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®. Overthe years we have continued to help people improve their health by leveraging
our transdermal 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 ¥119.27=U.S.$1.00, theapproximate rate of exchange on February 28, 2015.

Contents
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

HISAMITSU PHARMACEUTICAL CO., INC

1
2
3
11
18
19
20
21
22
24

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
Changes in Accounting Policies
Unapplied Accounting Standards, etc.
Notes to Consolidated Financial Statements
Supplementary Schedule
Corporate Information

25
26
29
31
31
35
35
36
58
60

FINANCIAL REPORT 2015

Consolidated Financial Highlights
Years ended the last day of February(Thousands of
U.S. dollars)(Millions of yen)
Fiscal 2011

Fiscal 2012

Fiscal 2013

Fiscal 2014

Fiscal 2015

Fiscal 2015

Net sales

137,184

137,794

142,772

150,635

156,743

1,314,186

Operating income

28,19325,93725,326

19,123

20,527

172,105

Ordinary income

33,23633,49433,051

28,91028,489238,861

Net income

20,956

18,43918,80921,357

18,784

157,491—

17,45824,74034,44832,244

270,345

Net assets

141,222

149,263

167,933

196,308

222,054

1,861,776

Total assets

194,787

192,838

214,141

251,852

285,440

2,393,225

Net assets per share (yen and dollars)

1,618.69

1,730.22

1,951.54

2,281.40

2,580.02

21.63

Net income per share (yen and dollars)

241.80215.09219.56249.30219.28

1.83

—

—

—

—

—

—

Shareholders’ equity ratio (%)

72.0

76.9

78.1

77.6

77.4

—

Return on equity (ROE) (%)

15.5

12.8

11.9

11.8

9.0

—

Price-earnings ratio (PER) (times)

13.6

17.1

24.5

19.1

20.4

—

Net cash provided by operating activities

36,34225,55832,48535,84523,232

194,785

Net cash used in investing activities(8,248)(15,473)(7,946)(5,843)(8,945)(74,998)

Net cash used in financing activities(15,659)(13,010)(9,288)(6,476)(7,036)(58,992)

Cash and cash equivalents, end of year

37,65434,22250,86077,78088,614

742,970

Number of employees[average temporary staff]

2,635
[415]

2,718
[503]

2,826
[610]

2,949
[625]

2,942
[626]

—
[—]

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.

HISAMITSU PHARMACEUTICAL CO., INC

1

FINANCIAL REPORT 2015

To Our Stakeholders

We would like to express our sincere appreciation for ourinvestors’ continued patronage and support.
We hereby report the overview of operations andfinancial results for the 113th fiscal year (from March 1, 2014
to February 28, 2015).
With regard to domestic business conditions, while theethical pharmaceuticals business saw a decrease in revenue
due to the impact of the reduction of National Health
Insurance drug prices and the measures to promote genericdrug use, sales grew in the OTC pharmaceuticals business,
especially for our mainstay products such as SALONPAS®,
and FEITAS® Z series, which launched new products.
As for overseas business conditions, sales expanded
significantly for our mainstay ethical pharmaceuticals suchas Minivelle® and Brisdelle®. OTC pharmaceuticals, too,
performed strongly overall and achieved revenue growth,with SALONPAS® brand obtaining the top share in terms ofsales value in the patch market in the U.S., where advertisingand publicity activities were strengthened.
As a result of the above, consolidated net sales increased
4.1% year on year to ¥156,743 million, consolidated
operating income increased 7.3% year on year to ¥20,527
million, consolidated ordinary income decreased 1.5% year
on year to ¥28,489 million, and consolidated net income
decreased 12.0% year on year to ¥18,784 million.
The Company appointed former President & CEO
NAKATOMI, Hirotaka as Chairman & CEO and former
Executive Vice President NAKATOMI, Kazuhide as
President & COO with approval at the 113th annual general
meeting of shareholders and the board of directors meeting
held on May 21, 2015. Under the new management
structure, we will aim at further business development.
We ask for our investors’ continued support andencouragement.

Medical Products

For Export

NAKATOMI, Hirotaka
Chairman & CEO
NAKATOMI, Kazuhide
President & COO

Over the Counter Products
HISAMITSU PHARMACEUTICAL CO., INC

2

FINANCIAL REPORT 2015

Overview of Operations

Operating results
The Japanese economy during the fiscal year under review witnessed a gradual recovery reflecting rising stock prices
thanks to aggressive economic policies and improved export conditions due to the ongoing depreciation of the yen.
However, uncertainty prevailed against the backdrop of the sluggish consumer spending in response to rush demandprior to the consumption tax hike.
The operating environment for the ethical pharmaceutical industry in Japan became more severe due to the impact of
the revision of National Health Insurance drug prices in April 2014, as well as measures to curtail healthcare spending,which involves enhanced measures to promote generic drug use.
We have responded to the changes by engaging in our business with a focus on our mainstay transdermal therapeutic
formulation and providing medical institutions with scientific information that precisely corresponds to their needs.
Regarding the OTC pharmaceuticals in Japan, we have worked to launch and promote sales of new products, as
sluggish consumption and tough competition continue in the OTC market.
Our research and development concentrated its resources in transdermal patches, a mainstay product, and strove todevelop new products with novel topical or systemic effects.
Additionally, in research and development activities carried out with overseas subsidiary Noven Pharmaceuticals, Inc.
(hereinafter referred to as “Noven”) we have strengthened cooperation that includes personnel exchanges and strived to
speed up the development of 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.
Furthermore, in addition to improving the efficiency of our manufacturing processes, we made an effort to reduce ourenvironmental footprint through the reduction of energy usage and waste by changing its method of product transport andintroducing 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 51
organizations including those engaged in recovery efforts after the Great East Japan Earthquake through the “Hisamitsu
Pharmaceutical Co., Inc. Hot Heart Club” program, in which the Company makes matching donations deducted from
employees’ and directors’ salaries.
In addition, we provided donation money to the Saga Prefecture branch of the Japanese Red Cross Society for damage
from the torrential rain and landslides that took place in Hiroshima in August 2014.
We have continued to provide various support for the “SAGA Heavy Ion Medical Accelerator in Tosu (SAGA HIMAT)
Project” that was launched to contribute to the crusade against cancer.
Hisamitsu Springs, a women’s volleyball team, became the first team in women’s volleyball history in 2014 to win theEmperor’s Cup and Empress’s Cup All Japan Volleyball Championship three times in a row. In addition, the team held
volleyball classes in a number of prefectures, mostly in Saga and Hyogo.
For the coming 2020 Tokyo Olympics, we will continue to contribute to the further development and improvement ofsports culture.
“Pharmaceuticals” is the Company’s sole reportable segment, whose performance is as follows.

HISAMITSU PHARMACEUTICAL CO., INC

3

FINANCIAL REPORT 2015

Overview of Operations

Pharmaceuticals
The Pharmaceuticals segment, particularly the ethical pharmaceuticals business in Japan, faced an uncertain environment
during FY2/15 due to 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 andMOHRUS® PAP, ketoprofen transdermal patches; ESTRANA® TAPE, an estradiol transdermal patch; Fentos® Tape, atransdermal sustained-release cancer pain relief patch of fentanyl citrate that is a synthetic narcotic with significant
analgesic effects; NORSPAN® TAPE, a transdermal sustained-release pain relief patch of buprenorphine; and NEOXY ®
TAPE, an oxybutynin hydrochloride transdermal patch for the treatment of an overactive bladder.
In May 2014, we were chosen as the winner of “the Prize of the Commissioner of the Japan Patent Office” in the 2014
National Commendation for Invention for the outstanding scientific and technological inventiveness of the transdermal antiinflammatory pain relief drug MOHRUS® TAPE. This has made it the first transdermal anti-inflammatory pain relief drug tobe approved for indications for relief of low back pain and local pain associated with rheumatoid arthritis.
In June 2014, we received approval of the additional indication for chronic pain of the transdermal sustained-releasecancer pain relief patch Fentos® Tape.
In October 2014, the transdermal anti-inflammatory pain relief patches MOHRUS® TAPE and MOHRUS® PAP and thetransdermal bronchodilator TULOBUTEROL TAPE “HMT” received the Good Design Award 2014 for our efforts in productdevelopment from the patients’ perspective, especially their user-friendly features such as being easy to take out from thepouch and easy to patch.
In the OTC pharmaceuticals business in Japan, we launched new products, in addition to engaging in sales of ourmainstay anti-inflammatory pain relief patches, targeting new users.
In order to acquire new customers, we began marketing BUTENALOCK® L POWDER GEL for the treatment of athlete’sfoot and ringworm in March 2014, FEITAS® Z DICSAS® and FEITAS® Z DICSAS® LARGE SIZE, a transdermal antiinflammatory pain relief patch containing 2.0% of diclofenac sodium in July 2014, and Lifecella® Dermabeaute®, skincare
cosmetic products containing SACRAN®, which has five times the moisture retaining capacity of hyaluronic acid, and
FEITAS® 5.0 HOT and FEITAS® 5.0 HOT LARGE SIZE, a transdermal anti-inflammatory pain relief patch containing 5.0%of felbinac, in September 2014.
In the fiscal year under review, which marks the 80th anniversary of the sales of our mainstay product SALONPAS®, we
carried out various promotional activities.
We produced a book titled “Gakken Manga de Yoku Wakaru Series: Harigusuri no Himitsu” (“Learning from Manga:
Secrets of Medical Patch” published by Gakken), which mentions the history of SALONPAS® and donated copies toelementary schools and public libraries throughout Japan.
In the overseas ethical pharmaceuticals, in September 2014, Minivelle®, an estradiol transdermal system, obtained an
additional approval from the U.S. Food and Drug Administration (FDA) for the new indication of postmenopausal
osteoporosis with a new dose of 0.025 mg.
This makes Minivelle® the world’s smallest estradiol transdermal patch approved by the FDA.
Furthermore, for the overseas OTC pharmaceuticals, as a result of active sales promotion, the SALONPAS brandobtained the largest share of sales in the anti-inflammatory pain relief patch market of U.S. OTC pharmaceuticals.
As a result of these business activities, net sales increased 4.1% year on year, or ¥6,108 million, to ¥156,743 million.
Operating income increased 7.3% year on year, or ¥1,404 million, to ¥20,527 million. Ordinary income decreased 1.5%
year on year, or ¥421 million, to ¥28,489 million; and net income decreased 12.0% year on year, or ¥2,572 million, to¥18,784 million.
HISAMITSU PHARMACEUTICAL CO., INC

4

FINANCIAL REPORT 2015

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 2015

Business segment

Fiscal 2015

Pharmaceuticals

153,600+4.2

1,287,834

Other businesses

3,143

(1.6)

26,352

156,743+4.1

1,314,186

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 2014

% of total

Medipal Holdings Corporation

25,98017.2

25,30516.1

212,166

Alfresa Holdings Corporation

26,132

17.3

24,62815.7

206,489

Customer

Sales
Fiscal 2015

% of total

Fiscal 2015

2. The foregoing figures do not include consumption tax.

Key Challenges
We expect the ethical pharmaceuticals business in Japan to witness continued efforts to curb healthcare 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, production and
R&D capabilities.
For OTC pharmaceuticals in Japan, amid a prolonged market slump and intensifying competition, we seek to expand
sales of mainstay anti-inflammatory pain relief patches and respond to the needs of our customers by improving existingproducts 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 function at our business baseNoven by combining our areas of strength in technology, as well as expanding and strengthening our manufacturing andsales network.
Continuing to recognize our mission and responsibility as a pharmaceutical company, we aim to create a more robust
business base and manufacturing structure, and to accelerate the development of new products by concentrating
management resources more in our specialty area of transdermal patches.

HISAMITSU PHARMACEUTICAL CO., INC

5

FINANCIAL REPORT 2015

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, by concentrating 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 NEOXY® TAPE, a transdermal patch to treat an overactive bladder and are expanding ourbusiness internationally by conducting sales, pursuing research and development, and acquiring approvals in various
countries around the world. As part of these efforts, Noven Pharmaceuticals, Inc. was acquired and made a subsidiary toestablish the Hisamitsu brand in the US and to ensure future growth, and Hisamitsu Pharmaceutical Technology
Consulting (Beijing) Co., Ltd. was established as a local subsidiary in order to enter the rapidly growing Chinese market
and promote our pharmaceutical business, etc.

HISAMITSU PHARMACEUTICAL CO., INC

6

FINANCIAL REPORT 2015

Overview of Operations

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.
In other words, the sources of enterprise value for our company are: a) broad access to a variety of drugs created by anumber of companies, and research and development capabilities to make these drugs available in patches; b)
manufacturing technology and quality control systems that enable the efficient, stable, and ongoing production of highquality products; c) marketing prowess to cultivate several long-selling and market-leading brands, including SALONPAS®,SALONSIP®, FEITAS®, BUTENALOCK®, MOHRUS® PAP, MOHRUS® TAPE, and ESTRANA® TAPE; and d) an integrated
research and development, 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.
For licensing activities, we entered an agreement with Mundipharma K.K. for exclusive distribution rights in Japan of the
ethical pharmaceutical NORSPAN® TAPE, which is a transdermal sustained-release pain relief patch for the treatment ofchronic pain associated with osteoarthritis and low back pain not being controlled sufficiently with non-opioid analgesics.
We are also actively pursuing OTC pharmaceuticals, including the acquisition of distribution rights from Sanofi K.K. of
allegra® FX, an allergic nasal inflammation medication and a switch OTC product for allegra® 60 mg marketed as an ethicalpharmaceutical for allergic disease treatment.
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 Return on Equity (ROE) at 15% or higher from the standpoint of raising capitalefficiency, and to consistently pay dividends with a target payout ratio of 30%. In the “5th Medium-term Management Plan
for FY2014-2018” released as of May 13, 2014, the targets for FY2018 are 11% or more in Return on Equity (ROE), 40%
or more in payout ratio, and 4.5% or more in Dividend on Equity (DOE).
Further, we have implemented structural reforms as we have placed priority on creating an organization capable ofresponding quickly to changes in the business environment, as well as enhanced corporate governance, in order toenhance management transparency and ensure compliance. To be specific, we have established the Management
Advisory Council, introduced an executive officer system, established the Crisis Management Committee, prepared theHisamitsu Corporate Charter summarizing behavior based on high ethical and moral standards as an employee, which
was ensured for officers and employees by the Compliance Promotion Committee and Compliance Promotion Office,introduced the System of Outside Corporate Auditors, prepared basic internal control policies, established the Internal

HISAMITSU PHARMACEUTICAL CO., INC

7

FINANCIAL REPORT 2015

Overview of Operations

Audit Department, established the Privacy Protection Committee, and prepared Disclosure Policy Rules to provide timely
and appropriate disclosure of corporate information.
Going forward, we seek to create a stronger bond of trust with our stakeholders as a good corporate citizen and toensure and enhance the company’s enterprise value and the common interests of shareholders, and thus, we plan tocontinue to achieve our basic policy.
(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 (takeover defense measures)” was approved to be adopted with an effective period until
the conclusion of the annual general meeting of shareholders for the fiscal year ended February 28, 2011 (hereinafter “thePlan”). After that, by shareholders at the 109th annual general meeting of shareholders held on May 26, 2011 and the112th annual general meeting of shareholders held on May 22, 2014, the continuation of the Plan with partial revision wasapproved with an effective period until the conclusion of the annual general meeting of shareholders for the fiscal year
ending February 28, 2017.
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 and in
granting a period for review and evaluation by this independent committee and the board of directors. If the purchaser fails
to comply with these procedures or if the purchase will damage the company’s enterprise value and the common interestsof shareholders, then the company can pursue countermeasures against the purchaser in the form of a gratis allotment ofshare acquisition rights or other appropriate countermeasure that the board of directors is permitted to take based on the
Companies Act, other laws, and the company’s articles of incorporation. Whether countermeasures based on the Plan are
adopted is ultimately a decision of the board of directors, but to ensure the proper use of the Plan and 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, 2017. 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.
HISAMITSU PHARMACEUTICAL CO., INC

8

FINANCIAL REPORT 2015

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.

Co-promotion agreement(1) Noven Pharmaceuticals, our U.S. subsidiary concluded a co-promotion agreement with Shionogi Inc., the U.S.
subsidiary of Shionogi & Co., Ltd. to co-promote Brisdelle® Capsule 7.5 mg, a non-hormonal treatment agent on
January 13, 2014.
1) Counterparty to the agreement
Shionogi Inc.
2) Agreement details
Co-promotion agreement with Shionogi, Inc. to co-promote Noven Pharmaceuticals’ Brisdelle® Capsule 7.5 mg, an
FDA-approved non-hormonal treatment agent.
3) Compensation
Compensation commensurate with co-promotion performance.

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 patch, in Japan.
3) Compensation
Compensation commensurate with a one-time contract payment and subsequent milestone payments based on
development progress and sales.
HISAMITSU PHARMACEUTICAL CO., INC

9

FINANCIAL REPORT 2015

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 of additional indications for chronic pain of the transdermal
long-acting pain relief patch Fentos® Tape (development code: HFT-290) on June 20, 2014. Phase 3 trials werecommenced for HP-3000 (active pharmaceutical Ingredient: ropinirole hydrochloride), a transdermal patch to treat
Parkinson’s disease. Phase 2 trials of HP-3000 have been completed for the treatment of idiopathic restless legs
syndrome, and we are preparing for phase 3 trials. Regarding HP-3060, a transdermal system for the treatment of allergic
rhinitis, phase 2 trials have been completed and we are preparing for phase 3 trials.
For OTC pharmaceuticals in Japan, we are developing new products and improving existing products for the purpose of
improving effectiveness, safety, and user satisfaction.
For the U.S. ethical pharmaceuticals, we received approval of a new indication with a new dose of Minivelle ®, an
estradiol transdermal system, for prevention of postmenopausal osteoporosis on September 23, 2014. Applications forgeneric approval have been submitted for HP-1010 (active pharmaceutical Ingredient: Lidocaine), a patch to treat postherpetic neuralgia and HP-1030 (active pharmaceutical Ingredient: rivastigmine), a patch to treat dementia of the
Alzheimer’s type. We are preparing for phase 3 trials for ATS (active pharmaceutical Ingredient: d-amphetamine), atransdermal patch to treat Attention Deficit Hyperactivity Disorder. Phase 1 trials for a transdermal patch formulation for thetreatment of schizophrenia (development code: HP-3070) have been completed, and we are preparing for phase 2 trials.
In addition to the development of our own fundamental technologies, we utilize Noven’s transdermal drug 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 ¥13,718 million in FY2/15.

HISAMITSU PHARMACEUTICAL CO., INC

10

FINANCIAL REPORT 2015

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 12 directors (including 2 outside directors) and 4
corporate auditors (including 2 outside corporate auditors) as of May 22, 2015.
In the area of corporate governance, we reduced the number of directors as a way to clarify the responsibilities and authorityof management and speed up decision-making and business execution. But in order to further reinforce and enhance ourmanagement structure in conjunction with the expansion of the organization, we changed the articles of incorporation to increase
the number of directors from 10 or less to 12 or less, at the annual general meeting of shareholders held on May 23, 2013.
Furthermore, we appointed 2 outside directors at the annual general meeting of shareholders held on May 21, 2015 to further
reinforce corporate governance.
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 thatcan 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 and executive
officers, and important resolutions are debated and decided by the board of directors.
As we stated above, we have 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 comprise outside
corporate auditors at the annual general meeting of shareholders held on May 26, 2004.
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 2 outside corporate auditors fromthe company has been ensured and we believe that a structure sufficiently capable of monitoring management has been
established.
Systems to ensure appropriate operations of the corporate group comprising Hisamitsu Pharmaceutical andgroup companies
We have requested group companies to prepare and observe their own rules regarding compliance, equivalent to the Hisamitsu
Corporate Charter, and are making the best efforts to foster the compliance awareness of directors and employees of the Group
as a whole.

HISAMITSU PHARMACEUTICAL CO., INC

11

FINANCIAL REPORT 2015

Corporate Governance and Internal Auditing

We are monitoring the business status of each subsidiary through compliance of the Operation Manuals for Overseas andDomestic Group Corporations, reporting at meetings of the subsidiaries’ presidents and group audit by the Company’s corporate
auditors, and also working on sharing information through exchanging opinions between corporate auditors of the subsidiaries
and the Company.
Directors, executive officers, division managers of the Company and presidents of group companies have authority andresponsibility for establishment and operations of internal control system to ensure appropriate business execution in eachbusiness division.
The Internal Audit Department of the Company carries out internal audits of Hisamitsu Pharmaceutical and group companies,
reports results to relevant business division managers and directors in charge, and provides guidance on improvement
measures for internal control as well as support and advice on their implementation as needed.
Internal auditing and audit by board of corporate auditors
We established the Internal Audit Department (3 persons in charge) as an internal audit division. The Internal Audit Department
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 theboard 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
Although we have not established selection criteria regarding the independence of outside officers, we do select our outside
officers based on the criteria of independence set forth by the Financial Instruments Exchange.
We have entered into agreements, in accordance with Article 427-1 of the Companies Act, with outside directors and outside
corporate auditors to limit their liability for damages to the minimum amount stipulated in Article 425-1 of the Companies Act,
provided that their duties have been carried out in good faith and with no gross negligence.
Our 2 outside directors are ICHIKAWA Isao and FURUKAWA Teijiro. ICHIKAWA Isao has gained overall management
experience and knowledge through his past career experience such as executive vice president and representative director of alisted company. FURUKAWA Teijiro has gained deep insight with regard to our particular business through his experience inimportant positions at the Ministry of Health, Labour and Welfare.
Although FURUKAWA Teijiro concurrently serves as Chairman of Imperial Gift Foundation Boshi-Aiiku-Kai, the company
does not have any special conflict of interests in this Foundation.
Our 2 outside corporate auditors are ONO Keinosuke and TOKUNAGA Tetsuo. ONO Keinosuke has gained scholarly
knowledge related to management through his past career experience such as professor of a graduate school of business.
TOKUNAGA Tetsuo has gained overall management experience and 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.
Although ONO Keinosuke concurrently serves as an outside director of YKK Corporation, a Trustee of Chubu University
Educational Foundation, and Professor Emeritus of Chubu University, the company does not have any special conflict ofinterests in YKK Corporation or Chubu University. Additionally, ONO Keinosuke serves as Professor Emeritus of Keio University
and the company 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 directors andoutside corporate auditors and the company.

HISAMITSU PHARMACEUTICAL CO., INC

12

FINANCIAL REPORT 2015

Corporate Governance and Internal Auditing

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 and head of office: Director)
We prepared the Hisamitsu Corporate Charter in June 2002 and established the Compliance Promotion Committee andCompliance Promotion Office, where the director serves as chair of the committee and head of office, to promote thoroughand ethical compliance. We have distributed handbooks to officers and employees to promote a recognition and sustained
awareness of the importance of compliance, and have worked to ensure 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: Chief Executive Officer (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.
Disclosure Policy Team (Chair: Chief Executive Officer (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 have set up the CSR Committee to progress our environmental and community service programs. Headed by the Cultural
Program and CSR Promoting Department, the CSR Committee is made up of CSR committee members in each businessdivision and engages in CSR programs.

HISAMITSU PHARMACEUTICAL CO., INC

13

FINANCIAL REPORT 2015

Corporate Governance and Internal Auditing

Corporate governance structure
General Meeting of Shareholders
Appoint and remove

Appoint and remove

Appoint and remove

Independent auditor

Corporate Auditors(Operational andaccounting auditing)

Audit

Board of Directors
Directors

Audit

Representative
director

Management Advisory
Council
Directors and Executive Officers
AdviceInternal Audit Department

Committees
Compliance Promotion Committee
Crisis Management Committee
Privacy Protection Committee
Disclosure Policy TeamCSR Committee

Audit

Advising attorneys and other specialists

Board of Corporate
Auditors

Various business divisions and group companies

HISAMITSU PHARMACEUTICAL CO., INC

14

FINANCIAL REPORT 2015

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 2015
Total compensation by type
Category

Total
compensation

Basic
compensation

Stock options

Bonuses

Retirement
benefits

Number of
officers to be paid

Directors (Excluding Outside Directors)

390

273

—

—

117

13

Corporate Auditors (Excluding Outside Corporate Auditors)

53

46

—

—

6

3

Outside Officers

21

19

—

—

1

3

(Thousands of U.S. dollars)
Fiscal 2015
Total compensation by type
Category
Directors (Excluding Outside Directors)

Total
compensation
3,270

Basic
compensation
2,289

Stock options

Bonuses

Retirement
benefits

Number of
officers to be paid

—

—

981

13

Corporate Auditors (Excluding Outside Corporate Auditors)

444

386

—

—

50

3

Outside Officers

176

159

—

—

8

3

b) Total consolidated compensation paid to executive of the filing company(Millions of yen)
Fiscal 2015
Name
(Category of executive)
NAKATOMI, Hirotaka(Chairman & CEO)

Total
consolidated
compensation
155

Total compensation by type
Category ofcompany

Basiccompensation

Stock options

Bonuses

Retirement
benefits

The filingcompany

114

—

—

41

(Thousands of U.S. dollars)
Fiscal 2015
Name
(Category of executive)
NAKATOMI, Hirotaka(Chairman & CEO)

Total
consolidated
compensation
1,300

Total compensation by type
Category ofcompany

Basiccompensation

Stock options

Bonuses

Retirement
benefits

The filingcompany

956

—

—

344

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

HISAMITSU PHARMACEUTICAL CO., INC

15

FINANCIAL REPORT 2015

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

Certified public accountants providing auditing services

KPMG AZSA LLC

Designated limited liability partner and engagement partner

MASUDA Yasushi

Designated limited liability partner and engagement partner

SADA Akihisa

Assisting personnel
5 CPAs & 9 others

Note: A statement on the years of continuous audit service is omitted because all of the above accounting auditors have served less thanseven 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 of shareholders
owning a majority of the voting rights of shareholders capable of executing voting rights.

HISAMITSU PHARMACEUTICAL CO., INC

16

FINANCIAL REPORT 2015

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 2014
Compensation forCompensation
audit certification
for non-auditing
services
services(Thousands of U.S. dollars)
Fiscal 2015

Fiscal 2015

Compensation foraudit certification
services

Compensation
for non-auditing
services

Compensation foraudit certification
services

51

67

428

Compensation
for non-auditing
services
562

52

—

Subsidiaries

4

—

4

—

34

—

Total

56

—

55

67

461

562

2) Breakdown of other important compensation
FY2/14The 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.
FY2/15The 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
FY2/14
Not applicable.
FY2/15The company has entrusted the accounting auditor with financial due diligence support service, etc., that is other than theservices set forth in Article 2-1 of the Certified Public Accountants Act (non-auditing services).
4) Policy on setting compensation for auditing services
Not applicable.

HISAMITSU PHARMACEUTICAL CO., INC

17

FINANCIAL REPORT 2015

Financial Section

Analysis of Financial Position, Operating Results, and Cash Flows(1) Analysis of financial position in Fiscal 2015
1) Assets
Assets totaled ¥285,440 million at the end of FY2/15, an increase of ¥33,587 million from the previous year, due mainly toincreases in short-term investment securities of ¥9,738 million, in notes and accounts receivable — trade of ¥9,494 million,
and in investment securities of ¥5,832 million.
2) Liabilities
Liabilities totaled ¥63,386 million at the end of FY2/15, an increase of ¥7,841 million from the previous year, due mainly to
an increase in electronically recorded obligations — operating of ¥2,297 million, a decrease in income taxes payable of¥3,375 million and an increase in deferred tax liabilities of ¥3,474 million.
3) Net assets
Net assets totaled ¥222,054 million at the end of FY2/15, an increase of ¥25,746 million from the previous year, due mainly
to increases in retained earnings of ¥12,143 million, in valuation difference on available-for-sale securities of ¥6,476 million
and in foreign currency translation adjustment of ¥6,737 million, respectively.

(2) Analysis of operating results in Fiscal 2015
1) Net sales
Net sales grew 4.1% year on year to ¥156,743 million. This increase is due mainly to the strong sales from overseas
subsidiaries.
2) Operating income
Operating income increased 7.3% year on year to ¥20,527 million. This increase is attributable mainly to the rise in net
sales.
3) Ordinary income
Ordinary income decreased 1.5% year on year to ¥28,489 million. This is attributable mainly to the decrease in equity inearnings of affiliates associated with the dissolution of Novogyne Pharmaceuticals.
4) Net income
Net income decreased 12.0% year on year to ¥18,784 million. This decrease is due mainly to the posting of distribution
license fees of ¥5,000 million under extraordinary gain in the previous year. Consequently, net income per share totaled¥219.28 in FY2/15, and return on equity was 9.0%.

HISAMITSU PHARMACEUTICAL CO., INC

18

FINANCIAL REPORT 2015

Financial Section(3) Analysis of cash flows in Fiscal 2015
Cash and cash equivalents at the end of the FY2/15 totaled ¥88,614 million, an increase of ¥10,833 million from the end of
the previous fiscal year.
1) Cash flows from operating activities
Net cash provided by operating activities totaled ¥23,232 million (¥35,845 million provided for of the previous fiscal year),due mainly to income before taxes and minority interests (¥29,416 million), interest and dividends received (¥10,711
million), and income taxes paid (¥13,874 million).
2) Cash flows from investing activities
Net cash used in investing activities totaled ¥8,945 million (¥5,843 million used for of the previous fiscal year), due mainly
to payments for purchase of tangible fixed assets (¥4,691 million) and payments for purchase of investment securities(¥3,867 million).
3) Cash flows from financing activities
Net cash used in financing activities totaled ¥7,036 million (¥6,476 million used for of the previous fiscal year), due mainly
to cash dividends paid (¥6,642 million).

Capital Expenditures
Capital investment totaled 5,556 million in FY2/15.
In the Pharmaceutical segment, we mainly invested in the building and manufacturing equipment, etc. of the Tosu andUtsunomiya Plants and Osaka Branch resulting in capital investment of ¥2,951 million.
In other businesses, we mainly invested to expand bandwidth to provide digital capabilities to our subscribers, resulting
in capital investment of ¥96 million.
In FY2/15, there was no disposal or removal of equipment that could impact production capacity.

HISAMITSU PHARMACEUTICAL CO., INC

19

FINANCIAL REPORT 2015

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 decides on interim dividends.
In FY2/15, we paid a year-end dividend of ¥42.5 per share and an interim dividend of ¥37.5 per share, which makes anannual dividend of ¥80 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 from retained earnings with a record date in Fiscal 2015 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 9, 2014
Board of directors resolution

3,213

37.5

26,939

0.31

3,642

42.5

30,536

0.36

May 21, 2015
General meeting of shareholders resolution

HISAMITSU PHARMACEUTICAL CO., INC

20

FINANCIAL REPORT 2015

Financial Section

Business and Other Risks
The following risks associated with our group’s business activities could have a significant impact on the decisionsof investors.
Any forward-looking statements are based on our judgments at the end of FY2/15.
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

21

FINANCIAL REPORT 2015

Financial Section

Consolidated Balance Sheets
February 28, 2014 and February 28, 2015

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

Fiscal 2014

Fiscal 2015

Fiscal 2015

Cash and deposits

66,307

71,298597,787

Notes and accounts receivable — trade

37,092

46,587

390,601

Short-term investment securities

15,45325,192

211,218

Merchandise and finished goods

9,694

8,762

73,464ASSETS
Current assets:

417

471

3,949

Raw materials and supplies

5,085

6,217

52,125

Deferred tax assets

2,921

3,480

29,177

Other

2,389

3,641

30,527

Allowance for doubtful accounts

(255)

(335)

(2,809)139,107

165,315

1,386,057

Buildings and structures (Notes 2 and 3)

17,735

18,105

151,798

Machinery, equipment and vehicles (Notes 2 and 3)

6,159

7,375

61,834Tools, furniture and fixtures (Notes 2 and 3)

2,320

2,220

18,613

Land (Notes 2 and 4)

12,677

12,843

107,680

Work-in-process

Total current assets
Noncurrent assets
Tangible fixed assets, net:

116

83

696

Construction in progress

4,321

4,374

36,673

Total tangible fixed assets

43,33045,003377,320

Lease assets

Intangible fixed assets:
Distribution right

5,844

4,760

39,909Goodwill

5,280

4,948

41,486

633

1,014

8,502

Other

5,053

5,580

46,785

Total intangible fixed assets

16,812

16,303

136,690

Investment securities (Note 1)

42,947

48,779408,980

Long-term deposits

2,000

159

1,333

Prepaid pension cost

2,822

—

—

SoftwareInvestments and other assets:

—

3,805

31,902

Deferred tax assets

1,239

1,705

14,295

Other

3,811

4,585

38,442

Allowance for doubtful accounts

(218)

(216)

(1,811)

Net defined benefit asset

52,60258,818493,150

Total noncurrent assets

112,745

120,125

1,007,169

TOTAL ASSETS

251,852

285,440

2,393,225

Total investments and other assets

HISAMITSU PHARMACEUTICAL CO., INC

22

FINANCIAL REPORT 2015

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

Fiscal 2014

Fiscal 2015

Fiscal 2015

Notes and accounts payable — trade

8,987

9,928

83,240Electronically recorded obligations — operating

5,625

7,923

66,429

Short-term loans payable (Note 2)

1,677

1,685

14,128LIABILITIESCurrent liabilities:

Lease obligations

112

102

855

Accounts payable

6,656

7,785

65,272

Income taxes payable

7,354

3,978

33,353

180

175

1,467

Allowance for sales returns
Provision for bonuses

1,942

2,249

18,856

Other

9,209

10,47087,784

Total current liabilities

41,74544,299371,418

Long-term loans payable (Note 2)

852

727

6,095

Lease obligations

156

61

511

Deferred tax liabilities on revaluation (Note 4)

1,894

1,894

15,880

Deferred tax liabilities

1,881

5,355

44,898Provision for retirement benefits

5,265

—

—

Provision for directors’ retirement benefits

1,200

1,305

10,942—

5,905

49,510Noncurrent liabilities:

Net defined benefit liability
Other

2,548

3,835

32,154

Total noncurrent liabilities

13,79919,086160,023

55,544

63,386

531,450

Capital stock

8,473

8,473

71,040Capital surplus

8,396

8,396

70,395Retained earnings

187,846

199,990

1,676,784

Treasury stock(21,851)(21,854)(183,231)

Total shareholders’ equity

182,865

195,006

1,634,996

Valuation difference on available-for-sale securities

6,611

13,087

109,726

Revaluation reserve for land (Note 4)

3,459

3,459

29,001

Foreign currency translation adjustment

2,506

9,243

77,496

—

225

1,886

12,57726,016

218,127

865

1,031

8,644

Total net assets

196,308

222,054

1,861,776

TOTAL LIABILITIES AND NET ASSETS

251,852

285,440

2,393,225

Total Liabilities
NET ASSETS
Shareholders’ equity:

Accumulated other comprehensive income:Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Minority interests

HISAMITSU PHARMACEUTICAL CO., INC

23

FINANCIAL REPORT 2015

Financial Section

Consolidated Statements of Income
Years ended February 28, 2014 and February 28, 2015

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

Fiscal 2014

Fiscal 2015

Fiscal 2015

Net sales

150,635

156,743

1,314,186

Cost of sales (Notes 2 and 3)

55,471

57,063

478,435

Gross profit

95,163

99,680835,751

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

76,04079,153

663,646

Operating income

19,123

20,527

172,105

Non-operating income:Interest income

84

104

872

Dividends income

477

519

4,351

Foreign exchange gains

294

597

5,005

Royalty Income

74

47

394

8,456

6,201

51,991

484

591

4,955

9,872

8,062

67,595Interest expenses

34

34

285

Loss on sales of receivables

24

23

193

Other

25

42

352

Total non-operating expenses

85

100

838

28,91028,489238,861

—

30

252
184

Equity in earnings of affiliates
Other
Total non-operating income
Non-operating expenses:

Ordinary income
Extraordinary gain:
Gain on the disposal of fixed assets (Note 4)

108

22

5,000

—

—

—

958

8,032

5,108

1,012

8,485

Loss on disposals of fixed assets (Note 5)

291

24

201

Loss on valuation of investment securities

—

60

503

Total extraordinary loss

291

84

704

Income before taxes and minority interests

33,727

29,416

246,634

Income taxes — current

14,072

10,82490,752

Income taxes — deferred(1,905)(392)(3,287)

Total income taxes

12,166

10,43187,457

Income before minority interests

21,56018,984

159,168

203

200

1,677

21,357

18,784

157,491

Gain on sales of investment securities
Distribution license fees
Gain on transfer of rights of approval for manufacture and commercial sale
Total extraordinary gain
Extraordinary loss:

Minority interests in income
Net income

HISAMITSU PHARMACEUTICAL CO., INC

24

FINANCIAL REPORT 2015

Financial Section

Consolidated Statements of Comprehensive Income
Years ended February 28, 2014 and February 28, 2015

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

Fiscal 2014

Fiscal 2015

Fiscal 2015

21,56018,984

159,168

Valuation difference on available-for-sale securities

4,338

6,475

54,289Foreign currency translation adjustment

6,879

6,424

53,861

Share of other comprehensive income of associates accounted for under the equity method

1,669

359

3,010

Income before minority interests
Other comprehensive income:

Total other comprehensive income (Note 1)
Comprehensive income

12,887

13,259111,168

34,44832,244

270,345

34,26031,998268,282

187

245

2,054

Comprehensive income attributable to:
Owners of the parent
Minority interests

HISAMITSU PHARMACEUTICAL CO., INC

25

FINANCIAL REPORT 2015

Financial Section

Consolidated Statements of Changes in Shareholders’ Equity
Years ended February 28, 2014 and February 28, 2015

(Millions of yen)
Shareholders’ equity

Common stock

Capital surplus

8,473

8,396

Balance as at March 1, 2013

Retainedearnings

Treasury stock

Total
shareholders’equity(21,846)

167,511

172,488

Cash dividends(5,998)(5,998)Net income

21,357

21,357Purchase of treasury stock

(4)

(4)

Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance as at February 28, 2014——

15,358(4)

15,353

8,473

8,396

187,846(21,851)

182,865(Millions of yen)
Accumulated other comprehensive income
Total
Valuation
accumulateddifference on
Foreignotheravailable-for- Revaluation
currency Remeasurementsof definedcomprehensale securi- reserve fortranslation
benefit plansive income
ties:
land
adjustments
Balance as at March 1, 2013

2,175

3,459

(5,961)—(325)

Minority
interests

Total
net assets

747

167,933

Cash dividends(5,998)Net income

21,357Purchase of treasury stock(4)

Net changes of items other than shareholders’ equity

4,435

—

8,467

—

12,903

118

13,021

Total changes of items during the period

4,435

—

8,467

—

12,903

118

28,374

6,611

3,459

2,506

—

12,577865

196,308

Balance as at February 28, 2014

HISAMITSU PHARMACEUTICAL CO., INC

26

FINANCIAL REPORT 2015

Financial Section(Millions of yen)
Shareholders’ equity

Balance as at March 1, 2014

Common stock

Capital surplus

8,473

8,396

Retainedearnings

Treasury stock

Total
shareholders’equity(21,851)

182,865

187,846

Cash dividends(6,641)(6,641)

Net income

18,784

18,784Purchase of treasury stock

(2)

(2)

Net changes of items other than shareholders’ equity——

12,143(2)

12,140

8,473

8,396

199,990(21,854)

195,006

Total changes of items during the period
Balance as at February 28, 2015

(Millions of yen)
Accumulated other comprehensive income
Valuationdifference on
available-for- Revaluation
sale securi- reserve for
ties:
land
Balance as at March 1, 2014

6,611

3,459

Total
accumulated
Foreignothercurrency Remeasurementsof definedcomprehentranslation
benefit plansive income
adjustments
2,506

—

12,577

Minority
interests

Total
net assets

865

196,308

Cash dividends(6,641)

Net income

18,784(2)

Purchase of treasury stock
Net changes of items other than shareholders’ equity

6,476

—

6,737

225

13,439166

13,605

Total changes of items during the period

6,476

—

6,737

225

13,439166

25,746

13,087

3,459

9,243

225

26,016

1,031

222,054

Balance as at February 28, 2015

HISAMITSU PHARMACEUTICAL CO., INC

27

FINANCIAL REPORT 2015

Financial Section(Thousands of U.S. dollars)
Shareholders’ equity

Balance as at March 1, 2014

Common stock

Capital surplus

71,04070,395Retainedearnings

Treasury stock

Total
shareholders’equity(183,206)

1,533.202

1,574,964

Cash dividends(55,680)(55,680)

Net income

157,491

157,491

Purchase of treasury stock

(17)

(17)

Net changes of items other than shareholders’ equity——

101,811(17)

101,786

71,04070,395

1,676,784(183,231)

1,634,996

Total changes of items during the period
Balance as at February 28, 2015

(Thousands of U.S. dollars)
Accumulated other comprehensive income
Valuationdifference on
available-for- Revaluation
sale securi- reserve for
ties:
land
Balance as at March 1, 2014

55,42929,001

Total
accumulated
Foreignothercurrency Remeasurementsof definedcomprehentranslation
sive income
adjustments benefit plan
21,011—

105,450

Minority
interests

Total
net assets

7,252

1,645,913

Cash dividends(55,680)

Net income

157,491(17)

Purchase of treasury stock
Net changes of items other than shareholders’ equity

54,297—56,485

Total changes of items during the period

54,297—56,485

109,726

29,001

77,496

Balance as at February 28, 2015

HISAMITSU PHARMACEUTICAL CO., INC

28

1,886
1,886
1,886

112,677

1,392

114,069

112,677

1,392

215,863

218,127

8,644

1,861,776

FINANCIAL REPORT 2015

Financial Section

Consolidated Statements of Cash Flows
Years ended February 28, 2014 and February 28, 2015

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

Fiscal 2014

Fiscal 2015

Fiscal 2015

Income before taxes and minority interests

33,727

29,416

246,634

Depreciation and amortization

6,619

6,667

55,898

Amortization of goodwill

873

946

7,932

Increase (decrease) in provision for retirement benefits

146

—

—

Cash flows from operating activities:

—

298

2,499

(102)

105

880

Increase (decrease) in provision for bonuses

60

149

1,249

Increase (decrease) in allowance for doubtful accounts

40

69

579

Increase (decrease) in provision for sales returns

(49)

(5)

(42)

Interest and dividends income

(562)

(624)

(5,232)

Interest expenses

34

34

285

Foreign exchange losses (gains)

(23)

(160)

(1,341)(8,456)(6,201)(51,991)

Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for directors’ retirement benefits

Equity in losses (earnings) of affiliates

(108)

(22)

(184)

Loss (gain) on valuation of investment securities

—

60

503

Loss (gain) on disposal of fixed assets

291

(6)

(50)

Decrease (increase) in notes and accounts receivable — trade571(8,506)(71,317)(1,365)

370

3,102

Decrease (increase) in other current assets

(445)

394

3,303

Increase (decrease) in notes and accounts payable — trade

896

2,840

23,812

4,180

418

3,505

540

185

1,551

36,86926,430221,598

12,36010,71189,805

(35)

(34)

(285)

(13,349)(13,874)(116,324)

35,84523,232

194,785

Loss (gain) on sales of investment securities

Decrease (increase) in inventories

Increase (decrease) in other current liabilities
Other, net
Sub-totalInterest and dividends received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities

HISAMITSU PHARMACEUTICAL CO., INC

29

FINANCIAL REPORT 2015

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

Fiscal 2014

Fiscal 2015

Fiscal 2015

Net decrease (increase) in time deposits(315)(1,317)(11,042)

Decrease (increase) in long-term deposits

(500)

(142)

(1,191)(4,089)(4,691)(39,331)

6

117

981

Payments for purchase of intangible fixed assets

(119)

(180)

(1,509)Proceeds from sales of intangible fixed assets

—

292

2,448

(532)

556

4,662

Payments for purchase of investment securities(1,354)(3,867)(32,422)

Proceeds from sales and redemption of investment securities

1,045

279

2,339

14

7

59

(5,843)(8,945)(74,998)

63

20

168

Repayment of long-term loans payable

(243)

(137)

(1,149)Cash dividends paid to minority shareholders

(69)

(79)

(662)

Purchase of treasury stock

(3)

(1)

(8)

(5,998)(6,642)(55,689)

(223)

(194)

(1,627)(6,476)(7,036)(58,992)

Effect of exchange rate changes on cash and cash equivalents

3,394

3,582

30,033

Net increase (decrease) in cash and cash equivalents

26,92010,83390,828Cash and cash equivalents, beginning of year

50,86077,780652,134

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

77,78088,614

742,970

Cash flows from investing activities

Payments for purchase of tangible fixed assets
Proceeds from sales of tangible fixed assets

Decrease (increase) in short-term investment securities

Collection of loans receivable
Net cash used in investing activities
Cash flows from financing activities
Increase (decrease) in short-term loans payable

Cash dividends paid
Other, net
Net cash used in financing activities

HISAMITSU PHARMACEUTICAL CO., INC

30

FINANCIAL REPORT 2015

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).
For the fiscal year under review (from March 1, 2014 to February 28, 2015), pursuant to Article 3, Paragraph 2 of the
Supplementary Provisions of the “Cabinet Office Ordinance Partially Amending the Regulations Concerning the
Terminology, Forms and Preparation Methods of Financial Statements, etc.” (Cabinet Office Ordinance No. 61 dated
September 21, 2012), comparative information included in the consolidated financial statements is prepared in accordancewith the Regulations for Consolidated Financial Statements before the amendment.

Significant Accounting Policies Concerning the Preparation of Consolidated Financial Statements
Fiscal 2015 (March 1, 2014 – February 28, 2015)

1. Scope of consolidation
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. Investments accounted for under the equity method
Equity-method affiliates: 3
SANOFI-HISAMITSU K.K.
Yutoku Pharmaceutical Ind. Co., Ltd.
Maruto Sangyo Co., Ltd.
Novogyne Pharmaceuticals has been excluded from application of the equity method due to its dissolution.

3. 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
HISAMITSU PHARMACEUTICAL CO., INC

31

FINANCIAL REPORT 2015

Financial Section

end of the fiscal years of the consolidated subsidiaries. We make the required consolidated adjustments if any majortransactions occur between the end of the fiscal years of the consolidated subsidiaries and end of the consolidated fiscal year.

4. 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
are computed 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.
2) 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 thestraight-line method.
3) Lease assets
For finance lease transactions other than those for which the right of ownership of the lease assets transfers to thelessee at the end of the lease period, depreciation is calculated by the straight-line method based on the assumptionthat the useful life equals the lease term and the residual value equals zero. The accounting treatment of finance leasetransactions 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 withthat of normal rental transactions.

HISAMITSU PHARMACEUTICAL CO., INC

32

FINANCIAL REPORT 2015

Financial Section(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 gain/loss.
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
to the portion of expected future bonus payments incurred during the term under review.
4) 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.

(4) Accounting method for retirement benefits
The Company and certain subsidiaries, to prepare for the payment of retirement benefits to employees, record a provisionat an amount deemed to arise at the end of the fiscal year under review based on estimated retirement benefit obligations
and pension assets at the end of the consolidated fiscal year.
1) Method of attributing estimated retirement benefits to periods
In the calculation of retirement benefit obligations, estimated retirement benefits are attributed to the periods up to theend of the consolidated fiscal year using the straight-line method.
2) Treatment of actuarial differences
Actuarial differences are amortized starting in the next consolidated fiscal year using the straight-line method over a
fixed number of years (five years) that is less than the average remaining years of service of employees when incurred.
3) Simplified method for small companies
Certain consolidated subsidiaries apply the simplified method to calculate net defined benefit liability and retirement
benefit expenses, where retirement benefit obligations are assumed to be equal to the benefits payable upon thevoluntary retirement of all employees at fiscal year-end.

HISAMITSU PHARMACEUTICAL CO., INC

33

FINANCIAL REPORT 2015

Financial Section(5) Translation of significant foreign currency denominated assets and liabilities
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
consolidated 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 thesetranslation differences are booked on the Foreign Currency Translation Adjustment and Minority Interests under Net
Assets.

(6) 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.

(7) 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.

(8) 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

34

FINANCIAL REPORT 2015

Financial Section

Changes in Accounting Policies(Adoption of the Accounting Standard for Retirement Benefits etc.)
Effective as of the end of the fiscal year under review, the “Accounting Standard for Retirement Benefits” (ASBJ” Statement
No. 26, May 17, 2012; hereinafter the “Retirement Benefits Accounting Standard”) and the “Guidance on AccountingStandard for Retirement Benefits” (ASBJ Guidance No. 25, May 17, 2012; hereinafter the “Retirement Benefits Guidance”)
have been adopted (except for the provisions in the main clause of paragraph 35 of the Retirement Benefits AccountingStandard and the main clause of paragraph 67 of the Retirement Benefits Guidance). The method has been changed torecord retirement benefit obligations after deducting pension assets as net defined benefit liability and accordingly,
unrecognized actuarial differences and unrecognized past service costs have been recorded as net defined benefit liability.
The adoption of the Retirement Benefits Accounting Standard etc. is in accordance with the transitional treatment set
forth in paragraph 37 of the Retirement Benefits Accounting Standard, and the effect of the change in accounting policies
has been added to or deducted from remeasurements of defined benefit plans under accumulated other comprehensive
income.
As a result, net defined benefit asset of ¥3,805 million and net defined benefit liability of ¥5,905 million have beenrecorded at the end of the fiscal year under review. Accumulated other comprehensive income increased ¥225 million.
Net assets per share increased ¥2.63.

Unapplied Accounting Standards, etc.
“Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26; May 17, 2012), and “Guidance on AccountingStandard for Retirement Benefits” (ASBJ Guidance No. 25; May 17, 2012)(1) Outline
With respect to the method of attributing expected retirement benefits to periods, the use of the benefit formula basis inaddition to the straight line basis has become possible, and the calculating method for determining discount rates has
been revised.
(2) Scheduled date of adoption
We plan to adopt them from the beginning of the fiscal year starting on and after March 1, 2015. There is, however,transitional treatment provided in these accounting standards, etc. Therefore, these standards will not be applied
retrospectively to the consolidated financial statements for the past periods.
(3) Impact of adoption of this accounting standard and guidance
The impact of adoption is currently being evaluated in preparing consolidated financial statements.

HISAMITSU PHARMACEUTICAL CO., INC

35

FINANCIAL REPORT 2015

Financial Section

Notes to Consolidated Financial Statements
Fiscal 2014 (March 1, 2013 – February 28, 2014) and Fiscal 2015 (March 1, 2014 – February 28, 2015)

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

Fiscal 2014
11,479Fiscal 2015
4,874

Fiscal 2015
40,865

1,118 (book value)
17 (book value)
150 (book value)
59 (book value)
1,344 (book value)

1,025 (book value)
11(book value)
129 (book value)
59 (book value)
1,225 (book value)

8,594
92
1,082
495
10,271972 (book value)
16 (book value)
150 (book value)
1,138 (book value)892 (book value)
11 (book value)
129 (book value)
1,033 (book value)

7,479
92
1,082
8,661

(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

137
852
989

125
727
852

1,048
6,095
7,143

99
770
870

98
672
770

822
5,634
6,456

(Note 3) Advanced depreciation of government subsidies is ¥5,832 million in both FY2/14 and FY2/15.
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 presented under liabilities as “Deferred tax liabilities on revaluation,” while the net sum after this transfer tothe deferred tax liability account is presented under net assets as “Revaluation reserve for land.”HISAMITSU PHARMACEUTICAL CO., INC

36

FINANCIAL REPORT 2015

Financial Section

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 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
FY2/14 and FY2/15 was ¥3,610 million and ¥3,791 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 2014

Fiscal 2015

Fiscal 2015

Advertising expenses

11,95013,134

110,120

Sales promotion expenses

15,29018,411

154,364

Freightage and packing expenses

2,643

2,644

22,168

38

73

612

Salaries and allowances

10,115

10,893

91,331

Provision for bonuses

1,013

1,074

9,005

Retirement benefit expenses

605

289

2,423

Provision for directors’ retirement benefits

94

121

1,015

Provision of allowance for doubtful accounts

873

946

7,932

Business consignment expenses

2,607

1,749

14,664

Research and development expenses, of which:Amortization of goodwill

13,924

13,718115,016

Provision for bonuses

339

371

3,111

Retirement benefit expenses

168

93

780

(Note 2) General and administrative expenses include research and development expenses of ¥13,924 million and ¥13,718
million in FY2/14 and FY2/15, respectively.
Manufacturing costs do not include research and development expenses.
(Note 3) In FY2/14 and FY2/15, manufacturing costs include provision for bonuses of ¥470 million and ¥446 million andretirement benefit expenses of ¥311 million and ¥156 million, respectively.

HISAMITSU PHARMACEUTICAL CO., INC

37

FINANCIAL REPORT 2015

Financial Section(Note 4) Breakdown of gains on the disposal of fixed assets(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2014

Fiscal 2015

Fiscal 2015

Buildings and structures

—

21

176

Machinery, equipment and vehicles

—

0

0

Tools, furniture and fixtures

—

8

67

Total

—

30

252

(Note 5) Breakdown of losses on the disposal of fixed assets(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2014

Fiscal 2015

Fiscal 2015

Buildings and structures

87

19

159

Machinery, equipment and vehicles

190

4

34

Tools, furniture and fixtures

12

0

0

Lease assets

0

—

—

Software

0

—

—

291

24

201

Loss on retirement

Total

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Note 1) Reclassification adjustments amount and tax effect amount relating to other comprehensive income(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2015

Fiscal 2015

6,577

9,599

80,481

(96)

(0)

(0)

Before tax effect adjustment

6,480

9,598

80,473Tax effect amount(2,142)(3,123)(26,184)

Valuation difference on available-for-sale securities

4,338

6,475

54,289

6,879

6,424

53,861

Fiscal 2014
Valuation difference on available-for-sale securities
Amount arising during fiscal year under review
Reclassification adjustment amount:

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

HISAMITSU PHARMACEUTICAL CO., INC

38

1,669

359

3,010

12,887

13,259111,168

FINANCIAL REPORT 2015

Financial Section

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Fiscal 2014 (March 1, 2013 – February 28, 2014)

1. Shares issued(Shares)

Type of shares

Beginning of fiscal 2014

Increase

Decrease

End of fiscal 2014

Common stock

95,164,895——

95,164,895

2. Treasury shares(Shares)

Type of shares

Beginning of fiscal 2014

Increase

Decrease

End of fiscal 2014

Common stock

9,496,077

949—

9,497,026

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

724 shares
225 shares

3. Dividends(1) Dividends paid
Resolution

Type of shares

Total dividends(Millions of yen)

Dividends per share(Yen)

Record date

May 23, 2013
Annual general meeting ofshareholders

Common stock

2,999

35

February 28, 2013

May 24, 2013

October 9, 2013
Board of Directors meeting

Common stock

2,999

35

August 31, 2013

November 8, 2013

Payment date(2) Dividends with a record date in fiscal 2014 but a payment date in fiscal 2015
Resolution

Type of shares

Source of dividend

Total dividends(Millions of yen)

Dividends per share(Yen)

Record date

Payment date

May 22, 2014
Annual general meeting ofshareholders

Common stock

Retained earnings

3,427

40

February 28, 2014

May 23, 2014

Fiscal 2015 (March 1, 2014 – February 28, 2015)

1. Shares issued(Shares)

Type of shares

Beginning of fiscal 2015

Increase

Decrease

End of fiscal 2015

Common stock

95,164,895——

95,164,895

HISAMITSU PHARMACEUTICAL CO., INC

39

FINANCIAL REPORT 2015

Financial Section

2. Treasury shares(Shares)

Type of shares

Beginning of fiscal 2015

Increase

Decrease

End of fiscal 2015

Common stock

9,497,026

689—

9,497,715

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

395 shares
294 shares

3. Dividends(1) Dividends paid
Resolution

Type of shares

Total dividends(Millions of yen)

Dividends per share(Yen)

Record date

May 22, 2014
Annual general meeting ofshareholders

Common stock

3,427

40

February 28, 2014

May 23, 2014

October 9, 2014
Board of Directors meeting

Common stock

3,213

37.5

August 31, 2014

November 10, 2014

Resolution

Type of shares

Total dividends(Thousands of U.S. dollars)

Dividends per share(U.S. dollars)

Record date

Payment date

May 22, 2014
Annual general meeting ofshareholders

Common stock

28,7330.34

October 9, 2014
Board of Directors meeting

Common stock

26,9390.31

Payment dateFebruary 28, 2014

May 23, 2014

August 31, 2014

November 10, 2014

(2) Dividends with a record date in fiscal 2015 but a payment date in fiscal 2016
Resolution

Type of shares

Source of dividend

Total dividends(Millions of yen)

Dividends per share(Yen)

Record date

Payment date

May 21, 2015
Annual general meeting ofshareholders

Common stock

Retained earnings

3,642

42.5

February 28, 2015

May 22, 2015

Dividends
per share(U.S. dollars)

Record date

Payment date

0.36

February 28, 2015

May 22, 2015

Resolution

Type of shares

Source of dividend

Total dividends(Thousands of
U.S. dollars)

May 21, 2015
Annual general meeting ofshareholders

Common stock

Retained earnings

30,536HISAMITSU PHARMACEUTICAL CO., INC

40

FINANCIAL REPORT 2015

Financial Section

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

Fiscal 2014

Fiscal 2015

Fiscal 2015

Cash and deposits

66,307

71,298597,787

Cash equivalents included in short-term investment securities

13,60922,878

191,817

Total

79,917

94,176789,603

Term deposits longer than three months(2,136)(5,562)(46,634)

Cash and cash equivalents

77,78088,614

742,970

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 in light of the business plan. Temporary cash surpluses are invested in low risk financial assets.
Derivatives are used within the scope 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, thisrisk 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, electronically recorded obligations —operating, accounts payable, and income taxes payable are less than one year. Borrowings are mainly for funding requiredfor corporate acquisitions and capital investment. Although operating payables and borrowings are exposed to liquidity risk,
this risk is managed 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.

HISAMITSU PHARMACEUTICAL CO., INC

41

FINANCIAL REPORT 2015

Financial Section

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 2014 (February 28, 2014)(Millions of yen)
Carrying amountMarket value

Unrealized gain
(loss)(1) Cash and deposits

66,30766,307—(2) Notes and accounts receivable — trade

37,09237,092—Available-for-sale securities

45,92245,922—

Stock of affiliated companies

1,488

764

(724)

2,000

1,996

(3)

152,811

152,083(727)(3) Short-term investment securities and investment securities:(4) Long-term deposits
Total assets(1) Notes and accounts payable — trade

8,987

8,987

—

(2) Electronically recorded obligations — operating

5,625

5,625

—

(3) Short-term loans payable

1,540

1,540

—

(4) Accounts payable

6,656

6,656

—

(5) Income taxes payable

7,354

7,354

—

(6) Long-term loans payable (*)

989

992

2

31,152

31,1552———

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

HISAMITSU PHARMACEUTICAL CO., INC

42

FINANCIAL REPORT 2015

Financial Section

Fiscal 2015 (February 28, 2015)(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

71,29871,298—597,787597,787—(2) Notes and accounts receivable —trade

46,587

46,587—

390,601

390,601—

Available-for-sale securities

68,35868,358—573,137

573,137—

Stock of affiliated companies

1,534

770

(764)

12,862

6,456(6,406)

159

162

2

1,333

1,358

17

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

187,938

187,176(761)

1,575,736

1,569,347(6,380)(1) Notes and accounts payable — trade

9,928

9,928

—

83,24083,240—(2) Electronically recorded obligations —operating

7,923

7,923

—

66,42966,429—(3) Short-term loans payable

1,560

1,560

—

13,08013,080—(4) Accounts payable

7,785

7,785

—

65,272

65,272—(5) Income taxes payable

3,978

3,978

—

33,35333,353

—

852

855

3

7,143

7,169

25

32,02832,032

3

268,534

268,567

25

—

—

—

—

—

—

Total assets(6) Long-term loans payable (*)
Total liabilities
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 their shortterm maturities.
(3) Short-term investment securities and investment securities
MMFs are recorded using book values because market values approximate book values because of 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) Electronically recorded obligations — operating, (3) Short-term loans payable,(4) Accounts payable, and (5) Income taxes payable
These payables are recorded using book values because market values approximate book values because of their shortterm maturities.
(6) 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 approximatebook values as these rates reflect market interest rates over the short-term. For long-term loans payable with fixedinterest rates, market values are determined by discounting the aggregated values of the principal and interest using anassumed interest rate based on the interest rate that would be applied to a new loan of a similar nature.

HISAMITSU PHARMACEUTICAL CO., INC

43

FINANCIAL REPORT 2015

Financial Section

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, 2015

February 28, 2014

February 28, 2015

4,079

10,99034,200

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 2014 (February 28, 2014)(Millions of yen)
Within one
year

One to five
years

Five to ten
years

Cash and deposits

66,307———

Notes and accounts receivable — trade

37,092

—

—

—

1,844

728

—

—

—

2,000

—

—

105,245

2,728

—

—

Over ten years

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

Fiscal 2015 (February 28, 2015)(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

71,298———597,787———

Notes and accounts
receivable — trade46,587———

390,601

—

—

—

2,313

158

—

—

19,393

1,325

—

—

—

159

—

—

—

1,333

—

—

120,199318——

1,007,789

2,666

—

—

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

HISAMITSU PHARMACEUTICAL CO., INC

44

FINANCIAL REPORT 2015

Financial Section

Note 4: Redemption schedule of short-term loans payable and long-term loans payable after the balance sheet dateFiscal 2014 (February 28, 2014)(Millions of yen)
Within one year

One to five years

Five to ten years

Over ten years

Short-term loans payable

1,540

—

—

—

Long-term loans payable

137

346

356

149

1,677

346

356

149

Total

Fiscal 2015 (February 28, 2015)(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

Short-term loans payable

1,560

—

—

—

13,080———Long-term loans payable

125

284

358

84

1,048

2,381

3,002

704

1,685

284

358

84

14,128

2,381

3,002

704

Total

SECURITIES
1. Available-for-sale securities
Fiscal 2014 (February 28, 2014)(Millions of yen)
Category

Carrying amount

Acquisition cost

Difference(1) Stocks

27,264

17,4959,769(2) Bonds———

Carrying amount higher than acquisition cost(3) Other———

Subtotal

27,264

17,495

9,769

2,474

2,726

(251)

Carrying amount lower than acquisition cost(1) Stocks(2) Bonds———(3) Other

16,182

16,182—

Subtotal

18,657

18,908

(251)

Total

45,92236,404

9,517

HISAMITSU PHARMACEUTICAL CO., INC

45

FINANCIAL REPORT 2015

Financial Section

Fiscal 2015 (February 28, 2015)(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

42,20822,965

19,242353,886

192,546

161,331(2) Bonds

—

—

—

—

—

—

(3) Other

—

—

—

—

—

—

Subtotal

42,20822,965

19,242353,886

192,546

161,331

798

925

(126)

6,691

7,756

(1,056)

Carrying amount lower than acquisition cost(1) Stocks(2) Bonds

—

—

—

—

—

—

(3) Other

25,35025,350—212,543

212,543—

Subtotal

26,14926,275(126)219,242

220,298(1,056)

Total

68,35849,241

19,116573,137

412,853

160,275

2. Available-for-sale securities sold during the fiscal year
Fiscal 2014 (March 1, 2013–February 28, 2014)
Because the total amount of gain or loss from sales is not material, this item is not stated.
Fiscal 2015 (March 1, 2014–February 28, 2015)
Because the total amount of gain or loss from sales is not material, this item is not stated.

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.

HISAMITSU PHARMACEUTICAL CO., INC

46

FINANCIAL REPORT 2015

Financial Section

RETIREMENT BENEFITS
Fiscal 2014 (March 1, 2013 – February 28, 2014)

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.

2. Retirement benefit obligations(Millions of yen)(Thousands of U.S. dollars)(1) Retirement benefit obligations(14,059)(2) Pension assets

11,14893,469(3) Subtotal (1) + (2)(2,910)(24,398)

466

3,907

(5) Total (3) + (4)(2,443)(20,483)(6) Prepaid pension costs(2,822)(23,661)(7) Provision for retirement benefits (5) + (6)(5,265)(44,144)(4) Unrecognized actuarial differences(117,875)

3. Retirement benefit costs(Millions of yen)(Thousands of U.S. dollars)(1) Service costs

597

5,005

(2) Interest costs

239

2,004

(3) Expected return on plan assets(288)(2,415)(4) Amortization of actuarial differences

536

4,494

1,085

9,097

(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 in “(1) Service
costs.”

4. Basis for calculating retirement benefit obligations(1) Allocation of expected retirement benefits
Straight-line method(2) Discount rate				1.30%
2.90%(3) Expected return on plan assets		
(4) 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.)
HISAMITSU PHARMACEUTICAL CO., INC

47

FINANCIAL REPORT 2015

Financial Section

Fiscal 2015 (March 1, 2014 – February 28, 2015)

1. Overview of retirement benefit plans
The Company and consolidated subsidiaries have adopted funded and unfunded defined benefit plans, in order to prepare
for the payment of retirement benefits to employees.
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.
For lump sum retirement allowance system of consolidated subsidiaries, net defined benefit liability and retirement benefits
expenses are calculated using the simplified method.

2. Defined benefit plans(1) Reconciliation of beginning and ending balances of retirement benefit obligations(Millions of yen)(Thousands of U.S. dollars)

14,059117,875

Service costs

717

6,012

Interest costs

179

1,501

Actuarial differences incurred

(37)

(310)

Payment of retirement benefits(436)(3,656)

Beginning balance of retirement benefit obligations

Other
Ending balance of retirement benefit obligations

(7)

(59)

14,474

121,355(2) Reconciliation of beginning and ending balances of pension assets(Millions of yen)(Thousands of U.S. dollars)

Beginning balance of pension assets

11,14893,469

Expected return on plan assets

323

2,708

Actuarial differences incurred

809

6,783

Employer contributions

341

2,859

Payment of retirement benefits(249)(2,088)Ending balance of pension assets

12,374

103,748

HISAMITSU PHARMACEUTICAL CO., INC

48

FINANCIAL REPORT 2015

Financial Section(3) Reconciliation of ending balance of retirement benefit obligations and pension assets with net defined benefit liability
and net defined benefit asset recorded in the consolidated balance sheets(Millions of yen)(Thousands of U.S. dollars)

8,568

71,837(12,374)(103,748)(3,805)(31,902)

Retirement benefit obligations for unfunded plans

5,905

49,510Net amount of liabilities and assets in consolidated balance sheets

2,100

17,607

Net defined benefit liability

5,905

49,510Net defined benefit asset(3,805)(31,902)

Net amount of liabilities and assets in consolidated balance sheets

2,100

17,607Retirement benefit obligations for funded plans
Pension assets(4) Breakdown of retirement benefit expenses(Millions of yen)(Thousands of U.S. dollars)

717

Service costs

6,012

Interest costs

179

1,501

Expected return on plan assets(323)(2,708)

Amortization of actuarial differences

(33)

(277)

Retirement benefit expenses for defined benefit plans

539

4,519

(5) Remeasurements of defined benefit plans
Items recorded in remeasurements of defined benefit plans (before related tax effects) are as follows:(Millions of yen)(347)

Unrecognized actuarial differences(Thousands of U.S. dollars)(2,909)(6) Pension assets
1) Breakdown by main items of pension assets
The proportions of main items to the total pension assets are as follows:
Bonds
53%
34%
StocksGeneral account
9%
4%
Other
Total
100%
2) Long-term expected rate of return on plan assets
Long-term expected rate of return on plan assets is determined considering the current and projected pension asset
allocations and the current and future long-term return rates expected from various assets that compose pension assets.
(7) Basis for actuarial calculation
Discount rateLong-term expected rate of return on plan assets

HISAMITSU PHARMACEUTICAL CO., INC

1.3%
2.9%

49

FINANCIAL REPORT 2015

Financial Section

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

Fiscal 2014

Fiscal 2015

Fiscal 2015

1,846

—

Net defined benefit liability

—

1,953

16,375

Provision for directors’ retirement benefits

423

460

3,857

Accrued enterprise tax

340

255

2,138

Allowance for doubtful accounts

252

180

1,509

Inventories

217

169

1,417

Excess depreciation

539

568

4,762

Intangible fixed assets

2,381

2,224

18,647

Valuation losses on memberships

248

216

1,811

Loss on valuation of investment securities

892

913

7,655

Provision for bonuses

372

784

6,573

Outsourced research and development

877

431

3,614

Deferred tax assets:
Provision for retirement benefits

Other

2,402

5,157

43,238Sub-total deferred tax assets

10,793

13,315

111,637

Valuation allowance(2,993)(3,023)(25,346)

Total deferred tax assets

7,800

10,291

86,283

Stock and investments in affiliated companies

(835)

—

—

Prepaid pension costs

(998)

—

—

Deferred tax liabilities:

Net defined benefit asset
Valuation difference on available-for-sale securities
Other
Total deferred tax liabilities
Net deferred tax assets—(1,107)(9,281)(3,153)(6,276)(52,620)(532)(3,078)(25,807)(5,519)(10,462)(87,717)

2,280

(170)

(1,425)

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 2014

Fiscal 2015

Fiscal 2015

Current assets; deferred tax assets

2,921

3,480

29,177

Noncurrent assets; deferred tax assets

1,239

1,705

14,295

Noncurrent liabilities; deferred tax liabilities(1,881)(5,355)(44,898)

HISAMITSU PHARMACEUTICAL CO., INC

50

FINANCIAL REPORT 2015

Financial Section(Changes in presentation)“Valuation difference on available-for-sale securities,” which was included in “Other” under deferred tax liabilities in the previous year,
is separately presented in the fiscal year under review because it has become significant in terms of amount. To reflect this change
in presentation, reclassification has been made for notes for the previous year.
As a result, ¥3,153 million presented as “Other” under deferred tax liabilities for the previous year has been reclassified as“Valuation difference on available-for-sale securities.”

2.	Breakdown by main items that caused major differences in statutory tax rate and income tax rate
after application of tax effect accounting
Fiscal 2014
(February 28, 2014)—

Statutory tax rate

Fiscal 2015
(February 28, 2015)
37.8%(Reconciliation)
Non-deductible expenses, such as entertainment expenses

—

1.1%

Non-taxable income, such as dividend income—(0.5)%

Special tax exemption for experimental research and development—(3.6)%

Amortization of goodwill

—

1.2%

Valuation allowance

—

0.1%

Other

—

(0.6)%—

35.5%

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 effect accounting is lessthan five per cent of the statutory tax rate, notes for Fiscal 2014 are omitted.

3.	Revisions to the amount of deferred tax assets and deferred tax liabilities due to changes in therate of income taxes
With the promulgation on March 31, 2014 of the “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 10,2014), the Special Corporation Tax for Reconstruction has no longer been imposed from the fiscal year beginning on andafter April 1, 2014. In accordance with this Act, the statutory tax rate used for the calculation of deferred tax assets anddeferred tax liabilities has been changed from the 37.8% applicable hitherto to 35.4%, for the temporary differences likely
to be eliminated in the fiscal year beginning on March 1, 2015.
The impact of this change in tax rate is minor.

4. Changes in the rate of income taxes after the balance sheet dateWith the promulgation on March 31, 2015 of the “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 9, 2015)
and “Act for Partial Amendment of the Local Tax Act, etc.” (Act No. 2, 2015), the income tax rate and corporate enterprisetax rate will be changed from the fiscal year beginning on and after April 1, 2015. In accordance with these Acts, thestatutory tax rate used for the calculation of deferred tax assets and deferred tax liabilities will be changed from the
35.4% applicable hitherto to 32.8% for temporary differences expected to be eliminated in the fiscal year beginning on
March 1, 2016, and to 32.1% for temporary differences expected to be eliminated in the fiscal year beginning on and after
March 1, 2017.
The impact of this change in tax rates is minor.

HISAMITSU PHARMACEUTICAL CO., INC

51

FINANCIAL REPORT 2015

Financial Section

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 salesof 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 byreportable segment
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 reportable segment
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.

HISAMITSU PHARMACEUTICAL CO., INC

52

FINANCIAL REPORT 2015

Financial Section

RELATED INFORMATION
Fiscal 2014 (March 1, 2013 – February 28, 2014)

1. Information by product/service segment
This information is not stated, as net sales to external customers in single product/service segment accounts for morethan 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

119,497

19,67011,467

150,635

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

33,763

7,129

2,436

43,3303. Information by significant customer(Millions of yen)
Name of customers

Net sales

Related segment

Alfresa Holdings Corporation

26,132

Pharmaceuticals

Medipal Holdings Corporation

25,980

Pharmaceuticals

Fiscal 2015 (March 1, 2014 – February 28, 2015)

1. Information by product/service segment
This information is not stated, as net sales to external customers in single product/service segment accounts for morethan 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

114,90228,92912,911

156,743

Japan

North America

Other

Total

963,377

242,551

108,250

1,314,186(Thousands of U.S. dollars)Note: Net sales are segmented into countries or territories according to the location of the customer.

HISAMITSU PHARMACEUTICAL CO., INC

53

FINANCIAL REPORT 2015

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

North America

Other

Total

34,003

7,665

3,334

45,003

Japan

North America

Other

Total

285,093

64,266

27,953377,320(Thousands of U.S. dollars)

3. Information by significant customer
Name of customers(Millions of yen)(Thousands of U.S. dollars)

Net sales

Net sales

Related segment

Medipal Holdings Corporation

25,305

212,166

Pharmaceuticals

Alfresa Holdings Corporation

24,628206,489

Pharmaceuticals

Information on the impairment loss of noncurrent assets by reportable segment
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
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
Because the reportable segment of the Company is “Pharmaceuticals” only, this item is not stated.

HISAMITSU PHARMACEUTICAL CO., INC

54

FINANCIAL REPORT 2015

Financial Section

RELATED PARTY INFORMATION
Fiscal 2014 (March 1, 2013 – February 28, 2014)

1. Transactions with related parties
Affiliated companies, etc.
Type

Name of company, etc.

Location

Capital or investment(Millions of yen)

Business activities or
occupation

Holding (held) of voting
rights, etc. (%)

Affiliate

Yutoku PharmaceuticalInd. Co., Ltd.

Kashima, Saga

120

Pharmaceuticals

Holding Direct
15.0

Description oftransaction

Amount of transaction(Millions of yen)

Item

Balance at end of the
fiscal year
(Millions of yen)

Selling of products

8,965

Accounts receivable-trade

2,920

Purchase ofmerchandise

10

Electronically recorded
obligations-operating1

Accounts payable-trade0

Relationship with related
party
Selling of products
Purchase of merchandiseInterlocking of executives

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.

2. Notes to parent entities or significant affiliated companies
Summarized financial statements of significant affiliated companies
For FY2/14, the significant affiliated company is Novogyne Pharmaceuticals and its summarized financial statement is
as follows.
(Millions of yen)
Total current assets

9,320

Total noncurrent assets

203

Total current liabilities

1,651

Total net assets

7,873

Net sales

29,649

Income before income taxes

25,092HISAMITSU PHARMACEUTICAL CO., INC

55

FINANCIAL REPORT 2015

Financial Section

Fiscal 2015 (March 1, 2014 – February 28, 2015)

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

Capital or investment(Thousands ofBusiness activities orHolding (held) of
U.S. dollars)
occupation
voting rights, etc. (%)
1,006

Amount oftransaction(Thousands of
U.S. dollars)

Relationship withrelated party

Description oftransaction

Amount oftransaction(Millions of yen)

Selling of products

Selling of products

7,819

65,557Purchase ofmerchandise

484

4,058

Purchase ofmerchandise

Pharmaceuticals

Holding
Direct15.0

Balance at end of
the fiscal year
(Millions of yen)

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

Accounts
receivable-trade

2,556

21,430Electronicallyrecorded obligationsoperating

194

1,627

Accounts
payable-trade

58

486

Item

Interlocking ofexecutives

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.

2. Notes to parent entities or significant affiliated companies
Not applicable.

HISAMITSU PHARMACEUTICAL CO., INC

56

FINANCIAL REPORT 2015

Financial Section

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

Fiscal 2014

Fiscal 2015

Fiscal 2015

Net assets per share

2,281.40

2,580.02

21.63

Net income per share

249.30219.28

1.84

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 2014

Fiscal 2015

Fiscal 2015

Total net assets in the consolidated balance sheets

196,308

222,054

1,861,776

Net assets attributable to common shareholders

195,442

221,022

1,853,123

865

1,031

8,644

Common stock issued (Thousands of shares)

95,164

95,164—

Common stock held in treasury (Thousands of shares)

9,497

9,497

—

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

85,66785,667—Main differences
Minority interests

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

Fiscal 2014

Fiscal 2015

Fiscal 2015

21,357

18,784

157,491

Amount not attributable to common shareholders

—

—

—

Net income attributable to common shareholders

21,357

18,784

157,491

Average common stock during year (Thousands of shares)

85,66885,667—

Net income

SIGNIFICANT SUBSEQUENT EVENTS(Abolition of directors’ retirement benefit payment system and introduction of stock options as compensation)
The Company, at the board of directors meeting held on April 8, 2015 and the 113th annual general meeting ofshareholders held on May 21, 2015, reviewed the directors’ compensation system and resolved to abolish the directors’
retirement benefit payment system and introduce stock options as compensation for the Company’s directors (excluding
outside directors).
More details about the stock option system are provided in “Corporate Information, Stock Information, (8) Details ofstock option system.”

HISAMITSU PHARMACEUTICAL CO., INC

57

FINANCIAL REPORT 2015

Financial Section

Supplementary Schedule
Supplementary schedule of bonds payableNot applicable.

Supplementary schedule of loans payable(Millions of yen)(Thousands of U.S. dollars)(%)

Balance at the beginning Balance at the end Balance at the beginning Balance at the endof Fiscal 2015of Fiscal 2015of Fiscal 2015of Fiscal 2015
Average interest rate

Category
Short-term loans

1,560

12,912

13,080

0.58

—

137

125

1,149

1,048

0.68

—

112

102

939

855

—

—

852

727

7,143

6,095

1.08

156

61

1,308

511

—

March 2016 to
March 2026
March 2016 to
October 2019

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

—

—

—

—

—

—

2,798

2,577

23,45921,606——

Other interest-bearing liabilities
Total

Due date

1,540

Notes: 1. Average interest rate is the weighted average interest rate for the year-end balances of loans, etc.
2. Current portion of long-term loans include ¥46 million in interest free loans from the Development Bank ofJapan 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. Long-term loans (excluding current portion) include ¥7 million in interest free loans from the Development Bank ofJapan 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)
Category

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

78

71

71

63

Lease obligations

28

17

9

6

(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

654

595

595

528

Lease obligations

235

143

75

50

Category

HISAMITSU PHARMACEUTICAL CO., INC

58

FINANCIAL REPORT 2015

Financial Section

Supplementary schedule of asset retirement obligations
The supplementary schedule of asset retirement obligations is not stated because the amounts of asset retirement
obligations at the beginning and the end of the fiscal year under review were not more than 1/100 of the total amounts ofliabilities and net assets at the beginning and the end of the fiscal year under review.

Other
Quarterly consolidated financial information for Fiscal 2015
(Millions of yen)Three months ended
May 31, 2014

Six months ended
August 31, 2014

Nine months ended
November 30, 2014

Fiscal 2015

Net sales

37,756

77,052

114,940

156,743

Income before taxes andminority interests

6,649

15,582

23,472

29,416

Net income

3,998

9,574

14,476

18,784

Net income per share (yen)46.68

111.76168.98219.28(Cumulative)(Thousands of U.S. dollars)
Three months ended
May 31, 2014

Six months ended
August 31, 2014

Nine months ended
November 30, 2014

Fiscal 2015

Net sales

316,559

646,030

963,696

1,314,186

Income before taxes andminority interests

55,747

130,645

196,797

246,634

Net income

33,52180,272

121,372

157,491

0.39

0.94

1.42

1.84

(Cumulative)

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

Second quarter

Third quarter

Fourth quarter

46.68

65.08

57.22

50.30

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

HISAMITSU PHARMACEUTICAL CO., INC

First quarter

Second quarter

Third quarter

Fourth quarter

0.39

0.55

0.48

0.42

59

FINANCIAL REPORT 2015

Corporate Information

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

Total authorized shares(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 year end Fiscal 2015
(February 28, 2015)

Shares issued on
filing date
(May 22, 2015)

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—

71,040(51,337)

17,758

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

60

FINANCIAL REPORT 2015

Corporate Information(6) Details of shareholders
As of February 28, 2015
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)

—

59

24

195

343

3

5,939

6,563

—

Shares owned(units)—441,047

14,730185,458

120,3416

189,620951,20244,695

Ratio (%)

—

46.37

1.55

19.50

12.65

0.00

19.93

100.00—Note: Treasury stock of 9,470,490 are listed as 94,704 units in the individuals and other column and as 90 sharesin the shares under one unit column. The 9,470,490 treasury share figure is the number of shares listed in theshareholder registry.

HISAMITSU PHARMACEUTICAL CO., INC

61

FINANCIAL REPORT 2015

Corporate Information(7) Principal shareholders
As of February 28, 2015
Percentage ofShares owned
shares outstanding(thousand shares)
(%)

Name

Address

Japan Trustee Service Bank, Ltd. (trust account)

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

5,927

6.23

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

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

4,318

4.54

Nippon Life Insurance Company

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

3,910

4.11

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

2,956

3.11

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

Hisamitsu Business Partners’ Shareholding
Association

408 Tashiro Daikan-machi, Tosu-shi Saga

1,973

2.07

TKY

1-12-3 Sasayama-machi, Kurume-shi, Fukuoka

1,834

1.93

35,611

37.42

Total

Notes: 1. The number of the foregoing shares related to fiduciary services is as follows.
Japan Trustee Service Bank, Ltd.: 12,361 thousand shares
The Nomura Trust and Banking Co., Ltd.: 4,387 thousand shares
The Master Trust Bank of Japan, Ltd.: 4,318 thousand shares
2. In addition to the shares listed above, the company owns treasury stock of 9,470 thousand shares (9.95%).

HISAMITSU PHARMACEUTICAL CO., INC

62

FINANCIAL REPORT 2015

(8) Details of stock option system
It was resolved at the 113th annual general meeting of shareholders held on May 21, 2015 that the Company awards stock
options as compensation for the Company’s directors (excluding outside directors) in accordance with Article 361 of theCompanies Act, accompanying the abolishment of the directors’ retirement benefit payment system.
The description of the relevant system is as follows.
Resolution date

May 21, 2015

Classification and number of persons to be granted
Class of shares to be issued upon exercise of subscription
rights to shares

10 directors of the Company (excluding outside directors)
Common stock

Number of shares

The maximum number of subscription rights to shares to be
allotted on the date within one year after the date of theannual general meeting of shareholders of the Company ineach fiscal year shall be 1,000. Number of shares to beissued upon exercise of each subscription right is shall be
100 shares per subscription right.

Cash payment upon exercise of subscription rights toshares

The amount of assets to be contributed upon exercise ofeach subscription right shall be determined by multiplying
the exercise price by the number of shares granted, where
the exercise price is set to be ¥1 per share to be granted
through exercise of each relevant subscription right.

Exercise period of subscription rights to shares

The exercise period shall be a period determined by theboard of directors of the Company within 50 years from the
day following the day of the allotment of the subscription
rights.

Conditions for exercise of subscription rights to shares

In principle, the holder of a subscription right to shares may
exercise the right from the day following the day he/sheloses the position as a director of the Company. Other
conditions regarding the exercise of subscription rights toshares shall be determined by the board of directors of theCompany.

Matters concerning transfer of subscription rights to shares

Acquisition of subscription rights to shares by transfer issubject to approval by the board of directors of theCompany.

Matters concerning substitute payment
Matters concerning issuance of subscription rights to sharesaccompanying organizational restructuring——

Notes: If the Company’s common stocks undergo any stock splits (including a gratis allotment of common stocks of theCompany) or reverse stock splits, the number of shares granted shall be adjusted according to the following formula,and fractions less than one share resulting from this adjustment shall be rounded down.
Number of shares granted after adjustment =Number of shares granted before adjustment×Ratio of stock split or reverse stock split
Furthermore, in addition to the above, if adjustment of the number of shares granted is necessary due to theCompany undergoing a merger, company split or other similar event after the resolution date, the Company may
appropriately adjust the number of shares granted within a reasonable scope.

HISAMITSU PHARMACEUTICAL CO., INC

63

FINANCIAL REPORT 2015

Corporate Information(9) 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

64

FINANCIAL REPORT 2015

Corporate Information

Group Companies
Our corporate group comprises Hisamitsu Pharmaceutical, 17 consolidated subsidiaries, and 4 equity-method affiliates.
Relationship
Concurrent employees

Name

Location

Capital orinvestment

Main businessactivities

Votingrights(%)

Hisamitsu Hisamitsu
Capitalofficers employees support from
(Persons) (Persons)
Hisamitsu Business transactions

Other

Remarks

Consolidated subsidiaries
CRCC Media Co., Ltd.

Kurume,Fukuoka¥1,115 million Other businesses

69.50

3

1

Debt
guarantees——

Saga City-Vision Co.,Ltd.

Saga, Saga

¥605 million Other businesses

70.12

2

1

Debt
guarantees——

Taiyo Co., Ltd.

Tosu, Saga

¥50 million Other businesses

100

2

2

—

Agent for casualty
insurance contracts
for Hisamitsu

Hisamitsu
leases land

Kyudo Co., Ltd.

Tosu, Saga

¥10 million Other businesses

100

2

1

—

Provide laboratory
animals and equipment to Hisamitsu

Hisamitsu
leases land
& buildings

Hisamitsu Agency Co.,
Ltd.

Kurume,Fukuoka¥25 million Other businesses

100
(100)

1

1

—

Provide advertising
agency services to
Hisamitsu

Hisamitsu
leases partof a leasebuilding

Hisamitsu U.S., Inc.

DelawareUSA

USD Pharmaceuticals
10

100

1

—

—

—

—

Hisamitsu America, Inc.

New Jersey,
USD Pharmaceuticals
3,000 thousands
USA

100
(100)

1

1

Working
Selling products—
capital loans supplied by Hisamitsu

USD Pharmaceuticals
10

100
(100)

2

—

Working
Hisamitsu outsources —capital loans development

Note 3

BRL Pharmaceuticals
15 million

100

—

3

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

Note 3

GBP Pharmaceuticals
120 thousands

100

1

1

—

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

VND Pharmaceuticals
258,775 million

100

—

3

Working
Manufacture and sell —capital loans 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

2

2

—

PT. Hisamitsu PharmaIndonesia

Surabaya,Indonesia

IDR Pharmaceuticals
32,518 million

75

1

2

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

4 other companies

—

— —

—

—

—

—

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

Manaus,BrazilHisamitsu UK Ltd.

London, UK

HISAMITSU PHARMACEUTICAL CO., INC

65

Note 3Note 3

Hisamitsu outsources —development
Note 3

Hisamitsu outsources —medical marketing——

FINANCIAL REPORT 2015

Corporate Information

Relationship
Concurrent employees

Name

Location

Capital orinvestment

Main businessactivities

Votingrights(%)

Hisamitsu Hisamitsu
Capitalofficers employees support from
(Persons) (Persons)
Hisamitsu Business transactions

Other

Remarks

Equity-method affiliates
Sanofi-Hisamitsu K.K.

Shinjuku
Tokyo¥250 million Pharmaceuticals

49.0

1

2

—

Yutoku PharmaceuticalInd. Co., Ltd.

Kashima,Saga¥120 million Pharmaceuticals

15.0

2

—

—

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

39.9

1

2

—

Supplies—
merchandise to
Hisamitsu
Manufacture and sell—
products with someproducts supplied by
Hisamitsu, supply merchandise 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. Net sales of Noven Pharmaceuticals, Inc. (excluding internal sales among consolidated subsidiaries) accounted
for more than 10% of consolidated sales and key earnings information is as follows. Noven Pharmaceuticals, Inc.
prepares financial statements on a consolidated basis and thus the information below is also presented on a consolidated basis.
Key earnings information(1) Net sales(2) Ordinary loss(3) Net loss(4) Net assets(5) Total assets

HISAMITSU PHARMACEUTICAL CO., INC(Millions of yen)
24,892
1,593
893
65,17449,062

66(Thousands of U.S. dollars)
208,703
13,356
7,487
546,441
411,352

FINANCIAL REPORT 2015

Corporate Information

Management
Chairman & CEO

NAKATOMI Hirotaka

Standing Corporate Auditor

NAKATOMI Nobuyuki

President & COO

NAKATOMI KazuhideStanding Corporate Auditor

HIRANO MunehikoSenior Managing Director

SUGIYAMA Kousuke

Corporate Auditor

ONO Keinosuke

Managing Director

AKIYAMA Tetsuo

Corporate Auditor

TOKUNAGA Tetsuo

Managing Director

HIGO Naruhito

Director

TSURUDA Toshiaki

Director

TAKAO Shinichiro

Director

SAITO Kyu

Director

TSUTSUMI Nobuo

Director

MURAYAMA Shinichi

Director

ICHIKAWA Isao

Director

FURUKAWA Teijiro
Notes: 1. NAKATOMI Kazuhide, President & COO, is the first son of NAKATOMI Hirotaka, Chairman & CEO.
2. NAKATOMI Nobuyuki, Standing Corporate Auditor, is the younger brother of NAKATOMI Hirotaka, Chairman& CEO.
3. Directors ICHIKAWA Isao and FURUKAWA Teijiro are Outside Directors.
4. Corporate Auditors ONO Keinosuke and TOKUNAGA Tetsuo are Outside Corporate Auditors.

Company Profile
Company name
FoundedEstablished
Head officeHisamitsu Pharmaceutical Co., Inc.
1847
May 22, 1944
408 Tashiro Daikan-machi, Tosu, Saga

Representative
Capital

NAKATOMI, Hirotaka, Chairman & CEO¥8,473,839,816

Fiscal year
Number of employees

March 1–End of February(As of February 28, 2015)

Business segment
Pharmaceuticals
Other businesses
Total

Employees
2,793 (575)149 (51)
2,942 (626)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 employees column.

HISAMITSU PHARMACEUTICAL CO., INC

67

FINANCIAL REPORT 2015

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