FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For June 12, 2006
Commission File Number: 0-30204
-------
Internet Initiative Japan Inc.
(Translation of registrant's name into English)
Jinbocho Mitsui Bldg. 1-105 Kanda Jinbo-cho, Chiyoda-ku, Tokyo 101-0051, Japan
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F:
Form 20-F [ X ] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1): ____
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of
a Form 6-K if submitted solely to provide an attached annual report to security
holders.
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7): ____
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of
a Form 6-K if submitted to furnish a report or other document that the
registrant foreign private issuer must furnish and make public under the laws of
the jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [ X ]
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_______________
EXHIBIT INDEX
Exhibit Date Description of Exhibit
------- ---- ----------------------
1 2006/06/12 Convocation Notice of the 14th Ordinary General
Meeting of Shareholders of Internet Initiative
Japan Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Internet Initiative Japan Inc.
Date: June 12, 2006 /s/ Koichi Suzuki
---------------------------------------------
Koichi Suzuki
President, Chief Executive Officer and
Representative Director
EXHIBIT 1
---------
Convocation Notice of the 14th
Ordinary General Meeting of Shareholders
of
Internet Initiative Japan Inc.
--------------------------------------------------------------------------------
This document is the English translation of the "Convocation notice of the 14th
ordinary general meeting of shareholders"("Dai ju-yonkai teiji kabunushi sokai
shoshu gotsuchi") of Internet Initiative Japan Inc. ("IIJ" or "the Company") to
be held on June 28, 2006.
CAUTIONARY NOTES
----------------
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
August 3, 2005 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
Corporation Law of Japan. Financial Statements have been prepared in
accordance with generally accepted accounting principles in Japan, which
differ in certain respects from generally accepted accounting principles in
the United States. Also, Financial Statements included in this document are
non-consolidated base which differ from consolidated ones 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 to exercise its
voting right represented by the shares underlying their ADRs but they may
only provide their instructions to The Bank of New York. Otherwise, they
are not entitled to exercise any voting right unless they cancel their ADRs
and withdraw the shares. This means they may not be able to exercise any
voting right for IIJ and attend the ordinary general meeting of
shareholders of IIJ.
1
June 12, 2006
TO OUR SHAREHOLDERS:
Koichi Suzuki
Representative Director
Internet Initiative Japan Inc.
1-105, Kanda Jinbo-cho, Chiyoda-ku,
Tokyo, Japan
CONVOCATION NOTICE OF
THE 14TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are hereby requested to attend the 14th ordinary general meeting of
shareholders of Internet Initiative Japan Inc. ("IIJ" or "the Company",) which
is to be held as stated below.
In the event you are unable to attend the meeting, after reviewing the
referential documents below, you may exercise your voting rights by indicating
approval or disapproval on the voting form attached hereto and sending it or by
accessing the voting web site (Japanese only) containing the voting form. The
voting form through the Internet must be received by 5:30 p.m., Tuesday, June
27, 2006 at the latest.
1. Date and time: 10:30 a.m., June 28, 2006 (Wednesday)
2. Place: KKR Hotel Tokyo
11th floor, Room Kujaku
1-4-1, Otemachi, Chiyoda-ku, Tokyo, Japan
3. Agenda of the meeting:
Subjects to be reported:
Reports on the business report, balance sheet and income statement of the
14th fiscal year (from April 1, 2005 to March 31, 2006)
Subjects to be resolved:
Item 1: Approval of the proposal for appropriation of loss for the 14th
fiscal year
Item 2: Reduction of additional paid-in capital
Item 3: Reduction of common stock
Item 4: Amendments to the Articles of Incorporation
Item 5: Election of six directors
Item 6: Election of a statutory auditor
Item 7: Granting of retirement allowance to a retiring statutory 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)
2
(Attachment)
Business Report for the 14th Fiscal Year
(For April 1, 2005 to March 31, 2006)
(Non-consolidated, Japan GAAP)
1. Summary of Business
(1) Progress and Results of Business
General Business Environment
During the fiscal year ended March 31, 2006, Japan's economy saw
improved corporate earnings with increased capital investment, and a
gentle rise in consumer spending, and while we must be cautious of the
effects of rising crude oil prices, the economic recovery is generally
continuing in Japan.
In the data communications markets in which the IIJ group ralates,
network usage increases dramatically as broadband networks continued to
spread. Bolstered by these trends and the improving economy, companies are
utilizing effectively network systems including the Internet in their
mission critical business network systems, therefore, our understanding is
that the demand for reliable network services is continuing to grow. IP
technology seems to be becoming one of the important elements in the
social infrastructure of the future, and while telecommunications and
broadcasting are expected to convert to IP-based technology in the near
future, it has also expose many new challenges inherent to the Internet,
such as how to maintain security and deal with the increased traffic.
Business Conditions
In 1992, the Company was established as a pioneer in the Internet
service provider industry in Japan, and ever since, it has been using its
advanced Internet-related technological expertise to develop and provide
reliable network services and products. We provide services to
approximately 6,500 medium- and large-size companies, and we are gaining
market recognition as one of leading Internet providers as our business
evolves. As network systems become more diverse, the needs for both
outsourcing and systems integration are growing amongst our customers, and
during this fiscal year, backed by a good economic environment, we have
begun actively providing high value-added network services and products,
starting with network solutions and systems integration services. The
network solutions lineup including many new services such as IIJ
Quarantine Network Solution, IIJ DDoS Solution Service, and IIJ
Internet-LAN Service, responds comprehensively customers' demands for a
high reliability.
Business Results for IIJ and the IIJ Group
During the fiscal year ended March 31, 2006, the Company continued to
focus sales efforts in outsourcing and systems integration services from
the previous year. The Company also developed Internet-based VPN services
for companies with multiple locations, using the IIJ-developed router
"SEIL" and the SEIL Management Framework (SMF)--a centralized management
platform that automatically configures SEIL routers--to provide total
network systems design, construction, and operations. The Company began
providing SMF as an OEM service to multiple telecommunications carriers,
and a patent was obtained for this proprietary technology. In addition,
the number of large-scale network systems construction and operation
projects increased, as did the number of consulting projects.
On the costs and expenses, percentage of costs remained the same level
as the previous year, with the cost of revenues increasing due to the
increased cost of systems integration services, and SG&A increasing due to
the increased personnel expenses and advertising expenses.
As a result of these activities, IIJ's non-consolidated operating
results for the fiscal year ended March 31, 2006, amounted to total
revenues of 37,457,565 thousand yen (11.1% increase YoY), operating income
of 845,581 thousand yen (32.5% increase YoY), and ordinary income of
737,161 thousand yen (72.4% increase YoY), the Company increased both in
sales and profit. There was net income of 4,231,131 thousand yen (57.0%
increase YoY) due in part to gain on sales of investments in securities.
The IIJ group's consolidated operating results for the fiscal year
ended March 31, 2006, revenues of 49,812,584 thousand yen (19.4% increase
YoY), operating income of 2,411,144 thousand yen (93.3% increase YoY) and
income before income taxes and net income amounted to 5,378,559 thousand
yen (70.8% increase YoY) and 4,753,570 thousand yen (63.6% increase YoY ),
respectively.
The IIJ Group Reorganization
The Company is offering total network solution services to our
customers as a unified group. In order to strengthen its capacity to
provide solutions and streamline group management, the Company acquired
IIJ Media Communications Inc. ("IIJ-MC") (part of IIJ-MC's business was
acquired by IIJ's subsidiary, IIJ Technology Inc. ("IIJ-Tech") in October
2005. The Company also acquired equity-method affiliate Asia Internet
Holding Co., Ltd.
3
In addition, the Company and Konami Corporation("Konami") established
a joint venture company in February 2006, Internet Revolution Inc. to
manage a comprehensive portal site, which includes online games, and made
it an equity-method affiliate company of IIJ (Konami's subsidiary).
Corporate Governance
The Company is aware of the importance of strengthening and enhancing
substantial corporate governance to continue maximizing corporate value
and to fulfill our mission to support and operate the Internet as a vital
element of social infrastructure. The Company's ADRs have been listed on
the NASDAQ National Market, and as such the Company must comply with the
Sarbanes-Oxley Act ("SOX Act") of 2002. The Company has appointed outside
directors and auditors, and has strengthened management oversight function
by strengthening the authority of the board of statutory auditors. Also
based on requirements of the SOX Act, CEO and CFO of the Company to submit
certifications as to the accuracy of the annual report on the Form 20-F to
the US SEC, including financial statements in US GAAP, the Company has
appointed a financial expert to the board of statutory auditors; it has
the board of statutory auditors oversee the appointment of the auditors,
it adopted a code of ethics; and it operates an internal reporting system
by the board of statutory auditors. The Company is preparing for
establishment of a new internal control system to be audited from the
fiscal year ending March 2007.
(2) Capital Investment
The Company's capital investment is mainly for purchases of
network equipment for operating highly reliable network systems. The
Company's general strategy is to lease non-current assets rather than own
them. In this fiscal year, the Company signed new lease agreements for
2,317 million yen worth of capital equipment, primarily routers, servers,
and other networking equipment. Capital spending also included cost for
the development of back-office systems. The total capital investment
during this fiscal year was 687 million yen.
(3) Financing
The Company listed its shares on the TSE Mothers market in December
2005, issued of 12,500 shares anew by public offering and raised 6,137
million yen (The issue price per share was 490,955 yen).
(4) Issues Facing the Company
Though the Company is in a favorable market environment and its
management results are improving, with further market opportunities in the
network development by taking advantage of increasing network utilized by
corporations and government and other public offices, the Company is aware
that it is important to bolster the business foundation of the Company and
the IIJ group affiliates by continuing to provide highly reliable and
competitive services. In the coming fiscal year, the Company aims to
continue to increase revenues and improve earnings by actively focusing on
R&D, providing new services, expanding business tie-ups through strategic
investments, and strengthening corporate governance.
The Company is also aware of the necessity to acquire and train
competent engineers and sales persons to support this continuous growth,
and to this end the Company is focusing on the employment and training of
new college graduates. For new graduates, the Company hired 29 graduates
during this fiscal year, and there are 49 new graduates joining the Company
in April 2006.
We sincerely hope that we can count on further support and
encouragement from our shareholders.
(5) Operating results and changes in properties
(Thousand Yen)
------------------------------------ -------------------- -------------------- ------------------- -------------------
11th Fiscal Year 12th Fiscal Year 13th Fiscal Year 14th Fiscal Year
------------------------------------ -------------------- -------------------- ------------------- -------------------
FY 2002 FY 2003 FY 2004 FY 2005
------------------------------------ -------------------- -------------------- ------------------- -------------------
Total revenues 34,188,460 31,198,882 33,711,448 37,457,565
------------------------------------ -------------------- -------------------- ------------------- -------------------
Ordinary income (loss) (2,272,580) (1,160,249) 427,534 737,161
------------------------------------ -------------------- -------------------- ------------------- -------------------
Net income (loss) (13,765,686) (11,119,956) 2,695,582 4,231,131
------------------------------------ -------------------- -------------------- ------------------- -------------------
Net income (loss) per share (612,352.62) (350,136.34) 70,270.65 21,597.37
yen yen yen yen
------------------------------------ -------------------- -------------------- ------------------- -------------------
Total assets 29,930,475 33,487,342 27,421,362 36,293,548
------------------------------------ -------------------- -------------------- ------------------- -------------------
Total shareholders' equity (452,748) 4,922,498 9,141,147 18,222,867
------------------------------------ -------------------- -------------------- ------------------- -------------------
Total shareholders' equity per (20,140.05) 128,323.72 238,298.93 89,196.61
share yen yen yen yen
------------------------------------ -------------------- -------------------- ------------------- -------------------
4
(Notes)
(a) Total shareholders' equity per share are calculated based on the
number of shares outstanding as of the balance sheet dates. Net income
(loss) per share is calculated based on the average number of shares
outstanding during the fiscal year.
(b) The significant amount of net losses in the 11th fiscal year and 12th
fiscal year stemmed mainly from impairment losses on investment in and
deposits for, and loans to Crosswave Communications Inc. (11th fiscal
year: 11,171,154 thousand yen, 12th fiscal year: 10,907,677 thousand
yen), which is formerly an equity-method investee of IIJ.
(c) During the 14th fiscal year, a 1 to 5 stock split for common stock has
been made on October 11, 2005. As for the calculation of the average
number of outstanding shares, per share data is calculated by deeming
that the stock split was conducted at the beginning of the fiscal year
ended March 31, 2006, and the past per share data of the previous
financial years are not adjusted retroactively.
(d) The detailed descriptions of the business for the 14th fiscal year are
as set forth in "(1) Progress and Results of Business" and "(3)
Financing".
2. Summary of the Company (as of March 31, 2006)
(1) Main businesses
To provide Internet connectivity services, outsourcing services related to
network solutions, systems integration and equipment sales.
(2) Shares
1. Number of total shares authorized to be issued: 377,600 shares
2. Number of total shares outstanding: 204,300 shares
(Notes)
(a) A 1 to 5 stock split for common stock was made on October 11, 2005
which resulted in the increase of the number of the total shares
outstanding by 153,440.
(b) Issuance of new shares by public offering was made on the paymanet
date set on December 1, 2005 which resulted in the increase of the
number of the total shares outstanding by 12,500.
3. Number of shareholders at the end of this fiscal year: 5,458
4. Major shareholders:
------------------------------------------------------------- ------------------------------- ---------------------------
Shareholder name Investment in the Company Investment by the Company
in each shareholder
------------------------------------------------------------- ------------------------------- ---------------------------
Number of Share Number of Share
shares holding shares holding
held ratio held ratio
------------------------------------------------------------- ------------------- ----------- --------------- -----------
Nippon Telegraph and Telephone Corporation 50,475 shares 24.71% - -
------------------------------------------------------------- ------------------- ----------- --------------- -----------
Hero and Company(note) 40,786 shares 19.96% - -
------------------------------------------------------------- ------------------- ----------- --------------- -----------
Koichi Suzuki 12,515 shares 6.13% - -
------------------------------------------------------------- ------------------- ----------- --------------- -----------
Itochu Corporation 10,430 shares 5.11% - -
------------------------------------------------------------- ------------------- ----------- --------------- -----------
NTT Communications Corporation 10,200 shares 4.99% - -
------------------------------------------------------------- ------------------- ----------- --------------- -----------
Sumitomo Corporation 8,559 shares 4.19% - -
------------------------------------------------------------- ------------------- ----------- --------------- -----------
The Dai-ichi Mutual Life Insurance Company 6,365 shares 3.12% - -
------------------------------------------------------------- ------------------- ----------- --------------- -----------
Mizuho Corporate Bank, Ltd. 3,560 shares 1.74% - -
------------------------------------------------------------- ------------------- ----------- --------------- -----------
The Bank of Tokyo-Mitsubishi UFJ, Ltd. 3,430 shares 1.68% - -
------------------------------------------------------------- ------------------- ----------- --------------- -----------
Sumitomo Mitsui Banking Corporation 3,030 shares 1.48% - -
------------------------------------------------------------- ------------------- ----------- --------------- -----------
(Note) Hero and Company is the nominee of The Bank of New York, which is the
depositary of IIJ's ADRs, and the number of shares held by Hero and
Company is equivalent to the number of ADRs outstanding.
(3) Stock Acquisition Rights
Stock options which we have issued pursuant to Article 280-19, Paragraph 1
of the former Commercial Code are described in notes to the balance sheet.
(4) Employees
------------------------- -------------------------- ------------------------------- ------------------------------------
Category Number of employees Average age Average years of service
------------------------- -------------------------- ------------------------------- ------------------------------------
Male 404 33.4 5.0
------------------------- -------------------------- ------------------------------- ------------------------------------
Female 109 32.8 4.6
------------------------- -------------------------- ------------------------------- ------------------------------------
Total or average 513 33.3 4.9
------------------------- -------------------------- ------------------------------- ------------------------------------
5
(Note) The above figures include employees and contracted employees, do
not include staff members on loan from other companies.
(5) Business combination
(a) Significant subsidiaries
---------------------------------- ---------------------- ------------------- --------------------------------------------
Name of company Capital Share holding Primary business
(thousand yen) ratio
---------------------------------- ---------------------- ------------------- --------------------------------------------
IIJ Technology Inc. 2,261,750 72.1% Design, development, construction and
operation and maintenance of systems
---------------------------------- ---------------------- ------------------- --------------------------------------------
IIJ America Inc. USD2,530,000.00 97.6% Build of backbone networks and Internet
connectivity services in the U.S.
---------------------------------- ---------------------- ------------------- --------------------------------------------
Net Care, Inc. 1,000,000 57.0% Network operation, customer service
support and call center
---------------------------------- ---------------------- ------------------- --------------------------------------------
IIJ Financial Systems Inc. 50,000 72.1% Systems integration and outsourcing
service to securities firms
---------------------------------- ---------------------- ------------------- --------------------------------------------
(Note) The shareholding ratio in IIJ America Inc. includes indirectly owned
shares. The shareholding ratio in IIJ Financial systems Inc. entirely
consists of indirectly owed shares.
(b) History of business combination
In October 2005, IIJ Media Communications Inc.("IIJ-MC"), IIJ's former
significant subsidiary, was merged into IIJ after a portion of IIJ-MC's systems
integration business was transferred to IIJ Technology Inc.("IIJ-Tech").
IIJ-Tech issued 1,235 shares of common stock to IIJ-MC as consideration for
IIJ-MC's business and IIJ purchased those shares in this merger. As a result of
these transactions, IIJ's shareholding ratio in IIJ-Tech increased to 72.1% from
69.0%. Due to this increase, IIJ's shareholding ratio in IIJ America
Inc.(including indirectly owned shares) increased to 97.6% from 97.3%.
IIJ's shareholding ratio in Net Care Inc. ("Net Care") increased to 57.0% from
52.5% due to the transfer shares from an existing shareholder of Net Care in
August 2005.
(c) Results of business combination
For the fiscal year ended March 31, 2006, the number of consolidated
subsidiaries was four and the number of equity-method investees was four.
According to the consolidated financial statements recorded in accordance with
generally accepted accounting principales in the United States total revenue was
49,812,584 thousand yen, an increase of 19.4% from the previous year; operating
income 2,411,144 thousand yen, an increase of 93.3% from the previous year;
income before income tax expense 5,378,559 thousand yen, an increase of 70.8%
from the previous year; and net income 4,753,570 thousand yen, an increase of
63.6% from the previous year.
(d) Other significant results of business combination
Since Nippon Telegraph and Telephone Corporation ("NTT") owns 29.7% of our
voting rights (including those owned indirectly), we are an equity-method
investee of NTT.
(6) Main sources of borrowings
----------------------------------------------------- -------------------------------- ---------------------------------
Number of the company's shares
Outstanding borrowings and equity stakes held by
Source (Thousands of Yen) sources
----------------------------------------------------- -------------------------------- ---------------------------------
Number of shares Share
held holding ratio
----------------------------------------------------- -------------------------------- ------------------ --------------
The Bank of Tokyo-Mitsubishi UFJ, Ltd. 2,350,000 3,430 shares 1.68%
----------------------------------------------------- -------------------------------- ------------------ --------------
Mizuho Corporate Bank, Ltd. 1,700,000 3,560 shares 1.74%
----------------------------------------------------- -------------------------------- ------------------ --------------
Sumitomo Mitsui Banking Corporation 1,110,000 3,030 shares 1.48%
----------------------------------------------------- -------------------------------- ------------------ --------------
Mitsubishi UFJ Trust and Banking Corporation 495,000 45 shares 0.02%
----------------------------------------------------- -------------------------------- ------------------ --------------
(7) Main offices
------------------------------- --------------------------------------- --------------------------------------------------
Name Address Functions
------------------------------- --------------------------------------- --------------------------------------------------
Head office Chiyoda-ku, Tokyo Head office functions, supervision of Kanto
region
------------------------------- --------------------------------------- --------------------------------------------------
Kansai Branch Office Osaka-shi, Osaka-fu Supervision of Kansai region
------------------------------- --------------------------------------- --------------------------------------------------
Nagoya Branch Office Nagoya-shi, Aichi Prefecture Supervision of Tokai region
------------------------------- --------------------------------------- --------------------------------------------------
Sapporo Branch Sapporo-shi, Hokkaido Supervision of Hokkaido region
------------------------------- --------------------------------------- --------------------------------------------------
Tohoku Branch Sendai-shi, Miyagi Prefecture Supervision of Chugoku and Shikoku region
------------------------------- --------------------------------------- --------------------------------------------------
Hokuriku Branch Toyama-shi, Toyama Prefecture Supervision of Hokuriku region
------------------------------- --------------------------------------- --------------------------------------------------
Chushikoku Branch Hiroshima-shi, Hiroshima Prefecture Supervision of Chugoku and Shikoku region
------------------------------- --------------------------------------- --------------------------------------------------
Kyushu Branch Fukuoka-shi, Fukuoka Prefecture Supervision of Kyushu region
------------------------------- --------------------------------------- --------------------------------------------------
Toyota Branch Toyota-shi, Aichi Prefecture Sales Office of Toyota region
------------------------------- --------------------------------------- --------------------------------------------------
Okinawa Branch Naha-shi, Okinawa Prefecture Sales Office of Okinawa region
------------------------------- --------------------------------------- --------------------------------------------------
6
(8) Directors and statutory auditors
----------------------------------------- --------------------------- ---------------------------------------------------
Position in the company Name Assignment or main occupation
----------------------------------------- --------------------------- ---------------------------------------------------
President Koichi Suzuki CEO
----------------------------------------- --------------------------- ---------------------------------------------------
Executive Vice President Toshiya Asaba Division Director of Solution Department
----------------------------------------- --------------------------- ---------------------------------------------------
Executive Vice President Fukuzo Inoue Division Director of Administrative Department
----------------------------------------- --------------------------- ---------------------------------------------------
Managing Director Hideshi Hojo Division Director of Sales Department
----------------------------------------- --------------------------- ---------------------------------------------------
Director Takamichi Miyoshi General Manager of Strategy Planning Division
----------------------------------------- --------------------------- ---------------------------------------------------
Director Akihisa Watai CFO and Division Director of Finance Division
----------------------------------------- --------------------------- ---------------------------------------------------
Director Hiroyuki Hisashima Division Director of Technology Department
----------------------------------------- --------------------------- ---------------------------------------------------
Director Kazuhiro Tokita Deputy Division Director of Sales Department
----------------------------------------- --------------------------- ---------------------------------------------------
Director Yasurou Tanahashi Chairman and Representative Director of NS
Solutions Corporation
----------------------------------------- --------------------------- ---------------------------------------------------
Director Takashi Hiroi Senior Manager of Corporate Management Strategy
Division of Nippon Telegraph and Telephone
Corporation
----------------------------------------- --------------------------- ---------------------------------------------------
Director Yoshifumi Nishikawa President of Japan Post Corporation
----------------------------------------- --------------------------- ---------------------------------------------------
Director Junnosuke Furukawa Senior Adviser of The Furukawa Electric Co. ,LTD
----------------------------------------- --------------------------- ---------------------------------------------------
Standing Statutory Auditor Hideki Matsushita
----------------------------------------- --------------------------- ---------------------------------------------------
Statutory Auditor Masaki Okada Attorney at law
----------------------------------------- --------------------------- ---------------------------------------------------
Statutory Auditor Masaaki Koizumi Japanese Certified Public Accountant
----------------------------------------- --------------------------- ---------------------------------------------------
Statutory Auditor Hirofumi Takahashi Standing statutory auditor of IIJ Technology Inc.
----------------------------------------- --------------------------- ---------------------------------------------------
(Notes)
(a) Directors and statutory auditors who assumed or left offices during the
year under review are as follows:
Assumption of office: June 29, 2005
Director Hiroyuki Hisashima
Director Kazuhiro Tokita
Director Yoshifumi Nishikawa
Director Junnosuke Furukawa
Statutory Auditor Hirofumi Takahashi
Retirement of Office: June 29, 2005
Director Kazumasa Utashiro
(b) Yasurou Tanahashi, Takashi Hiroi, Yoshifumi Nishikawa, and Junnosuke
Furukawa are outside directors pursuant to Article 188, Paragraph 2,
Item 7-2 of Commercial Code.
(c) Masaki Okada and Masaaki Koizumi are outside statutory auditors pursuant
to Article 18, Paragraph 1 of the Law for Special Exceptions to
Commercial Code concerning Audit, Etc. of Kabushiki Kaisha.
(9)The compensation and other fees paid for services performed to directors and
statutory auditors are as follows:
------------------------------ --------------------------- --------------------------- ----------------------------
Classification Directors Statutory auditors Total
------------------------------ --------------------------- --------------------------- ----------------------------
Number Amount Number Amount Number Amount
------------------------------ --------- ----------------- --------- ----------------- --------- ------------------
Compensation based on the
Articles of Incorporation or 12 164,117 4 18,460 16 182,577
the resolution of the thousand yen thousand yen thousand yen
general meeting of
shareholders
------------------------------ --------- ----------------- --------- ----------------- --------- ------------------
(Notes)
(a) The limit on compensation to directors as approved by shareholders at
the ordinary general meeting of shareholders on June 15, 1999 is 300,000
thousand yen a year in total.
(b) The limit on compensation to statutory auditors as approved by
shareholders at the ordinary general meeting of shareholders on June 16,
1995 is 100,000 thousand yen a year in total.
3. Significant Event, Which Occurred after the Company's Balance Sheet
Date, regarding the Conditions of the Company (Subsequent Event)
On April 27, 2006, the board of directors of the Company adopted a resolution to
purchase 450 shares of Net Care, Inc., our subsidiary, from existing
shareholders and completed the payment on April 28, 2006. As a result of this
transaction, the percentage of voting rights increased 59.3% from 57.0%. The
price per share was 27,559 thousand yen.
The aforementioned unit figures are rounded
7
Balance Sheet
As of March 31, 2006
------------------------------------------------------------------------------------------------------------------------
Assets Liabilities
------------------------------------------------------------------------------------------------------------------------
Item Amount Item Amount
------------------------------------------------------------------------------------------------------------------------
Thousand yen Thousand yen
[Current assets] [20,648,836] [Current liabilities] [14,865,330]
Cash and bank deposits 9,216,637 Accounts payable 5,841,913
Accounts receivable 10,155,602 Short-term borrowings 3,655,000
Products 116,158 Long-term borrowings -current 1,750,000
portion
Work in process 320,435 Accounts payable - other 1,887,470
Store 50,958 Accrued income taxes 86,659
Prepaid expenses 326,026 Accrued consumption tax 21,762
Accounts receivable - other 19,236 Advance received 389,666
Short-term loans receivable 86,723 Deposits received 1,048,137
Deferred income taxes 419,840 Advance received profit 132,802
Other current assets 3,331 Other current liabilities 51,921
Allowance for doubtful accounts -66,110 [Long-term liabilities] [3,205,351]
[Non-current assets] [15,573,464] Long-term borrowings 250,000
Long-term advance received profit 201,349
[Tangible non-current assets] (569,117) Reserve employees' retirement benefits 55,020
Leasehold improvements 680,531 Reserve for statutory auditors' retirement 2,870
benefits
Data communication equipment and 588,532 Deferred tax liabilities 2,696,112
office equipment
--------------------------------------------------------------
Accumulated depreciation -699,946 Total Liabilities 18,070,681
--------------------------------------------------------------
(Intangible non-current assets) (1,508,192) Shareholders' equity
--------------------------------------------------------------
Telephone rights 9,245
Software 1,498,947 [Common stock] [16,833,847]
(Investments and other assets) (13,496,155) [Capital surplus] [21,980,395]
Investment securities 8,545,153 Additional paid-in capital 21,980,395
Equity investment in subsidiaries 3,373,908 [Earned surplus] [-24,519,617]
Long-term prepaid expenses 179,985 Undisposed accumulated deficit for -24,519,617
the current period
Guarantee deposits 1,333,488 [Accumulated other comprehensive income] [3,928,242]
Other investments 104,601 Unrealized gain on available-for-sale 3,928,242
securities
--------------------------------------------------------------
Allowance for doubtful accounts -40,980 Total shareholders' equity 18,222,867
[71,248]
[Deferred asset]
New share issuing costs 71,248
------------------------------------------------------------------------------------------------------------------------
Total assets 36,293,548 Total liabilities and shareholders' 36,293,548
equity
------------------------------------------------------------------------------------------------------------------------
8
STATEMENT OF INCOME
(From April 1, 2005 to March 31, 2006)
------------------------------------------------------------------------------- ----------------------------------------
Item Amount
------------------------------------------------------------------------------- ----------------------------------------
Thousand yen
------------------------------------------------------------------------------- ------------------ ---------------------
(Ordinary Items)
(Operating income and loss)
[Total revenues] 37,457,565
[Total costs] 32,595,150
------------
Total cost of revenues 4,862,415
[Total costs and expenses] 4,016,834
------------
Operating income 845,581
(Non-operating Items)
[Non-operating income]
Interest and dividends income 41,035
Commissions received 83,726
Other non-operating income 10,445 135,206
----------- ------------
[Non-operating expenses]
Interest expense 132,976
Amortization of new share issuing costs 73,545
Other non-operating expenses 37,105 243,626
----------- ------------
Ordinary income 737,161
(Extraordinary Items)
[Extraordinary income]
Gain on sales of investments in securities 3,222,397
Other extraordinary income 48,625 3,271,022
----------- ------------
[Extraordinary loss]
Loss on sales of non-current assets 69,224
Loss on sales of investments in securities 303
Loss on sales of investments in affiliated companies 112,085 181,612
----------- ------------
Income(loss) before income taxes(benefit) 3,826,571
Corporation, inhabitant, and enterprise taxes 15,280
Deferred tax expense(benefits) -419,840
------------
Net income 4,231,131
Accumulated deficit brought forward -28,750,748
------------
Accumulated deficit for the current period -24,519,617
------------------------------------------------------------------------------- ------------------ ---------------------
9
1. Significant accounting policies
(1) Valuation standards and methods for securities
Shares of subsidiaries and affiliates: stated at cost based on the
moving average method.
Other securities:
Securities whose market prices are quoted: market value method based on the
market price, etc. as of the end of the fiscal term (all of the changes
resulting from the valuation are directly incorporated into capital, while the
cost of the securities at the time of their sale is calculated using the moving
average method.)
Securities whose market prices are not quoted: stated at cost based on the
moving average method. Investments in limited liability investment partnerships
and similar partnerships (those deemed as securities under Article 2, Paragraph2
of the Securities and Exchange Law) are accounted for by including the Company's
net equity in these investments based on the most recent statement of accounts
available according to the report on financial accounts stipulated in investment
partnership agreements.
(2) Valuation standards and methods for derivatives and others: market value
method, in principle.
(3) Valuation standards and methods for inventories
Products and store: stated at cost based on the moving average
method. Work in process: specific-order cost method.
(4) Depreciation methods for non-current assets
Tangible non-current assets: declining balance method.
The depreciable asset whose acquisition value is 100,000 yen or more but
less than 200,000 yen is depreciated in equal installments over three years. The
numbers of useful years of main depreciable assets are as specified below:
Plant and buildings facilities annexed: 8-15 years
Tools, machines, instruments and equipments: 3-15 years
Intangible non-current assets: straight line method.
The software used by the Company is depreciated over the number of useful
years for internal use, i.e., five years.
(5) Accounting for lease transactions
Financing lease transactions, other than those in which ownership of
the leased assets is deemed to transfer to the lessee, are recorded
based on the same accounting method as is used for normal rental
transactions.
(6) Treatment of deferred assets
New shares issuing costs are amortized in equal installments over
three years.
(7) Standards for recording of allowances
Allowance for doubtful accounts: To prepare for possible losses resulting
from non-payments of account receivables for trade and loans and others, an
allowance is provided based on the percentage of actual credit losses incurred
in the case of general receivables. In the case of credits for which the
relevant debtors are likely to default and other certain credits, such allowance
is based on the anticipated uncollectible amount after assessment of likelihood
of non-payment of individual credit.
Reserve for employees' retirement benefits: To prepare for payments of
retirement benefits to employees, a reserve is provided based on the projected
retirement benefits obligations and pension assets as of the end of the current
fiscal term. The difference arising from actuarial computations is amortized and
expensed in the subsequent fiscal terms using the straight-line method over a
certain number of years not exceeding the average number of remaining service
years of the employees at the time of accrual of such payment (14 years).
(8) Accounting for important hedging transactions
The Company uses interest swaps in order to hedge the risk of
changes in the interest rate on borrowing, pursuant to the internal
rules prescribing limitations and maximum transaction volumes, etc.
concerning derivative transactions.
Since interest swaps are accounted for according to special tax
treatment, a validity assessment is omitted.
10
(9) Consumption tax, etc.
Consumption tax is separately recorded.
2. Changes in accounting method
(1) Accounting standard for impairment of non-current assets
Effective from the fiscal year ended March 31, 2006, the Company
adopted the "Accounting Standards for Impairment of Fixed Assets"(
"Opinion Concerning Establishment of Accounting Standards for
Impairment of Fixed Assets(The Business Accounting Council, August
9, 2002)), and the "Guideline for Application of Accounting Standard
for Impairment of Fixed Asset" (Accounting Standard for Impairment
of Fixed Asset, The Business Accounting Standards, No. 6, October
31, 2003)). This change has not had effect on profit and loss for
this fiscal year.
(2) Reserve for statutory auditors' retirement benefits
With respect to retirement benefit to a retiring standing statutory
auditor, which were previously recognized as a cost at the time of
payment, the Company changed its method of accounting, to record a
reserve for the benefits to the amount necessary for payment as of
the end of the fiscal year based on the internal regulation
"Regulation for statutory auditors' retirement benefits".
This change is made due to establishment of "Regulation for
statutory auditors' retirement benefits" in March 2006 and is
intended to allocate periodic cost appropriately and to promote
sound financial condition of the Company.
In accordance with this change, 2,070 thousand yen, which accrued in
the previous fiscal year, and 800 thousand yen, which accrued in
this fiscal year are recorded as selling expense and general and
administrative expense. As a result thereof, operating income,
ordinary income and income before income taxes were 2,870 thousand
yen less than those as would have been accounted for under the
previous method. This reserve is an allowance stipulated in Article
43 of the Ordinance for Enforcement Commercial Code.
3. Notes to balance sheet
(1) Monetary claims and liabilities to subsidiaries
Short-term monetary claims: 129,699 thousand yen
Short-term monetary liabilities: 1,886,048 thousand yen
(2) Financial assets received as collateral of which the company has the right
to dispose
The company received securities from i-Heart, Inc. in connection
with the loan to it which amount is 51,246 thousand yen. The market
value of such securities received as of the end of the fiscal year
is 34,545 thousand yen.
(3) In addition to the non-current assets recorded on the balance sheet,
electronic office equipment, modems, routers, terminal adapters and others
are used under lease contracts.
(4) Asset provided as security
Deposit in an amount of 1,146,039 thousand yen
(5) Securities lending agreements
Of the investment securities, 1,554,000 thousand yen are on loan.
999,600 thousand yen, which were provided as collateral for
1,230,000 thousand yen from among the aforesaid amount of loan, are
recorded as deposit.
(6) Stock Options under Article 280-19, Paragraph 1 of the former Commercial
Code
---------------------------------------------- ------------------------------- -----------------------------
Date of resolution of the general meeting of April 7, 2000 June 27, 2001
shareholders
---------------------------------------------- ------------------------------- -----------------------------
Class of shares to be issued Common stock Common stock
---------------------------------------------- ------------------------------- -----------------------------
Stock Options outstanding 2,109,333 thousand yen 560,200 thousand yen
---------------------------------------------- ------------------------------- -----------------------------
Issue price 2,163,418 yen 334,448 yen
---------------------------------------------- ------------------------------- -----------------------------
(7) The increase in net assets, based on market value calculated in accordance
with Article 124, Item 3 of the Ordinance for Enforcement of Commercial
Code
3,928,242 thousand yen.
(8) Amount of accumulated deficit 24,519,617 thousand yen
4. Notes to income statement
(1) Net income per share
21,597.37 yen
11
(note) Net income per share is calculated based on the stated below.
Net income 4,231,131 thousand yen
Amount not available to common shareholders -
Net income related to common stock 4,231,131 thousand yen
Average number of outstanding shares of common stock
shares 195,910
(2) Transactions with subsidiaries
Revenues: 952,566 thousand yen
Purchases: 11,519,603 thousand yen
Turnover from non-operating transactions: 42,752 thousand yen
5. Retirement Benefits
(a) Outline of the current retirement benefit plan
The Company employs, as a defined retirement benefit plan, a
lump-sum retirement allowance plan and a tax-qualified retirement
pension plan funded by accumulated internal contribution pursuant to
the Regulations for Retirement Benefits. The proportion of the
retirement benefits funded under the tax-qualified retirement
pension plan has reached 70 percent.
The Company is a member of Zenkoku Joho Service Sangyo Kosei Nenkin
Kikin (the Japan Information Service Industry Welfare Pension Fund),
a pension plan that adopts such irregular treatment method as
provided for in Paragraph 33 of the Guidelines for Retirement
Benefit Accounting Practices. The balance of the Company's pension
assets as of the end of the current term calculated on the basis of
its premium payments in proportion to the balance of the aggregate
pension assets of the aforementioned Pension Fund stands at
1,593,463 thousand yen, while the premiums paid by the Company for
the current fiscal year are 75,569 thousand yen.
(b) Matters concerning retirement benefit obligations (as of March 31,
2006) (thousand yen)
Retirement benefit obligations: 1,049,652
Plan assets: 997,856
Unfunded retirement benefit obligations: 51,796
Unrecognized actuarial loss (gain): 3,224
-----
Retirement benefit allowance: 55,020
======
(c) Matters concerning retirement benefit costs (from April 1, 2005 to
March 31, 2006) (thousand yen)
Service cost: 159,300
Interest cost: 16,891
Expected return on plan assets: -16,736
Unrecognized actuarial loss (gain): 1,808
-----
Retirement benefit costs: 161,263
=======
(Note: The above figures do not include the amount of the premiums
paid to the welfare pension fund.)
(d) Matters concerning the bases for the retirement benefit
accounting.
Allocation method of expected retirement benefit per period: Fixed
amount per period
Discount rate: 2.0%
Expected rate of return on plan assets: 2.7%
Number of years used for amortization of unrecognized actuarial
loss(gain): 14 years (Differences are amortized and expensed in
the subsequent fiscal terms using the straight line method, for
which a certain number of years not exceeding the employees'
average remaining service years at the time of the accrual are
used.)
6. Deferred Tax Accounting
(a) Significant components of deferred tax assets and liabilities:
Deferred tax assets
Operating Loss carried-forward for income tax purposes: 9,100,340 thousand yen
Impairment loss on subsidiaries' securities: 412,164
Loss on sale of non-current assets: 63,148
Impairment loss of non-current assets 20,536
Allowance for retirement benefits: 23,561
Accrued enterprise taxes 29,225
Others: 25,310
------
Subtotal of deferred tax assets: 9,674,284
Valuation allowance: -9,254,444
----------
Total of deferred tax assets: 419,840
Deferred tax liabilities
Unrealized gain on other securities: 2,696,112
-----------
Total of deferred tax liabilities: 2,696,112
-----------
Net amount of deferred tax liabilities: 2,276,272 thousand yen
==========
12
(b) Reconciliation of the difference between the statutory effective
tax rate and the effective tax rate Statutory effective tax rate:
40.7% (Adjustments):
Entertainment expenses: 0.9
Inhabitants' tax: 0.4
Effect of merger -1.2
Reduction in valuation allowance: -50.1
Expiration of operating loss carried-forward: 3.9
Use of operating loss carried-forward: -5.3
Others: 0.1
---
Effective tax rate: -10.6%
======
13
The Proposal for Appropriation of Loss
(Unit: Yen)
------------------------------------------------------------------------------------ ----------------------------------------
Description Amount
------------------------------------------------------------------------------------ ----------------------------------------
Undisposed accumulated deficit for the current period 24,519,617,274
------------------------------------------------------------------------------------ ----------------------------------------
The amount above will be appropriated as below
-----------------------------------------------------------------------------------------------------------------------------
Accumulated deficit carried forward to the next period 24,519,617,274
------------------------------------------------------------------------------------ ----------------------------------------
14
(TRANSLATION) Certified Copy
INDEPENDENT AUDITORS' REPORT
May 22, 2006
To the Board of Directors of Internet Initiative Japan Inc.:
Deloitte Touche Tohmatsu
Designated Partner,
Engagement Partner,
Certified Public Accountant:
Shuko Shimoe (seal)
Designated Partner,
Engagement Partner,
Certified Public Accountant:
Takashi Yamaguchi (seal)
Pursuant to the first clause of Article 2 of the "Law Concerning Special
Measures under the Commercial Code with respect to Audit, etc. of Corporations
(Kabushiki-Kaisha)" of Japan, we have audited the balance sheet, the statement
of operations, the business report (with respect to accounting matters only),
the proposed disposition of accumulated deficits and the supplementary schedules
(with respect to accounting matters only) of Internet Initiative Japan Inc.
("the Company") for the (1)(4)th fiscal year from April 1, (200)(5) to March 31,
(200)(6). The accounting matters included in the business report and
supplementary schedules referred to above are based on the Company's books of
account. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with auditing standards generally
accepted in Japan. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion. Our audit includes auditing procedures applied to subsidiaries as
considered necessary.
As a result of our audit, in our opinion,
(1) The balance sheet and the statement of operations present fairly the
financial position and the results of operations of the Company in
conformity with the applicable laws and regulations of Japan and the
Articles of Incorporation,
(2) The business report (with respect to accounting matters only) presents
fairly the Company's affairs in conformity with the applicable laws and
regulations of Japan and the Articles of Incorporation,
(3) The proposed disposition of accumulated deficits are in conformity with the
applicable laws and regulations of Japan and the Articles of Incorporation,
and
(4) The supplementary schedules (with respect to accounting matters only)
present fairly the information required to be set forth therein under the
Commercial Code of Japan.
The subsequent events regarding purchase of shares of the Company's
subsidiary is described in the business report.
Our firm and the engagement partners do not have any financial interest in
the Company for which disclosure is required under the provisions of the
Certified Public Accountants Law.
The above represents a translation, for convenience only, of the original report
issued in the Japanese language.
15
AUDIT REPORT BY THE BOARD OF STATUTORY AUDITORS
-----------------------------------------------
(Certified Copy)
AUDIT REPORT
------------
The Board of Statutory Auditors of the Company received reports from each of the
Statutory Auditors regarding the methods and results of the audit of the
performance by the Directors of their duties during the Company's 14th fiscal
year, which began on April 1, 2005 and ended on March 31, 2006. Based on our
review of and discussions regarding such reports, we have prepared this Audit
Report and hereby report the following:
1. Summary of Auditing Methods Used by Statutory Auditors
In addition to attending meetings of the Board of Directors and other
important meetings pursuant to the audit policies and division of duties set
forth by the Board of Statutory Auditors, each of the Statutory Auditors made
inquiries to the Directors, etc., with regard to the results of operation,
reviewed important documents, etc., stating decisions and approvals,
investigated the state of the operations and financial position at the head
office and main branch offices of the Company, and, as necessary, asked the
Company's subsidiaries to provide reports on the state of their businesses.
Also, we received reports and explanations from the accounting auditors and
examined financial documents and schedules thereto.
As for transactions made by the Directors which were in competition
with the business of the Company, transactions between the Directors and the
Company which were in conflict with the interests of the Company, benefits given
without consideration by the Company, unusual transactions with subsidiaries or
shareholders, and the Company's acquisition and disposition of its treasury
stocks, we not only applied the above mentioned auditing methods, but also
obtained relevant reports from the Directors, etc., and conducted detailed
examinations.
2. Results of Audit
(1) We acknowledge that the methods and results of the audit as reported by
the accounting auditors, Deloitte Touche Tohmatsu, are appropriate.
(2) We acknowledge that the business report present fairly the state of the
Company in accordance with the relevant laws, regulations and its
Articles of Incorporation.
(3) We did not find anything that should be specified with respect to the
proposal on the disposition of losses in light of the conditions of the
assets and liabilities and other circumstances of the Company.
(4) We acknowledge that the schedules to the financial documents correctly
state matters that should be stated therein, and did not discover
anything that should be specified in connection therewith.
(5) As for the performance by the Directors of their duties, including
their duties with respect to subsidiaries, we did not discover any
significant facts indicating any unlawful conduct or breach of the
relevant laws, regulations or the Company's Articles of Incorporation.
In addition, we did not discover any breach of duties by the Directors
in light of the transactions made by any of the Directors which were in
competition with the business of the Company, transactions between any
of the Directors and the Company that were in conflict with the
interests of the Company, benefits given without consideration by the
Company, unusual transactions with subsidiaries or shareholders, or the
Company's acquisition and disposition of its treasury stocks.
May 25, 2006
Board of Statutory Auditors
Internet Initiative Japan Inc.
Standing Statutory Auditor: Hideki Matsushita (Seal)
Statutory Auditor: Masaki Okada (Seal)
Statutory Auditor: Masaaki Koizumi (Seal)
Statutory Auditor: Hirofumi Takahashi (Seal)
Note: Two of the Statutory Auditors, Masaki Okada and Masaaki Koizumi, are
outside auditors as set forth in Article 18, Paragraph 1 of the Law for Special
Exceptions to the Commercial Code concerning Audit, etc. of Kabushiki-Kaisha.
16
Reference Documents for the Ordinary General Meeting of Shareholders
--------------------------------------------------------------------
Agenda of the meeting and referential matters:
Item 1: Approval of the proposal for appropriation of loss for the 14th fiscal
year
The content of this item is as shown on page 14 of the above Appendix.
Item 2: Reduction of additional paid-in capital
Pursuant to Article 448 Paragraph 1 of the Corporation Law, the Company proposes
to reduce the additional paid-in capital in order to make up for the accumulated
deficit carried forward.
1. Amount of additional paid-in capital to be reduced: The Company proposes to
reduce 21,980,395,078 yen which is the full amount of the current additional
paid-in capital.
2. Effective date of reduction of additional paid-in capital: August 4, 2006
Item 3: Reduction of Common stock
Pursuant to Article 447 Paragraph 1 of the Corporation Law, the Company proposes
to reduce the common stock in order to make up for the accumulated deficit
carried forward.
1. Amount of common stock to be reduced:
The Company proposes to reduce its current common stock of 16,833,847,250 yen by
2,539,222,196 yen to 14,294,625,054 yen.
2. Effective date of reduction of common stock:
August 4, 2006
Item 4: Amendments to the Articles of Incorporation
Approval is asked that parts of the present Articles of Incorporation be
amended as follows.
1. Reason for the amendment
(1) In Accordance with the enforcement of the "Corporation Law" (Law No.86,
2005) as of May 1, 2006,
1. To add Article 4 (Establishment of Organs) in order to provide for organs
to be established in the Company pursuant to Article 326.2 of the Corporation
Law.
2. To add Article 7 (Issuance of Share Certificates) in order to provide
for the issuance of share certificates pursuant to Article 214 of the
Corporation Law.
3. To add Article 12 (Disclosure via Internet and Deemed Provision of
Reference Materials, etc. for a Shareholders Meeting) in order to enable the
Company to omit provision of written materials by disclosing via Internet a
part of description of business reports and reference materials for
shareholders meetings and notes and all consolidated financial statements
pursuant to Articles 94 and 133. 3 of the Enforcement Regulations of the
Corporation Law, and Articles 161.4 and 162.4 of the Corporate Accounting
Rules.
4. To add Article 22 (Omission of Resolutions of a Board of Directors Meeting)
to enable the Company to make a resolution by the board of directors meeting
in writing or by electromagnetic means agilely whenever necessary, pursuant to
Article 370 of the Corporation Law.
5. To add Article 31.2 in order to enable outside statutory auditors to fully
perform functions expected of them, pursuant to Article 427.1 of the
Corporation Law.
6. To amend clauses quoted in the Articles of Incorporation to match the
equivalent clauses of the Corporation Law.
7. To amend the term used in the former Commercial Code to the terms used in
the Corporation Law, and to modify some of the wordings and amend phrases.
8. To renumber the provisions as required by the above amendments.
(2) In order to further strengthen our management, it is proposed that the
maximum number of the directors be increased (Article 16 of the proposed
amendments).
17
2. Contents of amendments: Contents of amendments are as follows:
Present Articles Proposed Amendments
------------------------------------------------------------------------------------
CHAPTER I. GENERAL PROVISIONS CHAPTER I. GENERAL PROVISIONS
(Corporate Name) (Corporate Name)
Article 1. Article 1.
The Company shall be called Kabushiki The Company shall be called Kabushiki
Kaisha Internet Initiative, which shall Kaisha Internet Initiative, which shall
be expressed in English as Internet be expressed in English as Internet
Initiative Japan Inc. Initiative Japan Inc.
(Objects) (Objects)
Article 2. Article 2.
The objects of the Company shall be to The objects of the Company shall be to
engage in the following categories of engage in the following categories of
business: business:
(1) Telecommunications business under the(1) Telecommunications business under the
Telecommunications Business Law; Telecommunications Business Law;
(2) Processing, mediation and provision (2) Processing, mediation and provision
of information and contents by using of information and contents by using
telecommunications networks; telecommunications networks;
(3) Agency for the management business (3) Agency for the management business
such as the management of networks and such as the management of networks and
the management of information and the management of information and
telecommunications systems; telecommunications systems;
(4) Planning, consulting service, (4) Planning, consulting service,
development, operation and maintenance of development, operation and maintenance of
or for information and telecommunications or for information and telecommunications
systems; systems;
(5) Development, sales, lease and (5) Development, sales, lease and
maintenance of computer software; maintenance of computer software;
(6) Development, sales, lease and (6) Development, sales, lease and
maintenance of telecommunications' maintenance of telecommunications'
machinery and equipment; machinery and equipment;
(7) Telecommunications construction (7) Telecommunications construction
business; business;
(8) Agency for non-life insurance (8) Agency for non-life insurance
business; business;
(9) Research, study, education and (9) Research, study, education and
training related to the foregoing; and training related to the foregoing; and
(10) Any and all businesses incidental or(10) Any and all businesses incidental or
related to the foregoing. related to the foregoing.
(Location of Head Office) (Location of Head Office)
Article 3. Article 3.
The Company shall have its head office in The Company shall have its head office in
Chiyoda-ku, Tokyo. Chiyoda-ku, Tokyo.
[New provision] (Establishment of Organs)
Article 4.
The Company shall have shareholders
meeting, directors and the following
organization:
(1) Board of directors
(2) Statutory auditors
(3) Board of statutory auditors
(4) Accounting auditors.
(Method of Public Notice) (Method of Public Notice)
Article 4. Article 5.
Public notices of the Company shall be Public notices of the Company shall be
given by electronic public notice; given by electronic public notice;
provided that in case it is impossible to provided that in case it is impossible to
place electronic public notice due to place electronic public notice due to
accident or any other unavoidable events, accident or any other unavoidable events,
they shall be given in the Nihon Keizai they shall be given in the Nihon Keizai
Shinbun. Shinbun.
CHAPTER II. SHARES CHAPTER II. SHARES
(Total Number of Shares Authorized to be (Total Number of Shares Authorized to be
Issued) Issued)
Article 5. Article 6.
The total number of shares authorized to The total number of shares authorized to
be issued by the Company shall be three be issued by the Company shall be three
hundred seventy seven thousand and six hundred seventy seven thousand and six
hundred (377,600) shares; provided that hundred (377,600) shares.
in case of retirement of any shares, the
number of shares subject to retirement
shall be reduced from the total number of
shares authorized to be issued.
18
Present Articles Proposed Amendments
------------------------------------------------------------------------------------
(Issuance of Share Certificates)
[New provision] Article 7.
The Company shall issue share certificates
representing its shares.
(Handling of Shares and Fractional Shares)(Share Handling Regulations)
Article 6. Article 8.
Kinds of share certificates to be issued The procedures concerning shares and
by the Company, and matters concerning handling charges thereof shall be
registration of transfer of shares, governed by the Share Handling
registration of pledges, indication of Regulations to be prescribed by the Board
trust property, purchase of fractional of Directors.
shares, reissue of share certificates and
other procedures concerning shares and
handling charges thereof shall be
governed by the Share Handling
Regulations to be prescribed by the Board
of Directors.
(Transfer Agent) (Shareholder Register Agent)
Article 7. Article 9.
The Company shall appoint a transfer The Company shall appoint a shareholder
agent for the handling of its shares and register agent.
fractional shares.
2.The transfer agent and its place of 2.The shareholder register agent and its
business shall be designated by a place of business shall be designated by
resolution of the Board of Directors. a resolution of the Board of Directors.
3.The register of shareholders, the 3.The register of shareholders
original register of fractional shares of (hereinafter including the register of
the Company and the register of lost beneficial shareholders), the original
share certificates shall be kept by the register of stock acquisition rights and
transfer agent at its place of business, the register of lost share certificates
and matters concerning registration of shall be kept by the shareholder register
transfer of shares, registration of agent at its place of business, and the
pledges, indication of trust property, listing or recording of entries into the
delivery of share certificates, register of shareholders, the original
acceptance of reports by shareholders, register of stock acquisition rights and
listing or recording into the original the register of lost share certificates
register of fractional shares and the and other matters concerning shares and
register of lost share certificates and stock acquisition rights shall be handled
other matters concerning shares and by the shareholder register agent, and
fractional shares shall be handled by the the Company shall not handle any such
transfer agent, and the Company shall not matters.
handle any such matters.
(Record Date) (Record Date)
Article 8. Article 10.
The shareholders entitled to exercise The record date for the voting rights to
voting rights at the ordinary general be exercised at the ordinary general
meeting of shareholders of the Company meeting of shareholders of the Company
relevant to each fiscal year shall be shall be March 31 of each year.
those shareholders with voting rights who
are listed or recorded in the last
register of shareholders as of March 31
of the fiscal year.
2.In addition to the preceding paragraph, [Deleted]
whenever necessary, the Company may
provisionally fix a record date after
giving a public notice according to a
resolution of the Board of Directors and
may deem the shareholders or pledgees who
are listed or recorded in the last
register of shareholders as of the record
date, or holders of fractional shares who
are listed or recorded in the last
original register of fractional shares as
of the record date, as the shareholders,
registered pledgees or holders of
fractional shares entitled to exercise
the relevant rights.
CHAPTER III. GENERAL MEETING OF CHAPTER III. GENERAL MEETING OF
SHAREHOLDERS SHAREHOLDERS
(Convocation) (Convocation)
Article 9. Article 11.
An ordinary general meeting of An ordinary general meeting of
shareholders of the Company shall be shareholders of the Company shall be held
held within three (3) months from the within three (3) months from the last day
day immediately following the settlement of each business year and an
of accounts of each fiscal year and an extraordinary general meeting of
extraordinary general meeting of shareholders may be held from time to
shareholders may be held from time to time whenever necessary.
time whenever necessary. (Disclosure Internet and Deemed Provision
of Reference Materials for a Shareholders
Meeting)
19
Present Articles Proposed Amendments
------------------------------------------------------------------------------------
Article 12.
[New provision] For the purpose of convocation of a
general meeting of shareholders, the
Company may deem that it has duly
provided its shareholders with the
information to be listed or indicated in
the reference materials for a general
meeting of shareholders, the business
report, financial statements and
consolidated financial statements by
disclosing the information via the
Internet as provided for by the Ministry
of Justice Ordinance.
(Chairman) (Chairman)
Article 10. Article 13.
The President shall chair a general The President and Director shall chair a
meeting of shareholders. Should the general meeting of shareholders. Should
President be unable to so act, another the President and Director be unable to
director shall act in his/her place in so act, another director shall act in
the order predetermined by the Board of his/her place in the order predetermined
Directors. by the Board of Directors.
(Voting by Proxy) (Voting by Proxy)
Article 11. Article 14.
A shareholder may exercise his/her voting A shareholder may exercise his/her voting
right through another shareholder having right through another one(1) shareholder
voting rights acting as a proxy in a having voting rights acting as a proxy in
general meeting of shareholders. a general meeting of shareholders.
2.In the case of the preceding paragraph, 2.In the case of the preceding paragraph,
the shareholder or his/her proxy shall the shareholder or his/her proxy shall
submit to the Company an instrument submit to the Company an instrument
evidencing his/her power as proxy for evidencing his/her power as proxy for
each general meeting of shareholders. each general meeting of shareholders.
(Method of Resolution) (Method of Resolution)
Article 12. Article 15.
Unless otherwise provided for by law or Unless otherwise provided for by law or
these Articles of Incorporation, these Articles of Incorporation,
resolutions of a general meeting of resolutions of a general meeting of
shareholders shall be adopted by a shareholders shall be adopted by a
majority vote of shareholders present at majority vote of shareholders who are
the meeting. present and entitled to exercise voting
2. Special resolutions under Article 343 rights at the meeting.
of the Commercial Code of Japan and 2.Special resolutions under Article 309
other resolutions to which the method of Paragraph 2 of the Corporation Law of
resolution of aforementioned Article is Japan shall be passed by two-thirds or
applied mutatis mutandis by laws or more of the voting rights of the
regulations shall be passed by two-thirds shareholders present having one-third or
or more of the voting rights of the more of the voting rights of all
shareholders present having one-third or shareholders who are entitled to exercise
more of the voting rights of all voting rights.
shareholders.
(Minutes) [Deleted]
Article 13.
The summary of proceedings at a general
meeting of shareholders and the results
thereof shall be recorded in the minutes
of the meeting, which shall bear the
signatures, printed names and seal
impressions, or digital signatures of the
chairman of the meeting and the directors
who were present at the meeting.
CHAPTER IV. DIRECTORS AND THE BOARD OF CHAPTER IV. DIRECTORS AND THE BOARD OF
DIRECTORS DIRECTORS
20
Present Articles Proposed Amendments
------------------------------------------------------------------------------------
(Number of Directors) (Number of Directors)
Article 14. Article 16.
The number of directors of the Company The number of directors of the Company
shall be between three (3) and twelve shall be thirteen (13) at maximum.
(12).
(Election) (Election)
Article 15. Article 17.
A resolution for election of directors A resolution for election of directors
shall be made by a majority of voting shall be made by a majority of voting
rights of the shareholders present at the rights of the shareholders present at the
meeting where the shareholders meeting where the shareholders
representing one third (1/3) or more of representing one third (1/3) or more of
the total number of the voting rights of the total number of the voting rights of
all shareholders are present; provided all shareholders entitled to vote thereat
that cumulative voting shall not be are present; provided that cumulative
adopted for such election. voting shall not be adopted for such
election.
(Term of Office of Directors) (Term of Office of Directors)
Article 16. Article 18.
The term of office of directors shall The term of office of directors shall
expire at the close of the ordinary expire at the close of the ordinary
general meeting of shareholders held in general meeting of shareholders held in
relation to the last settlement of relation to the last business year ending
accounts within two (2) years following within two (2) years following their
their assumption of office. election to office.
(Convocation of Meetings of the Board of (Convocation of Meetings of the Board of
Directors) Directors)
Article 17. Article 19.
Unless otherwise provided for by law, a Unless otherwise provided for by law, a
meeting of the Board of Directors shall meeting of the Board of Directors shall
be convened and chaired by the President. be convened and chaired by the President
and Director.
2.The notice of convocation of a meeting 2.The notice of convocation of a meeting
of the Board of Directors shall be given of the Board of Directors shall be given
to each director and statutory auditor at to each director and statutory auditor at
least three (3) days prior to the day set least three (3) days prior to the day set
for such meeting; provided, however, that for such meeting; provided, however, that
this period may be further shortened this period may be further shortened
under pressing circumstances. under pressing circumstances.
3. Matters concerning operation of 3. Matters concerning operation of
meetings of the Board of Directors, etc. meetings of the Board of Directors, etc.
shall be governed by the Regulations of shall be governed by laws and
Board of Directors to be prescribed by regulations, the Articles of
the Board of Directors. Incorporation and the Regulations of
Board of Directors to be prescribed by
the Board of Directors.
(Representative Director and Directors (Representative Director and Directors
with with
Specific Titles) Specific Titles)
Article 18. Article 20.
Representative Directors shall be elected Representative Directors shall be elected
among directors by the resolution of the among directors by the resolution of the
Board of Directors. Each Representative Board of Directors. Each Representative
Director shall severally represent the Director shall severally represent the
Company. Company.
2.The Board of Directors may, by its 2.The Board of Directors may, by its
resolution, select from among its members resolution, select from among its members
one chairman of the Board of Directors, one Chairman and Director, one President
one President, several Vice Presidents, and Director, several Vice Presidents and
several Senior Managing Directors, Directors, several Senior Managing
several Managing Directors. Directors and several Managing Directors.
(Method of Resolution of the Meeting of (Method of Resolution of the Meeting of
the Board of Directors) the Board of Directors)
Article 19. Article 21.
A resolution of the Board of Directors
shall be adopted by a majority vote of
the directors present at the meeting at
which a majority of the directors
authorized to vote thereat are present.
21
Present Articles Proposed Amendments
------------------------------------------------------------------------------------
A resolution of the Board of Directors
shall be adopted by a majority vote of
the directors present at the meeting at
which a majority of the directors are
present.
[New provision] (Omission of Resolutions of a Board of
Directors Meeting)
Article 22.
The Company shall deem that a proposal for
a resolution at a meeting of the Board of
Directors has been approved if all
directors consent to the proposal in
writing or by electronic means; provided,
however that this shall not apply to the
case where any of the statutory auditors
raises an objection.
(Remuneration and Retirement Allowances) (Remuneration and other compensation)
Article 20. Article 23.
The remuneration and retirement allowances The remuneration, bonus and other profit
for directors shall be determined in a be paid to directors as consideration for
general meeting of shareholders. the execution of duties(hereinafter
referred to as 'Remuneration and other
compensation') shall be determined by a
general meeting of shareholders.
(Exemption of Liability for Directors) (Exemption of Liability for Directors)
Article 20.2 Article 24.
The Company may, pursuant to the provision The Company may, pursuant to the provision
of Article 266 paragraph 12 of the of Article 426 Paragraph 1 of the
Commercial Code of Japan, with a Corporation Law of Japan, with a
resolution of the Board of Directors, resolution of the Board of Directors,
exempt a director (either incumbent or exempt a director (either incumbent or
past) from liabilities in respect of the past) from liabilities for damages under
acts mentioned in Article 266 paragraph 1 Article 423 Paragraph 1 of the
item 5 of the Commercial Code of Japan Corporation Law of Japan with the limit
only to the extent permitted by laws or of the amount for which the director
regulations. would have been liable to compensate,
less the minimum amount of liability as
prescribed by laws or regulations, if the
requirements prescribed by laws or
regulations are satisfied.
2.The Company may, pursuant to Article 2. The Company may, pursuant to Article
266 paragraph 19 of the Commercial Code 427 Paragraph 1 of the Corporation Law of
of Japan, enter into an agreement with an Japan, enter into an agreement with an
outside director under which liability of outside director under which liability of
such director against the Company for the such director against the Company for the
damages resulting from acts mentioned in damages under Article 423 Paragraph 1 of
Article 266 paragraph 1 item (5) shall be the Corporation Law of Japan shall be
limited; provided, however, that the limited if the requirements prescribed by
limited amount of such damages pursuant laws or regulations are satisfied;
to the agreement shall be the larger of provided, however, that the limited
the amount not less than 10 million yen amount of such damages pursuant to the
which has been determined in advance or agreement shall be the larger of the
the amount provided by laws or amount not less than 10 million yen which
regulations. has been determined in advance or the
minimum amount of liability provided by
laws or regulations.
CHAPTER V. STATUTORY AUDITORS AND THE CHAPTER V. STATUTORY AUDITORS AND THE
BOARD OF STATUTORY AUDITORS BOARD OF STATUTORY AUDITORS
(Number of Statutory Auditors) (Number of Statutory Auditors)
Article 21. Article 25.
The Company shall have three (3) or more The Company shall have three (3) or more
statutory auditors. statutory auditors.
(Election) (Election)
Article 22. Article 26.
A resolution for election of statutory A resolution for election of statutory
auditors shall be made by a majority of auditors shall be made by a majority of
voting rights of the shareholders present voting rights of the shareholders present
at the meeting where the shareholders at the general meeting of shareholders
representing one third (1/3) or more of where the shareholders representing one
the total number of the voting rights of third (1/3) or more of the total number
all shareholders are present. of the voting rights of all shareholders
entitled to vote thereat are present.
(Term of Office of Statutory Auditors) (Term of Office of Statutory Auditors)
Article 23. Article 27.
The term of office of statutory auditors
shall expire at the close of the ordinary
general meeting of shareholders in
relation to the last business year ending
22
Present Articles Proposed Amendments
------------------------------------------------------------------------------------
The term of office of statutory auditors within four (4) years following their
shall expire at the close of the ordinary election to office.
general meeting of shareholders in
relation to the last settlement of
accounts within four (4) years following
their assumption of office.
2.The term of office of a statutory 2.The term of office of a statutory
auditor elected to fill a vacancy shall auditor elected to fill a vacancy of
expire at such time as the term of office his/her predecessor who retired or
of his/her predecessor would otherwise resigned prior to the expiration of term
expire. shall expire at such time as the term of
office of his/her predecessor would
otherwise expire.
(Full-time Statutory Auditors) (Full-time Statutory Auditors)
Article 24. Article 28.
The statutory auditors shall appoint a The Board of Statutory Auditors shall
full-time statutory auditor(s) from among appoint a full-time statutory auditor(s)
themselves. A standing statutory by a resolution thereof. A standing
auditor(s) may be appointed from among statutory auditor(s) shall be appointed
full-time statutory auditors through from among full-time statutory auditors
mutual consultation among statutory through mutual consultation among
auditors. statutory auditors.
(Procedures for Convocation of the Meeting (Procedures for Convocation of the Meeting
of the Board of Statutory Auditors) of the Board of Statutory Auditors)
Article 25. Article 29.
A notice of the convocation of a meeting A notice of the convocation of a meeting
of the Board of Statutory Auditors shall of the Board of Statutory Auditors shall
be given to each statutory auditor at be given to each statutory auditor at
least three (3) days prior to the date least three (3) days prior to the date
set for such meeting; provided, however, set for such meeting; provided, however,
that such period may be shortened under that such period may be shortened under
pressing circumstances. pressing circumstances.
2. Matters concerning operation of 2. Matters concerning operation of
meetings of the Board of Statutory meetings of the Board of Statutory
Auditors, etc. shall be governed by the Auditors, etc. shall be governed by laws
Regulations of Board of Statutory and regulations, the Articles of
Auditors to be prescribed by the Board of Incorporation and the Regulations of
Statutory Auditors. Board of Statutory Auditors to be
prescribed by the Board of Statutory
Auditors.
(Remuneration and Retirement Allowances (Remuneration)
for Article 30.
Statutory Auditors) The Remuneration and other compensation
Article 26. for statutory auditors shall be
The remuneration and retirement allowances determined by a general meeting of
for statutory auditors shall be shareholders.
determined in a general meeting of
shareholders.
(Exemption of Liability for Statutory (Exemption of Liability for Statutory
Auditors) Auditors)
Article 26.2 Article 31
The Company may, pursuant to the provision The Company may, pursuant to the
of Article 280 paragraph 1 of the provision of Article 426 Paragraph 1 of
Commercial Code of Japan, with a the Corporation Law of Japan, with a
resolution of the Board of Directors, resolution of the Board of Directors,
exempt a statutory auditor (either exempt a statutory auditor (either
incumbent or past) from liabilities only incumbent or past) from liabilities for
to the extent permitted by laws or damages under Article 423 Paragraph 1 of
regulations. the Corporation Law of Japan with the
limit of the amount for which the
statutory auditor would have been liable
to compensate, less the minimum amount of
liability as prescribed by laws or
regulations, if the requirements
prescribed by laws or regulations are
satisfied.
[New provision] 2.The Company may, pursuant to Article 427
Paragraph 1 of the Corporation Law of
Japan, enter into an agreement with an
outside statutory auditor under which
liability of such statutory auditor
against the Company for the damages under
Article 423 Paragraph 1 of the
Corporation Law of Japan shall be limited
if the requirements prescribed by laws or
regulations are satisfied; provided,
however, that the limited amount of such
damages pursuant to the agreement shall
be the larger of the amount not less than
10 million yen which has been determined
in advance or the minimum amount of
liability provided by laws or
regulations.
23
Present Articles Proposed Amendments
------------------------------------------------------------------------------------
(Substitute Statutory Auditor) [Deleted]
Article 27.
The Company may, in preparation for the
case where the Company has a vacancy in
the number of its statutory auditors
provided by laws or regulations, elect a
substitute statutory auditor at a general
meeting of shareholders in advance.
2.A resolution for election of a
substitute statutory auditor shall be
made by a majority of voting rights of
the shareholders present at the meeting
where the shareholders representing one
third (1/3) or more of the total number
of the voting rights of all shareholders
are present.
3.A resolution for election of a
substitute statutory auditor shall remain
effective until the holding of the
immediate subsequent ordinary general
meeting of shareholders.
4.In case a substitute statutory auditor
assumes the office of a statutory
auditor, the term of office of such
statutory auditor shall expire at such
time as the term of office of his/her
predecessor would otherwise expire.
CHAPTER VI. ACCOUNTING CHAPTER VI. ACCOUNTING
(Fiscal Year) (Business Year)
Article 28. Article 32.
The fiscal year of the Company shall The business year of the Company shall
commence on April 1 of each year and end commence on April 1 of each year and end
on March 31 of the following year. on March 31 of the following year.
(Fixing of Shareholders for Payment of (Record Date for Surplus Distribution)
Dividends) Article 33.
Article 29. The record date for year-end dividend
Dividends shall be paid to the distribution shall be March 31 of each
shareholders or pledgees who are listed year.
on recorded in the last register of
shareholders as of March 31 of each year,
or the holders of fractional shares who
are listed on recorded in the last
original register of fractional shares as
of the same date or who deposited their
fractional share certificates with the
Company as of such date.
(Interim Dividends)
Article 30.
The Company may, by resolution of the 2.The Company may, by resolution of the
Board of Directors, pay interim dividends Board of Directors, pay interim dividends
to shareholders or pledgees listed or by fixing September 30 of each year as
recorded in the last register of the record date.
shareholders as of September 30 in each
year or the holders of fractional shares
listed or recorded in the last original
register of fractional shares as of the
same day.
(Prescription Period of Dividends) (Prescription Period of Dividends)
Article 31. Article 34.
In case dividends or interim dividends In case any monetary dividends remain
remain unclaimed for three (3) full years unclaimed for three (3) full years after
after the first date of payment, the the first date of payment, the Company
Company shall be relieved from the shall be relieved from the obligation to
obligation to make payment thereof. make payment thereof.
2.No interest shall accrue on the 2.No interest shall accrue on the
outstanding dividends provided for in the outstanding dividends provided for in the
preceding paragraph. preceding paragraph.
*(Translation Note: The amendment which is made in the original Japanese is
a lexical one, and thus, such change is not reflected in the above translation.)
24
Item 5: Election of six directors
Since the terms of office of five (5) incumbent directors. Fukuzo
Inoue, Takamichi Miyoshi, Akihisa Watai, Yasurou Tanahashi, and Takashi Hiroi
will expire at the closing of this ordinary general meeting of shareholders, the
election of six (6) directors is proposed.
The candidates for the directors are as follows:
---------------------------- ------------------------------------------------------------------------- ----------
Number
of
Name shares
Date of birth Careers & current positions in and outside of the Company owned
---------------------------- ------------------------------------------------------------------------- ----------
Takamichi Miyoshi Apr. 1993 Joined the Company 385
May 5, 1963 Jun. 2002 Director of the same
Apr. 2004 Director, and General Manager,
Strategy Planning Division, of the
same
Jun. 2004 Director, and General Manager, of Strategy Planning
Division, and Information Security Management Officer, of
the same
(Current position)
---------------------------- ------------- ----------------------------------------------------------- ----------
Akihisa Watai Apr. 1989 Joined The Sumitomo Bank, Limited 0
September 30, 1965 (Current Sumitomo Mitsui Banking Corporation)
Aug. 1996 Temporarily transferred to the
Company
Feb. 2000 Joined the Company
Apr. 2004 General Manager, Finance
Division, of the same (Current
position)
Jun. 2004 Director and Chief Financial
Officer
(Current position)
---------------------------- ------------- ----------------------------------------------------------- ----------
Yoshiaki Hisamoto Apr. 1978 Joined Nippon Telegraph and Telephone Public Corporation 0
December 14, 1954 Jul. 1999 Senior Manager, Global Business Department and Corporate
Planning Department of NTT Communications Corporation
Jun. 2005 Senior Manager, Accounts and Finance Department of the
same
(Current position)
---------------------------- ------------- ----------------------------------------------------------- ----------
Yasurou Tanahashi Apr. 1963 Joined Fuji Iron & Steel Co., Ltd. 0
January 4, 1941 Apr. 2000 Representative Director & President of Nippon
Steel Information & Communication Systems Inc.
Apr. 2001 Representative Director & President of NS Solutions
Corporation
Apr. 2003 Chairman, Representative Director & Chairman, NS
Solutions Corporation
(Current position)
Jun. 2004 Director of the Company (Current position)
May. 2005 Chairman of Japan Information Technology Services
Industry Association (JISA)
(Current position)
---------------------------- ------------- ----------------------------------------------------------- ----------
Takashi Hiroi Apr. 1986 Joined Nippon Telegraph and Telephone Corporation 0
February 13, 1963 Apr. 2002 Senior Manager, Department 4, of the same
Jul. 2002 Senior Manager, Department 1, of the same
Jun. 2004 Director of the Company (Current position)
May. 2005 Senior Manager, Midterm Corporate Management Strategy
Division, Nippon Telegraph and Telephone Corporation
(Current position)
---------------------------- ------------- ----------------------------------------------------------- ----------
Senji Yamamoto Apr. 1970 Joined Sony Corporation 0
April 14, 1946 Jan. 1998 President of Sony Communication Network Corporation
Jun. 2000 President and CEO of the same
Oct. 2005 Director of IIJ Technology Inc.
(Current position)
Apr. 2006 Director of IIJ Financial Systems Corporation
(Current position)
---------------------------- ------------- ----------------------------------------------------------- ----------
(Notes)
(a) There is no special interest between the above candidates above and the
Company.
(b) Mr. Yasurou Tanahashi and Mr. Takashi Hiroi are candidates for outside
director.
25
Item 6: Election of a statutory auditor
The election of a statutory auditor is proposed as a replacement of
one of the incumbent statutory auditors, Mr. Hideki Matsushita, who is to resign
as statutory auditor at the closing of this ordinary general meeting of
shareholders. Pursuant to the provisions of the Articles of Incorporation, the
term of office of such statutory auditor as a replacement shall expire at such
time as the term of office of Mr. Hideki Matsushita is to expire. Consent of the
Board of statutory Auditors has been obtained for submission of this item of
business.
The candidate for the statutory auditor is as follow:
---------------------------- ------------------------------------------------------------------------- ----------
Number
of
Name shares
Date of birth Careers & current positions in and outside of the Company owned
---------------------------- ------------------------------------------------------------------------- ----------
Junichi Tate Apr. 1974 Joined The Dai-ichi Mutual Life Insurance Company
November 6, 1949 Apr. 2002 General Manager of International Corporate Relations 0
Dept. of the same
Apr. 2006 Staff General Manager of
Corporate Planning Dept. No.2
(Current position)
---------------------------- ------------- ----------------------------------------------------------- -----------
(Notes)
(a) There is no special interest between the above candidate and the Company.
(b) Mr. Junichi Tate is a candidate for outside statutory auditor.
Item 7: Granting of retirement allowance to a retiring statutory auditor
Payment of retirement allowances is proposed, to such reasonable extant
as is based on the rules of the Company, to Mr. Hideki Matsushita, a statutory
auditor who is to retire from the position at the closing of this ordinary
general meeting of shareholders, in order to reward his efforts during his term.
Shareholders are requested to entrust statutory auditors with the determination
of the amount, time and manner of payment of such retirement allowances.
A brief summary of the career of the retiring statutory auditor is as
follows:
--------------------------- ---------------------------------------------------------------------------------------
Name Resume
--------------------------- ------------ --------------------------------------------------------------------------
Hideki Matsushita Jun. 1998 Appointed to Standing Statutory Auditor of the Company
(Current position)
--------------------------- ------------ --------------------------------------------------------------------------
26