| As filed with the Securities and Exchange Commission on June 28, 2013 |
|-----------------------------------------------------------------------|

| [  ] | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-----------|--------------------------------------------------------------------------------------------------|

| [x] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-----|--------------------------------------------------------------------------------------|

| [  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-----------|------------------------------------------------------------------------------------------|

| [  ] | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-----------|---------------------------------------------------------------------------------------------|

| Title of Each Class |                    | Name of Each Exchange On Which Registered |
|---------------------|-------------------------|-------------------------------------------|
| Common Stock        | The NASDAQ Stock Market |

----

| PART I                                                                                 | 2      |
|----------------------------------------------------------------------------------------|--------|
| Item 1. Identity of Directors, Senior Management and Advisers.                         | 2      |
| Item 2. Offer Statistics and Expected Timetable.                                       | 2      |
| Item 3. Key Information.                                                               | 2      |
| Item 4. Information on the Company.                                                    | 17     |
| Item 5. Operating and Financial Review and Prospects.                                  | 37     |
| Item 6. Directors, Senior Management and Employees.                                    | 72     |
| Item 7. Major Shareholders and Related Party Transactions.                             | 78     |
| Item 8. Financial Information.                                                         | 80     |
| Item 9. The Offer and Listing.                                                         | 81     |
| Item 10. Additional Information.                                                       | 82     |
| Item 11. Quantitative and Qualitative Disclosures about Market Risk.                   | 95     |
| Item 12. Description of Securities Other than Equity Securities.                       | 96     |
|                                                                                   |   |
| PART II                                                                                | 97     |
| Item 13. Defaults, Dividend Arrearages and Delinquencies.                              | 97     |
| Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds. | 97     |
| Item 15. Controls and Procedures.                                                      | 97     |
| Item 16A. Audit Committee Financial Expert                                        | 100    |
| Item 16B. Code of Ethics.                                                         | 100    |
| Item 16C. Principal Accountant Fees and Services.                                 | 100    |
| Item 16D. Exemptions from the Listing Standards for Audit Committees.             | 102    |
| Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers. | 103    |
| Item 16F. Change in Registrant's Certifying Accountant.                           | 103    |
| Item 16G. Corporate Governance.                                                   | 103    |
| Item 16H. Mine Safety Disclosure.                                                 | 104    |
|                                                                                   |   |
| PART III                                                                               | 105    |
| Item 17. Financial Statements.                                                         | 105    |
| Item 18. Financial Statements.                                                         | 105    |
| Item 19. Exhibits.                                                                     | 105    |

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| ·   | that we may not be able to achieve or sustain profitability in the near future, |
|--------------------|---------------------------------------------------------------------------------|

| ·   | that we may not be able to compete effectively against competitors which have greater financial, marketing and other resources, and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | that our investments in our subsidiaries, affiliated companies and new business and service developments may not produce the returns that we expect or may adversely affect our results of operations and financial condition. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

PART 

Item 

Item 

Item 

| A. | Selected Financial Data |
|----|-------------------------|

----

|                                                                                                 |   | As of and for the fiscal year ended March 31,    |   |
|------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                                                                 |   | 2009                                             |   |   | 2010 |   |   | 2011 |   |   | 2012 |   |   | 2013 |   |   | 2013 |   |
|                                                                                                 |   | (millions of yen, except per share and ADS data) |   |   | (thousands ofU.S. dollars,except per shareand ADS data (1) ) |   |
| Statement of Income Data:                                                                            |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| REVENUES:                                                                                            |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Network services:                                                                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Internet connectivity services (corporate use)                                                       |   | ¥                                           | 13,142 |   |   | ¥ | 13,847 |   |   | ¥ | 14,005 |   |   | ¥ | 14,707 |   |   | ¥ | 16,027 |   |   | $ | 170,212 |   |
| Internet connectivity services (home use)                                                            |   |                                             | 6,538  |   |   |   | 6,854 |   |   |   | 6,525 |   |   |   | 5,717 |   |   |   | 5,466 |   |   |   | 58,052 |   |
| WAN services                                                                                         |   |                                             | 2,455  |   |   |   | 2,553 |   |   |   | 16,100 |   |   |   | 25,667 |   |   |   | 25,168 |   |   |   | 267,294 |   |
| Outsourcing services                                                                                 |   |                                             | 12,941 |   |   |   | 13,718 |   |   |   | 15,032 |   |   |   | 17,319 |   |   |   | 18,571 |   |   |   | 197,224 |   |
| Total                                                                                                |   |                                             | 35,076 |   |   |   | 36,972 |   |   |   | 51,662 |   |   |   | 63,410 |   |   |   | 65,232 |   |   |   | 692,782 |   |
| Systems integration:                                                                                 |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Systems construction                                                                                 |   |                                             | 14,658 |   |   |   | 11,354 |   |   |   | 11,937 |   |   |   | 11,997 |   |   |   | 15,825 |   |   |   | 168,064 |   |
| Systems operation and maintenance                                                                    |   |                                             | 18,989 |   |   |   | 18,717 |   |   |   | 17,507 |   |   |   | 19,472 |   |   |   | 21,380 |   |   |   | 227,062 |   |
| Total                                                                                                |   |                                             | 33,647 |   |   |   | 30,071 |   |   |   | 29,444 |   |   |   | 31,469 |   |   |   | 37,205 |   |   |   | 395,126 |   |
| Equipment sales                                                                                      |   |                                             | 985    |   |   |   | 756 |   |   |   | 796 |   |   |   | 1,112 |   |   |   | 1,491 |   |   |   | 15,834 |   |
| ATM operation business                                                                               |   |                                             | 23     |   |   |   | 207 |   |   |   | 516 |   |   |   | 1,324 |   |   |   | 2,320 |   |   |   | 24,640 |   |
| Total revenues                                                                                       |   |                                             | 69,731 |   |   |   | 68,006 |   |   |   | 82,418 |   |   |   | 97,315 |   |   |   | 106,248 |   |   |   | 1,128,382 |   |
|                                                                                                 |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| COST AND EXPENSES:                                                                                   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of network services                                                                             |   |                                             | 29,318 |   |   |   | 30,533 |   |   |   | 41,678 |   |   |   | 49,985 |   |   |   | 50,692 |   |   |   | 538,362 |   |
| Cost of systems integration                                                                          |   |                                             | 25,543 |   |   |   | 21,904 |   |   |   | 22,467 |   |   |   | 24,979 |   |   |   | 30,425 |   |   |   | 323,118 |   |
| Cost of equipment sales                                                                              |   |                                             | 863    |   |   |   | 649 |   |   |   | 683 |   |   |   | 980 |   |   |   | 1,318 |   |   |   | 14,001 |   |
| Cost of ATM operation business                                                                       |   |                                             | 422    |   |   |   | 964 |   |   |   | 1,000 |   |   |   | 1,382 |   |   |   | 1,959 |   |   |   | 20,812 |   |
| Total cost                                                                                           |   |                                             | 56,146 |   |   |   | 54,050 |   |   |   | 65,828 |   |   |   | 77,326 |   |   |   | 84,394 |   |   |   | 896,293 |   |
| Sales and marketing                                                                                  |   |                                             | 4,631  |   |   |   | 5,405 |   |   |   | 6,616 |   |   |   | 7,947 |   |   |   | 8,059 |   |   |   | 85,583 |   |
| General and administrative                                                                           |   |                                             | 5,622  |   |   |   | 4,826 |   |   |   | 5,479 |   |   |   | 5,300 |   |   |   | 5,632 |   |   |   | 59,817 |   |
| Research and development                                                                             |   |                                             | 415    |   |   |   | 313 |   |   |   | 354 |   |   |   | 389 |   |   |   | 410 |   |   |   | 4,354 |   |
| Total cost and expenses                                                                              |   |                                             | 66,814 |   |   |   | 64,594 |   |   |   | 78,277 |   |   |   | 90,962 |   |   |   | 98,495 |   |   |   | 1,046,047 |   |
| OPERATING INCOME                                                                                     |   |                                             | 2,917  |   |   |   | 3,412 |   |   |   | 4,141 |   |   |   | 6,353 |   |   |   | 7,753 |   |   |   | 82,335 |   |
|                                                                                                 |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSES):                                                                             |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividend income                                                                                      |   |                                             | 58     |   |   |   | 20 |   |   |   | 44 |   |   |   | 48 |   |   |   | 47 |   |   |   | 500 |   |
| Interest income                                                                                      |   |                                             | 45     |   |   |   | 29 |   |   |   | 23 |   |   |   | 35 |   |   |   | 26 |   |   |   | 273 |   |
| Interest expense                                                                                     |   |                                             | (408   | ) |   |   | (306 | ) |   |   | (268 | ) |   |   | (299 | ) |   |   | (287 | ) |   |   | (3,051 | ) |
| Other — net                                                                                    |   |                                             | (578   | ) |   |   | (296 | ) |   |   | (106 | ) |   |   | (161 | ) |   |   | 218 |   |   |   | 2,323 |   |
| Other income (expenses) — net                                                                  |   |                                             | (883   | ) |   |   | (553 | ) |   |   | (307 | ) |   |   | (377 | ) |   |   | 4 |   |   |   | 45 |   |
|                                                                                                 |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES |   |                                             | 2,034  |   |   |   | 2,859 |   |   |   | 3,834 |   |   |   | 5,976 |   |   |   | 7,757 |   |   |   | 82,380 |   |
| INCOME TAX EXPENSE                                                                                   |   |                                             | 1,002  |   |   |   | 1,132 |   |   |   | 956 |   |   |   | 2,525 |   |   |   | 2,608 |   |   |   | 27,693 |   |
| EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES                                                      |   |                                             | 35     |   |   |   | 159 |   |   |   | 123 |   |   |   | 124 |   |   |   | 168 |   |   |   | 1,784 |   |
| NET INCOME                                                                                           |   |                                             | 1,067  |   |   |   | 1,886 |   |   |   | 3,001 |   |   |   | 3,575 |   |   |   | 5,317 |   |   |   | 56,471 |   |
| LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS                                     |   |                                             | 352    |   |   |   | 348 |   |   |   | 202 |   |   |   | 66 |   |   |   | (16 | ) |   |   | (177 | ) |
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC.                                            |   | ¥                                           | 1,419  |   |   | ¥ | 2,234 |   |   | ¥ | 3,203 |   |   | ¥ | 3,641 |   |   | ¥ | 5,301 |   |   | $ | 56,294 |   |

----

|                                                           |   | As of and for the fiscal year ended March 31,    |
|----------------------------------------------------------------|--------|--------------------------------------------------|
|                                                           |   | 2009                                             |   |   | 2010 |   |   | 2011 |   |   | 2012 |   |   | 2013 |   |   | 2013 |   |
|                                                           |   | (millions of yen, except per share and ADS data) |   |   | (thousands ofU.S. dollars,except per shareand ADS data (1) ) |   |
|  Per Share and ADS Data:                                  |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic net income attributable to IIJ per common share (2)      |   | ¥                                           | 34.59 |   |   | ¥ | 55.15 |   |   | ¥ | 79.04 |   |   | ¥ | 89.82 |   |   | ¥ | 130.76 |   |   | $ | 1.39 |   |
| Diluted net income attributable to IIJ per common share (2)    |   |                                             | 34.58 |   |   |   | 55.15 |   |   |   | 79.04 |   |   |   | 89.78 |   |   |   | 130.65 |   |   |   | 1.39 |   |
| Basic net income attributable to IIJ per ADS equivalent        |   |                                             | 17.29 |   |   |   | 27.58 |   |   |   | 39.52 |   |   |   | 44.91 |   |   |   | 65.38 |   |   |   | 0.69 |   |
| Diluted net income attributable to IIJ per ADS equivalent      |   |                                             | 17.29 |   |   |   | 27.58 |   |   |   | 39.52 |   |   |   | 44.89 |   |   |   | 65.33 |   |   |   | 0.69 |   |
|                                                           |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash dividends declared per share:                             |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Japanese Yen(2)                                           |   | ¥                                           | 10.00 |   |   | ¥ | 11.25 |   |   | ¥ | 13.75 |   |   | ¥ | 16.25 |   |   | ¥ | 18.75 |   |   |   |   |   |
| U.S. Dollars (2) (3)                                      |   | $                                                | 0.10 |   |   | $ | 0.12 |   |   | $ | 0.17 |   |   | $ | 0.20 |   |   | $ | 0.22 |   |   |   |   |   |
| Basic weighted average number of shares (2)                    |   |                                             | 41,033,000 |   |   |   | 40,508,800 |   |   |   | 40,528,800 |   |   |   | 40,536,800 |   |   |   | 40,536,800 |   |   |   |   |   |
| Diluted weighted average number of shares (2)                  |   |                                             | 41,039,000 |   |   |   | 40,508,800 |   |   |   | 40,528,800 |   |   |   | 40,556,400 |   |   |   | 40,572,600 |   |   |   |   |   |
| Basic weighted average number of ADS equivalents (thousands)   |   |                                             | 82,066 |   |   |   | 81,018 |   |   |   | 81,058 |   |   |   | 81,074 |   |   |   | 81,074 |   |   |   |   |   |
| Diluted weighted average number of ADS equivalents (thousands) |   |                                             | 82,078 |   |   |   | 81,018 |   |   |   | 81,058 |   |   |   | 81,113 |   |   |   | 81,145 |   |   |   |   |   |
|                                                           |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance Sheet Data:                                            |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                                      |   | ¥                                           | 10,188 |   |   | ¥ | 8,764 |   |   | ¥ | 13,314 |   |   | ¥ | 13,537 |   |   | ¥ | 12,259 |   |   | $ | 130,192 |   |
| Total assets (4)                                          |   |                                             | 52,301 |   |   |   | 52,096 |   |   |   | 71,473 |   |   |   | 73,493 |   |   |   | 82,111 |   |   |   | 872,040 |   |
| Short-term borrowings                                          |   |                                             | 7,350 |   |   |   | 4,450 |   |   |   | 13,430 |   |   |   | 9,000 |   |   |   | 9,400 |   |   |   | 99,830 |   |
| Long-term borrowings, including capital lease obligations:     |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current portion                                                |   |                                             | 3,272 |   |   |   | 2,730 |   |   |   | 2,788 |   |   |   | 4,007 |   |   |   | 4,515 |   |   |   | 47,955 |   |
| Noncurrent portion                                             |   |                                             | 4,866 |   |   |   | 3,658 |   |   |   | 3,627 |   |   |   | 6,731 |   |   |   | 6,350 |   |   |   | 67,443 |   |
| Common stock                                                   |   |                                             | 16,834 |   |   |   | 16,834 |   |   |   | 16,834 |   |   |   | 16,834 |   |   |   | 16,834 |   |   |   | 178,779 |   |
| Total IIJ shareholders’ equity                           |   |                                             | 25,169 |   |   |   | 27,320 |   |   |   | 29,652 |   |   |   | 32,688 |   |   |   | 37,607 |   |   |   | 399,392 |   |
|                                                           |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating Data:                                                |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures, including capitalized leases (5)         |   | ¥                                           | 7,006 |   |   | ¥ | 5,584 |   |   | ¥ | 6,752 |   |   | ¥ | 10,917 |   |   | ¥ | 10,405 |   |   | $ | 110,504 |   |
|                                                           |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating margin ratio (6)                                |   |                                             | 4.2 | % |   |   | 5.0 | % |   |   | 5.0 | % |   |   | 6.5 | % |   |   | 7.3 | % |   |   |   |   |
|                                                           |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash provided by (used in):                           |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating activities                                           |   | ¥                                           | 8,631 |   |   | ¥ | 9,621 |   |   | ¥ | 12,564 |   |   | ¥ | 11,659 |   |   | ¥ | 9,639 |   |   | $ | 102,366 |   |
| Investing activities                                           |   |                                             | (3,328 | ) |   |   | (3,788 | ) |   |   | (13,493 | ) |   |   | (5,954 | ) |   |   | (5,946 | ) |   |   | (63,147 | ) |
| Financing activities                                           |   |                                             | (6,573 | ) |   |   | (7,238 | ) |   |   | 5,521 |   |   |   | (5,464 | ) |   |   | (4,996 | ) |   |   | (53,056 | ) |

| (1)   | The U.S. dollar amounts represent translation of yen amounts at the rate of ¥94.16 which was the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York prevailing as of March 29, 2013. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | We conducted a 1 to 200 stock split on common stock with an effective date of October 1, 2012. The figures are retroactively adjusted to reflect the stock split. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | The dividends per share were translated into U.S. dollars at the relevant record date. |
|-----------------|----------------------------------------------------------------------------------------|

| (4)   | Total Assets as of March 31, 2010 has been corrected. |
|-----------------|-------------------------------------------------------|

| (5)   | Further information regarding capital expenditures, including capitalized leases and a reconciliation to the most directly comparable U.S. GAAP financial measure can be found in the following page. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6)   | Operating income as a percentage of total revenues. |
|-----------------|-----------------------------------------------------|

----

|                                                  |   | For the fiscal year ended March 31, |   |
|-------------------------------------------------------|--------|-------------------------------------|--------|
|                                                  |   | 2009                                |   |   | 2010 |   |   | 2011 |   |   | 2012 |   |   | 2013 |   |
|                                                  |   | (millions of yen)                   |   |
| Capital expenditures:                                 |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Acquisition of assets by entering into capital leases |   | ¥                              | 4,015  |   |   | ¥ | 2,330 |   |   | ¥ | 2,913 |   |   | ¥ | 4,750 |   |   | ¥ | 4,816 |   |
| Purchases of property and equipment                   |   |                                | 2,991  |   |   |   | 3,254 |   |   |   | 3,839 |   |   |   | 6,167 |   |   |   | 5,589 |   |
| Total capital expenditures                            |   | ¥                              | 7,006  |   |   | ¥ | 5,584 |   |   | ¥ | 6,752 |   |   | ¥ | 10,917 |   |   | ¥ | 10,405 |   |

----

| Fiscal year ended March 31,(1) |   | High   |   |   | Low    |   |   | Average(2) |   |   | Period-end |   |
|--------------------------------|--------|--------|--------|--------|--------|--------|--------|------------|--------|--------|------------|--------|
| 2009                           |   | ¥ | 110.48 |   |   | ¥ | 87.80  |       |   | ¥ | 100.85     |   |   | ¥ | 99.15 |   |
| 2010                           |   |   | 100.71 |   |   |   | 86.38  |       |   |   | 92.51      |   |   |   | 93.40 |   |
| 2011                           |   |   | 94.68  |   |   |   | 78.74  |       |   |   | 85.02      |   |   |   | 82.76 |   |
| 2012                           |   |   | 85.26  |   |   |   | 75.72  |       |   |   | 78.83      |   |   |   | 82.41 |   |
| 2013                           |   |   | 96.16  |   |   |   | 77.41  |       |   |   | 82.96      |   |   |   | 94.16 |   |
|                           |   |   |   |   |   |   |   |       |   |   |       |   |   |   |   |   |
| Calendar year 2013             |   |   |   |   |   |   |   |       |   |   |       |   |   |   |   |   |
| January                        |   | ¥ | 91.28  |   |   | ¥ | 86.92  |       |   | ¥ | 89.06      |   |   | ¥ | 91.28 |   |
| February                       |   |   | 93.64  |   |   |   | 91.38  |       |   |   | 93.00      |   |   |   | 92.36 |   |
| March                          |   |   | 96.16  |   |   |   | 93.32  |       |   |   | 94.77      |   |   |   | 94.16 |   |
| April                          |   |   | 99.61  |   |   |   | 92.96  |       |   |   | 97.76      |   |   |   | 97.52 |   |
| May                            |   |   | 103.52 |   |   |   | 97.28  |       |   |   | 100.92     |   |   |   | 100.83 |   |
| June (through June 14 2013)    |   |   | 100.15 |   |   |   | 94.29  |       |   |   | 97.31      |   |   |   | 94.34 |   |

| (1)   | For December 2008 and prior periods, the exchange rate refers to the noon buying rate as reported by the Federal Reserve Bank of New York. For January 2009 and later periods, the exchange rate refers to the foreign exchange rate as set forth in the H.10 statistical release and historical data of the Board of Governors of the Federal Reserve System. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | For fiscal years, calculated from the average of the exchange rates on the last day of each month during the period. For calendar year months, calculated based on the average of daily exchange rates. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| B. | Capitalization and Indebtedness |
|----|---------------------------------|

| C. | Reasons for the Offer and Use of Proceeds |
|----|-------------------------------------------|

----

| D. | Risk Factors |
|----|--------------|

| ·   | a decrease in revenues from our Internet connectivity services for corporate and home use and WAN services because of price reduction pressure and the cancellation of large accounts, due, for example, to a severe price competition, a continued demand by corporate users to cut down costs or a tough competition regarding customer acquisition in a matured consumer market, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease in revenues from our outsourcing services if we fail to successfully differentiate our services from those of our competitors, or fail to provide our customers with competitive total network solutions, or if the service prices fall dramatically, due, for example, to severe price competition, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease in revenues from systems operation and maintenance if the number and the size of systems construction projects which contain continuous systems operation and maintenance work decrease, if we fail to successfully differentiate our technical skills from those of our competitors, if the average revenue per project decreases, if large accounts are cancelled or scaled-down or if service prices fall dramatically, due, for example, to price down pressure, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an inability to achieve anticipated revenue growth for our cloud computing services in which we have been continuously investing in facilities such as data centers, servers and other equipments if we fail to successfully differentiate our services from those of our competitors, if we have serious system troubles and interruptions with our cloud computing services that damage our credibility or cause customers to question the reliability of our services, if market prices for the services we provide fall dramatically, for example, due to severe price competition beyond expected levels, or if Japanese companies strongly stick to the current systems and fail to adopt cloud computing services to the extent currently anticipated, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease in systems construction revenues and lower margins if we fail to successfully differentiate our technical skills from those of our competitors, if corporate customers put off or stop placing orders with us, if the number of systems construction projects decreases, if the average revenues from each projects decreases, or if there are problems during the systems construction phase and such systems construction becomes unprofitable or incurs a loss, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | an inability to achieve anticipated revenue growth for our overseas business in which we have been adding overseas subsidiaries and facilities if we fail to build good relationships with our domestic customers who are increasing global transactions, if our domestic customers refrain from operating businesses overseas, if we fail to differentiate our services and solutions from those of our competitors, or if we fail to adequately control overseas subsidiaries and comply with necessary regulations, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase in backbone costs due to increased volume of Internet traffic and tightened demands for leasing backbone lines, an increase in cloud computing-related costs due to increased demands, both actual and expected, for cloud computing services, and a decline in the profitability of network services and systems integration if, for example, we invest and contract more network capacity including service facilities than we actually require to serve our customers, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase in expenses and investments for network and cloud computing infrastructure, research and development, back-office systems and other similar investments which we may be forced to make in the future in order to remain competitive, or an increase in expenses relating to the leasing of additional equipment and an increase in amortization and depreciation or loss in disposal, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | failure to control personnel and outsourcing costs if personnel and outsourcing costs increase, or we fail to manage personnel and outsourcing resource effectively or if we fail to raise enough revenue to cover personnel and outsourcing costs, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase in operating costs and expenses, for example, outsourcing related costs and expenses due to a shortage of human resources in the market, or in electrical power costs due to the rise in electricity prices, or an increase in costs and expenses, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase in SG&A expenses, such as advertising expenses and office rent related expenses, in conjunction with our expected, planned or continued business expansion, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a negative effect on our credibility, corporate image, or revenues and profits if we are unable to provide our services without interruption to customers due, for example, to shortage of power supply, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the recording of an impairment loss related to any mergers and acquisitions on the current and the future intangible assets that are, respectively, subject to amortization such as customer relationships and not subject to amortization such as goodwill as a result of an impairment test, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   |  the recording of impairment losses on available-for-sale securities, nonmarketable equity securities and funds, as well as the decline in the value and trading volume of our holding available-for-sale securities from which we expect gains on sale, and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a negative effect on our revenues and profits if newly established or consolidated subsidiaries cannot achieve our expected levels of revenues or manage costs and expenses in a timely and adequate manner. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | substantially greater financial resources, |
|--------------------|--------------------------------------------|

| ·   | more extensive and well-developed marketing and sales networks, |
|--------------------|-----------------------------------------------------------------|

| ·   | larger technology human resources including application development engineers, |
|--------------------|--------------------------------------------------------------------------------|

| ·   | higher brand recognition among consumers and corporate customers, |
|--------------------|------------------------------------------------------------------------|

| ·   | larger customer bases, and |
|--------------------|----------------------------|

| ·   | more diversified operations which allow profits from some operations to support operations with lower profitability, such as network services, for which we are a competitor. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | sustain downward pricing pressure, including pressure on low-price Internet connectivity services offered to corporate customers, which are our target customers, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | develop, market and sell their services, |
|--------------------|------------------------------------------|

| ·   | adapt quickly to new and changing technologies, |
|--------------------|-------------------------------------------------|

| ·   | obtain new customers, and |
|--------------------|---------------------------|

| ·   | aggressively pursue mergers and acquisitions to enlarge their customer base and market share. |
|--------------------|-----------------------------------------------------------------------------------------------|

----

----

----

----

----

| ·   | rapid technological change, including the shift to new technology-based networks such as IPv6 and cloud computing, |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | frequent new product and service introductions, |
|--------------------|-------------------------------------------------|

| ·   | continually changing customer requirements, and |
|--------------------|-------------------------------------------------|

| ·   | evolving industry standards. |
|--------------------|------------------------------|

----

----

----

Item 

| A.  | History and Development of the Company |
|----------|----------------------------------------|

----

| B.  | Business Overview |
|----------|-------------------|

----

|                              |   |                                                                             |   |
|-----------------------------------|--------|----------------------------------------------------------------------------------|--------|
|                              |   | For the fiscal year ended March 31,(millions of yen, except for percentage data) |   |
|                              |   | 2011                                                                             |   |   | 2012 |   |   | 2013 |   |
| Internet connectivity services    |   | ¥                                                                           | 20,530 |   |   |   | 24.9 | % |   | ¥ | 20,424 |   |   |   | 21.0 | % |   | ¥ | 21,493 |   |   |   | 20.2 | % |
| WAN services                      |   |                                                                             | 16,100 |   |   |   | 19.6 |   |   |   | 25,667 |   |   |   | 26.4 |   |   |   | 25,168 |   |   |   | 23.7 |   |
| Outsourcing services              |   |                                                                             | 15,032 |   |   |   | 18.2 |   |   |   | 17,319 |   |   |   | 17.8 |   |   |   | 18,571 |   |   |   | 17.5 |   |
| Systems construction              |   |                                                                             | 11,937 |   |   |   | 14.5 |   |   |   | 11,997 |   |   |   | 12.3 |   |   |   | 15,825 |   |   |   | 14.9 |   |
| Systems operation and maintenance |   |                                                                             | 17,507 |   |   |   | 21.2 |   |   |   | 19,472 |   |   |   | 20.0 |   |   |   | 21,380 |   |   |   | 20.1 |   |
| Equipment sales                   |   |                                                                             | 796    |   |   |   | 1.0 |   |   |   | 1,112 |   |   |   | 1.1 |   |   |   | 1,491 |   |   |   | 1.4 |   |
| ATM operation business            |   |                                                                             | 516    |   |   |   | 0.6 |   |   |   | 1,324 |   |   |   | 1.4 |   |   |   | 2,320 |   |   |   | 2.2 |   |
| Total revenues:                   |   | ¥                                                                           | 82,418 |   |   |   | 100.0 | % |   | ¥ | 97,315 |   |   |   | 100.0 | % |   | ¥ | 106,248 |   |   |   | 100.0 | % |

----

|                                                               |   | As of March 31, |    |
|--------------------------------------------------------------------|--------|-----------------|---------|
|                                                               |   | 2009            |    |   | 2010 |   |   | 2011 |   |   | 2012 |   |   | 2013 |   |
| Internet connectivity services (corporate use):                    |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |
| IP Service (-99 Mbps)                                              |   |            | 938     |   |   |   | 926 |   |   |   | 908 |   |   |   | 923 |   |   |   | 905 |   |
| IP Service (100 Mbps – 999 Mbps)                             |   |            | 225     |   |   |   | 254 |   |   |   | 305 |   |   |   | 344 |   |   |   | 401 |   |
| IP Service (1 Gbps –)                                        |   |            | 94      |   |   |   | 125 |   |   |   | 126 |   |   |   | 132 |   |   |   | 207 |   |
| IIJ Data Center Connectivity Service                               |   |            | 298     |   |   |   | 315 |   |   |   | 305 |   |   |   | 323 |   |   |   | 306 |   |
| IIJ FiberAccess/F and IIJ DSL/F (Broadband Services)               |   |            | 26,023  |   |   |   | 28,663 |   |   |   | 42,851 |   |   |   | 44,510 |   |   |   | 48,940 |   |
| IIJ Mobile Service (1)                                             |   |            | 19,698  |   |   |   | 32,315 |   |   |   | 40,988 |   |   |   | 46,329 |   |   |   | 62,517 |   |
| Others                                                             |   |            | 1,526   |   |   |   | 1,400 |   |   |   | 1,320 |   |   |   | 1,246 |   |   |   | 1,338 |   |
| Total Internet connectivity service (corporate use) contracts |   |            | 48,802  |   |   |   | 63,998 |   |   |   | 86,803 |   |   |   | 93,807 |   |   |   | 114,614 |   |
| Internet connectivity services (home use) :                        |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Under IIJ Brand                                                    |   |            | 46,901  |   |   |   | 46,900 |   |   |   | 41,176 |   |   |   | 42,721 |   |   |   | 102,256 |   |
| hi-ho                                                              |   |            | 179,786 |   |   |   | 168,223 |   |   |   | 151,828 |   |   |   | 153,901 |   |   |   | 149,000 |   |
| OEM (2)                                                            |   |            | 216,725 |   |   |   | 185,544 |   |   |   | 181,324 |   |   |   | 200,569 |   |   |   | 237,967 |   |
| Total Internet connectivity service (home use) contracts           |   |            | 443,412 |   |   |   | 400,667 |   |   |   | 374,328 |   |   |   | 397,191 |   |   |   | 489,223 |   |

| (1) | IIJ Mobile Service is the number of total contracts of mobile data communication services for corporate use. |
|-----|--------------------------------------------------------------------------------------------------------------|

| (2) | OEM services provided to other service providers. |
|-----|---------------------------------------------------|

| ·   | IP Service and IIJ Data Center Connectivity Service. Our IP Service and Data Center Connectivity Service is a full-scale, high-speed internet access service that connects the customer’s network to our backbone with dedicated access lines. The services are used mainly for corporate headquarters or data centers, where reliable network service is indispensable. The customer chooses the level of service it needs based upon its bandwidth requirements. We currently offer service at speeds ranging from 64 kbps to over 10 Gbps. We believe that business customers will continue to increase their use of the Internet and increasingly rely on the Internet as a business tool: therefore, our Internet connectivity service will continue to be the foundation of our total network solutions offerings. Subscribers pay a monthly fee for the leased local access line from the customer’s location to one of our POPs. The amount of this fee varies depending on the carrier, the distance between the customer’s site and our POPs and its contracted bandwidth. We collect the local access fee from the customer and pay the amount to the carrier. While we prepare and arrange the leased access lines on behalf of customers under our name, the usage fee collected from the customer and paid to the carriers is recorded gross in our consolidated financial statements. For our IP Service, we offer Service Level Agreements (“SLA”) to our customers to better define the quality of services our customers receive. We were the first ISP in Japan to introduce this type of agreement. We are able to offer these SLA due to our high quality and reliable network. Our SLA provides customers with credit against the amount invoiced for the services if our service quality fails to meet the prescribed standards. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Subscribers to our IP Service receive technical support 24 hours a day and seven days a week. We guarantee the performance of the following elements under our SLA: |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ▪   | 100% availability of our network, |
|---------------------|-----------------------------------|

| ▪   | the maximum average latency, or time necessary to transmit a signal, between designated POPs, and |
|---------------------|---------------------------------------------------------------------------------------------------|

| ▪   | prompt notification of outage or disruption. |
|---------------------|----------------------------------------------|

| ·   | IIJ FiberAccess/F and IIJ DSL/F (Broadband Services). IIJ FiberAccess/F and IIJ DSL/F are broadband Internet connectivity services that use “FLET’S” services for fiber optic access and ADSL access provided by NTT East, West and others allowing service on a best-efforts basis. The services are used mainly to connect branch offices and headquarters. We support this service by providing guarantees of latency rates under SLA. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | IIJ Mobile Service. This service provides wireless 3G and LTE Internet connectivity service for corporate customers as a MVNO. We use the wireless networks of NTT DoCoMo and EMOBILE Ltd. as last-one mile access. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Dial-up Access Services. We offer a variety of dial-up access services for corporate use. Our dial-up services allow employees that are out of the office or frequent travelers, to access Internet or their own internal networks through one of our POPs or through our roaming access points. When accessing their internal network, for security purposes, it is usually accessed using the VPN function that is provided by our outsourcing services or systems integration. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other Internet connectivity services. We offer, other than the services mentioned above, services such as IIJ ISDN/F which provides Internet access for ISDN lines, IIJ Line Management/F service that procures “FLET'S” services on behalf of customers and “LaIT” (pronounced "light") service, a brand that offers high-quality services at reasonable prices to small and medium enterprises. The main sales channels for LaIT are through direct sales via online-web sign-up or through sales partners. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Security-related outsourcing services. We offer services that protect customers' internal network systems from unauthorized, illegal access, such as firewall services and security scan services. We also provide secure remote connections to the internal networks. We were the first ISP in Japan to provide firewall services, which we introduced in 1994. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Network-related outsourcing services. We offer Internet-VPN and router rental services such as, IIJ Internet-LAN Service, IIJ SMFsx Service, IIJ Managed VPN PRO Service, SEIL Rental Service and Managed Router Service. IIJ SMFsx Service is based on the patent technology, the SEIL Management Framework (“SMF”) which enables centralized management of network-configuration, administration and maintenance, reducing both configuration and maintenance time and costs for large-scale network construction. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Server-related outsourcing services. We offer services such as web hosting, e-mail hosting, document storage and streaming services. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Data center-related services. We offer, IIJ data center facility services and management and monitoring services. Our Internet data center facility services are co-location services which allow companies to house their servers and routers off-site on our premises. Our Internet data center facilities are leased from third parties such as NTT Communications and are equipped with robust security systems, 24-hours-a-day non-stop power supplies and fire extinguishing systems, and have earthquake-resistant construction and high-speed Internet connectivity with IIJ backbones. We also offer basic monitoring and maintenance services for the equipment. This service enhances reliability because we provide 24-hours-a-day monitoring and have specialized maintenance personnel and facilities. We offer management and monitoring services tailored to our customers’ requirements. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | IIJ GIO/Hosting package. IIJ GIO/Hosting Package is a line-up of services for non-customizable packaged cloud computing service. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other services. Other than the above, we offer customer support and help desk solutions, IP Phone service and other services. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | connecting over a hundred locations such as gas stations, bank branches and retail shops via Internet-VPN, transmission of data over the Internet with an encryption feature and our proprietary SEIL Series routers and SMF, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | construction of large scale e-mail servers or systems to detect or delete e-mails with viruses or spam or record all e-mails incoming to and outgoing from customers, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | online brokerage systems for securities firms, |
|--------------------|------------------------------------------------|

| ·   | construction of websites for online businesses, such as on-line game providers, |
|--------------------|---------------------------------------------------------------------------------|

| ·   | re-construction of overall corporate network systems suited to increased traffic data, |
|--------------------|----------------------------------------------------------------------------------------|

| ·   | construction of voice over IP systems to transmit voice among customer branch offices over the Internet, |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | construction of wireless local area networks, and |
|--------------------|---------------------------------------------------|

| ·   | consultation on corporate network security. |
|--------------------|---------------------------------------------|

----

| ·   | our backbone, which includes leased lines and network equipment, such as routers, |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | POPs in major metropolitan areas in Japan, |
|--------------------|--------------------------------------------|

| ·   | Internet data centers, and |
|--------------------|----------------------------|

| ·   | a network operations center (“NOC”). |
|--------------------|--------------------------------------------------|

----

|                                                            |   | As of March 31, 2012 |   |   | As of March 31, 2013 |   |
|-----------------------------------------------------------------|--------|----------------------|--------|--------|----------------------|--------|
| Number of Contracts comprising the IIJ’s backbone network |   |                 |   |   |                 |   |
| NTT Group                                                       |   |                 | 92     |   |                 |   | 94 |   |
| KDDI                                                            |   |                 | 35     |   |                 |   | 41 |   |
| Others                                                          |   |                 | 25     |   |                 |   | 32 |   |
| Total                                                           |   |                 | 152    |   |                 |   | 167 |   |

|                        |   | For the fiscal year ended March 31, |   |
|-----------------------------|--------|-------------------------------------|--------|
|                        |   | 2009                                |   |   | 2010 |   |   | 2011 |   |   | 2012 |   |   | 2013 |   |
| Backbone cost (million yen) |   | ¥                              | 3,692  |   |   | ¥ | 3,699 |   |   | ¥ | 3,688 |   |   | ¥ | 3,371 |   |   | ¥ | 3,535 |   |

----

----

| Company Name                    |   | Jurisdiction ofIncorporation |   | Proportion of ownershipand voting interest |
|---------------------------------|--------|------------------------------|--------|--------------------------------------------|
| Consolidated Subsidiaries:      |   |                         |   |                                       |
| IIJ Global Solutions Inc.       |   | Japan                        |   | 100.0%                                     |
| Net Care, Inc.                  |   | Japan                        |   | 100.0%                                     |
| hi-ho Inc.                      |   | Japan                        |   | 100.0%                                     |
| Trust Networks Inc.             |   | Japan                        |   |   79.5%                               |
| Net Chart Japan Inc.            |   | Japan                        |   | 100.0%                                     |
| IIJ Innovation Institute Inc.   |   | Japan                        |   | 100.0%                                     |
| IIJ America Inc.                |   | U.S.A.                       |   | 100.0%                                     |
| IIJ Europe Limited              |   | U.K.                         |   |     100.0% (1)              |
| IIJ Global Solutions China Inc. |   | China                        |   |     100.0% (2)              |
| and other six subsidiaries (3)  |   |                         |   |                                       |
| Equity method investees:        |   |                         |   |                                       |
| Stratosphere Inc.               |   | Japan                        |   |   50.0%                               |
| Trinity Inc.                    |   | Japan                        |   |   33.7%                               |
| Internet Multifeed Co.          |   | Japan                        |   |   33.0%                               |
| Internet Revolution Inc.        |   | Japan                        |   |   30.0%                               |

| (1) | IIJ owned 52.8% voting interest directly and 47.2% indirectly through IIJ Exlayer Inc, a 99.9% owned subsidiary of IIJ. Our voting interest is 100.0%, while our ownership interest is 99.9%. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | 100% owned subsidiary of IIJ Global Solutions Inc. |
|-----|----------------------------------------------------|

| (3) | Other six subsidiaries are IIJ Deutschland GmbH, IIJ Exlayer Inc., IIJ Exlayer USA LLC, IIJ Global Solutions Hong Kong Ltd., IIJ Global Solutions Singapore Pte. Ltd. and IIJ Global Solutions (Thailand) Co., Ltd. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                   |   | For the fiscal year ended March 31, |   |
|--------------------------------------------------------|--------|-------------------------------------|--------|
|                                                   |   | 2011                                |   |   | 2012 |   |   | 2013 |   |
|                                                   |   | (millions of yen)                   |   |
| Capital expenditures, including capitalized leases (1) |   | ¥                              | 6,752  |   |   | ¥ | 10,917 |   |   | ¥ | 10,405 |   |

| (1) | Further information regarding capital expenditures, including capitalized leases and a reconciliation to the most directly comparable U.S. GAAP financial measure, can be found in Item 3.A., “Selected Financial Data— Reconciliations of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures.” |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Enterprise Business Divisions 1, 2 and 3 focus on selling total network solutions and work with large corporate clients, including manufacturers, retail companies and telecommunication carriers. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Financial Systems Business Division focuses on selling its total network solutions and work with financial institutions. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·   | Government, Public & Educational Organization Business Division focuses on selling total network solutions and works with governmental institutions, and universities and other schools. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Regional Division focuses on developing and strengthening partnerships with customers in areas other than the Kanto-area. Sales personnel in the branch or sales offices are here in this division. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Business Unit Management Department focuses on management and controlling the above six divisions. It is responsible for the planning and management of sales figures, processes and other information. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Marketing Division focuses mainly on setting the tariff pricing for each of IIJ’s services, makes and conducts promotion plans on its products and services as well as strengthening partnerships with sales agents such as systems integrators to expand our marketing reach. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Solution Division focuses on developing solution services including cloud computing related solutions as well as conducting sales and integration, operation and maintenance together with each of the Business Unit Division. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Global Business Division is in charge of planning and administration of overseas business development. |
|--------------------|--------------------------------------------------------------------------------------------------------|

----

| ·   | research and development of the basic technologies for cloud computing-related technology including SDN platform software, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| ·   | research and development of methodology to construct a virtualized large-scale data center with an assembly of a small-scale data center, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | continued research and improvement of a next generation outside-air-cooled container unit data center, |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | research of Internet traffic monitoring and management, |
|--------------------|---------------------------------------------------------|

| ·   | research relating to the behavior of Internet routing systems, |
|--------------------|----------------------------------------------------------------|

| ·   | research and development of IPv6-based communication technology, |
|--------------------|------------------------------------------------------------------|

| ·   | continued improvement of our SEIL router and SMF, systems which we developed specifically to be integrated into IIJ’s network-related services, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | research and analysis of the characteristics of captured malware and spam mails, and their countermeasures, |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| ·   | research relating to the methodology of configuration of routers and other servers, and |
|--------------------|-----------------------------------------------------------------------------------------|

| ·   | research and development of the Distributed and Parallel Processing Platform for very large data sets |
|--------------------|-------------------------------------------------------------------------------------------------------|

----

----

| (1) | The Exempted Business is the business related to facilities supplying broadcast services, wire radio broadcasting, wire broadcast telephone services, wire television broadcasting services, or the acceptance of applications for the use of the cable television broadcasting facility. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The “telecommunications business” is defined as: |
|-----|--------------------------------------------------------------|

| (i)   | the telecommunications business which exclusively provides telecommunications services to a single person (except one being a telecommunications carrier); |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii)   |  the telecommunications business which provides telecommunications services with telecommunications facilities, a part of which is to be established on the same premises (including the areas regarded as the same premises) or in the same building where any other part thereof is also to be established, or with telecommunications facilities which are below the standards stipulated in the ministerial ordinance of the MIC; and |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii)   |  the telecommunications business installing no telecommunications circuit facilities which provides telecommunications services other than the telecommunications services which intermediate communications of others by using telecommunications facilities; |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Registration |
|--------------------|--------------|

| ·   | Notification |
|--------------------|--------------|

----

| ·   | Our business is unregulated, in general, as IIJ does not fall under either Basic Telecommunications Services or Designated Telecommunications Services described below. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Prior notification to the Minister of the MIC is required for Basic Telecommunications Services (universal services specified by the ministerial ordinance of the MIC, i.e., analog or public fixed telephone services, analog or public remote island telephone services, and analog or public emergency call telephone services). Providing these telecommunications services other than pursuant to the terms and conditions and charges notified to the Minister of the MIC is prohibited. Provided that the charges may be discounted or waived pursuant to the exception criteria provided under the ministerial ordinance of the MIC (i.e., an emergency call for the safety of ships and airplanes, an emergency call for the safety of personal life and property in case of natural disaster, calls to police agencies regarding crimes, and calls to the fire brigade (“Emergency Exception”) |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Prior notification to the Minister of the MIC is required for Designated Telecommunications Services (i.e., services provided through Category I Designated Telecommunications Facilities and which meet the criteria provided by the ministerial ordinance of the MIC as the services for which the guarantee of the terms and conditions and charges are necessary for the protection of users, such as the basic fee). “Category I Designated Telecommunications Facilities” are the facilities which meet the criteria specified by the ministerial ordinance of the MIC as being the fixed telecommunications facilities used for the services which are offered to a substantial percentage of users in a given area, and which are currently only the facilities of NTT East and NTT West. Providing these telecommunications services other than pursuant to the terms and conditions and charges notified to the Minister of the MIC is prohibited, unless the telecommunications carrier and the user agree otherwise, provided that the charges may be discounted or waived in Emergency Cases, for emergency calls for injured persons in a ship, and for use by a police agency, fire brigade and broadcasting companies. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Minister of the MIC at least once a year notifies the telecommunications carrier providing the Specific Designated Telecommunications Services specified by the ministerial ordinance of the MIC (i.e., Designated Telecommunications Services other than voice services, except for telephone and general digital services and data transmission services) the price cap regarding such services. The telecommunications carriers will be required to obtain approval from the Minister of the MIC if a proposed change in charges exceeds the price cap. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our business is unregulated, in general, as IIJ does not fall under either Category I Designated Telecommunications Facilities or Category II Designated Telecommunications Facilities described below. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Approval from the Minister of the MIC required for Category I Designated Telecommunications Facilities. |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | Prior notification to the Minister of the MIC required for Category II Designated Telecommunications Facilities (i.e., the facilities which meet the criteria provided by the ministerial ordinance of the MIC as being the mobile telecommunications facilities used for the services which are offered to a substantial percentage of users in a given area, and which are currently NTT DoCoMo, Okinawa Cellular and KDDI). |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | A telecommunications carrier that installs telecommunications circuit facilities must maintain its telecommunications facilities (except telecommunications facilities stipulated in the ministerial ordinance of the MIC as those having a minor influence on the users' benefit in the cases of damage or failure thereof) in conformity with the technical standards provided in the ministerial ordinance of the MIC. Such telecommunications carriers shall confirm that its telecommunications facilities are in compliance with the technical standards specified in the ministerial ordinance of the MIC. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A telecommunications carrier that provides Basic Telecommunications Services must maintain its telecommunications facilities for provision of Basic Telecommunications Services in conformity with the technical standards provided in the ministerial ordinance of the MIC. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Telecommunications carriers that install telecommunications circuit facilities or provide Basic Telecommunications Services must establish their own administrative rules in accordance with the ministerial ordinance of the MIC in order to secure the reliable and stable provision of telecommunications services. These administrative rules must regulate the operation and manipulation of telecommunications facilities and the safeguarding, inspecting and testing regarding the construction, maintenance and administration of telecommunications facilities, etc. as provided for by the ministerial ordinance of the MIC. Such administrative rules must be submitted to the Minister of the MIC prior to the commencement of operations, and changes must be submitted to the Minister of the MIC once after they are implemented without delay. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Minister of the MIC may, if it is deemed that business activities of a telecommunications carrier fall under inappropriate cases set forth in the Telecommunications Business Law, insofar as it is necessary to ensure the users’ benefit or the public interest, order the telecommunications carrier to take actions to improve operations methods or other measures. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A telecommunications carrier which is engaged, or intends to engage, in the telecommunications business by installing telecommunications circuit facilities and which wishes to have the privileged use of land or other public utilities for circuit facilities deployment, must obtain the authorization on the entire or a part of the relevant telecommunications business by the Minister of the MIC. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Post facto notification to the Minister of the MIC without delay is required. |
|--------------------|-------------------------------------------------------------------------------|

| ·   | Post facto notification to the Minister of the MIC without delay is required. Prior announcement of withdrawals to service users is required in accordance with ministerial ordinances of the MIC. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Prior notification is required under the Foreign Exchange and Foreign Trade Law for the acquisition of shares of telecommunications carriers to which registration for start-up services is applicable. This is not applicable to purchasers of ADSs. The one-third foreign ownership restriction is applicable only to NTT East and NTT West. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| C. | Organizational Structure |
|----|--------------------------|

| D. | Property, Plants and Equipment |
|----|--------------------------------|

|                                                                 |   | As of March 31    |    |
|----------------------------------------------------------------------|--------|-------------------|---------|
|                                                                 |   | 2012              |    |   | 2013 |   |   | 2013 |   |
|                                                                 |   | (millions of yen) |    |   | (thousands ofU.S. dollars) |   |
| Data communications equipment                                        |   | ¥            | 5,791   |   |   | ¥ | 6,746 |   |   | $ | 71,645 |   |
| Office and other equipment                                           |   |              | 939     |   |   |   | 2,130 |   |   |   | 22,623 |   |
| Buildings                                                            |   |              | 490     |   |   |   | 669 |   |   |   | 7,101 |   |
| Leasehold improvements                                               |   |              | 2,513   |   |   |   | 2,666 |   |   |   | 28,320 |   |
| Capitalized software                                                 |   |              | 15,515  |   |   |   | 18,466 |   |   |   | 196,110 |   |
| Assets under capital leases, primarily data communications equipment |   |              | 20,181  |   |   |   | 21,865 |   |   |   | 232,211 |   |
| Total                                                                |   |              | 45,429  |   |   |   | 52,542 |   |   |   | 558,010 |   |
| Less accumulated depreciation and amortization                       |   |              | (25,693 | ) |   |   | (29,516 | ) |   |   | (313,471 | ) |
| Property and equipment- net                                          |   | ¥            | 19,736  |   |   | ¥ | 23,026 |   |   | $ | 244,539 |   |

Item 

| A.  | Operating Results |
|----------|-------------------|

----

----

|                                                                                                                 |   | Fiscal year ended March 31,                  |   |
|----------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                                                 |   |                                         |   |   |   |   |   |   |   |
|                                                                                                                 |   | 2011                                         |   |   | 2012 |   |   | 2013 |   |
|                                                                                                                 |   | (millions of yen except for percentage data) |   |   | (thousandsof U.S.dollars (1)) |   |
| REVENUES:                                                                                                            |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Network services:                                                                                                    |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Internet connectivity services (corporate use)                                                                       |   | ¥                                       | 14,005 |   |   |   | 17.0 | % |   | ¥ | 14,707 |   |   |   | 15.1 | % |   | ¥ | 16,027 |   |   |   | 15.1 | % |   | $ | 170,212 |   |
| Internet connectivity services (home use)                                                                       |   |                                         | 6,525  |   |   |   | 7.9 |   |   |   | 5,717 |   |   |   | 5.9 |   |   |   | 5,466 |   |   |   | 5.1 |   |   |   | 58,052 |   |
| WAN services                                                                                                         |   |                                         | 16,100 |   |   |   | 19.6 |   |   |   | 25,667 |   |   |   | 26.4 |   |   |   | 25,168 |   |   |   | 23.7 |   |   |   | 267,294 |   |
| Outsourcing services                                                                                                 |   |                                         | 15,032 |   |   |   | 18.2 |   |   |   | 17,319 |   |   |   | 17.8 |   |   |   | 18,571 |   |   |   | 17.5 |   |   |   | 197,224 |   |
| Total                                                                                                                |   |                                         | 51,662 |   |   |   | 62.7 |   |   |   | 63,410 |   |   |   | 65.2 |   |   |   | 65,232 |   |   |   | 61.4 |   |   |   | 692,782 |   |
| Systems integration:                                                                                                 |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Systems construction                                                                                                 |   |                                         | 11,937 |   |   |   | 14.5 |   |   |   | 11,997 |   |   |   | 12.3 |   |   |   | 15,825 |   |   |   | 14.9 |   |   |   | 168,064 |   |
| Systems operation and maintenance                                                                                    |   |                                         | 17,507 |   |   |   | 21.2 |   |   |   | 19,472 |   |   |   | 20.0 |   |   |   | 21,380 |   |   |   | 20.1 |   |   |   | 227,062 |   |
| Total                                                                                                                |   |                                         | 29,444 |   |   |   | 35.7 |   |   |   | 31,469 |   |   |   | 32.3 |   |   |   | 37,205 |   |   |   | 35.0 |   |   |   | 395,126 |   |
| Equipment sales                                                                                                      |   |                                         | 796    |   |   |   | 1.0 |   |   |   | 1,112 |   |   |   | 1.1 |   |   |   | 1,491 |   |   |   | 1.4 |   |   |   | 15,834 |   |
| ATM operation business                                                                                               |   |                                         | 516    |   |   |   | 0.6 |   |   |   | 1,324 |   |   |   | 1.4 |   |   |   | 2,320 |   |   |   | 2.2 |   |   |   | 24,640 |   |
| Total revenues                                                                                                       |   |                                         | 82,418 |   |   |   | 100.0 |   |   |   | 97,315 |   |   |   | 100.0 |   |   |   | 106,248 |   |   |   | 100.0 |   |   |   | 1,128,382 |   |
|                                                                                                                 |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| COST AND EXPENSES:                                                                                                   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Network services:                                                                                                    |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Backbone cost                                                                                                        |   |                                         | 3,688  |   |   |   | 4.5 |   |   |   | 3,371 |   |   |   | 3.5 |   |   |   | 3,535 |   |   |   | 3.3 |   |   |   | 37,545 |   |
| Local access line cost                                                                                               |   |                                         | 16,751 |   |   |   | 20.3 |   |   |   | 23,004 |   |   |   | 23.6 |   |   |   | 22,314 |   |   |   | 21.0 |   |   |   | 236,980 |   |
| Other connectivity cost                                                                                              |   |                                         | 346    |   |   |   | 0.4 |   |   |   | 351 |   |   |   | 0.4 |   |   |   | 383 |   |   |   | 0.4 |   |   |   | 4,063 |   |
| Depreciation and amortization                                                                                        |   |                                         | 3,455  |   |   |   | 4.2 |   |   |   | 3,170 |   |   |   | 3.3 |   |   |   | 2,945 |   |   |   | 2.8 |   |   |   | 31,277 |   |
| Other                                                                                                                |   |                                         | 17,438 |   |   |   | 21.2 |   |   |   | 20,089 |   |   |   | 20.6 |   |   |   | 21,515 |   |   |   | 20.3 |   |   |   | 228,497 |   |
| Total cost of network services                                                                                       |   |                                         | 41,678 |   |   |   | 50.6 |   |   |   | 49,985 |   |   |   | 51.4 |   |   |   | 50,692 |   |   |   | 47.8 |   |   |   | 538,362 |   |
|                                                                                                                 |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of systems integration:                                                                                         |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of equipment sales related to systems  integration                                                    |   |                                         | 3,321  |   |   |   | 4.1 |   |   |   | 3,580 |   |   |   | 3.7 |   |   |   | 5,006 |   |   |   | 4.7 |   |   |   | 53,168 |   |
| Other                                                                                                                |   |                                         | 19,146 |   |   |   | 23.2 |   |   |   | 21,399 |   |   |   | 22.0 |   |   |   | 25,419 |   |   |   | 23.9 |   |   |   | 269,950 |   |
| Total cost of systems integration                                                                                    |   |                                         | 22,467 |   |   |   | 27.3 |   |   |   | 24,979 |   |   |   | 25.7 |   |   |   | 30,425 |   |   |   | 28.6 |   |   |   | 323,118 |   |
| Cost of equipment sales                                                                                              |   |                                         | 683    |   |   |   | 0.8 |   |   |   | 980 |   |   |   | 1.0 |   |   |   | 1,318 |   |   |   | 1.2 |   |   |   | 14,001 |   |
| Cost of ATM operation business                                                                                       |   |                                         | 1,000  |   |   |   | 1.2 |   |   |   | 1,382 |   |   |   | 1.4 |   |   |   | 1,959 |   |   |   | 1.8 |   |   |   | 20,812 |   |
| Total cost                                                                                                           |   |                                         | 65,828 |   |   |   | 79.9 |   |   |   | 77,326 |   |   |   | 79.5 |   |   |   | 84,395 |   |   |   | 79.4 |   |   |   | 896,293 |   |
| Sales and marketing                                                                                                  |   |                                         | 6,616  |   |   |   | 8.0 |   |   |   | 7,947 |   |   |   | 8.2 |   |   |   | 8,059 |   |   |   | 7.6 |   |   |   | 85,583 |   |
| General and administrative                                                                                           |   |                                         | 5,479  |   |   |   | 6.7 |   |   |   | 5,300 |   |   |   | 5.4 |   |   |   | 5,632 |   |   |   | 5.3 |   |   |   | 59,817 |   |
| Research and development                                                                                             |   |                                         | 354    |   |   |   | 0.4 |   |   |   | 389 |   |   |   | 0.4 |   |   |   | 410 |   |   |   | 0.4 |   |   |   | 4,354 |   |
| Total cost and expenses                                                                                              |   |                                         | 78,277 |   |   |   | 95.0 |   |   |   | 90,962 |   |   |   | 93.5 |   |   |   | 98,495 |   |   |   | 92.7 |   |   |   | 1,046,047 |   |
| OPERATING INCOME                                                                                                     |   |                                         | 4,141  |   |   |   | 5.0 |   |   |   | 6,353 |   |   |   | 6.5 |   |   |   | 7,753 |   |   |   | 7.3 |   |   |   | 82,335 |   |
| OTHER INCOME (EXPENSES):                                                                                             |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividend income                                                                                                      |   |                                         | 44     |   |   |   | 0.1 |   |   |   | 48 |   |   |   | 0.0 |   |   |   | 47 |   |   |   | 0.1 |   |   |   | 500 |   |
| Interest income                                                                                                      |   |                                         | 23     |   |   |   | 0.0 |   |   |   | 35 |   |   |   | 0.0 |   |   |   | 26 |   |   |   | 0.0 |   |   |   | 273 |   |
| Interest expense                                                                                                     |   |                                         | (268   | ) |   |   | (0.3 | ) |   |   | (299 | ) |   |   | (0.3 | ) |   |   | (287 | ) |   |   | (0.3 | ) |   |   | (3,051 | ) |
| Foreign exchange gain (loss), net                                                                                    |   |                                         | (32    | ) |   |   | (0.0 | ) |   |   | (5 | ) |   |   | (0.0 | ) |   |   | 112 |   |   |   | 0.1 |   |   |   | 1,191 |   |
| Net gain (loss) on sales of other investments                                                                        |   |                                         | 105    |   |   |   | 0.1 |   |   |   | (3 | ) |   |   | (0.0 | ) |   |   | 14 |   |   |   | 0.0 |   |   |   | 144 |   |
| Impairment of other investments                                                                                      |   |                                         | (180   | ) |   |   | (0.2 | ) |   |   | (160 | ) |   |   | (0.2 | ) |   |   | (20 | ) |   |   | (0.0 | ) |   |   | (210 | ) |
| Other—net                                                                                                      |   |                                         | 1      |   |   |   | 0.0 |   |   |   | 7 |   |   |   | 0.0 |   |   |   | 112 |   |   |   | 0.1 |   |   |   | 1,198 |   |
| Other income (expenses) — net                                                                                  |   |                                         | (307   | ) |   |   | (0.3 | ) |   |   | (377 | ) |   |   | (0.4 | ) |   |   | 4 |   |   |   | 0.0 |   |   |   | 45 |   |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES—(FORWARD) |   |                                         | 3,834  |   |   |   | 4.7 |   |   |   | 5,976 |   |   |   | 6.1 |   |   |   | 7,757 |   |   |   | 7.3 |   |   |   | 82,380 |   |

----

|                                                                                                                                                                                                                                                                                       |   |   | Fiscal year ended March 31,                  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                       |   |   |                                         |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                       |   |   | 2011                                         |   |   |   | 2012 |   |   |   | 2013 |   |
|                                                                                                                                                                                                                                                                                       |   |   | (millions of yen except for percentage data) |   |   |   | (thousandsof U.S.dollars (1)) |   |
|                                                                                                                                                                                                                                                                                       |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES—(FORWARD)                                                                                                                                                                       |   |   | 3,834                                        |   |   |   | 4.7 |   |   |   | 5,976 |   |   |   | 6.1 |   |   |   | 7,757 |   |   |   | 7.3 |   |   |   | 82,380 |   |
| INCOME TAX EXPENSE                                             |   |   | 956                                          |   |   |   | 1.2 |   |   |   | 2,525 |   |   |   | 2.6 |   |   |   | 2,608 |   |   |   | 2.5 |   |   |   | 27,693 |   |
| EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES                                                                                                                                                                                                                                            |   |   | 123                                          |   |   |   | 0.1 |   |   |   | 124 |   |   |   | 0.1 |   |   |   | 168 |   |   |   | 0.2 |   |   |   | 1,784 |   |
| NET INCOME                                                     |   |   | 3,001                                        |   |   |   | 3.6 |   |   |   | 3,575 |   |   |   | 3.6 |   |   |   | 5,317 |   |   |   | 5.0 |   |   |   | 56,471 |   |
| LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS                                                                                                                                                                                                                           |   |   | 202                                          |   |   |   | 0.3 |   |   |   | 66 |   |   |   | 0.1 |   |   |   | (16 | ) |   |   | 0.0 |   |   |   | (177 | ) |
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC                                                                                                                                                                                                                                   |   | ¥ | 3,203                                        |   |   |   | 3.9 | % |   | ¥ | 3,641 |   |   |   | 3.7 | % |   | ¥ | 5,301 |   |   |   | 5.0 | % |   | $ | 56,294 |   |

| (1)   | The U.S. dollar amounts represent translation of yen amounts at the rate of ¥94.16 = U.S.$1.00 which was the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York prevailing as of March 29, 2013. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Internet connectivity services for corporate use. Revenues for Internet connectivity services for corporate use depend on customers’ bandwidth usage and the number of contracts for connectivity services. The revenues increased by 9.0% to ¥16.0 billion for the fiscal year ended March 31, 2013 from ¥14.7 billion for the previous fiscal year. The IP connectivity service revenue increased by 9.9% to ¥10.2 billion for the fiscal year ended March 31, 2013 from ¥9.3 billion for the previous fiscal year. IIJ Mobile service revenues increased by 19.3% to ¥2.4 billion for the fiscal year ended March 31, 2013 from ¥2.0 billion for the previous fiscal year. Broadband services increased by 0.6% to ¥3.2 billion for the fiscal year ended March 31, 2013 from ¥3.2 billion for the previous fiscal year. Although we do not expect prices of Internet connectivity services to increase significantly in the fiscal year ending March 31, 2014, we believe that customer demand, especially network business operators demand, for broader bandwidth will continue contributing to the revenue growth as the use of broadband by corporate customers expands. We will also focus on acquiring new customers and contracts as well as increasing the bandwidth usage of existing customers by maintaining the quality of our services to differentiate them from those of our competitors. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Internet connectivity services for home use. Revenues for Internet connectivity services for home use depend on the size of our customer base and pricing. For the fiscal year ended March 31, 2013, revenues decreased by 4.4% to ¥5.5 billion from ¥5.7 billion for the previous fiscal year mainly due to the continuous cancellation of outdated network service by hi-ho. For the fiscal year ended March 31, 2013, the revenues from hi-ho brand services decreased by 17.4% from the previous fiscal year, while the revenues from IIJ brand services increased by 48.2% from the previous fiscal year. For the fiscal year ending March 31, 2014, while we will continue to experience the cancellation of outdated network services, LTE service contracts should continue to accumulate. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | WAN services. The WAN services that we offer are closed network services using connectivity such as Ethernet and dedicated access lines, and are mainly provided by IIJ-Global and IIJ. Revenues for WAN services depend on the number of contracted lines for WAN services and the customers’ bandwidth usage. For the fiscal year ended March 31, 2013, with the cancellation and price reduction in some contracts, revenues decreased by 1.9% to ¥25.2 billion from ¥25.7 billion for the previous fiscal year. For the fiscal year ending March 31, 2014, we may continue to experience cancellation and price reduction in some contracts while we anticipate to accumulate new contracts. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Outsourcing services. For outsourcing services, we are currently offering security-related, network-related, server-related, data center-related outsourcing services and cloud computing services such as the IIJ GIO/Hosting Package. Examples of our outsourcing services include, among others, firewall service, email service, web hosting service, anti-DDoS attack protection service, internet-VPN service and router rental services, which are provided mainly to our internet connectivity customer base. Our revenues depend on our ability to cross-sell our existing outsourcing services, add new features to existing outsourcing services and introduce new services. For the fiscal year ended March 31, 2013, our outsourcing services revenues increased by 7.2% to ¥18.6 billion from ¥17.3 billion for the previous fiscal year as a result of steady usage growth of each of our outsourcing services and the continuous growth from IIJ GIO/Hosting Package. We believe that corporate customers will increasingly rely on the broader range of our outsourcing services to enhance their productivity and to reduce costs. As a result, we expect our revenue from outsourcing services to continue to grow. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| ·   | Internet connectivity services for corporate use. Revenues for Internet connectivity services for corporate use depend on the number of contracts for connectivity services and customers’ bandwidth usage. For the fiscal year ended March 31, 2012, IP service revenues increased as the number of new contracts and volume charge revenues increased. As a result, revenues increased by 5.0% to ¥14.7 billion for the fiscal year ended March 31, 2012 from ¥14.0 billion for the previous fiscal year. IP connectivity service revenue increased by 3.8% to ¥9.3 billion for the fiscal year ended March 31, 2012 from ¥9.0 billion for the previous fiscal year. IIJ Mobile service increased by 15.8% to ¥2.0 billion for the fiscal year ended March 31, 2012 from ¥1.7 billion for the previous fiscal year. Broadband services increased by 3.4% to ¥3.2 billion for the fiscal year ended March 31, 2012 from ¥3.0 billion for the previous fiscal year. Although we do not expect prices of Internet connectivity services to increase significantly in the fiscal year ending March 31, 2013, we believe that customer demand for higher bandwidth and the increase in the number of contracts will continue contributing to revenue growth as the use of broadband by corporate customers expands. We will also focus on acquiring new customers as well as to increase the use bandwidth of existing customers by maintaining the quality of our services to differentiate them from those of our competitors. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Internet connectivity services for home use. Revenues for Internet connectivity services for home use depend on the size of our customer base and pricing. For the fiscal year ended March 31, 2012, despite the introduction of new services, for example, WiMAX and LTE services, revenues decreased by 12.4% to ¥5.7 billion from ¥6.5 billion for the previous fiscal year due to the continuous cancellation of outdated network services. Revenues from hi-ho and IIJ brand services for the fiscal year ended March 31, 2012 decreased compared to the previous fiscal year by 15.5% and 7.8%, respectively. For the fiscal year ending March 31, 2013, while we will continue to introduce new services, the decreasing trend in revenues may continue for the time being. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | WAN services. The WAN services that we offer are closed network services using connectivity such as Ethernet and dedicated access lines, and are mainly provided by IIJ-Global and IIJ. Revenues for WAN services depend on the number of contracted lines for WAN services and the customers’ bandwidth usage. For the fiscal year ended March 31, 2012, with the full year contribution from IIJ-Global and the increase in number of new contracts from IIJ’s WAN services, revenues increased by 59.4% to ¥25.7 billion from ¥16.1 billion for the previous fiscal year. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Outsourcing services. For outsourcing services, we are currently offering security-related, network-related, server-related, data center-related outsourcing services and cloud computing services such as the IIJ GIO/Hosting Package. Examples of our outsourcing services include, among others, firewall service, email service, web hosting service, anti-DDoS attack protection service, internet-VPN service and router rental services, which are provided mainly to our internet connectivity customer base. Our revenues depend on our ability to cross-sell our existing outsourcing services, add new features to existing outsourcing services and introduce new services. For the fiscal year ended March 31, 2012, our outsourcing services revenues increased by 15.2% to ¥17.3 billion from ¥15.0 billion for the previous fiscal year as a result of steady usage growth of each of our outsourcing services and the continuous growth from IIJ GIO/Hosting Package. We believe that corporate customers will increasingly rely on the broader range of our outsourcing services to enhance their productivity and to reduce costs. As a result, we expect our revenue from outsourcing services to continue to grow. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

|                                             |   | For the fiscal year ended March 31, |   |
|--------------------------------------------------|--------|-------------------------------------|--------|
|                                             |   | 2011                                |   |   | 2012 |   |   | 2013 |   |   | 2013 |   |
|                                             |   | (millions of yen)                   |   |   | (thousands of U.S.dollars) |   |
| Revenues:                                        |   |                                |   |   |   |   |   |   |   |   |   |   |
| Network service and systems integration business |   | ¥                              | 82,357 |   |   | ¥ | 96,497 |   |   | ¥ | 104,487 |   |   | $ | 1,109,676 |   |
| ATM operation business                           |   |                                | 516    |   |   |   | 1,324 |   |   |   | 2,320 |   |   |   | 24,640 |   |
| Elimination                                      |   |                                | 455    |   |   |   | 506 |   |   |   | 559 |   |   |   | 5,934 |   |
| Total                                            |   |                                | 82,418 |   |   |   | 97,315 |   |   |   | 106,248 |   |   |   | 1,128,382 |   |
| Operating income (loss):                         |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Network service and systems integration business |   |                                | 4,813  |   |   |   | 6,631 |   |   |   | 7,629 |   |   |   | 81,026 |   |
| ATM operation business                           |   |                                | (643   | ) |   |   | (194 | ) |   |   | 239 |   |   |   | 2,539 |   |
| Elimination                                      |   |                                | 29     |   |   |   | 84 |   |   |   | 115 |   |   |   | 1,230 |   |
| Total                                            |   | ¥                              | 4,141  |   |   | ¥ | 6,353 |   |   | ¥ | 7,753 |   |   | $ | 82,335 |   |

----

----

| ・   | System construction services ― include all or some of the following elements depending on arrangements to meet each of our customer's requirements: consulting, project planning, system design, and development of network systems. These services also include the installation of software as well as configuration and installation of hardware. |
|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ・   | Software ― we resell third-party software such as Oracle and Windows to our customers, which are installed by us during the system development process. |
|----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ・   | Hardware ― we also resell third-party hardware, primarily servers, switches and routers, which we install during the system development process. The hardware is generic hardware that is often sold by third party manufacturers and resellers. |
|----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ・   | Monitoring and operating service ― we monitor our customer's network activity and internet connectivity to detect and report problems. We also provide constant data backup services. |
|----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ・   | Hardware and software maintenance service ―we repair or replace any malfunctioning parts of hardware. We examine the fault of software and provide the suitable solution to customers. |
|----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ・   | Revenue allocated to system construction services is accounted for using contract accounting. System construction service revenues, which are generally completed within three months, are recognized based on the completed-contract method in compliance with Accounting Standards Codification (“ASC”) 605-35-25-92 because the Company is unable to bill customers and the title of constructed network system is not transferred to customer unless customers are satisfied with and accept the completed systems. |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ・   | Revenue related to the hardware and software essential to the hardware product’s functionality is not recognized until customer acceptance is received because title to the hardware and software do not transfer to our customers until formal acceptance is received. |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ・   | Revenue related to undelivered non-software services (monitoring, operating and hardware maintenance Services) is recognized on a straight-line basis over the contract period. |
|----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Item                                            |   | Useful Lives                                                        |
|-------------------------------------------------|--------|---------------------------------------------------------------------|
| Data communications, office and other equipment |   | 3 to 20 years                                                  |
| Buildings                                       |   |         20 years                 |
| Leasehold improvements                          |   |  8 to 20 years                                            |
| Capitalized software                            |   |           5 years |
| Capital leases                                  |   |    4 to 6 years                                      |

----

----

| ·   | significant decline in the market value of an asset, |
|--------------------|------------------------------------------------------|

| ·   | current period operating cash flow loss, |
|--------------------|------------------------------------------|

| ·   | introduction of competing technologies or services, |
|--------------------|-----------------------------------------------------|

| ·   | significant underperformance of expected or historical cash flows, |
|--------------------|--------------------------------------------------------------------|

| ·   | significant or continuing decline in subscribers, |
|--------------------|---------------------------------------------------|

| ·   | changes in the manner or use of an asset, |
|--------------------|-------------------------------------------|

| ·   | disruptions in the use of network equipment under capital lease arrangements, and |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | other negative industry or economic trends. |
|--------------------|---------------------------------------------|

----

| ・ | A significant deterioration in the earnings performance or business prospects of the investee. |
|----------|------------------------------------------------------------------------------------------------|

| ・   | A significant adverse change in the regulatory, economic, or technological environment of the investee. |
|----------------------|---------------------------------------------------------------------------------------------------------|

| ・   | A significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates. |
|----------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| ・   | A recent example of new issuance of security, in which the issue price is less than our cost. |
|----------------------|-----------------------------------------------------------------------------------------------|

----

| Change in Assumption                                          | Pre-Tax PBO | Pension Expense | Equity (Net of Tax) |
|---------------------------------------------------------------|-------------|-----------------|---------------------|
| (millions of yen)                                             |
| 50 basis point increase/decrease in discount rate             | (278)/308   | (25)/41         | 15/(26)             |
| 50 basis point increase/decrease in expected return on assets | -    | (10)/10         | -/(6)        |

----

----

----

| B. | Liquidity and Capital Resources |
|----|---------------------------------|

|                                                         |   | For the fiscal year ended March 31, |   |
|--------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                         |   | 2011                                |   |   | 2012 |   |   | 2013 |   |
|                                                         |   | (millions of yen)                   |   |
| Capital expenditures, including capitalized leases (1)  |   | ¥                              | 6,752  |   |   | ¥ | 10,917 |   |   | ¥ | 10,405 |   |

| (1) | Further information regarding capital expenditures, including capitalized leases and a reconciliation to the most directly comparable U.S. GAAP financial measure, can be found in Item 3.A., “Selected Financial Data— Reconciliation of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures.” |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                                                                                                                                                                                                 |   |                     |   |   | Payment due by period |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|--------|--------|-----------------------|--------|
|                                                                                                                                                                                                                                                                                                 |   | (millions of yen)        |   |
|                                                                                                                                                                                                                                                                                                 |   | Total contractual amount |   |   | Less than 1 year |   |   | 1 to 3 years |   |   | 3 to 5 years |   |   | More than 5 years |   |
| Connectivity lines operating leases                                                                                                                                                                                                                                                                  |   | ¥                   | 78     |   |                  | ¥ | 76 |   |   | ¥ | 2 |   |   | ¥   | - |   |   | ¥   | - |   |
| Other operating leases                                              |   |                     | 5,346  |   |                  |   | 2,381 |   |   |   | 2,445 |   |   |   | 418 |   |   |   | 102 |   |
| Capital leases                                                      |   |                     | 9,147  |   |                  |   | 3,655 |   |   |   | 4,846 |   |   |   | 646 |   |   |   | 0 |   |
| Total minimum lease payments (1)                                                                                                                                                                                                                                                                     |   | ¥                   | 14,571 |   |                  | ¥ | 6,112 |   |   | ¥ | 7,293 |   |   | ¥ | 1,064 |   |   | ¥ | 102 |   |
|                                                                                                                                                                                                                                                                                                 |   |                     |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1) | See Note 9 “Leases” to our consolidated financial statements included in this annual report. |
|-----|----------------------------------------------------------------------------------------------------------|

----

|                  |   | Millions of Yen |   |   | Thousands of U.S. Dollars |   |
|-----------------------|--------|-----------------|--------|--------|---------------------------|--------|
| Year ending March 31: |   |            |   |   |                      |   |
| 2014                  |   | ¥          | 1,010  |   |                      | $      | 10,726 |   |
| 2015                  |   |            | 980    |   |                      |   | 10,408 |   |
| Total                 |   | ¥          | 1,990  |   |                      | $      | 21,134 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | Fiscal year ended March 31, |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 2011                        |    |   | 2012 |   |   | 2013 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | (millions of yen)           |    |
| Net cash provided by operating activities                                                                  |   | ¥                      | 12,564  |   |   | ¥ | 11,659 |   |   | ¥ | 9,639 |   |
| Net cash used in investing activities                                                                      |   |                        | (13,493 | ) |   |   | (5,954 | ) |   |   | (5,946 | ) |
| Net cash provided by (used in) financing activities                                                                                                                                                                                                                                                                                                                                                                                             |   |                        | 5,521   |   |   |   | (5,464 | ) |   |   | (4,996 | ) |
| Effect of exchange rate changes on cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                    |   |                        | (42     | ) |   |   | (18 | ) |   |   | 25 |   |
| Net increase (decrease) in cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                            |   |                        | 4,550   |   |   |   | 223 |   |   |   | (1,278 | ) |
| Cash and cash equivalents at beginning of the year                                                                                                                                                                                                                                                                                                                                                                                              |   |                        | 8,764   |   |   |   | 13,314 |   |   |   | 13,537 |   |
| Cash and cash equivalents at end of the year                                                                                                                                                                                                                                                                                                                                                                                                    |   | ¥                      | 13,314  |   |   | ¥ | 13,537 |   |   | ¥ | 12,259 |   |

----

| C. | Research and Development, Patents and Licenses, etc. |
|----|------------------------------------------------------|

----

| D. | Trend Information |
|----|-------------------|

| ·   | Increased contracted bandwidth. Total contracted bandwidth for Internet connectivity services for corporate users increased to 1,218.7Gbps as of March 31, 2013 from 857.7Gbps for the previous fiscal year end. The number of IP Service contracts for the bandwidth over 100 Mbps increased to 608 for the fiscal year ended March 31, 2013 from 476 for the previous fiscal year end. This increase is mainly due to an increase in customers' demand for broader bandwidth for their Internet connectivity. The total contracted bandwidth for Internet connectivity services for corporate users is calculated by adding the contracted bandwidth for each of the following services: IP Service, IIJ Data Center Connectivity Service and Broadband Services. The average monthly revenues per contract for IP Services at the end of March 2013 stayed around the same, approximately to ¥0.57 million compared to ¥0.57 million at the end of March 2012. Although we do not expect revenue per contract to grow in the fiscal year ending March 31, 2014 due to continuing competition, we believe that customer demand for broader bandwidth will continue as the use of broadband by corporate customers expands, and we will try to acquire new customers and increase the bandwidth of existing customers as well as maintain the quality of our services to differentiate them from those of our competitors. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Increased demands for broadband services. Demand for broadband services such as IIJ FiberAccess/F, IIJ DSL/F and IIJ DSL/A is steadily increasing as the services are used more often to connect corporate branches and remote offices. For access lines, the services use ADSL lines with a maximum speed of 47Mbps or optical lines with maximum speeds of 100Mbps, 200Mbps or 1Gbps. The number of contracts for our broadband services increased to 48,940 as of March 31, 2013 from 44,510 for the previous fiscal year end. We also expect that demand for broadband services will contribute to an increase in our outsourcing services and systems integration revenues as usage and implementation of these connectivity services increase the demand for outsourcing services such as security services and network systems integration. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increased demands for Mobile Data Communications services. Demand for our mobile data communications service, IIJ Mobile Service, which is provided under MVNO has increased rapidly since its introduction in January 2008. The number of contracts for IIJ Mobile Service increased to 62,517 as of March 31, 2013 from 46,329 for the previous fiscal year end. Corporate customers who are highly security conscious are looking for data communication services with high security features such as VPN access and private access. From February 2012, we have also launched the LTE mobile data communication service under MVNO. We also expect that demand for mobile data communication services will contribute to an increase in our outsourcing services and systems integration revenues as usage and implementation of these connectivity services increase the demand for outsourcing services such as security services and network systems integration. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| ·   | Increase in business usage: Our revenues will be affected by the extent and speed with which businesses in Japan exploit Internet and network solutions to their full potential, including, for example, electronic transactions between businesses and wider range of devices accessing to Internet. Such services require high-quality and high-capacity connectivity services for both businesses and individuals. Such services also require provision of total network solutions including various Internet connectivity services, systems integration and other outsourcing services which we believe we are well positioned to provide. The degree of business usage will also depend upon a variety of factors including: |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | technological advances, reliability of security systems and users’ familiarity with and confidence in new technologies, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·   | the rate at which Japanese companies in certain industries significantly increases their Internet usage, and |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | corporate budgets for information technologies, including Internet-related items. |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | Range of service offerings: To increase our revenues from business users, we provide a wide variety of services and are introducing new services. For Internet connectivity services, we have introduced LTE service as an addition to our MVNO mobile connectivity service. We are also broadening the service line-up of our cloud computing service IIJ GIO. We believe these steps will allow us to sell a greater variety of services to our high-end corporate users and to capture a greater amount of the current growth and demand. However, we will still be strongly dependent on the Japanese economy and on the Japanese companies and their Information Technology budgets nonetheless. We expect Internet usage to continue to grow in Japan and that businesses will continue to diversify their uses of the Internet. Our ability to offer a broad range of services to meet our customers’ demands will significantly influence our future revenues. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Synergies between Internet connectivity services, WAN services, outsourcing services and systems integration: Most of our systems integration customers come from our Internet connectivity services customers, and we expect these relationships to continue. As part of our systems integration business, we offer solution services for corporate information network systems, consultation, project planning, system design and systems/operation outsourcing or Internet VPN solution services which combine the FLET’S Internet connectivity or mobile connectivity services with SEIL, adopted by customers who have multiple locations, such as branches, offices and factories. Cloud computing services are also provided together with connectivity and systems integration services. The ability to introduce a wide range of services, including solutions necessary to build corporate information network systems, like disaster recovery services and Internet VPN, Voice over IP (“VoIP”), SEIL, private mobile access solutions, SEIL/SMF and wireless LAN service, is an important competitive factor. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our cloud computing services "IIJ GIO": We are currently focusing on providing and expanding our cloud computing service, IIJ GIO/Hosting Package and IIJ GIO/Component. The cloud computing services revenues are accounted in outsourcing services and systems operation and maintenance, respectively. For the fiscal year ended March 31, 2013, revenues for IIJ GIO were approximately ¥6.2 billion and for the fiscal year ending March 31, 2014, we target the cloud related revenue to reach over ¥10.0 billion. The timing of when demand for cloud computing service in Japan will come into wide use is still uncertain. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Synergies between group companies: The group works together as a team to provide network solutions to our customers, mainly corporate and governmental organizations. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Overseas business: The group is enhancing its overseas operation mainly to fulfill the broad range of IT network related needs of our Japanese clients that are headed abroad to expand their overseas business. As a group, we aim to expand our cloud computing related services and overseas business by leveraging our client base and our engineering skills. However, our overseas business portion is still very small. For the fiscal year ended March 31 2013, our overseas revenue was ¥3.6 billion. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Backbone cost: Backbone cost for the fiscal year ended March 31, 2013 was ¥3.5 billion, a slight increase compared to the fiscal year ended March 31, 2012. We do not expect that our backbone costs to significantly increase. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Dedicated local access line costs: We collect dedicated local access line fees from subscribers and pay these fees over to the carriers. Dedicated local access line costs for the fiscal year ended March 31, 2013 were ¥22.5 billion compared to ¥23.0 billion for the fiscal year ended March 31, 2012. Other connectivity costs were ¥0.4 billion for the fiscal year ended March 31, 2013, compared to ¥0.4 billion for the previous fiscal year. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Interest expense: Most of our interest expense is from bank borrowing and capital leases. Interest income and interest expenses are also affected by the fluctuation of market interest rates and our total amount of outstanding borrowings. If we increase capital leases or borrowings in order to finance further development of our backbone, data centers and for other investments, interest expenses will increase. Along with the increase in capital leases, we expect interest expenses to increase. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Impairment of other investments: We hold other investments comprised of available-for-sale securities, nonmarketable equity securities and funds. If the fair value of other investments becomes lower than its costs and such decline in fair value is evaluated as other-than-temporary, we will have to recognize an impairment loss on investment. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Foreign exchange gains: Attributed to the weaker Japanese yen against the U.S. dollar, we recognized foreign currency gain of ¥112 million for the fiscal year ended March 31, 2013. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| E. | Off-Balance Sheet Arrangements |
|----|--------------------------------|

----

| F. | Tabular Disclosure of Contractual Obligations |
|----|-----------------------------------------------|

|                                                                                                                                                                                                                                                                                                                              |   | Payments due by period (in millions of yen) |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|--------|
| Contractual Obligations                                                                                                                                                                                                                                                                                                           |   | Total                                       |   |   | less than 1 year |   |   | 1-3 years |   |   | 3-5 years |   |   | more than 5 years |   |
| Long-term debt obligations                                                   |   | ¥                                      | 1,990  |   |   | ¥ | 1,010 |   |   | ¥ | 980 |   |   | - |   |   | - |   |
| Capital lease obligations                                                    |   |                                        | 9,147  |   |   |   | 3,655 |   |   |   | 4,846 |   |   |   | 646 |   |   |   | 0 |   |
| Operating lease obligations                                                  |   |                                        | 5,424  |   |   |   | 2,457 |   |   |   | 2,447 |   |   |   | 418 |   |   |   | 102 |   |
| Total (1) (2)                                                                                                                                                                                                                                                                                                                     |   | ¥                                      | 16,561 |   |   | ¥ | 7,122 |   |   | ¥ | 8,273 |   |   | ¥ | 1,064 |   |   | ¥ | 102 |   |

| (1)   | The table above does not include short term borrowings. For short term borrowings, see Item 5.B “Liquidity and Capital Resource” and Note 11 “Borrowings” to our consolidated financial statements included in this annual report on Form-20F. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The table above does not include obligations for interest payments on debt, as such payments are not material. For interest payments regarding capital lease, see Note 9 “Leases” to our consolidated financial statements included in this annual report on Form 20-F. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| G. | Safe Harbor |
|----|-------------|

| ·   | that we may not be able to achieve or sustain profitability in the near future, |
|--------------------|---------------------------------------------------------------------------------|

| ·   | that we may not be able to compete effectively against competitors which have greater financial, marketing and other resources, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | that our investments in our new business and service developments may not produce the returns we expect or may affect our results of operations and financial condition adversely, and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | that our investments in our subsidiaries and affiliated companies may not produce the returns that we expect or may adversely affect our results of operations and financial condition. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 

| A. | Directors and Senior Management |
|----|---------------------------------|

| Name                | Position                                                                              | Date of birth | Current termexpires | Initialappointment date | Numbers ofShares Owned(1) | Percentage ofSharesOwned (1) |
|---------------------|---------------------------------------------------------------------------------------|---------------|---------------------|-------------------------|---------------------------|------------------------------|
| Koichi Suzuki       | Chairman, Chief Executive   Officer and Representative   Director           | Sep. 3, 1946  | June 2015           | Dec. 1992               | 1,802,213(2)              | 4.36%(2)                     |
| Eijiro Katsu        | President, Chief Operating   Officer and Representative   Director          | June 19, 1950 | June 2015           | June 2013               | 0                         | —                      |
| Hideshi Hojo        | Senior Managing Director                                                              | Dec. 22, 1957 | June 2015           | June 2000               | 23,473                    | 0.06%                        |
| Takeshi Kikuchi     | Senior Managing Director                                                              | Apr. 27, 1959 | June 2014           | June 2010               | 59,026                    | 0.14%                        |
| Hitoshi Imafuku     | Senior Managing Director                                                              | Apr. 2, 1957  | June 2015           | June 2009               | 1,179                     | 0.00%                        |
| Takamichi Miyoshi   | Managing Director                                                                     | May 5, 1963   | June 2014           | June 2002               | 79,809                    | 0.19%                        |
| Akihisa Watai       | Managing Director, Chief   Financial Officer and Chief   Accounting Officer | Sep. 30, 1965 | June 2014           | June 2004               | 11,604                    | 0.03%                        |
| Yasurou Tanahashi   | Director                                                                              | Jan. 4, 1941  | June 2014           | June 2004               | 0                         | —                      |
| Takashi Hiroi       | Director                                                                              | Feb. 13, 1963 | June 2014           | June 2004               | 0                         | —                      |
| Junnosuke Furukawa  | Director                                                                              | Dec. 5, 1935  | June 2015           | June 2005               | 0                         | —                      |
| Shingo Oda          | Director                                                                              | Nov. 8, 1944  | June 2014           | June 2008               | 0                         | —                      |
| Yoshifumi Nishikawa | Director                                                                              | Aug. 3, 1938  | June 2014           | June 2005               | 0                         | —                      |
| Toshinori Iwasawa   | Director                                                                              | May 8, 1962   | June 2015           | June 2013               | 537                       | 0.00%                        |
| Kazuhiro Ohira      | Company Auditor                                                                       | Dec. 26, 1957 | June 2016           | June 2010               | 0                         | —                      |
| Chiaki Furuya       | Company Auditor                                                                       | July 11, 1949 | June 2017           | June 2013               | 7,763                     | 0.02%                        |
| Masaki Okada        | Company Auditor                                                                       | Jan. 9, 1959  | June 2016           | June 2004               | 0                         | —                      |
| Masaaki Koizumi     | Company Auditor                                                                       | Oct. 4, 1964  | June 2016           | June 2004               | 0                         | —                      |

| _________ |
|-----------|

| (1) | The number of IIJ shares owned as of June 2, 2013. |
|-----|----------------------------------------------------|

| (2) | Mr. Koichi Suzuki jointly owns IIJ stocks through his wholly owned private company called KS Holdings which holds 2.0% of the total company outstanding shares. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Name              | Position                   | Responsibility                                                                                  |
|-------------------|----------------------------|-------------------------------------------------------------------------------------------------|
| Kazuhiro Tokita   | Senior Executive Officer   | Senior Executive Officer of Financial Systems Business Division and in charge of Cloud Business |
| Masayoshi Tobita  | Executive Managing Officer | Executive Managing Officer of Administrative Division and Business Unit Management Department   |
| Junichi Shimagami | Executive Managing Officer | Executive Managing Officer of Service Network Division                                          |
| Kiyoshi Ishida    | Executive Managing Officer | Executive Managing Officer of Product Division                                                  |
| Yasumitsu Iizuka  | Executive Officer          | Executive Officer of Government, Public & Educational Organization Business Division        |
| Kokichi Matsumoto | Executive Officer          | Executive Officer of Marketing Division                                                         |
| Koichi Maruyama   | Executive Officer          | Executive Officer of Enterprise Business Division 3 and Global Business Division                |
| Naoshi Yoneyama   | Executive Officer          | Executive Officer of Technology Management Division                                             |
| Makoto Ajisaka    | Executive Officer          | Executive Officer of Enterprise Business Division 3                                             |
| Yoshikazu Yamai   | Executive Officer          | Executive Officer of Service Operation Division                                                 |

----

| B.  | Compensation |
|----------|--------------|

|                                        |   |                    |   | Breakdown of Compensation (in millions of yen) |   |         |
|---------------------------------------------|--------|-------------------------|--------|------------------------------------------------|--------|--------------|
| Position                                    |   | Total Compensation |   | Base Salary                                    |   | Stock Option |   | Bonus |   | Liability for Retirement Benefit |   | Others |   | Number of Persons |
| Directors *                                 |   | ¥197               |   | ¥167                                      |   | ¥23     |   | ¥6 |   | - |   | ¥1 |   | 7 |
| Company Auditor **                          |   | 9                       |   | 8                                              |   | -     |   | - |   | 1 |   | 0 |   | 1 |
| Outside Directors/ Outside Company Auditors |   | 31                      |   | 30                                             |   | -     |   | - |   | 1 |   | 0 |   | 6 |

| _________ |
|-----------|

| (1)   | Starting with its annual securities report for the year ended March 31, 2010 filed with the Ministry of Finance, a Japanese listed company is required to disclose the individual compensation of any director, executive officer or corporate auditor if it is ¥100 million or more. For fiscal year ended March 31, 2013, there was no director, executive officer or corporate auditor who received compensation of over ¥100 million. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Upper limits on compensation for directors and company auditors are determined at a general meeting of shareholders of the Company. Within the upper limit approved by the shareholders' meeting, the Board of Company Auditors will determine the amount of compensation for each company auditor. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Please see Item 6.E, “Share Ownership” for more detailed information concerning our stock options. |
|-----------------|----------------------------------------------------------------------------------------------------------------|

| * | Excluding Outside Directors |
|---|-----------------------------|

| ** | Excluding Outside Company Auditors |
|----|------------------------------------|

| C.  | Board Practices |
|----------|-----------------|

----

| D.  | Employees |
|----------|-----------|

|           | For the fiscal year ended March 31, |
|----------------|-------------------------------------|
|           | 2011                                | 2012 | 2013 |
|           | (number of employees)               |
| Engineering    | 1,291                               | 1,282 | 1,425 |
| Sales          | 382                                 | 361 | 404 |
| Administration | 271                                 | 280 | 287 |

----

| E.  | Share Ownership |
|----------|-----------------|

| ·   | Stock compensation –type stock option. A Stock compensation-type stock option is a stock acquisition right entitling its holder to acquire shares upon the exercise of a stock acquisition right at an exercise price of one yen (¥1) per share. Stock compensation-type stock options are allocated to directors and executive officers as a substitution for the retirement allowance planned for them and to further motivate and incentivize them to enhance IIJ’s mid- to long- term business performance and corporate value. On May 26, 2011, IIJ’s board of directors resolved to introduce stock compensation –type stock options for executive officers of IIJ. On June 28, 2011, IIJ’s ordinary general meeting of shareholders approved the introduction of stock compensation type stock options for directors of IIJ. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (1) | First Series (July 2011) |
|--------|-----|--------------------------|

|   | (1) | Total number of Stock Acquisition Rights: 138 rights |
|--------|-----|------------------------------------------------------|

|   | (2) | Class and total number of shares underlying the Stock Acquisition Rights: 138 shares of the Company’s common stock (The number of shares to be issued or transferred for each Stock Acquisition Rights shall be 1 share) |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Amount to be paid in exchange for the Stock Acquisition Rights: ¥259,344 per share of common stock. The fair value of stock acquisition rights used to recognize compensation expense was estimated using the Black-Scholes option-pricing model. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Exercise period of stock acquisition rights: From July 15, 2011 to July 14, 2041. |
|--------|-----|-----------------------------------------------------------------------------------|

|   | (5) | Position and number of persons to be allotted the stock acquisition rights and number of stock acquisition rights to be allotted:Directors (excluding Part-time and Outside Directors) of IIJ 6 Directors 89 rightsExecutive Officers of IIJ 8 Executive Officers 49 rights |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Second Series (July 2012) |
|--------|-----|---------------------------|

|   | (1) | Total number of Stock Acquisition Rights: 130 rights |
|--------|-----|------------------------------------------------------|

|   | (2) | Class and total number of shares underlying the Stock Acquisition Rights: 130 shares of the Company’s common stock (The number of shares to be issued or transferred for each Stock Acquisition Rights shall be 1 share) |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Amount to be paid in exchange for the Stock Acquisition Rights: ¥318,562 per share of common stock. The fair value of stock acquisition rights used to recognize compensation expense was estimated using the Black-Scholes option-pricing model. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Exercise period of stock acquisition rights: From July 14, 2012 to July 13, 2042. |
|--------|-----|-----------------------------------------------------------------------------------|

|   | (5) | Position and number of persons to be allotted the stock acquisition rights and number of stock acquisition rights to be allotted:Directors (excluding Part-time and Outside Directors) of IIJ 6 Directors 74 rightsExecutive Officers of IIJ 11 Executive Officers 56 rights |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (3) | Third Series (approved on June 26, 2013, to be determined on July 11, 2013) |
|--------|-----|-----------------------------------------------------------------------------|

|   | (1) | Maximum number of Stock Acquisition Rights to be determined on July 11, 2013: 135 rights |
|--------|-----|------------------------------------------------------------------------------------------|

|   | (2) | Class of shares underlying the Stock Acquisition Rights, the Company’s common stock, and the total number of shares underlying the Stock Acquisition Rights to be determined accordingly with the number of stock acquisition rights to be allotted. (The number of shares to be issued or transferred for each Stock Acquisition Rights shall be 200 shares) |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Amount to be paid in exchange for the Stock Acquisition Rights is to be determined on July 11, 2013 based on the fair value of stock acquisition rights used to recognize compensation expense was estimated using the Black-Scholes option-pricing model. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Exercise period of stock acquisition rights: From July 12, 2013 to July 11, 2043. |
|--------|-----|-----------------------------------------------------------------------------------|

|   | (5) | Position and number of persons to be allotted the stock acquisition rights and number of stock acquisition rights to be allotted:Directors (excluding Part-time and Outside Directors) of IIJ 7 Directors 95 rightsExecutive Officers of IIJ 10 Executive Officers 40 rights |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Item 

| A. | Major Shareholders |
|----|--------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | Outstanding Voting Sharesas of March 31, 2013 (3) |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | Number                                            |       |   | Percentage |   |
| Nippon Telegraph and Telephone Corporation and affiliates (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                              | 12,135,000 |   |   |   | 29.9 | % |
| Koichi Suzuki(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                              | 2,611,500  |   |   |   | 6.4 |   |
| Itochu Corporation                                                                                   |   |                                              | 2,086,000  |   |   |   | 5.1 |   |
| Directors, executive officers and company auditor as a group (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                              | 2,973,100  |   |   |   | 7.3 |   |

| ___________ |
|-------------|

----

| (1)   | Includes NTT, which owned 10,095,000 shares, or 24.9% of our outstanding voting shares and 24.4% of our total issued shares, and NTT Communications, which owned 2,040,000 shares, or 5.0% of our outstanding voting shares and 4.9% of our total issued shares. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Mr. Koichi Suzuki directly held 4.4% of our outstanding voting shares and 2.0% indirectly through his wholly owned private company called KS Holdings. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Includes Koichi Suzuki’s holdings which are also separately set forth above. No other director or executive officer except for Koichi Suzuki was a beneficial owner of more than 5%. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | As of March 31, 2013, the Company held 758,800 shares of the Company as treasury stock. |
|-----------------|-----------------------------------------------------------------------------------------|

| B. | Related Party Transactions |
|----|----------------------------|

|   |                                                                                                                                                                                                                                                                                                    |   | millions of yen |   |   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|--------|--------|
|   | Accounts receivable                                               |   | ¥52        |   |   |
|   | Accounts payable                                                  |   | 40              |   |   |
|   | Revenues                                                          |   | 599             |   |   |
|   | Costs and Expenses                                                |   | 457             |   |   |

----

| ·   | any enterprise that directly or indirectly controls, is controlled by, or is in common control with us or any of our subsidiaries, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ·   | any director, officer, company auditor or family member of any of the preceding or any enterprise over which such person directly or indirectly is able to exercise significant influence, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | any individual shareholder directly or indirectly having significant influence over us or any of our subsidiaries or a family member of such individual or any enterprise over which such person directly or indirectly is able to exercise significant influence, or their respective family members or enterprises over which they exercise significant influence, or |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | any unconsolidated enterprise in which we have a significant influence or which has a significant influence over us. |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| C. | Interests of Experts and Counsel |
|----|----------------------------------|

Item 

| A. | Consolidated Statements and Other Financial Information |
|----|---------------------------------------------------------|

----

| B. | Significant Changes |
|----|---------------------|

Item 

| A. | Offer and Listing Details |
|----|---------------------------|

|                               |   | NASDAQ (1)(per ADS) |   |   | TSE (1) (2)(per share of common stock) |   |
|------------------------------------|--------|---------------------|--------|--------|----------------------------------------|--------|
| Fiscal year ended/ending March 31, |   | High                |   |   | Low                                    |   |   | High |   |   | Low |   |
| 2009                               |   | $                   | 9.72   |   |                                   | $      | 1.90 |   |   | ¥ | 2,140 |   |   | ¥ | 359 |   |
| 2010                               |   |                | 6.33   |   |                                   |   | 2.50 |   |   |   | 1,232 |   |   |   | 498 |   |
| 2011                               |   |                | 8.37   |   |                                   |   | 5.08 |   |   |   | 1,460 |   |   |   | 815 |   |
| 2012                               |   |                |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| First Quarter                      |   |                | 9.95   |   |                                   |   | 6.67 |   |   |   | 1,635 |   |   |   | 1,128 |   |
| Second Quarter                     |   |                | 11.78  |   |                                   |   | 9.10 |   |   |   | 1,830 |   |   |   | 1,371 |   |
| Third Quarter                      |   |                | 11.13  |   |                                   |   | 8.40 |   |   |   | 1,793 |   |   |   | 1,305 |   |
| Fourth Quarter                     |   |                | 9.09   |   |                                   |   | 7.25 |   |   |   | 1,490 |   |   |   | 1,157 |   |
| 2013                               |   |                |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| First Quarter                      |   |                | 10.47  |   |                                   |   | 8.24 |   |   |   | 1,685 |   |   |   | 1,326 |   |
| Second Quarter                     |   |                | 13.63  |   |                                   |   | 9.93 |   |   |   | 2,142 |   |   |   | 1,568 |   |
| Third Quarter                      |   |                | 14.18  |   |                                   |   | 10.95 |   |   |   | 2,280 |   |   |   | 1,802 |   |
| Fourth Quarter                     |   |                | 17.3   |   |                                   |   | 11.22 |   |   |   | 3,300 |   |   |   | 1,970 |   |
| Month                              |   |                |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| January 2013                       |   |                | 13.98  |   |                                   |   | 11.22 |   |   |   | 2,570 |   |   |   | 1,970 |   |
| February 2013                      |   |                | 14.93  |   |                                   |   | 13.03 |   |   |   | 2,794 |   |   |   | 2,410 |   |
| March 2013                         |   |                | 17.30  |   |                                   |   | 13.06 |   |   |   | 3,300 |   |   |   | 2,442 |   |
| April 2013                         |   |                | 20.23  |   |                                   |   | 16.40 |   |   |   | 3,985 |   |   |   | 2,903 |   |
| May 2013                           |   |                | 21.21  |   |                                   |   | 13.80 |   |   |   | 4,365 |   |   |   | 3,105 |   |
| June 2013(3)                  |   |                | 19.68  |   |                                   |   | 16.61 |   |   |   | 3,835 |   |   |   | 3,150 |   |

| ___________ |
|-------------|

| (1)  | Price data are based on prices throughout the sessions for each corresponding period at each stock exchange. |
|-----------|--------------------------------------------------------------------------------------------------------------|

| (2) | We conducted a 1 to 200 stock split on common stock with an effective date of October 1, 2012. The figures are retroactively adjusted to reflect the stock split. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The high and low prices of our ADSs and shares of common stock were the prices quoted during the period, from June 1, 2013 to June 14, 2013. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------|

| B. | Plan of Distribution |
|----|----------------------|

----

| C. | Markets |
|----|---------|

| D. | Selling Shareholders |
|----|----------------------|

| E. | Dilution |
|----|----------|

| F. | Expenses of the issue |
|----|-----------------------|

Item 

| A. | Share Capital |
|----|---------------|

| B. | Memorandum and Articles of Association |
|----|----------------------------------------|

| ·   | Telecommunications business under the Telecommunications Business Law, |
|--------------------|------------------------------------------------------------------------|

| ·   | Processing, mediation and provision of information and contents by using telecommunications networks, |
|--------------------|-------------------------------------------------------------------------------------------------------|

| ·   | Agency for the management business such as the management of networks and the management of information and telecommunications systems, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Planning, consulting service, development, operation and maintenance of or for information and telecommunications systems, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| ·   | Development, sales, lease and maintenance of computer software, |
|--------------------|-----------------------------------------------------------------|

| ·   | Development, sales, lease and maintenance of telecommunications machinery and equipment, |
|--------------------|------------------------------------------------------------------------------------------|

| ·   | Telecommunications construction, |
|--------------------|----------------------------------|

| ·   | Agency for non-life insurance, |
|--------------------|--------------------------------|

| ·   | Research, study, education and training related to the foregoing, and |
|--------------------|-----------------------------------------------------------------------|

----

| ·   | Any and all businesses incidental or related to the foregoing. |
|--------------------|----------------------------------------------------------------|

| ·   | the right to receive dividends when the payment of dividends has been approved at a shareholders' meeting, with this right lapsing three full years after the due date for payment according to a provision in our Articles of Incorporation, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the right to receive interim dividends as provided for in our Articles of Incorporation, with this right lapsing three full years after the due date for payment according to a provision in our Articles of Incorporation, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the right to vote at a shareholders' meeting (cumulative voting is not allowed under our Articles of Incorporation), |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| ·   | the right to receive surplus in the event of liquidation, and |
|--------------------|---------------------------------------------------------------|

| ·   | the right to require us to purchase shares subject to certain requirements under the Corporation Law of Japan when a shareholder opposes certain resolutions including (i) the transfer of all or material part of the business, (ii) an amendment of the Articles or Incorporation to establish a restriction on share transfer, (iii) a share exchange or share transfer to establish a holding company, (iv) company split or (v) merger, all of which must in principle, be approved by a Special Resolution of Shareholders’ meeting. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | a reduction of the stated capital, (expect when a company reduces the stated capital within certain amount provided for under the Corporation Law of Japan concurrently with a share issue), |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | amendment of our Articles of Incorporation (except amendments that the Board of Directors are authorized to make under the Corporation Law of Japan), |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | establishment of a 100% parent-subsidiary relationship through a share exchange or share transfer requiring shareholders’ approval, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a dissolution, merger or consolidation requiring shareholders’ approval, |
|--------------------|--------------------------------------------------------------------------------|

| ·   | a company split requiring shareholders’ approval, |
|--------------------|---------------------------------------------------------|

| ·   | a transfer of the whole or an important part of our business, |
|--------------------|---------------------------------------------------------------|

| ·   | the taking over of the whole of the business of any other corporation requiring shareholders’ approval, and |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| ·   | issuance of new shares at a specially favorable price, or issuance of stock acquisition rights or bonds with stock acquisition rights with specially favorable conditions to persons other than shareholders. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | dissolution, and |
|--------------------|------------------|

| ·   | commencement of reorganization proceedings as provided for in the Company Reorganization Law of Japan. |
|--------------------|--------------------------------------------------------------------------------------------------------|

----

| ·   | demand the convening of a general meeting of shareholders, |
|--------------------|------------------------------------------------------------|

| ·   | apply to a competent court for removal of a director or company auditor, |
|--------------------|--------------------------------------------------------------------------|

| ·   | apply to a competent court for removal of a liquidator, and |
|--------------------|-------------------------------------------------------------|

| ·   | apply to a competent court for an order to inspect our business and assets in a special liquidation proceeding. |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| ·   | examine our accounting books and documents and make copies of them, and |
|--------------------|-------------------------------------------------------------------------|

| ·   | apply to a competent court for appointment of an inspector to inspect our operation or financial condition. |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| ·   | the institution of an action to enforce the liability of one of our directors or company auditors, |
|--------------------|----------------------------------------------------------------------------------------------------|

| ·   | the institution of an action to recover from a recipient the benefit of a proprietary nature given in relation to the exercise of the right of a shareholder, and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a director on our behalf for the cessation of an illegal or ultra vires action. |
|--------------------|---------------------------------------------------------------------------------|

----

|   | (i) | through market transactions on a stock exchange on which our shares are listed or by way of tender offer (in either case pursuant to a resolution of the Board of Directors as currently authorized by our Articles of Incorporation); |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | from a specific shareholder other than any of our subsidiaries (pursuant to a special resolution of a general meeting of shareholders); or |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | from any of our subsidiaries (pursuant to a resolution of the Board of Directors). |
|--------|-------|------------------------------------------------------------------------------------|

----

| C. | Material Contracts |
|----|--------------------|

----

----

| D.  | Exchange Controls |
|----------|-------------------|

|   | • |  individuals who are Non-residents of Japan; |
|--------|---------|---------------------------------------------------|

|   | • | corporations which are organized under the laws of foreign countries or whose principal offices are located outside of Japan; and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | • | corporations (i) of which 50% or more of their voting rights are held by individuals who are Non-residents of Japan and/or corporations which are organized under the laws of foreign countries or whose principal offices are located outside of Japan or (ii) a majority of whose officers, or officers having the power of representation, are individuals who are Non-residents of Japan. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| E. | Taxation |
|----|----------|

| ·   | the overall tax consequences of the acquisition, ownership and disposition of shares or ADSs, including specifically the tax consequences under Japanese law, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the laws of the jurisdiction of which they are resident, and |
|--------------------|--------------------------------------------------------------|

| ·   | any tax treaty between Japan and their country of residence. |
|--------------------|--------------------------------------------------------------|

----

| ·   | tax-exempt entities, |
|--------------------|----------------------|

| ·   | life insurance companies, |
|--------------------|---------------------------|

| ·   | dealers in securities, |
|--------------------|------------------------|

| ·   | traders in securities that elect to use a mark-to-market method of accounting for securities holdings, |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | investors liable for alternative minimum tax, |
|--------------------|-----------------------------------------------|

| ·   | investors that actually or constructively own 10% or more of the voting stock of IIJ, |
|--------------------|---------------------------------------------------------------------------------------|

| ·   | investors that hold shares or ADSs as part of a straddle or a hedging or conversion transaction, |
|--------------------|--------------------------------------------------------------------------------------------------|

| ·   | a person that purchases or sells shares or ADSs as part of a wash sale for tax purposes, or |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | investors whose functional currency is not the U.S. dollar. |
|--------------------|-------------------------------------------------------------|

----

| ·   | a citizen or resident of the United States, |
|--------------------|---------------------------------------------|

| ·   | a domestic corporation, |
|--------------------|-------------------------|

| ·   | an estate whose income is subject to United States federal income tax regardless of its source, or |
|--------------------|----------------------------------------------------------------------------------------------------|

| ·   | a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | at least 75% of our gross income for the taxable year is passive income, or |
|--------------------|-----------------------------------------------------------------------------|

| ·   | at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | any gain you realize on the sale or other disposition of your shares or ADSs, and |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | any “excess distribution” that we make to you (generally, any distributions to you during a single taxable year that are greater than 125% of the average annual distributions received by you in respect of the shares or ADSs during the three preceding taxable years or, if shorter, your holding period for the shares or ADSs). |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | the gain or excess distribution will be allocated ratably over your holding period for the shares or ADSs, |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | the amount allocated to the taxable year in which you realized the gain or excess distribution will be taxed as ordinary income, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year, and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------|

| F. | Dividends and Paying Agents |
|----|-----------------------------|

| G. | Statement by Experts |
|----|----------------------|

----

| H. | Documents on Display |
|----|----------------------|

| I. | Subsidiary Information |
|----|------------------------|

Item 

----

Item 

| A. | Debt Securities |
|----|-----------------|

| B. | Warrants and Rights |
|----|---------------------|

| C. | Other Securities |
|----|------------------|

| D. | American Depositary Shares |
|----|----------------------------|

| Services                                                                                                                                                                                                                                                                                                                                                        |   | Fees (USD)                     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|
| Taxes and other governmental charges                                                                                                                                                                                                                                                                                                                            |   | As applicable                  |
| Such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Shareholders’ register of the Issuer or Foreign Registrar and applicable to transfers of Shares to the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder |   | As applicable                  |
| Such cable, telex and facsimile transmission expenses as are expressly provided in this Deposit Agreement                                                                                                                                                                                                                                                       |   | As applicable                  |
| Such expenses as are incurred by the Depositary in the conversion of Foreign Currency                                                                                                                                                                                                                                                                           |   | As applicable                  |
| The execution and delivery of Receipts and the surrender of Receipts                                                                                                                                                                                                                                                                                            |   | $5.00 or less per 100 ADR      |
| Any cash distribution made pursuant to the Deposit Agreement                                                                                                                                                                                                                                                                                                    |   | $.02 or less per ADR           |
| Receipt or Receipts for transfers made                                                                                                                                                                                                                                                                                                                          |   | $.1.50 or less per certificate |
| The distribution of securities, such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a results of the deposit of such securities, but which securities are instead distributed by the Depositary to Owners                                              |   | As applicable                  |

----

PART 

Item 

Item 

Item 

|   | ● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets, |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

Item 

Item 

Item 

|                                                                                                                                                                                                                                                                                                                                                                                                                     |   | Fiscal year ended March 31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 2012                        |   |   | 2013 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                     |   | (millions of yen)           |   |
| Audit fees (1)                                                                      |   | 128                         |   |   | 126 |   |
| Audit-related fees                                                                  |   | -                    |   |   | - |   |
| Tax fees (2)                                                                        |   | 3                           |   |   | 7 |   |
| All other fees                                                                      |   | -                    |   |   | - |   |
| Total fees                                                                          |   | 131                         |   |   | 133 |   |

| __________ |
|------------|

| (1) | These are the aggregate fees billed for the fiscal year for professional services rendered by Deloitte Touche Tohmatsu LLC for the audit of our annual financial statements, the audit of our internal control over financial reporting and services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (2) | These are the aggregate fees billed for the fiscal year for professional services rendered by member firms of Deloitte Touche Tohmatsu Limited, such as Deloitte Tax LLP, for tax compliance, tax advice and tax planning. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 

| ·   | The Board of Company Auditors must be established, and its members must be selected, pursuant to Japanese law expressly requiring such a board for Japanese companies that elect to have a corporate governance system with company auditors, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Japanese law must and does require the Board of Company Auditors to be separate from the Board of Directors, |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | None of the members of the Board of Company Auditors may be elected by management, and none of the listed company’s executive officers may be a member of the Board of Company Auditors, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Japanese law must and does set forth standards for the independence of the members of the Board of Company Auditors from the listed company or its management, and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Board of Company Auditors, in accordance with Japanese law or the registrant’s governing documents, must be responsible, to the extent permitted by Japanese law, for the appointment, retention and oversight of the work of any registered public accounting firm engaged (including, to the extent permitted by Japanese law, the resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the listed company, including its principal accountant which audits its consolidated financial statements included in its annual reports on Form 20-F. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Board of Company Auditors must establish procedures for (i) the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls, or auditing matters, and (ii) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Board of Company Auditors must have the authority to engage independent counsel and other advisers, as it determines necessary to carry out its duties, and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The listed company must provide for appropriate funding, as determined by its Board of Company Auditors, for payment of (i) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us, (ii) compensation to any advisers employed by the Board of Company Auditors, and (iii) ordinary administrative expenses of the Board of Company Auditors that are necessary or appropriate in carrying out its duties. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 

Item 

Item 

----

Item 

----

PART 

Item 

Item 

Item 

| 1.1    |   | Articles of Incorporation, as amended (English translation)1                                                                                                                                                     |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.2    |   | Share Handling Regulations, as amended (English translation) 2                                                                                                                                                   |
| 1.3    |   | Regulations of the Board of Directors, as amended (English translation) 3                                                                                                                                        |
| 1.4    |   | Regulations of the Board of Company Auditors, as amended (English translation) 4                                                                                                                                 |
| 2.1    |   | Bylaws of the IIJ Group Employee Shareholders’ Association (English translation) 5                                                                                                                         |
| 2.2    |   | Form of Deposit Agreement among IIJ, The Bank of New York Mellon as depositary and all owners and holders from time to time of American Depositary Receipts, including the form of American Depositary Receipt 6 |
| 2.3    |   | Bylaws of the IIJ Group Director Stock Purchase Plan (English translation) 7                                                                                                                                     |
| 4.1    |   | Shareholders’ Agreement Relating to the Establishment of INTERNET MULTIFEED CO., dated August 20, 1997, between Nippon Telegraph and Telephone Corporation and the Registrant (English translation) 8 |
| 4.2    |   | Basic Agreement to Delegate Services, dated April 1, 1998, between Internet Initiative Japan Inc. and Net Care, Inc. (English translation) 8                                                                |
| 4.3    |   | Joint Venture Agreement, dated January 19, 2006, between Internet Initiative Japan Inc. and Konami Corporation (English translation) 9                                                                           |
| 4.4    |   | Service Agreement, dated March 25, 2004, between Internet Initiative Japan Inc. and IIJ America Inc.10                                                                                                           |
| 4.5    |   | Agreement on Limited Liability, dated June 27, 2012 and June 26, 2013, between Internet Initiative Japan Inc. and outside directors and outside company auditors 11                                              |
| 4.6    |   | Stock Purchase Agreement, dated June 1, 2010, between Internet Initiative Japan Inc. and AT&T Japan LLC. 5, 12                                                                                               |
| 4.7    |   | Solutions Engagement Agreement, dated May 31, 2010 between Communications Services KK (changed its trade name to IIJ-Global Solutions Inc. on September 1, 2010) and IBM Japan, Ltd.5, 12                        |
| 8.1    |   | List of Significant Subsidiaries (See “Our Group Companies” in Item 4.B. of this Form 20-F)                                                                                                |
| 11.1   |   | Internet Initiative Japan Code of Conduct 13                                                                                                                                                                     |
| 12.1   |   | Certification of the principal executive officer required by 17 C.F.R. 240. 13a-14(a)                                                                                                                            |
| 12.2   |   | Certification of the principal financial officer required by 17 C.F.R. 240. 13a-14(a)                                                                                                                            |
| 13.1   |   | Certification of the chief executive officer required by 18 U.S.C. Section 1350                                                                                                                                  |
| 13.2   |   | Certification of the chief financial officer required by 18 U.S.C. Section 1350                                                                                                                                  |
|   |   |                                                                                                                                                                                                             |

| (1) | We amended some parts of the Article of Incorporation as of June 26, 2013 from the previous version filed on September 29, 2009 as a reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | We amended some parts of the Share Handling Regulations along with the stock split on October 1, 2012. The previous version was filed on July 27, 2012 as a reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204). |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | We amended some parts of the Regulations of the Board of Directors as of June 26, 2013 from the previous version filed on September 28, 2010 as a reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on August 3, 2005. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on July 19, 2011. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Incorporated by reference to the Registration Statement on Form F-6 (File No. 333-110862) filed on December 2, 2003. |
|-----|----------------------------------------------------------------------------------------------------------------------|

| (7) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on September 28, 2010. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Incorporated by reference to the corresponding exhibit to our Form F-1 Registration Statement (File No. 333-10584) declared effective on August 3, 1999. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on July 11, 2006. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on July 23, 2004. |
|------|-------------------------------------------------------------------------------------------------------------------------------------|

----

| (11) | We entered into a Limitation of Liability Agreement with Mr. Yasurou Tanahashi, Mr. Takashi Hiroi and Mr. Shingo Oda as our outside directors and with Mr. Masaki Okada and Mr. Masaaki Koizumi as our outside company auditors on June 27, 2012 and with Mr. Junnosuke Furukawa as our outside director on June 26, 2013. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | Schedules, annexes and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. IIJ agrees to furnish supplementary copies of the omitted schedules, annexes and similar attachments to the SEC upon request. A list briefly describing the omitted schedules, annexes and similar attachments are contained in this exhibit. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (13) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on June 30, 2008. |
|------|-------------------------------------------------------------------------------------------------------------------------------------|

|   | Internet Initiative Japan Inc. |
|--------|--------------------------------|
|   |                           |   |   |
|   | By:                            | /s/ Koichi Suzuki |
|   |                           | Name: | Koichi Suzuki |
|   |                           | Title: | Chairman, Chief Executive Officer |
|   |                           |   | and Representative Director |
|   |                           |   |   |

----

| Index to Consolidated Financial Statements                                                                     |   |
|----------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                           |   |
|                                                                                                           | Page   |
|                                                                                                           |   |
|                                                                                                           |   |
| Report of Independent Registered Public Accounting Firm                                                        | F-2    |
|                                                                                                           |   |
| Consolidated Balance Sheets as of March 31, 2012 and 2013                                                      | F-3    |
|                                                                                                           |   |
| Consolidated Statements of Income for Each of the Three Years in the Period Ended March 31, 2013               | F-5    |
|                                                                                                           |   |
| Consolidated Statements of Comprehensive Income for Each of the Three Years in the Period Ended March 31, 2013 | F-7    |
|                                                                                                           |   |
| Consolidated Statements of Shareholders' Equity for Each of the Three Years in the Period Ended March 31, 2013 | F-8    |
|                                                                                                           |   |
| Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended March 31, 2013           | F-10   |
|                                                                                                           |   |
| Notes to Consolidated Financial Statements                                                                     | F-13   |

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|                                                                                                                                                                                         |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars(Note 1) |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|----------------------------------|--------|
| ASSETS                                                                                                                                                                                       |   | 2012             |       |   | 2013                             |   |   | 2013 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |
| CURRENT ASSETS:                                                                                                                                                                              |   |             |       |   |                             |   |   |   |   |
| Cash and cash equivalents                                                                                                                                                                    |   | ¥           | 13,536,824 |   |                             | ¥ | 12,258,872 |   |   | $ | 130,192 |   |
| Accounts receivable, net of allowance for doubtful accounts of ¥107,919 thousand and ¥93,934 thousand ($998 thousand) at March 31, 2012 and 2013, respectively (Notes 5, 6 and 22) |   |             | 15,722,135 |   |                             |   | 18,764,703 |   |   |   | 199,285 |   |
| Inventories (Note 3)                                                                                                                                                                         |   |             | 752,075    |   |                             |   | 1,301,684 |   |   |   | 13,824 |   |
| Prepaid expenses                                                                                                                                                                             |   |             | 1,848,344  |   |                             |   | 2,492,164 |   |   |   | 26,467 |   |
| Deferred tax assets―current (Note 12)                                                                                                                                                  |   |             | 939,370    |   |                             |   | 1,046,828 |   |   |   | 11,118 |   |
| Other current assets, net of allowance for doubtful accounts of ¥10,732 thousand ($114 thousand) at March 31, 2012 and 2013 (Notes 5 and 9)                                             |   |             | 891,560    |   |                             |   | 1,576,718 |   |   |   | 16,745 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| Total current assets                                                                                                                                                                         |   |             | 33,690,308 |   |                             |   | 37,440,969 |   |   |   | 397,631 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| INVESTMENTS IN EQUITY METHOD INVESTEES (Note 6)                                                                                                                                              |   |             | 1,406,634  |   |                             |   | 1,681,723 |   |   |   | 17,860 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| OTHER INVESTMENTS (Notes 4, 17, 18 and 19)                                                                                                                                                   |   |             | 2,938,146  |   |                             |   | 3,771,262 |   |   |   | 40,052 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| PROPERTY AND EQUIPMENT—Net (Notes 7 and 9)                                                                                                                                             |   |             | 19,735,546 |   |                             |   | 23,025,755 |   |   |   | 244,539 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| GOODWILL (Note 8)                                                                                                                                                                            |   |             | 5,788,333  |   |                             |   | 5,969,951 |   |   |   | 63,402 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| OTHER INTANGIBLE ASSETS—Net (Note 8)                                                                                                                                                   |   |             | 5,396,469  |   |                             |   | 4,791,431 |   |   |   | 50,886 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| GUARANTEE DEPOSITS (Note 9)                                                                                                                                                                  |   |             | 1,899,815  |   |                             |   | 2,051,449 |   |   |   | 21,787 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| DEFERRED TAX ASSETS―Noncurrent (Note 12)                                                                                                                                               |   |             | 24,760     |   |                             |   | 163,773 |   |   |   | 1,739 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| NET INVESTMENT IN SALES-TYPE LEASES―Noncurrent (Note 9)                                                                                                                                |   |             | 935,446    |   |                             |   | 898,040 |   |   |   | 9,538 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| PREPAID EXPENSES―Noncurrent                                                                                                                                                            |   |             | 1,536,932  |   |                             |   | 2,201,108 |   |   |   | 23,376 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| OTHER ASSETS, net of allowance for doubtful accounts of ¥86,388 thousand and ¥71,727 thousand ($762thousand) at March 31, 2012 and 2013, respectively (Notes 5, 6 and 18)          |   |             | 140,857    |   |                             |   | 115,805 |   |   |   | 1,230 |   |
|                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| TOTAL                                                                                                                                                                                        |   | ¥           | 73,493,246 |   |                             | ¥ | 82,111,266 |   |   | $ | 872,040 |   |

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|                                                                                                                   |   | Thousands of Yen |        |   | Thousands ofU.S. Dollars(Note 1) |   |
|------------------------------------------------------------------------------------------------------------------------|--------|------------------|-------------|--------|----------------------------------|--------|
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                   |   | 2012             |        |   | 2013                             |   |   | 2013 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |
| CURRENT LIABILITIES:                                                                                                   |   |             |        |   |                             |   |   |   |   |
| Short-term borrowings (Note 11)                                                                                        |   | ¥           | 9,000,000   |   |                             | ¥ | 9,400,000 |   |   | $ | 99,830 |   |
| Long-term borrowings —current portion (Note 11)                                                                  |   |             | 1,010,000   |   |                             |   | 1,010,000 |   |   |   | 10,726 |   |
| Capital lease obligations—current portion (Note 9)                                                               |   |             | 2,997,292   |   |                             |   | 3,505,471 |   |   |   | 37,229 |   |
| Accounts payable —trade (Notes 6 and 22)                                                                         |   |             | 9,093,657   |   |                             |   | 10,973,120 |   |   |   | 116,537 |   |
| Accounts payable —other                                                                                          |   |             | 659,266     |   |                             |   | 949,264 |   |   |   | 10,081 |   |
| Income taxes payable (Note 12)                                                                                         |   |             | 2,210,089   |   |                             |   | 1,669,849 |   |   |   | 17,734 |   |
| Accrued expenses                                                                                                       |   |             | 2,277,307   |   |                             |   | 2,266,427 |   |   |   | 24,070 |   |
| Deferred income―current                                                                                          |   |             | 1,495,468   |   |                             |   | 1,806,074 |   |   |   | 19,181 |   |
| Other current liabilities                                                                                              |   |             | 717,342     |   |                             |   | 803,902 |   |   |   | 8,538 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| Total current liabilities                                                                                              |   |             | 29,460,421  |   |                             |   | 32,384,107 |   |   |   | 343,926 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| LONG-TERM BORROWINGS (Note 11)                                                                                         |   |             | 1,990,000   |   |                             |   | 980,000 |   |   |   | 10,408 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| CAPITAL LEASE OBLIGATIONS—Noncurrent (Note 9)                                                                    |   |             | 4,741,241   |   |                             |   | 5,370,365 |   |   |   | 57,035 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| ACCRUED RETIREMENT AND PENSION COSTS―Noncurrent (Note 13)                                                        |   |             | 1,805,683   |   |                             |   | 2,112,085 |   |   |   | 22,431 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| DEFERRED TAX LIABILITIES―Noncurrent (Note 12)                                                                    |   |             | 652,280     |   |                             |   | 412,132 |   |   |   | 4,377 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| DEFERRED INCOME―Noncurrent                                                                                       |   |             | 1,547,159   |   |                             |   | 2,562,208 |   |   |   | 27,211 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| OTHER NONCURRENT LIABILITIES                                                                                           |   |             | 600,215     |   |                             |   | 656,191 |   |   |   | 6,969 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| Total liabilities                                                                                                      |   |             | 40,796,999  |   |                             |   | 44,477,088 |   |   |   | 472,357 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| COMMITMENTS AND CONTINGENCIES (Note 17)                                                                                |   |             |        |   |                             |   |   |   |   |   |   |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| SHAREHOLDERS' EQUITY (Notes 4, 13, 14 and 15):                                                                         |   |             |        |   |                             |   |   |   |   |   |   |   |
| Common stock—authorized, 75,520,000 shares; issued and outstanding, 41,295,600 shares at March 31, 2012 and 2013 |   |             | 16,833,847  |   |                             |   | 16,833,847 |   |   |   | 178,779 |   |
| Additional paid-in capital                                                                                             |   |             | 27,260,318  |   |                             |   | 27,300,325 |   |   |   | 289,936 |   |
| Accumulated deficit                                                                                                    |   |             | (10,990,348 | )      |                             |   | (6,399,088 | ) |   |   | (67,960 | ) |
| Accumulated other comprehensive income (loss)                                                                          |   |             | (23,533     | )      |                             |   | 263,770 |   |   |   | 2,801 |   |
| Treasury stock—758,800 shares held by the company at March 31, 2012 and 2013                                     |   |             | (392,079    | )      |                             |   | (392,079 | ) |   |   | (4,164 | ) |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| Total Internet Initiative Japan Inc. shareholders' equity                                                              |   |             | 32,688,205  |   |                             |   | 37,606,775 |   |   |   | 399,392 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| NONCONTROLLING INTERESTS                                                                                               |   |             | 8,042       |   |                             |   | 27,403 |   |   |   | 291 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| Total equity                                                                                                           |   |             | 32,696,247  |   |                             |   | 37,634,178 |   |   |   | 399,683 |   |
|                                                                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| TOTAL                                                                                                                  |   | ¥           | 73,493,246  |   |                             | ¥ | 82,111,266 |   |   | $ | 872,040 |   |

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|                                                                                                                 |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars(Note 1) |   |
|----------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|----------------------------------|--------|
|                                                                                                                 |   | 2011             |       |   | 2012                             |   |   | 2013 |   |   | 2013 |   |
| REVENUES (Notes 6 and 22):                                                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |
| Network services:                                                                                                    |   |             |       |   |                             |   |   |   |   |   |   |   |
| Internet connectivity services (corporate use)                                                                       |   | ¥           | 14,004,608 |   |                             | ¥ | 14,706,511 |   |   | ¥ | 16,027,134 |   |   | $ | 170,212 |   |
| Internet connectivity services (home use)                                                                            |   |             | 6,525,128  |   |                             |   | 5,717,417 |   |   |   | 5,466,198 |   |   |   | 58,052 |   |
| WAN services                                                                                                         |   |             | 16,100,046 |   |                             |   | 25,666,524 |   |   |   | 25,168,425 |   |   |   | 267,294 |   |
| Outsourcing services                                                                                                 |   |             | 15,031,785 |   |                             |   | 17,318,954 |   |   |   | 18,570,641 |   |   |   | 197,224 |   |
| Total                                                                                                                |   |             | 51,661,567 |   |                             |   | 63,409,406 |   |   |   | 65,232,398 |   |   |   | 692,782 |   |
| Systems integration:                                                                                                 |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Systems construction                                                                                                 |   |             | 11,936,581 |   |                             |   | 11,997,680 |   |   |   | 15,824,938 |   |   |   | 168,064 |   |
| Systems operation and maintenance                                                                                    |   |             | 17,507,099 |   |                             |   | 19,471,641 |   |   |   | 21,380,158 |   |   |   | 227,062 |   |
| Total                                                                                                                |   |             | 29,443,680 |   |                             |   | 31,469,321 |   |   |   | 37,205,096 |   |   |   | 395,126 |   |
| Equipment sales                                                                                                      |   |             | 796,385    |   |                             |   | 1,111,722 |   |   |   | 1,490,906 |   |   |   | 15,834 |   |
| ATM operation business                                                                                               |   |             | 516,574    |   |                             |   | 1,324,156 |   |   |   | 2,320,086 |   |   |   | 24,640 |   |
|                                                                                                                 |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Total revenues                                                                                                       |   |             | 82,418,206 |   |                             |   | 97,314,605 |   |   |   | 106,248,486 |   |   |   | 1,128,382 |   |
|                                                                                                                 |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| COSTAND EXPENSES (Notes 6, 9, 13 and 22):                                                                            |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Cost of network services                                                                                             |   |             | 41,678,052 |   |                             |   | 49,984,821 |   |   |   | 50,692,190 |   |   |   | 538,362 |   |
| Cost of systems integration                                                                                          |   |             | 22,466,436 |   |                             |   | 24,978,607 |   |   |   | 30,424,802 |   |   |   | 323,118 |   |
| Cost of equipment sales                                                                                              |   |             | 683,285    |   |                             |   | 980,279 |   |   |   | 1,318,344 |   |   |   | 14,001 |   |
| Cost of ATM operation business                                                                                       |   |             | 1,000,470  |   |                             |   | 1,382,194 |   |   |   | 1,959,597 |   |   |   | 20,812 |   |
| Total cost                                                                                                           |   |             | 65,828,243 |   |                             |   | 77,325,901 |   |   |   | 84,394,933 |   |   |   | 896,293 |   |
| Sales and marketing (Note 21)                                                                                        |   |             | 6,616,013  |   |                             |   | 7,946,852 |   |   |   | 8,058,481 |   |   |   | 85,583 |   |
| General and administrative (Note 7)                                                                                  |   |             | 5,479,176  |   |                             |   | 5,299,608 |   |   |   | 5,632,430 |   |   |   | 59,817 |   |
| Research and development                                                                                             |   |             | 353,732    |   |                             |   | 388,761 |   |   |   | 410,000 |   |   |   | 4,354 |   |
|                                                                                                                 |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Total cost and expenses                                                                                              |   |             | 78,277,164 |   |                             |   | 90,961,122 |   |   |   | 98,495,844 |   |   |   | 1,046,047 |   |
|                                                                                                                 |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME                                                                                                     |   |             | 4,141,042  |   |                             |   | 6,353,483 |   |   |   | 7,752,642 |   |   |   | 82,335 |   |
|                                                                                                                 |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSES):                                                                                             |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Dividend income                                                                                                      |   |             | 43,732     |   |                             |   | 48,269 |   |   |   | 47,117 |   |   |   | 500 |   |
| Interest income                                                                                                      |   |             | 23,113     |   |                             |   | 34,602 |   |   |   | 25,708 |   |   |   | 273 |   |
| Interest expense                                                                                                     |   |             | (268,129   | )      |                             |   | (299,271 | ) |   |   | (287,314 | ) |   |   | (3,051 | ) |
| Foreign exchange gain (loss), net                                                                                    |   |             | (31,975    | )      |                             |   | (4,549 | ) |   |   | 112,136 |   |   |   | 1,191 |   |
| Net gain (loss) on sales of other investments (Note 4)                                                               |   |             | 105,252    |   |                             |   | (3,154 | ) |   |   | 13,565 |   |   |   | 144 |   |
| Impairment of other investments (Note 4)                                                                             |   |             | (179,829   | )      |                             |   | (159,592 | ) |   |   | (19,788 | ) |   |   | (210 | ) |
| Other—net                                                                                                      |   |             | 783        |   |                             |   | 6,432 |   |   |   | 112,798 |   |   |   | 1,198 |   |
|                                                                                                                 |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expenses)—net                                                                                    |   |             | (307,053   | )      |                             |   | (377,263 | ) |   |   | 4,222 |   |   |   | 45 |   |
|                                                                                                                 |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES―(FORWARD) |   | ¥           | 3,833,989  |   |                             | ¥ | 5,976,220 |   |   | ¥ | 7,756,864 |   |   | $ | 82,380 |   |

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|                                                                                                                 |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars(Note 1) |   |
|----------------------------------------------------------------------------------------------------------------------|--------|------------------|-----------|--------|----------------------------------|--------|
|                                                                                                                 |   | 2011             |      |   | 2012                             |   |   | 2013 |   |   | 2013 |   |
|                                                                                                                 |   |             |      |   |                             |   |   |   |   |   |   |   |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES―(FORWARD) |   | ¥           | 3,833,989 |   |                             | ¥ | 5,976,220 |   |   | ¥ | 7,756,864 |   |   | $ | 82,380 |   |
|                                                                                                                 |   |             |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME TAX EXPENSE (Note 12)                                                                                         |   |             | 955,697   |   |                             |   | 2,525,486 |   |   |   | 2,607,582 |   |   |   | 27,693 |   |
| EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES (Note 6)                                                             |   |             | 122,667   |   |                             |   | 123,776 |   |   |   | 168,065 |   |   |   | 1,784 |   |
| NET INCOME                                                                                                           |   |             | 3,000,959 |   |                             |   | 3,574,510 |   |   |   | 5,317,347 |   |   |   | 56,471 |   |
|                                                                                                                 |   |             |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS                                                     |   |             | 202,409   |   |                             |   | 66,453 |   |   |   | (16,693 | ) |   |   | (177 | ) |
|                                                                                                                 |   |             |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC.                                                            |   | ¥           | 3,203,368 |   |                             | ¥ | 3,640,963 |   |   | ¥ | 5,300,654 |   |   | $ | 56,294 |   |

|                                                                           |   | Shares |       |   |
|--------------------------------------------------------------------------------|--------|--------|------------|--------|
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. PER SHARE (Note 16): |   |   |       |   |   |   |   |   |   |   |
| Basic weighted-average number of common shares outstanding                     |   |   | 40,528,800 |   |   |   | 40,536,800 |   |   |   | 40,536,800 |   |   |
| Diluted weighted-average number of common shares outstanding                   |   |   | 40,528,800 |   |   |   | 40,556,400 |   |   |   | 40,572,600 |   |   |

|                                                                               |   | Yen    |   |   | U.S. Dollars |   |
|------------------------------------------------------------------------------------|--------|--------|--------|--------|--------------|--------|
|                                                                               |   |   |   |   |         |   |
| BASIC NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. PER COMMON SHARE   |   | ¥ | 79.04  |   |         | ¥ | 89.82 |   |   | ¥ | 130.76 |   |   | $ | 1.39 |   |
|                                                                               |   |   |   |   |         |   |   |   |   |   |   |   |   |   |   |   |
| DILUTED NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. PER COMMON SHARE |   |   | 79.04  |   |         |   | 89.78 |   |   |   | 130.65 |   |   |   1.39 |   |

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|                                                                                  |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars(Note 1) |   |
|---------------------------------------------------------------------------------------|--------|------------------|-----------|--------|----------------------------------|--------|
|                                                                                  |   | 2011             |      |   | 2012                             |   |   | 2013 |   |   | 2013 |   |
|                                                                                  |   |             |      |   |                             |   |   |   |   |   |   |   |
| NET INCOME                                                                            |   | ¥           | 3,000,959 |   |                             | ¥ | 3,574,510 |   |   | ¥ | 5,317,347 |   |   | $ | 56,471 |   |
|                                                                                  |   |             |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX (Note 15):                              |   |             |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustments                                              |   |             | (43,435   | )      |                             |   | (9,539 | ) |   |   | 90,014 |   |   |   | 956 |   |
| Unrealized holding gain (loss) on securities                                          |   |             | (245,085  | )      |                             |   | 102,745 |   |   |   | 256,521 |   |   |   | 2,724 |   |
| Defined benefit pension plans                                                         |   |             | 34,617    |   |                             |   | (31,605 | ) |   |   | (59,252 | )  |   |   | (629 | )  |
|                                                                                  |   |             |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL COMPREHENSIVE INCOME                                                            |   |             | 2,747,056 |   |                             |   | 3,636,111 |   |   |   | 5,604,630 |   |   |   | 59,522 |   |
|                                                                                  |   |             |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| LESS: COMPREHENSIVE (INCOME)  LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS |   |             | 202,409   |   |                             |   | 66,453 |   |   |   | (16,673 | )  |   |   | (177 | )  |
|                                                                                  |   |             |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC.                   |   | ¥           | 2,949,465 |   |                             | ¥ | 3,702,564 |   |   | ¥ | 5,587,957 |   |   | $ | 59,345 |   |

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Internet 

----

|                                                                                   |   | Thousands of Yen / Shares |       |
|----------------------------------------------------------------------------------------|--------|---------------------------|------------|
|                                                                                   |   |                      |       |   | Internet Initiative Japan Inc. Shareholders’ Equity |   |   |   |   |
|                                                                                   |   | TotalEquity               |       |   | AccumulatedDeficit(Note 14) |   |   | AccumulatedOtherComprehensiveIncome (Loss)(Notes 13 and 15) |   |   | Shares ofCommon Stock Outstanding |   |   | CommonStock |   |   | TreasuryStock(Note 14) |   |   | AdditionalPaid-inCapital |   |   | Noncontrolling Interests |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, MARCH 31, 2010                                                                |   | ¥                    | 27,363,703 |   |   | ¥ | (16,720,092 | ) |   | ¥ | 168,769 |   |   |   | 41,295,600 |   |   | ¥ | 16,833,847 |   |   | ¥ | (406,547 | ) |   | ¥ | 27,443,600 |   |   | ¥ | 44,126 |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subsidiary stock issuance (Note 14)                                                    |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (147,346 | ) |   |   | 147,346 |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                             |   |                      | 3,000,959  |   |   |   | 3,203,368 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (202,409 | ) |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive loss, net of tax                                                   |   |                      | (253,903   | ) |   |   |   |   |   |   | (253,903 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid                                                                         |   |                      | (506,535   | ) |   |   | (506,535 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Disposal of treasury stock                                                             |   |                      | 37,126     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 14,468 |   |   |   | 22,658 |   |   |   |   |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, MARCH 31, 2011                                                                |   |                      | 29,641,350 |   |   |   | (14,023,259 | ) |   |   | (85,134 | ) |   |   | 41,295,600 |   |   |   | 16,833,847 |   |   |   | (392,079 | ) |   |   | 27,318,912 |   |   |   | (10,937 | ) |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchase of noncontrolling  interests in consolidated subsidiaries (Note 14) |   |                      | (5         | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (19,395 | ) |   |   | 19,390 |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subsidiary stock issuance (Note 14)                                                    |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (66,042 | ) |   |   | 66,042 |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock-based compensation (Note 14)                                                     |   |                      | 26,843     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 26,843 |   |   |   |   |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                             |   |                      | 3,574,510  |   |   |   | 3,640,963 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (66,453 | ) |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income, net of tax                                                 |   |                      | 61,601     |   |   |   |   |   |   |   | 61,601 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid                                                                         |   |                      | (608,052   | ) |   |   | (608,052 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, MARCH 31, 2012                                                                |   |                      | 32,696,247 |   |   |   | (10,990,348 | ) |   |   | (23,533 | ) |   |   | 41,295,600 |   |   |   | 16,833,847 |   |   |   | (392,079 | ) |   |   | 27,260,318 |   |   |   | 8,042 |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Acquisition and establishment of new consolidated subsidiaries                         |   |                      | 2,688      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2,688 |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock-based compensation (Note 14)                                                     |   |                      | 40,007     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 40,007 |   |   |   |   |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                             |   |                      | 5,317,347  |   |   |   | 5,300,654 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 16,693 |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income, net of tax                                                 |   |                      | 287,283    |   |   |   |   |   |   |   | 287,303 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (20 | ) |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid                                                                         |   |                      | (709,394   | ) |   |   | (709,394 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                   |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, MARCH 31, 2013                                                                |   | ¥                    | 37,634,178 |   |   | ¥ | (6,399,088 | )  |   | ¥ | 263,770 |   |   |   | 41,295,600 |   |   | ¥ | 16,833,847 |   |   | ¥ | (392,079 | )  |   | ¥ | 27,300,325 |   |   | ¥ | 27,403 |   |

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----

|                                                           |   | Thousands of U.S. Dollars (Note 1) |    |
|----------------------------------------------------------------|--------|------------------------------------|---------|
|                                                           |   |                               |    |   | Internet Initiative Japan Inc. Shareholder’s Equity |   |   |   |   |
|                                                           |   | TotalEquity                        |    |   | AccumulatedDeficit(Note 14) |   |   | AccumulatedOtherComprehensiveIncome (Loss)(Notes 13 and 15) |   |   | CommonStock |   |   | TreasuryStock(Note 14) |   |   | AdditionalPaid-inCapital |   |   | NoncontrollingInterests |   |
|                                                           |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, MARCH 31, 2012                                        |   | $                                  | 347,241 |   |   | $ | (116,720 | ) |   | $ | (250 | ) |   | $ | 178,779 |   |   | $ | (4,164 | ) |   | $ | 289,511 |   |   | $ | 85 |   |
|                                                           |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Acquisition and establishment of new consolidated subsidiaries |   |                               | 29      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 29 |   |
|                                                           |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock-based compensation (Note 14)                             |   |                               | 425     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 425 |   |   |   |   |   |
|                                                           |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                     |   |                               | 56,471  |   |   |   | 56,294 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 177 |   |
|                                                           |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income, net of tax                         |   |                               | 3,051   |   |   |   |   |   |   |   | 3,051 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (0 | ) |
|                                                           |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid                                                 |   |                               | (7,534  | ) |   |   | (7,534 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, MARCH 31, 2013                                        |   | $                                  | 399,683 |   |   | $ | (67,960 | ) |   | $ | 2,801 |   |   | $ | 178,779 |   |   | $ | (4,164 | ) |   | $ | 289,936 |   |   | $ | 291 |   |

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|                                                                                      |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars(Note 1) |     |
|-------------------------------------------------------------------------------------------|--------|------------------|------------|--------|----------------------------------|----------|
|                                                                                      |   | 2011             |       |   | 2012                             |     |   | 2013 |   |   | 2013 |   |
| OPERATING ACTIVITIES:                                                                     |   |             |       |   |                             |     |   |   |   |   |   |   |
| Net income                                                                                |   | ¥           | 3,000,959  |   |                             | ¥   | 3,574,510 |   |   | ¥ | 5,317,347 |   |   | $ | 56,471 |   |
| Adjustments to reconcile net income to net cash provided by operating activities:         |   |             |       |   |                             |     |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                             |   |             | 5,850,882  |   |                             |     | 7,143,631 |   |   |   | 7,507,808 |   |   |   | 79,735 |   |
| Impairment loss on intangible assets                                                      |   |             | 218,073    |   |                             |     | 37,000 |   |   |   | 48,000 |   |   |   | 510 |   |
| Provision for retirement and pension costs, less payments                                 |   |             | 253,818    |   |                             |     | 187,287 |   |   |   | 213,963 |   |   |   | 2,272 |   |
| Provision for (reversal of) allowance for doubtful accounts                               |   |             | (10,522    | )      |                             |     | 82,046 |   |   |   | (10,712 | ) |   |   | (114 | ) |
| Loss on disposal of property and equipment                                                |   |             | 23,588     |   |                             |     | 62,368 |   |   |   | 14,638 |   |   |   | 155 |   |
| Net (gain) loss on sales of other investments                                             |   |             | (105,252   | )      |                             |     | 3,154 |   |   |   | (13,565 | ) |   |   | (144 | ) |
| Impairment of other investments                                                           |   |             | 179,829    |   |                             |     | 159,592 |   |   |   | 19,788 |   |   |   | 210 |   |
| Gain on receipt of investment securities                                                  |   |             | (18,060    | )      |                             | - |   |   | - |   |   | - |   |
| Foreign exchange losses (gains), net                                                      |   |             | 27,309     |   |                             |     | 14,202 |   |   |   | (55,983 | ) |   |   | (595 | ) |
| Equity in net income of equity method investees                                           |   |             | (122,667   | )      |                             |     | (123,776 | ) |   |   | (168,065 | ) |   |   | (1,784 | ) |
| Deferred income tax expense (benefit)                                                     |   |             | 606,875    |   |                             |     | 35,714 |   |   |   | (527,128 | ) |   |   | (5,598 | ) |
| Others                                                                                    |   |             | 16,960     |   |                             |     | 67,470 |   |   |   | 39,377 |   |   |   | 418 |   |
| Changes in operating assets and liabilities net of effects from acquisition of a company: |   |             |       |   |                             |     |   |   |   |   |   |   |   |   |   |   |
| Decrease (increase) in accounts receivable                                                |   |             | 429,691    |   |                             |     | 626,783 |   |   |   | (2,906,215 | ) |   |   | (30,865 | ) |
| Decrease (increase) in net investment in sales-type lease―noncurrent                |   |             | (765,510   | )      |                             |     | 330,961 |   |   |   | 37,406 |   |   |   | 397 |   |
| Increase in inventories, prepaid expenses and other current and noncurrent assets         |   |             | (65,828    | )      |                             |     | (161,418 | ) |   |   | (2,422,332 | ) |   |   | (25,725 | ) |
| Increase (decrease) in accounts payable                                                   |   |             | 1,995,375  |   |                             |     | (2,928,912 | ) |   |   | 1,881,105 |   |   |   | 19,978 |   |
| Increase (decrease) in income taxes payable                                               |   |             | 27,490     |   |                             |     | 1,842,553 |   |   |   | (545,914 | ) |   |   | (5,798 | ) |
| Increase in deferred income― noncurrent                                             |   |             | 333,548    |   |                             |     | 276,175 |   |   |   | 1,015,049 |   |   |   | 10,780 |   |
| Increase in accrued expenses, other current and noncurrent liabilities                    |   |             | 687,658    |   |                             |     | 429,998 |   |   |   | 194,201 |   |   |   | 2,063 |   |
| Net cash provided by operating activities—(Forward)                                 |   | ¥           | 12,564,216 |   |                             | ¥   | 11,659,338 |   |   | ¥ 9,638,768  |   |   | $ | 102,366 |   |

----

----

|                                                                                                               |   | Thousands of Yen |        |   | Thousands ofU.S. Dollars(Note 1) |     |
|--------------------------------------------------------------------------------------------------------------------|--------|------------------|-------------|--------|----------------------------------|----------|
|                                                                                                               |   | 2011             |        |   | 2012                             |     |   | 2013 |   |   | 2013 |   |
|                                                                                                               |   |             |        |   |                             |     |   |   |   |   |   |   |
| Net cash provided by operating activities—(Forward)                                                          |   | ¥           | 12,564,216  |   |                             | ¥   | 11,659,338 |   |   | ¥ | 9,638,768 |   |   | $ 102,366 |   |
|                                                                                                               |   |             |        |   |                             |     |   |   |   |   |   |   |   |   |   |
| INVESTING ACTIVITIES:                                                                                              |   |             |        |   |                             |     |   |   |   |   |   |   |   |   |   |
| Purchases of property and equipment                                                                                |   |             | (3,839,011  | )      |                             |     | (6,167,434 | ) |   |   | (5,588,815 | ) |   |   | (59,354 | ) |
| Proceeds from sales of property and equipment                                                                      |   |             | 174,334     |   |                             |     | 350,136 |   |   |   | 543,978 |   |   |   | 5,777 |   |
| Purchases of available-for-sale securities                                                                         |   |             | (141,020    | )      |                             |     | (269,218 | ) |   |   | (48,903 | ) |   |   | (519 | ) |
| Purchases of other investments                                                                                     |   |             | (200,000    | )      |                             |     | (186,115 | ) |   |   | (467,622 | ) |   |   | (4,966 | ) |
| Investment in an equity method investee                                                                            |   | -         |        |   |                             | (24,647  | ) |   |   | (100,000 | ) |   |   | (1,062 | ) |
| Proceeds from sales of available-for-sale securities                                                               |   |             | 155,571     |   |                             |     | 226,346 |   |   | - |   |   | - |   |
| Proceeds from sales of other investments                                                                           |   |             | 66,047      |   |                             |     | 94,285 |   |   |   | 109,944 |   |   |   | 1,168 |   |
| Payments of guarantee deposits                                                                                     |   |             | (686,825    | )      |                             |     | (39,403 | ) |   |   | (164,417 | ) |   |   | (1,746 | ) |
| Refund of guarantee deposits                                                                                       |   |             | 165,193     |   |                             |     | 26,045 |   |   |   | 17,349 |   |   |   | 184 |   |
| Payments for refundable insurance policies                                                                         |   |             | (22,188     | )      |                             |     | (6,604 | ) |   |   | (737 | ) |   |   | (8 | ) |
| Refund from insurance policies                                                                                     |   |             | 29,642      |   |                             |     | 42,948 |   |   | - |   |   | - |   |
| Acquisition of a newly controlled company, net of cash acquired (Note 2)                                           |   |             | (9,170,000  | )      |                             | - |   |   |   | (229,058 | ) |   |   | (2,433 | ) |
| Other                                                                                                              |   |             | (24,860     | )      |                             |     | (594 | ) |   |   | (17,620 | ) |   |   | (188 | ) |
| Net cash used in investing activities                                                                              |   |             | (13,493,117 | )      |                             |     | (5,954,255 | ) |   |   | (5,945,901 | ) |   |   | (63,147 | ) |
|                                                                                                               |   |             |        |   |                             |     |   |   |   |   |   |   |   |   |   |   |
| FINANCING ACTIVITIES:                                                                                              |   |             |        |   |                             |     |   |   |   |   |   |   |   |   |   |   |
| Proceeds from issuance of short-term borrowings with initial maturities over three months and long-term borrowings |   |             | 1,600,000   |   |                             |     | 3,370,000 |   |   |   | 71,000 |   |   |   | 753 |   |
| Repayments of short-term borrowings with initial maturities over three months and long-term borrowings             |   |             | (1,550,000  | )      |                             |     | (620,000 | ) |   |   | (1,081,000 | ) |   |   | (11,480 | ) |
| Principal payments under capital leases                                                                            |   |             | (2,989,471  | )      |                             |     | (3,425,680 | ) |   |   | (3,678,940 | ) |   |   | (39,071 | ) |
| Net increase (decrease) in short-term borrowings                                                                   |   |             | 8,930,000   |   |                             |     | (4,180,000 | ) |   |   | 400,000 |   |   |   | 4,248 |   |
| Proceeds from issuance of subsidiary stock to noncontrolling interests                                             |   | -         |        |   | -                         |     |   |   | 2,570 |   |   |   | 28 |   |
| Dividends paid                                                                                                     |   |             | (506,535    | )      |                             |     | (608,052 | ) |   |   | (709,394 | ) |   |   | (7,534 | ) |
| Proceeds from sales of treasury stock                                                                              |   |             | 37,126      |   |                             | - |   |   | - |   |   | - |   |
| Net cash provided by (used in) financing activities                                                                |   |             | 5,521,120   |   |                             |     | (5,463,732 | ) |   |   | (4,995,764 | ) |   |   | (53,056 | ) |
|                                                                                                               |   |             |        |   |                             |     |   |   |   |   |   |   |   |   |   |   |
| FORWARD                                                                                                            |   | ¥           | 4,592,219   |   |                             | ¥   | 241,351 |   |   | ¥ | (1,302,897 | ) |   | $ | (13,837 | ) |

----

----

|                                                         |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars(Note 1) |   |
|--------------------------------------------------------------|--------|------------------|------------|--------|----------------------------------|--------|
|                                                         |   | 2011             |       |   | 2012                             |   |   | 2013 |   |   | 2013 |   |
|                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
|                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| FORWARD                                                      |   | ¥           | 4,592,219  |   |                             | ¥ | 241,351 |   |   | ¥ | (1,302,897 | ) |   | $ | (13,837 | ) |
|                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |   |             | (43,019    | )      |                             |   | (18,142 | ) |   |   | 24,945 |   |   |   | 265 |   |
|                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         |   |             | 4,549,200  |   |                             |   | 223,209 |   |   |   | (1,277,952 | ) |   |   | (13,572 | ) |
|                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                 |   |             | 8,764,415  |   |                             |   | 13,313,615 |   |   |   | 13,536,824 |   |   |   | 143,764 |   |
|                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, END OF YEAR                       |   | ¥           | 13,313,615 |   |                             | ¥ | 13,536,824 |   |   | ¥ | 12,258,872 |   |   | $ | 130,192 |   |

|                                                            |   |     |       |   |     |     |      |   |   |     |      |   |
|-----------------------------------------------------------------|--------|----------|------------|--------|----------|----------|-----------|--------|--------|----------|-----------|--------|
| ADDITIONAL CASH FLOW INFORMATION:                               |   |     |       |   |     |     |      |   |   |     |      |   |
| Interest paid                                                   |   | ¥   | 267,750    |   |     | ¥   | 297,862   |   |   | ¥   | 287,158   |   |   | $ | 3,050 |   |
| Income taxes paid                                               |   |     | 346,561    |   |     |     | 481,580   |   |   |     | 3,527,987 |   |   |   | 37,468 |   |
|                                                            |   |     |       |   |     |     |      |   |   |     |      |   |   |   |   |   |
| NONCASH INVESTING AND FINANCING ACTIVITIES:                     |   |     |       |   |     |     |      |   |   |     |      |   |   |   |   |   |
| Acquisition of assets by entering into capital leases           |   |     | 2,912,806  |   |     |     | 4,749,695 |   |   |     | 4,816,248 |   |   |   | 51,150 |   |
| Facilities purchase liabilities                                 |   |     | 1,559,343  |   |     |     | 659,266   |   |   |     | 949,264   |   |   |   | 10,081 |   |
| Asset retirement obligation                                     |   |     | 213,336    |   |     |     | 42,273    |   |   |     | 26,620    |   |   |   | 283 |   |
| Acquisition of a company (Note 2):                              |   |     |       |   |     |     |      |   |   |     |      |   |   |   |   |   |
| Assets acquired                                                 |   |     | 14,956,137 |   |     | - |      |   |   | 404,139  |      |   |   | 4,292 |   |
| Liabilities assumed                                             |   |     | 5,786,137  |   |     | - |      |   |   | 104,321  |      |   |   | 1,108 |   |
| Noncontrolling interests                                        |   | - |       |   | - |     |      |   | 118    |     |      |   | 1 |   |
| Cash paid                                                       |   |     | (9,170,000 | )      |     | - |      |   |   | (299,700 | )         |   |   | (3,183 | ) |
| Cash acquired                                                   |   | - |       |   | - |     |      |   | 70,642 |     |      |   | 750 |   |
| Acquisition of a newly controlled company, net of cash acquired |   |     | (9,170,000 | )      |     | - |      |   |   | (229,058 | )         |   |   | (2,433 | ) |

----

Internet 

----

| 1. | DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|----|------------------------------------------------------------------------|

----

|   | ・ | System construction services ― include all or some of the following elements depending on arrangements to meet each of our customer's requirements: consulting, project planning, system design, and development of network systems. These services also include the installation of software as well as configuration and installation of hardware. |
|--------|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ・ | Software ― we resell third-party software such as Oracle and Windows to our customers, which are installed by us during the system development process. |
|--------|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ・ | Hardware ― we also resell third-party hardware, primarily servers, switches and routers, which we install during the system development process. The hardware is generic hardware that is often sold by third party manufacturers and resellers. |
|--------|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ・ | Monitoring and operating service ― we monitor our customer's network activity and internet connectivity to detect and report problems. We also provide constant data backup services. |
|--------|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ・ | Hardware and software maintenance service ― we repair or replace any malfunctioning parts of hardware. We examine faults of software and provide suitable solutions to customers. |
|--------|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | ・ | Revenue allocated to system construction services is accounted for using contract accounting. System construction service revenues, which are generally completed within three months, are recognized based on the completed-contract method in compliance with Accounting Standards Codification (“ASC”) 605-35-25-92 because the Company is unable to bill customers and the title of constructed network system is not transferred to customer unless customers are satisfied with and accept the completed systems. |
|--------|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ・ | Revenue related to the hardware and software essential to the hardware product’s functionality is not recognized until customer acceptance is received because title to the hardware and software do not transfer to our customers until formal acceptance is received. |
|--------|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ・ | Revenue related to undelivered non-software services (monitoring, operating and hardware maintenance services) is recognized on a straight-line basis over the contract period. |
|--------|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                            |   | Range ofUseful Lives |
|-------------------------------------------------|--------|----------------------|
|                                            |   |                 |   |   |   |
| Data communications, office and other equipment |   | 3                    | to | 20 |  years |
| Buildings                                       |   |                 |   | 20 |  years |
| Leasehold improvements                          |   | 8                    | to | 20 |  years |
| Capitalized software                            |   |                 |   |   5 |  years |
| Capital leases                                  |   | 4                    | to |   6 |  years |

----

----

----

----

| 2. | BUSINESS COMBINATIONS |
|----|-----------------------|

|                                      |   | Thousands of Yen |       |
|-------------------------------------------|--------|------------------|------------|
|                                      |   |             |       |
| Accounts receivable                       |   | ¥           | 5,459,158  |   |
| Inventories                               |   |             | 12,196     |   |
| Prepaid expenses                          |   |             | 159,285    |   |
| Deferred tax assets―current         |   |             | 170,852    |   |
| Other current assets                      |   |             | 13,562     |   |
| Other investments                         |   |             | 357,097    |   |
| Property and equipment                    |   |             | 1,371,086  |   |
| Other intangible assets                   |   |             | 3,725,649  |   |
| Deferred tax assets―Noncurrent      |   |             | 1,354,758  |   |
| Other assets                              |   |             | 44,221     |   |
| Total assets acquired                     |   |             | 12,667,864 |   |
|                                      |   |             |       |   |
| Accounts payable                          |   |             | 485,271    |   |
| Accrued expenses                          |   |             | 3,216,424  |   |
| Deferred income―current             |   |             | 113,336    |   |
| Other current liabilities                 |   |             | 243,513    |   |
| Deferred tax liabilities―Noncurrent |   |             | 1,525,610  |   |
| Deferred income―Noncurrent          |   |             | 201,983    |   |
| Total liabilities assumed                 |   |             | 5,786,137  |   |
|                                      |   |             |       |   |
| Total identified net assets               |   |             | 6,881,727  |   |
|                                      |   |             |       |   |
| Goodwill                                  |   |             | 2,288,273  |   |
|                                      |   |             |       |   |
| Purchase price                            |   | ¥           | 9,170,000  |   |

----

|                                                      |   | Thousands of Yen |       |
|-----------------------------------------------------------|--------|------------------|------------|
|                                                      |   |             |       |
| Revenues                                                  |   | ¥           | 15,094,218 |   |
| Net income attributable to Internet Initiative Japan Inc. |   |             | 690,761    |   |

|                                                      |   | Thousands of Yen |       |
|-----------------------------------------------------------|--------|------------------|------------|
|                                                      |   |             |       |
| Revenues                                                  |   | ¥           | 92,583,743 |   |
| Net income attributable to Internet Initiative Japan Inc. |   |             | 4,800,412  |   |

|                                                                                         |   | Yen    |   |
|----------------------------------------------------------------------------------------------|--------|--------|--------|
|                                                                                         |   |   |   |
| Pro forma basic net income attributable to Internet Initiative Japan Inc. per common share   |   | ¥ | 118    |   |
| Pro forma diluted net income attributable to Internet Initiative Japan Inc. per common share |   |   | 118    |   |

| 3.  | INVENTORY |
|----------|-----------|

|                                   |   | Thousands of Yen |    |   | Thousands ofU.S. Dollars |   |
|----------------------------------------|--------|------------------|---------|--------|--------------------------|--------|
|                                   |   | 2012             |    |   | 2013                     |   |   | 2013 |   |
|                                   |   |             |    |   |                     |   |   |   |   |
|                                   |   |             |    |   |                     |   |   |   |   |
| Network equipment purchased for resale |   | ¥           | 287,786 |   |                     | ¥ | 350,976 |   |   | $ | 3,727 |   |
| Work in process                        |   | ¥           | 464,289 |   |                     | ¥ | 950,708 |   |   | $ | 10,097 |   |
|                                   |   |             |    |   |                     |   |   |   |   |   |   |   |
| Total inventories                      |   | ¥           | 752,075 |   |                     | ¥ | 1,301,684 |   |   | $ | 13,824 |   |

----

| 4. | OTHER INVESTMENTS |
|----|-------------------|

|                                       |   | Thousands of Yen |    |
|--------------------------------------------|--------|------------------|---------|
|   March 31, 2012                      |   | Cost             |    |   | UnrealizedGains |   |   | UnrealizedLosses |   |   | FairValue |   |
|                                       |   |             |    |   |   |   |   |   |   |   |   |   |
| Available-for-sale—Equity securities |   | ¥           | 451,404 |   |   | ¥ | 418,195 |   |   | ¥ | 8,685 |   |   | ¥ | 860,914 |   |

|                                       |   |   |    |   |   |   |    |   |   |   |   |   |
|--------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
| March 31, 2013                             |   |   |    |   |   |   |    |   |   |   |   |   |
|                                       |   |   |    |   |   |   |    |   |   |   |   |   |
| Available-for-sale—Equity securities |   | ¥ | 500,616 |   |   | ¥ | 813,445 |   |   | ¥ | 4,138  |   |   | ¥ | 1,309,923 |   |

|                                       |   | Thousands of U.S. Dollars |   |
|--------------------------------------------|--------|---------------------------|--------|
|   March 31, 2013                      |   | Cost                      |   |   | UnrealizedGains |   |   | UnrealizedLosses |   |   | FairValue |   |
|                                       |   |                      |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale—Equity securities |   | $                         | 5,317  |   |   | $ | 8,639 |   |   | $ | 44 |   |   | $ | 13,912 |   |

|                                       |   | Thousands of Yen   |    |
|--------------------------------------------|--------|--------------------|---------|
|                                       |   | Less than12 Months |    |   | 12 Months or More |   |   | Total |   |
|   March 31, 2012                      |   | FairValue          |    |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
|                                       |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale—Equity securities |   | ¥             | 118,055 |   |   | ¥ | 7,628 |   |   | ¥ | 15,288 |   |   | ¥ | 1,057 |   |   | ¥ | 133,343 |   |   | ¥ | 8,685 |   |
|                                       |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 31, 2013                             |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale—Equity securities |   | ¥             | 27,902  |   |   | ¥ | 4,138 |   |   | - |   |   | - |   |   | ¥ | 27,902 |   |   | ¥ | 4,138 |   |

|                                       |   | Thousands of U.S. Dollars |   |
|--------------------------------------------|--------|---------------------------|--------|
|                                       |   | Less than12 Months        |   |   | 12 Months or More |   |   | Total |   |
| March 31, 2013                             |   | FairValue                 |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
|                                       |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale—Equity securities |   | $                         | 296    |   |   | $ | 44 |   |   |   | - |   |   |   | - |   |   | $ | 296 |   |   | $ | 44 |   |

----

----

| 5. | ALLOWANCE FOR DOUBTFUL ACCOUNTS AND LOANS |
|----|-------------------------------------------|

|                      |   | Thousands of Yen             |    |
|---------------------------|--------|------------------------------|---------|
|                      |   | Balance at Beginning of Year |    |   | Credits Charged Off |   |   | Provision for (Reversal of) Doubtful Accounts |   |   | Other |   |   | Balance at End of Year |   |
|                      |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Year ended March 31, 2011 |   | ¥                       | 145,918 |   |   | ¥ | (7,376 | ) |   | ¥ | (10,522 | ) |   | ¥ | 14,851 |   |   | ¥ | 142,871 |   |
|                      |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year ended March 31, 2012 |   | ¥                       | 142,871 |   |   | ¥ | (19,878 | ) |   | ¥ | 82,046 |   |   | - |   |   | ¥ | 205,039 |   |
|                      |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year ended March 31, 2013 |   | ¥                       | 205,039 |   |   | ¥ | (17,934 | ) |   | ¥ | (10,712 | ) |   | - |   |   | ¥ | 176,393 |   |

|                      |   | Thousands of Yen             |   |
|---------------------------|--------|------------------------------|--------|
|                      |   | Balance at Beginning of Year |   |   | Credits Charged Off |   |   | Provision for Doubtful Accounts |   |   | Other |   |   | Balance at End of Year |   |
|                      |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year ended March 31, 2013 |   | ¥                       | 2,178  |   |   | ¥ | (190 | ) |   | ¥ | (114 | ) |   | - |   |   | ¥ | 1,874 |   |

| 6. | INVESTMENTS IN EQUITY METHOD INVESTEES |
|----|----------------------------------------|

|                |   | Thousands of Yen |    |   | Thousands ofU.S. Dollars |   |
|---------------------|--------|------------------|---------|--------|--------------------------|--------|
|                |   | 2011             |    |   | 2012                     |   |   | 2013 |   |   | 2013 |   |
|                |   |             |    |   |                     |   |   |   |   |   |   |   |
| Accounts receivable |   | -         |    |   | ¥                   | 51,788 |   |   | ¥ | 52,422 |   |   | $ | 557 |   |
| Accounts payable    |   | -         |    |   |                     | 36,698 |   |   |   | 39,734 |   |   |   | 422 |   |
| Revenues            |   | ¥           | 730,622 |   |                     |   | 624,718 |   |   |   | 598,765 |   |   |   | 6,359 |   |
| Costs and expenses  |   |             | 348,771 |   |                     |   | 403,400 |   |   |   | 456,892 |   |   |   | 4,852 |   |

----

|         |   | Thousands of Yen |   |   | Thousands ofU.S. Dollars |   |
|--------------|--------|------------------|--------|--------|--------------------------|--------|
|         |   | 2012             |   |   | 2013                     |   |   | 2013 |   |
|         |   |             |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Multifeed    |   |             | 33.00  | %      |                     | ¥ | 1,089,319 |   |   |   | 33.00 | % |   | ¥ | 1,141,909 |   |   | $ | 12,127 |   |
| i-revo       |   |             | 30.00  |   |                     |   | 186,115 |   |   |   | 30.00 |   |   |   | 371,888 |   |   |   | 3,950 |   |
| Trinity      |   |             | 45.00  |   |                     |   | 98,041 |   |   |   | 33.75 |   |   |   | 93,154 |   |   |   | 989 |   |
| Stratosphere |   | -         |   |   | -                 |   |   |   | 50.00 |   |   |   | 74,772 |   |   |   | 794 |   |
| i-Heart      |   |             | 20.22  |   |                     |   | 33,159 |   |   | - |   |   | - |   |   | - |   |
|         |   |             |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total        |   |             |   |   |                     | ¥ | 1,406,634 |   |   |   |   |   |   | ¥ | 1,681,723 |   |   | $ | 17,860 |   |

----

| 7. | PROPERTY AND EQUIPMENT |
|----|------------------------|

|                                                                 |   | Thousands of Yen |        |   | Thousands ofU.S. Dollars |   |
|----------------------------------------------------------------------|--------|------------------|-------------|--------|--------------------------|--------|
|                                                                 |   | 2012             |        |   | 2013                     |   |   | 2013 |   |
|                                                                 |   |             |        |   |                     |   |   |   |   |
| Data communications equipment                                        |   | ¥           | 5,791,067   |   |                     | ¥ | 6,746,069 |   |   | $ | 71,645 |   |
| Office and other equipment                                           |   |             | 939,435     |   |                     |   | 2,130,160 |   |   |   | 22,623 |   |
| Buildings                                                            |   |             | 489,360     |   |                     |   | 668,631 |   |   |   | 7,101 |   |
| Leasehold improvements                                               |   |             | 2,513,220   |   |                     |   | 2,666,584 |   |   |   | 28,320 |   |
| Capitalized software                                                 |   |             | 15,514,986  |   |                     |   | 18,465,716 |   |   |   | 196,110 |   |
| Assets under capital leases, primarily data communications equipment |   |             | 20,180,641  |   |                     |   | 21,864,989 |   |   |   | 232,211 |   |
| Total                                                                |   |             | 45,428,709  |   |                     |   | 52,542,149 |   |   |   | 558,010 |   |
| Less accumulated depreciation and amortization                       |   |             | (25,693,163 | )      |                     |   | (29,516,394 | ) |   |   | (313,471 | ) |
|                                                                 |   |             |        |   |                     |   |   |   |   |   |   |   |
| Property and equipment—net                                     |   | ¥           | 19,735,546  |   |                     | ¥ | 23,025,755 |   |   | $ | 244,539 |   |

|  Year Ending  March 31 |   | Thousands of Yen |    | Thousands ofU.S. Dollars |
|---------------------------------------|--------|------------------|---------|--------------------------|
| 2014                                  |   | ¥           | 510,722 |                     | $ | 5,424 |
| 2015                                  |   |             | 510,722 |                     |   | 5,424 |
| 2016                                  |   |             | 467,535 |                     |   | 4,965 |
| 2017                                  |   |             | 446,021 |                     |   | 4,737 |
| 2018                                  |   |             | 17,450  |                     |   | 185 |

----

| 8. | GOODWILL AND OTHER INTANGIBLE ASSETS |
|----|--------------------------------------|

|                                                                                                                                                  |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|--------------------------|--------|
|                                                                                                                                                  |   | 2012             |       |   | 2013                     |   |   | 2013 |   |
|                                                                                                                                                  |   |             |       |   |                     |   |   |   |   |
| Intangible assets subject to amortization:                                                                                                            |   |             |       |   |                     |   |   |   |   |
|     Customer relationship                                                                                                         |   | ¥           | 6,424,471  |   |                     |   | 6,424,471 |   |   | $ | 68,229 |   |
|                         Total |   |             | 6,424,471  |   |                     |   | 6,424,471 |   |   |   | 68,229 |   |
| Less accumulated amortization                                                                                                                         |   |             |       |   |                     |   |   |   |   |   |   |   |
|   Customer relationship                                                                                                                 |   |             | (1,201,881 | )      |                     |   | (1,759,440 | ) |   |   | (18,685 | ) |
|                         Total |   |             | (1,201,881 | )      |                     |   | (1,759,440 | ) |   |   | (18,685 | ) |
| Intangible assets subject to amortization—net                                                                                                   |   |             | 5,222,590  |   |                     |   | 4,665,031 |   |   |   | 49,544 |   |
|                                                                                                                                                  |   |             |       |   |                     |   |   |   |   |   |   |   |
| Intangible assets not subject to amortization:                                                                                                        |   |             |       |   |                     |   |   |   |   |   |   |   |
| Telephone rights                                                                                                                                      |   |             | 18,879     |   |                     |   | 19,400 |   |   |   | 206 |   |
|     Trademark                                                                                                                     |   |             | 155,000    |   |                     |   | 107,000 |   |   |   | 1,136 |   |
|     Goodwill                                                                                                                      |   |             | 5,788,333  |   |                     |   | 5,969,951 |   |   |   | 63,402 |   |
| Total                                                                                                                                                 |   |             | 5,962,212  |   |                     |   | 6,096,351 |   |   |   | 64,744 |   |
|                                                                                                                                                  |   |             |       |   |                     |   |   |   |   |   |   |   |
| Total intangible assets                                                                                                                               |   | ¥           | 11,184,802 |   |                     |   | 10,761,382 |   |   | $ | 114,288 |   |

| Year Ending March 31 |   | Thousands of Yen |    | Thousands ofU.S. Dollars |
|----------------------|--------|------------------|---------|--------------------------|
| 2014                 |   | ¥           | 463,073 |                     | $ | 4,918 |
| 2015                 |   |             | 397,031 |                     |   | 4,217 |
| 2016                 |   |             | 388,014 |                     |   | 4,121 |
| 2017                 |   |             | 380,496 |                     |   | 4,041 |
| 2018                 |   |             | 365,460 |                     |   | 3,881 |

----

|                          |   | Thousands of Yen                                 |            |   | Thousands of U.S. Dollars   |     |
|-------------------------------|--------|--------------------------------------------------|-----------------|--------|-----------------------------|----------|
|                          |   | Network Service and Systems Integration Business |            |   | ATM Operation Business      |     |   | Total |   |   | Network Service and Systems Integration Business |   |   | ATM Operation Business |   |   | Total |   |
| Balance at March 31, 2011     |   |                                             |            |   |                        |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Goodwill                      |   | ¥ 5,673,064                          |            |   | ¥  235,551 |     |   | ¥ | 5,908,615 |   |   |   |   |   |   |   |   |   |   |
| Accumulated impairment losses |   |                                             | (120,282        | )      |                        | - |   |   |   | (120,282 | ) |   |   |   |   |   |   |   |   |   |
|                          |   |                                             |  5,552,782 |   |                        |     | 235,551 |   |   |   | 5,788,333 |   |   |   |   |   |   |   |   |   |   |
|                          |   |                                             |            |   |                        |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Acquisition                   |   | -                                         |            |   | -                    |     |   | - |   |   | - |   |   | - |   |   | - |   |
|                          |   |                                             |            |   |                        |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impairment losses             |   | -                                         |            |   | -                    |     |   | - |   |   | - |   |   | - |   |   | - |   |
|                          |   |                                             |            |   |                        |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at March 31, 2012     |   |                                             |            |   |                        |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Goodwill                      |   |                                             | 5,673,064       |   |                        |     | 235,551 |   |   |   | 5,908,615 |   |   | $ | 60,249 |   |   | $ | 2,501 |   |   | $ | 62,750 |   |
| Accumulated impairment losses |   |                                             | (120,282        | )      |                        | - |   |   |   | (120,282 | ) |   |   | (1,277 | ) |   | - |   |   |   | (1,277 | ) |
|                          |   |                                             | 5,552,782       |   |                        |     | 235,551 |   |   |   | 5,788,333 |   |   |   | 58,972 |   |   |   | 2,501 |   |   |   | 61,473 |   |
|                          |   |                                             |            |   |                        |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Acquisition                   |   |                                             | 181,618         |   |                        | - |   |   |   | 181,618 |   |   |   | 1,929 |   |   | - |   |   |   | 1,929 |   |
|                          |   |                                             |            |   |                        |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impairment losses             |   | -                                         |            |   | -                    |     |   | - |   |   | - |   |   | - |   |   | - |   |
|                          |   |                                             |            |   |                        |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at March 31, 2013     |   |                                             |            |   |                        |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Goodwill                      |   |                                             | 5,854,682       |   |                        |     | 235,551 |   |   |   | 6,090,233 |   |   |   | 62,178 |   |   |   | 2,501 |   |   |   | 64,679 |   |
| Accumulated impairment losses |   |                                             | (120,282        | )      |                        | - |   |   |   | (120,282 | ) |   |   | (1,277 | ) |   | - |   |   |   | (1,277 | ) |
|                          |   | ¥                                           | 5,734,400       |   |                        | ¥   | 235,551 |   |   | ¥ | 5,969,951 |   |   | $ | 60,901 |   |   | $ | 2,501 |   |   | $ | 63,402 |   |

----

| 9. | LEASES |
|----|--------|

|                                |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars |   |
|-------------------------------------|--------|------------------|-----------|--------|--------------------------|--------|
|                                |   | 2012             |      |   | 2013                     |   |   | 2013 |   |
|                                |   |             |      |   |                     |   |   |   |   |
| Head office                         |   | ¥           | 1,470,812 |   |                     | ¥ | 1,472,311 |   |   | $ | 15,636 |   |
| Sales and subsidiaries offices      |   |             | 402,256   |   |                     |   | 543,181 |   |   |   | 5,769 |   |
| Others                              |   |             | 26,747    |   |                     |   | 35,957 |   |   |   | 382 |   |
|                                |   |             |      |   |                     |   |   |   |   |   |   |   |
| Total refundable guarantee deposits |   | ¥           | 1,899,815 |   |                     | ¥ | 2,051,449 |   |   | $ | 21,787 |   |

----

|                                                |   | Thousands of Yen                 |   |   | Thousands of U.S. Dollars |   |
|-----------------------------------------------------|--------|----------------------------------|--------|--------|---------------------------|--------|
|                                                |   | ConnectivityLinesOperatingLeases |   |   | OtherOperatingLeases      |   |   | CapitalLeases |   |   | ConnectivityLinesOperatingLeases |   |   | OtherOperatingLeases |   |   | CapitalLeases |   |
|                                                |   |                             |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year ending March 31:                               |   |                             |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2014                                                |   | ¥                           | 76,000 |   |                      | ¥ | 2,380,619 |   |   | ¥ | 3,654,924 |   |   | $ | 807 |   |   | $ | 25,283 |   |   | $ | 38,816 |   |
| 2015                                                |   |                             | 1,914  |   |                      |   | 2,055,756 |   |   |   | 3,009,028 |   |   |   | 20 |   |   |   | 21,832 |   |   |   | 31,957 |   |
| 2016                                                |   |                             |   |   |                      |   | 389,326 |   |   |   | 1,837,318 |   |   |   |   |   |   |   | 4,135 |   |   |   | 19,513 |   |
| 2017                                                |   |                             |   |   |                      |   | 382,178 |   |   |   | 603,737 |   |   |   |   |   |   |   | 4,059 |   |   |   | 6,412 |   |
| 2018                                                |   |                             |   |   |                      |   | 36,149 |   |   |   | 42,031 |   |   |   |   |   |   |   | 384 |   |   |   | 446 |   |
| 2019 and thereafter                                 |   |                             |   |   |                      |   | 102,259 |   |   |   | 421 |   |   |   |   |   |   |   | 1,086 |   |   |   | 4 |   |
|                                                |   |                             |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total minimum lease payments                        |   | ¥                           | 77,914 |   |                      | ¥ | 5,346,287 |   |   |   | 9,147,459 |   |   | $ | 827 |   |   | $ | 56,779 |   |   |   | 97,148 |   |
|                                                |   |                             |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less amounts representing interest                  |   |                             |   |   |                      |   |   |   |   |   | 271,623 |   |   |   |   |   |   |   |   |   |   |   | 2,884 |   |
|                                                |   |                             |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Present value of net minimum capital lease payments |   |                             |   |   |                      |   |   |   |   |   | 8,875,836 |   |   |   |   |   |   |   |   |   |   |   | 94,264 |   |
| Less current portion                                |   |                             |   |   |                      |   |   |   |   |   | 3,505,471 |   |   |   |   |   |   |   |   |   |   |   | 37,229 |   |
|                                                |   |                             |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noncurrent portion                                  |   |                             |   |   |                      |   |   |   |   | ¥ | 5,370,365 |   |   |   |   |   |   |   |   |   |   | $ | 57,035 |   |

|                                                       |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars |   |
|------------------------------------------------------------|--------|------------------|-----------|--------|--------------------------|--------|
|                                                       |   | 2012             |      |   | 2013                     |   |   | 2013 |   |
| Year ending March 31:                                      |   |             |      |   |                     |   |   |   |   |
| 2014                                                       |   |             |      |   |                     | ¥ | 493,074 |   |   | $ | 5,237 |   |
| 2015                                                       |   |             |      |   |                     |   | 446,212 |   |   |   | 4,739 |   |
| 2016                                                       |   |             |      |   |                     |   | 341,230 |   |   |   | 3,624 |   |
| 2017                                                       |   |             |      |   |                     |   | 62,371 |   |   |   | 662 |   |
| 2018                                                       |   |             |      |   |                     |   | 62,371 |   |   |   | 662 |   |
|                                                       |   |             |      |   |                     |   |   |   |   |   |   |   |
| Total minimum lease payments to be received*               |   | ¥           | 1,430,502 |   |                     | ¥ | 1,405,258 |   |   | $ | 14,924 |   |
| Estimated residual value of leased property (unguaranteed) |   | -         |      |   | -                 |   |   | - |   |
| Less unearned income                                       |   |             | 37,911    |   |                     |   | 30,400 |   |   |   | 323 |   |
| Net investment in sales-type leases                        |   |             | 1,392,591 |   |                     |   | 1,374,858 |   |   |   | 14,601 |   |
| Less current portion                                       |   |             | 457,145   |   |                     |   | 476,818 |   |   |   | 5,063 |   |
| Non-current net investment in sales-type leases            |   | ¥           | 935,446   |   |                     | ¥ | 898,040 |   |   | $ | 9,538 |   |

----

| 10.  | ASSET RETIREMENT OBLIGATIONS |
|-----------|------------------------------|

|                             |   | Thousands of Yen            |    |   | Thousands ofU.S. Dollars      |   |
|----------------------------------|--------|-----------------------------|---------|--------|-------------------------------|--------|
|                             |   | 2012                        |    |   | 2013                          |   |   | 2013 |   |
|                             |   |                        |    |   |                          |   |   |   |   |
|                             |   |                        |    |   |                          |   |   |   |   |
| Balance at beginning of the year |   | ¥                      | 248,183 |   |                          | ¥ | 299,083 |   |   | $ | 3,176 |   |
|                             |   |                        |    |   |                          |   |   |   |   |   |   |   |
| Liabilities incurred             |   |  42,273              |    |   |                          | 26,620 |   |   |   | 283 |   |
| Liabilities settled              |   | -                    |    |   | -                      |   |   | - |   |
| Accretion expense                |   |                        | 8,627   |   |                          |   | 8,882 |   |   |   | 94 |   |
| Revision in estimated cash flows |   | -                    |    |   | -                      |   |   | - |   |
|                             |   |                        |    |   |                          |   |   |   |   |   |   |   |
| Balance at end of the year       |   | ¥  299,083 |    |   | ¥ 334,585  |   |   | $ | 3,553 |   |

| 11. | BORROWINGS |
|-----|------------|

|                                                                                                                                                                                                                                                                                                                                 |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars |                                                                             |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|--------------------------|----------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                 |   | 2012             |       |   | 2013                     |                                                                             |   | 2013 |   |
| Long-term installment payable at various dates through calendar 2014. Interest is payable at variable rates based on Tokyo InterBank Offered Rate (TIBOR) which were 0.336% and 0.250% as of March 31, 2012 and 2013, respectively. Weighted average interest rates were 1.026% and 0.962% at March 31, 2012 and 2013, respectively. |   | ¥           | 3,000,000  |   |                     | ¥                                                                           | 1,990,000 |   |   | $ | 21,134 |   |
|                                                                                                                                                                                                                                                                                                                                 |   |             |       |   |                     |                                                                             |   |   |   |   |   |   |
| Less current portion                                                                                                                                                                                                                                                                                                                 |   |             | (1,010,000 | )      |                     |    (1,010,000       | ) |   |    (10,726 | ) |
|                                                                                                                                                                                                                                                                                                                                 |   |             |       |   |                     |                                                                             |   |   |   |   |   |   |
| Long-term borrowings, less current portion                                                                                                                                                                                                                                                                                           |   | ¥           | 1,990,000  |   |                     | ¥                                                                           | 980,000 |   |   | $ | 10,408 |   |

|                  |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars |   |
|-----------------------|--------|------------------|-----------|--------|--------------------------|--------|
| Year ending March 31: |   |             |      |   |                     |   |
| 2014                  |   |             | 1,010,000 |   |                     |   | 10,726 |   |
| 2015                  |   |             | 980,000   |   |                     |   | 10,408 |   |
| Total                 |   | ¥           | 1,990,000 |   |                     | $      | 21,134 |   |

----

----

| 12. | INCOME TAXES |
|-----|--------------|

|                                                                                                  |   | Thousands of Yen |      |   | Thousands of U.S. Dollars |   |
|-------------------------------------------------------------------------------------------------------|--------|------------------|-----------|--------|---------------------------|--------|
|                                                                                                  |   | 2011             |      |   | 2012                      |   |   | 2013 |   |   | 2013 |   |
|                                                                                                  |   |             |      |   |
| Income from operations before income tax expense and equity in net income of equity method investees: |   |             |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Domestic                                                                                              |   | ¥           | 3,818,930 |   |                      | ¥ | 5,970,007 |   |   | ¥ | 7,825,846 |   |   | $ | 83,113 |   |
| Foreign                                                                                               |   |             | 15,059    |   |                      |   | 6,213 |   |   |   | (68,982 | ) |   |   | (733 | ) |
| Total                                                                                                 |   | ¥           | 3,833,989 |   |                      | ¥ | 5,976,220 |   |   | ¥ | 7,756,864 |   |   | $ | 82,380 |   |
| Income taxes―current:                                                                           |   |             |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Domestic                                                                                              |   | ¥           | 351,592   |   |                      | ¥ | 2,489,350 |   |   | ¥ | 3,140,964 |   |   | $ | 33,357 |   |
| Foreign                                                                                               |   |             | (2,770    | )      |                      |   | 422 |   |   |   | (6,254 | ) |   |   | (66 | ) |
| Total                                                                                                 |   | ¥           | 348,822   |   |                      | ¥ | 2,489,772 |   |   | ¥ | 3,134,710 |   |   | $ | 33,291 |   |
| Income taxes―deferred:                                                                          |   |             |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Domestic                                                                                              |   | ¥           | 606,875   |   |                      | ¥ | 35,714 |   |   | ¥ | (528,832 | ) |   | $ | (5,616 | ) |
| Foreign                                                                                               |   |             | -  |   |                      |   | - |   |   |   | 1,704 |   |   |   | 18 |   |
| Total                                                                                                 |   | ¥           | 606,875   |   |                      | ¥ | 35,714 |   |   | ¥ | (527,128 | ) |   | $ | (5,598 | ) |

----

|                                                                   |   | Thousands of Yen  |       |   | Thousands ofU.S. Dollars |      |
|------------------------------------------------------------------------|--------|-------------------|------------|--------|--------------------------|-----------|
|                                                                   |   | 2012              |       |   | 2013                     |      |   | 2013 |   |
|                                                                   |   | DeferredTaxAssets |       |   | DeferredTaxLiabilities   |      |   | DeferredTaxAssets |   |   | DeferredTaxLiabilities |   |   | DeferredTaxAssets |   |   | DeferredTaxLiabilities |   |
|                                                                   |   |              |       |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized gains on available-for-sale securities                      |   | -          |       |   | ¥                   | 147,043   |   |   | - |   |   | ¥ | 290,623 |   |   | - |   |   | $ | 3,086 |   |
| Capital leases                                                         |   | ¥            | 6,369      |   |                     | -  |   |   | ¥ | 73,735 |   |   | - |   |   | $ | 783 |   |   | - |   |
| Accrued expenses                                                       |   |              | 739,404    |   |                     | -  |   |   |   | 713,056 |   |   | - |   |   |   | 7,573 |   |   | - |   |
| Retirement and pension cost                                            |   |              | 648,240    |   |                     | -  |   |   |   | 758,240 |   |   | - |   |   |   | 8,053 |   |   | - |   |
| Allowance for doubtful accounts                                        |   |              | 70,114     |   |                     | -  |   |   |   | 66,170 |   |   | - |   |   |   | 703 |   |   | - |   |
| Depreciation                                                           |   |              | 103,374    |   |                     | -  |   |   |   | 48,315 |   |   | - |   |   |   | 513 |   |   | - |   |
| Net loss on other investments                                          |   |              | 354,714    |   |                     | -  |   |   |   | 285,505 |   |   | - |   |   |   | 3,032 |   |   | - |   |
| Operating loss carryforwards                                           |   |              | 1,432,104  |   |                     | -  |   |   |   | 1,416,522 |   |   | - |   |   |   | 15,044 |   |   | - |   |
| Transactions in transit*                                               |   | -          |       |   |                     | 53,798    |   |   | - |   |   |   | 47,983 |   |   |   |   |   |   |   | 510 |   |
| Impairment loss on telephone rights                                    |   |              | 76,181     |   |                     | -  |   |   |   | 77,101 |   |   | - |   |   |   | 819 |   |   | - |   |
| Accrued enterprise tax                                                 |   |              | 171,358    |   |                     | -  |   |   |   | 179,725 |   |   | - |   |   |   | 1,909 |   |   | - |   |
| Asset retirement obligation                                            |   |              | 107,371    |   |                     | -  |   |   |   | 120,116 |   |   | - |   |   |   | 1,276 |   |   | - |   |
| Deferred revenue                                                       |   |              | 260,411    |   |                     | -  |   |   |   | 468,382 |   |   | - |   |   |   | 4,974 |   |   | - |   |
| Customer relationship                                                  |   | -          |       |   |                     | 1,903,137 |   |   | - |   |   |   | 1,690,781 |   |   | - |   |   |   | 17,956 |   |
| Tax deduction of goodwill                                              |   | -          |       |   |                     | 383,005   |   |   | - |   |   |   | 528,299 |   |   | - |   |   |   | 5,611 |   |
| Excess of tax deductible goodwill over the reported amount of goodwill |   |              | 808,944    |   |                     | -  |   |   |   | 570,356 |   |   | - |   |   |   | 6,057 |   |   | - |   |
| Trademark                                                              |   | -          |       |   |                     | 55,645    |   |   | - |   |   |   | 38,413 |   |   | - |   |   |   | 408 |   |
| Investments in equity method investees                                 |   | -          |       |   | -                 |      |   | - |   |   |   | 168,061 |   |   | - |   |   |   | 1,785 |   |
| Other                                                                  |   |              | 242,000    |   |                     |      | 157,220 |   |   |   | 237,761 |   |   |   | 159,753 |   |   |   | 2,524 |   |   |   | 1,697 |   |
| Total                                                                  |   |              | 5,020,584  |   |                     |      | 2,699,848 |   |   |   | 5,014,984 |   |   |   | 2,923,913 |   |   |   | 53,260 |   |   |   | 31,053 |   |
| Valuation allowance                                                    |   |              | (2,008,886 | )      |                     | -  |   |   |   | (1,361,807 | ) |   | - |   |   |   | (14,462 | ) |   | - |   |
|                                                                   |   |              |       |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                                  |   | ¥            | 3,011,698  |   |                     | ¥    | 2,699,848 |   |   | ¥ | 3,653,177 |   |   | ¥ | 2,923,913 |   |   | $ | 38,798 |   |   | $ | 31,053 |   |

|   | * | This item arises from transactions between IIJ and foreign subsidiaries, which were recorded in the different periods as a result of the difference in each company’s fiscal year-end. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                |   | Thousands of Yen                                   |    |
|---------------------|--------|----------------------------------------------------|---------|
| Year EndingMarch 31 |   | Enterprise Tax Subject to Consolidation Tax Filing |    |   | Inhabitant Tax Subject to Consolidation Tax Filing |   |   | Others |   |
|                |   |                                               |    |   |   |   |   |   |   |
| 2014                |   | -                                    |    |   | - |   |   | -  |   |
| 2015                |   | -                                           |    |   | - |   |   | - |   |
| 2016                |   | -                                           |    |   | - |   |   | - |   |
| 2017                |   | -                                           |    |   | - |   |   | ¥ | 38,427 |   |
| 2018 and thereafter |   | ¥                                             | 303,194 |   |   | ¥ | 89,889 |   |   |   | 3,666,158 |   |
|                |   |                                               |    |   |   |   |   |   |   |   |   |   |
| Total               |   | ¥                                             | 303,194 |   |   | ¥ | 89,889 |   |   | ¥ | 3,704,585 |   |

|                |   | Thousands of U.S. Dollars                          |   |
|---------------------|--------|----------------------------------------------------|--------|
| Year EndingMarch 31 |   | Enterprise Tax Subject to Consolidation Tax Filing |   |   | Inhabitant Tax Subject to Consolidation Tax Filing |   |   | Others |   |
|                |   |                                               |   |   |   |   |   |   |   |
| 2014                |   | -                                    |   |   | - |   |   | -  |   |
| 2015                |   | -                                           |   |   | - |   |   | - |   |
| 2016                |   | -                                           |   |   | - |   |   | - |   |
| 2017                |   | -                                           |   |   | - |   |   | $ | 408 |   |
| 2018 and thereafter |   | $                                                  | 3,220  |   |   | $ | 955 |   |   |   | 38,935 |   |
|                |   |                                               |   |   |   |   |   |   |   |   |   |   |
| Total               |   | $                                                  | 3,220  |   |   | $ | 955 |   |   | $ | 38,935 |   |

----

|                                                                          |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars |     |
|-------------------------------------------------------------------------------|--------|------------------|------------|--------|--------------------------|----------|
|                                                                          |   | 2011             |       |   | 2012                     |     |   | 2013 |   |   | 2013 |   |
|                                                                          |   |             |       |   |                     |     |   |   |   |   |   |   |
| Amount computed by using normal Japanese statutory tax rate                   |   | ¥           | 1,571,935  |   |                     | ¥   | 2,450,250 |   |   | ¥ | 2,970,879 |   |   | $ | 31,551 |   |
| Increase (decrease) in taxes resulting from:                                  |   |             |       |   |                     |     |   |   |   |   |   |   |   |   |   |   |
| Expenses not deductible for tax purpose                                       |   |             | 146,060    |   |                     |     | 81,115 |   |   |   | 89,012 |   |   |   | 945 |   |
|     Reversal of reserve for tax contingencies             |   |             | (8,312     | )      |                     | - |   |   | - |   |   | - |   |
|     Inhabitant tax―per capita                       |   |             | 39,676     |   |                     |     | 34,415 |   |   |   | 35,809 |   |   |   | 380 |   |
|     Expiration of operating loss carryforward             |   |             | 616,400    |   |                     |     | 176,829 |   |   | - |   |   | - |   |
| Change in valuation allowance*                                                |   |             | (1,458,455 | )      |                     |     | (107,171 | ) |   |   | (666,973 | ) |   |   | (7,083 | ) |
|     Tax effects on investments in equity method investees |   | -         |       |   | -                 |     |   |   | 168,061 |   |   |   | 1,785 |   |
|     Enterprise tax ―not based on income             |   |             | 61,085     |   |                     |     | 68,960 |   |   |   | 77,868 |   |   |   | 827 |   |
|     Tax rate change                                       |   | -         |       |   |                     | (110,381 | ) |   | - |   |   | - |   |
| Other—net                                                               |   |             | (12,692    | )      |                     |     | (68,531 | ) |   |   | (67,074 | ) |   |   | (712 | ) |
|                                                                          |   |             |       |   |                     |     |   |   |   |   |   |   |   |   |   |   |
| Income tax expense as reported                                                |   | ¥           | 955,697    |   |                     | ¥   | 2,525,486 |   |   | ¥ | 2,607,582 |   |   | $ | 27,693 |   |

|   | *  | Change in valuation allowance for the year ended March 31, 2011 included the release of the valuation allowance for the deferred tax assets of operating loss carryforward as of March 31, 2010, that were utilized during the year, which amounted to ¥131,319 thousand, which represents the net of the adjustment of the beginning-of -the year balance of the valuation allowance because of the acquisition of IIJ-Global, amounting to ¥308,197 thousand  and the expiration of operating loss carryforwards of ¥176,878 thousand. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                      |   | Thousands of Yen |   |
|-----------------------------------------------------------------------------------------------------------|--------|------------------|--------|
|                                                                                                      |   | 2011             |   |
| Balance at April 1, 2010                                                                                  |   | ¥           | 9,391  |   |
| Decrease due to the adjustment of the difference between the actual transaction and the terms of the BAPA |   |             | (8,951 | ) |
| Translation adjustment                                                                                    |   |             | (440   | ) |
| Balance at March 31, 2011                                                                                 |   | -         |   |

----

----

| 13. | RETIREMENT AND PENSION PLANS |
|-----|------------------------------|

|                                  |   | Thousands of Yen |    |   | Thousands of U.S. Dollars |    |
|---------------------------------------|--------|------------------|---------|--------|---------------------------|---------|
|                                  |   | 2011             |    |   | 2012                      |    |   | 2013 |   |   | 2013 |   |
|                                  |   |             |    |   |                      |    |   |   |   |   |   |   |
| Service cost                          |   | ¥           | 421,771 |   |                      | ¥  | 467,583 |   |   | ¥ | 479,158 |   |   | $ | 5,089 |   |
| Interest cost                         |   |             | 41,424  |   |                      |    | 48,335 |   |   |   | 46,975 |   |   |   | 499 |   |
| Expected return on plan assets        |   |             | (26,085 | )      |                      |    | (27,086 | ) |   |   | (29,796 | ) |   |   | (317 | ) |
| Amortization of transition obligation |   |             | 369     |   |                      |    | 369 |   |   |   | 369 |   |   |   | 4 |   |
| Other                                 |   | -         |    |   |                      | (12,632 | ) |   | - |   |   | - |   |
|                                  |   |             |    |   |                      |    |   |   |   |   |   |   |   |   |   |   |
| Net periodic pension cost             |   | ¥           | 437,479 |   |                      | ¥  | 476,569 |   |   | ¥ | 496,706 |   |   | $ | 5,275 |   |

|                                                                                 |   | Thousands of Yen |    |   | Thousands ofU.S. Dollars |   |
|--------------------------------------------------------------------------------------|--------|------------------|---------|--------|--------------------------|--------|
|                                                                                 |   | 2011             |    |   | 2012                     |   |   | 2013 |   |   | 2013 |   |
|                                                                                 |   |             |    |   |                     |   |   |   |   |   |   |   |
| Net actuarial loss                                                                   |   | ¥           | 3,324   |   |                     | ¥ | 39,083 |   |   | ¥ | 92,808 |   |   | $ | 986 |   |
| Amortization of transition obligation in net periodic pension cost                   |   |             | (369    | )      |                     |   | (369 | ) |   |   | (369 | ) |   |   | (4 | ) |
| Other                                                                                |   |             | (6,316  | )      |                     |   | 12,632 |   |   | - |   |   | - |   |
|                                                                                 |   |             |    |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Amounts recognized in other comprehensive income                                     |   | ¥           | (3,361  | )      |                     | ¥ | 51,346 |   |   | ¥ | 92,439 |   |   | $ | 982 |   |
|                                                                                 |   |             |    |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Total net periodic pension cost and amounts recognized in other comprehensive income |   | ¥           | 434,118 |   |                     | ¥ | 527,915 |   |   | ¥ | 589,145 |   |   | $ | 6,257 |   |

----

|                                           |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars |   |
|------------------------------------------------|--------|------------------|------------|--------|--------------------------|--------|
|                                           |   | 2012             |       |   | 2013                     |   |   | 2013 |   |
| Change in benefit obligation:                  |   |             |       |   |                     |   |   |   |   |
| Benefit obligation at beginning of year        |   | ¥           | 2,744,718  |   |                     | ¥ | 3,196,857 |   |   | $ | 33,951 |   |
| Service cost                                   |   |             | 467,583    |   |                     |   | 479,158 |   |   |   | 5,089 |   |
| Interest cost                                  |   |             | 48,335     |   |                     |   | 46,975 |   |   |   | 499 |   |
| Actuarial loss                                 |   |             | 37,454     |   |                     |   | 209,406 |   |   |   | 2,224 |   |
| Benefit paid                                   |   |             | (101,233   | )      |                     |   | (77,064 | ) |   |   | (819 | ) |
|                                           |   |             |       |   |                     |   |   |   |   |   |   |   |
| Benefit obligation at end of year              |   |             | 3,196,857  |   |                     |   | 3,855,332 |   |   |   | 40,944 |   |
|                                           |   |             |       |   |                     |   |   |   |   |   |   |   |
| Change in plan assets:                         |   |             |       |   |                     |   |   |   |   |   |   |   |
| Fair value of plan assets at beginning of year |   |             | 1,425,587  |   |                     |   | 1,655,373 |   |   |   | 17,580 |   |
| Actual return on plan assets                   |   |             | 27,605     |   |                     |   | 146,394 |   |   |   | 1,555 |   |
| Employer contribution                          |   |             | 250,969    |   |                     |   | 257,288 |   |   |   | 2,732 |   |
| Benefits paid                                  |   |             | (48,788    | )      |                     |   | (46,444 | ) |   |   | (493 | ) |
|                                           |   |             |       |   |                     |   |   |   |   |   |   |   |
| Fair value of plan assets at end of year       |   |             | 1,655,373  |   |                     |   | 2,012,611 |   |   |   | 21,374 |   |
|                                           |   |             |       |   |                     |   |   |   |   |   |   |   |
| Funded status at end of year                   |   | ¥           | (1,541,484 | )      |                     |   | (1,842,721 | ) |   | $ | (19,570 | ) |

|                                                  |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars |   |
|-------------------------------------------------------|--------|------------------|------------|--------|--------------------------|--------|
|                                                  |   | 2012             |       |   | 2013                     |   |   | 2013 |   |
|                                                  |   |             |       |   |                     |   |   |   |   |
| Accrued retirement and pension costs―noncurrent |   | ¥           | (1,541,484 | )      |                     | ¥ | (1,842,721 | ) |   | $ | (19,570 | ) |
|                                                  |   |             |       |   |                     |   |   |   |   |   |   |   |
| Net amount recognized                                 |   | ¥           | (1,541,484 | )      |                     | ¥ | (1,842,721 | ) |   | $ | (19,570 | ) |

|                     |   | Thousands of Yen |    |   | Thousands ofU.S. Dollars |   |
|--------------------------|--------|------------------|---------|--------|--------------------------|--------|
|                     |   | 2012             |    |   | 2013                     |   |   | 2013 |   |
|                     |   |             |    |   |                     |   |   |   |   |
| Net actuarial loss       |   | ¥           | 212,241 |   |                     | ¥ | 305,049 |   |   | $ | 3,239 |   |
| Obligation at transition |   |             | 1,473   |   |                     |   | 1,104 |   |   |   | 12 |   |
| Total                    |   | ¥           | 213,714 |   |                     | ¥ | 306,153 |   |   | $ | 3,251 |   |

----

|                                             |   | BenefitObligations |   |   | Net Periodic Costs |   |
|--------------------------------------------------|--------|--------------------|--------|--------|--------------------|--------|
|                                             |   | 2012               |   |   | 2013               |   |   | 2011 |   |   | 2012 |   |   | 2013 |   |
|                                             |   |               |   |   |               |   |   |   |   |   |   |   |   |   |   |
| Discount rate                                    |   |               | 1.5    | %      |               |   | 1.2 | % |   |   | 1.8 | % |   |   | 1.8 | % |   |   | 1.5 | % |
| Expected long-term rate of return on plan assets |   |               |   |   |               |   |   |   |   |   | 2.1 |   |   |   | 1.9 |   |   |   | 1.8 |   |
| Rate of increase in compensation                 |   |               | 3.3    |   |               |   | 3.3 |   |   |   | 3.5 |   |   |   | 3.4 |   |   |   | 3.3 |   |

----

| Years EndingMarch 31 |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars |   |
|----------------------|--------|------------------|-----------|--------|--------------------------|--------|
| 2014                 |   | ¥           | 99,786    |   |                     | $      | 1,060 |   |
| 2015                 |   |             | 113,460   |   |                     |   | 1,205 |   |
| 2016                 |   |             | 131,087   |   |                     |   | 1,392 |   |
| 2017                 |   |             | 166,104   |   |                     |   | 1,764 |   |
| 2018                 |   |             | 220,121   |   |                     |   | 2,338 |   |
| 2019-2023     |   |             | 1,691,760 |   |                     |   | 17,967 |   |
|                 |   |             |      |   |                     |   |   |   |
| Total                |   | ¥           | 2,422,318 |   |                     | $      | 25,726 |   |

----

|   | Level 1― | Inputs are quoted prices in active markets for identical assets or liabilities. |
|--------|----------------|---------------------------------------------------------------------------------|

|   | Level 2― | Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical  or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
|--------|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 3― | Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable, which reflect the reporting entity’s own assumptions about the assumptions that market participants would use in establishing a price. |
|--------|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Basis of Fair Value Measurement  of Pension Plan Assets at March 31, 2012 |   | Thousands of Yen |    |
|-------------------------------------------------------------------------------------|--------|-----------------------|---------|
|                                                                                |   | Level 1               |    |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Equity securities:                                                                  |   |                  |    |   |   |   |   |   |   |   |   |   |
| Japanese equity                                                                     |   | ¥                | 235,933 |   |   | - |   |   | - |   |   | ¥ | 235,933 |   |
| U.S. equity                                                                         |   |                  | 54,179  |   |   | - |   |   | - |   |   |   | 54,179 |   |
| Other equity― developed countries                                             |   |                  | 39,495  |   |   | - |   |   | - |   |   |   | 39,495 |   |
| Total equity securities                                                             |   |                  | 329,607 |   |   | - |   |   | - |   |   |   | 329,607 |   |
|                                                                                |   |                  |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt securities:                                                                    |   |                  |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Japanese government and municipalities                                              |   | -              |    |   | ¥ | 337,885 |   |   | - |   |   |   | 337,885 |   |
| Japanese corporate bonds― investment grade                               |   | -              |    |   |   | 93,030 |   |   | - |   |   |   | 93,030 |   |
| U.S. government                                                                     |   | -              |    |   |   | 58,760 |   |   | - |   |   |   | 58,760 |   |
| Other government― developed countries                                    |   | -              |    |   |   | 82,523 |   |   | - |   |   |   | 82,523 |   |
| Residential mortgage-backed                                                         |   | -              |    |   |   | 23,627 |   |   | - |   |   |   | 23,627 |   |
| Total debt securities                                                               |   | -              |    |   |   | 595,825 |   |   | - |   |   |   | 595,825 |   |
|                                                                                |   |                  |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other financial instruments*                                                        |   | -              |    |   |   | 692,613 |   |   | - |   |   |   | 692,613 |   |
|                                                                                |   |                  |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                                |   |                  | 37,328  |   |   | - |   |   | - |   |   |   | 37,328 |   |
|                                                                                |   |                  |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |                  |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets at fair value                                                          |   | ¥                | 366,935 |   |   | ¥ | 1,288,438 |   |   | - |   |   | ¥ | 1,655,373 |   |

----

| Basis of Fair Value Measurement  of Pension Plan Assets at March 31, 2013 |   | Thousands of Yen |    |
|-------------------------------------------------------------------------------------|--------|-----------------------|---------|
|                                                                                |   | Level 1               |    |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Equity securities:                                                                  |   |                  |    |   |   |   |   |   |   |   |   |   |
| Japanese equity                                                                     |   | ¥                | 302,533 |   |   | - |   |   | - |   |   | ¥ | 302,533 |   |
| U.S. equity                                                                         |   |                  | 72,760  |   |   | - |   |   | - |   |   |   | 72,760 |   |
| Other equity― developed countries                                             |   |                  | 51,220  |   |   | - |   |   | - |   |   |   | 51,220 |   |
| Total equity securities                                                             |   |                  | 426,513 |   |   | - |   |   | - |   |   |   | 426,513 |   |
|                                                                                |   |                  |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt securities:                                                                    |   |                  |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Japanese government and municipalities                                              |   | -              |    |   | ¥ | 477,430 |   |   | - |   |   |   | 477,430 |   |
| Japanese corporate bonds― investment grade                               |   | -              |    |   |   | 59,533 |   |   | - |   |   |   | 59,533 |   |
| U.S. government                                                                     |   | -              |    |   |   | 74,294 |   |   | - |   |   |   | 74,294 |   |
| Other government― developed countries                                    |   | -              |    |   |   | 103,471 |   |   | - |   |   |   | 103,471 |   |
| Residential mortgage-backed                                                         |   | -              |    |   |   | 26,252 |   |   | - |   |   |   | 26,252 |   |
| Total debt securities                                                               |   | -              |    |   |   | 740,980 |   |   | - |   |   |   | 740,980 |   |
|                                                                                |   |                  |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other financial instruments*                                                        |   | -              |    |   |   | 800,968 |   |   | - |   |   |   | 800,968 |   |
|                                                                                |   |                  |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                                |   |                  | 44,150  |   |   | - |   |   | - |   |   |   | 44,150 |   |
|                                                                                |   |                  |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |                  |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets at fair value                                                          |   | ¥                | 470,663 |   |   | ¥ |   1,541,948 |   |   | - |   |   | ¥ | 2,012,611 |   |

----

| Basis of Fair Value Measurement  of Pension Plan Assets at March 31, 2013 |   | Thousands of U.S. Dollars |   |
|-------------------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                                |   | Level 1                        |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Equity securities:                                                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Japanese equity                                                                     |   | $                              | 3,213  |   |   | - |   |   | - |   |   | $ | 3,213 |   |
| U.S. equity                                                                         |   |                           | 773    |   |   | - |   |   | - |   |   |   | 773 |   |
| Other equity― developed countries                                             |   |                           | 544    |   |   | - |   |   | - |   |   |   | 544 |   |
| Total equity securities                                                             |   |                           | 4,530  |   |   | - |   |   | - |   |   |   | 4,530 |   |
|                                                                                |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt securities:                                                                    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Japanese government and municipalities                                              |   | -                       |   |   | $ | 5,071 |   |   | - |   |   |   | 5,071 |   |
| Japanese corporate bonds― investment grade                               |   | -                       |   |   |   | 632 |   |   | - |   |   |   | 632 |   |
| U.S. government                                                                     |   | -                       |   |   |   | 789 |   |   | - |   |   |   | 789 |   |
| Other government― developed countries                                    |   | -                       |   |   |   | 1,099 |   |   | - |   |   |   | 1,099 |   |
| Residential mortgage-backed                                                         |   | -                       |   |   |   | 279 |   |   | - |   |   |   | 279 |   |
| Total debt securities                                                               |   | -                       |   |   |   | 7,870 |   |   | - |   |   |   | 7,870 |   |
|                                                                                |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other financial instruments*                                                        |   | -                       |   |   |   | 8,506 |   |   | - |   |   |   | 8,506 |   |
|                                                                                |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                                |   |                           | 468    |   |   | - |   |   | - |   |   |   | 468 |   |
|                                                                                |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets at fair value                                                          |   | $                              | 4,998  |   |   | $ | 16,376 |   |   | - |   |   | $ | 21,374 |   |

----

----

| 14. | SHAREHOLDERS' EQUITY |
|-----|----------------------|

----

|                                            |   | 2012   |   |   | 2013   |   |
|-------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Assumptions:                                    |   |   |   |   |   |   |
|     Risk-free interest rate |   |   | 1.614  | %      |   |   | 1.298 | % |
|     Expected lives (years)  |   | 15     |   |   | 15     |   |
|     Expected volatility     |   |   | 59.892 | %      |   |   | 57.020 | % |
|     Expected dividends      |   |   | 0.924  | %      |   |   | 0.893 | % |

----

|                                                 |   |              |   |   |             |   |   | Yen           |   |   | Years         |   |   | Thousands of Yen    |   |   | Thousands of U.S. Dollars |   |
|------------------------------------------------------|--------|-------------------|--------|--------|------------------|--------|--------|---------------|--------|--------|---------------|--------|--------|---------------------|--------|--------|---------------------------|--------|
|                                                 |   | Number of Options |   |   | Number of Shares |   |   | ExercisePrice |   |   | RemainingLife |   |   | TotalIntrinsicValue |   |   | TotalIntrinsicValue       |   |
|                                                 |   |              |   |   |             |   |   |          |   |   |          |   |   |                |   |   |                      |   |
|                                                 |   |              |   |   |             |   |   |          |   |   |          |   |   |                |   |   |                      |   |   |
| Unexercised options outstanding—March 31, 2011 |   | -          |   |   | -         |   |   | -      |   |   |          |   |   |                |   |   |                      |   |   |
| Granted                                              |   |              | 138    |   |             |   | 27,600 |          |   |   | 1             |   |   |                |   |   |                      |   |   |   |   |   |   |
| Exercised                                            |   | -          |   |   | -         |   |   | -      |   |   |          |   |   |                |   |   |                      |   |   |   |
| Forfeited or expired                                 |   | -          |   |   | -         |   |   | -      |   |   |          |   |   |                |   |   |                      |   |   |   |
| Unexercised options outstanding—March 31, 2012 |   |              | 138    |   |             |   | 27,600 |          |   |   | 1             |   |   |                |   |   |                      |   |   |   |   |   |   |   |
| Granted                                              |   |              | 130    |   |             |   | 26,000 |          |   |   | 1             |   |   |                |   |   |                      |   |   |   |   |   |   |   |
| Exercised                                            |   | -          |   |   | -         |   |   | -      |   |   |          |   |   |                |   |   |                      |   |   |   |   |
| Forfeited or expired                                 |   | -          |   |   | -         |   |   | -      |   |   |          |   |   |                |   |   |                      |   |   |   |   |
| Unexercised options outstanding—March 31, 2013 |   |              | 268    |   |             |   | 53,600 |          |   |   | 1             |   |   |                |   |   |                      |   |   |   |   |   |   |   |
|                                                 |   |              |   |   |             |   |   |          |   |   |          |   |   |                |   |   |                      |   |   |   |   |   |   |   |
| Exercisable options—March 31, 2013             |   |              | 138    |   |             |   | 27,600 |          |   |   | 1             |   |   |                | 28.29  |   |                      | ¥ |  89,672 |   |   | $ | 952 |   |
| Expected to vest after July 13, 2013                 |   |              | 130    |   |             |   | 26,000 |          |   |   | 1             |   |   |                | 29.29  |   |                      | ¥ | 84,474 |   |   | $ | 897 |   |

----

|                                                                                        |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars |   |
|---------------------------------------------------------------------------------------------|--------|------------------|-----------|--------|--------------------------|--------|
|                                                                                        |   | 2011             |      |   | 2012                     |   |   | 2013 |   |   | 2013 |   |
|                                                                                        |   |             |      |   |                     |   |   |   |   |   |   |   |
| Net income attributable to IIJ                                                              |   | ¥           | 3,203,368 |   |                     | ¥ | 3,640,963 |   |   | ¥ | 5,300,654 |   |   | $ | 56,294 |   |
| Transfers to the noncontrolling interests                                                   |   |             |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Decrease in additional paid-in capital for purchase of Trust Networks and GDX common shares |   |             | (147,346  | )      |                     |   | (85,437 | ) |   | - |   |   | - |   |
|                                                                                        |   |             |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Change from net income attributable to IIJ and transfers to noncontrolling interests        |   | ¥           | 3,056,022 |   |                     | ¥ | 3,555,526 |   |   | ¥ | 5,300,654 |   |   | $ | 56,294 |   |

----

| 15. | OTHER COMPREHENSIVE INCOME (LOSS) |
|-----|-----------------------------------|

|                                                                            |   | Thousands of Yen |     |
|---------------------------------------------------------------------------------|--------|------------------|----------|
|                                                                            |   | Before TaxAmount |     |   | Tax (Expense)Benefit |   |   | Net of TaxAmount |   |
|                                                                            |   |             |     |   |   |   |   |   |   |
| Year ended March 31, 2011:                                                      |   |             |     |   |   |   |   |   |   |
| Foreign currency translation adjustments                                        |   | ¥           | (43,435  | ) |   |     - |   |   | ¥ | (43,435 | ) |
| Unrealized holding gain (loss) on securities:                                   |   |             |     |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                |   |             | (53,702  | ) |   | ¥ | 22,018 |   |   |   | (31,684 | ) |
| Less:  Reclassification adjustments for gains included in net income  |   |             | (77,570  | ) |   |   | 31,803 |   |   |   | (45,767 | ) |
| Recognition of tax expense                                                      |   | -         |     |   |   | (167,634 | ) |   |   | (167,634 | ) |
| Net unrealized holding gain (loss) during the period                            |   |             | (131,272 | ) |   |   | (113,813 | ) |   |   | (245,085 | ) |
| Defined benefit pension plans:                                                  |   |             |     |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                |   |             | (3,324   | ) |   |   | 1,363 |   |   |   | (1,961 | ) |
| Less: Reclassification adjustments for losses included in net income            |   |             | 6,685    |   |   |   | (2,741 | ) |   |   | 3,944 |   |
| Release of deferred tax asset valuation allowance                               |   | -         |     |   |   | 32,634 |   |   |   | 32,634 |   |
| Net defined benefit pension plans                                               |   |             | 3,361    |   |   |   | 31,256 |   |   |   | 34,617 |   |
|                                                                            |   |             |     |   |   |   |   |   |   |   |   |   |
| Other comprehensive loss                                                        |   | ¥           | (171,346 | ) |   | ¥ | (82,557 | ) |   | ¥ | (253,903 | ) |
|                                                                            |   |             |     |   |   |   |   |   |   |   |   |   |
|                                                                            |   |             |     |   |   |   |   |   |   |   |   |   |
| Year ended March 31, 2012:                                                      |   |             |     |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustments                                        |   | ¥           | (9,539   | ) |   |     - |   |   | ¥ | (9,539 | ) |
| Unrealized holding gain (loss) on securities:                                   |   |             |     |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                |   |             | 56,384   |   |   | ¥ | (20,242 | ) |   |   | 36,142 |   |
| Less:  Reclassification adjustments for losses included in net income |   |             | 91,064   |   |   |   | (37,336 | ) |   |   | 53,728 |   |
| Other                                                                           |   |             |     |   |   |   | 12,875 |   |   |   | 12,875 |   |
| Net unrealized holding gain (loss) during the period                            |   |             | 147,448  |   |   |   | (44,703 | ) |   |   | 102,745 |   |
| Defined benefit pension plans:                                                  |   |             |     |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                |   |             | (39,083  | ) |   |   | 14,030 |   |   |   | (25,053 | ) |
| Less: Reclassification adjustments for gains included in net income        |   |             | (12,263  | ) |   |   | 5,711 |   |   |   | (6,552 | ) |
| Net defined benefit pension plans                                               |   |             | (51,346  | ) |   |   | 19,741 |   |   |   | (31,605 | ) |
|                                                                            |   |             |     |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss)                                               |   | ¥           | 86,563   |   |   | ¥ | (24,962 | ) |   | ¥ | 61,601 |   |

----

|                                                                            |   | Thousands of Yen |    |
|---------------------------------------------------------------------------------|--------|------------------|---------|
|                                                                            |   | Before TaxAmount |    |   | Tax (Expense)Benefit |   |   | Net of TaxAmount |   |
| Year ended March 31, 2013:                                                      |   |             |    |   |   |   |   |   |   |
| Foreign currency translation adjustments                                        |   | ¥           | 90,014  |   |   |     - |   |   | ¥ | 90,014 |   |
| Unrealized holding gain (loss) on securities:                                   |   |             |    |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                |   |             | 380,637 |   |   | ¥ | (136,649 | ) |   |   | 243,988 |   |
| Less:  Reclassification adjustments for losses included in net income |   |             | 19,788  |   |   |   | (7,579 | ) |   |   | 12,209 |   |
| Other                                                                           |   |             |    |   |   |   | 324 |   |   |   | 324 |   |
| Net unrealized holding gain (loss) during the period                            |   |             | 400,425 |   |   |   | (143,904 | ) |   |   | 256,521 |   |
| Defined benefit pension plans:                                                  |   |             |    |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                |   |             | (92,808 | ) |   |   | 33,319 |   |   |   | (59,489 | ) |
| Less: Reclassification adjustments for losses included in net income            |   |             | 369     |   |   |   | (132 | ) |   |   | 237 |   |
| Net defined benefit pension plans                                               |   |             | (92,439 | ) |   |   | 33,187 |   |   |   | (59,252 | ) |
|                                                                            |   |             |    |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss)                                               |   | ¥           | 398,000 |   |   | ¥ | (110,717 | ) |   | ¥ | 287,283 |   |

|                                                                            |   | Thousands of U.S. Dollars |   |
|---------------------------------------------------------------------------------|--------|---------------------------|--------|
|                                                                            |   | Before TaxAmount          |   |   | Tax (Expense)Benefit |   |   | Net of TaxAmount |   |
| Year ended March 31, 2013:                                                      |   |                      |   |   |   |   |   |   |   |
| Foreign currency translation adjustments                                        |   | $                         | 956    |   |   |     - |   |   | $ | 956 |   |
| Unrealized holding gain (loss) on securities:                                   |   |                      |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                |   |                      | 4,042  |   |   | $ | (1,451 | ) |   |   | 2,591 |   |
| Less:  Reclassification adjustments for losses included in net income |   |                      | 210    |   |   |   | (80 | ) |   |   | 130 |   |
| Other                                                                           |   |                      |   |   |   |   | 3 |   |   |   | 3 |   |
| Net unrealized holding gain (loss) during the period                            |   |                      | 4,252  |   |   |   | (1,528 | ) |   |   | 2,724 |   |
| Defined benefit pension plans:                                                  |   |                      |   |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                |   |                      | (986   | ) |   |   | 354 |   |   |   | (632 | ) |
| Less: Reclassification adjustments for gains included in net income             |   |                      | 4      |   |   |   | (1 | ) |   |   | 3 |   |
| Net defined benefit pension plans                                               |   |                      | (982   | ) |   |   | 353 |   |   |   | (629 | ) |
|                                                                   |   |                      |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss)                                               |   | $                         | 4,226  |   |   | $ | (1,175 | ) |   | $ | 3,051 |   |

|                                     |   | Thousands of Yen |     |   | Thousands ofU.S. Dollars |   |
|------------------------------------------|--------|------------------|----------|--------|--------------------------|--------|
|                                     |   | 2012             |     |   | 2013                     |   |   | 2013 |   |
|                                     |   |             |     |   |                     |   |   |   |   |
| Foreign currency translation adjustments |   | ¥           | (134,163 | )      |                     | ¥ | (44,129 | ) |   | $ | (469 | ) |
| Unrealized holding gain on securities    |   |             | 238,696  |   |                     |   | 495,217 |   |   |   | 5,259 |   |
| Defined benefit pension plans            |   |             | (128,066 | )      |                     |   | (187,318 | ) |   |   | (1,989 | ) |
|                                     |   |             |     |   |                     |   |   |   |   |   |   |   |
| Total                                    |   | ¥           | (23,533  | )      |                     |   | 263,770 |   |   | $ | 2,801 |   |

----

| 16. | BASIC AND DILUTED NET INCOME PER COMMON SHARE |
|-----|-----------------------------------------------|

|                                                                              |   | Thousands of Yen |      |   | Thousands of U.S. Dollars |   |
|-----------------------------------------------------------------------------------|--------|------------------|-----------|--------|---------------------------|--------|
|                                                                              |   | 2011             |      |   | 2012                      |   |   | 2013 |   |   | 2013 |   |
|                                                                              |   |             |      |   |                      |   |   |   |   |   |   |   |
| Numerator―                                                                  |   |             |      |   |                      |   |   |   |   |   |   |   |
| Net income attributable to Internet Initiative Japan Inc.―basic and diluted |   | ¥           | 3,203,368 |   |                      | ¥ | 3,640,963 |   |   | ¥ | 5,300,654 |   |   | $ | 56,294 |   |

|                                                     |   | Number of Shares |       |   |
|----------------------------------------------------------|--------|------------------|------------|--------|
|                                                     |   | 2011             |       |   | 2012 |   |   | 2013 |   |   |
| Denominator:                                             |   |             |       |   |   |   |   |   |   |   |
| Weighted-average common shares outstanding―basic   |   |             | 40,528,800 |   |   |   | 40,536,800 |   |   |   | 40,536,800 |   |   |
| Dilutive effect of stock options                         |   |             |       |   |   |   | 19,600 |   |   |   | 35,800 |   |   |
| Weighted-average common shares outstanding―diluted |   |             | 40,528,800 |   |   |   | 40,556,400 |   |   |   | 40,572,600 |   |   |

|                                                                               |   | Yen    |   |   | U.S. Dollars |   |
|------------------------------------------------------------------------------------|--------|--------|--------|--------|--------------|--------|
|                                                                               |   | 2011   |   |   | 2012         |   |   | 2013 |   |   | 2013 |   |
|                                                                               |   |   |   |   |         |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |         |   |   |   |   |   |   |   |
| Basic net income attributable to Internet Initiative Japan Inc. per common share   |   | ¥ | 79.04  |   |         | ¥ | 89.82 |   |   | ¥ | 130.76 |   |   | $ | 1.39 |   |
|                                                                               |   |   |   |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Diluted net income attributable to Internet Initiative Japan Inc. per common share |   | ¥ | 79.04  |   |         | ¥ | 89.78 |   |   | ¥ | 130.65 |   |   | $ | 1.39 |   |

|                                |   | Year Ended March 31 |    |
|-------------------------------------|--------|---------------------|---------|
|                                |   | 2011                |    |   | 2012 |   |   | 2013 |   |
|                                |   |                |    |   |   |   |   |   |   |
| Shares issuable under stock options |   |                | 295,000 |   |   |   | - |   |   |   | - |   |

----

| 17. | COMMITMENTS AND CONTINGENT LIABILITIES |
|-----|----------------------------------------|

| 18. | FINANCIAL INSTRUMENTS |
|-----|-----------------------|

|                                                    |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars |     |
|---------------------------------------------------------|--------|------------------|-----------|--------|--------------------------|----------|
|                                                    |   | 2012             |      |   | 2013                     |     |   | 2013 |   |
|                                                    |   | CarryingAmount   |      |   | FairValue                |     |   | CarryingAmount |   |   | FairValue |   |   | CarryingAmount |   |   | FairValue |   |
| Other investments for which it is:                      |   |             |      |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Practicable to estimate fair value                      |   | ¥           | 860,914   |   |                     | ¥   | 860,914 |   |   | ¥ | 1,309,923 |   |   | ¥ | 1,309,923 |   |   | $ | 13,912 |   |   | $ | 13,912 |   |
| Not practicable                                         |   |             | 2,077,232 |   |                     | - |   |   |   | 2,461,339 |   |   | - |   |   |   | 26,140 |   |   | - |   |
| Noncurrent refundable insurance policies (other assets) |   |             | 63,282    |   |                     |     | 63,282 |   |   |   | 64,020 |   |   |   | 64,020 |   |   |   | 680 |   |   |   | 680 |   |

----

| 19. | FAIR VALUE MEASUREMENTS |
|-----|-------------------------|

|   | Level 1― | Inputs are quoted prices in active markets for identical assets or liabilities |
|--------|----------------|--------------------------------------------------------------------------------|

|   | Level 2― | Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical  or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data by correlation or other means |
|--------|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 3― | Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable, which reflect the reporting entity’s own assumptions about the assumptions that market participants would use in establishing a price. |
|--------|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                             |   | Thousands of Yen |    |
|------------------------------------------------------------------|--------|-----------------------|---------|
|                                                             |   |                  |    |   | Total |   |
| March 31, 2012                                                   |   | Level 1               |    |   | Level 2 |   |   | Level 3 |   |   | 2012 |   |
| Assets―                                                    |   |                  |    |   |   |   |   |   |   |   |   |   |
| Available-for-sale securities―equity  securities |   | ¥                | 860,914 |   |   |   | - |   |   |   | - |   |   | ¥ | 860,914 |   |

|                                                             |   | Thousands of Yen |      |
|------------------------------------------------------------------|--------|-----------------------|-----------|
|                                                             |   |                  |      |   | Total |   |
| March 31, 2013                                                   |   | Level 1               |      |   | Level 2 |   |   | Level 3 |   |   | 2013 |   |
| Assets―                                                    |   |                  |      |   |   |   |   |   |   |   |   |   |
| Available-for-sale securities―equity  securities |   | ¥                | 1,309,923 |   |   |   | - |   |   |   | - |   |   | ¥ | 1,309,923 |   |

|                                                             |   | Thousands of  U.S. Dollars |   |
|------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                             |   |                                 |   |   | Total |   |
| March 31, 2013                                                   |   | Level 1                              |   |   | Level 2 |   |   | Level 3 |   |   | 2013 |   |
| Assets―                                                    |   |                                 |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale securities―equity  securities |   | $                                    | 13,912 |   |   |   | - |   |   |   | - |   |   | $ | 13,912 |   |

----

|                                                         |   | Thousands of Yen |     |
|--------------------------------------------------------------|--------|------------------|----------|
| March 31, 2012                                               |   | Level 1          |     |   | Level 2 |   |   | Level 3 |   |   | ImpairmentLoss |   |
|                                                         |   |             |     |   |   |   |   |   |   |   |   |   |
| Assets:                                                      |   |             |     |   |   |   |   |   |   |   |   |   |
| Non-marketable securities―equity  securities |   |             | - |   |   |   | - |   |   | ¥ | 28,319 |   |   | ¥ | 71,681 |   |
| Trademark                                                    |   |             | - |   |   |   | - |   |   |   | 155,000 |   |   |   | 37,000 |   |
|                                                         |   |             | - |   |   |   | - |   |   | ¥ | 183,319 |   |   | ¥ | 108,681 |   |

|                                                         |   | Thousands of Yen |     |
|--------------------------------------------------------------|--------|------------------|----------|
| March 31, 2013                                               |   | Level 1          |     |   | Level 2 |   |   | Level 3 |   |   | ImpairmentLoss |   |
|                                                         |   |             |     |   |   |   |   |   |   |   |   |   |
| Assets:                                                      |   |             |     |   |   |   |   |   |   |   |   |   |
| Non-marketable securities―equity  securities |   |             | - |   |   |   | - |   |   | - |   |   | - |   |
| Trademark                                                    |   |             | - |   |   |   | - |   |   | ¥ | 107,000 |   |   | ¥ | 48,000 |   |
|                                                         |   |             | - |   |   |   | - |   |   | ¥ | 107,000 |   |   | ¥ | 48,000 |   |

|                                                         |   | Thousands of  U.S. Dollars |     |
|--------------------------------------------------------------|--------|--------------------------------------|----------|
| March 31, 2013                                               |   | Level 1                              |     |   | Level 2 |   |   | Level 3 |   |   | ImpairmentLoss |   |
|                                                         |   |                                 |     |   |   |   |   |   |   |   |   |   |
| Assets:                                                      |   |                                 |     |   |   |   |   |   |   |   |   |   |
| Non-marketable securities―equity  securities |   |                                 | - |   |   |   | - |   |   | - |   |   | - |   |
| Trademark                                                    |   |                                 | - |   |   |   | - |   |   | $ | 1,136 |   |   | $ | 510 |   |
|                                                         |   |                                 | - |   |   |   | - |   |   | $ | 1,136 |   |   | $ | 510 |   |

----

|                 |   | Thousandsof Yen |    |   |               |   |           |               |   |   |
|----------------------|--------|----------------------|---------|--------|--------------------|--------|----------------|--------------------|--------|--------|
|  March 31, 2012 |   | Fairvalue            |    |   | Valuationtechnique |   |           | Unobservableinputs |   |   | Range |   |   |
|                 |   |                 |    |   |               |   |           |               |   |   |   |   |
| Trademark            |   | ¥               | 155,000 |   |               |   | Relief from    |               |   |   | Discount Rate |   |   |   | 7.8 | % |   |
|                 |   |                 |    |   |               |   | royalty method |               |   |   | Royalty rate |   |   |   | 0.4 | % |   |

|                 |   | Thousandsof Yen |    |   |               |   |           | Thousands of U.S. Dollars |   |
|----------------------|--------|----------------------|---------|--------|--------------------|--------|----------------|---------------------------|--------|
|  March 31, 2013 |   | Fairvalue            |    |   | Valuationtechnique |   |           | Unobservableinputs        |   |   | Range |   |   | Fairvalue |   |
|                 |   |                 |    |   |               |   |           |                      |   |   |   |   |   |   |
| Trademark            |   | ¥               | 107,000 |   |               |   | Relief from    |                      |   |   | Discount Rate |   |   |   | 7.5 | % |   | $ | 1,136 |   |
|                 |   |                 |    |   |               |   | royalty method |                      |   |   | Royalty rate |   |   |   | 0.3 | % |   |   |   |   |

| 20. | BUSINESS SEGMENTS |
|-----|-------------------|

|                                              |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars |   |
|---------------------------------------------------|--------|------------------|------------|--------|--------------------------|--------|
|                                              |   | 2011             |       |   | 2012                     |   |   | 2013 |   |   | 2013 |   |
| Network service and systems integration business: |   |             |       |   |                     |   |   |   |   |   |   |   |
| Customers                                         |   | ¥           | 81,901,632 |   |                     | ¥ | 95,990,449 |   |   | ¥ | 103,928,400 |   |   | $ | 1,103,742 |   |
| Intersegment                                      |   |             | 455,230    |   |                     |   | 506,030 |   |   |   | 558,753 |   |   |   | 5,934 |   |
| Total                                             |   |             | 82,356,862 |   |                     |   | 96,496,479 |   |   |   | 104,487,153 |   |   |   | 1,109,676 |   |
| ATM operation business:                           |   |             |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Customers                                         |   |             | 516,574    |   |                     |   | 1,324,156 |   |   |   | 2,320,086 |   |   |   | 24,640 |   |
| Intersegment                                      |   | -         |       |   | -                 |   |   | - |   |   | - |   |
| Total                                             |   |             | 516,574    |   |                     |   | 1,324,156 |   |   |   | 2,320,086 |   |   |   | 24,640 |   |
|                                              |   |             |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Elimination                                       |   |             | 455,230    |   |                     |   | 506,030 |   |   |   | 558,753 |   |   |   | 5,934 |   |
| Consolidated total                                |   | ¥           | 82,418,206 |   |                     | ¥ | 97,314,605 |   |   | ¥ | 106,248,486 |   |   | $ | 1,128,382 |   |

----

|                                             |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars |   |
|--------------------------------------------------|--------|------------------|-----------|--------|--------------------------|--------|
|                                             |   | 2011             |      |   | 2012                     |   |   | 2013 |   |   | 2013 |   |
|                                             |   |             |      |   |                     |   |   |   |   |   |   |   |
| Operating income (loss):                         |   |             |      |   |                     |   |   |   |   |   |   |   |
| Network service and systems integration business |   | ¥           | 4,812,926 |   |                     | ¥ | 6,631,476 |   |   | ¥ | 7,629,435 |   |   | $ | 81,026 |   |
| ATM operation business                           |   |             | (642,877  | )      |                     |   | (194,264 | ) |   |   | 239,035 |   |   |   | 2,539 |   |
| Elimination                                      |   |             | 29,007    |   |                     |   | 83,729 |   |   |   | 115,828 |   |   |   | 1,230 |   |
| Consolidated total                               |   | ¥           | 4,141,042 |   |                     | ¥ | 6,353,483 |   |   | ¥ | 7,752,642 |   |   | $ | 82,335 |   |

|                                             |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars |   |       |
|--------------------------------------------------|--------|------------------|------------|--------|--------------------------|--------|------------|
|                                             |   | 2012             |       |   | 2013                     |   |       | 2013 |   |   |
|                                             |   |             |       |   |                     |   |       |   |   |   |
| Segment assets:                                  |   |             |       |   |                     |   |       |   |   |   |
| Network service and systems integration business |   | ¥           | 71,749,633 |   |                     | ¥ | 79,958,814 |   |   | $ | 849,180 |   |   |
| ATM operation business                           |   |             | 1,743,613  |   |                     |   | 2,152,452  |   |   |   | 22,860 |   |   |
| Elimination                                      |   |             |       |   |                     |   |       |   |   |   |   |   |   |
| Consolidated total                               |   | ¥           | 73,493,246 |   |                     | ¥ | 82,111,266 |   |   | $ | 872,040 |   |   |

|                                             |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars |   |
|--------------------------------------------------|--------|------------------|-----------|--------|--------------------------|--------|
|                                             |   | 2011             |      |   | 2012                     |   |   | 2013 |   |   | 2013 |   |
|                                             |   |             |      |   |                     |   |   |   |   |   |   |   |
| Depreciation and amortization:                   |   |             |      |   |                     |   |   |   |   |   |   |   |
| Network service and systems integration business |   | ¥           | 5,777,683 |   |                     | ¥ | 7,006,576 |   |   | ¥ | 7,178,397 |   |   | $ | 76,236 |   |
| ATM operation business                           |   |             | 38,351    |   |                     |   | 137,055 |   |   |   | 329,411 |   |   |   | 3,499 |   |
| Consolidated total                               |   | ¥           | 5,816,034 |   |                     | ¥ | 7,143,631 |   |   | ¥ | 7,507,808 |   |   | $ | 79,735 |   |

----

| 21. | ADVERTISING EXPENSES |
|-----|----------------------|

| 22. | RELATED PARTY TRANSACTIONS |
|-----|----------------------------|

|                |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars |   |
|---------------------|--------|------------------|------------|--------|--------------------------|--------|
|                |   | 2011             |       |   | 2012                     |   |   | 2013 |   |   | 2013 |   |
| Accounts receivable |   |             | -   |   |                     | ¥ | 191,925 |   |   | ¥ | 171,909 |   |   | $ | 1,826 |   |
| Accounts payable    |   |             | -   |   |                     |   | 1,800,922 |   |   | 1,578,969  |   |   | 16,769  |   |
| Revenues            |   |             | 991,465    |   |                     |   | 895,189 |   |   |   | 880,079 |   |   | 9,347  |   |
| Costs               |   |             | 14,949,352 |   |                     |   | 14,225,717 |   |   |   | 14,966,177 |   |   | 158,944  |   |

| 23.  | SUBSEQUENT EVENTS |
|-----------|-------------------|

----