Financial Statements
Year ended March 31, 2023

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

－

1

－

Consolidated Balance Sheets
SMS CO., LTD. and its Consolidated Subsidiaries
As of March 31, 2022 and 2023
(Millions of yen)
As of March 31, 2022

As of March 31, 2023

AssetsCurrent assets
Cash and deposits
Accounts receivable - trade

14,640
5,842

16,965
6,510

28
25

20
29

Accounts receivable - otherPrepaid expenses

6,757
665

8,440
793

Other
Allowance for doubtful accounts

27
(163)

67
(274)

27,82332,552

746
(396)

845
(448)

Work in process
Supplies

Total current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net

350

397

864
(642)

1,024
(802)

Tools, furniture and fixtures, net

222

222

Machinery, equipment and vehicles
Accumulated depreciation

28
(18)

30
(23)

Tools, furniture and fixtures
Accumulated depreciation

Machinery, equipment and vehicles, net

9

7

Right-of-use assets
Accumulated depreciation

688
(394)

768
(509)

Right-of-use assets, net

294

259

876

886

Goodwill
Software

8,907
3,013

10,0294,156

Trademark rights
Customer-related assets

9,581
1,421

11,0531,355

0

0

22,923

26,594

Total property, plant and equipment
Intangible assets

Other
Total intangible assets
Investments and other assets
Investment securities
Deferred tax assets

*

2,825
975

*

2,629
1,138

Lease and guarantee deposits

1,160

1,298

Total investments and other assets

4,962

5,065

28,76232,54656,58565,098

Total non-current assets
Total assets

－

2

－

(Millions of yen)
As of March 31, 2022

As of March 31, 2023

Liabilities
Current liabilities
Accounts payable - trade

307

324

Current portion of long-term loans payable
Accounts payable - other

1,999
8,933

1,901
10,566

Accrued expenses
Income taxes payable

577
1,674

682
1,263

Accrued consumption taxes
Contract liabilities

460
1,004

654
1,073

Deposits received
Provision for bonuses

169
704

180
858

Lease obligations
Other

131
244

152
357

Total current liabilities

16,20718,015

Non-current liabilities
Long-term loans payable

8,054

6,153

173
1,973

178
2,208

185
0

121
–

Net defined benefit liability
Deferred tax liabilities
Lease obligations
Other
Total non-current liabilities

10,387

8,661

26,594

26,677

Shareholders’ equity
Capital stock

2,310

2,315

Capital surplus
Retained earnings

114
27,69911933,190Total liabilities
Net assets

Treasury shares
Total shareholders’ equity

(1)

(1)

30,12335,624567(1,052)

395
1,917

(484)

2,312

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustments
Total accumulated other comprehensive income
Subscription rights to shares
Total net assets
Total liabilities and net assets
See the accompanying Notes to Consolidated Financial Statements.

－

3

－

352

484

29,991

38,421

56,58565,098

Consolidated Statements of Income
SMS CO., LTD. and Its Consolidated Subsidiaries
Fiscal years ended March 31, 2022 and 2023
Fiscal year ended
March 31, 2022
Net sales*138,899(Millions of yen)
Fiscal year ended
March 31, 2023
*1

45,667

Cost of sales

4,455

5,566

Gross profit

34,443

40,100

Selling, general and administrative expenses*2

Operating income
Non-operating income
Interest income

28,125*2

32,820

6,318

7,279

12

17

Share of profit of entities accounted for using equity method
Other

1,509
47

1,526
70

Total non-operating income

1,569

1,615

43

59

79
38

69
6

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

160

135

7,726

8,759

Gain on sale of non-current assets
Gain on reversal of foreign currency translation adjustment

1
–

0
50

Total extraordinary income

151

Ordinary income
Extraordinary income

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

*3

15

*4

3
–

–
1

1

0

*3

13

21

15

Profit before income taxes

7,707

8,795

Income taxes – current

2,444

2,575

Income taxes – deferred

(145)

(186)

Total income taxes

2,298

2,389

Profit

5,408

6,406

–

–

5,408

6,406

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

－

4

－

Consolidated Statements of Comprehensive Income
SMS CO., LTD. and Its Consolidated Subsidiaries
Fiscal years ended March 31, 2022 and 2023
Fiscal year ended
March 31, 2022
Profit(Millions of yen)
Fiscal year ended
March 31, 2023

5,408

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*

Comprehensive income

6,406

(0)

(0)

2,031

2,945

590

(147)

2,622

*

2,797

8,031

9,203

8,031
–

9,203
–

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

－

5

－

Consolidated Statements of Changes in Net Assets
SMS CO., LTD. and Its Consolidated Subsidiaries
Fiscal years ended March 31, 2022 and 2023
(Millions of yen)
Shareholders' equity
Capital stock
Balance at April 1, 2021

Capital surplus

Retained earnings

Treasury shares

Total shareholders'equity2,281

85

23,140(0)25,506

－

－

(22)

－

(22)

2,281

85

23,118(0)

25,484Issuance of new shares

29

29

－

－

58

Dividends of surplus

－

－

(827)

－

(827)

Profit attributable to ownersof parent

－

－

5,408

－

5,408

Purchase of treasury shares

－

－

－

(0)

(0)

－

－

－

－

－

29

29

4,580

(0)

4,639

2,310

114

27,699(1)

30,123

Accumulated other comprehensive income
Valuation difference on
Total accumulated
Foreign currency
available-for-saleother comprehensive
translation adjustments
securities
incomeSubscription rights tosharesCumulative effects of changes
in accounting policies
Restated balance
Changes of items during period

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at March 31, 2022

Balance at April 1, 2021

Total net assets

0(3,107)(3,107)259

22,658

－

－

－

－

(22)

0

(3,107)(3,107)259

22,636

Issuance of new shares

－

－

－

－

58

Dividends of surplus

－

－

－

－

(827)

Profit attributable to ownersof parent

－

－

－

－

5,408

Purchase of treasury shares

－

－

－

－

(0)

567

2,055

2,622

92

2,715

567

2,055

2,622

92

7,354

567

(1,052)

(484)

352

29,991

Cumulative effects of changes
in accounting policies
Restated balance
Changes of items during period

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at March 31, 2022

－

6

－

(Millions of yen)
Shareholders' equity
Capital stock
Balance at April 1, 2022

Capital surplus

Retained earnings

Treasury shares

Total shareholders'equity2,310

114

27,699(1)

30,123Issuance of new shares

4

4

－

－

9

Dividends of surplus

－

－

(915)

－

(915)

Profit attributable to ownersof parent

－

－

6,406

－

6,406

Purchase of treasury shares

－

－

－

(0)

(0)

－

－

－

－

－

4

4

5,491

(0)

5,500

2,315

119

33,190(1)

35,624

Accumulated other comprehensive income
Valuation difference on
Total accumulated
Foreign currency
available-for-saleother comprehensive
translation adjustments
securities
incomeSubscription rights tosharesChanges of items during period

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at March 31, 2023

Balance at April 1, 2022

Total net assets

567(1,052)

(484)

352

29,991

Issuance of new shares

－

－

－

－

9

Dividends of surplus

－

－

－

－

(915)

Profit attributable to ownersof parent

－

－

－

－

6,406

Purchase of treasury shares

－

－

－

－

(0)

(171)

2,969

2,797

131

2,929

(171)

2,969

2,797

131

8,430

395

1,917

2,312

484

38,421

Changes of items during period

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at March 31, 2023

See the accompanying Notes to Consolidated Financial Statements.

－

7

－

Consolidated Statements of Cash FlowsSMS CO., LTD. and Its Consolidated Subsidiaries
Fiscal years ended March 31, 2022 and 2023
(Millions of yen)
Fiscal year ended
March 31, 2023

Fiscal year ended
March 31, 2022
Cash flows from operating activities
Profit before income taxes
Depreciation

7,707
1,649

8,795
1,977

833
14

919
12

Impairment losses
Loss (gain) on sale of investment securities

3
–

–
1

Loss (gain) on valuation of investment securities

1
91

0
126

–

(50)

(262)

45

(36)
4

93
106

7
43

(18)
59

Interest expenses
Decrease (increase) in notes and accounts receivable - trade

79
(750)

69
(324)

Increase (decrease) in accrued consumption taxes
Decrease (increase) in accounts receivable - other

(49)
(428)

179
(1,649)Decrease (increase) in prepaid expenses
Increase (decrease) in contract liabilities

152
54

(114)
(60)

Increase (decrease) in accounts payable - other
Other, net

1,169
213

1,523
(105)

Subtotal

Amortization of goodwill
Loss (gain) on sale and retirement of non-current assets

Share-based remuneration expenses
Loss (gain) on reversal of foreign currency translation
adjustment
Share of (profit) loss of entities accounted for using equity
methodIncrease (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in net defined benefit liability
Foreign exchange losses (gains)

10,498

11,586

Interest and dividend income received
Interest expenses paid

15
(80)

22
(70)

Income taxes paid

(616)

(3,034)

Net cash provided by (used in) operating activities

9,818

8,504

Payments into time deposits
Proceeds from withdrawal of time deposits

(171)
95

(459)
227

Purchase of property, plant and equipment
Purchase of intangible assets(212)(1,800)(286)(2,628)

–

0

–

(618)

9

0

(2,079)(3,763)(Continued)

Cash flows from investing activities

Proceeds from sale of investment securities
Purchase of shares of subsidiaries resulting in change in scopeof consolidation
Other, net
Net cash provided by (used in) investing activities

－

8

－

(Millions of yen)
Fiscal year ended
March 31, 2022

Fiscal year ended
March 31, 2023

Cash flows from financing activities
Repayments of long-term loans payable(3,070)(126)(2,013)
(128)

7

6

52

8

(849)

(915)

(0)

(0)

Net cash provided by (used in) financing activities(3,987)(3,043)

Effect of exchange rate change on cash and cash equivalents

229

345

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

3,981

2,043

Cash and cash equivalents at beginning of the year

10,144

14,126

Cash and cash equivalents at end of the year*

See the accompanying Notes to Consolidated Financial Statements.

－

9

－

14,126*

16,170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: 39
Names of major consolidated subsidiaries
SENIOR MARKETING SYSTEM ASIA PTE. LTD.
MIMS PTE. LTD.
MIMS MEDICA SDN. BHD.
MIMS (SHANGHAI) LIMITED.
KIMS CO., LTD.
MEDICA ASIA AUSTRALIA (HOLDCO) PTY LIMITEDMIMS AUSTRALIA PTY LTDMIMS (NZ) LIMITEDMEDICA ASIA (HOLDCO) LIMITED and others
SENIOR MARKETING SYSTEM SDN. BHD. was excluded from the scope of consolidation due to the completion ofits liquidation. The Company included CWC Care with Care GmbH and Care Forward GmbH in the scope of
consolidation for the fiscal year ended March 31, 2023 due to the acquisition of their shares.
2. Application of equity method
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 33
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
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

－

10

－

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.
(4) Accounting treatment for retirement benefits
a. Method of attributing expected benefit to periods
The benefit formula basis is used as the method of attributing expected benefit to periods through the fiscal year-end in
calculating the projected benefit obligations.
b. 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.
(5) Basis for recognition of significant revenue and expenses
In accordance with the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020),
the Group recognizes revenue based on the following five 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) a performance obligation is satisfied.
The Group mainly engages in the following businesses: (a) placement and recruiting services for medical care andelderly care professionals in the career field, (b) management support platform services for elderly care operators, (c)medical marketing services overseas, (d) clinical decision support services overseas, (e) health and productivity
management platform services in the area of business development (Specific Health Guidance), (f) health and productivity
management platform services in the area of business development (Remote Occupational Health), and (g) problemsolving platform services in the area of business development.
The revenue recognition policy for each of the major revenue categories is summarized below. The amount of variableconsideration included in revenue is not material. The promised amount of consideration does not include a significant
financing component since it is generally received within one year.
a. Placement and recruiting services
The Group provides placement and recruiting services mainly to medical and elderly care service providers seeking
appropriate professionals for their services. In these transactions, the Group is obligated, under contracts, to provide
services resulting in individual employment. Since the performance obligations are satisfied at a point in time when eachapplicant is hired as an employee, the Group recognizes relevant revenue at the same point in time.
b. Management support platform services
The Group provides a variety of management support services, with functions including insurance billing, mainly toelderly care service providers through cloud computing. In these transactions, the Group is obligated to provide a platform
environment to care providers who become members based on a membership application. Since the performanceobligations are satisfied over time, the Group recognizes relevant revenue over the contract period.
c. Medical marketing services
－

11

－

The Group provides a variety of marketing support services to medical and healthcare service providers, mainly
overseas, according to their needs. In these transactions, the Group is obligated, under contracts, to provide healthcare
professionals with medical and healthcare information through various channels including publications, websites, andevents. Since the performance obligations are satisfied when the services are rendered in accordance with individual
contracts, the Group recognizes relevant revenue when the services are rendered.
d. Clinical decision support services
The Group provides database solutions to detect prescription errors primarily to healthcare institutions overseas. In
these transactions, the Group is obligated, under contracts, to provide healthcare professionals with access to the databases
to ensure that there are no prescription errors. Since the performance obligations are satisfied over time, the Group
recognizes relevant revenue over the contract period.
e. Health and productivity management platform services (Specific Health Guidance)
The Group provides health insurance associations with ICT-based health guidance services. In these transactions, theGroup is obligated, under contracts, to provide nutrition specialist guidance to participants in health insurance
associations. Since the performance obligations are satisfied when the nutrition specialist guidance services are rendered,
the Group recognizes relevant revenue at the same point in time.
f. Health and productivity management platform services (Remote Occupational Health)
The Group provides human resources departments of entities with ICT-based occupational health services. In thesetransactions, the Group is obligated, under contracts, to support overall industrial health services including healthguidance by industrial physicians and implementation of stress checks. Since the performance obligations are satisfied
over time, the Group recognizes relevant revenue over the contract period.
g. Problem-solving platform services
The Group provides elderly persons and their families (“end users”) with referral services by introducing affiliatedservice providers to solve issues and problems specific to the aging society. In these transactions, the Group is obligated,primarily under contracts, to provide an intermediary function to introduce affiliated service providers to end users
through the Company’s platform. Since the performance obligation is satisfied at a point in time when an end user enters
into a contract with a service provider, the Group recognizes relevant revenue at the same point in time.
(6) Basis for 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) 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
It is the Company’s policy to use 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－ 12 －

Instruments that Reference LIBOR” (PITF No. 40, March 17, 2022) 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(8) Amortization of goodwill – method and period of amortization
Goodwill is amortized over its effective period, not exceeding 20 years, on a straight-line basis.
(9) 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.

(Significant accounting estimates)(Valuation of intangible assets)
The Company recognized intangible assets of ¥26,594 million (¥22,923 million as of March 31, 2022), including goodwill of¥10,029 million (¥8,907 million as of March 31, 2022) and trademark right of ¥11,053 million, (¥9,581 million as of March 31,2022), in the consolidated balance sheet as of March 31, 2023. These intangible assets are mostly the result of the acquisition of
MIMS group.
MIMS group engages in business to provide marketing support services to medical and healthcare-related entities across 18
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 in the next fiscal year 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.

(Consolidated balance sheets)* Investment in non-consolidated subsidiaries and affiliates included in investment securities is as follows:(Millions of yen)
As of March 31, 2022
Investment securities (shares)

2,822

As of March 31, 2023
2,629(Consolidated statements of income)*1. Revenue from contracts with customers
For net sales, revenue from contracts with customers and other revenue are not separately presented. The amounts of revenue
from contracts with customers is disclosed in (Revenue recognition), 1. Information on disaggregation of revenue from contracts
with customers.
*2. Major items and amounts included in selling, general and administrative expenses are as follows:

－

13

－

(Millions of yen)
Fiscal year ended
March 31, 2022

Fiscal year ended
March 31, 2023

Salaries and allowance
Advertising expenses

10,911
5,592

12,216
7,075

Amortization of goodwill
Depreciation

833
1,649

919
1,977

Business consignment expenses
Legal welfare expenses

2,316
1,695

2,644
1,922

Rents
Provision for bonuses

1,686
564

1,796
702

29
21

8
126

Fiscal year ended
March 31, 2022

Fiscal year ended
March 31, 2023

–
14

10
1

Retirement benefit expenses
Provision of allowance for doubtful accounts*3. Loss on sale and retirement of non-current assets is as follows:(Millions of yen)

Buildings
Tools, furniture and fixtures
SoftwareTotal*4. Impairment losses
Fiscal year ended March 31, 2022
The disclosure is omitted due to immateriality.
Fiscal year ended March 31, 2023
None to report.

－

14

－

1

1

15

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, 2023

Fiscal year ended
March 31, 2022
Valuation difference on available-for-sale securities:
Amount arising during the year

(0)

(1)

Reclassification adjustments–

0

Amount before tax effects

(0)

(0)

Tax effects

00Valuation difference on available-for-sale securities

(0)

(0)

Amount arising during the year

2,031

2,995

Reclassification adjustments

－

(50)

2,031

2,945

Amount arising during the year

590

(147)

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

－

－

590

(147)

2,622

2,797

Foreign currency translation adjustments:

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

Total other comprehensive income(Consolidated statements of changes in net assets)
Fiscal year ended March 31, 2022
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

87,109,600

38,200–87,147,800

87,109,600

38,200–87,147,800

491

70

–

561

491

70

–

561

Treasury shares:
Common stock (Note 2)
Total(Notes) 1. The increase in issued shares (38,200 shares) is due to the exercise of subscription rights to shares.
2. The increase in treasury shares (70 shares) is due to the buyback of fractional shares of less than one unit.
2. Matters regarding subscription rights to sharesClassification

The
Company(Parent
company)

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

Description of subscription
rights to sharesClass of sharessubject to
subscription
rights to shares

Subscription rights toshares as stock options

–

–

–

–

–

352

–

–

–

–

–

352

Total

Beginning of the
year

－

15

－

Increase

Decrease

End of the year

Balance at endof the year
(Millions ofyen)3. Matters regarding dividends(1) Dividend payment
Resolution

Class

Ordinary General
Meeting of
Shareholders heldon June 18, 2021

Dividend amount(Millions of yen)

Common stock

Dividend per share
(Yen)

827

9.5

Record date

Effective date

March 31, 2021

June 21, 2021

(2) Of dividends whose record date is in the fiscal year ended March 31, 2022, those whose effective date is in the fiscal year
ending March 31, 2023
Resolution

Class

Ordinary General
Meeting of
Shareholders heldon June 24, 2022

Commonstock

Resource

Dividend
amount(Millions of yen)

Dividend
per share(Yen)

Record date

Effective date

915

10.5

March 31, 2022

June 27, 2022

Retainedearnings

Fiscal year ended March 31, 2023
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

87,147,800

5,700

–

87,153,500

87,147,800

5,700

–

87,153,500

561

80

–

641

561

80

–

641

Treasury shares:
Common stock (Note 2)
Total(Notes) 1. The increase in issued shares (5,700 shares) is due to the exercise of subscription rights to shares.
2. The increase in treasury shares (80 shares) is due to the buyback of fractional shares of less than one unit.
2. Matters regarding subscription rights to sharesClassification

The
Company(Parent
company)

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

Description of subscription
rights to sharesClass of sharessubject to
subscription
rights to shares

Subscription rights toshares as stock options

–

–

–

–

–

484

–

–

–

–

–

484

Total

Beginning of the
year

－

16

－

Decrease(Note 2)

Increase

End of the year

Balance at endof the year
(Millions ofyen)3. Matters regarding dividends(1) Dividend payment
Resolution
Ordinary General
Meeting of
Shareholders heldon June 24, 2022

Dividend amount(Millions of yen)Class

Common stock

Dividend per share
(Yen)

915

10.5

Record date

Effective date

March 31, 2022

June 27, 2022

(2) Of dividends whose record date is in the fiscal year ended March 31, 2023, those whose effective date is in the fiscal year
ending March 31, 2024
Resolution
Ordinary General
Meeting of
Shareholders heldon June 23, 2023

Class
Commonstock

Resource
Retainedearnings

Dividend
amount(Millions of yen)

Dividend
per share(Yen)

Record date

Effective date

1,307

15.0

March 31, 2023

June 26, 2023

(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, 2022
March 31, 2023
Cash and deposits
Time deposits with maturity in excess of three months
Cash and cash equivalents

14,64016,965

(514)

(795)

14,126

16,170(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, 2022

As of March 31, 2023

Due within one year

996

68

Due after one year

68

–

1,064

68

Total

－

17

－

(Financial instruments)
1. Status of financial instruments(1) Policy on financial instruments
It is the Company’s policy to generally operate its business using funds provided by operating activities, and to invest
temporary surplus funds in very safe financial instruments. The Company does not enter into financial transactions for tradingor 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 the time of settlement. However, the Company avoids such risk byreviewing its 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
Variable factors are incorporated into measurements of fair value of financial instruments. 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:
As of March 31, 2022
(Millions of yen)
Carrying amountLong-term loans payable (*1)
Liabilities, total
Derivative transactions

Fair value

Difference

10,053

10,000(53)

10,053

10,000

(53)

–

–

–

(*1) The amount includes the current portion of long-term loans payable.
(*2) The disclosure is omitted for cash. The disclosure is also omitted for deposits, accounts receivable - trade, accounts
receivable - other, accounts payable - other, and income taxes payable since their fair value approximates their carrying
amount due to their short maturities.
(*3) Equity securities without market prices are not included in the table above. Their carrying amount is as follows:
Classification

Carrying amount

Investment securities
Unlisted equity securities

2,825

As of March 31, 2023
(Millions of yen)
Carrying amountLong-term loans payable (*1)
Liabilities, total
Derivative transactions

Fair value

Difference

8,054

7,950

(103)

8,054

7,950

(103)

–

–

–

(*1) The amount includes the current portion of long-term loans payable.
(*2) The disclosure is omitted for cash. The disclosure is also omitted for deposits, accounts receivable - trade, accounts
receivable - other, accounts payable - other, and income taxes payable since their fair value approximates their carrying－ 18 －

amount due to their short maturities.
(*3) Equity securities without market prices are not included in the table above. Their carrying amount is as follows:
Classification

Carrying amount

Investment securities
Unlisted equity securities

2,629(Note 1) Maturity analysis for financial assets and securities with contractual maturities
As of March 31, 2022
(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

14,635–––

Accounts receivable - trade

5,842

–

–

–

Accounts receivable - other

6,757

–

–

–

Total

27,234–––As of March 31, 2023
(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

16,959–––Accounts receivable - trade

6,510

–

–

–

Accounts receivable - other

8,440

–

–

–

Total

31,911–––(Note 2) Maturity analysis for bonds, long-term loans payable, leases payable and other interest-bearing debts
As of March 31, 2022
(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

1,999

1,901

1,901

1,901

1,300

1,050

Total

1,999

1,901

1,901

1,901

1,300

1,050

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

1,901

1,901

1,901

1,300

700

350

Total

1,901

1,901

1,901

1,300

700

350

Due after
five years

As of March 31, 2023
(Millions of yen)

－

19

－

Due after
five years

3. Matters regarding fair value hierarchy of financial instruments
The Company classifies the fair value of financial instruments into three categories depending on whether inputs for a fairvalue measurement are observable or significant.
Level 1 fair value:
Fair value measured by using quoted prices in active markets as observable inputs for assets orLevel 2 fair value:liabilities subject to a fair value measurement
Fair value measured by using observable inputs other than those for Level 1

Level 3 fair value:
Fair value measured by using unobservable inputs
When multiple inputs of different categories are used in measuring fair value, the Company classifies the fair value into a
category to which the lowest priority is assigned.
(1) Financial instruments measured at fair value in the consolidated balance sheet
Fiscal year ended March 31, 2022
None to report.
Fiscal year ended March 31, 2023
None to report.
(2) Financial instruments other than those measured at fair value in the consolidated balance sheet
Fiscal year ended March 31, 2022
(Millions of yen)Classification

Fair value
Level 1

Level 2

Level 3Total

Long-term loans payable–

10,000–10,000Liabilities, total–

10,000–10,000Fiscal year ended March 31, 2023
(Millions of yen)Classification

Fair value
Level 1

Level 2

Level 3Total

Long-term loans payable

–

7,950

–

7,950

Liabilities, total

–

7,950

–

7,950

(Note) Explanation of valuation techniques and inputs used for fair value measurement
Long-term loans payable (including current portion)
The fair value of loans payable is measured at the present value calculated by discounting the aggregate amount of principal
and interest at the interest rate reflecting the remaining period of each loan payable and credit risk. The fair value is classified as
Level 2.
Derivative transactions
Interest rate swaps under the special accounting treatment and currency swaps under the allocation method are accounted foras an integral component of long-term loans payable, etc. designated as hedged items. Thus, their fair value is included in that of
the loans payable.

(Securities)
1. Impairment of securities
Fiscal year ended March 31, 2022
The disclosure is omitted due to immateriality.
Fiscal year ended March 31, 2023
The disclosure is omitted due to immateriality.

－

20

－

2. Available-for-sale securities sold during the fiscal year
Fiscal year ended March 31, 2022
None to report.
Fiscal year ended March 31, 2023
The disclosure is omitted due to immateriality.
(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, 2022
(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

4,204

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, 2023
(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

3,003

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, 2022
(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

4,204

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.
As of March 31, 2023
(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

3,003

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

－

(Retirement benefit)
1. Summary of retirement benefit plans
Some overseas subsidiaries of the Company have a lump-sum payment plan.
2. Defined benefit plan
(1) Reconciliation between beginning balance and ending balance of projected benefit obligations
Fiscal year ended
March 31, 2022
Balance at beginning of the year

(Millions of yen)
Fiscal year ended
March 31, 2023

149

173

Service cost

33

36

Interest cost00Actuarial gain or loss

(3)

(28)

Retirement benefits paid

(14)

(18)

8

14

173

178

Other
Balance at end of the year

(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, 2022

As of March 31, 2023

Unfunded retirement benefit obligations

173

178

Net defined benefit liability

173

178

(3) The components of retirement benefit expenses and their amounts(Millions of yen)
Fiscal year ended
March 31, 2022

Fiscal year ended
March 31, 2023

Service cost

33

36

Interest cost00

Amortization of actuarial gain or loss

(3)

(28)

Total retirement benefit expenses

298(4) The major assumptions used for the actuarial calculation (weighted average)
As of March 31, 2022
Discount rate

3.5%

－

22

－

As of March 31, 2023
5.7%

(Stock options)
1. The amount of costs incurred for the stock option plans and the account under which such amount is recorded are as follows:(Millions of yen)
Fiscal year ended
March 31, 2022
Share-based remuneration expenses included in general andadministrative expenses

Fiscal year ended
March 31, 2023

91

126

2. Outline, number and status of changes in number of stock options(1) Outline of stock options

Position and number ofgrantees
Number of options granted(Notes 1 and 2)
Date of grantNo. 10 Stock Option

No. 11 Stock Option

No. 12 Stock Option

1 representative director

3 directors(excluding outside directors)

3 directors (excluding outside
directors), 40 employees

400,000 shares

36,000 shares

412,000 shares

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 –July 16, 2021
July 17, 2021 –July 16, 2024－

August 9, 2016 –July 19, 2019
July 20, 2019 –July 19, 2026

23

－

–
July 1, 2019 –June 30, 2024

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 (excluding outside
directors), 44 employees

2 directors (excluding outside
directors), 45 employees

2 directors (excluding outside
directors), 64 employees

318,000 shares

180,000 shares

254,000 shares

June 21, 2017

August 7, 2018

September 3, 2019

Only when operating income
for the fiscal year ending

Only when EBITDA for the
fiscal year ending March 31,

Only when actual operating
income for the fiscal year

March 31, 2020 exceeds (a),(b), or (c) stated below,

2021 (Note 4) exceeds (a),(b), or (c) stated below,

ending March 31, 2022 (Note5) exceeds (a), (b), or (c)subscription rights to sharesshall become exercisable. Of

subscription rights to sharesshall become exercisable. Of

stated below, subscription
rights to shares shall become

the subscription rights allotted the subscription rights allotted exercisable. Of theto each grantee, the number
to each grantee, the number
subscription rights allotted to

Vesting conditionof rights which become
exercisable (“exercisableof rights which become
exercisable (“exercisableeach grantee, the number ofrights which become

ratio”) shall be determined asfollows:

ratio”) shall be determined asfollows:

exercisable (“exercisable
ratio”) shall be determined as(a) Operating income exceeds (a) EBITDA exceeds ¥7,670¥4,853 million: exercisable
million: exercisable ratio is

follows:(a) Actual operating income

ratio is 10%10%(b) Operating income exceeds (b) EBITDA exceeds ¥8,764

exceeds ¥6,408 million:
exercisable ratio is 10%¥6,301 million: exercisable
ratio is 50%

million: exercisable ratio is50%(b) Actual operating income
exceeds ¥7,322 million:(c) Operating income exceeds (c) EBITDA exceeds ¥9,958¥8,011 million: exercisable
million: exercisable ratio is

exercisable ratio is 70%(c) Actual operating income

ratio is 100%

100%

exceeds ¥8,319 million:
exercisable ratio is 100%

Other terms and conditions
shall be stipulated in the

Other terms and conditions
shall be stipulated in the

Other terms and conditions

contract for allotment ofsubscription rights to shares.

contract for allotment ofsubscription rights to shares.

shall be stipulated in thecontract for allotment ofsubscription rights to shares.

Service period

–

–

–

Exercise period

July 1, 2020 –June 30, 2025

July 1, 2021 –June 30, 2026

July 1, 2022 –June 30, 2027

－

24

－

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

No. 16 Stock Option

No. 17 Stock Option

No. 18 Stock Option

2 directors (excluding outside
directors), 24 employees

2 directors (excluding outside
directors), 25 employees

2 directors (excluding outside
directors), 27 employees

200,000 shares

183,000 shares

192,000 shares

July 29, 2020

July 28, 2021

July 27, 2022

Only when actual operating
income for the fiscal year

Only when actual operating
income for the fiscal year

Only when actual operating
income for the fiscal year

ending March 31, 2023 (Note6) exceeds (a) or (b) statedending March 31, 2024 (Note7) exceeds (a), (b), or (c)ending March 31, 2025 (Note8) exceeds (a), (b), or (c)below, subscription rights toshares shall become

stated below, subscription
rights to shares shall become

stated below, subscription
rights to shares shall become

exercisable. Of thesubscription rights allotted toexercisable. Of thesubscription rights allotted toexercisable. Of thesubscription rights allotted toeach grantee, the number ofrights which become

each grantee, the number ofrights which become

each grantee, the number ofrights which become

exercisable (“exercisable
ratio”) shall be determined as

exercisable (“exercisable
ratio”) shall be determined as

exercisable (“exercisable
ratio”) shall be determined asfollows:(a) Actual operating income

follows:(a) Actual operating income

follows:(a) Actual operating income

exceeds ¥6,647 million:
exercisable ratio is 10%

exceeds ¥7,390 million:
exercisable ratio is 10%

exceeds ¥8,532 million:
exercisable ratio is 10%(b) Actual operating income
exceeds ¥7,237 million:(b) Actual operating income
exceeds ¥8,444 million:(b) Actual operating income
exceeds ¥9,750 million:

exercisable ratio is 100%

exercisable ratio is 70%(c) Actual operating income

exercisable ratio is 70%(c) Actual operating income

Other terms and conditions
shall be stipulated in theexceeds ¥9,594 million:
exercisable ratio is 100%exceeds ¥11,077 million:
exercisable ratio is 100%contract for allotment ofsubscription rights to shares.

Other terms and conditions

Other terms and conditions

shall be stipulated in thecontract for allotment ofshall be stipulated in thecontract for allotment ofsubscription rights to shares.

subscription rights to shares.

Service period

–

–

–

Exercise period

July 1, 2023 –June 30, 2028

July 1, 2024 –June 30, 2029

July 1, 2025 –June 30, 2030

(Notes) 1. It is converted and stated as number of shares.
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.
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.
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.
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 ended March 31, 2022.
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 ended March 31, 2023.
7. Actual operating income is calculated by adding the amount of share-based remuneration expenses stated in Notes to
－

25

－

Consolidated 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, 2024.
8. 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, 2025.
(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, 2023. 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

Outstanding at March 31, 2022

–

–

–

Granted–––Forfeited–––

Vested–––Outstanding at March 31, 2023

–

–

–

400,000

20,00091,000

Vested–––Exercised

–

–

3,000

Forfeited–––

400,000

20,00088,000No. 13 Stock Option

No. 14 Stock Option

No. 15 Stock Option

Outstanding at March 31, 2022––

252,000

Granted–––Forfeited––

226,800

Vested––25,200

Outstanding at March 31, 2023

–

–

–

17,80011,500–––25,200Exercised

1,400

400

900

Forfeited–––

16,400

11,10024,300Non-vested:

Vested:Outstanding at March 31, 2022

Outstanding at March 31, 2023

Non-vested:

Vested:Outstanding at March 31, 2022
VestedOutstanding at March 31, 2023

－

26

－

No. 16 Stock Option

No. 17 Stock Option

No. 18 Stock Option

200,000

183,000–

Granted––

192,000

Forfeited–––

Vested–––200,000

183,000

192,000

Outstanding at March 31, 2022

–

–

–

Vested–––Exercised–––

Forfeited–––

Outstanding at March 31, 2023

–

–

–

Non-vested:
Outstanding at March 31, 2022

Outstanding at March 31, 2023
Vested:b. Price information of stock options(Yen)
No. 10 Stock Option

No. 11 Stock Option

No. 12 Stock Option

736

1,205

1,190

–

–

3,140

422.0

568.5

3.0

No. 13 Stock Option

No. 14 Stock Option

No. 15 Stock Option

1,528

1,978

2,544

3,205

3,270

3,134

7.5

969.0

792.0

No. 16 Stock Option

No. 17 Stock Option

No. 18 Stock Option

2,322

3,290

2,951

–

–

–

879.0

901.0

1,091.0

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)

Exercise price
Average market price of the stockat the time of exercise
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. 18 Stock Option granted for the fiscal year ended March 31, 2023 are as follows:
No. 18 Stock Option
a. Valuation techniqueBlack-Scholes Modelb. Major assumptions and estimation method
No. 18 Stock Option
Volatility of stock price (Note 1)

38.85%

Estimated remaining period to maturity (Note 2)

5.4 years

Estimated dividend (Note 3)¥10.5 per share

Risk-free interest rate (Note 4)

0.011 %

(Notes) 1. The volatility of stock price is estimated based on the actual stock prices from February 20, 2017 to July 27, 2022.
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.
3. An amount of the actual dividend for the fiscal year ended March 31, 2022 is used for the assumption.
4. This rate is the yield of Japanese government bonds maturing on December 20, 2027 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, 2022
Deferred tax assets:
Enterprise tax payable
Provision for bonuses
Refund liabilities
Legal welfare expenses payable
Accounts payable - other
Allowance for doubtful accounts
Excess depreciation and amortization
Bad debt expenses
Share-based remuneration expenses

As of March 31, 2023

86
135

87
184

71
19

82
21

37
37

1
50

290
25

372
24

Loss carryforward
Other

51
82

51
132

151

146

Total deferred tax assets

988

1,155

Offset by deferred tax liabilities

(12)

(17)

Deferred tax assets, net

975

1,138

1,973

2,208

12

17

Total deferred tax liabilities

1,986

2,225

Offset by deferred tax assets

(12)

(17)

Deferred tax liabilities, net

1,973

2,208

Deferred tax liabilities:
Trademark right
Other

2. Reconciliation between the statutory tax rate and the effective tax rate reflected in the consolidated statements of income
As of March 31, 2022
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

As of March 31, 2023

30.62%

30.62%–(2.42)%

4.22%(6.00)%
0.98%
29.82%

4.17%(5.32)%
0.11%
27.16%

3. Accounting treatment of corporation tax/local corporation tax and related tax effect accounting
Effective from the fiscal year ended March 31, 2023, the Company and certain domestic consolidated subsidiaries have applied thegroup tax sharing system. Accordingly, the Company has followed the “Practical Solution on the Accounting and Disclosure Under
the Group Tax Sharing System” (PITF No. 42, August 12, 2021) with regard to the accounting treatment and disclosures of corporation
tax/local corporation tax and related tax effect accounting.

－

29

－

(Asset retirement obligations)Fiscal year ended March 31, 2022
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 ¥258 million, of which the amount recognized as expenses for the fiscal
year ended March 31, 2022 is ¥49 million.
Fiscal year ended March 31, 2023
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 ¥278 million, of which the amount recognized as expenses for the fiscal
year ended March 31, 2023 is ¥46 million.
(Revenue recognition)
1. Information on disaggregated revenue from contracts with customers
Fiscal year ended March 31, 2022
(Millions of yen)
Name of business
CareerMedical care

Elderly care
operators

10,48713,011

7,192

–

1,844

32,536

–

–

–

6,362

–

6,362

10,48713,011

7,192

6,362

1,844

38,899

–

–

–

–

–

–

10,48713,011

7,192

6,362

1,844

38,899Japan
Other
Revenue from contracts
with customers
Other revenue
Net sales to outside
customers

Businessdevelopment

Total

Elderly care

Overseas

Fiscal year ended March 31, 2023
(Millions of yen)
Name of business
CareerJapan
Other
Revenue from contracts
with customers
Other revenue
Net sales to outside
customers

Businessdevelopment

Total

Elderly care

Medical care

Elderly care
operators

12,676

14,585

8,362

–

2,227

37,851

–

–

–

7,815

–

7,815

12,676

14,585

8,362

7,815

2,227

45,667

–

–

–

–

–

–

12,676

14,585

8,362

7,815

2,227

45,667

Overseas

2. Information forming the basis for understanding revenue from contracts with customers
The disclosure is omitted since the same information is disclosed in Notes to Consolidated Financial Statements, (Significant
matters forming the basis for the preparation of consolidated financial statements), 4. Matters related to the accounting policies, (5)Basis for recognition of significant revenue and expenses.
3. Information on the relationship between satisfaction of performance obligations based on contracts with customers and cash
flows from the contracts, and information on amounts of revenue expected to be recognized from contracts with customers that exist
as of the end of the current fiscal year and the expected timing of revenue recognition after the end of the current fiscal year
(1) Balances of contract assets and contract liabilities
Contract assets represent a right to consideration to be received in exchange for satisfying a performance obligation, otherthan for receivables. The Group has no applicable transactions, and therefore, contract assets are not accounted for in the
consolidated balance sheet.
－

30

－

Contract liabilities, presented as “contract liabilities” in the consolidated balance sheet, represent an advanced receipt ofconsideration before satisfying a performance obligation. The balance of contract liabilities as of April 1, 2021 and 2022 isrecognized as revenue for the fiscal year ended March 31, 2022 and 2023, respectively.
(2) Transaction prices allocated to remaining performance obligations
The disclosure is omitted since there are no significant transactions with expected individual contract periods exceeding one
year. In addition, all significant considerations arising from contracts with customers are included in transaction prices.
(Segment and other information)[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, 2022
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 and,as such, the disclosure is omitted.
2. Information by geographical area
(1) Net sales(Millions of yen)Japan
32,536

Other

Total

6,362

38,899(Note) The amount of net sales is classified by country and region based on customers’ locations.
(2) Property, plant and equipment(Millions of yen)
Japan
441

Other

Total

435

876

3. Information on major customers
Information on major customers is omitted since no single customer accounts for 10% or more of the amount of net sales
presented in the consolidated statements of income.
Fiscal year ended March 31, 2023
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 and,as such, the disclosure is omitted.
2. Information by geographical area
(1) Net sales(Millions of yen)Japan
37,851

Other

Total

7,815

45,667(Note) The amount of net sales is classified by country and region based on customers’ locations.

－

31

－

(2) Property, plant and equipment(Millions of yen)
Japan
474

Other

Total

411

886

3. Information on major customers
Information on major customers is omitted since no single customer accounts for 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, 2022
None to report.
Fiscal year ended March 31, 2023
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, 2023, M3 Career, Inc. was a major affiliate of the Company and its condensed
financial information is as follows:(Millions of yen)
M3 Career, Inc.
2022

2023

Total current assets

5,695

5,898

Total non-current assets

2,957

2,244

Total current liabilities

2,479

2,520

592

416

Total net assets

5,580

5,205

Net sales
Profit before income taxes

14,093
4,545

14,538
4,544

Profit

3,125

3,182

Total non-current liabilities

－

32

－

(Amounts per share)

Fiscal year ended
March 31, 2022

Fiscal year ended
March 31, 2023

Net assets per share (Yen)

340.10435.29Profit per share (Yen)
Diluted profit per share (Yen)

62.07

73.51

61.77

73.13

(Note) The basis for calculating profit per share and diluted profit per share is as follows:
Fiscal year ended
March 31, 2022

Fiscal year ended
March 31, 2023

5,408

6,406

–

–

5,408

6,406

87,131,740

87,148,889––

Increase in number of common stock (Shares)

428,588448,332[Of which, exercise of subscription rights to shares (Shares)][428,588][448,332]

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 effectNo. 15 Subscription rights toshares based on theNo. 17 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 226,800

July 12, 2021:
Common stock

sharessharesNo. 16 Subscription rights toshares based on theNo. 18 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 13, 2020:
Common stock

July 11, 2022:
Common stock

200,000

sharessharesNo. 17 Subscription rights toshares based on the
resolution of the Board of
Directors’ meeting held on
July 12, 2021:
Common stock
shares－33－

183,000

183,000

192,000

(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

–

–

–

–

1,999

1,901

0.32

–

Long-term loans payable(excluding current portion)

8,054

6,153

0.34

From 2024 to 2028

Total

10,053

8,054

–

–

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

1,901

1,901

Due after three years
through four years
1,300

Due after four years
through five years
700[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.

－

34

－

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, 2022 to March 31, 2023.

Independent Auditor’s Report on the Consolidated Financial Statements
andInternal Control over Financial Reporting
To the Board of Directors of
SMS CO., LTD.
June 23, 2023
Ernst & Young ShinNihon LLC
Tokyo, Japan
Designated Engagement Partner, Certified Public Accountant
Ryo Kayama (Seal)
Designated Engagement Partner, Certified Public Accountant
Kiyoto Tanaka (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, 2022 to March 31, 2023.
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, 2023, and the results of their operations and their cash flows
for the year then ended in conformity 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 fiscal year. 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.

－

1

－

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

Auditor’s Response

The Company recorded intangible assets of ¥26,594

With regard to the Company’s estimate of total undiscounted

million, including goodwill of ¥10,029 million and trademark

future cash flows used in conducting the impairment test ofright of ¥11,053 million, in its consolidated balance sheet as ofintangible assets related to MIMS group, we mainly performed

March 31, 2023. These amounts are mostly the result of thethe following audit procedures:acquisition of MIMS group.

•

As described in (Significant accounting estimates) in the

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

•

Notes to Consolidated Financial Statements, MIMS group

We considered whether the future cash flows areengages in business to provide marketing support services toconsistent with the business plan approved by the Board

medical and healthcare-related entities in 18 countries andof Directors.
•

regions including Asia and Oceania. As a result of an

We compared prior year business plans with subsequent

impairment test, the Company did not recognize an

actual results in order to assess the effectiveness of

impairment loss for the asset group to which MIMS groupmanagement’s estimation process.
•belongs since the total undiscounted future cash flows from theasset group exceeded the carrying amount.

We made inquiries of management regarding the rationale
for key assumptions, which are net sales in the next fiscal

Undiscounted future cash flows are estimated based on theyear and the rate of return used to calculate thebusiness plan for the next fiscal year approved by the Board ofrecoverable amount after the remaining useful life, andDirectors, the growth rate over subsequent fiscal years, thecompared the key assumptions with publicly available

recoverable amounts after the remaining useful lives and otherexternal data.
•

factors.
Key assumptions used in estimating undiscounted future

We involved a valuation expert from our network firm toassess the rate of return used to calculate the recoverable

cash flows are net sales in the next fiscal year and the rate ofamount after the remaining useful life.
•

return used to calculate the recoverable amount after theremaining useful life.

We evaluated the sensitivity of future cash flows to net
sales in the next fiscal year and the rate of return used to

These key assumptions are subject to uncertainty due to thecalculate the recoverable amount after the remaining

impact from changes in the business environment, and require

useful life.

management’s judgement. Therefore, we determined that thevaluation of intangible assets is a key audit matter.

Other Information
The other information comprises the information included in the Annual Securities Report that contains audited consolidated
financial statements, but does not include the consolidated financial statements and our auditor’s report thereon. Management is
responsible for preparation and disclosure of the other information. The Audit & Supervisory Committee is responsible foroverseeing the directors' performance of their duties including the design, implementation and maintenance of the Company’s
financial reporting process.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form ofassurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.

－

2

－

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 directors' performance of their duties including the design,
implementation and maintenance of 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 toinfluence 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 fiscal year 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－

3－

Opinion
Pursuant 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, 2023 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, 2023 iseffectively maintained, presents fairly, in all material respects, the results of the assessment of internal control over financial
reporting in conformity 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.
Conflicts of Interest
Our firm and its designated engagement partners do not have any interest in the Company and its subsidiaries which should be
disclosed in accordance with the Certified Public Accountants Act.
(End of Report)－

4－