Annual Securities Report(Report based on Article 24, Paragraph 1 of the
Financial Instruments and Exchange Act of Japan)
Fiscal year
Started October 1, 2020
(55th Term)
Ended September 30, 2021

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

- 1 -Contents

Page[Front Cover] ........................................................................................................................................................................................ - 3 Section 1 [Information on the Company] ............................................................................................................................................. - 4 Part 1 [Overview of the Company] ................................................................................................................................................ - 4 1 [Key Financial Data] .......................................................................................................................................................... - 4 2 [History]............................................................................................................................................................................. - 7 3 [Description of Business] ................................................................................................................................................... - 9 4 [Information on Affiliates] ............................................................................................................................................... - 12 5 [Employees] ..................................................................................................................................................................... - 13 Part 2 [Business Overview] .......................................................................................................................................................... - 14 1 [Management Policy, Business Environment and Challenges Faced by the Company] .................................................. - 14 2 [Risk Factors] .................................................................................................................................................................. - 19 3 [Management Analysis of Consolidated Financial Conditions, Operating Results, and Cash Flows] ............................. - 21 4 [Material Agreements, etc.] ............................................................................................................................................. - 33 5 [Research and Development Activities]........................................................................................................................... - 33 Part 3 [Property, Plant and Equipment] ........................................................................................................................................ - 34 1 [Summary of Capital Investments] .................................................................................................................................. - 34 2 [Major Property, Plant and Equipment] ........................................................................................................................... - 34 3 [Plans for Capital Investments, Disposals of Property, Plant and Equipment]................................................................. - 35 Part 4 [Information on the Company] .......................................................................................................................................... - 36 1 [Information on the Company’s Stock]............................................................................................................................ - 36 (1) [Total Number of Shares, etc.] ................................................................................................................................ - 36 (2) [Share Subscription Rights, etc.] ............................................................................................................................. - 36 (3) [Exercise of Bonds with Share Subscription Rights Containing a Clause for Exercise Price Adjustment, etc.] ..... - 36 (4) [Changes in Total Number of Issued Shares, Capital Stock, etc.] ........................................................................... - 36 (5) [Shareholders Composition].................................................................................................................................... - 37 (6) [Major Shareholders] .............................................................................................................................................. - 37 (7) [Status of Voting Rights] ........................................................................................................................................ - 38 (8) [Information on Employee Stock Ownership Plan】 .............................................................................................. - 39 2 [Acquisition, etc. of Treasury Stocks].............................................................................................................................. - 40 3 [Dividend Policy]............................................................................................................................................................. - 42 4 [Corporate Governance]................................................................................................................................................... - 43 (1) [Overview of Corporate Governance] ..................................................................................................................... - 43 (2)[Officers].................................................................................................................................................................. - 56 (3) [Audits] ................................................................................................................................................................... - 60 (4) [Officers’ Compensation, etc.] ................................................................................................................................ - 63 (5) [Status of Shareholdings] ........................................................................................................................................ - 66 Part 5 [Financial Information] ...................................................................................................................................................... - 68 1. [Consolidated Financial Statements] ............................................................................................................................... - 69 (1)[Consolidated Financial Statements] ........................................................................................................................ - 69 (2) [Other]................................................................................................................................................................... - 105 2 [Financial Statements, etc.] ............................................................................................................................................ - 106 (1) [Financial Statements]........................................................................................................................................... - 106 (2)[Major Assets and Liabilities] ................................................................................................................................ - 117 (3)[Other].................................................................................................................................................................... - 117 Part 6 [Stock-related Administration of the Company] .............................................................................................................. - 118 Part 7 [Reference Information on the Company] ....................................................................................................................... - 119 1 [Information on the Parent Company] ........................................................................................................................... - 119 2 [Other Reference Information] ...................................................................................................................................... - 119 Section 2 [Information on Guarantors, etc. of the Company] ........................................................................................................... - 120 [Audit Report] [Internal Control Report] [Confirmation Letter]- 2 -[Front Cover][Document filed]Annual Securities Report[Applicable law]

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

Director of Kanto Local Finance Bureau[Date filed]December 20, 2021

[Fiscal year]

55th term (from October 1, 2020 to September 30, 2021)[Company name]

Kabushiki Kaisha TKC[Company name in English]

TKC Corporation[Title and name of representative]

Masanori Iizuka, Representative Director, President and Executive Officer[Address of head office]1758 Tsurutamachi, Utsunomiya-shi, Tochigi[Phone number]

028-648-2111[Contact person]

Kiyotsugu Nakanishi, Director, Managing Executive Officer, Chief of theBusiness Administration Headquarters[Contact address]

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

03-3235-5511[Contact person]

Kiyotsugu Nakanishi, Director, Managing Executive Officer, Chief of theBusiness Administration Headquarters[Place available for public
inspection]

TKC Corporation, Tokyo Head Office(2-1 Ageba-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashikabutocho, Chuo-ku, Tokyo)- 3 -Section 1 [Information on the Company]
Part 1 [Overview of the Company]
1 [Key Financial Data](1) Consolidated Financial Data, etc.
Fiscal year

51st Term

Year end

52nd Term

53rd Term

54th Term

55th Term

September 2017 September 2018 September 2019 September 2020 September 2021

Net sales(million yen)

59,70561,621

66,12067,814

66,221

Ordinary income(million yen)

8,792

8,961

9,669

11,685

12,673(million yen)

6,071

6,158

6,721

7,821

8,686

Comprehensive income(million yen)

7,097

6,517

4,082

7,501

9,839

Total net assets(million yen)

68,892

72,55073,121

77,07583,416

Total assets(million yen)

85,42890,202

96,98997,671

103,406

Net assets per share(yen)

1,275.85

1,343.16

1,362.39

1,466.56

1,582.45

Net income per share(yen)

114.56116.73127.76148.81164.93

Diluted net income per share(yen)

114.08116.20127.50－－Equity ratio

(%)

78.8

78.6

73.8

78.9

80.7

Return on equity (ROE)

(%)

9.3

8.9

9.4

10.5

10.8

Price earnings ratio (PER)(times)

15.1

20.4

18.3

22.9

21.3

Cash flows from operating
activities(million yen)

8,123

8,810

10,55010,56910,550Cash flows from investing
activities(million yen)

(4,617)(4,013)411(10,124)(7,201)(million yen)

(3,019)(2,567)(3,792)(3,786)(3,691)(million yen)

17,03919,26826,81023,46923,126(No. of people)

2,588

2,625

2,701

2,770

2,851

Net income attributable toowners of parent

Cash flows from financing
activities
Cash and cash equivalents at
end of year
No. of employees(Notes) 1. Net sales do not include consumption taxes (consumption tax and local consumption tax; hereinafter the same).
2. The Company introduced the Board Incentive Plan (BIP) Trust starting from the 2nd quarter consolidated
accounting period of the 53rd Term, and recorded the stocks held by said Trust as treasury stocks.
Accordingly, for the purpose of calculating the net income per share, they are included in the treasury stocks
to be deducted in calculating the average number of shares outstanding.
Diluted net income per share for the 54th and 55th Terms are not stated as there were no dilutive shares.
4. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. Net assets
per share, net income per share, and diluted net income per share have been calculated assuming that thestock split was conducted at the beginning of the 51st Term.
5. The reason for decrease in net sales compared to the previous fiscal year is because the Company started
applying the Accounting Standard for Revenue Recognition as of the beginning of fiscal year ended
September 2021. For details, please refer to Notes (Changes in Accounting Policies) on Page 80.
6. The Company applies the partially amended Accounting Standard for Tax Effect Accounting (ASBJ Standard
No. 28, February 16, 2018), etc. as of the beginning of the 53rd Term. Accordingly, said accounting standard
has been applied retroactively to the key financial data and other indicators for the 52nd Term shown herein.

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

51st Term

Year end

52nd Term

53rd Term

54th Term

55th Term

September 2017 September 2018 September 2019 September 2020 September 2021

Net sales(million yen)

55,17556,76960,897

63,07061,637

Ordinary income(million yen)

8,473

8,577

8,972

11,107

12,064

Net income(million yen)

5,900

5,959

6,262

7,472

8,293

Capital stock(million yen)

5,700

5,700

5,700

5,700

5,700

267,310

267,310

267,310

267,310534,620

Total number of shares issued(hundreds ofshares)Total net assets(million yen)

65,466

68,86370,622

74,71480,491

Total assets(million yen)

79,03482,737

88,192

89,767

95,264(yen)

1,237.41

1,300.74

1,343.47

1,421.63

1,526.97

100.00105.00110.00120.00104.50(40.00)(50.00)(55.00)(55.00)(65.00)Net assets per share
Dividend per share(Of the above, interim dividends
per share)(yen)

Net income per share(yen)

111.34112.96119.04142.18157.46

Diluted net income per share(yen)

110.86112.45118.79－－Equity ratio

(%)

82.6

82.9

80.1

83.2

84.5

Return on equity (ROE)

(%)

9.3

8.9

9.0

10.3

10.7

Price earnings ratio (PER)(times)

15.5

21.0

19.7

23.9

22.3

Dividend payout ratio

(%)

44.91

46.48

46.20

42.20

45.70

(No. of people)

2,269

2,225

2,288

2,312

2,398

Total shareholder return

(%)

113.2

158.2

159.3

231.1

242.7

(Benchmark index: TOPIX total
return index)(%)(129.3)(143.3)(128.4)(134.7)(171.7)

Stock price - high

(yen)

3,530

4,875

5,030

7,270

Stock price - low

(yen)

2,716

3,305

3,350

3,820

No. of employees

3,910(7,840)3,175(6,190)(Notes) 1. Net sales do not include consumption taxes.
2. Dividends per share include a special dividend of 7 yen for the 55th Term.
The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. Dividend of
104.50 yen per share for the 55th Term is the sum of an interim dividend of 65 yen per share prior to this stock
split, and a year-end dividend of 39.50 yen per share after said stock split. If the stock split is not taken into
consideration, year-end dividend will be 79 yen per share, and annual dividend will be 144 yen per share.
3. The Company introduced the Board Incentive Plan (BIP) Trust starting from the 2nd quarter accounting periodof the 53rd Term, and recorded the stocks held by said Trust as treasury stocks. Accordingly, for the purposeof calculating the net income per share, they are included in the treasury stocks to be deducted in calculating
the average number of shares outstanding.
4. Diluted net income per share for the 54th and 55th Terms are not stated as there were no dilutive shares.
5. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. Net assets per
share, net income per share, and diluted net income per share have been calculated assuming that the stock split
was conducted at the beginning of the 51st Term.
Total shareholder return has been calculated taking into consideration said stock split.
6. The reason for decrease in net sales compared to the previous fiscal year is because the Company started
applying the Accounting Standard for Revenue Recognition as of the beginning of fiscal year ended September
2021. For details, please refer to Notes (Changes in Accounting Policies) on Page 114.

- 5 -

7. The Company applies the partially amended Accounting Standard for Tax Effect Accounting (ASBJ Standard
No. 28, February 16, 2018), etc. as of the beginning of the 53rd Term. Accordingly, said accounting standard
has been applied retroactively to the key financial data and other indicators for the 52nd Term shown herein.
8. The highest and lowest stock prices are based on the market prices on the First Section of the Tokyo Stock
Exchange.
The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. The stock
prices for the 55th Term show the highest and lowest stock prices after the stock split; the figures in parenthesis
show the highest and lowest stock prices before the stock split.

- 6 -2 [History]
Date

Company History

October 1966

The Company was established in Utsunomiya-shi, Tochigi Prefecture on October 22, 1966 as a dataprocessing center to defend the business domains and maintain control over the fate of accounting 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.

August 1971
September 1972

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 in January 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]

November 1972

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]

December 1972

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]

November 1973

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]

August 1975

Established Tokyo Line Printer Company (currently a consolidated subsidiary).

February 1976

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]

January 1978

Opened TKC Systems Development Research Center.

October 1982

Established TKC Security Services Co., Ltd. (currently a consolidated subsidiary).

October 1984

Opened TKC Tax Research Center.

February 1985
April 1985

Established TKC Management Consulting Co., Ltd. (a subsidiary). [Merged and absorbed into theCompany in May 2011]
Opened TKC Okinawa Information Service Center and deployed information service centers nationwide.

August 1985

Opened OA Technology Development Center.

December 1986

Changed corporate name in the Articles of Incorporation to Kabushiki Kaisha TKC (TKC Corporation).

June 1987

Changed names of Keisan Centers to Information Centers.

July 1987

Listed on the Second Section of the Tokyo Stock Exchange.

September 1987

Opened TASK Technology Development Center.

- 7 -

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 to form TKC Tokyo
Consolidated Information Center.
Established TKC Corporation Strategic Management Research Center. [Merged and absorbed into theCompany in October 2000]
Opened TKC Data Entry Center.

April 1990
June 1991
January 1992
November 1992
February 1994
March 1996
January 1998
June 1998

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.

June 1999

Acquired shares in SKYCOM Corporation (currently a consolidated subsidiary).

July 1999
March 2001

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 the corporate 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.

November 2002
March 2003
July 2003
October 2003

Opened TKC Internet Service Center (TISC).

April 2004
June 2005
December 2008

September 2010
September 2015
October 2015
April 2016
October 2017
March 2018
October 2018
March 2019
September 2019
September 2019
March 2020

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 Auditing Standards 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).
Acquired 100% ownership of SKYCOM Corporation as wholly-owned subsidiary.
Became the first company in Japan to obtain third party accreditation for ISO/IEC 27018:2014, "Code ofpractice 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.
Tokyo Line Printer Company changed the company name to TLP Corporation.
Became the first company to acquire certification under the Electronic Books Software Legal Compliance
Certification System by Japan Image and Information Management Association (JIIMA) for its financial
accounting systems that are offered to the clients of accounting firms.
Acquired 100% ownership of TKC Shuppan Corporation as wholly-owned subsidiary.
Established a voluntary Nomination and Compensation Advisory Committee.
Acquired 100% ownership of TLP Corporation as wholly-owned subsidiary.

- 8 -3 [Description of Business]
The TKC Group (TKC Corporation and affiliated companies) consists of the Company, six subsidiaries and one
affiliated company. 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 office equipment), andprinting 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 theNotes to Consolidated Financial Statements under Part 5 Financial Information, 1. Consolidated Financial Statements,(1) Consolidated Financial Statements.

(1) Accounting Firm Business
Key services/products
1. Information processing services(i) Computer services by the TKC
Consolidated Information Center(ii) Computer services by the TKCInternet Service Center (TISC)
2. Software and consulting services(i) Development and provision ofsoftware to be installed on system
devices for information service
applications

Positioning of the Company and affiliated companies(Services and sales)
1. The Company provides information processing services, software and consulting
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 the Company, offers
help desk services to accounting firms and their clients, and for medium andlarge-size companies.
(Manufacturing and production)
1. TLP Corporation, a subsidiary of the Company, offers printed continuous
business forms for TKC’s computer-based accounting for information processing
service applications, and manufacturing of office supplies for use with TKC’scomputer-based accounting systems.
2. SKYCOM Corporation, a subsidiary of the Company, is engaged in thedevelopment and sales of software.
3. TKC Shuppan Corporation, a subsidiary of the Company, publishes books andmonthly magazines on business management, taxing and accounting to provide
useful business information to TKC member accounting firms and their clients.
4. iMobile Inc., an affiliated company, is engaged in the development andmaintenance of website services.

(ii) Systems consulting services byspecialized staff
3. Sales of office equipment(Others)
TKC Security Services Co., Ltd., a subsidiary of the Company, provides security,
maintenance and repair services for buildings owned by the Company.

Sales of system devices for information
service applications
4. Sales of supplies
Sales of office supplies for computerbased accounting- 9 -(2) Local Governments Business
Key services/products
1. Information processing services(i) Computer services by the TKC
Consolidated Information Center(ii) Computer services by the TKCInternet Service Center (TISC)

Positioning of the Company and affiliated companies(Services and sales)
1. The Company provides information processing services, software and consulting
services, and sales of office equipment to local governments (local municipalities,etc.).
2. TKC Customer Support Service Co., Ltd., a subsidiary of the Company, offers
help desk services to local governments (local municipalities, etc.).
(Manufacturing)
1. TLP Corporation, a subsidiary of the Company, offers printed continuous
business forms for TKC PC systems for information processing service
applications.

2. Software and consulting services

2. SKYCOM Corporation, a subsidiary of the Company, is engaged in thedevelopment and sales of software.

(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
Key products

Positioning of the Company and affiliated companies

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

(Manufacturing and sales)
TLP Corporation, a subsidiary of the Company, is engaged in the manufacturing andsales of continuous business forms for PCs and general office forms, and data
printing services (DPS).

- 10 -

A structural diagram of the Group’s business activities is as follows:- 11 -

4 [Information on Affiliates](1) Consolidated Subsidiaries
Name

AddressTLP Corporation

Itabashi-ku,
Tokyo

TKC Security Services
Co., Ltd.

Utsunomiya-shi,
Tochigi

SKYCOM
Corporation

Chiyoda-ku,
Tokyo

TKC Customer
Support Service Co.,Ltd.

TKC Shuppan
Corporation

Capital(millions of
yen)

100

Kanuma-shi,
Tochigi

Shinjuku-ku,
TokyoPrincipal line ofbusiness
Printing business,
manufacture andsales of continuous
business forms for
PCs

Percentage of voting
rights held (%)

100.0

10

Security,
maintenance &repairs, and cleaning
services

100.0

100

Development andsales of systems

100.0

25

Help desk services

83

Production ofmonthly magazines,
etc.

Relationship
Purchasing of printed
continuous business
forms for PCs;
lease of office spaces.
Executive positions
held concurrently: yes
Funding: no
Security, maintenance& repairs, packaging
and shipping services.
Executive positions held
concurrently: yes
Funding: no
Outsourcing ofsystems development.
Executive positions held
concurrently: yes
Funding: no

100.0

Outsourcing of help
desk services.
Executive positions held
concurrently: yes
Funding: no100.0

Purchasing of monthly
magazines, etc.
Executive positions held
concurrently: yes
Funding: no(Notes) 1. TLP Corporation is a specified subsidiary.
2. None of the companies currently submit Securities Registration Statements or Annual Securities Reports.
(2) Equity Method Affiliated Companies
NameiMobile Inc.

Address

Shibuya-ku,
Tokyo

Capital(millions of
yen)

100

Principal line ofbusiness

Development andmaintenance ofwebsite services

Percentage of voting
rights held (%)

30.0

Relationship
Outsourcing ofdevelopment andmaintenance ofwebsite services.
Executive positions held
concurrently: yes
Funding: yes(Note) None of the companies currently submit Securities Registration Statements or Annual Securities Reports.

- 12 -

5 [Employees](1) Consolidated Basis
As of September 30, 2021
Name of segment

Number of employees

Accounting Firm business

1,688

Local Governments business

604

Printing business

189

Corporate (shared)

370
Total

2,851

(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, 2021
Number of employees

Average age (years)

Average years of service (years)

Average annual salary (yen)

39.5

16.2

7,587,877

2,398
Name of segment

Number of employees

Accounting Firm business

1,540

Local Governments business

604

Corporate (shared)

254
Total

2,398

(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.

- 13 -

Part 2 [Business Overview]
1 [Management Policy, Business Environment and Challenges Faced by the Company](1) Management Policy, Business Environment and Challenges Faced by the Company
1. Management policy, management strategy
The Company is managed to achieve the following two business objectives as set forth in our Articles of Incorporation(Article 2) under the company motto of “Jiri Rita (“self-interest is in the realization of other's interest”) andmanagement principle of “Contribution to our Customers.”
1)

Management of electronic data processing centers to defend the business domain 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.

2. Business environment
The Japanese economy is seeing gradual recovery as progress is made in novel coronavirus (COVID-19) vaccinations.
However, as the pandemic persists in other countries around the world, the re-spread of the disease in Japan remains
a concern. Moreover, the impacts of rise in costs of materials and components due to the fragmented supply chain are
gradually surfacing, and we have not ruled out the possibility of greater impacts depending on future trends in
slowdown in trade and suppression of corporate capital investments.
In such situation, the Japanese government is aiming to resume the socio-economic activities by preparing various
measures to support the people and SMEs such as offering booster vaccination. By quickly complying with suchgovernmental initiatives and offering compatible systems and services, the Group will continue to support the local
communities and society.
Revisions to the laws and advancements in ICT have significant impacts on the products and services that the Group
offers. Legal reforms to which we must respond include: the electronic filing of income taxes mandated to large
corporations starting in April 2020; the Revised Electronic Books Maintenance Act to be enacted as of January 1,
2022; the Group Tax Sharing System to be enacted in April, 2022; the new invoicing system to be implemented in
October 2023; and electromagnetic invoicing requirements. In addition, we must also respond to the digital reform
initiatives promoted by the government and local municipalities, as well as the unified standards for local public
accounting. Advancements in ICT include evolutions in cloud computing technologies, response to FinTech, and useof AI.
We believe it is critical to become responsive to these changes in the environment and reflect such knowledge in the
products and services offered by the Group.
3. Priority business and financial issues
1)

Providing systems in complete compliance with laws and regulations
The Group provides support for the operation of accounting firms and local governments by achieving complete
compliance with relevant laws and regulations and offering systems developed based upon the latest ICT. As
such, the Group will continue to enhance system developments that will enable us to promptly respond torevisions to such 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, and compile the Company’s management
philosophy, various board structures and corporate rules and regulations in a systematic manner to improve theGroup governance system.
In particular, the Group established and operates a Group governance system in response to the Practical
Guidelines for Group Governance System formulated by the Ministry of Economy, Trade and Industry (METI)
in June 2019.

3)

Fostering an organizational culture that bolsters job satisfaction
The Group will work to develop a workplace that respects individuals and team work, support efforts to develop
the capabilities of employees necessary to deliver value to our customers in accordance with the Company’s
Management Principles, and foster an organizational culture that bolsters job satisfaction.

- 14 -

4)

Ensuring business continuity
The Group will strengthen and expand existing services to ensure the continuity or early recovery of the business
operations of all of our customers in the event of large-scale natural disaster and other unforeseen circumstances.

5)

Rapid response to system failure
In the rare event that the Company’s system fails, the Group will identify the users impacted by system failure
to notify them of the nature of the failure and countermeasures, and strive to establish a system to provide rapid
support for recovery under the policy of “100% customer relief.”

6)

Efforts toward information security
The Group always provides various information services for accounting firms and their clients and local
governments through the use of latest ICT. Ensuring information security is our highest priority and also a social
responsibility in conducting our business activities.
It is with this awareness that the Company 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) in order to develop a technical environment that enables our customers touse our cloud services with a peace of mind.
In addition, the TKC Internet Service Center (TISC) acquired the following certifications: ISO/IEC 27018, codeof practice for protection of personally identifiable data in the public cloud on October 12, 2015; ISO/IEC27017,
code of practice for information security controls for cloud services on June 19, 2017; and ISO/IEC20000, theinternational standard for IT service management system on June 7, 2021.
The Company will continue to strive to develop environments where customers can use cloud services safely,
securely and conveniently.

(2) Management Policy, Business Environment and Challenges Faced by the Accounting Firm Business Division
1. Management policy, management strategy
The Accounting Firm BD operates in accordance with the business objectives set forth in the Articles of Incorporation(Article 2, Paragraph 1: Management of electronic data processing centers to defend the business domain andmaintain control over the fate of accounting firms) and works under close ties with the TKC National Federation,
which consists of certified public tax accountants and certified public accountants that are customers of TKC (11,500
members).
TKCNF announced its 3-year activity policy from 2019 to 2021 as follows:[Activity policy to change society with the TKC brand]
1)

Promote Shomen-tempu (attachment of tax audit reports) by the TKC methods (FY2021 year-end target:
corporate Shomen-tempu by 156,000 companies)

2)

Promote TKC Monitoring Information Service (FY2021 year-end target: 140,000 companies, 280,000 cases)

3)

Promote self-accounting practice by the TKC methods (FY2021 year-end target: 300,000 companies, of which,
180,000 cases to be electronic books)

Based on the activity policy of TKCNF, the Company conducts activities to achieve its strategic targets for FY2021.
In addition, the Company supports the expansion of clients of TKC Members by providing tax and accounting
systems for listed companies and other large enterprises in close collaboration with the TKCNF's Medium andLarge-size Support Research Committee and the Overseas Deployment Support Research Committee.
2. Business environment
According to the Outline of Filing of Corporate Income Tax Returns (Taxation) published in October 2020 by the
National Tax Agency, the percentage of companies recording profit in FY2019 was 35.3%. Although this was anincrease of 0.6 percent points over the previous program year and the percentage has been rising for nine consecutive
years, it shows that approximately 65% are still recording losses. Moreover, due to the COVID-19 pandemics, SMEs
are still exposed to risks of difficulties and record losses. Amidst such impenetrable fog, many SMEs have secured
cash on hand through emergency loans, which they began repaying in 2021. Businesses now face a big challenge of
securing profit necessary to repay the loans.
In such climate, TKC Member firms, in an aim to achieve positive balance and proper filing, conducted monthly fieldaudits and monthly settlements, offered managerial advisory services, and undertook activities to “strengthen thecompany through accounting.” We also provided various support services, including the calculation of profits andsales revenues needed for loan repayment and development of business plans. As a result of these activities, nearly
56% of the clients of TKC Member firms have achieved surplus, and there are rising expectations from SMEs and- 15 -

financial institutions nationwide towards the effective instructions provided by TKC Member firms.
The Revised Electronic Books Maintenance Act will be enforced on January 1, 2022, and the Revised Consumption
Tax Act will be enforced on October 1, 2023. All business operators will be required to take actions for thepreservation of data in the form of electromagnetic records and qualified invoice system. The Company considers
such legal and social system reforms as an opportunity to expand the client base of TKC Members.
3. Priority business and financial issues
The Accounting Firm BD considers contributing to the prosperity of accounting firms and their clients the most vitalbusiness challenge, and will continue to collaborate closely with the TKCNF on the various TKCNF activities as wellas support the operation of TKC Members through the development and provision of systems and services.
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.

a. The strengths of the Company’s systems lie in the one-stop, full line of tax affairs and accounting. We have thecapability to maintain complete compliance with laws, regulations and accounting standards in our financial
accounting systems and to provide a one-stop, full line of accounting, tax affairs and electronic tax filing withfully compatible links to related tax information systems. Looking ahead, the Company will continue to respondpromptly and accurately to revisions of laws/regulations and system modifications.
b. The most important feature of the Company’s systems is that they are not mere offering systems and services.
Our systems come with the meticulous support, from implementation to operation, by TKC Members that haveextensive experience in tax- and accounting-related practices, to enable clients to perform legitimate andappropriate tax and accounting. The Company will strengthen our support for such TKC Members to assist themin adding greater value to their 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 self-accounting promotion activities, taking
advantage of the strengths of systems that prevent any retroactive insertions, deletions and corrections which
may lead to falsification of accounting data.

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)

Enhance and expand the TKC Consolidated Group Solution
In collaboration with the Medium- and Large-sized Companies Support and Overseas Business Support
Councils of TKCNF, the Company utilizes the TKC Consolidated Group Solution to support large sizedcompanies in rationalizing and streamlining such operations as taxation, accounting, and management ofoverseas subsidiaries.

5)

Increase of user base of TKC Law Library
The Company will enhance the functions and contents of LEX/DB Internet, Publishers’ Database, Legal Book
Search and other contents constituting the TKC Law Library to further increase the convenience of users.
Through such efforts, we aim to differentiate the TKC Law Library from the services offered by competitors inorder to further increase the use by law firms.

(3) Management Policy, Business Environment and Challenges Faced by the Local Governments Business Division
1. Management policy, management strategy
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 the administrative
efficiency of local governments") and offers specialized information services in order to help promote the welfare ofresidents by improving administrative efficiency.
Also, as a medium- to long-term business vision, the Company established a policy to “contribute to the prosperity
and development of local communities by improving administrative efficiency and resident services and reducing
administrative costs through optimal use of TKC systems, and is now in the process of executing the strategies tothat end.
2. Business environment
Informatization of local governments (municipalities, in particular) is at a major turning point.

- 16 -

Against the backdrop of labor shortages due to declining birthrate/aging population and depopulation in local
communities, municipalities are facing an important managerial issue of transitioning to a “Smart Municipality(digital society)” that could provide administrative services in a sustainable manner with half the number of staff. In
particular, the COVID-19 pandemic brought light to the social issue of delay in digitalization of administrative
services, which caused local governments to further accelerate their efforts. The national government formulated the
Basic Act on the Formulation of a Digital Society (Cabinet Decision of Dec. 25, 2020), highlighting that the roles of
local municipalities (cities, wards, towns, and villages) which take on administrative services close to residents are
crucial in achieving a digital society. It calls for all municipalities to keep pace in implementing the following
measures in accordance with the Local Governments Digital Transformation (DX) Promotion Plan (Ministry ofInternal Affairs and Communications, Dec. 25, 2020):
1)Standardization and common use of information systems
By end of March 2026, migrate the 17 mission-critical operating systems to systems that are compliant with thestandard specifications designed by the national government; utilize the nation-wide cloud (Gov-Cloud) toaccess the standardized systems.

2)

Promotion of My Number Cards
In an aim for the majority of residents to become My Number Card holders by the end of March 2023, encourage
applications in accordance with the Issuance Promotion Plan as well as enhance issuance functions.

3)

Switching to online administrative services
Targeting the end of March 2023, enable residents to use their My Number Cards to access major administrative
services (31 services) online through Mynaportal.

4)

Promotion of use of AI/RPA

5)

Promotion of teleworking

6)

Ensuring security measures

In addition, while governments and municipalities face increasingly serious financial conditions, local governments
are expected to establish “sustainable administrative operations” in order to provide administrative services in aconsistent, sustainable, efficient, and effective manner. To this end, local municipalities are facing the urgent need to
update and disclose financial documents appropriately, visualize their financial conditions accurately, andaggressively utilize the information obtained from those financial documents in the assessment of projects and top
decision-making.
Meanwhile, looking toward the market trends of business vendors supplying for local governments, new players
from other industries and startups are entering the field of digitalization of administrative services one after another.
Trends show that the local governments market is now increasingly competitive and the world has shifted to a harshplace where only those system suppliers who have the ability to respond flexibly and quickly to the changing businessenvironment could survive.
3. Priority business and financial issues
As corporate effort to achieve digital transformation of local governments and to support sustainable reform ofadministrative and financial services, the Local Governments BD considers it a vital business challenge to provide
support for the enhancement of services for residents and reduction of costs through improving the administrative
efficiency of local governments, which are to be achieved through the development and provision of innovative
products and services that leverage the latest in ICT, and will implement the following five priority activities to thisend.
1)

We will develop new municipality customers of mission-critical operational systems and further promote
government cloud systems to propel digitalization of administrative services and minimize costs;

a. To respond to the standardization & common use of local government information systems to be implemented
by end of March 2026, we began to develop systems that are fully compliant with the standard specifications
designed by the national government, and to achieve compatibility with Gov-Cloud.
b. Compatibility with Gov-Cloud means that the systems that are implemented and operated at TISC will be fullycompatible and operable on the nationwide cloud platform that the government is building.
c. Two of the clients of the Company (Misato Town and Kawajima Town, Saitama Pref.) were selected for theGovernment Cloud Predecessor Project procured by the national government. The Company will be involvedin this Project as application vendors for both towns. In this Project, we will mainly conduct verifications on thesystem migration to Gov-Cloud, functions and behavior of the systems after migrating, and information
securities.
2)

We will support the realization of evidence-based policy making (EBPM) based on public accounting- 17 -

information by providing systems that allows analysis of administrative efficiency through multilateral use offinancial data;3)

We will support the enhancement of convenience of users (governments and residents) through disseminationand expansion of eLTAX-related services and digitalization of tax administration;

4)

We will engage in the development and provision of new, user-oriented administrative services anddigitalization support solutions;5)

We will establish mutual software product supply relationship with local vendors providing services to local
municipalities in order to promote alliance strategies to achieve expansion of sales area and multiplexing ofservices.

(4) Management Policy, Business Environment, and Challenges Faced by the Printing Business Division(Subsidiary: TLP Corporation)
1. Management policy, management strategy
The Printing BD operates under the management policy to contribute to the communication and marketing of clientcompanies and their customers by utilizing digital technologies and providing products and services that meet thechanging needs. The COVID-19 pandemic has created a rapid flow for the government to go digital in thisinformation-intensive society. To respond to the changes in social environment and values of clients, the Printing
BD works to develop products and services utilizing our production technologies, to improve quality, and to add
greater value. As a good partner to our clients, we will strive to further improve corporate value through thedevelopment of a communication environment utilizing digital technologies and printed materials.
2. Business environment
With the expansion of the Internet environment and due to impacts of the COVID-19 pandemics, people haveadjusted their lives to new lifestyles and new work/business styles. Under the government’s digital reform
initiatives, digitalization of administrative services, regulatory reform, wide use of the My Number card, anddigitalization of education are in progress. The market is seeing creation of new businesses prompted by such
unprecedented changes in the environment and shifts in sense of values. As to our key products, data print services(DPS) and business process outsourcing (BPO), we strive to provide products and services that meet these changes.
While demands for business forms continue to decline over time, we will work to reduce costs and expand ourshares within the market through streamlining of production environment, elimination and consolidation offacilities, and increase in production efficiency.
3. Priority business and financial issues
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 provide greater added-values to our products and services by combining our analog and digital printing
technologies, thereby contribute to direct communication efforts of our customers.

2)

We will continue to develop new technologies to respond to customer needs and to enable unique proposaloriented sales activities by differentiating ourselves from competitors.

3)

Customers have increased reliance on outsourcing as a result of COVID-19 pandemics. We will contribute tostreamlining the customers’ business operations through efforts including maintaining high quality, minimizing
costs, and reducing information security risks.

4)

We will improve quality and enhance quality and production capabilities by further strengthening the production
environment of the dedicated DSP plant.

5)

We will strive to improve and maintain consistent quality, and enhance our quality inspections of each process
for all products to prevent quality defects.

6)

We will carry out digital transformation (DX) and automation of processes throughout the Company to boost
productivity and operational quality of all business segments.

7)

In order to win trust from customers and business partners, and to stay on the front line of the governmentinitiated promotion of My Number Cards, we will further strengthen our information security systems based on
Privacy Mark and ISMS to ensure strict management of My Number.

8)

As ISO14001 certified, environmentally-friendly company, we will reduce wasted paper and further put ourefforts into reducing energy consumption through increased productivity and efficiency.

- 18 -

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 ourinvestors are described below. It is also our policy to be forthcoming in disclosing information on other 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 respondpromptly should they occur. However, we feel it necessary that investment decisions concerning the Company
securities should be made after thorough review in light of this section and also in reference to the contents of thisentire report. Note that this section does not cover all risk factors related to investment in the Company securities.
Statements with regard to the future are based on the Group’s decision made as of the end of the current consolidated
fiscal year (September 30, 2021).

(1) 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 the effectsof 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 affect the financial
standing and operating results of the Group.

(2) Decline in Value of Fixed Assets
The Accounting Standard for the Impairment of Fixed Assets has been applicable since FY2006 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.

(3) 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 and tighteningof supply and demand in international markets. Should such circumstances prevail, the Group will aim to respondthrough 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 whenpurchase prices rise significantly.

(4) Stable Operation of Cloud Services
The Company is taking various measures to enable customers (including accounting firms and their clients, medium
and large sized companies, and local governments) to use its cloud services in a safe and secure ICT environment,
and to be able to maintain and continue its business operations in the event of emergencies. However, as we cannot
prevent all unexpected disruptions, we take the following measures for early detection and recovery, and to minimize
the impacts to our customers’ business operations;
1. Strengthen our verification process upon providing the programs;
2. Strengthen our BCP in the event of unplanned disruptions;
3. Reduce time needed for recovery;
4. Third party assessment and verification of the effectiveness of measures.

(5) 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 also strengthens its information protection management systems by obtaining third party accreditations
such as ISO/IEC27001 Information Security Management System (ISMS) and JIS Q 15001 Personal Information
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 cloudservices, and ISO/IEC27017 certification for information security controls for cloud services and other third party- 19 -

accreditations.
However, the potential for such information leaking due to unforeseen circumstances cannot be eliminatedcompletely, and 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 resultsof the Group.

(6) Contentious Cases
While there are no contentious cases that could affect the financial standing and operating results of the Group, suchcontentious cases could occur in the future.

- 20 -

3 [Management Analysis of Consolidated Financial Conditions, Operating Results, and Cash Flows](1) Analysis of the Group’s Consolidated Operating Results for the Current Consolidated Fiscal Year
1. Operating Results across the GroupThe Japanese economy in the consolidated fiscal year under review (October 1, 2020 to September 30, 2021)(hereinafter, the “current fiscal year”) is seeing gradual recovery as progress is made in coronavirus (COVID-19)
vaccinations. However, as the pandemic persists in other countries around the world, the re-spread of the disease inJapan remains a concern. Moreover, the impacts of rise in costs of materials and components due to the fragmented
supply chain is gradually surfacing, and we have not ruled out the possibility of various restrictions to future economic
activities.
In such economic climate, the Company has worked to provide aggressive support to our customers by offering new
systems and services.
The Accounting Firm Business Division continued to support certified public tax accountants and certified public
accountants that are customers of TKC (hereinafter, “TKC Members”) in their efforts to provide their clients withassistance in financing and managerial advisory services as escort supporters of SMEs. We also support SMEs ingoing digital and reducing the burdens of accounting operations by providing cloud-based accounting systems.
The Local Governments Business Division quickly provided services in response to the release of the administrative
circular “Implementation Outline of Establishing COVID-19 Vaccination Systems” on October 23, 2020 from the
Ministry of Health, Labour and Welfare, including revision of the vaccination ledger system and related systems,
rendering of services for the production of COVID-19 vaccination coupon notices, and provision of vaccination
reservation & registration systems, thereby supported customer local municipalities in their COVID-19 vaccination
projects.
As a result of these activities, during the fiscal year under review, the consolidated Group comprising of TKC
Corporation and its six consolidated subsidiaries recorded a net sales of 66,221 million yen (decreased 2.3% year-onyear), operating income of 12,314 million yen (increased 8.2% year-on-year), ordinary income of 12,673 million yen(increased 8.5% year-on-year), and net income attributable to owners of parent of 8,686 million yen (increased 11.1%
year-on-year).
The reason for decrease in net sales compared to the previous fiscal year is due to the Company’s decision on theearly application of the Accounting Standard for Revenue Recognition (hereinafter, “Revenue Recognition
Accounting Standard”), which will be mandatory for listed companies from the fiscal year starting after April 1, 2021.
As a result of applying the Revenue Recognition Accounting Standard, net sales decreased by 2,460 million yen
compared to the amount recognized if said Standard had not been applied. The reason for the Company’s early
application of the Revenue Recognition Accounting Standard was in an aim to compile the know-how gained throughthe application of said Standard and provide such know-how in its consulting services for listed companies.
Net sales for the current fiscal year by business division are shown below.

2. Business activities and operating results of the Accounting Firm Business Division
1) Business activities of the Accounting Firm BD
The Accounting Firm BD operates in accordance with the business objectives set forth in the Articles ofIncorporation (Article 2, Paragraph 1: Management of electronic data processing centers to defend the businessdomain and maintain control over the fate of accounting firms) and works under close ties with the TKC National
Federation (TKCNF), which consists of 11,500 certified public tax accountants and certified public accountants(as of September 30, 2021) that are customers of TKC.
[Activities to achieve the strategic goals of the Accounting Firm Business Division]a. Support of SMEs affected by COVID-19
During the fiscal year under review, the Company aggressively engaged in support activities under the policy tofocus all its effort on supporting TKC Members and their clients.
i)

Provision of the latest information to TKC Members
To accurately and quickly convey information on SME support policies (such as the Employment Adjustment
Subsidy and Business Reestablishment Subsidy) released by the national government and SME support
organizations to TKC Members, the Company provided the latest information on a daily basis and offered ondemand webinars on these programs over the exclusive Intranet (ProFIT) for TKC Members. We began thisactivity on February 25, 2020 and posted a total of 253 entries as of the end of September 2021.

ii) Provision of TKC Monthly Indicators (Monthly BAST)- 21 -

In May 2021, we began the free offering of TKC Monthly Indicators (hereinafter, “Monthly BAST”). Monthly
BAST is a statistical summary unprecedented in Japan which contains the monthly settlement data of over
250,000 companies. The reliability of the monthly settlements contained is verified through the monthly fieldaudits conducted by TKC Members. Users can view the latest information on the shift of sales and loans, etc.
of companies, on a nation-wide scale or by prefecture, by annual revenue, or by industry. We expect that theMonthly BAST will be utilized by those in charge of supporting SMEs at financial institutions andadministrative agencies, and economists analyzing the trends of SMEs in determining measures to support
SMEs going forward.
iii) Offering of “COVID-19 management support information & emergency financial measures” corner
The Company developed a special website where TKC Members can check SME support policies offered by
the national governments, prefectural governments, as well as cities with a population of 40,000 or greater,
and financial institutions under the categories: Loans, Employment, Subsidies, and Taxation. TKC Members
are able to send out information on emergency financial measures widely across clients and other SMEs. Asof the end of September 2021, the website had 8,002 entries on support policies and is the largest database
dedicated to SME support policies in Japan. The corner has been updated twice a week since the launch toensure that the latest information is available at all times.
iv) Upgrading of a check function for clients requiring emergency support
The Company provided a check function for clients requiring emergency support on the Tax Accountants
Office Management system (OMS). This function can automatically evaluate the eligibility of each client in
the form of a checklist of various governmental emergency economic policies, special loans by governmentaffiliated financial institutions and other SME support policies. Further in the current fiscal year, we responded
immediately to changes in the eligibility for the 3rd call for application for Business Reestablishment Subsidy,
and added a function to extract eligible clients with a single click.
b. Sales activities to achieve TKCNF’s Strategic Targets 2021
TKCNF sets its 3-year activity policy from 2019 to 2021 and Strategic Targets 2021. The content is as follows:[Activity policy to change society with the TKC brand]i)

Promotion of Shomen-tempu (attachment of tax audit reports) by the TKC methodsii) Promotion of TKC Monitoring Information Serviceiii) Promotion of self-accounting by the TKC methods
The initiatives of TKCNF are beginning to draw the attention of many financial institutions. To take advantageof this opportunity to further enhance the managerial infrastructure of TKC Member firms, we launched thefollowing measures:i)Understand and practice the Standards of Conduct for TKC Accountants;ii) Increase the numbers of Field Auditors and Assistant Field Auditors;iii) Enhance the managerial advisory services as a Certified Support Agency.
The Company has been engaged in sales activities to achieve the Strategic Targets 2021 in collaboration withTKCNF.
i)

Promotion of TKC Monitoring Information Service
TKC Monitoring Information Service is a free cloud-based service in which the TKC Members, upon request
by the management of their clients, provide to financial institutions such information as monthly trial balance
sheets, financial statements and tax returns prepared by TKC Member firms after monthly field audits andmonthly settlements. Monthly trial balance sheets will be made available immediately upon completion of
the monthly settlement, and financial statements and tax returns are disclosed immediately after the clientelectronically files its financial documents to the tax authorities.
While promoting the TKC Monitoring Information Service, the Company communicated to financial
institutions that the reliability of financial statements prepared by SMEs can be verified by the following
three documents:- Supporting documents submitted by TKC Members as provided for under Article 33-2 of the Certified
Public Tax Accountant Act of Japan- Certificate of Bookkeeping Timeliness, with which TKC Corporation certifies the timeliness in the
preparation of accounting books as required under Article 432 of the Companies Act of Japan and theconnection between the financial statements and tax returns for the past three years- 22 -

- The Chusho Kaikei Yoryo checklist developed by the Japan Federation of Certified Public Tax
Accountants' Associations and Japan Federation of Credit Guarantee Corporations
As a result of these activities, the number of financial institutions adopting this Service is increasing rapidly,
adopted by 468 financial institutions including all local banks throughout Japan (64 institutions) as of
September 30, 2021. Also, as of September 30, 2021, we achieved the target of 280,000 cases set in
TKCNF’s Strategic Targets 2021.
While the issue of excessive debt of SMEs is gradually surfacing amidst the pandemic, our TKC Monitoring
Information Service, which can quickly provide monthly trial balance sheets, financial statements, and tax
returns, is gaining high acclaims from financial institutions and credit guarantee corporations that are striving
to support the businesses of SMEs. This service is expected to serve as a bridge between financial institutions
and TKC Members in their efforts to support the businesses of SMEs.
ii) Promotion of self-accounting by the TKC methods (promotion of FX series)
Many SMEs are in need to plan for repaying the virtually interest-free, no-collateral loans from governmentaffiliated and private financial institutions. Recognizing these needs, during the current fiscal year, we
continued to provide support for the utilization of functions for the management strategy level (budget
registration, management by division, financing results spreadsheet) incorporated in the FX series. In orderfor management to utilize these functions effectively, they need to enter the accounting transaction data in atimely and accurate manner, so the Company also provided support on functions for daily task level,
including support for the bank credit data receiving function to receive bank deposit transaction data throughonline banking and generate journal entries automatically, and the linking of salary journal with the strategicsalary information system (PX2). In addition, the FX Cloud series which was released on September 25,
2020 features enhanced functions to “strengthen the company through accounting” and enhanced functions
to support the field auditing by accounting firms. By offering assistance to implement the FX Cloud series,
the Company will work to support SMEs in strengthening their financial management and capitalprocurement capabilities.
iii) Supporting complete compliance with the Electronic Books Maintenance Act of JapanThe requirements for the retention of electronic books have been eased in the Revised Electronic Books
Maintenance Act of Japan to be enacted as of January 1, 2022. With this, there will be two types of electronic
books (which are electromagnetic records of national tax-related books): (a) “superior electronic books” that
contain the history of additions, deletions and revisions to the accounting data (traceable) (electronic books
that satisfy the requirements of Article 2 and Article 5 of the Ordinance for Enforcement of the revised Act);and (b) “other electronic books” that are prepared using accounting software that do not keep record of such
additions/deletions/revisions (electronic books that satisfy only the requirements of Article 2 of theOrdinance for Enforcement of the revised Act). This legal reform negates “the power of evidence” of thebooks, and the acceptance of such “other electronic books” implies that the government has approved theuse of accounting software that might enable falsification of books.
To counter this issue, the Company supports the implementation of the FX series for the preparation of“superior electronic books” on a national level.
iv) Supporting complete compliance with the new invoicing system
A new invoicing system will be implemented as from October 1, 2023. During the two years until the new
system comes into effect, taxable business entities must prepare for the new invoicing system, including
application for registration as qualified invoice issuer, issuing of qualified invoices, and gaining knowledge
on bookkeeping from qualified invoices. To enable accounting firms to provide smooth support to SMEs,
we are offering reference materials and preparing for on-demand seminars.
v) 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
2021. The Company is working closely with the New Members Service Committee of TKCNF in soliciting
new members to achieve this goal through activities such as active hosting of webinars.
As a result of these activities, the number of TKC Member firms totaled approximately 9,800 accounting
firms (11,500 accountants) as of September 30, 2021. The difference in numbers of firms and accountants
are because some firms have multiple accountants who are members.
[Activities to "support the preparation of highly reliable financial statements based on timely and accurate
bookkeeping"]
a. Support activities for diffusion of Chusho Kaikei Yoryo (Guidelines for SME accounting)
The TKCNF recommends the use of Basic Guidelines with Respect to the Accounting Procedures at Small- andMedium-sized Enterprises (hereinafter, “Chusho Kaikei Yoryo” (Guidelines for SME Accounting)) formulated- 23 -

in February 2012 with which SME clients should comply.
These Guidelines have been formulated based on the following principles: i) accounting that helps to grasp thecompany's business situation; ii) accounting that contributes to providing information to stakeholders (financial
institutions, etc.); iii) accounting that complies with the Ordinance on Company Accounting while achieving
harmony between accounting and taxation system; and iv) accounting that does not 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 with otherorganizations supporting SMEs.
b. Issuance of Certificate of Bookkeeping Timeliness
The Company utilizes the processing log data and historical time series data that are automatically logged at ourdata centers when TKC Members access our accounting system to issue a Certificate of Bookkeeping Timelinessfree of charge. This Certificate serves as reference for financial institutions and other third parties to objectively
evaluate the business performance of TKC Member firms.
This service 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 thefeatures of the Company's financial accounting processing at 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 clients on a monthly basis to provide 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 by a one-stop, full line process in a timely manner.
By next year, we will enhance the functions to enable private businesses who use the TKC systems for accounting
and tax return process, and receive the issuance of Certificate of Bookkeeping Timeliness (for private businesses)
to submit their blue returns and other documents to financial institutions. We will support private businesses instrengthening their collaboration with financial institutions.
[Expansion into large-scale enterprise market]
By utilizing the TKC systems, the Company contributes to the compliance and rationalization of tax andaccounting operations of large enterprises, mainly of listed companies, and is actively working to solicit thesecompanies and their affiliates to become clients of TKC Members.
Starting April 2020, large enterprises with a capital of 100 million yen or greater are mandated to use electronic
filing of income tax, consumption tax, and local taxes. With this reform, large sized companies must file theirincome tax returns electronically, as well as submit any attachments to tax returns (financial statements, statementclassified by accounting items, etc.) in electronic data form. To enable these companies to switch smoothly to the
mandated electronic filing system, the Company worked with TKCNF’s Medium- and Large-sized Companies
Support Council (1,518 members as of September 30, 2021) and released the Guidebook on Complying withMandatory Electronic Filing on the Company’s website and conducted activities to support users of ASP1000R
electronic tax filing system for corporations and the eConsoliTax consolidated tax payment system in the actual
implementation of electronic filing. As a result, the number of users of systems such as ASP1000R electronic tax
filing system for corporations and the eConsoliTax consolidated tax payment system reached 7,644 companies asof September 30, 2021. This is equivalent to approximately 33% of the 23,000 some companies with a capital of
100 million yen or greater.
Also, as companies having business abroad are restricted from traveling overseas due to COVID-19 pandemic,
they are facing challenges in managing their foreign subsidiaries and ensuring governance. More and morecompanies facing such hardship are implementing our OBMonitor overseas business monitoring system, as it isa cloud service that allows companies to check the financial data of their foreign subsidiaries from their offices
in Japan. The number of users of the OBMonitor reached 1,200 companies, and is currently used in 37 countries
around the world.
As a result of these activities, the number of corporate groups using the TKC Consolidated Group Solution
counted approximately 4,720 corporate groups as of September 30, 2021. With this, our taxation-related
information systems are adopted by 89% of the 100 largest Japanese listed companies by sales amount. The
market shares among Japanese listed companies reached 41%.
Based on the know-how gained through the early application of the Revenue Recognition Accounting Standard,
the Company is conducting webinars to explain the practical measures in complying with said Standard and to
introduce the case studies of early application by the Company. To date, we have received over 4,250 requests toparticipate in the webinars.
[Expansion of markets for legal information database services]a. Increase of user base of TKC Law Library- 24 -

Many customers of the TKC Law Library including law firms and corporate legal departments now operate online
due to the COVID-19 pandemic. Because users are unable to conduct research at data rooms or libraries, the TKC
Law Library which offers access to laws and regulations, judicial precedents, bibliographic information references
and also contents of specialized law magazines, any time, from any place is now earning greater reputation. As aresult, the numbers of users and contracts to access additional contents have grown.
Also, in June 2021, the Company launched a new optional service of the TKC Law Library called the Legal Book
Search which allows users to access PDF versions of specialized books on laws, accounting, tax accounting,business management, etc. This service is a fixed rate service for attorneys to access the free book search functionsand view (for fee) the PDF versions on their tablets and PCs.
In the current fiscal year, as a result of online promotional activities towards TKC Member firms, universities,
law schools, government offices, law firms, patent offices and corporate legal departments, the number of users
exceeded 53,000 IDs and the Library is used by over 23,000 institutions as of September 30, 2021.
b. Progress in the academic market
Due to the impacts of COVID-19, many universities and law schools continue to conduct hybrid-style classes
combining face-to-face and online lectures or full online classes after April 2021.
Our systems, such as the TKC Educational and Research Support System and TKC Law Library, can be accessed
online and used anytime, anywhere. They contain a huge number of diverse contents compared to those of othercompanies, and include various functions such as report generation, exercises and testing. These features are being
reconsidered as tools to support online classes and learning for faculty and students. To date, the Company
conducts web meetings with various universities as needed, and continues to provide support in the developmentof online learning environments tailored to meet the situation of each university.
Also, the online study tools (for civil service examination, practical business law examination, and jurisprudence
examination) offered mainly to the faculty of law of universities have been adopted by 26 universities as of
September 30, 2021. Currently, many qualification examinations are adopting computer-based testing (CBT/IBT
method). We will promote the use of our online testing functions and other effective online study tools to prepare
for computer-based examinations among examination bodies and applicants.
2) Analysis of Accounting Firm BD’s operating results
Net sales of the Accounting Firm BD were 45,412 million yen (decreased 3.7% year-on-year); operating income was
10,563 million yen (increased 3.2% year-on-year). The impacts of applying the Revenue Recognition AccountingStandard resulted in a 2,344 million yen decrease in net sales and a 17 million yen decrease in operating income.
Breakdown of sales is as follows:a. Sales from computer services increased by 1.6% year-on-year. Medium-size companies are rapidly working
towards digital transformation (DX), and in such climate, this was attributable to the continuing growth in numberof implementations of the FX4 Cloud Integrated Accounting Information System for mid-size companies, whichenables the linking of sales management systems, salary calculation systems and other business systems withaccounting data, and the increase in the number of tax accounting firms adopting the Office Management System(OMS Cloud) for Tax Accounting Firms and the OMS Mobile which allows accounting firms to perform works
using the OMS from home or outside their offices.
b. Software sales increased by 3.7% year-on-year. This is the result of increase in the number of users of financial
accounting systems, such as FX4 Cloud Integrated Accounting Information System for mid-size companies, thatcompletely meet the requirements of the Electronic Books Maintenance Act of Japan, as well as strong growth in
the number of users of our electronic tax filing system for corporations (ASP1000R) in response to the electronic
filing of income taxes mandated to large enterprises with a capital of 100 million yen or greater starting April
2020.
As a result of applying the Revenue Recognition Accounting Standard, net sales decreased by 36 million yen
compared to the amount recognized if said Standard had not been applied. This was because the Company changed
the method of recognizing the net sales of software which were conventionally recognized as lump sum upon
shipment. For contract obligations that are fulfilled over a certain period of time, net sales are divided in proportion
to the contract period and recognized on a monthly basis.
c. Sales from consulting services increased slightly year-on-year. This was due to strong sales of the FX4 Cloud
Integrated Accounting Information System for mid-size companies, leading to increase in orders for system launch
support services.
d. Hardware sales decreased by 11.8% year-on-year. This was due to customers having completed their first roundof PC replacements last year in response to the termination of Microsoft’s Windows 7 support in January 2020,and PC sales reverting back to the usual level.
e. Sales from supplies decreased by 68.1% year-on-year. Sales from office equipment for remote works and COVID-- 25 -

19 infection prevention supplies were strong, however, with the application of the Revenue Recognition
Accounting Standard, many of transactions of accounting slips and office equipment for accounting firms mustbe journalized as “agent transaction.” Starting this current fiscal year, the Company recognized the amount of net
sales as transaction value less the purchase prices. As such, net sales decreased by 2,101 million yen compared tothe amount recognized if said Standard had not been applied.
f. The improvement in operating income year-on-year was a result of decrease in travel expenses by switching thestyle of customer support and proposal activities to remote using the online meeting system, and conducting
planned large-scale events in hybrid style by combining face-to-face and online, and also from decrease in costs
related to hosting seminars by changing our new customer acquisition activities from face-to-face seminars to
webinars.

3. Business activities and operating results of the Local Governments Business Division
1) Business activities of the Local Governments BD
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 the administrative
efficiency of local governments") and offers specialized information services in order to help promote the welfare ofresidents by improving administrative efficiency.
a. Development and provision of mission-critical system-related services
The Company provides TKC Government Cloud Service to municipalities (mainly for cities, wards, towns andvillages). This is a cloud service that consists of the TASK Cloud Service which supports 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.
Our TASK Cloud Service is a single version package system operated at TKC data centers that is designed toallow shared use by multiple institutions. Service fees are charged in the form of fixed rate subscription fee
depending on the scale of the municipality, which also include one regular upgrade per year. Acknowledged forthese benefits, the TASK Cloud Service has been adopted by more than 160 local municipalities as of September
30, 2021.
In the current fiscal year, we provided client municipalities with aggressive support for their vaccination projects
by offering the latest information to enable them to respond quickly and effectively to the vaccination projects,
and providing agile services for the revision of the vaccination ledger system and launching of the COVID-19
vaccination reservation & registration system.
b. Support for digitalization of administrative services
In an aim to contribute to promoting digital transformation of local governments, the Company provides
administrative service digitalization support solutions which support governments to achieve “no writing, no
waiting, no visiting” administrative counter services.
In the current fiscal year, we greatly enhanced the functionalities of the TASK Cloud Easy Counter Service
System, the TASK Cloud My Number Card Issuance Reservation and Management System, and also the TASKCloud Smart Application System which was developed and launched with the cooperation of Osaka city, Osaka
Prefecture.
As a result of aggressive promotional activities of these services, the TASK Cloud Smart Application System has
been adopted by over 10 municipalities including government ordinance-designated cities such as Osaka,
Yokohama, and Sakai cities, the TASK Cloud Easy Counter Service System is used by more than 20
municipalities, and the TASK Cloud My Number Card Issuance Reservation and Management System is adopted
by over 70 municipalities.
c. Support for digitalization of local tax administrations
The Company is an authorized contractor of the Local Tax Agency, and provides a cloud-based service for the
standard systems such as inspection system for eLTAX (local tax portal system) offered by the Agency. We also
develop and provide Data Connection Services as our own functionality to connect the individual tax systems ofeach municipality.
These services are proposed in collaboration with 50 partner companies with whom we have on-going alliancepartner agreements. As a result, our TASK Cloud Local Taxes Electronic Filing Support Service is currently usedby approximately 780 agencies which account for more than 40% of all prefectures and local municipalities as of
September 30, 2021.
In the current fiscal year, we worked to enhance the functionalities of our proprietary data connection services, aswell as engaged in aggressive promotional activities and implementation support together with our partner- 26 -

companies.
d. Response to standardized local public accounting
There is a section in the report by the Study Group on the Promotion of Local Public Accounting (FY2019)released by the Ministry of Internal Affairs and Communications in March 2020 that suggests: “It is believed thatsmooth implementation of the daily journalizing method and reduction of checking tasks in year-end bulk
journalizing can be achieved by implementing a local public accounting system that has an integrated financial
accounting system, linking, in advance, the expenditure items with account headings, and by establishing a systemthat can journalize and convert the budget items automatically upon budget execution. It may also be possible tostreamline the ledger registration tasks by linking and integrating the data in the public domain ledger and data in
the fixed assets ledger.” Based on the report, the Company recommends client municipalities to consider
implementation of a local public accounting system that has an integrated financial accounting system and adopt
the daily journalizing method upon system updating.
The Company provides the TASK Cloud Public Accounting System, as local public accounting systems integrated
with financial accounting system which is compatible with the daily journalizing method encouraged by theJapanese government, and its related systems TASK Cloud Non-current Assets Control System and TASK Cloud
Consolidated Financial Statement Preparing System.
In the current fiscal year, the Company engaged in enhancing the functions using the public accounting data fromthese local public accounting systems, such as year-by-year comparison analysis and graph displays. It also
received new orders from many agencies including Sodegaura City, Chiba Prefecture, and Kanuma City, Tochigi
Prefecture, and provided support for the smooth system launch and operation.
As a result, our local public accounting systems are adopted by more than 280 agencies as of September 30, 2021.
e. Research and development of next-generation products
The COVID-19 pandemic has revealed the delay in digitalization and moving online in administrative areas. In
response, the Basic Policy on Economic and Fiscal Management and Reform 2020 (Cabinet Decision of July2020) positioned all-out promotion of a digital government as top priority, and decided to speed up the
implementation of digitalization to move as many administrative procedures as possible online and make them
one stop and once only. Also, on December 25, 2020, the Ministry of Internal Affairs and Communications
announced the Local Governments Digital Transformation (DX) Promotion Plan, and six legislative bills on
digital reform were adopted on May 12, 2021, mandating local governments to standardize and commonalize theirinformation systems by March 31, 2026.
To respond to the change in the environment surrounding our customers, the Company is working to accelerate
the planning and development of new products as well as to strengthen customer support including the collection
and communication of the latest information.
During the current fiscal year, we gathered and communicated information on the digitalization of administrative
services and standardization of mission-critical operational systems, and conducted surveys, research anddevelopment on next-generation solutions through experimental projects with advanced organizations to support
the post-COVID-19 “New Normal Lifestyle.”
2) Analysis of Local Governments BD’s operating results
Net sales of the Local Governments BD were 17,704 million yen (increased 1.9% year-on-year); operating income was
1,705 million yen (increased 64.4% year-on-year). The impacts of applying the Revenue Recognition AccountingStandard resulted in a 72 million yen decrease in net sales and a 118 million yen decrease in operating income.
Breakdown of sales is as follows:a. Sales from computer services increased by 10.1% year-on-year. This was driven by increase in sales from thecustomer outsourcing services whose system was fully launched in FY2020, and increase in data center usage
fees, and the winning of contracts for the production of COVID-19 vaccination coupon notices under thevaccination projects.
b. Software sales decreased by 10.9% year-on-year. This was due to decrease in temporary revenue in response tolegal reforms from the previous fiscal year, including sales from system revisions conducted in the previous fiscal
year for the free preschool education subsidy program in response to partial revisions to the Child and Childcare
Support Act of Japan. As a result of applying the Revenue Recognition Accounting Standard, net sales decreased
by 176 million yen compared to the amount recognized if said Standard had not been applied.
c. Sales from consulting services increased 22.3% year-on-year. This was a result of increase in sales from system
implementation support, with the orders for new services such as the vaccination reservation & registration
systems and My Number Card Issuance Reservation & Management System. Also, as a result of implementing
the accounting processing which is unique to the first fiscal year of applying the Revenue Recognition AccountingStandard (recognizing the development costs prior to the previous fiscal year as cumulative effect of changes in- 27 -

accounting principle), net sales increased by 116 million yen compared to the amount recognized if said Standard
had not been applied.
d. Hardware sales increased by 5.7% year-on-year. This was due to increase in renewal of servers and peripheral
equipment by customers compared to the previous fiscal year.
e. The increase in operating income year-on-year was a result of rendering of services for the production of
vaccination coupon notices and provision of vaccination reservation & registration systems for the abovementioned COVID-19 vaccination projects, and in addition, significant decrease in travel expenses by switching
the style of customer support and proposal activities to remote using the online meeting system.

4. Business activities and operating results of the Printing Business Division
1) Business activities of the Printing Business BD
The Group’s Printing BD operates with the main focus on data print services (hereinafter, “DPS”), business form
printing, and printing of commercial-use creative materials.
In the DPS area, sales increased thanks to orders from local municipalities for printing of vaccination coupons under
their COVID-19 vaccination projects, despite impacts of decline in contract prices due to smaller lot orders, failure toreceive large projects from government offices, and decrease in demands for direct mail among private enterprises.
In the area of business form printing, sales decreased as a result of weak demands for business forms in response topaperless trends, and decline in demands for business forms due to impacts of COVID-19 pandemic.
In the area of printing of commercial-use creative materials (catalogs, flyers, booklets, books, etc.), sales dropped due
to decrease in printing orders for reference materials and flyers with the continued cancellation/postponement of events
impacted by COVID-19 pandemic and with increase in web-based seminars.
2) Analysis of Printing Business BD’s operating results
Net sales of the Printing BD were 3,105 million yen (decreased 5.5% year-on-year); operating income was 39 million
yen (decreased 63.5% year-on-year). As a result of applying the Revenue Recognition Accounting Standard, net sales
decreased by 43 million yen compared to the amount recognized if said Standard had not been applied. There were no
impacts to the amount of operating income or loss. Breakdown of sales is as follows:a. Sales of data printing service-related products increased by 1.7% year-on-year. While demands for direct mail among
private enterprises continue to decline due to the COVID-19 pandemic, we were able to improve performance by
winning orders from local municipalities for printing of vaccination coupons.
b. Business form-related sales decreased by 4.3% year-on-year. This is due to decline in demands for business forms
as a result of digital transformation initiatives by client companies.
c. Sales of printing of commercial-use creative materials (catalogs, flyers, books, etc.) decreased by 13.1% year-onyear. This was due to decrease in demands for printed materials and flyers for events, etc. from thecancellation/postponement of events, etc. impacted by the COVID-19 pandemic and switching to webinars.

5. Important matters with respect to the Company as a whole
1) Prevention of COVID-19 infection and actions for new working styles
As the outlook for the containment of COVID-19 pandemic is still unpredictable, the Company is taking the following
infection prevention measures and adaptation to new working styles in order to continue the provision of services to its
customers:a. To enable customers to continue using our cloud services, business form printing services, and help desk services,
we have been continuing from the previous fiscal year to strengthen our business continuity measures (includingprohibiting the entry of outside personnel at important offices and developing the infrastructure for remote access tothe data center).
b. By introducing teleworking and staggered working hour programs, we have worked towards achieving our target for
weekly attendance to less than 30% for applicable areas during declaration of state of emergency. We also made it ageneral rule to conduct customer support and business meetings using the Web meeting systems.
2) Application of the Revenue Recognition Accounting Standard
The Company began the early application of the Revenue Recognition Accounting Standard in the current fiscal year
(started October 1, 2020). This is in an aim to compile the know-how gained through the application of the Revenue
Recognition Accounting Standard and provide such know-how in our consulting services for listed companies.
3) Conducting of Stock Split
With the record date of March 31, 2021, each common stock held by shareholders listed or recorded in the final Register- 28 -

of Shareholders of the day will be divided at a ratio of two for one. The purpose is for the Company to aim to reduce
the amount of investment unit of the Company’s shares through a stock split, thereby improving the liquidity of theCompany’s shares and further expanding the investor base.
4) Acquisition of patents pertaining to systems
The Company acquired the following six patents:
a. Patent pertaining to “System, Method, and Program for Welfare Consultation Support” (Acquired on October 16,
2020; Patent No. 6780144)
b. Patent pertaining to “Instrument, Method, and Program for the Generation of Genogram and Eco-map” (Acquiredon January 8, 2021; Patent No. 6821846)
c. Patent pertaining to “Instrument, Method, and Program for the Reading of Card Information” (Acquired on January
8, 2021; Patent No. 6821847)
d. Patent pertaining to “Instrument, Method, and Program for Facility Acceptance Coordination” (Acquired on
February 19, 2021; Patent No. 6840882)
e. Patent pertaining to “System, Method, and Program for Graph Display” (Acquired on April 15, 2021; Patent No.
6869408)
f. Patent pertaining to “Instrument, Method, and Program for Generation of Accounting Data” (Acquired on September
27, 2021; Patent No. 6950107)
5) Acquisition of ISO/IEC20000
On June 7, 2021, the Company’s data center, TKC Internet Service Center (hereinafter, “TISC”) obtained the ISO/IEC
20000, the international standards for IT service management system. This certifies that the operating platform of TKC
cloud services established inside TISC is managed and operated in compliance with the international standards for
quality management, IT service management, and information security. From this data center, we will continue toprovide safe, secure, and convenient cloud services in order to support the business operation of customers.
6) Number of companies using the Company’s systems for the filing of corporate income tax returns exceeds 600,000
The Company began the offering of Japan’s first system to prepare corporate income tax returns (TPS1000) in 1981.
Since then, the system underwent various upgrading to respond to the enforcement of the Consumption Tax Act ofJapan in 1989 and legal reforms such as mandatory electronic filing, as we continued to improve the system’sfunctionalities. Today, we offer the Corporate Financial Reporting System (TPS1000), which incorporates the optimum
work process for corporate financial reporting enabling companies to complete the entire process from financial
settlements to electronic tax filing in a one-stop manner. In 2003 the Company also released the eConsoliTax
consolidated tax payment system which complies with the consolidated taxation system introduced in 2002, and theElectronic Tax Filing System for Corporations (ASP1000R) for large sized companies in 2007 which allows the
preparation and electronic filing of corporate income tax returns. These corporate income tax return preparation systems
are being highly rated by many TKC Member firms and listed companies, and the number of companies using theCompany’s systems for the filing of income tax returns exceeds 600,000 as of May 31, 2021.
This means that one out of every 4.6 companies in Japan are using TKC’s corporate income tax return preparation
systems.

6. Analysis of the Group’s consolidated financial conditions for the current consolidated fiscal year
1) Assets
Total assets as of the end of the current consolidated fiscal year amounted to 103,406 million yen, a 5,734 million yen
increase compared to 97,671 million yen as of end of the previous consolidated fiscal year.
a. Current assets
Current assets as of the end of the current consolidated fiscal year amounted to 36,107 million yen, a 263 million
yen increase from 35,844 million yen as of end of the previous consolidated fiscal year.
This was mainly attributable to an increase of 233 million yen in Advances payments included in Other.
b. Non-current assets
Non-current assets as of the end of the current consolidated fiscal year amounted to 67,298 million yen, a 5,471
million yen increase compared to 61,826 million yen as of end of the previous consolidated fiscal year.
This was mainly attributable to 3,423 million yen increase in Investment securities and 2,000 million yen increasein Long-term deposits.
2) Liabilities- 29 -

Total liabilities as of the end of the current consolidated fiscal year amounted to 19,990 million yen, a 605 million yen
decrease compared to 20,595 million yen as of end of the previous consolidated fiscal year.
a. Current liabilities
Current liabilities as of the end of the current consolidated fiscal year amounted to 14,721 million yen, a 19 million
yen increase from 14,701 million yen as of end of the previous consolidated fiscal year.
This was mainly attributable to an increase of 400 million yen in Provisions for bonuses, despite a 398 million yen
decrease in Accounts payable–other.
b. Non-current liabilities
Non-current liabilities as of the end of the current consolidated fiscal year amounted to 5,268 million yen, a 625
million yen decrease from 5,893 million yen as of end of the previous consolidated fiscal year.
This was mainly attributable to a 418 million yen decrease in Lease obligations and a 291 million yen decrease in
Provisions for stocks payment.
3) Net assets
Total net assets as of the end of the current consolidated fiscal year amounted to 83,416 million yen, a 6,340 million
yen increase compared to 77,075 million yen as of end of the previous consolidated fiscal year.
This was mainly attributable to an increase of 4,878 million yen in Retained earnings and an increase of 1,002 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 80.7%, a 1.8 point increase compared to
the ratio of 78.9% as of the end of the previous consolidated fiscal year.

7. Analysis of the Group’s cash flows for the current consolidated fiscal year
The balance of cash and cash equivalents as of the end of the current consolidated fiscal year decreased by 342 million
yen from the end of the previous consolidated fiscal year amounting to 23,126 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 10,550 million yen (18 million yen decrease in revenue year-onyear). Major factors include the recognition of 12,660 million yen for Net income before taxes and adjustments and2,945 million yen for Depreciation, and payment of 4,516 million yen for income taxes.
2) Cash flows from investing activities
Cash flows from investing activities decreased by 7,201 million yen (2,922 million yen decrease in spending year-onyear). Major factors include expenditure of 5,300 million yen into time deposits, revenue of 3,300 million yen fromwithdrawal of time deposits, expenditure of 1,420 million yen for the acquisition of tangible fixed assets, andexpenditure of 1,887 million yen for the acquisition of intangible fixed assets.
3) Cash flows from financing activities
Cash flows from financing activities decreased by 3,691 million yen (95 million yen decrease in spending year-onyear). Major factors include payment of 3,449 million yen for year-end dividends as of end of September 2020 andinterim dividends for the term ended September 2021 (a dividend of 65 yen per share).
Trends in cash flow indicators of the Group are as shown below:
Equity ratio (%)
Ratio of equity at market
value (%)
Debt redemption (years)
Interest coverage ratio(x)

FY ended September 2018

FY ended September 2019

FY ended September 2020

FY ended September 2021

139.1

126.8

183.2

179.2

0.1

0.1

0.1

0.1

3,385.5

4,566.9

6,492.7

27,055.7

78.6

73.8

78.9

80.7

Equity ratio = Total equity ÷ Total assets x 100
Ratio of equity at market value = Market cap ÷Total assets x 100
Years of debt redemption = Interest-bearing debts ÷ Operating cash flows
Interest coverage ratio = Operating cash flows ÷ Interest expense(Notes) 1. Each indicator is calculated based on consolidated financial figures.
2. Market capitalization is calculated by multiplying the closing share price as of the end of the fiscal year by
the number of outstanding shares at the end of the fiscal year (after deducting treasury stocks).

- 30 -

(2) Production, Orders Received and Sales
1.

Production
None to be disclosed.

2.

Orders received
None to be disclosed.

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 BD

45,412

96.3

Local Governments BD

17,704

101.9

Printing BD

3,105

94.5

66,221

97.7

Total

(Notes) 1. Transactions between segments have been offset.
2. Figures shown do not include consumption taxes.
(3) Analysis and Discussions on Operating Results, etc. from Management’s Perspective(1) Significant accounting estimates and assumptions used in said estimates
The Group’s consolidated financial statements have been prepared in accordance with accounting standards that are
generally accepted as fair and appropriate in Japan. In preparing the consolidated financial statements, certain parts
require management to use estimates and assumptions within these accounting policies, and such estimates andassumptions are reflected in the figures of assets and liabilities, revenue and expenses. While management conducts
assessments on these estimates on an on-going basis and makes revisions as necessary based on changes in
conditions, there are uncertainties in the estimates that could cause actual results to differ from such estimates.
Of the significant accounting estimates and assumptions used in said estimates of the Group, those estimates usedthat may have material impacts on the Group’s consolidated financial statements are described in the Notes toConsolidated Financial Statements (Significant Accounting Estimates) under Part 5 [Financial Information] 1.
Consolidated Financial Statements, (1) Consolidated Financial Statements.
(2) Factors having material impacts on the Group’s operating results
Refer to 2 [Risk Factors].
(3) Analysis and discussions on the Group’s cash flows, 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 we holdadequate cash-on-hand to maintain our business operation and to ensure a 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.
(4) Objective indicators to measure the status of achievement of the Group’s management policy, management strategy,
and management goals
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. Based on this policy, we establish andmanage the following items as important management indicators:
1) Management indicators based on consolidated figures
a. Year-on-year sales ratio: 3% or greaterb. Return on equity: 8% or greater
2) Management indicators based on non-consolidated figures
a. Equity ratio: greater than 80%
b. Recurring profit margin: 8% or greaterc. Total marginal profit ratio: 60% or greater* Marginal profit is the amount derived by deducting the costs that change in proportion to sales (variable costs)- 31 -

from the amount of sales. Marginal profit will vary depending on product mix. Total marginal profit ratiomeans the ratio of the amount of this marginal profit in relation to the amount of sales.
In such situation, the consolidated year-on-year sales ratio of the current fiscal year under review was -2.3% (adecrease of 4.9 points year-on-year), and consolidated return on equity was 10.8% (an increase of 0.3 points yearon-year). The reason for decrease in the consolidated year-on-year sales ratio is due to the Company’s decision on
the early application of the Revenue Recognition Accounting Standard, which will be mandatory for listedcompanies from the fiscal year starting after April 1, 2021.
The non-consolidated equity ratio was 84.5% (an increase of 1.3 points year-on-year), non-consolidated recurring
profit margin was 19.6% (an increase of 2.0 points year-on-year), and non-consolidated total marginal profit ratio
was 76.0% (an increase of 1.2 points year-on-year).
In order to maintain the high level of performance, we will work to improve the Company’s earnings structure andcapital efficiency.

- 32 -

4 [Material Agreements, etc.]
None to be disclosed.

5 [Research and Development Activities]
There were no research and development expenses spent by the TKC Group during the current consolidated fiscal year.
There are no significant changes in the status of research and development activities of the TKC Group during thecurrent consolidated fiscal year.

- 33 -

Part 3 [Property, Plant 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 3,735 million yen were made in the current
consolidated fiscal year.
(1) Accounting Firm Business
Capital investment of 2,213 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
Capital investment of 1,186 million yen was made for the development of software to provide services over the
cloud system.
(3) Printing Business
Capital investment of 336 million yen was made for the implementation of envelop printing, bag-making, anddocument inserter/sealing machines.

2 [Major Property, Plant and Equipment](1) The Company
As of September 30, 2021
Book values (millions of yen)
Name of office(Address)

Name ofsegment

Facilities

TKC Tochigi Head Office
TKC Systems Development
Research Center
TKC Internet Service Center
TKC Tochigi Consolidated
Information Center(Utsunomiya-shi, Tochigi,etc.)*1, *2

Accounting
Firm BD
Local
Governments
BD

Development
facilities
Information
communicati
on service
facilities
Information
processing
facilities

TKC Tokyo Head Office
TKC Systems Development
Research Center Tokyo Branch(Shinjuku-ku, Tokyo)

Accounting
Firm BD
Local
Governments
BD

TKC Tokyo Consolidated
Information Center(Nerima-ku, Tokyo)

Buildings &structures

Machinery,
Tools,
Land
equipment
furniture &(Area in m2)& vehicles
fixtures

Other

Total

No. ofemployees(No. ofpeople)

5,235

19

2,694
(29,365.21)

1,431

3,514

12,896

1,225

Officefacilities

103

－

－

72

－

176

374

Accounting
Firm BD

Information
processing
facilities

197

－

2,224
(1,447.44)

55

－

2,477

22

TKC Chubu Consolidated
Information Center(Kasugai-shi, Aichi)

Accounting
Firm BD

Information
processing
facilities

69

－

196
(3,017.47)

34

0

300

17

TKC Kansai Consolidated
Information Center(Ibaraki-shi, Osaka)

Accounting
Firm BD

Information
processing
facilities

458

－

286
(1,808.03)

35

0

781

39

TKC Chushikoku Consolidated
Information Center
TKC Chushikoku Control
Center(Kita-ku, Okayama-shi,
Okayama)

Accounting
Firm BD

Information
processing
facilities
Officefacilities

12

－

－

32

－

44

11

TKC Kyushu Consolidated
Information Center(Koga-shi, Fukuoka)

Accounting
Firm BD

Information
processing
facilities

149

－

203
(2,341.48)

28

0

382

11

TKC Hokkaido Consolidated
Information Center
TKC Hokkaido SCG Service
Center(Chuo-ku, Sapporo-shi,
Hokkaido)

Accounting
Firm BD

Information
processing
facilities
Officefacilities

35

－

－

32

0

68

32

- 34 -

TKC Tohoku Consolidated
Information Center
TKC Tohoku SCG Service
Center(Aoba-ku, Sendai-shi, Miyagi)

Accounting
Firm BD

Information
processing
facilities
Officefacilities

5

－

－

41

0

46

20

As of September 30, 2021
Name of office(Address)

Book values (millions of yen)

Name ofsegment

Facilities

TKC Okinawa Consolidated
Information Center
TKC Okinawa SCG Service
Center(Naha-shi, Okinawa)

Accounting
Firm BD

Information
processing
facilities
Officefacilities

TKC Ibaraki SCG Service
CenterTKC Ibaraki Sales Section(Tsukuba-shi, Ibaraki)

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

Other

No. ofemployees(No. ofpeople)

Total

3

－

－

5

0

9

9

Accounting
Firm BD
OfficeLocal
facilities
Governments
BD

21

－

147
(1,120.00)

3

0

171

24

TKC Yamaguchi SCG Service
Center(Yamaguchi-shi, Yamaguchi)

Accounting
Firm BD

Officefacilities

20

－

197
(814.00)

2

0

220

5

Dormitories, company housing(Utsunomiya-shi, Tochigi)

Accounting
Firm BD
WelfareLocal
facilities
Governments
BD

220

－

391
(5,326.69)

13

－

625

－

(2) Domestic subsidiaries
As of September 30, 2021
Book values (millions of yen)

No. ofemployees(No. ofpeople)Company
nameName of office(Address)

Name ofsegment

TLP
Corporation

Hanyu Plant(Hanyu-shi,
Saitama)Printing BD

Printing
facilities

58

349

145
(7,275.17)

8

12

574

68

Printing BD

Printing
facilities

980

165

132
(9,768.00)

39

109

1,427

53

TLP
Corporation

DPS Solutions
Center(Hanyu-shi,
Saitama)

Facilities

Machinery,
Tools,
Buildings &Land
equipment &furniture &(Area in m2)
structures
vehiclesfixtures

Other

Total

(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 1,333 million yen for leased buildings and 56 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
731 million yen

3 [Plans for Capital Investments, Disposals of Property, Plant 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.
There are no plans for the establishment or disposal of major facilities and equipment as of the end of the current
consolidated fiscal year (September 30, 2021), except for routine updates of facilities and equipment and disposals
and/or sales related thereto.

- 35 -

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

Total number of shares authorized to be issued (shares)

Common stock

120,000,000

Total

120,000,000(Note) Based on the resolution of the board of Directors meeting held on March 10, 2021, the Company made a partial

amendment of the Articles of Incorporation to conduct a stock split, effective as of April 1, 2021. As a result, thetotal number of authorized shares of the Company was increased by 60,000,000 shares to 120,000,000 shares.

(ii) [Issued shares]

Class

Name of stock
Number of shares issued as Number of shares issued as
exchange on which theof end of current fiscal year of the filing date (shares)
Company is listed, or(shares)name of Authorized
Financial Instruments(September 30, 2021)(December 20, 2021)
Firms Association

Description

Common stock

53,462,066

53,462,066

First Section of theTokyo Stock Exchange

Number of sharesconstituting a unit: 100
sharesTotal

53,462,066

53,462,066－－(Note) Based on the resolution of the Board of Directors meeting held on March 10, 2021, the Company conducted a stock
split of its common shares at a ratio of 1:2, effective as of April 1, 2021. As a result, the total number of sharesissued increased by 26,731,033 shares to 53,462,066 shares.
(2) [Share Subscription Rights, etc.](i) [Stock option scheme]
None to be disclosed.
(ii) [Rights plan]
None to be disclosed.
(iii) [Other share subscription rights, etc.]
None to be disclosed.
(3) [Exercise of Bonds with Share Subscription Rights Containing a Clause for Exercise Price Adjustment, etc.]
None to be disclosed.
(4) [Changes in Total Number of Issued Shares, Capital Stock, etc.]

Date
April 1, 2021
(Note)

Increase or
decrease in total
number ofissued shares(shares)

Balance of total
number of issued
shares

26,731,033

53,462,066(shares)

Increase or
decrease incapital stock

Balance ofcapital stock

Increase or
decrease incapital reserve

Balance ofcapital reserve(millions of yen) (millions of yen) (millions of yen) (millions of yen)－

(Note) As a result of a stock split (1:2).

- 36 -

5,700

－

5,409

(5) [Shareholders Composition]
As of September 30, 2021
Status of shares (100 shares in one unit of shares)
Classification

Number ofshares lessthan oneunit(shares)

Government &municipalities

Financial
institutions

Financial
instruments
business
operators

－

26

26

143

155

2

8,258

8,610

－

－

177,942

2,925

131,943

79,511

4

141,517533,842

77,866

－

33.3

0.5

24.7

14.9

0.0

26.5

100.0

－

Number ofshareholders
Number ofshares held
(share units)
Percentage ofshares held
(%)

Other
corporatebodiesForeign corporate bodies, etc.
Nonindividuals

Individuals

Other
individuals

Total(Notes) 1. Of the 529,135 shares held as treasury stock, 5,291 share units are included in "Other individuals" and 35 sharesare included in "Number of shares less than one unit."
2. Of the shares registered under the name of Japan Securities Depository Center, Inc., 13 units are included in"Other corporate bodies" and 74 shares are included in "Number of shares less than one unit."
3. The “Financial Institutions” column includes 2,198 units of the Company’s stocks owned by the BIP Trust.
4. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021.
(6) [Major Shareholders]
As of September 30, 2021

Names of shareholder

Address

Percentage ofshares held to total
Number of shares heldnumber of issued(hundreds of shares)
shares (excluding
treasury stock) (%)

Iizuka Takeshi ScholarshipFoundation

1758 Tsurutamachi, Utsunomiya-shi, Tochigi

75,06014.2

Daido Life Insurance Company

1-2-1 Edobori, Nishi-ku, Osaka-shi, Osaka

51,3809.7

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

46,7058.8

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

30,930

5.8

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

29,2595.5

One Lincoln Street, Boston, MA 02111 USA(3-11-1 Nihonbashi, Chuo-ku, Tokyo)

24,566

4.6

Utsunomiya-shi, Tochigi

15,5762.9

1-8-12 Harumi, Chuo-ku, Tokyo

14,3192.7

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

13,3282.5

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

11,966

2.3

1-26-1 Nishishinjuku, Shinjuku-ku, Tokyo

11,9662.3

325,059

61.4

The Master Trust Bank of Japan,
Ltd. (Trust account)Sozeishiryokan (Institute of Tax
Research and Literature)
TKC Employee Shareholding
Association
SSBTC Client Omnibus Account(Standing proxy: The Hong Kong &Shanghai Banking Corporation)
Masaharu Iizuka
Custody Bank of Japan, Ltd. (Trustaccount)
Tokio Marine & Nichido Fire
Insurance Co., Ltd.
Aioi Nissay Dowa Insurance Co.,Ltd.
Sompo Japan Insurance Inc.
Total

－

(Notes) 1. The 219,800 shares of the Company held by the BIP Trust are not included in the treasury stocks to be
deducted in calculating the percentage of shares held to the total number of issued shares.
2. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021.

- 37 -

(7) [Status of Voting Rights](i) [Shares issued]
As of September 30, 2021
Number of shares (shares)

Number of voting rights(units)Shares without voting right

－

－

－

Shares with restricted voting right (treasury
stock, etc.)

－

－

－

Shares with restricted voting right (others)

－

－

－

Classification

Description

Shares with full voting right (treasury stock,etc.)

Common stock

529,100－－

Shares with full voting right (others)

Common stock

52,855,100

528,551－

Shares less than one share unit

Common stock

77,866－－53,462,066

－

－

－

528,551－

Total number of shares issued
Total voting rights held by all shareholders(Notes) 1. Shares with full voting right (others) includes 1,300 shares (13 units of voting rights) registered in the name ofJapan Securities Depository Center, Inc., and 219,800 shares (2,198 units of voting rights) owned by the BIP
Trust.
2. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. As a result, thetotal number of shares issued increased by 26,731,033 shares to 53,462,066 shares.
(ii) [Treasury stock, etc.]
As of September 30, 2021
Percentage ofshares held to the
Total shares held
total number of(shares)issued shares (%)

Number of shares
held under own
name (shares)

Number of shares
held under othernames (shares)

1758 Tsurutamachi,
Utsunomiya-shi,
Tochigi

529,100－

529,100

0.99－

529,100－

529,100

0.99

Name ofshareholder

Address of shareholder

TKC Corporation
Total(Notes) 1. In addition to the above, the 219,800 shares owned by the BIP Trust are recorded as treasury stocks in the
consolidated financial statements.
2. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021.

- 38 -

(8) [Information on Employee Stock Ownership Plan】
The Company introduced 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, etc. to contribute more to enhancing the medium- tolong-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 share price. The introduction of thePlan was approved by resolution at the 52nd Ordinary General Meeting of Shareholders held on December 21,
2018.
(i) Description of the Plan
The Plan uses a structure called Board Incentive Plan trust (hereinafter “BIP Trust”). The Plan is similar to theperformance-linked share compensation (Performance Share) and share compensation 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.
(ii) Total number of shares subject to delivery and provision 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.

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

Trust period

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

March 1, 2019

Exercising of voting
rightsType of shares to beacquired
Maximum amount oftrust fundAcquisition of shares

Not to be exercised
Common stock of the Company
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 oftreasury 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 acquisition.

(iii) Persons eligible for the delivery and provision of the Company’s shares
Directors, etc., who satisfy the beneficiary conditions- 39 -

2 [Acquisition, etc. of Treasury Stocks][Class of shares] Acquisition of common stocks under Article 155, Item 3 and Article 155, Item 7 of the Companies
Act of Japan(1) [Acquisition of treasury stocks based on resolution at the General Meeting of Shareholders]None to be disclosed.
(2) [Acquisition of treasury stocks based on resolution of the Board of Directors]
Classification

Number of shares (shares)

Total amount (yen)Resolution at the Board of Directors meeting(November 9, 2021)(Acquisition period: November 10, 2021)

300,000

1,033,500,000

Treasury stocks acquired prior to the current fiscal year－－

Treasury stocks acquired during the current fiscal year

－

－

－

－

－

－

300,000

1,033,500,000－－

Total number and value of remaining shares subject toresolution
Percentage of unexercised acquisition as of the last dateof the current fiscal year (%)
Treasury stocks acquired during the current period
Percentage of unexercised acquisition as of the date offiling (%)(3) [Acquisitions of treasury stocks not based on resolutions of General Meeting of Shareholders or Board of Directors]
Classification

Number of shares (shares)

Treasury stocks acquired during the current fiscal year

Total amount (yen)265,620

6,985,535

20

68,800Treasury stocks acquired during the current period(Notes) 1.Treasury stocks acquired during the current period do not include shares constituting less than one unit
purchased during the period from December 1, 2021 to the date on which this Annual Securities Report was
filed.
2. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. Treasury stocks
acquired during the current fiscal year consists of 792 shares acquired prior to the stock split, 264,407 sharesthat increased as a result of the stock split, and 421 shares acquired after the stock split.
(4) [Disposition and holding of acquired treasury stock]
Current fiscal year
Classification

Number of shares(shares)

Current period for acquisition

Total amountdisposed(yen)

Number of shares(shares)

Total amountdisposed(yen)

Acquired treasury stocks for which subscribers
were solicited

－

－

－

－

Acquired treasury stocks canceled

－

－

－

－

－

－

－

－

100

173,340

46

79,769529,135－

829,109－

Acquired treasury stocks transferred due tomerger, share exchange, subscription, or
company split
Other treasury stocks (sold due to demand forsales of fractional unit shares)
Number of treasury stocks held

(Notes) 1.The disposition and holding of treasury stocks acquired during the current period do 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,- 40 -

2021 up to the date on which this Annual Securities Report was filed.
2. The number of treasury stocks held does not include the 219,800 shares of the Company’s stocks owned by the
BIP Trust.
3. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. Other treasury
stocks (sold due to demand for sales of fractional unit shares) during the current fiscal year are those after thestock split.

- 41 -

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 resolutionof 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 the mediumterm management plan set forth by the Board of Directors while continuing to maintain optimal profit each fiscal year inorder 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 advance investments in research and development
efforts and to actively pursue other capital investments to enhance customer support to accounting firms and local
governments and lead them to success while remaining competitive in the marketplace.
Thus, dividends to be paid to shareholders are determined by taking into full consideration such factors as the Company’s
financial standing, operating results and payout ratios as we seek to maintain a balance between strengthening our capitalbase to provide adequate funding in R&D and making funds available for stable dividend payouts over the long-term.
(1) An interim dividend of 65 yen per share has been paid after the resolution of the Board of Directors.
(2) The year-end dividend shall consist of an ordinary dividend of 32.50 yen per share and a special dividend of 7 yen
per share as announced on November 9, 2021.
(3) The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. Dividends per sharefor the current fiscal year shall be 104.50 yen, which is the sum of an interim dividend of 65 yen per share prior tothis stock split, and a year-end dividend of 39.50 yen per share after said stock split.
As a result, the annual payout ratio came to 45.7%.
Date of Resolution

Total amount of cash dividends(millions of yen)

May 7, 2021
Meeting of the Board of Directors
December 17, 2021
Ordinary General Meeting of Shareholders- 42 -

Dividend per share
(yen)

1,720

65.00

2,090

39.50

4 [Corporate Governance](1) [Overview of Corporate Governance]
I. Basic Approach to Corporate GovernanceThe core of the Group, TKC Corporation, was established on October 22, 1966, listing the following two businessobjectives in Article 2 of the Articles of Incorporation:
1. Management of electronic data processing centers to defend the business domain and maintain control over thefate 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 of focusing
our target on accounting firms and local governments and specializing in the field of ICT (information andcommunication technology) to guide our customers’ business to success remains unchanged, and this has led theGroup 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 theGroup are in full compliance with the laws and regulations pertaining to our customer’s business, and the Group strives
diligently to ensure total compliance in managing each Group companies as well as the Group as a whole in order toearn 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 resources thatwill enable us to develop and supply software products and services that can drive our customers' business to
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 to theoriginal owners of the Group, our shareholders.
Through such corporate governance process, we aim to improve the transparency of our decision-making and businessprocesses, implement effective risk management measures, undertake information disclosure and accountability in atimely manner to continue enhancing our corporate values.

Ⅱ. Overview of the Corporate Governance System and Reasons for Selecting the Current System
1. Overview of the corporate governance system(1) Board of Directors
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 eight members and, with the exception of three Outside Directors,
each Director represents a business unit as executive officer in charge and participates in deliberations and express
their opinions. The Company adopts an executive officer system since December 22, 2006.
The members of the Board of Directors are the eight Directors, whose names are listed in (2) [Officers] 1. List of
Officers.
(2) Board of Auditors
The Board of Auditors provides advice and suggestions to ensure the legality, appropriateness, and validity of thedecision-making processes and resolutions by the Board of Directors.
The members of the Board of Auditors are the three Auditors, whose names are listed in (2) [Officers] 1. List of- 43 -

Officers. The Board of Auditors is chaired by a Corporate Auditor (full-time).
(3) Nomination and Compensation Advisory Committee
At the Meeting of the Board of Directors held on September 10, 2019, the Company resolved to establish a
Nomination and Compensation Advisory Committee as a voluntary advisory body to the Board of Directors.
The chairperson and majority of the committee members are independent Outside Directors and outside experts,
and functioning as an advisory body to the Board of Directors, the Committee was established in an aim to further
enhance the corporate governance system by ensuring that independent Outside Directors etc. are given theopportunity to engage in and provide advice on the decision-making of the following matters, thereby
strengthening the independence, objectivity, and accountability of the Board of Directors;(i)

Policy and procedure for the nomination of candidates for Directors and executive officers holding executive
position;(ii)

Appointment and dismissal of Directors and executive officers holding executive position;(iii) Policy for the determination of compensations for Directors and executive officers holding executive
position;(iv) Policy for the determination of individual compensations for Directors and executive officers holding
executive position;(v)

Individual compensations for Directors and executive officers holding executive position;(vi) Appointment and dismissal of representative directors and auditors of subsidiaries and their individualcompensations;(vii) Other matters that the Board of Directors deem necessary in relation to any of the above items.
The names of the members of the Nomination and Compensation Advisory Committee are as follows:<List of members>
Chairperson: Junko Iijima (Outside Director)
Member: Yoshimasa Oshida (Outside Director)
Member: Hideki Tomonaga (Outside Auditor)
Member: Misao Taguchi (Outside expert)
Member: Masaharu Iizuka (In-house expert)
Member: Masanori Iizuka (Director)
Member: Satoshi Hitaka (Director)- 44 -

2. Reasons for selecting the current corporate governance system
The Company implements an auditor system and also appoints Outside Directors. Outside Directors are appointed
and installed from the perspective of improving the transparency of the Board of Directors and enhancing its
supervisory functions. This ensures the legality, appropriateness, and validity of the decision-making processes andresolutions 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 oncompliance issues and whether the resolutions of the Board of Directors are in violation of laws and regulations.
We also have three Outside Directors and two Outside Auditors, a total of five members 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 the supervision
over the management of the Company.
Therefore, we feel that the functions to supervise the management activities are in place, which enables us to institutea highly efficient, highly transparent management system that the Company aims for.
A schematic diagram of the Company’s business execution and management oversight is shown below:- 45 -

3. Other matters concerning corporate governance(1) 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 is described 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
over the fate of accounting firms,” and the “management of electronic data processing centers to improve
the administrative 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
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 theparticulars 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
the laws and regulations, he/she must, without delay, give warning to such Director or employee as joint
bearer of managerial responsibilities.
If such matter is of significant importance, said Director must immediately report to the President and receive
guidance.
5. Prior to attending any meetings of the Board of Directors, Directors must review the matters to bedeliberated, reported and/or discussed at the next meeting of the Board of Directors (hereinafter, “matters tobe deliberated”) 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 areother matters to be deliberated, they must be brought to the Director(s) in charge of the meetings of theBoard of Directors without delay.
6. Directors must attend the meetings of the Board of Directors and voice their opinions and exercise theirvoting 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 andoperational risks, and give the opportunity and time for the Board of Directors to review countermeasures
for such issues in advance.
7. The entire process of deliberations, etc. at the meetings of the Board of Directors shall be recorded inaccordance with the Company’s Rules on Management of Information Concerning the Decision-making
Process of the Board 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 andthe minutes of meeting of 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.

- 46 -

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 at all times, strictly observe all laws and regulations andcompany rules, eliminate ego and put aside personal affairs, exhibit discerning judgments to achievebusiness objectives, take lead 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 closelywith the 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)
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 and managed 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, etc. at the meetings ofthe Board of Directors shall be stored and managed in accordance with the Company’s Rules on
Management of Information 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 and managed 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
and stored and managed based on the Company’s Rules on Management of Information Concerning
the Daily Operations of Directors:(i) of the meetings called by a Director (excluding the General Meetings of Shareholders andmeetings of the Board of Directors), minutes and relevant documents of meetings in whichmatters that may have significant impact on the Company’s performance are deliberated, andmeeting in which matters directly related to the interest of specific customers, clients or
employees are deliberated;(ii) written applications for approval and relevant documents settled by the Directors based on the
Company’s Rules Concerning Requests for Decisions;(iii) 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 sothat their presence or absence and contents are immediately searchable. The operating status of said
database shall 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 losses to the Company(in relation to the provisions of Article 100 Paragraph 1 Item 2 of the Ordinance for Enforcement of theCompanies Act of Japan)
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,
and develop timely and optimal schematic plans and propose the execution to the President.
(3) Upon receiving such proposals from Directors (including employees) as set forth above, the President- 47 -

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) in charge to announce an implementation plan at the meetings of the Board of Directors:(i) Conformances with the management philosophy of the Company;(ii) Compliances;(iii) Expected degree of contributions to customers' business;(iv) Anticipated feedback from customers;(v) Technical feasibilities;(vi) Funds and costs necessary;(vii) Other matters, such as principle of good faith with business partners.
(4) When submitting proposals on the appointment of Directors to the General Meeting of Shareholders, it
shall be made in accordance with the Company’s Rules on the Nomination and Compensation Advisory
Committee.
Proposals shall be deliberated and decided at the Nomination and Compensation Advisory Committee
chaired by an independent Outside Director, etc. based on the standards for the appointment anddismissal of directors, which shall be reported to the Board of Directors.
The Board of Directors shall deliberate and decide on the matters reported by the Nomination andCompensation Advisory Committee.
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:(i) risks that may occur across all divisions (hereinafter, “common risks”);(ii) 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:(i) Risks that have high degree of urgency;(ii) Risks associated with compliance;(iii) Risks associated with confidentiality obligations of the Company;(iv) Risks associated with the preservation of assets and accounting;(v) Risks associated with the preparation of regulations and manuals for operation of business;(vi) Risks associated with the workplace environment and labor management;(vii) 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 suchfindings 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 tohandle 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 Boardof 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 toprevent 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 theBoard 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
to prevent recurrence of apparent risks.

- 48 -

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
and cases 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 controllingrisks involving multiple divisions, and the relevant division shall be responsible for controlling any risk
involving that single division:(i) Systems Development Research Center Operation Improvement Committee(ii) Municipality Systems Development & Operations Division Operation Improvement Committee(iii) Consolidated Information Centers Operation Improvement Committee(iv) SCG Service Centers Operation Improvement Committee(v) Municipality Sales Division Operation Improvement Committee(vi) Supplier Business Operation Improvement Committee(vii) Tokyo Head Office Operation Improvement Committee(viii) Personnel & Salary Systems Improvement Committee(ix) Risk Management Committee(x) 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,
and may 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
the same manner as controlling common risks as prescribed in 2-2-1. Division-specific risks shall beidentified by each committee and reported to the Board of Directors.
2-2-3. Regulations for the management of hazards 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 headedby 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
the spread 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 thesupervising 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 the provisions of Article 100 Paragraph 1 Item 3 of the Ordinance for Enforcement of theCompanies Act of Japan)(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 ofShareholders shall be planned 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 forthe upcoming fiscal year formulated in light of the management philosophy of the Company and a
medium-term 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 in accordance 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,
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 forthe entire company and each business unit as of the end of the previous month shall be reported, and- 49 -

the Board of Directors shall analyze the differences in target and actual results, and discuss actions to
be taken 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 plannedby the Directors in charge of each business unit, coordinate to maximize the effect of the projects inlight of the current management policy, and approve the use of president’s strategic reserve funds tothe 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
cycle is thoroughly implemented to achieve these goals, and shall monitor the progress andachievements of the entire division at all times and strive to achieve the sales and ordinary income
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.
4. Systems to ensure that performance of duties by employees of the Company is in conformance with laws
and regulations and the Articles of Incorporation(in relation to the provisions of Article 100 Paragraph 1 Item 4 of the Ordinance for Enforcement of theCompanies Act of Japan)(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
the approval of the Board of Directors as to their contents, distribute them to all employees as guidelines
from the President.
(2) Regular training sessions for all employees of the Company aiming at further understanding on the
Compliance Regulations and Compliance Manual as set forth above shall be conducted in accordancewith 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 bodytext and attached files of all electronic mails sent from internal PCs to outside the company shall be
stored for a 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 firstlearns of such information gives emergency notification to the President or the Director in charge oflegal 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 the provisions of Article 100 Paragraph 1 Item 5 of the Ordinance for Enforcement of theCompanies Act of Japan)(1) 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, and those equivalent (hereinafter "Directors, etc." in items (2) and(3) below) of the Company’s subsidiaries (in relation to Article 100, Paragraph 1, Item 5(a) of theOrdinance for Enforcement of the Companies Act)(i) 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.
(ii) The Internal Audit Department shall establish a system whereby, upon identifying any incidents that
may cause significant loss to the Subsidiaries, the President and the heads of relevant businessdivisions are immediately notified of the risks causing such incident, the degree of loss expected andimpacts on the Company.

- 50 -

(iii) 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.
(iv) The Company shall assign Directors or employees of Deputy Manager or higher to the Subsidiaries
to serve as Directors in order to communicate the management policy and requests of the Company
in writing 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.
(2) 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.
(3) 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)(i) 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 beplanned at least six months in advance.
(ii) At the meetings of the Board of Directors held at the end of each fiscal year, a management policy
for the upcoming 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 thissection and the next section), and the Board of Directors shall deliberate upon their strategic
rationalities in accordance with the Company’s Rules on the Board of Directors.
(iii) At the meetings of the Board of Directors held on the second month of each new fiscal year, theTargeted 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.
(iv) At the monthly regular meetings of the Board of Directors, the targeted and actual P/L statements
for the entire company and each business unit as of the end of the previous month shall be reported,and the Board of Directors shall analyze the differences in target and actual results, and discuss
actions to be taken to achieve the targeted sales and current profits for the fiscal year.
(v) In executing his/her daily duties, the President shall inspect the details of individual projects plannedby the Directors in charge of each business unit and coordinate to maximize the effect the projects
in light of the current management policy.
(vi) 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 havecorrect awareness of the fiscal management policy and strategic goals for their division and that the
PDCA cycle is thoroughly implemented to achieve these goals, and shall monitor the progress andachievements of the entire division at all times and strive to achieve the sales and ordinary income
goals for the fiscal year.
(vii) In managing the business unit under his/her charge, Directors in charge of each business unit shallstrive to reduce unnecessary expenses, improve work quality and productivity, and keep theworkplace organized, and must exhibit leadership to create a workplace environment in which all
employees are safe and comfortable, inspired and satisfied.
(4) 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 of Japan)(i) 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 ofinternal audit under the direct control of the President shall develop Compliance Regulations andCompliance Manual based on guidance provided by Auditors and outside company attorneys.
(ii) Regular training sessions for all Directors and employees aiming at further understanding on the
Compliance Regulations and Compliance Manual as set forth above shall be conducted in accordance- 51 -

with the plans of the division in charge of internal audit.
(iii) 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.
(iv) Directors in charge of each division shall appoint a compliance manager within each business unit
in accordance with the Compliance Regulations, and conduct training on the Compliance Manual for
employees within the business unit in a timely and appropriate manner.
(v) In order to prevent the leaking of customer information and other confidential information, the bodytext and attached files of all electronic mails sent from internal PCs to outside the company shall be
stored for a certain period of time.
(vi) 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 the provisions of Article
100 Paragraph 3 Item 1 of the Ordinance for Enforcement of the Companies Act of Japan)(1) The Company shall establish an Auditor Office to assist the duties of the Auditors and assign one ormore 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 full consideration the opinions of the Director in chargeof human resources and other relevant personnel.
7. Independence of employees assisting duties of Corporate Auditors from Directors(in relation to the provisions of Article 100 Paragraph 3 Item 2 of the Ordinance for Enforcement of theCompanies Act of Japan)(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
the Company’s business, and shall perform their duties under the direct command of the Board ofAuditors, 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
necessary investigations and gather necessary information.
8. Ensuring effectiveness of directions to employees assisting duties of Corporate Auditors(in relation to the provisions of Article 100 Paragraph 3 Item 3 of the Ordinance for Enforcement of theCompanies Act of Japan)
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)(1) 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 theCompanies Act of Japan)(i) All Directors and employees of the Company shall promptly submit the necessary reports andinformation requested by Auditors as established by the Board of Auditors.
(ii) The reports and information to be submitted as set forth in the preceding item shall mainly include
the following:
1) Status of activities of business units involved in the risk management of the Company;
2) Status of activities pertaining to audits of the Subsidiaries of the Company and internal audits;
3) Important accounting policies and accounting standards of the Company and any changes thereto;4) Contents of announcements and important disclosure documents on the Company’s latest businessresults and earnings forecasts announcements on both non-consolidated and consolidated basis;
5) Circulation of internal approval documents and meeting minutes requested by Auditors.
(iii) In the event a Director or employee learns of any fact of violations of laws and regulations or any- 52 -

fact that could cause significant damage to the Company, such Director or employee shallimmediately report matters pertaining to such fact to Auditors.
(iv) Auditors shall attend all the meetings of the Board of Directors and other important meetings, andare expected to voice their opinions freely without being requested to do so by the chairman orcaller of such meetings.
(2) 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)(i) 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.
(ii) The reports and information to be submitted as set forth in the preceding item shall mainly include
the following:
1) Status of activities of business units involved in the risk management of the Subsidiaries;2) Status of activities pertaining to the audits by auditors of the Subsidiaries;3) Important accounting policies and accounting standards of the Subsidiaries and any changes
thereto;4) Circulation of internal approval documents and meeting minutes of the Subsidiaries requested byAuditors.
(iii) 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
shall immediately report matters pertaining to such fact to the Auditors of the Company.
(iv) 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 so by 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 the provisions of Article 100 Paragraph 3 Item 5 of the Ordinance for Enforcement of theCompanies Act of Japan)
The Company and Subsidiaries must not treat any persons making reports stated in the preceding item ina disadvantageous manner due to grounds of providing such reports to the Board of Auditors of theCompany.
9-3. Policy on the procedures 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 the provisions of Article 100 Paragraph 3 Item 6 of the Ordinance for Enforcement of theCompanies Act of Japan)
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 executionof the Auditors’ duties.
(1) Ordinary auditing expenses shall be budgeted in the current fiscal year based on the business plan of
the Company and the audit plan of the Board of Auditors.
(2) Other emergency auditing expenses and contingency auditing expenses shall be estimated in advanceby the Board of Auditors and establish a policy on such expenses. The Board of Directors shall executethe measures under said determined policy as notified by the Board of Auditors after deliberation andreview of such measures 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 the provisions of Article 100 Paragraph 3 Item 7 of the Ordinance for Enforcement of theCompanies Act of Japan)(1) Auditors shall receive advanced explanations on the annual internal auditing plan to be performed by
the Internal Audit Department and express their opinions to the President if they deem that the planneeds to be 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- 53 -

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,
and reports on auditing methods and audit results whenever accounting audits on quarterly settlements
and audits on full year settlements are performed, and exchange opinions.
(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 by said Director and Auditors. The Committee is expected to prepare reports on the auditing
systems that should be created by the Company in the future, and to submit such reports to the Board of
Directors.
(2) Number of Directors
The Articles of Incorporation stipulate that the Company may have a maximum of 15 Directors.
(3) 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 more ofshareholders at the meeting with the attendance of at least half of the shareholders that can exercise voting rights.
(4) 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) from liabilities
to the extent allowed by law in accordance with Article 426 Paragraph 1 of the Companies Act of Japan.
(5) 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 regard to their responsibilities set forthin Article 423, Paragraph 1.
(6) 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.
(7) Acquisition of treasury stock
In order to allow for flexible implementation of capital policies on improving capital efficiency and shareholder interest, theCompany stipulates in its Articles of Incorporation that treasury stock may be acquired by resolution of the Board of
Directors pursuant to the provisions of Article 165, Paragraph 2 of the Companies Act of Japan.
(8) Special resolutions
The Company stipulates in its Articles of Incorporation that special resolutions of the General Meetings of Shareholders as
specified in Article 309, Paragraph 2 of the Companies Act of Japan shall be passed by a vote of two-thirds or more ofshareholders at meetings with the attendance of at least 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.
(9) Collaboration with outside experts
The Company consults with company attorneys concerning important legal issues and compliance-related matters, andconducts reviews as necessary. The Company consults with the Accounting Auditors and reviews important accounting
issues from time to time in addition to the regular accounting audits, and holds discussions promptly after quarterly andannual financial settlements.
(10) Basic policy on the control of the Company
The Company has no particular policy on matters concerning the persons controlling the decisions on the financial andbusiness policies of the Company. A schematic diagram of the Company’s internal control system is shown under 2.
Reasons for Selecting the Current Corporate Governance System.

- 54 -

III. 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 andapproaches 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 and Tokyo 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 anti-social forces.
(2) Coordination with external expert organizations
The Company maintains close ties with external expert organizations, for example, by taking part in liaison groups
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 toanti-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 to deal 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 the Company and at Group
companies.

- 55 -

(2) [Officers]
1. List of Officers
10 male and 1 female (percentage of female directors: 9.1%)
Position and Title

Representative
Director President andExecutive Officer

Name

Date of Birth

Masanori Iizuka

March 12, 1975

Satoshi Hitaka

January 19, 1971

Director of
Accounting Firm BD

Representative
Director Senior
Managing Executive
Officer
Director of Local
Governments BD

Brief biography
April 2002
Joined the Company
December 2010 Director, Executive Officer, in charge ofCorporate Information Systems Sales
Headquarters and Chief of G Project Promotion
Headquarters, Accounting Firm BD
October 2012
Director, Executive Officer, Chief of Corporate
Information Systems Sales Headquarters,
Accounting Firm BD
December 2012 Director, Managing Executive Officer, Chief ofCorporate Information Systems Sales
Headquarters, Accounting Firm BD
April 2014
Director, Managing Executive Officer, Chief ofSales Headquarters, Accounting Firm BD
October 2016
Representative Director, Senior Managing
Executive Officer, Chief of Sales Headquarters,
Head of Accounting Firm BD
October 2018
Representative Director, Senior Managing
Executive Officer, Head of Accounting Firm
BD
December 2019 Representative Director, President andExecutive Officer, Head of Accounting Firm
BD (current position)
December 2019 Representative Director and President, TKC
Customer Support Service Co., Ltd. (current
position)
April 2003
Joined the Company
December 2010 Executive Officer, General Manager of ASP
Service Promotion Dept., Sales Planning
Headquarters, Local Governments BD
December 2011 Director, Executive Officer, in charge of New
Business Strategy Headquarters, Local
Governments BD
January 2012
Director, Executive Officer, Chief of CloudBusiness Promotion Headquarters, Local
Governments BD
December 2018 Director, Managing Executive Officer, Chief ofSales Headquarters, Local Governments BD

Term ofofficeNumber ofshares held
(hundredsof shares)(Note 5)

153

(Note 5)48

(Note 5)

154

(Note 5)63

December 2020 Representative Director, Senior Managing
Executive Officer, Head of Local Governments
BD (current position)
December 2020 Representative Director and President, TKC
Security Services Co., Ltd. (current position)
April 1977

Joined the Company

December 2006 Executive Officer, Systems Development
Headquarters, Local Governments BD
January 2008
Executive Officer, Chief of Internal Control
CenterDirector
Senior Managing
Executive Officer

Director
Managing Executive
Officer
Chief of Systems
Development
Research Center,Accounting Firm BD

Ikuo Kawahashi

February 26, 1955

December 2013 Representative Director and Vice President,
SKYCOM Corporation
December 2014 Representative Director and President, SKYCOM
Corporation (current position)

Yasuo Igarashi

January 4, 1967

December 2019 Senior Managing Executive Officer of theCompany
December 2020 Director, Senior Managing Executive Officer of
the Company (current position)
April 1989
Joined the Company
August 2012
Executive Officer, Chief of Account Information
Systems Development Center, Systems
Development Research Center, Accounting Firm
BD
December 2016 Director, Executive Officer, General Manager ofSales Planning Dept., Sales Headquarters,
Accounting Firm BD
December 2017 Director, Managing Executive Officer, General
Manager of Sales Planning Dept., Accounting
Firm BD
January 2018
Director, Managing Executive Officer, Chief ofSystems Development Research Center,Accounting Firm BD (current position)- 56 -

Position and Title

Name

Date of Birth

Brief biography
April 1979

Term ofofficeJoined the Company

Number ofshares held
(hundredsof shares)

December 2008 Executive Officer, General Manager of General
Affairs Dept.
December 2009 General Manager of General Affairs Dept.

Director
Managing Executive
Officer
Chief of Business
Administration
Headquarters

Kiyotsugu
Nakanishi

August 27, 1956

Director

Yoshimasa Oshida

August 17, 1956

January 2015 General Manager of Internal Audit Dept.
December 2018 Full-time Auditor of the Company
December 2020 Director, Executive Officer, Chief of Business
Administration Headquarters
December 2021 Director, Managing Executive Officer, Chief ofBusiness Administration Headquarters (current
position)
November 1988Registered as certified tax accountant
November 1991Started business as certified tax accountant
July 2002

Representative Partner, Oshida Accounting
Office (current position)
December 2018 Director of the Company (current position)
October 2001

(Note 5)331

(Note 5)21

(Note 5)-(Note 5)10(Note 6)198

(Note 4)-(Note 6)

22

Registered as attorney

October 2001
Director

Director

Junko Iijima

Nobuhiko Kouga

August 3, 1967

January 25, 1964

Joined Tokyo Toranomon Law Office (current
position)
October 2019 Chairperson of the Nomination andCompensation Advisory Committee of theCompany (current position)
December 2019 Director of the Company (current position)
February 1996 Registered as certified tax accountant
February 1996 Started business as certified tax accountant
April 2019
Representative Partner of Accounting Firm Top
Management (current position)
December 2020 Director of the Company (current position)
March 1975
Joined the Company
December 2006 Executive Officer, General Manager of TKCNF
Research Committee Support Dept.
October 2010 General Manager of Chairman’s Office

Auditor (full-time)

Tsuneo Miyashita

May 28, 1949

Auditor

Hideki Tomonaga

February 15, 1956

AuditorTomoyasu
Hamamura

February 12, 1958

December 2016 Full-time Auditor of the Company (current
position)
Auditor, TKC Security Services Co., Ltd.
(current position)
October 2017 Auditor, TKC Customer Support Service Co.,
Ltd.(current position)
April 1982
Joined Tokyo Regional Taxation Bureau
July 2006

Resigned from National Tax College

August 2006

Registered as certified tax accountant

March 2007

Representative Director, Taxation Institute ofJapan (current position)
December 2018 Representative Partner, Tomonaga Hideki
Licensed Tax Accountant Office (current
position)
December 2019 Auditor of the Company (current position)
March 1989
Registered as certified tax accountant
March 1989
Started business as certified tax accountant
February 2007 Representative Partner of Hamamura Accounting
Office (current position)
December 2020 Auditor of the Company (current position)
Total

1,002

(Notes) 1. Director Satoshi Hitaka is the spouse of the elder sister of Masanori Iizuka, Representative Director, President,
and Executive Officer.
2. Directors Yoshimasa Oshida, Junko Iijima, and Nobuhiko Kouga are Outside Directors.
3. Auditors Hideki Tomonaga and Tomoyasu Hamamura are Outside Auditors.
4. Four years from the close of the Ordinary General Meeting of Shareholders held December 20, 2019.
5. Two years from the close of the Ordinary General Meeting of Shareholders held December 18, 2020.
6. Four years from the close of the Ordinary General Meeting of Shareholders held December 18, 2020.
7. Auditor Masaaki Arino resigned and retired from office as of the close of the Ordinary General Meeting of
Shareholders held December 17, 2021.

- 57 -

2. Procedures and policy on the nomination of Directors(1) For the appointment and dismissal of Directors, the Board of Directors shall consult with the Nomination andCompensation Advisory Committee, and respecting the report from said Committee, prepare the original proposals
to be submitted for resolution at the General Meeting of Shareholders.
(2) The Nomination and Compensation Advisory Committee shall nominate a candidate for a new Director who satisfies
one of the following qualifications:(i) a person who is an Executive Officer or of higher rank, who has engaged in the timely development of new
products or new services (emergence of innovation) or, as person in charge of such marketing strategy, led suchprojects to success in line with the business objectives of the Company while anticipating the rapidly moving
trends of a digital society, thereby winning a large number of clients, etc., improving the social reputation of theCompany, and contributing notably to the sustainable growth of the Company.
(ii) a person who is an Executive Officer or of higher rank, who has eliminated unreasonableness, waste, andinconsistency within his/her business division in compliance with the laws, developed a business plan to achieve
increased income and increased profit on an ongoing basis, improve the treatment of employees, and implement
risk measures, and in executing such plan, contributed notably to improving the medium- and long-term corporate
value through aggressive information sharing and provision of opinions to the Director in charge.
3. Outside Officers
Category

Name

Director

Yoshimasa Oshida

Director

Junko Iijima

Director

Nobuhiko Kouga

Functions, roles and appointment
Mr. Oshida is a representative partner of a certified public tax accountants firm Oshida
Accounting Office and the Company’s Accounting Firm Business could benefit from his
extensive experience and insights in the management of accounting firms. Based on his
nine years of experience as chairperson of the TKCNF System Development Committee,
he is expected to contribute to the sustainable growth of the Company and improvementof corporate value through the development and promotion of the Company’s systems andservices. He is also expected to provide input to ensure the validity of decisions made andresolved by the Board of Directors, and therefore, he has been reappointed as Outside
Director.
While Oshida Accounting Office is engaged in a business relationship with the Company,
transactions are based on the same terms and conditions as with other third parties.
Therefore, it is not likely that any conflict of interest shall occur between Mr. Oshida andgeneral shareholders, and the Company deems that this would not affect the independenceof Mr. Oshida.
Mr. Oshida has no special interest in the Company. The number of shares of the Company
held is as indicated in the “Number of shares held” column under 1. List of Officers.
As a certified attorney, Ms. Iijima possesses expertise and extensive experience, and, inparticular, deep insight into corporate governance. As chairperson of the Company’s
Nomination and Compensation Advisory Committee established on October 10, 2019, shedisplayed strong leadership in deliberating and designing the policies and procedures forthe appointment and dismissal of Directors, etc., and the officers’ compensation plan inaccordance with the principles of the corporate governance code. She is expected tocontribute to the sustainable growth and medium- to long-term improvement in thecorporate value of the Company through enhanced corporate governance, and to provide
valuable input from the perspective of a female. She is also expected to enhance thedecision-making and supervisory functions of the Board of Directors, and therefore, she
has been reappointed as Outside Director.
Ms Iijima has no special interest in the Company. The number of shares of the Company
held is as indicated in the “Number of shares held” column under 1. List of Officers.
Mr. Kouga is a representative partner of Accounting Firm Top Management, and theCompany’s Accounting Firm Business could benefit from his extensive experience andinsights in the management of accounting firms. As chairperson of the TKCNF New
Members Service Committee, he is expected to contribute to the sustainable growth of theCompany and improvement of corporate value over the medium-term by providing advice
on follow-up activities for new member tax accountants and certified public accountants
and activities to increase TKC Members. Therefore, he has been appointed as Outside
Director.
Mr. Kouga has no special interest in the Company. The number of shares of the Company
held is as indicated in the “Number of shares held” column under 1. List of Officers.

- 58 -

Category

Name

Auditor

Hideki Tomonaga

AuditorTomoyasu
Hamamura

Functions, roles and appointment
Mr. Tomonaga is a representative partner of a certified public tax accounting firmTomonaga Hideki Licensed Tax Accountant Office, and has extensive experience as a tax
specialist on consolidated taxation system, corporate reorganization taxation system andinternational trade. He has been providing appropriate guidance and audits from his
professional perspective in ensuring tax compliance of the Company, and therefore, hasbeen reappointed as Outside Auditor.
While Tomonaga Hideki Licensed Tax Accountant Office is engaged in a business
relationship with the Company, transactions are based on the same terms and conditions
as with other third parties. Therefore, it is not likely that any conflict of interest shall occur
between Mr. Tomonaga and general shareholders, and the Company deems that this would
not affect the independence of Mr. Tomonaga.
Mr. Tomonaga has no special interest in the Company. The number of shares of theCompany held is as indicated in the “Number of shares held” column under 1. List of
Officers.
Mr. Hamamura is a representative partner of Hamamura Accounting Office, and has mademajor contributions in the development of local economies through corporate management
as certified public tax accountant, auditor, and accounting advisors to many businesses in
Utsunomiya City, Tochigi Prefecture. Based on such experience and deep insight in the
Company and the industry, he is expected to provide advice and proposals to ensure thelegality, adequacy and appropriateness of the decision-making and resolutions of theBoard of Directors. He is also expected to strengthen the supervisory functions of theBoard of Directors, and therefore, has been appointed as Outside Auditor.
Mr. Hamamura has no special interest in the Company. The number of shares of theCompany held is as indicated in the “Number of shares held” column under 1. List of
Officers.

4. Support systems for Outside Directors and Outside Auditors(1) The Company appoints the Chief of Business Administration Headquarters as a point of liaison to provide
assistance to Outside Directors and Outside Auditors. The Chief of Business Administration Headquarters notifies
in advance the Outside Directors and Outside Auditors of the schedule of each meeting of the Board of Directors
or meeting of the Board of Auditors and send any related materials thereto, and if necessary, provides explanationsin 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 exchange opinions.
(4) Compensations for Auditors shall be determined each January upon discussion among Auditors based on thebusiness results for the preceding fiscal year.

5. Standards concerning the independence of Outside Directors and Outside Auditors of the Company(1) A person who is currently not, or has not been for the past ten years, an executive member of the Company or theCompany’s subsidiaries;(2) A person for which the Company is currently not, or was recently not, an important trade partner or its executing
member, or an important trade partner of the Company or its executing member;(3) A person for which the Company is currently not, or was recently not, a consultant, accounting specialist, or legal
specialist receiving large sums of money or other assets other than officers’ compensation from the Company;(4) A person who is currently not, or has not recently been, a near relative of an executive member of the Company or
the Company’s subsidiaries, or a near relative of any of the persons falling under items (2) or (3);(5) Any other person whose independence is clear of doubt in executing the duties of an Outside Director.

- 59 -

(3) [Audits]
Since its founding in 1966, the Company has adopted the so-called “management based on rules.” All directors andemployees were required to ensure compliance, and any illegal act or violation of internal rules have been dealt withstrictly and impartially without exceptions, even if the motivation was for the interest of the Company or for thecustomers, shareholders, business partners or employees. The main objective of this “management based on rules”
is to firstly protect our employees, secondly our clients, and thirdly the Company through strict compliance. That is
why our Directors and employees have a correct understanding on the standards that they need to abide by in theprocess of fulfilling their basic responsibilities and performing their day-to-day work, and strive to act according tothese standards.
(i)

Audits by Auditors
The Company has three Auditors, consisting of one Full-time Auditor and two Outside Auditors. Outside Auditors
Hideki Tomonaga and Tomoyasu Hamamura are certified tax accountants who have considerable expertise in theareas of finance, accounting, and tax accounting.
Full-time Auditor Tsuneo Miyashita has served as head of Business Administration in charge of general affairs,
accounting and financing and have considerable expertise on financing, accounting and tax affairs.
Auditors shall attend the meetings of the Board of Directors and other important management meetings inaccordance with the Code of Kansayaku Auditing Standards. They shall strive to oversee the material decisionmaking process and execution of business, and receive reports from the accounting auditors, Directors andemployees to form their audit opinions through deliberation.
The attendance of each Auditor to the meetings of the Board of Auditors is shown below:
Name
Tsuneo Miyashita

Number of days attended/number of
meetings held (Note 1)
6/6

Attendance rate (Note 1)
100%

Masaaki Arino (Note 2)

4/4

100%

Kiyotsugu Nakanishi (Note 3)

2/2

100%

Hideki Tomonaga

6/6

100%

Tomoyasu Hamamura (Note 4)

4/4

100%

Yoshiki Takashima (Note 3)

2/2

100%

(Note 1) Based on the number of days held the during his/he term office in the current fiscal year.
(Note 2) Assumed office on December 18, 2020 and resigned and retired from office on December 17, 2021.
(Note 3) Retired from office on December 18, 2020.
(Note 4) Assumed office on December 18, 2020.
(ii) Internal audits
1) Organization, personnel and procedures of internal audits
Internal audits of the Company are conducted based on the Resolution on Internal Control, Operational Risk
Management Regulations, Internal Audit Regulations, and Regulations for the Management of Affiliates. Internal
audits are aimed to establish an appropriate internal control system covering the entire TKC Group, and conductedfrom a standpoint independent from the line of business execution in order to determine the effectiveness.
The Internal Audit Department is an organization independent of other divisions of the Company and operates
under the direct control of the President. There are five internal auditors in the Internal Audit Department, ofwhich two hold the qualification of Certified Internal Auditors, the only globally recognized certification forinternal auditors.
In June every year, the Company conducts a risk survey for all of its employees. Based on the assessment of thissurvey and risk-related information of affiliates, the Internal Audit Department formulates the annual internal
auditing plan, taking into consideration any special assignments from the Board or Directors and results ofdeliberation with the Auditors. The audit plan is reported to the Board of Directors after approval by the President.
Prior to conducting the audit, the internal auditors will undertake preliminary surveys and develop individual audit
plans. After obtaining approval from the head of the Internal Audit Department, the internal auditors will notify
the divisions to be audited. Site visits are conducted by several internal auditors. Within one week from thecompletion of the audit, the head of the Internal Audit Department shall prepare and submit an Internal Audit
Report to the President. Based on the approved Internal Audit Report, the President will order the heads of audited
divisions to take actions and report on any matters that need to be improved.
In addition, the head of the Internal Audit Department will provide copies of the Internal Audit Report to the
Directors in charge of each division and Auditors. Directors in charge of each division shall control any division-- 60 -

specific operational risks.
2) Coordination among internal audits, audits by Auditors, and accounting audits, and the relationship between theseaudits and the internal control division
The head of the Internal Audit Department must ensure an appropriate scope of audits and shall consider
coordinating with the Auditors and accounting auditors in order to minimize the redundancy of tasks. To this end,
the head of the Internal Audit Department holds monthly meetings with the Auditors and quarterly meetings withthe accounting auditor, to report on the status of the internal control system and results of internal audits asrequested and to exchange opinions.
The Auditors receive reports on the implementation and operation of internal controls of the TKC Group by theInternal Audit Department, reports on the progress of the internal audit plans, and reports on the results ofassessment of internal control over financial reporting.
The Company has an audit agreement with the accounting auditor, and receives audit of the financial statements
and internal control audit over financial reporting from the firm. In that process, the Internal Audit Department
provides necessary information to the accounting auditor.
While the Auditors, accounting auditor, and internal auditors each have their own objectives of audits, standpointsof the auditing body, and duties, during the current fiscal year under review, they worked to strengthen thecoordination and information sharing between the three different audits (audits by Auditors, audits by theaccounting auditor, and internal audits), to improve the effectiveness and efficiency of each audit, and to maintainand improve the governance of the TKC group by complementing each other.
(iii) Accounting audits
1) Name of audit firm
Ernst & Young ShinNihon LLC
2) Continuous audit period
38 years(Note) The Company had an audit agreement with Misuzu Audit Corporation (Chuo Audit Corporation at thetime) from 1983 to 2007 (including the period from July 1, 2006 to August 31, 2006 when the Company
temporarily appointed an accounting auditor instead of Misuzu Audit Corporation (Chuo Audit
Corporation at the time)). Upon dissolution of Misuzu Audit Corporation, the Company has entered into
an audit agreement with Ernst & Young ShinNihon LLC since 2007 (Shin Nihon LLC at the time).
However, the certified public accountant who was providing the audit services to the Company alsotransferred to Ernst & Young ShinNihon LLC (Shin Nihon LLC at the time) and continued to provide audit
services to the Company. As such, it could be deemed that the same auditing firm has been providing audit
services to the Company on a continuous basis, and therefore, the audit period of the auditing firm prior
to the transfer of said certified public accountant is also added and included.
3) Certified public accountants that executed the accounting audit
Kanji Tako, Toru Iizuka
4) Number of assistants assisting auditing:
The number of assistants assisting the accounting audit of the Company was 8 certified public accountants and 13
other personnel.
5) Policy and reasons for appointing the audit firm
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 something which prevents the accounting auditor’s execution of his/her duties, the Board of Auditors,
as necessary, shall develop a proposal on the dismissal or refusal of reappointment of said accounting auditor, andthe Board of Directors shall present such proposal for resolution at the General Meeting of Shareholders.
6) Assessment of Accounting Auditors by Auditors and Board of Auditors
Based on the Practical Guidelines on the Assessment of Accounting Auditors and the Formulation of Selection
Standards issued by the Japan Audit & Supervisory Board Members Association, the Board of Auditors assessed
the auditing activities of Ernst & Young ShinNihon LLC during the past year, including such items as the quality
control system of the auditing firm, auditing team, audit fees, communication with Auditors, etc., relationship- 61 -

with management, and non-compliance risks. As a result of assessment, the Board of Auditors has determinedthat it is appropriate to reappoint said auditing firm as accounting auditor.
(iv) Content of audit fees
1) Content of compensation to certified public accountants engaged in audits
Previous consolidated fiscal year
Category

Compensation for audit
and attestation services(millions of yen)

Current consolidated fiscal year

Compensation for nonaudit services (millionsof yen)Compensation for audit
and attestation services(millions of yen)Compensation for nonaudit services (millionsof yen)The Company

43

10

49

10

Consolidated
subsidiaries

－

－

－

－

Total

43

10

49

10

(Note) The Company pays certified public accountants engaged in audits compensation for assurance services forinternal controls pertaining to the Company’s ASP service based on the Auditing and Assurance PracticeCommittee Practical Guideline No. 3402 "Assurance Reports on Controls at a Service Organization (JapaneseInstitute of Certified Public Accountants dated August 1, 2019)" covering services other than the services
prescribed in Article 2 Paragraph 1 of the Certified Public Accountants Act.
2) Compensation to certified public accountants who belong to the same network as the Company’s auditors(excluding 1) above)
Not applicable.
3) Policy for determining audit fees
Audit fees are determined with the consent of the Board of Auditors, taking into account such factors as scale andbusiness characteristics of the Company and number of days of auditing works performed.
4) Reasons for Board of Auditors giving consent to the audit fees to the accounting auditor
The Board of Auditors has checked the audit plan, content of audit, man-hours required for the audit, and the unit
price per man-hour, and reviewed the appropriateness of the amount of compensation in comparison to theconventional amounts and planned amounts. As a result, it has determined that the decision by the Board of
Directors with respect to the compensation for the accounting auditor is appropriate, and has given consent inaccordance with Article 339 Paragraph 1 of the Companies Act of Japan.
5) Other important fees under the audit and attestation services
Not applicable.

- 62 -

(4) [Officers’ Compensation, etc.]
The Company resolved the policy on determining the individual compensations for officers of the Company at themeeting of the Board of Directors held on May 10, 2021. The Board of Directors also confirmed that, with respect tothe individual compensations for officers for the current fiscal year, the method for determining the details ofcompensations, etc. and the details of the determined compensations were in compliance with said policy and reflected
the matters reported by the Nomination and Compensation Advisory Committee, and determined that they are incompliance with said policy.
The details of the policy on determining the individual compensations for officers are as follows:

1. Policy on determining the amount of officers’ compensation and/or calculation method(1) Officers’ compensation system
Officers’ compensation consists of monetary compensation and stock-based compensation (BIP Trust).
(2) Maximum amounts of Officers’ compensation
The amount of compensation for officers of the Company was established by resolution of the 43rd Ordinary
General Meeting of Shareholders convened on December 22, 2009, at an annual monetary amount of up to 480
million yen for Directors’ compensation and up to 80 million yen for Auditors’ compensation. Separate fromthese maximum amounts of compensation, Directors (excluding outside directors and expatriates), executive
officers (excluding expatriates) are entitled to a stock-based compensation plan (BIP Trust) established byresolution of the 52nd Ordinary General Meeting of Shareholders convened on December 21, 2018, at an amountof up to 500 million yen for Directors and executive officers for three fiscal years.
Also, the total amount of compensation to be paid in each fiscal year is within the maximum amounts ofcompensation as determined by resolution of the General Meeting of Shareholders in accordance with Article 361
and Article 387 of the Companies Act of Japan, and within 1% of the total amount of marginal profit of the entire
company achieved in the previous fiscal year.
Here, Officers’ compensation shall mean monetary compensation and stock-based compensation for Directors,
monetary compensation for Auditors, and the portion of stock-based compensation of the executive officers’
allowance for executive officers who are not Directors.
(3) Policy on determining the amount of Officers’ compensation(i)

Policy on determining the compensation for Directors also serving as executive officers

1) The amounts of compensation may be increased if both of the following two conditions are met:a) On a non-consolidated, year-on-year basis, net sales, marginal profits and ordinary income of the entire
Company increased.
b) On closing an equity ratio of 83% or greater has been achieved.
Provided, in calculating the equity ratio, the effects of valuation difference on the available-for-sale securities
that are held as cross-shareholdings are to be excluded.
In addition to the above, if, for reasons such as merging/absorbing affiliated companies, the amount of assets,
liabilities, and net assets temporarily fluctuate significantly, such effects are also to be excluded.
Moreover, if the accounting standards applied to the year-to-year comparison of net sales, marginal profits
and ordinary income of the entire Company have been changed, such effects are to be excluded only for the
first fiscal year in which such new accounting standards are applied.
2) The amounts of compensation for Directors who are executive officers shall be determined at the meeting of
the Board of Directors, by assessing the achievement of business results of divisions in charge by referencing
the year-on-year marginal profits as indicator. If the accounting standards applied to the year-to-yearcomparison of marginal profits have been changed, such effects are to be excluded only for the first fiscal
year in which such new accounting standards are applied.
3) In addition to item 2) above, if an officer is reappointed, the Board may also take into consideration thenumber of years holding executive positions based on his/her contribution to items 1) and 2) above.
4) If the divisions in charge have failed to achieve target performance for two consecutive fiscal years, theamounts of compensation for the next fiscal year shall be decreased.
The amounts of compensation may also be reduced in the event he/she causes a material accident or major
loss.
(ii) Policy on determining the compensation for Directors not holding executive positions- 63 -

1) Directors who do not serve as executive officers shall be excluded from performance assessments.
2) If the Company makes a request to any of the Directors who do not hold executive positions to perform
matters beyond the normal responsibilities of an outside Directors, it shall pay an advisory fee based on a
separately entered agreement in compliance with the independence standards (compensation other than
Officers’ compensation must be less than 10 million yen per year).
(iii) Policy on determining the compensation for Auditors
1) Auditors shall be excluded from performance assessments, and shall be eligible for monetary compensation
only.
2) If the Company makes a request to any of the Auditors to perform matters beyond the normal responsibilities
of an outside Auditor, it shall pay an advisory fee based on a separately entered agreement in compliancewith the independence standards (compensation other than Officers’ compensation must be less than 10
million yen per year).
(iv) Basic policy on compensation for executive officers who are not Directors
1) An executive officer who is not a Director shall be paid an executive officer’s allowance in addition toemployee’s salaries.
2) Executive officers’ allowance shall consist of monetary compensation and stock-based compensation.
3) Executive officers’ allowance shall be determined at the meeting of the Board of Directors, taking into
consideration the following four points and assessing the business results.
a) Achievement of business results of divisions in charge;b) Individual accomplishments in marketing or innovation;c) Expertness of duties and individual contribution in improving the division’s business results;d) Executive position held and number of years holding such position.
If the division in charge continues to be unsuccessful in achieving the goals for two consecutive fiscal
years, or causes a material accident or major loss, the Company may suspend the payment of executive
officers’ allowance in the middle of a fiscal year.
(4) Method of determining the amount of Officers’ compensation
The Company determines the amounts of Directors’ compensation at the meeting of the Board of Directors by
respecting the results of the reports from the Nomination and Compensation Advisory Committee, chaired by an
Independent Outside Officer and the majority of which consists of Outside Officers. Compensation for Auditors
is determined by consultation among Auditors within the maximum amount approved at the General Meeting of
Shareholders. The Nomination and Compensation Advisory Committee deliberates on the following matters andreports to the Board of Directors:(i) Policy and procedure for the nomination of candidates for Directors and executive officers holding executive
position;(ii) Appointment and dismissal of Directors and executive officers holding executive position;(iii) Policy for the determination of compensations for Directors and executive officers holding executive
position;(iv) Policy for the determination of individual compensations for Directors and executive officers holding
executive positions;(v) Individual compensations for Directors and executive officers holding executive position;(vi) Appointment and dismissal of representative directors and auditors of subsidiaries and their individualcompensations;(vii) Other matters that the Board of Directors deem necessary in relation to any of the above items.
(5) Partial changes to the stock-based compensation plan using a trust
At the 53rd Ordinary General Meeting of Shareholders held on December 20, 2019, the proposal to change thestock-based compensation (BIP Trust) from the conventional system of granting points based on executive
positions held to a performance-linked system was approved.
Under the new system, points will be granted to each individual within the range of 0% to 120% of the basic
number of issued shares depending on the year-on-year ratio of the company-wide performance goals (marginal
profits and ordinary income) for a given period of each fiscal year during the trust period, provided, during the- 64 -

fiscal year ended September 30 of the same year, (1) the sales and ordinary income of the entire Company bothincrease, and (2) the non-consolidated equity ratio exceeds 80%.
Based on the advice of the Board of Auditors, the Company has resolved at the regular meeting of the Board of
Directors held in January 2020 not to grant points to Auditors. For the fiscal year under review, the Company has
calculated the amounts of stock-based compensation in accordance with the revised system.
The maximum number of total points granted to Directors, etc. in a single fiscal year shall remain unchanged at
34,000 points as approved at the 52nd Ordinary General Meeting of Shareholders held on December 21, 2018.
(6) Calculation method
Points = (monthly amount of officers’ compensation ÷ trust average stock acquisition price × 50% × year-on-year
ratio of marginal profits) ＋ (monthly amount of officers’ compensation ÷ trust average acquisition stock
price × 50% × year-on-year ratio of ordinary income)*1: Trust average stock acquisition price is the average stock acquisition price of the Company’s stock acquiredby the Trust in establishing the stock-based compensation program (BIP Trust).
*2: Marginal profit is the amount derived by deducting the costs that change in proportion to sales (variable costs)
from the amount of sales. Marginal profit will vary depending on product mix. The Company considers themarginal profit ratio as an important financial indicator, and sets the target at 60%.
*3: The year-on-year ratios of marginal profits and ordinary income fluctuate between the range of 0% to 120%.
*4: Year-on-year ratio of marginal profits for the current fiscal year under review was 103.1%. Year-on-year ratioof ordinary income was 108.6%.

2.

Total amount of compensation, total by type, and number of eligible officers, by officer category
Officer category

Directors (excluding
Outside Directors)
Auditors (excluding
Outside Auditors)

Total amount of
remuneration(millions of yen)

Total compensation by type (millionsof yen)Number of eligible
officers
Stock-based
Monetary
compensationcompensation(BIP Trust)

182

170

12

10

34

34

－

3

Outside Directors

28

28

－

4

Outside Auditors

19

19

－

3

(Notes) 1. As of the end of the fiscal year under review, the Company has eight Directors (of which, three are Outside
Directors) and four Auditors (of which, two are Outside Auditors). The difference in the number of eligible
Directors and Auditors is because the above number includes six Directors (of which, one is an Outside
Director) and one Auditor (of which, one is an Outside Auditor) who retired from office due to expirationof terms of office, and one Auditor who resigned and retired from office as of the close of the Ordinary
General Meeting of Shareholders for the 54th Term held on December 18, 2020.
2. The maximum amount of Officers’ compensation was resolved at 480 million yen per year at the 43rd
Ordinary General Meeting of Shareholders convened on December 22, 2009. The Directors’ compensationis performance-linked and determined within the above maximum amount. The number of Directors as ofthe end of said General Meeting of Shareholders was twelve (of which, one was an Outside Director).
Separate from the above, the maximum amount of the stock-based compensation plan (BIP Trust) for threefiscal years was resolved at 500 million yen at the 52nd Ordinary General Meeting of Shareholders held on
December 21, 2018. The number of Directors (excluding Outside Directors) as of the end of said General
Meeting of Shareholders was eight.
In the Initial Trust Period, in addition to the maximum amounts set forth above, an amount not exceeding
970 million yen in total has also been resolved to be used as funds to acquire the Company’s stock to be
granted as points to Directors, etc. (including Directors, etc. who have retired from office and became
employees after the grant of stock options) as measures to be taken for the transition from the stock-based
compensation stock option scheme.

- 65 -

(5) [Status of Shareholdings](i) Standards and approach to the classification of equity securities
The Company classifies its equity securities as those held for the purpose of pure investments, which are held forthe purpose of gaining profits mainly by fluctuation in share values or by receipt of dividends, and those held for
purposes other than pure investments (hereinafter “cross-shareholdings”). The Company make it a general rule
not to hold equity securities for the purpose of pure investments.
As of the end of the fiscal year under review, the Company does not hold equity securities for the purpose ofpure investments.
(ii) Equity securities held for purposes other than pure investments
1) Policy on cross-shareholding and methods to assess its rationality, and results of assessment of the appropriatenessof each holding by Directors, etc.
a) Policy on cross-shareholdings
The purposes of cross-shareholding of share of other listed companies are to maintain and strengthen long-term,
stable business relationships, or to maintain and strengthen business partnerships.
b) Methods to assess the rationality of cross-shareholding, and assessment of the appropriateness of each holding
by Directors, etc.
The Boards of Directors of the Company and its Group companies annually assess the major crossshareholdings taking into consideration the returns and risks and examining the medium- to long-term economic
rationality and future prospects. As a result of such assessment, any cross-shareholdings that do not necessarily
have significance shall be reduced through dialogue and negotiation with such business partners.
2) Number of securities and amounts recorded in the balance sheets
Number of securities(Stock name)

Total amount recorded in balance
sheets (millions of yen)

Unlisted stock

7

112

Securities other thanunlisted stock

4

4,372

(Securities that increased in number of shares in the current fiscal year)
Number of securities(Stock name)

Total amount acquired byincrease in number of shares(millions of yen)

Unlisted stock

－

－

－

Securities other thanunlisted stock

－

－

－

Reasons for increase in number ofshares(Securities that decreased in number of shares in the current fiscal year)
Total amount sold by decrease in
number of shares (millions of yen)

Number of securities(Stock name)
Unlisted stock－－

Securities other thanunlisted stock243) Numbers of securities and amounts recorded in the balance sheet for equity holdings for specific purpose anddeemed equity holdings
Specified investment securities- 66 -

Current fiscal year
Stock name

Previous fiscal year

Number of shares
Number of shares(shares)(shares)Amount recorded in Amount recorded inbalance sheetsbalance sheets(millions of yen)(millions of yen)
1,780,000

1,780,000

T&D Holdings, Inc.
2,757

1,836

2,322,180

2,322,180

Mitsubishi UFJ
Financial Group,
Inc.
1,527

966

275,400

275,400

Mebuki Financial
Group, Inc.
67

65

17,00017,000

Nippon Paper
Industries Co., Ltd.
20

22

－

31,460Mito Securities Co.,
Ltd.
－

6

－

9,187

Tokai Tokyo
Financial Holdings,
Inc.
2

－

Purpose of holding, quantitative effect ofholding, reason for increase in number ofsharesHolding oftheCompany’s
sharesTo maintain and strengthen the partnershipfor the purpose of supporting the prosperity
and success of SMEs.
Figures on the effect of holding are notdisclosed as they contain business secrets ofsaid company. However, the Company
assesses whether the benefits and risks fromthe holding cover the costs of capital,
quantitatively on a regular basis.

Yes

To maintain and strengthen the long-term,
stable business relationship.
Figures on the effect of holding are notdisclosed as they contain business secrets ofsaid company. However, the Company
assesses whether the benefits and risks fromthe holding cover the costs of capital,
quantitatively on a regular basis.

Yes

To maintain and strengthen the long-term,
stable business relationship.
Figures on the effect of holding are notdisclosed as they contain business secrets ofsaid company. However, the Company
assesses whether the benefits and risks fromthe holding cover the costs of capital,
quantitatively on a regular basis.

Yes

To maintain and strengthen the long-term,
stable business partnership.
Figures on the effect of holding are notdisclosed as they contain business secrets ofsaid company. However, the Company
assesses whether the benefits and risks fromthe holding cover the costs of capital,
quantitatively on a regular basis.

Yes

As a result of assessment of whether or not
to hold the cross-shareholding by comparing
the benefits of the business relationship andholding with the costs of capital, the Boardof Directors decided on selling, and shareswere sold in April 2021.

No

As a result of assessment of whether or not
to hold the cross-shareholding by comparing
the benefits of the business relationship andholding with the costs of capital, the Boardof Directors decided on selling, and shareswere sold in April 2021.

No(Note) Column with “－” indicates that the Company does not hold said stock.
(iii) Equity securities held for the pure investment
None to be disclosed.

- 67 -

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 Ordinance on the
Terminology, Forms, and Preparation Methods of Consolidated Financial Statements (Ordinance of the Ministry of
Finance No. 28 of 1976; hereinafter, the "Ordinance on Consolidated Financial Statements").
Note that the consolidated financial statements for the current consolidated fiscal year (started October 1, 2020; ended
September 30, 2021) have been prepared based on the Revised Ordinance on Consolidated Financial Statements inaccordance with the notes to Article 3, Supplementary Provisions of the Cabinet Office Ordinance on Partial
Amendments to the Ordinance on the Terminology, Forms, and Preparation Methods of Consolidated Financial
Statements (Cabinet Office Ordinance No. 29 of June 8, 2018; hereinafter, the “Revised Cabinet Office Ordinance”).
(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").
Note that the financial statements for the current fiscal year (started October 1, 2020; ended September 30, 2021)
have been prepared based on the Revised Ordinance on Financial Statements in accordance with the notes to Article
2, Supplementary Provisions of the Revised Cabinet Office Ordinance.
Further, as the Company is a Specified Company Submitting Financial Statements, we have prepared the financial
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, 2020 to September 30, 2021)
and financial statements for the fiscal year (from October 1, 2020 to September 30, 2021) 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 that would
enable us to appropriately 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.

- 68 -

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, 2020)(September 30, 2021)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable–trade
Lease investment assets
Merchandise and finished goods
Work in progress
Raw materials and stored items
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and 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, plant and equipment
Intangible assets
Software
Software in progress
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Long-term deposits
Guarantee deposits
Long-term lease investment assets
Other
Total investments and other assets
Total non-current assets
Total assets

26,769
7,014
432
238
307
177
924
(19)
35,844

26,426
6,973
384
222
51
138
1,925
(14)
36,107

8,182

7,855

547

611

1,857
6,911
290
5
*1 17,794

2,050
6,802
220
－
*1 17,540

2,724
370
25
3,120

2,654
924
25
3,605

*2 16,282*2 19,705

163
7,360
14,600
1,438
889
178
40,911
61,826
97,671- 69 -

120
7,209
16,600
1,440
539
537
46,152
67,298103,406

(Unit: millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(September 30, 2020)(September 30, 2021)
Liabilities
Current liabilities
Accounts payable–trade
Electronically recorded obligations–operating
Current portion of long-term loans payable
Lease obligations
Accounts payable–other
Income taxes payable
Accrued consumption taxes
Provisions for bonuses
Provisions for loss on construction contracts
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Lease obligations
Retirement benefit liabilities
Provisions for stocks payment
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Accumulated remeasurements of defined benefit
plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets- 70 -

2,181
802
142
522
2,184
2,549
1,520
3,673
－
1,124
14,701

2,402
834
80
468
1,786
2,211
780
4,073
141
1,942
14,721

295
1,113
3,400
599
485
5,893
20,595

214
694
3,554
307
498
5,268
19,9905,700
6,588
68,533(1,660)79,161

5,700
6,589
73,411(1,352)
84,348(553)

449(1,532)(1,382)(2,085)77,07597,671(932)
83,416
103,406

2) [Consolidated Statements of Income and Comprehensive Income][Consolidated Statements of Income](Unit: millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2019;(Started October 1, 2020;
ended September 30, 2020)
ended September 30, 2021)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Land and house rent received
Subsidy income
Other
Total non-operating income
Non-operating expenses
Interest expenses
Loss on sale of securities
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Other
Total extraordinary income
Extraordinary losses
Loss on sale of non-current assets
Loss on retirement of non-current assets
Loss on valuation of investment securities
Other
Total extraordinary losses
Net income before taxes and adjustments
Income taxes–current
Income taxes–deferred
Total income taxes
Net income
Loss attributable to non-controlling interests
Profit attributable to owners of parent

67,814*1 22,667

45,147

46,902*2, *3 33,766*2, *3 34,587

11,381

12,314

37
146
50
15
56
306

51
150
51
13
92
359

1
－
0
1
11,685000012,673*4 2*4 111

－
2

9
121

－

*5 22

*6 40

－
0
41
11,646
4,070
(225)
3,845
7,801
(20)
7,821

- 71 -

66,221*1 19,319

*6 23

89
－
134
12,660
4,156
(183)
3,973
8,686
－
8,686

[Consolidated Statements of Comprehensive Income](Unit: millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2019;(Started October 1, 2020;
ended September 30, 2020)
ended September 30, 2021)
Net income
Other comprehensive income
Valuation difference on available-for-sale securities
Remeasurements of defined benefit plans
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners of theparentComprehensive income attributable to non-controllinginterests- 72 -

7,801

8,686

(471)
171
*1 (299)
7,501

1,002
150
*1 1,153
9,839

7,524

9,839

(22)

－

3) [Consolidated Statement of Changes in Net Assets]
Previous consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)(Unit: millions of yen)

Shareholders’ equity
Capital stock
Balance at beginning of year

Capital surplus

5,700

Retained earnings

5,711

63,623

Total shareholders’equityTreasury stock(1,630)73,404

Changes during fiscal year
Dividends of surplus(2,911)(2,911)

Profit attributable to ownersof parent

7,821

7,821

Acquisition of treasury stock
Disposal of treasury stock

(34)

(34)

3

3

0

Change in parent’s ownershipinterest from transactions
with non-controlling interests

877

877

Changes in items other thanequity (net)Total changes during fiscal year
Balance at end of year

－

877

4,909

(30)

5,756

5,700

6,588

68,533(1,660)79,161

Accumulated other comprehensive income

Balance at beginning of year

Valuation difference
on available-for-salesecurities

Accumulated
remeasurements ofdefined benefit plans

Total accumulated
other comprehensive
income(83)(1,704)(1,787)

Non-controllinginterests
1,504

Total net assets

73,121

Changes during fiscal year
Dividends of surplus(2,911)

Profit attributable to ownersof parent

7,821

Acquisition of treasury stock(34)

Disposal of treasury stock

3

Change in parent’s ownershipinterest from transactions
with non-controlling interests

877

Changes in items other thanequity (net)

(469)

171

(297)

(1,504)(1,801)

Total changes during fiscal year

(469)

171

(297)

(1,504)

3,954

Balance at end of year(553)

(1,532)(2,085)－77,075- 73 -

Current consolidated fiscal year (Started October 1, 2020; ended September 30, 2021)(Unit: millions of yen)

Shareholders’ equity
Capital stock
Balance at beginning of year

Capital surplus

5,700

Retained earnings

6,588

68,533Cumulative effects of changes
in accounting policies
Restated balance

Total shareholders’equityTreasury stock(1,660)

(367)
5,700

6,588

68,165

79,161(367)(1,660)78,793

Changes during fiscal year
Dividends of surplus(3,440)(3,440)

Profit attributable to ownersof parent

8,686

8,686

Acquisition of treasury stock
Disposal of treasury stock

0

(6)

(6)

315

315

Changes in items other thanequity (net)Total changes during fiscal year
Balance at end of year

－

0

5,246

308

5,555

5,700

6,589

73,411(1,352)

84,348

Accumulated other comprehensive income
Valuation difference
on available-for-salesecurities
Balance at beginning of year

(553)

Accumulated
remeasurements ofdefined benefit plans

Total accumulated
other comprehensive
income(1,532)(2,085)

Cumulative effects of changes
in accounting policies
Restated balance

Total net assets

77,075
(367)

(553)

(1,532)(2,085)76,707

Changes during fiscal year
Dividends of surplus(3,440)

Profit attributable to ownersof parent

8,686

Acquisition of treasury stock(6)

Disposal of treasury stock

315

Changes in items other thanequity (net)

1,002

150

1,153

1,153

Total changes during fiscal year

1,002

150

1,153

6,708

449

(1,382)(932)

83,416

Balance at end of year

- 74 -

4) [Consolidated Statements of Cash Flows](Unit: millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2019;(Started October 1, 2020;
ended September 30, 2020)
ended September 30, 2021)

Cash Flows from Operating Activities
Net income before taxes and adjustments
Depreciation
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provisions for bonuses
Increase (decrease) in provisions for loss on
construction contracts
Increase (decrease) in retirement benefit liabilities
Contribution of securities to retirement benefit trust
Increase (decrease) in provisions for stocks payment
Interest and dividends income
Interest expenses
Loss on retirement of non-current assets
Loss (gain) on sale of non-current assets
Loss (gain) on valuation of investment securities
Decrease (increase) in notes and accounts receivable–
trade
Decrease (increase) in inventories
Decrease (increase) in other assets
Increase (decrease) in accounts payable–trade
Increase (decrease) in other liabilities
Increase (decrease) in accrued consumption taxes
Other
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, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales 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- 75 -

11,646
3,070
(21)
72

12,660
2,945
(5)
400

－

33

82
(1,200)
37
(183)
1
40
(2)
－

367
－
(291)
(201)
0
23
(89)
89

1,257

159

366
68
(1,559)
(211)
798
66
14,330212(1)(3,971)
10,569

31
(679)
131
(283)
(739)
281
14,832234(0)(4,516)
10,550(8,400)3,000(1,738)2(1,369)(5,505)
－
4,050
(173)
97
(230)
141
(0)
1
(10,124)(5,300)3,300(1,420)201(1,887)(4,118)
13
2,000
(47)
44
－
12
(0)
－
(7,201)

(Unit: millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2019;(Started October 1, 2020;
ended September 30, 2020)
ended September 30, 2021)
Cash Flows from Financing Activities
Repayment of long-term loans payable
Repayment of lease obligations
Purchase of treasury stock
Proceeds from disposal of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling shareholders
Purchase of shares of subsidiaries without changes tothe scope of consolidation
Cash Flows from Financing Activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of year

- 76 -

(142)
(99)
(34)
0
(2,905)
(11)

(142)
(91)
(6)
0
(3,449)
－

(593)

－

(3,786)(3,341)
26,810*1 23,469(3,691)(342)
23,469*1 23,126

[Notes to Financial Statements](Basis of Presenting the Consolidated Financial Statements)
1. Scope of Consolidation
Consolidated subsidiaries (5 companies):
TLP Corporation
TKC Security Services Co., Ltd.
SKYCOM Corporation
TKC Customer Support Service Co., Ltd.
TKC Shuppan Corporation
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. Scope of Application of the Equity Method
Affiliated companies under the equity method: (1 company)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 not under the equity method: (1 company)
TKC Financial Guarantee Co., Ltd.
(Reason for excluding the company from the scope of application of the equity method)
TKC Financial Guarantee Co., Ltd. is excluded from the scope of application of the equity method becausesuch exclusion has little impact on the consolidated financial statements of the Company in terms of net
income (amount in proportion to equity held) or retained earnings (amount in proportion to equity held), anddoes not 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(i) Marketable and investment securities
1) Available-for-sale securities
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
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(ii) Inventory assets
1) Merchandise, raw materials
Cost determined by first-in, first-out method (with balance sheet values reflecting write downs for
decreased profitability).
2) Finished goods- 77 -

Cost mainly determined by cost percentage method (with balance sheet values reflecting write
downs for decreased profitability).
3) Work in progress
Cost determined by specific identification method (with balance sheet values reflecting write downs
for decreased profitability).
4) Supplies
Last purchase price method (with balance sheet values reflecting write downs for decreased
profitability).
(2)

Depreciation of major depreciable assets(i) Property, plant 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 & structures

10 to 50 years

Machinery, equipment &4 to 10 years
vehiclesTools,
fixturesfurniture&2 to 20 years(ii) Intangible assets (excluding lease assets)
1) Software
a. Software for sale
Software for sale is 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).
b. Software for internal use
Amortized using straight-line method with an estimated in-house useful life of five years.
2) Other intangible assets
Amortized using the straight-line method.
(iii) 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(i) Allowance for doubtful accounts
In setting aside provisions for possible losses due to uncollectable receivables, provisions are recognizedat 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 todoubtful accounts and certain other receivables.
(ii) Provisions for bonuses
Provisions for bonuses are recognized based on the estimated amounts of payment.
(iii) Provisions for stocks payment
In setting aside provisions for payment of the Company’s shares to Directors, etc., provisions arerecognized at estimated amounts of stocks payment determined based on the points allocated to Directors,
etc. in accordance with the rules on issuance of shares under the Board Incentive Plan (BIP) Trust.
(iv) Provisions for loss on construction contracts
In setting aside provisions for future losses related to construction contracts, provisions are recognized- 78 -

at estimated amounts of losses for works in progress as at the end of the current consolidated fiscal year,
if it is likely that the total amount of costs will exceed the total amount of revenues, and further if suchamounts can be reasonably estimated.
(4)

Accounting procedure for retirement benefits(i) Method of attributing expected benefits to dateIn calculating retirement benefit obligations, expected benefits are attributed to the period up until theend of the current consolidated fiscal year based on benefit formula standards.
(ii) Recognizing actuarial differences as expenses and past service costs
Past service costs are recognized as expenses for a certain years (10 years) within the average remaining
years of service of employees in which they occur using the straight-line method.
Actuarial differences are recognized as expenses for the consolidated fiscal year in which they occur.
(iii) Unrecognized past service costs
Unrecognized past service costs are recognized on a tax-adjusted basis at the amount of accumulated
remeasurements of defined benefit plans under accumulated other comprehensive income in net assets.

(5)Standards for recognizing significant revenues and expenses
The Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 30, 2018) and
Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30,
March 30, 2018) have been applied. Accordingly, revenues are recognized at the time the controls overpromised goods or services are transferred to customers, in the amounts that are expected to be received
in exchange for such goods or services.

(6)

Scope of funds covered by the consolidated statements of cash flows
The scope of funds (cash and cash equivalents) covered by the consolidated statements of cash flows
includes:(i) Cash on hand(ii) Demand deposits(iii) 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(i) Accounting method for consumption taxes and local consumption taxes
Consumption taxes are accounted for using the tax-exclusion method.
(ii) Application of the consolidated taxation system
The consolidated taxation system is applied.
(iii) Application of tax effect accounting for the transition from the consolidated taxation system to GroupTax Sharing System
Based on the treatment set forth under Item 3 of the Treatment of Tax Effect Accounting for theTransition from the Consolidated Taxation System to Group Tax Sharing System (Practical Solution No.
39, March 31, 2020), the Company and its domestic consolidated subsidiaries do not implement theprovisions of Paragraph 44 of the Implementation Guidance on Accounting Standard for Tax EffectAccounting (ASBJ Guidance No. 28, February 16, 2018) for items that were transitioned to the grouptax sharing system which was established in the Law for Partial Revisions to the Income Tax Act, etc.
(Law No. 8 of 2020) and items that were revised under the non-consolidated taxation system in line withthe transition to the group tax sharing system. The amounts of deferred tax assets and deferred tax
liabilities are based on the provisions of the Tax Act prior to revisions.

- 79 -

(Changes in Accounting Policies)
As it has become possible to apply the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29,
March 30, 2018) (hereinafter, “Revenue Recognition Accounting Standard”) and Implementation Guidance on
Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March 30, 2018) from the beginning ofa consolidated fiscal year commencing after April 1, 2018, the Company applies the Revenue Recognition
Accounting Standard, etc. from the beginning of the current consolidated fiscal year. Accordingly, we recognize
revenues at the time the controls over promised goods or services are transferred to customers, in the amounts
that we expect to receive in exchange for such goods or services.
Major changes are, conventionally for certain transactions, we have been recognizing the total amounts ofcompensation received from customers as revenue, but going forward, for transactions in which the Group acts
as agent in the provision of goods or services to customers, we will recognize as revenues, the net amount after
deducting the amounts we pay to suppliers from the amounts we receive from customers.
In applying the Revenue Recognition Accounting Standard, etc., we have followed the transitional measures set
forth in the notes to Section 84 of the Revenue Recognition Accounting Standard. Therefore, we have adjusted
the retained earnings at the beginning of the current consolidated fiscal year to include the cumulative effects ofretroactive application of the new accounting policy prior to the beginning of the said consolidated fiscal year,
and applied the new accounting policy to the balance at the beginning of the fiscal year under review.
As a result, the amounts of cumulative effects are reflected in the net assets at the beginning of the current
consolidated fiscal year, and the beginning balance of retained earnings has decreased by 367 million yen.
Also, compared to the conventional method, net sales for the current consolidated fiscal year decreased by 2,460
million yen, cost of sales decreased by 2,324 million yen, and the amounts of operating income, ordinary income,and net income before taxes and adjustments decreased by 136 million yen each.
(Significant Accounting Estimates)
1. Revenue recognition based on percentage of completion(1) Amounts stated in the consolidated financial statements for the fiscal year under review:
Net sales(Unit: millions of yen)
Current consolidated fiscal year351(2) Information on the nature of significant accounting estimates related to the identified items(i) Calculation method
For net sales, in case where the contract price or total amount of costs required through completion formade-to-order software can be estimated reliably, then revenue is recognized depending on the percentage
of fulfillment of the measured performance obligations. Provided, in case where the contract price or total
amount of costs required through completion cannot be estimated reliably, then revenue is recognizedwithin the expenses incurred.
(ii) Key assumptions
In estimating the total amount of costs, we first make sure that the schedule, development workload, andnumber of development personnel assigned to each made-to-order software development project are
adequate and appropriate, then calculate the cost by multiplying the development man-hours by man-hour
unit price for each contracted project.
In estimating the total amount of costs, we revise our estimations by conducting regular monitoring of theestimated development workload and actual man-hours for development projects.
(iii) Impact on next fiscal year’s consolidated financial statements
The Company considers the total amount of project costs revised based on the latest information including
comparison of estimated costs and actual costs, and progress of the project at the time appropriate.
However, in the event that the actual costs deviate from our estimations due to changes in future
conditions, the estimates may impact the amount of revenue that the Group recognizes.

- 80 -

(Accounting Standards Not Yet Applied)(Application of Accounting Standards for Revenue Recognition, etc.)
・ Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020, ASBJ)・ Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March 31,
2020, ASBJ)(1) Summary
The standard and implementation guidance stipulate the disclosure of revenue recognition (method of presentation& notes).
(2) Planned date of application
We plan to apply the standard and implementation guidance as of the beginning of the fiscal year ending
September 2022.
(Accounting Standard for Fair Value Measurement, etc.)
・ Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019, ASBJ)・ Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9, July 4, 2019, ASBJ)・ Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019, ASBJ)・ Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, July 4,
2019, ASBJ)・ Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19,
March 31, 2020, ASBJ)(1) Summary
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB)
have established almost the same detailed guidance regarding fair value measurement (IFRS 13 “Fair Value
Measurement” in IFRS and Topic 820 “Fair Value Measurement” of the Accounting Standards Codification in
FASB). As such, ASBJ considered the guidance regarding fair value of financial instruments and disclosure inorder to improve the compatibility with such international accounting standards, and issued the AccountingStandard for Fair Value Measurement, etc.
ASBJ’s basic approach in developing the Accounting Standard for Fair Value Measurement was to basically
implement the entire provision of IFRS 13 and adopt unified calculation methods in order to improve thecomparability of financial statements among companies in and outside Japan. Taking into consideration thepractices that have been conducted thus far in Japan, alternative treatments will be added for each item to theextent to which comparability between financial statements is not greatly impaired.
(2) Planned date of application
We plan to apply the standards and implementation guidance as of the beginning of the fiscal year ending
September 2022.
(3) Impacts of application of said accounting standards
The impact of the application of the Accounting Standard for Fair Value Measurement, etc. on the consolidated
financial statements remains undetermined at present.
(Changes in Method of Presentation)(Application of Accounting Standard for Disclosure of Accounting Estimates)
Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31, March 31, 2020) has been
applied to the consolidated financial statements prepared for the year-end of the current consolidated fiscal year
under review. Accordingly, notes on Significant Accounting Estimates are included in the consolidated financial
statements.
Provided, said notes do not include information on the previous consolidated fiscal year in accordance with thetransitional measures set forth in the notes to Section 11 of said Accounting Standard.

- 81 -

(Additional Information)(Stock-based Compensation Plan for Officers)
1. Outline of transaction
Based on the resolution of the Board of Directors’ Meeting held on October 31, 2018 followed by approval at theOrdinary General Meeting of Shareholders held on December 21, 2018, the Company introduced a stock-based
compensation plan called “BIP Trust.” The objectives of the plan are to clarify the linkage between the Company’s
shareholder value and the remuneration for Directors, etc. and to motivate Directors, etc. 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 share price.
The proposal to change the stock-based compensation plan for Directors, etc. (excluding Directors not holding
executive positions) and Full-time Auditors to performance-linked compensation has been deliberated by the
Nomination and Compensation Advisory Committee whose chairperson and half of the members are independent
Outside Directors and outside experts, and approved at the Ordinary General Meeting of Shareholders held on
December 20, 2019.
2. Stocks of the Company remaining in trust
The stocks of the Company remaining in trust are recorded as treasury stock under net assets with the book values
in the trust (not including expenses attributable thereto). The book value of said treasury stocks was 434 million
yen for 219,800 shares as of the end of the consolidated accounting period under review.
(Note) The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. The
number of stocks has been calculated assuming that the stock split was conducted at the beginning of the previous
consolidated fiscal year.

- 82 -

(Notes to Consolidated Balance Sheets)*1. Accumulated depreciation of property, plant and equipment
Previous consolidated fiscal year
(September 30, 2020)

Current consolidated fiscal year
(September 30, 2021)

21,762 million yen

23,055 million yen*2. Items pertaining to non-consolidated subsidiaries and affiliated companies are as follows:
Previous consolidated fiscal year
(September 30, 2020)
Investment securities (shares)

Current consolidated fiscal year
(September 30, 2021)

100 million yen

100 million yen(Notes to Consolidated Statements of Income)
Provisions for loss on construction contracts included in Cost of sales are as follows:
Previous consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Current consolidated fiscal year
(Started October 1, 2020;
ended September 30, 2021)－million yen

33 million yen*2. Major items included in selling, general and administrative expenses are as follows:
Previous consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)
Salaries
Provision for bonuses

11,564 million yen
3,015

Retirement benefit expenses
Provisions for stocks payment
Depreciation
Rent expenses

Current consolidated fiscal year
(Started October 1, 2020;
ended September 30, 2021)
11,958 million yen
3,357

731
40

957
24

648
2,220

723
2,444

*3. Total amount of research and development expenses included in general administrative expenses
Previous consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)
6million yen

Current consolidated fiscal year
(Started October 1, 2020;
ended September 30, 2021)－million yen*4. Breakdown of gains on sales of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)
Land
Machinery, equipment & vehicles
Tools, furniture & fixtures
Total- 83 -

Current consolidated fiscal year
(Started October 1, 2020;
ended September 30, 2021)－ million yen
02

109 million yen

2

111

0
1

*5. Breakdown of loss on sale of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)
Buildings & structures

Current consolidated fiscal year
(Started October 1, 2020;
ended September 30, 2021)－ million yen

22

million yen*6. Breakdown of loss on retirement of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Current consolidated fiscal year
(Started October 1, 2020;
ended September 30, 2021)

Buildings & structures

19 million yen

12 million yen

Machinery, equipment & vehicles
Tools, furniture & fixtures

0
20

0
9

Intangible assets
Other (Investments and other assets)
Total

0
－
40

0
0
23

(Notes to Consolidated Statements of Comprehensive Income)*1. Reclassification adjustments and tax expense or benefits on other comprehensive income
Previous consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Current consolidated fiscal year
(Started October 1, 2020;
ended September 30, 2021)

Valuation difference on available-for-sale securities:
Increase/decrease during the fiscal year
Reclassification adjustments(665) million yen－

1,425 million yen
8

Amount before tax

(665)

1,434

Tax effect

194

(431)

Valuation difference on available-for-sale securities

(471)

1,002

－
247

(33)
247

Amount before tax
Tax effect

247
(75)

214
(63)

Remeasurements of defined benefits

171
(299)

150
1,153

Remeasurements of defined benefit plans, net of tax:
Increase/decrease during the fiscal year
Reclassification adjustments

Total other comprehensive income- 84 -

(Notes to Consolidated Statements of Changes in Equity)
Previous consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)
1. Types and numbers of issued stocks and treasury stocks
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)

267,310－－

267,310

267,310－－

267,310

Common stock (Note)

4,475

66

9

4,533

Total

4,475

66

9

4,533

Issued shares
Common stock
Total
Treasury stock(Notes) 1. The 66 hundred share increase in common treasury stock resulted from purchase of 66 hundred fractional unit

shares.

2. The 9 hundred share decrease in common treasury stock resulted from sales of 1 hundred fractional unit shares,
and payment of 8 hundred shares under the BIP Trust.
3. The number of treasury stock at the end of the current consolidated fiscal year includes the 1,897 hundred
shares of treasury stock of the Company held by the BIP Trust.
4. The Company conducted a stock split of its common shares at a ratio of 1:2, effective as of April 1, 2021. The
above numbers of shares held are the numbers prior to the stock split.
2. Subscription rights to shares and treasury subscription rights to shares
None to be disclosed.
3. Dividends(1) Dividend payments
Resolution
December 20, 2019
Ordinary General
Meeting of
Shareholders
May 1, 2020
Meeting of theBoard of Directors

Type of shares

Total amount of cash
dividends(millions of yen)

Dividend per share(yen)

Common stock

1,456

Common stock

1,455

Record date

Effective date

55

September 30, 2019

December 23, 201955

March 31, 2020

June 15, 2020

(Notes) 1. The total amount of cash dividends determined by resolution of the Ordinary General Meeting of Shareholders
on December 20, 2019 includes a cash dividend of 10 million yen to the stocks of the Company owned by the
BIP Trust.
2. The total amount of cash dividends determined by resolution of the Board of Directors on May 1, 2020 includes
a cash dividend of 10 million yen to the stocks of the Company owned by the BIP Trust.
3. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. The dividend
per share shows the amount prior to the stock split.
(2) Of the dividends with record dates during this consolidated fiscal year, those with effective dates in thefollowing consolidated fiscal year
Resolution
December 18, 2020
Ordinary General
Meeting of
Shareholders

Total amount ofType of shares cash dividends(millions of yen)

Source ofdividends

Common stock

Retainedearnings

1,720

Dividend pershare (yen)65

Record date

Effective date

September 30, 2020

December 21, 2020

(Notes) 1. The total amount of cash dividends determined by resolution of the Ordinary General Meeting of Shareholders
on December 18, 2020 includes a cash dividend of 12 million yen to the stocks of the Company owned by the
BIP Trust.

- 85 -

2. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. The dividend
per share shows the amount prior to the stock split.
Current consolidated fiscal year (Started October 1, 2020; ended September 30, 2021)
1. Types and numbers of issued stocks and treasury stocks
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)

267,310

267,310－534,620

267,310

267,310－534,620

4,533

3,771

815

7,489

4,533

3,771

815

7,489

Issued shares
Common stock
Total
Treasury stock
Common stock
Total(Notes) 1. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021.
2. The 267,310 hundred share increase in issued common shares is the increase as a result of the stock split.
3. The 3,771 hundred share increase in common treasury stock resulted from 3,759 hundred shares from thestock split, and 12 hundred shares from purchase of fractional unit shares (7 hundred shares prior to the stock
split, 4 hundred shares after the stock split).
4. The 815 hundred share decrease in common treasury stock resulted from sales of 1 hundred shares offractional unit shares (after the stock split), and payment of 814 hundred shares under the BIP Trust (782hundred shares prior to the stock split, 32 hundred shares after the stock split).
5. The number of treasury stock at the end of the current consolidated fiscal year includes the 2,198 hundred
shares of treasury stock of the Company held by the BIP Trust.
2. Subscription rights to shares and treasury subscription rights to shares
None to be disclosed.
3. Dividends(1) Dividend payments
Resolution
December 18, 2020
Ordinary General
Meeting of
Shareholders
May 7, 2021
Meeting of theBoard of Directors(Notes)Type of shares

Total amount of cash
dividends(millions of yen)

Dividend per share(yen)

Common stock

1,720

Common stock

1,720

Record date

Effective date

65.00

September 30, 2020

December 21, 2020

65.00

March 31, 2021

June 14, 2021

1. The total amount of cash dividends determined by resolution of the Ordinary General Meeting of Shareholders
on December 18, 2020 includes a cash dividend of 12 million yen to the stocks of the Company owned by the
BIP Trust.
2. The total amount of cash dividends determined by resolution of the Board of Directors on May 7, 2021
includes a cash dividend of 7 million yen to the stocks of the Company owned by the BIP Trust.
3. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. The dividend
per share shows the amount prior to the stock split.

(2) Of the dividends with record dates during this consolidated fiscal year, those with effective dates in thefollowing consolidated fiscal year
Resolution
December 17, 2021
Ordinary General
Meeting of
Shareholders

Total amount ofType of shares cash dividends(millions of yen)

Source ofdividends

Common stock

Retainedearnings

2,090- 86 -

Dividend pershare (yen)39.50

Record date

Effective date

September 30, 2021

December 20, 2021

(Note)

The total amount of cash dividends determined by resolution of the Ordinary General Meeting of Shareholders
on December 17, 2021 includes a cash dividend of 8 million yen to the stocks of the Company owned by the
BIP Trust.

(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, 2019;
ended September 30, 2020)

Current consolidated fiscal year
(Started October 1, 2020;
ended September 30, 2021)

Cash and deposits

26,769 million yen

26,426 million yen

Time deposits with deposit period greater than three months(3,300)(3,300)Cash and cash equivalents

23,46923,126(Lease Transactions)1. Finance lease transactions (Lessee)
Finance lease transactions that do not involve transfer of ownership(i)

Description of lease assets
Property, plant and equipment
Mainly include machinery and equipment, tools, furniture and fixtures.

(ii) 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
Previous consolidated fiscal year
(September 30, 2020)(Unit: millions of yen)

Current consolidated fiscal year
(September 30, 2021)

Within one year

238

235

Over 1 year

470

393

709

628

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, 2020)

Current consolidated fiscal year
(September 30, 2021)

Current assets

432

384

Investments and other assets

889

539

(2) Lease obligations(Unit: millions of yen)Previous consolidated fiscal year
(September 30, 2020)

Current consolidated fiscal year
(September 30, 2021)

Current liabilities

432

384

Non-current liabilities

889

539

- 87 -

(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, 2020)
Book value in consolidatedbalance sheets(millions of yen)
(1) Cash and deposits

26,769(2) Notes and accounts receivable

7,014

Fair value(millions of yen)

Differences(millions of yen)

26,769

－

6,994

6,994

－

(3) Investment securities

15,97915,979－(4) Long-term deposits

14,60014,554(45)

64,34364,297(45)(1) Accounts payable–trade

2,181

2,181

－

(2) Accounts payable–other

2,184

2,184

－

4,366

4,366

－

Allowance for doubtful accounts(19)

Total assets

Total liabilities- 88 -

Current consolidated fiscal year (September 30, 2021)
Book value inconsolidated balance
sheets(millions of yen)

Fair value (millions ofyen)

Differences (millions ofyen)

26,426

－

6,959

6,959

－

(3) Investment securities

19,491

19,491－(4) Long-term deposits

16,60016,533(66)

69,477

69,411(66)(1) Accounts payable–trade

2,402

2,402

－

(2) Accounts payable–other

1,786

1,786

－

4,188

4,188

－

(1) Cash and deposits

26,426(2) Notes and accounts receivable

6,973

Allowance for doubtful accounts(14)

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 most of these instruments.
(3) Investment securities
The fair value of equity securities is based on quoted market prices on the stock exchange; and the fairvalue of 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
rate applicable 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, 2020)

Current consolidated fiscal year
(September 30, 2021)

Other securities (unlisted equity
securities)

202

113

Stocks of subsidiaries and affiliates

100

100

302

213

Total

The fair value of these financial instruments is 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 is not included in "(3) Investment
securities" for the previous consolidated fiscal year nor in "(3) Investment securities" for the current consolidated fiscalyear.

- 89 -

3. Redemption scheduled for monetary claims and securities with maturity dates subsequent to the consolidated
settlement datePrevious consolidated fiscal year (September 30, 2020)
Within 1 year
(millions of yen)Over 1 year andwithin 5 years(millions of yen)Over 5 years andwithin 10 years(millions of yen)Over 10 years(millions of yen)

Cash and deposits

26,760－－－Notes and accounts receivable–
trade

7,014

－

－

－

Corporate bonds

－

2,100

6,900

4,000

Long-term deposits

－

6,000

8,600

－

Total

33,774

8,100

15,5004,000

Within 1 year
(millions of yen)Over 1 year andwithin 5 years(millions of yen)Over 5 years andwithin 10 years(millions of yen)Over 10 years(millions of yen)

Cash and deposits

26,422－－－

Notes and accounts receivable–
trade

6,973

－

－

－

Corporate bonds

－

2,100

4,900

8,000

Long-term deposits

－

6,000

10,600－Total

33,395

8,100

15,5008,000

Investment securities

Current consolidated fiscal year (September 30, 2021)

Investment securities(Securities)
1. Other securities
Previous consolidated fiscal year (September 30, 2020)
Class
Securities for which theamounts in the
consolidated balance sheets
exceeds the original
purchase value
Securities for which theamounts in the
consolidated balance sheets
do not exceed the original
purchase value

Book value inconsolidated balance
sheets (millions of yen)

Original purchasevalue (millions of yen)

Differences (millionsof yen)

157

87

69

2,105

2,101

4

2,262

2,189

73

2,882

3,558

(675)

10,834

10,986(151)

13,716

14,544(827)

15,97916,733(753)(1) Stocks(2) Bonds
Corporate
bonds
Subtotal(1) Stocks(2) Bonds
Corporate
bonds
Subtotal

Total(Note) Unlisted shares (202 million yen in the consolidated balance sheets) are not included under the table "Other
securities" above since quoted market value is not available and the fair value is deemed to be extremely difficult
to measure.

- 90 -

Current consolidated fiscal year (September 30, 2021)
Class
Securities for which theamounts in the
consolidated balance sheets
exceeds the original
purchase value
Securities for which theamounts in the
consolidated balance sheets
do not exceed the original
purchase value

Book value inconsolidated balance
sheets (millions of yen)

Original purchasevalue (millions of yen)

Differences (millionsof yen)

4,476

3,545

931

1,101

1,100

0

5,577

4,646

931

68

96

(27)

13,845

14,068(223)

13,913

14,165(251)

19,491

18,811680(1) Stocks(2) Bonds
Corporate
bonds
Subtotal(1) Stocks(2) Bonds
Corporate
bonds
Subtotal

Total(Note) Unlisted shares (113 million yen in the consolidated balance sheets) are not included under the table "Other
securities" above since quoted market value is not available and the fair value is deemed to be extremely difficult
to measure.
2. Other securities sold
Previous consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)
None to be disclosed.
Current consolidated fiscal year (Started October 1, 2020; ended September 30, 2021)
Class

Price sold (millions of yen)

(1) Stocks(2) Bonds
Corporate bonds
Subtotal

13

Total gain from sales(millions of yen)

－
13

8
－
8

Total loss from sales(millions of yen)－－－

3. Securities for which impairment loss are recognized
For the current fiscal year, the Group recorded an impairment loss of 89 million yen on securities (89 million yen
on shares of other securities).
In recording the impairment loss, if the market value at year-end has dropped by 50% or more 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 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.
(Retirement Benefits)
1. Overview of the retirement benefit system in use
The Company and its four 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.
Under the retirement lump-sum plan, the Company pays a lump-sum retirement benefit based on employees’ salaryand 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 recognized similar
to the defined benefit plan because the amount cannot be reasonably calculated.

- 91 -

2. Defined benefit retirement plan
(1) Adjustment of balance of retirement benefit obligations at the beginning and end of fiscal years
Previous consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Current consolidated fiscal year
(Started October 1, 2020;
ended September 30, 2021)

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

8,704 million yen
556
－
(369)
(379)
－

8,511 million yen
445
－
33
(324)
36

Balance of retirement benefit obligations at end of
year

8,511

8,702

(Note) Past service costs were accrued as a result of amendments to the retirement benefit rules made by someof the consolidated subsidiaries during the current consolidated fiscal year.
(2) Adjustment of balance of pension assets at the beginning and end of fiscal years

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

Previous consolidated fiscal
Current consolidated fiscal year
year
(Started October 1, 2020;(Started October 1, 2019;
ended September 30, 2021)
ended September 30, 2020)
millionmillion
3,939
5,110
yen
yen
－
－
(28)
37
1,200
－
－
－
5,110
5,148

(3) Adjustment of balance of retirement benefit obligations and pension assets at the end of the fiscal years, and net
retirement benefit obligations and assets recognized in the consolidated balance sheets
Previous consolidated fiscal year
(September 30, 2020)

Current consolidated fiscal year
(September 30, 2021)

million
7,832
yen(5,110)
2,721
678

million
7,984
yen(5,148)
2,835
718

3,400

3,554

3,400

3,554

3,400

3,554

Contributory retirement benefit obligations
Pension assets
Non-contributory retirement benefit liabilities
Net obligations and assets in the consolidated balance
sheetsRetirement benefit liabilities
Net obligations and assets in the consolidated balance
sheets(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 fiscal
Current consolidated fiscal year
year
(Started October 1, 2020;(Started October 1, 2019;
ended September 30, 2021)
ended September 30, 2020)
millionmillion
556
445
yen
yen
－
－
－
－
(341)
(4)
247
250
462

- 92 -

692

(5) Remeasurements of retirement benefits
Items that were recorded under remeasurements of defined benefit plans (amount before tax) are as follows:

Past service costs
Total

Previous consolidated fiscal
Current consolidated fiscal year
year
(Started October 1, 2020;(Started October 1, 2019;
ended September 30, 2021)
ended September 30, 2020)
247 million yen
250 million yen
247250(6) Accumulated remeasurements of retirement benefits
Items that were recorded under remeasurements of defined benefit plans (amount before tax) are as follows:

Unrecognized past service costs
Total

Previous consolidated fiscal
Current consolidated fiscal year
year
(September 30, 2021)(September 30, 2020)(2,204) million yen(1,990) million yen(2,204)(1,990)(7) Pension assets
1)

Major pension assets
The percentages of each major classification in comparison to the amount of total pension assets are as
follows:
Previous consolidated fiscal year
(September 30, 2020)

Current consolidated fiscal year
(September 30, 2021)

77%
20
3
100

79%
21
－
100

Bonds
Cash and deposits
Other
Total

(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.

(8) Basis for actuarial calculations
Basis for major actuarial calculations
Previous consolidated fiscal year
(September 30, 2020)

Current consolidated fiscal year
(September 30, 2021)

0.00%
－%
1.00 - 1.64%

0.00%
－%
1.00 - 1.64%

Discount rate
Expected long-term rate of return
Expected increase in salary

3. Defined contribution plan
The amount of necessary contributions to the defined contribution plan of the Company and its consolidated
subsidiaries was 286 million yen for the previous consolidated fiscal year, and 291 million yen for the current
consolidated fiscal year.
4. Multiemployer pension plan
The amounts of necessary contributions to the corporate pension fund plan under the multiemployer pension plan,
which are recognized in the same manner as the defined contribution plan, were 132 million yen in the previous
consolidated fiscal year and 135 million yen in the current consolidated fiscal year.
(1) Reserve fund for multiemployer pension plan

Pension assets

Previous consolidated fiscal year
(March 31, 2020)
million236,669yen- 93 -

Current consolidated fiscal year
(March 31, 2021)
million262,373yenActuarial liabilities based on pension plan financecalculation
Differences

193,925

206,858

42,74455,515(2) Coverage ratio of the Group in the multiemployer pension planPrevious consolidated fiscal year: 2.29% (Started April 1, 2019; ended March 31, 2020)
Current consolidated fiscal year: 2.28% (Started April 1, 2020; ended March 31, 2021)(3) Supplementary information

The ratio in (2) above does not match the actual self-pay ratio of the Company.
(Tax Effect Accounting)
1. Major factors of deferred tax assets and deferred tax liabilities

Deferred tax assets
Software development costs
Provisions for bonuses
Retirement benefit liabilities
Retirement benefit trust
Accumulated remeasurements of defined benefit
plans
Retirement bonuses for directors payable
Accrued business tax
Loss on valuation of investment securities
Legal welfare expenses corresponding to provisions
for bonuses
Asset retirement obligations
Impairment losses
Provisions for stocks payment
Valuation difference on available-for-sale securities
Other
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-sale securities
Other
Total deferred tax liabilities
Net deferred tax assets

Previous consolidated fiscal
year(September 30, 2020)

Current consolidated fiscal
year(September 30, 2021)

2,620 million yen
1,134
388
1,558

2,794 million yen
1,258
501
1,570

672

608

36
161
158

22
138
188

169

188

121
115
171
249
374
7,933
(509)
7,423

119
115
93
－
443
8,042
(582)
7,460

0

3

34

36

19
9
63
7,360

201
9
251
7,209

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. not deductible for tax
purposes
Other
Income tax rate after applying tax effect accounting- 94 -

Previous consolidated fiscal
year(September 30, 2020)
30.5%

Current consolidated fiscal
year(September 30, 2021)
30.5%

0.6

0.6

0.2

0.1

1.7
33.0

0.2
31.4

(Asset Retirement Obligations)
Previous consolidated fiscal year (ended September 30, 2020) and current consolidated fiscal year (ended
September 30, 2021)
Information has been omitted as it was immaterial.
(Revenue Recognition)
The Group is engaged mainly in the accounting firm business and the local governments business.
Performance obligations under the main businesses are provision of information processing service, provision ofsoftware and consulting service, sale of office equipment, and sale of supplies.
The performance obligations for many of these transactions are fulfilled at a certain point in time upon delivery of
the goods or services, so we recognize revenue at the time of delivery.
Of the software and consulting services, revenue from performance obligations that are fulfilled over a certain
period of time is divided and recognized in proportion to the software usage period or service provision period,
whichever applicable. For made-to-order software development, in case where the contract price or total amount ofcosts required through completion can be estimated reliably, revenue is recognized depending on the percentage offulfillment of the measured performance obligations. Provided, in case where the contract price or total amount ofcosts required through completion cannot be estimated reliably, then revenue is recognized within the costs actually
incurred.
(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 is available
and which are subject to regular review by management for the purpose of determining the allocation of 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]
Continuous business forms for PCs, 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.
As stated in the (Changes in Accounting Policies), the Company applies the Revenue Recognition AccountingStandard, etc. from the beginning of the current consolidated fiscal year, and changed its accounting processing
methods on revenue recognition. As such, the method of measurements of profit/loss of the reportable segments
has been changed accordingly.
As a result of these changes, compared to the conventional method, for the current consolidated fiscal year underreview: for the Accounting Firm BD, net sales decreased by 2,344 million yen, and segment profit decreased by
17 million yen; for the Local Governments BD, net sales decreased by 72 million yen, and segment profit decreasedby 118 million yen; and for the Printing BD, net sales decreased by 43 million yen.

- 95 -

3. Information on net sales, profit or loss, assets, and other items by reportable segments
Previous consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)
Reportable segment(Unit: millions of yen)Amounts inconsolidated
Adjustments
financial(Note 1)statements(Note 2)

Accounting
Firm BD

Local
Governments
BD

Printing
BD47,15017,377

3,286

67,814－67,814

7

0

2,183

2,191

(2,191)－

47,157

17,3785,470

70,005(2,191)

67,814

Segment profit

10,2371,037

106

11,381(0)

11,381

Segment assets

28,236

9,780

5,867

43,88453,787

97,671

1,392

1,315

364

3,072

(1)

3,070

100

－

－

100

－

100

2,195

1,289

319

3,804

－

3,804

Total

Net sales
Sales to outside customers
Inter-segment sales or transfers
Total

Other items
Depreciation (Note 3)
Investments in affiliatedcompany under the equity
methodIncrease in property, plant andequipment and intangible assets(Note 3)(Notes) 1. Adjustments are as follows:(1) Adjustments of segment profit of -0 million yen include 6 million yen for elimination of inter-segment
transactions and -8 million yen for adjustments of inventory assets.
(2) Adjustments of segment assets of 53,787 million yen include 54,824 million yen of corporate assets thatare not allocated to specific reportable segments, and -1,037 million yen for elimination of inter-segment
transactions. Corporate assets are primarily surplus funds of the parent company (cash and cash
equivalents), and long-term investment funds (investment securities).
(3) Adjustments of depreciation of -1 million yen represent 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.

- 96 -

Current consolidated fiscal year (Started October 1, 2020; ended September 30, 2021)(Unit: millions of yen)

Reportable segment

Adjustments(Note 1)

Amounts inconsolidated
financialstatements(Note 2)

Accounting
Firm BD

Local
Governments BD

45,412

17,704

3,105

66,221－

66,221

8

0

2,073

2,082

(2,082)－45,42017,704

5,178

68,304(2,082)

66,221

Segment profit

10,5631,705

39

12,307

6

12,314

Segment assets

29,065

9,595

5,676

44,33759,068103,406

1,533

1,047

364

2,946

(0)

2,945

100

－

－

100

－

100

2,213

1,186

336

3,735

(0)

3,735

Printing BD

Total

Net sales
Sales to outside customers
Inter-segment sales or transfers
Total

Other items
Depreciation (Note 3)
Investments in affiliatedcompany under the equity
methodIncrease in property, plant andequipment and intangible assets(Note 3)(Notes) 1. Adjustments are as follows:(1) Adjustments of segment profit of 6 million yen include 6 million yen for elimination of inter-segment
transactions and 2 million yen for adjustments of inventory assets.
(2) Adjustments of segment assets of 59,068 million yen include 60,047 million yen of corporate assets thatare not allocated to specific reportable segments, and -979 million yen for elimination of inter-segment
transactions. Corporate assets are primarily surplus funds of the parent company (cash and cash
equivalents), and long-term investment funds (investment securities).
(3) Adjustments of depreciation of -0 million yen represent 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.

- 97 -

[Related information]
Previous consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)
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, plant & equipment
Information is omitted since the Company has no property, plant 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, 2020; ended September 30, 2021)
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, plant & equipment
Information is omitted since the Company has no property, plant 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.

- 98 -

[Information on impairment losses of fixed assets by reportable segments]
Previous consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)(Unit: millions of yen)

Reportable segment

Impairment losses

Accounting
Firm BD

Local
Governments BD

Printing BD

0

－

－

Total

Adjustments

Amounts inconsolidated
financialstatements

－

0

0

Current consolidated fiscal year (Started October 1, 2020; ended September 30, 2021)
None to be disclosed.
[Information on amortization of goodwill and balance of goodwill by reportable segments]
Previous consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)
None to be disclosed.
Current consolidated fiscal year (Started October 1, 2020; ended September 30, 2021)
None to be disclosed.
[Information on gain on negative goodwill by reportable segments]
Previous consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)
None to be disclosed.
Current consolidated fiscal year (Started October 1, 2020; ended September 30, 2021)
None to be disclosed.

- 99 -

[Related Parties Information]
1 Related Parties Transactions(1) Transactions between the Company and related parties
Previous consolidated fiscal year (Started October 1, 2019; ended September 30, 2020)(i) Non-consolidated subsidiaries and affiliated companies of the Company
Type

Capital orCompany
investment
Business orname or name Addresssoccupationof individual(millions ofyen)

Affiliatedcompanies iMobile Inc.

Shibuya
-ku,
Tokyo

100

Information
provision
services

Holding (held)
voting rights
Relationship withratio (%)
related party(Holding)
Direct (30.0)

Outsourcing ofdevelopment andmaintenance ofwebsite services

Details oftransaction
Loan of funds(Note)
Recovery offunds(Note)
Receiving ofinterests(Note)

Transaction
amount(millions of
yen)

Item

Year-endbalance(millions of
yen)

230
141

Loans
receivables

175

3(Note) 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.
(ii) Officers and major shareholders (individuals only) of the Company
Capital orCompany
investment
Business or
Typename or name Addresssoccupationof individual(millions ofyen)
CertifiedCertifiedpublic tax
publicEdoga
accounting
tax
5
firm Taguchi wa-ku,
accounti
Tokyo
Partners
ng firm
Kaikei(Note 2)Companiesin which
CertifiedCertifiedpublic tax
officers
Yokohapublicaccounting
and nearma-shi,tax
firm Oshidarelatives
4
Kanagaaccounti
Accounting
holdwa
ng firm
Officemajority(Note 3)votingrightsCertifiedCertifiedpublic tax
Miyagipublicaccounting
no-ku,
tax
firm Ofuji
Sendai9
accounti
Accounting shi,ng firm
OfficeMiyagi(Note 4)

Holding (held)
voting rights
Relationship withratio (%)
related party

Details oftransaction

Transaction
amount(millions ofyen)－

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

13

Accounts
receivable

1－

Rendering ofRendering of
information
information
processing
processing services
services(Note 1)18

Accounts
receivable

2－

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

15

Accounts
receivable

1

Item

Year-endbalance(millions ofyen)(Notes) 1. Terms of transaction or policies on determining the terms of transaction
Terms of transaction for the rendering 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. Yoshimasa Oshida, Director of the Company.
4. The company was co-founded with a near relative of Mr. Kazuyuki Sumi, Director and Chairman of theCompany.
5. Consumption taxes are not included in the transaction amounts. Consumption taxes are included in the yearend balance.

- 100 -

Current consolidated fiscal year (Started October 1, 2020; ended September 30, 2021)(i) Non-consolidated subsidiaries and affiliated companies of the Company
Type

Company
name orname ofindividual

AffiliatediMobilecompanies
Inc.

Address

Capital or
Holding (held)
investments Business orvoting rights(millions of occupation
ratio (%)
yen)

Shibuyaku, Tokyo

Information
provision
100
services(Holding)
Direct (30.0)

Relationship withrelated party

Details oftransaction

Outsourcing ofdevelopment andmaintenance ofwebsite services

Recovery offunds(Note)
Receiving ofinterests(Note)

Transaction
amount(millions of
yen)
12
3

Item

Year-endbalance(millions of
yen)

Loans
receivables

163(Note) 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.
(ii) Officers and major shareholders (individuals only) of the Company
Company
Capital or
Holding (held)
name orinvestments Business orRelationship with
Address
voting rights(millions of occupation
name ofrelated party
ratio (%)
individualyen)
Certifiedpublic tax
Certifiedaccounting Yokoham
publicRendering of
a-shi,
firmtax
information
4－
Kanagaw
Oshidaaccounti
processing services
Accountin ang firmg Office(Note 2)
CertifiedCertifiedCompanies public tax Miyagino
publicRendering ofaccounting -ku,
in whichtax
information
firm Ofuji Sendai9－
officers
accounti
processing services
Accountin shi,and nearng firmg Office
Miyagirelatives(Note 3)
holdmajority
Accountin
Certifiedvotingg FirmpublicRendering ofKushirorights
Top
tax
information
shi,
9－Manageme
accounti
processing services
Hokkaido
nt
ng firm(Note 4)
Certified
Hamamura
publicRendering of
Utsunomi
Accountin
tax
information
ya-shi,3－g Office
accounti
processing services
Tochigi(Note 5)ng firm
Type

Details oftransaction

Transaction
amount(millions ofyen)

Rendering of
information
processing
services(Note 1)24

Accounts
receivable

2

Rendering of
information
processing
services(Note 1)

14

Accounts
receivable

1

Rendering of
information
processing
services(Note 1)18

Accounts
receivable

2

Rendering of
information
processing
services(Note 1)

11

Accounts
receivable

1

Item

Year-endbalance(millions ofyen)(Notes) 1. Terms of transaction or policies on determining the terms of transaction
Terms of transaction for the rendering of information processing are similar to the terms between othercounterparts.
2. The company was co-founded by Mr. Yoshimasa Oshida, Director of the Company.
3. The company was co-founded with a near relative of Mr. Kazuyuki Sumi, Advisor (former Director) of theCompany.
4. The company was co-founded by Mr. Nobuhiko Kouga, Director of the Company.
5. The company was co-founded by Mr. Tomoyasu Hamamura, Auditor of the Company.
6. Consumption taxes are not included in the transaction amounts. Consumption taxes are included in the yearend balance.
(2) Transactions between consolidated subsidiaries of the Company and related parties
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.

- 101 -

(Earnings Per Share Information)
Previous consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Current consolidated fiscal year
(Started October 1, 2020;
ended September 30, 2021)

Net assets per share

1,466.56 yen

1,582.45 yen

Net income per share

148.81 yen

164.93 yen(Notes) 1. The diluted net income per share is not stated as there were no dilutive shares.
2. The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. Net assets per
share and net income per share have been calculated assuming that said stock split was conducted at the
beginning of the previous consolidated fiscal year.
3. The basis for the calculation of net income per share is as follows:
Previous consolidated fiscal year
(Started October 1, 2019;
ended September 30, 2020)
Net income per share
Net income attributable to owners of parent(millions of yen)Amount not attributable to common shareholders(millions of yen)
Net income from common stocks attributable toowners of parent (millions of yen)
Average number of common stocks outstanding(hundreds of shares)

Current consolidated fiscal year
(Started October 1, 2020;
ended September 30, 2021)

7,821

8,686

－

－

7,821

8,686

525,587

526,691(Note) The average number of stocks outstanding used in the calculation of earnings per share information has been
determined by including the stocks of the Company owned by the BIP Trust (which has been established with theintroduction of the BIP Trust plan) as deductible treasury stocks.
The average numbers of said treasury stocks outstanding deducted for the calculation of net income per share
were 380,138 shares for the previous consolidated fiscal year, and 264,371 shares for the current consolidated
fiscal year.

- 102 -

(Material Subsequent Events)(Acquisition of Treasury Stock)
In the meeting of the Board of Directors held on November 9, 2021, the Company resolved the agenda item on
the acquisition of treasury stock pursuant to the provisions of Article 156 of the Companies Act of Japan, which
is applicable in accordance with Article 165, paragraph 3 of the Companies Act. Said acquisition was conducted
as follows:
1. Reason for acquisition of treasury stock
The objective for the acquisition of treasury stock is to improve capital efficiency and the interest of shareholders.
2. Details of the acquisition(1) Type of shares to be acquired
Common stock of the Company(2) Total number of shares to be acquired
300,000 shares (maximum)(3) Total amount of shares to be acquired
1,033,500,000 yen (maximum)
3. Results of acquisition(1) Number of shares acquired
300,000 shares(2) Total amount of acquisition cost
1,033,500,000 yen(3) Date of acquisition
November 10, 2021
(4) Method of acquisition
Acquisition through TSE’s Off-auction Own Share Repurchase Trading System (ToSTNeT-3)- 103 -

5) [Supplementary Schedules][Schedule – Corporate Bonds]
None to be disclosed.
[Schedule – Borrowings]
Category

Balance at beginning Balance at end ofof yearyear(millions of yen)(millions of yen)

Average interest
rate
(%)

Terms of repayment

Short-term loans payable

－

－

－

－

Current portion of long-term loans payable

142

80

0.13

－

Current portion of lease obligations

522

468

－

－

Long-term loans payable (excluding
current portion)

295

214

0.13

October 5, 2021 September 10, 2025

Lease obligations (excluding current
portion)

1,113

694

－

October 9, 2021 December 31, 2025

Accounts payable–installment purchases

10

6

－

October 31, 2021 February 28, 2023

Total

2,084

1,464

Other interest-bearing debts－－(Notes) 1. The weighted average interest rates applicable to the year-end balance of borrowings are indicated for
average interest 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. Repayments 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 are as follows.
Over 1 year and within 2 Over 2 years and within 3 Over 3 years and within 4 Over 4 years and within 5
years
years
years
years
(millions of yen)(millions of yen)(millions of yen)(millions of yen)
Long-term loans payable

71

71

71

－

Lease obligations

437

191

62

2

1

－

－

－

Other interest-bearing
debts[Schedule – Asset Retirement Obligations]
Information has been omitted as it was immaterial.

- 104 -

(2) [Other]
Quarterly financial information for the current consolidated fiscal year
(Cumulative period)
Net sales (millions of yen)

1st quarter

Quarterly net income per share(yen)

3rd quarter

Current consolidated
fiscal year

14,83733,372

49,587

66,221

2,815

8,050

11,692

12,660

1,873

5,495

7,961

8,686

35.64

104.42151.19164.93

Quarterly (current FY) net
income before income taxes(millions of yen)
Quarterly (current FY) net
income attributable to owners ofparent (millions of yen)
Quarterly (current FY) net
income per share (yen)(Accounting period)

2nd quarter

1st quarter2nd quarter
35.64

68.73

3rd quarter
46.77

4th quarter
13.76(Note) The Company conducted a stock split of its common shares at a ratio of 1:2 as of April 1, 2021. The quarterly(current FY) net income per share has been calculated assuming that the stock split was conducted at the
beginning of the current consolidated fiscal year.

- 105 -

2 [Financial Statements, etc.](1) [Financial Statements](i)[Balance Sheets](Unit: millions of yen)Previous fiscal year
(September 30, 2020)

AssetsCurrent assets
Cash and deposits
Accounts receivable–trade
Lease investment assets
MerchandiseWork in progress
Raw materials and supplies
Prepaid expenses
Accounts receivable–other
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Structures
VehiclesTools, furniture & fixtures
Land
Total property, plant and equipment
Intangible assets
Software
Software in progress
Telephone subscription rights
Other
Total intangible assets
Investments and other assets
Investment securities
Stocks of subsidiaries and affiliates
Investments in capital
Long-term loans receivable
Long-term prepaid expenses
Deferred tax assets
Long-term deposits
Guarantee deposits
Long-term lease investment assets
Other
Total investments and other assets
Total non-current assets
Total assets

Current fiscal year
(September 30, 2021)

22,508*1 6,304

6,849
187
28
1,779
6,636
15,481

6,567
173
19
1,974
6,525
15,259

2,647
361
22
0
3,031

2,599
915
22
0
3,537

15,9401,389
0*1 163110
6,068
14,5001,340
889
6240,46458,97789,767

19,3311,389
0*1 120472
5,967
16,5001,345
539
60
45,72764,525
95,264

432
57
281
141
537
*1 203*1 338(19)
30,790- 106 -

21,881*1 6,308

384
77
0
100
715
*1 192*1 1,096(13)
30,739(Unit: millions of yen)Previous fiscal year
(September 30, 2020)
Liabilities
Current liabilities
Accounts payable–trade
Lease obligations
Accounts payable–other
Income taxes payable
Accrued business office taxes
Accrued consumption taxes
Advances received
Deposits received
Provisions for bonuses
Provisions for loss on construction contracts
Accounts payable–facilities
Other
Total current liabilities
Non-current liabilities
Lease obligations
Provisions for retirement benefits
Provisions for stocks payment
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital 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 shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

Current fiscal year
(September 30, 2021)*1 2,058432*1 2,051
2,506
54
1,356
516
327
3,300
－
*1 45
10
12,659- 107 -

*1 2,251384*1 1,686

2,169
56
684
594
343
3,660
141
*1 7
674
12,654

889
517
599
387
2,393
15,052

539
878
307
392
2,118
14,772

5,700

5,700

5,409
302
5,711

5,409
302
5,711

688

688

58,757
6,077
65,523(1,660)75,274

63,057
6,263
70,009(1,352)80,069

(560)

422

(560)
74,71489,767422
80,491
95,264(ii)[Statement of Income](Unit: millions of yen)Previous fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Land and house rent received
Subsidy income
Other
Total non-operating income
Non-operating expenses
Cost of lease revenue
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Other
Total extraordinary income
Extraordinary losses
Loss on sale of non-current assets
Loss on retirement of non-current assets
Loss on valuation of investment securities
Other
Total extraordinary losses
Net income before taxes
Income taxes–current
Income taxes–deferred
Total income taxes
Net income*1 63,070*1 61,637

42,973*1, *2 32,181
10,791*1, *2 32,943*1 20,097*1 36*1 16,993

44,644
11,700*1 50*1 156*1 155

15
*1 57
422

*1 91

*1 155- 108 -

Current fiscal year
(Started October 1, 2020;
ended September 30, 2021)*1 156

13

468

106
0
106
11,107104
0
104
12,064

2
－
2

111
9
121

－
36
－
0
36
11,073
3,804
(203)
3,600
7,472

22
22
89
－
133
12,051
3,917
(158)
3,758
8,293

[Report on cost of sales](a) Cost of sales on information processing, software and consulting services
54th Term(Started October 1, 2019;
ended September 30, 2020)
Category

Note

II Labor costs

Ratio
(%)

Amount (millions of yen)

I Materials costs*155th Term(Started October 1, 2020;
ended September 30, 2021)
Ratio
(%)

Amount (millions of yen)

4,169

30.5

4,386

31.8

2,599

19.0

2,669

19.4

6,723

48.8

13,779100.0

III Expenses
1. Computer rental expenses

389

402

2. Maintenance contracts

1,255

1,288

3. Depreciation

741

649

4. Repairs and maintenanceexpenses581

592

5. Supplies expenses

1,658

1,356

6. Other

2,267

Total expenses
Works in progress andinventories at beginning ofyear
Transfers from other accounts

*2

Total
Works in progress andinventories at end of year
Transfers to other accounts*3

Cost of sales on information
processing, software andconsulting services

6,895

50.5

13,664

100.0

2,433

597

1

1,308

1,206

15,57014,987

281

0

1,263

1,512

14,026

13,475(Notes) 1. Labor costs include the following provisions. Figures in (parentheses) denote amounts for the previous fiscal year.
Provision for bonuses: 629 million yen (572 million yen)
Retirement benefit expenses: 110 million yen (96 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
54th Term(Started October 1, 2019;
ended September 30, 2020)
Category

Note

Ratio
(%)

Amount (millions of yen)

I Inventories at beginning of year

55th Term(Started October 1, 2020;
ended September 30, 2021)
Ratio
(%)

Amount (millions of yen)

70

1.1

57

1.6

II Purchases

6,058

98.9

3,537

98.4

Total

6,128

100.0

3,595

100.0

III Inventories at end of year

57

77

Cost of sales on officeequipment and supplies

6,071

3,518

- 109 -

(iii) [Statement of Changes in Equity]
Previous fiscal year (Started October 1, 2019; ended September 30, 2020)(Unit: millions of yen)
Shareholders’ equity
Capital surplus
Capital stock Legal capitalsurplus

Balance at
beginning ofyear
Changes during
fiscal year
Generalreserve
Dividends ofsurplus

5,700

5,409

Other
capitalsurplusRetained earnings
Total
capitalsurplus302

Legalretainedearnings

5,711

688

Other retained earnings
Generalreserve

Retainedearnings
brought
forward55,457

4,816

60,962

3,300(3,300)－(2,911)(2,911)

7,472

7,472

Net income
Acquisition oftreasury stock
Disposal oftreasury stock
Changes in
items otherthan equity(net)
Total changes
during fiscal year
Balance at end of
year

0

0

Total
retainedearnings

－

－

0

0

－

3,300

1,261

4,561

5,700

5,409

302

5,711

688

58,757

6,077

65,523

Shareholders’ equity
Treasury stock
Balance at beginning ofyear

Valuation and translation adjustments

Valuation difference on Total valuation and Total net assets
Total shareholders’available-for-saletranslation
equitysecurities
adjustments(1,630)70,744

(121)

(121)

70,622

Changes during fiscal year
General reserve－－

Dividends of surplus(2,911)(2,911)

Net income

7,472

7,472

(34)

(34)

(34)

3

3

3

Acquisition of treasury
stock
Disposal of treasury
stock
Changes in items otherthan equity (net)Total changes during fiscal
year
Balance at end of year

(438)

(438)

(438)

(30)

4,530

(438)

(438)

4,092

(1,660)75,274

(560)

(560)

74,714- 110 -

Current fiscal year (Started October 1, 2020; ended September 30, 2021)(Unit: millions of yen)
Shareholders’ equity
Capital surplus
Capital stock Legal capitalsurplus

Balance at beginningof year
Cumulative effects ofchanges in accounting
policies

5,409

Total
capitalsurplus(367)

58,757

5,710

65,1564,300(4,300)－

Dividends of surplus(3,440)(3,440)Net income

8,293

8,293

302

5,711

688

Total
Retainedretained
Generalearnings brought earnings
reserveforward

(367)
5,409

5,711

Other retained earnings

65,523

5,700

302

Legal
retainedearnings

6,077

Restated balance

5,700

Other
capitalsurplusRetained earnings

688

58,757

Changes during fiscal
year
General reserve

Acquisition oftreasury stock
Disposal of treasury
stock
Changes in items
other than equity(net)
Total changes during
fiscal year
Balance at end of year

0

0

－

－

0

0

－

4,300

552

4,852

5,700

5,409

302

5,711

688

63,057

6,263

70,009

Shareholders’ equity

Balance at beginning ofyear
Cumulative effects ofchanges in accounting
policies
Restated balance

Valuation and translation adjustments

Valuation difference on Total valuation andTotal shareholders’
Treasury stock
available-for-saletranslation
equitysecurities
adjustments(1,660)75,274

(560)

(560)

(367)
(1,660)74,907

Total net assets

74,714
(367)

(560)

(560)

74,347

Changes during fiscal year
General reserve－－

Dividends of surplus(3,440)(3,440)Net income

8,293

8,293

(6)

(6)

(6)

315

315

315

Acquisition of treasury
stock
Disposal of treasury
stock
Changes in items otherthan equity (net)Total changes during fiscal
year
Balance at end of year

982

982

982

308

5,161

982

982

6,143

(1,352)80,069422

422

80,491- 111 -

[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(i) Stocks of subsidiaries and affiliates
Stated at cost determined by the moving average method.
(ii) Available-for-sale securities
1) 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).
2) 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(i) Merchandise, raw materials
Cost determined by first-in, first-out method (with balance sheet values reflecting write downs for
decreased profitability).
(ii) Work in progress
Cost determined by specific identification method (with balance sheet values reflecting write downs
for decreased profitability).
(iii) Supplies
Last purchase price method (with balance sheet values reflecting write downs for decreased
profitability).

2.

Depreciation of non-current assets(1) Tangible fixed 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.
(2) Intangible fixed assets(i) Software
1) Software for sale
Software for sale is 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).
2) Software for internal use
Amortized using straight-line method with an estimated in-house useful life of five years.
(ii) Other intangible fixed assets
Amortized using the straight-line method.

3.

Accounting standards for provisions(1) Allowance for doubtful accounts
In setting aside provisions for possible losses due to uncollectable receivables, provisions are recognized at
the amounts 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- 112 -

Provisions for bonuses are recognized based on the estimated amounts of payment.
(3) Provisions for stocks payment
In setting aside provisions for payment of the Company’s shares to Directors, etc., provisions are recognizedat estimated amounts of stocks payment determined based on the points allocated to Directors, etc. inaccordance with the rules on issuance of shares under the Board Incentive Plan (BIP) Trust.
(4) 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.
(i) Method of attributing expected benefits to dateIn calculating retirement benefit obligations, expected benefits are attributed to the period up until
the end of the fiscal year based on benefit formula standards.
(ii) Recognizing actuarial differences as expenses and past service costs
Past service costs are recognized as expenses for a certain years (10 years) within the averageremaining years of service of employees in which they occur using the straight-line method.
Actuarial differences are recognized as expense for the fiscal year in which they occur.
(5) Provisions for loss on construction contracts
In setting aside provisions for future losses related to construction contracts, provisions are recognized at
estimated amounts of losses for works in progress as at the end of the current fiscal year, if it is likely that the
total amount of costs will exceed the total amount of revenues, and further if such amounts can be reasonably
estimated.
4.

Accounting standards for revenues and expenses
The Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 30, 2018) and
Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March
30, 2018) have been applied. Accordingly, revenues are recognized at the time the controls over promised goods
or services are transferred to customers, in the amounts that are expected to be received in exchange for such
goods or services.

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
The consolidated taxation system is applied.
(3) Application of tax effect accounting for the transition from the consolidated taxation system to Group Tax
Sharing System
Based on the treatment set forth under Item 3 of the Treatment of Tax Effect Accounting for the Transition
from the Consolidated Taxation System to Group Tax Sharing System (Practical Solution No. 39, March 31,2020), the Company do not implement the provisions of Paragraph 44 of the Implementation Guidance on
Accounting Standard for Tax Effect Accounting (ASBJ Guidance No. 28, February 16, 2018) for items thatwere transitioned to the group tax sharing system which was established in the Law for Partial Revisions to
the Income Tax Act, etc. (Law No. 8 of 2020) and items that were revised under the non-consolidated taxation
system in line with the transition to the group tax sharing system. The amounts of deferred tax assets anddeferred tax liabilities are based on the provisions of the Tax Act prior to revisions.

- 113 -

(Changes in Accounting Policies)
As it has become possible to apply the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29,
March 30, 2018) (hereinafter, “Revenue Recognition Accounting Standard”) and Implementation Guidance on
Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March 30, 2018) from the beginning ofa fiscal year commencing after April 1, 2018, the Company applies the Revenue Recognition AccountingStandard, etc. from the beginning of the current fiscal year. Accordingly, we recognize revenues at the time thecontrols over promised goods or services are transferred to customers, in the amounts that we expect to receivein exchange for such goods or services.
Major changes are, conventionally for certain transactions, we have been recognizing the total amounts ofcompensation received from customers as revenue, but going forward, for transactions in which the Group acts
as agent in the provision of goods or services to customers, we will recognize as revenues, the net amount after
deducting the amounts we pay to suppliers from the amounts we receive from customers.
In applying the Revenue Recognition Accounting Standard, etc., we have followed the transitional measures set
forth in the notes to Section 84 of the Revenue Recognition Accounting Standard. Therefore, we have adjusted
the retained earnings at the beginning of the current fiscal year to include the cumulative effects of retroactive
application of the new accounting policy prior to the beginning of the said fiscal year, and applied the new
accounting policy to the balance at the beginning of the fiscal year under review.
As a result, the amounts of cumulative effects are reflected in the net assets at the beginning of the fiscal year,
and the beginning balance of retained earnings has decreased by 367 million yen.
Also, compared to the conventional method, net sales for the current fiscal year decreased by 2,328 million yen,cost of sales decreased by 2,178 million yen, and the amounts of operating income, ordinary income, and net
income before taxes and adjustments decreased by 150 million yen each.
(Significant Accounting Estimates)
Information is omitted since the content is the same as the statement set forth in the “Significant Accounting
Estimates” in the Notes to Consolidated Financial Statements under 1. Consolidated Financial Statements, (1)Consolidated Financial Statements.
(Changes in Method of Presentation)(Application of Accounting Standard for Disclosure of Accounting Estimates)
Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31, March 31, 2020) has
been applied to the financial statements prepared for the year-end of the current fiscal year under review.
Accordingly, notes on Significant Accounting Estimates are included in the financial statements.
Provided, said notes do not include information on the previous fiscal year in accordance with the transitional
measures set forth in the notes to Section 11 of said Accounting Standard.
(Additional Information)
Information is omitted since the content is the same as the statement set forth in the “Additional Information” in
the Notes to Consolidated Financial Statements under 1. Consolidated Financial Statements, (1) Consolidated
Financial Statements.

- 114 -

(Notes to Balance Sheets)*1. Monetary claims and monetary liabilities on affiliated companies
Previous fiscal year
(September 30, 2020)
Short-term monetary claims on affiliatedcompanies
Long-term monetary claims on affiliatedcompanies
Short-term monetary liabilities on affiliatedcompanies

Current fiscal year
(September 30, 2021)

204 million yen

225 million yen

163

120

442

445

(Notes to Income Statements)*1. Volume of transactions with affiliated companies
Previous fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Current fiscal year
(Started October 1, 2020;
ended September 30, 2021)

Volume of trading transactions
Net sales

59 million yen

Purchases
Operating expenses
Volume of non-operating transactions

48 million yen

2,937
2,426

3,006
2,491

141

136

*2. The approximate percentages of expenses under selling expenses were 48.7% for the previous
fiscal year and 48.1% for the current fiscal year; percentages of expenses under general andadministrative expenses were 51.3% and 51.9%, respectively.
Major items included in selling, general and administrative expenses are as follows.
Previous fiscal year
(Started October 1, 2019;
ended September 30, 2020)

Current fiscal year
(Started October 1, 2020;
ended September 30, 2021)

Salaries

9,882 million yen

10,227 million yen

Provision for bonuses
Retirement benefit expenses

2,726
670

3,030
868

Provisions for stocks payment
Depreciation

40
530

24
607

2,073

2,286

Rent expenses- 115 -

(Securities)
Stocks of subsidiaries and affiliates (the amounts in the previous fiscal year’s balance sheets were 1,389 million
yen for stocks of subsidiaries and 0 million yen for stocks of affiliates; the amounts in the current fiscal year’sbalance sheets are 1,389 million yen for stocks of subsidiaries and 0 million yen for stocks of affiliates) are notpresented here since quoted market values are not available and are deemed to be extremely difficult tomeasure.
(Tax Effect Accounting)1.

Major factors of deferred tax assets and deferred tax liabilities
Previous fiscal year
(September 30, 2020)
Deferred tax assets
Software development costs
Provisions for bonuses
Provisions for retirement benefits
Retirement benefit trust
Accrued business tax
Loss on valuation of investment securities
Retirement bonuses for directors payable
Legal welfare expenses corresponding to provisions
for bonuses
Asset retirement obligations
Impairment losses
Provisions for stocks payment
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Valuation difference on available-for-sale securities
Retirement expenses corresponding to asset
retirement costs
Total deferred tax liabilities
Net deferred tax assets

2,415 million yen
1,006
157
1,558
150
197
17

Current fiscal year
(September 30, 2021)
2,581 million yen
1,116
267
1,570
127
227
－

150

167

106
112
171
554
6,599
(504)
6,095

106
112
93
375
6,745
(576)
6,168

－

171

26

29

26
6,068

201
5,967

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, 2020)
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 grossrevenue
Other
Income tax rate after applying tax effect accounting

Current fiscal year
(September 30, 2021)

30.5%

30.5%

0.6

0.6

0.2

0.1

(0.1)

(0.1)

1.3

0.1

32.5

31.2

(Revenue Recognition)
Information is omitted since the content is the same as the statement set forth in the “Revenue Recognition” in
the Notes to Consolidated Financial Statements under 1. Consolidated Financial Statements, (1) Consolidated
Financial Statements.
(Material Subsequent Events)
Information is omitted since the content is the same as the statement set forth in the “Material Subsequent
Events” in the Notes to Consolidated Financial Statements under 1. Consolidated Financial Statements, (1)Consolidated Financial Statements.

- 116 -

(iv) [Supplementary Schedules][Schedule – Tangible Fixed Assets, etc.](Unit: millions of yen)
Balance at
beginningof yearDecrease incurrent year

Depreciation in current
year

Increase incurrent year

Balance at
end of year

Accumulated
depreciation

Buildings

6,849

122

12

391

6,567

11,274Structures

187

4

1

18

173

525

Vehicles

28

1

－

9

19

33

Tools, furniture &fixtures

1,779

933

9

728

1,974

5,406

Land

6,636

－

111

－

6,525

－

Total property, plants& equipment

15,481

1,061

134

1,148

15,25917,240Software

2,647

1,335

0

1,382

2,599

2,289

Software in progress

361

1,022

467

－

915

－

Telephonesubscription rights

22

－

－

－

22

－

Other

0

－

－

0

0

0

3,031

2,357

468

1,382

3,537

2,289

Category

Property,plant andequipment

Intangible
assetsType of asset

Total intangible assets(Note) Major increase/decrease during the current fiscal year were attributable to the following:(Amounts of increase)
Buildings
Tools, furniture & fixtures

SoftwareAcquisition of HVAC system for 1F of DEC Bldg.

23 million yen

Acquisition of high-speed storage, etc. for common cloudinfrastructure
Acquisition of servers for common cloud infrastructure

222 million yen
165 million yen

Acquisition of servers for management of host printers

131 million yen

Development costs of software for sale

428 million yen

Development costs of software for internal use

564 million yen

Software purchased from outside

175 million yen

Sell-off of land in Chigasaki

111 million yen(Amounts of decrease)
Land[Schedule – Provisions](Unit: millions of yen)
Balance at beginningof yearIncrease in current
year

Decrease in current
year

Allowance for doubtful accounts

19

13

19

13

Provisions for bonuses

3,300

3,660

3,300

3,660

Provisions for loss on construction
contracts

－

189

48

141

Provisions for stocks payment

599

24

315

307

Item

Balance at end of year(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.

- 117 -

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 or sale of shares less than
one unit
Place of handling
Administrator of shareholder
registry(Special account)
1-4-5 Marunouchi, Chiyoda-ku, Tokyo
Mitsubishi UFJ Trust and Banking Corporation, Stock Transfer Agency Division
1-4-5 Marunouchi, Chiyoda-ku, Tokyo
Mitsubishi UFJ Trust and Banking Corporation

Forwarding office――――――――――

Handling charges for buyback orsale――――――――――

Method of giving public notice

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/

Shareholder privileges

None to be disclosed.

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

- 118 -

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 (54th Term) (started October 1, 2019; ended September 30, 2020), filed to the Director-General of the
Kanto Local Finance Bureau, Japan, on December 21, 2020
(2) Correction Reports for the Annual Securities Reports, Appendices, and Confirmation Letters
Submitted to the Director-General of the Kanto Local Finance Bureau, Japan, on December 21, 2020
Correction Reports for the Annual Securities Reports for the Fiscal Year (54th Term) (started October 1, 2019;
ended September 30, 2020), Appendices and Confirmation Letter thereto.
(3) Internal Control Report and AppendicesSubmitted to the Director-General of the Kanto Local Finance Bureau, Japan, on December 21, 2020
(4) Quarterly Securities Reports and Confirmation Letter
First quarter of 55th Term (started October 1, 2020; ended December 31, 2020), filed to the Director-General of
the Kanto Local Finance Bureau, Japan, on February 12, 2021.
Second quarter of 55th Term (started January 1, 2021; ended March 31, 2021), filed to the Director-General of the
Kanto Local Finance Bureau, Japan, on May 10, 2021.
Third quarter of 55th Term (started April 1, 2021; ended June 30, 2021), filed to the Director-General of the
Kanto Local Finance Bureau, Japan, on August 12, 2021.
(5) Extraordinary Reports
Submitted to the Director-General of the Kanto Local Finance Bureau, Japan, on December 21, 2020
Submitted to the Director-General of the Kanto Local Finance Bureau, Japan, on December 20, 2021
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.
(6) Reports on Status of Acquisition of Treasury Stock
Reporting period (from November 1, 2021 to November 30, 2021); filed to the Director-General of the Kanto
Local Finance Bureau, Japan, on December 10, 2021.

- 119 -

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

- 120 -

Independent Auditors’ Audit Report andInternal Control Audit Report
December 17, 2021

To: The Board of Directors, TKC Corporation

Ernst & Young ShinNihon LLC
Tokyo Office
Designated Limited Liability Partner
Engagement Partner

Certified Public
Kanji Tako
Accountant

Designated Limited Liability Partner
Engagement Partner

Certified Public
Toru Iizuka
Accountant[Audit of Financial Statements]
OpinionPursuant to Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act, we have audited the consolidated
financial statements presented in the Financial Information section, which comprise the consolidated balance sheets, theconsolidated statement of income, the consolidated statement of comprehensive income, the consolidated statement ofchanges in equity, the consolidated statement of cash flows, bases of presenting the consolidated financial statements, othernotes and the consolidated supplementary schedules of TKC Corporation applicable to the consolidated fiscal year started
October 1, 2020 and ended September 30, 2021.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of TKC Corporation and its consolidated subsidiaries as of September 30, 2021, and their financial performanceand its cash flows for the consolidated fiscal year then ended in conformity with accounting principles generally acceptedin Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report. We are independent of the Company and its consolidated subsidiaries in accordance with the code ofprofessional ethics in Japan, and we have fulfilled our other ethical responsibilities as the auditors. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key Audit Matters (KAM) are those matters that, in our professional judgment, were of most significance in our audit of
the consolidated financial statements of the current consolidated fiscal year. These matters were addressed in the context
of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.

- 121 -

Application of Accounting Standards, etc. for Revenue Recognition
Details of key audit matters and reason for determination thereof

How we addressed the matter in our audit

As stated in the (Changes in Accounting Policies) in [Notes toFinancial Statements], it has become possible to apply the
Accounting Standard for Revenue Recognition (ASBJ Statement
No. 29, March 30, 2018) (hereinafter, “Revenue Recognition
Accounting Standard”) and Implementation Guidance on
Accounting Standard for Revenue Recognition (ASBJ Guidance
No. 30, March 30, 2018) from the beginning of a consolidated
fiscal year commencing after April 1, 2018. Accordingly, theCompany and its consolidated subsidiaries apply the Revenue
Recognition Accounting Standard, etc. from the beginning of thecurrent consolidated fiscal year, and recognize revenues at thetime the controls over promised goods or services are transferred
to customers, in the amounts that they expect to receive in
exchange for such goods or services. As a result, the amounts ofcumulative effects have been reflected in the net assets at the
beginning of the consolidated fiscal year, and the beginningbalance of retained earnings has decreased by 367 million yen.
Also, compared to the conventional method, net sales for thecurrent consolidated fiscal year decreased by 2,460 million yen,cost of sales decreased by 2,324 million yen, and the amounts ofoperating income, ordinary income, and net income before taxes
and adjustments decreased by 136 million yen each.
In applying the Revenue Recognition Accounting Standard, etc.,
there were diverse transactions that required consideration, suchas whether to recognize the net amount as revenue after deducting
the amounts paid to suppliers from the amounts received from
customers for those transactions in which the Company and its
subsidiaries act as agent of transactions for which the total
amounts of compensation received from customers wererecognized as revenue. The impacts of such changes to theamounts were also of significance. In addition, it requiredcomprehensive determination, and as it was the first fiscal year of
application, we have considered this matter to be a key audit
matter.

To examine the adequacy of the application of Revenue
Recognition Accounting Standard, etc. by the Company and its
consolidated subsidiaries, we mainly implemented the following
audit procedures:・ We obtained documents to assess each transaction andcompared the total amounts with the net sales in the trial balance
sheets in order to evaluate whether the differences between thecurrent standard were comprehensively taken into consideration.
・ We obtained documents to assess the differences with theconventional standard, and asked questions to the heads ofbusiness units and head of accounting, and examined contracts
that formed the basis of judgment in order to evaluate whether
they complied with the Revenue Recognition AccountingStandard, etc.
・We gained understanding on the accounting policy adopted by
the Company, and assessed the design and operation of internal
controls over the application of the Revenue Recognition
Accounting Standard, etc.
・We obtained documents on the calculation of the amounts ofimpacts, evaluated the consistency with documents on eachtransactions in question, reviewed the aggregation andcalculation, and compared the amounts of journal entries in thegeneral ledger in order to determine the adequacy of impacts to
the retained earnings at the beginning of the fiscal year and to the
net income.
・We evaluated the adequacy of the presentation and disclosureof the consolidated financial statements with respect to theapplication of the Revenue Recognition Accounting Standard, etc.

Responsibilities of Management, Corporate Auditors and Board of Auditors for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordancewith accounting principles generally accepted in Japan, and for designing and operating such internal control as
management determines is necessary to enable the preparation and fair presentation of consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue
as a going concern and disclosing, as applicable, matters related to going concern in accordance with accounting principles
generally accepted in Japan.
Corporate auditors and the Board of Auditors are responsible for overseeing the execution of duties by Directors indesigning and implementing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our responsibility is to express an opinion on the consolidated financial statements in our auditor’s report from an
independent standpoint based on our audit by obtaining reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, either due to fraud or error. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence thedecision-making of users of the consolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we perform the following by
exercising professional judgment and maintaining professional skepticism throughout the audit.
・ We identify and assess the risks of material misstatement of the consolidated financial statements, either due to fraud
or error, and then design and perform audit procedures responsive to those risks. The procedures selected and applied
depend on the auditors’ judgment. Further, we obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion.

- 122 -

・ In making those risk assessments, we consider internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the purpose of the audit of the consolidated financial statements is not
expressing an opinion on the effectiveness of the internal control.
・ We evaluate the appropriateness of accounting policies and their method of application adopted by management, as
well as the reasonableness of accounting estimates made by management and adequacy of related notes thereto.
・ We conclude on the appropriateness of management’s use of the going concern basis of accounting to prepare theconsolidated financial statements and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the going concern basis of accounting. If we conclude
that such material uncertainty exists, we are required to draw attention in our auditor’s report to the related notes in
the consolidated financial statements or, if such notes about the material uncertainty are inadequate, to express aqualified opinion with an exceptive item on the consolidated financial statements. Our conclusions are based on theaudit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause theCompany to cease to continue as a going concern.
・ We evaluate whether the overall presentation, structure, and content of the consolidated financial statements, including
the related notes thereto, are in accordance with accounting principles generally accepted in Japan, and whether the
consolidated financial statements and notes thereto represent the underlying transactions and events in a manner that
achieves fair presentation.
・ We obtain sufficient and appropriate audit evidence regarding the financial information of the Company and its
consolidated subsidiaries to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the audit on the consolidated financial statements. We remain solely
responsible for our audit opinion.
We communicate with corporate auditors and the Board of Auditors regarding the planned scope and timing of the audit,
significant audit findings including any significant deficiencies in internal control that we identify during our audit, andany other matters required by the auditing standards.
We also provide corporate auditors and the Board of Auditors with a statement that we have complied with regulations on
professional ethics in Japan regarding independence, and communicate with them all matters that may reasonably bethought to bear on our independence, and where applicable, related safeguards to eliminate or mitigate factors that mayhinder our independence.
Out of the matters we discuss with the corporate auditors and the Board of Auditors, we determine those matters that we
judge as being of most significance in our audit of the consolidated financial statements for the current consolidated fiscal
year to be key audit matters, and present those matters in our auditors’ report. However, we do not describe these mattersin our auditors’ report in cases where the disclosure of such matters is prohibited by laws, regulations, etc., or in extremely
limited circumstances where we determine that such matters should not be reported because disadvantages of doing sowould reasonably be expected to outweigh the public interests.
[Audit of Internal Control]
OpinionPursuant to Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act, we have audited the Internal Control
Report as of September 30, 2021 of TKC Corporation.
In our opinion, the Internal Control Report referred to above, which represents that the internal control over financial
reporting of TKC Corporation as of September 30, 2021 is effective, presents fairly, in all material respects, the result of
the management’s assessment on internal control over financial reporting in conformity with the assessments standards forinternal control over financial reporting generally accepted in Japan.
Basis for Opinion
We conducted our internal control audit in accordance with auditing standards for internal control over financial reporting
generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Internal Control Report section of our report. We are independent of the Company
and its consolidated subsidiaries in accordance with the code of professional ethics in Japan, and we have fulfilled ourother ethical responsibilities as the auditors. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Responsibilities of Management and Corporate Auditors and the Board of Auditors for the Internal Control ReportManagement is responsible for designing and operating internal control over financial reporting, and for the preparationand fair presentation of the Internal Control Report in accordance with assessment standards for internal control overfinancial reporting generally accepted in Japan.

- 123 -

Corporate auditors and the Board of Auditors are responsible for overseeing and verifying the design and operation ofinternal control over financial reporting.
Internal control over financial reporting may not fully prevent or detect misstatements.
Auditor’s Responsibilities for the Audit of the Internal Control Report
Our responsibility is to express an opinion on the Internal Control Report in our internal control audit report from an
independent standpoint based on our internal control audit by obtaining reasonable assurance about whether the Internal
Control Report is free from material misstatement.
As part of our audit in accordance with auditing standards for internal control over financial reporting generally acceptedin Japan, we performed the following by exercising professional judgment and maintaining professional skepticism
throughout the audit.
・ We perform audit procedures to obtain audit evidence regarding the results of the assessments of internal control overfinancial reporting in the Internal Control Report. The procedures selected and applied depend on the auditor’s
judgment based on the significance of effect on the reliability of financial reporting.
・ We evaluate the overall presentation of the Internal Control Report, including disclosures on scope, procedures andconclusions of management’s assessment of internal control over financial reporting.
・ We obtain sufficient and appropriate audit evidence regarding the results of the assessment of internal control overfinancial reporting in the Internal Control Report. We are responsible for the direction, supervision and performanceof the audit of the Internal Control Report. We remain solely responsible for our audit opinion.
We communicate with corporate auditors and the Board of Auditors regarding, among other matters, the planned scope
and timing of the internal control audit, the results of the internal control audit, significant deficiencies in internal control
that we identified which should be disclosed, and the result of their remediation, and any other matters required by theauditing standards for internal control.
We also provide corporate auditors and the Board of Auditors with a statement that we have complied with regulations on
professional ethics in Japan regarding independence, and communicate with them all matters that may reasonably bethought to bear on our independence, and where applicable, related safeguards to eliminate or mitigate factors that mayhinder our independence.
Conflicts of Interest
Our firm or its engagement partners have no interest in the Company or its consolidated subsidiaries which should be
disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
End of document(*)

1. The above represents a translation, for convenience only, of the original copy of the Audit Report issued in the Japanese
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.

- 124 -

Independent Auditors’
Audit Report
December 17, 2021

To: The Board of Directors, TKC Corporation

Ernst & Young ShinNihon LLC
Tokyo Office
Designated Limited Liability Partner
Engagement Partner

Certified Public
Kanji Tako
Accountant

Designated Limited Liability Partner
Engagement Partner

Certified Public
Toru Iizuka
Accountant

OpinionPursuant to Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act, we have audited the financial
statements presented in the Financial Information section, which comprise the balance sheet, the statement of income, thestatement of changes in equity, the important accounting policies, other notes and the supplementary schedules of TKC
Corporation applicable to the 55th fiscal year started October 1, 2020 and ended September 30, 2021.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
TKC Corporation as of September 30, 2021, and its financial performance for the fiscal year then ended in conformity
with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of ourreport. We are independent of the Company in accordance with the code of professional ethics in Japan, and we havefulfilled our other ethical responsibilities as auditors. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Key Audit Matters
Key Audit Matters (KAM) are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current fiscal year. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Application of Accounting Standards, etc. for Revenue Recognition
As stated in the Notes (Changes in Accounting Policies), the Company applies the Accounting Standard for Revenue Recognition(ASBJ Statement No. 29, March 30, 2018) (hereinafter, “Revenue Recognition Accounting Standard”) and Implementation Guidanceon Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March 30, 2018) from the beginning of the current fiscal
year. As a result, the beginning balance of retained earnings has decreased by 367 million yen in the current fiscal year. Also, comparedto the conventional method, net sales for the current fiscal year decreased by 2,328 million yen, cost of sales decreased by 2,178
million yen, and the amounts of operating income, ordinary income, and net income before taxes and adjustments decreased by 150
million yen each.
Details of key audit matters, the reason for determination, and how we addressed the matter in our audit are omitted since the content
is the same as the Key Audit matters stated in the auditor’s report on the consolidated financial statements.

Responsibilities of Management, Corporate Auditors and Board of Auditors for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance withaccounting principles generally accepted in Japan, and for designing and operating such internal control as management
determines is necessary to enable the preparation and fair presentation of the financial statements that are free from material- 125 -

misstatement, either due to fraud or error.
In preparing the financial statements, management is responsible for assessing whether it is appropriate to prepare thefinancial statements on the going concern basis of accounting and disclosing, as applicable, matters related to going concern
in accordance with accounting principles generally accepted in Japan.
Corporate auditors and the Board of Auditors are responsible for overseeing the execution of duties by Directors indesigning and implementing the financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our responsibility is to express an opinion on the financial statements in our auditor’s report from an independent
standpoint based on our audit by obtaining reasonable assurance about whether the financial statements as a whole are freefrom material misstatement, either due to fraud or error. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the decision-making of usersof the financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we perform the following by
exercising professional judgment and maintaining professional skepticism throughout the audit.
・ We identify and assess the risks of material misstatement of the financial statements, either due to fraud or error, andthen design and perform audit procedures responsive to those risks. The procedures selected and applied depend on
the auditors’ judgment. Further, we obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion.
・ In making those risk assessments, we consider internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, while the purpose of the audit of the financial statements is not
expressing an opinion on the effectiveness of the internal control.
・ We evaluate the appropriateness of accounting policies and their method of application adopted by management, as
well as the reasonableness of accounting estimates made by management and adequacy of related notes thereto.
・ We conclude on the appropriateness of management’s use of the going concern basis of accounting to prepare thefinancial statements and, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the going concern basis of accounting. If we conclude thatsuch material uncertainty exists, we are required to draw attention in our auditor’s report to the related notes in thefinancial statements or, if such notes about the material uncertainty are inadequate, to express a qualified opinion
with an exceptive item on the financial statements. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue
as a going concern.
・ We evaluate whether the overall presentation, structure, and content of the financial statements, including the related
notes thereto, are in accordance with accounting principles generally accepted in Japan, and whether the financial
statements and notes thereto represent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with corporate auditors and the Board of Auditors regarding the planned scope and timing of the audit,
significant audit findings including any significant deficiencies in internal control that we identify during our audit, andany other matters required by the auditing standards.
We also provide corporate auditors and the Board of Auditors with a statement that we have complied with regulations on
professional ethics in Japan regarding independence, and communicate with them all matters that may reasonably bethought to bear on our independence, and where applicable, related safeguards to eliminate or mitigate factors that mayhinder our independence.
Out of the matters we discuss with the corporate auditors and the Board of Auditors, we determine those matters that we
judge as being of most significance in our audit of the financial statements for the current fiscal year to be key audit matters,
and present those matters in our auditors’ report. However, we do not describe these matters in our auditors’ report in cases
where the disclosure of such matters is prohibited by laws, regulations, etc., or in extremely limited circumstances where
we determine that such matters should not be reported because disadvantages of doing so would reasonably be expected
to outweigh the public interests.
Conflicts of Interest
Our firm or its engagement partners have no interest in the Company which should be disclosed pursuant to the provisionsof the Certified Public Accountants Act of Japan.
End of document(*)

1. The above represents a translation, for convenience only, of the original copy of the Audit Report issued in the Japanese
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.

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[Front Cover][Document filed]Internal Control Report[Applicable law]

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

Director of Kanto Local Finance Bureau[Date filed]December 20, 2021

[Company name]

Kabushiki Kaisha TKC[Company name in English]

TKC Corporation[Title and name of representative]

Masanori Iizuka, Representative Director, President and Executive Officer[Title and name of Chief Financial
Officer]

Kiyotsugu Nakanishi, Director, Managing Executive Officer, Chief of theBusiness Administration Headquarters[Address of head office]1758 Tsurutamachi, Utsunomiya-shi, Tochigi[Place available for public inspection]

TKC Corporation, Tokyo Head Office(2-1 Ageba-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashikabutocho, Chuo-ku, Tokyo)- 127 -

1 [Matters concerning the basic framework for internal control over financial reporting]Masanori Iizuka, Representative Director, President and Executive Officer, and Kiyotsugu Nakanishi, 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 inaccordance with the basic framework for internal control set forth in "Establishing the Standards and Practice Standards
for Management 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, 2021, which is the end of
this fiscal year, in accordance with assessment standards for internal control over financial reporting generally acceptedin 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, we selected thebusiness processes to be assessed. In the process-level assessment, we analyzed the selected business processes,
identified key controls that may have material impact on the reliability of the financial reporting, and assessed thedesign 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 fourother consolidated subsidiaries and one equity-method affiliated company determined to have insignificant quantitativeand qualitative influence on the reliability of financial reporting were not included in the scope of assessment of entitylevel 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 in order of size (after elimination oftransactions between consolidated companies) and added up their net sales. As a result, the Company, whose net sales
accounted for almost two-thirds of the Group’s consolidated net sales, was selected as "Significant Business
Location." For the selected Significant Business Location, we included as items of assessment, business processes
that lead to sales, accounts receivable, purchases and inventories that may have material impact on the businessobjectives of the entity. Further, when including business locations other than the selected Significant Business
Location in the scope of assessment, we also individually included as items of assessment, certain business processes
having greater likelihood of material misstatements, processes having significant accounts involving estimates andforecasts and processes concerning businesses or operations dealing with high-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 of the last day of the fiscal year.

4 [Supplementary Information]
None to be disclosed.

5 [Special Notes]
None to be disclosed.

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[Front Cover][Document filed]

Confirmation Letter[Applicable law]

Article 24-4-2, Paragraph 1 of the Financial Instruments and Exchange
Act of Japan[Filed with]

Director of Kanto Local Finance Bureau[Date filed]December 20, 2021

[Company name]

Kabushiki Kaisha TKC[Company name in English]

TKC Corporation[Title and name of representative]

Masanori Iizuka, Representative Director, President and Executive
Officer[Title and name of Chief Financial Officer] Kiyotsugu Nakanishi, Director, Managing Executive Officer, Chief of theBusiness Administration Headquarters[Address of head office]1758 Tsurutamachi, Utsunomiya-shi, Tochigi[Place available for public inspection]

TKC Corporation, Tokyo Head Office(2-1 Ageba-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashikabutocho, Chuo-ku, Tokyo)- 129 -

1 [Matters Related to Adequacy of Statements Contained in the Annual Securities Report]
Masanori Iizuka, Representative Director, President and Executive Officer of the Company and Kiyotsugu Nakanishi,
Chief Financial Officer of the Company hereby confirm that the statements contained in the Annual Securities Reportfor the 55th fiscal year (started October 1, 2020; ended September 30, 2021) are adequate under the Financial
Instruments and Exchange Act of Japan.

2 [Special Notes]
None to be disclosed.

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