Information Meeting Materials
for the First Two Quarters of the Fiscal Year Ending March 31, 2017
October 28, 2016

Copyright © 2016 TIS Inc. All rights reserved.

Fiscal 2017 First Two Quarters Financial Highlights
Fiscal 2017 Performance Forecast
Status of Progress on Key Strategies
Reference Materials

Copyright © 2016 TIS Inc. All rights reserved.

2

Fiscal 2017 First Two Quarters: Financial Highlights[Millions of yen]

• Net sales grew against favorable business backdrop, leading to year-on-year improvement. Exceeded target.
• On profit front, efforts to expand business volume and boost profitability were successful, but unprofitable projects had larger
impact, holding profit levels to year-on-year par, with operating income falling below expectations.

Net Sales ¥189,023 million

Operating Income ¥9,423 million

Net income
attributable to ownersof the parent company

YOY change: +¥6,340 million [+.5%]
Compared with estimate: +¥4,023 million [+2.2%]

YOY change: +¥50 million [+0.5%]
Compared with estimate: -¥577 million [-5.8%]

YOY change: +¥79 million [+1.4%]
Compared with estimate: +¥181 million [+ 3.3%]

189,023 185,000

182,683[Estimate]

9,373+ 6,340[+3.5 %]

[Estimate]+ 50[+0.5 %]
5.1%

First Two Quartersof Fiscal 2016

9,423 10,000

First Two Quartersof Fiscal 2017

In sectors where IT investment is showing renewedinterest, we emphasized accurate identification ofclient needs and were rewarded with higher net sales
year-on-year. Exceeded target.
Copyright © 2016 TIS Inc. All rights reserved.

OperatingmarginFirst Two Quartersof Fiscal 2016

¥5,681 million

5,681 5,500

5,601
+ 79
[+1.4 %]

[Estimate]

5.0%First Two Quartersof Fiscal 2017

Higher net sales starting point was complemented bysteady progress on measures to boost profitability, butlarger impact from unprofitable projects held
operating income at year-on-year par. Did not reachtarget.

First Two Quartersof Fiscal 2016

First Two Quartersof Fiscal 2017

Net income attributable to owners of parent hovered at
year-on-year par, paralleling operating income result.
Extraordinary loss was less than predicted, which
lifted income above target.

3

Fiscal 2016 First Two Quarters:
Net Sales and Operating Income Analysis[Billions of yen]

Net Sales
182.68IT Infrastructure
Services+ 0.82[61.10→61.93]

Financial IT
Services+ 2.36[376.9→400.5]

Industrial IT
Services+ 4.96Other−1.69[7.68→5.99]

Inter-segment− 0.12189.02+ 6.34[+ 3.5 %][- 9.02→ - 9.14][85.22→90.18]

First Two Quartersof Fiscal 2016

First Two Quartersof Fiscal 2017

Operating Income

9.42

93.7
IT Infrastructure
Services+ 1.92[3.25→5.17]

Financial IT
Services-2.34

Industrial IT
Services+ 0.97[1.81→ - 0.52][3.40→4.38]

First Two Quartersof Fiscal 2016
Copyright © 2016 TIS Inc. All rights reserved.

Other
-0.63

Inter-segment+ 0.13[1.16→0.52][- 0.26→ - 0.13]+ 0.05[+ 0.5 %]First Two Quartersof Fiscal 2017
4

Fiscal 2017 First Two Quarters:
Sales and Income for Key Segments[Millions of yen]

IT Infrastructure Services
Net Sales ¥61,930 million

Financial IT Services
Net Sales ¥40,057million

Net Sales ¥90,188million

YOY change: +¥829 million [+1.4%]
Compared with estimate: +¥1,030 million [+1.7%]

YOY change: +¥2,364 million [+6.3%]
Compared with estimate: - ¥343 million [-0.8%]

YOY change: +¥4,962 million [+5.8%]
Compared with estimate: +¥3,388 million [+3.9%]

61,93061,10160,900[Estimate]First Two Quartersof Fiscal 2017

First Two Quartersof Fiscal 2016

First Two Quartersof Fiscal 2017

90,188 86,800

85,226[Estimate]+2,364[+6.3 %]

+829[+1.4 %]First Two Quartersof Fiscal 2016

40,057 40,400

37,693

Industrial IT Services[Estimate]+4,962[+5.8 %]First Two Quartersof Fiscal 2016

First Two Quartersof Fiscal 2017

Operating Income ¥5,179million

Operating Income - ¥527million

Operating Income ¥4,383million

YOY change: +¥1,922 million [+59.0%]
Compared with estimate: +¥1,779 million [+52.3%]

YOY change: -¥2,343 million
Compared with estimate: - ¥3,227 million

YOY change: +¥978 million [+28.7%]
Compared with estimate: +¥733 million [+20.1%]

3,257
5.3%

5,179

+1,922[+59.0%]3,400

OperatingmarginFirst Two Quartersof Fiscal 2016

2,700
1,816

8.4% [Estimate]First Two Quartersof Fiscal 2017

Sales and income up year-on-year, owing to stable shift in data
center business, expansion in BPO operations through M&A
effect, and cost reduction through successful efforts to boost
efficiency. Exceeded target.

Copyright © 2016 TIS Inc. All rights reserved.

4,383
3,405

[Estimate]- 2,343
4.8%
Operating marginFirst Two Quartersof Fiscal 2016

First Two Quartersof Fiscal 2017(1.3%)(527)

Sales up year-on-year, owing to expanded business volume on
renewed IT investment interest, particularly from clients incredit card sector. On target. Operating income eroded by larger
impact from unprofitable projects, leading to year-on-year
decrease and well below target.

4.0%

3,650

+978
[+28.7%][Estimate]

OperatingmarginFirst Two Quartersof Fiscal 2016

4.9%

First Two Quartersof Fiscal 2017

Sales and income up year-on-year, owing to expanded businessvolume, which stems primarily from consistently active IT
investment by clients in energy-related fields paralleling
electric power and gas system reform, as well as contributions
from large projects for clients in public sector. Also fueled bysuccessful efforts to improve profitability. Exceeded target.

*Segment sales include intersegment sales.

5Fiscal 2017 First Two Quarters: Sales by Client Sector* We revised the breakdown of client sector categories for some clients, effective from the first quarter of fiscal 2017.
Values for the previous term have been reviewed and restated under the new category breakdown.

[Millions of yen]

37,934

41,44931,02528,281
23,959[+ 9.7 %]
13,711Credit card

14,026

12,592 12,486[+ 2.3 %][- 0.8 %]Banking

Insurance

10,013 9,970[+ 9.3 %]21,634

16,837 18,223 16,016[- 9.7 %][+ 8.2 %][- 0.4 %]Other finance

Assembly-based Processing-based
manufacturing manufacturing

First Two Quarters of Fiscal 2016

First Two Quarters of Fiscal 2016
4.0%
15.5%
8.7%
20.8%

Net Sales
Breakdown by
ClientSector

8.8%
9.2%
Financial sector:35.4 %Public sector: 8.7 %

7.5%
6.9%
5.5%

13.1%

Copyright © 2016 TIS Inc. All rights reserved.

15,942

16,748[+ 5.1 %][- 1.5 %]Distribution

Service

7,392 7,686

Public institutions[+ 4.0 %]OthersFirst Two Quarters of Fiscal 2017
Credit card
Banking
Insurance
Other finance
Assembly-based
manufacturing
Processing-based
manufacturing
Distribution

First Two Quarters of Fiscal 2016
4.1%
16.4%
8.9%

21.9%

Net Sales
Breakdown by
ClientSectorServicePublic institutions
OthersIndustrial sector: 51.9 %Other sectors: 4.0 %

15,772

8.3%
9.6%
Financial sector:35.7 %Public sector:8.9 %

7.4%
6.6%
5.3%

11.5%
Industrial sector: 51.3 %Other sectors: 4.1 %6

Fiscal 2017 First Two Quarters: Order Status[Millions of yen]

• Higher order activity year-on-year against favorable business conditions.
Aggregate results for first two quarters marked new record.
• Backlog of orders on a par with corresponding period a year ago, holding at high level.

Orders received during the term

¥104,570 million

Order backlog at term-end¥72,691 million

YOY change : +¥5,922 million [+6.0 %]YOY change : - ¥350 million [-0.5 %]104,570

98,648- 350[-0.5 %]

+ 5,922[+ 6.0 %]First Two Quartersof Fiscal 2016

Financial IT Services
32,43135,76572,69173,041First Two Quartersof Fiscal 2017

First Two Quartersof Fiscal 2016

Industrial IT Services
66,21768,804

22,617+3,334[+10.3 %]+2,587[+3.9 %]First Two Quarters First Two Quartersof Fiscal 2016of Fiscal 2017

First Two Quarters First Two Quartersof Fiscal 2016of Fiscal 2017

Copyright © 2016 TIS Inc. All rights reserved.

Financial IT Services

25,172First Two Quartersof Fiscal 2017

Industrial IT Services
50,42447,518+2,555[+11.3 %]-2,906[- 5.8 %]First Two Quarters First Two Quartersof Fiscal 2016of Fiscal 2017

First Two Quarters First Two Quartersof Fiscal 2016of Fiscal 2017

*Order volume and backlog at term-end and net sales apply to Software Development only.

7Changes in Orders Received[Millions of yen]

110,457[+27.7 %]86,248[- 8.5 %]86,472[+1.6 %]

89,385

108,697
98,648[+4.3 %]

39,568[- 20.0 %][- 3.1 %]36,895[+8.7 %]

1st Half
2nd Half
Fiscal 2014[+6.0 %][+3.6 %][+ 17.2 %]49,577

104,570[+10.4 %]58,09546,680[- 1.6 %]47,73153,369[+11.8 %]61,62153,437[+6.1 %][+0.1 %]

47,076

51,133[+2.3 %]

41,654[+5.3 %]

52,362[+41.9 %]1st Half
2nd Half
Fiscal 2015

45,279[+8.7 %][- 10.1 %]1st Half
2nd Half
Fiscal 2016

Second quarter of first half

Fourth quarter of second halfFirst quarter of first half

Third quarter of second half

Copyright © 2016 TIS Inc. All rights reserved.

[+12.9 %]1st Half
2nd Half
Fiscal 2017

* Orders received during the term apply to Software Development only.
* Percentage figures in columns indicate increase or decrease from the previous term.

8Changes in Orders Received[Millions of yen]

Financial IT Services
30,813

33,11338,41030,816[- 3.9 %][- 0.6 %]19,129[+21.8 %]20,469[- 4.5 %]17,029[- 11.0 %]11,684[- 28.6 %]12,644[+6.5 %]

13,786[+18.0 %]1st Half
2nd Half
Fiscal 2014[+16.0 %]32,431

41,430[+7.9 %][+5.2 %][+0.0 %]
23,207[+13.4 %]15,203[+20.2 %]1st Half
2nd Half
Fiscal 2015

18,414[+8.1 %]
14,017[+1.7 %]

35,765[+10.3 %]25,900[+11.6 %]
15,530[+2.2 %]

1st Half
2nd Half
Fiscal 2016

19,494[+5.9 %]
16,271[+16.1 %]1st Half
2nd Half
Fiscal 2017

Industrial IT Services
72,04855,434[- 10.8 %]27,551[- 5.2 %]27,883[- 15.8 %]53,359[+3.0 %]
29,108[- 2.1 %]24,251[+9.8 %]

1st Half
2nd Half
Fiscal 2014

58,568[+5.7 %]
30,701[+11.4 %]27,867[- 0.1 %][+35.0 %]34,889[+19.9 %]37,159[+53.2 %]1st Half
2nd Half
Fiscal 2015

66,217

67,266[+13.1 %][- 6.6 %]34,955[+13.9 %]35,720[+2.4 %]

33,943[- 2.9 %]31,262[+12.2 %]31,546[- 15.1 %]34,861[+11.5 %]1st Half
2nd Half
Fiscal 2016

Second quarter of first half

Fourth quarter of second halfFirst quarter of first half

Third quarter of second half

Copyright © 2016 TIS Inc. All rights reserved.

68,804[+3.9 %]

1st Half
2nd Half
Fiscal 2017

* Orders received during the term apply to Software Development only.
* Percentage figures in columns indicate increase or decrease from the previous term.

9

Fiscal 2017 First Two Quarters Financial Highlights
Fiscal 2017 Performance Forecast
Status of Progress on Key Strategies
Reference Materials

Copyright © 2016 TIS Inc. All rights reserved.

10Understanding the External Environment
Business environment should continue to move in a favorable direction, against a backdrop highlighted by wider IT investment
needs among clients increasingly keen to embrace digital management. However, uncertainty clouds the economic path ahead,and given such factors, some clients are taking a very cautious approach to IT investment, which will require attention topossible shifts in the direction of demand.
To dateFrom now

IT Infrastructure Services
 Data center business should continue to benefit from trend toward wider use of cloud services.
Expect demand for facilities with robust security features and high-value-added services to grow.
 BPO operations should see sustained increase in demand for outsourced administration services
that contribute to improved corporate management.

Financial IT Services
 In credit card sector, IT investment, especially backbone system replacement, will remain high.
 Among banks, system integration and overhauls by the majors are drawing to a close, but interest
in fintech, including blockchain architecture, and other IT investment for innovating businesses
and services, is in expansion mode.
 Negative interest rate situation is prompting banks and insurers to be cautious in IT investment.

Industrial IT Services
 In manufacturing, service and distribution sectors, companies will continue to invest in frontoffice IT to sharpen competitive edge, especially in marketing-related pursuits. However,concerns are building over possible downtrend in IT investment, paralleling sluggish market
sentiment and faltering business results.
 Utilities sector IT investment remains strong, paralleling reform of electric power and gas
systems.
 Public sector IT investment is brisk, especially in connection with My Number social security
and tax identification system and to ensure data security.
Copyright © 2016 TIS Inc. All rights reserved.

* These trends may differ from general industry trends since management’s assumptions also take
into consideration the status of IT investment by clients

11

Fiscal 2017: Key Points in Core Segments
IT Infrastructure Services
 In data center business, will strive to enhance the operating structure, primarily through centralization of offices
under an initiative launched in fiscal 2016 as well as a review of revenue structure and implementation of
measures to reinforce status.
 On the business front, emphasis will be on stronger security-related business through joint efforts with
Trustwave, expanded EDI business, wider scale and more extensive coverage in cloud business, and enhanced
network service capabilities, and goal is to build and reinforce pillars of revenue.
 In BPO operations, associated activities within the Group will be concentrated at AGREX. The objective is torealize greater efficiency while expanding business volume through M&A opportunities and access to large
projects.
Financial IT Services
 All-out effort toward steady execution of large projects.
 Using fintech, expand payments business from financial realm to all industries and, given prevailing awareness,that is, a push for use of fintech even by the Japanese government, target a wider client base beyond major
providers of retail settlement services to include startups in the payments business as well as companies
providing distribution and transportation services.
 With burgeoning IT demand from principal clients, maintain and then expand solutions to meet client needs.
Industrial IT Services
 With integration and realignment of operations within the Group, raise profile of the Group in energy andnational health insurance sectors. Promote wider presence in assigned domains through responses to projectinquiries and new orders.
 In manufacturing sector, IT investment, particularly ERP, is back in the spotlight. Emphasis will be on efforts tostrengthen consulting expertise and reinforce business content based on client needs, especially delivery andglobalization.
Copyright © 2016 TIS Inc. All rights reserved.

12

Fiscal 2017: Performance Forecasts[Millions of yen]

• Higher sales and income are expected. Will strive to expand business volume by accurately responding to IT investment needsof clients and steadily executing large projects, in addition to promoting strategies to boost profitability, including measures toraise productivity.
⇒ Results are generally on track, obviating the need to revise initial targets.

Net Sales ¥390,000 million

Operating Income ¥26,500 million

Net income
attributable to ownersofthe parent company
3

YOY change: +¥7,311 million [+1.9 %]YOY change: +¥2,064 million [+8.4 %]YOY change: +¥2,322 million [+18.3 %]390,000

382,689

26,50024,436[Estimate][Estimate]+2,064[+8.4 %]

+7,311[+1.9 %]
6.4%

Fiscal 2016

Fiscal 2017

Anticipate higher net sales year-on-year, mainly fromexpanded business volume achieved through accurate
responses to clients’ IT investment needs and fromsteady execution of large projects.
Copyright © 2016 TIS Inc. All rights reserved.

OperatingmarginFiscal 2016

6.8%

15,000 million
15,00012,678+2,322[+18.3 %][Estimate]

Net Income¥145.22 per Share
3.3% Net income to
net sales ratio

Fiscal 2017

Expect higher operating income year-on-year, buoyedby higher net sales as well as progress on strategies toboost profitability, such as measures to improve
productivity. Emphasis also on approaches to prevent
projects from turning unprofitable.

Fiscal 2016

¥173.88
3.8%

Fiscal 2017

Net income attributable to owners of parent
should rise year-on-year, mainly due to boost
from operating income.

13

Fiscal 2017:
Net Sales and Operating Income Analysis [Forecast][Billions of yen]

Net Sales

382.68IT Infrastructure
Services- 0.22Financial IT
Services+ 3.38[125.92→125.70][79.51→82.90]

Industrial IT
Services+ 8.70Other- 3.39[16.09→12.70]

390.0Inter-segment- 1.14[Estimate]+7.31[+1.9%][-18.85→-20.00）[180.00→188.70]

Fiscal 2016

Fiscal 2017

Operating Income

26.50
24.43
IT Infrastructure
Services+ 1.47

Financial IT
Services+ 0.23

Industrial IT
Services+ 1.92[3.36→3.60][9.97→11.90]

Other- 1.64

Inter-segment＋0.07[2.64→1.00][- 0.47→- 0.40][Estimate]+2.06[+8.4%][8.92→10.40]

Fiscal 2016
Copyright © 2016 TIS Inc. All rights reserved.

Details on revision of profit/loss projections by segment
IT infrastructure services +¥2 billion
Financial IT services -¥2.5 billion
Industrial IT services +500 million

Fiscal 201714

Fiscal 2017:
Key Business Segment Performances [Forecast]
IT Infrastructure Services

Financial IT Services[Millions of yen]

Industrial IT Services

Net Sales ¥125,700 million

Net Sales ¥82,900 million

Net Sales ¥188,700 million

YOY change: - ¥229 million [- 0.2 %]YOY change: +¥3,381 million [+4.3 %]YOY change: +¥8,700 million [+4.8 %]125,700

125,929- 229[-0.2%]

Fiscal 2016

82,90079,519[Estimate][Estimate][Estimate]+3,381[+4.3%]

Fiscal 2017

188,700

180,000

Fiscal 2016

+8,700[+4.8%]

Fiscal 2017

Fiscal 2016

Fiscal 2017

Operating Income ¥10,400 million

Operating Income ¥3,600 million

Operating Income ¥11,900 million

YOY change: +¥1,476 million [+16.5 %]YOY change: +¥239 million [+7.1 %]YOY change: +¥1,928 million [+19.3 %]

8,924

10,400+1,476[+16.5%] [Estimate]

7.1%
Fiscal 2016

Operatingmargin

3,361

8.3%
4.2%
Fiscal 2017

Fiscal 2016

+239[+7.1%]
Operatingmargin3,600+1,928[Estimate][+19.3%]

5.5%

Operatingmargin[Estimate]

4.3%
Fiscal 2017

11,900

9,972

Fiscal 2016

6.3%

Fiscal 2017

Comparison to the forecast at the
beginning of the term +¥2,000

Comparison to the forecast at the
beginning of the term - ¥2,500

Comparison to the forecast at the
beginning of the term +¥500

Although segment sales are likely to decrease year-on-year,
mainly due to impact of restructuring, segment sales should
increase on a real basis. Note, income forecast has beenrevised upward, reflecting success of cost-cutting efforts infirst half.

Expect year-on-year growth in sales and income, mainly due
to contributions from large development projects. Impact of
unprofitable projects on operating income in first half led to
downward revision of full-year forecast but segment shouldstill post year-on-year income increase.

Expect higher sales and income year-on-year, mainly due towider demand paralleling overall increase in IT investment
and also due to successful efforts to prevent unprofitableprojects while improving productivity. Note that income
forecast revised upward, based on first-half results.

Copyright © 2016 TIS Inc. All rights reserved.

*Segment sales include intersegment sales.

15

Fiscal 2017: Policy on return to shareholders, Dividend Forecast<Policy on return to shareholders>Will adopt total shareholder return measure (total return ratio) to promote shareholder returns through dividends
and an appropriate capital structure through treasury stock buyback.
Target 35% total return ratio (Stable, continuous dividends + share buybacks)

Fiscal 2017 Dividend forecast: Annual dividend per share: ¥36 (YOY change: +¥3)
Fiscal 2017 Treasury stock buyback (actual) :total number of shares: 834,900 shares, total acquision amount: ¥2,099 million
Changes in Dividends per Share
Annual:¥33

Annual:¥36[Estimate]

Annual:¥30
Annual:¥25
Annual:¥21
¥14
31.4%

¥7

¥17

¥20
30.4%

22.6%
27.7%

25.6%

¥8

¥10

Fiscal 2013
Fiscal 2014
Fiscal 2015
Dividends (interim)
Dividends (term-end)
Copyright © 2016 TIS Inc. All rights reserved.

¥22
35.2%

¥24
35.2%
20.9%

¥11

¥12

Fiscal 2016
Total return ratio

Fiscal 2017
Payout ratio*Total return ratio: Total amount of dividends and treasury stock buybacks
as a percentage of net income.

16

Fiscal 2017 First Two Quarters Financial Highlights
Fiscal 2017 Performance Forecast
Status of Progress on Key Strategies
Reference Materials

Copyright © 2016 TIS Inc. All rights reserved.

17

TIS INTEC Group: Fiscal 2017 Group Management Direction
Third Medium-termManagement Plan
Basic Concepts
Profit Emphasis

Fiscal 2017 Group Management Direction
Ensure management with emphasis on profitability(Expand value-added business)

Seek full optimization of Group, utilizing operating holding company structure
Broaden value-added services that contribute to digital management at client companies

Portfolio
Management

Organize business portfolio and develop and attract/keep human resources who are wellsuited to each business model

IT Brain

Key Points
1. Steadily undertake big projects

4. Promote service-style businesses

2. Reduce unprofitable projects

5. Promote global businesses

3. Restructure data center business

6. Get more involved, with focus on field of“FinTech”—integrating finance andinformation technology—IoT and AI

Copyright © 2016 TIS Inc. All rights reserved.

18

Status of Unprofitable Projects
 Two unprofitable projects having major impact on recent business results(Project outlines)• Backbone system overhaul for credit card company
Causes:Actions:(1) Scale of project far greater than anticipated at external designstage(2) Revision of process plan to ensure delivery and quality standard(1) Individual in top management position with considerable projectexperience to respond as large project specialist(2) Client dialogue and project structure to be made more scaleappropriate(3) Personnel structure to be strengthened• Information solution implementation project for bankCause:
Action:Design quality not satisfactoryStrengthen project structure and revise timeframe for completion
Note: Project completed in second quarter of fiscal 2017

[Billions of yen]

Losses associated withtwo projects
Losses excluding two
projects

2.07
1.38
1.38
1st
Half

2.07

3.87
1.98

2.75

1.85
1.85

3.65

1.89
0.90

2nd
Half

Fiscal 2015

1st
Half

2nd
Half

Fiscal 2016

1st
Half

2nd
Half

Fiscal 2017

• Of projects currently under development, the only one seen to need a higher level of monitoring than usual is the abovementioned backbone system overhaul for a credit card company.
• For the above-mentioned project, a review of the process plan was undertaken to ensure standard of quality and delivery time.
Risk can be contained as long as progress is made within the parameters of the revised plan.
⇒ Given the booking of reserve for possible losses at this time, efforts will be made to execute thorough status control, under astrict supervision format.

Copyright © 2016 TIS Inc. All rights reserved.

19

Steps to Prevent Projects from Turning Unprofitable
Measures Previously Used to Prevent Unprofitable Projects• Strengthen corporate review system and revise as necessary• Improve on-site risk monitoring capabilities→ Study sessions for division managers and continuous efforts to reinforce project-by-project follow-up withdivisions where unprofitable projects have occurred proving successful• Project status checks—serve extremely useful function→ Promote the process at all companies within the Group• Enhance project manager training to reinforce project management capabilities and raise to higher level• Strengthen engineering capabilities→ Enrich content of Nablarch required definition framework, cultivate and expand skills of architects, emphasize
next-generation AXION→ Going forward, reinforce test stage and establish enhancement framework
Further Efforts to Prevent Unprofitable Projects
Operating holding company TIS in leadership role, emphasizing efforts to prevent projects from turning
unprofitable by drawing on knowledge and know-how throughout the Group• Designate person responsible for the Group’s response to unprofitable projects and constantly engage in dialogue
and research with experts at companies under the Group umbrella→Some measures, such as project status checks, have already been rolled out at Group companies• Establish TIS INTEC Group Production Innovation Committee, as an internal third party, to underpin objective
check function and ensure the effectiveness of measures to prevent projects from turning unprofitable→Analyze root cause of unprofitable projects and draft policies matched to characteristics of each company topreclude reoccurrence→Provide report to Board of Directors on quarterly basis on PDCA status of Group’s measures to prevent
projects from turning unprofitable
Copyright © 2016 TIS Inc. All rights reserved.

20

Technological Innovation and New Services Strategy
to Expand Value-Added Businesses
Basic Policy on Technological Innovation and New Services Strategy• Combine inherent experience, knowledge and know-how with next-generation technologies• Combine TIS’ own approaches and joint research and other pursuits with venture companies and universities

Create technological innovation, new businesses and progressive services through open platform

Copyright © 2016 TIS Inc. All rights reserved.

21

Efforts in New Technology Areas to Expand Value-Added Businesses
・To help clients embrace digital management, it is essential that we have the ability to respond to the advent of
new technologies, including FinTech, IoT and AI, as well as currents in the industry. We seek to turn such
responses into new business strengths and will actively work toward this end.
⇒ Our goal is to utilize open innovation to quickly reshape business models and launch new core businesses.
We are currently working on various strategies to achieve this goal

TIS’ Innovation Ecosystem Ideal

 Devise new businesses by linking external innovators and TIS’s client companies Collaboration through corporate venture capital and joint research between industry and universities
 Access to leading-edge technologies, such as blockchain and AI
Copyright © 2016 TIS Inc. All rights reserved.

22

Efforts to Promote Innovation Eco-system

Launched venture investment system — Corporate
Venture• Make investment decisions in as short as one month.
• Take multifaceted approach to involvement, investing not only capital
into targeted companies but also people, including TIS engineers, aswell as things, such as workspace and IT assets.
• Offer solid support beyond simple capital involvement to accelerate
new business startup even after the initial investment.

Set up “bit & innovation,” a new point for promoting
open innovation• Three-party coworking space for innovators, including venturecompanies, startup teams and freelance engineers, managers fromnew business and R&D divisions at major corporations, and people
connected to TIS INTEC Group.
• Hold various regular events, such as presentations from startup
companies and major corporations, and study sessions on recent
technology and market trends, and encourage active opportunities forbusiness creation.

Copyright © 2016 TIS Inc. All rights reserved.

23

Stronger Joint Activities with Digital Garage Participating in DG Lab as technology development partner• TIS is a technology development partner in DG Lab, an open platform R&D organization established byDigital Garage, Inc., and two other companies.
• Will utilize inherent knowledge and solutions used in payments operations as well as accumulated
technologies and know-how in AI to support technology development for blockchain architecture, which isan area of concentration for DG Lab.
 Jointly established DG Technologies, a strategic technology
development company• DG Technologies, Inc., working with DG Lab, will get started
with fintech-related technology development utilizing blockchain
technology.
• TIS plans to apply the newest technologies and platforms,
including fintech-related results, from DG Technologies, tosystem development for client companies on a global scale whereappropriate.
• Ownership ratio: Digital Garage: 80%; TIS: 20%

Core Patner

Raising stake in Digital Garage• To further solidify its relationship as a strategic partner in IT
pursuits, TIS raised its equity stake in Digital Garage to 5.0%.
TIS formed a capital alliance with Digital Garage in 1999, andthe two companies have worked together, particularly in thearea of payments solutions, since then.
Copyright © 2016 TIS Inc. All rights reserved.

24

Strategic Alliance with Singtel
・Signed a strategic alliance agreement on managed security services with Singtel, a major telecommunications
carrier in Singapore. Will offer managed security services in Japan powered by Trustwave Holdings, one of
the largest managed security services providers in North America and a subsidiary of Singtel.
⇒Intend to provide integrated security response, which is gaining interest in Japan, and expand security
business in this market.

Real-Time Security Concept from TIS
 Realize real-time cyber security
response that quickly gathers andanalyzes threat intelligence occurring“now” somewhere in the world andinitiates instantaneous action throughthe managed services.
 Offer as cloud-based service that
holds down cost of initial investment
for security response and facilitates
start of necessary security services.
 Security experts located around theworld will monitor customer networks
24/7 through Trustwave’s global
network of security operation centers.

Copyright © 2016 TIS Inc. All rights reserved.

25

Status of Group Reorganization
 Transferred some businesses between TIS and INTEC
 Business activities related to national health insurance program (TIS ⇒ INTEC) Net sales: ¥1.6 billion
 Business activities related to electric power and gas sectors (INTEC ⇒ TIS) Net sales ¥2.2 billion⇒ Gradually deriving tangible advantages on the operating front, such as a higher profile by expanding scope of
potential demand response, wider application of know-how and knowledge, and improved informationgathering capabilities.
 Transitioned to operating holding company structure through merger of IT Holdings and TIS; changed
corporate name Consolidated group brands under single “TIS INTEC Group” banner⇒ Accelerated management decision-making process, still cultivating deeper sense of solidarity within the Group Integrated BPO business in Thailand, centralized at I-AGREX (Thailand) Co., Ltd.
⇒ Leveraging strengths, promoting business from two complementary fronts — offshore outsourcing services forJapanese clients building a presence overseas and local outsourcing rooted in the local market.
 Businesses being reviewed in line with business reorganization
 Bank-related business Service platforms
 IT infrastructure Regional hubs, local
 BPO businessarea subsidiaries⇒ For each business area, we are pursuing discussions through task force and other meeting structures based on
business model, client base and the merits/demerits of reorganization. Business strategies are being drafted thatwill utilize the special characteristics of each company.
Copyright © 2016 TIS Inc. All rights reserved.

26

Overseas Activities (1)・F-AGREX GLOBAL, a strategic BPO company in Vietnam, contributes to outsourcing capacity for largescale application processing services.
⇒ Utilizes overseas offshore bases with cost-lowing potential but maintains quality at Japanese standards.
Model case to ascertain effectiveness of Vietnam as new order destination, replacing Dalian, China, as
mainstay location for offshore data entry services
 To hone sharper cost competitiveness, management decided to turn F-AGREX GLOBAL, an offshore data entry company inVietnam, into a consolidated subsidiary. Goal is to have a structure in place within three years from establishment that
underpins ability to handle large-scale projects. Personnel built on two members from Japan and 205 local hires. Main clientsare life insurers, non-life insurers and public sector companies.
 Through the application of a data entry method and training system developed by AGREX itself, Vietnamese staff can, even
without understanding Japanese, enter data in kanji characters, hiragana and katakana — the three primary writing formats inJapanese. Training has been going on since the company’s establishment, and data accuracy by local staff is now as high asthat achieved by employees in Japan.

Copyright © 2016 TIS Inc. All rights reserved.

* Presentation of Excellent Employee Award, October 2016, in Hanoi,
Vietnam27

Overseas Activities (2)Seeking to promote retail settlement-related operations — payments business — in Thailand and draw on
advanced overseas technologies, we welcomed PromptNow under our corporate umbrella as a consolidated
subsidiary⇒Intend to utilize reciprocal strengths and expand payments business in Thailand, a market exhibiting
outstanding
g growth.
g PromptNow is a leading company in Thailand with strength in the development of mobile applications primarily for financial
institutions, including banks and insurance companies.
 While exploring the potential of joint activities in new growth fields with Thai-listed MFEC Public Company Limited, withwhich TIS had formed a capital and business alliance in 2014, a strategy to expand the payments solution services offered by
PromptNow, then MFEC’s subsidiary, in Thailand was very well received. PromptNow is seen as a vital component of thepayments business in Thailand, and was subsequently turned into a consolidated subsidiary under the TIS INTEC Group.

Solutions from PromptNow
Covering mobile applications, from front-end to middleware

Front-end*Mobile banking*Contactless payment*Mobile insurance advice

Middle*Fitness report*Mobile POS*Diabetic screening*Gamification*Promotions

Susanoo: MEAP

*MEAP: Mobile Enterprise Application Platform. Product for efficient, low-cost development and operation of service applications by tablet andsmartphone where previously only used with computers
Copyright © 2016 TIS Inc. All rights reserved.

28

Fiscal 2017 First Two Quarters Financial Highlights
Fiscal 2017 Performance Forecast
Status of Progress on Key Strategies
Reference Materials

Copyright © 2016 TIS Inc. All rights reserved.

29

Fiscal 2017 Second Half:
Sales and Income for Key Business Segments [Forecast]
Net Sales
200,006

200,977

Operating Income
17,077

15,063[Estimate]+971[+0.5 %]
Second Halfof Fiscal 2016

7.5%
Second Halfof Fiscal 2017

+2,014 [Estimate][+13.4 %]OperatingmarginSecond Halfof Fiscal 2016

[Millions of yen]

Net income attributable toowner of the parent company
9,319
7,077

8.5%

Second Halfof Fiscal 2017

[Estimate]+2,242[+31.7 %]Second Halfof Fiscal 2016

Second Halfof Fiscal 2017

IT Infrastructure Services

Financial IT Services

Industrial IT Services

Net Sales

Net Sales

Net Sales

63,77064,828[Estimate]+1,017[+2.4 %]

-1,058[- 1.6 %]Second Halfof Fiscal 2016

Second Halfof Fiscal 2017

Operating Income
5,667

8.7%

5,221
-446
[- 7.9 %][Estimate]

Operatingmargin

8.2%

Second Halfof Fiscal 2016

Second Halfof Fiscal 2016

Copyright © 2016 TIS Inc. All rights reserved.

+3,738[+3.9 %]

Second Halfof Fiscal 2017

3.7%

Second Halfof Fiscal 2016

Second Halfof Fiscal 2016

9.6%

Second Halfof Fiscal 2017

[Estimate]

Second Halfof Fiscal 2017

Operating Income
7,517

6,567

+950
[Estimate][+14.5 %]6.9%

Operatingmargin+2,582 [Estimate][+167.1 %]Operatingmargin98,512

94,774[Estimate]

Operating Income
4,127
1,545

Second Halfof Fiscal 201742,843

41,826

Second Halfof Fiscal 2016

7.6%

Second Halfof Fiscal 2017

*Estimated amounts for the second half of Fiscal 2016 are calculated by subtracting the first half
estimates from the annual estimates of Fiscal 2016. *Segment sales include intersegment sales.

30

Cautionary Statements• All statements described in these materials are based on information available to management regarding the TIS INTEC Group—that is,
TIS and the subsidiaries under its umbrella—as of the presentation date and certain assumptions deemed reasonable at this time. No intent
is implied of promise by the Company to achieve such forward-looking statements. Indeed, various factors may cause future results to be
substantially different from the assumptions presented in these materials.
•Amounts for each three-month quarter are calculated by subtracting data for the respective period from the cumulative total.