15th term business report · unified threat management (utm) appliance ss5000 vpn router c1000 file...

Ticker code: 6675

April 1, 2017 March 31, 2018

15th Term Business Report

1

Matters reported:

1. Business Report, Consolidated Financial Statements for the 15th Term (from April 1, 2017 to March 31, 2018) and results of audits by the Accounting Auditor and the Board of Auditors of the Consolidated Financial Statements

2. Non-Consolidated Financial Statements for the 15th Term (from April 1, 2017 to March 31, 2018)

The particulars of the above 1 and 2 were reported.

Matters resolved:

Proposal No. 1: Distribution from SurplusThe proposal was approved and adopted as proposed. (The year-end dividend is ¥30 per share.)

Proposal No. 2: Election of Seven DirectorsThe proposal was approved and adopted as proposed.Naoki Matsuo, Fumihisa Isono, Mitsugu Osaka, Koji Nakamura, Yoichi Inoue and Hideo Yamamoto were re-elected as Directors and assumed office, and Taketo Marui was newly elected as Directors and assumed office.Hideo Yamamoto is an Outside Director.

To All ShareholdersJune 28, 2018

Naoki MatsuoPresident & C.E.O.

NBF Platinum Tower, 17-3, Shirokane 1-chome, Minato-ku, Tokyo

NOTICE OF RESOLUTIONSOF THE 15th ORDINARY GENERAL SHAREHOLDERS’ MEETING

We are pleased to announce that the matters outlined below were reported and resolved at the 15th Ordinary General Shareholders’

Meeting of the Company held today.

Proposal No. 3: Election of Two Substitute AuditorsThe proposal was approved and adopted as proposed. Hayato Yamazaki and Yoji Takaguchi were elected as substitute auditors.Hayato Yamazaki and Yoji Takaguchi are substitute auditors for Outside Auditor Takenari Shimizu and Outside Auditor Kenji Iimori, respectively.

Proposal No. 4: Payment of Bonuses to Directors and AuditorsThe proposal was approved and adopted as proposed.

NOTICE OF RESOLUTIONS OF THE 15th ORDINARY GENERAL SHAREHOLDERS’ MEETING

This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.

2

Japan’s economy during the term under review was on a moderate recovery track supported by strong corporate results, but economic outlook remained uncertain due to increasing political risks in Europe and the U.S. and geopolitical risks in Asia.

In this economic environment, to respond to harsh change in the business environment, the SAXA Group formulated a medium-term managerial plan (covering three years from the term ending March 2018 to the term ending March 2020). Basic policies of this plan are twofold: “shift to a business that can grow sustainably” and “reform to develop an ideal revenue structure.” A three-year period devoted to reestablishment of our business

structure and fortification of our business base has started for developing a foothold for growth.

Consolidated net sales for the fiscal term under review declined 6.8% year on year to ¥37,684 mill ion, reflecting the revision of regulations impacting the amusement market and changes in the market environment. The main reason for the decline was a decrease in orders for OEM key telephone systems as well as systems integration and products for the amusement market, despite increased sales of network security products and imaging systems. In terms of profit, a decrease in net sales and increased R&D expenditures resulted in ordinary income of ¥653 million, down 39.3% year on year, and net income attributable to owners of parent of ¥280 million, down 43.2% year on year.

In view of these circumstances, we will focus on strengthening our continuing efforts to meet the business targets set for the term ending March 2020, the final year of the medium-term managerial plan.

Reestablishment of the business structureWe have positioned the network business for the office market and the video business as core businesses and are strengthening them to facilitate their expansion, while also devoting ourselves to the creation of new businesses focused on IoT services.

Naoki MatsuoPresident & C.E.O.

Cautionary StatementThis business report has been prepared for the sole purpose of facilitating understanding of the Company’s financial position and operations, and is not intended to solicit investments. Investors are advised to exercise their own judgment when making investment decisions.

To Our Shareholders

3

During the fiscal term under review, in the video business, which we designate as a core business, we conducted R&D on image analysis technology for applications in such fields as surveillance, crime prevention and marketing. We also promoted R&D on IoT Gateways applicable to IoT solutions in various markets.

In the network solutions field, as a specific initiative of the video business, we started offering the SKVMS, a highly scalable and fault tolerant video management system (VMS) in which proprietary distributed processing technology is implemented tha t reduces the concen t ra t i on o f image processing.

We also developed and commercial ized the VC1000 video compression gateway that can compress high-quality video to approximately one-tenth of its size and transmit it in real time. Going forward, we will continue to provide a wide range of video solutions.

In addition, we took a stake in AXION RESEARCH, Inc. to gain a foothold for business development in the social infrastructure market. Also, we will create new IoT services by linking the IoT Gateway for the Raspberry Pi (small, lightweight single board computer) to the cloud of IBM Japan, Ltd.

In the security solutions field, we developed and began providing an optical alarm system that complies with the Guidelines for Installing Optical

Alarm Systems (Fire and Disaster Management Agency of the Ministry of Internal Affairs and Communications) in addition to the automated fire alarm equipment we already offer.

This new system was installed in the toilets at Narita International Airport, which is promoting universal design in preparation for hosting the 2020 Tokyo Olympics and Paralympics. We will work to promote wider use of such systems as part of our efforts to achieve a safe and secure society.

Fortification of our business baseWe worked to enhance management efficiency through further selection and concentration of businesses and to improve the financial standing by reduc ing i n te res t -bea r i ng deb t , wh i l e cont inuous ly imp lement ing in i t i a t i ves fo r rat ional izat ion of personnel and reinforcing corporate governance, in order to enhance corporate value.

To accelerate the creation of new businesses, we will strengthen the functions of the new business development department and the video business promotion structure.

The SAXA Group intends to redouble its efforts to meet the expectations of shareholders. In all our endeavors, we wi l l great ly appreciate your continuing support and cooperation.

To Our Shareholders

4

Entering a New Healthcare Market Utilizing AITaking a stake in AXION RESEARCH, INC.

Initiatives for the Creation of New Businesses

SAXA, Inc. received a third-party allotment of new shares of AXION RESEARCH INC. (AXION R), which develops and offers artificial intelligence (AI) for the health sciences sector, in order to enter a new healthcare market.

The SAXA Group is currently focusing on smart care services in the healthcare and social infrastructure markets, which utilize technologies that the Group has been cultivating such as telecommunications, IoT, and AI. The Group is also conducting demonstration experiments for health status assessment by efficiently collecting and analyzing vital data using IoT devices, such as sensors, cameras, and microphones, installed at care service sites.

AXION R develops technologies for big data analytics using a hybrid implementation method that combines an AI engine (deep learning) with a knowledge base engine (correlation, deduction, verification, optimization). Above all, it is emphasizing development of technology for evaluating, predicting, and estimating an individual’s health level and the risk of health issues, diseases, and disorders occurring in the future.

The two companies consider offering IoT devices, analysis engines, and a platform as well as application services to establish high-value-added smart care services. Through co-creation of a business, we aim to provide new solutions in a wide range of healthcare-related fields extending from the office market to the social infrastructure market, including nursing and medical applications, which will allow us to contribute to better health for many people.

SAXA, Inc. has invested in the SBI AI & Blockchain Fund (SBI AI & Blockchain Investment Limited Partnership), which was established and is operated by SBI Investment Co., Ltd. (Representative Director, President & CEO, Katsuya Kawashima), a subsidiary of SBI Holdings, Inc. (Representative Director, President & CEO, Yoshitaka Kitao)

The high-growth-potential markets in which this fund invests are a good fit with those the SAXA Group is actively cultivating by pursuing initiatives to “enter new healthcare markets utilizing AI and IoT” and for “expansion of the video business.” To accelerate business development in growth fields, the SAXA Group will promote creation of new businesses and technological innovation faster and more efficiently through collaboration with venture companies via the fund.

Venture Funding in the AI and Blockchain FieldsInvesting in the SBI AI & Blockchain Fund

Topics

Unified threat management (UTM) appliance SS5000

VPN router ZC1000

File server SB2100

Office safety transmitter BS1000

Information security gateway

Multi-line cordless telephone PS800

UTM-integrated IP-PBX SP2000

CS800

Cloudcomputing

PC

HUB

UPSPLATIA II

Key telephone system

AP

HUB

CameraElectric lockSensor

Fee

Fax

Nurse call

Call center

Audio conferencing

Multi-function printer

Camera

GE1000

5

In December 2017, SAXA, Inc. launched the GE1000 information security gateway to strengthen office internal security as part of its Office AGENT series of office agent systems for small and medium-size offices.

The GE1000 has functions for defending against unauthorized terminal access and email security. The function defending against unauthorized terminal access detects personal computers, smartphones and IT equipment that are not authorized to connect and blocks them from connecting to the internal network, thus preserv ing the normal i ty of the internal network and preventing attacks, such as the dispersion of viruses and spyware, impersonation and communications eavesdropping. The email secur i ty funct ion prevents leak ing of confidential or personal information from email by preventing the sending of email to wrong addresses and filtering of email to be sent as well as automatic encryption of email with attached files.

Thoroughly Guarding Against Confidential Data LeaksLaunch of information security gateway GE1000

Initiatives for Expansion of Our Core Business

Electronic medical card service

Cloud

Topics

Unified threat management (UTM) appliance SS5000

VPN router ZC1000

File server SB2100

Office safety transmitter BS1000

Information security gateway

Multi-line cordless telephone PS800

UTM-integrated IP-PBX SP2000

CS800

Cloudcomputing

PC

HUB

UPSPLATIA II

Key telephone system

AP

HUB

CameraElectric lockSensor

Fee

Fax

Nurse call

Call center

Audio conferencing

Multi-function printer

Camera

GE1000

6

The Office AGENT series of agent systems meet the needs of small and

medium-size offices without information systems departments.

Integrating SAXA’s expertise in office solutions and combining it with our

network products, we offer speedy solutions to our customers’

problems.

In March 2018, SAXA, Inc. launched the industry-first DECT multi-line system cordless telephone to connect to the PLATIA II business communication system for small and medium-size offices.

DECT multi-l ine cordless telephones have been introduced previously, but this is the industry’s first multi-line and multi-zone system cordless telephone capable of handling calls from multiple external lines.

Registering this multi-line system cordless telephone as a terminal in PLATIA II allows it to be used as an extension telephone over a wide area (maximum line-of-sight distance: 200 meters) if within the area of a dedicated cell station (CS) installed in an office. Extension and external line calls can be made when moving in a factory or warehouse away from the office. Additionally, since wiring is not required, there is minimal hassle when changing the office layout. Further, when calls come in for employees who are not at their seats, the call can be forwarded to their terminal to avoid making customers wait.

Launch of Industry-first DECT Multi-line System Cordless Telephone

7

In October 2017, System K Corporation introduced mainly for existing markets the SKVMS, a highly scalable and fault tolerant video management system (VMS) in which its proprietary distributed processing technology is implemented that reduces the concentration of image processing. SAXA, Inc. aims to create new products for the video business field. The first such initiative was the development and commercialization of the VC1000 image compression gateway that can transmit compressed high-quality video in real time, which SAXA launched in March 2018.

To continue strengthening its initiatives to expand the video business, the SAXA Group will provide VMS as a video system platform and develop its commercial video solutions by linking video analysis to such applications as video compression, facial recognition and vehicle license plate recognition. In regard to video and IoT solutions, we will continue providing high-value-added commercial services by combining video sensing with IoT, such as linking the analysis results of network camera video to the IoT Gateway to visualize the status of displays and alarms, having various sensor information received by the IoT Gateway, and using a VMS to link and register the video information.

Strengthening initiatives of the video business using video compression systems, VMS and IoT technology—Launch of VC1000 video compression gateway—

In 2017, SAXA Precision, Inc. has started sales of the FB210 optical alarm equipment, which was the first of its kind to be certified by the format review of the Japan Fire Equipment Inspection Inst i tute in accordance with the Guidelines for Installing Optical Alarm Systems of the Fire and Disaster Management Agency of the Ministry of Internal Affairs and Communications. The FP-510 optical alarm control equipment has also been certified by the format review. SAXA Precision has started offering the Optical Alarm System consisting of the FB210 and the FP-510.

Full-scale Launch of Optical Alarm System Compliant with the Guidelines for Installing Optical Alarm Systems—Used at Narita International Airport for Universal Design—

Optical alarm equipment installed in the toilets of Narita International Airport (first installation in a major facility in Japan)

Participated in SMART FACTORY Expo 2018

Initiatives for Expansion of Our Core Business

Topics

8

3,887

(78.20)

2.8

15

10

Term endedMarch 2014















4.9

2.9

5.2

(4.6)
















10.8

16.8

(5.9)

8.6

404431 437

464

3,8683,869

84.18

228

416

230

425437

229

426

222

0

100

200

300

400

500

0

2

4

6

0

6

0

100

200

300

400

500

0

1,000

2,000

3,000

4,000

5,000

0

5

15

20

0

5

10

20

0

20

40

60

80

100

48.87

10.310.5

(5.5)

88.66

3,759

16.0

2.2%

1.2%

(2.0%)

2.5%

1.3%

2

4

377

5.2

6.5

234

4083,967

48.02

Net sales (left)(100 millions of yen)

Operating income(100 millions of yen)

Ordinary income(100 millions of yen)

(100 millions of yen) (%)

Net income attributable to owners of parent ROE Total assets Net assets(100 millions of yen) (yen)

Earnings per share (left) Net assets per share (right)(yen)

Note: The Company conducted a 1-for-10 consolidation of shares on October 1, 2017. Accordingly, net income per share and net assets per share are calculated, assuming that the said consolidation of shares was conducted at the beginning of the 11th term ended March 2014.

Consolidated Financial Highlights

9

●Consolidated Balance Sheets (Millions of yen)

●Consolidated Statements of Cash Flows (Millions of yen)

●Consolidated Statements of Comprehensive Income (Millions of yen)

●Consolidated Statements of Income (Millions of yen)

Account item Term ended March 2017

Term ended March 2018

Assets

Current assets 25,220 24,364

Fixed assets 16,405 16,437

Property, plant and equipment 9,566 9,395

Intangible fixed assets 2,452 2,232

Investments and other assets 4,387 4,809

Deferred assets 3 0

Total assets 41,629 40,802

Liabilities

Current liabilities 11,201 12,013

Long-term liabilities 7,656 5,421

Total liabilities 18,858 17,435

Net assets

Shareholders’ equity 21,957 21,944

Common stock 10,836 10,836

Capital surplus 6,023 6,023

Retained earnings 6,341 6,330

Treasury stock (1,243) (1,245)

Accumulated other comprehensive income 642 1,236

Noncontrolling interests 170 186

Total net assets 22,770 23,367

Total liabilities and net assets 41,629 40,802



Net sales 40,414 37,684

Cost of goods sold 30,763 28,209

Gross profit 9,651 9,474

Selling, general and administrative expenses 8,618 8,958

Operating income 1,033 516

Nonoperating income 200 243

Nonoperating expenses 156 106

Ordinary income 1,076 653

Special profits 0 18

Special losses 173 101

Income before income taxes 903 570

Tax expense 389 267

Net income 514 303

Net income attributable to non-controlling interests

20 22

Net income attributable to owners of parent 494 280



Cash flows from operating activities 3,653 3,190

Cash flows from investing activities (1,554) (2,006)

Cash flows from financing activities (996) (1,667)

Effect of exchange rate changes on cash and cash equivalents 0 (4)

Net increase (decrease) in cash and cash equivalents 1,104 (489)

Cash and cash equivalents at the beginning of the term 7,205 8,310

Cash and cash equivalents at the end of the term 8,310 7,821



Net income 514 303

Other comprehensive income 272 593

Comprehensive income 786 896

* Figures in consolidated financial statements are rounded down to the nearest indicated unit.

Consolidated Financial Statements (Condensed)

10

SAXA Holdings, Inc.<Holding company>

SAXA BusinessSystem, Inc.

<Sales, work andmaintenance

service company>

SAXA Precision, Inc.<Manufacturing and

sales company>

SAXA, Inc.<Core business

company>

SAXA Techno, Inc.<Manufacturing

company>

SAXA SystemAmazing, Inc.

<System developmentcompany>

SAXA SystemEngineering, Inc.

<System developmentcompany>

Meister Corporation<System development

company>

Coretac, Inc.<Manufacturing

company>

SAXA Proassist, Inc.<Service company

in the Group>

System K Corporation<System development

company>

SAXA Group (11 group companies) (as of April 1, 2018)●

Directors and Auditors (as of June 28, 2018)

Established February 2, 2004

Capital Stock ¥10,836,678,400

Number of Employees 1,114 (Consolidated), 44 (Nonconsolidated)

Head Office NBF Platinum Tower, 17-3, Shirokane 1-chome, Minato-ku, Tokyo

Business Management consultation for its subsidiaries that engage in the development, manufacture and sales of information communication system equipment and components

President & C.E.O. Naoki Matsuo

Managing Director Fumihisa Isono

Managing Director Mitsugu Osaka

Director Koji Nakamura

Director Yoichi Inoue

Director Atsushi Sogabe

Director Taketo Marui (newly elected)

Director Masashi Fuse

Director Kimio Oguchi

Director Hideo Yamamoto

Standing Auditor Susumu Eto

Auditor Mitsuo Umetsu

Auditor Kenji Iimori

Auditor Takenari Shimizu

Notes:1. Masashi Fuse, Kimio Oguchi, and Hideo Yamamoto are outside directors. In addition, the Group has filed the required notification to the Tokyo Stock Exchange of the appointment of Kimio Oguchi and Hideo Yamamoto as independent officers as prescribed by the Exchange.

2. Kenji Iimori and Takenari Shimizu are outside auditors. In addition, the Group has filed the required notification to the Tokyo Stock Exchange of the appointment of Kenji Iimori and Takenari Shimizu as independent officers as prescribed by the Exchange.

● (as of March 31, 2018)

Group Companies and Company Profile

Individuals, etc.

41.6%

Domestic corporations(excluding �nancial institutions and securities companies)

13.7%

Financial institutions

33.1%

Foreign-af�liated corporations and foreigners

10.4%

Securities companies

1.2%

Shares

●Total number of shares authorized to be issued..... 24,000,000

●Total number of shares issued ............................ 6,244,962

●Number of shareholders ............................................. 6,030

Major Shareholders

Notes:1. Although the Company holds 401 thousand shares of treasury stock, it is not included

among the Major Shareholders listed above.2. Shareholding ratio is calculated by deducting the number of shares of treasury stock

from the total number of shares issued.3. The number of shares held by Oki Electric Industry Co., Ltd., includes the Company’s

605 thousand shares, which are contributed by Oki Electric Industry Co., Ltd., as the trust estate of the retirement benefit trust. (They are recorded in the name of “Mizuho Trust & Banking Co., Ltd., Retirement Benefit Trust (Oki Electric Industry Account) for the Re-trust by the Trustee of Trust & Custody Services Bank, Ltd.” on the register of shareholders.)

4. The number of shares held by Mizuho Bank, Ltd., includes the Company’s 177 thousand shares, which are contributed by Mizuho Bank, Ltd., as the trust estate of the retirement benefit trust. (They are recorded in the name of “Mizuho Trust & Banking Co., Ltd., Retirement Benefit Trust (Mizuho Bank Account) for the Re-trust by the Trustee of Trust & Custody Services Bank, Ltd.” on the register of shareholders.)

5. The values shown in “Number of shares held” are rounded down to the nearest indicated unit, and the values shown in “Shareholding ratio” are rounded off.

Shareholder nameNumber of shares held (thousand)

Shareholding ratio (%)

Oki Electric Industry Co., Ltd. 806 13.7

NEC Corporation 236 4.0

Mizuho Bank, Ltd. 233 4.0

Sumitomo Mitsui Banking Corporation 176 3.0

DFA INTL SMALL CAP VALUE PORTFOLIO 170 2.9

The Master Trust Bank of Japan, Ltd. (trust account) 110 1.8

Kimihito Mizumoto 103 1.7

Japan Trustee Services Bank, Ltd. (trust account 5) 96 1.6

Bank of Tokyo-Mitsubishi UFJ, Ltd. 95 1.6

SAXA Group Employee Stock Ownership 91 1.5

Shareholder Information

Fiscal Year April 1 to March 31

Record Date for Payment of Dividends March 31

Ordinary General Shareholders’ Meeting June

Record DateMarch 31If necessary, another day may be designated as the record date by public announcement.

URL for Public Announcements

http://www.saxa.co.jpNote: The Company makes public announcement by electronic

means. However, in the event that accidents or other unavoidable reasons prevent use of the method of electronic announcement, the Company will make announcements in the Nihon Keizai Shimbun (daily newspaper).

If you have a brokerage account at your securities

company

If you do not have a brokerage account but a ‘special account’

at a securities company or other financial institution

Mailing Address

Your securities company

Stock Transfer Agency DepartmentMizuho Trust & Banking Co., Ltd.8-4, Izumi 2-chome, Suginami-ku, Tokyo168-8507

Telephone Referral 0120-288-324 (Toll-free call)(09:00 – 17:00 on weekdays)

Agencies for procedures such as change of address, change of method for receiving dividends, etc.

Mizuho Securities Co., Ltd.: Head office and all branches nationwide and Planet Booths (in the Mizuho Bank, Ltd.)Mizuho Trust & Banking Co., L td . : Head off ice and a l l branches nationwide

Payment of dividends payable

Mizuho Trust & Banking Co., Ltd.: Head office and all branches nationwideMizuho Bank Co., Ltd.: Head office and all branches nationwide

Notes

For the issuance of payment statements, please use the mailing address, telephone referral or agencies for procedures that are listed in the right-hand column for “special accounts.”

As special accounts cannot be used for trading securities except for the purpose of purchasing fractional shares, you need first to implement the t ransfer of shares by opening a brokerage account at a securities company or other financial institution of your choice. If you would like to make a request for additional purchase of fractional shares via Mizuho Secur i t ies Co. , Ltd. , you need to make a remittance to the account designated in advance by Mizuho Trust & Banking Co., Ltd.

Distribution of Shareholders by Category

Note: The values shown in “Distribution of Shareholders by Category” are rounded off.

Stock Information (as of March 31, 2018)

15th term business report · unified threat management (utm) appliance ss5000 vpn router c1000 file...

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