FINANCIAL
STATEMENTS
2019
Consolidated Financial Statements
for the Year Ended March 31, 2019,
and Independent Auditor’s Report

In the Financial Statements 2019, we have posted the English consolidated financial statements, which are
based on the Japanese consolidated financial statements with certain recombinations and recompositions
for the convenience of readers outside Japan. For details, please refer to Note 1 on page 7.

Contents
01 Consolidated Balance Sheet
03 Consolidated Statement of Income
04 Consolidated Statement of Comprehensive Income
04 Consolidated Statement of Changes in Equity
05 Consolidated Statement of Cash Flows
07 Notes to Consolidated Financial Statements
37 Independent Auditor’s ReportConsolidated Balance Sheet
Benesse Holdings, Inc. and Subsidiaries
March 31, 2019

Thousands of
U.S. Dollars(Note 1)Millions of Yen

ASSETS

2019

2018

2019

Cash and time deposits (Notes 3 and 4)¥109,682¥134,206$  988,126

Marketable securities (Notes 3, 4 and 5)

34,467

23,600310,514

Accounts

33,24530,798299,505

Other

408,153

CURRENT ASSETS:

Trade receivables (Note 4):45,30541,614Due from affiliates

10

73

90

Inventories (Note 6)30,94929,704

278,820

Other current assets

12,407

8,451

111,774

Allowance for doubtful receivables (Note 4)(1,755)(1,547)(15,811)

264,310

266,899

2,381,171

Land

35,146

34,834

316,631

Buildings and leasehold improvements (Note 7)

92,63990,889834,586

Equipment, fixtures and other (Note 7)

33,38932,508300,801

Lease assets (Note 7)

89,567

79,471

806,910

250,741

237,7022,258,928

Total current assets

PROPERTY AND EQUIPMENT:

Total
Accumulated depreciation(103,388)(98,306)(931,423)

147,353

139,396

1,327,505

Investment securities (Notes 4 and 5)

11,023

11,64599,306

Investments in associated companies (Note 4)

2,050

2,490

18,468Goodwill and other intangible assets (Note 9)

16,457

11,950148,261

Software (Note 7)

22,71024,757

204,595

Asset for retirement benefits (Note 11)

2,806

1,566

25,279Deferred tax assets (Note 17)

4,405

4,904

39,685

Other assets

33,56932,989302,424

93,02090,301

838,018¥504,683¥496,596$4,546,694

Net property and equipment

INVESTMENTS AND OTHER ASSETS:

Total investments and other assets
TOTAL
See notes to consolidated financial statements.

01

B e n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N TS 2019

Thousands of
U.S. Dollars(Note 1)Millions of Yen

LIABILITIES AND EQUITY

2019

2018

2019

¥ 19,186¥   5,000$  172,847

Accounts

15,67916,842

141,252

Other

25,017

26,464

225,378

CURRENT LIABILITIES:Current portion of long-term debt (Notes 4 and 10)
Trade payables (Note 4):

Due to affiliates

852

842

7,676

Advances received

91,29487,276

822,468

Income taxes payable (Note 4)

3,076

5,755

27,712Other current liabilities

19,131

19,408172,352

174,235

161,587

1,569,685

Long-term debt, less current portion (Notes 4 and 10)

19,09932,806

172,063

Lease obligations (Notes 4 and 8)

79,967

71,172

720,423

Guarantee deposits received from nursing home residents

36,07736,923325,018

Liability for retirement benefits (Note 11)

7,833

7,499

70,568Deferred tax liabilities (Note 17)

1,262

457

11,369Other long-term liabilities

11,11011,029100,091

155,348

159,886

1,399,532

Common stock—authorized, 405,282,040 shares in 2019 and2018; issued, 102,483,603 shares in 2019 and 102,464,061
shares in 2018

13,662

13,624

123,081

Capital surplus

29,55529,556266,261

Total current liabilities
LONG-TERM LIABILITIES:

Total long-term liabilities
COMMITMENTS AND CONTINGENT LIABILITIES(Notes 4, 8 and 16)
EQUITY (Notes 12 and 18):

Stock acquisition rights

105

99

946

Retained earnings

152,165

154,246

1,370,856

Treasury stock—at cost—6,156,644 shares in 2019 and
6,156,103 shares in 2018(21,360)(21,358)(192,432)

Unrealized gain on available-for-sale securities

1,372

1,719

12,360Foreign currency translation adjustments(5,748)(5,404)(51,785)

Defined retirement benefit plans (Note 11)(267)(1,218)(2,405)

169,484

171,264

1,526,882

Accumulated other comprehensive income (loss):

Total
Noncontrolling interests
Total equity
TOTAL

5,616

3,859

50,595

175,100

175,123

1,577,477¥504,683¥496,596$4,546,694

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 9

02

Consolidated Statement of Income
Benesse Holdings, Inc. and Subsidiaries
Year Ended March 31, 2019

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2019

2018

2019

NET SALES¥439,432¥434,497$3,958,847

COST OF SALES (Notes 11 and 15)

249,050

249,993

2,243,694

190,382

184,504

1,715,153

174,136

171,878

1,568,793

16,246

12,626

146,360

Dividend income

143

141

1,288

Rent income

341

350

3,072

(4,275)(3,998)(38,514)

Foreign exchange (loss) gain

(758)

369

(6,829)Gain on investments—net

350

190

3,153

Equity in net earnings of associated companies

324

192

2,919

Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 11, 14 and 15)
Operating income
OTHER INCOME (EXPENSES):Interest expense—net (Note 10)

Gain on sale of investment in a subsidiary

12,681

Loss on impairment of long-lived assets (Note 7)

(467)

(874)

(4,207)

Other—net

180

(921)

1,623

12,08420,756

108,865

Current

5,723

8,142

51,559Deferred

597

(513)

5,378

6,320

7,629

56,937

5,764

13,12751,928

862

729

7,766

¥   4,902¥ 12,398$    44,162

INCOME BEFORE INCOME TAXESINCOME TAXES (Note 17):

Total income taxes
NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTSNET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT

Yen
2018

2019

¥   50.89¥ 128.79$      0.46

Diluted net income

50.88

128.71

0.46

Cash dividends applicable to the year

72.50

95.00

0.65

PER SHARE OF COMMON STOCK (Notes 2.t and 21):
Basic net income

See notes to consolidated financial statements.

03

U.S. Dollars

2019

B e n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N TS 2019

Consolidated Statement of Comprehensive Income
Benesse Holdings, Inc. and Subsidiaries
Year Ended March 31, 2019

Thousands of
U.S. Dollars(Note 1)Millions of Yen

NET INCOME

2019

2018

¥5,764¥13,1272019$51,928

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 11 and 19):
Unrealized (loss) gain on available-for-sale securities

(333)

88

(3,000)Foreign currency translation adjustments

(340)

(835)

(3,064)

Defined retirement benefit plans

940

(130)

8,468

3

17

27

270

(860)

2,431

¥6,034¥12,267$54,359¥5,162¥11,560$46,504

872

707

7,855

Share of other comprehensive income in associates
Total other comprehensive income (loss)
COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests
See notes to consolidated financial statements.

Consolidated Statement of Changes in Equity
Benesse Holdings, Inc. and Subsidiaries
Year Ended March 31, 2019

Thousands

Millions of Yen
Accumulated Other Comprehensive Income (Loss)

Number of
Shares ofCommon Stock
Outstanding

CommonStockCapitalSurplus

Stock
Acquisition
RightsBALANCE, APRIL 1, 2017

96,188¥13,600¥29,479

Issuance of new shares(Note 12)

11

24

24

Net income attributableto owners of the parent
Cash dividends, ¥95.0 per share
Purchases of treasury stock(1)

Disposal of treasury stock

110

46

Change in the parent’s ownership interest due
to .transactions with noncontrolling interests

Issuance of new shares(Note 12)

Treasury
Stock¥150,991¥ (21,736)¥1,606

DefinedRetirement
Benefit Plans¥ (4,597)¥ (1,074) ¥168,384

13,62429,55620

38

38¥6,782

Total
Equity¥175,166

48

48

12,39812,39812,398(9,143)(9,143)(9,143)

(42)

(2)

(2)

(2)

380

384

384

7
26

96,308

Noncontrolling
Interests

Total

7

Net change in the year
BALANCE, MARCH 31, 2018¥115

Unrealized
Foreign
Gain onCurrency
Available-for- Translation
Sale Securities Adjustments

Retained
Earnings

99

154,246(21,358)

7

113

(807)

(144)

(812)

(2,923)(3,735)

1,719(5,404)(1,218)171,264

3,859

175,123

76

76

Net income attributableto owners of the parent

4,902

4,902

4,902

Cash dividends, ¥72.5 per share(6,983)(6,983)(6,983)(2)(2)

Purchases of treasury stock

(1)

(2)

Change in the parent’s ownership interest due
to .transactions with noncontrolling interests(39)

BALANCE, MARCH 31, 2019(39)
6

Net change in the year

96,327¥13,662¥29,555¥105¥152,165¥ (21,360)

(347)

(344)

¥1,372¥ (5,748)

951

(39)

266

1,757

2,023

¥   (267) ¥169,484¥5,616¥175,100Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income (Loss)

BALANCE, MARCH 31, 2018
Issuance of new shares (Note 12)

CommonStockCapitalSurplus$122,739$266,270

342

342

Stock
Acquisition
RightsRetained
Earnings

TreasuryStock$892 $1,389,604 $ (192,414)

Unrealized
Foreign
Gain onCurrency
Available-for- Translation
Sale Securities Adjustments$15,486

DefinedRetirement
Benefit Plans$ (48,685)

Noncontrolling
Interests

Total

Total
Equity$ (10,973) $1,542,919$34,766 $1,577,685

684

684

Net income attributableto owners of the parent

44,162

44,162

44,162

Cash dividends, $0.65 per share(62,910)(62,910)(62,910)

(18)

(18)

(18)

Purchases of treasury stock
Change in the parent’s ownership interest due totransactions with noncontrolling interests(351)

BALANCE, MARCH 31, 2019

(351)
54

Net change in the year

$123,081$266,261$946 $1,370,856 $ (192,432)(3,126)(3,100)$12,360$ (51,785)

8,568

2,396

$ (2,405) $1,526,882(351)
15,82918,225$50,595 $1,577,477

See notes to consolidated financial statements.

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 904

Consolidated Statement of Cash Flows
Benesse Holdings, Inc. and Subsidiaries
Year Ended March 31, 2019

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2019

2018

2019

¥ 12,084¥ 20,756$   108,865

20,014

20,121

180,306

467

874

4,207

5,375

4,241

48,423

OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Depreciation and amortization
Loss on impairment of long-lived assets
Other noncash income and expenses—net
Gain on sale of investment in a subsidiary(12,681)

Changes in assets and liabilities, net of effects:(Decrease) increase in allowance for doubtful receivables and otherreserves

(242)

1,073

(2,180)

Increase in trade accounts receivable(2,626)(2,423)(23,658)

Increase in inventories(1,455)(4,641)(13,108)(Decrease) increase in trade accounts payable(2,955)

2,705(26,622)

Increase in advances received

2,413

6,651

21,739(Increase) decrease in asset for retirement benefits(1,240)

109(11,171)

Other—net
SubtotalInterest and dividends received(3,874)342(34,900)

27,961

37,127

251,901

665

678

5,991

Interest paid

(4,759)(4,460)(42,874)

Income taxes—paid(11,370)(8,437)(102,432)

Income taxes—refund

1,451

1,542

13,072

13,94826,450125,658

Net cash provided by operating activities
INVESTING ACTIVITIES:
Decrease (increase) in time deposits—net

296

(867)

2,667

Purchases of marketable securities(60,313)(34,042)(543,360)

Proceeds from sales of marketable securities

49,52040,218446,126

Purchases of property and equipment(6,783)(6,198)(61,108)

Purchases of software(6,192)(5,766)(55,784)

Purchases of investment securities(1,560)(470)(14,054)

1,155

6,793

Proceeds from sales of investment securities

754

Proceeds from sale of interests in a subsidiary previously consolidated

12,910Cash decrease due to acquisition of controlling interest in a company(3,879)Other—net(2,334)(1,436)(21,027)(30,491)

5,504(274,693)

Net cash (used in) provided by investing activities(34,946)

FINANCING ACTIVITIES:
Proceeds from long-term debt

5,000

45,045

Repayments of long-term debt

(5,046)(45,459)

Dividends paid

(6,987)(9,150)(62,946)

Repayments of lease obligations(2,316)(2,222)(20,865)

Dividends paid to noncontrolling interests(588)(1,531)(5,297)

Other—net

(148)

390

(1,334)

Net cash used in financing activities(10,085)(12,513)(90,856)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS(1,127)(137)(10,153)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(27,755)

19,304(250,044)

CASH AND CASH EQUIVALENTS OF A NEWLY CONSOLIDATEDSUBSIDIARY

18,991

138,305

119,001

1,245,991

CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3)¥112,658¥138,305$1,014,938

ADDITIONAL CASH FLOW INFORMATION:

05

2,108

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2019

2018

2019

Acquisition of controlling interests in a company:
Current assets¥ 2,205$ 19,865

Long-term assets

3,999

36,027

Consolidation goodwill

3,989

35,937

Current liabilities(3,280)(29,550)

Long-term liabilities(880)(7,928)

Noncontrolling interest(712)(6,414)

Acquisition cost

5,321

47,937

Cash and cash equivalents of a newly consolidated subsidiary
Cash decrease due to acquisition of controlling interests in a company(1,442)(12,991)¥ 3,879$ 34,946

Proceeds from sale of interests in a subsidiary previously consolidated:
Current assets¥ 7,027

Long-term assets

3,105

Current liabilities(4,468)Long-term liabilities(530)

Unrealized gain on available-for-sale securities(51)

Foreign currency translation adjustments(29)

Defined retirement benefit plans

13

Noncontrolling interest(2,118)Transfer expenses

300

Gain on sale of investment in a subsidiary

12,681

Selling price

15,930Transfer expenses(300)

Cash and cash equivalents of a subsidiary(2,720)

Proceeds from sale of interests in a subsidiary previously consolidated¥12,910NONCASH INVESTING AND FINANCING ACTIVITIES:Assets and obligations from finance lease transactions recognized in the
consolidated balance sheet:
Lease assets¥10,539¥7,361$ 94,946

Lease obligations

11,376

7,809

102,486

On January 8, 2019, Classi Corporation, previously accounted for by applying the equity method, became a consolidated subsidiary of
the Company, applying the control criteria. Increases in assets and liabilities as a result of the consolidation are as follows:
Thousands of
U.S. Dollars

Millions of Yen

Current assets (Note 20)*

¥2,162Long-term assets (Note 20)$19,477

332

2,991

Total assets (Note 20)¥2,494$22,468

Current liabilities (Note 20)¥  750$ 6,757

Long-term liabilities (Note 20)
Total liabilities (Note 20)

19

171

¥  769$ 6,928*Cash and cash equivalents amount of ¥2,108 million ($18,991 thousand) are included in cash and cash equivalents of a newly consolidated subsidiary.
See notes to consolidated financial statements.

Be n e sse Holdin gs, In c.

FINANCIAL STATEMENTS 2 0 1 906

Notes to Consolidated Financial Statements
Benesse Holdings, Inc. and Subsidiaries
Year Ended March 31, 2019

Note 1.

BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Benesse Holdings, Inc. (the "Company") havebeen prepared in accordance with the provisions set forth in the Japanese Financial Instruments andExchange Act and its related accounting regulations, and in accordance with accounting principles
generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards ("IFRS"). The foreign subsidiaries prepare their financial statements in accordance with either IFRS or accounting principles generally
accepted in the United States of America ("U.S. GAAP").
In preparing these consolidated financial statements, certain reclassifications and rearrangements
have been made to the consolidated financial statements issued domestically in order to present
them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications
have been made in the 2018 consolidated financial statements to conform to the classifications usedin 2019.
The consolidated financial statements are stated in Japanese yen, the currency of the country inwhich the Company is incorporated and operates. The translations of Japanese yen amounts into U.S.
dollar amounts are included solely for the convenience of readers outside Japan and have been madeat the rate of ¥111 to $1, the approximate rate of exchange at March 31, 2019. Such translations
should not be construed as representations that the Japanese yen amounts could be converted into
U.S. dollars at that or any other rate.

Note 2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation —The consolidated financial statements include the accounts of the Company andits 40 (38 in 2018) subsidiaries (collectively, the "Companies"). Berlitz Corporation, a wholly owned

subsidiary of the Company located in the United States of America, consolidates all of its subsidiaries,
and is counted as one company, the financial statements of which are prepared in accordance with
U.S. GAAP.
Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies overwhich the Companies have the ability to exercise significant influence are accounted for by the equity
method.
Investments in nine associated companies are accounted for by applying the equity method.
All significant intercompany balances and transactions have been eliminated in consolidation. All
material unrealized profits included in assets resulting from transactions within the Companies arealso eliminated.

b. Business Combinations —Business combinations are accounted for using the purchase method.

Acquisition-related costs, such as advisory fees or professional fees, are accounted for as expenses in
the periods in which the costs are incurred. If the initial accounting for a business combination isincomplete by the end of the reporting period in which the business combination occurs, an acquirer
shall report in its financial statements provisional amounts for the items for which the accounting is
incomplete. During the measurement period, which shall not exceed one year from the acquisition,
the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date toreflect new information obtained about facts and circumstances that existed as of the acquisition date
and that would have affected the measurement of the amounts recognized as of that date. Suchadjustments shall be recognized as if the accounting for the business combination had been completed at the acquisition date. The acquirer recognizes any bargain purchase gain in profit or loss
immediately on the acquisition date after reassessing and confirming that all of the assets acquired
and all of the liabilities assumed have been identified after a review of the procedures used in thepurchase price allocation. A parent's ownership interest in a subsidiary might change if the parent
purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrolling interestis adjusted to reflect the change in the parent's ownership interest in its subsidiary while the parent
retains its controlling interest in its subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted is accounted
for as capital surplus as long as the parent retains control over its subsidiary.

07

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

c. Cash Equivalents —Cash equivalents in the consolidated statement of cash flows are defined as

low-risk, highly liquid, short-term (maturity within three months of acquisition date) investments thatare readily convertible to cash.

d. Inventories —Inventories are primarily stated at the lower of cost, determined by the average cost

method, or net selling value. Inventories of foreign subsidiaries are primarily stated at the lower ofcost or market, or net selling value.

e. Marketable and Investment Securities —Marketable and investment securities are classified andaccounted for, depending on management's intent, as follows: (1) trading securities, which are held
for the purpose of earning capital gains in the near term are reported at fair value, and the related
unrealized gains and losses are included in earnings; (2) held-to-maturity debt securities, for which
there is a positive intent and ability to hold to maturity are reported at amortized cost; and (3) available-for-sale securities, which are not classified as either of the aforementioned securities, arereported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate
component of equity.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-averagemethod. For other-than-temporary declines in fair value, investment securities are reduced to net
realizable value by a charge to income.

f. Property and Equipment —Property and equipment are stated at cost. Depreciation of property andequipment of the Company and its domestic subsidiaries is computed by the declining-balancemethod over the estimated useful lives of the assets, while the straight-line method is applied tobuildings acquired on or after April 1, 1998, building improvements and structures acquired on orafter April 1, 2016, lease assets of the Company and its domestic subsidiaries, and all property andequipment of foreign subsidiaries. The range of useful lives in the Company and its domestic subsidiaries is principally from 2 to 50 years for buildings. The useful lives for lease assets of the Company
and its domestic subsidiaries are the terms of the respective leases.
Under certain conditions such as exchanges of fixed assets of similar kinds and sales and purchases
resulting from expropriation, Japanese tax laws permit companies to defer the profit arising from suchtransactions by reducing the cost of the assets acquired. As of March 31, 2019 and 2018, suchdeferred profit amounted to ¥1,959 million ($17,649 thousand) and ¥1,607 million, respectively.

g. Long-Lived Assets —Long-lived assets of the Company and its domestic subsidiaries are reviewed

for impairment whenever events or changes in circumstance indicate the carrying amount of an asset
or asset group may not be recoverable. An impairment loss is recognized if the carrying amount of anasset or asset group exceeds the sum of the undiscounted future cash flows expected to result fromthe continued use and eventual disposition of the asset or asset group. The impairment loss would bemeasured as the amount by which the carrying amount of the asset exceeds its recoverable amount,which is the higher of the discounted cash flows from the continued use and eventual disposition of
the asset or the net selling price at disposition.

h. Goodwill and Other Intangible Assets —The differences between the cost and net equity at acqui-sition ("consolidation goodwill") and customer-related intangible assets in domestic subsidiaries areamortized on a straight-line basis over 5 to 20 years for goodwill and 20 years for customer-related
intangible assets. Immaterial consolidation goodwill that was incurred in the current period wascharged to income.
Prior to April 1, 2008, in accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," goodwill and other intangible assets of Berlitz Corporationthat were determined to have an indefinite life were not amortized, but rather tested for impairment
on an annual basis and between annual tests if an event occurred or circumstances arose that would
more likely than not reduce the fair value below its carrying amount, which were reflected in the
Company's consolidated financial statements without any adjustments. Effective April 1, 2008, goodwill and other intangible assets are adjusted to be amortized on a straight-line basis primarily over 20

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 908

years due to the adoption of Accounting Standards Board of Japan ("ASBJ") Practical Issues Task
Force No. 18, "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries
for the Consolidated Financial Statements." See Note 9 for details on goodwill and other intangible
assets. Intangible assets that are determined not to have an indefinite life primarily consist of publishing rights. Publishing rights are amortized on a straight-line basis over 25 years.

i. Software —Software used internally is amortized by the straight-line method over its estimateduseful life (primarily 5 years and 10 years) within the Company.

j. Leases —Finance lease transactions are capitalized to recognize lease assets and lease obligationsin the balance sheet. Lease obligations relating to finance leases are primarily used for capital
expenditures.

k. Retirement and Pension Plans —The Company and certain of its domestic subsidiaries have severance lump-sum payment plans for employees. The Company and its certain domestic subsidiaries

have a contributory funded defined benefit pension plan and lump-sum payment plans for employees,
directors, Audit & Supervisory Board members and Company officers. The pension plans, which were
established under the Japanese Welfare Pension Insurance Law, cover a substitutional portion of thegovernmental pension program by the Company on behalf of the government and a corporate portion
established at the discretion of the Company. The pension fund is administered by a board of trustees
composed of management and employee representatives as required by government regulations.
Effective April 1, 2004, the Company and its certain domestic subsidiaries introduced a cash-balance plan as part of the former pension plan to reduce the Company's future risk due to unexpected
low returns from the pension fund.
A certain foreign subsidiary (Berlitz Corporation) has a Supplemental Executive Retirement Plan("SERP") for the benefit of its Chairman of the Board, certain designated executives and their designated beneficiaries.
In addition, certain subsidiaries have defined contribution plans.
The Company accounted for the liability for retirement benefits based on the projected benefit
obligations and plan assets at the balance sheet date. The projected benefit obligations of certain
domestic subsidiaries are attributed to periods on a benefit formula basis, and those of foreign subsidiaries are attributed to periods using the projected unit credit method. Actuarial gains and lossesof certain domestic subsidiaries that are yet to be recognized in profit or loss are recognized withinequity (accumulated other comprehensive income) after adjusting for tax effects, and are recognizedin profit or loss over eight years no longer than the expected average remaining service period of theemployees. Foreign subsidiaries only recognize actuarial gains and losses that are greater than 10% of
the larger of the beginning balances of the projected benefit obligation or the market-related value(which may equal fair value) of the plan assets and they are amortized on a straight-line basis primarily over five years within the average remaining service period. Past service costs are amortized on astraight-line basis primarily over eight years within the average remaining service period.
Retirement benefits to directors, Audit & Supervisory Board members and Company officers of certain domestic subsidiaries are recorded as a liability at the amount that would be required if all directors, Audit & Supervisory Board members and Company officers retired at each consolidated balance
sheet date.

l. Asset Retirement Obligations —An asset retirement obligation is recorded for a legal obligation

imposed either by law or contract that results from the acquisition, construction, development andnormal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed
asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required
for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot bemade in the period the asset retirement obligation is incurred, the liability should be recognized whena reasonable estimate of the asset retirement obligation can be made. Upon initial recognition of aliability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is09

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019subsequently allocated to expense through depreciation over the remaining useful life of the asset.
Over time, the liability is accreted to its present value each period. Any subsequent revisions to thetiming or the amount of the original estimate of undiscounted cash flows are reflected as an adjustment to the carrying amount of the liability and the capitalized amount of the related asset retirementcost.

m. Stock Options —Compensation expense for employee stock options are recognized based on thefair value at the date of grant and over the vesting period as consideration for receiving goods orservices in accordance with ASBJ Statement No. 8, "Accounting Standard for Share-based Payment."
Stock options granted to nonemployees are accounted for based on the fair value of either the stock
option or the goods or services received. In the balance sheet, the stock option is presented as astock acquisition right as a separate component of equity until exercised.

n. Research and Development Costs —Research and development costs are charged to income as

incurred.

o. Foreign Currency Transactions —All short-term and long-term monetary receivables and payables

denominated in foreign currencies are translated into Japanese yen at the exchange rates at the consolidated balance sheet date. The foreign exchange gains and losses from translation are recognizedin the consolidated statement of income to the extent that they are not hedged by forward exchange
contracts.

p. Foreign Currency Financial Statements —The consolidated balance sheet accounts of the foreignsubsidiaries are translated into Japanese yen at the current exchange rate as of the consolidatedbalance sheet date except for equity, which is translated at the historical rate. Differences arising fromsuch translation are shown as "Foreign currency translation adjustments" in a separate component ofequity. Revenue and expense accounts of foreign subsidiaries are translated into yen at the averageexchange rate.

q. Derivative Financial Instruments and Hedge Activities —The Company uses derivative financial

instruments to manage its exposures to fluctuations in foreign currency exchange and interest rates.
Foreign exchange forward contracts, and interest rates and currency swaps are utilized by the Company to reduce foreign currency exchange and interest rate risks. The Company does not enter into
derivatives for trading or speculative purposes.
The Company records foreign exchange forward contracts at fair value, and the unrealized gains/losses are recognized in the consolidated statement of income.
The interest rate and currency swaps used to hedge long-term debt denominated in a foreign currency with a variable interest rate, which qualifies for hedge accounting and meets specific matching
criteria, is not measured at market value. Rather, the long-term debt is recorded at a yen amountunder the swap agreement and interest expense is calculated and recorded using a fixed interest
rate.

r. Bonuses to Directors, Audit & Supervisory Board Members and Company Officers —Bonuses todirectors, Audit & Supervisory Board members and Company officers are accrued at the end of theyear to which such bonuses are attributable.

s. Income Taxes —The provision for income taxes is computed based on the pretax income includedin the consolidated statement of income. The asset and liability approach is used to recognize

deferred tax assets and liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted income tax rates to the temporary differences.
The Company and certain domestic subsidiaries file a tax return under the consolidated corporatetax system, which allows companies to base tax payments on the combined profits or losses of theparent company and its wholly owned domestic subsidiaries.
On February 16, 2018, the ASBJ issued ASBJ Statement No. 28, "Partial Amendments to Accounting

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 9

10Standard for Tax Effect Accounting," which requires deferred tax assets and deferred tax liabilities to
be classified as investments and other assets and long-term liabilities, respectively. Deferred tax
assets were previously classified as current assets and investments and other assets, and deferred tax
liabilities were previously classified as current liabilities and long-term liabilities under the previous
accounting standard. The revised accounting standard is effective for annual periods beginning on orafter April 1, 2018. The Company retrospectively applied the revised accounting standard effective
April 1, 2018, and deferred tax assets of ¥3,273 million which were previously classified as current
assets, as of March 31, 2018, have been reclassified as investments and other assets, in the accompanying consolidated balance sheet.

t. Per Share Information —Basic net income per share is computed by dividing net income attributable

to common shareholders by the weighted-average number of common shares outstanding for theperiod.

Diluted net income per share reflects the potential dilution that could occur if securities were exercised or converted into common stock.
Cash dividends per share presented in the accompanying consolidated statement of income are
dividends applicable to the respective fiscal years, including dividends to be paid after the end of theyear.

u. New Accounting Pronouncements

Accounting Standard for Revenue Recognition —On March 30, 2018, the ASBJ issued ASBJ Statement

No. 29, "Accounting Standard for Revenue Recognition," and ASBJ Guidance No. 30, "Implementation
Guidance on Accounting Standard for Revenue Recognition." The core principle of the standard andguidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to beentitled in exchange for those goods or services. An entity should recognize revenue in accordancewith that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

The accounting standard and guidance are effective for annual periods beginning on or after April 1,
2021. Earlier application is permitted for annual periods beginning on or after April 1, 2018.
The Company expects to apply the accounting standard and guidance for annual periods beginningon or after April 1, 2021, and is in the process of measuring the effects of applying the accounting
standard and guidance in future applicable periods.

Revenue from Contracts with Customers—On May 28, 2014, the Financial Accounting Standards

Board ("FASB") issued ASU 2014-09, "Revenue from Contracts with Customers."

The core principal of the standard is that an entity should recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which theentity expects to be entitled in exchange for those goods or services.
Certain overseas subsidiaries that apply U.S. GAAP applied this accounting standard from the beginning of the annual period beginning on April 1, 2019, and are in the process of measuring the effects
of applying the accounting standard in future applicable periods.

Leases—On January 13, 2016, the International Accounting Standards Board (IASB) issued IFRS 16,"Leases," and on February 25, 2016, FASB issued ASU 2016-02, "Leases," requiring recognition of substantially all lease assets and leases liabilities on the balance sheet.
Certain overseas subsidiaries that apply IFRS applied this accounting standard from the beginning of
the annual period beginning on April 1, 2019, and certain overseas subsidiaries that apply U.S. GAAP
expected to apply this accounting standard from the beginning of annual periods beginning on April

11

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

1, 2020, and are in the process of measuring the effects of applying the accounting standard andguidance in future applicable periods.

Note 3.

CASH AND CASH EQUIVALENTS
Cash and cash equivalents at March 31, 2019 and 2018, consisted of the following:
Millions of Yen

Cash and time deposits
Marketable securities
Time deposits and short-term investments which matureor become due after more than three months fromacquisition date
Investment fund and otherCash and cash equivalents

Note 4.

2019

2018

Thousands of
U.S. Dollars
2019¥109,682
34,467¥134,206
23,600$  988,126
310,514(18,075)(13,416)¥112,658(11,383)(8,118)¥138,305(162,837)(120,865)$1,014,938

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments

The Companies focus on liquidity and safety in regards to investments of surplus funds, after considering their application and timing. Particularly, derivative transactions are utilized mainly to hedge various risks and efficiently invest in funds. The Companies consider derivative transactions with highleverage to be high-risk transactions, and do not enter into such transactions. In addition, the Companies have set overdraft limits in order to finance operating capital with efficiency and stability in caseof an unexpected contingency.

(2) Nature and Extent of Risks Arising from Financial Instruments

Trade receivables are exposed to credit risks of counterparties. Trade receivables in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates. The Companies
enter into foreign exchange forward contracts and interest rate and currency swaps in order to earn
returns and manage exposure to market risk from changes in foreign currency exchange rates of dividend income from foreign subsidiaries and long-term debt denominated in foreign currencies. Foreignexchange forward contracts and interest rate and currency swaps are exposed to credit risks of counterparties and the market risk of fluctuation in foreign currency exchange rates and interest rates.
Marketable and investment securities mainly comprise commercial papers, negotiable certificates ofdeposit, trust beneficiary rights, government and corporate bonds, and others including equity securities and trust fund investments with certain holding limits, which are exposed to issuer credit risk andfluctuation risks of foreign exchange, interest rates and market price.
Trade payables and income taxes payable are payable within one year. Short-term bank loans andlong-term debt are primarily used for future business investments in the Company. Long-term debt
with variable interest is exposed to fluctuation risk of interest rates. Long-term debt denominated in aforeign currency with a variable interest rate is exposed to fluctuation risks of the foreign currency
exchange and interest rates.

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 9

12

(3) Risk Management for Financial Instruments
Credit risk management

The Companies manage credit risks of trade receivables as defined in the "Management Regulations
for Receivables," based on which the general manager of each department manages each receivableby type with regard to the counterparty, due date, the amount and the balance in order to recognize
or mitigate any concerns over their collection at an early stage. "Management Regulations for Receivables" of subsidiaries are established pursuant to the "Management Regulations for Receivables" ofBenesse Corporation, a subsidiary of the Company.
The Finance Department of the Companies manages the credit risk of security issuers by regularly
monitoring the fair values, rating and credit standing in accordance with "Fund Management
Regulations."
Because the counterparties to these derivatives are limited to major international financial institutions, the Company and its foreign subsidiaries do not anticipate any losses arising from credit risk.

Market risk management
For fluctuation risks of foreign currency exchange rates, interest rates and market prices relating tomarketable and investment securities, the Companies' Finance Department obtains and monitors theprice information of marketable and investment securities from financial institutions on a steady basis
for securities with market prices, and periodically for those without market prices. With respect tosecurities transactions, the Companies' Finance Department executes transactions in accordance withthe provisions of the "Fund Management Regulations," which regulate the authorization and transaction limit amounts, in order to monitor operating status on a regular basis. The results of the monitoring by the Companies' Finance Department are reported to the CEO weekly and to the Board of
Directors quarterly, and are also reported to the Board of Directors each time significant circumstances occur.
Fluctuation risks of foreign currency exchange rates relating to receivables in foreign currencies arehedged by foreign exchange forward contracts and the risks relating to long-term debt denominatedin a foreign currency with a variable interest rate is hedged by an interest and currency swap. In addition, a portion of short-term bank loans and long-term debt is financed by fixed interest to prevent
fluctuation risk of the corresponding interest rates.
For fluctuation risks of foreign currency exchange rates and risks resulting from changes in interest
rates relating to derivative transactions that are foreign exchange forward contracts and interest andcurrency swaps, the authorization and credit limits amount are defined in "Derivative Transaction
Regulations." The Companies' Finance Department also monitors foreign exchange forward contracts
in terms of the balance and gain or loss on valuation, and reports to the CEO weekly and to theBoard of Directors quarterly. The results of the monitoring by the Companies' Finance Department arealso reported to the Board of Directors each time significant circumstances occur.

Liquidity risk management
The Companies' Finance Department monitors liquidity risk by preparing an annual cash management
plan based on reports from each department, and a monthly cash management plan through confirmation of daily cash receipts and payments. Subsidiaries perform similar procedures in accordancewith the Company's procedures.

13

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

(4) Fair Values of Financial Instruments

Fair values of financial instruments are based on quoted prices in active markets. If quoted prices are
not available, other rational valuation techniques are used instead. Such techniques include variablefactors and the results of valuation may differ depending on prerequisites. The contract amounts ofderivatives, which are shown in the following table, do not represent the amounts exchanged by theparties and do not measure the Companies' exposure to market risk.
The table below shows the carrying amounts of financial instruments recorded in the consolidatedbalance sheets as of March 31, 2019 and 2018, and their fair values, as well as the differences
between the carrying amounts and the fair values. Financial instruments whose fair values are
deemed extremely difficult to assess are not included.

(a) Fair value of financial instruments
Millions of Yen
Carrying
AmountMarch 31, 2019
Cash and time deposits
Trade receivables
Allowance for doubtful receivables
Net trade receivables
Marketable and investment securities
Total
Trade payables
Income taxes payable
Long-term debt
Lease obligations
Total
Derivatives¥109,682
78,560(1,754)76,80642,487¥228,975¥ 41,548
3,076
38,28582,341¥165,250¥     (16)March 31, 2018
Cash and time deposits
Trade receivables
Allowance for doubtful receivables
Net trade receivables
Marketable and investment securities
Total
Trade payables
Income taxes payable
Long-term debt
Lease obligations
Total¥134,206
72,485(1,547)70,93832,685¥237,829¥ 44,148
5,755
37,80673,291¥161,000

Be n e sse Ho ldin gs, In c.

Fair
Value

Unrealized
Gain (Loss)¥109,682

76,80642,486¥228,974¥ 41,548
3,076
38,35588,023¥171,002¥     (16)¥    (1)¥    (1)¥    70
5,682¥5,752¥134,206

70,93832,685¥237,829¥ 44,148
5,755
37,902
78,193¥165,998¥    96
4,902¥4,998FINANCIAL STATEMENTS 2 0 1 9

14Thousands of U.S. Dollars

March 31, 2019
Cash and time deposits
Trade receivables
Allowance for doubtful receivables
Net trade receivables
Marketable and investment securities
Total
Trade payables
Income taxes payable
Long-term debt
Lease obligations
Total
Derivatives

Carrying
AmountFair
Value$  988,126
707,748(15,802)691,946
382,766$2,062,838$  374,306
27,712344,910
741,811$1,488,739$      (144)$  988,126

691,946
382,757$2,062,829$  374,306
27,712345,541
793,000$1,540,559$      (144)

Unrealized
Gain (Loss)$     (9)$     (9)$   631
51,189$51,820

Notes: 1. Trade receivables are stated net of each allowance for doubtful receivables.
2.	Long-term debt and lease obligations are stated at the carrying amount, including current portion. The fair value ofthe interest rate and currency swap, which qualify for hedge accounting and meet specific matching criteria, is
included in the fair value of the long-term debt as the related hedged-items.
3. Derivatives are stated net of assets and liabilities. The figures in parentheses indicate net liabilities.

Cash and Time Deposits and Trade Receivables
The carrying values of cash and time deposits and trade receivables approximate fair value becauseof their short maturities.
Marketable and Investment Securities
While the fair values of equity securities are measured at the quoted market price of the stock
exchange, the fair values of government and corporate bonds and trust fund investments and others
are measured at the quoted market price of the stock exchange and also by the prices obtained fromfinancial institutions. Fair value information for marketable and investment securities by classification
is included in Note 5.
Trade Payables and Income Taxes Payable
The carrying values of trade payables and income taxes payable approximate fair value because of
their short maturities.
Long-Term Debt and Lease Obligations
The fair values of long-term debt and lease obligations are determined by discounting the cash flows
related to the debt at the Companies' assumed corporate borrowing rate.
Certain long-term debt denominated in a foreign currency with a variable interest rate is hedged byan interest and currency swap. Since the swap qualifies for hedge accounting and meets specificmatching criteria, it is not measured at market value. Rather, the long-term debt is recorded at a yen
amount under the swap agreement and interest expense is calculated and recorded using a fixedinterest rate.
The fair value of the long-term debt is determined based on the assumption that the long-term debt
is debt denominated in Japanese yen with a fixed rate.
Derivatives
Fair value information for derivatives is included in Note 16.

15

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

(b) Carrying amount of financial instruments whose fair value cannot be reliably determined
Thousands of
U.S. Dollars

Millions of Yen

Investments in equity instruments that do not havea quoted market price in an active market
Investments in partnerships
Investments in associated companies
Total

2019

2018

2019

¥1,1351,868
2,050¥5,053¥1,1691,391
2,490¥5,050$10,225
16,82918,468$45,522(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen

March 31, 2019
Time deposits
Trade receivables
Marketable and investment securities—
Available-for-sale securities with fund investments
and other:Government and corporate bonds
Trust fund investments and otherTotal marketable and investment securities
March 31, 2018
Time deposits
Trade receivables
Marketable and investment securities—
Available-for-sale securities with fund investments
and other:Government and corporate bonds
Trust fund investments and otherTotal marketable and investment securities

Due in 1 Yearor Less

Due after 1
Year through5 Years

Due after 5
Years through10 Years

Due after
10 Years¥2,335987¥3,322

¥101
¥101

¥100
¥100

¥107,611
78,560¥   3,555
30,900¥ 34,455¥133,746
72,485¥   1,500
22,100¥ 23,600¥2,931969¥3,900Thousands of U.S. Dollars

March 31, 2019
Time deposits
Trade receivables
Marketable and investment securities—
Available-for-sale securities with fund investments
and other:Government and corporate bonds
Trust fund investments and otherTotal marketable and investment securities

Due in 1 Yearor Less

Due after 1
Year through5 Years

Due after 5
Years through10 Years

Due after
10 Years$21,036
8,892$29,928

$910
$910

$901
$901

$969,468
707,748$ 32,027
278,378$310,405

Please see Note 10 for annual maturities of long-term debt and Note 8 for obligations under financeleases.

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 916

Note 5.

MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Current:
Government and corporate bonds
Trust fund investments and other
Total
Non-current:
Marketable equity securities
Investments in equity instruments that do nothave a quoted market price in an active market
Investments in partnerships
Government and corporate bonds
Trust fund investments and other
Total

2019

2018

2019

¥ 3,566
30,901¥34,467¥ 1,500
22,100¥23,600$ 32,126
278,388$310,514¥ 4,437¥ 5,141$ 39,973

1,135
1,868
2,446
1,137
¥11,023

1,169
1,391
2,976
968
¥11,645

10,225
16,82922,036
10,243$ 99,306

The costs and aggregate fair values of marketable and investment securities at March 31, 2019 and2018, were as follows:
Millions of Yen
Cost

Unrealized
Gains

Unrealized
LossesFair Value

March 31, 2019
Securities classified as:
Trading
Available-for-sale:
Equity securities
Government and corporate bonds
Trust fund investments and other¥ 3,024
5,894
32,055¥1,477
136
1

¥64
18
18

4,437
6,012
32,038March 31, 2018
Securities classified as available-for-sale:
Equity securities
Government and corporate bonds
Trust fund investments and other¥ 2,841
4,403
23,105¥2,312
78

¥12
5
37

¥ 5,141
4,476
23,068¥      1Thousands of U.S. Dollars

March 31, 2019
Securities classified as:
Trading
Available-for-sale:
Equity securities
Government and corporate bonds
Trust fund investments and other

Cost

Unrealized
Gains

Unrealized
LossesFair Value$       9$ 27,244
53,100288,784$13,306
1,224
9

$577
162
162

39,97354,162
288,631

The proceeds and realized gains of the available-for-sale securities that were sold during the years
ended March 31, 2019 and 2018, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Proceeds from sales
Gross realized gains
Gross realized losses
Net realized gain17

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

2019

¥165
¥ 16
15
¥   1

2018

¥267
¥ 43

¥ 43

2019

$1,486$  144135$     9

Note 6.

INVENTORIESInventories at March 31, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2019

Finished products
Work in process
Raw materials and supplies
Total

Note 7.

2018¥26,2292,889
1,831¥30,949¥23,998
4,318
1,388¥29,7042019$236,297
26,027
16,496$278,820

LONG-LIVED ASSETSThe Company and its subsidiaries reviewed their long-lived assets for impairment as of March 31,
2019 and 2018. As a result, the Company recognized impairment losses, which were as follows:
Use

Type

Year ended March 31, 2019

UnusedLand, software andothersLanguage training business
Buildings and structuresand others
English language classes for children Buildings and structures
businessand others
Cram and prep school business
Management system
Cram school businessPhoto studio business

Buildings and structuresand others
Software

Buildings and structuresand others

Buildings and structuresand others

Residential care services business Leases assets, buildings

Year ended March 31, 2018
Language training business andoverseas study support businessMillionsof YenThousands of
U.S. Dollars¥175$1,577

The assessed value of fixed assets

61

550

The assessed value of fixed assets

55

495

The assessed value of fixed assets

54

487

The assessed value of fixed assets

41
17

369
153

The assessed value of fixed assets

41

369

The assessed value of fixed assets
The assessed value of fixed assets

and structures andothers
Total

23

207

¥467

$4,207

Goodwill¥718

Correspondence course business in
TaiwanResidential care services business

Software for internal use
and others
Buildings and structuresand others
English language classes for children Buildings and structures
businessand others
Cram and prep school business
Buildings and structuresand others
Total

Recoverable Amounts

The assessed value of fixed assets

99

The calculated value in use was¥2,277 million and the discountrate used for computation of thepresent value of future cash flow
was 12.3%
The assessed value of fixed assets

25

The assessed value of fixed assets

22

The assessed value of fixed assets

10

The assessed value of fixed assets¥874

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 918

Note 8.

LEASES
LesseeA foreign subsidiary leases certain equipment, office space and other assets under noncancelable
operating leases. The Company and a domestic subsidiary have lease contracts for certain land, buildings and other assets under noncancelable operating leases.
Obligations under finance leases and future minimum payments under noncancelable operatingleases were as follows:
Millions of Yen

Thousands of U.S. Dollars

2019

Due within one year
Due after one year
Total

Note 9.

Finance
Leases¥ 2,374
79,967¥82,341

2019
Operating
LeasesFinance
Leases¥13,51261,666¥75,178$ 21,388
720,423$741,811

Operating
Leases$121,730
555,549$677,279

GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets at March 31, 2019 and 2018, consisted of the following:
Millions of Yen

Consolidation goodwill
Goodwill associated with domestic consolidated subsidiaries
Goodwill associated with a foreign consolidated subsidiary
Others
Total

Note 10.

2019

2018

¥10,355
410
1,939
3,753
¥16,457¥ 7,686
465
2,507
1,292
¥11,950

Thousands of
U.S. Dollars
2019$ 93,288
3,694
17,46833,811$148,261

SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Long-term debt at March 31, 2019 and 2018, consisted of the following:
Millions of Yen

Loans from banks with interest rates
ranging from 0.030% to 0.230% in 2019 and 0.030% to
0.130% in 2018:
Collateralized
Unsecured
Total
Less current portionLong-term debt, less current portion

2019

2018

¥   278
38,00738,285(19,186)¥19,099¥37,806
37,806(5,000)¥32,806

Thousands of
U.S. Dollars
2019$   2,505
342,405
344,910(172,847)$172,063

Annual maturities of long-term debt, excluding finances leases (see Note 8), at March 31, 2019, wereas follows:Year Ending March 31

2020
2021
2022
2023
2024
2025 and thereafter
Total

19

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

Millions of Yen¥19,186
13,943
41
5,021
21
73
¥38,285

Thousands of
U.S. Dollars$172,847
125,613369
45,234189
658$344,910

The carrying amounts of assets pledged as collateral for above collateralized long-term debt at March
31, 2019, were as follows:
Millions of Yen

Buildings, and leasehold improvements
Land
Total

Note 11.

¥115
333
¥448

Thousands of
U.S. Dollars$1,157
3,339$4,496RETIREMENT AND PENSION PLANS
Under most circumstances, employees terminating their employment are entitled to retirement benefits determined based on the rate of pay at the time of termination, years of service and certain
other factors. Such retirement benefits are made in the form of a lump-sum severance payment fromcertain domestic subsidiaries and annuity payments from a welfare annuity fund. Employees are entitled to larger payments if the termination is involuntary or by retirement at the mandatory retirementage.
(1) The changes in defined benefit obligation for the years ended March 31, 2019 and 2018, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year
Current service cost
Interest cost
Actuarial (gains) losses
Benefits paid
Past service cost
Foreign currency translation difference for a foreignsubsidiary
Decrease resulting from exclusion of subsidiaries fromconsolidation
Other
Balance at end of year

2019

2018

2019

¥24,557
1,511
170(1,366)(884)
82¥23,634
1,415
192
531
(772)
169

$221,234
13,613
1,532(12,306)(7,964)
739

188

(34)

1,694

(2)
¥24,256(579)
1¥24,557(19)$218,523(2) The changes in plan assets for the years ended March 31, 2019 and 2018, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year
Expected return on plan assets
Actuarial (gains) losses
Contributions from the employer
Benefits paid
Decrease resulting from exclusion of subsidiaries fromconsolidation
OthersBalance at end of year2019

¥18,524
501
(232)
726
(409)

2018

¥17,975
355
208
742
(367)

2019

$166,883
4,514(2,090)6,540(3,685)(389)¥19,110¥18,524$172,162(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balancesof defined benefit obligation and plan assets was as follows:
Millions of Yen

Funded defined benefit obligation
Plan assets
Total
Unfunded defined benefit obligation
Net liability arising from defined benefit obligation2019¥16,304(19,110)(2,806)
7,952¥ 5,146

Be n e sse Ho ldin gs, In c.

2018¥16,958(18,524)(1,566)
7,599¥ 6,033

Thousands of
U.S. Dollars
2019$146,883(172,162)(25,279)
71,640$ 46,361

FINANCIAL STATEMENTS 2 0 1 9

20

Millions of Yen

Liability for retirement benefits
Asset for retirement benefits
Net liability arising from defined benefit obligation

2019¥7,952(2,806)¥5,1462018¥7,599(1,566)¥6,033Thousands of
U.S. Dollars
2019$71,640(25,279)$46,361

Berlitz Corporation has a SERP for the benefit of its Chairman of the Board, certain designated executives and their designated beneficiaries. Liability for retirement benefits above includes ¥186 million($1,676 thousand) and ¥190 million for SERP for the years ended March 31, 2019 and 2018, respectively, which is disclosed in other current liabilities in the consolidated balance sheets.
(4) The components of net periodic benefit costs for the years ended March 31, 2019 and 2018,
were as follows:
Millions of Yen

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial losses
Amortization of prior service cost
Net periodic benefit costs

2019¥2,146
170
(501)
246
25
¥2,0862018¥2,077
192
(355)
291
¥2,205

Thousands of
U.S. Dollars
2019$19,333
1,532(4,514)2,217
225$18,793

Service cost includes ¥635 million ($5,720 thousand) and ¥662 million of estimated prepaid retirement payment for employees in accordance with the prepaid retirement allowance plan of Benesse
Corporation for the years ended March 31, 2019 and 2018, respectively.
The Companies have also paid additional retirement benefits to employees for the year ended
March 31, 2018. These payments, which are not included in net periodic benefit costs above, areincluded in ¥218 million ($2,057 thousand) of other expenses for the year ended March 31, 2018.
(5) Amounts recognized in other comprehensive income (before income tax effect) in respect ofdefined retirement benefit plans for the years ended March 31, 2019 and 2018, were as follows:
Millions of Yen

Prior service cost
Actuarial gains (amount before income tax effect)
Total

2019

¥   (57)
1,380¥1,3232018¥ (168)2¥ (166)

Thousands of
U.S. Dollars
2019$   (514)
12,432$11,918(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in
respect of defined retirement benefit plans as of March 31, 2019 and 2018, were as follows:
Millions of Yen

Unrecognized prior service cost(amount before income tax effect)
Unrecognized actuarial losses(amount before income tax effect)
Total

21

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

2019

2018

Thousands of
U.S. Dollars
2019¥ (222)¥   (165)$ (2,000)(144)¥ (366)(1,524)¥ (1,689)(1,297)$ (3,297)

(7) Plan assets

a. Components of plan assets
Plan assets as of March 31, 2019 and 2018, consisted of the following:2019

Debt investments
Equity investments
General accountCash and cash equivalents
Others
Total

2018

31%
20
18
8
23
100%

33%
20
18
5
24
100%

b. Method of determining the expected rate of return on plan assets
	The expected rate of return on plan assets is determined considering the long-term rates of return,which are expected currently and in the future from the various components of the plan assets.
(8) Assumptions used for the years ended March 31, 2019 and 2018, were set forth as follows:
Discount rate

The Company and domestic
consolidated subsidiaries
Foreign consolidated subsidiaries
Expected rate of
The Company and domestic
return on plan assets consolidated subsidiaries
Expected rate of
The Company and domesticsalary increases
consolidated subsidiaries
Foreign consolidated subsidiaries

2019

2018

Primarily 0.3%
Primarily 4.0%

Primarily 0.5%
Primarily 3.3%

Primarily 2.0%

Primarily 2.0%

Primarily 6.4%
Primarily 2.0%

Primarily 7.1%
Primarily 2.0%

Retirement Benefits for Directors, Audit & Supervisory Board Members and Company Officers

The liability for retirement benefits at March 31, 2019 and 2018, for directors, Audit & Supervisory
Board members and Company officers at certain domestic subsidiaries was ¥67 million ($604 thousand) and ¥90 million, respectively. The retirement benefits for directors and Audit & Supervisory
Board members are paid subject to the approval of the shareholders.

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 922

Note 12.

EQUITYJapanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant
provisions in the Companies Act that affect financial and accounting matters are summarized below:

a. Dividends

Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition
to the year-end dividend upon resolution at the shareholders' meeting. Additionally, for companies
that meet certain criteria including (1) having a Board of Directors, (2) having independent auditors,(3) having an Audit & Supervisory Board, and (4) the term of service of the directors being prescribedas one year rather than the normal two-year term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time during the fiscal year if the Company has prescribed so in its articles of incorporation. The Company meets all the above criteria, andaccordingly, the Board of Directors may declare dividends (except for dividends-in-kind) at any time
during the fiscal year.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the Company so stipulate. The Companies Act provides certain
limitations on the amounts available for dividends or the purchase of treasury stock. The limitation isdefined as the amount available for distribution to the shareholders, but the amount of net assets
after dividends must be maintained at no less than ¥3 million.

b. Increases/Decreases and Transfer of Common Stock, Reserve and Surplus

The Companies Act requires that an amount equal to 10% of dividends must be appropriated as alegal reserve (a component of retained earnings) or as additional paid-in capital (a component of
capital surplus) depending on the equity account charged upon the payment of such dividends until
the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common
stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may
be reversed without limitation. The Companies Act also provides that common stock, legal reserve,
additional paid-in capital, other capital surplus and retained earnings can be transferred among theaccounts within equity under certain conditions upon resolution of the shareholders.
With the issuance of shares under the restricted stock compensation plan, common stock and capital surplus each increased by ¥38 million ($342 thousand) and ¥24 million as of March 31, 2019 and2018, respectively.

c. Treasury Stock and Treasury Stock Acquisition Rights

The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot
exceed the amount available for distribution to the shareholders which is determined by a specificformula. Under the Companies Act, stock acquisition rights are presented as a separate component ofequity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.

23

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

Note 13.

SEGMENT INFORMATION
Under ASBJ Statement No. 17, "Accounting Standard for Disclosures about Segments of an Enterpriseand Related Information," and ASBJ Guidance No. 20, "Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and Related Information," an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating
segments or aggregations of operating segments that meet specified criteria. Operating segments arecomponents of an entity about which separate financial information is available and for which suchinformation is evaluated regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. Generally, segment information is required to be reported on
the same basis as is used internally for evaluating operating segment performance and deciding how
to allocate resources to operating segments.

(1) Description of Reportable Segments

The reportable segments of the Benesse Group (the "Group") are subject to regular review in orderfor the Board of Directors to decide on the allocation of management resources and evaluate results,
and to obtain financial data separated from the constituents of each company.
The Group concentrates investment of management resources in the four fields of Domestic Education, Global Kodomo Challenge, Nursing Care and Childcare and Berlitz in order to achieve long-term
growth for the Group as a whole.
Accordingly, the Group is made up of segments grouped by products and services based on thesefour businesses, and has designated the Domestic Education, Global Kodomo Challenge, Nursing Careand Childcare and Berlitz as its reportable segments.
In the Domestic Education Business, the Group engages in the correspondence course business,school and teacher support business, cram and prep school business, English language classes forchildren business and other businesses for primary school students to high school students.
In the Global Kodomo Challenge Business, the Group engages in the correspondence course business in Japan, China, Taiwan and Indonesia, targeting mainly infants.
In the Nursing Care and Childcare Business, the Group engages in the residential care services business (operation of nursing homes and elderly homes), home helper services business, training courses
for nursing care personnel, a staff placement and personnel dispatch company specializing in medical
and nursing care personnel, the daycare and afterschool childcare operations business and otherbusinesses.
In the Berlitz business, the Group engages in the language instruction business; the ELS business,
which provides educational services including language training to those who want to study abroad;the global leadership training business and other businesses.

(2) Matters regarding Changes in Reportable Segments

For the year ended March 31, 2019, as a result of organizational change effective April 1, 2018, inorder to achieve long-term growth for the Group as a whole, the Group changed its reportable segments from Domestic Education Company, Overseas Business Company, Nursing Care and Childcare
Company, and Language Learning Company to Domestic Education Business, Global Kodomo Challenge Business, Nursing Care and Childcare Business and Berlitz Business. Domestic Kodomo Challenge Business of Benesse Corporation and Benesse Music Publishing Co. previously included in theDomestic Education Company are determined to be included in Global Kodomo Challenge Business,
Okayama Language Center, Simul International, Inc. and its subsidiaries previously included in the
Language Learning Company are determined to be included in Others and Benesse Education
Research and Development Institute that was transferred from Benesse Holdings, Inc. to Benesse
Corporation, previously included in Reconciliations as a part of Corporate expense, is determined to
be included in Domestic Education Business.
Moreover, segment information for the year ended March 31, 2018, has been restated based on
the new classification after these changes.

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 9

24

(3) Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets and Other Items for
Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2,“Summary of Significant Accounting Policies.”(4) Information about Sales, Profit (Loss), Assets and Other Items
Millions of Yen
2019
Reportable Segment
Domestic
Education
Business

Sales:

Sales to external customers

Intersegment sales or transfers

Total

Segment profit (loss)
Segment assets
Other:

Global Kodomo Nursing Care
Challenge and Childcare
Business
Business

Berlitz
Business

Reportable
Segment Total

Others

Total

Reconciliations Consolidated¥192,064¥56,444¥117,000¥49,276¥414,784¥24,648¥439,432

113

21

56

1,833

2,023

19,847

21,870¥ (21,870)¥439,432¥192,177¥56,465¥117,056¥51,109¥416,807¥44,495¥461,302¥ (21,870)¥439,432¥ 10,056¥ 3,258¥ 11,396¥ (4,748)¥ 19,962¥   554¥ 20,516¥ (4,270)¥ 16,246

172,205

42,937

174,164

28,826418,132

22,049440,181

64,502504,683

Increase in property and equipment
and intangible assets

16,451

1,196

11,975

1,210

30,832907

31,739(157)

31,582

Depreciation

9,294

1,202

4,675

1,903

17,074

1,006

18,080(13)

18,067

Amortization of goodwill

989

534

295

1,818

1,818

Loss on impairment of long-lived assets

209

22

61

292

292

Goodwill at March 31, 2019

6,878

3,887

1,939

12,704

12,704

12,704

Investment in equity method affiliates

231

2,120

2,120

70

301

1,819

1,818
175

467

Millions of Yen
2018
Reportable Segment
Domestic
Education
Business

Sales:

Sales to external customers

Berlitz
Business

Reportable
Segment Total

Others

Total

Reconciliations Consolidated¥182,028¥52,221¥111,812¥51,306¥397,367¥37,130¥434,497

287

13

85

1,788

2,173

23,70025,873¥182,315¥52,234¥111,897¥53,094¥399,540¥60,830¥460,370¥ (25,873)¥434,497¥   9,092¥ 2,328¥   8,851¥ (4,000)¥ 16,271¥ 1,094¥ 17,365¥ (4,739)¥ 12,626

163,126

42,873

162,759

32,933

401,691

22,601

424,292

72,304

496,596

Increase in property and equipment
and intangible assets

7,181

1,090

9,548

870

18,689752

19,441(22)

19,419Depreciation

9,189

1,038

4,369

1,820

16,416

1,329

17,745(11)

17,734

Amortization of goodwill

1,071

534

604

2,209

19

2,228

25

718

874

874

874

4,421

2,359

10,65810,65810,658

2,559

2,559

Intersegment sales or transfers

Total

Segment profit (loss)
Segment assets
Other:

Loss on impairment of long-lived assets

25

Global Kodomo Nursing Care
Challenge and Childcare
Business
Business

32

Goodwill at March 31, 2018

3,878

Investment in equity method affiliates

820

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

99
69

889

1,670

¥434,497¥ (25,873)

2,228

Thousands of U.S. Dollars
2019
Reportable Segment

Sales:

Sales to external customers
Intersegment sales or transfers

Total

Domestic
Education
Business

Global Kodomo Nursing Care
Challenge and Childcare
Business
Business$1,730,306$508,505 $1,054,054

1,018

189

505

Berlitz
Business

Reportable
Segment Total$443,928 $3,736,793
16,513

Others

Total

Reconciliations Consolidated$222,054 $3,958,847

18,225

178,802

197,027$3,958,847$ (197,027)$1,731,324$508,694 $1,054,559$460,441 $3,755,018$400,856 $4,155,874$ (197,027) $3,958,847$    90,595$ 29,351 $  102,667$ (42,775) $  179,838$   4,990 $  184,828$ (38,468) $  146,360

1,551,396

386,820

1,569,045

259,694

3,766,955

198,640

3,965,595

581,099

4,546,694

Increase in property and equipment
and intangible assets

148,207

10,775

107,883

10,901

277,766

8,171

285,937(1,414)

284,523

Depreciation

83,73010,82942,117

17,144

153,820

9,063

162,883(117)

162,766

Amortization of goodwill

8,910

4,811

2,657

16,37816,378Loss on impairment of long-lived assets

1,883

198

550

2,631

2,631

Goodwill at March 31, 2019

61,96435,01817,468114,450

114,450

114,450

Investment in equity method affiliates

2,081

19,09919,099Segment profit (loss)
Segment assets
Other:

631

2,712

16,387

16,378
1,576

4,207

Note: The details of reconciliations are as follows:
Millions of Yen
Sales

Intersegment eliminations
Total

2019

¥ (21,870)¥ (21,870)

2018¥ (25,873)¥ (25,873)

Millions of Yen
Profit (Loss)

Intersegment eliminations
Corporate expenses
Total

2019

¥   (135)(4,135)¥ (4,270)2018¥     38
(4,777)¥ (4,739)

Thousands of
U.S. Dollars
2019$ (197,027)$ (197,027)

Thousands of
U.S. Dollars
2019$ (1,216)(37,252)$ (38,468)

Notes: 1. Corporate expenses are mainly expenses of the Company that are not attributable to the reportable segments.
2. Segment profit (loss) is adjusted with operating income in the consolidated statement of income.

Millions of Yen
AssetsIntersegment eliminations
Corporate assets
Total

2019

¥ (14,057)
78,559¥ 64,5022018¥ (13,199)
85,503¥ 72,304

Thousands of
U.S. Dollars
2019$ (126,640)
707,739$ 581,099

Note: Corporate assets consist mainly of marketable securities of the Company that are not attributable to the reportablesegments.

Millions of Yen
Increase in Tangible and Intangible Fixed Assets

Intersegment eliminations
Corporate assets
Total

2019

¥ (322)165¥ (157)2018¥ (281)259¥ (22)

Thousands of
U.S. Dollars
2019$ (2,901)
1,487$ (1,414)

Note: Capital investment in the Company is not attributable to reportable segments.

Millions of Yen
Depreciation

2019

2018

Total

¥ (13)¥ (11)

Intersegment eliminations
Corporate expenses¥ (253)240¥ (251)
240

Thousands of
U.S. Dollars
2019$ (2,279)
2,162$   (117)

Note: Corporate expenses are expenses related to the Company that are not attributable to the reportable segments.

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 9

26

(5) Information about Geographical Areas
Sales

Millions of Yen
2019
Japan

¥367,040

Others¥72,392

Thousands of U.S. Dollars
2018

Total

¥439,432

Japan¥361,644

2019

Others¥72,853

Total

Japan

¥434,497$3,306,667

OthersTotal$652,180$3,958,847

Note: Sales are classified by country or region based on the location of customers.

Note 14.

ADVERTISING COSTS
Advertising costs charged to income were ¥33,130 million ($298,468 thousand) and ¥32,342 million
for the years ended March 31, 2019 and 2018, respectively.

Note 15.

RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥1,312 million ($11,820 thousand) and¥1,035 million for the years ended March 31, 2019 and 2018, respectively.

Note 16.

DERIVATIVESThe Company enters into foreign currency exchange contracts to hedge foreign currency exchange
risk associated with certain assets denominated in foreign currencies.
It is the Company's policy to use derivatives only for the purpose of reducing market risks associated with assets. The Company does not hold or issue derivatives for trading purposes.
Derivatives are subject to market risk and credit risk. Market risk is the exposure created by potential fluctuations in market conditions, including foreign currency exchange rates. Credit risk is the possibility that a loss may result from a counterparty's failure to perform according to the terms andconditions of the contract.
Because the counterparties to these derivatives are limited to major international financial institutions, the Company does not anticipate any losses arising from credit risk.
The execution and control of derivatives are managed by the Companies' Finance Department
applying internal control policies that regulate the authorization and credit limit amounts. Each derivative transaction is reported to the CEO weekly and reported to the Board of Directors quarterly, andis also reported to the Board of Directors each time significant circumstances occur. Prior to entering
into derivative contracts, foreign subsidiaries confer with independent advisers to assess the reasonableness of the contracts and obtain the Board of Directors' approval, and each derivative transaction
is periodically reported to the Board of Directors.

Derivative Transactions to Which Hedge Accounting Is Not Applied at March 31, 2019
Millions of Yen

Foreign currency forward contracts—
Selling—U.S. dollars

Contract
AmountContract
AmountDue after
One Year¥2,735

Fair Value¥ (16)

Unrealized
Gain (Loss)¥ (16)

Thousands of U.S. Dollars

Foreign currency forward contracts—
Selling—U.S. dollars

27

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

Contract
Amount$24,640

Contract
AmountDue after
One Year

Fair Value$ (144)

Unrealized
Gain (Loss)$ (144)

Derivative Transactions to Which Hedge Accounting Is Applied at March 31, 2019 and 2018
Millions of Yen
2019

Interest rate and currency swap

Hedged Item

Long-term debt

Contract
AmountDue after
One YearContract
Amount¥9,806¥9,806

Millions of Yen
2018

Interest rate and currency swap

Hedged Item

Long-term debt

Contract
AmountDue after
One YearContract
Amount¥9,806¥9,806

Thousands of U.S. Dollars
2019Interest rate and currency swap

Hedged Item

Long-term debt

Contract
Amount$88,342

Contract
AmountDue after
One Year$88,342

The above interest rate and currency swap used to hedge long-term debt denominated in a foreign
currency with a variable interest rate, which qualifies for hedge accounting and meets specific matching criteria, is not measured at market value. Rather, the long-term debt is recorded at a yen amountunder the swap agreement and interest expense is calculated and recorded using a fixed interest
rate.
The fair value of these interest rates and currency swaps is included in long-term debt as describedin Note 4.

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 928

Note 17.

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes
which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 30.6% for
the year ended March 31, 2019, and 30.9% for the year ended March 31, 2018.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at March 31, 2019 and 2018, are as follows:
Thousands of
U.S. Dollars

Millions of Yen

Deferred tax assets:
Tax loss carryforwards
Depreciation
Provision for employees' bonuses
Accrued expenses
Liability for retirement benefits
Trade receivables—accounts
Long-term payables—otherForeign tax credit carryforwards
Asset retirement obligations
Advances received
Deferred consumption taxes
Inventories
Enterprise tax
Loss on impairment of long-lived assets
Social insurance premium
Payables—other
Deferred revenue
Unrealized profit on fixed assets
Loss on valuation of investment securities
Other
Total of tax loss carryforwards and temporary
differences
Less valuation allowance for tax loss carryforwards
Less valuation allowance for temporary differences
Total valuation allowance
Total
Offset with deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities:
Inventories
Unrealized gain on available-for-sale securities
Intangible assets
Undistributed earnings of foreign subsidiaries andassociated companies
Prepaid pension expenses
Other
Total
Offset with deferred tax assets
Net deferred tax liabilities

29

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

2019

2018

¥11,469
4,565
2,005
1,664
1,540
1,199
880
443
440
425
371
369
363
338
326
274
257
242
167
696

¥10,156
4,700
2,183
1,700
1,394
1,279
961
203
386

28,033(10,158)(8,876)(19,034)
8,999
4,594
¥ 4,405

26,949(18,320)
8,629
3,725
¥ 4,904

252,552(91,513)(79,964)(171,477)
81,07541,390$ 39,685¥ 1,973612
1,146¥ 1,679
771
261$ 17,775
5,514
10,324

755
858
512
5,856
4,594
¥ 1,262

658
483
330
4,182
3,725
¥   457

6,802
7,730
4,614
52,75941,390$ 11,369

263
427
516
830
360
207
352
210
136
686

2019

$103,324
41,126
18,063
14,991
13,874
10,802
7,928
3,992
3,964
3,830
3,343
3,324
3,270
3,045
2,937
2,468
2,315
2,180
1,505
6,271

The expiration of tax loss carryforwards, the related valuation allowances and the resulting net
deferred tax assets as of March 31, 2019, were as follows:
Millions of Yen
March 31, 2019

Deferred tax assets relating to tax loss
carryforwards
Less valuation allowances for tax loss
carryforwards

Net deferred tax assets relating to tax
loss carryforwards

1 Year or Less

After 1 Yearthrough
2 Years

After 2 Years
through
3 Years

After 3 Years
through
4 Years

After 4 Years
through
5 Years

After 5 Years

¥60

¥240

¥71

¥264

¥1,046¥9,788¥11,469

49

240

71

264

1,046

8,488

10,158

1,300

1,311

11

Total

Thousands of U.S. Dollars
March 31, 2019

Deferred tax assets relating to tax loss
carryforwards
Less valuation allowances for tax loss
carryforwards

Net deferred tax assets relating to tax
loss carryforwards

1 Year or Less

After 1 Yearthrough
2 Years

After 2 Years
through
3 Years

After 3 Years
through
4 Years

After 4 Years
through
5 Years

After 5 Years$541$2,162$640$2,378$9,423$88,180$103,324

442

2,162

640

2,378

9,423

76,46891,513

11,712

11,81199

Total

For the tax loss carryforwards of ¥11,469 million ($103,324 thousands) (amount multiplied by effective statutory tax rate), deferred tax assets of ¥1,311 million ($11,811 thousands) have beenrecorded. Net deferred tax assets relating to tax loss carryforwards were determined to be recoverable as future taxable income is anticipated, and therefore valuation allowance has not beenrecognized.
A reconciliation between the normal effective statutory tax rate for the years ended March 31, 2019and 2018, and the actual effective tax rate reflected in the accompanying consolidated statement ofincome was as follows:
Normal effective statutory tax rate
Difference in burden of income taxes with the foreign consolidated
subsidiaries
Change in the valuation allowance
Expense not deductible for income tax purposes
Amortization of goodwill
Per capita inhabitants' taxes
Foreign withholdings tax
Equity in net earnings of affiliated companies
Revenue exempt from income tax purposesTax credit under tax package incentivizing wage increases and productivity
enhancements
Foreign tax credit
Share of loss (profit) of entities accounted for using the equity method
Tax credit under the income growth promotion tax system
Adjustment of gain on sales of investments in a consolidated subsidiary
Decrease in deferred tax assets by change of tax rate
Other
Actual effective tax rate

Be n e sse Ho ldin gs, In c.

2019

2018

6.7
5.8
5.1
4.4
3.8
2.0
0.8
(1.9)

(1.7)
(2.7)
3.1
3.1
2.2
1.5
(0.4)
(1.0)

30.6%

(1.9)
(1.0)
(0.8)

(1.3)
52.3%

30.9%

(0.4)
(0.3)
(1.9)
4.1
0.8
(0.5)
36.8%

FINANCIAL STATEMENTS 2 0 1 930

Note 18.

STOCK OPTION PLAN
The stock options that existed as of March 31, 2019, are as follows:
Stock Option

Persons Granted2015 Stock Option 3 directors
17 selected employees

2016 Stock Option 3 directors

Numberof Options
Granted

1,477
1,873
975

Date of Grant

August 3,
2015

September 12,
2016

Exercise
Price

Exercise Period¥3,513

From August 4, 2017
to August 3, 2022

¥2,639From September 13, 2018
to September 12, 2023

The stock option activity is as follows:
2015 Stock Option

Year Ended March 31, 2019Non-vested
March 31, 2018—Outstanding
GrantedCanceled
VestedMarch 31, 2019—Outstanding
VestedMarch 31, 2018—Outstanding
VestedExercised
Canceled
March 31, 2019—Outstanding
Exercise price
Average stock price at exercise
Fair value price at grant date31

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 20192016 Stock Option(Shares)

975
975
2,079

975

2,079
¥3,513($32)

975¥2,639
($24)

¥377
($3)

¥277
($2)

Note 19.

OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the years ended March 31, 2019 and2018, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Unrealized (loss) gain on available-for-sale securities:(Losses) gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal

Foreign currency translation adjustments:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect

Total

Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect

Total

Share of other comprehensive income in associates:
Gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total

2018

2019

¥ (237)
(248)

¥ 340
(215)

$ (2,135)(2,234)¥ (333)¥   88$ (3,000)¥ (340)¥ (786)(49)$ (3,064)¥ (340)¥ (835)$ (3,064)¥1,057266¥ (484)318$ 9,5222,396¥  940¥ (130)$ 8,468¥     9(2)¥   19(2)$     81
(18)

(485)
152

(340)

1,323
(383)

7
(4)

¥     3

Total other comprehensive income (loss)

Note 20.

2019¥  270

125
(37)

(835)

(166)
36

17

¥   17¥ (860)(4,369)1,369(3,064)

11,918(3,450)63(36)$     27

$ 2,431

BUSINESS COMBINATIONSBusiness Combination by Acquisition
Classi Corporationa. Outline of the business combination(1)Name of acquired company and its business outline
Name of the acquired company: Classi Corporation ("Classi")
Business outline:

Development and operation of learning platforms(2)Major reason for the business combination
	Classi was established in April 2014 as a joint venture between the Company and Softbank Corp.
(now, Softbank Group Corp.). The provision of Classi, a cloud-based learning platform, enables a
new kind of learning from four different perspectives: adaptive learning, active learning, communication, and learning log (portfolio). Notably, with its significant presence in the high school market,
the Classi platform boasts the leading market share in Japan. To strengthen the relationshipbetween the Company and Classi, Classi became a consolidated subsidiary of the Company.
(3)Date of business combination
January 1, 2019(4)Legal form of business combination
Applying the control criteria, Classi became a consolidated subsidiary of the Company.

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 9

32

(5)Name of the company after the combination
No change(6)Ratio of voting rights acquired
Ratio of voting rights held before change 50%
Ratio of voting rights held after change50%(7)Basis for determining the acquirer
	The Company had a majority of the Board of Directors membership of Classi and provided the
majority of the total amount of funding for Classi, therefore in accordance with applying the control
criteria, Classi decided to provide the majority of total amount of funding of Classi.
b.	The period for which the operations of the acquired company are included in the consolidated
financial statements
From January 1, 2019 to March 31, 2019
	Classi's operating results from April 1, 2018 to December 31, 2019, are included by equity method
investment profit.
c. Acquisition cost of the acquired company and related details of each class of consideration

Acquisition cost of acquired business—Fair value ofClassi's stock at the time before business combination

Millions of Yen

Thousands of
U.S. Dollars¥862$7,766

Acquisition cost of acquired business was accounted in accordance with "Accounting Standard forBusiness Combinations," and "Revised Guidance on Accounting Standard for Business Combination
and Accounting Standard."d.	Amount of goodwill incurred, reasons for the goodwill incurred, and the method and period ofamortization
Goodwill and negative goodwill is not incurred.
e. The assets acquired and the liabilities assumed at the acquisition date are as follows:

Current assets
Long-term assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities

Millions of Yen¥2,162332¥2,494¥  75019¥  769Thousands of
U.S. Dollars$19,477
2,991$22,468$ 6,757
171$ 6,928

f. Pro forma information (unaudited)	If this business combination had been completed as of April 1, 2018, the beginning of the current
fiscal year, the effects on the consolidated statement of income for the year ended March 31,
2019, would be as follows:

Net sales
Operating income

Millions of Yen¥1,453419

Thousands of
U.S. Dollars$13,090
3,775

Outline of the method of calculation for the effects above:
Difference between net sales and operating income that was estimated as though the business combination had been completed at the beginning of the fiscal year and net sales and operating incomein the consolidated statement of income are presented as the estimated amounts of impact.

33

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

EDUCOM Corporation
On January 8, 2019, Classi, consolidated subsidiary of the Company, acquired 65.2% of the issued
shares of EDUCOM Corporation (head office: Kasugai City, Aichi Prefecture). As a result, EDUCOM
Corporation became a consolidated subsidiary of the Company.
a. Outline of the business combination(1)Name of acquired company and its business outline
Name of the acquired company:

EDUCOM Corporation ("EDUCOM")

Business outline:	Development and sales of school support systems for public
elementary and junior high schools(2)Major reason for the business combination
	Under its corporate slogan of "supporting the creation of healthy schools," EDUCOM provides
EDUCOM Manager C4th, an integrated school support system that helps streamline the school
business of teaching staff of elementary and junior high schools as well as education boards
nationwide, as both a cloud-based and on-premise solution. The joint provision of services offeredby EDUCOM, which has extensive knowledge of school business support spanning nearly 30 years,
and Classi, which has assisted teachers and students with both school business and learning, especially in high schools, will reduce and streamline the workload of schools, thereby ensuring thatteachers have time to spend with their students. In addition, we will provide high quality and indepth school guidance services by linking and leveraging the teaching and learning support data ofClassi, as well as the various school business data of EDUCOM.
(3)Date of business combination
January 1, 2019(4)Legal form of business combination
Share acquisition by cash(5)Name of the company after the combination
No change(6)Ratio of voting rights acquired
65.2%(7)Basis for determining the acquirer	Classi, consolidated subsidiary of the Company, acquired 65.2% of the issued shares of EDUCOM
by cash.
b.	The period for which the operations of the acquired company are included in the consolidated
financial statements
From January 1, 2019 to March 31, 2019c. Acquisition cost of the acquired company and related details of each class of consideration

Consideration for acquisition–CashAcquisition cost

Millions of Yen

Thousands of
U.S. Dollars

Millions of Yen

Thousands of
U.S. Dollars¥5,321¥5,321$47,937$47,937d. Major acquisition-related costs

Advisory fees and others¥    20

Be n e sse Ho ldin gs, In c.

$    180

FINANCIAL STATEMENTS 2 0 1 934

e.	Amount of goodwill incurred, reasons for the goodwill incurred, and the method and period ofamortization(1)

Amount of goodwill incurred

Millions of Yen¥3,989Thousands of
U.S. Dollars$35,937

The purchase price allocation has not yet been completed as of March 31, 2019. Therefore, theamount of goodwill is accounted for on a provisional basis.
(2)Reasons for the goodwill incurred	Goodwill is incurred from expected excess earnings power in the future arising from further business development.
(3)Method and period of amortization
Goodwill is amortized on a straight-line basis over 20 years.
f. The assets acquired and the liabilities assumed at the acquisition date are as follows:

Current assets
Long-term assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities

Millions of Yen¥2,205
3,999¥6,204¥3,280880¥4,160Thousands of
U.S. Dollars$19,865
36,027$55,892$29,550
7,928$37,478

g. Amount allocated to intangible assets other than goodwill, and amortization period(1)

Amount allocated to intangible assets

Millions of Yen

Thousands of
U.S. Dollars

Millions of Yen

Thousands of
U.S. Dollars¥2,821$25,414(2)Breakdown by type

Customer-related assets¥2,821$25,414(3)Period of amortization of goodwill
20 yearsh. The purchase price allocation
	The process for evaluating the fair value of assets and liabilities on the date of the above businesscombination is under examination and the purchase price allocation has not yet been completed
as of March 31, 2019. Therefore, the purchase price allocation is accounted for on a provisional
basis.
i. Pro forma information (unaudited)	If this business combination had been completed as of April 1, 2018, the beginning of the current
fiscal year, the effects on the consolidated statement of income for the year ended March 31,
2019, would be as follows:

Net sales
Operating loss

35

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

Millions of Yen¥1,616(150)

Thousands of
U.S. Dollars$14,559(1,351)

Outline of the method of calculation for the effects above:
Difference between net sales and operating income that was estimated as though the business combination had been completed at the beginning of the fiscal year and net sales and operating incomein the consolidated statement of income are presented as the estimated amounts of impact. In addition, amortization was estimated as though goodwill was recognized at the business combination
date had arose at the beginning of the year ended March 31, 2019.

Note 21.

NET INCOME PER SHARE
Reconciliation of the differences between basic and diluted net income per share ("EPS") for the years
ended March 31, 2019 and 2018, is as follows:Year Ended March 31, 2019
Basic EPS—
Net income available to common shareholders
Effect of dilutive securities—Warrants
Diluted EPS—Net income for computation

Millions of Yen

Thousands ofSharesNet Income
Attributable to
Owners of the
ParentWeightedAverage SharesYear Ended March 31, 2018
Basic EPS—
Net income available to common shareholders
Effect of dilutive securities—Warrants
Diluted EPS—Net income for computation

Note 22.

¥ 4,902¥ 4,902¥12,398¥12,398

Yen

U.S. Dollars

EPS

96,321
23
96,344¥ 50.89$0.46¥ 50.88$0.46

96,26262
96,324¥128.79¥128.71

SUBSEQUENT EVENT
a. Borrowing of Significant Funds

The Company has borrowed funds under the following loan agreement executed with the Chugoku
Bank, Limited.
(1)Use of funds:

Long-term operating capital(2)Contract date:

April 26, 2019(3)Lender:

Chugoku Bank, Limited(4)Loan amount:¥5,000 million ($45,045 thousand)(5)Execution date:

April 26, 2019(6)Interest rate:

Fixed interest 0.13%(7)Repayment method:

Lump-sum repayment on April 28, 2023

(8)Assets pledged as collateral:Noneb. Appropriations of Retained Earnings

The following appropriation of retained earnings at March 31, 2019, was approved at the Company's
shareholders' meeting held on June 22, 2019:Year-end cash dividends, ¥25 ($0.23) per share

Be n e sse Ho ldin gs, In c.

Millions of Yen¥2,408

Thousands of
U.S. Dollars$21,694

FINANCIAL STATEMENTS 2 0 1 936

Independent Auditor’s Report
To the Board of Directors of Benesse Holdings, Inc.:

37

Be n e s s e Ho l d i n g s, Inc.

F IN AN CIAL STATE M E N T S 2019

Be n e sse Ho ldin gs, In c.

FINANCIAL STATEMENTS 2 0 1 938

Benesse Holdings, Inc.
Corporate Communications &Investor Relations Department
1-34, Ochiai, Tama-shi,
Tokyo 206-0033, Japan
Phone: +81-42-357-3656
Email: tokyoir@mail.benesse.co.jp
URL: https://www.benesse-hd.co.jp/en/ir/

Disclaimer
This Financial Statements 2019 is intended only to serve as a reference for use in making investment decisions; it is not intended as an inducement either topurchase or to sell Benesse Holdings’shares. Investors are solely responsible for their investment decisions. Please bear in mind that while Benesse Holdings
has taken great care over the content of the Financial Statements 2019, the Company accepts no responsibility for any errors that the book may contain.