February 13, 2019

Summary of Consolidated Financial Results
for the Third Quarter of Fiscal Year Ending March 31, 2019
(Nine Months Ended December 31, 2018)[Japanese GAAP]
Company name: Japan System Techniques Co., Ltd.
Listing: Tokyo Stock Exchange, First Section
Stock code:
4323
URL: http://www.jast.jp
Representative:
Takeaki Hirabayashi, President and CEO
Contact:
Noriaki Okado, Director and CFO
Tel: +81-6-4560-1000
Scheduled date of filing of Quarterly Report:
February 14, 2019
Scheduled date of payment of dividend:
Preparation of supplementary materials for quarterly financial results: None
Holding of quarterly financial results meeting:
None
Note: The original disclosure in Japanese was released on February 13, 2019 at 16:00 (GMT +9).
(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the Third Quarter Ended December 31, 2018
(April 1, 2018 – December 31, 2018)(1) Consolidated results of operations
Net sales

Operating income

Million yen%
Million yen%
11.6
Nine months ended Dec. 31, 2018
11,725251 159.8
Nine months ended Dec. 31, 2017
10,506
9.7
96
Note: Comprehensive income (million yen) Nine months ended Dec. 31, 2018:
Nine months ended Dec. 31, 2017:

Nine months ended Dec. 31, 2018
Nine months ended Dec. 31, 2017

Net income per share

Diluted net income per
share

Yen

Yen

23.90
12.42

-

(Percentages represent year-on-year changes)
Profit attributable toOrdinary income
owners of parent
Million yen% Million yen
%
79.9
125
92.4
252
140
65
86 (down 6.4%)
92 (- %)

(2) Consolidated financial position
Total assets
Net assets
Million yen
Million yen
12,662
6,186
As of Dec. 31, 2018
As of Mar. 31, 201812,3086,246
Reference: Shareholders’ equity (million yen)
As of Dec. 31, 2018:
6,145

Equity ratio
%
48.5
50.4
As of Mar. 31, 2018:

Net assets per share
Yen
1,171.10
1,181.54
6,200

2. Dividends
1Q-endYen-

Fiscal year ended Mar. 31, 2018
Fiscal year ending Mar. 31, 2019
Fiscal year ending Mar. 31, 2019 (forecasts)
Note: Revisions to the most recently announced dividend forecast: None

Dividend per share
2Q-end3Q-endYear-end
Yen
Yen
Yen
0.00
28.00
0.00
28.00

Total
Yen
28.00
28.00

3. Consolidated Earnings Forecasts for the Fiscal Year Ending March 31, 2019 (April 1, 2018 – March 31, 2019)
Net sales

Operating income

Ordinary income

Million yen% Million yen% Million yen%
Full year
15,765
0.9
865
16.7
875
11.4
Note: Revisions to the most recently announced consolidated earnings forecasts: None

(Percentages represent year-on-year changes)
Profit attributable to
Net income perowners of parent
shareMillion yen
%
Yen
585
1.0
111.47

* Notes(1) Changes in consolidated subsidiaries during the period (changes in scope of consolidation): None
Newly added: -Excluded: -(2) Application of special accounting methods for presenting quarterly consolidated financial statements: None
(3) Changes in accounting policies and accounting-based estimates, and restatements
1) Changes in accounting policies due to revisions in accounting standards, others:None2) Changes in accounting policies other than 1) above:None3) Changes in accounting-based estimates:

None4) Restatements:

None(4) Number of outstanding shares (common shares)
1) Number of shares outstanding at the end of the period (including treasury shares)
As of Dec. 31, 2018:

5,612,230 shares

As of Mar. 31, 2018:

5,612,230 shares

As of Mar. 31, 2018:364,210 shares

2) Number of treasury shares at the end of the period
As of Dec. 31, 2018:364,210 shares

3) Average number of shares outstanding during the period
Nine months ended Dec. 31, 2018:

5,248,020 shares

Nine months ended Dec. 31, 2017:

5,248,020 shares

Note: The Company’s stock held by the Board Benefit Trust (BBT) is included in the number of treasury shares (49,000
shares as of Dec. 31, 2018), and is deducted from the number of shares that is used to calculate the average number ofshares outstanding during the period.
Note 1: The current quarterly summary report is not subject to quarterly review by certified public accountants or auditing firms.
Note 2: Cautionary statement with respect to forward-looking statements
Forecasts of future performance in these materials are based on assumption judged to be valid and information available to theCompany’s management at the time the materials were prepared, but are not promises by the Company regarding future
performance. Actual results may differ materially from the forecasts. Please refer to “1. Qualitative Information on Quarterly
Consolidated Financial Performance, (3) Explanation of Consolidated Forecasts and Other Forward-looking Statements” on page 3
for forecast assumptions and notes of caution for usage.

Japan System Techniques Co., Ltd. (4323) Financial Results for the Third Quarter of FY3/19

Contents of Attachments
1. Qualitative Information on Quarterly Consolidated Financial Performance2(1) Explanation of Results of Operations

2(2) Explanation of Financial Position

3(3) Explanation of Consolidated Forecasts and Other Forward-looking Statements

3

2. Quarterly Consolidated Financial Statements and Notes

4(1) Quarterly Consolidated Balance Sheet

4(2) Quarterly Consolidated Statements of Income and Comprehensive Income

6

Quarterly Consolidated Statement of Income
For the Nine-month Period

6

Quarterly Consolidated Statement of Comprehensive Income
For the Nine-month Period7(3) Quarterly Consolidated Statement of Cash Flows

8(4) Notes to Quarterly Consolidated Financial Statements

9

Going Concern Assumption

9

Significant Changes in Shareholders’ Equity

9

Additional Information

9

Segment and Other Information

10

Business Combinations

11

Contingent Liabilities

121Japan System Techniques Co., Ltd. (4323) Financial Results for the Third Quarter of FY3/19

1. Qualitative Information on Quarterly Consolidated Financial Performance(1) Explanation of Results of Operations
In the first nine months of the current fiscal year, the Japanese economy continued to recover at a moderate pacedespite the continuation of geopolitical risk in eastern Asia. The recovery was supported by improvements incorporate profits, the number of jobs and personal income due to the benefits of economic initiatives by theJapanese government.
In the IT industry in Japan, according to the latest statistics in the “Survey of Selected Service Industries” by the
Ministry of Economy, Trade and Industry (the final November figures), net sales continued to climb, rising 2.5%
year on year in Fiscal 2017 (compared with 1.3% annual growth in Fiscal 2016). Despite the higher sales, theoutlook for the IT industry is uncertain because there were some months in Fiscal 2017 when sales were lower
than one year earlier.
In the first nine months, the Japan System Techniques Group (Japan System Techniques Co., Ltd. (JAST) and its
consolidated subsidiaries, hereafter “the JAST Group”) posted net sales of 11,725 million yen (up 11.6% year onyear), operating income of 251 million yen (up 159.8% year on year), ordinary income of 252 million yen (up79.9% year on year), and profit attributable to owners of parent of 125 million yen (up 92.4% year on year).
Results by segment were as follows.
In the software business (individualized contracted software development), sales in the service/retail industry,
manufacturing industry and finance/insurance/brokerage industry increased while there was a decrease in sales inpublic sector. Net sales in this business totaled 8,398 million yen (up 15.1% year on year) and operating income
was 350 million yen (up 122.7% year on year).
In the GAKUEN business (development, sale and related services of operational reform packages for schools),
there were increases in IT equipment sales and maintenance and implementation support sales. However, there
was a decline in sales of program products (PP) to universities, which are a highly profitable category of thisbusiness. Net sales in this business totaled 1,340 million yen (down 0.1% year on year) and operating loss was
112 million yen (vs. operating income of 9 million yen in the same period of the previous fiscal year).
In the system sales business (IT equipment sales and IT/telecom infrastructure construction), sales to universities
and the public sector increased. Net sales in this busin ess totaled 1,378 million yen (up 6.8% year on year), andoperating income was 133 million yen (vs. operating loss of 15 million yen in the same period of the previous
fiscal year).
Lastly, in the medical big data business (inspection, analysis and related services of medical information data),
sales of automated inspection services for health insurance claims and services for data analysis and notificationof the cost of medical care were strong. However, expenses increased faster than sales growth in order to build astronger organization in this business and for other activities. Net sales in this business totaled 607 million yen(up 5.0% year on year), and operating loss totaled 126 million yen (vs. operating loss of 58 million yen in thesame period of the previous fiscal year).
Features of the Group’s quarterly results
A feature of the Group’s software, GAKUEN and systems sales businesses is that the delivery inspection periodof most customers concentrates in March, the last month of the fiscal year for most companies, and then in
September, the last month of the second quarter. This means that the Group’s earnings in the first and third
quarters tend to be much smaller than in the second and fourth quarters.

2

Japan System Techniques Co., Ltd. (4323) Financial Results for the Third Quarter of FY3/19(2) Explanation of Financial Position
1) Balance sheet position
The balance of current assets at the end of the third quarter of the current fiscal year was 9,006 million yen, down
434 million yen from the end of the previous fiscal year. This was mainly due to decreases in accounts
receivable-trade and merchandise and finished goods. The balance of non-current assets was 3,655 million yen at
the end of the third quarter, up 787 million yen from the end of the previous fiscal year. This was mainly due to anincrease in goodwill.
The balance of current liabilities at the end of the third quarter was 4,968 million yen, up 404 million yen fromthe end of the previous fiscal year. This was mainly due to increases in short-term loans payable and advances
received, and decreases in notes and accounts payable-trade and provision for bonuses. The balance of
non-current liabilities was 1,507 million yen at the end of the third quarter, up 9 million yen from the end of theprevious fiscal year.
The balance of net assets was 6,186 million yen at the end of the third quarter, down 60 million yen from the endof the previous fiscal year.
2) Cash flows
Cash and cash equivalents increased 1,872 million yen from 2,785 million yen at the beginning of the current
fiscal year to 4,657 million yen at the end of the first nine months of the current fiscal year.
Cash flows by category were as follows.
Cash flows provided by operating activities totaled 1,200 million yen, an increase of 742 million yen from 457
million yen provided in the same period of the previous fiscal year. This increase was mainly due to an increase inproceeds from collection of notes and accounts receivable-trade and a decrease in outlays for inventories while
there was an increase in payments for notes and accounts payable-trade.
Cash flows used in investing activities totaled 1,013 million yen, a decrease of 980 million yen from 33 million
yen used in the same period of the previous fiscal year. This decrease was mainly due to an increase in purchasesof shares of subsidiaries while there were increases in proceeds from cancellation of time deposits and sales ofreal estate for rent.
Cash flows provided by financing activities totaled 1,687 million yen, an increase of 1,503 million yen from 184
million yen provided in the same period of the previous fiscal year. This increase was mainly due to an increase in
short-term loans payable.
(3) Explanation of Consolidated Forecasts and Other Forward-looking Statements
We maintain the May 11, 2018 forecasts for the fiscal year ending March 31, 2019: net sales of 15,765 million
yen (up 0.9% year on year), operating income of 865 million yen (up 16.7% year on year), ordinary income of
875 million yen (up 11.4% year on year), and profit attributable to owners of parent of 585 million yen (up 1.0%
year on year).

3Japan System Techniques Co., Ltd. (4323) Financial Results for the Third Quarter of FY3/19

2. Quarterly Consolidated Financial Statements and Notes(1) Quarterly Consolidated Balance Sheet
FY3/18(As of Mar. 31, 2018)(Thousands of yen)
Third quarter of FY3/19(As of Dec. 31, 2018)

AssetsCurrent assets
Cash and deposits

2,994,700

4,714,777

Notes and accounts receivable-trade

4,991,576

3,088,762

Merchandise and finished goods

576,412104,282

Work in process

711,654824,894

2,272

2,753

Other

201,206

338,710

Allowance for doubtful accounts(36,900)(67,343)

9,440,922

9,006,838

Raw materials and supplies

Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures

657,805

721,089

Accumulated depreciation(375,281)(410,277)

Buildings and structures, net

282,523

310,811Land

142,361

142,361

Other

381,968

441,883(283,798)(328,208)

Accumulated depreciation
Other, net

98,170113,675

523,055

566,848

Goodwill

29,434

1,022,181

Software

86,99761,315

Total property, plant and equipment
Intangible assets

Other

7,626

7,626

124,058

1,091,123

Investment securities

705,240

644,062

Net defined benefit asset

535,482

550,679

Deferred tax assets

389,352

302,969

Guarantee deposits

390,110414,218

Other

245,123

97,797

Allowance for doubtful accounts(44,609)(12,209)

Total investments and other assets

2,220,698

1,997,518

Total intangible assets
Investments and other assets

Total non-current assets
Total assets

42,867,812

3,655,490

12,308,734

12,662,329

Japan System Techniques Co., Ltd. (4323) Financial Results for the Third Quarter of FY3/19(Thousands of yen)
Third quarter of FY3/19(As of Dec. 31, 2018)

FY3/18(As of Mar. 31, 2018)
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable

2,040,633

825,645

218,592

2,071,515

8,400

8,400

Income taxes payable271,702

8,704

Provision for bonuses

638,152

361,236

Provision for directors’ bonuses

29,087

19,634

Advances received

652,455

892,241

Other
Total current liabilities

705,120

781,357

4,564,144

4,968,736

20,30014,000-13,367

Non-current liabilities
Long-term loans payable
Provision for management board incentive plan trust
Provision for directors’ retirement benefits

426,250

13,031

Net defined benefit liability

920,209965,385

Other

131,268

501,630

1,498,027

1,507,415

6,062,172

6,476,152

Capital stock

1,076,669

1,076,669

Capital surplus

994,621

1,048,676

Retained earnings

4,188,119

4,166,581

Treasury shares(266,539)(320,594)

Total shareholders’ equity

5,992,871

5,971,333

Valuation difference on available-for-sale securities

126,589

83,280Foreign currency translation adjustment(10,428)

13,792Remeasurements of defined benefit plans

91,694

77,528

Total accumulated other comprehensive income

207,856

174,600

Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity

Accumulated other comprehensive income

Non-controlling interests
Total net assets
Total liabilities and net assets

545,83540,243

6,246,562

6,186,177

12,308,734

12,662,329

Japan System Techniques Co., Ltd. (4323) Financial Results for the Third Quarter of FY3/19(2) Quarterly Consolidated Statements of Income and Comprehensive Income
Quarterly Consolidated Statement of Income(For the Nine-month Period)First nine months of FY3/18(Apr. 1, 2017 – Dec. 31, 2017)(Thousands of yen)First nine months of FY3/19(Apr. 1, 2018 – Dec. 31, 2018)

Net sales

10,506,786

11,725,460

Cost of sales

8,512,423

9,283,831

Gross profit

1,994,362

2,441,628

Selling, general and administrative expenses

1,897,669

2,190,416

96,693

251,211

Interest income

5,607

5,548

Dividend income

6,058

6,960

Rent income

9,954

2,836

Foreign exchange gains

5,909

-

Operating income
Non-operating income

Insurance premiums refunded cancellation

5,226

-

Subsidy income

11,817

13,417

Other

7,135

6,657

Total non-operating income

51,70835,420Non-operating expenses
Interest expenses
Foreign exchange losses

901

1,817

-

29,209Rent expenses

4,586

980

Other

2,275

1,674

Total non-operating expenses

7,763

33,681

Ordinary income

140,638

252,950

Profit before income taxes

140,638

252,950

Income taxes

80,395

133,320

Profit60,243

119,630

Loss attributable to non-controlling interests(4,925)(5,776)

Profit attributable to owners of parent

65,169125,406

6

Japan System Techniques Co., Ltd. (4323) Financial Results for the Third Quarter of FY3/19

Quarterly Consolidated Statement of Comprehensive Income(For the Nine-month Period)First nine months of FY3/18(Apr. 1, 2017 – Dec. 31, 2017)(Thousands of yen)First nine months of FY3/19(Apr. 1, 2018 – Dec. 31, 2018)60,243

119,630

Valuation difference on available-for-sale securities

45,698(43,309)

Foreign currency translation adjustment(1,842)

24,394Remeasurements of defined benefit plans, net of tax(11,622)(14,166)

Total other comprehensive income

32,232(33,081)

92,47686,54895,764

92,151(3,287)(5,602)

ProfitOther comprehensive income

Comprehensive income
Comprehensive income attributable to:Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests

7

Japan System Techniques Co., Ltd. (4323) Financial Results for the Third Quarter of FY3/19(3) Quarterly Consolidated Statement of Cash FlowsFirst nine months of FY3/18(Apr. 1, 2017 – Dec. 31, 2017)(Thousands of yen)First nine months of FY3/19(Apr. 1, 2018 – Dec. 31, 2018)

Profit before income taxes

140,638

252,950

Depreciation

79,701

57,789Amortization of software

31,871

31,175

Amortization of goodwill

8,792

6,792

Cash flows from operating activities

Increase (decrease) in provision for bonuses(298,544)(278,367)

Increase (decrease) in net defined benefit liability

36,18444,890Decrease (increase) in net defined benefit asset(14,217)(15,197)

Interest and dividend income(11,665)(12,509)

Interest expenses
Decrease (increase) in notes and accounts
receivable-trade
Increase (decrease) in advances received

901

1,817

1,291,902

2,177,988

351,720

252,677

Decrease (increase) in inventories(772,156)

357,893

Increase (decrease) in notes and accounts payable-trade(55,288)(1,279,546)

Other, net(100,174)(115,479)

Subtotal

689,665

1,482,874

Interest and dividend income received

12,541

13,242

Interest expenses paid

(935)

(1,634)

Income taxes paid

(243,523)(293,938)

Net cash provided by (used in) operating activities

457,747

1,200,544(23)

153,108

Cash flows from investing activities
Decrease (increase) in time deposits
Purchase of property, plant and equipment(18,994)(71,540)

Proceeds from sales of real estate for rent-

109,183

Purchase of software(16,060)(21,827)

Purchase of investment securities
Proceeds from sales of short-term and long-term
investment securities
Purchase of shares of subsidiaries resulting in change inscope of consolidation
Proceeds from cancellation of insurance funds(31,717)(1,974)

9,260

-

-

(1,161,140)

12,275162

Payments for guarantee deposits(1,368)(19,442)

Proceeds from collection of guarantee deposits

12,485

1,469

Other, net

1,107(1,930)(33,037)(1,013,933)

Net increase (decrease) in short-term loans payable

333,438

1,853,248

Repayments of lease obligations(11,746)(12,582)

Repayments of long-term loans payable(5,600)(6,300)(131,200)(146,944)

Net cash provided by (used in) investing activities
Cash flows from financing activities

Cash dividends paid
Dividends paid to non-controlling interests

(764)

-

184,126

1,687,421

2,355(1,498)Net increase (decrease) in cash and cash equivalents

611,192

1,872,533

Cash and cash equivalents at beginning of period

1,951,458

2,785,193

Cash and cash equivalents at end of period

2,562,650

4,657,727

Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents

8Japan System Techniques Co., Ltd. (4323) Financial Results for the Third Quarter of FY3/19(4) Notes to Quarterly Consolidated Financial Statements
Going Concern Assumption
Not applicable.
Significant Changes in Shareholders’ Equity
Not applicable.
Additional Information
Application of the Partial Amendments to Accounting Standard for Tax Effect Accounting, etc.
Effective from the beginning of the first quarter of the current fiscal year, JAST has applied the “Partial
Amendments to Accounting Standard for Tax Effect Accounting” (Accounting Standards Board of Japan (ASBJ)
Statement No. 28, February 16, 2018), etc. Accordingly, deferred tax assets are reclassified and included in theinvestments and other assets section.
Provision for directors’ retirement benefits
The JAST Board of Directors resolved at a meeting held on May 11, 2018 to terminate the current system fordirectors’ retirement benefits at the end of the 46 th Annual General Meeting of Shareholders on June 26, 2018. At
this meeting, shareholders approved a resolution to make benefit plan termination payments to directors. JAST
plans to make these termination payments when eligible directors reach the end of their final terms or resign orretire.
Accordingly, the entire amount of the provision for directors’ retirement benefits, which was included in
non-current liabilities, has been deleted and there is instead a long-term accounts payable-other of 356.395
million yen for these benefit plan termination payments that is included in the “other” item of non-current
liabilities.
Some consolidated subsidiaries will maintain a provision for directors’ retirement benefits in non -current
liabilities for the payment of retirement benefits to benefits in accordance with the payment rules of thesecompanies.
Board Benefit Trust (BBT)
Based on the resolution of the 46th Annual General Meeting of Shareholders, JAST on June 26, 2018 terminatedthe directors’ retirement benefit system and introduced a Board Benefit Trust (BBT, hereafter, “the Plan”) for the
purpose of increasing motivation for contributing to medium to long-term improvement in sales and earnings andan increase in corporate value. The Plan clearly links the compensation of directors with the JAST stock price.
Furthermore, directors share with shareholders the benefits of a higher stock price as well as the risk of a lower
stock price.
1) Overview of transaction
This is a stock compensation plan under which directors receive stock compensation through a trust (a trust
established under the current system, hereafter “the Trust”). The Trust acquires JAST stock using cash
contributions from JAST as the source of funds. Directors (excluding external directors; hereafter same unlessindicated otherwise) receive stock compensation or a monetary amount equivalent to the market value of thestock in lieu of stock compensation (hereafter “JAST stock”) in accordance with the rules on the stockcompensation plan for directors. In principle, a director becomes eligible for stock compensation only uponretirement.
2) JAST stock held by the trust
The book value (excluding associated expenses) of JAST stock held by the trust is shown as treasury stock in the
net assets section of the consolidated balance sheet. As of the end of the third quarter, the BBT held 49,000 sh aresof JAST with a book value of 89.915 million yen.
9

Japan System Techniques Co., Ltd. (4323) Financial Results for the Third Quarter of FY3/19

Segment and Other Information
Segment information
I. First nine months of FY3/18 (Apr. 1, 2017 – Dec. 31, 2017)
1. Information related to net sales and profit or loss for each reportable segment
SoftwareGAKUEN System sales

businessbusinessbusiness

7,294,946

1,341,836

1,291,083

48,426-

20,7597,343,373

1,341,836

1,311,843

Medicalbig data

Total

business(Thousands of yen)Amounts shown onquarterly
Adjustment
consolidated(Note 1)statement of income(Note 2)

Net sales
1. External sales
2. Inter-segment sales
and transfers
Total

578,920 10,506,786-

10,506,786

69,186(69,186)-

578,920 10,575,973(69,186)

10,506,786-

Segment profit (loss)
157,564
9,169(15,032)(58,089)
93,613
3,080
Notes: 1. Segment profit (loss) in the above adjustment represents eliminations for inter-segment transactions.

96,693

2. Segment profit is consistent with operating income shown on the quarterly consolidated statement of income.
2. Information related to impairment losses on non-current assets, goodwill, etc. for each reportable segment
Not applicable.
II. First nine months of FY3/19 (Apr. 1, 2018 – Dec. 31, 2018)
1. Information related to net sales and profit or loss for each reportable segment
Softwarebusiness

GAKUEN System sales
businessbusiness

Medicalbig data
business

8,398,560

1,340,203

1,378,956

607,739 11,725,460

48,955

7,652

3,242

8,447,516

1,347,855

1,382,198

Total(Thousands of yen)Amounts shown onquarterly
Adjustment
consolidated(Note 1)statement of income(Note 2)

Net sales
1. External sales
2. Inter-segment sales
and transfers
Total

-

11,725,460

59,850(59,850)-

607,739 11,785,310(59,850)

11,725,460-

Segment profit (loss)
350,900(112,098)
133,028(126,406)
245,424
5,786
Notes: 1. Segment profit (loss) in the above adjustment represents eliminations for inter -segment transactions.

251,211

2. Segment profit is consistent with operating income shown on the quarterly consolidated statement of income.
3. In the first quarter of the current fiscal year, the Package business segment was renamed the GAKUEN businesssegment. The change does not influence the segment information. The segment information for the first nine monthsof the previous fiscal year is prepared and disclosed using the new segment name.
2. Information related to impairment losses on non-current assets, goodwill, etc. for each reportable segment
Significant change in goodwill
In the third quarter of the current fiscal year, the Software business purchased the stock of the following companies locatedin Malaysia: Virtual Calibre SDN. BHD. and Virtual Calibre MSC SDN. BHD. In addition, Virtual Calibre MSC SDN. BHD
purchased the stock of Virtual Calibre Consulting SDN. BHD, making it a consolidated subsidiar y. The goodwill arisingfrom these transactions is 999.538 million yen.
The amount of goodwill is calculated provisionally because the allocation of the acquisition cost is incomplete at the end of
the third quarter.

10Japan System Techniques Co., Ltd. (4323) Financial Results for the Third Quarter of FY3/19

Business Combinations
Business combination through acquisition
1. Summary of business combination
1) Acquired companies and their business activitiesi) Virtual Calibre SDN. BHD.
Business activities: Software development and consultation servicesii) Virtual Calibre MSC SDN. BHD.
Business activities: Software development and multimedia app designiii) Virtual Calibre Consulting SDN. BHD.
Business activities: IT management and consultation services
2) Reasons for acquisition
The JAST Group has been active in the ASEAN region for more than 25 years, primarily at JASTTECHNIQUES PTE. LTD. in Singapore and JASTEC (THAILAND) CO., LTD. in Thailand. JAST believes
this region is a highly attractive market because of the outlook for a continuation of rapid economic
expansion and a growing middle class that will create a large consumer market.
Adding the Virtual Calibre Group to the JAST Group will expand our operations in Malaysia as well as theentire ASEAN region. This expansion is expected to contribute to the growth of JAST subsidiaries in the
ASEAN region and to more opportunities for the growth of the SAP business in Japan over the medium andlong term. These benefits are expected to enable the JAST Group to grow even faster. Due to this outlook,the decision was made to acquire the Virtual Calibre Group.
3) Acquisition date
October 11, 2018 and November 26, 2018 (stock acquisition date)
September 30, 2018 (assumed acquisition date)4) Legal form of acquisition
Acquisition of shares with cash5) Company’s names after acquisition
There is no change in the company’s names.
6) Percentage of voting rights acquiredi) Virtual Calibre SDN. BHD.
100%ii) Virtual Calibre MSC SDN. BHD.
100%iii) Virtual Calibre Consulting SDN. BHD.
Virtual Calibre MSC SDN. BHD. acquired 30% of the voting rights of Virtual Calibre Consulting SDN.
BHD. JAST makes Virtual Calibre Consulting SDN. BHD. a consolidated subsidiary too because twocompanies belonging to the JAST Group or Virtual Calibre Group account for the majority ofadministrative operations and for other reasons.
7) Basis for choosing the company to acquire
JAST acquired the shares in exchange for consideration in cash.

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Japan System Techniques Co., Ltd. (4323) Financial Results for the Third Quarter of FY3/19

2. Period of the acquired companies’ performance included in the quarterly consolidated statement of income forthe period under review
The quarterly consolidated statement of income for the first nine months of the current fiscal year does notreflect the performance of the acquired companies since JAST has consolidated only the balance sheets. Thisis because the assumed acquisition date of September 30, 2018 does not exceed three months from theconsolidation closing date of the third quarter.
3. Acquisition cost of acquired companies and breakdown by type of consideration
Payment for the acquisition:

Cash1,653.094 million yen

Acquisition cost:

1,653.094

4. Details of major acquisition-related costs
Remuneration for advisory members and other related fees: 68.007 million yen
5. Goodwill resulting from the acquisition
1) Value of goodwill
999.538 million yen
The amount of goodwill is calculated provisionally because the allocation of the acquisition cost is incompleteat the end of the third quarter.
2) Source of goodwill
The source is primarily the expectation of excess earnings power emerging from business development in the
future.
3) Amortization method and amortization period
Goodwill is amortized over eight years by the straight-line method.
Contingent Liabilities
On November 10, 2015 JAST was sued by Plesion Co., Ltd. for payment of incentives (initial demand 40.798
million yen, which the plaintiff later increased to 145.000 million yen) based on the basic business alliance andother agreement related to medical insurance inspection systems. At the trial on August 10, 2018, the Osaka
District Court delivered judgement to order JAST to pay 145.000 million yen.
Nevertheless, because the factual premises for the judgement were at variance with its perceptions, JAST has
appealed the judgement to the Osaka High Court.
The judgement came with a declaration of provisional execution. In order to seek exemption from the provisional
execution, JAST on August 16, 2018 deposited 120.000 million yen (“Others” under current assets) with theRegional Legal Affairs Bureau.

This financial report is solely a translation of “Kessan Tanshin” (in Japanese, including attachments), which has been
prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience of readers
who prefer an English translation.

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