Consolidated Financial Report for the Fiscal Year Ending ...Review procedures of consolidate...

－1－

Disclaimer: This financial report is solely a translation of the “Kessan Tanshin” (in Japanese, including attachments), which has been prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience of readers who prefer an English translation.

Consolidated Financial Report for the Fiscal Year Ending December 31, 2013

[Japanese GAAP] January 30, 2014

Corporate name listed on the stock exchange Softbrain Co., Ltd. Listed on the Tokyo Stock Exchange

Code number 4779 URL http://www.softbrain.co.jp/

Representative President & CEO Hirofumi Toyoda

Contact person Director & CFO Teppei Kinoshita Tel: +81-3-6880-2600

Scheduled date of General Shareholders’ Meeting: March 27, 2014

Scheduled start date of dividend payments: －

Scheduled date of filing of Securities Report: March 27, 2014 Preparation of supplementary materials for financial results: Yes Financial results briefing: Yes (for institutional investors and securities analysts)

(Round off down to the nearest million yen)

1. Consolidated Financial Results for the year ended at December 2013 (from January 1, 2013 to December 31, 2013)

(1) Consolidated Operating results

(Percents are the amount of increase or decrease that of the previous fiscal year) Net sales Operating income Ordinary income Net income

million yen ％ million yen ％ million yen ％ million yen ％

Fiscal year ended

December 31, 2013 4,416 4.2 492 -18.8 492 -20.9 391 -14.6

Fiscal year ended

December 31, 2012 4,237 24.7 606 36.3 622 37.0 458 32.4

Note: Comprehensive income (million yen) Fiscal year ended December 31, 2013: 434 (down 15.8%)

Fiscal year ended December 31, 2013: 516 (up 21.1%)

Net income per share Diluted net income per share Return on

Equity (ROE)

Ratio of ordinary

income to total

assets

Operating

income on sales

yen yen % ％％

Fiscal year ended

December 31, 2013 13.37 － 18.1 14.3 11.2

Fiscal year ended

December 31, 2012 15.67 － 26.5 22.0 14.3

Reference: Equity in earnings of affiliates (million yen) Fiscal year ended December 31, 2013: －

Fiscal year ended December 31, 2012: -2

Note: As of July 1, 2013, the company split each share of common stock into 100 shares of common stock. Therefore, the net asset per

share of the stock after the split was used for calculations in the previous consolidated accounting year. g year, and assumes that the

calculation.

(2) Consolidated financial position

Total assets Net assets Shareholders’

Equity ratio Net assets per share

million yen million yen ％ yen

As of December 31, 2013 3,667 2,722 64.4 80.70

As of December 31, 2012 3,206 2,281 61.2 67.11 Reference: Owned capital (million yen) As of Dec. 31, 2013: 2,361 As of Mar. 31, 2012: 1,963

Note: As of July 1, 2013, the company split each share of common stock into 100 shares of common stock. Therefore, the net asset per

share of the stock after the split was used for calculations in the previous consolidated accounting year. g year, and assumes that the

calculation.

(3) Consolidated cash flow conditions

Cash flow from

Operating activities

Cash flow from

investment activities

Cash flow from

financing activities

Cash and cash equivalents

balance at the end of the term

million yen million yen million yen million yen

Fiscal year ended December 31, 2013 526 -229 -1 2,058

Fiscal year ended December 31, 2012 726 -248 － 1,751

http://www.softbrain.co.jp/

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2. Dividends

Dividend per share Total

dividends

Payout ratio

(consolidated)

Dividend rate to net assets

(consolidated) 1Q-end 2Q-end 3Q-end Year-end

Total

Yen Yen Yen Yen Yen million yen ％％

Fiscal year ended

December 31, 2012 － 0.00 － 0.00 0.00 －－－

Fiscal year ended

December 31, 2013 － 0.00 － 0.00 0.00 －－－

Fiscal year ending

December 31, 2014(Forecast)

－ 0.00 － 0.00 0.00 －

3. Forecast of business results for the fiscal year ending inDecember 2014 (January 1, 2014 to December 31, 2014)

(Percent means increase or decrease ratio from the same term in the previous fiscal year)

Net sales Operating income Ordinary income Net income Net income

per share

million yen ％ million yen ％ million yen ％ million yen ％ yen

At the end of 2nd quarter

(cumulative) 2,260 9.9 200 18.0 200 16.5 90 10.9 3.08

Full year 4,800 8.0 530 7.0 530 7.0 250 -56.5 8.55

* Notes

(1) Changes of important subsidiaries during the period (change of specific subsidiary that caused a change of the scope of

consolidation) None

(2) Changes in accounting policies, changes in accounting estimates, or restatements

1) Changes of accounting policies in response to a revision of the accounting standards: No

2) Changes other than 1) above: No

3) Changes in accounting estimates No

4) Restatement of changes: No

(3) Number of shares issued (common stock)

(1) Number of outstanding shares at the end of

this term (including company-owned

shares):

As of December

31,2013 30,955,000

Sh

ares

As of December

31,2012 30,955,000

Sh

ares

(2) Number of company-owned shares at the end

of this term.

As of

December

31, 2013 1,700.00

Sh

ares

As of

December

31, 2012 1,700,000

Sh

ares

(3) Average number of shares during the term

Fiscal year

ended December

31, 2013 29,255,000

Sh

ares

Fiscal year

ended December

31, 2012 29,255,000

Sh

ares

Note: As of July 1, 2013, the company split each share of common stock into 100 shares of common stock. Therefore, the net asset per share of the stock after the

split was used for calculations in the previous consolidated accounting year. he previous fiscal year.

* Display of the auditing procedures that were implemented

Review procedures of consolidate financial statement and individual financial statement according to the Financial Instruments and Exchange Law is not

completed when this short new is disclosed.

* Statement regarding the proper use of financial forecasts and other special remarks

Precautions for writing about the outlook for the future

The statements describing about the future including the performance forecasts in this material are based on the information we obtained and certain

premises deemed reasonable. Actual results may be varied much with various factors. See “1. Analysis on management results and financial condition (1)

Analysis on consolidated management result” on page 2 as for precautions for premises for the forecast and result forecast that is the base for the business

forecast.

(Other special notes)

Effective July 1, 2013, we split each share of common stock into 100 shares, and then used 100 times the previous number of shares as the new number of

shares outstanding. This was done as the result of the decision of the Board of Directors at their meeting of January 30, 2013 and the resolution made at the

21st ordinary shareholders general meeting held on March 22, 2013.

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Table of Contents for the attached materials

1. Analysis of management results and financial figures

(1) Analysis of management results

(2) Analysis of financial figures

(3) Basic policy on distribution of profits and current and next period dividends

(4) Business and other risks

2. Status of the corporate group

(1) Nature of the business

(2) Status of the affiliated companies

3. Management policies

(1) Basic company management policy

(2) Targeting management indicators

(3) Middle- and long-term management strategies

(4) Issues the company must cope with

(5) Other important matters related to company management

4. Consolidated financial statements

(1) Consolidated balance sheet

(2) Consolidated profit and loss statements and consolidated comprehensive profit statement

Consolidated profit and loss statement

Consolidated comprehensive profit statement

(3) Consolidated statements of changes in shareholders and equity

(4) Consolidated cash flow statement

(5) Notes concerning the consolidated financial statements

(Notes regarding the premise of a sustainable company)

(Important matters basic to creating consolidated financial statements)

(Change of display method)

(Notes related to the consolidated balance sheet)

(Notes related to the consolidated profit and loss statement)

(Notes related to the consolidated comprehensive profit statement)

(Notes related to the consolidated statements of changes in shareholders and equity)

(Notes related to the consolidated cash flow statement)

(Segment information)

(Per share information)

(Important events after the report)

5. Others

(1) Changes in officers

(2) Others

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1. Analysis of management results and financial figures

(1) Analysis of management results

When we look back at the Japanese economy during this consolidated fiscal year, though there were some negative

factors such as unstable economies abroad, generally the Japanese economy was in a recovery mood. This was led by

steady momentum in personal consumption backed by expectations of results from Abe administration economic

policies, and gradual increases in facilities investments by corporations.

Our group, under these circumstances, has focused on these management policies: the fusion of tools and services,

taking up the challenge of going for large volume orders and the implementation of speed and efficiency. We have

been using these to work toward improving our business performance in each segment, including our e-Sales Manager

related business, field marketing business, and system development business. During this consolidated fiscal year, our

core businesses, the e-Sales Manager-related business and field marketing business, are getting good steady results,

and our profits have increased. However, this increase in profit did not cover the decrease in income and profit

incurred by the system development business and other business. So the group as a whole suffered a decrease in profit.

As a result, our sales totaled 4,416 million yen (a 4.2% increase from the previous year), our operating profit was 492

million yen (an 18.8% decrease from the previous year), our ordinary profit was 492 million yen (a 20.9% increase

from the previous year) and we had a net profit of 391 million yen (a 14.6% decrease from the previous year).

Looking at the results by segment, while we have focused on the e-Sales Manager Remix Cloud (which works on

smart phones and tablets), we have continued to provide our education and training services, including our salespeople

development consulting service. In addition, through our ongoing investment in development, we are striving to meet

widespread customer requirements. In terms of our sales in this consolidated fiscal year, we mainly aimed to expand

sales channels for small and medium-sized firms, and Otsuka Corporation started to sell our e-Sales Manager Remix

Cloud.” In terms of development, we added a succession of functions to our “e-Sales Manager RemixCoud,” such as a

link to Google calendar and a voice-recognition function, and we collaborated with some third-party packages systems.

In addition, we are also working hard to improve performance and operability, keeping in mind our desire to have the

best handy SFA on the market. Considering not only the investment for development, but the spread of smart devices

greatly increased the needs of the market situation in mind, we recruit personnels aiming to reinforce our

organizational structure, and strengthen investment for sales promotion and advertisement. As a result of the above,

our sales amount reached to 2,267million yen (3.9% increase from the last fiscal year), our segment profits reached to

276 million yen (21.3% decrease from the last fiscal year).

Our “Field Marketing business” is primarily in charge of our over-the-counter sales support activities and market

research business. This business segment is always aware of the importance of improving quality, and its sales

activities are geared to responding to the growing needs of corporations. As a result, the section continued to show

steady results, including large-scale projects and repeat orders from our existing customers. Furthermore, we have

started to provide two new services. They are: 1) a service to obtain data about the reasons consumers make purchases

and 2) the “Rounder Human Resource Bank” (which recruits and dispatches personne to go around to retailers to

support the sale of a company’s products) As a result of the above, our sales amount reached to 1,373million yen

(10.7% increase from the last fiscal year), our segment profits reached to 254 million yen (10.0% from the last fiscal

year).

Our “System development business” offers services that include the development of software programs under

consignment and the development and customization of customer's software packages. During this consolidated fiscal

year, we strove to create new development projects for existing customers and to acquire new customers. However,

due to delayed delivery of some projects and one unprofitable project -- a problem that carried over from the previous

year until the end of our 2nd quarter -- our sales were 485 million yen (an 8.8% decrease from the previous year) and

the segment loss was 56 million yen. (For your reference, the account in the previous fiscal year had a loss of 55

million yen.) It should be noted that, in order to respond to changes in the offshore development situation in China, at

the end of the 3rd quarter cumulative period we transferred one of our subsidiaries, Softbrain Offshore Resources Co.,

Ltd. (Qingdao), to a third party.

In other businesses, our sales amount was 473 million yen (an 8.0% decrease from the previous fiscal year), our

segment profit was 5 million yen (a 91.3% decrease from the previous fiscal year).

－5－

Forecast of consolidated business results for the next fiscal year

The Japanese economy in fiscal 2014 may continue its recovery trend due to a return by firms to facilities investment.

However, there are concerns that the domestic economy may be suppressed in parallel with overseas economic

difficulties, and because of the negative effect on personal consumption of the scheduled increase in the consumption

tax rate. However, Japanese firms have identified “improve profitability” and “expand sales and market share” as

among the most important topics for management, and smart devices are rapidly penetrating corporate business. These

facts may provide a tailwind to our e-Sales Manager related business and the others as well.

Under this economic environment, forecast for FY 2014 will be as follows:

Sales : 4,800million yen

Profit on sales : 530 million yen

Ordinary profit : 530 million yen

Current profit : 250 million yen

The above reports were created on the basis of currently available information; the effects of potential risks and

uncertainties are not included. Therefore, please note that due to changes in various factors, the actual earning may be

significantly different from the reports given above.

(2) Analysis of financial figures

1) Assets, liabilities and net assets

The total assets at the end of this consolidated fiscal year reached to 3,667million yen as compared with the same

period last year, an increase of 461 million yen. This was mainly due to an increase of 307 million yen in cash and

deposits. Debt reached to 944 million yen, a increase of 20 million yen as compared with the end of the previous

consolidated fiscal year. This was mainly due to an increase of 38 million yen in notes and accounts payable, and an

increase of 34 million yen in advanced receipts, though arrears decreased 29 million yen.

Net assets reached 2,722 million yen, an increase of 441 million yen as compared with the end of the previous

consolidated fiscal year. This was mainly due to an increase of 397 million yen in retained earnings after the current

net profit was recorded. The percent of capital we held in our own fund reached 64.4%.

2) Cash flow conditionss

By the end of our consolidated fiscal year, cash and cash equivalents (hereafter referred to as “the fund”) reached

2,058million yen, an increase of 307 million yen as compared with the end of the last consolidated fiscal term. The

increase or decrease in various flows of cash and the factors behind them are as follows:

(Cash flow through sales activities)

The funds obtained through sales activities was 526 million yen (726 million yen in the previous year). This is mainly

due to increased factors such as a net profit before tax of 510 million yen, depreciation costs of 155 million yen, and

the increased factor of a payment reduction of 56 million yen in the trade receivable.

(Cash flow by investment activities)

The funds spent on investment activities were 229 million yen (an expenditure of 248 million yen in the previous

year). This was mainly due to the increased expenditure of 43 million yen from obtaining tangible fixed assets, and

expenditure of 204 million yen of obtaining intangible fixed assets.

(Cash flow by financing activities)

The amount of the fund spent on financing activities was 1 million yen (thus remaining the same, when compared

with the same period last year).

(3) Basic policy on distribution of profits and current and next period dividends

We recognize returning profits to shareholders as one of its management important priorities. As a basic policy for this

purpose, we provide dividend elastically according to our growth and business results while considering it imperative

to build internal reserves for reinforcing our structure and for future developments of our business.

Regarding the fiscal year under review, it was concluded that there are still insufficient funds accumulated to distribute

profits. We sincerely regret that there will be no dividend distributed this term, either. In addition, regarding

subsequent periods, at the moment we have no plans to issue a dividend, but in view of possible changes in the

economic environment and business conditions, we would like to continue to re-examine our shareholder return policy

as events unfold.

Furthermore, our basic policy for the internal reserve funds is to strengthening business management, investment for

facilities, and for future developments such as research and development,

－6－

(4) Business and other risks

These are the matters that may affect the management results, financial status, and stock prices of our group.

1) Abnormal fluctuations of financial condition and business results

The main products of our group, our e-Sales Manager related business, is a research and development type of business

based on software packages, and therefore the expansion of our upfront investment in research and development may

increase our research and development expenses. In addition, the amount of orders received in the system development

business is large, and they take a long time to complete. Sometimes a customer may request a change or add to the

requested specifications, and significant delays in development may possible. These events may affect the financial

figures and business results of our group.

2) Dependence on our main products and services

Our group is highly dependent on e-Sales Manager related business. In the 2013 fiscal year, it occupies approximately

51% of our consolidated net sales. If the sales of this product drop due to market changes and stiffer competition, it

will have a bad effect on our results.

3) Acquisition of skilled personnel

We recognize that we can only provide high quality service to our customers if we secure excellent talent and improve

their skills. We recruit new graduates and mid-career workers continuously in order obtain top talent. However, if we

cannot secure peoplot secure talents as scheduled, the shorted talent may badly affect business results and financial

situation.

4) Intellectual property rights

We carefully investigate patents and intellectual property rights related to our software and business models. However,

intellectual property rights issued on information technology are relatively shallow. In some fields, established

practices do not exisist. Therefore, the matter of the intellectual property is limited to ones recognized at present. It

may possible that the matter will not get to be exhaustive in the future. By now, there has been no issues to be suited

on patents and intellectual rights related to our business. However, if any patent or intellectual right will be established

in the future, our sales results and financial condition may badly be affected.

2. Status of the corporate group

(1) Nature of the business

Our group -- Softbrain Co., Ltd (the Company) -- consists of, five subsidiaries. We chiefly conduct business related to

e-Sales Manager, field marketing, and system development.

e-Sales Manager-related businesses

This segment provides licenses for sales support systems, cloud services, customized development, sales consulting,

and sales skills training.

Our field marketing business

Our “field marketing business” provides field activiies and market research services.

System development business

Our “system development business” provides the development of software on consignment.

－7－

Business system diagram of our group is shown below.

e-Sales Manager related business

Softbrain Co., Ltd. Softbrain Service Co., Ltd

Provide and sell services

Cu

sto

mers

Field marketing business Softbrain Field Co., Ltd.

System development business

Softbrain Offshore Co., Ltd.

Others Softbrain Integration Co., Ltd. Diamond Business Planning

Inc.

(2) Status of the affiliated companies

Consolidated subsidiaries

Subsidiaries Capital

Percentage of

voting rights or

non-holding rights

Major lines of business

Softbrain Field Co., Ltd. 151,499 thousand yen 58 % Field activity operation, market

research,

Softbrain Service Co., Ltd. 77,900 thousand yen 99 % Business consulting and sales skills

training

Softbrain Integration Co., Ltd. 50,175 thousand yen 100 % Business consulting and education,

using the iPad

Softbrain Offshore Co., Ltd. 90,000 thousand yen 70 % Software development on

consignment

Diamond Business Planning Inc. 10,000 thousand yen 70 % Planning, editing, and publishing

business books

3. Management policies

(1) Basic company management policy

Gur Group management policy is “always to implementing the best practices for solving business challenges and to

deliver the best process management system in the world."

The Manufacturing Department of Japanese companies strived for improvement of production through the movement of

the TQC. On the other hand, the Sales field is in the process management concept, and individual worked

individualistically, so there wa a huge amount of waste, and caused lower competitiveness.

Our group takes this as advantage of business opportunities, and we challenge various matters to thoroughly pursue

process management, from four view points of "sales construction force," "marketing force,” organization “human

power," and "IT power.” Then we provide its results to our customers as “structure” and “service”and support them

increasing competitiveness.

(2) Targeting management indicators

Our group is aiming to maximize sales and profit management under efficient organization structure, and we take 1)

sales, 2) sales profit, 3) sales profit ratio against sales 4) operating cash flow, and 5) current net income as important

management indicators.

In addition, in order to experience sales productivity improvements in our company, we focused on 6) sales per

employ, and 7) sales profit per employee.

－8－

(3) Middle- and long-term management strategies

Our group aims to become a leading company of sales subject resolution business based on the “basic policy of the

management.”

Specifically,

1) Continuous reinforce of the core of sales system "e-Sales Manager” that is to be at the center of the business, and

core to realize "sales organization force” and "IT force."

2) Reinforce our field marketing service and business book planning, editing and publishing activities, in order to

help customer corporations to improve their marketing ability and provide them with critical information about their

targeted potential customers.

3) Reinforce consulting service on “process management university” and “salesman growing consulting” that

improved “human force” required skill for sales force.

4) We are focusing on strengthening our consulting service and the improvements it makes to “the power of

Information Technology.” This includes the use of smart devices, which are indispensable for effective sales activities

in today’s world. We combine the IT environment, systems, and human resources to create a powerful blend of

business strengths.

(4) Issues the company must cope with

1) Development of the software products that users will value most highly.

We believe that when you compare them with software programs for consumers, most software programs for business

use are inferior in design, operability, performance, and user experience. They leave the user to suffer their

inconveniences in silence! Therefore, we think it is important to develop and provide software programs that are more

user-friendly. We focus on developing truly handy and useable products.

2) Evolution to an institute for professional sales research

The field of sales is still not being studied systematically and professionally, unlike the situation in marketing.

Therefore, we want to strengthen our reputation by establishing ourselves as a professional sales research institute, and

making it clear that we can deliver a rational system for good sales. This will contribute to improving our Group

competitiveness.

3) Illuminate and expand the medium-sized and small enterprises’ market

Providing problem-solving solutions for sales, including sales support systems, is now limited to large enterprises and

some medium-size enterprises. They are not supplied to medium-sized and smaller enterprises. However, we believe,

just as with accountis support system is also indispensable in corporate activities. We are in an opinion that to make

vivid and expand non-touched medium-size and small enterprise market is important.

4) Establishing a high-quality service operation

Our clients in the field marketing business are chiefly “B to C” (Business to Consumer) enterprises. Thus, they are

easily affected by depreciation of the yen and increases in the consumption tax rate. In order to expand our business

under these circumstances, we believe it is most important to establish a higher quality service operation, and maintain

a high customer satisfaction level.

5) Strengthening our plan for system development

We had been moving our system development business offshore to China. However, the depreciation of the yen and

the steep rise in labor costs in China have changed the conditions under which we developed this scheme. Therefore,

we think that it is important to expand our development scheme to include the extension of our offshore development

bases in South East Asia and the use of domestic near shore development.

6) Make stable profit by reinforcing our stock and business

In our group, we believe that reinforcing our stock business may contribute to stabilizing our profit, and this is key a

challenge. The major stocks in trade of our group are: software support services including e-Sales Manager, cloud

services, and our field marketing business.

It is important to for us to reinforce management quality by enhancing the quality of our business and services,

improve the quality of the services we provide and add value in an extensive but stable manner.

－9－

7) Strengthening management control systems

To expand the business activities discussed above, we make sure we reinforce management and internal control

systems, and assure thorough compliance, including in terms of corporate governance and the assured correctness of

our financial statements.

(5) Other important matters related to company management (matters relating to important transactions between the

directors)

There were no such matters.

－10－

4. Consolidated financial statements

(1) Consolidated balance sheet (Unit: thousand yen)

Previous consolidated fiscal

year

(December 31, 2012)

This consolidated fiscal year

(December 31, 2013)

Assets

Current assets

Cash and deposits 1,751,152 2,058,490

Notes receivable and accounts receivable 615,122 671,319

Merchandise and products 58,908 62,948

WIP (Works In Process) *154,781 *157,898

Deferred tax assets 125,384 116,791

Others 104,409 99,381

Reserve for possible loan losses -3,511 -5,646

Total current assets 2,706,247 3,061,182

Fixed assets

Tangible fixed assets

Buildings and structures 51,523 51,950

Accumulated depreciation -4,685 -21,308

Buildings and structures (net price) 46,838 30,642

Tools, appliances and fixtures 226,720 231,051

Accumulated depreciation -182,393 -199,945

Tools, appliances and fixtures (net) 44,327 31,106

Total tangible fixed assets 91,165 61,748

Intangible fixed assets

Software 227,711 307,218

Others 13,665 10,665

Total intangible fixed assets 241,376 317,884

Investments and other assets

Investment securities *28,513 *26,897

Guarantee deposit 53,679 43,925

Long-term delinquent loans 36,562 36,394

Deferred tax assets 100,114 173,175

Others 5,335 3,000

Reserve for possible loan losses -36,562 -36,394

Total investments and other assets 167,642 226,998

Total tangible fixed assets 500,184 606,631

Total assets 3,206,431 3,667,814

－11－

(Unit: thousand yen)

Previous consolidated fiscal

year

(December 31, 2012)


(December 31, 2013)

Liabilities

Current liabilities

Notes payable and accounts payable 162,592 201,119

Arrears 145,974 116,942

Unpaid bonuses to directors and corporate

auditors 15,889 13,170

Short-term debt 150,973 150,000

Corporate taxes payable 105,619 100,779

Advance receipts 186,111 220,326

Reserve for employee bonuses 40,658 25,739

Provision for sales returns 7,440 5,072

Others 109,343 111,755

Total current liabilities 924,602 944,904

Total liabilities 924,602 944,904

Net assets

Shareholders’ equity

Capital 826,064 826,064

Capital surplus 616,734 616,734

Earned surplus 783,782 1,181,502

Re-acquired stock -263,285 -263,285

Total shareholders’ equity 1,963,295 2,361,015

Other comprehensive cumulative profit

Foreign currency conversion account -24 -

Total other comprehensive cumulative profit -24 -

Minority shareholders interest 318,558 361,894

Total net assets 2,281,829 2,722,910

Total liabilities minus net assets 3,206,431 3,667,814

－12－

(2) Consolidated profit and loss statements and consolidated comprehensive profit statement

(Consolidated profit and loss statement) (Unit: thousand yen)

Previous consolidated fiscal year

(From January 1, 2012 to

December 31, 2012)



December 31, 2013)

Net sales 4,237,791 4,416,850

Cost of conducting sales activities 2,163,004 2,658,008

Gross profit from sales 2,074,787 1,758,842

Transfer for provision for sales returns 7,440 5,072

Gross profit on sales balance 2,067,347 1,753,770

Sales expenditures and general administrative

expenditures *1, *3 1,460,868 *1, *3 1,460,868

Operating income 606,478 492,783

Non-operating income

Interest and dividends receivable 938 845

Gains due to favorable foreign exchange rates 11,567 －

Revenue from subsidized projects 5,659 2,950

Settlement amounts receivable － 1,000

Profit on the sale of investment securities － 1,770

Others 3,717 2,652

Total non-operating income 21,882 9,218

Non-operating expenses

Interest payable 1,837 1,560

Equity method investment loss 2,686 133

Losses due to negative foreign exchange rates － 7,132

Others 938 386

Total non-operating expenses 5,463 9,213

Ordinary imcome 622,897 492,787

Extraordinary income

Gains from the sale of affiliated company’s

shares － 17,233

Total extraordinary income － 17,233

Extraordinary loss

Loss on retirement of fixed assets *25,835 *2 -

Impairment loss 2,961 －

Total extraordinary loss 8,797 －

This term net income before taxes and other

adjustments 614,100 510,021

Corporate tax, residual tax and business tax 103,329 139,644

Income tax and other adjustments 188 -64,468

Total corporate taxes payable 103,518 75,176

This term net income before minority

shareholders profit 510,582 434,845

Minority shareholder income 52,247 43,571

Net income 458,335 391,273

－13－

(Consolidated comprehensive profit statement) (Unit: thousand yen)



December 31, 2012)



December 31, 2013)

This term net income before minority

shareholders profit 510,582 434,845

Other comprehensive profit

Foreign currency conversion account 6,142 7

Total other comprehensive profit *16,142 *17

Comprehensive profit 516,725 434,852

(Breakdown)

Comprehensive profit relating to the parent

company shareholders 462,659 391,278

Comprehensive profit relating to minority

shareholders 54,065 43,573

－14－

(3) Consolidated statements of changes in shareholders and equity

Previous consolidated fiscal year (From January 1, 2012 to December 31, 2012)



Capital Capital surplus Earned surplus Re-acquired stock Total shareholders’

equity Balance at the beginning of this

term 826,064 616,734 325,447 -263,285 1,504,960

Amount of current change

Current profit 458,335 458,335

Change of the consolidated

range

Changes in the range of

application of the equity

method

The amount of current change

other than shareholders' equity

(net)

Total amount of current change －－ 458,335 － 458,335

Balance at the end of this term 826,064 616,734 783,782 -263,285 1,963,295

Other comprehensive cumulative profit Minority shareholders

interest Total net assets

Foreign currency

conversion account

Total other

comprehensive

cumulative profit Balance at the beginning of this

term -6,117 -6,117 260,927 1,759,770


Current profit 458,335


range －



method －

The amount of current change other than shareholders' equity

(net) 6,093 6,093 57,631 63,724

Total amount of current change 6,093 6,093 57,631 522,059

Balance at the end of this term -24 -24 318,558 2,281,829

－15－

This consolidated fiscal year (From January 1, 2013 to December 31, 2013)



Capital Capital surplus Earned surplus Re-acquired stock Total shareholders’

equity Balance at the beginning of this

term 826,064 616,734 783,782 -263,285 1,963,295


Current profit 391,273 391,273


range 5,255 5,255



method 1,190 1,190


other than shareholders' equity (net)

Total amount of current change －－ 397,719 － 397,719

Balance at the end of this term 826,064 616,734 1,181,502 -263,285 2,361,015

Other comprehensive cumulative profit Minority shareholders

interest Total net assets

Foreign currency

conversion account

Total other

comprehensive

cumulative profit Balance at the beginning of this

term -24 -24 318,558 2,281,829


Current profit 391,273


range 5,255



method 1,190


other than shareholders' equity

(net) 24 24 43,335 43,360

Total amount of current change 24 24 43,335 441,080

Balance at the end of this term －－ 361,894 2,722,910

－16－

(4) Consolidated cash flow statement (Unit: thousand yen)



December 31, 2012)



December 31, 2013)

Cash flows from operating activities

This term net income before taxes and other

adjustments 614,100 510,021

Depreciation 138,829 155,248

Long-term prepaid expenses depreciation 1,406 262

Good will depreciation 559 －

Investment loss by equity method 2,686 133

The change in the amount reserved for possible

loan losses 2,641 1,968

Change in the amount reserved for employee

bonuses 9,234 -13,393

Change in the amount provided for sales returns 950 -2,367

Interest and dividends receivable -938 -845

Interest payable 1,837 1,560

Sales losses on investment securities － -177.0

Gain and loss on the sale of affiliated company’s

shares － -17,233

Impairment loss 2,961 －

Loss on retirement of fixed assets 5,835 －

Amount of increase or decrease in trade

receivables -125,461 -56,426

Amount of increase or decrease in inventory

assets -34,042 49,437

Change in amount of accounts payable 37,141 38,918

Others 99,464 -13,940

Subtotal 757,207 651,572

Amounts of interest and dividends received 938 770

Amount of interest paid -1,775 -147.1

Amount of corporate taxes paid -29,394 -145,787

Amount of corporate taxes returned － 21,852

Cash flows from operating activities 726,976 526,936

Cash flows from investing activities

Income from the sale of investment securities － 2,622

Payment for acquisition of tangible fixed assets -45,373 -43,554

Payment for acquisition of intangible fixed assets -166,136 -204,145

Income from collecting guarantee deposits 10,222 32,759

Payment for guarantee deposits -47,322 -339

Income by selling shares of affiliated companies － 10,062

Payment for acquisition of subsidiaries’ shares － -396.0

Disbursement from the sale of investments in

subsidiaries resulting in changes in the scope of

consolidation

－ -22,474

Cash flows from investing activities -248,610 -229,029

Cash flows from financing activities

Expenditures from repayment of short-term loans － -1100

Cash flows from financing activities － -1100

Exchange differences related to cash and equivalents 5,651 10,532

Increase/decrease of cash and equivalents 484,017 307,338

Beginning balance of cash and equivalents 1,267,134 1,751,152

Cash and cash equivalents balance at the end of the

term *11,751,152 *12,058,490

－17－

(5) Notes concerning the consolidated financial statements

(Notes regarding the premise of a sustainable company)

There were no such notes.

(Important matters basic to creating consolidated financial statements)

1. Matters related to the scope of consolidation

Five consolidated subsidiaries

We consolidated five subsidiaries. The name of the consolidated subsidiaries: Softbrain Field Service Co.,

Ltd., Softbrain Service Co., Ltd., Softbrain Integration Co., Ltd., Softbrain Offshore Co., Ltd., and Diamond

Business Planning, Inc.

We sold our equity shares in Softbrain Offshore Resources (Qingdao) Co., Ltd. Therefore, it was excluded

from the scope of our consolidated range.

2. Matters concerning the application of the Equity Method

(1) Non-consolidated subsidiaries which applied the equity method

One affiliated company

We sold our shares held in System Kobo Inc. during this consolidated fiscal year. Therefore, this company

was excluded from the scope of range of appreciation of the equity method used.

(2) Non-consolidated subsidiaries which applied the equity method

One affiliated company

3. Issues related to the business years of the consolidated subsidiaries

Financial settlement days for the consolidated subsidiaries match that of Softbrain Co., Ltd.

4. Issues related to accounting standards

1) Important securities valuation basis and methods

(a) Securities valuation basis and methods

Other securities

Some of those for which market values are not available

Cost accounting using the moving average method

(b) Valuation standards and methods of inventory assets

A work-in-process is evaluated using the specific identification method. For these values of WIPs on

the balance sheet, the book values are depreciated when their profitability drops.

The merchandise and products are evaluated using the specific identification method. For these values

of products on the balance sheet, the book values are depreciated when their profitability drops.

2) Depreciation method for significant depreciated assets

(a) Tangible fixed assets

We primarily use the straight-line method for calculating building depreciation. The declining balance

method is primarily used for calculating the depreciation of equipment and facilities.

The primary estimated useful lives are as follows.

Buildings: 3 to 18 years

Appliances and fixtures: 3 to 15 years

(b) Intangible fixed assets

1) Software for sale

To find a value for the software we have for sale, we compare the amortization based on the projected

sales volume over the estimated sales period (usually three years or less), to an equal allocation

amount based on the remaining salable period, and use the larger value.

2) Software used by our own Company

We use the straight-line method for the period (5 years) that the software is used by the Company.

－18－

3) Accounting standards for important reserves

1) Reserves against possible loan losses

Primarily used to provide a reserve against credit losses, such as trade receivables. For general

receivables we use the loan loss ratio method (the estimate of the loan loss amount times a factor

(ratio) based on past experience). We also use the account detail evaluation method to evaluate loans

with a possibility of default or bankruptcy reorganization. In this method the amount of estimated bad

debt is subtracted from the mortgage and security deposit amount. We then evaluate this balance by

taking into account the debtor’s current financial standing.

2) Provisions for returns of goods sold

In preparation for possible losses caused by the return of sold products, Diamond Business Planning

Inc., a consolidated subsidiary, records an equivalent amount of profit based on our return experience

history.

3) Reserves for employee bonuses

To cover employee bonuses, the Company and its consolidated subsidiaries reserve an amount

anticipated to be due during the current fiscal year.

(4) Range of funds in the consolidated cash flow statement

Funds (cash and cash equivalents) in the consolidated statements of cash flow consist of cash on hand and

deposits that can be withdrawn, as well as short-term investments that are easy to convert to cash and not

liable to anything more than insignificant risk, and mature three months or less from the date they are

obtained.

(5) Other important issues involved in creating consolidated financial statements

Accounting related to consumption taxes

Taxes are excluded from the transaction figures.

(Change of display method)

Softbrain Field Co., Ltd. -- one of our consolidated subsidiaries – has been entering its labor cost and indirect

expenditure related to business profits as sales expenditures and general administrative expenditures. From this 1st

quarter consolidated period, this company has begun recording these accounts under cost of sales.

This change was made because the field marketing business, the main business of this subsidiary, was expanded and

the importance of this business within our group was enhanced. This means we now have to have a precise understanding

of the cost of this business’s sales activities and therefore needed to arrange for a clearer cost management system.

It should be noted that some of the past data and information needed within the new system for allocation and

accounting were not saved. Therefore, it is not possible to provide those data at this time. We have not reconfigured the

previous year’s consolidated financial statements.

Due to this treatment, sales expenditures and general administrative expenditures decreased 222.646 million yen and

sales cost increased 222.646 million yen, as compared with those obtained by the previously used accounting method.

However, this change does not affect operating profit, ordinary profit, or current net profit before taxes.

(Notes related to the consolidated balance sheet)

*1. WIPs relating to working contracts that may be expected to suffer losses are listed after offsetting the data

with provisions for received order losses. The amounts of provisions for received order losses

corresponding to inventory assets that were offset are as follows.


(December 31, 2012)


(December 31, 2013)

Items related to WIP 61,917thousand yen 150 thousand yen

*2. Notes concerning the affiliated companies:


(December 31, 2012)


(December 31, 2013)

Investment securities 7,661 thousand yen －

－19－

(Notes related to the consolidated profit and loss statement)

*1. Major items and amounts of sales expenses and general administrative expenses are as follows:


(From January. 1, 2012 to December

31, 2012)

This consolidated fiscal year (From

January. 1, 2013 to December 31,

2013)

Remuneration for directors 190,682thousand yen 186,034thousand yen

Bonuses for directors and corporate

auditors 15889 13170

Salary allowance 400890 331923

Bonuses 76837 54461

Transfer amount reserved for employee

bonuses 23359 13234

Depreciation 27699 27570

Transfer amount for reserves for possible

loan losses 2681 2879

Sales promotion expenses 96270 107687

Real estate costs and residence rent 45844 31091

*2. Breakdown of losses on disposal of fixed assets are as follows:


(From January. 1, 2012 to December 31, 2012)


(From January 1, 2013 to December 31, 2013)

Appliances and fixtures 5,835thousand yen －

Total 5,835 －

*3. Total research and development expenses

Previous consolidated fiscal year (From January 1, 2012 to

December 31, 2012)

This consolidated fiscal year (From January 1, 2013 to

December 31, 2013)

23,146 thousand yen 30,714 thousand yen

(Notes related to the consolidated comprehensive profit statement)

*1. Adjustment amount related to comprehensive profit changed retroactively



December 31, 2012)



December 31, 2013)

Foreign currency conversion adjustment account

Current amount during this term 6.142 431

Amount of adjustment for the reorganization of

the data

- -6.567

Total other comprehensive profit 6,142 7

－20－

(Notes related to the consolidated statements of changes in shareholders and equity)


1. The total number and the type of outstanding shares, and items relating to the types and numbers of shares of

company-owned stocks

Number of shares

at the beginning of

this consolidated

accounting year

Increase in the

number of shares

during this

consolidated

accounting year

Decrease in the

number of shares

during this

consolidated

accounting year

Number of shares

during this

consolidated

accounting year

Number of shares issued

Common stock 309,550 －－ 309,550

Total 309,550 －－ 309,550

Re-acquired stock

Common stock 17,000 －－ 17,000

Total 17,000 －－ 17,000

2. Issues regarding stock acquisition rights and treasury stock acquisition rights

There were no such issues.

3. Issues related to dividends



1. The total number and the type of outstanding shares, and items relating to the types and numbers of shares of

company-owned stocks

Number of shares

at the beginning of

this consolidated

accounting year

Increase in the number

of shares during this

consolidated

accounting year

Decrease in the number

of shares during this

consolidated accounting

year

Number of shares

during this

consolidated

accounting year

Number of shares issued

Common stock 309,550 30,645,450 30,955,000

Total 309,550 30,645,450 30,955,000

Re-acquired stock

Common stock 17,000 1,683,000 1,700,000

Total 17,000 1,683,000 1,700,000

Note: As of July 1, 2013, the company effected a split of the shares of common stock: in this split, each share of stock

became 100 shares of company stock.

2. Issues regarding stock acquisition rights and treasury stock acquisition rights


3. Issues related to dividends


－21－

(Notes related to the consolidated cash flow statement)

*1. Relationship between the balance of cash and cash equivalents at the end of the term and items and

amounts described in the consolidated balance sheet



December 31, 2012)



December 31, 2013)

Cash and deposits 1,751,152 thousand yen 2,058,490 thousand yen

Cash and equivalents at the end of the term 1,751,152 2,058,490

The balance of cash and cash equivalents at the end of the fiscal year and the amount described in the

consolidated balance sheet are the same.

(Segment information)

a. Segment information

1. Outline of the reported segments

The reports of segments from our group are available with separate financial statements from our constituent units,

and the board of directors meeting uses these to examine each segment regularly to determine the distribution of

management resources and to evaluate earnings.

We promoted business activities for each product and service separately, and three segments -- “e-Sales Manager

related business,” “field marketing business”and “system development business” -- are the segments reported upon.

The major products and services belonging to each reported segment are shown in the table below.

Reported segment Major products

e-Sales Manager related business Selling software licenses for sales support systems, cloud services,

customized development, sales consulting and sales skills training

Field Marketing business Field activity operation, market research,

System development business Software development on consignment

2. Method used to calculate sales, profits or losses, assets and other items for each segment

The accounting methods used to report on the business segments are the same as those stated under the description

of the “Important items that could be used as the basis for creating consolidated statements.” The profits of the

reported segment are sales profit figures. Internal sales or transfers between segments are based on market prices.

－22－

3. Information about amounts of sales, profits or losses, assets, debts, and other items for each segment



Reported segment

Others,

Note 1 Total

Adjustment

amount

Amounts

recorded in the

consolidated

financial

statements

e-Sales

Manager

related

business

Field

Marketing

business

System

development

business

Total

Sales

Sales to

external

customers

2,165,765 1,171,356 420,897 3,758,019 479,771 4,237,791 － 4,237,791

Internal sales

or transfers

between

segments

16,930 69,788 111,078 197,796 34,566 232,363 -232,363 －

Total 2,182,695 1,241,145 531,975 3,955,816 514,338 4,470,155 -232,363 4,237,791

Segment profits

or losses 352,007 231,553 -55,225 528,336 68,677 597,013 9,464 606,478

Segment assets 2,264,499 777,003 358,222 3,399,725 172,899 3,572,624 -366,193 3,206,431

Other items

Depreciation 137,548 8,215 2,830 148,594 1,086 149,681 -10,852 138,829

Impairment

loss －－－－ 2,961 2,961 － 2,961

Increased

amount in

tangible fixed

assets and

intangible

fixed assets

188,314 17,796 6,585 212,695 151 212,847 -1,336 211,510

Note: The Other category contains segments that are not included among the reported segments. They are the

operation consulting and education businesses using iPads and the planning, editing, and publishing of business

books.

－23－



Reported segment

Others,

Note 1 Total

Adjustment

amount

Amounts

recorded in

the

consolidated

financial

statements

e-Sales

Manager

related

business

Field

Marketing

business

System

development

business

Total

Sales

Sales to

external

customers

2,253,203 1,307,568 420,754 3,981,526 435,324 4,416,850 - 4,416,850

Internal sales

or transfers

between

segments

14,011 66,141 64,683 144,836 37,838 182,675 -182,675 -

Total 2,267,215 1,373,710 485,437 4,126,362 473,163 4,599,526 -182,675 4,416,850

Segment profits

or losses 276,942 254,735 -56,522 475,155 5,969 481,124 11,658 492,783

Segment assets 2,498,263 963,234 273,638 3,735,136 156,018 3,891,155 -223,340 3,667,814

Other items

Depreciation 151,455 11,494 3,450 166,400 390 166,790 -11,542 155,248

Impairment

loss - - - - - - - -

Increased

amount in

tangible fixed

assets and

intangible

fixed assets

226,181 13,170 8,590 247,942 334 248,277 -578 247,699

Note: The Other category contains segments that are not included among the reported segments. They are the

operation consulting and education businesses using iPads and the planning, editing, and publishing of business

books.

－24－

4. Difference between the total amounts of the reported segments and the amount reported in the consolidated

financial statements, and the main reasons for this difference (items related to adjustments for the difference)


Sales Previous consolidated fiscal

year This consolidated fiscal year

Reported segment totals 3,955,816 4,126,362

Sales of the series of the "other" 514,338 473,163

Clearing transactions between segments -232,363 -182,675

Sales amounts in the consolidated financial statements 4,237,791 4,416,850


Profit Previous consolidated fiscal


Reported segment totals 528,336 475,155

In the "Other" category of income 68,677 5,969

Amount of fixed asset adjustment 9,516 11,607

Amount of inventory asset adjustment -51 51

Sales profit reported in the consolidated financial

statements 606,478 492,783


Assets Previous consolidated fiscal


Reported segment totals 3,399,725 3,735,136

In the "Other" category of the assets 172,899 156,018

Segment assets -354,339 -219,915

Amount of fixed asset adjustment -11,821 -342.5

Amount of inventory asset adjustment -31 －

Total assets listed in the consolidated financial

statements 3,206,431 3,667,814


Other items

Reported segment totals Others Adjustment amount

Amounts recorded in

the consolidated

financial statements

Previous

consolidated

fiscal year

This

consolidated

fiscal year

Previous

consolidated

fiscal year

This

consolidated

fiscal year

Previous

consolidated

fiscal year

This

consolidated

fiscal year

Previous

consolidated

fiscal year

This

consolidated

fiscal year

Depreciation 148,594 166,400 1,086 390 -10,852 -11,542 138,829 155,248

Increased amount in

tangible fixed assets

and intangible fixed

assets

212,695 247,942 151 334 -1,336 -578 211,510 247,699

b. Related information

Previous consolidated fiscal year (From January. 1, 2012 to December 31, 2012)

1. Information about each product and service

The same information is contained in the segment information, so this has been omitted here.

2. Regional Information

(1) Sales

Domestic sales to external customers make up over 90% of the sales reported in the profit and loss statement. Thus,

descriptions for each location are omitted.

－25－

(2) Tangible fixed assets

Domestic tangible fixed assets make up over 90% of those reported in the profit and loss statement. Thus, descriptions

for each location are omitted.

3. Information regarding each major customer

There is no entry under net sales to external customers because there is no party in that category that accounts for more

than 10% of the consolidated sales income.

This consolidated fiscal year (From January. 1, 2013 to December 31, 2013)

1. Information about each product and service

The same information is contained in the segment information, so this has been omitted here.

2. Regional Information

(1) Sales

Domestic sales to external customers make up over 90% of the sales reported in the profit and loss statement. Thus,

descriptions for each location are omitted.

(2) Tangible fixed assets

Domestic tangible fixed assets make up over 90% of those reported in the profit and loss statement. Thus, descriptions

for each location are omitted.

3. Information regarding each major customer

There is no entry under net sales to external customers because there is no party in that category that accounts for more

than 10% of the consolidated sales income.

c. Information about impairment losses related to fixed assets for each segment

Previous consolidated fiscal year (From January. 1, 2012 to December 31, 2012)


e-Sales

Manager

related

business

Field

Marketing

business

System

development

business

Others Total Adjustment

amount

Amounts recorded in

the consolidated

financial statements

Impairment

loss －－－ 2,961 2,961 － 2,961


There are no applicable matters.

－26－

d. Information about goodwill depreciation and the undepreciated balance for each reported segments.



e-Sales

Manager

related

business

Field

Marketing

business

System

development

business

Others Total Adjustme

nt amount Total

Current

depreciation

amount

559 －－－ 559 － 559

Balance at the

end of this

term

－－－－－－－



e. Information about decreases in goodwill profit for each segment





(Per share information)





Net assets per share 67.11 yen

Current net profit per share 15.67 yen

At this time we are not reporting a net profit per share

after adjustment of potential shares because there are no

potential shares that might cause dilution.

Net assets per share 80.70 yen

Current net profit per share 13.37 yen

At this time we are not reporting a net profit per share

after adjustment of potential shares because there are no

potential shares that might cause dilution.

Note: Calculation basis for net profit per share in this fiscal term is as follows.



December 31, 2012)



December 31, 2013)

Current net profit per share

1. Current net profit (thousands of yen) 458,335 391,273

Amount not attributed to common

shareholders (thousands of yen) －－

Current net profit related to common

shares (thousands of yen) 458,335 391,273

2. Average number of outstanding

common shares during this fiscal year 29,255,000 29,255,000

Outline of potential stocks that were not

added to the current net profit amount per

share after adjustment of potential stocks

because there is no dilution effect.

－－

Note 1. At this time, we are not reporting a net profit per share after adjustment of potential shares because there are no

potential shares.

Note 2. As of July 1, 2013, the company effected a split of the shares of common stock: in this split, each share of stock

became 100 shares of company stock. Therefore, a net asset per share the stock split had been implemented at the

beginning of the previous consolidated accounting year, and assumes that the calculation.

－27－

(Important events after the report)

There were no such events.

5. Others

(1) Changes in officers

1) Changes of Representative Director and President

There were no such changes.

2) Changes of other Directors

Candidate of the new director Jyunzo Osada, Director (currently our company’s Executive Officer, Marketing, Cooperative Management)

Candidate of the new director (from outside the Group)

Takashi Okita (Currently Representative Director & CEO of VeriTrans Inc.)

Retire scheduled director

Hiroshi Kinase

(2) Others

There were no such matters.

Consolidated Financial Report for the Fiscal Year Ending ...Review procedures of consolidate...

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