creating value and contributing to society by …creating value and contributing to society by...
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Creating value and contributing to society by providing an “information infrastructure for an aging society”
Annual Report 2016Year ended March 31, 2016
2
Contents01 Our Mission
02 Market Segments
03 Information Infrastructure
04 Our History
06 Consolidated Nine-Year Summary
08 Message from the CEO
12 Review of Operations
12 Career Segment
14 Nursing Care Segment
16 Overseas Segment
18 New Businesses
19 Board of Directors and Audit & Supervisory Committee Members
20 Corporate Governance
23 Compliance and Risk Management
27 Management’s Discussion and Analysis of Operations
30 Consolidated Financial Statements and Notes
64 Independent Auditor’s Report
65 Corporate Data
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements, including estimates, projections, and statements related to the business operations of SMS Co., Ltd. (hereinafter, “the Company”). These forward-looking statements are based on current expectations and assumptions in light of the information available to the Company as of March 31, 2016, and are subject to significant risks and uncertainties, including, but not limited to, the risks described on page 23 and subsegment pages of this report. The results or events predicted in these forward-looking statements may differ materially from actual results or events. Therefore, we cannot guarantee that any forward-looking statements will materialize nor do we undertake any obligation to update or revise publicly any of these forward-looking statements.
01
The Japanese society is aging at a rapid pace. As a result, social secu-rity costs are increasing, putting pressure on Japan’s financial condi-tion. At the same time, it is neces-sary for the declining number of people working in Japan to support the elderly population both in eco-nomic and physical terms, which is giving rise to various social issues. Furthermore, overseas, the demand for medical care and healthcare is also increasing following economic development and aging popula-tions. It is believed that, in the next few decades, many countries will have rapidly aging populations simi-lar to Japan. As such, a wide range of social issues, including issues related to nursing care, are expected to emerge. Meanwhile, the market related to an aging society, including nursing care, medical care, and healthcare, is recognized as one of the few growth markets in Japan. Accordingly,
more and more people are begin-ning to take interest in this market. Also, information related to the aging society is highly specialized and, as there is not necessarily a high level of IT literacy in the indus-try, this information becomes extremely asymmetrical. As such, there is an increased need for useful and reliable information as the market related to the aging society expands, bringing forth tremendous business opportunities. Since its founding in 2003, SMS Co., Ltd. (hereinafter, “SMS” or ”the Company”) has focused on domains related to the aging society, offering a large number of highly valuable information services. By providing an information infrastructure for the aging society, SMS and its subsidiaries (hereinafter, “the SMS Group”) aim to resolve a variety of issues through sound business management and contribute to the greater society.
Our MissionWe create value and contribute to society by providing an
“information infrastructure for an aging society.”
02
The SMS Group defines its business
segments that are essential for the aging
society as nursing care, medical care,
career, healthcare, and senior life.
The Nursing Care segment and the
Medical Care segment deal with busi-
nesses related to medical insurance
systems, and the Healthcare segment
deals with general health-related topics
aside from nursing care and medical
care. The Senior Life segment deals with
the unique lifestyle of the aging society.
The Career segment, which includes
recruiting agent and recruiting adver-
tisement services, refers to businesses
geared toward not only operators, such
as hospitals and clinics, but also health-
care professionals, such as nurses, who
provide services in nursing care and
medical care fields. Unlike the other
segments, the Career segment was
created on a business model basis due
to the importance of the businesses to
the Company as a whole.
In addition, the Group believes that
these five business domains can be
applied overseas as well. While some
business segments that depend on an
aging population such as the Nursing
Care segment and the Senior Life
segment do not currently exist in some
countries, the Group believes that, in
the future, there will be a need for such
domains in these countries, much in
the same way as Japan.
The Group defines its global opera-
tions as the Overseas segment. Currently,
the Group focuses on Asia, a region in
which medical care and healthcare
related expenses are increasing. The
Group will therefore promote busi-
nesses within the region centered on
medical care and healthcare fields.
The reason why the Group has
dedicated itself to these segments is
because of their significant market
growth potential. Furthermore, as the
segments are all closely related to each
other, it is easy to develop synergies
between them. By developing busi-
nesses specific to these domains, the
Group can promptly create a large
number of diverse services, responding
to the demand for information.
Market Segments
Senior Life *1
Healthcare *2
CareerNursing
CareMedical
Care
Our Mission
*1 Businesses related to daily life in the aging society
*2 Covers health-related matters that are not subject to long-term care
insurance or medical insurance
Global Coverage Market Segments in the Aging Society
Our Mission
03
The SMS Group defines the information
infrastructure as a system that fills in
the gaps regarding the asymmetric
information surrounding the people it
provides value to. The Group regards
these people as professionals who
work in segments in which it does
business, operators who provide services
in these segments, and end users who
receive services in these segments.
Information related to the aging
society is highly specialized, and, there
is a lack of systems to collect, organize,
and communicate the increasing
amount of diverse information that is
accompanying this market expansion.
As such, a situation is occurring where
those who wish to communicate infor-
mation are unable to do so sufficiently,
and those who wish to receive infor-
mation are unable to obtain what they
need. To resolve this issue, the Group
will connect the various people it pro-
vides value to through the provision of
a variety of information related to the
aging society, which it will do primarily
through the Internet but also through
other forms such as a paper medium.
Also, in order to provide an informa-
tion infrastructure efficiently, the Group
will win over these professionals, oper-
ators, and end users by creating a situa-
tion where it is easy for them to access
the Group’s services. In doing so, the
Group will promptly develop a large
number of diverse services going forward.
Information Infrastructure
Operators
End Users
Professionals Operators
End Users
Professionals
Sender of Information
Receiver of Information
Career Community
Management Support Medical Information
2004.3 2005.3 2006.3 2007.3 2008.3 2009.3 2010.3 2011.3 2012.3 2013.3 2014.3 2015.3 2016.3 2017.3(Forecast)
0
25,000
5,000
10,000
15,000
20,000
0
7,500
1,500
3,000
4,500
6,000
58 383835
1,545
2,715
5,177
7,172
-5 52 109269
426
1,230 1,261
CAGR*1 (2008.3–2016.3)
Net Sales
27.6%Operating Income
26.3%
04
2008 Sep. RAG for PT / OT / ST*5: PT / OT Jinzai-bank
2008 Mar. Listed on the Tokyo Stock Exchange
Our HistorySMS was founded in 2003 at the dawn
of Japan’s long-term care insurance
system. Beginning with the recruiting
agent service for care managers, the
Company has since expanded its
business to include the Nursing Care,
Medical Care, Career, Healthcare, and
Overseas segments. In addition, the
Company has been achieving growth
in net sales and income for the 12
consecutive years since its founding.
The main reason why the Company
has achieved long-term growth is due
to the fact that it has developed
numerous new services in a continuous
manner. This growth can also be attrib-
uted to the Company’s ability to create
numerous services with diverse busi-
ness models that transcend the busi-
ness model for its recruiting agent
services, which represented the found-
ing business of the Company, to include
recruiting advertisement services, man-
agement support services for nursing
care operators, online community
services, and drug information services.
To further develop new services, the
Company invests in new businesses on
a continuous basis.
Through these efforts, the Company
has transformed by expanding its revenue
portfolio to include not only the Career
segment but also the Nursing Care and
Overseas segments.
Going forward, the Company will
continue to develop a large number
of diverse information infrastructure
services with various business models
in the Nursing Care, Medical Care,
Career, Healthcare, Senior Life, and
Overseas segments, thereby realizing
sustainable growth.
Historical Financial Results
Millions of yen
Net Sales (left scale)
Operating Income (right scale)
2003 May RAG*2 for Care Managers: Care Jinzai-bank
2006 Sep.Com for Care Managers: Care Mane.com
2006 Jul. Management Support Service for Nursing Care Operators: Kaipoke
2006 Aug.Com*4 for Nurses and Student Nurses: Nurse-senka Community
2005 Sep. RAG for Nurses: Nurse Jinzai-bank
2004 Mar.RAD*3 for Nursing Care Professionals: Kaigo Job
= Career = Nursing Care = Medical Care = Overseas
*1 CAGR since Being on the Tokyo Stock Exchange *2 RAG = Recruiting Agent *3 RAD = Recruiting Ads
*4 Com = Online Community *5 PT / OT / ST = Physical Therapist and Occupational Therapist, Speech Therapist
2004.3 2005.3 2006.3 2007.3 2008.3 2009.3 2010.3 2011.3 2012.3 2013.3 2014.3 2015.3 2016.3 2017.3(Forecast)
0
25,000
5,000
10,000
15,000
20,000
0
7,500
1,500
3,000
4,500
6,000
7,618
8,692
10,181
1,480 1,519 1,570
12,046
15,056
19,069
24,051
1,730
2,079
2,756
3,432
Our History
05
1%
Breakdown of Consolidated Net Sales by SegmentMillions of yen
Millions of yen
2011 Sep. Online Sales of Nursing Goods:
PURE NURSE
2013 Nov. Home-delivered Meal Search Site:
Lifood
2014 Aug. RAG for Care Workers:
Kaigo Job Agent
2015 Oct. Drug Information Service for Healthcare
Professionals and Institutions: MIMS
Career
Nursing Care
Medical Care
Healthcare
Overseas
2009.3 2013.3 2017.3(Forecast)
0
9,000
1,4000
2,1000
2,8000
58.9%
99%
87.3%4% 7.6% 1%
15.8%
21.7%
2.8% 0.7%
= Career = Nursing Care = Medical Care = Overseas
Consolidated Nine-Year Summary
06
Millions of yen
SMS Co., Ltd. Years ended March 31 2008.3 2009.3 2010.3 2011.3 2012.3 2013.3 2014.3 2015.3 2016.3
For the Year:
Net sales ¥2,715 ¥5,177 ¥7,172 ¥7,618 ¥8,692 ¥10,181 ¥12,046 ¥15,056 ¥19,069
Selling, general and administrative expenses 2,211 3,796 5,534 5,818 6,740 7,910 9,363 11,644 14,108
Operating income 426 1,230 1,261 1,480 1,519 1,570 1,730 2,079 2,756
Ordinary income 415 1,238 1,266 1,530 1,734 1,990 2,340 2,693 3,509
Profit attributable to owners of parent 244 719 717 876 1,004 1,226 1,380 1,824 2,265
EBITDA*1 470 1,305 1,501 1,845 1,989 2,073 2,197 2,686 3,739
Cash Flows:
Net cash provided by operating activities 536 1,086 159 1,249 956 1,008 1,595 3,103 2,244
Net cash (used in) provided by investing activities (103) (107) (1,743) (244) (1,358) 428 (1,323) (1,049) (18,401)
Net cash used in financing activities 207 5 (48) 14 (83) (191) (571) (1,271) 18,656
Cash and cash equivalents at the end of the year 1,039 2,023 391 1,449 964 2,215 1,897 2,694 5,147
At Year-End:
Total assets 1,806 3,118 3,645 4,672 5,716 6,948 8,406 11,421 41,689
Interest-bearing debt — — — — — — — — 41,689
Total net assets 983 1,708 2,379 3,242 4,136 5,153 6,074 6,923 13,157
Total shareholders’ equity*2 983 1,708 2,377 3,242 4,163 5,197 5,990 6,516 8,413
Number of employees (people) 176 277 375 424 503 578 673 977 1,550
Yen
Per Share Data:
Net income–basic ¥ 6.70 ¥18.47 ¥18.41 ¥22.13 ¥24.46 ¥ 29.71 ¥ 33.58 ¥ 44.72 ¥ 55.86
Net assets 25.37 43.85 61.06 79.24 99.78 123.77 146.79 168.03 211.03
Cash dividends — 1.25 1.25 2.50 3.00 4.00 5.00 7.00 7.00
%
Financial Ratios:
Return on assets*3 17.3 29.2 21.2 21.1 19.3 19.4 18.0 18.4 8.5
Operating income ratio 15.7 23.8 17.6 19.4 17.5 15.4 14.4 13.8 14.5
Return on equity 32.3 53.4 35.1 31.3 27.2 26.4 24.7 28.4 29.5
Equity ratio 54.4 54.8 65.3 69.2 72.3 74.1 71.5 59.7 20.5
Debt/equity ratio*4 — — — — — — — — 487.11
Dividend payout ratio — 6.8 6.8 11.6 12.3 13.6 14.8 15.6 12.5
*1 EBITDA = Operating income + Depreciation expense
*2 Total shareholder’s equity = Capital + Capital surplus + Retained earnings + Treasury stock
*3 Return on assets = Profit attributable to owners of parent / Total assets
*4 Debt/equity ratio = Interest-bearing debt / Equity
0
800
1,600
3,200
2,400
0
10
5
15
20
2012.3 2013.3 2014.3 2015.3 2016.3
2,756
14.5
0
8
16
24
32
29.5
8.5
2012.3 2013.3 2014.3 2015.3 2016.3
Operating Income / Operating Income RatioMillions of yen %
Return on Assets / Return on Equity%
Operating Income (left scale) Operating Income Ratio Return on Equity Return on Assets
Consolidated Nine-Year Summary
07
Millions of yen
SMS Co., Ltd. Years ended March 31 2008.3 2009.3 2010.3 2011.3 2012.3 2013.3 2014.3 2015.3 2016.3
For the Year:
Net sales ¥2,715 ¥5,177 ¥7,172 ¥7,618 ¥8,692 ¥10,181 ¥12,046 ¥15,056 ¥19,069
Selling, general and administrative expenses 2,211 3,796 5,534 5,818 6,740 7,910 9,363 11,644 14,108
Operating income 426 1,230 1,261 1,480 1,519 1,570 1,730 2,079 2,756
Ordinary income 415 1,238 1,266 1,530 1,734 1,990 2,340 2,693 3,509
Profit attributable to owners of parent 244 719 717 876 1,004 1,226 1,380 1,824 2,265
EBITDA*1 470 1,305 1,501 1,845 1,989 2,073 2,197 2,686 3,739
Cash Flows:
Net cash provided by operating activities 536 1,086 159 1,249 956 1,008 1,595 3,103 2,244
Net cash (used in) provided by investing activities (103) (107) (1,743) (244) (1,358) 428 (1,323) (1,049) (18,401)
Net cash used in financing activities 207 5 (48) 14 (83) (191) (571) (1,271) 18,656
Cash and cash equivalents at the end of the year 1,039 2,023 391 1,449 964 2,215 1,897 2,694 5,147
At Year-End:
Total assets 1,806 3,118 3,645 4,672 5,716 6,948 8,406 11,421 41,689
Interest-bearing debt — — — — — — — — 41,689
Total net assets 983 1,708 2,379 3,242 4,136 5,153 6,074 6,923 13,157
Total shareholders’ equity*2 983 1,708 2,377 3,242 4,163 5,197 5,990 6,516 8,413
Number of employees (people) 176 277 375 424 503 578 673 977 1,550
Yen
Per Share Data:
Net income–basic ¥ 6.70 ¥18.47 ¥18.41 ¥22.13 ¥24.46 ¥ 29.71 ¥ 33.58 ¥ 44.72 ¥ 55.86
Net assets 25.37 43.85 61.06 79.24 99.78 123.77 146.79 168.03 211.03
Cash dividends — 1.25 1.25 2.50 3.00 4.00 5.00 7.00 7.00
%
Financial Ratios:
Return on assets*3 17.3 29.2 21.2 21.1 19.3 19.4 18.0 18.4 8.5
Operating income ratio 15.7 23.8 17.6 19.4 17.5 15.4 14.4 13.8 14.5
Return on equity 32.3 53.4 35.1 31.3 27.2 26.4 24.7 28.4 29.5
Equity ratio 54.4 54.8 65.3 69.2 72.3 74.1 71.5 59.7 20.5
Debt/equity ratio*4 — — — — — — — — 487.11
Dividend payout ratio — 6.8 6.8 11.6 12.3 13.6 14.8 15.6 12.5
*1 EBITDA = Operating income + Depreciation expense
*2 Total shareholder’s equity = Capital + Capital surplus + Retained earnings + Treasury stock
*3 Return on assets = Profit attributable to owners of parent / Total assets
*4 Debt/equity ratio = Interest-bearing debt / Equity
0
2.0
4.0
6.0
8.0
0
5
10
15
20
7.0
12.5
2012.3 2013.3 2014.3 2015.3 2016.30
1,000
2,000
3,000
4,0003,739
2012.3 2013.3 2014.3 2015.3 2016.3
Cash Dividends per Share / Dividend Payout RatioYen %
EBITDAMillions of yen
Cash Dividends per Share (left scale) Dividend Payout Ratio
08
Natsuki GotoChief Executive Officer
“Aiming to contribute to society and improve corporate value by providing an information infrastructure for an aging society”
Message from the CEO
09
Business Performance in the Consolidated Fiscal Year Ended March 31, 2016In the fiscal year ended March 31, 2016,
we achieved increases in net sales and
all income figures. Career-related busi-
nesses, the first pillar of our overall
business, continued to grow steadily,
and Kaipoke, the second pillar of our
overall business, realized rapid growth.
In addition to such growth, we acquired
the MIMS Group, which is acting as the
third pillar of our overall business,
making the fiscal year under review a
year in which we expanded our future
growth potential.
Net sales in the fiscal year ended
March 31, 2016, came to ¥19,069,101
thousand, with operating income total-
ing ¥2,756,539 thousand and profits
attributable to owners of parent stand-
ing at ¥2,265,512 thousand. These
results represented year-on-year
increases of 26.7%, 32.6%, and 24.2%,
respectively. They also represented
the twelfth consecutive year since our
founding in which we have achieved
growth in both net sales and income.
The main factors that helped drive
our solid business performance were
the expansion of our career-related
businesses and Kaipoke, our manage-
ment support service for nursing care
operators, in addition to the acquisition of
the MIMS Group in October 2015, which
provides drug information services in 13
countries in Asia and Oceania.
The management support service
Kaipoke realized a positive turnaround
during the entire fiscal year due in
particular to the price revisions we
carried out following the service’s
renewal. Going forward, we expect
Kaipoke to continue to grow, helping
to drive business performance as the
second pillar together with our career-
related businesses.
Moreover, the MIMS Group repre-
sents the first large-scale acquisition
we have carried out since our found-
ing. Through this acquisition, we gained
the overwhelming name recognition of
the MIMS Group in Asia and its more
than two million registered healthcare
professionals. We also gained a wide
range of transactional connections with
pharmaceutical companies, which
comes from the MIMS Group’s strong
membership of healthcare profession-
als. By combining the strengths of the
MIMS Group with our development
and management know-how of diverse
information services as well as the
global network of Mitsui & Co., Ltd.,
the joint investor in this acquisition, we
will further advance the shift toward
making the existing drug information
services of the MIMS Group available
online. We will also develop a wide
range of new businesses and services,
such as career-related businesses and
management support services for clinics
that are similar to Kaipoke. We intend to
place the MIMS Group at the center of
our business development in Asia and
Oceania. In doing so, the MIMS Group
will help us to aggressively promote our
overseas strategy and provide us with
a third business pillar for realizing
future growth.
The Continuously Expanding Market Related to the Aging Society and the Company’s Growth within That MarketOur Group mission is “we create value
and contribute to society by providing
an information infrastructure for an
aging society.” Guided by this mission, we
have defined the marketing segments
required by an aging society as the
Nursing Care, Medical Care, Career,
Healthcare, Senior Life, and Overseas
segments. We are aiming to realize an
aging society in which its members can
live in a lively and energetic manner by
connecting them through the provision
of information and services.
The component ratio of the people
over the age of 65 in Japan already
exceeds 25%, which means that Japan
has become a super-aged society.
While Japan’s working population
decreases and medical expenses and
Message from the CEO
10
nursing care benefits significantly rise,
businesses related to the aging society
are drawing the attention of both people
and corporations as one of the few
domains in Japan with high growth
potential. Furthermore, medical
expenses in Asia and Oceania continue
to increase against a backdrop of growing
populations and economic development.
The information related to the aging
society is significantly asymmetrical, as
such information on nursing care and
medical care tends to be highly special-
ized and there is not necessarily a high
degree of IT literacy within the industry
related to the aging society. As a result,
a growing need exists to obtain accu-
rate information easily, which presents
us with a massive business opportunity.
Given this social backdrop, we believe
that the “information infrastructure for
an aging society,” which we put forward
in our Group mission, will become a
major industry.
In order to create an “information
infrastructure industry for an aging
society,” we are providing a variety of
information and services to those
involved in the aging society and are
working to organically connect people
with each other. In doing so, we aim to
realize a society where healthcare
professionals and operators can work
and conduct businesses in a vigorous
manner, which in turn will ensure the
well-being and livelihood of the end
users, such as senior citizens and their
families.
Guided by this aspiration, we have
continued to develop and manage a
wide array of services and expand our
business performance since our found-
ing in 2003. I am confident that we can
continue to grow going forward.
It is estimated that by 2025, the
market size of the information infra-
structure related to nursing care,
medical care, and healthcare in Asia and
Oceania, including Japan, will increase
to ¥3.7 trillion, which is 1.8 times the
level as of 2015. In the market filled
with this type of growth potential, we
are drawing up the following scenario
for growth.
We are anticipating the continuous
expansion of our career-related busi-
nesses in Japan, which have helped
drive growth for us thus far. While the
need for a large number of healthcare
professionals is rising with the increase
of senior citizens, due to the influence
of a declining birthrate, there is little
chance of a significant jump in this
number. As such, it is believed that the
labor shortage we are currently seeing
will continue going forward. Under
these circumstances, I feel that as the
leading company in key growth fields,
the need for the services we have to
offer will rise, allowing us to realize
continuous growth.
The next pillar that will support our
growth is Kaipoke, a management
support service for nursing care opera-
tors. In the fiscal year ending March 31,
2017, sales of Kaipoke are expected to
grow approximately 30%. After that, I
am confident that sales of the service
Market size*1 of Nursing Care, Medical Care and Healthcare Information Infrastructure in Asia*2 including Japan
Japan
¥0.6 trillion
Asia
¥3.7 trillion
Japan
¥1.0 trillion
*1 Market size based on SMS estimates
*2 Includes Oceania
2015
2025
Asia
¥2.0 trillion
Message from the CEO
11
will continue to expand at a high rate.
Furthermore, as we employ a stock-
type business model for this service,
the fixed costs per member will
decrease as the number of members
using the service increase, which will
help improve profitability. While the
number of nursing care operators is on
the rise due to the increase in those
requiring nursing care, compensation
from public long-term care insurance,
the source of these operators’ income,
is scarce, resulting in the continuation
of a difficult business environment for
many operators. Kaipoke is the one and
only service in the industry that pro-
vides nursing care operators with com-
prehensive management support
services that help improve the overall
level of management in such ways as
reducing costs. Going forward, I expect
that this service will be used by an even
greater number of operators.
Furthermore, the third pillar that
supports our growth is our overseas
business, which centers on the MIMS
Group acquired in October, 2015. The
MIMS Group provides drug information
mainly via paper media. We position
the next two years as a period of invest-
ment for the MIMS Group, during
which we will leverage the know-how
we have cultivated in Japan and make
MIMS’s existing services available
online. We will also develop new busi-
nesses and services, such as career-
related businesses and management
support services that are similar to
Kaipoke. Through these new busi-
nesses and services, I believe that we
will be able to realize a high level of
growth going forward.
In addition, we will work to further
develop and grow new businesses
primarily in Japan. Through services
such as our online communities, we
have secured a large number of health-
care professionals, operators, and end
users in Japan, including 56% of care
managers, 40% of nurses, and 65% of
hospitals. By providing newly devel-
oped services to these groups, we are
able to launch affordable services at an
overwhelmingly faster pace than start-
ing from zero. Among these new
services, we aim to create businesses
with a size that can rival our career-
related businesses and Kaipoke service.
With the aim of establishing an
“information infrastructure industry for
an aging society” and realizing a vigor-
ous lifestyle for the members of such
a society, we will continue to take on
challenges on a Groupwide basis.
I would like to offer my deepest
gratitude to our shareholders and
other investors for the support they
have shown us and ask for their
continued understanding and support
going forward.
Natsuki GotoCEO
Growth Scenario
4. Growth of New Domestic Businesses
3. Growth of Overseas Businesses Driven by MIMS
2. Growth of Kaipoke
1. Growth of Career-related Businesses
FutureNow
Message from the CEO
12
In the Career segment, the SMS Group provides recruiting
agent services and recruiting advertisement services to a wide
range of professionals and operators in the fields of nursing
care and medical care. The Career segment is divided into
four business areas based on a business model for recruiting
agent and recruiting advertisement services, depending on the
type of job the applicant is seeking in the fields of nursing care
or medical care.
For recruiting agent services, the Group employs a business
model where, if an applicant changes jobs by using the Group’s
services, a certain percentage of the applicant’s assumed annual
income is paid to the Group by the operator (hospitals, nursing
care operators, etc.) as commission. For recruiting advertise-
ment services, the Group employs a business model where
fees are paid to it at a measured rate by the operator (hospitals,
nursing care operators, dispatching firms, employment agen-
cies, etc.) depending on the number of applicants who
respond to a posted advertisement for a job.
In the plan for the fiscal year ending March 31, 2017, the
Group expects the Career segment’s sales to account for
58.9% of its total sales. Furthermore, the Group anticipates
that sales of Nurse Jinzai-bank, a recruiting agent service for
nurses that is included in the area of medical care recruiting
agent services, will account for 50% of total sales within the
Career segment. Also, the Group has been recording a high
growth rate for its recruiting agent and human resources
media services in nursing care fields.
Since its founding in 2003, SMS has been involved in
recruiting agent and recruiting advertisement services. SMS is
also a pioneer in the fields of nursing care and medical care in
employing the Internet to offer human resource services.
In particular, the Group’s Nurse Jinzai-bank service boasts
the No. 1 share in the industry. Nearly two-thirds of nurses
seeking work are registered with the service and roughly 65%
Career Segment
Subsegment of Career Segment
Business Model of Recruiting Agent Service
SMS Group Website
Provides info on
registered members
Post recruiting
ads
Introduce job seekers
Request recruiting
Register on the website
Provide job opportunity information
Seek consultation
Pay commission for job placement service (Calculated as a percentage of the job seeker’s
estimated annual income)
Nursing Care Operators
Care Workers (Job Seekers)
Business Model of Recruiting Advertisement Service
SMS Sales Staff
Post recruiting
ads
Apply to job opportunities
posted
Provide job opportunity information
Pay advertisement posting fee calculated in pro-rata of the number of applicants
SMS Group Website
Provides information of applicants
Request posting of
recruiting ads
Subsegment Recruiting Agent (RAG) Recruiting Ads (RAD)
Nursing Care
RAG for Care Managers: Care Jinzai-Bank
RAD for Nursing Care Professionals: Kaigo Job
RAG for Physical / Occupational / Speech Therapists: PT/OT Jinzai-Bank
RAD for Newly-graduated Nursing Care Professionals: Kaigo Job Gakusei-ban
RAG for Care Workers: Kaigo job Agent Certification Course Information: Sikatoru
Medical Care
RAG for Nurses: Nurse Jinzai-bank RAD for Nurses: Nurse-senka Kyujin-navi
RAG for Medical Technologists: MT Jinzai-bank
RAD for Newly-graduated Nurses: Nurse-senka Shushoku-navi
RAG for Medical Engineers: ME Jinzai-bank
Com*1 for Nurses and Student Nurses: Nurse-senka Community
RAG for Radiological Technologists: RT Jinzai-bank
Scholarship Information Portal: Kango Shogakukin-navi
RAG for Nutritionists: Nutritionist Jinzai-bank
Hospital (Service Operators)
Nurses (Job Seekers)
SMS Consultants
*1 Com = Online Community
Review of Operations
13
of hospitals in Japan are registered clients. Moreover, leveraging
the strong connections it has made with client hospitals and
other medical care operators through Nurse Jinzai-bank, the
Group is offering a wide range of recruiting agent services to
other professionals working for medical care operators, such
as laboratory medical technologists.
Additionally, Kaigo Job, a recruiting advertisement service
for nursing care professionals, has 600,000 members, which
is nearly 30% of all nursing care professionals in Japan, and
about half of the country’s major nursing care operators are
registered clients. Drawing on the connections it has made
through this service, the Group is developing other recruiting
agent services geared toward nursing care professionals.
With the Career segment’s industry-leading position, the Group
will continue to offer a large number of services to healthcare pro-
fessionals and operators while aiming for long-term and sustain-
able growth through the further expansion of these services.
Details and Strategies for the Career SegmentIn the nursing care and medical care industry, labor shortages
are persisting against a backdrop of a rapidly aging society.
While the active opening ratio (effective ratio of job offers to
applicants) for the entire industry is in the vicinity of one to
one, the ratio is nearly two to one for care workers and
approximately three to one for nurses. As the birthrate
declines and the population ages, the number of people in
need of care will increase while the number of people who
can offer care will decrease. As such, the Group believes it will
be difficult to eliminate these labor shortages going forward.
The Group anticipates the market size for career-related
businesses in the fields of nursing care and medical care will
grow from its 2015 level of ¥54.0 billion to ¥106.0 billion by
2025, which amounts to a 7% compound annual growth rate
(CAGR). Amid this expansion, the Group’s career-related busi-
nesses are continuing to grow at a rate over 10%, which
exceeds the market’s CAGR.
To further expand its services, the Group aims to optimize
its organization, human resource management, and work
culture. To this end, the Group’s career-related businesses
branched off in January 2015 to form SMS Career Co., Ltd. In
addition, to respond as a business to the needs of job seekers,
the Group is expanding the services it offers to include new
occupational categories. In the fiscal year ended March 31,
2016, the Group commenced the full-scale operation of
recruiting agent services for paramedics and, in the fiscal year
ending March 31, 2017, it is launching a recruiting agent ser-
vice for nursing care professionals. Furthermore, the Group
plans to expand its services that address the other human
resource needs of operators aside from employment. The
Group has also started to provide hospitals with a stress check
service (an obligation commenced in December 2015 that
requires workplaces with over 50 employees to identify those
with high levels of stress through an annual survey, carry out
measures to address any stress-related issues, and report
survey results to the government).
By expanding the range of services it offers while making
internal improvements to its organization and human resource
management, the Group aims to realize long-term and sus-
tainable growth.
Long-term Strategy of Career Segment
*1 RAG = Recruiting Agent
*2 PT / OT = Physical Therapist, Occupational Therapist, respectively
*3 RAD = Recruiting Ads
Needs of Service Operators
Needs of Professionals
Providing a broad range of services to meet the
needs of service operators
Enhancing competitive advantages through continuous growth
centered on recruiting agent services
Covering all medical and nursing care professionals
RAG for Nurses
RAG*1 for PT / OT*2
RAD*3 for Nurses
Others
RAD for Nursing Care Professionals
Expanding Scope of Services Developing Organization,
Human Resource Management, and Culture
Expanding Scope of Services
Review of Operations
14
In the Nursing Care segment, the Group provides services
such as Kaipoke, a management support service for nursing
care operators; Lifood, a home-delivered meal search site for
senior citizens; and Care Mane.com, an online community for
care managers.
Starting with software for insurance claims, the Group has
introduced approximately 40 types of services with Kaipoke,
including services to improve operational efficiency using
iPads, recruiting advertisement, and factoring. By offering
Kaipoke, the industry’s only comprehensive management sup-
port service, primarily via the Internet, the Group provides
support to nursing care operators and receives a monthly fee.
In its Lifood service, the Group provides online marketing sup-
port to operators of home-delivered meal services, the market
size of which has grown by four times in the past 10 years
amid an aging society. Every time a potential client makes a
request for information materials, the Group collects a fee
from home-delivered meal service operators. Furthermore,
with its Care Mane.com service, as the Group provides a
wealth of content that is useful in care managers’ direct line of
work, 56% of care managers currently working in Japan have
become members.
In the plan for the fiscal year ending March 31, 2017, the
Group expects the Nursing Care segment’s sales to account
for 15.8% of its total sales. Furthermore, the Group anticipates
that sales of the management support service Kaipoke will
account for nearly 90% of the total sales within the Nursing
Care segment.
Going forward in this segment, the Group will continue to
focus its efforts on expanding nursing care services that are
compatible with Kaipoke while working to increase the number
of Kaipoke members. At the same time, the Group will promote
new businesses such as Lifood and move forward with the
launching of other new businesses that leverage the strong
membership base of professionals, operators, and end users
that it has built through services such as Care Mane.com.
Details and Strategies for KaipokeInitially, Kaipoke provided insurance claim software at a signifi-
cantly lower price than other companies as the service was a
latecomer to the industry. In February 2014, the Group carried
out a renewal of the service, transitioning it to a service that
Insurance Claim Service
Management Support Service
(Improve operation efficiency and reduce costs)
Accounting /Financing • Insurance claim
system • Accounting software • Factoring • Business management
etc.
Service Improvement • Tablet • Marketing • Bank transfer • Document Sharing
etc.Human Resource • Recruitment • Attendance • Welfare • Payroll calculation
etc.
General Affairs / Purchasing • Purchasing • Insurance • Document storage
etc.
Establishment • Market analysis • Task management • Funding consulting • Reform support
etc.
Service Expansion of Kaipoke
Starting in February 2014*
Prior to February 2014
Insurance claim system
* Only representative services are shown
Nursing Care Segment
Review of Operations
15
provides comprehensive management support by resolving the
various management issues that face nursing care operators. In
conjunction with this renewal, the Group revised the price for
Kaipoke in October 2014. After doing so, the Group started to
see a net increase in membership in March 2015. This trend of
growth in membership has currently taken hold, and the pace
of increased membership continues to accelerate.
Currently, nursing care operators receive 90% of their
compensation from public long-term care insurance. To receive
this compensation, these operators must prepare an extremely
complex insurance claim. As such, the majority of operators
make use of nursing care insurance claim software. In addition,
compensation from public long-term care insurance is being
held at low levels due to the impact of Japan’s financial condi-
tion. Nursing care operators are facing extremely difficult
management conditions as a large number of these operators
are small to medium-sized. Furthermore, it is expected that
public long-term care insurance compensation will be brought
down to even lower levels going forward.
To respond to these circumstances, the Group is providing
nursing care operators with a comprehensive management
support service. While there are numerous companies that
develop and provide nursing care insurance claim software,
SMS is the only company offering a service that supports the
management of nursing care operators.
As of April 2016, the number of nursing care operator
offices in Japan was 233,300. Of those, there are 151,000
offices with nursing care services that are compatible with
Kaipoke. Among them, 16,200 offices were registered members
of Kaipoke (12,400 locations as of July 2016), putting the
service’s total market share at 11%.
Going forward, in addition to further increasing the number
of registered Kaipoke members, the Group will make efforts
to expand the parameter of potential customers by offering
new services that are not yet compatible with Kaipoke.
Moreover, the Group will aim to raise the average revenue per
user (ARPU) through the development and provision of new
peripheral services.
Long-term Strategy of Kaipoke
New peripheral services (finance, logistics and sales support, etc.)
Insurance claims, management support and factoring, etc.
Operators Using Management Support Services
Operators Not Yet Using Management Support Services
Service Type
Increase unit price by developing and delivering new peripheral services
Increase members
Already increased members by including large operators, e.g. franchisers
Current Kaipoke net sales
# of Nursing Care Operators*
* All nursing care operators including nursing care facilities
Expand the scope of nursing care services
Review of Operations
16
In the Overseas segment, the Group offers drug information
services in 13 countries in Asia and Oceania through the MIMS
Group as well as Nurscape, an online community for nurses
in South Korea.
The MIMS Group provides healthcare professionals and oper-
ators with an organized and summarized data base for pharma-
ceutical information, which it receives from pharmaceutical
companies, making it the de facto standard in Asia and Oceania.
For Nurscape, nearly 80% of nurses in South Korea are regis-
tered members. Through Nurscape’s online community, the
Group offers a variety of services, including information on
job offers.
In the plan for the fiscal year ending March 31, 2017, the
Group expects sales in the Overseas segment to account for
21.7% of its total sales. In addition, the Group expects sales of the
MIMS Group to make up nearly 90% of the total sales in the
Overseas segment.
Going forward, the Group will aggressively promote the
business development of the MIMS Group in Asia, where
healthcare investments continue to expand against a backdrop
of increased populations and economic development. In
doing so, the Group will aim to realize further growth for the
segment.
Details and Strategies for the MIMS GroupIn October 2015, the Group acquired a 60% stake in the MIMS
Group, with Mitsui & Co., Ltd. acquiring a 40% share.
The MIMS Group provides drug information services in 13
countries in Asia and Oceania. Founded in 1963, the MIMS
Group has a track record of over 50 years in the medical
industry, with a brand that boasts an overwhelmingly high level
of name recognition within Asia and Oceania. The MIMS
Group also possesses nearly two million registered healthcare
professionals. Most importantly, the MIMS Group has a high
registration rate of doctors in many countries. By leveraging
this strong member base, the MIMS Group has established
business relationships with a wide range of pharmaceutical
companies in the region.
Overseas Segment
Review of Operations
Strengths of the MIMS Group1. Overwhelming Brand Value • 50 years of history • Utilized by healthcare institutions / professionals
to get drug information on a daily basis
2. Strong Membership Base of
Healthcare Professionals • Healthcare professional membership approx. 2.0 million
- Including approx. 0.45 million doctors• More than 80% of all doctors are registered in Singapore
and Hong Kong
3. Business Relationships with
Pharmaceutical Companies • Almost all patented drug makers in the region post
information of their drugs on MIMS’s database
Business Model of ”Pharma Marketing”
Healthcare Professionals
(e.g. doctors, nurses, pharmacists)
• Provides access to drug database
• Provides medical news and
educational contents
Post drug information on databasePay posting fee
Service Provision Area Singapore, China, Hong Kong, South Korea, India, Indonesia, Malaysia, Philippines, Thailand, Myanmar and Vietnam
Business Model of “Healthcare Data”
Healthcare Institutions
(e.g. hospitals, clinics, pharmacies)
• Provides access to drug database
• Database can be integrated into core
systems of healthcare institutions
Pay usage fee
Service Provision Area Australia, New Zealand, South Korea and Singapore
Pharmaceutical Companies
Healthcare
Professionals
2.0million
Pharmaceutical
Companies
17
The main business of the MIMS Group is Pharma Marketing.
This business employs a business model where pharmaceutical
information is provided to healthcare professionals via a paper
medium, with a posting fee collected from pharmaceutical
companies. Also, the MIMS Group’s Healthcare Data business
employs a similar model, where pharmaceutical information is
provided to medical operators such as hospitals via an online
system, as well as a paper medium, and a user fee is collected.
Medical expenses in Asia and Oceania have doubled in the
past five years. In this promising market, the MIMS Group has
strong brand power, a member base of healthcare professionals,
and a solid business foundation with pharmaceutical compa-
nies.By combining these strengths with SMS’s development
and management know-how of diverse information services
and Mitsui’s global network, the Group will be able to expand
the existing drug information services of the MIMS Group and
launch a wide range of new businesses. Specifically, the Group
will expand the Pharma Marketing business of the MIMS Group
based on the Internet business know-how the Group has
cultivated in Japan to further leverage the Internet to provide
the pharmaceutical information that the MIMS Group currently
offers to healthcare professionals via paper. In doing so, the
MIMS Group will provide online marketing support for pharma-
ceutical companies. In addition, the Group will develop new
businesses such as career-related businesses and manage-
ment support services for clinics that are similar to Kaipoke.
The Group considers the fiscal year ended March 31, 2016,
and the fiscal year ending March 31, 2017, as a period of
investment. In order to transition Pharma Marketing into an
online business, the Group will work to strengthen its relationship
with registered members via the Internet and move forward
with product development. At the same time, the Group will
commence a test run of clinic management support services
and career-related services in multiple countries and launch
new businesses based on the knowledge it obtains through
these efforts.
Review of Operations
Strengths of SMS and Mitsui
Long-term Strategy of MIMS
Business Classification
First and Second Year
Third Year and Beyond
Existing Businesses
• PM*1: Promote online systemization of services targeting key countries - Strengthen ties with members - Develop web-based products
• HD*2: Enhance system-based products
• In several countries, conduct tests and launch businesses related to management support systems for clinics and career-related businesses
Investment Growth Acceleration
• PM: As online systemization of services proceeds in key countries, expand to other countries - Roll out best practices developed during the first two years to
other countries - Drive growth in web-based products• HD: Establish a solid presence by expanding to other countries and
integrating with other systems
• Solidify businesses in the countries where we have already expanded and start the businesses in other countries
New Businesses
Phase
*1 PM=Pharma Marketing
*2 HD=Healthcare Data
Career-related Services
Management Support Services
1. Overwhelming Brand Value
3. Business Relationships with Pharmaceutical Companies
2. Strong Membership Base of Healthcare Professionals
Online Communities
ケアマネドットコム
グレースケール 地色にのせる場合(1ptの白フチ) ※モノクロの場合も同じ
#BFAE99#977E70#CB4F4E#B03F3ERGB
スミ80スミ60スミ50スミ30
Medical / Healthcare Network
Mitsui
18
List of Services Provided
Segment Service Name
Medical Care
Mail Order / Online sales of Nursing Goods: PURE NURSE
Information Portal for Hospital Management: GALENUS
Com*1 for Pharmacists: CocoyakuDrug and Medicine DB for Pharmacists: Cocoyaku DI-pedia
Home-visit Pharmacy DB: Houmon Yakkyoku-navi
Regional Partnership Support System: EIR
Magazines for Regional Medical Resources: Zaitaku Houmon Iryou Guide
Publishing for Nurses: Nurse-senka Books
Information Portal for Hospital Admin. Managers: Jimcom
Purchasing Support for Hospital Admin. Managers: Aikon
Regional Partnership Support in the Nursing / Medical Segment: Chiiki Renkei ONE
IT Service for Pharmacies: Okusute Net
Online Academic Media for Nurses: Nurse Press
Home-visit Nursing Station DB: Houmon Kango Station-navi
Healthcare
Com for Nutritionists: Eichie Q&A Site on Health: Narukara
Information Portal of Dementia: Ninchisho Net
News Column for Active Seniors: Lvly
Information Portal of Genetic Test: Navigene
News Column Regarding Pregnancy, Childbirth and Child-raising: Ixil
ココヤク
地色にのせる場合 ※モノクロの場合も同じ
#0c4eadRGB
エイル
The Group currently operates over 50 services. In order to
capitalize on the tremendous business opportunities arising
amid an increasingly aging society, the Group has been
developing numerous new services on a continuous basis.
The recruiting agent service for nurses Nurse Jinzai-bank
and the management support service for nursing care operators
Kaipoke, two of the Group’s current mainstay businesses, are
just a couple of examples of services the Group previously
created with the ambition to capitalize on such business
opportunities. Going forward, the Group will make concerted
efforts to develop and promote new businesses in order to
realize sustainable growth.
This section introduces the Medical Care segment and the
Healthcare segment, where the Group operates a large
number of new services.
Medical Care SegmentIn the Medical Care segment, the Group provides such services
as PURE NURSE, a mail order and online sales service for
nursing goods; Jimcom, an information portal for hospital
administration managers; and GALENUS, an information portal
that deals with hospital management.
At the moment, medical treatment in Japan is facing a
major turning point. The number of patients is increasing due
to the influence of the aging society, and conventional medical
systems, primarily major hospitals, are unable to cover this
increase. There is a need for a system where patients can
continuously receive appropriate medical care locally through
cooperation between major hospitals, small to medium-sized
hospitals, medical clinics, and nursing care facilities.
In this segment, the Group will develop new businesses
that resolve the issues facing medical treatment in Japan,
including businesses that promote this kind of regional
collaboration between medical institutions.
Healthcare SegmentIn the Healthcare segment, the Group offers such services
as Ninchisho Net, an information portal for dementia.
The number of views for Ninchisho Net is increasing due to
heightened social demand for such a service and the service’s
enhanced content. The service is being used by a large number
of dementia patients and people at risk for dementia as well as
their families.
In this segment, the Group will leverage its extremely solid
position in nursing care and medical care fields. At the same
time, the Group will continue to develop and promote various
services in the healthcare domain primarily under the theme
of dementia and lifestyle disease prevention.
*1 Com = Online Community
Review of Operations
New Businesses
19
Board of Directors and Audit & Supervisory Committee Members
Outside Director and
Audit & Supervisory
Committee Member
Tomoki Matsubayashi
Director
Hajime Kawaguchi
Director
Masato Sugizaki
Outside Director and
Audit & Supervisory
Committee Member
Tadaharu Goto
Outside Director and
Audit & Supervisory
Committee Member
Takuya Yano
CEO
Natsuki Goto
20
Corporate Governance Structure
SMS Group Corporate Governance Basic ApproachThe SMS Group conducts business operations under
the Group mission, “We create value and contribute
to society by providing an information infrastructure
for an aging society.” In order to realize this Group
mission, the SMS Group recognizes that it is neces-
sary to meet the needs of all stakeholders, including
shareholders, clients, and transaction partners, through
the maximization of corporate value, as well as to
receive stakeholder support in a continuous manner.
With regard to corporate governance, as an important
prerequisite, the SMS Group believes that strengthen-
ing corporate governance ensures the fairness, trans-
parency, and efficiency of operations. Accordingly,
corporate governance is vital for the SMS Group to
realize its Group mission.
Corporate Governance OverviewOverview of Corporate Governance System
and Reason for Adopting the System
At the 13th Ordinary General Meeting of the
Shareholders held on June 24, 2016, a partial revi-
sion was made to the Articles of Incorporation, and
on the same date, the Company thereby transitioned
from a company with a Board of Corporate Auditors
to one with an Audit & Supervisory Committee. This
transition was made to further enhance the
Company’s corporate governance.
The majority of important decisions made
regarding the Company’s execution of operations is
conducted at the Board of Directors and Executive
Committee level. The Board of Directors comprises
six members, three of whom are outside directors.
As a general rule, the Board meets once a month
and holds extraordinary meetings when necessary.
For other important matters, as a general rule, the
Executive Committee, which is made up of directors
who are not Audit & Supervisory Committee mem-
bers as well as executive general managers, meets
once a month to supplement management deci-
sions. The Executive Committee makes decisions
related to business execution based on the rules
and regulations governing the Board of Directors
and the committee itself, in addition to the guide-
lines on administrative authorities. At the same time,
the committee confirms the status of business
execution. Furthermore, directors who are Audit &
Internal Audit Department
CEO
Executive Committee
Each Department
SubsidiariesAffiliates
Board of Directors Audit & Supervisory Committee
General Meeting of Shareholders
Directors who are not Audit & Supervisory Committee members
Legal Counsel Law Firm
Directors who are Audit & Supervisory Committee members
Accounting Auditors
Discussion and Report of Important Business Matters
Election / Dismissal
Audit / Supervision
Cooperation
Cooperation
Instruction
Accounting Audit
Internal Audit
Report
Advice
Report
Instruction / Supervision
Report
Instruction
Consultation
Election / Dismissal Election / Dismissal
Cooperation
Consultation
Advice
Appointment / Dismissal, Supervision
In Charge of Important Business Execution
Report
Corporate Governance
21
Supervisory Committee members attend the Executive
Committee meetings as observers when necessary.
In accordance with the Audit Policy determined
by the Audit & Supervisory Committee as well as
the division of duties, directors who are Audit &
Supervisory Committee members receive reports
from general employees and directors who are not
Audit & Supervisory Committee members on the
status of executing professional duties and request
further explanations when necessary. These direc-
tors also inspect important approval forms. In addi-
tion, through close collaboration with the Internal
Audit Department and accounting auditors, these
directors work to maintain and improve the effi-
ciency of corporate management and ensure the
legality of that management. Accordingly, the
Company believes that the objectivity of manage-
ment can be secured under its current corporate
governance system, which has been adopted in
order to rationally conduct decision making by the
Board of Directors and business execution, ensures
that audits and management supervision are func-
tioning sufficiently, and further strengthen the
Company’s corporate governance.
Status of Audits by the Audit & Supervisory Committee, Internal Audit Department, and Accounting AuditorsAudits by the Audit & Supervisory Committee
The Audit & Supervisory Committee comprises three
outside directors. The Company appoints Audit &
Supervisory Committee members who have a deep
understanding and knowledge of the business environ-
ment and who are experts in various fields, including
legal and accounting/tax experts. These members
also do not present any conflict of interest with
general shareholders.
Based on the Audit Policy and Audit Plan deter-
mined by the Audit & Supervisory Committee, Audit
& Supervisory Committee members conduct audits
of the business execution of directors by investigat-
ing matters such as the status of operations and
financial assets. Also, Audit & Supervisory Committee
members attend other important meetings, including
meetings of the Executive Committee, sharing opin-
ions and inspecting important documents circulated
for approval and other related materials. In these
ways, Audit & Supervisory Committee members
carry out their audits. As a general rule, the Audit &
Supervisory Committee Meeting is held once a
month. Through mutual contact and cooperation
performed in an appropriate manner, the Audit &
Supervisory Committee conducts audits on the
various risks that are difficult to visualize within
organizational management in a manner that is
independent from business execution.
Internal Audits
The Internal Audit Department (three persons),
which is under the direct supervision of the CEO,
implements internal audits of the operations of all
departments based on the rules and regulations of
internal audits and the Internal Audit Plan deter-
mined each term. The results of these audits are
reported to directors and Audit & Supervisory
Committee members. The CEO issues instructions
for improvement to each relevant department based
on audit results, and the efficacy of internal audits is
secured by requiring written reports on the status of
improvements.
Accounting Audits
As for accounting audits, the Company has
concluded an audit contract with Ernst & Young
ShinNihon LLC. Fifteen certified public accountants
assist with accounting audit work, in addition to nine
other members.
Mutual Cooperation between the Audits by
Audit & Supervisory Committee, Internal Audit
Department, and Accounting Auditors as well
as the Relationship of Audits with the Internal
Control Department
The Audit & Supervisory Committee cooperates with
the Internal Audit Department to conduct audits.
The Audit & Supervisory Committee also receives
quarterly reports from the accounting auditors
on the results of accounting audits. Moreover, the
Committee holds meetings with the accounting
auditors on a timely basis to exchange opinions and
information, thereby working to realize mutual
cooperation.
In addition to assisting in the duties of the Audit &
Supervisory Committee, the Internal Audit Department
holds monthly meetings with the Audit & Supervisory
Committee, where reports are made on the results
and progress of audits, including the Audit Plan, and
opinions and information are exchanged. The Internal
Audit Department also reports on the operational
status of the Company’s internal reporting system. In
Corporate Governance
22
these ways, the department aims to achieve mutual
cooperation with the Audit & Supervisory
Committee. Moreover, the department exchanges
opinions and information related to internal controls
and governance based on the Financial Instruments
and Exchange Act, with accounting auditors. In
doing so, the department facilitates close coopera-
tion in order to improve the efficacy and efficiency
of audits.
Also, the Internal Control Department evaluates
issues raised by these various types of audits and
makes efforts to implement the necessary response.
Outside DirectorsNumber of Outside Directors
The Company has three outside directors, all of
whom are Audit & Supervisory Committee members.
Personal, Capital, and Business Relationships
and Other Interests of Outside Directors with
the Company
Outside director Tadaharu Goto owns 3,963 shares
of the Company’s stock; however, outside of that,
he does not have any personal, capital, or business
relationship or other interest with the Company.
Also, while there is a business relationship with
respect to assistance for recruiting activities with
the Ministry of Health and Welfare (currently the
Ministry of Health, Labour and Welfare), where he
worked at previously, there has not been any instance
of a transaction between the Company and the
above ministry directly involving Mr. Goto.
Outside director Tomoki Matsubayashi does not
have any personal, capital, or business relationship
or other interest with the Company. Mr. Matsubayashi
works as an attorney at the law firm Tanabe &
Partners. While the Tanabe & Partners is one of the
legal advisors to the Company, Mr. Matsubayashi has
not handled any law-related issues for the Company.
Accordingly, the Company does not view this busi-
ness relationship as one that would impact Mr.
Matsubayashi’s independence as an outside director.
Outside director Takuya Yano, who is a certified
public accountant, does not have any personal,
capital, or business relationship or other interest with
the Company.
Function and Role of Outside Directors in
Corporate Governance
The function and role of outside directors in corpo-
rate governance is to participate in the Company’s
important decision making from an independent and
more wide-reaching perspective based on their
backgrounds, knowledge, and experience, which
differ from those who originated from within the
Company. The outside directors also verify the deci-
sion-making process, provide advice, and carry out
effective audits of the Company’s management.
Furthermore, all of the Company’s outside directors
are Audit & Supervisory Committee members, who
carry out the audits required of them as committee
members.
Additionally, the outside directors do not have
any personal relationships with the Company or
business transactions involving the Company’s
directors. For capital relationships as well, the
outside directors are not major shareholders and are
required to not have any conflicts of interest with
general shareholders. The Company believes that
the current three individuals meet these conditions,
and therefore their independence from the
Company has been secured.
Outside director Tadaharu Goto has a deep
understanding of the Company’s business from his
time at the Ministry of Health and Welfare as well
from his current position as the director general at
the Japan Pharmaceutical Manufacturers Association,
which he has held for a long period of time. Outside
director Tomoki Matsubayashi has spent many years
working as an attorney and possesses a wealth of
knowledge and extensive experience as a legal
expert. Outside director Takuya Yano has worked a
long period of time as a certified public accountant
as well as a tax accountant and possesses an abun-
dance of knowledge and a wide range of experience
as an accounting and tax expert.
Audits by the Outside Directors and Mutual
Cooperation with the Internal Audit
Department, Accounting Auditors, and
Internal Control Department
As all of the Company’s outside directors are Audit &
Supervisory Committee members, information on
their mutual cooperation with the Internal Audit
Department, Accounting Auditors, and the Internal
Control Department is listed in the section titled
“Mutual Cooperation between the Audits by Audit &
Supervisory Committee, Internal Audit Department,
and Accounting Auditors as well as the Relationship
of Audits with the Internal Control Department.”
Corporate Governance
23
ComplianceSMS places the core of its management on adher-
ence to laws, its articles of incorporation, and social
norms. In order to thoroughly enforce and continu-
ally improve compliance for the entire Group, poli-
cies related to the observance of laws, the fostering
of ethics, and Groupwide risk management have
been determined. In doing so, the Group is working
to maintain and improve its compliance system.
As part of its efforts in compliance, SMS has set
up a Groupwide internal reporting system with the
support of the counsel law firm, for the purpose
of quickly discovering and rectifying illegal conduct
and other issues related to compliance. In these
ways, the Group is making efforts to promptly dis-
cover and prevent compliance-related issues.
The Group has also organized rules relating to
risk management, which includes compliance, and
has set up a department with jurisdiction over risk
management that oversees the Group’s response to
compliance-related issues on a cross-organizational
level. Decision making regarding compliance activi-
ties is conducted by the Executive Committee, and
the details on decisions made are regularly reported
to the Board of Directors.
Furthermore, the Internal Control Department
monitors the status of adhering to laws, fostering
ethics, and managing risks for the Group and reports
the results of these activities to the Board of
Directors and the Audit & Supervisory Committee.
The Group shuts out any connection with antisocial
forces or organizations that threaten the order and
safety of society and, as a whole, maintains a
steadfast attitude against such groups.
Risk ManagementSMS has determined policies for the establishment
and maintenance of risk management systems
within the Group’s business activities. Based on
these policies, the Company recognizes risks that
pertain to its business. In addition, bearing in mind
the probability of risks occurring and the severity of
these risks, the Group conducts appropriate risk
management based on the importance of each risk.
A department with jurisdiction over risk manage-
ment oversees the Group’s response to risk on a
cross-organizational level. Decision making related
to risk management activities is conducted by the
Executive Committee, and the details of decisions
made are reported to the Board of Directors.
Furthermore, the Group has established a
response policy in the event that a major disaster or
accident were to occur. Based on this policy, the
Group determines the level of emergency and
promptly carries out appropriate measures. In doing
so, the Group works to prevent the expansion of
damage while keeping losses to a minimum.
Business RisksThe key items that could become factors for risk in
the development of the Group’s business are listed
below. Also, from the perspective of disclosing infor-
mation to investors, items that are not necessarily
risk factors, but could be viewed as important in
investment decisions and in enhancing the under-
standing of the Group’s business activities, are listed.
Please note that the forward-looking statements in
this section are determined based on the information
available at the end of the fiscal year under review.
Risks Related to Internal Management and
Organizational Systems
1. Compliance
In order to comply with laws, ordinances and other
various regulations, as well as social norms, the
Group established “SMS Business Guidelines” and
works to have these guidelines be well-known and
thoroughly understood by all officers and employ-
ees. These guidelines require strict observance of
laws and ordinances deeply related to the Group’s
business, including the Act on the Protection of
Personal Information, the Antimonopoly (Antitrust)
Act, the Act against Unjustifiable Premiums and
Misleading Representations, the Financial
Instruments and Exchange Act, and the Employment
Security Act, in addition to shutting out relationships
with antisocial forces and preventing inappropriate
conduct. Also, through training sessions in which all
officers and employees are required to participate,
which are held at the time of joining and regularly
thereafter, the Group is striving to continually
strengthen its compliance systems. However, in the
event that the pace for establishing adequate com-
pliance systems has not kept up with the Group’s
rapid business expansion and violations of laws or
regulations occur, this could invite the loss of cred-
ibility with users and clients, or bring about a lawsuit,
thereby affecting the Group’s business activities and
financial results.
2. Recruitment and Development of Human
Resources and the Occurrence of Vacant
Positions
The market related to the aging society, which is a
major business domain of the Group, is expected to
grow going forward, and the Group recognizes that
this will bring about a large number of business
opportunities. In order for the Group to fulfill its
mission of providing an information infrastructure
for an aging society, there is a need to promptly
Compliance and Risk Management
24
capitalize on these business opportunities by con-
tinuously creating a wide variety of services. It is also
extremely important for the Group to recruit and
develop human resources who can sincerely accept
the demands of society and independently respond
to changes. To this end, the Group actively engages
in recruiting activities and endeavors to develop
optimal human resource management structures
and training systems. However, in the event that the
recruitment and development of human resources
do not progress according to plan, or in the event
that a large number of vacant positions occur due to
employees quitting or taking childcare or nursing
care leave, the Group’s business activities and finan-
cial results could be impacted.
Risks Related to Legal Matters
3. Information Security
In the course of operating each of the various ser-
vices it offers, the Group handles client information,
including personal information, and other sensitive
information. In order to prevent unauthorized access
and fraudulent leakage or disclosure of such infor-
mation, the Group is making efforts to continually
strengthen its internal management controls, including
employee training related to handling information,
improving security systems, and managing access to
information. However, there is potential for informa-
tion to be leaked or lost as the result of third-party
attacks with deliberate, negligent, or malicious intent
by persons related to the Group or its subcontrac-
tors, or through the occurrence of other unexpected
events. In such an event, loss of social trust in the
Group, decline in competitiveness, and damage
compensation or large expenses for improving secu-
rity protocols could occur, which would affect the
Group’s business activities and financial results.
4. Intellectual Property
In the provision of various services, the Group pays
careful attention to avoid infringing on intellectual
property rights, such as copyrights or trademark
rights, while obtaining the advice of legal counsel.
However, in the unlikely event that the Group
infringes on the intellectual property rights of others,
damage compensation claims and other factors could
affect the Group’s financial results and condition.
5. Legal Regulations Related to
Recruiting Agent Services
As a fee-charging employment placement business
provider, the Group operates with the permission of
the Minister of Health, Labour and Welfare.
Accordingly, the Group requires permission to con-
tinue to engage in its principal business activities as
such a provider. If for some reason the Group’s
permits are revoked, it could potentially affect the
Group’s business activities and financial results.
Grounds for revoking permits are stipulated in Article
32-9 of the Employment Security Act. It is worth
noting that as of March 31, 2016, based on informa-
tion currently available to the Group, there are no
facts concerning the Group that would fall within
the grounds of revoking these permits. Permit num-
bers and acquisition dates for the main fee-charging
employment placement business permits held by
the Group are shown below.
Relevant Ministry
Name of Acquirer
Permit Number
Date Acquired
Expiration Date
Ministry of Health, Labour and Welfare
SMS Co., Ltd.
13-yu-190019
July 1, 2003
June 30, 2021
Ministry of Health, Labour and Welfare
SMS Career Co., Ltd.
13-yu-306922
January 5, 2015
January 4, 2018
Also, as the Group provides services targeting
qualified healthcare professionals, including care
managers and nurses, in the event the Long-Term
Care Insurance Act and the Act on Public Health
Nurses, Midwives and Nurses, which determine
these various qualifications, are amended in the
future, it could potentially affect the Group’s busi-
ness activities and financial results. It is worth noting
that as of March 31, 2016, based on information
currently available to the Group, there are no facts
pertaining to the revision of laws and ordinances
that would affect the Group’s financial results.
6. Legal Restrictions Overseas
Starting with the MIMS Group, which was acquired
in October 2015, the Group is developing various
businesses overseas, primarily in Asia. Overseas
subsidiaries are subject to local laws and regulations.
In the future, there may be cases where such laws
and regulations become stricter, or new laws or
regulations are established unexpectedly. The Group
makes concerted efforts to operate its business in
accordance with the relevant provisions of these
legal systems through seeking the advice of local
legal counsels and other means. However, in the
event a subsidiary is unable to adhere to the relevant
laws and regulations, that subsidiary may be ordered
by law to improve its business practices or discon-
tinue its business, which could potentially limit the
scope of the Group’s business activities.
Compliance and Risk Management
25
7. Litigation
Thus far, there has not been any litigation brought
against the Group that significantly affected its finan-
cial results. In addition, the Group does not forecast
any such litigation being brought against it for the
time being. However, if litigation is brought against
the Group that would significantly affect financial
results or influence social opinion and the Group
receives an unfavorable ruling, it could potentially
affect the Group’s financial results and condition.
Financial Risks
8. Dilution of Share Value
The Group has adopted a stock option system and,
as of March 31, 2016, the number of potential shares
from stock options was 382,400 shares, which is
equivalent to 0.90% of total shares, including dilu-
tion. These stock options were implemented as one
way to expand the Group’s financial results and
business scale, and the Company believes these
stock options do not necessarily conflict with the
interests of existing shareholders. However, when
these stock options are exercised, the value per
share of the Company’s shares is diluted.
9. Impact of Exchange Rates
Consolidated financial statements for the financial
results, assets, and liabilities of the Group’s overseas
subsidiaries are created after converting financial
amounts to yen. Accordingly, there is an impact when
exchange rates fluctuate at the time of conversion. In
the event that rapid exchange rate fluctuations occur
that exceed expectations, the Group’s financial results
and position could potentially be affected.
10. Goodwill Impairment
Following the acquisition of the MIMS Group, which
provides services related to drug information in Asia
and Oceania, in October 2015, the Group acquired
60% of shares in Medica Asia (Holdco) Limited, the
holding company of the MIMS Group. In accordance
with this acquisition, the Group recorded a large
amount of goodwill. In the event that the MIMS
Group profitability declines remarkably and an impair-
ment loss is recorded in the future, it could poten-
tially affect the Group’s financial results and position.
Risks Related to Business Operation
11. Soundness of Online Community Service
The Group’s online community services allow a
large number of individual members to communi-
cate with other members on their own through
bulletin boards and other means. To foster a sound
and healthy online community, the Group has estab-
lished Terms of Use in order to encourage members
to use the service in an appropriate manner. Also, in
the event inappropriate use is confirmed, measures
such as the removal of user posts are in place.
However, as a result of a rapid increase in the number
of members going forward, it may become difficult
to completely ascertain the behavior of members
within the site. In the event of trouble arising due
to inappropriate behavior by members, the Group
could potentially be held legally liable. Also, even
in the event the Group is not held legally liable,
damage to the Group’s brand image could poten-
tially affect business activities and financial results.
12. Overseas Development
The Group recognizes overseas as an overwhelm-
ingly large market and believes that in order to
capture the opportunity this market presents, the
prompt introduction of services is required. As part
of that effort, the Group acquired the MIMS Group,
which develops businesses in 13 countries in Asia
and Oceania, in October 2015. In this kind of over-
seas development, political factors (e.g., legal sys-
tems, regulations for the fields of nursing care and
medical care, and political unrest), economic fac-
tors (e.g., foreign exchange rates and economic
conditions), cultural factors (e.g., local culture and
business practices), and unforeseeable factors from
the social environment present latent risks. Such
risks are associated with doing business in a com-
pletely different environment than in Japan. The
Group has placed Singapore as the administration
base for overseas business development, which,
while cooperating with the head office in Japan,
promotes business development that bears in mind
the country risk in each country. However, in the
event the Group is unable to handle these various
risks, the business activities and financial results of
the Group could be impacted.
13. M&A and Business Alliances
In addition to organic business development, the
Group has been promoting new business develop-
ment through M&A and business alliances with other
companies. Target companies are selected giving
consideration to consistency with the Group’s strat-
egy and synergies and after performing due diligence
Compliance and Risk Management
26
on the financial position of the concerned company,
contractual matters, business conditions, and other
matters. The decision on whether to move forward
with an M&A or business alliance is made with the
utmost care at the Executive Committee and the
Board of Directors. However, in the event that the
anticipated effects from M&A and alliances are not
realized and strategic objectives are not achieved, or
in the event unrecognized debt is discovered after
the investment, it can potentially affect financial
results of the Group and its financial position.
14. Expansion of the Service Domain
In order to shape the information infrastructure for an
aging society into an industry, the Group is promptly
capitalizing on business opportunities to create new
services and making strides with the establishment of
a business model in line with trends in political poli-
cies and market needs. When launching a new busi-
ness, there are instances where a reasonable upfront
investment is necessary and instances where busi-
ness-specific risk factors occur. Accordingly, there is
a possibility that the Group is unable to realize the
initially anticipated results due to such factors as
changes in the external environment and rapid market
expansion. In addition, when withdrawing from a
business, losses could occur from the disposal and
impairment of that business’s assets and the Group’s
financial results and condition could be affected.
15. System Failure
The Group uses Internet telecommunications net-
works and websites as the main vehicles for provid-
ing services in operations systems, including a
management support service for nursing care opera-
tors, a recruiting advertisement website, and an
online community website for nurses. From the
perspective of service reliability and transaction
security, the Group’s business-use IT infrastructure is
designed with high availability and high stability
against failure. Also, in order to strengthen infrastruc-
ture management, the Group proactively recruits
personnel with a wealth of experience in information
systems development and operation. In addition,
regarding the long-term care insurance claims
system on the management support service for
nursing care operators, over 10,000 nursing care
facilities are registered users. Due to the fact that the
system handles critical data related to monthly insur-
ance claims, data centers were established in two
locations that are capable of addressing immediate
switchover in case of emergency. However, despite
management under this type of rigorous system, in
the event natural disasters or accidents occur, the
event of human error on the part of Group officers
and employees, or the event an act of data destruc-
tion or falsification through unauthorized access
occurs, it could lead to the diminished functionality
of the Group’s computer systems and potentially
invite a serious situation such as malfunction or
failure. If this type of situation arises, Group service
provision and business transactions would be seri-
ously impacted, and the Group may be required to
provide compensation for nursing care insurance
claims deficiencies, thereby affecting the business
activities of the Group and its financial results.
16. Competition
In the market for recruiting agent services for nurses
in which the Group operates, competitors from
major staffing-related service providers have been
entering the market for the past several years. In
order to achieve ongoing growth of its business, the
Group recognized that it is important to build barri-
ers to entry through comprehensive management of
multiple services where synergistic effects could be
realized in each field, and therefore is making efforts
toward securing both professionals and operators.
However, going forward, if new entrant competitors
succeed in securing workers and operators ahead of
the Group, or in the event a large capital competitor
enters the market through a major investment, it
could potentially affect business activities of the
Group and its financial results.
17. Labor Markets for the Nursing Care and
Medical Care Industries
For the labor market in the nursing care field, a cer-
tain number of qualified care managers are required
to be involved in services provided by nursing care
operators under the Long-Term Care Insurance Act.
Also, a chronic labor shortage has continued and,
for operators to continue their business, securing
qualified personnel has become an important man-
agement issue. For the labor market in the medical
care field as well, a chronic labor shortage situation
for nurses has continued for quite some time. Under
such circumstances, the Group believes that there
will be continued demand for recruiting healthcare
professionals from operators in the fields of nursing
care and medical care going forward. However, in
the event that demand from operators to recruit
healthcare professionals actually declines due to
deregulation in the fields of nursing and medical
care, it could potentially affect business activities of
the Group and its financial results. It is worth noting
that as of March 31, 2016, based on information
currently available to the Group, there are no facts
pertaining to revisions of laws and ordinances that
would affect the Group’s financial results.
Compliance and Risk Management
27
Overview of Business PerformanceThe SMS Group mission is to “create value and contribute to
society by providing an information infrastructure for an aging
society.” Guided by this mission, the Group has defined its
business segments as the Nursing Care, Medical Care, Career,
Healthcare, and Senior Life segments, and it is developing a
large number of services with information as the core value.
The market related to an aging society, the main area of
the Group’s business, has been expanding year by year, and
further growth is expected going forward.
In Japan, there were approximately 34.3 million people
over the age of 65 as of April 1, 2016, accounting for 27.0% of
the total population. This means that Japan has the highest
percentage of elderly people in the world. Accordingly, nursing
care and medical care expenses are rapidly increasing, reach-
ing the levels of ¥10 trillion and ¥40 trillion, respectively.*1
In Asia and Oceania, the medical care and healthcare mar-
kets are expanding quickly against a backdrop of population
growth and economic development. Medical care expenses in
this region amounted to ¥112 trillion,*2 which is more than
twice that of Japan.
While the market related to an aging society is growing
annually, there is a lack of systems to collect, organize, and
communicate the rising amount of diverse information that is
accompanying this market expansion. As a result, people are
unable to collect or receive adequate information sufficiently
under such circumstances. This issue has led to heightened
demand for appropriately transmitting and receiving informa-
tion, and the Group recognizes this situation as an enormous
business opportunity. Accordingly, the Group provides a wide
variety of services by promptly capitalizing on these opportunities.
The operating results for the consolidated fiscal year under
review are as follows.
Net sales increased 26.7% year on year, to ¥19,069,101
thousand. This increase was attributable to the expansion of
businesses related to the Career segment, price revisions that
followed the renewal of the management support service
Kaipoke, and the contributions from the MIMS Group, which
was acquired in October 2015. Turning to profits, operating
income was up 32.6%, to ¥2,756,539 thousand, due to the
solid performance of Kaipoke. Total non-operating income
rose 22.7%, to ¥753,245 thousand, following the strong per-
formance of the equity-method affiliate M3 Career, Inc. Total
extraordinary income decreased 49.4%, to ¥66,376 thousand,
with profit attributable to owners of parent increasing 24.2%,
to ¥2,265,512 thousand.
*1 Elderly population and component ratio: statistics from Ministry of Internal
Affairs and Communications; nursing care expenses: fiscal 2014 reference
materials from Ministry of Health, Labour and Welfare (Total long-term care
insurance [nursing care insurance] expenses); medical care expenses: fiscal
2014 statistics from Ministry of Health, Labour and Welfare
*2 WHO statistics, 2013
2012.3 2013.3 2014.3 2015.3 2016.3
19,069
15,056
12,046
10,1818,692
0
6,000
12,000
18,000
24,000
0
800
1,600
2,400
3,200
2,756
2,079
1,7301,5701,519
2012.3 2013.3 2014.3 2015.3 2016.3
Net SalesMillions of yen
Operating IncomeMillions of yen
Management’s Discussion and Analysis of Operations
28
Overview by Marketing SegmentCareer Segment
For recruiting agent services, Nurse Jinzai-bank, a recruiting
agent service for nurses; Care Jinzai-bank, a recruiting agent
service for care managers; and PT/OT Jinzai-bank, a recruiting
agent service for physical therapists, occupational therapists,
and speech therapists, all recorded strong performances due
to an increase in sales personnel.
In media services, Kaigo Job, a recruiting advertisement
service for nursing care professionals, and Nurse-senka
Kyujin-navi, a recruiting advertisement service for nurses, both
showed robust performances. As a result, net sales for the
Career segment in the consolidated fiscal year under review
were up 9.6%, to ¥12,720,778 thousand.
Nursing Care Segment
Regarding management support for service operators, the
performance of Kaipoke, a management support service for
nursing care operators, improved significantly compared with
the previous fiscal year. The Company implemented a renewal
of this service, transitioning it from only nursing-care insurance
claim software, which it provided previously, to a comprehensive
management support service that helps to solve the various
management issues facing nursing-care operators. In conjunc-
tion with this renewal, the Company revised the price for
Kaipoke in October 2014. After carrying out the price revision,
the Company started to see a net increase in membership in
March 2015. This trend of growth in membership has currently
taken hold, and the pace of the increase in membership
continues to accelerate. Furthermore, the Company is focus-
ing its efforts on providing this service to not only small-scale
operators but also corporations with multiple locations, such
as medium-sized operators and franchisers. As a result of the
above, net sales for the Nursing Care segment in the consolidated
fiscal year under review rose 57.7%, to ¥2,972,250 thousand.
Overseas Segment
In the Overseas segment, the October 2015 acquisition of the
MIMS Group, which provides services related to drug informa-
tion in 13 countries in Asia and Oceania, was a major factor
behind sales increases. Additionally, in South Korea, Senior
Marketing System Korea Co., Ltd. (formerly NURSCAPE CO.,
LTD.), which provides online community services for nurses,
realized a solid performance. As a result, net sales for the
Overseas segment were up 251.2%, to ¥2,601,059 thousand.
Also, the performance of the MIMS Group was consolidated
following a three-month delay. Net sales of the MIMS Group
consolidated in the Group’s balance sheet for the consoli-
dated fiscal year under review were ¥1,581,190 thousand.
Medical Care Segment
While net sales in the Medical Care segment were below the
previous fiscal year’s level due to the transition from catalog
sales geared toward nurses to online sales, the level of profit-
ability improved. Moreover, the heightened popularity of new
services such as the information portal service for hospital
administration managers helped increase contact points with
important stakeholders. Leveraging this heightened popularity,
the Company is focusing its strength on expanding the pur-
chase support services for hospital administration managers, in
addition to other services. As a result, net sales for the Medical
Care segment in the consolidated fiscal year under review
declined 16.2%, to ¥657,211 thousand.
1,380
1,004
1,824
2,265
0
700
1,400
2,100
2,800
1,226
2012.3 2013.3 2014.3 2015.3 2016.3
Profit Attributable to Owners of ParentMillions of yen
Career
Nursing Care
Medical Care
Healthcare
Overseas
Sales by Business Segment%
66.7Year ended
March 31, 2016
15.6
13.6
3.4
0.6
Management’s Discussion and Analysis of Operations
29
Healthcare Segment
In the Healthcare segment, the Company has been promoting
the development of services under specific categories and
themes. Ninchisho Net, an information portal service for
dementia, is registering an increase in the number of views
due to heightened social demand for such a service and the
service’s enhanced content. The service is being used by
a large number of dementia patients and people at risk for
dementia as well as their families. Furthermore, Narukara, a
Q&A site on health, and Eichie, an online community for nutri-
tionists, both recorded strong performances. As a result, net
sales for the Healthcare segment in the consolidated fiscal
year under review increased 174.1%, to ¥117,801 thousand.
Analysis of Financial PositionTotal assets at the consolidated fiscal year-end stood at
¥41,689,802 thousand, increasing ¥30,268,671 thousand from
the previous fiscal year-end. This increase was primarily attrib-
utable to higher cash and cash deposits as well as accounts
receivable–trade, reflecting the Company’s expanded opera-
tions; the rise in accounts receivable—other, resulting from
growth in the number of users of the factoring services within
Kaipoke, a management support service for nursing care oper-
ators; and the increase in goodwill, software, trademark rights,
and customer-related assets that followed the acquisition of
the MIMS Group.
Total liabilities amounted to ¥28,532,136 thousand,
increasing ¥24,034,247 thousand from the previous fiscal
year-end. The main factors behind this increase was the rise
in short-term loans payable that accompanied the acquisition
of the MIMS Group, the increase in advances received that
also accompanied that acquisition, and the increase in
deferred tax liabilities.
Total net assets were ¥13,157,666 thousand, increasing
¥6,234,423 thousand from the previous fiscal year-end. The
primary reasons for this increase were the rise in retained
earnings due to the recording of profit attributable to owners
of parent and the increase in non-controlling interests that
followed the acquisition of the MIMS Group.
Cash FlowsCash and cash equivalents at the consolidated fiscal year-end
totaled ¥5,147,343 thousand, up ¥2,453,334 thousand from
the end of the previous fiscal year. The result of each cash
flow and the primary factors behind that result are as follows.
Net cash provided by operating activities amounted to
¥2,244,486 thousand, compared with ¥3,103,460 thousand
in the previous fiscal year. The main reasons for this result
were profit before income taxes of ¥3,576,161 thousand,
depreciation of ¥557,450 thousand, and amortization of
goodwill of ¥425,672 thousand, while income taxes paid were
¥1,287,252 thousand.
Net cash used in investing activities stood at ¥18,401,902
thousand, compared with ¥1,049,649 thousand in the previ-
ous fiscal year. The primary factors behind this result were the
purchase of intangible assets totaling ¥772,738 thousand,
which accompanied system development investments in
Kaipoke and other services, as well as expenditures related
to the acquisition of stock in the MIMS Group totaling
¥17,907,051 thousand.
Net cash provided by financing activities came to
¥18,656,253 thousand, compared with net cash used in
financing activities of ¥1,271,984 thousand in the previous
fiscal year. The main reason for this result was an increase in
short-term loans payable of ¥19,004,038 thousand, while cash
dividends paid totaled ¥282,744 thousand.
13,157
6,0745,153
6,923
4,136
0
4,000
8,000
12,000
16,000
2012.3 2013.3 2014.3 2015.3 2016.3
Total Net AssetsMillions of yen
6,9485,716
11,421
0
11,000
22,000
33,000
44,000 41,689
8,406
2012.3 2013.3 2014.3 2015.3 2016.3
Total AssetsMillions of yen
Management’s Discussion and Analysis of Operations
30
1
Consolidated Balance Sheets SMS Co., Ltd. and Its Consolidated Subsidiaries As of March 31, 2015 and 2016
Thousands of yen 2015 2016
Assets Current assets
Cash and deposits 2,708,623 5,291,707 Accounts receivable – trade 2,486,428 3,982,752 Merchandise and finished goods 109,185 95,830 Work in process 7,784 31,185 Supplies 12,721 6,770 Accounts receivable – other 1,306,471 1,891,531 Prepaid expenses 572,957 685,224 Deferred tax assets 214,454 268,219 Other 38,232 140,001 Allowance for doubtful accounts (93,840) (217,510) Total current assets 7,363,018 12,175,712
Non-current assets Property, plant and equipment
Buildings 208,087 383,400 Accumulated depreciation (71,655) (151,756) Buildings, net 136,432 231,643
Tools, furniture and fixtures 275,425 515,019 Accumulated depreciation (164,006) (366,414) Tools, furniture and fixtures, net 111,419 148,605
Machinery, equipment and vehicles 11,871 110,080 Accumulated depreciation (3,322) (61,999) Machinery, equipment and vehicles, net 8,548 48,081
Total property, plant and equipment 256,400 428,330 Intangible assets
Goodwill 1,318,296 12,874,322 Software 730,608 1,335,532 Trademark rights – 10,046,813 Customer-related assets – 3,046,910 Other 50 50 Total intangible assets 2,048,954 27,303,627
Investments and other assets Investment securities * 1,240,328 * 1,025,966 Deferred tax assets 101,309 211,138 Lease and guarantee deposits 382,489 516,448 Other 28,629 28,578 Total investments and other assets 1,752,757 1,782,132
Total non-current assets 4,058,113 29,514,090 Total assets 11,421,131 41,689,802
2
Thousands of yen 2015 2016
Liabilities Current liabilities
Accounts payable – trade 131,641 451,116 Short-term loans payable 188 19,002,638 Accounts payable – other 2,604,033 3,443,188 Accrued expenses 207,408 232,160 Income taxes payable 554,460 947,942 Accrued consumption taxes 371,521 100,331 Advances received 52,158 1,102,636 Deposits received 56,556 45,718 Provision for bonuses 241,572 373,715 Provision for refund 135,835 129,785 Other 38,713 85,266 Total current liabilities 4,394,091 25,914,499
Non-current liabilities Net defined benefit liability 89,634 111,938 Deferred tax liabilities – 2,442,393 Other 14,163 63,305 Total non-current liabilities 103,797 2,617,637
Total liabilities 4,497,889 28,532,136 Net assets
Shareholders' equity Capital stock 304,166 304,166 Retained earnings 7,249,161 9,145,508 Treasury shares (1,036,485) (1,036,485) Total shareholders' equity 6,516,843 8,413,190
Accumulated other comprehensive income Valuation difference on available-for-sale securities 10,403 9,888 Foreign currency translation adjustments 287,523 135,593 Total accumulated other comprehensive income 297,926 145,482
Subscription rights to shares 47,339 80,108 Non-controlling interests 61,133 4,518,884 Total net assets 6,923,242 13,157,666
Total liabilities and net assets 11,421,131 41,689,802 See the accompanying Notes to Consolidated Financial Statements
Consolidated Balance SheetsSMS Co., Ltd. and Its Consolidated SubsidiariesAs of March 31, 2015 and 2016
31
1
Consolidated Balance Sheets SMS Co., Ltd. and Its Consolidated Subsidiaries As of March 31, 2015 and 2016
Thousands of yen 2015 2016
Assets Current assets
Cash and deposits 2,708,623 5,291,707 Accounts receivable – trade 2,486,428 3,982,752 Merchandise and finished goods 109,185 95,830 Work in process 7,784 31,185 Supplies 12,721 6,770 Accounts receivable – other 1,306,471 1,891,531 Prepaid expenses 572,957 685,224 Deferred tax assets 214,454 268,219 Other 38,232 140,001 Allowance for doubtful accounts (93,840) (217,510) Total current assets 7,363,018 12,175,712
Non-current assets Property, plant and equipment
Buildings 208,087 383,400 Accumulated depreciation (71,655) (151,756) Buildings, net 136,432 231,643
Tools, furniture and fixtures 275,425 515,019 Accumulated depreciation (164,006) (366,414) Tools, furniture and fixtures, net 111,419 148,605
Machinery, equipment and vehicles 11,871 110,080 Accumulated depreciation (3,322) (61,999) Machinery, equipment and vehicles, net 8,548 48,081
Total property, plant and equipment 256,400 428,330 Intangible assets
Goodwill 1,318,296 12,874,322 Software 730,608 1,335,532 Trademark rights – 10,046,813 Customer-related assets – 3,046,910 Other 50 50 Total intangible assets 2,048,954 27,303,627
Investments and other assets Investment securities * 1,240,328 * 1,025,966 Deferred tax assets 101,309 211,138 Lease and guarantee deposits 382,489 516,448 Other 28,629 28,578 Total investments and other assets 1,752,757 1,782,132
Total non-current assets 4,058,113 29,514,090 Total assets 11,421,131 41,689,802
2
Thousands of yen 2015 2016
Liabilities Current liabilities
Accounts payable – trade 131,641 451,116 Short-term loans payable 188 19,002,638 Accounts payable – other 2,604,033 3,443,188 Accrued expenses 207,408 232,160 Income taxes payable 554,460 947,942 Accrued consumption taxes 371,521 100,331 Advances received 52,158 1,102,636 Deposits received 56,556 45,718 Provision for bonuses 241,572 373,715 Provision for refund 135,835 129,785 Other 38,713 85,266 Total current liabilities 4,394,091 25,914,499
Non-current liabilities Net defined benefit liability 89,634 111,938 Deferred tax liabilities – 2,442,393 Other 14,163 63,305 Total non-current liabilities 103,797 2,617,637
Total liabilities 4,497,889 28,532,136 Net assets
Shareholders' equity Capital stock 304,166 304,166 Retained earnings 7,249,161 9,145,508 Treasury shares (1,036,485) (1,036,485) Total shareholders' equity 6,516,843 8,413,190
Accumulated other comprehensive income Valuation difference on available-for-sale securities 10,403 9,888 Foreign currency translation adjustments 287,523 135,593 Total accumulated other comprehensive income 297,926 145,482
Subscription rights to shares 47,339 80,108 Non-controlling interests 61,133 4,518,884 Total net assets 6,923,242 13,157,666
Total liabilities and net assets 11,421,131 41,689,802 See the accompanying Notes to Consolidated Financial Statements
Consolidated Balance Sheets
2
Thousands of yen 2015 2016
Liabilities Current liabilities
Accounts payable – trade 131,641 451,116 Short-term loans payable 188 19,002,638 Accounts payable – other 2,604,033 3,443,188 Accrued expenses 207,408 232,160 Income taxes payable 554,460 947,942 Accrued consumption taxes 371,521 100,331 Advances received 52,158 1,102,636 Deposits received 56,556 45,718 Provision for bonuses 241,572 373,715 Provision for refund 135,835 129,785 Other 38,713 85,266 Total current liabilities 4,394,091 25,914,499
Non-current liabilities Net defined benefit liability 89,634 111,938 Deferred tax liabilities – 2,442,393 Other 14,163 63,305 Total non-current liabilities 103,797 2,617,637
Total liabilities 4,497,889 28,532,136 Net assets
Shareholders' equity Capital stock 304,166 304,166 Retained earnings 7,249,161 9,145,508 Treasury shares (1,036,485) (1,036,485) Total shareholders' equity 6,516,843 8,413,190
Accumulated other comprehensive income Valuation difference on available-for-sale securities 10,403 9,888 Foreign currency translation adjustments 287,523 135,593 Total accumulated other comprehensive income 297,926 145,482
Subscription rights to shares 47,339 80,108 Non-controlling interests 61,133 4,518,884 Total net assets 6,923,242 13,157,666
Total liabilities and net assets 11,421,131 41,689,802 See the accompanying Notes to Consolidated Financial Statements
32
3
Consolidated Statements of Income SMS Co., Ltd. and Its Consolidated Subsidiaries Fiscal year ended March 31, 2015 and 2016
Thousands of yen 2015 2016
Net sales 15,056,370 19,069,101 Cost of sales *3 1,332,631 *3 2,204,290 Gross profit 13,723,738 16,864,810 Selling, general and administrative expenses *1, *2 11,644,320 *1, *2 14,108,270 Operating income 2,079,418 2,756,539 Non-operating income
Interest income 5,393 10,885 Interest on securities 398 453 Operations consignment fee 115 – Share of profit of entities accounted for using equity method 413,708 781,798 Consulting fee 157,912 – Other 44,351 39,059 Total non-operating income 621,879 832,197
Non-operating expenses Foreign exchange losses 403 35,957 Interest expenses 4,739 35,738 Commission for purchase of treasury shares 1,725 – Other 935 7,256 Total non-operating expenses 7,803 78,952
Ordinary income 2,693,494 3,509,785 Extraordinary income
Gain on step acquisitions 185,084 – Gain on sales of investment securities 1,434 240,038 Total extraordinary income 186,519 240,038
Extraordinary losses Loss on sales and retirement of non-current assets 28,282 4,853 Impairment loss – 16,000 Loss on abolishment of retirement benefit plan 14,604 – Loss on valuation of investment securities – 83,257 Loss on sales of investment securities 12,440 – Loss on sales of shares of subsidiaries and associates – 18,985 Provision of allowance for doubtful accounts – 50,567 Total extraordinary losses 55,327 173,662
Profit before income taxes 2,824,685 3,576,161 Income taxes – current 997,497 1,265,170 Income taxes – deferred (4,602) (98,415) Total income taxes 992,895 1,166,754 Profit 1,831,790 2,409,406 Profit attributable to non-controlling interests 7,341 143,893 Profit attributable to owners of parent 1,824,448 2,265,512
See the accompanying Notes to Consolidated Financial Statements
4
Consolidated Statements of Comprehensive Income SMS Co., Ltd. and Its Consolidated Subsidiaries Fiscal year ended March 31, 2015 and 2016
Thousands of yen 2015 2016
Profit 1,831,790 2,409,406 Other comprehensive income
Valuation difference on available-for-sale securities 10,366 (571) Foreign currency translation adjustments 270,954 (95,369) Share of other comprehensive income of entities accounted for using equity method
1,933 12,001
Total other comprehensive income * 283,255 * (83,939) Comprehensive income 2,115,045 2,325,467 Comprehensive income attributable to
Comprehensive income attributable to owners of parent 2,101,430 2,113,068 Comprehensive income attributable to non-controlling interests
13,614 212,398
See the accompanying Notes to Consolidated Financial Statements
Consolidated Statements of IncomeSMS Co., Ltd. and Its Consolidated SubsidiariesFiscal year ended March 31, 2015 and 2016
33
3
Consolidated Statements of Income SMS Co., Ltd. and Its Consolidated Subsidiaries Fiscal year ended March 31, 2015 and 2016
Thousands of yen 2015 2016
Net sales 15,056,370 19,069,101 Cost of sales *3 1,332,631 *3 2,204,290 Gross profit 13,723,738 16,864,810 Selling, general and administrative expenses *1, *2 11,644,320 *1, *2 14,108,270 Operating income 2,079,418 2,756,539 Non-operating income
Interest income 5,393 10,885 Interest on securities 398 453 Operations consignment fee 115 – Share of profit of entities accounted for using equity method 413,708 781,798 Consulting fee 157,912 – Other 44,351 39,059 Total non-operating income 621,879 832,197
Non-operating expenses Foreign exchange losses 403 35,957 Interest expenses 4,739 35,738 Commission for purchase of treasury shares 1,725 – Other 935 7,256 Total non-operating expenses 7,803 78,952
Ordinary income 2,693,494 3,509,785 Extraordinary income
Gain on step acquisitions 185,084 – Gain on sales of investment securities 1,434 240,038 Total extraordinary income 186,519 240,038
Extraordinary losses Loss on sales and retirement of non-current assets 28,282 4,853 Impairment loss – 16,000 Loss on abolishment of retirement benefit plan 14,604 – Loss on valuation of investment securities – 83,257 Loss on sales of investment securities 12,440 – Loss on sales of shares of subsidiaries and associates – 18,985 Provision of allowance for doubtful accounts – 50,567 Total extraordinary losses 55,327 173,662
Profit before income taxes 2,824,685 3,576,161 Income taxes – current 997,497 1,265,170 Income taxes – deferred (4,602) (98,415) Total income taxes 992,895 1,166,754 Profit 1,831,790 2,409,406 Profit attributable to non-controlling interests 7,341 143,893 Profit attributable to owners of parent 1,824,448 2,265,512
See the accompanying Notes to Consolidated Financial Statements
4
Consolidated Statements of Comprehensive Income SMS Co., Ltd. and Its Consolidated Subsidiaries Fiscal year ended March 31, 2015 and 2016
Thousands of yen 2015 2016
Profit 1,831,790 2,409,406 Other comprehensive income
Valuation difference on available-for-sale securities 10,366 (571) Foreign currency translation adjustments 270,954 (95,369) Share of other comprehensive income of entities accounted for using equity method
1,933 12,001
Total other comprehensive income * 283,255 * (83,939) Comprehensive income 2,115,045 2,325,467 Comprehensive income attributable to
Comprehensive income attributable to owners of parent 2,101,430 2,113,068 Comprehensive income attributable to non-controlling interests
13,614 212,398
See the accompanying Notes to Consolidated Financial Statements
Consolidated Statements of Comprehensive IncomeSMS Co., Ltd. and Its Consolidated SubsidiariesFiscal year ended March 31, 2015 and 2016
34
5
Consolidated Statements of Changes in Net Assets SMS Co., Ltd. and Its Consolidated Subsidiaries Fiscal year ended March 31, 2015 and 2016
(Thousands of yen)
Shareholders' equity
Capital stock Capital surplus Retained earnings Treasury shares Total shareholders'
equity
Balance at April 1, 2014 303,914 278,907 5,909,700 (502,456) 5,990,067
Changes of items during period
Issuance of new shares 252 243 – – 495
Dividends of surplus – – (204,753) – (204,753)
Profit attributable to owners of parent
– – 1,824,448 – 1,824,448
Net increase (decrease) due to change in scope of consolidation
– – (2,286) – (2,286)
Change in treasury shares of parent arising from transactions with non-controlling shareholders
– (279,150) (277,948) – (557,099)
Purchase of treasury shares – – – (534,029) (534,029)
Net changes of items other than shareholders' equity
– – – – –
Total changes of items during the year
252 (278,907) 1,339,461 (534,029) 526,776
Balance at March 31, 2015 304,166 – 7,249,161 (1,036,485) 6,516,843
Accumulated other comprehensive income
Subscription rights to shares
Non-controlling interests
Total net assets
Valuation difference on
available-for-sale securities
Foreign currency translation
adjustments
Total accumulated other
comprehensive income
Balance at April 1, 2014 9,979 10,933 20,912 19,513 44,395 6,074,888
Changes of items during period
Issuance of new shares – – – – – 495
Dividends of surplus – – – – – (204,753)
Profit attributable to owners of parent
– – – – – 1,824,448
Net increase (decrease) due to change in scope of consolidation
– – – – – (2,286)
Change in treasury shares of parent arising from transactions with non-controlling shareholders
– – – – – (557,099)
Purchase of treasury shares – – – – – (534,029)
Net changes of items other than shareholders' equity
423 276,590 277,013 27,826 16,738 321,577
Total changes of items during the year
423 276,590 277,013 27,826 16,738 848,353
Balance at March 31, 2015 10,403 287,523 297,926 47,339 61,133 6,923,242
See the accompanying Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net AssetsSMS Co., Ltd. and Its Consolidated SubsidiariesFiscal year ended March 31, 2015 and 2016
35
5
Consolidated Statements of Changes in Net Assets SMS Co., Ltd. and Its Consolidated Subsidiaries Fiscal year ended March 31, 2015 and 2016
(Thousands of yen)
Shareholders' equity
Capital stock Capital surplus Retained earnings Treasury shares Total shareholders'
equity
Balance at April 1, 2014 303,914 278,907 5,909,700 (502,456) 5,990,067
Changes of items during period
Issuance of new shares 252 243 – – 495
Dividends of surplus – – (204,753) – (204,753)
Profit attributable to owners of parent
– – 1,824,448 – 1,824,448
Net increase (decrease) due to change in scope of consolidation
– – (2,286) – (2,286)
Change in treasury shares of parent arising from transactions with non-controlling shareholders
– (279,150) (277,948) – (557,099)
Purchase of treasury shares – – – (534,029) (534,029)
Net changes of items other than shareholders' equity
– – – – –
Total changes of items during the year
252 (278,907) 1,339,461 (534,029) 526,776
Balance at March 31, 2015 304,166 – 7,249,161 (1,036,485) 6,516,843
Accumulated other comprehensive income
Subscription rights to shares
Non-controlling interests
Total net assets
Valuation difference on
available-for-sale securities
Foreign currency translation
adjustments
Total accumulated other
comprehensive income
Balance at April 1, 2014 9,979 10,933 20,912 19,513 44,395 6,074,888
Changes of items during period
Issuance of new shares – – – – – 495
Dividends of surplus – – – – – (204,753)
Profit attributable to owners of parent
– – – – – 1,824,448
Net increase (decrease) due to change in scope of consolidation
– – – – – (2,286)
Change in treasury shares of parent arising from transactions with non-controlling shareholders
– – – – – (557,099)
Purchase of treasury shares – – – – – (534,029)
Net changes of items other than shareholders' equity
423 276,590 277,013 27,826 16,738 321,577
Total changes of items during the year
423 276,590 277,013 27,826 16,738 848,353
Balance at March 31, 2015 10,403 287,523 297,926 47,339 61,133 6,923,242
See the accompanying Notes to Consolidated Financial Statements
6
(Thousands of yen)
Shareholders' equity
Capital stock Capital surplus Retained earnings Treasury shares Total shareholders'
equity
Balance at April 1, 2015 304,166 – 7,249,161 (1,036,485) 6,516,843
Changes of items during period
Issuance of new shares – – – – –
Dividends of surplus – – (283,898) – (283,898)
Profit attributable to owners of parent
– – 2,265,512 – 2,265,512
Net increase (decrease) due to change in scope of consolidation
– – (23,025) – (23,025)
Change in treasury shares of parent arising from transactions with non-controlling shareholders
– – (62,241) – (62,241)
Purchase of treasury shares – – – – –
Net changes of items other than shareholders' equity
– – – – –
Total changes of items during the year
– – 1,896,347 – 1,896,347
Balance at March 31, 2016 304,166 – 9,145,508 (1,036,485) 8,413,190
Accumulated other comprehensive income
Subscription rights to shares
Non-controlling interests
Total net assets
Valuation difference on
available-for-sale securities
Foreign currency translation
adjustments
Total accumulated other
comprehensive income
Balance at April 1, 2015 10,403 287,523 297,926 47,339 61,133 6,923,242
Changes of items during period
Issuance of new shares – – – – – –
Dividends of surplus – – – – – (283,898)
Profit attributable to owners of parent
– – – – – 2,265,512
Net increase (decrease) due to change in scope of consolidation
– – – – – (23,025)
Change in treasury shares of parent arising from transactions with non-controlling shareholders
– – – – – (62,241)
Purchase of treasury shares – – – – – –
Net changes of items other than shareholders' equity
(514) (151,929) (152,444) 32,769 4,457,751 4,338,076
Total changes of items during the year
(514) (151,929) (152,444) 32,769 4,457,751 6,234,423
Balance at March 31, 2016 9,888 135,593 145,482 80,108 4,518,884 13,157,666
See the accompanying Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
36
7
Consolidated Statements of Cash Flows SMS Co., Ltd. and Its Consolidated Subsidiaries Fiscal year ended March 31, 2015 and 2016
Thousands of yen 2015 2016
Cash flows from operating activities Profit before income taxes 2,824,685 3,576,161 Depreciation 264,081 557,450 Amortization of goodwill 343,300 425,672 Loss (gain) on sales and retirement of non-current assets 28,282 4,853 Impairment loss – 16,000 Loss (gain) on step acquisitions (185,084) – Loss (gain) on sales of investment securities 12,440 (240,038) Loss (gain) on valuation of investment securities – 83,257 Loss on abolishment of retirement benefit plan 14,604 – Share of (profit) loss of entities accounted for using equity method
(100,373) (219,277)
Loss (gain) on sales of shares of subsidiaries and associates
– 18,985
Increase (decrease) in allowance for doubtful accounts 44,311 25,804 Increase (decrease) in provision for bonuses 58,763 132,142 Increase (decrease) in provision for refund 18,347 (6,050) Increase (decrease) in net defined benefit liability (40,951) 22,303 Foreign exchange losses (gains) 403 35,957 Decrease (increase) in notes and accounts receivable – trade
(565,067) (262,710)
Increase (decrease) in accrued consumption taxes 281,414 (277,234) Decrease (increase) in prepaid expenses 43,948 33,585 Increase (decrease) in advances received (6,024) (103,575) Increase (decrease) in accounts payable – other 1,418,728 243,886 Decrease (increase) in lease and guarantee deposits (55,993) (29,032) Other, net (384,751) (481,122) Subtotal 4,015,065 3,557,017 Interest and dividend income received 5,945 10,669 Interest expenses paid (5,075) (35,947) Income taxes paid (912,475) (1,287,252) Net cash provided by (used in) operating activities 3,103,460 2,244,486
Cash flows from investing activities Payments into time deposits (1,356) (116,512) Purchase of property, plant and equipment (127,601) (129,952) Purchase of intangible assets (618,800) (772,738) Proceeds from sales of investment securities 8,934 502,341 Purchase of investment securities (50) (8,330) Purchase of shares of subsidiaries and associates (65,278) – Payments of loans receivable (19,086) (37,680) Purchase of shares of subsidiaries resulting in change in scope of consolidation
*2 (229,989) *2 (17,907,051)
Other, net 3,580 68,020 Net cash provided by (used in) investing activities (1,049,649) (18,401,902)
See the accompanying Notes to Consolidated Financial Statements
Consolidated Statements of Cash FlowsSMS Co., Ltd. and Its Consolidated SubsidiariesFiscal year ended March 31, 2015 and 2016
37
7
Consolidated Statements of Cash Flows SMS Co., Ltd. and Its Consolidated Subsidiaries Fiscal year ended March 31, 2015 and 2016
Thousands of yen 2015 2016
Cash flows from operating activities Profit before income taxes 2,824,685 3,576,161 Depreciation 264,081 557,450 Amortization of goodwill 343,300 425,672 Loss (gain) on sales and retirement of non-current assets 28,282 4,853 Impairment loss – 16,000 Loss (gain) on step acquisitions (185,084) – Loss (gain) on sales of investment securities 12,440 (240,038) Loss (gain) on valuation of investment securities – 83,257 Loss on abolishment of retirement benefit plan 14,604 – Share of (profit) loss of entities accounted for using equity method
(100,373) (219,277)
Loss (gain) on sales of shares of subsidiaries and associates
– 18,985
Increase (decrease) in allowance for doubtful accounts 44,311 25,804 Increase (decrease) in provision for bonuses 58,763 132,142 Increase (decrease) in provision for refund 18,347 (6,050) Increase (decrease) in net defined benefit liability (40,951) 22,303 Foreign exchange losses (gains) 403 35,957 Decrease (increase) in notes and accounts receivable – trade
(565,067) (262,710)
Increase (decrease) in accrued consumption taxes 281,414 (277,234) Decrease (increase) in prepaid expenses 43,948 33,585 Increase (decrease) in advances received (6,024) (103,575) Increase (decrease) in accounts payable – other 1,418,728 243,886 Decrease (increase) in lease and guarantee deposits (55,993) (29,032) Other, net (384,751) (481,122) Subtotal 4,015,065 3,557,017 Interest and dividend income received 5,945 10,669 Interest expenses paid (5,075) (35,947) Income taxes paid (912,475) (1,287,252) Net cash provided by (used in) operating activities 3,103,460 2,244,486
Cash flows from investing activities Payments into time deposits (1,356) (116,512) Purchase of property, plant and equipment (127,601) (129,952) Purchase of intangible assets (618,800) (772,738) Proceeds from sales of investment securities 8,934 502,341 Purchase of investment securities (50) (8,330) Purchase of shares of subsidiaries and associates (65,278) – Payments of loans receivable (19,086) (37,680) Purchase of shares of subsidiaries resulting in change in scope of consolidation
*2 (229,989) *2 (17,907,051)
Other, net 3,580 68,020 Net cash provided by (used in) investing activities (1,049,649) (18,401,902)
See the accompanying Notes to Consolidated Financial Statements
8
Thousands of yen 2015 2016
Cash flows from financing activities Increase in short-term loans payable 188 19,004,038 Proceeds from issuance of common shares 495 – Purchase of treasury shares (534,028) – Cash dividends paid (204,410) (282,744) Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation
(534,229) (42,114)
Other, net – (22,925) Net cash provided by (used in) financing activities (1,271,984) 18,656,253
Effect of exchange rate change on cash and cash equivalents 10,506 (54,803) Net increase (decrease) in cash and cash equivalents 792,332 2,444,033 Cash and cash equivalents at beginning of year 1,897,846 2,694,008 Increase in cash and cash equivalents from newly consolidated subsidiary
3,828 9,301
Cash and cash equivalents at end of year *1 2,694,008 *1 5,147,343 See the accompanying Notes to Consolidated Financial Statements
Consolidated Statements of Cash Flows
38
9
Notes to Consolidated Financial Statements (Significant basis of presenting consolidated financial statements)
1. Scope of consolidation
(1) Number of consolidated subsidiaries: 39 Names of consolidated subsidiaries
SMS Career CO., LTD. SMS Support Service CO., LTD. EIR Inc. SMS Medicare Service CO., LTD. SMS Financial Service CO., LTD. SENIOR MARKETING SYSTEM ASIA PTE. LTD. Senior Marketing System Korea Co., Ltd. SMS Beijing Co., Ltd. SMS Shanghai Co., Ltd. SMS TAIWAN Co., Ltd. iHealth SMS PHILIPPINES HEALTHCARE SOLUTIONS INC. PT. SENIOR MARKETING SYSTEM INDONESIA PT. MEETDOCTOR SENIOR MARKETING SYSTEM SDN. BHD. Centium Software Sdn Bhd SENIOR MARKETING SYSTEM (THAILAND) CO., LTD. eChannelling PLC EHEALTHWISE SERVICES PTY LTD Medica Asia (Holdco) Limited MIMS Pte. Ltd. KIMS Limited MIMS (Shanghai) Ltd. MediData Zhuhai Ltd. MIMS (Hong Kong) Limited MIMS Events (Hong Kong) Limited MediMarketing, Inc. PT Medidata Indonesia MIMS Medica Sdn Bhd Wadoc Pte. Ltd. Medidata Pte. Ltd. MIMS Integrated Pte. Ltd. Medidata (Thailand) Ltd. TIMS (Thailand) Ltd. UBM Medica India Private Limited. MIMS Australia Pty Ltd Medica Asia Australia (Holdco) Pty Limited Medica Asia Australia Pty Limited MIMS (NZ) Limited
On April 1, 2015, SMS Co., Ltd. (“the Company”) acquired a 72.2% stake in EIR Inc. and included it in the Company’s consolidated subsidiaries. On April 1, 2015, SMS KOREA CO., LTD. was excluded from the scope of consolidation since its liquidation was completed. On August 6, 2015, SENIOR MARKETING SYSTEM ASIA PTE. LTD., a consolidated subsidiary in Singapore, established its wholly owned subsidiary Wadoc Pte. Ltd. On October 7, 2015, the Company acquired a 60.0% stake in Medica Asia (Holdco) Limited, the holding company of MIMS Group, and included it and its 19 subsidiaries in the Company’s consolidated subsidiaries.
Notes to Consolidated Financial Statements(Significant basis of presenting consolidated financial statements)
3910
On March 1, 2016, Pure Nurse Co., Ltd. was merged with SMS Career CO., LTD. and excluded from the scope of consolidation. On March 28, 2016, the Company sold its entire stake in SMS Vietnam Company Limited and excluded it from the scope of consolidation. PT. MEETDOCTOR, a former non-consolidated subsidiary, was included in the scope of consolidation from the fiscal year ended March 31, 2016, since its financial impact became material.
(2) Number of non-consolidated subsidiaries: 2 Names of non-consolidated subsidiaries
Time Creation Limited This Source (Pvt) Ltd
(Reason for exclusion from consolidation) These non-consolidated subsidiaries are small in size, and each company’s total assets, net sales, profit (amount corresponding to equity holdings), and retained earnings (amount corresponding to equity holdings) do not have a material effect on the consolidated financial statements. These subsidiaries have relatively small direct impact on the Company’s business and, therefore, are excluded from the scope of consolidation.
2. Application of equity method
(1) Number of affiliates accounted for using equity method: 3 Names of affiliates
M3 Career, Inc. VIET NAM HIGH TECHNOLOGY SERVICES AND SOLUTIONS PROVIDING JOINT STOCK COMPANY Luvina Software Joint Stock Company
On January 22, 2016, the Company sold all shares of QLife, Inc. and excluded it from the scope of consolidation.
(2) Number of affiliates not accounted for using equity method: 1 Name of affiliates not accounted for using equity method
HelpingDoc Private Limited (3) Number of non-consolidated subsidiaries not accounted for using equity method: 2
Names of non-consolidated subsidiaries not accounted for using equity method Time Creation Limited This Source (Pvt) Ltd
(Reason for exclusion from application of equity method) The associates and non-consolidated subsidiaries not accounted for using the equity method do not have a material impact in aggregate, and each company’s profit (amount corresponding to equity holdings) and retained earnings (amount corresponding to equity holdings) do not have a material effect on the consolidated financial statements. Therefore, they are not accounted for using the equity method.
3. Fiscal year of consolidated subsidiaries The fiscal year-end of SMS Career CO., LTD., SMS Support Service CO., LTD., EIR Inc., SMS Medicare Service CO., LTD., SMS Financial Service CO., LTD., and eChannelling PLC is March 31, the same as the Company’s consolidated balance sheet date. The balance sheet date of consolidated subsidiaries other than the above is December 31. For these companies, preliminary financial statements as of March 31 are used in preparing the consolidated financial statements.
Notes to Consolidated Financial Statements
40
Notes to Consolidated Financial Statements
11
4. Significant 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-average method. b. Inventories
Merchandise and finished goods, work in process, and supplies Inventories are mainly measured at cost determined by the weighted-average method. (The carrying amount is measured
at lower of cost or net selling value.)
(2) Depreciation and amortization method of significant depreciable assets a. Property, plant and equipment
Property, plant and equipment are depreciated by the declining-balance 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
b. Intangible assets
Intangible assets are amortized by the straight-line method. Software 2 to 5 years Trademark rights Not amortized Customer-related assets 12 years
(3) Basis of significant allowance and provision
a. Allowance for doubtful accounts Allowance for doubtful accounts is provided at an amount determined based on the historical experience of bad debt
with respect to normal trade receivables. For specific doubtful receivables, uncollectible amounts are individually 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 provision stipulated in job placement contracts between the Company and clients, provision for refund is provided at an amount estimated based on historical experience.
(4) 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 balance sheet date
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.
(5) Basis of translation of significant assets and 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, and income and expenses are translated into yen at average exchange rates during the year. Differences arising from the translations are included in “Foreign currency translation adjustments” and “Non-controlling interests” under net assets.
41
Notes to Consolidated Financial Statements
12
(6) Amortization of goodwill–method and period of amortization Goodwill is amortized over its effective period, not exceeding 20 years, on a straight-line basis.
(7) Cash and cash equivalents in consolidated statements of cash flows The Company considers cash on hand, readily available deposits, and all highly liquid short-term instruments with a maturity of three months or less when purchased that are exposed to insignificant risk of changes in value to be cash and cash equivalents.
(8) Other significant matters for preparation of consolidated financial statements Accounting treatment of consumption taxes National and local consumption taxes are accounted for by the tax-excluded method. Non-deductible consumption tax and local consumption taxes are recorded as expenses as incurred.
42
Notes to Consolidated Financial Statements
13
(Accounting standards issued but not yet applied) The disclosure is omitted due to immateriality.
(Changes in presentation) (Consolidated balance sheets) From the fiscal year under review, short-term loans payable, which was previously included in other under current liabilities, is presented as a separate line item since the amount became material. The previous year’s consolidated financial statements have been restated in order to reflect this change in presentation. As a result, ¥38,901 thousand of other under current liabilities, previously shown on the consolidated balance sheet as of March 31, 2015, is reclassified to ¥188 thousand of short-term loans payable and ¥38,713 thousand of other. (Consolidated statements of cash flows) Increase in short-term loans payable, which was previously included in other under net cash provided by (used in) financing activities, is presented as a separate line item since the amount became material. The previous year’s consolidated financial statements have been restated in order to reflect this change in presentation. As a result, ¥188 thousand of other under net cash provided by (used in) financing activities, previously shown in the consolidated statement of cash flows for the year ended March 31, 2015, is reclassified to ¥188 thousand of increase in short-term loans payable. (Change in accounting policies regarding business combinations) The Company applied provisions stipulated in Paragraph 39 of the “Revised Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, September 13, 2013), and changed the presentation of net income and using the term “non-controlling interests” instead of “minority interests.” In order to reflect this change in the presentation, certain reclassifications were made to the previous year’s consolidated financial statements.
43
Notes to Consolidated Financial Statements
14
(Consolidated balance sheets) * Investment in non-consolidated subsidiaries and affiliates included in investment securities is as follows: (Thousands of yen)
As of March 31, 2015 As of March 31, 2016
Investment securities (shares) 1,078,234 958,951 (Consolidated statements of income)
*1 Major items and amounts included in selling, general and administrative expenses are as follows: (Thousands of yen)
Fiscal year ended March 31, 2015
Fiscal year ended March 31, 2016
Salaries and allowance 3,808,905 4,678,830 Advertising expenses 2,519,267 2,772,896 Amortization of goodwill 343,300 425,672 Depreciation 264,081 557,450 Business consignment expenses 1,606,425 2,117,667 Legal welfare expenses 537,282 697,945 Rents 460,594 579,930 Provision for bonuses 204,986 282,668 Retirement benefit expenses 51,845 30,794 Provision of allowance for doubtful accounts 75,661 45,861
*2 Research and development expenses included in general and administrative expenses are as follows: (Thousands of yen)
Fiscal year ended March 31, 2015
Fiscal year ended March 31, 2016
21,643 24,422
*3 Inventories as of the balance sheet date are measured at lower of cost or net selling value. Loss on valuation of inventories included in cost of sales is as follows:
(Thousands of yen)
Fiscal year ended March 31, 2015
Fiscal year ended March 31, 2016
12,323 11,872
44
Notes to Consolidated Financial Statements
15
(Consolidated statements of comprehensive income) * Reclassification adjustments and tax effects in connection with other comprehensive income (Thousands of yen)
Fiscal year ended March 31, 2015
Fiscal year ended March 31, 2016
Valuation difference on available-for-sale securities: Amount arising during the year 15,322 (824)
Reclassification adjustments － －
Amount before tax effects 15,322 (824)
Tax effects (4,955) 252
Valuation difference on available-for-sale securities 10,366 (571)
Foreign currency translation adjustments: Amount arising during the year 270,954 (114,519)
Reclassification adjustments － 19,150
Foreign currency translation adjustments 270,954 (95,369) Share of other comprehensive income of entities accounted for using equity method:
Amount arising during the year (9,406) 12,001
Reclassification adjustments 11,340 －
Share of other comprehensive income of entities accounted for using equity method
1,933 12,001
Total other comprehensive income 283,255 (83,939)
45
Notes to Consolidated Financial Statements
16
(Consolidated statements of changes in net assets) Fiscal year ended March 31, 2015 1. Matters regarding class and number of issued shares and class and number of treasury shares
(Shares)
Number of shares at beginning of year Increase Decrease Number of shares at
end of year
Issued shares:
Common stock (Note 2) 20,935,200 20,952,000 － 41,887,200
Total 20,935,200 20,952,000 － 41,887,200
Treasury shares:
Common stock (Note 3) 459,900 870,372 － 1,330,272
Total 459,900 870,372 － 1,330,272
(Notes) 1. Based on the resolution of the Board of Directors’ meeting held on November 19, 2014, the Company implemented a 2-for-1 stock split effective January 1, 2015.
2. Increase in issued shares is due to the stock split (20,943,600 shares) and exercise of stock options (8,400 shares). 3. Increase in treasury shares is due to the stock split (620,832 shares) and purchase of treasury shares (249,540 shares).
2. Matters regarding subscription rights to shares
Classification Description of subscription
rights to shares
Class of shares subject to
subscription rights to shares
Number of shares subject to subscription rights to shares (shares) Balance at end of year
(Thousands of yen)
Beginning of year
Increase Decrease End of year
The
Company
(Parent
company)
February 2006
No. 5 Stock Option
Common stock
16,800 － 16,800 － －
August 2011
No. 7 Stock Option
Common stock
54,400 － － 54,400 3,686
July 2012
No. 8 Stock Option
Common stock
91,200 － － 91,200 13,142
July 2013
No. 9 Stock Option
Common stock
100,800 － － 100,800 12,423
July 2014
No. 10 Stock Option Common stock
－ 200,000 － 200,000 18,085
Total － 263,200 200,000 16,800 446,400 47,339
(Notes) 1. No. 5 Stock Option has become exercisable on February 18, 2007. Other stock options will be exercisable on the following dates: No. 7 Stock Option on August 19, 2016; No. 8 Stock Option on July 20, 2017; No. 9 Stock Option on July 18, 2018, and No. 10 Stock Option on July 17, 2021.
2. Increase is due to an issuance of subscription rights to shares. 3. Based on the resolution of the Board of Directors’ meeting held on November 19, 2014, the Company implemented a
2-for-1 stock split effective January 1, 2015. The number of shares above represents those after the stock split.
46
Notes to Consolidated Financial Statements
17
3. Matters regarding dividend (1) Dividend payment
Resolution Class Dividend amount (Thousands of yen)
Dividend per share (Yen) Record date Effective date
Ordinary General Meeting of Shareholders held on June 20, 2014
Common stock 204,753 10 March 31, 2014 June 23, 2014
(Note) The Company implemented a 2-for-1 stock split effective January 1, 2015. The dividend per share above in the amount of ¥10 is the amount before the stock split.
(2) Of the dividends whose record date belongs to the fiscal year ended March 31, 2015, the dividend whose effective
date falls in the fiscal year ended March 31, 2016
Resolution Class Recourse
Dividend amount
(Thousands of yen)
Dividend per share (Yen) Record date Effective date
Ordinary General Meeting of Shareholders held on June 24, 2015
Common stock
Retained earnings
283,898 7 March 31, 2015 June 25, 2015
Fiscal year ended March 31, 2016 1. Matters regarding class and number of issued shares and class and number of treasury shares
(Shares)
Number of shares at beginning of year Increase Decrease Number of shares at
end of year
Issued shares:
Common stock 41,887,200 － － 41,887,200
Total 41,887,200 － － 41,887,200
Treasury shares:
Common stock 1,330,272 － － 1,330,272
Total 1,330,272 － － 1,330,272
47
Notes to Consolidated Financial Statements
18
2. Matters regarding subscription rights to shares
Classification Description of subscription
rights to shares
Class of shares subject to
subscription rights to shares
Number of shares subject to subscription rights to shares (shares) Balance at end of year
(Thousands of yen)
Beginning of year
Increase Decrease End of year
The
Company
(Parent
company)
August 2011
No. 7 Stock Option
Common stock
54,400 － 16,000 38,400 4,021
July 2012
No. 8 Stock Option
Common stock
91,200 － 19,200 72,000 15,813
July 2013
No. 9 Stock Option
Common stock
100,800 － 28,800 72,000 18,073
July 2014
No. 10 Stock Option Common stock
200,000 － － 200,000 42,200
Total － 446,400 － 64,000 382,400 80,108
(Notes) 1. The stock options above will be exercisable in the following schedule: No. 7 Stock Option on August 19, 2016; No. 8 Stock Option on July 20, 2017; No. 9 Stock Option on July 18, 2018, and No. 10 Stock Option on July 17, 2021.
2. Decreases are due to the expiration of subscription rights to shares.
3. Matters regarding dividend (1) Dividend payment
Resolution Class Dividend amount (Thousands of yen)
Dividend per share (Yen) Record date Effective date
Ordinary General Meeting of Shareholders held on June 24, 2015
Common stock 283,898 7 March 31, 2015 June 25, 2015
(2) Of the dividends whose record date belongs to the fiscal year ended March 31, 2016, the dividend whose effective
date falls in the fiscal year ending March 31, 2017
Resolution Class Recourse
Dividend amount
(Thousands of yen)
Dividend per share (Yen) Record date Effective date
Ordinary General Meeting of Shareholders held on June 24, 2016
Common stock
Retained earnings
283,898 7 March 31, 2016 June 27, 2016
48
Notes to Consolidated Financial Statements
19
(Consolidated statements of cash flows) *1 Reconciliation of cash and cash equivalents in the consolidated statements of cash flows to accounts and amounts in the
accompanying consolidated balance sheets (Thousands of yen)
Fiscal year ended March 31, 2015
Fiscal year ended March 31, 2016
Cash and deposits 2,708,623 5,291,707 Time deposits with maturity in excess of three
months (14,615 ) (144,364 )
Cash and cash equivalents 2,694,008 5,147,343 *2 Assets and liabilities of companies which newly became consolidated subsidiaries through a share acquisition Fiscal year ended March 31, 2015
eChannelling PLC became a consolidated subsidiary of the Company through a share acquisition. The details of assets and liabilities of eChannelling PLC at the beginning of consolidation and the relationship between the acquisition cost of eChannelling PLC’s shares and net proceeds to acquire eChannelling PLC are as follows:
(Thousands of yen) Current assets 28,243
Non-current assets 110,103
Goodwill 600,141
Current liabilities (35,265)
Non-current liabilities (1,713)
Non-controlling interests (66,504)
Subtotal 635,005
Investments accounted for using equity method at the
time of acquisition (213,684)
Gain on step acquisitions (185,084)
Cash and cash equivalents (10,821)
Difference: Proceed to acquire eChannelling PLC 225,415 Fiscal year ended March 31, 2016
The Company acquired shares of Medica Asia (Holdco) Limited, the holding company of MIMS Group, so that Medica Asia (Holdco) Limited and MIMS Group companies (collectively, “MIMS Group”) became consolidated subsidiaries of the Company. The details of assets and liabilities of MIMS Group at the beginning of consolidation and the relationship between the acquisition cost of Medica Asia (Holdco) Limited’s shares and net proceeds for acquisition are as follows:
(Thousands of yen) Current assets 1,914,880
Non-current assets 13,575,595
Goodwill 11,920,862
Current liabilities (2,482,056)
Non-current liabilities (2,450,646)
Foreign currency translation adjustments 158,314
Non-controlling interests (4,223,108)
Subtotal 18,413,839
Cash and cash equivalents (529,908)
Difference: Proceeds to acquire MIMS Group 17,883,931 (Leases)
The disclosure is omitted because all lease transactions for the fiscal year ended March 31, 2016 are not material in view of the Company’s business, and each transaction is small in size.
49
Notes to Consolidated Financial Statements
20
(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 and related risk, and risk management Accounts receivable–trade and accounts receivable–other are exposed to the credit risk of customers; however, the risk is limited because most of these receivables become 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. Investment securities consist of unlisted shares and their market value is difficult to determine. Some of them are investments in companies outside Japan and are exposed to foreign exchange risk. However, the Company considers that the risk exposure is limited because the Company closely monitors the business conditions of the issuers. Lease and guarantee deposits are primarily associated with lease contracts for the headquarters and other office buildings. In order to assess the credit risk of the lessors who hold deposits, the Company investigates and evaluates their credit status before concluding the lease contracts. 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 by reviewing the cash management plan on a monthly basis. Short-term loans payable are primarily for share acquisitions related to M&A transactions, and exposed to interest rate fluctuation risk. The Company avoids such risk by appropriately preparing the cash management plan based on future business plans and demand for funds.
(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. Because estimations of fair value incorporate variable factors, the fair value may vary when different assumptions are applied.
50
Notes to Consolidated Financial Statements
21
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 is extremely difficult to estimate are excluded from the following table (See Note 2 below).
As of March 31, 2015 (Thousands of yen)
Carrying amount
Fair value
Difference
(1) Cash and deposits 2,708,623 2,708,623 －
(2) Accounts receivable–trade 2,486,428
Allowance for doubtful accounts (*1) (93,840)
2,392,587 2,392,587 －
(3) Accounts receivable–other 1,306,471 1,306,471 －
(4) Lease and guarantee deposits 382,489 338,694 (43,795)
Total assets 6,790,172 6,746,376 (43,795)
(5) Accounts payable–other 2,604,033 2,604,033 －
(6) Income taxes payable 554,460 554,460 －
Total liabilities 3,158,493 3,158,493 －
(*1) The amount is presented as allowance for doubtful accounts receivable–trade.
As of March 31, 2016 (Thousands of yen)
Carrying amount
Fair value
Difference
(1) Cash and deposits 5,291,707 5,291,707 －
(2) Accounts receivable–trade 3,982,752
Allowance for doubtful accounts (*1) (171,014)
3,811,737 3,811,737 －
(3) Accounts receivable–other 1,891,531 1,891,531 －
(4) Lease and guarantee deposits 516,448 503,627 (12,821)
Total assets 11,511,425 11,498,604 (12,821)
(5) Short-term loans payable 19,002,638 19,002,638 －
(6) Accounts payable–other 3,443,188 3,443,188 －
(7) Income taxes payable 947,942 947,942 －
Total liabilities 23,393,769 23,393,769 －
(*1) The amount is presented as allowance for doubtful accounts receivable–trade.
51
Notes to Consolidated Financial Statements
22
(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 is extremely 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 that allowance for doubtful accounts approximates the amount of credit risk. (4) Lease and guarantee deposits These deposits are principally associated with lease contracts for the headquarters and other offices. The fair value is based on the present value discounted by reasonable rates after deducting estimated restoration expenses from respective amounts of lease and guarantee deposits.
Liabilities (5) Short-term loans payable, (6) Accounts payable–other, (7) Income taxes payable Since these items are settled in a short period of time, their carrying amount approximates fair value.
2. Financial instruments whose fair value is extremely difficult to determine (Thousands of yen)
Classification As of March 31, 2015 As of March 31, 2016
Investment securities
Unlisted shares 1,240,328 1,025,966
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.
52
Notes to Consolidated Financial Statements
23
3. Maturity analysis for financial assets and securities with contractual maturities As of March 31, 2015 (Thousands 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 2,706,028 － － －
Accounts receivable–trade 2,486,428 － － －
Investment securities
Available-for-sale securities with maturities
Bonds (Corporate bonds) － 79,750 － －
Total 5,192,456 79,750 － －
As of March 31, 2016 (Thousands 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 5,263,019 － － －
Accounts receivable–trade 3,982,752 － － －
Investment securities
Available-for-sale securities with maturities
Bonds (Corporate bonds) － 40,150 － －
Total 9,245,771 40,150 － －
(Securities)
Impairment of securities Fiscal year ended March 31, 2015 The Company omitted disclosure due to immateriality. Fiscal year ended March 31, 2016 The Company omitted disclosure due to immateriality.
53
Notes to Consolidated Financial Statements
24
(Retirement benefit) 1. Summary of retirement benefit plans
The Group has a lump-sum payment plan.
2. Defined benefit plan (1) Reconciliation between beginning balance and ending balance of projected benefit obligations (Thousands of yen)
Fiscal year ended March 31, 2015
Fiscal year ended March 31, 2016
Balance at beginning of year 128,872 89,634 Service cost 38,736 22,721
Interest cost 570 308
Actuarial gain or loss 12,538 7,764 Retirement benefits paid (24,861) (8,490)
Decrease due to abolishment of
retirement benefit plan (66,221) －
Balance at end of year 89,634 111,938
(2) Reconciliation between the ending balance of projected benefit obligations and net defined benefit liability recorded on the
consolidated balance sheets (Thousands of yen)
As of March 31, 2015 As of March 31, 2016
Unfunded retirement benefit obligations 89,634 111,938
Net defined benefit liability 89,634 111,938
(3)The components of retirement benefit expenses (Thousands of yen)
Fiscal year ended March 31, 2015
Fiscal year ended March 31, 2016
Service cost 38,736 22,721
Interest cost 570 308
Amortization of actuarial gain or loss 12,538 7,764
Total retirement benefit expenses 51,845 30,794
(4) The major assumptions used for the actuarial calculation (weighted average)
As of March 31, 2015 As of March 31, 2016
Discount rates 0.4% 0.3%
54
Notes to Consolidated Financial Statements
25
(Stock options) 1. The amount of costs incurred for the stock option plans and the account recorded are as follows:
(Thousands of yen)
Fiscal year ended March 31, 2015
Fiscal year ended March 31, 2016
Share-based compensation expenses included in general and administrative expenses
27,825 32,769
2. Outline, number, and status of changes in number of stock options
(1) Outline of stock options
No. 7 Stock Option No. 8 Stock Option
Position and number of grantee 4 directors, 9 employees 5 directors, 9 employees
Number of options granted (Notes 1 and 2) 54,400 shares 91,200 shares
Date of grant August 18, 2011 July 19, 2012
Vesting condition
The grantee shall be in the position of director or employee of the Company or its associates. This shall not apply in cases where the grantee resigned the position due to expiration of the term of office, retired due to the age of retirement, or other legitimate reasons. Other terms and conditions shall be stipulated in the contract for allotment of subscription rights to shares.
The grantee shall be in the position of director or employee of the Company or its associates. This shall not apply in cases where the grantee resigned the position due to expiration of the term of office, retired due to the age of retirement, or other legitimate reasons. Other terms and conditions shall be stipulated in the contract for allotment of subscription rights to shares.
Service period August 18, 2011 – August 18, 2016
July 19, 2012 – July 19, 2017
Exercise period August 19, 2016 – August 18, 2021
July 20, 2017 – July 19, 2022
55
Notes to Consolidated Financial Statements
26
No. 9 Stock Option No. 10 Stock Option
Position and number of grantee 4 directors, 13 employees 1 director
Number of options granted (Notes 1 and 2) 100,800 shares 200,000 shares
Date of grant July 18, 2013 July 17, 2014
Vesting condition
The grantee shall be in the position of director or employee of the Company or its associates. This shall not apply in cases where the grantee resigned the position due to expiration of the term of office, retired due to the age of retirement, or other legitimate reasons. Other terms and conditions shall be stipulated in the contract for allotment of subscription rights to shares.
The grantee shall be in the position of director of the Company. This shall not apply in cases where the grantee resigned the position due to expiration of the term of office or other legitimate reasons. Other terms and conditions shall be stipulated in the contract for allotment of subscription rights to shares.
Service period July 18, 2013 – July 18, 2018
July 17, 2014 – July 17, 2021
Exercise period July 19, 2018 – July 18, 2023
July 17, 2021 – July 16, 2024
(Notes) 1. It is converted and stated as number of shares. 2. Based on the resolution of the Board of Directors’ meeting held on November 19, 2014, the Company implemented a
2-for-1 stock split effective January 1, 2015. The number of shares above represents those after the stock split.
56
Notes to Consolidated Financial Statements
27
(2) Number and status of changes in number of stock options The following tables are based on the stock options that existed for the year ended March 31, 2016. The number of stock options is converted and stated as the number of shares.
a. Number of stock options (Shares)
No. 7 Stock Option No. 8 Stock Option No. 9 Stock Option
Non-vested:
Outstanding at March 31, 2015 54,400 91,200 100,800
Granted － － －
Increase due to stock split － － －
Forfeited 16,000 19,200 28,800
Vested － － －
Outstanding at March 31, 2016 38,400 72,000 72,000
Vested:
Outstanding at March 31, 2015 － － －
Vested － － －
Increase due to stock split － － －
Exercised － － －
Forfeited － － －
Outstanding at March 31, 2016 － － －
57
Notes to Consolidated Financial Statements
28
No. 10 Stock Option
Non-vested:
Outstanding at March 31, 2015 200,000
Granted －
Increase due to stock split －
Forfeited －
Vested －
Outstanding at March 31, 2016 200,000
Vested:
Outstanding at March 31, 2015 －
Vested －
Increase due to stock split －
Exercised －
Forfeited －
Outstanding at March 31, 2016 －
(Note) Based on the resolution of the Board of Directors’ meeting held on November 19, 2014, the Company implemented a 2-for-1 stock split effective January 1, 2015. The number of shares above represents those after the stock split.
b. Price information of stock options (Yen)
No. 7 Stock Option No. 8 Stock Option No. 9 Stock Option
Exercise price 213 468 743
Average market price of the stock at the time of exercise
－ － －
Fair value (date of grant) 112 293 457
No. 10 Stock Option
Exercise price 1,471
Average market price of the stock at the time of exercise
－
Fair value (date of grant) 844
(Note) Based on the resolution of the Board of Directors’ meeting held on November 19, 2014, the Company implemented a 2-for-1 stock split effective January 1, 2015. The number of shares above represents those after the stock split.
3.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, the number of options that has been forfeited is reflected.
58
Notes to Consolidated Financial Statements
29
(Tax-effect accounting) 1. Major components of deferred tax assets and deferred tax liabilities (Thousands of yen)
As of March 31, 2015 As of March 31, 2016
Deferred tax assets: Enterprise tax payable 26,763 40,267 Provision for bonuses 82,943 79,563 Provision for refund 48,030 45,179 Legal welfare expenses payable 11,188 18,346 Allowance for doubtful accounts 16,833 27,293 Provision for sales returns 1,554 1,203 Loss on abolishment of retirement benefit plan 26,754 － Amortization of software 79,098 93,427 Provision for retirement benefits 27,663 35,834 Incidental costs of share acquisition － 88,348 Loss carryforward 319,787 406,418 Other 3,432 50,199
Subtotal 644,051 886,084 Valuation allowance (328,129) (406,725) Total deferred tax assets 315,922 479,358 Deferred tax liabilities:
Customer-related assets － 2,442,301 Valuation difference on available-for-sale securities 157 91
Total deferred tax liabilities 157 2,442,393 Deferred tax assets (liabilities), net 315,764 (1,963,035)
2. Reconciliation between the statutory tax rate and the effective tax rate reflected in the consolidated statements of income
The disclosure is omitted because the difference between the statutory tax rate and the effective tax rate reflected in the consolidated statements of income is less than 5% of the statutory tax rate.
3. Adjustment to amounts of deferred tax assets and liabilities due to change in income tax rate The “Act for Partial Revision of the Income Tax Act, etc.” (Act No. 15, 2016) and the “Act for Partial Revision of the
Local Tax Act, etc.” (Act No. 13, 2016), have been enacted on March 29, 2016 in the Diet session, and the income tax rate is reduced from the year beginning on and after April 1, 2016. Accordingly, the effective statutory tax rate used in calculating deferred tax assets and liabilities is reduced from 32.34% to 30.86% for the temporary differences expected to be reversed in the years beginning on April 1, 2016 and 2017 and 30.62% for those expected to be reversed in the years beginning on and after April 1, 2018. The impact on the consolidated financial statements is immaterial.
4. Accounting treatment under consolidated taxation system The Company and certain consolidated subsidiaries filed an application for the consolidated taxation system for the fiscal
year ended March 31, 2016 and was approved to adopt it from the fiscal year ending March 31, 2017. Accordingly, effective from the fiscal year ended March 31, 2016, the Company applied the accounting treatment assuming the application of the consolidated taxation system in accordance with the “Revised Practical Solution on Tentative Treatment of Tax Effect Accounting Under Consolidated Taxation System (Part 1)” (ASBJ Practical Issue Task Force No. 5, January 16, 2015) and the “Revised Practical Solution on Tentative Treatment of Tax Effect Accounting Under Consolidated Taxation System (Part 2)” (ASBJ PITF No. 7, January 16, 2015).
(Business combination) Business combination through acquisition 1. Overview of business combination (1) Name of acquired company and description of its business
Name of acquired company: Medica Asia (Holdco) Limited Business description: Medical information service for healthcare providers
(2) Primary reason for business combination
Positioning MIMS Group as its core business in Asia and Oceania, the Company aims to actively promote its overseas business strategy and to realize further growth.
59
Notes to Consolidated Financial Statements
30
(3) Date of business combination October 7, 2015
(4) Legal form of business combination
Share acquisition in exchange for cash
(5) Company name after business combination No change in the name of the company after business combination
(6) Voting share acquired Voting share held after business combination: 60%
(7) Grounds for determining acquiring company Due to acquisition of shares by SMS Co., Ltd. in exchange for cash
2. Period of financial results of the acquired company included in the consolidated financial statements
From October 1, 2015 to December 31, 2015 3. Acquisition cost and its breakdown
Compensation for acquisition Cash and deposits ¥18,413,839 thousand Acquisition cost ¥18,413,839 thousand
4. Description and amount of major acquisition-related expenses
Advisory fee, etc. ¥309,415 thousand 5. Amount, reason, amortization method, and amortization period of goodwill (1) Amount of goodwill incurred
¥11,920,862 thousand (2) Reason for goodwill
The goodwill arose from additional future income-generating power expected to derive from business development going forward.
(3) Method and period of amortization Straight-line method over 20 years
6. Amounts of assets received and liabilities assumed on the day of business combination, and their breakdown
Current assets ¥ 1,914,880 thousand Non-current assets ¥ 13,575,595 thousand Total assets ¥ 15,490,475 thousand Current liabilities ¥ 2,482,056 thousand Non-current liabilities ¥ 2,450,646 thousand Total liabilities ¥ 4,932,703 thousand
7. Amounts allocated to intangible assets other than goodwill, their breakdown and period of amortization
Trademark rights ¥9,992,668 thousand Period of amortization: Not amortized Customer-related assets ¥3,094,968 thousand Period of amortization: 12 years
8. Estimated amount and calculation method of influence on the consolidated statement of income for the fiscal year ended March 31,
2016, if business combination had been completed at the beginning of the fiscal year ended March 31, 2016 The amount is not calculated since it is difficult to estimate.
60
Notes to Consolidated Financial Statements
31
(Asset retirement obligations) Asset retirement obligations recorded in the consolidated balance sheets
a. Overview of asset retirement obligations Asset retirement obligations include the obligation to restore assets to their original state, etc., related to real estate lease contracts for the headquarters and other office buildings.
b. Calculation method for asset retirement obligations Asset retirement obligations are determined based on past actual restoration costs, and related depreciation is calculated over the expected period of use of 3 years based on past actual lease periods.
c. Changes in asset retirement obligations (Thousands of yen)
Fiscal year ended March 31, 2015
Fiscal year ended March 31, 2016
Balance at beginning of year 19,520 14,078 Increase due to acquisition of non-current assets 6,915 5,458 Decrease due to fulfillment of asset retirement
obligations (12,357) (13,010)
Balance at end of year 14,078 6,526
(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 None to report.
Information on impairment loss of non-current assets by reporting segment Fiscal year ended March 31, 2015 The Company omitted disclosure since there is only one segment in the Group. Fiscal year ended March 31, 2016 The Company omitted disclosure since there is only one segment in the Group.
Information on amortization of goodwill and balance of unamortized goodwill by reportable segment None to report.
Information on negative goodwill incurred by reportable segment None to report.
61
Notes to Consolidated Financial Statements
32
Related party transactions 1. Related party transactions Transactions between the Company and related parties
The Company’s subsidiaries and affiliates Fiscal year ended March 31, 2015
Classifica-tion
Name of company Location
Capital (Thousands
of yen) Type of business Percentage of
voting shares Business
relationship Type of
transaction
Transaction amount
(Thousands of yen)
Account
Balance at end of year (Thousands
of yen)
Affiliated
company
M3 Career,
Inc.
Minato-ku,
Tokyo 50,000
Job placement
business targeting
healthcare providers
and workers engaged
in healthcare-related
business
(Ownership)
Direct 49%
Management
consulting/
Interlocking
director
Consulting 157,912
Accounts
receivable
–other
171,547
(Notes) 1. In the amounts above, consumption taxes were not included in the transaction amount but included in the balance at end of year.
2. The Company has concluded a management consulting contract, which stipulates that the consulting fee is determined based on the result of operations.
Fiscal year ended March 31, 2016 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, 2016, M3 Career, Inc. was a major affiliate of the Company, and its condensed financial information is as follows:
(Thousands of yen)
M3 Career, Inc.
2015 2016
Total current assets 2,423,220 2,861,133 Total non-current assets 181,386 228,339 Total current liabilities 1,114,850 1,239,479 Total non-current liabilities 25,325 － Total net assets 1,464,431 1,849,992 Net sales 5,712,352 6,924,623 Profit before income taxes 1,727,124 2,292,466 Profit 1,148,002 1,533,564
62
Notes to Consolidated Financial Statements
33
(Amounts per share)
Fiscal year ended March 31, 2015
Fiscal year ended March 31, 2016
Net assets per share (Yen) 168.03 211.03 Profit per share (Yen) 44.72 55.86 Diluted profit per share (Yen) 44.60 55.69
(Notes) 1. Based on the resolution of the Board of Directors’ meeting held on November 19, 2014, the Company implemented a 2-for-1 stock split effective January 1, 2015. Net assets per share, profit per share, and diluted profit per share are calculated assuming that the share split had been carried out at the beginning of the fiscal year ended March 31, 2015.
2. The basis for calculating profit per share and diluted profit per share is as follows:
Fiscal year ended March 31, 2015
Fiscal year ended March 31, 2016
Profit per share: Profit attributable to owners of parent (Thousands of yen)
1,824,448 2,265,512
Amount not attributable to common stock shareholders (Thousands of yen)
－ －
Profit attributable to common stock owners of parent (Thousands of yen)
1,824,448 2,265,512
Weighted average number of shares (Shares) 40,801,154 40,556,928
Diluted profit per share: Adjustment to profit attributable to owners of parent (Thousands of yen)
－ －
Increase in number of common stock (Shares) 105,111 122,019 (Of which, exercise of subscription rights to shares [Shares])
(105,111) (122,019)
Details of residual shares excluded from calculation of diluted profit per share due to no dilutive effect
Subscription rights to shares based on the resolution of the general meeting of shareholders held on June 20, 2014: Common stock 200,000 shares
Subscription rights to shares based on the resolution of the general meeting of shareholders held on June 20, 2014: Common stock 200,000 shares
(Significant subsequent events)
None to report.
63
Notes to Consolidated Financial Statements
34
Consolidated statements schedules Details of bonds None to report.
Details of loans payable
Classification Balance at beginning of year
(Thousands of yen) Balance at end of year
(Thousands of yen) Average interest rate
(%) Repayment date
Short-term loans payable
188 19,002,638 0.27 －
Total 188 19,002,638 － －
Detail of asset retirement obligations
The disclosure is omitted since the information is provided in “Asset retirement obligations.”
Other Quarterly information for the fiscal year ended March 31, 2016
Year-to-date data First quarter Second quarter Third quarter Fiscal year ended March 31, 2016
Net sales (Thousands of yen) 5,421,407 9,325,242 12,842,667 19,069,101
Profit before income taxes (Thousands of yen)
1,868,823 2,390,401 2,113,864 3,576,161
Profit attributable to owners of parent (Thousands of yen)
1,292,536 1,602,180 1,371,898 2,265,512
Profit per share (Yen) 31.87 39.50 33.83 55.86
Quarterly data First quarter Second quarter Third quarter Fourth quarter
Profit (loss) per share (Yen) 31.87 7.63 (5.68) 22.03
64
TRANSLATION This is a translation of the original Independent Auditor’s Report filed under the Financial Instruments and Exchange Act, prepared in the Japanese 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, 2015 to March 31, 2016.
Independent Auditor’s Report
June 24, 2016 To the Board of Directors of SMS Co., Ltd. Ernst & Young ShinNihon LLC Designated and Engagement Partner, Certified Public Accountant Atsushi Ono (Seal) Designated and Engagement Partner, Certified Public Accountant Hiroyuki Ishii (Seal) Pursuant 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. for the fiscal year from April 1, 2015 to March 31, 2016. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting 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 misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. The purpose of an audit of the consolidated financial statements is not to express an opinion on the effectiveness of the entity’s internal control, but in making these risk assessments the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SMS Co., Ltd. and its consolidated subsidiaries as at March 31, 2016, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in Japan. Conflicts of Interest We have no interest in the Company which should be disclosed in compliance with the Certified Public Accountants Act.
65
Corporate Data(As of June 30, 2016)
0
2,000
4,000
6,000
8,000
10,000
0
700
1,400
2,100
2,800
3,500
2015.32014.3 2016.3
2015.32014.3 2016.3
Thousands of Shares
Yen
Classified by Type of Shareholder Major Shareholders*
Stock Price Range and Trading Volume (Tokyo Stock Exchange)
Name of shareholdersNumber of shares held
Percentage of total shares
SHUHEI MOROFUJI 10,199,600 24.35
JAPAN TRUSTEE SERVICES BANK LTD. (TRUST ACCOUNT) 2,143,900 5.12
NORTHERN TRUST CO. (AVFC) RE IEDU UCITS CLIENTS NON LENDING 15 PCT TREATY ACCOUNT
1,782,300 4.25
SHIGEKI TAGUCHI 1,727,600 4.12
AS ONE CORPORATION 1,680,000 4.01
THE MASTER TRUST BANK OF JAPAN, LTD. (TRUST ACCOUNT)
1,622,200 3.87
STATE STREET LONDON CARE OF STATE STREET BANK AND TRUST. BOSTON SSBTC A/C UK LONDON BRANCH CLIENTS - UNITED KINGDOM
1,340,000 3.20
STATE STREET BANK AND TRUST COMPANY 1,093,870 2.61
M3, Inc. 1,039,700 2.48
THE BANK OF NEW YORK, NON-TREATY JASDEC ACCOUNT
929,615 2.22
* Treasury stock (1,330,272 shares) is excluded as it has no voting rights. Also, the holding percentage is
the percentage of total number of outstanding shares, excluding treasury stock.
Foreign Investors
Individuals and Others
Financial Institutions
Other Corporations
Financial Instruments Business Operators
Company Name SMS Co., Ltd.
Head Office Sumitomo Fudosan
Shibakoen Tower,
2-11-1, Shibakoen, Minato-ku,
Tokyo 105-0011, Japan
Founded April 4, 2003
Paid-in Capital ¥304.16 million
Number of Employees Consolidated Basis: 1,550
Non-Consolidated Basis: 258
Stock Listings First Section of the
Tokyo Stock Exchange
Securities Code 2175
Fiscal Year-End March 31
Annual Shareholders’ Meeting June
Transfer Agent Mitsubishi UFJ Trust and
Banking Corporation
44.16%
17.31%
26.65%
10.13%1.68%
Printed in Japan