Annual Securities Report(Report based on Article 24, Paragraph 1 of the
Financial Instruments and Exchange Act of Japan)
Fiscal year
Started October 1, 2019
(54th Term)
Ended September 30, 2020

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

– 1 –Contents
Page[Front Cover] ........................................................................................................................................................................ 3
Section 1 [Information on the Company] ............................................................................................................................ 4
Part 1[Overview of the Company] ................................................................................................................................ 4
1 [Key Financial Data]......................................................................................................................................... 4
2 [History]............................................................................................................................................................ 6
3 [Description of Business].................................................................................................................................. 8
4 [Information on Affiliates] .............................................................................................................................. 11
5 [Employees] .................................................................................................................................................... 12Part 2 [Business Overview] ............................................................................................................................................ 13
1 [Management Policy, Economic Environment and Challenges Faced by the Company] ............................... 13
2 [Risk Factors] ................................................................................................................................................. 17
3 [Management Analysis of Consolidated Financial Conditions, Operating Results, and Cash Flows] ............ 20
4 [Material Agreements, etc.] ............................................................................................................................ 32
5 [Research and Development Activities] .......................................................................................................... 32
Part 3[Property, Plant and Equipment]........................................................................................................................ 33
1 [Summary of Capital Investments] ................................................................................................................. 33
2 [Major Property, Plant and Equipment] .......................................................................................................... 33
3 [Plans for Capital Investments, Disposals of Property, Plant and Equipment] ............................................... 34

Part 4[Information on the Company] .......................................................................................................................... 35
1 [Information on the Company’s Stock]........................................................................................................... 35(1) [Total number of shares, etc.] .................................................................................................................... 35(2) [Share subscription rights, etc.] ................................................................................................................. 35(3) [Exercise of Bonds with Share Subscription Rights Containing a Clause
for Exercise Price Adjustment, etc.] .......................................................................................................... 35(4) [Changes in Total Number of Issued Shares, Capital Stock, etc.] ............................................................. 35(5) [Shareholders Composition]...................................................................................................................... 36(6) [Major shareholders] ................................................................................................................................. 36(7) [Status of voting rights] ............................................................................................................................. 37(8) [Information on Employee Stock Ownership Plan】 ................................................................................ 38
2 [Acquisition, etc. of Treasury Stock] .............................................................................................................. 39
3 [Dividend Policy]............................................................................................................................................ 40
4 [Corporate Governance] ................................................................................................................................. 41(1) [Overview of Corporate Governance] ....................................................................................................... 41(2) [Officers] ................................................................................................................................................... 55(3) [Audits] ..................................................................................................................................................... 59(4) [Officers’ Compensation, etc.] .................................................................................................................. 62(5) [Status of Shareholdings] .......................................................................................................................... 64

Part 5[Financial Information]...................................................................................................................................... 67
1. [Consolidated Financial Statements] .............................................................................................................. 68(1) [Consolidated Financial Statements] ......................................................................................................... 68(2) [Other] ..................................................................................................................................................... 104
2 [Financial Statements, etc.] ........................................................................................................................... 105(1) [Financial Statements] ............................................................................................................................. 105(2) [Major Assets and Liabilities] ................................................................................................................. 115(3) [Other] ..................................................................................................................................................... 115

Part 6[Stock-related Administration of the Company] .............................................................................................. 116

Part 7[Reference Information on the Company] ....................................................................................................... 117
1 [Information on the Parent Company] .......................................................................................................... 117
2 [Other Reference Information] ..................................................................................................................... 117

Section 2 [Information on Guarantors, etc. of the Company] .......................................................................................... 118[Independent Auditor’s Report] [Confirmation Letter] [Internal Control Report]– 2 –[Front Cover][Document filed]Annual Securities Report[Applicable law]

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

Director of Kanto Local Finance Bureau[Date filed]December 21, 2020

[Fiscal year]

54th term (From October 1, 2019 to September 30, 2020)[Company name]

Kabushiki Kaisha TKC[Company name in English]

TKC Corporation[Title and name of representative]

Masanori Iizuka, Representative Director, President and Executive Officer[Address of head office]1758 Tsurutamachi, Utsunomiya-shi, Tochigi[Phone number]

028-648-2111[Contact person]

Kiyotsugu Nakanishi, Director & Executive Officer, Chief Director of Business
Administration[Contact address]

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

03-3235-5511[Contact person]

Kiyotsugu Nakanishi, Director & Executive Officer, Chief Director of Business
Administration[Place available for public
inspection]

TKC Corporation, Tokyo Head Office(2-1 Ageba-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashikabutocho, Chuo-ku, Tokyo)– 3 –Section 1 [Information on the Company]
Part 1 [Overview of the Company]
1 [Key Financial Data](1) Consolidated Financial Data, etc.
Fiscal year

50th Term

51st Term

52nd Term

53rd Term

54th Term

Year end

September
2016

September
2017

September
2018

September
2019

September
2020

Net sales(millions of yen)

57,75059,70561,621

66,12067,814

Ordinary income(millions of yen)

7,604

8,792

8,961

9,669

11,685

Net income attributable toowners of parent(millions of yen)

4,770

6,071

6,158

6,721

7,821

Comprehensive income(millions of yen)

3,958

7,097

6,517

4,082

7,501

Total net assets(millions of yen)

64,556

68,892

72,55073,121

77,075

Total assets(millions of yen)

81,11685,42890,202

96,98997,671

Net assets per share(yen)

2,374.07

2,551.70

2,686.32

2,724.78

2,933.12

Net income per share(yen)

179.65229.13233.46255.52297.63

Diluted net income per share(yen)

178.88228.16232.41

255.01－Equity ratio

(%)

77.7

78.8

78.6

73.8

78.9

Return on equity

(%)

7.7

9.3

8.9

9.4

10.5

Price earnings ratio(times)

17.5

15.1

20.4

18.3

22.9

(millions of yen)

9,181

8,123

8,810

10,55010,569(millions of yen)

(7,022)(4,617)(4,013)411(10,124)(millions of yen)

(2,225)(3,019)(2,567)(3,792)(3,786)(millions of yen)

16,552

17,03919,26826,81023,469(No. of people)

2,547

2,588

2,625

2,701

2,770

Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Cash and cash equivalents at
end of year
No. of employees(Notes) 1. Net sales do not include consumption taxes (consumption tax and local consumption tax; hereinafter thesame).
2. The Company introduced the Board Incentive Plan (BIP) Trust starting from the 2nd quarter consolidated
accounting period of the 53rd Term, and recorded the stocks held by said Trust as treasury stocks.
Accordingly, for the purpose of calculating the fiscal net income per share, they are included in the treasury
stocks to be deducted in calculating the average number of shares outstanding.
3. Diluted net income per share is not stated for the 54th term as there were no dilutive shares.
4. The Company applies the partially amended Accounting Standard for Tax Effect Accounting (ASBJ
Standard No. 28, February 16, 2018), etc. as of the beginning of the current 53rd Term. Accordingly, said
accounting standard has been applied retroactively to the key financial data and other indicators for the 52nd
Term shown herein.

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

50th Term

51st Term

52nd Term

53rd Term

54th Term

Year end

September
2016

September
2017

September
2018

September
2019

September
2020

Net sales(millions of yen)

53,361

55,17556,76960,897

63,070Ordinary income(millions of yen)

7,665

8,473

8,577

8,972

11,107

Net income(millions of yen)

4,542

5,900

5,959

6,262

7,472

Capital stock(millions of yen)

5,700

5,700

5,700

5,700

5,700

(hundreds of shares)

267,310

267,310

267,310

267,310

267,310

Total net assets(millions of yen)

61,37065,466

68,86370,622

74,714

Total assets(millions of yen)

75,03079,03482,737

88,192

89,767(yen)

2,304.61

2,474.82

2,601.49

2,686.94

2,843.26

80

100

105

110

120

(40)

(40)

(50)

(55)

(55)

Total number of shares issued

Net assets per share
Dividend per share(Of the above, interim dividends(yen)

per share)
Net income per share(yen)

171.08222.67225.92238.07284.36

Diluted net income per share(yen)

170.34221.73224.90237.59－Equity ratio

(%)

81.6

82.6

82.9

80.1

83.2

Return on equity

(%)

7.5

9.3

8.9

9.0

10.3

Price earnings ratio(times)

18.3

15.5

21.0

19.7

23.9

Dividend payout ratio

(%)

46.76

44.91

46.48

46.20

42.20

(No. of people)

2,234

2,269

2,225

2,288

2,312

(%)

104.6

118.0

163.9

165.0

238.2

(%)

(95.8)(123.9)(137.3)(123.1)(129.1)

Stock price - high

(yen)

3,365

3,530

4,875

5,030

7,270

Stock price - low

(yen)

2,393

2,716

3,305

3,350

3,820

No. of employees
Total shareholder return(Benchmark index: TOPIX total
return index)(Notes) 1. Net Sales do not include consumption taxes, etc.
2. Dividends per share include a dividend of 10 yen for the 50th term in commemoration of the Company’s
50th anniversary.
3. The Company introduced the Board Incentive Plan (BIP) Trust starting from the 2nd quarter consolidated
accounting period of the 53rd Term, and recorded the stocks held by said Trust as treasury stocks.
Accordingly, for the purpose of calculating the fiscal net income per share, they are included in the treasury
stocks to be deducted in calculating the average number of shares outstanding.
4. Diluted net income per share is not stated for the 54th term as there were no dilutive shares.
5. The Company applies the partially amended Accounting Standard for Tax Effect Accounting (ASBJ
Standard No. 28, February 16, 2018), etc. as of the beginning of the current 53rd Term. Accordingly, said
accounting standard has been applied retroactively to the key financial data and other indicators for the 52nd
Term shown herein.
6. The highest and lowest share prices are based on the market prices on the First Section of the Tokyo Stock
Exchange.

– 5 –2 [History]
Date

Company History

October 1966

The Company was established in Utsunomiya-shi, Tochigi Prefecture on October 22, 1966 as a dataprocessing center to defend the business domains and maintain control over the fate of accounting 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

November 1972

December 1972

November 1973

August 1975
February 1976

Established TKC Tokyo Youhin Center Co., Ltd. (a subsidiary, changed name to TKC Tokyo Supply
Center Co., Ltd. in December 1993). [Merged and absorbed into the Company in January 2000]
Established TKC Osaka Keisan Center Co., Ltd. (a subsidiary, changed name to TKC Osaka Youhin
Center Co., Ltd. in July 1987, and to TKC Osaka Supply Center Co., Ltd. in December 1993). [Merged
and absorbed into the Company in January 2000]
Established TKC Okayama Keisan Center Co., Ltd. (a subsidiary, changed name to TKC Chushikoku
Youhin Center Co., Ltd. in July 1987, and to TKC Chushikoku Supply Center Co., Ltd. in December
1993). [Merged and absorbed into the Company in January 2000]
Changed corporate name to Kabushiki Kaisha TKC.
Established TKC Tohoku Keisan Center Co., Ltd. (a subsidiary, changed name to TKC Tohoku Yohin
Center Co., Ltd. in July 1987, and to TKC Tohoku Supply Center Co., Ltd. in December 1993). [Merged
and absorbed into the Company in January 2000]
Established TKC Nagoya Keisan Center Co., Ltd. (a subsidiary, changed name to TKC Chubu Youhin
Center Co., Ltd. in July 1987, and to TKC Chubu Supply Center Co., Ltd. in December 1993). [Merged
and absorbed into the Company in January 2000]
Established TKC Kyushu Keisan Center Co., Ltd. (a subsidiary, changed name to TKC Kyushu Yohin
Center Co., Ltd. in July 1987, and to TKC Kyushu Supply Center Co., Ltd. in December 1993). [Merged
and absorbed into the Company in January 2000]
Established Tokyo Line Printer Company (currently a consolidated subsidiary).

January 1978

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

October 1982

Established TKC Security Services Co., Ltd. (currently a consolidated subsidiary).

October 1984

Opened TKC Tax Research Center.

February 1985
April 1985

Established TKC Management Consulting Co., Ltd. (a subsidiary).
[Merged and absorbed into the Company in May 2011]
Opened TKC Okinawa Information Service Center and deployed information service centers nationwide.

August 1985

Opened OA Technology Development Center.

December 1986

Changed corporate name in the Articles of Incorporation to Kabushiki Kaisha TKC (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.

– 6 –

Date
March 1990

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

Company History
Integrated the information processing service divisions of TKC Tokyo Second Information Center, TKC
Shinjuku-Minami Information Center and TKC Ikebukuro Information Center to form TKC Tokyo
Consolidated Information Center.
Established TKC Corporation Strategic Management Research Center. [Merged and absorbed into theCompany 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 the corporate 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.

April 2004
June 2005
December 2008

September 2010
September 2015
October 2015
April 2016
October 2017
March 2018
October 2018
March 2019
September 2019
September 2019
March 2020

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 Auditing Standards 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).
Acquired 100% ownership of SKYCOM Corporation as a wholly owned subsidiary.
Became the first company in Japan to obtain third party accreditation for ISO/IEC 27018:2014, “Code ofpractice for protection of personally identifiable information (PII) in public cloud acting as PII processors”(October 12).
Opened System Engineering Center (SEC) building.
Established TKC Customer Support Service Co., Ltd. (currently a consolidated subsidiary).
Completed the construction of TKC Customer Support Service building.
Tokyo Line Printer Company changed the company name to TLP Corporation.
Became the first company to acquire certification under the Electronic Books Software Legal Compliance
Certification System by Japan Image and Information Management Association (JIIMA) for its financial
accounting systems that are offered to the clients of accounting firms.
Acquired 100% ownership of TKC Shuppan Corporation as a wholly owned subsidiary.
Established a voluntary Nomination and Compensation Advisory Committee
Acquired 100% ownership of TLP Corporation as wholly-owned subsidiary.

– 7 –3 [Description of Business]
The TKC Group (TKC Corporation and affiliated companies) consists of the Company, six subsidiaries and one
affiliated company. The Group is engaged in business activities including accounting firm business (information
processing services, software and consulting services, and sales of office equipment and supplies), local governments
business (information processing services, software and consulting services, and sales of office equipment), andprinting business.
The positioning of each company in each business segment is as follows.
Note that the three business divisions below are the same as the categories in the segment information set forth in theNotes to Consolidated Financial Statements under Part 5 Financial Information, 1. Consolidated Financial Statements,(1) Consolidated Financial Statements.

1 Accounting Firm Business Division
Key services/products
1. Information processing services(i) Computer services by the TKC
Consolidated Information Center(ii) Computer services by the TKCInternet Service Center (TISC)
2. Software and consulting services(i) Development and provision ofsoftware to be installed on system
devices for information service
applications

Positioning of the Company and affiliated companies(Services and sales)
1. The Company provides information processing services, software and consulting
services, and sales of office equipment and office supplies for computer-based
accounting to customers including accounting firms and their clients.
2. TKC Customer Support Service Co., Ltd., a subsidiary of the Company, offers
help desk services to accounting firms and their clients, and for medium- andlarge-size companies.
(Manufacturing and production)
1. TLP Corporation, a subsidiary of the Company, offers printed continuous
business forms for TKC’s computer-based accounting for information processing
service applications, and manufacturing of office supplies for use with TKC’scomputer-based accounting systems.
2. SKYCOM Corporation, a subsidiary of the Company, is engaged in thedevelopment and sales of software.
3. TKC Shuppan Corporation, a subsidiary of the Company, publishes books andmonthly magazines on business management, taxing and accounting to provide
useful business information to TKC member accounting firms and their clients.
4. iMobile Inc., an affiliated company, is engaged in the development andmaintenance of website services.

(ii) Systems consulting services byspecialized staff
3. Sales of office equipment(Others)
TKC Security Services Co., Ltd., a subsidiary of the Company, provides security,
maintenance and repair services for buildings owned by the Company.

Sales of system devices for information
service applications
4. Sales of supplies
Sales of office supplies for computerbased accounting– 8 –2 Local Governments Business
Key services/products
1. Information processing services(i) Computer services by the TKC
Consolidated Information Center(ii) Computer services by the TKCInternet Service Center (TISC)

Positioning of the Company and affiliated companies(Services and sales)
1. The Company provides information processing services, software and consulting
services, and sales of office equipment and office supplies to local governments(local municipalities, etc.).
2. TKC Customer Support Service Co., Ltd., a subsidiary of the Company, offers
help desk services to local governments (local municipalities, etc.).
(Manufacturing)
1. TLP Corporation, 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 thedevelopment 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
Key products

Positioning of the Company and affiliated companies

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

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

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

TKC National
Federation partnercompanies

Law schools, etc.

Medium/largesized companies

Clients

Clients ofaccounting firms

Accounting firms

Local governments(municipalities, etc.)

General companies

Non-consolidated
subsidiary
TKC Financial
Guarantee Co., Ltd.

Sales of monthly
magazines

Sales of supplies for
TKC computer-based
accounting systems
TKC

Entrustment ofdevelopment/
maintenance ofwebsite services

Equity method
affiliated company:iMobile Inc.

Help desk
services

Information
processing services

Software andconsulting
services, etc.

Accounting Firm Business Division

Purchasing ofmonthlymagazines, etc.

Purchasing of
supplies for TKC
computer-based
accounting systems

Consolidated
subsidiary:
TKC Shuppan
Corporation

Outsourcing ofhelp desk
services

Consolidated
subsidiary:
TKC Customer
Support Service Co.,Ltd.

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

– 10 –

Sales of officeequipment

Sales of continuous
business forms for
TKC PC systems

Local Governments
Business Division

Printing Business
Division

Outsourcing ofsystems
development/mai
ntenance

Consolidated
subsidiary:
SKYCOM
Corporation

Purchasing ofcontinuous
business forms
for TKC PC
systems

Consolidated
subsidiary:
TLP Corporation

4 [Information on Affiliates](1) Consolidated Subsidiaries
Name

Address

Principal line ofbusiness

100

Printing business,
manufacture andsales of continuous
business forms for
PCs

100.0

Security,
maintenance &repairs, and cleaning
services

100.0

Development andsales of systems

100.0

Itabashi-ku,

TLP CorporationTokyo

TKC Security Services
Co., Ltd.

SKYCOM
Corporation

Utsunomiya-shi,

10

Tochigi

Chiyoda-ku,

100

Tokyo

TKC Customer
Support Service Co.,Ltd.

TKC Shuppan
Corporation

Capital(millions ofyen)

Percentage of voting
rights held(%)

Related activities
Purchasing of printed
continuous business
forms for PCs;
lease of office spaces.
Executive positions areheld concurrently.
Security, maintenance& repairs, packaging
and shipping services.
Executive positions areheld concurrently.
Outsourcing ofsystems development.
Executive positions areheld concurrently.
Outsourcing of help
desk services.

Kanuma-shi,
Tochigi

Chiyoda-ku,
Tokyo

25

Help desk services

83

Production ofmonthly magazines,
etc.

100.0

Executive positions areheld concurrently.
Purchasing of monthly
magazines, etc.

100.0

Executive positions areheld concurrently.

(Notes) 1. TLP Corporation is a specified subsidiary. Effective as of March 2, 2020, the Company purchased additional
shares of TLP Corporation, thereby making TLP Corporation a wholly owned subsidiary of the Company.
2. None of the companies currently submit Securities Registration Statements or Annual Securities Reports.
(2) Equity Method Affiliated Companies
NameiMobile Inc.

Address

Chiyoda-ku, Tokyo

Capital(millions of yen)100

Principal line ofbusiness

Development andmaintenance ofwebsite services

Percentage of voting
rights held
(%)

30.0

Related activities
Outsourcing ofdevelopment andmaintenance ofwebsite services.
Executive positions areheld concurrently.

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

– 11 –

5 [Employees](1) Consolidated Basis
As of September 30, 2020
Name of segment

Number of employees

Accounting Firm BD

1,650

Local Governments BD

590

Printing BD

195

Corporate (shared)

335
Total

2,770

(Notes) 1. Number of employees represents the number of working persons.
2. Number of employees listed under Corporate (shared) belongs to the management division.
(2) Status of the Company
As of September 30, 2020
Number of employees

Average age (years)

Average years of service (years)

Average annual salary (yen)

39.7

16.4

7,457,353

2,312

Name of segment

Number of employees

Accounting Firm BD

1,502

Local Governments BD

590

Corporate (shared)

220
Total

2,312

(Notes) 1. Number of employees represents the number of working persons.
2. Average annual salary includes bonuses and extra wages.
3. Number of employees listed under Corporate (shared) belongs to the management division.
(3) Status of Labor Unions
There are no labor unions.

– 12 –

Part 2 [Business Overview]
1 [Management Policy, Economic Environment and Challenges Faced by the Company]
1. Management Policy, Economic Environment and Challenges Faced by the Company(1) Management policy, management strategy
The Company is managed to achieve the following two business objectives as set forth in our Articles ofIncorporation (Article 2) under the company motto of “Jiri Rita (“self-interest is in the realization of other'sinterest”) and management principle of “Contribution to our Customers.”(i)Management of electronic data processing centers to defend the business domain and maintain control overthe fate of accounting firms(ii)Management of electronic data processing centers to improve the administrative efficiency of local
governments
This basic principle has been inscribed in our Articles of Incorporation since the incorporation of the Company(October 22, 1966). With the expansion of our business scope, other business objectives have been added to
the Articles, although they merely supplement these two business objectives and our basic policy for
management has never changed.

(2) Business environment
Factors that have great impacts on the products and services offered by the Group include revisions to the laws andadvancements in ICT. Legal reforms to which we must respond include the electronic filing of income taxes
mandated to large corporations starting in April 2020, the compulsory application of Accounting Standard for
Revenue Recognition starting in April 2021, the Digital Administrative Procedures Act, and standardized local
public accounting.
Advancements in ICT such as cloud computing, FinTech, AI and RPA continue to evolve rapidly. In addition, theestablishment of a new Digital Agency and the integration of the My Number card and health insurance card arealso scheduled in 2021.
We believe it is critical to become responsive to these changes in the environment and reflect such knowledge inthe products and services offered by the Group.
As the outlook for the containment of the novel coronavirus infection (hereinafter, “Coronavirus”) is still
unpredictable, future prospects of the Japanese economy is unclear and long-term impacts on the Group’s customers,
namely the accounting firms and their clients, are anticipated. While the Printing Business Division operated by theGroup’s subsidiary has seen decrease in orders for direct mails from private companies, impacts to the Group’s
performance has been minimal so far. Yet, we have not ruled out the possibility of greater impacts depending on
future trends in slowdown in trade and suppression of corporate capital investments.
(3) Priority business and financial issues(i)Providing systems in complete compliance with laws and regulations
The Group provides support for the operation of accounting firms and local governments by achieving
complete compliance with relevant laws and regulations and offering systems developed based upon the latest
ICT. As such, the Group will continue to enhance system developments that will enable us to promptly
respond to revisions to such laws and regulations.

(ii)

Establishing the Group governance system
The Group will establish an internal controls system in compliance with the requirements of the Companies
Act as well as the Financial Instruments and Exchange Act of Japan, and compile the Company’s management
philosophy, various board structures and corporate rules and regulations in a systematic manner to improve
the Group governance system.
In particular, the Group established and launched a Group governance system in response to the Practical
Guidelines for Group Governance System formulated by the Ministry of Economy, Trade and Industry(METI) in June 2019.

(iii) Fostering an organizational culture that bolsters job satisfaction
The Group will work to develop a workplace that respects individuals and teamwork, support efforts todevelop the capabilities of employees necessary to deliver value to our customers in accordance with theCompany’s Management Principles, and foster an organizational culture that bolsters job satisfaction.

– 13 –

(iv) Ensuring business continuity
The Group will strengthen and expand existing services to ensure the continuity or early recovery of thebusiness operations of all of our customers in the event of large-scale natural disaster and other unforeseen
circumstances.
(v)

Rapid response to system failure
In the rare event that the Company’s system fails, the Group will identify the users impacted by system failure
to notify them of the nature of the failure and countermeasures, and strive to establish a system to provide
rapid support for recovery under the policy of “100% customer relief.”(vi) Efforts toward information security
The Group provides various information services for accounting firms and their clients and local governments
through the use of latest ICT. Ensuring information security is our highest priority and also a social
responsibility in conducting our business activities.
It is with this awareness that the Company acquired third party accreditations including the ISO/IEC 27001
Information Security Management Systems certification and the JIS Q 15001 Personal Information Protection
Management Systems (PrivacyMark) in order to develop a technical environment that enables our customers
to use our cloud services with a peace of mind.
In addition, the TKC Internet Service Center (TISC) also acquired certifications under ISO/IEC 27018, codeof practice for protection of personally identifiable data in the public cloud on October 12, 2015, andISO/IEC27017, code of practice for information security controls for cloud services on June 19, 2017.
The Company will continue to strive to develop environments where customers can use cloud services safely,
securely and conveniently.

2. Management Policy, Economic Environment and Challenges Faced by the Accounting Firm Business Division(1) Management policy, management strategy
The Accounting Firm BD operates in accordance with the business objectives set forth in the Articles ofIncorporation (Article 2, Paragraph 1: Management of electronic data processing centers to defend the businessdomain and maintain control over the fate of accounting firms) and works under close ties with the TKC National
Federation, which consists of certified public tax accountants and certified public accountants that are customers
of TKC (11,400 members).
TKCNF announced its 3-year activity policy from 2019 to 2021 as follows based on the policy agenda in view of
its 50th anniversary (in 2021).
[Activity policy to change society with the TKC brand](i)

Promote Shomen-tempu (attachment of tax audit reports) by the TKC methods (FY2020 target: Corporate
Shomen-tempu by 144,000 companies)(ii)

Promote TKC Monitoring Information Service (FY2020 target: 120,000 companies, 245,000 cases)(iii) Promote self-accounting practice by the TKC methods (FY2020 target: 285,000 companies)
Based on the activity policy of TKCNF, the Company conducts activities to achieve its strategic targets for
FY2020.
In addition, the Company supports the expansion of clients of TKC Members by providing tax and accounting
systems for listed companies and other large enterprises in close collaboration with the TKCNF's Mediumand Large-size Support Research Committee and the Overseas Deployment Support Research Committee.
(2) Business environment
According to the Outline of Filing of Corporate Income Tax Returns (Taxation) published in October 2019 by the
National Tax Agency, the percentage of companies recording profit was 34.7%. Although this was an increase of
0.5 percent points over the previous program year and the percentage has been rising for eight consecutive years, itshows that approximately 65% are still recording losses.
Moreover, we may see more SMEs impacted by the spread of COVID-19 that face difficulties and record losses.
Amidst such impenetrable fog, many SMEs have secured cash on hand through emergency loans, which they will
begin repaying after 2021. Businesses now face a big challenge of securing profit necessary to repay the loans.
In such climate, TKC Member firms, in an aim to achieve positive balance and proper filing, conducted monthly
field audits and monthly settlements, offered managerial advisory services, and undertook activities to “strengthen
the company through accounting.” We also provided various support services, including the calculation of profits– 14 –

and sales revenues needed for loan repayment and development of business plans. As a result of these activities,
nearly 60% of the clients of TKC Member firms have achieved surplus, and there are rising expectations from
SMEs and financial institutions nationwide towards the effective instructions provided by TKC Member firms.
Meanwhile, large enterprises with a capital of 100 million yen or greater will be mandated to use electronic filingof income taxes starting from the fiscal year beginning after April 1, 2020. Also, for local taxes, certain corporations
including large enterprises with a capital of 100 million yen or greater, must file the tax returns and attachments forcorporate inhabitant tax and corporate income taxes through an electronic data processing system. The Company
considers such legal and social system reforms as an opportunity to develop markets and to expand the client baseof TKC Members.
(3) Priority business and financial issues
The Accounting Firm BD considers contributing to the prosperity of accounting firms and their clients the mostvital business challenge, and will continue to collaborate closely with the TKCNF on the various TKCNF activities
as well as develop and provide systems and services to support the operation of TKC Members.
(i)Increase system competitivenessWe will take the following actions to increase competitiveness of its systems and differentiate ourselves fromother companies by appealing the advantages of our systems.

1) The strengths of the Company’s systems lie in the one-stop, full line of tax affairs and accounting. The
advantage is the capability to provide a one-stop, full line of accounting, tax affairs and electronic tax filingwith fully compatible links to related tax information systems while maintaining complete compliance withlaws, regulations and accounting standards in our financial accounting systems. Looking ahead, the Company
will continue to respond promptly and accurately to revisions of laws/regulations and system modifications,and strive to enhance these strengths.
2) The most important feature of the Company’s systems is that they are not mere offering of systems and services.
Our systems come with the meticulous support, from implementation to operation, by TKC Members thathave 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.
(ii)

Activities to promote the use of self-accounting
In order to help TKCNF achieve their strategic targets, the Company will enhance and expand functions that
support corporate executives' quick decision making, and carry out promotional activities taking advantageof the strengths of systems that prevent any retroactive insertions, deletions and corrections which may leadto falsification of accounting data.

(iii) Support to achieve “Over 10,000 TKC Member Firms”
To achieve TKCNF’s target of achieving over 10,000 TKC Member firms, the Company will solicit
membership in cooperation with TKC Members and contribute to the achievement of TKCNF’s strategic
target.
(iv) Increase of user base of TKC Law Library
The Company will increase the convenience of users by enhancing the functions and contents of LEX/DB
Internet Publishers’ Database consisting the TKC Law Library. Through such efforts, we aim to differentiate
the TKC Law Library from the services offered by competitors in order to further increase the use by law
firms.

3. Management Policy, Economic Environment and Challenges Faced by the Local Governments Business
Division(1) Management policy, management strategy
The Local Governments BD operates in accordance with the business objectives set forth in the Articles ofIncorporation (Article 2 Item 2: “Management of electronic data processing centers to improve the administrative
efficiency of local governments”) and offers specialized information services in order to help promote the welfareof residents by improving administrative efficiency.
Also, as a medium- to long-term business vision, the Company established a policy to “contribute to the prosperity
and development of local communities by improving administrative efficiency, improving resident services andreducing administrative costs through optimal use of TKC systems, and is now in the process of executing thestrategies to that end.

– 15 –

(2) Business environment
Informatization of local governments (municipalities, in particular) is at a major turning point.
One of their new challenge is to become a “smart” municipality. Against the backdrop of labor shortages due todeclining birthrate/aging population and depopulation, municipalities are facing an important challenge oftransitioning to a smart municipality and promoting shared, wide-area cloud that could provide administrative
services in a sustainable manner with half the number of staff.
Also on May 31, 2019, the Law for Partial Revision to the Act on Use of Information and Communications
Technology in Administrative Procedure, etc. for the Improvement of Convenience of Related Parties Engaged in
Administrative Procedure Using Information and Communications Technology and for the Promotion of
Simplifying and Streamlining Administrative Operations (“Digital Administrative Procedures Act” for short) was
promulgated, under which policies for the Three Principles of Digitalization (digital first, once-only and connected
one-stop) and Principles of On-line Administrative Procedures were introduced and municipalities are obliged tomake best efforts to conduct administrative procedures on-line.
In such situation, the government is accelerating its efforts towards the standardization of municipality systems.
Conventionally, each municipality had created and developed its own information systems. As a result, they are
now facing personnel and financial burden in placing purchase orders, maintaining and managing the systems, andresponding to system reforms. The different forms and formats used by each municipality are also causing burden
on those creating and using them, namely the residents, companies, and municipalities. The standardization andsharing of information systems are essential infrastructures in achieving the digitalization of administrative
procedures.
Moreover, the spread of the COVID-19 has drastically changed the socio-economic activities of Japan, redefining
our past sense of values. In particular, the delay in the payment of the Special Cash Payment has triggered the movetowards early digitalization of administrative procedures.
Moreover, while governments and municipalities face increasingly serious financial conditions, reform ofadministrative and financial services to increase financial transparency, efficiency and appropriateness will continue
to gain speed. Thus, it is imperative that municipalities conduct appropriate updates and disclosure of financial
documents, while using the information obtained from such financial documents for comparison of secular changes,
comparison between similar organizations, and analysis using indicators, and creating and analyzing financial
documents by facility to be used in asset management and budgeting of public facilities.
Meanwhile, looking toward the market trends of business vendors supplying for local governments, new players
called Govtech who specialize in the field of digitalization of administrative services are entering the market. Trends
show that the local governments market is now increasingly competitive and the world has shifted to a harsh place
where only those system suppliers who have the ability to respond flexibly to the changing business environment
could survive.
(3) Priority business and financial issues
As corporate effort to support the achievement of Smart governments, digitalization of administrative services, andreform of administrative and financial services, the Company considers providing support for improving theadministrative efficiency of local governments and enhancing resident convenience a vital business challenge,
which shall be achieved through the development and provision of innovative products and services that leverage
the latest in ICT, and will implement the following five priority activities to this end.
(i)

We will develop new municipality customers of mission-critical operational systems and further promote
government cloud systems to propel digitalization of administrative services and minimize costs;(ii)

We will support the realization of evidence-based policy making (EBPM) based on public accounting
information by providing systems that allow analysis of administrative efficiency through multilateral use offinancial data;(iii) We will support the enhancement of convenience of users (governments and residents) through disseminationand expansion of eLTAX-related services and digitization of tax administration;(iv) We will engage in the development and provision of new, user-oriented administrative services anddigitization support systems;(v)

We will establish mutual software product supply relationship with local vendors providing services to local
municipalities in order to promote alliance strategies to achieve expansion of sales area and multiplexing ofservices.

– 16 –

4. Management Policy, Economic Environment, and Challenges Faced by the Printing Business Division(Subsidiary: TLP Corporation)(1) Management policy, management strategy
The Printing BD operates under the management philosophy to contribute to the communication and marketing ofclient companies and their customers by utilizing digital technologies and securely providing printed materials. We
anticipate an even highly advanced information society and a hurried installation of a digitalized government due
to the impacts of COVID-19. To respond to the diversified needs of clients in the rapidly changing society, thePrinting BD offers greater added-value services utilizing the latest equipment and technologies based on its sales,
quality, and production capabilities to create maximum customer values. As a good partner to our clients, we will
strive to further improve corporate value through the development of a communication environment utilizing digitaltechnologies and printed materials.
(2) Business environment
As to our key products, data print services (DPS) and business process outsourcing (BPO), we expect the increasein Internet advertisements as well as transformation to post-COVID-19 new business styles such as teleworking
and work-at-home, and the governmental initiatives in digitalizing administrative services. We will strive to adapt
and survive these major changes. The market is looking upon the unprecedented changes in the environment andcreation of a new businesses. We will offer proposals in view of these changes to improve customer satisfaction.
While demands for business forms continue to decline over time, we will work to expand our shares within themarket through streamlining of production environment, elimination and consolidation of facilities, and increase inproduction efficiency.
(3) Priority business and financial issues
The Group’s Printing BD implements the following actions to increase sales mainly from data print services (DPS)
and business process outsourcing (BPO).
(i)

We will strengthen our sales force for the sales of DPS-related products in order to increase our shares among
existing customers and to acquire new customers.

(ii)With the full-scale operation of the Kansai Plant and Kansai sales office, we will increase sales in the WestJapan area.

(iii) We will submit proposals combining our analog and digital printing technologies to loyal customers toachieve direct communication with such customers.
(iv) Due to the impacts of the COVID-19 pandemics, we expect customers to increase the weight of outsourcing.
We will accept BPO (business process outsourcing) orders and contribute to streamlining the customers’
business operations by maintaining high quality, minimizing costs, and reducing information security risks.
(v)

We will enhance quality and production capabilities by further improving the production environment of thededicated DSP plant which has been expanded.

(vi) We will continue to respond to customer needs, submit unique proposals to differentiate ourselves fromcompetitors, and develop new technologies to reduce production costs.
(vii) We will strive to improve and maintain consistent quality, and enhance our quality inspections of each process
for all products to prevent quality defects.
(viii) We will introduce a new facility for envelop production and reduce the percentage of subcontracting throughincreased self-manufacturing in order to save costs.
(ix) In order to win trust from customers and business partners, and to stay on the front line of the governmentinitiated promotion of My Number Cards, we will further strengthen our information security systems basedon Privacy Mark and ISMS to ensure strict management of My Number.
(x)

As ISO14001 certified, environmentally friendly company, we will reduce wasted paper and further put ourefforts into reducing energy consumption through increased productivity and efficiency.

2 [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 be forthcoming in disclosing information on other risk factors that
may be deemed material to investors.
The Company is aware of the possibility that these risks may occur and strives to prevent them in advance or respondpromptly should they occur. However, we feel it necessary that investment decisions concerning the Company– 17 –

securities should be made after thorough review in light of this section and also in reference to the contents of thisentire report. Note that this section does not cover all risk factors related to investment in the Company securities.
Statements with regard to the future are based on the Group’s decision made as of the end of the current consolidated
fiscal year (September 30, 2020).

1. Economic Climate
The clients of the Group are mainly TKC member accounting firms and local governments. Although the trends indomestic economy do not have direct impacts on the Group’s business performance, there may be adverse effects on
the Group’s business results and financial status if recession persists and earnings of TKC member accounting firms
and their clients decline as a result.

2. Market Competitiveness
The Group develops and provides business software for our clients, including TKC member accounting firms andtheir clients, and local governments. There are other vendors that develop such software, and if our software is inferior
in quality or operability, we may not be selected from our customers.
The Group strives to be quick in capturing legal reforms and advancements in ICT, maintains a dedicated team in thedevelopment division to market our software, and has a development system to widely incorporate the demands of ourcustomers and users.

3. Quality of Products and Services
The products and services that the Group offers to customers contain information such as accounting and taxation
information of TKC member firms and their clients, and residential information of local municipalities. Errors in suchinformation may cause significant damages to our customers, and as such, the quality of the Group’s products andservices are considered important elements of our business activities. We conduct training to increase understandingon the system architecture, and enhance tests to maintain and improve quality.
However, as it is difficult to completely eliminate system failure of larger scale, complex software in the recent years,
we are working to establish a system that can provide a speedy, direct, full-scale customer rescue in the event of system
failure.

4. Raw Material Procurement for Printing BD
The Printing BD of the Group has concerns about 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 respond through price negotiations with its customers. However, such circumstances may still affect the financial
standing and operating results of the Group in the event the procurement of raw materials becomes extremely difficult,or when purchase prices rise significantly.
The majority of raw materials is procured through direct purchases of base paper from paper manufacturers, and theGroup strives to ensure the stable procurement of raw materials and to maintain optimal pricing.

5. 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 reviews its policies and procedures related
to information management on an on-going basis, educates its directors and employees, disseminates the importanceof information management and implements system-based information security measures.
The Company also strengthens its information protection management systems by obtaining accreditations such as
ISO/IEC27001 Information Security Management System (ISMS) and JIS Q 15001 Personal Information Protection
Management Systems (Privacy Mark). TKC Internet Service Center also acquired ISO/IEC27018 certification, astandard specializing in the protection of personal information in relation to ISMS and public cloud services, andISO/IEC27017 certification for information security controls for cloud services.
However, the potential for such information leaking due to unforeseen circumstances cannot be eliminated completely,and 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.

6. 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.
– 18 –

7. Impacts of COVID-19
The slowdown of the economy on a global scale due to the spread of COVID-19 is expected to continue for the next
few years. In such environment, the Company may not be able to avoid the impact should the business of our customers,
the accounting firms and their clients be significantly affected.
However, with this pandemic, there are new demands that are arising out of the accelerated digital transformation andnew lifestyles, and the Company will continue to provide a wide range of support to our customers and to expand ourbusiness.

– 19 –

3 [Management Analysis of Consolidated Financial Conditions, Operating Results, and Cash Flows]I.

Analysis of the Group’s consolidated operating results for the current consolidated fiscal year

1. Operating Results across the GroupThe Japanese economy in the consolidated fiscal year under review (October 1, 2019 to September 30, 2020)(hereinafter, the “current fiscal year”) started out with a gradual growth trend, but resulted in serious circumstances
impacted by the global spread of the novel coronavirus disease (COVID-19). As the outlook for the containment of
the novel coronavirus is still unpredictable, future prospects of the Japanese economy is unclear and long-term impacts
on the Group’s customers, namely the accounting firms and their clients including SMEs and local municipalities are
anticipated.
In such situation, the Company has placed highest priority on supporting our customers, and worked to develop
systems and provide services for them.
The Accounting Firm BD supported the efforts of certified public tax accountants and certified public accountants thatare customers of TKC (hereinafter, “TKC Members”) in providing assistance in financing and managerial advisory
services as escort supporters of SMEs. The Company also worked to promote the use of TKC Monitoring Information
Service, in which TKC Members, upon request by their clients, disclose the company’s settlement at the same time as
the electronic tax filings of settlement documents.
The Local Governments Business Division provided support for the administrative tasks related to the application andacceptance procedures for the Special Cash Payment and Temporary Special Benefit for Households with Children
programs that were conducted under the COVID-19 emergency economic policy (approved by the cabinet on April
20, 2020). In addition, the Division received orders and conducted system revisions in response to the free preschool
education & nursing subsidy program and the online confirmation of qualifications (for example, the use of My
Number card as health insurance card, etc.) under the Health Insurance Act.
As a result of these activities, the TKC Group recorded a net sales of 67,814 million yen (increased 2.6% year-onyear), operating income of 11,381 million yen (increased 21.8% year-on-year), ordinary income of 11,685 million yen(increased 20.8% year-on-year), and current net income attributable to owners of parent of 7,821 million yen(increased 16.4% year-on-year).
Net sales for the current fiscal year by business division are shown below.

2. Business Activities and Operating Results of the Accounting Firm Business Division(1) Business activities of the Accounting Firm BD
The Accounting Firm BD operates in accordance with the business objectives set forth in the Articles ofIncorporation (Article 2, Paragraph 1: Management of electronic data processing centers to defend the businessdomain and maintain control over the fate of accounting firms) and works under close ties with the TKC National
Federation, which consists of 11,400 certified public tax accountants and certified public accountants (as of
September 30, 2020) that are customers of TKC (hereinafter, “TKC Members”).
TKCNF was established in 1971 and is engaged in various activities in an aim to realize the following six businessobjectives:
1) Realize tax justice;2) Conduct tax consultant business on compliance completely;3) Support SMEs for their prosperity and success;4) Enhance managerial infrastructure of TKC Member firms;
5) Make full use of TKC systems;
6) Promote mutual enlightenment, support and friendship.
(Note) For more information on the TKC National Federation, see the booklet “All About TKC National
Federation” or visit the TKC Group website (http://www.tkc.jp/).

– 20 –

[Activities of the TKC National Federation (“TKCNF”)]
TKCNF sets its 3-year activity policy from 2019 to 2021 and Strategic Targets 2020 based on the policy agenda inview of its 50th anniversary (in 2021). The content is as follows:[Activity policy to change society with the TKC brand](i)

Promote Shomen-tempu (attachment of tax audit reports) by the TKC methods (FY2020 target: Corporate
Shomen-tempu by 144,000 companies)(ii)

Promote TKC Monitoring Information Service (FY2020 target: 140,000 companies, 245,000 cases)(iii) Promote self-accounting practice by the TKC methods (FY2020 target: 285,000 companies)
In addition, as the initiatives of TKCNF are beginning to draw the attention of many financial institutions, thefollowing measures have been launched to take advantage of this opportunity to further enhance the managerial
infrastructure of TKC Member firms:(i)Understand and practice the Standards of Conduct for TKC Accountants(ii)

Increase the numbers of Field Auditors and Assistant Field Auditors(iii) Enhance the managerial advisory services as a Certified Support Agency
With COVID-19 casting shadows on the business environment surrounding SMEs, TKCNF sent out messages:“Now is the time to exert the true values as tax consultants!” “Tax accountants should be an empathetic counselor
for SMEs in light of this crisis.” While continuing to engage in the activities outlined above, TKCNF worked tosupport SMEs whose businesses were impacted by the spread of COVID-19 in resolving cash flow situations andpreparing applications for subsidies.
[Activities to achieve the strategic goals of the Accounting Firm Business Division](i)

Support of SMEs affected by COVID-19
During the fiscal year under review, the Company engaged in the following support activities under the policy
to focus all its effort on supporting TKC Members and their clients.

1) Provision of the latest information to TKC Members
To accurately and quickly convey information on SME support policies released by the national government
and SME support organizations to TKC Members, the Company provided the latest information on a daily
basis on the exclusive Intranet (ProFIT) for TKC Members. We began this activity on February 25, and posted
a total of 168 entries as of the end of the fiscal year.
2) Offering of the COVID-19 Emergency Financial Measures Corner
The Company developed a special website where TKC Members can check SME support policies offered by
the national, prefectural, and municipal governments under the categories: Loans, Subsidies, Employment,
and Taxation. The site has enabled TKC Members to send out information on emergency financial measures
widely across clients and other SMEs. The website has 9,231 entries on support policies as of the end of the
fiscal year.
3) Offering of a check function for clients requiring emergency support
The Company implemented a check function for clients requiring emergency support on the Tax Accountants
Office Management system (OMS). This function can automatically evaluate the eligibility of each client in alist of 20 items of various SME emergency economic policies such as the subsidy program for sustaining
businesses, employment adjustment subsidy, and rent support benefit, special loans by government-affiliatedfinancial institutions, and temporary loan under the management safety mutual aid system run by theOrganization for Small & Medium Enterprises and Regional Innovation, JAPAN. We also incorporated afunction that features one-click generation of the Application for Decrease in Sales Affected by COVID-19,
which is required in order to apply for the Special Loans for Coronavirus offered by the Japan FinanceCorporation. With this, we established a system to enable TKC Members to provide their clients prompt
support in filing applications for emergency financing.
4) Strengthening of on-demand training
The Company provided on-demand training on specific application procedures for the above-mentioned SME
support policies and extensions of tax returns/tax payments, and on accounting and tax practices uponreceiving such benefits, and also encouraged viewing the contents.
5) Provision of equipment necessary to work from home
To enable TKC Members and their staff to work from home in complete compliance with “The Services of– 21 –

Certified Public Tax Accountants and Teleworking (Working from Home), Measures to Prevent the Spreadof the Novel Coronavirus” published by the Japan Federation of Certified Public Tax Accountants'
Associations on April 15, the Company provided communication equipment such as web meeting systems andmicrophone headsets for users to access the TKC systems from home in a highly secured environment.
(ii)

Sales activities to achieve Strategic Targets 2020
The Company operates to achieve the Strategic Targets 2020 in collaboration with TKCNF.

1) Promotion of TKC Monitoring Information Service
TKC Monitoring Information Service is a free cloud-based service in which the TKC Members, upon request
by the management of their clients, provide to financial institutions such information as monthly trial balance
sheets, financial statements and tax returns prepared by TKC Member firms after monthly field audits andmonthly settlements. Monthly trial balance sheets will be made available immediately upon completion of themonthly settlement, and fiscal financial settlements and tax returns are disclosed immediately after the clientelectronically files its financial documents to the tax authorities. While promoting the TKC Monitoring
Information Service, we communicated to financial institutions that the reliability of financial statements
prepared by SMEs can be verified by the following three documents:
i. Supporting documents submitted by TKC Members as provided for under Article 33-2 of the Certified
Public Tax Accountant Act of Japan
ii. Certificate of Bookkeeping Timeliness, with which TKC Corporation certifies the timeliness in the
preparation of accounting books as required under Article 432 of the Companies Act of Japan and theconnection between the financial statements and tax returns for the past three years
iii. The Chusho Kaikei Yoryo checklist developed by the Japan Federation of Certified Public Tax
Accountants' Associations and Japan Federation of Credit Guarantee Corporations
As a result of these activities, the number of financial institutions adopting this Service is increasing rapidly,
adopted by 443 financial institutions including all local banks throughout Japan (64 institutions) as of
September 30, 2020. Also, over 220,000 companies provided their financial statements to financial institutions
as of September 30, 2020. We have also seen cases where clients utilizing the TKC Monitoring Information
Service were able to quickly pass the examination for emergency loans in response to the impacts of the
COVID-19 pandemic to obtain financing. This could be seen as evidence that financial institutions consider
financial statements prepared by TKC Members to be highly reliable. In addition, the Ministry of Economy,
Trade and Industry established a program to enable financial institutions to offer interest-free, collateral-freeloans in order to strengthen financial support to SMEs in response to the increasing impacts of COVID-19
pandemic. Many financial institutions provided emergency loans to SMEs under this program. These financial
institutions are required to check the performance of borrowers and report to the credit guarantee association
on a regular basis. That is why financial institutions are interested in our services to provide monthly trial
balance sheets under the TKC Monitoring Information Service. The Company continues to provide support toenable TKC Members and financial institutions to promote this service together.
2) Promotion of self-accounting by the TKC methods (promotion of FX series)
The Company has incorporated various functions in the FX series in a triple hierarchical structure: (i) functions
for management strategy level, to be used by top management to understand the activities of the entire
organization at a glance; (ii) functions for performance management level, to be used by managers to evaluate
the performance of their respective business divisions and to consider the next course of actions; and (iii)functions for business execution level to streamline accounting operations and reduce tasks. During the current
fiscal year, we provided support for the utilization of functions for the management strategy level (budget
registration, management by division, financing results spreadsheet) incorporated the FX series, which hasenabled the management of clients to accurately understand the impacts of COVID-19 and to determine thenext actions. In order for management to utilize these functions effectively, they need to enter the accounting
transaction data in a timely and efficient manner, so the Company also provided support on functions forbusiness execution level, including support for the bank credit data receiving function to receive bank deposit
transaction data through online banking and generate journal entries automatically, and the linking of salaryjournal with the strategic salary information system (PX2). In addition, on September 25, 2020, the Company
started the new offering of its FX Cloud series. This system features enhanced functions to “strengthen thecompany through accounting” and enhanced functions to support the field auditing by accounting firms. By
offering assistance to implement the FX Cloud series, the Company will work to support SMEs instrengthening their financial management and capital procurement capabilities.
3) Supporting complete compliance with the Electronic Books Maintenance Act of Japan
Last year, the Company became the first among its competitors to acquire the certification under the Electronic
Books Software Legal Compliance Certification System by Japan Image and Information Management
Association (JIIMA) for its FX series and other systems. Through the promotion of the certified FX series,– 22 –

etc., we support complete compliance with the Electronic Books Maintenance Act of Japan.
4) Soliciting new members (promotion of joining TKCNF)
TKCNF is engaged in a project to increase TKC membership to over 10,000 firms by the end of September
2021. The Company is working closely with the New Members Service Committee of TKCNF in soliciting
new members to achieve this goal. During the fiscal year under review, we were unable to visit potential
accounting firms that we intended to solicit due to the coronavirus-related confusion. So the Company held
on-demand seminars and promoted joining TKCNF by introducing practices to support clients’ cash flow
situations and case studies on teleworking of accounting firms. As a result of these activities, the number of
TKC Members totaled approximately 9,700 accounting firms and 11,400 accountants as of September 30,
2020. The difference in numbers of firms and accountants are because some firms have multiple accountants
who are members.
[Activities to “support the preparation of highly reliable financial statements based on timely and accurate
bookkeeping”](i)Support activities for diffusion of Chusho Kaikei Yoryo (Guidelines for SME accounting)
The TKCNF recommends the use of Basic Guidelines with Respect to the Accounting Procedures at Smalland Medium-sized Enterprises (hereinafter, “Chusho Kaikei Yoryo” (Guidelines for SME Accounting))
formulated in February 2012 with which SME clients should comply. These Guidelines have been formulated
based on the following principles: i) accounting that helps to grasp the company's business situation; ii)
accounting that contributes to providing information to stakeholders (financial institutions, etc.); iii)
accounting that complies with the Ordinance on Company Accounting while achieving harmony between
accounting and taxation system; and iv) accounting that does not place excessive burden on SMEs.
In order to support the activities of the TKCNF towards the diffusion and utilization of the Guidelines, theCompany continues to promote the development of training materials and to strengthen collaboration withother organizations supporting SMEs.

(ii)

Issuance of Certificate of Bookkeeping Timeliness
The Company utilizes the processing log data and historical time series data that are automatically logged atour data centers when TKC Members access our accounting system to issue a Certificate of Bookkeeping
Timeliness free of charge. This Certificate serves as reference for financial institutions and other third parties
to objectively evaluate the business performance of TKC Member firms. This service was developed in an
aim to improve reliability of financial statements and tax returns 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 andcorrections to past data, and TKC Corporation proves, as a third party, that TKC Members have visited clientson a monthly basis to provide guidance on accurate bookkeeping (monthly Field Audits), and that all work
processes from monthly settlements to the final settlement of accounts and electronic tax filings have been
completed by a one-stop, full line process in a timely manner.

[Expansion into large-scale enterprise market]
By utilizing the TKC systems, the Company contributes to the compliance and rationalization of tax and accounting
operations of large enterprises, mainly of listed companies, and are actively working to solicit these companies andtheir affiliates to become clients of TKC Members.
As systems to supplement these activities, the Company provide the TKC Consolidated Group Solution package(which includes: the eCA-DRIVER consolidated accounting system, the eConsoliTax consolidated tax payment
system, the eTaxEffect tax effect accounting system, the ASP1000R electronic tax filing system for corporations, theFX5 integrated accounting information system, the e-TAX series electronic tax filing system, the FAManager noncurrent asset management system, the TDS documented evidence storage service, and the OBMonitor overseas
business monitoring system, etc.).
Starting April 2020, large enterprises with a capital of 100 million yen or greater are mandated to use electronic filingof income tax, consumption tax, and local taxes. With this reform, large sized companies must file their income tax
returns electronically, as well as submit any attachments to tax returns (financial statements, statement classified byaccounting items, etc.) in electronic data form. According to statistics of the National Tax Agency, electronic filingof corporate income tax was conducted by 2,268,473 companies in FY2018. While the percentage of companies using
the electronic filing system was 84.3%, only 66.1% of large sized companies used electronic tax filings. This meansthat many of the mandated large enterprises will be using the electronic filing system for the first time.
To enable these companies to switch smoothly to the mandated electronic filing system, the Company released the
Guidebook on Complying with Mandatory Electronic Filing on the Company’s website and held on-demand seminars
in collaboration with TKCNF’s Medium- and Large-sized Companies Support Council (1,447 members as of
September 30, 2020). We also entered into alliance agreements with four ERP vendors, working on the development– 23 –

of systems linking to financial statements data. Moreover, as many listed companies encouraged telecommuting in
response to the coronavirus, we switched our sales activities from visiting sales to inside sales, consequently reducing
the time to visit clients and increasing the number of negotiations.
As a result, the number of users of ASP1000R electronic tax filing system for corporations reached 3,170 companies
as of September 30, 2020.
As a result of these activities, the number of corporate groups using the TKC Consolidated Group Solution counted
approximately 4,100 corporate groups as of September 30, 2020. Our taxation-related information systems are
adopted by 87% of the 100 largest Japanese listed companies by sales amount. The market shares among Japaneselisted companies reached 32%.
[Expansion of markets for legal information database services]
The LEX/DB Internet legal information database, developed originally by the Company, maintains an archive of over
311,500 judicial precedents and decisions as of September 30, 2020, covering all legal fields from precedents, etc.
set in the former Supreme Court dating back to 1875 to those most recently published, being the largest database ofits kind in Japan.
The TKC Law Library is a comprehensive legal information database which uses the LEX/DB Internet as its corecontent and contains over 959,000 bibliographic information references with links to 62 of the legal information
databases operated by 18 specialized legal publishers (including Gyosei Corporation, Nippon Hyoron-Sha Co., Ltd.,
Yuhikaku Publishing Co., Ltd., Chuokeizai-Sha, Inc., Hanrei Times Co., Ltd., and Japan Institute of Business Law)
with accessible number of information now exceeding 2,650,000 items.
(i)Increase of user base of TKC Law Library
Many customers were forced to work online as a result of transitioning to teleworking due to COVID-19. Thishas consequently caused users who were unable to conduct research at the data room or library to reconsider
the advantages of TKC Law Library that covers laws and regulations, judicial precedents, bibliographic
information references and also contents of specialized law magazines, which could be accessed any time,from any place. As a result, the numbers of user IDs and contracts to access additional contents are growing.
In the current fiscal year under review, as a result of active on-line promotional activities through the website
and SNS towards TKC Member firms, universities, law schools, government offices, law firms, patent offices
and corporate legal departments, the number of users exceeded 52,000 IDs and the Library is used by over
23,000 institutions as of September 30, 2020.

(ii)

Progress in the academic market
Due to the impacts of COVID-19, almost all universities were conducting online classes in the first semester.
Our systems, such as the TKC Educational and Research Support System and TKC Law Library, can beaccessed online and used anytime, anywhere. They contain a huge number of diverse contents compared tothose of other companies, and includes various functions such as report generation, computing and testing.
These features are being reconsidered as tools to support online classes and learning for faculty and students
during the COVID-19 confusion. Since April, the Company conducted web meetings with various universities
and responded to requests for additional access to our basic services and provided support in the developmentof online learning environments tailored to meet the situation of each university.
Also, the study tools (for civil service examination and practical business law examination) offered mainly tothe faculty of law of universities have been adopted by 25 universities as of September 30, 2020. As
examinations are postponed and learning environment is incomplete, students must rely on online study toolsthat contain well-developed learning materials. Such students are using our systems much more frequently.
In September, we began offering a new study tool for the jurisprudence examination. Because thejurisprudence exam for the current fiscal year (November) was limited to group examinees, we are promoting
trial use among 63 target universities in an aim to expand use in the next fiscal year.

(2) Analysis of Accounting Firm BD’s operating results
Net sales of the Accounting Firm BD were 47,150 million yen (increased 2.7% year-on-year); operating income
was 10,237 million yen (increased 17.3% year-on-year).
(i)

Sales from computer services increased by 4.1% year-on-year. This was attributable to the following factors:
that the number of financial processing by TKC Members increased in order to support clients with theirbusiness management, emergency financing measures, and application for subsidies, as the number of SMEs
facing financial difficulties increased amid the economic recession due to spread of COVID-19; that the
number of SMEs implementing the FX4 Cloud Integrated Accounting Information System for mid-size
companies increased, as more companies encouraged teleworking and needed a system to centrally manage
their business including subsidiaries; and that, in light of the increase in accounting firms that needed torespond to work-from-home demands, the number of customers of the OMS Mobile and TKC Cyber Security– 24 –

Services, which allow users to access the TKC systems from home while maintaining a highly secureenvironment, increased.
(ii)

Software sales increased by 4.0% year-on-year. This is the result of factors such as increase in the number ofusers of financial accounting systems that meet the requirements of the Electronic Books Maintenance Act ofJapan, as well as increase in the number of users of our electronic tax filing system for corporations(ASP1000R) in response to the electronic filing of income taxes mandated to large enterprises with a capitalof 100 million yen or greater starting April 1, 2020.

(iii) Hardware sales increased by 6.4% year-on-year. This was caused by the increase in demands for PC
replacements in response to the termination of Windows 7 support by Microsoft in January 2020, and in
addition, due to the increase in demands for notebook PCs equipped with web camera and mobile monitors
as a result of increase in the number of accounting firms that encourage teleworking due to COVID-19.
(iv) The improvement in operating income year-on-year was a result of decrease in travel expenses by switching
the style of customer support to remote using the online meeting system instead of visiting, and decrease incosts related to hosting seminars by using webinars for marketing activities.

3. Business Activities and Operating Results of the Local Governments Business Division(1) Business activities of the Local Governments BD
The Local Governments BD operates in accordance with the business objectives set forth in the Articles ofIncorporation (Article 2 Item 2: “Management of electronic data processing centers to improve the administrative
efficiency of local governments”) and offers specialized information services in order to help promote the welfareof residents by improving administrative efficiency.
(i)

Development and provision of mission-critical system-related services
The Company provides TKC Government Cloud Service to municipalities (mainly for cities, wards, towns
and villages). This is a Cloud Service that consists of the TASK Cloud Service which supports 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.
On July 17, 2020, the Declaration to be the World's Most Advanced IT Nation: Basic Plan for the
Advancement of Public and Private Sector Data Utilization was approved by the cabinet. In an aim to reduce
administrative costs, standardize administrative tasks, improve information security, and ensure business
continuity in the event of a disaster, the Japanese government has set a target to have approximately 1,600
institutions using cloud for their administrative systems (of which, approximately 1,100 institutions to beusers of local government cloud systems) by the end of FY2023.
Our TASK Cloud Service is a single version package system operated at TKC data centers that is designed toallow shared use by multiple institutions. It has been attracting attention as being an optimal system for a local
government cloud system promoted by the government, and has been adopted by eleven groups for shareduse. The seven alliance partners across the country are also actively promoting our TASK Cloud Service. As
a result, the TASK Cloud Service has been adopted by more than 160 local municipalities as of September
30, 2020.
In the current fiscal year under review, we continued to undertake proposal activities to win new contracts, aswell as supported newly implementing municipalities that were scheduled for a full-scale launch by
September 2020 in enabling smooth system transition.
Also, for the Welfare Consultation Support System, we enhanced the functionalities of various systems
through the provision of functions to support streamlining of record preparation and smooth sharing of
information between relevant parties based on the F-SOAIP lifestyle support recording method(*).
In addition, the Company provided emergency support on related systems under the Special Cash Payment
program conducted as COVID-19 emergency economic policy, and offered as outsourcing service a full
application document package including explanatory materials and return envelops, thereby contributing toearly cash payments to 1.52 million households by 112 organizations mandated to carry out the administrative
tasks.
* About lifestyle support recording method F-SOAIP
F-SOAIP is a progress recording method developed for the purpose of creating a common language among
the areas of welfare, nursing care, and health care. It is drawing attention because it can standardize
terms/expressions to be used in recording necessary information in itemized format, which allows users torecord the progress of support in an efficient and accurate manner and to facilitate sharing of information
among relevant parties.
– 25 –

(ii)Support for digitalization of administrative services
The Company positions its TASK Cloud Convenience Store Certificate Issuing System and the TASK CloudEasy Counter Service System that uses the features of the former system as administrative service digitization
support solutions, and works to enhance functionalities and to expand product offerings.
For the Convenience Store Certificate Issuing System, the Company supported the nine municipalities of the
Kanagawa Prefecture Collective Business Partnership for Information Systems in Municipalities(Administrator Yuji Yukawa, Mayor of Yamakita Town) in preparation for the launch and smooth operationof the Convenience Store Certificate Issuing System using the Company’s systems.
For the Easy Counter Service System, we also participated in the Demonstration Experiment for the
Improvement of Counter Services Using ICT (Smart Counter Services) conducted by Nara City in Nara
Prefecture (planned experiment period: November 2019 - September 2020), and engaged in the developmentof a new smart counter services system.
Furthermore, the Company began offering the following systems that were under development.
1) TASK Cloud My Number Card Issuance Reservation & Management System (launched in May 2020)
First user: Goka Town, Ibaraki Prefecture2) TASK Cloud Smart Application System (launched in August 2020)
First user: Osaka City, Osaka Prefecture
In addition, as a result of functional enhancements of various systems and aggressive promotional activities,
the Convenience Store Certificate Issuing System is adopted by over 130 agencies including government
ordinance-designated cities such as Kobe and Kitakyushu, the Easy Counter Service System is used byapproximately 10 municipalities, and the My Number Card Issuance Reservation & Management System isadopted by over 20 municipalities as of September 30, 2020.

(iii) Response to digitization of local tax administrations
The Company is an authorized contractor of the Local Tax Agency, and provides a cloud-based service forthe standard systems such as inspection system for eLTAX (local tax portal system) offered by the Agency.
We also develop and provide Data Connection Services as our own functionality to connect the individual tax
systems of each municipality. These services are proposed in collaboration with 50 partner companies withwhom we have on-going alliance partner agreements. As a result, our TASK Cloud Local Taxes Electronic
Filing Support Service is currently used by more than 780 agencies which account for more than 40% of all
prefectures and local municipalities as of September 30, 2020.
In the current fiscal year, we engaged in the enhancement and expansion of functionalities of related systems
in response to the launch of the Common Tax Payment System for Local Taxes, and active promotional
activities for data connection services.
(iv) Support for the development of standardized local public accounting
Municipalities are required to further promote their initiatives in local public accounting and to focus on
streamlining the preparation of financial documents in order to utilize such data for financial analysis.
According to the report by the Study Group on the Promotion of Local Public Accounting (FY2019) releasedby the Ministry of Internal Affairs and Communications in March 2020, it is believed that smooth
implementation of the daily journalizing method and reduction of checking tasks in year-end bulk journalizing
can be achieved by implementing a local public accounting system that has an integrated financial accounting
system, linking, in advance, the expenditure items with account headings, and by establishing a system thatcan journalize and convert the budget items automatically upon budget execution.
The report also suggests that “it may be possible to streamline the ledger registration tasks by linking andintegrating the data in the public domain ledger and data in the fixed assets ledger” and encourages
municipalities to consider implementation of a local public accounting system that has an integrated financial
accounting system and adopt the daily journalizing method upon system updating.
The Company provides the TASK Cloud Public Accounting System, which is compatible with the daily
journalizing method encouraged by the Japanese government, and its related systems TASK Cloud Noncurrent Assets Control System and TASK Cloud Consolidated Financial Statement Preparing System.
In the current fiscal year, the Company provided support for the smooth system launch and operation to 51
agencies (7 cities, 26 towns, 4 villages, and 14 partial-affairs associations) that are members of the Kagoshima
Prefecture Municipal Association, Kumamoto Prefecture Municipal Association, Nagasaki Prefecture
Municipal Administration Promotion Council, and Kyoto Prefecture Municipal Information Promotion
Council, as well as for newly transitioning agencies.
– 26 –

We also engaged in the development and enhancement of various functions to support the visualization andutilization of local public accounting as well as in aggressive promotional activities. As a result, our public
accounting systems are adopted by more than 270 agencies as of September 30, 2020.
(v)

Research and development of next-generation products
In response to the lagging in digitization and moving online that became apparent from the spread of COVID19, the Basic Policy on Economic and Fiscal Management and Reform 2020 (Cabinet Decision of July 2020)
positioned all-out promotion of a digital government as top priority, and decided to speed up the
implementation of digitization to “move as many administrative procedures as possible online and make them‘one stop and once only.’” Under the same Policy, to “be ready for building up the Social Security and tax
Number System and the national and local digital networks,” the need “to embark on focused initiatives forstandardizing and bringing conformity to local governments’ central operational systems” was emphasized.
In such climate, initiatives for the digitization of municipal administrative services are also speeding up.
To respond to the change in the environment surrounding our customers, the Company is working to further
accelerate the planning and development of new products as well as to strengthen customer support including
the collection and communication of the latest information.
During the fiscal year under review, we gathered and communicated information on the digitalization ofadministrative services and standardization of operational systems, and conducted surveys, research anddevelopment on next-generation solutions through experimental projects with advanced organizations to
support the post-COVID-19 “New Normal Lifestyle.”(2) Analysis of Local Governments BD’s operating results
Net sales of the Local Governments BD were 17,377 million yen (increased 5.9% year-on-year); operating income
was 1,037 million yen (increased 612 million yen year-on-year).
(i)

Sales from computer services increased by 16.1% year-on-year. This was driven by increase in sales fromdata center usage fees for the use of TASK Cloud Local Taxes Electronic Filing Support Service in responseto the launch of the common tax payment system for local taxes that started on October 1, 2019.

(ii)

Software sales increased by 33.2% year-on-year. This was due to increase in sales from major systemrevisions in response to the free preschool education & nursing subsidy program and online confirmation ofqualifications under the Health Insurance Act. Meanwhile, as emergency economic policy to respond to the
spread of COVID-19, the Government established the Special Cash Payment program to pay 100,000 yen perperson, and municipalities were mandated to carry out the administrative tasks related to applications andpayment. The Company provided customers using our mission-critical system with emergency support on
systems related to the Special Cash Payment program, and offered as outsourcing service a full application
document package including explanation material and return envelops, thereby contributing to early cash
payments to 1.52 million households by 112 organizations mandated to carry out the administrative tasks.

(iii) Sales from consulting services decreased 34.9% year-on-year. This was due to the absence of system
implementation support fees for renewal of eLTAX inspection systems and implementation of Common Tax
Payment Systems that the Company enjoyed during previous fiscal year.
(iv) Hardware sales decreased by 37.9% year-on-year. This was due to the absence of the renewal of Registration
Network System-related devices during this fiscal year, for which orders concentrated in the previous fiscal
year.

4. Business Activities and Operating Results of the Printing Business Division(1) Business activities of the Printing Business BD
The Group’s Printing BD operates with the main focus on data print services (“DPS”) and business form printing.
In the DPS area, sales dropped by 5.6% year-on-year, as while orders for notice-related services from municipalities
and other authorities increased, orders for direct mail and other productions from private enterprises dropped
significantly due to impacts of COVID-19.
In the area of business form printing, sales decreased by 7.8% year-on-year as a result of ongoing decline indemands for business forms and further decrease in the use of business forms as logistics services was stagnated
due to impacts of COVID-19.
In the area of printing of commercial arts (catalogs, flyers, booklets, books, etc.), sales decreased 27.9% year-onyear due to decrease in demands for paper media with the advancement of browsing of electronic data, and also
due to large decrease in orders for booklets, flyers, and books from the cancellation/postponement of many events
impacted by COVID-19.
– 27 –

(2) Analysis of Printing Business BD’s operating results(i)

Net sales of the Printing BD were 3,286 million yen (decreased 13.7% year-on-year); operating income was
106 million yen (decreased 43.6% year-on-year).

(ii)

Sales of data printing service-related products decreased by 5.6% year-on-year. While orders for noticerelated services from municipalities and other authorities increased, large orders for direct mail and otherproductions from private enterprises decreased due to impacts of COVID-19.

(iii) Business form-related sales decreased by 7.8% year-on-year. This was due to ongoing decline in demands forbusiness forms in the recent years, and further decrease in the use of business forms as logistics services wasstagnated due to impacts of COVID-19.
(iv) Sales of printing of commercial arts (catalogs, flyers, books, etc.) and booklets decreased by 27.9% year-onyear. This was due to a significant decrease in orders for booklets, flyers, and books from thecancellation/postponement of many events impacted by COVID-19.

5. Important Matters with Respect to the Company as a Whole(1) Prevention of novel coronavirus infection and actions for new working styles
As the outlook for the containment of the novel coronavirus is still unpredictable, the Group is taking the following
infection prevention measures and adaptation to new working styles in order to continue the provision of services
to its customers:(i)

To enable customers to continue using our cloud services, business form printing services, and help desk
services, we strengthen our business continuity measures (including prohibiting the entry of outside personnel
at important offices, distributing the help desk functions to multiple offices, and developing the infrastructure
for remote access to the data center in case of an outbreak of COVID-19 within a data center).

(ii)

In addition to introducing teleworking and staggered working hours programs, as measure to prevent infection
within the Company, we installed automated temperature scanners, protective panels, sterilized mats andsanitizers, and gave out face masks.

(iii) To meet the new working styles, we formulated a guideline on customer support using the web meetingsystem, and encourage employees to increase the number of interviews with clients even through teleworking.
In addition, the Company provided all employees with mobile communication devices, and upgraded the web
meeting systems.
(2) Support for customers switching to new working styles(i)

From April to end of September 2020, the Accounting Firm BU leased out its web meeting system to the TKC
National Federation free of charge to support the TKCNF committee activities and information exchange
among TKC Members. The Company also introduced work-from-home programs for TKC Member firms
and provided (leased for free) eligible TKC Members with mobile monitors and speaker/microphones forthem to establish a new working style.

(ii)

To provide remote support to the approximately 170 customers using our mission-critical system (local
governments), we leased out (for free) equipment necessary to use the web meeting system (large displays,
speaker phones, web cameras).

(iii) By conducting these measures, we worked to prevent infection among customers and employees and maintainthe same level of quality in our customer support.
(3) CSR activities in the coronavirus-related confusion
The Company engaged in the following initiatives to prevent the collapse of the medical system and to support
students in economic hardship.
(i)

The Company donated 300 million yen, and Masaharu Iizuka, Chairman Emeritus and Mrs. Runako Iizuka,
wife of the founder of the Company, each donated 100 million yen to Tochigi prefecture to be used to preventthe collapse of the medical system for the treatment of coronavirus infections.

(ii)

The Company also donated a total of 169 million yen as relief money to our client agencies (130municipalities).

(iii) To provide support to students studying online at Utsunomiya University, the Company donated 75 notebook
PCs. In addition, Masaharu Iizuka, Chairman Emeritus of the Company, personally donated 10 million yen
to Utsunomiya University for the purpose of supporting students facing economic hardship.

– 28 –

(4) Review of business continuity plan (BCP) in case of outbreak of large-scale disasters
As preparation for large-scale disasters, we checked the safety of all offices, company housing and dormitories, andrelocated the offices, employee housing and dormitories located in vulnerable areas to safer locations.
(5) Acquisition of patent pertaining to the Operation Checklist in the eCA-DRIVER consolidated accounting system
On June 11, 2020, the Company acquired a patent for the function to enable visual confirmation of whether thesystem processing was performed in the correct order and in an appropriate manner, which is in the Operation
Checklist incorporated in the eCA-DRIVER consolidated accounting system. (Patent No. 6715886)(6) Early application of the Accounting Standard for Revenue Recognition
The Company decided on the early application of the Accounting Standard for Revenue Recognition (ASBJ
Statement No. 29, March 30, 2018) and the Implementation Guidance on Accounting Standard for Revenue
Recognition (ASBJ Guidance No. 30, March 30, 2018) beginning from the fiscal year started October 1, 2020 (55thTerm). This is in an aim to compile the know-how gained through the application of the Accounting Standard for
Revenue Recognition and provide such know-how in our consulting services for listed companies.
In applying the new accounting standard for revenue recognition, the Group must make certain changes in its sales
recognition process, including: (i) changing the accounting processing of the sales of certain products which wereconventionally recognized as one time sales at the time of the contract, to proportional division over the contract
period; and (ii) changing the accounting processing for products that were purchased from other companies andsold thereafter, where the transaction prices less costs should be recognized as sales.
We estimated that the amount of fiscal impact of such application of Accounting Standard for Revenue Recognition,etc. to the consolidated financial statements: 69,000 million yen as sales prior to the application of said Standard,and 66,000 million yen as sales after the application of said Standard. Therefore, the impact on sales is estimatedto be 3,000 million yen.

6. Analysis of the Group’s Consolidated Financial Conditions for the Current Consolidated Fiscal Year
(1) Assets
Total assets as of the end of the current consolidated fiscal year amounted to 97,671 million yen, a 681 million yen
increase compared to 96,989 million yen as of the end of the previous consolidated fiscal year.
(i)

Current assets
Current assets as of the end of the current consolidated fiscal year amounted to 35,844 million yen, a 5,229
million yen decrease from 41,073 million yen of the previous consolidated fiscal year.
This was mainly attributable to 3,041 million yen decrease in cash and deposits, 1,740 million yen decreasein notes and accounts receivable, and 326 million yen decrease in work in progress.

(ii)

Non-current assets
Non-current assets as of the end of the current consolidated fiscal year amounted to 61,826 million yen, a
5,910 million yen increase compared to 55,915 million yen as of the end of the previous consolidated fiscal
year.
This was mainly attributable to a 5,100 million yen increase in long-term deposits, 755 million yen increase
in investment securities, 344 million yen increase in deferred tax assets, and 267 million yen increase insoftware despite a 437 million yen decrease in software in progress, and 222 million yen decrease in buildings
and structures (net amount).

(2) Liabilities
Total liabilities as of the end of the current consolidated fiscal year amounted to 20,595 million yen, a 3,273 million
yen decrease compared to 23,868 million yen as of the end of the previous consolidated fiscal year.
(i)

Current liabilities
Current liabilities as of the end of the current consolidated fiscal year amounted to 14,701 million yen, a 1,576
million yen decrease from 16,278 million yen as of the end of the previous consolidated fiscal year.
This was mainly attributable to a 1,421 million yen decrease in accounts payable–trade, a 483 million yen
decrease in advances received included in Other, and a 476 million yen decrease in accounts payable–other,
despite a 798 million yen increase in consumption taxes payable.

(ii)

Non-current liabilities
Non-current liabilities as of the end of the current consolidated fiscal year amounted to 5,893 million yen, a
1,696 million yen decrease from 7,590 million yen as of the end of the previous consolidated fiscal year.
– 29 –

This was mainly attributable to 1,364 million yen decrease in net defined benefit liability and 220 million yen
decrease in lease obligations.
(3) Net assets
Total net assets as of the end of the current consolidated fiscal year amounted to 77,075 million yen, a 3,954 million
yen increase compared to 73,121 million yen as of the end of the previous consolidated fiscal year.
This was mainly attributable to a 4,909 million yen increase in retained earnings and an 877 million yen increasein capital surplus, despite a 1,504 million yen decrease in non-controlling interests and a 469 million yen decreasein valuation difference on available-for-sale securities.
Capital-to-asset ratio as of the end of the current consolidated fiscal year was 78.9%, a 5.1 point increase comparedto the ratio of 73.8% as of the end of the previous consolidated fiscal year.

7. Analysis of the Group’s Cash Flows for the Current Consolidated Fiscal YearThe balance of cash and cash equivalents as of the end of the current consolidated fiscal year decreased by 3,341
million yen from the end of the previous consolidated fiscal year amounting to 23,469 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 10,569 million yen (18 million yen increase in revenue year-onyear). Major factors include the recognition of 11,646 million yen in net income before taxes and adjustments, anda spending of 1,200 million yen for the establishment of retirement benefit trust.
(2) Cash flows from investing activities
Cash flows from investing activities decreased by 10,124 million yen (10,535 million yen increase in spending
year-on-year). Major factors include expenditure of 8,400 million yen into time deposits, revenue of 3,000
million yen from withdrawal of time deposits, expenditure of 1,738 million yen for the acquisition of tangible
fixed assets, and expenditure of 1,369 million yen for the acquisition of intangible fixed assets.
(3) Cash flows from financing activities
Cash flows from financing activities decreased by 3,786 million yen (5 million yen decrease in spending year-onyear). Major factors include payment of 2,905 million yen for year-end dividends as of the end of September 2019and interim dividends for the term ended September 2020 (a dividend of 55 yen per share), and payment of 593
million yen for the acquisition of stock of the Company’s consolidated subsidiary.

II. Production, Orders Received and Sales
1. Production
None to be disclosed.

2. Orders Received
None to be disclosed.

3. Sales Results
Sales results by segment for the current consolidated fiscal year were as follows:
Name of segment

Amount (millions of yen)

Year-on-year rate (%)

Accounting Firm BD

47,150102.7

Local Governments BD

17,377

105.9

Printing BD

3,286

86.3

67,814

102.6

Total

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

– 30 –

III. Analysis and Discussions on Operating Results, etc. from Management’s Perspective
1. Important Accounting Policies and Estimates
The Group’s consolidated financial statements have been prepared in accordance with accounting standards that are
generally accepted as fair and appropriate in Japan. The preparation of the financial statements requires ourmanagement to select and apply the accounting policies, and make estimates that affect the reported amounts anddisclosure of assets and liabilities, and revenue and expenses. While management has used reasonable judgments
based on historical performance and current conditions in making these estimates, there are specific uncertainties in
estimates that could cause actual results to differ from such estimates. Details of important accounting policies adopted
in preparing the Group’s consolidated financial statements are described in the Notes to Consolidated Financial
Statements (Basis of Presenting the Consolidated Financial Statements) under Part 5 [Financial Information] 1.
Consolidated Financial Statements, (1) Consolidated Financial Statements.

2. Factors Having Material Impacts on the Group’s Operating Results
Refer to 2 [Risk Factors].

3. The Group’s Capital Resources and Liquidity of Funds
In strengthening the Group’s management to achieve sustainable growth of its corporate value, the Group makes it abasic policy to fund its business operation primarily by its own capital. Under this policy, we believe that we holdadequate cash-on-hand to maintain our business operation and to ensure a sufficient level of liquidity.
With the rapid advancement of information and communication technology (ICT) and major changes in social systems,
we strive to make advance investments in research and development efforts and to actively pursue other capital
investments to respond quickly to the changing market environment and achieve competitive advantage to lead ourcustomers’ business to success.

4. Objective Indicators to Measure the Status of Achievement of the Group’s Management Policy, Management
Strategy, and Management Goals
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. Based on this policy, we establish and manage
the following items as important management indicators:(i)Management indicators based on consolidated figures
1) Year-on-year sales ratio: 3% or greater
2) Return on equity: 8% or greater(ii)Management indicators based on non-consolidated figures
1) Equity ratio: greater than 80%
2) Recurring profit margin: 8% or greater3) Total marginal profit ratio: 60% or greater* Marginal profit is the amount derived by deducting the costs that change in proportion to sales (variable
costs) from the amount of sales. Marginal profit will vary depending on product mix. Total marginal
profit ratio means the ratio of the amount of this marginal profit in relation to the amount of sales.
In such situation, the consolidated year-on-year sales ratio of the current fiscal year under review was 2.6%
(a decrease of 4.7 points year-on-year), and consolidated return on equity was 10.5% (an increase of 1.1
points year-on-year).
The non-consolidated equity ratio was 83.2% (an increase of 3.1 points year-on-year), non-consolidated
recurring profit margin was 17.6% (an increase of 2.9 points year-on-year), and non-consolidated total
marginal profit ratio was 74.8% (an increase of 2.0 points year-on-year).
In order to maintain the high level of performance, we will work to improve the Company’s earnings
structure and capital efficiency.

– 31 –

4 [Material Agreements, etc.]
None to be disclosed.

5 [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 of administrative
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 6 million yen was spent on R&D in the current consolidated fiscal year, yielding the following results:(1) Accounting Firm BD
The Company is conducting research & development of an electronic tax payment system for companies using the
ASP1000R and eConsoliTax. The system will enable users to prepare tax returns and make electronic tax payments
in one-stop using the TKC systems.
Total research and development cost associated with this project was 6 million yen.
(2) Local Governments BD
None to be disclosed.

– 32 –

Part 3 [Property, Plant 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 3,804 million yen were made in the current
consolidated fiscal year.
(1) Accounting Firm Business Division
Capital investment of 2,195 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 Business Division
Capital investment of 1,289 million yen was made for the development of software to provide services over the
cloud system.
(3) Printing Business Division
Capital investment of 319 million yen was made for the implementation of roll collectors and purchase of automatedcarriage trolleys.

2 [Major Property, Plant and Equipment](1) The Company
As of September 30, 2020
Book values (millions of yen)
Name of office(Address)

Name ofsegment

Facilities

TKC Tochigi Head Office
TKC Systems Development
Research Center
TKC Internet Service Center
TKC Tochigi Consolidated
Information Center(Utsunomiya-shi, Tochigi,etc.)*1, *2

Accounting
Firm BD
Local
Governments
BD

Development
facilities
Information
communicati
on service
facilities
Information
processing
facilities

TKC Tokyo Head Office
TKC Systems Development
Research Center Tokyo Branch(Shinjuku-ku, Tokyo)

Accounting
Firm BD
Local
Governments
BD

TKC Tokyo Consolidated
Information Center(Nerima-ku, Tokyo)

Machinery,
Buildings &Land
equipment &structures(Area in m2)
vehiclesTools,
furniture &fixtures

Other

Total

No. ofemployees(No. ofpeople)

5,499

28

2,694
(29,365.21)

1,137

3,009

12,368

1,163

Officefacilities

115

－

－

65

－

181

360

Accounting
Firm BD

Information
processing
facilities

201

－

2,224
(1,447.44)

82

－

2,507

22

TKC Chubu Consolidated
Information Center(Kasugai-shi, Aichi)

Accounting
Firm BD

Information
processing
facilities

75

－

196
(3,017.47)

48

0

320

17

TKC Kansai Consolidated
Information Center(Ibaraki-shi, Osaka)

Accounting
Firm BD

Information
processing
facilities

483

－

286
(1,808.03)

49

0

820

37

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

Accounting
Firm BD

Information
processing
facilities
Officefacilities

14

－

－

45

－

59

11

Accounting
Firm BD

Information
processing
facilities

152

－

203
(2,341.48)

34

0

391

10

Accounting
Firm BD

Information
processing
facilities
Officefacilities

37

－

－

42

0

80

32

Accounting
Firm BD

Information
processing
facilities
Officefacilities

5

－

－

56

0

63

21

TKC Kyushu Consolidated
Information Center(Koga-shi, Fukuoka)
TKC Hokkaido Consolidated
Information Center
TKC Hokkaido SCG Service
Center(Chuo-ku, Sapporo-shi,
Hokkaido)
TKC Tohoku Consolidated
Information Center
TKC Tohoku SCG Service
Center(Aoba-ku, Sendai-shi, Miyagi)– 33 –

As of September 30, 2020
Name of office(Address)

Book values (millions of yen)
Machinery,
Tools,
Buildings &Land
equipment &furniture &structures(Area in m2)
vehiclesfixturesNo. ofemployees(No. ofpeople)Name ofsegment

Facilities

TKC Okinawa Consolidated
Information Center
TKC Okinawa SCG Service
Center(Naha-shi, Okinawa)

Accounting
Firm BD

Information
processing
facilities
Officefacilities

4

－

－

6

0

11

9

TKC Ibaraki SCG Service
CenterTKC Ibaraki Sales Section(Tsukuba-shi, Ibaraki)

Accounting
Firm BD
Local
Governments
BD

Officefacilities

23

－

147
(1,120.00)

3

0

174

22

TKC Yamaguchi SCG Service
Center(Yamaguchi-shi, Yamaguchi)

Accounting
Firm BD

Officefacilities

22

－

197
(814.00)

3

0

223

6

Dormitories, company housing(Utsunomiya-shi, Tochigi)

Accounting
Firm BD
Local
Governments
BD

Welfarefacilities

221

－

391
(5,326.69)

14

－

627

－

Other

Total

(2) Domestic subsidiaries
As of September 30, 2020
Book values (millions of yen)Company
nameName of office(Address)

Name ofsegment

TLP
Corporation

Hanyu Plant(Hanyu-shi,
Saitama)Printing BD

Printing
facilities

61

Printing BD

Printing
facilities

1,017

TLP
Corporation

DPS Solutions
Center(Hanyu-shi,
Saitama)

Facilities

No. ofemployees(No. ofpeople)Machinery,
Buildings &Land
equipment &structures(Area in m2)
vehiclesTools,
furniture &fixtures

Other

Total

265

145
(7,275.17)

6

11

490

64

159

129
(7,772.00)

53

268

1,627

56

(Notes) 1. The figures above do not include consumption taxes.
2. The status of equipment and facilities held by consolidated companies other than those described above issmall in scale and has 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.
*2 includes 1,405 million yen for leased buildings and 64 million yen for leased tools, furniture & fixtures,
which are leased to our subsidiary TKC Customer Support Service Co., Ltd.
5. Major leased facilities and equipment other than those described above are as follows.
(The Company)
Annual office rent
681 million yen

3 [Plans for Capital Investments, Disposals of Property, Plant 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.
There are no plans for the establishment or disposal of major facilities and equipment as of the end of the current
consolidated fiscal year (September 30, 2020), except for routine updates of facilities and equipment and disposals
and/or sales related thereto.

– 34 –

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 of shares authorized to be issued (shares)

Common stock

60,000,000

Total

60,000,000(ii) [Issued shares]
Name of stock
Number of shares issued as Number of shares issued as
exchange on which theof the end of current fiscal of the filing date (shares)
Company is listed, or
year (shares)
name of Authorized
Financial Instruments(September 30, 2020)(December 21, 2020)
Firms Association

Class

Common stock

26,731,033

26,731,033

Total

26,731,033

26,731,033

Description

First Section of the
Number of shares consisting
Tokyo Stock Exchange
a unit: 100 shares－－(2) [Share subscription rights, etc.](i)[Stock option scheme]
None to be disclosed.

(ii)[Rights Plan]
None to be disclosed.

(iii) [Information on Share Subscription Rights]
None to be disclosed.

(3) [Exercise of Bonds with Share Subscription Rights Containing a Clause for Exercise Price Adjustment, etc.]
None to be disclosed.

(4) [Changes in Total Number of Issued Shares, Capital Stock, etc.]

Date

November 30, 2009
(Note)

Increase or
Balance of total
Increase or
Balance of capital
Increase or
Balance of
decrease in total number of issued
decrease instock
decrease incapital reserve
number of issued
sharescapital stock
capital reserve
shares(shares)(shares)(millions of yen) (millions of yen) (millions of yen) (millions of yen)
(1,185,800)

26,731,033－(Notes) Decrease caused by cancellation of treasury stock.

– 35 –

5,700

－

5,409

(5) [Shareholders Composition]
As of September 30, 2020
Status of shares (100 shares in one unit of shares)
Government &municipalities

Financial
institutions

Financial
instruments
business
operators

Other
corporatebodiesNumber ofshareholders

－

32

23

Number ofshares held
(share units)－

90,648Percentage ofshares held
(%)

－

34.0

Classification

Foreign corporate bodies, etc.

Otherindividuals

Total

Number ofshares lessthan oneunit(shares)Nonindividuals

Individuals

111

158

2

7,725

8,051

－

1,107

66,04137,9282

70,882

266,608

70,233

0.4

24.8

14.2

0.0

26.6

100.0

－

(Notes) 1. Of the 263,615 shares held as treasury stock, 2,636 share units are included in “Other individuals” and 15
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.”
3. The “Financial Institutions” column includes 1,897 units of the Company’s stocks owned by the BIP Trust.

(6) [Major shareholders]
As of September 30, 2020

Names of shareholders

Address

Percentage ofshares held to total
Number of shares heldnumber of issued(hundreds of shares)
shares (excluding
treasury stock) (%)

Iizuka Takeshi ScholarshipFoundation

1758 Tsurutamachi, Utsunomiya-shi, Tochigi

37,53014.2

Daido Life Insurance Company

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

25,6909.7

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

15,465

5.8

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

15,126

5.7

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

13,8095.2

One Lincoln Street, Boston, MA 02111 USA(3-11-1 Nihonbashi, Chuo-ku, Tokyo)

9,896

3.7

Utsunomiya-shi, Tochigi

8,098

3.1

1-8-12 Harumi, Chuo-ku, Tokyo

7,703

2.9

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

6,664

2.5

50 Bank Street, Canary Wharf, London E14
5NT, UK(3-11-1 Nihonbashi, Chuo-ku, Tokyo)

6,040

2.3

－

146,023

55.2

Sozeishiryokan (Institute of Tax
Research and Literature)
TKC Employee Shareholding
Association
The Master Trust Bank of Japan,
Ltd. (Trust account)
SSBTC Client Omnibus Account(Standing proxy: The Hong Kong &Shanghai Banking Corporation,
Tokyo Branch)
Masaharu Iizuka
Custody Bank of Japan, Ltd. (Trustaccount)
Tokio Marine & Nichido Fire
Insurance Co., Ltd.
Northern Trust Co. (AVFC) Re
Fidelity Funds(Standing proxy: The Hong Kong &Shanghai Banking Corporation,
Tokyo Branch)
Total(Note) The 189,700 shares of the Company held by the BIP Trust are not included in the treasury stocks to be deductedin calculating the percentage of shares held to the total number of issued shares.

– 36 –

(7) [Status of voting rights](i)[Shares issued]
As of September 30, 2020
Number of shares (shares)

Number of voting rights(units)Shares without voting right

－

－

－

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

－

－

－

Shares with restricted voting right (others)

－

－

－

Classification

Description

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

Common stock

263,600－－

Shares with full voting right (others)

Common stock 26,397,200

263,972－

Shares less than one share unit

Common stock

70,233－－

26,731,033

－

－

－

263,972－

Total number of shares issued
Total voting rights held by all shareholders(Note) Shares with full voting right (others) includes 600 shares (6 units of voting rights) registered in the name ofJapan Securities Depository Center, Inc., and 189,700 shares (1,897 units of voting rights) owned by the BIP
Trust.
(ii)[Treasury stock, etc.]
As of September 30, 2020

Name ofshareholder

Address of shareholder

TKC Corporation

1758 Tsurutamachi,
Utsunomiya-shi,
Tochigi

Total－

Percentage ofshares held to thetotal number ofissued shares (%)

Number of shares
held under own
name (shares)

Number of shares
held under othernames (shares)

Total shares held
(shares)263,600－

263,600

0.99

263,600－

263,600

0.99(Note) In addition to the above, the 189,700 shares owned by the BIP Trust are recorded as treasury stocks in the
consolidated financial statements.

– 37 –

(8) [Information on Employee Stock Ownership Plan】
The Company introduced this Plan with the objectives to clarify the linkage between the Company’s shareholder
value and the compensation for directors (excluding outside directors and expatriates), executive officers(excluding expatriates), and auditors (excluding outside directors and expatriates) (hereinafter referred tocollectively as “Directors, etc.”), and to motivate Directors to contribute more to enhancing the medium- to longterm corporate value by sharing common interest with shareholders, including not only the merit derived fromthe rising share price, but also the risk associated with the decline in share price. The introduction of the Plan
was approved by resolution at the 52nd Ordinary General Meeting of Shareholders held on December 21, 2018.
(i)

Description of the Plan
The Plan uses a structure called Board Incentive Plant trust (hereinafter “BIP Trust”). The Plan is similar tothe performance-linked share compensation (Performance Share) and share compensation with transfer
restriction (Restricted Stock) in the US and Europe, and delivers and provides the Company’s shares and cash
equivalent to the amount to convert and dispose the Company’s shares (collectively, “the Company’s Shares,etc.”) to Directors, etc.

(ii)

Total number of shares subject to delivery to eligible Directors, etc.
The Company will contribute a total amount not exceeding 1,549 million yen to the Trust for a period of threefiscal years between the fiscal year ending September 30, 2019 and the fiscal year ending September 30, 2021(“Initial Trust Period”). An amount not exceeding 977 million yen in total will be included in the Initial Trust
Period as the amount for measures to be taken for the transition from the stock-based compensation stock
option scheme.
Overview of Trust Agreement
Category of trust

Money trust other than a specific individually operated money trust (third party benefit
trust)

Objective of trust

To provide incentive for Directors, etc.

Assignor

TKC Corporation

Trustee

Mitsubishi UFJ Trust and Banking Corporation(Joint trustee: The Master Trust Bank of Japan, Ltd.)

Beneficiary

Directors, etc., who satisfy the beneficiary conditions

Trust administrator

A third party professional expert having no interest in the Company

Date of trust agreement

February 26, 2019

Trust period

February 26, 2019 to February 28, 2022 (scheduled)Start of plan

March 1, 2019

Exercising of voting
rightsType of shares to beacquired

Not to be exercised
Common stock of the Company

Maximum amount oftrust fundDirectors and executive officers: 1,470 million yen (scheduled)(Including trust fees and expenses)
Auditors: 79 million yen (scheduled) (same as above)

Acquisition of shares

To be acquired in the stock market or from the Company (disposal of treasury stock)

Holder of vested rights

TKC Corporation

Residual property

The residual property that the Company (as holder of vested rights) may receive shallbe within the amount of trust expense reserve, which is the trust fund less the fund forshare acquisition.

(iii) Persons eligible for the delivery of the Company’s shares
Directors, etc., who satisfy the beneficiary conditions– 38 –

2 [Acquisition, etc. of Treasury Stock][Class of shares] Acquisition of shares of common stock under Article 155, Item 7 of the Companies Act of Japan(1) [Acquisition of treasury stock based on resolution at the General Meeting of Shareholders]None to be disclosed.
(2) [Acquisition of treasury stock based on resolution of the Board of Directors]
None to be disclosed.
(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

Total amount (yen)6,679

34,409,620

240

1,599,000

Treasury stock acquired during the current period(Note) Treasury stock acquired during the current period does not include shares constituting less than one unit
purchased during the period from December 1, 2020 to the date on which this Annual Securities Report was
filed.
(4) [Disposition and holding of acquired treasury stock]
Current fiscal year
Classification

Number of shares(shares)

Current period for acquisition

Total amountdisposed(yen)

Number of shares(shares)

Total amountdisposed(yen)

Acquired treasury stock for which subscribers
were solicited

－

－

－

－

Acquired treasury stock canceled

－

－

－

－

Acquired treasury stock transferred due tomerger, share exchange, or company split

－

－

－

－

150

514,571－－

263,615－

263,855－

Other(Sold due to demand for sales of fractional unit
shares)Number of shares of treasury stock held

(Notes) 1. 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 ofshares constituting less than one unit, and shares sold through demand for sales during the period from
December 1, 2020 up to the date on which this Annual Securities Report was filed.
2. The number of treasury stock held does not include the 189,700 shares of the Company’s stocks owned by
the BIP Trust.

– 39 –

3 [Dividend Policy]
The basic policy of the Company is to pay two annual dividends of retained earnings, an interim dividend and a yearend dividend. Year-end dividends are resolved at the General Meeting of Shareholders and interim dividends byresolution of the Board of Directors.
The Company further provides in its Articles of Incorporation that interim dividends as set forth in Article 454 Item 5of the Companies Act of Japan as of March 31 every year may be paid by resolution of the Board of Directors.
The basic policy of the Company is to pay out dividends that exceed the industry average in accordance with themedium-term management plan set forth by the Board of Directors while continuing to maintain optimal profit eachfiscal year in order to meet the expectation of our shareholders. With the rapid advancement of ICT (information andcommunication technology) and major changes in social systems, it is essential to make advance investments inresearch 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.
To respond to the expectations of shareholders, the Company announced on November 11, 2019 that the estimatedamounts for interim and year-end dividends for the 54th term would be 55 yen as ordinary dividends (for the 53rd term,
55 yen for interim dividends and 55 yen for year-end dividends), and has paid the interim dividends of 55 yen after the
resolution of the Board of Directors.
During the fiscal year under review, the Group’s net sales, operating income, ordinary income and current net income
attributable to owners of parent exceeded the previous fiscal year’s performance for six consecutive years with recordbreaking figures. Based on these results, to express our respect and gratitude to our shareholders, we decided that the
year-end dividend per share would be 65 yen as ordinary dividends, as announced on November 4, 2020.
As a result, the annual payout ratio was 42.2%.
Date of Resolution

Total amount of cash dividends(millions of yen)

May 1, 2020
Meeting of the Board of Directors
December 18, 2020
Ordinary General Meeting of Shareholders– 40 –

Dividend per share
(yen)

1,455

55

1,720

65

4 [Corporate Governance](1) [Overview of 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 domain and maintain control over thefate of accounting firms
2. Management of electronic data processing centers to improve the administrative efficiency of local governments
While other business objectives were later added as business operations expanded, our management policy of focusing
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 their business 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 in order toearn the trust of such customers.
As such, the Group understands corporate governance as follows:
1. in order to achieve the business objectives of the Company in compliance with the laws and regulations, theArticles of Incorporation and the resolutions of the General Meetings of Shareholders,
2. the Group shall formulate strategic medium-term management plans and foster competent human resources thatwill enable us to develop and supply software products and services that can drive our customers' business to
success,
3. strive to earn the gratitude, trust, and hopefully the respect of our customers,
4. and as a result, secure good operating results and sound financial standing so that we can return the fruits to theoriginal owners of the Group, our shareholders.
Through such corporate governance process, we aim to improve the transparency of our decision-making and businessprocesses, implement effective risk management measures, undertake information disclosure and accountability in atimely manner to continue enhancing our corporate values.

Ⅱ. Overview of the Corporate Governance System and Reasons for Selecting the Current System
1. Overview of the Corporate Governance System(1) Board of Directors
The Representative Director & President chairs the meetings of the Board of Directors, which are held at least oncea month and attended by other Directors where they share information and make decisions in a prompt manner.
The Board of Directors currently consists of 8 members and, with the exception of three Outside Directors, each
Director represents a business unit as executive officer in charge and participates in deliberations and express theiropinions. The Company adopts an executive officer system since December 22, 2006.
The members of the Board of Directors are the eight Directors, whose names are listed in (2) [Officers] 1. List of
Officers.
(2) Board of Auditors
The Board of Auditors provides advice and suggestions to ensure the legality, appropriateness, and validity of thedecision-making processes and resolutions by the Board of Directors.
The members of the Board of Auditors are the four Auditors, whose names are listed in (2) [Officers] 1. List of
Officers. The Board of Auditors is chaired by a Corporate Auditor (full-time).
– 41 –

(3) Nomination and Compensation Advisory Committee
At the Meeting of the Board of Directors held on September 10, 2019, the Company resolved to establish a
Nomination and Compensation Advisory Committee as a voluntary advisory body to the Board of Directors.
The chairperson and half of the committee members are independent Outside Directors and outside experts, andfunctioning as an advisory body to the Board of Directors, the Committee was established in an aim to further
enhance the corporate governance system by ensuring that independent Outside Directors etc. are given theopportunity to engage in and provide advice on the decision-making of the following matters, thereby strengthening
the independence, objectivity, and accountability of the Board of Directors;(i)

Policy and procedure for the nomination of candidates for Directors and executive officers holding executive
position;(ii)

Appointment and dismissal of Directors and executive officers holding executive position;(iii) Policy for the determination of compensations for Directors and executive officers holding executive position;(iv) Policy for the determination of individual compensations for Directors and executive officers holding
executive position;(v)

Individual compensations for Directors and executive officers holding executive position;(vi) Appointment and dismissal of representative directors and auditors of subsidiaries and their individualcompensations;(vii) Other matters that the Board of Directors deem necessary in relation to any of the above items.
The names of the members of the Nomination and Compensation Advisory Committee are as follows:<List of members>
Chairperson: Junko Iijima(Outside Director)

Member:Yoshimasa Oshida (Outside Director)

Member:

Hideki Tomonaga(Outside Director)

Member:Misao Taguchi(Outside expert)

Member:Masaharu Iizuka(In-house expert)

Member:Masanori Iizuka(Director)

Member:Satoshi Hitaka(Director)– 42 –

2. Reasons for Selecting the Current Corporate Governance System
The Company implements an auditor system and also appoints Outside Directors. Outside Directors are appointed andinstalled 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 and resolutions 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 three Outside Directors and two Outside Auditors, a total of five members who meet the requirements
of independent directors/auditors and are notified to the Tokyo Stock Exchange.
Through the implementation of these measures the Company ensures objectivity and neutrality of the supervision overthe management of the Company.
Therefore, we feel that the functions to supervise the management activities are in place, which enables us to institutea highly efficient, highly transparent management system that the Company aims for.
A schematic diagram of the Company’s business execution and management oversight is shown below:

General Meeting of Shareholders

Appointment/
Dismissal

Reports

Appointment/
Dismissal

Appointment/
Dismissal

Reports

Consult
Nomination &Compensation
Advisory
Committee
7members

Board of Directors
8 Directors(Including 3 Outside
Directors)

Audit

ReportBoard ofAuditors
4 Auditors(Including 2
Outside Auditors)

Setting the Agenda for Appointment/
Dismissal/Refusal of Reappointment

Appointment/
Dismissal/
Supervision

Reports

Reports
Representative
Directors

Accounting
Auditors

Business
Improvement
Committee

Instructions
Reports

Internal Audit
Department

Instructions,Supervision

Audit

34 Executive Officers
Instructions, Orders

All Divisions, Group Companies– 43 –

Reports

Requests

3. Other Matters Concerning Corporate Governance(1) 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 and operations of group of enterprises
consisting of the Stock Company and its Subsidiary Companies” as stipulated in Article 362, Paragraph 5 of theCompanies Act of Japan. The outline is described 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(vi) of the Companies Act of Japan)
1. Directors must comply with all laws and regulations, the Articles of Incorporation, and the Resolutionsof General Meetings of Shareholders (hereafter “laws and regulations”), keep in mind at all times thatthe business 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 andmaintain control 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 toachieve these objectives.
2. Directors must perform their duties based on the Company’s Rules on Administrative Authority and
Dividing Duties of Directors established by the Board of Directors, and cooperate with other Directors
in improving corporate performance.
3. In the event a Director finds that his/her decision (including approvals given to proposals made bysubordinates) may be in violation of the laws and regulations, he/she must, without delay, consult with
the Director in charge of legal affairs and act based on said Director’s decision to prevent the 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 (hereafter, the “President”), andfull-time Corporate Auditors and outside company attorneys and receive their guidance as well as report
the particulars to the Board of Directors.
4. In the event a Director finds that an act or a plan of another Director or an employee may be in 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 andreceive guidance.
5. 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 (Articles 362) and Authority (Articles 363) of
Directors as stipulated in the Companies Act of Japan and the Company’s Rules on the Board of
Directors. If there are other matters to be deliberated, they must be brought to the Director(s) in chargeof the meetings of the Board of Directors without delay.
6. 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.
7. 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 of Japan along with any materials used for explanations
and the minutes of meeting of the Board of Directors.
8. 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.
9. 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 oflaws and regulations. In the event an Auditor finds in the course of sitting in the meetings of the Boardof 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.
– 44 –

10. 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.
11. 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(vi) of the Companies Act of Japan)
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 the Companies Act
of Japan)(1) Of the information relating to the execution of duties by Directors (hereafter, “information on
Directors’ duty”), information pertaining to the minutes of General Meetings of Shareholders shallbe stored and managed in accordance with the Company’s Rules on Management of Information
Concerning the Minutes of General Meetings of Shareholders.
(2) Of the information on Directors’ duty, information pertaining to deliberations at the meetings of theBoard of Directors shall be stored and managed in accordance with the Company’s Rules on
Management of Information Concerning Decision-making Processes of the Board of Directors as
described (in [1] 7.) above.
(3) Of the information on Directors’ duty, information submitted to or received from government
authorities and information sent to or received from outside parties in relation to legal affairs shallbe stored and managed based on the Company’s Rules on Management of Information Concerning
Legal Affairs.
(4) Information on Directors’ duty not included above shall be divided into the following three
categories and stored and managed based on the Company’s Rules on Management of Information
Concerning the Daily Operations of Directors:(i) of the meetings called by a Director (excluding the General Meetings of Shareholders andmeetings of the Board of Directors), minutes and relevant documents of meetings in whichmatters that may have significant impact on the Company’s operation are deliberated, andmeeting in which matters directly related to the interest of specific customers, clients or
employees are deliberated;(ii) written applications for approval and relevant documents settled by the Directors based on the
Company’s Rules Concerning Requests for Decisions;(iii) other important information pertaining to the execution of duties by Directors.
(5) All information on Directors’ duty set forth in the preceding four items shall be stored in a databaseso that their presence or absence and contents are immediately searchable. The operating status ofsaid database shall 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 losses to the Company(in relation to the provisions of Article 100 Paragraph 1 Item 2 of the Ordinance for Enforcement of theCompanies Act of Japan)
2-1. Regulations for the management of strategic risks(1) Strategic risks are risks related to business opportunities that arise out of uncertainties of strategic
managerial decision-making. In light of the current situation of the Company, the objective ofmanaging 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 ofShareholders.

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(2) In order to prevent the loss of business opportunities, all Directors must actively gather information
and retain unrelenting spirit of inquiry to capture business opportunities that contribute to ourcustomers’ success ahead of others, exhibit outstanding intuition to make the best of such business
opportunities, and develop timely and optimal schematic plans and propose the execution to the
President.
(3) Upon receiving such proposals from Directors (including employees) as set forth above, thePresident must evaluate the contents from the following perspectives, and if it is determined that a
proposal should be executed, he/she shall report to the Board of Directors and cause for the Director(including employees) in charge to announce an implementation plan at the meetings of the Boardof Directors:(i) Conformances with the management philosophy of the Company;(ii) Compliances;(iii) Expected degree of contributions to customers’ business;(iv) Anticipated feedback from customers;(v) Technical feasibilities;(vi) Funds and costs necessary;(vii) Other matters, such as principle of good faith with business partners.
(4) When submitting proposals on the appointment of Directors to the General Meeting of Shareholders,it shall be made in accordance with the Company’s Rules on the Nomination and Compensation
Advisory Committee.
Proposals shall be deliberated and decided at the Nomination and Compensation Advisory
Committee chaired by an independent Outside Director, etc. based on the standards for theappointment and dismissal of directors, which shall be reported to the Board of Directors.
The Board of Directors shall deliberate and decide on the matters reported by the Nomination andCompensation Advisory Committee.
2-2. Regulations for the management of operational risks
2-2-1. Regulations for the management of operational risks that may occur across all divisions(1) Operational risks are risks related to the performance of business activities that arise out of
uncertainties of performance of appropriate and efficient operations. These risks shall be divided
and controlled under the following two categories:(i) risks that may occur across all divisions (hereinafter, “common risks”);(ii) risks that may occur in specific divisions (hereinafter, “division-specific risks”).
This section provides for regulations for the management of common risks.
(2) The Board of Directors shall elect a Director in charge of risk management, who shall be in chargeof investigating and identifying the following common risks from among all employees of theCompany:(i) Risks that have high degree of urgency;(ii) Risks associated with compliance;(iii) Risks associated with confidentiality obligations of the Company;(iv) Risks associated with the preservation of assets and accounting;(v) Risks associated with the preparation of regulations and manuals for operation of business;(vi) Risks associated with the workplace environment and labor management;(vii) Other risks deemed necessary.
(3) In the event the Director in charge finds, as a result of the inspections in the preceding paragraph,that there are measures to completely eliminate any of the common risks, he/she shall promptly
report such findings to the President and discuss the actions to be taken.
(4) The Director in charge shall sort and classify unresolved risks and formulate a basic policy on how
to handle such risks, and submit it to the Board of Directors as Regulations for the Prevention of
Operational Risks (hereinafter referred to as “Regulations” in this section) for approval by the Boardof Directors. The approved Regulations shall be announced and distributed to all employees as
guidelines from the President.
(5) In the event a major risk becomes apparent, the Director in charge shall immediately take actions toprevent and minimize the spread of damages in accordance with the Regulations.

– 46 –

(6) The Director in charge shall, within one month of completing the actions in the preceding item,
investigate the true cause of the risk and formulate measures to prevent recurrence, and report to theBoard of Directors within two months and undertake any revisions to the Regulations.
(7) All heads of business units shall verify the compliance with the Regulations within their own
business units either on a daily or regular basis in accordance with the Regulations and report to the
Director in charge.
(8) The Director in charge shall submit to the President applications for special award money to those
uncovering major common risks that were previously unnoticed or those proposing effective
measures to prevent recurrence of apparent risks.
2-2-2. Regulations for the management of operational risks that may occur in specific divisions(1) Division-specific risks include cases in which division-specific operational risks need to becontrolled and cases in which highly advanced, specialized knowledge is required to control certain
common risks. The following committees (including committees to be newly established) shall bein charge controlling risks involving multiple divisions, and the relevant division shall be responsible
for controlling any risk involving that single division:(i) Systems Development Research Center Operation Improvement Committee(ii) Municipality Systems Development & Operations Division Operation Improvement
Committee(iii) Consolidated Information Centers Operation Improvement Committee(iv) SCG Service Centers Operation Improvement Committee(v) Municipality Sales Division Operation Improvement Committee(vi) Supplier Business Operation Improvement Committee(vii) Tokyo Head Office Operation Improvement Committee(viii) Personnel & Salary Systems Improvement Committee(ix) Risk Management Committee(x) Other committees that the Board of Directors deems necessary to establish.
(2) The committees listed in the preceding item shall serve as assisting body to the President or the
Director in charge of the division, the executive officer heading each committee with a fixed numberof committee members as determined by the Board of Directors. The Director in charge or the headof committee shall attend the meeting of the Board of Directors and report on the matters to bereported by the committee, and may request deliberations as necessary by the Board of Directors.
(3) Division-specific risks involving an individual committee or a specific division shall be controlled
in the same manner as controlling common risks as prescribed in 2-2-1. Division-specific risks shallbe identified by each committee and reported to the Board of Directors.
2-2-3 Regulations for the management of hazards and other risks(1) In the event of large-scale earthquakes, flood damages, fire and other disasters, or long power
outage, water stoppage, the disconnection of communication lines and other circumstances that may
cause substantial damage, the Company will immediately set up an emergency response headquarterheaded 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 team including the company attorneys to establish a system to respond promptly andprevent and minimize the spread of damages.
(2) In the event of any matters that may be in violation of the laws and regulations, the General Affairs
Headquarters under the responsibility of the Director in charge of legal affairs shall become thesupervising division to take actions.
Any legal compliance issue of significant importance shall be consulted with outside attorneys as
external legal advisors.
3. Systems to ensure the efficient execution of Directors’ duties of the Company(in relation to the provisions of Article 100 Paragraph 1 Item 3 of the Ordinance for Enforcement of theCompanies Act of Japan)(1) 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 ofShareholders shall be planned at least six months in advance.

– 47 –

(2) At the meetings of the Board of Directors held at the end of each fiscal year, a management policy
for the upcoming fiscal year formulated in light of the management philosophy of the Company anda medium-term management plan covering the next three years starting from the upcoming fiscal
year shall be submitted by the President, and the Board of Directors shall deliberate upon theirstrategic rationalities in accordance with the Company’s Rules on the Board of Directors.
(3) At the meetings of the Board of Directors held on the second month of each new fiscal year, theTargeted 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, and the Board of Directors shall deliberate upon their feasibilities in accordance with
the Company’s Rules on the Board of Directors.
(4) At the monthly regular meetings of the Board of Directors, the targeted and actual P/L statements
for the entire company and each business unit as of the end of the previous month shall be reported,and the Board of Directors shall analyze the differences in target and actual results, and discuss
actions to be to taken to achieve the targeted sales and current profits for the fiscal year.
(5) In executing his/her daily duties, the President shall inspect the details of individual projects plannedby the Directors in charge of each business unit and coordinate to maximize the effect of the projects
in light of the current management policy, and approve the use of president’s strategic reserve funds
to the extent approved by the Board of Director.
(6) In executing his/her daily duties, Directors in charge of each business unit shall provide instructions
to the executive officers and managers under his/her immediate control to ensure that they havecorrect awareness of the fiscal management policy and strategic goals for their division and that the
PDCA cycle is thoroughly implemented to achieve these goals, and shall monitor the progress andachievements of the entire division at all times and strive to achieve the sales and profit goals forthe fiscal year.
(7) In managing the business unit under his/her charge, Directors in charge of each business unit shallstrive to reduce unnecessary expenses, improve work quality and productivity, and keep theworkplace organized, and must exhibit leadership to create a workplace environment in which all
employees are safe and comfortable, inspired and satisfied.
4. Systems to ensure that performance of duties by employees of the Company is in conformance with laws
and regulations and the Articles of Incorporation(in relation to the provisions of Article 100 Paragraph 1 Item 4 of the Ordinance for Enforcement of theCompanies Act of Japan)(1) In order to ensure compliance with laws and regulations by employees, the Internal Audit
Department under the direct control of the President shall prepare drafts of Compliance Regulations
and Compliance Manual based on guidance provided by Auditors and outside company attorneys
and, upon obtaining the approval of the Board of Directors, distribute them to all employees as
guidelines from the President.
(2) Regular training sessions for all employees of the Company to further understanding on the
Compliance Regulations and Compliance Manual as set forth above shall be conducted inaccordance with the plans of the Internal Audit Department.
(3) When performing an internal audit on internal business units, the Internal Audit Department must
always inspect the awareness on Compliance Regulations and implementation of Compliance
Manual among employees of the business unit being audited, and submit an Internal Audit Reportto the President within one week after the completion of the audit.
(4) Directors in charge of each division shall appoint a compliance manager within each business unit
in accordance with the Compliance Regulations, and conduct training on the Compliance Manualfor employees within the business unit in a timely and appropriate manner.
(5) In order to prevent the leaking of customer information and other confidential information, the bodytext and attached files of all electronic mails sent from internal PCs to outside the company shall be
stored for a certain period of time.
(6) In preparation for the unlikely event that a Company employee violates any laws or regulations, theCompany shall establish a system whereby the Internal Audit Department or the employee that firstlearns of such information gives emergency notification to the President or the Director in charge oflegal 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 andits subsidiaries(in relation to the provisions of Article 100 Paragraph 1 Item 5 of the Ordinance for Enforcement of theCompanies Act of Japan)– 48 –

(1) Systems concerning reports to the Company on matters pertaining to the execution of duties bydirectors, 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 (2) and (3) 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 of Japan)(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 the Internal Audit Department shall conduct audits.
(ii) The Internal Audit Department shall establish a system whereby, upon identifying any
incidents that may cause significant damage to the Subsidiaries, the President and the heads of
relevant business divisions are notified of the risks causing such incident, the degree of damage
expected and impacts on the Company.
(iii) The Internal Audit Department shall 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 theSubsidiaries to serve as Directors in order to communicate the management policy and requestsof the Company in writing to the Subsidiaries’ Board of Directors. The Company shall request
the presidents of the subsidiaries to submit monthly reports on the latest business results,business forecast and risk management issues.
(2) 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 theCompanies Act of Japan)
Efforts shall be made to raise awareness on risks which may impact the Company’s operation, andto promote early discovery, preventive measures, and prompt and appropriate responses in the eventof an emergency in accordance with the separate Compliance Regulations, Compliance Manual andother internal rules.
(3) 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 theCompanies Act of Japan)(i) The Board of Directors of Subsidiaries (referred to as “Board of Directors” in this section)
shall hold regular 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 the approval of financial statements or in relation to the General Meetingsof 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 the upcoming fiscal year formulated in light of the Management Philosophy of theSubsidiaries and a Medium-Term Management Plan covering the next three years starting fromthe upcoming fiscal year shall be 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 shallbe submitted by the President, and the Board of Directors shall deliberate upon theirfeasibilities in accordance with the Company’s Rules on the Board of Directors.
(iv) At the monthly regular meetings of the Board of Directors, the targeted and actual P/Lstatements for the entire company and each business unit as of the end of the previous monthshall be reported, and the Board of Directors shall analyze the differences in target and actual
results, and discuss actions to be to taken to achieve the targeted sales and current profits forthe 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 effectthe projects in light of the current management policy.

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(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 ensurethat they have correct awareness of the fiscal management policy and strategic goals for theirdivision and that the PDCA cycle is thoroughly implemented to achieve these goals, and shallmonitor the progress and achievements of the 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 workplace organized, and must exhibit leadership to create a workplace environment inwhich all employees are safe and comfortable, inspired and satisfied.
(4) 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 theCompanies Act of Japan)(i) In order to ensure compliance with laws and regulations by the directors and employees of theSubsidiaries (referred to as “Directors and employees” in this section), the division in chargeof 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 inaccordance with the plans of the division in charge of internal audit.
(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 ofCompliance Manual among employees of the business unit being audited, and submit anInternal 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 in accordance 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, thebody text and attached files of all electronic mails sent from internal PCs to outside thecompany shall be stored for a 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 Corporate Auditors(in relation to the provisions of Article 100 Paragraph 3 Item 1 of the Ordinance for Enforcement of theCompanies Act of Japan)(1) The Company shall establish an Auditor Office to assist the duties of the Auditors and assign one ormore dedicated employees.
(2) In determining the specific details pertaining to the preceding item, the Company shall respect theopinions of the Board of Auditors and take into consideration the opinions of the Director in chargeof human resources and other relevant personnel.
7. Independence of employees assisting duties of Corporate Auditors from Directors(in relation to the provisions of Article 100 Paragraph 3 Item 2 of the Ordinance for Enforcement of theCompanies Act of Japan)(1) The appointment, transfer, personnel evaluation and disciplinary punishment of employees assisting
the duties of Auditors shall be subject to prior consent of the Board of Auditors.
(2) Employees assisting the duties of Auditors shall not hold concurrent posts that involve the executionof the Company’s business, and shall perform their duties under the direct command of the Board
of Auditors, and their performance shall be evaluated by the Board of Auditors.
(3) Business units executing the Company’s business shall cooperate with employees assisting theduties of Auditors and allow attendance of such employees at the necessary meetings for them toconduct to necessary investigations and gather necessary information.

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8. Ensuring effectiveness of directions to employees assisting duties of Corporate Auditors.
(in relation to the provisions of Article 100 Paragraph 3 Item 3 of the Ordinance for Enforcement of theCompanies Act of Japan)
Employees assisting the duties of Auditors shall report to Auditors as appropriate on the status of duties
performed in accordance with the directions and commands given by Auditors.
9-1. The systems listed below and other systems for reporting to Corporate Auditors(in relation to the provisions of Article 100 Paragraph 3 Item 4 of the Ordinance for Enforcement of theCompanies Act of Japan)(1) Systems for reporting to Corporate Auditors by the Company’s Directors, accounting advisors andemployees(in relation to Article 100, Paragraph 3, Item 4(a) of the Ordinance for Enforcement of theCompanies Act of Japan)(i) All Directors and employees of the Company shall promptly submit the necessary reports andinformation 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 the following:
1) Status of activities of business units involved in the risk management of the Company;
2) Status of activities pertaining to audits and internal audits of the Subsidiaries of theCompany;3) Important accounting policies and accounting standards of the Company and any changes
thereto;4) Contents of announcements and important disclosure documents on the Company’s latest
business results and earnings forecasts announcements on both non-consolidated andconsolidated 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 shallimmediately 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 thechairman or caller of such meetings.
(2) Systems for reporting to Corporate Auditors of the Company by the Subsidiaries’ directors,
accounting advisors, auditors, executive officers, employees executing operations, persons
performing the duties under Article 598, Paragraph 1 of the Companies Act of Japan and otherpersons equivalent to the above, employees or any persons receiving reports from the above(in relation to Article 100, Paragraph 3, Item 4(b) of the Ordinance for Enforcement of theCompanies Act of Japan)(i) All directors, auditors and employees of Subsidiaries shall promptly submit the necessary
reports and information requested by each Corporate Auditor of the Company as establishedby the Board of Auditors of the Company.
(ii) The reports and information to be submitted as set forth in the preceding item shall mainly
include the following:
1) Status of activities of business units involved in the risk management of the Subsidiaries;2) Status of activities pertaining to the audits by auditors of the Subsidiaries;3) Important accounting policies and accounting standards of the Subsidiaries and anychanges thereto;4) Circulation of internal approval documents and meeting minutes of the Subsidiaries
requested by Auditors.
(iii) In the event a director, auditor or employee learns of any fact of violations of laws andregulations or any fact that could cause significant damage to the Company, such director,
auditor or employee of the Subsidiaries shall immediately report matters pertaining to suchfact to the Auditors of the Company.
(iv) The Company’s Auditors shall attend all the meetings of the Board of Directors and otherimportant meetings of the Subsidiaries, and are expected to voice their opinions freely without
being requested to do so by the chairman or caller of such meetings.
– 51 –

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 the provisions of Article 100 Paragraph 3 Item 5 of the Ordinance for Enforcement of
the Companies Act of Japan)
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 theCompany.
9-3. Policy on prepayment or reimbursement of expenses arising from the execution of duties of Corporate
Auditors and the processing of expenses or debts arising from the performance of other duties(in relation to the provisions of Article 100 Paragraph 3 Item 6 of the Ordinance for Enforcement of
the Companies Act of Japan)
The Company shall secure sufficient amounts to cover for the procedures on prepayment or
reimbursement of expenses arising from the execution of duties of Auditors and for the processing ofexpenses or debts arising from the performance of other duties so as to allow Auditors to sufficiently
achieve the execution of the Auditors’ duties.
(1) Ordinary auditing expenses shall be budgeted in the current fiscal year based on the business planof the Company and the audit plan of the Board of Auditors.
(2) Other emergency auditing expenses and contingency expenses shall be estimated in advance by the
Board of Auditors and establish a policy on such expenses. The Board of Directors shall execute themeasures under said determined policy as notified by the Board of Auditors after deliberation andreview of such measures in light of the status of execution of the budget for the fiscal year.
10. Other systems to ensure that audits by the Corporate Auditors are implemented effectively(in relation to the provisions of Article 100 Paragraph 3 Item 7 of the Ordinance for Enforcement of theCompanies Act of Japan)(1) Auditors shall receive advanced explanations on the annual internal auditing plan to be performedby the Internal Audit Department and express their opinions to the President if they deem that theplan needs to be corrected or changed, and the President must respect such opinions.
(2) 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.
(3) Auditors shall receive advance explanations on the accounting audit plans from accounting auditors,
and reports on auditing methods and audit results whenever accounting audits on quarterly
settlements and audits on full year settlements are performed.
(4) For the purpose of increasing the effectiveness of the Company’s auditing system by achieving
coordination between the Company’s auditing system and the risk management system, theCompany shall establish an Audit System Improvement Committee headed by the Director in chargeof legal affairs and consisting of the head of the Internal Audit Department and deputy managers or
higher nominated by said Director and Auditors. The Committee is expected to prepare reports on
the auditing systems that should be created by the Company in the future, and to submit such reports
to the Board of Directors.
(2) Number of Directors
The Articles of Incorporation stipulate that the Company may have a maximum of 15 Directors.
(3) 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.
(4) Exemption from liability for Directors and Auditors
In order to limit the responsibilities of Directors and Auditors to a reasonable extent in performing their duties, theCompany stipulates in its Articles of Incorporation that the Company may, by resolution of the Board of Directors,
exempt Directors (including former Directors) and Auditors (including former Auditors) from liabilities to theextent allowed by law in accordance with Article 426 Paragraph 1 of the Companies Act of Japan.

– 52 –

(5) Outline of Limited Liability Agreement
The Company concludes agreements with Outside Directors and Outside Auditors in accordance with the provisionsof Article 427, Paragraph 1 of the Companies Act of Japan, limiting their liabilities to the amounts set forth by law
if they are without knowledge and not grossly negligent with regard to their responsibilities set forth in Article 423,
Paragraph 1.
(6) Interim dividends
In order to maintain flexible redistribution of profits to shareholders, the Company stipulates in its Articles ofIncorporation that the Company may, by resolution of the Board of Directors, pay interim dividends as of March
31 every year pursuant to the provisions of Article 454, Item 5 of the Companies Act of Japan.
(7) 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 resolutionof the Board of Directors pursuant to the provisions of Article 165, Paragraph 2 of the Companies Act of Japan.
(8) 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 of Japan shall be passed by a vote of
two-thirds or more of shareholders at meetings with the attendance of at one-third of the shareholders that can
exercise voting rights. This has been established to ensure smooth handling of special resolutions at General
Meetings of Shareholders by easing the quorum for special resolutions by General Meetings of Shareholders.
(9) Collaboration with outside experts
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 importantaccounting issues from time to time in addition to the regular accounting audits, and hold discussions promptly
after quarterly and annual financial settlements.
(10) 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
under 2. Reasons for Selecting the Current Corporate Governance System.

III. Basic Approach and Countermeasures to Eliminate Anti-social Forces
1. Basic approach to eliminate anti-social forces
The basic policy of the Company is to have absolutely no engagement with anti-social forces under “Strict
Implementation of Compliance Management” as stated in the TKC Charter of Corporate Code. The Company fully
disseminates that it will maintain a resolute, organization-wide response against any and all unreasonable demands
and approaches from anti-social forces and bodies.

2. Countermeasures to eliminate anti-social forces(1) Establishment of a Response Control Division and appointment of managers
The Company has established a division to control responses to anti-social forces (the Response Control Division)and appointed managers in charge of preventing unreasonable demands within its Tochigi and Tokyo Head Offices.
The Company has also established a system for immediate reporting and consultation with the Response Control
Division on matters concerning unreasonable demands, organized violence, and criminal acts by anti-social forces.
(2) Coordination with external expert organizations
The Company maintains close ties with external expert organizations, for example, by taking part in liaison groups
organized by the police and receiving guidance on how to deal with anti-social forces.
(3) Collecting and managing information on anti-social forces
The Response Control Division coordinates with experts and the police in sharing the latest information pertaining
to anti-social forces and using such information to give warning to the employees within the Company.
(4) Preparation of response manuals
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.
– 53 –

(5) Training activities
The Company promotes activities to prevent damages from anti-social forces before they occur by sharing
information on anti-social forces within the Company and conducting compliance training sessions with theCompany and at Group companies.

– 54 –

(2) [Officers]
1. List of Officers
11 male and 1 female (percentage of female directors: 8.3%)

Position and Title

Representative
Director, President
and Executive
Officer

Name

Masanori Iizuka

Date of Birth

Satoshi Hitaka

Number ofshares held
(hundredsof shares)

March 12, 1975

April 2002
Joined the Company
December 2010 Director, Executive Officer, Sales of Corporate
Information Systems, Chief Director of G Projectof Sales, Corporate Information Systems,
Accounting Firm BD
October 2012 Director, Executive Officer, Chief Director of
Sales of Corporate Information Systems,
Accounting Firm BD
December 2012 Director, Managing Director and Executive
Officer, Chief Director of Sales, Corporate
Information Systems, Accounting Firm BD
April 2014
Director, Managing Director and Executive
Officer, Chief Director of Sales, Accounting Firm
BD
October 2016 Representative Director, Senior Managing
Director and Executive Officer, Chief Director of
Sales, Accounting Firm BD
October 2018 Representative Director, Senior Managing
Director and Executive Officer, Chief Director of
Accounting Firm BD
December,Representative Director, President and Executive
2019
Officer, Director of Accounting Firm BD (current
position)
December 2019 Representative Director, President, TKC Customer
Support Service Co., Ltd. (current position)(Note 5)74

January 19, 1971

April 2003
Joined the Company
December 2010 Executive Officer, Director of ASP Service
Promotion, Sales Planning, Local Governments
Business DivisionDecember 2011 Director, Executive Officer, New Business
Strategy, Local Governments BD
January 2012
Director, Executive Officer, Chief Director of
Cloud Business Promotion, Local Governments
BD
December 2018 Director, Managing Director and Executive
Officer, Chief Director of Sales, Local
Governments BD
September
Representative Director, Senior Managing
2020
Director and Executive Officer, Director of Local
Governments BD (current position)(Note 5)23

(Note 5)76

(Note 5)30

Director of
Accounting Firm
BD

Representative
Director, Senior
Managing Directorand Executive
Officer

Brief biography

Term ofofficeDirector of Local
Governments BD

April 1977

Joined the Company

December 2006 Executive Officer, Systems Development
Department, Local Governments BD
January 2008
Executive Officer, Chief of Internal Control
CenterDirector
Senior Managing
Director andExecutive Officer

Ikuo Kawahashi

February 26, 1955

December 2013 Representative Director and Vice President,
SKYCOM Corporation
December 2014 Representative Director and President, SKYCOM
Corporation (current position)
December 2019 Senior Managing Director and Executive Officer
December 2020 of the Company
Director, Senior Managing Director and Executive
Officer of the Company (current position)
April 1989
August 2012

Director
Managing Directorand Executive
Officer
Chief of Systems
Development
Research Center,Accounting Firm
BD

Yasuo Igarashi

January 4, 1967

Joined the Company
Executive Officer, Chief of Account Information
Systems Development Center, Systems
Development Research Center, Accounting Firm
BD
December 2016 Director, Executive Officer, Director of Sales
Planning, Sales, Accounting Firm BD
December 2017 Director, Managing Director and Executive
Officer, Director of Sales Planning, Accounting
Firm BD
January 2018
Director, Managing Director and Executive
Officer, Chief of Systems Development ResearchCenter, Accounting Firm BD (current position)– 55 –

Position and Title

Name

Date of Birth

Brief biography

April 1979
Director andExecutive Officer
Chief Director of
Business
Administration

Kiyotsugu
Nakanishi

August 27, 1956

Term ofofficeNumber ofshares held
(hundredsof shares)

Joined the Company

December 2008 Executive Officer, Head of General Affairs
Department
December 2009 Head of General Affairs Department
January 2015 Head of Internal Audit Department
December 2018 Full-time Auditor of the Company
December 2020 Director and Executive Officer, Chief Director of
Business Administration (current position)(Note 5)150(Note 5)10(Note 5)-(Note 5)5(Note 6)99

(Note 6)52

November 1988Registered as certified tax accountant
November 1991Started business as certified tax accountant
Director

Yoshimasa Oshida

August 17, 1956

July 2002

Representative Partner of Oshida Accounting
Office (current position)
December 2018 Director of the Company (current position)
October 2001

Registered as attorney

October 2001
Director

Director

Junko Iijima

Nobuhiko Kouga

August 3, 1967

January 25, 1964

Joined Tokyo Toranomon Law Office (current
position)
October 2019 Chairperson of the Nomination and Compensation
Advisory Committee of the Company (current
position)
December 2019 Director of the Company (current position)
February 1996 Registered as certified tax accountant
February 1996 Started business as certified tax accountant
April 2019
Representative Partner of Accounting Firm Top
Management (current position)
December 2020 Director of the Company (current position)
March 1975

Joined the Company

December 2006 Executive Officer, Chief of TKCNF ResearchCommittee Support Division
October 2010 Head of Chairman’s Office
Auditor (full-time) Tsuneo Miyashita

May 28, 1949

December 2016 Full-time Auditor of the Company (current
position)
Auditor, TKC Security Services Co., Ltd. (current
position)
October 2017 Auditor, TKC Customer Support Service Co.,
Ltd.(current position)
April 1985
January 2015

Auditor (full-time)

Auditor

AuditorMasaaki Arino

Hideki Tomonaga

Tomoyasu
Hamamura

March 17, 1963

Joined the Company
Executive Officer, Chief of General Affairs,
Business Administration Headquarters
October 2018 Executive Officer, Head of General Affairs
Department
December 2020 Full-time Auditor of the Company (current
position)
April 1982

Joined Tokyo Regional Taxation Bureau

July 2006

Resigned from National Tax College

August 2006

Registered as certified tax accountant

February 15, 1956

March 2007

(Note 4)-

February 12, 1958

March 1989
Registered as certified tax accountant
March 1989
Started business as certified tax accountant
February 2007 Representative Partner of Hamamura Accounting
Office (current position)
December 2020 Auditor of the Company (current position)(Note 6)

11

Representative Director of Taxation Institute ofJapan (current position)
December 2018 Representative Partner of Tomonaga Hideki
Licensed Tax Accountant Office (current position)
December 2019 Auditor of the Company (current position)

Total

530

(Notes) 1. Director Satoshi Hitaka is the spouse of the elder sister of Masanori Iizuka, Representative Director,
President, and Executive Officer.
2. Directors Yoshimasa Oshida, Junko Iijima, and Nobuhiko Kouga are Outside Directors.
3. Auditors Hideki Tomonaga and Tomoyasu Hamamura are Outside Auditors.
4. Four years from the close of the Ordinary General Meeting of Shareholders held on December 20, 2019.
5. Two years from the close of the Ordinary General Meeting of Shareholders held on December 18, 2020.
6. Four years from the close of the Ordinary General Meeting of Shareholders held on December 18, 2020.
– 56 –

2. Procedures and policy on the nomination of Directors(1) For the appointment and dismissal of Directors, the Board of Directors shall consult with the Nomination andCompensation Advisory Committee, and respecting the report from said Committee, prepare the original proposals
to be submitted for resolution at the General Meeting of Shareholders.
(2) The Nomination and Compensation Advisory Committee shall nominate a candidate for a new Director who
satisfies one of the following qualifications:(i)a person who is an Executive Officer or of higher rank, who has engaged in the timely development of new
products or new services (emergence of innovation) or, as person in charge of such marketing strategy, ledsuch projects to success in line with the business objectives of the Company while anticipating the rapidly
moving trends of a digital society, thereby winning a large number of clients, etc., improving the social
reputation of the Company, and contributing notably to the sustainable growth of the Company.

(ii)

a person who is an Executive Officer or of higher rank, who has eliminated unreasonableness, waste, andinconsistency within his/her business division in compliance with the laws, developed a business plan toachieve increased income and increased profit on an ongoing basis, improve the treatment of employees, andimplement risk measures, and in executing such plan, contributed notably to improving the medium- andlong-term corporate value through aggressive information sharing and provision of opinions to the Director
in charge.

3. Outside Officers
Category

Director

Name

Functions, roles and appointment

Yoshimasa Oshida

Mr. Oshida is a representative partner of a certified public tax accountants firm Oshida
Accounting Office and the Company’s Accounting Firm Business could benefit from his
extensive experience and insights in the management of accounting firms. Based on his
nine years of experience as chairperson of the TKCNF System Development Committee,
he is expected to contribute to the sustainable growth of the Company and improvementof corporate value through the development and promotion of the Company’s systems
and services. He is also expected to provide input to ensure the validity of decisions
made and resolved by the Board of Directors, and therefore, he has been reappointed as
Outside Director.
While Oshida Accounting Office 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. Oshida andgeneral shareholders, and the Company deems that this would not affect the independenceof Mr. Oshida.

Director

Director

Junko Iijima

Nobuhiko Kouga

Mr. Oshida has no special interest in the Company. The number of shares of the Company
held is as indicated in the “Number of shares held” column under 1. List of Officers.
As a certified attorney, Ms Iijima possesses expertise and extensive experience, and, inparticular, deep insight into corporate governance. As chairperson of the Company’s
Nomination and Compensation Advisory Committee established on October 10, 2019,
she displayed strong leadership in deliberating and designing the policies and proceduresfor the appointment and dismissal of Directors, etc., and the director’s compensation
plan in accordance with the principles of the corporate governance code. She is expected
to contribute to the sustainable growth and medium- to long-term improvement in thecorporate value of the Company through enhanced corporate governance, and to provide
valuable input from the perspective of a female. She is also expected to enhance thedecision-making and supervisory functions of the Board of Directors, and therefore, she
has been reappointed as Outside Director.
Ms Iijima has no special interest in the Company. The number of shares of the Company
held is as indicated in the “Number of shares held” column under 1. List of Officers.
Mr. Kouga is a representative partner of Accounting Firm Top Management, and theCompany’s Accounting Firm Business could benefit from his extensive experience andinsights in the management of accounting firms. As chairperson of the TKCNF New
Members Service Committee, he is expected to contribute to the sustainable growth of
the Company and improvement of corporate value over the medium-term by providing
advice on follow-up activities for new member tax accountants and certified public
accountants and activities to increase TKC Members. Therefore, he has been appointed
as Outside Director.
Mr. Kouga has no special interest in the Company. The number of shares of the Company
held is as indicated in the “Number of shares held” column under 1. List of Officers.

– 57 –

Category

Name

Functions, roles and appointment
Mr. Tomonaga is a representative partner of a certified public tax accounting firmTomonaga Hideki Licensed Tax Accountant Office, and has extensive experience as a tax
specialist on consolidated taxation system, corporate reorganization taxation system andinternational trade. He is expected to provide appropriate guidance and audits from his
professional perspective in ensuring tax compliance of the Company, and therefore, hasbeen reappointed as Outside Auditor.

Auditor

Auditor

Hideki Tomonaga

Tomoyasu
Hamamura

While Tomonaga Hideki Licensed Tax Accountant Office 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. Tomonaga and general shareholders, and the Company deems that this would
not affect the independence of Mr. Tomonaga.
Mr. Tomonaga has no special interest in the Company. The number of shares of theCompany held is as indicated in the “Number of shares held” column under 1. List of
Officers.
Mr. Hamamura is a representative partner of Hamamura Accounting Office, and has
made major contributions in the development of local economies through corporate
management as certified public tax accountant, auditor, and accounting advisors to manybusinesses. Based on such experience and deep insight in the Company and the industry,
he is expected to provide advice and proposals to ensure the legality, adequacy andappropriateness of the decision-making and resolutions of the Board of Directors. He is
also expected to strengthen the supervisory functions of the Board of Directors, andtherefore, has been appointed as Outside Auditor.
Mr. Hamamura has no special interest in the Company. The number of shares of theCompany held is as indicated in the “Number of shares held” column under 1. List of
Officers.

4. Support systems for Outside Directors and Outside Auditors(1) The Company appoints the Chief Director of General Affairs Department as a point of liaison to provide assistanceto Outside Directors and Outside Auditors. The Chief Director of General Affairs Department notifies the Outside
Directors and Outside Auditors of the schedule of the meetings of the Board of Directors or meetings of the Board
of Auditors and send any related materials thereto, and if necessary, provides explanations in advance on suchmaterials.
(2) Outside Directors attends any major meetings of the TKCNF, the customer organization of the Accounting Firm
BD.
(3) Once a month, Outside Auditors review the approval request documents, accounting books and major evidence
documents, and receive reports from the heads of Departments and give their opinions.
(4) Compensations for Auditors shall be determined each January upon discussion among Auditors based on thebusiness results for the preceding fiscal year.

5. Standards concerning the independence of Outside Directors and Outside Auditors of the Company(1) A person who is currently not, or has not been for the past ten years, an executive member of the Company or theCompany’s subsidiaries;(2) A person for which the Company is currently not, or was recently not, an important trade partner or its executing
member, or an important trade partner of the Company or its executing member;(3) A person for which the Company is currently not, or was recently not, a consultant, accounting specialist, or legal
specialist receiving large sums of money or other assets from the Company;(4) A person who is currently not, or has not recently been, a near relative of an executive member of the Company or
the Company’s subsidiaries, or a near relative of any of the persons falling under items (2) or (3);(5) Any other person whose independence is clear of doubt in executing the duties of an Outside Director.

– 58 –

(3) [Audits]
Since its founding in 1966, the Company has adopted the so-called “management based on rules.” All directors
and employees were required to ensure compliance, and any illegal act or violation of internal rules have been
dealt with strictly and impartially without exceptions, even if the motivation was for the interest of the Company
or for the customers, shareholders, business partners or employees. The main objective of this “management
based on rules” is to firstly protect our employees, secondly our clients, and thirdly the society through strict
compliance. That is why our Directors and employees have a correct understanding on the standards that theyneed to abide by in the process of fulfilling their basic responsibilities and performing their day-to-day work, andstrive to act according to these standards.
(i)

Audits by Auditors
The Company has four Auditors, consisting of two Standing Auditors and two Outside Auditors. Outside
Auditors Hideki Tomonaga and Tomoyasu Hamamura are qualified tax accountants who have considerable
expertise in the areas of finance, accounting, and tax accounting.
Standing Auditors Tsuneo Miyashita and Masaaki Arino have served as heads of Business Administration in
charge of general affairs, accounting, and financing and have considerable expertise on financing, accounting
and tax affairs.
Auditors shall attend the meetings of the Board of Directors and other important management meetings inaccordance with the Code of Kansayaku Auditing Standards. They shall strive to oversee the material
decision-making process and execution of business, and receive reports from the accounting auditors,
Directors and employees to form their audit opinions through deliberation.
The attendance of each Auditor to the meetings of the Board of Auditors is shown below:
Name
Tsuneo Miyashita
Kiyotsugu Nakanishi (Note 2)
Yoshiki takashima (Note 2)
Hideki Tomonaga (Note 3)
Kenji Matsumoto (Note 4)

Number of days/number of
meetings attended (Note 1)
7/7
7/7
7/7
5/5
2/2

Attendance rate
(Note 1)
100%
100%
100%
100%
100%

(Note 1) The number of days on which the meeting of the Board of Auditor was held is based thenumber of days held during each term of office in the fiscal year.
(Note 2) Resigned on December 18, 2020.
(Note 3) Assumed office on December 20, 2019.
(Note 4) Resigned on December 20, 2019.
(ii)

Internal audits

1) Organization, personnel and procedures of internal audits
Internal audits of the Company are conducted based on the Resolution on Internal Control, Operational Risk
Management Regulations, Internal Audit Regulations, and Regulations for the Management of Affiliates.
Internal audits are aimed to establish an appropriate internal control system covering the entire TKC Group,and conducted from a standpoint independent from the line of business execution in order to determine theeffectiveness.
The Internal Audit Department is an organization independent of other divisions of the Company and operates
under the direct control of the President. There are five internal auditors in the Internal Audit Department, ofwhich two hold the qualification of Certified Internal Auditors, the only globally recognized certification forinternal auditors.
In June every year, the Company conducts a risk survey for all of its employees. Based on the assessment of
this survey and risk-related information of affiliates, the Internal Audit Department formulates the annualinternal auditing plan, taking into consideration any special assignments from the Board or Directors andresults of deliberation with the Auditors. The audit plan is reported to the Board of Directors after approval by
the President. Prior to conducting the audit, the internal auditors will undertake preliminary surveys anddevelop individual audit plans. After obtaining approval from the head of the Internal Audit Department, theinternal auditors will notify the divisions to be audited. Site visits are conducted by several internal auditors.
Within one week from the completion of the audit, the head of the Internal Audit Department shall prepare
and submit an Internal Audit Report to the President. Based on the approved Internal Audit Report, thePresident will order the heads of audited divisions to take actions and report on any matters that need to be
improved.
– 59 –

In addition, the head of the Internal Audit Department will provide copies of the Internal Audit Report to the
Directors in charge of each division and Auditors. Directors in charge of each division shall control any
division-specific operational risks.
2) Coordination among internal audits, audits by Auditors, and accounting audits, and the relationship between
these audits and the internal control division
The head of the Internal Audit Department must ensure an appropriate scope of audits and shall consider
coordinating with the Auditors and accounting auditors in order to minimize the redundancy of tasks. To thisend, the head of the Internal Audit Department holds monthly meetings with the Auditors and quarterly
meetings with the accounting auditor, to report on the status of the internal control system and results ofinternal audits as requested and to exchange information.
The Auditors receive reports on the implementation and operation of internal controls of the TKC Group by
the Internal Audit Department, reports on the progress of the internal audit plans, and reports on the results ofassessment of internal control over financial reporting.
The Company has an audit agreement with the accounting auditor, and receives audit of the financial
statements and internal control audit over financial reporting from the firm. In that process, the Internal Audit
Department provides necessary information to the accounting auditor.
While the Auditors, accounting auditor, and internal auditors each have their own objectives of audits,
standpoints of the auditing body, and duties, during the current fiscal year under review, they worked tostrengthen the coordination and information sharing between the three different audits (audits by Auditors,
audits by the accounting auditor, and internal audits), to improve the effectiveness and efficiency of each audit,
and to maintain and improve the governance of the TKC group by complementing each other.
(iii) Accounting audits
1) Name of audit firm
Ernst & Young ShinNihon LLC
2) Continuous audit period
37 years(Note) The Company had an audit agreement with Misuzu Audit Corporation (Chuo Audit Corporation at
the time) from 1983 to 2007 (including the period from July 1, 2006 to August 31, 2006 when the
Company temporarily appointed an accounting auditor instead of Misuzu Audit Corporation(ChuoAoyama Audit Corporation at the time)). Upon dissolution of Misuzu Audit Corporation, theCompany has entered into an audit agreement with Ernst & Young ShinNihon LLC since 2007
(Shin Nihon LLC at the time). However, the certified public accountant who was providing theaudit services to the Company also transferred to Ernst & Young ShinNihon LLC (Shin Nihon LLC
at the time) and continued to provide audit services to the Company. As such, it could be deemedthat the same auditing firm has been providing audit services to the Company on a continuous basis,and therefore, the audit period of the auditing firm prior to the transfer of said certified public
accountant is also added and included.
3) Certified public accountants that executed the accounting audit
Kanji Tako, Toru Iizuka
4) Number of assistants assisting auditing:
The number of assistants assisting the accounting audit of the Company was 15 certified public accountants
and 15 other personnel.
5) Policy and reasons for appointing the audit firm
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 of Japan. In such event, an Auditor selected by the Board of Auditors
shall report the dismissal 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 ofAuditors shall develop a proposal on the dismissal or refusal of reappointment of said accounting auditor, andthe Board of Directors shall present such proposal for resolution at the General Meeting of Shareholders.
6) Assessment of Accounting Auditors by Auditors and Board of Auditors
Based on the Practical Guidelines on the Assessment of Accounting Auditors and the Formulation of Selection– 60 –

Standards issued by the Japan Audit & Supervisory Board Members Association, the Board of Auditors
assessed the auditing activities of Ernst & Young ShinNihon LLC during the past year, including such items
as the quality control system of the auditing firm, auditing team, audit fees, communication with Auditors,
etc., relationship with management, and non-compliance risks. As a result of assessment, the Board of Auditors
has determined that it is appropriate to reappoint said auditing firm as accounting auditor.
(iv) Content of audit fees
1) Content of compensation to certified public accountants engaged in audits
Previous consolidated fiscal year

Current consolidated fiscal year

Category

Compensation for audit
and attestation services(millions of yen)Compensation for nonaudit services (millionsof yen)Compensation for audit
and attestation services(millions of yen)Compensation for nonaudit services (millionsof yen)The Company

44

17

43

10

Consolidated
subsidiaries

－

－

－

－

Total

44

17

43

10

(Note) The Company pays certified public accountants engaged in audits compensation for assurance services
for internal controls pertaining to the Company’s ASP service based on the Auditing and Assurance
Practice Committee 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.
2) Compensation to certified public accountants who belong to the same network as the Company’s auditors(excluding 1) above)
None to be disclosed.
3) Policy for determining audit fees
Audit fees are determined with the consent of the Board of Auditors, taking into account such factors as scale
and business characteristics of the Company and number of days of auditing works performed.
4) Reasons for Board of Auditors giving consent to the audit fees to the accounting auditor
The Board of Auditors has checked the audit plan, content of audit, man-hours required for the audit, and theunit price per man-hour, and reviewed the appropriateness of the amount of compensation in comparison to
the conventional amounts and planned amounts. As a result, it has determined that the decision by the Boardof Directors with respect to the compensation for the accounting auditor is appropriate, and has given consent
in accordance with Article 339 Paragraph 1 of the Companies Act of Japan.
5) Other important fees under the audit and attestation services
None to be disclosed.

– 61 –

(4) [Officers’ Compensation, etc.]
1. Policy on determining the amount officers’ compensation and/or calculation method(1) Officers’ compensation system
Officers’ compensation consists of monetary compensation and stock-based compensation (BIP Trust).
(2) Maximum amounts of Officers’ compensation
The amount of compensation for officers of the Company was established by resolution of the 43rd Ordinary
General Meeting of Shareholders convened on December 22, 2009, at an annual monetary amount of up to 480
million yen for Directors’ compensation and up to 80 million yen for Auditors’ compensation. Separate from thesemaximum amounts of compensation, Directors (excluding outside directors and expatriates), executive officers(excluding expatriates) are entitled to a stock-based compensation plan (BIP Trust) established by resolution of the
52nd Ordinary General Meeting of Shareholders convened on December 21, 2018, at an amount of up to 500 million
yen for Directors and executive officers.
Also, the total amount of compensation to be paid in each fiscal year is within the maximum amounts ofcompensation as determined by resolution of the General Meeting of Shareholders in accordance with Article 361
and Article 387 of the Companies Act of Japan, and within 1% of the total amount of marginal profit of the entire
company achieved in the previous fiscal year.
Here, Officers’ compensation shall mean monetary compensation and stock-based compensation for Directors,
monetary compensation for Auditors, and the portion of stock-based compensation of the executive officers’
allowance for executive officers who are not Directors.
(3) Policy on determining the amount of Officers’ compensation(i)

Policy on determining the compensation for Directors also serving as executive officers

1) The amounts of compensation may be increased if both of the following two conditions are met:a) On a non-consolidated, year-on-year basis, net sales, marginal profits and ordinary income of the entire
Company increased.
b) On closing an equity ratio of 83% or greater has been achieved.
2) The amounts of compensation for Directors who are executive officers shall be determined at the meeting of
the Board of Directors, by assessing the achievement of business results of divisions in charge by referencing
the year-on-year marginal profits as indicator.
3) In addition to item 2) above, if an officer is reappointed, the Board may also take into consideration the numberof years holding executive positions based on his/her contribution to items 1) and 2) above.
4) If the divisions in charge have failed to achieve target performance for two consecutive fiscal years, theamounts of compensation for the next fiscal year shall be decreased.
The amounts of compensation may also be reduced in the event he/she causes a material accident or major
loss.
(ii)

Policy on determining the compensation for Directors not holding executive positions

1) Directors who do not serving as executive officers shall be excluded from performance assessments.
2) If the Company makes a request to any of the Directors who do not hold executive positions to perform mattersbeyond the normal responsibilities of an outside Directors, it shall pay an advisory fee based on a separately
entered agreement in compliance with the independence standards (compensation other than Officers’
compensation must be less than 10 million yen per year).
(iii) Policy on determining the compensation for Auditors
1) Auditors shall be excluded from performance assessments, and shall be eligible for monetary compensation
only.
2) If the Company makes a request to any of the Auditors to perform matters beyond the normal responsibilities
of an outside Auditor, it shall pay an advisory fee based on a separately entered agreement in compliance with
the independence standards (compensation other than Officers’ compensation must be less than 10 million yen
per year).
(iv) Basic policy on compensation for executive officers who are not Directors
1) An executive officer who is not a Director shall be paid an executive officer’s allowance in addition toemployee’s salaries.
– 62 –

2) Executive officers’ allowance shall consist of monetary compensation and stock-based compensation.
3) Executive officers’ allowance shall be determined at the meeting of the Board of Directors, taking into
consideration the following four points and assessing the business results.
a) Achievement of business results of divisions in charge;b) Individual accomplishments in marketing or innovation;c) Expertness of duties and individual contribution in improving the division’s business results;d) Executive position held and number of years holding such position.
If the divisions in charge continues to be unsuccessful in achieving the goals for two consecutive fiscal
years, or causes a material accident or major loss, the Company may suspend the payment of executive
officers’ allowance in the middle of a fiscal year.
(4) Method of determining the amount of Officers’ compensation
The Company determines the amounts of Directors’ compensation at the meeting of the Board of Directors by
respecting the results of the reports from the Nomination and Compensation Advisory Committee, chaired by an
Independent Outside Officer and the majority of which consists of Outside Officers. Compensation for Auditors isdetermined by consultation among Auditors within the maximum amount approved at the General Meeting of
Shareholders. The Nomination and Compensation Advisory Committee deliberates on the following matters andreports to the Board of Directors:(i)

Policy and procedure for the nomination of candidates for Directors and executive officers holding executive
position;(ii)

Appointment and dismissal of Directors and executive officers holding executive position;(iii) Policy for the determination of compensations for Directors and executive officers holding executive position;(iv) Policy for the determination of individual compensations for Directors and executive officers holding
executive positions;(v)

Individual compensations for Directors and executive officers holding executive position;(vi) Appointment and dismissal of representative directors and auditors of subsidiaries and their individualcompensations;(vii) Other matters that the Board of Directors deem necessary in relation to any of the above items.
(5) Partial changes to the stock-based compensation plan using a trust
At the 53rd Ordinary General Meeting of Shareholders held on December 20, 2019, the proposal to change thestock-based compensation (BIP Trust) from the conventional system of granting points based on executive positions
held, to a performance-linked system was approved.
Under the new system, points will be granted to each individual within the range of 0% to 120% of the basic number
of issued shares depending on the year-on-year ratio of the company-wide performance goals (marginal profits andordinary income) for a given period of each fiscal year during the trust period, subject that, during the fiscal year
ended September 30 of the same year, (1) the sales and ordinary income of the entire Company both increase, and(2) the non-consolidated equity ratio exceeds 80%.
Based on the advice of the Board of Auditors, the Company has resolved at the regular meeting of the Board of
Directors held in January 2020 not to grant points to Auditors. For the fiscal year under review, the Company has
calculated the amounts of stock-based compensation in accordance with the revised system.
The maximum number of total points granted to Directors, etc. in a single fiscal year shall remain unchanged at
34,000 points as approved at the 52nd Ordinary General Meeting of Shareholders held on December 21, 2018.
(6) Calculation method
Points = (monthly amount of officers’ compensation ÷ trust average stock acquisition price × 50% × year-on-year
ratio of marginal profits) ＋ (monthly amount of officers’ compensation ÷ trust average stock acquisition price ×
50% × year-on-year ratio of ordinary income)*1: Trust average stock acquisition price is the average stock acquisition price of the Company’s stock acquired by
the Trust in establishing the stock-based compensation program (BIP Trust).
*2: Marginal profit is the amount derived by deducting the costs that change in proportion to sales (variable costs)
from the amount of sales. Marginal profit will vary depending on product mix. The Company considers themarginal profit ratio as an important financial indicator, and sets the target at 60%.
*3: The year-on-year ratios of marginal profits and ordinary income fluctuate between the range of 0% to 120%.
*4: Year-on-year ratio of marginal profits for the current fiscal year under review was 106.5%. Year-on-year ratioof ordinary income was 123.8%.
– 63 –

2. Total amount of compensation, total by type, and number of eligible officers, by officer category
Total compensation by type (millionsof yen)Number of
eligible officers
Stock-based
Monetary
compensationcompensation(BIP Trust)

Officer category

Total amount ofcompensation(millions of yen)

Directors (excluding
Outside Directors)

278

255

23

8

Auditors (excluding
Outside Auditors)

32

32

－

2

Outside Directors

27

27

－

3

Outside Auditors

21

21

－

3

(5) [Status of Shareholdings](i)Standards and approach to the classification of equity securities
The Company classifies its equity securities as those held for the purpose of pure investments, which are held
for the purpose of gaining profits mainly by fluctuation in share values or by receipt of dividends, and those
held for purposes other than pure investments (hereinafter “cross-shareholdings”). The Company make it ageneral rule not to hold equity securities for the purpose of pure investments.
As of the end of the fiscal year under review, the Company does not hold equity securities for the purpose ofpure investments.

(ii)

Equity securities held for purposes other than pure investments

1) Policy on cross-shareholding and methods to assess its rationality, and results of assessment of theappropriateness of each holding by Directors, etc.
a) Policy on cross-shareholdings
The purposes of cross-shareholding of share of other listed companies are to maintain and strengthen
long-term, stable business relationships, or to maintain and strengthen business partnerships.
b) Methods to assess the rationality of cross-shareholding, and assessment of the appropriateness of eachholding by Directors, etc.
The Boards of Directors of the Company and its Group companies annually assess the major crossholdings taking into consideration the returns and risks and examining the medium- to long-term
economic rationality and future prospects. As a result of such assessment, any cross-holdings that do notnecessarily have significance shall be reduced through dialogue and negotiation with such business
partners.
2) Number of securities and amounts recorded in the balance sheet
Number of securities(Securities name)

Total amount recorded in balance
sheet (millions of yen)

Unlisted stock

7

201

Securities other thanunlisted stock

6

2,900

(Securities that increased in number of shares in the current fiscal year)
Number of
Total amount acquired by
securities
increase in number of shares(Securities name)(millions of yen)

Reasons for increase in number of shares

Unlisted stock1

99

To improve the value of the Company’s
Accounting Firm business segment.

Securities other thanunlisted stock

-

-

-

– 64 –

(Securities that decreased in number of shares in the current fiscal year)
Number of
securities(Securities name)

Total amount sold by decrease in
number of shares (millions of yen)

Unlisted stock--

Securities other thanunlisted stock--3) Numbers of securities and amounts recorded in the balance sheet for equity holdings for specific purpose anddeemed equity holdings
Specified investment securities

Securities nameCurrent fiscal year

Previous fiscal year

Number of shares(shares)Number of shares(shares)

1,780,000

1,780,000

1,836

2,038

2,322,180

2,322,180

966

1,273

275,400

275,400

65

73

17,00017,000

22

29

Purpose of holding, quantitative effect ofHolding of theholding, reason for increase in number ofCompany’s sharessharesAmount recorded in Amount recorded inbalance sheet
balance sheet(millions of yen)(millions of yen)

T&D Holdings, Inc.

Mitsubishi UFJ
Financial Group, Inc.

Mebuki Financial
Group, Inc.

Nippon Paper
Industries Co., Ltd.

– 65 –

To maintain and strengthen thepartnership for the purpose of
supporting the prosperity and successof SMEs.
Figures on the effect of holding are notdisclosed as they contain businesssecrets of said company. However, theCompany assesses whether the benefits
and risks from the holding cover thecosts of capital, quantitatively on aregular basis.

Yes

To maintain and strengthen the longterm, stable business relationship.
Figures on the effect of holding are notdisclosed as they contain businesssecrets of said company. However, theCompany assesses whether the benefits
and risks from the holding cover thecosts of capital, quantitatively on aregular basis.

Yes

To maintain and strengthen the longterm, stable business relationship.
Figures on the effect of holding are notdisclosed as they contain businesssecrets of said company. However, theCompany assesses whether the benefits
and risks from the holding cover thecosts of capital, quantitatively on aregular basis.

Yes

To maintain and strengthen the longterm, stable business partnership.
Figures on the effect of holding are notdisclosed as they contain businesssecrets of said company. However, theCompany assesses whether the benefits
and risks from the holding cover thecosts of capital, quantitatively on aregular basis.

Yes

Securities nameCurrent fiscal year

Previous fiscal year

Number of shares(shares)Number of shares(shares)

31,46031,460

6

7

9,187

9,187

2

2

Purpose of holding, quantitative effect ofHolding of theholding, reason for increase in number ofCompany’s sharessharesAmount recorded in Amount recorded inbalance sheet
balance sheet(millions of yen)(millions of yen)

Mito Securities Co.,Ltd.

Tokai Tokyo Financial
Holdings, Inc.

To maintain and strengthen the longterm, stable business relationship.
Figures on the effect of holding are notdisclosed as they contain businesssecrets of said company. However, theCompany assesses whether the benefits
and risks from the holding cover thecosts of capital, quantitatively on aregular basis.
To maintain and strengthen the longterm, stable business relationship.
Figures on the effect of holding are notdisclosed as they contain businesssecrets of said company. However, theCompany assesses whether the benefits
and risks from the holding cover thecosts of capital, quantitatively on aregular basis.

(Note) Column with “－” indicates that the Company does not hold said securities.
(iii) Equity securities held for the pure investment
None to be disclosed.

– 66 –Yes

NoPart 5 [Financial Information]
1. Method of Preparing Consolidated Financial Statements and Financial Statements(1) The consolidated financial statements of the Company have been prepared in accordance with the Ordinance on
Terminology, Forms, and Preparation Methods of Consolidated Financial Statements (Ordinance of the 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 the financial
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, 2019 to September 30, 2020)and financial statements for the fiscal year (from October 1, 2019 to September 30, 2020) have been audited by Ernst& Young ShinNihon LLC pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange
Act of Japan.

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.

– 67 –

1. [Consolidated Financial Statements](1) [Consolidated Financial Statements]
1) [Consolidated Balance Sheet](Unit: millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(September 30, 2019)(September 30, 2020)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable–trade
Lease investment assets
Merchandise and finished goods
Work in progress
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures (net amount)
Machinery, equipment and vehicles (netamount)Tools, furniture & fixtures (net amount)Land
Lease assets (net amount)
Construction in progress
Total property, plant and equipment
Intangible assets
Software
Software in progress
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Long-term time deposits
Guarantee deposits
Long-term lease investment assets
Other
Total investments and other assets
Total non-current assets
Total assets*1*2– 68 –

29,810
8,755
443
308
634
147
1,015
(41)
41,073

26,769
7,014
432
238
307
177
924
(19)
35,844

8,404

8,182

503

547

1,793
6,892
369
－
17,963

1,857
6,911
290
5
*1 17,794

2,456
807
26
3,290

2,724
370
25
3,120

15,527
38
7,015
9,500
1,339
1,033
206
34,661
55,91596,989*2

16,282163
7,360
14,600
1,438
889
178
40,911
61,826
97,671

(Unit: millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(September 30, 2019)(September 30, 2020)
Liabilities
Current liabilities
Accounts payable–trade
Electronically recorded obligations–operating
Current portion of long-term loans payable
Lease obligations
Accounts payable–other
Income taxes payable
Accrued consumption taxes
Provisions for bonuses
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Lease obligations
Retirement benefit liabilities
Provisions for stocks payment
Other
Total non-current 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-sale securities
Accumulated remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets– 69 –

3,602
916
142
541
2,661
2,450
721
3,600
1,640
16,278

2,181
802
142
522
2,184
2,549
1,520
3,673
1,124
14,701

438
1,333
4,764
562
492
7,590
23,868

295
1,113
3,400
599
485
5,893
20,5955,700
5,711
63,623(1,630)73,404

5,700
6,588
68,533(1,660)79,161(83)(1,704)(1,787)
1,504
73,121
96,989(553)(1,532)(2,085)－77,07597,671

2) [Consolidated Statements of Income and Comprehensive Income][Consolidated Statements of Income](Unit: millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2018;(Started October 1, 2019;
ended September 30, 2019)
ended September 30, 2020)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Land and house rent received
Subsidy income
Equity in earnings of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gains on sales of non-current assets
Gain on negative goodwill
Gain on reversal of subscription rights to shares
Other
Total extraordinary income
Extraordinary losses
Loss on sale of non-current assets
Loss on retirement of non-current assets
Loss on step acquisitions
Other
Total extraordinary losses
Net income before taxes and adjustments
Income taxes–current
Income taxes–deferred
Total income taxes
Net income
Net profit (loss) attributable to non-controlling interests
Profit attributable to owners of parent*1, *2

66,12022,822
43,29833,951
9,347
31
135
52
13
27
64
325

37
146
50
15
－
56
306

2
0
3
9,669

1
0
1
11,685

*3

1
88
274
8
373

*3

10
7
20
0
38
10,004
3,776
(556)
3,220
6,784
63
6,721

－
40
－
0
41
11,646
4,070
(225)
3,845
7,801
(20)
7,821

*4
*5

– 70 –*1, *2

67,814
22,66745,14733,766
11,381

*5

2
－
－
－
2

[Consolidated Statements of Comprehensive Income](Unit: millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2018;(Started October 1, 2019;
ended September 30, 2019)
ended September 30, 2020)
Net income
Other comprehensive income
Valuation difference on available-for-sale securities
Remeasurements of retirement benefits
Share of other comprehensive income of entities accounted
for using equity method
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners of theparentComprehensive income attributable to non-controllinginterests– 71 –

*1

6,784

7,801

(996)
(1,704)

(471)
171

(0)

－

(2,701)
4,082

*1

(299)
7,501

4,015

7,524

66

(22)

3) [Consolidated Statement of Changes in Net Assets]
Previous consolidated fiscal year (Started October 1, 2018; ended September 30, 2019)(Unit: millions of yen)
Shareholders’ equity
Capital stock
Balance at beginning ofyear

Capital surplus

Retained earnings

5,409

59,806

5,700

Total shareholders’equityTreasury stock(971)

69,944

Changes during fiscal year
Dividends of surplus(2,904)(2,904)

Profit attributable toowners of parent

6,721

6,721

Acquisition of treasury
stock(1,387)(1,387)

Disposal of treasury
stock

228

535

763

Increase due to shareexchange

74

193

267

Changes in items otherthan equity (net)Total changes during fiscal
year
Balance at end of year

－

302

3,816

(658)

3,460

5,700

5,711

63,623(1,630)73,404

Subscription
rights toshares

Noncontrollinginterests

Total net
assets

235

1,453

72,550

Accumulated other comprehensive income
Valuationdifference on
available-forsale securities
Balance at beginning of
year

917

Accumulated
remeasurementsof defined
benefit plans

Total
accumulated
othercomprehensive
income917－

Changes during fiscal
year
Dividends of surplus(2,904)

Profit attributable toowners of parent

6,721

Acquisition of treasury
stock(1,387)

Disposal of treasury
stock

763

Increase due to shareexchange267

Changes in items otherthan equity (net)(1,001)(1,704)(2,705)(235)

50(2,890)Total changes during
fiscal year

(1,001)(1,704)(2,705)

(235)

50

570

Balance at end of year(83)

(1,704)(1,787)－

1,504

73,121– 72 –

Current consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)(Unit: millions of yen)
Shareholders’ equity

Balance at beginning ofyear

Capital stock

Capital surplus

5,700

5,711

Retained earnings
63,623

Treasury stock(1,630)Total shareholders’equity73,404

Changes during fiscal year
Dividends of surplus(2,911)(2,911)

Profit attributable toowners of parent

7,821

7,821

Acquisition of treasury
stock
Disposal of treasury
stock
Change in parent’s
ownership interest fromtransactions with noncontrolling interests

0

(34)

(34)

3

3

877

877

Changes in items otherthan equity (net)Total changes during fiscal
year
Balance at end of year

－

877

4,909

(30)

5,756

5,700

6,588

68,533(1,660)79,161

Non-controllinginterests

Total net assets

1,504

73,121

Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities
Balance at beginning of
year

(83)

Accumulated
Total accumulated
remeasurements ofotherdefined benefit
comprehensive
plansincome(1,704)(1,787)

Changes during fiscal year
Dividends of surplus(2,911)

Profit attributable toowners of parent

7,821

Acquisition of treasury
stock

(34)

Disposal of treasury
stock

3

Change in parent’s
ownership interest fromtransactions with noncontrolling interests

877

Changes in items otherthan equity (net)

(469)

171

(297)

(1,504)(1,801)

Total changes during fiscal
year

(469)

171

(297)

(1,504)

3,954

Balance at end of year(553)

(1,532)(2,085)－77,075– 73 –

4) [Consolidated Statements of Cash Flows](Unit: millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2018;(Started October 1, 2019;
ended September 30, 2019)
ended September 30, 2020)
Cash Flows from Operating Activities
Net income before taxes and adjustments
Depreciation
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provisions for bonuses
Increase (decrease) in retirement benefit liabilities
Contribution of securities to retirement benefit trust
Increase (decrease) in provisions for stocks payment
Interest and dividends income
Interest expenses
Equity in losses (earnings) of affiliates
Loss on retirement of non-current assets
Loss (gain) on sale of non-current assets
Share-based payment expenses
Gain on reversal of subscription rights to shares
Gain on negative goodwill
Loss (gain) on step acquisitions
Decrease (increase) in notes and accounts receivable–
trade
Decrease (increase) in inventories
Decrease (increase) in other assets
Increase (decrease) in accounts payable–trade
Increase (decrease) in other liabilities
Increase (decrease) in accrued consumption taxes
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, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Proceeds from redemption of investments in capital
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of investment securities
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Payments of loans receivables
Collection of loans receivables
Other payments
Other proceeds
Cash Flows from Investing Activities– 74 –

10,004
3,006
(8)
402
170
－
562
(103)
2
(27)
7
9
44
(274)
(88)
20

11,646
3,070
(21)
72
82
(1,200)
37
(183)
1
－
40
(2)
－
－
－
－

(566)

1,257

(372)
179
566
(272)
215
(17)
13,458200(2)(3,106)
10,550366
68(1,559)
(211)
798
66
14,330212(1)(3,971)
10,569(6,500)3,000(1,929)25(1,249)0(3,001)
15
10,000
(8)
15
－
49
(5)
－
411

(8,400)3,000(1,738)2(1,369)－(5,505)
－
4,050
(173)
97
(230)
141
(0)
1
(10,124)

(Unit: millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2018;(Started October 1, 2019;
ended September 30, 2019)
ended September 30, 2020)
Cash Flows from Financing Activities
Repayment of long-term loans payable
Repayment of lease obligations
Purchase of treasury stock
Proceeds from disposal of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling shareholders
Purchase of shares of subsidiaries without changes tothe scope of consolidation
Other
Cash Flows from Financing Activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents from newly
consolidated subsidiaries
Cash and cash equivalents at end of year*1

– 75 –(142)(101)(1,387)756(2,900)
(16)

(142)
(99)
(34)
0
(2,905)
(11)

－

(593)

0
(3,792)
7,169
19,268－(3,786)(3,341)
26,810372－

26,810*1

23,469[Notes to Financial Statements](Basis of Presenting the Consolidated Financial Statements)
1. Scope of Consolidation
Consolidated subsidiaries (5 companies):
TLP Corporation
TKC Security Services Co., Ltd.
SKYCOM Corporation
TKC Customer Support Service Co., Ltd.
TKC Shuppan Corporation
Non-consolidated subsidiaries (1 company):
TKC Financial Guarantee Co., Ltd.
(Reason for excluding the company from the consolidated group)
TKC Financial Guarantee Co., Ltd. is excluded from the consolidated group because it does not have any
material impact on the consolidated financial statements of the Company in terms of total assets, net sales,
net income (amount in proportion to equity held) or retained earnings (amount in proportion to equity held),
nor does it have material importance as a whole.
2. Scope of Application of the Equity Method
Affiliated companies under the equity method: (1 company)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.
Non-consolidated subsidiaries under the equity method: (1 company)
TKC Financial Guarantee Co., Ltd.
(Reason for excluding the company from the scope of application of the equity method)
TKC Financial Guarantee Co., Ltd. is excluded from the scope of application of the equity method becausesuch exclusion does not have any material impact on the consolidated financial statements of the Company
in terms of net income (amount in proportion to equity held) or retained earnings (amount in proportion toequity held), nor does it have material importance 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 securities
a. 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 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)– 76 –

2) Finished goods
Cost determined by cost percentage method (with balance sheet values reflecting write downs for
decreased profitability).
3) Work in progress
Cost determined by specific identification method (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, plant and equipment (excluding lease assets)
Calculated based on declining balance method.
Provided, buildings acquired after April 1, 1998 (excluding accompanying facilities), andaccompanying facilities and structures acquired after April 1, 2016 are calculated based on straightline method.
Primary useful lives are as follows:(ii)

Buildings & structures

10 to 50 years

Machinery, equipment & vehicles

4 to 10 years

Tools, furniture & fixtures

2 to 20 years

Intangible assets (excluding lease assets)
1) Software
a. 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.
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 atzero.
(3) Standards for recognizing significant provisions(i)

Allowance for doubtful accounts
In setting aside provisions for possible losses due to uncollectable receivables, provisions arerecognized 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
In setting aside provisions for payment of bonuses of employees, provisions are recognized based on
the estimated amounts of payment.

(iii) Provisions for stocks payment
In setting aside provisions for payment of the Company’s shares to Directors, etc., provisions arerecognized at estimated amounts of stocks payment determined based on the points allocated to
Directors, etc. in accordance with the rules on issuance of shares under the Board Incentive Plan (BIP)
Trust.

– 77 –

(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 theend of the consolidated fiscal year based on benefit formula standards.

(ii)

Recognizing actuarial differences as expenses and past service costs
Past service costs are recognized as expenses for a certain years (10 years) within the average remaining
years of service of employees in which they occur using the straight-line method.
Actuarial differences are recognized as expenses for the consolidated fiscal year in which they occur.

(iii) Unrecognized past service costs
Unrecognized past service costs are recognized on a tax-adjusted basis at the amount of accumulated
remeasurements of defined benefit plans under accumulated other comprehensive income in net assets.
(5) Standards for recognizing significant revenues and expenses
Accounting standards for recognizing revenues and cost of sales of made-to-order software (softwaredevelopment 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 estimatedbased on the construction cost percentage method)(ii)

Other projects
Accounted for upon completion of construction works.

(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:(i)

Cash on hand(ii) Demand deposits(iii) Short-term investments that mature within three months, 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.

(iii) Application of Tax Effect Accounting for the Transition from the Consolidated Taxation System toGroup Tax Sharing System
Based on the treatment set forth under Item 3 of the Treatment of Tax Effect Accounting for theTransition from the Consolidated Taxation System to Group Tax Sharing System (Practical Solution
No. 39, March 31, 2020), the Company and its domestic consolidated subsidiaries do not implement
the provisions of Paragraph 44 of the Implementation Guidance on Accounting Standard for Tax EffectAccounting (ASBJ Guidance No. 28, February 16, 2018) for items that were transitioned to the grouptax sharing system which was established in the Law for Partial Revisions to the Income Tax Act, etc.
(Law No. 8 of 2) and items that were revised under the non-consolidated taxation system in line withthe transition to the group tax sharing system. The amounts of deferred tax assets and deferred tax
liabilities are based on the provisions of the Tax Act prior to revisions.

– 78 –

(Accounting Standards Not Yet Applied)(Application of Accounting Standards for Revenue Recognition, etc.)• Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 30, 2018, ASBJ)• Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March
30, 2018, ASBJ)• Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020, ASBJ)• Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March
31, 2020, ASBJ)(1) Summary
The International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB)
jointly developed a comprehensive accounting standard on the recognition of revenue and issued the “Revenue
From Contracts With Customers” (IASB’s IFRS 15 and FASB’s Topic 606) in May 2014. IFRS 15 has been adopted
from the fiscal year beginning after January 1, 2018, and Topic 606 has been adopted from the fiscal year beginning
after December 15, 2017. In line with this adoption, ASBJ developed a comprehensive accounting standard on therecognition of revenue and issued it together with the implementation guidance.
The basic approach in developing the accounting standard on the recognition of revenue was to set forth theaccounting standards that incorporates the basic principles of IFRS 15 so as to allow comparability among financial
statements which is an advantage to ensure consistency with IFRS 15, and to add alternative treatments to the extent
not to compromise such comparability in case there are matters to be considered with respect to practices that havebeen conducted in Japan up to date.
(2) Planned date of application(i)2018 Standards
We plan to apply the standards as of the beginning of the fiscal year ending September 2021.

(ii)

2020 Standards
We plan to apply the standards as of the beginning of the fiscal year ending September 2022.

(3) Impacts of application of said accounting standards
The impacts from the application of the Accounting Standard for Revenue Recognition, etc., on the consolidated
financial statements are currently under evaluation.
(Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections)
Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections (ASBJ Statement
No. 24, March 31, 2020, ASBJ)(1) Summary
Upon recommendation on the enhancement of the information in notes regarding accounting principles andprocedures adopted in case the relevant accounting standards are not definitive, ASBJ revised certain accounting
standards and issued the Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error
Corrections.
When enhancing the information in notes regarding accounting principles and procedures adopted in case therelevant accounting standards are not definitive, provisions of annotations to the business accounting principles(paragraph 1-2) shall be applied in order not to conflict with the current accounting practices where relevant
accounting standards are definitive.
(2) Planned date of application
We plan to apply the standards as of the beginning of the fiscal year ending September 2021.

– 79 –

(Accounting Standard for Disclosure of Accounting Estimates)
Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31, March 31, 2020, ASBJ)(1) Summary
The disclosure of key sources of estimation uncertainty is required under Paragraph 125 of the International
Accounting Standard (IAS) 1 “Presentation of Financial Statement” issued by the International AccountingStandards Board (IASB) in 2003. The Japanese standards also request the disclosure of such information in notes
for the convenience of users of the financial statements, and ASBJ has formulated and issued the AccountingStandard for Disclosure of Accounting Estimates (hereinafter “the Accounting Standard”).
ASBJ’s basic approach in developing the Accounting Standard was not to enhance the individual notes, but rather
to disclose the principles (the purposes of disclosure), and items to be disclosed should be determined bymanagement in light of the purposes of disclosure. The development of the Accounting Standard was in accordancewith Paragraph 125 of IAS 1.
(2) Planned date of application
We plan to apply the standards as of the beginning of the fiscal year ending September 2021.
(Accounting Standard for Fair Value Measurement, etc.)• Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019, ASBJ)• Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9, July 4, 2019, ASBJ)• Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019, ASBJ)• Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, July4, 2019, ASBJ)• Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19,
March 31, 2020, ASBJ)(1) Summary
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) haveestablished detailed guidance with almost the same contents regarding fair value measurement (IFRS 13 “Fair Value
Measurement” in IFRS and Topic 820 “Fair Value Measurement” of the Accounting Standards Codification in
FASB). As such, ASBJ considered the guidance regarding fair value of financial instruments and disclosure inorder to improve the comparability with such international accounting standards, and issued the AccountingStandard for Fair Value Measurement, etc.
ASBJ’s basic approach in developing the Accounting Standard for Fair Value Measurement was to basically
implement the entire provision of IFRS 13 in order to improve the comparability of financial statements among
companies in and outside Japan. Taking into consideration the practices that have been conducted thus far in Japan,
alternative treatments will be added for each item to the extent to which comparability between financial statements
is not impaired.
(2) Planned date of application
We plan to apply the standards as of the beginning of the fiscal year ending September 2022.
(3) Impacts of application of said accounting standards
The impact of the application of the Accounting Standard for Fair Value Measurement, etc. on the consolidated
financial statements remains undetermined at present.

– 80 –

(Changes in method of presentation)(Consolidated Statements of Income)Impairment losses, which were presented independently in the previous consolidated fiscal year, have become lessimportant in terms of value, and have been included in Other under extraordinary losses for the current consolidated
fiscal year. To reflect this change in method of presentation, the consolidated financial statements for the previous
consolidated fiscal year have been reclassified.
As a result, the -- million yen presented under impairment losses in the consolidated statement of income for theprevious consolidated fiscal year has been reclassified in Other under extraordinary losses.
(Consolidated Statements of Cash Flows)
Impairment losses, which were presented independently in the previous consolidated fiscal year, have become lessimportant in terms of value, and have been included in Other under the Cash Flows from Operating Activities for thecurrent consolidated fiscal year. To reflect this change in method of presentation, the consolidated financial statements
for the previous consolidated fiscal year have been reclassified.
As a result, the -- million yen presented under impairment losses in the consolidated statement of cash flows for theprevious consolidated fiscal year has been reclassified in Other under the Cash Flows from Operating Activities.
(Additional Information)(Stock-based compensation plan for officers)
The Company introduced a stock-based compensation plan for its Directors (excluding Outside Directors andexpatriates), Auditors (excluding Outside Auditors and expatriates), and Executive Officers (excluding expatriates;
hereinafter referred to collectively as “Directors, etc.”).
1. Outline of transaction
Based on the resolution of the Board of Directors’ Meeting held on October 31, 2018 followed by approval at
the Ordinary General Meeting of Shareholders held on December 21, 2018, the Company introduced a stockbased compensation plan called “BIP Trust.” The objectives of the plan are to clarify the linkage between the
Company’s shareholder value and the remuneration for Directors, etc. and to motivate Directors, etc. tocontribute more to enhancing the medium- to long-term corporate value by sharing common interest withshareholders, including not only the merit derived from the rising share price, but also the risk associated withthe decline in share price.
2. Stocks of the Company remaining in the trust
The stocks of the Company remaining in the trust are recorded as treasury stock under Net Assets with the bookvalues in the trust (not including expenses attributable thereto). The book value of said treasury stocks was 750
million yen for 189,700 shares as of the end of the consolidated fiscal accounting period under review.

– 81 –

(Notes to Consolidated Balance Sheets)*1. Accumulated depreciation of property, plant and equipment
Previous consolidated fiscal year
(September 30, 2019)

Current consolidated fiscal year
(September 30, 2020)

20,951 million yen

21,762 million yen*2. Items pertaining to affiliated companies are as follows:
Previous consolidated fiscal year
(September 30, 2019)

Current consolidated fiscal year
(September 30, 2020)

100 million yen

100 million yen

Investment securities (shares)(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, 2018;
ended September 30, 2019)
million yen

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Salaries

11,300

Provision for bonuses

2,981

11,564 million yen
3,015

Retirement benefit expenses

648

731

Provisions for stocks payment

562

40

Depreciation

692

648

Rent expenses

2,158

2,220

*2. Total amount of research and development expenses included in general administrative expenses
Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)－ million yen

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)
6 million yen*3. Breakdown of gains on sales of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)
million yen

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Machinery, equipment & vehicles

00 million yen

Tools, furniture & fixtures

1

2

Total

1

2

*4. Breakdown of loss on sale of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)Land

10 million yen– 82 –

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)－ million yen

*5. Breakdown of loss on retirement of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Buildings & structures

5

Machinery, equipment & vehicles

0

million yen

190

Tools, furniture & fixtures

1

20

Intangible assets00Other (Investments and other assets)
Total

0
7

－
40

million yen(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, 2018;
ended September 30, 2019)

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Valuation difference on available-for-sale securities:
Increase/decrease during the fiscal year

(1,432) million yen

Reclassification adjustments(665) million yen

1－(1,430)(665)

Tax effect

434

194

Valuation difference on available-for-sale securities

(996)

(471)

(2,451)－－247(2,451)

247

Amount before tax

Remeasurements of defined benefit plans, net of tax:
Increase/decrease during the fiscal year
Reclassification adjustments
Amount before tax
Tax effectRemeasurements of retirement benefits
Share of other comprehensive income of entities
accounted for using the equity method:
Increase/decrease during the fiscal year
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income– 83 –

747(75)(1,704)

171

(0)

－

(0)

－

(2,701)(299)

(Notes to Consolidated Statements of Changes in Equity)
Previous consolidated fiscal year (Started October 1, 2018; ended September 30, 2019)
1. Types and numbers of issued stocks and treasury stocks
Number of shares at
beginning of current
consolidated FY(hundreds of shares)

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

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

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

Common stock

267,310－－

267,310

Total

267,310－－

267,310

Common stock (Note)

3,525

3,466

2,515

4,475

Total

3,525

3,466

2,515

4,475

Issued shares

Treasury stock(Notes) 1. The 3,466 hundreds of share increase in common treasury stock resulted from 1,555 hundreds of sharesthrough acquisition of treasury stock based on resolution of the Board of Directors, 6 hundreds of sharesfrom purchase of fractional unit shares, and 1,905 hundreds of shares from purchase by the BIP Trust.
2. The 2,515 hundreds of share decrease in common treasury stock consists of 22 hundreds of shares fromexercise of stock options, 571 hundreds of shares from share exchange, 17 hundreds of shares from disposalof shares of parent company held by the equity-method affiliated company, and 1,905 hundreds of sharescontributed to the BIP Trust.
3. The number of treasury stock at the end of the current consolidated fiscal year includes the 1,905 hundredsof shares of treasury stock of the Company held by the BIP Trust.
2. Subscription rights to shares and treasury subscription rights to shares
None to be disclosed.
3. Dividends(1) Dividend payments
Resolution

Type of shares

Total amount of cash
dividends(millions of yen)

Dividend per share(yen)

December 21, 2018
Ordinary General
Meeting of Shareholders

Common stock

1,450

May 8, 2019
Meeting of the Board of
Directors

Common stock

1,453

Record date

Effective date

55

September 30, 2018

December 25, 201855

March 31, 2019

June 10, 2019

(Note) The total amount of cash dividends determined by resolution of the Board of Directors on May 8, 2019 includes
a cash dividend of 10 million yen to the stocks of the Company owned by the BIP Trust.
(2) Of the dividends with record dates during this consolidated fiscal year, those with effective dates in thefollowing consolidated fiscal year
Resolution
December 20, 2019
Ordinary General
Meeting of
Shareholders

Total amount ofType of shares cash dividends(millions of yen)

Source ofdividends

Common stock

Retainedearnings

1,456

Dividend pershare (yen)55

Record date

Effective date

September 30, 2019

December 23, 2019

(Note) The total amount of cash dividends determined by resolution of the Ordinary General Meeting of Shareholders
on December 20, 2019 includes a cash dividend of 10 million yen to the stocks of the Company owned by the
BIP Trust.
– 84 –

Current consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)
1. Types and numbers of issued stocks and treasury stocks
Number of shares at
beginning of current
consolidated FY(hundreds of shares)

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

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

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

Common stock

267,310－－

267,310

Total

267,310－－

267,310

Common stock (Note)

4,475

66

9

4,533

Total

4,475

66

9

4,533

Issued shares

Treasury stock(Notes) 1. The 6,600 share increase in common treasury stock resulted from purchase of 6,600 fractional unit shares.
2. The 9 hundreds of share decrease in common treasury stock resulted from sales of 1 hundred shares offractional unit shares, and payment of 8 hundred shares under the BIP Trust.
3. The number of treasury stock at the end of the current consolidated fiscal year includes the 1,897 hundredsof shares of treasury stock of the Company held by the BIP Trust.
2. Subscription rights to shares and treasury subscription rights to shares
None to be disclosed.
3. Dividends(1) Dividend payments
Resolution

Type of shares

Total amount of cash
dividends(millions of yen)

Dividend per share(yen)

December 20, 2019
Ordinary General
Meeting of
Shareholders

Common stock

1,456

May 1, 2020
Meeting of theBoard of Directors

Common stock

1,455

Record date

Effective date

55

September 30, 2019

December 23, 201955

March 31, 2020

June 15, 2020

(Notes) 1. The total amount of cash dividends determined by resolution of the Ordinary General Meeting of
Shareholders on December 20, 2019 includes a cash dividend of 10 million yen to the stocks of the Company
owned by the BIP Trust.
2. The total amount of cash dividends determined by resolution of the Board of Directors on May 1, 2020
includes a cash dividend of 10 million yen to the stocks of the Company owned by the BIP Trust.
(2) Of the dividends with record dates during this consolidated fiscal year, those with effective dates in thefollowing consolidated fiscal year
Resolution
December 18, 2020
Ordinary General
Meeting of
Shareholders

Total amount ofType of shares cash dividends(millions of yen)

Source ofdividends

Common stock

Retainedearnings

1,720

Dividend pershare (yen)Record date

65 September 30, 2020

Effective date

December 21, 2020

(Note) The total amount of cash dividends determined by resolution of the Ordinary General Meeting of Shareholders
on December 18, 2020 includes a cash dividend of 12 million yen to the stocks of the Company owned by the
BIP Trust.
– 85 –

(Notes to Consolidated Statements of Cash Flows)*1. Relationship between the ending balance of cash and cash equivalents and account items stated in the consolidatedbalance sheets
Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

29,810 million yen

26,769 million yen

Cash and deposits
Time deposits with deposit period greater than three months(3,000)(3,300)Cash and cash equivalents

26,81023,469(Lease Transactions)1. Finance lease transactions (Lessee)
Finance lease transactions that do not involve transfer of ownership(i)

Description of lease assets
Property, plant and equipment
Mainly include machinery and equipment, tools, furniture and fixtures.

(ii)

Depreciation of lease assets
Lease assets are amortized in accordance with the basis of presenting the consolidated financial
statements as described in 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, 2019)

Current consolidated fiscal year
(September 30, 2020)

Within one year

170

238

Over 1 years

318

470

488

709

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, 2019)
Current assets
Investments and other assets

Current consolidated fiscal year
(September 30, 2020)
443

432

1,033

889

(2) Lease obligations(Unit: millions of yen)Previous consolidated fiscal year
(September 30, 2019)
Current liabilities
Non-current liabilities– 86 –

Current consolidated fiscal year
(September 30, 2020)
443

432

1,033

889

(Financial Instruments)
1. Status of financial instruments(1) Policy for the handling of financial instruments
The Group manages its funds in the form of low risk, highly safe financial assets such as bank deposits andbonds. It is the policy of the Group not to enter into derivative transactions for speculative trading purposes.
(2) Description of financial instruments, risks and risk management policies
Notes and accounts receivable resulting from operating activities of the Company are exposed to credit riskof the customers. To reduce credit risk, the Company manages such risk as appropriate based on payment
terms and credit ratings of customers in accordance with internal credit management regulations.
Investment securities are exposed to market fluctuation risk, and the Company periodically checks the fairvalues 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 of deposit).
The majority of trade payables and accounts payable resulting from operating activities are due within threemonths.
(3) Supplementary information on fair value of financial instruments
The fair value of financial instruments is based on quoted market prices or on reasonable calculations in theabsence of market quotations. Since certain assumptions that contain fluctuation factors were used inestimating the fair value, results may fluctuate when a different set of assumptions is used.
2. Fair value of financial instruments
The book value in consolidated balance sheets, fair value and differences are as follows. Financial instruments
for which the fair value is extremely difficult to measure are not included (see Note 2).
Previous consolidated fiscal year (September 30, 2019)
Book value in consolidatedbalance sheets(millions of yen)
(1) Cash and deposits

29,810(2) Notes and accounts receivable

8,755

Allowance for doubtful accounts

Fair value(millions of yen)

Differences(millions of yen)

29,810

－

(41)
8,713

8,713

－

(3) Investment securities

15,324

15,324－(4) Long-term deposits

9,500

9,470

(29)

63,34863,319(29)(1) Accounts payable–trade

3,602

3,602

－

(2) Accounts payable–other

2,661

2,661

－

6,263

6,263

－

Total assets

Total liabilities– 87 –

Current consolidated fiscal year (September 30, 2020)
Book value in consolidatedbalance sheets(millions of yen)
(1) Cash and deposits

26,769(2) Notes and accounts receivable

7,014

Fair value(millions of yen)

Differences(millions of yen)

26,769

－

6,994

6,994

－

(3) Investment securities

15,97915,979－(4) Long-term deposits

14,60014,554(45)

64,34364,297(45)(1) Accounts payable–trade

2,181

2,181

－

(2) Accounts payable–other

2,184

2,184

－

4,366

4,366

－

Allowance for doubtful accounts(19)

Total assets

Total liabilities(Notes) 1. Methods of calculating the fair value of financial instruments and securities transactions
Assets(1) Cash and deposits, (2) Notes and accounts receivable
The book value approximates the fair value because of the short maturity of these instruments.
(3) Investment securities
The fair value of equity securities is based on quoted market prices on the stock exchange; and the fairvalue of bonds is based on the market prices quoted on the stock exchange or provided by financial
institutions. These securities categorized by purpose of holding are described further in the Notes on
Securities.
(4) Long-term deposits
The fair value of long-term deposits is estimated based on the present value discounted using the interest
rate applicable to new deposits in the total amount of principal and interest, and on the fair market value
provided by financial institutions for the derivative portions.
Liabilities(1) Accounts payable–trade, (2) Accounts payable–other
The book value approximates the fair value because of the short maturity of these instruments.
2. Financial instruments for which the fair value is extremely difficult to measure(Unit: millions of yen)Previous consolidated fiscal year
(September 30, 2019)

Current consolidated fiscal year
(September 30, 2020)

Other securities (unlisted equity securities)

102

202

Stocks of subsidiaries and affiliates

100

100

202

302

Category

Total

The fair 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 is not included in“(3) Investments in securities” for the previous consolidated fiscal year nor in “(3) Investments in securities” forthe current consolidated fiscal year.

– 88 –

3. Redemption scheduled for monetary claims and securities with maturity dates subsequent to the consolidated
settlement datePrevious consolidated fiscal year (September 30, 2019)
Within 1 year
(millions of yen)Over 1 year andwithin 5 years(millions of yen)Over 5 years andwithin 10 years(millions of yen)Over 10 years(millions of yen)

Cash and deposits

29,805－－－

Notes and accounts receivable–trade

8,755

－

－

－

Corporate bonds

－

2,000

2,500

7,000

Long-term time deposits

－

6,000

3,500

－

38,560

8,000

6,000

7,000

Within 1 year
(millions of yen)Over 1 year andwithin 5 years(millions of yen)Over 5 years andwithin 10 years(millions of yen)Over 10 years(millions of yen)

Cash and deposits

26,760－－－Notes and accounts receivable–trade

7,014

－

－

－

Corporate bonds

－

2,100

6,900

4,000

Long-term time deposits

－

6,000

8,600

－

33,774

8,100

15,5004,000

Investment securities

Total

Current consolidated fiscal year (September 30, 2020)

Investment securities

Total– 89 –

(Securities)
1. Other securities
Previous consolidated fiscal year (September 30, 2019)
Class
Securities for which theamounts in the
consolidated balance
sheets exceed 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
sheets (millions of yen)

Original purchasevalue (millions of yen)

Differences (millionsof yen)

1,486

1,145

340

Corporate bonds

5,182

5,171

11

Subtotal

6,669

6,317

351

2,126

2,498

(371)

Corporate bonds

6,528

6,596

(67)

Subtotal

8,654

9,094

(439)

15,324

15,411(87)(2) Bonds(2) Bonds

Total(Note) Unlisted shares (102 million yen in the consolidated balance sheets) are not included under “Other securities”
in the table above since quoted market value is not available and is deemed to be extremely difficult to measure.
Current consolidated fiscal year (September 30, 2020)
Class
Securities for which theamounts in the
consolidated balance
sheets exceed 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
sheets (millions of yen)

Original purchasevalue (millions of yen)

Differences (millionsof yen)

157

87

69

Corporate bonds

2,105

2,101

4

Subtotal

2,262

2,189

73

2,882

3,558

(675)

Corporate bonds

10,834

10,986(151)

Subtotal

13,716

14,544(827)

15,97916,733(753)(2) Bonds(2) Bonds

Total(Note) Unlisted shares (202 million yen in the consolidated balance sheets) are not included under “Other securities”
in the table above since quoted market value is not available and is deemed to be extremely difficult to measure.
2. Other securities sold
Previous consolidated fiscal year (Started October 1, 2018; ended September 30, 2019)
Class(1) Stocks

Price sold (millions of yen)

Total gain from sales(millions of yen)

Total loss from sales(millions of yen)

15

2

0

Corporate bonds

－

－

－

Subtotal

1520(2) Bonds

Current consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)
None to be disclosed.
3. Securities for which impairment loss is recognizedNone to be disclosed.

– 90 –

(Derivatives)
1. Derivative transactions for which hedge accounting is not applied
None to be disclosed.
2. Derivative transactions for which hedge accounting is applied
None to be disclosed.
(Retirement Benefits)
1. Overview of the retirement benefit system in use
The Company and its four consolidated subsidiaries have contributory and non-contributory defined benefit
retirement plans (retirement lump-sum plan) and a defined contribution pension plan to cover retirement benefits
to employees.
Under the retirement lump-sum plan, the Company pays a lump-sum retirement benefit based on employees’salary and period of service. The Company establishes a retirement benefit trust for the retirement lump-sum
plan.
Although the Company is a member of a multiemployer pension plan called the Japan Computer Information
Service Employees’ Pension Fund, the portion of pension assets that the Company contributes is recognizedsimilar to the defined benefit plan because the amount cannot be reasonably calculated.
2. Defined benefit retirement plan
(1) Adjustment of balance of retirement benefit obligations at the beginning and end of fiscal years
Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

5,957 million yen

8,704 million yen

105
397
－
(53)
(175)
2,472

－
556
－
(369)
(379)
－

8,704

8,511

Retirement benefit obligations at beginning ofyear
Increase due to new consolidations
Service costs
Interest costs
Actuarial differences
Retirement benefits paid
Amount of past service costs accrued
Balance of retirement benefit obligations at
end of year

(Note) Past service costs were accrued as a result of amendments to the Company’s retirement benefit rules
made during the current consolidated fiscal year.
(2) Adjustment of balance of pension assets at the beginning and end of fiscal years
Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

3,921 million yen
－
18
－
－
3,939

3,939 million yen
－
(28)
1,200
－
5,110

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

– 91 –

(3) Adjustment of balance of retirement benefit obligations and pension assets at the end of the fiscal years, andnet retirement benefit obligations and assets recognized in the consolidated balance sheets
Previous consolidated fiscal year
(September 30, 2019)

Current consolidated fiscal year
(September 30, 2020)

Contributory retirement benefit obligations

8,026 million yen

7,832

Pension assets(3,939)(5,110)

4,087

2,721

Non-contributory retirement benefit liabilities

million yen

677

678

Net obligations and assets in the consolidated balance
sheets

4,764

3,400

Retirement benefit liabilities

4,764

3,400

Net obligations and assets in the consolidated balance
sheets

4,764

3,400

Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Service costs

397

556

Interest costs－－

Expected returns－－

Amount of actuarial differences treated as expenses

(71)

(341)

Amount of past service costs treated as expenses

20

247

Retirement benefit expenses under the defined
retirement benefit plan

345

462

(4) Retirement benefit expenses and breakdown

million yen

million yen(5) Remeasurements of retirement benefits
Items that were recorded under remeasurements of defined benefit plans (amount before tax) are as follows:
Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)(2,451) million yen(2,451)

247 million yen
247

Past service costs
Total(6) Remeasurements of retirement benefits
Items that were recorded under remeasurements of defined benefit plans (amount before tax) are as follows:
Previous consolidated fiscal year
(September 30, 2019)
Unrecognized past service costs
Total(2,451) million yen(2,451)– 92 –

Current consolidated fiscal year
(September 30, 2020)(2,204) million yen(2,204)

(7) Pension assets(i)

Major pension assets
The percentages of each major classification in comparison to the amount of total pension assets are as
follows:
Previous consolidated fiscal year
(September 30, 2019)

Current consolidated fiscal year
(September 30, 2020)

41%
51
8
100

77%
20
3
100

Bonds
Cash and deposits
Other
Total

(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
expected long-term rate of return on pension assets.

(8) Basis for actuarial calculations
Basis for major actuarial calculations
Previous consolidated fiscal year
(September 30, 2019)

Current consolidated fiscal year
(September 30, 2020)

0.00%

0.00%

－%

－%

1.00 - 1.85%

1.00 - 1.64%

Discount rate
Expected long-term rate of return
Expected increase in salary

3. Defined contribution plan
The amount of necessary contributions to the defined contribution plan of the Company and its consolidated
subsidiaries was 271 million yen for the previous consolidated fiscal year, and 286 million yen for the current
consolidated fiscal year.
4. Multiemployer pension plan
The amounts of necessary contributions to the corporate pension fund plan under the multiemployer pension
plan, which are recognized in the same manner as the defined contribution plan, were 126 million yen in theprevious consolidated fiscal year and 132 million yen in the current consolidated fiscal year.
(1) Reserve fund for multiemployer pension planPrevious consolidated fiscal year
(March 31, 2019)

Current consolidated fiscal year
(March 31, 2020)

Pension assets

234,785 million yen

236,669 million yen

Actuarial liabilities based on pension plan financecalculation

192,041

193,925

Differences

42,74442,744(2) Coverage ratio of the Group in the multiemployer pension planPrevious consolidated fiscal year: 2.13% (Started April 1, 2018; ended March 31, 2019)
Current consolidated fiscal year: 2.29% (Started April 1, 2019; ended March 31, 2020)(3) Supplementary information
The ratio in (2) above does not match the actual self-pay ratio of the Company.

– 93 –

(Stock Option Plans)
1. Expenses related to stock options(Unit: millions of yen)Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)
Selling, general and administrative
expenses

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)
44－

2. Amount recognized as profit from forfeiture due to non-exercise of stock options(Unit: millions of yen)Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)
Gain on reversal of subscription
rights to shares

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)
274－(Tax Effect Accounting)
1. Major factors of deferred tax assets and deferred tax liabilities
Previous consolidated
fiscal year
(September 30, 2019)
Deferred tax assets
Software development costs
Provisions for bonuses
Retirement benefit liabilities
Retirement benefit trust
Accumulated remeasurements of defined benefit plans
Retirement bonuses for directors payable
Accrued business tax
Loss on valuation of investment securities
Legal welfare expenses corresponding to provisions forbonuses
Asset retirement obligations
Impairment losses
Provisions for stocks payment
Valuation difference on available-for-sale securities
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Business tax refund
Retirement expenses corresponding to asset retirement
costs
Valuation difference on available-for-sale securities
Other
Total deferred tax liabilities
Net deferred tax assets– 94 –

2,471 million yen
1,112
732
1,201
747
32
145
156

Current consolidated
fiscal year
(September 30, 2020)
2,620 million yen
1,134
388
1,558
672
36
161
158

165

169

112
115
171
71
186
7,424
(346)
7,077

121
115
171
249
374
7,933
(509)
7,423

0

0

24

34

37
－

19
9
63
7,360

62
7,015

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 for tax
purposes
Other
Income tax rate after applying tax effect accounting

Previous consolidated fiscal
year(September 30, 2019)30.5 %

Current consolidated fiscal
year(September 30, 2020)
30.5 %

0.7

0.6

1.1

0.2

(0.2)
32.2

1.7
33.0

(Asset Retirement Obligations)
Previous consolidated fiscal year (ended September 30, 2019) and current consolidated fiscal year (ended
September 30, 2020)
Information has been omitted as it was immaterial.
(Segment information, etc.)[Segment information]
1. Overview of reportable segments
The Group’s reportable segments are components of the Group for which separate financial information isavailable and which are subject to regular review by management for the purpose of determining the allocationof managerial resources and evaluating business performance.
The Group has three reportable segments for each of its business divisions: the Accounting Firm Business
Division, the Local Governments Business Division, and Printing Business Division.
Major services and products of each reportable segment are as follows:[Accounting Firm BD] (Providing services & products to accounting firms and their clients)
Information processing service, software and consulting service, sales of office equipment and supplies.
[Local Governments BD] (Providing services & products to local governments (municipalities, etc.))
Information processing service, software and consulting service, sales of office equipment.
[Printing BD]
Continuous business forms for PCs, 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.

– 95 –

3. Information on net sales, profit or loss, assets, and other items by reportable segments
Previous consolidated fiscal year (Started October 1, 2018; ended September 30, 2019)
Reportable segment(Unit: millions of yen)Amounts inconsolidated
Adjustments
financial(Note 1)statements(Note 2)

Accounting
Firm BD

Local
Governments
BD

Printing BD

45,89916,413

3,808

66,120－66,120

8

－

2,118

2,126

(2,126)－45,907

16,413

5,926

68,247(2,126)

66,120

Segment profit

8,725

425

189

9,339

7

9,347

Segment assets

27,58912,051

6,343

45,98451,00596,989

1,325

1,341

341

3,008

(1)

3,006

100

－

－

100

－

100

1,515

1,450

1,472

4,438

－

4,438

Total

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

Other items
Depreciation (Note 3)
Investments in affiliatedcompany under the equity
methodIncrease in property, plant andequipment and intangible assets(Note 3)(Notes) 1. Adjustments are as follows:(1) Adjustments of segment profit of 7 million yen include 6 million yen for elimination of inter-segment
transactions and 1 million yen for adjustments of non-current assets.
(2) Adjustments of segment assets of 51,005 million yen include 51,452 million yen of corporate assets thatare not allocated to specific reportable segments, and -447 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 (investment securities).
(3) Adjustments of depreciation of -1 million yen represent to unrealized profits.
2. Segment profit is adjusted with the operating profit presented in the Consolidated Statements of Income.
3. Increases in depreciation, tangible fixed assets and intangible fixed assets include long-term prepaid
expenses and depreciation of such expenses.

– 96 –

Current consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)
Reportable segment(Unit: millions of yen)Amounts inconsolidated
Adjustments
financial(Note 1)statements(Note 2)

Accountin
g Firm BD

Local
Governments
BD

Printing BD

47,15017,377

3,286

67,814－67,814

7

0

2,183

2,191

(2,191)－

47,157

17,3785,470

70,005(2,191)

67,814

Segment profit

10,2371,037

106

11,381(0)

11,381

Segment assets

28,236

9,780

5,867

43,88453,787

97,671

1,392

1,315

364

3,072

(1)

3,070

100

－

－

100

－

100

2,195

1,289

319

3,804

－

3,804

Total

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

Other items
Depreciation (Note 3)
Investments in affiliatedcompany under the equity
methodIncrease in property, plant andequipment and intangible assets(Note 3)(Notes) 1. Adjustments are as follows:(1) Adjustments of segment profit of -0 million yen include 6 million yen for elimination of inter-segment
transactions and -8 million yen for adjustments of inventory assets.
(2) Adjustments of segment assets of 53,787 million yen include 54,824 million yen of corporate assets thatare not allocated to specific reportable segments, and -1,037 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 (investment securities).
(3) Adjustments of depreciation of -1 million yen represent to unrealized profits.
2. Segment profit is adjusted with the operating profit presented in the Consolidated Statements of Income.
3. Increases in depreciation, tangible fixed assets and intangible fixed assets include long-term prepaid
expenses and depreciation of such expenses.

– 97 –

[Related information]
Previous consolidated fiscal year (Started October 1, 2018; ended September 30, 2019)
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) Net sales
Information is omitted since more than 90% of sales in the Consolidated Statements of Income are sales tooutside customers in Japan.
(2) Property, Plant & Equipment
Information is omitted since the Company has no property, plant and equipment in regions outside Japan.
3. Information by major customer
Information is omitted since there are no sales to external customers that account for 10% or more of the sales
in the Consolidated Statements of Income.
Current consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)
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) Net sales
Information is omitted since more than 90% of sales in the Consolidated Statements of Income are sales tooutside customers in Japan.
(2) Property, Plant & Equipment
Information is omitted since the Company has no property, plant and equipment in regions outside Japan.
3. Information by major customer
Information is omitted since there are no sales to external customers that account for 10% or more of the sales
in the Consolidated Statements of Income.
[Information on impairment losses of fixed assets by reportable segments]
Previous consolidated fiscal year (Started October 1, 2018; ended September 30, 2019)
None to be disclosed.
Current consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)(Unit: millions of yen)
Reportable segment
Accounting
Firm BD
Impairment losses

0

Local
Governments BD－– 98 –

Printing BD
－

Total
0

Adjustments

Amounts inconsolidated
financialstatements－0[Information on amortization of goodwill and balance of goodwill by reportable segments]
Previous consolidated fiscal year (Started October 1, 2018; ended September 30, 2019)
None to be disclosed.
Current consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)
None to be disclosed.
[Information on gain on negative goodwill by reportable segments]
Previous consolidated fiscal year (Started October 1, 2018; ended September 30, 2019)
Gain on negative goodwill of 88 million yen has been recognized under the Accounting Firm BD segment
as a result of a share exchange between the Company as wholly owning parent company and TKC Shuppan
Corporation as wholly owned subsidiary company in said share exchange.
Current consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)
None to be disclosed.

– 99 –

[Related Parties Information]
1 Related Parties Transactions(1) Transactions between the Company and related parties
Previous consolidated fiscal year (Started October 1, 2018; ended September 30, 2019)(i)

Non-consolidated subsidiaries and affiliated companies of the Company

Type

Company
name or nameof individual

Address

Capital orinvestments(millions ofyen)

Business or
occupation

Affiliatedcompanies

iMobile Inc.

Chiyoda-ku,
Tokyo

100

Information
provision
services

Transaction
Year-end
Holding (held)
Relationship withamountbalancevoting rights
Details of transaction
Item
related party(millions of(millions ofratio (%)
yen)
yen)
Outsourcing of
Recovery of funds
48(Holding)
development and(Note)
Loans
86
Direct (30.0)
maintenance of Receiving of interests
receivables
3
website services.
(Note)(Note) Terms of transaction or policies on determining the terms of transaction
The interest rates for the loans are determined in a reasonable manner based on the market interest rates.
(ii)
Type

Company
name or nameof individual

Directors and major shareholders (individuals only) of the Company
Address

Certifiedpublic tax
accounting
Edogawa-ku,
firm Taguchi
Tokyo
Partners
Kaikei(Note 2)
Certifiedpublic tax
accounting
Yokohamashi,
Companies firm Oshida
Accounting
Kanagawa
in which
Officedirectors(Note 3)and nearrelatives
Representativ
holde Partner andmajority
Certified Tax
votingAccountant,
Minato-ku,
rightsAoyamaTokyo
Accounting
Firm(Note 4)
Certifiedpublic tax
accounting
Miyagino-ku,
firm Ofuji
Sendai-shi,
Accounting
Miyagi
Office(Note 5)

Capital orinvestments(millions ofyen)

Business or
occupation

Transaction
Holding (held)
Relationship withamountvoting rights
Details of transaction
related party(millions ofratio (%)
yen)

5

Certifiedpublic tax
accounting
firm－

Rendering of
information
processing
services

Rendering of
information
processing services(Note 1)54

Accounts
receivable

1

4

Certifiedpublic tax
accounting
firm－

Rendering of
information
processing
services

Rendering of
information
processing services(Note 1)

23

Accounts
receivable

1

8

Certifiedpublic tax
accounting
firm－

Rendering of
information
processing
services

Rendering of
information
processing services(Note 1)30

Accounts
receivable

2

9

Certifiedpublic tax
accounting
firm

Rendering of
information
processing services(Note 1)

23

Accounts
receivable

1－

Rendering of
information
processing
services

Item

Year-endbalance(millions ofyen)(Notes) 1. Terms of transaction or policies on determining the terms of transaction
Terms of transaction for the outsourcing of information processing are similar to the terms between othercounterparts.
2. The company was co-founded by Mr. Misao Taguchi, Director of the Company.
3. The company was co-founded by Mr. Yoshimasa Oshida, Director of the Company.
4. The company was co-founded by Mr. Kenji Matsumoto, Auditor of the Company.
5. The company was co-founded with a near relative of Mr. Kazuyuki Sumi, Director and Chairman of theBoard of the Company.
6. Consumption taxes are not included in the transaction amounts. Consumption taxes are included in the yearend balance.

– 100 –

Current consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)(i) Non-consolidated subsidiaries and affiliated companies of the Company
Type

Company
name orname ofindividual

Address

Capital or
Holding
investments Business or (held) voting Relationship with(millions of occupation rights ratio
related party
yen)
(%)

Details oftransaction

Transaction
amount(millions ofyen)

Loan of funds(Note)

230

Outsourcing of Recovery ofInformation(Holding)
development and funds
100 provision
Direct (30.0) maintenance of (Note)services
website services.
Receiving ofinterests(Note)

AffiliatedShibuya-ku,
iMobile Inc.
companies
Tokyo

141

Item

Year-endbalance(millionsof yen)Loans
receivables

175

3(Note) Terms of transaction or policies on determining the terms of transaction
The interest rates for the loans are determined in a reasonable manner based on the market interest rates.
(ii) Directors and major shareholders (individuals only) of the Company
Type

Company
name orname ofindividual

Address

Capital or
Holding
Relationshipinvestments Business or(held)
with related(millions of occupation voting rights
party
yen)
ratio (%)

Certifiedpublic tax
accounting
Edogawa-ku,
firm Taguchi
Tokyo
Partners
Kaikei(Note 2)Companiesin which
Certifieddirectors
public tax
and nearaccounting
Yokohama-shi,
relatives
firm Oshida
Kanagawa
holdAccounting
majority
Officevoting(Note 3)rightsCertifiedpublic tax
accounting Miyagino-ku,
firm Ofuji
Sendai-shi,
Accounting Miyagi
Office(Note 4)

5

4

9

Certifiedpublic tax
accounting
firm

Certifiedpublic tax
accounting
firm

Certifiedpublic tax
accounting
firm

Details oftransaction

Transaction
amount(millions of
yen)

Item

Year-endbalance(millionsof yen)－Rendering of Rendering of
information information
processing processing services
services(Note 1)

13

Accounts
receivable

1－

Rendering of Rendering of
information information
processing processing services
services(Note 1)18

Accounts
receivable

2－

Rendering of Rendering of
information information
processing processing services
services(Note 1)

15

Accounts
receivable1(Notes) 1. Terms of transaction or policies on determining the terms of transaction
Terms of transaction for the outsourcing of information processing are similar to the terms between othercounterparts.
2. The company was co-founded by Mr. Misao Taguchi, Director of the Company.
3. The company was co-founded by Mr. Yoshimasa Oshida, Director of the Company.
4. The company was co-founded with a near relative of Mr. Kazuyuki Sumi, Director and Chairman of theBoard 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 submitting the consolidated
financial statements
None to be disclosed.
2 Notes on the Parent Company and Important Affiliated Companies(1) Information on the parent company
None to be disclosed.
(2) Summary of financial information of important affiliated companies
None to be disclosed.

– 101 –

(Earnings per share information)
Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Net assets per share

2,724.78 yen

2,933.12 yen

Net income per share

255.52 yen

297.63 yen

Diluted net income per share

255.01 yen- yen(Notes) 1. The diluted net income per share for the current consolidated fiscal year is not stated as there were no dilutive
shares.
2. The basis for calculating net income per share and diluted net income per share is as follows.
Previous consolidated fiscal year
(Started October 1, 2018;
ended September 30, 2019)

Current consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Net income per share
Net income attributable to owners of parent(millions of yen)

6,721

7,821

Amount not attributable to common shareholders(millions of yen)－－

Net income from common stocks attributable toowners of parent (millions of yen)

6,721

7,821

Average number of common stocks outstanding(hundreds of shares)

263,028

262,793

Adjustments to net income attributable to owners of
the parent(millions of yen)－－

Number of common stocks increased (hundreds ofshares)

531－(Subscription rights to shares (hundreds ofshares))

(531)

(－)

Diluted net income per share

Outline of diluted shares not included in thecalculation of diluted net income per share for nothaving dilutive effect――――――――――(Note) The average number of stocks outstanding used in the calculation of earnings per share information has been
determined by including the stocks of the Company owned by the BIP Trust (which has been established with
the introduction of the BIP Trust plan) as deductible treasury stocks.
The average number of said treasury stocks deducted for the calculation of net income per share was 190,069
shares for the current consolidated fiscal year.

– 102 –

(v)[Supplementary Schedules][Schedule – Corporate Bonds]
None to be disclosed.
[Schedule – Borrowings]
Category

Balance at
beginning of year
(millions of yen)

Balance at end ofyear(millions of yen)

Average interest
rate
(%)

Short-term loans payable

－

－

－

－

Current portion of long-term loans payable

142

142

0.23

－

Current portion of lease obligations

541

522

－

－

Long-term loans payable (excluding
current portion)

438

295

0.23

October 5, 2020 September 10, 2025

Lease obligations (excluding current
portion)

1,333

1,113

－

October 9, 2020 September 6, 2025

38

10

0.44

October 22, 2020 February 28, 2023

2,494

2,084

－

Terms of repayment

Other interest-bearing debts
Accounts payable – installment
purchases
Total－(Notes) 1. The weighted average interest rates applicable to the year-end balance of borrowings are indicated for
average interest 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. Repayments of long-term loans, lease obligations (excluding current portion) and other interest-bearing
debts (excluding current portion) scheduled within 5 years from the consolidated settlement date are 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 loans payable

80

71

71

71

Lease obligations

456

425

180

51

4

1

－

－

Other interest-bearing debts[Schedule – Asset Retirement Obligations]
Information has been omitted as it was immaterial.

– 103 –

(2) [Other]
Quarterly financial information for the current consolidated fiscal year
(Cumulative period)

1st quarter2nd quarter3rd quarter

Current consolidated
fiscal year

Sales (millions of yen)

16,32035,13751,31067,814

Quarterly net income before
income taxes (current FY)(millions of yen)

2,578

7,144

10,225

11,646

Quarterly net income
attributable to owners of parent(current FY) (millions of yen)

1,594

4,712

6,792

7,821

Quarterly net income per share(current FY) (yen)60.68

179.32258.46297.63(Accounting period)
Quarterly net income per share(yen)

1st quarter2nd quarter
60.68

118.65– 104 –

3rd quarter
79.13

4th quarter
39.16

2 [Financial Statements, etc.](1) [Financial Statements](i)[Balance Sheets](Unit: millions of yen)Previous fiscal year
(September 30, 2019)

AssetsCurrent assets
Cash and deposits
Accounts receivable
Lease investment assets
MerchandiseWork in progress
Raw materials and supplies
Prepaid expenses
Accounts receivable–other
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Structures
VehiclesTools, furniture & fixtures
Land
Total property, plant 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 receivable
Long-term prepaid expenses
Deferred tax assets
Long-term time deposits
Guarantee deposits
Long-term lease investment assets
Other
Total investments and other assets
Total non-current assets
Total assets*1– 105 –

25,775
7,813
443
70
595
109
495
*1 172*1 364(25)
35,813Current fiscal year
(September 30, 2020)

22,508
6,308
432
57
281
141
537
*1
203
*1
338
(19)
30,790

*1

7,028
205
0
1,724
6,636
15,595

6,849
187
28
1,779
6,636
15,481

2,347
807
22
0
3,177

2,647
361
22
0
3,031

15,084
795
0
*1 38
138
5,687
9,500
1,263
1,033
63
33,60552,37888,192

15,940
1,389
0
*1
163
110
6,068
14,5001,340
889
6240,46458,97789,767

(Unit: millions of yen)Previous fiscal year
(September 30, 2019)
Liabilities
Current liabilities
Accounts payable–trade
Lease obligations
Accounts payable–other
Income taxes payable
Accrued business office taxes
Accrued consumption taxes
Advances received
Deposits received
Provisions for bonuses
Accounts payable – facilities
Other
Total current liabilities
Non-current liabilities
Lease obligations
Provisions for retirement benefits
Provisions for stocks payment
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Total capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
General reserve
Retained earnings brought forward
Total retained earnings
Treasury stock
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

3,402
443
*1 2,133
2,340
54
599
994
364
3,222
*1 373
12
13,941*1– 106 –

Current fiscal year
(September 30, 2020)

2,058
432
*1 2,051
2,506
54
1,356
516
327
3,300
*1 45
10
12,659
*1

1,033
1,635
562
398
3,629
17,570

889
517
599
387
2,393
15,052

5,700

5,700

5,409
302
5,711

5,409
302
5,711

688

688

55,457
4,816
60,962(1,630)70,74458,757
6,077
65,523(1,660)75,274

(121)

(560)

(121)
70,622
88,192(560)
74,71489,767(ii)[Profit and Loss Statement](Unit: millions of yen)Previous fiscal year
(Started October 1, 2018;
ended September 30, 2019)60,897
20,31840,579*1, *2 31,979
8,600

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Land and house rent received
Subsidy income
Other
Total non-operating income
Non-operating expenses
Cost of lease revenue
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gains on sales of non-current assets
Gain on reversal of subscription rights to shares
Other
Total extraordinary income
Extraordinary losses
Loss on sale of non-current assets
Loss on retirement of non-current assets
Other
Total extraordinary losses
Net income before taxes
Income taxes–current
Income taxes–deferred
Total income taxes
Net income

*1
*1

31
217
*1 157
13
*1 62
481
*1

*1

– 107 –

Current fiscal year
(Started October 1, 2019;
ended September 30, 2020)

63,07020,09742,973*1, *2 32,181
10,791
*1
*1

36
156
*1 155
15
*1 57
422
*1

*1

108
0
109
8,972

106
0
106
11,107

1
274
8
283

2
－
－
2

10
7
0
18
9,238
3,469
(493)
2,975
6,262

－
36
0
36
11,073
3,804
(203)
3,600
7,472

[Report on cost of sales](a) Cost of sales on information processing, software and consulting services
53rd Term(Started October 1, 2018;
ended September 30, 2019)
Category

Note

II Labor costs

Ratio
(%)

Amount (millions of yen)

I Materials costs*154th Term(Started October 1, 2019;
ended September 30, 2020)
Ratio
(%)

Amount (millions of yen)

3,798

27.6

4,169

30.5

2,314

16.8

2,599

19.0

6,895

50.5

13,664

100.0

III Expenses
1. Computer rental expenses

382

389

2. Maintenance contracts

1,230

1,255

3. Depreciation

638

741

4. Repairs and maintenanceexpenses604

581

5. Supplies expenses

1,743

6. Other

3,069

1,658

Total expenses
Works in progress andinventories at beginning ofyear
Transfers from other accounts

*2

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

Cost of sales on information
processing, software andconsulting services

7,668

55.6

13,781

100.0

2,267

209

597

1,318

1,308

15,30915,570

595

281

1,072

1,263

13,64014,026(Notes) 1. Labor costs include the following provisions. Figures in (parentheses) denote amounts for the previous fiscal
year.
Provision for bonuses: 572 million yen (517 million yen)
Retirement benefit expenses: 96 million yen (52 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 softwarein progress accounts.
4. Costs are determined using job order costing by project.
(b) Cost of sales on office equipment and supplies
53rd Term(Started October 1, 2018;
ended September 30, 2019)
CategoryNote

54th Term(Started October 1, 2019;
ended September 30, 2020)

Amount (millions of yen)

Ratio
(%)

Amount (millions of yen)

Ratio
(%)

54

0.8

70

1.1

I Inventories at beginning of year
II Purchases

6,693

99.2

6,058

98.9

Total

6,747

100.0

6,128

100.0

III Inventories at end of year

70

57

Cost of sales on officeequipment and supplies

6,677

6,071

– 108 –

(iii) [Statement of Changes in Equity]
Previous consolidated fiscal year (Started October 1, 2018; ended September 30, 2019)(Unit: millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Other
capitalsurplusCapital stock Legal capitalsurplus

Balance at
beginning ofyear
Changes during
fiscal year
Generalreserve
Dividends ofsurplus
Net income
Acquisition oftreasury stock
Disposal oftreasury stock
Increase due toshare exchange
Changes in
items otherthan equity(net)
Total changes
during fiscal year
Balance at end of
year

5,700

5,409

－

228

228

74

74

Generalreserve

688

Retainedearnings
brought
forwardTotal
retainedearnings

52,257

4,658

57,604

3,200(3,200)－(2,904)(2,904)

6,262

6,262

－

302

302

－

3,200

158

3,358

5,700

5,409

302

5,711

688

55,457

4,816

60,962

Treasury
stock
(968)

Valuation and translation adjustments

Valuation difference
Total shareholders’on available-for-sale
equitysecurities
67,745882

Subscription rights
to shares

Total net
assetsTotal valuation andtranslation
adjustments
882

235

68,863－－(2,904)(2,904)

6,262

6,262

(1,387)(1,387)(1,387)

531

760

760

193

267

267

Net income
Acquisition oftreasury stock
Disposal oftreasury stock
Increase due toshare exchange
Changes in items
other than equity(net)
Total changes
during fiscal year
Balance at end of
year

5,409

Legal
retainedearnings－

Shareholders’ equity

Balance at
beginning of year
Changes during
fiscal year
General reserve
Dividends ofsurplusTotal
capitalsurplus(1,004)(1,004)(235)(1,240)

(661)

2,998

(1,004)(1,004)

(235)

1,758

(1,630)70,744

(121)

(121)

－

70,622– 109 –

Current consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)(Unit: millions of yen)
Shareholders’ equity
Capital surplus
Capital stock Legal capitalsurplus
Balance at
beginning of
year

5,700

5,409

Retained earnings

Other
capitalsurplusTotal
capitalsurplusLegalretainedearnings

302

5,711

688

Changes during
fiscal year
Generalreserve
Dividends ofsurplus

Other retained earnings
Retained
Generalearnings
reservebrought
forward55,457

4,816

60,962

3,300(3,300)－(2,911)(2,911)

7,472

7,472

Net income
Acquisition oftreasury stock
Disposal oftreasury stock
Changes in
items otherthan equity(net)
Total changes
during fiscal year
Balance at end of
year

0

0

Total
retainedearnings

－

－

0

0

－

3,300

1,261

4,561

5,700

5,409

302

5,711

688

58,757

6,077

65,523

Shareholders’ equity

Total
Valuation difference Total valuation andshareholders’ on available-for-saletranslation
equitysecurities
adjustments

Treasurystock
Balance at beginning of year

Valuation and translation adjustments(1,630)70,744

(121)

(121)

Total net
assets70,622

Changes during fiscal year
General reserve－－

Dividends of surplus(2,911)(2,911)

Net income

7,472

7,472

Acquisition of treasury stock

(34)

(34)

(34)

Disposal of treasury stock

3

3

3

Changes in items other thanequity (net)Total changes during fiscal year
Balance at end of year

(438)

(438)

(438)

(30)

4,530

(438)

(438)

4,092

(1,660)75,274

(560)

(560)

74,714– 110 –

[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
valuation differences 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 specific identification method (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) Tangible fixed assets
Calculated based on declining balance method.
Provided, buildings acquired after April 1, 1998 (excluding accompanying facilities), and accompanying
facilities and structures acquired after April 1, 2016 are calculated based on straight-line method.
(2) Intangible fixed assets(i)

Software1) 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).
2) Software for internal use
Amortized using straight-line method with an estimated in-house useful life of five years.

(ii)

Other intangible fixed assets
Amortized using the straight-line method.

– 111 –

3. Accounting standards for provisions(1) Allowance for doubtful accounts
In setting aside provisions for possible losses due to uncollectable receivables, provisions are recognized at
the amounts calculated based on the historical rate of credit loss with respect to normal receivables, and at
the amounts determined in consideration of collectability of individual receivables with respect to doubtful
accounts and certain other receivables.
(2) Provisions for bonuses
In setting aside provisions for payment of bonuses of employees, provisions for bonuses are recognizedbased on the estimated amounts of payment.
(3) Provisions for stocks payment
In setting aside provisions for payment of the Company’s shares to Directors, etc., provisions are recognizedat estimated amounts of stocks payment determined based on the points allocated to Directors, etc. inaccordance with the rules on issuance of shares under the Board Incentive Plan (BIP) Trust.
(4) Provisions for retirement benefits
In setting aside allowances for employees’ retirement benefits, retirement benefit obligations and expectedpension assets payable as of the end of the current fiscal year are recognized.
(i)

Method of attributing expected benefits to dateIn calculating retirement benefit obligations, expected benefits are attributed to the period up until theend of the fiscal year based on benefit formula standards.

(ii)

Recognizing actuarial differences as expenses and past service costs
Past service costs are recognized as expenses for a certain years (10 years) within the average remaining
years of service of employees in which they occur using the straight-line method.
Actuarial differences are recognized as expense for the fiscal year in which they occur.

4. Accounting standards for revenues and expenses
Accounting standards for recognizing revenues and cost of sales of made-to-order software (softwaredevelopment contracts)(1) Projects for which the progress up to the end of the current fiscal year can be measured reliably
Accounted for by percentage-of-completion method (whereas the degree of completion is estimated basedon the construction cost percentage method).
(2) Other projects
Accounted for upon completion of construction works
5. Other important matters regarding the preparation of financial statements(1) Accounting method for consumption taxes and local consumption taxes
Consumption taxes are accounted for using the tax-exclusion method.
(2) Application of the consolidated taxation system
The consolidated taxation system is applied.
(3) Application of tax effect accounting for the transition from the consolidated taxation system to Group tax
sharing system
Based on the treatment set forth under Item 3 of the Treatment of Tax Effect Accounting for the Transition
from the Consolidated Taxation System to Group Tax Sharing System (Practical Solution No. 39, March 31,2020), the Company and its domestic consolidated subsidiaries do not implement the provisions of Paragraph
44 of the Implementation Guidance on Accounting Standard for Tax Effect Accounting (ASBJ Guidance No.
28, February 16, 2018) for items that were transitioned to the group tax sharing system which was establishedin the Law for Partial Revisions to the Income Tax Act, etc. (Law No. 8 of 2) and items that were revised
under the non-consolidated taxation system in line with the transition to the group tax sharing system. The
amounts of deferred tax assets and deferred tax liabilities are based on the provisions of the Tax Act prior torevisions.

– 112 –

(Changes in method of presentation)(Profit and Loss Statement)
Foreign exchange losses, which were presented independently in the previous fiscal year, have become lessimportant in terms of value, and have been included in Other under non-operating expenses for the current fiscal
year.
Also, impairment losses, which were presented independently in the previous fiscal year, have become lessimportant in terms of value, and have been included in Other under extraordinary losses for the current fiscal
year.
To reflect this change in method of presentation, the consolidated financial statements for the previous fiscal
year have been reclassified.
As a result, the 0 million yen presented as foreign exchange losses in the profit and loss statement of the previous
fiscal year has been reclassified as Other under non-operating expenses, and the -- million yen presented as
impairment losses has been reclassified as Other under extraordinary losses.
(Notes to Balance Sheets)*1. Monetary claims and monetary liabilities on affiliated companies
Previous fiscal year
(September 30, 2019)

Current fiscal year
(September 30, 2020)

Short-term monetary claims on affiliated companies

212 million yen

204 million yen

Long-term monetary claims on affiliated companies

38

163

Short-term monetary liabilities on affiliated companies

544

442

Previous fiscal year
(Started October 1, 2018;
ended September 30, 2019)

Current fiscal year
(Started October 1, 2019;
ended September 30, 2020)

60 million yen

59 million yen(Notes to Income Statements)*1. Volume of transactions with affiliated companies

Volume of trading transactions
Net sales
Purchases

2,966

2,937

Operating expenses

2,413

2,426

227

141

Volume of non-operating transactions*2. The approximate percentages of selling expenses were 51.3% for the previous fiscal year and 48.7% for
the current fiscal year; percentages of general and administrative expenses were 48.7% and 51.3%,
respectively.
Major items included in selling, general and administrative expenses are as follows.
Previous fiscal year
(Started October 1, 2018;
ended September 30, 2019)

Current fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Salaries

9,767million yen

9,882million yen

Provision for bonuses

2,704

2,726

Retirement benefit expenses

585

670

Provisions for stocks payment

562

40

Depreciation

575

530

Rent expenses

2,032

2,073

(Securities)
Stocks of subsidiaries and affiliates (the amounts in the previous fiscal year’s balance sheet were 795 million
yen for stocks of subsidiaries and 0 million yen for stocks of affiliates; the amounts in the current fiscal year’sbalance sheet are 1,389 million yen for stocks of subsidiaries and 0 million yen for stocks of affiliates) are notpresented here since quoted market values are not available and are deemed to be extremely difficult to measure.
– 113 –(Tax Effect Accounting)
1. Major factors of deferred tax assets and deferred tax liabilities
Previous fiscal year
(September 30, 2019)
Deferred tax assets
Software development costs
Provisions for bonuses
Provisions for retirement benefits
Retirement benefit trust
Accrued business tax
Loss on valuation of investment securities
Retirement bonuses for directors payable
Legal welfare expenses corresponding to provisions
for bonuses
Asset retirement obligations
Impairment losses
Provisions for stocks payment
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Retirement expenses corresponding to asset
retirement costs
Total deferred tax liabilities
Net deferred tax assets

2,290 million yen
982
498
1,201
126
195
17

Current fiscal year
(September 30, 2020)
2,415 million yen
1,006
157
1,558
150
197
17

146

150

99
112
171
238
6,081
(373)
5,707

106
112
171
554
6,599
(504)
6,095

20

26

20
5,687

26
6,068

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, 2019)

Current fiscal year
(September 30, 2020)

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

30.5 %

30.5 %

0.8

0.6

1.2

0.2

(0.3)

(0.1)

0.0

1.3

Income tax rate after applying tax effect accounting

32.2

32.5

– 114 –

(iv) [Supplementary Schedules][Schedule – Tangible Assets](Unit: millions of yen)
Balance at
beginning ofyear

Decrease incurrent year

Depreciationin current
year

Increase incurrent year

Balance at
end of year

Accumulated
depreciation

Buildings

7,028

235

17

397

6,849

10,900

Structures

205

2

－

19

187

507

Property, Vehicles
plant andequipment Tools, furniture & fixtures

0

29

0

0

28

24

1,724

794

18

721

1,779

4,978

6,636

－

－

－

6,636

－

15,595

1,062

36

1,139

15,481

16,410

2,347

1,809

－

1,509

2,647

2,667

Software in progress

807

578

1,024

－

361

－

Telephone subscription
rights

22

－

0

－

22

－

Other

0

－

－

0

0

0

3,177

2,387

1,024

1,509

3,031

2,668

Category

Type of asset

Land
Total property, plants &equipment
SoftwareIntangible
assetsTotal intangible assets(Note) Major increase during the current fiscal year was attributable to the following:
Buildings
VehiclesSoftwareAcquisition of HVAC for Chubu Consolidated Information Center
Acquisition of HVAC for Data Entry Center
Acquisition of UPS equipment for TISC Server Room 3
Acquisition of corporate bus
Development costs of software for sale
Development costs of software for internal use
Software purchased from outside

31 million yen
26 million yen
14 million yen
29 million yen
376 million yen
1,331 million yen
102 million yen[Schedule – Provisions](Unit: millions of yen)

Item

Balance atIncrease in current
beginning of year
year

Decrease incurrent year

Balance at
end of year

Allowance for doubtful accounts

25

19

25

19

Provisions for bonuses

3,222

3,300

3,222

3,300

Provisions for stocks payment

562

40

3

599

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

(3) [Other]
None to be disclosed.

– 115 –

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(Special account)
1-4-5 Marunouchi, Chiyoda-ku, Tokyo
Mitsubishi UFJ Trust and Banking Corporation, Stock Transfer Agency
Division

Administrator of shareholder
registry

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

Forwarding office――――――――――

Handling charges for buyback
and increase――――――――――

Method of giving public notice

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: https://www.tkc.jp/

Shareholder privileges

None to be disclosed.

(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 of Japan; rights to receive allotment of shares for subscription and subscription rights to shares based on thenumber of shares they hold; and rights to request the sale of shares less than one unit.

– 116 –

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 of Japan.

2 [Other Reference Information]
TKC Corporation has filed the following documents, originally written in Japanese, between the beginning of thecurrent fiscal year and the filing date of this Annual Securities Report.
(1) Annual Securities Report, Appendices and Confirmation Letter
Fiscal year (53rd term) from October 1, 2018 to September 30, 2019, filed to the Director-General of the Kanto
Local Finance Bureau, Japan, on December 23, 2019(2) Internal Control Report and AppendicesSubmitted to the Director-General of the Kanto Local Finance Bureau, Japan, on December 23, 2019(3) Quarterly Securities Reports and Confirmation Letter
First quarter of 54th term (From October 1, 2019 to December 31, 2019), filed to the Director-General of the Kanto
Local Finance Bureau, Japan, on February 6, 2020
Second quarter of 54th term (From January 1, 2020 to March 31, 2020), filed to the Director-General of the Kanto
Local Finance Bureau, Japan, on May 7, 2020
Third quarter of 54th term (From April 1, 2020 to June 30, 2020), filed to the Director-General of the Kanto Local
Finance Bureau, Japan, on August 11, 2020
(4) Extraordinary Reports
Submitted to the Director-General of the Kanto Local Finance Bureau, Japan, on December 23, 2019
Extraordinary Report based on Article 19, Paragraph 2, Item 9-2 (Results of Exercise of Voting Rights at General
Meeting of Shareholders) of the Cabinet Office Ordinance on Disclosure of Corporate Information, etc.

– 117 –

Section 2 [Information on Guarantors, etc. of the Company]
None to be disclosed.

– 118 –

Independent Auditors’ Audit Reportand Internal Control Audit Report
December 18, 2020

TKC Corporation
To: The Board of Directors
Ernst & Young ShinNihon LLC
Tokyo Office
Designated Engagement Partner
Executing Partner

Certified Public
Kanji Tako (seal)
Accountant

Designated Engagement Partner
Executing Partner

Certified Public
Toru Iizuka (seal)
Accountant[Audit of financial statements]
OpinionWe have audited the consolidated financial statements of TKC Corporation for the period started October 1, 2019 andended September 30, 2020 provided in the Financial Information section, which comprise the consolidated balance sheets,the consolidated statements of profit or loss, the consolidated comprehensive income, the consolidated statement ofchanges in equity, and the consolidated statement of cash flows for the year then ended, and notes to the consolidated
financial statements in accordance with Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act of Japan.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of TKC Corporation and its consolidated subsidiaries as of September 30, 2020, and its consolidated
financial performance and its consolidated cash flows for the year then ended in accordance with accounting principles
generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report. We are independent of the Company and its consolidated subsidiary in accordance with the ethicalrequirements that are relevant to our audit of the financial statements in Japan, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinion.
Responsibilities of Management, Corporate Auditors and Board of Auditors 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.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue
as a going concern and disclosing, as required by accounting principles generally accepted in Japan, matters related togoing concern.
Corporate auditors and the Board of Auditors are responsible for overseeing the Directors’ performance of their duties
including the design and implementation of the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are freefrom material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:– 119 –

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion.
• Obtain an understanding of internal control relevant to the audit in order to assess the risk and design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an opinion on theeffectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if suchdisclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going
concern.
• Evaluate whether the presentation and disclosures in the consolidated financial statements are in accordance withaccounting principles generally accepted in Japan, the overall presentation, structure and content of the consolidated
financial statements, including the disclosures, and whether the consolidated financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with corporate auditors and the Board of Auditors regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide corporate auditors and the Board of Auditors with a statement that we have complied with relevant ethicalrequirements regarding independence, and communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, related safeguards.
[Internal control audit]
OpinionWe also have audited the accompanying internal control report of TKC Corporation as of September 30, 2020, in
accordance with Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act of Japan.
In our opinion, the accompanying internal control report, which states that the internal control over financial reporting was
effective as of September 30, 2020, presents fairly, in all material respects, the results of the assessments of internal control
over financial reporting in accordance with assessment standards for internal control over financial reporting generally
accepted in Japan.
Basis for Opinion
We conducted our audit of the internal control in accordance with auditing standards for internal control over financial
reporting generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Internal Control Report section of our report. We are independent of the Company andits consolidated subsidiary in accordance with the ethical requirements that are relevant to our audit of the internal control
report in Japan, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management and Corporate auditors and the Board of Auditors for the Internal Control ReportManagement is responsible for the design and operation of internal control over financial reporting and the preparation andfair presentation of the internal control report in accordance with assessment standards for internal control over financial
reporting generally accepted in Japan.
Corporate auditors and the Board of Auditors are responsible for overseeing and examining the design and operation ofinternal control over financial reporting.
Internal control over financial reporting may not completely prevent or detect financial statement misstatements.

– 120 –

Auditor’s Responsibilities for the Audit of the Internal Control Report
Our objectives are to obtain reasonable assurance about whether the internal control report is free from material
misstatement based on our audit of the internal control report and to issue an auditor’s report that includes our independent
opinion.
As part of our audit in accordance with auditing standards for internal control over financial reporting generally acceptedin Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:• Perform procedures to obtain audit evidence about the results of the assessments of internal control over financial
reporting in the internal control report. The procedures for the audit of the internal control report are selected andperformed, depending on the auditor’s judgment, based on significance of effect on the reliability of financial reporting.
• Evaluate the overall presentation of the internal control report, including the appropriateness of the scope, procedures
and results of the assessments that management presents.
• Obtain sufficient appropriate audit evidence about the results of the assessments of internal control over financial
reporting in the internal control report. We are responsible for the direction, supervision and performance of the auditof the internal control report. We remain solely responsible for our audit opinion. We remain solely responsible for our
audit opinion.
We communicate with corporate auditors and the Board of Auditors regarding, among other matters, the planned scope
and timing of our audit of the internal control report, the results thereof, material weaknesses in internal control identified
during our audit of internal control report, and those that were remediated.
We also provide corporate auditors and the Board of Auditors with a statement that we have complied with relevant ethicalrequirements regarding independence, and communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, related safeguards.
Conflicts of Interest
Our firm and its designated engagement partners have no interest in the Company or its consolidated subsidiaries whichshould be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
End of document(*) 1 The above represents a translation, for convenience only, of the original copy of the Audit Report issued in the Japanese
language, 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.

– 121 –

Independent Auditors’
Audit Report
December 18, 2020
TKC Corporation
To: The Board of Directors

Ernst & Young ShinNihon LLC
Tokyo Office
DesignatedEngagement Partner
Executing Partner

Certified Public
Accountant

Kanji Tako (seal)

DesignatedEngagement Partner
Executing Partner

Certified Public
Accountant

Toru Iizuka (seal)

OpinionWe have audited the financial statements of TKC Corporation for the 54th fiscal year started October 1, 2019 and ended
September 30, 2020 provided in the Financial Information section, which comprise the balance sheets, the statements ofprofit or loss, the comprehensive income, and the statement of changes in equity, and notes to the financial statements inaccordance with Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act of Japan.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of TKC
Corporation as of September 30, 2020, and its financial performance for the year then ended in accordance with accounting
principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of ourreport. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Responsibilities of Management, Corporate Auditors and Board of Auditors for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance withprinciples setting forth the preparation and properly presentation of these financial statements generally accepted in Japan.
Responsibilities include those for designing and operating an internal control system as the management deems necessary
in order to prepare and properly present the financial statements that are free from material misstatement due to fraud or
error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going
concern and disclosing, as required by accounting principles generally accepted in Japan, matters related to going concern.
Corporate auditors and the Board of Auditors are responsible for overseeing the Directors’ performance of their duties
including the design and implementation of the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Misstatements canarise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:– 122 –

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion.
• 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 in making these risk assessments the auditor considers internal controls relevant to the audits inorder to design audit procedures that are appropriate in the circumstances.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if suchdisclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as agoing concern.
• Evaluate whether the presentation and disclosures in the financial statements are in accordance with accounting
principles generally accepted in Japan, the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying transactions and events in amanner that achieves fair presentation.
We communicate with corporate auditors and the Board of Auditors regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide corporate auditors and the Board of Auditors with a statement that we have complied with relevant ethicalrequirements regarding independence, and communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, related safeguards.
Conflicts of Interest
Our firm and the executing partners have no interest in the Company for which disclosure is required under the provisionsof the Certified Public Accountants Act of Japan.
End of document(*) 1. The above represents a translation, for convenience only, of the original copy of the Audit Report issued in the Japanese
language, 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.

– 123 –

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

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

Director of Kanto Local Finance Bureau[Date filed]December 21, 2020

[Company name]

Kabushiki Kaisha TKC[Company name in English]

TKC Corporation[Title and name of representative]

Masanori Iizuka, Representative Director, President and Executive
Officer[Title and name of Chief Financial Officer]

Kiyotsugu Nakanishi, Director & Executive Officer, Chief Director of
Business Administration[Address of head office]1758 Tsurutamachi, Utsunomiya-shi, Tochigi[Place available for public inspection]

TKC Corporation, Tokyo Head Office(2-1 Ageba-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashikabutocho, Chuo-ku, Tokyo)– 124 –

1 [Matters concerning the basic framework for internal control over financial reporting]Masanori Iizuka, Representative Director, President and Executive Officer, and Kiyotsugu Nakanishi, Chief Financial
Officer of TKC Corporation (the “Company”), are responsible for designing and operating effective internal control
over financial reporting of the Company, and have designed and operated internal control over financial reporting inaccordance with the basic framework for internal control set forth in “Establishing the Standards and Practice Standards
for Management Assessment and Audit Concerning Internal Control Over Financial Reporting (Council Opinions)”
released by the Business Accounting Council.
Internal control, by nature, may not function effectively due to errors in judgment or negligence of those implementing
internal control, or may not respond to unanticipated changes in internal and external environments. Therefore, there isa possibility that misstatements may not be completely prevented or detected by internal control over financial reporting.

2 [Matters concerning the scope of assessment, assessment date and assessment procedures]
Assessment of internal control over financial reporting was performed as of September 30, 2020, which is the end of
this fiscal year, in accordance with assessment standards for internal control over financial reporting generally acceptedin Japan.
In conducting this assessment, we first assessed internal controls which may have material impact on the entire financial
reporting on a consolidated basis (entity-level controls), and based on the results of such assessment, we selected thebusiness processes to be assessed. In the process-level assessment, we analyzed the selected business processes,
identified key controls that may have material impact on the reliability of the financial reporting, and assessed thedesign and operation of these key controls to determine the effectiveness of our internal controls.
We determined the required scope of assessment of internal control over financial reporting for the Company as wellas its consolidated subsidiaries and equity-method affiliated companies based on the materiality that may affect thereliability of the Company’s financial reporting. The materiality that may affect the reliability of financial reporting
was determined by taking into account the materiality of quantitative and qualitative impacts on financial reporting.
Based on the results of assessment of entity-level controls conducted for the Company and one of its consolidated
subsidiaries, we reasonably determined the scope of assessment of internal controls over business processes. The fourother consolidated subsidiaries and one equity-method affiliated company determined to have insignificant quantitativeand qualitative influence on the reliability of financial reporting were not included in the scope of assessment of entitylevel controls.
For the purpose of determining the scope of assessment of internal control over business processes, we selected
locations and business units to be tested based on the fiscal year’s nets sales (after elimination of transactions between
consolidated companies), and companies whose net sales reached two-thirds of total amount on the Company’s
consolidated net sales were selected as “Significant Locations/Business Units.” At such Significant Locations/Business
Units, we included in the scope of assessment, business processes that lead to sales, accounts receivable, purchases andinventories that may have material impact on the business objectives of the Company. Further, in addition to the selected
Significant Locations/Business Units, we also included in the scope of assessment, certain business processes having
greater likelihood of material misstatements, processes having significant accounts involving estimates andmanagement’s judgment, and processes concerning businesses or operations dealing with high-risk transactions, asbusiness processes that may have material impacts on financial reporting.

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

4 [Supplementary Information]
None to be disclosed.

5 [Special Notes]
None to be disclosed.

– 125 –

[Front Cover][Document filed]

Written Confirmation[Applicable law]
[Filed with]

Article 24-4-2, Paragraph 1 of the Financial Instruments and Exchange
Act of Japan
Director of Kanto Local Finance Bureau[Date filed]December 21, 2020

[Company name]

Kabushiki Kaisha TKC[Company name in English]

TKC Corporation[Title and name of representative]

Masanori Iizuka, Representative Director, President and Executive
Officer
Kiyotsugu Nakanishi, Director & Executive Officer, Chief Director of
Business Administration
1758 Tsurutamachi, Utsunomiya-shi, Tochigi[Title and name of Chief Financial Officer][Address of head office][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)

1 [Matters Related to Adequacy of Statements Contained in the Annual Securities Report]
Masanori Iizuka, Representative Director, President and Executive Officer of the Company and Kiyotsugu Nakanishi,
Chief Financial Officer of the Company hereby confirm that the statements contained in the Annual Securities Reportfor the 54th fiscal year (from October 1, 2019 to September 30, 2020) are adequate under the Financial Instruments
and Exchange Act of Japan.

2 [Special Notes]
None to be disclosed.

– 126 –