| Note 1: | This document contains forward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended and Section 21E of the U.S. Securities Exchange Act of 1934, as amended) 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 16, 2014 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. |
| TRANSLATION |
| Eijiro Katsu President and Representative Director Internet Initiative Japan Inc. 2-10-2 Fujimi, Chiyoda-ku, Tokyo, Japan |
1. Date and Time: | 10:00 A.M., Friday, June 26, 2015 |
2. Venue: | Bellesalle Kudan Event Hall |
| 3rd floor, Sumitomo Fudosan Kudan Bldg. |
| 1-8-10 Kudankita, Chiyoda-ku, Tokyo, Japan |
| The venue for this year’s meeting is different from last year. |
| 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 23rd term (from April 1, 2014 to March 31, 2015) |
| 2. | Non-consolidated financial statements for the 23rd term (from April 1, 2014 to March 31, 2015) |
| Item 1: Appropriation of Retained Earnings |
| Item 2: Election of Nine(9) Directors |
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) |
| 20th fiscal Year | 21st fiscal Year | 22nd fiscal Year | 23rd fiscal Year | |
| FY2011 | FY2012 | FY2013 | FY2014 | |
| Revenues | 97,314,605 | 106,248,486 | 114,272,351 | 123,050,115 |
| Operating income | 6,353,483 | 7,752,642 | 5,723,312 | 5,075,238 |
| Net income attributable to IIJ | 3,640,963 | 5,300,654 | 4,442,237 | 3,322,081 |
| Basic net income attributable to IIJ per share | JPY89.82 | JPY130.76 | JPY100.26 | JPY 72.31 |
| Total assets | 73,493,246 | 82,111,266 | 103,866,575 | 108,705,315 |
| Total IIJ shareholders’ equity | 32,688,205 | 37,606,775 | 59,912,185 | 62,504,402 |
| IIJ shareholders’ equity per share | JPY806.38 | JPY927.72 | JPY1,304.17 | JPY 1,360.50 |
| 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. | 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 20th and 21st fiscal year have been calculated respectively, as if the stock split was conducted at the beginning of the 20th fiscal year. |
| 5. | IIJ issued 4,700,000 shares of common stock by way of public offering in July, 2013 and also issued 700,000 shares of common stock by way of third-party allotment in connection with secondary offering of shares by way of over-allotment in August, 2013. As a result of these, the total number of shares issued increased by 5,400,000 shares and total IIJ shareholders’ equity increased by JPY17,271 million. |
| Name of company | Common stock (Unit : thousands) | Ownership | Primary business |
IIJ Innovation Institute Inc. (“IIJ-II”) | JPY75,000 | 100.0% | R&D for the next generation internet |
IIJ Engineering Inc. (“IIJ-EG”) | JPY400,000 | 100.0% | Operation and monitoring of network systems, customer service support and call centers |
IIJ Global Solutions Inc. (“IIJ-GS”) | JPY490,000 | 100.0% | Provision of network services and systems integration |
Trust Networks Inc. (“Trust Networks”) | JPY100,000 | 79.5% | Operation of ATMs and ATMs networks |
Net Chart Japan, Inc. (“Net Chart”) | JPY55,000 | 100.0% | Development and construction of networks, operation and maintenance of networks and sales of network-related equipment |
hi-ho Inc. (“hi-ho”) | JPY240,000 | 100.0% | Provision of Internet connectivity services for consumer |
| RYUKOSHA | JPY10,000 | 100.0% | Provision of human resources outsourcing services for systems operation and service support |
IIJ America Inc. (“IIJ-A”) | USD10,460 | 100.0% | Provision of network services, systems integration and other related services in the U.S. |
IIJ Europe Limited (“IIJ-Europe”) | GBP143 | 100.0% | Provision of network services, systems integration and other related service in Europe |
IIJ Global Solutions Singapore Pte. Ltd. (“IIJ-GS SGP”) | SGD1,895 | (48.9%) 100.0% | Provision of network services, systems integration and other related service in Singapore |
IIJ Global Solutions China Inc. (“IIJ-GS China”) | USD5,950 | (100.0%) 100.0% | Provision of network services, systems integration and other related service 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-EG | Headquarters | Chiyoda-ku, Tokyo |
IIJ-GS | Headquarters | Chiyoda-ku, Tokyo |
| Branches | Osaka-shi, Sapporo-shi , Nagoya-shi and Fukuoka-shi | |
| Trust Networks | Headquarters | Chiyoda-ku, Tokyo |
| Net Chart | Headquarters | Yokohama-shi |
| hi-ho | Headquarters | Chiyoda-ku, Tokyo |
| RYUKOSHA | Headquarters | Chuo-ku, Tokyo |
| IIJ-A | Headquarters | California, the United States |
IIJ-Europe | Headquarters | London, the United Kingdom |
| IIJ-GS SGP | Headquarters | Singapore |
| IIJ-GS China | Headquarters | Shanghai, China |
| Number of employees as of the end of FY2014 | Change from the end of FY2013 |
| 2,835 | +482 |
| Source | Balance (JPY thousands) |
| Mizuho Bank, Ltd. | 2,500,000 |
| Sumitomo Mitsui Banking Corporation | 2,500,000 |
| The Bank of Tokyo-Mitsubishi UFJ, Ltd. | 2,500,000 |
| Mitsubishi UFJ Trust and Banking Corporation | 1,500,000 |
| Name of shareholders | Number of shares held (shares) | Shareholding Ratio |
| Nippon Telegraph and Telephone Corporation | 10,095,000 | 22.0% |
| GOLDMAN, SACHS & CO. REG | 2,279,987 | 5.0% |
| NTT Communications Corporation | 2,040,000 | 4.4% |
| Koichi Suzuki | 1,808,800 | 3.9% |
| ITOCHU Corporation | 1,436,000 | 3.1% |
| MORGAN STANLEY & CO.LLC | 1,412,004 | 3.1% |
| The Dai-ichi Life Insurance Company, Limited | 1,273,000 | 2.8% |
| Japan Trustee Services Bank, Ltd (Trust account) | 1,226,500 | 2.7% |
| THE BANK OF NEW YORK MELLON AS DEPOSITARY BANK FOR DEPOSITARY RECEIPT HOLDERS | 1,110,398 | 2.4% |
| BNY GCM CLIENT ACCOUNT JPRD AC ISG(FE-AC) | 901,659 | 2.0% |
| 1. | Shareholding ratio is calculated by deducting treasury stock from total number of shares issued. |
| 2. | 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. |
| 3. | Kabushiki Kaisha KS Holdings, a wholly owned and controlled by Mr. Koichi Suzuki, is a joint holder of Mr. Koichi Suzuki and the company owned 810,000 shares of common stock of IIJ, representing 1.8 percent of the total, as of March 31, 2015. |
| 4. | Joho Capital, L.L.C. (“Joho”) 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 IIJ as of January 28, 2013, representing 7.5 percent of the total at that point. Since then, we have not recognized any filings by Joho. Their holdings were not verified based on the shareholder record as of March 31, 2015, therefore, Joho and their holdings are not included in the above list. |
| Allotment date | Number of stock acquisition rights outstanding | 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 | 125 | Common Stock 25,000 shares | JPY 259,344 | JPY 1 | From July 15, 2011 to July 14, 2041 |
#2 Stock Acquisition Rights | July 13, 2012 | 119 | Common Stock 23,800 shares | JPY 318,562 | JPY 1 | From July 14, 2012 to July 13, 2042 |
#3 Stock Acquisition Rights | July 11, 2013 | 86 | Common Stock 17,200 shares | JPY 647,000 | JPY 1 | From July 12, 2013 to July 11, 2043 |
#4 Stock Acquisition Rights | July 10, 2014 | 128 | Common Stock 25,600 shares | JPY 422,600 | JPY 1 | From July 11, 2014 to July 10, 2044 |
| 1. | A person granted the stock acquisition rights may exercise his or her rights only within ten 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, as for #1 and #2 Stock Acquisition Rights, number of shares to be issued per stock acquisition right upon exercise of stock acquisition rights were adjusted as follows after the record date. |
| (1) | IIJ’s Stock Acquisition Rights Granted to and Held by IIJ’s Directors or Company Auditors as of the End of FY2014 |
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 |
| #3 Stock Acquisition Rights | 60 | Common Stock 12,000 shares | 7 Directors 60 |
| #4 Stock Acquisition Rights | 88 | Common Stock 17,600 shares | 7 Directors 88 |
| 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 FY2014. |
| 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, as for #1 and #2 Stock Acquisition Rights, number of shares to be issued per stock acquisition right upon exercise of stock acquisition rights were adjusted as follows after the record date. |
| (2) | IIJ’s Stock Acquisition Rights Granted to Employees or Others during FY2014 |
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 | |
| #4 Stock Acquisition Rights | 40 | Common Stock 8,000 shares | 10 Executive Officers 40 |
| (Note) | Except the above, there are no stock acquisition rights granted to IIJ employees, IIJ’s consolidated subsidiary’s directors or employees during FY2014. |
| Position in the Company | Name | Business in charge or important concurrent posts |
| Chairman and Representative Director | Koichi Suzuki | CEO [Important concurrent posts] Director of IIJ-GS President and Representative Director of IIJ-EG Chairman and Representative Director of hi-ho Chairman of IIJ-A President and Representative Director of Internet Multifeed Co. |
| President and Representative Director | Eijiro Katsu | COO [Important concurrent posts] Outside Company Auditor of The Yomiuri Shimbun |
| Senior Managing Director | Hideshi Hojo | Director in charge of Asian Business Development |
| Senior Managing Director | Takeshi Kikuchi | Director in charge of Busines Unit Division Director of Enterprise Business Division 2 |
| Senior Managing Director | Hitoshi Imafuku | Division Director of Enterprise Business Division 1 |
| Managing Director | Takamichi Miyoshi | Director in charge of Strategy Planning Division |
| Managing Director | Akihisa Watai | CFO Division Director of Administrative Division |
| Director | Yasurou Tanahashi | Outside Director of Murata Manufacturing Co., Ltd. Outside Director of Yokogawa Electric Corporation |
| Director | Takashi Hiroi | Senior Vice President, Finance and Accounting of Nippon Telegraph and Telephone Corporation (“NTT”) |
| Director | Junnosuke Furukawa | Senior Advisor of Furukawa Electric Co., Ltd. Director Advisor of Furukawa Ringyo Co.,Ltd. |
| Director | Shingo Oda | Outside Director of IT Holdings Corporation |
| Director | Toshinori Iwasawa | President and Representative Director of IIJ Global Solutions Inc. |
| Full-time Company Auditor | Kazuhiro Ohira | |
| Full-time Company Auditor | Chiaki Furuya | |
| Company Auditor | Masaki Okada | Attorney at law, Partner of Ishii Law Office |
| Company Auditor | Masaaki Koizumi | Japanese Certified Public Accountant, Koizumi CPA office Outside Company Auditor of Tsukui Corporation Outside Company Auditor of K.R.S. Corporation |
| 1. | Business in charge or representatives of other organizations is stated as of March 31, 2015. |
| 2. | Yasurou Tanahashi, Takashi Hiroi, Junnosuke Furukawa and Shingo Oda are outside directors, defined in Item 15, Article 2 of the Companies Act of Japan. |
| 3. | Kazuhiro Ohira, Masaki Okada and Masaaki Koizumi are outside company auditors. |
| 4. | 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. |
| 5. | Masaaki Koizumi, a company auditor, is a Japanese Certified Public Accountant and has extensive expertise in finance and accounting |
| 6. | Relationship between IIJ and those companies that our Directors hold important concurrent posts. |
・NTT is IIJ's major shareholder (holds 10,095,000 shares of IIJ). |
・Other than the above, there is no special relationship between IIJ and the companies where outside directors and corporate auditors hold concurrent positions. |
| Name | Title | Principal position |
| Kazuhiro Tokita | Senior Executive Officer | Division Director of Financial System Business Division |
| Junichi Shimagami | Senior Executive Officer | CTO Division Director of Network Division |
| Masayoshi Tobita | Executive Managing Officer | Division Director of Administrative Division and General Manager of Business Unit Management Division |
| Kiyoshi Ishida | Executive Managing Officer | Division Director of Product Division |
| Naoshi Yoneyama | Executive Managing Officer | Division Director of Technology Unit and General Manager of Corporate Planning Department |
| Makoto Ajisaka | Executive Managing Officer | Division Director of Enterprise Business Division 1, Enterprise Business Division 3 and Strategic Business Division |
| Yoshikazu Yamai | Executive Managing Officer | Division Director of Service Operation Division |
| Yasumitsu Iizuka | Executive Officer | Division Director of Government Public & Educational Organization Business Division |
| Koichi Maruyama | Executive Officer | Division Director of Global Business Division |
| Naoya Kaihara | Executive Officer | Division Director of West Japan Business Division and Director of Kansai Branch |
| Seiji Okita | Executive Officer | Division Director of Solution Division |
| Masakazu Tachikui | Executive Officer | Division Director of Platform Division |
| (Note) | Seiji Okita and Masakazu Tachikui were appointed as Executive Officers of the Company on April 1, 2015. |
| 1. | The amounts of above remunerations include JPY 2,010 thousand for the reserve of accrued company auditors’ retirement benefits. |
| 2. | The amounts of above remunerations include JPY 37,597 thousand as compensation-type stock options granted to full-time inside directors (not including part-time and outside directors) for duties performed during FY2014. |
| 3. | It was resolved that the yearly amount of remuneration, etc. (including bonus) for Directors was 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. |
| Position | Name | Principal Activities |
| Director | Yasurou Tanahashi | Attended 11 of the 12 board of directors meetings held during the fiscal year and made necessary remarks in deliberations. |
| Director | Takashi Hiroi | Attended 11 of the 12 board of directors meetings held during the fiscal year and made necessary remarks in deliberations. |
| Director | Junnosuke Furukawa | Attended all 12 of the board of directors meetings held during the fiscal year and made necessary remarks in deliberations. |
| Director | Shingo Oda | Attended 11 of the 12 board of directors meetings held during the fiscal year and made necessary remarks in deliberations. |
| Company Auditor | Kazuhiro Ohira | Attended all 12 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 18 of the board of company auditors meetings 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 12 board of directors meetings held during the fiscal year and made comments from time to time to clarify the doubt point, and attended 17 of the 18 board of company auditors meetings 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 12 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 18 of the board of company auditors meetings 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 127,800 thousand |
| (Note) | The audit contract between the Company and the accounting auditor does not distinguish between remuneration paid for audits and quarterly reviews, 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. Systems for ensuring the compliance of Directors and employees with the law and articles of incorporation in the execution of their 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 |
| (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. |
| 8. Systems for Directors and Assistants to Report to Auditors, and Other Systems for Reporting to Auditors |
| (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 | 21,093,633 |
| Accounts receivable, net of allowance for doubtful accounts of JPY 54,590 thousand | 22,251,818 |
| Inventories | 1,229,463 |
| Prepaid expenses | 3,691,643 |
| Deferred tax assets – current | 1,547,474 |
| Other current assets, net of allowance for doubtful accounts of JPY720 thousand | 2,272,605 |
| Total current assets | 52,086,636 |
| INVESTMENTS IN EQUITY METHOD INVESTEES | 2,560,557 |
| OTHER INVESTMENTS | 6,660,706 |
| PROPERTY AND EQUIPMENT – Net | 29,370,054 |
| GOODWILL | 6,169,609 |
| OTHER INTANGIBLE ASSETS – Net | 3,941,279 |
| GUARANTEE DEPOSITS | 2,800,201 |
| DEFERRED TAX ASSETS – Noncurrent | 471,087 |
| NET INVESTMENT IN SALES-TYPE LEASES – Noncurrent | 762,159 |
| PREPAID EXPENSES – Noncurrent | 2,914,375 |
| OTHER ASSETS, net of allowance for doubtful accounts of JPY92,935 thousand | 968,652 |
| TOTAL | 108,705,315 |
| CURRENT LIABILITIES: | |
| Short-term borrowings | 9,250,000 |
| Capital lease obligations – current | 3,522,113 |
| Accounts payable – trade | 12,182,908 |
| Accounts payable – other | 1,442,810 |
| Income taxes payable | 499,104 |
| Accrued expenses | 2,968,139 |
| Deferred income – current | 2,143,480 |
| Other current liabilities | 1,732,781 |
| Total current liabilities | 33,741,335 |
| CAPITAL LEASE OBLIGATIONS – Noncurrent | 4,340,421 |
| ACCRUED RETIREMENT AND PENSION COSTS – Noncurrent | 2,792,617 |
| DEFERRED TAX LIABILITIES – Noncurrent | 1,097,650 |
| DEFERRED INCOME – Noncurrent | 2,943,975 |
| OTHER NONCURRENT LIABILITIES | 945,537 |
| Total liabilities | 45,861,535 |
| COMMITMENTS AND CONTINGENCIES | |
| SHAREHOLDERS’ EQUITY: | |
| IIJ stockholders’ equity: | |
| Common stock – authorized, 75,520,000 shares; issued and outstanding, 46,701,000 shares at March 31, 2015 | 25,499,857 |
| Additional paid-in capital | 36,014,128 |
| Accumulated deficit | (556,162) |
| Accumulated other comprehensive income | 1,938,649 |
| Treasury stock – 758,709 shares held by the company at March 31, 2015 | (392,070) |
| Total IIJ shareholders' equity | 62,504,402 |
| NONCONTROLLING INTERESTS | 339,378 |
| Total equity | 62,843,780 |
| TOTAL | 108,705,315 |
| REVENUES: | |
| Network services: | |
| Internet connectivity services (enterprise) | 16,349,785 |
| Internet connectivity services (consumer) | 8,222,015 |
| WAN Services | 24,325,951 |
| Outsourcing services | 20,107,050 |
| Total | 69,005,601 |
| Systems integration | |
| Systems construction | 20,437,326 |
| Systems operation and maintenance | 27,800,132 |
| Total | 48,237,458 |
| Equipment sales | 2,166,928 |
| ATM operation business | 3,640,128 |
| Total revenues | 123,050,115 |
| COST AND EXPENSES: | |
| Cost of network services | 54,932,285 |
| Cost of systems integration | 41,561,621 |
| Cost of equipment sales | 1,932,180 |
| Cost of ATM operation business | 2,551,437 |
| Total cost | 100,977,523 |
| Sales and marketing | 9,188,425 |
| General and administrative | 7,367,600 |
| Research and development | 441,329 |
| Total cost and expenses | 117,974,877 |
| OPERATING INCOME | 5,075,238 |
| OTHER INCOME (EXPENSE): | |
| Dividend income | 63,143 |
| Interest income | 23,111 |
| Interest expense | (238,260) |
| Foreign exchange gains | (5,045) |
| Net gain on sales of other investments | 41,251 |
| Net gain on other investments | (29,117) |
| Other – net | 208,671 |
| Other income (expense) – net | 63,754 |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES | 5,138,992 |
| INCOME TAX EXPENSE | 1,896,865 |
| EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES | 154,626 |
| NET INCOME | 3,396,753 |
| LESS:NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (74,672) |
| NET INCOME ATTRIBUTABLE TO IIJ | 3,322,081 |
Total Equity | IIJ Shareholders’ Equity | |||
Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Common Stock | ||
| BALANCE, MARCH 31, 2014 | 60,180,626 | (2,867,548) | 1,712,786 | 25,497,022 |
| Issuance of common stock upon exercise of stock options | 5,671 | 2,835 | ||
| Stock-based compensation | 49,297 | |||
| Comprehensive income: | ||||
| Net income | 3,396,753 | 3,322,081 | ||
| Other comprehensive income (loss), net of tax | 222,128 | 225,863 | ||
| Payment of dividends | (1,010,695) | (1,010,695) | ||
| BALANCE, MARCH 31, 2015 | 62,843,780 | (556,162) | 1,938,649 | 25,499,857 |
| IIJ Shareholders’ equity | Noncontrolling Interests | ||
Treasury Stock | Additional Paid-in Capital | ||
| BALANCE, MARCH 31, 2014 | (392,070) | 35,961,995 | 268,441 |
| Issuance of common stock upon exercise of stock options | 2,836 | ||
| Stock-based compensation | 49,297 | ||
| Comprehensive income: | |||
| Net income | 74,672 | ||
| Other Comprehensive Income (loss), net of tax | (3,735) | ||
| Payment of dividends | |||
| BALANCE, MARCH 31, 2015 | (392,070) | 36,014,128 | 339,378 |
| - Available-for-sale securities are recorded at fair value as of the end of the fiscal year. (Realized gains or losses are determined on the moving average cost method.). Unrealized gains or losses (net of tax) are recorded in accumulated other comprehensive income of shareholders’ equity. |
| - Nonmarketable equity and debt securities are determined on the cost method. (Realized losses are determined on the moving average cost method.) |
| - Network equipment purchased for resale is stated at the lower of cost, which is determined by the average-cost method, or market. |
| - Work-in-process for development of network systems is stated at the lower of actual production costs, including overhead cost, or market. |
| 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 the 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. |
| Consumption tax is separately recorded. |
| The company applied the consolidated tax declaration. |
| Class of stock | Number of shares as of March 31, 2014 | Increase | Decrease | Number of shares as of March 31, 2015 |
| Common Stock | 46,697,800 | 3,200 | ― | 46,701,000 |
| Resolution | Classes of stock | Total amount of dividends | Dividend per share | Record date | Effective date |
| Ordinary general meeting of shareholders held on June 25, 2014 | Common stock | JPY 505,330 thousand | JPY 11 | March 31, 2014 | June 26, 2014 |
| Board of Directors’ meeting held on November 7, 2014 | Common stock | JPY 505,365 thousand | JPY 11 | September 30, 2014 | December 8, 2014 |
| (ii) Dividends decleared during the year ended March 31, 2015 and to be paid during the next fiscal year. |
| 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 26, 2015 | Common stock | Retained earning | JPY 505,365 thousand | JPY 11 | March 31, 2015 | June 29, 2015 |
| (3) | Class and number of common stock to be acquired by exercising stock acquisition rights outstanding, as of March 31,2015 |
Stock acquisition rights First Series issued on July 14, 2011 | Stock acquisition rights Second Series issued on July 13, 2012 | Stock acquisition rights Second Series issued on July 11, 2013 | |
Class and number of common stock to be acquired | Common stock 25,000 shares | Common stock 23,800 shares | Common stock 17,200 shares |
Stock acquisition rights Fourth Series issued on July 10, 2014 | |||
Class and number of common stock to be acquired | Common stock 25,600 shares |
| (Unit: JPY thousands) |
| Amount recognized in Consolidated Balance Sheet | Fair Value | Differences | |
(1) Cash and cash equivalents | 21,093,633 | 21,093,633 | - |
| (2) Accounts receivable | 22,251,818 | 22,251,818 | - |
| (3) OTHER INVESTMENTS | |||
| Available-for-sale equity securities | 4,314,481 | 4,314,481 | - |
| (4) Short-term borrowings | 9,250,000 | 9,250,000 | - |
(5) Capital lease obligations – current | 3,522,113 | 3,522,113 | - |
(6) Accounts payable – trade | 12,182,908 | 12,182,908 | - |
(7) Accounts payable – other | 1,442,810 | 1,442,810 | - |
(8) Capital lease obligations – noncurrent | 4,340,421 | 4,273,774 | 66,647 |
| 1. Cash and cash equivalents, accounts receivable, current portion of guarantee deposits , 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. |
| 2. Other investments |
| (i) The amount of available-for-sale securities between the book value and the acquisition cost are as follows: |
(Unit: JPY thousands) |
| Acquisition cost | Book value | Difference | ||
Book value > Acquisition cost | Equity securities | 736,975 | 3,265,859 | 2,528,884 |
| Bond | 100,300 | 101,910 | 1,610 | |
| Other | - | - | - | |
| Total | 837,275 | 3,367,769 | 2,530,494 | |
Book value < Acquisition cost | Equity securities | 1,040,826 | 945,711 | (95,115) |
| Bond | - | - | - | |
| Other | 1,002 | 1,001 | (1) | |
| Total | 1,041,828 | 946,712 | (95,116) | |
| Total | 1,879,103 | 4,314,481 | 2,435,378 | |
| (ii) As for available-for-sale securities, proceeds from sales were JPY141,234 thousand, Gross realized gains from sales were JPY35,934 thousand and no realized losses from sales were recorded for the year ended March 31, 2015. |
| The balance of Capital lease obligations-noncurrent was calculated at the net present value of the future receipt amounts. |
| The future lease payments, including interest, as of March 31, 2015 were as follows: |
(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 | 3,656,304 | 2,356,415 | 1,334,395 | 641,375 | 129,179 |
| 4. | Investment in Equity method investee (book value of JPY2,560,557 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 JPY2,346,225 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. | Guarantee deposits (book value of JPY2,800,201 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. |
| Assets | Liabilities | |||||||
| Item | Amount | Item | Amount | |||||
[Current assets] | 35,755,431 | [Current liabilities] | 25,802,340 | |||||
| Cash and bank deposits | 12,505,674 | Accounts payable | 3,336,422 | |||||
| Accounts receivable | 15,664,120 | Short-term borrowings | 9,250,000 | |||||
| Investment in lease | 1,553,699 | Accounts payable – other | 5,331,804 | |||||
| Merchandise | 52,077 | Capital lease obligations – current | 3,303,950 | |||||
| Work in process | 637,195 | Accrued expense | 727,740 | |||||
| Supplies | 525,496 | Accounts payable – fixed assets | 1,384,449 | |||||
| Prepaid expenses | 2,866,053 | Income taxes payable | 411,923 | |||||
| Accounts receivable – other | 1,385,332 | Consumption taxes payable | 786,535 | |||||
| Loans to affiliated companies | 195,192 | Deposits received | 85,562 | |||||
| Deferred tax assets – current | 386,115 | Advance received | 160,465 | |||||
| Other current assets | 64,377 | Deferred income | 969,811 | |||||
| Allowance for doubtful accounts | (79,899) | Other current liabilities | 53,679 | |||||
| [Fixed assets] | 56,929,742 | [Long-term liabilities] | 8,384,044 | |||||
| <Property and equipment> | 15,612,822 | Deferred income – noncurrent | 1,404,885 | |||||
| Land | 532,997 | Capital lease obligations – noncurrent | 3,544,437 | |||||
| Buildings | 511,806 | Asset retirement obligations | 521,106 | |||||
| Leasehold improvements | 3,680,075 | Long-term borrowings from affiliated companies | 39,378 | |||||
| Construction other than buildings | 1,142,148 | Accrued pension and severance cost | 1,794,682 | |||||
Data communication equipment and office equipment | 7,309,996 | Accrued directors’ and company auditors’ retirement benefits | 260,860 | |||||
| Assets under capital leases | 20,619,882 | Deferred tax liabilities – noncurrent | 818,696 | |||||
| Construction in progress | 862,581 | |||||||
| Accumulated depreciation | (19,046,663) | |||||||
| <Intangible assets> | 11,724,740 | Total liabilities | 34,186,384 | |||||
| Goodwill | 1,689,089 | [Shareholders’ equity] | 56,166,846 | |||||
| Customer relationship | 1,465,973 | <Capital stock> | 22,960,636 | |||||
| Telephone rights | 4,764 | <Capital surplus> | 9,704,584 | |||||
| Software | 8,588,587 | Legal capital surplus | 9,681,320 | |||||
| Assets under capital leases | 6,327 | Other capital surplus | 23,264 | |||||
| <Investments and other assets> | 29,592,180 | <Earned surplus> | 23,886,817 | |||||
| Investments in securities | 4,782,512 | Legal retained earnings | 502,473 | |||||
| Money held in trust | 2,427,392 | Other retained earnings | 23,384,344 | |||||
Investments in affiliated companies | 16,534,947 | Reserve for advanced depreciation of fixed assets | 384,711 | |||||
| Guarantee deposits | 2,429,832 | Retained earnings brought forward | 22,999,633 | |||||
| Long-term advances | 793,456 | <Treasury stock> | (385,191) | |||||
| Long-term prepaid expenses | 2,297,420 | [Valuation and translation adjustment] | 2,165,405 | |||||
Claims against insolvencies | 42,804 | Net unrealized gains on securities | 2,165,405 | |||||
| Investment in lease | 36,780 | [Subscription rights to shares] | 166,538 | |||||
| Other investments | 348,636 | Stock acquisition rights | 166,538 | |||||
| Allowance for doubtful accounts | (101,599) | Total Shareholders’ equity | 58,498,789 | |||||
| Total assets | 92,685,173 | Total liabilities and shareholders’ equity | 92,685,173 | |||||
| Item | Amount | |
| [Total revenues] | 90,687,076 | |
| [Total costs of revenues] | 75,679,202 | |
| Gross margin | 15,007,874 | |
| [Total sales and administrative expense] | 12,215,159 | |
| Operating income | 2,792,715 | |
| [Non-operating income] | ||
| Interest income | 9,681 | |
| Dividends income | 929,122 | |
| Commissions received | 26,266 | |
| Royalty charge received | 3,314 | |
| Foreign exchange gain | 42,525 | |
| Gains on investments on anonymous association | 241,347 | |
| Subsidy income | 703,333 | |
| Other non-operating income | 88,905 | 2,044,493 |
| [Non-operating expenses] | ||
| Interest expense | 165,299 | |
| Provision of allowance for doubtful accounts | 46,095 | |
| Other non-operating expenses | 52,751 | 264,145 |
| Ordinary income | 4,573,063 | |
| [Extraordinary income] | ||
| Gains on sales of investments in securities | 41,251 | 41,251 |
| [Extraordinary loss] | ||
| Losses on disposal of fixed assets | 70,269 | |
| Losses on valuation of stocks of affiliates | 100,000 | |
| Loss on valuation of investment securities | 29,117 | |
| Other extraordinary loss | 7,079 | 206,465 |
| Income before income taxes | 4,407,849 | |
| Income taxes -current | 1,359,818 | |
| Income taxes -deferred | (169,754) | |
| Net income | 3,217,785 | |
| Shareholders’ Equity | ||||||||||
Common Stock | Capital Surplus | Earned Surplus | ||||||||
Legal Capital Surplus | Other Capital Surplus | Total Capital Surplus | Legal Surplus | Other Earned Surplus | Total Earned Surplus | |||||
Reserve for Advanced Depreciations of Fixed Assets | Earned Surplus Brought Forward | |||||||||
| Balance, April 1, 2014 | 22,957,801 | 9,678,485 | 23,264 | 9,701,749 | 401,401 | - | 21,438,710 | 21,840,111 | ||
Cumulative effects of changes in accounting policies | - | - | - | - | - | - | 24,221 | 24,221 | ||
Restated balance, April 1, 2014 | 22,957,801 | 9,678,485 | 23,264 | 9,701,749 | 401,401 | - | 21,462,931 | 21,864,332 | ||
| Changes in the term | ||||||||||
Issuance of common stock upon exercise of stock options | 2,835 | 2,835 | - | 2,835 | - | - | - | - | ||
| Payment of dividends | - | - | - | - | - | - | (1,010,695) | (1,010,695) | ||
| Fund for legal surplus | - | - | - | - | 101,072 | - | (101,072) | - | ||
Provision of reserve for advanced depreciation of fixed assets | 384,711 | (569,316) | (184,605) | |||||||
| Net income | - | - | - | - | - | - | 3,217,785 | 3,217,785 | ||
Net changes other than shareholders’ equity | - | - | - | - | - | - | - | - | ||
| Total changes in the term | 2,835 | 2,835 | - | 2,835 | 101,072 | 384,711 | 1,536,702 | 2,022,485 | ||
| Balance, March31, 2015 | 22,960,636 | 9,681,320 | 23,264 | 9,704,584 | 502,473 | 384,711 | 22,999,633 | 23,886,817 | ||
| 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, 2014 | (385,191) | 54,114,470 | 1,757,045 | 117,241 | 55,988,756 | ||
Cumulative effects of changes in accounting policies | - | 24,221 | - | - | 24,221 | ||
Restated balance, April 1, 2014 | (385,191) | 54,138,691 | 1,757,045 | 117,241 | 56,012,977 | ||
| Changes in the Term | |||||||
Issuance of common stock upon exercise of stock options | - | 5,670 | - | - | 5,670 | ||
| Payment of dividends | - | (1,010,695) | - | - | (1,010,695) | ||
| Fund for legal surplus | - | - | - | - | - | ||
Provision of reserve for advanced depreciation of fixed assets | - | (184,605) | - | - | (184,605) | ||
| Net income | - | 3,217,785 | - | - | 3,217,785 | ||
Net changes other than shareholders’ equity | - | - | 408,360 | 49,297 | 457,657 | ||
| Total changes in the term | - | 2,028,155 | 408,360 | 49,297 | 2,485,812 | ||
| Balance, March31, 2015 | (385,191) | 56,166,846 | 2,165,405 | 166,538 | 58,498,789 | ||
| 1. | Notes to Significant Matters Regarding accounting policies of Non-Consolidated Financial Statements |
| 1) Method of attributing the estimated benefit obligation to periods |
| 2) Amortization method of actuarial calculation differences |
| Balance at beginning of the fiscal year: | JPY | 477,901 | thousand | |
| Increase in relation to the acquisition of assets: | JPY | 258,205 | thousand | |
| Decrease in relation to payments for execution of assets retirement obligations: | JPY | (225,500) | thousand | |
| Other increases: | JPY | 10,500 | thousand | |
| Balance at end of the fiscal year: | JPY | 521,106 | thousand |
| Deferred tax assets | ||||
| Impairment loss on investment securities: | JPY | 202,412 | thousand | |
| Accrued directors’ and company auditors’ retirement benefits : | 84,258 | |||
| Accrued pension and severance cost | 579,144 | |||
| Allowance for doubtful accounts | 56,527 | |||
| Impairment loss on investments in affiliated companies: | 1,083,193 | |||
| Loss on disposal of telephone rights: | 50,115 | |||
| Impairment loss of telephone rights: | 19,921 | |||
| Accrued enterprise taxes: | 67,046 | |||
| Deferred revenue: | 65,643 | |||
| Research and development cost: | 24,508 | |||
| Asset retirement obligations: | 168,317 | |||
| Depreciation: | 103,752 | |||
| Stock-based compensation: | 53,792 | |||
| Accrued rent payable: | 239,510 | |||
| Others: | 268,911 | |||
| Subtotal of deferred tax assets: | 3,067,049 | |||
| Valuation allowance: | (1,663,255) | |||
| Total of deferred tax assets: | 1,403,794 | |||
| Deferred tax liabilities: | ||||
| Unrealized gain on other securities: | 1,033,221 | |||
| Customer Relationship: | 474,602 | |||
| Reserve for advanced depreciations of fixed assets: | 184,605 | |||
| Asser retirement obligation: | 142,091 | |||
| Other: | 1,856 | |||
| Total of deferred tax liabilities: | 1,836,375 | |||
| Net amount of deferred tax liabilities: | JPY | 432,581 | thousand | |
Type of related company | Name | Business | Ownership | Relation with related parties | Nature of transaction | Amount of transaction (Thousands of JPY) | Account | Balance as of March 31, 2015 (Thousands of JPY) | |
Collateral offices of directors | Business Relation | ||||||||
| Subsidiary | IIJ-EG | 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 | 8,112,119 (Notes 2-1) | Accounts payable | 102,259 |
Accounts payable - other | 840,728 | ||||||||
Type of related company | Name | Business | Ownership | Relation with related parties | Nature of transaction | Amount of transaction (Thousands of JPY) | Account | Balance as of March 31, 2015 (Thousands of JPY) | |
Collateral offices of directors | Business Relation | ||||||||
Other related company’s subsidiary | NTT Communications Corporation | Telecommunications services | 4.4% (Direct owning) | No | Customer and supplier | Network facilities for the operation of network services and data center facilities | 5,908,836 (Notes 2-2) | Accounts payable Accounts Payable - other | 348,478 543,822 |
| 1. | Consumption tax is excluded from the amounts of transaction and included in the amounts of balance as of March 31, 2015. |
| 2. | Terms and conditions of the above transactions: |
| 1) | 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. |
| 2) | 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. |
| TRANSLATION |
| Certified Copy |
Deloitte Touche Tohmatsu LLC Designated Limited Liability Partner Engagement Partner Certified Public Accountant: | ||
| Shuko Shimoe | (seal) | |
Designated Limited Liability Partner Engagement Partner Certified Public Accountant: | ||
| Keiji Nakae | (seal) | |
| TRANSLATION |
| Certified Copy |
Deloitte Touche Tohmatsu LLC Designated Limited Liability Partner Engagement Partner Certified Public Accountant: | ||
| Shuko Shimoe | (seal) | |
Designated Limited Liability Partner Engagement Partner Certified Public Accountant: | ||
| Keiji Nakae | (seal) | |
| TRANSLATION |
| Certified Copy |
| 1. | Auditing Methodology Employed by Company Auditors and the Board of Company Auditors and Details Thereof |
| 2. | Audit Results |
| 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. |
| Note: | Full-time Company Auditor, Kazuhiro Ohira, and two Company Auditors, Masaki Okada and Masaaki Koizumi, are outside auditors as provided in Article 2, Item 16, and Article 335, Paragraph 3 of the Companies Act. |
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 Apr. 1994 Jun. 2013 | Director with the establishment of the Company President and Representative Director of the Company Chairman of the Board and Representative Director of the Company (Current position) | 1,808,800 |
< Important concurrent posts > Director of the IIJ Global Solutions Inc. President and Representative Director of IIJ Engineering Inc. Chairman of the Board and Representative Director of hi-ho Inc. Chairman of the Board of IIJ America Inc. President and Representative Director of Internet Multifeed Co. | ||||
| 2 | Eijiro Katsu June 19, 1950 | Apr.1975 Jul. 2007 Jul. 2008 Jul. 2009 Jul. 2010 Aug.2012 Nov. 2012 Jun. 2013 | Joined Ministry of Finance Director-General of the Financial Bureau, MOF Deputy Vice Minister, MOF Director-General, Budget Bureau, MOF Vice Minister of Finance Retired from Minister of Finance Joined IIJ as Special Advisor President and Representative Director of the Company (Current position) | 7,900 |
< Important concurrent posts > Outside Auditor of The Yomiuri Shimbun | ||||
| 3 | Hideshi Hojo December 22, 1957 | Apr. 1980 Apr. 1996 Feb. 1998 Jun. 2000 Jun. 2002 Jun. 2006 Apr. 2010 Apr. 2014 | Joined Itochu Data System Corporation Joined the Company Division Director of Sales Department of the Company Director of the Company Managing Director of the Company Senior Managing Director of the Company (Current position) Division Director of Enterprise Business Division 1, Business Unit Director in charge of Asian Business Development of the Company (Current position) | 24,300 |
| 4 | Tadashi Kawashima February 27, 1963 | Apr. 1987 Jul. 1988 Jun. 2011 Jun. 2013 | Joined Nippon Telegraph and Telephone Corporation Joined NTT DATA Communications Systems Corporation (Currently NTT DATA Corporation) Head of Public Division 2, First Public Administration Systems Sector of the same Senior Specialist of Public and Financial IT Service Company of the same President and Representative Director of NTT Data Tokai Corporation | 0 |
| 5 | Junichi Shimagami April 17, 1967 | Apr. 1990 Sep. 1996 Apr. 2007 Jun. 2007 Apr. 2010 Apr. 2015 | Joined Nomura Research Institute, Ltd. Joined the Company Division Director of Network Service Division of the Company Director of the Company Executive Managing Officer of the Company Senior Executive Officer, Division Director of Network Division of the Company (Current position) | 8,400 |
Candidate No. | Name Date of Birth | Careers & Current Positions in and Outside the Company | Number of Shares Owned | ||
| 6 | Junnosuke Furukawa December 5,1935 | Apr. 1959 Jun. 1995 Jun. 2003 Jun. 2004 Jun. 2005 Jun. 2007 | Joined The Furukawa Electric Co., Ltd. President of the same Chairman of the Board and Representative Director of the same Director Advisor of the same Director of the Company (Current position) Senior Advisor of The Furukawa Electric Co., (Current position) | 0 | |
< Important concurrent posts > Director Advisor of THE FURUKAWA RINGYO CO.,LTD | |||||
| 7 | Toshinori Iwasawa May 8, 1962 | Apr. 1985 Mar. 2000 Mar. 2009 Sep. 2010 Jun. 2013 | Joined IBM Japan Ltd. Joined AT&T Global Network Service Japan LLC(Currently AT&T Japan LLC) President and Representative Director of AT&T Japan Inc. President and Representative Director of IIJ Global Solutions Inc. (Current position) Director of the Company (Current position) | 700 | |
| 8 | Tadashi Okamura July 26, 1938 | Apr. 1962 Jun. 2000 Jun. 2003 Jun. 2005 Jun. 2009 | Joined Toshiba Corporation Director, President and Chief Executive Officer of the same Director, Representative Executive Officer, President and Chief Executive Officer of the same Director, Chairman of the Board of the same Advisor to the Board of the same (Current position) | 0 | |
< Important concurrent posts > Board Director, IHI Corporation | |||||
| 9 | Hiroki Watanabe March 15, 1953 | Apr. 1976 Jun. 2005 Jun. 2008 Jun. 2011 Jun. 2012 | Joined Nippon Telegraph and Telephone Public Corporation Member of the Board, Senior Vice President, Executive Manager of Corporate Strategy Planning Department of Nippon Telegraph and Telephone East Corporation Member of the Board, Senior Vice President of Corporate Strategy Planning Department of Nippon Telegraph and Telephone Corporation Executive Vice President, Senior Vice President of Corporate Strategy Planning Department of the same Representative Director and Senior Executive Vice President of the same | 0 | |
< Important concurrent posts > Chairman of The Japan Telecommunications Welfare Association | |||||
| (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 ten (10) 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. The Company appoints him as our independent Director required to secure by the Tokyo Stock Exchange. If he is appointed as our Director, we will continue to appoint him as our independent Director. |
| (c) | Mr. Tadashi Okamura 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. The Company, pursuant to the Articles of Incorporation of the Company, plans to enter 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 after his assumption of the office of Outside Director. If he is appointed as our Director, we will appoint him as our independent Director required to secure by the Tokyo Stock Exchange. |
| (d) | Mr. Hiroki Watanabe is a candidate for Outside Director. Since he has abundant experience in information technology and telecommunication business, the Company proposes to appoint him as a candidate for Outside Director to enhance the supervisory functions of management. The Company, pursuant to the Articles of Incorporation of the Company, plans to enter 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 after his assumption of the office of Outside Director. |
