Consolidated Summary Report of Operating Resultsfor Fiscal 2012 (Year ended December 2012) [Japan GAAP]
February 7, 2013
Company name:

Future Architect, Inc.

Shares listed on:First Section of Tokyo Stock Exchange

Security code number:

4722

Representative:

Yasufumi Kanemaru, President & CEO

Contact:

Yoshihiko Nakajima, Executive Officer

Website:http://www.future.co.jp

TEL:+81-3-5740-5724

Scheduled date of annual general shareholders’ meeting: March 26, 2013 Scheduled date for distribution of dividend payments: March 27, 2013

Scheduled date for filing the securities report: March 27, 2013
Creation of supplemental material on financial results: Yes  No
Holding of financial results briefing:Yes  No (For institutional investors and analysts)(Amount rounded off to million yen)

1. Consolidated Results for Fiscal 2012 (January 1, 2012 to December 31, 2012)(1) Consolidated operating results(Percentage figures reflect year-on-year change)
Net sales
Fiscal 2012
Fiscal 2011

Operating income

Ordinary income

Million yen% change

Million yen% change

Million yen % change

23,35323,292

0.3
2.9

1,935
2,929

(34.0)(6.7)

Note: Comprehensive income Fiscal 2012: 1,151 million yen (-29.4%)

Net income per share(fully diluted)

Net income per share
Yen

Fiscal 2012
Fiscal 2011

2,588.
3,756.

2,057
3,051

% change

1,167
1,715

(31.9)
7.8(32.6)(7.0)

Fiscal 2011: 1,632 million yen (1.4%)

Ratio of ordinary
income to total assets

Return on equity

Yen

05
80

Net income
Million yen-

Operating profit
margin

%

%

%

10.1
15.6

14.1
21.5

8.3
12.6

(Reference) Profit/loss from equity method investments Fiscal 2012: 8 million yen

Fiscal 2011: 22 million yen(2) Consolidated financial position
Total assets

Net assets

Shareholders’ equity ratio

Net assets per share

Million yen

Million yen

Percent (%)

Yen

14,83014,453

11,766
11,41078.5
78.9

25,865. 24
24,964. 67

Fiscal 2012
Fiscal 2011

(Reference) Shareholders’ equity Fiscal 2012: 11,645 million yen

Fiscal 2011: 11,399 million yen(3) Consolidated cash flow position
Cash flows from operating
activities

Cash flows from investing
activities

Cash flows from financing
activities

Cash and cash equivalents
at the end of the period

Million yen

Million yen

Million yen

Million yen

727
1,919

(1,157)
(617)

(919)
(919)

4,184
5,526

Fiscal 2012
Fiscal 2011

2. Dividends
Dividends per share (yen)Firstquarter

Secondquarter

Yen

Fiscal 2011
Fiscal 2012
Fiscal 2013 (Forecast)

-

Third
QuarterYen

750.00750.00750.00Year-end
dividend

Yen

-

Total

Annualdividends(Total)Dividend
payout ratio(consolidated)

Ratio ofdividends to
net assets(consolidated)

Yen

Yen

Million yen%%

750.00750.00750.001,500.00
1,500.00
1,500.00

684
675

39.9
58.0
37.5

6.2
5.9

3. Projected Consolidated Results for Fiscal 2013 (January 1, 2013 to December 31, 2013)
Net salesFirst six months(accumulated
total)
Full year

Operating income(Percentage figures reflect year-on-year change)
Net income per
Ordinary income
Net income
shareMillion yen% change

Million yen% change

12,250

10.1

1,340

84.9

1,365

69.7

750

61.7

1,665. 81

25,700

10.0

3,200

65.4

3,250

57.9

1,800

54.1

3,997. 94

Million yen % change

Million yen % change

Yen* Notes(1) Changes in significant subsidiaries during the period under review (changes in specified subsidiaries that involved
changes in the scope of consolidation): Yes  No
New: companies (company names)
Excluding: 1 company (company names) Associant Technology Inc.
Note:

For details, please refer to “4. Consolidated Financial Statements, (6) Significant Accounting Policies’ Regarding the Preparation ofConsolidated Financial Statements” on page 26 of Attached Materials.

(2) Change in accounting policies or estimates and restatements
a. Change in accounting policies in accordance with revision of accounting standards: Yes  No
b. Change in accounting policies other than item a. above : Yes  No
c. Change in accounting estimates : Yes  No
d. Restatements : Yes  No
(3) Number of outstanding shares (common stock)a. Total outstanding shares as of the end of theperiod (including treasury stocks)
b. Total treasury stocks as of the end of the periodc. Average number of outstanding stocks during thequarter under review

Fiscal 2012

476,640 sharesFiscal 2011

476,640 sharesFiscal 2012

26,408 sharesFiscal 2011

20,008 sharesFiscal 2012

451,208 sharesFiscal 2011

456,632 shares(Reference) Overview of non-consolidated results
1. Non-consolidated Results for Fiscal 2012 (January 1, 2012 to December 31, 2012)(1) Non-consolidated operating results(Percentage figures reflect year-on-year change)
Net sales

Operating income

Ordinary income

Net income

Million yen%

Million yen%

Million yen%

Million yen%

14,017
14,630

(4.2)
2.4

2,011
2,745

(26.7)
(9.7)

2,130
2,803

(24.0)
(9.8)

1,036
1,547

(33.0)
4.5

Fiscal 2012
Fiscal 2011

Net income per share (fully
diluted)Yen
Yen
2,297.17
3,389.84-

Net income per share
Fiscal 2012
Fiscal 2011

(2) Non-consolidated financial position
Total assets

Net assets

Shareholders’ equity ratio

Net assets per share

Million yen

Million yen%

Yen

13,113
12,997

11,201
11,06485.4
85.1

24,878.39
24,229.93

Fiscal 2012
Fiscal 2011
(Reference) Shareholders’ equity

Fiscal 2012: 11,201 million yen

Fiscal 2011: 11,064 million yen

2. Projected Non-consolidated Results for Fiscal 2013 (January 1, 2013 to December 31, 2013)(Percentage figures reflect year-on-year change)

First six months(accumulated total)
Full year

Net sales
Million yen%

Ordinary income
Million yen%

Net income
Million yen

-

-

-

-

-

-

15,800

12.7

3,050

43.2

1,740

67.9

%

Net income per shareYen
3,864. 67* Indication of audit procedure implementation status
This earnings report is exempt from audit procedures based upon the Financial Instruments and Exchange Act. At the time of this document’s
release, audit procedures for the financial statements under the Financial Instruments and Exchange Act had not been completed.

* Points to note about the proper use of projections, and other noteworthy events
The above projection, representing our best estimate based on information currently available to us, incorporates uncertain factors. For details of
the preconditions used in making the above-mentioned forecast and other relevant matters, refer to page 3 of the accompanying material.

 Contents
1.

2.
3.

4.

5.

6.

Analysis of Operating Results and Financial Condition .............................................................................................................................................2(1) Analysis of operating results .............................................................................................................................................................................2(2) Analysis of financial condition ..........................................................................................................................................................................4(3) Dividend policy and dividends for the current and next year ...........................................................................................................................4(4) Business risks .....................................................................................................................................................................................................5
The Future Group ......................................................................................................................................................................................................10
Management Policy ...................................................................................................................................................................................................14(1) Basic corporate tenets ......................................................................................................................................................................................14(2) Goals and objectives ........................................................................................................................................................................................14(3) Medium to long-term management strategies .................................................................................................................................................14(4) Issues the Company faces ................................................................................................................................................................................16
Consolidated Financial Statements ...........................................................................................................................................................................17(1) Consolidated balance sheets ............................................................................................................................................................................17(2) Consolidated statements of income and comprehensive income ....................................................................................................................19(3) Consolidated statements of changes in net assets ...........................................................................................................................................21(4) Consolidated statements of cash flows ............................................................................................................................................................23(5) Notes regarding premise of surviving company .............................................................................................................................................25(6) Significant accounting policies regarding the preparation of consolidated financial statements ...................................................................26(7) Changes in accounting policies .......................................................................................................................................................................28(8) Accounting standards not applied ...................................................................................................................................................................28(9) Changes in classification .................................................................................................................................................................................28(10) Changes in accounting estimates .....................................................................................................................................................................28(11) Additional information ....................................................................................................................................................................................29(12) Notes to consolidated financial statements .....................................................................................................................................................29(Notes to consolidated balance sheets) ........................................................................................................................................................... 29(Notes to consolidated statements of income and comprehensive income) .................................................................................................. 29(Notes to consolidated statements of changes in net assets) .......................................................................................................................... 31(Notes to consolidated statements of cash flows) .......................................................................................................................................... 33(Segment information) .................................................................................................................................................................................... 35(Lease transactions) ........................................................................................................................................................................................ 40(Related party information) ............................................................................................................................................................................ 41(Tax effect accounting) ................................................................................................................................................................................... 42(Financial instrument) ..................................................................................................................................................................................... 44(Securities) ...................................................................................................................................................................................................... 47(Derivative transactions)................................................................................................................................................................................. 48(Retirement benefits) ...................................................................................................................................................................................... 48(Stock options) ................................................................................................................................................................................................ 49(Business combinations) ................................................................................................................................................................................. 50(Asset retirement obligations) ........................................................................................................................................................................ 56(Real estate, including lease) .......................................................................................................................................................................... 56(Special purpose company subject to disclosure) .......................................................................................................................................... 56(Per share data) ............................................................................................................................................................................................... 56(Significant subsequent events) ...................................................................................................................................................................... 57
Non-consolidated Financial Statements ....................................................................................................................................................................58(1) Balance sheets ..................................................................................................................................................................................................58(2) Non-consolidated statements of income ..........................................................................................................................................................60(3) Statements of changes in net assets .................................................................................................................................................................64(4) Notes regarding the premise of surviving company........................................................................................................................................66(5) Significant accounting policies........................................................................................................................................................................67(6) Change in accounting policies .........................................................................................................................................................................68(7) Change in classification ................................................................................................................................................................................68(8) Changes in accounting estimates .....................................................................................................................................................................68(9) Additional information ....................................................................................................................................................................................68(10) Notes to non-consolidated financial statements ..............................................................................................................................................69(Notes to balance sheets) ................................................................................................................................................................................ 69(Notes to statements of income) ..................................................................................................................................................................... 69(Notes to statements of changes in net assets) ............................................................................................................................................... 71(Lease transactions) ........................................................................................................................................................................................ 71(Securities) ...................................................................................................................................................................................................... 71(Tax effect accounting) ................................................................................................................................................................................... 72(Business combinations) ................................................................................................................................................................................. 73(Asset retirement obligations) ........................................................................................................................................................................ 73(Per share data) ............................................................................................................................................................................................... 74(Significant subsequent events) ...................................................................................................................................................................... 75
Other ..........................................................................................................................................................................................................................76(1) Changes in Directors........................................................................................................................................................................................76(2) Other ................................................................................................................................................................................................................76-1-

1. Analysis of Operating Results and Financial Condition(1) Analysis of operating results(Overview of fiscal year under review)
The Group’s consolidated operating results for fiscal 2012 were as follows:
Net sales¥23,353 million (up 0.3% year-on-year)

Operating income¥1,935 million (down 34.0% year-on-year)

Ordinary income¥2,057 million (down 32.6% year-on-year)

Net income¥1,167 million (down 31.9% year-on-year)

During the fiscal year ended December 2012, the Group completed orders for multiple large-scale projects in the first half
and also acquired new clients in the financial and manufacturing sectors besides the retail and service sectors, despite thetransitional period to the new projects. Furthermore, subsidiaries in Southeast Asia and new businesses such as healthcare
contributed to consolidated earnings, resulting in a year-on-year increase of net sales. Meanwhile, profits declined from a year
earlier, due to an increase in costs for improving the quality at some projects and delays in some other projects, as well as anincrease in costs for expanding operations in Southeast Asia and starting up new businesses.
As a result of the aggressive client sales activities, the backlog stood at ¥7,560 million at the end of fiscal 2012, a sharp
increase from ¥4,748 million a year ago.
Earnings results of each business segment are as follows. The earnings results by business segment represent values before
adjusting for internal sales or transfers among segments.
1. IT Consulting BusinessIn the IT Consulting Business, we received orders for multiple large projects involving the renovation and integration of
IT systems accordance with operational reforms, as well as the initiation of many medium-scale projects for new clients inthe financial and manufacturing sectors.
We saw an increase in new initiatives, including the short-term establishment of e-commerce infrastructures, using
existing components. In addition, we began to see favorable results from services, such as cloud services for financial
institutions, value-added outsourcing services, and global ERP, which we are promoting as new strategic fields. However,profitability dropped as costs for improving quality increased and delays in some existing projects occurred.
With regard to businesses in Southeast Asia, the Malaysian subsidiary grew steadily, achieving a profit in the full fiscal
year, while promotional costs were incurred at subsidiaries in Singapore and Thailand due to a slower-than-expected pace ofacquiring new customers.
As a result, net sales increased by 1.5% from the previous fiscal year to ¥14,843 million, while operating income
decreased by 32.1% to ¥1,745 million.
2. Package & Service BusinessIn the Package & Service Business, Ascendia Inc. began to provide full-scale development and operation services at its
regional bases, saw its public-related projects progress steadily, and achieved stable performance throughout the fiscal year.
The earnings of Future One, Inc., for the second half increased from a year earlier, but profits decreased for the full fiscal
year, caused by a fall in the profitability of some projects in the first quarter.
As a result, net sales decreased by 2.4% from a year earlier to ¥4,389 million, and operating income decreased by 16.3%
to ¥279 million.
3. Corporate Revitalization BusinessIn the Corporate Revitalization Business, Uoei Shoten Corporation, the operator of a grocery supermarket, implemented
various IT-based measures, including introduction of automatic order placement and EDI systems, which it had promoted,
and squeezed selling, general and administrative expenses through an efficient advertising strategy. As a result, net sales
decreased by 2.5% year-on-year to ¥4,439 million and operating income decreased by 6.9% to ¥29 million. Operating income
was positive on a full-year basis for the second consecutive year.
4. Others
Through a corporate split, we acquired media service businesses, including publication of the magazine Tokyo Calendar,
at the end of January 2012, and expanded its Internet services, for example, by renewing its website. As a result, we achieveda profit from the businesses in November and December; however, this failed to offset earlier losses.

-2-

(Outlook for the next fiscal year)
Our earnings forecast for the fiscal year ending December 2013 is as follows:
Consolidated net sales¥25,700 million (up 10.0% year-on-year)

Consolidated operating income¥3,200 million (up 65.4% year-on-year)

Consolidated ordinary income¥3,250 million (up 57.9% year-on-year)

Consolidated net income¥1,800 million (up 54.1% year-on-year)

The noteworthy events for the following fiscal year are as follows:
1. IT Consulting Business(1) Core business area
Reflecting the trend of corporate reorganization and integration, companies have realized again the importance ofrenovating and integrating IT systems, which should lead to operational reforms, and reduce IT costs significantly. Multiple
projects for new clients have started in the area of the Company’s core business, which provides real-time management
processes for customers. We believe that it is crucial to confidently lead these projects to success.
(2) New services area
We have already established relations with multiple customers in the area of new services such as cloud services, value
added outsourcing services (VAO), and global ERP for large companies. We will further expand these new services. In
addition, we will work to win more orders for the new services by marketing our favorable achievement with new clients,
including securities firms and FX online-trade companies, to the industry which these companies belong.
In the healthcare field, we will engage in new businesses in the coming fiscal year, for example, through the cloud-based
provision of electronic medical charts.
(3) Quality improvement
We developed an in-house a system that monitors the implementation status of projects and detects problems at earlier
stages, and began to use it in the second half. From now, we will effectively use the system and thoroughly control thequality of projects, aiming to enhance overall profitability.
(4) Overseas businesses
In Southeast Asia, we will further strengthen our partnerships with global ERP vendors, and combine the development
capabilities of our Malaysian subsidiary, which has already become profitable, with the marketing capabilities ofSingaporean and Thai subsidiaries. Through these activities, we aim to win more orders from large local companies and makelocal operations profitable at an early date. Furthermore, we will expand IT-based support for Japanese companies advancing
into the Asian region.
2. Package & Service Business
Future One, Inc. will work to increase orders received by upgrading in-house manufactured products and enhancing
functions for which needs are strong, while continuing to strengthen direct marketing and developing new sales channels.
Future One, Inc. will also improve the profit and loss management of projects using the Company’s project management tool,
which has already been introduced. Ascendia Inc. will strengthen its technological capabilities by enhancing cooperation andsharing expertise with the Company, and further expand public-related businesses and near-shore businesses (such as
operation/maintenance and development at regional bases in Japan).
3. Corporate Revitalization BusinessUoei Shoten Corporation will continue to reform the processes of customer marketing, procurement and sales of products,
and inventory management using IT.

-3-

(2) Analysis of financial condition
1. Assets, liabilities and net assets
The following are the status of assets, liabilities and net assets as of the end of fiscal year under review.
Assets¥14,830 million (up 2.6% year-on-year)

Liabilities¥3,063 million (up 0.7% year-on-year)

Net assets¥11,766 million (up 3.1% year-on-year)

The following is the analysis of financial condition for the fiscal year under review.
(1) Assets
Current assets were ¥9,771 million on a consolidated basis at the end of the fiscal year under review, down ¥757 million
from the preceding year, and fixed assets amounted to ¥5,058 million, up ¥1,134 million, with total assets standing at ¥14,830
million, up ¥376 million. The main underlying factors were an increase in fixed assets, including software (increase of ¥450
million from the end of the previous consolidated fiscal year) and investment securities (increase of ¥383 million), due to thelaunch of cloud services and proactive business-related investments, and a rise in notes and accounts receivable-trade(increase of ¥752 million), in contradiction to decline in cash and deposits (decrease of ¥920 million) and short term
investment securities (decrease of ¥670 million).
For a breakdown of decrease in cash and deposits, see “2. Analysis of cash flows.”(2)

Liabilities
Current liabilities were ¥2,747 million at the end of the fiscal year under review, up ¥31 million from the preceding year,

and noncurrent liabilities were ¥316 million, down ¥10 million, which brought total liabilities to ¥3,063 million, up ¥21
million. Main factors included a rise in accounts payable-trade (increase of ¥95 million from the end of the previous
consolidated fiscal year) and allowance for office transfer expenses (increase of ¥35 million), in contradiction to a fall inincome tax payable (decrease of ¥54 million) and reserve for quality assurance (decrease of ¥54 million).
(3) Net assets
Net assets were ¥11,766 million at the end of the fiscal year under review, up ¥355 million from the preceding year. The
main factors included an increase of retained earnings (an increase of ¥489 million from the end of previous consolidated
fiscal year).
2. Analysis of cash flows
The following is the analysis of the Group’s consolidated cash flows for the fiscal year under review.
(1) Cash flows from operating activities
Net cash from operating activities was inflow of ¥727 million (compared to an inflow of ¥1,919 million in the previous
fiscal year), mainly due to the posting of net income before taxes of ¥2,047 million, despite an increase in notes and accounts
receivable-trade of ¥536 million and an income taxes payment of ¥903 million.
(2) Cash flows from investing activities
Net cash from investing activities was outflow of ¥1,157 million (compared to an outflow of ¥617 million in the previous
fiscal year), chiefly due to purchases of tangible fixed assets of ¥291 million and purchases of intangible fixed assets of ¥497
million.
(3) Cash flows from financing activities
Net cash from financing activities was outflow of ¥919 million (compared to an outflow of ¥919 million in the previous
fiscal year), mainly reflecting purchases of treasury stock of ¥223 million and payments for a cash dividend of ¥677 million.
(4) Cash and cash equivalents at end of the period
Cash and cash equivalents outstanding at the end of the fiscal year under review were ¥4,184 million, with a decrease of¥1,341 million in cash and cash equivalents resulting from operating, investing and financing activities.

(3) Dividend policy and dividends for the current and next year
The Company seeks to maximize medium-term total returns (capital and income gains) to our shareholders. In order toachieve this goal, we will pay a dividend of surplus, targeting a dividend payout ratio on a non-consolidated basis of 30% or moreof earnings, by comprehensively taking into consideration a proper balance between dividend payout and the status of period
profit and loss and cash flows for the term, as well as purchases of treasury shares, after ensuring internal reserves needed forimportant investments, aimed at enhancing R&D activities to ensure medium-term technological superiority; attracting andtraining personnel; implementing measures for strengthening project management; and enhancing M&A activities and alliances.

-4-

Dividend of surplus at the end of the fiscal year under review (December 31, 2012) at the record date is planned to pay ¥750
per share, making a full-year dividend of ¥1,500 per share when combined with the interim dividend (with the record date of June30, 2012), which was paid in September 2012. As a result, the dividend payout ratio on a consolidated basis is 58.0% and that on
a non-consolidated basis is 65.3%.
The Company’s planned dividend payment for the next fiscal year is ¥1,500 per share (of which, the interim dividend is¥750) in accordance with the above policy.

(4) Business risks
The followings are major factors that could cause risks in association with the Group’s businesses as well as other parties,
and thus could have a significant impact on investors’ decisions.
The factors described need not necessarily be regarded as risk factors, but the Group deemed them as important for investors
who are considering investing, and also useful in terms of proactive information disclosure to investors. Given the possibility ofthese risks, the Group will strive to prevent them from occurring and respond to them in the event they occur.
The forecasts referred to in the text are based on the Group’s judgment as of February 7, 2013.
1) Economic conditions and business climate
At major corporations, which are the main clients of the IT Consulting Business, it has become indispensable to make IT
investments aimed at quickly and efficiently responding to changes in the business environment, and implement new IT
strategies such as downsizing and using cloud services to reduce IT costs. However, the Group may be affected by a decreasein IT investment as a whole, reflecting uncertainty over the economic situation.
Also, it is effective for small and midsize companies, which are principle clients of the Package & Service Business, touse solutions based on inexpensive and highly versatile software packages to improve the efficiency of their operations. Useof IT, including use of cloud services, is expected to increase in the future among these companies. However, the amount of
IT investments by small and midsize companies may decline, since they may be affected by business trends more greatly thanmajor corporations.
As described above, the Group will strive to further increase its competitive edge by pushing forward with measures thatare most suitable for needs of each client. However, it is likely that corporate investments will slow due to the economic
trends, and orders will decrease. Hence, we need to make preparations so that we will be able to better respond to such asituation.
In the Corporate Revitalization Business, the Group provides services that closely meet the needs of local clients.
However, operational results might be influenced by such external factors as economic trends, heightened price competition,and substantial price fluctuations of perishables due to abnormal weather and rumors.
2) Staying abreast of technological innovation
Ever since its establishment, the IT Consulting Business of the Group has endeavored to specialize in open systems that
do not rely on specific products, by using cutting-edge IT and network technologies. Independent of any vendors, the Group
strives to select the optimal products for clients, but the options of hardware, middleware, etc. may narrow as some vendors
drop out due to the excessively harsh competition.
Thus, the Group needs to raise and maintain its competitiveness by putting its efforts and resources into the research andintroduction of cutting-edge technologies, centering on IT. To this end, the Group is always gathering the latest information
on software and hardware, with the core technology division at the helm. In the Package & Service Business, the Group is
gradually upgrading software packages by making existing ones compatible with and developing next-generation products sothat our software packages stay abreast of new technologies.
In addition, the selection and operation environment of hardware for applications at client companies has changed
significantly in recent years due to innovations related to cloud computing technologies. The Group is responding quickly tosuch changes by introducing cloud computing to accumulated technologies and solutions, and further enhancing research anddevelopment.
However, should the Group not manage to fully keep abreast of new technologies, its competitiveness may decline
leading to fewer orders being received.
3) R&D activities
In recent years, the economic climate that our clients find themselves in has been dramatically changing and the rate ofprogress in IT has been increasing, causing the information systems of our clients to become obsolete more quickly.
Therefore, it is crucial for the Group to develop advanced systems in shorter time spans, while taking future trends into fullaccount. Against this backdrop, the Group is making the most of various components and development support tools.

-5-Such components and development support tools have enabled the Group to significantly improve system quality andproductivity in actual systems development. However, the technological evolution of IT is rapid and client needs are
becoming more sophisticated and complicated.
To respond to such needs, it is important for the Group to continue to incorporate new technical elements into thesecomponents and development support tools so that it can develop high-quality systems more promptly; improve processing
performance through decentralization; facilitate the system maintenance through centralized management; and standardize
interfaces to enable smooth interconnectivity with other systems.
The Group also needs to expand the range of industry-specific platform models, in order to effectively and efficiently
leverage the know-how it has accumulated.
In the Package & Service Business, when customizing packages to suit clients’ needs, the Group uses templates bybusiness type and additional libraries prepared in advance, aiming to offer high-quality products and deliver them in a shorttime, and is constantly adding variations to these templates and libraries.
Furthermore, the Group is promoting research and development for introduction of cloud computing to various solutions,
including financial, CRM, and ERP packages, and implementing cloud computing.
In the future, the Group will continue to focus on such research and development. The Group will further make efforts toobtain able personnel who proceed with such R&D. However, there is a possibility that the Group may fail to recruit such
persons or that the R&D activities do not fare as well as expected, which would have an adverse effect on the Group’s
competitive edge.
4) Recruitment and training
The Group understands that recruiting excellent personnel and training them are the most important tasks for thedevelopment of the Group’s businesses. To this end, the Group develops various employment activities and focuses on
training and education. In the fiscal year under review, recruitment and training expenses amounted to ¥220 million and ¥109
million, respectively. The Group intends to continue to attach importance to personnel acquisition and training. However,should these efforts prove unsuccessful the Group’s growth potential would be hampered.
Moreover, an increase in the number of employees may drive up fixed labor costs, creating downward pressure on
performance if the Group fails to receive sufficient orders to cover the increase in fixed costs.
5) Strengthening relations with partners
The Group is committed to the acquisition and training of talented staff as a corporate resource. However, in response to
the demand of each phase of a given project, we also think it is crucial to obtain appropriate external partners in a timely
manner. Consequently, the Group is endeavoring to strengthen its alliance with business partners and create corporate
structures that will serve the Group flexibly in the expansion of the scale of its business. In order to raise productivity and thequality of the Group’s system development, training is provided on the Group’s proprietary design and development methods
for partners who support Group management policies.
However, as the Group’s degree of dependence on partners increases, there is a possibility that additional costs may be
incurred which were not foreseen at the time of the concluding of contracts, due to the delay in bringing service quality to alevel that fully satisfies customers, or a possibility that projects may be delayed as no partners who agree to the management
policies of the Group are found.
6) Project management
There is no doubt that project management is required for every project. Accordingly, project control is one of the key
issues for the Group to tackle.
To enhance its project control, the IT Consulting Business of the Group is strengthening and strictly operating a projectreview system through engineers experienced in quality control.
The Group is also integrating, expanding, and evolving current standard project promotion methods, while establishing
and adopting quality control techniques consistent with global standards for model configuration. In addition, the Group issharing various knowledge concerning IT and providing education and training on project management, while solving bugs
and carefully managing the progress of projects using newly-developed project information-sharing and visualization
systems.
In the Package & Service Business, although most projects are small and relatively easy to control, the Group is working
to improve quality management by increasing the number of persons in charge of reviews and through other measures
because the number of orders received for larger projects is increasing.
As seen above, the Group is continuing to strengthen quality control and project management. However, as it is-6-

impossible to completely eliminate risks associated with projects, unless the Group’s project management functions
satisfactorily, the profitability of projects may deteriorate.
7) Dependence on specific clientsThe IT Consulting Business of the Group may come to rely heavily on sales to specific clients for a time, whenlarge-scale projects enter the development phase and a significant portion of human resources within (and outside) the Group
has to be allocated to such projects.
While the method of receiving orders in installments allows the Group to at least temporarily refrain from proceeding to
the next phase of a project if a client fails to make timely payment (or when its credit standing deteriorates), the Group could
nevertheless be affected by the financial performance and/or IT investment policy of specific clients.
8) Expanding scale of projects
The average size of clients’ operations is growing. In addition, needs for projects involving the comprehensive rebuildingof both information and mission-critical systems (large-scale downsizing projects) with open system technologies isincreasing and such projects are beginning to occupy a greater share of the Group’s total sales. As a result, the scale ofprojects undertaken by the Group is growing.
To pilot these large-scale projects to success and ensure complete client satisfaction, a high level of project management
skill is required.
The Group assigns highly experienced project leaders to such large-scale projects. As the project progresses, at each
important milestone, the project review team composed of personnel in charge of their specialized areas meet to identify
potential problems at an early stage and to ensure timely implementation of necessary countermeasures. However, as projects
grow in scale, so inevitably do the potential risks. To achieve quality standards that will fully satisfy the clients, additionalcosts may be incurred that were not foreseeable at the time the contract was concluded. Furthermore, it may at times become
necessary to revise the delivery schedule owing to various factors such as a change in specifications, which could affect sales
and profits for an entire fiscal period.
Once a large-scale project is completed, the large number of consultants previously assigned to the projects need to bereassigned to other projects. Because of the number of consultants involved, they may not be reassigned to other projects intimely manner, which could have adverse effects on sales and profits for a fiscal period.
The Group is making the utmost effort to maintain quality of service and to meet delivery commitments, in order toensure that clients do not suffer losses through any service offered by the Group. While maximum damages payable to clientsare stated in the contracts, if a client claims for damages or makes a complaint about a transaction or project, the Group may
incur legal expenses, damages or other expenditures affecting the corporate resources.
9) Reserve for quality assurance and provision for loss on project
The Group may provide its clients with free services that were unforeseeable at the time of concluding contracts or at theclose of the accounting period, in order to guarantee the quality of its product so that customers will be completely satisfied.
Although this enhances customer confidence in the Group and their evaluation of it, if the project management malfunctions,the project has to be extended or additional personnel have to be allocated because of an unexpected problem or adiscrepancy between the estimated number of man-hours worked and the actual number worked, then there is a possibility
that the group will be liable for the costs involved.
To cope with the risk of additional costs after the end of projects, which is among the risks mentioned above, the Grouphas established a reserve for quality assurance, stating an amount for future costs based on estimates calculated from pastexperience. For the fiscal year under review, the Group set aside ¥11 million as a reserve, considering this amount sufficient
to meet potential future payments.
For specific ongoing projects for which a loss is expected to occur, the Group has established a provision for loss on
projects, stating an amount for future loss based on estimates calculated reasonably. For the fiscal year under review, theGroup set aside ¥13 million as provision.
The possibility remains that actual payments may exceed this amount if there are extenuating circumstances.
10) Fixed assets
In the Corporate Revitalization Business, the Group operates retail stores. If the business environment changes
significantly because of such factors as competitors establishing large stores in their marketing areas, the Group may post
impairment losses on buildings of specific stores, etc. and its earnings may affected.
11) Prior investments in assets
The Group develops software for internal use to improve information available for business management and to make its-7-

operations more efficient. Software for in-house use may be stated in assets, with the expectation that costs decrease due toimprovement in operational efficiency, but the value of software can decline if specific functions should rapidly become
obsolete due to changes in technological trends and drastic operational changes.
The Group is also engaged in developing software to provide cloud services to clients in a variety of business categories,
including the financial sector, and as well as various software packages. The Group may state these software packages asassets by making reasonable assessments of future orders and sales. However, the Group may fail to fully recoup its
investments because of unforeseen abrupt changes in market conditions and changes in technical trends. In addition, underthe business model, prior investments are made for software development, and software is sold and introduced after thecompletion of development. Accordingly, if a sales plan does not work smoothly, fundraising may become difficult and theGroup’s financial condition might be affected.
In the Corporate Revitalization Business, the Group purchases land and buildings, arranges the interiors and procures
goods, before selling them. Hence, before establishing stores and procuring goods, the Group carefully conducts marketing
research. However, unless sales targets are achieved satisfactorily, it will become difficult to secure operating funds, and theGroup’s financial conditions may be affected.
12) Hygiene management
Consumers are increasing their awareness about food safety, as seen in the publicized cases of food whose place of origin
and ingredients have been mislabeled. Under such circumstances, the Group, whose Corporate Revitalization Business deals
with food, makes great efforts to secure high-quality foods and thoroughly manage safety and hygiene, while emphasizing
food safety more than ever. However, if problems occur relating to the safety of goods, such as food poisoning, and an
unexpected situation breaks out, such as BSE issue, avian influenza or a norovirus, the Group’s earnings may be affected.
13) Information security
In the course of undertaking transactions, the Group comes to know various top-secret information of its clients, ranging
from technical to management information.
Accordingly, the Group regards “information management” as a key managerial issue, and formulates measures against
the leakage of such top secret information considering from various perspectives. The measures include: the establishment of
a security committee to maintain and strengthen the information management system within the Group; and promotion ofactivities to enlighten and educate the Group’s employees on information management as well as enhancing their awarenessfor this issue. However, in the event of the leakage of a client’s confidential information, the Group may face lawsuits and theclient in question will be lost to us. The result may seriously affect the Group’s earnings.
Moreover, the Group is endeavoring to strengthen its entire system for protecting personal information. To this end, it has
set up a special project, which is tasked to familiarize every officer and employee with the importance of personal
information through enlightenment activities. The Group has acquired Japan’s “Privacy Mark,” a sign of quasi-official
acknowledgment that the holder properly manages personal information, and the Company has obtained ISO 27001:2005
Certification Standards for Information Security Management System (ISMS Certification).
14) Strategic investments
The Group may make investments in securities taking business relationships and the prospect of possible future
partnerships into consideration. There is a risk that it would sustain losses equivalent to the entire investment in such a
company, because of such a firm’s major business failure. Furthermore, depending on operating performance of the firms inwhich the Group invests, the Group earnings may be affected as a result of the statutory requirement to devalue its investmentin the firms.
15) Lawsuits, etc.
The Company initiated legal action in November 2009 relating to the payment of contract fees, etc., against NITTO
DENKO CORPORATION, and the case is still pending in the Tokyo District Court. Also, NITTO DENKO CORPORATION
brought a counterclaim against the Company in December 2011.
There also is a possibility that lawsuits or disputes will occur between the Company and the business partners orinvestment and loans targets with which the Group keep running the business. At this time, we cannot foresee the final
judgment that will be passed by courts concerning the lawsuit currently under trial and cases of lawsuits that could occur inthe future. However, the details and results of these lawsuits may seriously affect the Group’s earnings and performance.
Furthermore, regardless of the results of these lawsuits, the Group’s earnings may be adversely affected as a result of adecline in the credibility and reputation of the Group due to critical reports concerning the lawsuits.

-8-16) Effects of large-scale disasters, etc.
The Group takes measures to cope with emergencies by dispersing offices and using plural data centers. However, whenlarge-scale disasters, etc., occur, there is a possibility that employees of Group and offices, etc., of the Group and theirsystems may be damaged, and the Group’s earnings and performance may be seriously affected by restoration cost and lost
opportunities as a result of business interruption.
17) Development of overseas business
The Group is accelerating overseas development, centering on the Asian region, as one of its medium- to long-term
strategies. Overseas expansion is affected by various factors, including trends of not only the Japanese economy but also theglobal economy, exchange rates, legal regulations, and political trends of each country/region and differences in businesspractices. These factors could adversely affect the Group’s earnings and performance.

-9-2. The Future GroupThe Group (the parent and related companies) consists of 15 consolidated subsidiaries and 7 equity-method affiliates, andoperates three main businesses, the IT Consulting Business, the Package & Service Business, and the Corporate Revitalization
Business. Business activities, involved major companies and relationships with business segment are as follow. The classificationis the same as segmentation.
(IT Consulting Business)
In this business, the Group helps clients solve problems, by sharing management issues with them from a managerial
perspective, understanding the essence of the clients’ businesses and establishing information systems for them using advanced
IT.
Company nameBusiness activities

Future Architect, Inc. (Parent company)

Using its advanced information technology, Future Architect, Inc.
offers IT consulting, hardware and other procurement services from an
objective and independent position. The Company also functions ascorporate headquarters for the Group.

ABM Corporation (subsidiary)

Development and sales of managerial accounting packages and related
consulting

North Consulting Group Pte. Ltd. (subsidiary)

Introduction of ERP and provision of consulting services in Southeast
Asia, including Singapore

Brightree Solutions Sdn Bhd. (subsidiary)

Introduction, customization, and operation and maintenance of ERP in
Malaysia

North Consulting Group (Thailand) Co. LTD. (subsidiary)

Introduction, customization, and operation and maintenance of ERP in
ThailandLife Sciences Computing Corporation (subsidiary) (new)Provision of “OpenDolphin Cloud” electronic medical chart(Package & Service Business)
In this business, to help clients improve their operational efficiency, the Group introduces or provides, via cloud and ASP,
operating software packages dedicated to highly specialized fields, such as sales management and ERP, as well as provides
consigned development and education and other IT services.
Company nameBusiness activities
FutureOne, Inc. (subsidiary)

Development and sales of and support for “FUTUREONE”
mission-critical software centering on sales management, production
management and accounting, and building of EC sites

Ascendia Inc. (subsidiary)

Development, maintenance, and operation of systems based on Javaand Web technologies, provision of IT-field personnel training andeducation services, system development for local governments, andsales of software packages

Logizard Co., Ltd. (affiliate) (new)Cloud-based logistics and inventories management(Corporate Revitalization Business)
To get deeply involved in the management team of client firms, revitalize client firms through drastic reform focusing on IT,
and establish success models for each industry.
Company nameBusiness activities
Uoei Shoten Corporation (subsidiary)

Operation of “Uoei” grocery supermarket

Among affiliated companies engaged in businesses that are not included in the three businesses mentioned above, such as
Internet businesses, publishing, and investing in, holding and managing securities, the main companies are as follows:
Company nameBusiness activities
Tokyo Calendar Inc. (subsidiary)

Publication of the magazine “Tokyo Calendar,” running of websites,and provision of Internet services such as EC

Future Investment Corp. (subsidiary)

Securities holding, management and investment

Beijing ZhongNouBoEr Information Technology Co., Ltd.
(affiliate) (new)EC business centering on consumer electronics

dit Co., Ltd. (affiliate)

Development and sales of security network products and development
and provision of such services

Cyber Solution, Inc. (affiliate)

Establishment of ASP service systems and corporate information
system bases, and provision of operations planning and management
services

Elmos Inc. (affiliate)

General printing, and sales of office fixtures, OA (office automation)
supplies, OA equipment, POS systems, etc.
-10-<Business System Diagram>[Consolidated subsidiary (Abroad)]
North Consulting Group Pte. Ltd. (Singapore)
North consulting Group (Thailand) Co. Ltd. (Thailand)
Brightree Solution Sdn Bhd. (Malaysia)

Sales ofproducts

Consumers[Consolidated Subsidiaries (Domestic)]
Uoei Shoten Corporation

Publication/
Sales ofproducts
Sales ofproducts

Provision ofservices /Sales ofproducts
Sales ofproducts

Customers/Consumers[Consolidated Subsidiaries (Domestic)]
Tokyo Calendar Inc.
[Equity-method affiliate (Abroad)]
Beijing ZhongNouBoEr Information Technology Co., Ltd.
[Equity-method affiliate (Domestic)]
dit Co., Ltd.
[Equity-method affiliate (Domestic)]
Cyber Solution, Inc.
[Equity-method affiliate (Domestic)]
Elmos Inc.

-11-

Investment

Investment

Services[Consolidated Subsidiaries (Domestic)]
Future Investment Corp.

Contracting

Investment

Investment
targets

Investment

Customers

Corporate Revitalization
Business[Equity-method affiliate (Domestic)]
Logizard Co, Ltd.

Future Architect, Inc.

[Consolidated subsidiary (Domestic)]
Ascendia Inc.

Licensesales, etc.

[Consolidated subsidiary (Domestic)]
FutureOne, Inc.

Contracting

Provision of services/
sales of products, etc.

Package & Service Business

CLIENTS[Consolidated subsidiary (Domestic)]
ABM Corporation

Contracting/services

Services

IT Consulting Business[Consolidated subsidiary (Domestic)]
Life Sciences Computing Corporation

Affiliated companies(1) Consolidated subsidiaries
Relationship

Name

Location

Capital(in thousands ofyen)

ABM Corporation

Shinagawa-ku,
Tokyo

80,000

North Consulting

SINGAPORE,

100,350

Interlocking directors
Main businessactivities

Voting rightratio (%)

IT Consulting
Business

NumberNumberofofcompany company
directors employees

100.0

Monetary
assistanceBusiness transactions

1

Provision of
3 Fund lending development-related
services2- None

None

100.0

IT Consulting(US$ 1,250 Businessthousand)(100.0)Group Pte. Ltd.

SINGAPORE

Brightree Solutions Sdn
Bhd.

PETALING
JAYA,
MALAYSIA

51,411IT Consulting(1,936 thousand
Businessringgit)

51.0(51.0)-- NoneNoneSiam NCG Holdings
Co., LTD.

BANGKOK,THAILAND

245
IT Consulting(100 thousand
Business
baht)

48.0
(48.0)[52.0]-- NoneNone

North Consulting Group BANGKOK,(Thailand) CO., LTD.
THAILAND

24,500IT Consulting(10,000 thousand
Business
baht)

99.0
(99.0)[1.0]-- NoneNone

Life Sciences
Computing Corporation

Toshima-ku,
Tokyo

134,000

IT Consulting
Business

51.9

1

2 NoneNone

FutureOne, Inc.

Shinagawa-ku,
Tokyo

200,000

Package & Service
Business

100.0

2

1 NoneProvision of software
licenses

Ascendia Inc.

Oita-shi, Oita

83,700

Package & Service
Business

100.0

2

1 Fund lending

Receipt of services fordevelopment

Uoei Shoten
Corporation

Minami-ku,
NiigataCorporate
198,000 Revitalization
Business

100.0(100.0)-2 NoneNone

Tokyo Calendar Inc.

Shinagawa-ku,
Tokyo

50,000 Other

100.0(100.0)1

Provision of
1 Fund lending development-related
services

Future Investment Corp.

Shinagawa-ku,
Tokyo

10,000 Other

100.0

3

2 Fund lending None

RI Partners Limited
Liability Association

Shinagawa-ku,
Tokyo

348,000 Other

100.0(100.0)-- NoneNone

Future Architect,Inc.

CALIFORNIA,
U.S.A.

11
Other(US$ 100)

100.0

2

1 NoneNone

Future Global Pte. Ltd.

SINGAPORE,
SINGAPORE

108,378(US$ 1,350 Other
thousand)

100.0

3

- Fund lending None

FUTURE GLOBAL
HONG KONG
LIMITED

China,
Hong Kong

100(HK$ 10 Other
thousand)

100.0

3

1 Fund lending None

Notes: 1.
2.

The name of the business segment is stated in “Main business activities.”
FutureOne, Inc., Uoei Shoten Corporation and RI Partners Limited Liability Association are specified subsidiaries.

3.

The above subsidiaries file neither securities registration statements nor securities reports.

4.

Figures in square brackets in “Voting right ratio” represent the ratio of voting rights held by those who are closely related to the5.

Figures in round brackets in “Voting right ratio” represent an indirectly owned ratio and are included in the figures above numbers.

6.

Future Investment Corp. is a managing partner of RI Partners Limited Liability Association.

7.

Only transactions directly conducted with the Company are stated in “Monetary assistance” and “Business transactions.”

company or have agreed with the company on holdings, not included in the above numbers.

-12-(2) Affiliated companies to which equity method is applicable
Relationship
Name

Location

Chuo-ku,Tokyo

Logizard Co., Ltd.
Crossflo Systems, Inc.

CALIFORNIA,
U.S.A.

Beijing ZhongNouBoEr
Information Technology
Co., Ltd.

China, Beijing

dit Co., Ltd.
Cyber Solution, Inc.
Elmos Inc.
Axis Solutions
Corporation

Notes: 1.
2.

Koto-ku,Tokyo
Koto-ku,Tokyo
Chuo-ku,
Osaka
Koto-ku,Tokyo

Capital (inthousands of yen)

56,824

Interlocking directors
Voting right Number
Numberratio (%)
ofofcompany company
directors employees

Main businessactivities

Package & Service
Business

105,841(US$ 1,325 Other
thousand)
3,990(RMB 2,872 Other
thousand)
428,745 Other

10,000 Other
17,000 Other

Business transactions

34.0

-

1 None

None

35.0

-

- NoneNone

30.4(30.4)-

3 None48.2

2- None1- None-- NoneNone- NoneReceipt of services fordevelopment

48.2(48.2)
40.0(40.0)
20.0(20.0)

310,000 Other

Monetary
assistance-

Provision ofdevelopment-related
services
Receipt of services for
network consulting
None

The name of the business segment is stated in “Main business activities.”
Figures in round brackets in “Voting right ratio” represent an indirectly owned ratio and are included in the figures above numbers.

-13-

3. Management Policy(1) Basic corporate tenets
The mission of the Company is to raise future value of client companies and society by providing the proper state in whichbusiness should be and an optimal mechanism to realize it by proactively taking in cutting-edge IT technologies, with a view topromising the greatest success to clients. We understand that endless pursuit of optimum and taking up the challenge of achieving
optimum to realize our mission is the service we provide and the starting point of ourselves. In addition, we are striving to makeall employees share and understand the basic tenets of the Company by establishing the following corporate philosophies.
(Corporate philosophies) We love science and technology and contribute to corporate and social changes. Also, we continue to change ourselves.
 We will not be fearful of or daunted by “being insufficient,” and try to change impossibility to possibility using our own
ingenuity and enthusiasm.
 We continue to have a desire to improve ourselves and attach importance to the enhancement of individual capability throughconstant hart study as well as understand the limit of power of individuals and resolve even greater challenges by organicallycombining power of colleagues.
 We conduct warmhearted and humorous organization operation, which features courtesy and behavior according to time,
place and opportunity though it is based on merits and results.
 We will not be arrogant when we have a pleasant time, and we will never forget hope when we have a bad time.
 We learn from history, strive to deepen mutual understanding and engage in international exchanges and cooperation.
Basic policies of each business segment are as follows:
1) IT Consulting Business
The Company believes that business reform can be realized only when we focus on three domains of management,
business and systems, not merely aiming at realization of functions by IT. To that end, the Group has maintained a neutral
position, independent of any hardware vendors or software vendors, and has been pursuing optimization by specializing inopen systems ever since its establishment while proceeding with establishment of methodology, which enables it to provide
high-quality and high-speed services that draw out maximum performance, and various kinds of standardization.
We also aim to improve customer satisfaction by providing integrated services, which cover consulting phase, design ofsystems, development of application software, selection and procurement of hardware and software products and educationand operation phases, giving a concrete form to the results of consulting as systems, not merely presenting such results as aconcept, and offering them for actual use by clients to enable them to actually feel such results as the fruit of business.
2) Package & Service BusinessWe fully meet the needs of small and midsize companies, which are our major clients in the Package & Service Business,by not only providing IT systems that support businesses of the client at a lower cost and in a shorter installation period in
accordance with the needs of small and midsize companies by making the most of successful cases, know-how and IT asset
the Company has accumulated through provision of services to large client companies, but also customizing these software
packages according to the client’s business type and market. We are also offering cutting-edge functions, such as
visualization of internal control and work, as standards.
3) Corporate Revitalization Business
The Group will strive to revitalize subject companies by fully using strategic and technological experience in the
distribution industry it has accumulated so far, with use of IT as the core, and sublimate the results obtained throughoperation of the business into IT systems that can be used generally in the same business category, so that they can be applied
to other businesses.

(2) Goals and objectives
To differentiate ourselves from competitors and maintain growth, the Group concentrates management resources on the fields
in which it makes strategic investments, such as research and development, training, and recruiting. At the same time, however,
we have set the goal of an ordinary income margin of 20% or more a year for the mainstay IT Consulting Business. We also aim
to achieve an ordinary income margin of at least 10% for the Package & Service Business, and about 5% for the Corporate
Revitalization Business.

(3) Medium to long-term management strategies
We will put designing management and IT in the center of our medium to long-term management strategies, as a leading
company of IT consulting.

-14-

We will develop our accumulated know-how expertise on managerial reform, IT technological capabilities, etc., in the IT
Consulting Business, and organically combine it with the Package & Service Business and the Corporate Revitalization Business,aiming to provide solutions that deliver greater customer satisfaction within the two businesses. Also, we will focus on reduction
development cost through the visualization of projects, standardizing development processes and establishment of new design
development methods and on significant improvement of system quality. The specific strategies for this are as follows:
1) Further growth of core business (IT Consulting Business)
In an uncertain economic situation and harsh management environment, it is expected that companies in Japan willfurther enhancement their investment requirements leading to IT cost reduction, as well as IT system renovation andintegration, associated with work restructurings and industrial reorganization. Against this backdrop, the Group will provide
high-value-added know-how and technologies, including downsizing by open systems and real-time processing, more
speedily and at higher quality than ever, in the industries where the Company has accumulated track records (logistics,
distribution, finance, service, etc.).
In addition, new needs of clients, such as reduction of maintenance and operation cost, improvement of quality andturning of IT cost into variable expenses through cloud services, have become obvious. To meet such needs, the Group will
drive ahead with provision of new services. To that end, we will proceed with: “VAO” (Value Added Outsourcing), whichrationalizes operation and maintenance cost and adds value by taking over the operation of not only systems developed by theCompany but also those built by competitors; “lisnar+,” a service to visualize opinions of clients using IT and utilize themnot only in handling of cases but also in operations, improvement of products and services and development of products;
services developed by extensively turning information systems for financial institutions into cloud computing-based ones;
and cloud services by business category, including distribution and logistics. Furthermore, the Group will meet a wide rangeof customer needs by further enhancing services to introduce ERP products of SAP AG and Oracle Corporation to major
corporations, particularly those expanding operations overseas, in addition to existing component-type development.
2) Expansion of business for small and mid-size companies (Package & Service Business)Among small and midsize companies whose human and physical resources are limited, needs are great for realizing
improvement of business efficiency and managerial reform through the use of package solutions and cloud computing thatcan be introduced at relatively low cost and in short time. The Group believes that grasping such needs will lead to growth of
this business. The Group consolidated businesses related to software packages and cloud computing for small and midsize
companies, which were dispersed within the Group, to FutureOne, Inc. and is proceeding with measures such as enhancementof direct marketing. The Group will aim to expand sales and raise operating profit margin by satisfying detailed needs ofclients through proposals for high-level solutions by applying IT consulting know-how and technologies for major
corporations to those for small and midsize companies. Meanwhile, Ascendia Inc. will strengthen the services of systemdevelopment and maintenance operation in cooperation with the Company, taking advantage of regional bases (nearshore).
3) Acceleration of global development (IT Consulting Business)
The Group considers the Asian region, where the information infrastructure is immature while economy has been
growing significantly in recent years, to be a large latent market for the Group. To proactively push forward with global
development, including Asia, the Group will promote the establishment of a structure that can cover development of the IT
Consulting Business in Southeast Asian region, the mainland China, including Hong Kong, with Singapore, Malaysia andThailand for a starter. The Group will further enhance not only IT consulting for local companies, but also IT support forJapanese companies expanding operations in Asia.

-15-(4) Issues the Company faces
1) Stepping up our large scale project management capabilities and establishing a support infrastructure [IT Consulting Business,
Package & Service Business
The Group has strengthened its project management capabilities, which it positions as an important management issues.
For further refining and standardizing development technologies, we will enhance our preventive support infrastructure morethan ever to respond to any issue that arises from the launch of a project until start-ing up the system, including maintenanceand operation after operation has begun.
2) Research and development of core design and development technologies [IT Consulting Business]
With regard to a number of proprietary core design/development technologies common to our projects, we will continue
research and development to realize the improvement in productivity and technological superiority more than ever, andachieve a wider sharing of knowledge within the Company.
3) Recruitment and training of professionals [IT Consulting Business, Package & Service Business]
The Group understands that what is most important for raising corporate value of the Group is personnel and that it isnecessary to ensure and train highly qualified personnel. We continue to create an environment conducive to proactively
attracting talented people by challenging the frontiers of information technology and train professionals through training andproject fields.
4) Enhancement of outside alliances [IT Consulting Business]
To always provide optimal solutions to clients, the Company will maintain good relations with corporations that haveparticularly excellent technologies and strive to enhance alliances with them, while grasping the technological trends in theworld.
5) Overseas (Asia) development [IT Consulting Business and Package & Service Business]
The Group has already started to expand operations in Asia, with ensuring bases in Singapore, Malaysia, Thailand, andHong Kong and taking a stake in the company in Beijing. The Group will promote sales and development at these bases andexpand the scope of entry to other countries, including Indonesia, Vietnam, and India. In addition, the Group will expand its
businesses by making existing solutions and products available in multiple languages, developing software packages andcloud computing, and providing Japanese companies entering Asia with IT-based support.
6) Improving profit margin [Package & Service Business]
As for the Package & Service Business, a structure to expand order acceptance is being established through the
improvement of the sales structure and consolidation and enhancement of the lineup of packages. The Group will aim to raise
operating profit margin through measures to improve the degree of perfection of packages themselves by adding functions
strongly demanded by clients and control cost by strengthening the management of customization person-hours.
7) Sales, purchase, and inventory information management by using IT [Corporate Revitalization Business]
The Group will continue to carry out reforms using IT, covering all stages from client marketing to purchase and sales of
products and management of inventories, aimed at minimizing costs for disposal and retained inventories as well as
improving the satisfaction and convenience of customers by boosting product lineups that meet customer’s needs.

-16-

4. Consolidated Financial Statements(1) Consolidated balance sheets(in thousands of yen)
Fiscal 2012
(December 31, 2012)

Fiscal 2011
(December 31, 2011)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Short-term investment securities
Merchandise and finished goods
Work in process
Deferred tax assets
Accounts receivable-other
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Land
Other
Accumulated depreciation
Other, net
Total tangible fixed assets
Intangible assets
Software
Goodwill
Other
Total intangible fixed assets
Investments and other assets
Investment securities
Lease and guarantee deposits
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total assets

*3

*2

*2

5,076,449
2,770,586
701,110
126,890
54,928
146,561
1,357,981
302,005(7,364)
10,529,150

3,077,281(2,654,607)
422,673
122,868
1,549,422(1,308,490)
240,931
786,474

*3

*2

*2

386,794
145,464
22,063554,322*1-17-

1,523,639
840,114
218,382
61,320(60,043)2,583,414
3,924,210
14,453,360

4,156,343
3,523,351
30,129134,677
33,597
153,662
1,358,569
387,026(6,034)
9,771,322

3,110,805(2,740,590)
370,214
122,868
1,840,525(1,448,329)
392,195
885,279
836,883
195,332
21,817
1,054,032*1

1,907,516
1,035,870
172,157
61,063(57,052)
3,119,554
5,058,866
14,830,189(in thousands of yen)
Fiscal 2012
(December 31, 2012)

Fiscal 2011
(December 31, 2011)
Liabilities
Current liabilities
Accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Accounts payable-other
Income taxes payable
Provision for bonuses
Reserve for quality assurance
Reserve for loss on projects
Allowance for office transfer expenses
Other
Total current liabilities
Noncurrent liabilities
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Total valuation and translation adjustments
Minority interests
Total net assets
Total liabilities and net assets-18-

644,020
32,327
16,000567,454590,481106,269
65,3594,200
690,054
2,716,167

739,873
30,283516,697535,959
116,997
11,275
13,50035,342
747,736
2,747,663

309,408
16,899326,307
3,042,475

304,006
12,269316,276
3,063,940

1,421,815
2,495,772
8,661,248(1,171,668)
11,407,167

1,421,815
2,495,772
9,151,020(1,393,328)
11,675,279(1,483)612(6,017)(7,501)
11,22011,410,885
14,453,360(30,532)(29,920)
120,890
11,766,249
14,830,189

(2) Consolidated statements of income and comprehensive income

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Directors’ compensations
Salaries and bonuses
Other salaries
Training expenses
Research and development expenses
Depreciation and amortization
Recruiting expenses
Amortization of goodwill
Other
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Amortization of negative goodwill
Foreign exchange gains
Equity in earnings of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Commission for purchase of treasury stock
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
Gain on sales of noncurrent assets
Gain on negative goodwill
Reversal of reserve for quality assurance
Compensation for damages received
Total extraordinary income
Extraordinary loss
Loss on retirement of noncurrent assets
Loss on sales of investment securities
Loss on valuation of investment securities
Impairment loss
Office transfer expenses
Litigation expenses
Loss on adjustment for changes of accounting standard for
asset retirement obligations
Other
Total extraordinary losses
Net income before taxes

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)23,292,666*1
14,280,213
9,012,452(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
23,353,208*1
14,983,640
8,369,568

310,287
3,092,535
99,98960,94032,310129,483
198,915
15,0602,143,064
6,082,587
2,929,865

275,497
3,358,593
126,805
109,785
23,459116,112220,143
85,003
2,119,106
6,434,509
1,935,058

*2

*4

*3

*5

-19-

*2

2,592
20,44456,61722,89529,090131,641

3,868
23,64463,786
8,759
27,098127,155

1,651
5,266
2,862
9,780
3,051,725

2,094
1,647
717
4,458
2,057,755

160,290203
38,27594,945
293,715

75,20975,20920,351
1,349
66,04964,981-

1,275
35,34244,000252,519-30,000435,250
2,910,190

4,785
85,402
2,047,562

Income taxes-current
Income taxes-deferred
Total income taxes
Income before minority interests
Minority interests in income
Net income
Minority interests in income
Income before minority interests
Other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
1,190,886(141)
1,190,744
1,719,445
3,969
1,715,476
3,969
1,719,445(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
839,559
37,567877,127
1,170,435
2,687
1,167,747
2,687
1,170,435(83,480)(3,729)2,190(24,415)(99)(87,308)
1,632,137
1,627,985
4,152

-20-

*6

3,376
(18,847)
1,151,587
1,145,328
6,258

(3) Consolidated statements of changes in net assets
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Shareholders’ equity
Capital stock
Balance at the beginning of the period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Capital surplus
Balance at the beginning of the period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Retained earnings
Balance at the beginning of the period
Changes of items during the period
Change of scope of consolidation
Dividends from surplus
Net income
Total changes of items during the period
Balance at the end of the period
Treasury stock
Balance at the beginning of the period
Changes of items during the period
Purchase of treasury stock
Total changes of items during the period
Balance at the end of the period
Total shareholders’ equity
Balance at the beginning of the period
Changes of items during the period
Change of scope of consolidation
Dividends from surplus
Net income
Purchase of treasury stock
Total changes of items during the period
Balance at the end of the period
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Balance at the beginning of the period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of the period
Foreign currency translation adjustment
Balance at the beginning of the period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of the period-21-(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

1,421,815

1,421,815

1,421,815

1,421,815

2,495,772

2,495,772

2,495,772

2,495,772

7,836,204

8,661,248(890,432)
1,715,476
825,0448,661,248

2,172(680,148)
1,167,747
489,771
9,151,020(1,171,668)(1,171,668)(1,171,668)(221,659)(221,659)(1,393,328)

10,582,123

11,407,167(890,432)
1,715,476
825,044
11,407,167

2,172(680,148)
1,167,747(221,659)
268,111
11,675,279

82,095(1,483)(83,579)(83,579)(1,483)

2,095
2,095
612

(2,105)(6,017)(3,912)(3,912)(6,017)(24,514)(24,514)(30,532)(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Total valuation and translation adjustments
Balance at the beginning of the period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of the period
Minority interests
Balance at the beginning of the period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of the period
Total net assets
Balance at the beginning of the period
Changes of items during the period
Change of scope of consolidation
Dividends from surplus
Net income
Purchase of treasury stock
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of the period-22-

79,989(7,501)(87,491)(87,491)(7,501)(22,418)(22,418)(29,920)-

11,220

11,220
11,220
11,220109,670
109,670
120,890

10,662,113

11,410,885(890,432)
1,715,476(76,271)748,772
11,410,885

2,172(680,148)
1,167,747(221,659)
87,251
355,363
11,766,249

(4) Consolidated statements of cash flows
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Net cash provided by (used in) operating activities
Net income before taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in reserve for quality assurance
Increase (decrease) in reserve for loss on projects
Office transfer expenses
Interest and dividends income
Interest expenses
Foreign exchange losses (gains)
Commission for purchase of treasury stock
Equity in (earnings) losses of affiliates
Gain on negative goodwill
Compensation for damages received
Loss (gain) on sales of noncurrent assets
Loss on retirement of noncurrent assets
Loss (gain) on sales of investment securities
Loss (gain) on valuation of investment securities
Litigation expenses
Impairment loss
Loss on adjustment for changes of accounting standard for
asset retirement obligations
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Decrease (increase) in other assets
Increase (decrease) in other liabilities
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Litigation expenses
Net cash provided by (used in) operating activities-23-(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

2,910,190
233,033
15,0601,840
932(73,804)(2,800)(23,037)
1,651
5,266
(22,895)(94,945)(203)
20,351(158,940)
66,04964,981

2,047,562
263,970
85,003(4,320)6,642(54,084)
9,300
35,342(27,512)2,094(63,025)
1,647(8,759)(75,209)1,275
44,000-252,519-

203,901
3,862
4,447
15,459(105,394)
3,317,525
23,954(1,816)(1,420,566)
1,919,096(536,921)
24,86624,175(74,574)(51,507)
1,649,965
27,918(2,176)(903,891)(44,000)
727,815(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Net cash provided by (used in) investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of short-term investment securities
Proceeds from redemption of securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments for execution of asset retirement obligations
Purchase of investments in subsidiaries resulting in change
in scope of consolidation
Purchase of stocks of subsidiaries and affiliates
Proceeds from liquidation of subsidiaries and affiliates
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of investment securities
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee deposits
Proceeds from transfer of business
Other
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in short-term borrowings
Repayments of long-term loans payable
Proceeds from payment by minority shareholders
Purchase of treasury stock
Cash dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Increase (decrease) in cash and cash equivalents resulting
from change to scope of consolidation
Cash and cash equivalents at end of the period(50,000)
80,000(199,268)(187,798)
4,389(243,334)(41,033)*2(150,080)
7,429
228,270
1,950(164,140)
94,612
1,700(617,304)

50,000(201,196)
400,464(291,874)(497,196)(1,211)*2*3(32,000)(887,631)(919,631)(8,887)373,274
5,153,036-24-

5,526,311(191,811)(180,100)(223,469)
31,8498,240
3,150(1,157,590)(2,441)(40,713)
24,021(223,307)(677,234)(919,675)
6,454(1,342,996)
5,526,311*1(64,435)1,357*14,184,672

(5) Notes regarding premise of surviving company
Not applicable.

-25-

(6) Significant accounting policies regarding the preparation of consolidated financial statements
1. Scope of consolidation
Number of consolidated subsidiaries: 15
Names and other details of consolidated subsidiaries
ABM Corporation, Life Sciences Computing Corporation, North Consulting Group Pte. Ltd., Brightree Solutions Sdn
Bhd., Siam NCG Holdings Co., Ltd., North Consulting Group (Thailand) CO., LTD., FutureOne, Inc., Ascendia Inc., Uoei
Shoten Corporation, Tokyo Calendar Inc., Future Investment Corporation, RI Partners LLC., Future Architect, Inc., Future
Global Pte. Ltd., FUTURE GLOBAL HONG KONG LIMITED.
Life Sciences Computing Corporation and DigitalGlobe, Inc. were included in the scope of consolidation because theCompany acquired their shares on February 29, 2012. We also included FUTURE GLOBAL HONG KONG LIMITED
within the scope of consolidation because it began its substantial operations and increased its importance through acquisitionof Beijing ZhongNouBoEr Information Technology Co., Ltd., while it had been excluded from the scope of consolidation andthe scope of application of the equity method because it had not engaged in substantial operations with no business
importance after its new establishment on March 29, 2012.
Associant Technology Inc. was removed from the scope of consolidation because its liquidation was completed on
October 16, 2012. Meanwhile, DigitalGlobe, Inc. is excluded from the scope of consolidation because it was absorbed into
Life Sciences Computing Corporation as the extinct company as a result of the merger on December 31, 2012.
There are no non-consolidated subsidiaries.
2. Application of equity method
Number of affiliated companies to which equity-method is applicable: 7Names and other details of affiliated companies to which equity-method is applicable
dit Co., Ltd., Cyber Solution Inc., Elmos Inc., Axis Solutions Corporation, Crossflo Systems, Inc., Logizard Co., Ltd.,
Beijing ZhongNouBoEr Information Technology Co., Ltd.
Crossflo Systems, Inc., Logizard Co., Ltd. and Beijing ZhongNouBoEr Information Technology Co., Ltd., are included
within the scope of applying the equity method because the Company acquired their shares and made them affiliates on April
27, 2012, October 25, 2012 and December 28, 2012, respectively.
There are no non-consolidated subsidiaries and affiliates to which the equity method is not applicable.
3. Accounting period of consolidated subsidiaries
Uoei Shoten Corporation’s account settlement date is November 30. In preparing consolidated financial statements, theGroup normally presents the balance sheet position of consolidated subsidiaries using figures as of the fiscal year-end date ofeach subsidiary. However, if there are any major transactions or events affecting the financial condition of the subsidiaries
between the date of their book closing and the parent company’s fiscal year-end, the Group makes necessary adjustments to
its financial statements to reflect these transactions.
4. Accounting policies(1) Valuation standards/methods for principal assets(a) Securities
Held-to-maturity bonds
Amortized cost method (straight-line method)
Other securities:
Marketable securities:
Stated at fair value based on the market price as of the end of the financial period (Unrealized holding
gains/losses are reported as a net amount in a separate component of shareholders’ equity. Cost of sale iscalculated based on moving average method).
Non-marketable securities
Stated at cost based on moving average method.

-26-

(b) Inventories
Merchandise and finished goods
Stated at of cost using the gross average method (amounts in the balance sheets are calculated using the method todevaluate the book value according to the decrease in profitability)
Uoei Shoten Corporation adopts the cost method based on the retail method (amounts in the balance sheets arecalculated using the method to devaluate the book value according to the decrease in profitability).
Work in process
Stated at cost based on the specific cost method (amounts in the balance sheets are calculated using the method todevaluate the book value according to the decrease in profitability).
(2) Depreciation/ amortization of major depreciable/ amortizable assets(a) Tangible fixed assets (Excluding lease assets)
The Group mainly applies the declining-balance method to depreciate assets, but cloud service-related assets are
depreciated applying the straight-line method. If the acquisition price of the asset to be depreciated is between¥100,000 and ¥200,000, it is depreciated evenly over three (3) years. Useful life is as follows:
Buildings

3-34 years

Other

3-20 years(b) Intangible fixed assets (Excluding lease assets)
Software for in-house use
Software for in-house use is depreciated using the straight-line method over its useful life (5 years).
Software for sale
Software for sale is depreciated by the larger of either of the amount calculated based on projected sales volume
or the amount from the straight-line method over the period for which they are expected to remain salable(3 years).
Other
Straight-line method(c) Lease assets
Lease assets concerning finance lease transactions not accompanying the transfer of property rights
Of lease transactions other than those deemed to accompany the transfer of property rights to lessees, leasetransactions that commenced before the start of the initial year of the application of the “Accounting Standard forLease Transactions” (ASBJ Statement No. 13) are accounted for in a manner similar to the accounting treatment
for regular lease transactions.
(3) Accounting standards for allowances/reserves(a) Allowance for doubtful accounts
To prepare for losses incurred through bad debts, the amount of potential loss is calculated by using the historicalloss ratio in case of non-classified loans/receivables. Potential losses for classified loans/receivables are individuallyassessed.
(b) Reserve for quality assurance
In projects related to open system consultation and system development (IT consulting services and Package &Service), where technological changes are taking place rapidly, there are occasions where we are obliged to provide
services to our clients after sales are stated in order to resolve problems that were unforeseeable at the time of thesigning of the contract or as of the close of accounting period. There are instances where the Company and its
consolidated subsidiaries provide such services without compensation in order to guarantee quality standards that will
fully satisfy its customers in IT consulting services and Package & Service.
To prepare for additional cost of sales in IT consulting services and Package & Service that may arise after sales
are stated, estimated amount of such additional cost, calculated based on past experience, is stated in the reserve for
quality assurance.
(c) Reserve for loss on projects
In projects related to open system consultation and system development (IT consulting services and Package &Service), where technological changes are taking place rapidly, there are occasions where we are obliged to provide
services to our clients in order to resolve problems that were unforeseeable at the time of the signing of the contract.

-27-

To prepare for future loss in IT consulting services and Package & Service, estimated amount of such loss in andafter the following fiscal year is stated in the reserve for loss on project, concerning ongoing projects for which loss is
projected to be incurred as of the end of the fiscal year under review and for which it is possible to rationally estimate
the amount of loss.
(d) Reserve for bonuses
In order to set aside funds for the payment of bonuses to employees at consolidated subsidiaries, the estimatedamount of expenses for bonus payments in the fiscal year under review is set aside in the reserve for bonuses account.
(e) Allowance for office transfer expenses
To prepare for the payment of office transfer expenses, the amount estimated to be incurred is stated.
(4) Standard for translating important foreign currency-denominated assets or liabilities into Japanese currency
Monetary claims or liabilities in foreign currencies are translated into yen at spot foreign exchange rates on the
consolidated settlement date, with translation differences recognized as gains or losses. Assets and liabilities of overseas
subsidiaries, etc., are translated into yen at spot exchange rates on the consolidated settlement date. Revenues andexpenses of overseas subsidiaries, etc., are translated into yen at the average exchange rate for the fiscal year. The
resultant translation differences are included in Foreign currency translation adjustment and Minority interests under Net
assets.
(5) Standards for recognizing important income and expenses
Standards for recognizing sales and cost of sales for IT consulting services.
(a) The extent to which a project has advanced by the end of the fiscal year under review is calculated according to thepercentage of completion method (Progress rate is estimated in proportion to cost.)(b) Other projects
Completed contract method(6) Amortization of goodwill and negative goodwill
Goodwill and negative goodwill are amortized evenly over their useful lives. However, negative goodwill occurringon or after April 1, 2010 is treated as profit in the fiscal year it occurs.
If the monetary value of goodwill is not material, it is treated as a loss in the fiscal year it occurs.
(7) Cash and cash equivalents“Cash (cash and cash equivalents)” included in the consolidated statements of cash flow include cash in hand,demand deposits, and short-term investments readily convertible to cash with minimum price risk.
(8) Other material information concerning the compiling of financial statements
Accounting treatment of consumption taxes, etc.
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.

(7) Changes in accounting policies
None(8) Accounting standards not applied
None(9) Changes in classification(Consolidated statements of cash flows)“Amortization of goodwill” and “Foreign exchange losses (gains),” which were included in “Increase (decrease) in otherliabilities” under “Net cash provided by (used in) operating activities” in the previous fiscal year, has been recorded separately
since the beginning in the fiscal year under review because their monetary significance increased. The consolidated financial
statements for the previous fiscal year were revised to reflect this classification change.
As a result, “Increase (decrease) in other liabilities” (-¥85,067 million) reported under “Net cash provided by (used in)operating activities” in the Consolidated statements of cash flows for the previous fiscal year is reclassified into “Amortization of
goodwill” (¥15,060 million), “Foreign exchange losses (gains)” (¥5,266 million) and “Increase (decrease) in other liabilities” (¥105,394 million).

(10) Changes in accounting estimates
None

-28-

(11) Additional information(Application of accounting standard for accounting changes and error corrections)
The Company began to apply the “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Statement
No. 24, December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ
Guidance No. 24, December 4, 2009) for accounting changes and corrections of prior period errors, which would be made after
the beginning of the fiscal year under review.
(Depreciation of cloud service tangible fixed assets)
The Company started providing cloud services on a full- scale from the fiscal year under review, anticipating that theimportance of such services will increase. The Company previously used the declining-balance method to depreciate tangible
fixed assets, but began to apply the straight-line method to depreciate cloud service tangible fixed assets in the fiscal year underreview. This change is intended to make the relationship between profits and depreciation costs rational and calculate the periods
to which profits and losses apply more appropriately, given that profits from cloud services will be earned stably over the periodfacilities are used.
With this change, operating income, ordinary income and net income before taxes for the fiscal year under review eachincreased by ¥32,315 thousand on a consolidated basis compared to those calculated by the previous method.

(12) Notes to consolidated financial statements(Notes to consolidated balance sheets)*1.

Investments in affiliates
Fiscal 2011
(December 31, 2011)

Investment securities (stocks)*2.
*3.

¥351,523(in thousands of yen)
Fiscal 2012
(December 31, 2012)¥555,070

Total asset impairment losses are included in accumulated depreciation.
LawsuitFiscal 2011 (December 31, 2011)
The Company initiated legal action in the Tokyo District Court relating to payment of contract fees, etc. (¥1,462
million) against NITTO DENKO CORPORATION as of November 30, 2009.
The Company delivered the deliverables on September 4, 2009 in accordance with an agreement with NITTO
DENKO. However, NITTO DENKO did not recognize the action by the Company as delivery and refused to pay thecontract fees etc. Against this backdrop, the Company initiated legal action.
Fiscal 2012 (December 31, 2012)
The Company initiated legal action in the Tokyo District Court relating to payment of contract fees, etc. (¥1,462
million) against NITTO DENKO CORPORATION as of November 30, 2009.
The Company delivered the deliverables on September 4, 2009 in accordance with an agreement with NITTO
DENKO. However, NITTO DENKO did not recognize the action by the Company as delivery and refused to pay thecontract fees etc. Against this backdrop, the Company initiated legal action.

(Notes to consolidated statements of income and comprehensive income)*1.

Total of provision of reserve for loss on project
Amount of provision of reserve for loss on project included in cost of sales
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)(¥2,800)*2.

(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)¥9,300Total amount of research & development expenditures
Research & development expenses included in selling, general and administrative expenses
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)¥32,310-29-(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)¥23,459

*3.

Breakdown of loss on retirement of noncurrent assets¥15,156¥5,194¥20,351(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)-¥203(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)-

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Buildings and structures
Other
Total
*4.

Breakdown of gain on sales of noncurrent assets
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)

Other
*5.

Impairment loss
The Group reported impairment losses of the following asset groups.
Fiscal 2011 (from January 1, 2011 to December 31, 2011)(1)

Main assets on which impairment losses were recognized
Use
Idle asset

Type
Land

Food retail business Buildings and other(2)

Location
Nasushiobara, Tochigi Prefecture
Niigata Prefecture

Background of the recognition of impairment losses(i)

Idle asset
The Group wrote down the book value of idle land in Nasushiobara, Tochigi Prefecture, for which it has no
specific plan for future use, to the recoverable amount, and recognized the difference between book value
and recoverable value as an impairment loss.

(ii)

Food retail business
The Group wrote down the book values of asset groups in stores that had continued to post operating losses
to their recoverable values.

(3)

Amounts of impairment losses(in thousands of yen)

(4)

Land

¥4,893

Buildings and other¥60,087

Total¥64,981

Asset grouping method
The Company groups assets by businesses for management accounting or by stores for the food retail business,
which it regards as the smallest units that generate almost independent cash flows. However, with regard to idle
assets that are not used directly for business, each idle asset is considered to constitute a group.

(5)

Calculation method of recoverable amounts(i)Idle asset
The recoverable value is calculated from the net selling price. The net selling price is calculated byrationally adjusting the assessed value against those of fixed assets and market prices in the neighborhood.

(ii)

Food retail business
The recoverable value is the higher of either net selling price or use value. The net selling price is calculated
based on real estate appraisal, and the use value is calculated by discounting estimated future cash flows at
3% (capital costs).

Fiscal 2012 (from January 1, 2012 to December 31, 2012)
None

-30-

*6.

Reclassification adjustment and tax effects relating to other comprehensive income
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Valuation differences on other securities:(in thousands of yen)Amount accrued¥3,404
Reclassification adjustment
Before tax¥3,404
Tax effects(¥1,213)
Valuation differences on other securities¥2,190Foreign currency translation adjustment:
Amount accrued(¥24,415)
Amount corresponding to equity interest in equity-method companies:
Amount accrued¥3,376
Total other comprehensive income(¥18,847)(Notes to consolidated statements of changes in net assets)
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
1. Matters related to the types and numbers of outstanding stocks and treasury stocks
Number of stocks at
Number of stocks
Number of stocks
the end of the previous
increased during thisdecreased during thisfiscal year
fiscal year
fiscal year
Outstanding stocks
Common stock
476,640
Total
476,640
Treasury stock
Common stock
20,008Total
20,008-

Number of stocks at
the end of this fiscal
year476,640
476,640
20,00820,0082. Matters related to dividends(1) Dividends paid
Resolution
Ordinary general
meeting ofshareholders held on
March 22, 2011
Meeting of Board of
Directors held on
July 28, 2011

Stock type

Total dividend
amount(in thousands of yen)

Dividends per
share (yen)Record date

Effective dateCommon stock

547,958

1,200

December 31, 2010

March 23, 2011

Common stock

342,474750

June 30, 2011

September 22, 2011

(2) Among dividends for which the record date falls within the fiscal year under review, the dividend for which the effective
date of payment falls in the next fiscal year is as follows:
Total dividend
amount (inSource of funds
Resolution
Stock type
thousands offor dividends
yen)Ordinary general
meeting ofCommonRetained342,474
shareholders heldstock
earnings
on March 22, 2012-31-

Dividends
per share(yen)

Record date

Effective date

750

December 31,
2011

March 23, 2012

Fiscal 2012 (from January 1, 2012 to December 31, 2012)
1. Matters related to the types and numbers of outstanding stocks and treasury stocks
Number of stocks
Number of stocks
Number of stocks at the end
increased during
decreased during thisof the previous fiscal year
this fiscal year
fiscal year
Outstanding stocks
Common stock
476,640
Total
476,640
Treasury stock
Common stock
20,0086,400
Total
20,0086,400-

Number of stocks
at the end of thisfiscal year
476,640
476,640
26,40826,408(Overview of reasons for change)
Purchase of treasury stock approved by a resolution of the Board of Directors meeting held on February 7, 2012
Number of shares acquired: 6,400 shares
2. Matters related to dividends(1) Dividends paid
Resolution
Ordinary general
meeting ofshareholders held on
March 22, 2012
Meeting of Board of
Directors held on July26, 2012

Total dividend
amount (inthousands of yen)

Dividends per
share (yen)Common stock

342,474

Common stock

337,674

Stock type

Record date

Effective date

750

December 31,2011

March 23, 2012

750

June 30, 2012

September 21,
2012(2) Among dividends for which the record date falls within the fiscal year under review, the dividend for which the effective
date of payment falls in the next fiscal year is as follows:
Total dividend
amount (inSource of funds
Resolution
Stock type
thousands offor dividends
yen)Ordinary general
meeting ofCommonRetained
337,674
shareholders heldstock
earnings
on March 26, 2013-32-

Dividends
per share(yen)

Record date

Effective date

750

December 31,
2012

March 27,
2013

(Notes to consolidated statements of cash flows)*1.

Cash and cash equivalents at the end of the fiscal year and amounts stated in consolidated balance sheet

Cash and deposits
Time deposits for which the term ofdeposit is more than three months
Short-term investment securities
Cash and cash equivalents:*2.

Fiscal 2011
Fiscal 2011 (from January 1,
2011 to December 31, 2011)¥5,076,449(in thousands of yen)
Fiscal 2012
Fiscal 2012 (from January 1,
2012 to December 31, 2012)¥4,156,343(¥50,000)¥499,861¥5,526,311¥28,329¥4,184,672

Breakdown of assets and liabilities of the companies that have become consolidated subsidiaries through the purchaseof shares
Fiscal 2011 (from January 1, 2011 to December 31, 2011)(1)

The breakdown of assets and liabilities upon consolidating Brightree Solutions Sdn. Bhd., which is included
within the scope of consolidation through the acquisition of shares, and the relationship between the acquisition
price of shares and expenditure (net value) for the acquisition of shares are as follows:(in thousands of yen)
47,462
6,049
137,355(38,981)(443)(6,902)Current assets
Noncurrent assets
Goodwill
Current liabilities
Noncurrent liabilities
Minority interests(2)

Acquisition price of shares in newly consolidated subsidiary
Balance of cash and cash equivalents of newly consolidated subsidiary

144,540(15,191)

Expenditure for acquisition of shares in newly consolidated subsidiary

129,348

The breakdown of assets and liabilities upon consolidating ELECTRA (T) LTD., which is included within thescope of consolidation through the acquisition of shares, and the relationship between the acquisition price ofshares and expenditure (net value) for the acquisition of shares are as follows:(in thousands of yen)
8,247
883
16,804336(5,279)(38)

Current assets
Noncurrent assets
Goodwill
Foreign currency translation adjustment
Current liabilities
Minority interests
Acquisition price of shares in newly consolidated subsidiary
Balance of cash and cash equivalents of newly consolidated subsidiary

20,953(223)

Expenditure for acquisition of shares in newly consolidated subsidiary

20,731-33-

Fiscal 2012 (from January 1, 2012 to December 31, 2012)
The breakdown of assets and liabilities upon consolidating Life Sciences Computing Corporation and DigitalGlobe,
Inc., which is included within the scope of consolidation through the acquisition of shares, and the relationship between
the acquisition price of shares and expenditure (net value) for the acquisition of shares are as follows:(in thousands of yen)
183,5317,539
117,730(31,913)(1,498)(79,390)

Current assets
Noncurrent assets
Goodwill
Current liabilities
Noncurrent liabilities
Minority interests*3.

Acquisition price of shares in newly consolidated subsidiary
Balance of cash and cash equivalents of newly consolidated subsidiary

196,000(131,564)

Expenditure for acquisition of shares in newly consolidated subsidiary

64,435

Breakdown of assets and liabilities that increased as a result of business succession
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
The breakdown of assets and liabilities succeeded from ACCESS CO., LTD. through the business transfer, and income
earned through business succession are as follows:(in thousands of yen)
182,129
247(107,168)(75,209)

Current assets
Fixed assets
Current liabilities
Negative goodwill*4.

Consideration for business succession
Cash and cash equivalents

0
8,240

Income earned through business succession

8,240

Important non-fund transaction

Increase in asset retirement
obligations

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)¥309,408-34-(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)¥4,880(Segment information)a. Segment information
1. Overview of reportable segments
The reportable segments of the Group are constituent units of the Company for which separate financial information
can be obtained, and the Board of Directors examines such information on a regular basis to determine the allocation ofmanagement resources and evaluate business performance.
The entire Group is pushing forward to create future value for clients by providing the most suitable businesssolutions and optimal mechanisms, while proactively applying cutting-edge IT technologies. The Group operates
businesses to establish information systems using advanced IT mainly for large clients, provide software packages,
consigned development, and educational and IT services chiefly for small and midsize companies, and hat reform andrevitalize companies centering on IT.
Hence, the Group is composed of businesses segmented by solution and market, and has three reportable segments:
the IT Consulting Business, the Package & Service Business, and the Corporate Revitalization Business.
The business operations of the three reportable segments are as follows:
Segment reported
Business operations
In this business, the Group helps clients solve problems, by sharing management
issues with them from a managerial perspective, understanding the essence of the
IT Consulting Businessclients’ businesses and establishing information systems for them using advanced
IT.
Package & Service BusinessTo introduce or provide via cloud and ASP operations software packages forhighly specialized fields, such as sales management and ERP, and provide
consigned development, and educational and IT services to help clients improvetheir operational efficiency.

Corporate Revitalization
Business

To get deeply involved in the management team of client firms, revitalize client
firms through drastic reform focusing on IT, and establish success models foreach industry.

2. Methods of calculating net sales, income or loss, assets, liabilities, and other items by reportable segment
Accounting procedures for reportable business segments are as described in “Significant Accounting Policies
Regarding the Preparation of Consolidated Financial Statements.”
Income of reportable segments is based on operating income.
Inter-segment sales and transfers are based on market prices.

-35-

3. Information on amounts of net sales, income or loss, assets, and other items by reportable segment
Fiscal 2011 (from January 1, 2011 to December 31, 2011)(in thousands of yen)Segment reported

Net sales
Net sales tooutside clientsInter-segment
sales ortransfer
Total
Segment
income (loss)
Segment
assetsOther items
Depreciation
andamortization
Amortizationof goodwill
Increase intangible andintangible
fixed assets(Note 1)

Adjustment(Note 2)

Amountstated infinancialstatements(Note 3)23,292,666-

23,292,666

22,560436,116(463,116)-

23,670,900

84,882

23,755,783(463,116)

23,292,666

31,5292,935,255(29,065)

2,906,190

23,674

2,929,865

2,018,033

568,181

12,091,964

2,512,608

14,604,573(151,212)

14,453,360

147,401

41,732

42,187

231,320

1,712

233,033-

233,033

13,4791,581-

15,060-15,060-15,060386,579

40,5249,906

437,010-437,010-437,010

Other(Note 1)IT Consulting
Business

Package &ServiceBusiness

Corporate
Revitalization
Business

14,610,689

4,066,955

4,552,698

23,230,344

62,322

8,879

430,4291,247

440,556

14,619,569

4,497,385

4,553,946

2,570,258

333,467

9,505,749

Total

Total

“Others,” a segment not included in the business segment reported, include Internet-related businesses and securities investment,
holding, and management activities.

(Note 2)Adjustment to segment income (loss) “¥23,674 thousand” and adjustment to segment assets “-¥151,212 thousand” are adjustments(Note 3)

Segment income (loss) is adjusted with operating income in consolidated financial statements.

to inter-segment transactions.

-36-

Fiscal 2012 (from January 1, 2012 to December 31, 2012)(in thousands of yen)Segment reported

Net sales
Net sales tooutside clientsInter-segment
sales ortransfer
Total
Segment
income (loss)
Segment
assetsOther items
Depreciation
andamortization
Amortizationof goodwill
Increase intangible andintangible
fixed assets(Note 1)

Adjustment(Note 2)

Amountstated infinancialstatements(Note 3)23,353,208-

23,353,208

1,002

602,137(602,137)-

23,672,048

283,297

23,955,346(602,137)

23,353,208

29,3452,053,630(155,032)

1,898,597

36,4601,935,058

2,155,468

543,489

12,594,587

2,398,209

14,992,797(162,607)

14,830,189

191,506

42,25429,390263,150819

263,970-

263,970

85,003--85,003-85,003-85,003705,049

27,37618,002

750,428

53,498803,926-

803,926

Other(Note 1)IT Consulting
Business

Package &ServiceBusiness

Corporate
Revitalization
Business

14,788,300

3,844,629

4,437,983

23,070,912

282,295

55,296544,678

1,160

601,135

14,843,596

4,389,307

4,439,144

1,745,047

279,236

9,935,630

Total

Total

“Others,” a segment not included in the business segment reported, include Internet-related businesses and securities investment,
holding, and management activities.

(Note 2)Adjustment to segment income (loss) “¥36,460 thousand” and adjustment to segment assets “-¥162,607 thousand” are adjustments
to inter-segment transactions.

(Note 3)

Segment income (loss) is adjusted with operating income in consolidated financial statements.

-37-

b. Related information
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
1. Information by product and service
Information by product and service is omitted because similar information is disclosed in Segment information.
2. Geographical segment information(1) Net sales
Net sales of domestic operations for external clients account for more than 90% of net sales in the consolidated
statements of income. Net sales are therefore omitted.
(2) Property, plant and equipment
The amount of property, plant and equipment located in Japan accounts for more than 90% of the amount of tangible
fixed assets in the consolidated balance sheets. Property, plant and equipment are therefore omitted.
3. Information by major client
Name of client

Net sales

SG SYSTEMS Co., Ltd.

5,396,584

Lawson, Inc.

3,448,065(in thousands of yen)
Relevant segment
IT Consulting Business andPackage & Service Business
IT Consulting Business

Fiscal 2012 (from January 1, 2012 to December 31, 2012)
1. Information by product and service
Information by product and service is omitted because similar information is disclosed in Segment information.
2. Geographical segment information(1) Net sales
Net sales of domestic operations for external clients account for more than 90% of net sales in the consolidated
statements of income. Net sales are therefore omitted.
(2) Property, plant and equipment
The amount of property, plant and equipment located in Japan accounts for more than 90% of the amount of tangible
fixed assets in the consolidated balance sheets. Property, plant and equipment are therefore omitted.
3. Information by major client
None
c. Information on tangible fixed asset impairment losses by reportable segment
Fiscal 2011 (from January 1, 2011 to December 31, 2011)(in thousands of yen)
IT
Consulting
Business
Impairment loss-

Segment reported
Package
Corporate&
Revitalization
ServiceBusiness
Business
60,087

Total
60,087

Notes: The amount in “Others” represents impairment loss on idle land.

Fiscal 2012 (from January 1, 2012 to December 31, 2012)
None

-38-

Others(Note)

Total

Corporateor
elimination

Total

4,893

64,981-

64,981

d. Information on amortization and unamortized balance of goodwill by reportable segment
Fiscal 2011 (from January 1, 2011 to December 31, 2011)(in thousands of yen)
IT
Consulting
Business(Goodwill)
Amortization during
the period
Balance at the end of
the period(Negative goodwill)
Amortization during
the period
Balance at the end of
the period

Segment reported
Package
Corporate&
Revitalization
ServiceBusiness
Business

Others(Note)

Total

Corporateor
elimination

Total

Total

13,4791,581-

15,060-15,060-15,060145,464--

145,464-

145,464-

145,464--

56,61756,617-56,617-56,617

-

-

-

-

-

-

-

-

Fiscal 2012 (from January 1, 2012 to December 31, 2012)(in thousands of yen)
IT
Consulting
Business(Goodwill)
Amortization during
the period
Balance at the end of
the period(Negative goodwill)
Amortization during
the period
Balance at the end of
the period

Segment reported
Package
Corporate&
Revitalization
ServiceBusiness
Business

Others(Note)

Total

Corporateor
elimination

Total

Total

85,003--85,003-85,003-85,003

195,332--

195,332-

195,332-

195,332

-

-

-

-

75,20975,209-75,209

-

-

-

-

-

-

-

-

-39-

(Lease transactions)(Lessee)
1. Finance lease transactions
Finance lease transactions not accompanying the transfer of property rights
1) Lease assets
None2) Depreciation of lease assets
As stated in Significant Accounting Policies Regarding the Preparation of Consolidated Financial Statements ‘4.
Accounting policies (2) Depreciation/amortization of major depreciable/ amortizable assets.
Of Finance lease transactions not accompanying the transfer of property rights, lease transactions thatcommenced before the start of the initial year of the application of the ‘Accounting Standard for Lease Transactions’(Accounting Standard Board of Japan Statement No. 13) are accounted for in a manner similar to the accounting
treatment for regular lease transactions.
(1) Acquisition cost equivalents, accumulated depreciation equivalents, accumulated impairment loss equivalents andbook value equivalents of leased properties

Fiscal 2011 (December 31, 2011)
Acquisition costequivalents(thousands of yen)

Accumulated
Accumulated impairment
depreciation equivalents
loss equivalents(thousands of yen)(thousands of yen)Book value equivalents(thousands of yen)

Property, plant andequipment¥149,664¥87,861¥42,059¥19,743

Intangible assets¥5,294¥3,979¥122¥1,192¥154,958¥91,840¥42,181¥20,936

Total

Fiscal 2012 (December 31, 2012)
Acquisition costequivalents(thousands of yen)

Accumulated
Accumulated impairment
depreciation equivalents
loss equivalents(thousands of yen)(thousands of yen)Book value equivalents(thousands of yen)

Property, plant andequipment¥146,745¥101,682¥42,059¥3,003

Intangible assets¥5,294¥5,001¥122¥170¥152,039¥106,683¥42,181¥3,173Total(2) Future lease payments obligation and balance of lease asset impairment loss account at the end of fiscal year
(in thousands of yen)
Fiscal 2011
(December 31, 2011)

Fiscal 2012
(December 31, 2012)

Future lease payments obligation
Due within one year

¥32,963¥8,366

Due after one year

¥8,663

¥297

Total

¥41,626¥8,663

Balance of lease asset impairment loss
account at the end of fiscal year

¥17,252¥17,252-40-

(3) Lease payments, reversal of lease asset impairment loss account, depreciation expense equivalents andimpairment loss
(in thousands of yen)
Fiscal 2011 (from January 1, 2011 to
December 31, 2011)

Fiscal 2012 (from January 1, 2012 to
December 31, 2012)

Lease payments¥38,929¥34,452

Reversal of lease asset impairment loss
account¥12,464¥12,645

Depreciation expense equivalents¥22,184¥17,954

Interest expense equivalents¥2,935¥1,277(4) Calculation method of depreciation expense equivalents
Depreciation equivalents are calculated using the straight-line method over the lease terms without residual value.
(5) Calculation method of interest expense equivalents
The difference between total lease payments and acquisition cost equivalents of leased assets is recognized asinterest expense equivalents and allocated over the lease term by the interest method.
(Impairment loss)
There are no impairment losses allocated to lease assets.
(Related party information)
None

-41-

(Tax effect accounting)
1. Breakdown of major causes for deferred tax assets and liabilities(in thousands of yen)
Fiscal 2011
(December 31, 2011)

Fiscal 2012
(December 31, 2012)[Current]
Deferred tax assets
Enterprise tax payable
Reserve for quality assurance
Reserve for loss on projects
Excess amount over maximum reserve forbonuses
Accrued business office taxes
Losses carried forward for tax purposes
Allowance for office transfer expenses
Other49,19826,485
1,708

42,2854,316
5,131

36,843
12,785
114,223
4,272

34,593
11,892
179,611
13,433
5,357

Subtotal of deferred tax assets
Valuation allowance

245,516(98,955)

296,618(142,959)

Total deferred tax asset

146,561

153,662

Deferred tax liabilities
Retirement expenses for asset retirement
obligations-

425

Total deferred tax liabilities-

425

Net deferred tax assets

146,561

153,237[Non-current]
Deferred tax assets
Losses carried forward for tax purposes
Depreciation excess
Loss on valuation of investment securities
Asset retirement obligations
Other934,845377,645
197,866
114,2835,231

868,240
356,299
199,780
113,102
4,033

1,629,872(1,352,080)

1,541,454(1,301,161)

277,791

240,294

42,92558,01623,213-

15,6291,225

Subtotal of deferred tax assets
Valuation allowance
Total deferred tax asset
Deferred tax liabilities
Temporary difference of future addition inconsolidated accounting
Retirement expenses for asset retirement
obligations
Other
Total deferred tax liabilities

66,13874,871

Net deferred tax assets

211,653

165,423(Note): Net amount of deferred tax assets is included in the following items in the consolidated balance sheets.
Fiscal 2011
(December 31, 2011)
146,561
218,382
6,729

Current assets - Deferred tax assets
Non-current assets - Deferred tax assets
Current liabilities - Others
Noncurrent liabilities - Others-42-

Fiscal 2012
(December 31, 2012)
153,662
172,157425
6,734

2. Breakdown of difference between the normal effective statutory tax rate and the rate of income taxes after
application of deferred tax accounting
Fiscal 2011
(December 31, 2011)
Normal effective statutory tax rate
(Adjustment)
Amortization of goodwill
Amortization of negative goodwill
Valuation allowance
Inhabitant tax, flat-rate
Transfer of losses brought forward resulting frommergerAddition permanent difference
Effect of change in tax rate
Difference in tax rates applied to overseas
subsidiaries
Effects of liquidation of consolidated subsidiaries
Other
Rate of income taxes after application of deferred
accounting

Fiscal 2012
(December 31, 2012)

40.7%

40.7%

-%
(0.6%)(1.2%)
0.9%

0.5%
-%
(1.2%)
1.3%(0.7%)
0.5%
0.8%

-%
0.7%
0.3%

-%
-%
0.5%

1.5%
(0.9%)(0.1%)

40.9%

42.8%

3. Revision of amounts of deferred tax assets and liabilities due to change in normal effective statutory tax rate
(Fiscal 2011)
The ‘Act on Partial Revision of the Income Tax Act, etc. to Build Tax System Conforming to Changes in the Structureof Economic Society’ (Law No. 114 of 2011) and the ‘Act on Special Measures Concerning Security of Financial
Resources Necessary for Implementation of Measures for Restoration from the Great East Japan Earthquake’ (Law No.
117 of 2011) were promulgated on December 2, 2011, and the corporate tax rate will be reduced and special restoration
corporate tax will be imposed from the consolidated fiscal year that starts on or after April 1, 2012. As a result, thenormal effective statutory tax rate to be used to calculate deferred tax assets and liabilities will be reduced from former
40.7% to 38.0% for temporary differences that are expected to be resolved in the consolidated fiscal year that starts on
January 1, 2013 to the consolidated fiscal year that starts on January 1, 2015, and to 35.6% for those that are projected tobe resolved in or after the consolidated fiscal year that starts on January 1, 2016.
As a result of the change, the amount of deferred tax assets (excluding the amount of deferred tax liabilities)
decreased ¥22,947 thousand, while corporate tax adjustments increased ¥22,839 thousand.

-43-

(Financial instrument)
1. Matters relating to the status of financial instruments(1) Financial instrument guidelines
The Group limits fund management to highly safe, short-term financial assets, etc., and procures fund mainly throughborrowings from banks. The Group does not engage in derivative transactions.
(2) Details and risk of financial instruments and risk management structure
Notes and accounts receivable and accounts receivable-other, which are trade receivables, are exposed to credit risks ofclients. With regard to the said risk, however, the Group manages due dates and balances by client in accordance with theGroup’s Credit Management Regulations, and if there is a possibility of delay in collection, it quickly and properly
handles the situation in cooperation with the sales division. Accounts receivable-other includes a case that is being
resolved through a lawsuit since there had been a difference in understanding of the delivery of deliverables under anagreement with the other party.
Shares, which are categorized into short-term investment securities and investment securities, and held-to-maturity
bonds, are exposed to the fluctuation risk of market prices. They are shares of companies with which the Group hasbusiness relations and market prices periodically grasped are reported to the Board of Directors.
Lease and guarantee deposits are mainly those put in when lease agreements on offices of the Group were concluded.
Though they are exposed to credit risk of their recipients, the Group strives to reduce risk by periodically grasping thecredit status of recipients of lease and guarantee deposits.
Payment of all accounts payable and accounts payable-other, which are trade payable, is due within one year. All of
income tax payable, etc., which are unpaid income tax, inhabitant taxes (that mean prefectural and municipal taxes) andenterprise tax, see the deadline for payment arrive within two months.
Short-term and long-term borrowings are mainly aimed at procuring funds concerning business transactions and their
payment dates are within one year after the account settlement date at the longest.
These trade payables, borrowings, etc. are exposed to liquidity risk at the time of their settlement. In the Group, suchrisk is managed through the preparation of monthly financing plans by each Group company and the maintenance ofproper liquidity on hand.
(3) Supplementary explanations of matters relating to market value of financial instruments and others
Market values of financial instruments include rationally calculated prices when there are no market values, as well as
prices based on market values. Since certain fluctuation factors are incorporated in calculating the relevant prices, therelevant values may fluctuate when different preconditions and others are used in calculation.

-44-

2. Matters relating to market values of financial instruments and others
Amounts stated in B/S, market value and differences between them are as follows. Financial instruments whose market
values are deemed to be extremely difficult to determine are not included in the table below. (Refer to Note 2)
Fiscal 2011 (December 31, 2011)
Amount stated in B/S(1)Cash and deposits(2)Notes and accounts receivable(3) Short-term investment securities(4)Accounts receivable-other(5)Investment securities(6)Lease and guarantee deposits
Total assets

Market value

5,076,449
2,770,586
699,310
1,357,981
112,575
840,114

5,076,449
2,770,586
696,780
1,357,981
112,575
799,311(2,530)(40,802)

10,857,018

10,813,685(43,333)

644,020
32,327567,454590,481
16,000644,020
32,327567,454590,481
16,000-1,850,284-(1)Accounts payable(2)Short-term borrowings(3)Accounts payable-other(4)Income tax payable, etc.
(5)Long-term borrowings(*)

Total liabilities
1,850,284(*) Long-term borrowings include current portion long-term loans payable.
Fiscal 2012 (December 31, 2012)
Amount stated in B/S(1)Cash and deposits(2)Notes and accounts receivable(3) Short-term investment securities(4)Accounts receivable-other(5)Investment securities(6)Lease and guarantee deposits
Total assets

Market value(in thousands of yen)
Difference

4,156,343
3,523,351
28,3291,358,569
115,979
1,035,870

4,156,343
3,523,351
28,3291,358,569
115,979
1,004,645(31,225)

10,218,443

10,187,218(31,225)

739,873
30,283516,697535,959

739,873
30,283516,697535,959-

1,822,812

1,822,812-(1)Accounts payable(2)Short-term borrowings(3)Accounts payable-other(4)Income tax payable, etc.
Total liabilities(in thousands of yen)
Difference

Notes: 1.Calculation methods of market values of financial instruments and matters relating to securities
Assets(1) Cash and deposits, (2) Notes and accounts receivable, (3) Short-term investment securities,(4) Accounts receivable-other
Since these are settled in short terms, their market values approximate book values. Therefore, we deem theirbook values to be market values.
(5) Investment securities
We deem stock prices quoted in the exchanges to be their market values and also bond prices quoted in theexchanges or indicated by correspondent financial institutions, etc. to be their market values. As for mattersrelating to securities held-to-maturity, please refer to Notes ‘Securities.’(6) Lease and guarantee deposits
Market values of these are calculated based rationally estimated planned refund time for lease and guarantee
deposits and by the present value obtained by discounting by interest rates that take into consideration the credit
risk of recipients of lease and guarantee deposits.
Liabilities(1) Accounts payable, (2) Short-term borrowings, (3) Accounts payable-other, (4) Income tax payable, etc.
Since these are settled in short terms, their market values approximate book values. Therefore, we deem theirbook values to be market values.
(5) Long-term borrowings
Since these are settled in short terms, their market values approximate book values. Therefore, we deem theirbook values to be market values.

-45-

2. Financial instruments whose market values are deemed to be extremely difficult to determine(in thousands of yen)
Item

Fiscal 2011
(December 31, 2011)

Unlisted stocks (*)
Stocks of subsidiaries and affiliates

Fiscal 2012
(December 31, 2012)¥1,044,191¥1,222,915¥351,523¥555,070(*) Allowance for doubtful accounts was fully posted for bonds payable valued at ¥17,150 thousand in fiscal 2011 and¥15,350 thousand in fiscal 2012, therefore, the amounts of these bonds were excluded for representation.
These are neither included in ‘(3) Short-term investment securities’ or in ‘(5) Investment securities,’ since there areno market prices for them and it is deemed to be extremely difficult to determine their market values.
3. Projected redemption amounts of monetary claims and securities with maturity after the consolidated accountsettlement dateFiscal 2011 (December 31, 2011)(in thousands of yen)

Within one year

Over one year but
within five years

Over five years but
within ten years

Over ten years

Deposits
Notes and accounts
receivable-trade
Accounts receivable-other
Short-term investment
securities
Held-to-maturity
bonds
Bonds payable
Of other securities,
those with maturity
Bonds payable (*)
Lease and guarantee
deposits

5,062,051
2,770,586---

1,357,981---

700,000

-

-

-

1,800
34,145

15,350521,633

203,873

80,461

Total

9,926,565

536,983

203,873

80,461(*) Allowance for doubtful accounts was fully posted at ¥1,800 thousands and at ¥15,350 thousands for bonds payable.
Fiscal 2012 (December 31, 2012)(in thousands of yen)

Within one year

Over one year but
within five years

Over five years but
within ten years

Over ten years

Deposits
Notes and accounts
receivable-trade
Accounts receivable-other
Short-term investment
securities
Of other securities,
those with maturity
Bonds payable (*)
Lease and guarantee
deposits

4,130,467
3,523,351---

1,358,569

-

-

-

1,800
585,633

13,550162,351

223,034

64,850Total

9,599,821

175,901

223,034

64,850(*) Allowance for doubtful accounts was fully posted at ¥1,800 thousands and ¥13,550 thousands for bonds payable.
4. Projected repayment amounts of long-term borrowings after the consolidated account settlement date
None

-46-

(Securities)
1. Held-to-maturity bonds
Fiscal 2011 (December 31, 2011)(1)
Held-to-maturity bonds
whose market value
exceeds amount stated in
B/S

(2)
(3)
(1)

Held-to-maturity bonds
whose market value does
not exceed amount stated in
B/S

(2)
(3)

Type
Central/local
government
bonds
Bonds payable
Other
Subtotal
Central/local
government
bonds
Bonds payable
Other
Subtotal

Amount stated in B/S(in thousands of yen)
DifferenceMarket value

-

-

-

-

-

-

-

-

-

699,310699,310699,310

696,780
696,780
696,780(2,530)(2,530)(2,530)

Amount stated in B/S
50,825Acquisition cost
49,657---50,82561,75049,65765,0701,168(3,320)

Total
Fiscal 2012 (December 31, 2012)
None
2. Other securities:
Fiscal 2011 (December 31, 2011)
Type(1) Stocks(2) Bonds
1) Central/local
government
bonds2) Bonds payable3) Other(3) Other
Subtotal(1) Stocks(2) Bonds
1) Central/local
government
bonds2) Bonds payable3) Other(3) Other
Subtotal

Securities stated in B/S
whose amount exceeds
acquisition cost

Securities stated in B/S
whose amount does notexceed acquisition cost-(in thousands of yen)
Difference
1,168

-

61,750112,575

Total

65,070114,727(3,320)(2,151)

Notes: Unlisted stocks, etc. (amount stated in B/S: ¥1,044,191 thousand) are not included in ‘Other securities’ in the table above, since
there are no market prices for them and it is deemed to be extremely difficult to determine their market values.

-47-

Fiscal 2012 (December 31, 2012)
Type(1) Stocks(2) Bonds
1) Central/local
government
bonds2) Bonds payable3) Other(3) Other
Subtotal(1) Stocks(2) Bonds
1) Central/local
government
bonds2) Bonds payable3) Other(3) Other
Subtotal

Securities stated in B/S
whose amount exceeds
acquisition cost

Securities stated in B/S
whose amount does notexceed acquisition cost(in thousands of yen)
Difference
12,852

Amount stated in B/S
62,509Acquisition cost
49,657---62,50953,47049,65765,07012,852(11,600)--

28,32981,799144,308

Total

28,32993,399143,056(11,600)
1,252

Notes: Unlisted stocks, etc. (amount stated in B/S: ¥1,222,915 thousand) are not included in ‘Other securities’ in the table above, since
there are no market prices for them and it is deemed to be extremely difficult to determine their market values.

3. ’Other securities’ soldFiscal 2011 (from January 1, 2011 to December 31, 2011)
Type(1) Stocks(2) Bonds
1) Central/local
government bonds2) Bonds payable3) Other(3) Other
Total

Profits on sale
228,270

Total profits on sale160,290

-

-

-

-

228,270

160,290(in thousands of yen)
Total losses on sale
1,349
1,349

Fiscal 2012 (from January 1, 2012 to December 31, 2012)
None
4. Securities for which impairment losses are recognized
For the fiscal year under review, impairment losses of ¥1,275 thousand were posted for securities (shares among othersecurities: ¥1,275 thousand).
When the market value of securities at the end of the fiscal year declined by at least 50% from the acquisition price, thefull value was written off as an asset impairment loss. When the market value declined by 30%-50% from the acquisition
price, the amount was written off as an asset impairment loss after considering the likelihood of a recovery in value. Among
unlisted shares for which determining the market value was recognized to be extremely difficult, shares whose real prices
were considered to have fallen significantly due to a deterioration in the financial positions of issuers were treated as
impaired.
(Derivative transactions)
There are no applicable items, since the Group does not utilize derivative transactions.
(Retirement benefits)
None

-48-

(Stock options)
1. Details, scale and fluctuation status of stock options(1) Details of stock options
Stock options of 2005
Director of the Company

Classification and number ofgrantees

Number of stock options
Date of grantRight allotment conditions

5
Employee of the Company
467
Director of subsidiary of theCompany
1
Employee of subsidiary of theCompany
6
Common stock: 8,000 shares
August 25, 2005
Having continued to work from thedate of grant (August 25, 2005) tothe date of right allotment (August24, 2008)
From August 25, 2005 to August24, 2008
From August 25, 2008
To March 23, 2015

Subject service period
Exercise period(2) Scale and fluctuation status of stock options
Stock options that existed in the fiscal year under review are subject. The number of stock options is converted into andpresented in the number of shares.
1) Number of stock options
Stock option of 2005
Before right allotment
End of the previous
fiscal year
Grant
Lapse
Right allotment
Balance of stock
options not allotted
After right allotment
End of the previous
fiscal year
Right allotment
Exercise of right
Lapse
Balance of stock
options not
exercised(Share)(Share)
3,384
364
3,020

2) Unit price information
Stock option of 2005
Exercise price(Yen)
Average stock price at the(Yen)time of exercise
Fair assessed unit price (Date of grant) (Yen)

65,205--49-

(Business combinations)Fiscal 2011 (from January 1, 2011 to December 31, 2011)(Business combination through acquisition)
Turning of Brightree Solutions Sdn Bhd. (hereinafter ‘Brightree’) into a subsidiary by North Consulting Group Pte. Ltd.
(hereinafter ‘NCG’), a consolidated subsidiary of the Company
1. Overview of business combination(1) Name and business activities of the acquired company
Name of the acquired company: Brightree Solutions Sdn Bhd.
Business activities:
Introduction, customization and operation and maintenance of ERP in Malaysia Brightree
Solutions Sdn Bhd.
(2) Main reasons for business combination
The Group believes that it will be able to expand business domain, enhance delivery capability and expand clientbase in Malaysia and its neighboring countries by mutually making the most of high-value-added IT consulting
know-how and client network of NCG and plenty of introduction track records and operation and maintenance baseof Brightree through turning of Brightree into a subsidiary by NCG.
(3) Date of business combination
October 1, 2011(4) Legal form of business combination
Acquisition of shares(5) Name of the company after business combination
Brightree Solutions Sdn Bhd.
(6) Acquired voting right ratio
51.0%(7) Main ground for deciding the company to be acquired
Because NCG, a wholly owned subsidiary of the Company, acquired 51.0% of voting rights of Brithtree throughacquisition of shares in exchange for cash.
2. Period of operating results of the acquired company, which is included in the consolidated financial statements
From October 1, 2011 to December 31, 2011
3. Acquisition cost of the acquired company and its breakdown
Consideration for acquisition
Cash 144,540 Thousand Yen
Acquisition cost
144,540 Thousand Yen
4. Amount of goodwill that occurred, cause of occurrence, amortization method and amortization period(1) Amount of goodwill that occurred
137,355 Thousand Yen(2) Cause of occurrence
Mainly surplus profitability expected from expansion of business domain by Brightree in Malaysia(3) Amortization method and amortization period
Equal amortization over three years
5. Amount of assets received and obligations taken over on the date of business combination and their breakdown
Current assets
47,462 Thousand Yen
Noncurrent assets
6,049
Total assets
53,512Current liabilities(38,981)Noncurrent liabilities(443)
Total liabilities(39,425)
6. Estimated impact on the Consolidated statements of income and comprehensive income for fiscal 2012 on theassumption that business combination was completed on the first day of fiscal 2012, and method of calculation:
Net sales
139,943 Thousand Yen
Operating income
14,328(Calculation method of estimated amounts)
The estimated impact was calculated according to the difference between net sales and profits/losses, computedon the assumption that business combination was completed on the day of fiscal year starting consolidated accounting,and net sales and profits/losses in the acquirer’s Consolidated statements of income and comprehensive income.
This note has not been subjected to audit certification.

-50-

Turning of ELECTRA (T) LTD. (hereinafter ‘ELECTRA’) into a subsidiary by North Consulting Group Pte. Ltd.
(hereinafter ‘NCG’), a consolidated subsidiary of the Company
1. Overview of business combination(1) Name and business activities of the acquired company
Name of the acquired company: ELECTRA (T) LTD.
Business activities: Introduction, customization and operation and maintenance of ERP in Thailand(2) Main reasons for business combination
The Group believes that it will be able to expand business domain, enhance delivery capability and expand clientbase in Thailand and its neighboring countries by mutually making the most of high-value-added IT consulting
know-how and client network of NCG and plenty of introduction track records and operation and maintenance baseof ELECTRA through turning of ELECTRA into a subsidiary by NCG.
(3) Date of business combination
November 30, 2011(4) Legal form of business combination
Acquisition of shares(5) Name of the company after business combination
ELECTRA (T) LTD. (Its trade name is planned to be changed to North Consulting Group (Thailand) CO., LTD. on
January 6, 2012.)(6) Acquired voting right ratio
100.0%(7) Main ground for deciding the company to be acquired
Because NCG, a wholly owned subsidiary of the Company, acquired 100.0% of voting rights of ELECTRA
through acquisition of shares in exchange for cash.
2. Period of operating results of the acquired company, which is included in the consolidated financial statements
Operating results of the acquired company are not included in the consolidated financial statements for the fiscal
year under review, since the deemed date of acquisition of the consolidated subsidiary is the last day of the fiscal
year.
3. Acquisition cost of the acquired company and its breakdown
Consideration for acquisition
Cash 20,953 Thousand Yen
Acquisition cost
20,953 Thousand Yen
4. Amount of goodwill that occurred, cause of occurrence, amortization method and amortization period(1) Amount of goodwill that occurred
16,804 Thousand Yen(2) Cause of occurrence
Mainly surplus profitability expected from expansion of business domain by ELECTRA in Thailand(3) Amortization method and amortization period
Equal amortization over three years
5. Amount of assets received and obligations taken over on the date of business combination and their breakdown
Current assets
8,247 Thousand Yen
Noncurrent assets
883
Total assets
9,130
Current liabilities(5,279)Total liabilities(5,279)
6. Estimated amounts of impact on the Consolidated statements of income and comprehensive income for fiscal 2012 on
the assumption that the business combination was completed on the first day of fiscal 2012, and the method of
calculation:
Net sales
46,730 Thousand Yen
Operating income
2,558(Calculation method of estimated amounts)
The estimated amounts of impact were calculated according to the difference between net sales and profits/losses,
computed on the assumption that the business combination was completed on the day of fiscal year starting
consolidated accounting, and net sales and profits/losses in the acquirer’s Consolidated statements of income andcomprehensive income.
This note has not been subjected to audit certification.

-51-

(Transactions, etc. under common control)
Company split of the Company and Elm Corporation
1. Overview of business combination(1) Name of subject business and its business activities
Name of business: ERP business for small and midsize companies
Business activities: Services concerning introduction of ‘NewRRR,’ application software that matches businesscharacteristics of small and midsize companies, and maintenance service after the introduction of the relevant system(2) Date of business combination
April 1, 2011
(3) Legal form of business combination
Company split, with the Company as the split company and Elm Corporation (consolidated subsidiary of theCompany) as the successor(4) Name of company after business combination
Elm Corporation (Its trade name was changed to FutureOne, Inc. on April 1, 2011.)(5) Other matters concerning overview of transactions
The company split is aimed at building a structure that can provide high-value-added services more quickly tosatisfy demand for IT systems, which is expected to grow in the future, by reorganizing the relevant business, which
is currently dispersed within the Group.
2. Overview of implemented accounting treatment
Pursuant to the ‘Accounting Standard for Business Combinations’ (ASBJ Statement No. 21, December 26, 2008) andthe ‘Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures’(ASBJ Guidance No. 10, December 26, 2008), transactions are treated as those under common control.
Absorption-type merger of the Company and Future Financial Strategy Corp.
1. Overview of business combination(1) Name of subject business and its business activities
Name of business: Consulting business for financial institutions
Business activities: Future Financial Strategy Corp. is engaged in consulting services for financial institutions andresearch on financial technology.
(2) Date of business combination
July 1, 2011
(3) Legal form of business combination
Absorption-type merger, with the Company as company surviving absorption-type merger and Future Financial
Strategy Corp. as company absorbed in absorption-type merger(4) Name of company after business combination
Future Architect, Inc.
(5) Other matters concerning overview of transactions
The absorption-type merger is aimed at further supporting financial institutions resolve their issues from thestandpoints of management and IT by integrating IT consulting for financial institutions provided by the Financial
Division of the Company and consulting know-how that has been offered by Future Financial Strategy Corp. tofinancial institutions.
2. Overview of implemented accounting treatment
Pursuant to the ‘Accounting Standard for Business Combinations’ (ASBJ Statement No. 21, December 26, 2008) andthe ‘Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures’(ASBJ Guidance No. 10, December 26, 2008), transactions are treated as those under common control.

-52-

Fiscal 2012 (from January 1, 2012 to December 31, 2012)(Business combination-through acquisition)
Succession of media service business of ACCESS CO., LTD., including publication, through a corporate split by Zakura Inc.,
which is a consolidated subsidiary of the Company
1. Overview of business consolidation(1) Name and business activities of splitting company
Name of splitting company: ACCESS CO., LTD.
Business activities: Media service business including publication(2) Main reasons for business combination
With this business combination, we aim to provide new services in many fields, centering on a well-known
publication, which transcend the distribution of content.
(3) Date of business combination
January 31, 2012
(4) Legal form of business combination
Corporate split in which ACCESS CO., LTD. is the splitting company and Zakura Inc. (the Company’s consolidated
subsidiary) is the succeeding company.
(5) Name of company after business combination
Zakura Inc. (renamed Tokyo Calendar Inc. on February 1, 2012)
2. Period of operating results of the acquired business, which is included in the consolidated financial statements
From February 1, 2012 to December 31, 2012
3. Acquisition cost of acquired business and breakdown
Consideration for acquisition

Cash 0 Thousand Yen

Acquisition cost

0 Thousand Yen

4. Amount of gain on negative goodwill and cause(1) Amount of gain on negative goodwill
75,209 Thousand Yen(2) Cause of occurrence
Negative goodwill was incurred because net assets acquired through investments exceeded acquisition cost.

-53-

Converting Life Sciences Computing Corporation (hereinafter “Life Sciences Computing”) and its subsidiary DigitalGlobe,
Inc. (hereinafter “DigitalGlobe“) into subsidiaries of the Company
1. Overview of business combination(1) Name and business activities of the acquired company
Name of the acquired company: Life Sciences Computing Corporation
DigitalGlobe, Inc.
Business activities: Development and sales of software for the medical sector(2) Main reasons for business combination
Because the Group aims to further aggressively expand operations into the healthcare field by combining Life
Sciences Computing’s medical-related solutions with the Company’s technologies, expertise, and client network.
(3) Date of business combination
March 31, 2012
(4) Legal form of business combination
Acquisition of shares(5) Name of the company after business combination
Life Sciences Computing Corporation
DigitalGlobe, Inc.
(6) Acquired voting right ratio
51.9%(7) Main ground for deciding the company to be acquired
Because the Company acquired 51.9% of the voting rights of Life Sciences Computing through the acquisition ofshares in exchange for cash.
2. Period of operating results of the acquired company, which is included in the consolidated financial statements
April 1, 2012 to December 31, 2012
3. Acquisition cost of the acquired company and its breakdown
Consideration for acquisition
Cash 196,000 Thousand Yen
Acquisition cost
196,000 Thousand Yen
4. Amount of goodwill that occurred, cause of occurrence, amortization method and amortization period(1) Amount of goodwill that occurred
117,730 Thousand Yen(2) Cause of occurrence
Additional profitability mainly expected from a further aggressive expansion of operations into the healthcare
field by combining of Life Sciences Computing’s medical-related solutions with the Company’s technologies,
expertise and client network(3) Amortization method and amortization period
Equal amortization over three years
5. Amount of assets received and obligations taken over on the date of business combination and their breakdown
Current assets
183,531 Thousand Yen
Noncurrent assets
7,539
Total assets
191,071
Current liabilities(31,913)
Noncurrent liabilities-Others(1,498)
Total liabilities(33,411)
6. Estimated amounts of impact on the Consolidated statements of income and comprehensive income for fiscal 2012 on
the assumption that the business combination was completed on the first day of fiscal 2012, and the method of
calculation:
Net sales
49,125 Thousand Yen
Operating income(3,730 Thousand Yen)
(Calculation method of estimated amounts)
The estimated amounts of impact were calculated according to the difference between net sales and profits/losses,
computed on the assumption that the business combination was completed on the day of fiscal year starting
consolidated accounting, and net sales and profits/losses in the acquirer’s Consolidated statements of income andcomprehensive income.
This note has not been subjected to audit certification.

-54-

(Transactions, etc. under common control)
Absorption-type merger of Life Sciences Computing, a subsidiary of the Company, and DigitalGlobe, a subsidiary of Life
Sciences Computing
1. Overview of business combination(1) Name of subject business and its business activities
Name of business: Development and sales of software for the medical sector
Business activities: Customization, support, and OEM of the OpenDolphin system(2) Date of business combination
December 31, 2012
(3) Legal form of business combination
Absorption-type merger in which Life Sciences Computing (a subsidiary of the Company) is the succeedingcompany of the absorption-type merger, and DigitalGlobe (a subsidiary of Life Sciences Computing), is the company
absorbed by the absorption-type merger(4) Name of company after business combination
Life Sciences Computing Corporation(5) Other matters concerning overview of transactions
The absorption-type merger is aimed at expanding operations in the medical business by embarking on thedevelopment and sales of an electronic medical chart, a key tool for clinics, following sales of medical image
systems.
2. Overview of implemented accounting treatment
Pursuant to the ‘Accounting Standard for Business Combinations’ (ASBJ Statement No. 21, December 26, 2008) andthe ‘Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures’(ASBJ Guidance No. 10, December 26, 2008), transactions are treated as those under common control.

-55-

(Asset retirement obligations)
Of asset retirement obligations, those stated in the consolidated balance sheetsa) Overview of the relevant asset retirement obligations
Obligation of restoration to original condition following conclusion of real estate lease agreements on offices,
including the head office, and storesb) Calculation method of the amount of the relevant asset retirement obligations
The amount of asset retirement obligations is calculated by estimating the usable period to be seven to 20 years
from the acquisition and using discount rate of 0.726% to 1.186%.
c) Increase/decrease in total amount of the relevant asset retirement obligations
Fiscal 2011
Fiscal 2011 (from January 1,
2011 to December 31, 2011)(in thousands of yen)
Fiscal 2012
Fiscal 2012 (from January 1,
2012 to December 31, 2012)

331,237

309,408

Balance at the beginning of the period (Note 1)
Increase due to acquisition of tangible fixed
assetsAdjustment due to passage of time
Decrease due to fulfillment of asset retirement
obligations
Other increase (decrease)

11,437
2,899

3,603
2,986

(36,477)
311(1,700)1,498

Balance at the end of the period (Note 2)

309,408

315,796Note 1: “Balance at the beginning of the period” for fiscal 2011 is the balance resulting from application of the “AccountingStandard for Asset Retirement Obligations” (ASBJ Statement No. 18, March 31, 2008) and the “Guidance on AccountingStandard for Asset Retirement Obligations” (ASBJ Guidance No. 21, March 31, 2008).
Note 2: Total asset retirement obligations (current liabilities) and asset retirement obligations (noncurrent liabilities)(Real estate, including lease)
Real estate, including lease, is omitted, since its total is of little significance in terms of monetary amounts.
(Special purpose company subject to disclosure)
None(Per share data)

Net asset value per share
Net income per share

Notes:

Fiscal 2011
(from January 1, 2011 to December 31, 2011)¥24,964.67¥3,756.80
Fully diluted net income per share is not statedbecause the average stock price during theperiod is below the exercise price of stockacquisition rights and hence net income pershare is not diluted.

Fiscal 2012
(from January 1, 2012 to December 31, 2012)¥25,865.24¥2,588.05
Fully diluted net income per share is not statedbecause the average stock price during theperiod is below the exercise price of stockacquisition rights and hence net income pershare is not diluted.

Net income per share is calculated based on the following:

Net income per share
Net income(thousands of yen)Amount not available forcommon shareholders tocommon shares(thousands of yen)
Net income attributable tocommon shares(thousands of yen)
Average outstanding
shares of common stockduring the period (shares)
Latent shares that have no
dilution effect and thus are
not included in thecalculation of diluted net
income per share

Fiscal 2011
(from January 1, 2011 to December 31, 2011)

Fiscal 2012
(from January 1, 2012 to December 31, 2012)

1,715,476

1,167,747--

1,715,476

1,167,747

456,632

451,208

Stock options granted by resolution of theOrdinary General Meeting of Shareholders on
March 24, 2005 (Stock acquisition rights: 846
units)
Common stock: shares 3,384-56-

Stock options granted by resolution of theOrdinary General Meeting of Shareholders on
March 24, 2005 (Stock acquisition rights: 755
units)
Common stock: shares 3,020

(Significant subsequent events)
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
Purchase of treasury stock
At the Board of Directors meeting of the Company held on February 7, 2012, the Company decided to purchase treasury
stock pursuant to Article 156, Paragraph 1 of the Companies Act, applied by the reading of terms under provisions of Article
165, Paragraph 3 of the same act.
(1) Reason for purchase of treasury stock
Treasury stock will be purchased in order to carry out flexible capital policy to cope with changes in the management
environment.
(2) Type of stock to be purchased
Common stock(3) Number of shares to be purchased
6,400 (ceiling limit)(4) Total amount of stock acquisition price
250,000,000 yen (ceiling limit)(5) Purchase method
Purchase in the market through a trust bank(6) Purchase period
From February 8, 2012 to March 19, 2012
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Purchase of treasury stock
At the Board of Directors meeting of the Company held on February 7, 2013, the Company decided to purchase treasury
stock pursuant to Article 156, Paragraph 1 of the Companies Act, applied by the reading of terms under provisions of Article
165, Paragraph 3 of the same act.
(1) Reason for purchase of treasury stock
Treasury stock will be purchased in order to carry out flexible capital policy to cope with changes in the management
environment.
(2) Type of stock to be purchased
Common stock(3) Number of shares to be purchased
4,000 (ceiling limit)(4) Total amount of stock acquisition price160,000,000 yen (ceiling limit)(5) Purchase method
Purchase in the market through a trust bank(6) Purchase period
From February 8, 2013 to March 22, 2013-57-

5. Non-consolidated Financial Statements(1) Balance sheets
Fiscal 2011
(December 31,2011)
AssetsCurrent assets
Cash and deposits
Accounts receivable-trade
Short-term investment securities
Prepaid expenses
Deferred tax assets
Short-term loans receivable from subsidiaries andaffiliates
Accounts receivable-other
Other
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Total tangible fixed assets
Intangible assets
Patent right
Right of trademark
Software
Other
Total intangible fixed assets
Investments and other assets
Investment securities
Stocks of subsidiaries and affiliates
Long-term loans receivable from subsidiaries andaffiliates
Deferred tax assets
Lease and guarantee deposits
Other
Allowance for doubtful accounts
Allowance for investment loss
Total investments and other assets
Total fixed assets
Total assets(in thousands of yen)
Fiscal 2012
(December 31,2012)

3,840,226
2,119,444
699,310248,636
82,242

2,658,509
2,657,475
303,670
66,926

120,000
*3

*1
*1

-58-

1,435,373
11,3368,556,571

70,000*3

1,451,442
16,124
7,224,149

590,082(388,075)
202,007
1,091,012(912,050)
178,961
18,825
399,794603,392(442,496)
160,896
1,348,535(1,008,657)
339,878
18,825519,599

345
949
337,492
10,710349,497

165
497
744,968
10,710756,342

907,505
1,353,318

1,090,909
1,628,871

1,384,683

1,830,018

188,853
723,761
15,070(567,492)(313,788)
3,691,911
4,441,204
12,997,775

196,622941,602
15,236(667,515)(422,166)
4,613,578
5,889,519
13,113,668*1*1

Fiscal 2011
(December 31,2011)
Liabilities
Current liabilities
Accounts payable-trade
Current portion of long-term loans payable
Accounts payable-otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Deposits received
Unearned revenue
Reserve for quality assurance
Reserve for loss on projects
Allowance for office transfer expenses
Asset retirement obligations
Total current liabilities
Noncurrent liabilities
Asset retirement obligations
Total noncurrent liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Legal capital surplus
Total capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
Retained earnings brought forward
Total retained earnings
Treasury stock
Total shareholders' equity
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets-59-(in thousands of yen)
Fiscal 2012
(December 31,2012)

237,910
16,000461,08782
561,71439,752
11,218
171,668
173,30761,2904,200
1,738,232

289,229430,703501,263
20,84342,943
189,532
185,422
3,174
13,50035,342
11,7891,723,743

195,380
195,380
1,933,612

188,878
188,878
1,912,621

1,421,815

1,421,815

2,495,772
2,495,772

2,495,772
2,495,772

27,74827,7488,291,880
8,319,628(1,171,668)
11,065,547

8,648,233
8,675,982(1,393,328)
11,200,241(1,384)(1,384)
11,064,163
12,997,775

806
806
11,201,047
13,113,668

(2) Non-consolidated statements of income
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Net sales
IT Consulting Business
IT Consulting service
Procurement services related to hardware
Total of IT Consulting Business
Package & Service Business
Package & service
Procurement services related to hardware
Total of Package & service
Total net sales
Cost of sales
IT Consulting Business
IT Consulting service
Procurement services related to hardware
Total of IT Consulting Business
Package & Service Business
Package & service
Procurement services related to hardware
Total of Package & service
Total cost of sales
Gross profit
Selling, general and administrative expenses
Advertising expenses
Directors' compensations
Salaries and bonuses
Other salaries
Welfare expenses
Training expenses
Research and development expenses
Depreciation and amortization
Rent expenses
Recruiting expenses
Other
Total selling, general and administrative expenses
Operating income

*7

-60-

(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

14,085,398
350,358
14,435,757

13,501,414
516,237
14,017,651

186,248
8,241
194,489
14,630,246

14,017,651

8,015,188
299,032
8,314,220*7

7,993,105
406,524
8,399,630

73,605
7,205
80,811
8,395,032
6,235,214

8,399,630
5,618,021

321,807
189,076
1,611,871
105,844
98,644
59,818*1
24,60868,134361,385
179,448469,5443,490,185
2,745,028

311,261
132,385
1,756,850
125,474
71,22589,160*1
22,20552,865455,653
175,151
414,1623,606,396
2,011,624

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Non-operating income
Interest income
Dividends income
Group management expense
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expenses
Acquisition expenses of treasury stock
Guarantee commission
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
Gain on sales of noncurrent assets
Gain on extinguishment of tie-in shares
Gain on liquidation of subsidiaries and affiliates
Total extraordinary income
Extraordinary loss
Loss on retirement of noncurrent assets
Loss on sales of investment securities
Impairment loss
Litigation expenses
Office transfer expenses
Provision of allowance for doubtful accounts
Provision of allowance for investment loss
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Loss on liquidation of subsidiaries and affiliates
Debt waiver loss from subsidiaries and affiliates
Other
Total Extraordinary losses
Net income before taxes
Income taxes-current
Income taxes-deferred
Total income taxes
Net income*212,242
17,47523,8852,777
3,121
59,501*2(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
*2

*2

987
233
217
1,438
2,803,092

1,598
1,647
262
3,508
2,130,082

160,275
107
38,774
199,157

49,73949,739

*3

*4

*5

*6

15,291
1,349
4,893
80,699
-

*9

*6
*11

161,754
4,075
30,000
298,064
2,704,185
1,169,672(13,397)
1,156,275
1,547,910

44,00035,342
138,857
108,377
-

*8

-61-

16,613
21,27636,54145,191
2,343
121,967*10

11,000337,576
1,842,245
799,409
6,334
805,743
1,036,501

Statement of cost of sales
1. IT Consulting service business(1) IT Consulting service

Item
Labor expenses
1. Salaries and bonuses
2. Welfare expenses
Subcontract expenses
1. Subcontract expenses
Overheads
1. Traveling expenses
2. Depreciation and amortization
3. Rent expenses
4. Supplies expenses
5. Provision (reversal) of reserve for
quality assurance
6. Provision (reversal) of reserve forloss on project
7. Other
Total manufacturing expenses in
the period
Work in process at the beginningof the period
TotalWork in process at the end of theperiodTransfer to other account
Cost of sales

I

II
III

Notes

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
AmountRatio (%)

(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
AmountRatio (%)

3,465,432
437,031

3,902,464

48.6

3,468,931
494,070

3,963,001

49.5

2,963,535

2,963,535

36.9

2,902,410

2,902,410

36.3

1,137,346

14.2

8,002,758

100.0

423,446
76,659461,167
64,301

448,126
116,543
393,406
79,031

16,048(58,116)(2,800)9,300

123,399

1,162,221

14.5

8,028,221

100.0

149,055--

8,028,221

8,002,758--

13,0328,015,188

9,653
7,993,105

Actual job-order costing for each project is used to compute costs.

(2) Procurement services related to hardware

Item
Commodities inventories at the beginning of
the period
Product inventories at the beginning of theperiodCost of purchased goods
Purchase of finished goods
Total
Commodities inventories at the end of theperiodProduct inventories at the end of the period
Cost of sales

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
AmountRatio (%)
-

-

-

-

298,97755
299,032

406,50915
406,524--

299,032

406,524

Notes Actual job-order costing for each project is used to compute costs.

-62-(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
AmountRatio (%)

2. Package & Service Business(1) Package & service
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Item
I

Labor expenses
1. Salaries and bonuses
2. Welfare expenses
Subcontract expenses
1. Subcontract expenses
Overheads
1. Traveling expenses
2. Depreciation and amortization
3. Rent expenses
4. Supplies expenses
5. Provision (reversal) of reservefor quality assurance
6. Other
Total manufacturing expenses
in the period
Work in process at the
beginning of the period
Total
Decrease in work in-process
resulting from corporate split
Work in process at the end of
the period
Transfer to other account
Cost of sales

II
III

AmountRatio (%)

(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
Ratio
Amount(%)

25,112
5,590

30,703

38.6

-

-

-

3,297

3,297

4.1

-

-

-

-

-

-

-

4,223
607
8,049
810
(88)

-

31,96345,566

57.3

79,567

100.0

-

8,007

-

87,575-

13,956---15
73,603-

Notes Actual job-order costing for each project is used to compute costs.

(2)

Procurement services related to hardware
Fiscal 2011
(from January 1, 2011 to December
31, 2011)
Item

AmountCommodities inventories at the beginningof the period
Product inventories at the beginning of
the period
Cost of purchased goods
Purchase of finished goods
Total
Decrease in merchandise resulting from
corporate split
Commodities inventories at the end of theperiodProduct inventories at the end of theperiodCost of sales-63-

Ratio (%)

(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to December
31, 2012)
Ratio
Amount
(%)

-

-

-

-

9,903
9,903

-

2,697

-

-

-

-

-

7,205

-

(3) Statements of changes in net assets
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Shareholders' equity
Capital stock
Balance at the beginning of the period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Capital surplus
Legal capital surplus
Balance at the beginning of the period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Total capital surplus
Balance at the beginning of the period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Retained earnings
Legal retained earnings
Balance at the beginning of the period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Other retained earnings
Retained earnings brought forward
Balance at the beginning of the period
Changes of items during the period
Dividends from surplus
Net income
Decrease by corporate division-split-off type
Total changes of items during the period
Balance at the end of the period
Total retained earnings
Balance at the beginning of the period
Changes of items during the period
Dividends from surplus
Net income
Decrease by corporate division-split-off type
Total changes of items during the period
Balance at the end of the period-64-(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

1,421,815

1,421,815

1,421,815

1,421,815

2,495,772

2,495,772

2,495,772

2,495,772

2,495,772

2,495,772

2,495,772

2,495,772

27,74827,74827,74827,748

7,655,316

8,291,880(890,432)
1,547,910(20,914)636,563
8,291,880(680,148)
1,036,501
356,353
8,648,233

7,683,065

8,319,628(890,432)
1,547,910(20,914)636,5638,319,628(680,148)
1,036,501
356,353
8,675,982

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Treasury stock
Balance at the beginning of the period
Changes of items during the period
Purchase of treasury stock
Total changes of items during the period
Balance at the end of the period
Total shareholders' equity
Balance at the beginning of the period
Changes of items during the period
Dividends from surplus
Net income
Decrease by corporate division-split-off type
Purchase of treasury stock
Total changes of items during the period
Balance at the end of the period
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Balance at the beginning of the period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of the period
Total valuation and translation adjustments
Balance at the beginning of the period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of the period
Total net assets
Balance at the beginning of the period
Changes of items during the period
Dividends from surplus
Net income
Decrease by corporate division-split-off type
Purchase of treasury stock
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of the period-65-(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)(1,171,668)(1,171,668)(1,171,668)(221,659)(221,659)(1,393,328)

10,428,984

11,065,547(890,432)
1,547,910(20,914)636,563
11,065,547(680,148)
1,036,501(221,659)
134,693
11,200,241

82,095(1,384)(83,480)(83,480)(1,384)

2,190
2,190
806

82,095(1,384)(83,480)(83,480)(1,384)

2,190
2,190
806

10,511,079

11,064,163(890,432)
1,547,910(20,914)(83,480)
553,083
11,064,163(680,148)
1,036,501(221,659)
2,190
136,884
11,201,047

(4) Notes regarding the premise of surviving company
None

-66-

(5) Significant accounting policies
1. Valuation standards and methods for securities(1) Held-to-maturity bonds
Amortized cost method (straight-line method)(2) Stocks issued by subsidiaries/affiliates
Stated at cost based on moving average method.
(3) Other securities:
Marketable securities:
Stated at fair value based on the market price as of the end of the financial period (Unrealized holding gains/losses arereported as a net amount in a separate component of shareholders’ equity. Cost of sale is calculated based on moving
average method).
Non-marketable securities
Stated at cost based on moving average method.
2. Valuation standards and method for inventories(1) Merchandise and finished goods
Stated at lower of cost or market using the gross average method (amounts in the balance sheets are calculated using
the method to devaluate the book value according to the decrease in profitability)(2) Work in process
Stated at cost based on the specific cost method (amounts in the balance sheets are calculated using the method todevaluate the book value according to the decrease in profitability).
3. Depreciation method of fixed assets(1) Property, plant and equipment
The declining-balance method is primarily applied for property, plant and equipment, while the straight-line method
is applied for cloud service-related assets.
If the acquisition cost of the asset to be depreciated is between ¥100,000 and ¥200,000, it is depreciated evenly using
straight-line method over three (3) years.
Useful life is as follows:
Buildings

3-31 years

Tools, furniture and fixtures

3-10 years(2) Intangible assets(a) Software for in-house use
Software for in-house use is depreciated using the straight-line method over its useful life (5 years).
(b) Software for sale
Software for sale is depreciated by the larger of either of the amount calculated based on projected sales volume
or the amount from the straight-line method over the period for which they are expected to remain salable (3 years).
(c) Other
Straight-line method
4. Accounting standards for allowances/ reserves(1) Allowance for doubtful accounts
To prepare for losses incurred through bad debts, the amount of potential loss is calculated by using the historical loss
ratio in case of non-classified loans/receivables. Potential losses for classified loans/receivables are individually assessed(2) Reserve for quality assurance
In projects related to open system consultation and system development (IT consulting services and Package &Service), where technological changes are taking place rapidly, there are occasions where we are obliged to provide
services to our clients after sales are stated in order to resolve problems that were unforeseeable at the time of the signingof the contract or as of the close of accounting period. There are instances where Future Architect provides such services
without compensation in order to guarantee quality standards that will fully satisfy its customers in IT consulting services
and Package & Service.

-67-

To prepare for additional cost of sales in IT consulting services and Package & Service that may arise after sales arestated, estimated amount of such additional cost, calculated based on past experience, is stated in the reserve for quality
assurance.
(3) Reserve for loss on projects
In projects related to open system consultation and system development (IT consulting services and Package &Service), where technological changes are taking place rapidly, there are occasions where we are obliged to provide
services to our clients in order to resolve problems that were unforeseeable at the time of the signing of the contract.
To prepare for future loss in IT consulting services and Package & Service, estimated amount of such loss in and after
the following fiscal year is stated in the reserve for loss on project, concerning ongoing projects for which loss is
projected to be incurred as of the end of the fiscal year under review and for which it is possible to rationally(4) Allowance for investment loss
To prepare for losses on investments in affiliated companies, estimated amount of potential losses, calculated inconsideration of financial conditions and other characteristics of the relevant companies, is stated in the reserve forinvestment losses.
(5) Allowance for office transfer expenses
To prepare for the payment of office transfer expenses, the amount estimated to be incurred is stated.
5. Standard for translating of important foreign currency-denominated assets and liabilities into Japanese currency
Monetary claims and liabilities in foreign currencies are translated into the yen at spot foreign exchange rates on thesettlement date, with translation differences recognized as gains or losses.
6. Recognition standards for important income and expenses
Recognition standards for sales and cost of sales for IT consulting services(1) Project whose results concerning the part that had advanced by the end of the fiscal year under review are deemed to becertain
Percentage of completion method (Progress rate is estimated in proportion to cost.)(2) Other projects
Completed contract method
7. Other material information concerning the compiling of financial statements
Accounting treatment of consumption taxes, etc.
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.

(6) Change in accounting policies
None(7) Change in classification
None(8) Changes in accounting estimatesNone(9) Additional information(Depreciation of cloud service tangible fixed assets)
The Company started providing cloud services on a full- scale from the fiscal year under review, anticipating that theimportance of such services will increase. The Company previously used the declining-balance method to depreciate tangible
fixed assets, but began to apply the straight-line method to depreciate of cloud service tangible fixed assets in the fiscal year
under review. This change is intended to make the relationship between profits and depreciation costs rational and calculate
period profits and losses more appropriately, given that profits from cloud services will be earned stably over the period thefacilities are used.
With this change, operating income, ordinary income, and net income before taxes for the fiscal year under review eachincreased ¥32,315 thousand compared to those calculated by the previous method.

-68-

(10) Notes to non-consolidated financial statements(Notes to balance sheets)*1.

Items concerning affiliates
Assets and liabilities in relation to affiliated companies, which are not separately stated, are as follows:

Allowance for doubtful accounts
Allowance for investment loss

Fiscal 2011
(December 31, 2011)(¥567,492)(¥313,788)(in thousands of yen)
Fiscal 2012
(December 31, 2012)(¥667,515)(¥422,166)

The sum of assets related to affiliated companies other than the above balance exceeded 1/100 of total assets, withthe amount being ¥122,820 thousand for fiscal 2011 and ¥145,205 thousand for fiscal 2012.
*2.

Debt guarantees
Guarantee against trade accounts payable of affiliated company
Fiscal 2011
(December 31, 2011)

Uoei Shoten Corporation*3.

72,642(in thousands of yen)
Fiscal 2012
(December 31, 2012)
89,584

LawsuitFiscal 2011 (December 31, 2011)
The Company initiated legal action in the Tokyo District Court relating to payment of contract fees, etc. (¥1,462
million) against NITTO DENKO CORPORATION as of November 30, 2009.
The Company delivered the deliverables on September 4, 2009 in accordance with an agreement with NITTO
DENKO. However, NITTO DENKO did not recognize the action by the Company as delivery and refused to pay thecontract fees etc. Against this backdrop, the Company initiated legal action.
Fiscal 2012 (December 31, 2012)
The Company initiated legal action in the Tokyo District Court relating to payment of contract fees, etc. (¥1,462
million) against NITTO DENKO CORPORATION as of November 30, 2009.
The Company delivered the deliverables on September 4, 2009 in accordance with an agreement with NITTO
DENKO. However, NITTO DENKO did not recognize the action by the Company as delivery and refused to pay thecontract fees etc. Against this backdrop, the Company initiated legal action.

(Notes to statements of income)*1.

Total amount of research & development expenditures
Research & development expenses included in selling, general and administrative expenses

24,608(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
22,205

11,15923,885(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
14,26336,541107
107(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)-

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)*2.

Transactions with group affiliates are summarized below:
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)

Interest income
Group management expense*3.

Breakdown of gain on sales of fixed assets
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)

Tools, furniture and fixtures
Total

-69-

*4.

Breakdown of loss on retirement of fixed assets
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)

Buildings
Tools, furniture and fixtures
Total
*5.

15,156134
15,291(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)-

Impairment loss
The Group reported impairment losses of the following asset groups.
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
(1)

(2)

Main assets on which impairment losses were recognized
Use

Type

Location

Idle asset

Land

Nasushiobara, Tochigi Prefecture

Background of the recognition of impairment losses
The Group reduced the book value of idle land in Nasushiobara, Tochigi Prefecture, for which it has no
specific plan for future use, to its recoverable amount, and recognized the difference between the book value andthe recoverable value as impairment losses.

(3)

Amounts of impairment lossesLand(in thousands of yen)
4,893

Total
(4)

4,893

Asset grouping method
The Company groups assets by businesses in terms of management accounting, which it regards as thesmallest units that generate almost independent cash flows. However, with regard to idle assets that are notdirectly used for business, each idle asset is considered to constitute a group.

(5)

Calculation method of recoverable amounts
The recoverable value of idle assets that are not directly used for business is calculated based on the net
selling price. The net selling price is calculated by rationally adjusting the assessed value of fixed assets andmarket prices in the neighborhood.

Fiscal 2012 (from January 1, 2012 to December 31, 2012)
None
*6.

Provision of allowance for doubtful accounts is in relation to affiliated companies.

*7.

Amount of provision of reserve for loss on project included in cost of sales
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)-2,800*8.

(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
9,300

Loss on liquidation of subsidiaries and affiliates
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
Loss on liquidation of subsidiaries and affiliates resulted from liquidation of Shanghai UFIDA Future Consulting
Ltd.
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
None

*9.

Gain on liquidation of subsidiaries and affiliates
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
None
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Gain on liquidation of subsidiaries and affiliates resulting from liquidation of Associant Technology Inc.

-70-

*10. Debt waiver loss from subsidiaries and affiliates
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
None
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Debt waiver loss from subsidiaries and affiliates resulting from debt waiver for ABM Corporation.
*11. Provision of allowance for investment loss
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
None
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Provision of allowance for investment loss relates to stocks of subsidiaries and affiliates.
(Notes to statements of changes in net assets)
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
Type and number of treasury shares
Number of shares at
beginning of fiscal 2011
Treasury stock
Common stock
20,008Total
20,008

Increase in numberof shares in fiscal 2011

Decrease in numberof shares in fiscal 2011--

Increase in numberof shares in fiscal 2012

Decrease in numberof shares in fiscal 2012

6,400
6,400

-

Number of shares at
end of fiscal 2011
20,00820,008

Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Type and number of treasury shares
Number of shares at
beginning of fiscal 2012
Treasury stock
Common stock
20,008Total
20,008

Number of shares at
end of fiscal 2012
26,40826,408(Overview of reasons for change)
Purchase of treasury stock approved by the resolution of the Board of Directors meeting held on February 7, 2012: 6,400
shares(Lease transactions)Fiscal 2011 (from January 1, 2011 to December 31, 2011)
Lease transactions are omitted, since they are of little significance.
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Lease transactions are omitted, since they are of little significance.
(Securities)
Shares in subsidiaries and affiliated companies (shares in subsidiaries stated on the B/S for fiscal 2012: ¥1,278,537
thousand; shares in affiliates stated on the B/S for fiscal 2012: ¥350,333 thousand; shares in subsidiaries stated on the B/S for
fiscal 2011: ¥1,110,682 thousand; shares in affiliates stated on the B/S for fiscal 2011: ¥242,636 thousand) are not stated,because there are no market prices for them and it is deemed to be extremely difficult to determine their market values.

-71-

(Tax effect accounting)
1. Breakdown of major causes for deferred tax assets and liabilities(in thousands of yen)
Fiscal 2011
(December 31, 2011)

Fiscal 2012
(December 31, 2012)[Current]
Deferred tax assets
Enterprise tax payable
Allowance for office transfer expenses
Reserve for quality assurance
Reserve for loss on projects
Accrued business office taxes

47,29324,9381,708
8,300

39,63813,433
1,206
5,131
7,516

Total deferred tax asset

82,242

66,926483,253
111,834

485,226
150,460

148,004
94,35872,553

169,626
95,38471,800

4,976
416

3,763
416

Subtotal of deferred tax assets
Valuation allowance

915,398(709,609)

976,678(769,935)

Total deferred tax asset
Deferred tax liabilities
Retirement expenses for asset retirement
obligations

205,788

206,742

16,935

10,120Total deferred tax liabilities

16,935

10,120Net deferred tax assets

188,853

196,622[Non-current]
Deferred tax assets
Stocks of subsidiaries and affiliates
Provision of allowance for investment loss
Excess amount over the maximum reserve for
doubtful accounts
Depreciation excess
Asset retirement obligations
Net unrealized gain on available-for salesecurities
Other

2. Breakdown of difference between the normal effective statutory tax rate and the rate of income taxes after
application of deferred tax accounting
Fiscal 2011
Fiscal 2012
(December 31, 2011)(December 31, 2012)
Normal effective statutory tax rate
(Adjustment)
Valuation allowance
Earnings excluded from dividends income
Inhabitant tax, flat-rate(Gain) on extinguishment of tie-in shares
Transfer of loss brought forward resulting frommergerAdded permanent difference
Effect of change in tax rate
Effects of liquidating consolidated subsidiaries
Rate of income taxes after application of deferred tax
accounting

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40.7%

40.7%

2.1%
(0.1%)
0.3%(0.6%)

3.7%(0.2%)
0.4%-(0.8%)
0.4%
0.8%
-

0.7%
0.5%
(2.1%)

42.8%

43.7%

3. Revision of amounts of deferred tax assets and liabilities due to change to normal effective statutory tax rate
Fiscal 2011 (December 31, 2011)
The ‘Act on Partial Revision of the Income Tax Act, etc. to Build Tax System Conforming to Changes in the
Structure of Economic Society’ (Law No. 114 of 2011) and the ‘Act on Special Measures Concerning Security of
Financial Resources Necessary for Implementation of Measures for Restoration from the Great East Japan Earthquake’(Law No. 117 of 2011) were promulgated on December 2, 2011, and the corporate tax rate will be reduced and a special
reconstruction corporate tax will be imposed from the consolidated fiscal year that starts on or after April 1, 2012. As aresult, the normal effective statutory tax rate to be used to calculate deferred tax assets and liabilities will be reduced fromformer 40.7% to 38.0% for temporary differences that are projected to be resolved in the consolidated fiscal year thatstarts on January 1, 2013 to the consolidated fiscal year that starts on January 1, 2015, and to 35.6% for those that are
projected to be resolved in or after the consolidated fiscal year that starts on January 1, 2016.
As a result of the change, the amount of deferred tax assets (excluding the amount of deferred tax liabilities)
decreased ¥20,883 thousand, while corporate tax adjustments increased ¥20,774 thousand.
(Business combinations)
Notes are omitted, because they are stated in ‘Notes to Consolidated Financial Statements (Business combination) in the
consolidated financial statements.
(Asset retirement obligations)Among asset retirement obligations, those stated in the consolidated balance sheetsa) Overview of the relevant asset retirement obligations
Obligation for restoration to original condition following conclusion of real estate lease agreements on offices,
including the head office, and storesb) Method of calculating the amount of the relevant asset retirement obligations
Asset retirement obligations are calculated by estimating the usable period to be seven to nine years from theacquisition and using a discount rate of 0.726% to 1.042%.
c) Increase/decrease in total amount of the relevant asset retirement obligations in fiscal 2011
Fiscal 2011
Fiscal 2011 (from January 1,
2011 to December 31, 2011)(in thousands of yen)
Fiscal 2012
Fiscal 2012 (from January 1,
2012 to December 31, 2012)

216,817

195,380

Balance at the beginning of the period (*note)
Increase due to acquisition of tangible fixed
assetsAdjustment due to passage of time
Decrease due to fulfillment of asset retirement
obligations
Other increase (decrease)

11,437
1,591

3,603
1,684

(34,777)
311-

Balance at the end of the period

195,380

200,668

Note 1: “Balance at the beginning of the period” for fiscal 2011 is the balance resulting from application of the “AccountingStandard for Asset Retirement Obligations” (ASBJ Statement No. 18, March 31, 2008) and the “Guidance on AccountingStandard for Asset Retirement Obligations” (ASBJ Guidance No. 21, March 31, 2008).

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(Per share data)

Net asset value per share
Net income per share

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)¥24,229.93¥3,389.84
Fully diluted net income per share isnot stated because the average stock priceduring the period is below the exercise
price of stock acquisition rights andhence net income per share is not diluted.

Fiscal 2012
(from January 1, 2012 to
December 31, 2012)¥24,878.39¥2,297.17
Fully diluted net income per share isnot stated because the average stock priceduring the period is below the exercise
price of stock acquisition rights andhence net income per share is not diluted.

Notes: Net income per share is calculated based on the following:

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Net income per share
Net income (thousands of yen)Amount not available for commonshareholders to common shares(thousands of yen)
Net income attributable to commonshares (thousands of yen)
Average outstanding shares of common
stock during the period (shares)
Latent shares that have no dilution effectand thus are not included in thecalculation of diluted net income per
share

Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

1,547,910-

1,036,501-

1,547,910

1,036,501

456,632

451,208

Stock options granted by resolution of
the Ordinary General Meeting of
Shareholders on March 24, 2005 (Stockacquisition rights: 846 units)
Common stock
3,384 shares

Stock options granted by resolution of
the Ordinary General Meeting of
Shareholders on March 24, 2005 (Stockacquisition rights: 755 units)
Common stock
3,020 shares-74-

(Significant subsequent events)
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
Notes are omitted because they are stated in ‘Notes to Consolidated Financial Statements (Significant subsequent events)’
in the consolidated financial statements.
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Merger with consolidated subsidiary
The Company merged with ABM Corporation (hereinafter “ABM”), a consolidated subsidiary of the Company, throughabsorption on January 1, 2013 in accordance with a resolution of the Board of Directors meeting held on October 25, 2012.
(1) Purpose of merger
As the first Japanese consulting firm specializing in activity-based costing (ABC), ABM introduced many managerial
accounting packages mainly to financial institutions and municipalities. ABM also provided the ABC function of cloudservices for financial institutions, which the Company is promoting. The Company and ABM closely cooperated in its
development. Then, the Company concluded a merger agreement with ABM to aggregate management resources, whilefurther enhancing services for financial institutions by adding the ABC package software of ABM to the service lineup of
the Company, in addition to ABM’s provision of software for cloud services.
(2) Outline of mergera) Schedule of merger
Date of Board of Directors meetings to approve merger agreement (both parties) October 25, 2012
Date of conclusion of merger agreement
October 25, 2012
Effective date of merger
January 1, 2013
Note: The Company conducted the merger through procedures for a simplified merger stipulated in Article 796,
Paragraph 3 of the Corporation Law, and ABM executed the merger through procedures for a short form
merger provided for in Article 784, Paragraph 1 of the Corporation Law, both without holding respective
general meetings of shareholders to approve the merger.
b) Method of merger
The merger was an absorption-type merger, through which ABM was dissolved.
c) Allotment related to merger
Because the merger was an absorption-type merger with the Company’s wholly-owned subsidiary, there will be noallotment of shares and capital increase as a result of the merger.
d) Overview of accounting procedures used
The merger was processed as a transaction under common control in accordance with the accounting procedures
stipulated in the “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, December 26, 2008)
and the “Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10, December 26, 2008).
Purchase of treasury stock
Notes to the purchase of treasury stock are omitted, because they are stated in “Notes to Consolidated Financial
Statements (Significant subsequent events)” in the consolidated financial statements.

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6. Other(1) Changes in Directors
None(2) Other
Orders received (outstanding contracts)(in thousands of yen)

Item

Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Orders received

Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

Order backlog

Orders received

Order backlog

IT Consulting Business

13,498,883

3,559,152

17,805,540

6,576,393

Package & Service Business

4,555,212

1,185,314

3,631,162

971,847

59,974

4,249

290,786

12,74018,114,069

4,748,715

21,727,490

7,560,980

Other
Total

Notes: Orders received include adjustments for exchange rate fluctuations.

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