This document has been translated from the Japanese original for reference purposes only. In theevent of any discrepancy between this translated document and the Japanese original, the original
shall prevail. Sosei Group Corporation makes no warranty of any nature as to the accuracy of thisEnglish translation and assumes no responsibility for this translation or for direct, indirect or any otherform of damages arising from the translation.

TSE Securities Code: 4565
June 1, 2017

To Shareholders:
Sosei Group Corporation (the “Company”)
2-4 Kojimachi, Chiyoda-ku, Tokyo
Notice of the 27th Ordinary General Meeting of Shareholders
The Company would like to inform you that the 27th Ordinary General Meeting of
Shareholders of the Company (the “Meeting”) will be held as follows, and would be grateful
if you would attend the meeting.
If you are unable to attend the meeting in person, you may exercise your voting rights inwriting or via the Internet. You are kindly requested to review the appended “Reference
Documents for the Ordinary General Meeting of Shareholders” and exercise your voting
rights by indicating your votes for or against the proposal no later than 6:00 p.m. on
Wednesday, June 21, 2017.
Yours Sincerely,Peter Bains
Board Director, Representative Executive Officer and President
1. Date and Time
2. Venue

3. Agenda
Matters to bereported：

Matters to be
Resolved:
ProposalThursday, June 22, 2017 at 10:00 a.m.
Fuji-No-Ma Hall, 4th Floor, Grand Arc HanzomonHotel
1-1, Hayabusa-cho, Chiyoda-ku, Tokyo, Japan
Please note that souvenirs to the shareholders
attending the meeting will not be offered and a
reception will not be held from this time. Thank you
for your understanding.
1. Report on Business Report, Consolidated
Financial Statements, and Reports of Independent
Auditors and the Audit Committee on Consolidated
Financial Statements for the 27th fiscal year (from
April 1,2016 to March 31, 2017)
2. Report on the Non-Consolidated Financial
Statements for the 27th fiscal year (from April 1,2016 to March 31, 2017)

Election of Five (5) Directors

 Please submit the enclosed voting rights exercise form at the reception desk when you attend theMeeting.
 Notes to the Consolidated Financial Statements and Notes to the Non-Consolidated Financial
Statements are provided to shareholders through disclosure on the Company’s Internet website(http://www.sosei.com/) in accordance with the law and Article 14 of the Articles of Incorporation.
 Should any revisions be made to the Reference Documents for the Ordinary General Meeting of
Shareholders, Business Report, Non-Consolidated Financial Statements or Consolidated Financial
Statements prior to the date of the Meeting, the Company will provide notice through disclosure on its
website (http://www.sosei.com/).

- 1 -Business Report(

From April 1, 2016
To March 31, 2017)

1. Current State of the Corporate Group(1) Progress and Results of Operations
1)
Group Outlook
The Company and its subsidiaries (the “Group”) aim to contribute to improving the healthand quality of life of people around the world as a global biotechnology company anchoredin Japan. Through acquiring Sosei R&D Ltd. (formerly Arakis Ltd.; “Sosei R&D”) andHeptares Therapeutics Limited (“Heptares”) in the U.K. and through alliances with major
global pharmaceutical companies, the Group has worked to establish a foundation that will
make possible integrated global business development.
In the fiscal year 2016, the Company's subsidiary Heptares signed an R&D andcommercialization agreement with Allergan Pharmaceuticals International Ltd. (“Allergan”),
a wholly-owned subsidiary of global pharmaceutical company Allergan plc, to license global
rights to a broad portfolio of novel subtype-selective muscarinic receptor agonists indevelopment for the treatment of major neurological disorders, including Alzheimer’s
disease, and under the terms of the agreement received an upfront payment of USD 125
million. Through an agreement with AstraZeneca UK Limited (“AstraZeneca”), Heptares
also received a milestone payment of USD 10 million due to the start of a Phase 1 clinicalstudy for AZD4635 (HTL1071), an immuno-oncology candidate. Further, Heptares enteredinto a drug discovery and licensing agreement with Daiichi Sankyo Company, Limited(“Daiichi Sankyo”), a major Japanese pharmaceutical company, focused on novel, smallmolecules for the treatment of pain. The Group thus continued working to promote new
drug discovery and partnerships with major pharmaceutical companies.
Additionally, complementing the Group’s medium/long-term growth strategy, which pivots
on autonomous growth from pipeline expansion and new drug development centering on
Heptares, and as a part of its M&A policy based on that strategy, Heptares Therapeutics
Zurich AG (formerly G7 Therapeutics AG; "Heptares Zurich”), whose proprietary method
shares a high degree of complementariness with Hepatares’ StaR® technology platform,
was made a subsidiary.
Moreover, Seebri® Breezhaler® and Ultibro® Breezhaler®, treatments for chronic
obstructive pulmonary disease (COPD) licensed to Novartis International AG (“Novartis”),
produced combined annual sales in 2016 of over USD 500 million, which triggered amilestone payment received by the Group of USD 5 million.
* Ultibro® Breezhaler® (EU) / Ultibro® Inhalation Capsules (Japan) and Seebri® Breezhaler® 50mcg(EU) /Seebri® Inhalation Capsules 50 mcg (Japan) are the registered trademarks of Novartis.

From the above result, in the fiscal year under review, revenue totaled 18,901 million yen,
an increase of 131.86% compared to the previous fiscal year. Operating income totaled
12,389 million yen. Net income before income taxes amounted to 12,483 million yen, andnet income was 9,638 million yen. Net income attributable to parent company shareholders
amounted to 9,797 million yen.
Information by business segment is as follows.

- 2 -Domestic pharmaceutical business
Revenue in the domestic pharmaceutical business segment in the fiscal year was 102
million yen, a decrease of 95 million yen from the previous financial year. The Operating
Loss in this segment was 794 million yen, a decrease of 257 million yen from the last year.
Overseas pharmaceutical business
Revenue in the overseas pharmaceutical business segment in the fiscal year was 18,797
million yen, an increase of 10,843 million yen from the previous financial year. Operating
income totaled 12,801 million yen, an increase of 11,136 million yen.
Revenue
Milestone-related revenue in the fiscal year under review amounted to 15,620 million yen.
This was an increase of 9,786 million yen compared to the previous fiscal year (an increaseof 167.8%, an increase of 215.7% on a constant currency basis). The increase is primarily
attributable to an upfront milestone of USD 125 million received under a licensing
agreement concluded by our wholly owned subsidiary Heptares with Allergan in April 2016.
The agreement gives Allergan exclusive global rights to a broad portfolio of novel subtypeselective muscarinic receptor agonists in development for the treatment of major
neurological disorders, including Alzheimer’s disease.
Under the terms of the agreement, Heptares is eligible to receive contingent milestone
payments of up to approximately USD 665 million associated with the successful Phase I,
II and III clinical development and launch of the first three licensed compounds for multiple
indications and up to approximately USD 2,575 million associated with achieving certain
annual sales thresholds during the several years following launch, as well as tiered royalties
reaching double digits on net sales.
In August 2015, Heptares entered into an agreement with Astra Zeneca to develop novel
immuno-oncology treatments for a range of cancers. In June 2016, a USD 10 million
milestone, was received from AstraZeneca related to the first subject being dosed with the
immuno-oncology candidate AZD4635 (HTL1071) in a Phase I clinical study. Under theagreement AstraZeneca gained exclusive global rights to develop, manufacture andcommercialize the adenosine A2A receptor antagonist, AZD4635 (HTL1071), a small
molecule immuno-oncology candidate, and potential additional A2A receptor-blocking
compounds across a range of cancers, including in combination with its existing portfolio of
immunotherapies.
In April 2017, post the close of the fiscal year, we received a USD 12 million milestone
payment due to the successful completion of a preclinical study that demonstrated a clear
effect of AZD4635 (HTL1071) in reversing adenosine-mediated T-cell suppression andenhancing anti-tumor immunity and, subject to successful completion of development andcommercialization milestones, we are also eligible to receive more than USD 500 million,
as well as up to low double-digit tiered royalties on net sales.
In March 2017, Heptares entered into a drug discovery and licensing agreement with Daiichi
Sankyo focused on a single G protein-coupled receptor (GPCR) that plays a crucial role inrelieving pain. Under the terms of the agreement, we will assume a role to discover novel,small-molecules focusing on a single GPCR nominated by Daiichi Sankyo and Daiichi
Sankyo will receive exclusive global rights to develop, manufacture and commercialize the- 3 -said molecules discovered by Heptares. In return, we received an upfront payment of USD
4 million and we will receive research funding of approximately USD 8 million and we are
eligible to receive additional research, development and commercialization milestone
payments. In addition, we will be eligible to receive royalties on net sales of new products
resulting from the alliance.
Revenue related to royalties in the fiscal year under review increased by 792 million yen
compared to the previous fiscal year (an increase of 37.3%; increase of 51.7% on aconstant currency basis), and totaled 2,918 million yen. Most of this royalty revenue isrelated to the sales of Ultibro® Breezhaler® and Seebri® Breezhaler® by Novartis, ourlicensing partner. Sales of Ultibro® Breezhaler® as reported by Novartis on January 25,2017 were USD 363 million for the calendar year 2016. Adjusting for currency, Novartis
reported underlying sales growth of 38 %, or USD 40 million. Sales of Seebri® Breezhaler®
as reported by Novartis for the calendar year were USD 149 million, a 2% increase adjustingfor currency or a USD 1 million decrease. Revenue was also registered from a milestone
payment of USD 5 million received due to the annual combined sales of Ultibro®
Breezhaler® and Seebri® Breezhaler® by Novartis surpassing USD 500 million.
Research and development expenses
The fiscal year under review saw the start of activities designed to scale up our discovery
capability and expand our clinical development capacity. This investment should
significantly increase the number of new drug candidates, from one to up to three perannum that we can identify and develop, utilizing Heptares’ unique StaR® structure-based
drug design technology. Additionally, as we look to advance our own proprietary portfolio(‘Wave 2’), we have strengthened our clinical development and translational medicine
capabilities so that we are able to progress our proprietary development drug candidates
into Phase I clinical trials and then into Phase II and Phase III trials.
Research and development expenses incurred by Heptares in the fiscal year under review
have been substantially impacted by exchange rate fluctuations caused by the weaknessof the British pound. The average yen/GBP exchange rate pre the Brexit vote was 155.17
yen. Post the Brexit vote the exchange rate for the remainder of the year averaged 141.60
yen. As a result, research and development expenses, in the fiscal year under review
decreased by 698 million yen compared to the previous fiscal year (decrease of 17.8%; anincrease of 1.6% on a constant currency basis), and totaled 3,218 million yen. In the year
under review, 68% of our total cost base was related to Heptares in the UK.
In November 2016, Jitsubo became an affiliated company, rather than a subsidiarycompany, and consequently the results of Jitsubo are only included in the consolidated
financial results of the Group for the eight-month period up to November 2016.
A portion of research and development expenses incurred by the Group under agreementswith our R&D partners are borne by our partners, and the reimbursements that we receive
have been deducted from our research and development expenses. These
reimbursements relate either to the partnered assets (‘Wave 1’) or to the technology
agreements with a multiple number of partners. On a comparative basis, the Allergancollaboration made a significant impact on R&D expenses in the fiscal year as Allergan took
over the financial responsibility for the muscarinic programs. In the prior fiscal year, we had- 4 -made a significant investment in the muscarinic programs.
In December 2016, the Group paid 12 million Swiss Francs to acquire Heptares Zurich.
Given that we only consolidated the results of Heptares Zurich for approximately one
quarter of the fiscal year the impact on R&D expenditure for the year under review was
limited.
Selling, general and administrative expenses
Selling, general and administrative expenses, excluding non-cash costs, in the fiscal year
under review increased by 279 million yen compared to the previous fiscal year, and totaled
3,572 million yen. This represented an increase of 8.5% on a reported basis and 25.0% on
a constant currency basis. A proportion of the increase in SG&A relates to advisory services
received in relation to the licensing agreement with Allergan.
Other income
Other income totaled 659 million yen, an increase of 510 million yen from the previous fiscal
year. This increase was partly related to R&D grants (218 million yen, compared to 145
million yen for the prior year), and an equity profit from Jitsubo which moved to being anaffiliated company as previously described, resulting in it being accounted for using theequity method (417 million yen).
Other expenses
Other expenses totaled 380 million yen, an increase of 369 million yen from the previous
fiscal year. This increase is due to the impairment loss (373 million yen) of fixed assets in
Heptares at acquisition.
Operating income
Operating income in the fiscal year under review increased by 11,313 million yen andtotaled 12,389 million yen. The increase is primarily attributable to the upfront milestone
received from Allergan.
Finance income
Finance income in this fiscal year totaled 1,521 million yen. This is mainly due to theweakening of the British pound relative to our reporting currency and its effect of the valueof foreign currency denominated assets in our UK operations.
Finance costs
Finance costs in the fiscal year under review totaled 479 million yen. Of this amount 287
million yen is due to the fluctuation in the fair value of contingent consideration and 192
million yen of the remaining amount is predominantly the interest expense on interest
bearing debt related to the acquisition of Heptares.
The contingent consideration is the consideration to be paid to former shareholders of
Heptares if certain financial conditions are met, and the fluctuation in fair value inconnection with contingent consideration is recorded as an expense. In the previous
financial year, 3,816 million yen was recorded as an expense which related to the upfront
payment we were expecting to receive from Allergan in the fiscal year under review. In thecurrent year, 287 million yen has been recorded as an expense in relation to the change on
the fair value of the contingent consideration. This relates to the milestone payment
received from AstraZeneca.

- 5 -Income tax expenses
Income tax expense in this fiscal year totaled 2,844 million yen. This is mainly due to bothof our UK subsidiaries being in taxable positions for the year under review.
Net income
Net income in this fiscal year totaled 9,638 million yen, an increase of 11,186 million yen
from the previous fiscal year where a loss was incurred. This is mainly due to the increases
in revenue and operating income.
3)

Capital Expenditures
There were no significant capital expenditures during fiscal year 2016.

4)

Significant Organizational Restructuring, etc.
i. Heptares Therapeutics Zurich AG
The Company’s subsidiary Heptares acquired a 100% stake in G7 Therapeutics(currently Heptares Zurich) from its shareholders on December 14, 2016 at a price of
1,366 million yen (CHF 12 million), and Heptares Zurich became a consolidated
subsidiary.
The Group accounts for Heptares Zurich as an acquired company.
ii. Jitsubo Ltd.
Jitsubo Ltd., which had been a Company’s subsidiary, issued new shares by way of athird-party allotment with a payment date of November 18, 2016. This put the Group's
stake at 43.7%, so Jitsubo was removed from the Group’s scope of consolidation andbecame an affiliate accounted for by the equity method. The Group’s stake as of March
31, 2017 is 43.5%.
iii. Sosei RMF1 Limited Partnership for Investment
The Company’s subsidiary Sosei Corporate Venture Capital Ltd. ("Sosei CVC”),
established the Sosei RMFI Limited Partnership for Investment (“RMF1”) on June 23,
2016 to invest primarily in Japanese biotechnology companies specialized in life science
related to regenerative medicine. Sosei CVC is the general partner (“GP”) and will procurea total of 2.0 billion yen from the limited liability partners. The Group’s stake is 17.5%, but,
Sosei CVC, as the GP, has control over RMF1, so RMF1 became the Company’s
consolidated subsidiary.

5)

Financing
Not applicable.

- 6 -(2) Assets and Profit/Loss in the previous three fiscal years
24th Fiscal Year 25th Fiscal Year 26th Fiscal Year 27th Fiscal Year(ended March(ended March(ended March (current) (ended
2014)
2015)
2016)
March 2017)

Item
Sales revenue(JPY millions)

2,069

3,671

8,151

18,901

Operating profit(JPY millions)

756

1,043

1,075

12,389Net income or loss (JPY millions)

1,526

510

-1,547

9,638

Net income or loss
(JPY)
per share - basic

126.6537.51-93.60579.97

Total asset(JPY millions)

14,582

47,83347,35448,087

Total shareholders’(JPY millions)
equity14,354

14,842

23,26928,845Note:
The Company has prepared the consolidated financial statements in accordance with the International Financial ReportingStandards (IFRS) from the 25th fiscal year. The figures for the 24th fiscal year shown above are also based on IFRS.

(3)
1)

Issues to be addressed
Realization of growth through early development of innovative drugs
To realize the Group’s vision, “To become a leading biotechnology company, anchored inJapan, with a global reach,” the Group must continuously make investments to build arobust and balanced pipeline with development candidates that have the potential to
become future, stable revenue sources, meet unmet medical needs and rank as first-inclass or best-in-class products.
The Group's growth pivots on Heptares, and it is working to strengthen the company’s
distinctive technologies and enhance and further promote its pipeline. Over the
medium/long term, investing in R&D with a view to taking selected drug candidates all theway through development and participate in commercialization will be central to theGroup’s growth strategy.

2)

Expanding business opportunities, diversification of risk and stabilization offunding
The Group will enhance its pipeline and carry out further research and development toexpand business opportunities, and will also conduct corporate acquisitions to acquire
technologies that complement Heptares’ platform technology.
In addition, the Group will work to diversify risk by having multiple revenue models, including
licensing pipeline products at the initial development stage to major global pharmaceuticalcompanies, which is already being performed, and licensing upon advancement to latterdevelopment stages. Also, the Group will work to realize sustainable revenue by conducting
further development and ultimately becoming involved in product commercialization. To
further strengthen the business foundation, the Group will continue to consider diverse andappropriate financing methods.

3)

Creating shareholder value
The Group believes that conducting active investment in R&D and strategic investment- 7 -through corporate acquisitions and other methods will lead to a stronger businessfoundation and higher shareholder value over the long term. Maximum effort will be devoted
going forward to reach these goals while taking into account the Group’s financial position.
With its emphasis on R&D activities, the Group regards it as necessary for the foreseeable
future to prioritize internal reserves for various growth opportunities that will allow more
profit to be returned to shareholders.
4)

Strengthening corporate governance
The Group is conducting global business development centering on Japan and the U.K.,
and it recognizes that building an effective corporate governance system to strictly comply
with national regulations and meeting the expectations of shareholders is an important taskof management.
The Group works to effectively utilize outside directors and promote coordination between
the audit committee, independent auditors and internal audit department to ensure theboard functions adequately in setting and overseeing management strategy andconducting risk management and compliance activities and to maintain accountability.
Through this, the Group strives to further raise the integrity and transparency ofmanagement and become a more deeply trusted corporate group.

- 8 -

(4)

Main Business Activities (as of March 31, 2017)

The Group’s main business is research, development and sales of pharmaceutical products.
The business is divided into two segments, namely, domestic pharmaceutical business andoverseas pharmaceutical business, based mainly on subsidiary location.
Business Segment
Company-wide(shared)Domestic
Pharmaceuticals

Overseas
Pharmaceuticals

Company NameBusiness Description

Sosei Group Corporation

Planning of management strategies of Sosei Group,and the administrative works entrusted by groupcompanies

Sosei Co. Ltd.

Researchanddevelopment,
pharmaceutical drugs

Activus Pharma Co., Ltd.

Drug development through nanoparticle technology

Sosei CVC Ltd.

Operation of regenerative medicine funds

Sosei RMF1 Limited Partnership for
Investment

Investment in regenerative medicine bio-venturecompanies in Japan

Sosei R&D Ltd.

Licensing and business development outside Japan

Heptares Therapeutics Ltd.

Structural analysis of GPCRs, generation of initiallead compounds, discovery of drug candidates
through the original StaR® technology

Heptares Therapeutics Zurich AG

Promotion of structure-based drug design,
screening, and research and development ofantibody drugs utilizing basic technologies related to
GPCR.

- 9 -

sales

of

(5)
1)

2)

Principal Parent Company and Subsidiaries (as of March 31, 2017)
Parent company
Not applicable.
Subsidiaries
CapitalRatio of
Voting

Sosei Co. Ltd.

Million yen
250

Research and development, sales of
100.0% pharmaceutical drugs

Sosei R&D Ltd.

Thousand GBP
929

Licensing and business development
100.0% outside Japan

Million yen
97

Drug development through nanoparticle
100.0% technology

Thousand GBP
247

Structural analysis of GPCRs, generationof initial lead compounds, discovery of
100.0% drug candidates through the original
StaR® technology

Company Name

Activus Pharma Co., Ltd.
Heptares Therapeutics
Ltd.

Million yen
35

Sosei CVC Ltd.

Key Business

Operation of regenerative
90.0% medicine funds

Note: Jitsubo Ltd., which had been a consolidated subsidiary of the Group, became an equity-method affiliate as ofNovember 18, 2016 and has therefore been excluded from principal subsidiaries.

3)

Specified wholly-owned subsidiaries

Nameofsubsidiaryspecified

wholly-owned

Address of
subsidiaryspecified

wholly-owned

Sosei R&D Ltd.

Heptares Therapeutics Ltd.

2 Royal College Street
London NW1 ONH, UK

Biopark, Broadwater Road,
Welwyn Garden City,
Hertfordshire, AL7 3AX, UK

Book value of shares of specified whollyowned subsidiary of the Company or theCompany’s wholly-owned subsidiary¥12,236 million¥29,032 million

Group’s total assets¥48,151 million¥48,151 million

4)

Other significant information
Not applicable.

- 10 -

(6)Main Offices and Factories (as of March 31, 2017)

1)

Main Sites of the Company
OfficeLocation

Head Office

Chiyoda-ku, Tokyo

London OfficeLondon, UK

2)Main Sites of Subsidiaries
OfficeLocation

Sosei Co. Ltd.

Chiyoda-ku, Tokyo

Activus Pharma Co., Ltd.

Funabashi, Chiba Pref.

Sosei CVC Ltd.

Chiyoda-ku, Tokyo

Sosei R&D Ltd.

London, UK

Heptares Therapeutics Ltd.

Hertfordshire, UK

Note: Jitsubo Ltd., which had been a consolidated subsidiary of the Company, became an affiliate accounted for by theequity-method as of November 18, 2016 and has therefore been excluded from principal subsidiaries.

- 11 -

(7)Employee Information (as of March 31, 2017)

1)

Group Employees
Business Segment

Change from the end of theprevious Fiscal Year

Number of Employees

Domestic Pharmaceuticals

21 (4.6)

Overseas Pharmaceuticals

111 (-)

Company-wide (shared)

13 (0.7)-

145 (5.3)

+29

Total

-6
+35

Note:
1. The number of employees is the number of people employed full-time and does not include the number of temporary
employees, which is listed in parentheses as the average for the year.
2. Employees in domestic pharmaceutical business decreased by six people compared to the end of the previous fiscal
year; the primary reason was Jitsubo Ltd. becoming an equity-method affiliate as of November 18, 2016.
3. Employees in overseas pharmaceutical business increased by 35 people compared to the end of the previous fiscal
year; the primary reason was strengthening the research and development division.

2)

Company Employees
Number of
Employees

Change from the end of theprevious Fiscal Year13 (0.7)

Average Age-

Average Service Years

45.8

3.8

Note: The number of employees is the number of people employed full-time and does not include the number of temporary
employees, which is listed in parentheses as the average for the year.

(8)

Principal Lenders (as of March 31, 2017)
Lenders

Loan AmountMizuho Bank, Ltd. and 5 other financial
institutions participating in syndicate loan

¥7,000 million(8) Other Significant Matters on the Current Status of the GroupThe Company resolved at its board meeting held on May 2, 2017 to acquire 25.6% of theoutstanding shares of MiNA (Holdings) Limited, parent company of U.K. biomedical company
MiNA Therapeutics Limited, through the Company’s consolidated subsidiary Sosei R&D, andacquired the shares on the same date.

- 12 -

2. Current Status of the Company(1) State of Shares (as of March 31, 2017)1) Total number of authorized shares2) Total number of outstanding shares

37,344,000 shares
16,916,184 shares

Total number of outstanding shares increased as follows during the fiscal year 2016.
・New shares issued by exercise of stock acquisition rights
60,900 shares

3) Number of shares constituting one unit
4) Number of shareholders
5) Major shareholders (Top 10)

100 shares
24,287
Shareholdings(shares)

Shareholder’s Name

Ownership
Stake

Daisuke Gomi

900,000

5.32%

Pfizer Seiyaku K.K.

471,284

2.79%

Rakuten Securities, Inc.

362,200

2.14%

Japan Trustee Services Bank, Ltd. (trust account)309,200

1.83%

BNY GCM CLIENT ACCOUNT J PRD AC ISG (FEAC)

302,909

1.79%

Matsui Securities Co., Ltd.

278,100

1.64%

Shinichi Tamura

251,100

1.48%

STATE STREET LONDON CARE OF STATESTREET BANK AND TRUST. BOSTON SSBTC A/C
UK LONDON BRANCH CLIENTS-UNITED
KINGDOM

208,500

1.23%

Japan Securities Finance Co., Ltd.

207,600

1.23%

The Master Trust Bank of Japan, Ltd. (trust account)

189,900

1.12%

Note:
1.
2.

Ownership stakes have been rounded off to two decimal places.
The Company does not own treasury shares.

- 13 -

(2) Stock Acquisition Rights (“Stock Options”), Etc. (as of March 31, 2017)1) Stock options owned by the Company’s directors and executive officers that were
issued as compensation for performance of duties as of the end of the fiscal year
under review
Date of Board
resolution
Number of stock options
Number and class of sharesfor stock options
Amount of payment for
stock options
The value of asset to beprovided on exercise ofstock options
Exercise period

Holdings bydirectors andexecutive
officers

Terms and Conditions forexercise
Directors andexecutive officers(excluding outside
directors)
Outside directors

Date of Board
resolution
Number of stock options
Number and class of sharesfor stock options
Amount of payment for
stock options
The value of asset to beprovided on exercise ofstock options
Exercise period

Holdings by directors
and executive officers

Terms and Conditions forexercise

14th Stock Options

27th Stock Options

July 17, 2007

September 6, 2010

330

180

33,000 shares of common stock

18,000 shares of common stock

1 yen per stock option

1 yen per stock option

191,600 yen per stock option(1,916 yen per share)

64,800 yen per stock option(648 yen per share)from July 18, 2010
to July 17, 2017

Number of stock option
330
Number of shares for stock
Option33,000
Number of holders
1-

from September 7, 2012
to September 6, 2020
If a beneficiary loses its position
during the exercise period, thebeneficiary is able to exercise therights only during the period
prescribed in “Agreement on
Allotment of Stock Option”
Number of stock option
180
Number of shares for stock
Option18,000
Number of holders
1-

29th Stock Options

30th Stock Options

November 13, 2015

November 13, 2015

60

1,321

6,000 shares of common stock

132,100 shares of common stock

261 yen per stock option

281 yen per stock option

413,000 yen per stock option(4,130 yen per share)

413,000 yen per stock option(4,130 yen per share)from July 1, 2017
to June 30, 2020

from July 1, 2018
to June 30, 2021

(Note)(Note)

On losing the position as abeneficiary, the beneficiary can
exercise the number of stock option
corresponding to the period ofservice

Directors andexecutive officers(excluding outside
directors)-

Outside directors

Number of stock option
60
Number of shares for stock
Option6,000
Number of holders
2

Number of stock option
1,221
Number of shares for stock
Option122,100
Number of holders
4
Number of stock option
100
Number of shares for stock
Option1,000
Number of holders
1

Notes:
1 Stock option holders may exercise stock options when the cumulative total of revenue on the Company’s audited Consolidated
Statement of Comprehensive Income reported in securities reports submitted by the Company for the fiscal years ending
March 2016 and March 2017 is ¥23.0 billion or greater.
2. If during the period from the allotment date to the date the stock option exercise period expires, the average closing price forregular trading of the Company’s shares of common stock on the Tokyo Stock Exchange for any five consecutive trading days
falls below a price that is 50% of the exercise price (amounts less than 1 yen rounded off) even one time, stock options may- 14 -

3.

4.
5.
6.

not be exercised even if the conditions of 1 above are met.
Stock option holders must be directors, executive officers or employees of the Company or the Company’s affiliates when
exercising stock options, provided, however, that this does not apply in cases of retirement due to expiration of a term of officeor reaching the mandatory retirement age, or when there are other legitimate reasons.
Stock options may not be exercised by heirs of stock option holders.
Stock options may not be exercised if by exercising the options the Company’s total number of outstanding shares after
exercise would exceed the total number of authorized shares at that time.
Stock options may not be exercised in fractions of one unit.

2)Stock options issued during the fiscal year to employees, etc. as compensation for
performance of duties
Not applicable.

- 15 -

(3) Directors and executive officers (as of March 31, 2017)
1) Directors
Title

Name

Chairman of
the Board

Shinichi Tamura

Director

Director

Responsibility
Member of Nomination
Committee &Compensation
Committee

Peter Bains*

Takuya Fujii

Chairman of Nomination
Committee & Member ofAudit Committee

Director*

Declan Doogan

Chairman of Compensation
Committee , Member ofNomination Committee &Audit Committee

Director*

Tomohiro
Tohyama

Chairman of Audit
Committee & Member ofCompensation Committee

Significant Concurrent Posts

Non-Executive Board Director,
Syngene International Limited
Non-Executive Chairman, Fermenta
Biotech Limited
Non-Executive Director, Mina
Therapeutics Limited
Managing Director, Sosei R&D Ltd.
Representative Director, Sosei CVC
Ltd.
Chairman, Promontory Financial Group
GlobalServices, Japan, LLC.
Director & CED, Portage Biotech Inc.
Chairman & Director, Biohaven
Pharmaceutical Holding Company
LimitedVisiting Professor, Kitasato University(Tokyo)Partner at TMI Associates
Outside Director and Audit andSupervisory Committee member,
Nippon Shikizai, Inc.
Outside Director, Trust Capital Co., Ltd.
Outside Statutory Auditor, WOWOWInc.

Notes:
1. The directors listed above with an asterisk (*) are outside directors. The Company designates Director Takuya Fujii as anindependent director in accordance with the regulations of Tokyo Stock Exchange, Inc. and has notified the Exchange
accordingly.
2. Director Shinichi Tamura resigned as Managing Director of Sosei R&D Ltd. As of December 2, 2016.
3. Director Peter Bains and Director Declan Doogan resigned as Directors of Heptares Therapeutics Ltd. As of July 21,
2016.
4. Director Peter Bains assumed the office of Managing Director of Sosei R&D Ltd. as of December 2, 2016.
5. Director Peter Bains assumed the office of Representative Director of Sosei Corporate Venture Capital Ltd. as of March
31, 2017.
6. Director Peter Bains resigned as Non-Executive Director of Syngene International Limited as of April 27, 2017.
7. The Audit Committee has conducted audits in close coordination with the internal audit department and employees who
assist in the performance of duties of the Committee, and believes it is not essential that a full-time committee member
be selected. Accordingly, a full-time committee member has not been selected.
8. The Company has no special relationships with the companies at which the outside directors concurrently serve theoffices as listed above.

- 16 -

2) Executive officers
Title

Name

Responsibility

Significant Concurrent Posts

Representative
Executive Officer* Shinichi Tamura

Executive
Chairman-

Representative
Executive Officer andPresident* Peter BainsCEOSame as mentioned in (3)-1) above.

Chief R&D
Officer

Director & CEO, Heptares
Therapeutics Ltd.

CSO

Director & CSO, Heptares
Therapeutics Ltd.
Chairman & Director, Heptares
Therapeutics Zurich AG

Executive Officer andExecutive Vice
President
Executive Officer andExecutive Vice
President

Malcolm Weir

Fiona MarshallNotes:
1. The executive officer listed above with an asterisk (*) serves concurrently as a director.
2. Director Shinichi Tamura assumed the office of Representative Executive Officer and Executive Chairman as of June 24,
2016.
3. Director Peter Bains assumed the office of Representative Executive Officer, President & CEO as of June 24, 2016.
4. Hidetoshi Torami resigned as Executive Vice President and CFO as of December 3, 2016.
5. Executive Vice President Fiona Marshall assumed the office of Chairman and Director of Heptares Therapeutics Zurich
AG as of December 14, 2016.

3) Summary of liability limitation agreements
In accordance with Article 427, Paragraph 1 of the Companies Act, the Company andoutside directors have entered into agreements that limit liability for damages as provided
in Article 423, Paragraph 1 of the Act.
The limit on liability for damages applicable to each outside director under theagreements is the minimum amount of liability stipulated in Article 425, Paragraph 1 of theCompanies Act.
The above agreement between the Company and Director Peter Bains ceased to beeffective as of April 1, 2016 due to his appointment as Executive Officer and Representative
Executive Officer.

- 17 -

4) Principles on determining remuneration for individual directors and executive
officers by the Compensation Committee
i. Principles
It is the Company’s principles to determine executive remuneration in order to attract andretain talented human resources and to incentivize execution of business strategy forsustainable growth and raising the Company’s corporate value. The Compensation
Committee, which determines executive remuneration, is made up of two outside directors
and one director who serves concurrently as the representative executive officer and it ischaired by an outside director.
The individual remuneration of directors and executive officers is determined by theCompensation Committee with respect to executive officers based on their individual roles
and evaluations made by the representative executive officer on their performance andother contribution to the Company in the previous fiscal year and with respect to thedirectors and the representative executive officer based on their individual roles andevaluations on the performance made by the Compensation Committee considering
remuneration levels, etc. in relevant industries in the country where the recipients live andwork, with reference to data from outside research institutes.
ii. Director remuneration
For director remuneration, base salary (annual pay) is determined based on individual roles,
whether they serve concurrently as executive officers, their responsibilities as committee
members or chairmen and other such factors. Directors are not paid bonuses or otherperformance-related remuneration, or retirement allowances. Stock options are granted inrecognition of their service for each fiscal year.
Directors serving concurrently as executive officers are not paid remuneration as directors.
iii. Executive officer remuneration
For executive officer remuneration, base salary (annual pay) is determined based on
individual roles and the performance in the previous year. In addition, bonuses are paid
according to the financial results of the Company and the level of achievement of objectives
within their respective areas of responsibilities by using base salary (annual pay) as thebase amount, and stock options are granted in recognition of their service for each fiscalyear.

- 18 -

5)

Total amount of remuneration paid to directors and executive officers(JPY millions)

Number of payees

Amounts paid

Directors(Outside directors)

3
(3)

39
(39)

Executive Officers

3

338

Total

6

378

Notes:
1. In the term under review, three directors, three executive officers (as a result of retirement of one of them, only two were in
office as of the end of the term) and two directors serving concurrently as an executive officer performed their duties for theCompany.
2. Payments made to the two directors serving concurrently as an executive officer are stated in full in the column of executive
officers above.
3. The above table does not include the remuneration of ¥171 million paid to two of the five executive officers serving during
the term because the amount was paid and borne by subsidiaries.
4. The amounts paid shown above include the following.
• Remuneration through stock options: Three directors and three executive officers¥62 million

6)

Attendance of outside directors at board and committee meetings, and the stateof activities
Name

Attendance
Board of Directors

23 out of 24 (96%)

Nomination Committee

2 out of 2 (100%)

Audit Committee

6 out of 7 (86%)

Board of Directors

22 out of 24 (92%)

Compensation Committee

1 out of 1 (100%)

Nomination Committee

2 out of 2 (100%)

Audit Committee

7 out of 7 (100%)

Board of Directors

23 out of 24 (96%)

Audit Committee

7 out of 7 (100%)Compensation Committee

1 out of 1 (100%)

Takuya Fujii

Declan Doogan

Tomohiro Tohyama- 19 -

Remarks/Activities
Makes necessary statements asappropriate during deliberations
on board agenda items from a
specialized standpoint related tofinance, risk management, etc.,presides at the Nomination
Committee meetings, and ask
questions and gives opinions andother statements as appropriate
at the Audit Committee meetings.
Makes necessary statements asappropriate during deliberations
on board agenda items from a
specialized standpoint related
primarily
totheoverseas
pharmaceutical industry and bioindustry,
presidesattheCompensation
Committee
meetings, and asks questions
and gives opinions and otherstatements as appropriate at theNomination Committee and Audit
Committee meetings.
Makes necessary statements asappropriate during deliberations
on board agenda items from a
specialized standpoint as an
attorney, leads audits as thechairman of the Audit Committee,
and asks questions and gives
opinions and other statements asappropriate at the Compensation
Committee meetings.

(4)
1)
2)

Independent Auditors
Name Deloitte Touche Tohmatsu LLC
Amounts of remuneration, etc.
Amounts paid

Amount of remuneration, etc. payable to the independent auditors for theservice related to this fiscal year

Million yen
47

Total amount of cash and other property benefits payable to the independent
auditors by the Company and its subsidiaries

Million yen
47

Notes:
1. In the audit agreement between the Company and the Independent Auditors, there is no clear distinction between
the remuneration for audits based on the Companies Act and the remuneration for audits based on the Financial
Instruments and Exchange Act, and no distinction can be made in practice, so amounts of remuneration, etc. for the
Independent Auditors for this fiscal year are the total of these remuneration.
2. The Audit Committee has confirmed the audit plan of the independent auditors, the state of execution of duties foraccounting audits, and the basis of estimating remuneration estimates, etc. and considered whether or not audit
remuneration is adequate for the implementation of appropriate audits and as a result has found that remuneration,etc. is appropriate. Therefore, it has given consent to remuneration, etc. of the independent auditors in accordancewith Article 399, Paragraph 1 of the Companies Act.
3 Of the Company’s significant subsidiaries, Sosei R&D Ltd. and Heptares Therapeutics Ltd. have been audited bycertified public accountants or auditing firms other than the Company’s independent auditors

3)

Policy on determining dismissal or non-reappointment of the independent auditors
In case there exists the circumstances that would interfere with the appropriate executionof duties of the independent auditors or that cause the Audit Committee to deem it
appropriate to dismiss or not to reappoint the independent auditors, the Audit Committee
determines the proposal for dismissal or non-reappointment of the independent auditorsthat is submitted to the Ordinary General Meeting of Shareholders. Also, when it deems
that any cause stipulated in each item of Article 340, Paragraph 1 of the Companies Act
apply to the independent auditors, the Audit Committee dismisses the independent auditors
by agreement of all committee members.

4) Summary of liability limitation agreements
The Company has not entered into an agreement with the Independent Auditors to limit
their liability for damages under Article 423, Paragraph 1 of the Companies Act.

- 20 -

(5) Systems for ensuring the appropriateness of operations and their operating
status
The following provides a summary of systems for ensuring proper business as resolved by
the Company’s Board of Directors, and of the operating status of these systems.
1.
Systems for ensuring the appropriateness of operations≪Matters required for execution of duties by the Audit Committee≫a) Matters related to directors and employees who assist in Audit Committee duties
Employees who assist in the duties of the Audit Committee conduct their duties incoordination with the Internal Audit Department in accordance with the directions of thechairman of the Committee. Evaluations related to performance of these employees are
conducted by the Committee, and transfers of such employees are subject to approvalby the Committee.
b) Systems regarding matters to be reported by directors (excluding directors who
are Audit Committee member), executive officers, and employees to the Audit
Committee and other matters to be reported to the Audit Committee• Directors, executive officers, corporate auditors and employees of the Company andsubsidiaries who learn of facts that may cause material damages to the Company oracts, etc. that are in violation of the law or Articles of Incorporation shall report them to
the Audit Committee, and those who made such report shall not be treated to his/her
disadvantage for reporting such facts or actions.
• The Internal Audit Department regularly reports to the Audit Committee on theimplementation status of internal audits as well as the status and content ofwhistleblowing.
c) Other systems to ensure that audits are conducted effectively by the Audit
Committee• The Internal Audit Department consults in advance with the Audit Committee regarding
internal audit policies and plans, etc. and closely coordinates with the Committee, which
includes holding discussions related to audits.
• The Company promptly processes requests by the Audit Committee member foradvancement or reimbursement of expenses necessary for performance of Audit
Committee duties.
≪Systems for ensuring that execution of duties by executive officers conforms withthe law and Articles of Incorporation, and other systems required to ensure theappropriateness of the Company’s operations≫d) System to ensure the performance of duties by executive officers and employees
and by directors and employees of subsidiaries to conform to the law and Articles
of Incorporation• Compliance with law and adherence to corporate ethics are stipulated as the Group’s
principles of corporate conduct, and every effort is made to raise awareness of thisamong all executives and employees, including its subsidiaries. An independentwhistleblower contact is also established and operated appropriately.
• The Internal Audit Department conducts internal audits related to performance of duties
at the Company and its subsidiaries.

- 21 -e) System related to preservation and management of information related toperformance of duties by executive officers
Information related to performance of duties by executive officers is appropriately
prepared, retained and managed in accordance with internal company rules.
f) Rules and other systems related to management of risk of loss
• Specific policies and measures are determined to deal with risks related to the Group’sbusiness operations, and risk management is appropriately conducted at the Company
and its subsidiaries.
• Important management decisions are made after adequate deliberation by the Boardof Directors, etc. and based on the opinions of outside experts as necessary.
g) System to ensure that performance of duties by executive officers and directors,
etc. of subsidiaries is conducted efficiently• Operational responsibilities of executive officers and official authority for respective
executives and employees of the Company and subsidiaries are clearly stipulated andreporting on operational performance and deliberations on important matters are
conducted with flexibility in accordance with rules.
• System construction is promoted to improve operational efficiency.
h) System to ensure the appropriateness of operations at the corporate groupconsisting of the Company and its subsidiaries• Reports on operational execution at subsidiaries are received in accordance withinternal company rules, and instructions and support related to the establishment ofsystems to ensure operational appropriateness are provided to subsidiaries.
• The Internal Audit Department provides instructions and recommendations for
improvements to subsidiaries based on the findings of internal audits of subsidiaries.
• Efforts are made to ensure the appropriateness of the Group’s financial reporting, while
evaluation, continuance and improvement, etc. of the reporting should be assured.
2. Operational status of systems for ensuring the appropriateness of operationsa) Compliance system
The Group has established a code of corporate conduct that applies to the entire Groupand works to communicate the code to the Group’s executives and employees. In addition,
whistle-blowing incidents are handled appropriately through a whistle-blower hotline
established externally, and internal audits are conducted of the Group’s companies inaccordance with the internal auditing plan of the Internal Audit Department.
b) Information retention and management system
The Company has appropriately created, stored and managed minutes of meetings ofthe Board of Directors and committees, etc. and other documents related to the executionof operations in accordance with the rules of document management and other rules.
c) Risk management system
The Company has conducted sufficient deliberations and made business decisions at
meetings of the Board of Directors, by taking into account the opinions of outside experts,
etc., regarding the Group’s significant investment projects and technical alliances, etc. In
addition, the Internal Audit Department has provided guidance on the risk management
system of the Company and subsidiaries based on the results of internal audits.
d) System for efficient and appropriate execution of duties
The Group clearly stipulates official authority for executives and employees in accordancewith rules of each company, and in order to ensure that the Group’s operations are carriedout efficiently and appropriately, has stipulated the rule of management of affiliated- 22 -

companies that require reports by subsidiaries to the parent company and proper
supervision and guidance of affiliated companies by the parent company and the rule has
been appropriately implemented. In addition, the Company has received reports on thebusiness performance of subsidiaries at monthly meetings of the Board of Directors. The
Internal Audit Department has been giving instructions on necessary improvements
based on the findings of internal audits.
e) System for execution of duties by the Audit Committee
The Audit Committee and the employees who assist in the performance of duties of the
Audit Committee have been coordinating as appropriate with the Internal Audit
Department in the execution of their duties. Audit Committee members attended
important meetings, including meetings of the Board of Directors, and requested reports
from the directors, executive officers, corporate auditors and employees of the Company
and its subsidiaries. In addition, they received reports on the handling of report madethrough whistle-blower system.
(6)

Policy on determination of Dividends, etc.
The Group will comprehensively consider the needs to balance the need to invest in theGroups organic Research and Development of new drug candidates, and to expand andextend these activities in order to build a sustainable pipeline of assets that can underpin
the Groups ability to generate future growth and stable earnings, as well as the need toinvest in appropriate inorganic M&A opportunities that can accelerate Group pipeline
development and also bring into the Group new platform technology opportunities, with
the need to provide the desired return to its shareholders.
The Group’s goal is to provide superior long term returns to our shareholders by building
Sosei into a globally competitive and valuable biotechnology company.

(7) Basic Policy on Company Control
Not applicable.

- 23 -

Consolidated Statement of Financial Position(as of March 31, 2017)(JPY Millions)

Item
Non-current assets

Value

Tangible fixed assets

422

Goodwill

14,154

Intangible assets

16,970Item
Non-current liabilities
Deferred tax liabilities
Conditional prices for businesscombinations
Interest-bearing liabilities
Other financial liabilities
Other non-current liabilities
Total of non-current liabilities

Investments accounted for using
equity method605

4

Deferred revenue

108

Total of non-current assets

32,266

Current assets
Operating and other receivables

1,382

Other current assets
Cash and cash equivalents

538
13,899Total of current assets

15,821

Total of assets

48,087

5,230
4,910
625
175
14,243

1,547
4

Corporate income tax payable
Other non-current assets

3,301

Current liabilities
Operating and other payables

Deferred tax assets

Value

Interest-bearing liabilities
Other current liabilities
Total of current liabilities
Total of liabilities
Shareholders’ equity
CapitalCapital surplus

1,378
1,990
77
4,998
19,241
26,004
14,632Retained earnings-4,386Otherelements
ofshareholders’ equity
Equity attributable to ownersof the parent company
Non-controlling interest-7,40928,841
4

Total of shareholders’ equity

28,845

Totalofliabilities
shareholders’ equity

48,087

Note: Amounts less than 1 million yen are rounded off.

- 24 -

andConsolidated Statement of Comprehensive Income(

From April 1, 2016
To March 31, 2017)
(JPY Millions)

Item

Value

Sales revenue

18,901

Sales cost-

Gross operating income or loss

18,901Other income and expenses
Research and development cost

3,218

Selling, general and administrative expenses

3,572

Other revenues

659

Other expenses

380

Operating income or loss

6,511
12,389Finance income

1,521

Finance cost
Share of loss of entities accounted for using equity
methodImpairment loss of investments accounted forusing equity method
Net Income or loss before taxes

479

12,483

Income tax expense

2,844

229
718

Net Income or loss

9,638

Other comprehensive income
Items which may be reclassified into net profit or loss
Exchange differences of foreign operations
Total of items which may be reclassified into net
profit or loss
Other comprehensive income-4,518-4,518-4,518Comprehensive income-4,5185,120

Attribution of net income：Owners of the parent company

9,797

Non-controlling interest

-158

9,638

Attribution of comprehensive income：Owners of the parent company

5,279

Non-controlling interest-158

Note: Amounts less than 1 million yen are rounded off.

- 25 -

5,120

Consolidated Statements of Changes in Equity(

From April 1, 2016
To March 31, 2017)
(JPY Millions)

CapitalOutstanding balance asof April 1, 2016
Net income or loss
Exchange differences
Total of comprehensive
incomeIssuance of new shares
Cost of stockcompensation
Change in treasury
shares in controlledsubsidiaries
Change of scope of
consolidation
Total amount oftransactions with owners
Outstanding balance asof March 31, 2017

Capital surplus

Retainedearnings

25,955

14,263-14,184

Exchange differences
Total of comprehensive
incomeIssuance of new shares
Cost of stockcompensation
Change in treasury
shares in controlledsubsidiaries
Change of scope of
consolidation
Total amount oftransactions with owners
Outstanding balance asof March 31, 2017

-2,891

23,142

-

-

9,797

-

9,797

-

-

-

-4,518-4,518

-

-

9,797

-4,518

5,279

49

6

-

-

55

-

372

-

-

372

-

1

-

-

1

-

-11

-

-

-11

49

369

-

-

418

26,004

14,632-4,386-7,40928,841

Total ofNon-controllingshareholders'interest
equityOutstanding balance asof April 1, 2016
Net income or loss

Other
elements ofTotal ofshareholders’Equityequityattributable toowners of the
Exchangeparentdifferencescompanyof foreign
operations

126

23,269

-158

9,638

-

-4,518

-158

5,120

-

55

-

372

4

6

32

20

36

455

4

28,845

Note: Amounts less than 1 million yen are rounded off.

- 26 -

Balance Sheet(as of March 31, 2017)(JPY Millions)

Item

Value

Item

Value

AssetsLiabilities

Current assets
Cash and deposit

2,972
1,488

Prepaid expenses

17

Accounts receivableaffiliated companies
OthersFixed assets
Tangible fixed assets
Buildings

fromCurrent liabilities
Accounts payable
Current portion of long-termborrowings
Accrued expenses

43

30
45,1794
0

Income taxes payable
Deposits
Bonus payment reserve
Others

50
10
5
1

3

Fixed liabilities

5,022

Intangible fixed assets

7

Long-term borrowing

Software in progress

7Long-term accounts payable

Long-term loans receivablefrom affiliated companies

0

Total liabilities

45,16743,857120
1,485

Long-term
accounts
receivable from affiliatedcompanies
OthersLoan loss reserves

Total assets

2,000

1,434

Tools, furniture and fixtures

OthersInvestments
and
other
assetsSharesofaffiliatedcompanies
Investments in affiliatedcompanies

2,293
180

5,000
22
7,315

Net Assets
Shareholders’ equity

40,078

Capital26,004

Capital surplus

14,121570

Legal capital reserve

14,121

91-955

Retained earnings
Other retained earnings
Equity warrants
Total net assets

-48
-48
757
40,835

Total liabilities and net assets

48,151

48,151

Note: Amounts less than 1 million yen are rounded off.

- 27 -

Profit and Loss Statement(

From April 1,2016
To March 31, 2017)
(JPY Millions)

Item

Value

Operating income

1,499

Operating expense

1,657

Operating profit or loss

-158

Non-operating income
Non-operating income

10

Dividends income

2,329

Miscellaneous income

0

2,340

Non-operating expense
Interest payment

129

Foreign exchange gains

186

Ordinary profit or loss

315
1,866

Extraordinary profit
Extraordinary profits-gain on reversal ofsubscription rights to shares

12

12

826

826

Extraordinary loss
Loss on valuation of shares of affiliated companies
Net income or loss before tax

1,052

Corporate tax, residential tax and enterprise tax
Net profit or loss

48

48
1,004

Note: Amounts less than 1 million yen are rounded off.

- 28 -

Consolidated Statements of Changes
in Shareholders’ Equity(

From April 1, 2016
To March 31, 2017)
(JPY Millions)Shareholders’ equity
CapitalsurplusRetainedearnings
Other retained
earnings

CapitalOutstanding balance as ofApril 1, 2016
Changes in value during the
fiscal year

Capital reserve

Retainedearnings carriedforward25,955

14,072-1,052

38,975

49

49

-

98

-

-

1,004

1,004

-

-

-

-

49

49

1,004

1,102

26,004

14,121-48

40,078Issuance of new shares
Net income or loss
Changes in value in items
other than shareholders’equity (net)Total of change in value
during the fiscal year
Outstanding balance as ofMarch 31, 2017

Equitywarrants
Outstanding balance as ofApril 1, 2016
Changes in value during the
fiscal year

Total net assets

307

39,283Issuance of new shares-98

Net income or loss

-

1,004

450

450

450

1,552

757

40,835

Changes in value in items
other than shareholders’equity (net)Total of change in value
during the fiscal year
Outstanding balance as ofMarch 31, 2017

Total ofshareholders’equityNote: Amounts less than 1 million yen are rounded off.

- 29 -

Accounting Audit Report on the Consolidated Financial Statements
Audit Report of the Independent Auditors
May 12, 2017
Sosei Group Corporation
To the Board of Directors
Deloitte Touche Tohmatsu LLC
Designated limited liability employee
Managing partner
Designated limited liability employee
Managing partner

Certified public accountant

Yasuhiko Endo

Certified public accountant

Shuichi Momoki **In accordance with the Article 444 (4) of Companies Act, the Auditors have audited the consolidated
financial statements, which are the consolidated statements of financial position, consolidated
statements of comprehensive income, consolidated statements of change in equity, and notes on the
consolidated financial statements, of Sosei Group Corporation for the consolidated fiscal year from April
1, 2016 to March 31, 2017.
Responsibility of the management for the consolidated financial statements
The responsibility of the management is the preparation and appropriate presentation of theconsolidated financial statements in accordance with the stipulations of the latter part of Paragraph 1,
Article 120 of the Corporate Accounting Rules, which allows the statements to be prepared excluding
some of the disclosure items required under the International Financial Reporting Standards. This
responsibility includes design and operation of internal controls judged to be necessary by the
management for the preparation and appropriate presentation of consolidated financial statements thatare free of material misstatements due to fraud or error.
Responsibility of the Auditors
The responsibility of the Auditors is to express an opinion on the consolidated financial statements froman independent perspective based on the audit that they performed. The Auditors performed the audit
in conformance with generally accepted auditing standards in Japan. Audit standards require that the
Auditors formulate an audit plan and perform the audit on the basis of the plan to acquire reasonableassurance on whether the consolidated financial statements are free of material misstatement.
The audit involves conducting procedures to obtain audit evidence on the amounts and disclosures in
the consolidated financial statements. The procedures are selected and applied at the judgement of the
Auditors based on an assessment of the risk of material misstatement in consolidated financial
statements due to fraud or error. The purpose of the audit is not to express an opinion on theeffectiveness of internal controls, but the Auditors in assessing this risk do consider internal controls
related to preparation and appropriate presentation of the consolidated financial statements in order todevise audit procedures that are appropriate for the conditions. In addition, the audit includes
consideration of the overall presentation of the consolidated financial statements, including anevaluation of the accounting policies and application methods adopted by the management and theestimates made by the management.
The Auditors believe that audit evidence has been obtained that is sufficient and appropriate as thebasis for expressing an opinion.
Audit Opinion
The Auditors find that the aforementioned financial statements, which have been prepared excluding
some disclosure items required by International Financial Reporting Standards in accordance with thestipulations of the latter part of Paragraph 1, Article 120 of the Corporate Accounting Rules,
appropriately present on all major points the status of assets and income of the corporate group
comprised of Sosei Group Corporation and the consolidated subsidiaries for the period of theconsolidated financial statements.
Interest Relationships
There are no interest relationships that must be disclosed under the provisions of the Certified Public
Accountants Act between the Company and the Auditors or the managing partners.

- 30 -

Accounting Audit Report on the Financial Statements
Audit Report of the Independent Auditors
May 12, 2017
Sosei Group Corporation
To the Board of Directors
Deloitte Touche Tohmatsu LLC
Designated limited liability employee
Managing partner
Designated limited liability employee
Managing partner

Certified public accountant

Yasuhiko Endo*

Certified public accountant

Shuichi Momoki*

In accordance with the Article 436 (2) (i) of Companies Act, the Auditors have audited the financial
statements, which consist of the balance sheet, income statement, statement of changes in shareholders’equity and notes on the non-consolidated financial statements, and the supplementary schedules of Sosei
Group Corporation for the 27th fiscal year from April 1, 2016 to March 31, 2017.
Responsibility of the management for the financial statements, etc.
The responsibility of the management is the preparation and appropriate presentation of the financial
statements and supplementary statements in accordance with auditing standards generally accepted inJapan. This responsibility includes design and operation of internal controls judged to be necessary by
the management for the preparation and appropriate presentation of financial statements andsupplementary schedules that are free of material misstatements due to fraud or error.
Responsibility of the Auditors
The responsibility of the Auditors is to express an opinion on the financial statements and supplementaryschedules from an independent perspective based on the audit performed by the Auditors. The Auditors
performed the audit in conformance with generally accepted auditing standards in Japan. Audit standards
require that the Auditors formulate an audit plan and perform the audit on the basis of the plan to acquirereasonable assurance on whether the financial statements and supplementary schedules are free ofmaterial misstatement.
The audit involves conducting procedures to obtain audit evidence on the amounts and disclosures in thefinancial statements and supplementary schedules. The procedures are selected and applied at thejudgement of the Auditors based on an assessment of the risk of material misstatement in the financial
statements and supplementary schedules due to fraud or error. The purpose of the audit is not to express
an opinion on the effectiveness of internal controls, but the Auditors in assessing this risk do consider
internal controls related to preparation and appropriate presentation of the financial statements andsupplementary schedules in order to devise audit procedures that are appropriate for the conditions. In
addition, the audit includes consideration of the overall presentation of the financial statements andsupplementary schedules, including evaluations of the accounting policies and application methods
adopted by the management and the estimates made by the management.
The Auditors believe that audit evidence has been obtained that is sufficient and appropriate as the basis
for expressing an opinion.
Audit Opinion
The Auditors find that the aforementioned financial statements and supplementary schedules
appropriately present on all major points the status of assets and income for the period of the financial
statements and supplementary schedules in conformance with corporate accounting standards generally
accepted in Japan.
Interest Relationships
There are no interest relationships that must be disclosed under the provisions of the Certified Public
Accountants Act between the Company and the Auditors or the managing partners.

- 31 -

Audit Report of the Audit Committee
Audit Report
The Audit Committee of Sosei Group Corporation (the “Company”) has audited the performance of duties
by directors and executive officers for the 27th fiscal year from April 1, 2016 to March 31, 2017. The
methods and findings are reported as follows.
1. Methods and content of the audit
The Audit Committee received reports from directors, executive officers and employees, etc. on a regularbasis of the content of resolutions of the Board of Directors related to items provided in Article 416,
Paragraph 1, Item 1 (b) and (e) of the Companies Act and of the structures and operation of the systems
established in accordance with the resolutions (internal control systems), requested and expressed
opinions explanations as necessary, and conducted audit as follows.
1) In accordance with the audit policy and the division of responsibilities, etc. determined by the Audit
Committee, each member of the Committee attended meetings of the Board of Directors and otherimportant meetings, regularly received reports from directors, executive officers and others on theperformance of their duties, etc., and requested additional explanations as necessary, and reviewed
the documents relating to the important decisions, and investigated the state of the business andassets of the Company in cooperation with the Internal Audit Department. Regarding subsidiaries, theAudit Committee sought to achieve a mutual understanding with and exchanged information with thedirectors and corporate auditors, etc. of subsidiaries and received reports on the business fromsubsidiaries as necessary.
2) The Audit Committee monitored and verified whether the Independent Auditors maintained
independence and conducted appropriate audits, received reports from the Independent Auditors on
the performance of their duties, etc., and requested explanations as necessary. Also, the Audit
Committee received notification from the Independent Auditors that they had established the“Structure for Ensuring Appropriate Operation” (matters provided in each item of Article 131 of theOrdinance for Company Accounting) in accordance with the “Quality Control Standards for Audits”(Business Accounting Council, October 28, 2005).
Based on the aforementioned methods, the Audit Committee examined the business report andsupplementary schedules thereof, non-consolidated financial statements (balance sheet, profit and loss
statement, statement of change in shareholders’ equity and notes thereto) and supplementary schedules
thereof, and consolidated financial statements (consolidated statement of financial position, consolidated
statement of comprehensive income, consolidated statement of change in equity, and notes thereto) for
the fiscal year under review.
2. Results of Audit(1) Results of audit of business report, etc.
1) The Committee found that the business report and supplementary schedules accurately present thestatus of the Company in accordance with the laws, regulations and the Articles of Incorporation.
2) The Committee did not find any inappropriate conduct related to the execution of duties by directors
or executive officers or any material facts indicating violation of law or the Articles of Incorporation.
3) The Committee found that the contents of resolutions of the Board of Directors related to the internal
control systems are appropriate. In addition, the Committee did not find any matter requiring us tocomment on the contents of the business report or execution of duties by directors or executive
officers regarding the internal control systems.
(2) Results of audit of non-consolidated financial statements and supplementary schedules
The Committee found that the methods and results of the audit performed by the Independent
Auditors, Deloitte Touche Tohmatsu LLC were appropriate.
(3) Results of audit of consolidated financial statements
The Committee found that the methods and results of the audit performed by the Independent
Auditors, Deloitte Touche Tohmatsu LLC were appropriate.
May 12, 2017
Sosei Group Corporation

Audit Committee

Audit Committee
Chair
Audit Committee
MemberAudit Committee
MemberTomohiro Tohyama*

Takuya Fujii*

Declan Doogan*

Note: All members of the Audit Committee are outside directors stipulated in Article 2, Item 15 and Article
400, Paragraph 3 of the Companies Act.

- 32 -

Reference Documents for Ordinary General Meeting of Shareholders
Proposal
Election of Five Directors
The terms of office of all five directors will expire upon conclusion of the Meeting.
Accordingly, in accordance with the decision of the Nomination Committee, the election of thefive candidates of directors, including one new candidate, is proposed. The candidates are
as shown below.
Candidate
No.

1

2

Career summary, positions,
responsibilities
and significant concurrent posts
Apr. 1978 Joined Fujisawa PharmaceuticalCo., Ltd. (current Astellas Pharma
Inc.)
Feb. 1987 Moved to Genentech Limited
Jul. 1989
Representative Director &President, Genentech Limited
Jun. 1990 Representative Director & CEO of
the Company
Jun. 2005 Board Director, Representative
Shinichi Tamura
Executive Officer and President,(9/17/1949)
CEO of the Company
Mar. 2012 Managing Director, Sosei R&D Ltd.
June 2016 Chairman of the Board,
Representative Executive Officer
and Executive Chairman of theCompany (to the present)<Committee membership>
Member of Nomination Committee andCompensation CommitteeMar. 1996 General Manager, Smithkline
Beecham plc. (current Glaxo
Smithkline)
Jan. 2001 Senior Vice President, International
Commercial Development,
GlaxoSmithkline plc.
Jan. 2010 Non-Executive Director, Syngene
International Limited
Apr. 2010 Non-Executive Chairman, Fermenta
Biotech Limited (to the present)
Jun. 2010 Board Director of the Company (tothe present)
Dec. 2013 Non-Executive Director, MiNA
Therapeutics Limited (to thepresent)
Peter Bains
Feb. 2015 Director, Heptares Therapeutics Ltd.
(7/26/1957)
Apr. 2015 Executive Director and CEO,
Syngene International Limited
Mar. 2016 Non-Executive Director, Syngene
International Limited
Apr. 2016 Representative Executive Officer
and Chief Operating Officer of theCompany
Jun. 2016 Representative Executive Officer
and CEO of the Company (to thepresent)
Dec. 2016 Managing Director, Sosei R&D Ltd.
(to the present)
Mar. 2017 Representative Director &President, Sosei CVC Ltd. (to thepresent)<Committee membership>
Name(Date of birth)- 33 -

No. ofsharesowned

251,100-

Candidate
No.

Career summary, positions,
responsibilities
and significant concurrent posts

Name(Date of birth)None- 34 -

No. ofsharesowned

Candidat
e No.

Name
(Date of birth)

Career summary, positions, responsibilities
and significant concurrent posts
Feb. 1978
Feb. 1982
Feb. 2005

3

Declan Doogan(3/22/1952)

4

Tomohiro
Tohyama(2/21/1950)

Joined Duphar BV.
Moved to Pfizer Inc.
Head of Worldwide Development,
Pfizer Inc.
Oct. 2005 Visiting professor, Kitasato University
in Tokyo (to the present)
Jun. 2007 Outside Director of the Company (tothe present)
Nov. 2009 Interim CEO, Amarin Corporation plc
Sep. 2010 Chief Medical Officer, Amarin
Corporation plc
Jun. 2013 Director and CEO, Portage Pharma
Inc. (to the present)
Jun. 2013 Chairman and Director, Biohaven
Pharmaceutical Holding Company
Ltd.( to the present)
Feb. 2015 Director, Heptares Therapeutics Ltd.
<Committee membership>
Chairman of Compensation Committee, Memberof Nomination Committee, Member of Audit
Committee
Apr. 1978 Entered Legal Training and ResearchInstitute, Supreme Court of Japan
Apr. 1980 Registered with Dai-ichi Tokyo Bar
Association
Joined Nishimura & Sanada Law Office
May 1984 Mason & Sloane LLP. USA
Feb. 1985 Pollock, Bloom & Dekom, USA
Jun. 1985 Pryor, Cashman, Sherman & Flynn,
USA
Aug. 1985 Returned to Nishimura & Sanada Law
Office as a partner
Oct. 1990 Partner at TMI Associates (to thepresent)
Nov. 1999 Outside Corporate Auditor, Nippon
Shikizai, Inc.
Jun. 2010 Outside Director, Avex Group Holdings
Jun. 2011 Outside Director of the Company (tothe present)
May 2016 Outside Director and Audit andSupervisory Committee Member,
Nippon Shikizai, Inc. (to the present)
May 2016 Outside Director, Trust Capital Co.,
Ltd. (to the present)
Jun. 2016 Outside Statutory Auditor, WOWOW
Inc. (to the present)<Committee membership>
Chairman of Audit Committee and Member ofCompensation Committee

No. ofsharesowned- 35 -

15,000-Sep. 1980

5*

Julia Gregory(9/7/1952)

Senior Vice President, Dillon, Read &Co. (now UBS AG) (resigned
December 1990)
Feb. 2000 Executive Vice President & CFO,
Lexicon Pharmaceuticals, Inc.
Jun. 2009
President & CEO, Five Prime
Therapuetics, Inc.
Jul. 2012
Executive Vice President & CFO,
ContraFect Corporation
Nov. 2013 President & CEO, ContraFect
Corporation
Apr. 2016 Chairman & CEO, Isometry Advisors,
Inc. (to the present)

-

Note:
1.
Asterisk (*) indicates new director candidate.
2.
There are no special conflicts of interest between the director candidates and the Group.
3.
Declan Doogan, Tomohiro Tohyama and Julia Gregory are candidates for outside directors.
4.
Reasons for selection of the candidates as outside directors(1) Dr. Declan Doogan has experience of serving as the head of the research and development division of theworld’s largest pharmaceuticals company. The Company believes that leveraging his experience andexpertise related to pharmaceutical research and development will serve to further reinforce the Company’s
management structure and so proposes his appointment as outside director. The term of office of Dr. Doogan
as outside director will be ten years as of the conclusion of the Meeting.
(2) Mr. Tomohiro Tohyama has no experience in corporate management other than as an outside director or
corporate auditor, but he does have extensive experience and expertise in international legal affairs as apartner at a major law firm in Japan. The Company believes that by leveraging his expertise and experienceand receiving views and opinions on the Company’s overall management from this specialized perspective,
the Company will be able to further strengthen the management and governance structures and so proposes
his appointment as an outside director. The term of office of Mr. Tohyama as outside director will be six years
as of the conclusion of the Meeting.
(3) Julia Gregory has many years of experience in corporate management as a company representative and
CFO in the financial and pharmaceuticals industries, and the Company believes that she will leverage her
extensive experience and specialized knowledge to advise the Company on overall management and further
strengthen the Company’s management system and so proposes her appointment as outside director. In
addition, the Company intends to designate her as an independent director as stipulated in the listing
regulations of the Tokyo Stock Exchange and to notify the Tokyo Stock Exchange accordingly.
5.
Summary of liability limitation agreements with director candidates(1) In accordance with Article 427, Paragraph 1 of the Companies Act, the Company entered into with each of
Dr. Declan Doogan and Mr. Tomohiro Tohyama an agreement that limits liability for damages under Article
423, Paragraph 1 of the said Act. The limit on the liability for damages under the agreements is the minimum
amount of liability stipulated in Article 425, Paragraph 1 of the Companies Act.
(2) If this proposal is approved at the Meeting, the Company intends to continue liability limitation agreementswith Dr. Declan Doogan and Mr. Tomohiro Tohyama stated in (1) above and to conclude a liability limitationagreement equivalent to the agreements stated in (1) above with Ms. Julia Gregory.

- 36 -

How to Exercise Voting Rights via the Internet
If you exercise your voting rights via the Internet, please do so in accordance with the following instructions.
1.

Voting rights may be exercised via the Internet by using the following site for exercising voting rights(“voting site”) that has been specified by the Company. The site may also be used by mobile phones.
http://www.web54.net

Voting Site URL

The voting site can be accessed using a mobile phone with a barcode
reader function by scanning the QR Code® at right. For operating details,
refer to your mobile phone’s user’s manual.
(QR Code is the registered trademark of Denso Wave Inc.)

2.

In exercising voting rights via the Internet, please use the voting code and password listed on theenclosed Voting Form and register your votes for or against the proposals by following the instructions
on the screen.

3.

Voting rights may be exercised via the Internet until 6:00 p.m. on Wednesday, June 21, 2017. We ask
your kind cooperation in as early vote as possible.

4.

The following system environment is needed to use the voting site to exercise your voting rights via
the Internet.
For use of the voting site, connection fees charged by the Internet service provider and applicablecommunications fees (such as phone rates) charged by the telecom carrier shall be paid by you.
1) If you exercise voting rights using a computer◇Screen resolution of 800 (horiz.) x 600 (vert.) bits (SVGA) or above.
◇Web browser and PDF viewer installed (confirmed to operate with the following combinations).
OS

Web browser

PDF viewer

Windows Vista®

Internet Explorer® Ver.7～9

Adobe® Reader® Ver.9

Windows® Ver.7

Internet Explorer® Ver.8～11

Adobe® Reader® Ver.11

Windows® Ver.8.1

Internet Explorer® Ver.11

Adobe® Reader® Ver.11*Windows, Windows Vista and Internet Explorer are the trademarks or registered trademarks of Microsoft
Corporation of the U.S. in the U.S. and other countries.
*Adobe and Reader are the trademarks or registered trademarks of Abode Systems Incorporated in the U.S.
and other countries.

◇If pop-up blockers are enabled on your Web browser and add-on tools, etc. disable (or temporarily
disable) them and ensure your privacy settings are set to allow the use of “Cookies” on this site.
◇If you are unable to connect to the above site, communication with the Internet may be restrictedby firewall, proxy server or security software settings, so please check the settings.
2) If you exercise voting rights using a mobile phone
The model of phone you use needs to be capable of 128-bit SSL communication (encrypted
communication). (For security reasons, the site can only be used with models capable of 128-bit
SSL communication (encrypted communication) and so cannot be used with some models. It
may also be possible to exercise voting rights using the full browser function found on mobile
phones, including smartphones, but this may not be possible depending on the model of phone.
Your understanding on this point is appreciated.
5.

If you exercise voting rights redundantly in writing and via the Internet, the votes cast via theInternet will be regarded as the effective votes.

6.

If you exercise voting rights multiple times via the Internet, the final time vote casted will be regarded
as the effective vote.

- 37 -

[Inquiries related to exercise of voting rights via the Internet]
If you have questions regarding exercising voting rights via the Internet, please inquire with the following
contact.
Transfer Agent: Sumitomo Mitsui Trust Bank, Limited
0120-652-031 (9:00 a.m. – 9:00
[Helpline]p.m.)Inquiries other than on exercising voting rights

0120-782-031 (weekdays, 9:00 a.m. – 5:00 p.m.)[About the Digital Voting Platform]
The digital voting platform managed by Investor Communications Japan, which is partially owned by the
Tokyo Stock Exchange, may be available for exercising voting rights at the Meeting by nominal
shareholders (including standing proxies) if an application has been made in advance.

- 38 -

Access to the Shareholder Meeting Venue
Grand Arc Hanzomon 4F Fuji-No-Ma
1-1 Hayabusacho, Chiyoda-ku, Tokyo
03-3288-0111
Subway access

2-min. walk from Hanzomon Station (Exit 1) on Hanzomon Line
8-min. walk from Kojimachi (Exit 1) on Yurakucho Line- 39 -