Annual Report 2016
From April 1, 2015 to March 31, 2016

Securities Code 4775

Good Medical Practicethrough Good Management
Medical institutions like hospitals and clinics need good management to provide good medical care.
Providing good medical care from the outset, however, also results in good management.
Therefore, good medical care and good management are both essential to the provision ofefficient, high-quality healthcare. When treating patients, doctors have pride and a sense of
mission that cause them to do everything in their power for the patient they are treating.
Consequently, Sogo Medical’s mission is to provide the institutional support that enables doctors to focus on theprovision of this good medical care.

Management Principles
At Sogo Medical, a unique set of management principles is at the center of the work that we do andthe way we undertake it. Our Pledge dedicates our lives to valuing human life through our vocationand putting our hearts into our work. The Mission Statement declares the Company’s purpose. Our
Corporate Credo outlines the assurances and promises we make to society.

Our Pledge
We shall, in our own lives, highly value
the irreplaceable lives of others.

We shall work to build a better society
through good medical practice.

Corporate Credo

We shall strive always to be right-thinking,grateful, diligent, modest, honest, refined,straight and fair independent people.

1. We shall be a company that values
each life as irreplaceable.

We believe that our work contributes
to the advancement of society andbenefits many people, andshall therefore conduct our work
responsibly and efficiently.

3. We shall encourage our employees tolive full lives, and grow together
with them as a company.

We shall not hesitate to do goodnor prevent harm.

SOGO MEDICAL CO., LTD.

Mission Statement

2. We shall be a good partner to our
suppliers and earn their trust.

4. We shall seek to cultivate thecharacter, skills, and insight of each
employee, to meet our
responsibilities both as a company as
a whole and as individual citizens.

01

Contents
Company Profile
02 Long-Term Vision & Business Outline
04 Business Overview
06 Sogo Medical’s Development
08 2016 Highlights

President’s Message
12 Foreword
13 General Outline of the Year Ended March 2016
14 Medium-Term Management Plan Priority Initiatives
18 Achieving Our Long-Term Vision

Action Reports
24 Medical Practice Support Business
28 Pharmacy Business
34 CSR

Business Performance by Segment
36 Higashinihon Office
37 Nishinihon Office
38 Kyushu Office

Corporate Governance
40 Directors, Audit & Supervisory Board Members and
42
44
45

Corporate Executive Officers
Corporate GovernanceInternal Control System and Compliance System
CSR Management

Financial Section

Corporate Logo

47 Five-Year Summary of Consolidated Financial Statements
48 Management’s Discussion and Analysis
54 Risk Information
56 Consolidated Financial Statements

The logo is designed arounda human being motif.
The upper circle is the head
• (intelligence)
The lower circle is the heart• (passion)
The arc in the center is the body• (conduct)

Corporate Information

This combination of intelligence, passion and conduct forms thebasis for action at our company with our emphasis on management
consulting.

A cautionary note on
forward-looking statements

Stock Information• This annual report contains forward-looking statements relating to performance projections and future predictions that are based on
judgments made in light of information available at the time of writing, and as a result includes risks and uncertainties. For this reason, there isa possibility that actual results may differ from such forecasts.
• If it becomes necessary to make revisions to items presented in this annual report after publication, the revised items will be updated on thecompany website in the “Investor Relations” section.

Annual Report 2016

02 Company Profile

Long-Term Vision & Business Outline
We are working to build a better society
through good medical practice.
Patients

Business
Partners

Local
Communities
Shareholders

Doctors
MedicalInstitutions

The
EnvironmentLong-Term Vision"Tackling the Challenges of Achieving a
Unique Japanese Healthcare Business Model"

Medium-Term Management Plan

Further Challenge
Toward a better society in which people can live with a sense of security

Support forGood Medical Care

Assisting Local Medical Practices
with Advanced Specialist Expertise

Support for Leading Safe,
Comfortable Lives

Medical Practice
SupportPharmacies

Other Activities

Dispensing Pharmacies

Long-Term CareManagement Consulting, DtoD,
Leasing, Rental, Design &Construction, Healthcare
Information Service

Management Principles

Our Pledge

SOGO MEDICAL CO., LTD.

Mission Statement & Corporate Credo

Company Profile

03

Long-Term Vision "Tackling the Challenges of Achieving a Unique
Japanese Healthcare Business Model"
It is through achieving a unique Japanese healthcare business model that we will help create a
medical system that provides citizens with efficient, high-quality medical care.

Medium-Term Management Plan
"Further Challenge—Toward a better society in which people canlive with a sense of security"(For the three-year period from April 2014 to March 2017)
Contributing to building a platform for regional
healthcare networks through our Doctor to Doctor(DtoD) system and high-value pharmacies.

1
Undertaking
New Businesses

For more details, see p. 18

2

Priority
Initiatives

Improving
Existing
Businesses

3
Enhancing
Corporate Value

Providing Total Consulting-Based Medical Management Support
Sogo Medical offers total consulting-based
medical management support that enables
hospitals and clinics to provide efficient,high-quality healthcare. We are engaged ina variety of activities that support good
medical practice.
Our DtoD system helps to stimulate
local medical practices through doctor
introductions, support for the succession of
medical practices, and the coordination of
medical care. We have also established 576
dispensing pharmacies nationwide, andlease medical equipment and rent TVs tohelp improve the quality of amenities forpatients.

Pharmacies
DesignConstruction

RentalMedicalInstitutions
Leasing
Patients

Long-Term
Care

DtoD System
Management Consulting

Annual Report 2016

04 Company Profile

Business Overview

Medical Practice Support

Percentage
of total sales

19.3%

We conduct consulting to formulate
basic plans and to support medical
practice management improvement. We
also put into practice our DtoD system,
which supports doctors who are wishing
to start up or transfer practices, orcoordinate healthcare networks. We arefurthermore involved in other ways of
supporting medical practices, such as
renting out TVs for patients in hospitals,
leasing medical equipment, and planningthe design and construction of medical
and long-term care facilities.
Please refer to page 48 for our achievements in Medical
Practice Support.

Pharmacies

Percentage
of total sales

79.8%

We operate 576 dispensing pharmacies
across Japan, including our Sogo
Pharmacies that serve as "general
healthcare stations." Our keyword is"coordination"—working with medical
institutions and doctors in the care ofpatients, and lending support to local
medical practices. We take various
measures to enable our pharmacists towork to their fullest capabilities so thatpeople come to consider them their"primary care pharmacist" at their "primarycare pharmacy."
Please refer to page 50 for our achievements in
Pharmacies.

Other Activities

Percentage
of total sales

0.9%

SOGO MEDICAL CO., LTD.

We are expanding our elderly care business through Sogo Care Network Co., Ltd., which
manages fee-based residential homes for the elderly, and Sun Villa Co., Ltd., which manages
fee-based homes with long-term care for the elderly.

Company Profile05

Contributing to the Revitalization of Local Medical Carethrough the DtoD System
In d

Independent
Physicians

tra
gis
Re

n

rt

SOGO
MEDICAL

t io

er c
ha

Su

Registration

ng

e

ppo

Introduction of successor

tra

Su

ion

gis

t io

e, S u c c e s sRen

nd en cSupport

Employed
Physiciansepe

Hospitals

pp

m
na en
tio t o f
n s h e altruc thcar etures

Career change,
support to launch
independent practiceC are

The DtoD system is a framework that supports
both the ambitions of doctors and good medical
practices. For example, one service offered under
the DtoD system provides extensive nationwide
placement information to doctors wishing tochange their practice, suggesting opportunities
that provide the best match. The DtoD system
also provides comprehensive support to doctors
seeking to go into private practice, from practicestart-up preparation, including the drawing up of
management principles and a business plan,
through post-launch follow-up. The system canalso introduce successors to medical practiceowners who have worked to build up a practiceover many years when they have no person readyto carry forward the business. We also introduce
hospitals with superior doctors who meet theirneeds and we support overall healthcare
coordination.
The DtoD system also connects hospitals,
employed physicians, and doctors in private
practice within the region, contributing to thecreation of important ties among practitioners torealize efficient, high-quality healthcare.

or thli s diab or
Est coIntroduction of superior physicians
Support for overall healthcare coordination

High-Value Pharmacies with Local Roots
By putting our pharmacists’ abilities to work,
we have promoted in-home medical care,
supported disease prevention efforts, offeredself-medication*1 support, and accelerated theuse of generic pharmaceuticals, all to promote
the establishment of high-value pharmacies.
Also, through our GOES*2 independent training
system, we are furthering efforts to improve thequality of medical service by providing ourpharmacists with the necessary medical andpharmaceutical knowledge, communication
ability, technical skills, and proper attitude.
*1 Self-medication: Taking responsibility for one's own health, aperson treats slight physical ailments on his or her own.
*2 GOES: Gradable OJT Educational System

Promote in-homemedical care

Support disease
prevention efforts
and offerself-medication
supportAccelerate useof genericpharmaceuticals

Demonstrating on-the-job skills

Gradable OJT Educational System (GOES) for Pharmacists

Annual Report 2016

06 Company Profile

Sogo Medical's Development
Net Sales(¥ billion)

140

We will continue to support good medical practice tobuild a better society.

120

100
Net Sales

Ordinary Income

8060June 1988
Pharmacy businesslaunched

40

June 1978
Sogo Medical Leasing Co.,
Ltd. established with acapitalization of ¥20 million

October 1994
Design andconstruction of
medical facilities
begun

November 1989
"Green Members" (now"Succeed Members") system
for medical personnel
launched

November 1987
TV rental business forpatients launched

20

0
1979

Major Events

1980

1981

1982

1983

1984

1985

1986

1978-1987• 1978• 1987

SOGO MEDICAL CO., LTD.

1988

1989

1990

1991

1992

1993

1994

1995

1996

1988-1996

June
Sogo Medical Leasing Co., Ltd.
established with a capitalizationof ¥20 million

NovemberTV rental business forpatients launched

1987

Area around the Fukuoka Tenjin Center Bldg.
at the time of the company's establishment• 1988June
Pharmacy businesslaunched• 1989November"Green Members"(now "Succeed Members") system
for medical personnel launched• 1994

October
Design and construction of
medical facilities begun

First Sogo Pharmacy,
in SakuradaiCompany Profile

February 2016
Acquired 75% of shares of
GM Co., Ltd., a company that
performs interior construction at
medical facilities

07

Ordinary Income(¥ billion)

6
March 2015
Acquired 61.6% of shares of
Hokendohjinsha Inc., a healthcare
information services company

5
November 2011
Long-term care service
business launched

43August 2007
Business alliance
formed with Mitsui &Co., Ltd.
March 2014
Net sales reach ¥100
billion

2001
April

All shares of TV rental
company acquired
September Listed on First Section ofTokyo Stock Exchange
October
DtoD system launched21April 2005
Hospital operational
management
contracting begun

0
August 2000
Listed on Second Section ofTokyo Stock Exchange-11997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

January 2002
100th Sogo
Pharmacy
openedNovember 2004
200th Sogo
Pharmacy
opened1997-2006• 2000• 2001• 2005

AugustListed on Second Sectionof Tokyo Stock Exchange
April
All shares of TV rental
At our listing on the Second Section ofcompany acquired
the Tokyo Stock Exchange
September
Listed on First Section of Tokyo Stock Exchange
October
DtoD system launched
April
Hospital operational management contracting begun

June 2010
300th Sogo
Pharmacy
openedDecember 2012
400th Sogo
Pharmacy
openedApril 2014
500th Sogo
Pharmacy
opened2007-2016• 2007

AugustBusiness alliance formed with Mitsui & Co., Ltd.

• 2011

NovemberLong-term care service
business launched• 2014March
Net sales reach ¥100 billion• 2015long-term care for the elderly
March
Acquired 61.6% of shares of Hokendohjinsha Inc.,a healthcare information services company• 2016

February
Acquired 75% of shares of GM Co., Ltd., a company
that performs interior construction at medical facilities

Villanova Otani, a fee-based home with

Annual Report 2016

08 Company Profile

2016 Highlights

Each humble activity adds up and leads to steady growth.
A total of 367 doctors
attended our seminars on
how to open a practice.

464 new
practicequestionnaires
collected.

Seminar Participation from Doctors
We hold seminars for doctors seeking
to start their own private practices,
providing support to make these
doctors' dreams into a reality.

62,429 doctors areregistered with our DtoD system.

New Practice Questionnaires
Interviews were carried out with doctors to determine what an
ideal medical practice would be. These questionnaires haveallowed Sogo Medical to support each physician in providing
better medical care.

We have 34 healthcare
management consultants.
Officially Registered as Healthcare Management
Consultants with the Japan Association of
Healthcare Management Consultants
Our consultants provide a wide range of management
consulting services as partners to medical institutions, fromsolving immediate problems to setting up structures for the
future.

Net Sales¥120.7billion

103.3

65.8
59.6 64.4

70.4 72.7

80.2

Support for Doctors Who Wish to
Change Jobs or Open a Practice
Our support creates an environment inwhich employed physicians can give theirfull attention to providing medical care andrealize their aspiration to change jobs oropen a private practice.

Succeed Members
now total 1,639.
Succeed Members
We provide support for running a medical practice andachieving good management at medical institutions from avariety of angles that includes human resources, facilities,
funding, and information.

Operating Income / Operating Income
to Net Sales Ratio
Operatingincome

107.9

4.8

86.6

4.1
3.0
1.6
2.8

2007 2008 2009 2010

SOGO MEDICAL CO., LTD.

2011

2012

Operating income to
net sales ratio

2013

2014

2015

2016

¥ 6.0
billion

5.0

5.0

4.3

3.2
2.4

4.7
3.8

6.0
4.6

2007 2008 2009 2010

5.7

2011

5.0

2012

2013

4.9
4.6
2014

5.0％

2015 2016

Company Profile

We ran economic comparison
simulations for 117 pharmacies.
Economic Comparison Reports
As new policies have been adopted for locating pharmacies
outside of hospitals and clinics, we forecast and analyze economic
conditions for medical institutions before and after this shift tofacilitate the smooth functioning of pharmaceutical dispensing.

1,913
Pharmacists

09

HealthCare Note
(Electronic Medicine Scheduler)registered users now
total 28,358.
HealthCare Note
This application brings convenienceby shortening patient waiting times, forexample, and by allowing pharmacists
to review patients' medication records
ahead of time, promoting more reliable
dispensing of medicine.

Pharmacists
A broad-based training system
helps pharmacists improve theirskills and expand pharmacy
services.

(As of March 1, 2016)

We provided feedback to
doctors from 73,784 trace
reports.

There arenow 576
Sogo
Pharmacies.

Trace Reports

Sogo Pharmacies

Information from patients, including dosage
schedules, was shared with doctors to
improve the quality of care given to patientsin collaboration with medical institutions.

We have expanded our network of dispensary pharmacies
nationwide to serve as "general healthcare stations" with rootsin their local communities. By putting our pharmacists' skills
into action we are helping to improve local medical care.

Total Assets /Capital Adequacy Ratio
Capitaladequacy ratio

Total
assets

53.1
36.2

28.3 29.5 29.9
50.1
49.6

Total Net Assets / ROE
Total net assets

14.7 15.0 15.9
9.6
37.8
36.7

2011

2012

billion

ROE

57.1

40.5

34.1

¥ 29.6billion66.9 69.8

43.0

43.3

2007 2008 2009 2010

¥74.6

2013

35.7 37.7
2014

39.5％

2015 2016

10.0

17.4

14.1
8.6

10.0

2007 2008 2009 2010

19.5

13.1

2011

21.6

23.9

13.6

2012

12.3
2013

26.5

12.6

2014

11.0

8.3％

2015 2016

Fiscal year ended March 31

Annual Report 2016

10 President’s Message

We solve social issues inmedical treatment throughour DtoD system andestablishing high-value
pharmacies.

Kenji Sakamoto
Representative Director,
President andChief Executive Officer

SOGO MEDICAL CO., LTD.

President’s Message

11

President’s Message

12 Foreword
13

General Outline of the Year
Ended March 2016

Medium-Term Management Plan Priority Initiative 1

14 Undertaking New Businesses

Medium-Term Management Plan Priority Initiative 2

15 Improving Existing Businesses
Medium-Term Management Plan Priority Initiative 3

17 Enhancing Corporate Value

18 Achieving Our Long-Term Vision

Annual Report 2016

12 President’s Message

Foreword

ProfileBorn October 9, 1958
1983
2002
2004
2006
2007
2008
2010
2011
2012
2015
2016

Joined Sogo Medical
Managing Officer
Manager of Chugoku & Shikoku OfficeSenior Managing Officer
Manager of Nishinihon Office
Executive Managing Officer
Manager of Higashinihon OfficeDirector
Executive Director
Senior Executive Director
Representative Director, Executive Vice President
Representative Director, Executive Vice President,
Managing Officer
Representative Director, President andChief Executive Officer (–present)

SOGO MEDICAL CO., LTD.

Since joining Sogo Medical in 1983 I have worked tofulfill one of the company's principal goals of supporting
local medical practices. Improving medical treatment
gives people the chance to lead healthier lives and provides
a strong foundation for stimulating local economies.
Following a set of management principles that include
Our Pledge, Mission Statement, and Corporate Credo, wewant each and every employee to see reality with anunaffected heart and maintain a caring attitude toward
others, carrying out their duties with a spirit of altruism.
By so doing we will maintain the trust that we have built,
while working to build a better society through good
medical practice. Such efforts, I believe, will promote
our employees' personal growth and further enhance thequality of our services.
The coming year is the final year of our medium-term
management plan "Further Challenge—Toward a better
society in which people can live with a sense of security."
Focusing on our DtoD system and high-value pharmacies,
we will endeavor to provide new services that contributeto society while extending our existing businesses.

Kenji Sakamoto
Representative Director,
President andChief Executive Officer

President’s Message

13

General Outline of the Year Ended March 2016

This fiscal year what kind of actions were taken to fulfill the objectivesof the medium-term management plan "Further Challenge—Toward
a better society in which people can live with a sense of security"?

"We actively promoted our two primarybusinesses—medical practice support and pharmacies."
At present, one in five private medical practices is run by a doctor who is 70
years of age or older, and it is not easy to find a younger doctor to take oversuch practices. Over 4,000 clinics are closed every year. We introduce doctors
who want to open a practice to doctors who are looking for a successor so that
their clinic may continue to serve the local community. In this way we help tosustain and invigorate healthcare activities in regional communities. The
younger doctor taking over the practice inherits the clinic's patients and its
facilities and equipment, so start-up costs are low. This model for third-party
succession not only helps to keep medical costs down, it offers a valuable
service to society.
We also worked hard to develop healthcare malls. Such malls offer theadvantage of various specialized medical care practices concentrated in one
location. With the ongoing aging of Japanese society, they bring convenienceto patients suffering from multiple illnesses, eliminating the need to travel fromone clinic to another in separate locations. The quality of medical care also
improves due to greater interaction among doctors as a natural result of theirclose proximity.
In the pharmacy business, we consider it our role to be closely involved inlocal healthcare as partners to medical institutions. This fiscal year we aim tocontinue opening dispensary pharmacies to serve as "general healthcare
stations" that take root in each community and come to be considered bypeople as their primary care pharmacy. Such an approach also winds up
attracting patients from farther distances away.

Clinic Doctors by Age

Cases of Support Provided for Clinic Succession
Under 29
0.2%

30–39
4.9%

18.8%

40–49
19.4%

37

Average age

59.2
50–59
31.1%

74

80

Over 70

50

47

60–69

25.7%

Note: Doctors may have their own private clinic or be a corporate
representative or employee.

2012/3 13/3

14/3

15/3

16/3

Source: 2014 Survey of Physicians, Dentists and Pharmacists(Ministry of Health, Labour and Welfare)

Annual Report 2016

14 President’s Message

Medium-Term Management Plan Priority Initiative 1

Undertaking New Businesses

Please tell us about efforts made during this fiscal year to support
hospital management.

"We are taking a variety of initiatives to provide steadysupport for hospital management."
Public fiscal reforms are a top priority in Japan today, and a wide range ofreforms are taking place in the field of healthcare to ensure the base financial
stability of the social security system. The functions and role that medical
institutions should fulfill for healthcare in regional communities have been called
into question.
For this reason we have seen an increase in consultation requests frommedical institutions regarding their management and have already begun
consulting on multiple projects. As we proceed, we are also studying how best
to develop new businesses.

Please tell us about the efforts and results this year of Hokendohjinsha
Inc., which became a Group company in March 2015.

"We have begun strengthening sales and developing
systems for our services. This is having synergistic effects
within the Group."
Synergistic effects with
Hokendohjinsha Inc.
Areas covered by each company
Acute medical
care
Clinics

Sogo Medical(consultations,
pharmacies,
financing, etc.)

High risk
Prevention
Presymptomatic

Hokendohjinsha Inc.
(consultations, EAP)

Healthy

Consultation/counseling service

SOGO MEDICAL CO., LTD.

Up to this point, Sogo Medical has supported good medical practice byworking to assist both medical institutions and patients. In conjunction with
Hokendohjinsha we are able to help build a platform for regional healthcare
networks by providing comprehensive support to insured individuals,
corporations, and other parties. These efforts also help to establish a unique
Japanese healthcare business model by contributing to lowering medical costs
through the operation of businesses such as those relating to Data HealthPlans.
Hokendohjinsha has been running an employee assistance program (EAP)business since 2007 to support companies looking to improve their healthmanagement and also the people working for those companies.
Since December 2015, businesses with workplaces that regularly employ 50
or more workers are being required by law to conduct checkups for mental
stress once a year. We have worked to strengthen sales of the Hokendohjinsha
packaged service for conducting stress checkups as legally required.
Hokendohjinsha also reworked its telephone consultation system, relaunchedon April 1, 2016, for individual consultations following stress checkups.
We are looking at how these activities can spur further synergy with Sogo
Medical through the pursuit of pharmacy-based health guidance, consultation
services, and education for people in regional communities.

President’s Message

15

Medium-Term Management Plan Priority Initiative 2

Improving Existing Businesses

Please talk about the results of medical practice support efforts thisyear based on the DtoD system.

"We are working hard on projects such as healthcare mallswith a view toward the future, aiming to support good
medical practice, together with our new Group companies."
At present we have 62,429 employed physicians registered in our DtoD
system (an increase of 5,924 from the previous year)—those who either wish tochange practices or open a private practice. This year, Sogo Medical conducted
22 seminars around the country on how to open a practice. We also facilitated
74 clinic successions as part of the support we provide to doctors seeking tostart their own practices, which also leads to lease contracts, the opening of newpharmacies, and other developments.
Additionally, we have opened healthcare malls around the country, including
Medical Mall Fujimi (Fujimi, Saitama Prefecture) and P Mall Fujita Clinic Zone
(Okayama, Okayama Prefecture). Medical Mall Fujimi is located within a large-scalecommercial facility and has an ophthalmology clinic, a multi-specialty clinic(internal medicine, pediatrics, dermatology, gastroenterology, rheumatology), as
well as a Sogo Pharmacy. This healthcare mall offers great convenience and isalso open on weekends and holidays. (For more details, see pp. 24–25.)
As society advances in age, the role of healthcare malls will only continue togrow in importance. We feel it is necessary to be flexible in providing medicalcare, and to bring care to people and locations where they reside as needed byregional communities, including the development of in-home medical careservices.
Also, in February 2016, GM Co., Ltd. became a new Group company. GM
performs interior construction at medical facilities and installs and maintains
medical equipment. By having GM work in conjunction with another Group
company, Somtech Co., Ltd., which plans, designs, and builds medical andnursing care facilities, our services have expanded in the areas of new start-ups
and maintenance support after opening.
Number of registered doctors wishing to change
practices or open a practiceTotal healthcare malls opened at fiscal year end

62,42932,054

40,778

2012/3 13/3

48,43065

56,505

53
32

14/3

15/3

16/3

36

2012/3 13/3

41

14/3

15/3

16/3

Annual Report 2016

16 President’s Message

Medium-Term Management Plan Priority Initiative 2

Improving Existing Businesses

Please talk about the company's efforts to establish high-value
pharmacies during this fiscal year.

"We bring out the full capabilities of pharmacists tomaintain and improve the health of patients."

HealthCare Note (electronic medicine
scheduler), Hokendohjinsha's "Health
Library for All" and successful integration
between the twoThis year 47 pharmacies were opened (including 25 through M&A activities),
bringing our total to 576 at the end of fiscal year.
The pharmacies of the Sogo Medical Group have introduced the use of the
HealthCare Note (electronic medicine scheduler) to over 28,000 patients. Since
December 2015, the HealthCare Note has been linked to the OS-integrated"Health" iPhone app, allowing the collection of pedometer data. There areplans to expand the system in the future to include body weight, bloodpressure, and other health indicators. By so doing, pharmacists will be able tohelp patients beyond offering guidance on taking medications, extending togiving advice on improving lifestyle patterns and other aspects of wellbeing, tomore actively help people to be healthy. In addition, Hokendohjinsha's
healthcare and health information browsing service, "Health Library for All,"
supplied through the HealthCare Note, allows free-of-charge browsing of
information to help maintain and improve patients' health.
In February 2016, Sogo Pharmacies around the country began using theMedication Calendar to help people take their medications properly. The
calendar helps keep people from forgetting to take their dose or from taking thewrong dose. (For more details, see p. 32.)
Also, at the Sogo Pharmacy Tenjin Chuo Location in Fukuoka City, "Cancer
Conversation Café" sessions have been held since March 2013 to help alleviate
the concerns of cancer patients and their families. Refreshments are served ina relaxing atmosphere and pharmacists use their expertise to address people's
many concerns about cancer, helping to reduce their anxiety in whatever way
they can. (For more details, see pp. 30–31.)

Number of Pharmacies

576

493
366

2012/3SOGO MEDICAL CO., LTD.

538

pharmacies

417

13/3

14/3

15/3

16/3

President’s Message

17

Medium-Term Management Plan Priority Initiative 3

Enhancing Corporate Value

Please talk about the efforts made and results achieved this year with regard tocreating mechanisms that enable employees to take pride in their work and feela sense of purpose, and that allow the organization to grow with its employees.

"We are making progress with our human resources
systems to enable our employees to grow personally andlead fuller lives."
This year we offered new optional training programs for employees that include"cafeteria-style training" and management development training for female
employees. We also trained people through various other means. Practice Process
Innovation (PPI) is an internal certification system aimed at developing humanresources in the areas of start-up support, personnel placement, and pharmacy
management. Our Gradable OJT Educational System (GOES) is an independent
system for training pharmacists at different levels that helps them to fully utilize theirskills in the course of their work.
In January 2015 we launched a Diversity Promotion Project and also set up acommittee for promoting leadership opportunities for female employees and acommittee for promoting participation of foreign citizens, senior persons, andworkers from other industries. This year we made steady progress with thesediversity efforts. Our goal is to have 30% or more positions of leadership filled byfemale employees by March 2017. We are also concentrating on hiring people withdisabilities and have set up a department within the company that provides asupportive environment in which people with disabilities can work. Among those wehave hired are athletes who compete in international disabled sports competitions.
Based on the principle that as our company grows, our employees grow with it,
we promote work-life balance. Specifically, we have introduced such systems as
child-rearing assistance, nursing care leave, and long-term income protection
insurance. In particular, as more than half of our pharmacists are female, it isessential to create workplaces that have a comfortable working environment andthat offer opportunities for growth. We have therefore worked to establish internal
systems that are suited to the life plans of our female employees. (For more details,
see p. 34.)
Practice Process Innovation (PPI)Internal Certification

Promoting the Hiring of
People with Disabilities
Disabled athletes who compete ininternational sports competitions areamongst those hired

Rie Urata
Goalball (Japan women's team captain)

Yuki Yoshida
Swimming

Honoka Niiyama
Swimming

Takashi Hori
Wheelchair rugby

Gradable OJT Educational System (GOES) for Pharmacists

Start-Up Support PPI
PPI

Personnel Placement PPIPPI Skills for Different Levels
Leadershipskills
Implementation skills(ability to perform)
Knowledge and skills(ability to retain)
Level I

Level II

Level IIIses ce
in a ns
B u fo r mrpeLevel IV

Skill Improvement

Pharmacy Management PPINew Employee
Training
Introductory residentialtraining course for new
employees hired
regularly
OJT / Block training for
new employees
Follow-up training

Skill Improvement
Training

Physical assessment
training

Communication

In-home medical caretraining

Medical knowledge

Overseas training
etc.

Practical skills(pharmaceutical affairs,
technical skills, attitude)

Board-certified
pharmacy specialist
training

Gradable OJT Educational System (GOES) for Pharmacists

Level V

Annual Report 2016

18 President’s Message

Achieving Our Long-Term Vision

Please tell us about the company's goals for the coming year based on
this year's performance with regard to achieving the long-term vision.

"We have set out to achieve the objectives of themedium-term management plan by enhancing our
initiatives taken and creating new services."
This year, an increase in sales at our existing pharmacies, combined withnew pharmacy openings, caused net sales to rise 11.9% over the previous yearto ¥120,776 million. Operating income similarly rose 21.3% to ¥6,087 million.
Ordinary income increased 18.5% to ¥6,196 million, while net income
decreased 16.5% to ¥2,318 million due to extraordinary losses.
In the coming fiscal year we plan to further expand our DtoD system andcreate more high-value pharmacies, so we are aiming for net sales of ¥126,507
million, ordinary income of ¥6,020 million, and net income of ¥3,730 million.
Long-Term Vision and Medium-Term Management Plan

Long-Term Vision "Tackling the Challenges of Achieving a Unique Japanese
Healthcare Business Model"
Our main objective is to achieve a unique Japanese-style healthcare business model that helps create
medical systems through which patients can receive efficient and high-quality medical treatment.

Major regional
hospitals
Dispensing
pharmacies

Medium-Term Management Plan
(April 2014–March 2017, three-year period)

Further Challenge

Hospitals

Residential homes
and facilities forthe elderly

In-homecare

Healthcare
malls

Clinics—Toward a better society in whichpeople can live with a sense of security—
Main Priority Initiatives

1 Undertaking
New Businesses
We will provide support for
managing and coordinating
medical services ranging
from acute medical care to
in-home care in order to help
build a platform for regional
healthcare networks.

SOGO MEDICAL CO., LTD.

2 Improving Existing Businesses
We will provide medical support based aroundthe DtoD system by constructing exemplary
healthcare malls, enhancing support forstarting up practices, improving user services,and expanding recurring businesses.
We will create high-value pharmacies byhelping pharmacists fully utilize their skills toenhance coordination between pharmacies
and medical institutions, make medical costs
more affordable, and improve in-homemedical care services and self-medication
support.

3 Enhancing
Corporate Value
Acting in accordance with
our management principles,
we strive to always be anorganization that grows with
its employees and at which
employees can take pride in
their work and feel a senseof purpose.

President’s Message

19

Please talk about steps being taken to achieve the objectives of the company's
long-term vision.

"We are working to achieve a unique Japanese
healthcare business model."The coming fiscal year is the final year in our medium-term management
plan. We will be putting energy into the following three areas as we work toachieve the objectives of our long-term vision of achieving a unique Japanese
healthcare business model by focusing on our DtoD system and high-value
pharmacies.
The first area is development and expansion of healthcare malls.
We are promoting two types of healthcare malls—an evolutionary type anda new-model type. The evolutionary healthcare mall serves as a community
healthcare station that primarily functions to strengthen urban development
and the integrated community care system. The new-model healthcare mallpromotes the specialization and coordination of healthcare functions toeliminate inefficiencies in the current medical system—concentration ofpatients with minor illnesses receiving care at sophisticated acute care
hospitals.
To promote healthcare malls in the Tokyo metropolitan area where demandis high, we established a new Healthcare Mall Development Division at theHigashinihon Office. This division aims to improve our 65 existing healthcaremalls and expand that number to 300 over the five years until March 31, 2021.
In assisting with medical practice successions, which help to sustain andrevitalize healthcare in local communities, we also offer healthcare malls as
an alternative location for a practice.
The second area is hospital management support as a means of assistancefor building an integrated community care system.
Based on community medical care plans, we support hospitals throughconsulting on the specialization and aggregation of clinical functions to suiteach locality's medical care situation.
In providing hospital management support we discovered the need to
improve amenities for patients, particularly the need for TV rentals. In thethree years ahead, we will focus on renewals of contracts following theswitchover to digital terrestrial TV in July 2011, so in the coming year the rental
business is positioned as a key endeavor.
The third area is creating high-value pharmacies. The Japanese
government's 2016 revision of regulations pertaining to drug dispensing
specifically addresses the role and evaluation of "primary care pharmacists
and pharmacies." We are working to help pharmacists fully utilize their skills,
aiming to create "primary care pharmacies" chosen by the community thatact as "general healthcare stations."
Our strength lies in the relationships of trust that we have established todate. We aim to further solidify this trust from doctors, business partners andordinary people in local communities to propel our growth. I request yourcontinued support as we move forward.

Annual Report 2016

20 President’s Message

Achieving Our Long-Term Vision

Realization of a Japanese Healthcare Business Model
Creating solutions with our DtoD system and high-value pharmacies to deal withsocial issues in the medical and healthcare field.

1 Development and Expansion of Healthcare Malls(1) Evolutionary healthcare malls“Community healthcare stations” that play a central role in community development and theintegrated community care system
Create 100 malls by March 31, 2018 and 300 by March 31, 2021
(2) New-model healthcare malls (rebuilding the healthcare delivery system)
Healthcare malls that promote the specialization and coordination of healthcare functions toeliminate inefficiencies in the current medical system—concentration of patients with minor
illnesses receiving care at sophisticated acute care hospitals(3) Promote support of medical practices carried on by successors(sustain and revitalize local healthcare)
Of the 600 clinics that are having difficulty finding a successor, Sogo Medical aims for a 30% shareby March 31, 2019 and 90 practices in the fiscal year ending March 31, 2017

2 Hospital Management Support (assist in the building of the integrated community care system)(1) Consulting services for the reorganization of hospital beds (consulting for the specialization andintegration of hospital beds to conform to the medical situation)
Targeting 2,000 hospitals, each with 200 or fewer beds, that are having difficultyfinding a successor(2) Support of establishing a corporate organization to promote coordination of local healthcare

3 Create High-Value Pharmacies
Fully leverage functions and capabilities as a primary care pharmacist
Become a primary care pharmacy that is chosen by local community members

Promote through a structured system along strategic lines

Offices and Pharmacies

1 Development andExpansion of
Healthcare Malls

SystemHealthcare Mall
Development
Division(Higashinihon Office)2 Hospital Management
SupportConsulting
Division

DtoD Strategy Division

SOGO MEDICAL CO., LTD.

3 Create High-Value
Pharmacies

PharmacyManagement
Division

President’s Message

21

Healthcare mall goals

Create 100 malls by March 31, 2018
(target 22 malls in fiscal year ended March 31, 2017)

Create 300 malls by March 31, 2021
(target 200 malls by March 31, 2018)

Target 200 malls

Target 22 malls
Expansion
78 malls by the end of
the fiscal year

65 malls by the end of
the fiscal year

Fiscal year ended
March 31, 2016

Fiscal year ending
March 31, 2017

100 malls by the end of
the fiscal year

Fiscal year ending
March 31, 2018

ExamplesMedical Mall Fujimi

Medical Hills Korigaoka

Tsukiguma Medical Mall

(Opened May 2015 in Fujimi City,
Saitama Prefecture)(Opened September 2014 in Hirakata City,
Osaka Prefecture)(Opened May 2012 in Fukuoka City,
Fukuoka Prefecture)

Types of Support
Start-up consulting; leasing; design; pharmacy
opening; facility leasing; introduction of doctors;
operations outsourcing

Types of Support
Start-up consulting; leasing; design and construction;
facility leasing; risk management; pharmacy opening

Types of Support
Start-up consulting; leasing; design; facility leasing;
pharmacy opening; etc.

Key Points

Key Points

Key Points

Opened at Mitsui Shopping Park LaLaport Fujimi, alarge-scale shopping complex

An orthopedic clinic was opened in April 2015
in addition to an internal medicine clinic,
ophthalmology clinic, and residential home forthe elderly with services

Site received from Fukuoka City and facility
opened to promote urban development in linewith administrative intent

Multi-specialty clinic (internal medicine; pediatrics;
dermatology; gastroenterology; rheumatology)
plus ophthalmology clinic and dispensing
pharmacy
Multi-specialty clinic centralizes patient data toprovide quality medical care efficiently

Patients are referred between the internal
medicine and ophthalmology clinics, along withother forms of cooperation

Healthcare mall for the local community isestablished on the site along with a supermarket
and community center to serve as a key local
gathering place, including emergency use as anevacuation site

Also open on weekends and holidays, which will
attract customers, including patients from far
away

Annual Report 2016

22 President’s Message

Achieving Our Long-Term Vision

Creating High-Value Pharmacies

We aim to bring out the full capabilities of "primary care pharmacists" andsupplement additional value by serving as "general healthcare stations."

Full skill utilization of "primary care pharmacists"

Support of
1 Strengthen
At-Home Care

Specialization
2 Improve(Expertise)

Patient
3 Improve
Services

Implement at-home support in allpharmacies by March 31, 2017(currently implemented at 67% of all
pharmacies)

Train pharmacists to deal withcancer and diabetes
Increase in the number of sport
pharmacists
Provide support to prevent illnesses
from becoming serious
Increase the number of dementia
patient supporters

Healthcare consultation initiatives
Secure fees for supporting
out-patient pharmaceutical services
Secure premiums for preventing the
duplication of doses and druginteractions
Promote the use of generics(implement at more than 80% ofpharmacies by March 31, 2017)
Acquire wide-area prescriptions

Coordination between theJapan Pharmaceutical
Association (JPA), local
healthcare liaison office,care managers, visiting
nurse stations, and others
Urge participation byhealthcare facilities

SOGO MEDICAL CO., LTD.

Train personnel byimplementing various types oftraining, including OJT and
GOES

Implement training on
handling patients
Promote brown-bag
movement and trace reports
Urge participation by local
community

Action Reports

23

Action Reports
Here we introduce examples of company efforts in three areas—medical practice support, pharmacies and CSR

Medical Practice Support Business

24 Yuai Clinic, Medical Mall Fujimi
Medical Practice Support Business

26 Harada Internal Medicine Clinic
Pharmacy Business

28 Sogo Pharmacy Takata Location
Pharmacy Business

30 Sogo Pharmacy Tenjin Chuo Location
Pharmacy Business32

Distribution of Medication Calendars /Development and Sales of Private Brand Products
CSR

34

Promoting the Hiring of People with Disabilities /Women's Advancement

Annual Report 2016

24 Action Reports
SOGO MEDICAL

Action Report

Medical Practice
Support Business

Takuma Asada

Chief Pharmacist
Sogo Pharmacy LaLaport Fujimi Location
Sogo Medical Co., Ltd.

Action Report1

The Healthcare Mall—A Hub of theRegional Healthcare Network

Medical Mall Fujimi

Yuai Clinic
Support for the opening and running ofa multi-specialty clinic
Medical Mall Fujimi opened in May 2015 in
the city of Fujimi, Saitama Prefecture, at alarge-scale shopping complex, Mitsui Shopping
Park LaLaport Fujimi. We talked with Dr.
Takehiko Dochi, director of Yuai Clinic(Medical Corporation Yushinkai Association),
which he established as a multi-specialty
clinic active in community medicine, in
conjunction with an ophthalmology clinic
and a Sogo Pharmacy. Dr. Dochi discussed
the process leading up to the opening of theclinic, what services the clinic performs
today, and what direction he sees the clinic
moving toward.

SOGO MEDICAL CO., LTD.

Dr. Takehiko Dochi

Head Physician
Yuai Clinic
Medical Corporation Yushinkai Association

Masato Kaga

Saitama Branch
Sogo Medical Co., Ltd.

Turning the ideal clinic
envisioned by Dr. Dochi into a
reality through the combined
capabilities of Sogo Medical.
Masato Kaga of the start-up support
project team explains, "We alreadyhad materials prepared, such as anarea survey of clinics, to explain thehealthcare mall concept to doctors
who wanted to open a medical
practice. So when Dr. Dochi gave us
the 'go sign' we were soon readywith a business plan and proposeda schedule leading up to the

opening of the clinic." With over 10
people on the team, the project got
its real kickoff in July 2014 with the
input of Dr. Dochi. Saitama
Prefecture has the fewest doctors
per capita in the country. The area
has a chronic shortage of doctors,
particularly dermatologists.
Aware of these circumstances,
Kaga consulted with Dr. Dochi, andbased on the location and potential
clientele selected the medical
disciplines of internal medicine,Action Reports

pediatrics, and dermatology. The
concept for the clinic was "to see
patients at any time with any kind of
illness." Comprehensive support wasprovided to bring out the full strengthof the team, including inviting doctors
who supported the concept of theclinic, as well as for the clinic's designand choice of medical equipment.
Yuai Clinic opened at Medical Mall
Fujimi in May 2015. The ideal clinicthat Dr. Dochi had envisioned had
become a reality.

Striving to become"primary care doctors."
Dr. Dochi explains: "I want to provide
medical care that makes everyone
whose life is touched by the clinic
happy. For the staff it is necessary tocreate a workplace that is not only
fulfilling but that allows them todevelop compassion in their approach
toward patients. Moreover, I wanted tooffer medical services on weekends
and holidays for people who work on
weekdays. I feel that we were able toachieve both of these things asplanned, thanks to the support of Mr.
Kaga and his team." After the clinic
opened, as part of being "primarycare doctors," checkups were offeredto the tenant companies at LaLaport
Fujimi, and health seminars were heldat the facility, thus reaching beyond
the scope of the clinic location with

25

such activities. Mr. Kaga, who helped
set up and run the health seminars
had this to say, "Now we are in aphase of spreading awareness of theclinic. To enable the clinic to see many
more patients 'at any time with any
kind of illness' we are working withthe project team, the Sogo Pharmacy,and people both inside and outside
the company to provide ongoingsupport." Action to take the next step
into the future has already begun.

Annual Report 2016

26 Action Reports
SOGO MEDICAL

Action Report

Medical Practice
Support Business

Dr. Naoki Harada

Head Physician
Harada Internal Medicine Clinic

Action Report2

Connecting with a Local Doctor's
Approach—Third-Party
Medical Practice Succession

Dispelling anxieties overstarting a practice anddelivering third-party successionthat lives up to the doctor’shopes and expectations.

Harada Internal
Medicine Clinic
Support for medical practice succession
helps doctors provide the ideal form of
medical care to patients and the local community
Sogo Medical received a request from thedirector of an internal medicine clinic who had
been treating local patients for many years in
Neyagawa City, Osaka Prefecture. The director
wanted to find a doctor to take over the practice,so we introduced him to Dr. Harada who hadjoined one of our seminars on starting a medical
practice. That was the summer of 2014.
The succession went smoothly with our support
and the clinic reopened in April 2015. Here, we
introduce this example of a third-party medical
practice succession that continues to provide
local medical care.

SOGO MEDICAL CO., LTD.

Dr. Harada speaks of his concerns
when first attending the seminar:"Opening a new practice has highcosts, and once it opens people will
not necessarily start coming in large
numbers. That is what I was mostworried about."
Sogo Medical's Masahiko Kawae
says he decided to introduce Dr.
Harada to the internal medicine clinic
in Neyagawa City "after listening to
his ideas about the ideal way toprovide medical care, which suggested
that taking over an established clinic
would be the best option." "Dr. Haradaalso wished to offer endoscopic
examinations, which the previous
head physician had not offered. So, I
was happy to see that the succession
would expand the range of treatment
and contribute to better local medicalcare," states Mr. Kawae, expressing
his high expectations for the newpractice.
At that point everything started
moving. We lent our full support tothe process of succession andhelped prepare for the reopening. In
charge of selecting the medical
equipment, Kyoichi Masuda explains,"I had many discussions with Dr.
Harada about what kind of equipment

Action Reports

27

Masahiko Kawae
Minori Nagasaki
Osaka Branch
Sogo Medical Co., Ltd.

he would need to provide the care he
was aiming for. After demonstrations
and other steps, we were able to bringin the most suitable equipment."
After all of the other preparations had
been completed, the interior wasredesigned and the equipment was
installed in just one week, in time forthe clinic's opening in April 2015.

Carrying forward a practice tobe a clinic that is an ever moreessential part of the community.
"I had no experience opening a medical
practice and I did not know a single
thing about what it entailed, but
because I had someone to consult withat any time, I was free from anxiety.
Also, having so many patients coming
to the clinic I believe is thanks to thesmooth succession and remodeling,"says Dr. Harada, who was able to offer
new types of treatment from the start.
"Thanks to Mr. Kawae's introduction,
we have begun making house calls toprovide at-home medical care, and we

Kyoichi Masuda

Nishinihon Sales Management Division
Sogo Medical Co., Ltd.

Nishinihon Sales Management Division
Sogo Medical Co., Ltd.

TopicsCorporate branding video(animation)"Jobs to Support Lives ofLocal Communities"
also provide rehabilitation. I am looking
forward to improving the quality of
medical care and doing everything I
can for the local community," he adds
with passion.
Mr. Kawae's successor in taking overthe project is Minori Nagasaki, whosays with enthusiasm, "I want toprovide support to the clinic to makepatients happier than ever, while living
up to the expectations of Dr. Harada
who has placed his trust in Mr. Kawae
and Mr. Masuda."
Commitment to local medical careand relationships of trust are being
carried into the next generation. This
medical practice is taking a new form
through the succession.

We produced a three-minute animatedvideo on the topic of third-party
medical practice succession to help
more people understand what we do.
It is available for viewing on the Sogo
Medical website or on YouTube.

Video screenshot

Annual Report 2016

28 Action Reports
SOGO MEDICAL

Action Report

Pharmacy Business

AomoriPrefecture

Iwate
Prefecture
Akita
Prefecture

Sumita Town

Rikuzentakata
City

Kesen
District
Ofunato City

MiyagiPrefecture

Action Report

3

Rikuzentakata City, Beyond the Disaster
Local Medical Care in the Afflicted Zone

Dr. Kiyoshi Tabata

Head Physician
Iwate Prefectural Takata Hospital

Improving the efficacy andefficiency of in-home medicalcare by pooling with otherprofessions.

Sogo Pharmacy
Takata Location
Linking multiple professions for in-homemedical care through the use of ICT *1
Rikuzentakata City in Iwate Prefecture faces aserious problem with a decreasing birthrate,
aging population, and increasing numbers ofseniors living alone.
After the earthquake and tsunami, theimportance of in-home medical care there
became more acute, and people in different
professions began to work together—physicians,
nurses, and social welfare workers. The Takata
pharmacy joined this communal effort. Fiveyears have passed since the disaster. This is areport on the current state of in-home medicalcare in the city and the outlook for the future.

*1 ICT: Information and Communication Technology
SOGO MEDICAL CO., LTD.

The Takata pharmacy has worked
closely since its inception with the
Iwate Prefectural Takata Hospital, its
main client, and the relationship has
developed with the submission ofprescription questions and tracing
reports (reports tracking drugs being
taken). Takata's pharmacists began
making house calls in 2011 toprovide guidance on how to takemedicine, and to submit reports todoctors on unused medications. Dr.
Tabata, Head Physician of the Takata
Hospital, gave high praise to theefforts of the Takata pharmacy,
saying, "In some cases patients willtell their doctor they are taking their
medicine properly, but in fact there ismuch leftover. The Takata Pharmacy's
efforts are a big help to ourphysicians."
In-homemedicalcareinRikuzentakata City have taken on evergreater importance since the 2011
tragedy. The loss of hospitals anddamage to the public transportation
system have placed a great burden on
patients to reach a hospital fortreatment.

Action Reports

29

Hidenori Shirai

Chief Pharmacist
Sogo Pharmacy Takata Location
Sogo Medical Co., Ltd.

respond right away, which helps put
patients at ease," explains chief
pharmacist Hidenori Shirai, endorsing
the use of ICT to improve the quality
and efficiency of in-home medical
care.

Rikuzentakata and its declining
population—the circle ofcommunication must extend to
the entire Kesen District going
forward.

In 2015, the Kesen*2 District began
receiving prefectural support andcoordinated efforts were begun using
ICT, bringing different professions
together to provide more efficient
in-home medical care. Doctors,
nurses, and social welfare workers use
tablet computers to share data andcommunicate quickly with one
another. "Patients' questions alsoreach us through people in otherprofessions, and we are able toFive years since the disaster, the town
is undergoing a transformation. People
who were victims of the disaster but
who had been trying to survive in
Rikuzentakata are moving inland anddepopulation is worsening. "We havereached the point where we need torethink how to provide medical caresuited to the current situation," says Dr.
Tabata. "In Rikuzentakata, we have
had face-to-face relationships amongpeople of different professions forsome time, but that system needs tobe expanded to all of the Kesen District,including Ofunato and Sumita." Thehospital director leads an organization
to build a future for the area, Mirai
Kanae Kiko, aiming to expand
inter-profession collaboration throughICT. The Takata pharmacy has joined
this effort, about which Mr. Shirai
enthuses, "The Takata pharmacy, whichsurvived the disaster, plays a largerrole than other pharmacies. We aregoing to continue working hard tomaintain close contact with patientsand exceed all expectations."
People will be taking more notice ofinitiatives that employ ICT to resolve
medical care issues in an aging
society.
Example of the use of ICT(tablet computer)

1. Question from visitingnurse
2. Pharmacy response to 1
3. Report from visiting
nurse
Using tablet computers,
information can be obtainedin real time from people inother professions forsmooth collaboration.

*2 Kesen: Indicates Rikuzentakata City, Ofunato City and Sumita Town
Annual Report 2016

30 Action Reports
SOGO MEDICAL

Action Report

Pharmacy Business

Masashi Honda

Pharmacy Specialist
Sogo Pharmacy Tenjin Chuo Location
Sogo Medical Co., Ltd.

Shiho Yoshida

Pharmacy Specialist
Sogo Pharmacy Tenjin Chuo Location
Sogo Medical Co., Ltd.

Action Report

4

Pharmacy Specialists Provide Closer
Support for Cancer Patients

Sogo Pharmacy
Tenjin Chuo Location
Introducing a system of specialists forindividual conditions to strengthen functions as
a "primary care pharmacy"

About 200 patients per day visit the Sogo
Pharmacy Tenjin Chuo Location as their"primary care pharmacy." The pharmacy has
introduced progressive measures such as a Cancer
Conversation Café and a system of pharmacy
specialists for individual conditions. These
measures are aimed at supplying higher quality
care while strengthening the expertise of its
pharmacists.

SOGO MEDICAL CO., LTD.

A patient's comment sparked asearch for ways to improve theattending pharmacist systemand specializations.
"I realized the potential of apharmacy specialist system when acertain patient whom I had been
looking after for about a year asked
especially that I be the one toprepare her medication, saying, 'I am
grateful that she is always taking careof me,'" says Yukari Shimokawa,senior pharmacy specialist at the Tenjin
Chuo pharmacy. Ms. Shimokawa put
together two three-person teams totake care of patients with cancer anddiabetes, respectively. After half ayear of preparation that followed
investigations into new ways thelocation could do business andraising awareness among the staff, in2012 the pharmacy introduced a systemof pharmacy specialists for individual
conditions. Ms. Shimokawa started
dealing directly with cancer patients,

providing them with individualized
care.
While she had greater contact withpatients suffering from cancer, alongwith more opportunities to receive
feedback, she still wanted to do more
for her patients. Ms. Shimokawa
searched for some way to empathize
more closely with them. One day shecame across an organization named
Cancer Philosophy Visitors* whose
aim was to reduce psychologicalsuffering. She traveled to Nagano
Prefecture to attend a seminar withher cancer team at the time. That iswhen Ms. Shimokawa renewed her
vow to do something for thepsychological care of patients.

Action Reports

31

Yukari Shimokawa

Senior Pharmacy Specialist
Sogo Pharmacy Tenjin Chuo Location
Sogo Medical Co., Ltd.

Ai Tanimoto

Pharmacist
Sogo Pharmacy Tenjin Chuo Location
Sogo Medical Co., Ltd.

and Ai Tanimoto, who joined the teamlast year, are enthusiastic about
improving their specializations. The
cancer team will continue to deal
directly with cancer patients, aiming toprovide emotional support to eachand every one.

A better understanding of theemotions of cancer patientsallows for extra care.

After returning from the seminar, Ms.
Shimokawa's team immediately
started making preparations. She
decided to host an event on Saturdays
to make it easy for all people toattend, and she called it the Cancer
Conversation Café to create an
informal, friendly atmosphere. The
first event was held in the spring of2013. Three years later, including
new members today, the four-person

team has attended to about 430
cancer patients.
One patient undergoing changes
in treatment said, "They always
explain things to me carefully so I feelreassured." Such comments show how
the cancer team's efforts have been
engaging in care on an emotional level.
The next most experienced on theteam is Shiho Yoshida, in her third year.
Ms. Yoshida used her experience togain qualification as an Accredited
Pharmacist of Ambulatory Cancer
Chemotherapy, which is rare forsomeone working at a healthinsurance pharmacy. Masashi Honda*Cancer Philosophy Visitors is a non-profit
organization chaired by Professor Okio Hino of
the Faculty of Medicine at Juntendo University.
The organization provides a public forum for
dialogue between medical professionals andother patients, aiming to relieve thepsychological suffering of cancer patients andtheir families.

Annual Report 2016

32 Action Reports
SOGO MEDICAL

Action Report

Pharmacy Business

Action Report5

Helping Patient
Adherence with theMedication Calendar

Action Report

6

Developing Safe andReliable Private Brand
Products

SOGO MEDICAL CO., LTD.

Visual representation of medication
schedules helps prevent forgetting or taking
the wrong dose. We plan to distributecalendars to all Group pharmacies.
Leftover medicine has become anissue in medical treatment today, as
medicines pile up at patients' homes
due to the large variety of prescribed
medications and people deciding todiscontinue their medicine, forexample.
The Medication Calendar is one way
for our "primary care pharmacies" tohelp people adhere to theirprescription. The calendar has
see-through pockets for each day of
the week and a pocket for each doseon that day. The proper dosage isplaced into each of these pockets sothat patients and family members will
immediately be able to understandwhen a dose has been taken or not.

This system started being used in
September 2015. As a trial, theMedication Calendar was introduced
at 92 Sogo Pharmacies. Based on the
results of a questionnaire after use,
more than half of the people who usedthe calendars felt that it helped them totake their medicine. It was also
reconfirmed that the assistance of thepharmacist in taking medicine helped
patients to take the proper dosage for
their drug therapy and eliminate
leftover medicine. In February 2016 thesystem was implemented at all 435
Sogo Pharmacies throughout Japan. It
is also being implemented as
appropriate at other Sogo Medical
Group pharmacies.

We are developing and marketing private
brand goods under the SOGO SMILE
label. A unified brand offers a more familiar
face to people in local communities.
We have been working to develop aunified pharmacy brand for Sogo
Pharmacies and all Group pharmacies
around Japan based on the PR
concept of pharmacies as "general
healthcare stations." In 2014 we began
to develop and market the SOGO
SMILE private brand as part of thisstrategy. Today we supply 31 items
under the brand, including healthfoods and sanitary goods, with theslogan of "Greater peace of mind,
more smiles."Nationally certified senior nutritionists
and pharmacists from Sogo Medical
help to develop products. We focus
on quality, safety, and great flavor,
producing such items as throat

lozenges made from the highest
grade ingredients in the world, andsupplements for which we manage
every process from raw materials topackaging to assure quality andsafety. As professionals in medicine
and health, we take pride in making
products this way to help people leadhealthy, energetic lives.
At our Sogo Pharmacies we willcontinue making efforts both insideandoutsidethepharmacies
themselves to be appreciated byeveryone in the community.

Action Reports

33

SOGO MEDICAL

Action Report

Pharmacy Business

Action Report

7

Actions to Become"Primary Care Pharmacies"
We are adding value at each location to produce high-value pharmacies chosen by patients that are rooted in the local community.
Collaboration

Risk Management

In medical treatment

Disaster planning and drills

With other pharmacies

Dispensing error system

With multiple professions

Joint BCP training, etc., at head office,offices, branches and pharmacies

Meeting at a medical institution—the pharmacy's
main client(Sogo Pharmacy Tenjin Center Bldg. 5F Location,
Fukuoka Prefecture)

Evacuation drill with person in wheelchair(Sogo Pharmacy Omura Saiwaimachi Location,
Nagasaki Prefecture)

Health Support

Improving Satisfaction

New Pharmacy Functions
System of pharmacy specialists for individual
conditions (cancer, diabetes)
Sports pharmacists (to support athletes intandem with sports doctors)
Conducting academic research and presenting
at academic society meetings, etc.

Internal academic meeting, "Pharmacy Forum"(Held annually; 391 participants in 2015 frominside and outside the company)

Other Community-Based Activities

Self-medication support (medicine and healthconsultations, etc.)
School health support
Supporters of dementia patients
Pharmacies that support quitting smoking
Sharing of recipes that use private brandproducts; food tasting events

Concierge services

Talk by senior nutritionist, nutrition consultation(Yataya Pharmacy Kinomoto Location,
Wakayama Prefecture)

Concierge providing information(Sogo Pharmacy Tenjin Chuo Location, Fukuoka
Prefecture)

In-hospital pharmacy located at temporary clinic(Sogo Pharmacy Takata Location, Miyagi
Prefecture)Hand-washing class at nursery school(Sogo Pharmacy Tone Chuo Location, Gunma
Prefecture)

Health seminar for seniors(Sogo Pharmacy Fusa Location, Chiba Prefecture)

Sterile medication preparation by pharmacy student using aclean bench (Sogo Pharmacy Takarazuka Mefu Location,
Hyogo Prefecture)

Seminars for better understanding ofseniors
Service care-fitter and service sector
reception qualifications

Ongoing support for disaster-afflicted regions(Miyagi Prefecture)
Pharmacy student intern program
Sign language support
Workplace experience for children
Foreign customer support (English-language
drug information sheets, etc.)
Community cleanups

Annual Report 2016

34 Action Reports
SOGO MEDICAL

Action Report

CSR

Action Report

8AwardWinning

Our Support for Integrating
People with Disabilities into the
Workplace is Highly EvaluatedAiming to create a workplace environment in which
every employee can use his or her strengths andabilities—hiring people with disabilities.
In August 2015 we received an award torecognize enterprises with distinguishedperformance in employing people withdisabilities.* Sogo Medical was chosenfrom 80 or so companies around Japanfor our new hirings and integration into
the workplace of people with mental ordevelopmental disabilities.
Sogo Medical employs 52 people withdisabilities, who comprise 2.24% of thecompany's
workforce.
Of
these
individuals, 28 belong to the Operational
Support Group (as of March 2016). This
group also employs a full-time job coach
who provides assistance in adapting to
the workplace and helps each person
work to the best of their ability given theirindividual strengths.

Operational Support Group's
Main Clerical Tasks
Printing documents, etc., fillingenvelopes and sending them insideand outside the company
Sorting head office mail and sending
mail to branches and pharmacies
Creating business cards, personalseals, and other items for allcompany employees
Data entry for contracts, patientsatisfaction questionnaires, etc.
Cleaning of the head office, nearby
pharmacies and the training center,etc.
Lamination of rental TV channel
guides, etc.
Creation of medication record books(stamping, attaching cover)etc.

*Organized by the Japan Organization for Employmentof the Elderly, Persons with Disabilities and Job Seekers

Action Report

9AwardWinning

Our Engagement inFemale Employees' Advancement
is Well Recognized

SOGO MEDICAL CO., LTD.

We are promoting the growth and advancement offemale employees, thereby improving personnel value.
In September 2015 Sogo Medical received anaward of excellence from the Fukuoka
Prefectural Labour Bureau Chief in the"equality-promoting enterprise" category as
part of the 2015 Equality and Family-Friendly
Corporation Commendations issued by the
Ministry of Health, Labour and Welfare. Thissystem publicly commends companies thattake positive action to enable female
employees to make full use of their abilities in
the workplace.
The award was given for measures that Sogo
Medical has taken that include setting
numerical targets and announcing them both
inside and outside the company, creating asystem for enabling a shift from clerical
positions to professional tracks, and setting up
fixed-location positions that do not require
relocation. Beginning this fiscal year, we areoffering training to female employees to moveinto management positions and to develop
future candidates. We will also continue to set
up and operate internal systems as well as
create a conducive workplace environment for
female employees' advancement.

Target(to be achieved by March 31, 2017)30% of management positions filled by
women

Measures Taken
Switch to Professional Track/
Professional Training System
A system to promote female employees
working in clerical positions toprofessional positions as part of humanresource development in light ofbusiness expansion.
Creation of Fixed-Location Positions
A system of promotion to "block chief," amanagerial position that does not entail
relocation within the country.
Improving the Workplace Environment
Placing female employees on various
committees, etc., to raise genderequality awareness in the workplace.
Training Courses to Develop Female
Managers

Business Performance by Segment

35

Business Performance by Segment
Business performance this fiscal year and outlook explained from theperspectives of the Higashinihon, Nishinihon, and Kyushu Offices

36 Higashinihon Office
37 Nishinihon Office
38 Kyushu Office

Annual Report 2016

36 Business Performance by Segment

Higashinihon Office
We are working together to achieve performancecommensurate with our market size.
Shigeyuki Nakano
Senior Managing Officer
Manager of Higashinihon Office

Mall Development Division of the Higashinihon Office; wewill also focus on creating high-value pharmacies.
The work of our company is in itself a way of contributing
to society. We are helping all of our employees to study andseek personal improvement, while working to create asociety in which everyone can receive efficient, high-quality
medical care.

The Higashinihon area in which we operate accounts fornearly 60% of the potential market in Japan, and we aim to
improve our percentage of total sales to the same level as
our market size.
This fiscal year in the medical practice support business,
we worked on new projects developing healthcare malls
and supporting hospital management. In the pharmacy
business we promoted the creation of a community-based
framework for supporting the health of all citizens.
In the coming year we will accelerate development ofhealthcare malls through the newly established Healthcare

Higashinihon
OfficePercentage of Total Sales

375%
37.

Performance for the Year Ended March 2016

Practice Start-Up/Transfer Support
and Number of Doctors Registered

Net Sales
Medical Practice
SupportPharmacies

Number of Pharmacies

Doctors wishing to start up or transfer practices
Practice start-up
support¥ 43,838

Existing

Newly opened

Practice transfer
supportmillion39,61436,70033,216

243

36,763doctors

pharmacies

227
206

28,3291722

pharmacies

35
26,52230,997¥ 36,088
million

2,825

2,757

2,507
projects
205

10,177

2014/3SOGO MEDICAL CO., LTD.

8,617

15/3

152

165

2014/3

15/3

169

226

pharmacies

171

projects¥7,750
million

16/3

16/3

2014/3

15/3

16/3

Business Performance by Segment

37

Nishinihon Office
We engage the trust of our customers with a senseof mission to contribute to local communities.
Osamu Yamasaki
Managing Officer
Manager of Nishinihon Officeaccelerated the creation of high-value pharmacies byhelping pharmacists to fully utilize their skills, enhancing
coordination between pharmacies and medical institutions,improving in-home medical care, and providing support for
self-medication.
Following our management principles each of us will
work together with passion and a sense of mission to be ofassistance to our customers and provide valuable services
that make people happy.

This fiscal year we strengthened our relationships withcustomers and expanded our circle of working partners
through healthcare mall development, start-up support,
consulting, and creating high-value pharmacies. We willcontinue working next year to achieve the targets set in
the medium-term management plan and make newadvancements.
Specifically, in the medical practice support business weprovide management support to core hospitals facing
difficult issues through our DtoD system and by creating
model healthcare malls. In the pharmacy business we have

Nishinihon
OfficePercentage of Total Sales

28.4
. %
.4

Performance for the Year Ended March 2016

Practice Start-Up/Transfer Support
and Number of Doctors Registered

Net Sales
Medical Practice
SupportPharmacies

Doctors wishing to start up or transfer practices
Practice start-up
support¥ 33,176

Existing

14,55728,205
12,363

Newly opened

166

Practice transfer
supportpharmacies

16,211

million27,390

Number of Pharmacies

doctors

2,665

24

143

pharmacies

16

127

projects

32
17,526

19,784¥ 26,410
million

2,073
127

1,352
106
9,863

2014/3

8,420

15/3

¥ 6,765
million

16/3

2014/3

98

88

15/3

142

pharmacies

95

projects

16/3

2014/3

15/3

16/3

Annual Report 2016

38 Business Performance by Segment

Kyushu Office
Each of our employees seeks to be helpful tocustomers in every way.
Kazuya Watabe
Senior Managing Officer
Manager of Kyushu Office

With the beginning of a shift in focus from simply curative
medical care to medical care that also provides support,
the management environment surrounding medical
professionals has come to demand the provision ofeffective, high-quality medical care and comprehensive
regional medical and nursing services that transcend theboundaries of individual medical institutions or facilities.
This fiscal year we implemented various measures todevelop trustworthy pharmacies that customers come torely upon. In the next term we will follow a basic
policy—"being helpful in every way." In the medical
practice support business we provide management

support to resolve problems at hospitals and aredeveloping healthcare malls that will be closely integrated
into the local community and play a significant role insociety. In the pharmacy business we are working to bringout the best as "primary pharmacies and pharmacists"and carry out efficient, high-quality pharmacy operations
that advance comprehensive regional care.
Every one of our employees takes responsibility for theirrole in helping to achieve our medium-term management
plan goals.

KyushuOfficePercentage of Total Sales

34.1%

Performance for the Year Ended March 2016

Net Sales

Practice Start-Up/Transfer Support
and Number of Doctors Registered

Medical Practice
SupportPharmacies

Doctors wishing to start up or transfer practices
Practice start-up
support¥ 39,905
37,23837,793

Number of Pharmacies
Existing

Newly opened

Practice transfer
support

8,091

milliondoctors

7,394

167

168

160
11

pharmacies

10

6

158

161

pharmacies

6,412

28,08729,752¥ 33,828
million

889
704

56

55

690

projects

149

pharmacies

37

projects

9,150

2014/3SOGO MEDICAL CO., LTD.

8,040

15/3

¥ 6,077
million

16/3

2014/3

15/3

16/3

2014/3

15/3

16/3

Corporate Governance39

Corporate Governance
Here we introduce our approach to company managementand developing human resources.

40

Directors, Audit & Supervisory Board Members
and Corporate Executive Officers

42 Corporate Governance
44 Internal Control System and Compliance System
45 CSR Management

Annual Report 2016

40 Corporate GovernanceDirectors, Audit & Supervisory Board Members
and Corporate Executive Officers (As of June 22, 2016)

Board of Directors

Kenji Sakamoto

Shinya Mikita

Makoto Kuroda

Masatoshi Sadahisa

Representative Director,
President and Chief Executive Officer

Representative Director,
Executive Vice President

Director & Senior Executive
Managing Officer

Director & Senior Executive
Managing Officer

In charge of Corporate Auditing Division

In charge of Higashinihon Office

In charge of Administration Division,
Management Strategy Division

In charge of Personnel Division

Moritaka Nakashima

Takao Nakashima

Hirosada Oyamada

Itsuo Tashiro

Director & Executive Managing Officer

Director & Executive Managing Officer

Director & Senior Corporate Adviser

Director & Vice Chairman

In charge of Consulting Division,
Medical Practice Support Business Division,
Pharmacy Management Division

In charge of Nishinihon Office,
Kyushu Office, DtoD Strategy Division

Makoto Nogami

Kiyotaka Watanabe

Eiichi Seki

Director (External Director)

Director (External Director)

Director (External Director)

Audit & Supervisory Board Members

Minoru Ohno

Shoji Hirao

Naomasa Mitsukado

Setsuko Gondou

Standing Auditor (External Auditor)

Standing Auditor

Auditor (External Auditor)

Auditor (External Auditor)

SOGO MEDICAL CO., LTD.

Corporate Governance41

Corporate Executive Officers

Kenji Sakamoto*

Shinya Mikita *Makoto Kuroda*

President and Chief Executive Officer

Executive Vice President

Senior Executive Managing Officer

Masatoshi Sadahisa*
Senior Executive Managing Officer
Manager of Personnel Division

Moritaka Nakashima*

Takao Nakashima*

Kohichi Hashimoto

Joji Haraguchi

Executive Managing Officer

Executive Managing Officer

Executive Managing Officer

Executive Managing Officer

Manager of Pharmacy Management
Division
Representative Director andChairman of SME Co., Ltd.

Manager of DtoD Strategy Division

Manager of Management Strategy
DivisionManager of Management Strategy
Department

Representative Director andPresident of Somtech Co., Ltd.

Takahide Terada

Genichi Shimmura

Kazuya Watabe

Yuriko Tanigawa

Senior Managing Officer

Senior Managing Officer

Senior Managing Officer

Senior Managing Officer

Deputy Manager of DtoD Strategy
Division

Deputy Manager of DtoD Strategy
DivisionManager of Kyushu Office

Manager of Administration Division

Shigeyuki Nakano

Akihiro Shitozawa

Senior Managing Officer

Senior Managing Officer

Manager of Higashinihon Office

Manager of Medical Practice Support
Business Division

Takamichi Okuno

Nobuo Fujii

Toshikazu Matsuo

Osamu Yamasaki

Managing Officer

Managing Officer

Managing Officer

Managing Officer

Assistant Manager of Administration
DivisionManager of General Affairs Department

Assistant to Manager of Higashinihon
OfficeAssistant Manager of Pharmacy
Management Division
Manager of Pharmacy Business
Promotion Department

Manager of Nishinihon Office

Masatomo Hara

Katsuyuki Honda

Tetsuro Irie

Managing Officer

Managing Officer

Managing Officer

Higashinihon Office
Manager of Higashinihon Pharmacy
Management Division

Assistant Manager of Personnel Division
Manager of Hiring Department

Manager of Consulting Division
Manager of Consulting Promotion
Department* Corporate executive officers indicated with an asterisk also serve on the board of directors.

Annual Report 2016

42 Corporate GovernanceCorporate Governance

Basic Policy

Sogo Medical considers one of its most important issues
facing management to be recognizing the importance ofcorporate ethics based on legal compliance, while also making
prompt decisions in response to the ever-changing businessenvironment and working to make management sounder inorder to record continued corporate value. To achieve that, it isnecessary to build good relationships with customers, clients,
local communities, employees, and other stakeholders, at thesame time as enhancing corporate governance by strengthening,
improving, and implementing functional systems required bylaw, including the general meeting of shareholders, board of
directors, audit and supervisory board, and independent
external auditors.
We also aim to increase management transparency byproviding fast, accurate, and wide-ranging information
disclosure to all our shareholders and investors.

Corporate Governance System (As of June 22, 2016)

The board of directors is made up of 11 members, of which 3
are outside directors, reflecting the company’s size whileemphasizing mobility.
Sogo Medical has adopted an audit and supervisory board
system with a board of auditors and believes including external
auditors allows for the effective monitoring of management.
Board of directors’ meetings are held every month as a
general rule with decisions made about important company
matters.
Managing directors’ meetings attended by working
managing directors and standing directors are held twice permonth as a general rule, to make decisions about whichmatters to discuss at board of directors’ meetings and about
important matters that are not decided at board meetings.
Individual item meetings attended separately by working
managing directors, standing directors and other relevant
management are generally held twice per month, respectively.
As a general rule these meetings decide important matters notdecided at managing directors’ meetings, and discuss
important issues brought up at managing directors’ meetings.
At management meetings, working managing directors,

executive managing officers, and other involved management
in attendance deliberate and exchange information regarding
management-related issues.
Sogo Medical has adopted a corporate executive officer
system in which officers selected by the board of directors
perform the administration of business matters under the
direction of the board of directors.
The company also holds regular new employee training andgradable training through the year as well as working to
improve compliance with workplace training on the subject ofcorporate ethics and compliance management given by staff
responsible for promoting compliance.
Sogo Medical declares the following basic policy, “We do
not involve ourselves with anti-social forces or clientcompanies who have a relationship with anti-social forces,
under any circumstances.”
For the purpose of removing anti-social forces, together withthe cooperation of outside expert organizations such as
lawyers and relevant administrative bodies, we will work as agroup to create a corresponding structure.

Auditing System (As of June 22, 2016)

The audit and supervisory board comprises 4 auditors, ofwhich 2 are standing auditors and 2 are part-time auditors.
Three of these are external auditors to ensure fairness andtransparency. Each auditor attends board of directors’
meetings, while standing auditors also attend and offer
opinions at managing directors’ meetings, management
meetings, and individual item meetings.
Auditors monitor the legality of operations based on financial
standards, audit planning, and task divisions, as outlined by
the audit and supervisory board.
Internal audits are held systematically by the corporate

SOGO MEDICAL CO., LTD.

auditing division, consisting of 9 members, auditing all divisions
and reporting the results directly to the president. Audited
divisions are given guidance on where they need to improve,with further reporting required on whether improvement has
been made or not, ensuring an efficient audit process.
Collectively, the audit and supervisory board members,
corporate auditing division, independent external auditors, andinternal control division exchange information regarding audit
planning and audit results as required, working to achieve
efficient and effective audits.

Corporate Governance

43

Governance Systems (As of June 22, 2016)

General Meeting of Shareholders
Selection / Dismissal

Selection / Dismissal

Board of Directors

Audit & Supervisory
Board

Directors
11 members

Audit(3 external directors)
Financial Audit
Selection /Dismissal /Supervision

Selection /Dismissal /Supervision

Selection / Dismissal

Audit & Supervisory
Board Members
4 members (3 external auditors)

Corporate Auditor Division

Independent External Auditors(Mutual Coordination)
Financial Audit

ReportRepresentative Director, President and Chief Executive Officer
Corporate Executive Officers

Corporate Auditing DivisionInternal Control DivisionInternal Control
Internal Auditing

Divisions

Help Desk
7 Sogo Medical employees
3 outside lawyers

ReportRequest Advice /Report Information

Corporate Ethics Helpline

Officer Remuneration

Shareholders monitor remuneration through a limit to the total
amount of remuneration for directors and audit and supervisoryboard members (including bonuses) decided throughresolutions at the general meeting of shareholders. The
president (who is the representative director and an executive

officer) decides remuneration for directors after consulting withthe board of directors and compensation for auditors is decided
after discussion among auditors, in both cases within the limits
decided at the general meeting of shareholders.

Total Remuneration of Each Category of Officers in Fiscal 2016
Total by form of remuneration (¥ million)

Officer category

Directors

Number ofrecipients

Basic
Stock
compensation options

Bonuses

Retirementcompensation

11

170

170

–

–

–

Audit & supervisoryboard members

1

11

11

–

–

–

Outside officers

6

24

24

–

–

–

Total

18

206

206

–

–

–

(not including
external directors)(not including
external auditors)

Notes: 1. Remuneration of directors (not including external directors)
includes profit-linked compensation as decided at theboard of directors’ meeting held on May 21, 2015.
2. Remuneration for Sogo Medical officers only includes theamount paid by Sogo Medical, excluding payments fromsubsidiaries.
3. No Sogo Medical officer receives a consolidated salary of
more than ¥100 million.
4. Annual remuneration for directors (not including employee
salaries for people who are both directors and employees)
was given a firm limit of ¥300 million with a limit to increases
of 2% of the previous fiscal year’s consolidated net income
in a resolution at the 34th General Meeting of Shareholders
held on June 20, 2012.
5. Annual compensation for audit and supervisory board
members was limited to ¥50 million in a resolution at the 24th
General Meeting of Shareholders held on June 18, 2002.

Annual Report 2016

44 Corporate GovernanceInternal Control System and Compliance System

Sogo Medical is striving to build up its Group-wide
compliance system by establishing a common corporate
charter and code of ethics shared by the Sogo Medical
Group.
In order for directors and employees to perform theirduties with corporate social responsibility and corporate
ethics in mind, we put our compliance policy (Sogo
Medical action standards) into practice, while making thepolicy thoroughly understood and enforced. In order for
directors and employees of the Sogo Medical Group to
perform their duties in accordance with the law and thearticles of association, we have placed a director in
charge of compliance (legal department management
officer) as well as formed an internal control committee,
which is managed by the compliance division (according
to policies of dividing duties).
We have also set up a help desk (corporate ethics
helpline), which employees can contact with requests foradvice or to report information and get a speedy
response.
In order to enhance compliance knowledge among
directors and employees of the Sogo Medical Group, weare upgrading training, as part of our efforts to improveknowledge of respecting compliance.

Information Management System
Sogo Medical has a system in place for storing and managing
information related to work carried out by directors. Based on thelaw and its own internal regulations, directors make and keep theminutes of board meetings and other information related toimportant work duties as well as the decisions made, which arecollectively recorded and managed appropriately.
We have also established document management regulations for
directors’ decisions and reports, based on which we store andmanage this information. Information is managed carefully based on
our information management and information system management
regulations.

Risk Management System
We have installed a function in the compliance division thatsupervises risk management of the entire Group and placed a
director in charge of it. In order to establish fundamental policy andpromotion systems for risk management, we have determined risk
management regulations, and constructed and put into operation
risk management systems. The compliance division evaluates theeffectiveness of the establishment and operations of risk
management. In the case a problem is identified, the division
provides recommendations for improvement to the respective
departments to enhance effective monitoring.
Also, to make precise response guidelines for the entire Group
when a crisis occurs, we have determined standard crisis
management regulations, created a business continuity plan (BCP)
and a disaster prevention manual, and are preparing a system thatallows accurate response in times of emergency.

Comments from an External Audit & Supervisory Board Member

Setsuko Gondou

Auditor (External Auditor)

SOGO MEDICAL CO., LTD.

I have been serving in the post of external auditor for Sogo Medical a full year now. This
company provides total management support in the medical industry based on the concept of“good medical practice through good management.” Its stated mission is to build a better
society through good medical practice.
Stronger and more thorough compliance is necessary at the company in order for it tosustainably carry out its activities moving forward. A four-person audit and supervisory board
was established for this purpose, composed of two standing auditors and two part-time
auditors.
The external auditors, myself included, are able, as independent third parties, to speak frankly
to company directors from an objective position, and our perspective is particularly valued inregard to the company’s management approach and state of fiscal health.
My principle objective at the regular meetings of the board of directors and the audit andsupervisory board is to give my honest opinion from the viewpoint of an auditor, drawing upon
my experience and general knowledge from outside the company. I check to see if complianceis being given serious consideration and whether or not management policy is adhering to Our
Pledge, Mission Statement, and Corporate Credo. I aim to be even more active in sharing
proposals and recommendations as an external auditor to help the company develop in a soundand sustainable way.

Corporate Governance45

CSR Management

Our CSR activities are the very same as our business activities—working tobuild a better society through good medical practice.
We work hard to develop valuable human resources who can make good
medical practice and a better society a reality.
Four Principal Elements of CSR

1. We shall understand and share our management principles and fulfill our corporate mission through our work.
2. We shall provide services that surpass customer expectations.
3. We shall create an environment in which employees feel secure and derive fulfillment in their work.
4. As a member of society, we shall be committed to compliance and earn the trust of customers and other people.
The Sogo Medical Group’s CSR activities are the same as its business activities—to build a better society through good
medical practice.
Our job is to support good medical practice, and that is connected to the development of society and improving the lives ofmany people. Through supporting good medical practice in the future, we aim to fulfill our social mission as a company.

Compliance Efforts and StanceCompliance is generally thought of in the sense of “regulatorycompliance,” or conforming with laws and internal regulations.
However, we undertake compliance in a broader sense. In
addition to complying with laws, we consider compliance to mean
acting in an ethical manner and eschewing any activity that would
inconvenience society as we strive aggressively to meet society’s
expectations. Our compliance goes beyond obeying the letter ofthe law, and our actions extend to a respect for the social norms
that form the background for these laws. We endeavor to be acompany that delivers essential value to all people. As such, we
remain sensitive to changes in society, considering individuallywhat society requires and following through with actions to satisfy
those needs.

Meeting the responsibilities
required by society
Fulfilling our
responsibility as
a company

Ethical practiceOurcompliance

Generalcompliance
Regulatory compliance(compliance in a narrow sense)

Our Pledge, Mission Statement, Corporate Credo

Annual Report 2016

46 Financial Section

Financial Section
Detailed information on business performance in thecurrent fiscal year

47 Five-Year Summary of Consolidated Financial Statements
48 Management's Discussion and Analysis
54 Risk Information
56 Consolidated Financial Statements

SOGO MEDICAL CO., LTD.

Financial Section

47

Five-Year Summary of Consolidated Financial Statements
Years Ended March 31

2012

2013

2014

2015

2016

Net sales(¥ million)

80,22286,658103,318

107,945

120,776

Operating income(¥ million)

4,848

4,324

5,014

5,017

6,087

Ordinary income(¥ million)

4,881

4,343

5,068

5,227

6,196

Net income attributable to owners of the parent(¥ million)

2,504

2,532

2,856

2,774

2,318

Total net assets(¥ million)

19,511

21,63623,934

26,52129,646

Total assets(¥ million)

53,16057,13866,982

69,811

74,621

Net assets per share(yen)

1,351.39

1,496.64

1,655.73

1,824.14

1,967.14

Net income per share(yen)

173.46175.41

197.82

192.20154.65

Cash dividends per share

(yen)

35.00

40.00

40.00

40.00

45.00

(Includes interim dividend)(yen)(17.50)(20.00)(20.00)(20.00)(22.50)

Dividend payout ratio

(%)

20.2

22.8

20.2

20.8

29.1

Capital adequacy ratio

(%)

36.7

37.8

35.7

37.7

39.5

Net income to shareholders’ equity ratio (ROE)

(%)

13.6

12.3

12.6

11.0

8.3

Price-earnings ratio(times)

8.6

9.5

10.5

17.6

24.7

Price-to-book-ratio(times)

1.1

1.1

1.2

1.8

1.9

(thousands of shares)

15,34015,34015,34015,34015,340Cash flows from operating activities(¥ million)

4,484

7,269

7,461

6,051

7,004

Cash flows from investing activities(¥ million)(4,086)(3,380)(5,335)(5,296)(4,981)

Cash flows from financing activities(¥ million)(170)(2,777)(1,370)(1,637)(635)

Cash and cash equivalents at end of period(¥ million)

3,984

5,095

5,851

4,968

6,356

Number of regular employees(people)

2,195

2,508

2,650

2,951

3,233

Number of part-time employees(people)

623

735

1,064

1,190

1,208

Number of shares outstanding

Note: The number of regular and part-time employees indicates the average number of people employed during the year (excluding members of the Sogo
Medical Group dispatched outside the Group and including personnel dispatched from outside the Group to the Sogo Medical Group). Part-time
employees indicates people working part-time, contract employees, and dispatched personnel.

Other Financial Data (Consolidated)
Years Ended March 31

2012

2013

2014

2015

2016

Operating income to net sales ratio

(%)

6.0

5.0

4.9

4.6

5.0

Ordinary income to net sales ratio

(%)

6.1

5.0

4.9

4.8

5.1

Net income to net sales ratio

(%)

3.1

2.9

2.8

2.6

1.9

(times)

1.5

1.5

1.5

1.5

1.6

Return on assets

(%)

10.2

7.9

8.2

7.6

8.6

Current ratio

(%)

131.7

128.8

122.0

121.5

125.5

Fixed assets to capitalization

(%)

78.1

80.0

81.7

83.7

81.7

Interest-bearing debt ratio

(%)

27.4

25.1

23.2

23.7

24.7

(times)

0.54

0.43

0.40

0.44

0.41

Total assets turnover

Net debt-to-equity ratio

Notes: 1. Interest-bearing debt includes lease obligations and installment purchase accounts payable that are included in the consolidated balance sheet.
2. Method of calculating the net debt-to-equity ratio: (Interest-bearing debt – cash and deposits - certificates of deposit)/shareholders’ equity.
(On April 1, 2015, we carried out a 2-for-1 split of common stock, and calculations have been carried out, assuming this stock split, for net assets per share,
dividends per share, interim dividends per share, and total number of issued shares in and prior to the fiscal year ended in March 2015.)

Annual Report 2016

48 Financial Section

Management's Discussion and Analysis
1. Operation Results
Overview of Performance During the YearIn the fiscal year under review, Sogo Medical posted net
sales of ¥120,776 million, an increase of 11.9%
year-on-year, primarily attributable to an increase in sales atexisting pharmacies and benefits from sales growth owing
to the opening of new pharmacies. On the profit front, thecompany booked operating income of ¥6,087 million, agrowth of 21.3%, and ordinary income of ¥6,196 million, an
expansion of 18.5%. However, net income attributable toowners of the parent came to ¥2,318 million, a decline of
16.5%, due to the negative impact from impairment losses.
In April 2014, Sogo Medical launched a three-year
medium-term management plan, dubbed “Further
Challenge—toward a better society in which people can livewith a sense of security.” The plan outlines medium-termgoals and specific priority initiatives. This fiscal year, whichis the second year of our current medium-term
management plan, coming together as one single group,
we are working to solve problems faced by society byfurther expanding and advancing the initiatives carried out
thus far and by developing new services that are widely
needed today.
This fiscal year Sogo Medical supported the start-up of
304 private practices, including succession start-ups andhealthcare malls. At the end of the current fiscal year, thenumber of employed physicians wishing to transfer or start
up a practice via the DtoD System stood at 62,429 doctors,
an increase of 5,924 doctors compared with one year
previous.
In the pharmacies business, there were 47 new openings
in the fiscal year, including 25 pharmacies acquired via M&A
transactions. The total number of pharmacies at the end of
the fiscal year is 576. In a breakdown of pharmacy openings
by region, 17 pharmacies were opened in east Japan, 24 inwest Japan, and six in Kyushu. Of the 22 pharmacies
opened in the fiscal year, excluding acquisitions, 12 wereopened by doctors using the Sogo Medical practicestart-up support system.

By Business
Medical Practice Support
The Medical Practice Support segment comprises theprovision of such services as medical management
consulting for medical institutions and doctors, the DtoD
system, TV rental for patients in hospitals, leasing andinstallment sales of medical equipment, and the planning,
design, and construction of medical facilities.
Net sales from medical practice support for the year
were ¥23,302 million, a reduction of 9.7% from the previous
year. This decline is attributable to lower sales in rental
services and leasing/installment sales of medical
equipment despite increased sales in consulting. Operating
income decreased by 86.3% to ¥137 million. The following
describes the situation in each division.

(1) Consulting
Net sales from the consulting division posted a 11.9%
increase year on year, to ¥1,894 million. Of this amount,medical institution management consulting sales rose
16.1% to ¥1,232 million. Sales related to support for
doctors who wish to transfer or start up a practice rose
4.8% to ¥662 million. In addition to supporting 5,863
transfer projects, we also supported 304 practicestart-up support projects, which extended into lease
contracts and the opening of new pharmacies.

(2) Rental
Net sales in the rental division were ¥5,465 million, a
7.7% decrease from the previous year. Within theseresults, rental sales increased by 11.2% to ¥4,665
million, and net sales of products decreased by 53.7%
to ¥800 million.

(3) Leasing and Installment
Segment Financial Results by Business and Region
From the fiscal year ended March 2013, Sogo Medical
reformed its organizational and management structure,
adopting a region-based structure, in order to draw up
strategies and conduct business through prompt decision
making at a regional level. Accompanying this reform, theprevious reportable segments, “Medical Practice Support,”“Pharmacies,” and “Others,” were abandoned in favor of
the region-based reportable segments “Higashinihon,”“Nishinihon,” and “Kyushu.”In this report, for the convenience of readers and to allow
for comparison between years, there is analysis based on
the previous segments in the “By Business” section andbased on the new segments in the “By Region” section.

SOGO MEDICAL CO., LTD.

Net sales in the leasing/installment division fell 27.6%
year on year, to ¥11,035 million. This is due to an 82.1%
decrease, to ¥923 million, in medical equipment sales.
Despite accounts receivable–installment sales rising
3.7% to ¥1,874 million, lease receivables and investment
assets fell 17.5% to ¥1,403 million, and operating assets
fell 6.6% to ¥3,277 million. Although the number of lease
contracts recovered somewhat from the downturn after
the increase in consumption tax, there was an increaseof only 0.1% year on year to ¥9,937 million.

Financial Section(4) Others (Design and Construction of Medical Facilities,
Healthcare Information Services, etc.)
Sales in the others division increased 66.2% to ¥4,905
million year on year, thanks to sales from Hokendohjinsha
Inc., a company that became part of the Group in March
2015, working in the field of healthcare information
services.

Years Ended March 31

2014

2015

2016

Net sales (¥ million)

103,318

107,945

120,776

29,77925,811

23,302

Consulting

1,672

1,693

1,894

RentalMedical Practice Support

5,914

5,922

5,465

Leasing and Installment Sales 19,113

15,243

11,035

Others

3,079

2,952

4,905

Pharmacies

72,17180,66096,405

Others

1,366

1,473

1,068

5,014

5,017

6,087

Operating income (¥ million)
Medical Practice Support

Sales by Business
MedicalPractice
SupportOthers(¥ million)

1,068
1,366

1,473

72,17180,66029,77925,811
15/3

5,066
314

2014/3

137

4,805

6,655

Others

(115)

(123)

(114)

Elimination/Corporate

(582)

(670)

(591)

16/3

308

15/3

Pharmacies

Others(¥ million)

4,752

4,805

6,655

959
(115)
(582)

1,005

137

(123)
(670)

(114)
(591)

15/3

16/3

Rental Sales
Rental

1,672

1,693

2014/3

15/3

16/3

Leasing and Installment Sales
Sales of rental contracts(¥ million)

Sales of leasing contracts

Leasing(¥ million)
Sales of medical equipment

Installment

5,863

7,767

304

16/3

(¥ million)

1,894

2014/3(projects)

Consulting Sales

Elimination/Corporate

23,302

Practice start-up
support5,535

MedicalPractice
Support

96,405Practice Transfer/Start-up Support
Practice transfer
support

1,005

4,752

Operating Income by BusinessPharmacies

2014/3959

Pharmacies

49

1,650

1,728

800

4,263

4,193

4,665

2014/3

15/3

16/3

568
954

5,159
514
945

923
554
867

9,824

8,622

8,690

2014/3

15/3

16/3

Annual Report 2016

50 Financial Section

Management's Discussion and Analysis

By Region
Pharmacies

Higashinihon

In the pharmacy division we are moving ahead with thecreation of high-value pharmacies throughout Japan.
We opened 47 new pharmacies (including 25 pharmacies
from M&A activities), and as a result the number ofpharmacies at year-end was 576, up 38 from last year,
contributing ¥6,009 million toward net sales. Net sales fromexisting pharmacies rose 9.9%, to ¥83,083 million. Sales
from the 48 pharmacies opened in the previous fiscal year
rose 103.6%, to ¥5,845 million. As a result, net sales from thepharmacy division rose 19.5%, to ¥96,405 million. Also,
operating income rose 38.5%, to ¥6,655 million.

Although sales declined in the leasing and installment
division, net sales increased in the consulting division andrental division, and in the pharmacies division there wasincreased revenue due to the opening of new pharmacies,
leading to an overall net sales increase of 10.7% year on
year to ¥43,838 million.
Operating income rose to ¥1,228 million, a 45.9%
increase, due to increased profits from a rise in sales in the
consulting, rental, and pharmacy divisions.

Nishinihon

Number of Pharmacies / Pharmacy Sales
Number ofpharmacies

Net sales (¥ million)

72,171493

96,40580,660538

576

Despite a decline in sales in the rental division and leasing
and installment division, there was a 17.6% year-on-yearincrease in net sales to ¥33,176 million. This was due to anincrease in sales in the consulting division, as well as, in thepharmacy division, such factors as increased revenue
reflecting the opening of new pharmacies, including thecontribution of sales from dispensing pharmacy subsidiaries
whose stock was acquired.
Operating income showed a 37.8% increase over theprevious year to ¥2,082 million reflecting increased profits
driven by higher sales in the consulting and pharmacy
divisions.

Kyushu2014/315/3

16/3

Despite a decline in sales in the rental division and leasing
and installment division, net sales rose by 5.6% from theprevious year to ¥39,905 million. This was due to higher
sales in the consulting division, along with such factors asincreased sales at existing pharmacies and a rise in sales
from the opening of new pharmacies in the pharmacy
division.
Operating income was ¥2,854 million, a year-on-yearincrease of 8.0% due to increased profits driven by higher
sales in the consulting and pharmacy divisions.

SOGO MEDICAL CO., LTD.

Financial Section

Years Ended March 31

2014

2015

2016

Net sales (¥ million)

103,318

107,945

120,776

Higashinihon

36,70039,614

43,838

Medical Practice Support

10,177

8,617

7,750

Pharmacies

26,52230,99736,08827,39028,20533,176

Nishinihon
Medical Practice Support

9,863

8,420

6,765

Pharmacies

17,526

19,784

26,41037,23837,79339,905

KyushuMedical Practice Support

9,150

8,040

6,077

Pharmacies

28,08729,75233,828

1,989

2,331

3,855

OthersOperating income (¥ million)

5,014

5,017

6,087

Higashinihon

1,289

842

1,228

Nishinihon

1,324

1,510

2,082

Kyushu

2,611

2,643

2,854

Others

346

620

490

Adjustments

(558)

(599)

(568)

Net Sales by Region
Higashinihon

Nishinihon

Kyushu

3,855

2,331

1,989

(¥ million)

Others39,90537,23837,79327,39028,20533,17636,70039,614

43,838

2014/315/351Forecast for the Fiscal Year Ending March 31, 2017
The year ending in March 2017 is the final year of the current
medium-term management plan. The company plans tocontinue to move ahead with its priority initiatives ofundertaking new businesses, improving existing businesses,
and enhancing corporate value, based on the theme of“Further Challenge.”
In order to achieve business results commensurate withthe scale of the market in which we operate—a key
management topic, we will continue to strengthen our
regional network, train consultants, and develop humanresources through the PPI internal certification system,
thereby building assets that do not appear on the balance
sheet but that will create a solid foundation for the company
in the future.
Specific initiatives include creating healthcare malls andpromoting other projects, supporting medical practice
succession for revitalizing and sustaining healthcare in local
communities, and supporting hospital management andcreating high-value pharmacies as support for building an
integrated community care system. We estimate 13
openings of healthcare malls, 90 cases of medical practice
succession, and 30 new pharmacy openings.
As a result of these initiatives, the company forecasts net
sales of ¥126,507 million, a rise of 4.7% year on year. Sales
growth in the medical practice support business is
expected to offset the negative impact from a revision todispensing fees in the pharmacy business. Meanwhile, thecompany estimates operating income of ¥6,005 million, adecline of 1.3% year on year, and ordinary income of ¥6,020
million, a fall of 2.8%, as it does not expect to absorb an
increase in sales management costs. Note that in the year
ending March 2017, the company forecasts net income
attributable to owners of the parent at ¥3,730 million, an
increase of 60.9%, as we do not plan on registering
impairment losses as in the previous fiscal year.

16/3

Operating Income by Region
Higashinihon
Adjustments

Nishinihon

Kyushu

346

620

2,611

2,643

1,324

2,854

2,082
1,228

842

(558)

(599)
15/3

(¥ million)

490

1,510

1,289
2014/3

Others(568)
16/3

Annual Report 2016

52 Financial Section

Management's Discussion and Analysis
2. Financial Position
AssetsTotal assets at the end of the year increased by ¥4,810
million over the previous year to ¥74,621 million. Current
assets increased by ¥2,605 million to ¥39,189 million. The
main factor underlying this was a ¥2,131 million jump innotes and accounts receivable-trade.
Noncurrent assets rose by ¥2,205 million to ¥35,431
million. This was the combination of an increase of ¥2,953
million in buildings and structures, and a fall of ¥752 million
in property for lease.

Liabilities
Liabilities for the year were ¥44,975 million, a ¥1,685 million
increase over the previous year. Current liabilities rose by¥1,128 million to ¥31,237 million. This was the result of a
¥1,143 million increase in the current portion of long-termloans payable. Noncurrent liabilities rose by ¥557 million year
on year to ¥13,737 million. This was mainly due to a ¥2,368
million increase in long-term loans payable, and a ¥1,117
million decrease in long-term accounts payable (installment
purchase). In addition, interest-bearing debt (including leaseobligations and accounts payable-installment purchases)
increased by ¥1,874 million to ¥18,447 million, and the net
debt-to-equity ratio—found by subtracting cash anddeposits from interest-bearing debt and dividing the resultby shareholders' equity—fell by 0.03 points, to 0.41.

Net Assets
As of March 31, 2016, net assets were ¥29,646 million, a
year-on-year increase of ¥3,124 million. Declines from thepurchase of treasury stock (¥708 million) and the payment
of dividends (¥629 million) were offset by the disposition oftreasury stock through a stock swap (¥2,262 million) andcomprehensive income attributable to owners of the parent(¥2,318 million). As a result, the capital adequacy ratio was
39.5%, an increase of 1.7 percentage points compared to37.7% on March 31, 2015.

Cash Flows
As of March 31, 2016, cash and cash equivalents totaled¥6,356 million, a year-on-year increase of ¥1,387 million(27.9%). The primary factors are described below.

Cash Flows from Operating Activities
Cash provided by operating activities increased by ¥7,004
million. The major cash increases were ¥4,824 million fromincome before income taxes, ¥3,836 million fromadjustment for depreciation and amortization, and ¥1,253
million from a decrease in inventories. The major cash
decreases were ¥2,559 million from income taxes paid and¥1,436 million from an increase in notes and accounts
payable-trade.

Cash Flows from Investing Activities
Cash decreased by ¥4,981 million as a result of investing
activities. This was mainly due to acquisition of own-usedassets (¥4,233 million) and purchase of property for lease(¥876 million).

Cash Flows from Financing Activities
Cash decreased by ¥635 million as a result of financing
activities. This was due to the fact that, despite an increasein cash due to long-term loans payable (¥6,485 million),
there was a decrease in cash from repayment of long-termloans payable (¥3,001 million), repayment of installment
payables (¥2,092 million), repayment of lease obligations(¥751 million), purchase of treasury stock (¥708 million) andpayment of dividends (¥629 million).

Trends in Cash Flows
Operating cash flow
Free cash flow(¥ million)

Investment cash flow

7,461

7,004

6,051
2,126

2,022

755

(5,335)(5,296)(4,981)

2014/3

15/3

16/3

Note: Free cash flow = cash flows from operating activities+ cash flows from investing

SOGO MEDICAL CO., LTD.

Financial Section

53

3. Financial Strategies
Issues on the Financial Front

Shareholder Returns

Under our medium-term management plan, with the DtoD
system and high-value pharmacies as a starting point, weare actively striving to expand business. We are developing
healthcare malls and supporting hospital management as
part of efforts in new fields. We plan to continue moving inthis direction and anticipate that suitable funds will beneeded to achieve these goals in the years to come.
Capital for the facility leasing of medical institutions andthe opening of 47 new pharmacies (including 25 pharmacies
from M&A transactions) in the fiscal year ended March 2016
was provided by our retained earnings as well as financial
institution loans and leasing.
To make "good medical practice" a reality, Sogo Medical
must not only target the stable management of medical
institutions; we must also achieve stable management of
our own operations. Holding to the basic principle ofexpanding shareholders' equity through the accumulationof income, while considering an appropriate level of debt
leveraging, we have sought to maintain a net debt-to-equity
ratio of 0.5 over the past several years.
While making steady progress in line with our growthstrategies, we must at the same time shore up our financialbase. We recognize that in the future, we must step up ourefforts to create a balanced capital structure.

Our basic policy on shareholder returns is to maintain apayout ratio of approximately 20%. We recognize that there
are calls to raise our payout ratio further, but at present we
consider it important to retain earnings to avoid degrading
our financial base over the long term, and we intend to
apply the cash on hand toward investment in growth inorder to expand the scale of our business operations.
Through this investment in growth, we expect our stock
price to rise, and we aim to pay back shareholders throughincreases in the value of their shares.
Also, on April 1, 2015, we carried out a 2-for-1 split ofcommon stock. This was done in order to lower the
price-per-unit investment in our stock. This will provide anenvironment in which all of our investors can makeinvestments more easily, while also improving liquidity of
our shares and expanding the pool of investors.
We expect the number of Sogo Medical shareholders toincrease in the future as our trading volume grows. In order
to attract the attention of numerous investors, we arehoping to expand our market capitalization to ¥100 billion in
the medium to long term.

Interest-Bearing Debt / Net Debt-to-Equity Ratio

Trends in Dividends

Interest-bearing debt (¥ million)

15,5520.40

Net debt-to-equity ratio (times)

16,572

Dividends (¥)

18,447

45
40

0.44

40

0.41

20.2

2014/3

15/3

Dividend payout ratio (%)

16/3

2014/3

20.8

15/3

29.1

16/3

Note: On April 1, 2015, we carried out a 2-for-1 split of common stock,and dividends per share prior to March 31, 2015 have been
calculated assuming that the stock split had been performed.

Annual Report 2016

54 Financial Section

Risk Information
Business Risks
Business risks related to the operational performance
reported in this annual report that have a possibility ofmaterially affecting investor decisions are listed below.
Points regarding future events are based on judgments
made as of June 22, 2016.

1. M&A and Other Investments
The Group invests through mergers and acquisitions, etc.
as part of business expansion efforts, and theaccompanying goodwill is recorded. It is therefore possiblethat new goodwill could be generated that increases
amortization costs. Or, if the firm invested in does notachieve initial performance targets and is not likely toachieve them into the future, it becomes necessary to book
an impairment loss, which can affect the performance of
the Group.

2. Pharmacies
A. Pharmacies and separation of dispensing andprescribing functions
In order to increase the quality of healthcare, the Japanese
government is pursuing policies encouraging theseparation of prescribing and dispensing functions so that
medical institutions focus on medical activities such as
medical treatment and pharmacies provide drug history
management, patient compliance instructions, and otherservices. However, if the degree of separation reduces in
the future, this could have an effect on new pharmacy
openings and the overall performance of pharmacies.

B. Pharmacy regulations
To perform dispensing duties within our Group, it isnecessary to receive permission to open a new pharmacy
and be designated as a health insurance pharmacy by theprefectural or city governor, as well as receive other kinds ofdesignation as necessary. In the unlikely event that a
pharmacy was forced to suspend business or was closed
down as the result of a legal infraction or some otherreason, this could have an effect on the performance ofpharmacies.

C. Drug price and dispensing fee revisions
Dispensing sales comprise revenue from prescription drugs
and dispensing technical fees. Revenue from prescription
drugs is based on official prices called the Drug Price
Standards decided under the Health Insurance Act, while
revenue from dispensing technical fees is also based on fees
decided under the same act. Changes in drug prices anddispensing fees as a result of official revisions could have aneffect on the performance of pharmacies.

SOGO MEDICAL CO., LTD.

D. Dispensing errors
Our Group treats the prevention of dispensing errors as animportant issue, therefore we increase the skill andknowledge of pharmacists through training and implement
multiple checks and a dispensing error prevention system.
Our Group has also taken out liability insurance forpharmacists in all its pharmacies as a precautionary
measure. However, in the case of a major dispensing error
leading to loss of public trust, financial losses from lawsuits,
or other losses, there could be an effect on theperformance of pharmacies.

E. Consumption tax
Under the Consumption Tax Act, dispensing sales are notsubject to consumption tax, but pharmaceuticals purchasedby our Group are taxable. Consequently, consumption
tax paid by our Group on purchases is recorded asconsumption tax on the statement of income as part ofdispensing cost of sales. When consumption tax was
introduced and later increased, the increase was taken into
account in drug price revisions and the company was alsoable to have it taken into account when negotiating with our
suppliers. However, if future rises in consumption tax are notreflected in drug prices or our suppliers’ prices, there could
be an effect on the performance of pharmacies.

F. Recruitment of pharmacists and the pharmacy
opening plan
Under the Pharmaceutical and Medical Device Act, a fixed
number of pharmacists are required at pharmacies, andunder the Pharmacists Act, dispensing duties must be
performed by pharmacists. Our Group presently hasenough pharmacists at all its pharmacies to meet thecriteria of the Pharmaceutical and Medical Device Act. Our
company also has a pharmacist recruitment plan based on
its new pharmacy opening plan and by implementing
recruitment activities and supplementing the main period ofhiring in recruitment season with initiatives throughout theyear, our Group expects to recruit enough pharmacists
such that there will be no obstacles to its pharmacy
opening plan. However, if it proves impossible to recruit
enough pharmacists or if our Group’s pharmacy opening
plan is delayed and recruitment nonetheless goes ahead,so that for a time there are more pharmacists than areneeded, there could be an effect on the performance ofpharmacies.

Financial Section

3. Rental
A. Rental transactions
Sogo Medical operates a system whereby patients pay touse TVs and other items that are placed in medical
institutions based on rental contracts. Net sales from rental
transactions (revenue from rental fees) vary based on thenumber of TVs and the rental fee. Presently, there is a
downward trend in the number of beds, which is having aknock-on effect on the number of TVs in medical
institutions. Revenue from rental fees is affected by the
number of beds, their occupancy rates and the number ofhours patients spend watching TV.

55

B. Product sales
To increase the efficiency of funds collection, Sogo Medicalsells part of the property from the contracts it acquires
during the fiscal year and records it on the statement ofincome as product sales. These sales transactions refer tosales to another leasing company of the equipment fromthe lease contracts or installment contracts signed withcustomers. We collect receivables from customers and paythat money to the leasing company. We profit from thedifference between the purchasing price from the supplierand the selling price to the leasing company. If sales
increase, unearned lease contract and installment
receivables decrease and revenue from lease fees andinstallment sales also decrease.

B. Responding to technological advances
5. DtoD promotion
The shift to digital-only terrestrial broadcasting in July 2011is now complete, but if it became necessary to respond toa similar advance in technology, while there would be thepossibility of exploiting new business opportunities such as
through product development, the obsolescence ofexisting equipment and subsequent investment could havean effect on the performance of the rental division.

C. Consumption tax
If consumption tax is increased but not reflected in patients’
TV rental fees or absorbed through the cutting of costs, it
could have an effect on the performance of the rental
division.

4. Leasing / installment
A. Changes in interest rates
Ultralow interest rate policies in the leasing/installment
business environment have led to increasingly fierce
competition with other companies over lease fees.
Leasing/installment contracts and profit margins areaffected by changes in interest rates.

The DtoD system supports practice succession, healthcare
cooperation, and doctors transferring practice. The system
helps to solve problems by comprehensively providing
assistance to doctors wishing to start or change practice,doctors in practice seeking successors, and medical
institutions looking for excellent doctors and healthcare
partners. Revenues from the DtoD system come not only
directly in such forms as introduction fees as part of doctortransfer support and consulting fees for doctors starting
new practices, but also indirectly through related businessexpansion that increases productivity and profitability.
As the number of employed physicians, medical practiceowners, and medical institutions registered in the systemincreases, DtoD results will steadily improve. As afundamental strategy, Sogo Medical plans to further
promote and strengthen the DtoD system and expand its
business. However, if DtoD business expansion does not
go according to plan, it could have an effect on our
performance.

6. Personal information protection
The Group handles personal information as defined in theProtection of Personal Information Act in all of its various
businesses. In 2006, our Group acquired PrivacyMark
certification and we are working to prevent personal
information leaks. However, in the event that personal
information was leaked, loss of public trust, financial losses
from lawsuits, or other losses could affect our
performance.

Annual Report 2016

56 Financial Section

Consolidated Financial Statements
Consolidated Balance Sheet
2014

2015

2016

(Apr. 1, 2013–
Mar. 31, 2014)(Apr. 1, 2014–
Mar. 31, 2015)(Apr. 1, 2015–
Mar. 31, 2016)

5,873

4,988

6,376

Notes and accounts receivable-trade

18,326

17,485

19,617

Accounts receivable-installment sales

1,687

1,806

1,874

Lease receivables and investment assets

2,014

1,701

1,403

Inventories

6,475

7,543

6,583

762

628

789

1,933

2,450

2,566

(26)

(19)

(20)

37,04736,584

39,189Property for lease

6,871

5,929

5,177

Buildings and structures, net

7,418

8,763

11,716

Land

3,078

3,992

4,109

Other, net

2,065

3,116

2,539

Total property, plant and equipment

19,43321,801

23,542

Goodwill

5,294

5,252

5,833

Other

953

1,031

1,201

6,248

6,283

7,034

Investment securities

1,008

1,566

1,134

Deferred tax assets

568

468

507

2,681

3,107

3,231

(5)

(0)

(19)

4,252

5,141

4,853

29,93433,22635,431

66,982

69,811

74,621

AssetsCurrent assets
Cash and deposits

Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment

Intangible assets

Total intangible assets
Investments and other assets

Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

SOGO MEDICAL CO., LTD.

Financial Section

57(¥ million)

2014

2015

2016

(Apr. 1, 2013–
Mar. 31, 2014)(Apr. 1, 2014–
Mar. 31, 2015)(Apr. 1, 2015–
Mar. 31, 2016)

20,372

18,841

18,590

350

360

610

2,155

2,903

4,046

Lease obligations

503

363

267

Accrued expenses

1,725

2,072

2,972

Income taxes payable

1,333

1,452

1,572

175

190

182

Other

3,743

3,925

2,994

Total current liabilities

30,35830,10931,237Long-term loans payable

5,191

6,835

9,204

Lease obligations

944

1,028

714

Long-term accounts payable-installment purchase

4,450

3,055

1,938

Other

2,103

2,260

1,880

Total noncurrent liabilities

12,68913,18013,73743,04843,29044,975

Capital stock

3,513

3,513

3,513

Capital surplus

4,136

4,136

5,566

Retained earnings

17,05819,25520,944

Treasury stock(1,043)(1,044)(920)

Total shareholders’ equity

23,66525,861

29,104

Valuation difference on available-for-sale securities

240

475

338

Total accumulated other comprehensive income

240

475

338

28

184

203

23,934

26,52129,646

66,982

69,811

74,621

Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable

Deferred profit on installment sales

Noncurrent liabilities

Total liabilities
Net assets
Shareholders’ equity

Accumulated other comprehensive income

Non-controlling shareholders
Total net assets
Total liabilities and net assets

Annual Report 2016

58 Financial Section

Consolidated Financial Statements
Consolidated Statements of Income(¥ million)

2014

2015

2016

(Apr. 1, 2013–
Mar. 31, 2014)(Apr. 1, 2014–
Mar. 31, 2015)(Apr. 1, 2015–
Mar. 31, 2016)

Net sales

103,318

107,945

120,776

Cost of sales

88,88993,139103,178

Gross profit

14,42814,805

17,598Selling, general and administrative expenses

9,414

9,787

11,511

Operating income

5,014

5,017

6,087

Non-operating income

183

368

287

Dividends income

16

20

22

Rent income

35

38

31

Insurance cancellation refunds

—

106

36

Other

130

202

196

Non-operating expenses

128

159

178

Interest expenses

57

75

75

Loss on valuation of investments securities

—

17

—

Other

71

65

103

5,068

5,227

6,196

Ordinary income
Extraordinary income

48

—

—

Gain on sales of investment securities

41

—

—

Contributed income

7

—

—

Extraordinary loss

70

51

1,371

Impairment loss

34

51

1,014

Loss on sales of stocks of subsidiaries and affiliates

—

—

87

Loss on sales of investment securities

26

—

—

Loss on valuation of investment securities

—

—

270

Office transfer expenses

9

—

—

Income before income taxes

5,046

5,175

4,824

Income taxes-current

2,082

2,236

2,569

Income taxes-deferred

105

163

(68)

Total income taxes

2,187

2,400

2,501

Net income

2,858

2,774

2,323

2

0

4

2,856

2,774

2,318

Net income attributable to non-controlling shareholders
Net income attributable to owners of the parent

SOGO MEDICAL CO., LTD.

Financial Section

Consolidated Statements of Comprehensive Income
2014(¥ million)

2015

2016

(Apr. 1, 2013–
Mar. 31, 2014)(Apr. 1, 2014–
Mar. 31, 2015)(Apr. 1, 2015–
Mar. 31, 2016)

2,858

2,774

2,323

18

234

(136)

Net income

59

Other comprehensive income
Valuation difference on available-for-sale securities

18

234

(136)

2,876

3,009

2,186

2,874

3,009

2,181

2

0

4

Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of the parent
Comprehensive income attributable to non-controlling shareholders

Consolidated Statements of Change in Net Assets(¥ million)
Accumulated othercomprehensive income

Shareholders’ equity
Capitalstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityValuation difference
on available-forsale securities

Non-controllingshareholders

Net
assets

3,513

4,136

14,779(1,043)

21,386222

26

21,636

Dividends from surplus

—

—

(577)

—

(577)

—

—

(577)

Net income attributable toowners of the parent

—

—

2,856

—

2,856

—

—

2,856

Purchase of treasury stock

—

—

—

(0)

(0)

—

—

(0)

—

—

—

—

—

Balance at the end of FY2013

Disposition of treasury stock

—

—

—

Net changes of items otherthan shareholders’ equity

—

—

—

—

—

18

2

18

Balance at the end of FY2014

3,513

4,136

17,058(1,043)

23,665240

28

23,934

Dividends from surplus

—

—

(577)

—

(577)

—

—

(577)

Net income attributable toowners of the parent

—

—

2,774

—

2,774

—

—

2,774

Purchase of treasury stock

—

—

—

(1)

(1)

—

—

(1)

Disposition of treasury stock

—

—

—

—

—

—

—

—

Net changes of items otherthan shareholders’ equity

—

—

—

—

—

234

156

390

Balance at the end of FY2015

3,513

4,136

19,255(1,044)25,861

475

184

26,521Dividends from surplus

—

—

(629)

—

(629)

—

—

(629)

Net income attributable toowners of the parent

—

—

2,318

—

2,318

—

—

2,318

Purchase of treasury stock

—

—

—

(708)

(708)

—

—

(708)

Disposition of treasury stock

—

1,429

—

832

2,262

—

—

2,262

Net changes of items otherthan shareholders’ equity

—

—

—

—

—

(136)

18

(117)

Balance at the end of FY2016

3,513

5,566

20,944(920)

29,104338

203

29,646

Annual Report 2016

60 Financial Section

Consolidated Financial Statements
Consolidated Statements of Cash Flows(¥ million)

2014

Net cash provided by (used in) operating activities
Income before income taxes
Depreciation and amortization
Goodwill amortization
Impairment loss
Loss (gain) on sales of subsidiaries and affiliated companies stocks
Loss (gain) on valuation of investment securities
Interest and dividends income
Capital cost and interest expenses
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in accounts receivable-installment sales
Net decrease (increase) in lease receivables and investment assets
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Increase (decrease) in other assets/liabilities
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Purchase of own-used assets
Proceeds from sales of own-used assets
Purchase of property for lease
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of investments in subsidiaries resulting in change in scope of consolidation
Other, net
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Repayments of lease obligations
Repayments of installment payables
Cash dividends paid
Purchase of treasury stock
Other, net
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

SOGO MEDICAL CO., LTD.

2015

2016

(Apr. 1, 2013–
Mar. 31, 2014)(Apr. 1, 2014–
Mar. 31, 2015)(Apr. 1, 2015–
Mar. 31, 2016)

5,046
3,522
587
34
—
—
(18)
126
(3,468)(264)
106(1,222)
4,932
181
(148)
9,416
18
(130)
(1,842)
7,461

5,175
3,746
805
51
—
—
(22)
131
1,050
(104)
313
(953)
(1,735)
(223)
33
8,269
22
(131)
(2,108)
6,051

4,824
3,836
1,021
1,014
87
270
(23)
112
(993)
(75)
298
1,253
(1,436)
(798)
262
9,652
23
(111)
(2,559)7,004(3,308)
88
(69)
(97)
444
(2,277)(115)(5,335)(3,767)
—
(359)
(270)
—
(579)
(318)
(5,296)(4,233)
172
(876)
(11)
—
(147)
115
(4,981)6
3,650(1,910)(573)(1,963)
(577)
(0)
(1)
(1,370)
755
5,095
5,851

9
4,749
(3,211)(512)(2,094)(577)(1)—(1,637)
(882)
5,851
4,968

64
6,485
(3,001)(751)(2,092)
(629)
(708)
—
(635)
1,387
4,968
6,356

Financial Section

Segment Information(¥ million)

2014

Apr. 1, 2013–Mar. 31, 2014

Sales
Unaffiliated sales
Intersegment sales
Total
Segment profit
Segment assets

61

Reportable Segments

Reconciliations* 2

Consolidated
amounts* 3

Others*1

Total

101,329

1,989

103,318—

103,318

3

369

2,457

2,826

(2,826)—37,241
2,611
16,524

101,698
5,225
55,112

4,446
346
3,285

106,145
5,572
58,398(2,826)
(558)
8,584

103,318
5,014
66,982

Higashinihon

Nishinihon

KyushuTotal

36,70027,39037,23819346

36,7191,289
22,936

27,737
1,324
15,651

Notes:*1. Others includes items such as TV rental for hotels, which are not classified as reportable segments.
*2. Reconciliations were as follows:(1) Reconciliation for reportable segment loss (–¥558 million) included elimination of intersegment sales (¥5 million) and overall corporate expense (–¥563 million).
The overall corporate expenses were mainly classified as general and administrative expenses and were not allocated to reportable segments.
(2) Reconciliation for reportable segment assets (¥8,584 million) included elimination investment against equity (–¥7,529 million) and overall corporate assets(¥17,040 million). The overall corporate assets were mainly classified as parent company deposits and were not allocated to reportable segments.
*3. Reportable segment profits were reconsolidated with the operating income of the consolidated income statement.

2015

Apr. 1, 2014–Mar. 31, 2015

Sales
Unaffiliated sales
Intersegment sales
Total
Segment profit
Segment assets

Reportable Segments

Reconciliations* 2

Consolidated
amounts* 3

Others*1

Total

105,6132,331

107,945—

107,945

2

796

4,823

5,620

(5,620)—37,796
2,643
15,272

106,410
4,996
56,156

7,155
620
5,698

113,565
5,617
61,855(5,620)
(599)
7,955

107,945
5,017
69,811

Higashinihon

Nishinihon

KyushuTotal

39,61428,20537,79355738

39,670842
25,02928,943
1,510
15,854

Notes:*1. Others includes items such as TV rental for hotels, which are not classified as reportable segments.
*2. Reconciliations were as follows:(1) Reconciliation for reportable segment loss (–¥599 million) included elimination of intersegment sales (¥26 million) and overall corporate expenses (–¥572 million).
The overall corporate expenses were mainly classified as general and administrative expenses and were not allocated to reportable segments.
(2) Reconciliation for reportable segment assets (¥7,955 million) included elimination investment against equity (–¥8,464 million) and overall corporate assets(¥17,150 million). The corporate overall assets were mainly classified as parent company deposits and were not allocated to reportable segments.
*3. Reportable segment profits were reconsolidated with the operating income of the consolidated income statement.

2016

Apr. 1, 2015–Mar. 31, 2016

Sales
Unaffiliated sales
Intersegment sales
Total
Segment profit
Segment assets

Reportable Segments

Reconciliations* 2

Consolidated
amounts* 3

Others*1

Total

116,920

3,855

120,776—

120,776

0

601

6,020

6,622

(6,622)—39,906
2,854
16,635

117,5226,165
61,180

9,875
490
4,745

127,398
6,655
65,926(6,622)
(568)
8,695

120,776
6,087
74,621

Higashinihon

Nishinihon

KyushuTotal

43,83833,17639,90540

560

43,8791,228
25,82333,737
2,082
18,720Notes:*1. Others includes business segments that are not classified as reportable segments, which includes wholesale distribution of pharmaceutical products and healthcare
information services.
*2. Reconciliations were as follows:(1) Reconciliation for reportable segment loss (–¥568 million) included elimination of intersegment sales (¥1 million) and overall corporate expenses (–¥570 million).
The overall corporate expenses were mainly classified as general and administrative expenses and were not allocated to reportable segments.
(2) Reconciliation for reportable segment assets (¥8,695 million) included elimination investment against equity (–¥9,562 million) and overall corporate assets(¥18,902 million). The corporate overall assets were mainly classified as parent company deposits and were not allocated to reportable segments.
*3. Reportable segment profits were reconsolidated with the operating income of the consolidated income statement.

Annual Report 2016

62 Corporate Information

Corporate Information (As of June 1, 2016)
Corporate Outline
Company Name
Head Office
FoundedCapitalListedBanking
Relationships

Group
Companies

Bases
Employees

Licensed personnel (including part-timers)

Sogo Medical Co., Ltd.
Fukuoka Tenjin Center Bldg. 16F, 2-14-8 Tenjin, Chuo-ku, Fukuoka
June 12, 1978
¥3,513 million
First Section, Tokyo Stock Exchange. (Code 4775)
The Bank of Fukuoka, Ltd., Mizuho Bank, Ltd., The 77 Bank, Ltd., The Kita-Nippon
Bank, Ltd., The Bank of Yokohama, Ltd., The Gunma Bank, Ltd., The Joyo Bank,
Ltd., The Chiba Bank, Ltd., The Musashino Bank, Ltd., The Shizuoka Bank, Ltd.,The Hachijuni Bank, Ltd., The Bank of Kyoto, Ltd., The Senshu Ikeda Bank, Ltd.,The Kiyo Bank, Ltd., The Chugoku Bank, Ltd., The Hiroshima Bank, Ltd., The
San-in Godo Bank, Ltd., The Shikoku Bank, Ltd., The Kitakyushu Bank, Ltd., The
Miyazaki Bank, Ltd., The Oita Bank, Ltd., The Bank of Saga, Ltd., The EighteenthBank, Ltd., The Higo Bank, Ltd., The Kagoshima Bank, Ltd., The Nishi-Nippon City
Bank, Ltd., The Chikuho Bank, Ltd., The Miyazaki Taiyo Bank, Ltd., The Bank ofTokyo-Mitsubishi UFJ, Ltd., Mitsubishi UFJ Trust and Banking Corporation,
Sumitomo Mitsui Banking Corp., Sumitomo Mitsui Trust Bank, Development Bankof Japan Inc., The Norinchukin Bank, etc.
Somtech Co., Ltd. (planning, design and construction of hospitals, clinics and assisted living facilities)
Sogo Medical Pharmacy Chubu Co., Ltd. (pharmacies)
Aoba Pharmacy Co., Ltd. (pharmacies)
Maeda & Co., Ltd. (pharmacies)
Yataya Pharmacy Co., Ltd. (pharmacies)
Taikodo Yakkyoku Honten Co., Ltd. (pharmacies)
Beauty Drug Saito Co., Ltd. (pharmacies)
Nakano Pharmacy Co., Ltd. (pharmacies)
Pharma Systems Co., Ltd. (pharmacies)
Shokando Co., Ltd. (pharmacies)
Dradok Co., Ltd. (pharmacies)
Sogo Medipro Co., Ltd. (paramedical staff introduction and dispatch)
Sogo Real Estate Co., Ltd. (lease and management business for medical facilities)
SME Co., Ltd. (wholesale of pharmaceuticals, etc.)
Sogo Care Network Co., Ltd. (fee-based residential homes for the elderly)
Sun Villa Co., Ltd. (fee-based assisted living facilities for the elderly)
Hokendohjinsha Inc. (healthcare information service)
GM Co., Ltd. (interior finishing of hospital and clinics)
611 (3 offices, 23 branches, 4 sales offices, 1 satellite office, 578 pharmacies, 2 in-hospital stores)
3,669 full-time workers, 1,135 part-time workers

Pharmacists

1,913

Registered nurses

62

Public health nurses

16

Midwives

7

Registered dietitians

10

Social workers

3

Psychiatric social workers

15

Care workers

62

Care managers

14

Attorneys

1

CPAs

1

Tax accountants

1

Clinical psychologists

24

First-class architects

17Interior coordinators

3

Real estate transaction specialists

58

Healthcare management consultants registeredwith the JAHMC

34

Personnel certified for start-up support;
PPI Level III or above

93

Personnel certified for recruitment;
PPI Level III or above

110

Personnel certified for pharmacy management;
PPI Level III or above

89

Note: PPI is our internal certification with Level V as the highest.
Figures are valid as of March 1, 2016.

Corporate Timeline
Jun. 1978

Oct. 1987
Nov. 1987
Jun. 1988
Oct. 1989
Nov. 1989
Oct. 1994
Aug. 2000
Apr. 2001

Sep. 2001
Oct. 2001
Jan. 2002

Dec. 2003
Apr. 2005
Aug. 2007
Sep. 2007
SOGO MEDICAL CO., LTD.

Established Sogo Medical Leasing Co., Ltd. with a capitalizationof ¥20 million, for business purposes of leasing medical
equipment and consulting for medical institutions.
Started real estate agency and practice inheritance businesses.
Started the TV rental business for patients.
Established the first Sogo Pharmacy.
Name changed to Sogo Medical Co., Ltd.
Started the “Green Members” (now “Succeed Members”)
member system targeted to medical personnel.
Started the planning, design, and construction of medical
facilities.
Listed on Second Section of Tokyo Stock Exchange.
Acquired all outstanding shares of Orix Media Supply Co., Ltd., acompany that carried out TV rentals for hospitals, etc.
Began operation of stores within hospitals.
Listed on First Section of Tokyo Stock Exchange.
Started the DtoD system.
Acquired all outstanding shares of the pharmacies Hello Medical
Co., Ltd., Hello Network Co., Ltd. and Hase Dispensing
Pharmacy Co., Ltd.
Started temporary introduction and placement service of othermedical staff.
Started hospital operational management contracting.
Formed business alliance with Mitsui and Co., Ltd.
Conducted allocation to third party to Mitsui & Co., Ltd.

Jun. 2010
Jan. 2011
Oct. 2011
Nov. 2011
Jun. 2012
Nov. 2012
Aug. 2013
Mar. 2014
Oct. 2014
Mar. 2015
May 2015
Jun. 2015
Jul. 2015
Aug. 2015
Feb. 2016

Acquired all outstanding shares of Aoba Pharmacy Co., Ltd., apharmacy.
Started wholesale marketing of medical and pharmaceutical products.
Acquired all outstanding shares of Maeda Pharmacy Co., Ltd., apharmacy.
Started long-term care service businesses, such as residential homes
for the elderly.
Acquired all outstanding shares of Sun Villa Co., Ltd., a fee-based
residential home for the elderly.
Acquired all outstanding shares of Yataya Pharmacy Co., Ltd., apharmacy.
Acquired all outstanding shares of pharmacies Taikodo Yakkyoku
Honten Co., Ltd. and TM Yakkyoku Co., Ltd.
Acquired all outstanding shares of pharmacies Beauty Drug Saito Co.,
Ltd. and Nakano Pharmacy Co., Ltd.
Absorption-type merger with pharmacies Taikodo YakkyokuHonten Co.,
Ltd. and TM Yakkyoku Co., Ltd.
Acquired 61.6% of shares of Hokendohjinsha Inc., a healthcare
information service company.
Acquired all outstanding shares of Pharma Systems Co., Ltd., apharmacy.
Acquired all outstanding shares of Shokando Co., Ltd.
Acquired all outstanding shares of Dradok Co., Ltd.
Transferred all shares of Sogo Media Supply Co., Ltd.
Acquired 75% of shares of GM Co., Ltd., a company that performs
interior construction at medical facilities.

Stock Information

63

Stock Information (As of March 31, 2016)
Shareholder Composition
Major Shareholders (Top 10 Largest Shareholders)

Total Number of Issued Shares 15,340,156 shares

Name of Shareholder

Number of Shareholders

6,227 shareholders

Number of Unit Shareholders

5,599 shareholders

Mitsui & Co., Ltd.
The SFP Value Realization Master Fund Limited(Standing proxy: Citibank Japan Ltd.)
Century Tokyo Leasing Corporation
The Bank of Fukuoka, Ltd.
Hirosada Oyamada
The Kitakyushu Bank, Ltd.
State Street Bank and Trust Company 505001(Standing proxy: Settlement Sales Department, Mizuho Bank, Ltd.)THE CHASE MANHATTAN BANK, N.A. LONDON SPECIAL OMNIBUS SECS LENDING ACCOUNT(Standing proxy: Settlement Sales Department, Mizuho Bank, Ltd.)
Japan Trustee Services Bank, Ltd. (trust account)
Employees Shareholders’ Association of Sogo Medical

Number of Shares Held(thousands of shares)

Shareholding
Ratio

3,819

25.5%

938

6.3%

722
615
453
404

4.8%
4.1%
3.0%
2.7%

315

2.1%

298

2.0%

290
224

1.9%
1.5%

Ratios of controlling shares are calculated excluding Sogo Medical treasury stock (372 thousand shares).

Breakdown of Shares by Type of Shareholder
Treasury Stock
372 thousand shares (2.4%)

Financial Institutions
31 shareholders (0.5%)

Financial Institutions
2,888 thousand shares(18.9%)

Number ofsharesIndividuals
and Others
3,861 thousand shares(25.2%)

Securities Firms
24 shareholders(0.4%)

Securities Firms
97 thousand shares(0.6%)

15,340

Other Companies
62 shareholders (1.0%)

6,227

thousandsharesForeign Companies, etc.
3,501 thousand shares (22.8%)

Foreign Companies, etc.
119 shareholders (1.9%)

Number of
Shareholders

Individuals and Others
5,991 shareholders (96.2%)

Other Companies
4,619 thousand shares (30.1%)

Share Price and Trading Volume
Share Price (yen)
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
0

Trading Volume (ten thousand shares)
150
100
50
0

4

5

6

7

8 9 10 11 12 1
2013

2

3

4

5

6 7
2014

8

9 10 11 12

1

2

3

4

5

6 7 8
2015

9 10 11 12

1

2

3 4
2016

5

(On April 1, 2015, we carried out a 2-for-1 split of common stock. Figures on share price and trading volume prior to and including the year ended March
2015 were calculated assuming that the stock split had been performed.)For further inquiries, please contact: Sogo Medical Co., Ltd., Public and Investor Relations Division
TEL: +81-92-713-9181 E-mail: ir@sogo-medical.co.jp http://www.sogo-medical.co.jp/english/

Annual Report 2016

[ Notes ][ Notes ]Fukuoka Tenjin Center Bldg. 16F,
2-14-8 Tenjin, Chuo-ku, Fukuoka
www.sogo-medical.co.jp/english

Printed in Japan