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Annual Securities Report for FY2020

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Annual Securities Report for FY2020 (TRANSLATION) Annual Securities Report (The 29th Business Term) From April 1, 2020 to March 31, 2021 Internet Initiative Japan Inc. Note for readers of this English translation This is an English translation of the Annual Securities Report (Yuka-shoken-houkokusho) of Internet Initiative Japan Inc. (“IIJ”) filed with the Director-General of the Kanto Local Finance Bureau in Japan through EDINET (Electronic Disclosure for Investors’ NETwork). This translation includes an English translation of the audit report of KPMG AZSA LLC, IIJ’s accounting auditor, of the financial statements included in the Japanese original Annual Securities Report. KPMG AZSA LLC has not audited and makes no warranty as to the accuracy or otherwise of the translation of the financial statements of other financial information included in this English translation of the Annual Securities Report. This document has been translated from the Japanese original for reference purpose only. In the event of any discrepancy between this English translation and the Japanese original, the Japanese original shall prevail. TABLE OF CONTENTS Annual Securities Report (Translation) COVER ................................................................................................................................................................................1 PART 1 Information on the Company ......................................................................................................................................2 Item 1. Overview of the Company .......................................................................................................................................2 1 Selected Financial Data .............................................................................................................................................2 2 Corporate History......................................................................................................................................................5 3 Description of Business ............................................................................................................................................7 4 Information on Affiliates ...........................................................................................................................................16 5 Employees .................................................................................................................................................................18 Item 2. Business Overview ..................................................................................................................................................19 1 Management Policy, Business Environment and Challenges ....................................................................................19 2 Risk Factors ..............................................................................................................................................................23 3 Management’s Analysis of Financial Position, Results of Operations and Cash Flows ............................................36 4 Material Contracts, etc. ...........................................................................................................................................46 5 Research and development ........................................................................................................................................47 Item 3. Property and Equipment ..........................................................................................................................................48 1 Overview of Capital Investments ..............................................................................................................................48 2 Overview of Major Facilities ....................................................................................................................................49 3 Planned Capital Investments and Disposals of Property ...........................................................................................50 Item 4. Information on IIJ ....................................................................................................................................................51 1 Information on IIJ’s Shares .......................................................................................................................................51 2 Information on Acquisitions of Treasury Stock .........................................................................................................61 3 Dividend Policy ........................................................................................................................................................62 4 Corporate Governance ..............................................................................................................................................63 Item 5. Consolidated and Non-Consolidated Financial Statements .....................................................................................85 1 Consolidated Financial Statements, etc. ....................................................................................................................86 2 Non-Consolidated Financial Statements, etc. ............................................................................................................163 Item 6. Stock-Related Administration for the Company ......................................................................................................180 Item 7. Reference Information on the Company ..................................................................................................................181 1 Information about the Parent Company of the Company ..........................................................................................181 2 Other Reference Information ....................................................................................................................................181 PART 2 Information about Guarantors of the Company ..........................................................................................................182 Independent Auditor’s Reports (Translation) ...............................................................................................................................186 Management’s Report on Internal Control over Financial Reporting (Translation) ...................................................................197 Confirmation Letter (Translation) ..............................................................................................................................................198 【Cover】 【Document Filed】 Annual Securities Report 【Applicable Law】 Article 24, Paragraph 1 of the Financial Instruments and Exchange Act of Japan 【Filed With】 Director-General, Kanto Local Finance Bureau 【Filing Date】 June 30, 2021 【Fiscal Year】 29th business term (from April 1, 2020 to March 31, 2021) 【Company Name in English】 Internet Initiative Japan Inc. 【Title and name of representative】 Eijiro Katsu President and Representative Director 【Address of Head Office】 2-10-2 Fujimi, Chiyoda-ku, Tokyo 【Phone No.】 +81-3-5205-6500 【Contact Person】 Akihisa Watai, Senior Managing Director and Chief Financial Officer 【Contact Address】 2-10-2 Fujimi, Chiyoda-ku, Tokyo 【Phone No.】 +81-3-5205-6500 【Contact Person】 Akihisa Watai, Senior Managing Director and Chief Financial Officer 【Place Where Available for Public Inspection】 Internet Initiative Japan Inc. Kansai Branch (4-7-28 Kitahama, Chuo-ku, Osaka-shi, Osaka) Internet Initiative Japan Inc. Nagoya Branch (1-24-30 Meieki-minami, Nakamura-ku, Nagoya-shi, Aichi) Internet Initiative Japan Inc. Yokohama Branch (2-15-10 Shin-Yokohama, Kohoku-ku, Yokohama-shi, Kanagawa) Tokyo Stock Exchange, Inc. (2-1 Nihombashi Kabuto-cho, Chuo-ku, Tokyo) - 1 - PART 1 Information on the Company Item 1. Overview of the Company 1 Selected Financial Data (1) Consolidated financial data, etc. Fiscal year IFRS Date of transition 26th business term 27th business term 28th business term 29th business term to IFRS ended March 31, ended March 31, ended March 31, ended March 31, (April 1, 2017) 2018 2019 2020 2021 (thousands of Revenues ― 176,233,321 192,430,185 204,473,515 213,001,880 yen) (thousands of Operating profit ― 6,769,617 6,022,987 8,225,172 14,247,723 yen) (thousands of Profit before tax ― 6,872,196 5,842,984 7,158,987 14,034,719 yen) (thousands of Profit attributable to owners of the parent ― 4,422,923 3,520,566 4,006,773 9,711,559 yen) Comprehensive income, attributable to (thousands of ― 7,648,143 2,902,764 3,997,565 12,274,666 owners of the parent yen) (thousands of Equity attributable to owners of the parent 68,036,472 74,528,732 76,271,438 79,075,589 89,956,379 yen) (thousands of Total assets 137,957,682 155,162,729 167,289,196 206,524,260 220,777,269 yen) Owners' equity per share (yen) 754.95 826.94 846.14 876.99 997.24 Basic earnings per share (yen) ― 49.08 39.06 44.44 107.67 Diluted earnings per share (yen) ― 48.91 38.90 44.24 107.14 Ratio of owners' equity to gross assets (%) 49.3 48.0 45.6 38.3 40.7 Rate of return on equity (%) ― 6.2 4.7 5.2 11.5 Price-earnings ratio (times) ― 22.0 28.7 39.9 24.1 (thousands of Cash flows from operating activities ― 14,663,819 25,152,346 33,393,751 40,544,167 yen) (thousands of Cash flows from investing activities ― (14,296,789) (8,687,589) (7,264,834) (13,215,842 ) yen) (thousands of Cash flows from financing activities ― (717,512)
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