| This document is an English translation of the “Convocation notice of the 21st ordinary general meeting of shareholders” (“Dai ni-jyu-ikkai teiji kabunushi sokai shoshu gotsuchi”) of Internet Initiative Japan Inc. (“IIJ” or “the Company”) to be held on June 26, 2013. |
| Note 1: | This document contains forward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934) about our future plans that involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties, and other factors include, in particular, the factors set forth in “Item 3.D: Risk Factors” of our Annual Report on Form 20-F dated July 27, 2012 which has been filed with the U.S. Securities and Exchange Commission. Such risks, uncertainties and other factors may cause our actual results, performance, achievements or financial position to be materially different from any future results, performance, achievement or financial position expressed or implied by these forward-looking statements. |
| Note 2: | This document has been prepared pursuant to the requirements of the Companies Act of Japan. Consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. Non-consolidated financial statements included in this document are prepared in accordance with generally accepted accounting principles in Japan which differ from consolidated financial statements which IIJ should file with the U.S. Securities and Exchange Commission as Form 20-F. |
| Note 3: | The ADRs holders shall instruct The Bank of New York Mellon Corporation to exercise their voting rights represented by the shares underlying their ADRs but they may only provide their instructions to The Bank of New York Mellon Corporation. Otherwise, they are not entitled to exercise any voting right unless they cancel their ADRs and withdraw the shares of common stock. This means they may not be able to exercise any voting rights for IIJ and attend the ordinary general meeting of shareholders of IIJ. |
| Koichi Suzuki | |
| Representative Director | |
| Internet Initiative Japan Inc. | |
| 1-105 Kanda Jinbo-cho, | |
| Chiyoda-ku, Tokyo, Japan |
| 1. | Date and Time: | 10:00 A.M., Wednesday, June 26, 2013 |
| 2. | Place: | KKR Hotel Tokyo |
| 11th floor, Room Kujaku | ||
| 1-4-1 Otemachi, Chiyoda-ku, Tokyo, Japan | ||
| 3. | Agenda of the Meeting: |
| 1. | Business report, consolidated financial statements and a report on the audit results of consolidated financial statements by the accounting auditors and the board of company auditors for the 21st term (from April 1, 2012 to March 31, 2013) |
| 2. | Non-consolidated financial statements for the 21st term (from April 1, 2012 to March 31, 2013) |
| Item 1: Appropriation of Retained Earnings |
| Item 2: Partial Amendments to the Articles of Incorporation |
| Item 3: Election of Six (6) Directors |
| Item 4: Election of One (1) Company Auditor |
| Item 5: Grant of Retirement Allowance to Retired Auditor |
| 4. | Notice to Shareholders |
| With regard to the documents attached hereto, if there are any changes to be notified to the shareholders up to the day prior to the ordinary general meeting of shareholders, you may be notified by mail or IIJ’s web site at http://www.iij.ad.jp/ir/. (Japanese only) |
| 18th fiscal Year | 19th fiscal Year | 20th fiscal Year | 21st fiscal Year | |
| FY2009 | FY2010 | FY2011 | FY2012 | |
| Revenues | 68,006,380 | 82,418,206 | 97,314,605 | 106,248,486 |
| Operating income | 3,411,585 | 4,141,042 | 6,353,483 | 7,752,642 |
| Net income attributable to IIJ | 2,234,138 | 3,203,368 | 3,640,963 | 5,300,654 |
| Basic net income attributable to IIJ per share | JPY 11,030 | JPY15,808 | JPY17,964 | JPY130.76 |
| Total assets | 51,115,450 | 71,472,989 | 73,493,246 | 82,111,266 |
| Total IIJ shareholders’ equity | 27,319,577 | 29,652,287 | 32,688,205 | 37,606,775 |
| IIJ shareholders’ equity per share | JPY 134,882 | JPY146,298 | JPY161,277 | JPY927.72 |
| (Notes) |
| 1. | IIJ’s consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America(US GAAP). |
| 2. | Basic net income attributable to IIJ per share is calculated based on the weighted-average number of common shares outstanding during each fiscal year. |
| 3. | Total IIJ shareholders’ equity per share is calculated based on the total number of common shares (excluding treasury stock) outstanding at the end of each fiscal year. |
4. | IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. Accordingly, basic net income attributable to IIJ per share and IIJ shareholders’ equity per share for the 21st fiscal year have been calculated as if the stock split was conducted at the beginning of the 21st fiscal year. The figures from 18th fiscal year to 20th fiscal year are not retroactively adjusted to the stock split. |
| Name of company | Common stock (JPY thousands) | Ownership | Primary business |
IIJ Innovation Institute Inc. (“IIJ-II”) | 75,000 | 100.0% | R&D for the next generation internet |
IIJ-Global | 490,000 | 100.0% | Provides network and systems integration services |
| Trust Networks | 100,000 | 79.5% | Operation of ATMs and ATMs networks |
Net Care, Inc. (“Net Care”) | 400,000 | 100.0% | Operation and monitoring of network systems, customer service support and call centers |
Net Chart Japan, Inc. (“Net Chart”) | 55,000 | 100.0% | Development of networks, construction, operation and maintenance and sales of network-related equipment |
hi-ho Inc. (“hi-ho”) | 240,000 | 100.0% | Provision of Internet connectivity services for home use |
IIJ America Inc. (“IIJ-A”) | USD10,460,000 | 100.0% | Operation of backbone networks and provision of Internet connectivity services in the U.S. |
| IIJ Exlayer Europe Limited | GBP1,450,000 | (47.2%) 100.0% | Operation and maintenance service of networks and IT systems in Europe |
| IIJ Global Solutions China Inc. (“IIJ-GS China”) | USD1,300,000 | (100.0%) 100.0% | Operation and maintenance services of networks and IT systems and equipment sales in China |
| Name | Functions | Address |
| IIJ | Headquarters | Chiyoda-ku, Tokyo |
| Branches and sales offices | Osaka-shi, Nagoya-shi, Fukuoka-shi, Sapporo-shi, Sendai-shi, Toyama-shi, Hiroshima-shi, Yokohama-shi, Toyota-shi and Naha-shi | |
| IIJ-II | Headquarters | Chiyoda-ku, Tokyo |
IIJ-Global | Headquarters | Chiyoda-ku, Tokyo |
| Branches | Osaka-shi, Nagoya-shi, Fukuoka-shi, Sapporo-shi | |
| Trust Networks | Headquarters | Chiyoda-ku, Tokyo |
| Net Care | Headquarters | Chiyoda-ku, Tokyo |
| Net Chart | Headquarters | Yokohama-shi |
| hi-ho | Headquarters | Chiyoda-ku, Tokyo |
| IIJ-A | Headquarters | California, the United States |
| IIJ Exlayer Europe Limited | Headquarters | London, the United Kingdom |
| IIJ-GS China | Headquarters | Shanghai, China |
| Number of employees | Change from the end of FY2011 |
| 2,116 | +193 |
| (Note) The above figures include employees and contracted employees and exclude employees seconded from other companies. |
| Source | Balance (JPY thousands) |
| Mizuho Corporate Bank, Ltd. | 3,030,000 |
| Sumitomo Mitsui Banking Corporation | 3,030,000 |
| The Bank of Tokyo-Mitsubishi UFJ, Ltd. | 3,030,000 |
| Mitsubishi UFJ Trust and Banking Corporation | 1,900,000 |
| Name of shareholders | Number of shares held (shares) | Shareholding Ratio (%) |
| Nippon Telegraph and Telephone Corporation | 10,095,000 | 24.9% |
| Goldman. Sachs & Co. Reg | 2,257,965 | 5.6% |
| Itochu Corporation | 2,086,000 | 5.1% |
| NTT Communications Corporation | 2,040,000 | 5.0% |
| Koichi Suzuki | 1,801,500 | 4.4% |
| Morgan Stanley & Co. LLC | 1,405,021 | 3.5% |
| Japan Trustee Services Bank, Ltd (Trust account) | 1,377,100 | 3.4% |
| The Dai-ichi Mutual Life Insurance Company, Limited | 1,273,000 | 3.1% |
The Bank of New York Mellon as Depositary Bank for Depositary Receipt Holders | 1,234,200 | 3.0% |
| Kabushiki Kaisha KS Holdings | 810,000 | 2.0% |
| (Notes) |
| 1. | The Bank of New York Mellon as Depositary Bank for Depositary Receipt Holders is the nominee of The Bank of New York Mellon, which is the depositary of IIJ’s ADRs, and the number of shares held by The Bank of New York Mellon as Depositary Bank for Depositary Receipt Holders is equivalent to the number of ADRs outstanding. |
| 2. | Shareholding ratio is calculated by deducting treasury stock from total shares issued. |
| 3. | Kabushiki Kaisha KS Holdings is a wholly owned and controlled by Mr. Koichi Suzuki. |
| 4. | Joho Capital, L.L.C. filed a report of substantial shareholding with the Director General of the Kanto Bureau of the Ministry of Finance on January 30, 2013. According to the filing, Joho Capital, L.L.C. owned 3,429,200 shares of common stock of the Company as of January 28, 2013, representing 8.5 percent of the total. However, their holdings were not verified based on the shareholder record as of March 31, 2013, therefore, Joho Capital, L.L.C. and their holdings are not included in the above list. |
| Allotment date | Number of stock acquisition rights | Type of stock and number of shares subject to stock acquisition rights | Issue price (per stock acquisition right) | Exercise of stock acquisition rights (per share) | Exercise period | |
#1 Stock Acquisition Rights | July 14, 2011 | 138 | Common Stock 27,600 shares | JPY 259,344 | JPY 1 | From July 15, 2011 to July 14, 2041 |
#2 Stock Acquisition Rights | July 13, 2012 | 130 | Common Stock 26,000 shares | JPY 318,562 | JPY 1 | From July 14, 2012 to July 13, 2042 |
| (Notes) |
| 1. | A person granted the stock acquisition rights may exercise his or her rights only within ten (10) days from the day immediately following the day on which the person loses his or her position as neither a Director nor an Executive Officer of IIJ. |
| 2. | IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. In connection with the stock split, number of shares to be issued per stock acquisition right upon exercise of stock acquisition rights was adjusted as follows after the record date. |
| Before adjustment : 1 share per stock acquisition right |
| After adjustment : 200 shares per stock acquisition right |
| (1) | IIJ’s Stock Acquisition Rights Granted to and Held by IIJ’s Directors or Company Auditors at the End of FY2012 |
Number of stock acquisition rights | Type of stock and number of shares subject to stock acquisition rights | Number of holders Number of stock acquisition rights | |
| #1 Stock Acquisition Rights | 89 | Common Stock 17,800 shares | 6 Directors 89 |
| #2 Stock Acquisition Rights | 74 | Common Stock 14,800 shares | 6 Directors 74 |
| (Notes) |
| 1. | In place of the retirement allowance plan for Directors which was abolished, the Stock Acquisition Rights mentioned in the above were issued in consideration of their execution of duties. |
| 2. | There are no stock acquisition rights granted to and held by IIJ’s part- time Directors, outside Directors or Company Auditors at the end of FY2012. |
| 3. | IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. In connection with the stock split, number of shares to be issued per stock acquisition right upon exercise of stock acquisition rights was adjusted as follows after the record date. |
| Before adjustment : 1 share per stock acquisition right |
| After adjustment : 200 shares per stock acquisition right |
| (2) | IIJ’s Stock Acquisition Rights Granted to Employees or Others during FY2012 |
Number of stock acquisition rights | Type of stock and number of shares subject to stock acquisition rights | Number of holders Number of stock acquisition rights | |
| #2 Stock Acquisition Rights | 56 | Common Stock 11,200 shares | 11 Executive Officers 56 |
| (Notes) |
| 1. | Except the above, there are no stock acquisition rights granted to IIJ employees, IIJ’s consolidated subsidiary’s directors or employees during FY2012. |
| 2. | IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. In connection with the stock split, number of shares to be issued per stock acquisition right upon exercise of stock acquisition rights was adjusted as follows after the record date. |
| Before adjustment : 1 share per stock acquisition right |
| After adjustment : 200 shares per stock acquisition right |
| Position in the Company | Name | Business in charge or important concurrent posts |
Representative Director and President | Koichi Suzuki | CEO (Important concurrent posts) Director of IIJ-Global President of Net Care Chairman of the Board and President of hi-ho Chairman of the Board of IIJ-A President of Internet Multifeed Co. Director of Stratosphere Inc. |
| Director and Vice President | Senji Yamamoto | Chairman of the Board of IIJ-Global |
| Senior Managing Director | Hideshi Hojo | Division Director of Enterprise Business Division 1 |
| Senior Managing Director | Takeshi Kikuchi | Division Director of Enterprise Business Division 2 |
| Senior Managing Director | Hitoshi Imafuku | Division Director of Regional Division |
| Managing Director | Takamichi Miyoshi | Director in charge of Strategy Planning Division |
| Managing Director | Akihisa Watai | CFO Division Director of Finance and Planning Division |
| Director | Yasurou Tanahashi | Outside Director of Murata Manufacturing Co., Ltd. Outside Director of Yokogawa Electric Corporation |
| Director | Takashi Hiroi | General Manager of Business Planning Division of Nippon Telegraph and Telephone Corporation (“NTT”) |
| Director | Junnosuke Furukawa | Advisor of Furukawa Electric Co., Ltd. Director Advisor of Furukawa Ringyo Co.,Ltd. |
| Director | Shingo Oda | Outside Director of IT Holdings Corporation |
| Director | Yoshifumi Nishikawa | Honorary Advisor of Sumitomo Mitsui Banking Corporation |
| Full-time company auditor | Kazuhiro Ohira | |
| Full-time company auditor | Shunichi Kozasa | |
| Company auditor | Masaki Okada | Attorney at law, Ishii Law Office |
| Company auditor | Masaaki Koizumi | Japanese Certified Public Accountant, Koizumi CPA Office Outside Company Auditor of Tsukui Corporation. |
| 1. | Business in charge or representatives of other organizations is stated as of March 31, 2013. |
| 2. | On April 1, 2013, business in charge or important concurrent posts were changed as for the following directors: |
| Position in the Company | Name | Business in charge or important concurrent posts |
| Senior Managing Director | Hideshi Hojo | Division Director of Regional Division |
| Senior Managing Director | Hitoshi Imafuku | Division Director of Enterprise Business Division 1 |
| Managing Director | Akihisa Watai | CFO Division Director of Administrative Division |
| 3. | Yasurou Tanahashi, Takashi Hiroi, Junnosuke Furukawa and Shingo Oda are outside directors, defined in Item 15, Article 2 of the Companies Act of Japan. |
| 4. | Kazuhiro Ohira, Masaki Okada and Masaaki Koizumi are outside company auditors. |
| 5. | Outside directors, Yasurou Tanahashi, Junnosuke Furukawa and Shingo Oda, and outside company auditors, Masaki Okada and Masaaki Koizumi are Independent Directors as specified by the Tokyo Stock Exchange. |
| 6. | Masaaki Koizumi, a company auditor, is a Japanese Certified Public Accountant and has extensive expertise in finance and accounting |
| 7. | Relationship between IIJ and those companies that our Directors hold important concurrent posts. |
| Name | Title | Principal position |
| Kazuhiro Tokita | Senior Executive Officer | Division Director of Financial System Business Division In charge of Cloud Business |
| Masayoshi Tobita | Executive Managing Officer | Deputy Division Director of Administrative Division and General Manager of Business Unit Management Department |
| Junichi Shimagami | Executive Managing Officer | Division Director of Network Division |
| Kiyoshi Ishida | Executive Managing Officer | Division Director of Product Division |
| Yasumitsu Iizuka | Executive Officer | Division Director of Government Public & Educational Organization Business Division |
| Kokichi Matsumoto | Executive Officer | Division Director of Marketing Division |
| Koichi Maruyama | Executive Officer | Division Director of Global Business Division |
| Naoshi Yoneyama | Executive Officer | Division Director of Technology Management Division |
| Makoto Ajisaka | Executive Officer | Division Director of Enterprise Business Division 3 |
| Yoshikazu Yamai | Executive Officer | Division Director of Service Operation Division |
| 1. | The amounts of above remunerations include JPY 1,340 thousand for the reserve of accrued directors’ and company auditors’ retirement benefits. |
| 2. | The amounts of above remunerations include JPY 23,451 thousand as compensation-type stock options granted to full-time inside directors (not including part-time and outside directors) for duties performed during FY2012. |
| 3. | We have resolved that the yearly amount of remuneration, etc. (including bonus) for Directors to be JPY 500 million yen or less (including bonus and stock-compensation-type stock options) and JPY 100 million (including bonus) or less for Company Auditors at the 16th ordinary general meeting of shareholders of the Company held on June 27, 2008. |
| Name | Principal Activities | |
| Director | Yasurou Tanahashi | Attended 12 of the 13 board of directors meetings held during the fiscal year and made necessary remarks in deliberations. |
| Director | Takashi Hiroi | Attended 12 of the 13 board of directors meetings held during the fiscal year and made necessary remarks in deliberations. |
| Director | Junnosuke Furukawa | Attended all 13 of the board of directors meetings held during the fiscal year and made necessary remarks in deliberations. |
| Director | Shingo Oda | Attended all 13 of the board of directors meetings held during the fiscal year and made necessary remarks in deliberations. |
| Company auditor | Kazuhiro Ohira | Attended all 13 of the board of directors meetings held during the fiscal year and made comments from time to time to clarify the doubt point, and attended all 16 of the board of company auditors held during the fiscal year. At these meetings, he exchanged opinions about audit results and conferred about important matters concerned audit as a full-time company auditor. |
| Company auditor | Masaki Okada | Attended 11 of the 13 board of directors meetings held during the fiscal year and made comments from time to time to clarify the doubt point, and attended 15 of the 16 board of company auditors held during the fiscal year. At these meetings, he exchanged opinions about audit results and conferred about important matters concerned audit. |
| Company auditor | Masaaki Koizumi | Attended all 13 of the board of directors meetings held during the fiscal year and made comments from time to time to clarify the doubt point, and attended all 16 of the board of company auditors held during the fiscal year. At these meetings, he exchanged opinions about audit results and conferred about important matters concerned audit. |
| (Note) The number of the board of directors meetings held during the fiscal year does not include a resolution by the board of directors by a letter pursuant to Article 370 of the Companies Act of Japan. |
| (1) | Name of Accounting Auditor: |
| (2) | Accounting Auditor Remuneration for the fiscal year |
| (i)Remuneration for accounting auditor this fiscal year | JPY 110,000 thousand |
| (ii)Total cash or proceeds from other assets that should be paid by the Company or its subsidiaries | JPY 126,000 thousand |
| (Note) | The audit contract between the Company and the accounting auditor does not distinguish between remuneration paid for audits and quarterly review, therefore, the (i) are total amounts. Remuneration for audits and quarterly review includes, audits performed for the financial statement for the Companies Act of Japan, for the Financial Products Exchange Law in Japan and for the quarterly review in accordance with the standards of the PCAOB (Public Company Accounting Oversight Board), audit performed for internal control in accordance with the standards of the PCAOB and the audit performed for internal controls in accordance with the Financial Products Exchange Law in Japan. |
| (1) Systems for ensuring the compliance of directors with the law and articles of incorporation, and systems for ensuring the proper execution of other duties |
| (1) | The company will establish a code of ethics that sets for a standard of conduct and requires strict adherence to the law. In addition, the Company will establish regulations for applying the laws regarding the prevention of insider trading, the protection of personal information, among others. |
| (2) | The company will establish a system for appointing the necessary personnel to ensure compliance with the law, and for consulting with lawyers and other experts outside the Company. |
| (3) | The company will establish an internal reporting system for reporting any legal violations, and will maintain an internal notification system that enables people to contact the Board of Company Auditors while protecting the person reporting. |
| (4) | An Office of Internal Audits under the direct control of the president will conduct internal audits on a regular basis, indicating where each division could improve compliance with the law, and overseeing the improvements. |
| (5) | For legally required reports, ad hoc reports, and other types of releases, the Company will establish a Disclosure Committee whose members consist of Directors, External Directors, executive officers and Auditors, whom will evaluate the content for appropriateness and completeness, and approve any material to be released. |
| (1) | Basic policy and procedures regarding the handling of information assets will be set and followed in the handling of information and documents related to the execution of duties by Directors (“performance information”), these policies and procedures will detail who is responsible for managing the information, how long the information is to be stored, how it is to be stored, measures for countering loss or leakage of the information, and proper management of the information. The management of this information will be reviewed on a regular basis. |
| (2) | The company will create a system that ensures the proper filing of performance information (committing it to electronic storage when necessary), and that enables the quick verification of the existence, condition, and content of these documents. In addition, the system will allow people with the proper authority to view documents related to the Auditors and others without delay. |
| (3) | The duties related to the above fall under the jurisdiction of the Chief Information Security Officer (or Executive Officers) and the Chief Document Management Officer (or Executive Officers). |
| (1) | The Director (or Executive Officers) that oversees the operation of each division will identify the risks defined by the governing regulations, evaluate these risks, and develop measures to counter these risks, as well as review them on a regular basis. |
| (2) | For certain risk categories, a Review Committee will be established to evaluate the risk and to develop countermeasures. |
| (3) | A Business Continuity Plan will be developed to address potential emergency situations. |
| (4) | An Internal Auditor Office under the direct control of the President will conduct internal audits on a regular basis, indicating where each division could improve operations, including risk management, and overseeing the improvements. |
| (1) | A business plan for each fiscal year will be created in line with management objectives, and each operation will actively seek to achieve the goals put forth in the plan. In addition, regular progress reports will be submitted and reviewed to monitor progress on each target. |
| (2) | In management of operations, all issues that should be decided by the Board of Directors in accordance with the Regulations of the Board of Directors will be strictly decided by the Board, and as a basic rule of the decision-making process, sufficient documentation on the issue to be decided will be distributed to all Board members in advance. |
| (3) | In the execution of daily duties, authority will be delegated based on scope of authority regulations and division of duties regulations, and managers at each level will execute their duties while complying with the rules of the decision making process. |
| (4) | To reinforce the Board of Directors’ authority, a certain number of people with notable management acumen will be appointed as External Directors. |
| (1) | Subsidiaries will be managed based on the subsidiary management regulations, which are the basic policy of subsidiary management, and an agreement will be made with the parent company regarding the management of the subsidiary. |
| (2) | Subsidiaries will report on required items, and a system for consultation will be established. |
| (3) | To impose internal control on important items, regulations governing the entire corporate group will be established, and subsidiaries will be required to comply with them. |
| (4) | The Company’s Internal Audit Office will perform internal audits of subsidiaries. |
| (1) | The selection, appointment, and transfer of personnel assigned to the Office of Internal Audits will be done with full consideration of the opinion of the Board of Company Auditors. |
| (2) | The Office of Internal Audits is under the direct control of the president. |
| (1) | Directors and assistants will comply with the Regulations of the Board of Company Auditors, and they will provide the necessary reports on a regular basis or when requested by an Auditor or the Board of Company Auditors. |
| (2) | Deliberative bodies involved in important decision making, such as the Disclosure Committee, will include Auditors as members. |
| (1) | To ensure that the Board of Company Auditors can properly execute their duties, a sufficient budget will be created and the necessary external experts retained. |
| (2) | To preserve the independence of the Independent Auditors, they are prohibited from engaging in specific non-auditing related services. In addition, the Board of Company Auditors must approve any auditing and auditing related services to be provided by the Independent Auditors. |
| (3) | A financial expert will be appointed to one or more Auditors. |
| CURRENT ASSETS: | |
| Cash and cash equivalents | 12,258,872 |
Accounts receivable, net of allowance for doubtful accounts of JPY 93,934 thousand | 18,764,703 |
| Inventories | 1,301,684 |
| Prepaid expenses | 2,492,164 |
| Deferred tax assets – Current | 1,046,828 |
Other current assets, net of allowance for doubtful accounts of JPY10,732 thousand | 1,576,718 |
| Total current assets | 37,440,969 |
| INVESTMENTS IN EQUITY METHOD INVESTEES | 1,681,723 |
| OTHER INVESTMENTS | 3,771,262 |
| PROPERTY AND EQUIPMENT, net of accumulated depreciation | 23,025,755 |
| GOODWILL | 5,969,951 |
| OTHER INTANGIBLE ASSETS, net of accumulated amortization -net | 4,791,431 |
| GUARANTEE DEPOSITS | 2,051,449 |
| DEFERRED TAX ASSETS – Noncurrent | 163,773 |
| NET INVESTMENT IN SALES-TYPE LEASES – Noncurrent | 898,040 |
| PREPAID EXPENSES – Noncurrent | 2,201,108 |
| OTHER ASSETS, net of allowance for doubtful accounts of JPY71,727 thousand | 115,805 |
| TOTAL | 82,111,266 |
| CURRENT LIABILITIES: | |
| Short-term borrowings | 9,400,000 |
| Long-term borrowings – Current portion | 1,010,000 |
| Capital lease obligations –Current portion | 3,505,471 |
| Accounts payable – Trade | 10,973,120 |
| Accounts payable – Other | 949,264 |
| Income taxes payable | 1,669,849 |
| Accrued expenses | 2,266,427 |
| Deferred income – Current | 1,806,074 |
| Other current liabilities | 803,902 |
| Total current liabilities | 32,384,107 |
| LONG-TERM BORROWINGS | 980,000 |
| CAPITAL LEASE OBLIGATIONS – Noncurrent | 5,370,365 |
| ACCRUED RETIREMENT AND PENSION COSTS – Noncurrent | 2,112,085 |
| DEFERRED TAX LIABILITIES – Noncurrent | 412,132 |
| DEFERRED INCOME – Noncurrent | 2,562,208 |
| OTHER NONCURRENT LIABILITIES | 656,191 |
| Total liabilities | 44,477,088 |
| COMMITMENTS AND CONTINGENCIES | - |
| EQUITY: | |
| IIJ stockholders’ equity: | |
Common stock—authorized, 75,520,000 shares; issued and outstanding, 41,295,600 shares at March 31, 2013 | 16,833,847 |
| Additional paid-in capital | 27,300,325 |
| Accumulated deficit | (6,399,088) |
| Accumulated other comprehensive income | 263,770 |
| Treasury stock – 758,800 shares held by the company | (392,079) |
| Total IIJ shareholders' equity | 37,606,775 |
| NONCONTROLLING INTERESTS | 27,403 |
| Total equity | 37,634,178 |
| TOTAL | 82,111,266 |
| REVENUES: | |
| Network services: | |
| Internet connectivity services(corporate use) | 16,027,134 |
| Internet connectivity services(home use) | 5,466,198 |
| WAN Services | 25,168,425 |
| Outsourcing services | 18,570,641 |
| Total | 65,232,398 |
| Systems integration | |
| Systems Construction | 15,824,938 |
| Systems Operation and Maintenance | 21,380,158 |
| Total | 37,205,096 |
| Equipment sales | 1,490,906 |
| ATM operation business | 2,320,086 |
| Total revenues | 106,248,486 |
| COST AND EXPENSES: | |
| Cost of Network services | 50,692,190 |
| Cost of systems integration | 30,424,802 |
| Cost of equipment sales | 1,318,344 |
| Cost of ATM operation business | 1,959,597 |
| Total cost | 84,394,933 |
| Sales and marketing | 8,058,481 |
| General and administrative | 5,632,430 |
| Research and development | 410,000 |
| Total cost and expenses | 98,495,844 |
| OPERATING INCOME | 7,752,642 |
| OTHER INCOME(EXPENSE): | |
| Dividend income | 47,117 |
| Interest income | 25,708 |
| Interest expense | (287,314) |
| Foreign exchange gains | 112,136 |
| Net gains on sales of other investments | 13,565 |
| Losses on write-down of other investments | (19,788) |
| Other—net | 112,798 |
| Other income (expense)—net | 4,222 |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES | 7,756,864 |
| INCOME TAX EXPENSE | 2,607,582 |
| EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES | 168,065 |
| NET INCIOME | 5,317,347 |
| LESS:NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (16,693) |
| NET INCOME ATTRIBUTABLE TO IIJ | 5,300,654 |
Total Equity | IIJ shareholders’ equity | |||
| Accumulated deficit | Accumulated other comprehensive income(loss) | Common stock | ||
BLANCE, APRIL 1,2012 | 32,696,247 | (10,990,348) | (23,533) | 16,833,847 |
| Establishment of new consolidated subsidiaries | 2,688 | |||
| Stock-based compensation | 40,007 | |||
| Comprehensive income: | ||||
| Net Income (loss) | 5,317,347 | 5,300,654 | ||
| Other Comprehensive income,net of tax | 287,283 | 287,303 | ||
| Payment of dividends | (709,394) | (709,394) | ||
BALANCE, MARCH 31,2013 | 37,634,178 | (6,399,088) | 263,770 | 16,833,847 |
| IIJ shareholders’ equity | NONCONTROLLING INTERESTS | ||
Treasury Stock | Additional Paid-in Capital | ||
BLANCE, APRIL 1,2012 | (392,079) | 27,260,318 | 8,042 |
| Establishment of new consolidated subsidiaries | 2,688 | ||
| Stock-based compensation | 40,007 | ||
| Comprehensive income: | |||
| Net Income (loss) | 16,693 | ||
| Other Comprehensive income,net of tax | (20) | ||
| Payment of dividends | |||
BALANCE, MARCH 31,2013 | (392,079) | 27,300,325 | 27,403 |
| Buildings | 20 years | |
| Data communications, office and other equipment | 3 to 20 years | |
| Leasehold improvements | 8 to 20 years | |
| Construction other than buildings | 20 years | |
| Purchased software | 5 years | |
| Capitalized leases | 4 to 6 years |
| Capital leases, which meet specific criteria noted in ASC840, “Accounting for Leases”, are capitalized at the inception of the lease at the present value of the minimum lease payments. All other leases are accounted for as operating leases. Lease payments for capital leases are apportioned to interest expense and a reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Operating lease payments are recognized as an expense on a straight-line basis over the lease term. |
| (1) | “Accounts payable-trade” and “Accounts payable-other,” which were previously included in “Accounts payable,” have been reclassified and shown in a separate line in the consolidated balance sheets. “Accounts payable-other” as of the end of the previous fiscal year was JPY 659,266 thousand. |
| (2) | “Dividend income,” which was previously included in “Other-net,” has been reclassified and shown in a separate line in the consolidated statement of income. “Dividend income” for the previous fiscal year was JPY 48,269 thousand. |
| Class of stock | Number of shares as of March 31, 2012 | Increase | Decrease | Number of shares as of March 31, 2013 |
| Common Stock | 206,478 | 41,089,122 | ― | 41,295,600 |
| Resolution | Classes of stock | Total amount of dividends | Dividend per share | Record date | Effective date |
Ordinary general meeting of shareholders held on June 27, 2012 | Common stock | JPY 354,697 thousand | JPY 1,750 | March 31, 2012 | June 28, 2012 |
Board of Directors’ meeting held on November 8, 2012 | Common stock | JPY 354,697 thousand | JPY 1,750 | September 30, 2012 | December 6, 2012 |
| (Note) IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. Dividends per share in the above table have been calculated by the number of shares outstanding before the stock split. |
| Resolution | Classes of stock | A Source of dividend | Total amount of dividends | Dividend per share | Record date | Effective date |
Ordinary general meeting of shareholders to be held on June 28, 2013 | Common stock | Retained earning | JPY 405,368 thousand | JPY 10 | March 31, 2013 | June 27, 2013 |
Stock acquisition rights First Series issued on July 14, 2011 | Stock acquisition rights Second Series issued on July 13, 2012 | |
Class and number of common stock to be acquired | Common stock 27,600 shares | Common stock 26,000 shares |
| Before adjustment : 1 share per stock acquisition right |
| After adjustment : 200 shares per stock acquisition right |
| (Unit: JPY thousands) |
Amount recognized in Consolidated Balance Sheet | Market Value | Differences | |
(1) Cash and cash equivalent | 12,258,872 | 12,258,872 | - |
| (2) Accounts receivable | 18,764,703 | 18,764,703 | - |
| (3) OTHER INVESTMENTS | |||
| Available for sale equity securities | 1,309,923 | 1,309,923 | - |
| (4) Short-term borrowings | 9,400,000 | 9,400,000 | - |
| (5) Long-term borrowings –current | 1,010,000 | 1,010,000 | - |
| (6) Capital lease obligations—current | 3,505,471 | 3,505,471 | - |
| (7) Accounts payable – Trade | 10,973,120 | 10,973,120 | - |
| (8) Accounts payable – Other | 949,264 | 949,264 | - |
| (8) Long-term borrowings | 980,000 | 980,000 | - |
| (9) Capital lease obligations—noncurrent | 5,370,365 | 5,292,902 | 77,463 |
| 1. | Cash and cash equivalent, Accounts receivable, Short-term borrowings, Capital lease obligations-current, Accounts payable -Trade and Accounts payable -Other are stated at book value, because they are short-term and their book values are approximately the same as their fair values. Long-term borrowings, including current and noncurrent, are stated at book value because interest rates for long-term borrowings are determined every three months and book values are approximately the same as their fair values. |
| 2. | Other investments |
(Unit: JPY thousands) |
| Acquisition cost | Book value | Difference | ||
Book value > Acquisition cost | Equity securities | 468,576 | 1,282,021 | 813,445 |
Book value < Acquisition cost | Equity securities | 32,040 | 27,902 | (4,138) |
| Total | 500,616 | 1,309,923 | 809,307 | |
| 3. | Capital lease obligations-noncurrent |
(Unit: JPY thousands) |
| Class | Less than 1 Year | 1 to 2 years | 2 to 3 years | 3 to 4 years | More than 4 years |
Capital lease obligations | 3,654,924 | 3,009,028 | 1,837,318 | 603,737 | 42,452 |
| 4. | Investment in Equity method investee (book value of JPY1,681,723 thousand) is not included in the above because it is extremely difficult to evaluate fair value as it has no market value and it is difficult to estimate future cash flow. |
| 5. | Nonmarketable equity securities and others included in other investments (book value of JPY2,461,339 thousand) is not included in the above because it is extremely difficult to evaluate fair value as it has no market value and it is difficult to estimate future cash flow. |
| 6. | Deposits (book value of JPY2,051,449 thousand) is not included in the above because it is extremely difficult to evaluate fair value as the term of contract is uncertain and the timing for refund is not determined. |
| (Note) | IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. Accordingly, basic net income attributable to IIJ per share and diluted net income attributable to IIJ per share have been calculated as if the stock split was conducted at the beginning of the previous consolidated fiscal year. |
| Assets | Liabilities | ||||||
| Item | Amount | Item | Amount | ||||
[Current assets] | 26,150,802 | [Current liabilities] | 26,745,750 | ||||
| Cash and bank deposits | 6,530,354 | Accounts payable | 3,227,239 | ||||
| Accounts receivable | 12,310,850 | Short-term borrowings | 10,290,000 | ||||
| Investment in Lease | 1,451,711 | Long-term borrowing-current | 1,010,000 | ||||
| Merchandise | 20,719 | Accounts payable – other | 3,740,364 | ||||
| Work in process | 1,128,934 | Capital lease obligations (current) | 3,551,727 | ||||
| Supplies | 302,548 | Accrued expense | 373,698 | ||||
| Prepaid expenses | 2,521,278 | Accounts payable – Fixed assets | 908,790 | ||||
| Accounts receivable - other | 1,236,619 | Income taxes payable | 1,514,460 | ||||
| Loans to affiliated companies | 324,577 | Consumption taxes payable | 193,046 | ||||
| Deferred tax assets – current | 306,931 | Deposits received | 150,889 | ||||
| Other current assets | 144,697 | Advance received | 375,717 | ||||
| Allowance for doubtful accounts | (128,416) | Deferred income | 1,318,578 | ||||
| Other current liabilities | 91,242 | ||||||
| [Fixed assets] | 45,078,675 | ||||||
| <Property and Equipment> | 11,316,853 | [Long-term liabilities] | 9,985,690 | ||||
| Land | 150 | Long –term borrowings | 980,000 | ||||
| Buildings | 167,071 | Deferred income –noncurrent | 1,512,163 | ||||
| Leasehold improvements | 2,516,916 | Capital lease obligations – (noncurrent) | 5,249,348 | ||||
| Construction other than Buildings | 508,828 | Asset retirement obligations | 291,128 | ||||
| Data communication equipment and office equipment | 4,796,843 | Accrued pension and severance cost | 1,387,374 | ||||
| Assets under capital leases | 19,422,718 | Accrued directors’ and company auditors’ retirement benefits | 259,020 | ||||
| Construction in Progress | 199,954 | Deferred tax liabilities (noncurrent) | 277,320 | ||||
| Accumulated depreciation | (16,295,627) | Other long-term liabilities | 29,337 | ||||
| <Intangible assets> | 10,455,732 | ||||||
| Goodwill | 1,977,360 | Total Liabilities | 36,731,440 | ||||
| Customer relationship | 1,748,970 | [Shareholders’ equity] | 33,795,460 | ||||
| Telephone rights | 7,156 | <Common stock> | 14,294,625 | ||||
| Software | 6,647,491 | <Capital surplus> | 1,038,222 | ||||
| Assets under capital leases | 74,755 | Additional paid-in capital | 1,015,310 | ||||
| <Investments and other assets> | 23,306,090 | Other Capital surplus | 22,912 | ||||
| Investments in securities | 2,387,316 | <Earned surplus> | 18,847,813 | ||||
| Money held in trust | 1,342,817 | Legal reserve | 310,333 | ||||
| Investments in affiliated companies | 15,272,703 | Other Earned surplus | 18,537,480 | ||||
| Long-term prepaid expenses | 1,643,148 | Earned surplus brought forward | 18,537,480 | ||||
| Guarantee deposits | 1,771,962 | <Treasury stock> | (385,200) | ||||
| Claims against insolvencies | 42,705 | [Valuation and translation adjustment] | 635,727 | ||||
| Investment in Lease | 317,011 | Net unrealized gains on securities | 635,727 | ||||
| Other investments | 593,820 | [Subscription rights to shares] | 66,850 | ||||
| Allowance for doubtful accounts | (65,392) | Subscription rights to shares | 66,850 | ||||
| Total Shareholders’ equity | 34,498,037 | ||||||
| Total assets | 71,229,477 | Total liabilities and Shareholders’ equity | 71,229,477 | ||||
| Item | Amount | |
| [Total revenues] | 74,138,296 | |
| [Total costs of revenues] | 59,380,650 | |
| Gross margin | 14,757,646 | |
| [Total Sales and administrative expense] | 9,734,513 | |
| Operating income | 5,023,133 | |
| [Non-operating income] | ||
| Interest income | 7,296 | |
| Dividends income | 1,542,996 | |
| Commissions received | 18,339 | |
| Royalty charge received | 3,634 | |
| Foreign exchange gain | 85,625 | |
| Reverse of allowance of doubtful accounts | 5,314 | |
| Gains on investments on anonymous association | 50,787 | |
| Other non-operating income | 21,367 | 1,735,358 |
| [Non-operating expenses] | ||
| Interest expense | 248,716 | |
| Other non-operating expenses | 11,418 | 260,134 |
| Ordinary income | 6,498,357 | |
| [Extraordinary income] | ||
| Gains on sales of investments in securities | 13,420 | |
| Gains on sales of fixed assets | 11,280 | 24,700 |
| [Extraordinary loss] | ||
| Losses on disposal of fixed assets | 5,441 | |
| Losses on valuation of investments in securities | 19,788 | |
| Other extraordinary loss | 4,087 | 29,316 |
| Income before income taxes | 6,493,741 | |
| Income taxes -current | 2,170,667 | |
| Income taxes -deferred | (168,847) | |
| Net income | 4,491,921 | |
| Shareholders’ equity | ||||||||
Common stock | Capital surplus | Earned surplus | ||||||
Additional Paid-in Capital | Other Capital Surplus | Total Capital surplus | Legal reserve | Other Earned surplus | Total Earned surplus | |||
Earned surplus Brought forward | ||||||||
| BALANCE, APRIL 1, 2012 | 14,294,625 | 1,015,310 | 22,912 | 1,038,222 | 239,394 | 14,825,892 | 15,065,286 | |
| Changes in the Term | ||||||||
| Payment of Dividends | - | - | - | - | - | (709,394) | (709,394) | |
| Fund for Legal reserve | - | - | - | - | 70,939 | (70,939) | - | |
| Net income | - | - | - | - | - | 4,491,921 | 4,491,921 | |
| Net changes other than shareholders’ equity | - | - | - | - | - | - | - | |
| Total changes in the term | - | - | - | - | 70,939 | 3,711,588 | 3,782,527 | |
| BALANCE, March 31, 2013 | 14,294,625 | 1,015,310 | 22,912 | 1,038,222 | 310,333 | 18,537,480 | 18,847,813 | |
| Shareholders’ equity | Valuation and translation adjustments | Subscription rights to shares | Total Shareholders’ equity | |||
| Treasury stock | Total shareholders’ equity | Net unrealized holding gains or losses on securities | ||||
| BALANCE, APRIL 1, 2012 | (385,200) | 30,012,933 | 229,752 | 26,843 | 30,269,528 | |
| Changes in the Term | ||||||
| Payment of Dividends | - | (709,394) | - | - | (709,394) | |
| Fund for Legal reserve | - | - | - | - | - | |
| Net income | - | 4,491,921 | - | - | 4,491,921 | |
| Net changes other than shareholders’ equity | - | - | 405,975 | 40,007 | 445,982 | |
| Total changes in the term | - | 3,782,527 | 405,975 | 40,007 | 4,228,509 | |
| BALANCE, March 31, 2013 | (385,200) | 33,795,460 | 635,727 | 66,850 | 34,498,037 | |
| Buildings: | 20 years | |
| Plant and buildings facilities annexed: | 8-20 years | |
| Construction other than buildings: | 20 years | |
| Tools, machines, instruments and equipments: | 3-20 years |
| Short-term monetary claims: | JPY | 1,593,294 | thousand | |
| Long-term monetary claims: | JPY | 484,979 | thousand | |
| Short-term monetary liabilities: | JPY | 2,185,494 | thousand |
| Revenues: | JPY | 2,691,769 | thousand | |
| Purchases: | JPY | 11,635,338 | thousand | |
| Turnover from non-operating transactions: | JPY | 33,862 | thousand |
| Balance at beginning of the fiscal year : | JPY | 256,895 | thousand | |
| Increase in relation to the acquisition of assets: | JPY | 26,620 | thousand | |
| Other increases: | JPY | 7,613 | thousand | |
| Balance at the end of the fiscal year: | JPY | 291,128 | thousand |
| Deferred tax assets | ||||
| Impairment loss on investment securities: | JPY | 262,562 | thousand | |
| Accrued directors’ and company auditors’ retirement benefits : | 92,211 | |||
| Accrued pension and severance cost | 493,905 | |||
| Allowance for doubtful accounts | 59,272 | |||
| Impairment loss on investments in affiliated companies: | 1,157,378 | |||
| Loss on disposal of telephone rights: | 55,235 | |||
| Impairment loss of telephone rights: | 21,105 | |||
| Accrued enterprise taxes: | 141,231 | |||
| Revenue Deferred: | 110,862 | |||
| Accounts payable for Defined contribution plan: | 6,202 | |||
| Research and development cost | 54,069 | |||
| Asset retirement obligations: | 103,642 | |||
| Depreciation: | 51,942 | |||
| Others: | 229,323 | |||
| Subtotal of deferred tax assets: | 2,838,939 | |||
| Valuation allowance: | (1,753,513) | |||
| Total of deferred tax assets: | 1,085,426 | |||
| Deferred tax liabilities: | ||||
| Unrealized gain on other securities: | 351,760 | |||
| Long-lived assets associated with asset retirement obligations: | 74,630 | |||
| Customer Relationship: | 629,425 | |||
| Total of deferred tax liabilities: | 1,055,815 | |||
| Net amount of deferred tax assets: | JPY | 29,611 | thousand | |
| Attribute | Name | Business | Ownership | Relation with related parties | Nature of transaction | Amount of transaction (Thousands of Yen) | Account | Balance as of March 31, 2013 (Thousands of Yen) | |
Collateral offices of directors | Business Relation | ||||||||
| Subsidiary | IIJ -Global | Network services and systems integration | 100.0% (Direct owning) | Yes | Customer and supplier | Borrowings of funds | 800,000 (Notes 2-a) | Short-term borrowings | 800,000 |
| Subsidiary | Net Care | Operation and monitoring of network systems, customer service support and call centers | 100.0% (Direct owning) | Yes | Customer and supplier | Purchase related to systems integration | 7,447,639 (Notes 2-b) | Accounts payable | 120,352 |
Accounts payable – other | 699,660 | ||||||||
| Attribute | Name | Business | Ownership | Relation with related parties | Nature of transaction | Amount of transaction (Thousands of Yen) | Account | Balance as of March 31, 2013 (Thousands of Yen) | |
Collateral offices of directors | Business relation | ||||||||
| Other affiliated company’s subsidiary | NTT Communications Corporation | Telecommunications services | 5.0% (Direct owning) | No | Customer and supplier | Network facilities for the operation of network services and data center facilities | 6,229,599 (Notes 2-c) | Accounts payable Accounts payable -other | 7,764 588,277 |
a. Short-term borrowings with IIJ-Global are based on the policy to use group finance efficiently. The interest is based on the external financing. |
| b. The cost and other conditions of purchase of construction, maintenance and operation for network system are determined in the comparison by receiving an estimate for each purchase and in reference to the market price. |
| c. The cost for domestic and international connectivity and data center facilities for the operation of network services and others are determined in the comparison by receiving an estimate for each purchase and in reference to the market price. |
| (1) Shareholders’ equity per share: | JPY 849.38 |
| (2) Net income per share: | JPY 110.81 |
| (Note) | IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. Accordingly, basic net income attributable to IIJ per share and diluted net income attributable to IIJ per share have been calculated as if the stock split was conducted at the beginning of the previous consolidated fiscal year. |
| Certified Copy |
| TRANSLATION |
| Certified Copy |
| TRANSLATION |
| Certified Copy |
| A. | In our opinion, the business report and the supplementary schedules fairly represent the Company’s condition in conformity with the applicable laws and regulations of Japan as well as the Articles of Incorporation of the Company. |
| B. | With respect to the execution of duties by the Directors, we have found no evidence of misconduct or material facts in violation of the applicable laws and regulations of Japan or the Articles of Incorporation of the Company in the course of the execution of duties of the Directors. |
| C. | In our opinion, the content of the resolutions made by the Board of Directors of the Company regarding the internal control systems is appropriate, and furthermore, we have not found anything to be pointed out on the performance of duties of the Directors concerning the internal control systems. |
| In our opinion, the methodology and results of the audit employed and rendered by Deloitte Touche Tohmatsu, the Independent Auditor, are fair and reasonable. |
| In our opinion, the methodology and results of the audit employed and rendered by Deloitte Touche Tohmatsu, the Independent Auditor, are appropriate. |
| Full-time Company Auditor | Kazuhiro Ohira | (seal) | |
| Full-time Company Auditor | Shunichi Kozasa | (seal) | |
| Company Auditor | Masaki Okada | (seal) | |
| Company Auditor | Masaaki Koizumi | (seal) |
| (1) | The Company’s Board of Directors resolved at the meeting of the Board of Directors held on September 6, 2012, with the effective date of such resolution being October 1, 2012, to adopt the unit share system that sets a share-trading unit as 100 shares and simultaneously conduct a 1:200 stock split, along with the change of the total number of shares authorized to be issued from 377,600 shares to 75,520,000 shares, according to the amendment of the securities listing regulations, etc. of Tokyo Stock Exchange, Inc. in April 2012, whereby listed companies whose number of shares constituting a share-trading unit is a number other than 100 shares or 1,000 shares are obliged to set their number of shares constituting a share-trading unit as 100 shares. Accordingly, the Company proposes to establish new provisions of Article 8 (Rights Pertaining to Less-than-a-full-unit Shares) and Article 9 (Request to Purchase Less-than-a-full-unit Shares) to stipulate the rights pertaining to shares that do not constitute a full unit of shares. |
| (2) | To make the operations of general meetings of shareholders and Board of Directors’ meetings more flexible, regarding Article 14 (Chairman) and Article 20 (Convocation of Meetings of the Board of Directors) of the present Articles of Incorporation, the Company proposes to change the chairman of a general meeting of shareholders and Board of Directors’ meetings to be the directors who are each determined in advance by the Board of Directors. |
| (3) | To provide for the effective dates of the establishment of new provisions of Article 8 and Article 9, the Company proposes to establish the new provision of Article 1 of Supplementary Provisions. |
| (4) | Further, following on the foregoing amendments, the necessary amendments will be made, such as renumbering the accompanying provision numbers, additions and deletions of the necessary provisions and phrases, and corrections. |
| Present Articles | Proposed Articles |
[New Provision] | (Rights Pertaining to Less-than-a-full-unit Shares) Article 8. No shareholder of the Company shall exercise any right pertaining to shares that do not constitute a full unit of shares (“Less-than-a-full-unit Shares”) that he/she has except the following rights: (1) Rights granted by the items listed in Article 189 Paragraph 2 of the Companies Act; (2) A right to make a request pursuant to Article 166 Paragraph 1 of the Companies Act; (3) A right for allotment of shares for subscription or stock acquisition rights for subscription in proportion to the number of shares owned by a shareholder; and (4) A right to make a request pursuant to the following article. |
[New Provision] | (Request to Purchase Less-than-a-full-unit Shares) Article 9. Any shareholder of the Company with Less-than-a-full-unit Shares may request the Company to sell to such shareholder shares that will become a number of full unit of shares together with a number of Less-than-a-full-unit Shares owned by such shareholder, in accordance with the Share Handling Regulations to be prescribed by the Board of Directors. |
Article 8. | [Provisions omitted] Article 13. | Article 10. | [Unchanged] Article 15. |
(Chairman) Article 14. The President and Director shall chair a general meeting of shareholders. Should the President and Director be unable to so act, another director shall act in his/her place in the order predetermined by the Board of Directors. | (Chairman) Article 16. A director designated in advance by the Board of Directors shall chair a general meeting of shareholders. Should such director be unable to so act, another director shall act in his/her place in the order predetermined by the Board of Directors. |
Article 15. | [Provisions omitted] Article 19. | Article 17. | [Unchanged] Article 21. |
(Convocation of Meetings of the Board of Directors) Article 20. Unless otherwise provided for by law, a meeting of the Board of Directors shall be convened and chaired by the President and Director. 2 The notice of convocation of a meeting of the Board of Directors shall be given to each director and company auditor at least three (3) days prior to the day set for such meeting; provided, however, that this period may be further shortened under pressing circumstances. 3 Matters concerning operation of meetings of the Board of Directors, etc. shall be governed by laws and regulations, the Articles of Incorporation and the Regulations of Board of Directors to be prescribed by the Board of Directors. | (Convocation of Meetings of the Board of Directors) Article 22. Unless otherwise provided for by law, a meeting of the Board of Directors shall be convened and chaired by a director designated in advance by the Board of Directors; provided, however, that when such director is unable to so act, another director shall act in his/her place in the order predetermined by the Board of Directors. 2 The notice of convocation of a meeting of the Board of Directors shall be given to each director and company auditor at least three (3) days prior to the day set for such meeting; provided, however, that this period may be further shortened under pressing circumstances. 3 Matters concerning operation of meetings of the Board of Directors, etc. shall be governed by laws and regulations, the Articles of Incorporation and the Regulations of Board of Directors to be prescribed by the Board of Directors. |
Article 21. | [Provisions omitted] Article 35. | Article 23. | [Unchanged] Article 37. |
[New Provision] | Supplementary Provisions Article 1. The establishment of the new provisions of Article 8 and Article 9shall become effective as of July 1, 2013. 2. The Supplementary Provisions shall be deleted as of July 1, 2013. |
Candidate No. | Name Date of Birth | Careers & Current Positions in and Outside the Company | Number of Shares Owned |
| 1 | Koichi Suzuki September 3, 1946 | Dec .1992 Director with the establishment of the Company Apr .1994 President and Representative Director of the Company(Current position) < Important concurrent posts > Chairman of the Board of IIJ America Inc. President and Representative Director of Net Care, Inc. Chairman of the Board, and President and Representative Director of hi-ho Inc. President and Representative Director of Internet Multifeed Co. Director of the IIJ Global Solutions Inc. Director of Stratosphere Inc. | 1,801,777 |
| 2 | Eijiro Katsu June 19, 1950 | Apr. 1975 Joined Ministry of Finance Jun. 1995 Director, Foreign Exchange and Money Market Department, International Finance Bureau, MOF Jul. 1997 Budget Examiner of Budget Bureau, MOF Jul. 2007 Director-General of the Financial Bureau, MOF Jul. 2008 Deputy Vice Minister, MOF Jul. 2009 Director-General, Budget Bureau, MOF Jul. 2010 Vice Minister of Finance Aug. 2012 Retired from Minister of Finance, Special Adviser, MOF Nov. 2012 Joined IIJ as Special Adviser (Current position) | 0 |
| 3 | Hideshi Hojo December 22, 1957 | Apr. 1980 Joined Itochu Data System Corporation Apr. 1996 Joined the Company Jun. 2000 Director of the Company Jun. 2002 Managing Director of the Company Jun. 2006 Senior Managing Director of the Company (Current position) Apr. 2013 Division Director of Business Unit of Regional Division (Current position) | 23,395 |
| 4 | Hitoshi Imafuku April 2, 1957 | Apr. 1980 Joined Nippon Telegraph and Telephone Public Corporation July 2006 Kagoshima General Manager of Nippon Telegraph and Telephone West Corporation Jun. 2009 Senior Managing Director of the Company (Current position) Apr. 2013 Division Director of Enterprise Business Division 1, (Current position) | 1,163 |
| 5 | Junnosuke Furukawa December 5,1935 | Apr. 1959 Joined The Furukawa Electric Co., Ltd. Jun. 1995 President of the same Jun. 2003 Chairman of the Board and Representative Director of the same Jun. 2004 Director Adviser of the same Jun. 2005 Director of the Company (Current position) Jun. 2007 Senior Adviser of The Furukawa Electric Co., (Current position) < Important concurrent posts > Director Adviser of THE FURUKAWA RINGYO CO.,LTD | 0 |
| 6 | Toshinori Iwasawa May 8, 1962 | Apr. 1985 Joined IBM Japan Ltd. Mar. 2000 Joined AT&T Global Network Service Japan LLC(AT&T Japan LLC) Apr. 2008 Director of AT&T Japan LLC Mar. 2009 President and Representative Director of AT&T Japan Inc. Sep. 2010 President and Representative Director of IIJ Global Solutions Inc. (Current position) < Important concurrent posts > President and Representative Director of IIJ Global Solutions Inc. | 521 |
| (a) | There is no special interest between the candidates and the Company. |
| (b) | Mr. Junnosuke Furukawa is a candidate for Outside Director. Since he has established a prominent career as a corporate manager and has abundant experience and profound knowledge of management, the Company proposes to appoint him as a candidate for Outside Director to enhance the supervisory functions of management. He is presently an Outside Director of the Company, and his total term of office as an Outside Director will be eight (8) years at the close of this Ordinary General Meeting of Shareholders. The Company, pursuant to the Articles of Incorporation of the Company, entered into a Liability Limitation Agreement (Article 427, Paragraph 1 of the Companies Act) with him which limits the liability provided for in Article 423, Paragraph 1 of the Companies Act to the higher of either 10 million yen or the amount prescribed in Article 427, Paragraph 1 of the Companies Act, provided that he is bona fide and without gross negligence in performing his duties. As the said Liability Limitation Agreement will terminate upon the expiration of his current term of office as an Outside Director, a new Liability Limitation Agreement providing the same is scheduled to be entered into after his assumption of the office of Outside Director. |
| (c) | The Company appoints Mr. Junnosuke Furukawa as our independent Director required to secure by the Tokyo Stock Exchange. If Mr. Junnosuke Furukawa is appointed as our Director, we will continue to appoint him as our independent Director. |
| (d) | If Mr. Koichi Suzuki and Mr. Eijiro Katsu are appointed as our Directors, subject to approval of resolution of the Board of Director’s meeting to be held after this ordinary general meeting of shareholders, Mr. Koichi Suzuki is expected to be appointed as Chairman of the Board and Representative Director of the Company and Mr. Eijiro Katsu is expected to be appointed as President and Representative Director of the Company. |
(e) | If Mr. Toshinori Iwasawa is appointed as our Director, he will become a part-time Director because he is a current President and Representative Director of IIJ Global Solutions Inc. |
Name Date of Birth | Careers & Current Positions in and Outside the Company | Number of Shares Owned |
Chiaki Furuya July 11, 1949 | Apr. 1973 Joined Japan Broadcasting Corporation Jun. 2006 Head of secretary’s office of the same Oct. 2008 Joined the Company Oct. 2009 Managing Director of the Company Apr. 2010 Senior Executive officer, Division Director of Administrative Division of the Company Apr. 2013 Adviser (Current position) | 7,763 |
| Name | Careers |
| Shunichi Kozasa | Jun. 2010 Full-time company auditor of the company (Current position) |
