Financial Statements
Year ended March 31, 2021

SMS CO., LTD.
Sumitomo Fudosan Shibakoen Tower,
2-11-1, Shibakoen, Minato-ku,
Tokyo, 105-0011, Japan

Consolidated Balance Sheets
SMS CO., LTD. and Its Consolidated Subsidiaries
As of March 31, 2020 and 2021
(Millions of yen)
As of March 31, 2020

As of March 31, 2021

AssetsCurrent assets
Cash and deposits
Accounts receivable - trade

11,091
5,213

10,538
4,933

14
30

16
31

6,183
–

6,324
598

Prepaid expenses
Other

664
18

808
156

Allowance for doubtful accounts

(113)

(188)

23,102

23,218Work in process
Supplies
Accounts receivable - other
Income taxes receivable

Total current assets
Non-current assets
Property, plant and equipment
Buildings

626

619

Accumulated depreciation

(291)

(324)

Buildings, net

335

295

Tools, furniture and fixtures

806

792

Accumulated depreciation

(545)

(552)

Tools, furniture and fixtures, net

261

239

Machinery, equipment and vehicles

37

36

Accumulated depreciation

(17)

(20)

Machinery, equipment and vehicles, net

20

16

Right-of-use assets
Accumulated depreciation
Right-of-use assets, net
Total property, plant and equipment
Intangible assets
Goodwill

481

618

(91)

(230)

389

387

1,006

939

10,148

8,834

SoftwareTrademark rights

1,637
9,126

2,355
8,621

Customer-related assets
Other

1,825
0

1,502
0

Total intangible assets

22,73821,313

Investments and other assets
Investment securities*

Deferred tax assets
Lease and guarantee deposits
Other
Total investments and other assets
Total non-current assets
Total assets

－

1

－

2,225

*

1,975

873
1,039

879
1,110

11

7

4,149

3,972

27,893

26,22550,99649,444

(Millions of yen)
As of March 31, 2020

As of March 31, 2021

Liabilities
Current liabilities
Accounts payable - trade

314

258

2,487
7,711

2,479
7,750

Accrued expenses
Income taxes payable

451
534

438
374

Accrued consumption taxes
Advances received

536
725

505
869

Deposits received
Provision for bonuses

84
600

147
669

Provision for refund
Lease obligations

242
112

233
115

Other

30

33

13,831

13,875Long-term loans payable
Net defined benefit liability

15,144354

10,644
149

Deferred tax liabilities
Lease obligations

1,994
260

1,830
281

11

3

17,766

12,90931,597

26,785

Capital stock
Capital surplus

2,246
51

2,281
85

Retained earnings
Treasury shares

19,079(0)

23,140(0)Total shareholders’ equity

21,37625,50600Foreign currency translation adjustments(2,149)(3,107)

Total accumulated other comprehensive income(2,149)(3,107)

171259

19,39822,65850,99649,444Current portion of long-term loans payable
Accounts payable - otherTotal current liabilities
Non-current liabilities

Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity

Accumulated other comprehensive income
Valuation difference on available-for-sale securities

Subscription rights to shares
Total net assets
Total liabilities and net assets
See the accompanying Notes to Consolidated Financial Statements.

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2

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Consolidated Statements of Income
SMS CO., LTD. and Its Consolidated Subsidiaries
Fiscal years ended March 31, 2020 and 2021
Fiscal year ended
March 31, 2020
Net sales(Millions of yen)
Fiscal year ended
March 31, 2021

35,14035,960

Cost of sales

4,048

3,957

Gross profit

31,091

32,003

Selling, general and administrative expenses*1

Operating income
Non-operating income
Interest income

26,156*1

26,533

4,935

5,470

24

10

Share of profit of entities accounted for using equity method
Other

1,486
62

1,241
88

Total non-operating income

1,573

1,340

43

53

102
6

90
13

Non-operating expenses
Foreign exchange losses
Interest expenses
Other
Total non-operating expenses
Ordinary income

152

157

6,355

6,653

1
–
55

0
70

Extraordinary income
Gain on sale of non-current assets
Gain on sale of investment securities
Gain on sale of businesses*3

Total extraordinary income

*2

–

57

70

Extraordinary losses
Loss on sale and retirement of non-current assets
Loss on valuation of investment securities

*4

23

*4

117

*5
*6

3
121
11

–

Loss on termination of retirement benefit plan
Loss on cancellation of events*6

Total extraordinary losses

–
13
37

253

Profit before income taxes

6,375

6,470

Income taxes – current
Income taxes – deferred

1,702
(87)

1,734
(65)

Total income taxes

1,615

1,669

Profit

4,760

4,800

–

–

4,760

4,800

Profit attributable to non-controlling interests
Profit attributable to owners of parent
See the accompanying Notes to Consolidated Financial Statements.

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3

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Consolidated Statements of Comprehensive Income
SMS CO., LTD. and Its Consolidated Subsidiaries
Fiscal years ended March 31, 2020 and 2021
Fiscal year ended
March 31, 2020
Profit(Millions of yen)
Fiscal year ended
March 31, 2021

4,760

Other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustments
Share of other comprehensive income of entities accounted
for using equity method
Total other comprehensive income (loss)*

Comprehensive income

4,800

(0)

0

(310)

(952)

(4)

(5)

(315)

*

(957)

4,444

3,843

4,444
–

3,843
–

Comprehensive income attributable to:
Owners of parent
Non-controlling interests
See the accompanying Notes to Consolidated Financial Statements.

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4

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Consolidated Statements of Changes in Net Assets
SMS CO., LTD. and Its Consolidated Subsidiaries
Fiscal years ended March 31, 2020 and 2021
(Millions of yen)
Shareholders' equity
Capital stock

Capital surplus

Retained earnings

Total shareholders'equityTreasury shares

2,208

13

14,971(0)

17,193Issuance of new shares

37

37

－

－

75

Dividends of surplus

－

－

(652)

－

(652)

Profit attributable to ownersof parent

－

－

4,760

－

4,760

Purchase of treasury shares

－

－

－

(0)

(0)

－

－

－

－

－

37

37

4,107

(0)

4,183

2,246

51

19,079(0)

21,376

Balance at April 1, 2019
Changes of items during period

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at March 31, 2020

Accumulated other comprehensive income
Valuation
Total accumulated Subscription rights
Foreign currency
difference onotherto shares
translation
available-for-salecomprehensive
adjustments
securities
incomeBalance at April 1, 2019

Total net assets

0(1,834)(1,833)179

15,539Issuance of new shares

－

－

－

－

75

Dividends of surplus

－

－

－

－

(652)

Profit attributable to ownersof parent

－

－

－

－

4,760

Purchase of treasury shares

－

－

－

－

(0)

(0)

(315)

(315)

(7)

(323)

(0)

(315)

(315)

(7)

3,859

0

(2,149)(2,149)171

19,398Changes of items during period

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at March 31, 2020

－

5

－

(Millions of yen)
Shareholders' equity
Capital stock
Balance at April 1, 2020

Capital surplus

2,246

51

Issuance of new shares

34

Dividends of surplus－

Profit attributable to ownersof parent
Purchase of treasury shares

Retained earnings

Total shareholders'equityTreasury shares

19,079(0)

21,376

34

－

－

68

－

(739)

－

(739)

－

－

4,800

－

4,800

－

－

－

(0)

(0)

－

－

－

－

－

34

34

4,060

(0)

4,129

2,281

85

23,140(0)25,506

Changes of items during period

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at March 31, 2021

Accumulated other comprehensive income
Valuation
Total accumulated Subscription rights
Foreign currency
difference onotherto shares
translation
available-for-salecomprehensive
adjustments
securities
incomeBalance at April 1, 2020

Total net assets

0(2,149)(2,149)171

19,398Issuance of new shares

－

－

－

－

68

Dividends of surplus

－

－

－

－

(739)

Profit attributable to ownersof parent

－

－

－

－

4,800

Purchase of treasury shares

－

－

－

－

(0)

0

(957)

(957)

88

(869)

0

(957)

(957)

88

3,259

0

(3,107)(3,107)259

22,658Changes of items during period

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at March 31, 2021

See the accompanying Notes to Consolidated Financial Statements.

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6

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Consolidated Statements of Cash FlowsSMS CO., LTD. and Its Consolidated Subsidiaries
Fiscal years ended March 31, 2020 and 2021
Fiscal year ended
March 31, 2020

(Millions of yen)
Fiscal year ended
March 31, 2021

Cash flows from operating activities
Profit before income taxes
Depreciation

6,375
1,211

6,470
1,371

809
21

814
117

–
–

(70)
3

(10)
(55)

81
–

(179)

240

(0)
121

79
82

Increase (decrease) in provision for refund
Increase (decrease) in net defined benefit liability

14
43

(9)
(198)

Foreign exchange losses (gains)
Interest expenses

43
102

53
90

Decrease (increase) in notes and accounts receivable - trade
Increase (decrease) in accrued consumption taxes

(910)
101

208
(30)

Decrease (increase) in accounts receivable - other
Decrease (increase) in prepaid expenses(1,626)
(30)

(142)
(148)

Increase (decrease) in advances received
Increase (decrease) in accounts payable - other

176
1,647

180
44

Amortization of goodwill
Loss (gain) on sale and retirement of non-current assets
Loss (gain) on sale of investment securities
Loss (gain) on valuation of investment securities
Share-based remuneration expenses
Loss (gain) on sale of businesses
Share of (profit) loss of entities accounted for using equity
methodIncrease (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses

Other, net

(308)

64

Subtotal

7,547

9,303

Interest and dividend income received

27

20

Interest expenses paid
Income taxes paid

(102)
(1,880)(90)(2,463)

Net cash provided by (used in) operating activities

5,591

6,769

Cash flows from investing activities
Payments into time deposits

(729)

(218)

Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment

916
(419)

399
(376)

Purchase of intangible assets
Proceeds from sale of investment securities(1,186)–(1,659)
71

(5)
57

–
–

(762)

–

1

0

Payments for acquisition of businesses
Proceeds from sale of businesses
Purchase of shares of subsidiaries resulting in change in scopeof consolidation
Other, net
Net cash provided by (used in) investing activities(2,127)－

7－(1,783)(Continued)

(Millions of yen)
Fiscal year ended
March 31, 2020

Fiscal year ended
March 31, 2021

(2,488)(78)(4,507)
(60)

8

12

70

64

(644)

(732)

(0)

(0)

Net cash provided by (used in) financing activities(3,132)(5,224)

Effect of exchange rate change on cash and cash equivalents

270

(110)

Cash flows from financing activities
Repayments of long-term loans payable
Repayments of lease obligations
Proceeds from issuance of share acquisition rights
Proceeds from issuance of shares resulting from exerciseof share acquisition rights
Cash dividends paid
Other, net

Net increase (decrease) in cash and cash equivalents

602

(348)

Cash and cash equivalents at beginning of the year

9,890

10,493

Cash and cash equivalents at end of the year*

See the accompanying Notes to Consolidated Financial Statements.

－

8

－

10,493*

10,144

Notes to Consolidated Financial Statements(Significant matters forming the basis for the preparation of consolidated financial statements)
1. Matters related to the scope of consolidation(1) Number of consolidated subsidiaries: 38
Names of major consolidated subsidiaries
SENIOR MARKETING SYSTEM ASIA PTE. LTD.
Medica Asia (Holdco) Limited
MIMS Pte. Ltd.
MIMS (Shanghai) Ltd.
KIMS Co., Ltd.
Medica Asia Australia (Holdco) Pty Limited
MIMS Australia Pty Ltd.
MIMS (NZ) Limited and other
Effective January 1, 2021, SMS Career CO., LTD., Zweig Co., Ltd., WorkAmbitious Co., Ltd., and WILLONE Co.,
Ltd. were merged into the Company through an absorption-type merger in which the Company was the surviving
company and were dissolved; thus, the Company excluded them from the scope of consolidation for the fiscal year ended
March 31, 2021.
In addition, eHealthWise Pty Ltd. and PT. MEETDOCTOR were excluded from the scope of consolidation due to thecompletion of their liquidation. The Company included MEL SUPPORT SERVICES, INC. in the scope of consolidation
for the fiscal year ended March 31, 2021 due to it being newly established.
2. Application of equity method(1) Number of affiliates accounted for using equity method: 3Name of major affiliate
M3 Career, Inc. and others
3. Fiscal year of consolidated subsidiaries
Of the consolidated subsidiaries of the Company, the fiscal year-end of Medica Asia (Holdco) Limited and its 30
consolidated subsidiaries is December 31. Since the difference in fiscal year-ends is not more than three months, financial
statements as of December 31 are used in preparing the consolidated financial statements. For significant transactions that
occurred in the period from their fiscal year-end to the Company’s fiscal year-end, necessary adjustments have been madeupon consolidation.
4. Matters related to the accounting policies(1) Basis and method of valuation of significant assets
a. Securities
Available-for-sale securities
Available-for-sale securities without a determinable market value are stated at cost determined by the moving-averagemethod.
b. Inventories
Work in process and supplies
Inventories are mainly measured at cost determined by the weighted-average method. (The amounts on the consolidatedbalance sheets are calculated using a method of writing down the carrying amount due to decreased profitability.)(2) Depreciation and amortization method of significant depreciable assets
a. Property, plant and equipment (excluding right-of-use assets)
Property, plant and equipment is depreciated using the declining-balance method. Buildings and accompanying fixturesand structures acquired on or after April 1, 2016 are depreciated using the straight-line method.
Major useful lives are as follows:
Buildings
6 to 15 years
Tools, furniture and fixtures
3 to 9 years
Machinery, equipment and vehicles
2 to 5 years

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9

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b. Intangible assets
Intangible assets are amortized using the straight-line method.
Major useful lives are as follows:
SoftwareEstimated period of internal use (within 5 years)
Trademark rights
Not amortized
Customer-related assets
12 yearsc. Right-of-use assets
Right-of-use assets are depreciated using the straight-line method.
(3) Basis of significant allowances and provisions
a. Allowance for doubtful accounts
For normal trade receivables, allowance for doubtful accounts is provided at an amount determined based on thehistorical experience of bad debt. For certain receivables such as doubtful receivables, uncollectible amounts areindividually estimated.
b. Provision for bonuses
Provision for bonuses is provided for the payment of employees’ bonuses based on the estimate of future payments
attributed to the fiscal year.
c. Provision for refund
In order to meet refund payments due to applicants’ resignation based on the refund clause stipulated in job placement
contracts between the Company and clients, provision for refund is provided at an amount estimated based on historicalexperience.
(4) Methods for significant hedge accounting
a. Hedge accounting method
Deferral hedge accounting is applied. For interest rate swaps, special accounting treatment is applied if the criteria for
special accounting treatment are met. For currency swaps, the allocation method is applied if the criteria for the allocation
method are met.
b. Hedging instruments and hedged items
Hedging instruments:
Interest rate swaps and currency swaps
Hedged items:
Long-term loans payable and associated interest denominated in foreign currencies
c. Hedge policy
As a policy, the Company uses interest rate swaps and currency swaps in order to mitigate and avoid interest rate
fluctuation risk and foreign exchange fluctuation risk.
d. Method of evaluating hedge effectivenessHedge effectiveness is evaluated by comparing the total changes in values of hedging instruments and hedged items forthe periods from the commencement of hedge contracts to the evaluation dates. For interest rate swaps which meet thecriteria for special accounting treatment, the evaluation of hedge effectiveness is omitted.
(Hedging related items to which “Practical Solution on the Treatment of Hedge Accounting for Financial Instruments that
Reference LIBOR” is applied)
The special treatment stipulated in the “Practical Solution on the Treatment of Hedge Accounting for Financial
Instruments that Reference LIBOR” (PITF No. 40, September 29, 2020) is applied to all hedging related items whenapplicable. The following are hedging related items to which PITF No. 40 is applied.
Hedge accounting method:
Hedging instruments:
Hedged items:
Type of hedging transaction:

Deferral hedge accounting
Interest rate swaps and currency swaps
Long-term loans payable and associated interest denominated in foreign currencies
Transactions to fix cash flows(5) Accounting treatments for retirement benefit
a. The method of attributing expected benefit to periods
The straight-line method is used as the method of attributing expected benefit to periods through the fiscal year-end in
calculating the projected benefit obligations.
b. The method of recognizing actuarial gain or loss
Actuarial gain or loss is charged to income in the fiscal year when such gain or loss is incurred.
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10

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(6) Basis of translation of significant assets or liabilities denominated in foreign currencies into Japanese yen
All monetary assets and liabilities denominated in foreign currencies are translated into yen at the exchange rates
prevailing as of the fiscal year-end, and resulting gains and losses are included in income.
Assets and liabilities of overseas consolidated subsidiaries are translated into yen at the year-end exchange rates, andincome and expenses are translated into yen at average exchange rates during the year. Differences arising from thetranslations are included in “Foreign currency translation adjustments” under net assets.
(7) Amortization of goodwill – method and period of amortization
Goodwill is amortized over its effective period, not exceeding 20 years, on a straight-line basis.
(8) Cash and cash equivalents in consolidated statements of cash flows
The Company considers cash on hand, readily available deposits, and all easily convertible short-term instruments with amaturity of three months or less when purchased that are exposed to insignificant risk of changes in value to be cash andcash equivalents.
(9) Other significant matters for preparation of consolidated financial statementsa. Accounting treatment of consumption taxes
Consumption taxes are accounted for by the tax-excluded method.
b. Consolidated taxation system
The Company and certain consolidated subsidiaries have applied the consolidated taxation system, with the Company
being a parent company under the system.
c. Tax effect accounting for the transition from the consolidated taxation system to the group tax sharing system
In accordance with the Act for Partial Revision of the Income Tax Act, etc. (Act No. 8 of 2020, hereinafter the “Act”)
promulgated in March 2020, the consolidated taxation system was revised and a shift is made to the group tax sharing
system, which will be effective for fiscal years beginning on or after April 1, 2022.
In accordance with paragraph 3 of PITF No. 39, March 31, 2020), as to the provisions in which the separate taxation
system was revised, the Company and certain consolidated subsidiaries apply the tax provisions in effect prior to the Act
in calculating deferred tax assets and liabilities instead of the provisions prescribed in paragraph 44 of “Implementation
Guidance on Tax Effect Accounting” (Accounting Standards Board of Japan (“ASBJ”) Guidance No. 28, February 16,2018).
(Significant accounting estimates)
1. Valuation of intangible assets
The Company recognized intangible assets of ¥21,313 million, including goodwill of ¥8,834 million and trademark right of¥8,621 million, in the consolidated balance sheet as of March 31, 2021. These intangible assets are mostly the result of theacquisition of MIMS group.
MIMS group engages in business to provide marketing support services to medical and healthcare-related entities across 17
countries and territories in regions such as Asia and Oceania. The Company did not recognize an impairment loss for the asset grouprelated to MIMS group since the total undiscounted future cash flows of the asset group exceeded its carrying amount when the
impairment test was performed. The undiscounted future cash flows of the asset group were estimated based on factors such as thebusiness plan for the next fiscal year approved by the Board of Directors, the growth rate over subsequent fiscal years, and therecoverable amount after the expiration of the useful life. Key assumptions used in estimating undiscounted future cash flows are:net sales and operating expenses in the next fiscal year, the growth rate, and the rate of return used to calculate the recoverable
amount after the expiration of the useful life.
The Company believes that the fair value estimates used in testing the asset group related to MIMS group for impairment arereasonable; however, changes in estimates due to unpredictable future changes in circumstances, which could cause a decline in
future cash flows or fair value, could have an adverse impact on these valuations, and may result in the Company recognizing an
impairment loss of goodwill or other intangible assets.
(Accounting standards and guidance issued but not yet applied)
1. Accounting standard for revenue recognition
・ “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020)
・ “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, March 26, 2021)
・ “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
The above comprehensive accounting standard and guidance relate to revenue recognition. Revenues are recognized using－ 11 －

the following 5-step model.
Step 1: Identify the contract with a customer
Step 2: Identify 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(2) Scheduled date of application
The Company will apply the aforementioned standard and guidance from the beginning of the fiscal year ending March
31, 2022.
(3) Effect of application
The effect of application of the aforementioned standard and guidance on the Company’s consolidated financial
statements is immaterial.
2. Accounting Standards for Fair Value Measurement
・ “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019)
・ “Accounting Standard for Measurement of Inventories” (ASBJ Statement No. 9, July 4, 2019)
・ “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019)
・ “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, July 4, 2019)
・ “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19, March 31,
2020)(1) Overview
Considering that the IASB and the FASB (US) provide detailed guidance on fair value measurements that is almost
identical (IFRS 13 by IASB and Topic 820 by FASB), the ASBJ issued “Accounting Standard for Fair Value Measurement”
and other standards and guidance in an effort to harmonize Japanese GAAP with international accounting standards mainlywith respect to the guidance and disclosure of the fair value of financial instruments.
As a basic policy in developing these standards, the ASBJ adopted the provisions of IFRS 13 in order to improve thecomparability of financial statements between domestic and foreign entities by using a uniform measurement method. In
addition, in consideration of accounting practices in Japan, other treatment for individual items shall be prescribed to theextent that the comparability between financial statements is not significantly impaired.
(2) Scheduled date of application
The Company will apply the aforementioned standards and guidance from the beginning of the fiscal year ending March
31, 2022.
(3) Effect of application of the new accounting standard
The effect of application of the aforementioned standards and guidance on the Company’s consolidated financial
statements is immaterial.
(Changes in presentation)
1. Application of accounting standard for disclosure of accounting estimates
The Company applied “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31, March 31, 2020)
from the fiscal year ended March 31, 2021, and accordingly provided notes on significant accounting estimates in the consolidated
financial statements.
In the notes, the details for the fiscal year ended March 31, 2020 are omitted in accordance with the transitional treatmentprescribed in the provision of Paragraph 11 of ASBJ Statement No. 31.
(Additional information)
1. Accounting estimates regarding the impact of the COVID-19 pandemic
Although it is difficult to accurately estimate the future status and timing of containment of the COVID-19 pandemic, theCompany estimated the recoverability of deferred tax assets and impairment of non-current assets for the fiscal year ended March
31, 2021 under the assumption that the impact of the pandemic would be limited.

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12

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(Consolidated balance sheets)* Investment in non-consolidated subsidiaries and affiliates included in investment securities is as follows:(Millions of yen)
As of March 31, 2020
Investment securities (shares)

2,215

As of March 31, 2021
1,969(Consolidated statements of income)*1 Major items and amounts included in selling, general and administrative expenses are as follows:
Fiscal year ended
March 31, 2020

(Millions of yen)
Fiscal year ended
March 31, 2021

Salaries and allowance
Advertising expenses

9,860
4,714

10,433
4,979

Amortization of goodwill
Depreciation

809
1,211

814
1,371

Business consignment expenses
Legal welfare expenses

2,543
1,478

2,452
1,641

Rents
Provision for bonuses

1,458
521

1,487
588

98
34

80
74

Retirement benefit expenses
Provision of allowance for doubtful accounts*2 Gain on sale of investment securities
Fiscal year ended March 31, 2021
The gain recognized under extraordinary income is due to the sale of shares of one unlisted issue.
*3 Gain on sale of businesses
Fiscal year ended March 31, 2020
The gain recognized under extraordinary income is due to transfer of an educational business by WILLONE Co., Ltd., aconsolidated subsidiary of the Company.
*4 Loss on sale and retirement of non-current assets is as follows:
Fiscal year ended
March 31, 2020

(Millions of yen)
Fiscal year ended
March 31, 2021

Buildings

840

Tools, furniture and fixtures
Software

4
11

21
55

23

117

Total

*5 Loss on termination of retirement benefit plan
Fiscal year ended March 31, 2021
The Company resolved to terminate retirement benefit plans of certain consolidated subsidiaries upon their merger anddissolution. Thus, loss on termination of retirement benefit plans was recognized under extraordinary losses when the plans wereactually terminated.
*6 Loss on cancellation of events
For the fiscal year ended March 31, 2020 and 2021, loss on cancellation of events is the loss incurred by the Company as a resultof canceling recruitment events hosted by the Company due to the COVID-19 pandemic.

－

13

－

(Consolidated statements of comprehensive income)* Reclassification adjustments and tax effects in connection with other comprehensive income(Millions of yen)
Fiscal year ended
March 31, 2021

Fiscal year ended
March 31, 2020
Valuation difference on available-for-sale securities:
Amount arising during the year

(0)0

Reclassification adjustments––

Amount before tax effects(0)0

Tax effects

0(0)Valuation difference on available-for-sale securities(0)0Amount arising during the year

(310)

(952)

Reclassification adjustments

–

–

(310)

(952)

Amount arising during the year

(4)

(5)

Reclassification adjustments
Share of other comprehensive income of entities accounted forusing equity method

–

–

(4)

(5)

(315)

(957)

Foreign currency translation adjustments:

Foreign currency translation adjustments
Share of other comprehensive income of entities accounted forusing equity method:

Total other comprehensive income (loss)(Consolidated statements of changes in net assets)
Fiscal year ended March 31, 2020
1. Matters regarding class and number of issued shares and class and number of treasury shares(Shares)Number of shares at
beginning of the year

Increase

Number of shares at
end of the year

Decrease

Issued shares:
Common stock (Note 1)
Total

86,998,800

58,800–87,057,600

86,998,800

58,800–87,057,600

372

73

–

445

372

73

–

445

Treasury shares:
Common stock (Note 2)
Total(Note 1)
(Note 2)

Increase in issued shares (58,800 shares) is due to the exercise of subscription rights to shares.
Increase in treasury shares (73 shares) is due to the acquisition of treasury shares.

－

14

－

2. Matters regarding subscription rights to sharesClassification

The
Company(Parent
company)

Description of subscription
rights to shares

July 2014
No.10 Stock Option
July 2016
No.11 Stock Option
July 2016
No.12 Stock Option
May 2017
No.13 Stock Option
July 2018
No.14 Stock Option
August 2019No.15 Stock Option

Number of shares subject to subscription rights to shares (shares)

Class of sharessubject to
subscription
rights to shares

Beginning of theyear

Common stock

400,000––

400,000

138

Common stock

36,000–9,800

26,20014

Common stock

408,000–

253,000

155,000

0Common stock

316,000––

316,000

2

Common stock

180,000––

180,000

4

Common stock–

254,000–

254,000

10

1,340,000

254,000

262,800

1,331,200

171

Total

–

Increase

Decrease

End of the year

Balance at endof the year
(Millions ofyen)(Notes) 1. The stock options above are exercisable in the following schedule: No.10 Stock Option on July 17, 2021; No.11 Stock
Option on July 20, 2019; No.12 Stock Option on July 1, 2019; No.13 Stock Option on July 1, 2020, No.14 Stock
Option on July 1, 2021, and No.15 Stock Option on July 1, 2022.
2. Decreases are due to the exercise and the expiration of subscription rights to shares.
3. Matters regarding dividends(1) Dividend payment
Resolution
Ordinary General
Meeting of
Shareholders heldon June 19, 2019

Dividend amount(Millions of yen)Class

Common stock

Dividend per share
(Yen)

652

7.5

Record date

Effective date

March 31, 2019

June 20, 2019(2) Of the dividends whose record date belongs to the fiscal year ended March 31, 2020, the dividend whose effective date falls
in the fiscal year ending March 31, 2021.
Resolution
Ordinary General
Meeting of
Shareholders heldon June 19, 2020

Class
Commonstock

Resource

Dividend
amount(Millions of yen)

Dividend
per share(Yen)

Record date

Effective date

739

8.5

March 31, 2020

June 22, 2020

Retainedearnings－

15－

Fiscal year ended March 31, 2021
1. Matters regarding class and number of issued shares and class and number of treasury shares(Shares)Number of shares at
beginning of the year

Increase

Number of shares at
end of the year

Decrease

Issued shares:
Common stock (Note 1)
Total

87,057,600

52,000–87,109,600

87,057,600

52,000–87,109,600

445

46

–

491

445

46

–

491

Treasury shares:
Common stock (Note 2)
Total(Note 1)
(Note 2)

Increase in issued shares (52,000 shares) is due to the exercise of subscription rights to shares.
Increase in treasury shares (46 shares) is due to the acquisition of treasury shares.

2. Matters regarding subscription rights to sharesClassification

The
Company(Parent
company)

Description of subscription
rights to shares

July 2014
No.10 Stock Option
July 2016
No.11 Stock Option
July 2016
No.12 Stock Option
May 2017
No.13 Stock Option
July 2018
No.14 Stock Option
August 2019No.15 Stock Option
July 2020
No.16 Stock Option
Total

Number of shares subject to subscription rights to shares (shares)

Class of sharessubject to
subscription
rights to shares

Beginning of theyear

Common stock

400,000––

400,000

162

Common stock

26,200–

6,200

20,00011

Common stock

155,000–

37,000118,000

0Common stock

316,000–

293,400

22,6000Common stock

180,000–

1,000

179,000

17

Common stock

254,000–

1,000

253,000

14

Common stock–

200,000–

200,00052

1,331,200

200,000

338,600

1,192,600

259–

Increase

Decrease

End of the year

Balance at endof the year
(Millions ofyen)(Notes) 1. The stock options above are exercisable in the following schedule: No.10 Stock Option on July 17, 2021; No.11 Stock
Option on July 20, 2019; No.12 Stock Option on July 1, 2019; No.13 Stock Option on July 1, 2020, No.14 Stock
Option on July 1, 2021, No.15 Stock Option on July 1, 2022, and No.16 Stock Option on July 1, 2023.
2. Decreases are due to the exercise and the expiration of subscription rights to shares.
3. Matters regarding dividends(1) Dividend payment
Resolution
Ordinary General
Meeting of
Shareholders heldon June 19, 2020

Class

Common stock

Dividend amount(Millions of yen)

Dividend per share
(Yen)

739

8.5

－

16

－

Record date

Effective date

March 31, 2020

June 22, 2020

(2) Of the dividends whose record date belongs to the fiscal year ended March 31, 2021, the dividend whose effective date falls
in the fiscal year ending March 31, 2022.
Resolution
Ordinary General
Meeting of
Shareholders heldon June 18, 2021

Class
Commonstock

Resource

Dividend
amount(Millions of yen)

Dividend
per share(Yen)

Record date

Effective date

827

9.5

March 31, 2021

June 21, 2021

Retainedearnings(Consolidated statements of cash flows)* Reconciliation of cash and cash equivalents in the consolidated statements of cash flows to accounts and amounts in theaccompanying consolidated balance sheets(Millions of yen)
Fiscal year ended
Fiscal year ended
March 31, 2020
March 31, 2021
Cash and deposits
Time deposits with maturity in excess of three months
Cash and cash equivalents

11,091

10,538

(598)

(394)

10,493

10,144(Leases)(As a lessee)
1. Finance leases
Finance leases that do not transfer ownership(1) Details of leased assets
Property, plant and equipment
Certain overseas consolidated subsidiaries have applied IFRS 16 “Leases.” As a result of the application of IFRS 16, theCompany has recognized amounts such as office rents of the consolidated subsidiaries as right-of-use assets.
(2) Depreciation method of leased assets
The depreciation method of leased assets is stated in “Significant matters forming the basis for the preparation of
consolidated financial statements, 4. Matters related to the accounting policies, (2) Depreciation and amortization method ofsignificant depreciable assets.”
2. Operating leases
Future minimum lease payments under non-cancellable operating leases are as follows:(Millions of yen)
As of March 31, 2020

As of March 31, 2021

Due within one year6833

Due after one year

24

895

31

1,729

Total

－

17

－

(Financial instruments)
1. Status of financial instruments(1) Policy on financial instruments
As a policy, the Company generally operates its business using funds provided by operating activities, and invests temporary
surplus funds in very safe financial instruments. The Company does not enter into financial transactions for trading or
speculative purposes.
(2) Types of financial instruments, related risk and risk management
Accounts receivable - trade and accounts receivable - other are exposed to the credit risk of customers; however, the risk islimited because most of these receivables are due within two months. In accordance with the Company’s credit management
policy, the Company manages such risk by monitoring due dates and outstanding balances by customer and evaluating their
credit status.
Accounts payable - other and income taxes payable have payment due dates within one year, in general. Current liabilities
including these payables are exposed to liquidity risk at time of settlement. However, the Company avoids such risk byreviewing the cash management plan on a monthly basis.
Long-term loans payable are primarily for share acquisitions related to M&A transactions. The Company manages interest
rate fluctuation risk and the foreign exchange fluctuation risk of each contract by using derivative transactions such as interest
rate swaps and currency swaps as hedging instruments, except for those of some syndicated loans payable.
(3) Supplemental information regarding fair value of financial instruments
The fair value of financial instruments is based on their market prices, if available. Where there is no market price available,
fair value is reasonably estimated. As the estimation of fair value incorporates variable factors, the fair value may vary whendifferent assumptions are applied.
2. Matters regarding fair value of financial instruments
The carrying amount, fair value and the difference between them are as follows. Financial instruments for which fair value isextremely difficult to estimate are excluded from the following table (See Note 2 below).
As of March 31, 2020
(Millions of yen)
Carrying amount

Fair value

Difference(1) Cash and deposits

11,091

11,091–(2) Accounts receivable - trade

5,213

5,213

–

(113)

(113)

–

5,099

5,099

–

6,183

6,183

–

22,374

22,374–(4) Long-term loans payable (*2)

17,632

17,644

11(5) Accounts payable - other

7,711

7,711

–

(6) Income taxes payable

534

534

–

Total liabilities

25,87825,890

11

–

–

–

Allowance for doubtful accounts (*1)(3) Accounts receivable - otherTotal assets

Derivative transactions(*1) The amount is presented as allowance for doubtful accounts receivable - trade.
(*2) The amount includes current portion of long-term loans payable.

－

18

－

As of March 31, 2021
(Millions of yen)
Carrying amount

Fair value

Difference(1) Cash and deposits

10,538

10,538–(2) Accounts receivable - trade

4,933

4,933

–

(188)

(188)

–

4,744

4,744

–

6,324

6,324

–

21,607

21,607–(4) Long-term loans payable (*2)

13,124

13,119(4)(5) Accounts payable - other

7,750

7,750

–

(6) Income taxes payable

374

374

–

Total liabilities

21,24921,245

(4)

–

–

–

Allowance for doubtful accounts (*1)(3) Accounts receivable - otherTotal assets

Derivative transactions(*1) The amount is presented as allowance for doubtful accounts receivable - trade.
(*2) The amount includes current portion of long-term loans payable.
(Notes) 1. Measurement method of fair value of financial instruments and information on securities
Assets(1) Cash and deposits, (2) Accounts receivable - trade, (3) Accounts receivable - other
Since these items are settled in a short period of time, their carrying amount approximates fair value. Since it isextremely difficult to estimate credit risk of each receivable, the Company estimates the fair value of accounts
receivable - trade by deducting allowance for doubtful receivables from the carrying amount, considering thatallowance for doubtful accounts approximates the amount of credit risk.
Liabilities(4) Long-term loans payable (including current portion)
For loans payable whose interest is fixed rate or fixed using interest rate swaps, the fair value is calculated bydiscounting the total of principal and interest classified by the remaining period to the maturity using an assumed
interest rate applicable to a similar type of new borrowings. For loans payable with variable interest rate, the fairvalue is measured in the same manner as those with fixed interest rate using TIBOR as of the balance sheet date.
(5) Accounts payable - other, (6) Income taxes payable
Since these items are settled in a short period of time, their carrying amount approximates fair value.
Derivative transactions
Interest rate swaps under the special accounting treatment and currency swaps under the allocation method areaccounted for as an integral component of long-term loans payable designated as hedged items. Thus, their fair value
is included in those of the loans payable.
2. Financial instruments whose fair value is extremely difficult to determine(Millions of yen)Classification

As of March 31, 2020

As of March 31, 2021

2,225

1,975

Investment securities
Unlisted shares

These securities are not included in the table above, as there were no market prices available and it is extremely
difficult to determine the fair value.
3. Maturity analysis for financial assets and securities with contractual maturities
－

19

－

As of March 31, 2020
(Millions of yen)Due in one year or
less

Due after one year
through five years

Due after five years
through ten years

Due after ten years

Cash and deposits

11,035–––

Accounts receivable - trade

5,213

–

–

–

Accounts receivable - other

6,183

–

–

–

Total

22,432–––Due in one year or
less

Due after one year
through five years

Due after five years
through ten years

Due after ten years

Cash and deposits

10,452–––

Accounts receivable - trade

4,933

–

–

–

Accounts receivable - other

6,324

–

–

–

Total

21,710–––

As of March 31, 2021
(Millions of yen)

4. Maturity analysis for bonds, long-term loans payable, leases payable and other interest-bearing debts and other interestbearing debts
As of March 31, 2020
(Millions of yen)Due in one
year or lessDue after
one yearthrough
two years

Due after
two years
throughthree years

Due after
three years
throughfour years

Due after
four years
throughfive years

Long-term loans payable

2,487

2,487

2,394

2,301

2,301

5,660

Total

2,487

2,487

2,394

2,301

2,301

5,660

Due in one
year or lessDue after
one yearthrough
two years

Due after
two years
throughthree years

Due after
three years
throughfour years

Due after
four years
throughfive years

Long-term loans payable

2,479

2,390

2,101

1,901

1,901

2,350

Total

2,479

2,390

2,101

1,901

1,901

2,350

Due after
five years

As of March 31, 2021
(Millions of yen)

(Securities)
1. Impairment of securities
Fiscal year ended March 31, 2020
None to report.
Fiscal year ended March 31, 2021
The disclosure is omitted due to immateriality.
2. Available-for-sale securities sold during the fiscal year
Fiscal year ended March 31, 2020
None to report.
－

20

－

Due after
five years

Fiscal year ended March 31, 2021
(Millions of yen)
Sales proceeds(1) Equity securities

Gain

Loss

71

70

–

a. Government bonds and municipal bonds

–

–

–

b. Corporate bonds

–

–

–

c. Other

–

–

–

–

–

–

71

70

–

(2) Debt securities(3) Other
Total(Derivative transactions)
1. Derivatives transactions for which hedge accounting has not been applied
None to report.
2. Derivatives transactions for which hedge accounting has been applied(1) Currency-related
As of March 31, 2020
(Millions of yen)
Hedge accounting
methodTransaction

Main hedged
item

Allocation method

Currency swaps
Receive: U.S. dollar/
Pay: Yen

Long-termloans payable

Contract amountContract amount over one year
12,012

6,606

Fair value(Note)(Note) Currency swaps under the allocation method are accounted for as an integral component of long-term loans payable
designated as hedged items. Thus, their fair value is included in those of the loans payable.
As of March 31, 2021
(Millions of yen)
Hedge accounting
methodTransaction

Main hedged
item

Allocation method

Currency swaps
Receive: U.S. dollar/
Pay: Yen

Long-termloans payable

Contract amountContract amount over one year
12,012

5,405

Fair value(Note)(Note) Currency swaps under the allocation method are accounted for as an integral component of long-term loans payable
designated as hedged items. Thus, their fair value is included in those of the loans payable.
(2) Interest rate-related
As of March 31, 2020
(Millions of yen)
Hedge accounting
methodTransaction

Main hedged
item

Special accounting
treatmentInterest rate swaps
Receive: Floating /Pay: Fixed

Long-termloans payable

Contract amountContract amount over one year
12,012

6,606

Fair value(Note)(Note) Interest rate swaps under special accounting treatment are accounted for as an integral component of long-term loans
payable designated as hedged items. Thus, their fair value is included in those of the loans payable.

－

21

－

As of March 31, 2021
(Millions of yen)
Hedge accounting
methodTransaction

Main hedged
item

Special accounting
treatmentInterest rate swaps
Receive: Floating /Pay: Fixed

Long-termloans payable

Contract amountContract amount over one year
12,012

5,405

Fair value(Note)(Note) Interest rate swaps under special accounting treatment are accounted for as an integral component of long-term loans
payable designated as hedged items. Thus, their fair value is included in those of the loans payable.
(Retirement benefit)
1. Summary of retirement benefit plans
The Group has only a lump-sum payment plan.
2. Defined benefit plan
(1) Reconciliation between beginning balance and ending balance of projected benefit obligations(Millions of yen)
Fiscal year ended
March 31, 2020

Fiscal year ended
March 31, 2021

311

354

Service cost

69

96

Interest cost2

2

Actuarial gain or loss

26

(19)

Retirement benefits paid

(22)

(20)

–

(255)

Balance at beginning of the year

Decrease due to termination of retirement benefit plan
Other
Balance at end of the year

(32)

(8)

354

149

(2) Reconciliation between the ending balance of projected benefit obligations and net defined benefit liability recorded on the
consolidated balance sheets(Millions of yen)
As of March 31, 2020

As of March 31, 2021

Unfunded retirement benefit obligations

354

149

Net defined benefit liability

354

149

(3) The components of retirement benefit expenses and their amounts(Millions of yen)
Fiscal year ended
March 31, 2020

Fiscal year ended
March 31, 2021

Service cost

69

96

Interest cost2

2

Amortization of actuarial gain or loss

26

(19)

Total retirement benefit expenses

9879(4) The major assumptions used for the actuarial calculation (weighted average)
As of March 31, 2020
Discount rate

1.0%

－

22

－

As of March 31, 2021
3.1%

(Stock options)
1. The amount of costs incurred for the stock option plans and the account recorded are as follows:(Millions of yen)
Fiscal year ended
March 31, 2020
Share-based compensation expenses included in general andadministrative expenses

Fiscal year ended
March 31, 2021

(10)

81

2. Outline, number and status of changes in number of stock options(1) Outline of stock options
No.10 Stock Option

No.11 Stock Option

No.12 Stock Option

Position and number ofgrantees
Number of options granted(Notes 1 and 2)

1 director

3 directors

3 directors, 40 employees

400,000 shares

36,000 shares

412,000 shares

Date of grant

July 17, 2014

August 9, 2016

August 9, 2016

The grantee shall be in theposition of director of the

The grantee shall be in theposition of director of the

Only when EBITDA for the
fiscal year ended March 31,

Company. This shall not
apply in cases where theCompany. This shall not
apply in cases where the2019 (Note 3) exceeds (a),(b), or (c) stated below,

grantee resigned the position
due to expiration of the term

grantee resigned the position
due to expiration of the term

subscription rights to sharesshall become exercisable. Ofof office or other legitimate
reasons.

of office or other legitimate
reasons.

the subscription rights allottedto each grantee, the number

Other terms and conditions
shall be stipulated in the

Other terms and conditions
shall be stipulated in theof rights which become
exercisable (“exercisable

contract for allotment ofsubscription rights to shares.

contract for allotment ofsubscription rights to shares.

ratio”) shall be determined asfollows:(a) EBITDA exceeds ¥4,977
million: exercisable ratio is

Vesting condition

10%(b) EBITDA exceeds ¥6,462
million: exercisable ratio is50%(c) EBITDA exceeds ¥8,216
million: exercisable ratio is100%
Other terms and conditions
shall be stipulated in thecontract for allotment ofsubscription rights to shares.
Service period
Exercise period

July 17, 2014 –August 9, 2016 –July 16, 2021

July 19, 2019

July 17, 2021 –July 20, 2019 –July 1, 2019 –July 16, 2024

July 19, 2026

June 30, 2024

－

23

－

–

Position and number ofgrantees
Number of options granted(Notes 1 and 2)
Date of grantNo.13 Stock Option

No.14 Stock Option

No.15 Stock Option

2 directors, 44 employees

2 directors, 45 employees

2 directors, 64 employees

318,000 shares

180,000 shares

254,000 shares

June 19, 2017

August 7, 2018

September 3, 2019

Only when operating income

Only when EBITDA for the

Only when actual operating

for the fiscal year ending
March 31, 2020 exceeds (a),fiscal year ending March 31,
2021 (Note 4) exceeds (a),income for the fiscal year
ending March 31, 2022 (Note(b), or (c) stated below,
subscription rights to shares(b), or (c) stated below,
subscription rights to shares5) exceeds (a), (b), or (c)stated below, subscription

shall become exercisable. Of shall become exercisable. Of rights to shares shall become
the subscription rights allotted the subscription rights allotted exercisable. Of theVesting condition

to each grantee, the numberof rights which become

to each grantee, the numberof rights which become

subscription rights allotted toeach grantee, the number of

exercisable (“exercisable
ratio”) shall be determined as

exercisable (“exercisable
ratio”) shall be determined asrights which become
exercisable (“exercisable

follows:
follows:(a) Operating income exceeds (a) EBITDA exceeds ¥7,670

ratio”) shall be determined asfollows:¥4,853 million: exercisable
ratio is 10%

million: exercisable ratio is
10%(a) Actual operating income
exceeds ¥6,408 million:(b) Operating income exceeds (b) EBITDA exceeds ¥8,764¥6,301 million: exercisable
million: exercisable ratio is

exercisable ratio is 10%(b) Actual operating income

ratio is 50%50%(c) Operating income exceeds (c) EBITDA exceeds ¥9,958

exceeds ¥7,322 million:
exercisable ratio is 70%¥8,011 million: exercisable
ratio is 100%

million: exercisable ratio is
100%(c) Actual operating income
exceeds ¥8,319 million:

Other terms and conditions

Other terms and conditions

shall be stipulated in thecontract for allotment ofshall be stipulated in thecontract for allotment of

Other terms and conditions
shall be stipulated in thesubscription rights to shares.

subscription rights to shares.

contract for allotment ofsubscription rights to shares.

–

–

–

July 1, 2020 –July 1, 2021 –July 1, 2022 –June 30, 2025

June 30, 2026

June 30, 2027

exercisable ratio is 100%Service period
Exercise period

－

24

－

No.16 Stock Option
Position and number ofgrantees
Number of options granted(Notes 1 and 2)
Date of grant

2 directors, 24 employees
200,000 shares
July 29, 2020
Only when actual operating
income for the fiscal year
ending March 31, 2023 (Note6) exceeds (a) or (b) statedbelow, subscription rights toshares shall become
exercisable. Of thesubscription rights allotted toeach grantee, the number ofrights which become
exercisable (“exercisable

Vesting condition

ratio”) shall be determined asfollows:(a) Actual operating income
exceeds ¥6,647 million:
exercisable ratio is 10%(b) Actual operating income
exceeds ¥7,237 million:
exercisable ratio is 100%
Other terms and conditions
shall be stipulated in thecontract for allotment ofsubscription rights to shares.

Service period–

Exercise period

July 1, 2023 –June 30, 2028

(Note 1) It is converted and stated as number of shares.
(Note 2) The Company implemented a 2-for-1 stock split effective January 1, 2015. In addition, the Company implemented
another 2-for-1 stock split effective July 1, 2018. The number of shares above represents those after these stock splits.
(Note 3) EBITDA is calculated by adding the amounts of depreciation and amortization of goodwill on the Consolidated
Statements of Cash Flows to the amount of operating income on the Consolidated Statements of Income for the fiscal
year ended March 31, 2019.
(Note 4) EBITDA is calculated by adding the amounts of depreciation and amortization of goodwill on the Consolidated
Statements of Cash Flows, and the amount of share-based remuneration expenses described in Notes to Consolidated
Financial Statements to the amount of operating income on the Consolidated Statements of Income for the fiscal year
ended March 31, 2021.
(Note 5) Actual operating income is calculated by adding the amount of share-based remuneration expenses stated in Notes toConsolidated Financial Statements to the amount of operating income on the Consolidated Statements of Income
contained in the Annual Securities Report for the fiscal year ending March 31, 2022.
(Note 6) Actual operating income is calculated by adding the amount of share-based remuneration expenses stated in Notes toConsolidated Financial Statements to the amount of operating income on the Consolidated Statements of Income
contained in the Annual Securities Report for the fiscal year ending March 31, 2023.

－

25

－

(2) Number and status of changes in number of stock options
The following tables are based on the stock options that existed for the fiscal year ended March 31, 2021. The number ofstock options is converted and stated as the number of shares.
a. Number of stock options(Shares)
No.10 Stock Option

No.11 Stock Option

No.12 Stock Option

400,000––

Granted–––Forfeited–––

Vested–––400,000––

Outstanding at March 31, 2020–

26,200155,000

Vested–––Exercised

–

6,200

37,000Forfeited–––

Outstanding at March 31, 2021–

20,000118,000

No.13 Stock Option

No.14 Stock Option

No.15 Stock Option

316,000

180,000

254,000

Granted–––Forfeited

284,600

1,000

1,000

Vested31,400–––179,000

253,000–––

Vested31,400––Exercised

8,800

–

–

Forfeited–––

22,600––Non-vested:
Outstanding at March 31, 2020

Outstanding at March 31, 2021
Vested:Non-vested:
Outstanding at March 31, 2020

Outstanding at March 31, 2021
Vested:Outstanding at March 31, 2020

Outstanding at March 31, 2021

－

26

－

No.16 Stock Option
Non-vested:
Outstanding at March 31, 2020–

Granted

200,000

Forfeited–

Vested–Outstanding at March 31, 2021

200,000

Vested:Outstanding at March 31, 2020–

Vested–Exercised–

Forfeited–

Outstanding at March 31, 2021–

b. Price information of stock options(Yen)
No.10 Stock Option

No.11 Stock Option

No.12 Stock Option

736

1,205

1,190

–

3,390

2,968

422

569

3

No.13 Stock Option

No.14 Stock Option

No.15 Stock Option

1,528

1,978

2,544

2,878

–

–

8

969

792

Exercise price
Average market price of the stockat the time of exercise
Fair unit value (date of grant)

Exercise price
Average market price of the stockat the time of exercise
Fair unit value (date of grant)

No.16 Stock Option
Exercise price

2,322

Average market price of the stockat the time of exercise–
879

Fair unit value (date of grant)(Note) The Company implemented a 2-for-1 stock split effective January 1, 2015. In addition, the Company implemented another 2for-1 stock split effective July 1, 2018. The number of shares above represents those after these stock splits.

－

27

－

3. Methods to estimate fair value of stock options
The methods to estimate fair value of No. 16 Stock Option granted for the fiscal year ended March 31, 2021 are as follows:
No.16 Stock Option
a. Valuation techniqueBlack-Scholes Modelb. Major assumptions and estimation method
No.16 Stock Option
Volatility of stock price (Note 1)

39.73%

Estimated remaining period to maturity (Note 2)

5.43 years

Estimated dividend (Note 3)¥8.5 per share

Risk-free interest rate (Note 4)(0.121)%(Note 1) The volatility of stock price is estimated based on the actual stock prices from February 26, 2015 to July 29, 2020.
(Note 2) Since it is difficult to make reliable estimates due to insufficient historical data, the remaining period was calculated
based on the assumption that the rights were exercised in the middle of each exercise period.
(Note 3) An amount of the actual dividend for the fiscal year ended March 31, 2020 is used for the assumption.
(Note 4) This rate is the yield of Japanese government bonds maturing on December 20, 2025 as of the date of valuation.
4. Method of estimating number of stock options vested
Since it is difficult to reasonably estimate the number of stock options that will expire in the future, only the number of options
that has been forfeited is reflected.

(This part is intentionally left blank)

－

28

－

(Tax-effect accounting)
1. Major components of deferred tax assets and deferred tax liabilities(Millions of yen)
As of March 31, 2020
Deferred tax assets:
Enterprise tax payable

As of March 31, 2021

52
140

38
149

74
17

71
18

–
20

28
38

221
–

249
26

–
74

12
-

149
688

49
72

143

130

1,583
(703)

886
-

Offset by deferred tax liabilities

880
(7)

886
(7)

Deferred tax assets, net

873

879

1,994

1,830

Provision for bonuses
Provision for refund
Legal welfare expenses payable
Accounts payable - other
Allowance for doubtful accounts
Excess depreciation and amortization
Bad debt expenses
Loss on retirement of non-current assets
Provision for retirement benefits
Incidental costs of share acquisition
Loss carryforward
Other
Subtotal
Valuation allowance
Total deferred tax assets

Deferred tax liabilities:
Trademark right
Other
Total deferred tax liabilities

7

7

2,001

1,837

Offset by deferred tax assets

(7)

(7)

Deferred tax liabilities, net

1,994

1,830

2. Reconciliation between the statutory tax rate and the effective tax rate reflected in the consolidated statements of income
As of March 31, 2020
Statutory tax rate
Special corporation tax credit granted upon increase in salaryand bonus payments
Amortization of goodwill and other
Share of profit/loss of entities accounted for using equity method
Other
Effective tax rate

－

29

－

As of March 31, 2021

30.62%

30.62%(3.68)%(3.99)%

4.98%(7.14)%
0.56%
25.34%

4.90%(5.87)%
0.16%
25.80%

(Asset retirement obligations)Fiscal year ended March 31, 2020
The Group has obligations to restore assets to their original state on leaving the properties based on real estate lease contracts foroffice spaces, which are asset retirement obligations. Instead of recognizing asset retirement obligations, the Group reasonably
estimates the amounts which would not be recoverable at the end of the lease periods and recognizes expenses for the year byamortizing the amounts of lease deposits over the expected periods of use.
The total amount of restoration costs is estimated to be ¥232 million, of which the amount recognized as expenses for the fiscal
year ended March 31, 2020 is ¥35 million.
Fiscal year ended March 31, 2021
The Group has obligations to restore assets to their original state on leaving the properties based on real estate lease contracts foroffice spaces, which are asset retirement obligations. Instead of recognizing asset retirement obligations, the Group reasonably
estimates the amounts which would not be recoverable at the end of the lease periods and recognizes expenses for the year byamortizing the amounts of lease deposits over the expected periods of use.
The total amount of restoration costs is estimated to be ¥251 million, of which the amount recognized as expenses for the fiscal
year ended March 31, 2021 is ¥39 million.
(Segment information and other)【Segment information】
Overview of reportable segments
The Company and its consolidated subsidiaries consist of a single business, which aims to build information infrastructure
suitable for the aging society, and operations incidental thereto.
Accordingly, there is no segment information to be disclosed and as such the disclosure is omitted.
【Related information】
Fiscal year ended March 31, 2020
1. Information by products and services
The Company and its consolidated subsidiaries consist of a single business, which aims to build information infrastructure
suitable for the aging society, and operations incidental thereto. Accordingly, there is no segment information to be disclosed andas such the disclosure is omitted.
2. Information by geographical areas(1) Net sales(Millions of yen)Japan
29,863

Other

Total

5,276

35,140(Note) The amount of net sales is classified by country and region based on customers’ location.
(2) Property, plant and equipment(Millions of yen)
Japan
443

Other

Total

562

1,006

3. Information on major customers
Information on major customers is omitted since there is no single customer with 10% or more of the amount of net
sales presented in the consolidated statements of income.
Fiscal year ended March 31, 2021
1. Information by products and services
The Company and its consolidated subsidiaries consist of a single business, which aims to build information infrastructure
suitable for the aging society, and operations incidental thereto. Accordingly, there is no segment information to be disclosed andas such the disclosure is omitted.

－

30

－

2. Information by geographical areas(1) Net sales(Millions of yen)Japan
30,812

Other

Total

5,147

35,960(Note) The amount of net sales is classified by country and region based on customers’ location.
(2) Property, plant and equipment(Millions of yen)
Japan
408

Other

Total

530

939

3. Information on major customers
Information on major customers is omitted since there is no single customer with 10% or more of the amount of net
sales presented in the consolidated statements of income.
【Information on impairment loss of non-current assets by reportable segment】
The disclosure is omitted since there is only one segment in the Group.
【Information on amortization of goodwill and balance of unamortized goodwill by reportable segment】
The disclosure is omitted since there is only one segment in the Group.
【Information on negative goodwill incurred by reportable segment】
None to report.
【Related party transactions】
1. Related party transactions
Transactions between the Company and related parties
Fiscal year ended March 31, 2020
None to report.
Fiscal year ended March 31, 2021
None to report.
2. Notes on parent company or major affiliates
Summary of financial information of major affiliates
As of and for the fiscal year ended March 31, 2021, M3 Career, Inc. was a major affiliate of the Company and its condensed
financial information is as follows:(Millions of yen)
M3 Career, Inc.
2020

2021

Total current assets

5,775

4,795

Total non-current assets

1,132

1,092

Total current liabilities

2,526

1,983

81

74

Total net assets

4,300

3,830

Net sales
Profit before income taxes

15,393
4,046

13,536
3,696

Profit

2,950

2,544

Total non-current liabilities

－

31

－

(Amounts per share)

Fiscal year ended
March 31, 2020

Fiscal year ended
March 31, 2021

Net assets per share (Yen)

220.86257.14

Profit per share (Yen)
Diluted profit per share (Yen)

54.69

55.13

54.45

54.86

(Note) The basis for calculating profit per share and diluted profit per share is as follows:
Fiscal year ended
March 31, 2020

Fiscal year ended
March 31, 2021

4,760

4,800

4,760

4,800

87,033,325

87,085,303––

Increase in number of common stock (Shares)

396,895

419,406[Of which, exercise of subscription rights to shares (Shares)][396,895][419,406]

Profit per share:
Profit attributable to owners of parent(Millions of yen)Amount not attributable to common stock shareholders(Millions of yen)
Profit attributable to common stock owners of parent (Millionsof yen)Weighted average number of shares (Shares)
Diluted profit per share:
Adjustment to profit attributable to owners of parent (Millionsof yen)Details of potential shares excluded from calculation of diluted
profit per share due to no dilutive effect－32

No.13 Subscription rights toshares based on theNo.14 Subscription rights toshares based on the

resolution of the Board of
Directors’ meeting held on

resolution of the Board of
Directors’ meeting held on

May 29, 2017:
Common stock

July 18, 2018:
Common stock

284,400

161,100

sharessharesNo.14 Subscription rights toshares based on theNo.15 Subscription rights toshares based on the

resolution of the Board of
Directors’ meeting held on

resolution of the Board of
Directors’ meeting held on

July 18, 2018:
Common stock

August 19, 2019:
Common stock 253,000

180,000

sharesshares

No.15 Subscription rights toshares based on theNo.16 Subscription rights toshares based on the

resolution of the Board of
Directors’ meeting held on

resolution of the Board of
Directors’ meeting held on

August 19, 2019:
Common stock 254,000

July 13, 2020:
Common stock

sharesshares－200,000

(Significant subsequent events)
None to report.

【Consolidated statements schedules】【Details of bonds】
None to report.
【Details of loans payable】

Classification

Balanceat beginning of the year
(Millions of yen)

Short-term loans payable

Balanceat end of the year
(Millions of yen)

Average interest rate(%)

Repayment date

–

–

–

–

2,487

2,479

0.45

–

Long-term loans payable(excluding current portion)

15,144

10,644

0.34

From 2022 to 2028

Total

17,632

13,124––Current portion of
long-term loans payable(Notes) 1. The average interest rate represents the weighted-average rate applicable to the balance at end of the year.
2. The five-year repayment schedule of long-term loans payable (excluding current portion) subsequent to the fiscal year
end is as follows:(Millions of yen)
Due after one year
through two years
Long-term loans payable

Due after two years
through three years

2,390

2,101

Due after three years
through four years
1,901

Due after four years
through five years
1,901【Details of asset retirement obligations】
For asset retirement obligations, instead of recording liabilities for asset retirement obligations, the Group reasonably estimates
the amounts which would not be recoverable at the end of the lease periods and recognizes expenses for the year by amortizing
the amounts of lease deposits over the expected periods of use.
Thus, there is nothing to report.

－

33

－

TRANSLATIONThis is a translation of the original Independent Auditors’ Report filed under the Financial Instruments and Exchange Act, prepared in theJapanese language. This report is presented merely as supplemental information. Ernst & Young ShinNihon LLC has not audited the English
language version of the consolidated financial statements of SMS Co., LTD. for the fiscal year from April 1, 2020 to March 31, 2021.

Independent Auditor’s Report on the Consolidated Financial Statements
andInternal Control over Financial Reporting
To the Board of Directors of
SMS CO., LTD.
June 18, 2021
Ernst & Young ShinNihon LLC
Tokyo, Japan
Designated Engagement Partner, Certified Public Accountant
Hisafumi Nomoto (Seal)
Designated Engagement Partner, Certified Public Accountant
Keiichi Wakimoto (Seal)
Audit of Financial Statements
OpinionPursuant to Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act, we have audited the consolidated financial
statements included in the Financial Section, namely, the consolidated balance sheet, and the consolidated statements of income,comprehensive income, changes in net assets and cash flows, the significant matters forming the basis for the preparation of
consolidated financial statements, the other notes and consolidated supplementary schedules of SMS CO., LTD. (“the Company”)
for the fiscal year from April 1, 2020 to March 31, 2021.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial positionof SMS CO., LTD. and its consolidated subsidiaries as at March 31, 2021, and the results of their operations and their cash flows
for the year then ended in accordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of
our report. We are independent of the Company and its consolidated subsidiaries in accordance with the ethical requirements thatare relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities inaccordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial
statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.

Valuation of intangible assets related to MIMS group
Description of Key Audit Matter

Auditor’s Response

The Company recognized intangible assets of ¥21,313

We performed the following audit procedures on the estimate

million, including goodwill of ¥8,834 million and trademarkof total undiscounted future cash flows used in testingright of ¥8,621 million, in its consolidated balance sheet as ofintangible assets related to MIMS group for impairment:

March 31, 2021. These intangible assets are mostly the result•of the acquisition of MIMS group.
As described in (Significant accounting estimates) under

We compared the period for estimating future cash flows
to the remaining useful lives of major assets.

•

We considered whether the future cash flows were

Notes to Consolidated Financial Statements, MIMS groupconsistent with the business plan approved by the Board

engages in business to provide marketing support services toof Directors.

medical and healthcare-related entities across 17 countries and•We compared prior year business plans with actual

territories in regions such as Asia and Oceania. The Company

performance in order to assess the appropriateness of

did not recognize an impairment loss on the asset group related

management’s process for the estimate.

to MIMS group since the total undiscounted future cash flows•

We inquired of management regarding the rationale forgenerated from the asset group exceeded its carrying amountthe key assumptions, which are net sales and operatingwhen the impairment test was performed.

expenses in the next fiscal year, the growth rate, and the

The undiscounted future cash flows were estimated based

rate of return used to calculate the recoverable amounton factors such as the business plan for the next fiscal year

after the expiration of the useful life, taking into

approved by the Board of Directors, the growth rate overconsideration the impact of COVID-19.

subsequent fiscal years, and the recoverable amount after the•

expiration of the useful life.

and the rate of return used to calculate the recoverable

Key assumptions used in estimating undiscounted future

amount after the expiration of the useful life with publicly

cash flows are: net sales and operating expenses in the next
fiscal year, the growth rate, and the rate of return used to

Of these key assumptions, we compared the growth rateavailable external data.
•

We tested the rate of return used to calculate thecalculate the recoverable amount after the expiration of therecoverable amount after the expiration of the useful life

useful life.

by engaging valuation experts from our network firm.

These key assumptions are subject to uncertainty due to the•

We evaluated the sensitivity of future cash flows to theimpact from changes in the business environment including

growth rate and the rate of return used to calculate thethe status of the COVID-19 pandemic, and require

recoverable amount after the expiration of the useful life.

management to exercise judgement. Therefore, we determinedthat the valuation of intangible assets is a key audit matter.

Responsibilities of Management and the Audit & Supervisory Committee for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance withaccounting principles generally accepted in Japan, and for designing and operating such internal control as management determines
is necessary to enable the preparation and fair presentation of the consolidated financial statements that are free from material
misstatements, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as agoing concern and disclosing, as required by accounting principles generally accepted in Japan, matters related to going concern.
The Audit & Supervisory Committee is responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free frommaterial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Misstatements canarise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion.

•

Consider internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances forour risk assessments, while the purpose of the audit of the consolidated financial statements is not expressing an opinion on
the effectiveness of the Company’s internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.

•

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’sreport. However, future events or conditions may cause the Company to cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, andwhether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fairpresentation in accordance with accounting principles generally accepted in Japan.

•

Obtain sufficient appropriate audit evidence regarding the financial information or business activities of the Company and its
consolidated subsidiaries to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Audit & Supervisory Committee regarding, among other matters, the planned scope and timing of theaudit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Audit & Supervisory Committee with a statement that we have complied with the ethical requirements
regarding independence that are relevant to our audit of the financial statements in Japan, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the Audit & Supervisory Committee, we determine those matters that were of mostsignificance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Audit of Internal Control
OpinionPursuant to Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act, we have audited management’s report oninternal control over financial reporting for the consolidated financial statements as at March 31, 2021 of SMS CO., LTD.
In our opinion, management's report on internal control referred to above, which represents that the internal control over financial
reporting of the consolidated financial statements of SMS CO., LTD. and its consolidated subsidiaries as at March 31, 2021 iseffectively maintained, presents fairly, in all material respects, the results of the assessment of internal control over financial
reporting in accordance with assessment standards for internal control over financial reporting generally accepted in Japan.
Basis for Opinion
We conducted our internal control audit in accordance with auditing standards for internal control over financial reporting generally
accepted in Japan. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit ofInternal Control section of our report. We are independent of the Company and its consolidated subsidiaries in accordance with the
ethical requirements that are relevant to our audit of internal control in Japan, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide

a basis for our opinion.
Responsibilities of Management and the Audit & Supervisory Committee for Management's Report on Internal Control
Management is responsible for designing and operating internal control over financial reporting, and for the preparation and fairpresentation of its report on internal control in accordance with assessment standards for internal control over financial reporting
generally accepted in Japan.
The Audit & Supervisory Committee is responsible for monitoring and verifying the design and operation of internal control overfinancial reporting.
Internal control over financial reporting may not prevent or detect misstatements fully.
Auditor’s Responsibilities for the Audit of Internal Control
Our objectives are to obtain reasonable assurance about whether management's report on internal control as a whole is free frommaterial misstatement and to issue an auditor’s report that includes our opinion.
As part of an audit in accordance with auditing standards for internal control over financial reporting generally accepted in Japan,
we exercise professional judgment and maintain professional skepticism throughout the audit. We also:•

Perform audit procedures to obtain audit evidence about the results of the assessment of internal control over financial
reporting in management’s report on internal control. The procedures selected depend on the auditor’s judgment, including
the materiality of the effect on the reliability of financial reporting.

•Examine representations on the scope, procedures and results of the assessment of internal control over financial reporting
made by management and evaluate the overall presentation of management’s report on internal control.

•

Obtain sufficient appropriate audit evidence regarding the results of the assessment of internal control over financial reportingin management’s report on internal control. We are responsible for the direction, supervision and performance of the audit of
the report on internal control. We remain solely responsible for our audit opinion.

We communicate with the Audit & Supervisory Committee regarding, among other matters, the planned scope and timing of theinternal control audit, significant deficiencies in internal control requiring disclosure that we identify during our audit and theresults of corrections thereof.
We also provide the Audit & Supervisory Committee with a statement that we have complied with the ethical requirements
regarding independence that are relevant to our audit of internal control in Japan, and communicate with them all relationships andother matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company and its subsidiaries which is required tobe disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

(End of Report)