Annual Securities Report(Report based on Article 24, Paragraph 1 of the Financial
Instruments and Exchange Act)
Fiscal year
Started October 1, 2016
(51st Term)

Ended September 30, 2017

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[Front cover].............................................................................................................................................................................................. 3
Section 1[Information on the Company] ........................................................................................................................................... 4
Part 1[Overview of the Company] ............................................................................................................................................... 4
1[Key Financial Data] ............................................................................................................................................................... 42[ 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 ................................................................................................................................ 24
3[Management Policies, Management Environment, and Challenges Facing the Company] ................................................. 24
4[Risk Factors] ........................................................................................................................................................................ 29
5[Material Agreements, etc.] ................................................................................................................................................... 30
6[Research and Development Activities] ................................................................................................................................ 31
7[Analysis of Consolidated Financial Conditions, Operating Results, and Cash Flows] ........................................................ 31
Part 3[Property, Plants and Equipment] ..................................................................................................................................... 33
1[Summary of Capital Investments] ....................................................................................................................................... 33
2[Major Property, Plants and Equipment] ............................................................................................................................... 33
3[Plans for Capital Investments, Disposals of Property, Plants and Equipment] .................................................................... 36
Part 4[Information on the Company] ......................................................................................................................................... 37
1[Information on the Company's Stock] ................................................................................................................................. 37(1)
Total number of shares, etc. ......................................................................................................................................... 37(2)[Information on Share Subscription Rights] ................................................................................................................ 38(3)[Exercise of Corporate Bonds with Share Subscription Rights Containing a Clause for Exercise Price Adjustment] . 45
(4)[Rights Plan] ................................................................................................................................................................ 45(5)[Changes in Total Number of Issued Shares, Common Stock, etc.] ............................................................................. 45(6)[Shareholders Composition] ........................................................................................................................................ 47(7)[Major Shareholders] ................................................................................................................................................... 47(8)[Status of Voting Rights] .............................................................................................................................................. 48(9)[Stock Option Scheme] ................................................................................................................................................ 49
2[Acquisition, etc. of Treasury Stock] .................................................................................................................................... 55
3[Dividend Policy] .................................................................................................................................................................. 57
4[Changes in Share Prices] ..................................................................................................................................................... 57
5[Board of Directors] .............................................................................................................................................................. 59
6[Corporate Governance] ........................................................................................................................................................ 64
Part 5[Financial Information] .................................................................................................................................................... 89
1[Consolidated Financial Statements] ..................................................................................................................................... 90(1)
Consolidated Financial Statements .............................................................................................................................. 90(2)[Other] ....................................................................................................................................................................... 138
2[Financial Statements, etc.] ................................................................................................................................................. 139(1)[Financial Statements] ............................................................................................................................................... 139(2)[Major Assets and Liabilities] .................................................................................................................................... 152(3)[Others] ...................................................................................................................................................................... 152
Part 6[Stock-related Administration of the Company] ............................................................................................................. 153
Part 7[Reference Information on the Company] ...................................................................................................................... 154
1[Information on the Parent Company] ................................................................................................................................ 154
2[Other Reference Information] ............................................................................................................................................ 154
Section 2[Information on Guarantors, etc. of the Company] ......................................................................................................... 155[Independent Auditor's Report] [Confirmation Letter] [Internal Control Report]

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[Front cover][Document Filed]Annual Securities Report[Applicable Laws]

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

Director General, Kanto Local Finance Bureau[Date Filed]December 25, 2017

[Fiscal year]

51st term (From October 1, 2016 to September 30, 2017)[Company name]

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

TKC Corporation[Title and name of representative]

Kazuyuki Sumi, Representative Director and President[Address of head office]1758 Tsurutamachi, Utsunomiya-shi, Tochigi[Phone number](028)648－2111[Contact person]

Hitoshi Iwata, Representative Director, Vice President and Executive
Officer, Chief Director of Business Administration[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)

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Section 1[Information on the Company]

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

47th Term

48th Term

49th Term

50th Term

51st Term

Year end

September
2013

September
2014

September
2015

September
2016

September
2017

53,11554,502

54,92857,75059,705

6,186

6,401

7,042

7,604

8,792

3,685

3,604

4,011

4,770

6,071

4,674

3,827

4,149

3,958

7,097

57,421

59,906

62,63064,556

68,89272,72375,266

76,836

81,11685,428Net Sales
Ordinary income
Profit attributable toowners of parent
Comprehensive income
Total net assets
Total assets(millions ofyen)(millions ofyen)(millions ofyen)(millions ofyen)(millions ofyen)(millions ofyen)

Net assets per share(yen)

2,106.23

2,205.39

2,304.38

2,374.07

2,551.70

Earnings per share(yen)

138.44135.55151.18179.65229.13

Diluted earnings per share(yen)

138.19135.15150.63178.88228.16Equity ratio

(%)

77.1

77.7

79.6

77.7

78.8

Return on equity

(%)

6.8

6.3

6.7

7.7

9.3

Price earnings ratio(times)

12.2

16.0

20.3

17.5

15.1

Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Cash and cash equivalents
at end of year

(millions of
3,926
4,402
6,485
9,181
8,123
yen)
(millions of(2,026)(2,873)(4,558)(7,022)(4,617)yen)(millions of(1,291)(1,125)(1,333)(2,225)(3,019)yen)(millions of
15,622
16,025
16,61916,552
17,039yen)(no. ofNo. of employees
2,521
2,503
2,500
2,547
2,588
people)(Note) Net Sales do not include consumption taxes, (consumption tax and local consumption tax; hereinafter the same).

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

47th Term

48th Term

49th Term

50th Term

51st Term

Year end

September
2013

September
2014

September
2015

September
2016

September
2017

49,35550,61650,95753,361

55,175

6,056

6,367

7,032

7,665

8,473

3,626

3,581

4,073

4,542

5,900

5,700

5,700

5,700

5,700

5,700

267,310

267,310

267,310

267,310

267,31054,47956,934

59,694

61,37065,466

67,81969,882

71,23475,03079,034

2,044.87

2,142.76

2,243.29

2,304.61

2,474.82

44

44

71

80

100

22

22

33

40

40

Net Sales
Ordinary income
ProfitCapital
Total number of shares issued
Total net assets
Total assets(millions ofyen)(millions ofyen)(millions ofyen)(millions ofyen)(hundreds ofshares)(millions ofyen)(millions ofyen)

Net assets per share(yen)

Dividend per share(Of the above interim
dividends per share)(yen)

Earnings per share(yen)

136.22134.68153.50171.08222.67

Diluted earnings per share(yen)

135.98134.28152.94170.34221.73Equity ratio

(%)

80.2

81.3

83.6

81.6

82.6

Return on equity

(%)

6.9

6.4

7.0

7.5

9.3

Price earnings ratio(times)

12.4

16.1

20.0

18.3

15.5

Dividend payout ratio

(%)

32.30

32.67

46.25

46.76

44.91

(no. of
2,231
2,203
2,201
2,234
2,269
people)1. Net sales do not include consumption taxes.
2. Dividends per share for the 49th term and the 50th term include a dividend of 5 yen and 10 yen incommemoration of the Company's 50th anniversary, respectively.

No. of employees(Notes)－5－

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.

December 1972

November 1973

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

April 1985
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.

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Date

Company History

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.
Established TKC Corporation Strategic Management Research Center. [Merged and absorbed
into the Company in October 2000]
Opened TKC Data Entry Center.
Opened TKC Precedent Retrieval Service Center.
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.
Opened Systems Development Center.
Listed on the First Section of the Tokyo Stock Exchange.
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.
Opened New Systems Development Center.
Acquired shares in SKYCOM Corporation (currently a consolidated subsidiary).
The systems development division obtained ISO9001 quality management systems
certification.
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.
Changed the company name in the company registry to TKC Corporation to match thecorporate name in the Articles of Incorporation.
Tokyo Line Printer Company obtained "PrivacyMark" accreditation from the Japan
Information Processing Development Center (JIPDEC).
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.
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.
Obtained PrivacyMark accreditation from JIPDEC (Local Governments BD).
Obtained PrivacyMark accreditation from JIPDEC (company-wide).
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").
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).
Opened System Engineering Center (SEC) Building.

April 1990
June 1991
January 1992
November 1992

February 1994
March 1996
January 1998

June 1998
June 1999
July 1999
March 2001

November 2002
March 2003
July 2003

October 2003

April 2004
June 2005
December 2008

September 2010
October 2015

April 2016

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3 [Description of Business]
The TKC Group (TKC Corporation and affiliated companies) consists of the Company, four 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 officeequipment), and printing 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(i) Computer services by the TKC
Consolidated Information
Centers(ii) 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(i) Development and provision ofsoftware to be installed on
system devices for information
service applications(ii) Systems consulting services byspecialized staff
3. Sales of office equipment
Sales of 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.
(Others)
TKC Security Services K.K., a subsidiary of the Company, provides
security, maintenance and repair services for buildings owned by theCompany.

4. Sales of supplies
Sales of office supplies forcomputer-based accounting

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2

Local Governments Business
Main services/products

Positioning of the Company and affiliated companies

1. Information processing services(i) Computer services by the TKC
Consolidated Information
Centers(ii) 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 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(i) Development and provision ofsoftware to be installed on
system devices for information
service applications(ii) Systems consulting services byspecialized 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).

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A structural diagram of the Group's business activities is as follows:
TKC National
Federation partnercompanies

Law schools,
etc.

Clients ofaccounting firms

Medium/largesized companies

Clients

Accounting firms

Local governments(municipalities, etc.)

General companies

Non-consolidated
subsidiary
TKC Financial
Assurance K.K.

Sales of monthly
magazines

Sales of supplies for
TKC computer-based
accounting systems

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 ofwebsiteservices

Outsourcing ofsystems
development/maintenance

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

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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

Equity method
affiliated company:iMobile, Inc.

Sales of officeequipment

Consolidated subsidiary:Tokyo Line Printer Company

4 [Information on Affiliates](1) Consolidated subsidiaries

Name

Tokyo Line PrinterCompany

TKC Security
Services K.K.

SKYCOM
Corporation

Address

Capital(millions ofyen)Itabashi-ku,
Tokyo

Utsunomiyashi, Tochigi

Taito-ku, Tokyo

Principal line ofbusiness

Percentage ofvoting rights(%)

Printing business,
manufacture andsales of100
continuous
business forms for
PCs

55.0

Security,
maintenance &10
repairs, andcleaning services

100.0

Development andsales of systems

100

100.0

Related activities
Purchasing ofprinted continuous
business forms for
PCs; lease of officespaces.
Executive positions
are held concurrently.
Security,
maintenance &repairs, packaging
and shipping
services.
Executive positions
are held concurrently.
Outsourcing ofsystems
development.
Executive positions
are held 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

TKC Shuppan
Corporation

iMobile, Inc.

Address

Chiyoda-ku,
Tokyo

Chiyoda-ku,
Tokyo

Capital(millions ofyen)

Principal line ofbusiness

Percentage ofvoting rights(%)

Production of
166 monthly
magazines, etc.

32.8

Development and100 maintenance ofwebsite services

30.0

Related activities
Purchasing ofmonthly magazines,
etc.
Executive positions
are held concurrently.
Outsourcing ofdevelopment andmaintenance ofwebsite services.

Executive positions
are held concurrently.
(Note) None of the companies currently submit Securities Registration Statements or Annual Securities Reports.

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5 [Employees](1) Consolidated Basis
As of September 30, 2017
Name of Segment

Number of employees

Accounting Firm Business Division

1,610

Local Governments Business Division

556

Printing Business Division

187

Corporate (shared)

235
Total

(Notes) 1.
2.

2,588

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

(2) Status of the Company
As of September 30, 2017
Number of employees

Average age (years of age)

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

39.3

16.0

7,013,841

2,269

Number of employees

Name of segment
Accounting Firm Business Division

1,500

Local Governments Business Division

556

Corporate (shared)

213
Total

2,269

(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.

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

Operating Results

The consolidated TKC group comprising of TKC Corporation and its five consolidated subsidiaries recorded net sales of
59,705 million yen (increased 3.4% year-on-year), operating income of 8,567 million yen (increased 12.1% year-onyear), ordinary income of 8,792 million yen (increased 15.6% year-on-year), and profit attributable to owners of parentof 6,071 million yen (increased 27.3% year-on-year).
The Group's net sales, operating income, ordinary income and profit attributable to owners of parent all exceeded theprevious fiscal year's performance with record-breaking figures. The main reasons for the growth include the steady
growth in orders for cloud services in both the Accounting Firm and Local Governments Business Divisions (BDs), as
well as the new orders with respect to the strengthening of information security measures surpassing the estimates due tothe commencement of the My Number system (measures for hardening security of the internal network withinmunicipalities) in the Local Governments BD.
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(i) Net sales of the Accounting Firm BD were 42,325 million yen (increased 4.2% year-on-year); operating
income was 7,818 million yen (increased 20.7% year-on-year).
(ii) Sales from computer services increased 4.1% year-on-year. The growth was driven by the increasing
number of users of the company's cloud services as in the previous fiscal year, such as PX My Portal
providing support for the appropriate management of the My Numbers, and Tax Accountants Office
Management System (OMS), in addition to FX4 Cloud, an Integrated Accounting Information System for
mid-sized companies.
(iii) Software sales increased by 5.2% year-on-year. This increase was the result of the fact that increasing
number of users has also occurred in the FX4 Cloud and e21-Meister.
(iv) Sales from consulting services decreased 7.2% year-on-year. This was due to the decrease in revenue fromclient/server system launch support services and the hardware maintenance business as a result of
increasing number of users of FX4 Cloud system, etc.
(v) Hardware sales increased by 1.7% year-on-year. This was because we started dealing in file servers foraccounting firms as equipment for storing administrative documents.
(2) Net sales of the Local Governments Business Division(i)

Net sales of the Local Governments BD were 13,717 million yen (increased 1.9% year-on-year); operating
income was 576 million yen (decreased 43.3% year-on-year).

(ii)

Sales from computer services increased 3.6% year-on-year. This was driven by the increase in the numberof users of such systems as New Generation TASK Cloud and Convenience Store Certificate Issuing
System.

(iii)

Software sales decreased by 9.1% year-on-year. This was due to the absence of the last year's large-scale
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projects for legal reforms such as system renovation for the last fiscal year's introduction of the My Number
system, despite the increase in system renovation projects in response to the transfer of the administrative
responsibilities for National Health Insurance to prefectures.
(iv)

Sales from consulting services decreased 3.6% year-on-year. This was due to the absence of the last fiscal
year's sales from the renewal of the inspection system for the inspection service for electronic filing of local
taxes, despite that sales related to on-site installation and calibration services increased due to an increase inhardware sales.

(v)

Hardware sales increased by 76.6% year-on-year. This growth was driven by the increase in the sales unitsof servers and network devices surpassing the estimates due to the need for strengthening the information
security systems (measures for hardening information security of the internal network withinmunicipalities) where the My Number system was put into use.

(3) Net sales of the Printing Business Division (Subsidiary: Tokyo Line Printer Company)(i)

Net sales of the Printing BD were 3,662 million yen (increased 0.1% year-on-year); operating income was
166 million yen (increased 15.8% year-on-year).

(ii)

Sales from data printing service increased slightly by 1.9% year-on-year. This was due to an increase insales from large bidding projects from government agencies and their associate organizations, election
related orders and related products.

(iii)

Business form-related sales decreased by 1.6% year-on-year. This was due to continuing decline in the
demands for business forms.

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2.Important Matters with Respect to the Company as a Whole(1)

Transfer of shares without charge by Masaharu Iizuka, Chairman Emeritus of the Company, to TKC Members

Masaharu Iizuka, the Chairman Emeritus, announced in July 2017 that he would transfer the common shares owned byhimself without charge to the members of TKC National Federation, customers of the Company. In this transfer,
Chairman Emeritus Iizuka will transfer the shares in person without charge commemorating the centennial of the birth of
Dr. Takeshi Iizuka, the founder of the Company, in July 2018. It is also a token of his gratitude for the TKC Members,
who put in practice the Shomen-tempu (tax audit report) pursuant to Article 33-2 of the Certified Public Tax Accountant
Act with an aim to "realize the justice in taxation", a business purpose of TKC National Federation. This transfer withoutcharge will be made by Chairman Emeritus Iizuka in person up to one million shares in five years between 2018 and
2022.
(2)

Construction of Customer Support Center

In order to strengthen the support system for our users, the Company is constructing a new office building TKC
Customer Support Center (TCSS) in Kanuma City, Tochigi Prefecture, with the plan to start business in April 2018.
Along with this, we plan to increase the number of telephone support staff from 100 to 300 in stages.
In order to enhance the expertise of help desk operations more than ever and to ensure our customers use our service witha peace of mind, we established on October 5, 2017 TKC Customer Support Service Co., Ltd., our wholly-owned
subsidiary.
(3)

Acquisition of ISO27017 certification

TKC Internet Service Center acquired third-party accreditation for ISO/IEC27017, the international standards forsecurity in cloud services, with the accreditation registration on June 19, 2017. This is the international standards for
information security in cloud services. We are striving to strengthen our management system of information security in
our cloud services through the acquisition of ISO/IEC27017, in addition to ISO/IEC27001, the standards for
management systems with respect to information security as a whole.
(4)

Establishment of Information Security Strategy Office

We established on June 1 Information Security Strategy Office with an aim to further strengthen the management system
of information security. This organization is responsible for carrying out measures for information security in the TKC
group, in line with the Cybersecurity Management Guidelines formulated by the Ministry of Economy, Trade andIndustry and the Information-technology Promotion Agency, Japan.
(5)

Establishment of AI Research Center

In order to collect and analyze the latest trends of AI and to utilize it for in-house use and our products and services, on
April 1, we established the AI Research Center under the direct control of the President. In the autumn of last year, welaunched the Big Data/AI Utilization Discussion Project led by the system development departments and have been
studying the possibility of utilizing the AI. Based on these results, the Center conducts research on cutting-edge
technologies and products, and is working on the creation and evaluation of their prototype versions and technicalsupport for implementation of such functions, with a view to place them in market in one or two years to come.

3.

Business Activities and Operating Results of the Accounting Firm Business Division

The Accounting Firm BD operates in accordance with the business objectives set forth in the Articles of Incorporation(Article 2, Paragraph 1: "Management of electronic data processing centers to defend the business domain and maintaincontrol over the fate of accounting firms") and works under close ties with the TKC National Federation, which consistsof certified public tax accountants and certified public accountants that are customers of TKC (hereinafter, "TKC
Members").
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(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 TKC National Federation ("TKCNF")(i)

Basic principles for the activities of TKCNF

TKCNF added its new purpose of "providing support for the business continuity and prosperity of SMEs" at the
TKC National Federation Policy Presentation Meeting held in January 2014 and is making proactive efforts toaccomplish the purposes. In its first stage (January 2014 through December 2016), TKCNF had been conducting
campaigns on the theme of "enhancing the comprehensive strength of TKC member firms and increasing the numberof members". Following this, and in its second stage (January 2017 through December 2018), it has set the following
two focus activities and is actively taking actions to accomplish them.
Focus activity 1: Commit ourselves to three major themes and fulfill our roles in society!
1) Prepare highly reliable financial statements in compliance with "Chusho Kaikei Yoryo (Guidelines for SME
accounting)", and make it widely known to financial institutions as well as raising their awareness to the guideline.
2) Promote the "Shomen-tempu (tax audit report)" (Ensure that tax accounting practices adhere to the principle of"no taxation without law.")
3) Promote the "self-accounting practices" (support for the business continuity and prosperity of SMEs)
Focus activity 2: Achieve the maximum use of the overall capability of accounting firms and build up the systemthat creates high added value!
Actively extend following three services to their clients in collaboration with local financial institutions.
1) "TKC Monitoring Information Service"2) "Support for business improvement" (support for the quick drafting of business improvement plans)
3) "Founding of business", "succession of business", "support for overseas expansion", etc.
Such activities of TKCNF utilize the systems and services provided by the Company. The Company supports theactivities of TKCNF and is actively engaged in the development and provision of computer services and softwarethat are to the benefit of the prosperity and success of SMEs.
(2)

Support for the focus activities of TKCNF

In order to support the activities of TKCNF, we are engaging in the activities setting our focus themes of; "promotion ofself-accounting by the TKC methods (promotion of FX series)", "retention of good-standing clients (promotion of FX4
Cloud)", "soliciting new members (promotion of newly joining firms into TKCNF)", and "promoting the Use of Tax
Accountants Office Management System (OMS)".
(i)
Promotion of self-accounting by the TKC methods (promotion of FX series)
1) Assisting TKC member firms to realize high value-added office work through hosting Self-accounting
Promotion Meeting
In the fiscal year under review, we provided support to focus accounting firms in their hosting of Self-accounting
Promotion Meeting so as to enable TKC member firms to engage independently in the "promotion of selfaccounting by the TKC methods".
At this meeting, we provided information about realizing high value-added services provided by TKC member
firms to their clients and enhancing customer benefits brought by the FX series, through conducting seminars
about the effective use of such services as; TKC FinTech Services including Data Receiving Functionality from
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Banks and Credit Card Companies (provided in June 2016) and TKC Monitoring Information Service (started
providing in October 2016); TKC Documented Evidence Storage Service (started providing in April 2017); andProfit and Loss Statement that Changes 365 Days a Year.
2) Strengthening support for companies using the FX series
We launched the TKC System My Support on June 1 to provide a smooth system operation of companies using
the FX series and an environment where TKC member firms can promote self-accounting with a peace of mind.
This system support was previously done mainly by TKC member firms themselves for their clients. However,
the evolution of ICT and popularization of cloud computing have made the system operation environment in
SMEs increasingly complicated, and, as such, it is now conducted by our employees who have received
specialized education, upon request by TKC member firms.
Thanks to these activities, the number of FX series users has reached approximately 250,000 as of September 30,
2017.
(ii)

Retention of good-standing clients (promotion of FX4 Cloud)

The Company offers an integrated accounting information system, FX4 Cloud, designed for medium-scale
corporations (with annual turnover of 500 million to 5 billion yen) to support TKC Members in their effort to retain
their good-standing clients and expand their client base.
1) Support activities to strengthen the proposal capability of the TKC member firms
In the fiscal year under review, the Company was engaged in various activities on the concepts of "more efficientaccounting work by utilizing the Data Receiving Functionality from Banks and Credit Card Companies", "moreefficient accounting work through utilizing the coordinated journal entries functionality with business systems ofother companies", and "effective use of performance management by division/hierarchy and management reportdesign tools". We also conducted training on consulting utilizing "bird's eye view of business models" to discoverissues of companies, and supported the strengthening of proposal capability of TKC member firms.
2) Management support activities for corporate groups
The Company is conducting support activities for corporate groups such as franchise chains and voluntary chains,
including "establishing monthly settlement system" and "establishing management plans" to strengthen their
management capabilities. In the fiscal year under review, we collaborated with Lotus, Inc. and Az-com MaruwaShien Network to launch such consulting services by TKC member firms as seminars and individual consultation
for the member shops of the corporate groups.
These activities helped the Company to increase the number of users of FX4 Cloud as of September 30, 2017 over
10,000, and to get the award of "No. 1 Installation" for fiscal year 2016 as a cloud accounting software formedium-scale corporations with annual turnover of 500 million yen or more and less than 10 billion yen. Thisaward was given based on the "Survey on Cloud Accounting System" (monthly magazine BT in its September
2017 issue), conducted by Fuji Chimera Research Institute, Inc., a major research company.
(iii)

Activities to achieve "Over 10,000 TKC Member Firms"
TKCNF is actively working on its activities to increase TKC membership to over 10,000 offices by the end of
December 2020. The Company is working closely with TKCNF in soliciting new members to achieve this.
In the fiscal year under review, we held various seminars such as "TKC New Members' Forum 2016" (held in
November 2016), for middle and large-scale non-member firms, newly opened accountants, and certified public
accountants planning to start an independent business. For non-member certified public tax accountant and others
who participated in these seminars, we made proposals for complying with the "electronic filing of corporation
tax becoming mandatory" and "support for the quick drafting of business improvement plan", soliciting their entry
into the TKCNF.
These activities brought the number of TKC members totaling 9,500 firms and 11,000 accountants as of
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September 30, 2017.
(iv)

Promotion of Tax Accountants Office Management System (OMS)
We are providing the Tax Accountants Office Management System (OMS) with an aim to enhance productivity
and quality of work at TKC member firms.
In the fiscal year under review, we promoted the use of OMS highlighting its capabilities for the My Number
system, achieving the management of accounting firms in compliance with laws (including "automatic
preparation of operation handling records" and "complete performance of obligation to supervise employees, etc."
in accordance with the Certified Public Tax Accountant Act), electronic filing of corporation tax becoming
mandatory, and information security.
As a result of these activities, the number of accounting firms using the OMS has reached approximately 6,700 asof September 30, 2017.

(3) Activities for FinTech(i)

FinTech service for TKC member firms' clients
Our FinTech service, Data Receiving Functionality from Banks and Credit Card Companies launched in June
2016 for TKC member firms' clients, is one of the functions of the FX series that automatically receives
transaction data such as internet banking service from more than 99% of financial institutions (corporate
accounts)* and details of major credit cards, and facilitates accurate journal entries in accordance with preset
journal entry rules.
In this fiscal year under review, we promoted the use of the FX series, highlighting the benefit of utilizing thefunctionality for making journal entry more efficient, and collaborated with Joyo Bank and other banks for thedevelopment of API interactions for further enhancing the usefulness of the functionality.
*City banks, regional banks, second regional banks, and shinkin banks(ii) FinTech service for financial institutions
1) Promotion of the TKC Monitoring Information Service
TKC Monitoring Information Service, our FinTech service for financial institutions launched in October 2016, isa cloud-based service. In this service, the TKC member firms provide financial data, the correctness, existence,and comprehensiveness of which is secured by the monthly Field Audits by the TKC member firms, to financial
institutions upon request by the management of their clients.
The high reliability of the monthly trial balance sheet and financial statements provided by this service hasreceived good reputation, and its utilization is spreading to financial institutions nationwide.
In the fiscal year under review, we conducted a campaign to propose the use of this service to regional financial
institutions in collaboration with 20 TKC Regional Associations nationwide. These activities produced
approximately 280 financial institutions and 10,000 companies using the service as of September 30, 2017.
2) Provision of the TKC Local Benchmark Cloud
On June 1, we started providing the TKC Local Benchmark Cloud which generates "Local Benchmark" material
promoted by the Ministry of Economy, Trade and Industry.
Upon request by the management, the local benchmark prepared by this service can be provided to financial
institutions from the TKC member firms through monitoring information services, strengthening therelationship of trust between clients and financial institutions.
(4)

Activities for the "support for the quick drafting of business improvement plans"
The Small and Medium Enterprise Agency announced on May 10, 2017 the support for the quick drafting of business
improvement plans as part of its project for supporting business improvement planning by the authorized supportingorganizations.
This project is "to provide support for enabling SMEs and small-scale enterprises to conduct cash flow management
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and profit management from normal times, through raising their awareness for improving their management andpromoting their early response, which can be achieved through utilizing the scheme in the project for supporting
business improvement planning carried out by the authorized supporting organizations, and by such SMEs andenterprises making efforts to improve basic issues of management (quick drafting of business improvement plans)".
The TKCNF actively promotes this project as being consistent with the purpose of its focus activity themes, and theCompany is working on system revision and holding workshops to support this.
(5)
Promotional activities taking the opportunity of the "project for supporting the introduction of IT for improving
the productivity in services""Project for supporting the introduction of IT for improving the productivity in services", the application for which
can be made to the Ministry of Economy, Trade and Industry since January 27, 2017, is a system aiming at "enabling
SMEs and small-scale enterprises to improve their productivity through government subsidies to partially compensate
them for the expenses for introducing IT tools (software, service, etc.).
Taking this opportunity, we suggested that TKC member firms promote the use of the FX series, OMS, etc. thatutilize this project, launched a consortium as an IT introduction support business operator, and supported the TKC
member firms for the utilization of the system.
(6)
Activities to "support the preparation of highly reliable financial statements based on timely and accurate
bookkeeping"(i) Issuance of a Certificate of Bookkeeping Timeliness
The Company issues a Certificate of Bookkeeping Timeliness with 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 insertions, deletions and corrections to past data, and TKC Corporation proves, as a third
party, that TKC Members have visited their 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 andelectronic tax filings have been completed in a timely manner.
The Certificate of Bookkeeping Timeliness has been highly acclaimed by financial institutions across Japan, and it isused to make judgments about loan plans and preferential interest rates for financial products such as "Kiwame"
introduced by The Bank of Tokyo-Mitsubishi UFJ and "Taikoban" offered by The Chukyo Bank, and other financial
products of many other financial institutions in Japan.
(ii) Support activities for disseminating Chusho Kaikei Yoryo (Guidelines for SME accounting)
TKCNF recommends the "Basic guidelines with respect to the accounting procedures at small- and medium-sizedenterprises" (Chusho Kaikei Yoryo (Guidelines for SME accounting)) with which the clients should comply in theiraccounting procedures. These guidelines have been formulated based on the principles; "accounting that helps to
grasp the company's business situation", "accounting that contributes to providing information to stakeholders(financial institutions, etc.)", "accounting that complies with the Ordinance on Company Accounting whileachieving harmony between accounting and taxation system", and "accounting that does not to place an excessive
burden on small- and medium-sized enterprises".
In order to support the activities of the TKCNF towards the dissemination and utilization of the guidelines, we are
striving to promote the development of relevant environments and collaboration with other SME-supportingorganizations.
(7)

Expansion into large-scale enterprise market
The Company develops markets for large-scale enterprises, contributes to the rationalization of tax and accounting
operations by utilizing the TKC system, and is actively working to make these companies clients of TKC Members.
Publicly listed companies and other large-scale enterprises are continuously required to comply with and adapt to therevisions of laws and systems implemented one after another, such as the government's move towards mandatory
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electronic filing of corporation tax or other tax, preparation for complying with the "Exposure Drafts of AccountingStandard for Revenue Recognition, etc.", measures for adapting to the revision of consumption tax, and the reporting
systems (submissions of reports by country and the master files now becoming mandatory) with respect toinformation about multi-national enterprises that are introduced along with the system for documenting requirements
for the transfer pricing taxation, and increasing needs for storing the evidence documents electrically due to therelaxation in the system of storing the electrically scanned documents relating to national taxes. In addition,companies that have already expanded abroad as part of their group's growth strategies are facing issues on securing
the adequateness, accuracy and timely procurement of financial information from its overseas subsidiaries, along with
the new issue of managing risks of wrongdoing. They have pressing needs to strengthen the group's global
performance management structures.
In light of these environmental changes, the Company actively promotes the TKC Consolidated Group Solution
package for large-size companies, which includes: the eCA-DRIVER consolidated accounting system; theeConsoliTax consolidated tax payment system, the eTaxEffect tax effect accounting system, the ASP1000R electronic
tax filing system for corporations, the FX5 integrated accounting information system, the e-TAX Series electronic tax
filing system, the FAManager non-current assets management system, and the OBMonitor overseas businessmonitoring system.
In the fiscal year under review, we held seminars on "tax reforms", "up-to-date accounting systems", "improving the
productivity of accounting work", and "accounting and taxation systems in foreign countries", as well as the seminar
introducing a case study on utilizing the TKC Consolidated Group Solutions, in collaboration with the TKCNF's
Medium and Large-size Support Research Committee (consisting of nearly 1,270 members as of September 30, 2017)
and TKCNF's Overseas Deployment Support Research Committee (consisting of nearly 520 members as of
September 30, 2017), in order to enhance the awareness and brand power of the system for the purpose of acquiring
new customers. In addition, following the indication by the Cabinet Office Council for the Promotion of Regulatory
Reform, Administrative Procedure Committee of the mandatory electronic tax filing to be imposed on large-scale
enterprises, we have held the "Your First Electronic Filing (Corporate Tax/Local Tax) Seminar" in Tokyo, Osaka, andNagoya on a monthly basis from May. We also held in August a large-scale seminar on the theme of "electronic tax
filing". For existing customers, we leveraged the strengths in our company's systems that encompass all aspects ofaccount settlements and tax declaration on corporate group level, and worked on multiplexing our services andpromoting multiple systems.
As a result, the number of companies using the TKC Consolidated Group Solution counted approximately 2,700
corporate groups (or about 18,600 companies) as of September 30, 2017, adopted by approximately 80% of the 100
largest Japanese listed companies by sales amount. To these companies, about 900 TKC Members are appointed assystem consultants.
(8)

Expansion of market for legal information database services
The LEX/DB Internet legal information database maintains an archive of over 290,000 judicial precedents, etc. (as of
September 30, 2017) covering all legal fields from precedents set in the former Supreme Court dating back to 1875 tothose most recently announced, as well as those collected from our own sources, making it the largest database of allin Japan. The TKC Law Library is a comprehensive legal information database which uses the LEX/DB Internet as
its core content and contains over 910,000 bibliographic information references with links to 51 of the Databases ofProfessional Journals, with total items of information now exceeding 2,360,000. As of September 30, 2017, theLibrary is used by over 16,600 institutions with more than 50,000 IDs, including TKC member firms, universities,
law schools, government offices, law firms, patent offices and corporate legal departments.
In the fiscal year under review, we continued to focus on sales promotions for the databases, highlighting theirusefulness in business operations, through putting the contents in the TKC Law Library that are useful for businesspractices into customer-specific packages (Law Office Pack for law firms, Corporate Legal Pack for corporate legal
departments). Our portal site related to labor laws Labor Law EX+, which was jointly developed with a partnercompany Roudou Kaihatsu Kenkyukai Co., Ltd., was launched in March 2017, and it will be promoted to membersof the Labor Law Study Group and offered as an optional content in the TKC Law Library as part of our efforts to
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explore new sales channels for further expansion of use.
In the academic market, we proposed the introduction of an early learning support system to the 56 law schools using
the TKC Law School Educational Support System, which is the basis of the proposed system. We are supporting such
schools to apply for the Public Support Program for Law Schools Concerning the Revision of Budget Distribution
initiative by the Ministry of Education, Culture, Sports, Science and Technology. In addition, the system has theexercise systems 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 Learning Support NAVI and Study Drills of Judicial Precedents,
the effective use of which provides new functions enabling more students to create study plans, check their progressand study the essential judicial precedents for the bar exam, leading to its good reputation and increasing number ofusers year by year.
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 as well asother countries including Germany, the U.K. and the U.S. A., and, as of September 30, 2017, over 60 licenses are in
use worldwide, with further growth anticipated in the future, particularly in the Asian region.

4.

Business Activities and Operating Results of the Local Governments Business Division

The Local Governments BD operates in accordance with the business objectives set forth in the Articles of Incorporation(Article 2, Paragraph 2: "Management of electronic data processing centers to improve the administrative efficiency of
local governments") and offers specialized information services in order to help promote the welfare of residents byimproving administrative efficiency.
(1) Development and provision of cloud services designed for local municipalities
The Company provides the TKC Government Cloud Service to municipalities (mainly for cities, wards and towns)
nationwide. 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 attracts
considerable attention from the viewpoint of "local government cloud systems" that the Japanese government seeks toestablish.
In the fiscal year under review, we worked on the enhancement of the New Generation TASK Cloud (compatible with
My Number system)* mission-critical operation system (such as Basic Resident Register System, taxation and welfare),and its phase-two development (12 systems). We also supported preparations for comprehensive operational tests at ourclient agencies. These activities are targeted to the successful information collaboration between central and local
governments, of which full-fledged operation was scheduled to start in the fall of 2017. Approximately 1,400 people
from about 400 municipalities, the largest number of all time, participated in the TASK Cloud Fair 2017 held in 19 cities
nationwide, where we introduced our latest solution, including prototype version system now under research anddevelopment.
As a result, there have been new orders such as the one from Kanagawa Prefecture Collective Business Partnership for
Information Systems in Municipalities (consisting of 14 municipalities), and the New Generation TASK Cloud isadopted by approximately 150 municipalities nationwide as of September 30, 2017.
* New Generation TASK Cloud (compatible with My Number system) is the brand name of the mission-criticaloperation system of the TASK Cloud Service.
(2) Expansion of cloud services for residents
In response to the notice issued in September 2016 by the Minister of Internal Affairs and Communications, "Review
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regarding improvement of services for residents utilizing My Number Cards and vitalization of regions (request)", there
has been a sharp increase in the number of municipalities examining the possibility of introducing the Issuance ofCertificates at Convenience Store service.
In response, the Company provides the TASK Cloud Convenience Store Certificate Issuing System as the system torealize this service. The extensive track record of the system as the first cloud service for municipalities across Japan has
attracted a number of requests for quotation from local governments including government ordinance-designated cities.
In the fiscal year under review, we worked on the "low-priced cloud" initiated by the government as a means ofpromoting the use by 928 municipalities where introduction of the service is not progressing as it should, as well as
enhancing and expanding various functions of the service. This led to more than 60 local governments having adopted
the TASK Cloud Convenience Store Certificate Issuing System as of September 30, 2017.
(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 cloud-based
service for electronic filing of local taxes and the electronic tax payment offered by the Council. We also develop andprovide data connection services to connect the individual tax systems of various municipalities with the Council's
platform.
These services are proposed in collaboration with 46 system vendors with whom we have signed alliance partner
agreements, and the Support Service for TASK Cloud Electronic Filing of Local Taxes is currently used by 740 agencies(as of September 30, 2017), which accounts for more than 40% of all municipalities.
Our TASK Cloud Taxation Document Image Management Service is drawing attention as means of preventing
information leakage caused by paper media, as well as streamlining taxation-related affairs and reducing associated costs.
This service is adopted by more than 90 municipalities as of September 30, 2017.
In the fiscal year under review, we engaged in a new development of TASK Cloud e-Tax Collaboration Service (tentativename) that can directly transmit the data of the final tax return form to the e-Tax (national tax electronic
declaration/payment system) via the Local Government Wide Area Network (LGWAN). We also conducted survey andresearch activities on the unified tax payment system for local taxes, which is expected to start operation in two years.
(4) Support for the development of standardized local public accounting
Municipalities are required to complete the "accrued basis accounting" (double entry bookkeeping) as a mechanism tocomplement the existing "cash basis accounting" (single entry bookkeeping) by, as a general rule, fiscal year 2017, and toprepare and disclose financial documents making use of it.
The Company provides the TASK Cloud Public Accounting System which complies with this requirement, and its related
system, TASK Cloud Fixed Assets Control System. In particular, the TASK Cloud Public Accounting System is widely
recognized as providing ease of use because it is a package system compatible with "daily journalizing system" andachieves "highly accurate automatic journalizing" by patented technology, attracting a number of requests for quotation
nationwide.
In the fiscal year under review, we promoted the new development of useful functionalities for management support inaddition to enhancing and expanding various functions, and worked to develop new customers by leveraging our strong
track record of introducing daily journal functions to more than 90 municipalities. As a result, there have been neworders such as the one from Kanagawa Prefecture Collective Business Partnership for Information Systems in
Municipalities (consisting of 14 municipalities) and the TASK Cloud Public Accounting System is adopted by more than
170 municipalities as of September 30, 2017.
(5) Compliance with other laws and revisions of governmental systems
Municipalities are required to achieve "enhancement in the convenience of citizens" and "more efficiency inadministrative work" by making the effective use of My Number Cards and others, as well as to comply with the Act
Partially Amending the Long-Term Care Insurance Act for Strengthening Regional General Care System expected to take
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effect in next spring.
In order to support this, in the fiscal year under review, we conducted the survey, research and development of new
products and services (including Easy-to-use Reception System, One-stop Child-rearing Support Service, and Welfare
Consultation Support System) that utilize state-of-the-art ICT such as My Number Card, Myna Portal and AI, under theleadership by the New Product Planning Promotion Office established on October 1, 2016.
On March 1, 2017, we became the first operator certified by the Minister of Internal Affairs and Communications as a
"Use Case of My Number Card at Private Business Operator". And from this autumn, we started working on the
preparation for "Validation of Authority/Permission to Enter Security Room", "Validation of Authority/Permission to Use
Terminal Device Handling Personal Information" so as to make full use of them.

5.

Business Activities and Operating Results of the Printing Business Division

The Group's Printing BD is committed to "contributing to the general public and customers through printing services thatsurely convey messages you want to communicate to the people you want to communicate with" and conducts its
manufacturing and sales activities with the main focus on data printing services (DPS) and business forms printing.
In the DPS field, there has been an increase in large-lot orders from government agencies, orders related to the electionof the Tokyo Metropolitan Assembly, and other related products, which offset the decline in orders for large-lot DM
businesses from private enterprises, leading to a slight increase in overall DPS business as a whole.
In the field of business form printing, regular orders from large-scale customers for business forms mitigated the general
downward trends in market demand of business forms, and sales are making just a small decline.

Ⅱ.

Cash FlowsThe balance of cash and cash equivalents as of the end of the current consolidated fiscal year increased by 486 million
yen from the end of the previous consolidated fiscal year amounting to 17,039 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 8,123 million yen (1,058 million yen decrease in revenue year-onyear). Major factors include the recognition of 8,798 million yen in profit before taxes and adjustments.

2. Cash Flows from Investing Activities
Cash flows from investing activities decreased by 4,617 million yen (2,405 million yen decrease in spending yearon-year). Major factors include the payment of 2,561 million yen for the acquisition of investment securities, and of
2,124 million yen for the purchase of tangible non-current assets.

3. Cash Flows from Financing Activities
Cash flows from financing activities decreased by 3,019 million yen (794 million yen increase in spending year-onyear). Major factors include the payment of 2,119 million yen for year-end dividends as of end of September 2016
and for interim dividends for the period ended September 2017, as well as the payment of 677 million yen for theacquisition of treasury stocks.

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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

42,325104.2

Local Governments Business Division

13,717

101.9

Printing Business Division

3,662

100.1

59,705

103.4

Total
(Notes)1.
2.

Transactions between segments have been offset.
Figures shown do not include consumption taxes.

3 [Management Policies, Management Environment, and Challenges Facing the Company]
The core value of the Company is "To benefit oneself is to benefit others". With its key management principle of"contributing to our customers", the Company is engaged in management with an aim to achieve the following two
business objectives as stipulated in the Articles of Incorporation (Article 2).
1.

Management of a data processing center to defend the business domains and maintain control over the fate ofaccounting firms;

2. Management of a data processing center to improve the administrative efficiency of local governments.
The basic policy stipulated in the Company's Articles of Incorporation has been in place ever since its establishment(October 22, 1966). Some other business objectives that have been added due to the subsequent expansion of businessonly complement the two business objectives; the basic management policy has not changed.
Ⅰ.

Target Management Indicators

The Company maintains the principle of attributing the source of dividend for each fiscal year to the profit earned in
the same fiscal year, on the premise of a company as going concern. Accordingly, we believe it necessary tosimultaneously manage our medium-term management indicators to maintain sustainable growth and short-term
management indicators to ensure appropriate net profit for each year.
From the perspective of short-term management indicators, we classify all expenses into variable costs and fixed costs,
and then focus on trends of marginal profits, which are calculated by deducting variable costs from net sales. While themarginal profits tend to fluctuate due to different product mixes, we set the target of achieving 60% and above foroverall marginal profits. In addition, we consider the percentage of personnel expenses in the marginal profits as thelabor share ratio, for which we aim to achieve 50%. Our target for ordinary income to net sales ratio is 8% and above.
As for the long-term management indicators, we focus on ratio to the previous year sales (3% and above),shareholders' equity ratio (70% and above) and shareholders' equity ratio (8% and above).
Ⅱ.

Challenges Faced by Each Division
－

24

－

1.

Challenges Faced by the Accounting Firm Business Division
The Accounting Firm BD considers contributing to the prosperity of accounting firms and their clients the businesschallenge with the highest priority, and will continue to collaborate closely with TKCNF on the various TKCNF
activities as well as develop and provide systems and services to support the operation of TKC Members.
(1) Strengthen the competitive power of the systems we provide
We will take the following actions to increase competitiveness of its systems and differentiate ourselves from othercompanies by appealing the advantages of our systems.
(i) The strengths of the Company's systems lie in the one-stop support from tax affairs to accounting. The
advantage is the capability to provide a one-stop, full line of accounting, tax affairs and electronic tax filing withlinks to related tax returns while maintaining complete compliance with laws, regulations and accounting
standards. Looking ahead, the Company will continue to respond promptly and accurately to revisions oflaws/regulations and system modifications, and strive to enhance these strengths.
(ii) The most important feature of the Company's systems is that they are not merely 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 andappropriate tax and accounting. The Company will provide enhanced support for such TKC Members to assist
them in offering greater added-value services.

(2)

Self-accounting promotion activities
In order to support the achievement of the TKCNF's strategic targets, the Company will enhance and expand
functions that support corporate executives' quick decision making, and carry out promotional activities taking
advantage of the strengths of systems that prevent retroactive insertions, deletions and corrections.

(3)

Provide support to achieve the target of over 10,000 TKC Member firms
The Company will solicit membership in cooperation with TKC Members to contribute to the achievement of
TKCNF's strategic target of more than 10,000 TKC member firms.

(4)

Increase the use base of TKC Law Library
The Company will continue to provide support to law firms by increasing the use base of the TKC Law Library,enhancing the functions of LEX/DB Internet and other major contents, expanding the databases for law
practitioners and creating new databases of professional journals and other useful contents, and providing theLegal Tech Service.

2.

Challenges Faced by the Local Governments Business Division
The Local Governments BD considers providing support for improving resident convenience and improving theefficiency of local governments a vital business challenge, to be achieved through the development and provision of
innovative products and services that leverage the latest in ICT, and will implement the following six key initiatives
to this end.
(i) Development of new customers with the New Generation TASK Cloud(ii) Development of new customers with the Public Accounting System(iii) Expansion of eLTAX businesses with unified tax payment system for local taxes, etc.
(iv) Promotion of new services for residents by utilizing My Number Cards(v) Provision of new types of cloud services utilizing cutting-edge technology
－

25

－

(vi) Promotion of alliance strategies
3.

Challenges Faced by the Printing Business Division
The Group's Printing BD will address the following actions for sales expansion, focusing on data printing service(DPS) and business process outsourcing (BPO).
(i) We will focus on promoting sales of products related to data printing services through the acquisition of new
customers.
(ii) We will submit proposals combining our analog and digital printing technologies to customers to achieve directcommunication with such customers.
(iii) We will handle back-office operations of customers in the form of BPO, and contribute to streamlining thecustomers' business operations by enhancing work efficiency and reducing costs and information security risks
while maintaining high quality.
(iv) We will strengthen ties with existing customers to increase market share.
(v) We will continue to respond to customer needs, submit unique proposals to differentiate ourselves fromcompetitors, and develop new technologies to reduce production costs.
(vi) We will make proposals for ensuring accuracy by mechanizing the manufacturing process and for reducing thedelivery time by improving production efficiency, thereby expanding the share of government projects.
(vii) We will strengthen the quality checking systems by manufacturing process of all products, in order to improveand maintain consistent quality, and to prevent quality defects.
(viii)We will increase self-manufacturing and reduce the percentage of subcontracting in order to save costs.
(ix) We will further strengthen the information security system based on Privacy Mark and ISMS in order to win
trust from customers and business partners and to ensure My Number management.
(x) As an ISO14001-certified, environmentally-friendly company, we will further our efforts to reduce theconsumption of energy through reducing wasted paper, purifying used paste, and enhancing productivity andefficiency.

4.

Challenges Faced by the Entire Company(1) Providing systems in complete compliance with laws and regulations
The business operations of the Company are 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 in 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 willcontinue to pursue system developments that will enable us to promptly respond to revisions to such laws andregulations.
(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.
－

26

－

(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.

－

27

－

(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 the useof latest ICT, ensuring information security is our highest priority and also a social responsibility in conducting
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 for identifying individuals. Further, as theAmended Act on the Protection of Personal Information was fully enforced in May 30, 2017, reducing the risk 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.
TKC Internet Service Center acquired on October 12, 2015 ISO/IEC27018 certification, the international
standards specialized for the protection of personal information in the cloud service, and on June 19, 2017,
ISO/IEC27017 certification, the international standards for security in cloud services.
The Group will continue to strive to provide environments where customers can use cloud services safely, securely
and conveniently.

－

28

－

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 ourinvestors are described below. It is also our policy to disclose information on other risk factors that may be deemedmaterial 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 this entire 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, 2017).

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 effects ofsuch 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 non-current assets
The Accounting Standard for the Impairment of Non-current 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 and tightening of
supply and demand in international markets. Should such circumstances prevail, the Group will aim to respondthrough price negotiations with its customers. However, such circumstances may still affect the financial standing andoperating results of the Group in the event the procurement of raw materials becomes extremely difficult, or whenpurchase 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
－

29

－

certification, an international standard specializing in the protecting of personal information in relation to cloudservices.
However, the potential for such information leaking due to unforeseen circumstances cannot be eliminated completely,such an event could have negative impacts on the Company's social standing and may require enormous costs in
response or reduce the brand value which could affect the financial standing and operating results of the Group.
5.

Contentious Cases
While there are no contentious cases that could affect the financial standing and operating results of the Group, suchcontentious cases could occur in the future.

5 [Material Agreements, etc.]
Not applicable.

－

30

－

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 106 million yen was spent on R&D in the current consolidated fiscal year, yielding the following
results:(1) Accounting Firm BD
For our clients using the FX2/FX4 cloud and corporate/continuing MAS system, we are developing a"Departmental Budget Compilation System (Cloud System)" in which they can use the cloud system for preparing
tax applications/notices and for making applications in an electronic form, which is designed for corporate group
adopting the consolidated tax payment and enterprises with a large number of facilities and offices. Using thesystem and with assistance from an accounting firm, such companies have their budgets compiled throughdiscussions between its president and heads of division.
Total research and development cost associated with this BU was 92 million yen.
(2) Local Governments BD
Not applicable.

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 85,428 million yen, a 4,312 million yen
increase compared to 81,116 million yen as of the previous consolidated fiscal year.
(i)

Current assets

Current assets as of the end of the current consolidated fiscal year amounted to 30,545 million yen, a 991 million
yen increase from 29,554 million yen of the previous consolidated fiscal year.
This was mainly attributable to an increase of 486 million yen in cash and deposits, 219 million yen in notes andaccounts receivable, 176 million yen in work in progress, and 88 million yen in deferred tax assets in others.
(ii)

Non-current assets

Non-current assets as of the end of the current consolidated fiscal year amounted to 54,883 million yen, a 3,320
million yen increase compared to 51,562 million yen as of the previous consolidated fiscal year.
This was mainly attributable to an increase of 3,442 million yen in investment securities, 569 million yen in
construction in progress, 314 million yen in land, and 213 million yen in lease assets (net amount), against a
－

31

－

decrease of 1,000 million yen in long-term deposits and 237 million yen in deferred tax assets.

2. Liabilities
Total liabilities as of the end of the current consolidated fiscal year amounted to 16,536 million yen, a 22 million yen
decrease compared to 16,559 million yen as of the previous consolidated fiscal year.
(i)

Current liabilities

Current liabilities as of the end of the current consolidated fiscal year amounted to 13,345 million yen, a 74 million
yen decrease from13,419 million yen of the previous consolidated fiscal year.
This was mainly attributable to a decrease of 757 million yen in income taxes payable and 452 million yen inaccounts payable, against an increase of 897 million yen in electronically recorded obligations, 174 million yen inprovisions for bonuses, and 62 million yen in lease obligations.
(ii)

Fixed liabilities

Fixed liabilities as of the end of the current consolidated fiscal year amounted to 3,191 million yen, a 51 million yen
increase from 3,140 million yen of the previous consolidated fiscal year.
This was mainly attributable to an increase of 85 million yen in retirement benefit liabilities.

3. Net assets
Total net assets as of the end of the current consolidated fiscal year amounted to 68,892 million yen, a 4,335 million
yen increase from 64,556 million yen of the previous consolidated fiscal year.
This was mainly attributable to an increase of 617 million yen in treasury stock, 3,943 million yen in retained earnings,
and 961 million yen in valuation difference on available-for-sale securities.
Capital-to-asset ratio as of the end of the current consolidated fiscal year was 78.8%, a 1.1% increase compared to theratio 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."

－

32

－

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 4,162 million yen were made in the current
consolidated fiscal year.
(1) Accounting Firm BD
Capital investment of 1,855 million yen was made for reinforcement of the common cloud infrastructure to enhance
the cloud environment for the Company's systems, and in the development of software for sale.
(2) Local Governments BD
Capital investment of 1,753 million yen was made for the development of software to provide services over the
cloud system.
(3) Printing BD
Capital investment of 553 million yen was made for the purchase of film printers, lease of ink jet printers, etc.

2 [Major Property, Plants and Equipment](1) The Company
As of September 30, 2017
Book values (millions of yen)
Name of office(address)

Segment

Facilities

Buildings
andstructures

Machinery,equipment
andvehiclesLand(area in m2)

Tools,
furnitureandfixtures

Other

Total

No. ofemployees(no. ofpeople)Development

TKC Tochigi Head Office
TKC Systems Development

Accounting

Research Center

Firm

TKC Internet Service Center

Business(TISC)Local

TKC Tochigi Consolidated

Governments

Information Center

Business(Utsunomiya City, Tochigi, etc.) *1

facilities,
information

2,696

communication

29,418.00

service

4,467

0

120

－

229

－

53

－

450

－

947

4,206

12,317

1,085

92

－

212

355

6

－

2,460

23

6

－

256

20

8

－

774

36

facilities,
Information
processing
facilities

Accounting
TKC Tokyo Head Office

Firm

TKC Systems Development

Business

Research Center Tokyo Branch

Local(Shinjuku-ku, Tokyo, etc.)

Governments

Office facilities－

Business
TKC Tokyo Consolidated

Accounting

Information

Information Center

Firm

processing(Nerima-ku, Tokyo)

Businessfacilities

TKC Chubu Consolidated

Accounting

Information

Information Center

Firm

processing(Kasugai City, Aichi)

Businessfacilities

TKC Kansai Consolidated

Accounting

Information

Information Center

Firm

processing

－

33

－

2,224
1,447.44
196
3,017.47

314

(Ibaraki City, Osaka)

Businessfacilities

Local

Office facilities

817.30Governments
Business
TKC Chushikoku Consolidated

Accounting

Information

Firm

processing

Businessfacilities

TKC Kyushu Consolidated

Accounting

Information

Information Center

Firm

processing(Koga City, Fukuoka)

Businessfacilities

Accounting

Information

Firm

processing

Businessfacilities

Accounting

Information

Firm

processing

Businessfacilities

Information Center(Kita-ku, Okayama City,
Okayama)

18

－

174

－

27

－

7

－

－

3

－

22

10

5

－

384

11

－

10

－

38

35

－

7

－

15

28

203
2,341.48

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

－

34

－

As of September 30, 2017
Book values (millions of yen)
Name of office(address)

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

Segment

Facilities

Accounting

Information

Firm

processing

Businessfacilities

Buildings
andstructures

Machinery,equipment
andvehiclesLand(area in m2)－－

1,120.00

6

Tools,
furnitureandfixtures

Other

No. ofemployees(no. ofpeople)

Total

2

－

9

11

1

－

178

19

0

－

220

6

3

－

642

－

Accounting
Firm
TKC Ibaraki SCG Service Center

Business(Tsukuba City, Ibaraki)

Local

147
Office facilities

29－

Office facilities

22－

Governments
Business
TKC Yamaguchi SCG Service

Accounting

CenterFirm(Yamaguchi City, Yamaguchi)

Business

197
814.00Accounting
Firm

391

Dormitories, company housing

Business

Welfare(Utsunomiya-shi, Tochigi)

Localfacilities－247

5,326.69

Governments
Business(2) Domestic subsidiaries
As of September 30, 2017
Book values (millions of yen)Company nameName of office(address)

Tokyo Line

Hanyu Plant

Printer(Hanyu-shi,Company

Saitama)

Facilities

Printing

Printing

Business

equipment

Solution Center

Printing

Printing(Hanyu-shi,

Business

equipment

Buildings
andstructures

71

100

493

240

Land
(area in m2)

145
7,275.17

Tools,
furnitureandfixtures

Other

Total

No. ofemployees(no. ofpeople)

7

34

358

67

12

305

1,161

42

DPS

Tokyo Line
PrinterCompany(Notes)Segment

Machinery,equipment
andvehicles

110
5,776.00

Saitama)

1.
2.

The figures above do not include consumption taxes.
The status of equipment and facilities held by consolidated companies other than those described above
are small 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
737 million yen

－

35

－

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, 2017)—excluding routine updates of facilities and equipment—were as follows.
Establishment of major facilities and equipment
Planned start and completion
dates

Planned investments
Company nameName of office

Address

TKC
Corporation
Customer
Support Center

Kanumashi,
Tochigi

Segment

Accountin
g FirmBusiness

Facilities

Acquisition of
office building

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

1,736

1,092

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

－

36

－

Selffunded

Floor area
Start

Completion

March 2017

March 2018

4,969㎡

Part 4 [Information on the Company]
1 [Information on the Company's Stock](1)

Total number of shares, etc.
(i) [Total number of shares]

Class

Total number shares authorized to be issued (shares)

Common stock

60,000,000

Total

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

As of end of current
fiscal year
Number of sharesissued (shares)(September 30, 2017)

Common stock

26,731,033

Total

26,731,033

Name of stock
exchange on which
Number of shares issued
the Company is
as of the filing datelisted, or name of
Number of shares issued
Authorized(shares)
Financial(December 25, 2017)
Instruments Firms
Association
First Section of the
26,731,033
Tokyo Stock
Exchange
26,731,033

－

37

－

－

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:(i)First Stock Option (Resolution of the Board of Directors on February 10, 2012)
As of end of current fiscal year
(September 30, 2017)

As of the end of the monthprior to the filing date(November 30, 2017)

122

122

－

－

Number of subscription rights to shares
Number of own subscription rights to shares among all
subscription rights to sharesClass of shares to be issued upon exercise subscription
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 (in yen)

Common stock

Same as left

12,200 (Notes) 1
1
From March 13, 2012
To March 12, 2047
The price of issuing shares
1,146
Amount of capitalization
573(Notes) 2

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

12,200 (Notes) 1
Same as left
Same as left

Same as left

Conditions for exercise of subscription rights to shares(Notes) 3

Same as left

Matters concerning the transfer of subscription rights tosharesAcquisition of subscription
rights to shares throughtransfers shall be subject toapproval by resolution of theBoard of Directors.

Same as left－

Matters concerning substitute payments
Matters concerning the grant of subscription rights toshares upon reorganization(Notes) 4－
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
exercise of subscription rights to shares.
3. Conditions for exercise of subscription rights to shares(1) A holder of subscription rights to 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 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
－

38

－

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 thedate of such 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 toshares 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) (hereinafter 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 (hereinafter, 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 dateof 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, the date a shareexchange 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 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 toshares defined in (Notes) 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 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
and amount of capitalization 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 (Notes) 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 (i), (ii), (iii), (iv) or (v) be approved at a General Meeting of
Shareholders of the Company (or through a resolution by the Board of Directors of the Company, or upon thedecision of an executive officer entrusted with such a matter pursuant to the provisions set forth in Article 416,
Paragraph 4 of the Companies Act in case a resolution of the General Meeting of Shareholders is not required):(i) Resolution approving a merger agreement where the Company would become a dissolved company;(ii) Resolution approving a company split agreement or a company split plan where the Company would become asplit company;(iii) Resolution approving a share exchange agreement or a share transfer plan where the Company would become
a wholly owned subsidiary;
－

39

－

(iv) 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;(v) 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.

(ii)

Second Stock Option (Resolution of the Board of Directors on November 5, 2012)
As of end of current fiscal year
(September 30, 2017)

As of the end of the monthprior to the filing date(November 30, 2017)

200

200

－

－

Number of subscription rights to shares
Number of own subscription rights to shares among all
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 (in yen)

Common stock

Same as left

20,000 (Notes) 1
1
From December 8, 2012
To December 7, 2047
The price of issuing shares
1,033
Amount of capitalization
517(Notes) 2

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

20,000 (Notes) 1
Same as left
Same as left

Same as left

Conditions for exercise of subscription rights to shares(Notes) 3

Same as left

Matters concerning the transfer of subscription rights tosharesAcquisition of subscription
rights to shares throughtransfers shall be subject toapproval by resolution of theBoard of Directors.

Same as left－

Matters concerning substitute payments
Matters concerning the grant of subscription rights toshares upon reorganization(Notes) 1
23(Notes) 4－
Same as left

Refer to (Notes) 1 under the section, "First Stock Option."
Refer to (Notes) 2 under the section, "First Stock Option."
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
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 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 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
from the date following the date of such approval or resolution. However, this shall exclude cases wheresubscription rights to shares of a restructured company are to be issued in accordance with the matters concerning
the issuing of subscription rights to shares upon reorganization.
－

40

－

(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 (Notes) 4 under the section, "First Stock Option."(iii)

Third Stock Option (Resolution of the Board of Directors on November 12, 2013)
As of end of current fiscal year
(September 30, 2017)

As of the end of the monthprior to the filing date(November 30, 2017)

224

224

－

－

Number of subscription rights to shares (shares)
Number of own subscription rights to shares among all
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 (in yen)

Common stock

Same as left

22,400 (Notes) 1
1
From December 10, 2013
to December 9, 2048
The price of issuing shares
1,324
Amount of capitalization
662(Notes) 2

Period to exercise subscription rights to shares

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

22,400 (Notes) 1
Same as left
Same as left

Same as left

Conditions for exercise of subscription rights to shares(Notes) 3

Same as left

Matters concerning the transfer of subscription rights tosharesAcquisition of subscription
rights to shares throughtransfers shall be subject toapproval by resolution of theBoard of Directors.

Same as left－

Matters concerning substitute payments
Matters concerning the grant of subscription rights toshares upon reorganization(Notes) 4－
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
exercise of 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 asa Director or Auditor or as an employee of the Company. However, if a person who has lost his/her position as
－

41

－

4.

Director or Auditor or as an employee of the Company is appointed Director of the Company or employed by theCompany 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 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
from the date following the date of such approval or resolution. However, this shall exclude cases wheresubscription rights to shares of a restructured company are to be issued in accordance 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.
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) (hereinafter 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 (hereinafter, 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 dateof 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, the date a shareexchange 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 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 toshares defined in (Notes) 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 capital reserve occurring when issuing shares upon exercise ofsubscription rights to shares:(i) 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.
(ii) The amount of capital reserve to be increased shall be the amount calculated by subtracting the amount of
capital increase stipulated in (i) above from the amount of maximum increase in capital described in (i) 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 (Notes) 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 (i), (ii), (iii), (iv) or (v) be approved at a General Meeting of
Shareholders of the Company (or through a resolution by the Board of Directors of the Company, or upon the
－

42

－

decision of an executive officer entrusted with such a matter pursuant to the provisions set forth in Article 416,
Paragraph 4 of the Companies Act in case a resolution of the General Meeting of Shareholders is not required):(i) Resolution approving a merger agreement where the Company would become a dissolved company;(ii) Resolution approving a company split agreement or a company split plan where the Company would become asplit company;(iii) Resolution approving a share exchange agreement or a share transfer plan where the Company would become
a wholly owned subsidiary;(iv) 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;(v) 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.

(iv) Fourth Stock Option (Resolution of the Board of Directors on November 11, 2014)
As of end of current fiscal year
(September 30, 2017)

As of the end of the monthprior to the filing date(November 30, 2017)

191

191

－

－

Number of subscription rights to shares (shares)
Number of own subscription rights to shares among all
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 (in yen)

Common stock

Same as left

19,100 (Notes) 1
1
From December 13, 2014
to December 12, 2049
The price of issuing shares
1,570
Amount of capitalization
785(Notes) 2

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

19,100 (Notes) 1
Same as left
Same as left

Same as left

Conditions for exercise of subscription rights to shares(Notes) 3

Same as left

Matters concerning the transfer of subscription rights tosharesAcquisition of subscription
rights to shares throughtransfers shall be subject toapproval by resolution of theBoard of Directors.

Same as left－

Matters concerning substitute payments
Matters concerning the grant of subscription rights toshares upon reorganization(Notes) 1.
2.
3.
4.

(Notes) 4

Refer to (Notes) 1 under the section, "Third Stock Option."
Refer to (Notes) 2 under the section, "Third Stock Option."
Refer to (Notes) 3 under the section, "Third Stock Option."
Refer to (Notes) 4 under the section, "Third Stock Option."

－

43

－

－
Same as left

(v) Fifth Stock Option (Resolution of the Board of Directors on November 10, 2015)
As of end of current fiscal year
(September 30, 2017)

As of the end of the monthprior to the filing date(November 30, 2017)

162

162

－

－

Number of subscription rights to shares (shares)
Number of own subscription rights to shares among all
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 (in yen)

Common stock

Same as left

16,200 (Notes) 1
1
From December 12, 2015
To December 11, 2050
The price of issuing shares
2,671
Amount of capitalization
1,336(Notes) 2

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

16,200 (Notes) 1
Same as left
Same as left

Same as left

Conditions for exercise of subscription rights to shares(Notes) 3

Same as left

Matters concerning the transfer of subscription rights tosharesAcquisition of subscription
rights to shares throughtransfers shall be subject toapproval by resolution of theBoard of Directors.

Same as left－

Matters concerning substitute payments
Matters concerning the grant of subscription rights toshares upon reorganization(Notes) 1.
2.
3.
4.

(Notes) 4

Refer to (Notes) 1 under the section, "Third Stock Option."
Refer to (Notes) 2 under the section, "Third Stock Option."
Refer to (Notes) 3 under the section, "Third Stock Option."
Refer to (Notes) 4 under the section, "Third Stock Option."

－

44

－

－
Same as left

(v)Sixth Stock Option (Resolution of the Board of Directors on November 8, 2016)
As of end of current fiscal year
(September 30, 2017)

As of the end of the monthprior to the filing date(November 30, 2017)

160

160

－

－

Number of subscription rights to shares (shares)
Number of own subscription rights to shares among all
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 (in yen)

Common stock

Same as left

16,000 (Notes) 1
1
From December 13, 2016
to December 12, 2051
The price of issuing shares
2,558
Amount of capitalization
1279(Notes) 2

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

16,000 (Notes) 1
Same as left
Same as left

Same as left

Conditions for exercise of subscription rights to shares(Notes) 3

Same as left

Matters concerning the transfer of subscription rights tosharesAcquisition of subscription
rights to shares throughtransfers shall be subject toapproval by resolution of theBoard of Directors.

Same as left－

Matters concerning substitute payments
Matters concerning the grant of subscription rights toshares upon reorganization(Notes) 1.
2.
3.
4.

－

(Notes) 4

Same as left

Refer to (Notes) 1 under the section, "Third Stock Option."
Refer to (Notes) 2 under the section, "Third Stock Option."
Refer to (Notes) 3 under the section, "Third Stock Option."
Refer to (Notes) 4 under the section, "Third Stock Option."(3) [Exercise of Corporate 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(November 30, 2009)(Note)

Increase or
decrease intotal number
of issued
shares(shares)

Balance of
total number
of issued
shares(shares)(1,185,800)

26,731,033

Increase or
decrease incapital stock(millions of
yen)
－
－

45

－

Balance ofcapital stock(millions of
yen)
5,700

Increase or
decrease incapitalreserve(millions ofyen)

Balance ofcapitalreserve(millions of
yen)

－

5,409

(Note) Decrease caused by cancellation of treasury stock.

－

46

－

(6)

[Shareholders Composition]
As of September 30, 2017
Status of shares (100 shares in one unit of shares)

Numberof shares
less than
one unit(shares)

Financial
institutio
ns

Other
corporati
on

－

30

24

110

136

3

7,766

8,069

－

－

81,822

4,345

61,70835,003

7

84,037

266,922

38,833

Classificati Governm
ent &onmunicipa
litiesNumber ofshareholdersNumber ofshares held
(shareunits)

Foreign corporate
bodies, etc.
Otherindividua
NonIndividualsindividualslsFinancial
Instrume
ntsbusiness
operators

Total

Percentageof shares
－
30.7
1.6
23.1
13.1
0.0
31.5
100.0
－
held (%)(Notes)1. Of the 349,981 shares held as treasury stock, 3,499 share units are included in "individuals and others" and 81
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
Iizuka Takeshi ScholarshipFoundation
Daido Life Insurance Company
TKC Employee Shareholding
Association
Sozeishiryokan (Institute of Tax
Research and Literature)
Masaharu Iizuka
The Hongkong and Shanghai
Banking Corporation, Tokyo
Branch, standing proxy of theState Street Bank and Trust
Company
The Master Trust Bank ofJapan, Ltd. (trust account)
Tokio Marine & Nichido Fire
Insurance Co., Ltd.
Aioi Nissay Dowa InsuranceCo., Ltd.
Sompo Japan Nipponkoa
Insurance Inc.
Total

As of September 30, 2017
Percentage of
Number of sharesshares held to theheld (share units)
total number of(hundreds of shares)
issued shares (%)

Address1758 Tsurutamachi, Utsunomiya-shi,
Tochigi
1-2-1 Edobori, Nishi-ku, Osaka-shi,
Osaka36,524

13.7

25,690

9.6

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

16,3396.1

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

12,465

4.7

Utsunomiya-shi, Tochigi

11,282

4.2

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

8,978

3.4

2-11-3 Hamamatsucho, Minato-ku, Tokyo

7,827

2.9

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

6,664

2.5

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

5,983

2.2

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

5,983

2.2

－

137,737

51.5

－

47

－

(8)

[Status of Voting Rights](i)[Shares Issued]

As of September 30, 2017
Number of shares(shares)Category

Shares with full voting right (others)
Shares less than one unit
Total number of shares issued

Commonstock
Commonstock
Commonstock

Description

－

－

－

－

－

－

－

－

－

355,400－－

26,336,800

263,368－

38,833－－

26,731,033－－

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.)

Number of voting rights(units)Total voting rights held by all－－
263,368
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.
(ii) [Treasury Stock, etc.]

Name ofshareholder

TKC Corporation
TKC Shuppan
Corporation
Total

Address ofshareholder
1758 Tsurutamachi,
Utsunomiya-shi,
Tochigi
4-8-8 Kudanminami,
Chiyoda-ku, Tokyo－

Number ofshares held
under own
name (shares)

Number ofshares held
under othernames (shares)

As of September 30, 2017
Percentage ofshares held to the
Total shares
total number ofheld (shares)
issued shares(%)

349,900－

349,900

1.31

5,500

－

5,500

0.02

355,400－

355,400

1.33

－

48

－

(9)

[Stock Option Scheme]

The Company has adopted a stock-based compensation stock option schemein accordance with the provisions of the Companies Act.

that issues subscription rights to shares

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

9 Directors of the Company (excluding Outside Directors)

shares2 Auditors of the Company (excluding Outside Auditors)

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

As described in (2) Information on Share Subscription Rights
Same as above

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

sharesPeriod to exercise subscription rights to shares

Same as above

Conditions for exercise of subscription rights to shares

Same as above

Matters concerning the transfer of subscription rights to shares

Same as above

Matters concerning substitute payments

Same as above

Matters concerning the grant of subscription rights to shares

Same as above

upon reorganization

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 toshares10 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
Number of shares

As described in (2) Information on Share Subscription Rights
Same as above

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

sharesPeriod to exercise subscription rights to shares

Same as above

Conditions for exercise of subscription rights to shares

Same as above

Matters concerning the transfer of subscription rights to shares

Same as above

Matters concerning substitute payments

Same as above

Matters concerning the grant of subscription rights to shares

Same as above

upon reorganization

－

49

－

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 toshares10 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
Number of shares

As described in (2) Information on Share Subscription Rights
Same as above

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

sharesPeriod to exercise subscription rights to shares

Same as above

Conditions for exercise of subscription rights to shares

Same as above

Matters concerning the transfer of subscription rights to shares

Same as above

Matters concerning substitute payments

Same as above

Matters concerning the grant of subscription rights to shares

Same as above

upon reorganization

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 toshares11 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
Number of shares

As described in (2) Information on Share Subscription Rights
Same as above

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

sharesPeriod to exercise subscription rights to shares

Same as above

Conditions for exercise of subscription rights to shares

Same as above

Matters concerning the transfer of subscription rights to shares

Same as above

Matters concerning substitute payments

Same as above

Matters concerning the grant of subscription rights to shares

Same as above

upon reorganization

－

50

－

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 toshares

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
Number of shares

As described in (2) Information on Share Subscription Rights
Same as above

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

sharesPeriod to exercise subscription rights to shares

Same as above

Conditions for exercise of subscription rights to shares

Same as above

Matters concerning the transfer of subscription rights to shares

Same as above

Matters concerning substitute payments

Same as above

Matters concerning the grant of subscription rights to shares

Same as above

upon reorganization

Sixth Stock Option (Resolution of the Board of Directors on November 8, 2016)
Date of Resolution

November 8, 2016

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

9 Directors of the Company (excluding Outside Directors)
2 Auditors of the Company (excluding Outside Auditors)
22 Executive Officers of the Company
As described in (2) Information on Share Subscription
RightsNumber of shares

Same as above

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

Same as above

Period to exercise subscription rights to shares

Same as above

Conditions for exercise of subscription rights to shares

Same as above

Matters concerning the transfer of subscription rights tosharesSame as above

Matters concerning substitute payments

Same as above

Matters concerning the grant of subscription rights toshares upon reorganization

Same as above

Class and number of persons eligible for subscription rights toshares－51－

Seventh Stock Option (Resolution of the Board of Directors on November 7, 2017)
Date of Resolution

November 7, 2017Class and number of persons eligible for subscription rights tosharesClass of shares to be issued upon exercise of subscription
rights to shares

Number of shares

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

Period to exercise 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
Common stock
Common stocks: 16,500 shares (Note) 1
The number of shares per one unit of subscription right ofshares (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 allottedsubscription rights to shares should decrease due toabsence of applications for subscriptions, the total numberof common stocks to be issued shall be 100 times the total
number of subscription rights to shares to be allotted.
The amount of assets to be contributed upon exercise ofsubscription rights to shares shall be the amountdetermined by multiplying the amount of 1 yen per shareto be paid in to have such shares issued upon exercise ofeach subscription right to shares, by the number of shares
granted.
From December 11, 2017
To December 10, 2052

Conditions for exercise of subscription rights to shares(Note) 2

Matters concerning the transfer of subscription rights toshares

The acquisition of subscription rights to shares throughtransfers shall require the approval of the Board of
Directors of the Company.
－

Matters concerning substitute payments
Matters concerning the grant of subscription rights toshares upon reorganization(Note) 3(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 thanthose listed above, such as when the Company is engaged in a merger, a company split, a share exchange, or for any otherreason where such an adjustment is required, the Company may adjust the number of shares granted as deemed necessary
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
－

52

－

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 datefollowing the date of such approval or resolution. However, this shall exclude cases where subscription rights toshares of a restructured company are to be issued in accordance with the matters concerning the issuing ofsubscription 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 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) (hereinafter 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 (hereinafter, 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 dateof 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, the date a shareexchange 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 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 toshares defined in (Notes) 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 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:(i) 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.
(ii) The amount of capital reserve to be increased shall be the amount calculated by subtracting the amount of capitalincrease stipulated in (i) above from the amount of maximum increase in capital described in (i) 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 (Notes) 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 (i), (ii), (iii), (iv) or (v) be approved at a General Meeting of Shareholdersof the Company (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, Paragraph 4 of theCompanies Act in case a resolution of the General Meeting of Shareholders is not required):(i) Resolution approving a merger agreement where the Company would become a dissolved company;(ii) Resolution approving a company split agreement or a company split plan where the Company would become asplit company;(iii) Resolution approving a share exchange agreement or a share transfer plan where the Company would become awholly owned subsidiary;
－

53

－

(iv) 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;(v) 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.

－

54

－

2

[Acquisition, etc. of Treasury Stock][Class of shares] Acquisition of shares of common stock under Article 155, Items 3 and 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]
Classification

Number of shares (shares)

Total amount (yen)Status of resolution of Board of Directors (February
10, 2017)(Period of acquisition: February 14, 2017 to February
28, 2017)

100,000

355,000,000

Treasury stock acquired prior to the current fiscal year－－

Treasury stock acquired during the current fiscal year

76,700266,532,500

23,30088,467,500

23.3

24.9

－

－

23.3

24.9

Total number and value of remaining shares withvoting rights
Percentage of the unexercised as at the end of thecurrent fiscal year (%)
Treasury shares acquired during the period
Percentage of the unexercised as of the filing date (%)
Classification

Number of shares (shares)

Status of resolution of Board of Directors (June 28,
2017)(Period of acquisition: June 29, 2017)

Total amount (yen)150,000

510,000,000

Treasury stock acquired prior to the current fiscal year－－

Treasury stock acquired during the current fiscal year

125,000

408,125,000

25,000101,875,000

16.7

20.0

－

－

16.7

20.0

Total number and value of remaining shares withvoting rights
Percentage of the unexercised as at the end of thecurrent fiscal year (%)
Treasury shares acquired during the period
Percentage of the unexercised as of the filing date (%)(3) [Acquisitions of Treasury Stock Not Based on Resolutions of General Meeting of Shareholders or Board of Directors]
Classification

Number of shares (shares)

Treasury stock acquired during the current fiscal
year

739

Total amount (yen)2,380,241

Treasury stock acquired during the current period
159
577,435
for acquisition(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, 2017 up to the date on which this Annual Securities Report
was filed.
－

55

－

(4)

[Disposition and Holding of Acquired Treasury Stock]
Current fiscal year
Category

Number ofshares(shares)

Current period for acquisition

Total amountdisposed(yen)

Number ofshares(shares)

Total amountdisposed(yen)

Acquired treasury stock for which
subscribers were solicited

－

－

－

－

Acquired treasury stock canceled

－

－

－

－

－

－

－

－

30,50059,504,585

－

－

－

－

－

－

349,981－

350,140－

Acquired treasury stock transferred due tomerger, share exchange, or company split
Other(Transferred by the exercise of subscription
rights to shares)(Sold due to demand for sales of fractional
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 sharestransferred through the exercise of subscription rights to shares, shares obtained through the purchase of sharesconstituting less than one unit, and shares sold through demand for sales during the period from December 1,
2017 up to the date on which this Annual Securities Report was filed.

－

56

－

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 Information andCommunication Technology (ICT) and major changes in social systems, it is essential to make advance investments
in research and development efforts and to actively pursue other capital investments to enhance customer support toaccounting 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.
In order to live up to the expectations of shareholders, the Company announced on November 8, 2016 that theestimated dividend amount for interim and year-end dividends for its 51st term would be 40 yen each as ordinary
dividends (for the 50th term, 35 yen ordinary dividends for both interim and year-end dividends, and 5 yen of
dividend in commemoration of the Company's 50th anniversary), the 40-yen interim dividend of which has been
paid after the resolution of the Board of Directors.
The basic policy of the Company is to pay two annual dividends of retained earnings, an interim dividend and a
year-end dividend. Year-end dividends are resolved at the General Meeting of Shareholders and interim dividends byresolution of the Board of Directors.
Further, the Company provides in its Articles of Incorporation that interim dividends as set forth in Article 454,
Paragraph5 of the Companies Act as of March 31 each year 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 44.9%.

Date of Resolution
May 10, 2017
Meeting of theBoard of Directors
December 22, 2017
Ordinary General
Meeting of
Shareholders

Total amount of cash
Dividend per share
dividends(yen)(millions of yen)
1,060

40

1,582

60

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

47th Term

48th Term

49th Term

50th Term

51st Term

Year end

September 2013

September 2014

September 2015

September 2016

September 2017

Highest (yen)

1,800

2,359

3,690

3,365

3,530

Lowest (yen)

1,390

1,576

1,841

2,393

2,716

(Note) The highest and lowest share prices are based on the market prices on the First Section of the Tokyo Stock
Exchange.
－57－

(2) [Highest and Lowest Prices by Month for the Past Six Months]
MonthApril 2017

May 2017

June 2017

July 2017

August 2017

September 2017

Highest (yen)

3,305

3,240

3,325

3,345

3,270

3,475

Lowest (yen)

2,946

3,040

3,105

3,170

3,040

3,075

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

－

58

－

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

Official title

Position

Name

Date of Birth

Brief biography

Term ofofficeNumberof shares
held(shareunits)(hundredsof shares)

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 ofRepresentative
Director

President andExecutive

Local Governments Business Division
Kazuyuki Sumi

September 28, 1948

December 2006 Director, Senior Managing Director andOfficer,(Notes) 6

216(Notes) 6

63(Notes) 6

70

Executive Officer, Director of Local
Governments Business DivisionDecember 2008 Representative Director, Vice President andExecutive 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)

October 2016

Representative Director, President andExecutive Officer (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 ofVice President

Business Administrationand Executive
Representative

Officer,

Director

Chief Director

December 2006 Director, Managing Director and Executive
Hitoshi Iwata

March 31, 1957

Officer, Chief Director of the Business
Administrationof Business

December 2008 Representative Director, Vice President andAdministration

Executive Officer, Chief Director of
Business Administration (current position)
August 2014

Representative Director, Vice President,
TKC Financial Assurance K.K. (current
position)

April 2002
SeniorRepresentative
Director

Joined TKC

December 2010 Director, Executive Officer, Sales ofCorporate Information Systems, Chief

Managing

Director of G Project of Sales, Corporate

Director andInformation Systems, Accounting Firm

Executive
Officer,Business Division
Masanori Iizuka

March 12, 1975

October 2012

Director, Executive Officer, Chief Directorof Sales of Corporate Information Systems,

Director of

Accounting Firm Business Division

Accounting

December 2012 Director, Managing Director and Executive

Firm Business

Officer, Chief Director of Sales, Corporate

Division

Information Systems, Accounting Firm
Business Division

－

59

－

April 2014

Director, Managing Director and Executive
Officer, Chief Director of Sales,
Accounting Firm Business DivisionDecember 2014 Representative Director, Senior Managing
Director and Executive Officer, Chief
October 2016

Director of Sales, Accounting Firm
Business Division
Representative Director, Senior Managing
Director and Executive Officer, Director of
Accounting Firm Business Division(current position)

－

60

－

Official title

Position

Name

Date of Birth

Brief biography

April 1979
June 2013

Managing
Director andExecutive
Director

Officer,

July 2014
Makoto Ito

September 2, 1956

Chief of the Tax
ResearchCenterManaging
Director andExecutive
Officer,
Director

Director of

Masao Yuzawa

January 16, 1959

Local
Governments

Numberof shares
held
Term of(shareofficeunits)(hundredsof shares)

Joined National Tax Agency
Deputy Commissioner (Collection),
National Tax Agency
Resigns from National Tax Agency

September 2014 Joined TKC, Deputy Chief, Tax Research(Notes) 6
CenterDecember 2014 Director, Managing Director and Executive
Officer, Chief of Tax Research Center(current position)
April 1979
Joined TKC
December 2006 Executive Officer, Local Governments
Business Division
Chief Director of Sales Planning
December 2011 Director, Executive Officer, Local
Governments Business Division
January 2012
Director, Executive Officer, Director of
Local Governments Business Division10(Notes) 6

43

Joined TKC
Executive Officer, Chief of Accounting
Information Systems Development Center,
Systems Development Research Center,Accounting Firm Business Division
October 2012
Executive Officer, Chief of Financial Host
System Development Center, Systems
Development Research Center, Accounting
Firm Business Division
January 2015
Executive Officer, Chief of Accounting(Notes) 6
Information Systems Design Center,
Systems Development Research Center,Accounting Firm Business DivisionDecember 2016 Director, Executive Officer, Director of
Sales Planning, Sales, Accounting Firm
Business DivisionDecember 2017 Director, Managing Director and Executive
Officer, Chief of Systems Development
Research Center, Accounting Firm Business
Division (current position)

26

December 2014 Director, Managing Director and Executive
Officer, Director of Local Governments
Business Division (current position)

Business
Division

April 1989
August 2012Managing
Director andExecutive
Officer,
Chief ofDirector

Systems
Development

Yasuo Igarashi

January 4, 1967

ResearchCenter,Accounting
Firm Business
Division

April 1991
June 2012

Executive
Officer,
Deputy Chief ofSystems
Director

Development
Research

Hitoshi Uotani

August 3, 1967

Center,Accounting
Firm Business
Division

April 2003

Executive
Director

Officer,
Chief of Cloud

Joined TKC
Executive Officer, Chief of Corporate
Information Systems Development Center,
Systems Development Research Center
October 2012
Executive Officer, Chief of Systems
Development Research Center, Accounting
Firm Business DivisionDecember 2012 Director, Executive Officer, Chief ofSystems Development Research Center,Accounting Firm Business DivisionDecember 2014 Director, Managing Director and Executive (Notes) 6
Officer, Chief of Systems Development
Research Center, Accounting Firm Business
Division
December 2016 Director, Executive Officer, Chief ofSystems Development Research Center,Accounting Firm Business DivisionDecember 2017 Director, Executive Officer, Deputy Chiefof Systems Development Research Center,Accounting Firm Business Division(current position)

Satoshi Hitaka

January 19, 1971

Business－

Joined TKC

December 2010 Executive Officer, Director of ASP Service
Promotion, Sales Planning, Local
Governments Business DivisionDecember 2011 Director, Executive Officer, New Business

61

－

21

(Notes) 6

19

Promotion,
Local

January 2012

Governments
Business
Division

April 1983
January 2009

Joined TKC
Executive Officer, Director of Local
Governments Business Division, Chief
Director of System Development DivisionDecember 2016 Director, Executive Officer, Director of
Local Governments Business Division,
Chief Director of System Development
Division (current position)

Executive
Officer,
Director of
Local
Governments
Director

Business

Strategy, Local Governments Business
Division
Director, Executive Officer, Chief Directorof Cloud Business Promotion, Local
Governments Business Division(current position)

Hiroshi Nakamura

March 2, 1961

Division, Chief(Notes) 630(Notes) 6

10

Director of
SystemDevelopment
Division
July 1986

Registered as certified tax accountant

July 1986
Director－

Hiroshi Ashikawa

October 17, 1960－

Started business as certified tax accountant
Chief of Ashikawa Accounting Firm
(current position)
Representative Director, K.K. MACOS(current position)
December 2014 Director of the Company (current position)

62－

Official title

Position

Name

Date of Birth

Brief biography

October 1990

TermofofficeNumberof shares
held(hundreds ofshares)Registered as certified public tax
accountant

November 1990 Started business as certified public tax－

Director

Misao Taguchi

June 15, 1960

June 2011accountant
Representative Partner, certified public(Notes)10

6

tax accounting firm Taguchi Partners
Kaikei (current position)
December 2016 Director, TKC (current position)
April 1979

Auditor (fulltime)－

Masataka Iida

December 8, 1954

Joined TKC

April 2004

Section Chief of Internal Audit

October 2005

Department
Deputy Director of Internal Audit
Department

January 2011

(Notes)40

4Director of Internal Audit Department

December 2014 Full-time Auditor (current position)
March 1975
Auditor (fulltime)－

TsuneoMiyashita

Joined TKC

December 2006 Executive Officer, Director of TKCNF
May 28, 1949

Research Committee Support Division
October 2010

Director of Chairman's Office(Notes)98

7

December 2016 Full-time Auditor (current position)－

AuditorKenji Matsumoto

March 10, 1947

September

Registered as certified public tax

1986
Septemberaccountant
Started business as certified public tax

1986

accountant

November 2010 Representative Partner and Certified(Notes)10

5Public Tax Accountant, Aoyama
Accounting Firm (current position)
December 2015 Auditor (current position)－

AuditorYoshikiTakashima

April 18, 1959

April 1990

Registered as attorney

January 2003

Partner, Shibata, Yamaguchi &Takashima Law Firm (current position)

December 2008 Auditor (current position)
September
2015(Notes)－7

Outside Auditor, Atomlivintech Co., Ltd.
(current position)
Total

666

(Notes) 1. Director Satoshi Hitaka is the spouse of the elder sister of Masanori Iizuka, Representative Director, Senior Managing
Director and Executive Officer.
2.

Directors Hiroshi Ashikawa and Misao Taguchi are Outside Directors.

3.

Auditors Kenji Matsumoto and Yoshiki Takashima are Outside Auditors.

4.

Four years from the close of the Ordinary General Meeting of Shareholders held December 19, 2014.

5.

Four years from the close of the Ordinary General Meeting of Shareholders held December 22, 2015.

6.

Two years from the close of the Ordinary General Meeting of Shareholders held December 22, 2016.

7.

Four years from the close of the Ordinary General Meeting of Shareholders held December 22, 2016.

－

63

－

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 overthe fate 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 resourcesthat will enable us to develop and supply software products and services that can drive our customers' businessto 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 tothe original 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
－

64

－

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.
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 oncompliance 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, all four of whom 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 andOther Functions (Overview of the Current Corporate Governance System)(i)

Execution of business
The Representative Director & President chairs the meetings of the Board of Directors, which are held atleast 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 2 Outside Directors,
each Director represents a business unit as operating officer in charge and participates in deliberations
and express their opinions. The Company adopts an executive officer system since December 22, 2006.

(ii) Supervision
The Board of Directors oversees the operations of the Company and supervises the execution of businessby each Director by receiving monthly business reports from the executive officers and heads of the
major business units of the Head Office.
(iii) Auditing
Auditors attend monthly meetings of the Board of Directors and other major internal meetings andexpress their opinions on general managerial or individual issues. The Board of Auditors audits theperformance of duties by Directors in accordance with the Company's audit policy and annual audit plansestablished in reference 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
and Representative Directors and exchange opinions on methods and results of accounting audit.
(iv) 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 business performances, personalities and depth of knowledge, and propose thepromotions and reappointments of Directors to be resolved at General Meetings of Shareholders.
－

65

－

(v) Remuneration
The Company implements a performance-based compensation scheme. Director compensation consistsof two parts: fixed-amount compensation and performance-based compensation. Fixed-amountcompensation is determined in January each year based on the level of achievement of the Company'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
performance goals in previous fiscal year, and the level of achievement of performance goals by eachbusiness unit that each Director oversaw during previous fiscal year. Proposals on remuneration aredeveloped at the meeting of Representative Directors and approved by resolution of the Board of
Directors. Compensation for Auditors consists of fixed amount compensation and is determined byconsultation 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 compliance-related
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 holddiscussions 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 of duties bydirectors complies with laws and regulations and the Articles of Incorporation (in relation to the first half of
Article 362, Paragraph 4, Item 6 of the Companies Act)(i)

Directors must comply with all laws and regulations, the Articles of Incorporation, and the Resolutions ofGeneral Meetings of Shareholders (hereinafter "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 maintaincontrol over the fate of accounting firms," and the "management of electronic data processing centers to
improve the administrative efficiency of local governments," and perform their duties to achieve theseobjectives.

(ii)

Directors must perform their duties based on the Company's Rules of Administrative Authority and
Dividing the Duties of Directors established by the Board of Directors, and cooperate with other
Directors in improving corporate performance.

(iii) 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 occurrenceof any illegal conduct. If such matter is of significant importance, the Director in charge of legal affairs
shall immediately report to the Representative Director and President (hereinafter, the "President"), and
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full-time Auditors and outside company attorneys and receive their guidance as well as report theparticulars to the Board of Directors.
(iv) In the event a Director finds that an act or a plan of another Director or an employee may be in violationof the laws and regulations, he/she must, without delay, give warning to such Director or employee as
joint bearer of managerial responsibilities. If such matter is of significant importance, said Director must
immediately report to the President and receive guidance.
(v)

Prior to attending any meetings of the Board of Directors, Directors must review the matters to bedeliberated, reported and/or discussed at the next meeting of the Board of Directors (hereinafter, "mattersto be deliberated") to make sure that there are no omissions in view of the scope of matters to bedeliberated under the regulations concerning the duties of the Board of Directors (Article 362) andauthority of Directors (Article 363) as stipulated in the Companies Act and the Company's Rules of theBoard of Directors. If there are other matters to be deliberated, they must be brought to the Director(s) incharge of the meetings of the Board of Directors without delay.

(vi) Directors must attend the meetings of the Board of Directors and voice their opinions and exercise theirvoting 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 andoperational risks, and give the opportunity and time for the Board of Directors to review countermeasures
for such issues in advance.
(vii) The entire process of deliberations at the meetings of the Board of Directors shall be recorded inaccordance with the Company's Rules on Management of Information Concerning the Decision-making
Process of the Board 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 theminutes of meeting of the Board of Directors.
(viii) Directors must attend the General Meeting of Shareholders, and provide answers in a sincere manner toany questions pertaining to the execution of their duties when asked by shareholders and instructed by
the Chairman to provide such answers.
(ix) Upon deliberations at the meetings of the Board of Directors, the Chairman of the Board of Directors
must seek the opinions of Auditors in attendance as to whether any resolution may be in violation of laws
and regulations. 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.
(x)

As the highest authority of the Company, Directors are obliged to be acutely aware of the social
responsibilities of the Company under the principles set forth in the "TKC Charter of Corporate Code2006," work to improve their characters and insight, strictly observe all laws and regulations andcompany rules, eliminate ego and put aside personal affairs, exhibit discerning judgments to achievebusiness objectives, take lead in setting good examples, and strive to gain utmost trust of employees
under their charge.

(xi) It is the basic policy of the Company to have no involvement with antisocial forces, bodies andindividuals, and to not comply with unjust and unlawful requests. The Company shall develop anddisseminate 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, theCompany shall collaborate closely with the 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, Item 6 of the Companies Act)
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(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)(i) Of the information relating to the execution of duties by Directors (hereinafter, "information on Directors'
duty"), information pertaining to the minutes of General Meetings of Shareholders shall be stored andmanaged in accordance with the Company's Rules of Management of Information Concerning the Minutesof General Meetings of Shareholders.
(ii) Of the information on Directors' duty, information pertaining to deliberations at the meetings of the Boardof Directors shall be stored and managed in accordance with the Company's Rules of Management ofInformation Concerning Decision-making Processes of the Board of Directors as described in [1] (vii)
above.
(iii) Of the information on Directors' duty, information submitted to or received from government authorities
and information sent to or received from outside parties in relation to legal affairs shall be stored andmanaged based on the Company's Rules of Management of Information Concerning Legal Affairs.
(iv) Information on Directors' duty not included above shall be divided into the following three categories andstored and managed based on the Company's Rules of Management of Information Concerning the Daily
Operations of Directors:
1. of the meetings called by a Director (excluding the General Meetings of Shareholders and meetings ofthe Board 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;
2. written applications for approval and relevant documents settled by the Directors based on the
Company's Rules Concerning Requests for Decisions;
3. other important information pertaining to the execution of duties by Directors.
(v) 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 databaseshall be 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(i) 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 strategic risks 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.
(ii) In order to prevent the loss of business opportunities, all Directors must actively gather information andretain unrelenting spirit of inquiry to capture business opportunities that contribute to our customers'
success ahead of others, exhibit outstanding intuition to make the best of such business opportunities, anddevelop timely and optimal schematic plans and propose the execution to the President.
(iii) Upon receiving such proposals from Directors (including employees) as set forth above, the President mustevaluate 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:
1. Conformances with the management philosophy of the Company;
2. Compliances;
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3. Expected degree of contributions to customers' business;
4. Anticipated feedback from customers;
5. Technical feasibilities;
6. Funds and costs necessary;
7. Other matters, such as the principle of good faith with business partners.
(iv) 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 business performances, personalities and depth of knowledge, and propose thepromotions and reappointments of Directors to be resolved at General Meetings of Shareholders.
(v) 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 Representative Director & President throughdiscussion 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(i) Operational risks are risks related to the performance of business activities that arise out of uncertainties ofthe performance of appropriate and efficient operations. These risks shall be divided and controlled under
the following two categories:
1. risks that may occur across all divisions (hereinafter, "common risks");
2. risks that may occur in specific divisions (hereinafter, "division-specific risks").
This section provides for regulations for the management of common risks.
(ii) 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:
1. Risks that have high degree of urgency;
2. Risks associated with compliance;
3. Risks associated with confidentiality obligations of the Company;
4. Risks associated with the preservation of assets and accounting;
5. Risks associated with the preparation of regulations and manuals for operation of business;
6. Risks associated with the workplace environment and labor management;
7. Other risks deemed necessary.
(iii) 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 suchfindings to the President and discuss the actions to be taken.
(iv) The Director in charge shall sort and classify unresolved risks and formulate a basic policy on how tohandle 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.
(v) In the event a major risk becomes apparent, the Director in charge shall immediately take actions toprevent and minimize the spread of damages in accordance with the Regulations.
(vi)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
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Directors within two months and undertake any revisions to the Regulations.
(vii)
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.
(viii)The Director in charge shall submit to the President applications for special award money to those
uncovering major common risks that were previously unnoticed or those proposing effective measures toprevent recurrence of apparent risks.
(2-2-2) Regulations for the management of operational risks that may occur in specific divisions(i) 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:
1. Systems Development Research Center Operation Improvement Committee;
2. Municipality Systems Development & Operations Division Operation Improvement Committee;
3. Consolidated Information Centers Operation Improvement Committee;
4. SCG Service Centers Operation Improvement Committee;
5. Municipality Sales Division Operation Improvement Committee;
6. Supplier Business Operation Improvement Committee;
7. Tokyo Head Office Operation Improvement Committee;
8. Personnel & Salary Systems Improvement Committee;
9. Risk Management Committee;
10. Other committees that the Board of Directors deems necessary to establish.
(ii) 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.
(iii) Division-specific risks involving an individual committee or a specific division shall be controlled in thesame manner as controlling common risks as prescribed in (2-2-1). Division-specific risks shall beidentified by each committee and reported to the Board of Directors.
(2-2-3) Regulations for the management of hazard and other risks(i) 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 their families, shareholders, clients and external press, and an external advisory teamincluding the company attorneys and to establish a system to respond promptly, prevent and minimize thespread of damages.
(ii) 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 shallbecome the supervising division to take actions. Any legal compliance issue of significant importance shallbe consulted with outside attorneys as external legal advisors.
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(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)(i)

The Company holds regular meetings of the Board of Directors generally on the 10th day of every month,
as well as ad hoc meetings when necessary. The date and time of meetings of the Board of Directors
called for the disclosure of financial statements or in relation to the General Meetings of Shareholders
shall be planned at least six months in advance.

(ii)

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 mediumterm 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 inaccordance with the Company's Rules of the Board of Directors.

(iii) 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 list of dividing duties of Directors and strategic goals shall be submitted by the President, andthe Board of Directors shall deliberate upon their feasibilities in accordance with the Company's Rules of
the Board of Directors.
(iv) At the monthly regular meetings of the Board of Directors, the targeted and actual P/L statements for theentire company and each business unit as of the end of the previous month shall be reported, and theBoard of Directors shall analyze the differences in target and actual results, and discuss actions to betaken to achieve the targeted sales and current profits for the fiscal year.
(v)

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 of the projects in lightof the current management policy, and approve the use of president's strategic reserve funds to the extent
approved by the Board of Director.

(vi) 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
awareness of the fiscal management policy and strategic goals for their division and that the PDCA cycleis thoroughly implemented to achieve these goals, and shall monitor the progress and achievements ofthe entire division at all times and strive to achieve the sales and profit goals for the fiscal year.
(vii) 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 workplaceorganized, and must exhibit leadership to create a workplace environment in which all employees aresafe 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)(i) 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 theapproval of the Board of Directors, distribute them to all employees as guidelines from the President.
(ii) Regular training sessions for all employees of the Company to further understanding of the Compliance
Regulations and Compliance Manual as set forth above shall be conducted in accordance with the plans of
the Internal Audit Department.
(iii) When performing an internal audit on internal business units, the Internal Audit Department must always
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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.
(iv) 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.
(v) In order to prevent the leaking of customer information and other confidential information, the body text
and attached files of all electronic mails sent from internal PCs to outside the Company shall be stored fora certain period of time.
(vi) In preparation for the unlikely event that a Company employee violates any laws or regulations, theCompany shall establish a system whereby the Internal Audit Department or the employee that first learnsof such information 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, Item 5 of the Ordinance for Enforcement of theCompanies 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 1 of the Companies Act, and those equivalent (hereinafter "Directors, etc." in items (C) and (D)below) of the Company's subsidiaries (in relation to Article 100, Paragraph 1, Item 5(a) of the Ordinance for
Enforcement of the Companies Act)(i) 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 headedby the chief of the Business Administration Headquarters.
(ii) 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 theheads of relevant business divisions are notified of the risks causing such incident, the degree of damage
expected and impacts on the Company.
(iii) The Group Audit Office shall periodically and thoroughly exchange information with the Subsidiaries'
divisions in charge of internal 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.
(iv) The Company shall assign Directors or employees of Deputy Manager or higher to the Subsidiaries toserve as 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 tosubmit 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 in accordancewith the separate Compliance Regulations, Compliance Manual and other internal rules.
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(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)(i)

The Board of Directors of Subsidiaries (referred to as "Board of Directors" in this section) shall holdregular meetings of the Board of Directors generally on a given day of every month, as well as ad hoc
meetings when necessary. The date and time of meetings of the Board of Directors called for theapproval of financial statements or in relation to the General Meetings of Shareholders shall be plannedat least six months in advance.

(ii)

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
medium-term management plan covering the next three years starting from the upcoming fiscal year shallbe submitted by the president of the Subsidiaries (referred to as "President" in this section and the next
section), and the Board of Directors shall deliberate upon their strategic rationalities in accordance with
the Company's Rules on the Board of Directors.

(iii) 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 list of dividing duties of Directors and strategic goals shall be submitted by the President, andthe Board of Directors shall deliberate upon their feasibilities in accordance with the Company's Rules of
the Board of Directors.
(iv) At the monthly regular meetings of the Board of Directors, the targeted and actual P/L statements for theentire company and each business unit as of the end of the previous month shall be reported, and theBoard of Directors shall analyze the differences in target and actual results, and discuss actions to betaken to achieve the targeted sales and current profits for the fiscal year.
(v)

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 of the projects in lightof the current management policy.

(vi) In executing his/her daily duties, Directors in charge of each business unit shall provide instructions to
the executive officers or managers under his/her immediate control to ensure that they have correct
awareness of the fiscal management policy and strategic goals for their division and that the PDCA cycleis thoroughly implemented to achieve these goals, and shall monitor the progress and achievements ofthe entire division at all times and strive to achieve the sales and profit goals for the fiscal year.
(vii) 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 workplaceorganized, and must exhibit leadership to create a workplace environment in which all employees aresafe and comfortable, inspired and satisfied.
(D) Systems to ensure that performance of duties by directors and employees of the Subsidiaries is inconformance with 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)(i) 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.
(ii) 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
the division in charge of internal audit.
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(iii) 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.
(iv) 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.
(v) In order to prevent the leaking of customer information and other confidential information, the body text
and attached files of all electronic mails sent from internal PCs to outside the Company shall be stored fora certain period of time.
(vi) 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 first learns of such information gives emergency notification to the President informing
him/her of the facts and other relevant information.
(6) Assignment of employees to assist the duties of Auditors of a company with company auditors (in relation to
Article 100, Paragraph 3, Item 1 of the Ordinance for Enforcement of the Companies Act)(i) The Company shall establish an Auditor Office to assist the duties of the Auditors and assign one or more
dedicated employees.
(ii) In determining the specific details pertaining to the preceding item, the Company shall respect the opinionsof the Board of Auditors and take into consideration the opinions of the Director in charge of humanresources and other relevant personnel.
(7) Independence of employees assisting duties of Auditors from Directors of a company with company auditors(in relation to Article 100, Paragraph 3, Item 2 of the Ordinance for Enforcement of the Companies Act)(i) The appointment, transfer, personnel evaluation and disciplinary punishment of employees assisting theduties of Auditors shall be subject to prior consent of the Board of Auditors.
(ii) Employees assisting the duties of Auditors shall not hold concurrent posts that involve the execution of theCompany's business, and shall perform their duties under the direct command of the Board of Auditors,
and their performance shall be evaluated by the Board of Auditors.
(iii) Business units executing the Company's business shall cooperate with employees assisting the duties of
Auditors and allow attendance of such employees at the necessary meetings for them to conduct necessary
investigations and gather necessary information.
(8) Ensuring effectiveness of directions to employees assisting duties of Auditors of a company with company
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 Auditors of a company with company auditors including the systems stipulated
below (in relation to Article 100, Paragraph 3, Item 4 of the Ordinance for Enforcement of the Companies
Act)
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(A) Systems for reporting to Auditors of a company with company auditors by the Directors, accounting advisorsand employees in a company with company auditors (in relation to Article 100, Paragraph 3, Item 4(a) of theOrdinance for Enforcement of the Companies Act)(i) 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.
(ii) The reports and information to be submitted as set forth in the preceding item shall mainly include thefollowing:
1.
2.
3.
4.

Status of activities of business units involved in the risk management of the Company;
Status of activities pertaining to audits and internal audits of the Subsidiaries of the Company;
Important accounting policies and accounting standards of the Company and any changes thereto;Contents of announcements and important disclosure documents on the Company's latest businessresults and earnings forecasts announcements on both non-consolidated and consolidated basis;
5. Circulation of internal approval documents and meeting minutes requested by Auditors.
(iii) 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
matters pertaining to such fact to Auditors.
(iv) 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 suchmeetings.
(B) Systems for reporting to Auditors of a company with company auditors by the 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 the Subsidiaries of a company with company auditors (in relation to
Article 100, Paragraph 3, Item 4(b) of the Ordinance for Enforcement of the Companies Act)(i) All directors, auditors and employees of Subsidiaries shall promptly submit the necessary reports andinformation requested by each Auditor of the Company as established by the Board of Auditors of theCompany.
(ii) The reports and information to be submitted as set forth in the preceding item shall mainly include thefollowing:
1.
2.
3.
4.

Status of activities of business units involved in the risk management of the Subsidiaries;
Status of activities pertaining to the audits by auditors of the Subsidiaries;
Important accounting policies and accounting standards of the Subsidiaries and any changes thereto;
Circulation of internal approval documents and meeting minutes of Subsidiaries requested by Auditors.

(iii) In the event a director, auditor 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, auditor or employee shallimmediately report matters pertaining to such fact to the Auditors of the Company.
(iv) The Company's Auditors shall attend all the meetings of the Board of Directors and other important
meetings of Subsidiaries, and are expected to voice their opinions freely without being requested to do soby the chairman 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 theOrdinance for Enforcement of the Companies Act)
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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 Auditors of acompany with company auditors and the processing of expenses or debts arising from the performance ofother duties (in relation to Article 100, Paragraph 3, Item 6 of the Ordinance for Enforcement of theCompanies Act)The Company shall bear sufficient amounts to cover the procedures on prepayment or reimbursement of expenses
arising from the execution of duties of Auditors and for the processing of expenses or debts arising from theperformance of other duties so as to allow Auditors to sufficiently achieve the execution of the Auditors' duties.
(i) 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.
(ii) Other emergency auditing expenses and contingency expenses shall be estimated in advance by the Board
of Auditors and establish a policy on such expenses. The Board of Directors shall execute the measures
under said determined policy as notified by the Board of Auditors after deliberation and review of suchmeasures in light of the status of execution of the budget for the fiscal year.
(10) Other systems to ensure that audits by the Auditors of a company with company auditors are implemented
effectively (in relation to Article 100, Paragraph 3, Item 7 of the Ordinance for Enforcement of the Companies
Act)(i) Auditors shall receive explanations in advance 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 tobe corrected or changed, and the President must respect such opinions.
(ii) Auditors shall receive reports, as appropriate, on the status of implementation of internal audits, andexpress 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.
(iii) Auditors shall receive explanations in advance on the auditing plans from Accounting Auditors, andreceive reports on auditing methods and audit results and have the exchange of opinions whenever audits
on quarterly settlements and audits on full year settlements are performed.
(iv) 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 shallestablish 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 suchreports 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:－

76－

General Meeting of Shareholders
Appointment/
Dismissal

Board of Directors
11 Directors(Including 2 Outside Directors)

Appointment/
Dismissal

Reports

Appointment/
Dismissal

Reports
Collaboration

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

Appointment/
Dismissal/
Supervision

Reports

Accounting
Auditors
Setting the Agenda for
Appointment/ Dismissal/Refusalof Reappointment

Reports

Instructions
Internal Audit Department

Representative Directors

Business Improvement
Committee

Reports
Instructions,Supervision

Audit

32 Executive Officers

Instructions, Orders

All Divisions, Group Companies

－

77

－

Reports

Requests

IIIInternal Audits and Audits by Auditors

The Company has four Auditors, one of which, Kenji Matsumoto, an Auditor, is a qualified public tax accountant
and has extensive expertise in the areas of finance and accounting. Yoshiki Takashima, an Auditor, is a qualified
attorney, and has extensive expertise in the areas of finance and accounting.
The Internal Audit Department, coordinating closely with the Auditors, audits the operation of all business units ina systematic manner to assess the effectiveness of internal controls and the actual business operations, and reports
the results 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 controlof the President, the Internal Audit Department audits the operation of each business units within the Company
from the perspectives of appropriateness of operation and compliance in accordance with the laws and regulations,
the Articles of Incorporation, guidelines from the President, and work regulations and other internal rules andregulations. 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 24-4-4, Paragraph 1of 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 Forces1.

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(i) Establishment of a Response Control Division and appointment of managers in charge of preventing
unreasonable demands
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 byanti-social forces.
(ii) Coordination with external expert organizations
The Company maintains close ties with external expert organizations, for example, by taking part inliaison groups organized by the police and receiving guidance on how to deal with anti-social forces.
(iii)

Collecting and managing information on anti-social forces
－

78

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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.
(iv)

Preparation of response manuals3

The Company has prepared training materials on compliance-related case studies including topics on how
to deal with anti-social forces, which are distributed and used in compliance training sessions.
(v)

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
the Company and at Group companies.

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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. Taguchi is a representative partner of a certified public tax accounting firm Taguchi
Partners Kaikei, 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 the Board of Directors in order to increase transparency, andprovide valuable input to ensure the legality and validity of decisions made and resolved by
the Board of Directors.

Director

Misao Taguchi
While Taguchi Partners Kaikei is engaged in a business relationship with the Company,
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. Taguchi and generalshareholders, and the Company deems that this would not affect the independence of Mr.
Taguchi.
Mr. Taguchi 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 ofaccounting 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

Hiroshi Ashikawa
While Ashikawa Accounting Firm and MACOS are engaged in a business relationship with
the Company, 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 and general shareholders, and the Company deems that this would not affect theindependence 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 andregulations, and to provide opinions, advice and suggestions in order to ensure the legality,
appropriateness, and validity of the decisions made and resolved by the Board of Directors.

AuditorKenji Matsumoto

While Mr. Matsumoto and the certified public tax accounting firm, Aoyama Accounting Firm
where Mr. Matsumoto serves as Representative Partner and Certified Public Tax Accountant
are engaged in a business relationship with the Company, transactions are based on the sameterms and conditions as with other third parties. Therefore, it is not likely that any conflict ofinterest should occur between Mr. Matsumoto and general shareholders, and the Company
deems that this would not affect the independence of Mr. Matsumoto.
Mr. Matsumoto has no special interest in the Company.
Mr. Takashima is a certified attorney and has been appointed to provide compliance-related
audits and advise from a legal perspective on the execution of duties by the Directors of the

AuditorYoshiki TakashimaCompany.
Mr. Takashima has no special interest in the Company.

－

80

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2.

Support Systems for Outside Directors and Outside Auditors(i) The Company appoints the head of the Business Administration Headquarters, General Affairs Department
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 ofthe Board 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.
(ii) Outside Directors attend any major meetings of TKCNF, the customer organization of the Accounting Firm
BD.
(iii)
Once a month, Outside Auditors review the approval request documents, accounting books andmajor evidence documents, and receive reports from the heads of Departments and give their opinions.
(iv)
Remunerations for Auditors shall be determined each January upon discussion among Auditors
based on the business 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 Outside Directors or Outside
Auditors of the Company (hereinafter, "outside executives"), he/she must maintain a neutral stance,
independent of the Company's management without falling under any of the following (independent outside
executives shall be referred to as "independent executives" hereinafter):(i)

executive member of the Company or the Company's affiliate companies (hereinafter, "the Group");(ii) an important trade partner of the Group or its executing member;(iii) 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;(iv) 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);(v) certified public accountant, certified public tax accountant or other accounting specialists, an attorney orother legal 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 suchmonies or assets);(vi) a person belonging to an audit firm that performs accounting audits for the Company, or a certified public
tax accountant or person belonging to a tax firm that performs tax audits for the Company;(vii) any person falling under items (i) to (vi) within the last three years;(viii) near relatives of the following:
1) Persons falling under items (ii) to (vi) above (provided that an "executing member" in items (ii) to (iv)shall be limited to a person executing important duties, and "person affiliated with the corporation,
association or other bodies" in item (v) shall be limited to a person executing important duties, or incase of an audit firm, a tax accounting firm, law firm or other organization of accounting and legal
specialists, only certified public accountants, certified public 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 (vi) shall be limited to persons executing important duties and certified public
accountants, certified public tax accountants and other persons with specialized qualifications);
－

81

－

2) Persons executing important duties of the Group;3) Persons falling under item (ii) 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 theirresignation, 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(hereinafter referring to a director of a stock company listed in any item of Article 363(1), and any otherdirector who has executed operation of such stock company) nor an executive officer, nor an employee,
including a manager, of such stock company or any of its subsidiaries, and who has neither ever servedin the past as an executive director nor executive officer, nor as an employee, including a manager, ofsuch 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 theCompanies 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 andemployees executing the operation.

Note 4:

Persons for which the Group is an important trade partner refers to those falling under either of thefollowing:(i) a trade partner group that provides products or services to the Group (referring to companies
belonging to consolidated groups to which the direct trade partner is affiliated, hereinafter the same)that has received from the Group 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 thehigher;(ii) 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:(i) a trade partner group to which the Group provides products and services from which the Group hasreceived 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;(ii) 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;(iii) a financial institution group from which the Group is borrowing (referring to companies belonging
－

82

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to consolidated 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, certified public tax accountants or other accounting specialists, andattorneys or other legal specialists receiving large sums of money or other assets from the Group otherthan director compensation shall refer to persons who received from the Group, an amount in excess of
10 million yen or any property in the amount in 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 shareliving 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 andheads 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.

－

83

－

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
2017 are as follows:
Designated Limited Liability Partner, Executing Partner: Yasuo Sekiya
Designated Limited Liability Partner, Executing Partner: Yuichi Noda
Number of assistants assisting auditing:
Certified Public Accountants
5
Others27

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 liabilities 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.
－

84

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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, Paragraph 5 of the Companies Act.
5.

Acquisition of Treasury Stock

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 resolution of
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 least 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.

－

85

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VIII. Compensation to Executive Directors
1. Total Amount of Compensation, Total by Type, and Number of Eligible Executives, by Executive
Category

Executive category

Director(Excluding Outside
Directors)
Auditor(Excluding Outside
Auditors)
Outside executives

2.

Total compensation by type (millions of yen)
Total amount of
Basiccompensation
Stock
Executive Retirement(millions of yen) compensatio
optionsbonusesbenefitsn

Number of
eligible
executives(no. ofpeople)

289

252

37

－

－

11

30

27

3

－

－

3

53

53

－

－

－

5

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.

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86

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IX.

1.

Status of Shareholdings

Equity Securities Held for Purposes Other Than Pure Investment and the Total Amount Recorded in
the Balance Sheet
14 stock names, 4,956 million yen

2.

Stock Name, Number of Shares, Amount Recorded in the Balance Sheet and Purpose of Holding ofEquity 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

2,010

Mitsubishi UFJ Financial Group, Inc.

2,322,180

1,172

Mebuki Financial Group, Inc.
(Joyo Bank, Ltd.)

235,321

102

Nippon Paper Industries Co., Ltd.

17,00031

Toyo Securities Co., Ltd.

51,0009Mito Securities Co., Ltd.

31,4607

Fujitsu Limited

11,8806

Tokai Tokyo Financial Holdings, Inc.

9,187

4

Number ofshares (shares)

Amount recorded inbalance sheet(millions of yen)

T&D Holdings, Inc.

1,780,000

2,907

Mitsubishi UFJ Financial Group, Inc.

2,322,180

1,696

Mebuki Financial Group, Inc.

275,325

119

Nippon Paper Industries Co., Ltd.

17,00035

Toyo Securities Co., Ltd.

51,00013

Mito Securities Co., Ltd.

31,46011

Stock namePurpose 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

Current fiscal year
Specified investment securities

Stock name

－

87

－

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 relationshipFujitsu Limited

11,880Tokai Tokyo Financial Holdings, Inc.

9,187

3.

To maintain and strengthenbusiness relationshipTo maintain and strengthen
6business relationship
9Equity Securities Held for the Pure Investment
Not applicable.
(3) [Audit Fees](i)[Compensation paid to Auditors and certified public accountants]
Previous consolidated fiscal year

Category

Compensation foraudit and attestation
services (millions ofyen)

Current consolidated fiscal year
Compensation foraudit and attestation
services (millions ofyen)Compensation for
non-audit services(millions of yen)Compensation for
non-audit services(millions of yen)

The Company

45

9

44

10

Consolidated
subsidiaries

－

－

－

－

Total

45

9

44

10

(ii)

[Other important fees](For the previous consolidated fiscal year and the current consolidated fiscal year)
Not applicable.

(iii) [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(Japanese Institute of Certified Public Accountants dated December 22, 2011)" covering services otherthan the services prescribed in Article 2 Paragraph 1 of the Certified Public Accountants Act.
(iii)

[Policy for determining Audit fees]

Auditor compensations paid to Auditors and certified public accountants are determined by discussion
based on the number days of auditing works performed.

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88

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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 Ordinanceon Terminology, Forms, and Preparation Methods of Consolidated Financial Statements (Ordinance of the
Ministry of Finance No. 28 of 1976).
(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, 2016 to September 30, 2017)
and financial statements for the fiscal year (from October 1, 2016 to September 30, 2017) have been audited by Ernst& Young ShinNihon LLC pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange
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 that would
enable us to respond to changes in accounting standards, we maintain membership of the Financial AccountingStandards Foundation and attend seminars held by the Accounting Standards Board of Japan.

－

89

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1

[Consolidated Financial Statements](1) Consolidated Financial Statements(i)[Consolidated Balance Sheet]Previous consolidated fiscal
year(September 30, 2016)(Unit: millions of yen)
Current consolidated fiscal
year(September 30, 2017)19,552
6,335
238
360
112
158
2,079
751
(36)
29,554

20,039
6,555
269
325
289
140
2,046
913
(33)
30,545

6,554

6,619

425

508

1,188
6,607
129
－
*1 14,906

1,249
6,922
342
569
*1 16,212

2,976
706
29
3,712

2,806
976
29
3,812

*2 20,216
175
3,190
7,000
1,303
601
454
32,94351,562
81,116*2 23,659
82
2,953
6,000
1,310
459
392
34,85854,88385,428AssetsCurrent assets
Cash and deposits
Notes and accounts receivable
Lease investment assets
Finished goods inventory
Work in progress
Raw materials and stored items
Deferred tax assets
Other
Provisions 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 and fixtures (net amount)Land
Lease assets (net amount)
Construction in progress
Total 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

－

90

－

Previous consolidated fiscal
year(September 30, 2016)(Unit: millions of yen)
Current consolidated fiscal
year(September 30, 2017)

2,602
－
40
71
290
3,371
2,203
529
2,853
1,457
13,419

2,392
897
－
71
353
2,918
1,445
543
3,028
1,694
13,345

295
689
1,583
572
3,140
16,559

223
746
1,668
552
3,191
16,5365,700
5,419
52,606(350)
63,3745,700
5,409
56,549(968)
66,690

(339)

621

(339)

621

176
1,345
64,556
81,116178
1,401
68,89285,428

Liabilities
Current liabilities
Accounts payable – trade
Electronically Recorded Obligations
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
incomeSubscription rights to shares
Non-controlling interests
Total net assets
Total liabilities and net assets

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91

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(ii)

[Consolidated Statements of Income and Comprehensive Income][Consolidated Statements of Income]Net Sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Land & rent income
Equity in earnings of affiliates
Other
Total non-operating income
Non-operating expenses
Interest paid
Equity in loss of affiliates
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gains on sale of non-current assets
Gain on reversal of asset retirement obligations
Total extraordinary income
Extraordinary losses
Losses on sale of non-current assets
Loss on disposal of non-current assets
Loss on disposal of software
Impairment losses
Total extraordinary losses
Profit before taxes and adjustments
Income taxes – current
Income taxes – deferred
Total income taxes
ProfitProfit attributable to the non-controllingshareholders
Profit attributable to owners of parent(Unit: millions of yen)Previous consolidated fiscal
Current consolidated fiscal
year
year
(Started October 1, 2015;(Started October 1, 2016;
ended September 30, 2016)
ended September 30, 2017)57,75059,705
20,344
20,41937,40639,285*1,*2 29,764*1,*2 30,718
7,642
8,567

－

92

－

39
106
37
－
46
230

31
110
42
11
33
229

5
262
0
268
7,604

3
－
0
4
8,792

*3 11
－
11

*3 2
23
25

*4 0
*5 41
－
*6 1
42
7,573
3,316
(553)
2,762
4,810

－
*5 3
15
*6 0
19
8,798
2,828
(156)
2,671
6,126

40

55

4,770

6,071

[Consolidated Statements of Comprehensive Income]

ProfitOther comprehensive income
Valuation difference on available-for-salesecurities
Share of other comprehensive income ofassociates accounted for using the equity method
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners of
the parent
Comprehensive income attributable to noncontrolling shareholders(Unit: millions of yen)Previous consolidated fiscal
Current consolidated fiscal
year
year
(Started October 1, 2015;(Started October 1, 2016;
ended September 30, 2016)
ended September 30, 2017)
4,810
6,126

－

93

－

(852)

970

0

0

*1 (852)
3,958*1 971
7,097

3,922

7,032

36

65

(iii) [Consolidated Statement of Changes in Equity]
Previous consolidated fiscal year (Started October 1, 2015; ended September 30, 2016)(Unit: millions of yen)
Shareholders' equity
Capital stock
Balance at beginning ofyear

Capital surplus

Retained earnings

Treasury stock

Total shareholders'equity5,419

49,906(349)

60,676

5,700

Changes of items during
the period

Dividends of surplus(2,071)(2,071)

Profit attributable toowners of parent

4,770

4,770

Acquisition oftreasury stock
Disposal of treasury
stock
Changes of items
other thanshareholders' equity(net)
Total changes of items
during the period

Balance at end of year

Balance at beginning of
year

0

(1)

(1)

0

0

－

0

2,699

(1)

2,697

5,700

5,419

52,606(350)

63,374

Accumulated other comprehensive
incomeTotal
Valuation
accumulateddifference on
otheravailable-forcomprehensive
sale securities
incomeSubscription
rights to shares

Non-controllinginterests

Total net assets

127

1,317

62,630508

508

Changes of items during
the period

Dividends of surplus(2,071)

Profit attributable toowners of parent

4,770

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

(1)
0
(848)

(848)

48

28

(771)

Total changes of items
during the period

(848)

(848)

48

28

1,926

Balance at end of year

(339)

(339)

176

1,345

64,556－94－

Current consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)(Unit: millions of yen)
Shareholders' equity
Capital stock
Balance at beginning ofyear

Capital surplus

Retained earnings

Treasury stock

Total shareholders'equity5,419

52,606(350)

63,374

5,700

Changes of items during
the period

Dividends of surplus(2,122)(2,122)

Profit attributable toowners of parent

6,071

6,071

Acquisition oftreasury stock
Disposal of treasury
stock
Changes of items
other thanshareholders' equity(net)
Total changes of items
during the period

Balance at end of year

Balance at beginning of
year

(677)

(677)

(10)

(5)

59

44

－

(10)

3,943

(617)

3,316

5,700

5,409

56,549(968)

66,690

Accumulated other comprehensive
incomeTotal
Valuation
accumulateddifference on
otheravailable-forcomprehensive
sale securities
incomeSubscription
rights to shares

Non-controllinginterests

Total net assets

176

1,345

64,556

(339)

(339)

Changes of items during
the period

Dividends of surplus(2,122)

Profit attributable toowners of parent

6,071

Acquisition oftreasury stock
Disposal of treasury
stock
Changes of items
other thanshareholders' equity
(net)

(677)
44
961

961

2

56

1,019

Total changes of items
during the period

961

961

2

56

4,335

Balance at end of year

621

621

178

1,401

68,892－95－

(iv) [Consolidated Statements of Cash Flows]
Previous consolidated fiscal
year(Started October 1, 2015;
ended September 30, 2016)(Unit: millions of yen)
Current consolidated fiscal
year(Started October 1, 2016;
ended September 30, 2017)

7,573
2,449

8,798
2,716

1

(2)

403

174

764

85

(145)
5

(141)
3

262

(11)

41
－

3
15

(11)

(2)

1
－
48
656
5
(366)
9
(0)

0
(23)
46
(132)
(123)
14
634
(394)

(240)

13

3
11,463153(5)(2,430)9,181(59)
11,614168(3)(3,655)8,123(3,000)7,700(1,612)(3,000)4,000(2,124)20

2(1,668)－(16,163)(1,602)100(2,561)

7,500

500

250

－

(15)
164
(300)
116
(16)
2
(7,022)

(15)
9
－
74
－
1
(4,617)

Cash flows from operating activities
Profit before taxes and adjustments
Depreciation
Change in provision for bad debts (( ):decrease)
Change in provisions for bonuses (( ):decrease)
Change in retirement benefit liabilities (( ):decrease)
Interest and dividends received
Interest paid
Share of profits of investments accounted forusing the equity method (( ): gain)
Loss on disposal of non-current assets
Loss on disposal of software
Gain/loss on sales of non-current assets (( ):gain)Impairment losses
Gain on reversal of asset retirement obligations
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
Purchase of property, plants and equipment
Proceeds from sales of property, plants andequipment
Purchase of intangible assets
Proceeds from redemption of capital contribution
Purchase of investment securities
Proceeds from redemption of investment
securities
Profit on sales of stocks of subsidiaries andaffiliates
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Payment of loans receivableCollection of loan receivables
Other payments
Other proceeds
Cash flows from investing activities
－

96

－

Previous consolidated fiscal
year(Started October 1, 2015;
ended September 30, 2016)(Unit: millions of yen)
Current consolidated fiscal
year(Started October 1, 2016;
ended September 30, 2017)

(20)

(40)

(71)
(55)
(1)
(2,069)(8)
0(2,225)(66)
16,619*1 16,552

(71)
(102)
(677)
(2,119)(9)0(3,019)486
16,552*1 17,039

Cash flows from financing activities
Increase/decrease in short-term loans payable(( ): decrease)
Repayment of long-term loans payable
Repayment of lease obligations
Purchase of treasury stock
Dividends paid
Dividends paid to non-controlling 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

－

97

－

[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
Non-consolidated subsidiary (1 company):
TKC Financial Assurance K.K.
(Reason for excluding this company from the scope of consolidation)
TKC Financial Assurance K.K. is excluded from the scope of consolidation because it neither has any material
impact on the consolidated financial statements of the Company in terms of total assets, sales, profit/loss(allocable to the Company in proportion to the share ownership) or retained earnings (allocable to theCompany in proportion to the share ownership), nor has material importance to the Company as a whole.

2.

Application of the Equity Method
Affiliated companies under the equity method (2 companies)
TKC Shuppan Corporation
iMobile Inc.
Because the fiscal year-end of iMobile Inc. is March 31, a provisional settlement of accounts similar to a final
settlement has been performed as of the closing date of the consolidated financial statements.
Number of non-consolidated subsidiary not under the equity method (1 company)
TKC Financial Assurance K.K.
Reason for excluding this company from the scope of equity method)
TKC Financial Assurance K.K. is excluded from the scope of equity method because, even though it is
excluded from the scope of equity method, it has minor impact on the consolidated financial statements of theCompany in terms of, among others, profit (allocable to the Company in proportion to the share ownership)and retained earnings (allocable to the Company in proportion to the share ownership), and has no material
importance to the Company as a whole.

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(i) Marketable and investment securities
1) 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
valuation differences are directly charged or credited to the shareholders' equity, and cost of securities
－

98

－

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(ii) Inventory assets
1) Merchandise, raw materials
Cost determined by first-in, first-out method (with balance sheet values reflecting write-downs for
decreased profitability)
2) Finished goods
Cost determined by cost percentage method and adjusted based on percentage of completion (withbalance sheet values reflecting write-downs for decreased profitability)
3) 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)4) Supplies
Last purchase price method (with balance sheet values reflecting write-downs for decreased profitability)(2) Depreciation of major depreciable assets(i) Property, plants and equipment (excluding lease assets)
Calculated based on declining balance method, except for buildings acquired after April 1, 1998 (excluding
accompanying facilities), and accompanying facilities and structures acquired after April 1, 2016, which
are calculated based on straight-line method.
Primary useful life figures are as follows:
Buildings and structures:
10 to 50 years
Machinery, equipment and vehicles: 4 to 10 years
Tools, furniture and fixtures:
2 to 20 years(ii) Intangible assets (excluding lease assets)
1)

Softwarea. Software for sale
Software for sale is 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.
－

99

－

2) Other intangible assets
Amortized using the straight-line method.
(iii)

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)

Accounting standards for recognizing significant provisions(i) 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.
(ii) Provisions for bonuses
Provisions for bonuses are recognized based on the estimated amounts of payment.

(4)

Accounting procedure for retirement benefits(i) 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.
(ii) Recognizing actuarial differences as expenses
Actuarial differences are recognized as expense for the consolidated fiscal year in which they occur.

(5)

Accounting standards for recognizing significant revenues and expenses

Accounting standards for recognizing revenues and cost of sales of made-to-order software (software development
contracts)(i) 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).
(ii) 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:
－

100

－

(i)

Cash on hand;(ii) Demand deposits;(iii) 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(i) Accounting method for consumption taxes and local consumption taxes
Consumption taxes are accounted for using the tax-exclusion method.
(ii) Application of the consolidated taxation system
The consolidated taxation system is applied.
(Accounting Standards Not Yet Applied)
Not applicable.

－

101

－

(Notes to Consolidated Balance Sheets)*1. Accumulated depreciation of property, plants and equipment
Previous consolidated fiscal year
(September 30, 2016)
21,268Current consolidated fiscal year
(September 30, 2017)
million yen

21,859 million yen*2 Items pertaining to non-consolidated subsidiaries and affiliated companies are as follows.
Previous consolidated fiscal year
(September 30, 2016)
Investment securities (shares)

261 million yen

－

102

－

Current consolidated fiscal year
(September 30, 2017)
272 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, 2015; ended
September 30, 2016)
Salaries
Provisions for bonuses
Retirement benefit expenses
Depreciation
Rent expenses
Research and development expenses

Current consolidated fiscal year
(Started October 1, 2016; ended
September 30, 2017)

9,569million yen
2,462
1,150
557
2,091
74

10,196million yen
2,610
513
584
2,066
106

*2. Total amount of research and development expenses included in general administrative expenses
Previous consolidated fiscal year
(Started October 1, 2015; ended September 30, 2016)

Current consolidated fiscal year
(Started October 1, 2016; ended September 30, 2017)

74million yen

106million yen*3. Breakdown of gains on sale of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2015; ended September 30, 2016)
Land
Machinery, equipment andvehiclesTools, furniture and fixtures
Total

Current consolidated fiscal year
(Started October 1, 2016; ended September 30, 2017)10million yen－million yen

0

0

1
11

2
2

*4. Breakdown of loss on sales of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2015; ended September 30, 2016)
Buildings and structures

Current consolidated fiscal year
(Started October 1, 2016; ended September 30, 2017)－million yen

0million yen*5. Breakdown of loss on sales of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2015; ended September 30, 2016)
Buildings and structures
Machinery, equipment andvehiclesTools, furniture and fixtures
Other (Investments and otherassets)
Total

Current consolidated fiscal year
(Started October 1, 2016; ended September 30, 2017)16million yen

1million yen

7

－

17

2

0

0

41

3

*6. Impairment losses
Previous consolidated fiscal year (Started October 1, 2015; ended September 30, 2016)
－

103

－

The Group recorded an impairment loss for the following asset group for the current consolidated fiscal year:
Location
Itabashi-ku, Tokyo, etc.

Classification

Impairment losses(millions of yen)

Telephonesubscription rights

1

Usage
Idle assets

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 werereduced to recoverable amounts, and such reduced amounts were recorded as impairment losses (1 million
yen) under extraordinary losses.
Recoverable amounts were measured based on the net selling prices. Telephone subscription rights were
evaluated based on their expected disposal prices.
Current consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)
The Group recorded an impairment loss for the following asset group for the current consolidated fiscal year:
Location
Shinjuku-ku, Tokyo, etc.

Usage
Idle assets

Classification

Impairment losses(millions of yen)

Telephonesubscription rights

0

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 werereduced to recoverable amounts, and such reduced amounts were recorded as impairment losses (0 million
yen) under extraordinary losses.
Recoverable amounts were measured based on the net selling prices. Telephone subscription rights were
evaluated based on their expected disposal prices.

－

104

－

(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, 2015; ended
September 30, 2016)

Current consolidated fiscal year
(Started October 1, 2016; ended
September 30, 2017)

Valuation difference on available-for-sale securities:
Increase/decrease during the fiscal year
Reclassification adjustments
Amount before tax
Tax expense () or benefit

Valuation difference on available-for-sale securities(1,243)million yen－

1,396million yen(1,243)

1,396

390

(426)

(852)

970

(0)

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

0

0

0

0

(852)

971

accounted for using the equity method
Total other comprehensive income

－

105

－

(Notes to Consolidated Statements of Changes in Equity)
Previous consolidated fiscal year (Started October 1, 2015; ended September 30, 2016)

1.

Class and number of issued stocks and treasury stock
Number of shares at
beginning of current
consolidated FY(hundreds of shares)

Increase in numberof shares during
current consolidated
FY (hundreds ofshares)Decrease in numberof shares during
current consolidated
FY (hundreds ofshares)Number of shares at
end of current
consolidated FY(hundreds of shares)

267,310－－

267,310

267,310－－

267,310

1,793

4

0

1,797

1,793

4

0

1,797

Issued shares
Common stock
Total
Treasury stock
Common stock(Note)
Total(Note) The 400 share increase in common treasury stock resulted from increase due to purchase of fractional unit shares.
The 0 share decrease in common treasury stock resulted from increase due to purchase of fractional unit shares.

2.

Subscription rights to shares and treasury subscription rights to shares

Category

Class ofshares to beissued upon
Description of subscription rights
exercise of
to shares
subscription
rights tosharesThe Company(Parent
company)

Subscription rights to shares asstock options
Total

3.

Dividends(1)

Dividend payments
Resolution

Number of shares to be issued upon exercise of
Balance at
subscription rights to shares (shares)
the end ofcurrent
Increase
Decrease
Beginning
End ofconsolidated
duringduringof current
current
fiscal year
current
current
consolidated
consolidated(millions ofconsolidated consolidated
fiscal year
fiscal year
yen)fiscal year fiscal year

－

－

－

－

－

176

－

－

－

－

－

176

Class of shares

Total amount of cash
dividends(millions of yen)

Dividend per share(yen)

Common stock

1,009

Common stock

1,062

Record date

Effective date38

September 30, 2015

December 24, 201540

March 31, 2016

June 13, 2016

December 22, 2015
Ordinary General
Meeting of
Shareholders
May 13, 2016
Meeting of theBoard of Directors(2)

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

－

106

－

Resolution

Class ofsharesTotal amountof cashdividends(millions ofyen)

December 22,
2016
Ordinary General
Meeting of
Shareholders

Common
stock

1,062

Source ofdividends

Retainedearnings－

107

Dividend pershare (yen)Record date

Effective date

40 September 30, 2016 December 26, 2016－

Current consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)
1.

Type and number of issued stocks and treasury stock
Number of shares at
beginning of current
consolidated FY(hundreds of shares)

Increase in numberof shares during
current consolidated
FY (hundreds ofshares)Decrease in numberof shares during
current consolidated
FY (hundreds ofshares)Number of shares at
end of current
consolidated FY(hundreds of shares)

267,310－－

267,310

267,310－－

267,310

1,797

2,024

305

3,517

1,797

2,024

305

3,517

Issued shares
Common stock
Total
Treasury stock
Common stock(Note)
Total(Note) The 2,024 hundred share increase in common treasury stock resulted from a 2,017 hundred share increase
through acquisition of treasury stock based on resolution of the Board of Directors, and a 7 hundred share
increase due to purchase of fractional unit shares.
The 305 hundred share decrease in common treasury stock resulted from the exercise of stock option.
2. Subscription rights to shares and treasury subscription rights to shares

Category

Class ofshares to beissued upon
Description of subscription
exercise ofrights to shares
subscription
rights tosharesThe
Company(Parent
company)

Subscription rights to sharesas stock options
Total

3.

Dividends(1)

Dividend payments

Resolution
December 22,
2016
Ordinary General
Meeting of
Shareholders
May 10, 2017
Meeting of theBoard of Directors

Class ofsharesNumber of shares to be issued upon exercise of Balance at
subscription rights to shares (shares)
the end ofcurrent
Increase
Decrease
Beginning
End ofconsolidate
duringduringof current
current
d fiscalcurrent
current
consolidate
consolidateyear
consolidate consolidate
d fiscald fiscal(millions ofd fiscald fiscal
year
year
yen)
year
year

－

－

－

－

－

178

－

－

－

－

－

178

Total amount of cash
Dividend per share
dividends(yen)(millions of yen)

Record date

Effective dateCommon
stock

1,062

40 September 30, 2016 December 26, 2016

Common
stock

1,060

40

－

108

－

March 31, 2017

June 12, 2017

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

Resolution

Class ofsharesTotal amountof cashdividends(millions ofyen)

December 22,
2017
Ordinary General
Meeting of
Shareholders

Common
stock

1,582

Source ofdividends

Retainedearnings

Dividend pershare (yen)Record date

Effective date

60 September 30, 2017 December 25, 2017

(Notes to Consolidated Statements of Cash Flows)*1. Relationship between the ending balance of cash and cash equivalents and the amounts under the accountitems stated in the consolidated balance sheets
Previous consolidated fiscal
Current consolidated fiscal
year
year
(Started October 1, 2015;(Started October 1, 2016;
ended September 30, 2016)
ended September 30, 2017)19,552 million yen
20,039 million yen

Cash and deposits
Time deposits with deposit period greater than threemonthsCash and cash equivalents

－

109

－

(3,000)(3,000)16,552

17,039(Notes to Lease Transactions)1.

Finance Lease Transactions (Lessee)

Finance lease transactions that do not involve transfer of ownership(i) Description of lease assets
Property, Plants and Equipment
Mainly include machinery and equipment, tools, furniture and fixtures.
(ii) Depreciation of lease assets
Lease assets are amortized in accordance with Basis of Presenting the Consolidated Financial Statements, 4.
Accounting Policies, (2) Depreciation of major depreciable assets.
2.

Operating Lease Transactions (Lessee)
Unexpired lease payments for non-cancellable operating lease transactions(Unit: millions of yen)Previous consolidated fiscal year
(September 30, 2016)

Current consolidated fiscal year
(September 30, 2017)

Within one year

145

157

After one year

255

263

400

421

Total

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, 2016)

Current consolidated fiscal year
(September 30, 2017)

Current assets

238

269

Investments and other assets

601

459

(2) Lease obligations(Unit: millions of yen)Previous consolidated fiscal year
(September 30, 2016)

Current consolidated fiscal year
(September 30, 2017)

Current liabilities

238

269

Fixed liabilities

601

459

－

110

－

(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 and bonds.
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 risk of thecustomers. 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.
Investment securities are exposed to market fluctuation risk, and the Company periodically checks the fair market
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 certificates ofdeposit).
The majority of trade payables and accounts payable resulting from operating activities are due within three months.
(3)

Supplementary information on fair market value of financial instruments

The fair market 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 in estimating thefair market value, results may fluctuate when a different set of assumptions is used.
2.

Fair Market Value of Financial Instruments

The book value in consolidated balance sheets, fair market value and differences are as follows. Financial
instruments for which the fair market value is extremely difficult to measure are not included. (See (Notes) 2.).

Previous consolidated fiscal year (September 30, 2016)
Book value inconsolidated balance
sheets(millions of yen)

Fair market value(millions of yen)

Differences (millions ofyen)

19,552

－

6,299

6,299

－

(3) Investments securities

19,79819,798－(4) Long-term deposits

7,000

7,004

4

52,651

52,655

4(1) Accounts payable – trade

2,602

2,602

－

(2) Accounts payable

3,371

3,371

－

(1) Cash and deposits

19,552(2) Notes and accounts receivable

6,335

Provisions for bad debts(36)

Total assets

－

111

－

Total liabilities

5,973

－

112

－

5,973

－

Current consolidated fiscal year (September 30, 2017)
Book value inconsolidated balance
sheets(millions of yen)

Fair market value(millions of yen)

Differences (millions ofyen)

20,039

－

6,521

6,521

－

(3) Investments securities

23,23023,230－(4) Long-term deposits

6,000

5,999

(0)

55,79055,790(0)(1) Accounts payable – trade

2,392

2,392

－

(2) Accounts payable

2,918

2,918

－

Total liabilities

5,311

5,311

－

(1) Cash and deposits

20,039(2) Notes and accounts receivable

6,555

Provisions for bad debts(33)

Total assets(Notes) 1. Methods of calculating the fair market value of financial instruments and securities transactions
Assets(1) Cash and deposits, (2) Notes and accounts receivable
The book value approximates the fair market value because of the short maturity of these instruments.
(3) Investment securities
The fair market value of equity securities is based on quoted market prices on the stock exchange; andthe fair market value of bonds is based on the market prices quoted on the stock exchange or provided byfinancial institutions. These securities categorized by purpose of holding are described further in theNotes to Securities of the Notes to Consolidated Financial Statements.
(4) Long-term deposits
The fair market value of long-term deposits is estimated based on the present value discounted using theinterest rate applicable to new deposits in the total amount of principal and interest, and on the fairmarket value provided by financial institutions for the derivative portions.
Liabilities(1) Accounts payable – trade, (2) Accounts payable
The book value approximates the fair market value because of the short maturity of these instruments.
2.

Financial instruments for which the fair market value is extremely difficult to measure(Unit: millions of yen)
Category

Previous consolidated fiscal year
(September 30, 2016)

Current consolidated fiscal year
(September 30, 2017)

Other securities (unlisted equity
securities)

156

156

Stocks of subsidiaries and affiliates

261

272

Total

418

429

The fair market value of these financial instruments is 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 not included in(3) Investment securities for the previous consolidated fiscal year nor in (3) Investment securities for the current
consolidated fiscal year.
－

113

－

3. Redemption scheduled for monetary claims and securities with maturity dates subsequent to the consolidated
settlement datePrevious consolidated fiscal year (September 30, 2016)
Over 1 years andOver 5 years andOver 10 years
Within 1 year
within 5 years
within 10 years(millions of yen) (millions of yen) (millions of yen) (millions of yen)

Cash and deposits

19,549－－－Notes and accounts receivable

6,335

－

－

－

Corporate bonds

－

－

4,500

12,000Long-term deposits

－

7,000

－

－

Total

25,885

7,000

4,500

12,000Over 1 years andOver 5 years andInvestment securities

Current consolidated fiscal year (September 30, 2017)
Over 10 years
Within 1 year
within 5 years
within 10 years(millions of yen) (millions of yen) (millions of yen) (millions of yen)

Cash and deposits

20,034－－－

Notes and accounts receivable

6,555

－

－

－

Corporate bonds

－

2,000

2,500

14,000Long-term deposits

－

6,000

－

－

Total

26,590

8,000

2,500

14,000Investment securities

－

114

－

(Notes to Securities)
1.

Other Securities

Previous consolidated fiscal year (September 30, 2016)

Classification

Securities for which theamounts in the
consolidated balance
sheets exceeds theoriginal purchase value(1) Stocks

Securities for which theamounts in the
consolidated balance
sheets do not exceed theoriginal purchase value(1) Stocks

Book value inconsolidated balance
Original purchaseDifferences (millions
sheets (millions ofvalue (millions of yen)of yen)
yen)
1,420

1,244

176

Corporate
bonds

503

500

3

Subtotal

1,924

1,744

179

2,024

2,400

(376)

Corporatebonds

15,84916,146(296)

Subtotal

17,874

18,547(673)(2) Bonds(2) Bonds

Total
19,79820,291(493)(Note) Unlisted shares (156 million yen in the consolidated balance sheets) are not included under "Other securities" inthe table above since quoted market value is not available and is deemed to be extremely difficult to measure.
Current consolidated fiscal year (September 30, 2017)
Book value inconsolidated balance
sheets (millions ofyen)

Original purchasevalue (millions of
yen)

4,936

3,646

1,289

Corporate
bonds

－

－

－

Subtotal

4,936

3,646

1,289

－

－

－

Corporatebonds

18,293

18,679(385)

Subtotal

18,293

18,679(385)

Classification

Securities for which theamounts in the
consolidated balance
sheets exceeds theoriginal purchase value(1) Stocks

Securities for which theamounts in the
consolidated balance
sheets do not exceed theoriginal purchase value(1) Stocks

Differences(millions of yen)

(2) Bonds(2) Bonds

Total
23,23022,326903(Note) Unlisted shares (156 million yen in the consolidated balance sheets) are not included under "Other securities" inthe table above since quoted market value is not available and is deemed to be extremely difficult to measure.
2.

Other Securities Sold

Previous consolidated fiscal year (September 30, 2016)
Classification(1) Stocks

Proceeds from sales(millions of yen)

Total gains on sales(millions of yen)
－

250
－

115

Total losses on sales(millions of yen)－－(2) Bonds
－

－

－

250

－

－

Corporate bonds
Total

Current consolidated fiscal year (September 30, 2017)
Not applicable.

－

116

－

3.

Securities for Which Impairment Losses Are RecognizedNot applicable.

－

117

－

(Notes to Derivatives)
1.

Derivative Transactions for Which Hedge Accounting Is Not Applied

Not applicable.
2.

Derivative Transactions for Which Hedge Accounting Is Applied

Not applicable.
(Notes to 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 toemployees.
Under the retirement lump-sum plan, the Company pays a lump-sum retirement benefit based on employees' salaryand 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 ("zenkoku joho sabisu sangyo kigyo nenkin kikin"), the portion of pension
assets that the Company contributes is recognized similar to the defined benefit plan because the amountcannot be reasonably calculated.
Japan Computer Information Service Employees' Pension Fund ("zenkoku joho sabisu sangyo kosei nenkin kikin"),to which the Company had subscribed, was dissolved as approved by the Minister of Health, Labour and Welfare on
July 1, 2017. As such, the fund has been transferred on the same day to a new corporate pension system, Japan
Computer Information Service Employees' Corporate Pension Fund ("zenkoku joho sabisu sangyo kigyo nenkinkikin"), established as a new successor system. No additional bearing of expenses is estimated which may arise fromthe dissolution of Japan Computer Information Service Employees' Pension Fund ("zenkoku joho sabisu sangyo
kosei nenkin kikin").
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, 2015; ended
September 30, 2016)

Current consolidated fiscal year
(Started October 1, 2016; ended
September 30, 2017)

4,619million yen

5,512million yen

283
46
723
(159)

321
－
(106)
(131)

5,512

5,595

Balance of retirement benefit obligations at beginningof yearService costs
Interest costs
Actuarial differences
Retirement benefits paid
Balance of retirement benefit obligations at end ofyear(2) Adjustment of balance of pension assets at the beginning and end of fiscal years
Previous consolidated fiscal
year(Started October 1, 2015;
ended September 30, 2016)
－

118

－

Current consolidated fiscal
year(Started October 1, 2016;
ended September 30, 2017)

million
3,801
yen
－
128
－
－
3,929

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

million
3,929
yen
－
(2)
－
－
3,927

(3) Adjustment of balance of retirement benefit obligations and pension assets at the end of the fiscal years, and net
retirement benefit obligations and assets recognized in the consolidated balance sheets
Previous consolidated fiscal year
(September 30, 2016)
Contributory retirement benefit obligations
Pension assets
Non-contributory retirement benefit obligations
Net obligations and assets in the consolidated balance
sheetsRetirement benefit liabilities
Net obligations and assets in the consolidated balance
sheetsCurrent consolidated fiscal year
(September 30, 2017)

5,045million yen(3,929)1,115
467

5,113million yen(3,927)
1,186
482

1,583

1,668

1,583

1,668

1,583

1,668

(4) Retirement benefit expenses and breakdown
Previous consolidated fiscal
year(Started October 1, 2015; ended
September 30, 2016)
283million yen
46
－
723

Service costs
Interest costs
Expected returns
Amount of actuarial differences treated as expenses
Retirement benefit expenses under the defined
retirement benefit plan

1,053

－

119

－

Current consolidated fiscal year
(Started October 1, 2016; ended
September 30, 2017)
321million yen
－
－
(106)
215

(5) Pension assets(i)

Major pension assets

Previous consolidated fiscal
Current consolidated fiscal
year
year
(September 30, 2016)(September 30, 2017)
Bonds
－%
13%
Cash and deposits
100
87
Total
100
100
(Note) All pension assets are the retirement benefit trust established for the Company's defined retirement benefit
plan.
(ii)
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 expectedlong-term rate of return on pension assets.
(6) Basis for actuarial calculations
Basis for major actuarial calculations
Previous consolidated fiscal
year(September 30, 2016)
0.00%－%
1.00-1.85%

Discount rate
Expected long-term rate of return
Expected increase in salary3.

Current consolidated fiscal
year(September 30, 2017)
0.00%－%
1.00-1.85%

Defined Contribution Plan
The amount of necessary contributions to the defined contribution plan of the Company and its consolidated
subsidiaries was 237 million yen for the previous consolidated fiscal year, and 248 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 120 million yen for the previous
consolidated fiscal year, and 115 million yen for the current consolidated fiscal year.
(1) Reserve fund for multiemployer pension planPrevious consolidated fiscal year
(March 31, 2016)

Current consolidated fiscal year
(March 31, 2017)

million727,403yen

million
738,049
yen

706,662

722,844

20,74015,205Pension assets
Total of actuarial liabilities based on pension plan
finance calculation and minimum policy reserves
Differences(2) Coverage ratio of the Group in the multiemployer pension planPrevious consolidated fiscal year: 1.52% (Started April 1, 2015; ended March 31, 2016)
Current consolidated fiscal year: 1.63% (Started April 1, 2016; ended March 31, 2017)(3) Supplementary information
The ratio in (2) above does not match the actual self-pay ratio of the Company.

－

120

－

(Notes to Stock Option Plans)
1.

Expenses Related to Stock Options(Unit: millions of yen)
Current consolidated fiscal year
(Started October 1, 2016; ended
September 30, 2017)

Previous consolidated fiscal year
(Started October 1, 2015; ended
September 30, 2016)
Selling, general andadministrative expenses
2.

48

46

Description, Scale and Fluctuation of Stock Option Plans(1)

Details of stock options
1st subscription rights to

2nd subscription rights toshares
9 Directors of the Company(excluding Outside
Directors)
Position and number of grantees 2 Auditors of the Company(excluding Outside
Auditors)

3rd subscription rights to

4th subscription rights tosharessharesshares10 Directors of the

10 Directors of the

11 Directors of theCompany (excluding

Company (excluding

Company (excluding

Outside Directors)

Outside Directors)

Outside Directors)

2 Auditors of the Company 2 Auditors of the Company 2 Auditors of the Company(excluding Outside(excluding Outside(excluding Outside

Auditors)

Auditors)

Auditors)

13 Executive Officers of the 13 Executive Officers of the 17 Executive Officers of theCompany

Company

Company

Common stock: 27,000

Common stock: 37,600

Common stock: 34,400

Common stock: 28,100

sharessharessharessharesDate of grant

March 12, 2012

December 7, 2012

December 9, 2013

May 12, 2014

Conditions for vesting

n/a

n/a

n/a

n/a

Required period of service

Not provided

Not provided

Not provided

Not provided

Period stock options can be

From March 13, 2012 to

From December 8, 2012 to

From December 10, 2013 to From December 13, 2014 toexercised

March 12, 2047

December 7, 2047

December 9, 2048

5th subscription rights to

6th subscription rights tosharessharesNumber of stock options by class(Note)(Note)

9 Directors of the Company 9 Directors of the Company

Position and number of grantees(excluding Outside(excluding Outside

Directors)

Directors)

2 Auditors of the Company 2 Auditors of the Company(excluding Outside(excluding Outside

Auditors)

Auditors)

21 Executive Officers of the 22 Executive Officers of theCompany

Company

Common stock: 18,200

Common stock: 18,100

sharessharesDate of grant

December 11, 2015

December 12, 2016

Conditions for vesting

n/a

n/a

Number of stock options by class(Note)(Notes)－121－

December 12, 2049

Required period of service

Not provided

Not provided

Period stock options can be

From December 12, 2015 to From December 13, 2016 toexercised

December 11, 2050

December 12, 2051

(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 (year ended
September 2017). Number of stock options is exchanged to the number of common stock.
(i)

Number of stock options
1st subscription rights 2nd subscription rights to 3rd subscription rights to 4th subscription rights toto shares
sharessharesshares

Before vesting (shares)
At end of previous

－

－

－

－

Granted

－

－

－

－

Forfeited

－

－

－

－

Vested－－－－Balance not vested

－

－

－

－

17,50026,70030,80025,100

Vested－－－－Exercised

5,300

6,700

8,400

6,000

Forfeited

－

－

－

－

12,20020,00022,40019,100consolidated fiscal year

After vesting (shares)
At end of previous
consolidated fiscal year

Balance not vested

5th subscription rights to 6th subscription rights tosharesshares
Before vesting (shares)
At end of previous－－

Granted－18,100Forfeited－－

Vested－18,100

Balance not vested－－

18,200－

Vested－18,100Exercised

2,000

2,100

Forfeited－－

16,20016,000consolidated fiscal year

After vesting (shares)
At end of previous
consolidated fiscal year

Balance not vested(ii)

Per unit information
1st subscription rights to 2nd subscription rights to 3rd subscription rights to 4th subscription rights tosharessharessharessharesExercise price (yen)

1

1
－

122

－

1

1

Average market price ofstock at time of exercise

3,105

3,105

3,105

3,105

1,145

1,032

1,323

1,569

(yen)
Fair value per unit as ofgrant date (yen)Exercise price (yen)Average market price ofstock at time of exercise(yen)
Fair value per unit as ofgrant date (yen)

5th subscription rights 6th subscription rights
to shares
to shares
1
1
3,105

3,105

2,670

2,557

－

123

－

3.

Method Used to Estimate the Fair Value of Stock Options

The fair value of the 6th issue of subscription rights to shares (stock options) granted in the current consolidated
fiscal year was measured as follows.
(i) Valuation method used: The Black-Scholes model(ii) Major base figures and estimations

Expected volatility of stock (Notes) 1

6th subscription rights to shares (stock options)24.484%

Expected option life (Notes) 2

8.5 years

Expected dividends (Notes) 3

68 yen/share

Risk-free interest rate (Notes) 4(0.005%)(Notes) 1. Expected volatility of stock is calculated based on the actual stock price data over the 8.5-year period(from June 2008 to December 2016).
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 68 yen of actual dividends made, consisting of the year-end
dividend of 33 yen for the period ended September 2015 and the interim dividend of 35 yen for theperiod ended September 2016.
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.

－

124

－

(Notes to Tax Effect Accounting)1.

Major Factors of Deferred Tax Assets and Deferred Tax Liabilities
Previous consolidated fiscal
year(September 30, 2016)
Deferred tax assets
Software development costs
Provisions for bonuses
Retirement benefit liabilities
Retirement benefit trust
Retirement bonuses for directors payable
Accrued business tax
Valuation loss on investment securities
Legal welfare expenses corresponding to provisions
for bonuses
Asset retirement obligations
Impairment losses
Valuation difference on available-for-sale securities
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Enterprise tax refund receivable
Retirement expenses corresponding to asset
retirement costs
Valuation difference on available-for-sale securities
Other
Total deferred tax liabilities
Net deferred tax assets

1,989million yen
883
501
1,198
18
151
136

Current consolidated fiscal
year(September 30, 2017)
2,139million yen
938
528
1,197
18
108
136

141

138

113
116
172
206
5,629
(319)
5,310

107
116
－
205
5,636
(319)
5,317

－

26

29

26

10
0
40
5,269

264
0
317
5,000

(Note) Net deferred tax assets for the previous and current consolidated fiscal years are included in thefollowing items in the consolidated balance sheets.
Previous consolidated
Current consolidated fiscal
fiscal year
year
(September 30, 2016)(September 30, 2017)
Current assets - Deferred tax assets
2,079million yen
2,046million yen
Non-current assets - Deferred tax assets
3,190
2,953

2.

Major Items Causing Significant Difference Between Statutory Income Tax Rate and Effective Income Tax
Rate After Applying Tax Effect Accounting

Statutory income tax rate
(Adjusted)
Inhabitant tax on per capita basis
Entertainment expenses, etc. not deductible fortax purposesTax credits for salary growth taxation system
Changes in assessment of year end deferred
tax assets due to changes in tax rate
Other
Income tax rate after applying tax effectaccounting

Previous consolidated
fiscal year
(September 30, 2016)
32.8%(Notes to Asset Retirement Obligations)
－

125

－

Current consolidated fiscal
year(September 30, 2017)
30.7%

0.9

0.8

1.0

1.3

(1.7)

(2.5)

3.2

－

0.3

0.0

36.5

30.4

Previous consolidated fiscal year (ended September 30, 2016) and current consolidated fiscal year (ended
September 30, 2017)
Information has been omitted as it was immaterial in terms of the amount of asset retirement obligations.

－

126

－

(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 is available
and which are subject to regular review by management for the purpose of determining the allocation of 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 the 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.

－

127

－

3. Information on Net Sales, Profit or Loss, Assets, and Other Items by Reportable Segments
Previous consolidated fiscal year (Started October 1, 2015; ended September 30, 2016)

Reportable segment(Unit: millions of yen)Amounts inconsolidate
Adjustments
d financial(Notes) 1
statements(Notes) 2

Accounting
Firm BD

Local
Governmen
ts BD

40,636

13,455

3,658

57,750－57,750

10

0

1,930

1,942

(1,942)－40,647

13,456

5,589

59,693(1,942)57,750

Segment profit

6,479

1,016

143

7,639

3

7,642

Segment assets

22,665

8,872

5,715

37,25343,862

81,116

1,020

1,134

294

2,450

(1)

2,449

261

－

－

261

－

261

2,586

1,829

144

4,559

－

4,559

Printing
BD

Total

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

Other items
Depreciation (Notes) 3
Investments in affiliatedcompany under the equity
methodIncrease in property, plants andequipment and intangible assets(Notes) 3(Notes)1. Adjustments are as follows:(1) Adjustments of segment profit of 3 million yen include 7 million yen for elimination of inter-segment transactions,and -3 million yen for adjustment of non-current assets.
(2) Adjustments of segment assets of 43,862 million yen include 44,246 million yen of corporate assets that are notallocated to specific reportable segments, and -384 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 the 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 long-term
prepaid expenses and depreciation of such expenses.

－

128

－

Current consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)

Reportable segment(Unit: millions of yen)Amounts in
Adjustment consolidatesd financial(Notes) 1
statements(Notes) 2

Accounting
Firm BD

Local
Governmen
ts BD

42,325

13,717

3,662

59,705－59,705

7

0

1,867

1,875

(1,875)－42,332

13,7185,530

61,581(1,875)59,705

Segment profit

7,818

576

166

8,561

5

8,567

Segment assets

22,918

9,143

5,813

37,87547,55285,428

1,068

1,354

294

2,717

(0)

2,716

－

－

272

－

272

1,753

553

4,163

(0)

4,162

Printing
BD

Total

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

Other items
Depreciation (Notes) 3

Investments in affiliatedcompany under the equity272
methodIncrease in property, plants andequipment and intangible assets
1,855(Notes) 3(Notes) 1 Adjustments are as follows:(1) Adjustments of segment profit of 5 million yen include 5 million yen for elimination of inter-segment
transactions, -2 million yen for adjustment of non-current assets and 2 million yen for adjustments of inventory
assets.
(2) Adjustments of segment assets of 47,552 million yen include 47,896 million yen of corporate assets that are notallocated to specific reportable segments, and -343 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 -0 million yen represent the unrealized profits.
(4) Adjustments of property, plants and equipment, and intangible assets of -0 million yen represent the 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 long-term
prepaid expenses and depreciation of such expenses.

－

129

－

[Related information]
Previous consolidated fiscal year (Started October 1, 2015; ended September 30, 2016)
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 to outside
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 customers

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, 2016; ended September 30, 2017)
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 to outside
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 Customers

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.

－

130

－

[Information on impairment losses of non-current assets by reportable segments]
Previous consolidated fiscal year (Started October 1, 2015; ended September 30, 2016)(Unit: millions of yen)
Reportable segment
Accounting
Firm BD
Impairment losses

Local
Government Printing BD
s BD

－

－

Amounts inconsolidated
Adjustments
financialstatements

Total

1

1

－

1

Current consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)(Unit: millions of yen)
Reportable segment
Accounting
Firm BD
Impairment losses

Local
Government Printing BD
s BD
－

0

Amounts inconsolidated
Adjustments
financialstatements

Total

－

0

[Information on amortization of goodwill and balance of goodwill by reportable segments]
Previous consolidated fiscal year (Started October 1, 2015; ended September 30, 2016)
Not applicable.
Current consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)
Not applicable.
[Information on gain on negative goodwill by reportable segments]
Previous consolidated fiscal year (Started October 1, 2015; ended September 30, 2016)
Not applicable.
Current consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)

Not applicable.

－

131

－

－

0

[Related Parties Information]
1.

Related Parties Transactions(1)

Transactions between the Company and related parties
Previous consolidated fiscal year (Started October 1, 2015; ended September 30, 2016)(i)

Non-consolidated subsidiaries and affiliated companies of the Company

Type

Subsidiary

Capital orCompany
investment
name orBusiness or
Addresssname ofoccupation(millionsindividualof yen)TKC
Shinjuk
Financial
Financingu-ku,
100
Assurancebusiness
Tokyo
K.K.

AffiliatediMobile Inc.
companies

Chiyoda
-ku,
Tokyo

262

Holding(held) voting
rights ratio(%)

Relationship withrelated party

Details oftransaction

Transaction
amount(millions ofyen)Account

Year-endbalance(millions ofyen)(Holding)
Direct (73.9)

Collaborations inbusiness related
to financing

Sale of shares(Note 1(i))

250

－

－

Informatio(Holding)n providing
Direct (30.0)
services

Outsourcing ofdevelopment andmaintenance ofwebsite services.

Provision offunds(Note 1(ii))

250

Loan
receivables

146(Note) 1. Terms of transaction or policies on determining the terms of transaction(i) The price at which the stocks were sold was approved by the resolution of the Board of Directors of TKC Financial
Assurance K.K. (August 28, 2015), and is the same as that to other shareholders.
(ii)The interest rates for the loan was determined in a reasonable manner, taking the market interest rates into account.

(ii) Directors and major shareholders (individuals only) of the Company
Type

Capital orCompany
investment
name orBusiness or
Addresssname ofoccupation(millionsindividualof yen)Holding(held) voting
rights ratio(%)

Relationship withrelated party

Details oftransaction

Transaction
amount(millions ofyen)Account

Year-endbalance(millions ofyen)

Director

HiroshiAshikawa

Certifiedpublic tax
accountant(Held)
Direct (0.0)

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing, etc.
(Notes 1(i))

10Accounts
receivable1

Leasing ofbuildings (Notes
1(ii))

98－－

Purchase ofbuilding and land
(Notes 1 (iii))

126

－

－

RunakoIizuka(Near relativeofRepresentativ
e Director,
Near
Seniorrelative ofManaging
director
Director andExecutive
Officer,
Masanori
Iizuka)－－CertifiedNumazupublic tax
City,accounting
Shizuokfirm TOPa(Notes 2)
Companies Certified
in which
public tax
directors accounting Minatoand near firm Aoyama ku,
relatives Accounting Tokyo
hold
Firm
majority(Notes 3)
voting
Certifiedrightspublic tax Miyaginaccounting o-ku,
firm Ofuji Sendai
Accounting City,
OfficeMiyagi(Notes 4)－－－

Leasing ofbuildings－

6

Certifiedpublic tax－
accounting
firm

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing, etc.
(Notes 1(i))

12Accounts
receivable

1

8

Certifiedpublic tax－
accounting
firm

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing, etc.
(Notes 1(i))

17Accounts
receivable

1

9

Certifiedpublic tax－
accounting
firm

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing, etc.
(Notes 1(i))

14

Accounts
receivable1(Notes)1. Terms of transaction or policies on determining the terms of transaction(i) Terms of transaction for the outsourcing of information processing are similar to the terms between other counterparts.
－

132

－

(ii) Rent expenses have been determined based on the result of survey by real estate agencies on rent expenses of other nearbybuildings.
(iii) The purchase price of the building and land was determined by referring to the appraisal value assessed by a real estateappraiser.
2. The company was co-founded with Mr. Yasuyuki Saito, Director of the Company.
3. The company was co-founded with Mr. Kenji Matsumoto, Auditor of the Company.
4. The company was co-founded with a near relative of Mr. Kazuyuki Sumi, Representative Director, President and Executive
Officer of the Company.
5. Consumption taxes are not included in the transaction amounts. Consumption taxes are included in the year-end balance.

Current consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)(i)

Non-consolidated subsidiaries and affiliated companies of the Company

Type

Capital orCompany nameinvestments Business oror name of Address(millions of occupationindividual
yen)

Holding (held)
voting rights
ratio (%)

Relationship withrelated party

Details oftransaction

Transaction
amount(millions of

Accountyen)

Year-endbalance(millions ofyen)

Provision of

Affiliatedcompanies

ChiyodaiMobile Inc.

-ku,
Tokyo

Information
262

providingservices(Holding)

Outsourcing of

funds

development and(Note 1)maintenance of

Receipt of

Direct (30.0)

website services

24

Loan

122

receivables

1

interest(Note 1)

(Note) 1. Terms of transaction or policies on determining the terms of transaction
The interest rates for the loan was determined in a reasonable manner, taking the market interest rates into account.

(ii) Directors and major shareholders (individuals only) of the Company
Capital orCompany
investment
name orBusiness or
Type
Addresssname ofoccupation(millionsindividualof yen)Certified public
Hiroshi－－tax
Director
Ashikawa
account
ant
Masaharu
Iizuka(Near
relative ofRepresentati
Nearve Director,－－－
relative of Seniordirector Managing
Director andExecutive
Officer,
Masanori
Iizuka)RunakoIizuka
Near
(Near
－
－
－
relative ofrelative of
director
Representati
ve Director,

Holding(held) voting
rightsratio (%)

(Held)
Direct (0.0)

Relationship withrelated party

Details oftransaction

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing,etc.
(Note 1(i))

Exercise of
Exercise ofsubscription
subscription rights
rights to sharesto shares(Note 1(ii))

Transaction
amountAccount

Year-endbalance(millions of
yen)

11

Accounts
receivable

0

52

－

－

92

－

－

49

－

－

(millions ofyen)(Held)
Direct (3.4)
Acquisition oftreasury stock

Acquisition oftreasury stock(Note 1(iii))

Leasing ofbuildings－

Leasing ofbuildings(Note 1 (iv))

－

133

－

SeniorManaging
Director andExecutive
Officer,
Masanori
Iizuka)certifiedpublic tax
accounting
Edoga
firm
wa-ku,
TaguchiTokyo
Partners
Kaikei(Note 2)Companies in which Certified
directors public tax
and near accounting
Minatorelatives
firm
-ku,
hold
AoyamaTokyo
majority Accounting
votingFirmrights(Note 3)
Certifiedpublic tax
Miyagiaccounting no-ku,
firm Ofuji
Sendai
Accounting City,
OfficeMiyagi(Note 4)Purchase of
Purchase ofbuilding andbuilding and land land

620

－

－

(Note 1 (v))－

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing,etc.
(Note 1(i))

10Accounts
receivable1－

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing,etc.
(Note 1(i))

23

Accounts
receivable1

Outsourcing of
information
processing,etc.
(Note 1(i))

15

Accounts
receivable

1

Certifiedpublic5tax
accountin
g firmCertifiedpublic8tax
accountin
g firmCertifiedpublic9tax－

accountin
g firmOutsourcing of
information
processing, etc.

(Notes) 1. Terms of transaction or policies on determining the terms of transaction(i) Terms of transaction for the outsourcing of information processing are similar to the terms between othercounterparts.
(ii) The exercises of the subscription right to shares stated here represent the exercise of stock options
occurred in the current consolidated fiscal year, the granting of which was resolved at the Board of
Directors' Meeting on February 10, 2012, November 5, 2012, November 12, 2013, November 11, 2014,
November 10, 2015 and November 8, 2016. The transaction amount is the amount obtained by multiplying
the number of granted shares by the exercise of stock options during the current consolidated fiscal year by
the amount paid at the time of exercise.
(iii) Share prices at the time of acquiring treasury stocks are based on the Tokyo Stock Exchange in off-hours
trading (through the ToSTNeT-3 system).
(iv) Rent expenses have been determined based on the result of survey by real estate agencies on rent
expenses of other nearby buildings.
(v) The purchase price of the building and land was determined by referring to the appraisal value assessed bya real estate appraiser.
2. The company was co-founded with Mr. Misao Taguchi, Director of the Company.
3. The company was co-founded with Mr. Kenji Matsumoto, Auditor of the Company.
4. The company was co-founded with a near relative of Mr. Kazuyuki Sumi, Representative Director, President
and Executive Officer of the Company.
5. Consumption taxes are not included in the transaction amounts. Consumption taxes are included in the yearend balance.
(2)

Transactions with consolidated subsidiaries and related parties to the Company
Not applicable.

2

Notes on the Parent Company and Important Affiliated Companies(1)

Information on the parent company
Not applicable.
－

134

－

(2)

Summary of financial information of important affiliated companies
Not applicable.

－

135

－

(Earnings Per Share Information)
Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2015; ended (Started October 1, 2016; ended
September 30, 2016)
September 30, 2017)
Net assets per share
2,374.07 yen
Earnings per share
179.65 yen
Diluted earnings per share
178.88 yen(Note) The basis for calculating earnings per share and diluted earnings per share is as follows.

2,551.70 yen
229.13 yen
228.16 yen

Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2015; ended (Started October 1, 2016; ended
September 30, 2016)
September 30, 2017)
Earnings per share
Profit attributable to owners of parent(millions of yen)Amount not attributable to commonshareholders (millions of yen)
Profit attributable to owners of parent having
the common shares (millions of yen)
Average number of shares outstanding(hundreds of shares)
Diluted earnings per share
Adjustments to profit attributable to owners ofparent(millions of yen)
Number of common shares increased(hundreds of shares)(Subscription rights to shares included in theabove (hundreds of shares))
Outline of diluted shares not included in thecalculation of diluted earnings per share for nothaving dilutive effect

4,770

6,071

－

－

4,770

6,071

265,514264,962

－

－

1,147

1,126

(1,147)――――――――――(Subsequent Events)
Not applicable.

(v) [Consolidated Supplementary Schedules]
－

136

－

(

1,126)

[Schedule – Corporate Bonds]
Not applicable.
[Schedule – Borrowings]
Balance atBalance at end of Average interest
beginning of year
year
rate
Terms of repayment(millions of yen) (millions of yen)(%)

Category
Short-term debts

40

－

1.00

－

Current portion of long-term debts

71

71

0.83

－

Current portion of lease obligations

290

353

－

－

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

295

223

Lease obligations (excluding current
portion of lease obligations)

689

746

From October 5,0.83 2018 to October 29,
2021
From October 22,－ 2018 to April 27,
2024

Other interest-bearing debts
Accounts payable – installment
purchases

149

98

Total

1,551

1,495

From October 22,
0.53 2017 to May 22,
2020
－

－

(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 long-term debts, 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)

Long-term debts

71

71

71

9

Lease obligations

319

204

115

50

24

－

－

Other interest-bearing
36
debts[Schedule – Asset Retirement Obligations]

Information has been omitted as it was immaterial in terms of the amount of asset retirement obligations.

－

137

－

(2)

[Other]Quarterly financial information for the current consolidated fiscal year
(Cumulative period)
Sales (millions of yen)
Quarterly profit before
income taxes (current FY)(millions of yen)
Quarterly profit attributableto owners of parent (Current
FY)(millions of yen)
Quarterly earnings per share(current FY) (yen)(Accounting period)
Quarterly earnings per share(yen)

1st quarter2nd quarter3rd quarter

Current consolidated
fiscal year

13,42330,20744,62559,705

1,625

4,893

7,185

8,798

1,082

3,306

4,748

6,071

40.75

124.54178.97229.13

1st quarter2nd quarter

40.75

83.79

－

138

－

3rd quarter
54.42

4th quarter
50.12

2 [Financial Statements, etc.](1)[Financial Statements](i)[Balance Sheets](Unit: millions of yen)Previous fiscal year
(September 30, 2016)

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
Provisions for bad debts
Total current assets
Non-current assets
Property, Plants and Equipment
Buildings
structures
VehiclesTools, furniture and fixtures
Land
Construction in progress
Total property, plants and equipment
Intangible Assets
Software
Software in progress
Telephone subscription rights
Other
Total intangible assets
Investments and other assets
Investment 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

－

139

－

Current fiscal year
(September 30, 2017)16,575*1 5,383
238
198
69
124
341
*1 76
1,909
*1 325(35)
25,207

17,185*1 5,542
269
125
243
110
328
*1 1451,890*1 414(31)
26,225

5,772
154
0
1,159
6,352
－
13,439

5,905
138
0
1,220
6,667
569
14,502

2,817
694
26
0
3,538

2,683
953
25
0
3,663

19,853502
100*1 172
340
2,998
7,000
1,265
601
10
32,84549,82275,03023,250
502
0
*1 80
331
2,737
6,000
1,272
459
9
34,64352,80979,034

(Unit: millions of yen)Previous fiscal year
(September 30, 2016)
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-sale securities
Total valuation and translation adjustments
Subscription rights to shares
Total net assets
Total liabilities and net assets

－

140

－

Current fiscal year
(September 30, 2017)*1 2,468
238*1 1,916
2,127
51
397
978
331
2,660
*1 329－11,500*1 2,252
269*1 2,213
1,403
53
502
1,026
463
2,810
*1 511
0
11,507

601
1,115
442
2,159
13,660

459
1,186
413
2,059
13,567

5,700

5,700

5,409
10
5,419

5,409
－
5,409

688

688

46,557
3,527
50,773(347)
61,545

48,9574,900
54,546(964)
64,690

(351)
(351)
176
61,37075,030597
597
178
65,46679,034

(ii) [Profit and Loss Statement](Unit: millions of yen)Previous fiscal year
Current fiscal year
(Started October 1, 2015;(Started October 1, 2016;
ended September 30, 2016)
ended September 30, 2017)*1 53,361*1 55,175*1 17,862*1 17,942
35,49937,233*1,*2 28,069*1,*2 28,978
7,429
8,254

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Land & rent income
Other
Total non-operating income
Non-operating expenses
Treasury stock acquisition expenses
Foreign exchange losses
Total non-operating expenses
Ordinary income
Extraordinary income
Gains on sale of non-current assets
Gain on reversal of asset retirement obligations
Total extraordinary income
Extraordinary losses
Loss on disposal of non-current assets
Loss on disposal of software
Valuation loss on stocks of subsidiaries and affiliates
Impairment losses
Total extraordinary losses
Profit before taxes
Income taxes – current
Income taxes – deferred
Total income taxes
Profit

－

141

－

*1 39
113
*1 38
*1 45
236

*1 31
118
*1 39
*1 29
219

－
0
0
7,665

0
0
0
8,473

11
－
11

2
23
25

33
－
287
－
321
7,355
3,201
(388)
2,813
4,542

3
15
－
0
19
8,479
2,713
(134)
2,578
5,900

[Report on cost of sales](A) Cost of sales on information processing, software and consulting services
50th Term(Started October 1, 2015; ended
September 30, 2016)
Category

Notes

Amount (millions of yen)

I Materials costs
II Labor costs*1

III Expenses
1. Computer rental
expenses
2. Maintenance contracts

51st Term(Started October 1, 2016; ended
September 30, 2017)

Ratio
(%)

Amount (millions of yen)

3,347

27.7

3,375

28.1

2,176

18.0

2,033

17.0

6,585

54.9

11,994

100.0

350

427

1,377

1,316

529

558

3. Depreciation
4. Repairs and maintenanceexpenses
5. Supplies expenses

641

640

1,493

1,333

6. Other

2,157

Total expenses
Works in progress andinventories at beginning ofyear
Transfers from otheraccounts
Total
Works in progress andinventories at end of year
Transfers to other accounts

6,549

54.2

12,074

100.0

69

1,052

1,234

13,276

13,298

69

243

1,131

1,354

12,076

11,700*3

Cost of sales on
information processing,
software and consulting
services

2,308

150
*2

Ratio
(%)

(Notes) 1. Labor costs include the following provisions. Figures in (parentheses) denote amounts for the previous
fiscal year.
Provisions for bonuses: 429 million yen (438 million yen)
Retirement benefit expenses: 37 million yen (89 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
50th Term(Started October 1, 2015; ended
September 30, 2016)
Category

Notes

Amount (millions of yen)

I Inventories at beginning of
year

117
－

142

－

51st Term(Started October 1, 2016; ended
September 30, 2017)

Ratio
(%)
2.0

Amount (millions of yen)
198

Ratio
(%)
3.1

II Purchases

5,866

Total

98.0

5,984 100.0

6,170

6,368 100.0

III Inventories at end of year

198

125

Cost of sales on officeequipment and supplies

5,786

6,242

－

143

－

96.9

(iii) [Statement of Changes in Equity]
Previous fiscal year (Started October 1, 2015; ended September 30, 2016)(Unit: millions of yen)
Shareholders' equity
Capital surplus

Retained earnings
Other retained earnings

Capital stock Legal capitalsurplus
Balance at
beginning ofyear
Changes of items
during the period
Provision ofgeneral reserve
Dividends ofsurplus

5,700

5,409

Other
capitalsurplusTotal
capitalsurplus10

Legalretainedearnings

5,419

688

Retainedearnings
brought
forwardGeneralreserve
44,457

3,155

48,301

2,100(2,100)－(2,071)(2,071)

4,542

4,542

ProfitAcquisition oftreasury stock
Disposal oftreasury stock
Changes of
items otherthanshareholders'equity (net)Total changes of
items during theperiodBalance at end of
year

0

0

－

－

0

0

－

2,100

371

2,471

5,700

5,409

10

5,419

688

46,557

3,527

50,773

Valuation and translation
adjustments
Subscription
Valuation
Total
rights to
Total
difference on valuation andsharesshareholders'available-for- translation
equitysale securities adjustments

Total net
assetsShareholders' equity
Treasurystock
Balance at
beginning ofyear
Changes of items
during the period
Provision ofgeneral reserve
Dividends ofsurplus(346)

59,074

492

492

127

59,694－－(2,071)(2,071)

4,542

4,542

(1)

(1)

(1)

0

0

0

ProfitAcquisition oftreasury stock
Disposal oftreasury stock
Changes of
items otherthanshareholders'equity (net)Total
retainedearnings

(843)

－

(843)

144

－

48

(794)

Total changes of
items during theperiodBalance at end of
year

(1)

2,470

(843)

(843)

48

1,675

(347)

61,545

(351)

(351)

176

61,370－145－

Current fiscal year (Started October 1, 2016; ended September 30, 2017)(Unit: millions of yen)
Shareholders' equity
Capital surplus

Retained earnings
Other retained earnings

Capital stock Legal capitalsurplus
Balance at
beginning ofyear
Changes of items
during the period
Provision ofgeneral reserve
Dividends ofsurplus

5,700

5,409

Other
capitalsurplusTotal
capitalsurplus

10

5,419

Legal
retainedearnings

Generalreserve

688

(10)

(10)

3,527

50,7732,400(2,400)－(2,122)(2,122)

5,900

5,900

(5)

(5)

－

－

(10)

(10)

－

2,400

1,373

3,773

5,700

5,409

－

5,409

688

48,9574,900

54,546

Valuation and translation
adjustments
Subscription
Valuation
Total
rights to
Total
difference on valuation andsharesshareholders'available-for- translation
equitysale securities adjustments

Total net
assetsShareholders' equity
Treasurystock
Balance at
beginning ofyear
Changes of items
during the period
Provision ofgeneral reserve
Dividends ofsurplus(347)

61,545

(351)

492

176

61,370－－(2,122)(2,122)

5,900

5,900

(677)

(677)

(677)

59

44

44

ProfitAcquisition oftreasury stock
Disposal oftreasury stock
Changes of
items otherthanshareholders'equity (net)Total changes of
items during the

Total
retainedearnings

46,557

ProfitAcquisition oftreasury stock
Disposal oftreasury stock
Changes of
items otherthanshareholders'equity (net)Total changes of
items during theperiodBalance at end ofyear

Retainedearnings
brought
forward

(617)

3,145

948

948

2

950

948

948

2

4,096

－

146

－

period
Balance at end of
year

(964)

64,690

597

597

178

65,466[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(i) Stocks of subsidiaries and affiliates
Stated at cost determined by the moving average method(ii) Available-for-sale securities
1)

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)

2)

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(i) Merchandise, raw materials
Cost determined by first-in, first-out method (with balance sheet values reflecting write-downs for
decreased profitability).
(ii) 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).
(iii)

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) and accompanying facilities and structures acquired after April 1, 2016, which arecalculated based on straight-line method.
(2)

Intangible Assets(i) Software
1) Software for sale
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147

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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).
2) Software for internal use
Amortized using straight-line method with an estimated in-house useful life of five years.
(ii) 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 theamounts 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 expected pension
assets payable as of the end of the current fiscal year are recognized.
(i) 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.
(ii) 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 (software development
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 based on theconstruction 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
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148

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Consumption taxes are accounted for using the tax-exclusion method.
(2)

Application of the consolidated taxation system

The consolidated taxation system is applied.
(Notes to Balance Sheets)*1.

Monetary claims and monetary liabilities on affiliated companies
Previous fiscal year
(September 30, 2016)

Short-term monetary claims on affiliatedcompanies
Short-term monetary claims on affiliatedcompanies
Short-term monetary liabilities on
affiliated companies－

149

Current fiscal year
(September 30, 2017)

72million yen

85million yen

122

80

523

452

－

(Notes to Income Statements)*1 Volume of transactions with affiliated companies
Previous fiscal year
(Started October 1, 2015: ended September 30, 2016)

Current fiscal year
(Started October 1, 2016; ended September 30, 2017)

Volume of trading transactions
Sales
Purchases
Operating expenses
Volume of non-operatingtransactions

million
66
yen
2,667
1,173

million
65
yen
2,636
1,128

10

9

*2

The approximate percentages of selling expenses were 56.4% for the previous fiscal year and 55.5%
for the current fiscal year; percentages of general and administrative expenses were 43.6% and 44.5%,
respectively.
Major items included in selling, general and administrative expenses are as follows.
Previous fiscal year
(Started October 1, 2015; ended
September 30, 2016)
million
8,721
yen
2,325
1,086
529
1,988
74

Salaries
Provisions for bonuses
Retirement benefit expenses
Depreciation
Rent expenses
Research and development expenses

Current fiscal year
(Started October 1, 2016; ended
September 30, 2017)
million
9,316
yen
2,461
474
555
1,966
106

(Notes to Securities)
Stocks of subsidiaries and affiliates (the amounts in the previous fiscal year's balance sheet are 448 million yen for thestocks of subsidiaries and 54 million yen for the stocks of affiliates; and the amounts in the current fiscal year's balance
sheet are 448 million yen for the stocks of subsidiaries and 54 million yen for the stocks of affiliates) are not presented
here since quoted market value is not available and is deemed to be extremely difficult to measure.

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150

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(Notes to Tax Effect Accounting)1.

Major factors of deferred tax assets and deferred tax liabilities
Previous fiscal year
(September 30, 2016)

Current fiscal year
(September 30, 2017)

1,862million yen
816
340
1,198
141
174
17

2,005million yen
862
362
1,197
102
174
17

Deferred tax assets
Software development costs
Provisions for bonuses
Provisions for retirement benefits
Retirement benefit trust
Accrued business tax
Valuation loss on investment securities
Retirement bonuses for directors payable
Legal welfare expenses corresponding toprovisions for bonuses
Asset retirement obligations
Impairment losses
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Enterprise tax refund receivable
Valuation difference on available-for-salesecurities
Retirement expenses corresponding to asset
retirement costs
Other
Total deferred tax liabilities
Net deferred tax assets

131

128

103
112
380
5,280
(345)
4,935

97
112
205
5,267
(346)
4,920

－

26

－

242

27

24

－

0
293
4,627

27
4,907

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, 2016)
Statutory income tax rate
(Adjusted)
Inhabitant tax on per capita basis
Entertainment expenses, etc. not deductible fortax purposes for an indefinite period
Dividends received, etc. to be excluded fromgross revenue for an indefinite period
Tax credits for salary growth taxation system
Reduction in assessment of year end deferred
tax assets due to changes in tax rate
Other
Income tax rate after applying tax effectaccounting(Subsequent Events)
Not applicable.
－

151

－

Current fiscal year
(September 30, 2017)

32.8%

30.7%

1.0

0.8

1.0

1.3

(0.1)

(0.1)

(1.6)

(2.4)

3.1

－

2.0

0.0

38.2

30.4

(iv) [Supplementary Schedules][Schedule – Tangible Assets](Unit: millions of yen)
Accumulat
Balance at ed
end of year depreciationBalance at
beginningof yearIncrease incurrent
year

Decreasein current
year

Depreciati
on incurrent
year

Building

5,772

506

6

366

5,905

10,667structures

154

0

－

16

138

446

Vehicles

0

－

－

0

0

44

Tools, furniture and fixtures

1,159

550

2

486

1,220

5,450

Land

6,352

314

－

－

6,667

－

－

703

134

－

569

－

Total property, plants andequipment

13,439

2,075

142

868

14,502

16,608

Software

2,817

1,352

15

1,472

2,683

2,419

Software in progress

694

879

620

－

953

－

Telephone subscription
rights

26

－

0

－

25

－

Other

0

0

－

0

0

0

3,538

2,232

635

1,472

3,663

2,420

Cate
gory

Type of asset

Property, plants and equipment

Construction in progress

Intangible assets

Total intangible assets(Note) Major increases in tangible assets during the current fiscal year were attributable to the following:
Buildings

Acquisition of Kansai Consolidated Building

305 million yen

Land

Acquisition of Kansai Consolidated Land314 million yen

Construction in progress

Construction of TKC Customer Support Center Building

569 million yen

SoftwareDevelopment costs of software for sale

426 million yen

Development costs of software for internal use

670 million yen

Software purchased from outside

257 million yen[Schedule – Provisions]
Item

(2)

Balance at
beginning of year

Increase in current Decrease in current
year
year

(millions of yen)
Balance at end ofyear

Provisions for bad debts

35

31

35

31

Provisions for bonuses

2,660

2,810

2,660

2,810

[Major Assets and Liabilities]
This item is omitted as information has been disclosed in the consolidated financial statements.

(3)[Others]
Not applicable.

－

152

－

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 sharesless than one unit
Place of handling

Administrator of shareholder
registry(Special account)
Mitsubishi UFJ Trust and Banking Corporation (Stock Transfer Agency
Department)
1-4-5 Marunouchi, Chiyoda-ku, Tokyo
Mitsubishi UFJ Trust and Banking Corporation
1-4-5 Marunouchi, Chiyoda-ku, Tokyo

Forwarding office――――――

Handling charges for buyback
and increase

Amount stipulated separately as commission for entrusting sale orpurchase of stock
By means of electronic public notice. However, in the event that electronic
notice is not possible due to incidents or other unavoidable circumstances,public notices will be posted in the Nihon Keizai Shimbun.
TKC's website for public notices: http://www.tkc.jp/

Method of giving public notice

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 numberof shares they hold; and rights to request the sale of shares less than one unit.

－

153

－

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 the filingdate of this Annual Securities Report.
(1) Annual Securities Report, Appendices and Confirmation Letter
Fiscal year (50th term) from October 1, 2015 to September 30, 2016, filed to the Director-General of the Kanto
Local Finance Bureau on December 26, 2016.
(2) Internal Control Report and AppendicesSubmitted to the Director-General of the Kanto Local Finance Bureau on December 26, 2016.
(3) Quarterly Securities Reports and Confirmation Letter
First quarter of 51st term (From October 1, 2016 to December 31, 2016), filed to the Director-General of the Kanto
Local Finance Bureau on February 13, 2017.
Second quarter of 51st term (From January 1, 2017 to March 31, 2017), filed to the Director-General of the Kanto
Local Finance Bureau on May 12, 2017.
Third quarter of 51st term (From April 1, 2017 to June 30, 2017), filed to the Director-General of the Kanto Local
Finance Bureau on August 14, 2017.
(4) Extraordinary Reports
Submitted to the Director-General of the Kanto Local Finance Bureau on December 26, 2016.
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 Affairs.
Submitted to the Director-General of the Kanto Local Finance Bureau on December 25, 2017.
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 Affairs.
(5) Share Buyback Report
Reporting period (From February 10, 2017 to February 28, 2017), filed to the Director-General of the Kanto Local
Finance Bureau on March 13, 2017.
Reporting period (From June 28, 2017 to June 30, 2017), filed to the Director-General of the Kanto Local Finance
Bureau on July 13, 2017.
Reporting period (From July 1, 2017 to July 31, 2017), filed to the Director-General of the Kanto Local Finance
Bureau on August 7, 2017.

－

154

－

Section 2[Information on Guarantors, etc. of the Company]

Not applicable.

－

155

－

Independent Auditors' Audit Report and Internal Control Audit Report

December 22, 2017
To: The Board of Directors
TKC Corporation
Ernst & Young ShinNihon LLC
Designated Limited Liability Partner
Yasuo Sekiya
Executing Partner
Certified Public Accountant(Seal)

Designated Limited Liability Partner
Executing Partner
Yuichi Noda (Seal)
Certified Public Accountant[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 Financial Information Section, namely, the consolidated
statements of financial position of TKC Corporation and consolidated subsidiaries for the fiscal year from October
1, 2016 to September 30, 2017, which consists of the consolidated balance sheets, consolidated statements ofincome, consolidated statements of comprehensive income, consolidated statements of changes in equity,
consolidated statements of cash flows, a basis of presenting the consolidated financial statements, and 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 independent 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 that we 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 theeffectiveness 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 presentation of the consolidated financial statements in order todesign audit procedures that are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.
－

156

－

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 consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of TKC Corporation and consolidated subsidiaries as of September 30, 2017, 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 Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act, we have audited
management's report on internal control over financial reporting of TKC Corporation as of September 30, 2017.
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 withassessment standards for internal control over financial reporting generally accepted in Japan.
There is a possibility that misstatements may not be completely prevented or detected by internal control overfinancial reporting.
Auditor's 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 weplan and perform the internal control audit to obtain reasonable assurance about whether the management's reporton 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, 2017 is effectively maintained, andpresents fairly, in all material respects, the result of the assessment of internal control over financial reporting inconformity with the assessments standards for internal control over financial reporting generally accepted in Japan.
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.
－

157

－

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.

－

158

－

Independent Auditors' Audit Report
December 22, 2017
To: The Board of Directors
TKC Corporation
Ernst & Young ShinNihon LLC
Designated Limited Liability Partner
Executing Partner
Yasuo Sekiya
Certified Public Accountant(Seal)

Designated Limited Liability Partner
Executing Partner
Yuichi Noda (Seal)
Certified Public Accountant

Pursuant to Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act, we have audited thefinancial statements included in the Financial Information Section, namely, the statements of financial position of
TKC Corporation for the 51st fiscal year from October 1, 2016 to September 30, 2017, which consists of thebalance sheets, statements of income, statements of changes in equity, important accounting policies, and otherrelated notes and supplementary schedules.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordancewith 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 financial statements thatare free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an independent 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 thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditors' judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. The purpose of an audit of
the financial statements is not to express an opinion on the effectiveness of the entity's internal control, but inmaking these risk assessments the auditor considers internal controls relevant to the entity's preparation and fairpresentation of 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 ofaccounting 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.
Audit Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of TKC Corporation as of September 30, 2017, and its financial performance for the year then ended inconformity with accounting principles generally accepted in Japan.
－

159

－

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.

－160－