Financial Section
Contents
Financial Analysis

01

Consolidated Balance Sheets

05

Consolidated Statement of Income

07

Consolidated Statement of Changes in Net Assets

08

Consolidated Statement of Cash Flows09

Notes to Consolidated Financial Statements

10

Report of Independent Auditors

24

For reference: Unaudited

25

KYORIN Pharmaceutical Co., Ltd.
Balance Sheet / Statements of Income

Disclaimer Regarding Forward-Looking Statements
Statements made in this annual report with respect to KYORIN Holdings Inc.’s forecasts, plans, strategies and otherstatements other than those of historical facts are forward-looking statements about the future performance of theCompany and its consolidated subsidiaries and are based on management’s rational assumptions and beliefs inlight of information currently available. As a consequence, readers should understand that, for a variety of reasons,actual results could differ materially from projections presented in this report.
Key factors that could impact our results include, but are not limited to, economic conditions, social trends, competition from rival companies, laws and regulations, uncertainties in drug development and exchange rate ﬂuctuations.

01

Annual Report 2010

Financial AnalysislC onsolidated net sales for fiscal 2009 were a record ¥99,764 million, up 9.8% year on year.
This was the result of strong sales in the principal products of our ethical drugs in Japanbusiness, and growth in generic drugs sales.
l Operating income was ¥13,261 million, up 48.1% from the previous year, as higher sales and an
improved cost of sales ratio boosted gross profit, outweighing an increase in selling, generaland administrative (SG&A) expenses due to the merger with Nisshin Kyorin PharmaceuticalCo., Ltd. Net income was also a record, up 334.3% year on year to ¥8,848 million.

Business Overview
The Kyorin Group comprises KYORIN Pharmaceutical Co., Ltd., which is mainly involved
with R&D, manufacture and sales of pharmaceuticals; KYORIN Rimedio Co., Ltd., whichmainly manufactures and sells generic drugs; Dr. Program Co., Ltd., which mainly develops and sells cosmetics, pharmaceuticals and raw materials for cosmetics; andKyobundo Co., Ltd., which is mainly involved in sales promotion, and advertising planning and production. These four companies operate under the Group holding company,
KYORIN Holdings, Inc. (“the Company”). The Group formulated a new long-term vision,
HOPE 100, and the new HOPE 100 Stage 1 medium-term business plan, to guide its
efforts to ­realize its future corporate image. Essentially, the Group is diversifying its core
consumer healthcare business, which centers on the pharmaceuticals business.

Net sales(Millions of yen)
120,000
90,000During fiscal 2009, the market environment for the pharmaceutical industry, which isthe core business area for the Kyorin Group, became even harsher as competition
intensified among companies in and outside of Japan. In Japan, authorities debatedreforms to the drug pricing system. Guidelines for revised drug pricing standards wereset, and in April 2010 premiums for promoting new drug creation and the eliminationof off-label drug use were introduced on a trial basis. The revisions also further
reduced the prices of original drugs for which there are generics, creating significant
changes in the business environment.

74,05477,093

81,070

2005

2006

2007

60,00030,0000Trends in the Domestic Pharmaceutical Industry

99,76490,8892008

Operating income andoperating margin(Millions of yen)
12.1

Net sales
Under these conditions, consolidated net sales for fiscal 2009 increased 9.8% to¥99,764 million. A decline in sales from ethical drugs overseas was offset by brisk salesof our principal ethical drugs in Japan, including Kipres, for treating bronchial asthma
and allergic rhinitis, Pentasa, for treating ulcerative colitis and Crohn’s disease, andUritos, for treating an overactive bladder. Further contributing to total net sales wereincreased sales in generic drugs of supplementary items and principal products as well
as a change in the accounting period for the generic drugs segment with results
reflecting a 14-month transitional period in the consolidated business year.

(FY)(Pharmaceutical business)n Ethical drug sales overseas(Pharmaceutical business)
n Generic drugs businessn Consumer healthcare businessn Other businesses(%)

30,000Consolidated Operating Results

2009n Ethical drug sales in Japan

13.3
10.9

15.0

9.8

20,00010.0

7.7
13,261
8,989

8,413

10,000

0

8,952

5.0

6,251

2005 2006 2007 2008 2009
(FY)

n Operating income (Left scale)n0Operating margin (Right scale)

Net income and ROE
Summary of Consolidated Statements of Income
Net sales
Cost of sales
Gross profit
SG&A expenses(Including R&D expenses)
Operating income
Other income
Other expenses
Income before income taxes
Net income

Millions of yen

FY200890,88936,79154,09845,146(10,531)

FY200999,76437,47762,28749,025(11,807)

8,952
807

13,261
1,092

550
4,847
2,037

120
13,982
8,848

YoY change YoY change (%)
8,874
9.8
686
1.9
8,188
15.1
3,878
8.6
(1,275)(12.1)
4,309
285
(430)

48.1
35.4
(78.2)

9,134
6,811

188.5
334.3

(Millions of yen)

(%)

15,0008.8

12,000

8.0
5.6

9,000
6,000

5,228

8,848
5.0

6.0

4,842
2.2
2,189

3,000
0

4.0

2.1
2,037

2.0

2005 2006 2007 2008 2009n Net income (Left scale)n

10.0

ROE (Right scale)

(FY)

0

KYORIN Holdings, Inc.

Cost of sales ratio, SG&A expenses, and operating income
The cost of sales ratio decreased approximately 2.9 percentage points due to thein-house manufacture of Pentasa and steady sales growth of Uritos. SG&A expenses(excluding R&D expenses) increased 7.5% year on year to ¥37,218 million following
KYORIN Pharmaceutical’s October 2008 merger by absorption of Nisshin Kyorin­Pharmaceutical; however, the SG&A expenses ratio actually decreased 0.8 of a percentage point from the previous fiscal year to 37.3% due to sales growth. As a result,operating income increased 48.1% to ¥13,261 million and the operating marginincreased 3.5 percentage points to 13.3%.

Cost of sales ratio
(%)
60.0
40.5

39.7

40.0

39.2

35.8

37.6

20.0

Net income and net income per share
Net income was up sharply year on year to ¥8,848 million. Net income per share
increased ¥91.13 from the previous fiscal year to ¥118.37.

2005

0

2006

2007

2008

94,752

98,17897,18496,501

2005

2006

2007

2008

Segment Information

Net assets

Please see Annual Report pages 14–17 “Operation Overview” for a breakdown ofresults by segment.

(Millions of yen)
120,000

Assets, Liabilities and Net Assets
At March 31, 2010, current assets had increased ¥15,920 million due to increases incash and cash in banks, notes and accounts receivable, and inventories. Fixed assets
decreased ¥3,282 million due to declines in property, plant and equipment, net, intangible fixed assets and deferred tax assets. As a result, total assets increased ¥12,637
million, or 10.1%, to ¥137,190 million.
Liabilities at year-end were up ¥4,227 million, or 15.1%, to ¥32,278 million from theprevious year-end. This was mainly due to an increase in current liabilities of ¥4,483
million resulting from increases in notes and accounts payable and accrued income
taxes, and a decrease in short-term bank loans.
Net assets at year-end amounted to ¥104,911 million, up ¥8,410 million, or 8.7%,
year on year. This was attributable to increases in retained earnings and unrealized
holding gain on securities.
As a result, the shareholders’ equity ratio at year-end was 76.5%, down 1.0 percentage point from the previous fiscal year-end.
Summary of Consolidated Balance Sheets

Millions of yen

Current assets

FY200875,140FY200991,060

Fixed assets
Total assets
Current liabilities

49,412
124,552
21,715

46,129137,190
26,198Long-term liabilities
Total liabilities
Shareholders’ equity
Valuation and translation
adjustments
Net assets
Liabilities and net assets

6,336
28,051
97,513

6,079
32,278104,907(1,012)

3
104,911
137,190

96,501
124,552

YoY change YoY change (%)
15,92021.2(3,282)(6.6)
12,637
4,483
(256)

10.1
20.6
(4.0)

4,227
7,394

15.1
7.6

1,015
8,410
12,637

—
8.7
10.1

2009
(FY)

104,91190,00060,00030,000
0

2009
(FY)

The figures for fiscal 2005 are the consolidated
figures for KYORIN Pharmaceutical Co., Ltd. The
figures from fiscal 2008 and onward are theconsolidated figures for KYORIN Co., Ltd.

Shareholders’ equity ratio
(%)
90.0
78.3

79.2

79.4

77.5

76.5

2005

2006

2007

2008

2009

60.0

30.0

0

(FY)

02

03

Annual Report 2010

Cash FlowsNet cash provided by operating activities totaled ¥12,027 million, reflecting mainly
income before income taxes of ¥13,982 million, depreciation and amortization of¥2,810 million, increase in notes and account receivable of ¥1,244 million, increase ininventories of ¥3,686 million, increase in notes and accounts payable of ¥1,600 million
and income taxes paid of ¥1,981 million.
Net cash provided by investing activities was ¥412 million, mainly due to paymentsfor purchase of property, plant and equipment of ¥1,153 million, payments for purchase of investment securities of ¥2,905 million and proceeds from sales and redemption of investment securities of ¥4,153 million.
Net cash used in financing activities was ¥3,297 million, largely attributable to a net
decrease in short-term loans of ¥1,358 million and payment of cash dividends of¥1,418 million.
As a result, cash and cash equivalents at the end of the fiscal year were up ¥9,193
million year on year, or 74.4%, to ¥21,556 million.

Cash flows from operating activities,
cash flows from investing activities,
and free cash flow
(Millions of yen)
20,00010,000Cash provided by operating activities
Cash provided by (used in) investing
activities
Cash provided by (used in) financing
activities
Cash and cash equivalents at end of year

Millions of yen

FY20084,575

FY200912,027

YoY change
7,452

YoY change (%)
162.9(4,229)

412

4,641

—

1,184
12,363(3,297)(4,481)

21,556

9,193

—
74.4

Forecast for Fiscal 2010
The pharmaceutical industry in Japan will continue to face a harsh environment on
account of the April 2010 revision of National Health Insurance (NHI) drug pricing
standards (industry average: 6.4%, KYORIN Pharmaceutical: in 6% range). Other
healthcare businesses are also expected to experience uncertainty over the future of
the economy.
Under these conditions, the Kyorin Group will implement strategies for each business segment based on its new medium-term business plan, the first year of which isfiscal 2010. In the core pharmaceutical business, we will work to build and develop a
new pharmaceutical business model for sustainable growth, and in the consumer
healthcare business we aim to develop our business to make it more profitable andseek to create new businesses.
In terms of sales, in our pharmaceutical business in Japan we expect sales to growon the back of higher sales for our mainstay products Kipres, Uritos, Pentasa and
Mucodyne. In our pharmaceutical business overseas, we expect sales of our ophthalmic solution Zymar to decline following the expiry of patents. In our generic drugs
business, we are expecting a decrease in sales due to the change in fiscal year-end in
fiscal 2009, but we also expect to effectively grow sales as policies for promoting theuptake of generic drugs in Japan take effect.
In terms of profits, although we anticipate a decline in the cost of sales ratio, we
expect SG&A expenses to increase due to higher R&D expenses. Our consolidated
forecasts for fiscal 2010 are as follows.
Forecasts for fiscal 2010
Net sales
Operating income
Net income

Billions of yen

FY200999.8

FY2010YoY change(%)

100.3

0.5

13.3

12.7

(4.2)

8.8

8.5

(3.9)

Our forecast for cash flows for fiscal 2010 is as follows.
In investing activities, we expect to use cash of approximately ¥1,700 million for
expanding production facilities and other purchases of property, plant and equipment.
In financing activities, we expect to use cash of approximately ¥3,700 million for thepayment of cash dividends; for payment of year-end cash dividends of ¥40 per shareand planned interim dividends of ¥10 per share.

5,005 4,444
3,463
1,865

4,575
346

0

(3,140)(7,085)–10,000

412(1,700)(6,144)(4,229)2005 2006 2007 2008 2009n Cash flows from operating activitiesn Cash flows from investing activitiesn

Summary of Consolidated Statements of Cash flows

12,027
12,43910,548

Free cash flow

(FY)KYORIN Holdings, Inc.

Business Risks
We have described below the risk factors that could affect the businessperformance or financial health of the Group. Although the Group has takenorganizational and systematic measures to minimize risk, the outline does notinclude every risk or variable that could affect its business.

(1) Legal Regulations
Legal regulations in Japan, such as the Pharmaceutical Affairs Law, the National Health Insurance(NHI) system, NHI drug prices and laws in othercountries can affect the Group’s business. Everystage of our operations, including pharmaceuticaldevelopment, production, import and distribution,is regulated by various approval and licensing
systems. Unforeseen substantial shifts in future
healthcare administration policy could affect ourbusiness performance and financial health.

(6) Slowdowns or Delays in Production
Technical or regulatory problems, natural disasters
and accidents, including fires, could cause slowdowns or delays in production or the cessation ofoperations, thereby affecting the Group’s
performance.

(2) Pharmaceutical R&D
Ethical drug development requires substantial
R&D investment over lengthy periods. Furthermore, the success rate is low for companies seeking to discover original compounds and bring
pharmaceutical products to market. Currently,
several of KYORIN Pharmaceutical Co. Ltd.’s ethical drugs are undergoing clinical trials. The clinicaldevelopment of such drugs could be terminatedas a consequence of various factors, such as
unforeseeable side effects or failure to achieveintended results.

(8) Intellectual Property Protection
There is a risk that the Group may become unable
to protect its intellectual property effectively inJapan or overseas. In this event, third parties
could exploit the Group’s technology and reducedemand for its principal products and related
pharmaceuticals. If the Group’s other activities are
deemed to infringe on another company’s patents
or threaten its intellectual property rights relating
to its products, the Group may become involvedin legal disputes and have to terminate somebusiness operations.

(3) Increased Competition
The pharmaceutical industry is experiencing rapid
technological change. Sales of the Group’s principal products could be affected if a competitor
developed and brought to market drugs that weremore useful or produced the same effects.

(9) Lawsuits
The Group could become the subject of a lawsuit
for alleged patent infringements, violations of the
Product Liability Act or the Antimonopoly Act or asa result of environmental issues or labor disputes.

(4) NHI Drug Price Revisions
Japan’s healthcare system, including National
Health Insurance (NHI) drug prices, is being
revised. When forecasting business results, theKyorin Group does its best to predict and factor in
the effects of such changes. Nevertheless, ourperformance could suffer as a result of greaterthan-expected NHI drug price revisions orchanges to the NHI system.
(5) Side Effects
Information concerning the safety of new pharmaceuticals is based only on clinical trials using alimited number of subjects and therefore cannot
eliminate the possibility of all side effects. If adrug in general use is found to have unknown andunreported side effects after its launch, its usage
may be restricted or, in some cases, its sale could
be discontinued.

(7) Pharmaceutical Recalls
If the Group’s pharmaceuticals are shown to be
defective due to contamination or other causes,
they will be recalled. Such a situation would
adversely affect the Group’s business results.

(10) Exchange Rate Fluctuations
As the Group imports and exports pharmaceuticalproducts, its sales are vulnerable to exchange rate
fluctuations.
(11) Cancellations of Tie-up Agreements
The Group promotes strategic alliances to makeefficient use of external capital. Through tie-up
agreements with other pharmaceutical companies
in and outside of Japan, the subsidiary allocatessales rights for some of its products and collaborates in sales, R&D and other activities. A cancellation of these tie-up agreements for any reason
could affect the forecast performance of the Group.
(12) IT Security and Information Management
In the course of business operations the Grouputilizes numerous IT systems. This means business
operations are vulnerable to disruptions caused bysystem faults or outside causes such as computerviruses. Furthermore, the leakage of information
could cause a loss of trust in the Group and materially affect the business performance of the Group.

04

05

Annual Report 2010

Consolidated Balance Sheets
KYORIN Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2010 and 2009

Millions of yen

Thousands of
U.S. dollars(Note 3)

2010

2009

2010

¥ 20,193¥ 12,223$  217,036

Notes and accounts receivable (Notes 5 and 13)

36,85935,615396,163

Short-term investments (Notes 4, 6 and 13)

5,353

3,500

57,534   Merchandise and finished goods

11,0689,454

118,960   Work in process

1,195

1,429

12,844   Raw materials and supplies

9,609

7,304

103,278

Deferred tax assets (Note 16)

2,616

2,067

28,117

Other

4,232

3,680

45,486

(69)

(134)

(742)

91,06075,140978,719

Land (Note 7)

1,645

1,671

17,681

Buildings and structures (Notes 7 and 15)

28,29528,165304,117

Machinery and vehicle (Note 7)

14,524

14,023

156,105

Lease assets (Notes 7 and 12)

189

189

2,031

Construction in progress

29

12

312

6,308

6,352

67,799(35,165)(33,291)(377,956)

15,825

17,122

170,088

23,77923,531

255,578

Long-term loans (Note 13)

27

30

290

Goodwill

552

953

5,933

Trademark

18

23

193

Deferred tax assets (Note 16)

4,188

5,042

45,013

Other

2,167

3,003

23,291Less allowance for doubtful accounts

(432)

(294)

(4,643)    Total investments and other assets

30,30232,289325,688¥137,190¥124,552$1,474,527

AssetsCurrent assets:
Cash and cash in banks (Notes 4, 13 and 15)

Inventories:

Less allowance for doubtful accounts    Total current assets

Property, plant and equipment:

Other (Note 15)
Less accumulated depreciation and impairment loss (Note 7)    Property, plant and equipment, net

Investments and other assets:
Investment securities (Notes 6 and 13)

Total assets

KYORIN Holdings, Inc.

Millions of yen

Thousands of
U.S. dollars(Note 3)

2010

2009

2010

¥   9,858¥   8,258$  105,954

2,795

4,149

30,041

59

59

634

Accrued income taxes (Note 16)

4,501

963

48,377

Accrued bonuses to employees

3,043

2,560

32,706

Reserve for sales returns

114

110

1,225

Provision for point card certificates

57

57

613

5,767

5,555

61,984

26,19821,715281,578

Long-term debt (Notes 8, 13 and 15)

602

1,035

6,470

Lease obligations (Note 8)

40

99

430

4,394

4,330

47,227

Accrued retirement benefits for directors and corporate auditors

53

87

570

Other

988

783

10,619

6,079

6,336

65,337

700

700

7,524

Capital surplus

4,752

4,752

51,075Retained earnings

99,73892,3101,071,991

(283)

(250)

(3,042)

Unrealized holding gain (loss) on securities

138

(852)

1,483

Translation adjustments

(134)

(159)

(1,440)    Total net assets

104,91196,501

1,127,590

Total liabilities and net assets¥137,190¥124,552$1,474,527

Liabilities and net assets
Current liabilities:
Notes and accounts payable (Notes 5 and 13)
Short-term bank loans (Notes 8, 13 and 15)
Lease obligations (Note 8)

Other    Total current liabilities

Long-term liabilities:

Accrued retirement benefits for employees (Note 14)    Total long-term liabilities

Contingent liabilities (Note 18)

Net assets (Note 9):
Shareholders’ equity:
Common stock, no per value:   Authorized — 297,000,000 shares in 2010 and 2009   Issued — 74,947,628 shares in 2010 and 2009

Treasury stock, at cost:   203,047 shares in 2010   179,456 shares in 2009
Valuation and translation adjustments:

See accompanying notes to consolidated financial statements.

06

07

Annual Report 2010

Consolidated Statements of Income
KYORIN Co., Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2010 and 2009

Millions of yen

Thousands of
U.S. dollars(Note 3)

2010

2009

2010

Net sales¥99,764¥90,889$1,072,270

Cost of sales

37,47736,791

402,805    Gross profit

62,28754,098669,465

Selling, general and administrative expenses (Note 10)

49,02545,146526,924    Operating income

13,261

8,952

142,530

Interest and dividend income

411

474

4,417

Rent income

277

197

2,977

Interest expense

(60)

(66)

(645)

Equity in earnings (losses) of affiliates

123

(426)

1,322

Loss on disposal of inventories

—

(322)

—

Loss on investments in partnership

(26)

(25)

(279)

(62)

34

(666)

Gain (loss) on sales of investment securities, net (Note 6)

32

(222)

344

Loss on devaluation of investment securities

(17)

(819)

(183)

Impairment loss (Note 7)

(154)

(414)

(1,655)Gain on bad debts recovered

—

27

—

Loss on discontinuance of sales of products—(2,641)—

Loss on valuation of stocks of subsidiaries and affiliates

(10)

—

(107)

Loss on liquidation of subsidiaries and affiliates

(40)

—

(430)

Other, net

247

102

2,655

   Other income (expenses), net

720(4,104)

7,739    Income before income taxes

13,982

4,847

150,279

Current

5,518

2,727

59,308Deferred

(385)

82

(4,138)

5,133

2,809

55,170¥ 8,848¥ 2,037$  95,099

Other income (expenses):(Loss) gain on sales and disposal of property, plant and equipment,   net (Note 11)

Income taxes (Note 16)   Total income taxes
Net income
See accompanying notes to consolidated financial statements.

KYORIN Holdings, Inc.

Consolidated Statements of Changes in Net Assets
KYORIN Co., Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2010 and 2009

Millions of yen
Number ofshares issued(Commonstock)

Commonstock

CapitalsurplusRetainedearnings

74,947,628¥700¥4,752

Cash dividends——

Net income—

Purchase of treasury stock
Other changes
Net changes during the year

Balance as of March 31, 2008

Balance as of March 31, 2009

Treasurystock,
at costUnrealized
holding
gain (loss)
on securities

Translation
adjustments

Total
net assets¥91,133¥(184)¥   745¥  37¥ 97,184

—

(860)

—

—

—

(860)

—

—

2,037

—

—

—

2,037

—

—

—

—

(65)

—

—

(65)

—

—

—

—

—

(1,598)(196)(1,794)

—

—

—

1,177

(65)

(1,598)

(196)

(683)

74,947,628

700

4,752

92,310

(250)

(852)

(159)

96,501

Cash dividends

—

—

—

(1,420)———(1,420)Net income

—

—

—

8,848

—

—

—

8,848

Purchase of treasury stock

—

—

—

—

(33)

—

—

(33)

Other changes

—

—

—

—

—

990

24

1,015

Net changes during the year

—

—

—

7,428

(33)

990

24

8,410

Balance as of March 31, 2010

74,947,628¥700¥4,752¥99,738¥(283)¥   138¥(134)¥104,911

Retainedearnings

Treasurystock,
at costUnrealized
holding
gain (loss)
on securities

Translation
adjustments

Total
net assets$51,075 $          992,154

Thousands of U.S. dollars (Note 3)

Commonstock

Balance as of March 31, 2009$(2,687)$ (9,157)$(1,709)$1,037,199

Cash dividends——(15,262)———(15,262)

Net income——

95,099———95,099Purchase of treasury stock

—

—

—

(355)

—

—

(355)

Other changes

—

—

—

—

10,641258

10,909Net changes during the year——

79,837(355)

10,641

258

90,391

Balance as of March 31, 2010

$7,524$51,075 $1,071,991$(3,042)$ 1,483

See accompanying notes to consolidated financial statements.

$7,524

Capitalsurplus$(1,440) $1,127,590

08

09

Annual Report 2010

Consolidated Statements of Cash Flows
KYORIN Co., Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2010 and 2009

Operating activities
Income before income taxes
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase in allowance for doubtful accounts
Increase in accrued bonuses to employees
Increase (decrease) in accrued retirement benefits for employees
Decrease in accrued retirement benefits for directors and corporate auditors
Decrease in provision for dismantling of fixed assets
Equity in (earnings) losses of affiliates, net
Interest and dividend income
Interest expense
Loss (gain) on sales and disposal of property, plant and equipment, net(Gain) loss on sales of investment securities, net
Loss on devaluation of investment securities
Increase in notes and accounts receivable(Increase) decrease in inventories
Increase in notes and accounts payable(Decrease) increase in consumption taxes payable
Other   Subtotal
Interest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities
Investing activities
Payments for time deposits
Proceeds from cancelation of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments for purchase of investment securities
Proceeds from sales and redemption of investment securities
Payments of merger consideration
Other
Net cash provided by (used in) investing activities
Financing activities(Decrease) increase in short-term loans, net
Repayments of lease obligations
Repayment for long-term loans payable
Redemption of bonds
Purchase of treasury stock, net
Cash dividends
Net cash (used in) provided by financing activities
Effects of exchange rate changes on cash and cash equivalents
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents from newly consolidated subsidiary
Increase in cash and cash equivalents resulting from merger
Cash and cash equivalents at end of year (Note 4)
See accompanying notes to consolidated financial statements.

Millions of yen

Thousands of
U.S. dollars(Note 3)

2010

2009

2010

¥13,982
2,810
154
400
72
481
64
(33)
—
(123)
(411)
60
62
(32)
17
(1,244)(3,686)
1,600
(91)
(418)
13,665406(63)(1,981)
12,027¥ 4,847
3,799
414
312
174
204
(15)
(218)
(84)
426
(474)
66
(33)
220
819
(5,628)
1,649
447
814
(1,073)
6,670
466
(63)
(2,497)
4,575$150,279
30,202
1,655
4,299
774
5,170
688
(355)
—
(1,322)(4,417)
645
666
(344)
183
(13,371)(39,617)
17,197(978)(4,493)
146,8724,364(677)(21,292)
129,267(955)
773(1,153)39(99)(2,905)
4,153
—
561
412

(2,021)
2,220(1,498)187(83)(4,808)5,512(3,511)(227)(4,229)(10,264)
8,308(12,393)419(1,064)(31,223)
44,637
—
6,030
4,428

(1,358)
(58)
(367)
(60)
(33)
(1,418)(3,297)50
9,193
12,363——¥21,556

2,475
(39)
(262)
(60)
(65)
(863)
1,184
(305)
1,224
9,599
31
1,507
¥12,363(14,596)(623)(3,945)(645)(355)(15,241)(35,436)537
98,807
132,878——$231,685

KYORIN Holdings, Inc.

Notes to the Consolidated Financial Statements
KYORIN Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2010 and 20091.

Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of KYORIN Co., Ltd. (the “Company”) and its
domestic subsidiaries have been prepared in accordance with accounting principles generally acceptedin Japan, which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards, and are compiled from the consolidated financial statement
prepared by the Company as required by the Financial Instruments and Exchange Law of Japan.
Certain reclassifications have been made in the 2009 consolidated financial statements to conform to
the 2010 presentation. These reclassifications had no effect on consolidated net income and net assets.

2.

Summary of Significant Accounting Policies(a) Basis of Consolidation and Accounting for Investments in Unconsolidated Subsidiaries
and Affiliates
The accompanying consolidated financial statements include the accounts of the Company and significant companies controlled directly or indirectly by the Company. Companies over which the Company
exercises significant influence in terms of their operating and financial policies are included in the consolidated balance sheets on an equity basis. All significant inter-company balances and transactions are
eliminated in consolidation.
Investments in subsidiaries and affiliates, which are not consolidated or accounted for by the equity
method, are carried at cost or less. Where there has been a permanent decline in the value of suchinvestments, the Company has written down the investments.
Among the consolidated subsidiaries, Kyorin USA, Inc., Kyorin Europe GmbH, and ActivX Biosciences,Inc. close their books of account at December 31 for financial reporting purposes. Kyobundo Co., Ltd.
closes its book at February 28 and KYORIN Rimedio Co., Ltd. closes its book at January 31. Effectivefrom the year ended March 31, 2010, Kyobundo Co., Ltd. and KYORIN Rimedio Co., Ltd. have changed
their fiscal year end to March 31 from February 28 and January 31, respectively. Because of thesechanges, they have a transitional 13 or 14-month fiscal year for the year ended March 31, 2010.
The necessary adjustments are made to the consolidated balance sheets of all the consolidated
subsidiaries to reflect any significant transactions between their respective fiscal year end and the Company’s fiscal year end.
(b) Foreign Currency Translation
The balance sheets accounts of the foreign consolidated subsidiaries are translated into yen at theexchange rates in effect at the balance sheet date. Translation adjustments are presented as a component of net assets in the accompanying consolidated balance sheets.
(c) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposit with banks withdrawable on demand, andshort-term investments which are readily convertible into cash subject to an insignificant risk of any
changes in their value and which were purchased with an original maturity of three months or less.
(d) Short-Term Investments and Investment Securities
Securities other than equity securities issued by subsidiaries and affiliates are classified into other securities. Marketable securities classified as other securities are carried at fair value with changes in unrealized
gain or loss, net of the applicable income taxes, directly included in net assets. Non-marketable securities classified as other securities are stated at cost.
Cost of securities sold is determined by the moving average method.
(e) Inventories
Merchandise and finished goods, work in process, and raw materials and some supplies are stated at cost
determined by the gross average method. These inventories with lower profitability are written down totheir net realizable value. Supplies except for samples are stated at the last purchase price method.
(f) Depreciation and Amortization (Except for Leased Assets)
Depreciation of property, plant and equipment is calculated by the declining-balance method at rates
based on the estimated useful lives of the respective assets. For buildings acquired after April 1998, thestraight-line method is used. The useful lives of property, plant and equipment are summarized as follows:
Buildings and structures
3 to 50 years
Machinery, equipment and vehicles
4 to 17 years

10

11

Annual Report 2010

Intangible assets are amortized by the straight-line method over their estimated useful lives. Computer software for internal use is capitalized and is amortized by the straight-line method over the usefullife of five years.
(g) Leases
Leased assets are initially accounted for at their acquisition costs and depreciated over the leased termby the straight-line method with no residual value. All finance leases are accounted for in the samemanner as sales transaction. However, finance lease transactions that do not deem to transfer ownershipof the leased property to the lessee whose term commences on or before March 31, 2008 are stillaccounted for in a similar manner as operating lease transactions.
(h) Amortization of Goodwill
Goodwill is amortized over a period of within 20 years on a straight-line basis except that when theexcess is immaterial, it is fully charged to income as incurred.
(i) Research and Development Expenses
Research and development expenses are charged to income as incurred.
(j) Income Taxes
Deferred tax assets and liabilities are determined based on the differences between financial reporting
and the tax bases of the assets and liabilities and are measured using the effective tax rates and laws
which will be in effect when the differences are expected to reverse.
(k) Retirement Benefits
Accrued retirement benefits for employees are provided mainly at an amount calculated based on the
projected benefit obligation and the fair value of the pension plan assets at balance sheet dates, asadjusted for unrecognized actuarial gain or loss and unrecognized prior service cost. The retirement
benefit obligation is attributed to each period by the straight-line method over the estimated years ofservice of the eligible employees. Actuarial gains or losses are being amortized in the following year inwhich the gain or loss is recognized primarily by the straight-line method over the average remaining
years of service of the employees (10 years). Prior service cost is being amortized as incurred by thestraight-line method over the average remaining years of services of the employees (10 years). At certain
domestic consolidated subsidiaries, ¥504 million ($5,417 thousand) of unrecognized transitional assets
and liabilities is amortized over 10 years.
In addition, directors and corporate auditors of certain consolidated subsidiaries are customarily
entitled to lump-sum payments under their respective unfunded retirement benefits plans. The provision
for retirement benefits for these officers has been estimated in an amount as 100% as benefit obligation
based on their policy required under assumption that all directors and corporate auditors retired at thebalance sheets date.
Effective from the year ended March 31, 2010, the Company adopted “Partial Amendments to
Accounting Standard for Retirement Benefits (Part 3)” (ASBJ Statement No. 19, issued on July 31, 2008).
As actuarial gains or losses are being amortized from the following year, there were no effects of thischange on operating income and income before income taxes for the year ended March 31, 2010. As aresult of adoption of new standard, liabilities for employees’ retirement benefits increased by ¥1,922
million ($20,658 thousand) as of March 31, 2010.
(l) Appropriation of Retained Earnings
Appropriation of retained earnings with respect to a given financial period is made by resolution of theboard of directors’ meeting for dividend and resolution of the ordinary general shareholders’ meetingfor other appropriations. (see Note 9).

3.

U.S. Dollar Amounts
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter ofarithmetic computation only, at the rate of ¥93.04 = U.S.$1.00, the approximate rate of exchange on
March 31, 2010. The translation should not be construed as a representation that yen have been, could
have been, or could in the future be, converted into U.S. dollars at the above or any other rate.

KYORIN Holdings, Inc.

4.

Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2010 and 2009 for the consolidated statements of cash flows
consisted of the following:
Millions of yen

Cash and cash in banks
Short-term investments
Time deposits with a maturity over three months
Cash and cash equivalents

5.

Thousands of
U.S. dollars

2010

2009

2010

¥20,193
2,462(1,099)¥21,556¥12,223
1,062(921)¥12,363$217,036
26,462(11,812)$231,685

Notes with Maturity Date of Fiscal Year End
Notes with a maturity date of the fiscal year end are settled on the clearing date. Since KYORIN ­Remedio
Co., Ltd. closed its book on January 31, 2009, on which financial institutions were closed, the following
notes are included in the ending balance on the consolidated balance sheets as of March 31, 2009.
Millions of yen

Notes receivable
Notes payable

6.

¥ 91
149

Short-Term Investments and Investment Securities
Information regarding marketable securities classified as other securities as of March 31, 2010 and 2009
are as follows:
Millions of yen

Thousands of U.S. dollars

2010
Marketable other securities

Securities whosecarrying value exceeds
their acquisition cost:
Stock
Debt securities:   Government bonds   Corporate bonds   Other bonds
Other    Subtotal
Securities whosecarrying value do not
exceed theiracquisition cost :StockDebt securities:   Government bonds   Corporate bonds   Other bonds
Other    Subtotal    Total

2010

Acquisition
cost

Carrying
value

Unrealized
gain (loss)

Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥ 1,962¥ 2,854¥  892$ 21,088$ 30,675$ 9,587

1,400
9,683
200
—
13,246

1,401
9,809
202
—
14,268

1
126
2
—
1,022

15,047104,074
2,150—
142,369

15,058105,428
2,171—
153,353

11
1,354
21
—
10,985

1,807

1,621

(185)

19,422

17,423(1,988)

6,198
4,817
1,700
93
14,616¥27,863

6,104
4,566
1,462
59
13,815¥28,083

(93)
(250)
(237)
(34)
(801)
¥  22066,617
51,773
18,2721,000
157,094$299,473

65,60649,076
15,714634
148,485$301,838(1,000)(2,687)(2,547)(365)(8,609)$ 2,36512

13

Annual Report 2010

Millions of yen
2009

Securities whose carrying value exceeds
their acquisition cost:
Stock
Debt securities:   Government bonds   Corporate bonds   Other bonds
Other    Subtotal
Securities whose carrying value do not exceed
their acquisition cost :StockDebt securities:   Government bonds   Corporate bonds   Other bonds
Other    Subtotal    Total

Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥   603¥ 1,165¥   562

199
2,695
—
—
3,498

199
2,716
—
—
4,081

0
20
—
—
583

2,139

1,868

(271)

4,797
14,783
2,100
96
23,917¥27,416

4,607
13,532
1,825
51
21,884¥25,966(190)(1,250)(274)(45)(2,032)¥(1,449)

Unlisted securities and other non-marketable securities are not included in the above schedules as
their fair market values are extremely difficult to be determined. The amounts of these securities are¥588 million ($6,320 thousand) and ¥665 million as of March 31, 2010 and 2009, respectively.
Sales amounts of securities classified as other securities and the related aggregate gain and loss forthe years ended March 31, 2010 and 2009 are summarized as follows:
Millions of yen

Proceeds from sales
Gains on sales
Losses on sales

Thousands of
U.S. dollars

2010

2009

2010

¥542
37
5

¥2,77572
293$5,825398
54

The redemption schedule for securities with maturities classified as other securities as of March 31,
2009 is as follows:
Millions of yen
2009

Government bonds
Corporate bonds
Other bonds    Total

7.

Due inone yearor less

Due after
one yearthroughfive years

Due after
five years
throughten years

Due after
ten years¥1,0002,300
200¥3,500¥    —
10,200500¥10,700

¥   —
1,600
—
¥1,600¥4,0003,700
1,200¥8,900

Impairment Loss
The Company and its consolidated subsidiaries recognized a loss on impairment of long-lived assets forthe years ended March 31, 2010 and 2009 as follows:
2010
Location

Use

Type of assets

Shinjuku-ku, Tokyo
Total

Business use

Leased assets

Millions ofyen

Thousands of
U.S. dollars

¥154
¥154

$1,655$1,655KYORIN Holdings, Inc.

2009
Millions ofyen

Location

Use

Type of assets

Former Nara Office
Kashihara City,
Nara Prefecture

Idle properties

Land
Buildings

¥   3
17

Business use

Leased assets

393
¥414

Chiyoda-ku, Tokyo
Total

The Company and its consolidated subsidiaries identify groups of assets based on the managerial
accounting categories except for idle asset, which is grouped individually.
For the year ended March 31, 2010, the book value of the leased assets of Kyobundo Co., Ltd. waswritten down to its recoverable value as it fell below the book value due to deterioration of the assets interms of profitability. This decrease in value was included in other expenses as impairment loss. The recoverable amount of the leased assets was estimated based on its utility value with a discount rate of 6.7%.
For the year ended March 31, 2009, since the former Nara Office of KYORIN Rimedio Co., Ltd. had
been idle, its book value was written down to its recoverable amount and this decrease in value wasincluded in other expenses as impairment loss. The recoverable amounts were estimated based on the
net sales prices; the land was valuated by road rating, and the buildings were estimated to zero due toits decrepitude. The book value of the leased assets of Japan Medical Advance Co., Ltd. was written
down to its recoverable value as it fell below the book value due to deterioration of the assets in terms
of profitability. This decrease in value was included in other expenses as impairment loss. The recoverable amount of the leased assets was estimated based on its utility value with a discount rate of 6.7%.

8.

Short-Term Bank Loans, Long-Term Debt and Lease Obligations
Short-term bank loans and the current portion of long-term debt and lease obligations as of March 31,
2010 and 2009 consisted of the following:

Short-term bank loans
Current portion of long-term bank loans
Current portion of lease obligations
Total

Millions of yen

Thousands of
U.S. dollars

2010

2009

2010

¥2,486309
59¥2,854¥3,844305
59¥4,208$26,720
3,321
634$30,675

The average interest rates applicable to short-term bank loans outstanding as of March 31, 2010 and2009 are 1.0% and 1.1%, respectively.
Long-term debt as of March 31, 2010 and 2009 consisted of the following:

Long-term bank loans due through 2014
at average interest rate of 2.2% and2.1% in 2010 and 2009, respectively
Lease obligations due through 2014
1.4% unsecured bonds, payable in yen, due 2011
Current portion of long-term bank loans andlease obligations, and bonds due within one year
Total

Millions of yen

Thousands of
U.S. dollars

2010

2009

2010

¥ 881

¥1,250$ 9,469

99
90

158
150

1,064
967

(428)
¥ 642

(424)
¥1,134(4,600)$ 6,900

14

15

Annual Report 2010

The annual maturities of long-term debt and lease obligations are summarized as follows:

9.

Year ending March 31

Millions ofyen

Thousands of
U.S. dollars

2011
2012
2013
2014
2015 and thereafter
Total¥  428
305
172
160
4
¥1,070$ 4,600
3,278
1,849
1,720
43
$11,500

Shareholders’ Equity
Japanese companies have been subject to the Corporation Law of Japan (the Corporation Law”).
The significant provisions in the Corporation Law that affect financial and accounting matters are summarized below;(a) Dividends
Under the Corporation Law, companies can pay dividends at any time during the fiscal year in addition
to the year-end dividend upon resolution at the shareholders meeting. The board of directors may
declare dividends (except for dividends in kind) if the company has prescribed so in its articles of incorporation for companies that meet certain criteria such as;(1) having the board of directors,(2) having independent auditors,(3) having the board of corporate auditors, and(4) the term of service of the directors is prescribed as one year rather than two years of normal termby its articles of incorporation
The Corporation Law permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of­Directors if the articles of incorporation of the company so stipulate. The Corporation Law also provides
certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets
after dividends must be maintained at no less than ¥3 million.
(b) Increases/decreases and transfer of common stock, reserve and surplus
The Corporation Law requires that an amount equal to 10% of dividends must be appropriated as a legal
reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of
aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock.
Under the Corporation Law, the total amount of additional paid-in capital and legal reserve may bereversed without limitation. The Corporation Law also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts
under certain conditions upon resolution of the shareholders.
(c) Treasury stock and Stock option
The Corporation Law also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the board of directors. The amount of treasury stock purchased cannot
exceed the amount available for distribution to the shareholders, which is determined by specific formula. Under the Corporation Law, stock acquisition rights, which were previously presented as a liability,
are now presented as a separate component of net assets. The Corporation Law also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of net assets or deducted directly from stockacquisition rights.

10.

Research and Development Expenses
Research and development expenses included in selling, general and administrative expenses
for the years ended March 31, 2010 and 2009 were ¥11,807 million ($126,902 thousand) and ¥10,531
million, respectively.

KYORIN Holdings, Inc.

11.

Gain (Loss) on Sales and Disposal of Property, Plant and Equipment, Net
Significant components of the gain (loss) on sales and disposal of property, plant and equipment, net for
the years ended March 31, 2010 and 2009 were as follows:

Gain:
Buildings and structures
Machinery and vehicle
Land
Other
Loss:
Buildings and structures
Machinery and vehicle
Other
Total

12.

Millions of yen

Thousands of
U.S. dollars

2010

2009

2010

¥  6
0
5
0
¥ 11

¥ 33
2
69
1
¥105

$  64
0
54
0
$ 118

¥(25)
(12)
(34)
(71)
¥(62)

¥ (47)
(11)
(13)
(71)
¥ 34

$(269)
(129)
(365)
(763)
$(666)

LeasesLeased assets principally consist of medical computer terminals (machinery and vehicle) for medical use.
Pro forma information of the leased property whose term commences on or before March 31, 2008
such as acquisition cost, accumulated depreciation, obligations under finance leases, depreciation
expense for finance leases that do not transfer ownership of the leased property to the lessee on an “asif capitalized” basis for the years ended March 31, 2010 and 2009 were as follows:
Millions of yen
March 31, 2010
Acquisition
costs

Accumulated
depreciation

Accumulated
impairment
loss

Net book
value

Machinery and vehicle
Other   Total¥1,383463¥1,846¥  757295¥1,052

¥455
—
¥455

¥170
167
¥338

Machinery and vehicle
Other   Total$14,865
4,976$19,841$ 8,136
3,171$11,307$4,890—$4,890Thousands of U.S. dollars$1,827
1,795$3,633
Millions of yen
March 31, 2009

Machinery and vehicle
Other   Total

Acquisition
costs

Accumulated
depreciation

Accumulated
impairment
loss

Net book
value¥1,383703¥2,086

¥537
408
¥946

¥393
—
¥393

¥451
294
¥746

For the year ended March 31, 2010 and 2009, lease payments relating to finance leases accounted
for in a similar manner as operating lease transactions amounted to ¥346 million ($3,719 thousand) and¥348 million, respectively, which was equal to the depreciation expense of the leased assets computedby the straight-line method over the lease terms assuming no residual value, reversal of accumulated
impairment loss on leased assets amounted to ¥92 million ($989 thousand) and ¥393 million, respectively,
and related impairment losses amounted to ¥154 million ($1,655 thousand) and none, respectively.

16

17

Annual Report 2010

Future minimum lease payments (including the interest portion thereon) subsequent to March 31,
2010 on noncancelable operating leases and finance leases accounted for as rental transactions are
summarized as follows:
Millions of yen
Year ending March 31,

20112012 and thereafter
Total
Accumulated impairment loss

13.

Thousands of U.S. dollars

FinanceleasesOperatingleasesFinanceleasesOperatingleases

¥263
530
¥793
¥455

¥  528985¥1,514¥   —$2,827
5,696$8,523$4,890$ 5,675
10,587$16,273$       —Financial Instruments
Effective from the year ended March 31, 2010, the Company and its consolidated subsidiaries(“the Companies”) adopted “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10,
issued on March 10, 2008) and Guidance on Disclosure about Fair Value of Financial Instruments (ASBJ
Guidance No. 19, issued on March 10, 2008). Status of financial instruments is as follows:(1) Investment policy of financial instruments
The Companies mainly operate funds by the highly secured financial instruments such as deposits andhighly rated bonds, ensuring the security and liquidity. The Companies use bank loans as our prime
source of financing and no derivatives are used.
(2) Details of financial instruments, associated risk and risk management
Operating receivables such as notes and accounts receivable are exposed to credit risk.
The Companies follow internal rules and monitors the major customers’ credit conditions periodicallyand manages the due date and balance per each customer. The Companies keep track of the adverse
financial conditions of our customers in the early stage to mitigate the bad debt. The Companies haveoperating receivables dominated in foreign currencies that are exposed to foreign currency fluctuation
risk. The Companies mitigate foreign currency fluctuation risk by utilizing foreign currency deposits andnetting receivables with payables dominated in foreign currencies.
Short-term investments and investment securities are mainly consists of highly rated bonds and stockof companies that have business relationship with the Companies. These are exposed to market fluctuation risk and credit risk and the Companies regularly review the fair value and issuers’ financial condition
to mitigate market fluctuation risk and credit risk.
Operating payables such as notes and accounts payable are due within six months and the Companies
have operating payables dominated in foreign currencies.
Short-term bank loans are mainly used to finance operating capital and long-term loans and bonds
payable are mainly used to finance necessary funds for the capital investments and business expansion.
Operating payables, loans and bonds are exposed to liquidity risk. The Companies manages theliquidity risk by preparing and updating the cash management plan periodically.
(3) Supplemental information on fair value of financial instruments
As well as the values based on market prices, fair values of financial instruments include values, which arereasonably calculated in case market prices do not exist. As the calculation of those values adopts certain assumptions, those values may vary in case different assumptions are applied.
Fair value and others of financial instruments as of March 31, 2010 are as follows:
Millions of yen

Thousands of U.S. dollars

2010

Cash and cash in banks
Notes and accounts
receivable
Short-term investments
and investment securities   Total assets
Notes and accounts
payable   Total liabilities

Carrying
value

Fair value¥20,193¥20,193

36,8592010

Difference

Carrying
value

Fair value

Difference¥—$217,036$217,036$—

36,859—396,163

396,163—

28,083¥85,136

28,083¥85,136—¥—

301,838$915,047

301,838$915,047—$—¥ 9,858¥ 9,858¥ 9,858¥ 9,858¥—¥—$105,954$105,954$105,954$105,954$—$—

KYORIN Holdings, Inc.

Unlisted securities and others of ¥1,049 million ($11,275 thousand) whose fair values are extremely
difficult to determine as of March 31, 2010 were not included in the above schedules.
Valuation method of fair value of financial instruments information regarding securities is as follows:(1) Cash and cash in banks
The carrying value is deemed as the fair value since it is scheduled to be settled in a short period of time.
(2) Notes and accounts receivable
The carrying value is deemed as the fair value since it is scheduled to be settled in a short period of time.
(3) Short-term investments and investment securities
Fair value of stocks is based on the price on stock exchanges and that of bonds is based on the price onbond markets or the price presented by the counter party financial institutions. Please see Note 6. ShortTerm Investments and Investment Securities.
(4) Notes and accounts payable
The carrying value is deemed as the fair value since it is scheduled to be settled in a short period of time.
The redemption schedule for monetary receivables and security with maturities subsequent to March
31, 2010 is as follows:
Millions of yen
2010

Cash and cash in banks
Notes and accounts receivable
Securities with maturities classified as othersecurities
Government bonds
Bonds
Other
Total

Due in one
year or lessDue after
one yearthroughfive years

Due after
five years
throughten years

Due after
10 years¥20,192
36,859

¥   —
—

¥   —
—

¥   —
—

¥ 2,400
2,400
500¥62,352¥1,2008,300
200¥9,700¥2,0002,500—¥4,500¥2,000500
1,200¥3,700Thousands of U.S. dollars
2010

Cash and cash in banks
Notes and accounts receivable
Securities with maturities classified as othersecurities
Government bonds
Bonds
Other
Total

14.

Due in one
year or lessDue after
one yearthroughfive years

Due after
five years
throughten years

Due after
10 years$217,025
396,193$     ——

$    ——$    ——$ 25,795
25,7955,374$670,163$ 12,898
89,2092,150$104,256$21,496
26,870—$48,366$21,496
5,374
12,898$39,768

Retirement Benefit Plans
The Company and its consolidated subsidiaries have defined benefit pension plans, defined contribution pension plans, and annuity in advance retirement severance plans, and certain of its domestic­consolidated subsidiaries have lump-sum retirement plan, Government Welfare Pension Fund Plan, andtax qualified pension plans.

18

19

Annual Report 2010

The following table sets forth the funded and accrued status of the plans and the amounts recognized in the consolidated balance sheets as of March 31, 2010 and 2009 for the Company’s and the consolidated subsidiaries’ defined benefit plans:Millions of yen

Thousands of
U.S. dollars

2010

2009

2010

Projected benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized transitional assets and liabilities
Unrecognized actuarial gain or loss
Unrecognized prior service cost
Net retirement benefit obligation
Prepaid pension cost¥(27,759)
19,709(8,049)
8
3,781
(134)
(4,394)—¥(25,851)
17,207(8,643)
67
4,408
(162)
(4,330)—$(298,356)
211,834(86,511)86
40,638(1,440)(47,227)—

Accrued retirement benefits for employees¥ (4,394)¥ (4,330)$ (47,227)

The components of retirement benefit expenses for the years ended March 31, 2010 and 2009 areoutlined as follows:
Millions of yen

Thousands of
U.S. dollars

2010

2009

2010

Service cost
Interest cost
Expected return on plan assets
Amortization of transitional assets and liabilities
Amortization of actuarial gain or loss
Amortization of prior service cost
Premium of defined contribution pension plan andannuity in advance retirement severance plan, etc.

¥  830
633
(427)
58
643
(28)

¥  810
636
(506)
50
220
(28)

$ 8,9216,804(4,589)
623
6,911
(301)

286

270

3,074

Total

¥1,996¥1,451$21,453

The assumptions used in accounting for the above plans are as follows:

Discount rates
Expected return on plan assets

15.

2010

2009

2.0%
2.5%

2.5%
2.5%

Pledged Assets
Assets pledged as collateral for guaranty deposits and plant mortgage as of March 31, 2010 and 2009were as follows:
Millions of yen

Thousands of
U.S. dollars

2010

2009

2010

Cash and cash in banks   Total
For plant mortgage
Buildings
Other   Total
Related loans and debt for plant mortgage
pledged as collateral
Short-term bank loans
Long-term bank loans¥   10¥   10¥   10¥   10$   107$   107¥1,866402¥2,269¥2,044473¥2,518$20,056
4,321$24,387¥  13865¥  143234$ 1,483699   Total¥  204¥  378$ 2,193

Assets pledged as collateral:

For guaranty deposits

KYORIN Holdings, Inc.

16.

Income Taxes
Significant components of deferred tax assets and liabilities as of March 31, 2010 and 2009 were as follows:

Deferred tax assets:
Accrued retirement benefits for employees
Accrued bonuses to employees
Allowance for doubtful accounts
Accrued enterprise tax
Loss on disposal of inventories
Loss on devaluation of investment securities
Loss on disposal of property, plant and equipment
Impairment loss
Asset adjustment accountTax loss carry forward
Unrealized holding loss on securities
Other   Subtotal
Valuation allowance   Total deferred tax assets
Deferred tax liabilities:
One time revaluation for property, plant and   equipment
Other   Total deferred tax liabilities
Net deferred tax assets

Millions of yen

Thousands of
U.S. dollars

2010

2009

2010

¥ 1,814
1,230
186
361
205
327
1,084
245
725
967
—
1,262
8,411
(1,502)
6,908¥ 1,781
1,035
174
132
200
713
1,101
224
966
859
604
1,058
8,853
(1,622)
7,231$ 19,497
13,220
1,999
3,880
2,203
3,515
11,651
2,633
7,792
10,393—
13,56490,402(16,144)
74,248

(77)
(26)
(103)

(101)
(19)
(121)

(828)
(279)
(1,107)¥ 6,804¥ 7,109$ 73,130

Taxes on income consist of corporate, inhabitants and enterprise taxes. Reconciliation of the statutory tax rate to the effective tax rate for the years ended March 31, 2010 and 2009 were as follows:

Statutory tax rate
Entertainment expenses and others that are not tax deductible
permanently
Inhabitants’ per capita taxes
Tax credits for research and development expenses
Valuation allowanceOther   Effective tax rate

17.

2010

2009

41.3%

41.3%

3.8
0.5
(9.4)
(0.9)
1.4
36.7%

10.4
1.6
(8.6)
14.8
(1.5)
58.0%

Segment Information(1) Business Segments
Information regarding business segments is omitted in the consolidated financial statements for the years
ended March 31, 2010 and 2009, because sales, operating income, and total assets in the pharmaceuticalsegment are more than 90% in all business segment for the years ended March 31, 2010 and 2009.
(2) Geographical Segments
Information regarding geographical areas is omitted for the years ended March 31, 2010 and 2009,
because sales and total assets of Japanese area are more than 90% in all geographical areas for theyears ended March 31, 2010 and 2009.
(3) Overseas Sales
Information regarding overseas sales is omitted for the years ended March 31, 2010 and 2009, because
overseas sales is less than 10% in all consolidated net sales for the years ended March 31, 2010 and 2009.

20

21

Annual Report 201018.

Contingent Liabilities
Contingent liabilities as of March 31, 2010 and 2009 were as follows:
Millions of yen

Guarantors of indebtedness of employees
Notes receivable endorsed

19.

Thousands of
U.S. dollars

2010

2009

2010

¥ 8
11

¥10
12

$ 86
118

Combination of Business
For the year ended March 31, 2009, KYORIN Pharmaceutical Co., Ltd., a wholly owned subsidiary of theCompany, merged Nisshin Kyorin Pharmaceutical Co., Ltd., an affiliate company of the Company, on
October 1, 2008, and this transaction was accounted for using the purchasing method.
(1) Details of the merged companya) Company name and description of business		 Company Name: KYORIN Pharmaceutical Co., Ltd.
		 Business:	Manufacture, sale, and entrusted research and development of pharmaceuticalproductsb) Purpose of the merger
		In the long run, the Company concluded that it was the best option to enhance the corporate
value by not causing Nisshin Kyorin Phermaceutical Co., Ltd to solely operate the pharmaceuticalbusiness but by integrating Nisshin Kyorin Pharmaceutical Co., Ltd into KYORIN PharmaceuticalCo., Ltd., through reinforcements of the capacities of the research and development and the sales
force of ethical drugs.
c) Effective date		 October 1, 2008d) Type of the merger and trade name		 Type:
Merger
		 Trade name:
KYORIN Pharmaceutical Co., Ltd.
e) Acquired voting rights
		 100%(2) Period of the merged company included in the consolidated income statement
	Business result of operation of the merged company from October 1, 2008 to March 31, 2009 wasincluded in the consolidated statement of income for the year ended March 31, 2009. For the period
from April 1, 2008 to September 30, 2008, the Company accounted for by the equity method and recognized equity in losses of affiliates (with 50% of voting rights) in the consolidated statement of income.
(3) Acquisition costa) Merger consideration
		The merger consideration is paid in cash without issuing new shares of the merged company ofallocating own shares. The amount of the merger consideration was ¥3,511 million.
b) Calculation of merger consideration
		The amount of the merger consideration was calculated with consideration of the current net
assets including the future value based on the merged company’s balance sheets as of the end ofJune 2008.
(4) Goodwilla) Amount of goodwill		 ¥642 millionb) Reason for goodwill incurred		 Goodwill was incurred because of future excess earning power.
c) Method and period of amortization
		 Goodwill is amortized on the straight-line method over 5 years.

KYORIN Holdings, Inc.

(5) The assets and liabilities transferred to the merging company
Millions ofyen

Current assets
Noncurrent assets¥5,729360

Total assets

6,090

Current liabilities

2,359

Total liabilities¥2,359(6) Effect of the merger on the consolidated statement of income	Information regarding the merger effect on the consolidated statement of income is omitted, as theeffect of the merger, assuming that the merger was completed at the beginning of this fiscal year,
was immaterial for the year ended March 31, 2009.

20.

Amounts Per Share
Amount per share for the years ended March 31, 2010 and 2009 were as follows:
Yen

Basic net income
Cash dividends
Net assets

U.S. dollars

2010

2009

2010

¥  118.37
50.00
1,403.60¥   27.24
13.00
1,290.67$ 1.270.54
15.09

Basic net income per share was computed based on the net income available for distribution toshareholders of common stock and the weighted average number of shares of common stock outstanding during the year. Diluted net income per share has been omitted because no potentially dilutive
instruments were outstanding during the years ended March 31, 2010 and 2009.
Cash dividends per share represent the cash dividends as applicable to the year.
The amount per share of net assets is computed based on the net assets available for distribution
to the shareholders of common stock and the number of shares of common stock outstanding at theyear end.

21.

Subsequent Events
The following appropriations of retained earnings, which have not been reflected in the accompanying
consolidated financial statements for the year ended March 31, 2010, were approved at the board of
directors’ meeting held on May 25, 2010:

Cash dividends (¥40.0=U.S.$0.43 per share)

Millions ofyen

Thousands of
U.S. dollars¥2,989$32,126

22

23

Annual Report 2010

Report of Independent Auditors
KYORIN Pharmaceutical Co., Ltd.
As of March 31, 2010 and 2009

For reference: Unaudited

KYORIN Holdings, Inc.

NON-CONSOLIDATED FINANCIAL SUMMARY

Non-consolidated Balance Sheet
KYORIN Pharmaceutical Co., Ltd.
As of March 31, 2010 and 2009

Millions of yen

2009

2010

AssetsCurrent assets

64,82278,422   Cash, deposits

8,615

15,313   Accounts receivable

32,01833,088   Market securities

3,437

5,290

   Inventory

15,684

19,147   Other

5,066

5,581

Fixed assets

43,69941,400   Tangible assets

13,78912,847   Intangible assets

486

328

   Investments

29,42328,225

Total Assets

108,522

119,822

14,59319,003Liabilities and equity
Current liabilities   Notes and accounts payable

5,423

6,849

   Other

9,170

12,154Non-current liabilities

5,457

5,312

Total liabilities

20,051

24,31689,32895,384

Net assets
Shareholders’ equity
Net unrealized gain and translation adjustments
Total equity
Total liabilities and equity

(857)

120

88,47095,505

108,522

119,822

Non-consolidated Statements of Income
KYORIN Pharmaceutical Co., Ltd.
Years Ended March 31, 2010 and 2009
Millions of yen

2009

2010

Sales

77,96285,308

Cost of Sales

29,551

28,374Gross profit

48,41156,934

Selling, general and administrative expenses

39,894

43,795

Operating income

8,517

13,139998

1,497

Non operating income
Non operating expense
Recurring income

52

56

9,463

14,580Extraordinary gain

176

37

Extraordinary loss

2,823

112

6,816

14,506

2,617

5,452

157

(419)

4,041

9,472

Income before income taxes and minority interests
Corporate,inhabitants and enterprise taxes
Deferred income taxes
Net income

24

KYORIN Holdings, Inc.
5, Kanda Surugadai 2-chome, Chiyoda-ku, Tokyo
101-8311 JAPANCorporate Communication
TEL+81-3-3293-3451
E-mail http://www.kyorin-gr.co.jp/contact/
URL
http://www.kyorin-gr.co.jp/

This report was printed on FSC-approved paper using vegetable oil ink.
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