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I would like to extend my heartfelt gratitude to our share holders for their continued support and understanding for our business.

In presenting the business report for FY2017 of the Company, I would like to offer a few words.

As we strive to solve various issues and challenges that face society, our founding spirit--"Create a future society full of wisdom, together with our stakeholders,by utilizing our technologies based on engineering knowledge and by disseminating them throughout society"--is at the heart of our Thought (philosophy), "Innovating for a Wise Future."

Founded in 1959, since the days of its incorporation the Company has worked on advanced technologies and business challenges, making the best of its engineering knowledge which integrates academic and empirical knowledge. While maintaining a solid foundation of expertise in the structural design of buildings, we are expanding our businesses into diversified areas such as ground analysis and environmental analysis of the surroundings, support for utilizing IT in architectural and manufacturing industries, as well as simulation and decision making support for the development of social systems. In each business domain, we focus on leveraging the experience curve effects and have thus far accumulated engineering expertise and steadily enhanced the value we add to our solutions.

These efforts have contributed to the robust financial results for FY2017 of the Company, with its net income of ¥860 million, an increase of ¥244 million or growth of 39.6% over the previous fiscal year.

The Engineering Consulting business recorded an increase in profit, driven by repeated orders from bluechip enterprises in the residential/construction industries with their strong motivation for investment to expand business and enhance competitiveness, orders for structural design services and analytical consulting services that contribute to building a safe and secure society, as well as orders for simulation and decision making support for the development of social systems.

Profit from the Product Service business has been contributed by the sales of CAE software for designers which realizes period shortening and cost reduction in product development, and sales of package software products such as radio propagation analysis software, as well as the robust revenue from cloud-based email delivery services.

While maintaining steady growth of our core business as mentioned above, we have made continued investments with a view to future growth. Regarding investments to enable collaboration with partner companies both in Japan and overseas, for domestic investments, Prometech Software, Inc., shares of which we acquired in 2012, is steadily expanding its business. As for overseas investments, we have made an additional investment of approximately 1.5 million U.S. dollars this year to LockState, Inc., a U.S. company with which we have had capital and business alliances since 2008. This investment is part of a joint investment that was put by four firms and amounts to approximately 5.8 million U.S. dollars. The joint investment was organized by Iron Gate Capital LLC (head office: Colorado, USA) as a lead investor. Through the investment, we support development and business expansion of this promising company. Utilizing the IoT technologies in our operations of designing, analyzing, and system development to realize safety and security, we will continue to improve the usability, comfortability, and efficiency for building managers and residents.

In addition, as part of our investment for the future, we will continue to invest in venture capital funds and promote discovery of the seeds that sprout new business. As part of our commitment to academiaindustry cooperation, we participated in the Social Cooperation Programs of the Institute of Industrial Science, the University of Tokyo. Efforts have been jointly made to conduct basic research in mathematical engineering to serve as a foundation when solving the challenges of complex social systems in the future, as well as to explore the themes of applied research from a medium- to long-term perspective. In addition, we are also actively engaged in new business development inhouse, and growing new breeds of business through continuous reiteration of hypothesizing, practicing, and verifying. Each project is being led by junior staff members who will become next-generation leaders, which is promising in terms of our future growth.

To sustain these activities, it is crucial to recruit and develop human resources, the source of value creation. The recruitment of human resource is supported by proactive recruitment activities continued both in Japan and overseas. We are focusing, among others, on overseas recruitment activities that started in Singapore in 2014. As of the end of FY2017, there are 38 foreign nationals working with us, accounting for about 6% of all colleagues. In light of recent changes in the social situation, from FY2017 we implemented a revised personnel system with a focus on abolition of the mandatory retirement age and introduction of a specialterm work system (for colleagues with location- or timerelated ristrictions), in view of the coming era of the 100- year life. For human resources development, we are actively supporting our colleagues' growth through dispatching researchers and staff members to external organizations including Stanford University in the U.S., and our overseas partner enterprises. Although the outcome of these measures is not directly reflected in the financial statements, it is our belief that this strategy contributes to future organizational growth.

Looking ahead, we are committed to enhancing our corporate value by providing customers with solutions that benefit the society.

Therefore, we ask our shareholders for their continued support going forward.

September 2018

President, Shota Hattori