Corporate Vision
Our commitment totreating people around the world
with topical and transdermal patches
Topical and transdermal patches are simple to use, being placed on the skin totreat medical conditions. They are consistent with the latest trend of improving
drug delivery in medical treatment designed to enhance people’s quality of life.
Our message that medicated skin patches have a lot to offer is embodied in
the word Salonpathy, derived from our mainstay product Salonpas. Over theyears we have continued to help people improve their health by leveraging ourtransdermal drug delivery system (TDDS) expertise to develop topical andtransdermal patches mainly for pain relief and reducing inflammation.
Our basic management policy is to concentrate on and specialize in creating
new pharmaceutical products and formulations adaptable to TDDS, which isthe source of our competitiveness. We believe this will allow us to respond to
the underlying need for health, safety, and comfort of people around the world
and improve their quality of life.
We are committed to supplying pharmaceutical products capable of treating
people anywhere in the world simply by applying them to the skin.
Forward-looking statements:
Statements in this financial report concerning current plans, forecasts, strategies, beliefs, and other forward-looking
information related to Hisamitsu Pharmaceutical Co., Ltd., other than those of historical fact, are forecasts of futurebusiness performance based on the judgments of management at Hisamitsu Pharmaceutical Co., Ltd. in light ofcurrently available information. Accordingly, please refrain from making investment decisions based solely on forecastsof business performance in this financial report. Actual business performance may differ significantly from these
forecasts due to changes in a variety of factors.
Note:
Amounts in US dollars are included solely for convenience and are translated at a rate of ¥92.51=U.S.$1.00, theapproximate rate of exchange on February 28, 2013.

Contents
Corporate Vision
Consolidated Financial Highlights
To Our Stakeholders
Overview of Operations
Corporate Governance and Internal Auditing
Financial Section:
Analysis of Financial Position, Operating Results, and Cash Flows
Capital Expenditures
Dividend Policy
Business and Other Risks
Consolidated Balance Sheets
Consolidated Statements of Income

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Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Basis of Preparation of Consolidated Financial Statements
Significant Accounting Policies Concerning the Preparation ofConsolidated Financial Statements
Unapplied Accounting Standards, etc.
Additional Information
Notes to Consolidated Financial Statements
Supplementary Schedule
Corporate Information

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FINANCIAL REPORT 2013

Consolidated Financial Highlights
Years ended the last day of February(Thousands of
U.S. dollars)(Millions of yen)
Fiscal 2009

Fiscal 2010

Fiscal 2011

Fiscal 2012

Fiscal 2013

Fiscal 2013

Net sales

124,655

129,834

137,184

137,794

142,772

1,543,314

Operating income

32,53228,58528,19325,93725,326

273,765

Ordinary income

32,476

31,231

33,23633,49433,051

357,269

Net income

19,12018,423

20,956

18,43918,809203,319———

17,45824,740267,431

Net assets

124,105

130,976

141,222

149,263

167,933

1,815,296

Total assets

167,642

193,551

194,787

192,838

214,1412,314,788

Net assets per share (yen and dollars)

1,391.49

1,500.92

1,618.69

1,730.22

1,951.54

21.10

Net income per share (yen and dollars)

215.61210.78241.80215.09219.56

2.37

—

—

—

—

—

—

Shareholders’ equity ratio (%)

73.6

67.2

72.0

76.9

78.1

—

Return on equity (ROE) (%)

16.2

14.5

15.5

12.8

11.9

—

Price-earnings ratio (PER) (times)

13.8

15.4

13.6

17.1

24.5

—

Net cash provided by operating activities

22,382

20,49836,34225,55832,485351,151

Net cash used in investing activities(15,927)(32,547)(8,248)(15,473)(7,946)(85,893)

Net cash provided by (used in) financing activities(5,467)

4,899(15,659)(13,010)(9,288)(100,400)

Cash and cash equivalents, end of year

33,356

26,23237,65434,22250,860549,778

Number of employees[average temporary staff]

1,890
[288]

2,562
[369]

2,635
[415]

2,718
[503]

2,826

—

[610]

[—]

Comprehensive income

Diluted net income per share (yen and dollars)

Notes: 1. Net sales do not include consumption tax.
2. Diluted net income per share is not listed due to the absence of residual securities.

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FINANCIAL REPORT 2013

To Our Stakeholders

The market environment for the ethical pharmaceuticalindustry in Japan during the fiscal year ended February 28,
2013, remained severe due to the impact of National Health
Insurance drug price revision amid further measures by thegovernment to curtail spending on healthcare.
Regarding the pharmaceutical market in Japan, we have
responded to current conditions by launching a new product,
Fentanyl 3-day tape “HMT,” and engaging in activities topromote the proper use of ethical pharmaceuticals, mainlytransdermal therapeutic formulations. For OTC pharma­
ceuticals, we engaged in activities to create new customers
by launching products in new areas such as Allegra® FX,

Medical Products

an OTC nasal inflammation medication, in addition to
focusing on sales of our mainstay products that includeanti-inflammatory pain relief patches.
In our overseas business, we commenced sales of the
SALONPAS ® PAIN RELIEF PATCH in the U.K. and
SALONPAS® in China and promoted market expansion for
pain relief patches in the OTC pharmaceutical field.
We achieved revenue growth as a result of these efforts,
with consolidated net sales increasing 3.6% year on year to¥142,772 million. In terms of profits, the revision of national
health insurance drug price had the effect of raising thecost-to-sales ratio and consequently consolidated operating
For Export

income declined 2.4% year on year to ¥25,326 million,
consolidated ordinary income declined 1.3% year on yearto ¥33,051 million, and consolidated net income increased
2.0% year on year to ¥18,809 million.
NAKATOMI, Hirotaka
President & CEO

Over the Counter Products
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FINANCIAL REPORT 2013

Overview of Operations

Operating results
The Japanese economy during the fiscal year under review continued to face harsh conditions against the backdrop of asluggish world economy precipitated by such factors as the European debt crisis and high prices for crude oil.
While expectations are growing for economic recovery on the back of improved export conditions, which reflect the
depreciating yen and the effects of the government’s economic measures, uncertainty continues to prevail as personal
consumption remains sluggish and moderate deflation persists.
The operating environment for the ethical pharmaceutical industry in Japan remained severe due to the impact of
National Health Insurance drug price revision in April 2012 amid the government’s basic stance of curtailing healthcare
spending, which involves enhanced measures to promote generic drug use. In Japan, we have responded to the changes
by engaging in the ethical pharmaceuticals business with a focus on our mainstay transdermal therapeutic formulation andproviding medical institutions with scientific information that precisely corresponds to their needs.
Regarding the OTC pharmaceuticals, we have also worked to launch and promote sales of new products in new areas,
as sluggish consumption and tough competition continue in the OTC market.
Our research and development concentrated its resources on transdermal patches, a mainstay product, and focused on
the development of new products with novel topical or systemic effects.
Additionally, in research and development activities carried out with overseas subsidiary Noven Pharmaceuticals, Inc.
(“Noven”) we have strengthened cooperation that includes personnel exchanges and strived to speed up the developmentof pharmaceutical products.
As for our production facilities, the Tosu and Utsunomiya Plants carried on initiatives to help protect the global
environment as “ISO 14001” (International Environmental Management Standard) certified factories.
In addition to improving the efficiency of our manufacturing processes, we made an effort to reduce our environmental
footprint through the reduction of energy usage and waste by changing its method of product transport and introducing
highly functional air conditioning, and through maintaining a 99% recycle rate.
We also promoted energy conservation by establishing the Energy Management Committee and made an effort toconserve electricity by adjusting room temperatures.
As for CSR activities, the Company and employees jointly took part in community service programs such as the “JapanRed Cross Society Street Collection Drive for Overseas Programs.” The Company also provided support to a total 35
organizations including 12 that were engaged in recovery efforts after the Great East Japan Earthquake through the“Hisamitsu Hot Heart Club” program, in which the Company makes matching donations deducted from employees’ anddirectors’ salaries.
In addition, we have continued to provide active financial support for the “SAGA Heavy Ion Medical Accelerator in Tosu
Project” that was launched to contribute to the crusade against cancer.
“Pharmaceuticals” is the Company’s sole reportable segment, whose performance is as follows.

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FINANCIAL REPORT 2013

Overview of Operations

Pharmaceuticals
The Pharmaceuticals segment, particularly the ethical pharmaceuticals business, faced an extremely uncertain businessenvironment during FY2/13 due to the impact of National Health Insurance drug price revision in April 2012 and further
measures to curb healthcare expenditures.
We responded to the situation by providing medical institutions with appropriate and detailed scientific information about
our products, particularly our transdermal therapeutic formulations. While collecting and supplying information on efficacy
and safety, we engaged in activities to promote the proper use of our mainstay products, including Mohrus ® Tape, aketoprofen transdermal patch; Mohrus® Pap, a ketoprofen transdermal patch; Estrana® Tape, an estradiol transdermal
patch; HMT, a transdermal patch containing the bronchodilator tulobuterol; Fentos® Tape, a transdermal sustained-releasecancer pain relief patch of fentanyl citrate that is a synthetic narcotic with significant analgesic effects; and NORSPAN®
Tape, a transdermal sustained-release pain relief patch of buprenorphine.
In July 2012, we also began marketing Fentanyl 3-day tape “HMT,” a transdermal sustained-release cancer pain relief
patch, as a new alternative for the treatment of pain in order to contribute to the enhancement of the QOL (Quality of Life)of a number of patients suffering pain from cancer.
Furthermore, in March 2013, we received approval to manufacture and market NEOXY® Tape 73.5 mg, an oxybutyninhydrochloride transdermal patch to treat overactive bladder.
In December 2012, we entered into a joint sales agreement for this medication with Asahi Kasei Pharma Corp. so that
we could improve the distribution of this product and provide information on it in Japan.
In the OTC pharmaceuticals business, we launched new products in new areas, in addition to engage in sales of ourmainstay anti-inflammatory pain relief patches, targeting new users.
In July 2012, we established a joint venture, SANOFI-HISAMITSU K.K., for marketing efforts in the OTC allergy
medications business together with Sanofi K.K.
In November 2012, we commenced marketing of Allegra® FX, an OTC nasal inflammation medication, and we worked
to cultivate new users.
Allegra® FX is the first Switch OTC product in Japan of Allegra® 60 mg, an ethical pharmaceutical for allergic disease
treatment, using the same ingredients and dosage.
Overseas, we began the marketing in the U.K. of SALONPAS® PAIN RELIEF PATCH, the first anti-inflammatory pain
relief patch product in the world to be approved by the FDA (the U.S. Food and Drug Administration), in the category of
OTC pharmaceuticals.
As a result, this product is now approved in eleven countries and marketed in ten countries.
Additionally, in April 2012, we commenced marketing of the topical pain relief patch SALONPAS® in China.
As a result of these business activities, net sales increasing 3.6% year on year, or ¥4,978 million, to ¥142,772 million.
Operating income declined 2.4% year on year, or ¥611 million, to ¥25,326 million. Ordinary income decreased 1.3%
year on year, or ¥442 million, to ¥33,051 million; and net income increased 2.0% year on year, or ¥370 million, to¥18,809 million.

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FINANCIAL REPORT 2013

Overview of Operations

Sales results
Our sales results broken down by business segment are as follows:(Millions of yen)(Thousands of
U.S. dollars)YoY (%)

Fiscal 2013

Business segment:

Fiscal 2013

Pharmaceuticals

139,569

3.7

1,508,691

Other businesses

3,202

0.6

34,612

142,772

3.6

1,543,314

Total

Notes: 1. Sales breakdown by main customers and percentage of sales to main customers.
(Thousands of
U.S. dollars)(Millions of yen)
Sales
Fiscal 2012

% of total

Alfresa Holdings Corporation

25,64818.6

26,31418.4

284,445

Medipal Holdings Corporation

25,06618.2

26,00718.2

281,126

Customer

Sales
Fiscal 2013

% of total

Fiscal 2013

Effective October 1, 2012, Alfresa Holdings Corporation made TOKIWA YAKUHIN CO., LTD. its wholly-owned
subsidiary. The amounts for the previous fiscal year have been adjusted to enable comparison with the amounts
after the change.
2. The foregoing figures do not include consumption tax.

Key Challenges
We expect the ethical pharmaceuticals business to witness continued efforts to curb pharmaceutical expenditures,
including additional National Health Insurance drug reimbursement price cuts for long listed products, and strengthened
measures to promote the use of generic drugs, against a backdrop of a rapidly aging population. In response to this difficult
business environment, we are stepping up efforts to provide medical institutions with scientific information and seek todevelop new topical and systemic pharmaceutical products that meet the needs of medical institutions and their patients.
Furthermore, we strive to grow further with an aim to improve our profitability as well as enhance our sales and R&D
capabilities.
For OTC pharmaceuticals, amid a prolonged market slump and intensifying competition, we seek to expand sales ofmainstay anti-inflammatory pain relief patches and respond to the needs of our customers by continuing to improveexisting products and developing new products.
In overseas business, we are working to establish our brand in terms of trademarks, designs, manufacturing technology,
and quality control systems, and to further augment overseas production facilities and promote overseas clinical trials.
Especially, in the U.S. ethical pharmaceutical market, we plan to enhance our R&D capability at our business baseNoven Pharmaceuticals by combining our areas of strength in technology, as well as building a manufacturing and sales
network. Continuing to recognize our mission and responsibility as a pharmaceutical company, we aim to create a morerobust business base and manufacturing structure, and to accelerate the development of new products by concentrating
research in areas of specialty.

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FINANCIAL REPORT 2013

Overview of Operations

Basic policy on control of the company(1) Overview of our basic policy on the entity with control over decision-making related to the company’s financial
and business policies
We believe any entity with control over decision-making related to the company’s financial and business policies must havean understanding of the source of the company’s enterprise value and be able to consistently maintain and improve thisenterprise value and the common interests of shareholders.
We believe any decision on how to respond to a proposed acquisition that would transfer control over the company
should ultimately be based on the wishes of individual shareholders. We are not opposed to large purchases of thecompany’s stock, provided that it contributes to enterprise value and the common interests of shareholders.
However, there are many instances in which large stock purchases and proposed acquisitions may not contribute to thetarget company’s enterprise value and the common interests of shareholders. Examples include: those that clearly damage
the target company’s enterprise value and the common interests of shareholders, in light of the objective and other aspectsof the share purchase or proposed acquisition; those that effectively coerce shareholders into selling their shares; thosethat fail to provide a reasonable amount of time for the target company’s board of directors and shareholders to consider
the details and possibly prepare a counteroffer; those that have conditions (e.g., purchase price, timing, and method) thatare either inadequate or inappropriate in light of the target company’s enterprise value; and those that damage relations
with employees, customers, creditors, or other parties essential to continued growth in the target company’s enterprisevalue.
We believe any entity that pursues a large stock purchase or proposed acquisition that does not contribute to thecompany’s enterprise value and the common interests of shareholders is not an appropriate entity for controlling decisionmaking related to the company’s financial and business affairs, and that any large stock purchase or proposed acquisition
by such an entity must be necessarily and appropriately counteracted to ensure the company’s enterprise value and thecommon interests of shareholders.
(2) Overview of specific initiatives instrumental to achieving our basic policy
Since launching a pharmaceutical business in 1847, our company has worked hard to improve the health of people byproviding pharmaceutical products, mainly pain relieving patches. Transdermal patches, that can heal the body simply by
being applied to the skin, will be an improvement of not only the administration of drugs but also quality of life, and they arealso representative of Japan’s therapeutic culture, which is well respected around the world. We pursue our business as a
mission to convey to the world the effectiveness and resulting excitement of this therapeutic patch culture.
Since releasing Salonpas® in 1934, we have successfully developed and marketed a variety of pharmaceutical patch
products, including the OTC pharmaceutical Salonsip and the ethical pharmaceuticals Mohrus® Pap and Mohrus® Tape, byconcentrating on the creation of new drugs and new drug preparations based on our accumulated expertise andexperience and the support of our customers. We have also created products in new areas other than anti-inflammatory
pain relief, including an estradiol transdermal patch Estrana® Tape, the transdermal sustained-release cancer pain relief
patch Fentos® Tape, and the like, and are expanding our business internationally by conducting sales, pursuing researchand development, and acquiring approvals in various countries around the world. As part of these efforts, Noven
Pharmaceuticals, Inc. was acquired and made a subsidiary in 2009 to establish the Hisamitsu brand in the US and toensure future growth.
Our corporate philosophy is to strive to improve the quality of life of people around the world by creating external drugs
to meet the needs of our customers, and by implementing this philosophy, we seek to enhance enterprise value and thecommon interests of shareholders.

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Overview of Operations

In other words, the sources of enterprise value for our company are: 1) broad access to a variety of drugs created by anumber of companies, and research and development capabilities to make these drugs available in patches;2) manufacturing technology and quality control systems that enable the efficient, stable, and ongoing production of highquality products; 3) marketing prowess to cultivate several long-selling and market-leading brands, including Salonpas®,
Salonsip®, Feitas®, Butenalock®, Mohrus® Pap, Mohrus® Tape, and Estrana® Tape; and 4) an integrated research anddevelopment, manufacturing, and sales structure that allows us to quickly reflect the needs of our customers to improve
products and services.
Going forward, we will continue our efforts to increase enterprise value and maximize the common interests ofshareholders through ongoing and aggressive investment.
To achieve this goal, we aim to build a robust corporate structure capable of meeting our sales targets and securing net
profits despite the difficult competitive environment, and to ensure sustained growth in net profits by strengthening ourbusiness both in Japan and overseas. We also aspire to be an independent research and development-based
pharmaceutical company by concentrating research in our areas of specialty, in line with our basic management policy,
and by focusing on the creation of new drugs and new drug preparations.
We are also actively pursuing licensing activities, including an agreement with Mundipharma K.K. for the exclusive
distribution rights in Japan of NORSPAN® Tape, a buprenorphine patch for treatment of chronic pain associated withosteoarthritis and low back pain not being controlled sufficiently with non-opioid analgesics.
In this way, we seek to increase cash flow through the active pursuit of our business and to create future assets that willcontribute to the common interests of shareholders through the development of new topical and transdermal products,
international expansion of our brands in terms of trademarks, designs, manufacturing technology, and quality control
systems, streamlining of management, and bolstering of our corporate structure.
We consider the return of profits to shareholders to be an important management issue, and we seek to pay appropriate
dividends based on earnings and pursue flexible financial policies, including share buybacks, after considering researchand development investment to raise capital efficiency and enterprise value and the internal reserves needed for future
growth.
In particular, we seek to maintain ROE at 15% or higher from the standpoint of raising capital efficiency, and to
consistently pay dividends with a target payout ratio of 30%.
(3) Initiatives in light of our basic policy to prevent inappropriate entities from controlling decision-making related
to the group’s financial and business affairs
At the 106th annual general meeting of shareholders held on May 22, 2008, “Takeover defense measures to counter large
purchases of the company’s stock” were adopted to ensure and enhance the company’s enterprise value and the common
interests of shareholders. Upon expiration of the effective period for the takeover defense measures, the measures werepartly revised and its renewal was approved by shareholders at the 109th annual general meeting of shareholders held on
May 26, 2011 (hereinafter the renewed takeover defense measures are referred to as “the Plan”).
The Plan applies to purchases of the company’s stock with the objective or result of a specific shareholder groupowning 20% or more of the voting rights (hereinafter referred to as “Purchases” and those who conduct the “Purchases”
are referred to as “Purchasers”). Purchasers are required to follow certain procedures in providing shareholders, thecompany’s board of directors, and an independent committee with information on which to base their decision. If thepurchaser fails to comply with these procedures or if the purchase will damage the company’s enterprise value and thecommon interests of shareholders, then the company can pursue countermeasures against the purchaser in the form of a
gratis allotment of share acquisition rights or other appropriate countermeasure that the board of directors is permitted totake based on the Companies Act, other laws, and the company’s articles of incorporation. Whether countermeasures
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FINANCIAL REPORT 2013

Overview of Operations

based on the Plan are adopted is ultimately a decision of the board of directors, but to ensure the proper use of the Planand objective, rational, and impartial decisions by the company’s board of directors, we established a committee
independent from the board of directors and will give utmost respect to the opinions of this committee.
The Plan shall be effective until the conclusion of the annual general meeting of shareholders for the fiscal year ending
February 28, 2014. Additionally, the Plan shall be terminated immediately if the board of directors comprising directors
appointed at a general meeting of shareholders decides to terminate the Plan.
(4) Board of directors’ opinion and reasoning for the foregoing initiatives
1) Specific initiatives to achieve our basic policy
The initiatives outlined above are intended to contribute to fulfilling our basic policy and have been prepared as specificpolicies to ensure and enhance on an ongoing basis the company’s enterprise value and the common interests ofshareholders. Accordingly, these initiatives comply with our basic policy and will not damage the common interests ofshareholders.
2) Initiatives in light of our basic policy to prevent inappropriate entities from controlling decision-making related
to the group’s financial and business affairs
The Plan complies in its content with our basic policy and is intended to ensure objectivity and rationality in the decisions of
the board of directors. Further, the Plan was adopted to ensure and enhance the company’s enterprise value and thecommon interests of shareholders, and is not intended to maintain the position of the company’s directors.

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FINANCIAL REPORT 2013

Overview of Operations

Important Business Agreements
Joint sales agreement(1) We concluded an agreement with Kyowa Hakko Kirin Co., Ltd. (headquarters: Chiyoda-ku, Tokyo) on June 18, 2008 on
joint sales in Japan of Fentos® Tape, a transdermal sustained-release patch for the treatment of cancer pain.
1) Counterparty to the agreement
Kyowa Hakko Kirin Co., Ltd.
2) Agreement details
Contract on the joint sales within Japan with Kyowa Hakko Kirin Co., Ltd. of Fentos® Tape, a transdermal sustainedrelease patch for treatment of cancer pain that Hisamitsu Pharmaceutical has acquired manufacturing and marketing
approval for.
3) Compensation
Compensation commensurate with a one-time contract payment.
(2) We concluded an agreement with Asahi Kasei Pharma Corp. (headquarters: Chiyoda-ku, Tokyo) on December 10,
2012 on joint sales in Japan of NEOXY® Tape, a transdermal patch to treat overactive bladder.
1) Counterparty to the agreement
Asahi Kasei Pharma Corp.
2) Agreement details
Contract on the joint sales within Japan with Asahi Kasei Pharma Corp. of NEOXY® Tape, a transdermal patch to treat
overactive bladder that Hisamitsu Pharmaceutical has acquired manufacturing and marketing approval for.
3) Compensation
Compensation commensurate with a one-time contract payment and subsequent payments according to milestones
reached.

Distribution agreement(1) We concluded an exclusive contract with Mundipharma K.K. on August 6, 2007, for the Japanese distribution rights to
NORSPAN® Tape, a transdermal sustained-release pain relief patch.
1) Counterparty to the agreement
Mundipharma K. K.
2) Agreement details
Contract acquiring the exclusive rights for distribution of NORSPAN® Tape, a transdermal sustained-release pain
relief tape, in Japan.
3) Compensation
Compensation commensurate with a one-time contract payment and subsequent milestone payments based on
development progress and sales.

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Overview of Operations

Research and Development
Pharmaceuticals
Our R&D program centered on the development of transdermal pharmaceutical products targets the needs of medical
institutions.
For ethical pharmaceuticals in Japan, we received approval for Fentanyl 3-day tape “HMT,” a transdermal sustainedrelease cancer pain relief patch, on February 15, 2012. We applied for approval of NEOXY® Tape (development code:
HOB-294; generic name: oxybutynin hydrochloride), a transdermal patch to treat an overactive bladder, in May 2012, andreceived approval on March 25, 2013. Phase 3 trials have been completed for additional indications of chronic pain relief
for the Fentos® Tape (development code: HFT-290), a transdermal sustained-release cancer pain relief patch, and we arepreparing to apply for its approval. Phase 2 trials are underway for HP-3000 (generic name: ropinirole hydrochloride), a
patch to treat Parkinson’s disease. Regarding HTU-520 (generic name: terbinafine hydrochloride), a patch to treat tinea
unguium, further development is under consideration since phase 3 trials in April 2012 failed to show the originally
anticipated level of efficacy.
For OTC pharmaceuticals in Japan, we are developing new products and improving existing products for the purpose of
improving effectiveness, safety, and user satisfaction.
In the U.S. ethical pharmaceutical market, we received FDA approval on October 29, 2012, of Minivelle™ (genericname: estradiol), a patch for the treatment of vasomotor symptoms due to menopause. Phase 3 trials have been
completed for LDMP (generic name: paroxetine mesylate), an oral preparation for the treatment of vasomotor symptoms
due to menopause, and an application for approval has been filed. Applications for generic approval have been submitted
for HP-1010 (generic name: Lidocaine), a patch to treat post-herpetic neuralgia and HP-1030 (generic name: rivastigmine),a patch to treat dementia of the Alzheimer’s type. Phase 2 trials are underway for ATS (generic name: d-amphetamine), a
patch to treat Attention Deficit Hyperactivity Disorder. We have completed phase 2 trials for HTU-520 (generic name:terbinafine hydrochloride), a patch to treat tinea unguium, and further development is under consideration.
For the U.S. OTC pharmaceuticals, post-sale clinical trials with pediatric patients following a request received from the
FDA for the transdermal analgesic anti-inflammatory SALONPAS® PAIN RELIEF PATCH (development code: FS-67;
generic name: methyl salicylate, l-menthol) were completed on March 29, 2013.
In addition to the development of our own fundamental technologies, we utilize Noven’s transdermal delivery system(TDDS) technology to develop pharmaceuticals and to conduct joint development with external organizations, working
towards improvement of commercialization technologies to expand the possibilities of transdermal absorption.

Other businesses
We conduct some research and development in other businesses, but because the amount is limited, it does not merit
special mention.
As a result of the foregoing, research and development expenses totaled ¥12,662 million in FY2/13.

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Corporate Governance and Internal Auditing

Corporate Governance(1) Basic approach to corporate governance1) Corporate governance structure
We have prepared basic internal control policies to enhance management transparency and ensure compliance, and we
consider the improvement of corporate governance to be an important task. To this end, we have placed priority on
creating an organization capable of responding quickly to changes in the business environment and have implemented
structural reforms.
With this in mind, we have adjusted the number of directors to an appropriate level with the goals of enhancing theperformance of the board of directors and speeding up decision making. We have also introduced an executive officer
system to clarify roles and responsibilities in business execution.
Going forward, we seek to create a stronger bond of trust with our stakeholders as a good corporate citizen by
improving transparency, ensuring compliance, and upholding corporate ethics in our business activities.
Overview of our corporate governance structure and reasons for adopting the structure
We are structured as a company with a board of corporate auditors, comprising 11 directors and 6 corporate auditors(including 3 outside corporate auditors) as of May 24, 2013.
In the area of corporate governance, we reduced the number of directors as a way to clarify the responsibilities andauthority of management and speed up decision-making and business execution. But in order to further reinforce andenhance our management structure in conjunction with the expansion of the organization, we changed the articles ofincorporation to increase the number of directors from 10 or less to 12 or less, at the annual general meeting ofshareholders on May 23, 2013.
In addition, we introduced an executive officer system in March 2003 to improve the speed, transparency, and strategic
focus of business decisions. Moreover, to clarify management responsibilities of directors and construct a management
structure that can respond to changes in management environments, the term of directors was changed from 2 years to 1
year at the annual general meeting of shareholders held on May 26, 2011.
Important management decisions are made by the Management Advisory Council comprising key directors andexecutive officers, and important resolutions are debated and decided by the board of directors.
We have also worked to enhance management oversight and to separate, decentralize, and strengthen decision
making functions and business execution functions.
To better facilitate fair auditing, we switched to an auditing system in which 2 of the 4 corporate auditors compriseoutside corporate auditors at the annual general meeting of shareholders on May 26, 2004. To bolster management
oversight further and strengthen our auditing system, we changed the articles of incorporation to increase the number ofcorporate auditors from 4 or fewer to 6 or fewer at the annual general meeting of shareholders on May 25, 2006. In
addition, the number of corporate auditors was increased to 6 (including 3 outside corporate auditors) at the annual general
meeting of shareholders held on May 26, 2011.
Corporate auditors attend meetings of the board of directors, regularly convene meetings of the board of corporate
auditors, and receive audit reports from the independent auditor as needed. The independence of our 3 outside corporate
auditors from the company has been ensured and we believe that a structure sufficiently capable of monitoring
management has been established.

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Corporate Governance and Internal Auditing

Internal auditing and audit by board of corporate auditors
We established the Internal Audit Office (2 persons in charge) as an internal audit division. The Internal Audit Office is
responsible for auditing the business activities of Hisamitsu Pharmaceutical and group companies to ensure that these activities
are effective and appropriate and that they comply with relevant laws and the articles of incorporation, reporting to the board of
directors and the board of corporate auditors, promoting mutual cooperation, reporting to relevant business division managers
and directors, and providing support and advice as needed to improve internal control.
In addition to conducting audits based on predetermined audit guidelines and plans, the Board of Corporate Auditors also
regularly holds individual hearings with directors, executive officers, division managers and key staff from each business division.
Outside directors and outside corporate auditors
Our 3 outside corporate auditors are ONO Keinosuke, ICHIKAWA Isao, and TOKUNAGA Tetsuo. Although we have notestablished selection criteria regarding the independence of outside officers, we do select our outside corporate auditors basedon the criteria of independence set forth by the Financial Instruments Exchange. ONO Keinosuke has gained scholarly
knowledge related to management through his past career experience such as professor of a graduate school of business.
ICHIKAWA Isao has gained overall management experience and knowledge through his past career experience such as executive
vice president and representative director of a listed company. TOKUNAGA Tetsuo has gained overall management experienceand knowledge through his past career experience such as executive vice president and representative director of a listed company.
Outside corporate auditors regularly attend meetings of the board of directors and meetings of the board of corporate
auditors. We believe that a structure sufficiently capable of auditing management has been established. In consideration of theefficiency and flexibility of the business decision making process, no outside directors have been appointed.
Although ONO Keinosuke concurrently serves as an outside director of YKK Corporation, Vice President of Chubu University,and a Trustee of Chubu University Educational Foundation, the company does not have any special conflict of interests in YKKCorporation or Chubu University. Additionally, ONO Keinosuke serves as Professor Emeritus of Keio University and thecompany outsources research to Keio University, although the transaction amounts are minimal.
Apart from the information stated above, there are no special cases of conflict of interest between our outside corporate
auditors and the company.
2) Risk management systems
To respond to a variety of business risks, we have sought to enhance risk management and corporate governance by
establishing a variety of internal committees.
Compliance Promotion Committee and Compliance Promotion Office (Chair: Director)
We prepared the Hisamitsu Corporate Charter in June 2002 and established the Compliance Promotion Committee andCompliance Promotion Office, to promote thorough and ethical compliance. We have distributed handbooks to officers andemployees to promote a recognition and sustained awareness of the importance of compliance, and have worked toensure behavior based on high ethical and moral standards.
Going forward, we will continue our efforts to bolster compliance related to social responsibility, including corporate
ethics, the environment, and privacy protection, at Hisamitsu Pharmaceutical and group companies.
Crisis Management Committee (Chair: President & CEO)We established a Crisis Headquarters to help prevent risk and prepare for times of crisis, standing as a permanent Crisis
Management Committee to operate in normal times, and conduct training of committee members as needed.
Privacy Protection Committee (Chair: Director)
We established the Privacy Protection Committee in April 2005 to fully comply with the Personal Information Protection
Act. We have called personal information administrators together and held committee meetings as needed to create anorganization to protect individual rights and interests and to ensure that this organization is safely managed.
HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Corporate Governance and Internal Auditing

Disclosure Policy Team (Chair: President & CEO)We established the Disclosure Policy Team in April 2001 to provide the timely and appropriate disclosure of corporate
information. All officers and employees work toward timely disclosure based on our Disclosure Policy Rules.
We strive to actively disclose information to enhance management transparency and seek to promote smoothcommunication with shareholders and investors through our investor relations activities.
CSR Committee (Chair: Director)
We set up the CSR Committee to progress our environmental and community service programs. Headed by the CSR Office,
the CSR Committee is made up of CSR committee members in each business division and engages in CSR programs.

Corporate governance structure
General Meeting of Shareholders
Appoint and remove

Independent auditor

Board of Corporate
Auditors
Corporate Auditors
Operational andaccounting auditing

Appoint and remove

Audit

Board of Directors
Directors

Audit

Representative
director

Management Advisory
Council
Directors and Executive Officers
AdviceInternal Audit OfficeCommittees
Compliance Promotion Committee

Advising attorneys and other specialists

Appoint and remove

Crisis Management Committee
Privacy Protection Committee
Disclosure Policy TeamAudit

CSR Committee

Various business divisions and group companies

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Corporate Governance and Internal Auditing

3) Executive compensationa) Total compensations by classification of executives and by type of compensations, and number of executives
by category of the filing company(Millions of yen)
Fiscal 2013
Total compensation by type
Category

Total
compensation

Basic
compensation

Stock options

Bonuses

Retirement
benefits

Number of
officers to be paid

Directors (Excluding Outside Directors)

341

265

—

—

75

11

Corporate Auditors (Excluding Outside Corporate Auditors)

54

48

—

—

6

3

Outside Officers

21

19

—

—

1

3

(Thousands of U.S. dollars)
Fiscal 2013
Total compensation by type
Category
Directors (Excluding Outside Directors)

Total
compensation
3,686

Basic
compensation
2,865

Stock options

Bonuses

Retirement
benefits

Number of
officers to be paid

—

—

811

11

Corporate Auditors (Excluding Outside Corporate Auditors)

584

519

—

—

65

3

Outside Officers

227

205

—

—

11

3

b) Total consolidated compensation paid to executive of the filing company(Millions of yen)
Fiscal 2013
Name
(Category of executive)
NAKATOMI, Hirotaka (President & CEO)

Total
consolidated
compensation
126

Total compensation by type
Category ofcompany

Basiccompensation

Stock options

Bonuses

Retirement
benefits

The filingcompany

102

—

—

24

(Thousands of U.S. dollars)
Fiscal 2013
Name
(Category of executive)
NAKATOMI, Hirotaka (President & CEO)

Total
consolidated
compensation
1,362

Total compensation by type
Category ofcompany
The filingcompany

Basiccompensation
1,103

Stock options

Bonuses

Retirement
benefits

—

—

259

c) Material disclosures on employee salaries for directors who also serve as employees.
Not applicable.

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Corporate Governance and Internal Auditingd) Policy on deciding amount of executive compensation
Directors’ compensation is determined at the board of directors meeting within the range approved at the annual
general meeting of shareholders in consideration of the company’s business performance, as well as the position, job
specifications, and individual performance of each director.
Corporate auditors’ compensation is determined at the board of corporate auditors meeting within the range
approved at the annual general meeting of shareholders.
4) Accounting auditing
The company has concluded an auditing contract with KPMG AZSA LLC to serve as an independent auditor responsible
for accounting auditing, and by providing accurate business information and taking other steps, we provide an environment
conductive to fair auditing. There are no special interests between the company and KPMG AZSA LLC and theirdesignated limited liability partner and engagement partners.
Audit company providing auditing services
Audit company
KPMG AZSA LLC

Certified public accountants providing auditing services
Designated limited liability partner and engagement partner

Yasushi Masuda

Designated limited liability partner and engagement partner

Hiromi Kimura

Designated limited liability partner and engagement partner

Akihisa Sada

Assisting personnel
6 CPAs & 7 others

Note: A statement on the years of continuous audit service is omitted because all accounting have served less than seven years.

5) Annual general meeting of shareholders resolution items that can be decided at the board of directors meeting
Acquisition of treasury stock
To enable the flexible execution of capital policy, the articles of incorporation stipulate that the company can repurchaseshares in the open market or through other means based on a board of directors resolution in accordance with Article 1652 of the Companies Act.

•

• Interim dividends

To flexibly return profits to shareholders, the articles of incorporation stipulate that interim dividends from retained earnings,
as defined in Article 454-5 in the Companies Act, can be paid based on a board of directors resolution to shareholders orpledgees listed or registered in the final shareholder registry at the end of August each year.
6) Resolutions to appoint or remove directors
The articles of incorporation stipulate that resolutions to appoint directors require a majority vote of at least one-third of•

shareholders capable of executing voting rights. Cumulative voting is not provided for.

• The articles of incorporation stipulate that resolutions to remove directors require a minimum two-third vote ofshareholders owning a majority of the voting rights of shareholders capable of executing voting rights.

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Corporate Governance and Internal Auditing7) Special resolutions of the general meeting of shareholders
To facilitate the smooth administration of general meetings of shareholders, the articles of incorporation stipulate that
resolutions based on Article 309-2 of the Companies Act require a minimum two-third vote of shareholders owning aminimum one-third of the voting rights of shareholders capable of executing voting rights, except as otherwise provided forby the articles of incorporation.

(2) Compensation for auditing
1) Breakdown of compensation for certified public accountants providing auditing services, etc.
(Millions of yen)
Category
The company

Fiscal 2012
Compensation forCompensation
audit certification
for non-auditing
services
services(Thousands of U.S. dollars)
Fiscal 2013

Fiscal 2013

Compensation foraudit certification
services

Compensation
for non-auditing
services

Compensation foraudit certification
services

52

—

562

Compensation
for non-auditing
services—522

Subsidiaries

4

—

4

—

43

—

Total

57

2

56

—

605

—

2) Breakdown of other important compensation
FY2/12The company and most of its overseas consolidated subsidiaries paid the KPMG Group, which belongs to the same
network as our certified public accountants providing auditing services, for audit certification and non-auditing services(such as tax advisory services).
FY2/13The company and most of its overseas consolidated subsidiaries paid the KPMG Group, which belongs to the same
network as our certified public accountants providing auditing services, for audit certification services.
3) Details of non-auditing services provided by certified public accountants to the company
FY2/12
We have commissioned an audit company to undertake advisory and guiding tasks relating to the International Financial
Reporting Standards (IFRS), which are business other than that stipulated in Article 2, Paragraph 1 of the Certified Public
Accounts Act (non-auditing services).
FY2/13
Not applicable.
4) Policy on setting compensation for auditing services
Not applicable.

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Financial Section

Analysis of Financial Position, Operating Results, and Cash Flows(1) Analysis of financial position in Fiscal 2013
1) Assets
Assets totaled ¥214,141 million at the end of FY2/13, an increase of ¥21,303 million from the previous year, due mainly toincreases of ¥13,368 million in cash and deposits, of ¥3,351 million in notes and accounts receivable — trade, and of¥5,255 million in short-term investment securities.
2) Liabilities
Liabilities totaled ¥46,207 million at the end of FY2/13, an increase of ¥2,632 million from the previous year, due mainly toa decrease in short-term loans payable of ¥2,770 million and an increase in income taxes payable of ¥2,737 million.
3) Net assets
Net assets totaled ¥167,933 million at the end of FY2/13, an increase of ¥18,670 million from the previous year, due mainly
to increases in retained earnings of ¥12,810 million, in valuation difference on available-for-sale securities of ¥2,128 million
and in foreign currency translation adjustment of ¥4,022 million.

(2) Analysis of operating results in Fiscal 2013
1) Net sales
Net sales grew 3.6% year on year to ¥142,772 million. This increase is due mainly to the strong sales of Mohrus® Tapeand NORSPAN® Tape.
2) Operating income
Operating income fell 2.4% year on year to ¥25,326 million. This decrease is attributable mainly to the rise in ratio of costof sales as a result of National Health Insurance drug price revision.
3) Ordinary income
Ordinary income fell 1.3% year on year to ¥33,051 million. This decrease is attributable mainly to the decrease in operating
income.
4) Net income
Net income rose 2.0% year on year to ¥18,809 million due mainly to the decrease in minority interests. Consequently, net
income per share totaled ¥219.56 in FY2/13, and return on equity was 11.9%.

HISAMITSU PHARMACEUTICAL CO., INC

17

FINANCIAL REPORT 2013

Financial Section(3) Analysis of cash flows in Fiscal 2013
Cash and cash equivalents at the end of the FY2/13 totaled ¥50,860 million, an increase of ¥16,637 million from the end of
the previous fiscal year.
1) Cash flows from operating activities
Net cash provided by operating activities totaled ¥32,485 million (¥25,558 million provided for of the previous fiscal year),due mainly to income before taxes and minority interests (¥31,991 million), interest and dividends received (¥8,162 million),and income taxes paid (¥9,841 million).
2) Cash flows from investing activities
Net cash used in investing activities totaled ¥7,946 million (¥15,473 million used for of the previous fiscal year), due mainly
to payments for purchase of tangible fixed assets (¥4,976 million) and payments for purchase of investment securities(¥1,763 million).
3) Cash flows from financing activities
Net cash used in financing activities totaled ¥9,288 million (¥13,010 million used for of the previous fiscal year), due mainly
to outflow from repayment of long-term loans payable (¥2,803 million) and cash dividends paid (¥6,000 million).

Capital Expenditures
Capital investment totaled ¥5,170 million in FY2/13.
In the Pharmaceutical segment, we mainly invested in the building and manufacturing equipment, etc. of the Tosu
Plant, resulting in capital investment of ¥2,438 million.
In other businesses, we mainly invested to expand bandwidth to provide digital capabilities to our subscribers, resulting
in capital investment of ¥125 million.
In FY2/13, there was no disposal or removal of equipment that could impact production capacity.

HISAMITSU PHARMACEUTICAL CO., INC

18

FINANCIAL REPORT 2013

Financial Section

Dividend Policy
Our basic policy is to continue paying stable dividends to shareholders. We pay special and commemorative dividends inlight of earnings and other factors in an effort to return profits to shareholders.
We also implement various other financial measures, such as company share buybacks, as effective means for
returning profits to shareholders.
Our basic policy is to pay dividends from retained earnings twice yearly through interim dividends and year-end
dividends. The General Meeting of Shareholders is responsible for deciding on year-end dividends and the Board of
Directors decide on interim dividends.
In FY2/13 we paid an interim dividend of ¥35 per share and a year-end dividend of ¥35 per share, for an annual
dividend of ¥70 per share.
We work to improve our business base through the targeted investment of internal reserves into research anddevelopment, manufacturing facilities, overseas business development, and other areas.
Our Articles of Incorporation stipulate that interim dividends can be paid based on a Board of Directors’ resolution toshareholders or pledgees listed or registered in the final shareholder registry at the end of August each year.
Note: Dividends in Fiscal 2013 are as follows.

Resolution date(Millions of yen)

(Yen)

(Thousands of
U.S. dollars)(U.S. dollars)

Total dividends

Dividends per share

Total dividends

Dividends per share

October 10, 2012
Board of directors resolution

2,999

35

32,418

378

2,999

35

32,418378

May 23, 2013
General meeting of shareholders resolution

HISAMITSU PHARMACEUTICAL CO., INC

19

FINANCIAL REPORT 2013

Financial Section

Business and Other Risks
The following risks associated with our group’s business activities could have a significant impact on the decisions ofinvestors.
Any forward-looking statements are based on our judgments at the end of FY2/13.
1) Legal and regulatory risks
Our mainstay pharmaceuticals and related products business is affected by a variety of regulations, including the national
health insurance drug price system and the healthcare insurance system. For example, the revision of national healthinsurance drug prices every two years places regular downward pressure on selling prices, and this could have a negative
impact on earnings. We are similarly affected by a variety of regulations overseas.
2) Risks from side effects
Unforeseen side effects could force our mainstay pharmaceuticals and related products business to recall products orcancel product launches, which could have a negative impact on earnings.
3) Research and development risks
We conduct research and development into new products and new technologies. However, earnings could be adversely
affected by the suspension of research and development activities for a variety of reasons, including failure to produce
anticipated results, or by the inability to recover research and development investment through sales.
4) Manufacturing and procurement risks
We manufacture products using independent technology at our own plants. We rely on specific vendors to supply certain
products and raw materials. Consequently, earnings could be adversely affected by the suspension of manufacturing orpurchasing of these products and raw materials for some reason.
5) Environmental risksSome of the chemicals used in our research and development activities and manufacturing processes can have an
adverse impact on human health and the surrounding environment. Although we take sufficient safeguards, earnings could
be adversely affected if these substances are judged to be having a negative impact on the surrounding environment.
6) Intellectual property risks
Our business activities could possibly be suspended or lead to litigation if they violate the patents or other intellectual
property rights of another company. We may also initiate litigation if another company violates our intellectual property
rights. Earnings could be adversely affected by the process and outcome of such actions.
7) Litigation risks
Our business activities could possibly lead to litigation related to pharmaceutical side effects and product liability. Earnings
could be adversely affected by the process and outcome of such actions.
8) Other risks
In addition to the foregoing, other potential risks include natural disasters and the security of computer systems.
HISAMITSU PHARMACEUTICAL CO., INC

20

FINANCIAL REPORT 2013

Financial Section

Consolidated Balance Sheets
February 29, 2012 and February 28, 2013

(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

Cash and deposits

27,78941,157444,892

Notes and accounts receivable — trade33,63536,986

399,805

Short-term investment securities

7,083

12,338133,369

Merchandise and finished goods

7,249

7,927

85,688ASSETS
Current assets:

367

271

2,929

Raw materials and supplies

4,935

5,130

55,453

Deferred tax assets

2,896

2,281

24,657

Other

3,702

1,838

19,868

Allowance for doubtful accounts

(202)

(211)

(2,281)87,455

107,719

1,164,404

Buildings and structures (Notes 2 and 3)

19,385

17,643

190,715

Machinery, equipment and vehicles (Notes 2 and 3)

6,972

6,094

65,874Tools, furniture and fixtures (Notes 2 and 3)

2,470

2,354

25,446

Land (Notes 2 and 4)

12,364

12,462

134,710Work-in-process

Total current assets
Noncurrent assets
Tangible fixed assets, net

390

145

1,567

Construction in progress

1,772

4,518

48,838

Total tangible fixed assets

43,35743,219467,182

Distribution right

7,893

6,828

73,808Goodwill

5,286

5,112

55,259Software

345

291

3,146

Temporary account for intangible fixed assets

50

50

540

Lease assets

Intangible fixed assets:

Other

2,973

4,881

52,762

Total intangible fixed assets

16,54817,163

185,526

Investment securities (Note 1)

34,54936,685396,552

Long-term deposits

3,000

2,500

27,024

Prepaid pension cost

3,995

3,170

34,267

Deferred tax assets

1,402

460

4,972

Other

2,757

3,440

37,185

Allowance for doubtful accounts

(228)

(218)

(2,357)

Investments and other assets:

45,47746,038497,654

Total noncurrent assets

105,382

106,421

1,150,373

TOTAL ASSETS

192,838

214,1412,314,788

Total investments and other assets

HISAMITSU PHARMACEUTICAL CO., INC

21

FINANCIAL REPORT 2013

Financial Section(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

Notes and accounts payable — trade

11,932

12,991

140,428

Short-term loans payable (Note 2)

4,445

1,674

18,095

Lease obligations

111

125

1,351

Accounts payable

6,177

7,035

76,046

Income taxes payable

3,839

6,576

71,084

LIABILITIESCurrent liabilities:

Allowance for sales returns
Provision for bonuses

198

229

2,475

1,550

1,714

18,528

147

—

—

Other

2,730

4,036

43,628

Total current liabilities

31,134

34,385

371,690

1,224

989

10,691

304

245

2,648

Deferred tax liabilities on revaluation (Note 4)

1,894

1,894

20,473

Deferred tax liabilities

1,495

392

4,237

Provision for retirement benefits

4,927

5,119

55,335

Provision for directors’ retirement benefits

1,230

1,302

14,074

Other

1,365

1,878

20,301

Total noncurrent liabilities

12,441

11,822

127,792

43,575

46,207499,481

Capital stock

8,473

8,473

91,590Capital surplus

8,396

8,396

90,758

159,677

172,4881,864,534

Provision for loss on disaster

Noncurrent liabilities:
Long-term loans payable (Note 2)
Lease obligations

Total Liabilities
NET ASSETS
Shareholders’ equity:

Retained earnings
Treasury stock(21,844)(21,846)(236,147)

Total shareholders’ equity

154,702167,5111,810,734

47

2,175

23,511

Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Revaluation reserve for land (Note 4)

3,459

3,459

37,391

Foreign currency translation adjustment(9,983)(5,961)(64,436)

Total accumulated other comprehensive income(6,476)(325)(3,513)

Minority interests

1,036

747

8,075

Total net assets

149,263

167,933

1,815,296

TOTAL LIABILITIES AND NET ASSETS

192,838

214,1412,314,788

HISAMITSU PHARMACEUTICAL CO., INC

22

FINANCIAL REPORT 2013

Financial Section

Consolidated Statements of Income
Years ended February 29, 2012 and February 28, 2013

(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

Net sales

137,794

142,772

1,543,314

Cost of sales (Notes 2 and 3)

46,78551,659558,415Gross profit

91,008

91,112984,888

Selling, general and administrative expenses (Notes 1 and 2)

65,07065,786

711,123

Operating income

25,93725,326

273,765

Non-operating income:Interest income

71

67

724

Dividends income

392

433

4,681

Foreign exchange gains

—

253

2,735

Development license revenues

127

122

1,319

Equity in earnings of affiliates

6,881

6,540

70,695

402

383

4,140

7,875

7,800

84,315Interest expenses

92

38

411

Foreign exchange losses

44

—

—

Provision of allowance for doubtful accounts

97

—

—

Loss on sales of receivables

21

24

259

Other

63

11

119

Total non-operating expenses

319

74

800

33,49433,051

357,269—

Other
Total non-operating income
Non-operating expenses:

Ordinary income
Extraordinary income:

4,611

—

Reversal of allowance for doubtful accounts

20

—

—

Distribution license fees

—

500

5,405
—

Government subsidies

R&D expenses received
Insurance income
Other
Total extraordinary income

190

—

3,403

—

—

34

1

11

8,260

501

5,416

Extraordinary loss:
189

208

2,248

Advanced depreciation deduction of fixed assets

4,611

—

—

Loss on valuation of investment securities

1,940

—

—

Impairment loss (Note 6)

—

1,353

14,625

Loss on disaster (Note 5)

2,584

—

—

49

—

—

9,375

1,561

16,874

Income before taxes and minority interests

32,37931,991

345,811

Income taxes — current

12,145

13,927

150,546

Income taxes — deferred

1,610

(518)

(5,599)Total income taxes

13,755

13,409144,946

Income before minority interests

18,623

18,582200,865

Loss on disposals of fixed assets (Note 4)

Other
Total extraordinary loss

Minority interests
Net income
HISAMITSU PHARMACEUTICAL CO., INC

23

184

(227)

(2,454)

18,43918,809203,319
FINANCIAL REPORT 2013

Financial Section

Consolidated Statements of Comprehensive Income
Years ended February 29, 2012 and February 28, 2013

(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

18,623

18,582200,865

Valuation difference on available-for-sale securities

607

2,050

22,160

Revaluation reserve for land

270

—

—

(1,508)3,077

33,261

Income before minority interests
Other comprehensive income:

Foreign currency translation adjustment
Share of other comprehensive income of associates accounted for under the equity method
Total other comprehensive income (Note 1)
Comprehensive income:

(534)

1,030

11,134(1,165)

6,158

66,566

17,45824,740267,431

17,287

24,960269,809

171

(219)

(2,367)

Comprehensive income attributable to:
Owners of the parent
Minority interests

HISAMITSU PHARMACEUTICAL CO., INC

24

FINANCIAL REPORT 2013

Financial Section

Consolidated Statements of Changes in Shareholders’ Equity
Years ended February 29, 2012 and February 28, 2013

(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

8,473

8,473

91,590Shareholders’ equity
Common stock:
Balance at the beginning of the current period
Changes of items during the period
Total changes of items during the period
Balance at the end of the current period

—

—

—

8,473

8,473

91,590

8,396

8,396

90,758

—

—

—

8,396

8,396

90,758147,272

159,677

1,726,051

Capital surplus:
Balance at the beginning of the current period
Changes of items during the period
Total changes of items during the period
Balance at the end of the current period
Retained earnings:
Balance at the beginning of the current period
Changes of items during the period:
Cash dividends(6,033)(5,998)(64,836)

Net income

18,43918,809203,319

Total changes of items during the period
Balance at the end of the current period

12,405

12,810138,472

159,677

172,4881,864,534(18,525)(21,844)(236,126)

Treasury stock:
Balance at the beginning of the current period
Changes of items during the period:
Purchase of treasury stock(3,319)(1)(11)

Total changes of items during the period(3,319)(1)(11)(21,844)(21,846)(236,147)

145,616

154,702

1,672,273

Balance at the end of the current period
Total shareholders’ equity:
Balance at the beginning of the current period
Changes of items during the period:
Cash dividends(6,033)(5,998)(64,836)

Net income

18,43918,809203,319

Purchase of treasury stock(3,319)(1)(11)

Total changes of items during the period

9,086

12,808138,450

154,702167,5111,810,734

Balance at the end of the current period

HISAMITSU PHARMACEUTICAL CO., INC

25

FINANCIAL REPORT 2013

Financial Section(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

(564)

47

508

Net changes of items other than shareholders’ equity

611

2,128

23,003

Total changes of items during the period

611

2,128

23,00347

2,175

23,511

3,189

3,459

37,391

Net changes of items other than shareholders’ equity

270

—

—

Total changes of items during the period

270

—

—

3,459

3,459

37,391(7,949)(9,983)(107,913)

Net changes of items other than shareholders’ equity(2,034)

4,022

43,476

Total changes of items during the period(2,034)

4,022

43,476(9,983)(5,961)(64,436)(5,324)(6,476)(70,003)

Net changes of items other than shareholders’ equity(1,152)

6,150

66,479Total changes of items during the period(1,152)

6,150

66,479(6,476)(325)(3,513)

930

1,036

11,199106(289)(3,124)

Accumulated other comprehensive income
Valuation difference on available-for-sale securities:
Balance at the beginning of the current period
Changes of items during the period:

Balance at the end of the current period
Revaluation reserve for land:
Balance at the beginning of the current period
Changes of items during the period:

Balance at the end of the current period
Foreign currency translation adjustments:
Balance at the beginning of the current period
Changes of items during the period:

Balance at the end of the current period
Total accumulated other comprehensive income:Balance at the beginning of the current period
Changes of items during the period:

Balance at the end of the current period
Minority interests
Balance at the beginning of the current period
Changes of items during the period:
Net changes of items other than shareholders’ equity

106

(289)

(3,124)

1,036

747

8,075

141,222

149,263

1,613,480

Cash dividends(6,033)(5,998)(64,836)

Net income

18,43918,809203,319

Purchase of treasury stock(3,319)(1)(11)

Net changes of items other than shareholders’ equity(1,045)

5,861

63,355

Total changes of items during the period

8,040

18,670201,816

149,263

167,933

1,815,296

Total changes of items during the period
Balance at the end of the current period
Total net assets
Balance at the beginning of the current period
Changes of items during the period:

Balance at the end of the current period

HISAMITSU PHARMACEUTICAL CO., INC

26

FINANCIAL REPORT 2013

Financial Section

Consolidated Statements of Cash Flows
Years ended February 29, 2012 and February 28, 2013

(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

Income before taxes and minority interests

32,37931,991

345,811

Depreciation and amortization

6,188

6,878

74,349Impairment loss

—

1,353

14,625

Amortization of goodwill

711

715

7,729

Cash flows from operating activities:

Increase (decrease) in provision for retirement benefits

21

188

2,032

Increase (decrease) in provision for directors’ retirement benefits

29

72

778

Increase (decrease) in provision for bonuses

79

87

940

Increase (decrease) in allowance for doubtful accounts

59

(2)

(22)

Increase (decrease) in provision for sales returns

22

30

324

(464)

(500)

(5,405)Interest expenses

92

38

411

Foreign exchange losses (gains)

2

(83)

(897)

Equity in losses (earnings) of affiliates(6,881)(6,540)(70,695)

Subsidy income(4,611)——

Insurance income(3,403)——

Advanced depreciation deduction of fixed assets

4,611

—

—

Loss on disaster

2,584

—

—

(34)

(1)

(11)

Loss (gain) on valuation of investment securities

1,940

—

—

Loss (gain) on disposal of tangible fixed assets

189

208

2,248

Decrease (increase) in notes and accounts receivable-trade

2,979(3,068)(33,164)

Decrease (increase) in inventories(2,168)(754)(8,150)Decrease (increase) in other current assets(1,004)

621

6,713

Interest and dividends income

Loss (gain) on sales of investment securities

790

792

8,561

Increase (decrease) in other current liabilities(1,022)

1,759

19,014

Other, net

1,449

412

4,454

34,54334,203369,722

6,982

8,162

88,228

(92)

(38)

(411)

Proceeds from insurance income

3,403

—

—

Payments for loss on disaster

(793)

—

—

(18,484)(9,841)(106,378)

25,55832,485351,151

Increase (decrease) in notes and accounts payable — trade

Sub-totalInterest and dividends received
Interest expenses paid

Income taxes paid
Net cash provided by (used in) operating activities

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Financial Section(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

Net decrease (increase) in time deposits

189

(134)

(1,448)Decrease (increase) in long-term deposits(1,000)

500

5,405

Payments for purchase of tangible fixed assets(9,858)(4,976)(53,789)

3

5

54(5,921)(659)(7,124)—(967)(10,453)(3,735)(1,763)(19,057)

Proceeds from sales and redemption of investment securities

234

3

32

Payments of loans receivable

(11)

—

—

Collection of loans receivable

13

44

476

4,611

—

—

(15,473)(7,946)(85,893)

Cash flows from investing activities

Proceeds from sales of tangible fixed assets
Payments for purchase of intangible fixed assets
Decrease (increase) in short-term investment securities
Payments for purchase of investment securities

Proceeds from subsidy
Net cash provided by (used in) investing activities
Cash flows from financing activities

881

(211)

(2,281)

Proceeds from long-term loans payable

1,065

—

—

Repayment of long-term loans payable(5,401)(2,803)(30,299)

(65)

(69)

(746)

Purchase of treasury stock(3,317)(0)(0)

Cash dividends paid

(6,031)(6,000)(64,858)

(140)

(202)

(2,184)(13,010)(9,288)(100,400)

(506)

1,387

14,993

Net increase (decrease) in cash and cash equivalents(3,431)

16,637

179,840

Cash and cash equivalents, beginning of year

37,65434,222369,928

Cash and cash equivalents, end of year (Note 1)

34,22250,860549,778

Increase (decrease) in short-term loans payable

Cash dividends paid to minority shareholders

Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Financial Section

Basis of Preparation of Consolidated Financial Statements
The Company has prepared consolidated financial statements in accordance with the Regulations Concerning the
Terminology, Forms and Preparation Methods of Consolidated Financial Statements (Ministry of Finance OrdinanceNo. 28, 1976).

Significant Accounting Policies Concerning the Preparation of Consolidated Financial Statements
Fiscal 2013 (March 1, 2012 – February 28, 2013)

I. Scope of consolidation(1) Consolidated subsidiaries: 17
Names of consolidated subsidiaries:
CRCC Media Co., Ltd.
Saga City-Vision Co., Ltd.
Taiyo Co., Ltd
Kyudo Co., Ltd
Hisamitsu Agency Co., Ltd.
Hisamitsu U.S., Inc.
Hisamitsu America, Inc.
Noven Pharmaceuticals, Inc.
Hisamitsu Farmaceutica do Brasil Ltda.
Hisamitsu UK Ltd.
Hisamitsu Vietnam Pharmaceutical Co., Ltd.
Hisamitsu Pharmaceutical Technology Consulting (Beijing) Co., Ltd.
P.T. Hisamitsu Pharma Indonesia
4 other companies(2) Non-consolidated subsidiaries: 0
Liquidation procedures for Kokusai Pappu-zai Kenkyusho Co., Ltd. and Taiyo Kaihatsu Co., Ltd. were completed during
the fiscal year under review.

II. Investments accounted for under the equity method(1) Equity-method non-consolidated subsidiaries: 0(2) Equity-method affiliates: 4
SANOFI-HISAMITSU K.K.
Yutoku Pharmaceutical Ind. Co., Ltd.
Maruto Sangyo Co., Ltd.
Novogyne Pharmaceuticals
SANOFI-HISAMITSU K.K., upon its formation and equity investment, has been accounted for under the equity method.

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Financial Section

Reason why non-consolidated subsidiaries have not been accounted for under the equity method
Liquidation procedures for Kokusai Pappu-zai Kenkyusho Co., Ltd. and Taiyo Kaihatsu Co., Ltd. were completed during
the fiscal year under review.

III. Information concerning fiscal years, etc., of consolidated subsidiaries
The fiscal years of the 12 overseas consolidated subsidiaries end on December 31. Since there is less than three months’
difference between that date and the end of the consolidated fiscal year, we use financial statements as of the date of
the end of the fiscal years of the consolidated subsidiaries. We make the required consolidated adjustments if any
major transactions occur between the end of the fiscal years of the consolidated subsidiaries and end of the consolidated
fiscal year.

IV. Accounting standards(1) Valuation standards and methods for significant assets
1) Securitiesa) Held-to-maturity bonds
Valued under amortized cost method (straight-line method).
b) Available-for-sale securitiesi ) Securities with market value
Valued at market price, using the market price at the balance sheet date.
All valuation differences are directly charged or credited to shareholders’ equity, and costs of securities sold arecomputed using the moving average method.
ii) Securities without market value
Valued at cost, determined by the moving average method.
2) Inventories
Calculated by the average cost method (book value on the balance sheet is written down according to the decline inprofitability).

(2) Depreciation methods for significant depreciable assets
1) Tangible fixed assets (excluding lease assets)a) Company and domestic consolidated subsidiaries
Mainly the declining balance method.
b) Overseas consolidated subsidiaries
Mainly straight-line method.

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FINANCIAL REPORT 2013

Financial Section2) Intangible fixed assets (excluding lease assets) and long-term prepaid expenses
Measured by the straight-line method.
Within intangible fixed assets, software for internal use is depreciated over its useful life (five years) using the straight-line
method.
3) Lease assets
For finance lease transactions other than those for which the right of ownership of the lease assets transfers to the lessee
at the end of the lease period, depreciation is calculated by the straight-line method based on the assumption that theuseful life equals the lease term and the residual value equals zero. The accounting treatment of finance lease transactions
other than those for which the right of ownership of the lease assets transfers to the lessee at the end of the lease period
and whose lease period commenced before February 28, 2009 is accounted for in accordance with that of normal rental
transactions.

(3) Standards for significant reserves and allowances
1) Allowance for doubtful accounts
In order to provide against losses from doubtful receivables, estimated irrecoverable amounts are recorded as a provision.
a) General receivables
Based on historical bad debt experience.
b) Receivables at risk of default and in bankruptcy reorganization
Based on an assessment of the financial position.
2) Provision for sales returns
In order to provide against losses from product returns after the balance sheet date, the company makes a provision up to
the maximum amount allowed under the Corporation Tax Law.
3) Provision for bonuses
To provide for the payment of bonuses to employees, the Company and its certain subsidiaries record a provision equal tothe portion of expected future bonus payments incurred during the term under review.
4) Provision for retirement benefits
The Company and certain subsidiaries, to prepare for the payment of retirement benefits to employees, provide a reserve at
an amount based on estimated retirement benefit obligations and pension assets at the end of the consolidated fiscal year.
Actuarial differences are amortized starting in the next consolidated fiscal year in equal amounts for a fixed number ofyears (five years) that is less than the average remaining years of service of employees when incurred.
5) Provision for directors’ retirement benefits
The Company and certain subsidiaries make a provision for estimated retirement payments to directors and corporate
auditors in accordance with its internal regulations.

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Financial Section(4) Translation of significant foreign currency denominated assets and liabilities used in preparing
the financial statements of consolidated companies on which the consolidated financial
statements are based
Assets and liabilities denominated in foreign currencies are translated into yen using the spot exchange rate for final day of
the fiscal year, and translation differences are booked as gains or losses. Note that the assets and liabilities of overseas
subsidiaries and other like entities are translated into yen using the spot exchange rate for final day of the fiscal year, while
revenues and expenses are translated using the average exchange rate for the period, and these translation differences
are booked on the Foreign Currency Translation Adjustment and Minority Interests under Net Assets.

(5) Method and period of amortization of goodwill
Goodwill is amortized evenly over a five to ten-year period which is expected to show an effect. If the value of goodwill issmall, it is amortized in full in the fiscal year when it accrues.

(6) Scope of funds in the Consolidated Statements of Cash Flows
Funds (cash & cash equivalents) in the Consolidated Statements of Cash Flows consist of cash in hand, demand deposits
and easily realizable short-term investments with high liquidity and maturity dates not more than three months from thedate of purchase, and which carry negligible risks of price fluctuation.

(7) Other significant accounting policies used in the preparation of the consolidated financial
statements
Treatment of Consumption Tax etc.
The accounts are prepared excluding Consumption Tax and Local Consumption Tax.

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Financial Section

Unapplied Accounting Standards, etc.
Accounting standards relating to consolidated financial statements
Issuance of “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26; May 17, 2012), and “Guidance on
Accounting Standard for Retirement Benefits” (ASBJ Guidance No.25; May 17, 2012)(1) Outline
This accounting standard and guidance have been revised mainly in terms of the accounting methods of unrecognizedactuarial differences and past service costs, the calculation methods of projected retirement benefit obligations andservice costs, and the improvement of disclosure, from the perspective of improving financial statements and in light ofcurrent international trends.
(2) Scheduled date of adoption
We plan to adopt this accounting standard and guidance from the end of the fiscal year starting on and after March 1,
2014.
(3) Impact of adoption of this accounting standard and guidance
In preparing consolidated financial statements, the impact in the financial statements as a result of the adoption iscurrently being evaluated.

Additional Information
The Company adopts the “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Statement No. 24;
December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ
Guidance No. 24; December 4, 2009) for accounting changes and corrections made after the beginning of the fiscal year
under review.

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Financial Section

Notes to Consolidated Financial Statements
Fiscal 2012 (March 1, 2011 – February 29, 2012) and Fiscal 2013 (March 1, 2012 – February 28, 2013)

CONSOLIDATED BALANCE SHEETS(Note 1) Investment securities for non-consolidated subsidiaries and affiliated companies are as follows.
(Millions of yen)
Investment securities (stocks)(Thousands of U.S. dollars)

Fiscal 2012
14,738

Fiscal 201313,069Fiscal 2013
141,271

1,370 (book value)
32 (book value)
192 (book value)
59 (book value)
1,655 (book value)

1,306 (book value)
23 (book value)
171 (book value)
59 (book value)
1,560 (book value)

14,117
249
1,848
638
16,863

1,128 (book value)
28 (book value)
192 (book value)
1,349 (book value)

1,147 (book value)
21 (book value)
171 (book value)
1,340 (book value)

12,399227
1,848
14,485

182
1,164
1,346

174
989
1,164

1,881
10,691
12,582

119
989
1,108

118
870
989

1,276
9,404
10,691(Note 2) Assets pledged as collateral are as follows.
Pledged assets
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Land
Total
Assets provided for factory foundation mortgage
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Total
Liabilities related to the above assets
Short-term loans payable
Long-term loans payable
Total
Liabilities provided for factory foundation mortgage
Short-term loans payable
Long-term loans payable
Total(Note 3) Advanced depreciation of government subsidies is ¥5,830 million and ¥5,832 million in FY2/12 and FY2/13,
respectively.
These figures are deducted from the consolidated balance sheets.
(Note 4) Application of the Land Revaluation Law
Land used for business purposes has been revalued in accordance with the “Act on revaluation of land” (Law 34 of 1998,
promulgated on March 31, 1998) and the “Law Partially Amending the Act on Revaluation of Land” (revision of March 31,
1999). The portion of the revaluation gain equivalent to corporation tax and other taxes with tax bases linked to corporate
profits has been recorded under liabilities as “Deferred tax liabilities on revaluation,” while the net sum after this transfer tothe deferred tax liability account is recorded under net assets as “Revaluation reserve for land.”
Revaluation method
The land value used as the basis for calculation of the tax base under the Land Value Tax, stipulated in Article 16 of theLand Value Tax Law (Law No. 69 of 1991), has been calculated by making rational adjustments to the price calculated by
the method determined and publicly announced by the Commissioner of the National Tax Agency, as stipulated in
HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Financial Section

Article 2.4 of the “Regulations for Applying the Land Revaluation Law” (Government Ordinance No. 119 of 1998, promulgatedMarch 31, 1998).
Revaluation dateFebruary 28, 2001

The market value of commercial land revalued in accordance with Article 10 of the Land Revaluation Law at the end of
FY2/12 and FY2/13 were ¥3,103 million and ¥3,464 million lower than the book value after revaluation.

CONSOLIDATED STATEMENTS OF INCOME(Note 1) Main items and the amounts under “Selling, general and administrative expenses” are as follows.
(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

Advertising expenses

9,565

10,086109,026

Sales promotion expenses

12,415

12,549135,650

Packing and transportation expenses

2,502

2,757

29,802

1

20

216

Salaries and allowances

6,755

7,299

78,900

Provision for bonuses

941

1,004

10,853

Provision for retirement benefits

639

819

8,853

Provision for directors’ retirement benefits

101

84

908

Provision of allowance for doubtful accounts

711

715

7,729

Business consignment expenses

3,097

2,933

31,705

Research and development expenses, of which:

14,75812,662

136,872

Provision for bonuses

263

312

3,373

Provision for retirement benefits

216

269

2,908

Amortization of goodwill(Note 2) General and administrative expenses include research and development expenses of ¥14,758 million and ¥12,662
million in FY2/12 and FY2/13, respectively.
Manufacturing costs do not include research and development expenses.
(Note 3) In FY2/12 and FY2/13, manufacturing costs include provision for bonuses of ¥333 million and ¥380 million andprovision for retirement benefits of ¥358 million and ¥442 million, respectively.
(Note 4) Breakdown of losses on the disposal of fixed assets(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

Buildings and structures

122

116

1,254

Machinery, equipment and vehicles

57

77

832

Tools, furniture and fixtures

8

13

141

Software

0

0

0

189

208

2,248

Loss on retirement

Total

HISAMITSU PHARMACEUTICAL CO., INC

35

FINANCIAL REPORT 2013

Financial Section(Note 5) Fiscal 2012 (March 1, 2011 – February 29, 2012)
Loss on disaster represents the loss resulting from the Great East Japan Earthquake which occurred on March 11, 2011
comprising primarily costs for retirement and restoration of tangible fixed assets, loss on disposal of inventories, and fixed
expenses during the period of suspended operation. Of these, provision for loss on disaster is ¥147 million.
Fiscal 2013 (March 1, 2012 – February 28, 2013)
Not applicable.
(Note 6) In FY2/13, the Group recorded impairment losses on the following assets.
Purpose of use

Location

Assets used forbusiness activities

Kurume city,
Fukuoka, etc.

Amount(Millions of yen)Amount(Thousands of U.S. dollars)

Buildings and structures

645

6,972

Machinery, equipment and vehicles

42

454

Category

Tools, furniture and fixtures
Lease assets
Software
United States

3

32

199

2,151

2

21

Future lease payments

53

573

Intangible fixed assets and other

406

4,389

Assets used for business activities are basically grouped according to the business unit for which reasonable profit and loss
management is possible, and rental assets and idle assets are grouped by individual asset. Each consolidated subsidiaryis taken as a single unit when determining signs of impairment.
Consequently, in terms of the aforementioned assets used for business activities, the estimated future cash flows havebeen determined to fall below the book values of each asset. Accordingly, the book values have been written down to theirrecoverable amounts and the write-down amount was recognized as impairment loss.
Recoverable amounts are measured based on value in use, and value in use is calculated by discounting future cash
flow by 3.0%. A discount rate of 18.45% has been applied to the assets of overseas consolidated subsidiaries.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Fiscal 2013 (March 1, 2012 – February 28, 2013)(Note 1) Reclassification adjustments amount and tax effect amount relating to other comprehensive income(Millions of yen)(Thousands of U.S. dollars)

Valuation difference on available-for-sale securities
Amount arising during fiscal year under review
Reclassification adjustment amount:

3,082

33,315

(78)

(843)

Before tax effect adjustment

3,004

32,472

Tax effect amount(954)(10,312)Valuation difference on available-for-sale securities

2,050

22,1603,077

33,261

1,030

11,134

6,158

66,566

Foreign currency translation adjustment
Amount arising during fiscal year under review
Share of other comprehensive income of associates accounted for under the equity method
Amount arising during fiscal year under review
Total other comprehensive income

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Financial Section

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Fiscal 2012 (March 1, 2011 – February 29, 2012)
1. Shares issued
Type of shares

Beginning of fiscal 2012

Increase

Decrease

End of fiscal 2012

Common stock

95,164,895——

95,164,895

Type of shares

Beginning of fiscal 2012

Increase

Decrease

End of fiscal 2012

Common stock

8,494,757

1,000,867—

9,495,624

2. Treasury shares

Reasons for changes
Shares increased for the following main reasons:Acquisition in compliance with the articles of incorporation under
the provisions of Paragraph 2, Article 165 of the Companies Act
Increase from purchasing shares in less than one unit
Company portion of treasury shares purchased by equity method affiliates

1,000,000 shares
538 shares
329 shares

3. Dividends(1) Dividends paid
Resolution

Type of shares

Total dividends(millions of yen)

Dividends per share(yen)

Record date

May 26, 2011
Annual general meeting ofshareholders

Common stock

3,034

35

February 28, 2011

May 27, 2011

October 12, 2011
Board of Directors meeting

Common stock

2,999

35

August 31, 2011

November 8, 2011

Payment date(2) Dividends with a record date in fiscal 2012 but a payment date in fiscal 2013
Resolution

Type of shares

Source of dividend

Total dividends(millions of yen)

Dividends per share(yen)

Record date

Payment date

May 24, 2012
Annual general meeting ofshareholders

Common stock

Retained earnings

2,999

35

February 29, 2012

May 25, 2012

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Fiscal 2013 (March 1, 2012 – February 28, 2013)
1. Shares issued
Type of shares

Beginning of fiscal 2013

Increase

Decrease

End of fiscal 2013

Common stock

95,164,895——

95,164,895

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FINANCIAL REPORT 2013

Financial Section

2. Treasury shares
Type of shares

Beginning of fiscal 2013

Increase

Decrease

End of fiscal 2013

Common stock

9,495,624

453—

9,496,077

Reasons for changes
Shares increased for the following main reasons:
Increase from purchasing shares in less than one unit
Company portion of treasury shares purchased by equity method affiliates

166 shares
287 shares

3. Dividends(1) Dividends paid
Resolution

Type of shares

Total dividends(millions of yen)

Dividends per share(yen)

Record date

May 24, 2012
Annual general meeting ofshareholders

Common stock

2,999

35

February 29, 2012

May 25, 2012

October 10, 2012
Board of Directors meeting

Common stock

2,999

35

August 31, 2012

November 8, 2012

Resolution

Type of shares

Total dividends(Thousands of
U.S. dollars)

Dividends per share(U.S. dollars)

Record date

Payment date

May 24, 2012
Annual general meeting ofshareholders

Common stock

32,418378

February 29, 2012

May 25, 2012

October 10, 2012
Board of Directors meeting

Common stock

32,418378

August 31, 2012

November 8, 2012

Payment date(2) Dividends with a record date in fiscal 2013 but a payment date in fiscal 2014
Resolution

Type of shares

Source of dividend

Total dividends(millions of yen)

Dividends per share(yen)

Record date

Payment date

May 23, 2013
Annual general meeting ofshareholders

Common stock

Retained earnings

2,999

35

February 28, 2013

May 24, 2013

Dividends per share(U.S. dollars)

Record date

Payment date

378

February 28, 2013

May 24, 2013

Resolution

Type of shares

Source of dividend

Total dividends(Thousands of
U.S. dollars)

May 23, 2013
Annual general meeting ofshareholders

Common stock

Retained earnings

32,418HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Financial Section

CONSOLIDATED STATEMENTS OF CASH FLOWS(Note 1) Relationship between year-end balances of cash and cash equivalents and amounts stated in the
consolidated balance sheets(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

Cash and deposits

27,78941,157444,892

Cash equivalents included in short-term investment securities

7,083

10,495

113,447

Total

34,87251,652

558,340

(649)

(792)

(8,561)

34,22250,860549,778

Term deposits longer than three months
Cash and cash equivalents

LEASE TRANSACTIONS
Lease transactions other than finance leases in which ownership of the leased asset is deemed to have passed to thelessee and whose lease period commenced before February 28, 2009
1. Purchase price equivalent, accumulated depreciation equivalent, and book value equivalent(Millions of yen)
Fiscal 2012
Purchase value
equivalent

Accumulated
depreciation equivalentBook value
equivalent

Machinery, equipment and vehicles

192

164

27

Tools, furniture and fixtures

749

604

144

Software

34

29

4

Total

976

799

176

Note: The purchase price equivalent was computed by including interest paid because the ratio of future lease payment
obligations to the year-end balance of tangible fixed assets is not material.

Tools, furniture and fixtures
Software
Total(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2013

Fiscal 2013

Purchase value
equivalent

Accumulated
depreciation equivalentBook value
equivalent

Purchase value
equivalent

Accumulated
depreciation equivalentBook value
equivalent

638

585

52

6,897

6,324

562

3

3

0

32

32

0

642

588

53

6,940

6,356

573

Note: The purchase price equivalent was computed by including interest paid because the ratio of future lease payment
obligations to the year-end balance of tangible fixed assets is not material.

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2. Book value equivalent of future lease payments(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

Within one year

124

44

476

Over one year

52

8

86

Total

176

53

573

Note: Future lease payment obligations were computed by including interest paid because the ratio of the year-end balanceof future lease payments to the year-end balance of tangible fixed assets is not material.

3. Lease payments and depreciation equivalent(Millions of yen)
Fiscal 2012

(Thousands of U.S. dollars)

Fiscal 2013

Fiscal 2013

Lease payments

231

95

1,027

Depreciation equivalent

231

95

1,027

4. Method of calculating depreciation equivalent
The value is calculated using the straight-line method whereby the lease period equals the useful life of the lease asset,
and the residual value of the lease asset is zero.

FINANCIAL INSTRUMENTS
1. Outline of financial instruments(1) Policy for financial instruments
Our Group raises funds necessary to conduct mainly the manufacturing and sales of pharmaceuticals through bank loans
or issuance of bonds. Temporary cash surpluses are invested in low risk financial assets. Derivatives are used within thescope of actual requirements and not for speculative purposes.
(2) Nature and extent of risks arising from financial instruments, and risk management for financial instruments
Although operating receivables such as notes and accounts receivable-trade are exposed to customer credit risk, this risk
is managed through regular checks on the business and credit position of customers.
Short-term investment securities and investment securities, mainly consisting of stocks of corporations that theCompany has business relationships with, are exposed to the risk of market price fluctuations. This risk is managed
through periodic monitoring of market value and the financial status of the related issuers. With respect to stocks incompanies that have a business relationship, the Company checks necessity for holding them, taking into account thebusiness relationship.
Payment terms of operating payables, such as notes and accounts payable-trade, accounts payable, and income taxes
payable are less than one year. Although operating payables and borrowings are exposed to liquidity risk, this risk ismanaged through methods such as preparing cash flow planning on a monthly basis.
Derivatives transactions are undertaken by the Finance Department after authorization by the Board of Directors or the
General Manager of the Finance Department, depending on the importance of the transaction, and details areappropriately reported to the Board of Directors.

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2. Market values of financial instruments
Carrying amount, market value and unrealized gain/loss of the financial instruments are as follows: Financial instruments
whose market values are not readily determinable are excluded from the following table (See (Note 2)):
Fiscal 2012 (February 29, 2012)(Millions of yen)
Carrying amountMarket value

Unrealized gain
(loss)(1) Cash and deposits

27,78927,789—(2) Notes and accounts receivable-trade33,63533,635—

Available-for-sale securities

25,862

25,862—

Stock of affiliated companies

1,382

612

(769)

(3) Short-term investment securities and investment securities:(4) Long-term deposits

3,000

2,986

(13)

Total assets

91,66990,885(783)(1) Notes and accounts payable-trade

11,932

11,932—(2) Short-term loans payable

1,651

1,651

—

(3) Accounts payable

6,177

6,177

—

(4) Income taxes payable

3,839

3,839

—

(5) Long-term loans payable (*)

4,018

4,032

14

Total liabilities

27,62027,634

14

—

—

—

Derivative transactions(*) Includes current portion of long-term loans payable.

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Fiscal 2013 (February 28, 2013)(Millions of yen)
Carrying amount Market value(Thousands of U.S. dollars)
Unrealized gain
(loss)
Carrying amount Market value

Unrealized gain
(loss)(1) Cash and deposits

41,157

41,157—444,892

444,892—(2) Notes and accounts receivable-trade

36,98636,986—

399,805

399,805—

34,92434,924—

377,516

377,516—(3) Short-term investment securities andinvestment securities:
Available-for-sale securities

1,440

637

(802)

15,566

6,886(8,669)

2,500

2,494

(5)

27,024

26,959(54)

Total assets

117,009116,200(808)

1,264,825

1,256,080(8,734)(1) Notes and accounts payable-trade

12,991

12,991—

140,428

140,428—(2) Short-term loans payable

1,440

1,440

—

15,566

15,566—(3) Accounts payable

7,035

7,035

—

76,04676,046—(4) Income taxes payable

6,576

6,576

—

71,08471,084—

Stock of affiliated companies(4) Long-term deposits(5) Long-term loans payable (*)

1,224

1,227

3

13,231

13,26332

Total liabilities

29,26829,272

3

316,377

316,420

32

—

—

—

—

—

—

Derivative transactions(*) Includes current portion of long-term loans payable.
Note 1: Calculation method of market values of financial instruments and securities
Assets(1) Cash and deposits and (2) Notes and accounts receivable-trade
These assets are recorded using book values because market values approximate book values because of theirshort-term maturities.
(3) Short-term investment securities and investment securities
Certificates of deposit are recorded using book values because market values approximate book values becauseof their short-term maturities. The market values of stocks are determined using the quoted market price on
applicable stock exchanges.
(4) Long-term deposits
Long-term deposits are stated using the quoted prices obtained from financial institutions.
Liabilities(1) Notes and accounts payable-trade, (2) Short-term loans payable, (3) Accounts payable, and (4) Income taxes
payableThese payables are recorded using book values because market values approximate book values because of theirshort-term maturities.
(5) Long-term loans payable (including current portion of long-term loans payable)
Long-term loans payable with floating interest rates are recorded using book values because market values
approximate book values as these rates reflect market interest rates over the short-term. For long-term loans
payable with fixed interest rates, market values are determined by discounting the aggregated values of theprincipal and interest using an assumed interest rate based on the interest rate that would be applied to a newloan of a similar nature.
HISAMITSU PHARMACEUTICAL CO., INC

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Note 2: Carrying amounts of financial instruments whose market values are not readily determinable(Millions of yen)
Category
Unlisted equity securities(Thousands of U.S. dollars)

February 28, 2013

February 29, 2012

February 28, 2013

12,65914,388136,839

These items are not included in “(3) Short-term investment securities and investment securities,” because there is no market
price, and it is very difficult to identify market values.
Note 3: Redemption schedule of monetary assets and securities with contractual maturities after the balance sheet dateFiscal 2012 (February 29, 2012)(Millions of yen)
Within one
year

One to five
years

Five to ten
years

Cash and deposits

27,789———Notes and accounts receivable-trade33,635

—

—

—

2,000

—

—

—

—

—

433

282

—

3,000

—

—

63,424

3,000

433

282

Over ten years

Short-term investment securities and investment securities:
Available-for-sale securities with contractual maturities:
Negotiable certificates of deposit
Other
Long-term deposits
Total

Fiscal 2013 (February 28, 2013)(Millions of yen)(Thousands of U.S. dollars)Within one
year

One to five
years

Five to ten
years

Over tenyears

Within one
year

One to five
years

Five to ten
years

Over tenyears

Cash and deposits

41,157———444,892———

Notes and accounts
receivable-trade

36,986———

399,805

—

—

—

1,842

—

—

—

19,911

—

—

—

—

2,500

—

—

—

27,024——

79,987

2,500

—

—

864,631

27,024——

Short-term investment securities
and investment securities:
Available-for-sale securities
with contractual maturities:
Other
Long-term deposits
Total

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Note 4: Redemption schedule of long-term loans payable after the balance sheet dateFiscal 2012 (February 29, 2012)(Millions of yen)
Within one year

One to five years

Five to ten years

Over ten years

Long-term loans payable

2,793

576

356

292

Total

2,793

576

356

292

Fiscal 2013 (February 28, 2013)(Millions of yen)(Thousands of U.S. dollars)Within one
year

One to five
years

Five to ten
years

Over tenyears

Within one
year

One to five
years

Five to ten
years

Over tenyears

Long-term loans payable

234

412

356

221

2,529

4,454

3,848

2,389

Total

234

412

356

221

2,529

4,454

3,848

2,389

SECURITIES
1. Available-for-sale securities
Fiscal 2012 (February 29, 2012)(Millions of yen)
Category

Carrying amount

Acquisition cost

Difference(1) Stocks

7,833

6,414

1,419

(2) Bonds———(3) Other———

Subtotal

7,833

6,414

1,419

(1) Stocks

10,22911,615(1,386)(2) Bonds———(3) Other

7,799

7,799

—

Subtotal

18,02819,415(1,386)

Total

25,862

25,83032

Carrying amount higher than acquisition cost

Carrying amount lower than acquisition cost

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Fiscal 2013 (February 28, 2013)(Millions of yen)
Category

Carrying amount Acquisition cost(Thousands of U.S. dollars)
Difference

Carrying amount Acquisition cost

Difference

Carrying amount higher than acquisition cost(1) Stocks

16,053

12,194

3,859

173,527

131,81341,714(2) Bonds

—

—

—

—

—

—

(3) Other

—

—

—

—

—

—

Subtotal

16,053

12,194

3,859

173,527

131,81341,714

6,532

7,354

(821)

70,60979,494(8,875)Carrying amount lower than acquisition cost(1) Stocks(2) Bonds

—

—

—

—

—

—

(3) Other

12,33812,338—133,369

133,369—

Subtotal

18,87019,692(821)

203,978

212,863(8,875)

Total

34,92431,887

3,037

377,516

344,687

32,8292. Available-for-sale securities sold during the fiscal year
Fiscal 2012 (March 1, 2011 – February 29, 2012)(Millions of yen)
Category

Sale value

Profit from sale

Loss from sale(1) Stocks

234

34

—

(2) Bonds———(3) Other

—

—

—

Total

234

34

—

Fiscal 2013 (March 1, 2012 – February 28, 2013)(Millions of yen)
Category

Sale value(Thousands of U.S. dollars)Profit from sale Loss from sale

Sale value

Profit from sale Loss from sale(1) Stocks

3

1

—

32

11

—

(2) Bonds

—

—

—

—

—

—

(3) Other

—

—

—

—

—

—

Total

3

1

—

32

11

—

HISAMITSU PHARMACEUTICAL CO., INC

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3. Impairment loss on securities
Fiscal 2012 (March 1, 2011 – February 29, 2012)
In FY2/12, the Group recognized an impairment loss of ¥1,940 million under short-term investment securities.
Note that when the market value at the end of FY2/12 declines more than approximately 30% of its acquisition cost, themarket value is considered to have diminished sharply. An impairment loss is recognized when the market value declines
more than 50% of its acquisition cost, as it is not considered possible for market value to be recovered. When the market
value declines more than 30% and lower than 50% of the acquisition cost, the amount considered to be necessary, taking
into account the recoverability in light of the market value and the financial position of the issuer of the security, isrecognized as an impairment loss.
Fiscal 2013 (March 1, 2012–February 28, 2013)
Not applicable.

DERIVATIVE TRANSACTIONS
1. Derivative transactions to which hedge accounting is not applied
Not applicable.
2. Derivative transactions to which hedge accounting is applied
Not applicable.

RETIREMENT BENEFITS
1. Overview of retirement benefit plans
Corporate pension plan:
The Company previously used the Hisamitsu Pharmaceutical Welfare Pension Plan to cover a portion of retirement benefits
starting on July 1, 1995, but it switched to the Hisamitsu Pharmaceutical Corporate Pension Plan on July 1, 2005.
The Company previously used a qualified pension plan to augment its retirement benefit plans from March 1, 1966, but
this plan was terminated on April 1, 2007 and integrated into the corporate pension plan.
Lump sum retirement allowance:
The Company and domestic consolidated subsidiaries provide lump sum retirement allowances based on retirement
benefit regulations. In some cases, employees may receive an additional retirement allowance upon retirement.

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2. Retirement benefit obligations(Millions of yen)
Fiscal 2012
(February 29, 2012)(Thousands of U.S. dollars)

Fiscal 2013
(February 28, 2013)

Fiscal 2013
(February 28, 2013)(11,604)(12,213)(132,018)(2) Pension assets

9,024

9,938

107,426(3) Subtotal (1) + (2)(2,580)(2,275)(24,592)(4) Unrecognized actuarial differences

1,648

326

3,524

(1) Retirement benefit obligations(931)(1,949)(21,068)(6) Prepaid pension costs(3,995)(3,170)(34,267)(7) Provision for retirement benefits (5) + (6)(4,927)(5,119)(55,335)(5) Total (3) + (4)3. Retirement benefit costs(Millions of yen)
Fiscal 2012
(March 1, 2011 –February 29, 2012)(Thousands of U.S. dollars)

Fiscal 2013
(March 1, 2012 –February 28, 2013)

Fiscal 2013
(March 1, 2012 –February 28, 2013)(1) Service costs

548

575

6,216

(2) Interest costs

223

228

2,465

(3) Expected return on plan assets

(267)

(261)

(2,821)(4) Amortization of actuarial differences

728

989

10,691

1,232

1,531

16,550(5) Retirement benefit expenses

Notes: 1. Excludes employee contributions to the corporate pension plan.
2. Retirement benefit expenses at consolidated subsidiaries using the simplified method are recorded under “(1)Service costs.”

4. Basis for calculating retirement benefit obligations(1) Allocation of expected retirement benefits

Straight-line method(2) Discount rate
Fiscal 2012
(March 1, 2011 – February 29, 2012)

Fiscal 2013
(March 1, 2012 – February 28, 2013)

2.00%

2.00%

(3) Expected return on plan assets
Fiscal 2012
(March 1, 2011 – February 29, 2012)

Fiscal 2013
(March 1, 2012 – February 28, 2013)

2.90%

2.90%

(4) Amortization period of prior service costs
Two years (amortized in equal amounts for a fixed number of years that is less than the average remaining years ofservice of employees when incurred)(5) Amortization period of actuarial differences
Five years (amortized starting in the next consolidated fiscal year in equal amounts for a fixed number of years that isless than the average remaining years of service of employees when incurred.)

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TAX EFFECT ACCOUNTING
1. Main reasons for deferred tax assets and deferred tax liabilities.
(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

1,724

1,798

19,436

Provision for directors’ retirement benefits

434

459

4,962

Accrued enterprise tax

344

351

3,794

Allowance for doubtful accounts

236

240

2,594

Inventories

181

99

1,070

Deferred tax assets:
Provision for retirement benefits

Excess depreciation

645

586

6,334

Intangible fixed assets

2,886

1,967

21,263

Valuation losses on memberships

265

248

2,681

Loss on valuation of investment securities

946

945

10,215

Provision for bonuses

373

360

3,891

Outsourced research and development

1,376

759

8,205

Other

1,551

1,791

19,360Sub-total deferred tax assets

10,966

9,607

103,848

Valuation allowance(2,202)(2,413)(26,084)

Total deferred tax assets

8,764

7,193

77,754

Stock and investments in affiliated companies(2,580)(1,845)(19,944)

Prepaid pension costs(1,413)(1,121)(12,118)

Other(1,966)(1,877)(20,290)

Total deferred tax liabilities(5,960)(4,844)(52,362)

2,803

2,349

25,392

Deferred tax liabilities:

Net deferred tax assets

Note: The net value of deferred tax assets are included in the following consolidated balance sheet categories:(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

Current assets – deferred tax assets

2,896

2,281

24,657

Noncurrent assets – deferred tax assets

1,402

460

4,972

Noncurrent liabilities – deferred tax liabilities(1,495)(392)(4,237)HISAMITSU PHARMACEUTICAL CO., INC

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2. Main reasons for difference in statutory tax rate and income tax rate after application of tax effect accounting
Fiscal 2012

Fiscal 2013

40.4%

—

Non-deductible expenses, such as entertainment expenses

1.3—

Non-taxable income, such as dividend income

(0.3)

—

Special tax exemption for experimental research and development

(3.8)

—

Valuation allowance

4.2

—

Other

0.7

—

42.5

—

Statutory tax rate
Adjustments:

Income tax rate after application of tax effect accounting

Note: Because the difference in the statutory tax rate and the income tax after the application of tax effectaccounting is less than five per cent of the statutory tax rate, notes for Fiscal 2013 are omitted.

INVESTMENT AND RENTAL PROPERTY
Because the total amount of investment and rental property is not material, this item is not stated.

SEGMENT INFORMATION
1. Outline of reportable segments
The Company engages in business activities primarily in research and development, manufacturing, purchase,and sales of pharmaceuticals, where “Pharmaceuticals” is the concerned reportable segment.
“Pharmaceuticals” is conducting business related to ethical and OTC pharmaceuticals both in Japan and overseas.
2. Method to calculate the amounts of net sales, profit or loss, assets, liabilities and other items by reportablesegment
Because the reportable segment of the Company is “Pharmaceuticals” only, this item is not stated.
3. Information regarding the amounts of net sales, profit or loss, assets, liabilities and other items by reportablesegment
Because the reportable segment of the Company is “Pharmaceuticals” only, this item is not stated.
4. Difference between the aggregate of all reportable segments and the consolidated financial statements amount,and the details of such difference (items concerning the adjustment of difference)
Because the reportable segment of the Company is “Pharmaceuticals” only, this item is not stated.

RELATED INFORMATION
Fiscal 2012 (March 1, 2011 – February 29, 2012)
1. Information by product/service segment
This information is omitted, as net sales to external customers in single product/service segment accounts for more than
90% of net sales in the consolidated statements of income.

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2. Information by geographic segment(1) Net sales(Millions of yen)Japan

North America

Other

Total

116,644

12,541

8,608

137,794

Note: Net sales are segmented into countries or territories according to the location of the customer.

(2) Tangible fixed assets(Millions of yen)Japan

North America

Other

Total

37,029

4,495

1,832

43,357

3. Information by significant customer(Millions of yen)
Name of customers

Net sales

Related segment

Alfresa Holdings Corporation

25,648

Pharmaceuticals

Medipal Holdings Corporation

25,066

Pharmaceuticals

Note: Effective October 1, 2012, Alfresa Holdings Corporation made TOKIWA YAKUHIN CO., LTD its wholly-owned subsidiary. The
foregoing figures have been adjusted to enable comparison with the amounts after the change.

Fiscal 2013 (March 1, 2012 – February 28, 2013)
1. Information by product/service segment
This information is omitted, as net sales to external customers in single product/service segment accounts for more than
90% of net sales in the consolidated statements of income.
2. Information by geographic segment(1) Net sales(Millions of yen)Japan

North America

Other

Total

119,242

14,135

9,394

142,772(Thousands of U.S. dollars)
Japan

North America

Other

Total

1,288,963

152,794

101,546

1,543,314

Note: Net sales are segmented into countries or territories according to the location of the customer.

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Financial Section(2) Tangible fixed assets(Millions of yen)Japan

North America

Other

Total

35,128

5,976

2,115

43,219Japan

North America

Other

Total

379,72164,59822,862

467,182(Thousands of U.S. dollars)

3. Information by significant customer(Millions of yen)
Name of customers

Net sales

Related segment

Alfresa Holdings Corporation

26,314

Pharmaceuticals

Medipal Holdings Corporation

26,007

Pharmaceuticals(Thousands of U.S. dollars)Name of customers

Net sales

Related segment

Alfresa Holdings Corporation

284,445

Pharmaceuticals

Medipal Holdings Corporation

281,126

Pharmaceuticals

Information on the impairment loss of noncurrent assets by reportable segment
Fiscal 2012 (March 1, 2011 – February 29, 2012) and Fiscal 2013 (March 1, 2012 – February 28, 2013)
Because the reportable segment of the Company is “Pharmaceuticals” only, this item is not stated.
Information on the amortization of goodwill and unamortized balance by reportable segment
Fiscal 2012 (March 1, 2011 – February 29, 2012) and Fiscal 2013 (March 1, 2012 – February 28, 2013)
Because the reportable segment of the Company is “Pharmaceuticals” only, this item is not stated.
Information on the gain on negative goodwill by reportable segment
Fiscal 2012 (March 1, 2011 – February 29, 2012) and Fiscal 2013 (March 1, 2012 – February 28, 2013)
Not applicable.

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RELATED PARTY INFORMATION
Fiscal 2012 (March 1, 2011 – February 29, 2012)
1. Transactions with related parties
Not applicable.
2. Notes to parent entities or significant affiliated companies
Summarized financial statements of significant affiliated companies
For FY2/12, the significant affiliated company is Novogyne Pharmaceuticals and its summarized financial statement is
as follows.
(Millions of yen)
5,363

Total current assets
Total noncurrent assets

523

Total current liabilities

1,854

Total net assets

4,031

Net sales

20,262

Income before income taxes

13,852

Fiscal 2013 (March 1, 2012–February 28, 2013)
1. Transactions with related parties
Affiliated companies, etc.
Type

Name of company, etc

Location

Capital orinvestment(Millions of yen)Affiliate

YutokuPharmaceuticalInd. Co., Ltd.

Kashima, Saga

120

Relationship withrelated party

Description oftransaction

Capital or investment(Thousands ofBusiness activities orHolding (held) of
U.S. dollars)
occupation
voting rights, etc. (%)
1,297

Amount oftransaction(Millions of yen)Amount oftransaction(Thousands of
U.S. dollars)

Pharmaceuticals

Item

Holding
Direct15.0

Balance at endof the fiscal year
(Millions of yen)

Balance at end of
the fiscal year
(Thousands of
U.S. dollars)

Selling of products
Purchase ofmerchandise

Selling ofproducts

9,344

101,005

Account
receivable-trade

3,014

32,580Interlocking ofexecutives

Purchase ofmerchandise

14

151

Accounts payabletrade443

Notes: 1. Transaction amounts do not include consumption tax.
2. Terms and conditions for the purchasing and selling of products and merchandises are determined similarly togeneral trading terms and conditions following discussions taking into account market prices.

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2. Notes on parent entities or significant affiliated companies
Summarized financial statements of significant affiliated companies
For FY2/13, the significant affiliated company is Novogyne Pharmaceuticals and its summarized financial statement is
as follows.
(Millions of yen)(Thousands of U.S. dollars)

7,564

81,764

Total noncurrent assets

514

5,556

Total current liabilities

2,008

21,706

Total net assets

6,070

65,615Net sales

29,042

313,934

Income before income taxes

18,750202,681

Total current assets

PER SHARE INFORMATION(Yen)(U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

Net assets per share

1,730.22

1,951.54

21.10

Net income per share

215.09219.562.37

Notes: 1. Diluted net income per share is not listed due to the absence of residual securities.
2. The basis for the calculation of net assets per share is as follows.
(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

Total net assets in the consolidated balance sheets

149,263

167,933

1,815,296

Net assets attributable to common shareholders

148,226

167,186

1,807,221

Main differences
Minority interests

1,036

747

8,075

Common stock issued (Thousands of shares)

95,164

95,164—

Common stock held in treasury (Thousands of shares)

9,495

9,496

—

Common stock used in calculating net assets per share (Thousands of shares)

85,66985,668—

3.The basis for the calculation of net income per share is as follows.
(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2012

Fiscal 2013

Fiscal 2013

18,43918,809203,319

Amount not attributable to common shareholders

—

—

—

Net income attributable to common shareholders

18,43918,809203,319

Average common stock during year (Thousands of shares)

85,726

85,669—Net income

HISAMITSU PHARMACEUTICAL CO., INC

53

FINANCIAL REPORT 2013

Financial Section

SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.

HISAMITSU PHARMACEUTICAL CO., INC

54

FINANCIAL REPORT 2013

Financial Section

Supplementary Schedule
Supplementary schedule of bonds payableNot applicable.
Supplementary schedule of loans payable(Thousands of
U.S. dollars)(Millions of yen)
Balance at the beginning Balance at the endof Fiscal 2013of Fiscal 2013

Category(%)

Balance at the endof Fiscal 2013
Average interest rate

Due date

Short-term loans

1,651

1,440

15,566

0.62—

Current portion of long-term
loans
Current portion of long-termlease obligation
Long-term loans(excluding current portion)
Lease obligation(excluding current portion)

2,793

234

2,529

0.95

—

111

125

1,351

—

—

1,224

989

10,691

1.07

304

245

2,648

—

March 1, 2014 toMarch 31, 2026
March 1, 2014 toJanuary 31, 2019

Other liabilities
Total

—

—

—

—

—

6,085

3,036

32,818——Notes: 1. Average interest rate is the weighted average interest rate for the year-end balances of loans, etc.
2. Repayments of current portion of long-term loans, include ¥103 million in interest free loans from the Development
Bank of Japan Inc.
3. The average interest rate on lease obligations is not listed, mainly because lease obligations are stated in the
consolidated balance sheet mainly as a total before deduction of the equivalent of interest contained in the totallease payment.
4. Repayments of long-term loans (excluding current portion), include ¥127 million in interest free loans from theDevelopment Bank of Japan Inc.
5. Yearly repayments of long-term loans and lease obligations (both excluding current portion) within five years after
the consolidated balance sheet date are as follows:(Millions of yen)
Due after one year
but within two years

Due after two years
but within three years

Long-term loans

153

108

78

71

Lease obligations

107

95

23

12

Category

Due after three years
but within four years

Due after four years
but within five years(Thousands of U.S. dollars)
Due after one year
but within two years

Due after two years
but within three years

Due after three years
but within four years

Due after four years
but within five years

Long-term loans

1,654

1,167

843

767

Lease obligations

1,157

1,027

249

130

Category

HISAMITSU PHARMACEUTICAL CO., INC

55

FINANCIAL REPORT 2013

Financial Section

Supplementary schedule of asset retirement obligations
Not applicable.
Other
Consolidated sales and income for Fiscal 2013
(Millions of yen)Three months ended May
31, 2012

Six months ended August
31, 2012

Nine months ended
November 30, 2012

Fiscal 2013

Net sales

34,67071,932

107,357

142,772

Income before taxes andminority interests

6,232

16,02525,58931,991

Net income

3,613

9,334

15,02118,809Net income per share (yen)42.18

108.96175.34219.56

Three months ended May
31, 2012

Six months ended August
31, 2012

Nine months ended
November 30, 2012

Fiscal 2013

Net sales

374,770

777,559

1,160,491

1,543,314

Income before taxes andminority interests

67,366173,225

276,608

345,811Net income

39,055

100,897

162,372

203,319

0.46

1.18

1.90

2.37

(Cumulative)(Thousands of U.S. dollars)(Cumulative)

Net income per share (U.S. dollars)(yen)(Quarterly)
Net income per shareFirst quarter

Second quarter

Third quarter

Fourth quarter

42.18

66.78

66.39

44.22

(U.S. dollars)(Quarterly)
Net income per share

HISAMITSU PHARMACEUTICAL CO., INC

First quarter

Second quarter

Third quarter

Fourth quarter

0.46

0.72

0.72

0.48

56

FINANCIAL REPORT 2013

Corporate Information

Stock Information(1) Total number of shares
1) Total number of shares
Type of shares

Total authorized shares

Common stock

380,000,000

Total

380,000,000

2) Shares issued
Names of listing stock
exchanges or registeredsecurities dealers
associations

Type of shares

Shares issued
at end-Fiscal 2013
(February 28, 2013)

Shares issued
on filing date
(May 24, 2013)

Common stock

95,164,895

95,164,895

Tokyo Stock Exchange(First Section)
Nagoya Stock Exchange(First Section)
Fukuoka Stock Exchange

All voting shares, standard
shares with unlimited rights(Voting units: 100 shares)

Total

95,164,895

95,164,895——

Details(2) Status of share subscription rights to shares
Not applicable.
(3) Execution of warrant bonds, etc. with clause allowing change in exercise priceNot applicable.
(4) Details of rights plans
Not applicable.
(5) Changes in shares issued, capital stock, and other items(Shares)
Date
July 5, 2002(Note)(Millions of yen)

Change in sharesissuedShares issued

Change in capitalstock

Capital stock

Change in additional
paid-in capital

Additional paid-in
capital—95,164,895

—

8,473

(6,123)

2,118(Shares)
Date
July 5, 2002(Note)(Thousands of U.S. dollars)

Change in sharesissuedShares issued

Change in capitalstock

Capital stock

Change in additional
paid-in capital

Additional paid-in
capital—95,164,895—

91,590(66,187)

22,895

Note: The decrease in additional paid-in capital was based on provisions in Article 289-2 of the former Commercial Code(creditor protection procedures were completed on July 5, 2002)

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Corporate Information(6) Details of shareholders
As of February 28, 2013
Status of shares (Investment unit comprises 100 shares)
Foreign shareholders
National andlocal
government

Category

Financial
institutions

Securities
companies

Other
corporations

Nonindividuals

Individuals

Individuals
and other

Total

Shares under
one unit(shares)

Shareholders(entities)

—

49

22

178

300

4

4,010

4,563

—

Shares owned(units)—463,635

3,389

169,311

124,94415

189,894

951,188

46,095

Ratio (%)

—

48.74

0.36

17.80

13.14

0.00

19.96

100.00—Note: Treasury stock of 9,469,371 are listed as 94,693 units in the individuals and other column and as 71 shares in theshares under one unit column. The 9,469,371 treasury share figure is the number of shares listed in the shareholder
registry.

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Corporate Information(7) Principal shareholders
As of February 28, 2013
Percentage ofShares owned
shares outstanding(thousand shares)
(%)

Name

Address

Japan Trustee Service Bank, Ltd. (trust account)

1-8-11 Harumi, Chuo-ku, Tokyo

5,973

6.28

Nippon Life Insurance Company

1-6-6 Marunouchi, Chiyoda-ku, Tokyo

4,887

5.14

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

2-11-3 Hamamatsucho, Minato-ku, Tokyo

4,807

5.05

The Nomura Trust and Banking Co., Ltd.
(The Bank of Tokyo-Mitsubishi UFJ, Ltd.
pension trust account)

2-2-2 Otemachi, Chiyoda-ku, Tokyo

4,387

4.61

Japan Trustee Service Bank, Ltd.
(Resona Bank, Ltd. retrust account, The NishiNippon City Bank, Ltd. pension trust account)

1-8-11 Harumi, Chuo-ku, Tokyo

4,370

4.59

The Bank of Fukuoka, Ltd.

2-13-1 Tenjin, Chuo-ku, Fukuoka

3,871

4.07

The Bank of Saga, Ltd.

2-7-20 Tojin, Saga

3,356

3.53

Japan Trustee Service Bank, Ltd.
1-8-11 Harumi, Chuo-ku, Tokyo(Sumitomo Mitsui Trust Bank, Ltd. retrust account,
Sumitomo Mitsui Banking Corporation pension
trust account)

2,064

2.17

Japan Trustee Service Bank, Ltd.
1-8-11 Harumi, Chuo-ku, Tokyo(Sumitomo Mitsui Trust Bank, Ltd. retrust account;
Resona Bank, Ltd. pension trust account)

2,000

2.10

BBH for Matthews Asian Growth andIncome Fund
(Standing proxy: The Bank ofTokyo-Mitsubishi UFJ, Ltd.)

1,983

2.08

37,701

39.62

Four Embarcadero Center Suite 550
San Francisco, CA 94111 U.S.A.
(2-7-1 Marunouchi, Chiyoda-ku, Tokyo)

Total

Notes: 1. The number of the foregoing shares related to fiduciary services is as follows.
Japan Trustee Service Bank, Ltd.: 14,407 thousand shares
The Master Trust Bank of Japan, Ltd.: 4,807 thousand shares
The Nomura Trust and Banking Co., Ltd.: 4,387 thousand shares
2. In addition to the shares listed above, the company owns treasury stock of 9,469 thousand shares (9.95%).

HISAMITSU PHARMACEUTICAL CO., INC

59

FINANCIAL REPORT 2013

Corporate Information(8) Information on transfer of the Company’s stock
Stock exchange listings

First sections of the Tokyo Stock Exchange, and Nagoya Stock Exchange,
and the Fukuoka Stock Exchange (stock code: 4530)

Stock registrar

Mitsubishi UFJ Trust and Banking Corporation
1-4-5 Marunouchi, Chiyoda-ku, Tokyo

Annual general meeting ofMay each year

shareholders
Ex dividend date

End of February (August 31 for interim dividend)

Record date

Record date for the annual general meeting of shareholders is the end of February.
Report in advance if otherwise needed.

Newspaper for public

Nihon Keizai Shimbun

announcements
Stock related inquiries

Stock Section, General Affairs Department, Kyushu Head Office
408 Tashiro Daikan-machi, Tosu-shi Saga
Tel: +81 942-83-2101 Fax: +81 942-83-6119
Website: http://www.hisamitsu.co.jp

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Corporate Information

Group Companies
Our corporate group comprises Hisamitsu Pharmaceutical, 17 consolidated subsidiaries, and Four equity-method affiliates.
Relationship
Name

Location

Capital orinvestment

Main businessactivities

Votingrights(%)

Concurrent employees

CapitalHisamitsu Hisamitsu support from Business transactions
officers employees Hisamitsu(Persons) (Persons)

Other

Remarks

Consolidated subsidiaries
CRCC Media Co., Ltd.

Kurume,Fukuoka¥1,115 million Other businesses

69.50

1

4

Debt
guarantees——

Saga City-Vision Co.,Ltd.

Saga, Saga

¥605 million Other businesses

70.12

—

3

Debt
guarantees——

Taiyo Co., Ltd.

Tosu, Saga

¥50 million Other businesses

100

1

3

—

Agent for casualty
insurance contracts
for Hisamitsu

Hisamitsu
leases land

Kyudo Co., Ltd.

Tosu, Saga

¥10 million Other businesses

100

1

2

—

Provide laboratory
animals and equipment to Hisamitsu

Hisamitsu
leases land
& buildings

Hisamitsu Agency Co.,
Ltd.

Kurume,Fukuoka¥25 million Other businesses

100
(100)

—

3

—

Provide advertising
agency services to
Hisamitsu

Hisamitsu
leases partof a leasebuilding

Hisamitsu U.S., Inc.

DelawareUSA

USD Pharmaceuticals
10

100

1

—

—

—

—

Hisamitsu America, Inc.

California,
USA

USD Pharmaceuticals
3,000,000

100
(100)

1

1

Selling products—Working
capital loans supplied by Hisamitsu

USD Pharmaceuticals
10

100
(100)

2

—

Working
Hisamitsu outsources —capital loans development

Note 3Note 3Noven Pharmaceuticals, Florida,
Inc.
USA
Hisamitsu Farmaceutica
do Brasil Ltda.

Manaus,BrazilBRL Pharmaceuticals
15 million

100

—

3

—

Manufacture and sell —products in Brazil,
with products andsome raw materials
supplied by Hisamitsu

Hisamitsu UK Ltd.

London, UK

GBP Pharmaceuticals
120,000

100

1

1

—

Hisamitsu outsources —development

Hisamitsu Vietnam
Bien Hoa,
Pharmaceutical Co., Ltd. Vietnam

VND Pharmaceuticals
258,775 million

100

—

4

Working
capital loans
Debt
guarantees

Manufacture and sell —products in Vietnam,with products andsome rawmaterials supplied by
Hisamitsu

Hisamitsu
Pharmaceutical
Technology Consulting(Beijing) Co., Ltd.

Beijing,
China

CNY Pharmaceuticals
1,206 thousand

100

1

3

—

Hisamitsu outsources —medical marketing

PT. Hisamitsu PharmaIndonesia

Surabaya,Indonesia

IDR Pharmaceuticals
32,518 million

75

1

2

—

Manufacture and—sell products inIndonesia, withproducts and some
raw materials
supplied by Hisamitsu

4 other companies

—

— —

—

—

—

—

—

HISAMITSU PHARMACEUTICAL CO., INC

61

Note 3Note 3Note 3—

FINANCIAL REPORT 2013

Corporate Information

Relationship
Name

Location

Capital orinvestment

Main businessactivities

Votingrights(%)

Concurrent employees

CapitalHisamitsu Hisamitsu support from Business transactions
officers employees Hisamitsu(Persons) (Persons)

Other

Remarks

Equity-method affiliates
Sanofi-Hisamitsu K.K.

Shinjuku
Tokyo¥250 million Pharmaceuticals

49.0

1

3

—

Yutoku PharmaceuticalInd. Co., Ltd.

Kashima,Saga¥120 million Pharmaceuticals

15.0

1

1

—

Maruto Sangyo Co., Ltd. Ogori,
Fukuoka¥1,807 million Other businesses

39.9

1

3

—

USD Pharmaceuticals
32 million

49.0(49.0)———

Novogyne
Pharmaceuticals

Delaware,USA

Supplies raw—
materials to
Hisamitsu
Manufacture and sell—
products with someproducts supplied by
Hisamitsu, supply someproducts of Hisamitsu
Supplies raw—
materials to
Hisamitsu—

Note 4—

Notes: 1. Main business activities column lists names of business segments.
2. There are no companies in accounting insolvency that would significantly affect the consolidated financial statements.
3. Specified subsidiary.
4. Listed and files financial statements.
5. Figures in parenthesis in the voting rights column indicate indirect ownership.
6. Key earnings information for the foregoing consolidated subsidiaries is not listed because sales at these companies account for less than 10% of consolidated sales (excluding internal sales between consolidated subsidiaries).

Management
President & CEO

NAKATOMI, Hirotaka

Standing Corporate Auditor

NAKATOMI, Nobuyuki

Senior Managing Director

NAKATOMI, KazuhideStanding Corporate Auditor

UEDA, Masahiro

Senior Managing Director

SUEYASU, Kensaku

Standing Corporate Auditor

HIRANO, MunehikoManaging Director

AKIYAMA, Tetsuo

Corporate Auditor

ONO, Keinosuke

Managing Director

NODA, TakehikoCorporate Auditor

ICHIKAWA, Isao

Managing Director

SUGIYAMA, Kousuke

Corporate Auditor

TOKUNAGA, Tetsuo

Director

TSURUDA, Toshiaki

Director

HIGO, Naruhito

Director

KABASHIMA, Mitsumasa

Director

TAKAO, Shinichiro

Director

SAITO, Kyu
Notes: 1. NAKATOMI Nobuyuki, Standing Corporate Auditor, is the younger brother of NAKATOMI Hirotaka, President & CEO.
2. NAKATOMI Kazuhide, Senior Managing Director, is the first son of NAKATOMI Hirotaka, President & CEO.
3. Corporate Auditors ONO Keinosuke, ICHIKAWA Isao, and TOKUNAGA Tetsuo are Outside Corporate Auditors
provided for under Article 2, Paragraph 16, of the Companies Act.

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Corporate Information

Company Profile
Company name
FoundedHisamitsu Pharmaceutical Co., Inc.
1847

Established
Head office
Representative

May 22, 1944
408 Tashiro Daikan-machi, Tosu, Saga
NAKATOMI, Hirotaka, President & CEO

CapitalFiscal year
Number of employees¥8,473,839,816
March 1 – End of February
Business segment
Pharmaceuticals

Employees (As of February 28, 2013)
2,671 (560)

Other businesses
Total

155 (50)
2,826 (610)

Note: Employee figures are for full-time employees. Temporary employees are shown in parentheses; these figures are averages for the fiscal year and are not included in totals.

HISAMITSU PHARMACEUTICAL CO., INC

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FINANCIAL REPORT 2013

Hisamitsu Pharmaceutical Co., Inc.
408 Tashiro Daikan-machi, Tosu, Saga
841-0017, Japan
Tel: +81-942-83-2101
Fax: +81-942-83-6119
Website: http://www.hisamitsu.co.jp