English translation

March 11, 2016

Annual Report(January 1, 2015 through December 31, 2015)
1. Business Performance of SymBio Pharmaceuticals Limited(1) Business conditions and operating results
The Japanese pharmaceutical industry during FY 2015 was again guided toward the “eraof generic drugs comprising 80% of all drugs dispensed,” with the announcement of theComprehensive Drug Industry Reinforcement Strategy. With Japan’s medical expenditures
exceeding 40 trillion yen, the environment surrounding healthcare has been changing at an
unprecedented pace while becoming increasingly harsh, as evidenced by the accelerated
push to dispense generic drugs, the reorganization of hospital functions, and thestrengthening of regional medical coordination.
However, as Japan is one of the few nations leading new drug discovery in the world, thepharmaceutical industry, with its knowledge-intensive industrial structure, has been
designated as a growth industry to spearhead “Japan Revitalization Strategy” and“Healthcare Policy.”
The Comprehensive Strategy indicated new directions to be taken by the pharmaceuticalindustry by proposing such measures as “SAKIGAKE Designation System,” which will
hasten the commercialization of innovative drugs ahead of the world and the commencementof a project by Japan Agency for Medical Research and Development (“AMED”) to support
the commercialization of drugs in the rare-disease field prior to orphan drug designation(advance orphan drug designation system), to the end of reinforcing drug creation
capabilities.
Under such circumstances, progress in the Company’s business for FY 2015 is as follows:(i) Domestic[Anticancer agent: SyB L-0501 (generic name: bendamustine hydrochloride, trade name:TREAKISYM®)]
The Company markets TREAKISYM® in Japan through its business partner, Eisai Co.,
Ltd. (“Eisai”), for the indications of refractory/relapsed low-grade non-Hodgkin’s
lymphoma and mantle cell lymphoma. Net sales showed a significant increase of 110.3%
year-on-year (NHI price basis), and net sales through Eisai also increased by 103.0%
compared to the plan.

- 1 -Aiming to maximize the product value of TREAKISYM®, the Company continues topursue three additional indications:Firstly, regarding the indications of first-line low-grade non-Hodgkin’s lymphoma andmantle cell lymphoma, after having completed its domestic Phase II clinical trial, theCompany filed a supplemental New Drug Application (sNDA) to the Pharmaceuticals
and Medical Devices Agency (“PMDA”) in December 2015. Regulatory approval in the
EU is also underway with an application submitted by Astellas Pharma GmbH (Headoffice: Germany).
Secondly, regarding the indication of chronic lymphocytic leukemia, the Company
filed an sNDA in December 2015. TREAKISYM® was designated as an orphan drug
(pharmaceutical for the treatment of rare diseases) for the indication of chronic
lymphocytic leukemia in June 2012. In addition, the “Evaluation Committee on
Unapproved or Off-Labeled Drugs with High Medical Needs,” a committee establishedby the Ministry of Health, Labour and Welfare (“MHLW”) in Japan, requested theCompany to further develop TREAKISYM®.
In addition to TREAKISYM® 100mg, the Company filed an sNDA for
TREAKISYM® in December 2015, in respect of a 25mg vial for use in an actual clinicalsetting.
Thirdly, regarding the indication of refractory/relapsed intermediate/high-grade nonHodgkin’s lymphoma, the Company continues to discuss the path forward for approvalwith the PMDA.
[Anticancer agents: SyB L-1101 (intravenous formulation) and SyB C-1101 (oral formulation),
generic name: rigosertib]
After having completed patient enrollment in January 2015, the Company continued to
conduct its domestic Phase I clinical trial of the intravenous formulation of rigosertib in
refractory/relapsed higher-risk myelodysplastic syndrome (HR-MDS), a hematologicalmalignancy. The clinical trial was successfully completed in October 2015.
For the global Phase III trial conducted by Onconova Therapeutics, Inc. (Head office:Pennsylvania, U.S.; “Onconova”), the U.S. Licensor, the Company started the clinical
trial in Japan in December 2015.
The global Phase III trial is conducted with clinical trial sites in more than ten countries
worldwide, for HR-MDS patients who do not respond to treatment with hypomethylating
agents (HMAs) or who relapse after treatment under the current standard of care(“primary HMA failure”).
Regarding the oral formulation of rigosertib, the Company’s domestic Phase I clinical
trial for the target indication of HR-MDS was completed in June 2015. As a result of the- 2 -trial, the safety of the oral formulation of rigosertib for monotherapy was confirmed,
hence the Company started its domestic Phase I clinical trial of the oral formulation as arigosertib in combination with azacitidine (Note) in December 2015. The Company plans
to complete this clinical trial promptly, and its participation in the global Phase III clinical
trial to be conducted by Onconova is under consideration.
(Note) About azacitidine (Vidaza®: currently marketed by Nippon Shinyaku Co.,
Ltd.): This drug was approved in 2011 upon successful confirmation ofextended overall survival for the first time in the Phase III clinical trial for theindication of MDS, and is currently used as a first-line drug for MDS patients
who have difficulties in hematopoietic stem cell transplantation.
[Patient-controlled iontophoretic transdermal system for the short-term management of acutepostoperative pain: SyB P-1501]
In addition to TREAKISYM® and rigosertib, the Company has continued with searchand evaluation activities to identify new drug candidates. In October 2015, the Company
entered into an agreement with Incline Therapeutics, Inc. (the “Incline”), a wholly-owned
subsidiary of U.S.-based The Medicines Company (Head office: New Jersey, U.S.;“MEDCO”), for an exclusive license to develop and commercialize SyB P-1501 in Japan(U.S. product name: IONSYS®), a patient-controlled iontophoretic transdermal system
for the short-term management of acute postoperative pain. The Company will begin
preparations for a domestic Phase III clinical trial to test SyB P-1501 in 2016.
As described above, the Company’s business made a significant progress towards
further growth in FY 2015, by filing three sNDAs for TREAKISYM® in Japan, starting a
Phase III clinical trial for the approval of the intravenous formulation of rigosertib, andentering into a license agreement for SyB P-1501, a new drug candidate in the
Company’s new business domain (pain management), and so forth.
(ii) Overseas
Product sales of SyB L-0501 in South Korea, Taiwan and Singapore grew steadily asplanned.

(iii) Business results
As a result of the above, net sales totaled 1,933,241 thousand yen for the fiscal year
ended December 31, 2015, primarily reflecting product sales of SyB L-0501 in Japan and- 3 -overseas markets. Although net domestic sales of TREAKISYM® increased by 24.0%
compared to the previous fiscal year, overall net sales showed a year-on-year decrease of
1.1% reflecting a decline in overseas net sales of 76.1% year on year, due to factors suchas front-loading orders in the previous fiscal year in Korea.
Selling, general and administrative expenses totaled 3,134,659 thousand yen (a yearon-year increase of 71.3%), including research and development (“R&D”) expenses of
2,034,714 thousand yen (a year-on-year increase of 162.8%) primarily due to expenses
associated with (i) clinical trials of TREAKISYM® and the intravenous and oral
formulations of rigosertib, and (ii) the introduction of the patient-controlled iontophoretictransdermal system for the management of acute postoperative pain SyB P-1501, as wellas other selling, general and administrative expenses of 1,099,944 thousand yen (a yearon-year increase of 4.2%).
As a result, operating loss of 2,551,662 thousand yen was recognized for the fiscal year
ended December 31, 2015 (operating loss of 1,303,279 thousand yen for the previous
fiscal year). In addition, the Company recorded non-operating expenses totaling 96,087
thousand yen primarily comprising foreign exchange loss of 86,242 thousand yen andcommission fees of 9,000 thousand yen, and non-operating income totaling 17,363
thousand yen primarily due to interest income of 12,949 thousand yen, and interest on
securities of 3,316 thousand yen. This resulted in an ordinary loss of 2,630,386 thousandyen (ordinary loss of 1,110,316 thousand yen for the previous fiscal year) and net loss of
2,632,095 thousand yen (net loss of 1,115,877 thousand yen for the previous fiscal year).
Segment information has been omitted as the Company operates within a single
segment of the pharmaceutical industry which includes the development andcommercialization of drugs, manufacturing, marketing and other related activities.
(iv) Capital investment
The total amount of capital expenditures during the current fiscal year was 17,910
thousand yen, mainly consisting of the purchase of network equipment and software forbusiness use.

- 4 -(2) Status of assets, profit and loss in the current fiscal year and the three preceding fiscal
years(Unit: thousands of yen, except for per-share figures)
FY 2012The 8th Term

FY 2013
The 9th Term

FY 2014The 10th Term

FY 2015
The 11th Term(current)

Net sales

1,955,178

1,532,054

1,955,027

1,933,241

Operating loss

(1,700,273)(1,680,528)(1,303,279)(2,551,662)

Ordinary loss

(1,729,480)(1,601,424)(1,110,316)(2,630,386)

Net loss(1,733,320)(1,605,224)(1,115,877)(2,632,095)

Net loss per share (yen)(90.60)(69.29)(36.26)(81.26)

Total assets

5,502,190

7,686,947

7,453,799

4,984,289

Net assets

4,899,957

7,432,996

6,963,576

4,431,811

Net assets per share (yen)254.71

239.48208.80127.56

Fiscal year
Classification(3) Issues to be addressed
The Company has a commitment to improve the following issues as a priority challenge formanagement.
(i) Further expansion of pipeline
In order to enhance the enterprise value as a specialty pharmaceutical company, weneed to expand the pipeline through continually in-licensing of new drug candidates fordevelopment.
Clinical trials are underway for our anticancer agents: SyB L-0501 and SyB L-1101(intravenous formulation)/SyB C-1101 (oral formulation). In addition, preparations areunderway for starting a Phase III clinical trial for the patient-controlled iontophoretictransdermal system for the management of acute postoperative pain SyB P-1501.
For an anti-cancer drug using TTR1 nano-agonist molecule, the Company is working
on a joint research and development with Teikyo Heisei University, striving for the
introduction of global license. We continue with ongoing efforts to in-license new
products in order to expand our pipeline.
(ii) Pursuit of life cycle management in the existing pipeline
In order to enhance the enterprise value, it is critical to maximize returns from eachdrug under development by adding indications for new drug candidates after their initial- 5 -introduction in pursuit of life cycle management.
TREAKISYM® has received approval for manufacture and marketing with theapproved indications of refractory/relapsed low-grade non-Hodgkin’s lymphoma andmantle cell lymphoma. For additional indications, the Company filed a supplemental
New Drug Application (sNDA) for first-line low-grade non-Hodgkin’s lymphoma,
mantle cell lymphoma, and chronic lymphocytic leukemia. The Phase II clinical trial wascompleted for refractory/relapsed intermediate/high-grade non-Hodgkin’s lymphoma.
Progress is being made with development of intravenous and oral rigosertib
formulations for the indication of myelodysplastic syndrome (MDS). No usefultherapeutic agents are currently available for this indication, so it is an area with very
high unmet medical needs.
As for the global Phase III trial of the intravenous formulation for the target indicationof refractory/relapsed higher-risk MDS conducted by Onconova, the Company isconducting its clinical trial in Japan. As for the oral formulation, the Company hascompleted the domestic Phase I clinical trial as a monotherapy for the target indication ofhigher-risk MDS, and a Phase I clinical trial in combination with azacitidine for the target
indication of higher-risk MDS is being conducted. The Company considers participating
in global clinical trials after completing the Phase I clinical trial. The development for thetarget indication of transfusion-dependent lower-risk MDS will be considered, with aview to development progress by Onconova.
For the patient-controlled iontophoretic transdermal system for the management of
acute postoperative pain SyB P-1501, approval has already been granted for
manufacturing and marketing by U.S. and European regulatory agencies, and a domestic
Phase I clinical trial has also been completed. The Company is aiming for the prompt
acquisition of manufacturing and marketing approval for this drug and will consider
subsequent additional indications.
The aim for the future is to maximize the value of TREAKISYM®, rigosertib, and SyB
P-1501 by further expansion of indications and by following through with life-cycle
management.
(iii) Global expansion for further growth
The Company has been operating its businesses not only in Japan, but also in other
Asian countries including China, Korea, Taiwan, and Singapore as our important strategic
geographic domains.
However, with skyrocketing medical expenditure due to the aging population in Japan,
and the advent of the “era of generic drugs comprising 80% of all drugs dispensed” as anational strategy, the business environment for innovator drug developers is expected to- 6 -remain severe. Also, similar policies will possibly be implemented in other Asian
countries as well.
Under these circumstances, the Company will promote global expansion aiming for afurther growth. The Company will carry out the search, evaluation, and negotiation
activities for new drug candidates, in order to acquire global rights on such candidates,
utilizing its experience fostered through its business development in Asia.
(iv) Securing people
The Company places the highest priority on people as the company management
resource. We cannot make superior achievements in exploring and developing new drugs
without talent. We have been continually recruiting talented people, especially after
listed; we have recruited the best and brightest people in order to strengthen the
management organization. Going forward, we plan to further strengthen our humanresources by providing development programs such as OJT and other trainings.
(v) Financial issue
It is necessary for the Company to raise funds required for business activities such as
R&D expenditures as the pipeline development progresses and the number of drugcandidates increases.
Therefore, we make every effort to strengthen the financial base by continually
diversifying the method for fund procurement and reducing costs thorough budget control.
(4) Major business activities (As of December 31, 2015)
The Company regards underserved therapeutic areas that lack the development of new
drugs, despite significant unmet medical needs, as business opportunities. We engage in thedevelopment of new drugs with main focus in the areas of oncology, hematology, and pain
management; search and evaluation, development and manufacturing to sales are the main
activities of our business.

- 7 -(5) Main office and employees(i) Main office (as of December 31, 2015)
Name

Location

Main office

Minato-ku, Tokyo(ii) Employees (as of December 31, 2015)

Male

51

Increase or
decrease fromprevious fiscal
year end
6 (increase)

Female23

Total or average

74

Classification

Number of
employees1

Average age(years)Average # of yearsof service

50.3

4.4

1 (decrease)

44.3

4.4

5 (increase)

48.4

4.4

(Note) Number of employees refers to full time employees (8 temporary employees notincluded).
(6) Status of parent company and significant subsidiaries
Not applicable.
(7) Status of main lenders (as of December 31, 2015)
Not applicable.

- 8 -2. Matters related to stock (as of December 31, 2015)(1) Total number of authorized shares

Common stock

56,000,000 shares(2) Total number of shares outstanding

Common stock

32,390,848 shares(excluding 75 shares oftreasury stock)
13,156(3) Number of shareholders(4) Major shareholders (10 largest)
Name of shareholder

Number of shares held

Shareholding ratio

Fuminori Yoshida

3,120,000

9.6%

Cephalon, Inc.

2,589,000

8.0%

Eisai Co., Ltd.

833,400

2.6%

Waseda No.1 Investment LP

684,000

2.1%

Oak Capital Corporation

614,566

1.9%

SBI SECURITIES Co., Ltd.

386,300

1.2%

Matsui Securities Co., Ltd.

319,200

1.0%

Japan Securities Finance Co., Ltd.

314,200

1.0%

Rakuten Securities, Inc.

240,400

0.7%

Hideyuki Hase

204,200

0.6%(Note) Calculation of issued shares (%) excludes treasury stock from number of shares outstanding.

- 9 -3. Matters related to stock acquisition rights(1) Stock acquisition rights held by the Company’s Directors and Audit & Supervisory Board
Members that were issued as compensation for services(i) Stock acquisition rights granted by resolution of the Ordinary General Meeting of
Shareholders held on March 31, 2006 (7th series of stock acquisition rights)(as of December 31, 2015)-

Number of stock acquisition rights

610-

Number of shares to be issued upon the exercise of stockacquisition rights

61,000-

Amount paid for stock acquisition rights

None

-

Value of property to be contributed upon the exercise ofeach stock acquisition right (Note)-

Period during which stock acquisition rights may be
exercised-

Status of possession by the Company’s Directors andAudit & Supervisory Board Members

Directors (excluding
Outside Directors)

From: July 2, 2008To:
March 30, 2016

Number of stockacquisition rights

Number of shares

Number of holders

-

-

-

Outside Directors
Audit & Supervisory
Board Members

1,461 yen100-

10,000-1-(ii) Stock acquisition rights granted by resolution of the Extraordinary General Meeting of
Shareholders held on December 1, 2006 (12th series of stock acquisition rights)(as of December 31, 2015)-

Number of stock acquisition rights

230-

Number of shares to be issued upon the exercise of stockacquisition rights

23,000-

Amount paid for stock acquisition rights

None

-

Value of property to be contributed upon the exercise ofeach stock acquisition right (Note)-

Period during which stock acquisition rights may be
exercised- 10 -

1,461 yen
From: August 29, 2009To:
August 28, 2017

-

Status of possession by the Company’s Directors andAudit & Supervisory Board Members

Directors (excluding
Outside Directors)

Number of stockacquisition rights

Number of shares

Number of holders

-

-

-

Outside Directors
Audit & Supervisory
Board Members

90
-

9,000
-

1
-

(iii) Stock acquisition rights granted by resolution of the Extraordinary General Meeting of
Shareholders held on September 30, 2008 (16th series of stock acquisition rights)(as of December 31, 2015)-

Number of stock acquisition rights

700-

Number of shares to be issued upon the exercise of stockacquisition rights

70,000-

Amount paid for stock acquisition rights

None

-

Value of property to be contributed upon the exercise ofeach stock acquisition right (Note)-

Period during which stock acquisition rights may be
exercised-

Status of possession by the Company’s Directors andAudit & Supervisory Board Members

Directors (excluding
Outside Directors)

From: October 1, 2010
To: September 30, 2018

Number of stockacquisition rights

Number of shares

Number of holders

-

-

-

Outside Directors
Audit & Supervisory
Board Members

1,169 yen

60
-

6,000
-

- 11 -

1-

(iv) Stock acquisition rights granted by resolution of the Ordinary General Meeting of
Shareholders held on March 30, 2010 (20th series of stock acquisition rights)(as of December 31, 2015)-

Number of stock acquisition rights

3,445

-

Number of shares to be issued upon the exercise of stockacquisition rights

344,500-

Amount paid for stock acquisition rights

None

-

Value of property to be contributed upon the exercise ofeach stock acquisition right (Note)

585 yen-

Period during which stock acquisition rights may be
exercised-

Status of possession by the Company’s Directors andAudit & Supervisory Board Members
Number of stockacquisition rights

From: April 1, 2012
To: March 31, 2020

Number of shares

Number of holders

Directors (excluding
Outside Directors)

1,800

180,000

1

Outside Directors

600

60,0002

Audit & Supervisory
Board Members

-

-

-

(v) Stock acquisition rights granted by resolution of the Ordinary General Meeting of
Shareholders held on March 30, 2010 (22nd series of stock acquisition rights)(as of December 31, 2015)-

Number of stock acquisition rights

1,530

-

Number of shares to be issued upon the exercise of stockacquisition rights

153,000-

Amount paid for stock acquisition rights

None

-

Value of property to be contributed upon the exercise ofeach stock acquisition right (Note)

585 yen-

Period during which stock acquisition rights may be
exercised- 12 -

From: April 1, 2012
To: March 31, 2020

-

Status of possession by the Company’s Directors andAudit & Supervisory Board Members

Directors (excluding
Outside Directors)

Number of stockacquisition rights

Number of shares

Number of holders

-

-

-

Outside Directors
Audit & Supervisory
Board Members

200-

20,000-1-(vi) Stock acquisition rights granted by resolution of the Ordinary General Meeting of
Shareholders held on March 30, 2011 (24th series of stock acquisition rights)(as of December 31, 2015)-

Number of stock acquisition rights

1,920

-

Number of shares to be issued upon the exercise of stockacquisition rights

192,000-

Amount paid for stock acquisition rights

None

-

Value of property to be contributed upon the exercise ofeach stock acquisition right (Note)

682 yen-

Period during which stock acquisition rights may be
exercised

From: March 31, 2013
To: March 30, 2021-

Status of possession by the Company’s Directors andAudit & Supervisory Board Members
Number of stock
Number of sharesacquisition rights
Directors (excluding
1,200
120,000
Outside Directors)
Outside Directors
Audit & Supervisory
Board Members

300
-

1

30,000-- 13 -

Number of holders

2-

(vii) Stock acquisition rights granted by resolution of the Ordinary General Meeting of
Shareholders held on March 29, 2012 (26th series of stock acquisition rights)(as of December 31, 2015)-

Number of stock acquisition rights

3,625

-

Number of shares to be issued upon the exercise of stockacquisition rights

362,500-

Amount paid for stock acquisition rights

None

-

Value of property to be contributed upon the exercise ofeach stock acquisition right (Note)

555 yen-

Period during which stock acquisition rights may be
exercised-

Status of possession by the Company’s Directors andAudit & Supervisory Board Members
Number of stockacquisition rights

From: April 18, 2014To:
April 17, 2022

Number of shares

Number of holders

Directors (excluding
Outside Directors)

2,600

260,000

1

Outside Directors

625

62,5002

Audit & Supervisory
Board Members

-

-

-

(viii) Stock acquisition rights granted by resolution of the Ordinary General Meeting of
Shareholders held on March 28, 2013 (30th series of stock acquisition rights)(as of December 31, 2015)-

Number of stock acquisition rights

1,160

-

Number of shares to be issued upon the exercise of stockacquisition rights

116,000-

Amount paid for stock acquisition rights

None

-

Value of property to be contributed upon the exercise ofeach stock acquisition right (Note)

799 yen-

Period during which stock acquisition rights may be
exercised- 14 -

From: May 15, 2015
To:
May 14, 2023

-

Status of possession by the Company’s Directors andAudit & Supervisory Board Members
Number of stockacquisition rights

Number of shares

Number of holders

Directors (excluding
Outside Directors)

645

64,5001

Outside Directors

305

30,5003

Audit & Supervisory
Board Members

-

-

-

(ix) Stock acquisition rights granted by resolution of the Ordinary General Meeting of
Shareholders held on March 27, 2014 (32nd series of stock acquisition rights)(as of December 31, 2015)-

Number of stock acquisition rights

2,520

-

Number of shares to be issued upon the exercise of stockacquisition rights

252,000-

Amount paid for stock acquisition rights*The person who receives the allotment of stockacquisition rights shall set off his/her claims forcompensation against the Company in lieu of payment ofmonies for the stock acquisition rights allotted.

22,900-

Value of property to be contributed upon the exercise ofeach stock acquisition right

1 yen

-

Period during which stock acquisition rights may be
exercised-

Status of possession by the Company’s Directors andAudit & Supervisory Board Members
Number of stockacquisition rights

From: April 16, 2017To:
April 15, 2024

Number of shares

Number of holders

Directors (excluding
Outside Directors)

1,830

183,000

1

Outside Directors

690

69,0004

Audit & Supervisory
Board Members--- 15 --

(x) Stock acquisition rights granted by resolution of the Ordinary General Meeting of
Shareholders held on March 26, 2015 (35th series of stock acquisition rights)(as of December 31, 2015)-

Number of stock acquisition rights

2,042

-

Number of shares to be issued upon the exercise of stockacquisition rights

204,200-

Amount paid for stock acquisition rights*The person who receives the allotment of stockacquisition rights shall set off his/her claims forcompensation against the Company in lieu of payment ofmonies for the stock acquisition rights allotted.

30,600-

Value of property to be contributed upon the exercise ofeach stock acquisition right

1 yen

-

Period during which stock acquisition rights may be
exercised-

Status of possession by the Company’s Directors andAudit & Supervisory Board Members
Number of stockacquisition rights

From: March 27, 2018To:
March 26, 2025

Number of shares

Number of holders

Directors (excluding
Outside Directors)

1,480

148,000

1

Outside Directors

562

56,2005

Audit & Supervisory
Board Members

-

-

-

(Note) New shares were issued through the public offering on December 4, 2013, and third-party
allotment on December 25, 2013, at the paid-in amount less than the value of property to becontributed upon the exercise of each stock acquisition right. Therefore, the stated value of
property to be contributed upon the exercise of each stock acquisition right excluding those of the
32nd and 35th series is adjusted in accordance with the adjustment provision.

- 16 -

(2) Stock acquisition rights distributed to the Company’s employees as compensation forservices during the current fiscal year
Stock acquisition rights granted by resolution of the Ordinary General Meeting of
Shareholders held on March 26, 2015 (36th series of stock acquisition rights)-

Number of stock acquisition rights

3,120

-

Number of shares to be issued upon the exercise of stockacquisition rights

312,000-

Amount paid for stock acquisition rights*The person who receives the allotment of stockacquisition rights shall set off his/her claims forcompensation against the Company in lieu of payment ofmonies for the stock acquisition rights allotted.

30,600-

Value of property to be contributed upon the exercise ofeach stock acquisition right

1 yen

-

Period during which stock acquisition rights may be
exercised-

Status of allotment to the Company’s employees
Number of stockacquisition rights

Company employees(Note)

3,120 (Note)

From: March 27, 2018To:
March 26, 2025

Number of shares

Number of holders

312,000 (Note)61

Of the stock acquisition rights mentioned above, 395 units (39,500 shares) have been forfeited
due to the retirement of employees.

- 17 -

4. The Company’s Executives (as of December 31, 2015)(1) Names of Directors and Audit & Supervisory Board Members
Company Position

Name

Responsibility / Significant
Concurrent Position

Representative Director

Fuminori Yoshida

Chief Executive Officer

Director

Takako Ebata

Takako Ebata Office Inc.
Representative Director

Director

Lowell Sears

Sears Capital Management Inc.
Chief Executive Officer

Director

George Morstyn

G & R Morstyn Pty Ltd.
Chief Executive Officer

Director

Milton Grannatt

Director

George Vandeman

Full-time Audit &Supervisory Board
MemberAudit & Supervisory
Board Member
Audit & Supervisory
Board Member

Vandeman & Company
Principal

Takeshi Masuda
Saneaki Ichijo
Chikara Shimazaki(Notes)1. Of the Directors, Takako Ebata, Lowell Sears, George Morstyn, Milton Grannatt and George
Vandeman are Outside Directors.
2. Takeshi Masuda, Saneaki Ichijo and Chikara Shimazaki are outside members of the Audit &Supervisory Board.
3. Audit & Supervisory Board Member Chikara Shimazaki is registered with the Tokyo Stock
Exchange as an independent officer.
4. Full-time Audit & Supervisory Board Member Takeshi Masuda has years of experience ascorporate auditor at listed companies, and possesses deep insight in finance and accounting.
5. Audit & Supervisory Board Member Saneaki Ichijo is an attorney (Partner at Anderson, Mori &Tomotsune), with expertise in corporate legal affairs.
6. Audit & Supervisory Board Member Chikara Shimazaki is a certified public accountant(Representative of the Shimazaki accounting office) with expertise in finance and accounting.
7. Changes in Directors and Audit & Supervisory Board Members during the current fiscal year are as
follows:- Audit & Supervisory Board Member Koshi Ohizumi resigned upon expiration of his term ofoffice at the closing of the 10th Ordinary General Meeting of Shareholders held on March 26,
2015.
- Audit & Supervisory Board Member Takeshi Masuda was newly appointed as Director at the10th Ordinary General Meeting of Shareholders held on March 26, 2015.
8. The Company has adopted the Corporate Officer System. Corporate Officers who do not hold aconcurrent position as Director are as follows:
Corporate Officer
Masamitsu Harata- 18 -

(2) Summary of contents of liability limitation agreement
The Company has executed an agreement with each of the Outside Directors and outside
members of the Audit & Supervisory Board with respect to the liability in Article 423,
Paragraph 1 of the Companies Act, setting forth that in the event it is with good faith andno gross negligence that an Outside Director or outside member of the Audit &Supervisory Board performs his or her duties, the higher of the amount of 1,000,000 yenor the amount set forth in laws and regulations at the maximum shall be borne.
(3) Compensation of Board of Directors and Audit & Supervisory Board

Company Board

Board of Directors
Audit & Supervisory Board
Total

Number of
Directors/Board
Members Paid
6
(Outside: 5)4(Outside: 4)10(Outside: 9)Amount of Compensation(thousands of yen)
121,819(Outside: 49,388)
19,045(Outside: 19,045)
140,865(Outside: 68,433)(Notes) 1. Salary in the event of a Director doubling as an employee is not included in the above
compensation for Directors.
2. The maximum amount of compensation for Directors was resolved as an annual amount of 130
million yen at the Extraordinary General Meeting of Shareholders held on August 3, 2005. In
addition to the aforementioned compensation, it was resolved that compensation for Directors in
the form of stock acquisition rights as stock options be granted up to a maximum annual amount of
80 million yen (of which 22 million yen is for Outside Directors) at the 9th Ordinary General
Meeting of Shareholders held on March 27, 2014.
3. The maximum amount of compensation for Audit & Supervisory Board Members was resolved as
an annual amount of 30 million yen at the Extraordinary General Meeting of Shareholders held on
June 30, 2011.
4. The number of Directors/Board Members paid as stated above includes one person who resigned at
the closing of the 10th Ordinary General Meeting of Shareholders held on March 26, 2015.
5. The total compensation paid includes expenses (six (6) Directors 57,056 thousand yen) in
connection with stock acquisition rights as stock options for the current fiscal year.

(4) Matters Concerning Outside Directors and outside members of the Audit & Supervisory
Board(i) Director: Ms. Takako Ebata
a. Status of concurrent position(s) of an executive at other companies, and relationshipbetween such companies and the Company
She holds the concurrent position of Representative Director at Takako Ebata Office
Inc. The Company has a business connection with this office such as subcontract- 19 -

agreements concerning management consulting, but the ratio of the amount paid forsuch transactions to all outsourcing expenses is negligible.
b. Status of concurrent positions as outside officer at other companies, and relationshipbetween such company and the Company
Not applicable.
c. Relationship with certain related companies, such as the Company’s main customers
Not applicable.
d. Status of main activities during the fiscal year reported
Ms. Takako Ebata attended all 13 meetings of the Board of Directors held during the
fiscal year (attendance rate: 100.0%).
e. Amount of compensation received from the Company’s subsidiaries
Not applicable.
(ii) Director: Lowell Sears
a. Status of concurrent positions of executives at other companies and relationshipbetween such companies and the Company
He holds the concurrent position of Chief Executive Officer at Sears CapitalManagement Inc.
There is no business transaction between the above company and the Company.
b. Status of concurrent positions as outside officer at other companies and relationshipbetween such companies and the Company
He holds the concurrent position of Outside Director at Cellerant Therapeutics, Inc.,
Vital Therapies, Inc., SiteOne Therapeutics, Inc. and Halcyon Medical, Inc.
There is no business transaction between either of the above companies and theCompany.
c. Relationship with particular related companies, such as main customers
Not applicable.
d. Status of main activities during the current fiscal year
Lowell Sears attended all 13 meetings of the Board of Directors held during the fiscal
year (attendance rate: 100.0%).
e. Amount of compensation received from the Company’s subsidiaries
Not applicable.
(iii) Director: George Morstyn
a. Status of concurrent positions of executives at other companies and relationshipbetween such companies and the Company
He holds the concurrent position of Chief Executive Officer at G & R Morstyn Pty Ltd.

- 20 -

There is no business transaction between the above company and the Company.
b. Status of concurrent positions as outside officer at other companies and relationshipbetween such companies and the Company
He holds concurrent positions of Outside Director at GBS Venture Partners Pty Ltd.,
Proacta, Cooperative Research Centre for Cancer Therapeutics, Therapeutics
Innovation and BioMedVic. He also holds concurrent positions at VictorianComprehensive Cancer Centre (Deputy Chairman of the Board). There is no business
transaction between the above companies/cancer centre and the Company.
c. Relationship with particular related companies, such as main customers
Not applicable.
d. Status of main activities during the current fiscal year
George Morstyn attended all 13 meetings of the Board of Directors held during the
fiscal year (attendance rate: 100.0%).
e. Amount of compensation received from the Company’s subsidiaries
Not applicable.

(iv) Director: Milton Grannatta. Status of concurrent positions of executives at other companies and relationshipbetween such companies and the Company
Not applicable.
b. Status of concurrent positions as outside officer at other companies and relationshipbetween such companies and the Company
He holds the concurrent position of Advisory Board Member at VOX Telehealth andBiohealthonomics.
There is no business transaction between either of the above companies and theCompany.
c. Relationship with particular related companies, such as main customers
Not applicable.
d. Status of main activities during the current fiscal year
Milton Grannatt attended all 13 meetings of the Board of Directors held during the
fiscal year (attendance rate: 100.0%).
e. Amount of compensation received from the Company’s subsidiaries
Not applicable.
(v) Director: George Vandemana. Status of concurrent positions of executives at other companies and relationship- 21 -

between such companies and the Company
He holds the concurrent position of Principal at Vandeman & Company.
There is no business transaction between the above company and the Company.
b. Status of concurrent positions as outside officer at other companies and relationshipbetween such companies and the Company
He holds the concurrent position of Vice Chairman of Board at Genelux Corporationand Managing Member at Restaurants Hawaii, LLC.
There is no business transaction between either of the above companies and theCompany.
c. Relationship with particular related companies, such as main customers
Not applicable.
d. Status of main activities during the current fiscal year
George Vandeman attended all 13 meetings of the Board of Directors held during the
fiscal year (attendance rate: 100.0%).
e. Amount of compensation received from the Company’s subsidiaries
Not applicable.

(vi) Full-time Audit & Supervisory Board Member: Takeshi Masudaa. Status of concurrent positions of executives at other companies and relationshipbetween such companies and the Company
Not applicable.
b. Status of concurrent positions as outside officer at other companies and relationshipbetween such companies and the Company
Not applicable.
c. Relationship with particular related companies, such as main customers
Not applicable.
d. Status of main activities during the current fiscal year
(1) Status of attendance at the Board of Directors meetings
Takeshi Masuda was newly appointed as an outside member of the Audit &Supervisory Board at the 10th Ordinary General Meeting of Shareholders held on
March 26, 2015. He attended all 10 meetings of the Board of Directors held since
taking office (attendance rate: 100.0%), to appropriately give advice andrecommendations concerning deliberations on proposals, etc. based on his many
years of experience and insight as a member of the Audit & Supervisory Board oflisted companies.
(2) Status of attendance at the Audit & Supervisory Board meetings- 22 -

Takeshi Masuda was newly appointed as an outside member of the Audit &Supervisory Board at the 10th Ordinary General Meeting of Shareholders held on
March 26, 2015. He attended all 11 meetings of the Audit & Supervisory Board
held since taking office (attendance rate: 100.0%), to exchange views regarding
audit results and deliberate key issues related to audits.
e. Amount of compensation received from the Company’s subsidiaries
Not applicable.
(vii) Audit & Supervisory Board Member: Saneaki Ichijoa. Status of concurrent positions of executives at other companies and relationshipbetween such companies and the Company
Not applicable.
b. Status of concurrent positions as outside officer at other companies and relationshipbetween such companies and the Company
Not applicable.
c. Relationship with particular related companies, such as main customers
Not applicable.
d. Status of main activities during the current fiscal year
(1) Status of attendance at the Board of Directors meetings
Saneaki Ichijo attended all 13 meeting of the Board of Directors held during the
fiscal year (attendance rate: 100.0%), to give advice from an objective perspective
regarding the legality of the Company’s management execution, etc. from his
professional viewpoints as a lawyer.
(2) Status of attendance at the Audit & Supervisory Board meetings
Saneaki Ichijo attended all 15 meetings of the Audit & Supervisory Board held
during the fiscal year (attendance rate: 100.0%) to exchange views regarding audit
results and deliberate key issues related to audits.
e. Amount of compensation received from the Company’s subsidiaries
Not applicable.
(viii) Audit & Supervisory Board Member: Chikara Shimazaki
a. Status of concurrent positions of executives at other companies and relationshipbetween such companies and the Company
Not applicable.
b. Status of concurrent positions as outside officer at other companies and relationshipbetween such companies and the Company
Not applicable.

- 23 -

c. Relationship with particular related companies, such as main customers
Not applicable.
d. Status of main activities during the current fiscal year
(1) Status of attendance at the Board of Directors meetings
Chikara Shimazaki attended all 13 meetings of the Board of Directors held during
the fiscal year (attendance rate: 100.0%), to appropriately give advice andrecommendations concerning deliberations on proposals, etc. from his professional
viewpoints as a certified public accountant.
(2) Status of attendance at the Audit & Supervisory Board meetings
Chikara Shimazaki attended all 15 meetings of the Audit & Supervisory Board held
during the fiscal year (attendance rate: 100.0%) to exchange views regarding audit
results and deliberate key issues related to audits.
e. Amount of compensation received from the Company’s subsidiaries
Not applicable.
Each Outside Director appropriately advised and raised questions regarding resolutions
and reports discussed at Board of Directors meetings based on his or her deep personal
insight of business administration, and from a point of view that was independent of business
operations.
Each outside member of the Audit & Supervisory Board appropriately advised and raisedquestions during meetings in fulfilling his role as management monitor for resolutions andreports introduced and discussed by the Board of Directors based on his deep personal
insight of business administration from an independent and neutral standpoint; Each member
also aggressively raised questions and expressed opinions regarding resolutions and reports
introduced by the Audit & Supervisory Board in order to execute highly effective audits.
Besides the Board of Directors meetings held during the current fiscal year, notice toDirectors in accordance with the provisions of Article 372, Paragraph 1 of the Companies
Act was implemented on four separate occasions.

- 24 -

5. Status of accounting auditor(1) Name of accounting auditor

Ernst & Young ShinNihon LLC(2) Summary of contents of liability limitation agreement
Not applicable.
(3) Amount of compensation
Amount paid
Amount of compensation to accounting auditor concerning thecurrent fiscal year

15,500 thousand yen

Total amount of monetary and other property benefits to be paidby the Company

15,500 thousand yen(Notes) 1. Reasons for Audit & Supervisory Board’s approval of the amount of compensation to be paid tothe accounting auditor
The Audit & Supervisory Board verified the contents of the audit planning by the accounting
auditor, performance of its duties in previous years, and status of planning and actual
performance, and as a result of a careful review on the adequacy of the amount of compensation
for this fiscal year, has approved the amount of compensation to be paid to the accounting
auditor, pursuant to the provisions of Article 399, Paragraph 1 of the Companies Act.
2. The amounts of compensation for audits paid in accordance with Companies Act, and the audits
conducted in accordance with Financial Instruments and Exchange Act, are not distinguished in
the contract agreement between the Company and the accounting auditor. It is not possible todistinguish between compensation paid for these two types of audits; therefore the total amountthereof is stated.

(4) Policies for dismissal or non-reappointment of accounting auditor
When it is deemed necessary to dismiss or refrain from reappointing the accounting
auditor for reasons such as difficulty in execution of duty by the accounting auditor, theAudit & Supervisory Board shall determine the contents of a proposal to be presented to a
General Meeting of Shareholders in respect of the dismissal or non-reappointment of theaccounting auditor. In addition, when the accounting auditor falls under any of the items of
Article 340, Paragraph 1 of the Companies Act, the Audit & Supervisory Board shalldismiss the accounting auditor upon consent of all members of the Audit & Supervisory
Board. If this is the case, an Audit & Supervisory Board Member selected by the Audit &- 25 -

Supervisory Board shall report the dismissal of the accounting auditor and the reasons forsuch dismissal at the first General Meeting of Shareholders convened after the dismissal.
(5) Disposition of business suspension currently imposed on the accounting auditor(i) The party subjected to the disposition
Ernst & Young ShinNihon LLC(ii) Description of the disposition
Suspension of business related to concluding new engagement contracts: threemonths (from January 1, 2016 to March 31, 2016)
Order to improve business operations (improvement of the operation management
system)- Administrative surcharge payment order (in the amount of 2,111 million yen)(iii) Reasons for the disposition- For the audit of financial documents of TOSHIBA CORPORATION, the audit firm,in negligence of due care, attested financial documents containing material
misstatements as if they contained no misstatements.
The audit firm’s operation was found to be significantly unjust.

- 26 -

6. System to ensure the appropriateness of operations(1) Corporate system to ensure that Directors, other officers and employees comply withlaws and ordinances, as well as the Articles of Incorporation, in the process of
performing their duties(i) The Company has its Representative Director and President to instill in all Directors,
Audit & Supervisory Board Members, and employees the Company’s policy that any
and all corporate activities should be based on the spirit of compliance of laws andthe maintenance of ethics (hereinafter “Compliance”) by repeatedly urging them toabide by the spirit of the Corporate Action Charter.
(ii) The Company promotes thorough activities for Compliance by setting up acompliance committee comprised of the senior manager in charge of the corporate
division as Chairman, and the head or senior managers of relevant departments asmembers thereof.
(iii) The Company sets up compliance hot-lines within and outside of the Company, as
designated compliance liaisons for compliance-related problems, to respond torequests for consultation from employees and make efforts to find and cure any andall unfair acts and practices as early as possible.
(iv) The Company sets up an internal audit office as an independent organizational unit
which acts under the direct control of the President and regular audits are conductedby this office. Through such audits, objective assessments are made for theeffectiveness and efficiency of business, reliability of various financial reports,
safeguarding of assets, status of compliance operation and appropriateness andeffectiveness of corporate risk management, and if necessary, reasonable assurance isobtained for advice and suggestions for the improvement in maintenance andoperation of internal control.
(v) The Company resolutely opposes antisocial forces and organizations that threaten theorder or safety of society as a whole.
(2) Corporate system for maintenance and control of information regarding the performanceof duties by Directors
The head of General Affairs of the Company is the person responsible for generalmanagement of corporate documents to appropriately maintain and otherwise control
all important documents containing information as to the performance by Directors of
their duties in addition to legally required records of proceedings of Shareholders'Meetings and Board of Directors’ meetings, as provided in laws and ordinances aswell as in the Company’s own “Rules for the Management of Documents.”- 27 -

(3) Corporate system for control of risk of loss, including in-house rules for such control
The Company practices risk control under its basic policy and related rules for suchrisk control. Usually the Company’s permanent risk-management committee, which
is chaired by Representative Director and President, monitors the conditions of risk
control, and will take appropriate measures on a company-wide basis if necessary. In
the case of an emergency, the Company will temporarily set up a headquarters with
its Representative Director and President acting as chairman thereof, and takenecessary measures in accordance with decisions made at this temporary
headquarters.
(4) Corporate system to ensure the efficient performance of duties by Directors(i) Directors, other officers and employees perform their duties as provided in theprocedural rules for appropriate decision-making under the “Rules for the Board of
Directors” and “Rules for the Internal Approvals” and other similar regulations.
(ii) The Company regularly holds Executive Management Committee meetings asprovided in the “Rules for the Executive Management Committee” for the purpose ofcontributing to sound and appropriate decision-making by the Representative
Director and President.
(iii) The Company develops long-term business plans, and operates and expands its
business in accordance with such long-term plans. The Company also predetermines
numerical targets for each business year for inclusion in such long-term plans, andconducts the evaluation of business results and the control of budgets in relation tosuch numerical targets. The Company reports to the Board of Directors every monthon the status of achieving such numerical targets.
(5) Matters related to an assistant to Audit & Supervisory Board Members to be appointed at
the request of such Members
Audit & Supervisory Board Members may request that the Representative Director
and President appoint an employee to act as an assistant to Audit & Supervisory
Board Members, and if deemed to be necessary, the Representative Director andPresident shall appoint such an assistant.
(6) Matters related to the independence of the employees who assist the Audit &Supervisory Board Members in executing their duties
Any employee shall, if and when he/she is ordered by an Audit & Supervisory Board
Member in the performance of audit-related tasks, not receive any instruction or
direction from the Director in charge, the internal audit section or any other similar- 28 -

section; further instruction or direction is to be received from the Audit &Supervisory Board Member.
(7) Matters related to ensuring effectiveness of the Audit & Supervisory Board Members’
instructions to the employees who assist them in executing their duties
Matters such as personnel evaluation and transfer and disciplinary actions concerning
the staff who assist the Audit & Supervisory Board Members, shall be subject to theprior consent of the Audit & Supervisory Board.
(8) Corporate system for Directors and employees to report to corporate auditors; corporate
system for other reports to corporate auditors to ensure the efficient performance ofaudits by corporate auditors(i) Any Director or employee shall, if and when he/she becomes aware of any fact which
threatens to cause any significant damage or could adversely influence the Company,
promptly inform the Audit & Supervisory Board Member thereof.
(ii) Audit & Supervisory Board Members may attend Board of Directors’ meetings,
Executive Management Committee meetings, and any other important meetings forthe purpose of gaining a better understanding of the decision-making process andconditions of business execution.
(iii) The Audit & Supervisory Board provides an opportunity for all Directors andemployees having significant work responsibilities to discuss on an individual basis.
(iv) The Audit & Supervisory Board holds meetings for the mutual exchange of views
and opinions with the Representative Director and President, and independent
auditors.
(9) Corporate system to ensure prevention of disadvantageous treatment to the person who
made report to the Audit & Supervisory Board Members merely on account of suchconduct
The Company establishes a whistleblowing system with points of contact inside as
well as outside of the Company, as part of the framework for early detection ofviolations against laws and regulations within the Company, while ensuring
prevention of disadvantageous treatment to whistleblowers.
(10) Matters related to the treatment of expenses or obligations associated with the executionof duties of the Audit & Supervisory Board Members, including the procedures for
prepayment or reimbursement of such expenses(i) With respect to the claim for prepayment of expenses based on Article 388 of the- 29 -

Companies Act, made by an Audit & Supervisory Board Member in association withthe execution of their duties, the Company processes settlement of such expenses or
obligations without delay, unless such expenses or obligations are recognized as
unnecessary for the execution of duties of such Audit & Supervisory Board Member
based on careful discussion thereof at responsible departments.
(ii) The Company authorizes expenses for seeking opinions and advice from external
experts including attorneys and certified public accountants, if it is found necessary
for the Audit & Supervisory Board Members to execute their duties.
7. Summary of the status of operation of the system to ensure the appropriateness ofoperations(1) The Company is striving to ingrain awareness of legal compliance across theorganization, by thorough communication thereon to Directors and employees, throughpublishing information such as the corporate conduct policy for compliance and thewhistleblowing system manual on the bulletin board of the in-house intranet.
(2) The Board of Directors of the Company comprises six Directors (including five Outside
Directors), in which Outside Directors participate in resolution from an independent
standpoint and monitor and supervise the management, while each Audit & Supervisory
Board Member carries out management audit as well.
(3) Full-time Audit & Supervisory Board Members attend important meetings such as theBoard of Directors meetings as well as Executive Management Committee meetings,
while having regular exchange of opinions with the Representative Director once amonth.

- 30 -

Balance Sheet(As of December 31, 2015)
Item(Assets)
Current assets
Cash and deposits
Accounts receivable-trade
Merchandise and finished goods

Supplies
Prepaid expenses
Advances paid
Other
Noncurrent assets
Property, plant and equipment

Buildings
Tools, furniture and fixtures(Accumulated depreciation)
Intangible assets

Software
Software in progress
Lease assets

Investments and other assets

Long-term prepaid expenses
Lease and guarantee
deposits
Total assets

Amount4,826,778
4,261,438
300,742
133,029167
38,591
79,63913,170157,51052,956
24,521
52,293(23,858)
52,00150,506900
594(Unit: thousands of yen)
Item
Amount(Liabilities)
Current liabilities
550,940
Accounts payable-trade319,866
Lease obligations
642
Accounts payable-other
183,690
Income taxes payable
14,183Forward exchange contracts
14,999Other
17,558
Noncurrent liabilities
1,537
Provision for retirement benefits
1,537
Total liabilities(Net assets)
Shareholders’ equity
Common stock
Capital surplus
Legal capital surplus
Retained earnings(Accumulated deficits)(12,499,609)

Other retained earnings(12,499,609)

Retained earnings(Accumulated deficits)
brought forward(12,499,609)

52,553
1,227
51,326

4,984,289

Treasury stock
Stock acquisition rights
Total net assets
Total liabilities and net assets(Note) Amounts less than one thousand yen have been omitted.

- 31 -

552,477
4,131,924
8,330,775
8,300,775
8,300,775(17)
299,887
4,431,811
4,984,289

Statement of Operations
January 1, 2015
( toFrom
December 31, 2015 )(Unit: thousands of yen)
Item

AmountI. Net sales
II. Cost of goods sold1,933,241
1,350,244

Gross profit
III.Selling, general and administrative expenses

582,996
3,134,659

Operating loss
IV. Non-operating income
Interest income
Interest on securities
Dividend income from insurance
Other(2,551,662)
12,949
3,316
1,072
24

17,363

V. Non-operating expenses
Interest expenses
Commission fee
Stock issuance cost
Foreign exchange loss
Other

13
9,000
160
86,242671

96,087

Ordinary loss
VI. Extraordinary income
Gain on reversal of stockacquisition rights(2,630,386)

VII. Extraordinary loss
Loss on retirement of noncurrent
assetsLoss before income taxes
Income taxes – current
Net loss

3,312

3,312

1,221

1,221

3,800

(2,628,295)
3,800(2,632,095)(Note) Amounts less than one thousand yen have been omitted.

- 32 -

Statement of Changes in Net Assets
January 1, 2015
( Fromto December 31, 2015 )(Unit: thousands of yen)
Shareholders’ equity
Retained earnings
Capital surplus (Accumulated
deficits)
Commonstock

Balance at the beginning of year

Total
Treasuryshareholders’stockequityLegal capital Retained earnings
surplus(Accumulated
deficits) brought
forward
Other retained
earnings

8,330,775

8,300,775(9,867,514)(17)

6,764,019

Net loss－－(2,632,095)－(2,632,095)

Net changes of items other thanshareholders' equity
Total changes of items during the
year

－

－

－

－

－

－

－

(2,632,095)－(2,632,095)

8,330,775

8,300,775(12,499,609)(17)

4,131,924

Changes of items during the year

Balance at the end of year

Valuation and translation adjustments

Balance at the beginning of year

StockacquisitionrightsTotal net assets(744)

200,300

6,963,576－－－(2,632,095)

744

744

99,586

100,330

744

744

99,586(2,531,764)－－

299,887

4,431,811

Unrealized holding
gain (loss) on
securities

Total valuationand translation
adjustments(744)

Changes of items during the year
Net loss
Net changes of items other thanshareholders' equity
Total changes of items during theyear
Balance at the end of year

(Note) Amounts less than one thousand yen have been omitted.

- 33 -

Notes on Financial Statements(Significant accounting policies)(1) Valuation basis and method for assets
Marketable securities
Available-for-sale securities
Available-for-sale securities Available-for-sale securities with determinable market
value are stated at fair value with any changes inwith determinable market
value
unrealized holding gain or loss, net of applicable income
taxes, included directly in shareholders’ equity. Cost of
securities sold is calculated by the moving averagemethod.
Available-for-sale securities Available-for-sale securities without determinable market
without determinablevalue are stated at cost determined by the moving
market value
average method.
Derivative transactions

Derivative financial instruments are stated at fair value.

Inventories

Inventories held for the purpose of ordinary sale aremeasured at lower of cost determined by the weighted
average method or net selling value.

(2) Depreciation of noncurrent assets
Property, plant and equipment Straight-line method(excluding lease assets)
The useful lives of major assets are as follows:
Building
3 to 18 years
Tools, furniture and fixtures
5 to 15 years
Intangible assets(excluding lease assets)

Straight-line method
Capitalized software costs are being amortized over theperiod of the internal use of 5 years.

Lease assets

Depreciation is calculated on the straight-line method
over the lease term with no residual value.

(3) Accounting for deferred assets
Stock issuance costs are expensed when incurred.

- 34 -

(4) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into yen at
the spot exchange rate prevailing at the balance sheet date, and resulting gains or losses
are credited or charged to income.
(5) Basis for reserves and provisions
Allowance for doubtful
accounts

The allowance for doubtful accounts is provided at an
amount determined based on the historical experience ofbad debt with respect to ordinary receivables and an
estimate of uncollectible amounts determined byreference to specific doubtful receivables from customers
which are experiencing financial difficulties.
As of December 31, 2015, no allowance for doubtful
accounts is provided due to no historical experience ofbad debt and no receivable balances that are deemed
uncollectible.

Provision for retirement
benefits

The provision for retirement benefits is provided at theamount of retirement benefit obligations to be required asof the balance sheet date.
For the calculation of the provision for retirement benefits
and the retirement benefit expenses, the Company adopts
the simplified method, where retirement benefit
obligations are estimated at the amount of retirement
benefit payments required for voluntary terminations asof the balance sheet date.

(6) Accounting for consumption taxes
Transactions are recorded at amounts exclusive of consumption taxes.

- 35 -

(Notes on balance sheet)
Not applicable.
(Notes on income statement)
R&D expenses included in general and administrative expenses

2,034,714 thousand yen(Notes on statement of changes in net assets)(1) Shares issued and outstanding / Treasury stock(Unit: number of shares)

Commonstock

At the beginning ofyear

Increase

DecreaseAt the end ofyear

Shares issued

32,390,923--

32,390,923

Treasury stock

75

-

-

75

(2) Number of shares to be issued upon exercise of stock acquisition rights issued at the end of
the current fiscal year
Common stock
5,547,250 shares(Note) Excludes stock acquisition rights of which the commencement date of exercise period has not
yet arrived.

- 36 -

(Notes on deferred tax accounting)(1) Significant components of deferred tax assets
Deferred tax assets:
Excess depreciation for lump-sum depreciable assets
Excess amortization for deferred assets
Research and development expenses
Accounts payable-other
Provision for retirement benefits
Enterprise tax payable
Asset retirement obligation
Share-based compensation expense
Loss carried forward
Subtotal
Valuation allowance
Total deferred tax assets(thousands of yen)
2,357
391,435
1,011,607
8,458
497
4,396
360
59,4801,818,206
3,296,798(3,296,798)－(2) Amendment of amounts of deferred tax assets and liabilities due to changes in rates ofcorporate tax, etc.
Following the promulgation of the “Act for Partial Amendment of the Income Tax Act, etc.”
and the “Act for Partial Amendment of the Local Tax Act, etc.” on March 31, 2015, theeffective statutory tax rate used in the calculation of deferred tax assets and liabilities(however, limited to those expected to be reversed on or after January 1, 2016), has beenchanged from 35.64% of the previous fiscal year to 33.10% for those that are expected to becollected or paid during the period from January 1, 2016 to December 31, 2016, and to
32.34% for those that are expected to be collected or paid on or after January 1, 2017.
There is no impact from this change in the tax rate.

(Notes on properties under lease arrangements)
Not applicable.

- 37 -

(Notes on financial instruments)(1) Financial instruments(i) Policies for financial instruments
The Company procures the funds necessary in light of the pipeline development plan
(primarily by third-party allotment and offering by new stock issuance). Temporary
surplus fund is invested in financial instruments which are highly safe and liquid.
As a principle, the Company does not enter into derivative transactions for speculative
trading purpose but uses them within the scope prescribed in the internal rules.
(ii) Types of financial instruments and related risks
Operating receivables such as accounts receivable-trade and advances paid inconnection with joint development are exposed to credit risk of customers and joint
development partners. Operating receivables denominated in foreign currencies are
exposed to foreign exchange fluctuation risk.
The Company intends to invest in marketable and investment securities which haverelatively low risk of falling below initial investments. However, it might carry a finite
risk.
Operating payables such as accounts payable-trade and accounts payable-other are
mostly due within 75 days. Operating payables denominated in foreign currencies are
exposed to foreign exchange fluctuation risk.
The Company uses derivative transactions to avoid foreign exchange fluctuation risks
and enters into forward exchange contracts within the scope prescribed in the internal
rules based on balances of receivables and payables denominated in foreign currencies aswell as actual volume of exports and imports transactions denominated in foreign
currencies.
Lease and guarantee deposits are mostly security deposits related to rented officepremises and their refunds are subject to the credit risk of the lessor.
Lease obligations are associated with the finance lease transactions that intend tofinance capital expenditures and the longest maturity of lease term is one year after the
fiscal year end.
(iii) Risk management for financial instruments
1. Monitoring of credit risks (the risk that customers or counterparties may default)
In accordance with the internal credit policies for managing credit risk arising fromoperating receivables, the Company’s marketing department periodically monitors the- 38 -

credit worthiness of major customers and monitors due dates and outstandingbalances by individual customer. In addition, the Company is making efforts topromptly identify and mitigate risks of bad debts from customers who are having
financial difficulties.
The Company enters into derivative transactions only with financial institutions
which have a sound credit profile in order to mitigate the counterparty risk.
2. Monitoring of market risk (the risk arising from fluctuations in foreign exchange rates,interest rates and others)
The Company deposits cash primarily with financial institutions with high credit
ratings.
For marketable and investment securities, the Company intends to avoid risks offalling below initial investments by investing in securities with the satisfactory credit
rating and investment period in accordance with the internal investment policies.
The Company enters into forward exchange contracts in order to avoid foreignexchange fluctuation risks in connection with receivables and payables denominatedin foreign currencies.
Followed by appropriate authorization procedures prescribed in the internal rules,
Finance & Accounting department executes and monitors derivative transactions.
Monthly transaction performances are reported to the executive management
committee.
3. Monitoring of liquidity risks (the risk that the Company may not be able to meet its
obligations on scheduled due date)
Based on the report from each department, the responsible department of theCompany prepares and updates its cash flow plans on a timely basis and ensures tomaintain liquidity on hand to manage liquidity risk.
(iv) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if
available. When there is no quoted market price available, fair value is reasonably
estimated. Since various assumptions and factors are reflected in estimating the fairvalue, different assumptions and factors could result in different fair value.
(v) Concentration of credit risk
As of December 31, 2015, all operating receivables are from one particular major
customer.

- 39 -

(2) Fair value of financial instruments
Carrying value on the balance sheet, fair value and their difference as of December 31,
2015 are as follows.
(Unit: thousands of yen)
Carrying value

Fair value

Difference(1) Cash and deposits(2) Accounts receivable-trade(3) Advances paid

4,261,438
300,742
79,6394,261,438
300,742
79,639－－－Assets, total(1) Accounts payable-trade(2) Lease obligations(3) Accounts payable-other(4) Income taxes payable
Liabilities, total

4,641,819
319,866642
183,690
14,183518,383

4,641,819
319,866643
183,690
14,183518,384

－
－
1
－
－
1

Derivative transactions, total (*)(14,999)(14,999)－(*) The value of assets and liabilities arising from derivative transactions is shown at net valueand ( ) is used for items that come to be liabilities in total.
(Note) 1. Fair value measurement of financial instruments and other matters related tosecurities and derivative transactions
Assets(1) Cash and deposits, (2) Accounts receivable-trade and (3) Advances paid
The carrying value is deemed as the fair value since these are scheduled to
be settled in a short period of time.
Liabilities(1) Accounts payable-trade, (3) Accounts payable-other and (4) Income taxes
payableThe carrying value is deemed as the fair value since these are scheduled to
be settled in a short period of time.
(2) Lease obligations
The fair value of lease obligations is determined at present value calculatedby discounting total amounts of principle and interests at a presumable rateused for similar new lease transactions.

- 40 -

Derivative transactions
Forward exchange contract
The fair value of forward exchange contract is measured based on market
quotes obtained from financial institutions.
(Note) 2. Financial instruments whose fair value is extremely difficult to determine
Lease and guarantee deposits (carrying value of 51,326 thousand yen) are notincluded in above tables since no market quote is available and their fair value isextremely difficult to determine.
(Note) 3. The redemption schedule for monetary assets and securities with maturities

Due in one
year or less
Deposits
Accounts receivable-trade
Advances paid
Total

4,261,410
300,742
79,6394,641,791

Due after
one yearthrough five
years
－
－
－
－

(Unit: thousands of yen)
Due after
five years
Due after
through ten
ten years
years
－
－
－
－
－
－
－
－

(Note) 4. Maturities of lease obligations after the fiscal year end(Unit: thousands of yen)
Due after Due after Due after Due after
Due in one one year two years three years four years Due after
throughthroughthrough five years
year or less throughtwo years three years four years five years
Lease obligations
Total

642
642

－
－

- 41 -

－
－

－
－

－
－

－
－

(Notes on per-share information)(1) Net assets per share(2) Net loss per share
Average number of shares outstanding during the year

127.56 yen(81.26) yen
32,390,848 shares(Other notes)
The Company has overdraft and commitment line contracts with three banks in a business
relationship to efficiently procure working capital. The status of the bank overdraft and loan
commitments based on these contracts at the end of fiscal year is as follows:

Total amount of bank overdraft limit and loan
commitment line
Balance of borrowing outstanding
Unused balance(Unit: thousands of yen)
1,350,000
1,350,000(Significant subsequent events)
Not applicable.

- 42 -

Independent Auditor’s ReportFebruary 25, 2016
The Board of Directors
SymBio Pharmaceuticals Limited
Ernst & Young ShinNihon LLC

Eishi Yoshida
Certified Public Accountant
Designated and Engagement Partner

Tomoaki Minamiyama
Certified Public Accountant
Designated and Engagement Partner

Kazuto Shiratori
Certified Public Accountant
Designated and Engagement Partner

Pursuant to Article 436, Paragraph 2, Item 1 of the Companies Act, we have audited theaccompanying financial statements, which comprise the balance sheet, the statement of income,the statement of changes in net assets, the notes to the financial statements and the related
supplementary schedules of SymBio Pharmaceuticals Limited (the “Company”) applicable tothe 11th fiscal year from January 1, 2015 through December 31, 2015.
Management’s Responsibility for the Financial Statements and the Related Supplementary
Schedules
Management is responsible for the preparation and fair presentation of these financial
statements and the related supplementary schedules in accordance with accounting principles
generally accepted in Japan, and for designing and operating such internal control as
management determines is necessary to enable the preparation and fair presentation of the- 43 -

financial statements and the related supplementary schedules that are free from material
misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements and the related
supplementary schedules based on our audit. We conducted our audit in accordance withauditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements and therelated supplementary schedules are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements and the related supplementary schedules. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the financial statements and the related supplementary schedules, whether due
to fraud or error. The purpose of an audit of the financial statements is not to express an opinion
on the effectiveness of the entity’s internal control, but in making these risk assessments theauditor considers internal controls relevant to the entity’s preparation and fair presentation of
the financial statements and the related supplementary schedules in order to design audit
procedures that are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements
and the related supplementary schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
OpinionIn our opinion, the financial statements and the related supplementary schedules referred toabove present fairly, in all material respects, the financial position and results of operations of
SymBio Pharmaceuticals Limited applicable to the 11th fiscal year ended December 31, 2015
in conformity with accounting principles generally accepted in Japan.
Conflicts of Interest
We have no interest in the Company which should be disclosed in compliance with theCertified Public Accountants Act.

- 44 -

Report of Audit & Supervisory Board
We, Audit and Supervisory Board Members, prepare this report of audit with regard to the
execution of Directors’ duties during the 11th Term from January 1, 2015 to December 31,
2015, as the uniformed opinion of all Audit and Supervisory Board Members after careful
discussion based on the audit reports prepared by respective Audit and Supervisory Board
Members, and report as follows.
1. Method and Contents of Audit by the Audit & Supervisory Board Member and the Audit &Supervisory Board
The Audit & Supervisory Board formulated the audit policy and plan for the Term reported,
and received the reporting from respective auditors with regard to the state of implementation
and results of audits as well as received the reporting from directors and the accounting auditor
with regard to the state of execution of their duties requesting additional explanations as
deemed necessary.
Respective auditors, in conformity with the standards for audits by Audit & Supervisory
Board Members that the Audit & Supervisory Board set forth and in accordance with the audit
policy and plan for the Term, strove to collect information and improve audit environments bycommunicating with directors, the internal audit section, and other employees. We also
attended Board of Directors’ meetings and other important meetings, received the reportingfrom directors and employees with regard to the state of execution of their duties requesting
additional explanations as deemed necessary, reviewed documents for important settlements,
and researched the situation of operations and assets. Moreover, with regard to the system toensure that the execution of Directors’ duties described in the business report were compliant
with laws and ordinances and the Company’s Article of Incorporation and other systems
required to secure the appropriateness of operations as a stock company maintained based on
the contents of resolution by the Board of Directors with regard to the maintenance of systems
stipulated by Ordinance for Enforcement of Article 100, Paragraph 1 and 3 of the Companies
Act (hereinafter the “Internal Control System”), we received reporting on the status of theirestablishment and operation from Directors and employees, requested additional explanation as
deemed necessary, and expressed our opinion. Based on the method described above, we
reviewed the business report and supplementary documents with regard to the Term reported.
In addition, we monitored and inspected the independent position of the accounting auditor
and the execution of appropriate audits by the accounting auditor, and also received thereporting from the accounting auditor with regard to the state of execution of its duties
requesting additional explanation as deemed necessary. Besides, we received the notification- 45 -

from the accounting auditor that “the system to ensure that its duties are executed as
appropriate (the items listed by respective paragraphs of Ordinance on Accounting ofCompanies Article 131)” are maintained in accordance with “the standards for quality control
of audits (Business Accounting Council, October 28, 2005),” requesting additional explanation
as deemed necessary. Furthermore, with regard to the order to improve business operations
issued by the Financial Services Agency on December 22, 2015, we received explanations on
the outline and implementation status of the plan to improve business operations submitted by
the accounting auditor. Based on the method described above, we reviewed the financial report(including balance sheet, profit and loss statement, statement of changes in net assets, and notes
on non-consolidated financial statements) and supplementary statements for the Term reported.
2. Results of audit(1) Results of audit of business reporta. We admit that the business report and supplementary statements fairly present theCompany’s situation in accordance with laws and ordinances and the Company’s
Articles of Incorporation.
b. Any misconduct in the execution of Directors’ duties or any material facts inviolation of laws and ordinances and the Company’s Articles of Incorporation are
not noticed.
c. We admit that the contents of resolution by the Board of Directors with regard to
the Internal Control System are appropriate. Also, there is no matter to be noted as
for the descriptions in the business report regarding such Internal Control Systemand the execution of Directors’ duties.
(2)

Results of audit of financial statements and the related supplementary statements
We admit that the method for and result of audits conducted by Ernst & Young
ShinNihon LLC, the accounting auditor, are appropriate.

March 2, 2016

- 46 -

Audit & Supervisory Board,
SymBio Pharmaceuticals Limited

Takeshi Masuda, (seal)
Full-time Audit & Supervisory Board
Member (Outside)

Saneaki Ichijo, (seal)
Audit & Supervisory Board Member(Outside)

Chikara Shimazaki, (seal)
Audit & Supervisory Board Member(Outside)

End of Report- 47 -