Consolidated Summary Report of Operating Resultsfor Fiscal 2011 (Year ended December 2011) [Japan GAAP]
February 7, 2012
Company name:

Future Architect, Inc.

Shares listed on:First Section of Tokyo Stock Exchange

Security code number:

4722

Representative:

Yasufumi Kanemaru, President & CEO

Contact:

Yoshihiko Nakajima, Executive Officer

Website:Scheduled date of annual general shareholders’ meeting:

http://www.future.co.jp

TEL:+81-3-5740-5724

March 22, 2012 Scheduled date for distribution of dividend payments:

March 23, 2012

Scheduled date for filing the securities report: March 23, 2012
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 2011 (January 1, 2011 to December 31, 2011)(1) Consolidated operating results(Percentage figures reflect year-on-year change)
Net sales
Fiscal 2011
Fiscal 2010
Note:

Operating income

Ordinary income

Million yen% change

Million yen% change

Million yen % change

23,292
22,639

2.9
-4.3

2,929
3,141

-6.7
19.9

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

Net income per share(fully diluted)

Net income per share
Yen

Fiscal 2011
Fiscal 2010

3,756
3,485

3,051
3,281
Fiscal 2010:-% change

1,715
1,591

7.8
32.1

-7.0
21.3

1,609 million yen (-%)

Ratio of ordinary
income to total assets

Return on equity

Yen

80
23

Net income
Million yen

Operating profit
margin

%

%

%

15.6
15.6

21.5
24.8

12.6
13.9

(Reference) Profit/loss from equity method investments Fiscal 2011: 22 million yen

Fiscal 2010: 21 million yen(2) Consolidated financial position
Total assets

Net assets

Shareholders’ equity ratio

Net assets per share

Million yen

Million yen

Percent (%)

Yen

14,453
13,931

11,410
10,662

78.9
76.5

24,964. 67
23,349. 47

Cash flows from operating
activities

Cash flows from investing
activities

Cash flows from financing
activities

Cash and cash equivalents
at the end of the period

Million yen

Million yen

Million yen

Million yen

1,919
2,163

(617)
170

(919)
(762)

5,526
5,153

Fiscal 2011
Fiscal 2010
(Reference) Shareholders’ equity
Fiscal 2011: 11,399 million yen
Fiscal 2010: 10,662 million yen(3) Consolidated cash flow position

Fiscal 2011
Fiscal 2010

2. Dividends
Dividends per share (yen)Firstquarter

Secondquarter

Yen

Fiscal 2010
Fiscal 2011
Fiscal 2012 (Forecast)

-

Third
QuarterYen

0.00
750.00750.00Year-end
dividend

Yen-

Annualdividends(Total)

Total

Dividend
payout ratio(consolidated)

Ratio ofdividends to
net assets(consolidated)

Yen

Yen

Million yen%%

1,200.00
750.00750.001,200.00
1,500.00
1,500.00

547
684

34.4
39.9
35.5

5.4
6.2

3. Projected Consolidated Results for Fiscal 2012 (January 1, 2012 to December 31, 2012)
Net salesFirst six months(accumulated
total)
Full year

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

Million yen% change

11,480

-2.4

1,280

-21.5

1,300

-24.0

780

-27.3

1,708. 16

24,800

6.5

3,300

12.6

3,330

9.1

1,930

12.5

4,226. 60

Million yen % change

Million yen % change

Yen4. Other(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)
Note: Presence or absence of changes in specified subsidiaries that involved changes in the scope of consolidation.

(2) Changes in principle, procedure, presentation
a. Changes accompanying revision of accounting standards:
b. Changes other than a: Yes  No
Note:

Yes  NoFor details, please refer to “Changes in Material Information for the Preparation of Consolidated Financial Statements” on page 32
of Attached Materials.

(3) Number of outstanding shares (common stock)a. Total outstanding shares as of the end of theperiod (including treasury stocks)
b. Total treasury stocks as of the end of the periodc. Average number of outstanding stocks during thequarter under review

Fiscal 2011

476,640 sharesFiscal 2010

476,640 sharesFiscal 2011

20,008 sharesFiscal 2010

20,008 sharesFiscal 2011

456,632 sharesFiscal 2010

456,632 shares(Reference) Overview of non-consolidated results
1. Non-consolidated Results for Fiscal 2011 (January 1, 2011 to December 31, 2011)(1) Non-consolidated operating results (Percentage figures reflect year-on-year change)
Net sales

Operating income

Ordinary income

Net income

Million yen%

Million yen%

Million yen%

Million yen%

14,63014,290

2.4
-7.2

2,745
3,039

-9.7
11.5

2,803
3,108

-9.8
12.3

1,547
1,480

4.5
41.5

Fiscal 2011
Fiscal 2010

Net income per share (fully
diluted)Yen
Yen
3,389. 84
3,242. 94-

Net income per share
Fiscal 2011
Fiscal 2010

(2) Non-consolidated financial position
Total assets
Fiscal 2011
Fiscal 2010

Net assets

Shareholders’ equity ratio

Net assets per share

Million yen

Million yen%

Yen

12,997
12,521

11,064
10,511

85.1
83.9

24,229. 93
23,018. 71(Reference) Shareholders’ equity Fiscal 2011: 11,064 million yen Fiscal 2010: 10,511 million yen

2. Projected Non-consolidated Results for Fiscal 2012 (January 1, 2012 to December 31, 2012)(Percentage figures reflect year-on-year change)

First six months(accumulated total)
Full year

Net sales
Million yen

Ordinary income
Million yen
%

%

6,950

-7.4

1,240

15,3004.6

3,060

Net income
Million yen%

Net income per share
Yen

-19.7

700

-21.9

1,532. 96

9.2

1,740

12.4

3,810. 51* Indication of audit procedure implementation status
This earnings report is exempt from audit procedures based upon the Financial Instruments and Exchange Act. At the time of this document’s
release, audit procedures for the financial statements under the Financial Instruments and Exchange Act had not been completed.

* Points to note about the proper use of projections, and other noteworthy events(Points to note regarding descriptions about future, etc.)
The above projection, representing our best estimate based on information currently available to us, incorporates uncertain factors. For details of
the preconditions used in making the above-mentioned forecast and other relevant matters, refer to page 3 of the accompanying material.
(Method of obtaining supplementary materials on operating results and content of materials to be distributed at operating results briefing )The Company plans to hold an operating results briefing on February 9, 2012 for institutional investors and analysts. It plans to make available on
its website the content of presentation materials to be distributed at the briefing immediately after the briefing.

 Contents
1.

2.
3.

4.

5.

6.

Operating Results ........................................................................................................................................................................................................2(1) Analysis of operating results .............................................................................................................................................................................2(2) Analysis of financial condition ..........................................................................................................................................................................4(3) Dividend policy and dividends for the current and next year ...........................................................................................................................4(4) Business risks .....................................................................................................................................................................................................5
The Future Group ......................................................................................................................................................................................................10
Management Policy ...................................................................................................................................................................................................14(1) Basic corporate tenets ......................................................................................................................................................................................14(2) Goals and objectives ........................................................................................................................................................................................14(3) Medium to long-term management strategies .................................................................................................................................................14(4) Issues the Company faces ................................................................................................................................................................................16
Consolidated Financial Statements ...........................................................................................................................................................................17(1) Consolidated balance sheets ............................................................................................................................................................................17(2) Consolidated statements of income and comprehensive income ....................................................................................................................19(3) Consolidated Statements of Changes in Shareholders’ Equity .......................................................................................................................21(4) Consolidated statements of cash flows ............................................................................................................................................................23(5) Notes regarding premise of surviving company .............................................................................................................................................25(6) Significant Accounting Policies Regarding the Preparation of Consolidated Financial Statements ..............................................................26(7) Changes in Material Information for the Preparation of Consolidated Financial Statements ........................................................................32(8) Change in classification ...................................................................................................................................................................................33(10) Notes to consolidated financial statements .....................................................................................................................................................35(Notes to consolidated balance sheet)(in thousands of yen) .................................................................................................................... 35(Notes to consolidated statements of income and comprehensive income)(in thousands of yen) ....................................................... 35(Statements of changes in shareholders' equity)............................................................................................................................................. 37(Notes regarding consolidated statements of cash flows) (in thousands of yen) ...................................................................................... 39(Segment information) .................................................................................................................................................................................... 40(Lease transactions) ........................................................................................................................................................................................ 44(Related party information) ............................................................................................................................................................................ 45(Tax effect accounting) ................................................................................................................................................................................... 45(Financial instruments) ................................................................................................................................................................................... 47(Securities) ...................................................................................................................................................................................................... 53(Derivative transactions)................................................................................................................................................................................. 55(Retirement benefits) ...................................................................................................................................................................................... 55(Stock options) ................................................................................................................................................................................................ 56(Business combinations) ................................................................................................................................................................................. 58(Transactions, etc. under common control) .................................................................................................................................................... 60(Asset retirement obligations) ........................................................................................................................................................................ 61(Real estate, including lease) .......................................................................................................................................................................... 61(Special purpose company subject to disclosure) .......................................................................................................................................... 61(Per share data) ............................................................................................................................................................................................... 61(Significant subsequent events) ...................................................................................................................................................................... 62
Non-consolidated Financial Statements ....................................................................................................................................................................63(1) Balance sheets ..................................................................................................................................................................................................63(2) Non-consolidated statements of income ..........................................................................................................................................................65(3) Statements of changes in net assets .................................................................................................................................................................70(4) Notes regarding the premise of a going concern .............................................................................................................................................72(5) Significant Accounting Policies ......................................................................................................................................................................73(6) Change in accounting principles......................................................................................................................................................................76(7) Change in classification ................................................................................................................................................................................76(Notes regarding balance sheets) .................................................................................................................................................................... 77(Notes regarding consolidated statements of income) ................................................................................................................................... 77(Type and number of treasury shares) ............................................................................................................................................................ 79(Lease transactions) ........................................................................................................................................................................................ 79(Securities) ...................................................................................................................................................................................................... 79(Tax effect accounting) ................................................................................................................................................................................... 80(Business combination) .................................................................................................................................................................................. 81(Asset retirement obligations) ........................................................................................................................................................................ 82(Per share data) ............................................................................................................................................................................................... 82(Significant subsequent events) ...................................................................................................................................................................... 83
Other ..........................................................................................................................................................................................................................84(1) Changes in Directors........................................................................................................................................................................................84(2) Other ................................................................................................................................................................................................................84-1-

1. Operating Results(1) Analysis of operating results(Overview of fiscal year under review)
During the fiscal year under review in Japan, uncertainty over the course of the Japanese economy grew due to the advance inthe appreciation of the yen and deceleration of the foreign economy, originating in the European debt issue, although there was atendency of recovery from the economic slowdown resulting from the Great East Japan Earthquake, which caused unprecedented
human and physical damages, thanks to restoration demand and other factors.
In the IT service industry, to which the Group belongs, a full-scale recovery is yet to come despite some signs of recovery ofcapital investment on IT, which leads to improved management efficiency and cost reductions. Hence, the IT service industry as awhole is facing a harsh business environment.
Under these circumstances, the Group’s consolidated operating results for fiscal 2011 were as follows:
Net sales¥23,292 million (up 2.9% year-on-year)

Operating income ¥2,929 million (down 6.7% year-on-year)
Ordinary income¥3,051 million (down 7.0% year-on-year)

Net income¥1,715 million (up 7.8% year-on-year)

The Group achieved the largest net income since its foundation.
The operating results by business segment are as follows. The operating results by business segment represent values before
adjustment for internal sales or transfers among segments. With the application of the “Accounting Standard for Segment
Information Disclosures,” segmentation has been partially changed. Hence, a year-on-year comparison was made using figures
for the previous fiscal year, calculated on the basis of a reclassification of business segment.
1. IT Consulting Business
Many projects, including major large projects, achieved their delivery dates and started operation smoothly due to ourefforts to enhance project management and rationalize the quality management structure. We also won orders from newclients, which could become core clients in the future, and those projects have already started. At the same time, we pushedforward with activities for future business expansion, including acquisition of value-added operation and maintenanceprojects (VAO) and projects to introduce ERP to enterprises (major corporations), as well as development of cloud services
for financial institutions. Furthermore, to expand the IT consulting business in the Southeast Asian region, we established abridgehead by setting up a new company, North Consulting Group Pte. Ltd., in Singapore, making Brightree Solutions Sdn
Bhd. of Malaysia a subsidiary, and purchasing a Thai company.
On the other hand, we focused on ensuring business continuity in an emergency, including natural disasters. Specifically,
we divided our data center into two—one located in eastern Japan and the other in western Japan—and started their strategic
distributed use; we also began renting an office building equipped with a non-utility generation facility, in addition to theexisting telecommuting environment.
Consequently, net sales increased 4.9% from the previous fiscal year to ¥14,619 million, while operating income
decreased 14.7% year-on-year to ¥2,570 million. The operating profit margin was maintained at a high level of 17.6%.
2. Package & Service Business
FutureOne, Inc. saw its sales grow significantly in the fourth quarter as a result of integrating software package
businesses targeting small and mid-size companies, which had been dispersed within the group, promoting direct marketingfor users, and consolidating functions in the “FUTUREONE” comprehensive brand series. Ascendia Inc. received orders
smoothly throughout the year, and sales of public projects and of operation and maintenance services provided in cooperation
with the Company increased steadily.
Consequently, net sales were ¥4,497 million, up 1.8% from a year earlier, and operating income was ¥333 million, up
95.7%.
3. Corporate Revitalization BusinessUoei Shoten Corporation, which operates a supermarket, further increased its gross profit margin to 23.4% from 22.5% in
the previous year due to the efficient application of IT, including introduction of automatic order placement and EDI systems,
which it had promoted, and squeezed selling and administrative expenses through an efficient advertising strategy. As a result,net sales were ¥4,553 million, up 1.5%, and operating income was ¥31 million, compared to an operating loss of ¥15 million
in the previous fiscal year. The business segment was profitable on a full-year basis for the first time since it joined theGroup.

-2-

(Outlook for the next fiscal year)
While restoration and reconstruction demand is expected to support the Japanese economy in the future, the outlook is
uncertain, as exemplified by the possibility of a deceleration of the global economy and the further appreciation of the yen,and depends on the status of the European sovereign debt crisis. On the other hand, in the IT service market, while an overalltendency to control IT investment is expected to continue due to uncertainty over the economy, the need for companies todifferentiate themselves from each other remains robust, and demand for cost reductions using cloud computing andimproving the efficiency of operations and maintenance continues to be strong. Under these circumstances, our earnings
forecast for the fiscal year ending December 2012 is as follows:
Consolidated net sales¥24,800 million (up 6.5% year-on-year)

Consolidated operating income¥3,300 million (up 12.6% year-on-year)

Consolidated ordinary income¥3,330 million (up 9.1% year-on-year)

Consolidated net income¥1,930 million (up 12.5% year-on-year)

The noteworthy events for the following fiscal year are as follows:(1) IT Consulting Business
The Group will work to achieve the dual goals of increasing the responsiveness of management through distributed
real-time processing technology, which is a strength of the Group, and achieving cost reductions through downsizing. The
Group will also further expand various new cloud services, such as those for the information systems of financial institutions,high-value-added operation and maintenance service (value added outsourcing (VAO)), and ERP for enterprises (major
corporations). Furthermore, the Group reorganized functions under each division in January 2012 to provide more
professional and detailed IT consulting services. Through the reorganization, the Group will further deepen relationships withexisting clients, enhance its capability of providing proposals for new customers, and strengthen project management.
Meanwhile, in Southeast Asia, the Group will expand marketing activities that have already been launched, centering on
the introduction of ERP. Furthermore, the Group plans to support the use of IT by Japanese companies entering the Asian
region.
(2) Package & Service Business
FutureOne, Inc. will work to acquire projects with mid-standing corporations, which are relatively large in scale, byleveraging proposals for packages after understanding the businesses of clients, which is its strength, while continuing toenhance direct marketing and develop new sales channels. In addition, Future Architect further strengthen its cooperative
structure with Group companies concerning further quality improvements to delivery services, development of next package
products, and development of cloud services. Ascendia Inc. will display the effects of cooperating within the Group in
operation and maintenance services and consigned development of systems, in which it has expertise.
(3) Corporate Revitalization Business
Regarding the Corporate Revitalization Business, the Group will work to raise customer satisfaction and expand sales of
Uoei Shoten Corporation by enhancing its customer analysis capability through the use of point cards, while proceeding witha further rationalization of inventory management using IT more extensively.

-3-(2) Analysis of financial condition
1. Assets, liabilities and net assets
The following are the status of assets, liabilities and net assets as of the end of fiscal year under review.
Assets¥14,453 million (up 3.7% year-on-year)

Liabilities¥3,042 million (down 6.9% year-on-year)

Net assets¥11,410 million (up 7.0% year-on-year)

The following is the analysis of financial condition for the fiscal year under review.
1) Assets
Current assets were ¥10,529 million on a consolidated basis at the end of the fiscal year under review, up ¥255 million
from the end of the previous consolidated fiscal year, and fixed assets amounted to ¥3,924 million, up ¥266 million from thepreceding year, with total assets standing at ¥14,453 million, up ¥521 million. The main factors were increases in short-term
investment securities (an increase of ¥701 million from the end of the previous consolidated fiscal year), a rise in software(an increase of ¥207 million from the end of the previous consolidated fiscal year), and goodwill (an increase of ¥145 million
from the end of the previous consolidated fiscal year), despite a decline in investment securities (a decrease of ¥254 million
from the end of the previous consolidated fiscal year).
For the breakdown of increase in cash and deposits, please see “2. Analysis of cash flows.”(2) Liabilities
Current liabilities amounted to ¥2,716 million at the end of the fiscal year under review, down ¥454 million from a year
earlier, and noncurrent liabilities were ¥326 million, up ¥227 million from the preceding year, which brought total liabilities
to ¥3,042 million, down ¥227 million from the previous year. The main factors included a decrease in income tax payable (adecrease of ¥290 million from the end of the previous consolidated fiscal year) and a decline in accounts payable-other (adecrease of ¥39 million from the end of the previous consolidated fiscal year) despite a rise in asset retirement obligations (anincrease of ¥309 million from the end of the previous consolidated fiscal year).
(3) Net assets
Net assets were ¥11,410 million at the end of the fiscal year under review, up ¥748 million from the preceding year. The
main factors included an increase of retained earnings (an increase of ¥825 million from the end of previous consolidated
fiscal year).
2. Analysis of cash flows
The following is the analysis of the Group’s consolidated cash flows for the fiscal year under review.
(1) Cash flows from operating activities
Net cash inflow from operating activities was ¥1,919 million (compared with an inflow of ¥2,163 million in the previous
fiscal year), primarily due to the posting of net income before taxes of ¥2,910 million and an income taxes payment of ¥1,420
million.
(2) Cash flows from investing activities
Net cash outflow from investing activities totaled ¥617 million (compared to an inflow of ¥170 million in the previous
fiscal year), chiefly due to purchase of investment securities of ¥199 million and purchases of tangible fixed assets andacquisition of intangible fixed assets of ¥431 million.
(3) Cash flows from financing activities
Net cash outflow from financing activities was ¥919 million (compared with an outflow of ¥762 million in the previous
fiscal year), mainly due to a cash dividends paid of ¥887 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 ¥5,526 million, because of anincrease of ¥373 million in cash and cash equivalents, the result of calculating cash flows from operating, investing andfinancing activities.

(3) Dividend policy and dividends for the current and next year
The Company seeks to maximize medium-term total returns (capital and income gains) to our shareholders. In order toachieve this goal, we will pay a dividend of surplus, targeting a dividend payout ratio on a non-consolidated basis of 30% or moreof earnings, by comprehensively taking into consideration a proper balance between dividend payout and the status of period
profit and loss and cash flows for the term, as well as purchases of treasury shares, after ensuring internal reserves needed for-4-

important investments, aimed at enhancing R&D activities to ensure medium-term technological superiority; attracting andtraining personnel; implementing measures for strengthening project management; and enhancing M&A activities and alliances.
Dividend of surplus for the fiscal year under review is in accordance with the aforementioned policy. Starting from the fiscal
year under review, the Company paid an interim dividend of ¥750 per share to increase opportunities for distributions toshareholders. Dividend payment for the full year is ¥1,500 per share when a planned year-end dividend of ¥750 is added. As aresult, the dividend payout ratio on a consolidated basis is 39.9% and that on a non-consolidated basis will be 44.2%.
The Company’s planned dividend payment for the next fiscal year is ¥1,500 per share (of which, interim dividend is ¥750),
and this would represent a dividend payout ratio of 35.5% on a consolidated basis and that of 39.4% on a non-consolidated basis.

(4) Business risks
The followings are major factors that could cause risks in association with the Group’s businesses as well as other parties,
and thus could have a significant impact on investors’ decisions.
The factors described need not necessarily be regarded as risk factors, but the Group deemed them as important for investors
who are considering investing, and also useful in terms of proactive information disclosure to investors. Given the possibility ofthese risks, the Group will strive to prevent them from occurring and respond to them in the event they occur.
The forecasts referred to in the text are based on the Group’s judgment as of February 7, 2012.
1) Economic conditions and business climate
While restoration and reconstruction demand is expected to support the Japanese economy, the outlook for the Japanese
economy is assumed to be unclear since business could slow down due to deceleration of foreign economy and advance inthe appreciation of the yen, depending on the status of the European debt issue.
At major corporations, which are main clients of the IT Consulting Business, IT investments are also indispensable,
including investments aimed at quickly and efficiently coping with changes in the business environment and those fordownsizing and use of cloud services in order to reduce IT cost. However, the Group may be affected by a decrease in theamount of investment in IT as a whole, reflecting uncertainty over the economic situation.
Also, it is effective for small and midsize companies, which are principle clients of the Package & Service Business, touse solutions based on inexpensive and highly versatile software packages to improve the efficiency of their operations. Useof IT, including use of cloud services, is expected to increase in the future among these companies. However, the amount of
IT investments by small and midsize companies may decline, since they may be affected by business trends more greatly thanmajor corporations.
As described above, the Group will strive to further increase its competitive edge by pushing forward with measures thatare most suitable for needs of each client. However, it is likely that corporate investments will slow due to the economic
trends, and orders will decrease. Hence, we need to make preparations so that we will be able to better respond to such asituation.
In the Corporate Revitalization Business, the Group provides services that closely meet the needs of local clients.
However, operational results might be influenced by such external factors as economic trends, heightened price competition,and substantial price fluctuations of perishables due to abnormal weather and rumors.
2) Staying abreast of technological innovation
Ever since its establishment, the IT Consulting Business of the Group has endeavored to specialize in open systems that
do not rely on specific products, by using cutting-edge IT and network technologies. Independent of any vendors, the Group
strives to select the optimal products for clients, but the options of hardware, middleware, etc. may narrow as some vendors
drop out due to the excessively harsh competition.
Thus, the Group needs to raise and maintain its competitiveness by putting its efforts and resources into the research andintroduction of cutting-edge technologies, centering on IT. To this end, the Group is always gathering the latest information
on software and hardware, with the core technology division at the helm. In the Package & Service Business, the Group is
gradually upgrading software packages by making existing ones compatible with and developing next-generation products sothat our software packages stay abreast of new technologies.
In addition, the selection and operation environment of hardware for applications at client companies has changed
significantly in recent years due to innovations related to cloud computing technologies. The Group is responding quickly tosuch changes by introducing cloud computing to accumulated technologies and solutions, and further enhancing research anddevelopment.
However, should the Group not manage to fully keep abreast of new technologies, its competitiveness may decline
leading to fewer orders being received.

-5-3) R&D activities
In recent years, the economic climate that our clients find themselves in has been dramatically changing and the rate ofprogress in IT has been increasing, causing the information systems of our clients to become obsolete more quickly.
Therefore, it is crucial for the Group to develop advanced systems in shorter time spans, while taking future trends into fullaccount. Against this backdrop, the Group is making the most of various components and development support tools.
Such components and development support tools have enabled the Group to significantly improve system quality andproductivity in actual systems development. However, the technological evolution of IT is rapid and client needs are
becoming more sophisticated and complicated.
To respond to such needs, it is important for the Group to continue to incorporate new technical elements into thesecomponents and development support tools so that it can develop high-quality systems more promptly; improve processing
performance through decentralization; facilitate the system maintenance through centralized management; and standardize
interfaces to enable smooth interconnectivity with other systems.
The Group also needs to expand the range of industry-specific platform models, in order to effectively and efficiently
leverage the know-how it has accumulated.
In the Package & Service Business, when customizing packages to suit clients’ needs, the Group uses templates bybusiness type and additional libraries prepared in advance, aiming to offer high-quality products and deliver them in a shorttime, and is constantly adding variations to these templates and libraries.
Furthermore, the Group is promoting research and development for introduction of cloud computing to various solutions,
including financial, CRM, and ERP packages, and implementing cloud computing.
In the future, the Group will continue to focus on such research and development. The Group will further make efforts toobtain able personnel who proceed with such R&D. However, there is a possibility that the Group may fail to recruit such
persons or that the R&D activities do not fare as well as expected, which would have an adverse effect on the Group’s
competitive edge.
4) Recruitment and training
The Group understands that recruiting excellent personnel and training them are the most important tasks for thedevelopment of the Group’s businesses. To this end, the Group develops various employment activities and focuses on
training and education. In the fiscal year under review, recruitment and training expenses amounted to ¥198 million and ¥60
million, respectively. The Group intends to continue to attach importance to personnel acquisition and training. However,should these efforts prove unsuccessful the Group’s growth potential would be hampered.
Moreover, increases in the number of employees result in higher fixed labor costs, creating downward pressure on
performance when the Group fails to receive orders sufficient to cover those increases in fixed costs.
5) Strengthening relations with partners
The Group is committed to the acquisition and training of talented staff as a corporate resource. However, in response to
the demand of each phase of a given project, we also think it is crucial to obtain appropriate external partners in a timely
manner. Consequently, the Group is endeavoring to strengthen its alliance with business partners and create corporate
structures that will serve the Group flexibly in the expansion of the scale of its business. In order to raise productivity and thequality of the Group’s system development, training is provided on the Group’s proprietary design and development methods
for partners who support Group management policies.
However, as the Group’s degree of dependence on partners increases, there is a possibility that additional costs may be
incurred which were not foreseen at the time of the concluding of contracts, due to the delay in bringing service quality to alevel that fully satisfies customers, or a possibility that projects may be delayed as no partners who agree to the management
policies of the Group are found.
6) Project management
There is no doubt that project management is required for every project. Accordingly, project control is one of the key
issues for the Group to tackle.
To enhance its project control, the IT Consulting Business of the Group is strengthening and strictly operating a projectreview system through engineers experienced in quality control.
The Group is also integrating, expanding and evolving present standard project promotion methods, while establishing
and adopting quality control techniques consistent with global standards in model configuration. In addition, the Group ismaking great efforts to share knowledge concerning IT and to focus on education and training in project management, whilesolving bugs and thoroughly managing progress in projects using a new project information sharing system.

-6-

In the Package & Service Business, although most projects are small and relatively easy to control, the Group is working
to improve quality management by increasing the number of persons in charge of reviews and through other measures
because the number of orders received for larger projects is increasing.
As seen above, the Group is continuing to strengthen quality control and project management. However, as it is
impossible to completely eliminate risks associated with projects, unless the Group’s project management functions
satisfactorily, the profitability of projects may deteriorate.
7) Dependence on specific clientsThe IT Consulting Business of the Group may come to rely heavily on sales to specific clients for a time, whenlarge-scale projects enter the development phase and a significant portion of human resources within (and outside) the Group
has to be allocated to such projects.
While the method of receiving orders in installments allows the Group to at least temporarily refrain from proceeding to
the next phase of a project if a client fails to make timely payment (or when its credit standing deteriorates), the Group could
nevertheless be affected by the financial performance and/or IT investment policy of specific clients.
8) Expanding scale of projects
The average size of clients’ operations is growing. In addition, needs for projects involving the comprehensive rebuildingof both information and mission-critical systems (large-scale downsizing projects) with open system technologies isincreasing and such projects are beginning to occupy a greater share of the Group’s total sales.
As a result, the scale of projects undertaken by the Group is growing. To pilot these large-scale projects to success andensure complete client satisfaction, a high level of project management skill is required.
The Group assigns highly experienced project leaders to such large-scale projects. As the project progresses, at each
important milestone, the project review team composed of personnel in charge of their specialized areas meet to identify
potential problems at an early stage and to ensure timely implementation of necessary countermeasures. However, as projects
grow in scale, so inevitably do the potential risks. To achieve quality standards that will fully satisfy the clients, additionalcosts may be incurred that were not foreseeable at the time the contract was concluded. Furthermore, it may at times become
necessary to revise the delivery schedule owing to various factors such as a change in specifications, which could affect sales
and profits for an entire fiscal period.
Once a large-scale project is completed, the large number of consultants previously assigned to the projects need to bereassigned to other projects. Because of the number of consultants involved, they may not be reassigned to other projects intimely manner, which could have adverse effects on sales and profits for a fiscal period.
The Group is making the utmost effort to maintain quality of service and to meet delivery commitments, in order toensure that clients do not suffer losses through any service offered by the Group. While maximum damages payable to clientsare stated in the contracts, if a client claims for damages or makes a complaint about a transaction or project, the Group may
incur legal expenses, damages or other expenditures affecting the corporate resources.
9) Reserve for quality assurance and provision for loss on project
The Group may provide its clients with free services that were unforeseeable at the time of concluding contracts or at theclose of the accounting period, in order to guarantee the quality of its product so that customers will be completely satisfied.
Although this enhances customer confidence in the Group and their evaluation of it, if the project management malfunctions,the project has to be extended or additional personnel have to be allocated because of an unexpected problem or adiscrepancy between the estimated number of man-hours worked and the actual number worked, then there is a possibility
that the group will be liable for the costs involved.
To cope with the risk of additional costs after the end of projects, which is among the risks mentioned above, the Grouphas established a reserve for quality assurance, stating an amount for future costs based on estimates calculated from pastexperience. For the fiscal year under review, the Group set aside ¥65 million as a reserve, considering this amount sufficient
to meet potential future payments.
For specific ongoing projects for which a loss is expected to occur, the Group has established a provision for loss on
projects, stating an amount for future loss based on estimates calculated reasonably. For the fiscal year under review, theGroup set aside ¥4 million as provision.
The possibility remains that actual payments may exceed this amount if there are extenuating circumstances.
10) Fixed assets
In the Corporate Revitalization Business, the Group operates retail stores. If the business environment changes
significantly because of such factors as competitors establishing large stores in their marketing areas, the Group may post-7-

impairment losses on buildings of specific stores, etc. and its earnings may affected.
11) Prior investments in assets
The Group develops software for internal use to improve information available for business management and to make its
operations more efficient. Software for in-house use may be stated in assets, with the expectation that costs decrease due toimprovement in operational efficiency, but the value of software can decline if specific functions should rapidly become
obsolete due to changes in technological trends and drastic operational changes.
The Group is also engaged in developing software to provide cloud services to clients in a variety of business categories,
including the financial sector, and as well as various software packages. The Group may state these software packages asassets by making reasonable assessments of future orders and sales. However, the Group may fail to fully recoup its
investments because of unforeseen abrupt changes in market conditions and changes in technical trends. In addition, underthe business model, prior investments are made for software development, and software is sold and introduced after thecompletion of development. Accordingly, if a sales plan does not work smoothly, fundraising may become difficult and theGroup’s financial condition might be affected.
In the Corporate Revitalization Business, the Group purchases land and buildings, arranges the interiors and procures
goods, before selling them. Hence, before establishing stores and procuring goods, the Group carefully conducts marketing
research. However, unless sales targets are achieved satisfactorily, it will become difficult to secure operating funds, and theGroup’s financial conditions may be affected.
12) Hygiene management
Consumers are increasing their awareness about food safety, as seen in the publicized cases of food whose place of origin
and ingredients have been mislabeled. Under such circumstances, the Group, whose Corporate Revitalization Business deals
with food, makes great efforts to secure high-quality foods and thoroughly manage safety and hygiene, while emphasizing
food safety more than ever. However, if problems occur relating to the safety of goods, such as food poisoning, and an
unexpected situation breaks out, such as BSE issue, avian influenza or a norovirus, the Group’s earnings may be affected.
13) Information security
In the course of undertaking transactions, the Group comes to know various top-secret information of its clients, ranging
from technical to management information.
Accordingly, the Group regards “information management” as a key managerial issue, and formulates measures against
the leakage of such top secret information considering from various perspectives. The measures include: the establishment of
a security committee to maintain and strengthen the information management system within the Group; and promotion ofactivities to enlighten and educate the Group’s employees on information management as well as enhancing their awarenessfor this issue. However, in the event of the leakage of a client’s confidential information, the Group may face lawsuits and theclient in question will be lost to us. The result may seriously affect the Group’s earnings.
Moreover, the Group is endeavoring to strengthen its entire system for protecting personal information. To this end, it has
set up a special project, which is tasked to familiarize every officer and employee with the importance of personal
information through enlightenment activities. The Group has acquired Japan’s “Privacy Mark,” a sign of quasi-official
acknowledgment that the holder properly manages personal information, and the Company has obtained ISO 27001:2005
Certification Standard for Information Security Management System (ISMS Certification).
14) Strategic investments
The Group may make investments in securities taking business relationships and the prospect of possible future
partnerships into consideration. There is a risk that it would sustain losses equivalent to the entire investment in such a
company, because of such a firm’s major business failure. Furthermore, depending on operating performance of the firms inwhich the Group invests, the Group earnings may be affected as a result of the statutory requirement to devalue its investmentin the firms.
15) Lawsuits, etc.
The Company initiated legal action in November 2009 relating to the payment of contract fees, etc., against NITTO
DENKO CORPORATION, and the case is still pending in the Tokyo District Court. Also, NITTO DENKO CORPORATION
brought a counterclaim against the Company in December 2011.
There also is a possibility that lawsuits or disputes will occur between the Company and the targets of investment andloans, business partners, suppliers, and other parties as the Group operates its business. At this time, we cannot foresee thefinal judgment that will be passed by courts concerning the lawsuit currently under trial and cases of lawsuits that could occur
in the future. However, the details and results of these lawsuits may seriously affect the Group’s earnings and performance.
-8-

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

-9-2. The Future GroupThe Group (the parent and related companies) consists of 14 consolidated subsidiaries and 4 equity-method affiliates, andoperates three main businesses, the IT Consulting Business, the Package & Service Business, and the Corporate Revitalization
Business. Business activities, involved major companies and relationships with business segment are as follow. The classificationis the same as segmentation.
(IT Consulting Business)
In this business, the Group helps clients solve problems, by sharing management issues with them from a managerial
perspective, understanding the essence of the clients’ businesses and establishing information systems for them using advanced
IT.
Company name
Future Architect, Inc. (Parent company)

ABM Corporation (subsidiary)Business activities
Using its advanced information technology, Future Architect, Inc.
offers IT consulting, hardware and other procurement services from an
objective and independent position. The Company also functions ascorporate headquarters for the Group.
Development and sales of managerial accounting packages and related
consulting

North Consulting Group Pte. Ltd. (subsidiary) (new)Introduction of ERP and provision of consulting services in Southeast
Asia, including Singapore

Brightree Solutions Sdn Bhd. (subsidiary) (new)Introduction, customization, and operation and maintenance of ERP in
Malaysia

ELECTRA (T) LTD. (subsidiary) (new) *1

Introduction, customization, and operation and maintenance of ERP in
Thailand(Package & Service Business)
In this business, the Group helps clients improve their operational efficiency, by selling or providing via ASP operations
software packages for highly specialized fields, such as sales management and ERP, and developing mission-critical systems on acommission basis.
Company nameBusiness activities

FutureOne, Inc. (subsidiary)

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

Ascendia Inc. (subsidiary)

Development of systems based on Java and Web technologies,
personnel training, sales of systems for e-Government and development
tools(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

Of affiliated companies engaged in businesses that are not included in the three businesses mentioned above, such as
Internet-related businesses and securities investment, holding and management, the main companies are as follows:
Company nameBusiness activities
Zakura Inc. (subsidiary) *2
Future Investment Corp. (subsidiary)
dit Co., Ltd. (affiliate)
Cyber Solution, Inc. (affiliate)
Elmos Inc. (affiliate)

Internet media business and provision of information system consulting
serviceSecurities holding, management and investment
Development and sales of security network products and development
and provision of such services
Establishment of ASP service systems and corporate information
system bases, and provision of operations planning and management
services
General printing, and sales of office fixtures, OA (office automation)
supplies, OA equipment, POS systems, etc.

*1 ELECTRA (T) LTD. changed its trade name to North Consulting Group (Thailand) CO., LTD. as of January 6, 2012.
*2 Zakura Inc. changed its trade name to Tokyo Calendar Inc. as of February 1, 2012.

-10-

Investment

Contracting/servies
Services[Consolidated Subsidiaries (domestic)]
Uoei Shoten Corporation[Equity-method investment (Domestic subsidiary)]
dit Co., Ltd.
[Equity-method investment (Domestic subsidiary)]
Cyber Solution, Inc.
[Equity-method investment (Domestic subsidiary)]
Elmos Inc.

-11-

Investment
Contracting/servies
Services[Consolidated Subsidiaries (domestic)]
Zakura Inc

Sales ofproducts

Sales ofproducts

Provision ofservices andsales of products

Investment[Consolidated subsidiaries (Domestic)]
Future Investment Corp.

Future Architect, Inc.

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

Investment

Consumers
Investment
targets[Consolidated subsidiary (Domestic)]
FutureOne, Inc.

Provision ofservices andsales ofproducts

Services
Provision ofservices salesof products,
etc.

[Consolidated subsidiary (Domestic)]
ABM Corporation

Provision of services, sales of
products, etc.

[Consolidated subsidiary (Abroad)]
North Consulting Group Pte. Ltd.(Singapore)
ELECTRA (T) LTD. (Thailand)
Brightree Solution Sdn Bhd. (Malaysia)

Costomers/Consumers
Costomers

Corporate Revitalization
Business

Package & Service Business

CLIENTSIT Consulting Business<Business System Diagram>Affiliated companies(1) Consolidated subsidiaries
Relationship

Name

Location

Capital(in thousands ofyen)Interlocking directors
Main businessactivities

Voting rightratio (%)

NumberNumberofofcompany company
directors employees

Monetary
assistanceBusiness transactions

1

Provision of the license
2 Fund lending for ABC cost accounting
packages1

1 NoneNone

51.0(51.0)-- NoneNone

245
IT Consulting(100 thousand
Business
baht)

100.0
(100.0)-- NoneNone

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

100.0
(100.0)-- NoneNone

Package & Service
Business

100.0

1

2 NoneProvision of the license
for sales management
packages

Package & Service
Business

100.0-

3 Fund lending

Receipt of services fordevelopment

Corporate
198,000 Revitalization
Business

100.0(100.0)-1 NoneNone

Shinagawa-ku,
Tokyo

50,000 Other

100.0(100.0)1

1 Fund lending

Receipt of services fordevelopment

Future Investment Corp.

Shinagawa-ku,
Tokyo

10,000 Other

100.0

2

1 Fund lending None

RI Partners Limited
Liability Association

Shinagawa-ku,
Tokyo

348,000 Other

100.0(100.0)-- NoneNone

Future Architect,Inc.

CALIFORNIA,
U.S.A.

11
Other(US$ 100)

100.0

3

- NoneNone

Future Global Pte. Ltd.

SINGAPORE,
SINGAPORE

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

100.0

3

- Fund lending None

Associant Technology
Inc.

Oita-shi, Oita

273,475 Other

100.0

1

1 None

ABM Corporation

Shinagawa-ku,
Tokyo

80,000

North Consulting

SINGAPORE,

100,350

Group Pte. Ltd.

SINGAPORE

Brightree Solutions Sdn
Bhd.

PETALING
JAYA,
MALAYSIA

2,409
IT Consulting(100 thousand
Businessringgit)Siam NCG Holdings
Co., LTD.

BANGKOK,THAILANDELECTRA (T) LTD.

BANGKOK,THAILAND

FutureOne, Inc.

Shinagawa-ku,
Tokyo

200,000

Ascendia Inc.

Oita-shi, Oita

83,700Uoei Shoten
Corporation

Minami-ku,
NiigataZakura Inc.

Notes: 1.
2.

IT Consulting
Business

100.0
100.0

IT Consulting(US$ 1,250 Businessthousand)(100.0)None

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

3.

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

4.

Figures in the parentheses in “Voting right ratio” represent an indirectly owned ratio and are included in the figures above theparentheses.

5.

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

6.

Only transactions directly conducted with the Company are stated in “Monetary assistance” and “Business transactions.”-12-

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

Location

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

Notes: 1.
2.

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

Capital (inthousands of yen)

Main businessactivities

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

428,745 Other

47.9
47.9
(47.9)
40.0(40.0)
20.0(20.0)

310,000 Other
10,000 Other
17,000 Other

Monetary
assistanceBusiness transactions

1- NoneReceipt of services for
network consulting

1- NoneNone-- None-- NonePurchase of OA
equipment and fixtures
Receipt of services fordevelopment

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

-13-3. Management Policy(1) Basic corporate tenets
The mission of the Company is to raise future value of client companies and society by providing the proper state in whichbusiness should be and an optimal mechanism to realize it by proactively taking in cutting-edge IT technologies, with a view topromising the greatest success to clients. We understand that endless pursuit of optimum and taking up the challenge of achieving
optimum to realize our mission is the service we provide and the starting point of ourselves. In addition, we are striving to makeall employees share and understand the basic tenets of the Company by establishing the following corporate philosophies.
(Corporate philosophies) We love science and technology and contribute to corporate and social changes. Also, We continue to change ourselves.
 We will not be fearful of or daunted by ““being insufficient,”” and try to change impossibility to possibility using our own
ingenuity and enthusiasm.
 We continue to have a desire to improve ourselves and attach importance to the enhancement of individual capability throughconstant hart study as well as understand the limit of power of individuals and resolve even greater challenges by organicallycombining power of colleagues.
 We conduct warmhearted and humorous organization operation, which features courtesy and behavior according to time,
place and opportunity though it is based on merits and results.
 We will not be arrogant when we have a pleasant time, and we will never forget hope when we have a bad time.
 We learn from history, strive to deepen mutual understanding and engage in international exchanges and cooperation.
Basic policies of each business segment are as follows:
1) IT Consulting Business
The Company believes that business reform can be realized only when we focus on three domains of management,
business and systems, not merely aiming at realization of functions by IT. To that end, the Group has maintained a neutral
position, independent of any hardware vendors or software vendors, and has been pursuing optimization by specializing inopen systems ever since its establishment while proceeding with establishment of methodology, which enables it to provide
high-quality and high-speed services that draw out maximum performance, and various kinds of standardization.
We also aim to improve customer satisfaction by providing integrated services, which cover consulting phase, design ofsystems, development of application software, selection and procurement of hardware and software products and educationand operation phases, giving a concrete form to the results of consulting as systems, not merely presenting such results as aconcept, and offering them for actual use by clients to enable them to actually feel such results as the fruit of business.
2) Package & Service BusinessWe fully meet the needs of small and midsize companies, which are our major clients in the Package & Service Business,by not only providing IT systems that support businesses of the client at a lower cost and in a shorter installation period in
accordance with the needs of small and midsize companies by making the most of successful cases, know-how and IT asset
the Company has accumulated through provision of services to large client companies, but also customizing these software
packages according to the client’s business type and market. We are also offering cutting-edge functions, such as
visualization of internal control and work, as standards.
3) Corporate Revitalization Business
The Group will strive to revitalize subject companies by fully using strategic and technological experience in the
distribution industry it has accumulated so far, with use of IT as the core, and sublimate the results obtained throughoperation of the business into IT systems that can be used generally in the same business category, so that they can be applied
to other businesses.

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

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

-14-

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

-15-(4) Issues the Company faces(1)

Stepping up our large scale project management capabilities and establishing a support infrastructure [IT Consulting

Business, Package & Service Business
The Group believes that the results of its focus on strengthening of project management capabilities, which it positions as
an important management challenge, have been produced in terms of smooth progress in projects. In addition to further
refining and standardizing development technologies more than ever, we will endeavor to enhance preventive support
infrastructure that can respond to any issue that arises from the start of a project to the start-up of the system and even after it
is put into operation.
(2) Research and development of core design and development technologies [IT Consulting Business]
With regard to a number of proprietary core design/development technologies common to our projects, we will continue
research and development to realize the improvement in productivity and technological superiority more than ever, andachieve a wider sharing of knowledge within the Company.
3) Recruitment and training of professionals [IT Consulting Business, Package & Service Business]
The Group understands that what is most important for raising corporate value of the Group is personnel and that it isnecessary to ensure and train highly qualified personnel. We continue to create an environment conducive to proactively
attracting talented people by challenging the frontiers of information technology and train professionals through training andproject fields.
(4) Enhancement of outside alliances [IT Consulting Business]
To always provide optimal solutions to clients, the Company will maintain good relations with corporations that haveparticularly excellent technologies and strive to enhance alliances with them, while grasping the technological trends in theworld.
(5) Overseas (Asia) development [IT Consulting Business and Package & Service Business]
The Group has already ensured bases in Singapore and other locations and started Asia development. The Group will put
sales and development in these bases into full swing and further expand the scope of entry to the mainland China, including
Hong Kong. In addition, the Group will expand business by making existing solutions and products conform to multiple
languages, developing software packages and cloud computing and supporting Asia development of Japanese companies.
6) Improving profit margin [Package & Service Business]
As for the Package & Service Business, a structure to expand order acceptance is being established through the
improvement of the sales structure and consolidation and enhancement of the lineup of packages. The Group will aim to raise
operating profit margin through measures to improve the degree of perfection of packages themselves by adding functions
strongly demanded by clients and control cost by strengthening the management of customization person-hours.
7) Sales, purchase, and inventory information management by using IT [Corporate Revitalization Business]
The Group will continuously carry out reform using IT, covering all stages from client marketing to purchase and sales of
products and management of inventories, aimed at urging clients to repeatedly purchase products through enhancement ofsatisfaction and trust of customers who visited stores.

-16-4. Consolidated Financial Statements(1) Consolidated balance sheets(in thousands of yen)
Fiscal 2011
(December 31, 2011)

Fiscal 2010
(December 31, 2010)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Short-term investment securities
Merchandise and finished goods
Work in process
Deferred tax assets
Accounts receivable-other
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Land
Other
Accumulated depreciation
Other, net
Total tangible fixed assets
Intangible assets
Software
Goodwill
Other
Total intangible fixed assets
Investments and other assets
Investment securities
Lease and guarantee deposits
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total assets

*4

*2

*2

5,233,036
2,941,834
136,929
48,752
188,282
1,419,725
318,544(13,001)
10,274,105
2,783,895(2,361,122)
422,772
127,762
1,459,776(1,223,002)
236,773787,309

*4

*2

*2

179,203
20,529199,732*1, *5-17-

1,778,560
769,357
115,096
60,044(52,565)
2,670,494
3,657,535
13,931,640

5,076,449
2,770,586
701,110
126,890
54,928
146,561
1,357,981
302,005(7,364)
10,529,150
3,077,281(2,654,607)
422,673
122,868
1,549,422(1,308,490)
240,931
786,474
386,794
145,464
22,063554,322*1

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

(in thousands of yen)
Fiscal 2011
(December 31, 2011)

Fiscal 2010
(December 31, 2010)
Liabilities
Current liabilities
Accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Accounts payable-other
Income taxes payable
Provision for bonuses
Reserve for quality assurance
Reserve for loss on projects
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Asset retirement obligations
Negative goodwill
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Valuation and translation adjustments
Valuationdifferenceonavailable-for-salesecurities
Foreign currency translation adjustment
Total valuation and translation adjustments
Minority interests
Total net assets
Total liabilities and net assets

*3

-18-

639,573
30,00032,000607,229880,886
98,783
139,163
7,000
736,393
3,171,030

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

16,00052,786
29,71098,496
3,269,527

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

1,421,815
2,495,772
7,836,204(1,171,668)
10,582,123

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

82,095(1,483)(2,105)79,98910,662,113
13,931,640(6,017)(7,501)
11,22011,410,885
14,453,360

(2) Consolidated statements of income and comprehensive income

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

Fiscal 2010
(from January 1, 2010 to
December 31, 2010)
22,639,154*1
13,605,853
9,033,301(in thousands of yen)
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)23,292,666*1
14,280,213
9,012,452

274,186
3,032,964
91,446
111,596
85,072116,051
92,8227,235
2,080,881
5,892,257
3,141,043

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

*2

*4

*5
*3

*6

-19-

*2

2,820
20,33569,797
21,95737,423
152,335

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

3,508
3,302
4,804
11,6153,281,763

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

30,51812,365
7,635
50,519160,290203
38,27594,945
293,715

99,214
4,874
23,99373,430260,764
30,000*4*3*6

20,351
1,349
66,04964,981--

252,519492,277
2,840,005

30,000435,250
2,910,190

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

Fiscal 2010
(from January 1, 2010 to
December 31, 2010)
1,278,671(28,770)
1,249,900(1,363)
1,591,467-(in thousands of yen)
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
1,190,886(141)
1,190,744
1,719,445
3,969
1,715,476
3,969
1,719,445-(83,480)(3,729)

-

-20-

(99)
*8
*7

(87,308)
1,632,137
1,627,985
4,152

(3) Consolidated Statements of Changes in Shareholders’ Equity
Fiscal 2010
(from January 1, 2010 to
December 31, 2010)
Shareholders’ equity
Capital stock
Balance at the end of the previous period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Capital surplus
Balance at the end of the previous period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Retained earnings
Balance at the end of the previous period
Changes of items during the period
Dividends from surplus
Net income
Total changes of items during the period
Balance at the end of the period
Treasury stock
Balance at the end of the previous period
Balance at the end of the period
Total shareholders’ equity
Balance at the end of the previous period
Changes of items during the period
Dividends from surplus
Net income
Total changes of items during the period
Balance at the end of the period
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Balance at the end of the previous period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of the period
Foreign currency translation adjustment
Balance at the end of the previous period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of the period-21-(in thousands of yen)
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)

1,421,815

1,421,815

1,421,815

1,421,815

2,495,772

2,495,772

2,495,772

2,495,772

6,975,347

7,836,204(730,611)
1,591,467
860,856
7,836,204(890,432)
1,715,476
825,0448,661,248(1,171,668)(1,171,668)(1,171,668)(1,171,668)

9,721,266

10,582,123(730,611)
1,591,467
860,856
10,582,123(890,432)
1,715,476
825,044
11,407,167

62,35582,09519,74019,74082,095(83,579)(83,579)(1,483)(1,558)(2,105)

(547)
(547)
(2,105)(3,912)(3,912)(6,017)

Fiscal 2010
(from January 1, 2010 to
December 31, 2010)
Total valuation and translation adjustments
Balance at the end of the previous period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of the period
Minority interests
Balance at the end of the previous period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of the period
Total net assets
Balance at the end of the previous period
Changes of items during the period
Dividends from surplus
Net income
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of the period-22-(in thousands of yen)
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)

60,797

79,98919,192
19,192
79,989(87,491)(87,491)(7,501)

59,634-(59,634)(59,634)-

11,220
11,220
11,2209,841,698

10,662,113(730,611)
1,591,467(40,441)
820,414
10,662,113(890,432)
1,715,476(76,271)748,772
11,410,885

(4) Consolidated statements of cash flows(in thousands of yen)
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)

Fiscal 2010
(from January 1, 2010 to
December 31, 2010)
Net cash provided by (used in) operating activities
Net income before taxes
Depreciation and amortization
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in reserve for quality assurance
Increase (decrease) in reserve for loss on projects
Increase (decrease) in provision for retirement benefits
Interest and dividends income
Interest expenses
Equity in (earnings) losses of affiliates
Loss (gain) on transfer of business
Compensation for damages received
Loss (gain) on sales of noncurrent assets
Loss on retirement of noncurrent assets
Loss (gain) on sales of investment securities
Loss (gain) on valuation of investment securities
Litigation expenses
Impairment loss
Loss (gain) from prior period adjustment
Loss on adjustment for changes of accounting standard for
asset retirement obligations
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Decrease (increase) in other assets
Increase (decrease) in notes and accounts payable-trade
Increase (decrease) in other liabilities
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Litigation expenses
Net cash provided by (used in) operating activities-23-

2,840,005
248,133(11,601)
37,60164,862
7,000
14,226(23,156)
3,508(21,957)(12,365)(7,635)
4,874(6,525)73,43030,000260,764
99,2142,910,190
233,033
1,840
932(73,804)(2,800)(23,037)
1,651(22,895)(94,945)(203)
20,351(158,940)
66,04964,981--

252,519(646,569)(13,989)
32,57648,074(91,083)2,929,389
23,508(3,673)(756,078)(30,000)
2,163,146

203,901
3,862
15,4594,447(85,067)
3,317,525
23,954(1,816)(1,420,566)
1,919,096

(in thousands of yen)
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)

Fiscal 2010
(from January 1, 2010 to
December 31, 2010)
Net cash provided by (used in) investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of short-term investment securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments for execution of asset retirement obligations
Purchase of investments in subsidiaries resulting in change
in scope of consolidation
Purchase of investments in subsidiaries
Purchase of stocks of subsidiaries and affiliates
Proceeds from liquidation of subsidiaries and affiliates
Proceeds from sales of investment securities
Proceeds from redemption of investment securities
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee deposits
Proceeds from transfer of business
Other
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Repayment of long-term loans payable
Cash dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period(80,000)
200,000(205,933)
52,800(39,929)
-

*1

-24-

(50,000)
80,000(199,268)(187,798)
4,389(243,334)(41,033)*2(150,080)(45,151)(5,000)82,624
5,200(12,364)
205,312
12,365910
170,833

7,429
228,270
1,950(164,140)
94,612
1,700(617,304)(32,000)(730,642)(762,642)(3,850)1,567,487
3,585,549
5,153,036(32,000)(887,631)(919,631)(8,887)373,274
5,153,036
5,526,311*1

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

-25-

(6) Significant Accounting Policies Regarding the Preparation of Consolidated Financial Statements
Item
1. Scope of consolidation

Fiscal 2010
(from January 1, 2010 to December 31, 2010)
Number of consolidated subsidiaries: 10
Names and other details of consolidated
subsidiaries
Future Financial Strategy Corporation,
ABM Corporation, Elm Corporation,
Ascendia Inc., Uoei Shoten Corporation,
Zakura, Inc., Future Investment
Corporation, RI Partners LLC., Future
Architect Inc., Associant Technology Inc.
There are no non-consolidated
subsidiaries.

Fiscal 2011
(from January 1, 2011 to December 31, 2011)
Number of consolidated subsidiaries: 14
Names and other details of consolidated
subsidiaries
ABM Corporation, North Consulting
Group Pte. Ltd., Brightree Solutions Sdn
Bhd., Siam NCG Holdings Co., Ltd.,ELECTRA (T) LTD. (currently North
Consulting Group (Thailand) CO.,LTD.),FutureOne, Inc., Ascendia Inc.,
Uoei Shoten Corporation, Zakura, Inc.
(currently Tokyo Calendar Inc.), Future
Investment Corporation, RI Partners LLC.,
Future Architect, Inc., Associant
Technology Inc., Future Global Pte. Ltd.
North Consulting Group Pte. Ltd. and
Future Global Pte. Ltd. are included in thescope of consolidation because they were
newly established on May 23, 2011, while
Siam NCG Holdings Co., Ltd. wasincluded in the scope of consolidation
because it was newly established on
November 29, 2011. Brightree Solutions
Sdn Bhd. and ELECTRA (T) LTD. were
included in the scope of consolidation
because the Company acquired theirshares in them and turned them into its
subsidiaries on October 1, 2011 andNovember 30, 2011, respectively.
Future Financial Strategy Corporation wasremoved from the scope of consolidation
because it was absorbed as a result of themerger with the Company on July 1, 2011.
There are no non-consolidated
subsidiaries.

2. Application of equity
methodNumber of affiliated companies to which
equity-method is applicable: 5Names and other details of affiliatedcompanies to which equity-method isapplicable
Shanghai UFIDA Future Consulting Ltd.,
dit Co., Ltd., Cyber Solution Inc., Elmos
Inc., and Axis Solutions Corporation
On April, 9, 2010, the Group purchased
shares of Axis Solutions Corporation, andmade it an affiliate to which the equity
method is applicable.
There are no non-consolidated
subsidiaries and affiliates to which theequity method is not applicable.

-26-

Number of affiliated companies to which
equity-method is applicable: 4Names and other details of affiliated companies
to which equity-method is applicable
dit Co., Ltd., Cyber Solution Inc., Elmos
Inc., and Axis Solutions Corporation
Shanghai UFIDA Future Consulting Ltd.
was removed from the scope of
application of equity method because its
liquidation was completed on December
15, 2011.
There are no non-consolidated subsidiaries
and affiliates to which the equity method
is not applicable.

Item
3. Accounting period of
consolidated subsidiaries

4. Accounting policies(1) Valuation
standards/methods forprincipal assets(2) Depreciation/ amortizationof major depreciable/
amortizable assets

Fiscal 2010
(from January 1, 2010 to December 31, 2010)
Uoei Shoten Corporationʼs account settlement
date is November 30. In preparing consolidated
financial statements, the Group normallypresents 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 thesubsidiaries between the date of their bookclosing and the parent companyʼs fiscal
year-end, the Group makes necessary
adjustments to its financial statements to reflect
these transactions.

Fiscal 2011
(from January 1, 2011 to December 31, 2011)
Same as on the left.

(a) Securities(a) Securities
Held-to-maturity bonds
Amortized cost method (straight-line method)
Other securities:
Marketable securities:
Same as on the left.

____________
Other securities:
Marketable securities:
Stated at fair value based on the market
price as of the end of the financial
period (Unrealized holding gains/losses
are reported as a net amount in a
separate component of shareholdersʼ
equity. Cost of sale is calculated basedon moving average method).
Non-marketable securities
Stated at cost based on moving averagemethod.
(b) Inventories
Merchandise and finished goods
Stated at of cost using the gross averagemethod (amounts in the balance sheets arecalculated using the method to devaluate thebook value according to the decrease inprofitability)
Uoei Shoten Corporation adopts the cost
method based on the retail method (amounts
in the balance sheets are calculated using
the method to devaluate the book value
according to the decrease in profitability).
Work in process
Stated at cost based on the specific cost
method (amounts in the balance sheets arecalculated using the method to devaluate thebook value according to the decrease inprofitability).
(a) Tangible fixed assets (Excluding leaseassets)The Group mainly uses the decliningbalance method to depreciate assets, thoughsome items are depreciated using thestraight-line method. If the acquisition priceof the asset to be depreciated is between¥100,000 and ¥200,000, it is depreciatedevenly using the straight-line method overthree (3) years. Useful life are as follows:
Buildings 3-34 years
Other
3-20 years(b) Intangible fixed assets (Excluding leaseassets)Software for in-house use
Software for in-house use is depreciatedusing the straight-line method over its
useful life (5 years).
Software for sale
Software for sale is depreciated by the-27-

Non-marketable securities
Same as on the left.
(b) Inventories
Merchandise and finished goods
Same as on the left.

Work in process
Same as on the left.

(a) Tangible fixed assets (Excluding leaseassets)Same as on the left.

(b) Intangible fixed assets (Excluding leaseassets)Software for in-house use
Same as on the left.
Software for saleSame as on the left.

Item

Fiscal 2010
(from January 1, 2010 to December 31, 2010)
larger of either of the amount calculated
based on projected sales volume or theamount from the straight-line method
over the period for which they are
expected to remain salable (3 years).

-28-

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

Item(3) Accounting standards forallowances/reserves

Fiscal 2010
(from January 1, 2010 to December 31, 2010)
Other
Straight-line method(c) Lease assets
Lease assets concerning finance leasetransactions not accompanying the transfer
of property rights
Of lease transactions other than thosedeemed to accompany the transfer ofproperty rights to lessees, leasetransactions that commenced before thestart of the initial year of the applicationof the “Accounting Standard for Lease
Transactions” (ASBJ Statement No. 13)
are accounted for in a manner similar to
the accounting treatment for regularlease transactions.
(a) Allowance for doubtful accounts
To prepare for losses incurred through bad
debts, the amount of potential loss iscalculated by using the historical loss ratio
in case of non-classified loans/receivables.
Potential losses for classified
loans/receivables are individually assessed(b) Reserve for quality assurance
In projects related to open system
consultation and system development (ITconsulting services and Packaging &Services), where technological changes aretaking place rapidly, there are occasions
where we are obliged to provide services toour clients after sales are stated in order toresolve problems that were unforeseeable atthe time of the signing of the contract or asof the close of accounting period. There are
instances where the Company and its
consolidated subsidiaries provide suchservices without compensation in order toguarantee quality standards that will fully
satisfy its customers in IT consulting
services and Packaging & Services. To
prepare for additional cost of sales in IT
consulting services and Packaging &Services that may arise after sales are stated,
estimated amount of such additional cost,calculated based on past experience, isstated in the reserve for quality assurance.
(c) Reserve for loss on projects
In projects related to open system
consultation and system development (ITconsulting services and Packaging &Services), where technological changes aretaking place rapidly, there are occasions
where we are obliged to provide services toour clients in order to resolve problems thatwere unforeseeable at the time of thesigning of the contract.

-29-

Fiscal 2011
(from January 1, 2011 to December 31, 2011)
Other
Same as on the left.
(c) Lease assets
Lease assets concerning finance leasetransactions not accompanying the transfer
of property rights
Same as on the left.

(a) Allowance for doubtful accounts
Same as on the left.

(b) Reserve for quality assuranceSame as on the left.

(c) Reserve for loss on projects
In projects related to open system
consultation and system development (ITconsulting services and Packaging &Services), where technological changes aretaking place rapidly, there are occasions
where we are obliged to provide services toour clients in order to resolve problems thatwere unforeseeable at the time of the signingof the contract.

Item(4) Standards for recognizing
important income andexpenses

Fiscal 2010
(from January 1, 2010 to December 31, 2010)
To prepare for future loss in IT consulting
services and Packaging & Services,estimated amount of such loss in and after
the following fiscal year is stated in thereserve for loss on project, concerning
ongoing projects for which loss is projected
to be incurred as of the end of the fiscal year
under review and for which it is possible torationally estimate the amount of loss.
(Additional information)
Reserve for future losses from ongoingprojects was previously stated in the reservefor quality assurance. However, with theapplication of the ”Accounting Standard forConstruction Contracts” (ASBJ Statement
No. 15, December 27, 2007) and the“Guidance on Accounting Standard forConstruction Contracts” (ASBJ GuidanceNo. 18, December 27, 2007), the reserve for
future losses from ongoing projects is statedin the reserve for losses concerning projects
from the fiscal year under review.
(d) Reserve for bonuses
In order to set aside funds for the paymentof bonuses to employees at consolidated
subsidiaries, the estimated amount ofexpenses for bonus payments in the fiscal
year under review is set aside in the reserve
for bonuses account.
(e) Allowance for retirement benefits──────
(Additional information)
The Group abolished the retirement benefit
system as of December 31, 2010. The
outstanding balance of allowance forretirement benefits as of December 31, 2010
has been transferred to “Accounts
payable-other” under current liabilities as
fixed obligations.
Standards for recognizing sales and cost of sales
for IT consulting services
a. The extent to which a project has advancedby the end of the fiscal year under review
is calculated according to the percentage
of completion method (Progress rate isestimated in proportion to cost.)
b. Other projects
Completed contract method-30-

Fiscal 2011
(from January 1, 2011 to December 31, 2011)
To prepare for future loss in IT consulting
services and Packaging & Services,estimated amount of such loss in and after
the following fiscal year is stated in thereserve for loss on project, concerning
ongoing projects for which loss is projected
to be incurred as of the end of the fiscal year
under review and for which it is possible torationally estimate the amount of loss.

(d) Reserve for bonuses
Same as on the left.

(e) Allowance for retirement benefits──────

Standards for recognizing sales and cost of salesof IT consulting services
Same as on the left.

Item(5) Amortization of goodwill
and negative goodwill

Fiscal 2010
(from January 1, 2010 to December 31, 2010)──────

(6) Cash and cash equivalents──────

(7) Other material
information concerning
the compiling of financial
statements
5. Valuation of assets andliabilities of consolidated
subsidiaries
6. Amortization of goodwill
and negative goodwill

Accounting treatment of consumption taxes, etc.
Transactions subject to consumption taxes arerecorded at amounts exclusive of consumption
taxes.
The full market price method is adopted.

7. Cash and cash equivalents

Goodwill and negative goodwill are amortizedevenly over their useful lives. However,negative goodwill occurring on or after April, 1,2010 is treated as profit in the fiscal year in it
occurs.
If the monetary value of goodwill is notmaterial, it is treated as loss in the fiscal year it
occurs.
“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.

-31-

Fiscal 2011
(from January 1, 2011 to December 31, 2011)
Goodwill and negative goodwill are amortizedevenly over their useful lives. However,negative goodwill occurring on or after April 1,2010 is treated as profit in the fiscal year it
occurs.
If the monetary value of goodwill is notmaterial, it is treated as a loss in the fiscal year it
occurs.
“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.
Accounting treatment of consumption taxes, etc.
Same as on the left.

──────

──────

──────

(7) Changes in Material Information for the Preparation of Consolidated Financial Statements
Fiscal 2010
(from January 1, 2010
to December 31, 2010)(Accounting standard for construction contracts)
The “Accounting Standard for Construction Contracts”(ASBJ Statement No. 15, December 27, 2007) and the“Guidance on Accounting Standard for Construction
Contracts” (ASBJ Guidance No. 18, December 27, 2007)
were applied effective of the fiscal year under review.
There is no effect of the above change of procedure to
profit and loss.
(Accounting standard for business combinations, etc.)
The “Accounting Standard for Business Combinations”(ASBJ Statement No. 21, December 26, 2008), the“Accounting Standard for Consolidated Financial
Statements” (ASBJ Statement No. 22, December 26, 2008),
the “Partial Amendments to the Accounting Standard for
Research and Development Cost” (ASBJ Statement No. 23,
December 26, 2008) , the “Accounting Standard forBusiness Divestitures” (ASBJ Statement No. 7, December
26, 2008), the “Accounting Standard for Equity Method of
Accounting for Investments” (ASBJ Statement No. 16,
announced on December 26, 2008) and the“Implementation Guidance on Accounting Standard forBusiness Combinations and Business Divestitures” (ASBJ
Guidance No. 10, December 26, 2008) were applied
effective of the fiscal year under review.

Fiscal 2011
(from January 1, 2011
to December 31, 2011)(Application of accounting standard for asset retirement
obligations)
The “Accounting Standard for Asset Retirement
Obligations (ASBJ Statement No. 18, March 31, 2008) andthe “Guidance on Accounting Standard for Asset
Retirement Obligations” (ASBJ Guidance No. 21, March
31, 2008” were applied in the fiscal year under review.
As a result of this change, operating income and ordinary
income decreased ¥32,754 thousand, and income before
income taxes decreased ¥285,273 thousand. The amount of
the change in asset retirement obligations incurred due tothe initial application of the accounting standard, etc. was¥331,237 thousand.

-32-

(8) Change in classification
Fiscal 2010
(from January 1, 2010 to December 31, 2010)(Consolidated balance sheets)
With the application of the “Accounting Standard forConstruction Contracts” (ASBJ Statement No. 15,
December 27, 2007) and the “Guidance on AccountingStandard for Construction Contracts” (ASBJ Guidance No.
18, December 27, 2007) from the fiscal year under review,
what was stated as “Reserve for quality assurance” in theprevious fiscal year are separately stated as “Reserve for
quality assurance” with regard to reserve for loss on repair
to be provided without compensation, which is projected tooccur after the end of projects, and “Reserve for loss on
project” concerning reserve for future loss, projected to be
incurred about ongoing projects.
“Reserve for quality assurance” in the previous fiscal
year, which amounted to ¥74,301 thousand, did not include
what fell under “Reserve for loss on project.”(Consolidated statements of income)“Foreign exchange gains” (¥8,486 thousand in theprevious fiscal year) was included in the “Other” section of
the non-operating income account in the previous fiscal
year. “Foreign exchange losses” was posted in the fiscal
year under review. Since the amount of foreign exchange
losses exceeded 10/100 of the total non-operating expenses
in the period under review, the item in question wasreported separately.
(Consolidated statements of cash flows)“Proceeds from collection of loans” (¥1,410 thousand in
the fiscal year under review) under cash flows frominvesting activities was separately reported in the previous
fiscal year. However, as the amount of proceeds fromcollection of loans is insignificant, the subject item wasincluded in the “Other” section in the fiscal year underreview.
With the application of the “Accounting Standard forConstruction Contracts” (ASBJ Statement No. 15,
December 27, 2007) and the “Guidance on AccountingStandard for Construction Contracts” (ASBJ Guidance No.
18, December 27, 2007) from the fiscal year under review,
what was stated as “Increase (decrease) in reserve for
quality assurance” in the previous fiscal year is separately
stated as “Increase (decrease) in reserve for quality
assurance” with regard to the increase (decrease) in reserve
for loss on repair to be provided without compensation,
which is projected to occur after the end of projects, and“Increase (decrease) in reserve for loss on project”
concerning the increase (decrease) in reserve for future loss,
projected to be incurred about ongoing projects.
Of ¥102,146 thousand in “Decrease in reserve for quality
assurance” in the previous fiscal year, ¥176,447 thousand
fell under “Decrease in provision for loss on project.”Fiscal 2011
(from January 1, 2011 to December 31, 2011)─────────

(Consolidated statements of income and comprehensive
income)With the application of the “Cabinet Office OrdinancePartially Amending Regulations for Terminology, Forms andMethods of Preparing Financial Statements, etc.” (Cabinet
Office Ordinance No. 5, March 24, 2009) pursuant to the“Accounting Standard for Consolidated Financial Statements”(ASBJ Statement No. 22, December 26, 2008) in the fiscal
year under review, the account, “Income before minority
interests,” is presented in the fiscal year under review.
─────────

-33-

(9) Additional information
Fiscal 2010
(from January 1, 2010 to December 31, 2010)──────

Fiscal 2011
(from January 1, 2011 to December 31, 2011)(Accounting Standard for Presentation of Comprehensive
Income)The “Accounting Standard for Presentation ofComprehensive Income” (ASBJ Statement No. 25, June 30,2010) was applied in the fiscal year under review. However,
the amount of “Valuation and translation adjustments” and thatof “Total valuation and translation adjustments” for theprevious fiscal year represent “Valuation and translation
adjustments” and “Total valuation and translation
adjustments.”-34-

(10) Notes to consolidated financial statements(Notes to consolidated balance sheet)
Fiscal 2010
(December 31, 2010)*1. Investments in affiliates
Investment securities (stocks)¥336,955*2. Total asset impairment losses are included in accumulated
depreciation*3. Goodwill and negative goodwill After offsetting goodwill
against negative goodwill, net goodwill is stated undernegative goodwill of non-current liabilities. Before
offsetting, the amounts of goodwill and negative goodwill
are as follows: Before offsetting, the amounts of goodwill
and negative goodwill are as follows:
Goodwill¥3,831
Negative goodwill-¥56,617*4. Lawsuit
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 ofNovember 30, 2009.
The Company delivered the deliverables on September 4,2009 in accordance with an agreement with NITTO DENKO.
However, NITTO DENKO did not recognize the action by theCompany as delivery and refused to pay the contract fees etc.
Against this backdrop, the Company initiated legal action.
*5. Of investment securities, ¥168,686 thousand is lent understock loan agreements.
6.Discount of notes receivable¥1,519(in thousands of yen)
Fiscal 2011
(December 31, 2011)*1. Investments in affiliates
Investment securities (stocks)*2.
Same as on the left.

¥351,523

─────────

*4. Lawsuit
Same as on the left.

──────────────────

(Notes to consolidated statements of income and comprehensive income)Fiscal 2010
(from January 1, 2010 to December 31, 2010)*1. Total of provision of reserve for loss on project
Amount of provision of reserve for loss on project included in cost ofsales¥7,000*2. Total amount of research & development expenditures
Research & development expenses included in selling, general andadministrative expenses¥85,072*3. Breakdown of loss on retirement of non-current assets
Buildings and structures¥4,012
Other
¥862
Total
¥4,874
Breakdown of gain on sales of fixed assets*4．
Land¥4,568Other¥3,066
Total¥7,635*5. Breakdown of loss on prior period adjustment
Adjustment of impairment losses reported in prior period¥41,549
Adjustment of intangible fixed assets and others reported in prior period¥30,851
Other¥26,812
Total¥99,214-35-(in thousands of yen)

Fiscal 2011
(from January 1, 2011 to December 31, 2011)*1. Total of provision of reserve for loss on project
Amount of provision of reserve for loss on project included incost of sales-¥2,800*2. Total amount of research & development expenditures
Research & development expenses included in selling,
general and administrative expenses¥32,310*3. Breakdown of loss on retirement of non-current assets
Buildings and structures¥15,156
Other¥5,194
Total¥20,351*4. Breakdown of gain on sales of fixed assets
Other
¥203

─────────

Fiscal 2010
(from January 1, 2010 to December 31, 2010)*6. Impairment loss
In the fiscal year under review, the Group reported
impairment losses of the following asset groups.
(1) Main assets on which impairment losses were recognized
Use

Type

In-house system

SoftwareConsulting business forfinancial companies
(2)

(3)

(4)

(5)

Other

Location-

Background of the recognition of impairment losses(i) As the Group changed to a policy to adopt the latest
outside software and the state-of-the-art proprietary
design method of the Company for the development of
in-house systems under development in and after thefollowing fiscal year, what cannot be utilized by suchnew technologies and new design method occurred inexisting deliverables. The Group recognized the portion
that cannot be utilized as impairment losses.
(ii)The Group reviewed business plans at subsidiaries in
response to the cautious stance of the financial industry
toward IT investment. As a result, the Group reduced
the whole amount of book values of asset groups in the
consulting business for financial companies, whichamounted to ¥17,979 thousand.
Amounts of impairment losses
Software¥242,785
Other¥17,979
Total¥260,764
Asset grouping method
The Company groups assets by businesses in termsof management accounting, which it regards as thesmallest units that generate almost independent cash
flows.

Calculation method of recoverable amounts
With regard to in-house systems, the Company
measures recoverable amounts based on use value, andreports impairment losses, judging the use value ofexisting deliverables that cannot be used to be zero. As
for assets for the consulting business for financial
companies, the Company measures recoverable
amounts based on use value, and values the use value ofsuch assets as zero after estimating the use value basedon future cash flows.
──────────────────

Fiscal 2011
(from January 1, 2011 to December 31, 2011)*6. Impairment loss
In the fiscal year under review, the Group reported
impairment losses of the following asset groups.
(1) Main assets on which impairment losses were recognized
Use
Type
Location
Nasushiobara,
Idle asset
Land
Tochigi
Prefecture
Niigata
Food retail business Buildings and otherPrefecture(2) Background of the recognition of impairment losses(i) Idle asset
The Group wrote down the book value of idle land in
Nasushiobara, Tochigi Prefecture, for which it has no specificplan for future use, to the recoverable amount, and recognized
the difference between book value and recoverable value as
an impairment loss.
(ii) Food retail business
The Group wrote down the book values of asset groups instores that had continued to post operating losses to theirrecoverable values.

(3)

Amounts of impairment losses
Land¥4,893
Buildings and other¥60,087
Total¥64,981(4) Asset grouping method
The Company groups assets by businesses for
management accounting or by stores for the foodretail business, which it regards as the smallest units
that generate almost independent cash flows.
However, with regard to idle assets that are not useddirectly for business, each idle asset is considered toconstitute a group.
(5) Calculation method of recoverable amounts(i) Idle asset
The recoverable value is calculated from the net selling
price. The net selling price is calculated by rationallyadjusting the assessed value against those of fixed assets
and market prices in the neighborhood.
(ii) Food retail business
The recoverable value is the higher of either net selling
price or use value. The net selling price is calculated basedon real estate appraisal, and the use value is calculated bydiscounting estimated future cash flows at 3% (capitalcosts).
*7 Comprehensive income in the fiscal year immediately
before the fiscal year under review
Comprehensive income¥1,610,660
attributable to owners of the parent
company
Comprehensive income-¥1,363
attributable to minority interests
Total¥1,609,297*8．Other comprehensive income in the fiscal year immediately
before the fiscal year under review
Valuation difference on¥19,740
available-for-sale securities
Foreign currency translation-¥547
adjustment
Total¥19,192-36-

(Statements of changes in shareholders' equity)
Fiscal 2010 (from January 1, 2010 to December 31, 2010)
1. Matters related to the types and numbers of outstanding stocks and treasury stocks
Number of stocks at
Number of stocks
Number of stocks
the end of the previous
increased during thisdecreased during thisfiscal year
fiscal year
fiscal year
Outstanding stocks
Common stock
476,640
Total
476,640
Treasury stock
Common stock
20,008Total
20,008-

Number of stocks at
the end of this fiscal
year476,640
476,640
20,00820,0082. Matters related to dividends(1) Dividends paid
Resolution

Stock type

Total dividend
amount(in thousands ofyen)

Ordinary general
meeting ofshareholders held on
March 19, 2010

Common stock730,611

Dividends per
share (yen)Record date

Effective date

1,600

December 31,2009

March 23, 2010

(2) Among dividends for which the record date falls within the fiscal year under review, the dividend for which the effective
date of payment falls in the next fiscal year is as follows:
Total dividend
amount (inSource of funds
Resolution
Stock type
thousands offor dividends
yen)Ordinary general
meeting ofCommonRetained
547,958
shareholders heldstock
earnings
on March 22, 2011-37-

Dividends
per share(yen)

Record date

Effective date

1,200

December
31,2010

March 23, 2011

Fiscal 2011 (from January 1, 2011 to December 31, 2011)
1. Matters related to the types and numbers of outstanding stocks and treasury stocks
Number of stocks at the end
Number of stocks
Number of stocksof the previous fiscal year
increased during
decreased during this
this fiscal year
fiscal year
Outstanding stocks
Common stock
476,640
Total
476,640
Treasury stock
Common stock
20,008Total
20,008-

Number of stocks
at the end of thisfiscal year
476,640
476,640
20,00820,0082. Matters related to dividends(1) Dividends paid
Resolution
Ordinary general
meeting ofshareholders held on
March 22, 2011
Meeting of Board of
Directors held on July28, 2011

Total dividend
amount (inthousands of yen)

Dividends per
share(yen)Common stock

547,958

Common stock

342,474

Stock type

Record date

Effective date

1,200

December 31,2010

March 23, 2011

750

June 30, 2011

September 22,
2011(2) Among dividends for which the record date falls within the fiscal year under review, the dividend for which the effective
date of payment falls in the next fiscal year is as follows:
Resolution
Stock type
Total dividend
Source of funds
amount (infor dividends
thousands ofyen)
Ordinary general
meeting ofCommonRetained342,474
shareholders heldstock
earnings
on March 22, 2012-38-

Dividends
pershare(yen)750

Record date

Effective date

December 31,
2011

March 23,
2012

(Notes regarding consolidated statements of cash flows)(in thousands of yen)
Fiscal 2010
Fiscal 2011
(from January 1, 2010 to December 31, 2010)(from January 1, 2011 to December 31, 2011)*1. Cash and cash equivalents at the end of the fiscal year and*1. Cash and cash equivalents at the end of the fiscal year andamounts stated in consolidated balance sheet
amounts stated in consolidated balance sheet
Cash and deposits¥5,233,036
Cash and deposits¥5,076,449
Time deposits for which theTime deposits for which theterm of deposit is more than-¥80,000
term of deposit is more-¥50,000
three months
than three months
Cash and cash equivalents:¥5,153,036
Short-term investment¥499,861
securities
Cash and cash equivalents:¥5,526,311*2. Breakdown of assets and liabilities of the companies that─────────have become consolidated subsidiaries through thepurchase of shares(1) The breakdown of assets and liabilities upon consolidating
Brightree Solutions Sdn. Bhd., which is included within thescope of consolidation through the acquisition of shares,
and the relationship between the acquisition price of sharesand expenditure (net value) for the acquisition of shares are
as follows:(in thousands of yen)
Current assets
Noncurrent assets
47,462
Goodwill
6,049
Current liabilities
137,355
Noncurrent liabilities(38,981)
Minority interests(443)
Acquisition price of shares in newly(6,902)
consolidated subsidiary
Balance of cash and cash equivalents
144,540of newly consolidated subsidiary
Expenditure for acquisition of shares(15,191)
in newly consolidated subsidiary
Expenditure for acquisition of shares
129,348in newly consolidated subsidiary(2) The breakdown of assets and liabilities upon consolidating
ELECTRA (T) LTD., which is included within the scope of
consolidation through the acquisition of shares, and therelationship between the acquisition price of shares andexpenditure (net value) for the acquisition of shares are as
follows:(in thousands of yen)
Current assets
8,247
Noncurrent assets
883
Goodwill
16,804Foreign currency translation
336
adjustment
Current liabilities-5,279Minority interests-38
Acquisition price of shares in newly
20,953
consolidated subsidiary
Balance of cash and cash equivalents-223
of newly consolidated subsidiary─────────

Expenditure for acquisition of shares
20,731in newly consolidated subsidiary
3. Important non-fund transaction
The “Accounting Standard for Asset Retirement Obligations”
and the “Guidance on Accounting Standard for Asset
Retirement Obligations” are applied effective from the fiscal
year under review.
Increase in asset retirement obligations¥309,408-39-

(Segment information)
a. Business segment information
Fiscal 2010 (from January 1, 2010 to December 31, 2010) (in thousands of yen)
IT Consulting
Business

Ⅰ Net sales and operating
income (or loss)
Net sales(1) Net sales to outside clients(2) Inter-segment sales ortransfer
Total
Operating expenses
Operating income (loss)
Ⅱ Assets, depreciation,
impairment loss and capital
expenditures

13,951,554

Package &ServiceBusiness

Corporate
Revitalization
Business/ New
Operations
Development
Business

4,158,491

4,528,645(in thousands of yen)
Elimination or
corporate

Consolidated

22,638,691

463

22,639,154

Total

30,294

257,50730,213

318,015-318,015--

13,981,848
10,986,799
2,995,049

4,415,998
4,245,595
170,4034,558,859
4,599,717-40,858

22,956,706
19,832,113
3,124,593-317,551-334,002
16,45022,639,154
19,498,110
3,141,043

Assets8,818,270
1,970,463
663,265
Depreciation and
152,033
48,961
44,910amortization
Impairment loss
252,554
8,210
41,549
Capital expenditures
89,23760,746
95,879Notes: 1. Method of classifying business segments
Business segments are classified according to contents of business.
2. Main products in each business segment

11,451,999

2,479,641

13,931,640

245,904

2,228

248,133

302,314245,862-

302,314245,862

Business segment

Business operations

IT Consulting Business

To provide solutions by establishing information systems with cutting-edge IT andpractical, advanced techniques, while sharing a client’s managerial issues from theviewpoint of management and understanding the essence of a client’s businesses.

Package & Service
Business

Helping clients improve operational efficiency by selling or providing software packages
for highly specialized fields (such as sales management and ERP) using ASP operations,and developing mission-critical systems on a commission basis.

Corporate
Revitalization
Business/ New
Operations
Development Business

To become deeply involved with the management team of client firms, quickly revitalize
client firms through major reforms focusing on IT, and establish models for success ineach industry.
By forming alliances with companies operating businesses in which the Group is not
involved, and establishing and making investments in new firms, the Group maximizes
the value of companies and accelerates their growth using and combining the Company’s
expertise and technologies in management, operations, and IT as a whole, with the aim ofcontributing to the development of these companies’ industries.

3. The amount of corporate assets which were included under “Elimination or corporate” was ¥4,037,550 thousand in
the previous fiscal year and ¥3,162,842 thousand in the fiscal year under review, and these assets consist mainly of
surplus funds (cash and securities) and assets relating to the administration sector.
4.

Impairment losses of the Corporate Revitalization Business/New Operations Development Business for the fiscal
year under review, ¥41,549 thousand, is an adjustment to the amount of impairment losses posted for the prior period
and included in loss on prior period adjustment.

b. Geographical segment information
Domestic operations accounts for more than 90% of consolidated sales and assets in the previous and the period
under review. Geographical segment information is therefore omitted.
c. Overseas sales
In the previous and the period under review, sales from overseas operations accounts for less than 10% ofconsolidated sales. Overseas sales information is therefore omitted.

-40-

d. Segment information
1

Overview of reportable segments
The reportable segments of the Group are constituent units of the Company for which separate financial information

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

Corporate Revitalization
Business

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

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

-41-

3. Information on amounts of net sales, income or loss, assets, and other items by reportable segment
Fiscal 2010 (from January 1, 2010 to December 31, 2010)(in thousands of yen)Segment reported

Net sales
Net sales to outsideclients
Inter-segment sales
or transfer
Total
Segment income orloss
Segment assets
Other items
Depreciation andamortization
Amortization of
goodwill
Increase in tangible
and intangible fixed
assetsAdjustment(Note 2)

Amountstated infinancialstatements(Note 3)

22,639,154-

22,639,154-

318,015-318,015-

124,817

22,957,169-318,015

22,639,154

Others (Note1)

IT
Consulting
Business

Package &ServiceBusiness

Corporate
Revitalization
Business

13,900,530

4,158,491

4,455,315

22,514,337

124,81730,294

257,50730,213

318,015

13,930,824

4,415,998

4,485,529

22,832,352

Total

Total

3,015,640

170,403-15,944

3,170,098-57,038

3,113,060

27,983

3,141,043

9,304,029

1,970,463

641,741

11,916,234

2,188,072

14,104,306-172,665

13,931,640

151,989

48,961

43,336244,287

3,846

248,133-

248,133

1,860

5,375

-

7,235

-

7,235

-

7,235

88,68260,74667,741

217,169247

217,417-

217,417

Fiscal 2011 (from January 1, 2011 to December 31, 2011)(in thousands of yen)Segment reported

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

Other
(Note 1)

Adjustment(Note 2)

Amountstated infinancialstatements(Note 3)

IT Consulting
Business

Package &ServiceBusiness

Corporate
Revitalization
Business

14,610,689

4,066,955

4,552,698

23,230,344

62,322

23,292,666-

23,292,666

8,879

430,4291,247

440,556

22,560436,116-463,116-

14,619,569

4,497,385

4,553,946

23,670,900

84,882

23,755,783-463,116

23,292,666

2,570,258

333,467

31,5292,935,255-29,065

2,906,190

23,674

2,929,865

9,505,749

2,018,033

568,181

12,091,964

2,512,608

14,604,573-151,212

14,453,360

147,401

41,732

42,187

231,320

1,712

233,033-

233,033

13,4791,581-

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

40,5249,906

437,010-437,010-437,010

Total

Total

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

(Note 2)Adjustment to segment income, “¥27,983 thousand” and “¥23,674 thousand,” and adjustment to segment assets, “-¥172,665” and“- ¥151,212 thousand,” are adjustments to inter-segment transactions.

(Note 3)

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

-42-

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

Net sales

SG SYSTEMS Co., Ltd.

5,396,584

Lawson, Inc.

3,448,065(in thousands of yen)
Relevant segment
IT Consulting Business andPackage & Service Business
IT Consulting BusinessInformation on tangible fixed asset impairment losses by reportable segment
Fiscal 2011 (from January 1, 2011 to December 31, 2011)(in thousands of yen)
IT
Consulting
Business

Impairment loss-

Segment reported
Package
Corporate&
Revitalization
ServiceBusiness
Business
60,087

Total
60,087

Others(Note)

Total

Corporateor
elimination

Total

4,893

64,981-

64,981

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

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

Segment reported
Package
Corporate&
Revitalization
ServiceBusiness
Business

Others(Note)

Total

Corporateor
elimination

Total

Total

13,4791,581-

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

145,464-

145,464-

145,464--

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

-

-

-

-

-

-

-

-

(Additional information)
The “Accounting Standard for Disclosures about Segments of an Enterprise and Related Information “(ASBJ Statement
No. 17, March 27, 2009) and the “Guidance on Accounting Standard for Disclosures about Segments of an Enterprise andRelated Information” (ASBJ Guidance No. 20, March 21, 2008) was applied effective from the fiscal year under review.

-43-

(Lease transactions)Fiscal 2010
(from January 1, 2010 to December 31, 2010)
Finance lease transactions (Lessee)
Finance lease transactions not accompanying the transfer ofproperty rights
1) Lease assets
None2) Depreciation of lease assets
As stated in Significant Accounting Policies Regarding the
Preparation of Consolidated Financial Statements ‘4.
Accounting policies (2) Depreciation/amortization ofmajor depreciable/ amortizable assets.
Of Finance lease transactions not accompanying the transfer
of property rights, lease transactions that commenced before
the start of the initial year of the application of the‘Accounting Standard for Lease Transactions’ (AccountingStandard Board of Japan Statement No. 13) are accounted forin a manner similar to the accounting treatment for regularlease transactions.
(1) Acquisition cost equivalents, accumulated depreciationequivalents, accumulated impairment loss equivalents andbook value equivalents of leased properties
Acquisition
cost
equivalents(thousandsof yen)Accumulated
depreciationequivalents(thousandsof yen)Accumulated
impairment
loss
equivalents(thousandsof yen)Book value
equivalents(thousandsof yen)Property,plant andequipment¥175,824¥92,367¥41,426¥42,029

Intangible
assets¥5,294¥2,957¥122¥2,214¥181,118¥95,324¥41,549¥44,243

Total(2) Future lease payments obligation and balance of lease asset
impairment loss account at the end of fiscal year
Future lease payments obligation
Due within one year
¥35,981Due after one year
¥42,173
Total¥78,155
Balance of lease asset impairment loss
account at the end of fiscal year
¥29,084(3) Lease payments, reversal of lease asset impairment account,depreciation expense equivalents, interest expenseequivalents and impairment loss
Lease payments¥43,520
Reversal of lease asset impairment account¥12,464
Depreciation expense equivalents¥26,429
Interest expense equivalents¥4,537(4) Calculation method of depreciation equivalents
Depreciation equivalents are calculated using thestraight-line method over the lease terms without residual
value.
(5) Calculation method of interest expense equivalents
The difference between total lease payments and acquisition
cost equivalents of leased assets is recognized as interest
expense equivalents and allocated over the lease term by theinterest method.
(Impairment loss)
Impairment loss allocated to lease assets is ¥41,549 thousand.

(in thousands of yen unless otherwise noted)
Fiscal 2011
(from January 1, 2011 to December 31, 2011)
Finance lease transactions (Lessee)
Finance lease transactions not accompanying the transfer ofproperty rights
1) Lease assets
Same as on the left.
2) Depreciation of lease assets
Same as on the left.

(1) Acquisition cost equivalents, accumulated depreciationequivalents, accumulated impairment loss equivalents andbook value equivalents of leased properties
Acquisition
cost
equivalents(thousands ofyen)

Accumulated
depreciationequivalents(thousands ofyen)

Accumulated
impairment
loss
equivalents(thousands ofyen)Book value
equivalents(thousands ofyen)

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

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

Total(2) Future lease payments obligation and balance of lease asset
impairment loss account at the end of fiscal year
Future lease payments obligation
Due within one year
¥32,963
Due after one year
¥8,663
Total¥41,626
Balance of lease asset impairment loss
account at the end of fiscal year
¥17,252(3) Lease payments, reversal of lease asset impairment account,depreciation expense equivalents, interest expenseequivalents and impairment loss
Lease payments¥38,929
Reversal of lease asset impairment account¥12,464
Depreciation expense equivalents¥22,184
Interest expense equivalents¥2,935(4) Calculation method of depreciation equivalents
Same as on the left.
(5) Calculation method of interest expense equivalents
Same as on the left.

(Impairment loss)
Impairment loss allocated to lease assets is ¥632 thousand.

-44-

(Related party information)
None(Tax effect accounting)(in thousands of yen unless otherwise noted)
Fiscal 2010
December 31,2010

Fiscal 2011
December 31,2011

1. Breakdown of major causes for deferred tax assets andliabilities[Current]
Deferred tax assets
Enterprise tax payable¥69,396
Reserve for quality¥57,688
assurance
Excess amount over
¥40,468
maximum reserve forbonuses
Accrued business office¥11,519
taxes
Retirement benefits¥48,582
payableOther¥41,347
Subtotal of deferred tax¥269,003
assetsValuation allowance-¥80,720
Total deferred tax asset¥188,282[Non-current]
Deferred tax assets
Losses carried forward¥1,345,298
for tax purposes
Depreciation excess¥449,421
Loss on valuation of¥203,685
investment securities
Other
¥31
Subtotal of deferred tax¥1,998,436
assetsValuation allowance-¥1,760,115
Total deferred tax asset
Deferred tax liabilities
Net unrealized gain on
available-for-salesecurities
Temporary difference of
future addition inconsolidated accounting
Reserve for programs
Total deferred tax liabilities
Net deferred tax assets¥238,321¥45,549¥76,118¥1,556¥123,224¥115,096

1. Breakdown of major causes for deferred tax assets andliabilities[Current]
Deferred tax assets
Enterprise tax payable¥49,198
Reserve for quality¥26,485
assurance
Excess amount over
¥36,843
maximum reserve forbonuses
Accrued business office¥12,785
taxes
Losses carried forward for¥114,223
tax purposes
Other¥5,980Subtotal of deferred tax¥245,516
assetsValuation allowance-¥98,955
Total deferred tax asset¥146,561[Non-current]
Deferred tax assets
Losses carried forward for¥934,845
tax purposes
Depreciation excess¥377,645
Loss on valuation of¥197,866
investment securities
Asset retirement obligations¥114,283
Other¥5,231
Subtotal of deferred tax
assetsValuation allowance
Total deferred tax asset
Deferred tax liabilities¥1,629,872-¥1,352,080¥277,791

Temporary difference of¥42,925
future addition inconsolidated accounting
Retirement expenses for¥23,213
asset retirement obligations
Total deferred tax liabilities¥66,138
Net deferred tax assets¥211,653(Note): Net amount of deferred tax assets is included in thefollowing items in the consolidated balance sheets.
Fixed assets-Deferred tax assets¥218,382
Fixed liabilities-Others¥6,729-45-

Fiscal 2010
(December 31,2010)

Fiscal 2011
(December 31,2011)

2. Breakdown of difference between the normal effective
statutory tax rate and the rate of income taxes after
application of deferred tax accounting
Normal effective statutory
40.7%
tax rate(Adjustment)
Amortization of negative-1.0%
goodwill
Valuation allowance
2.3%
Inhabitant tax, flat-rate
0.9%
Other
1.1%
Rate of income taxes after
application of deferred
accounting

44.0%

2. Breakdown of difference between the normal effective
statutory tax rate and the rate of income taxes after
application of deferred tax accounting
Normal effective statutory
40.7%
tax rate(Adjustment)
Amortization of negative-0.6%
goodwill
Valuation allowance-1.2%
Inhabitant tax, flat-rate
0.9%
Transfer of losses brought-0.7%
forward resulting frommergerAddition adjustment
0.5%
difference
Other
Effect of change in tax rate

0.5%
0.8%

Rate of income taxes after
40.9%
application of deferred
accounting
3. Revision of amounts of deferred tax assets and liabilities due
to change in normal effective statutory tax rate
The ‘Act on Partial Revision of the Income Tax Act, etc.
to Build Tax System Conforming to Changes in the Structureof Economic Society’ (Law No. 114 of 2011) and the ‘Act on
Special Measures Concerning Security of Financial
Resources Necessary for Implementation of Measures for
Restoration from the Great East Japan Earthquake’ (Law No.
117 of 2011) were promulgated on December 2, 2011, andthe 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 calculatedeferred tax assets and liabilities will be reduced fromformer 40.7% to 38.0% for temporary differences that are
expected to be resolved in the consolidated fiscal year thatstarts on January 1, 2013 to the consolidated fiscal year thatstarts 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 ofdeferred tax liabilities) decreased ¥22,947 thousand, while
corporate tax adjustments increased ¥22,839 thousand.

-46-

(Financial instruments)
Fiscal 2010 (from January 1, 2010 to December 31, 2010)
1. Matters relating to the status of financial instruments(1) Financial instrument guidelines
The Group limits fund management to highly safe, short-term deposits, etc., and procures fund mainly throughborrowings from banks. The Group does not engage in derivative transactions.
(2) Details and risk of financial instruments and risk management structure
Notes and accounts receivable and accounts receivable-other, which are trade receivables, are exposed to credit
risk of clients. With regard to the said risk, however, the Group manages due dates and balances by client inaccordance with the Group’s Credit Management Regulations, and if there is a possibility of delay in collection, it
quickly and properly handles the situation in cooperation with the sales division. Accounts receivable-other includes acase that is being resolved through a lawsuit since there had been a difference in understanding of the delivery ofdeliverables under an agreement with the other party.
Shares, which are investment securities, are exposed to the fluctuation risk of market prices. They are shares ofcompanies with which the Group has business relations and market values periodically grasped are reported to theBoard of Directors.
Lease and guarantee deposits are mainly those put in when lease agreements on offices of the Group wereconcluded. Though they are exposed to credit risk of their recipients, the Group strives to reduce the risk by
periodically grasping the credit status of recipients of lease and guarantee deposits.
Payment of all accounts payable and accounts payable-other, which are trade payable, is due within one year. Allof income tax payable, etc., which are unpaid income tax, inhabitant taxes (that mean prefectural and municipal
taxes) and enterprise tax, see the deadline for payment arrive within two months.
Short-term and long-term borrowings are mainly aimed at procuring funds concerning business transactions andtheir payment dates are within two years after the account settlement date at the longest.
These trade payables, borrowings, etc. are exposed to liquidity risk at the time of their settlement. In the Group,
such risk is managed through the preparation of monthly financing plans by each Group company and themaintenance of proper liquidity on hand.
(3) Supplementary explanations of matters relating to market value of financial instruments and others
Market values of financial instruments include rationally calculated prices when there are no market prices, aswell as prices based on market prices. Since certain fluctuation factors are incorporated in calculating the relevant
prices, the relevant prices may fluctuate when different preconditions and others are used in calculation.
(4) Concentration of credit risk
Of trade receivables as of the consolidated account settlement date of the fiscal year under review, 43.3% arereceivable from specific large clients.

-47-

2. Matters relating to market values of financial instruments and others
Amounts stated in B/S, market values and differences between them as of December 31, 2010 are as follows. Financial
instruments whose market values are deemed to be extremely difficult to determine are not included in the table below.
(Refer to Note.2.)(in thousands of yen unless otherwise noted)
Amount stated(1) Cash and deposits(2) Notes and accounts receivable(3) Accounts receivable-other(4) Investment securities(5) Lease and guarantee deposits
Total assets(1) Accounts payable(2) Short-term borrowings(3) Accounts payable-other(4) Income tax payable, etc.
(5) Long-term borrowings(*)

Market value

Difference

5,233,036
2,941,834
1,419,725
322,474
769,357

5,233,036
2,941,834
1,419,725
322,474
726,826(42,530)

10,686,428

10,643,898(42,530)

639,573
30,000607,229880,886
48,000639,573
30,000607,229880,886
48,742742

Total liabilities
2,205,689
2,206,431(*) Long-term borrowings include long-term borrowings that are planned to be repaid within one year.

742

Notes: 1.Calculation methods of market values of financial instruments and matters relating to securities
Assets(1) Cash and deposits, (2) Notes and accounts receivable, (3) Accounts receivable-other
Since these are settled in short terms, their market values approximate book values. Therefore, we deem theirbook values to be market values.
(4) Investment securities
With regard to market values of these, we deem prices of shares, etc. in exchanges to be their market values. As
for matters relating to securities by purpose of holding, please refer to Notes ‘Securities.’(5) Lease and guarantee deposits
Market values of these are calculated based on rationally estimated planned refund time for lease and guarantee
deposits and by the present value obtained by discounting by interest rates that take into consideration the credit riskof recipients of lease and guarantee deposits.
Liabilities(1) Accounts payable,(2)Short-term borrowings,(3)Accounts payable-other,(4)Income tax payable, etc.
Since these are settled in short terms, their market values approximate book values. Therefore, we deem theirbook values to be market values.
(5) Long-term borrowings(*)
Market values of long-term borrowings are calculated by discounting the total amount of the principal andinterest by the interest rates considered to be applicable to similar loans.

-48-

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

Amount stated

Unlisted stocks, etc.

¥1,119,130

Stocks of subsidiaries and affiliates¥336,955
These are not included in ‘(4) Investment securities,’ since there are no market prices for them and it is deemed to
be extremely difficult to determine their market values.
3. Projected redemption amounts of monetary claims after the consolidated account settlement date(in thousands of yen unless otherwise noted)
Over one year but
within five years

Within one year
5,214,191

Deposits
Notes and accounts
receivable-trade
Accounts receivable-other
Lease and guarantee deposits

Over five years
but within ten
years

-

2,941,834
1,419,725
78,057

Over ten years
-

-

-

-

-

451,655

158,325

81,318Total
9,653,808
451,655
158,325
4. Projected repayment amounts of long-term borrowings after the consolidated account settlement date

81,318(in thousands of yen unless otherwise noted)

Long-termloans payable

Within one
year

Over oneyear butwithin two
yearsOver twoyears butwithin threeyears

32,00016,000Over three
years butwithin four
years-

Over four
years butwithin five
years-

Over five
years
-

-

Total
32,00016,000(Additional information)
The ‘Accounting Standard for Financial Instruments’ (ASBJ Statement No. 10, March 10, 2008) and the ‘Implementation
Guidance on Disclosures about Fair Value of Financial Instruments’ (ASBJ Guidance No. 19, March 10, 2008) were applied
effective of the fiscal year under review.

-49-

Fiscal 2011 (from January 1, 2011 to December 31, 2011)
1. Matters relating to the status of financial instruments(1) Financial instrument guidelines
The Group limits fund management to highly safe, short-term deposits, etc., and procures fund mainly throughborrowings from banks. The Group does not engage in derivative transactions.
(2) Details and risk of financial instruments and risk management structure
Notes and accounts receivable and accounts receivable-other, which are trade receivables, are exposed to credit risks ofclients. With regard to the said risk, however, the Group manages due dates and balances by client in accordance with theGroup’s Credit Management Regulations, and if there is a possibility of delay in collection, it quickly and properly
handles the situation in cooperation with the sales division. Accounts receivable-other includes a case that is being
resolved through a lawsuit since there had been a difference in understanding of the delivery of deliverables under anagreement with the other party.
Securities shares, which are investment securities and , ars exposed to the fluctuation risk of market prices. They areshares of companies with which the Group has business relations and market prices periodically grasped are reported to
the Board of Directors.
Lease and guarantee deposits are mainly those put in when lease agreements on offices of the Group were concluded.
Though they are exposed to credit risk of their recipients, the Group strives to reduce risk by periodically grasping thecredit status of recipients of lease and guarantee deposits.
Payment of all accounts payable and accounts payable-other, which are trade payable, is due within one year. All of
income tax payable, etc., which are unpaid income tax, inhabitant taxes (that mean prefectural and municipal taxes) andenterprise tax, see the deadline for payment arrive within two months.
Short-term and long-term borrowings are mainly aimed at procuring funds concerning business transactions and their
payment dates are within two years after the account settlement date at the longest.
These trade payables, borrowings, etc. are exposed to liquidity risk at the time of their settlement. In the Group, suchrisk is managed through the preparation of monthly financing plans by each Group company and the maintenance ofproper liquidity on hand.
(3) Supplementary explanations of matters relating to market value of financial instruments and others
Market values of financial instruments include rationally calculated prices when there are no market values, as well as
prices based on market values. Since certain fluctuation factors are incorporated in calculating the relevant prices, therelevant values may fluctuate when different preconditions and others are used in calculation.
(4) Concentration of credit risk
Of trade receivables as of the consolidated account settlement date of the fiscal year under review, 25.3% arereceivable from specific large clients.

-50-

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

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

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

10,857,018

10,813,685(43,333)

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

Total liabilities
1,850,284
1,850,284(*) Long-term borrowings include long-term borrowings that are planned to be repaid within one year.

-

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

-51-

2. Financial instruments whose market values are deemed to be extremely difficult to determine(in thousands of yen unless otherwise noted)
Item
Amount stated
Unlisted stocks, etc.

¥1,061,341

Stocks of subsidiaries and affiliates¥351,523
These are not included in ‘(5) Investment securities,’ since there are no market prices for them and it is deemed to
be extremely difficult to determine their market values.
3. Projected redemption amounts of monetary claims and securities with maturity after the consolidated accountsettlement date(in thousands of yen unless otherwise noted)
Over one year but
Over five years but
Within one year
Over ten years
within five years
within ten years
Deposits
Notes and accounts
receivable-trade
Accounts receivable-other
Short-term investment
securities
Held-to-maturity
bonds
Bonds payable
Of other securities,
those with maturity
Bonds payable
Lease and guarantee
deposits

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

1,357,981---

699,310

-

-

-

1,800
34,145

15,350521,633

203,873

80,461

Total

9,925,876

536,983

203,873

80,461

4. Projected repayment amounts of long-term borrowings after the consolidated account settlement dateWithin one
year(in thousands of yen unless otherwise noted)
Over twoOver three
Over four
years but
years but
years but
Over five
within three
within four
within five
years
years
years
years

Over oneyear butwithin two
years

Long-termloans payable

16,000

-

-

-

-

-

Total

16,000

-

-

-

-

-

-52-

(Securities)
Fiscal 2010(December 31, 2010)
1. Other securities:(in thousands of yen unless otherwise noted)
Type

Securities stated in B/S
whose amount exceeds
acquisition cost

Amount statedAcquisition cost

Difference(1) Stocks

253,103

101,121

151,981(2) Bonds

-

-

-

-

-

-

-

-

-

-

253,103

101,121

151,981

69,371

82,935(13,564)

1) Central/local
government
bonds

-

-

-

2) Bonds
payable---3) Other

-

-

-

-

-

-

69,371

82,935(13,564)

322,474

184,056

138,417

1) Central/local
government
bonds

-

2) Bonds
payable-3) Other(3) Other
Subtotal(1) Stocks(2) Bonds

Securities stated in B/S
whose amount does notexceed acquisition cost(3) Other
Subtotal
Total

Notes: Unlisted shares, etc. (the amount stated in B/S: ¥1,119,130 thousand) are not included in ‘Other securities’ in the table, since they have nomarket price and it is deemed to be very difficult to grasp their market value.

2. ’Other securities’ sold in fiscal 2010 (from January 1, 2010 to December 31, 2010)(in thousands of yen unless otherwise noted)
Type(1) Stocks

Sale value

Total profits on sale

Total losses on sale82,62430,51823,993

1) Central/local
government bonds

-

-

-

2)

Corporate bonds

-

-

-

3)

Other

-

-

-

-

-

-

82,62430,51823,993(2) Bonds(3) OtherTotal

3. Securities for which impairment losses are recognized
In the fiscal year under review, impairment losses of ¥73,430 thousand were posted for securities (unlisted shares among
other securities, for which the market price was not available: ¥73,430 thousand). When the market value of the securities at theend of the fiscal year had declined by more than 50% from the acquisition price, the full value was written off as an asset
impairment loss. When the market value declined by 30%-50% from the acquisition price, the Group decided whether or not towrite off the amount as an asset impairment loss after considering whether the total amount of this decline in value wassignificant, and considering the likelihood of a recovery in value.

-53-

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

(2)
(3)
(1)

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

(2)
(3)

Type
Central/local
government
bonds
Bonds payable
Other
Subtotal
Central/local
government
bonds
Bonds payable
Other
Subtotal(in thousands of yen unless otherwise noted)
Market value
Difference

Amount stated

Total

-

-

-

-

-

-

-

-

-

699,310699,310699,310

696,780
696,780
696,780(2,530)(2,530)(2,530)2． Other securities:
Type(1) Stocks(2) Bonds
1) Central/local
government
bonds2) Bonds payable3) Other(3) Other
Subtotal(1) Stocks(2) Bonds
1) Central/local
government
bonds2) Bonds payable3) Other(3) Other
Subtotal

Securities stated in B/S
whose amount exceeds
acquisition cost

Securities stated in B/S
whose amount does notexceed acquisition cost

Amount stated
50,825(in thousands of yen unless otherwise noted)
Acquisition cost
Difference
49,657
1,168

-

-

-

50,82561,75049,65765,0701,168(3,320)--61,750112,575

Total

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

Notes: Unlisted stocks, etc. (amount stated in B/S: ¥1,061,341 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.

-54-

3. ’Other securities’ sold in fiscal 2011(from January 1, 2011 to December 31, 2011)(in thousands of yen unless otherwise noted)
Type
profits on sale
Total profits on sale
Total losses on sale(1) Stocks
228,270
160,290
1,349(2) Bonds
1) Central/local
government bonds2) Corporate bonds3) Other(3) Other
Total
228,270
160,290
1,349
4. Securities for which impairment losses are recognized
In the fiscal year under review, impairment losses of ¥66,049 thousand were posted for securities (unlisted shares among
other securities, for which the market price was not available: ¥66,049 thousand). When the market value of the securities atthe end of the fiscal year had declined by more than 50% from the acquisition price, the full value was written off as an asset
impairment loss. When the market value declined by 30%-50% from the acquisition price, the Group decided whether or not
to write off the amount as an asset impairment loss after considering whether the total amount of this decline in value wassignificant, and considering the likelihood of a recovery in value.
(Derivative transactions)
There are no applicable items, since the Group does not utilize derivative transactions.
(Retirement benefits)
Fiscal 2010
1. General information of adopted employee retirement benefit plans
Some consolidated subsidiaries had provided the lump-sum severance payment plan and the tax-qualified pension plan at
the same time as defined-benefit corporate pension plans. However, they abolished the lump-sum severance payment planand the tax-qualified pension plan as of December 31, 2010. The outstanding balance of allowance for retirement benefits asof December 31, 2010 has been transferred to ‘Accounts payable-other’ under current liabilities as fixed obligations.
2. Retirement benefit obligations(in thousands of yen unless otherwise noted)(1) Retirement benefit obligations(2) Plan assets(3) Allowance for retirement
benefits(1)+(2)3. Breakdown of retirement benefit obligations(1) Service cost-¥43,917
Notes:

Consolidated subsidiaries adopt the non-actuarial method for calculating projected benefit obligations.

4. Basis for calculation of projected benefit obligations
Basis for calculation of projected benefit obligations is omitted, since consolidated subsidiaries adopt the non-actuarial
method for calculating projected benefit obligations.
(Fiscal 2011)
None

-55-

(Stock options)Fiscal 2010 (from January 1, 2010 to December 31, 2010)
1. Details, scale and fluctuation status of stock options(1) Details of stock options
Stock options of 2005
Director of the Company

Classification and number ofgrantees

Number of stock options
Date of grantRight allotment conditions

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

Subject service period
Exercise period(2) Scale and fluctuation status of stock options
Stock options that existed in the fiscal year under review are subject. The number of stock options is converted into andpresented in the number of shares.
1) Number of stock options
Stock option of 2005
Before right allotment
End of the previous
fiscal year
Grant
Lapse
Right allotment
Balance of stock
options not allotted
After right allotment
End of the previous
fiscal year
Right allotment
Exercise of right
Lapse
Balance of stock
options not
exercised(Share)(Share)
4,600
616
3,984

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

65,205--56-

Fiscal 2011 (from January 1, 2011 to December 31, 2011)
1. Details, scale and fluctuation status of stock options(1) Details of stock options
Stock option of 2005
Director of the Company
5
Employee of the Company
467
Classification and number of
Director of subsidiary of the
grantees
Company
1
Employee of subsidiary of theCompany
6
Number of stock options
Common stock8,000 shares
Date of grantAugust 25, 2005
Right allotment conditions

Having continued to work fromthe date of grant (August 25,2005) to the date of rightallotment (August 24, 2008)

From August 25, 2005 to August24, 2008
From August 25, 2008 to March
Exercise period
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 intoand presented in the number of shares.
1) Number of stock options
Stock option of 2005
Before right allotment(Share)End of the previous
fiscal year
Grant
Lapse
Right allotment
Balance of stock
options not allotted
After right allotment(Share)End of the previous
3,984
fiscal year
Right allotment
Exercise of right
Lapse
600
Balance of stock
options not
3,384exercised
Subject service period

2) Unit price information

Exercise price(Yen)
Average stock priceat the time of(Yen)exercise
Fair assessed unit price (Date of grant)(Yen)

Stock option of 2005
65,205--57-

(Business combinations)Fiscal 2010 (from January 1, 2010 to December 31, 2010)
None
Fiscal 2011 (from January 1, 2011 to December 31, 2011)(Business combination through acquisition)
Turning of Brightree Solutions Sdn Bhd. (hereinafter ‘Brightree’) into a subsidiary by North Consulting Group Pte. Ltd.
(hereinafter ‘NCG’), a consolidated subsidiary of the Company
1. Overview of business combination(1) Name and business activities of the acquired company
Name of the acquired company: Brightree Solutions Sdn Bhd.
Business activities:
Introduction, customization and operation and maintenance of ERP in Malaysia Brightree
Solutions Sdn Bhd.
(2) Main reasons for business combination
The Group believes that it will be able to expand business domain, enhance delivery capability and expand clientbase in Malaysia and its neighboring countries by mutually making the most of high-value-added IT consulting
know-how and client network of NCG and plenty of introduction track records and operation and maintenance baseof Brightree through turning of Brightree into a subsidiary by NCG.
(3) Date of business combination
October 1, 2011(4) Legal form of business combination
Acquisition of shares(5) Name of the company after business combination
Brightree Solutions Sdn Bhd.
(6) Acquired voting right ratio
51.0%(7) Main ground for deciding the company to be acquired
Because NCG, a wholly owned subsidiary of the Company, acquired 51.0% of voting rights of Brithtree throughacquisition of shares in exchange for cash.
2. Period of operating results of the acquired company, which is included in the consolidated financial statements
From October 1, 2011 to December 31, 2011
3. Acquisition cost of the acquired company and its breakdown
Consideration for acquisition
Cash 144,540 Thousand Yen
Acquisition cost
144,540 Thousand Yen
4. Amount of goodwill that occurred, cause of occurrence, amortization method and amortization period(1) Amount of goodwill that occurred
137,000Thousand Yen(2) Cause of occurrence
Mainly surplus profitability expected from expansion of business domain by Brightree in Malaysia(3) Amortization method and amortization period
Equal amortization over three years
5. Amount of assets received and obligations taken over on the date of business combination and their breakdown
Current assets
47,462 Thousand Yen
Noncurrent assets
6,049
Total assets
53,512Current liabilities(38,981)Noncurrent liabilities(443)
Total liabilities(39,425)-58-

Turning of ELECTRA (T) LTD. (hereinafter ‘ELECTRA’) into a subsidiary by North Consulting Group Pte. Ltd.
(hereinafter ‘NCG’), a consolidated subsidiary of the Company
1. Overview of business combination(1) Name and business activities of the acquired company
Name of the acquired company: ELECTRA (T) LTD.
Business activities: Introduction, customization and operation and maintenance of ERP in Thailand(2) Main reasons for business combination
The Group believes that it will be able to expand business domain, enhance delivery capability and expand clientbase in Thailand and its neighboring countries by mutually making the most of high-value-added IT consulting
know-how and client network of NCG and plenty of introduction track records and operation and maintenance baseof ELECTRA through turning of ELECTRA into a subsidiary by NCG.
(3) Date of business combination
November 30, 2011(4) Legal form of business combination
Acquisition of shares(5) Name of the company after business combination
ELECTRA (T) LTD. (Its trade name is planned to be changed to North Consulting Group (Thailand) CO., LTD. on
January 6, 2012.)(6) Acquired voting right ratio
100.0%
100.0%(7) Main ground for deciding the company to be acquired
Because NCG, a wholly owned subsidiary of the Company, acquired 100.0% of voting rights of ELECTRA
through acquisition of shares in exchange for cash.
2. Period of operating results of the acquired company, which is included in the consolidated financial statements
Operating results of the acquired company are not included in the consolidated financial statements for the fiscal
year under review, since the deemed date of acquisition of the consolidated subsidiary is the last day of the fiscal
year.
3. Acquisition cost of the acquired company and its breakdown
Consideration for acquisition
Cash 20,953 Thousand Yen
Acquisition cost
20,953 Thousand Yen
4. Amount of goodwill that occurred, cause of occurrence, amortization method and amortization period(1) Amount of goodwill that occurred
16,804 Thousand Yen(2) Cause of occurrence
Mainly surplus profitability expected from expansion of business domain by ELECTRA in Thailand(3) Amortization method and amortization period
Equal amortization over three years
5. Amount of assets received and obligations taken over on the date of business combination and their breakdown
Current assets
8,247 Thousand Yen
Noncurrent assets
883
Total assets
9,130
Current liabilities(5,279)Total liabilities(5,279)-59-

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

-60-

(Asset retirement obligations)
At the end of fiscal 2011 (December 31, 2011)
Of asset retirement obligations, those stated in the consolidated balance sheetsa) Overview of the relevant asset retirement obligations
Obligation of restoration to original condition following conclusion of real estate lease agreements on offices,
including the head office, and storesb) Calculation method of the amount of the relevant asset retirement obligations
The amount of asset retirement obligations is calculated by estimating the usable period to be seven to 20 years
from the acquisition and using discount rate of 0.726% to 1.186%.
c) Increase/decrease in total amount of the relevant asset retirement obligations in fiscal 2011
Balance at the beginning of the period (Note)
331,237 Thousand Yen
Increase due to acquisition of tangible fixed assets
11,437
Adjustment due to passage of time
2,899
Decrease due to fulfillment of asset retirement obligations(36,477)
311
Other increase (decrease)
Balance at the end of the period
309,408
Notes: The balance at the beginning of the fiscal year resulted from the application 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) effective of the fiscal year under review.

(Real estate, including lease)
Real estate, including lease, is omitted, since its total is of little significance in terms of monetary amounts.
(Special purpose company subject to disclosure)
None(Per share data)
Net asset value per share
Net income per share

Notes:

Fiscal 2010
(from January 1, 2010 to December 31, 2010)¥23,349.47¥3,485.23
Fully diluted net income per share is not statedbecause the average stock price during theperiod is below the exercise price of stockacquisition rights and hence net income pershare is not diluted.

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

Net income per share is calculated based on the following:

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

Fiscal 2010
(from January 1, 2010 to December 31, 2010)

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

1,591,467

1,715,476--

1,591,467

1,715,476

456,632

456,632

Stock options granted by resolution of theOrdinary General Meeting of Shareholders on
March 24, 2005 (Stock acquisition rights:
996units)
Common stock: shares 3,984-61-

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

(Significant subsequent events)
Fiscal 2010
(from January 1, 2010 to December 31, 2010)─────────

Fiscal 2011
(from January 1, 2011 to December 31, 2011)
Purchase of treasury stock
At the Board of Directors meeting of the Company held
on February 7, 2012, the Company decided to purchasetreasury stock pursuant to Article 156, Paragraph 1 of theCompanies Act, applied by the reading of terms underprovisions of Article 165, Paragraph 3 of the same act.
(1) Reason for purchase of treasury stock
Treasury stock will be purchased in order to carry out
flexible capital policy to cope with changes in the
management environment.
(2) Type of stock to be purchased
Common stock(3) Number of shares to be purchased
6,400 (ceiling limit)(4) Total amount of stock acquisition price
250,000,000 yen (ceiling limit)(5) Purchase method
Purchase in the market through a trust bank(6) Purchase period
From February 8, 2012 to March 19, 2012-62-

5. Non-consolidated Financial Statements(1) Balance sheets
Fiscal 2010
(December 31, 2010)
AssetsCurrent assets
Cash and deposits
Accounts receivable-trade
Short-term investment securities
Work in process
Prepaid expenses
Deferred tax assets
Short-term loans receivable from subsidiaries andaffiliates
Accounts receivable-other
Other
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Total tangible fixed assets
Intangible assets
Patent right
Right of trademark
Software
Other
Total intangible fixed assets
Investments and other assets
Investment securities
Stocks of subsidiaries and affiliates
Long-term loans receivable from subsidiaries andaffiliates
Deferred tax assets
Lease and guarantee deposits
Other
Allowance for doubtful accounts
Allowance for investment loss
Total investments and other assets
Total fixed assets
Total assets(in thousands of yen)
Fiscal 2011
December 31,2011

4,202,350
2,410,164
8,007
253,852
107,567

3,840,226
2,119,444
699,310248,636
82,242120,000
*3

*4

*1
*1

-63-

1,422,568
16,092
8,540,603

120,000*3

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

424,270(236,728)
187,541
997,587(844,666)
152,920
23,719364,181590,082(388,075)
202,007
1,091,012(912,050)
178,961
18,825
399,794525
1,237
122,631
10,710135,104

345
949
337,492
10,710349,497

1,117,404
1,286,445

907,505
1,353,318

1,110,226

1,384,683

98,246
647,705
22,060(486,792)(313,788)
3,481,505
3,980,792
12,521,396

188,853
723,761
15,070(567,492)(313,788)
3,691,911
4,441,204
12,997,775*1*1

Fiscal 2010
(December 31, 2010)
Liabilities
Current liabilities
Accounts payable-trade
Current portion of long-term loans payable
Accounts payable-otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Deposits received
Unearned revenue
Reserve for quality assurance
Reserve for loss on projects
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Asset retirement obligations
Total non-current liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Legal capital surplus
Total capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
Retained earnings brought forward
Total retained earnings
Treasury stock
Total shareholders' equity
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets-64-(in thousands of yen)
Fiscal 2011
December 31,2011

236,600
32,000400,669248
857,329
73,175
159,788
169,474
58,0317,000
1,994,316

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

16,00016,0002,010,316

195,380
195,380
1,933,612

1,421,815

1,421,815

2,495,772
2,495,772

2,495,772
2,495,772

27,74827,748

7,655,316
7,683,065(1,171,668)
10,428,984

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

82,09582,095
10,511,079
12,521,396(1,384)(1,384)
11,064,163
12,997,775

(2) Non-consolidated statements of income
Fiscal 2010
(from January 1, 2010 to
December 31, 2010)
Net sales
IT Consulting Business
IT Consulting service
Procurement services related to hardware
Total of IT Consulting Business
Package & Service Business
Package & service
Procurement services related to hardware
Total of Package & service
Total net sales
Cost of sales
IT Consulting Business
IT Consulting service
Procurement services related to hardware
Total of IT Consulting Business
Package & Service Business
Package & service
Procurement services related to hardware
Total of Package & service
Total cost of sales
Gross profit
Selling, general and administrative expenses
Advertising expenses
Directors' compensations
Salaries and bonuses
Other salaries
Welfare expenses
Training expenses
Research and development expenses
Depreciation and amortization
Rent expenses
Recruiting expenses
Amortization of goodwill
Other
Total selling, general and administrative expenses
Operating income

*7

-65-

(in thousands of yen)
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)

12,986,988
776,994
13,763,983

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

498,456
28,053
526,509
14,290,493

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

6,935,230
636,653
7,571,884*7

8,012,493
299,032
8,311,525

256,638
23,777
280,416
7,852,301
6,438,192

73,603
9,903
83,506
8,395,032
6,235,214

370,442
160,850
1,637,210
97,22566,795
107,633*1
49,34445,056
332,80182,504
1,031
447,447
3,398,344
3,039,847

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

(in thousands of yen)
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)

Fiscal 2010
(from January 1, 2010 to
December 31, 2010)
Non-operating income
Interest income
Dividends income
Proceeds from compensation for damage
Group management expense
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Guarantee commission
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
Gain on sales of noncurrent assets
Gain on extinguishment of tie-in shares
Total extraordinary income
Extraordinary loss
Loss on retirement of noncurrent assets
Loss on sales of investment securities
Loss on valuation of stocks of subsidiaries and affiliates
Impairment loss
Litigation expenses
Provision of allowance for doubtful accounts
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Loss on liquidation of subsidiaries and affiliates
Other
Total Extraordinary losses
Net income before taxes, Corporate taxes,
Residential and enterprise taxes
Income taxes-deferred
Total income taxes
Net income*2

14,274
16,94011,14027,982
6,712
77,051

*2

*2

*2

3,419
3,303
2,062
8,785
3,108,112
*3

*4

*5
*6

12,242
17,47523,8852,777
3,121
59,501
987
233
217
1,438
2,803,092

29,391
3,066
32,4584,344
23,99329,970242,785
30,000128,398

160,275
107
38,774
199,157

*3

*4

*5
*6

15,177474,668
2,665,902
1,259,405(74,333)
1,185,071
1,480,830-66-

15,291
1,349
4,893
80,699161,754*8

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

Statement of cost of sales
1. IT Consulting service business(1) IT Consulting service
Fiscal 2010
(from January 1, 2010 to
December 31, 2010)
Item
I

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

II
III

Notes

Amount(in thousands of yen unless otherwise noted)
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Ratio
AmountRatio (%)(%)

3,653,991
471,058

4,125,049

59.5

3,465,432
437,031

3,902,464

48.6

1,725,167

1,725,167

24.9

2,963,535

2,963,535

36.9

1,162,221

14.5

8,028,221

100.0

372,006
99,662396,908
72,702

423,446
76,659461,167
64,301(12,856)

16,0487,000(2,800)150,649

1,086,073

15.6

6,936,290

100.0

123,399--

6,936,290

8,028,221

-

-

1,059
6,935,230

15,727
8,012,493*1. The table below provides a breakdown of transfers to other accounts.

(in thousands of yen unless otherwise noted)
Item

Fiscal 2010
(from January 1, 2010 to
December 31, 2010)

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

Transfer to selling, general and administrative expenses¥1,059¥15,727

Total¥1,059¥15,727

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

-67-

(2) Procurement services related to hardware(in thousands of yen unless otherwise noted)
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)
Ratio
Ratio (%)
Amount(%)

Fiscal 2010
(from January 1, 2010 to
December 31, 2010)
Item

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

-

-

-

-

636,448204
636,653

298,97755
299,032

-

-

-

-

636,653

299,032

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

-68-

2. Package & Service Business(1) Package & service

Item
I

II
III

Notes

Labor expenses
1. Salaries and bonuses
2. Welfare expenses
Subcontract expenses
1. Subcontract expenses
Overheads
1. Traveling expenses
2. Depreciation and amortization
3. Rent expenses
4. Supplies expenses
5. Provision (reversal) of reservefor quality assurance
6. Other
Total manufacturing expenses
in the period
Work in process at the
beginning of the period
TotalWork in process at the end of
the period
Transfer to other account*1
Cost of sales(in thousands of yen unless otherwise noted)
Fiscal 2010
Fiscal 2011
(from January 1, 2010 to(from January 1, 2011 to
December 31, 2010)
December 31, 2011)
Ratio
AmountRatio (%)
Amount(%)
122,661
17,395140,056

53.1

25,112
5,590

30,70338.6

28,75628,756

10.9

3,297

3,297

4.1

45,566

57.3

79,567100.0

15,544
4,026
32,620
4,155
3,586

4,223
607
8,049
810
(88)

35,021

94,95336.0

263,766

100.0

31,963926

8,007

264,693

87,575

8,007

-

46
256,638

13,97173,603*1.The table below provides a breakdown of transfers to other accounts.

(in thousands of yen unless otherwise noted)
Item

Fiscal 2010
(from January 1, 2010 to December
31, 2010)

Transfer to selling, general and administrative
expensesTotal
2. Actual job-order costing for each project is used to compute costs.
(2) Procurement services related to hardware

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

46

13,971

46

13,971(in thousands of yen unless otherwise noted)
Fiscal 2011
(from January 1, 2011 to December
31, 2011)
Ratio
Ratio (%)
Amount(%)

Fiscal 2010
(from January 1, 2010 to December
31, 2010)
Item

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

-69-

28

-

-

-

23,74923,777

9,903
9,903

-

-

-

-

23,7779,903

(3) Statements of changes in net assets
Fiscal 2010
(from January 1, 2010 to
December 31, 2010)
Shareholders' equity
Capital stock
Balance at the end of the previous period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Capital surplus
Legal capital surplus
Balance at the end of the previous period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Total capital surplus
Balance at the end of the previous period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Retained earnings
Legal retained earnings
Balance at the end of the previous period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Other retained earnings
Retained earnings brought forward
Balance at the end of the previous period
Changes of items during the period
Dividends from surplus
Net income
Decrease by corporate division-split-off type
Total changes of items during the period
Balance at the end of the period
Total retained earnings
Balance at the end of the previous period
Changes of items during the period
Dividends from surplus
Net income
Decrease by corporate division-split-off type
Total changes of items during the period
Balance at the end of the period-70-(in thousands of yen)
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)

1,421,815

1,421,815

1,421,815

1,421,815

2,495,772

2,495,772

2,495,772

2,495,772

2,495,772

2,495,772

2,495,772

2,495,772

27,74827,74827,74827,7486,905,097

7,655,316(730,611)
1,480,830
750,219
7,655,316(890,432)
1,547,910(20,914)636,563
8,291,880

6,932,845

7,683,065(730,611)
1,480,830
750,219
7,683,065(890,432)
1,547,910(20,914)636,5638,319,628

Fiscal 2010
(from January 1, 2010 to
December 31, 2010)
Treasury stock
Balance at the end of the previous period
Changes of items during the period
Total changes of items during the period
Balance at the end of the period
Total shareholders' equity
Balance at the end of the previous period
Changes of items during the period
Dividends from surplus
Net income
Decrease by corporate division-split-off type
Total changes of items during the period
Balance at the end of the period
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Balance at the end of the previous period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of the period
Total valuation and translation adjustments
Balance at the end of the previous period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of the period
Total net assets
Balance at the end of the previous period
Changes of items during the period
Dividends from surplus
Net income
Decrease by corporate division-split-off typeNet changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of the period-71-(in thousands of yen)
Fiscal 2011
(from January 1, 2011 to
December 31, 2011)(1,171,668)(1,171,668)(1,171,668)(1,171,668)

9,678,764

10,428,984(730,611)
1,140,830
750,219
10,428,984(890,432)
1,547,910(20,914)636,563
11,065,547

62,35582,09519,74019,74082,095(83,480)(83,480)(1,384)62,35582,09519,74019,74082,095(83,480)(83,480)(1,384)

9,741,120

10,511,079(730,611)
1,480,830
19,740769,959
10,511,079(890,432)
1,547,910(20,914)(83,480)
553,083
11,064,163

(4) Notes regarding the premise of a going concern
None

-72-

(5) Significant Accounting Policies
Item
1.

2.

3.

Valuation standards andmethods for securities

Valuation standards andmethod for inventories

Depreciation method of
fixed assets

Fiscal 2010
(from January 1, 2010 to December 31, 2010)──────
(2) Stocks issued by subsidiaries/affiliates
Stated at cost based on moving averagemethod.
(3) Other securities:
Marketable securities:
Stated at fair value based on the market
price as of the end of the financial period(Unrealized holding gains/losses arereported as a net amount in a separate
component of shareholders’ equity. Costof sale is calculated based on moving
average method).
Same as on the left.
Stated at cost based on moving averagemethod.
(1) Merchandise and finished goods
Stated at lower of cost or market using
the gross average method (amounts in thebalance sheets are calculated using themethod to devaluate the book value
according to the decrease in profitability)(2) Work in process
Stated at cost based on the specific cost
method (amounts in the balance sheets
are calculated using the method todevaluate the book value according to thedecrease in profitability).
(1) Property, plant and equipment
Declining balance method:
If the acquisition cost of the asset to be
depreciated is between ¥100,000 and¥200,000, it is depreciated evenly using
straight-line method over three (3) years.
Useful life are as follows:
Buildings
3-31 years
Tools, furniture and fixtures 3-10 years(2) Intangible assets(a) Software for in-house use
Software for in-house use is depreciatedusing the straight-line method over its usefullife (5 years).
(b) Software for sale
Software for sale is depreciated by thelarger of either of the amount calculated
based on projected sales volume or theamount from the straight-line method overthe period for which they are expected toremain salable (3 years).
(c) Goodwill
Goodwill is amortized evenly over its
useful life.
However, if they are of little significancein terms of monetary amounts they aretreated as profits or losses for the fiscal year
in which they occur.
(d) Other
Straight-line method-73-

Fiscal 2011
(from January 1, 2011 to December 31, 2011)(1) Held-to-maturity bonds
Amortized cost method (straight-line
method)(2) Stocks issued by subsidiaries/affiliates
Same as on the left.
(3) Other securities:
Marketable securities:
Same as on the left.
Same as on the left.
Same as on the left.

(1)

Merchandise and finished goods
Same as on the left.

──────

(1)

Property, plant and equipment
Same as on the left.

(2)
(a)

Intangible assets
Software for in-house use
Same as on the left.

(b)

Software for saleSame as on the left.

(c)

Goodwill
Same as on the left.

(d)

Other
Same as on the left.

Item
4. Accounting standards forallowances/ reserves

Fiscal 2010
(from January 1, 2010 to December 31, 2010)(1) Allowance for doubtful accounts
To prepare for losses incurred throughbad debts, the amount of potential loss iscalculated by using the historical loss ratio incase of non-classified loans/receivables.
Potential losses for classified
loans/receivables are individually assessed(2) Reserve for quality assurance
In projects related to open system
consultation and system development (ITconsulting services and Packaging &Services), where technological changes aretaking place rapidly, there are occasions
where we are obliged to provide services toour clients after sales are stated in order toresolve problems that were unforeseeable atthe time of the signing of the contract or asof the close of accounting period. There are
instances where Future Architect provides
such services without compensation in orderto guarantee quality standards that will fully
satisfy its customers in IT consulting services
and Packaging & Services.
To prepare for additional cost of sales in
IT consulting services and Packaging &Services that may arise after sales are stated,
estimated amount of such additional cost,calculated based on past experience, is statedin the reserve for quality assurance.
estimate the amount of loss.

Fiscal 2011
(from January 1, 2011 to December 31, 2011)(1) Allowance for doubtful accounts
Same as on the left.

(3) Reserve for loss on projects
In projects related to open system
consultation and system development (ITconsulting services and Packaging &Services), where technological changes aretaking place rapidly, there are occasions
where we are obliged to provide services toour clients in order to resolve problems thatwere unforeseeable at the time of the signingof the contract.
To prepare for future loss in IT
consulting services and Packaging &Services, estimated amount of such loss inand after the following fiscal year is stated in
the reserve for loss on project, concerning
ongoing projects for which loss is projected
to be incurred as of the end of the fiscal year
under review and for which it is possible torationally

(3)

-74-

(2)

Reserve for quality assuranceSame as on the left.

Reserve for loss on projects
In projects related to open system
consultation and system development (ITconsulting services and Packaging &Services), where technological changes aretaking place rapidly, there are occasions
where we are obliged to provide services
to our clients in order to resolve problems
that were unforeseeable at the time of thesigning of the contract.
To prepare for future loss in IT
consulting services and Packaging &Services, estimated amount of such loss inand after the following fiscal year is statedin the reserve for loss on project,
concerning ongoing projects for which loss
is projected to be incurred as of the end of
the fiscal year under review and for which
it is possible to rationally estimate theamount of loss.

Item

5.

Recognition standards forimportant income andexpenses

6.

Other material information
concerning the compiling offinancial statements

Fiscal 2010
(from January 1, 2010 to December 31, 2010)(Additional information)
Reserve for future loss expected to occur
concerning ongoing projects was previously
stated in the reserve for quality assurance.
However, with the application of the‘Accounting Standard for Construction
Contracts’ (ASBJ Statement No. 15, December
27, 2007) and the ‘Guidance on AccountingStandard for Construction Contracts’ (ASBJ
Guidance No. 18, December 27, 2007), reservefor future loss projected to be incurredconcerning ongoing projects is stated in reserve
for loss on project from the fiscal year underreview.
(4) Allowance for investment loss
To prepare for losses on investments inaffiliated companies, estimated amount ofpotential losses, calculated in considerationof financial conditions and othercharacteristics of the relevant companies, isstated in the reserve for investment losses.
Recognition standards for sales and cost of
sales for IT consulting services
a. Project whose results concerning the partthat had advanced by the end of the fiscal
year under review are deemed to becertain
Percentage of completion method(Progress rate is estimated in proportion
to cost.)b. Other projects
Completed contract method
Accounting treatment of consumption taxes,
etc.
Transactions subject to consumption
taxes are recorded at amounts exclusiveof consumption taxes.

-75-

Fiscal 2011
(from January 1, 2011 to December 31, 2011)(4)

Allowance for investment loss
Same as on the left.

Recognition standards for sales and cost forsales of IT consulting services
Same as on the left.

Accounting treatment of consumption taxes,
etc.
Same as on the left.

(6) Change in accounting principles
Fiscal 2010
(from January 1, 2010 to December 31, 2010)(Accounting standard for construction contracts)
The ‘Accounting Standard for Construction Contracts’ (ASBJ
Statement No. 15, December 27, 2007) and the ‘Guidance on
Accounting Standard for Construction Contracts’ (ASBJ
Guidance No. 18, December 27, 2007) were applied effective of
the fiscal year under review.
This adoption had no effect on the Company’s earnings for the
fiscal year under review.

Fiscal 2011
(from January 1, 2011 to December 31, 2011)(Accounting standard for asset retirement obligations)The ‘Accounting Standard for Asset Retirement
Obligations’ (ASBJ Statement No. 18, March 31, 2008) andthe ‘Guidance on Accounting Standard for Asset Retirement
Obligations’ (ASBJ Guidance No.21, March 31, 2008’ wereapplied effective of the fiscal year under review.
As a result of this change, operating income and ordinary
income decreased ¥29,129 thousand, respectively, and income
before income taxes declined ¥190,883 thousand. The amountof the change in asset retirement obligations incurred due tothe initial application of the accounting standard, etc. was¥216,817 thousand yen.

(7) Change in classification
Fiscal 2010
(from January 1, 2010 to December 31, 2010)(Balance sheets)
With the application of the ‘Accounting Standard forConstruction Contracts’ (ASBJ Statement No. 15, December 27,2007) and the ‘Guidance on Accounting Standard forConstruction Contracts’ (ASBJ Guidance No. 18, December 27,2007) from the fiscal year under review, what was stated as‘Reserve for quality assurance’ in the previous fiscal year are
separately stated as ‘Reserve for quality assurance’ with regard toreserve for loss on repair to be provided without compensation,
which is projected to occur after the end of projects, and‘Reserve for loss on project’ concerning reserve for future loss,
projected to be incurred about ongoing projects.
‘Reserve for quality assurance’ in the previous fiscal year, whichamounted to ¥74,301 thousand, did not include what fell under‘Reserve for loss on project.
─────────

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

(Income Statement)‘Guarantee commission’ (¥473 thousand in the previous
fiscal year), which was included in the ‘Other’ section of the
non-operating expenses account in the previous fiscal year,
was reported separately in the fiscal year under review, since
its amount exceeded 10/100 of the total non-operating
expenses in the period under review.

-76-

(8) Notes to non-consolidated financial statements(Notes regarding balance sheets)
Fiscal 2010
December 31,2010*1.
Items concerning affiliates
Assets and liabilities in relation to affiliated companies,
which are not separately stated, are as follows:
Allowance for doubtful accounts-¥486,792
Allowance for investment loss-¥313,788
2. Debt guarantees
Guarantee against trade accounts payable of affiliatedcompany
Guarantee
AmountUoei Shoten Corporation
78,859 thousand yen*3.
Lawsuit
The Company initiated legal action in the Tokyo
District Court relating to payment of contract fees, etc.
(¥1,462 million) against NITTO DENKOCORPORATION as of November 30, 2009.
The Company delivered the deliverables on September
4, 2009 in accordance with an agreement with NITTO
DENKO. However, NITTO DENKO did not recognize
the action by the Company as delivery and refused to pay
the contract fees etc. Against this backdrop, the Company
initiated legal action.
*4.

(in thousands of yen unless otherwise noted)
Fiscal 2011
December 31,2011*1.
Items concerning affiliates
Assets and liabilities in relation to affiliated companies,
which are not separately stated, are as follows:
Allowance for doubtful accounts-¥567,492
Allowance for investment loss-¥313,788
2. Debt guarantees
Guarantee against trade accounts payable of affiliatedcompany
Guarantee
AmountUoei Shoten Corporation
72,642 thousand yen*3.
LawsuitSame as on the left.

Of investment securities, ¥168,686 thousand is lent
under stock loan agreements.

─────────

(Notes regarding consolidated statements of income)

*1.

*2.

*3.

*4.

Fiscal 2010
(from January 1, 2010 to December 31, 2010)
Total amount of research & development
expenditures
Research & development expenses included in selling,
general and administrative expenses
49,344
Transactions with group affiliates are summarized
below:
Interest income
13,229Group management expense
27,982
Breakdown of gain on sales of fixed assets
Tools, furniture and fixtures
Total

*1.

*2.

Transactions with group affiliates are summarized below:
Interest income
11,159Group management expense
23,885*3.

Breakdown of gain on sales of fixed assets
Tools, furniture and fixtures
Total

3,066
3,066

Breakdown of loss on retirement of fixed assets
Buildings
3,771
Tools, furniture and fixtures
573
Total
4,344

(in thousands of yen unless otherwise noted)
Fiscal 2011
(from January 1, 2011 to December 31, 2011)
Total amount of research & development expenditures
Research & development expenses included in selling,
general and administrative expenses
24,608*4.

-77-

Breakdown of loss on retirement of fixed assets
Buildings
Tools, furniture and fixtures
Total

107
107
15,156134
15,291Fiscal 2010
(from January 1, 2010 to December 31, 2010)*5.
Impairment loss
In the fiscal year under review, the Group reported
impairment losses of the following asset groups.
(1) Main assets on which impairment losses were recognized
Use
Type
Location
In-house system
Software(2) Background of the recognition of impairment losses
As the Group changed to a policy to adopt the latest outside
software and the state-of-the-art proprietary design methodof the Company for the development of in-house systems
under development in and after the following fiscal year,
what cannot be utilized by such new technologies and new
design method occurred in existing deliverables. The Group
recognized the portion that cannot be utilized as impairment
losses.
(3) Amounts of impairment losses
Software242,785
Total
242,785(in thousands of yen unless otherwise noted)
Fiscal 2011
(from January 1, 2011 to December 31, 2011)*5.
Impairment loss
In the fiscal year under review, the Group reported
impairment losses of the following asset groups.
(1) Main assets on which impairment losses were recognized
Use
Type
Location
Nasushiobara,
Idle asset
Land
Tochigi Prefecture(2) Background of the recognition of impairment losses
The Group reduced the book value of idle land in
Nasushiobara, Tochigi Prefecture, for which it has no specificplan for future use, to its recoverable amount, and recognized
the difference between the book value and the recoverable
value as impairment losses.

(3) Amounts of impairment losses
Land
Total

4,893
4,893

(4) Asset grouping method
The Company groups assets by businesses in terms ofmanagement accounting, which it regards as the smallest
units that generate almost independent cash flows.

(4) Asset grouping method
The Company groups assets by businesses in terms ofmanagement accounting, which it regards as the smallest
units that generate almost independent cash flows. However,with regard to idle assets that are not directly used forbusiness, each idle asset is considered to constitute a group.

(5) Calculation method of recoverable amounts
The Company measures recoverable amounts based on use
value, and reports impairment losses, judging the use valueof existing deliverables that cannot be used to be zero.

(5) Calculation method of recoverable amounts
The recoverable value of idle assets that are not directly used
for business is calculated based on the net selling price. The
net selling price is calculated by rationally adjusting theassessed value of fixed assets and market prices in theneighborhood.
*6. Provision of allowance for doubtful accounts
Provision of allowance for doubtful accounts is in relation toaffiliated companies.
*7. Amount of provision of reserve for loss on project included
in cost of sales-2,800*8. Loss on liquidation of subsidiaries and affiliates resulted
from liquidation of Shanghai UFIDA Future Consulting Ltd.

*6.Provision of allowance for doubtful accounts
Provision of allowance for doubtful accounts is in relation toaffiliated companies.
*7. Amount of provision of reserve for loss on project included
in cost of sales
7,000─────────

-78-

((Notes regarding statements of changes in net assets))
Fiscal 2010 (from January 1, 2010 to December 31, 2010)
Type and number of treasury shares
Number of shares at
Increase in number
end of fiscal 2009of shares in fiscal 2010
Treasury stock
Common stock
20,008Total
20,008
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
Type and number of treasury shares
Number of shares at
Increase in number
end of fiscal 2010of shares in fiscal 2011
Treasury stock
Common stock
20,008Total
20,008-Decrease in numberof shares in fiscal 2010-

Decrease in numberof shares in fiscal 2011-

Number of shares at
end of fiscal 2010
20,00820,008

Number of shares at
end of fiscal 2011
20,00820,008(Lease transactions)Fiscal 2010 (from January 1, 2010 to December 31, 2010)
Lease transactions are omitted, since they are of little significance.
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
Lease transactions are omitted, since they are of little significance.
(Securities)
Fiscal 2010 (as of December 31, 2010)
Shares in subsidiaries and those in affiliated companies (shares in subsidiaries stated in B/S: ¥1,032,304 thousand;shares in affiliated companies stated in B/S: ¥254,141 thousand) are not stated, since there are no market prices for themand it is deemed to be extremely difficult to determine their market values.
Fiscal 2011 (as of December 31, 2011)
Shares in subsidiaries and those in affiliated companies (shares in subsidiaries stated in B/S: ¥1,110,682 thousand;shares in affiliated companies stated in B/S: ¥242,636 thousand) are not stated, since there are no market prices for themand it is deemed to be extremely difficult to determine their market values.

-79-

(Tax effect accounting)
Fiscal 2010
December 31,2010
1.
Breakdown of major causes for deferred tax assets andliabilities[Current]
Deferred tax assets
Enterprise tax payable
67,635thousand yen
Reserve for quality assurance
23,612
Accrued business office taxes
8,474
Other
7,843
Total deferred tax asset
107,567[Non-current]
Deferred tax assets
Stocks of subsidiaries and affiliates 551,728
Provision of allowance forinvestment loss
127,680
Excess amount over the maximum
reserve for doubtful accounts
112,705
Depreciation excess
105,128
Other
438
Subtotal of deferred tax assets
897,679
Valuation allowance-753,886
Total deferred tax asset
143,795
Deferred tax liabilities
Net unrealized gain on available-for-sale securities
45,549Total deferred tax liabilities
45,549Net deferred tax assets
98,246
2. Breakdown of difference between the normal effective statutory
tax rate and the rate of income taxes after application of deferred
tax accounting
Normal effective statutory tax rate
40.7%
(Adjustment)
Taxes on retained profits
0.5%
Valuation allowance
2.4%
Earnings excluded from dividends income-0.1%
Inhabitant tax, flat-rate
0.3%
Added permanent difference
0.7%
Rate of income taxes after application of deferred tax accounting
44.5%

-80-

Fiscal 2011
December 31,2011
1.
Breakdown of major causes for deferred tax assets andliabilities[Current]
Deferred tax assets
Enterprise tax payable
47,293thousand yen
Reserve for quality assurance
24,938Reserve for loss on projects
1,708
Accrued business office taxes
8,300
Total deferred tax asset
82,242[Non-current]
Deferred tax assets
Stocks of subsidiaries and affiliates
483,253
Provision of allowance forinvestment loss
111,834
Excess amount over the maximum
reserve for doubtful accounts
148,004
Depreciation excess
94,358Asset retirement obligations
72,553Net unrealized gain on available-forsale securities
4,976
Other
416
Subtotal of deferred tax assets
915,398
Valuation allowance-709,609
Total deferred tax asset
205,788
Deferred tax liabilities
Retirement expenses for asset
retirement obligations
16,935
Total deferred tax liabilities
16,935Net deferred tax assets
188,853
2. Breakdown of difference between the normal effective statutory
tax rate and the rate of income taxes after application of deferred
tax accounting
Normal effective statutory tax rate
40.7%
(Adjustment)
Valuation allowance
2.1%
Earnings excluded from dividends income-0.1%
Inhabitant tax, flat-rate
0.3%(Gain) on extinguishment of tie-in shares-0.6%
Transfer of loss brought forward resulting from merger-0.8%
Added permanent difference
0.4%
Effect of change in tax rate
0.8%
Rate of income taxes after application of deferred tax accounting
42.8%

Fiscal 2010
December 31,2010

Fiscal 2011
December 31,2011
3. Revision of amounts of deferred tax assets and liabilities due
to change to normal effective statutory tax rate
The ‘Act on Partial Revision of the Income Tax Act, etc. to
Build a Tax System Conforming to Structural Changes in the
Structure of Economy and Society’ (Law No. 114 of 2011) andthe ‘Act on Special Measures for Securing of Financial
Resources Necessary for Implementation of Measures for
Reconstruction from the Great East Japan Earthquake’ (Law
No. 117 of 2011) were promulgated on December 2, 2011, andthe corporate tax rate will be reduced and a special
reconstruction corporate tax will be imposed from theconsolidated fiscal year that starts on or after April 1, 2012. As
a result, the normal effective statutory tax rate to be used to
calculate deferred tax assets and liabilities will be reduced fromformer 40.7% to 38.0% for temporary differences that are
projected to be resolved in the consolidated fiscal year thatstarts on January 1, 2013 to the consolidated fiscal year thatstarts on January 1, 2015, and to 35.6% for those that are
projected to be resolved in or after the consolidated fiscal yearthat starts on January 1, 2016. As a result of the change, theamount of deferred tax assets (excluding the amount of deferred
tax liabilities) decreased ¥20,883 thousand, while corporate tax
adjustments increased ¥20,774 thousand.

(Business amalgamation)
Fiscal 2010 (from January 1, 2010 to December 31, 2010)
None
Fiscal 2011 (from January 1, 2011 to December 31, 2011)
Notes are omitted, because they are stated in ‘Notes to Consolidated Financial Statements (Business combination) in
the consolidated financial statements.

-81-

(Asset retirement obligations)
At the end of fiscal 2011 (December 31, 2011)
Among asset retirement obligations, those stated in the consolidated balance sheetsa) Overview of the relevant asset retirement obligations
Obligation for restoration to original condition following conclusion of real estate lease agreements on offices,
including the head office, and storesb) Method of calculating the amount of the relevant asset retirement obligations
Asset retirement obligations is calculated by estimating the usable period to be seven to 9 years from theacquisition and using a discount rate of 0.726% to 1.042%.
c) Increase/decrease in total amount of the relevant asset retirement obligations in fiscal 2011
Balance at the beginning of the period
Increase due to acquisition of tangible fixed assets
Adjustment due to passage of time
Decrease due to fulfillment of asset retirement obligations
Other increase (decrease)
Balance at the end of the period
Note216,817
11,437
1,591-34,777
311
195,380(in thousands of yen)

The balance at the beginning of the fiscal year resulted from application 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) effective from the fiscal year under review.

(Per share data)

Net asset value per share
Net income per share

Fiscal 2010
(from January 1, 2010 to December 31,
2010)¥23,018.71¥3,242.94
Fully diluted net income per share isnot stated because the average stock priceduring the period is below the exercise
price of stock acquisition rights andhence net income per share is not diluted.

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

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

Fiscal 2010
(from January 1, 2010 to December 31,
2010)

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

1,480,830-

1,547,910-

1,480,830

1,547,910

456,632

456,632

Stock options granted by resolution of
the Ordinary General Meeting of
Shareholders on March 24, 2005 (Stockacquisition rights: 996units)
Common stock
3,984 shares

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

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

-82-

(Significant subsequent events)
Fiscal 2010
(from January 1, 2010 to December 31, 2010)
Company split
At the Board of Directors meeting of the Company and thatof Elm Corporation, a consolidated subsidiary of the Company,
both held on February 8, 2011, the following were decided
concerning absorption-type company split, through which Elm
Corporation will succeed the Company’s package solution
business for small and midsize companies.
1. Purpose of the company split
To establish a system that can provide high-value-added
services more quickly to satisfy IT system needs that are
expected to continue to increase, by realigning andenhancing the IT solution business for small and midsize
companies, which is dispersed within the Group
2. Operations and scale of business to be spun off(1) Business operations
Business concerning services relating to theintroduction of ‘New RRR’ application software inaccordance with business characteristics of small andmidsize companies and maintenance services after the
introduction of the said system(2) Net sales (Fiscal year ended December 2010)¥449 million
3. Form of company split
Absorption-type company split, with the Company as the
splitting company and Elm Corporation as the succeedingcompany
4. Name, assets, liabilities and net assets of the succeedingcompany in the company split(1) Name
Elm Corporation(2) Assets
1,218 million yen(3) Liabilities
375 million yen(4) Net assets
843 million yen
5. Time of the company split(Effective date)
April 1, 2011 (planned)
6. Other important matters
At the Ordinary General Meeting of Shareholders of Elm
Corporation, held on March 11, 2011, it was resolved thatthe trade name of Elm Corporation will be changed toFutureOne, Inc. as of the effective date.

Fiscal 2011
(from January 1, 2011 to December 31, 2011)
Notes are omitted because they are stated in ‘Notes toConsolidated Financial Statements (Significant subsequent
events)’ in the consolidated financial statements.

-83-

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

Fiscal 2010
(from January 1, 2010 to December
31, 2010)

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

Orders received

Orders received

Order backlog

Order backlog

IT Consulting Business

15,481,466

4,670,958

13,498,883

3,559,152

Package & Service Business

4,256,765

697,057

4,555,212

1,185,314

59,174

6,597

59,974

4,249

19,797,406

5,374,613

18,114,069

4,748,715

Other
Total
Notes: 1.
2.

With the application of the ‘Accounting Standard for Segment Information Disclosures,’ the business segment has been
reclassified. Hence, the figures for Fiscal 2010 are, calculated on the basis of reclassification of business segment.
Orders received include adjustments for exchange rate fluctuations.

-84-