Internet Disclosure Accompanying the Notice of Convocation of. the 9th Annual General Meeting of Shareholders

Transcription

1 To Our Shareholders, Internet Disclosure Accompanying the Notice of Convocation of the 9th Annual General Meeting of Shareholders June 8, 2016 SKY Perfect JSAT Holdings Inc.

2 Table of Contents 1. Notes to the Consolidated Financial Statements Notes to the Non-consolidated Financial Statements The above items are posted on the Company s Internet website ( pursuant to laws and regulations, as well as Article 14 of the Articles of Incorporation; therefore, they are deemed to be provided to the shareholders.

3 Notes to the Consolidated Financial Statements 1. Significant matters for the preparation of consolidated financial statements (1) The consolidated financial statements were prepared in accordance with the Corporate Accounting Rules (Ordinance of the Ministry of Justice No. 13 of February 7, 2006; latest amendment: Ordinance of the Ministry of Justice No. 1 of January 8, 2016). (2) Scope of consolidation i) Number of consolidated subsidiaries: Ten companies Names of consolidated subsidiaries SKY Perfect JSAT Corporation SKY Perfect Customer-relations Corporation SKY Perfect Broadcasting Corporation Satellite Network, Inc. SKY Perfect Entertainment Corporation JSAT International Inc. JSAT MOBILE Communications Inc. JSAT IOM Limited DSN Corporation WAKUWAKU JAPAN CORPORATION Among the above, WAKUWAKU JAPAN CORPORATION was newly established during the consolidated fiscal year ended March 31, 2016, and, therefore, is included within the scope of consolidation from the current consolidated fiscal year. ii) Names of unconsolidated subsidiaries, etc. Names of unconsolidated subsidiaries Witchblade Production Committee and four other companies (Reason for excluding them from the scope of consolidation) All unconsolidated subsidiaries are small in size and each of their aggregate amount of total assets, operating revenue, profit (for the Company s share of equity interests), retained earnings (for the Company s share of equity interests), and others do not have material effects on the Company s consolidated financial statements. (3) Application of the equity method i) Number of unconsolidated subsidiaries accounted for using the equity method: Five companies Names of principal companies Witchblade Production Committee and four other companies ii) Number of associates accounted for using the equity method: 11 companies Names of principal companies J SPORTS Corporation NIKKATSU CORPORATION MCC Corporation Horizons Satellite Holdings LLC Horizons-3 Satellite LLC AT-X, Inc. and five other companies Among the above, the Company made a new investment in Horizons-3 Satellite LLC and an additional investment in AT-X, Inc. during the current consolidated fiscal year, and therefore, are treated as associates accounted for using the equity method from the current consolidated fiscal year. (4) Fiscal year-end of consolidated subsidiaries Of the consolidated subsidiaries, JSAT International Inc. has a closing date of December 31. Its financial statements as of and for the year ended December 31 are used for the purpose of preparing the consolidated financial statements. However, major transactions that occurred between December 31 and March 31, the consolidated balance sheet date, are reflected in the consolidated financial statements. 1

4 (5) Matters concerning accounting policies i) Valuation standard and methods for significant assets a. Securities Held-to-maturity debt securities: Stated at amortized cost (the straight-line method). Available-for-sale securities Marketable available-for-sale securities: Stated at fair value based on the market price at the consolidated balance sheet date (unrealized gains and losses are directly included in a separate component of equity, and cost of securities sold is determined by the moving-average method). Non-marketable available-for-sale securities: Stated at cost determined by the moving-average method. b. Derivative financial instruments Stated at fair value. c. Inventories Broadcasting rights Stated at cost determined by the specific identification method (for the value stated in the balance sheet, the carrying amount is written down based on the decreased profitability). Merchandise Stated at cost determined by the first-in, first-out method (for the value stated in the balance sheet, the carrying amount is written down based on the decreased profitability). Work in process Stated at cost determined by the specific identification method (for the value stated in the balance sheet, the carrying amount is written down based on the decreased profitability). Supplies Stated at cost determined mainly by the first-in, first-out method (for the value stated in the balance sheet, the carrying amount is written down based on the decreased profitability). ii) Depreciation and amortization methods of significant depreciable and amortizable assets a. Property and equipment (excluding lease assets) Depreciated by the straight-line method. The range of useful lives of property and equipment is principally as follows: Buildings and structures: 2 to 50 years Machinery, equipment, and vehicles: 2 to 17 years Telecommunications satellites: 11 to 15 years Other: 2 to 20 years b. Intangible assets (excluding lease assets) Amortized by the straight-line method. Software for internal use is amortized by the straight-line method over its estimated internal useful life (mainly five years). c. Lease assets Lease assets related to finance lease transactions that do not transfer ownership Depreciated by the straight-line method assuming the lease term as the useful life with no residual value. Finance lease transactions that do not transfer ownership which commenced on or before March 31, 2008, are accounted for in the same way as operating lease transactions. iii) Recognition of significant allowances and provisions a. Allowance for doubtful accounts An allowance for doubtful accounts is provided for the estimated amount of uncollectible receivables, such as accounts receivable - trade and loans receivable, based on the past credit loss experience of bad debts for general receivables, and on the individually evaluated collectability for specific doubtful accounts. For accounts receivable - trade for the Group s collection service for basic fees, membership fees, subscription fees, and other fees on which broadcasters hold claims, the Group records an allowance for doubtful accounts in light of its past credit loss experience with subscribers over a certain period. 2

5 b. Accrued bonus Accrued bonuses for employees are recorded for the estimated bonuses attributable to the current fiscal year within the period eligible for bonus payment set by the Company. c. Provision for directors retirement benefits A provision for retirement benefits for board directors and corporate auditors of consolidated subsidiaries is recorded at an amount required to be paid at the current fiscal year-end according to the internal regulations. iv) Accounting for retirement benefits To prepare for payments of employees retirement benefits, liabilities for retirement benefits are recorded based on the estimated amounts of the retirement benefit obligation as of the end of the current fiscal year. Unrecognized actuarial gains and losses, and unrecognized past service cost are included in remeasurement of defined retirement benefit plans in accumulated other comprehensive income under equity after adjusting for tax effects. a. Method of attributing expected retirement benefits to accounting periods In calculating the retirement benefit obligations, the benefit formula basis is used in attributing the expected retirement benefit obligations to periods up to the end of the current fiscal year. b. Method of recognizing actuarial gains and losses, and past service cost Unrecognized actuarial gains and losses are amortized on a straight-line basis over 10 to 19 years within the employees average remaining service period at the time of incurrence, commencing from the following fiscal year of the incurrence. Unrecognized past service cost is amortized on a straight-line basis over 10 to 17 years within the employees average remaining service period at the time of incurrence. c. Simplified accounting used by small companies Some consolidated subsidiaries apply a computational shortcut where the amounts of the retirement benefit obligations, in calculating liabilities for retirement benefits and retirement benefit expenses, are deemed to be the amount of benefit payments required for voluntary retirement at the fiscal year-end. v) Translation of significant assets or liabilities denominated in foreign currencies into Japanese yen Monetary receivables and payables denominated in foreign currencies are translated into yen at the spot rate on the consolidated balance sheet date and translation differences are recognized in profit or loss. Assets and liabilities of foreign subsidiaries are translated at the spot rate on the balance sheet date of the foreign subsidiaries, while their revenues and expenses are translated into yen at the average exchange rates for the period. The translation differences are recognized in foreign currency translation adjustments under equity. vi) Method of significant hedge accounting a. Method of hedge accounting Deferred hedge accounting is applied. b. Hedging instruments and hedged items Hedging instruments Forward exchange contracts and interest rate swaps Hedged items Forecast transactions denominated in foreign currencies and interest on borrowings c. Hedging policy The Group uses forward exchange contracts to hedge against the risk of fluctuations in foreign currency exchange rates, and interest rate swaps to hedge against the risk of interest rate fluctuations on loans payable, within the scope of actual demand in accordance with its internal rules. d. Method of assessing hedge effectiveness The assessment of hedge effectiveness for forward exchange contracts and interest rate swaps is omitted, because the critical terms of the hedged item and the hedging instrument are aligned and cash flows can be fixed at the inception of the hedge. vii) Amortization method and period for goodwill The Group reasonably estimates the period for which the effects of goodwill are expected to emerge and amortizes the goodwill on a straight-line basis over the estimated period. The amortization period of goodwill that arose on the acquisition of JSAT Corporation and Space Communications Corporation is 15 years. 3

6 viii) Other significant matters that serve as a basis for the preparation of the consolidated financial statements a. Interest expense As a general rule, interest expenses are expensed as incurred. However, interest on funds incurred during the purchasing lead time and used to procure satellites in relation to the maintenance and operations of the X-band satellite relay communications business is included in the acquisition cost of work in process. Interest expense included in the acquisition cost of work in process for the current fiscal year was 210 million. b. Accounting for consumption taxes Consumption taxes and local consumption taxes are excluded from transaction amounts. c. Application of the consolidated tax payment system The Group applies the consolidated tax payment system. (6) Changes in accounting policies The Company applied the Accounting Standard for Business Combinations (Accounting Standards Board of Japan (ASBJ) Statement No. 21, September 13, 2013), the Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, September 13, 2013), and the Accounting Standard for Business Divestures (ASBJ Statement No. 7, September 13, 2013) from the current fiscal year. Under these accounting standards, differences arising from changes in the Company s ownership interests in its subsidiaries over which it retains control are recognized in capital surplus, and acquisition-related costs are recognized as expenses as incurred. In addition, with regard to business combinations that are completed on or after the beginning of the current fiscal year, the revised allocation of acquisition costs, as a result of the finalization of the tentative accounting treatment, is reflected in the consolidated financial statements for a consolidated financial year in which the business combination occurred. Furthermore, the Company changed the presentation of certain accounts such as net income in the previous consolidated financial statements, and minority interests are now presented as non-controlling interests. For the application of the Accounting Standard for Business Combinations and others, the Company adopted the transitional measures provided in Item (4), Paragraph 58-2 of the Accounting Standard for Business Combinations; Item (4), Paragraph 44-5 of the Accounting Standard for Consolidated Financial Statements; and Item (4), Paragraph 57-4 of the Accounting Standard for Business Divestures effective from the beginning of the current consolidated fiscal year. As a result, profit before income taxes for the current consolidated fiscal year increased by 124 million and capital surplus as of the end of the current consolidated fiscal year decreased by 124 million from the end of the previous year. The effect of this change on per share information is immaterial. (7) Changes in presentation Consolidated Statement of Income Foreign exchange losses, which was included in Other under non-operating expenses in the previous fiscal year, is presented as a separate item in the current fiscal year due to an increase in its materiality. The amount of Foreign exchange losses included in Other under non-operating expenses during the previous fiscal year was 18 million. 4

7 2. Notes to the consolidated balance sheet (1) Accumulated depreciation for property and equipment 231,499 million (2) Overdraft facilities and lines of credit agreements (as a lessee) Certain domestic subsidiaries of the Company have lines of credit agreements with 10 financial institutions to efficiently manage their working capital. As of the end of the current fiscal year, the status of these lines of credit is as follows: Lines of credit 15,589 million Credit utilized million Available credit 15,589 million A domestic subsidiary of the Company has concluded lines of credit agreements with 12 financial institutions in order to finance the maintenance and operations of the X-band satellite relay communications business. As of the end of the current fiscal year, the status of these lines of credit is as follows: Lines of credit 77,500 million Credit utilized 34,791 million Available credit 42,708 million A domestic subsidiary of the Company has concluded lines of credit agreements with three financial institutions, in order to finance the procurement of a communications satellite, Horizons 3e. As of the end of the current fiscal year, the status of these lines of credit is as follows: Lines of credit 21,551 million ($191 million) Credit utilized 777 million ($6 million) Available credit 20,774 million ($184 million) 3. Notes to the consolidated statement of changes in equity (1) Class and total number of shares issued and treasury stock (Shares) Class of shares As of As of Increase Decrease April 1, 2015 March 31, 2016 Shares issued Common stock 344,603, ,603,700 Total 344,603, ,603,700 Treasury stock Common stock 36,387,600 11,208,252 47,595,852 Total 36,387,600 11,208,252 47,595,852 (Note) The increase of 11,208,252 shares of treasury stock of common stock is due to the purchase of 11,208,200 treasury shares based on the resolution of the Board of Directors held on December 2, 2015, and an increase of 52 shares due to the purchase of shares less than one unit. (2) Dividends i) Payment of dividends Resolution Board of Directors meeting held on May 13, 2015 Board of Directors meeting held on November 4, 2015 Class of shares Total dividends (millions of yen) Dividend per share (yen) Record date Effective date Common stock 1,849 6 March 31, 2015 June 29, 2015 Common stock 2,157 7 September 30, 2015 December 2,

8 ii) Dividends with a record date in the current fiscal year, but an effective date in the following fiscal year Total Dividend Class of dividends Source of Resolution per share Record date Effective date shares (millions of dividends (yen) yen) Board of directors meeting to be held on May 11, 2016 Common stock 2,079 Retained earnings 7 March 31, 2016 June 27, Notes to financial instruments (1) Financial instruments i) Policy for financial instruments The Group procures funds through bank loans and issuance of bonds. Temporary cash surpluses, if any, are invested in low-risk financial assets. Derivatives are not used for speculative purposes, but for managing exposure to financial risks as described in detail below. ii) Nature of, risks arising from, and risk management for financial instruments Trade receivables, such as accounts receivable - trade and accounts receivable - other, are exposed to customer credit risk. The Group manages its credit risk from receivables in accordance with internal credit control rules, which include monitoring payment due dates and balances of customers, and periodic assessment of the credit standing of major customers. Marketable and investment securities are mainly bonds, which are exposed to credit risk and market risk, held for the purpose of investing temporary cash surpluses. To mitigate these risks, the Group invests in only highly rated bonds. Payment terms of the majority of trade payables, such as accounts payable - trade and accounts payable - other, are less than one year. Bank loans and bonds are used to fund ongoing operations and capital expenditures. Although trade payables, bonds and bank loans are exposed to the liquidity risk related to financing activities, the Group manages such risk by ensuring each group company prepares monthly statements of cash receipts and disbursements, and concluding lines of credit agreements with respective financial institutions. Derivatives include forward exchange contracts used to hedge against the market risk resulting from fluctuations in foreign currency exchange rates related to financing the purchase of broadcasting rights and capital expenditures of telecommunications satellites, and interest rate swaps used to hedge against changes in interest rates on bank loans. Please see (5) Matters concerning accounting policies, vi) Method of significant hedge accounting of 1. Significant matters for the preparation of consolidated financial statements. for further details about hedging instruments and hedged items, hedging policy, and the method of assessing hedge effectiveness in relation to hedge accounting. The Group executes and manages derivative transactions in accordance with the internal policies that define transaction authority. The Group enters into derivative transactions only with financial institutions with a high credit rating to minimize credit risk exposure. 6

9 (2) Fair values of financial instruments Carrying amounts, fair values, and their differences as of March 31, 2016, the consolidated balance sheet date of the current fiscal year, are presented in the following table. Items whose fair values are extremely difficult to be determined are not included below. (Millions of yen) Carrying amount Fair value Difference (1) Cash and deposits 27,758 27,758 (2) Accounts receivable - trade 16,882 Allowance for doubtful accounts (473) (3) Accounts receivable - other 423 Allowance for doubtful accounts (0) (4) Securities and investment securities 16,409 16, i) Held-to-maturity securities 20,799 20,799 ii) Available-for-sale securities (5) Long-term loans receivable 1,193 1,193 (6) Accounts payable - trade (7) Current portion of long-term loans payable 6,903 6,904 0 (8) Accounts payable - other 13,318 13,318 (9) Income taxes payable 6,254 6,254 (10) Subscription fees received 9,685 9,685 (11) Bonds payable 20,000 20, (12) Long-term loans payable 37,233 37, (13) Derivative transactions (5,359) (5,359) (Note 1) Receivables and payables arising from derivative transactions are presented on a net basis, and items recorded as payables after netting are presented in parentheses. (Note 2) Method of determining fair values of financial instruments and matters related to securities and derivative transactions (1) Cash and deposits Cash and deposits are readily convertible into cash and the carrying amounts approximate their fair values. (2) Accounts receivable - trade, (3) Accounts receivable - other The carrying amounts of these receivables with a short collection period approximate their fair values. The fair values of receivables with a longer collection period are stated at present value, which is determined by categorizing receivables by a certain period and discounting them at the rate that incorporates the period to maturity and credit risk. (4) Securities and investment securities Held-to-maturity bonds are all to be settled in a short period of time, so the fair value and the book value of those are almost equal and thus they are recorded at book value. With their fair values being approximated by their carrying amounts; therefore, they are accounted for at their respective carrying amounts. Furthermore, the fair values of available-for-sale securities are based on prices provided by counterparty financial institutions. (5) Long-term loans receivable Long-term loans receivable are paid at floating interest rates that reflect market interest rates within a short period, rendering their fair values approximated by their carrying amounts unless the credit standing of borrowers has not changed materially from the time they were extended those loans. Therefore we account for such at book value. (6) Accounts payable - trade, (8) Accounts payable - other, (9) Income taxes payable, and (10) Subscription fees received The carrying amounts of these instruments approximate their fair values, given their short settlement periods. (7) Current portion of long-term loans payable, (12) Long-term loans payable The carrying amounts of the current portion of long-term loans payable and long-term loans payable with floating interest rates approximate their fair values because the interest rates of the loans are variable, and reflect market interest rates and the loans are of short duration. In addition, the credit standing of the Company has not varied greatly from the time it executed the financing transactions. Fair values of the current portion of long-term loans payable and long-term loans payable with fixed interest rates are determined based on the present value as calculated by categorizing the loans by a 7

10 (Note 3) certain period and discounting the aggregate value of principal and interest using an interest rate for similar new loans. (11) Bonds payable Fair value is determined based on the present value as calculated by discounting the aggregate value of principal and interest using an interest rate for the remaining period and reflecting credit risk of the applicable bond. (13) Derivative transactions The fair value of derivatives is determined based on the prices provided by the counterparty financial institutions. Financial instruments whose fair values are extremely difficult to determine (Millions of yen) Category Carrying amount Unlisted stocks 13,172 Investments in investment limited partnerships and similar partnerships 125 It is extremely difficult to determine fair values of these instruments because there is no quoted market price for the instruments and their future cash flows cannot be estimated. Therefore, these financial instruments are not included in (4) Securities and investment securities. 5. Per share information (1) Total equity per share (2) Earnings per share Significant subsequent events Not applicable. 7. Other notes Notes to tax effect accounting (1) Significant components of deferred tax assets and liabilities Deferred tax assets (Millions of yen) Depreciation 5,095 Deferred gain (loss) on derivatives under hedge accounting 1,759 Operating loss carryforwards 1,557 Liabilities for retirement benefits 1,550 Asset retirement obligations 674 Enterprise tax payable 553 Accrued expenses 365 Other 1,232 Subtotal deferred tax assets 12,788 Valuation allowance (1,497) Total deferred tax assets 11,291 Deferred tax liabilities Depreciation in foreign subsidiaries (1,409) Asset retirement obligations (274) Deferred gain (loss) on derivatives under hedge accounting (80) Other (60) Total deferred tax liabilities (1,825) Net deferred tax assets 9,466 (Note) Net deferred tax assets are included in the following items of the consolidated balance sheet. (Millions of yen) Current assets Deferred tax assets 2,635 Non-current assets Deferred tax assets 8,078 Current liabilities Other (1) Non-current liabilities Deferred tax liabilities (1,246) 8

11 (2) Reconciliation of significant differences between the normal effective statutory tax rate and the actual effective tax rate after applying tax effect accounting (%) Normal effective statutory tax rate 33.1 (Adjustments) Expenses not deductible for income tax purposes (e.g., entertainment expenses) 0.4 Change in valuation allowance (2.8) Amortization of goodwill 1.2 Share of profit or loss of investments accounted for using the equity method (0.2) Effect of reduction of income tax rates on deferred tax assets at the year-end 1.9 Other (0.9) Actual effective tax rate 32.7 (3) Adjustments to deferred tax assets and liabilities for the effects of changes in corporate income tax rates On March 29, 2016, the Diet passed the Act for Partial Revision of the Income Tax Act, etc. (Act No. 15 of 2016) and the Act for Partial Revision of the Local Tax Act, etc. (Act No. 13 of 2016) to reduce corporate income tax rates effective from fiscal years beginning on or after April 1, As a result of these acts, the normal effective statutory tax rate for calculating deferred tax assets and liabilities will be reduced from 32.3% to 30.9% and to 30.6% on temporary differences that are expected to be reversed during fiscal years beginning on April 1, 2016 and 2017, and on or after April 1, 2018, respectively. The effects of this change were to decrease deferred tax assets, net of deferred tax liabilities, by 544 million and to increase income taxes - deferred by 458 million. 9

12 Notes to business combinations Transactions under common control Demerger and capital increase of a subsidiary The WAKUWAKU JAPAN business, a Japanese content channel for overseas audiences, of SKY Perfect JSAT Corporation was transferred to WAKUWAKU JAPAN CORPORATION through a simple absorption-type demerger effective on July 1, Also, as of the same date, WAKUWAKU JAPAN CORPORATION increased its capital through a third-party allotment of new shares subscribed by SKY Perfect JSAT Corporation and Cool Japan Fund Inc. (1) Overview of the demerger Name and nature of the business demerged Name of the business: WAKUWAKU JAPAN Nature of the business: Distribution of Japanese content to overseas audiences Date of demerger July 1, 2015 Legal format of demerger Absorption-type demerger with the demerger company and successor company as SKY Perfect JSAT Corporation and WAKUWAKU JAPAN CORPORATION, respectively (Simple absorptiontype demerger) Name of company after the demerger WAKUWAKU JAPAN CORPORATION Other matters relating to overview of transaction The Group launched WAKUWAKU JAPAN, a channel offering Japanese content 24 hours a day for overseas audiences in February 2014, and executed this demerger with a view to expanding the business further and developing related businesses. Overview of accounting treatment adopted It is accounted for as a transaction under common control based on the Accounting Standard for Business Combinations (ASBJ Statement No. 21, September 13, 2013) and the Guidance on the Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No. 10, September 13, 2013). (2) Overview of capital increase of the subsidiary Name of the subsidiary that increased its capital WAKUWAKU JAPAN CORPORATION Amount of capital increase 10,970 million SKY Perfect JSAT Corporation invested 6,570 million and Cool Japan Fund Inc. invested 4,400 million by undertaking a capital increase through a third-party allotment of new shares. Payment date July 1, 2015 Shareholders and shareholding ratio (post capital increase) SKY Perfect JSAT Corporation: 60% Cool Japan Fund Inc.: 40% Overview of accounting treatment adopted It is accounted for as transactions under common control and with non-controlling interests based on the Accounting Standard for Business Combinations (ASBJ Statement No. 21, September 13, 2013) and the Guidance on the Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No. 10, September 13, 2013). Matters relating to the change in ownership interests as a result of transactions with noncontrolling interests i) Amount of capital surplus decreased as a result of transactions with non-controlling interests 124 million ii) Major reason for the change It is due to a difference between the paid-in amount and the change in the amount of ownership interests as a result of the capital increase through a third party allotment of new shares. 10

13 Notes to the Non-consolidated Financial Statements 1. Significant accounting policies (1) Valuation standard and methods for assets Shares of subsidiaries and associates Stated at cost determined by the moving-average method. (2) Depreciation and amortization methods of non-current assets i) Property and equipment Depreciated by the straight-line method. The range of useful lives of principal property and equipment is as follows: Buildings: 4 to 6 years Tools, furniture, and fixtures: 2 to 6 years ii) Intangible assets Amortized by the straight-line method. Software for internal use is amortized by the straight-line method over its estimated internal useful life (mainly five years). (3) Other matters for the preparation of the non-consolidated financial statements i) Accounting for consumption taxes Consumption taxes and local consumption taxes are excluded from transaction amounts. ii) Application of the consolidated tax payment system The Company applies the consolidated tax payment system. 2. Notes to the non-consolidated balance sheet (1) Accumulated depreciation for property and equipment 1,415 million (2) Monetary receivables from and payables to subsidiaries and associates (excluding those separately presented in the non-consolidated balance sheet) i) Short-term monetary receivables 5,903 million ii) Short-term monetary payables 100 million (3) Monetary payables to Board Directors Short-term monetary payables 84 million 3. Notes to the non-consolidated statement of income (1) Other under non-operating income includes a receipt of bond issuance cost to be borne by a subsidiary in the amount of 111 million. The Company loaned the subsidiary all amounts of funds that were raised by issuing corporate bonds in June 2015, and all of the bond issuance cost related to that issuance was borne by the subsidiary. (2) Amounts of transactions with subsidiaries and associates i) Operational transactions Operating revenue 4,994 million Selling, general, and administrative expenses 243 million ii) Other transactions Interest income 110 million Other (refer to (1)) 111 million 4. Notes to the non-consolidated statement of changes in equity Class and number of treasury stock (Shares) As of As of Class of shares Increase Decrease April 1, 2015 March 31, 2016 Common stock 36,387,600 11,208,252 47,595,852 Total 36,387,600 11,208,252 47,595,852 (Note) The increase of 11,208,252 shares of treasury stock of common stock is due to the purchase of 11,208,200 treasury shares based on the resolution of the board of directors held on December 2, 2015, and an increase of 52 shares due to the purchase of shares less than one unit. 11

14 5. Notes to tax effect accounting (1) Significant components of deferred tax assets and liabilities Deferred tax assets (Millions of yen) Write-down of shares of subsidiaries and associates 314 Operating loss carryforwards 312 Depreciation 139 Other 86 Subtotal deferred tax assets 851 Valuation allowance (672) Total deferred tax assets 179 Deferred tax liabilities Asset retirement obligations (3) Other (1) Total deferred tax liabilities (4) Net deferred tax assets 174 (Note) Net deferred tax assets are included in the following items of the non-consolidated balance sheet. (Millions of yen) Non-current assets Deferred tax assets 175 Current liabilities Other (1) (2) Reconciliation of significant differences between the normal effective statutory tax rate and the actual effective tax rate after applying tax effect accounting (%) Normal effective statutory tax rate 33.1 (Adjustments) Expenses not deductible for income tax purposes (e.g., entertainment expenses) Income not taxable for income tax purposes (e.g., cash dividends received) 0.3 (39.1) Change in valuation allowance 1.4 Other (0.0) Actual effective tax rate (4.3) (3) Adjustments to deferred tax assets and liabilities for the effects of changes in corporate income tax rates On March 29, 2016, the Diet passed the Act for Partial Revision of the Income Tax Act, etc. (Act No. 15 of 2016) and the Act for Partial Revision of the Local Tax Act, etc. (Act No. 13 of 2016) to reduce corporate income tax rates effective from fiscal years beginning on or after April 1, As a result of these acts, the normal effective statutory tax rate for calculating deferred tax assets and liabilities will be reduced from 32.3% to 30.9% and to 30.6% on temporary differences that are expected to be reversed during fiscal years beginning on April 1, 2016 and 2017, and on or after April 1, 2018, respectively. The impact of this tax rate change is immaterial. 12

15 6. Notes to transactions with related parties Subsidiaries, associates and other related parties Type Subsidiary Name of related party SKY Perfect JSAT Corporation Capital or investment in capital (millions of yen) 50,083 Nature of business or occupation Multichannel pay TV business, space & satellite business Share of voting rights holding (or held) (%) Owning directly Nature of relationship Number of concurrent officers 9 Business relationship Lending and deposit of funds, outsourcing the operation, and others Nature of transactions Lending of funds Receipt of bond issuance cost borne by a subsidiary Receipt of interest (Note 1) Deposit of funds Receipt of interest (Note 2) Receivables associated with tax consolidation Outsourcing fees (Note 3) Transaction amount (millions of yen) 20, Account Long-term loans to subsidiaries and associates (5,613) Deposit paid in subsidiaries 5 and associates 5, Accounts receivable - other Accounts payable - other Ending balance (millions of yen) Conditions of transactions and policies for determining the transaction conditions (Note 1) All amounts of funds raised by issuance of corporate bonds in June 2015, was loaned to SKY Perfect JSAT Corporation for capital investments, and the Company received all amount of bond issuance cost related to that bond issuance from SKY Perfect JSAT Corporation, which bore such costs. Interest rates on loans are determined based on market interest rates. (Note 2) The Group has introduced a cash management system, where the Group s funds are centrally managed by SKY Perfect JSAT Corporation, a managing company, and interest rates are determined based on market interest rates. The transaction amount of fund deposits by the Company with SKY Perfect JSAT Corporation under this system is shown as net increase or decrease. (Note 3) Outsourcing fees are determined through negotiations between the parties. (Note 4) The transaction amount does not include consumption taxes, but the ending balance includes consumption taxes. 7. Per share information (1) Total equity per share (2) Earnings per share ,000 5,495 5,