Consolidated Summary Report of Operating Resultsfor Fiscal 2013 (Year ended December 2013) [Japan GAAP]
February 6, 2014
Company name:

Future Architect, Inc.

Shares listed on:First Section of Tokyo Stock Exchange

Security code number:

4722

Representative:

Yasufumi Kanemaru, President & CEO

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

Contact:

Yoshihiko Nakajima, Executive OfficerTEL: +81-3-5740-5724

Scheduled date of annual generalshareholders’ meeting:March 25, 2014

Scheduled date for filing the securities
report:March 26, 2014

Scheduled date for distribution of dividend
payments:

March 26, 2014

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 2013 (January 1, 2013 to December 31, 2013)(1) Consolidated operating results (Percentage figures reflect year-on-year change)
Net sales

Operating income

Million yen%

Million yen

Fiscal 2013
30,04928.7
Fiscal 2012
23,3530.3(Note) Comprehensive income Fiscal 2013:
Net income per
share

Ordinary income%

Net income

Million yen%

Million yen

%

3,352
73.3
3,454
67.9
2,027
1,935
(34.0)
2,057(32.6)
1,167
2,101 million yen (82.5%) Fiscal 2012: 1,151 million yen (-29.4%)

Net income per share(fully diluted)

Return on equity

Ratio of ordinary income
to total assets

Yen

%

%

Yen

73.7
(31.9)

Operatingincome ratio%

Fiscal 2013
45.39
16.5
20.3
11.2
Fiscal 2012
25.88
10.1
14.1
8.3
(Reference) Equity in (earnings) losses of affiliates Fiscal 2013:(58) million yen Fiscal 2012: 8 million yen(Note) Effective July 1, 2013, the Company conducted a 1:100 split of each share of its common stock. Net income per share wascalculated on the assumption that the stock split was conducted at the beginning of the previous consolidated fiscal year.

(2) Consolidated financial position
Total assets

Net assets

Million yen

Shareholders’ equity ratio

Million yen

Net assets per share%

Yen

Fiscal 2013
19,225
13,04767.1
288.99Fiscal 2012
14,83011,76678.5
258.65(Reference) Shareholders’ equity Fiscal 2013: 12,895 million yen Fiscal 2012: 11,645 million yen(Note) Effective July 1, 2013, the Company conducted a 1:100 split of each share of its common stock. Net assets per share wascalculated on the assumption that the stock split was conducted at the beginning of the previous consolidated fiscal year.

(3) Consolidated cash flow position

Fiscal 2013
Fiscal 20122.

Net cash provided by(used in) operating
activities
Million yen
3,427
727

Net cash provided by(used in) investing
activities
Million yen(888)(1,157)

Net cash provided by(used in) financing
activities
Million yen
139
(919)

Cash and cash equivalents at theend of the period
Million yen
6,892
4,184

Dividends
Dividends per share (yen)Firstquarter
Yen

SecondquarterYen

Third
QuarterYear-end
dividend

Yen

Yen

Total
Yen

Annualdividends(Total)Million yen

Dividend
payout ratio(consolidated)

Ratio ofdividends to
net assets(consolidated)%%

Fiscal 2012
750.00750.001,500.00
675
58.0
5.9
Fiscal 2013
750.00
8.00
691
34.1
5.7
Fiscal 2014 (Forecast)
8.00
9.00
17.00
33.3
(Note)
1. Effective July 1, 2013, the Company conducted a 1:100 split of each share of its common stock. Year-end dividend for fiscal
2013 reflects the said stock split.
2. The year-end dividend of ¥9.00 for the fiscal year ending December 2014 (forecast) comprises an ordinary dividend of ¥8.00
and a 25th anniversary commemorative dividend of ¥1.00.

3.

Projected Consolidated Results for Fiscal 2014 (January 1, 2014 to December 31, 2014)
Net sales(Percentage figures reflect year-on-year change)
Net income per
Ordinary income
Net income
share

Operating income

Million yen%

Million yen%

Million yen%

Million yen%

Yen

16,20033,400

19.6
11.1

1,790
4,000

140.0
19.3

1,820
4,040

7.2
17.0

1,060
2,280

2.1
12.4

23.75
51.09

First six months(accumulated total)
Full year* 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: _____ companies (company names)(2) Change in accounting policies or estimates and restatementsa.

Change in accounting policies in accordance with revision of accounting standards: Yes • Nob.

Change in accounting policies other than item a. above: Yes • Noc.

Change in accounting estimates: Yes • Nod.

Restatements: Yes • No

(Note) For details, please refer to “Change in accounting policies” on page 28 of the Consolidated Summary Report ofOperating Results (Attachment).
(3) Number of outstanding shares (common stock)a.

Total outstanding shares as of the end of the period(including treasury stocks)
Total treasury stocks as of the end of the period

47,664,000
47,664,000
Fiscal 2012
sharessharesb.
3,040,800
2,640,800
Fiscal 2013
Fiscal 2012
sharessharesc.
Average number of outstanding stocks during the
44,674,713
45,120,826
Fiscal 2013
Fiscal 2012
quarter under review
sharesshares(Note) Effective July 1, 2013, the Company conducted a 1:100 split of each share of its common stock. The above numbers relating toshares were calculated on the assumption that the stock split was conducted at the beginning of the previous consolidated fiscal
year.
Fiscal 2013

(Reference) Overview of non-consolidated results1.

Non-consolidated Results for Fiscal 2013 (January 1, 2013 to December 31, 2013)(1) Non-consolidated operating results
Net sales
Fiscal 2013
Fiscal 2012

(Percentage figures reflect year-on-year change)
Ordinary income
Net income

Operating income

Million yen%

Million yen%

Million yen%

Million yen%

18,01414,017

28.5
(4.2)

3,157
2,011

57.0
(26.7)

3,367
2,130

58.1
(24.0)

1,718
1,036

65.8
(33.0)Net income per share (fully
diluted)Yen
Yen
Fiscal 2013
38.46
Fiscal 2012
22.97
(Note) Effective July 1, 2013, the Company conducted a 1:100 split of each share of its common stock. Net income per share wascalculated on the assumption that the stock split was conducted at the beginning of the previous consolidated fiscal year.
Net income per share(2) Non-consolidated financial position
Total assets
Million yen

Net assets
Million yen

Shareholders’ equity ratio%

Net assets per share
Yen

Fiscal 201316,107
12,18575.6
273.08
Fiscal 201213,113
11,201
85.4
248.78(Reference) Shareholders’ equity Fiscal 2013: 12,185 million yen
Fiscal 2012: 11,201 million yen(Note) Effective July 1, 2013, the Company conducted a 1:100 split of each share of its common stock. Net assets per share wascalculated on the assumption that the stock split was conducted at the beginning of the previous consolidated fiscal year.

2.

Projected Non-consolidated Results for Fiscal 2014 (January 1, 2014 to December 31, 2014)
Net salesFirst six months(accumulated total)
Full year(Percentage figures reflect year-on-year change)
Net income
Net income per share

Operating income

Million yen%

Million yen%

Million yen

%

Yen

-

-

-

-

-

-

-

19,000

5.5

3,650

15.6

2,140

24.6

47.96

*

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 thisdocument’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 earnings forecast and statements concerning the future contained in these materials are based on information currently obtained by
the Company and on certain premises the Company judges to be rational. The Company does not intend to guarantee their realization.
Actual results may differ from forecasts due to various uncertain factors.

 Contents
1.

2.
3.

4.

Analysis of Operating Results and Financial Condition ....................................................................................................2(1) Analysis of operating results.....................................................................................................................................2(2) Analysis of financial condition .................................................................................................................................5(3) Dividend policy and dividends for the current and next year ...................................................................................6
The Future Group...............................................................................................................................................................7
Management Policy .........................................................................................................................................................12(1) Basic corporate tenets ............................................................................................................................................. 12(2) Goals and objectives ............................................................................................................................................... 13(3) Medium to long-term management strategies .........................................................................................................13(4) Issues the Company faces ....................................................................................................................................... 15
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 to consolidated financial statements .............................................................................................................25(Notes regarding the premise of surviving company) ...................................................................................................... 25(Significant accounting policies regarding the preparation of consolidated financial statements) ................................... 26(Changes in accounting policies) ..................................................................................................................................... 28(Accounting standards not applied).................................................................................................................................. 28(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) ............................................................................................. 32(Notes to consolidated statements of cash flows) ............................................................................................................. 34(Lease transactions) ......................................................................................................................................................... 36(Securities) ....................................................................................................................................................................... 38(Derivative transactions) .................................................................................................................................................. 40(Retirement benefits) ....................................................................................................................................................... 40(Stock options) ................................................................................................................................................................. 41(Tax effect accounting) .................................................................................................................................................... 42(Business combinations) .................................................................................................................................................. 44(Asset retirement obligations) .......................................................................................................................................... 50(Real estate, including lease)............................................................................................................................................ 51(Segment information) ..................................................................................................................................................... 52(Related party information) .............................................................................................................................................. 56(Per share data) ................................................................................................................................................................ 57(Significant subsequent events)........................................................................................................................................ 58

5.

Non-consolidated Financial Statements ...........................................................................................................................59(1) Balance sheets ........................................................................................................................................................ 59(2) Non-consolidated statements of income .................................................................................................................61(3) Statements of changes in net assets ........................................................................................................................ 64(4) Notes to non-consolidated financial statements ......................................................................................................66(Notes regarding the premise of surviving company) ...................................................................................................... 66(Significant accounting policies)...................................................................................................................................... 67(Change in accounting policies) ....................................................................................................................................... 68(Notes to balance sheets).................................................................................................................................................. 69(Notes to statements of income) ....................................................................................................................................... 69(Notes to statements of changes in net assets) .................................................................................................................. 72(Lease transactions) ......................................................................................................................................................... 73(Securities) ....................................................................................................................................................................... 73(Tax effect accounting) .................................................................................................................................................... 74(Business combinations) .................................................................................................................................................. 75(Asset retirement obligations) .......................................................................................................................................... 75(Per share data) ................................................................................................................................................................ 76(Significant subsequent events)........................................................................................................................................ 77

6.

Other ................................................................................................................................................................................78(1) Changes in Directors .............................................................................................................................................. 78(2) Other .......................................................................................................................................................................78

-1-

1.

Analysis of Operating Results and Financial Condition(1) Analysis of operating results(Overview of fiscal year under review)
The Group’s consolidated earnings results for fiscal 2013 are as follows:
Net sales¥30,049 million (up 28.7 % year-on-year)

Operating income¥3,352 million (up 73.3% year-on-year)

Ordinary income¥3,454 million (up 67.9 % year-on-year)

Net income¥2,027 million (up 73.7% year-on-year)

During the fiscal year ended December 2013, the Group succeeded in favorably winning orders for
projects from multiple new customers the Company acquired in the previous fiscal year as well as
existing clients. In addition, net sales of all subsidiaries (*) increased from the previous year. As a result,the Group posted record consolidated net sales. Consolidated operating income, ordinary income and net
income also achieved record highs, as the profit margin on sales increased following the increase in net
sales. (*) Excluding subsidiaries aimed at possessing shares, etc.
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, the grand design phases of large projects concerning the renovationand integration of IT systems accompanying operational reforms steadily progressed for multiple newclients. At the same time, we won diversified orders in terms of business types and phases, by
establishing strategic relations with other new customers and existing clients. As a result, we achieved
an increase in net sales.
We also made steady progress in services in new strategic fields, starting providing full services ofcloud computing services for financial institutions (SKYBANK), which we are promoting as a new
initiative, and achieving an increase in orders for the introduction service for global ERP.
Subsidiaries in Singapore, Malaysia and Thailand all received the certification of Gold Partner of SAP
AG (“SAP”) certification, and gained the ability to sell SAP products through their channels(excluding Thailand). Accordingly, total sales of the three subsidiaries doubled from the previous
fiscal year to about ¥1,500 million.
As a result, net sales of this segment were ¥19,707 million, up 32.8% from a year earlier, andoperating income was ¥2,959 million, up 69.6%.
2. Package & Service BusinessIn the Package & Service Business, Future One, Inc. (“Future One”) saw an increase in net sales
owing to brisk sales of in-house manufactured ERP and licenses of sales management software. In
addition, its operating income significantly improved from a year earlier, as its profit margin for
projects improved due to the improvement in estimate accuracy, the steady progress of projects, andenhanced quality control. Ascendia Inc. (“Ascendia”) saw a year-on-year decrease in operating
income due to a rise in employment and training-related expenses, as well as increased outsourcing
expenses for some projects, despite an increase in net sales from the previous year, which is
attributable to increased sales of maintenance services provided in cooperation with the Company, andcontinued receipt of orders for public projects.
Consequently, net sales of this segment were ¥4,577 million, up 4.3% from a year ago, and operating
income was ¥377 million, up 33.6%
3. New Media & Web Service BusinesseSPORTS Co., Ltd. (“eSPORTS”), which became a consolidated subsidiary of the Company at theend of the second quarter, maintained robust online sales of sports and outdoor gears. In particular,eSPORTS won Genre Grand Prize of the sports category in “Rakuten Ichiba”, major online shopping
mall in Japan, for the third straight year (2011 ~ 2013). Tokyo Calendar Inc. (“Tokyo Calendar”) saw
a sharp decrease in operating loss for the full fiscal year thanks to an increase in publishing andadvertising revenues, and a review of costs.
As a result, net sales of this segment were ¥1,977 million, up 598.8% from a year ago, and operating
income loss was ¥51 million, an improvement from the loss of ¥151 million a year earlier.

-2-

Following the conversion of eSPORTS into a consolidated subsidiary, the Company added the“NewMedia & Web Service Business” as a new segment. Figures of Tokyo Calendar, which were stated in“Others” for the previous consolidated fiscal year, and those of eSPORTS were stated under the new
segment. Year-on-year comparison was made by including the figures of the two companies for theprevious fiscal year in the new segment.
4. Corporate Revitalization BusinessUoei Corporation (“Uoei”), which operates a grocery supermarket, saw sales rise year on year mainly
due to a review of its merchandise strategies, such as the introduction of an in-store sushi kitchen andthe direct purchase of fish at fishing ports, as well as the development of new products. As a result, it
posted its highest sales figures since it became a consolidated subsidiary. In addition, its gross profit
margin and Operating income ratio improved thanks to reduced logistics costs and proper control ofadvertising expenses, as well as water, fuel and light expenses. As a result, net sales of this segment
were ¥4,559 million, up 2.7% from a year ago, and operating income was ¥46 million, up 57.0%.

-3-

(Outlook for the next fiscal year)
The Group’s earnings forecast for the fiscal year ending December 2014 is as follows:
Net sales
Operating income
Ordinary income
Net income¥33,400 million (up 11.1% year-on-year)¥4,000 million (up 19.3% year-on-year)¥4,040 million (up 17.0% year-on-year)¥2,280 million (up 12.4% year-on-year)

Noteworthy events in each business segment for the following fiscal year are as follows:
1. IT Consulting BusinessWith strategic corporate reorganization and integration becoming more and more active, in order toovercome global competition, companies are urged to renovate and integrate IT systems of theirrespective corporate groups to integrate management information of the groups that have become
enormous, and to carry out strategic management. With regard to such IT renovation and integration,
the realization of speedier decision making through grasping real-time sales and profit/loss
information for each product has become a challenge. We believe that real-time distributed processing
technology and know-how about downsizing of systems, which the Group has focused on since its
founding, can be leveraged to cope with such a challenge. We have commenced multiple large
projects for clients that need to renovate and integrate their IT systems, and we expect the number ofrequests for such projects from new clients to increase in the future. We will ensure that we
implement the large projects for which we have already received orders, providing customers withvalues such as operational reforms, a substantial reduction in IT costs, and an improvement in the
speed of management. To this end, we will continue to focus on quality control of projects by making
the maximum use of project monitoring systems and know-how about project management that wehave accumulated.
In addition, we expand the service to support IT systems of clients as a professional by providing
additional development and maintenance/operation not only to clients who have IT systems we havedeveloped and delivered, but also to customers that use systems developed by other companies. Goingforward, we will provide added value as a strategic and long-term IT partner with efforts to improve
the technological capabilities of our employees, continuously upgrading components we havedeveloped, and improving system monitoring/operation mechanisms.
At subsidiaries in Singapore, Malaysia and Thailand, sales are increasing through the acquisition of
new customers, including major local companies and Asian subsidiaries of European companies.
Hereafter, we will aim to improve profitability by strengthening cooperation with sales partners thatare proficient at marketing SAP products and further enhancing cooperation among the threesubsidiaries on proposals and delivery to clients. Furthermore, we will accelerate businesses inSoutheast Asian nations through active expansion into neighboring countries. At the same time, wewill expand IT support for Japanese corporations that have entered Southeast Asia and China
2. Package & Service Business
Future One will further increase its Operating income ratio through continual effort for strengthening
profitability management and quality control of projects, in which it has obtained a certain degree ofachievement. It will also aim to further expand its customer base through cooperation with companies
that have expertise in regions where Future One has been understaffed and in solutions it has notoffered. Ascendia will strive to enhance the maintenance and operation services for existing clients bycontinuing to strengthen cooperation with the Company, and will aim to obtain orders from newcompanies and public bodies based on the know-how it has accumulated thus far.
3. New Media & Web Service BusinessIn the Media and Web service area, we will aim to create original services and expand profits. To thisend, we will combine the know-how about the EC business held by eSPORTS, abundant content
owned by Tokyo Calendar, and IT-related knowledge of the Company.
4. Corporation Revitalization BusinessUoei will endeavor to increase Operating income ratio by differentiating its selling space from rivals’
ones through further development of new purchase channels, including direct purchases of farm
products from farming districts, and the unearthing of needs based on the opinions of customers who
visit the stores, and by further promoting the realization of proper inventories based on an analysis ofsales and profit/loss data and improving the efficiency of standard work through the use of IT systems.

-4-(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 underreview.
Assets¥19,225 million (up 29.6% year-on-year)

Liabilities¥6,177 million (up 101.6% year-on-year)

Net assets¥13,047 million (up 10.9% year-on-year)

The following is the analysis of financial condition for the fiscal year under review.
(1) Assets
Current assets were ¥13,978 million on a consolidated basis at the end of the fiscal year underreview, up ¥4,207 million from the preceding year, and noncurrent assets amounted to ¥5,246
million, up ¥187 million, with total assets standing at ¥19,225 million, up ¥4,394 million. The mainunderlying factors were an increase in cash and deposits (increase of ¥2,736 million from the end of
the previous consolidated fiscal year) and notes and accounts receivable-trade (increase of ¥786
million) as earnings remained robust, and a rise in merchandise (increase of ¥327 million) following
the conversion of eSPORTS Co., Ltd. into a consolidated subsidiary.
For a breakdown of the increase in cash and deposits, see “2. Analysis of cash flows.”(2) Liabilities
Current liabilities were ¥4,809 million at the end of the fiscal year under review, up ¥2,061 million
from the preceding year, and noncurrent liabilities were ¥1,367 million, up ¥1,051million, whichbrought total liabilities to ¥6,177 million, up ¥3,093 million. Main factors included a rise in accounts
payable-trade (increase of ¥919 million from the end of the previous consolidated fiscal year),income tax payable (increase of ¥488 million) and long-term loans payable (increase of ¥1,000
million).
(3) Net assets
Net assets were ¥13,047 million at the end of the fiscal year under review, up ¥1,281 million fromthe preceding year. The main factors included an increase of retained earnings (an increase of¥1,355 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) Net cash provided by (used in) operating activities
Net cash from operating activities was inflow of ¥3,427 million (compared to an inflow of ¥727
million in the previous fiscal year), mainly due to the posting of income before income taxes of¥3,519 and an increase in notes and accounts payable-trade of ¥707 million, despite an increase innotes and accounts receivable-trade of ¥514 million and an income taxes payment of ¥937 million.
(2) Net cash provided by (used in) investing activities
Net cash from investing activities was outflow of ¥888 million (compared to an outflow of ¥1,157
million in the previous fiscal year), chiefly due to purchases of property, plant and equipment of¥285 million, purchases of intangible assets of ¥152 million, and a purchase of investments in
subsidiaries resulting in a change in the scope of consolidation of ¥999 million, despite proceedsfrom the sales of investment securities of ¥451 million.
(3) Net cash provided by (used in) financing activities
Net cash from financing activities was inflow of ¥139 million (compared to an outflow of ¥919
million in the previous fiscal year), mainly reflecting proceeds from long-term loans payable of¥1,000 million, despite purchases of treasury stock of ¥148 million and payments for a cash
dividend of ¥673 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 ¥6,892 million,
with an increase of ¥2,708 million in cash and cash equivalents resulting from operating, investing
and financing activities.

-5-(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 ourshareholders. In order to achieve this goal, we will pay a dividend of surplus, targeting a dividend payout
ratio on a non-consolidated basis of 30% or more of 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 stock, after ensuring internal reserves needed forimportant investments, aimed at enhancing R&D activities to ensure medium-term technologicalsuperiority; attracting and training personnel; implementing measures for strengthening project
management; and enhancing M&A activities and alliances.
Dividend of surplus at the end of the fiscal year under review (December 31, 2013) at the record date isplanned to pay ¥8.00 per share (Note), making a full-year dividend of ¥758 per share (Note) whencombined with the interim dividend (with the record date of June 30, 2013), which was paid in September
2013. As a result, the dividend payout ratio on a consolidated basis is 34.1% and that on a
non-consolidated basis is 40.3%.
The Company’s planned ordinary dividend payment for the next fiscal year is ¥16.00 per share inaccordance with the above policy. The Company also plans to pay a commemorative dividend of ¥1.00
per share, as it will celebrate the 25th anniversary of its founding in November 2014.
Accordingly, the annual dividend for the fiscal year ending December 2014 will be ¥17.00 per share,
when combined with the ordinary dividend, (interim dividend: ¥8.00; year-end dividend: ¥9.00).
(Note) Effective July 1, 2013, the Company conducted a 1:100 split of each share of its common stock.
The year-end dividend shall be ¥800 per share and the annual dividend shall be ¥1,550 per share interms of pre-split shares.

-6-

2.

The Future GroupThe Group (the parent and related companies) consists of 16 consolidated subsidiaries and 7
equity-method affiliates, and operates four main businesses, the IT Consulting Business, the Package &Service Business, the New Media & Web Service Business, and the Corporate Revitalization Business.
Business activities, involved major companies and relationships with business segment are as follows.
The classification is the same as segmentation.
(IT Consulting Business)
In this business, the Group helps clients solve problems, by sharing management issues with them from amanagerial 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 froman objective and independent position. The Company also functions
as corporate headquarters for the Group.

North Consulting Group Pte. Ltd. (subsidiary)

Introduction of ERP and provision of consulting services inSoutheast 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 Thailand

Life
Sciences(subsidiary)

Provision of “OpenDolphin Cloud” electronic medical chart, anddevelopment and sales of medical image systems

ComputingCorporation(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)

Maintenance and operation services, IT-field education services, andsystem development for local governments

Logizard Co., Ltd. (affiliate)

Cloud-based logistics and inventories management (WMS)(New Media & Web Service Business)
To create original services that have not existed so far in the Media and Web service area.
Company nameTokyo Calendar Inc. (subsidiary)Business activities
Publication of the magazine “Tokyo Calendar,” running of websites,and provision of EC web services

eSPORTS Co., Ltd. (subsidiary) (new)Sales of sports and outdoor gears on the Internet

Beijing ZhongNouBoEr Information Technology
Co., Ltd. (affiliate)

EC business centering on consumer electronics(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 nameUoei Shoten Corporation (subsidiary)Business activities
Operation of “Uoei” grocery supermarket-7-

Among affiliated companies engaged in businesses that are not included in the four businesses mentioned
above, such as investing in, as well as holding and managing securities, the main companies are as
follows:
Company nameBusiness activities

Future Investment Corp. (subsidiary)

Securities holding, management and investment

dit Co., Ltd. (affiliate)

Development and sales of security network products anddevelopment 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.

-8-<Business System Diagram>[Consolidated subsidiary (Abroad)]
North Consulting Group Pte. Ltd. (Singapore)
North consulting Group (Thailand) Co. Ltd.
(Thailand)
Brightree Solution Sdn Bhd. (Malaysia)

Licensesales, etc.
Contracting

Future Architect, Inc.

Publication/
Sales ofproducts[Equity-method affiliate (Domestic)]
Logizard Co, Ltd.

[Consolidated Subsidiaries (Domestic)]
Tokyo Calendar Inc.
[Consolidated Subsidiaries (Domestic)]eSPORTS Co., Ltd.

[Equity-method affiliate (Domestic)]
Cyber Solution, Inc.
[Equity-method affiliate (Domestic)]
Elmos Inc.

-9-

Contracting[Equity-method affiliate (Domestic)]
dit Co., Ltd.

Investment

Sales ofproducts[Consolidated Subsidiaries (Domestic)]
Future Investment Corp.

Provision ofservices /Sales of
Sales ofproducts
products

Investment[Equity-method affiliate (Abroad)]
Beijing ZhongNouBoEr Information
Technology Co., Ltd. (China)

Consumers

Sales ofproducts[Consolidated subsidiary (Domestic)]
Ascendia Inc.

Investment
targets

Clients[Consolidated subsidiary (Domestic)]
FutureOne, Inc.

[Consolidated Subsidiaries (Domestic)]
Uoei Shoten Corporation

Clients

Corporate
Revitalization
Business

New Media & Web
Service Business

Package & Service
Business

Provision of services/
sales of products, etc.

Clients

Services

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

Affiliated companies(1) Consolidated subsidiaries
Relationship
Location

Capital stock

Main businessactivities

Voting rightratio (%)

North Consulting
Group Pte. Ltd.

SINGAPORE,
SINGAPORE

US$ 1,250
thousandIT Consulting
Business

Brightree Solutions
Sdn Bhd.

PETALING
JAYA,
MALAYSIA

1,936 thousand
ringgitIT Consulting
Business

Siam NCG Holdings
Co., LTD.

BANGKOK,THAILAND

100 thousandbaht

IT Consulting
Business

North Consulting
Group (Thailand)CO., LTD.

BANGKOK,THAILAND

10,000thousand baht

IT Consulting
Business

Shanghai Beisheng
Management
Consulting Co., Ltd.

Shanghai, China

RMB 0
thousandLife Sciences
ComputingCorporation

Toshima-ku,
Tokyo¥ 134,000

FutureOne, Inc.

Shinagawa-ku,
Tokyo

Ascendia Inc.

Tokyo Calendar Inc.

Name

Interlocking directors
Monetary
assistanceBusiness transactions

-

None

None

-

-

None

None

-

-

None

None

99.0
(99.0)
[1.0]

-

-

None

None

IT Consulting
Business

100.0(100.0)

-

-

None

None

IT Consulting
Business

51.9

1

3

None

None

¥ 200,000
thousandPackage &ServiceBusiness

100.0

2

1

None

Provision ofsoftware licenses

Shinagawa-ku,
Tokyo¥ 83,700
thousandPackage &ServiceBusiness

100.0

2

1

None

Receipt of services
for development

Shinagawa-ku,
Tokyo¥ 50,000thousandNew Media &Web Service
Business

100.0(100.0)

1

1

Fund
lending

None

Gifu,
Gifu Prefecture¥ 100,000
thousandNew Media &Web Service
Business

100.0(100.0)

1

2

None

None

Uoei Shoten
Corporation

Minami-ku,
Niigata¥ 198,000
thousandCorporate
Revitalization
Business

100.0(100.0)

-

2

None

None

Future Investment
Corp.

Shinagawa-ku,
Tokyo¥ 10,000thousand

Other

100.0

2

2

Fund
lending

None

RI Partners Limited
Liability Association

Shinagawa-ku,
Tokyo¥ 1,398,000
thousand

Other

100.0
(100.0)

-

-

None

None

Future Architect,Inc.

CALIFORNIA,
U.S.A.

US$ 100

Other

100.0

2

1

None

None

Future Global Pte.
Ltd.

SINGAPORE,
SINGAPORE

US$ 1,350
thousand

Other

100.0

2

-

Fund
lending

None

FUTURE GLOBAL
HONG KONG
LIMITED

Hong Kong,
China

HK$ 10thousand

Other

100.0

2

-

Fund
lendingNoneeSPORTS Co., Ltd.

(Notes)thousandNumber ofcompany
directors

Number ofcompany
employees

100.0(100.0)2

51.0(51.0)
48.0(48.0)[52.0]

1.

The name of the business segment is stated in “Main business activities.”

2.

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

5.

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.”- 10 -

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

Location

Logizard Co., Ltd.

Chuo-ku, Tokyo

Crossflo Systems,
Inc.

CALIFORNIA,

Beijing
ZhongNouBoEr
Information
Technology Co., Ltd.

U.S.A.
Beijing,
China

dit Co., Ltd.

Koto-ku, Tokyo

Cyber Solution, Inc.

Koto-ku, Tokyo

Elmos Inc.

Chuo-ku, Osaka

Axis Solutions
Corporation

Koto-ku, Tokyo(Notes)Capital stock

Main businessactivities

Interlocking directors

Voting right
Number ofratio (%)
company
directors

Number ofcompany
employees

Monetary
assistanceBusiness transactions

Package &ServiceBusiness

34.0

-

-

None

None

US$ 1,540
thousand

Other

32.9

-

-

None

None

RMB 2,872
thousand

Other

30.4
(30.4)

-

2

None

None

Other

48.2

1

-

None

Receipt of services
for security
consulting

Other

48.2
(48.2)

-

-

None

None

Other

40.0
(40.0)

-

-

None

None

Other

20.0
(20.0)--

None

Receipt of services
for development¥ 56,824
thousand¥ 428,745
thousand¥ 310,000
thousand¥ 10,000thousand¥ 17,000thousand1.

The name of the business segment is stated in “Main business activities.”

2.

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

- 11 -

3.

Management Policy(1) Basic corporate tenets
The mission of the Company is to raise future value of client companies and society by providing theproper state in which business should be and an optimal mechanism to realize it by proactively taking in
cutting-edge IT technologies, with a view to promising 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 make all
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 tochange ourselves.
 We will not be fearful of or daunted by “being insufficient,” and try to change impossibility topossibility using our own ingenuity and enthusiasm.
 We continue to have a desire to improve ourselves and attach importance to the enhancement of
individual capability through constant hart study as well as understand the limit of power ofindividuals and resolve even greater challenges by organically combining 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 ofmanagement, business, and systems and use cutting-edge IT technologies, not merely aiming at therealization of functions by IT. To that end, the Group has maintained a neutral position, independentof any hardware vendors or software vendors, and has been pursuing optimization by specializing inopen systems while proceeding with the establishment of a methodology which enables it to provide
high-quality and high-speed services that draw out maximum performance, and various kinds ofstandardization, without being swayed by preconceived ideas or restrictions of products.
We are also striving to increase future value for customers by providing integrated services, which
cover the consulting phase, design of systems, development of application software, selection andprocurement of hardware and software products, introduction of systems and maintenance andoperation phases, thereby giving a concrete form to the results of consulting as systems rather thanmerely presenting such as a concept, and offering them for actual use by clients to enable them toview the results as the fruit of our 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 providing IT systems that support client businesses at a lower cost and with ashorter installation period according to the needs of small and midsize companies by making the mostof successful cases, know-how and IT assets the Company has accumulated through the provision ofservices to large client companies, as well as through customizing these software packages according
to the client’s business type and market. We are also offering cutting-edge functions, such as avisualization of internal control and work, as standards.
We will also provide maintenance and operation services for systems of clients and education services
concerning system building and IT of local governments, by leveraging our possession of regionalbases.
3) New Media & Web Service
In the Media and Web service area, we will aim to create original services that have not existed so far.
To this end, we will combine the know-how regarding operations of Web services that is held byeSPORTS Co., Ltd. and other EC-related companies, and the abundance of content owned by media
companies, such as Tokyo Calendar Inc., with the IT knowledge and know-how cultivated by theCompany. Also, we will offer values that have not existed so far by feeding back new knowledge,- 12 -

which we acquire through the provision of these original services, to client companies in the IT
Consulting Business.
4) Corporate Revitalization Business
The Group will strive to revitalize subject companies by fully using strategic and technologicalexperience in the distribution industry it has accumulated so far, with use of IT as the core, andsublimate the results obtained through operation of the business into IT systems that can be usedgenerally in the same business category, so that they can be applied to other businesses.
(2) Goals and objectives
To differentiate ourselves from our competitors and maintain growth, the Group concentrates
management resources on the fields in which it makes strategic investments, such as research anddevelopment, training, and recruiting. At the same time, however, we have set an Operating income ratioof 20% or more a year as our goal for the mainstay IT Consulting Business. We will also aim to achieve
an Operating income ratio of at least 10% for the Package & Service Business and the New Media & Web
Service Business, and 5% or more 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.
We will develop our accumulated know-how expertise on managerial reform, IT technologicalcapabilities, 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 costthrough 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 a harsh management environment, it is expected that companies in Japan will further enhance theirinvestment requirements, leading to IT cost reduction, as well as IT system renovation and integration
related to work restructurings and industrial reorganization. Against this backdrop, the Group will
provide high-value-added know-how and technologies, including downsizing by open systems andreal-time processing, more speedily and at higher quality than ever, in the industries where theCompany has accumulated track records (logistics, distribution, finance, service, etc.).
In addition, new needs of clients, such as reduction of maintenance and operation cost, improvementof quality and turning of IT cost into variable expenses through cloud services, have become obvious.
To meet such needs, the Group will drive ahead with the provision of new services. To that end, we
will proceed with: high value-added operation and maintenance services to which technical consulting
for platform technology is added; as well as services developed by extensively turning information
systems for financial institutions into those based on cloud computing (SKYBANK); and cloudservices by business category, including distribution and logistics. Furthermore, the Group will meet awide range of customer needs by further enhancing services to introduce ERP products of SAP AG
and Oracle Corporation to major corporations, particularly those expanding operations overseas, inaddition 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 that can 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 withmeasures such as enhancement of direct marketing. The Group will aim to expand sales and raise
Operating income ratio by satisfying detailed needs of clients through proposals for high-level
solutions by applying IT consulting know-how and technologies for major corporations to those forsmall and midsize companies. Meanwhile, Ascendia Inc. will strengthen the services of systemdevelopment and maintenance operation in cooperation with the Company, taking advantage ofregional bases (nearshore).

- 13 -

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 in Asia, the Group will promote theestablishment of a structure that can cover the development of the IT Consulting Business in theSoutheast Asian region, centering on Singapore, Malaysia and Thailand, and mainland China,
including Hong Kong, by enhancing cooperation among companies in these regions. The Group willfurther enhance not only IT consulting for local companies, but also IT support for Japanesecompanies expanding operations in Asia.
4) Provision of original services in the Media & Web Service area (New Media & Web Service
Business)
With the popularization of smartphones and tablet terminals, new Web services have been initiatedone after another, in addition to the acquisition of information and shopping via the Internet. In theMedia and Web service area, the Group will push forward with the provision of original services bycombining companies engaged in Media and Web services that were acquired by the Company
through M&As or were newly established, with knowledge and technologies regarding IT that theCompany has cultivated in the IT Consulting Business.

- 14 -

(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 importantmanagement issues. For further refining and standardizing development technologies, we will enhance
our preventive support infrastructure more than ever to respond to any issue that arises from thelaunch of a project until starting-up the system, including maintenance and operation after operation
has begun.
2) Research and development of analysis methods for existing systems and core design anddevelopment technologies for projects [IT Consulting Business]
In recent years, as a result of corporate integration following industrial reorganization, needs for
integrating and renovating IT systems are growing. In such projects, there are cases in which clientsthemselves do not understand the overall images of their IT systems for various reasons, including
missing specifications of existing systems, and the absence of persons who were in charge when thesystems were designed. Against this backdrop, the Company pushes forward with projects by making
the overall image of systems clear with the use of a mechanism to scientifically analyze source codesand system definition information, and to manage analysis results in an integrated way, and thenformulates a highly reliable and comprehensive transition plan. Since the need for such system
integration and renovation are expected to continue in the future, we will establish this systemanalysis method and expand it on a company-wide basis, with a view toward providing the analysis
method as a service in the future.
With regard to a number of proprietary core design/development technologies that are common to our
projects, we will continue the research and development to realize an improvement in productivity andtechnological superiority to a greater extent than ever before, and to achieve wider sharing of
knowledge within the Company.
3) Improving project quality [IT Consulting Business]
As an everlasting challenge in the IT industry, regardless of the scale of the project, we always
endeavor to improve quality of projects. The Company strives to enhance project quality by
establishing a project review system through engineers experienced in quality control, and a systemreview structure through engineers belonging to the core technology division. In addition, we obtained
the ISO 9001 certification, and further strengthened the quality management system from theperspectives of the certification.
From now on, we will endeavor to further improve project quality by not only visualizing the status ofprojects using a proprietary project information-sharing system and a project monitoring system, andthoroughly implementing reviews for each phase, but also by integrating and organizing ideas,
knowledge, etc. about the quality of each project and proactively expanding them to other projects.
4) 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 is necessary 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 training consultants who can grasp the essence of matters and find adirection for solution in the training and project fields.
5) Enhancement of outside alliances [IT Consulting Business]
To always provide optimal solutions to clients, the Company will maintain good relations withcorporations that have particularly excellent technologies and strive to enhance alliances with them,while grasping the technological trends in the world.
6) Overseas (Asia) development [IT Consulting Business and Package & Service Business]
The Group has already started to expand operations in Asia, while fortifying bases in Singapore,
Malaysia, Thailand, and Hong Kong. Subsidiaries in Singapore, Malaysia and Thailand all received
the Gold Partner of SAP AG certification, and their total sales are increasing thanks to their efforts toacquire customers in cooperation with SAP. From now on, we will strive to improve profitability byraising the quality of delivery and enhancing cooperation among these bases, while driving ahead withthe development of more customers. In addition, the Group will expand its local IT support businessfor Japanese companies in the distribution and logistics fields which are operating in Southeast Asia
and China.
- 15 -

7) Improving profit margin and expanding market share [Package & Service Business]
As for the Package & Service Business, the profit margin improved significantly due to management
reforms and the strengthening of service quality. From now on, to further increase profits, the Groupwill expand solution partners by emphasizing detailed functions and support capabilities of purely
Japanese-made packages for small and midsize companies. Also, we will promote the establishmentof a structure that can support small and midsize companies not only in the Tokyo Metropolitan andKansai areas, but also in major cities nationwide, by adding business and capital alliances to options.
8) 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 topurchase 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 byboosting 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)
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*3

Total current assets

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

Fiscal 2013
(December 31, 2013)*3

9,771,322

Noncurrent assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation*2

3,110,805(2,740,590)*2

Buildings and structures, net
Land
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Software
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Lease and guarantee deposits
Deferred tax assets
Other
Allowance for doubtful accounts*1

Total investments and other assets
Total noncurrent assets- 17 -

13,978,375*2

3,228,480(2,782,062)

370,214446,418

122,868
1,840,525(1,448,329)*2

109,474
1,956,834(1,555,282)

392,195

401,551885,279

957,444836,883
195,332
21,817

703,544823,705
21,4801,054,032

1,548,729

1,907,516
1,035,870
172,157
61,063(57,052)
3,119,554

Total assets

6,892,910
4,330,728
1,865
462,055
107,765
217,576
1,541,943
434,919(11,388)*1

1,757,591
951,363
25,51855,626(49,582)2,740,517

5,058,866

5,246,691

14,830,189

19,225,067

(in thousands of yen)
Fiscal 2012
(December 31, 2012)
Liabilities
Current liabilities
Accounts payable-trade
Short-term loans payable
Accounts payable-other
Income taxes payable
Provision for bonuses
Provision for quality assurance
Provision for loss on projects
Provision for office transfer expenses
Provision for point card certificates
Other

Fiscal 2013
(December 31, 2013)

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

1,660,351
35,000774,748
1,024,280
167,483
12,109173,600
2,439
959,622

Total current liabilities

2,747,663

4,809,634

Noncurrent liabilities
Long-term loans payable
Asset retirement obligations
Other

304,006
12,2691,000,000
357,691
10,239316,276

1,367,931

Total liabilities

Total noncurrent liabilities

3,063,940

6,177,566

Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock

1,421,815
2,495,772
9,151,020(1,393,328)

1,421,815
2,495,772
10,506,520(1,540,983)

11,675,279

12,883,124

612(30,532)

87,158(74,683)

Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Total valuation and translation adjustments
Minority interests
Total net assets
Total liabilities and net assets- 18 -(29,920)

12,475

120,890

151,900

11,766,249

13,047,500

14,830,189

19,225,067

(2) Consolidated statements of income and comprehensive income(in thousands of yen)
Fiscal 2012
(from January 1, 2012
to December 31, 2012)
Net sales
Cost of sales*1

23,353,208
14,983,640

Fiscal 2013
(from January 1, 2013
to December 31, 2013)*1

30,049,790
19,544,921

Gross profit

8,369,568

10,504,868

Selling, general and administrative expenses
Directors’ compensations
Salaries and bonuses
Other salaries
Training expenses
Research and development expenses
Depreciation
Recruiting expenses
Amortization of goodwill
Other

275,497
3,358,593
126,805
109,785
23,459116,112220,143
85,003
2,119,106

306,892
3,125,530
127,352
148,973
119,811
113,938
273,545
186,655
2,749,275*2

Total selling, general and administrative expenses*2

6,434,509

7,151,975

1,935,058

3,352,893

Non-operating income
Interest income
Dividends income
Foreign exchange gains
Equity in earnings of affiliates
Other

3,868
23,64463,786
8,759
27,0981,704
27,485
110,730
27,023

Total non-operating income

127,155

166,944

2,094
1,647
717

4,518
58,197
1,005
1,950

4,458

65,672

2,057,755

3,454,166

75,209-213,773
5,822

Total extraordinary income

75,209219,595

Extraordinary loss
Loss on retirement of noncurrent assets
Loss on valuation of investment securities
Impairment loss
Amortization of goodwill
Provision of allowance for office transfer expenses
Litigation expenses
Other

1,275
35,34244,0004,785

Operating income

Non-operating expenses
Interest expenses
Equity in losses of affiliates
Commission for purchase of treasury stock
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
Gain on bargain purchase
Gain on change in equity*3*4

107,154
41,138
5,670-

Total extraordinary losses

85,402

153,963

Income before income taxes

2,047,562

3,519,798- 19 -

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

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)

Income taxes-current
Income taxes-deferred

839,559
37,567

1,421,587
46,004

Total income taxes

877,127

1,467,591

1,170,435

2,052,206

2,687

24,3591,167,747

2,027,847

2,687

24,3591,170,435

2,052,206

2,190(24,415)

86,260(46,440)

3,376

9,226

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*5

Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners of theparentComprehensive income attributable to minority
interests- 20 -(18,847)*5

49,046

1,151,587

2,101,253

1,145,328

2,070,243

6,258

31,010(3) Consolidated statements of changes in net assets
Fiscal 2012 (from January 1, 2012 to December 31, 2012)(in thousands of yen)
Shareholders’ equity

Balance at the beginning of the period

Capital stock

Capital surplus

1,421,815

2,495,772

Retainedearnings

Treasury stock

Total shareholders’equity(1,171,668)

11,407,167

8,661,248

Changes of items during the period
Change of scope of consolidation

2,172

2,172

Dividends from surplus(680,148)(680,148)

Net income

1,167,747

1,167,747

Purchase of treasury stock(221,659)(221,659)

Net changes of items other thanshareholders' equity
Total changes of items during theperiod--489,771(221,659)

268,111

Balance at the end of the period

1,421,815

2,495,772

9,151,020(1,393,328)

11,675,279

Valuation and translation adjustments

Balance at the beginning of the period

Valuationdifference on
available-for-salesecurities

Foreign currencytranslation
adjustment

Total valuationand translation
adjustments(1,483)(6,017)(7,501)

Minority
interests

11,220Total net assets

11,410,885

Changes of items during the period
Change of scope of consolidation

2,172

Dividends from surplus(680,148)

Net income

1,167,747

Purchase of treasury stock(221,659)

Net changes of items other thanshareholders' equity

2,095(24,514)(22,418)

109,670

87,251

Total changes of items during theperiod2,095(24,514)(22,418)

109,670

355,363

Balance at the end of the period612(30,532)(29,920)

120,890

11,766,249- 21 -

Fiscal 2013 (from January 1, 2013 to December 31, 2013)(in thousands of yen)
Shareholders’ equity

Balance at the beginning of the period

Capital stock

Capital surplus

1,421,815

2,495,772

Retainedearnings

Treasury stock

Total shareholders’equity(1,393,328)

11,675,279

9,151,020

Changes of items during the period
Dividends from surplus(672,347)(672,347)

Net income

2,027,847

2,027,847

Purchase of treasury stock(147,654)

Net changes of items other thanshareholders' equity(147,654)-

Total changes of items during theperiod

--1,355,500(147,654)

1,207,845

Balance at the end of the period

1,421,815

2,495,772

10,506,520(1,540,983)

12,883,124

Valuation and translation adjustments
Valuationdifference on
available-forsale securities
Balance at the beginning of the period

612

Foreign currencytranslation
adjustment

Total valuationand translation
adjustments(30,532)(29,920)

Minority
interests

120,890

Total net assets

11,766,249

Changes of items during the period
Dividends from surplus(672,347)

Net income

2,027,847

Purchase of treasury stock(147,654)

Net changes of items other thanshareholders' equity

86,546(44,151)

42,39531,01073,405

Total changes of items during theperiod86,546(44,151)

42,39531,0101,281,251

Balance at the end of the period

87,158(74,683)

12,475

151,900

13,047,500- 22 -

(4) Consolidated statements of cash flows(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
Net cash provided by (used in) operating activities
Income before income taxes
Depreciation
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for quality assurance
Increase (decrease) in provision for loss on projects
Increase (decrease) in provision for office transfer
expenses
Interest and dividends income
Interest expenses
Commission for purchase of treasury stock
Foreign exchange losses (gains)
Equity in (earnings) losses of affiliates
Loss (gain) on change in equity
Gain on bargain purchase
Loss on retirement of noncurrent assets
Loss (gain) on sales of investment securities
Loss (gain) on valuation of investment securities
Litigation expenses
Impairment loss
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

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)

2,047,562
263,970
85,003(4,320)6,642(54,084)
9,300

3,519,798
407,518
192,325(2,115)38,886834
160,100

35,342(35,342)(27,512)
2,094
1,647
(63,025)(8,759)(75,209)1,275
44,000-(29,190)
4,518
1,005
(112,557)
58,197(5,822)
107,154(213,773)
41,138(536,921)(534,966)

24,86624,175(74,574)(51,507)(161,666)
707,148(202,981)
399,042

Subtotal

1,649,965

4,339,252

Interest and dividends income received
Interest expenses paid
Income taxes paid
Litigation expenses paid

27,918(2,176)(903,891)(44,000)

29,590(4,255)(937,228)-

Net cash provided by (used in) operating activities

727,815

3,427,358- 23 -

(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
Net cash provided by (used in) investing activities
Proceeds from withdrawal of time deposits
Purchase of short-term investment securities
Proceeds from redemption of securities
Purchase of property, plant and equipment
Purchase of intangible assets
Payments for asset retirement obligations
Purchase of investments in subsidiaries resulting inchange in scope of consolidation
Purchase of stocks of subsidiaries and affiliates
Purchase of investment securities
Proceeds from sales of investment securities
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee
deposits
Proceeds from transfer of business
Other

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)

50,000(201,196)
400,464(291,874)(497,196)(1,211)*2*3(64,435)(285,929)(152,097)(12,500)*2(999,367)(191,811)(180,100)(223,469)

451,773(57,662)

31,849161,420

8,240
3,150

5,642

Net cash provided by (used in) investing activities(1,157,590)(888,721)

Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from stock issuance to minority shareholders
Purchase of treasury stock
Cash dividends paid

(2,441)(40,713)
24,021(223,307)(677,234)(38,700)
1,000,000(148,660)(673,274)

Net cash provided by (used in) financing activities(919,675)

139,364

6,454

30,301

Net increase (decrease) in cash and cash equivalents(1,342,996)

2,708,303

Cash and cash equivalents at beginning of the period
Increase (decrease) in cash and cash equivalents resulting
from change of scope of consolidation

5,526,311

4,184,672

1,357

-

Effect of exchange rate change on cash and cash
equivalents*1

Cash and cash equivalents at end of the period- 24 -

4,184,672*1

6,892,975

(5) Notes to consolidated financial statements(Notes regarding the premise of surviving company)
None- 25 -

(Significant accounting policies regarding the preparation of consolidated financial statements)
1. Scope of consolidation
Number of consolidated subsidiaries: 16
Names and other details of consolidated subsidiaries
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., eSPORTS Co., Ltd., Tokyo Calendar Inc., Uoei Shoten Corporation, Future Investment
Corporation, RI Partners LLC., Future Architect, Inc., Future Global Pte. Ltd., FUTURE GLOBAL
HONG KONG LIMITED, Shanghai Beisheng Management Consulting Co., Ltd.
eSPORTS Co., Ltd. was included in the scope of consolidation because the Company acquired its
shares on June 14, 2013. Meanwhile, Shanghai Beisheng Management Consulting Co., Ltd. wasincluded in the scope of consolidation because the Company was established as of August 30, 2013.
ABM Corporation is excluded from the scope of consolidation because it was absorbed into theCompany as an extinct company as a result of the merger on January 1, 2013.
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.
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, the Group normally presents the balance sheet position of consolidated
subsidiaries using figures as of the fiscal year-end date of each 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 component ofshareholders’ equity. Cost of sale is calculated based on moving average method).
Non-marketable securities
Stated at cost based on moving average method.

(b) Inventories
Merchandise and finished goods
Stated at of cost using the gross average method (amounts in the balance sheets are calculatedusing the method to devaluate the book value according to the decrease in profitability)
Uoei Shoten Corporation adopts the cost method based on the retail method (amounts in thebalance sheets are calculated using the method to devaluate the book value according to thedecrease in profitability).
Work in process
Stated at cost based on the specific cost method (amounts in the balance sheets are calculatedusing the method to devaluate the book value according to the decrease in profitability).

- 26 -

(2) Depreciation/ amortization of major depreciable/ amortizable assets(a)Property, plant and equipment (Excluding lease assets)
The Group mainly applies the declining-balance method to depreciate assets, but cloudservice-related assets and some assets of consolidated subsidiaries are depreciated through theapplication of the straight-line method. If the acquisition price of the asset to be depreciated isover ¥100,000 and less than ¥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 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 forwhich 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
rightsOf lease transactions other than those deemed to accompany the transfer of property rights
to lessees, lease transactions that commenced before the start of the initial year of theapplication of the “Accounting Standard for Lease Transactions” (ASBJ Statement No. 13)
are accounted for in a manner similar to the accounting treatment for regular leasetransactions.

(3) Accounting standards for allowances/provisions(a)Allowance for doubtful accounts
To prepare for losses incurred through bad debts, the amount of potential loss is calculated byusing the historical loss ratio in case of non-classified loans/receivables. Potential losses forclassified loans/receivables are individually assessed.

(b) Provision 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 areoccasions where we are obliged to provide services to our clients after sales are stated in orderto resolve problems that were unforeseeable at the time of the signing 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 provision for quality assurance.
(c)

Provision 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 areoccasions 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 amountof such loss in and after the following fiscal year is stated in the provision for loss on projects,
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.

- 27 -

(d) Provision for bonuses
In order to set aside funds for the payment of bonuses to employees at consolidated
subsidiaries, the estimated amount of expenses for bonus payments in the fiscal year underreview is set aside in the reserve for bonuses account.
(e)Provision for office transfer expenses
To prepare for the payment of office transfer expenses, the amount estimated to be incurred isstated.

(f)

Provision for point card certificates
To prepare for the use of point card certificates granted under a point card certificate systemthat is designed for sales promotion at consolidated subsidiaries, the estimated amount to be
used in the future, calculated based on the past use ratio, is stated in the provision for point
card certificates.

(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 and expenses of overseas subsidiaries, etc., are translated
into yen at the average exchange rate for the fiscal year. The resultant translation differences areincluded in Foreign currency translation adjustment and Minority interests under Net assets.
(5) Standards for recognizing important income and expenses(a)

The extent to which a project has advanced by the end of the fiscal year under review iscalculated according to the percentage of completion method (Progress rate is estimated inproportion to cost.)(b) Other projects
Completed contract method(6) Amortization of goodwill
Goodwill is amortized evenly over its useful life.
If the monetary value of goodwill is not material, it is treated as a loss in the fiscal year in which 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 withminimum 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.
(Changes in accounting policies)
Changes in accounting policies that are difficult to distinguish from changes in accounting estimates(Changes in depreciation method)
In accordance with the revision of the Corporation Tax Act of Japan, the depreciation method of theCompany and its domestic consolidated subsidiaries for property, plant and equipment acquired on orafter January 1, 2013, has been changed to the method under the revised act from the fiscal year underreview.
(Accounting standards not applied)None- 28 -

(Notes to consolidated balance sheets)*1. Investments in affiliates(in thousands of yen)
Fiscal 2012
(December 31, 2012)
Investment securities (stocks)

Fiscal 2013
(December 31, 2013)¥555,070¥511,521*2. Total asset impairment losses are included in accumulated depreciation.
*3. Lawsuit
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 withNITTO DENKO. However, NITTO DENKO did not recognize the action by the Company as delivery
and refused to pay the contract fees etc. Against this backdrop, the Company initiated legal action.
Fiscal 2013 (December 31, 2013)
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 withNITTO DENKO. However, NITTO DENKO did not recognize the action by the Company as delivery
and refused to pay the contract fees etc. Against this backdrop, the Company initiated legal action.
(Notes to consolidated statements of income and comprehensive income)*1. Total of provision of allowance for loss on projects
Amount of provision of allowance for loss on projects included in cost of sales(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)¥9,300¥160,100*2. Total amount of research and development expenses
Research and development expenses included in selling, general and administrative expenses(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)¥23,459¥119,811*3. Breakdown of loss on retirement of noncurrent assets(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)

Software
Other-

SoftwareOther¥105,190¥1,963

Total

-

Total

¥107,154- 29 -

*4. Impairment loss
The Group reported impairment losses of the following asset groups.
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
None
Fiscal 2013 (from January 1, 2013 to December 31, 2013)(1) Main assets on which impairment losses were recognized
Use

Type

Idle asset

Land

Web business

Software

Location
Daisencho, Tottori Prefecture-(2) Background of the recognition of impairment losses
(i)

Land
The Group wrote down the book value of idle land in Daisencho, Tottori Prefecture, forwhich it has no specific plan for future use, to the recoverable amount, and recognized thedifference between the book value and the recoverable value as an impairment loss.

(ii) Software
The Group reviewed business plans at subsidiaries. As a result, the Group wrote down thebook values of asset groups in the Web business to their recoverable values.
(3) Amounts of impairment losses(in thousands of yen)
¥13,394¥27,743

Land
SoftwareTotal¥41,138(4) Asset grouping method
The Company groups assets by businesses for management accounting, which it regards as thesmallest units that generate almost independent cash flows. However, with regard to idle assetsthat are not used directly for business, each idle asset is considered to constitute a group.
(5) Calculation method of recoverable amounts
(i)

Land
The recoverable value is calculated from the net selling price. The net selling price iscalculated by rationally adjusting the assessed value against those of fixed assets andmarket prices in the neighborhood.

(ii) Software
The Company measures recoverable amounts based on use value, and calculates the use
value of such assets as an estimate of future cash flows after estimating the use value basedon future cash flows.

- 30 -

*5. Reclassification adjustment and tax effects relating to other comprehensive income
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
Valuation difference on available-for-sale securities:
Amount accrued
Reclassification adjustment
Before tax
Tax effects
Valuation difference on available-for-sale securities
Foreign currency translation adjustment:
Amount accrued
Share of other comprehensive income of associates
accounted for using equity method
Amount accrued
Total other comprehensive income- 31 -(in thousands of yen)
Fiscal 2013
(from January 1, 2013 to
December 31, 2013)¥3,404¥134,028¥3,404(¥1,213)¥2,190¥134,028(¥47,767)¥86,260(¥24,415)(¥46,440)¥3,376(¥18,847)

9,226
49,046

(Notes to consolidated statements of changes in net assets)
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
at the beginning of
this fiscal year

Outstanding stocks
Common stock
Total
Treasury stock
Common stock
Total

Number of stocks
increased during
this fiscal year

Number of stocks
decreased during
this fiscal year

Number of stocks
at the end of thisfiscal year

476,640
476,640--

476,640
476,640

20,00820,008

6,400
6,400

-

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
2.

Matters related to dividends(1) Dividends paid
Resolution

Stock type

Total dividend amount(in thousands of yen)

Dividends per
share (yen)Record date

Effective dateOrdinary general meeting ofshareholders held on March
22, 2012

Commonstock

342,474

750

December 31,
2011

March 23,
2012

Meeting of Board of Directors
held on July 26, 2012

Commonstock

337,674750 June 30, 2012

September 21,
2012(2) Among dividends for which the record date falls within the fiscal year under review, thedividend for which the effective date of payment falls in the next fiscal year is as follows:
Resolution

Stock type

Ordinary general
meeting of shareholders
held on March 26, 2013

Commonstock

Source ofTotal dividend
Dividends per
funds foramountshare (yen)(in thousands of yen) dividends
337,674- 32 -

Retainedearnings

750

Record date

Effective date

December 31,
March 27, 2013
2012

Fiscal 2013 (from January 1, 2013 to December 31, 2013)
1.

Matters related to the types and numbers of outstanding stocks and treasury stocks
Number of stocks
decreased during
this fiscal year

Number of stocks
increased during
this fiscal year

476,640
476,640

47,187,360
47,187,360-

47,664,000
47,664,000

26,40826,4083,014,392
3,014,392-

3,040,800
3,040,800

Outstanding stocks
Common stock
Total
Treasury stock
Common stock
Total(Overview of reasons for change)
Increase in the number of outstanding stocks due to the stock split conductedon July 1, 2013:
Purchase of treasury stock approved by the resolution of the Board of
Directors meeting held on February 7, 2013:

47,187,360 shares
4,000 shares

Increase in the number of treasury stocks due to the stock split conducted on
July 1, 2013:
2.

Number of stocks
at the end of thisfiscal year

Number of stocks
at the beginning of
this fiscal year

3,010,392 shares

Matters related to dividends(1) Dividends paid
Resolution

Stock type

Total dividend amount(in thousands of yen)

Dividends per
share (yen)Record date

Effective dateOrdinary general meeting ofshareholders held on March
26, 2013

Commonstock

337,674

750

December
31,2012

March 27,2013

Meeting of Board of Directors
held on July 26, 2013

Commonstock

334,674750 June 30, 2013

September 24,
2013(2) Among dividends for which the record date falls within the fiscal year under review, thedividend for which the effective date of payment falls in the next fiscal year is as follows:
Resolution

Stock type

Ordinary general
meeting of shareholders
held on March 25, 2014

Commonstock

Total dividend
Source ofDividends peramountfunds forshare (yen)(in thousands of yen) dividends
356,985

Retainedearnings

8.00

Record date

Effective date

December 31,
March 26, 20132012

(Note) Effective July 1, 2013, the Company conducted a 1:100 split of each share of its common stock. Dividend per sharereflects the said stock split.

- 33 -

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

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)

Cash and deposits
Short-term investment securities¥4,156,343¥28,329¥6,892,910¥65

Cash and cash equivalents:¥4,184,672¥6,892,975*2. Breakdown of assets and liabilities of the companies that have become consolidated subsidiaries
through the purchase of sharesFiscal 2012 (from January 1, 2012 to December 31, 2012)
The breakdown of assets and liabilities upon consolidating eSPORTS Co., Ltd., which is included
within the scope of consolidation through the acquisition of shares, and the relationship between theacquisition 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
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

Fiscal 2013 (from January 1, 2013 to December 31, 2013)
The breakdown of assets and liabilities upon consolidating eSPORTS Co., Ltd., which is included
within the scope of consolidation through the acquisition of shares, and the relationship between theacquisition price of shares and expenditure (net value) for the acquisition of shares are as follows:(in thousands of yen)
544,979
38,243809,945(343,169)-

Current assets
Noncurrent assets
Goodwill
Current liabilities
Noncurrent liabilities
Minority interests
Acquisition price of shares in newly consolidated subsidiary
Balance of cash and cash equivalents of newly consolidated subsidiary(1,050,000)
50,632

Expenditure for acquisition of shares in newly consolidated subsidiary(999,367)- 34 -

*3. 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
Noncurrent 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(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

Increase in asset retirement obligations¥6,387- 35 -

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)¥43,416

(Lease transactions)(Lessee)
1.

Finance lease transactions
Finance lease transactions not accompanying the transfer of property rights
1)

Lease assets

2)

Depreciation of lease assets

None
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, leasetransactions that commenced 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 leasetransactions.
(1) Acquisition cost equivalents, accumulated depreciation equivalents, accumulated
impairment loss equivalents and book value equivalents of leased properties

Acquisition costequivalents(thousands of yen)
Property, plant and equipment
Intangible assets
Total¥146,745¥5,294¥152,039(in thousands of yen)
Fiscal 2012 (December 31, 2012)
Accumulated
AccumulatedBook value
depreciation
impairment loss
equivalents
equivalents
equivalents(thousands of yen)(thousands of yen)(thousands of yen)¥101,682¥42,059¥3,003¥5,001¥122¥170¥106,683¥42,181¥3,173(in thousands of yen)

Acquisition costequivalents(thousands of yen)
Property, plant and equipment
Intangible assets
Total¥3,035¥3,035

Fiscal 2013 (December 31, 2013)
Accumulated
AccumulatedBook value
depreciation
impairment loss
equivalents
equivalents
equivalents(thousands of yen)(thousands of yen)(thousands of yen)¥607
¥2,428¥607¥2,428(2) Future lease payments obligation and balance of lease asset impairment loss account at
the end of fiscal year
(in thousands of yen)
Fiscal 2012
(December 31, 2012)

Fiscal 2013
(December 31, 2013)

Future lease payments obligation
Due within one year

¥8,366

Due after one year

¥599

¥297

¥1,841

Total¥8,663¥2,440

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

¥4,606-- 36 -

(3) Lease payments, reversal of lease asset impairment loss account, depreciation expenseequivalents and impairment loss
(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
Lease payments¥34,452

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)¥8,962

Reversal of lease asset impairment loss account¥12,645¥4,606

Depreciation expense equivalents¥17,954¥3,780Interest expense equivalents¥1,277¥109(4) Calculation method of depreciation expense equivalents
Depreciation equivalents are calculated using the straight-line method over the leaseterms 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 as interest expense equivalents and allocated over the lease term by
the interest method.
(Impairment loss)
There are no impairment losses allocated to lease assets.

- 37 -

(Securities)
1. Held-to-maturity bonds
Fiscal 2012 (December 31, 2012)
None
Fiscal 2013 (December 31, 2013)
None
2.

Other securities:
Fiscal 2012 (December 31, 2012)(in thousands of yen)
Type

Securities stated in
B/S whose amountexceeds acquisition
cost

Securities stated in
B/S whose amount
does not exceed
acquisition cost

Amount stated in B/S

Acquisition cost

Difference(1) Stocks(2) Bonds
1) Central/local
government bonds2) Bonds payable3) Other(3) Other

62,50949,657

12,852

-

-

-

-

-

-

Subtotal

62,50949,657

12,852(1) Stocks(2) Bonds
1) Central/local
government bonds2) Bonds payable3) Other(3) Other

53,47065,070(11,600)---

28,32928,329-Subtotal

81,79993,399(11,600)

144,308

143,056

1,252

Total

(Note) 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.

- 38 -

Fiscal 2013 (December 31, 2013)(in thousands of yen)
Type

Securities stated in
B/S whose amountexceeds acquisition
cost

Securities stated in
B/S whose amount
does not exceed
acquisition cost

Amount stated in B/S

Acquisition cost

Difference(1) Stocks(2) Bonds
1) Central/local
government bonds2) Bonds payable3) Other(3) Other

191,938

56,656135,281

-

-

-

-

-

-

Subtotal

191,938

56,656135,281

70

70

-

-

-

-

65

65

-

(1) Stocks(2) Bonds
1) Central/local
government bonds2) Bonds payable3) Other(3) Other
Subtotal
Total

135

135

-

192,073

56,792

135,281(Note) Unlisted stocks, etc. (amount stated in B/S: ¥1,040,915 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 2012 (from January 1, 2012 to December 31, 2012)
None
Fiscal 2013 (from January 1, 2013 to December 31, 2013)(in thousands of yen)Type

Profits on sale

Total profits on sale

Total losses on sale(1) Stocks(2) Bonds
1) Central/local
government bonds2) Bonds payable3) Other(3) Other451,773

213,773

-

-

-

-

-

-

-

Total

451,773

213,773-

4.

Securities for which impairment losses are recognizedNone- 39 -

(Derivative transactions)
There are no applicable items, since the Group does not utilize derivative transactions.
(Retirement benefits)None- 40 -

(Stock options)
1. Details, scale and fluctuation status of stock options(1) Details of stock options
Stock options of 2005
Classification and number ofgrantees

Director of the Company

5

Employee of the Company
Director of subsidiary of the Company
Employee of subsidiary of the Company

467
1
6

Number of stock options

Common stock:

Date of grantAugust 25, 2005

8,000 shares

Right allotment conditions

Having continued to work from the date of grant(August 25, 2005) to the date of right allotment(August 24, 2008)

Subject service period

From August 25, 2005 to August 24, 2008

Exercise period

From August 25, 2008
To March 23, 2015(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 and presented 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)302,000
35,200266,800(Note) Effective July 1, 2013, the Company conducted a 1:100 split of each share of its common stock.
The number of stock options is converted into and presented in the number of shares after the said
stock split

2)

Unit price information
Stock option of 2005

Exercise price

(Yen)

653

Average stock price at the time of exercise

(Yen)

-

Fair assessed unit price (Date of grant)

(Yen)

-

- 41 -(Tax effect accounting)
1. Breakdown of major causes for deferred tax assets and liabilities
Fiscal 2012
(December 31, 2012)(in thousands of yen)
Fiscal 2013
(December 31, 2013)

42,2854,316
5,131
34,593
11,892
179,611
13,433
5,357

81,131
4,602
65,98554,69813,023
20,376
8,868

Subtotal of deferred tax assets
Valuation allowance

296,621(142,959)

248,686(31,110)

Total deferred tax asset[Current]
Deferred tax assets
Enterprise tax payable
Provision for quality assurance
Provision for loss on projects
Excess amount over maximum provision for bonuses
Accrued business office taxes
Losses carried forward for tax purposes
Provision for office transfer expenses
Loss on valuation of inventories
Other

153,662

217,576

Deferred tax liabilities
Retirement expenses for asset retirement obligations
Others

425
-

394
1,238

Total deferred tax liabilities

425

1,632

153,237

215,944868,240
356,299
199,780
113,102
4,033

855,876
267,494
199,780
128,259
2,395

1,541,455(1,301,161)

1,453,804(1,313,414)

Total deferred tax asset
Deferred tax liabilities
Temporary difference of future addition in consolidated
accounting
Retirement expenses for asset retirement obligations
Valuation difference on available-for-sale securities
Other

240,294

140,391

58,01650,75915,6291,225

22,922
46,166-

Total deferred tax liabilities

74,871

119,847

Net deferred tax assets

165,423

9,022

Net deferred tax assets[Non-current]
Deferred tax assets
Losses carried forward for tax purposes
Depreciation excess
Loss on valuation of investment securities
Asset retirement obligations
Other
Subtotal of deferred tax assets
Valuation allowance(Note) Net amount of deferred tax assets is included in the following items in the consolidated balance sheets.
Fiscal 2012
(December 31, 2012)
153,662
172,157
425
6,734

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

Fiscal 2013
(December 31, 2013)
217,576
25,5181,632
4,974

2. Breakdown of major reasons for significant differences between the normal effective statutory
tax rate and the rate of income taxes after application of deferred tax accounting

Normal effective statutory tax rate
(Adjustment)
Amortization of goodwill
Accumulated earnings tax
Equity in (earnings) losses of affiliates
Valuation allowance
Inhabitant tax, flat-rate
Addition 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%

Fiscal 2013
(December 31, 2013)
38.0%

0.5%
-%
-%
(1.2%)
1.3%
0.7%
0.3%
1.5%
(0.9%)(0.1%)

2.1%
1.8%
0.6%
(5.8%)
0.7%
0.3%(0.1%)
4.0%
-%
0.1%

42.8%

41.7%

3. Revision of amounts of deferred tax assets and liabilities due to change in normal effective
statutory tax rate
(Fiscal 2012) (from January 1, 2012 to December 31, 2012)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 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 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 ¥22,947 thousand, while corporate tax adjustments increased ¥22,839 thousand.

- 43 -

(Business combinations)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. (theCompany’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, 20123.

Acquisition cost of acquired business and breakdown
Consideration for acquisition
Acquisition cost

4.

Cash

0 Thousand Yen
0 Thousand Yen

Amount of gain on bargain purchase and cause(1) Amount of gain on bargain purchase75,209 Thousand Yen(2) Cause of occurrence
Negative goodwill was incurred because net assets acquired through investments exceeded
acquisition cost.

- 44 -

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 fieldby 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 of shares 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, 20123.

Acquisition cost of the acquired company and its breakdown
Consideration for acquisition
Acquisition cost

4.

Cash

196,000 Thousand Yen
196,000 Thousand Yen

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- 45 -

5.

Amount of assets received and obligations taken over on the date of business combination andtheir breakdown
Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities

6.

183,531 Thousand Yen
7,539
191,071(31,913)(1,498)(33,411)

Estimated amounts of impact on the consolidated statements of income and comprehensive
income for fiscal 2013 on the assumption that the business combination was completed on thefirst day of fiscal 2013, and the method of calculation:
Net sales
Operating income

49,125 Thousand Yen(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 theacquirer’s Consolidated statements of income and comprehensive income.
This note has not been subjected to audit certification.

- 46 -

(Transactions, etc. under common control)
Absorption-type merger of Life Sciences Computing, a subsidiary of the Company, and DigitalGlobe, asubsidiary 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 succeeding company 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 byembarking on the development 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) and the ‘Guidance on Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures’ (ASBJ Guidance No. 10, December 26, 2008),
transactions are treated as those under common control.

- 47 -

Fiscal 2013 (from January 1, 2013 to December 31, 2013)(Business combination through acquisition)
Turning eSPORTS Co., Ltd. into a subsidiary1.

Overview of business combination(1) Name and business activities of the acquired company
Name of the acquired company:eSPORTS Co., Ltd.

Business activities:

Sales of sports and outdoor gear on the Internet(2) Main reasons for business combination
As one of its medium-term strategies, the Group creates new services using its ideas and IT. It
aims to expand businesses in the EC area by investing the intellectual property and know-how
the Company has cultivated into eSPORTS Co., Ltd.
(3) Date of business combination
June 30, 2013(4) Legal form of business combination
Acquisition of shares(5) Name of the company after business combinationeSPORTS Co., Ltd.
(6) Acquired voting right ratio
100%(7) Main ground for deciding the company to be acquired
Because RI Partners Limited Liability Association, which is owned by Future Investment
Corp., a subsidiary of the Company, acquired 100% of the voting rights of eSPORTS Co., Ltd.
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
July 1, 2013 to December 31, 2013

3.

4.

Acquisition cost of the acquired company and its breakdown
Consideration for acquisition
Cash 1,050,000 Thousand Yen
Acquisition cost
1,050,000 Thousand Yen
Amount of goodwill that occurred, cause of occurrence, amortization method and amortization
period(1) Amount of goodwill that occurred
809,945 Thousand Yen(2) Cause of occurrence
Future excess earning power expected from business development from now on(3) Amortization method and amortization period
Equal amortization over five years

5.

Amount of assets received and obligations taken over on the date of business combination and theirbreakdown
Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities

544,979 Thousand Yen
38,243
583,223(343,169)(343,169)- 48 -

6.

Estimated amounts of impact on the Consolidated statements of income and comprehensive income
for fiscal 2013 on the assumption that the business combination was completed on the first day offiscal 2013, and the method of calculation:
Net sales
Operating income

2,788,085 Thousand Yen
129,380 Thousand Yen(Calculation method of estimated amounts)
The estimated amounts of impact were calculated according to the difference between net sales andprofits/losses, computed on the assumption that the business combination was completed on the dayof 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.

- 49 -

(Transactions, etc. under common control)
Absorption-type merger of the Company and ABM Corporation, a subsidiary of the Company
1.

Overview of business combination(1) Name of subject business and its business activities
Name of business:

IT consulting businessBusiness activities:

Development, sales, and consulting regarding managerial accounting
packages(2) Date of business combination
January 1, 2013
(3) Legal form of business combination
Absorption-type merger, in which the Company is the surviving company, and ABM
Corporation is absorbed by the absorption-type merger.
(4) Name of company after business combination
Future Architect, Inc.
(5) Other matters concerning overview of transactions
The Company aims at aggregating management resources, while further enhancing services forfinancial institutions by adding the ABC package software, which has been offered by ABM,
to the service lineup of the Company, in addition to the provision of cloud services, in the
Company’s cloud computing services for financial institutions.
2.

Overview of implemented accounting treatment
Pursuant to the ‘Accounting Standard for Business Combinations’ (ASBJ Statement No. 21,
December 26, 2008) and the ‘Guidance on Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures’ (ASBJ Guidance No. 10, December 26, 2008),
transactions are treated as those under common control.

(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 leaseagreements 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 beseven 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 2012
Fiscal 2012 (from January 1,
2012 to December 31, 2012)(in thousands of yen)
Fiscal 2013
Fiscal 2013 (from January 1,
2013 to December 31, 2013)

Balance at the beginning of the period
309,408
315,796(Note 1)
Increase due to acquisition of property,
3,603
52,241
plant and equipment
Adjustment due to passage of time
2,986
3,206
Decrease due to fulfillment of asset(1,700)(12,031)retirement obligations
Other increase (decrease)
1,498
Balance at the end of the period (Note 2)
315,796359,213(Note) 1. “Balance at the beginning of the period” for fiscal 2012 is the balance resulting fromapplication of the “Accounting Standard for Asset Retirement Obligations” (ASBJ
Statement No. 18, March 31, 2008) and the “Guidance on Accounting Standard for Asset
Retirement Obligations” (ASBJ Guidance No. 21, March 31, 2008).
2. Total asset retirement obligations (current liabilities) and asset retirement obligations(noncurrent liabilities)- 50 -

(Real estate, including lease)
Real estate, including lease, is omitted, since its total is of little significance in terms of monetaryamounts.

- 51 -

(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 of management resources and evaluate businessperformance.
The Group defines the classification of business segments by comprehensively taking into
account main services, solutions, customers and markets, and has four reportable segments: theIT Consulting Business, the Package & Service Business, the New Media & Web Service
Business, and the Corporate Revitalization Business.
The business operations of the four reportable segments are as follows:
Reportable segments

2.

Business operations

IT Consulting BusinessIn 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 andestablishing information systems for them using advanced IT.

Package & Service BusinessTo introduce or provide via cloud and ASP operations software
packages for highly specialized fields, such as sales managementand ERP, and provide consigned development, and educationaland IT services to help clients improve their operational efficiency.

New Media & Web Service
Business

To create original services that have not existed so far in the Mediaand Web service area

Corporate Revitalization BusinessTo get deeply involved in the management team of client firms,
revitalize client firms through drastic reform focusing on IT, andestablish success models for each industry.

Methods of calculating net sales, income or loss, assets, liabilities, and other items byreportable 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.

- 52 -

3.

Information on amounts of net sales, income or loss, assets, and other items by reportablesegment
I

Fiscal 2012 (from January 1, 2012 to December 31, 2012)(in thousands of yen)
Reportable segments
Adjustment(Note 2)

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

23,353,208-

602,137(602,137)

23,353,208

IT Consulting
Business

Package &ServiceBusiness

New Media& Web
ServiceBusiness

Corporate
Revitalization
Business

Total

14,788,300

3,844,629

282,005

4,437,983

23,352,918

290

55,296544,678

1,002

1,160

602,137

Other(Note 1)Total

Net sales
Net sales to outsideclients
Inter-segment sales ortransfer
Total

14,843,596

4,389,307

283,0074,439,144

23,955,055

290

23,955,346(602,137)

Segment income (loss)

1,745,047

279,236(151,275)

29,345

1,902,354(3,837)

1,898,516

36,541

1,935,058

Segment assets

9,935,630

2,115,468(151,275)

543,489

12,873,209

2,434,245

15,307,455(477,265)

14,830,189

Depreciation

191,506

42,254819

29,390263,970-

263,970-

263,970

Amortization of
goodwill

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

Increase in property,
plant and equipment andintangible assets

705,049

27,376-18,002

750,428

53,498803,926-

803,926

Other items(Note) 1.

“Others,” a segment not included in the reportable segments, include securities investment, holding, and management activities.

2.

Adjustment to segment income (loss) “¥36,541 thousand” and adjustment to segment assets “-¥477,265 thousand” areadjustments to inter-segment transactions.

3.

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

- 53 -

II

Fiscal 2013 (from January 1, 2013 to December 31, 2013)(in thousands of yen)
Reportable segments
IT Consulting
Business

Package &ServiceBusiness

New Media& Web
ServiceBusiness

19,660,032

3,855,988

1,976,419

Corporate
Revitalization
Business

Total

4,577,350

30,049,790

Other(Note 1)

Total

Adjustment(Note 2)

Amountstated infinancialstatements(Note 3)-30,049,790

Net sales
Net sales to outsideclients
Inter-segment sales ortransfer
Total-

30,049,790

47,599721,985

1,350

2,521

773,456-

773,456(773,456)-

19,707,631

4,577,973

1,977,769

4,559,872

30,823,247-

30,823,247(773,456)

30,049,790

Segment income (loss)

2,959,679

373,177(51,843)

46,067

3,327,082(1,182)

3,325,899

26,994

3,352,893

Segment assets

12,618,510

2,523,712

1,655,080

782,612

17,579,916

1,634,606

19,214,523

10,544

19,225,067

Depreciation

310,838

32,537

34,13032,706410,212-410,212-410,212

Amortization of
goodwill

111,330-

80,944-

192,325-

192,325-

192,325

Increase in property,
plant and equipment
and intangible assets

370,250

32,74914,684

61,415

479,099-

479,099-

479,099

Other items(Note)

1. “Others,” a segment not included in the reportable segments, include securities investment, holding, and management activities.
2. Adjustment to segment income (loss) “¥26,994 thousand” and adjustment to segment assets “¥10,544 thousand” areadjustments to inter-segment transactions.
3. Segment income (loss) is adjusted with operating income in consolidated financial statements.

4.

Matters related to changes in reportable segments(Changes in reportable segments)
In the second quarter of the current consolidated fiscal year under review, the Company
acquired all shares of eSPORTS to include it in the scope of consolidation. In the third quarter,as the importance of eSPORTS increased, the Company added the “New Media & Web
Service Business” as a new reportable segments, and included eSPORTS’ business in the new
segment. The business of Tokyo Calendar, which was included in “Others” in the previous
consolidated fiscal year, was accordingly changed to be included in the added segment “NewMedia & Web Service Business.”
Segment information for the previous consolidated fiscal year was stated based on the newclassification of reportable segments.

- 54 -

b.

Related information
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 property, plant and equipment in the consolidated balance sheets.
Property, plant and equipment are therefore omitted.

3.

Information by major client
Of the sales to outside clients, no clients account for 10% or more of the net sales contained in
the consolidated statements of income. Therefore, information organized by major client isomitted.

Fiscal 2013 (from January 1, 2013 to December 31, 2013)
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 property, plant and equipment in the consolidated balance sheets.
Property, plant and equipment are therefore omitted.

3.

Information by major client
Of the sales to outside clients, no clients account for 10% or more of the net sales contained in
the consolidated statements of income. Therefore, information organized by major client isomitted.

- 55 -

c.

Information on noncurrent asset impairment losses by reportable segment
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
None
Fiscal 2013 (from January 1, 2013 to December 31, 2013)(in thousands of yen)
Reportable segments
IT Consulting
Business

Impairment lossd.

Package &ServiceBusiness--

New Media& Web
ServiceBusiness

Corporate
Revitalization
Business

27,743-

Total

Others(Note)

27,743

Total

13,394

Corporateor
elimination

41,138-

Total

41,138

Information on amortization and unamortized balance of goodwill by reportable segment
Fiscal 2012 (from January 1, 2012 to December 31, 2012)(in thousands of yen)
Reportable segments
IT Consulting
Business

Package &ServiceBusiness

New Media& Web
ServiceBusiness

Corporate
Revitalization
Business

Total

Others(Note)

Total

Corporateor
elimination

Total

Amortization during theperiod85,003---85,003-85,003-85,003

Balance at the end of theperiod195,332---

195,332-

195,332-

195,332

Fiscal 2013 (from January 1, 2013 to December 31, 2013)(in thousands of yen)
Reportable segments
IT Consulting
Business

Package &ServiceBusiness

New Media& Web
ServiceBusiness

Corporate
Revitalization
Business

Total

Others(Note)

Total

Corporateor
elimination

Total

Amortization during theperiod111,330-

80,994-

192,325-

192,325-

192,325

Balance at the end of theperiod94,754-

728,951-

823,705-

823,705-

823,705e.

Information on gain on bargain purchase by reportable segment
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
In the “New Media & Web Service Business,” Zakura Inc. (renamed Tokyo Calendar Inc. on
February 1, 2012), which is a consolidated subsidiary of the Company, succeeded the media service
business of ACCESS CO., LTD., including publication, through a corporate split, with January 31,
2012, as the effective date. Following the succession, gain on bargain purchase of ¥75,209 thousand
was posted in the fiscal year under review.
Fiscal 2013 (from January 1, 2013 to December 31, 2013)
None(Related party information)
None- 56 -

(Per share data)

Net asset value per share
Net income per share(Notes) 1.

2.

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

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)¥258.65¥25.88Fully diluted net income per share isnot stated because the average stock
price during the period is below theexercise price of stock acquisitionrights and hence net income per shareis not diluted.

¥288.99¥45.39Fully diluted net income per share isnot stated because the average stock
price during the period is below theexercise price of stock acquisitionrights and hence net income per shareis not diluted.

Effective July 1, 2013, the Company conducted a 1:100 split of each share of its common stock. Net asset value per share andnet income per share were calculated on the assumption that the stock split was conducted at the beginning of the previous
consolidated fiscal year.
Net income per share is calculated based on the following:

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

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)

Net income per share
Net income (thousands of yen)

1,167,747

2,027,847

Amount not available for commonshareholders to common shares(thousands of yen)--

Net income attributable to commonshares (thousands of yen)

1,167,747

2,027,847

Average outstanding shares ofcommon stock during the period(shares)

45,120,826

44,674,713

Stock options granted by resolution of
the Ordinary General Meeting of
Shareholders on March 24, 2005
(Stock acquisition rights: 755 units)
Common stock: shares 302,000

Stock options granted by resolution of
the Ordinary General Meeting of
Shareholders on March 24, 2005
(Stock acquisition rights: 667 units)
Common stock: shares 266,800

Latent shares that have no dilution
effect and thus are not included in thecalculation of diluted net income pershare- 57 -

(Significant subsequent events)
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 thereading of terms under provisions of Article 165, Paragraph 3 of the same act.
1.

Details of the resolution(1) Reason for purchase of treasury stock
Treasury stock will be purchased in order to carry out flexible capital policy to cope withchanges 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

2.

Results of purchase(1) Number of shares purchased
4,000(2) Total amount of shares purchased
147,654,650 yen(3) Purchase period
From February 8, 2013 to February 25, 2013

Fiscal 2013 (from January 1, 2013 to December 31, 2013)
None(Omission of disclosure)Notes accompanying the financial instruments are omitted, because the necessity of their disclosure in
the summary report of operating results is considered to be insignificant.

- 58 -

5.

Non-consolidated Financial Statements(1) Balance sheets(in thousands of yen)
Fiscal 2012
(December 31,2012)
AssetsCurrent assets
Cash and deposits
Accounts receivable-trade
Merchandise
Prepaid expenses
Deferred tax assets
Short-term loans receivable from subsidiaries and affiliates
Accounts receivable-other
Other

*3

Total current assets

2,658,509
2,657,475
303,670
66,92670,0001,451,442
16,124

Fiscal 2013
(December 31,2013)*3

4,859,775
2,773,204735
301,460
146,315
90,4801,637,314
20,7807,224,149

9,830,067

Noncurrent assets
Property, plant and equipment
Buildings
Accumulated depreciation

603,392(442,496)

730,039(485,249)

Buildings, net

160,896244,790

1,348,535(1,008,657)

1,431,209(1,117,001)

Tools, furniture and fixtures
Accumulated depreciation

339,878

314,208Land

Tools, furniture and fixtures, net

18,825

5,430

Total property, plant and equipment

519,599

564,429165
497
744,968
10,710532
640,384
10,810756,342

651,727

1,090,909
1,628,871

986,938
1,206,603

1,830,018

3,138,117

196,622941,602
15,236(667,515)(422,166)

68,510788,736
15,236(1,142,399)-

Intangible assets
Patent right
Right of trademark
Software
Other
Total intangible 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*1*1

4,613,578

Total noncurrent assets
Total assets- 59 -*1*1

5,061,743

5,889,519

6,277,900

13,113,668

16,107,968

(in thousands of yen)
Fiscal 2012
(December 31,2012)
Liabilities
Current liabilities
Accounts payable-trade
Accounts payable-otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Deposits received
Unearned revenue
Provision for quality assurance
Provision for loss on projects
Provision for office transfer expenses
Asset retirement obligations

Fiscal 2013
(December 31,2013)

289,229430,703501,263
20,84342,943
189,532
185,422
3,174
13,50035,342
11,789515,983
536,625
601
898,777
180,360
20,573
161,766
191,303
173,600-

Total current liabilities

1,723,743

2,679,591

Noncurrent liabilities
Long-term loans payable
Asset retirement obligations

188,878

1,000,000
242,770

Total noncurrent liabilities

188,878

1,242,770

1,912,621

3,922,361

Net assets
Shareholders' equity
Capital stock
Capital surplus
Legal capital surplus

Total liabilities

1,421,815

1,421,815

2,495,772

2,495,772

Total capital surplus

2,495,772

2,495,772

27,74827,7488,648,233

9,694,186

Retained earnings
Legal retained earnings
Other retained earnings
Retained earnings brought forward
Total retained earnings

8,675,982

9,721,935

Treasury stock(1,393,328)(1,540,983)

Total shareholders' equity

11,200,241

12,098,540

806

87,066806

87,066

Valuation and translation adjustments
Valuation difference on available-for-sale securities
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets- 60 -

11,201,047

12,185,607

13,113,668

16,107,968

(2) Non-consolidated statements of income(in thousands of yen)
Fiscal 2012
(from January 1, 2012
to December 31, 2012)

Fiscal 2013
(from January 1, 2013
to December 31, 2013)

13,501,414
516,237

17,491,875
522,235

14,017,651

18,014,110

Net sales
IT Consulting service
Procurement services related to hardware
Total net sales
Cost of sales
IT Consulting service
Procurement services related to hardware*1

Total cost of sales

7,993,105
406,524*1

10,858,210
431,633

8,399,630

11,289,843

Gross profit

5,618,021

6,724,267

Selling, general and administrative expenses
Advertising expenses
Directors' compensations
Salaries and bonuses
Other salaries
Welfare expenses
Training expenses
Research and development expenses
Depreciation
Rent expenses
Recruiting expenses
Other311,261
132,385
1,756,850
125,474
71,22589,16022,20552,865455,653
175,151
414,162

279,083
145,908
1,273,860
114,292
168,401
91,247103,770
33,928498,453
228,614628,985*2

Total selling, general and administrative expenses
Operating income- 61 -*2

3,606,396

3,566,543

2,011,624

3,157,723

(in thousands of yen)
Fiscal 2012
(from January 1, 2012
to December 31, 2012)
Non-operating income
Interest income
Dividends income
Group management expense
Foreign exchange gains
Other

*3
*3

Total non-operating income
Non-operating expenses
Interest expenses
Commission for purchase of treasury stock
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
Gain on extinguishment of tie-in shares
Gain on liquidation of subsidiaries and affiliates*7

Total extraordinary income
Extraordinary loss
Loss on retirement of noncurrent assets
Impairment loss
Litigation expenses
Provision of allowance for office transfer expenses
Provision of allowance for doubtful accounts
Provision of allowance for investment loss
Loss on valuation of subsidiaries’ stocks
Debt waiver loss from subsidiaries and affiliates

*6
*9
*8

Total Extraordinary losses

16,613
21,27636,54145,191
2,343

Fiscal 2013
(from January 1, 2013
to December 31, 2013)*3*3

20,74623,476
23,700143,530
3,664

121,967

215,117

1,598
1,647
262

3,914
1,005
212

3,508

5,132

2,130,082

3,367,708

49,739213,773
1,843-

49,739215,616

44,00035,342
138,857
108,377
11,000*4*5*6

105,141
13,394474,883100-

337,576593,520

1,842,245

2,989,804

Income taxes-current
Income taxes-deferred

799,409
6,334

1,270,549
954

Total income taxes

805,743

1,271,503

1,036,501

1,718,300

Income before income taxes

Net income- 62 -

Statement of cost of sales
1.

IT Consulting service business(in thousands of yen)

Item
Labor expenses
1. Salaries and bonuses
2. Welfare expenses
II Subcontract expenses
1. Subcontract expenses
III Overheads
1. Transportation expenses
2. Depreciation
3. Rent expenses
4. Supplies expenses
5. Provision (reversal) of allowancefor quality assurance
6. Provision (reversal) of allowance
for loss on projects
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

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

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)
AmountRatio (%)

I

3,468,931
494,070

3,963,001

49.5

4,165,254
554,866

4,720,120

43.3

2,902,410

2,902,410

36.3

4,587,674

4,587,674

42.1

1,582,755

14.5

10,889,921

100.0

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

424,495
241,752
509,095
51,390(58,116)(3,174)9,300
149,055

160,100
1,137,346

14.2

8,002,758

100.0

199,094--

8,002,758

10,889,921

-

-

9,653
7,993,105

31,711
10,858,210(Note) Actual job-order costing for each project is used to compute costs.

2.

Procurement services related to hardware(in thousands of yen)

Item

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

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)

AmountAmountRatio (%)

Ratio (%)

Commodities inventories at the
beginning of the period--

Product inventories at the beginning of
the period--

406,509432,363

15

5

Cost of purchased goods
Purchase of finished goods

406,524432,368

Commodities inventories at the end of
the period-

735

Product inventories at the end of theperiod--406,524

431,633

Total

Cost of sales(Note) Actual job-order costing for each project is used to compute costs.

- 63 -

(3) Statements of changes in net assets
Fiscal 2012 (from January 1, 2012 to December 31, 2012)(in thousands of yen)
Capital surplus

Balance at the beginning of
the period
Changes of items during
the period
Dividends from surplus
Net income
Purchase of treasurystock
Net changes of items
other than shareholders'equityTotal changes of items
during the period
Balance at the end of theperiodCapital stock

Legal capitalsurplus

Total capitalsurplus1,421,815

2,495,772

2,495,772

Shareholders’ equity
Retained earnings
Other retainedLegalearnings
Total retained
retainedearnings
Retained earnings
earnings
brought forward
27,7488,291,880

8,319,628(680,148)
1,036,501(680,148)
1,036,501

Treasury
stock

Total
shareholders'equity(1,171,668)

11,065,547(680,148)
1,036,501(221,659)(221,659)

-

-

-

-

356,353

356,353(221,659)

134,693

1,421,815

2,495,772

2,495,772

27,7488,648,233

8,675,982(1,393,328)

11,200,241

Valuation and translation adjustments
Valuation difference Total valuation andon available-for-saletranslation
securities
adjustments
Balance at the beginning of
the period
Changes of items during theperiodDividends from surplus
Net income
Purchase of treasury stock
Net changes of items otherthan shareholders' equity
Total changes of items during
the period
Balance at the end of theperiod(1,384)(1,384)

Total net assets

11,064,163(680,148)
1,036,501(221,659)
2,190

2,190

2,190

2,190

2,190

136,884806

806

11,201,047- 64 -

Fiscal 2013 (from January 1, 2013 to December 31, 2013)(in thousands of yen)
Capital surplus

Balance at the beginningof the period
Changes of items during
the period
Dividends from surplus
Net income
Purchase of treasurystock
Net changes of items
other than shareholders'equityTotal changes of items
during the period
Balance at the end of theperiodCapital stock

Legal capitalsurplus

Total capitalsurplus1,421,815

2,495,772

2,495,772

Shareholders’ equity
Retained earnings
Other retainedLegalearnings
Total retained
retainedearnings
Retained earnings
earnings
brought forward
27,7488,648,233

8,675,982(672,347)
1,718,300(672,347)
1,718,300

Treasury
stock

Total
shareholders'equity(1,393,328)

11,200,241(672,347)
1,718,300(147,654)(147,654)

-

-

-

-

1,045,953

1,045,953(147,654)

898,298

1,421,815

2,495,772

2,495,772

27,7489,721,935

9,721,935(1,540,983)

12,098,540

Valuation and translation adjustments
Valuation difference Total valuation andon available-for-saletranslation
securities
adjustments
Balance at the beginning of
the period
Changes of items during theperiodDividends from surplus
Net income
Purchase of treasury stock
Net changes of items otherthan shareholders' equity
Total changes of items during
the period
Balance at the end of theperiod806

806

Total net assets

11,201,047(672,347)
1,718,300(147,654)
86,26086,26086,26086,26086,260984,559

87,06687,066

12,185,607- 65 -

(4) Notes to non-consolidated financial statements(Notes regarding the premise of surviving company)
None- 66 -

(Significant accounting policies)
1. Valuation standards and methods for assets(1) Valuation standards and methods for securities(a) Held-to-maturity bonds
Amortized cost method (straight-line method)(b) Stocks issued by subsidiaries/affiliates
Stated at cost based on moving-average method.
(c) 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 component ofshareholders’ 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
MerchandiseStated 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 inprofitability)
2. Depreciation method of fixed assets(1) Property, plant and equipment
The declining-balance method is primarily applied for property, plant and equipment, while thestraight-line method is applied for cloud service-related assets.
If the acquisition cost of the asset to be depreciated is over ¥100,000 and less than ¥200,000, it isdepreciated evenly using straight-line method over three (3) years.
Useful life is as follows:
Buildings 3-31 years
Tools, furniture and fixtures 3-20 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 forwhich they are expected to remain salable (3 years).
(c) Other
Straight-line method
3. Accounting standards for allowances/ provisions(1) Allowance for doubtful accounts
To prepare for losses incurred through bad debts, the amount of potential loss is calculated byusing the historical loss ratio in case of non-classified loans/receivables. Potential losses forclassified loans/receivables are individually assessed.
(2) Provision 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 areoccasions where we are obliged to provide services to our clients after sales are stated in order toresolve problems that were unforeseeable at the time of the signing of the contract or as of theclose 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 are stated, estimated amount of such additional cost, calculated based on pastexperience, is stated in the provision for quality assurance.
(3) Provision 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 areoccasions 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 ofsuch loss in and after the following fiscal year is stated in the provision for loss on projects,
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 in consideration of financial conditions and other characteristics of the relevant
companies, is stated in the reserve for investment losses.
(5) Provision for office transfer expenses
To prepare for the payment of office transfer expenses, the amount estimated to be incurred isstated.
4. 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 foreignexchange rates on the settlement date, with translation differences recognized as gains or losses.
5. 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 underreview are deemed to be certain
Percentage of completion method (Progress rate is estimated in proportion to cost.)(2) Other projects
Completed contract method
6. 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.
(Change in accounting policies)
Changes in accounting policies that are difficult to distinguish from changes in accounting estimates(Changes in depreciation method)
In accordance with the revision of the Corporation Tax Act of Japan, the depreciation method of theCompany for property, plant and equipment acquired on or after January 1, 2013 has been changed
to the method under the revised act from the fiscal year under review.
The impact of this change on profit and loss for the fiscal year under review is immaterial.

- 68 -

(Notes to balance sheets)*1. Items concerning affiliates
Assets and liabilities in relation to affiliated companies, which are not separately stated, are as
follows:(in thousands of yen)
Fiscal 2012
(December 31, 2012)
Allowance for doubtful accounts
Allowance for investment loss

Fiscal 2013
(December 31, 2013)(¥667,515)(¥422,166)(¥1,142,399)-

The sum of assets related to affiliated companies other than the above balance exceeded 1/100 of
total assets, with the amount being ¥162,541 thousand for fiscal 2012.
2.

Debt guarantees
Guarantee against trade accounts payable of affiliated company(in thousands of yen)
Fiscal 2012
(December 31, 2012)

Uoei Shoten Corporation

Fiscal 2013
(December 31, 2013)
89,584

97,205*3. Lawsuit
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 agreementwith NITTO DENKO. However, NITTO DENKO did not recognize the action by the Company as
delivery and refused to pay the contract fees etc. Against this backdrop, the Company initiated legal
action.
Fiscal 2013 (December 31, 2013)
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 agreementwith NITTO DENKO. However, NITTO DENKO did not recognize the action by the Company as
delivery and refused to pay the contract fees etc. Against this backdrop, the Company initiated legal
action.
(Notes to statements of income)*1. Total of provision of allowance for loss on projects
Amount of provision of allowance for loss on projects included in cost of sales(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)
9,300- 69 -

160,100

*2. Total amount of research and development expenses
Research and development expenses included in selling, general and administrative expenses(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)
22,205

103,770*3. Transactions with group affiliates are summarized below:(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
Interest income
Group management expense

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)
14,21536,541

20,107
23,700*4. Breakdown of loss on retirement of fixed assets(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)

Software-105,141*5. Impairment loss
The Group reported impairment losses of the following asset groups.
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
None
Fiscal 2013 (from January 1, 2013 to December 31, 2013)(1) Main assets on which impairment losses were recognized
Use

Type

Idle asset

Land

Location
Daisencho, Tottori Prefecture(2) Background of the recognition of impairment losses
(a)

Land
The Group reduced the book value of idle land in Daisencho, Tottori Prefecture, forwhich it has no specific plan for future use, to its recoverable amount, and recognized thedifference between the book value and the recoverable value as impairment losses.

(3)

Amounts of impairment losses(in thousands of yen)Land

13,394
Total

13,394(4) Asset grouping method
The Company groups assets by businesses in terms of management accounting, which it
regards as the smallest units that generate almost independent cash flows. However, withregard to idle assets that are not directly used for business, each idle asset is considered toconstitute a group.

- 70 -

(5) Calculation method of recoverable amounts
(a)

Land
The recoverable value is calculated from the net selling price. The net selling price iscalculated by rationally adjusting the assessed value against those of fixed assets andmarket prices in the neighborhood.

*6. Provision of allowance for doubtful accounts is in relation to loans to affiliated companies.
*7. Gain on liquidation of subsidiaries and affiliates
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Gain on liquidation of subsidiaries and affiliates resulting from liquidation of Associant
Technology Inc.
Fiscal 2013 (from January 1, 2013 to December 31, 2013)
None*8. Debt waiver loss from subsidiaries and affiliates
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Debt waiver loss from subsidiaries and affiliates resulting from debt waiver for ABM
Corporation.
Fiscal 2013 (from January 1, 2013 to December 31, 2013)
None*9. Provision of allowance for investment loss
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Provision of allowance for investment loss relates to stocks of subsidiaries and affiliates.
Fiscal 2013 (from January 1, 2013 to December 31, 2013)
None- 71 -

(Notes to statements of changes in net assets)
Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Type and number of treasury stock
Number of shares at
beginning of fiscal
2012

Increase in number ofshares in fiscal 2012

Decrease in number ofshares in fiscal 2012

Number of shares at
end of fiscal 2012

Common stock

20,0086,400-

26,408Total

20,0086,400-

26,408Treasury stock(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 sharesFiscal 2013 (from January 1, 2013 to December 31, 2013)
Type and number of treasury stock
Number of shares at
beginning of fiscal
2013

Increase in number ofshares in fiscal 2013

Decrease in number ofshares in fiscal 2013

Number of shares at
end of fiscal 2013

Treasury stock
Common stock

26,4083,014,392-

3,040,800

Total

26,4083,014,392-

3,040,800(Overview of reasons for change)

Purchase of treasury stock approved by the resolution of the Board of Directors
meeting held on February 7, 2013:
Increase in the number of treasury stocks due to the stock split conducted on
July 1, 2013:- 72 -

4,000 shares
3,010,392 shares

(Lease transactions)Fiscal 2012 (from January 1, 2012 to December 31, 2012)
Lease transactions are omitted, since they are of little significance.
Fiscal 2013 (from January 1, 2013 to December 31, 2013)
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
2013: ¥856,270 thousand; shares in affiliates stated on the B/S for fiscal 2013: ¥350,333 thousand;shares in subsidiaries stated on the B/S for fiscal 2012: ¥1,278,537 thousand; shares in affiliates statedon the B/S for fiscal 2012: ¥350,333 thousand) are not stated, because there are no market prices forthem and it is deemed to be extremely difficult to determine their market values.

- 73 -(Tax effect accounting)
1. Breakdown of major causes for deferred tax assets and liabilities
Fiscal 2012
(December 31, 2012)(in thousands of yen)
Fiscal 2013
(December 31, 2013)[Current]
Deferred tax assets
Enterprise tax payable
Provision for office transfer expenses
Provision for quality assurance
Provision for loss on projects
Accrued business office taxes
Write-down of advance payments

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

70,001
65,985
8,170
2,158

Total deferred tax asset

66,926

146,315

485,226
150,460

581,172-

169,626

353,047

95,38471,8003,763
416

10,30786,523(46,166)
416

Subtotal of deferred tax assets
Valuation allowance

976,678(769,935)

985,300(898,842)

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

206,742

86,458

10,12017,947[Non-current]
Deferred tax assets
Stocks of subsidiaries and affiliates
Allowance for investment loss
Excess amount over the maximum allowance for doubtful
accounts
Depreciation excess
Asset retirement obligations
Net unrealized gain on available-for sale securities
Other

Total deferred tax liabilities

10,12017,947

Net deferred tax assets

196,622

68,5102. Breakdown of main causes of difference between the normal effective statutory tax rate andthe rate of income taxes after application of deferred tax accounting

Normal effective statutory tax rate
(Adjustment)
Accumulated earnings tax
Valuation allowance
Earnings excluded from dividends income
Inhabitant tax, flat-rate
Added permanent difference
Effect of change in tax rate
Effect of merger
Effects of liquidating consolidated subsidiaries
Other
Rate of income taxes after application of deferred tax
accounting- 74 -

Fiscal 2012
(December 31, 2012)
40.7%

Fiscal 2013
(December 31, 2013)
38.0%

-%
3.7%
(0.2%)
0.4%
0.7%
0.5%
-%
(2.1%)
-%

2.1%
6.5%
(0.1%)
0.3%
0.3%-%(4.5%)-%(0.1%)

43.7%

42.5%

(Business combinations)
Notes are omitted, because they are stated in ‘Notes to Consolidated Financial Statements (Businesscombination) in the consolidated financial statements.
(Asset retirement obligations)
Of 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 leaseagreements 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 the acquisition and using a discount rate of 0.726% to 1.042%.

c)Increase/decrease in total amount of the relevant asset retirement obligations(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)

Balance at the beginning of the period
Increase due to acquisition of property, plant andequipment
Adjustment due to passage of time
Decrease due to fulfillment of asset retirement
obligations
Other increase (decrease)

195,380

200,668

3,603

52,242

1,684

1,891

-

(12,031)--

Balance at the end of the period

200,668

242,770- 75 -

(Per share data)

Net asset value per share
Net income per share

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

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)¥248.78¥22.97
Fully diluted net income per share isnot stated because the average stock
price during the period is below theexercise price of stock acquisitionrights and hence net income pershare is not diluted.

¥273.08¥38.46
Fully diluted net income per share isnot stated because the average stock
price during the period is below theexercise price of stock acquisitionrights and hence net income pershare is not diluted.

(Notes) 1. Effective July 1, 2013, the Company conducted a 1:100 split of each share of its common stock. Net asset value
per share and net income per share were calculated on the assumption that the stock split was conducted at the
beginning of the previous consolidated fiscal year.
2. Net income per share is calculated based on the following:
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)

Net income per share
Net income (thousands of yen)

1,036,501

1,718,300

Amount not available for commonshareholders to common shares(thousands of yen)--

Net income attributable to commonshares (thousands of yen)

1,036,501

1,718,300

Average outstanding shares ofcommon stock during the period(shares)

45,120,826

44,674,713

Stock options granted by resolutionof the Ordinary General Meeting of
Shareholders on March 24, 2005
(Stock acquisition rights: 755 units)
Common stock
302,000 shares

Stock options granted by resolutionof the Ordinary General Meeting of
Shareholders on March 24, 2005
(Stock acquisition rights: 667 units)
Common stock
266,800shares

Latent shares that have no dilution effectand thus are not included in thecalculation of diluted net income pershare- 76 -

(Significant subsequent events)
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, through absorption on January 1, 2013 in accordance with a resolution of theBoard 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 andmunicipalities. ABM also provided the ABC function of cloud services for financial
institutions, which the Company is promoting. The Company and ABM closely cooperated inits development. Then, the Company concluded a merger agreement with ABM to aggregate
management resources, while further enhancing services for financial institutions by adding theABC package software of ABM to the service lineup of the Company, in addition to theCompany’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 Companies Act, and ABM executed
the merger through procedures for a short form merger provided for in Article
784, Paragraph 1 of the Companies Act, 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 no allotment of shares and capital stock increase as a result of themerger.

d)

Overview of accounting procedures used
The merger was processed as a transaction under common control in accordance with theaccounting 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 toConsolidated Financial Statements (Significant subsequent events)” in the consolidated financial
statements.
Fiscal 2013 (from January 1, 2013 to December 31, 2013)
None- 77 -6.

Other(1) Changes in Directors
None(2) Other
Status of orders received (outstanding contracts)(in thousands of yen)
Fiscal 2012
(from January 1, 2012 to
December 31, 2012)
Orders received

Fiscal 2013
(from January 1, 2013 to
December 31, 2013)

Order backlog

Orders received

Order backlog

IT Consulting Business

17,805,540

6,576,393

19,912,960

6,829,321

Package & Service Business

3,631,162

971,847

4,051,918

1,167,777

New Media & Web Service Business

290,496

12,740439,829

13,870Total

21,727,199

7,560,980

24,404,707

8,010,970(Notes) 1. Business segments were changed in the first nine months of the current consolidated fiscal year under review, andthe amounts for the twelve months of the previous fiscal year were stated based on the new classification ofreportable segments.
2. Orders received include adjustments for exchange rate fluctuations.

- 78 -