Annual Securities Report(Report based on Article 24, Paragraph 1 of the
Financial Instruments and Exchange Act of Japan)
Fiscal year
Started October 1, 2017
(52nd Term)
Ended September 30, 2018

TKC Corporation
1758 Tsurutamachi, Utsunomiya-shi, Tochigi(E04807)
This report (from the Cover onward) is a print out of the English translation of the (electronic) disclosure document
filed with EDINET－

1 －Contents[Cover]Section 1 [Information on the Company]
Part 1 [Overview of the Company]
1 [Key Financial Data]
2 [History]
3 [Description of Business]
4 [Information on Affiliates]
5 [Employees]
Part 2 [Business Overview]
1 [Management Policy, Economic Environment and Challenges Facing the Company]
2 [Risk Factors]
3 [Management Analysis of Consolidated Financial Conditions, Operating Results, and Cash Flows]
4 [Material Agreements, etc.]
Part 3 [Property, Plants and Equipment]
1 [Summary of Capital Investments]
2 [Major Property, Plants and Equipment]
3 [Plans for Capital Investments, Disposals of Property, Plants and Equipment]
Part 4 [Information on the Company]
1 [Information on the Company’s Stock](1) [Total number of shares, etc.](2) [Information on Share Subscription Rights](3) [Exercise of Bonds with Share Subscription Rights Containing a Clause for Exercise Price Adjustment](4) [Changes in Total Number of Issued Shares, Common Stock, etc.](5) [Shareholders Composition](6) [Major Shareholders](7) [Status of Voting Rights](8) [Information on Employee Stock Ownership Plan]
2 [Acquisition, etc. of Treasury Stock]
3 [Dividend Policy]
4 [Changes in Share Prices]
5 [Board of Directors]
6 [Corporate Governance]
Part 5 [Financial Information]
1 [Consolidated Financial Statements](1) [Consolidated Financial Statements](2) [Other]
2 [Financial Statements, etc.](1) [Financial Statements](2) [Major Assets and Liabilities](3) [Other]
Part 6 [Stock-related Administration of the Company]
Part 7 [Reference Information on the Company]
1 [Information on the Parent Company]
2 [Other Reference Information]
Section 2 [Information on Guarantors, etc. of the Company][Independent Auditor’s Report] [Confirmation Letter] [Internal Control Report]

－

2 －

Page
3
4
4
4
6
8
11
12
13
13
17
19
34
35
35
36
38
39
39
39
39
47
47
47
48
48
49
51
52
53
54
60
83
84
84
133
134
134
148
148
149
150
150
150
151

[Cover][Document filed]Annual Securities Report[Applicable law]

Article 24, Paragraph 1 of the Financial Instruments and Exchange Act
of Japan[Filed with]

Director, Kanto Local Finance Bureau[Date filed]December 25, 2018

[Fiscal year]

52nd term (From October 1, 2017 to September 30, 2018)[Company name]

Kabaushiki Kaisha TKC[Company name in English]

TKC Corporation[Title and name of representative]

Kazuyuki Sumi, President and Representative Director[Address of head office]1758 Tsurutamachi, Utsunomiya-shi, Tochigi[Phone number]

028-648-2111[Contact person]

Hitoshi Iwata, Vice President and Representative Director[Contact address]

2-1 Ageba-cho, Shinjuku-ku, Tokyo[Phone number]

03-3235-5511[Contact person]

Hitoshi Iwata, Executive Vice President and Representative Director
TKC Corporation Tokyo Head Office(2-1 Ageba-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashikabutocho, Chuo-ku, Tokyo)[Place available for public inspection]－

3 －Section 1 [Information on the Company]
Part 1 [Overview of the Company]
1 [Key Financial Data](1) Consolidated Financial Data, etc.
Fiscal year

48th Term

49th Term

50th Term

51st Term

52nd Term

Year end

September
2014

September
2015

September
2016

September
2017

September
2018

Net sales(Millions of yen)

54,502

54,92857,75059,70561,621

Ordinary income(Millions of yen)

6,401

7,042

7,604

8,792

8,961

Net income attributable to(Millions of yen)owners of parent

3,604

4,011

4,770

6,071

6,158

Comprehensive income(Millions of yen)

3,827

4,149

3,958

7,097

6,517

Total net assets(Millions of yen)

59,906

62,63064,556

68,892

72,550Total assets(Millions of yen)

75,266

76,836

81,11685,42890,202

Net assets per share(Yen)

2,205.39

2,304.38

2,374.07

2,551.70

2,686.32

Net income per share(Yen)

135.55151.18179.65229.13233.46

Diluted net income per
share

(Yen)

135.15150.63178.88228.16232.41Equity ratio

(%)

77.7

79.6

77.7

78.8

78.6

Return on equity

(%)

6.3

6.7

7.7

9.3

8.9

Price earnings ratio(Times)

16.0

20.3

17.5

15.1

20.4

4,402

6,485

9,181

8,123

8,810

(2,873)(4,558)(7,022)(4,617)(4,013)(1,125)(1,333)(2,225)(3,019)(2,567)

16,025

16,61916,552

17,03919,268

2,503

2,500

2,547

2,588

2,625

Cash flows from operating(Millions of yen)
activities
Cash flows from investing(Millions of yen)
activities
Cash flows from financing(Millions of yen)
activities
Cash and cash equivalents(Millions of yen)at end of year
No. of employees(No. of people)(Note) Net Sales do not include consumption taxes, etc.(consumption tax and local consumption tax; hereinafter the
same)

－

4 －

(2) Financial Data, etc. of the Company
Fiscal year

48th Term

49th Term

50th Term

51st Term

52nd Term

Year end

September
2014

September
2015

September
2016

September
2017

September
2018

Net sales(Millions of yen)

50,61650,95753,361

55,17556,769Ordinary income(Millions of yen)

6,367

7,032

7,665

8,473

8,577

Net income(Millions of yen)

3,581

4,073

4,542

5,900

5,959

Common stock(Millions of yen)

5,700

5,700

5,700

5,700

5,700

(Hundreds ofshares)267,310

267,310

267,310

267,310

267,310

Total net assets(Millions of yen)

56,934

59,694

61,37065,466

68,863

Total assets(Millions of yen)

69,882

71,23475,03079,03482,737

Net assets per share(Yen)

2,142.76

2,243.29

2,304.61

2,474.82

2,601.49

Dividend per share(Of the above interim
dividends per share)

44

71

80

100

105

(Yen)

(22)

(33)

(40)

(40)

(50)

Net income per share(Yen)

134.68153.50171.08222.67225.92

Diluted net income per
share

(Yen)

134.28152.94170.34221.73224.90Equity ratio

(%)

81.3

83.6

81.6

82.6

82.9

Return on equity

(%)

6.4

7.0

7.5

9.3

8.9

Price earnings ratio(Times)

16.1

20.0

18.3

15.5

21.0

Dividend payout ratio

(%)

32.67

46.25

46.76

44.91

46.48

(No. of people)

2,203

2,201

2,234

2,269

2,225

Total number of sharesissuedNo. of employees(Notes) 1. Net Sales do not include consumption taxes, etc.
2. Dividends per share include a dividend of 5 yen for the 49th term and 10 yen for the 50th term incommemoration of the Company’s 50th anniversary.

－

5 －2 [History]
Date

Company History

October 1966

The Company was established in Utsunomiya-shi, Tochigi Prefecture on October 22, 1966 as adata processing center to defend the business domains and maintain control over the fate ofaccounting firms, and to improve the administrative efficiency of local governments.
Established Kabushiki Kaisha Tochigi-ken Keisan Center.
Established TKC Tokyo Keisan Center and deployed data processing centers nationwide.
Established TKC Tokyo Youhin Center Co., Ltd. (a subsidiary, changed name to TKC Tokyo
Supply Center Co., Ltd. in December 1993). [Merged and absorbed into the Company inJanuary 2000]
Established TKC Osaka Keisan Center Co., Ltd. (a subsidiary, changed name to TKC Osaka
Youhin Center Co., Ltd. in July 1987, and to TKC Osaka Supply Center Co., Ltd. in December
1993). [Merged and absorbed into the Company in January 2000]
Established TKC Okayama Keisan Center Co., Ltd. (a subsidiary, changed name to TKC
Chushikoku Youhin Center Co., Ltd. in July 1987, and to TKC Chushikoku Supply Center Co.,
Ltd. in December 1993). [Merged and absorbed into the Company in January 2000]
Changed corporate name to Kabushiki Kaisha TKC.
Established TKC Tohoku Keisan Center Co., Ltd. (a subsidiary, changed name to TKC Tohoku
Youhin Center Co., Ltd. in July 1987, and to TKC Tohoku Supply Center Co., Ltd. in December
1993). [Merged and absorbed into the Company in January 2000]
Established TKC Nagoya Keisan Center Co., Ltd. (a subsidiary, changed name to TKC Chubu
Youhin Center Co., Ltd. in July 1987, and to TKC Chubu Supply Center Co., Ltd. in December
1993). [Merged and absorbed into the Company in January 2000]
Established TKC Kyushu Keisan Center Co., Ltd. (a subsidiary, changed name to TKC Kyushu
Youhin Center Co., Ltd. in July 1987, and to TKC Kyushu Supply Center Co., Ltd. in December
1993). [Merged and absorbed into the Company in January 2000]
Established Tokyo Line Printer Company (currently a consolidated subsidiary).
Established TKC Saitama Keisan Center Co., Ltd. (a subsidiary, changed name to TKC Kanshin
Youhin Center Co., Ltd. in July 1987, and to TKC Kanshin Supply Center Co., Ltd. in
December 1993). [Merged and absorbed into the Company in January 2000]
Opened TKC Systems Development Research Center.
Established TKC Security Services Co., Ltd. (currently a consolidated subsidiary).
Opened TKC Tax Research Center.
Established TKC Management Consulting Co., Ltd. (a subsidiary).
[Merged and absorbed into the Company in May 2011]
Opened TKC Okinawa Information Service Center and deployed information service centers
nationwide.
Opened OA Technology Development Center.
Changed corporate name in the Articles of Incorporation to Kabushikik Kaisha TKC (TKC
Corporation).
Changed names of Keisan Centers to Information Centers.
Listed on the Second Section of the Tokyo Stock Exchange.
Opened TASK Technology Development Center.

August 1971
September 1972

November 1972

December 1972

November 1973

August 1975
February 1976

January 1978
October 1982
October 1984
February 1985
April 1985
August 1985
December 1986
June 1987
July 1987
September 1987

－

6 －

Date

Company History

March 1990

Integrated the information processing service divisions of TKC Tokyo Second Information
Center, TKC Shinjuku-Minami Information Center and TKC Ikebukuro Information Center toform TKC Tokyo Consolidated Information Center.
Established TKC Corporation Strategic Management Research Center. [Merged and absorbed
into the Company in October 2000]
Opened TKC Data Entry Center.
Opened TKC Precedent Retrieval Service Center.
Integrated the information processing service divisions of TKC Osaka Information Center, TKC
Kyoto Information Center and TKC Hyogo Information Center to form TKC Kansai
Consolidated Information Center.
Opened Systems Development Center.
Listed on the First Section of the Tokyo Stock Exchange.
Integrated the information processing service divisions of TKC Nagoya Information Center,
TKC Shizuoka Information Center and TKC Nagano Information Center to form TKC Chubu
Consolidated Information Center.
Opened New Systems Development Center.
Acquired shares in SKYCOM Corporation (currently a consolidated subsidiary).
The systems development division obtained ISO9001 quality management systems certification.
Integrated the information processing service division of TKC Kyushu Information Center,
TKC Kumamoto Information Center and TKC Kagoshima Information Center to form TKC
Kyushu Consolidated Information Center.
Changed the company name in the company registry to TKC Corporation to match thecorporate name in the Articles of Incorporation.
Tokyo Line Printer Company obtained "PrivacyMark" accreditation from the Japan Information
Processing Development Center (JIPDEC).
Integrated the information processing service divisions of TKC Okayama Information Center,
TKC Hiroshima Information Center and TKC Shikoku Information Center to form TKC
Chushikoku Consolidated Information Center.
Reorganized the information processing service divisions of TKC Hokkaido Information Center,
TKC Tohoku Information Center, TKC Tochigi Information Center, and TKC Okinawa
Information Center into TKC Consolidated Information Center, and their SCG departments into
TKCSCG Service Center.
Changed the name of TKC Information Service Center (Accounting Firm BD) to TKCSCG
Service Center.
Opened TKC Internet Service Center (TISC).
Became the first private company to pass the LGWAN (Local Government Wide Area Network)- ASP connection qualification test.
Obtained PrivacyMark accreditation from JIPDEC (Local Governments BD).
Obtained PrivacyMark accreditation from JIPDEC (company-wide).
Obtained a report on the effectiveness of the implementation and operation of internal controls
related to ASP services prepared by Ernst & Young ShinNihon LLC based on JICPA AuditingStandards Committee Report 18, "Assessment of Control Risks relating to an Entity using
Service Organizations" (currently, Auditing and Assurance Practice Committee Practical
Guideline No. 86, "Assurance Reports on Controls at a Service Organization").
Opened Innovation & Technology Center (I&TC).
Became the first company in Japan to obtain third party accreditation for ISO/IEC 27018:2014,"Code of practice for protection of personally identifiable information (PII) in public cloud
acting as PII processors" (October 12).
Opened System Engineering Center (SEC).
Established TKC Customer Support Service Co., Ltd. (currently a consolidated subsidiary).
Completed the construction of TKC Customer Support Service building.

April 1990
June 1991
January 1992
November 1992

February 1994
March 1996
January 1998

June 1998
June 1999
July 1999
March 2001

November 2002
March 2003
July 2003

October 2003

April 2004
June 2005
December 2008

September 2010
October 2015
April 2016
October 2017
March 2018－7 －

3 [Description of Business]
The TKC Group (TKC Corporation and affiliated companies) consists of the Company, five subsidiaries and two
affiliated companies. The Group is engaged in business activities including accounting firm business (information
processing services, software and consulting services, and sales of office equipment and supplies), local
governments business (information processing services, software and consulting services, and sales of officeequipment), and printing business.
The positioning of each company in each business segment is as follows.
Note that the three business divisions below are the same as the categories in the segment information set forth in
the Notes to Consolidated Financial Statements under Part 5 Financial Information, 1. Consolidated Financial
Statements, etc., (1) Consolidated Financial Statements.
1 Accounting Firm BD
Main services/products

Positioning of the Company and affiliated companies

1. Information processing services(i) Computer services by the TKC
Consolidated Information
Center(ii) Computer services by the TKCInternet Service Center (TISC)(Services and sales)
1. The Company provides information processing services, software andconsulting services, and sales of office equipment and office supplies
for computer-based accounting to customers including accounting
firms and their clients.
2. TKC Customer Support Service Co., Ltd., a subsidiary of theCompany, offers help desk services to accounting firms and theirclients, and for medium and large-size companies.

2. Software and consulting services(i) Development and provision ofsoftware to be installed on
system devices for information
service applications(ii) Systems consulting services byspecialized staff
3. Sales of office equipment
Sales of system devices for use
with TKC information service
applications(Manufacturing and production)
1. Tokyo Line Printer Company, a subsidiary of the Company, offers
printed continuous business forms for TKC’s computer-based
accounting for information processing service applications, andmanufacturing of office supplies for use with TKC’s computer-based
accounting systems.
2. SKYCOM Corporation, a subsidiary of the Company, is engaged in
the development and sales of software.
3. TKC Shuppan Corporation, an affiliated company, publishes books
and monthly magazines on business management, taxing andaccounting to provide useful business information to TKC member
accounting firms and their clients.
4. iMobile Inc., an affiliated company, is engaged in the development
and maintenance of website services.
(Others)
TKC Security Services Co., Ltd., a subsidiary of the Company, provides
security, maintenance and repair services for buildings owned by theCompany.

4. Sales of supplies
Sales of office supplies forcomputer-based accounting－

8 －2 Local Governments Business
Main services/products

Positioning of the Company and affiliated companies

1. Information processing services(i) Computer services by the TKC
Consolidated Information
Center(ii) Computer services by the TKCInternet Service Center (TISC)(Services and sales)
1. The Company provides information processing services, software andconsulting services, and sales of office equipment and office supplies
to local governments (local municipalities, etc.).
2. TKC Customer Support Service Co., Ltd., a subsidiary of theCompany, offers help desk services to local governments (local
municipalities, etc.).
(Manufacturing)
1. Tokyo Line Printer Company, a subsidiary of the Company, offers
printed continuous business forms for TKC’s computer-based
accounting for information processing service applications.
2. SKYCOM Corporation, a subsidiary of the Company, is engaged in
the development and sales of software.

2. Software and consulting services(i) Development and provision ofsoftware to be installed on
system devices for information
service applications(ii) Systems consulting services byspecialized staff
3. Sales of office equipment
Sales of system devices for
information service applications
3 Printing Business
Main products

Positioning of the Company and affiliated companies

Continuous business forms for PCs,
general office forms, data printing
services, brochures, etc.

(Manufacturing and sales)
Tokyo Line Printer Company, a subsidiary of the Company, isengaged in the manufacturing and sales of continuous business forms
for PCs, general office forms and data printing services (DPS).

－

9 －A structural diagram of the Group’s business activities is as follows:

TKC National
Federation partnercompanies

Law schools,
etc.

Medium/largesized companies

Clients

Clients ofaccounting firms

Accounting firms

Local governments(municipalities, etc.)

General companies

Non-consolidated
subsidiary
TKC Financial Guarantee
Co., Ltd.

Sales of monthly
magazines

Sales of supplies for
TKC computer-based
accounting systems

Information
processing services

TKC

Accounting Firm Business Division

Purchasing of
supplies for TKC
computer-based
accounting systems

Purchasing ofmonthlymagazines,
etc.

Equity method
affiliated company:
TKC Shuppan
Corporation

Equity method
affiliated company:iMobile Inc.

Software andconsulting
services, etc.

Help desk
services

Entrustment ofdevelopment/
maintenance ofwebsite services

Outsourcing of help
desk services

Consolidated
subsidiary:
TKC Customer Support
Service Co., Ltd.

Accounting Firm
Business Division,consolidated subsidiary:
TKC Security Services
Co., Ltd.

－

10 －Sales of officeequipment

Sales of continuous
business forms for
TKC PC systems

Local Governments
Business Division

Printing Business
Division

Outsourcing ofsystems
development/maintenance

Consolidated
subsidiary:
SKYCOM Corporation

Purchasing ofcontinuous business
forms for TKC PC
systems

Consolidated subsidiary:Tokyo Line PrinterCompany

4 [Information on Affiliates](1) Consolidated Subsidiaries

Name

Tokyo Line
Printer Company

TKC Security
Services Co., Ltd.

Address

Capital(Millions ofyen)

Principal line ofbusiness

100

Printing business,
manufacture andsales ofcontinuous
business forms for
PCs

55.0

Security,
maintenance &repairs, andcleaning services

100.0

Development andsales of systems

100.0

Help desk services

100.0

Itabashi-ku,
Tokyo

Utsunomiyashi, Tochigi

10

SKYCOM
Corporation

Chiyoda-ku,
Tokyo

100

TKC Customer
Support Service
Co., Ltd.

Kanuma-shi,
Tochigi

25

Percentage ofvoting rights held(%)

Related activities
Purchasing of printed
continuous business
forms for PCs; lease of
office spaces.
Executive positions areheld concurrently.
Security, maintenance &repairs, packaging andshipping services.
Executive positions areheld concurrently.
Outsourcing of systems
development.
Executive positions areheld concurrently.
Outsourcing of help
desk services

Executive positions areheld concurrently.
(Notes) 1. Tokyo Line Printer Company is a specified subsidiary. Effective as of October 1, 2018, the company name waschanged to TLP Corporation aiming to enhance its DPS operation and expand its sales channels westward
beyond the Kansai region.
2. As of October 5, 2017, the Company established TKC Customer Support Service Co., Ltd., a 100% subsidiary.
3. None of the companies currently submit Securities Registration Statements or Annual Securities Reports.

(2) Equity Method Affiliated Companies

Name

AddressTKC Shuppan
Corporation

Chiyoda-ku,
Tokyo

iMobile Inc.

Chiyoda-ku,
Tokyo

Capital(Millions of
yen)

166

100

Principal line ofbusiness

Percentage ofvoting rights held(%)

Related activities
Purchasing of monthly
magazines, etc.

Production ofmonthlymagazines, etc.

32.8

Development andmaintenance ofwebsite services

30.0

Executive positions areheld concurrently.
Outsourcing ofdevelopment andmaintenance of website
services.

Executive positions areheld concurrently.
(Note) None of the companies currently submit Securities Registration Statements or Annual Securities Reports.
－

11 －5 [Employees](1) Consolidated Basis
As of September 30, 2018
Name of segment

Number of employees

Accounting Firm Business Division

1,628

Local Governments Business Division

566

Printing Business Division

185

Corporate (shared)

246
Total

2,625

(Notes) 1. Number of employees represents the number of working persons.
2. Number of employees listed under Corporate (shared) belongs to the management division.
(2) Status of the Company
As of September 30, 2018
Number of employees

Average age (years)

Average years of service(years)Average annual salary (yen)

39.4

16.1

7,160,851

2,225

Number of employees

Name of segment
Accounting Firm Business Division

1,455

Local Governments Business Division551

Corporate (shared)

219
Total

2,225

(Notes) 1. Number of employees represents the number of working persons.
2. Average annual salary includes bonuses and extra wages.
3. Number of employees listed under Corporate (shared) belongs to the management division.

(3) Status of Labor Unions
There are no labor unions.

－

12 －

Part 2 [Business Overview]
1 [Management Policy, Economic Environment and Challenges Facing the Company]
The Company is managed to achieve the following two business objectives as set forth in our Articles ofIncorporation (Article 2) under the company motto of “Jiri Rita (“self-interest is in the realization of other'sinterest”) and management principle of “Contribution to our Customers.”
1. Management of electronic data processing centers to defend the business domains and maintain control over thefate of accounting firms;
2. Management of electronic data processing centers to improve the administrative efficiency of local governments.
This basic principle has been inscribed in our Articles of Incorporation since the incorporation of the Company(October 22, 1966). With the expansion of our business scope, other business objectives have been added to the
Articles, although they merely supplement these two business objectives and our basic policy for management has
never changed.
I. Target Management Indicators
The Company maintains the principle of attributing the source of dividend for each fiscal year to the profit earnedin the same fiscal year, on the premise of a company as going concern. Accordingly, we believe it necessary tosimultaneously manage our medium-term management indicators to maintain sustainable growth and our shortterm management indicators to ensure appropriate net profit for each year.
From the perspective of short-term management indicators, we classify all expenses into variable costs and fixed
costs, and then focus on trends of marginal profits, which are calculated by deducting variable costs from net sales.
While the marginal profits tend to fluctuate due to different product mixes, we set the target of achieving 60% or
greater for overall marginal profits. In addition, we consider the percentage of personnel expenses in the marginal
profits as the labor share ratio, for which we aim to achieve 50%. Our target for ordinary income to net sales ratio
is 8% or greater.
As for the long-term management indicators, we focus on ratio to the previous year sales (3% or greater),shareholders’ equity ratio (70% or greater) and return on equity (ROE) (8% or greater).
II. Challenges Faced by Each Division
1. Challenges Faced by the Accounting Firm Business Division
The Accounting Firm BD considers contributing to the prosperity of accounting firms and their clients the mostvital business challenge, and will continue to collaborate closely with the TKCNF on the various TKCNF
activities as well as develop and provide systems and services to support the operation of TKC Members.
(1) Increase system competitivenessWe will take the following actions to increase competitiveness of its systems and differentiate ourselves fromother companies by appealing the advantages of our systems.
(i) The strengths of the Company’s systems lie in the one-stop, full line of tax affairs and accounting. The
advantage is the capability to provide a one-stop, full line of accounting, tax affairs and electronic tax filingwith links to related tax returns while maintaining complete compliance with laws, regulations and accounting
standards. Looking ahead, the Company will continue to respond promptly and accurately to revisions oflaws/regulations and system modifications, and strive to enhance these strengths.
－

13 －(ii) The most important feature of the Company’s systems is that they are not mere offering of systems andservices. Our systems come with the meticulous support, from implementation to operation, by TKC
Members that have extensive experience in tax- and accounting-related practices, to enable clients to perform
legitimate and appropriate tax and accounting. The Company will provide enhanced support for such TKC
Members to assist them in offering greater added-value services.
(2) Activities to promote the use of self-accounting
In order to support TKCNF achieve their strategic targets, the Company will enhance and expand functions that
support corporate executives' quick decision making, and carry out promotional activities taking advantage ofthe strengths of systems that prevent retroactive insertions, deletions and corrections.
(3) Support to achieve "Over 10,000 TKC Member Firms"
To achieve TKCNF’s target of achieving over 10,000 TKC Member firms, the Company will solicit membershipin cooperation with TKC Members and contribute to the achievement of TKCNF’s strategic target.
(4) Increase of user base of TKC Law Library
The Company will increase the user base of the TKC Law Library by enhancing the functions of LEX/DB
Internet and other major contents, expanding the databases for law practitioners and creating new databases ofprofessional journals and other useful contents, and offering Legal Tech Services to provide support to law firms.
2. Challenges Faced by the Local Governments Business Division
The Local Governments BD considers providing support for improving resident convenience and improving theadministrative efficiency of local governments a vital business challenge, to be achieve through the development
and provision of innovative products and services that leverage the latest in ICT, and will implement thefollowing five priority activities to this end.
(1) Develop new municipality customers of mission-critical operational systems and further promote government
cloud systems to achieve minimum cost;(2) Provide user-oriented administrative service digitization support systems based on cutting-edge information
technologies;(3) Support the enhancement of social roles of eLTAX and digitization of tax administration to further promoteelectronic filing & payment of local taxes;(4) Support evidence-based policy making (EBPM) based on public accounting information by providing various
systems and functions that allows multilateral analysis of financial data;(5) Establish mutual product supply relationship with local vendors providing services to local municipalities inorder to promote alliance strategies to achieve expansion of sales area and multiplexing of services.
3. Challenges Faced by the Printing Business Division
The Group’s Printing BD implements the following actions to increase sales mainly from data print services(DPS) and business process outsourcing (BPO).
(1) We will focus on promoting sales of DPS-related products through the acquisition of new customers.
(2) We will submit proposals combining our analog and digital printing technologies to loyal customers to achieve－

14 －direct communication with such customers.
(3) We will handle back-office operations of customers in the form of BPO (business process outsourcing), andcontribute to streamlining the customers’ business operations by enhancing work efficiency and reducing costs
and information security risks while maintaining high quality.
(4) We will strengthen ties with existing customers to increase market share.
(5) We will continue to respond to customer needs, submit unique proposals to differentiate ourselves fromcompetitors, and develop new technologies to reduce production costs.
(6) We will strengthen the quality checking systems by mechanizing process of all products, and shorten delivery
times by improving manufacturing efficiency in order to increase our market share of governmental andmunicipal projects.
(7) We will strive to improve and maintain consistent quality, and enhance our quality inspections of each process
for all products to prevent quality defects.
(8) We will increase self-manufacturing and reduce the percentage of subcontracting in order to save costs.
(9) We will further strengthen our information security systems based on Privacy Mark and ISMS in order to win
trust from customers and business partners and to ensure My Number management.
(10) As ISO14001 certified, environmentally-friendly company, we will reduce wasted paper and further put ourefforts into purifying used pastes and reduceing energy consumption through increased productivity andefficiency.
4. Challenges Faced by the Entire Company(1) Providing systems in complete compliance with laws and regulations
The business operations of the Company is to provide support for works performed by certified public tax
accountants, certified public accountants and local public officers, all bearing high levels of social accountability,
by engaging deeply into the legal areas related to the Japanese Tax Code, the Companies Act, the Civil Code, theFinancial Instruments and Exchange Act, and the Local Autonomy Act, and drawing upon the latest ICT. The
Company will continue to pursue system developments that will enable us to promptly respond to revisions tosuch laws and regulations.
(2) Establishing the Group governance system
The Company will establish an internal controls system in compliance with the requirements of the Companies
Act as well as the Financial Instruments and Exchange Act of Japan, compile the Company’s management
philosophy, various board structures and corporate rules and regulations in a systematic manner to improve theGroup governance system.
(3) Fostering an organizational culture that bolsters job satisfaction
The Company will promote the fostering of an organizational culture that bolsters job satisfaction in accordancewith the Company’s Management Principles, develop a workplace that respects individuals and team work, andactively develop the capabilities of employees necessary to deliver value to our customers.
(4) Ensuring business continuity
The Company will continue to strengthen and expand existing services to ensure the continuity or early recovery－

15 －of the business operations of all of our customers in the event of large-scale natural disaster and other unforeseen
circumstances.
(5) Efforts toward information security
As a provider of information services for accounting firms and their clients and local governments through theuse of latest ICT, ensuring information security is our highest priority and also a social responsibility inconducting our business activities.
It is with this awareness that the Group acquired third party accreditations including the ISO/IEC 27001
Information Security Management Systems certification and the JIS Q 15001 Personal Information Protection
Management Systems (PrivacyMark) so that our customers can use our cloud services with a peace of mind.
In addition, the TKC Internet Service Center (TISC) also acquired certifications under ISO/IEC 27018, code ofpractice for protection of personally identifiable data in the public cloud on October 12, 2015, andISO/IEC27017, code of practice for information security controls for cloud services on June 19, 2017.
The Company will continue to strive to develop environments where customers can use cloud services safely,
securely and conveniently.

－

16 －

2 [Risk Factors]
Major risks pertaining to the business operations of the Company and the Group, in reference to the sections
Business Overview and Financial Information in this Annual Securities Reports, that we consider are worth
informing our investors are described below. It is also our policy to be forthcoming in disclosing information onother risk factors that may be deemed material to investors.
The Company is aware of the possibility that these risks may occur and strives to prevent them in advance or
respond promptly should they occur. However, we feel it necessary that investment decisions concerning theCompany securities should be made after thorough review in light of this section and also in reference to thecontents of this entire report. Note that this section does not cover all risk factors related to investment in the
Company securities.
Statements with regards to the future are based on the Group’s decision made as of the end of the current
consolidated fiscal year (September 30, 2018).
I. Retirement Benefit Obligations
Retirement benefit obligations and related costs for employees of the Group are recognized based on certain
assumptions (base rates) used in actuarial discount rate calculations. Fluctuation in these base rates may affect thefinancial standing and operating results of the Group. While the Group implements measures to minimize theeffects of such fluctuation, for example, moving parts of the retirement plan to a defined contribution pension
management scheme, the impact of these changes cannot be completely eliminated. Base rate changes may affectthe financial standing and operating results of the Group.
II. Decline in Value of Fixed Assets
The Accounting Standard for the Impairment of Fixed Assets has been applicable since the fiscal year started
September 2006 in accordance with the Financial Instruments and Exchange Act of Japan.
The application of fixed asset impairment accounting may affect the financial standing and operating results of theGroup.
III. Fluctuations in Raw Material Procurement Costs for Printing BD
Direct purchasing of base paper from paper manufacturers’ accounts for the bulk of raw material procurement by
the Printing BD, and the division strives to ensure the stable provision of raw materials and to maintain optimal
pricing. However, there are concerns for possible imbalance in demand and supply due to oil price increases andtightening of supply and demand in international markets. Should such circumstances prevail, the Group will aim
to respond through price negotiations with its customers. However, such circumstances may still affect the financial
standing and operating results of the Group in the event the procurement of raw materials becomes extremely
difficult, or when purchase prices rise significantly.
IV. Protection of Personal Information
The Group is entrusted with a large amount of information on companies and individuals held by our customers(accounting firms, local governments) as well as internal information for the execution of its business.
In order to ensure that such information is managed properly, the Company will review its policies and procedures
related to information management on an on-going basis, and educate its directors and employees, disseminate theimportance of information management and implement system-based information security measures.
The Company shall also strengthen its information protection management systems by obtaining accreditations
such as ISO/IEC 27001 Information Security Management System (ISMS) and JIS Q 15001 Personal Information－

17 －Protection Management Systems (Privacy Mark). TKC Internet Service Center also acquired ISO/IEC27018
certification, a standard specializing in the protecting of personal information in relation to ISMS and public cloudservice, and ISO/IEC27017 certification for information security controls for cloud services.
However, the potential for such information leaking due to unforeseen circumstances cannot be eliminatedcompletely, such an event could have negative impacts on the Company’s social standing and may require
enormous costs in response or reduce the brand value which could affect the financial standing and operating
results of the Group.
V. Contentious Cases
While there are no contentious cases that could affect the financial standing and operating results of the Group,
such contentious cases could occur in the future.

－

18 －

3 [Management Analysis of Consolidated Financial Conditions, Operating Results, and Cash Flows][Summary of Business Results]
I. Operating Results
The consolidated Group comprising of TKC Corporation and its six consolidated subsidiaries recorded a net salesof 61,621 million yen (increased 3.2% year-on-year), operating income of 8,679 million yen (increased 1.3% yearon-year), ordinary income of 8,961 million yen (increased 1.9% year-on-year), and current net income attributableto owners of parent of 6,158 million yen (increased 1.4% year-on-year).
The Group’s net sales, operating income, ordinary income and current net income attributable to owners of parent
exceeded the previous fiscal year’s performance for two consecutive years with record-breaking figures. Major
factors include the steady growth in computer service and software sales earned by the Accounting Firm Business
Division in relation to widespread of cloud services, and increase in computer service and software sales earned by
the Local Governments Business Division thanks to the acquisition of new customers.
Net sales by business division are shown below.
1. Results of Operation of the Group for the Fiscal Year
(1) Net sales of the Accounting Firm Business Division(i) Net sales of the Accounting Firm BD was 43,781 million yen (increased 3.4% year-on-year); operating
income was 8,501 million yen (increased 8.7% year-on-year).
(ii) Sales from computer services increased 3.2% year-on-year. This was attributable to the growth in number ofusers of the cloud service-based FX4 Cloud Integrated Accounting Information System for mid-sizedcompanies and Office Management System for Tax Accounting Firms (OMS Cloud).
(iii) Software sales increased by 6.6% year-on-year. This is the result of the growing number of users of theInheritance Tax Declaration-related Systems (TPS8000 series) due to the establishment of special measures
under the business succession taxation scheme provided under the FY2018 tax reform, as well as theincrease in the numbers of users of FX4 Cloud and e21-Meister.
(iv) Sales from consulting services decreased 11.9% year-on-year. This was due to decrease in revenues fromclient/server system launch support services and hardware maintenance as a result of growth in the numberof users of FX4 Cloud and other systems.
(v) Hardware sales decreased by 7.2% year-on-year. This was caused by decrease in demands for servers andother hardware due to the increased transition to cloud services.
(2) Net sales of the Local Governments Business Division(i) Net sales of the Local Governments BD was 14,113 million yen (increased 2.9% year-on-year); operating
income was 3 million yen (decreased 99.4% year-on-year).
The large decrease in operating income was due mainly to the rise in purchase turnover in relation to thesystem change-over of new customers including the Kanagawa Prefecture Collective Business Partnershipfor Information Systems in Municipalities (13 municipalities), and increase in depreciation of softwaredeveloped newly for the corporate inhabitant tax system and personnel information system.
(ii) Sales from computer services increased by 4.0% year-on-year. This was driven by the increased sales fromoutsourcing services and the use of TKC data centers generated by orders for mission-critical systems from－19 －

new customers, and the increase in the number of users of LGWAN cloud services such as the Convenience
Store Certificate Issuing System and the Taxation Document Image Management System.
(iii) Software sales increased by 15.6% year-on-year. This was driven by the increase in system revision costs in
response to amendments to the National Health Insurance system and long-term care insurance system, as
well as the increasing number of users of mission-critical systems and public accounting systems.
(iv) Sales from consulting services decreased 11.5% year-on-year. This was due to the absence in the current
fiscal year of the sales from services related to the strengthening of information security systems for local
municipalities (measure for strengthening information security of the internal network within municipalities)
which existed in the previous fiscal year.
(v) Hardware sales decreased by 25.6% year-on-year. This was due to the absence in the current fiscal year of
the sales of servers and network devices for services related to the strengthening of information security
systems for local municipalities (measure for strengthening information security of the internal network
within municipalities) which existed in the previous fiscal year.
(3) Net sales of the Printing Business Division (Subsidiary: Tokyo Line Printer Company)(i) Net sales of the Printing BD was 3,726 million yen (increased 1.8% year-on-year); operating income was
168 million yen (increased 1.1% year-on-year).
(ii) Sales of data printing service-related products increased by 7.8% year-on-year. This was driven by theorders related to the 48th general election of members of the House of Representatives in October of 2017,
orders for notice-related services from municipalities at the beginning of the fiscal year, large orders fromlocal municipalities, large orders for direct mail productions from private enterprises, and orders forbusiness process outsourcing (BPO) projects.
(iii) Business form-related sales decreased by 3.0% year-on-year due to ongoing decline in demands for business
forms.
2. Important Matters with Respect to the Company as a Whole(1) Responses to the North Osaka Earthquake, Heavy Rain Event in July 2018, and the 2018 Hokkaido Eastern
Iburi Earthquake
Due to large-scale natural disasters that occurred in various locations this year, some business offices wereforced to close down temporarily. Fortunately, there were no serious damage to employees and business offices,
allowing them to resume their businesses early.
We also provided support to TKC Member firms, their clients and local governments who were affected by thedisasters in order for them to resume their ordinary course of business early.
(2) Completion of TKC Customer Support Service Building
The construction of TKC Customer Support Service Building (4 stories above ground, total floor area 4,991.99
sq. meters) in Kanuma-shi, Tochigi Prefecture was completed on March 16, 2018. The building began operation
on April 2 as the operation base for our wholly-owned subsidiary, TKC Customer Support Service Co., Ltd.,
which was established to enhance customer support (founded on October 5, 2017).
(3) New Establishment of Chiba Business Section
On June 1, 2018, we established the new Chiba Business Section in order to strengthen support for our local
municipality customers within Chiba Prefecture.
－

20 －(4) Transfer of Shares without Charge by Masaharu Iizuka, Chairman Emeritus of the Company, to TKC Members
In March 2018, Masaharu Iizuka, Chairman Emeritus, transferred without charge, the common shares of theCompany owned by himself to 620 TKC Members nationwide who newly implemented Shomen-tempu(attachment of tax audit reports) pursuant to Article 33-2 of the Certified Public Tax Accountant Act. Thistransfer was made in hope for the development of the certified public tax accountant industry, and based on his
belief that the practice of Shomen-tempu (attachment of tax audit reports) pursuant to Article 33-2 of the CPTA
Act will ensure the reliability of financial statements and tax returns prepared by the certified public tax
accountants against tax authorities and financial institutions, and that such practice would lead to thedevelopment of the industry of certified public tax accountants. Masaharu Iizuka, together with his brother lateKazuaki Iizuka (former vice president of the Company), had also transferred a total of three million shares of theCompany owned in person to 6,657 TKC Members in 2006.
This is the second transfer without charge made by Masaharu Iizuka, and he will continue transferring up to one
million shares of the Company in the five years until 2022.
3. Business Activities and Operating Results of the Accounting Firm Business Division
The Accounting Firm BD operates in accordance with the business objectives set forth in the Articles ofIncorporation (Article 2 Item 1: Management of electronic data processing centers to defend the business domain
and maintain control over the fate of accounting firms) and works under close ties with the TKC National
Federation (“TKCNF”), which consists of 11,200 certified tax accountants and certified public accountants (as of
September 30, 2018) that are customers of TKC (hereinafter, "TKC Members").
TKCNF was established in 1971 and is engaged in various activities in an aim to realize the following six
business objectives:
1) Realize tax justice;2) Conduct tax consultant business on compliance completely;3) Support SMEs for their prosperity and success;4) Enhance managerial infrastructure of TKC Member firms;
5) Make full use of TKC systems;
6) Promote mutual enlightenment, support and friendship.
(Note) For more information on the TKC National Federation, see the booklet "All About TKC National
Federation" or visit the TKC Group website (http://www.tkc.jp/).
(1) Current Activities of the TKC National Federation ("TKCNF")
TKCNF currently sets the following two focus activities and is actively taking actions to accomplish them:(i) Focus activity 1: Commit ourselves to three major themes and fulfill our roles in society!
1) Prepare highly reliable financial statements in compliance with Chusho Kaikei Yoryo (Guidelines for SME
Accounting) and make them widely know to financial institutions as well as raising their awareness to theguidelines.
2) Promote Shomen-tempu (attachment of tax audit reports) (ensure the reliability of financial statements and－21 －tax returns pursuant to the principle of definite settlement of accounts)
3) Promote self-accounting practices (achievement of account surplus and support for proper filing)(ii) Focus activity 2: Achieve the maximum use of the overall capability of accounting firms and build up asystem that creates high added value!
Actively provide clients with the following three services in collaboration with local financial institutions.
1) TKC Monitoring Information Service2) Support for business improvement (support for the early drafting of business improvement plans)3) Support for founding of businesses, succession of businesses, and overseas expansion, etc.
To support these activities of TKCNF, the Company is engaged in the development and provision of systems andservices that are to the benefit of the prosperity and success of SMEs.
(2) Priority Action Themes of the Accounting Firm BD
In order to support these activities of TKCNF, the Company has operated to achieve its strategic goals: topromote self-accounting by the TKC methods (promotion of FX series); to solicit new members (promotion ofjoining TKCNF); and to promote the use of Tax Accountant Office Management System (OMS).
In response to the recent changes in the legal systems, we have further established new strategic goals: to supportcomplete compliance with the Electronic Books Maintenance Act; to support the promotion of TKC Monitoring
Information Service; and to support responding to special measures under the business succession taxation
scheme.
(i) Promotion of self-accounting by the TKC methods (promotion of FX series)
As a result of the following business activities, the number of FX series users came to approximately 260,000
companies as of September 30, 2018.
1) Promotion of e21-Meister and FX2The Company offers its self-accounting systems for the clients of TKC Members, including e21-Meister forsmall-size corporations with annual turnover up to 50 million yen, and FX2 for SMEs with annual turnover
up to 500 million yen.
During the fiscal year under review, we conducted the following activities to promote the use of thesesystems:a. We provided TKC Member firms with internal seminars focusing on the utilization of the systems, as wellas support for each firm in setting and identifying targets for the promotion of self-accounting and support
for hosting self-accounting promotion meetings to determine specific action plans.
b. At the 45th TKC National Meeting of Executives held in July 2018, we announced the development policy
for FX Agricultural Accounting aimed to support TKC Members in their effort to promote self-accounting
in the agricultural fields, and the development policy for the Smart Performance Review functions which
will enable owners of clients using the FX series to check their company’s performance anytime andanywhere from their smartphones. We began to take actions for the launch in October 2018.
2) Promotion of FX4 Cloud－

22 －In order to support TKC Members in their effort to retain good-standing clients and expand their large-scaleclient base, the Company offers an integrated accounting information system FX4 Cloud designed for
medium-scale corporations with annual turnover of 500 million to 5 billion yen. During the fiscal year
under review, we engaged in the following activities:
a. In order to motivate TKC Members, we supported the 20 TKC Local Associations in hosting seminars foraccounting firms and worked to encourage more accounting firms to promote the use of FX4 Cloud.
Starting in June, we hosted seminars on how to streamline accounting works for user companies. Theseseminars were aimed to support the effective use of FX4 Cloud by explaining how to use the divisional
performance management function and the Management Report design tools to create original management
reports, both of which are the strengths of FX4 Cloud.
b. The Support Project for Introducing IT for Improvement in Productivity of Services, etc., is a project
conducted by the Ministry of Economy, Trade and Industry. Taking this as an opportunity to promote selfaccounting under the initiative of accounting firms, we provided information on the Project to TKC
Member firms and supported their promotion activities to their clients.
3) Promotion of use of TKC System MySupport
In order to enable smooth system operation at companies using the FX series and to provide anenvironment where TKC Member firms can promote self-accounting without stress, the Company offers
TKC System My Support service in which TKC’s dedicated staff provides direct support for telephoneinquiries from clients. During the fiscal year under review, we worked to increase the number of firms
using this service.
(ii) Soliciting new members (promotion of joining TKCNF)
TKCNF is engaged in a project to increase TKC membership to over 10,000 firms by the end of December
2020. The Company is working closely with the New Members Service Committee of TKCNF in soliciting
new members to achieve this goal.
During this fiscal year, certified public tax accountants and certified public accountants were introduced by
TKC Members and related agencies. In addition, we solicited new members through seminars held for nonmembers targeting medium- and large-sized firms and certified public accountants who plan to begin private
practice.
As a result of these activities, the total number of TKC Members totaled approximately 9,600 firms and11,200 accountants as of September 30, 2018. The numbers of firms and accountants are different becausesome firms have multiple accountants who are members.
(iii) Promoting the use of Tax Accountants Office Management system (OMS)
The Company positions its Tax Accountants Office Management system (OMS) as a platform for all of theservices it provides to accounting firms.
During the fiscal year under review, we promoted the use of OMS, highlighting the enhanced services
available through the use of OMS including improved information security, stronger collaboration withfinancial institutions by utilizing the TKC Monitoring Information Service, and better compliancemanagement by accounting firms.
In addition, starting in April 2018 we began offering a secured chat tool called TKC Chat as an optional
function of OMS to support the performance of the Obligations to Supervise Employees, etc. (Article 41-2;
Certified Public Tax Accountant Act of Japan).
－23 －As a result of these activities, the number of accounting firms using OMS reached approximately 7,200 as of
September 30, 2018.
(iv) Supporting complete compliance with the Electronic Books Maintenance Act
Under the FY 2018 tax reform, provisions to offer a tax benefit of 100,000 yen in special reduction for blue
income tax returns if the declarer 1) is subject to the Electronic Books Maintenance Act for bookkeeping, or2) files the income tax return electronically. This is a groundbreaking revision that offers favorable tax
treatment for business entities that keep the history of additions, deletions and revision to the book record,
which serves as basis of tax returns in accordance with the Electronic Books Maintenance Act. We anticipate
that the same treatment will be applied to the filing of corporate taxes in the future.
(v) Supporting the promotion of TKC Monitoring Information Service
TKC Monitoring Information Service is a cloud-based service in which the TKC Members, upon request by
the management of their clients, provide to financial institutions, free of charge, financial information such asmonthly trial balance sheets and financial statements prepared by TKC Member firms after field audits andmonthly settlements. Information will be made available at the earliest timing, for example, at the same time
the client electronically files its fiscal financial settlement to the tax authorities.
Financial institutions having adopted the service expressed their high appreciation, giving comments such thatthey "can now conduct fruitful interviews with loan customers, having obtained their financial information
early and conducted advance analysis on customer status," and that "the purpose of visiting loan customers is
no longer to obtain financial statements or worksheets, but rather to discuss their business.”
In the fiscal year under review, we worked to communicate the following two points to financial institutions:i) that the reliability of financial statements prepared by SMEs can be verified by three documents, namely:
1. Supporting documents submitted by TKC Members as provided for under Article 33-2 of the Certified
Public Tax Accountant Act of Japan.
2. Certificate of Bookkeeping Timeliness, with which TKC certifies the timeliness in the preparation of
accounting books as required under Article 432 of the Companies Act of Japan for three years (and at thesame time certifies the one-stop, full line process of accounting books = financial statements = tax returns
for corporate tax and consumption tax).
3. The Chusho Kaikei Yoryo Checklist developed by the Japan Federation of Certified Public Tax
Accountants' Associations.
ii) that these certificates can be obtained quickly with the TKC Monitoring Information Service.
Thanks to the high acclaims, the Service has been adopted by Japan Finance Corporation (Micro Businessand Individual Unit) to be used for its services (starting October 2018) as well as by 22 credit guarantee
corporations nationwide.
As a result of the campaign, the number of financial institutions adopting this Service is increasing rapidly
with more than 380 institutions throughout Japan, and over 50,000 companies providing their financial
information through this Service as of September 30, 2018.
(vi) Support in response to special measures under the business succession taxation scheme
There is a growing concern that, as business owners of SMEs are aging rapidly, many SMEs which provide－

24 －job opportunities to local communities may have to close down their business without being succeeded. In
response to such situation, the Japanese government, in the FY2018 tax reform, set forth a special measure
under the business succession taxation scheme in addition to the provisions of the conventional businesssuccession taxation scheme. In order to be eligible, SMEs are required to submit to the prefectural
governments a special business succession plan prepared under the guidance and advice of a certified business
innovation support agency (“Certified Support Agency”).
In an aim to enable TKC Members who are Certified Support Agency to efficiently support SMEs in thesmooth succession of business, the Company launched the TKCNF Project for Special Measures under theBusiness Succession Taxation Scheme in collaboration with the TKCNF to develop systems, provide various
support tools, and plan and host seminars.
On June 1, 2018, we developed and released the FY2018 edition of the Support System for Application ofBusiness Succession Taxation Scheme (compatible with the special measures under the business succession
taxation scheme)/TPS8800 for the preparation of the special succession plan that is required in order tobecome eligible for the special measures under the business succession taxation scheme.
(3) Amendments to the Participation Agreement
The Company amended the Participation Agreement taking effect as of January 1, 2018. It aims to help achieve
TKCNF's strategic target of "Over 10,000 TKC Member Firms" and promote the use of OMS which serves as
the platform for all services that the Company provides to TKC Member firms, and the ProFIT network of
TKCNF. In addition to standardizing the multiple formats of the Participation Agreement into one common
format, amendments include (i) unification of different participation fees and basic membership fees, (ii)measures to appropriate the entire basic membership fee to processing charges, (iii) changes in the terms andconditions of the Participation Agreement to provide access to OMS and ProFIT, (iv) discounts for the basic
program, and (v) free access to OMS and ProFIT (limited to the first three years of participation), enabling TKC
Members to access TKC services more easily.
The Company explained to Member firms about the amendments to the Participation Agreement and suggested
them to switch to the new Agreement.
(4) Activities to support the preparation of highly reliable financial statements based on timely and accurate
bookkeeping(i) Support activities for the diffusion of Chusho Kaikei Yoryo (Guidelines for SME Accounting)
The TKCNF recommends the use of Basic Guidelines with Respect to the Accounting Procedures at Smalland Medium-sized Enterprises (Chusho Kaikei Yoryo (Guidelines for SME Accounting)) formulated in
February 2012 with which SME clients should comply.
The Small and Medium Enterprise Agency of Japan describes the following objectives of the Accounting
Rules for SMEs in its website:(Source: http://www.chusho.meti.go.jp/zaimu/youryou/about/QandA.htm)“About Chusho Kaikei Yoryo (Guidelines for SME Accounting): While non-listed SMEs do not require
accounting rules designed for listed companies, we did not have an accounting rule that SMEs could use
with ease. The basic guidelines for SME accounting (Chusho Kaikei Yoryo) consist of a set of accounting
rules designed to meet the needs of SMEs that may be in the following situations:
SMEs that are short of accounting personnel and do not have the capability or accounting system tohandle high level accounting procedures;
SMEs that are required to disclose accounting information only to business accounts, financial－

25 －institutions, family shareholders, and tax authorities;
Many SMEs process their accounting focusing mainly on the process stipulated in the Corporation Tax
Act.”
Therefore, these Guidelines have been formulated based on the following principles: 1) accounting that helps
to grasp the company's business situation; 2) accounting that contributes to providing information to
stakeholders (financial institutions, etc.); 3) accounting that complies with the Ordinance on Company
Accounting while achieving harmony between accounting and taxation system; and 4) accounting that does
not to place excessive burden on SMEs.
In order to support the activities of the TKCNF towards the diffusion and utilization of the Guidelines, theCompany continues to promote the development of training materials and to strengthen collaboration withother organizations supporting SMEs.
(ii) Issuance of Certificate of Bookkeeping Timeliness
The Company utilizes the logging data and historical time series data that are automatically logged at the TKC
data centers when TKC Members access our system to issue a Certificate of Bookkeeping Timeliness free ofcharge. This Certificate serves as reference for financial institutions and other third parties to objectively
evaluate the business performance of TKC Member firms.
It certifies when the TKC Member visited each of their clients for field audits and monthly settlements in thepast 3 years (36 months). At the same time, the Certificate provides evidence 1) that the accounting books areprepared based on the daily book entries, 2) that the financial statements are prepared based on suchaccounting books, and 3) that the tax returns for corporate tax and consumption tax are prepared based onsuch financial statements. The Company calls this “a one-stop, full line of tax affairs and accounting.” The
Company calls this “a one-stop, full line of tax affairs and accounting.”
The Certificate of Bookkeeping Timeliness cannot be issued if the accounting processing is in violation of thisone-stop, full line process. This system was developed in an aim to improve reliability of financial statements
and tax returns prepared by TKC Members and to provide a passport for smooth financing to the clients of
TKC Members. This utilizes the features of the Company's Financial Accounting Processing Using TKC Data
Centers, which prohibits any retroactive insertions, deletions and corrections to past data, and TKC
Corporation proves, as a third party, that TKC Members have visited their clients on a monthly basis toprovide guidance on accurate bookkeeping (monthly Field Audits), and that all work processes from monthly
settlements to the final settlement of accounts and electronic tax filings have been completed in a timely
manner.
(5) Expansion into Large-Scale Enterprise Market
By utilizing the TKC systems, the Company contributes to the rationalization of tax and accounting operations oflarge enterprises, mainly of listed companies, and are actively working to solicit these companies and theiraffiliates to become clients of TKC Members.
As systems to supplement these activities, the Company provide the TKC Consolidated Group Solution package(which includes: the eCA-DRIVER consolidated accounting system, the eConsoliTax consolidated tax payment
system, the eTaxEffect tax effect accounting system, the ASP1000R electronic tax filing system for corporations,
the FX5 integrated accounting information system, the e-TAX series electronic tax filing system, the FAManager
non-current asset management system, the TDS documented evidence storage service, and the OBMonitor
overseas business monitoring system, etc.).
In the fiscal year under review, the Company held seminars in collaboration with the TKCNF's Medium andLarge-size Support Research Committee (consisting of nearly 1,320 members as of September 30, 2018) and the－26 －TKCNF's Overseas Deployment Support Research Committee (consisting of nearly 630 members as of
September 30, 2018), in order to enhance the awareness and brand power of system offered by the Company.
Seminars on responses to electronic filing mandated to large enterprises with a capital of 100 million yen or
greater under the FY2018 tax reforms, as well as on accounting standards with respect to recognition of revenue
with the introduction of IFRS, overseas M&A, and seminars targeting companies aiming IPO were held.
In addition, we made holistic proposals to the users of our systems, leveraging the strengths of the systems thatcover all aspects of account settlements and tax declaration on corporate group level. In June 2018, we started
offering a cloud-based service, TKC Tax Application & Notice Cloud, to support large-scale enterprises indigitalizing tax procedures (applications and notices).
As a result of these activities, the number of corporate groups using the TKC Consolidated Group Solution
counted approximately 2,900 corporate groups (with about 19,900 umbrella companies) as of September 30,
2018. Our systems are adopted by over 80% of the 100 largest Japanese listed companies by sales amount.
(6) Expansion of Markets for Legal Information Database Services
The LEX/DB Internet legal information database, developed originally by the Company, maintains an archive ofover 293,000 judicial references as of September30, 2018, covering all legal fields from precedents, etc. set in
the former Supreme Court dating back to 1875 to those most recently published as well as precedents anddecisions collected through our own channel, being the largest database of its kind in Japan. The TKC Law
Library is a comprehensive legal information database which uses the LEX/DB Internet as its core content andcontains over 929,000 bibliographic information references with links to 57 of the legal information databases
operated by 18 specialized legal publishers (including Gyosei Corporation, Nippon Hyoron-Sha Co., Ltd.,
Yuhikaku Publishing Co., Ltd., Chuokeizai-Sha Inc., Hnarei Times Co., Ltd.) with accessible number of
information now exceeding 2,600,000 items.
(i) Increase of user base of TKC Law Library
The Company has continuously engaged in sales promotions for the TKC Law Library, highlighting its
usefulness in business operations and putting the contents that are useful for business practices into customerspecific packages (Law Firm Package for law firms, Corporate Legal Package for corporate legal
departments). The Labor Law EX+ portal site related to labor laws which was jointly developed with ourpartner company Roudou Kaihatsu Kenkyukai Co., Ltd. (launched in March 2017) is offered to members of
the Labor Law Study Group and as an optional content of the TKC Law Library, bringing about new sales
channels for further expansion of use.
In the fiscal year under review, as a result of active promotional activities towards TCK Member firms,
universities, law schools, government offices, law firms, patent offices and corporate legal departments, thenumber of users exceeded 50,000 IDs and t is used by over 19,600 institutions as of September 30, 2018.
(ii) Promotion in the academic market
The Company proposes the implementation of system-based early learning support programs to 54 law
schools using the TKC Law School Educational and Research Support System and supports such schools inapplying for the Public Support Program for Law Schools Concerning the Revision of Budget Distribution
initiative by the Ministry of Education, Culture, Sports, Science and Technology. The system includes exercise
systems to aid students in self-study (Basic Skill Tests, Study Drills of Short Answer Questions from Past
Exams and the Essay Writing Seminar), as well as Learning Support NAVI and Study Drills of Precedents. In
particular, functions that enable students to create study plans, check their progress, and study and practice theessential judicial precedents in the lead up to the bar exam have gained a high reputation for its effect fromsuccessful applicants in the bar examination, leading to the increasing number of users year by year.
We also made a full-scale launch of the Civil Service Examination Study Tool for undergraduates in the fiscal－

27 －year under review, and concluded contracts with 16 universities and trial use by 56 schools as of September
30, 2018.
(iii) Overseas expansion
As for the sales of TKC Law Library (Overseas Edition) through agents, we have received inquiries fromcourts, governmental agencies, universities and law firms in South Korea, Taiwan, China and other Asian
countries as well as other countries including Germany, the U.K. and the U.S., with further growth anticipatedin the future, particularly in the Asian regions.
In an aim to further enhance our footprint in overseas markets, we are collaborating with the Research and
Education Center for Japanese Law having eight sites in Asia, each serving as a key facility of Nagoya
University for the development of laws and support in law education in Asia, and we promote the use of the
TKC Law Library by the local students writing their essays in the course of fostering legal talents.
As a result of these activities, over 70 foreign licenses are in use as of September 30, 2018.
4. Business Activities and Operating Results of the Local Governments Business Division
The Local Governments BD operates in accordance with the business objectives set forth in the Articles ofIncorporation (Article 2 Item 2: "Management of electronic data processing centers to improve theadministrative efficiency of local governments") and offers specialized information services in order to help
promote the welfare of residents by improving administrative efficiency.
(1) Development and provision of cloud services designed for local municipalities
The Company provides TKC Government Cloud Service to municipalities (mainly for cities, wards, towns andvillages) nationwide. This Cloud Service consists of the TASK Cloud Service which supports a range of services
for residents, mission- critical functions and information services within agencies, and the TASK Outsourcing
Service which supports massive batch output and processing of tax papers and other documents.
In particular, the TASK Cloud Service is a common platform package system operated at TKC data centers andshared by all municipalities across Japan, and attracts attention from the viewpoint of the promotion policy for
local government cloud systems by the Japanese government.
In the fiscal year under review, we began the offering of TASK Cloud Welfare Consultation Support System
while we continued our work on the enhancement of the functions of existing systems.
As for the project for Kanagawa Prefecture Collective Business Partnership for Information Systems in
Municipalities (total 14 municipalities) that began two years ago, we have competed the transitional proceduresof the mission-critical operational system in 13 municipalities and the change-over of public accounting systemand other internal information systems for 11 municipalities as of September 30, 2018.
In addition, we started hosting the TASK Cloud Fair 2018 starting at the Yokohama event site (June 28, 2018),
followed by events held in 17 cities nationwide. As a result of the aggressive promotional activities, our missioncritical operational systems are adopted by over 150 municipalities nationwide as of September 30, 2018.
(2) Expansion of cloud services for residents
To promote the utilization of My Number Cards, there has been a sharp increase in the number of municipalities
introducing or considering adopting the Issuance of Certificates at Convenience Store service in view ofproviding more convenience to residents.
In response, the Company provides the TASK Cloud Convenience Store Certificate Issuing System as the system－

28 －to realize this service. The extensive track record of the System as the first cloud service for municipalities
across Japan has attracted a number of requests for quotation from local governments including government
ordinance-designated cities and as a result, the System has been adopted in over 70 municipalities nationwide
including major cities as of September 30, 2018.
In the fiscal year under review, we worked to enhance and expand various functions, as well as provided the
TASK Cloud Easy Counter Service System to support the counter services within municipal offices using thefeatures of our System, and conducted active promotional activities for each system.
(3) Support for electronic filing of local taxes
The Company is an authorized contractor of the Council for the Digitization of Local Taxes, and provides a
cloud-based service for the standard system of the electronic filing of local taxes and the electronic tax payment
offered by the Council. We also develop and provide data connection services as our own functionality to connect
the individual tax systems of various municipalities with the Council's platform.
These services are proposed in collaboration with 46 companies nationwide with whom we have on-goingalliance partner agreements. As a result, our core system TASK Cloud Local Taxes Electronic Filing Support
Service is currently used by more than 750 agencies which account for more than 40% of all municipalities as of
September 30, 2018.
In the fiscal year under review, we engaged in the development and promotional activities for new data
connection services and related services in view of the common tax payment system for local taxes to belaunched nationwide in October 2019.
(4) Support for the development of standardized local public accounting
Municipalities are required to organize the system of accrual basis accounting (double entry bookkeeping) tocomplement the current cash basis accounting (single entry bookkeeping), and to prepare and disclose theirfinancial documents as well as to utilize such data for administrative operations. In order to support this, theCompany provides the TASK Cloud Public Accounting System, which is compatible with the daily journalizing
method encouraged by the Japanese government, and its related systems TASK Cloud Non-current Assets
Control System and TASK Cloud Consolidated Financial Statement Preparing System.
In the fiscal year under review, we engaged in the new development and promotion of useful functionalities suchas the financial statement analysis functions by segment. We also supported the full-scale operation and smoothmanagement for the system of Kanagawa Prefecture Collective Business Partnership for Information Systems in
Municipalities and other new customer institutions.
As a result of our promotional activities for new customers elsewhere, the TASK Cloud Public Accounting
System has been adopted in approximately 190 organizations across Japan as of September 30, 2018.
(5) Compliance with revised laws and systems
In June 2018, the Japanese cabinet approved the Declaration to be the World's Most Advanced IT Nation: Basic
Plan for the Advancement of Public and Private Sector Data Utilization to set forth the policy to push through thereform of administrative services with the full utilization of the digital technology in order to enhancecompetitiveness of Japan in the international arena. With this decision, municipalities throughout Japan will be
required to realize administrative services in line with the Three Principles of Digitalization (digital first, onceonly and connected one-stop) to improve the convenience of the entire user base (government, citizens andbusinesses).
In light of these circumstances, we significantly changed our organizational structure by establishing the Digital
Government Management & Promotion Office and the Revised Law and System Management & Promotion－

29 －Office in the Administrative System Research Center of the System Development Headquarters as of April 1,2018 in order to further accelerate the planning and development of new products and services as well as tostrengthen customer support including the collection and communication of the latest information. In addition,
we underwent major organizational reform as of October 1, 2018 including the new establishment of the System
Planning Department by separating the Administrative System Research Center from the System Development
Department. In the fiscal year under review, the Company, under the leadership of the Administrative System
Research Center, surveyed, researched and developed the next generation systems and services which utilize
cutting-edge digital technology.
5. Business Activities and Operating Results of the Printing Business Division
The Group’s Printing BU conducts its manufacturing and sales activities with the main focus on data print
services (DPS) and business form printing.
Sales in the area of DPS increased by 7.8% year-on-year, driven by election-related orders from the 48th generalelection of members of the House of Representatives in October 2017, orders for notice-related services frommunicipalities in May 2018, large orders from government offices, large orders for direct mail production fromprivatate enterprises, and regular orders for business process outsourcing.
In the area of business form printing, although market demands of business form are on a downward trend,
decline in sales was small stopping at a 3.0% decrease year-on-year.
II. Cash FlowsThe balance of cash and cash equivalents as of the end of the current consolidated fiscal year increased by 2,229
million yen from the end of the previous consolidated fiscal year amounting to 19,268 million yen.
The overview of cash flows for the current fiscal year and major factors contributing to the results are as follows:
1. Cash Flows from Operating Activities
Cash flows from operating activities increased by 8,810 million yen (687 million yen increase in revenue yearon-year). Major factors include the recognition of 8,897 million yen in net income before taxes and adjustments.
2. Cash Flows from Investing Activities
Cash flows from investing activities decreased by 4,013 million yen (603 million yen decrease in spending yearon-year). Major factors include the payment of 2,552 million yen for the acquisition of tangible fixed assets, andpayment of 1,395 million yen for the acquisition of intangible fixed assets.
3. Cash Flows from Financing Activities
Cash flows from financing activities decreased by 2,567 million yen (452 million yen decrease in spending yearon-year). Major factors include payment of 2,895 million yen for year-end dividends as of end of September
2017 and interim dividends for the term ended September 2018, and payment of 3 million yen for the acquisitionof treasury shares.
III. Production, Orders Received and Sales
1. Production
Not applicable.
2. Orders Received－

30 －Not applicable.
3. Sales Results
Sales results by segment for the current consolidated fiscal year were as follows:
Name of segment

Amount (Millions of yen)

Year-on-year rate (%)

Accounting Firm Business Division

43,781

103.4

Local Governments Business Division

14,113

102.9

Printing Business Division

3,726

101.8

61,621

103.2

Total
(Notes) 1. Transactions between segments have been offset.
2. Figures shown do not include consumption taxes.

IV. Analysis and Discussions on Operating Results, etc. from Management’s Perspective
1. Important Accounting Policies and Estimates
The Group’s consolidated financial statements have been prepared in accordance with accounting standards thatare generally accepted as fair and appropriate in Japan. The preparation of the financial statements requires ourmanagement to select and apply the accounting policies, and make estimates that affect the reported amounts anddisclosure of assets and liabilities, and revenue and expenses. While management has used reasonable judgments
based on historical performance and current conditions in making these estimates, there are specific uncertainties
in estimates that could cause actual results to differ from such estimates. Details of important accounting policies
adopted in preparing the Group’s consolidated financial statements are described in the Notes to Consolidated
Financial Statements (Basis of Presenting the Consolidated Financial Statements) under Part 5 [Financial
Information] 1. Consolidated Financial Statements, (1) Consolidated Financial Statements.
2. Analysis and Discussions on Operating Results, etc. for the Current Consolidated Fiscal Year
(1) Analysis of the Group’s consolidated operating results for the current consolidated fiscal year
Refer to I. Operating Results under Summary of Business Results.
(2) Analysis of the Group’s consolidated financial conditions for the current consolidated fiscal year(i) Assets
Total assets as of the end of the current consolidated fiscal year amounted to 90,202 million yen, a 4,773
million yen increase compared to 85,428 million yen as of end of the previous consolidated fiscal year.
1) Current assets
Current assets as of the end of the current consolidated fiscal year amounted to 33,961 million yen, a 3,415
million yen increase from 30,545 million yen as of end of the previous consolidated fiscal year.
This was mainly attributable to 2,229 million yen increase in cash and deposits, and 1,135 million yen
increase in notes and accounts receivable.
2) Non-current assets
Non-current assets as of the end of the current consolidated fiscal year amounted to 56,240 million yen, a
1,357 million yen increase compared to 54,883 million yen as of end of the previous consolidated fiscal－

31 －year.
This was mainly attributable to 1,372 million yen increase in buildings and structures (net amount), 367
million yen increase in investment securities, and 176 million yen increase in software, despite 310 million
yen decrease in construction in progress and 278 million yen decrease in software in progress.
(ii) Liabilities
Total liabilities as of the end of the current consolidated fiscal year amounted to 17,651 million yen, a 1,114
million yen increase compared to 16,536 million yen as of end of the previous consolidated fiscal year.
1) Current liabilities
Current liabilities as of the end of the current consolidated fiscal year amounted to 13,955 million yen, a
609 million yen increase from 13,345 million yen as of end of the previous consolidated fiscal year.
This was mainly attributable to 431 million yen increase in accounts payable-trade, 243 million yen
increase in income taxes payable, and 182 million yen increase in electronically recorded obligationsoperating, despite a decrease of 286 million yen in advances received included under other.
2) Fixed liabilities
Fixed liabilities as of the end of the current consolidated fiscal year amounted to 3,696 million yen, a 505
million yen increase from 3,191 million yen as of end of the previous consolidated fiscal year.
This was mainly attributable to 368 million yen increase in net defined benefit liability and 357 million yen
increase in long-term loans payable, despite a 169 million yen decrease in lease obligations.
(iii) Net assets
Total net assets as of the end of the current consolidated fiscal year amounted to 72,550 million yen, a 3,658
million yen increase compared to 68,892 million yen as of end of the previous consolidated fiscal year.
This was mainly attributable to an increase of 3,256 million yen in retained earnings and an increase of 295
million yen in valuation difference on available-for-sale securities.
Capital-to-asset ratio as of the end of the current consolidated fiscal year was 78.6%, a 0.2% decrease
compared to the ratio of 78.8% as of the end of the previous consolidated fiscal year.
(3) Factors having material impacts on the Group’s operating results
Refer to 2 [Risk Factors].
(4) The Group’s capital resources and liquidity of funds
In strengthening the Group’s management to achieve sustainable growth of its corporate value, the Group makes
it a basic policy to fund its business operation primarily by its own capital. Under this policy, we believe that wehold adequate cash-on-hand to maintain our business operation and to ensure an sufficient level of liquidity.
With the rapid advancement of information and communication technology (ICT) and major changes in social
systems, we strive to make advance investments in research and development efforts and to actively pursue othercapital investments to respond quickly to the changing market environment and achieve competitive advantage tolead our customers’ business to success.
－32 －(5) Objective indicators to measure the status of achievement ofstrategy, and management goals

the Group’s management policy, management

Refer to 1 [Management Policy, Economic Environment and Challenges Facing the Company].

－

33 －

4 [Material Agreements, etc.]
None to be disclosed.
5 [Research and Development Activities]
The Group conducts research and development of software to provide innovative information and management
tools to accounting firms and their clients, and to promote the streamlining, standardization and networking ofadministrative affairs performed by local governments.
Divisions involved in R&D acquired Quality Management Systems - Model for Quality Assurance in Design,
Development, Production, Installation and Servicing (ISO9001) certification—an international quality assurance
standard—in July 1999 for the purpose of establishing and strengthening quality control and quality assurance
systems within our system development operations. Additionally, the certificate’s scope of application was
expanded in September 2010 to include the system development headquarters of our Local Governments BD.
An amount of 82 million yen was spent on R&D in the current consolidated fiscal year, yielding the following
results:(1) Accounting Firm BD
The Company develops cloud systems for the preparation and electronic filing of tax applications and notices forcorporate groups, offices and enterprises with a large number of offices that adopt consolidated tax payment, andthe Departmental Budget Compilation System (Cloud System) for clients using FX2/FX4 cloud andcorporate/continuing MAS systems, which enables the president and heads of departments to develop theirbudgets through discussion with the assistance of their accounting firm.
Total research and development cost associated with these projects was 82 million yen.
(2) Local Governments BD
None to be disclosed.

－

34 －

Part 3 [Property, Plants and Equipment]
1 [Summary of Capital Investments]
The Group (the Company and its consolidated subsidiaries) makes capital investments on an ongoing basis in both
software development and information processing services.
Capital investments (including intangible assets and adjustments) of 5,359 million yen were made in the current
consolidated fiscal year.
(1) Accounting Firm Business Division
Capital investment of 2,985 million yen was made for reinforcement of the common cloud infrastructure toenhance the cloud environment for the Company’s systems, and in the development of software for sale.
(2) Local Governments Business Division
Capital investment of 1,818 million yen was made for the development of software to provide services over the
cloud system.
(3) Printing Business Division
Capital investment of 556 million yen was made for the purchase of offset form printing machine and expansionof our plant (under construction).

－

35 －

2 [Major Property, Plants and Equipment](1) The Company
As of September 30, 2018
Book values (Millions of yen)
Name of office(Address)

Name ofsegment

TKC Systems Development Research

Accounting

CenterFirm BDTKC Internet Service Center (TISC)

Local

TKC Tochigi Consolidated Information

Governments

CenterBD(Utsunomiya-shi, Tochigi, etc.)*1, *2

TKC Systems Development ResearchCenter Tokyo Branch(Shinjuku-ku, Tokyo, etc.)
TKC Tokyo Consolidated Information
Center(Nerima-ku, Tokyo)
TKC Chubu Consolidated Information
Center(Kasugai-shi, Aichi)

Local

Accounting
Firm BD
Accounting
Firm BD(Ibaraki-shi, Osaka)

Governments
BD(Koga-shi, Fukuoka)

Accounting
Firm BD
Accounting
Firm BDTKC Hokkaido Consolidated
Information Center

Accounting

TKC Hokkaido SCG Service Center

Firm BD(Chuo-ku, Sapporo-shi, Hokkaido)
TKC Tohoku Consolidated Information
Center

Accounting

TKC Tohoku SCG Service Center

Firm BD(Aoba-ku, Sendai-shi, Miyagi)

3,538

13,165

1,107

64

－

170

374

44

－

2,485

23

44

－

291

17

2,696

communication
service facilities(29,418.00)

5,880

0

106

－

216

－

50

－

523

－

(817.30)

46

－

884

32

16

－

－

2

－

19

11

166

－

23

－

394

11

23

－

－

7

－

31

32

6

－

－

4

－

11

28

Information
processing

Office facilities

－

BD

Local

CenterInformation

Governments

CenterTKC Kyushu Consolidated Information

1,049

facilities

Firm BD

Firm BD(Kita-ku, Okayama-shi, Okayama)Totalfacilities

Accounting

Information Center

Other

Accounting

TKC Kansai Consolidated Information

TKC Chushikoku Consolidated

Buildings Machinery,Land&equipment(Area in m2)
structures & vehicles

Development

TKC Tochigi Head Office

TKC Tokyo Head Office

Facilities

No. ofemployees(No. ofpeople)Tools,
furniture&
fixtures

Information
processing
facilities
Information
processing
facilities
Information

2,224(1,447.44)
196(3,017.47)

314

processing
facilities
Office facilities
Information
processing
facilities
Information
processing
facilities

203(2,341.48)

Information
processing
facilities

Information
processing
facilities

－

36 －

As of September 30, 2018
Book values (Millions of yen)
Name of office(Address)

Name ofsegment

Facilities

TKC Okinawa Consolidated
Information Center

Accounting

TKC Okinawa SCG Service Center

Firm BD

Buildings&
structures

Machinery,Landequipment(Area in m2)& vehicles

No. ofemployees(No. ofpeople)Tools,
furniture&
fixtures

Other

10

－

16

9

0

－

175

20

0

－

218

6

2

－

628

－

Total

Information
5－－

Office facilities

27－(1,120.00)

Office facilities

20－

Welfare facilities

234－

processing
facilities(Naha-shi, Okinawa)
Accounting
TKC Ibaraki SCG Service Center(Tsukuba-shi, Ibaraki)

Firm BD

147

Local
GovernmentsBD

TKC Yamaguchi SCG Service Center

Accounting(Yamaguchi-shi, Yamaguchi)

Firm BD197(814.00)

Accounting
Dormitories, company housing(Utsunomiya-shi, Tochigi)

Firm BD

391

Local

(5,326.69)

Governments
BD(2) Domestic subsidiaries
As of September 30, 2018
Book values (Millions of yen)Company nameName of office(Address)

Tokyo Line

Hanyu Plant

Printer(Hanyu-shi,Company

Saitama)

Tokyo Line
PrinterCompany

Name ofsegment

Printing BD

Facilities

Buildings&
structures

Machinery,equipment& vehicles

64

255

450

190

Printing
facilities

Land(Area in m2)

145(7,275.17)

Tools,
furniture& fixtures

Other

Total

No. ofemployees(No. ofpeople)

6

19

490

60

9

516

1,276

53

DPS Solutions
Center(Hanyu-shi,

Printing BD

Printing
facilities

110(5,776.00)

Saitama)(Notes) 1. The figures above do not include consumption taxes.
2. The status of equipment and facilities held by consolidated companies other than those described above aresmall in scale and have been omitted.
3. The "Other" field under book value represents leased assets and software (including work in progress).
4. *1 includes some of the welfare facilities.
*2 includes 1,551 million yen for leased buildings and 111 million yen for leased tools, furniture & fixtures,
which are leased to our subsidiary TKC Customer Support Service Co., Ltd.
5. Major leased facilities and equipment other than those described above are as follows.
(The Company)
Annual office rent
710 million yen

－

37 －

3 [Plans for Capital Investments, Disposals of Property, Plants and Equipment]
Capital investments of the Group are planned based on comprehensive review of economic forecast, industry
trends, investment efficiencies and other factors.
While, in principle, capital projects are formulated individually by each consolidated company, the Company takes
initiative in making Group-wide adjustments.
Plans for the establishment or disposal of major facilities and equipment as of the end of the current consolidated
fiscal year (September 30, 2018) — excluding routine updates of facilities and equipment — were as follows.
Establishment of major facilities and equipment
Planned start and completion
dates

Planned investments
Company nameName of office

Address

Tokyo Line
PrinterCompany
DPS Solutions
CenterHanyushi,
SaitamaName ofsegment

Facilities

Printing
BD

Expansion ofdata printing
service factory

FinancingAmountTotal amountmethodinvested(Millions of(Millions of
yen)
yen)

739

259

(Note) The figures above do not include consumption taxes.

－

38 －

Self-funded
and Loans

Floor area
Start

Completion

September
2018

April 2019

5,787.97m2

Part 4 [Information on the Company]
1 [Information on the Company’s Stock](1) [Total number of shares, etc.]
1) [Total number of shares]
Class

Total number shares authorized to be issued (Shares)

Common stock

60,000,000

Total

60,000,0002) [Issued shares]
Name of stock
exchange on which
Number of shares issued Number of shares issued
the Company is
as of end of current fiscal as of the filing dateClass
listed, or name ofyear (Shares)(shares)
Authorized Financial(September 30, 2018)(December 25, 2018)
Instruments Firms
Association
First Section of theCommon stock
26,731,033
26,731,033
Tokyo Stock
Exchange
Total

26,731,033

26,731,033

Description

Number of sharesconsisting a unit is 100
shares－－(2) [Information on Share Subscription Rights]
1) [Stock Option Scheme]
At the Meeting of the Board of Directors held on October 31, 2018, the Company resolved to abolish thestock-based compensation stock option scheme and to introduce a new stock-based remuneration plan using atrust (hereinafter the “Plan”). The introduction of the Plan was approved by resolution at the 52nd Ordinary
General Meeting of Shareholders held on December 21, 2018. Any unexercised subscription rights to sharesthat were granted as stock options will be deemed waived, and points equivalent to the number of sharessubject to the waived subscription rights will be granted under the Plan as special measures to be taken for thetransition from the stock-based compensation stock option scheme.
The content of the new share-based remuneration plan is also described under (8) [Information on Employee
Stock Ownership Plan].
Share subscription rights issued based on the Companies Act of Japan are as follows:First Stock Option (Resolution of the Board of Directors on February 10, 2012)
Date of Resolution

February 10, 2012

Category and number of persons eligible for subscription
rights to shares

9 Directors of the Company (excluding Outside
Directors)
2 Auditors of the Company (excluding Outside Auditors)

Number of subscription rights to shares*

122 rights

Class, content and number of shares to be issued upon
exercise of subscription rights*－

Common stocks: 12,200 shares (Note 1)
39 －Amount to be paid in upon exercise of subscription rights
to shares*

1 yen
From March 13, 2012
To March 12, 2047
Price of issuing shares: 1,146 yen
Amount of capitalization: 573 yen(Note 2)

Period for exercise of subscription rights to shares*
Price of issuing shares and amount of capitalization upon
exercise of subscription rights to shares*
Conditions for exercise of subscription rights to shares*(Note 3)Matters concerning the transfer of subscription rights toshares*Acquisition of subscription rights to shares throughtransfers shall be subject to approval by resolution of theBoard of Directors.

Matters concerning the grant of subscription rights to(Note 4)
shares upon organizational restructuring**Information as of the last day of the current fiscal year (September 30, 2018) is indicated. Information as of the last dayof the month preceding the filing date (November 30, 2018) has been omitted since there has been no change in theinformation to be disclosed from the information as of the last day of the current fiscal year.
(Notes) 1. When performing a share split (including gratis allotment of common shares of the Company; the same shallapply to all share splits described hereinafter) or share consolidation with respect to common shares of theCompany after the allotment date of subscription rights to shares, the number of shares granted will be adjusted
using the following formula:
Number of shares granted after adjustment = Number of shares granted before adjustment × ratio of share
split or share consolidation
Fractions of less than one share resulting from the foregoing adjustment shall be disregarded.
In addition, when the number of shares granted needs to be adjusted after the allotment date due to reasons otherthan those listed above, such as when the Company is engaged in a merger, a company split, a share exchange,or for any other reason where such an adjustment is required, the Company may adjust the number of shares
granted as deemed necessary by the Board of Directors.
2. The price of issuing shares is the sum of the amount to be paid upon subscription and the amount to be paid in
upon exercise of subscription rights to shares.
3. Conditions for exercise of subscription rights to shares(1) A holder of subscription rights may only exercise the share option rights within 10 days (or the next business
day if the 10th day falls on a holiday) from the date following the day such holder loses his/her position as a
Director or Auditor of the Company.
(2) Notwithstanding (1) above, should a proposal for the approval of a merger agreement where the Company
would become dissolved, a proposal for the approval of a company split agreement or a company split plan
where the Company would become a split company, or a proposal for the approval of a share exchange
agreement or a share transfer plan where the Company would become a wholly owned subsidiary were to beapproved at a General Meeting of Shareholders of the Company (or if a Board of Directors resolution ispassed in case a resolution of General Meeting of Shareholders is not required), subscription rights to shares
may be exercised within 30 days from the date following the date of such approval or resolution. However,this shall exclude cases where subscription rights to shares of a restructured company are to be issued inaccordance with the matters concerning the issuing of subscription rights to shares upon reorganization.
(3) All other applicable conditions shall be as set forth in the Stock Option Allocation Agreement concluded
between the Company and holders of subscription rights to shares.
4. If the Company is to engage in a merger with another (limited to cases where the Company is to be dissolved
as a result of the merger), an absorption-type split or incorporation-type split (both limited to cases where theCompany is to be a split company), or a share exchange or a share transfer (both limited to cases where theCompany is to be a wholly owned subsidiary) (hereafter jointly referred to as a "restructuring transaction"),subscription rights to shares in the entity set forth in Article 236, Paragraph 1, Item 8 (a) to (e) of theCompanies Act of Japan (hereafter, the "restructured company") shall be issued to the holders of thesubscription rights to shares remaining in effect at a time immediately before the effective date of therestructuring transaction (hereinafter respectively referring to the date an absorption-type merger comes into
effect, the date the new corporation is incorporated following a consolidation-type merger, the date anabsorption-type split comes into effect, the date the new corporation is incorporated following an
incorporation-type company split, the date a share exchange comes into effect, or the date the new joint-stock
corporation is incorporated following a share transfer) (hereinafter the "remaining subscription rights toshares"). However, such rights may be granted only if provisions for issuing the subscription rights to sharesof the restructured company in accordance with the items described below are included in an absorption-type－

40 －merger agreement, a consolidation-type merger agreement, an absorption-type split agreement, anincorporation-type split plan, a share exchange agreement or a share transfer plan.
(1) The number of subscription rights to shares of the restructured company to be issued
The same number of subscription rights to shares as the number of remaining subscription rights to shares
held by respective holders of subscription rights to shares.
(2) Class of shares of the restructured company shares to be issued upon exercise of subscription rights to shares
Common shares of the restructured company.
(3) The number of shares of the restructured company shares to be issued upon exercise of subscription rights
to shares
To be determined in proportion to the class and number of shares to be issued upon exercise of subscription
rights to shares defined in Note 1 above upon considering the conditions, etc. of the restructuring transactions.
(4) The amount of assets to be contributed upon exercise of subscription rights to shares
The amount shall be obtained by multiplying the amount to be paid in after restructuring as prescribed
below by the number of shares of the restructured company to be issued upon exercise of each subscription
right to shares as determined in accordance with (3) above. The amount to be paid in after restructuring
shall be 1 yen per share of the restructured company to be issued upon exercise of each subscription rights
to shares to be issued.
(5) Period in which subscription rights to shares can be exercised
The period shall start on the start date of the exercise period listed in the "Period to exercise subscription
rights to shares" in the table above, or the date the restructuring transactions come into effect, whichever thelater, and shall last until the expiration date of the period in which subscription rights to shares can be
exercised.
(6) Matters concerning increases in capital stock and the capital reserve occurring when issuing shares upon
exercise of subscription rights to shares:
To be determined in conformity with the matters concerning increases in capital stock and capital reserve
occurring when issuing shares upon exercise of subscription of rights to shares as set forth in the "Price of
issuing shares and amount of capitalization amount upon exercise of subscription rights to shares" in thetable above.
(7) Restrictions on the acquisition of subscription rights to shares through transfers
Acquisition of subscription rights to shares through transfers shall require the approval by resolution of theBoard of Directors of the restructured company.
(8) Other conditions for exercise of subscription rights to shares
To be determined in conformity with Note 3 above.
(9) Provisions for the acquisition of subscription rights to shares
Subscription rights to shares may be acquired without compensation on a date separately specified by the
Board of Directors should the following resolutions, 1), 2), 3), 4), or 5) be approved at a General Meetingof Shareholders of the Company (or through a resolution of a Meeting of Board of Directors of theCompany, or upon the decision of an executive officer entrusted with such a matter pursuant to theprovisions set forth in Article 416 Item 4 of the Companies Act of Japan in case a resolution of a General
Meeting of Shareholders of the Company is not required):
1) Resolution approving a merger agreement where the Company would become a dissolved company;
2) Resolution approving a company split agreement or a company split plan where the Company would
become a split company;
3) Resolution approving a share exchange agreement or a share transfer plan where the Company would
become a wholly owned subsidiary;4) Resolution approving an amendment to the Articles of Incorporation to establish a provision requiring theapproval of the Company for the acquisition of all shares issued by the Company through a transfer;5) Resolution approving an amendment to the Articles of Incorporation to establish a provision requiring theapproval of the Company for the acquisition of the class of shares to be issued upon exercise ofsubscription rights to shares, or a provision to acquire all of such class of shares by resolution of theGeneral Meeting of Shareholders of the Company.

Second Stock Option (Resolution of the Board of Directors on November 5, 2012)
Date of Resolution

November 5, 2012

Category and number of persons eligible for subscription
rights to shares－

10 Directors of the Company (excluding Outside
Directors)
2 Auditors of the Company (excluding Outside Auditors)
13 Executive Officers
41 －Number of subscription rights to shares*

200

Class, content and number of shares to be issued upon
exercise of subscription rights*
Amount to be paid in upon exercise of subscription rights
to shares*

Common stocks: 20,000 shares (Note 1)
1.
From December 8, 2012
To December 7, 2047
Price of issuing shares: 1,033 yen
Amount of capitalization: 517 yen(Note 2)

Period for exercise of subscription rights to shares*
Price of issuing shares and amount of capitalization upon
exercise of subscription rights to shares*
Conditions for exercise of subscription rights to shares*(Note 3)Matters concerning the transfer of subscription rights toshares*Acquisition of subscription rights to shares throughtransfers shall be subject to approval by resolution of theBoard of Directors.

Matters concerning the grant of subscription rights to(Note 4)
shares upon organizational restructuring**Information as of the last day of the current fiscal year (September 30, 2018) is indicated. Information as of the last dayof the month preceding the filing date (November 30, 2018) has been omitted since there has been no change in theinformation to be disclosed from the information as of the last day of the current fiscal year.
(Notes) 1. Refer to Note 1 under the section, "First Stock Option."
2. Refer to Note 2 under the section, "First Stock Option."
3. Conditions for exercise of subscription rights to shares(1) A holder of subscription rights may only exercise the share option rights within 10 days (or the next business
day if the 10th day falls on a holiday) from the date following the day such holder loses his/her position as a
Director or Auditor, or as an Executive Officer of the Company.
(2) Notwithstanding (1) above, should a proposal for the approval of a merger agreement where the Company
would become dissolved, a proposal for the approval of a company split agreement or a company split plan
where the Company would become a split company, or a proposal for the approval of a share exchange
agreement or a share transfer plan where the Company would become a wholly owned subsidiary were to beapproved at a General Meeting of Shareholders of the Company (or if a Board of Directors resolution ispassed in case a resolution of General Meeting of Shareholders is not required), subscription rights to shares
may be exercised within 30 days from the date following the date of such approval or resolution. However,this shall exclude cases where subscription rights to shares of a restructured company are to be issued inaccordance with the matters concerning the issuing of subscription rights to shares upon reorganization.
(3) All other applicable conditions shall be as set forth in the Stock Option Allocation Agreement concluded
between the Company and holders of subscription rights to shares.
4. Refer to Note 1 under the section, "First Stock Option."

Third Stock Option (Resolution of the Board of Directors on November 12, 2013)
Date of Resolution

November 12, 2013

Category and number of persons eligible for subscription
rights to shares

10 Directors of the Company (excluding Outside
Directors)
2 Auditors of the Company (excluding Outside Auditors)
13 Executive Officers

Number of subscription rights to shares*

224

Class, content and number of shares to be issued upon
exercise of subscription rights*
Amount to be paid in upon exercise of subscription rights
to shares*

Common stocks: 22,400 shares (Note 1)
1.
From December 10, 2013
to December 9, 2048

Period for exercise of subscription rights to shares*

－

42 －

Price of issuing shares and amount of capitalization upon
exercise of subscription rights to shares*

Price of issuing shares: 1,324 yen
Amount of capitalization: 662 yen(Note 2)

Conditions for exercise of subscription rights to shares*(Note 3)Matters concerning the transfer of subscription rights toshares*Acquisition of subscription rights to shares throughtransfers shall be subject to approval by resolution of theBoard of Directors.

Matters concerning the grant of subscription rights to(Note 4)
shares upon organizational restructuring**Information as of the last day of the current fiscal year (September 30, 2018) is indicated. Information as of the last dayof the month preceding the filing date (November 30, 2018) has been omitted since there has been no change in theinformation to be disclosed from the information as of the last day of the current fiscal year.
(Notes) 1. When performing a share split (including gratis allotment of common shares of the Company; the same shallapply to all share splits described hereinafter) or share consolidation with respect to common shares of theCompany after the allotment date of subscription rights to shares, the number of shares granted will be
adjusted using the following formula:
Number of shares granted after adjustment = Number of shares granted before adjustment × ratio of share split
or share consolidation
Fractions of less than one share resulting from the foregoing adjustment shall be disregarded.
In addition, when the number of shares granted needs to be adjusted after the allotment date due to reasons otherthan those listed above, such as when the Company is engaged in a merger, a company split, a share exchange,or for any other reason where such an adjustment is required, the Company may adjust the number of shares
granted as deemed necessary by the Board of Directors.
2. The price of issuing shares is the sum of the amount to be paid upon subscription and the amount to be paid in
upon exercise of subscription rights to shares.
3. Conditions for exercise of subscription rights to shares(1) A holder of subscription rights to shares may only exercise the share option rights within 10 days (or the next
business day if the 10th day falls on a holiday) from the date following the day such holder loses his/her
position as a Director or Auditor or as an employee of the Company. However, if a person who has lost his/her
position as Director or Auditor or as an employee of the Company is appointed Director of the Company or
employed by the Company with certain or specific entrustment within 10 days of having lost his/her original
position, such person shall not be entitled to exercise the subscription rights to shares.
(2) Notwithstanding (1) above, should a proposal for the approval of a merger agreement where the Company
would become dissolved, a proposal for the approval of a company split agreement or a company split plan
where the Company would become a split company, or a proposal for the approval of a share exchange
agreement or a share transfer plan where the Company would become a wholly owned subsidiary were to beapproved at a General Meeting of Shareholders of the Company (or if a Board of Directors resolution ispassed in case a resolution of General Meeting of Shareholders is not required), subscription rights to shares
may be exercised within 30 days from the date following the date of such approval or resolution. However,this shall exclude cases where subscription rights to shares of a restructured company are to be issued inaccordance with the matters concerning the issuing of subscription rights to shares upon reorganization.
(3) All other applicable conditions shall be as set forth in the Stock Option Allocation Agreement concluded
between the Company and holders of subscription rights to shares.
4. If the Company is to engage in a merger with another (limited to cases where the Company is to be dissolved
as a result of the merger), an absorption-type split or incorporation-type split (both limited to cases where theCompany is to be a split company), or a share exchange or a share transfer (both limited to cases where theCompany is to be a wholly owned subsidiary) (hereafter jointly referred to as a "restructuring transaction"),subscription rights to shares in the entity set forth in Article 236, Paragraph 1, Item 8 (a) to (e) of theCompanies Act of Japan (hereafter, the "restructured company") shall be issued to the holders of thesubscription rights to shares remaining in effect at a time immediately before the effective date of therestructuring transaction (hereinafter respectively referring to the date an absorption-type merger comes into
effect, the date the new corporation is incorporated following a consolidation-type merger, the date anabsorption-type split comes into effect, the date the new corporation is incorporated following an
incorporation-type company split, the date a share exchange comes into effect, or the date the new joint-stock
corporation is incorporated following a share transfer) (hereinafter the "remaining subscription rights toshares"). However, such rights may be granted only if provisions for issuing the subscription rights to sharesof the restructured company in accordance with the items described below are included in an absorption-typemerger agreement, a consolidation-type merger agreement, an absorption-type split agreement, anincorporation-type split plan, a share exchange agreement or a share transfer plan.
－

43 －(1) The number of subscription rights to shares of the restructured company to be issued
The same number of subscription rights to shares as the number of remaining subscription rights to shares
held by respective holders of subscription rights to shares.
(2) Class of shares of the restructured company shares to be issued upon exercise of subscription rights to shares
Common shares of the restructured company.
(3) The number of shares of the restructured company shares to be issued upon exercise of subscription rights
to shares
To be determined in proportion to the class and number of shares to be issued upon exercise of subscription
rights to shares defined in Note 1 above upon considering the conditions, etc. of the restructuringtransactions.
(4) The amount of assets to be contributed upon exercise of subscription rights to shares
The amount shall be obtained by multiplying the amount to be paid in after restructuring as prescribed
below by the number of shares of the restructured company to be issued upon exercise of each subscription
right to shares as determined in accordance with (3) above. The amount to be paid in after restructuring
shall be 1 yen per share of the restructured company to be issued upon exercise of each subscription rights
to shares to be issued.
(5) Period in which subscription rights to shares can be exercised
The period shall start on the start date of the exercise period listed in the "Period to exercise subscription
rights to shares" in the table above, or the date the restructuring transactions come into effect, whichever thelater, and shall last until the expiration date of the period in which subscription rights to shares can be
exercised.
(6) Matters concerning increases in capital stock and the capital reserve occurring when issuing shares upon
exercise of subscription rights to shares:
1) The amount of capital to be increased shall be one half of the amount of the maximum increase in capital
calculated in accordance with the provisions of Article 17, Paragraph 1 of the Ordinance on Company
Accounting. Fractions under 1 yen resulting from these calculations shall be rounded up.
2) The amount of capital reserve to be increased shall be the amount calculated by subtracting the amount of
capital increase stipulated in 1) above from the amount of maximum increase in capital described in 1)
above.
(7) Restrictions on the acquisition of subscription rights to shares through transfers
Acquisition of subscription rights to shares through transfers shall require the approval by resolution of theBoard of Directors of the restructured company.
(8) Other conditions for exercise of subscription rights to shares
To be determined in conformity with Note 3 above.
(9) Provisions for the acquisition of subscription rights to shares
Subscription rights to shares may be acquired without compensation on a date separately specified by the
Board of Directors should the following resolutions, 1), 2), 3), 4), or 5) be approved at a General Meetingof Shareholders of the Company (or through a resolution of a Meeting of Board of Directors of theCompany, or upon the decision of an executive officer entrusted with such a matter pursuant to theprovisions set forth in Article 416 Item 4 of the Companies Act of Japan in case a resolution of a General
Meeting of Shareholders of the Company is not required):
1) Resolution approving a merger agreement where the Company would become a dissolved company;
2) Resolution approving a company split agreement or a company split plan where the Company would
become a split company;
3) Resolution approving a share exchange agreement or a share transfer plan where the Company would
become a wholly owned subsidiary;4) Resolution approving an amendment to the Articles of Incorporation to establish a provision requiring theapproval of the Company for the acquisition of all shares issued by the Company through a transfer;5) Resolution approving an amendment to the Articles of Incorporation to establish a provision requiring theapproval of the Company for the acquisition of the class of shares to be issued upon exercise of subscription
rights to shares, or a provision to acquire all of such class of shares by resolution of the General Meetingof Shareholders of the Company.

Fourth Stock Option (Resolution of the Board of Directors on November 11, 2014)
Date of Resolution

November 11, 2014

Category and number of persons eligible for subscription
rights to shares－

11 Directors of the Company (excluding Outside
Directors)
2 Auditors of the Company (excluding Outside Auditors)
17 Executive Officers
44 －Number of subscription rights to shares*

191

Class, content and number of shares to be issued upon
exercise of subscription rights*
Amount to be paid in upon exercise of subscription rights
to shares*

Common stocks: 19,100 shares (Note 1)
1.
From December 13, 2014
To December 11, 2049
Price of issuing shares: 1,570 yen
Amount of capitalization: 785 yen(Note 2)

Period for exercise of subscription rights to shares*
Price of issuing shares and amount of capitalization upon
exercise of subscription rights to shares*
Conditions for exercise of subscription rights to shares*(Note 3)Matters concerning the transfer of subscription rights toshares*Acquisition of subscription rights to shares throughtransfers shall be subject to approval by resolution of theBoard of Directors.

Matters concerning the grant of subscription rights to(Note 4)
shares upon organizational restructuring**Information as of the last day of the current fiscal year (September 30, 2018) is indicated. Information as of the last dayof the month preceding the filing date (November 30, 2018) has been omitted since there has been no change in theinformation to be disclosed from the information as of the last day of the current fiscal year.
(Notes) 1. Refer to Note 1 under the section, "Third Stock Option."
2. Refer to Note 2 under the section, "Third Stock Option."
3. Refer to Note 3 under the section, "Third Stock Option."
4. Refer to Note 4 under the section, "Third Stock Option."

Fifth Stock Option (Resolution of the Board of Directors on November 10, 2015)
Date of Resolution

November 10, 2015

Category and number of persons eligible for subscription
rights to shares

9 Directors of the Company (excluding Outside
Directors)
2 Auditors of the Company (excluding Outside Auditors)
21 Executive Officers

Number of subscription rights to shares*

162

Class, content and number of shares to be issued upon
exercise of subscription rights*
Amount to be paid in upon exercise of subscription rights
to shares*

Common stocks: 16,200 shares (Note 1)
1.
From December 12, 2015
To December 11, 2050
Price of issuing shares: 2,671 yen
Amount of capitalization: 1,336 yen(Note 2)

Period for exercise of subscription rights to shares*
Price of issuing shares and amount of capitalization upon
exercise of subscription rights to shares*
Conditions for exercise of subscription rights to shares*(Note 3)Matters concerning the transfer of subscription rights toshares*Acquisition of subscription rights to shares throughtransfers shall be subject to approval by resolution of theBoard of Directors.

Matters concerning the grant of subscription rights to(Note 4)
shares upon organizational restructuring**Information as of the last day of the current fiscal year (September 30, 2018) is indicated. Information as of the last dayof the month preceding the filing date (November 30, 2018) has been omitted since there has been no change in theinformation to be disclosed from the information as of the last day of the current fiscal year.
(Notes) 1. Refer to Note 1 under the section, "Third Stock Option."
2. Refer to Note 2 under the section, "Third Stock Option."－45 －3. Refer to Note 3 under the section, "Third Stock Option."
4. Refer to Note 4 under the section, "Third Stock Option."

Sixth Stock Option (Resolution of the Board of Directors on November 8, 2016)
Date of Resolution

November 8, 2016

Category and number of persons eligible for subscription
rights to shares

9 Directors of the Company (excluding Outside
Directors)
2 Auditors of the Company (excluding Outside Auditors)
22 Executive Officers

Number of subscription rights to shares*

160

Class, content and number of shares to be issued upon
exercise of subscription rights*
Amount to be paid in upon exercise of subscription rights
to shares*

Common stocks: 16,000 shares (Note 1)
1.
From December 13, 2016
To December 12, 2051
Price of issuing shares: 2,558 yen
Amount of capitalization: 1,279 yen(Note 2)

Period for exercise of subscription rights to shares*
Price of issuing shares and amount of capitalization upon
exercise of subscription rights to shares*
Conditions for exercise of subscription rights to shares*(Note 3)Matters concerning the transfer of subscription rights toshares*Acquisition of subscription rights to shares throughtransfers shall be subject to approval by resolution of theBoard of Directors.

Matters concerning the grant of subscription rights to(Note 4)
shares upon organizational restructuring**Information as of the last day of the current fiscal year (September 30, 2018) is indicated. Information as of the last dayof the month preceding the filing date (November 30, 2018) has been omitted since there has been no change in theinformation to be disclosed from the information as of the last day of the current fiscal year.
(Notes) 1. Refer to Note 1 under the section, "Third Stock Option."
2. Refer to Note 2 under the section, "Third Stock Option."
3. Refer to Note 3 under the section, "Third Stock Option."
4. Refer to Note 4 under the section, "Third Stock Option."

Seventh Stock Option (Resolution of the Board of Directors on November 7, 2017)
Date of Resolution

November 7, 2017

Category and number of persons eligible for subscription
rights to shares

9 Directors of the Company (excluding Outside
Directors)
2 Auditors of the Company (excluding Outside Auditors)
21 Executive Officers

Number of subscription rights to shares*

165

Class, content and number of shares to be issued upon
exercise of subscription rights*
Amount to be paid in upon exercise of subscription rights
to shares*

Common stocks: 16,500 shares (Note 1)
1.
From December 11, 2017
To December 10, 2052
Price of issuing shares: 3,478 yen
Amount of capitalization: 1,739 yen(Note 2)

Period for exercise of subscription rights to shares*
Price of issuing shares and amount of capitalization upon
exercise of subscription rights to shares*

－

46 －

Conditions for exercise of subscription rights to shares*(Note 3)Matters concerning the transfer of subscription rights toshares*Acquisition of subscription rights to shares throughtransfers shall be subject to approval by resolution of theBoard of Directors.

Matters concerning the grant of subscription rights to(Note 4)
shares upon organizational restructuring**Information as of the last day of the current fiscal year (September 30, 2018) is indicated. Information as of the last dayof the month preceding the filing date (November 30, 2018) has been omitted since there has been no change in theinformation to be disclosed from the information as of the last day of the current fiscal year.
(Notes) 1. Refer to Note 1 under the section, "Third Stock Option."
2. Refer to Note 2 under the section, "Third Stock Option."
3. Refer to Note 3 under the section, "Third Stock Option."
4. Refer to Note 4 under the section, "Third Stock Option."

2) [Rights Plan]
None to be disclosed.
3) [Information on Share Subscription Rights]
None to be disclosed.
(3) [Exercise of Bonds with Share Subscription Rights Containing a Clause for Exercise Price Adjustment]
None to be disclosed.
(4) [Changes in Total Number of Issued Shares, Common Stock, etc.]

Date

Increase or
decrease intotal number
of issued
shares(Shares)

Balance of
total number
of issued
shares(Shares)

Increase or
decrease incapital stock(Millions ofyen)

Balance ofcapital stock(Millions ofyen)

Increase or
decrease incapitalreserve(Millions ofyen)

Balance ofcapitalreserve(Millions of
yen)

－

5,700

－

5,409

(November 30, 2009)(1,185,800)
26,731,033(Note)(Note) Decrease caused by cancellation of treasury stock.

(5) [Shareholders Composition]
As of September 30, 2018
Status of shares (100 shares in one unit of shares)

Numberof shares
Foreign corporate
Financial
Classification Government Financial instruments Other tax
less thanbodies, etc.
Other&
accounting
Total
one unit
institutions businessindividuals
Nonmunicipalities
firm
Individuals(Shares)
operators
individuals
Number of
－
32
23
109
156
2.
7,603
7,925
－
shareholders
Number ofshares held
－ 85,142
4,157
65,23836,275
2.
76,122
266,936
37,433(share units)
Percentageof shares
－
31.9
1.6
24.4
13.6
0.0
28.5
100.0
－
held (%)(Notes) 1. Of the 350,802 shares held as treasury stock, 3,508 share units are included in "Other individuals" and 2 sharesare included in "Number of shares less than one unit."
2. Of the shares registered under the name of Japan Securities Depository Center, Inc., 6 units are included in"Other corporate bodies" and 87 shares are included in "Number of shares less than one unit."－

47 －(6) [Major Shareholders]Names of shareholders

Iizuka Takeshi ScholarshipFoundation
Daido Life Insurance Company
TKC Employee Shareholding
Association
Sozeishiryokan (Institute ofTax Research and Literature)
Masaharu Iizuka
The Master Trust Bank ofJapan, Ltd. (Trust account)
SSBTC CLIENT OMNIBUS
ACCOUNT (Standing proxy:
The Hongkong & Shanghai
Banking Corporation, Tokyo
Branch)Tokio Marine & Nichido Fire
Insurance Co., Ltd.
Japan Trustee Services Bank,
Ltd. (Trust account)
Aioi Nissay Dowa InsuranceCo., Ltd.
Sompo Japan Nipponkoa
Insurance Inc.

As of September 30, 2018
Percentage ofshares held to the
Number of shares total number ofheldissued shares(Hundreds of shares) (excluding
treasury stock)(%)

Address1758 Tsurutamachi, Utsunomiya-shi,
Tochigi
1-2-1 Edobori, Nishi-ku, Osaka-shi,
Osaka37,53014.2

25,690

9.7

2-1 Ageba-cho, Shinjuku-ku, Tokyo

16,0836.1

3-45-13 Minamidai, Nakano-ku, Tokyo

14,465

5.5

Utsunomiya-shi, Tochigi

10,0423.8

2-11-3 Hamamatsucho, Minato-ku, Tokyo

9,655

3.7

3-11-1 Nihonbashi, Chuo-ku, Tokyo

6,970

2.6

1-2-1 Marunouchi, Chiyoda-ku, Tokyo

6,664

2.5

1-8-11 Harumi, Chuo-ku, Tokyo

6,074

2.3

1-28-1 Ebisu, Shibuya-ku, Tokyo

5,983

2.3

1-261 Nishishinjuku, Shinjuku-ku, Tokyo

5,983

2.3

－

145,141

55.0

Total

(7) [Status of Voting Rights]
1) [Shares Issued]
As of September 30, 2018
Category

Number of shares(shares)

Shares with full voting right (others)
Shares less than one unit

Commonstock
Commonstock
Commonstock

Description

－

－

－

－

－

－

－

－

－

356,300－－

26,337,300

263,373－

37,433－－

Shares without voting right
Shares with restricted voting right(treasury stock, etc.)
Shares with restricted voting right(others)
Shares with full voting right (treasury
stock, etc.)

Number of voting rights(Units)－48 －Total number of shares issued－

26,731,033－

Total voting rights held by all－－
263,373
shareholders(Note) "Shares with full voting right (others)" includes 600 shares registered in the name of Japan Securities Depository
Center, Inc. "Number of voting rights" includes 6 units of voting rights held under the name of Japan Securities
Depository Center, Inc.

2) [Treasury Stock, etc.]

Name ofshareholder

Kabaushiki
Kaisha TKC
TKC Shuppan
Corporation

Number ofshares held
under own
name (Shares)

Address ofshareholder
1758 Tsurutamachi,
Utsunomiya-shi,
Tochigi
4-8-8 Kudanminami,
Chiyoda-ku, Tokyo

Total

－

Number ofshares held
under othernames (Shares)

As of September 30, 2018
Percentage ofshares held to the
Total shares
total number ofheld (Shares)
issued shares(%)

350,800－

350,800

1.31

5,500

－

5,500

0.02

356,300－

356,300

1.33(8) [Information on Employee Stock Ownership Plan]
The Company will introduce this Plan with the objectives to clarify the linkage between the Company’s
shareholder value and the remuneration for directors (excluding outside directors and expatriates), executive
officers (excluding expatriates), and auditors (excluding outside directors and expatriates) (hereinafter referred tocollectively as “Directors, etc.”), and to motivate Directors to contribute more to enhancing the medium- to longterm corporate value by sharing common interest with shareholders, including not only the merit derived fromthe rising share price, but also the risk associated with the decline in share price. The introduction of the Plan
was approved by resolution at the 52nd Ordinary General Meeting of Shareholders held on December 21, 2018.
1) Description of the Plan
The Plan uses a structure called Board Incentive Plant trust (hereinafter “BIP Trust”). The Plan is similar tothe performance-linked share remuneration (Performance Share) and share remuneration with transfer
restriction (Restricted Stock) in the US and Europe, and delivers and provides the Company’s shares and cash
equivalent to the amount to convert and dispose the Company’s shares (collectively, “the Company’s Shares,etc.”) to Directors, etc.
2) Total number of shares subject to delivery to eligible Directors, etc.
The Company will contribute a total amount not exceeding 1,549 million yen to the Trust for a period of threefiscal years between the fiscal year ending September 30, 2019 and the fiscal year ending September 30, 2021(“Initial Trust Period”). An amount not exceeding 977 million yen in total will be included in the Initial Trust
Period as the amount for measures to be taken for the transition from the stock-based compensation stock
option scheme.
Overview of Trust Agreement
Category of trust

Money trust other than a specific individually operated money trust (third
party benefit trust)Objective of trust

To provide incentive for Directors, etc.
－

49 －Assignor

TKC Corporation

Trustee

Mitsubishi UFJ Trust and Banking Corporation(Joint trustee: The Master Trust Bank of Japan, Ltd.)

Beneficiary

Directors, etc., who satisfy the beneficiary conditions

Trust administrator

A third party professional expert having no interest in the Company

Date of trust agreement

February 26, 2019 (scheduled)

Trust period

February 26, 2019 (scheduled) to February 28, 2022 (scheduled)Start of plan

March 1, 2019 (scheduled)

Execution of voting rights

Not to be executedType of shares to be acquired

Common stock of the Company

Maximum amount of trust fundAcquisition of treasury stock

Directors and executive officers: 1,470 million yen (scheduled)(Including trust fees and expenses)
Auditors: 79 million yen (scheduled) (same as above)
To be acquired in the stock market or from the Company (disposal of treasury
stock)

Holder of vested rights

TKC Corporation

Residual property

The residual property that the Company (as holder of vested rights) may
receive shall be within the amount of trust expense reserve, which is the trust
fund less the fund for share acuqisition.

3) Persons eligible for the delivery of the Company’s shares
Directors, etc., who satisfy the beneficiary conditions

－

50 －

2 [Acquisition, etc. of Treasury Stock][Class of shares] Acquisition of shares of common stock under Article 155, Item 7 of the Companies Act of Japan(1) [Acquisition of Treasury Stock Based on Resolution at the General Meeting of Shareholders]None to be disclosed.
(2) [Acquisition of Treasury Stock Based on Resolution of the Board of Directors]
None to be disclosed.
(3) [Acquisitions of Treasury Stock not Based on Resolutions of General Meeting of Shareholders or Board of
Directors]
Classification

Number of shares (shares)

Treasury stock acquired during the current fiscal
year

Total amount (Yen)

821

3,470,590

Treasury stock acquired during the current period
74
296,740for acquisition(Note) Treasury stock acquired during the current period of acquisition does not include shares constituting less than one
unit purchased during the period from December 1, 2018 up to the date on which this Annual Securities Report
was filed.

(4) [Disposition and Holding of Acquired Treasury Stock]
Current fiscal year
Classification

Number ofshares(Shares)

Current period for acquisition

Total amountdisposed(Yen)

Number ofshares(Shares)

Total amountdisposed(Yen)

Acquired treasury stock for which
subscribers were solicited

－

－

－

－

Acquired treasury stock canceled

－

－

－

－

－

－

－

－

－

－

－

－

350,802－350,876－

Acquired treasury stock transferred due tomerger, share exchange, or company split
Other
( － )
Number of shares of treasury stock held

(Note) The disposition and holding of treasury stock acquired during the current period does not include sharestransferred through the exercise of subscription rights to shares, shares obtained through the purchase of sharesconstituting less than one unit, and shares sold through demand for sales during the period from December 1,
2018 up to the date on which this Annual Securities Report was filed.

－

51 －

3 [Dividend Policy]
The basic policy of the Company is to pay two annual dividends of retained earnings, an interim dividend and a
year-end dividend. Year-end dividends are resolved at the General Meeting of Shareholders and interim dividends
by resolution of the Board of Directors.
The Company further provides in its Articles of Incorporation that interim dividends as set forth in Article 454 Item
5 of the Companies Act of Japan as of March 31 every year may be paid by resolution of the Board of Directors.
The basic policy of the Company is to pay out dividends that exceed the industry average in accordance with themedium-term management plan set forth by the Board of Directors while continuing to maintain optimal profit
each fiscal year in order to meet the expectation of our shareholders. With the rapid advancement of ICT(information and communication technology) and major changes in social systems, it is essential to make advanceinvestments in research and development efforts and to actively pursue other capital investments to enhancecustomer support to accounting firms and local governments and lead them to success while remaining competitivein the marketplace.
Thus, dividends to be paid to shareholders are determined by taking into full consideration such factors as theCompany’s financial standing, operating results and payout ratios as we seek to maintain a balance between
strengthening our capital base to provide adequate funding in R&D and making funds available for stable dividend
payouts over the long-term.
To respond to the expectations of shareholders, the Company announced on May 2, 2018 that the estimatedamounts for interim and year-end dividends for the 52nd term would be 50 yen as ordinary dividends (for the 51st
term, 40 yen for interim dividends and 60 yen for year-end dividends), and has paid the interim dividends of 50 yen
after the resolution of the Board of Directors.
During the fiscal year under review, the Group’s net sales, operating income, ordinary income and current net
income attributable to owners of parent exceeded the previous fiscal year’s performance for two consecutive years
with record-breaking figures. Based on these results, to express our respect and gratitude to our shareholders, we
increased the year-end dividend per share announced on May 2, 2018 by 5 yen, resulting in a year-end dividend of
55 yen.
As a result, the annual payout ratio was 46.5%.
Total amount of cash dividends(Millions of yen)

Dividend per share(Yen)

May 2, 2018
Meeting of the Board of Directors

1,319

50

December 21, 2018
Ordinary General Meeting of
Shareholders

1,450

55

Date of Resolution

－

52 －

4 [Changes in Share Prices](1) [Highest and Lowest Prices for the Past Five Fiscal Years]
Fiscal year

48th Term

49th Term

50th Term

51st Term

52nd Term

Year end

September 2014

September 2015

September 2016

September 2017

September 2018

Highest (Yen)

2,359

3,690

3,365

3,530

4,875

Lowest (Yen)

1,576

1,841

2,393

2,716

3,305

(Note) The highest and lowest share prices are based on the market prices on the First Section of the Tokyo Stock
Exchange.
(2) [Highest and Lowest Prices by Month for the Past Six Months]
MonthApril 2018

May 2018

June 2018

July 2018

August 2018

September 2018

Highest (Yen)

4,420

4,630

4,525

4,315

4,365

4,875

Lowest (Yen)

3,980

4,120

3,935

3,810

3,985

4,170

(Note) The highest and lowest share prices are based on the market prices on the First Section of the Tokyo Stock
Exchange.

－

53 －5 [Board of Directors]
14 male and 0 female Directors (Percentage of female directors: 0%)

Official title

Position

Name

Date of Birth

Brief biography

Joined TKC
Director, Deputy Chief Director of
Sales
Director, Deputy Director of Local
Governments Business Division
May 1997
Managing Director, Deputy Directorof Local Governments Business
Division
DecemberManaging Director, Director of Local
1998
Governments Business Division
July 2001
Representative Director, President,
TKC Security Services Co., Ltd.
(current position)
DecemberSenior Managing Director, Director of
2001
Local Governments Business Division
President andDecemberDirector, Senior Managing Director
Representative
Executive
Kazuyuki Sumi September 28, 1948 2006
and Executive Officer, Director of
Director
Officer
Local Governments Business DivisionDecemberRepresentative Director, Vice
2008
President and Executive Officer,
Director of Local Governments
Business DivisionDecemberRepresentative Director, President and2011
Executive Officer, Director of
Accounting Firm Business Division
June 2012
Representative Director, Chairman,
SKYCOM Corporation (current
position)
October 2016 Representative Director, President andExecutive Officer (current position)
October 2017 Representative Director, President,
TKC Customer Support Service Co.,
Ltd. (current position)TermofofficeNumberofsharesheld(Hundredsof shares)(Note 6)

217

(Note 6)65

March 1972
December
1990
April 1997

April 1980
December
2000
September
2004
December
2005
December
2006
Representativ
e Director

Vice
President andExecutive
Officer,

Hitoshi Iwata

March 31, 1957－

Joined TKC
Director, Chief Director of General
Affairs
Director, Chief Director of Business
Administration
Managing Director, Chief Director of
Business Administration
Director, Managing Director andExecutive Officer, Chief Director of
the Business Administration
DecemberRepresentative Director, Vice
2008
President and Executive Officer, Chief
Director of Business Administration
August 2014 Representative Director, Vice
Chairman, TKC Financial Guarantee
Co., Ltd. (current position)
DecemberRepresentative Director, Vice
2017
Chairman, TKC Corporate Mutual
Aid Association (current position)
October 2018 Representative Director, Vice
President and Executive Officer(current position)

54 －April 2002
December
2010

Representativ
e Director

SeniorManaging
Director andExecutive
Officer,
Director of
Accounting
Firm
Business
Division

Masanori Iizuka

March 12, 1975－

Joined TKC
Director, Executive Officer, Sales ofCorporate Information Systems, Chief
Director of G Project of Sales,
Corporate Information Systems,
Accounting Firm Business Division
October 2012 Director, Executive Officer, Chief
Director of Sales of Corporate
Information Systems, Accounting
Firm Business DivisionDecemberDirector, Managing Director and2012
Executive Officer, Chief Director of
Sales, Corporate Information
Systems, Accounting Firm Business
Division
April 2014
Director, Managing Director andExecutive Officer, Chief Director of
Sales, Accounting Firm Business
Division
DecemberRepresentative Director, Senior
2014Managing Director and Executive
Officer, Chief Director of Sales,
October 2016 Accounting Firm Business Division
Representative Director, Senior
Managing Director and Executive
Officer, Chief Director of Accounting
Firm Business Division (current
position)

55 －(Note 6)72

Official title

Position

Name

Date of Birth

Brief biography

Numberofsharesheld(Hundredsof shares)

April 1979
June 2013

Director

Managing
Director andExecutive
Officer, Chiefof the Tax
ResearchCenterMakoto Ito

September 2, 1956

Director

Managing
Director andExecutive
Officer,
Director of
Local
Governments
Business
Division

Masao Yusawa

January 16, 1959

Director

Managing
Director andExecutive
Officer,
Chief of
Systems
Development
ResearchCenter,Accounting
Firm
Business
Division

Yasuo Igarashi

January 4, 1967

Director

Executive
Officer, Chief
Director of
Sales, Local
Governments
Business
Division

Satoshi Hitaka

January 19, 1971

Director

Executive

Takehiro Kariya

October 8, 1964－

Joined National Tax Agency
Deputy Commissioner (Collection),
National Tax Agency
July 2014
Resigns from National Tax Agency
September
Joined TKC, Deputy Chief, Tax
2014
Research Center
DecemberDirector, Managing Director and2014
Executive Officer, Chief of Tax
Research Center (current position)
April 1979
Joined TKC
December
Executive Officer, Chief Director of
2006
Sales Planning, Local Governments
Business DivisionDecemberDirector, Executive Officer, Local
2011
Governments Business Division
January 2012 Director, Executive Officer, Directorof Local Governments Business
Division
DecemberDirector, Managing Director and2014
Executive Officer, Director of Local
Governments Business Division(current position)
April 1989
Joined TKC
August 2012 Executive Officer, Chief of AccountInformation Systems Development
Center, Systems Development
Research Center, Accounting Firm
Business Division
October 2012 Executive Officer, Chief of Financial
Host System Development Center,
Systems Development ResearchCenter, Accounting Firm Business
Division
DecemberDirector, Executive Officer, Chief of2016
Account Information Systems Design
Center, Systems Development
Research Center, Accounting Firm
Business Division
NovemberDirector, Managing Director and2017
Executive Officer, Director of Sales
Planning, Sales, Accounting Firm
Business Division
January 2018 Director, Managing Director andExecutive Officer, Chief of Systems
Development Research Center,Accounting Firm Business Division(current position)
April 2003
Joined TKC
December
Executive Officer, Director of ASP
2010
Service Promotion, Sales Planning,
Local Governments Business DivisionDecemberDirector, Executive Officer, New
2011
Business Strategy, Local
Governments Business Division
January 2012 Director, Executive Officer, Chief
Director of Cloud Business
Promotion, Local Governments
Business Division
October 2018 Director, Executive Officer, Chief
Director of Sales, Local Governments
Business DivisionDecemberDirector, Managing Director and2018
Executive Officer, Chief Director of
Sales, Local Governments Business
Division (current position)
April 1989
Joined TKC

Termof
office56 －(Note 6)13

(Note 6)44

(Note 6)27

(Note 6)20

(Note 6)－

June 2011

Executive Officer, Chief of Network
Systems Development Center,
Systems Development ResearchCenter, Accounting Firm Business
Division
October 2012 Executive Officer, Chief of System
Engineering Center, Business
Administration Headquarters
DecemberDirector, Executive Officer, Chief of2018
System Engineering Center, (current
position)

Officer, Chiefof System
Engineering
Center－57 －Official title

Director

Director

Position

－

－

Name

Misao Taguchi

Yoshimasa
OshidaNumberofsharesheld(Hundredsof shares)

Date of Birth

Brief biographyTermofofficeJune 15, 1960

October 1990 Registered as certified tax accountant
NovemberStarted business as certified tax
1990
accountant
June 2011
Representative Partner, certified
public tax accounting firm Taguchi
Partners Kaikei (current position)
DecemberDirector, TKC (current position)
2016(Note 6)10(Note 6)10(Note 5)98

(Note 7)－(Note 4)10(Note 5)－

August 17, 1956

November
1988
November
1991
July 2002
December
2018

Registered as certified tax accountant
Started business as certified tax
accountant
Representative Partner, Oshida
Accounting Office (current position)
Director, TKC (current position)

March 1975
December
2006
Auditor (fulltime)－

TsuneoMiyashita

Joined TKC
Executive Officer, Director of
TKCNF Research Committee Support
Division
October 2010 Director of Chairman’s Office
December
Full-time Auditor (current position)
2016
Auditor, TKC Security Services Co.,
Ltd. (current position)
Auditor, TKC Customer Support
October 2017 Service Co., Ltd.(current position)

May 28, 1949

April 1979
April 1988

Auditor (fulltime)

Auditors－－

Kiyotsugu
Nakanishi

Kenji
MatsumotoAugust 27, 1956

March 10, 1947

Joined TKC
Section Chief of General Affairs
Department
January 1996 Deputy Director of General Affairs
Department
January 2006 Director, Director of General Affairs
Department
January 2015 Director of Internal Audit Department
December
Full-time Auditor (current position)
2018
September
1986
September
1986
November
2010

June 2015
December
2015

Auditors－

YoshikiTakashima

April 18, 1959－

Registered as certified tax accountant
Started business as certified tax
accountant
Representative Partner and Certified
Tax Accountant, Aoyama Accounting
Firm(current position)
Auditor, iMobile Inc.
Auditor (current position)

April 1990
Registered as attorney
January 2003 Partner, Shibata, Yamaguchi &Takashima Law Firm (current
position)
December
Auditor (current position)
2008
December
Auditor, TLP Co., Ltd. (current
2016
position)
Auditor, TKC Financial Guarantee
Co., Ltd. (current position)
December
Auditor, TKC Corporate Mutual Aid

58 －

2017

Association (current position)

Total

586

(Notes) 1. Director Satoshi Hitaka is the spouse of the elder sister of Masanori Iizuka, Representative Director, Senior
Managing Director and Executive Officer.
2. Directors Misao Taguchi and Yoshimasa Oshida are Outside Directors.
3. Auditors Kenji Matsumoto and Yoshiki Takashima are Outside Auditors.
4. Four years from the close of the Ordinary General Meeting of Shareholders held December 22, 2015.
5. Four years from the close of the Ordinary General Meeting of Shareholders held December 22, 2016.
6. Two years from the close of the Ordinary General Meeting of Shareholders held December 21, 2018.
7. Four years from the close of the Ordinary General Meeting of Shareholders held December 21, 2018.

－

59 －

6 [Corporate Governance](1) [Corporate Governance]
I. Basic Approach to Corporate GovernanceThe core of the Group, TKC Corporation, was established on October 22, 1966 listing the following two charters
in Article 2 of the Articles of Incorporation:
1. Management of electronic data processing centers to defend the business domains and maintain control overthe fate of accounting firms;
2. Management of electronic data processing centers to improve the administrative efficiency of local
governments.
While other business objectives were later added as business operations expanded, our management policy offocusing our target on accounting firms and local governments and specializing in the field of ICT (informationand communication technology) to guide our customers’ business to success remains unchanged, and this has led
the Group to occupy a unique position in Japan’s IT industries.
The Group (excluding the Printing BD) has a unique customer base – the Accounting Firm BD serves certified
public tax accountants, certified public accountants, tax accounting firms and audit corporations while the Local
Governments BD provides services to prefectural and municipal offices and affiliated public service
corporations. So from a compliance perspective, our customers are required by vocation-based laws (Certified
Public Tax Accountant Act or Certified Public Accountants Act) or administrative laws (Local Autonomy Act or
the Local Public Service Act) to follow much stricter levels of compliance than other business categories in
performing their business activities.
Thus, it is our utmost priority to ensure that all software products and services designed, produced and sold by
the Group are in full compliance with the laws and regulations pertaining to our customer’s business, and theGroup strives diligently to ensure total compliance in managing each Group companies as well as the Group as awhole in order to earn the trust of such customers.
As such, the Group understands corporate governance as follows:
1. in order to achieve the business objectives of the Company in compliance with the laws and regulations, theArticles of Incorporation and the resolutions of the General Meetings of Shareholders,
2. the Group shall formulate strategic medium-term management plans and foster competent human resourcesthat will enable us to develop and supply software products and services that can drive our customers' businessto success,3. strive to earn the gratitude, trust, and hopefully the respect of our customers,
4. and as a result, secure good operating results and sound financial standing so that we can return the fruits tothe original owners of the Group, our shareholders.
Through such corporate governance process, we aim to improve the transparency of our decision-making andbusiness processes, implement effective risk management measures, undertake information disclosure andaccountability in a timely manner to continue enhancing our corporate values.
II. Corporate Governance System
1. Reasons for Selecting the Current Corporate Governance System－

60 －The Company implements an auditor system and also appoints Outside Directors. Outside Directors areappointed and installed from the perspective of improving the transparency of the Board of Directors andenhancing its supervisory functions. This ensures the legality, appropriateness, and validity of the decisionmaking processes and resolutions by the Board of Directors.
Outside Auditors primarily give advice and make suggestions in order to ensure the legality, appropriateness, andvalidity of the decision-making processes and resolutions by the Board of Directors by expressing their opinions
on compliance issues and whether the resolutions of the Board of Directors are in violation of laws andregulations.
We also have two Outside Directors and two Outside Auditors who meet the requirements of independent
directors/auditors and are notified to the Tokyo Stock Exchange.
Through the implementation of these measures the Company ensures objectivity and neutrality of thesupervision over the management of the Company.
Therefore, we feel that the functions to supervise the management activities are in place, which enables us toinstitute a highly efficient, highly transparent management system that the Company aims for.
2. Execution of Business, Auditing and Supervision, Nominations, Decisions on Remuneration and Other
Functions (Overview of the Current Corporate Governance System)
1) Execution of business
The Representative Director & President chairs the meetings of the Board of Directors, which are held at least
once a month and attended by other Directors where they share information and make decisions in a prompt
manner.
The Board of Directors currently consists of 10 members and, with the exception of the Chairman and an
Outside Director, each Director represents a business unit as operating officer in charge and participates indeliberations and express their opinions. The Company adopts an executive officer system since December 22,
2006.
2) Supervision
The Board of Directors oversees the operations of the Company and supervises the execution of business byeach Director by receiving monthly business reports from the executive officers and heads of the major
business units of the Head Office.
3) Auditing
Auditors attend monthly meetings of the Board of Directors and other major internal meetings and express
their opinions on general managerial or individual issues. The Board of Auditors audits the performance of
duties by Directors in accordance with the Company’s audit policy and annual audit plans established inreference to the "Code of Kansayaku Auditing Standards" by the Japan Audit & Supervisory Members
Association.
Accounting Auditors perform accounting audits based on the annual audit plan, and report to the Auditors andRepresentative Directors and exchange opinions on methods and results of accounting audit.
4) Nomination
When submitting proposals on the appointment of Directors, a temporary Directors Nomination Committee,
consisting of the Representative Directors and Outside Directors and chaired by the President, shall take into
consideration such factors as the candidates’ records on business planning, contributions to past business－61 －performances, personalities and depth of knowledge, and propose the promotions and reappointments of
Directors to be resolved at General Meetings of Shareholders.
5) Remuneration
Director compensation consists of two parts: fixed-amount compensation and stock-based compensation using
a trust. Fixed amount compensation is determined in January each year based on the level of achievement of
the Company’s performance goals in the previous fiscal year and the performance targets for the current fiscal
year. The stock-based compensation using a trust is designed to motivate Directors to contribute more toenhancing the medium- to long-term corporate value by sharing common interest with shareholders, including
not only the merit derived from the rising share price, but also the risk associated with the decline in shareprice. The number of shares to be issued to Directors, etc., will be determined in accordance with the rules on
issuance of shares.
Compensation for Auditors also consists of two parts, fixed-amount compensation and stock-based
compensation using a trust. Fixed amount compensation is determined by consultation among Auditors.
3. Outline of Limited Liability Agreement
The Company concludes agreements with Outside Directors and Outside Auditors in accordance with theprovisions of Article 427, Paragraph 1 of the Companies Act of Japan, limiting their liabilities to the amounts set
forth by law if they are without knowledge and not grossly negligent with regards to their responsibilities set
forth in Article 423, Paragraph 1.
4. The Company consults with company attorneys concerning important legal issues and compliance-related
matters, and conducts reviews as necessary. The Company consults with the Accounting Auditors andreviews important accounting issues from time to time in addition to the regular accounting audits, andhold discussions promptly after quarterly and annual financial settlements.
5. Outline of Resolutions on the Development of Systems to Ensure the Appropriateness of Operations
The Company establishes a basic policy by resolution of the Board of Directors concerning “the development ofsystems necessary to ensure that the execution of duties by directors complies with laws and regulations and thearticles of incorporation, and other systems prescribed by the applicable Ordinance of the Ministry of Justice assystems necessary to ensure the properness of operations of a Stock Company” as stipulated in Article 362,
Paragraph 5 of the Companies Act of Japan. The outline of the policy is summarized below.
[1] Basic policy concerning the development of systems necessary to ensure that the execution of duties bydirectors complies with laws and regulations and the Articles of Incorporation(in relation to the first half of Article 362, Paragraph 4(vi) of the Companies Act of Japan)
1) Directors must comply with all laws and regulations, the Articles of Incorporation, and the Resolutions ofGeneral Meetings of Shareholders (hereafter “laws and regulations”), keep in mind at all times that thebusiness objectives of the Company are as set forth in Article 2 of our Articles of Incorporation, namely the“management of electronic data processing centers to defend the business domains and maintain control overthe fate of accounting firms,” and the “management of electronic data processing centers to improve theadministrative efficiency of local governments,” and perform their duties to achieve these objectives.
2) Directors must perform their duties based on the Company’s Rules on Administrative Authority and Dividing
Duties of Directors established by the Board of Directors, and cooperate with other Directors in improving
corporate performance.
3) In the event a Director finds that his/her decision (including approvals given to proposals made bysubordinates) may be in violation of the laws and regulations, he/she must, without delay, consult with the
Director in charge of legal affairs and act based on said Director’s decision to prevent the occurrence of any－

62 －illegal conduct. If such matter is of significant importance, the Director in charge of legal affairs shallimmediately report to the Representative Director and President (hereafter, the “President”), and full-time
Corporate Auditors and outside company attorneys and receive their guidance as well as report the particulars
to the Board of Directors.
4) In the event a Director finds that an act or a plan of another Director or an employee may be in violation of thelaws and regulations, he/she must, without delay, give warning to such Director or employee as joint bearer ofmanagerial responsibilities. If such matter is of significant importance, said Director must immediately reportto the President and receive guidance.
5) Prior to attending any meetings of the Board of Directors, Directors must review the matters to be deliberated,
reported and/or discussed at the next meeting of the Board of Directors (hereinafter, “matters to bedeliberated”) to make sure that there are no omissions in view of the scope of matters to be deliberated under
the regulations concerning the Duties (Articles 362) and Authority (Articles 363) of Directors as stipulated in
the Companies Act of Japan and the Company’s Rules on the Board of Directors. If there are other matters tobe deliberated, they must be brought to the Director(s) in charge of the meetings of the Board of Directors
without delay.
6) Directors must attend the meetings of the Board of Directors and voice their opinions and exercise their voting
rights on all matters to be deliberated based on their conscience and responsibility. Directors must give a true
account of the execution of their duties, speak frankly of any anticipated strategic risks and operational risks,and give the opportunity and time for the Board of Directors to review countermeasures for such issues inadvance.
7) The entire process of deliberations at the meetings of the Board of Directors shall be recorded in accordancewith the Company’s Rules on Management of Information Concerning the Decision-making Process of theBoard of Directors. The recordings must be kept in the form of electromagnetic records as specified in Article
371 of the Companies Act of Japan along with any materials used for explanations and the minutes of meetingof the Board of Directors.
8) Directors must attend the General Meeting of Shareholders, and provide answers in a sincere manner to anyquestions pertaining to the execution of their duties when asked by shareholders and instructed by the
Chairman to provide such answers.
9) Upon deliberations at the meetings of the Board of Directors, the Chairman of the Board of Directors mustseek the opinions of Auditors in attendance as to whether any resolution may be in violation of laws andregulations. In the event an Auditor finds in the course of sitting in the meetings of the Board of Directors,
that any resolution may be in violation of the laws and regulations, he/she must, without delay, give warning
to the Chairman of the Board.
10) As the highest authority of the Company, Directors are obliged to be acutely aware of the social
responsibilities of the Company under the principles set forth in the “TKC Charter of Corporate Code 2006,”
work to improve their characters and insight, strictly observe all laws and regulations and company rules,
eliminate ego and put aside personal affairs, exhibit discerning judgments to achieve business objectives, takelead in setting good examples, and strive to gain utmost trust of employees under their charge.
11) It is the basic policy of the Company to have no involvement with antisocial forces, bodies and individuals,
and to not comply with unjust and unlawful requests. The Company shall develop and disseminate this policy
among all Directors and employees, and shall establish systems to share all pertinent information within the
TKC Group and to develop appropriate countermeasures. Further, the Company shall collaborate closely withthe police and other external expert organizations, and with legal advisors and company attorneys.
[2] Basic policy concerning the development of systems ensuring the appropriateness of the Company’s operations(in relation to the latter half of Article 362 Paragraph 4(vi) of the Companies Act of Japan)]－63 －(1) Development of systems for the storage and management of information relating to the execution of
Directors’ duties of the Company(in relation to Article 100, Paragraph 1, Item 1 of the Ordinance for Enforcement of the Companies Act ofJapan)
1) Of the information relating to the execution of duties by Directors (hereafter, “information on Directors’duty”), information pertaining to the minutes of General Meetings of Shareholders shall be stored andmanaged in accordance with the Company’s Rules on Management of Information Concerning the
Minutes of General Meetings of Shareholders.
2) Of the information on Directors’ duty, information pertaining to deliberations at the meetings of the Boardof Directors shall be stored and managed in accordance with the Company’s Rules on Management ofInformation Concerning Decision-making Processes of the Board of Directors as described in [1] 7)
above.
3) Of the information on Directors’ duty, information submitted to or received from government authorities
and information sent to or received from outside parties in relation to legal affairs shall be stored andmanaged based on the Company’s Rules on Management of Information Concerning Legal Affairs.
4) Information on Directors’ duty not included above shall be divided into the following three categories andstored and managed based on the Company’s Rules on Management of Information Concerning the Daily
Operations of Directors:
a. of the meetings called by a Director (excluding the General Meetings of Shareholders and meetings ofthe Board of Directors), minutes and relevant documents of meetings in which matters that may havesignificant impact on the Company’s operation are deliberated, and meeting in which matters directly
related to the interest of specific customers, clients or employees are deliberated;b. written applications for approval and relevant documents settled by the Directors based on the
Company’s Rules Concerning Requests for Decisions;c. other important information pertaining to the execution of duties by Directors.
5) All information on Directors’ duty set forth in the preceding four items shall be stored in a database so that
their presence or absence and contents are immediately searchable. The operating status of said databaseshall be verified and rules shall be revised as necessary and reported to the Board of Directors.
(2) Regulations and other systems for the management of risks of loss for the Company(in relation to Article 100, Paragraph 1, Item 2 of the Ordinance for Enforcement of the Companies Act ofJapan)(2-1) Regulations for the management of strategic risks
1) Strategic risks are risks related to business opportunities that arise out of uncertainties of strategic
managerial decision-making. In light of the current situation of the Company, the objective of managing
such strategic risks shall be limited for the time being to “preventing the loss of business opportunities”
and to “appointment of Directors” to be submitted to the General Meetings of Shareholders.
2) In order to prevent the loss of business opportunities, all Directors must actively gather information andretain unrelenting spirit of inquiry to capture business opportunities that contribute to our customers’
success ahead of others, exhibit outstanding intuition to make the best of such business opportunities, anddevelop timely and optimal schematic plans and propose the execution to the President.
3) Upon receiving the such proposals from Directors (including employees) as set forth above, the President
must evaluate the contents from the following perspectives, and if it is determined that a proposal should
be executed, he/she shall report to the Board of Directors and cause for the Director (including employees)－

64 －in charge to announce an implementation plan at the meetings of the Board of Directors:
a. Conformances with the management philosophy of the Company;b. Compliances;c. Expected degree of contributions to customers' business;d. Anticipated feedback from customers;e. Technical feasibilities;
f. Funds and costs necessary;g. Other matters, such as principle of good faith with business partners.
4) When submitting proposals on the appointment of Directors, a temporary Directors Nomination
Committee, consisting of the Representative Directors and Outside Directors and chaired by the President,
shall take into consideration such factors as the candidates’ records on the preceding two items,
contributions to past business performances, personalities and depth of knowledge, and propose thepromotions and reappointments of Directors to be resolved at General Meetings of Shareholders.
5) Promotion of a Director to an executive position of managing director or above or demotion of an
executive director to a Director shall be determined by the President through discussion with other
Representative Directors and finally decided by approval of the Board of Directors.
(2-2) Regulations for the management of operational risks(2-2-1) Regulations for the management of operational risks that may occur across all divisions
1) Operational risks are risks related to the performance of business activities that arise out of uncertainties
of performance of appropriate and efficient operations. These risks shall be divided and controlled under
the following two categories:
a. risks that may occur across all divisions (hereinafter, “common risks”);
b. risks that may occur in specific divisions (hereinafter, “division-specific risks”).
This section provides for regulations for the management of common risks.
2) The Board of Directors shall elect a Director in charge of risk management, who shall be in charge ofinvestigating and identifying the following common risks from among all employees of the Company:a. Risks that have high degree of urgency;
b. Risks associated with compliance;c. Risks associated with confidentiality obligations of the Company;
d. Risks associated with the preservation of assets and accounting;e. Risks associated with the preparation of regulations and manuals for operation of business;
f. Risks associated with the workplace environment and labor management;
g. Other risks deemed necessary.
3) In the event the Director in charge finds, as a result of the inspections in the preceding paragraph, that there
are measures to completely eliminate any of the common risks, he/she shall promptly report such findings
to the President and discuss the actions to be taken.
4) The Director in charge shall sort and classify unresolved risks and formulate a basic policy on how to handle
such risks, and submit it to the Board of Directors as Regulations for the Prevention of Operational Risks(hereinafter referred to as “Regulations” in this section) for approval by the Board of Directors. The
approved Regulations shall be announced and distributed to all employees as guidelines from the President.
5) In the event a major risk becomes apparent, the Director in charge shall immediately take actions to prevent－65 －and minimize the spread of damages in accordance with the Regulations.
6) The Director in charge shall, within one month of completing the actions in the preceding item, investigate
the true cause of the risk and formulate measures to prevent recurrence, and report to the Board of Directors
within two months and undertake any revisions to the Regulations.
7) All heads of business units shall verify the compliance with the Regulations within their own business units
either on a daily or regular basis in accordance with the Regulations and report to the Director in charge.
8) The Director in charge shall submit to the President applications for special award money to those
uncovering major common risks that were previously unnoticed or those proposing effective measures toprevent recurrence of apparent risks.
(2-2-2) Regulations for the management of operational risks that may occur in specific divisions
1) Division-specific risks include cases in which division-specific operational risks need to be controlled andcases in which highly advanced, specialized knowledge is required to control certain common risks. The
following committees (including committees to be newly established) shall be in charge controlling risks
involving multiple divisions, and the relevant division shall be responsible for controlling any risk
involving that single division:a. Systems Development Research Center Operation Improvement Committeeb. Municipality Systems Development & Operations Division Operation Improvement Committeec. Consolidated Information Centers Operation Improvement Committeed. SCG Service Centers Operation Improvement Committee
e. Municipality Sales Division Operation Improvement Committee
f. Supplier Business Operation Improvement Committee
g. Tokyo Head Office Operation Improvement Committee
h. Personnel & Salary Systems Improvement Committee
i. Risk Management Committee
j. Other committees that the Board of Directors deems necessary to establish.
2) The committees listed in the preceding item shall serve as assisting body to the President or the Director in
charge of the division, the executive officer heading each committee with a fixed number of committee
members as determined by the Board of Directors. The Director in charge or the head of committee shallattend the meeting of the Board of Directors and report on the matters to be reported by the committee, andmay request deliberations as necessary by the Board of Directors.
3) Division-specific risks involving an individual committee or a specific division shall be controlled in thesame manner as controlling common risks as prescribed in (2-2-1). Division-specific risks shall be identified
by each committee and reported to the Board of Directors.
(2-2-3) Regulations for the management of hazard and other risks
1) In the event of large-scale earthquakes, flood damages, fire and other disasters, or long power outage,
water stoppage, the disconnection of communication lines and other circumstances that may cause
substantial damage, the Company will immediately set up an emergency response headquarter headed by
the President, and form an information communication team responsible for contacting customers,
employees and their families, shareholders, clients and external press, and an external advisory teamincluding the company attorneys and to establish a system to respond promptly, prevent and minimize thespread of damages.
2) In the event of any matters that may be in violation of the laws and regulations, the General Affairs
Headquarters under the responsibility of the Director in charge of legal affairs shall become the－66 －supervising division to take actions. Any legal compliance issue of significant importance shall be
consulted with outside attorneys as external legal advisors.
(3) Systems to ensure the efficient execution of Directors’ duties of the Company(in relation to Article 100, Paragraph 1, Item 3 of the Ordinance for Enforcement of the Companies Act ofJapan)
1) The Company holds regular meetings of the Board of Directors generally on the 10th day of every month,
as well as ad hoc meetings when necessary. The date and time of meetings of the Board of Directors called
for the disclosure of financial statements or in relation to the General Meetings of Shareholders shall beplanned at least six months in advance.
2) At the meetings of the Board of Directors held at the end of each fiscal year, a management policy for theupcoming fiscal year formulated in light of the management philosophy of the Company and a mediumterm management plan covering the next three years starting from the upcoming fiscal year shall be
submitted by the President, and the Board of Directors shall deliberate upon their strategic rationalities inaccordance with the Company’s Rules on the Board of Directors.
3) At the meetings of the Board of Directors held on the second month of each new fiscal year, the targeted
profit and loss statements for the entire company and each business unit for the new fiscal year, and a
proposed list of dividing duties of Directors and strategic goals shall be submitted by the President, andthe Board of Directors shall deliberate upon their feasibilities in accordance with the Company’s Rules on
the Board of Directors.
4) At the monthly regular meetings of the Board of Directors, the targeted and actual P/L statements for theentire company and each business unit as of the end of the previous month shall be reported, and theBoard of Directors shall analyze the differences in target and actual results, and discuss actions to be totaken to achieve the targeted sales and current profits for the fiscal year.
5) In executing his/her daily duties, the President shall inspect the details of individual projects planned by
the Directors in charge of each business unit and coordinate to maximize the effect the projects in light ofthe current management policy, and approve the use of president’s strategic reserve funds to the extent
approved by the Board of Director.
6) In executing his/her daily duties, Directors in charge of each business unit shall provide instructions to the
executive officers and managers under his/her immediate control to ensure that they have correct
awareness of the fiscal management policy and strategic goals for their division and that the PDCA cycleis thoroughly implemented to achieve these goals, and shall monitor the progress and achievements of theentire division at all times and strive to achieve the sales and profit goals for the fiscal year.
7) In managing the business unit under his/her charge, Directors in charge of each business unit shall strive to
reduce unnecessary expenses, improve work quality and productivity, and keep the workplace organized,
and must exhibit leadership to create a workplace environment in which all employees are safe andcomfortable, inspired and satisfied.
(4) Systems to ensure that performance of duties by employees of the Company is in conformance with laws andregulations and the Articles of Incorporation(in relation to Article 100, Paragraph 1, Item 4 of the Ordinance for Enforcement of the Companies Act ofJapan)
1) In order to ensure compliance with laws and regulations by employees, the Internal Audit Department
under the direct control of the President shall prepare drafts of Compliance Regulations and Compliance
Manual based on guidance provided by Auditors and outside company attorneys and, upon obtaining theapproval of the Board of Directors, distribute them to all employees as guidelines from the President.
－

67 －2) Regular training sessions for all employees of the Company to further understanding on the Compliance
Regulations and Compliance Manual as set forth above shall be conducted in accordance with the plans of
the Internal Audit Department.
3) When performing an internal audit on internal business units, the Internal Audit Department must always
inspect the awareness on Compliance Regulations and implementation of Compliance Manual among
employees of the business unit being audited, and submit an Internal Audit Report to the President within
one week after the completion of the audit.
4) Directors in charge of each division shall appoint a compliance manager within each business unit inaccordance with the Compliance Regulations, and conduct training on the Compliance Manual for
employees within the business unit in a timely and appropriate manner.
5) In order to prevent the leaking of customer information and other confidential information, the body text
and attached files of all electronic mails sent from internal PCs to outside the company shall be stored fora certain period of time.
6) In preparation for the unlikely event that a Company employee violates any laws or regulations, theCompany shall establish a system whereby the Internal Audit Department or the employee that first learnsof such information gives emergency notification to the President or the Director in charge of legal affairs
informing them of the facts and other relevant information.
(5) Other systems to ensure the appropriateness of operations of the Group consisting of the Company and its
subsidiaries(in relation to Article 100 Paragraph 1(v) of the Ordinance for Enforcement of the Companies Act of Japan)(A) Systems concerning reports to the Company on matters pertaining to the execution of duties by directors,
executive officers, employees executing operations, persons performing the duties under Article 598,
Paragraph 1 of the Companies Act of Japan, and those equivalent (hereinafter "Directors, etc." in items(C) and (D) below) of the Company’s subsidiaries(in relation to Article 100, Paragraph 1, Item 5(a) of the Ordinance for Enforcement of the Companies Act
of Japan)1) In order for the Company to perform quarterly audits on the presence or absence of risk information
pertaining to its subsidiary companies and affiliated companies (hereinafter, "Subsidiaries"), theCompany shall conclude an internal audit agreement with its Subsidiaries and the Internal Audit
Department shall conduct audits.
2) The Internal Audit Department shall establish a system whereby, upon identifying any incidents that
may cause significant damage to the Subsidiaries, the President and the heads of relevant businessdivisions are notified of the risks causing such incident, the degree of damage expected and impacts on
the Company.
3) The Internal Audit Department shall thoroughly exchange information with the Subsidiaries’ divisions
in charge of internal audits on a regular basis to prevent any inappropriate transactions (including using
corporate expenses for private entertainment purposes) or inappropriate accounting between the
Company and Subsidiaries.
4) The Company shall assign Directors or employees of Deputy Manager or higher to the Subsidiaries toserver as Directors in order to communicate the management policy and requests of the Company inwriting to the Subsidiaries’ Board of Directors. The Company shall request the presidents of thesubsidiaries to submit monthly reports on the latest business results, business forecast and risk
management issues.
－

68 －(B) Regulations and other systems for the management of risks of loss for the Subsidiaries(in relation to Article 100, Paragraph 1, Item 5(b) of the Ordinance for Enforcement of the Companies Act
of Japan)
Efforts shall be made to raise awareness on risks which may impact the Company’s operation, and topromote early discovery, preventive measures, and prompt and appropriate responses in the event of an
emergency in accordance with the separate Compliance Regulations, Compliance Manual and otherinternal rules.
(C) Systems to ensure the efficient execution of Directors’ duties of Subsidiaries(in relation to Article 100, Paragraph 1, Item 5(c) of the Ordinance for Enforcement of the Companies Act
of Japan)1) The Board of Directors of Subsidiaries (referred to as “Board of Directors” in this section) shall holdregular meetings of the Board of Directors generally on a given day of every month, as well as ad hoc
meetings when necessary. The date and time of meetings of the Board of Directors called for theapproval of financial statements or in relation to the General Meetings of Shareholders shall be plannedat least six months in advance.
2) At the meetings of the Board of Directors held at the end of each fiscal year, a management policy for theupcoming fiscal year formulated in light of the Management Philosophy of the Subsidiaries and a
Medium-Term Management Plan covering the next three years starting from the upcoming fiscal year
shall be submitted by the president of the Subsidiaries (referred to as “President” in this section and thenext section), and the Board of Directors shall deliberate upon their strategic rationalities in accordancewith the Company’s Rules on the Board of Directors.
3) At the meetings of the Board of Directors held on the second month of each new fiscal year, the Targeted
Profit and Loss Statements for the entire company and each business unit for the new fiscal year, and a
proposed List of Dividing Duties of Directors and Strategic Goals shall be submitted by the President,
and the Board of Directors shall deliberate upon their feasibilities in accordance with the Company’s
Rules on the Board of Directors.
4) At the monthly regular meetings of the Board of Directors, the targeted and actual P/L statements for theentire company and each business unit as of the end of the previous month shall be reported, and theBoard of Directors shall analyze the differences in target and actual results, and discuss actions to be totaken to achieve the targeted sales and current profits for the fiscal year.
5) In executing his/her daily duties, the President shall inspect the details of individual projects planned by
the Directors in charge of each business unit and coordinate to maximize the effect the projects in light ofthe current management policy.
6) In executing his/her daily duties, Directors in charge of each business unit shall provide instructions to
the executive officers and managers under his/her immediate control to ensure that they have correct
awareness of the fiscal management policy and strategic goals for their division and that the PDCA cycleis thoroughly implemented to achieve these goals, and shall monitor the progress and achievements ofthe entire division at all times and strive to achieve the sales and profit goals for the fiscal year.
7) In managing the business unit under his/her charge, Directors in charge of each business unit shall strive
to reduce unnecessary expenses, improve work quality and productivity, and keep the workplaceorganized, and must exhibit leadership to create a workplace environment in which all employees aresafe and comfortable, inspired and satisfied.
(D) Systems to ensure that performance of duties by Directors and employees of the Subsidiaries is inconformance with laws and regulations and the Articles of Incorporation(in relation to Article 100, Paragraph 1, Item 5(d) of the Ordinance for Enforcement of the Companies Act－

69 －of Japan)1) In order to ensure compliance with laws and regulations by the directors and employees of theSubsidiaries (referred to as "Directors and employees" in this section), the division in charge of internal
audit under the direct control of the President shall develop Compliance Regulations and Compliance
Manual based on guidance provided by Auditors and outside company attorneys.
2) Regular training sessions for all Directors and employees to further understanding on the Compliance
Regulations and Compliance Manual as set forth above shall be conducted in accordance with the plansof the division in charge of internal audit.
3) When performing an internal audit on internal business units, the division in charge of internal audit must
always inspect the awareness on Compliance Regulations and implementation of Compliance Manual
among employees of the business unit being audited, and submit an Internal Audit Report to the
President within one week after the completion of the audit.
4) Directors in charge of each division shall appoint a compliance manager within each business unit inaccordance with the Compliance Regulations, and conduct training on the Compliance Manual for
employees within the business unit in a timely and appropriate manner.
5) In order to prevent the leaking of customer information and other confidential information, the body text
and attached files of all electronic mails sent from internal PCs to outside the company shall be stored fora certain period of time.
6) In preparation for the unlikely event that a Director or employee violates any laws or regulations,
Subsidiaries shall establish a system whereby the division in charge of internal audit or the Director or
employee that first learns of such information gives emergency notification to the President informing
him/her of the facts and other relevant information.
(6) Assignment of employees to assist the duties of Corporate Auditors(in relation to Article 100, Paragraph 3, Item 1 of the Ordinance for Enforcement of the Companies Act ofJapan)
1) The Company shall establish an Auditor Office to assist the duties of the Auditors and assign one or more
dedicated employees.
2) In determining the specific details pertaining to the preceding item, the Company shall respect theopinions of the Board of Auditors and take into consideration the opinions of the Director in charge ofhuman resources and other relevant personnel.
(7) Independence of employees assisting duties of Corporate Auditors from Directors(in relation to Article 100, Paragraph 3, Item 2 of the Ordinance for Enforcement of the Companies Act ofJapan)
1) The appointment, transfer, personnel evaluation and disciplinary punishment of employees assisting theduties of Auditors shall be subject to prior consent of the Board of Auditors.
2) Employees assisting the duties of Auditors shall not hold concurrent posts that involve the execution of theCompany’s business, and shall perform their duties under the direct command of the Board of Auditors,
and their performance shall be evaluated by the Board of Auditors.
3) Business units executing the Company’s business shall cooperate with employees assisting the duties of
Auditors and allow attendance of such employees at the necessary meetings for them to conduct tonecessary investigations and gather necessary information.
－

70 －(8) Ensuring effectiveness of directions to employees assisting duties of Corporate Auditors(in relation to Article 100, Paragraph 3, Item 3 of the Ordinance for Enforcement of the Companies Act ofJapan)
Employees assisting the duties of Auditors shall report to Auditors as appropriate on the status of duties
performed in accordance with the directions and commands given by Auditors.
(9-1) The systems listed below and other systems for reporting to Corporate Auditors(in relation to the provisions of Article 100 Paragraph 3 Item 4 of the Ordinance for Enforcement of theCompanies Act of Japan)(A) Systems for reporting to Corporate Auditors by the Company’s Directors, accounting advisors andemployees(in relation to Article 100, Paragraph 3, Item 4(a) of the Ordinance for Enforcement of the Companies Act
of Japan)1) All Directors and employees of the Company shall promptly submit the necessary reports andinformation requested by Auditors as established by the Board of Auditors.
2) The reports and information to be submitted as set forth in the preceding item shall mainly include thefollowing:a. Status of activities of business units involved in the risk management of the Company;
b. Status of activities pertaining to audits and internal audits of the Subsidiaries of the Company;c. Important accounting policies and accounting standards of the Company and any changes thereto;d. Contents of announcements and important disclosure documents on the Company’s latest businessresults and earnings forecasts announcements on both non-consolidated and consolidated basis;e. Circulation of internal approval documents and meeting minutes requested by Auditors.
3) In the event a Director or employee learns of any fact of violations of laws and regulations or any factthat could cause significant damage to the Company, such Director or employee shall immediately report
matters pertaining to such fact to Auditors.
4) Auditors shall attend all the meetings of the Board of Directors and other important meetings, and are
expected to voice their opinions freely without being requested to do so by the chairman or caller of suchmeetings.
(B) Systems for reporting to Corporate Auditors of the Company by the Subsidiaries’ directors, accounting
advisors, auditors, executive officers, employees executing operations, persons performing the duties
under Article 598, Paragraph 1 of the Companies Act of Japan and other persons equivalent to the above,
employees or any persons receiving reports from the above(in relation to Article 100, Paragraph 3, Item 4(b) of the Ordinance for Enforcement of the Companies Act
of Japan)1) All directors, auditors and employees of Subsidiaries shall promptly submit the necessary reports andinformation requested by each Corporate Auditor of the Company as established by the Board ofAuditors of the Company.
2) The reports and information to be submitted as set forth in the preceding item shall mainly include thefollowing:a. Status of activities of business units involved in the risk management of the Subsidiaries;
b. Status of activities pertaining to the audits by auditors of the Subsidiaries;－

71 －c. Important accounting policies and accounting standards of the Subsidiaries and any changes thereto;d. Circulation of internal approval documents and meeting minutes of Subsidiaries requested byAuditors.
3) In the event a director, auditor or employee learns of any fact of violations of laws and regulations or any
fact that could cause significant damage to the Company, such director, auditor or employee shallimmediately report matters pertaining to such fact to the Auditors of the Company.
4) The Company’s Auditors shall attend all the meetings of the Board of Directors and other important
meetings of Subsidiaries, and are expected to voice their opinions freely without being requested to do soby the chairman or caller of such meetings.
(9-2) Systems to ensure that persons making reports as stated in the preceding item do not receive
disadvantageous treatment for providing such reports(in relation to Article 100, Paragraph 3, Item 5 of the Ordinance for Enforcement of the Companies Act ofJapan)The Company and Subsidiaries must not treat any persons making reports stated in the preceding item in a
disadvantageous manner due to grounds of providing such reports to the Board of Auditors of the Company.
(9-3) Policy on prepayment or reimbursement of expenses arising from the execution of duties of Corporate
Auditors and the processing of expenses or debts arising from the performance of other duties(in relation to Article 100, Paragraph 3, Item 6 of the Ordinance for Enforcement of the Companies Act ofJapan)The Company shall secure sufficient amounts to cover for the procedures on prepayment or reimbursementof expenses arising from the execution of duties of Auditors and for the processing of expenses or debts
arising from the performance of other duties so as to allow Auditors to sufficiently achieve the execution of
the Auditors’ duties.
1) Ordinary auditing expenses shall be budgeted in the current fiscal year based on the business plan of theCompany and the audit plan of the Board of Auditors.
2) Other emergency auditing expenses and contingency expenses shall be estimated in advance by the Board
of Auditors and establish a policy on such expenses. The Board of Directors shall execute the measures
under said determined policy as notified by the Board of Auditors after deliberation and review of suchmeasures in light of the status of execution of the budget for the fiscal year.
(10) Other systems to ensure that audits by the Corporate Auditors’ are implemented effectively(in relation to Article 100, Paragraph 3, Item 7 of the Ordinance for Enforcement of the Companies Act ofJapan)
1) Auditors shall receive advanced explanations on the annual internal auditing plan to be performed by theInternal Audit Department and express their opinions to the President if they deem that the plan needs tobe corrected or changed, and the President must respect such opinions.
2) Auditors shall receive reports, as appropriate, on the status of implementation of internal audits, andexpress their opinions to the President if they deem necessary that additional audits be implemented or
operation improvement measures be developed. The President must respect such opinions.
3) Auditors shall receive advance explanations on the accounting audit plans from accounting auditors, andreports on auditing methods and audit results whenever accounting audits on quarterly settlements andaudits on full year settlements are performed.
－

72 －4) For the purpose of increasing the effectiveness of the Company’s auditing system by achieving
coordination between the Company’s auditing system and the risk management system, the Company
shall establish an Audit System Improvement Committee headed by the Director in charge of legal affairs
and consisting of the head of the Internal Audit Department and deputy managers or higher nominated bysaid Director and Auditors. The Committee is expected to prepare reports on the auditing systems thatshould be created by the Company in the future, and to submit such reports to the Board of Directors.
6. Basic Policy on the Control of the Company
The Company has no particular policy on matters concerning the persons controlling the decisions on thefinancial and business policies of the Company. A schematic diagram of the Company’s internal control system
is shown below:

General Meeting of Shareholders
Appointment/
Dismissal

Board of Directors
10 Directors(Including 2 Outside Directors)

Appointment/
Dismissal

Reports

Appointment/
Dismissal

Reports
Collaboration

Audit
Board of Auditors
4 Auditors(Including 2 Outside Auditors)

Appointment/
Dismissal/
Supervision

Reports

Accounting
Auditors
Setting the Agenda for
Appointment/ Dismissal/Refusalof Reappointment

Reports

Instructions
Internal Audit Department

Representative Directors

Business Improvement
Committee

Reports
Instructions,Supervision

Audit

Reports

Requests

34 Executive Officers

Instructions, Orders

All Divisions, Group Companies

III. Internal Audits and Audits by Auditors
The Company has four Auditors, one of which, Kenji Matsumoto, Auditor, is a qualified public tax accountant who
has extensive expertise in the areas of finance and accounting. Yoshiki Takashima, Auditor, is a qualified attorney
who has extensive expertise in the areas of finance and accounting.
The Internal Audit Department, coordinating closely with the Auditors, audits the operation of all business units ina systematic manner to assess the effectiveness of internal controls and the actual business operations, and reports
the results of auditing directly to the President. Highly effective internal audits are implemented by providing thebusiness divisions indication and guidance on items required to be improved based on the auditing results, andrequiring them to report the progress of improvements after the auditing. As a department under the direct controlof the President, the Internal Audit Department audits the operation of each business units within the Company
from the perspectives of appropriateness of operation and compliance in accordance with the laws and regulations,
the Articles of Incorporation, guidelines from the President, and work regulations and other internal rules and
－

73

－

regulations. Auditors receive reports on internal audit plans for the fiscal year and reports on internal audit methods
and results for the first and second half-years from the Internal Audit Department and exchanges opinions on
relevant matters.
The Company conducts evaluations on the internal auditing systems to ensure the appropriateness of financial
reporting documents and related information in accordance with Article 24-4, Paragraph 4, Item 1 of the Financial
Instruments and Exchange Act of Japan, and holds discussions regularly and as-needed on the three auditing
functions—internal audits, audits by Auditors and accounting audits by accounting auditors to improve thereliability of our financial reporting. Information on the respective audit plans and audit results are shared andclosely coordinated to achieve highly efficient and effective auditing.
IV. Basic Approach and Countermeasures to Eliminate Anti-social Forces
1. Basic approach to eliminate anti-social forces
The basic policy of the Company is to have absolutely no engagement with anti-social forces under "Strict
Implementation of Compliance Management" as stated in the TKC Charter of Corporate Code. The Company
fully disseminates that it will maintain a resolute, organization-wide response against any and all unreasonable
demands and approaches from anti-social forces and bodies.
2. Countermeasures to eliminate anti-social forces
1) Establishment of a Response Control Division and appointment of managers
The Company has established a division to control responses to anti-social forces (the Response Control
Division) and appointed managers in charge of preventing unreasonable demands within its Tochigi andTokyo Head Offices.
The Company has also established a system for immediate reporting and consultation with the Response
Control Division on matters concerning unreasonable demands, organized violence, and criminal acts by antisocial forces.
2) Coordination with external expert organizations
The Company maintains close ties with external expert organizations, for example, by taking part in liaisongroups organized by the police and receiving guidance on how to deal with anti-social forces.
3) Collecting and managing information on anti-social forces
The Response Control Division coordinates with experts and the police in sharing the latest information
pertaining to anti-social forces and using such information to give warning to the employees within the
Company.
4) Preparation of response manuals
The Company has prepared training materials on compliance-related case studies including topics on how todeal with anti-social forces, which are distributed and used in compliance training sessions.
5) Training activities
The Company promotes activities to prevent damages from anti-social forces before they occur by sharing
information on anti-social forces within the Company and conducting compliance training sessions with theCompany and at Group companies.
－

74 －V. Outside Directors and Outside Auditors
1. Status and reasons for appointment of Outside Directors and Outside Auditors
Category

Director

Name

Misao Taguchi

Functions, roles and appointment
Mr. Taguchi is a representative partner of a certified public tax accountants firm
Taguchi Partners Kaikei, and has been appointed as Outside Director so that theCompany’s Accounting Firm Business can benefit from his extensive experienceand insights in the management of accounting firms. From an independent
standpoint, he is expected to enhance the supervisory functions of the Board of
Directors in order to increase transparency, and provide valuable input to ensure
the legality and validity of decisions made and resolved by the Board of
Directors.
While Taguchi Partners Kaikei is engaged in a business relationship with theCompany, transactions are based on the same terms and conditions as with otherthird parties. Therefore, it is not likely that any conflict of interest shall occur
between Mr. Taguchi and general shareholders, and the Company deems that thiswould not affect the independence of Mr. Taguchi.

Director

Yoshimasa
OshidaMr. Taguchi has no special interest in the Company.
Mr. Oshida is a representative partner of a certified public tax accountants firm
Oshida Accounting Office, and has been appointed as Outside Director so that
the Company’s Accounting Firm Business can benefit from his extensive
experience and insights in the management of accounting firms. From an
independent standpoint, he is expected to enhance the supervisory functions of
the Board of Directors in order to increase transparency, and provide valuable
input to ensure the legality and validity of decisions made and resolved by the
Board of Directors.
While Oshida Accounting Office is engaged in a business relationship with theCompany, transactions are based on the same terms and conditions as with otherthird parties. Therefore, it is not likely that any conflict of interest shall occur
between Mr. Oshida and general shareholders, and the Company deems that thiswould not affect the independence of Mr. Oshida.
Mr. Oshida has no special interest in the Company.
Mr. Matsumoto has been appointed to enhance the supervisory functions of theBoard of Directors in order to increase transparency, and to give opinions oncompliance issues and as to whether the resolutions of the Board of Directors
may be in violation of laws and regulations, and to provide opinions, advice andsuggestions in order to ensure the legality, appropriateness, and validity of thedecisions made and resolved by the Board of Directors.

Auditors

Kenji Matsumoto

While Mr. Matsumoto and the tax accounting firm, Aoyama Accounting Firm
where Mr. Matsumoto serves as representative partner are engaged in a business
relationship with the Company, transactions are based on the same terms andconditions as with other third parties. Therefore, it is not likely that any conflictof interest shall occur between Mr. Matsumoto and general shareholders, and theCompany deems that this would not affect the independence of Mr. Matsumoto.
Mr. Oshida has no special interest in the Company.

－

75 －

Auditors

YoshikiTakashima

Mr. Takashima is a certified attorney and has been appointed to provide
compliance-related audits and advise from a legal perspective on execution ofduties by the Directors of the Company.
Mr. Oshida has no special interest in the Company.

2. Support systems for Outside Directors and Outside Auditors
1) The Company appoints the Chief Director of General Affairs Department as a point of liaison to provide
assistance to Outside Directors and Outside Auditors. The Chief Director of General Affairs Department
notifies the Outside Directors and Outside Auditors of the schedule of the meetings of the Board of Directors
or meetings of the Board of Auditors and send any related materials thereto, and if necessary, provides
explanations in advance on such materials.
2) Outside Directors attends any major meetings of the TKCNF, the customer organization of the Accounting
Firm BD.
3) Once a month, Outside Auditors review the approval request documents, accounting books and major
evidence documents, and receive reports from the heads of Departments and give their opinions.
4) Remunerations for Auditors shall be determined each January upon discussion among Auditors based on thebusiness results for the preceding fiscal year.
3. Standards concerning the independence of Outside Directors and Outside Auditors of the Company(1) For the Board of Directors of the Company to recognize the independence of an Outside Director or Outside
Auditors of the Company (hereinafter, "outside executives"), he/she must maintain a neutral stance,
independent of the Company’s management without falling under any of the following (independent outside
executives shall be referred to as "independent executives" hereafter):1) executive member of the Company or the Company’s affiliate companies (hereinafter, "the Group");2) an important trade partner of the Group or its executing member;
3) a major shareholder of the Company (holding voting rights in excess of 10% of the total voting rights,
directly or indirectly) or its executing member;
4) an executing member of an entity in which the Group is a major investor (holding voting rights in excess
of 10% of the total voting rights, directly or indirectly);5) certified public accountant, certified public tax accountant or other accounting specialist, an attorney orother legal specialist receiving large sums of money or other assets from the Group other than director
compensation (or, any person affiliated with the corporation, association or other bodies receiving suchmonies or assets);
6) a person belonging to an audit firm that performs accounting audits for the Company, or a tax accountant
or person belonging to a tax firm that performs tax audits for the Company;7) any person falling under items 1) to 6) within the last three years;8) near relatives of the following:
1. Persons falling under items 2) to 6) above (provided that an "executing member" in items 2) to 4) shallbe limited to a person executing important duties, and "person affiliated with the corporation,
association or other bodies" in item 5) shall be limited to a person executing important duties, or in case－76 －of an audit firm, a tax accounting firm, law firm or other organization of accounting and legal
specialists, only certified public accountants, tax accountants or attorneys and persons with specialized
qualifications, and "persons belonging to an audit firm" and "persons belonging to a tax firm" in item 6)
shall be limited to persons executing important duties and certified public accountants, tax accountants
and other persons with specialized qualifications);
2. Persons executing important duties of the Group;
3. Persons falling under item 2) above within the last three years.
(2) In addition to the criteria in the preceding item, independent executives shall not have any condition that
could be reasonably interpreted as his/her inability to perform the duties of an independent outside executive.
(3) Independent executives shall strive to maintain the independence set forth in these standards until theirresignation, and shall immediately notify the Company if said independence as defined in these standards is
lost.
Note 1: An Outside Director refers to Outside Directors as defined in Article 2 Item 15 of the Companies Act ofJapan.
“An Outside Director means a director of any stock company who is neither an executive director(hereinafter referring to a director of a stock company listed in any item of Article 363(1), and any otherdirector who has executed operation of such stock company) nor an executive officer, nor an employee,
including a manager, of such stock company or any of its subsidiaries, and who has neither ever servedin the past as an executive director nor executive officer, nor as an employee, including a manager, ofsuch sock company or any of its subsidiaries.”
Note 2: An Outside Auditor refers to Outside Company Auditors as defined in Article 2 Item 16 of theCompanies Act of Japan.
“An Outside Company Auditor means an auditor of any stock company who has neither ever served in
the past as a director, accounting advisor (or, in cases where the accounting advisor is a juridical person,
any member thereof who was in charge of its advisory affairs) or executive officer, nor as an employee,
including a manager, of such stock company or any of its Subsidiaries.”
Note 3: An executing member refers to Directors (excluding Outside Directors), executive officers as defined in
Article 418 of the Companies Act of Japan (hereinafter "executive officers"), and corporate executive
officers and employees executing operation.
Note 4: Persons for which the Group is an important trade partner refers to those falling under either of thefollowing:
1) a trade partner group that provides products or services to the Group (referring to companies belonging
to consolidated groups to which the direct trade partner is affiliated, hereinafter the same) that hasreceived from the Group in the immediately preceding fiscal year an amount in excess of 100 million
yen or 2% of the consolidated net sales of said trade partner group, whichever the higher;
2) a trade partner group to which the Group is indebted to and owed in the immediately preceding fiscal
year a total amount in excess of 100 million yen or 2% of the consolidated total assets of the trade
partner group, whichever the higher.
Note 5: Important trade partners for the Group refers to those falling under either of the following:
1) a trade partner group to which the Group provides products and services from which the Group hasreceived in the immediately preceding fiscal year an amount in excess of 100 million yen or 2% of theconsolidated net sales of said trade partner group, whichever the higher;－

77 －2) a trade partner group indebted to the Group, that owed the Group in the immediately preceding fiscal
year a total amount in excess of 100 million yen or 2% of the consolidated total assets of the trade
partner group, whichever the higher;
3) a financial institution group from which the Group is borrowing (referring to companies belonging toconsolidated groups to which the direct lender is affiliated) and borrowed in the immediately
preceding fiscal year a total amount in excess of 2% of the consolidated total assets of the Group.
Note 6: Certified public accountants, public tax accountants or other accounting specialists, and attorneys orother legal specialists receiving large sums of money or other assets from the Group other than director
compensation shall refer to persons who received from the Group, an amount in excess of 10 million yen
or any property in the amount in excess of 2% of said person’s total sales or gross income, whichever
the higher, in the immediately preceding fiscal year in addition to the director compensation.
Note 7: Near relatives shall refer to relatives within the second degree and other interested parties that shareliving expenses.
Note 8: Persons executing important duties shall refer to persons executing important business operations,
including Directors (excluding Outside Directors), executive officers, corporate executive officers andheads of business units.
Note 9: The term "fiscal year" used above can be replaced for individuals to read the year subject to income tax
calculations.
VI. Accounting Audits
1. Accounting Auditors
The Company has an audit agreement with Ernst & Young ShinNihon LLC, and receives accounting audits fromthe firm. The names of certified public accountants that executed the accounting audit for the fiscal year ended
September 2018 are as follows:
Designated Limited Liability Partner, Executing Partner: Yasuo Sekiya
Designated Limited Liability Partner, Executing Partner: Yuichi Noda
Number of assistants assisting auditing:
Certified Public Accountants: 7
Others: 17
2. Policy for determining the dismissal or refusal to reappoint accounting auditors
It is the policy of the Company for the Board of Auditors to dismiss accounting auditors, with the consent of all
Auditors, should it be deemed that said accounting auditor falls under any of the items prescribed in Article 340
Paragraph 1 of the Companies Act of Japan. In such event, an Auditor selected by the Board of Auditors shallreport the dismissal of the accounting auditor and the reason for dismissal at the first General Meeting of
Shareholders convened following the dismissal.
If there is a reason or a need to prevent the accounting auditor’s execution of his/her duties, the Board ofAuditors shall develop a proposal on the dismissal or refusal of reappointment of said accounting auditor, and theBoard of Directors shall present such proposal for resolution at the General Meeting of Shareholders.
3. Matters concerning the suspension of operations by accounting auditors
None to be disclosed.
－

78 －VII. Other Stipulations
1. Number of Directors
The Articles of Incorporation stipulate that the Company may have a maximum of 15 Directors.
2. Criteria for the election or dismissal of Directors
The Articles of Incorporation stipulate that Directors shall be elected by a majority vote of shareholders at theGeneral Meeting of Shareholders with the attendance of at least one-third of shareholders that can exercise
voting rights, and that election of Directors shall not to be based on cumulative voting.
The Articles of Incorporation further stipulate that Directors shall be dismissed by a vote of two-thirds or moreof shareholders at the meeting with the attendance of at least half of the shareholders that can exercise voting
rights.
3. Exemption from liability for Directors and Auditors
In order to limit the responsibilities of Directors and Auditors to a reasonable extent in performing their duties,
the Company stipulates in its Articles of Incorporation that the Company may, by resolution of the Board of
Directors, exempt Directors (including former Directors) and Auditors (including former Auditors) fromliabilities to the extent allowed by law in accordance with Article 426 Paragraph 1 of the Companies Act ofJapan.
4. Interim dividends
In order to maintain flexible redistribution of profits to shareholders, the Company stipulates in its Articles ofIncorporation that the Company may, by resolution of the Board of Directors, pay interim dividends as of March
31 every year pursuant to the provisions of Article 454, Item 5 of the Companies Act of Japan.
5. Acquisition of treasury stock
In order to allow for flexible implementation of capital policies on improving capital efficiency and shareholderinterest, the Company stipulates in its Articles of Incorporation that treasury stock may be acquired by resolutionof the Board of Directors pursuant to the provisions of Article 165, Paragraph 2 of the Companies Act of Japan.
6. Special resolutions
The Company stipulates in its Articles of Incorporation that special resolutions of the General Meetings ofShareholders as specified in Article 309, Paragraph 2 of the Companies Act of Japan shall be passed by a vote of
two-thirds or more of shareholders at meetings with the attendance of at one-third of the shareholders that can
exercise voting rights. This has been established to ensure smooth handling of special resolutions at General
Meetings of Shareholders by easing the quorum for special resolutions by General Meetings of Shareholders.

－

79 －

VIII. Compensation to Executive Directors
1. Total amount of compensation, total by type, and number of eligible executives, by executive category

Executive category
Director(Excluding Outside
Directors)
Auditors(Excluding Outside
Auditors)

Total amount ofcompensation(Millions of yen)

Total compensation by type (Millions of yen)
Basiccompensation

Stock
options

Executive
bonuses

Retirement
benefits

Number of
eligible
executives

316

270

46

－

－

9

33

29

3.

－

－

2.

Outside Directors

28

28

－

－

－

2.

Outside Auditors

28

28

－

－

－

2.

2. Policy on determining the amount of executive remuneration or calculation method(Policy on determining remuneration)
The amount of remuneration for the executive officers of the Company was established by resolution of the 43rd
Ordinary General Meeting of Shareholders convened on December 22, 2009, at an annual amount of up to 480
million yen for Directors remuneration and up to 80 million yen for Auditors remuneration. It was further
established by resolution of the 52nd Ordinary General Meeting of Shareholders convened on December 21,
2018 that, separate from this maximum amount of remuneration, the Company will deliver and provide theCompany’s shares and cash equivalent to the amount to convert and dispose the Company’s share to its
Directors (excluding Outside Directors and expatriates), executive officers (excluding expatriates) and Auditors(excluding Outside Auditors and expatriates) pursuant to the stock-based remuneration plan as described in Part
4 [Information on the Company] 1 [Information on the Company’s Stock] (8) [Information on Employee Stock
Ownership Plan].
Under the remuneration system, compensation for Directors (excluding Outside Directors) and Auditors(excluding Outside Auditors) consists of fixed-amount compensation and stock-based remuneration using a trust
designed to motivate Directors to contribute to enhancing the medium- to long-term performance and corporate
value. Compensation for Outside Directors and Outside Auditors consists of fixed-amount compensation only.
(Procedure on determining remuneration)
Director compensation is determined by resolution of the Board of Directors within the maximum amountapproved at the General Meeting of Shareholders.
Compensation for Auditors is determined by consultation among Auditors within the maximum amountapproved at the General Meeting of Shareholders.

－

80 －

IX. Status of shareholdings
1. Equity securities held for purposes other than pure investment and the total amount recorded in thebalance sheet
14 stock names, 5,271 million yen
2. Stock name, number of shares, amount recorded in the balance sheet and purpose of holding of equity
securities held for purposes other than pure investments
Previous fiscal year
Specified investment securities

Stock name

Number of shares(shares)Amount recorded inbalance sheet(Millions of yen)

T&D Holdings, Inc.

1,780,000

2,907

Mitsubishi UFJ Financial Group, Inc.

2,322,180

1,696

Mebuki Financial Group, Inc.

275,325

119

Nippon Paper Industries Co., Ltd.

17,00035

Toyo Securities Co., Ltd.

51,00013

Mito Securities Co., Ltd.

31,46011

Fujitsu Limited

11,8809

Tokai Tokyo Financial Holdings, Inc.

9,187

6

Purpose of holding
To maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationship

Current fiscal year
Specified investment securities
Stock name

Number of shares(shares)Amount recorded inbalance sheet(Millions of yen)

T&D Holdings, Inc.

1,780,000

3,337

Mitsubishi UFJ Financial Group, Inc.

2,322,180

1,646

Mebuki Financial Group, Inc.

275,400

108

Nippon Paper Industries Co., Ltd.

17,00035

Toyo Securities Co., Ltd.

51,00013

Mito Securities Co., Ltd.

31,460

12

－

81 －

Purpose of holding
To maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthen
Tokai Tokyo Financial Holdings, Inc.
9,187
6
business relationship(Note) Fujitsu Limited performed consolidation of its common shares, consolidating ten shares into one share as of
October 1, 2018.
Fujitsu Limited (Note)

11,8809

3. Equity securities held for the pure investment
None to be disclosed.
(2) [Audit Fees]
1) [Compensation paid to Auditors and certified public accountants]
Previous consolidated fiscal year
Category

Compensation foraudit and attestation
services (Millions ofyen)

Current consolidated fiscal year
Compensation foraudit and attestation
services (Millions ofyen)Compensation for
non-audit services(Millions of yen)Compensation for
non-audit services(Millions of yen)

The Company

44

10

43

10

Consolidated
subsidiaries

－

－

－

－

Total

44

10

43

10

2) [Other important fees](For the previous consolidated fiscal year and the current consolidated fiscal year)
None to be disclosed.
3) [Descriptions on non-audit services performed for the Company by Auditors and certified public
accountants](For the previous consolidated fiscal year and the current consolidated fiscal year)
The Company pays its Auditors and certified public accountants compensation for assurance services forinternal controls pertaining to the Company’s ASP service based on the Auditing and Assurance PracticeCommittee Practical Guideline No. 86 "Assurance Reports on Controls at a Service Organization (JapaneseInstitute of Certified Public Accountants dated December 22, 2011)" covering services other than the services
prescribed in Article 2 Paragraph 1 of the Certified Public Accountants Act.
4) [Policy for determining Audit fees]
Auditor compensations paid to Auditors and certified public accountants are determined by discussion based on
the number days of auditing works performed.

－

82 －

Part 5 [Financial Information]
1. Method of Preparing Consolidated Financial Statements and Financial Statements(1) The consolidated financial statements of the Company have been prepared in accordance with the Ordinanceon Terminology, Forms, and Preparation Methods of Consolidated Financial Statements (Ordinance of the
Ministry of Finance No. 28 of 1976).
(2) The financial statements of the Company have been prepared in accordance with the Ordinance on the
Terminology, Forms, and Preparation Methods of Financial Statements (Ordinance of the Ministry of Finance
No. 59 of 1963; hereinafter, the "Ordinance on Financial Statements").
Further, as the Company is a Specified Company Submitting Financial Statements, we have prepared thefinancial statements in accordance with the provisions of Article 127 of the Ordinance on Financial
Statements.
2. Auditing and Attestation
The consolidated financial statements for the consolidated fiscal year (from October 1, 2017 to September 30,2018) and financial statements for the fiscal year (from October 1, 2017 to September 30, 2018) have been
audited by Ernst & Young ShinNihon LLC pursuant to the first paragraph of Article 193-2 of the Financial
Instruments and Exchange Act of Japan.
3. Special Efforts to Ensure the Appropriateness of its Consolidated Financial Statements
The Company makes exceptional efforts to ensure the appropriateness of our consolidated financial statements.
Specifically, in order to understand the contents of accounting standards correctly and to develop a system thatwould enable us to respond to changes in accounting standards, we maintain membership of the Financial
Accounting Standards Foundation and attend seminars held by the Accounting Standards Board of Japan.

－

83 －

1. [Consolidated Financial Statements](1) [Consolidated Financial Statements]
1) [Consolidated Balance Sheet](Unit: Millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(September 30, 2017)(September 30, 2018)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable
Lease investment assets
Finished good inventory
Work in progress
Raw materials and stored items
Deferred tax assets
Other Stipulations
Provisions for bad debts
Total current assets
Non-current assets
Property, Plants & Equipment
Buildings and structures (net amount)
Machinery, equipment and vehicles (netamount)Tools, furniture & fixtures (net amount)Land
Lease assets (net amount)
Construction in progress
Total property, plants and equipment
Intangible Assets
Software
Software in progress
Other Stipulations
Total intangible assets
Investments and other assets
Investments securities
Long-term loans
Deferred tax assets
Long-term deposits
Guarantee deposits
Long-term lease investment assets
Other Stipulations
Total investments and other assets
Total non-current assets
Total assets

－

84 －

20,039
6,555
269
325
289
140
2,046
913
(33)
30,54522,268
7,690
290
200
255
163
2,213
914
(35)
33,961

6,619

7,991

508

596

1,249
6,922
342
569
*1 16,212

1,418
6,922
275
259
*1 17,464

2,806
976
29
3,812

2,983
698
26
3,707

*2 23,659
82
2,953
6,000
1,310
459
392
34,85854,88385,428*2 24,026
87
2,998
6,000
1,318
350
286
35,06856,24090,202

(Unit: Millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(September 30, 2017)(September 30, 2018)
Liabilities
Current liabilities
Accounts payable – trade
Electronically recorded obligationsoperating
Current portion of long-term loans payable
Lease obligations
Accounts payable – other
Income taxes payable
Consumption taxes payable
Provisions for bonuses
Other Stipulations
Total current liabilities
Fixed liabilities
Long-term debts
Lease obligations
Retirement benefit liabilities
Other Stipulations
Total fixed liabilities
Total liabilities
Net assets
EquityCapitalCapital surplus
Retained earnings
Treasury stock
Total equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Total accumulated other comprehensive
incomeSubscription rights to shares
Non-controlling interests
Total equity
Total liabilities and net assets

－

85 －

2,392

2,824

897

1,080

71
353
2,918
1,445
543
3,028
1,694
13,345

142
363
2,805
1,689
492
3,169
1,387
13,955

223
746
1,668
552
3,191
16,536

580
576
2,036
501
3,696
17,651

5,700
5,409
56,549(968)
66,6905,700
5,409
59,806(971)
69,944

621

917

621

917

178
1,401
68,89285,428235
1,453
72,55090,202

2) [Consolidated Statements of Income and Comprehensive Income][Consolidated Statements of Income](Unit: Millions of yen)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Land & rent income
Subsidy income
Equity in earnings of affiliates
Other Stipulations
Total non-operating income
Non-operating expenses
Interest paid
Other Stipulations
Total non-operating expenses
Ordinary income
Extraordinary profit
Gains on sale of non-current assets
Asset retirement obligations
Total extraordinary profit
Extraordinary losses
Losses on sale of non-current assets
Loss on retirement of non-current assets
Loss on retirement of software
Valuation loss on investment securities
Impairment losses
Total extraordinary losses
Net income before taxes and adjustments
Income taxes – current
Income taxes – deferred
Total income taxes
Net income
Profit attributable to non-controlling interests
Profit attributable to owners of parent

Previous consolidated fiscal year
(Started October 1, 2016;
ended September 30, 2017)
59,705
20,41939,285*1, *2 30,718
8,567

Current consolidated fiscal year
(Started October 1, 2017;
ended September 30, 2018)
61,621
21,002
40,619*1, *2 31,939
8,679

31
110
42
－
11
33
229

31
122 rights
46
40
12
31
284

3
0
4.
8,792

2
0
3
8,961

*3 2
23
25

*3 3
－
3

－
*5 3
15
－
*6 0
19
8,798
2,828
(156)
2,671
6,126
55
6,071

*4 3
*5 9
－
53
*6 0
66
8,897
3,032
(347)
2,685
6,212
54
6,158

－

86 －

[Consolidated Statements of Comprehensive Income](Unit: Millions of yen)

Net income
Other comprehensive income
Valuation difference on available-for-salesecurities
Share of other comprehensive income ofassociates accounted for using the equity method
Total other comprehensive income
Comprehensive income(Comprehensive income attributable to)Comprehensive income attributable to owners of
the parent
Comprehensive income attributable to noncontrolling interests

Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2016;(Started October 1, 2017;
ended September 30, 2017)
ended September 30, 2018)
6,126
6,212

－

87 －

970

304

0

0

*1 9717,097*1 304
6,517

7,032

6,454

65

63

3) [Consolidated Statement of Changes in Equity]
Previous consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)(Unit: Millions of yen)
EquityCapitalBalance at beginning of
year

5,700

Capital surplus

Retained earnings

Treasury stock

Total equity

5,419

52,606(350)

63,374

Changes in equity
Dividends of surplus
Profit attributable toowners of parent
Acquisition oftreasury stock
Disposal of treasury
stock
Changes in items
other than equity (net)(2,122)(2,122)

6,071

6,071
(677)

(677)

(10)

(5)

59

44

Total changes in equity

－

(10)

3,943

(617)

3,316

Balance at end of year

5,700

5,409

56,549(968)

66,690

Accumulated other comprehensive
incomeTotal
Valuation
accumulateddifference on
otheravailable-forcomprehensive
sale securities
incomeSubscription
rights to shares

Balance at beginning of
year

(339)

(339)

176

Non-controllinginterests

1,345

Total equity

64,556

Changes in equity
Dividends of surplus
Profit attributable toowners of parent
Acquisition oftreasury stock
Disposal of treasury
stock
Changes in items
other than equity (net)(2,122)
6,071
(677)
44
961

961

2

56

1,019

Total changes in equity

961

961

2

56

4,335

Balance at end of year

621

621

178

1,401

68,892－88 －Current consolidated fiscal year (Started October 1, 2017; ended September 30, 2018)(Unit: Millions of yen)
EquityCapitalBalance at beginning of
year

5,700

Capital surplus

Retained earnings

Treasury stock

Total equity

5,409

56,549(968)

66,690Changes in equity
Dividends of surplus
Profit attributable toowners of parent
Acquisition oftreasury stock
Changes in items
other than equity (net)(2,901)(2,901)

6,158

6,158
(3)

(3)

Total changes in equity

－

－

3,256

(3)

3,253

Balance at end of year

5,700

5,409

59,806(971)

69,944

Accumulated other comprehensive
incomeTotal
Valuation
accumulateddifference on
otheravailable-forcomprehensive
sale securities
incomeSubscription
rights to shares

Non-controllinginterests

Total equity

178

1,401

68,892

Balance at beginning of
year

621

621

Changes in equity
Dividends of surplus
Profit attributable toowners of parent
Acquisition oftreasury stock
Changes in items
other than equity (net)(2,901)
6,158
(3)
295

295

57

52

405

Total changes in equity

295

295

57

52

3,658

Balance at end of year

917

917

235

1,453

72,550－89 －4) [Consolidated Statements of Cash Flows](Unit: Millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2016;(Started October 1, 2017;
ended September 30, 2017)
ended September 30, 2018)
Cash Flows from Operating Activities
Net income before taxes and adjustments
Depreciation
Increase (decrease) in provision for doubtfulreceivables
Increase (decrease) in provisions for bonuses
Increase (decrease) in retirement benefit
liabilities
Interest and dividends received
Interest paid
Equity in losses (earnings) of affiliates
Loss on retirement of non-current assets
Loss on retirement of software
Loss (gain) on sales of fixed assets
Impairment losses
Loss (gain) on valuation of investment securities
Asset retirement obligations
Share-based payment expenses
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease (increase) in other assets
Increase (decrease) in trade payables
Increase (decrease) in other liabilities
Increase (decrease) in accrued consumption taxes
Other Stipulations
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plants and equipment
Proceeds from sales of property, plants andequipment
Purchase of intangible assets
Proceeds from redemption of investments incapitalPurchase of investment securities
Proceeds from redemption of investment
securities
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Payments of loans receivables
Collection of loans receivables
Other payments
Other proceeds
Cash Flows from Investing Activities

－

90 －

8,798
2,716

8,897
2,646

(2)

2

174

140

85

368

(141)
3
(11)
3
15
(2)
0
－
(23)
46
(132)
(123)
14
634
(394)
13
(59)
11,614168(3)(3,655)
8,123

(154)
2
(12)
9
－
0
0
53
－
57
(1,422)
136
(74)
736
(89)
(50)
105
11,353192(2)(2,733)8,810(3,000)4,000(2,124)(3,000)3,000(2,552)2

5(1,602)(1,395)100－(2,561)

(1)

500

－

(15)
9
－
74
－
1
(4,617)

(31)
23
(150)
139
(49)
0
(4,013)

(Unit: Millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2016;(Started October 1, 2017;
ended September 30, 2017)
ended September 30, 2018)
Cash Flows from Financing Activities
Net increase (decrease) in short-term loans
payableProceeds from long-term loans payable
Repayment of long-term loans payable
Repayment of lease obligations
Purchase of treasury stock
Payment of dividends
Payment of dividends to non-controlling interests
Other Stipulations
Cash Flows from Financing Activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

－

91 －

(40)

－

－
(71)
(102)
(677)
(2,119)(9)0(3,019)486
16,552*1 17,039

500
(71)
(86)
(3)
(2,895)(10)－(2,567)2,229
17,039*1 19,268

[Notes to Financial Statements](Basis of Presenting the Consolidated Financial Statements)
1. Scope of Consolidation
Consolidated subsidiaries (4 companies):
Tokyo Line Printer Company
TKC Security Services Co., Ltd.
SKYCOM Corporation
TKC Customer Support Service Co., Ltd.
Of the above, TKC Customer Support Service Co., Ltd. Was newly established in the current consolidated fiscal
year and has been included in the consolidated group.
Non-consolidated subsidiaries (1 company):
TKC Financial Guarantee Co., Ltd.
(Reason for excluding the company from the consolidated group)
TKC Financial Guarantee Co., Ltd. Is excluded from the consolidated group because it does not have any
material impact on the consolidated financial statements of the Company in terms of total assets, net sales, net
income (amount in proportion to equity held) or retained earnings (amount in proportion to equity held), nordoes it have material importance as a whole.
2. Application of the Equity Method
Affiliated companies under the equity method: (2 companies)
TKC Shuppan Corporation
iMobile Inc.
Because the fiscal year-end of iMobile Inc. is March 31, a provisional settlement of accounts similar to a final
settlement has been performed as of the closing date of the consolidated financial statements.
Non-consolidated subsidiaries under the equity method: (1 company)
TKC Financial Guarantee Co., Ltd.
(Reason for excluding the company from the consolidated group)
TKC Financial Guarantee Co., Ltd. Is excluded from the consolidated group because it does not have any
material impact on the consolidated financial statements of the Company in terms of total assets, net sales, net
income (amount in proportion to equity held) or retained earnings (amount in proportion to equity held), nordoes it have material importance as a whole.
3. Fiscal Year-ends of Consolidated Subsidiaries
The closing dates of all consolidated subsidiaries are the same as the closing date of the consolidated financial
statements.
4. Accounting Policies(1) Valuation standards and methods for major assets
1) Marketable and investment securities
a. Available-for-sale securities－

92 －a) Available-for-sale securities with market value
Stated at fair market value based on the quoted market price as of the fiscal year-end (related valuationdifferences are directly charged or credited to the shareholders’ equity, and cost of securities sold is
calculated by the moving average method)b) Available-for-sale securities without market value
Stated at cost determined by the moving average method
2) Inventory assets
a. Merchandise, raw materials
Cost determined by first-in, first-out method (with balance sheet values reflecting write downs for
decreased profitability).
b. Finished goods
Cost determined by cost percentage method and adjusted based on percentage of completion (with balance
sheet values reflecting write downs for decreased profitability)c. Work in progress
Cost determined by cost percentage method or specific identification method and adjusted based on
percentage of completion (with balance sheet values reflecting write downs for decreased profitability).
d. Supplies
Last purchase price method (with balance sheet values reflecting write downs for decreased profitability).

(2) Depreciation of major depreciable assets
1) Property, plants and equipment (excluding lease assets)
Calculated based on declining balance method.
Provided, buildings acquired after April 1, 1998 (excluding accompanying facilities), and accompanying
facilities and structures acquired after April 1, 2016 are calculated based on straight-line method.
Primary useful lives are as follows:
Buildings and structures
Machinery, equipment & vehicles
Tools, furniture and fixtures

10 to 50 years
4 to 10 years
2 to 20 years

2) Intangible assets (excluding lease assets)
a. Softwarea) Software for sale
Software for sale are amortized and stated at the higher of amortization based on estimated sales volume
in the future, and amortization at a constant periodic rate based on remaining effective life (within 3
years).
－93 －b) Software for internal use
Amortized using straight-line method with an estimated in-house useful life of five years.
b. Other intangible assets
Amortized using the straight-line method.
3) Leased assets
Leased assets relating to finance lease transactions that do not involve transfer of ownership
Amortized using the straight-line method with useful lives equal to lease terms and residual values at zero.
(3) Standards for recognizing significant provisions
1) Provisions for bad debts
In setting aside provisions for possible losses due to uncollectible receivables, provisions are recognized at theamounts calculated based on the historical rate of credit loss with respect to normal receivables, and at theamounts determined in consideration of collectability of individual receivables with respect to doubtful
accounts and certain other receivables.
2) Provisions for bonuses
Provisions for bonuses are recognized based on the estimated amounts of payment.
(4) Accounting procedure for retirement benefits
1) Method of attributing expected benefits to dateIn calculating retirement benefit obligations, expected benefits are attributed to the period up until the end of
the consolidated fiscal year based on benefit formula standards.
2) Recognizing actuarial differences as expenses
Actuarial differences are recognized as expense for the consolidated fiscal year in which they occur.
(5) Standards for recognizing significant revenues and expenses
Accounting standards for recognizing revenues and cost of sales of made-to-order software (softwaredevelopment contracts)
1) Projects for which the progress up to the end of the current consolidated fiscal year can be measured reliably
Accounted for by percentage-of-completion method (whereas, the degree of completion is estimated based on
the construction cost percentage method)2) Other projects
Accounted for upon conclusion of contracts.
(6) Scope of funds covered by the consolidated statements of cash flows－

94 －The scope of funds (cash and cash equivalents) covered by the consolidated statements of cash flows includes:
1) Cash on hand2) Demand deposits3) Short-term investments that mature within three months and are easily convertible to cash and bear very little
value fluctuation risk.
(7) Other important matters regarding the preparation of consolidated financial statements
1) Accounting method for consumption taxes and local consumption taxes
Consumption taxes are accounted for using the tax-exclusion method.
2) Application of the consolidated taxation system

The consolidated taxation system is applied.

－

95 －

(Accounting Standards Not Yet Applied)(Implementation Guidance on Accounting Standard for Tax Effect Accounting, etc.)
Implementation Guidance on Accounting Standard for Tax Effect Accounting (ASBJ Guidance No. 28, amended
February 16, 2018, ASBJ)
Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No. 26, amended February
16, 2018, ASBJ)(1) Summary
The Implementation Guidance on Accounting Standard for Tax Effect Accounting, etc. has been partiallyamended as follows keeping in line with the basic content of the practical guideline on tax effect accounting
developed by the Japanese Institute of Certified Public Accountants which was handed over to ASBJ.
(Major treatments subject to changes in accounting method)・ Treatment of taxable temporary differences relating t shares, etc., of subsidiaries in non-consolidated
financial statements
・ Treatment in relation to the recoverability of deferred tax assets for companies in (Category 1)(2) Planned date of application
We plan to apply the standards as of the beginning of the fiscal year ending September 2019.
(3) Impact of application of said accounting standards
The impacts from the application of the Implementation Guidance on Accounting Standard for Tax EffectAccounting, etc., on the consolidated financial statements are currently under evaluation.
(Application of Accounting Standards for Revenue Recognition, etc.)
・ Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 30, 2018, ASBJ)・ Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March
30, 2018, ASBJ)(1) Summary
The International Accounting Standards Board (IASB) and the U.S, Financial Accounting Standards Board(FASB) jointly developed a comprehensive accounting standard on the recognition of revenue and issued the“Revenue From Contracts With Customers” (IASB’s IFRS 15 and FASB’s Topic 606) in May 2014. IFRS 15
has been adopted from the fiscal year beginning after January 1, 2018, and Topic 606 has been adopted fromthe fiscal year beginning after December 15, 2017. In line with this adoption, ASBJ developed acomprehensive accounting standard on the recognition of revenue and issued it together with theimplementation guidance.
The basic approach in developing the accounting standard on the recognition of revenue was to set forth theaccounting standards that incorporates the basic principles of IFRS 15 so as to allow comparability among
financial statements which is an advantage to ensure consistency with IFRS 15, and to add alternative
treatments to the extent not to compromise such comparability in case there are matters to be considered withrespect to practices that have been conducted in Japan up to date.
－96 －(2) Planned date of application
We plan to apply the standards as of the beginning of the fiscal year ending September 2022.
(3) Impact of application of said accounting standards
The impacts from the application of the Accounting Standard for Revenue Recognition, etc., on the
consolidated financial statements are currently under evaluation.

－

97 －

(Notes to Consolidated Balance Sheets)*1. Accumulated depreciation of property, plants and equipment
Previous consolidated fiscal year
(September 30, 2017)
21,859 million yen

Current consolidated fiscal year
(September 30, 2018)22,141 million yen*2. Items pertaining to affiliated companies are as follows:
Previous consolidated fiscal year
(September 30, 2017)
Investment securities (shares)

272 million yen

－

98 －

Current consolidated fiscal year
(September 30, 2018)
284 million yen

(Notes to Consolidated Statements of Income)*1. Major items included in selling, general and administrative expenses are as follows:
Previous consolidated fiscal year
(Started October 1, 2016;
ended September 30, 2017)

Current consolidated fiscal year
(Started October 1, 2017;
ended September 30, 2018)10,196 million yen
2,610
513
584
2,066
106

10,706 million yen
2,709
767
688
2,105
82

Salaries
Provision for bonuses
Retirement benefit expenses
Depreciation
Rent expenses
Research and development expenses*2. Total amount of research and development expenses included in general administrative expenses
Previous consolidated fiscal year
(Started October 1, 2016;
ended September 30, 2017)

Current consolidated fiscal year
(Started October 1, 2017;
ended September 30, 2018)

106 million yen

82 million yen*3. Breakdown of gains on sale of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2016;
ended September 30, 2017)

Current consolidated fiscal year
(Started October 1, 2017;
ended September 30, 2018)

0 million yen
22

1 million yen
13

Machinery, equipment & vehicles
Tools, furniture and fixtures
Total*4. Breakdown of losses on sale of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2016;
ended September 30, 2017)－

Machinery, equipment & vehicles

－

99 －

Current consolidated fiscal year
(Started October 1, 2017;
ended September 30, 2018)
3 million yen

*5. Breakdown of losses on retirement of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2016;
ended September 30, 2017)

Current consolidated fiscal year
(Started October 1, 2017;
ended September 30, 2018)

1 million yen
2－0
3

0 million yen
4.
4.
－

Buildings and structures
Tools, furniture and fixtures
Intangible Assets
Other (Investments and other assets)
Total

9

*6. Impairment losses
Previous consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)
The Group recorded an impairment loss for the following asset group for the current consolidated fiscal year:
Location
Shinjuku-ku, Tokyo, etc.

Usage

Class

Impairment losses(Millions of yen)

Telephonesubscription rights

Idle assets

0

The Group, in principle, groups its business assets based on management accounting units, and idle assets aregrouped by types of asset.
For the current consolidated fiscal year, the book values of idle assets not used for business purposes werereduced to recoverable amounts, and such reduced amounts were recorded as impairment losses (0 million
yen) under extraordinary losses.
Recoverable amounts were measured based on the net selling prices. Telephone subscription rights were
evaluated based on their expected disposal prices.
Current consolidated fiscal year (Started October 1, 2017; ended September 30, 2018)
The Group recorded an impairment loss for the following asset group for the current consolidated fiscal year:
Location
Shinjuku-ku, Tokyo, etc.

Usage

Class

Impairment losses(Millions of yen)

Telephonesubscription rights

Idle assets

0

The Group, in principle, groups its business assets based on management accounting units, and idle assets aregrouped by types of asset.
For the current consolidated fiscal year, the book values of idle assets not used for business purposes werereduced to recoverable amounts, and such reduced amounts were recorded as impairment losses (0 million
yen) under extraordinary losses.
Recoverable amounts were measured based on the net selling prices. Telephone subscription rights were
evaluated based on their expected disposal prices

－

100 －

(Notes to Consolidated Statements of Comprehensive Income)*1. Reclassification adjustments and tax expense or benefits on other comprehensive income
Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2016;(Started October 1, 2017;
ended September 30, 2017)
ended September 30, 2018)
Valuation difference on available-for-salesecurities:
Increase/decrease during the fiscal year
Reclassification adjustments
Amount before tax
Tax effect
Valuation difference on available-for-salesecurities
Share of other comprehensive income of associates
accounted for using the equity method:
Increase/decrease during the fiscal year
Share of other comprehensive income ofassociates accounted for using the equity
methodTotal other comprehensive income

1,396 million yen
(0)
1,396
(426)

－

101 －

439 million yen
－
439
(135)

970

304

0
0

0
0

971

304

(Notes to Consolidated Statements of Changes in Equity)
Previous consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)
1. Type and number of issued stocks and treasury stock
Number of shares at
beginning of current
consolidated FY(hundreds of shares)

Increase in numberof shares during
current consolidated
FY (hundreds ofshares)Decrease in numberof shares during
current consolidated
FY (hundreds ofshares)Number of shares at
end of current
consolidated FY(hundreds of shares)

267,310－－

267,310

267,310－－

267,310

1,797

2,024

305

3,517

1,797

2,024

305

3,517

Issued shares
Common stock
Total
Treasury stock
Common stock(Note)
Total(Note) The 2,024 hundreds of share increase in common treasury stock resulted from a 2,017 hundreds of share increaseof shares through acquisition of treasury stock based on resolution of the Board of Directors, and a 7 hundreds ofshare increase due to purchase of fractional unit shares.
The 305 hundreds of share decrease in common treasury stock resulted from decrease due to exercise of stock
options.

2. Subscription rights to shares and treasury subscription rights to shares

Description ofsubscription rights tosharesCategory

Number of shares to be issued upon exercise of Balance atrights (shares)
end of
Type ofcurrent
Increase
Decreaseshares to be Beginning
End ofconsolidate
duringduringissued upon of current
current
d fiscalcurrent
current
exercise of consolidate
consolidateyear
consolidate consolidate
rightsd fiscald fiscal(Millionsd fiscald fiscal
year
year
of yen)year
year

The Company
Subscription rights to(Parent company) shares as stock options

－

－

－

－

－

178

Total

－

－

－

－

－

178

3. Dividends(1) Dividend payments

Resolution
December 22, 2016
Ordinary General
Meeting of
Shareholders
May 10, 2017
Meeting of theBoard of Directors

Type ofsharesTotal amount ofcash dividends(Millions of yen)

Common
stock

1,062

40 September 30, 2016 December 26, 2016

Common
stock

1,060

40

－

Dividend per share
(Yen)

102 －

Record date

March 31, 2017

Effective dateJune 12, 2017

(2) Of the dividends with record dates during this consolidated fiscal year, those with effective dates in thefollowing consolidated fiscal year
Resolution

Type ofshares

December 22, 2017
Ordinary General
Meeting of
Shareholders

Commonstock

Total amount of
Source of Dividend per
cash dividends
dividends share (Yen)(Millions of yen)
1,582

Retainedearnings－

103 －Record date

Effective date

60 September 30, 2017 December 25, 2017

Current consolidated fiscal year (Started October 1, 2017; ended September 30, 2018)
1. Type and number of issued stocks and treasury stock
Number of shares at
beginning of current
consolidated FY(hundreds of shares)

Increase in number ofshares during current
consolidated FY(hundreds of shares)

Decrease in number ofshares during current
consolidated FY(hundreds of shares)

Number of shares at
end of current
consolidated FY(hundreds of shares)

Issued shares
Common stock

267,310－－

267,310

Total

267,310－－

267,310

Common stock(Note)

3,517

8

－

3,525

Total

3,517

8

－

3,525

Treasury stock(Note) The 8 hundreds of share increase in common treasury stock resulted from a 8 hundreds of share increase due topurchase of fractional unit shares.

2. Subscription rights to shares and treasury subscription rights to shares
Number of shares to be issued upon exercise of rights
Balance at(shares)
Type ofend of current
Description of shares to be
Increase
Decreaseconsolidated
Beginning ofEnd ofCategory
subscription issued upon
duringduringfiscal year
current
current
rights to shares exercise ofcurrent
current
consolidated
consolidated (Millions ofrightsconsolidated consolidatedyen)fiscal year
fiscal year
fiscal year
fiscal year
Subscription
The Company
rights to
－
－
－
－
－
235
(Parent company) shares asstock options
－
－
－
－
－
Total
235

3. Dividends(1) Dividend payments

Resolution
December 22, 2017
Ordinary General
Meeting of
Shareholders
May 2, 2018
Meeting of the Boardof Directors

Type ofsharesTotal amount of cash
Dividend per share
dividends(Yen)(Millions of yen)

Record date

Effective dateCommon
stock

1,582

60 September 30, 2017 December 25, 2017

Common
stock

1,319

50

March 31, 2018

June 11, 2018

(2) Of the dividends with record dates during this consolidated fiscal year, those with effective dates in thefollowing consolidated fiscal year

－

104 －

Resolution

Type ofsharesTotal amountof cashdividends(Millions ofyen)

December 21,
2018
Ordinary General
Meeting of
Shareholders

Common
stock

1,450

Source of Dividend per
dividends share (Yen)Record date

Effective date

Retainedearnings

September 30,
2018

December 25, 201855

(Notes to Consolidated Statements of Cash Flows)*1. Relationship between the ending balance of cash and cash equivalents and account items stated in the
consolidated balance sheets
Previous consolidated fiscal year
(Started October 1, 2016
Ended September 30, 2017)

Current consolidated fiscal year
(Started October 1, 2017
Ended September 30, 2018)

20,039 million yen

22,268 million yen(3,000)(3,000)17,03919,268Cash and deposits
Time deposits with deposit period greater than
three months
Cash and cash equivalents

－

105 －

(Lease Transactions)1. Finance lease transactions (Lessee)
Finance lease transactions that do not involve transfer of ownership
1) Description of lease assets
Property, Plants & Equipment
Mainly include machinery and equipment, tools, furniture and fixtures.
2) Depreciation of lease assets
Lease assets are amortized in accordance with the basis of presenting the consolidated financial statements as
described in 4. Accounting Policies, (2) Depreciation of major depreciable assets.
2. Operating lease transactions (Lessee)
Unexpired lease payments for non-cancellable operating lease transactions(Unit: Millions of yen)Previous consolidated fiscal year
(September 30, 2017)

Current consolidated fiscal year
(September 30, 2018)

Within one year

157

166

After one year

263

328

421

494

Total

3. Amounts of sublease transactions that are recorded in the consolidated balance sheets in amounts before
deduction of interests(1) Lease investment assets(Unit: Millions of yen)Previous consolidated fiscal year
(September 30, 2017)

Current consolidated fiscal year
(September 30, 2018)

Current assets

269

290

Investments and other assets

459

350

(2) Lease obligations(Unit: Millions of yen)Previous consolidated fiscal year
(September 30, 2017)

Current consolidated fiscal year
(September 30, 2018)

Current liabilities

269

290

Fixed liabilities

459

350

－

106 －

(Financial Instruments)
1. Status of financial instruments(1) Policy for the handling of financial instruments
The Group manages its funds in the form of low risk, highly safe financial assets such as bank deposits andbonds. It is the policy of the Group not to enter into derivative transactions for speculative trading purposes.
(2) Description of financial instruments, risks and risk management policies
Notes and accounts receivable resulting from operating activities of the Company are exposed to credit riskof the customers. To reduce credit risk, the Company manages such risk as appropriate based on payment
terms and credit ratings of customers in accordance with internal credit management regulations.
Investment securities are exposed to market fluctuation risk, and the Company periodically checks the fairvalues and financial conditions of issuing bodies and conducts reviews of its holdings on an ongoing basis.
Long-term deposits include deposits with special provisions concerning early termination (callable
certificates of deposit).
The majority of trade payables and accounts payable resulting from operating activities are due within threemonths.
(3) Supplementary information on fair value of financial instruments
The fair value of financial instruments is based on quoted market prices or on reasonable calculations in theabsence of market quotations. Since certain assumptions that contain fluctuation factors were used inestimating the fair value, results may fluctuate when a different set of assumptions is used.
2. Fair value of financial instruments
The book value in consolidated balance sheets, fair value and differences are as follows. Financial instruments
for which the fair value is extremely difficult to measure are not included. (See Note 2.)Previous consolidated fiscal year (September 30, 2017)
Book value in consolidatedbalance sheets(Millions of yen)

Fair value (Millions ofyen)

Differences (Millions ofyen)(1) Cash and deposits

20,03920,039－(2) Notes and accounts receivable

6,555

Provisions for bad debts

(33)
6,521

6,521

－

(3) Investments securities

23,23023,230－(4) Long-term deposits

6,000

5,999

(0)

55,79055,790(0)(1) Accounts payable- trade

2,392

2,392

－

(2) Accounts payable - other

2,918

2,918

－

5,311

5,311

－

Total assets

Total liabilities

－

107 －

Current consolidated fiscal year (September 30, 2018)
Book value in consolidatedbalance sheets(Millions of yen)

Fair value (Millions ofyen)

Differences (Millions ofyen)(1) Cash and deposits

22,26822,268－(2) Notes and accounts receivable

7,690

Provisions for bad debts

(35)
7,654

7,654

－

(3) Investments securities

23,63823,638－(4) Long-term deposits

6,000

5,999

(0)

59,56259,562(0)(1) Accounts payable- trade

2,824

2,824

－

(2) Accounts payable - other

2,805

2,805

－

5,629

5,629

－

Total assets

Total liabilities(Notes) 1. Methods of calculating the fair value of financial instruments and securities transactions
Assets(1) Cash and deposits, (2) Notes and accounts receivable
The book value approximates the fair value because of the short maturity of these instruments.
(3) Investments securities
The fair value of equity securities is based on quoted market prices on the stock exchange; and the fair valueof bonds is based on the market prices quoted on the stock exchange or provided by financial institutions.
These securities categorized by purpose of holding are described further in the Notes on Securities.
(4) Long-term deposits
The fair value of long-term deposits is estimated based on the present value discounted using the interest rateapplicable to new deposits in the total amount of principal and interest, and on the fair market value provided
by financial institutions for the derivative portions.
Liabilities(1) Accounts payable - trade, (2) Accounts payable - other
The book value approximates the fair value because of the short maturity of these instruments.
2. Financial instruments for which the fair value is extremely difficult to measure(Unit: Millions of yen)
Category

Previous consolidated fiscal year
(September 30, 2017)

Current consolidated fiscal year
(September 30, 2018)

Other securities (unlisted equity
securities)

156

102

Stocks of subsidiaries and affiliates

272

284

Total

429

387

The fair value of these financial instruments are deemed to be extremely difficult to measure since quoted
market value is not available and future cash flows cannot be reliably estimated, and thus the above are
not included in "(3) Investments in securities" for the previous consolidated fiscal year nor in "(3)Investments in securities" for the current consolidated fiscal year.

－

108 －

3. Redemption scheduled for monetary claims and securities with maturity dates subsequent to the consolidated
settlement datePrevious consolidated fiscal year (September 30, 2017)
Within 1 year
(millions of yen)Over 1 year and Over 5 years andOver 10 years
within 5 years
within 10 years(millions of yen)(millions of yen) (millions of yen)

Cash and deposits

20,034－－－

Notes and accounts receivable

6,555

－

－

－

Corporate bonds

－

2,000

2,500

14,000Long-term deposits

－

6,000

－

－

Total

26,590

8,000

2,500

14,000Investments securities

Current consolidated fiscal year (September 30, 2018)
Within 1 year
(millions of yen)Over 1 year and Over 5 years andOver 10 years
within 5 years
within 10 years(millions of yen)(millions of yen) (millions of yen)

Cash and deposits

22,263－－－

Notes and accounts receivable

7,690

－

－

－

Corporate bonds

－

2,000

2,500

14,000Long-term deposits

－

6,000

－

－

Total

29,953

8,000

2,500

14,000Investments securities

－

109 －

(Securities)
1. Other securities
Previous consolidated fiscal year (September 30, 2017)Class
Securities for which theamounts in the
consolidated balance
sheets exceeds theoriginal purchase value(1) Stocks

Securities for which theamounts in the
consolidated balance
sheets do not exceed theoriginal purchase value(1) Stocks

Book value inconsolidated balance
sheets (Millions ofyen)

Original purchasevalue (Millions ofyen)

Differences(Millions of yen)

4,936

3,646

1,289

－

－

－

4,936

3,646

1,289

－

－

－

18,293

18,679(385)

18,293

18,679(385)(2) Bonds
Corporate bonds
Subtotal(2) Bonds
Corporate bonds
Subtotal

Total
23,23022,326903(Note) Unlisted shares (156 million yen in the consolidated balance sheets) are not included under "Other securities" inthe table above since quoted market value is not available and is deemed to be extremely difficult to measure.

Current consolidated fiscal year (September 30, 2018)

Class
Securities for which theamounts in the
consolidated balance
sheets exceeds theoriginal purchase value(1) Stocks

Securities for which theamounts in the
consolidated balance
sheets do not exceed theoriginal purchase value(1) Stocks

Book value inconsolidated balance
sheets (Millions ofyen)

Original purchasevalue (Millions ofyen)

Differences(Millions of yen)

5,336

3,647

1,688

－

－

－

5,336

3,647

1,688

－

－

－

18,302

18,647(344)

18,302

18,647(344)(2) Bonds
Corporate bonds
Subtotal(2) Bonds
Corporate bonds
Subtotal

Total
23,63822,295
1,343(Note) Unlisted shares (102 million yen in the consolidated balance sheets) are not included under "Other securities" inthe table above since quoted market value is not available and is deemed to be extremely difficult to measure.

2. Other securities soldNone to be disclosed.
3. Securities for which impairment losses are recognized
For the current fiscal year, the Group recorded an impairment loss of 53 million yen on securities (53 million yen
on shares of other securities).
In recording the impairment loss, if the market value at year-end has dropped more than 50% compared to theoriginal purchase value, the entire amount has been recorded as impairment loss; if the market value has dropped
about 30-50%, the amount deemed necessary considering the recoverability has been recorded as impairment
－

110 －

loss.
(Derivatives)
1. Derivative transactions for which hedge accounting is not applied
None to be disclosed.
2. Derivative transactions for which hedge accounting is applied
None to be disclosed.

－

111 －

(Retirement Benefits)
1. Overview of the retirement benefit system in use
The Company and its two consolidated subsidiaries have contributory and non-contributory defined benefit
retirement plans (retirement lump-sum plan) and a defined contribution pension plan to cover retirement benefits
to employees.
In addition, one consolidated subsidiary plans to adopt the defined benefit retirement plans (retirement lumpsum plan) starting October 2018.
Under the retirement lump-sum plan, the Company pays a lump-sum retirement benefit based on employees’salary and period of service. The Company establishes a retirement benefit trust for the retirement lump-sum
plan.
Although the Company is a member of a multiemployer pension plan called the Japan Computer Information
Service Employees’ Pension Fund, the portion of pension assets that the Company contributes is recognizedsimilar to the defined benefit plan because the amount cannot be reasonably calculated.
Because the Japan Computer Information Service Employees’ Pension Fund, of which the Company was amember, dissolved as of July 1, 2017 by approval of the Minister of Health, Labour and Welfare, the Company
transferred its membership to a corporate pension plan which was newly established as a succeeding plan (under
the new Japan Computer Information Service Employees’ Pension Fund) as of the same date.
2. Defined benefit retirement plan
(1) Adjustment of balance of retirement benefit obligations at the beginning and end of fiscal years

Retirement benefit obligations at beginning of year
Service costs
Interest costs
Actuarial differences
Retirement benefits paid
Amount of past service costs accrued
Balance of retirement benefit obligations at end of year

Previous consolidated fiscal
year(Started October 1, 2016;
ended September 30, 2017)
5,512 million yen
321
－
(106)
(131)
－
5,595

Current consolidated fiscal
year(Started October 1, 2017;
ended September 30, 2018)
5,595 million yen
389
－
15
(114)
71
5,957

(2) Adjustment of balance of pension assets at the beginning and end of fiscal years
Previous consolidated fiscal
year(Started October 1, 2016;
ended September 30, 2017)
3,929 million yen
－
(2)
－
－
3,927

Balance of pension assets at beginning of year
Expected returns
Actuarial differences
Contributions by employer
Retirement benefits paid
Balance of pension assets at end of year

Current consolidated fiscal
year(Started October 1, 2017;
ended September 30, 2018)
3,927 million yen
－
(6)
－
－
3,921

(3) Adjustment of balance of retirement benefit obligations and pension assets at the end of the fiscal years, and net
－

112 －

retirement benefit obligations and assets recognized in the consolidated balance sheets
Previous consolidated fiscal Current consolidated fiscal
year
year
(September 30, 2017)(September 30, 2018)
5,113 million yen
5,390 million yen(3,927)(3,921)
1,186
1,469
482
567

Contributory retirement benefit obligations
Pension assets
Non-contributory retirement benefit liabilities
Net obligations and assets in the consolidatedbalance sheets
Retirement benefit liabilities
Net obligations and assets in the consolidatedbalance sheets

1,668

2,036

1,668

2,036

1,668

2,036

(4) Retirement benefit expenses and breakdown

Service costs
Interest costs
Expected returns
Amount of actuarial differences treated as expenses
Amount of past service costs treated as expenses
Retirement benefit expenses under the defined
retirement benefit planPrevious consolidated
Current consolidated fiscal
fiscal year
year
(Started October 1, 2016;(Started October 1, 2017;
ended September 30, 2017) ended September 30, 2018)
321 million yen
389 million yen
－
－
－
－
(106)
15
－
71
215

476

(5) Pension assets
1) Major pension assets
Previous consolidated fiscal year Current consolidated fiscal year
(September 30, 2017)(September 30, 2018)
Bonds
13%
26%
Cash and deposits
87
51
Other Stipulations
－
24
Total
100
100
(Note) All pension assets are the retirement benefit trust established for the Company’s defined retirement benefit
plan.

2) Basis for expected long-term rate of return on pension assets
The Company has a basic policy to cover the trust expenses with operation profit and does not have an
expected long-term rate of return on pension assets.
(6) Basis for actuarial calculations
Basis for major actuarial calculations

Discount rate

Previous consolidated fiscal year
(September 30, 2017)
0.00%
－

113 －

Current consolidated fiscal year
(September 30, 2018)
0.00%

Expected long-term rate of return
Expected increase in salary－%
1.00 - 1.85%－%
1.00 - 1.85%

3. Defined contribution plan
The amount of necessary contributions to the defined contribution plan of the Company and its consolidated
subsidiaries was 248 million yen for the previous consolidated fiscal year, and 262 million yen for the current
consolidated fiscal year.
4. Multiemployer pension plan
The amounts of necessary contributions to the employees pension fund plan and the corporate pension fund planunder the multiemployer pension plan, which are recognized in the same manner as the defined contribution
plan, were 115 million yen in the previous consolidated fiscal year and 117 million yen in the current
consolidated fiscal year.
(1) Reserve fund for multiemployer pension plan
1) (Former) Japan Computer Information Service Employees’ Pension FundPrevious consolidated fiscal year Current consolidated fiscal year
(March 31, 2017)(March 31, 2018)
Pension assets
Total of actuarial liabilities based on pension
plan finance calculation and minimum policy
reserves (Note)
Differences

738,049 million yen－ million yen

722,844－

15,205－2) (New) Japan Computer Information Service Employees’ Pension FundPrevious consolidated fiscal year Current consolidated fiscal year
(March 31, 2017)(March 31, 2018)
Pension assets
Actuarial liabilities based on pension plan
finance calculation
Differences－ million yen

238,026 million yen－

195,467－

42,558(2) Coverage ratio of the Group in the multiemployer pension plan
1) (Former) Japan Computer Information Service Employees’ Pension FundPrevious consolidated fiscal year: 1.63% (Started April 1, 2016; ended March 31, 2017)2) (New) Japan Computer Information Service Employees’ Pension Fund
Current consolidated fiscal year: 1.97% (Started April 1, 2017; ended March 31, 2018)(3) Supplementary information
The ratio in (2) above does not match the actual self-pay ratio of the Company.

－

114 －

(Stock Option Plans)
1. Expenses related to stock options(Unit: Millions of yen)
Current consolidated fiscal year
(Started October 1, 2017; ended
September 30, 2018)

Previous consolidated fiscal year
(Started October 1, 2016; ended
September 30, 2017)
Selling, general andadministrative expenses

46

57

2. Description, scale and fluctuation of stock option plans(1) Details of stock options
2nd subscription
rights to shares
10 Directors of theCompany (excluding
Outside Directors)
2 Auditors of theCompany (excluding
Outside Auditors)
13 Executive Officers

3rd subscription
rights to shares
10 Directors of theCompany (excluding
Outside Directors)
2 Auditors of theCompany (excluding
Outside Auditors)
13 Executive Officers

4th subscription
rights to shares
11 Directors of theCompany (excluding
Outside Directors)
2 Auditors of theCompany (excluding
Outside Auditors)
Executive Officers

Number of stock options
Common stock:by class
27,000 shares(Note)

Common stock:37,600 shares

Common stock:
34,400 shares

Common stock:
28,100 shares

Date of grant

March 12, 2012

December 7, 2012

December 9, 2013

December 12, 2014

Conditions for vesting

n/a

n/a

n/a

n/a

Required period ofserviceNot provided

Not provided

Not provided

Not provided

Period stock options can From March 13, 2012
be exercised
to March 12, 2047

From December 8,
2012
to December 7, 2047

From December 10,
2013
to December 9, 2048

From December 12,
2015
to December 11, 2050

5th subscription
rights to shares
9 Directors of theCompany (excluding
Outside Directors)
2 Auditors of theCompany (excluding
Outside Auditors)
21 Executive Officers

6th subscription
rights to shares
9 Directors of theCompany (excluding
Outside Directors)
2 Auditors of theCompany (excluding
Outside Auditors)
22 Executive Officers

7th subscription
rights to shares
9 Directors of theCompany (excluding
Outside Directors)
2 Auditors of theCompany (excluding
Outside Auditors)
21 Executive Officers

Number of stock options
Common stock:by class
18,200 shares(Note)

Common stock:
18,100 shares

Common stock:
16,500 shares

Date of grant

December 11, 2015

December 12, 2016

December 10, 2017

Conditions for vesting

n/a

n/a

n/a

Position and number ofgrantees

Position and number ofgrantees

1st subscription
rights to shares
9 Directors of theCompany (excluding
Outside Directors)
2 Auditors of theCompany (excluding
Outside Auditors)

－

115 －

Required period ofserviceNot provided

Not provided

Not provided

From December 12, From December 13, From December 11,
2015
2016
2017
to December 11, 2050 to December 12, 2051 to December 10, 2052
(Note) Number of stock options is converted to the number of common stock.
Period stock options canbe exercised

－

116 －

(2) Scale and fluctuation of stock options
The following summarizes the stock options that existed during the current consolidated fiscal year (year ended
September 2018). Number of stock options is converted to the number of common stock.
1) Number of stock options
1st subscription rights 2nd subscription rights 3rd subscription rights 4th subscription rights
to shares
to shares
to shares
to shares
Before vesting (shares)
At end of previous
consolidated fiscal
year
Granted

－

－

－

－

－

－

－

－

Forfeited

－

－

－

－

Vested－－－－Balance not vested

－

－

－

－

After vesting (shares)
At end of previous
consolidated fiscal
year
Vested12,20020,00022,40019,100－－－－Exercised

－

－

－

－

Forfeited

－

－

－

－

12,20020,00022,40019,100

Balance not vested

5th subscription rights 6th subscription rights 7th subscription rights
to shares
to shares
to shares
Before vesting (shares)
At end of previous
consolidated fiscal
year
Granted

－

－

－

－

－

Forfeited－－

16,500－

Vested－－Balance not vested－－

16,500－After vesting (shares)
At end of previous
consolidated fiscal
year
Vested

16,20016,000－－－Exercised－－

16,500－Forfeited－－－

16,20016,00016,500

Balance not vested

2) Per unit information

Exercise price (Yen)
Average market price ofstock at time of exercise(Yen)

1st subscription rights 2nd subscription rights 3rd subscription rights 4th subscription rights
to shares
to shares
to shares
to shares
1
1
1
1
－

－
－

117 －

－

－

Fair value per unit as ofgrant date (Yen)

Exercise price (Yen)
Average market price ofstock at time of exercise(Yen)
Fair value per unit as ofgrant date (Yen)

1,145

1,032

1,323

5th subscription rights 6th subscription rights 7th subscription rights
to shares
to shares
to shares
1
1
1
－

－

－

2,670

2,557

3,477

－

118 －

1,569

3. Method used to estimate the fair value of stock options
The fair value of the 7th issue of subscription rights to shares (stock options) granted in the current consolidated
fiscal year was measured as follows.
1) Valuation method used The Black-Scholes model2) Major base figures and estimations

Expected volatility of stock (Note 1)

7th subscription rights to shares (stock options)23.624%

Expected option life (Note 2)

7.3 years

Expected dividends (Note 3)

75 yen/share

Risk-free interest rate (Note 4)(0.054%)(Notes) 1. Expected volatility of stock is calculated based on the actual stock price data over the 7.3-year period (fromAugust 2010 to December 2017).
2. Expected option life is calculated based on the period of time from the allotment date to the date on which the
Directors, Auditors and Executive Officers are expected to lose their status.
3. Expected dividends are based on a total of 75 yen of actual dividends made, consisting of the year-end
dividend of 35 yen (after deducting the special dividend of 5 yen in commemoration of the Company’s 50th
anniversary) for the fiscal year ended September 2016 and the interim dividend of 40 yen for the period ended
September 2017.
4. Risk-free interest rate is calculated based on the yield of government bonds having a remaining life equal tothe expected option life.

4. Method used to estimate the number of stock options to be vested
Because it is difficult to rationally estimate the number of stock options that will be forfeited in the future, only
the actual number of forfeited stock options is used in the estimation.

－

119 －

(Tax Effect Accounting)
1. Major factors of deferred tax assets and deferred tax liabilities
Previous consolidated fiscal year
(September 30, 2017)

Current consolidated fiscal year
(September 30, 2018)

2,139 million yen
938
528
1,197
18
108
136

2,268 million yen
978
643
1,195
18
112
154

Deferred tax assets
Software development costs
Provisions for bonuses
Retirement benefit liabilities
Retirement benefit trust
Retirement bonuses for directors payable
Accrued business tax
Valuation loss on investment securities
Legal welfare expenses corresponding toprovisions for bonuses
Asset retirement obligations
Impairment losses
Other Stipulations
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Business tax refund
Retirement expenses corresponding to asset
retirement costs
Valuation difference on available-for-salesecurities
Other Stipulations
Total deferred tax liabilities
Net deferred tax assets

138

145

107
116
205
5,636
(319)
5,317

110
116
243
5,988
(349)
5,638

26

－

26

26

264

399

0
317
5,000

0
426
5,211

(Note) Net deferred tax assets for the previous and current consolidated fiscal years are included in the following
items in the consolidated balance sheets.
Previous consolidated fiscal year
(September 30, 2017)

Current consolidated fiscal year
(September 30, 2018)

2,046 million yen
2,953

2,213 million yen
2,998

Current assets - Deferred tax assets
Non-current assets - Deferred tax assets

2. Major items causing significant difference between statutory income tax rate and effective income tax rate after
applying tax effect accounting

Statutory income tax rate
(Adjusted)
Inhabitant tax on per capita basis
Entertainment expenses, etc. notdeductible for tax purposesTax credits for salary growth
Other Stipulations
Income tax rate after applying tax effectaccounting

Previous consolidated fiscal year Current consolidated fiscal year
(September 30, 2017)(September 30, 2018)
30.7%
30.7%

－

120 －

0.8

0.8

1.3

0.7

(2.5)
0.0

(2.6)
0.6

30.4

30.2

(Asset Retirement Obligations)
Previous consolidated fiscal year (ended September 30, 2017) and current consolidated fiscal year (ended
September 30, 2018)
Information has been omitted as it was immaterial.
(Segment information, etc.)[Segment information]
1. Overview of reportable segments
The Group’s reportable segments are components of the Group for which separate financial information isavailable and which are subject to regular review by management for the purpose of determining the allocationof managerial resources and evaluating business performance.
The Group has three reportable segments for each of its business divisions: the Accounting Firm Business
Division, the Local Governments Business Division, and Printing Business Division.
Major services and products of each reportable segment are as follows:[Accounting Firm BD] (Providing services & products to accounting firms and their clients)
Information processing service, software and consulting service, sales of office equipment and supplies.
[Local Governments BD] (Providing services & products to local governments (municipalities, etc.))
Information processing service, software and consulting service, sales of office equipment.
[Printing BD]
Computer-generated business forms, general office forms, data printing services, etc.
2. Methods of calculating net sales, profit or loss, assets and other items by reportable segments
Accounting methods for reported business segments are largely consistent with that methods described in the"Basis of Presenting the Consolidated Financial Statements" section.
Profits by reportable segments are figures of operating income of the segments.
Inter-segment sales and transfers are based on prevailing market values.

－

121 －

3. Information on net sales, profit or loss, assets, and other items by reportable segments
Previous consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)

Reportable segment
Local
Governments Printing BD
BD

Accounting
Firm BD

Total(Unit: Millions of yen)Amounts inconsolidated
Adjustments
financial(Note 1)statements(Note 2)

Net sales
42,325

13,717

3,662

59,705－59,705

7

0

1,867

1,875

(1,875)－42,332

13,7185,530

61,581(1,875)59,705

Segment profit

7,818

576

166

8,561

5

8,567

Segment assets

22,918

9,143

5,813

37,87547,55285,428

1,068

1,354

294

2,717

(0)

2,716

272

－

－

272

－

272

1,855

1,753

553

4,163

(0)

4,162

Sales to outside customers
Inter-segment sales ortransfers
Total

Other items
Depreciation (Note 3)
Investments in affiliatedcompany under the equity
methodIncrease in property, plants
and equipment andintangible assets (Note 3)(Notes) 1. Adjustments are as follows:(1) Adjustments of segment profit of 5 million yen include 5 million yen for elimination of inter-segment
transactions, -2 million yen for adjustments of non-current assets, and 2 million yen for adjustments
of inventory assets.
(2) Adjustments of segment assets of 47,552 million yen include 47,896 million yen of corporate assetsthat are not allocated to specific reportable segments, and -343 million yen for elimination of intersegment transactions. Corporate assets are primarily surplus funds of the parent company (cash andcash equivalents), and long-term investment funds (investments securities).
(3) Adjustments of depreciation of -0 million yen represent to unrealized profits.
(4) Adjustments of increases in tangible fixed assets and intangible fixed assets of -0 million yen
represent to unrealized profits.
2. Segment profit is adjusted with the operating profit presented in the Consolidated Statements of Income.
3. Increases in depreciation, tangible fixed assets and intangible fixed assets include depreciation long-term
prepaid expenses and depreciation of such expenses.

－

122 －

Current consolidated fiscal year (Started October 1, 2017; ended September 30, 2018)

Reportable segment
Local
Accounting
Printing
Governments
Firm BD
BD
BD

Total

(Unit: Millions of yen)Amounts inconsolidated
Adjustments
financial(Note 1)statements(Note 2)

Net sales
43,781

14,113

3,726

61,621－

61,621

35

－

1,871

1,906

(1,906)－43,816

14,113

5,597

63,528(1,906)

61,621

Segment profit

8,501

3

168

8,673

6

8,679

Segment assets

25,801

9,638

6,474

41,91348,28890,202

1,221

1,172

294

2,688

(1)

2,686

284

－

－

284

－

284

2,985

1,818

556

5,359

－

5,359

Sales to outside customers
Inter-segment sales or transfers
Total

Other items
Depreciation (Note 3)
Investments in affiliatedcompany under the equity
methodIncrease in property, plants andequipment and intangible assets(Note 3)(Notes) 1. Adjustments are as follows:(1) Adjustments of segment profit of 6 million yen include 5 million yen for elimination of intersegment transactions and 1 million yen for adjustments of non-current assets.
(2) Adjustments of segment assets of 48,288 million yen include 48,706 million yen of corporate assetsthat are not allocated to specific reportable segments, and -417 million yen for elimination of intersegment transactions. Corporate assets are primarily surplus funds of the parent company (cash andcash equivalents), and long-term investment funds (investments securities).
(3) Adjustments of depreciation of -1 million yen represent to unrealized profits.
2. Segment profit is adjusted with the operating profit presented in the Consolidated Statements of Income.
3. Increases in depreciation, tangible fixed assets and intangible fixed assets include depreciation long-term
prepaid expenses and depreciation of such expenses.

－

123 －

[Related information]
Previous consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)
1. Information by product and service
Information is omitted since the same information is disclosed under the segment information.
2. Information by geographic area
(1) Net sales
Information is omitted since more than 90% of sales in the Consolidated Statements of Income are sales tooutside customers in Japan.
(2) Property, Plants & Equipment
Information is omitted since the Company has no property, plants and equipment in regions outside Japan.
3. Information by major customer
Information is omitted since there are no sales to external customers that account for 10% or more of the sales
in the Consolidated Statements of Income.
Current consolidated fiscal year (Started October 1, 2017; ended September 30, 2018)
1. Information by product and service
Information is omitted since the same information is disclosed under the segment information.
2. Information by geographic area
(1) Net sales
Information is omitted since more than 90% of sales in the Consolidated Statements of Income
are sales to outside customers in Japan.
(2) Property, Plants & Equipment
Information is omitted since the Company has no property, plants and equipment in regions
outside Japan.
3. Information by major customer
Information is omitted since there are no sales to external customers that account for 10% ormore of the sales in the Consolidated Statements of Income.
[Information on impairment losses of fixed assets by reportable segments]
Previous consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)(Unit: Millions of yen)
Reportable segment
Accounting
Firm BD
Impairment losses

0

Local
Governments
BD

Printing BD

－

－

Total

Adjustments

Amounts inconsolidated
financialstatements

－

0

0

Current consolidated fiscal year (Started October 1, 2017; ended September 30, 2018)(Unit: Millions of yen)
Reportable segment
－

124 －

Total

Adjustments

Amounts inAccounting
Firm BD
Impairment losses

0

Local
Governments
BD

Printing BD－－

consolidated
financialstatements
0[Information on amortization of goodwill and balance of goodwill by reportable segments]
Previous consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)
None to be disclosed.
Current consolidated fiscal year (Started October 1, 2017; ended September 30, 2018)
None to be disclosed.

－

125 －

－

0

[Information on gain on negative goodwill by reportable segments]
Previous consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)
None to be disclosed.
Current consolidated fiscal year (Started October 1, 2017; ended September 30, 2018)
None to be disclosed.

－

126 －

[Related Parties Information]
1. Related Parties Transactions(1) Transactions between the Company and related parties

Previous consolidated fiscal year (Started October 1, 2016; ended September 30, 2017)
1) Non-consolidated subsidiaries and affiliated companies of the Company

Type

Company
Capital or
Holding
Businessname orinvestments(held) voting
Addressorname of(Millions ofrights ratio
occupationindividual
yen)
(%)

ChiyodAffiliatediMobile Inc. a-ku,
companies
Tokyo

Relationship withrelated party

Details oftransaction

Transaction
amount(millions of

Item

Year-endbalance(millions of
yen)

Loans

122 rights

yen)

Informatio(Holding)
100 n provision
Direct (30.0)
services

Loan of funds
Outsourcing of (Note 1)
development andReceiving ofmaintenance ofwebsite services. interests

24

receivables
1(Note 1)

(Note) 1. Terms of transaction or policies on determining the terms of transaction
The interest rates for the loans are determined in a reasonable manner based on the market interest rates.

2) Directors and major shareholders (individuals only) of the Company
Type

Director

Holding
Capital orCompany nameBusiness (held)
investments
or name of Addressorvoting(Millions ofindividual
occupation rights ratio
yen)(%)
HiroshiAshikawa

Masaharu
Iizuka(Near relativeofRepresentative
Near
Director andrelative ofSeniordirector
Managing
Executive
Officer,
Masanori
Iizuka)Runako Iizuka(Near relativeofRepresentative
Near
Director andrelative of Seniordirector Managing
Executive
Officer,
Masanori
Iizuka)Companie Certified
s in which public tax－－

Relationship withrelated party

Details oftransaction

Transaction
amount(millions of

Item

yen)

Rendering ofRendering of
information
Tax(Held)
information
processing
accountant Direct (0.0)
processing services services(Note 1-1))

Year-endbalance(millions of
yen)

11

Accounts
receivable

0

52

－

－

92

－

－

49

－

－

620

－

－

10

Accounts
receivable

1

Exercise ofsubscription
Exercise ofsubscription rights rights toto shares
shares－－－(Held)
Direct (3.4)(Note 1-2))

Acquisition oftreasury stock

Acquisition oftreasury stock(Note 1-3))

Leasing ofbuildings

Leasing ofbuildings(Note 1-4))

－

－

－

－
Purchase of
Purchase ofbuildings andbuildings and land land
(Note 1-5))

Edoga
wa-ku,

5

Certifiedpublic tax－－

Rendering of
information

127 －Rendering of
information

directors
and nearrelatives
holdmajority
votingrightsaccounting
firm Taguchi
Partners
Kaikei(Note 2)
Certifiedpublic tax
accounting
firm , Aoyama
Accounting
Firm(Note 3)
Certifiedpublic tax
accounting
firm Ofuji
Accounting
Office(Note 4)

Tokyo

Minato-ku,
Tokyo

Miyagino-ku,
Sendaishi,
Miyagiaccounting
firm

8

Certifiedpublic tax
accounting
firm

9

Certifiedpublic tax
accounting
firm

processing services processing
services(Note 1-1))－

Rendering ofRendering of
information
information
processing
processing services services(Note 1-1))

23

Accounts
receivable

1－

Rendering ofRendering of
information
information
processing
processing services services(Note 1-1))

15

Accounts
receivable1(Notes) 1. Terms of transaction or policies on determining the terms of transaction
1) Terms of transaction for the rendering of information processing services are similar to the terms between
other counterparts.
2) Exercise of subscription rights to shares shows the stock options granted pursuant to the resolution at theBoard of Directors meetings held on February 10, 2012, November 5, 2012, November 12, 2013,
November 11, 2014, November 10, 2015, and November 8, 2016, and exercised during the current
consolidated fiscal year. The transaction amounts shown are amounts paid-in at the time of exercising therights multiplied by the number of shares granted under the stock options that were exercised during thecurrent consolidated fiscal year.
3) The prices of shares for the acquisition of treasury stocks were determined based on TSE’s off-auction own
share repurchase transaction (ToSTNeT-3).
4) Rent expenses were determined based on the result of surveys by real estate agencies on rent expenses ofother nearby buildings.
5) The purchase prices of buildings and land were determined by referring to the appraisal values assessed bya real estate appraiser.
2. The company was co-founded by Mr. Misao Taguchi, Director of the Company.
3. The company was co-founded by Mr. Kenji Matsumoto, Auditor of the Company.
4. The company was co-founded by a near relative of Mr. Kazuyuki Sumi, Representative Director, President andExecutive Officer of the Company.
5. Consumption taxes are not included in the transaction amounts. Consumption taxes are included in the yearend balance.

－

128 －

Current consolidated fiscal year (Started October 1, 2017; ended September 30, 2018)
1) Non-consolidated subsidiaries and affiliated companies of the Company

Type

Company nameor name of
Address
individual

AffiliatediMobile Inc.
companies

Chiyodaku, Tokyo

Holding
Capital orBusiness (held)
investmentsorvoting(Millions ofoccupation rightsyen)ratio (%)

Relationshipwith related
party

Details oftransaction

Transaction
amount(millions of

Item

Year-endbalance(millions of
yen)

Loans

134

yen)

Loan of funds
Outsourcing of(Note 1)
Information (Holding)development and100 provision
Directmaintenance of Receiving ofservices(30.0)
website services. interests

150

receivables
2(Note 1)

(Note) 1. Terms of transaction or policies on determining the terms of transaction
The interest rates for the loans are determined in a reasonable manner based on the market interest rates.

2) Directors and major shareholders (individuals only) of the Company

Type

Director

Companiesin whichdirectors
and nearrelatives
holdmajority
votingrightsHolding
Capital orCompany name(held)
Relationshipinvestments Business oror name of
Address
votingwith related(Millions of occupationindividual
rightspartyyen)ratio (%)
HiroshiAshikawa
Certifiedpublic tax
accounting
firm Taguchi
Partners
Kaikei(Note 2)
Certifiedpublic tax
accounting
firm Aoyama
Accounting
Firm(Note 3)
Certifiedpublic tax
accounting
firm Ofuji
Accounting
Office(Note 4)－

Edogawaku, Tokyo

Minatoku, Tokyo

Miyagino-ku,
Sendaishi,
Miyagi－

Certifiedpublic tax
accounting
firm

5

Certifiedpublic tax
accounting
firm

8

Certifiedpublic tax
accounting
firm

9

Certifiedpublic tax
accounting
firm

Details oftransaction

Transaction
amount(millions of

Item

yen)

Year-endbalance(millions ofyen)(Held)
Direct(0.0)

Rendering of
information
processing
services

Rendering of
information
processing
services(Note 1)－

Rendering of
information
processing
services

Rendering of
information
processing
services(Note 1)

12

Accounts
receivable

2－

Rendering of
information
processing
services

Rendering of
information
processing
services(Note 1)21

Accounts
receivable

4.

－

Rendering of
information
processing
services

Rendering of
information
processing
services(Note 1)

15

Accounts
receivable1

10

Accounts
receivable0(Notes) 1. Terms of transaction or policies on determining the terms of transaction
Terms of transaction for the outsourcing of information processing are similar to the terms between othercounterparts.
2. The company was co-founded by Mr. Misao Taguchi, Director of the Company.
3. The company was co-founded by Mr. Kenji Matsumoto, Auditor of the Company.
4. The company was co-founded by a near relative of Mr. Kazuyuki Sumi, Representative Director, President andExecutive Officer of the Company.
5. Consumption taxes are not included in the transaction amounts. Consumption taxes are included in the year-end
balance.

(2) Transactions with consolidated subsidiaries and related parties to the Company submitting the consolidated
financial statements
－

129 －

None to be disclosed.
2. Notes on the parent company and important affiliated companies(1) Information on the parent company
None to be disclosed.
(2) Summary of financial information of important affiliated companies
None to be disclosed.

－

130 －

(Earnings Per Share Information)
Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2016; ended (Started October 1, 2017; ended
September 30, 2017)
September 30, 2018)
Net assets per share
2,551.70 yen
Net income per share229.13 yen
Diluted net income per share
228.16 yen(Note) The basis for calculating net income per share and diluted net income per share is as follows.

2,686.32 yen
233.46 yen
232.41 yen

Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2016; ended (Started October 1, 2017; ended
September 30, 2017)
September 30, 2018)
Net income per share
Net income attributable to owners of parent(millions of yen)Amount not attributable to commonshareholders (millions of yen)
Net income from common shares attributableto owners of parent (millions of yen)
Average number of common shares
outstanding (hundreds of shares)
Diluted net income per share
Adjustments to net income attributable toowners of the parent(millions of yen)
Number of common shares increased(hundreds of shares)(Subscription rights to shares (hundreds ofshares))Outline of diluted shares not included in thecalculation of diluted net income per share for
not having dilutive effect

6,071

6,158

－

－

6,071

6,158

264,962

263,789

－

－

1,126

1,191

(1,126)(1,191)――――――――――(Material Subsequent Events)(Introduction of stock-based remuneration plan, etc.)
At the Meeting of the Board of Directors held on October 31, 2018, the Company resolved to abolish the stockbased compensation stock option scheme and to introduce a new stock-based remuneration plan using a trust(hereinafter the “Plan”). The introduction of the Plan was approved by resolution at the 52nd Ordinary General
Meeting of Shareholders held on December 21, 2018.
Details are described in Part 4 [Information on the Company] 1 [Information on the Company’s Stock] (8)[Information on Employee Stock Ownership Plan].

－

131 －

5) [Supplementary Schedules][Schedule – Corporate Bonds]
None to be disclosed.
[Schedule – Borrowings]
Balance at beginning Balance at end of Average interestof yearyear
rate(millions of yen) (millions of yen)(%)

Category

Terms of repayment

Short-term debts

－

－

－

－

Current portion of long-term debts

71

142

0.66

－

Current portion of lease obligations

353

363

－

－

Long-term debts (excluding current
portion of long-term debts)

223

580

Lease obligations (excluding
current portion of lease obligations)

746

576

From October 5,0.66 2019 to
September 10, 2025
From October 9,－ 2019 toMarch 22, 2024

Other interest-bearing debts
Accounts payable – installment
purchases

98

60

Total

1,495

1,724

From October 25,
0.50 2018 to
May 22, 2020－－

(Notes) 1. The weighted average interest rates applicable to the year-end balance of borrowings are indicated for averageinterest rates.
2. The average interest rate for lease obligations is not included because the amount of lease obligations in the
consolidated balance sheets represents the total amount of lease payment before deducting interest.
3. Repayment of long-term loans, lease obligations (excluding current portion) and other interest-bearing debts(excluding current portion) scheduled within 5 years from the consolidated settlement date is as follows.
After 1 year but within
2 years(millions of yen)

After 2 years but
within 3 years(millions of yen)

After 3 years but
within 4 years(millions of yen)

After 4 years but
within 5 years(millions of yen)

Long-term loans

142

142

80

71

Lease obligations

247

158

93

64

Other interest-bearing
debts

24

－

－

－

[Schedule – Asset Retirement Obligations]
Information has been omitted as it was immaterial.

－

132 －

(2) [Other]
Quarterly financial information for the current consolidated fiscal year
(Cumulative period)
Sales (Millions of yen)
Quarterly net income before
income taxes (current FY)(Millions of yen)
Quarterly net income
attributable to owners ofparent (current FY) (Millionsof yen)Quarterly net income pershare (current FY) (Yen)(Accounting period)
Quarterly net income pershare (Yen)

1st quarter2nd quarter3rd quarter

Current consolidated
fiscal year

14,66430,31945,28961,621

2,522

4,935

7,667

8,897

1,698

3,298

5,069

6,158

64.38

125.05

192.17233.46

1st quarter2nd quarter

64.38

60.67

－

133 －

3rd quarter
67.11

4th quarter
41.29

2 [Financial Statements, etc.](1) [Financial Statements]
1) [Balance Sheets](Unit: Millions of yen)Previous fiscal year
(September 30, 2017)
AssetsCurrent assets
Cash and deposits
Accounts receivable
Lease investment assets
MerchandiseWork in progress
Raw materials and stored items
Prepaid expenses
Accounts receivable – other
Deferred tax assets
Other Stipulations
Provisions for bad debts
Total current assets
Non-current assets
Property, Plants & Equipment
Buildings
Structures
VehiclesTools, furniture and fixtures
Land
Construction in progress
Total property, plants and equipment
Intangible Assets
Software
Software in progress
Telephone subscription rights
Other Stipulations
Total intangible assets
Investments and other assets
Investments securities
Stocks of subsidiaries and affiliates
Investments in capital
Long-term loans
Long-term prepaid expenses
Deferred tax assets
Long-term deposits
Guarantee deposits
Long-term lease investment assets
Other Stipulations
Total investments and other assets
Total non-current assets
Total assets

－

134 －

Current fiscal year
(September 30, 2018)17,185*1 5,542
269
125
243
110
328
*1 1451,890*1 414(31)
26,225

18,461*1 6,758
290
54
209
133
540
*1 1311,970*1 302(34)
28,818

5,905
138
0
1,220
6,667
569
14,502

7,226
227
0
1,383
6,667
－
15,504

2,683
953
25
0
3,663

2,846
692
22
0
3,561

23,250
502
0
*1 80
331
2,737
6,000
1,272
459
9
34,64352,80979,034

23,573
527
0
*1 86
200
2,784
6,000
1,270
350
58
34,85253,91982,737

(Unit: Millions of yen)Previous fiscal year
(September 30, 2017)
Liabilities
Current liabilities
Accounts payable – trade
Lease obligations
Accounts payable – other
Income taxes payable
Accrued business office taxes
Consumption taxes payable
Advances received
Deposits received
Provisions for bonuses
Accounts payable – facilities
Other Stipulations
Total current liabilities
Fixed liabilities
Lease obligations
Provisions for retirement benefits
Other Stipulations
Total fixed liabilities
Total liabilities
Net assets
EquityCapitalCapital surplus
Legal capital surplus
Other capital surplus
Total capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
General reserve
Retained earnings brought forward
Total retained earnings
Treasury stock
Total equity
Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Total valuation and translation adjustments
Subscription rights to shares
Total equity
Total liabilities and net assets

－

135 －

Current fiscal year
(September 30, 2018)*1 2,252
269*1 2,213
1,403
53
502
1,026
463
2,810
*1 511
0
11,507*1 2,704290*1 2,213
1,605
54
374
708
438
2,870
*1 374－
11,634

459
1,186
413
2,059
13,567

350
1,469
418
2,239
13,873

5,700

5,700

5,409
－
5,409

5,409
－
5,409

688

688

48,9574,900
54,546(964)
64,69052,257
4,658
57,604(968)
67,745

597

882

597
178
65,46679,034882
235
68,86382,737

2) [Profit and Loss Statement](Unit: Millions of yen)Previous fiscal year
Current fiscal year
(Started October 1, 2016;(Started October 1, 2017;
ended September 30, 2017)
ended September 30, 2018)*1 55,175*1 56,769*1 17,942*1 18,497
37,23338,271*1, *2 28,978*1, *2 30,008
8,254
8,263

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Land & rent income
Subsidy income
Other Stipulations
Total non-operating income
Non-operating expenses
Treasury stock acquisition expenses
Foreign exchange losses
Cost of lease revenue
Total non-operating expenses
Ordinary income
Extraordinary profit
Gains on sale of non-current assets
Gain on reversal of asset retirement obligations
Total extraordinary profit
Extraordinary losses
Loss on retirement of non-current assets
Loss on retirement of software
Valuation loss on investment securities
Impairment losses
Total extraordinary losses
Net income before taxes
Income taxes - current
Income taxes - deferred
Total income taxes
Net income

－

136 －

*1 31
118
*1 39
－
*1 29
219

*1 31
*1 168
*1 96
40
*1 31
368

0
0
－
0
8,473

－
0
53
54
8,577

2.
23
25

1
－
1

3
15
－
0
19
8,479
2,713
(134)
2,578
5,900

9
－
53
0
63
8,516
2,808
(251)
2,556
5,959

[Report on cost of sales](a) Cost of sales on information processing, software and consulting services
51st Term(Started October 1, 2016; ended
September 30, 2017)
Category

Note

Amount (Millions of yen)

I Materials costs
II Labor costs*1

III Expenses
1. Computer rental
expenses
2. Maintenance contracts

52nd Term(Started October 1, 2017; ended
September 30, 2018)

Ratio
(%)

Amount (Millions of yen)

3,375

28.1

3,507

27.5

2,033

17.0

2,378

18.7

6,849

53.8

12,735

100.0

427

352

1,316

1,275

558

554

3. Depreciation
4. Repairs and maintenanceexpenses
5. Supplies expenses

640

593

1,333

2,034

6. Other Stipulations

2,308

Total expenses
Works in progress andinventories at beginning ofyear
Transfers from otheraccounts
Total
Works in progress andinventories at end of year
Transfers to other accounts*2*3

Cost of sales on
information processing,
software and consulting
services

Ratio
(%)

6,585

54.9

11,994

100.0

2,039

69

243

1,234

1,137

13,298

14,115

243

209

1,354

1,185

11,70012,721(Notes) 1. Labor costs include the following provisions. Figures in (parentheses) denote amounts for the previous fiscal
year.
Provision for bonuses: 536 million yen (429 million yen)
Retirement benefit expenses: 60 million yen (37 million yen)
2. Transfers from other accounts represent the transfer of depreciation of software.
3. Transfers to other accounts represent the transfer of software development costs into software and software in
progress accounts.
4. Costs are determined using job order costing by project.

(b) Cost of sales on office equipment and supplies
51st Term(Started October 1, 2016; ended
September 30, 2017)
Category

Note

Amount (Millions of yen)

I Inventories at beginning of
year

198
－

137 －

52nd Term(Started October 1, 2017; ended
September 30, 2018)

Ratio
(%)
3.1

Amount (Millions of yen)
125

Ratio
(%)
2.2

II Purchases

6,170

Total

96.9

6,368 100.0

5,704

5,830 100.0

III Inventories at end of year

125

54

Cost of sales on officeequipment and supplies

6,242

5,776

－

138 －

97.8

3) [Statement of Changes in Equity]
Previous fiscal year (Started October 1, 2016; ended September 30, 2017)(Unit: Millions of yen)
EquityCapital surplus

Retained earnings
Other retained earnings

CapitalBalance at
beginning ofyear
Changes inequityGeneralreserve
Dividends ofsurplus

5,700

Legal
capitalsurplus

5,409

Other
capitalsurplusTotal
capitalsurplus

10

5,419

Legal
retainedearnings

688

Generalreserve

Retainedearnings
brought
forwardTotal
retainedearnings

46,557

3,527

50,7732,400(2,400)－(2,122)(2,122)

5,900

5,900

(5)

(5)

Net income
Acquisitionof treasury
stock
Disposal oftreasurystock
Changes in
items otherthan equity(net)
Total changes
in equity
Balance at endof year

(10)

(10)

－

－

(10)

(10)

－

2,400

1,373

3,773

5,700

5,409

－

5,409

688

48,9574,900

54,546

Valuation and translation
adjustments
Valuation
Subscription
Total
difference
rights to Total equity
Total
valuation
Treasuryonsharesshareholders’
and
stock
availableequity
translation
for-saleadjustments
securities
Shareholders’ equity

Balance at
beginning ofyear
Changes inequityGeneralreserve
Dividends ofsurplus(347)

Net income
Acquisitionof treasury
stock

(677)

61,545

(351)

(351)

176

61,370－－(2,122)(2,122)

5,900

5,900

(677)

(677)

－

139 －

Disposal oftreasurystock
Changes in
items otherthan equity(net)
Total changes
in equity
Balance at endof year

59

44

44

948

948

2.

950

(617)

3,145

948

948

2.

4,096

(964)

64,690

597

597

178

65,466－140 －Current fiscal year (Started October 1, 2017; ended September 30, 2018)(Unit: Millions of yen)
Total shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

CapitalBalance at
beginning ofyear
Changes inequityGeneralreserve
Dividends ofsurplus

5,700

Legal
capitalsurplus

5,409

Other
capitalsurplusTotal
capitalsurplus

－

5,409

Legal
retainedearnings

Generalreserve

Retainedearnings
brought
forwardTotal
retainedearnings

688

48,9574,900

54,5463,300(3,300)－(2,901)(2,901)

5,959

5,959

Net income
Acquisitionof treasury
stock
Changes in
items otherthan equity(net)
Total changes
in equity
Balance at endof year

－

－

－

－

－

3,300

(241)

3,058

5,700

5,409

－

5,409

688

52,257

4,658

57,604

Total shareholders’equityValuation andtranslation adjustments
Valuation
Subscriptio
Total
difference
Totalvaluation n rights to Total equity
Treasuryonsharesshareholders’
and
stock
availableequity
translation
for-saleadjustments
securities
Balance at
beginning ofyear
Changes inequityGeneralreserve
Dividends ofsurplus
Net income
Acquisitionof treasury
stock
Changes in
items otherthan equity
(net)

(964)

(3)

64,690

597

597

178

65,466－－(2,901)(2,901)

5,959

5,959

(3)

(3)

284

284

－

141 －

57

342

Total changes
in equity
Balance at endof year

(3)

3,054

284

284

57

3,396

(968)

67,745

882

882

235

68,863－142 －[Notes to Financial Statements](Principal Accounting Policies)
1. Standards and methods used for the valuation of assets(1) Standards and methods used for the valuation of securities
a. Stocks of subsidiaries and affiliates
Stated at cost determined by the moving average method
b. Available-for-sale securitiesa) Available-for-sale securities with market value
Stated at fair market value based on the quoted market price as of the fiscal year-end (related
valuation differences are directly charged or credited to the shareholders’ equity, and cost of securities
sold is calculated by the moving average method)b) Available-for-sale securities without market value
Stated at cost determined by the moving average method(2) Standards and methods used for the valuation of inventory assets
a. Merchandise, raw materials
Cost determined by first-in, first-out method (with balance sheet values reflecting write downs for
decreased profitability).
b. Work in progress
Cost determined by cost percentage method or specific identification method and adjusted based on
percentage of completion (with balance sheet values reflecting write downs for decreased profitability).
c. Supplies
Last purchase price method (with balance sheet values reflecting write downs for decreased
profitability).
2. Depreciation of non-current assets(1) Property, Plants & Equipment
Calculated based on declining balance method.
Provided, buildings acquired after April 1, 1998 (excluding accompanying facilities), and accompanying
facilities and structures acquired after April 1, 2016 are calculated based on straight-line method.
(2) Intangible Assets
a. Softwarea) Software for sale
Software for sale are amortized and stated at the higher of amortization based on estimated sales
volume in the future, and amortization at a constant periodic rate based on remaining effective life
－

143 －

(within 3 years).
b) Software for internal use
Amortized using straight-line method with an estimated in-house useful life of five years.
b. Other intangible assets
Amortized using the straight-line method.
3. Accounting standards for provisions(1) Provisions for bad debts
In setting aside provisions for possible losses due to uncollectible receivables, provisions are recognized at
the amounts calculated based on the historical rate of credit loss with respect to normal receivables, and at
the amounts determined in consideration of collectability of individual receivables with respect to doubtful
accounts and certain other receivables.
(2) Provisions for bonuses
Provisions for bonuses are recognized based on the estimated amounts of payment.
(3) Provisions for retirement benefits
In setting aside allowances for employees’ retirement benefits, retirement benefit obligations and expectedpension assets payable as of the end of the current fiscal year are recognized.
a. Method of attributing expected benefits to dateIn calculating retirement benefit obligations, expected benefits are attributed to the period up until theend of the fiscal year based on benefit formula standards.
b. Recognizing actuarial differences as expenses
Actuarial differences are recognized as expense for the fiscal year in which they occur.
4. Accounting standards for revenues and expenses
Accounting standards for recognizing revenues and cost of sales of made-to-order software (softwaredevelopment contracts)(1) Projects for which the progress up to the end of the current fiscal year can be measured reliably
Accounted for by percentage-of-completion method (whereas, the degree of completion is estimatedbased on the construction cost percentage method)(2) Other projects
Accounted for upon completion of construction works.
5. Other important matters regarding the preparation of financial statements(1) Accounting method for consumption taxes and local consumption taxes
Consumption taxes are accounted for using the tax-exclusion method.
(2) Application of the consolidated taxation system
－

144 －

The consolidated taxation system is applied.
(Notes to Balance Sheets)*1. Monetary claims and monetary liabilities on affiliated companies
Previous fiscal year
(September 30, 2017)
Short-term monetary claims on affiliatedcompanies
Long-term monetary claims on affiliatedcompanies
Short-term monetary liabilities on
affiliated companies

Current fiscal year
(September 30, 2018)85 million yen

203 million yen

80

86

452

527

(Notes to Income Statements)*1. Volume of transactions with affiliated companies
Previous fiscal year
(Started October 1, 2016; ended September 30, 2017)

Current fiscal year
(Started October 1, 2017; ended September 30, 2018)

Volume of trading transactions
Net sales
Purchases
Operating expenses
Volume of non-operatingtransactions

65 million yen
2,636
1,128

110 million yen
2,701
1,786

9

161

*2. The approximate percentages of selling expenses were 55.5% for the previous fiscal year and 53.4% for
the current fiscal year; percentages of general and administrative expenses were 44.5% and 46.6%,
respectively.
Major items included in selling, general and administrative expenses are as follows.
Previous fiscal year
(Started October 1, 2016; ended
September 30, 2017)

Current fiscal year
(Started October 1, 2017; ended
September 30, 2018)

9,316 million yen
2,461
474
555
1,966
106

9,548 million yen
2,470
651
602
1,982
82

Salaries
Provision for bonuses
Retirement benefit expenses
Depreciation
Rent expenses
Research and development expenses(Securities)
Stocks of subsidiaries and affiliates (the amounts in the previous fiscal year’s were 448 million yen for stocks ofsubsidiaries and 54 million yen for stocks of affiliates; the amounts in the current fiscal year’s balance sheet are
473million yen for stocks of subsidiaries and 54 million yen for stocks of affiliates) are not presented here sincequoted market values are not available and are deemed to be extremely difficult to measure.

－

145 －

(Tax Effect Accounting)
1. Major factors of deferred tax assets and deferred tax liabilities
Previous fiscal year
(September 30, 2017)

Current fiscal year
(September 30, 2018)

2,005 million yen
862
362
1,197
102
174
17

2,115 million yen
875
448
1,195
96
193
17

Deferred tax assets
Software development costs
Provisions for bonuses
Provisions for retirement benefits
Retirement benefit trust
Accrued business tax
Valuation loss on investment securities
Retirement bonuses for directors payable
Legal welfare expenses corresponding to provisions forbonuses
Asset retirement obligations
Impairment losses
Valuation difference on available-for-sale securities
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Business tax refund
Valuation difference on available-for-sale securities
Retirement expenses corresponding to asset retirement costs
Other Stipulations
Total deferred tax liabilities
Net deferred tax assets

128

130

97
112
205
5,267
(346)
4,920

99
112
235
5,519
(375)
5,144

26
242
24
0
293
4,627

－
367
22
0
389
4,754

2. Major items causing difference between statutory income tax rate and effective income tax rate after applying tax
effect accounting
Previous fiscal year
(September 30, 2017)
Statutory income tax rate
(Adjusted)
Inhabitant tax on per capita basis
Entertainment expenses, etc. not deductible for tax
purposesDividends received, etc. to be excluded from grossrevenueTax credits for salary growth
Other Stipluations
Income tax rate after applying tax effect accounting

Current fiscal year
(September 30, 2018)

30.7%

30.7%

0.8

0.8

1.3

0.7

(0.1)

(0.2)

(2.4)
0.0
30.4

(2.4)
0.5
30.0

(Material Subsequent Events)(Introduction of stock-based remuneration plan, etc.)
At the Meeting of the Board of Directors held on October 31, 2018, the Company resolved to abolish the stockbased compensation stock option scheme and to introduce a new stock-based remuneration plan using a trust(hereinafter the “Plan”). The introduction of the Plan was approved by resolution at the 52nd Ordinary General
－

146 －

Meeting of Shareholders held on December 21, 2018.
Details are described in Part 4 [Information on the Company] 1 [Information on the Company’s Stock] (8)[Information on Employee Stock Ownership Plan].

－

147 －

4) [Supplementary Schedules][Schedule – Tangible Assets]

Property, Plants & Equipment

Category(Unit: Millions of yen)
Balance at
beginningof yearIncreasein current
year

Decreasein current
year

Depreciationin current
year

Balanceat end ofyear

Accumulated
depreciation

Buildings

5,905

1,706

0

385

7,226

11,050

Structures

138

107

－

19

227

466

Vehicles

0

－

－

0

0

44

Tools, furniture and fixtures

1,220

716

4.

549

1,383

5,516

Land

6,667

－

－

－

6,667

－

Construction in progress

569

1,283

1,852

－

－

－

Total property, plants &equipment

14,502

3,814

1,857

954

15,504

17,077

2,683

1,539

0

1,375

2,846

2,918

953

681

942

－

692

－

25

－

3

－

22

－

0

－

－

0

0

0

3,663

2,221

946

1,375

3,561

2,919

Type of asset

Intangible Assets

Software
Software in progress
Telephone subscription
rightsValuation difference on
available-for-sale securities
Total intangible assets(Note) Major increase during the current fiscal year were attributable to the following:

Construction in progress

Acquisition of building and accompanying facilities for TKC
Customer Support Center Building
Construction of TKC Customer Support Center Building

SoftwareDevelopment costs of software for sale

366 million yen

Development costs of software for internal use

1,080 million yen

Software purchased from outside

93 million yen

Buildings

1,487 million yen
1,172 million yen[Schedule – Provisions]
Item

Balance at
beginning of year

(Unit: Millions of yen)
Increase in current Decrease in current Balance at end of
year
year
year

Provisions for bad debts

31

34

31

34

Provisions for bonuses

2,810

2,870

2,810

2,870

(2) [Major Assets and Liabilities]
This item is omitted as information has been disclosed in the consolidated financial statements.
(3) [Other]
None to be disclosed.

－

148 －

Part 6 [Stock-related Administration of the Company]
Fiscal year

From October 1 to September 30

Ordinary General Meeting of
Shareholders

December

Record date

September 30

Record dates for dividends ofsurplus

September 30
March 31

Number of shares in one unit

100 shares

Buyback and increase of sharesless than one unit
Place of handling

Administrator of shareholder
registry(Special account)
Mitsubishi UFJ Trust and Banking Corporation, Stock Transfer Agency
Division
1-4-5 Marunouchi, Chiyoda-ku, Tokyo
Mitsubishi UFJ Trust and Banking Corporation
1-4-5 Marunouchi, Chiyoda-ku, Tokyo

Forwarding office――――――

Handling charges for buyback
and increase

Amount stipulated separately as commission for entrusting sale orpurchase of stock
By means of electronic public notice. However, in the event that electronic
notice is not possible due to incidents or other unavoidable circumstances,public notices will be posted in the Nihon Keizai Shimbun.
TKC’s website for public notices: https://www.tkc.jp/

Method of giving public notice

Shareholder privileges

None to be disclosed.

(Note) In accordance with the provisions of TKC Corporation’s Articles of Incorporation, holders of shares lessthan one unit shall have no rights other than: rights listed in the items of Article 189, Paragraph 2 of theCompanies Act of Japan; rights to receive allotment of shares for subscription and subscription rights toshares based on the number of shares they hold; and rights to request the sale of shares less than one unit.

－

149 －

Part 7 [Reference Information on the Company]
1 [Information on the Parent Company]
TKC Corporation does not have a parent company as defined in Article 24-7, Paragraph 1 of the Financial Instruments
and Exchange Act of Japan.
2 [Other Reference Information]
TKC Corporation has filed the following documents, originally written in Japanese, between the beginning of thecurrent fiscal year and the filing date of this Annual Securities Report.
(1) Annual Securities Report, Appendices and Confirmation Letter
Fiscal year (51th term) from October 1, 2016 to September 30, 2017, filed to the Director-General of the Kanto
Local Finance Bureau, Japan, on December 25, 2017.
(2) Internal Control Report and AppendicesSubmitted to the Director-General of the Kanto Local Finance Bureau, Japan, on December 25, 2017.
(3) Quarterly Securities Reports and Confirmation Letter
First quarter of 52nd term (From October 1, 2017 to December 31, 2017), filed to the Director-General of the
Kanto Local Finance Bureau, Japan, on February 13, 2018.
Second quarter of 52nd term (From January 1, 2018 to March 31, 2018), filed to the Director-General of the
Kanto Local Finance Bureau, Japan, on May 8, 2018.
Third quarter of 52nd term (From April 1, 2018 to June 30, 2018), filed to the Director-General of the Kanto
Local Finance Bureau, Japan, on August 13, 2018.
(4) Extraordinary Reports
Submitted to the Director-General of the Kanto Local Finance Bureau, Japan, on December 25, 2017.
Extraordinary Report based on Article 19, Paragraph 2, Item 9-2 (Results of Exercise of Voting Rights at
General Meeting of Shareholders) of the Cabinet Office Ordinance on Disclosure of Corporate Information,
etc.
Submitted to the Director-General of the Kanto Local Finance Bureau, Japan, on December 25, 2018.
Extraordinary Report based on Article 19, Paragraph 2, Item 9-2 (Results of Exercise of Voting Rights at
General Meeting of Shareholders) of the Cabinet Office Ordinance on Disclosure of Corporate Information,
etc.

－

150 －

Section 2 [Information on Guarantors, etc. of the Company]
None to be disclosed.

－

151 －

TRANSLATION
Following is an English translation of the Independent Auditors’ Report and Internal Control Audit Report filed under the
Financial Instruments and Exchange Act of Japan. This report is presented merely as supplemental information.

Independent Auditors’ Audit Report and Internal Control Audit Report
December 21, 2018
Kabaushiki Kaisha TKC
To: The Board of Directors
Ernst & Young ShinNihon LLC
Designated Limited Liability Partner
Executing Partner,
Certified Public Accountant

Yasuo Sekiya (Seal)

Designated Limited Liability Partner
Executing Partner,
Certified Public Accountant

Yuichi Noda (Seal)[Audit of financial statements]
Pursuant to Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act of Japan, we have audited
the consolidated financial statements included in the Accounting Section, namely, the consolidated statements offinancial position of TKC Corporation and consolidated subsidiaries for the fiscal year from October 1, 2017 to
September 30, 2018, which consists of the consolidated balance sheets, consolidated statements of profit or loss,
comprehensive income, change in consolidated equity, consolidated cash flows, and a summary of significant
accounting policies, other related notes and consolidated supplementary schedules.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for designing and operating such internal
control as management determines necessary to enable the preparation and fair presentation of the consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. The purpose of an audit of the consolidated financial statements is not to express an opinion on the
－

152 －

effectiveness of the entity’s internal control, but in making these risk assessments the auditor considers internal
controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order todesign audit procedures that are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of TKC Corporation and consolidated subsidiaries as of September 30, 2018, and theirconsolidated financial performance and cash flows for the year then ended in conformity with accounting
principles generally accepted in Japan.
[Audit of internal control]
Pursuant to the second paragraph of Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act ofJapan, we have audited management’s report on internal control over financial reporting of TKC Corporation as of
September 30, 2018.
Management’s Responsibility for the Report on Internal Control
The Company’s management is responsible for designing and operating effective internal control over financial
reporting and for the preparation and fair presentation of its report on internal control in conformity withassessment standards for internal control over financial reporting generally accepted in Japan.
There is a possibility that misstatements may not be completely prevented or detected by internal control overfinancial reporting.
Auditor’s Responsibility
Our responsibility is to express an opinion on the management’s report on internal control based on our internal
control audit as independent auditors. We conducted our internal control audit in accordance with auditing
standards for internal control over financial reporting generally accepted in Japan. Those standards require that weplan and perform the internal control audit to obtain reasonable assurance about whether the management’s reporton internal control is free from material misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the result of assessment oninternal control over financial reporting in the management’s report on internal control. The procedures selected
depend on the auditors’ judgment, including the significance of effects on reliability of financial reporting. Aninternal control audit includes, including examining representations on the scope, procedures and results of theassessment of internal control over financial reporting made by management, as well as evaluating the overall
presentation of the management’s report on internal control.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the management’s report on internal control referred to above, which represents that the internal
control over financial reporting of TKC Corporation as of September 30, 2018 is effectively maintained, andpresents fairly, in all material respects, the result of the assessment of internal control over financial reporting in
－

153 －

conformity with the assessments standards for internal control over financial reporting generally accepted in Japan.
Interest
Our firm and the executing partners have no interest in the Company for which disclosure is required under theprovisions of the Certified Public Accountants Act.
End of document(*)1. The above represents a translation, for convenience only, of the original copy of the Audit Report issued in theJapanese language, which is held in the custody by TKC Corporation (the Company filing this Annual
Securities Report).
2. XBRL data is not included in the scope of audit.

－

154 －

TRANSLATION
Following is an English translation of the Independent Auditors’ Audit Report filed under the Financial Instruments andExchange Act of Japan. This report is presented merely as supplemental information.

Independent Auditors’ Audit Report
December 21, 2018
Kabaushiki Kaisha TKC
To: The Board of Directors
Ernst & Young ShinNihon LLC
Designated Limited Liability Partner
Executing Partner,
Certified Public Accountant

Yasuo Sekiya (Seal)

Designated Limited Liability Partner
Executing Partner,
Certified Public Accountant

Yuichi Noda (Seal)

Pursuant to the first paragraph of Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act ofJapan, we have audited the financial statements included in the Financial Information Section, namely, thestatements of financial position of TKC Corporation for the 52nd fiscal year from October 1, 2017 to September
30, 2018, which consists of the balance sheets, statements of profit or loss, change in equity, and significant
accounting policies, other related notes and supplementary schedules.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for designing and operating such internal
control as management determines necessary to enable the preparation and fair presentation of the consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit
in accordance with auditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditors’ judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. The purpose of an audit of
the financial statements is not to express an opinion on the effectiveness of the entity’s internal control, but inmaking these risk assessments the auditor considers internal controls relevant to the entity’s preparation and fairpresentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overall presentation of thefinancial statements.
－

155 －

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of TKC Corporation as of September 30, 2018, and its financial performance for the year then ended inconformity with accounting principles generally accepted in Japan.
Interest
Our firm and the executing partners have no interest in the Company for which disclosure is required under theprovisions of the Certified Public Accountants Act.
End of document(*)1. The above represents a translation, for convenience only, of the original copy of the Audit Report issued in theJapanese language, which is held in the custody by TKC Corporation (the Company filing this Annual
Securities Report).
2. XBRL data is not included in the scope of audit.

－

156 －

[Cover][Document filed]Management’s Report on Internal Control[Applicable law]

Article 24-4-4, Paragraph 1 of the Financial Instruments and Exchange
Act of Japan[Filed with]

Director, Kanto Local Finance Bureau[Date filed]December 25, 2018

[Company name]

Kabaushiki Kaisha TKC[Company name in English]

TKC Corporation[Title and name of representative]

Kazuyuki Sumi, President and Representative Director[Title and name of Chief Financial

Hitoshi Iwata, Executive Vice President and Representative Director

Officer][Address of head office][Place available for public inspection]

1758 Tsurutamachi, Utsunomiya-shi, Tochigi
TKC Corporation Tokyo Head Office(2-1 Ageba-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashikabutocho, Chuo-ku, Tokyo)

－

157 －

1 [Matters concerning the basic framework for internal control over financial reporting]Kazuyuki Sumi, President and Representative Director, and Hitoshi Iwata, Chief Financial Officer of TKC
Corporation (the "Company"), are responsible for designing and operating effective internal control over financial
reporting of the Company, and have designed and operated internal control over financial reporting in accordancewith the basic framework for internal control set forth in "Establishing the Standards and Practice Standards forManagement Assessment and Audit Concerning Internal Control Over Financial Reporting (Council Opinions)"
released by the Business Accounting Council.
Internal control, by nature, may not function effectively due to errors in judgment or negligence of those
implementing internal control, or may not respond to unanticipated changes in internal and external environments.
Therefore, there is a possibility that misstatements may not be completely prevented or detected by internal control
over financial reporting.
2 [Matters concerning the scope of assessment, assessment date and assessment procedures]
Assessment of internal control over financial reporting was performed as of September 30, 2018, which is the end of
this fiscal year, in accordance with assessment standards for internal control over financial reporting generally
accepted in Japan.
In conducting this assessment, we first assessed internal controls which may have material impact on the entire
financial reporting on a consolidated basis (entity-level controls), and based on the results of such assessment, weselected the business processes to be assessed. In the process-level assessment, we analyzed the selected businessprocesses, identified key controls that may have material impact on the reliability of the financial reporting, andassessed the design and operation of these key controls to determine the effectiveness of our internal controls.
We determined the required scope of assessment of internal control over financial reporting for the Company as wellas its consolidated subsidiaries and equity-method affiliated companies based on the materiality that may affect thereliability of the Company’s financial reporting. The materiality that may affect the reliability of financial reporting
was determined by taking into account the materiality of quantitative and qualitative impacts on financial reporting.
Based on the results of assessment of entity-level controls conducted for the Company and one of its consolidated
subsidiaries, we reasonably determined the scope of assessment of internal controls over business processes. The
three other consolidated subsidiaries and two equity-method affiliated companies determined to have insignificant
quantitative and qualitative influence on the reliability of financial reporting were not included in the scope ofassessment of entity-level controls.
For the purpose of determining the scope of assessment of internal control over business processes, we selected
locations and business units to be tested based on the fiscal year’s nets sales (after elimination of transactions between
consolidated companies), and companies whose net sales reached two-thirds of total amount on the Company’s
consolidated net sales were selected as "Significant Locations/Business Units." At such Significant
Locations/Business Units, we included in the scope of assessment, business processes that lead to sales, accounts
receivable, purchases and inventories that may have material impact on the business objectives of the Company.
Further, in addition to the selected Significant Locations/Business Units, we also included in the scope of assessment,
certain business processes having greater likelihood of material misstatements, processes having significant accounts
involving estimates and management’s judgment, and processes concerning businesses or operations dealing withhigh-risk transactions, as business processes that may have material impacts on financial reporting.
3 [Matters concerning the results of assessment]
As a result of the above assessments, the Company determined that the internal control over financial reporting was
effective as if the last day of the fiscal year.
4 [Supplementary Information]
None to be disclosed.
－

158 －

5 [Special Notes]
None to be disclosed.

－

159 －

[Cover][Document filed]

Written Confirmation[Filed with]

Article 24-4-2, Paragraph 1 of the Financial Instruments and Exchange
Act of Japan
Director, Kanto Local Finance Bureau[Date filed]December 25, 2018

[Company name]

Kabaushiki Kaisha TKC[Company name in English]

TKC Corporation[Title and name of representative]

Kazuyuki Sumi, President and Representative Director[Applicable law]

[Title and name of Chief Financial
Officer][Address of head office][Place available for public inspection]

Hitoshi Iwata, Executive Vice President and Representative Director
1758 Tsurutamachi, Utsunomiya-shi, Tochigi
TKC Corporation Tokyo Head Office(2-1 Ageba-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashikabutocho, Chuo-ku, Tokyo)

－

160 －

1 [Matters Related to Adequacy of Statements Contained in the Annual Securities Report]
Kazuyuki Sumi, President and Representative Director of the Company and Hitoshi Iwata, Chief Financial Officerof the Company hereby confirm that the statements contained in the Annual Securities Report for the 52nd fiscal
year (from October 1, 2017 to September 30, 2018) are adequate under the Financial Instruments and Exchange
Act of Japan.
2 [Special Notes]
None to be disclosed.

－

161 －