NCXX Group Inc.

INTEGRATED REPORT 2016

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INTEGRATED REPORT 2016
About NCXX GroupTop Message

FeatureESG Information

Financial Section

Corporate Data

Publication of an Integrated Report
The NCXX Group Inc. seeks to help stakeholders gain an accurate understanding of its progress on

Editorial Policy

the Medium-Term Management Plan. To this end, we consider it important to provide not only financial

This integrated report has been issued to help stake­holders develop a deeper understanding of the NCXXGroup’s activities to achieve sustainable growth.

­information, such as our business results, strategies, and overview of operations, but also a systematic
explanation of our non-financial information, such as our management philosophy and social,­environmental, and human resource information.
In line with this thinking, from fiscal 2015, we have started publication of an integrated report thatwill enhance and integrate our non-financial information even further, systematically explaining theGroup’s various activities.
Currently, we provide customers with the highest quality device products and Internet travel­services, aiming to become their company of choice. At the same time, we seek to create better­relationships with all of our stakeholders, including shareholders and other investors, and are­therefore aiming to grow into a company that contributes not only in terms of corporate value, but in

Note on Forward-looking Statements
This report contains information that includes forwardlooking statements. These statements are preparedbased on information available to management as of the
preparation date of the report. Accordingly, actual conditions may differ significantly from such statements ordetails implied therein based on risks and uncertainties
associated with changes in economic conditions andmarkets and other factors.

terms of advanced social development.
­ ompanies
The Group operates under a holding company format where our respective operating clink their original business models at a higher level to enhance profitability. At the same time, we aim todrive the growth and corporate value improvement of the entire Group while solving various social

Group Company Websites
NCXX Group Inc.

issues. We will continue our tireless endeavors to create mutual synergies between Group companies

http://ncxxgroup.co.jp/enand contribute to people and society.

http://www.ncxx.co.jp/ (Japanese only)NCXX Inc.

NCXX Solutions Inc.

http://www.ncxx-sl.co.jp/ (Japanese only)

Yosuke Saito

Director
General Manager
Administration Division

SJI Inc.

http://www.sji-inc.jp/e-toppage/Care Dynamics Limited

http://www.care-dynamics.jp/(Japanese only)e-tabinet.com

http://www.e-tabinet.com/(Japanese only)

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INTEGRATED REPORT 2016
About NCXX GroupFeatureTop Message

ESG Information

Financial Section

Corporate Data

Contents
About NCXX Group

03 Overview of the NCXX Group

User Guide

05 Introducing Our Businesses
This PDF offers various functions to make iteasier to use and to find information.

Top Message

10 Greeting

11 Top Message
Connecting, Creating, and Growing as a GroupFeature15 Feature

Icons· · · · · · Return to theprevious page

· · · · · · To Contents· · · · · · To the previous
page· · · · · · To the nextpage	New Value Generated from Advanced Technologies
and Abundant Experience

ESG Information

20 Corporate Governance
23 CSR Activities

Financial Section

26 Financial Section
27

Analysis of Operating Results and Financial Position

32

Consolidated Financial Statements

37

Notes

Index
About NCXX Group

Corporate Data

68 Company Overview / History
69 Shareholder Information / Shareholder Memo

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FeatureClick on the items on the contents page to move directly
to that page.

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INTEGRATED REPORT 2016
About NCXX GroupFeatureTop Message

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Financial Section

Corporate Data

Overview of the NCXX GroupThe NCXX Group comprises NCXX Group
Inc. and six consolidated subsidiaries.
The Group’s business segments are thedevice business and the Internet travelbusiness.
The device business involves the­development-driven manufacture of­communication devices. In addition to
manufacturing communication devices,
the Company owns modem technologies
essential to basic telecommunication­functions and technological development
capabilities spanning both software andhardware aspects that are needed todevelop telecommunication device products. The ­Company develops, manufactures, and sells wireless telecommunication
devices and provides maintenance andother services. In addition, the Company
provides Internet of Things (IoT) solutions
by conducting systems development forindustries such as manufacturing, finance,
logistics, social infrastructure, and the
public sector, covering every stage fromconsultation through to design, construction, operation, and maintenance.
In the Internet travel business, the­Company’s consolidated subsidiary­e-tabinet.com and its subsidiary Web travelCo., Ltd. provide travel services throughthe Internet.

● NCXX Inc.
● NCXX Solutions Inc.
NCXX Group Inc.

● SJI Inc.
● Care Dynamics Limited● e-tabinet.com(As of April, 2016)

Device Business Net Sales

Internet Travel Business Net Sales

24.4(¥ Millions)

5,000

4.8

(¥ Millions)Up%year on year

6,000

Down
%
year on year

2,500

2,000

4,000
1,500
3,000
2,000

3,150

4,613

5,739
1,000

Fiscal 2013

1,762

1,677

Fiscal 2013

Fiscal 2014

Fiscal 2015

500

1,000
0

1,798

Fiscal 2014

Fiscal 20150

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INTEGRATED REPORT 2016
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Overview of the NCXX Group● NCXX Inc.
NCXX Inc.’s operations involve the development and sale oftelecommunication devices that use various wireless formats, and the provision of related system solutions andmaintenance services. With the goal of achieving mass production of these telecommunications technologies, the company has adopted the electronics manufacturing services(EMS) and original design manufacturer (ODM) methods, andis promoting joint operations with its corporate clients,
including those overseas. It has cultivated the required commercialization technology and expertise for these operations
as a fabless company. Meanwhile, the company responds tomarket demand by constantly improving quality and supplying the market with reliable, safe products. The company’s
target markets are the consumer and machine to machine(M2M) sectors within the mobile telecommunications market,
where its main customers are telecommunications service
providers and mobile virtual network operators (MVNOs),
along with corporate clients. The greatest strength of thecompany is its integrated operation from planning and development through to sales and maintenance. This enables it toflexibly meet customers’ needs for high-variety, small-lot
production, while its ability to keep a high level of quality sets
it apart from other competing manufacturers.

● NCXX Solutions Inc.
NCXX Solutions Inc.’s core business is the systems development business, serving industries such as manufacturing,finance, logistics, social infrastructure, and the public sector,
covering every stage from consultation through to design,
construction, operation, and maintenance. These services areprovided as integrated, full-line services for platform construction of networks, databases, and so forth. Specifically, thecompany develops systems, such as purchasing and procurement systems that use the Internet for manufacturers andlogistics service providers, financial strategy support systems
such as Internet banking for financial institutions, a line ofadministrative software packages for information service providers, and network monitoring and information processing
systems for telecommunication service providers. Moreover,the company is also aggressively developing a software product business in which activities include the provision of Internet of Things (IoT) products jointly developed with Group
companies and application service provider (ASP) services.
* ASP services provide applications, software and so forth via the Internet to enable
companies to advance their operations efficiently.

● SJI Inc.
SJI Inc.’s core business is information services, such assystem-related consulting and system maintenance andsupport. The company receives orders for systems development via major systems integration providers from end users
in the financial sector, ICT sector, manufacturing, and distribution sector, among others. The company mainly develops
systems such as purchasing and procurement systems that
use the Internet for manufacturers and logistics service providers, financial strategy support systems such as Internet
banking for financial institutions, a line of administrative software packages for information service providers, and network monitoring systems for telecommunication service
providers. The Company is also focusing on the FinTech
field, where it is utilizing over 40 years of experience in systems development for financial institutions.

● Care Dynamics Limited
Care Dynamics Limited develops and sells Care Online, an
ASP service for nursing care service providers that offers asystem for centrally managing operations and information
related to the nursing care business, including care plan creation, nursing care service provision, and invoicing to national
health insurance organizations. Additionally, the company
provides solutions that make use of conventional software
services in addition to NCXX’s services in hardware and telecommunications. Furthermore, in nursing care robot marketing, the company has taken over the consulting business from
Versatile Inc., a fellow subsidiary of parent company FISCO
Ltd. The company has incorporated and continued Versatile’s
expertise across the board, aiming to help create an environment where all nursing care providers can successfully introduce nursing care robots and continue to use them.

● e-tabinet.com
e-tabinet.com and Web travel Co., Ltd., primarily provide
travel services over the Internet consisting of optimal travel
itineraries sought by customers through “Travel Estimate
Services,” which enable customers to request travel estimates online from travel agencies throughout Japan. The
company also provides “Travel Concierge Services,” whereexpert travel concierges with extensive travel experience
propose customized travel itineraries free of charge over theInternet. Other services include providing specialized expertise and preparing optimal travel itineraries for customers
who wish to take world trips, and customized travel itinerary
preparation services for Chinese customers.

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INTEGRATED REPORT 2016
About NCXX GroupTop Message

Introducing
Our Businesses● Device Business(NCXX Inc.)M2M Solutions
Machine to Machine (M2M) refers to asystem that automates various controls
by enabling network-connected devices
to exchange data with each other. One
key advantage of M2M is that it enables
data communication between devices
without any human intervention. For thisreason, M2M has been introduced notjust to PCs and servers, but to a diverse
array of fields, including management ofdriving conditions through integration
with vehicle driving management systems,
inventory management for vending
machines and related monitoring of malfunctions and other issues, remote surveillance and monitoring for faults andso forth of elevators and ATMs, remotereadings of water, electricity and gas
meters, and security measures.

FeatureESG Information

Main Target Fields for M2M
Transport anddispatchmanagement
Buses, trucks, and taxis

Financial Section

Corporate Data

NCXX works to incorporate wireless telecommunication functions
into various equipment to provide
M2M solutions that realize­operational efficiency gains.

Remote control
and inspection

User

Water supply andgas meters

Remote monitoring
Security and monitoring
camerasM2M
moduleNetworkInventory sales
Vending machines
and others

Operational
supportSettlements and signage

M2M module product examples

Real-time
information retrieval
Car navigation systems
and PCsGX410NC

UX312NC

UX102NC

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INTEGRATED REPORT 2016
About NCXX GroupTop Message

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Financial Section

Corporate Data

Introducing Our Businesses

Corporate Information Provider Service
Original Brand App● Device Business(NCXX Solutions Inc.)

Provide customers with up-to-date
information through original app

NCXX Solutions constantly
updates information

Able to post stock promotions based on
personalized customer marketing

System Solutions
We provide high value-added solutions
including integrated, full-line services
from operational and IT consultation
through to implementation. Specifically,
we offer various services, such as a“Telematics Service” for realizing lower
fuel consumption through eco-driving
guidance and accident prevention. This
service is enabled by swiftly grasping thedriving status of a vehicle from a remotelocation, including its speed, travel time,
travel distance, sudden start up andsudden acceleration. We also provide anapp as a cloud (ASP/SaaS) service.
­Furthermore, with future business development we will develop various services,such as a “Corporate Information­Provider Service,” that provides apps as
an OEM (white label) solution to companies (small and medium-sized securities
companies, human resource service
companies, smartphone handset manufacturers, and so forth).

Browse company information

Server(Cloud)[Compatible OSs: Android 4.0 and later,
iOS7.0 and later]
OEM (white label) usage

Customize client apps as an OEM (white label) service,provided for use by their customers

Fees can be arranged flexibly based on initial cost + revenue share.

Implementation Example
Together with FISCO Ltd., NCXX Solutions developed and launched the smartphone app “FISCO” for providing investment information on listed companies.
The app includes a “Company Information Function” that enables users tocheck multiple stocks while looking at listed companies by stock code order,
and a “Market Flash Report Function” that delivers the latest investment news
from analysts. Other functions include the “Event Schedule Function” thatenables users to view a list of important recent event information and the“­Favorites (Portfolio) Management Function” that lets users register andmanage their favorite stocks easily.

Initial customization cost andinformation fees, etc.

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INTEGRATED REPORT 2016
About NCXX GroupTop Message

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Financial Section

Corporate Data

Introducing Our Businesses

Systems Development
Financial institutions● Device Business(SJI Inc.)

Information Service
Business
SJI Inc. operates an information services
business, with a primary focus on thesystems development business. Group
operating companies in Japan and Chinaleverage their strengths in technology,
speed, and scale in their respective­markets and coordinate with one anotherto provide high quality, high-value-added
services in an effort to achieve sustainable increases in corporate value andenhance shareholder profits. Systems
developed by SJI Inc. include missioncritical information processing systems
that cannot be allowed to fail and requirelarge scale and high performance. Examples include financial strategy support
systems such as Internet banking for
financial institutions, purchasing andprocurement ­systems that use the Internet for manufacturers and logistics service providers, a line of administrative
software packages for information service providers, and network monitoring
systems for telecommunications service
providers.

Financial strategy­support systems such
as Internet banking

Network
monitoring
Telecommunications
serviceproviders

SJI Inc.
Development ofline of administrative
software packages

Information service
providers

Purchasing
and pro­curement
systemsthat use
the Internet

Manufacturers
and Logistic­serviceproviders

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INTEGRATED REPORT 2016
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Introducing Our Businesses

Nursing Care Robot
Business● Device Business(Care Dynamics Limited)

Total Nursing Care
­Business Support Services
Care Dynamics develops and sells “CareOnline,” an ASP service for nursing careservice providers offering a system forcentrally managing operations and information related to the nursing care business, such as care plan creation, nursing
care service provision, and invoicing
national health insurance organizations.
Looking ahead, the company will combine M2M technologies that utilize synergies with the Group to transition into a“total nursing care business support
company.” To this end, the company isexpanding its conventional software service with NCXX’s hardware and services
in the telecommunication field to provide
the highest level of service and total solutions to people involved in nursing care.
It is also participating in the planning anddevelopment of a nursing care robot
business.

Care Dynamics aims to realize the highest level of nursing care service quality
through the harmonization of people
and robots. The company supports
sales and introduction and operation ofrobots at nursing care facilities. Care
Dynamics will provide introduction
consulting based on diverse trial dataobtained through use of nursing carerobots in actual front-line nursing caresituations, and is now creating aProf. Sankai, University of Tsukuba/
manual for optimal introduction and
CYBERDYNE Inc.
operation of nursing care robots.

ASP Services for Nursing Care
Service Providers
Care Dynamics provides “Care Online,” an operation support system for nursing care service providers. The system
is provided as cloud services corresponding to a suite ofoperations including care plan creation, nursing care service provision, and invoicing to national health insuranceorganizations. With simple operation that anyone can use
and features that can be customized to suit the characteristics of each facility, thesystem caters to a fullrange of administrative
processes in facilities. As
of December 2014, 120
nursing care service­providers have introduced
the system at over 400
facilities.

Nursing Care ICT Business
The telecommunication and communication technologies
cultivated in the nursing care robot business will be used
to supplement human workers on the front lines of nursing
care, which tend to be in short supply. This offers a way
for nursing care workers
to provide higher quality
services. Care Dynamics
will draw on the basis of
its accumulated experience in the nursing caresolutions business to provide ­solutions that nursing
care service ­providers
truly need.

< Features of Care Online >Handy
terminal

Touch panel
Input

Input
Call

Improvement
Analysis

ISO 27001
certificationacquiredCall

Various
documents

Robust data
centerCreateVariousanalyses

Apply

Nursing careinsurance, etc.

Externalorganization

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About NCXX GroupTop Message

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Introducing Our Businesses

Features● Internet Travel Business(e-tabinet.com)

Internet Travel
The main business in the Internet travelbusiness is “Customized Travel Services”
provided by e-tabinet.com’s wholly
owned subsidiary, Web travel Co., Ltd.
Specialist “travel concierges” create­multiple itineraries based on the requirements of the applicants, and propose thetravel plans via email. From these,­applicants select the travel concierge andplan that appeals to them. The service istherefore different from the package
tours offered by major travel companies,­combining high quality product proposals
brimming with hospitality and the unrivalled convenience of the Internet toprovide a service with a difference.

 roposal of high quality products brimming with hospitality that differ from major travelPcompany package tours
Unrivalled convenience of the Internet
Relatively unaffected by low price trends caused by price competition with major tour companies

Service Flow
After hearing from customers about
their goals, image, approximate budget,and other aspects of their trip, expert“travel concierges,” provide a proposal
and an estimate free of charge on a
travel plan designed according to thecustomer’s wishes. Since most of theservice is conducted through e-mail andtelephone, customers who are busy
during work hours can have a plancreated at a time that suits them. The
service also includes taking care oftiresome details, reservations, andother tasks.

STEP. 1

STEP. 2

STEP. 3

Send a travel estimate request
using a special form

Travel concierges reply withan estimate by e-mailCustomers enjoy a unique,custom-made tour

Travel Concierges
Travel concierges are travel consultants who specialize in creating travel plans to meet individual
clients’ wishes. They each have their own specialty fields, enabling them to respond flexibly toincreasingly diverse customer needs. However, theInternet is a medium that does not provide face toface interaction. Therefore, we post profiles of thetravel concierges online, emphasizing their experience and personality, so that customers can feel
peace of mind when they consult us.

As of April 2016, the service hasover 346 unique and original travel
concierges registered.

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INTEGRATED REPORT 2016
About NCXX GroupTop Message

FeatureGreeting
I am pleased to open this greeting to all our shareholders and other­stakeholders as we deliver NCXX Group Inc.’s integrated report.
The Internet of Things (IoT) market in which we are concentrating our­business is continuing to attract an extremely high level of interest, with some
forecasting the market at over ¥3 trillion in fiscal 2022. In this business environment, NCXX Group Inc. made SJI Inc., a systems development company, asubsidiary in June 2015. In doing so, we will make powerful progress in our
strategy for building a total solution business model and differentiating ourselves in the IoT market. We will also leverage the abundant knowledge aboutsystem infrastructure that SJI acquired through systems development for­financial institutions to aggressively capture business in the FinTech field, whichis expected to see rapid market expansion going forward. In doing so, we will
create new financial services and build our competitive advantage over othercompanies. At the same time, we will combine the technology assets of ourGroup companies to proactively develop businesses going forward in othergrowth fields such as robotics, automotive telematics, and agricultural ICT.

Tsukasa
Akiyama
Representative Director andPresident
NCXX Group Inc.

ESG Information

Financial Section

Corporate Data

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Connecting,
Creating,

The Company made SJI a subsidiary on June 1, 2015. SJI is primarily
engaged in the information service business of providing systems
consulting, maintenance, and support. The company receives orders
for systems development from end-users in the financial, ICT, manufacturing, and distribution sectors. In particular, SJI has over 40
years’ experience in systems development for financial institutions,and one of its strengths is the financial systems expertise that it hasdeveloped over this time. Leveraging the characteristics of fablessmanufacturing, the subsidiary has the strength of being able toand Growing

develop products rapidly with a cost structure capable of adapting
flexibly to market prices.
Other subsidiaries within our Group include systems developer
NCXX Solutions Inc., and online travel agency e-tabinet.com. Anothersubsidiary, Care Dynamics Limited (renamed from Care Online

as a Group­Limited on January 19, 2015), develops and operates Care Online,
which is a system for centrally managing operations and informationin the ­nursing care business.

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INTEGRATED REPORT 2016
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About NCXX GroupFeatureESG Information

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Results for the Fiscal Year Ended November 30, 2015
In the fiscal year ended November 30, 2015 (December 1, 2014 to November 30, 2015),
the Company saw its consolidated net sales increase 16.3% year on year to ¥7,416
million. Operating loss was ¥529 million (operating income of ¥82 million in the previous
fiscal year), with an ordinary loss of ¥810 million (ordinary income of ¥692 million in theprevious fiscal year). Income before income taxes and minority interests was ¥23 million(¥742 million in the previous fiscal year), reflecting extraordinary income from the sale ofe-tabinet.com group shares and other factors. In the telematics field, which is expected
to make a major contribution, two of the Company’s new products were subject to customer requests for specification changes, resulting in significant delays in the sales plan
and a significant decrease in sales. Moreover, the Company recognized ¥256 million foramortization of goodwill relating to the acquisition of shares of the newly consolidated
SJI, which put downward pressure on profits. However, SJI attained profitability on asingle-month basis from September onwards.

Consolidated Business Performance(Millions of yen)

(Millions of yen)

Net sales (left axis)
Ordinary income (loss) (right axis)

8,000

692

6,000

4,187

2,855

3,809

−101

4,948

93

6,375

7,416

0
−200

−105

−4,000

−400

−341

−600

−6,000−800−8,000−10,000

400

−810

10/7

11/7

12/7

12/11

13/11

● NCXX Group Inc.
NCXX Group Inc. will continue to proactively enter key growth fields such as robot
development, agribusiness, automotive telematics, and FinTech.
In the agriculture business, the greatest success of R&D activities over the past
three years has been the Company’s move to expand the size of its farming area from462.8 m2 (140 tsubo) at present to a total area of 5,421 m2 (1,640 tsubo) from the next
fiscal year in tandem with driving growth in the “sixth-order industrialization business”
for the production, processing and sale of agricultural produce. Moreover, the­Company will launch a franchise business that will conduct packaged sales of an
entire system encompassing NCXX FARM’s features, namely its chemical soil management based on a patented farming method plus digital management based on ICT
systems, augmented by a new product sales support system and a full purchaseguarantee for all agricultural produce. The Company will work to expand this franchise business into a new core business.
With regard to robot development, the Company has placed prototype nursing carerobots in facilities and is undertaking repeated trials and testing regarding their communication with elderly people. The Company aims to produce robots that are easy touse on the frontline and that have an easily accessible cost structure, and is proceeding with development towards early commercialization.

200

1,864

0
−2,000

600

487

4,000
2,000

800

Outlook for the Year Ending November 30, 2016

14/11

15/11

* Transitional accounting period of 16 months (April 1, 2009 to July 31, 2010) for the fiscal year ended July 31, 2010.
Transitional accounting period of four months (August 1, 2012 to November 30, 2012) for the fiscal year ended
November 30, 2012.

−1,000● NCXX Inc., NCXX Solutions Inc., and SJI Inc.
NCXX handles telecommunications equipment products. NCXX will enlarge its domains
and expand its horizons based on its successful activities in the fiscal year ended
November 30, 2015. New business initiatives will also be undertaken by integrating
different business sectors and telecommunication devices through the effective use ofdevelopment assets that the Group has cultivated to date. Specifically, NCXX will­continue to focus on the IoT field incorporating the M2M market and supply a wide
range of solutions. These will include solutions to enhance convenience by embedding

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About NCXX GroupTop Message

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communication functions into industrial fields that had not required them before, andsolutions to reduce personnel costs by refining remote control technologies for equipment and facilities.
Moreover, in the specialty business of automotive products, NCXX aims to provide­completely new services. These services will include vehicle status monitoring andthe acquisition of diverse vehicle data, which will be made possible by high-valueadded telecommunications devices such as the OBD II-type automotive telematic
data collecting unit, GX410NC, launched in fiscal 2015. Meanwhile, NCXX Solutions
will develop servers to accumulate information gathered from driving and other data
sources, along with applications to apply and make effective use of this data. To
achieve rapid market penetration with this service, NCXX will aggressively seek alliances with leading partners that possess various technologies, and expand its business scale at an accelerating rate.
NCXX Solutions and SJI will actively undertake development for the entire Group’s
projects, including development of telecommunication equipment software, related
applications, agricultural ICT and finance-related development, and robot-related systems and applications. They will aim to commercialize their own products while also
providing business support for the Group overall.
Moreover, in initiatives for growth fields, the Group will leverage the systems development expertise in the financial field of new fiscal 2014 Group member SJI to expand
into the FinTech field. We will also examine alliances with companies that possess
advanced technologies as we aim to develop this business quickly.
Moreover, we will leverage the expertise that our Group companies have accumulated in systems development to expand our development business based on orders
received from financial institutions, manufacturers, trading companies, and government organizations.

SJI’s results from July to October 2015 have been incorporated, but for fiscal 2016,
we plan to incorporate SJI’s revised forecast figures for the fiscal year ended October
2016 as announced on December 21, 2015 (net sales ¥6,300 million, operating
income ¥424 million, ordinary income ¥371 million, profit attributable to owners ofparent ¥377 million).
At NCXX, the full-scale start of sales of two new products in the automotive­telematics field that were originally scheduled to start sales in fiscal 2015 is forecast
to increase operating income by approximately ¥300 million.

● Care Dynamics Limited
At Care Dynamics Limited, we will expand sales of the ASP system that we are alreadysupplying to nursing care providers. We will also utilize our 400-strong network of service customers to promote adoption of nursing care robots. Our lineup of products isdesigned to meet the various needs of the elderly and nursing care facilities, andincludes the HAL® robot suit developed by CYBERDYNE Inc. and nursing care robots
for various applications.

● e-tabinet.com Inc.
The e-tabinet.com group will work to upgrade and expand services by recruiting new
travel concierges and enhancing their skills through training courses. In addition, we
will strive to provide high-quality, customized travel services replete with the spirit of
hospitality by recommending Kodawari No Tabi travel packages. Moreover, the Internet
travel business will initiate inbound travel services targeting overseas visitors to Japan,
whose numbers are increasing against the backdrop of the yen’s depreciation, with aview to proactively capturing earnings opportunities.

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Other subsidiaries will also continue to expand their sales and increase operational
efficiencies to contribute to the Group’s performance.
As a result of the above, in our outlook for the fiscal year ending November 30,
2016, we are projecting consolidated net sales of ¥12,910 million, operating income of¥112 million, ordinary income of ¥108 million, and loss attributable to owners of parentof ¥308 million. EBITDA is forecast at ¥733 million. The recognition of ¥541 million inamortization of goodwill in conjunction with the consolidation of SJI had a significant
negative effect on all income items from operating income and below. Since amortization of goodwill is an expense that does not represent a cash outflow, it has resulted ina significant divergence between changes in cash flows and income items from operating income downward. In consideration of this, we have decided to disclose EBITDA
as a reference indicator this year.
Moreover, we will leverage the expertise that our Group companies have accumulated in systems development to expand our development business based on orders
received from financial institutions, manufacturers, trading companies, and government organizations.

Net Sales

Operating Income (Loss)(Millions of yen)

(Millions of yen)

15,000200

12,000

112

0

9,000
12,910

6,000

−200

−529
7,416

3,000
0

Year ended
Nov. 2015−400

Year ending
Nov. 2016 (Target)−600

Year ending
Nov. 2016 (Target)

Profit (Loss) Attributable to
Owners of Parent

Ordinary Income (Loss)(Millions of yen)

Year ended
Nov. 2015(Millions of yen)

100

300

23
108

0

0

−100
−300

−600

−900

−308

−200

−810

−300

Year ended
Nov. 2015

Year ending
Nov. 2016 (Target)−400

Year ended
Nov. 2015

Year ending
Nov. 2016 (Target)

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INTEGRATED REPORT 2016
About NCXX GroupTop Message

FeatureESG Information

Financial Section

Corporate Data

Feature: New Value Generated from Advanced Technologies andAbundant Experience
The Group began its journey in 1984 withinitial operations in the development andmanufacture of telecommunication line
equipment. Since then, the Group has
achieved impressive technology development in the field of data communication,and has earned a reputation for excellence in telecommunications devices suchas mobile Internet devices and M2M
modules. In recent developments, theGroup has integrated these tech­nologies
into fields such as nursing care robots andagriculture, and has started bold, proactive businesses to extend its horizons.
In 2012, the Group made e-tabinet.com
a Group company and started the Internet
travel business. In 2015, we added SJI
Inc. as a Group company. SJI has
strengths in building systems for financial
institutions, and we will harness these toaggressively engage in the FinTech business, a new financial service.
The Group is pursuing the creation ofvalue brimming with originality, startingwith the advanced technologies andabundant experience of its Group companies, in pursuit of further growth.

Creating New Value
We will contribute to society by integrating our accumulated original technologies and knowledge,
as well as our outstanding human resources.

Device Business
1 Automotive Telematics
We develop and sell on-board diagnostic(OBD) data communication units that arecompatible with the OBD II interface, one of
the leaders in the field in terms of thenumber of compatible vehicle models andnumber of data obtained.

3 Agricultural ICT
As a model case for entering and expanding in the field of machine-to-machine(M2M) communications, we are taking on
the agricultural ICT business throughchemical soil management.

2 FinTech
In line with our FinTech strategy, we areadvancing surveys and research into
advanced technologies such as artificial
intelligence and development technologies
such as platforms.

4 Robot BusinessWe are integrating advanced robotics
technologies with our original telecommunications modules. We are involved in joint
development of nursing care robots capable of remote control and status monitoring.

Prof. Sankai, University of Tsukuba/
CYBERDYNE Inc.

Internet Travel Business
5 Internet Travel
We operate a travel-related e-marketplace.
We also conduct a crowd sourcing business that provides customers with custommade travel itineraries.

16

INTEGRATED REPORT 2016
About NCXX GroupFeatureTop Message

Business for Creation of New Value 1

Automotive Telematics
The GX410NC developed and sold by NCXX
is a data communication unit compatible
with the OBD II interface, a leader in the fieldin terms of the number of compatible vehicle
models and number of data obtained. The
GX410NC connects with the OBD II connector mounted in a car to enable diverse­vehicle management solutions.
For example, it enables businesses andservices based on data analysis, such as
telematics insurance that determines insurance premiums based on individual driving
About OBD II

information by collecting, analyzing andevaluating driving information such assudden braking and sudden start up.
The GX410NC differs from other generalproducts by using proprietary software
technology that allows it to be compatible
with an unrivaled 900 vehicle models. The
device is also able to perform software
updates through a mobile connection andcan flexibly handle new vehicle models
released each year as well as vehicles for
special applications.

OBD II is an international standard in self-fault diagnosis performed by the on-board computer(ECU) of a vehicle.

ESG Information

Financial Section

Number of compatible ­vehicle
models in Japan

900(Vehicle modelcompatibility to be
expanded in stages)

Basic data
volume10 types(Up to 38 types
depending on thevehicle model)

Corporate Data

Compatible
with special
vehiclesCommunication
protocolHSPA/UMTS

Optimize costs for commercial vehicles
and create new business!

Cost Optimization

New Business Creation

Eco-driving support can significantly reduce the cost of fuel.
­Further cost reductions can beachieved through a lower accident
rate and attendant improvements
in insurance premium discountrates. Moreover, detecting faults inthe vehicle before they become
noticeable reduces repair bills.
Finally, the system is expected tohelp increase awareness of following laws and regulations, and to
reduce driver stress through efficient vehicle deployment.

Accumulating driving informationand vehicle malfunction information
enables optimal maintenance andso forth, enabling close relationships
to be built with customers. Moreover, the trade-in price of a used car
can also be calculated accurately,
providing benefits for both the dealership and the customer. Finally, theinformation can also be used forcustomer management and marketing, while car rental, leasing com­panies, and so forth can grasp
customer movements and trends
from the driving data.

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INTEGRATED REPORT 2016
About NCXX GroupFeatureTop Message

Business for Creation of New Value   2

Financial Section

FinTech verification trials using blockchain
technology based on a model of deposit
account management at a financial institution. Going forward, the Group plans tovigorously push ahead with these measures
to realize practical services for the financial
sector. Notably, we have positioned blockchain and artificial intelligence (AI) as areasof focus.

SJI plans to vigorously push ahead withinitiatives in the FinTech field, in addition toexisting information services businesses.
The FinTech Strategy Office aims to create
innovative financial services for society by

Measures in the FinTech Field

Reasons for changes

Development of AI
Deep learning

Apply blockchain

Anticipated changes
in services

Perform tasks previously­undertaken by people

Distributed financial ­infrastructure using blockchain

Existing financial services will be transformed and new financial­services based on FinTech will become widespread.
●	Human operations will no longer be needed as numerous tasks will be automatedand streamlined(Data analysis managers, loan officers, bank tellers, etc.)●	As a result of the above, the cost of financial services will be significantly reduced.

Advanced Technology Research Center

Existing IT• AI (artificial intelligence)• Big dataInnovative IT• Blockchain

Existing financial
markets
Redirecttechnologies andknowledge

researching new technologies in the ­FinTech
field, and combining these technologies
with the financial systems integration expertise SJI has amassed over the years.

Anticipated Future of the Finance Sector

Anticipated future of
the finance sector

Existing financial technology• Financial engineering• Derivative transactions• High-speed trading

Corporate Data

FinTech Strategy Office

FinTechFinTech is growing rapidly worldwide,based on expectations that it could spark arevolution comparable to the IT revolution.
In Japan, FinTech has been attracting significant interest, following events such as
the Cabinet of Japan’s recent approval ofdraft regulations related to cryptocurrency.
SJI Inc. has set up a FinTech Strategy
Office, and is actively taking new initiatives
in swift succession, such as commencing

ESG Information

Redirect technologies andknowledge

Cryptocurrency market(new financial markets)

As a new body set up under the FinTech
Strategy Office, the Advanced Technology
Research Center is an organization whose
main task is to provide technical support forinternal projects, conduct joint research withexternal partners and conduct surveys andresearch related to new technologies andtrends. The center carries out surveys andresearch related to technologies that fit theCompany’s FinTech strategy, including
blockchain, cloud computing, big data and
AI. Concurrently, it also conducts surveys
and research related to development technologies, such as new environments, techniques, platforms and open source.

Main
Task

● Technical support for projects● Joint research with external partners● Surveys and research related to newtechnologies

New
technologies

Advanced
Technology
ResearchCenterDevelopment
technology

Blockchain

Development
environment

Cloud
computing

Development
methods

Big data

Development
platform

AI

Open source

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INTEGRATED REPORT 2016
About NCXX GroupFeatureTop Message

Business for Creation of New Value   3

Safe, Secure,­Ecological Produce
and Technologies
NCXX FARM utilizes digitally based
chemical soil management. The
company is pursuing safe, secure,and ecological vegetable cultivation,such as multi-stage pot cultivationthat draws out the full natural life
force inherent in the crops, reduced
agrichemical cultivation, and efficiency increases in cultivation insmall areas.

chemical soil management and provision oftechnology to growers.
The testing plot of NCXX FARM is built onsome idle land at the Company’s ­Hanamaki
Head Office. Here, we conduct various trial
tests using new agricultural methods. We areworking to create an attractive businessmodel in the agriculture sector, including
effective methods for land use, increasingenergy saving and efficiency in agriculturaloperations, and local production for local
consumption. By creating this businessmodel, we aim to expand our business inorder to contribute to local communities.

Creating an
Appealing
Agriculture
Business Model

Financial Section

Corporate Data

Full-Fledged Expansion of NCXX Farm

Agricultural ICT (NCXX FARM)
The NCXX Group Inc.’s main pillar is thedevice business, targeting the informationand communications market with its rapid
demand shifts and fierce competition. This
market requires the Group to constantly
seek new initiatives for driving businessdomain expansion. The Group has been
vigorously advancing and expanding in the
M2M field, based on its telecommunication
technology assets.
One model case is the agriculture business. The Group is working on NCXX FARM,
an agricultural ICT business aimed at vegetable cultivation driven by digitally based

ESG Information

As the culmination of research and development in the agricultural ICT business, we will
work to drive business expansion through“sixth-order industrialization” initiatives,
which involve the growing, processing andsale of agricultural products, by increasing
the size of the testing plot from the current
462.8 m2 (140 tsubo) to a total area of
5,421 m2 (1,640 tsubo). In addition, we

have commenced a franchise businesswhere we conduct packaged sales of theentire system, which combines chemical soil
management based on a patented farming
method and digital management based on
ICT systems, which are hallmarks of NCXX
Farm, with a new sales support system forproducts and purchases of agricultural produce and intermediation with buyers.

NCXX Farm Business Model● Member
farmers

Implement agricultural produce data accumulation and research, branding of agricultural
produce, community service, and the promotion of “sixth-order industrialization”• Patented
farming method• ICT systems• Expertise• Sales support

Technology for­Raising Tasty
Produce● Partner
wholesalers● Partner
facilities● Direct sales andsupermarkets● Web-based
sales

Sale

• Purchase of
agricultural produce• Intermediation withbuyersUnlike conventional approaches tocrop cultivation that are based on
instinct and experience alone, NCXXFARM converts cultivation conditions
into data in order to optimize them,enabling stable agriculture technologies to be established. The company
is also advancing initiatives with aview to providing these cultivation
technologies to growers.

Production at proprietary farms
Processed goods
Develop new
products
Independentsales● Processing
companies

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INTEGRATED REPORT 2016
About NCXX GroupFeatureTop Message

Business for Creation of New Value 4

Robot Business
NCXX Group Inc. is jointly developing nursing care robots with Vstone Co., Ltd.
Vstone has earned a strong reputation asa robotic products manufacturer for its workin the development and manufacture of
bipedal robots and robots with omnidirectional sensors. The company has accumulated original expertise in fields including
sensors and motors, such as the low-costdevelopment of a bipedal robot about thesize of a child in elementary school.
Our current joint development involves
incorporating NCXX’s telecommunication
modules into nursing care robots developedby Vstone to control and monitor themremotely and use them to keep watch overthe elderly. Furthermore, our Group company NCXX Solutions is continuing systemdevelopment aimed at utilizing the datacollected from robots, and pursuing various
possibilities that cannot be realized with astandalone robot.
Moreover, Care Dynamics Limited,
another Group company, has customer
interface with over 400 nursing care­facilities operated by 120 companies
throughout Japan. Looking ahead, Care
Dynamics will provide marketing, sales, andintroduction support and consulting services for the nursing care robots ­developedby the Company. As part of this, theESG Information

Financial Section

Corporate Data

Business for Creation of New Value   5

Internet Travel

Prof. Sankai, University of Tsukuba/
CYBERDYNE Inc.

company will also sell products such as the
HAL® robot suit made by ­CYBERDINE Inc.
The Company will use the raw dataobtained from these front-line nursing caresituations to promote the nursing care robot
business. In the process, we will contribute
solutions to the challenges of an aging
society with a falling birthrate through the
integration of services ­provided by humans
and robots.

HAL® for Care Support(Lumbar Type)
This product uses HAL’s
original system thatprovides assistance withsimple operation asneeded in accordancewith the wearer’s intention. It relieves the load on
the lumbar area of people
assisting in nursing care.
Prof. Sankai, University of Tsukuba/
CYBERDYNE Inc.

Walking Support Device(ACSIVE)
This is an unpowered walking support device that
requires no electricity or
motors. Using the action of apendulum and spring, thedevice assists people inswinging their legs.
Prof. Sankai, University of Tsukuba/
CYBERDYNE Inc.

e-tabinet.com operates “Tabiraku,” whereusers can receive estimates on travel frommultiple travel companies at a single point,
as well as a travel-related e-marketplace.
Furthermore, the e-tabinet.com groupcompany Web travel Co., Ltd. operates a
crowd sourcing business based on thetravel business. In this business, pre-­registered travel consultants called “travel
concierges” respond to travel requests
received via the Internet by providing eachcustomer with a customized itinerary. As of
April 2015, over 300,000 customers havealready used the service.

 rowd sourcing in fields otherC
than the travel business

Our strategy going forward is to start inour existing online travel business by initiating inbound travel services targeting overseas visitors to Japan, whose numbers are
increasing against the backdrop of the yen’s
depreciation, with a view to proactively capturing earnings opportunities. Furthermore,
we will expand the crowd sourcing businessto fields other than travel, developing into acomprehensive creator of crowd sourcing
platforms that are able to perform a variety
of services, not only for individuals, but also
for companies. e-tabinet.com will use thesebusinesses as a driving force to propel it toan early initial public offering.

Crowd sourcing in the travel businessCurrent business fields
Lateral developmentof online businessexpertise

Lateral developmentof crowd sourcing
expertise

Captureinbound demand

Incorporate concierges infields outside of travel[Inbound][Outbound]

Increase inoverseas visitors to Japan

Crowd sourcing market
expansion

20

INTEGRATED REPORT 2016
About NCXX GroupESG Information

FeatureTop Message

Financial Section

Corporate Data

Corporate Governance2. Number of Directors

I Corporate Governance System

The Company’s Articles of Incorporation stipulate that the Board of Directors comprises a maximum of
10 directors.

1. Outline of Corporate Governance System
The Company has a corporate governance system comprising a Board of Directors, Audit &­Supervisory Board members, an Audit & Supervisory Board, and an external auditor.
The Company’s Board of Directors has five directors, one of whom is an outside director. As the
body making management decisions, the Board of Directors resolves important business decisionsin accordance with the Board of Directors Regulations. The Board meets once a month and as theneed arises to supervise the execution of duties by directors based on monthly financial statements
and other reports. It also invites the outside director to participate in Board meetings in order toobtain the outside director’s views on management from an objective perspective based on his
extensive experience.
The Company’s Audit & Supervisory Board has three members, (including two outside members),
comprising one full-time Audit & Supervisory Board member and two part-time Audit & Supervisory
Board members. The Audit & Supervisory Board meets every month, in principle, to share information
between the Audit & Supervisory Board members and facilitate efficient audits.
In addition, the Company strives to promptly grasp information on business management by h­ olding
a Management Conference once a week, with mainly the directors and general managers in attendance.
A schematic diagram of the Company’s corporate governance system is presented below.

General Meeting of Shareholders
Appoint and dismiss
Cooperate

External Auditor

Audit &
Supervisory Board

Audit

Appoint and dismiss

Instruct andreportAudit

President and CEO
Discuss and reportManagement
Conference

Cooperate

Advising Corporate
Attorney

Board of Directors

Discuss and report

Division Director &General Manager

AdviseInternal Audit Office

Audit

Instruct and report

Divisions

3. Approval Criteria for the Appointment and Dismissal of Directors
The Company’s Articles of Incorporation stipulate that the appointment of directors shall be approvedby a majority of voting rights exercised at a meeting attended by shareholders holding at least onethird of all voting rights. The Articles of Incorporation also stipulate that the appointment of directors
shall not be approved on the basis of cumulative voting.
The Articles of Incorporation also stipulate that the dismissal of a director shall be approved by
two-thirds majority of voting rights exercised at a meeting attended by shareholders holding a majorityof all voting rights.

4. Limited Liability Agreement
The Company has concluded an agreement limiting liability for damages with each director (excluding
directors with executive responsibilities and similar posts) and each Audit & Supervisory Board member,pursuant to Article 423, paragraph 1 of the Companies Act, based on the provisions in Article 427,
paragraph 1 of the same.
The liability for damages based on this agreement is limited to either an amount no larger than ¥1
million specified by the Company in advance, or the minimum liability amount as set forth by the law,­whichever is higher.
Article 41 of the Company’s Articles of Incorporation stipulates that “the Company can conclude anagreement limiting liability for damages with the external auditor, pursuant to Article 423-1 of the­Companies Act, based on the provisions in Article 427-1 of the same. However, the upper limit of theliability amount under the contract shall be the amount provided in the law.” As such, the Company’s
external audit contract with Toko Audit Corporation makes provisions for an article limiting liability. The
limit on the amount of liability for damages in this contract is twice the amount of total remuneration for
Toko Audit Corporation’s auditing services.

5. Exemption of Directors and Audit & Supervisory Board Members from Liability
Pursuant to the provisions on liability set forth in Article 423-1 of the Companies Act, the Company’s
Articles of Incorporation stipulate that the Board of Directors may resolve to exempt a director(­including past directors) or Audit & Supervisory Board member (including past Audit & Supervisory
Board members) from their liability within the limit set forth by the law, provided that that person had
acted in good faith and was not grossly negligent.
The aim of this provision is to enable the directors and Audit & Supervisory Board members to fulfill
their roles to the fullest extent, and to enable the Company to appoint experienced and knowledgeable
personnel to the Board of Directors and Audit & Supervisory Board.

6. Body Making Decisions to Pay Dividends and other Distributions from Surplus
In order to flexibly return profits to shareholders, the Company’s Articles of Incorporation stipulate thatthe Board of Directors may resolve to pay an interim dividend to the shareholders and registered­pledgees of the Company’s shares, listed or recorded in the final register of shareholders as of May 31
each year.

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INTEGRATED REPORT 2016
About NCXX GroupTop Message

FeatureESG Information

Financial Section

Corporate Data

Corporate Governance

II Establishment of an Internal Control System
The Company has developed company-wide internal rules governing all business operations, andexecutes business with proper separation of management based on these rules. At the same time, theCompany has built an approval system based on rules governing the authorization of duties and thecircular approval of decisions. In order to evaluate the effectiveness and sustainability of the Company’s
internal control system, the Internal Audit Office audits each business division to ensure that their important business duties are being executed both efficiently and accurately.

III Status of Internal Audits, Audit & Supervisory Board
Audits and Accounting Audits
Each Audit & Supervisory Board member attends the Board of Directors meetings to audit the executionof duties by directors. The members also exchange information as required with the president and directors of the Company to share an understanding of the management priorities and issues. In addition toauditing the Company’s minutes, circular approval documents, contracts, and business transaction
records, the full-time Audit & Supervisory Board member is mainly responsible for interviewing relevant
personnel, observing accounting audits, and conducting on-site surveys, as well as attending otherimportant meetings apart from the Board of Directors.
The Company’s Internal Audit Office, comprising one person in charge, cooperates with the Audit &Supervisory Board members throughout the year to conduct the required internal audits based on aninternal audit plan. Results of the internal audits are reported in writing to the president and confirm thestatus of specific advice and recommendations given to the divisions receiving audits as well as the
improvements they have made.
The Company has also concluded an external auditor contract with Toko Audit Corporation, underwhich it periodically receives accounting audits.
The Internal Audit Office, Audit & Supervisory Board, and external auditor cooperate with one
another to conduct audits effectively and efficiently. To this end, they strive to conduct proper audits
and confirm the status of improvements in response to the findings and issues they raise by exchanging information and opinions and sharing what they find.

IV Development Status of the Risk Management System
The Company’s risk management system has rules that were developed based on the International
Organization for Standardization (ISO) from the standpoint of preventing risks. When there is information thought to represent a market, credit, business, or management risk, the Management Conference
confirms the status of compliance with laws and regulations of the Company and Group companies. At
the same time, executives in charge of each division strive to raise risk awareness by rigorously disseminating information considered to represent a risk within their respective divisions. The Company isalso striving to strengthen its legal risk management system by concluding an advisory contract with alaw firm so that it can receive timely advice and instruction on legal risks of high importance,­particularly the protection of personal information, statutory regulations, and so forth.

Internal audits are conducted periodically to verify that there are no problems with the Company’srisk management system and compliance with laws and regulations.

V 
Status of Development of a System for Ensuring the­Appropriateness of the Operations of Subsidiaries of the Company
The subsidiaries of the Company have adopted the basic policy of maintaining their independence bymaking management decisions autonomously in light of the characteristics of each company, such as
the scale of operations, business characteristics and design of governing bodies, in tandem with maintaining cooperation and information sharing with the Company. Meanwhile, with regard to importantmatters concerning management at the Company’s subsidiaries, the subsidiaries are requested to seek
the approval of these matters from the Company or report them to the Company, based on internal
rules. In parallel, subsidiaries regularly report on the status of business execution, financial conditionand other matters to the Company. Moreover, the Internal Audit Office audits transactions between the
Company and its subsidiaries.

VI Compensation of Corporate Officers
1. Total Compensation by Corporate Officer Position and Type of Compensation,
and Number of Eligible Officers
Position

Directors(excluding outside directors)
Audit & Supervisory Board members(excluding outside Audit &Supervisory Board members)
Outside officers

Total by type of compensation (Thousands of yen)
Total
compensation
Retirement
Basic
Stock
Bonuses(Thousands of yen) compensation
benefits
options

Number of
eligible
officers

14,810

9,810

5,000

–

–

6

–

–

–

–

–

–

1,800

1,800

–

–

–

1

Notes: 1. The 22nd Ordinary General Meeting of Shareholders, held on June 29, 2006, resolved that the total compensation for theCompany’s directors (excluding salary as an employee) shall be limited to within 300 million yen per year. Separately fromthe above, the 30th Ordinary General Meeting of Shareholders, held on February 26, 2014, resolved that the total­compensation in stock options shall be limited to within 100 million yen per year.
2. The 22nd Ordinary General Meeting of Shareholders, held on June 29, 2006, resolved that the total compensation for theCompany’s Audit & Supervisory Board members shall be limited to within 50 million yen per year.
3. There were three Audit & Supervisory Board members (of whom, two were outside Audit & Supervisory Board members)
who received no compensation in fiscal 2015 (from December 1, 2014 to November 30, 2015).

2. Breakdown of Compensation by Corporate Officer
Omitted from record in this report as there were no corporate officers receiving 100 million yen or morein total compensation.

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INTEGRATED REPORT 2016
About NCXX GroupTop Message

FeatureESG Information

Financial Section

Corporate Data

Corporate Governance

3. Material Information on Salary as an Employee for Corporate Officers Serving
Concurrently as Employees

2. View Concerning the Appointment Status of the Outside Director and Audit &Supervisory Board Members

No items to report

The Company has no standards or policies regarding independence from the Company for theappointment of outside directors and outside Audit & Supervisory Board members. However, as noted
above, the Company recognizes that the outside director and outside Audit & Supervisory Board­members are fulfilling their functions and roles as expected and judges that there is no problem with
their appointment status.

4. Policy on Determining the Amount and Calculation Method of Corporate Officer
Compensation
The Company has not established policies on the amount or calculation method of compensation forcorporate officers.

VII Outside Director and Outside Audit & Supervisory
Board Members
1. Functions and Roles relating to Corporate Governance
The Company has appointed one outside director and two outside Audit & Supervisory Board members.
Outside Director Sadatomo Matsudaira has extensive knowledge developed through his career as a
newscaster over many years. Mr. Matsudaira was appointed because his knowledge is expected tohelp strengthen the Company’s management team. There are no conflicts of interest between thisindividual and the Company.
Outside Audit & Supervisory Board member Mitsutoshi Urano possesses the extensive experienceand knowledge needed to perform audit operations based on his past and current positions as certified
tax accountant, representative director, and Audit & Supervisory Board member. Mr. Urano was
appointed because his experience and knowledge are expected to help strengthen the Company’s
audit team. There are no conflicts of interest between this individual and the Company.
Outside Audit & Supervisory Board member Kazuhisa Nagabuchi currently serves as chairman of anon-profit organization, and has ample knowledge needed to audit and supervise corporate management. Mr. Nagabuchi was appointed because his knowledge is expected to help strengthen the­Company’s audit team. There are no conflicts of interest between this individual and the Company.
Based on the above, and as noted under “2. Personnel, Capital, Business, and Other Vested­Interests between the Outside Director and Audit & Supervisory Board Members and the Company” inthis report, the outside director and outside Audit & Supervisory Board members have no noteworthy
vested interests in the Company from the standpoint of conflict of interest with general shareholders.
Furthermore, they are expected to supervise and audit the execution of duties by the Company’s­directors from an independent position posing no risk of a conflict of interest with general shareholders,since they are expected to apply an outsider’s perspective, drawing on their professional expertise andexperience and knowledge working for other companies, in offering impartial advice and opinions to
the Company.

3. Supervision and Audit by the Outside Director and Audit & Supervisory Board Members,
Their Mutual Cooperation in Internal, Audit & Supervisory Board, and Accounting Audits,
and Relationship with the Internal Control Division
The Company’s outside director voices timely opinions at Board of Directors meetings based on­high-level knowledge and ample experience, and fulfills the functions of supervising and checking
management from an independent position from the Company’s management team.
The outside Audit & Supervisory Board members provide opinions and advice based on professional expertise and ample experience at the Company’s Board of Directors and Audit & Supervisory
Board meetings. They also maintain and strengthen the compliance of Company divisions with laws
and regulations by deliberating and exchanging information with the Internal Audit Office and an­external auditor, as well as by receiving reports from them.

[Details of Compensation for Auditing Certified Accountants and Their Staff]
Previous fiscal year
Classification

Compensation paid
for audit certification
activities(Thousands of yen)

Fiscal year under review

Compensation
paid for non-audit
activities

Compensation paid
for audit certification
activities

Compensation
paid for non-audit
activities

Reporting company

12,000–16,000–Consolidated subsidiaries

5,500

–

10,000–Total

17,500–26,000–Board ofDirectors
and Audit &Supervisory
Board
Members

Representative Director and President �������������� Tsukasa Akiyama
Representative Director and Vice President ������ Naoki Ishihara
Director �������������������������������������������������������������� Osamu Fukami
Director �������������������������������������������������������������� Yosuke Saito
Outside Director ������������������������������������������������� Sadatomo Matsudaira
Audit & Supervisory Board Member ������������������ Kentaro Tawara
Outside Audit & Supervisory Board Member ����� Mitsutoshi Urano
Outside Audit & Supervisory Board Member ����� Kazuhisa Nagabuchi

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INTEGRATED REPORT 2016
About NCXX GroupTop Message

FeatureESG Information

Financial Section

CSR Activities

The NCXX Group believes that it is allowed to exist in society and to continue its­business because it provides value to society and carries out its social responsibilities. Guided by our Corporate Philosophy, “Provide new value to people based on­telecommunications technology, thereby contributing to the development of amore ­efficient and comfortable society,” we are working as a group to actively
engage in CSR activities that are deeply involved with our business.

Corporate Data

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INTEGRATED REPORT 2016
About NCXX GroupTop Message

FeatureESG Information

Financial Section

Corporate Data

CSR Activities

NCXX Group Inc.’s underlying desire as a manufacturer is to find ways to help people withdisabilities or elderly people achieve things that they want to do but cannot, and to take on
various individual wishes and realize them. Through our activities with various people in andoutside the company, we encounter many ways of thinking, widen our field of view, andcreate new values and ideas. We believe this helps to invigorate our organization.

Based on this stance, we are engaged in the volunteer activities introduced below andalso volunteer to support events held at nursing care facilities and the lives of aging
households in depopulated villages. In addition, we are also working to serve communities
through our businesses and to develop products that contribute to society.

Initiatives through Business

Volunteer Participation in the Tandem Parade Pre-Eventfor the Suzuka 8hours
The “Kaze no Kai” holds a tandem parade the night before the Suzuka 8 Hours Endurance Road
Race (Suzuka 8hours). It is a social contribution activity, in which the contestants and former
riders gather together to give tandem rides around the Suzuka circuit carrying people with­disabilities as their passengers. The Group sponsors the tandem event on the Suzuka circuit aspart of its CSR activities.
As one its products in the M2M field, the Group is developing a GPS data logger for motorcycles (a device that logs various information about the motorcycle). In developing products formotorcycles we conduct test operation of prototypes and data collection and analysis. In addition, with a philosophy and Japanese cultural trait of “winning through a team effort,” we formed
Team WINNER Z-TECH & NCXX Group (currently “NCXX Racing”) in 2014 to enter the Suzuka
8hours to support motorcycles and Japan’s largest motorcycle race.
Looking ahead, we will continue to support the activities of the Kaze no Kai and contributeto supporting the spread of motorcycle culture, which has a deep connection with our business activities.

Contribution to Communities through the Agricultural
ICT Business
The testing plot of NCXX FARM is built on some idle
land at the Company’s Hanamaki Head Office. Here,we conduct multi-variety harvesting by adopting new
agricultural methods, automation of environmental
management, which is important to cultivation, andoptimal growing environment control, to verify effective methods for using the land and energy saving andefficiency increases in agricultural operations. We arepromoting the use of ICT in agriculture to enhance theefficiency of conventional agriculture and improve
profitability. We are also promoting initiatives to enable
us to contribute to community revitalization. The farmin Hanamaki will continue to produce business models
for appealing agriculture that can realize local production for local consumption, even in areas where thepopulation aging has advanced.

Riding tandem
NCXX FARM is currently acceptings visitors for observation anytime

Our produce is also supplied to stores and events in
Hanamaki City

Adopted as a commemorative product of Hanamaki
City’s voluntary hometown tax system

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INTEGRATED REPORT 2016
About NCXX GroupTop Message

ESG Information

FeatureFinancial Section

Corporate Data

Reducing Fuel Consumption and Preventing Accidents Through Guidance on Safe Driving

Reducing the Burden of Caregivers and Care Recipients at Nursing Care Sites

Telematics Service

Contactless, Non-Confining Bed Monitoring System OWLSIGHT

The NCXX Group’s telematics service helps to reduce fuel costs by providing guidance on ecofriendly driving and helps to prevent accidents by providing guidance on safe driving. This isaccomplished through timely remote monitoring of driving conditions such as vehicle speed,
driving time, and driving distance, along with any sudden start up and rapid acceleration. The
service is highly versatile, supporting an expansive range of markets spanning the transportationindustry, taxi companies, rental car companies, and companies that own commercial vehicles, aswell as gas stations, after-market automotive parts retailers and others.

OWLSIGHT is a monitoring system that is able to detect both the large movements of care recipients, such as getting out of bed and leaning over bed rails, and small movements like tremblingand shivering. Because the system eliminates the need to constantly monitor the care recipientat their bedside, OWLSIGHT is expected to reduce the physical and mental workload of caregivers. For care recipients, the system imposes no physical burden and allows them to lead theirlives normally because it is a contactless, non-confining system. In this manner, the system
reduces the burden of both caregivers and care recipients.

The Group’s Telematics Service
Examples of Conditions Reported by the System
Timelyremotemonitoring

Monitor vehicle speed, driving time, and driving distance

RisingMonitor driving conditions such as any sudden start up and rapid accelerations

Getting out of bed

Leaning over bed rails

Monitoring• Detect theft or towing• Locate parked vehicle

Vehicle speed

GPS
Smartphone
Engine RPM

Driver safety and protection• Dangerous driving alerts• Detect of serious accidents

OBD II• GPS information• Three-axis accelerationdata• OBD data

Applications
PC
3G

InternetCommunication protocols
Battery voltage

Instantaneous fuelconsumption

HTTP, HTTPS, TCP, IP
and others

Reduce fuel costs through guidance on eco-friendly driving
Prevent accidents by detecting dangerous driving

Vehicle maintenance andmanagement

Tablet• Detect self-diagnosis informationand malfunction codes• Prevent battery death while parked

Cost management
educe fuel consumption throughAchieved! • Reco-driving• Support quotes during trade-in
assessments

List screen

The system detects when care recipients risefrom bed, or when they could fall based on
their position. Through a screen indication
and alert chime, the system sends notices tothe handheld devices of caregivers, showing
either a “Dangerous” or “Please check” indication according to the situation.

Details screen

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Financial Section

27–31	Analysis of Operating Resultsand Financial Position
32–36

Consolidated Financial Statements

37–67

Notes

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Analysis of Operating Results and Financial Position[Review of Operations]
In the fiscal year ended November 30, 2015, the Japanese economy continued to follow a gradual recovery
path, supported by signs of improving employment conditions and other factors.
The information and communications market, the Company’s primary market, is seeing market penetrationof communications infrastructure such as optical fiber and 4G, with the household broadband coverage ratio
reaching almost 100%. Voice communications is transitioning to IP-based technology, and the introduction of
IPv6*1 is gradually getting under way. In this environment, various forms of Software as a Service (SaaS) are
evolving over networks, and are spreading to smart devices such as smartphones and tablets across all age
groups, as a means of disseminating information. Moreover, highly unique new products such as wearable
devices*2 are emerging onto the market, marking the beginning of a new phase in this market. Meanwhile,
the M2M*3 field offers prospects for rapid market expansion. Indeed, the M2M market continues to attract an
extremely high level of interest, with the size of the market projected to expand from around ¥230.0 billion in2013 to over ¥1,000.0 billion in 2018. Furthermore, according to the 2015 White Paper on Information andCommunications in Japan, the Internet of Things (IoT), a higher-level concept encompassing M2M that willconnect a multitude of physical objects, not just devices, to the Internet, is predicted to experience exponential growth, along with rapid increases in data traffic volume and the evolution of artificial intelligence driven by
the increasing sophistication of algorithms. In this climate, the White Paper has identified several priorities,
such as developing network technologies, that will enable the exchange of a burgeoning volume of big data
traffic, building platforms for a diverse array of IoT devices operating autonomously, ­ensuring security to support the adoption of ICT by society as a whole, and strengthening resilience to natural disasters. Each of thesepriorities are now on the verge of giving rise to new markets.
*1 IPv6 is one version of the Internet Protocol, the communications protocol that serves as the foundation of the Internet. It is a new
standard that is scheduled to replace the now widely used IPv4 (IP version 4) standard.
*2 Wearable devices refer to devices that are designed to be used while being worn on the arm, head, and other parts of the body.
*3 Machine to Machine (M2M) refers to a system that automates various controls by enabling network-connected devices to exchange
data with each other. One key advantage of M2M is that it enables data communication between devices without any humanintervention. For this reason, M2M has been introduced not just to PCs and servers, but to a diverse array of fields, including
management of driving conditions through integration with vehicle driving management systems, inventory management for vending
machines and related monitoring of malfunctions and other issues, remote surveillance of elevators and ATMs and related monitoring of malfunctions and other issues, remote readings of electricity and gas meters, and security measures.

As an initiative targeting a new market, the Company commenced joint marketing activities in the automotive telematics*4 field with ZMP Inc. (“ZMP”) in January 2015. By combining ZMP’s technology for analyzing
vehicle information with the Company’s communications modules and communications technologies, the twocompanies will develop services such as surveillance of vehicle condition, transmission of audio and image
data and other information while driving, and automatic software updates for adding new functions.
Moreover, subsidiary NCXX Solutions Inc. (“NCXX Solutions”) will consider initiatives including providing­servers to archive data collected from driving information and other sources and developing applications to
put this data to good use.

*4 Telematics is a word formed by combining the words telecommunications and informatics. It collectively refers to the provision ofservices to mobile entities using mobile communications systems such as mobile phones.

On April 1, 2015, the Company changed its name to NCXX Group Inc. In parallel, the Company made thetransition to a holding company by splitting off its device business as a wholly owned subsidiary of theCompany and reincorporating it as NCXX Inc. Following the transition to a holding company, the Company will
focus on Group-wide management. By allocating personnel and funds according to the priority and size of
new businesses, the Company will implement the optimal management of the entire Group. In addition, substantial authority for business execution will be transferred to operating companies to ensure flexible andspeedy decision-making according to the conditions of each market. Furthermore, in the course of rapidly andefficiently implementing M&As, an effective option as a growth measure, the Company believes the holding
company’s flexibility and the management approach of not creating vertical hierarchies within the Group will
greatly facilitate the implementation of M&As, thereby helping to significantly enhance the pace of growth.
In June, the Company entered into a business and capital alliance agreement with SJI Inc. (“SJI”), making
SJI a subsidiary through an increase in capital through a private placement of shares and the acceptance ofsubscription rights to shares. Working together with NCXX Inc., which manufactures high value-added communications devices, and NCXX Solutions, SJI will provide not only hardware for device products, but also
M2M solution services, including server applications and other application services. Through these efforts,
the Company will push ahead with vertical integration of the value chain in the M2M market, which continues
to grow, with the aim of (1) delivering the benefits of one-stop services and (2) maximizing profit throughout
the value chain.
In the agricultural ICT business (NCXX FARM), over the past three years the Company has been conducting
verification of chemical soil management based on a patented farming method (multi-stage pot cultivation)plus digital management based on ICT systems. At the same time, the Company has been accumulating
expertise in growing cherry tomatoes and performing related data analysis, thereby improving systems toensure stable production of high-quality vegetables. As a result, the Company was able to prove, based on
its actual track record, that the harvest per unit area using multi-stage pot cultivation is 1.5 to 2.0 times
greater than that of traditional farming methods. In regard to environmental management using ICT systems,
the Company has boosted work efficiency through such means as automated control of agricultural equipment and automated irrigation. At the same time, the Company has amassed data on stabilizing the quality ofcultivation, enabling the technology to be used effectively as a systems product in the future.
In addition, the Company sells the tomatoes it produces as “IT vegetables” through local farmer’s markets,
restaurants, e-commerce and other channels, in conjunction with undertaking initiatives to promote sixthorder industrialization, including developing various processed products. In other areas, the Company willcontinue to advance initiatives closely tied to communities. One notable example is the Company’s production of souvenir gift-sets of “yellow tomatoes” from Hanamaki City, Iwate Prefecture, which were launched forsale in November 2013. These “yellow tomatoes” have been adopted as a commemorative product ofHanamaki City’s voluntary hometown tax system.

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Analysis of Operating Results and Financial Position

As the culmination of R&D activities over the past three years, the Company will expand the size of its
farming area from 462.8 m2 (140 tsubo) at present to a total area of 5,421 m2 (1,640 tsubo) from the next
fiscal year in tandem with driving growth in the sixth-order industrialization business for the production,­processing and sale of agricultural produce. Moreover, the Company will launch a franchise business that willconduct packaged sales of an entire system encompassing NCXX FARM’s features, namely its chemical soil
management based on a patented farming method plus digital management based on ICT systems,­augmented by a new product sales support system and a full purchase guarantee for all agricultural produce.
The Company will work to expand this franchise business into a new core business.
In the nursing care robotics business, which the Company entered as a domain that is poised to expand
the horizons of the M2M field, the Company has been conducting joint development of nursing care robots
with Vstone Co., Ltd., a robotics product manufacturer, since April 2014. At present, a prototype robot
focused on communicating with the elderly has been developed, and it is being introduced on a trial basis atpartner facilities. The prototype is being repeatedly improved based on the opinions and other feedback ofusers at these sites. The Company will continue to pursue development, with a view to developing a commercial product as early as possible.

[Operating Results]
Looking at consolidated business results, in the device business, the Company had planned to sell two new
product models in the automotive telematics field that would have contributed significantly to the Company’s
net sales from the beginning of the fiscal year under review, as well as the next fiscal year onward. However,net sales decreased sharply due to the reasons outlined below. Operating income also declined substantiallygiven the extremely high profit margins of these products.
In regard to sales of the OBD II-type Data Collection Unit, one of the new products, the Company hadplanned to undertake original design manufacturer (ODM) production for a company associated with a major
automotive firm and supply the product to this company. However, the Company had to conduct additional
development because the customer requested a change in the product’s specifications, resulting in majordelays in the sales plan. The sales plan was postponed further and ultimately brought to a halt due to thecustomer’s circumstances. For this reason, sales were approximately ¥1.9 billion below the sales forecast for
the fiscal year under review. Meanwhile, the Company has also started selling the OBD II-type Data Collection
Unit as a proprietary brand, and has already received many product inquiries from customers. Moreover, as aresult of the recent ODM development project, the Company has amassed the expertise needed to customize
the product in response to detailed requests from each customer. Accordingly, the Company will seek tomake up for the decline in sales in the fiscal year under review by capturing demand through sales of proprietary brand products and customized products in the next fiscal year.
Furthermore, in regard to the other new product, the Company had to conduct additional development
because the customer requested additional specifications. For this reason, the start of sales was delayed

significantly, and part of the sales in the fiscal year under review was postponed to the next fiscal year.
Consequently, sales of this product were about ¥1.3 billion lower than planned. For this product, theCompany has started sales from the fourth quarter of the fiscal year under review. Although there are someconcerns about opportunity losses due to the postponement of sales, the Company aims to fulfill all orders
received within the next fiscal year.
The Company has consolidated the business results of SJI, which became a consolidated subsidiary on
June 30, for the period from July to October. Efforts have been made to reduce costs at SJI since July, butthey did not contribute sufficiently to business results in the fiscal year under review. In addition, the Company
recorded amortization of goodwill of ¥164 million for the acquisition of shares, and non-operating expenses of¥283 million due to the foreign exchange translation effect of the yen-denominated liabilities of SJI (HongKong) Limited, an overseas subsidiary of SJI. Consequently, SJI posted an operating loss and an ordinary loss.
Looking at SJI’s business performance, SJI has already become profitable on a monthly basis, and isbriefing customers on the situation as necessary to minimize the impact on product orders of the designation of SJI Inc. stock as Securities Under Supervision by the Tokyo Stock Exchange. Thanks to SJI’s­continuing efforts to restore trust, SJI is expected to start contributing positively to business results from thenext fiscal year.
As a result of these efforts, consolidated net sales were ¥7,416 million, up 16.3% year on year. The­operating loss was ¥529 million, compared to operating income of ¥82 million in the previous fiscal year.
The ordinary loss was ¥810 million, compared to ordinary income of ¥692 million in the previous fiscal year.
Income before income taxes and minority interests was ¥23 million, compared with ¥742 million in the previous fiscal year, mainly reflecting the impact of an extraordinary gain on the sale of shares of the ­e-tabinet.com
Group. The bottom line was a net loss of ¥45 million, compared to net income of ¥630 million in the previous fiscal year.
Business performance by segment in the fiscal year under review was as follows:(Device Business)
Steady sales were posted for the Company’s mainstay USB data communication devices compatible withquad-band LTE, and USB data communication devices compatible with 3G, for uses such as surveillancecameras, business equipment, and car navigation systems. However, overall sales declined sharply due tothe postponement of sales plans for two new product models.
Moreover, SJI, which became a consolidated subsidiary in the fiscal year under review, restored profitability
on a monthly basis from September, owing to efforts to reduce costs since July. However, SJI recorded an
operating loss for the fiscal year under review. The Company recorded amortization of goodwill of ¥164
­million for the acquisition of SJI shares. As a result, a large operating loss was recorded in this segment.
NCXX Solutions and Care Dynamics Limited performed largely as planned. As a result, segment sales in
the fiscal year ended November 30, 2015 were ¥5,739 million, up 24.4% year on year. The segment loss was¥392 million, compared with segment income of ¥183 million in the previous fiscal year.

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Analysis of Operating Results and Financial Position(Internet Travel Business)(Net Assets)

Looking at segment sales in the fiscal year under review, sales from travel to Europe, which notably have highunit travel prices and good profit margins, were significantly affected by the protracted impact of a string ofterrorist attacks by Islamic State since the previous year. Indeed, major travel agencies have seen sales
decline by 30%. The e-tabinet.com Group was also impacted. It saw the cancellation of around ¥80 million in
the travel business, representing about 5% of annual sales. If orders that were not received are also included(i.e., the postponement of itineraries by customers who were considering travel, etc.), the impact is estimatedat about ¥200 million. The e-tabinet.com Group strove to improve earnings over and above the industry
trend, but was unable to make up for the drop in earnings. In terms of the sales mix, overseas travel businesssales were ¥1,547 million, centered on honeymoon packages to Italy, Spain and France, and domestic travelbusiness sales were ¥130 million. Segment sales thus totaled ¥1,677 million, down 4.8% year on year.
Meanwhile, continuing cost-cutting initiatives proved effective, leading to a 0.6 percentage point decline in the
selling, general and administrative expense ratio. Consequently, segment income increased 8.1% year on
year to ¥40 million.

Total net assets were ¥4,726 million, an increase of ¥1,175 million from a year earlier. The main contributing
factors were increases of ¥607 million in capital stock and ¥689 million in capital surplus due to the exerciseof convertible bonds with subscription rights to shares.

[Financial Position]
The Group’s financial position as of November 30, 2015 was as follows.

(Assets)
Total assets were ¥14,303 million as of November 30, 2015, an increase of ¥7,324 million from a year earlier.
The main contributing factors were increases of ¥1,685 million in notes and accounts receivable—trade,¥2,191 million in short-term loans receivable, ¥2,038 million in accounts receivable—other, ¥4,301 million in
goodwill, and ¥2,643 million in long-term accounts receivable—other, which were partly offset by a decreaseof ¥1,025 million in cash and deposits.

(Liabilities)
Total liabilities were ¥9,576 million, an increase of ¥6,148 million from a year earlier. The main contributing
factors were increases of ¥524 million in notes and accounts payable—trade, ¥484 million in short-termloans payable, ¥1,825 million in current portion of long-term loans payable, and ¥2,570 million in long-termloans payable.

[Cash Flows]
Cash and cash equivalents (“cash”) at November 30, 2015 were ¥2,905 million, a decrease of ¥1,025 million
from the previous fiscal year-end.
Cash flows during the fiscal year under review and analysis of the main components are as follows:(Cash Flows From Operating Activities)
Net cash used in operating activities was ¥1,090 million, compared with net cash provided by operating
activities of ¥1,448 million in the previous fiscal year. The primary reason was an increase in notes andaccounts receivable—trade of ¥220 million, the main factor reducing cash. This was partly offset by adecrease in accounts receivable—other of ¥1,103 million, the main factor increasing cash.

(Cash Flows From Investing Activities)
Net cash used in investing activities was ¥844 million, compared with ¥851 million in the previous fiscal year.
The main uses of cash were purchase of property, plant and equipment of ¥385 million, purchase of investments in subsidiaries resulting in change in scope of consolidation of ¥206 million, and increase in short-termloans receivable of ¥2,920 million.

(Cash Flows From Financing Activities)
Net cash provided by financing activities was ¥829 million, compared with ¥2,072 million in the previous fiscal
year. This was mainly due to proceeds from long-term loans payable of ¥2,583 million and proceeds fromissuance of bonds with subscription rights to shares of ¥1,157 million. These cash inflows were partly offset
by a net decrease in short-term loans payable of ¥1,905 million, and repayment of long-term loans payable of¥1,895 million.

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Analysis of Operating Results and Financial Position[Risk Information]
The Group presents the main factors that could pose a risk to its business development and related activities.
From the standpoint of actively disclosing information to investors, the Group discloses matters that could
have a material impact on investor judgment, even external factors beyond the control of the Company andmatters that may not necessarily be considered as business risks.
The items outlined below do not represent an exhaustive listing of all risks affecting investment in the
Company’s stock.
The items in the following section that concern the future were assessed by the Group based on­information available as of November 30, 2015. They are subject to uncertainties and may differ from
actual results.

(1) Business Characteristics
1. Group Driven by Research and Development
The Group primarily comprises companies driven by research and development (R&D), and its source ofcompetitiveness is the constant internal accumulation of new technology. If the Group has difficulty securing
and nurturing competent technicians, or suffers an outflow of competent human resources, this could have amaterial impact on the Group’s business and operating results.
As a policy, the Group adapts to technological and other advancements through its R&D activities.
However, the Group may not be able to adapt promptly to changes in the business environment if they werebrought about by new unforeseen technologies. Adapting to changes in the business environment may also
involve large sums of R&D expenses and other expenses. Such events could have a material impact on theGroup’s business and operating results.
2. Fabless Manufacturing
The Group outsources the manufacturing of mobile telecommunications devices and other products to alarge extent. As a result, business conditions at the outsourcing contractors, as well as the Group’s cultivation
and retention of outsourcing contractors and the Group’s in-house manufacturing capabilities, could have amaterial impact on the Group’s business and operating results.

3. Relationship with Telecommunications Service Providers
The Group’s core products are data telecommunications terminals and other mobile devices developed andmanufactured based on the specifications of telecommunications service providers. Furthermore, in thesetransactions the telecommunications service providers purchase all of the contracted output. As a result,changes in the content of the contracts, sales prices, and transaction terms with the telecommunications
service providers, as well as the success or failure of renewing the contracts, could have a material impact on
the Company’s business and operating results.
4. Changes in Demand for Mobile Devices
Data telecommunications terminals and other mobile devices developed and manufactured by the Group are
subject to severe product competition. As such, the trend in their demand has a tendency to change dramatically depending on such factors as technological advancement and the status of the product competition. The business is also characterized by the short turnaround in launching new products. As a policy, theGroup seeks to adapt to changes in demand with fabless manufacturing. However, the Group is currently
dependent on specific products because it develops and manufactures a limited variety of products.
Consequently, drastic changes in demand and falls in the sale price of mobile devices brought about byfactors such as business strategies of competitors and changing customer needs could have a material
impact on the Group’s business and operating results.

(2) Dependence on a Specific Business Partner
Dependence on a specific outsourcing contractor
In the year ended November 30, 2015, the Group outsourced the manufacturing of mobile devices to
TRICHEER TELECOMMUNICATION LTD. This represents a 74.3% monetary share of the Group’s­outsourced processes for mobile telecommunications devices and other products, making TRICHEERTELECOMMUNICATION LTD., a major outsourcing contractor for the Group. Consequently, changes in thebusiness transaction policy and manufacturing framework between the Group and this contractor could havea material impact on the Group’s business and operating results.

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Analysis of Operating Results and Financial Position(3) Risks Related to Protection of Intellectual Property Rights(6) Protection of Personal Information

The Group is driven by R&D and is the rightful owner of numerous intellectual properties that have been
submitted and registered for patent and registered with design rights and trademarks. The Group also strives
to make sure that the products it develops and manufactures do not infringe on the intellectual property rightsof third parties, and understands that there are no infringements at present. However, the possibility of infringing on the intellectual property rights of a third party in the future cannot be eliminated. Should the Groupinfringe on the intellectual property rights of a third party, it may experience legal action seeking damages, adecline in credibility, a deterioration in its corporate brand, and so forth, which could have a material impact
on the Group’s business and operating results. Conversely, should the intellectual property rights of theGroup suffer infringement by a third party, the Group would be obliged to divert management resources
toward taking the party to court and other defensive measures, which could have a material impact on theGroup’s business and operating results.

The Group holds the personal information and so forth of its customers in the conduct of its business ofselling and providing product support and so forth for mobile communication devices. To prevent theacquired personal information and so forth of customers from leaking externally, the Group takes ample
precautions such as limiting access to the personal information and strengthening the internal control system
by periodically conducting internal audits. However, should a leak in personal information occur, the Company
may be in violation of laws and regulations as well as its confidentiality agreements with client companies. As
a result, the Group may receive claims for damages from client companies and other customers as well as
experience a decline in its credibility with corporate clients and society, a deterioration in its corporate brandvalue, and so forth, which could have a material impact on the Group’s business and operating results.

(4) Quality Control
The Group must recall and repair the mobile devices it develops and manufactures in the event of a productmalfunction. Moreover, should an accident caused by defective products occur, the Company may be subject to claims for damages under the Product Liability Act.
In order to prevent such product defects and accidents from occurring, the Group has developed a quality
control system that also encompasses the management of outsourcing contractors and suppliers to improve
product safety and promote compliance with laws and regulations. In addition, the Group also subscribes to
product liability insurance as a contingency in the event of product accidents. However, should a serious
product defect or incident violating the Product Liability Act occur, the Group may have to bear product recall
and repair expenses and payment of damages, as well as experience a decline in its credibility with corporateclients and society, a deterioration in its corporate brand value, and so forth, which could have a material
impact on the Group’s business and operating results.

(5) Statutory Regulations on Telecommunications
The Group mainly develops products regulated by the Radio Act of Japan. As a result, trends regarding theRadio Act and other statutory regulations on telecommunications could have a material impact on theGroup’s business and operating results.

(7) Corporate Organization
In order to continue growing while strengthening the internal control system further at the same time, theGroup sees a need to bolster competent human resources, as well as further enhance the organization of its
administrative divisions, at each stage of business development. Consequently, should the Group be unable
to bolster human resources as required at each stage of business development, or suffer an outflow of competent human resources, this could have a material impact on the Group’s business and operating results.

(8) Relationship with the Parent Company
FISCO Ltd. (listed on the Tokyo Stock Exchange JASDAQ Growth) is the parent company of the Company,
holding 57.47% of the voting rights both directly and indirectly as of November 30, 2015. The Company
therefore belongs to a parent company group with FISCO at the center. As a result, changes in the parent
company group’s management policy and other circumstances could have a material impact on the
Company’s business and operating results.
Furthermore, SEQUEDGE INVESTMENT INTERNATIONAL LIMITED (unlisted), as the parent company of
FISCO Ltd., is the ultimate parent company of the Company, holding a majority of the voting rights indirectly.
Consequently, changes in the management policy and other circumstances of this company could also havea material impact on the Company’s business and operating results.

(9) Fluctuations in the Foreign Exchange Market
The Company subcontracts the manufacturing of some of its products to a Chinese original design manufacturer (ODM) to enhance price competitiveness and profitability. As a result, business transactions denominated in foreign currencies may be affected by fluctuations in the foreign exchange market. To reduce this
impact, the Company unwound a derivatives trade (foreign exchange margin trade) in the year ended
November 30, 2015, and will strive in the future to make use of instruments such as foreign exchange forward contracts, and to reconfigure its product portfolio. However, trading conditions and foreign exchange
market trends in the future could have a material impact on the Group’s business and operating results.

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Corporate Data

Consolidated Financial Statements[Consolidated Balance Sheets](Thousands of yen)(Thousands of yen)
Fiscal 2014 (As of
November 30, 2014)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable—trade
Work in process
Raw materials
Advance payments—trade
Deferred tax assets
Short-term loans receivable
Accounts receivable—other
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Total property, plant and equipment
Intangible assets¥3,930,484
665,867
484,430
3,086
251,682
17,668448,887
7,367
42,303–5,851,779

Fiscal 2015 (As of
November 30, 2015)¥ 2,905,141
2,351,650
661,180
10,763
185,857
1,019
2,640,314
2,046,360
141,575(2,889,846)
8,054,017

Goodwill
Software
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term accounts receivable—other
Long-term loans receivable
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
Please refer to page 37 for *1 and 2*1 315,654(219,696)
95,95828,954(20,826)
8,127
404,054(322,349)
81,705*1 151,737
337,529*1 518,244(233,966)
284,278
31,409(23,221)8,187
476,379(353,037)
123,341*1 298,994
714,801

Fiscal 2014 (As of
November 30, 2014)

Fiscal 2015 (As of
November 30, 2015)

587,853
48,145
3,566
639,565

4,889,085
89,845
8,620
4,987,552*2 12,758–
1,310
136,066–
150,134
1,127,229¥6,979,008*2 89,955
2,643,331
1,306,363
294,020(3,786,947)
546,723
6,249,077¥14,303,095

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Consolidated Financial Statements(Thousands of yen)(Thousands of yen)
Fiscal 2014 (As of
November 30, 2014)

Liabilities
Current liabilities
Notes and accounts payable—trade
Short-term loans payable
Current portion of bonds
Current portion of long-term loans payable
Accounts payable—otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Provision for product warranties
Provision for bonuses
Other
Total current liabilities
Noncurrent liabilities
Convertible bonds with subscription rights to shares
Long-term loans payable
Liability for retirement benefit
Deferred tax liabilities
Other
Total noncurrent liabilities
Total liabilities

Fiscal 2015 (As of
November 30, 2015)¥  109,723–
200,000*1 290,675
112,999
122,392
64,48967,959219,641
90,00021,180120,510
1,419,572¥   634,554
484,049
100,000*1 2,115,702
588,967
273,172
43,832
94,848
195,147
93,000153,253
227,003
5,003,532

1,215,000*1 735,836
3,407
26,492
27,6222,008,358
3,427,930

1,165,000*1 3,306,196
3,511
27,49670,9594,573,163
9,576,695

Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Total accumulated other comprehensive income
Subscription rights to shares
Minority interests
Total net assets
Total liabilities and net assets

Fiscal 2014 (As of
November 30, 2014)

Fiscal 2015 (As of
November 30, 2015)

1,212,248
1,018,821
1,147,022(35)
3,378,057

1,819,748
1,708,701
1,101,539(150,840)
4,479,148––
23,12023,120858
149,041
3,551,077¥6,979,008

(320)
14
104,081
103,775
30,185113,290
4,726,400¥14,303,095

34

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Corporate Data

Consolidated Financial Statements[Consolidated Statements of (Loss) / Income and Consolidated Statements ofComprehensive Income][Consolidated Statements of (Loss) / Income](Thousands of yen)(Thousands of yen)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating (loss) income
Non-operating income
Interest income
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Commissions paid
Stock issuance cost
Bond issuance cost
Donations
Other
Total non-operating expenses
Ordinary (loss) income
Extraordinary income
Gain on bargain purchase
Gain on sales of subsidiaries’ stocks
Settlement received
Gain on forgiveness of debt
Gain on investments in capital
Reversal of allowance for doubtful accounts
Other
Total extraordinary income

Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)¥6,375,427* 5,362,987
1,012,439*2, 3 930,098
82,341¥7,416,907* 6,412,185
1,004,721*2, 3 1,534,201(529,480)

11,757
638,688
7,791
658,238

41,270–20,22861,49921,902
–
2,855
5,546
5,784
11,500935
48,524
692,055

128,482
180,025––––
33,922
342,431(810,412)

56,822
–
–
–
–
–
2,105
58,927

20,571
432,106
271,745
137,743
36,35635,991–
934,5151

1

Extraordinary losses
Loss on retirement of property, plant and equipment
Loss on sales of subsidiaries’ stocks
Loss on valuation of investment securities
Impairment loss
Office transfer expenses
Provision of allowance for doubtful accounts
Settlement package
Other, net
Total extraordinary losses
Income before income taxes and minority interests
Income taxes
Income taxes—deferred
Total income taxes(Loss) income before minority interests
Minority interests in (loss) income
Net (loss) income

Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)*4 330
–
8,196
–
–
–
–
–
8,526
742,456
84,391
14,65999,051
643,405
13,093¥  630,311*4 6,904
14,938986*5 2,117
18,826
31,74625,00011
100,530
23,572
54,18816,16170,350(46,778)(1,294)¥  (45,483)

Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)¥643,405¥(46,778)––
11,007*1 11,007¥654,412(320)
1480,960*1 80,654¥ 33,876¥641,319
13,093¥ 35,170(1,294)

Please refer to page 37 for *1 and 2
Please refer to page 38 for *3 and 4[Consolidated Statements of Comprehensive Income](Thousands of yen)

Income (loss) before minority interests
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains on hedges
Foreign currency translation adjustments
Total other comprehensive income
Total comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests
Please refer to page 38 for *1

35

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Corporate Data

Consolidated Financial Statements[Consolidated Statements of Changes in Net Assets]
Fiscal 2014 (From December 1, 2013 to November 30, 2014)(Thousands of yen)
Shareholders’ equity

Balance at beginning of the fiscal year
Changes during the fiscal year
Issuance of new shares
Net income
Net changes of items other thanshareholders’ equity
Total changes during the fiscal year
Balance at end of the fiscal year

Capital stock

Capital surplus

Retainedearnings

Treasury
stock

Total
shareholders’equity¥1,068,146¥  875,405¥  516,710¥(35)¥2,460,227

144,102

143,415

143,415¥1,018,821

Foreign currencytranslation
adjustments

Total accumulated
othercomprehensive
incomeSubscription
rightsto shares

Minority
interests

Total
net assets¥12,113¥12,113¥  –¥192,827¥2,665,168

287,517630,311

630,311

144,102¥1,212,248

Accumulated other comprehensive income

630,311¥1,147,022

–
¥(35)

917,829¥3,378,057

287,517630,311
11,007
11,007¥23,120

11,007
11,007¥23,120

858
858
¥858

(43,786)(43,786)¥149,041(31,921)885,908¥3,551,077

Fiscal 2015 (From December 1, 2014 to November 30, 2015)(Thousands of yen)
Shareholders’ equity

Balance at beginning of the fiscal year
Changes during the fiscal year
Issuance of new shares
Net loss
Purchase of treasury stock
Net changes of items other thanshareholders’ equity
Total changes during the fiscal year
Balance at end of the fiscal year

Capital stock

Capital surplus

Retainedearnings

Treasury
stock

Total
shareholders’equity¥1,212,248¥1,018,821¥1,147,022¥     (35)

¥3,378,057

607,500

689,880(150,805)

1,297,380(45,483)(150,805)(150,805)¥(150,840)

1,101,091¥4,479,148(45,483)

607,500¥1,819,748

689,880¥1,708,701(45,483)¥1,101,539

Accumulated other comprehensive income
Valuationdifference on
available-forsale securities¥   –

Deferred gains
on hedges

Foreigncurrencytranslation
adjustments

Total accumulated
othercomprehensive
incomeSubscription
rights tosharesMinority
interests

Total
net assets¥ –¥ 23,120¥ 23,120¥   858¥149,041¥3,551,077
1,297,380(45,483)(150,805)

(320)
(320)
¥(320)

14
14¥14

80,96180,961¥104,081

80,65580,655¥103,775

29,327
29,327¥30,185(35,750)(35,750)¥113,290

74,232
1,175,323¥4,726,400

36

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Consolidated Financial Statements[Consolidated Statements of Cash Flows](Thousands of yen)

Cash flows from operating activities
Income before income taxes and minority interests
Depreciation and amortization
Amortization of goodwill
Gain on bargain purchases
Decrease in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase in retirement benefit obligations
Increase in provision for product warranties
Interest and dividend income
Interest expenses
Bond issuance cost
Stock issuance cost
Foreign exchange losses
Loss on retirement of property, plant and equipment
Loss on valuation of investment securities
Loss on sales of subsidiaries’ stocks(Increase) decrease in notes and accounts receivable—trade
Increase in inventories
Decrease (increase) in accounts receivable—other
Decrease in advance payments
Decrease in derivatives
Decrease in notes and accounts payable—trade(Decrease) increase in accounts payable—other(Decrease) increase in accrued expenses(Decrease) increase in accrued consumption taxes
Decrease in advances received
Impairment loss
Settlement package
Other, net
SubtotalInterest and dividends income received
Interest paid
Settlement package paid
Income taxes paid
Net cash (used in) provided by operating activities

Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)¥  742,456
27,65360,290(56,822)–(23,015)311
48,000(11,757)
21,902
5,784
5,546
2,838
330
8,196
–
39,366(51,612)(532)
253,952
411,137(128,955)
64,85075,43939,066(88,151)––
88,711
1,534,987
11,632(20,328)–(77,640)
1,448,650¥     23,572
55,538220,352(20,571)(226,107)
132,072103
3,000(41,270)
128,482
7,518
–
587
6,904
986
(417,846)(220,951)(114,508)
1,103,049
65,825–(346,753)(514,086)(536,801)(104,453)(37,283)
2,117
75,572(112,662)(867,612)
41,407(122,198)(75,572)(66,032)(1,090,008)(Thousands of yen)

Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of investments in subsidiaries resulting in change
in scope of consolidation
Purchase of investments in subsidiaries
Proceeds from sales of investments in subsidiaries
Increase in short-term loans receivableCollection of short-term loans receivableCollection of long-term loans receivable
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Payments for transfer of business
Other, net
Net cash used in investing activities
Cash flows from financing activities
Proceeds from collection of deposits
Net decrease in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of bonds
Payment for the redemption of bonds
Proceeds from issuance of bonds with subscription
rights to shares
Proceeds from issuance of common stock
Cash dividends paid
Purchase of treasury stock
Payments for installment payables—property and equipment
Net cash provided by financing activities
Effect of exchange rate change on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of the fiscal year
Cash and cash equivalents at end of the fiscal year
Please refer to page 40 for *1 and 2

Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)(134,335)(33,616)(385,053)(60,029)*2 (31,845)(162,336)–(443,475)
350,000–––(362,247)(33,277)(851,134)*2 (206,281)(89,275)
858,722(2,920,033)
28,432
1,990,838(87,217)
5,947–
19,029(844,920)–(152,500)
940,000(199,148)
200,000(200,000)

1,045,000(1,905,640)
2,583,000(1,895,951)–(100,000)

1,209,215
281,971––(6,873)2,072,665
7,036
2,677,218
1,253,266*1 ¥ 3,930,484

1,157,481–(1,238)(43,175)(10,008)
829,467
80,118(1,025,343)
3,930,484*1 ¥ 2,905,141

37

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Notes
(Notes to the Consolidated Financial Statements)
1. Scope of consolidation(1) Number of consolidated subsidiaries: 13(2) Names of consolidated subsidiaries: SJI Inc., NCXX Inc., NCXX Solutions Inc., Care Dynamics Limited,
星際富通(福建)網絡科技有限公司, e-tabinet.com, Web travel Co., Ltd.,SJI (Hong Kong) Limited, 聯迪恒星電子科技(上海)有限公司, 福建聯迪
資訊科技有限公司, SJ Asia Pacific Limited, Hua Shen Trading(International) Limited, Rapid Capital Holdings Limited
Among the abovementioned companies, NCXX Inc. was included in
the scope of consolidation from the fiscal year ended November 30,
2015, following its split-off and reincorporation as a subsidiary. From
the fiscal year ended November 30, 2015, SJI Inc. and its subsidiaries(SJI (Hong Kong) Limited, 聯迪恒星電子科技(上海)有限公司, 福建聯迪
資訊科技有限公司, SJ Asia Pacific Limited, Hua Shen Trading(International) Limited, Rapid Capital Holdings Limited) were includedin the scope of consolidation, following the conversion of these­companies into subsidiaries through the acquisition of SJI shares.
In the fiscal year ended November 30, 2015, Care Online Limited
was renamed as Care Dynamics Limited.
(3) Number of non-consolidated subsidiaries: 2(4) Name of non-consolidated subsidiary: Webtravel Asia & Pacific Pty Limited
ENPIX Corporation(Reasons for exclusion from the scope of consolidation)
Because total assets, net sales, net income (loss) (proportional to equity interest), retained earnings(­proportional to equity interest) and other metrics do not have a material impact on the consolidated­financial statements.

2. Application of the equity method(1) Number of non-consolidated subsidiaries and affiliates accounted for by the equity method: None(2) Name of non-consolidated subsidiary not accounted for by the equity method:
Webtravel Asia & Pacific Pty Limited
ENPIX Corporation(Reason for not applying the equity method)
Because total assets, net sales, net income (loss) (proportional to equity interest), retained earnings(­proportional to equity interest) and other metrics do not have a material impact on the consolidated­financial statements.

3. Fiscal year of consolidated subsidiaries
The companies with fiscal years that end on different dates than the end of the Company’s fiscal year are
as follows:Name

恒星信息(香港)有限公司

Fiscal year-end

SJ Asia Pacific Limited
Hua Shen Trading (International) Limited
Rapid Capital Holdings Limited
SJI Inc.

March 31*1
March 31*1
March 31*1
March 31*1
October 31*2

星際富通(福建)網絡科技有限公司

December 31*1

聯迪恒星電子科技(上海)有限公司

December 31*1

福建聯迪資訊科技有限公司

December 31*1

*1 Based on financial statements prepared using a provisional settlement of accounts in conformity with the regular settlement ofaccounts at the end of the Company’s fiscal year.
*2 The financial statements as of the fiscal year-end of the consolidated subsidiary are used. From the fiscal year ended November 30,
2015, the fiscal year-end has changed from March 31 to October 31, and differs from the end of the Company’s fiscal year.
However, the accounts have not been adjusted as there were no significant discrepancies upon the elimination of receivables,
obligations and transactions among the consolidated companies. If significant discrepancies arise due to a difference in the fiscal
year-end from the end of the Company’s fiscal year, the accounts are adjusted upon consolidation.

4. Accounting standards(1) Valuation standards and accounting treatment for important assets
1. Investment securities
Subsidiaries’ stocks and affiliates’ stocks
Stated at cost determined by the moving average method.
Investment securities—other
Without market quotations
Stated at cost determined by the moving average method.
2. Inventories
Valued at cost (book value is written down when profitability declines).
(i) Work in process
Specific identification method(ii) Raw materials
Moving average method

38

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Notes(2) Method for depreciating and amortizing important depreciable assets
1. Property, plant and equipment
Property, plant and equipment are depreciated using the declining-balance method. However, buildings,
excluding fixtures, acquired on or after April 1, 1998, are depreciated using the straight-line method.
The main estimated useful lives are as follows:   Buildings and structures:
3 to 39 years   Machinery, equipment and vehicles: 2 to 10 years   Tools, furniture and fixtures:
2 to 10 years
2. Intangible assets
In-house software is amortized by the straight-line method based on the estimated in-house useful life of 3
or 5 years.
In addition, software intended for commercial sale is amortized by the straight-line method based on theremaining estimated effective sales period of 3 years.

The liabilities related to retirement benefits and retirement benefit expenses are calculated for the lump-sum
retirement benefit plans of certain consolidated subsidiaries using the simplified method.

(5) Standards for translating important foreign currency denominated assets and liabilities
into Japanese yen
Foreign currency denominated receivables and obligations are translated into Japanese yen using the spot
exchange rate at the consolidated fiscal year-end, and translation gains and losses are charged to income.
The assets and liabilities, as well as the revenues and expenses, of foreign subsidiaries and other such­entities are translated into Japanese yen using the spot exchange rate at the fiscal year-end, and translation
gains and losses are recorded as foreign currency translation adjustments under net assets.

(6) Accounting methods for significant hedging

1. Provision for product warranties
A provision for product warranties is provided to cover product warranty costs that may be incurred after
products are sold. The provision for product warranties is determined on the basis of the estimated product warranty cost.
2. Provision for bonuses
A provision for bonuses is provided to cover the costs of bonuses paid to employees of domestic consolidated subsidiaries. The provision for bonuses is determined on the basis of the amount projected to be
paid in the fiscal year under review.
3. Allowance for doubtful accounts
In order to prepare for losses due to uncollectible receivables at certain consolidated subsidiaries, theCompany has recorded the estimated uncollectible amounts as an allowance for doubtful accounts.
For general receivables, an amount is recorded based on the historical default rate. For specific receivables for which there are concerns about collectability, an estimated amount deemed uncollectible isrecorded based on consideration of the collectability of each individual account.

a. Hedge accounting methods
The Company has primarily adopted the deferred hedge accounting method. The allocation method isapplied to foreign currency forward contracts that meet the requirements for allocation. Special treatment
is applied to interest rate swaps that meet the requirements for special treatment.
b. Hedge instrument and hedge targets
Hedge instruments: Interest rate swaps, foreign currency forward contracts
Hedge targets:
Borrowings, scheduled transactions denominated in foreign currencies
c. Hedging policy
Hedging is limited to the scope of target obligations in order to mitigate interest rate fluctuation risk, foreignexchange fluctuation risk, and improve the financial balance.
d. Method of evaluating hedging effectiveness
The Company compares cumulative market fluctuations in the hedge target and the hedge instrument
over the period from the start of hedging to the hedging effectiveness evaluation date, and arrives at anevaluation based on the amount of changes and other factors with respect to both the hedge target andhedge instrument.
The evaluation of hedging effectiveness is omitted for interest rate swaps and other instruments that
qualify for special treatment.

(4) Accounting method for retirement benefits(7) Method of calculating important revenues and expenses

The Company records liabilities related to retirement benefits to cover the costs of the retirement benefits of
employees, based on the projected retirement benefit obligations at the fiscal year-end. Retirement benefit
obligations are calculated using the simplified method.
Transitional obligations for retirement benefits are expensed in equal amounts over 15 years.
In addition, certain consolidated subsidiaries have joined multi-employer employee pension fund plans. These
plans have been accounted for in the same manner as defined contribution plans as it is not possible to reasonably calculate the amount of pension assets corresponding to any one of these subsidiaries’ contributions.

Basis for calculating sales and cost of sales on contracted development
Completed contract basis(3) Accounting for significant allowances(8) Method and period of amortization of goodwill
The Company reasonably estimates the period over which investment benefits will materialize, and amortizes
goodwill over this period applying the straight-line method.

39

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Notes(9) Scope of cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents in the consolidated statements of cash flows consist of cash on hand, demand
deposits, and short-term investments that are readily convertible to known amounts of cash and subject toinsignificant risk of change in value and due within three months from the date of acquisition.

(10) Other notes to the consolidated financial statements
1. Accounting method for consumption taxes
National and local consumption taxes are accounted for by the net tax method.
2. Consolidated taxation
The Company has adopted consolidated taxation.
3. Treatment of stock issuance costs
Stock issuance costs are fully expensed when they arise.
4. Treatment of corporate bond issuance costs
Stock issuance costs are fully expensed when they arise.

(New Accounting Standards Not Yet Applied)
Revised accounting standards for business combinations• Revised Accounting Standard for Business Combinations (ASBJ Statement No. 21, September 13, 2013)• Revised Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, September
13, 2013)• Revised Accounting Standard for Business Divestitures (ASBJ Statement No. 7, September 13, 2013)• Revised Accounting Standard for Earnings per Share (ASBJ Statement No. 2, September 13, 2013)• Revised Guidance on Accounting Standards for Business Combinations and Accounting Standard forBusiness Divestitures (ASBJ Guidance No. 10, September 13, 2013)• Revised Guidance on Accounting Standard for Earnings Per Share (ASBJ Guidance No. 4, September
13, 2013)(1) Outline
Revisions were made to the treatment of changes in a parent company’s shareholding in a subsidiary when
additional shares of the subsidiary are acquired while retaining control, the treatment of acquisition costs, thepresentation of net income and change of minority interests to non-controlling interests, and treatment of theestablishment of provisional accounting treatment.

(2) Date of adoption
The Company is scheduled to adopt the revised accounting standards from the beginning of the fiscal year
ending November 30, 2016.

In regard to the treatment of the establishment of provisional accounting treatment, the Company will apply
the treatment to business combinations undertaken on or after the beginning of the fiscal year ending
November 30, 2016.

(3) Impact of the adoption of the revised accounting standards
The Company is currently evaluating the impact of the revised accounting standards for business combinations on the consolidated financial statements.

(Change in Presentation)(Consolidated Balance Sheets)
Long-term loans receivable, which were previously included in other under noncurrent assets in the fiscal year
ended November 30, 2014, have been presented separately from the fiscal year ended November 30, 2015
due to its increased monetary importance. The consolidated financial statements in the fiscal year ended
November 30, 2014 have been restated to reflect this change in presentation method.
As a result, the ¥137,376 thousand presented as other under noncurrent assets on the consolidatedbalance sheet as of November 30, 2014 has been restated as long-term loans receivable of ¥1,310 thousand
and other of ¥136,066 thousand.

(Consolidated Balance Sheets)*1 Collateral assets and collateralized liabilities
Assets pledged as collateral are as follows.
(Thousands of yen)

Buildings
Land
Total

Fiscal 2014 (As of
November 30, 2014)

Fiscal 2015 (As of
November 30, 2015)¥ 26,533
151,097¥177,631¥ 58,174
295,714¥353,889

Note: In addition to the above, assets pledged as collateral include shares of subsidiaries eliminated upon consolidation.

Collateralized liabilities are as follows.
(Thousands of yen)

Current portion of long-term loans payable
Long-term loans payable

Fiscal 2014 (As of
November 30, 2014)

Fiscal 2015 (As of
November 30, 2015)¥ 52,013
195,306¥  160,204
1,182,942

40

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Notes

*2 Stakes in and exposures to non-consolidated subsidiaries and affiliates are as follows.

*3 Total research and development expenses included in selling, general and administrative expenses(Thousands of yen)

Investment securities (stocks)

Fiscal 2014 (As of
November 30, 2014)

Fiscal 2015 (As of
November 30, 2015)¥10,904¥15,739*3 Certain consolidated subsidiaries have entered into overdraft facility agreements with their banks in orderto ensure the efficient procurement of working capital.
The balance of unused loans based on these agreements as of November 30, 2015 was as follows.

(Thousands of yen)

Research and development expenses

Total amount of overdraft facilities and loan commitments
Outstanding loan balance
Difference

Fiscal 2015 (As of
November 30, 2015)

¥–
–
¥–

¥520,523
238,674¥281,848

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)¥1,406¥17,413*4 The components of loss on retirement of property, plant and equipment are as follows.
(Thousands of yen)(Thousands of yen)
Fiscal 2014 (As of
November 30, 2014)

Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)

¥312
–
17
–
–

¥    7
569
1,352
1,774
3,200

Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
SoftwareRestoration cost(Consolidated Statements of Income)*1 Book value write down of inventory held for sale under normal conditions due to decline in profitability(Thousands of yen)

Cost of sales

Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)¥11,458¥258,034*5 Impairment loss
Fiscal 2015 (From December 1, 2014 to November 30, 2015)
The Group recorded impairment losses on the following assets.
Use

Business assets*2 Major breakdown and amount of selling, general and administrative expenses are as follows.

Business assets

Type

Buildings andaccompanying facilities
Tools, furniture and fixtures

Location

Impairment loss
(Thousands of yen)

Hakata-ku, Fukuoka City

¥2,096

Hakata-ku, Fukuoka City

21

(Thousands of yen)

Director compensation
Salaries and allowances
Retirement benefit expenses
Commission fee
Depreciation
After-sales service expenses
Business consignment expenses
Amortization of goodwill

Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)¥ 78,456
278,855
4,834
71,302
13,75013,794
115,220
60,290¥ 93,927
394,690
8,700
175,358
28,0001,406
149,571
220,352(Background to recognizing impairment losses)
In regard to the above buildings and accompanying facilities, and tools, furniture and fixtures, the Company
reduced the carrying amount of these assets, which are not expected to be used following a business officerelocation, to the recoverable amounts, and recognized the amounts of the reductions as impairment losses
in the fiscal year under review.
(Asset grouping method)
The Group conducts asset grouping based on the minimum unit generating cash flows in a manner generally
independent of the cash flows of other assets and asset groups.
(Method of calculating the recoverable amount)
The Company uses the value in use to calculate the recoverable amount of business assets. However, therecoverable amount has been assessed as zero because there are no prospects for future cash flows.

41

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Notes

(Consolidated Statements of Comprehensive Income)(Consolidated Statements of Changes in Net Assets)*1 Reclassification adjustments and tax effects for other comprehensive income

Fiscal 2014 (From December 1, 2013 to November 30, 2014)
1 Type and number of shares issued and type and number of treasury stock(Thousands of yen)

Valuation difference on available-for-sale securities:
Amount incurred during the fiscal year
Reclassification adjustments
Before tax effect adjustment
Tax effect
Valuation difference on available-for-sale securities
Deferred gains (losses) on hedges:
Amount incurred during the fiscal year
Reclassification adjustments
Before tax effect adjustment
Tax effect
Deferred gains (losses) on hedges
Foreign currency translation adjustments:
Amount incurred during the fiscal year
Reclassification adjustments
Before tax effect adjustment
Tax effectForeign currency translation adjustments
Total other comprehensive income

Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)¥     –––––¥  (320)
–
(320)
–
(320)

–
–
–
–
–

14
–
14
–
14

11,007–
11,007–
11,007¥11,00780,960–80,960–80,960¥80,654(Number of shares)

Issued shares
Common shares(Note)
Total
Treasury stock
Common share
Total

Balance atthe beginning of
the fiscal year

Increaseduring the
fiscal year

Decreaseduring the
fiscal year

Balance atthe end of
the fiscal year

11,630,800
11,630,800

686,200
686,200––

12,317,000
12,317,000

79
79

–
–

–
–

79
79

Note: The increase in common shares was due to a capital increase through a third-party placement of shares conducted on
November 17, 2014.

2 Subscription rights to shares

Category

Components of subscription
rights to shares

Filing3rd Series of Unsecured
company Convertible Bonds with
(Parent
Subscription Rights tocompany) Shares(Note)
4th Series of Unsecured
Convertible Bonds with
Subscription Rights toShares(Note)
Subscription rights toshares as stock options
Total

Type ofsharesunderlying
thesubscription
rights tosharesNumber of shares underlying
the subscription rights to shares
Balanceat thebeginningof thefiscal year

Increaseduring the
fiscal year

Decreaseduring the
fiscal year

Balanceat theend of the
fiscal year

Balanceat theend of the
fiscal year
(Thousandsof yen)Commonshares–643,086–

643,086¥  –

Commonshares– 1,945,101– 1,945,101

–

  –

–

–

–

–

858

  –

–

–

–

–

¥858

Note: The increase during the fiscal year was due to the issuance of bonds. The lump-sum method was adopted for reporting purposes.

42

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Notes

3 Dividends(1) Dividends paid
Not applicable

2 Subscription rights to shares(2) Dividends with a record date that belongs to the fiscal year under review, but an effective date that falls in
the following fiscal year
Not applicable
Fiscal 2015 (From December 1, 2014 to November 30, 2015)
1 Type and number of shares issued and type and number of treasury stock(Number of shares)

Issued shares
Common shares(Note)
Total
Treasury stock
Common share
Total

Balance atthe beginning of
the fiscal year

Increaseduring the
fiscal year

Decreaseduring the
fiscal year

Balance atthe end of
the fiscal year

12,317,000
12,317,000

2,713,195
2,713,195––

15,030,195
15,030,195

79
79

72,43772,437––72,516
72,516

Notes: 1.	The increase in common shares was due to the exercise of subscription rights to shares (2,588,187 shares) and a shareexchange with NCXX Solutions Inc. (125,008 shares).
2.	The increase in treasury stock was mainly due to a share repurchase under the provisions of the Articles of Incorporation
pursuant to Article 165, Paragraph 2 of the Companies Act.

Category

Components of subscription
rights to shares

Type ofsharesunderlying
thesubscription
rights tosharesNumber of shares underlying
the subscription rights to shares
Balanceat thebeginningof thefiscal year

Increaseduring the
fiscal year

Filing company (Parent company)
643,086–
3rd Series of Unsecured Common
Convertible Bonds with shares
Subscription Rights toShares(Note 1)–
4th Series of Unsecured Common 1,945,101
Convertible Bonds with shares
Subscription Rights toShares(Note 1)–
1,069,788
5th Series of Unsecured Common
Convertible Bonds with shares
Subscription Rights toShares(Note 2)
Subscription rights to  –––shares as stock options
Consolidated subsidiaries
Common 20,833,300–
Subscription rights tosharesshares for the 1st
Series of ­Callable
Unsecured ­Convertible
Bonds with ­Subscription
Rights to Shares(Note 3)
Common– 114,284,000
5th Series ofshares­Subscription Rights
to Shares(Note 4)
Total
  –
–
–

Decreaseduring the
fiscal year

Balanceat theend of the
fiscal year

Balanceat the endof thefiscal year
(Thousandsof yen)643,086–¥     –

1,945,101–––

1,069,788–––

11,157

20,833,300––

34,286,000 79,998,000––– ¥30,185

Notes: 1.	The decreases in the 3rd Series of Unsecured Convertible Bonds with Subscription Rights to Shares and the 4th Series ofUnsecured Convertible Bonds with Subscription Rights to Shares were due to the exercise of subscription rights.
2.	The increase during fiscal 2015 was due to the issuance of bonds. The lump-sum method was adopted for reporting purposes.
3.	The decrease in the subscription rights to shares for the 1st Series of Callable Unsecured Convertible Bonds with
Subscription Rights to Shares was due to the redemption of bonds on June 30, 2015.
4.	The increase in the 5th Series of Subscription Rights to Shares of consolidated subsidiaries was due to the issuance ofsubscription rights to shares.
The decrease in the 5th Series of Subscription Rights to Shares of consolidated subsidiaries was due to the exercise ofsubscription rights to shares.

43

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Corporate Data

Notes

3 Dividends(1) Dividends paid
Not applicable(2) Dividends with a record date that belongs to the fiscal year under review, but an effective date that falls in
the following fiscal year
Not applicable(Consolidated Statements of Cash Flows)(Thousands of yen)
Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)¥3,930,484
3,930,484¥2,905,141
2,905,141*2 The main breakdown of assets and liabilities of subsidiaries that were consolidated by acquiring newshares in fiscal 2015
The breakdown of assets and liabilities of SJI Inc., at the point in time it was consolidated as a subsidiarythrough the acquisition of new shares, and the relationship between the acquisition price of SJI Inc. sharesand the net amount paid to acquire SJI Inc. are as follows.
(Thousands of yen)

Current assets
Noncurrent assets
Goodwill
Current liabilities
Noncurrent liabilities
Subscription rights to shares
Acquisition price of SJI Inc. shares
Cash and cash equivalents of SJI Inc.
Net: Amount paid to acquire SJI Inc.

(Lease Transactions)(As a lessee)*1 Cash and deposits in the consolidated balance sheets and cash and cash equivalents in the consolidated
statement of cash flows at the end of the fiscal year

Cash and deposits
Cash and cash equivalents*3 Important non-cash transactions
1. In fiscal 2015, the Company conducted a stock exchange to make NCXX Solutions Inc. a wholly owned
subsidiary and granted the common shares of the Company for this purpose. As a result, treasury stockincreased by ¥107,631 thousand on a consolidated basis.
2. In fiscal 2015, deposits were allocated to the repayment of the principal of short-term loans payable atcertain consolidated subsidiaries. As a result, short-term loans payable decreased by ¥400,000 thousand.

¥ 7,540,936
586,456
4,946,645(8,388,703)(1,123,928)(76,113)
3,485,293(3,279,012)¥   206,281

Lease transactions were omitted from record in these financial statements in conformity with Article 15-3 of
the Ordinance on Consolidated Financial Statements, due to the small amount per contract and immaterialityof the content.

(Financial Instruments)
1. Conditions of financial instruments(1) Policy regarding financial instruments
As a policy, the Group receives loans from banks and other FISCO Group companies primarily to procure
operating funds, in tandem with managing surplus funds in the form of short-term deposits, and investment
and loans to other FISCO Group companies. This is done in conformity with parent company FISCO Ltd.’sGroup financial policy of optimizing funding efficiency by adjusting the surplus and shortage of funds among
FISCO Group companies. Moreover, the policy of the Group is to use derivatives transactions for hedging
against the risk of interest rates and exchange rates on loans payable fluctuating, and to refrain from using
them for speculative purposes.

(2) Content, risk, and risk management of financial instruments
Notes and accounts receivable—trade are exposed to the credit risk of customers (risk of default by customers or counterparties). To mitigate this risk, relevant departments within each of the Group’s business divisions
strive to promptly detect and reduce the risk of trade receivables defaulting by keeping track of the due date
and amount of notes and accounts receivable by customer or counterparty.
The short-term loans the Company makes are for managing funds in conformity with the aforementioned
FISCO Group financial policy.
The Company’s investment securities are primarily unlisted stocks, and are therefore exposed to the risk ofprices fluctuating. To mitigate this risk, the Company periodically screens the assessed value and financial
position of the issuer of these financial instruments.
As a rule of thumb, trade payables, namely accounts payable—trade, and accounts payable—other havepayment dates that are due in one month or less. Furthermore, the loans the Company receives are primarily
for the purpose of procuring operating funds.

44

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Notes

Trade payables and loans payable are exposed to the liquidity risk involved in fund procurement (risk ofdefaulting on the payment date). To mitigate and manage this liquidity risk, the Company’s financial division
formulates a timely funding operation plan based on the reports it receives from the Group’s business divisions.
Certain variable interest rate loans the Company has received are exposed to the risk of interest rates
fluctuating. To mitigate this risk, the Company uses interest rate swaps to hedge against the risk of interest
payable on these loans fluctuating. For information regarding hedge accounting methods, hedge instruments
and hedge targets, hedging policy, and method of evaluating hedging effectiveness, please refer to “Notes to
the Consolidated Statements, 4 Accounting Standards, (6) Accounting methods for significant hedging.”
Certain accounts payable are procurement liabilities denominated in foreign currency in conjunction with
manufacturing consigned to an overseas ODM manufacturer. For this reason, the Company uses foreign
currency forward contracts and other arrangements to mitigate the risk of foreign exchange fluctuations
associated with those foreign currency-denominated procurement liabilities.
Derivative transactions are managed in accordance with internal rules that set forth transaction procedures
and transaction authority. The Company’s management division monitors information on transaction balances,
exchange rate movements, and gains or losses on derivative transactions on a daily or a monthly basis.

2. Fair value of financial instruments
The carrying amounts in the consolidated balance sheet, fair values, and their differences as of November 30,
2013 and 2014 are as follows. In addition, financial instruments, whose fair values cannot be reliably determined, are not included. (Please see “Note 2. Carrying amount of financial instruments whose fair values
cannot be reliably determined.”)Fiscal 2014 (As of November 30, 2014)(Thousands of yen)

(1) Cash and deposits(2) Notes and accounts receivable—trade(3) Short-term loans receivable
Total(1) Notes and accounts payable—trade(2) Accounts payable—other(3) Current portion of bonds(4) Convertible bonds with subscription
rights to shares(5) Long-term loans payable(including current portion)
Total

Carrying amount

Fair value

Difference¥3,930,484
665,867
448,887¥5,045,239¥  109,723
112,999
200,000¥3,930,484
665,867
448,887¥5,045,239¥  109,723
112,999
200,000

¥–
–
–
¥–
¥–
–
–

1,215,000

1,189,551(25,448)

1,026,511¥2,664,234

1,032,154¥2,644,428

5,642¥(19,805)

Notes: 1. Measurement of fair value of financial instruments, as well as investment securities and derivative transactions
Assets:(1) Cash and deposits, (2) Notes and accounts receivable—trade and (3) Short-term loans payable
Fair value is stated as the carrying amount because the fair value approximates the carrying amount given the short settlement periodof these instruments.
Liabilities(1) Notes and accounts payable—trade, (2) Accounts payable—other and (3) Current portion of bonds
Fair value is stated as the carrying amount because the fair value approximates the carrying amount given the short settlement periodof these instruments.
(4) Convertible bonds with subscription rights to shares
Fair value is measured as the present value of the total amount of bond principal and interest, discounted using an interest rateadjusted for the remaining maturity and the credit risk of the bonds.
(5) Long-term loans payable (including current portion)
Fair value is measured as the present value of the total amount of loan principal and interest, discounted using an interest rate thatwould apply to a similar new loan. However, certain long-term loans payable with variable interest rates are subject to special treatment
for interest rate swaps. (Please see “Derivative Transactions” below.) The fair value of these loans is measured by discounting the total
amount of the loan principal and interest, which are accounted for together with the respective interest rate swaps, using a reasonably
estimated interest rate that would apply to a similar new loan.
Derivative transactions
Interest rate swaps subject to special treatment are accounted for together with the long-term loans payable that are the hedge
targets. Therefore, the fair value of the interest rate swaps is included in the fair value of the respective long-term loans payable.

45

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Notes

Fiscal 2015 (As of November 30, 2015)(Thousands of yen)

(1) Cash and deposits(2) Notes and accounts receivable—trade
Allowance for doubtful accounts*1(3) Accounts receivable—other
Allowance for doubtful accounts*2(4) Short-term loans receivable
Allowance for doubtful accounts*3(5) Long-term loans receivable
Allowance for doubtful accounts*4(6) Long-term accounts receivable—other
Allowance for doubtful accounts*5
Total(1) Notes and accounts payable—trade(2) Short-term loans payable(3) Current portion of bonds(4) Accounts payable—other(5) Convertible bonds with subscription
rights to shares(6) Long-term loans payable(including current portion)
Total
Derivative transactions*6

Carrying amount

Fair value¥2,905,141
2,351,650
443,349
1,908,301
2,046,360
1,136,877
909,4832,619,274
1,201,863
1,417,410
1,327,403
1,326,503
900
2,643,331
2,481,484
161,847¥7,303,084¥  634,554
484,049
100,000
588,967¥2,905,141––
1,908,301––
909,483––
1,417,410
–
–
900
–
–
161,847¥7,303,084¥  634,554
484,049
100,000
588,967

1,165,000

1,138,966

5,421,898¥8,394,469¥     (497)

5,536,191¥8,482,727¥     (497)*1 Excludes the allowance for doubtful accounts recorded for notes and accounts receivable—trade.
*2 Excludes the allowance for doubtful accounts recorded for accounts receivable—other.
*3 Excludes the allowance for doubtful accounts recorded for short-term loans receivable.
*4 Excludes the allowance for doubtful accounts recorded for long-term loans receivable.
*5 Excludes the allowance for doubtful accounts recorded for long-term accounts receivable—other.
*6 Items that are net obligations are shown in parentheses.

Difference

¥

¥
¥

–
–
–
–
–
–
–
–
–
–
–

–
–
–
–
–
–
–
–
(26,034)

114,293¥ 88,259¥–Notes: 1. Measurement of fair value of financial instruments, as well as investment securities and derivative transactions
Assets:(1) Cash and deposits, (3) Accounts receivable—other and (4) Short-term loans receivable
Fair value is stated as the carrying amount because the fair value approximates the carrying amount given the short settlement periodof these instruments.
(2) Notes and accounts receivable—trade, (6) Long-term accounts receivable—other
Fair value is measured as the present value of the amount of receivables grouped together for a certain period, discounted using aninterest rate adjusted for the period until maturity and the credit risk of the receivables.
(5) Long-term loans receivable
The fair value of long-term loans receivable is measured as the present value of loans receivable classified into certain periods for eachcredit risk group used for credit management purposes, using the future cash flows as an appropriate indicator, discounted by aninterest rate to which the credit spread has been added. The current portion of long-term loans receivable expected to be collected
within one year and included in short-term loans receivable on the consolidated balance sheet, is included and shown in this item.
Liabilities(1) Notes and accounts payable—trade, (2) Short-term loans payable, (3) Current portion of bonds and (4) Accounts payable—other
Fair value is stated as the carrying amount because the fair value approximates the carrying amount given the short settlement periodof these instruments.
(5) Convertible bonds with subscription rights to shares
Fair value is measured as the present value of the total amount of bond principal and interest, discounted using an interest rateadjusted for the remaining maturity and the credit risk of the bonds.
(6) Long-term loans payable (including current portion)
Fair value is measured as the present value of the total amount of loan principal and interest, discounted using an interest rate thatwould apply to a similar new loan. However, certain long-term loans payable with variable interest rates are subject to special treatment
for interest rate swaps. (Please see “Derivative Transactions” below.) The fair value of these loans is measured by discounting the total
amount of the loan principal and interest, which are accounted for together with the respective interest rate swaps, using a reasonably
estimated interest rate that would apply to a similar new loan.
Derivative transactions
Interest rate swaps subject to special treatment are accounted for together with the long-term loans payable that are the hedge
targets. Therefore, the fair value of the interest rate swaps is included in the fair value of the respective long-term loans payable.
2. Carrying amount of financial instruments whose fair values cannot be reliably determined(Thousands of yen)

Unlisted stocks (investment securities)

Fiscal 2014 (As of
November 30, 2014)

Fiscal 2015 (As of
November 30, 2015)¥12,758¥94,790

Fair value is not disclosed because the fair value of these stocks cannot be reliably determined given that they do not have market
prices and their future cash flows cannot be estimated.

46

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3. Maturity analysis for financial assets and investment securities with contractual maturities after the fiscal year-end
Fiscal 2014 (As of November 30, 2014)

4. Scheduled repayments of loans, bonds, and other interest-bearing debt after the fiscal year-end
Fiscal 2014 (As of November 30, 2014)(Thousands of yen)

(1) Cash and deposits(2) Notes and accounts
receivable—trade(3) Short-term loans payable
Total

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years¥3,930,484

¥–

¥–

¥–

665,867
448,887¥5,045,239

–
–
¥–

–
–
¥–

–
–
¥–

Fiscal 2015 (As of November 30, 2015)(Thousands of yen)(1) Cash and deposits(2) Notes and accounts
receivable—trade*1(3) Accounts receivable—other*1(4) Short-term loans payable*1(5) Long-term loans receivable*1(6) Long-term accounts
receivable—other*1
Total

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years¥2,905,141

¥  –

¥–

¥–

1,908,301
909,483
1,417,410
–

–
–
–
900

–
–
–
–

–
–
–
–

161,847¥7,302,184

–
¥900

–
¥–

–
¥–

*1 The above table does not include accounts receivable with indefinite redemption schedules of ¥443,349 thousand (allowance for
doubtful accounts of ¥443,349 thousand), accounts receivable—other of ¥1,136,877 thousand (allowance for doubtful accounts of¥1,136,877 thousand), short-term loans receivable of ¥1,201,863 thousand (allowance for doubtful accounts of ¥1,201,863­thousand), long-term loans receivable of ¥1,326,503 thousand (allowance for doubtful accounts of ¥1,326,503 thousand) andlong-term accounts receivable—other of ¥2,481,484 thousand (allowance for doubtful accounts of ¥2,481,484 thousand.)(Thousands of yen)

Current portion ofbonds
Convertible bonds
with subscription
rights to shares
Long-term loans
payableAccounts payable—
installment
purchaseTotal

Due in one
year or lessDue after one
year throughtwo years

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

Due after
five years¥200,000

¥–

¥–

¥–

¥–

¥–

–

–

1,215,000–––

290,675

288,274

209,486

147,180

76,92913,967

6,442¥497,117

6,229¥294,504

6,327¥1,430,813

1,126¥148,306–¥76,929–¥13,967

Due in one
year or lessDue after one
year throughtwo years

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

Due after
five years¥  100,000

¥–

¥–

¥–

¥–

¥–

–

–

1,165,000–––

2,115,702

1,304,780

684,144426,707

747,786

142,776

484,049

–

–

–

–

–

337,300¥3,037,051–¥1,304,780–¥1,849,144–¥426,707–¥747,786–¥142,776

Fiscal 2015 (As of November 30, 2015)(Thousands of yen)

Current portion ofbonds
Convertible bonds
with subscription
rights to shares
Long-term loans
payableShort-term loans
payableAccounts
payable—other
Total

47

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(Investment Securities)
1. Investment securities—otherFiscal 2014 (As of November 30, 2014)
Unlisted investment securities (carrying amount ¥12,758 thousand) are not disclosed because the fair valueof these securities cannot be reliably determined given that they do not have market prices.
Fiscal 2015 (As of November 30, 2015)
Unlisted investment securities (carrying amount ¥79,051 thousand) are not disclosed because the fair valueof these securities cannot be reliably determined given that they do not have market prices.

2. Loss on valuation of investment securities
The Company recorded a ¥986 thousand loss on valuation of investment securities (¥1,853 thousand on
investment securities—other) in fiscal 2015.
Loss on valuation is recorded in full if the fair value at fiscal year-end falls more than 50% in relation to theacquisition price of investment securities. If the fall in fair value is around 30 to 50%, a loss on valuation
deemed appropriate is recorded in view of factors such as the likelihood of prices recovering.

(Derivative Transactions)Fiscal 2014 (As of November 30, 2014)
Derivative transactions to which hedge accounting is applied
Interest rate
(Thousands of yen)
Hedge accounting
methodType of transaction

Special treatment Interest rate swapof interest ratetransaction
swaps
Variable interest—
received
Fixed interest—paid

Main hedge target

Contract amountAmount of contract
exceeding one year

¥200,000¥121,662

Fair value

Long-term loans
payableNote:	Interest rate swaps to which the special treatment is applied are accounted for together with the long-term loans payabletargeted for hedging. Therefore, their fair value is included in the fair value of long-term loans payable.

(Note)

Fiscal 2015 (As of November 30, 2015)
Derivative transactions to which hedge accounting is applied
Interest rate
(Thousands of yen)
Hedge accounting
methodPrincipled
methodType of transaction

Interest rate swap
transaction
Variable interest—
received
Fixed interest—paid
Special treatment Interest rate swapof interest ratetransaction
swaps
Variable interest—
received
Fixed interest—paid

Main hedge target

Contract amountAmount of contract
exceeding one year¥  100,000¥–1,744,502¥1,478,974

Fair value

Long-term loans
payable(Note)¥(497)

Long-term loans
payable(Note)

Note:	Calculation of fair value(1) The transactions to which the principled method is applied are calculated based on quoted prices obtained from financial institution
counterparties.
(2) Interest rate swaps to which the special treatment is applied are accounted for together with the long-term loans payable targeted
for hedging. Therefore, their fair value is included in the fair value of long-term loans payable.

(Retirement Benefits)
1. Overview of retirement benefit plan
The Company has adopted an elective system in which employees can choose between a defined contribution pension plan and a prepaid retirement benefit plan as part of its defined contribution plan. In addition,certain consolidated subsidiaries have adopted a lump-sum payment plan and an employee pension fundplan as part of their defined retirement benefit plans, and an elective system in which employees can choose
between a defined contribution pension plan and a prepaid retirement benefit plan as part of their defined
contribution plans.
Certain consolidated subsidiaries have joined a multi-employer employee pension fund plan. These plans
have been accounted for in the same manner as defined contribution plans as it is not possible to reasonably
calculate the amount of pension assets corresponding to any one of these subsidiaries’ contributions.
Certain consolidated subsidiaries apply the simplified method for calculating the liability and expenses on
their lump-sum retirement benefit plans.

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2. Simplified-method defined benefit plan

4. Prepaid retirement benefit plan(1) Reconciliation of balance of simplified-method liability for retirement benefit at the
beginning and at the end of the fiscal year

Payments made to the prepaid retirement benefit plans of the Company and its consolidated subsidiaries
were ¥6,248 thousand in fiscal 2014 and ¥21,249 thousand in fiscal 2015.

(Thousands of yen)

Balance of liability for retirement benefit
at the beginning of the fiscal year
Retirement benefit expenses
Balance of liability for retirement benefit
at the end of the fiscal year

Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)¥3,096311¥3,407103¥3,407¥3,511(2) Reconciliation of balance of retirement benefit obligations and liability for retirement
benefit on the balance sheet at the end of the fiscal year
(Thousands of yen)

Retirement benefit obligations for non-funded plans
Unappropriated transitional obligations for retirement benefits
Net liability on balance sheet
Liability for retirement benefit
Net liability on balance sheet

Fiscal 2014 (As of
November 30, 2014)

Fiscal 2015 (As of
November 30, 2015)¥ 3,511
(103)
3,407

¥3,511
–
3,511

3,407
3,407

3,511
3,511

Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)

¥311

¥103

(3) Retirement benefit expenses(Thousands of yen)

Retirement benefit expenses based on the simplified method

3. Defined contribution pension plan
The required contributions to the defined contribution pension plans of the Company and its consolidated
subsidiaries were ¥23,796 thousand in fiscal 2014 and ¥44,595 thousand in fiscal 2015.

5. Multi-employer plans
The required contributions to the multi-employer employee pension fund plans, which are accounted for in
the same manner as defined contribution plans, was ¥53,680 thousand in fiscal 2015.
Matters concerning the multi-employer plans accounted for as retirement benefit expenses are as follows:(1) Recent funding position of multi-employer plans(Thousands of yen)
Fiscal 2014 (As of
November 30, 2014)

Fiscal 2015 (As of
November 30, 2015)¥–¥744,963,870–¥–

737,816,144¥  7,147,726

Amount of pension assets
Total amount of actuarial obligation and minimum actuarial
reserve based on pension fund finance calculations
Difference(2) Group’s share of contributions to the multi-employer plan
Fiscal 2014  –
Fiscal 2015   0.54% (From December 1, 2014 to November 30, 2015)(3) Supplemental explanation
Certain consolidated subsidiaries that have adopted multi-employer plans became newly consolidated subsidiaries in the fiscal year under review. Accordingly, the accounting periods of these subsidiaries differ fromthe fiscal year of NCXX Group Inc. (from December 1, 2014 to November 30, 2015).
Moreover, certain consolidated subsidiaries have joined multi-employer employee pension fund plans.
For some of these plans, the pension assets corresponding to any one of these subsidiaries’ contributions
cannot be reasonably calculated. Therefore, these plans are accounted for in the same manner as defined
contribution pension plans.

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(Stock Options)
1. Stock option expense item and amount(2) Stock option scale and change(Thousands of yen)
Fiscal 2014 (From
December 1, 2013 toNovember 30, 2014)

Stock compensation expense under selling,
general and administrative expenses

Fiscal 2015 (From
December 1, 2014 toNovember 30, 2015)¥858(1) Stock option details
11th Series of Subscription Rights to Shares

Type of share and number of stock options(Note)
Grant date
Vesting condition

Required service period
Exercise period
Note: Recorded based on the number of eligible shares(Shares)
11th Series ofSubscription Rights
to Shares¥9,536

2. Stock option details, scale and change

Status and number of option holders

Existing stock options as of fiscal 2015 (ended November 2015) are recorded herein on the basis of thenumber of eligible shares.
1. Number of stock options

NCXX Group Inc. directors: 5
NCXX Group Inc. employees: 3
NCXX Group Inc. subsidiary director: 1
Common shares: 100,000 shares
October 30, 2014
An option holder must remain in continued service
from the grant date (October 30, 2014) to the vestingdate (October 30, 2016)
October 30, 2014 to October 30, 2016
October 31, 2016 to October 30, 2020

Before vesting
As of November 30, 2014
GrantedForfeited
VestedOutstanding
After vesting
As of November 30, 2014
VestedExercised
Forfeited
Exercisable–
100,000––
100,000–––––

2. Unit price information(Yen)
11th Series ofSubscription
Rights to Shares

Exercise price
Average stock price at exercise
Fair value on the grant date

¥738
–
206

3. Method for estimating the fair value of stock options
There were no applicable matters with respect to stock options granted in the fiscal year under review.

4. Method for estimating the number of vested stock options
A method reflecting the actual number of forfeited stock options was adopted due to the fundamental­difficulty of reasonably estimating the actual number of stock options that will be forfeited in the future.

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(Tax-Effect Accounting)
1. Main factors giving rise to deferred tax assets and liabilities

2. Main items giving rise to material differences between the statutory income
tax rate and effective income tax rate
(Thousands of yen)

Deferred tax assets
Accrued enterprise taxes
Provision for product warranties
Provision for bonuses
Allowance for doubtful accounts
Liability for retirement benefit
Excess depreciation and amortization
Loss on valuation of telephone subscription right
Loss on valuation of inventories
Loss on valuation of subsidiaries’ stocks
Loss on valuation of investment securities
Loss on valuation of investments in capital of subsidiaries
and affiliates
Carry forwards of unused tax losses
OthersDeferred tax assets subtotal
Valuation allowance
Deferred tax assets total
Deferred tax liabilities
Goodwill adjustment
OthersDeferred tax liabilities total
Net deferred tax liabilities

Fiscal 2014 (As of
November 30, 2014)

Fiscal 2015 (As of
November 30, 2015)¥   7,118
32,076
10,901
–
1,214
5,606
995
14,60531,789–¥     4,962
30,74561,380734,576
1,132
6,119
1,240
4,096
62,123
3,075–
613,342
4,115
721,766(704,097)
17,668–1,267,675
56,0202,233,149(2,231,994)
1,154(26,492)–(26,492)¥  (8,823)(26,139)(1,356)(27,496)¥   (26,341)(%)

Statutory income tax rate
(Adjustments)
Entertainment and other non-deductible expenses
Amortization of goodwill
Dividends and other non-taxable income
Inhabitants taxes—per capita levy
Change in valuation allowance
Downward adjustment to the ending balance of deferred
tax assets due to changes in statutory tax rate
Carry forwards of unused tax losses and other deductions
Others
Effective income tax rate

Fiscal 2014 (As of
November 30, 2014)

Fiscal 2015 (As of
November 30, 2015)

38.00%

35.64%

0.6
1.7
(0.0)
0.6
(2.5)

36.8
22.7
0.0
35.7
(560.8)6.5(31.4)
(0.2)
13.3%

894.6
(166.3)0.0
298.4%

3. Restatement of deferred tax assets and deferred tax liabilities due tochanges in the corporate income tax rate, etc.
Following the promulgation of the “Act for Partial Revision of the Income Tax Act” (Act No. 9, 2015) and the“Act for Partial Revision of the Local Tax Act” (Act No. 2, 2015) on March 31, 2015, the corporate tax rate
and other tax rates will be reduced from fiscal years beginning on or after April 1, 2015.
In line with this change, the statutory income tax rate used to calculate deferred tax assets and deferred
tax liabilities for the fiscal year under review has been reduced from the previous 35.6% to 33.06% for tem­porary differences expected to reverse in the fiscal year beginning on December 1, 2015, and to 32.26% for
temporary ­differences expected to reverse in or after the fiscal year beginning on December 1, 2016.
This change in taxation rate will have a negligible impact.

(Asset Retirement Obligations)Fiscal 2014 (From December 1, 2013 to November 30, 2014)
Under its real estate lease contract, the Company and all of its consolidated subsidiaries except for one
company have obligations to restore their Head Office to its original condition when vacating it. However, thisasset retirement obligation cannot be estimated reasonably, given that the period of use of the relevant leaseasset remains unclear, and the Group has no plan for relocating. Consequently, no such asset retirement
obligation was recorded in this report.

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Fiscal 2015 (From December 1, 2014 to November 30, 2015)
In lieu of recording a liability for asset retirement obligations, one of the Company’s consolidated subsidiaries
has reasonably estimated the amount of a lease deposit for a real estate leasing agreement that is ultimately
expected to become uncollectible, and having set an estimated period of use of 10 years from the move-in
date, has recorded the cost of the lease deposit as an expense in each fiscal year.
Under real estate lease contracts, the Company and all consolidated subsidiaries except for one subsidiary
have obligations to restore their Head Office to its original condition when vacating it. However, this asset
retirement obligation cannot be estimated reasonably, given that the period of use of the relevant lease asset
remains unclear, and the Group has no plan for relocating. Consequently, no such asset retirement obligation
was recorded in this report.

(Real Estate Leasing)
Fiscal 2015 (From December 1, 2014 to November 30, 2015)
Certain consolidated subsidiaries hold idle real estate in Shizuoka Prefecture. Certain other consolidated
subsidiaries hold idle real estate in Tochigi Prefecture, and these consolidated subsidiaries have also acquired
new properties in Fukuoka Prefecture and other regions and are using them as offices and for other purposes.
However, since some of these properties are rented, real estate is treated as including the portion used asreal estate for rent. Rental income (loss) related to real estate including the portion used as real estate for rent
during the fiscal year under review was ¥4 million (Rental income is recorded under non-operating income,while main rental expenses are recorded under non-operating expenses). The carrying amount of idle realestate and real estate including the portion used as real estate for rent, as well as the main changes, fairvalue at the fiscal year-end, and the method of calculating fair value, are shown as follows:(Thousands of yen)
Carrying amount

Idle real estate
Real estate including the portion
used as real estate for rent

(Segment Information)[Segment Information]
1. Overview of reportable segments
The Company’s reportable segments are components of the Company for which separate financial information is available. They are periodically examined by the Board of Directors for the purpose of deciding on
resource allocation and assessing business results.
The Group formulates comprehensive strategies at the Company’s Head Office and is expanding businessactivities related to the products and services it handles. The Group’s businesses are made up of segments
classified based on products and services, as follows.
Please note that the systems development business operated by SJI Inc. has been included in the device
business from the fiscal year ended November 30, 2015.
Reportable segment

Device business

Internet travel business

Description of business

Development and sale of communication devices applying various wireless systems
Development and sale of PLC modems
Provision of systems solutions and maintenance services incidental to the above
Systems development
Cloud services
ASP services for nursing care centers
Purchasing and sale of mobile communication-related products in China
Operation of e-marketplace for travel-related products
Travel agency services for companies and individuals
Travel estimate services
Travel concierge services

Balance at
December 1, 2014

Change during
fiscal 2015

Balance atNovember 30, 2015

Fair value at
fiscal year-end¥–¥  2,000¥  2,000¥  2,010

2. Calculation method for amounts of net sales, income and loss, assets andliabilities, and other items by reportable segment–

317,443

317,443

317,443

The accounting policies and methods for reportable segments are the same as those shown in the notes tothe consolidated financial statements.
Segment income for reportable segments is based on operating income.

Notes: 1. The carrying amount represents the acquisition cost less cumulative depreciation.
2.	Method of calculating fair value
For certain idle real estate, there have been no material changes in the indicators believed to appropriately reflect market
prices from the time of the most recent appraisal, and the changes have been negligible. As a result, fair value has been
determined by recent principled calculations.
For other idle real estate and real estate including the portion used as real estate for rent, the carrying amount is stated as
the fair value because the real estate was newly purchased during the fiscal year under review, and any changes in fair value
are thus deemed to be negligible.

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3. Information on net sales, income and loss, assets and liabilities, and otheritems by reportable segment

Fiscal 2015 (From December 1, 2013 to November 30, 2015)(Thousands of yen)

Fiscal 2014 (From December 1, 2013 to November 30, 2014)

Reportable segment(Thousands of yen)

Reportable segment

Net sales
Sales to third parties
Inter-segment sales
and transfers
Total
Segment income
Segment assets
Other items
Depreciation andamortization
Amortization of
goodwill
Increase in property,
plant and equipment
and intangible assets

Device business

Internet travelbusiness

Total

Adjustments

Consolidated¥4,613,375¥1,762,051¥6,375,427¥–¥6,375,427–
4,613,375
183,881
1,946,745–
1,762,051
37,540512,758–
6,375,427
221,4222,459,503––(139,080)
4,519,504–
6,375,427
82,341
6,979,008

22,674704

23,3784,274

27,65332,442

27,84760,290–60,29045,871–45,871

127,476

173,348

Notes: 1. Segment income is adjusted to operating income in the consolidated statements of income. Adjustments for segment
income mainly represent general and administration expenses that are not allocated to reportable segments.
2. Adjustments for segment assets represent corporate assets that are not allocated to reportable segments.
3. Adjustments for depreciation and amortization represent depreciation and amortization related to corporate assets.
4. Increase in property, plant and equipment and intangible assets mainly represents the increase in corporate assets.

Net sales
Sales to third parties
Inter-segment sales
and transfers
Total
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of
goodwill
Increase in property,
plant and equipment
and intangible assets

Device business

Internet travelbusiness

Total

Adjustments

Consolidated¥5,739,194¥1,677,713¥7,416,907¥–¥ 7,416,907–
5,739,194(392,904)
8,221,674

815
1,678,528
40,581
464,863815
7,417,722(352,322)
8,686,538

(815)
(815)
(177,158)
5,616,557–
7,416,907(529,480)
14,303,095

35,728378

36,106

19,431

55,538186,831

33,520220,352–

220,352

26,761–

26,761

367,076

393,837

Notes: 1. Segment income is adjusted to operating income in the consolidated statements of income. Adjustments for segment
income mainly represent general and administration expenses that are not allocated to reportable segments.
2. Adjustments for segment assets represent corporate assets that are not allocated to reportable segments.
3. Adjustments for depreciation and amortization represent depreciation and amortization related to corporate assets.
4. Increase in property, plant and equipment and intangible assets mainly represent the increase in ­corporate assets.

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Notes

Fiscal 2014 (From December 1, 2013 to November 30, 2014)[Information on Impairment Loss on Property, Plant and Equipment by
Reportable Segment]

Disclosure is omitted as the same information is shown in segment information.

Fiscal 2014 (From December 1, 2013 to November 30, 2014)
Not applicable

2. Information by region

Fiscal 2015 (From December 1, 2014 to November 30, 2015)[Related Information]
1. Information by products and services(1) Net sales(Thousands of yen)Disclosure is omitted as sales to external customers in Japan accounts for over 90% of net sales in the consolidated statements of income.
Impairment loss

Device business

Internet
travel businessCorporate andelimination

Total¥2,117¥–¥–¥2,117(2) Property, plant and equipment
Disclosure is omitted as the amount of property, plant and equipment in Japan accounts for over 90% of
property, plant and equipment in the consolidated balance sheets.

[Information on Amortized Amount and Unamortized Balance of Goodwill by
Reportable Segment]
Fiscal 2014 (From December 1, 2013 to November 30, 2014)

3. Information by major customer(Thousands of yen)(Thousands of yen)
Name

KAGA ELECTRONICS CO., LTD.
SEIRYO ELECTRIC CORPORATIONNet sales¥1,069,297
705,642

Segment

Device Business
Device Business

Fiscal 2015 (From December 1, 2014 to November 30, 2015)

1. Information by products and services

Amortized amountUnamortized balance

Device business

Internet
travel businessCorporate andelimination

Total¥ 32,442
341,166¥ 27,847
246,687¥––¥ 60,290
587,853

Fiscal 2015 (From December 1, 2014 to November 30, 2015)(Thousands of yen)Disclosure is omitted as the same information is shown in segment information.

2. Information by region(1) Net sales
Disclosure is omitted as sales to external customers in Japan accounts for over 90% of net sales in the consolidated statements of income.

(2) Property, plant and equipment
Disclosure is omitted as the amount of property, plant and equipment in Japan accounts for over 90% of
property, plant and equipment in the consolidated balance sheets.

3. Information by major customer
Disclosure of information by major customer is omitted as sales to major customers account for less than
10% of consolidated net sales.

Amortized amountUnamortized balance

Device business

Internet
travel businessCorporate andelimination

Total¥  186,831
4,659,359¥ 33,520
229,726¥––¥  220,352
4,889,085[Information on Gain on Bargain Purchase by Reportable Segment]
Fiscal 2014 (From December 1, 2013 to November 30, 2014)A ¥56,822 thousand gain on bargain purchase was recorded as extraordinary income subsequent to theacquisition of additional shares in a consolidated subsidiary in the Internet travel business.
Fiscal 2015 (From December 1, 2014 to November 30, 2015)A ¥20,571 thousand gain on bargain purchase was recorded as extraordinary income subsequent to theacquisition of additional shares in a consolidated subsidiary in the device business.

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[Information on Related Parties]
1. Transactions with related parties(1) Transactions between the filing company and related parties(a) Parent company of the filing company and major shareholders (only companies and other such entities)
Fiscal 2014 (From December 1, 2013 to November 30, 2014)

Type

Parent company

Name of company
or other entity

FISCO Ltd.

Address

Minato-ku, Tokyo

Paid-in capitalor investment(Millions of yen)

¥1,210Description of businessor occupation

Percentage ofvoting rights held (%)

Relationshipwith related party

Information­services­business,consulting
business

Direct (33.11)
Indirect (24.36)

Concurrent
officers

Nature of transaction

Funds lentInterest received
Convertible bonds with
subscription rights toshares placed
Interest paid

Amount oftransaction(Thousands of yen)

¥150,000
4,126
600,000

3,282

Item

Short-term loans
receivable
Accounts
receivable—other
Convertible bonds
with subscription
rights to shares
Accounts
payable—otherEnding balance(Thousands of yen)

¥150,000
56
600,000

3,282

Fiscal 2015 (From December 1, 2014 to November 30, 2015)

Type

Parent company

Name of company
or other entity

FISCO Ltd.

Address

Minato-ku, Tokyo

Paid-in capitalor investment(Millions of yen)

¥1,210Description of businessor occupation

Percentage ofvoting rights held (%)

Relationshipwith related party

Information­services­business,consulting
business

Direct (34.58)
Indirect (19.95)

Concurrent
officers

Nature of transaction

Funds lent

Amount oftransaction(Thousands of yen)¥  100,000

Loans recovered
Interest received
Convertible bonds with
subscription rights toshares exercisedInterest on bonds

200,000
3,339
600,000

Debt guarantees received

1,256,343

901

Item

Ending balance(Thousands of yen)

Short-term loans
receivable
  –
  –
  –

¥50,000

Accounts
payable—other
  –

4,183

Notes: 1. Consumption taxes are not included in the amounts of transactions and the ending balances.
2. Transaction terms and policy on deciding transaction terms and conditions
		 (1) The interest rate on funds lent is determined reasonably based on prevailing market interest rates. The funds lent are unsecured.
		 (2) The exercise of convertible bonds with subscription rights to shares was due to the exercise of subscription rights to shares (200) placed on November 17, 2014, and subscription rights to shares (4) placed on February 7, 2014.
		 (3) The debt guarantees received are debt guarantees for bank loans. A guarantee fee is not paid.

–
–
–

–

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Notes(b) Companies and other entities with the same parent company as the filing company and subsidiaries of other related companies of the filing company
Fiscal 2014 (From December 1, 2013 to November 30, 2014)
Not applicable.
Fiscal 2015 (From December 1, 2014 to November 30, 2015)
Name of company
or other entity

Type

Companies withthe same parent
company as thefiling company

Versatile Inc.

Chanty Co., Ltd.

FISCO IR Ltd.

Head office location

Paid-in capitalor investment(Millions of yen)

Minato-ku, Tokyo¥95

Minato-ku, Tokyo

Minato-ku, Tokyo

32

89

Description of businessor occupation

Consulting business

Advertising agency
business

Information services
business

Percentage ofvoting rights held (%)

Relationshipwith related party   –Concurrent
officers

   –

   –

Concurrent
officers

Concurrent
officers

Nature of transaction

Funds lent

Amount oftransaction(Thousands of yen)

¥900,000Interest received

10,767

Funds lent

260,000

Funds recovered
Interest received
Funds lentFunds recovered
Interest received

100,000
2,948
160,000
160,000
1,197

Item

Short-term loans
receivable
Accounts
receivable—other
Short-term loans
receivable
   –
   –
   –
   –
   –

Ending balance(Thousands of yen)

¥900,000
10,767160,000–––––

Notes: 1. Consumption taxes are not included in the amounts of transactions and the ending balances.
2.	Transaction terms and policy on deciding transaction terms and conditions
The interest rate on funds lent is determined reasonably based on prevailing market interest rates. The funds lent are unsecured.

(c) Officers of filing company, major shareholders and other persons (Individuals only)
Fiscal 2014 (From December 1, 2013 to November 30, 2014)
Type

Officer and his relatives

Name of company
or other entity

Tsukasa Akiyama

Description of businessor occupation

Officer

Percentage ofvoting rights held (%)   –

Relationshipwith related party

Representative Director
and President of
NCXX Group Inc.

Nature of transaction

Debt guarantee
received

Amount of transaction(Thousands of yen)

Item

Ending balance(Thousands of yen)

¥53,987     –¥–

Amount of transaction(Thousands of yen)

Item

Ending balance(Thousands of yen)

¥45,316     –¥–

Fiscal 2015 (From December 1, 2014 to November 30, 2015)
Type

Officer and his relatives

Name of company
or other entity

Tsukasa Akiyama

Description of businessor occupation

Officer

Notes: 1. Consumption taxes are not included in the amounts of transactions and the ending balances.
2.	Transaction terms and policy on deciding transaction terms and conditions
The debt guarantees received are debt guarantees for bank loans. A guarantee fee is not paid.

Percentage ofvoting rights held (%)   –

Relationshipwith related party

Representative Director
and President of
NCXX Group Inc.

Nature of transaction

Debt guarantee
received

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(2) Transactions between the filing company and its consolidated subsidiaries and related parties(a) Parent company of the filing company and major shareholders (only companies and other such entities)
Fiscal 2014 (From December 1, 2013 to November 30, 2014)

Type

Parent company

Name of company
or other entity

FISCO Ltd.

Head office location

Paid-in capitalor investment(Millions of yen)

Minato-ku, Tokyo¥1,210Description of businessor occupation

Percentage ofvoting rights held (%)

Relationshipwith related party

Information services
business, consulting
business(Ownership ratio)
Direct (33.11)
Indirect (24.36)

Concurrent
officers

Description of businessor occupation

Percentage ofvoting rights held (%)

Relationshipwith related party

Information services
business, consulting
business(Ownership ratio)
Direct (34.58)
Indirect (19.95)

Concurrent
officers

Nature of transaction

Amount oftransaction(Thousands of yen)Funds recovered
Funds lentInterest received¥200,000
200,000
5,501

Nature of transaction

Amount oftransaction(Thousands of yen)

Item

Short-term loans
receivable
Accounts
receivable—otherEnding balance(Thousands of yen)

¥200,000–

Fiscal 2015 (From December 1, 2014 to November 30, 2015)

Type

Parent company

Name of company
or other entity

FISCO Ltd.

Head office location

Paid-in capitalor investment(Millions of yen)

Minato-ku, Tokyo¥1,210Funds lent¥–Interest received

3,999

Item

Short-term loans
receivable   –Ending balance(Thousands of yen)

¥200,000–

Notes: 1. Consumption taxes are not included in the amounts of transactions and the ending balances.
2.	Transaction terms and policy on deciding transaction terms and conditions
The interest rate on funds lent is determined reasonably based on prevailing market interest rates. The funds lent are unsecured.

(b) Companies and other entities with the same parent company as the filing company and subsidiaries of other related companies of the filing company
Fiscal 2014 (From December 1, 2013 to November 30, 2014)

Type

Companies withthe same parent
company

Name of company
or other entity

Head office location

Paid-in capitalor investment(Millions of yen)

FISCO Capital Ltd.

Minato-ku, Tokyo¥33

Fiscal 2015 (From December 1, 2014 to November 30, 2015)
Not applicable.

Description of businessor occupation

Consulting business

Percentage ofvoting rights held (%)

Relationshipwith related party

   –

   –

Nature of transaction

Funds lentInterest received

Amount oftransaction(Thousands of yen)

¥80,000
1,891

Item

Short-term loans
receivable
Accounts
receivable—otherEnding balance(Thousands of yen)

¥80,000
131

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Notes(c) Officers of the filing company, major shareholders and other persons (Individuals only)
Fiscal 2014 (From December 1, 2013 to November 30, 2014)
Name of company
or other entity

Type

Officer of a significant­subsidiary and his
relatives

Satoshi Ishii

Description of businessor occupation

Officer

Percentage ofvoting rights held (%)    –Relationshipwith related party

Nature of transaction

Representative Directorof a subsidiary

Debt guarantee
received

Amount oftransaction(Thousands of yen)

¥27,320

Ending balance(Thousands of yen)

Item     –¥–

Fiscal 2015 (From December 1, 2014 to November 30, 2015)

Type

Name of company
or other entity

A company and its CN Japan Inc.
subsidiary in whicha majority of voting
rights is owned by
an officer of theparent company
and his relatives,
based on their own
calculation

Head office location

Paid-in capitalor investment(Millions of yen)

Minato-ku, Tokyo¥35

Description of businessor occupation

International trading,manufacture andsale of apparel andaccessories

Percentage ofvoting rights held (%)

Relationshipwith related party   –Real estateleasingNature of transaction

Head office rent

Notes: 1. Consumption taxes are not included in the amounts of transactions and the ending balances.
2.	Transaction terms and policy on deciding transaction terms and conditions
Head office rent is based on a property subleasing agreement in which the parent company is the sub-lessor. The rent is the amount paid directly to the landlord under the original contract.

2. Notes on the parent company or significant related companies(1) Parent company information
1. FISCO Ltd. (Listed on the Tokyo Stock Exchange JASDAQ Growth Market)
2. SEQUEDGE INVESTMENT INTERNATIONAL LIMITED (Unlisted)(2) Summary financial information on significant related companies
Not applicable

Amount oftransaction(Thousands of yen)

¥16,051   

Item

Ending balance(Thousands of yen)

–

¥–

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(Business Combination)
I Business Combination Through Acquisition
1. Overview of business combination

2. Period of business results of the acquisition target includedin the consolidated financial statements
July 1, 2015 to October 31, 2015

(1) Name and business of acquired company

3. Acquisition cost of acquisition target and components

Name of target: SJI Inc.
Business:	Systems development business(Thousands of yen)(2) Main reason for the business combination
The purpose of the business combination is to secure the software development capabilities needed to drive
the Company’s growth, and to increase the sales of both companies and raise business efficiency. Throughthe sharing of SJI’s customer accounts and expertise, the two companies will conduct activities such as
coordinating sales promotions using their respective sales bases; joint marketing of new products and joint
research and development in software and other areas; and personnel exchanges.

(3) Business combination dateDirect acquisition expenses
Acquisition cost

Cash and other payments
Monetary claims
Advisory and other fees

¥1,969,998
1,500,000
15,295¥3,485,293

4. Amount of goodwill, reason for goodwill, amortization method andamortization period(1) Amount of goodwill

June 30, 2015

¥4,946,645 thousand(4) Statutory basis of business combination(2) Reason for goodwill

Share acquisition through the underwriting of a third-party placement of shares

Goodwill consists mainly of the premium expected from future business expansion of the device business at
SJI Inc.

(5) Name of company after business combination
No change(3) Amortization method and amortization period
Straight line method over 10 years(6) Ratio of voting rights acquired(%)

Voting rights owned before the business combination
Voting rights acquired on the business combination dateVoting rights after the acquisition

Consideration for
acquisition

–
47.79
47.79

(7) Other matters concerning the transaction
In order to improve the financial position of SJI Inc., the Company has underwritten part of the capitalincrease through the third-party placement of shares by SJI Inc. by the debt-equity swap method.

5. Amount of assets and liabilities transferred on the business combination
date and the main components(Thousands of yen)

Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities¥7,540,936
586,456¥8,127,393¥8,388,703
1,123,928¥9,512,632

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Notes

6. Estimated impact on NCXX Group Inc.’s consolidated statement of income
for fiscal 2015, and the estimation method, assuming the businesscombination was completed on December 1, 2014
(Millions of yen)

Net sales
Operating income
Ordinary income
Income before income taxes
and minority interests
Net income¥ 7,470536
431
11,024
9,238(Estimation Method)
The estimated impact is calculated by subtracting information on sales and profits in the consolidated­statements of income of the Company from the information on sales and profits calculated on the assumption that the business combination was completed on December 1, 2014. Notes on this business combination have not received accounting audit certification.

II Transactions with Entities under Common Control
1. Company split
On January 26, 2015, the Board of Directors of NCXX resolved to shift to a holding company structure by
conducting an incorporation-type company split, effective April 1, 2015, and proceeded to do so on thisbasis. An overview of the resolution follows.

(1) Purpose of the company split
The Company is strengthening and expanding its entry into the so-called machine to machine (M2M) market,
a growth market in which various means of information communication technology (ICT) are applied todevelop various ICT systems and configurations required for interfacing machines with other machines. This
is in contrast to the standalone smartphone and mobile telecommunication market, which is already in theprocess of saturating. In consideration of the above, the Company’s policy had been to drive growth bysecuring R&D funds for investment in select markets, while continuing to maintain a stable earnings base.
However, amid major upheavals in the foreign exchange market recently, the Company concluded it was
important to build an efficiently competitive sales framework, capable of responding rapidly to changes in themarket, and decided to shift to a holding company structure. This will be done by implementing a company
split in which a newly established NCXX Inc. will succeed the Company’s device business (excluding the
agricultural ICT business). The Company plans to remain in charge of growing the nursing care robotics
business and agriculture business after being renamed NCXX Group Inc., the holding company of the Group.

By transitioning to a holding company, the Company plans to specialize in managing the Group. Meanwhile,the new structure will enable it to delegate a significant degree of business execution authority to the operatingcompanies. This can be expected to optimize Group management while enhancing the business autonomyof the operating companies and synergies within the Group. The flexibility of a holding company structure
should also contribute significantly to the speedy and smooth execution of M&A transactions as a promising
growth option for the Group.

(2) Summary of the company split
1. Schedule for the incorporation-type company split
Date of resolution on the plan for an incorporation-type company split by the Board of Directors

January 26, 2015
Date of General Meeting of Shareholders for approval of the incorporation-type company split plan
February 25, 2015
Effective date of the incorporation-type company split
April 1, 2015
2. Method of company split
An incorporation-type company split with the Company as the divesting company and the newly established
NCXX Inc. as the succeeding company.
3. Company split allocation
In conjunction with the incorporation-type company split, the newly established NCXX Inc. will issue 26,000
shares of common stock, all for placement with the Company.
4. Handling of newly issued subscription rights to shares and corporate bonds with subscription rights
to shares
The incorporate-type company split will not affect the handling of subscription rights to shares and corporate
bonds with subscription rights to shares issued by the Company.
5. Decrease in capital stock due to the company split
The incorporation-type company split will not cause an increase or decrease in the Company’s capital stock.

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6. Rights and obligations to be assumed by the newly established NCXX Inc.
The newly established NCXX Inc. will assume the assets, liabilities, contractual status, and other rights andobligations deemed necessary to execute the split-off business at the time of the incorporation-type­company split.
7. Outlook for execution of obligations
Regarding obligations to be borne by the Company and the newly established NCXX Inc. on and after theeffective date, the amount of assets after the incorporation-type corporate split is expected to exceed theamount of liabilities. Moreover, no situation that would impede the execution of obligations to be borne after
the incorporation-type company split is currently expected. Therefore, the Company judges that there are noissues regarding the outlook for execution of obligations to be borne by the Company and the newly established NCXX Inc. after the incorporation-type company split.

Name
Head office location
Name and title ofrepresentative
Business
Capital Stock
Establishment dateIssued sharesFiscal year-end
Major ­shareholders andtheir ­shareholding ratio

NCXX Inc.
2-32-1 Kunuginome, Hanamaki City, Iwate Prefecture
Tsukasa Akiyama,
Representative Director and President
Device business, robotics business,
agricultural ICT business¥1,212 million
April 21, 1984
12,317,000 shares
November 30
FISCO Ltd.
33.11%DIAMOND AGENCY, Inc.
24.35%
Abit Holdings Co., Ltd.
2.83%
Japan Securities Finance Co., Ltd.
2.11%
Index Corporation
1.94%
Tomonori Morimoto
1.62%
Mizuho Securities Asia Limited Client
Account 69250601
1.45%
Investment Partnership F Target Fund
0.85%
Kabushiki Kaisha Okoso
0.58%
KST Trust Fund Investment Partnership
0.54%(Millions of yen)

Net sales
Operating income
Ordinary income
Net income
Net income per share (Yen)Net assets per share (Yen)¥ 6,37582
692
630¥ 54.07276.14(5) Overview of division to be split
1. Details of business division to be split
Device business (excluding the agricultural ICT business)(3) Overview of the incorporation-type company split
Company to be split (As of November 30, 2014)(4) The Company’s (the divesting company’s) financial status and business performance infiscal 2014

Newly established company(April 1, 2015)

Same
Same
Same
Device business¥310 million
April 1, 2015
26,000 shares
Same
NCXX Group Inc. 100%

2. Operating performance of business to be split (as of November 30, 2014)(Millions of yen)

Net sales

Business to be
split (a)The Company’s
consolidated results (b)Ratio (a/b)¥2,827¥6,37544.3%

3. Items and carrying amounts of assets and liabilities to be split (as of November 30, 2014)(Millions of yen)

AssetsCurrent assets
Noncurrent assets
Total¥  842190¥1,033(Millions of yen)

Liabilities
Current liabilities
Noncurrent liabilities
Total

Note: The figures above were calculated based on the balance sheet as of November 30, 2014. Actual amounts involved in thecompany split will take into account changes to the amounts listed above through to the effective date of the split.

(6) Overview of accounting treatment
The aforementioned transactions were treated as transactions concerning entities under common control
based on the “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, December 26,2008) and the “Revised Guidance on Accounting Standard for Business Combinations and AccountingStandard for Business Divestitures” (ASBJ Guidance No. 10, December 26, 2008).

¥–
–
¥–

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2. Conversion to a wholly owned subsidiary through share exchange(2) Method of the reorganization

In accordance with a resolution of the Board of Directors meeting held on June 26, 2015, the Company
concluded a share exchange agreement on the same day with NCXX Solutions Inc. NCXX Solutions Inc.
became a wholly owned subsidiary through a share exchange on July 24, 2015.

A share exchange with the company becoming the wholly owning parent company in share exchange and
NCXX Solutions Inc. becoming the wholly owned subsidiary company in share exchange.

(3) Details of allocations in the share exchange(1) Overview of business combination
1. Objective of the share exchange
Since its foundation, the Company has been working amid the shift in telecommunication technology fromanalog to digital and IP to integrate in-house manufacture of modulation and demodulation circuits and telecommunication control software, which are core telecommunication technologies. The Company applies thisaccumulated technology and expertise to development investment with a constant awareness of the market
in the shift from wired to wireless communications and PHS to global telecommunication equipment.
Meanwhile, through an absorption-type corporate split on January 31, 2014, NCXX Solutions Inc.
assumed the system development businesses of SJI Inc.’s Chubu Division, Kansai Division, and Kyushu
Division, and also received a partial (20%) investment from SJI Inc. Now NCXX Solutions Inc. provides­integrated one-stop services in manufacturing, finance, distribution, and corporate and public sectors.
Services cover all aspects from consulting to “system development businesses” including design, construction, operation, and maintenance, as well as infrastructure construction such as networks and databases(NCXX Solutions was a dormant company before the absorption-type corporate split.)
Since the absorption-type company split, the Company has worked to develop businesses that produce
strong synergy effects by strengthening links between the two companies. In this environment, the Company
decided to make SJI Inc. into a consolidated subsidiary as described in the press release dated June 1, 2015
“Notice regarding capital and business alliance with SJI Inc., and conversion to a subsidiary by private placement of new shares and acceptance of share subscription rights, and loan” (Japanese only). Going forward,
NCXX Solutions Inc. and SJI Inc. will generate synergies with one another as members of the Group.
2. Schedule of the share exchange
Board of Directors meeting for decision on the share exchange (both companies)
June 26, 2015 (Friday)
Conclusion of share exchange agreement (both companies)
June 26, 2015 (Friday)
General Meeting of Shareholders for approval of share exchange (NCXX Solutions Inc.) July 21, 2015 (Tuesday)
Scheduled date of share exchange (Effective date)
July 24, 2015 (Friday)
Note: The Company plans to conduct a simple share exchange without obtaining approval from the General Meeting of Shareholders,pursuant to Article 796 Paragraph 2 of the Companies Act.

(Millions of yen)Company name

Details of allocation in the share exchange
Number of shares to be issued in the share exchange

The Company(wholly owning parent
company in share exchange)

NCXX Solutions Inc.
(wholly owned subsidiarycompany in share exchange)

1
The Company will allocate and exchange 52
shares of common stock for every share ofcommon stock of NCXX Solutions Inc.

52

Note: The number of shares to be issued by the Company in the share exchange: 125,008 shares of common stock(4) Grounds and reason for the allocation details
To ensure fairness and propriety in calculating the share exchange ratio used in the share exchange, theCompany requested Tokyo Financial Advisers Co., Ltd. (hereinafter “Tokyo FA”) to calculate it, having selected
it as an independent calculation agent from both the Company and NCXX Solutions Inc.
The Company carefully considered the share exchange ratio making reference to the ratio calculated by
the independent calculation agent, Tokyo FA, and the two companies also conducted numerous careful
discussions in light of overall factors such as the two companies’ financial position, assets, share pricetrends, and future prospects. As a result, the two companies finally decided that the abovementioned shareexchange ratio is appropriate and concluded the share exchange agreement between themselves in accordance with the resolutions of their boards of directors.

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Notes(5) Overview of the companies in the share exchange
Wholly owning parent company in share exchange(As of February 28, 2015)

Name
Business

Establishment(founding) date
Location
Name and title ofrepresentative
Capital Stock
Issued shares
Net assets
Total assets
Fiscal year-end
Number of employees
Main business partners
Major ­shareholders andtheir ­shareholding ratio
Main banks

Wholly owned subsidiarycompany in share exchange(As of February 28, 2015)

NCXX Inc.
Management strategy formulation andmanagement of Group companies
Planning, development, and sale of nursing
care and rehabilitation robots, etc.
Planning, development, and sale ofagricultural ICT
April 21, 1984

NCXX Solutions Inc.
Design, development, sale andmaintenance of computer
software and systems, as wellas management and consulting
services

2-32-1 Kunuginome, Hanamaki City,
Iwate Prefecture
Tsukasa Akiyama,
Representative Director¥1,819 million
14,905,187 shares¥4,599 million (consolidated)¥6,698 million (consolidated)
November 30
235 (consolidated)(November 30, 2014)
KAGA ELECTRONICS CO., LTD.
SEIRYO ELECTRIC CORPORATIONFISCO Ltd.
29.59%FISCO DIAMOND AGENCY, Inc. 21.76%
Resona Bank, Limited

5-4-30 Minamiaoyama,
Minato-ku, Tokyo, Japan
Naoki Ishihara,
Representative Director¥300 million
12,020 shares¥606 million (non-consolidated)¥1,175 million (non-consolidated)Same
181 (non-consolidated)(November 30, 2014)
OGIS-RI Co., Ltd.
AISIN AW CO., LTD.
NCXX Group Inc.
80%
SJI Inc.
20%
Same

September 16, 2010

Relationships
between thecompanies

Wholly owning parent
company in share exchange(As of February 28, 2015)

Wholly owned subsidiarycompany in share exchange(As of February 28, 2015)

Capital relationships
Personnel
relationships

The Company owns 80% of the shares of NCXX Solutions Inc.
Naoki Ishihara, Representative Director of the Company, concurrently
serves as Representative Director of NCXX Solutions Inc.
Two directors of the Company concurrently serve as directors of
NCXX Solutions Inc.
One Audit & Supervisory Board member of the Company
concurrently serves as Audit & Supervisory Board member of
NCXX Solutions Inc.
The Company has software development outsourcing transactions
with NCXX Solutions Inc.
The Company has loaned ¥190 million to NCXX Solutions Inc.
(Loaned on November 27, 2014 and repaid on November 27, 2015).
NCXX Solutions Inc. is classified as a related party, as it is a Group
company of NCXX Group Inc.

Trading
relationships

Classification asa related party

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(Per Share Information)

Business Results for the Past Three Fiscal Years(Millions of yen)
NCXX Inc.
(Wholly owning parent company)(consolidated)

Net assets
Total assets
Net sales
Operating income
Ordinary income
Net income
Net income per share (Yen)Dividends per share (Yen)Net assets per share (Yen)Year ended
November 30,
2012

Year ended
November 30,
2013

Year ended
November 30,
2014¥ 1,222
2,156
1,864
95
93
86
¥  9.77–
123.84¥ 2,665
4,077
4,948
259
487
430
¥ 39.79–
212.57¥ 3,551
6,979
6,375
82
692
630
¥ 54.07–276.14(Yen)

NCXX Solutions Inc.
(Wholly owned subsidiary)(non-consolidated)Year ended
March 31,2013

Year ended
January 31,
2014

Year ended
November 30,
2014¥        1 ¥      480 ¥      606
1
621
1,175
0
0
1,707
0
0
19
0
0
20
0
(1)
7
¥ (8,874.05) ¥  (111.56) ¥   578.28–––
31,685.15
49,850.36
50,458.52(6) Overview of accounting treatment
The aforementioned transactions were treated as transactions concerning entities under common control
based on the “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, December 26,2008) and the “Revised Guidance on Accounting Standard for Business Combinations and AccountingStandard for Business Divestitures” (ASBJ Guidance No. 10, December 26, 2008).

Net assets per share
Net income per share
Diluted net income per share

Fiscal 2014
(From December 1, 2013
to November 30, 2014)

Fiscal 2015
(From December 1, 2014
to November 30, 2015)¥276.14
54.07
51.60

¥308.98
3.14–

Notes: 1.	The basis for calculating the amounts for net income per share, net loss per share, and diluted net income per share is
as follows:(Thousands of yen)Amounts for net income (loss) per share
Net income (loss)
Amounts not attributable to common shareholders
Net income (loss) related to common shares
Average number of common shares during the period(Shares)Amounts for diluted net income per share
Adjustments to net income[Of which, interest expenses (after tax adjustment)]
Increase in number of common shares (Shares)[Of which, convertible bonds with ­subscription rights
to shares (Shares)]

Outline of dilutive shares excluded fromthe calculation of diluted net income
per share because of not having
a dilutive effectFiscal 2014
(From December 1, 2013
to November 30, 2014)

Fiscal 2015
(From December 1, 2014
to November 30, 2015)¥   630,311–
630,311¥(45,483)–(45,483)

11,657,041

14,507,488¥     2,034[2,034]
597,795¥–[–]–[597,795][–]

Fiscal 2014
(From December 1, 2013
to November 30, 2014)

Fiscal 2015
(From December 1, 2014
to November 30, 2015)

11th Series of Subscription
Rights to Shares(1,000 subscription rights for
100,000 underlying shares)

Subscription rights to shares attached to the NCXXGroup Inc. 5th Series of Unsecured Convertible
Bonds with Subscription Rights to Shares (1,165
subscription rights for 1,069,788 underlying shares)

Notes: 2.	Although there were potentially dilutive shares, diluted net income per share for the fiscal year under review is not disclosed asa net loss per share was recorded.

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(Subsequent Events)
1. Issuance of stock compensation-type stock options (subscription rights
to shares)
On January 26, 2016, the Board of Directors of the Company decided to submit a resolution for approval by
the 32nd Ordinary General Meeting of Shareholders to be held on February 25, 2016, delegating it theauthority to decide the particulars for issuing and allotting subscription rights to shares, pursuant to the­provisions of Article 236, Article 238 and Article 239 of the Companies Act. The Board of Directors plans toallot the subscription rights to shares to directors and employees of the Company and its related companies
as stock options granted at particularly advantageous terms. The goal will be to raise the motivation andmorale of the directors and employees by providing them with an incentive to enhance the Group’s earnings
performance and corporate value.
The resolution was subsequently approved by the 32nd Ordinary General Meeting of Shareholders held on
February 25, 2016.
Details regarding the subscription rights to shares are as follows.

(1) Name of subscription rights to shares
13th Series of Subscription Rights to Shares of NCXX Inc.

(2) Total number of subscription rights to shares and the class and number of underlying shares
Total number of subscription rights to shares
The maximum number of subscription rights to shares shall be 1,000. Of this, a maximum of 500 rights shallbe allotted to the directors of the Company (with a proportionate 100 of those rights allotted to the outside
directors of the Company).
Class and number of underlying shares
There shall be 100 shares of common stock underlying each subscription right to shares. And the maximum
number of shares issued upon exercise of the maximum 1,000 subscription rights to shares shall be 100,000
shares of common stock. As a result, 50,000 shares of common stock shall be issued upon exercise of the
maximum 500 rights allotted to the directors of the Company (with a proportionate 10,000 shares of common
stock going to the outside directors of the Company).
The number of shares of common stock underlying the subscription rights to shares shall be adjusted
according to the following formula in the event the Company conducts a stock split or consolidation following
the resolution date of the General Meeting of Shareholders.
Number of underlying shares after adjustment = Number of underlying shares before adjustment
× Stock split or consolidation ratio

In addition to the foregoing, in the event of other unavoidable reasons requiring adjustment of the underlying shares, the Company shall be able to adjust the number of underlying shares within reasonable bounds
as deemed necessary.
Moreover, the adjustment shall apply only to the number of shares underlying the subscription rights toshares that have yet to be exercised as of the stock split or consolidation, and any fraction under one (1)share resulting from such adjustment shall be rounded down.

(3) Payment in exchange for the subscription rights to sharesNo monetary payment shall be required in exchange for the subscription rights to shares.

(4) Allotment date of subscription rights to shares
The decision shall be delegated to the Board of Directors of the Company.

(5) Value of assets to be invested upon exercise of subscription rights to shares
The value of assets to be invested upon exercise of a subscription right to shares shall be the amount payable for each share received upon exercise of the subscription right to shares (hereinafter, “exercise price”)
multiplied by the number of shares to be granted per subscription right to shares.
The exercise price of a subscription right to shares shall be the higher of the closing price of the underlying
common stock on the Tokyo Stock Exchange on the allotment date of the right (the most recent previous
closing price in the event that the stock fails to trade on that date) and the average closing price on theexchange (excluding days when the stock fails to trade) for the days of the month prior to the month of theallotment date, multiplied by 1.05 (with the fraction less than one (1) yen of the resulting amount rounded up).
In the event that a split or consolidation of the Company’s common stock takes place after the allotment
date, the exercise price shall be adjusted according to the following formula, with the fraction less than one(1) yen resulting from the adjustment rounded up.
1
Exercise price after adjustment = Exercise price before adjustment ×

Stock split orconsolidation ratio

In addition to the foregoing, if the exercise price must be adjusted following the allotment date due to theCompany conducting a merger with another company, a corporate split, or reduction in capital stock, orsome accordingly unavoidable reason, the Company shall be able to adjust the exercise price within reasonable bounds as deemed necessary.

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(6) Exercise period of subscription rights to shares(9) Restrictions on the assignment of subscription rights to shares

The starting date of the exercise period shall be two years from the day following the Board of Directors
resolution date for deciding the issuance terms of subscription rights to shares, and the expiration date shallbe five years from the day following this resolution date.

Approval of the Company’s Board of Directors shall be required for the acquisition of subscription rights toshares via assignment.

(7) Conditions for exercising subscription rights to shares
Holders of the subscription rights to shares must remain in their position as a director or employee of theCompany and its related companies in order to exercise the rights, apart from when the Board of Directors
makes a special exception.

(8) Provisions for the Company to buy back the subscription rights to shares
1. The Company may buy back the subscription rights to shares from the holders free of charge, on a datespecified separately by the Board of Directors, in the event that a resolution for a merger agreement underwhich the Company will become the dissolving company, or a resolution for a stock exchange agreement
or stock transfer plan under which the Company will become a wholly-owned subsidiary, is approved by
the General Meeting of Shareholders (or by the Board of Directors if approval by the General Meeting of
Shareholders is not required).
2. Following the allotment date of particular subscription rights to shares, the Company may acquire theparticular subscription rights to shares from the holders free of charge if the closing price of theCompany’s common stock traded on the Tokyo Stock Exchange on any business day falls to 50% orlower than the exercise price of the particular subscription rights to shares (with fractions less than one(1) yen rounded down).
3. The Company may buy back any and all subscription rights to shares of a particular holder free of charge,
on a date specified separately by the Board of Directors, in the event that the particular holder no longer
satisfies the provisions set forth above in “(7) Conditions for exercising subscription rights to shares.”(10) Matters relating to increases of capital stock and capital reserve as a result of sharesissued by the exercise of subscription rights to shares
In the event shares are issued by the exercise of subscription rights to shares, the amount of capital stock
shall be increased by half of the maximum for increase in capital, as calculated in accordance with the provisions of Article 17, Paragraph 1 of the Rules of Account Settlement of Corporations of Japan. Any fraction
less than one (1) yen resulting from the calculation shall be rounded up to the nearest one yen. The amount of
increase in capital reserve shall be the amount calculated by subtracting the aforementioned increase incapital stock from the maximum for increase in capital.

(11) Handling of fractions
Where fractions of less than one (1) share occur in the number of shares issued to holders of subscription
rights to shares upon exercising the rights, such fractions shall be rounded down.

(12) Other
Other terms for the allotment of subscription rights to shares shall be set forth by a separate resolution of theBoard of Directors of the Company.

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Notes

2. Purchase of treasury stock
At a Board of Directors meeting held on February 12, 2016, the Company passed a resolution to purchasetreasury stock pursuant to Article 156 of the Companies Act, as applied by replacing terms pursuant to theprovisions of Article 165-3 of the Companies Act.

(1) Reason for the purchase of treasury stock
Treasury stock was purchased as part of the execution of flexible capital management policies in line withchanges in the operating environment, in conjunction with efforts to enhance shareholder value per share.

(2) Matters concerning the purchase of treasury stock
1. Type of shares to be purchased
Common shares of NCXX Group Inc.
2. Total number of shares to be purchased	Up to 400,000 shares (Shareholding percentage of issued
shares (excluding treasury stock): 2.67%)
3. Total purchase value of shares
Up to ¥0.2 billion
4. Purchase period
From February 12, 2016 to November 20, 2016

[Consolidated Supplementary Schedules][Schedule of corporate bonds]

IssuerSeriesNCXX 3rd Series of Unsecured
Group ­Convertible Bonds withInc.
­Subscription Rights to Shares
NCXX 4th Series of Unsecured
Group ­Convertible Bonds withInc.
­Subscription Rights to Shares
NCXX 5th Series of Unsecured
Group ­Convertible Bonds with
­Subscription Rights to SharesInc.
NCXX 2nd Series of Unsecured
Group ­Ordinary Corporate Bonds
Inc.
NCXX 3rd Series of Unsecured
Group ­Ordinary Corporate Bonds
Inc.
Total
–

Notes: 1. Amounts in parentheses are the current portion of bonds.
2. Details on bonds with subscription rights to shares are as follows.
5th Series of Unsecured
Convertible Bonds with
Subscription Rights to Shares

SeriesType of shares to be issued
Issue price of subscription rights (Yen)
Issue price of shares (Yen)
Total face amount (Thousands of yen)
Total amount of shares to be issued upon exercise ofsubscription rights to shares (Millions of yen)
Percentage of shares granted per subscription right (%)
Exercise period of the subscription rights

Common shares
Gratis¥1,089¥1,165,000–
100%
From March 30, 2015
to March 29, 2018

Note: The information above assumes that the full payment due for exercising subscription rights to shares is paid in lieu of the full redemption of the convertible bonds associated with those rights when requested by rights holders seeking to exercise their subscription rights to shares. It is further assumed that such a request is made when the subscription rights to shares are exercised.
3. Scheduled redemptions due within five years subsequent to November 30, 2015 are as follows.

Issuance date

Starting balancein fiscal 2015
(Thousandsof yen)Ending balancein fiscal 2015
(Thousandsof yen)February
7, 2014¥  400,000
[–]

¥–
[–]

1.0

None February
6, 2017

November17, 2014

815,000
[–]

–
[–]

0.5

None November
16, 2017March
30, 2015–[–]

1,165,000[–]

0.5None March
29, 2018

December11, 2013

200,000[200,000]

–
[–]

2.25

None December
10, 2014

December11, 2014–[–]

100,000[100,000]

1.4

None December
10, 2015¥1,415,000[200,000]¥1,265,000[100,000]––(Thousands of yen)Interest(%)

Collateral–

Maturity date–

Due in one year
or less

Due after one year
through two years

Due after two years
through three years

Due after three years
through four years

Due after four years
through five years¥100,000¥–¥1,165,000

¥–

¥–

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ESG Information[Schedule of borrowings]

Corporate Data

[Schedule of asset retirement obligations](Thousands of yen)

Category

Starting balancein fiscal 2015

Ending balancein fiscal 2015

Average interest
rate (%)¥–¥  484,049

3.1–

290,675–

2,115,702
2,862

2.3
2.6

–
–

Short-term loans payable
Current portion of long-termloans payable
Current portion of lease obligations
Long-term loans payable(excluding current portion)
Lease obligations(excluding current portion)
Other interest-bearing debt
Current portion of accounts payable—otherCurrent portion of accounts payable—installment purchaseLong-term accounts payable—installment purchase
Total

Repayment

Quarterly and other information for fiscal 2014
(Thousands of yen)

735,836

3,306,196

0.1

2016 to 2030

–

5,075

1.1

2016 to 2020–

337,300

1.4

–

6,442

6,182

1.5

–

13,682¥1,046,635

7,371¥6,264,740

0.5–

The schedule of asset retirement obligations is omitted from record in these financial statements as the­matters that must be recorded in this statement are disclosed as a note in conformity with Article 15-3 of theOrdinance on Consolidated Financial Statements.

[Other](Cumulative period)

Net sales
Income (loss) before income taxes
and minority interests
Net loss
Net loss per share (Yen)First quarter

Second quarter

Third quarter

Fiscal year

¥1,010,714¥2,200,015¥4,574,741¥7,416,907(158,463)(162,186)¥(12.13)(260,821)(251,112)¥(17.75)(389,770)(429,577)¥(29.83)

23,572(45,483)¥(3.14)First quarter

Second quarter

Third quarter

Fiscal year¥(12.13)¥(5.97)¥(12.39)¥26.47(Yen)(Quarterly period)

2015 to 2018–

Quarterly net income (loss)
per share

Notes: 1. Average interest rate represents the weighted average interest rate for the balance at November 30, 2015.
2. Scheduled repayments of long-term loans payable (excluding current portion) and other interest-bearing debt (excluding
current portion) due within five years subsequent to November 30, 2015 are as follows.
(Thousands of yen)

Long-term loans payable
Long-term accounts payable—installment purchase
Lease obligations

Financial Section

Due after one
year throughtwo years

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

Due after
five years¥1,304,780¥684,144¥426,707¥747,786¥142,776

6,307
2,910

1,063
1,149

–
592

–
423

–
–

3. Interest-free loans account for ¥23,308 thousand of the balance of long-term loans payable (excluding current portion) as ofNovember 30, 2015.

68

INTEGRATED REPORT 2016
About NCXX GroupTop Message

FeatureCompany Overview
Name

Date of establishment

Capital stock

Consolidated group
employees

Business operations

Location

NCXX Group Inc.

April 21, 1984

¥1,819,748,000(as of November 30, 2015)712(as of November 30, 2015)

 anagement strategy formulation andMmanagement of Group companies
Planning, development, and sale ofnursing care and rehabilitation robots, etc.
Planning, development, and sale ofagricultural ICT
Businesses associated with or related
to the above
Hanamaki Head Office:2-32-1 Kunuginome, Hanamaki City,
Iwate Prefecture, Japan
TEL : +81-198-27-2851
FAX: +81-198-27-2850
Tokyo Head Office:2F CoSTUME NATIONAL Aoyama Complex,
5-4-30 Minamiaoyama, Minato-ku, Tokyo, Japan
TEL : +81-3-5766-9870
FAX: +81-3-5766-9871

ESG Information

Corporate Data

Financial Section

History
Date

Event

Apr.1984

Established as Honda Electron Co., Ltd. with capital stock of ¥10 million invested by
Honda Tsushin Kogyo Co., Ltd. Head Office was located in Himonya, Meguro-ku, Tokyo.
Started design and manufacture of telecommunication line equipment

Aug.1985

Constructed Hanamaki Plant in Hanamaki City, Iwate Prefecture and started operations

Aug.1986

Participated in the establishment of Iwateken Koudo Gijutsu Shinkou Kikou(Iwate Prefecture Advanced Technology Promotion Organization)

Aug.1987

Relocated Head Office to Shibaura, Minato-ku, Tokyo

Sept.1998

HOKUBU Communication & Industrial Co.,Ltd. and its group company become themajor shareholders

Oct.1999

Acquired ISO quality certification (ISO 9001, JQA-QM 3856)

Jan.2002

Launched world’s first 128 kbps data telecommunication cardJune2002

Established the Hanamaki R&D Center as a base for development of PHS data
telecommunication cards

Apr.2003

Established the Tokyo R&D Center and established bases for development of PLC
and wirelessSept.2003

Relocated Head Office to Kyobashi, Chuo-ku, Tokyo

Dec.2003

Acquired ISO environmental certification (ISO 14001, JQA-EM 3575)

June2004

Index Corporation acquired 2,416 shares, making the Company a subsidiary

Jan.2005

Received supreme prize for excellence in the modem category of the BCN Award

June2005

Sold the semiconductor manufacturing equipment business to SHIBAURA MECHATRONICSCORPORATION and specialized in the information and telecommunication business

Sept.2005

Changed company name from Honda Electron Co., Ltd. to Net Index Co., Ltd.

Sept.2005

Established Net Index ES Co., Ltd., and spun off the manufacturing and service divisions

Nov.2005

Introduced the W-SIM, which is the world’s smallest PHS module, and the first­SIM-STYLE voice handset

June2007

Listed on the JASDAQ securities exchange (securities code: 6634)

Nov.2010

Relocated the Head Office to Hanamaki City, Iwate Prefecture

July2012FISCO Ltd. acquired 47,401 shares, making the Company a subsidiary
Made e-tabinet.com into a subsidiary

Dec.2012

Changed company name from Net Index Co., Ltd. to NCXX Inc.

Dec.2013

Made NCXX Solutions Inc. and Care Online Limited into subsidiaries

Feb.2014

Transferred the domestic systems development business of SJI Inc. to subsidiary
NCXX Solutions Inc. through an absorption-type company split

Apr.2015

Changed the company name from NCXX Inc. to NCXX Group Inc.

Apr.2015

Established NCXX Inc. as a newly incorporated company. Transferred the device businessto NCXX Inc. through a corporate split.

June2016

Made SJI Inc. a subsidiary69

INTEGRATED REPORT 2016
About NCXX GroupFeatureTop Message

Shareholder Information
Overview of Shares

ESG Information

Total number of issuable shares: 30,000,000
15,030,195

Number of shareholders:

5,463

Major shareholders
Number ofshares held
(shares)

Shareholding
percentage ofissued shares (%)

FISCO Ltd.

5,198,700

34.58

Diamond Agency, Inc.

3,000,000

19.95

ABIT Corporation

349,000

2.32

Tomonori Morimoto

200,000

1.33

SJI Inc.

125,008

0.83

Kensuke Yabuta

79,0000.52

Japan Securities Finance Co., Ltd.

78,1000.51

NCXX Group Inc.

72,5160.48

Investment Partnership F Target Fund

68,1000.45

Shoji Hihara

57,3000.38

Shareholder name

Corporate Data

Shareholder Memo

(As of November 30, 2015)

Total number of shares issued:

Financial Section

Listed exchanges

Tokyo Stock Exchange, JASDAQ

Listing dateJune 22, 2007

Securities code

6634

Business year

December 1 to November 30

Ordinary General Meetingof Shareholders

Within three months of the final closing date of each year

Shareholder record dateNovember 30

Record dates for dividends
from retained earnings

November 30, May 31

Number of shares in one
trading unit

100 shares

Method of Posting Notices

The Company provides notification by electronic notices.
However, when the Company cannot provide notices by theelectronic method due to accidents or other unavoidable reasons,it will post the notices in the Nikkei newspaper. Notices areprovided on the Company’s website at the following address
http://www.ncxxgroup.co.jp/irinfo/notification/

Transfer agent

Mitsubishi UFJ Trust and Banking Corporation,
4-5, Marunouchi 1-Chome, Chiyoda-ku, Tokyo

Handling office of thetransfer agent(postal address)

Mitsubishi UFJ Trust and Banking Corporation,
Securities Agency Division,
4-5, Marunouchi 1-Chome, Chiyoda-ku, Tokyo

Contact office of the sametransfer agent

Mitsubishi UFJ Trust and Banking Corporation
branches throughout Japan

Financial institutions(0.79%)

Financial instruments
business operator(1.66%)

Individuals and others(36.04%)

Shareholder
composition
Foreign companies, etc.
(2.07%)

Other companies(59.40%)