Results of Operation

Q1 Where can I find IIJ's results of operations?

Yearly and monthly results of operations can be found in Consolidated Financial Results.

Q2 Why does IIJ prepare its financial statements under US GAAP?

IIJ is listed on the US NASDAQ Stock Market and its consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Non-consolidated financial statements are prepared in accordance with accepted Japanese accounting practices ("Japanese GAAP").

Q3 Please tell me the differences between Japanese GAAP and US GAAP.

There are differences such as;

• under U.S. GAAP, expenses and losses related to operation are recorded in "expensee" whereas under Japanese GAAP, they are recorded in "Non-operating expense" and "Extraordinary loss".
• "Ordinary Income/Expence" in the statement of income under Japanese GAAP does not exist under U.S. GAAP.
• differences in accounting policies such as, income taxes, stock issuance cost, retirement and pension cost, accumulated income, additional-paid in capital and common stock and goodwill.

Under Japanese law, a company is required to have retained earnings, without accumulated deficit, in order to be able to conduct certain types of capital-related transactions such as payments of dividends in general. For this reasons, IIJ eliminated its accumulated deficit through the reduction of additional-paid in capital and common stock in our non-consolidated financial statements under generally accepted accounting principles in Japan. On the contrary, under U.S. GAAP, to eliminate its accumulated deficit through the reduction of additional-paid in capital and common stock requires a more strict rule and for this, in IIJ's consolidated financial statements under U.S. GAAP, accumulated deficit still remains.

Q4 I'd like to know about revenue recognition.

Revenues from connectivity services and outsourcing services are billed and recognized monthly on a straight line basis during the service period. Initial set up fees from systesm integration and equipment sales revenues are recognized when network systems and equipment are delivered and accepted by the customer. Maintenance, monitoring and operating service revenues are recognized ratably over the separate contract period, which is generally for one year. For further details, please refer to our Form 20-f.

Q5 Is there a certain cycle for quarterly revenue and operating income?

Corporate spending in Japan has the tendency to become the largest in the fourth quarter and the lowest in the first quarter as many Japanese companies have fiscal years ending in March 31. IIJ's systems integration revenue and operating income are most likely to be the largest in the 4th quarter as most of our customers has fiscal years ending March 31. For operating results, please go to the following web site.

Q6 When is the next earning release scheduled?

IR schedule are frequently updated on the IR Calendar.

Q7 Where can I find the latest financial statements?

IR documents such as SEC filed materials can be found in IR Library.

Q8 What is your financial target for FY2012?

We target revenues of JPY107 billion, Operating Income of JPY7.5 billion, Income before Income Tax Expense (Benefit) of JPY6.9 billion and Net Income attributable to IIJ of JPY4.0 billion.

Q9 Please tell me about the risk factors for growth.

Our business is principally conducted in Japan and most of our revenues are from customers operating in Japan. If the Japanese economy deteriorates or does not improve, and it results in significantly lower levels of network-related investment, especially in network systems construction which may have significant influence on our corporate customers' investment, or if corporate customers respond to conditions by prioritizing low price over quality, it may become difficult to maintain our current level of revenues or achieve our expected revenues and profits. If we experience cancellation of large accounts, it may also become difficult to maintain our current level of revenues and margins or achieve our expected revenues and profits. For risk factors, please refer to Risk Factors.

Q10 Tell me more about IIJ's tax operating loss carryforwards.

IIIJ had a large amount of tax operating loss carryforwards, which are available to offset future taxable income, as a result of our equity method net loss and an impairment loss taken in respect of our investment in our former equity method investee, Crosswave Communications Inc. ("Crosswave") which filed a voluntary petition for the commencement of corporate reorganization proceedings in Japan in 2003. A large portion of our consolidated tax operating loss carryforwards related to consolidated corporate tax expired in the period ended March 31, 2011.

Q11 Tell me more about IIJ's deferred tax expense (income).

As of March 31, 2011, we recorded deferred tax expense of JPY607 million whereas there was deferred tax benefit of JPY1,653 million in FY2007 resulting from a release of valuation allowance against deferred income tax assets related to tax operating loss carryforwards.

Q12 Where should I look for property and equipment?

Property and equipment, net recorded on our balance sheet was JPY16,481 million as of March 31, 2011. The values of our property and equipment includes such as data communications equipments under capital leases, office and other equipment and purchased software.

Q13 Where should I look for goodwill and other intangible assets?

The components of intangible assets as of March 31, 2011 are mostly customer relationships and goodwill that were recorded related to mergers and acquisitions of consolidated subsidiaries.

As of March 31, 2011, the total balance of our intangible assets was JPY11,824 million, of which customer relationships was JPY5,844 and goodwill was JPY5,788 million.

Q14 Where should I look for bank borrowings?

As of March 31, 2012, the total balance of our short-term bank borrowing were JPY9,000 million and long-term bank borrowing were JPY3,000 million. Bank borrowing to purchase the stocks of IIJ-Global was partially refinanced by long-term bank borrowing.