Company Mission
Promoting
Patch Treatment Culture
Worldwide“To bring the benefits of patch treatment to the world”“To convey the surprise, relief, and moving of patches”
We have placed our hopes and dreams in the word, “Salonpathy®” , and havebeen using our world-class transdermal treatment systems to develop pain
relieving and anti-inflammation products, introducing them globally, andcontributing to personal health all over the world.
To meet the people’s need for a “healthy, safe, and comfortable livelihood” ,we will concentrate and specialize in creating new medicinal products andformulations based on transdermal drug delivery systems (TDDS), the core of
our competitive strength. We set “improving quality of life of people around theworld” as our basic principle and will make the best effort to expand ourbusiness operations worldwide. Our mission is to “bring patch culture to theworld” .

Forward-looking statements:
Statements in this financial report concerning current plans, forecasts, strategies, beliefs, and other forward-looking
information related to Hisamitsu Pharmaceutical Co., Inc., other than those of historical fact, are forecasts of futurebusiness performance based on the judgments of management at Hisamitsu Pharmaceutical Co., Inc. 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 ¥110.87=U.S.$1.00, theapproximate rate of exchange on February 28, 2019.

Contents
Consolidated Financial Highlights
To Our Investors
Overview of Operations
Corporate Governance and Internal Auditing
Financial Section:
Dividend Policy
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity

HISAMITSU PHARMACEUTICAL CO., INC.

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2
3
11
18
19
21
22
23

Consolidated Statements of Cash Flows
Basis of Preparation of Consolidated Financial Statements
Significant Accounting Policies Concerning the Preparation ofConsolidated Financial Statements
Unapplied Accounting Standards, etc.
Changes in Presentation Methods
Notes to Consolidated Financial Statements
Supplementary Schedule
Corporate Information

26
28
28
32
32
33
56
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FINANCIAL REPORT 2019

Consolidated Financial Highlights
Years ended the last day of February(Thousands of
U.S. dollars)(Millions of yen)
Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2019

Net sales

156,791

161,895

145,962

148,466

143,408

1,293,479

Operating profit

20,574

27,774

26,343

26,94022,278200,938

Ordinary profit

28,48928,00828,17928,24524,647

222,305

Profit attributable to owners of parent

18,784

17,784

20,395

19,11919,204

173,212Comprehensive income

32,244

15,29921,15622,852

15,969144,034

Net assets

222,054226,095

229,205

245,227

248,161

2,238,306

Total assets

285,440

284,954

278,820299,913

297,5122,683,431

Net assets per share (yen and dollars)

2,580.02

2,657.41

2,724.00

2,912.83

2,981.63

26.89

219.28208.81241.27228.52230.082.08—

208.76241.15228.35229.86

2.07

Shareholders’ equity ratio (%)

77.4

79.0

81.7

81.3

82.8

—

Return on equity (ROE) (%)

9.0

8.0

9.0

8.1

7.8

—

Price-earnings ratio (PER) (times)

20.4

23.6

25.0

33.9

23.9

—

Net cash provided by operating activities

23,23230,923

19,91030,453

15,772

142,257

Net cash (used in) provided by investing activities(8,945)(3,912)

1,070(1,378)(39,302)(354,487)

Net cash used in financing activities(7,036)(11,616)(18,402)(7,153)(13,347)(120,384)

Cash and cash equivalents at end of period

88,614

103,940

105,610

126,569

88,782

800,776

Number of employees[average temporary staff]

2,942
[626]

2,900
[583]

2,751
[630]

2,823
[899]

2,792
[636]

—
[—]

Profit per share (yen and dollars)
Diluted profit per share (yen and dollars)

Notes: 1. Net sales do not include consumption tax.
2. Diluted profit per share for fiscal 2015 is not listed due to the absence of residual securities.
3. “Royalty income,” which had previously been presented under non-operating income, has been included in and presented under “Net sales”
starting from the fiscal year under review. The amount during and before fiscal 2018 reflect this change in presentation method.

HISAMITSU PHARMACEUTICAL CO., INC.

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FINANCIAL REPORT 2019

To Our Investors

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 117th fiscal year (from March 1, 2018
to February 28, 2019).
Ethical pharmaceuticals in the domestic market posted adecrease in revenue, as our mainstay product, MOHRUS®
TAPE, was affected by government measures to control
medical costs. In the OTC pharmaceuticals business, sales
increased mainly for our mainstay product, Salonpas®, andFeitas® series, as well as Allegra® FX.
In overseas markets, ethical pharmaceuticals suffered adecrease in revenue due to the impact of generic drug sales.
The OTC pharmaceuticals business posted an increase inrevenue thanks to the increase in sales of Salonpas® andother products.
The Company continues to enhance its profile overseas,
as Euromonitor International certified Salonpas ® for thesecond consecutive year as the worldwide leading brand interms of share of sales in the category of pain relief and antiinflammatory patches in the OTC pharmaceuticals market,
and Hisamitsu Pharmaceutical as the worldwide leading
company in terms of share of sales. In the United States as
well, the Salonpas® brand won the top share of sales in the
OTC pharmaceutical pain relief and anti-inflammatory patch
market.
These business activities led to consolidated results asfollows. Net sales decreased 3.4% year on year to ¥143,408
million, operating profit decreased 17.3% year on year to¥22,278 million, ordinary profit decreased 12.7% year on yearto ¥24,647 million, and profit attributable to owners of parent
increased 0.4% year on year to ¥19,204 million.
We ask for our investors’ continued support andencouragement.

Medical Products

Products for Oversea Markets

NAKATOMI, Hirotaka
Chairman
NAKATOMI, Kazuhide
President & CEO

Over the Counter Products

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FINANCIAL REPORT 2019

Overview of Operations

Management Policy, Business Environment, Key Challenges, etc.
Any forward looking statements are based on our judgments at the end of FY2/19.
(1) Basic management policy
The Group has actively pursued its business activities under the basic policy of “customer first” since its establishment andupholds the corporate philosophy of “improving quality of life of people around the world” through creating, formulating,manufacturing and marketing pharmaceuticals and other products. Under this philosophy, in Japan as well as overseas,
we provide products that precisely meet customer needs, actively seek to create new customers and strive to enhanceenterprise value.
(2) Management targets
Under the “6th Medium-term Management Policy for FY2017-FY2021” announced on April 7, 2017, we have set our targets
for fiscal 2021 of achieving a return on equity (ROE) of 8% or more by making: 1) strategic investment; 2) investment ingrowth; 3) capital investments; and 4) investment to improve capital efficiency in the next five years.
(3) Medium- to long-term management strategy and key challenges
We expect the ethical pharmaceuticals business in Japan to witness continued efforts to curb healthcare expenditures,
including strengthened measures to promote the use of generic drugs and additional National Health Insurance drug
reimbursement price cuts for long listed products, against a backdrop of a rapidly aging population. In response to thisdifficult business environment, we are stepping up efforts to provide medical institutions with scientific information and seek
to develop 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 business in Japan, amid a prolonged market slump and intensifying competition, we seek toexpand sales of Pain relief and anti-inflammatory patch 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 intellectual property, manufacturing technology,
and quality control technology, 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 strengthening our manufacturing.
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.

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FINANCIAL REPORT 2019

Overview of Operations

Business and Other Risks
The following risks associated with our group’s business activities could have a significant impact on the decisions ofinvestors.
Any forward-looking statements are based on our judgments at the end of FY2/19.
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 Health
Insurance 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.

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FINANCIAL REPORT 2019

Overview of Operations

Management’s Analysis of Financial Position, Operating Results and Cash FlowsThe summary of the financial position, operating results and cash flows (hereinafter referred to as “Business Results”) of
the Group (the Company and its consolidated subsidiaries, and equity-method affiliates) in the fiscal year under review anddetails of the perception, analysis and deliberation of the status of Business Results from management’s perspective areas follows.
Any forward-looking statements are based on our judgments at the end of FY2/19.
Starting from FY2/19, “Royalty income” has been presented under “Net sales,” and comparison and analysis with theprevious fiscal year have been conducted using the amount after reclassification that reflect this change in the presentation
method.
(1) Significant accounting policies and estimates
The consolidated financial statements of the Group have been prepared based on accounting standards generally
accepted in Japan. For the accounting policies used in the preparation of these consolidated financial statements, theapplication method thereof and assessment of the estimates see “Significant Accounting Policies Concerning the
Preparation of Consolidated Financial Statements.”(2) Details of the analysis and deliberation of the status of Business Results from management’s perspective
1) Business Results(Financial position)
Assets totaled ¥297,512 million at the end of FY2/19, a decrease of ¥2,401 million from the previous year, due
mainly to a decrease in cash and deposits of ¥6,905 million, an increase in securities of ¥6,187 million, an increasein notes and accounts receivable - trade of ¥4,776 million, and a decrease in investment securities of ¥3,649 million.
Liabilities totaled ¥49,350 million at the end of FY2/19, a decrease of ¥5,335 million from the previous year, due
mainly to decreases in income taxes payable of ¥4,023 million, and in accounts payable - other of ¥1,342 million.
Net assets totaled ¥248,161 million at the end of FY2/19, an increase of ¥2,933 million from the previous year,
due mainly to an increase in retained earnings of ¥12,344 million, and a decrease in treasury shares of ¥6,176 million.
(Operating results)“Pharmaceuticals” is the Company’s sole reportable segment, whose performance for the fiscal year under review is
as follows.
Net sales decreased 3.4% year on year, or ¥5,057 million, to ¥143,408 million.
In the ethical pharmaceuticals business in the domestic market, revenue decreased 8.4% year on year due to thecontinuing impact of the measures to promote the use of generic drugs in addition to the revision of the National
Health Insurance drug prices in April 2018. In the OTC pharmaceuticals business, despite the continuing harsh sales
competition, revenue increased 6.2% year on year thanks to the strong sales of products such as the Feitas® series
and Allegra® FX, in addition to our mainstay product, Salonpas®.
Meanwhile, in the overseas markets, ethical pharmaceuticals posted a decrease of 14.0% year on year in revenue
due to the impact of generic drugs and the appreciating yen. In the OTC pharmaceuticals business, revenue
increased 10.3% year on year, thanks mainly to the increase in sales of the subsidiaries in the United States andVietnam, despite the impact of the appreciating yen.

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FINANCIAL REPORT 2019

Overview of Operations

Operating profit decreased 17.3% year on year, or ¥4,661 million, to ¥22,278 million. This was mainly due to thedecrease in net sales. Selling, general and administrative expenses increased 0.9% year on year, or ¥564 million, to¥66,401 million.
Ordinary profit decreased 12.7% year on year, or ¥3,598 million, to ¥24,647 million. This is attributable mainly tothe decrease in operating profit.
Profit attributable to owners of parent increased 0.4% year on year, or ¥85 million, to ¥19,204 million. This is
attributable mainly to the decrease in income taxes despite the decrease in ordinary profit.

Pharmaceuticals
The Pharmaceuticals segment, particularly the ethical pharmaceuticals business in Japan, faced an uncertain environment
during FY2/19 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 patches. While collecting and supplying information on efficacy and safety, we
engaged in activities to promote the proper use of our products, including MOHRUS® TAPE, MOHRUS® PAP XR and
MOHRUS ® PAP, transdermal pain relief and anti-inflammatory patches containing ketoprofen; ESTRANA ® TAPE,
transdermal estradiol patch; Fentos® Tape, transdermal pain management patch containing fentanyl citrate that has
significant analgesic effects; NORSPAN® TAPE, transdermal pain management patch containing buprenorphine; andNEOXY® TAPE, transdermal overactive bladder treatment patch containing oxybutynin hydrochloride.
We began marketing the ALLESAGA® TAPE, transdermal allergic rhinitis treatment patch, in April 2018, and the new
0.5mg dose of Fentos® Tape, transdermal pain management patch, in December 2018.
In the OTC pharmaceuticals business in Japan, we launched new products, in addition to engaging in sales of ourtransdermal pain relief and anti-inflammatory patches, targeting new users.
We launched the new packages of the therapeutic drug for athlete’s foot, Butenalock® Vα Cream 18 g and Butenalock®
Vα Liquid 18 ml in March 2018; the miscellaneous goods, Butenalock® Antiseptic and Antibacterial Spray, the <Cool type>analgesic anti-inflammatory gel patch Nobinobi® Salonsip® Fα and the analgesic anti-inflammatory plaster Salonpas®
120 Sheets, in April 2018; the newly -packaged <Cool type> analgesic anti-inflammatory gel patch Nobinobi® Salonsip® F in May
2018; the <Warm type> tape with diclofenac sodium Feitas® Zα Dicsas® Onkan and the Feitas® Zα Dicsas® Onkan Oban Sizein September 2018; and the allergic rhinitis drug Allegra® FX 56 Tablets in January 2019.
Additionally, in the overseas business, Salonpas® brand was certified for the second consecutive year as having thenumber one share of sales worldwide in the OTC pharmaceuticals market pain relief and anti-inflammatory patch category
by Euromonitor International, and Hisamitsu Pharmaceutical was certified for having the number one share of sales
worldwide in the same category and awarded the certificates on May 18, 2018.
The Salonpas® brand is also actively engaged in sales promotion activities overseas and has captured the top share ofsales (cumulative sales amount from January 2018 to December 2018) in the pain relief and anti-inflammatory patch marketof the OTC pharmaceuticals market in the United States (Information Resources, Inc.).

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FINANCIAL REPORT 2019

Overview of Operations(Cash flows)
Cash and cash equivalents at the end of FY2/19 totaled ¥88,782 million, a decrease of ¥37,786 million from the end of
the previous fiscal year.
Net cash provided by operating activities totaled ¥15,772 million (¥30,453 million provided in the previous fiscal year),due mainly to profit before income taxes of ¥25,673 million, depreciation of ¥5,742 million and income taxes paid of ¥9,339
million.
Net cash used in investing activities totaled ¥39,302 million (¥1,378 million used in the previous fiscal year), due mainly
to increase in time deposits of ¥36,218 million and purchase of property, plant and equipment of ¥3,626 million.
Net cash flows used in financing activities totaled ¥13,347 million (¥7,153 million used in the previous fiscal year), due
mainly to cash dividends paid of ¥6,882 million and purchase of treasury shares of ¥6,176 million.
(Reference) Cash flow-related indicators
FY2/15

FY2/16

FY2/17

FY2/18

FY2/19

Shareholders’ equity ratio

77.4

79.0

81.7

81.3

82.8

Shareholders’ equity ratio based on market price

134.0

146.3

181.2

215.9

152.8

Ratio of interest-bearing liabilities to cash flow

0.10

0.08

0.11

0.07

0.12

Interest coverage ratio

673.0

936.1

499.5

935.7

800.5

Shareholders’ equity ratio (%): Shareholders’ equity/total assets
Shareholders’ equity ratio based on market price (%): Market capitalization/total assets
Ratio of interest-bearing liabilities to cash flow (years): Interest-bearing liabilities/operating cash flow
Interest coverage ratio: Operating cash flow/interest payments
Notes: 1. All indicators are calculated on a consolidated basis.
2.	Market capitalization is calculated by multiplying the closing share price at the end of the fiscal year by the numberof shares outstanding at the end of the fiscal year (excluding treasury shares).
3.	The figure for operating cash flow refers to cash flows from operating activities reported on the consolidated statements of cash flows. Interest-bearing liabilities are all liabilities reported on the consolidated balance sheet thatare subject to interest payments. Interest payments refer to interest expenses paid reported on the consolidated
statements of cash flows.

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FINANCIAL REPORT 2019

Overview of Operations

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

Sales
Fiscal 2019

Business segment

Sales
Fiscal 2019Pharmaceuticals

139,960(3.5)

1,262,379

Other businesses

3,447

1.7

31,090143,408(3.4)

1,293,479

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 2018

% of total

Alfresa Holdings Corporation

22,00314.8

20,40014.2

183,999

MEDIPAL HOLDINGS CORPORATION

21,94414.8

20,22414.1

182,412

Customer

Sales
Fiscal 2019

% of total

Sales
Fiscal 2019

2. The foregoing figures do not include consumption tax.

3) Capital liquidity and resources
In procuring funds, the Group upholds the basic policy of securing the liquidity required for smooth businessactivities as well as ensuring soundness and security of finances, and engages in effective and flexible financing
taking into account the market environment and other factors. The demand for funds arises mainly as research anddevelopment investments and capital expenditures for the expansion and development of business, in addition tooperating costs including the manufacturing costs, product procurement, research and development expenses, andsales expenses. Internal funds are allocated as the source of these funds.
4) M anagement policy, management strategies, objective benchmarks to determine the achievement status ofmanagement goals, etc.
Under the “6th Medium-term Management Policy for FY2017-FY2021” announced on April 7, 2017, we have set ourtargets for fiscal 2021 of achieving a return on equity (ROE) of 8% or more.
In the fiscal year under review, our ROE was 7.8% (a decrease of 0.3% year on year).
The key challenges in achieving this target are as stated in “Overview of Operations, Management Policy,
Business Environment, Key Challenges, etc.”

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FINANCIAL REPORT 2019

Overview of Operations

Important Business Agreements
Joint sales agreement(1) We concluded an agreement with Kyowa Hakko Kirin Co., Ltd. (now Kyowa Kirin Co., Ltd.: headquarters: Chiyoda-ku,
Tokyo) on June 18, 2008 on joint sales in Japan of Fentos® Tape, transdermal pain management patch.
1) Counterparty to the agreement
Kyowa Hakko Kirin Co., Ltd. (now Kyowa Kirin Co., Ltd.)
2) Agreement details
Contract on the joint sales within Japan with Kyowa Hakko Kirin Co., Ltd. (now Kyowa Kirin Co., Ltd.) of Fentos®
Tape, a transdermal pain management patch that Hisamitsu Pharmaceutical has acquired manufacturing andmarketing approval for.
3) Compensation
Compensation commensurate with a one-time contract payment.

Distribution agreement(1) We concluded an agreement with Kyowa Hakko Kirin Co., Ltd. (now Kyowa Kirin Co., Ltd.: headquarters; Chiyoda-ku,
Tokyo) on February 5, 2019 on sales in Japan of the transdermal Parkinson’s disease treatment patch (Development
code: HP-3000).
1) Counterparty to the agreement
Kyowa Hakko Kirin Co., Ltd. (now Kyowa Kirin Co., Ltd.)
2) Agreement details
Contract on the distribution of the transdermal Parkinson’s disease treatment patch (Development code: HP-3000)
in Japan.
3) Compensation
Compensation commensurate with a one-time contract payment and subsequent milestone payment at the time
approval is obtained and milestone payments commensurate with sales.
Note: On December 11, 2018, the Company and Mundipharma K.K. (headquarters: Minato-ku, Tokyo) agreed totransfer the distribution rights of NORSPAN® TAPE, transdermal pain management patch to Mundipharma
K.K., and to terminate the sales by the Company as of February 28, 2019.

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FINANCIAL REPORT 2019

Overview of Operations

Research and Development
Pharmaceuticals
Our R&D program is centered on the development of patch products that targets the needs of medical institutions.
For ethical pharmaceuticals in Japan, ALLESAGA ® TAPE, transdermal allergic rhinitis treatment patch (active
pharmaceutical ingredient: emedastine fumarate) was listed on the National Health Insurance drug price listing on April 18,
2018, and is currently on sale. Approval was received for the application for partial changes related to the addition of a new
0.5 mg dose of Fentos® Tape, transdermal pain management patch on July 2, 2018, and it was listed on the National Health
Insurance drug price listing on November 28, 2018, and is currently on sale. Phase 3 clinical trials of the Fentos® Tape(development code: HFT-290) in opioid analgesic naive patients have been concluded and an application is being prepared.
Application for manufacturing and marketing approval of HP-3000, transdermal Parkinson’s disease treatment patch (active
pharmaceutical ingredient: ropinirole hydrochloride) was submitted on September 28, 2018. We are also preparing for phase 3
clinical trials of HP-3000 as treatment for idiopathic restless legs syndrome. Phase 3 clinical trials of HP-3150, transdermal
pain treatment NSAID patch for cancer pain relief, is currently being implemented. We are also preparing to for phase 3
clinical trials of HP-3150 for lower back pain. Phase 2 clinical trials for HP-5070, transdermal primary local hyperhidrosis
treatment drug are under way.
For the U.S. ethical pharmaceuticals, application for generic approval have been submitted for HP-1010 (active pharmaceuticalingredient: lidocaine), transdermal postherpetic neuralgia treatment patch. New drug application for HP-3070 (active pharmaceuticalingredient: asenapine maleate), transdermal schizophrenia treatment patch, has been submitted. Phase 2 clinical trials of
HP-5000 (active pharmaceutical ingredient: Diclofenac sodium), transdermal pain treatment NSAID patch, is currently being
implemented. We have commenced phase 3 clinical trials for ATS (active pharmaceutical ingredient: d-amphetamine),transdermal attention deficit hyperactivity disorder treatment patch.
For OTC pharmaceuticals both in Japan and overseas, we are developing new products and improving existingproducts for the purpose of improving effectiveness, safety, and user satisfaction.
In addition to the development of our own fundamental technologies, we are promoting the utilization of Noven’s
transdermal drug delivery system (TDDS) technology as well as joint development with external organizations, to expand
the possibilities of TDDS.

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 ¥13,032 million in FY2/19.

Capital Expenditures
Capital investment totaled ¥4,034 million in FY2/19.
In the Pharmaceutical segment, we mainly invested in the building and manufacturing equipment, etc. of the Tosu andUtsunomiya Plants resulting in capital investment of ¥1,502 million.
In other businesses, we mainly invested to expand bandwidth to provide digital capabilities to our subscribers, resulting
in capital investment of ¥112 million.
In FY2/19, there was no disposal or removal of equipment that could impact production capacity.
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FINANCIAL REPORT 2019

Corporate Governance and Internal Auditing

Corporate Governance(1) Basic approach to corporate governance1) Corporate governance structure
We consider corporate governance as the framework for transparent, fair, prompt and resolute decision-making with due
consideration to the interests of its stakeholders including shareholders, customers, employees and local communities andposition 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 structuralreforms.
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 27, 2019.
In the area of corporate governance, we reduced the number of directors as a way to clarify the responsibilities andauthority of management and speed up decision-making and business execution. But in order to further reinforce andenhance our management structure in conjunction with the expansion of the organization, we changed the articles ofincorporation to increase the number of directors from 10 or less to 12 or less, at the annual general meeting 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 that can respond to changes in management environments, the term of directors was changed from 2 years to 1
year at the annual general meeting of shareholders held on May 26, 2011.
Important management decisions are made based on the deliberation by the Management Advisory Council comprising
key directors and executive officers, etc. as needed, and particularly important resolutions are debated and decided by theboard 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 from the 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 and groupcompanies
We have requested group companies to prepare and observe their own rules regarding compliance, equivalent to theHisamitsu Corporate Charter, and are making the best efforts to foster the compliance awareness of directors andemployees of the Group as a whole.
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Corporate Governance and Internal Auditing

We are monitoring the business status of each subsidiary through compliance of the Operation Manuals for Overseas
and Domestic 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 groupcompanies, 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 ensurethat these activities are effective and appropriate and that they comply with relevant laws and the articles of incorporation,
reporting to the board of directors and the board of corporate auditors, promoting mutual cooperation, reporting to relevantbusiness 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 eachbusiness division.
Outside directors and outside corporate auditors
Although we have not established selection criteria regarding the independence of outside officers, we do select ouroutside 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 andoutside corporate auditors to limit their liability for damages to the minimum amount stipulated in Article 425-1 of theCompanies 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 directorof a listed company. FURUKAWA Teijiro has gained deep insight with regard to our particular business through his
experience in important positions at the Ministry of Health and Welfare.
Although FURUKAWA Teijiro concurrently serves as Executive 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 suchas 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 and Professor Emeritus of
Chubu University, the company does not have any special conflict of interests 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
and outside corporate auditors and the company.

HISAMITSU PHARMACEUTICAL CO., INC.

12

FINANCIAL REPORT 2019

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: President & CEO)We established a Crisis Headquarters to help prevent risk and prepare for times of crisis, standing as a permanent Crisis
Management Committee to operate in normal times, and conduct training of committee members as needed.
Privacy Protection Committee (Chair: Director)
We established the Privacy Protection Committee in April 2005 to fully comply with the Personal Information Protection Act.
We have called personal information administrators together and held committee meetings as needed to create anorganization to protect individual rights and interests and to ensure that this organization is safely managed.
Disclosure Policy Team (Chair: President & CEO)We established the Disclosure Policy Team in April 2001 to provide the timely and appropriate disclosure of corporate information.
All officers and employees work toward timely disclosure based on our Disclosure Policy Rules.
We strive to actively disclose information to enhance management transparency and seek to promote smoothcommunication with shareholders and investors through our investor relations activities.
CSR Committee (Chair: Director)
We 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 eachbusiness division and engages in CSR programs.

HISAMITSU PHARMACEUTICAL CO., INC.

13

FINANCIAL REPORT 2019

Corporate Governance and Internal Auditing

Corporate governance structure
General Meeting of Shareholders
Appointment/Dismissal

Appointment/Dismissal

Board of Corporate
Auditors

Independent auditor

Corporate Auditors(Operational andaccounting auditing)

Audit

Board of Directors
Directors

Audit

Representative
director

Inquiry
Reporting

Nomination andRemuneration
Committee

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

Appointment/Dismissal

Various business divisions and group companies

HISAMITSU PHARMACEUTICAL CO., INC.

14

FINANCIAL REPORT 2019

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 2019
Total compensation by type
Total
compensation

Basic
compensation

Stock options

Bonuses

Retirement
benefits

Number of
officers to be paid

Directors (Excluding Outside Directors)

383

290

93

—

—

10

Corporate Auditors(Excluding Outside Corporate Auditors)

39

39

—

—

—

2

Outside Officers

34

34

—

—

—

4

Category(Thousands of U.S. dollars)
Fiscal 2019
Total compensation by type
Category

Total
compensation

Basic
compensation

Stock options

Bonuses

Retirement
benefits

Number of
officers to be paid

Directors (Excluding Outside Directors)

3,454

2,616

839

—

—

10

Corporate Auditors(Excluding Outside Corporate Auditors)

352

352

—

—

—

2

Outside Officers

307

307

—

—

—

4

b) Total consolidated compensation paid to executive of the filing company(Millions of yen)
Fiscal 2019
Name
(Category of executive)
NAKATOMI, Hirotaka(Chairman)

Total
consolidated
compensation
177

Total compensation by type
Category ofcompany

Basiccompensation

Stock options

Bonuses

Retirement
benefits

The filingcompany

126

51

—

—

(Thousands of U.S. dollars)
Fiscal 2019
Name
(Category of executive)
NAKATOMI, Hirotaka(Chairman)

Total
consolidated
compensation
1,596

Total compensation by type
Category ofcompany
The filingcompany

Basiccompensation
1,136

Stock options

Bonuses

Retirement
benefits

460

—

—

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

HISAMITSU PHARMACEUTICAL CO., INC.

15

FINANCIAL REPORT 2019

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

TAJIMA Yoshiro

Designated limited liability partner and engagement partner

TOKUNAGA Hideki

Assisting personnel
8 CPAs & 17 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 2019

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 a minimum
one-third of the voting rights of shareholders capable of executing voting rights, except as otherwise provided for by thearticles of incorporation.

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

Fiscal 2018
Compensation forCompensation
audit certification
for non-auditing
services
services
50(Thousands of U.S. dollars)
Fiscal 2019

Fiscal 2019

Compensation foraudit certification
services

Compensation
for non-auditing
services

Compensation foraudit certification
services

50

—

451

Compensation
for non-auditing
services—

22

Subsidiaries

3

—

4

—

36

—

Total

53

22

54

—

487

—

2) Breakdown of other important compensation
FY2018The 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.
FY2019The 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
FY2018The Company has entrusted the accounting auditor with accounting advisory services, etc., that are other than the services
set forth in Article 2-1 of the Certified Public Accountants Act (non-auditing services).
FY2019Not applicable.
4) Policy on setting compensation for auditing services
Not applicable.

HISAMITSU PHARMACEUTICAL CO., INC.

17

FINANCIAL REPORT 2019

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 FY2/19, we paid a year-end dividend of ¥41.25 per share including an interim dividend of ¥41.25 per share, whichmakes an annual dividend of ¥82.5 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 2019 are as follows.

Resolution date
October 10, 2018
Board of directors resolution
May 23, 2019
Annual general meeting of shareholders resolution

HISAMITSU PHARMACEUTICAL CO., INC.

(Millions of yen)

(Yen)

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

Total dividends

Dividends per share

Total dividends

Dividends per share

3,452

41.25

31,136

0.37

3,411

41.25

30,766

0.37

18

FINANCIAL REPORT 2019

Financial Section

Consolidated Balance Sheets
February 28, 2018 and February 28, 2019

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

Fiscal 2018

Fiscal 2019

Fiscal 2019

Cash and deposits

117,189

110,283

994,706

Notes and accounts receivable - trade35,18539,961

360,431

Securities

14,75920,946

188,924

Merchandise and finished goods

10,142

8,519

76,838AssetsCurrent assets

453

470

4,239

Raw materials and supplies

6,375

6,769

61,053

Deferred tax assets

3,840

2,151

19,401

Other

2,359

4,766

42,987

Allowance for doubtful accounts

(239)

(299)

(2,697)

190,065

193,569

1,745,910

Buildings and structures, net (Notes 2 and 3)

15,955

14,816

133,634

Machinery, equipment and vehicles, net (Notes 2 and 3)

6,869

6,658

60,052Tools, furniture and fixtures, net (Notes 2 and 3)

1,909

1,781

16,064

Land (Notes 2 and 4)

12,62812,348111,374

Work in process

Total current assets
Non-current assets
Property, plant and equipment

81

91

821

Construction in progress

2,619

3,860

34,816

Total property, plant and equipment

40,06439,556

356,778

Leased assets, net

Intangible assets
Sales rights

1,596

68

613

Software

359

203

1,831

Other

2,144

1,718

15,496

Total intangible assets

4,100

1,990

17,94957,16953,520482,728

210

691

6,233

3,090

3,165

28,547

353

388

3,500

Other

5,076

4,843

43,682

Allowance for doubtful accounts

(216)

(215)

(1,939)Investments and other assets
Investment securities (Note 1)
Long-term bank cash
Net defined benefit asset
Deferred tax assets

65,68362,394

562,767

Total non-current assets

109,847

103,942

937,512

Total assets

299,913

297,5122,683,431

Total investments and other assets

HISAMITSU PHARMACEUTICAL CO., INC.

19

FINANCIAL REPORT 2019

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

Fiscal 2018

Fiscal 2019

Fiscal 2019

Notes and accounts payable - trade

7,709

8,290

74,772

Electronically recorded obligations - operating

6,202

5,864

52,891

Short-term loans payable (Note 2)

1,461

1,361

12,276

Liabilities
Current liabilities

29

26

235

Accounts payable - other

7,278

5,936

53,540

Income taxes payable

4,891

868

7,829

106

101

911

Provision for bonuses

1,674

1,629

14,693

Other

5,584

6,275

56,598

Total current liabilities

34,93830,354

273,780

Long-term loans payable (Note 2)

504

433

3,905

Lease obligations

64

70

631

Deferred tax liabilities for land revaluation (Note 4)

1,670

1,660

14,972

Deferred tax liabilities

6,153

5,756

51,917

Net defined benefit liability

7,297

7,465

67,331

Lease obligations

Provision for sales returns

Non-current liabilities

Other

4,055

3,610

32,561

Total non-current liabilities

19,747

18,996

171,336

54,68649,350445,116

8,473

8,473

76,423

Total liabilities
Net assets
Shareholders' equity
Capital stock

5,914

5,914

53,342Retained earnings

236,342

248,687

2,243,050

Treasury shares(34,709)(40,886)(368,774)

Total shareholders' equity

216,021

222,189

2,004,050

Valuation difference on available-for-sale securities

19,101

17,009153,414

Revaluation reserve for land (Note 4)

3,814

3,790

34,184Foreign currency translation adjustment

5,088

3,581

32,299Remeasurements of defined benefit plans

(325)

(97)

(875)

27,67924,284

219,031

299

392

3,536

Capital surplus

Accumulated other comprehensive income

Total accumulated other comprehensive income
Share acquisition rights
Non-controlling interests

1,227

1,295

11,680Total net assets

245,227

248,161

2,238,306

Total liabilities and net assets

299,913

297,5122,683,431

HISAMITSU PHARMACEUTICAL CO., INC.

20

FINANCIAL REPORT 2019

Financial Section

Consolidated Statements of Income
Years ended February 28, 2018 and February 28, 2019

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

Fiscal 2018

Fiscal 2019

Fiscal 2019

Net sales

148,466

143,408

1,293,479

Cost of sales (Notes 2 and 3)

55,68854,727493,614Gross profit

92,777

88,680799,856

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

65,836

66,401

598,909

Operating profit

26,94022,278200,938

Interest income

493

800

7,216

Dividend income

724

763

6,882

Share of profit of entities accounted for using equity method

129

619

5,583

Other

456

399

3,599

1,803

2,582

23,289Non-operating income

Total non-operating income
Non-operating expenses
Interest expenses

32

19

171

Foreign exchange losses

426

178

1,605

Loss on sales of accounts receivable

18

—

—

Other

20

17

153

Total non-operating expenses
Ordinary profit

498

214

1,930

28,24524,647

222,305

Extraordinary income
000Gain on sales of investment securities

487

1,312

11,834

Total extraordinary income

487

1,312

11,834Gain on disposal of non-current assets (Note 4)

Extraordinary losses
Loss on disposal of non-current assets (Note 5)
Impairment loss (Note 6)

15

72

649

1,023

138

1,245

—

74

667

Total extraordinary losses

1,038

285

2,571

Profit before income taxes

27,69425,673

231,559

Income taxes - current

9,261

4,688

42,284

Income taxes - deferred

(893)

1,605

14,476

Total income taxes

8,367

6,294

56,769Profit19,327

19,378

174,781

207

174

1,569

19,11919,204

173,212

Loss on sales of shares of subsidiaries

Profit attributable to non-controlling interests
Profit attributable to owners of parent

HISAMITSU PHARMACEUTICAL CO., INC.

21

FINANCIAL REPORT 2019

Financial Section

Consolidated Statements of Comprehensive Income
Years ended February 28, 2018 and February 28, 2019

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

Fiscal 2018

Fiscal 2019

Fiscal 2019

19,327

19,378

174,781

Other comprehensive income
Valuation difference on available-for-sale securities

4,453(1,915)(17,272)

Foreign currency translation adjustment(1,833)(1,546)(13,944)

Remeasurements of defined benefit plans, net of tax

791

215

1,939

Share of other comprehensive income of entities accounted for using
equity method

113

(163)

(1,470)Total other comprehensive income (Note 1)
Comprehensive income

3,525(3,409)(30,748)

22,852

15,969144,034

22,662

15,833

142,807

189

135

1,218

Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

HISAMITSU PHARMACEUTICAL CO., INC.

22

FINANCIAL REPORT 2019

Financial Section

Consolidated Statements of Changes in Shareholders’ Equity
Years ended February 28, 2018 and February 28, 2019

(Millions of yen)
Shareholders’ equity

Capital stock

Capital surplus

8,473

5,914

Balance at March 1, 2017

Retainedearnings
224,214

Treasury shares

Total
shareholders’equity(34,705)

203,897

Changes of items during period
Dividends of surplus(6,862)(6,862)

Profit attributable to owners of parent

19,11919,119

Reversal of revaluation reserve for land

(128)

(128)

Purchase of treasury shares

(3)

(3)

Net changes of items other thanshareholders’ equity—

Total changes of items during period
Balance at February 28, 2018——12,127(3)

12,124

8,473

5,914

236,342(34,709)

216,021(Millions of yen)
Accumulated other comprehensive income
Valuation
Total
difference on
Foreign Re­mea­sure­ accumulated
Shareavailable-for- Revaluation currency
other
Nonments ofsale securi- reserve for translation
Total
defined comprehen- acquisition controllingties
rightslandinterests net assets
adjustment benefit plans sive income
Balance at March 1, 2017

14,531

3,685

6,904

(1,115)24,007203

1,097

229,205

Changes of items during period
Dividends of surplus(6,862)

Profit attributable to owners of parent

19,119

Reversal of revaluation reserve for land

(128)

Purchase of treasury shares(3)

Net changes of items other thanshareholders’ equity

4,569

128

(1,815)

789

3,672

95

129

3,897

Total changes of items during period

4,569

128

(1,815)

789

3,672

95

129

16,022

19,101

3,814

5,088

(325)

27,679299

1,227

245,227

Balance at February 28, 2018

HISAMITSU PHARMACEUTICAL CO., INC.

23

FINANCIAL REPORT 2019

Financial Section(Millions of yen)
Shareholders’ equity

Capital stock

Capital surplus

8,473

5,914

Balance at March 1, 2018

Retainedearnings
236,342

Treasury shares

Total
shareholders’equity(34,709)

216,021

Changes of items during period
Dividends of surplus(6,883)(6,883)

Profit attributable to owners of parent

19,204

19,204

Reversal of revaluation reserve for land

23

Purchase of treasury shares

23(6,176)(6,176)

Net changes of items other thanshareholders’ equity—

Total changes of items during period
Balance at February 28, 2019——12,344(6,176)

6,167

8,473

5,914

248,687(40,886)

222,189(Millions of yen)
Accumulated other comprehensive income
Valuation
Total
difference on
Foreign Re­mea­sure­ accumulated
Shareavailable-for- Revaluation currency
other
Nonments ofsale securi- reserve for translation
Total
defined comprehen- acquisition controllingties
rightslandinterests net assets
adjustment benefit plans sive income
Balance at March 1, 201819,101

3,814

5,088

(325)

27,679299

1,227

245,227

Changes of items during period
Dividends of surplus(6,883)

Profit attributable to owners of parent

19,204

Reversal of revaluation reserve for land

23

Purchase of treasury shares(6,176)

Net changes of items other thanshareholders’ equity(2,092)(23)(1,507)228(3,394)93

67(3,234)

Total changes of items during period(2,092)(23)(1,507)228(3,394)

93

67

2,933

17,009

3,790

3,581

(97)

24,284

392

1,295

248,161

Balance at February 28, 2019

HISAMITSU PHARMACEUTICAL CO., INC.

24

FINANCIAL REPORT 2019

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

Capital stock

Capital surplus

76,42353,342

Balance at March 1, 2018

Retainedearnings

Treasury shares

Total
shareholders’equity(313,060)

1,948,417

2,131,704

Changes of items during period
Dividends of surplus(62,082)(62,082)

Profit attributable to owners of parent

173,212173,212

Reversal of revaluation reserve for land

207

Purchase of treasury shares

207(55,705)(55,705)

Net changes of items other thanshareholders’ equity———

111,338(55,705)

55,62476,42353,3422,243,050(368,774)

2,004,050

Total changes of items during period
Balance at February 28, 2019

(Thousands of U.S. dollars)
Accumulated other comprehensive income
Valuation
Total
difference on
Foreign Re­mea­sure­ accumulated
Shareavailable-for- Revaluation currency
other
Nonments ofsale securi- reserve for translation
Total
defined comprehen- acquisition controllingties
rightslandinterests net assets
adjustment benefit plans sive income
Balance at March 1, 2018

172,283

34,40145,892(2,931)

249,653

2,697

11,0672,211,843

Changes of items during period
Dividends of surplus(62,082)

Profit attributable to owners of parent

173,212

Reversal of revaluation reserve for land

207

Purchase of treasury shares(55,705)

Net changes of items other thanshareholders’ equity(18,869)(207)(13,592)

2,056(30,612)839

604(29,169)

Total changes of items during period(18,869)(207)(13,592)

2,056(30,612)839

604

26,454

153,414

34,18432,299(875)

219,031

3,536

11,6802,238,306

Balance at February 28, 2019

HISAMITSU PHARMACEUTICAL CO., INC.

25

FINANCIAL REPORT 2019

Financial Section

Consolidated Statements of Cash Flows
Years ended February 28, 2018 and February 28, 2019

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

Fiscal 2018

Fiscal 2019

Fiscal 2019

Profit before income taxes

27,69425,673

231,559

Depreciation

6,005

5,742

51,790

Impairment loss

1,023

138

1,245

Loss (gain) on sales of shares of subsidiaries

—

74

667

Increase (decrease) in net defined benefit liability

284

227

2,047

Increase (decrease) in provision for bonuses

(13)

(17)

(153)

Increase (decrease) in allowance for doubtful accounts

(71)

64

577

Increase (decrease) in provision for sales returns

(27)

(4)

(36)

(1,217)(1,563)(14,098)

Interest expenses

32

19

171

Foreign exchange losses (gains)

69

126

1,136

Share of loss (profit) of entities accounted for using equity method

(129)

(619)

(5,583)

Loss (gain) on sales of investment securities(487)(1,312)(11,834)

Cash flows from operating activities

Interest and dividend income

Loss (gain) on disposal of non-current assets

15

72

649

Decrease (increase) in notes and accounts receivable - trade667(5,310)(47,894)

Decrease (increase) in inventories

485

1,310

11,816

Decrease (increase) in other current assets

(41)

(892)

(8,045)

Increase (decrease) in notes and accounts payable - trade

(316)

649

5,854

Increase (decrease) in other current liabilities

1,795

(897)

(8,091)Other, net

412

184

1,660

Subtotal

36,18023,665

213,448

Interest and dividend income received

1,240

1,465

13,214

(32)

(19)

(171)

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

HISAMITSU PHARMACEUTICAL CO., INC.

26

(6,935)(9,339)(84,234)

30,453

15,772

142,257

FINANCIAL REPORT 2019

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

Fiscal 2018

Fiscal 2019

Fiscal 2019

Decrease (increase) in time deposits(300)(36,218)(326,671)

Decrease (increase) in long-term time deposits

(22)

(484)

(4,365)(3,131)(3,626)(32,705)

82

291

2,625

Cash flows from investing activities

Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets

(209)

(37)

(334)

Decrease (increase) in short-term investment securities

2,072

(530)

(4,780)Purchase of investment securities

(691)

(353)

(3,184)

Proceeds from sales and redemption of investment securities

804

1,898

17,119Collection of loans receivable

6

6

54

Collection of investments in capital

11

—

—

Payments for sales of shares of subsidiaries resulting in change in scopeof consolidation

—

(247)

(2,228)(1,378)(39,302)(354,487)

Increase (decrease) in short-term loans payable

(100)

(100)

(902)

Repayments of long-term loans payable

(71)

(71)

(640)

Dividends paid to non-controlling interests

(59)

(68)

(613)

Purchase of treasury shares(2)(6,176)(55,705)(6,855)(6,882)(62,073)

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

Cash dividends paid

(64)

(48)

(433)

(7,153)(13,347)(120,384)

(963)

(908)

(8,190)Net increase (decrease) in cash and cash equivalents

20,959(37,786)(340,814)

Cash and cash equivalents at beginning of period

105,610

126,569

1,141,598

Cash and cash equivalents at end of period (Note 1)

126,569

88,782

800,776

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

HISAMITSU PHARMACEUTICAL CO., INC.

27

FINANCIAL REPORT 2019

Financial Section

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

Significant Accounting Policies Concerning the Preparation of Consolidated Financial Statements
Fiscal 2019 (March 1, 2018 – February 28, 2019)

1. Scope of consolidation
Consolidated subsidiaries: 18
Names of consolidated subsidiaries:
CRCC Media Co., Ltd.
Saga City-Vision Co., Ltd.
Taiyo 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 Italia S.r.l.
Hisamitsu Vietnam Pharmaceutical Co., Ltd.
Hisamitsu Pharmaceutical Technology Consulting (Beijing) Co., Ltd.
Hisamitsu Pharmaceutical (China) Co., Ltd.
Hisamitsu Pharmaceutical (Hong Kong) Co., Ltd
P.T. Hisamitsu Pharma Indonesia
3 other companies
Change in the scope of consolidation
Hisamitsu Italia S.r.l. has been included in the scope of consolidation due to its establishment. Additionally, Kyudo Co.,
Ltd. has been excluded from the scope of consolidation due to the transfer of its shares.

2. Investments accounted for under the equity method
Equity-method affiliates: 3
Names of companies:
SANOFI-HISAMITSU K.K.
Yutoku Pharmaceutical Ind. Co., Ltd.
Maruto Sangyo Co., Ltd.

HISAMITSU PHARMACEUTICAL CO., INC.

28

FINANCIAL REPORT 2019

Financial Section

3. Information concerning fiscal years, etc., of consolidated subsidiaries
The fiscal years of the 14 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 endof the fiscal years of the consolidated subsidiaries. We make the required consolidated adjustments if any major transactions
occur between the end of the fiscal years of the consolidated subsidiaries and end of the consolidated fiscal year.

4. Accounting policies(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) Property, plant and equipment (excluding leased assets)a) Company and domestic consolidated subsidiaries
Mainly the declining balance method.
b) Overseas consolidated subsidiaries
Mainly the straight-line method.
2) Intangible assets (excluding leased assets) and long-term prepaid expenses
Measured by the straight-line method.
Within intangible assets, software for internal use is depreciated over its useful life (five years) using the straight-line
method.
3) Leased assets
For finance lease transactions other than those for which the right of ownership of the leased 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.

HISAMITSU PHARMACEUTICAL CO., INC.

29

FINANCIAL REPORT 2019

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.
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) 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 benefit formula basis.
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.

(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 “Foreign currency translation adjustment” and “Non-controlling interests” under Net
assets.

HISAMITSU PHARMACEUTICAL CO., INC.

30

FINANCIAL REPORT 2019

Financial Section(6) Scope of funds in the Consolidated Statements of Cash Flows
Funds (cash and 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 the date of purchase, and which carry negligible risks of price fluctuation.

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

HISAMITSU PHARMACEUTICAL CO., INC.

31

FINANCIAL REPORT 2019

Financial Section

Unapplied Accounting Standards, etc.
• “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 30, 2018)• “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, March 30, 2018)(1) Outline
A comprehensive accounting standard for revenue recognition. Revenue is recognized by applying the following five
steps.
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations
Step 5: Recognize revenue when or as the performance obligation is satisfied(2) Scheduled date of adoption
We are currently considering the adoption date.
(3) Impact of adoption of this accounting standard and guidance
The impact of adoption is currently being evaluated in preparing consolidated financial statements.

Changes in Presentation Methods
Compensation based on the results of the Company’s research and development including distribution rights and royalties
had previously been presented under non-operating income or extraordinary income in the Consolidated Statements ofIncome. However, starting from the fiscal year under review, they have been included in “Net sales,” as they are expected
to occur on a recurring basis and due to their increasing monetary significance. The Consolidated Financial Statements forthe previous fiscal year have been reclassified in order to reflect this change in the presentation method.
As a result, “Royalty income” of ¥595 million under non-operating income in the Consolidated Statements of Income in
the previous fiscal year has been reclassified and included under “Net sales.”HISAMITSU PHARMACEUTICAL CO., INC.

32

FINANCIAL REPORT 2019

Financial Section

Notes to Consolidated Financial Statements
Fiscal 2018 (March 1, 2017 – February 28, 2018) and Fiscal 2019 (March 1, 2018 – February 28, 2019)

CONSOLIDATED BALANCE SHEETS(Note 1) Investment securities for affiliated companies are as follows.
(Millions of yen)
Fiscal 2018
5,810

Investment securities (stocks)

Fiscal 2019
5,914

(Thousands of U.S. dollars)
Fiscal 201953,342(Note 2) Assets pledged as collateral are as follows.
(Millions of yen)
Fiscal 2018
Fiscal 2019
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(Thousands of U.S. dollars)
Fiscal 2019734 (book value)
1 (book value)
65 (book value)
59 (book value)
859 (book value)

674 (book value)
0 (book value)
44 (book value)
59 (book value)
778 (book value)

6,079 (book value)
0 (book value)
397 (book value)
532 (book value)
7,017 (book value)

708 (book value)
1 (book value)
65 (book value)
775 (book value)

650 (book value)
0 (book value)
44 (book value)
695 (book value)

5,863 (book value)
0 (book value)
397 (book value)
6,269 (book value)

149
349
498

99
299
399

893
2,697
3,599

144
315
460

94
271
365

848
2,444
3,292

(Note 3) Advanced depreciation of government subsidies is ¥5,832 million in both FY2/18 and FY2/19.
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 No.
34, promulgated on March 31, 1998) and the “Law Partially Amending the Act on Revaluation of Land” (revision ofMarch 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 for land revaluation,” while
the net sum after this transfer to the deferred tax liability account is presented under Net assets as “Revaluation
reserve for land.”HISAMITSU PHARMACEUTICAL CO., INC.

33

FINANCIAL REPORT 2019

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
FY2/18 and FY2/19 was ¥3,366 million and ¥3,072 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 2018

Fiscal 2019

Fiscal 2019

Advertising expenses

10,987

13,089118,057

Sales promotion expenses

13,227

13,283

119,807

Freightage and packing expenses

2,681

2,832

25,543

(27)

49

442

Salaries and allowances

7,598

7,796

70,317

Provision for bonuses

863

836

7,540

Retirement benefit expenses

604

567

5,114

Business consignment expenses

335

721

6,503

Provision of allowance for doubtful accounts

15,076

13,032

117,543

Provision for bonuses

360

364

3,283

Retirement benefit expenses

208

193

1,741

Research and development expenses, of which:(Note 2) ‌General and administrative expenses include research and development expenses of ¥15,076 million and ¥13,032
million in FY2/18 and FY2/19, respectively.
Manufacturing costs do not include research and development expenses.
(Note 3) ‌In FY2/18 and FY2/19, manufacturing costs include provision for bonuses of ¥460 million and ¥472 million andretirement benefit expenses of ¥325 million and ¥312 million, respectively.

HISAMITSU PHARMACEUTICAL CO., INC.

34

FINANCIAL REPORT 2019

Financial Section(Note 4) Breakdown of gain on disposal of non-current assets(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2018

Fiscal 2019

Fiscal 2019

Machinery, equipment and vehicles

0

0

0

Total

0

0

0

(Note 5) Breakdown of loss on disposal of non-current assets(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2018

Fiscal 2019

Fiscal 2019

Buildings and structures

5

15

135

Machinery, equipment and vehicles

1

12

108

Tools, furniture and fixtures

0

6

54

Land

8

38

343

Total

15

72

649

Loss on retirement

Loss on sales(Note 6) The Group recorded impairment loss on the following assets.
The Group’s business assets are grouped based on business units on which the Group can reasonably performprofit and loss management, and rental assets and idle assets are grouped by individual assets. For determining
an indication of impairment loss, each consolidated subsidiary is determined as one unit.
Fiscal 2018 (March 1, 2017–February 28, 2018)
Purpose of use

Amount(Millions of yen)

LocationType

Idle assets

Tosu-shi, Saga

Buildings and construction inprogress

599

Idle assets

Tsukuba-shi, Ibaraki

Buildings and land423

The above idle assets were written down to their recoverable amounts, as it became clear during the fiscal
year under review that there were no prospects of future use. The idle assets in Tosu-shi, Saga Prefecture havebeen valued at their memorandum values, due to the difficulty of diverting or selling the assets. The recoverable
amount of the idle assets in Tsukuba-shi, Ibaraki Prefecture is the net realizable value and has been measured
based on a reasonably calculated value (e.g., real estate appraisal value).
Fiscal 2019 (March 1, 2018–February 28, 2019)
The information is omitted, as its significance is low.

HISAMITSU PHARMACEUTICAL CO., INC.

35

FINANCIAL REPORT 2019

Financial Section

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 2018

Fiscal 2019

Fiscal 2019

7,018

(1,142)(10,300)

Valuation difference on available-for-sale securities:
Amount arising during fiscal year under review(487)(1,312)(11,834)

Before tax effect adjustment

6,531(2,454)(22,134)

Tax effect amount(2,077)

538

4,853

Valuation difference on available-for-sale securities

4,453(1,915)(17,272)(1,833)(1,546)(13,944)

Reclassification adjustment amount:

Foreign currency translation adjustment:
Amount arising during fiscal year under review
Remeasurements of defined benefit plans, net of tax:
Amount arising during fiscal year under review

759

(11)

(99)

Reclassification adjustment amount:

379

322

2,904

Before tax effect adjustment

1,138

310

2,796

Tax effect amount

(346)

(94)

(848)

Remeasurements of defined benefit plans, net of tax

791

215

1,939

113

(163)

(1,470)3,525(3,409)(30,748)

Share of other comprehensive income of entities accounted for using
equity method:Amount arising during fiscal year under review
Total other comprehensive income

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Fiscal 2018 (March 1, 2017–February 28, 2018)

1. Shares issued(Shares)

Type of shares

Beginning of fiscal 2018

Increase

Decrease

End of fiscal 2018

Common stock

95,164,895——

95,164,895

Type of shares

Beginning of fiscal 2018

Increase

Decrease

End of fiscal 2018

Common stock

11,499,580

579—

11,500,159

2. Treasury shares(Shares)

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 acquired by equity method affiliates

HISAMITSU PHARMACEUTICAL CO., INC.

36362 shares
217 shares

FINANCIAL REPORT 2019

Financial Section

3. Subscription rights to shares

(Millions of yen)
Number of shares

Name ofcompany
The filingcompany

BreakdownType of shares

Beginning offiscal 2018

Subscription
rights to sharesas stock option——

Increase—

Decrease

End offiscal 2018

Balance at theend of the fiscal
2018

—

—

299

4. Dividends(1) Dividends paid

(Millions of yen)

(Yen)

Resolution

Type of shares

Total dividends

Dividends per share

Record date

May 25, 2017
Annual general meeting ofshareholders

Payment dateCommon stock

3,431

41.0

February 28, 2017

May 26, 2017

October 10, 2017
Board of Directors meeting

Common stock

3,431

41.0

August 31, 2017

November 7, 2017

(2) Dividends with a record date in fiscal 2018 but a payment date in fiscal 2019
(Millions of yen)

(Yen)

Resolution

Type of shares

Source of dividend

Total dividends

Dividends per share

Record date

Payment date

May 24, 2018
Annual general meeting ofshareholders

Common stock

Retained earnings

3,431

41.0

February 28, 2018

May 25, 2018

Fiscal 2019 (March 1, 2018–February 28, 2019)

1. Shares issued(Shares)

Type of shares

Beginning of fiscal 2019

Increase

Decrease

End of fiscal 2019

Common stock

95,164,895——

95,164,895

2. Treasury shares(Shares)

Type of shares

Beginning of fiscal 2019

Increase

Decrease

End of fiscal 2019

Common stock

11,500,159

1,000,511—

12,500,670

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

HISAMITSU PHARMACEUTICAL CO., INC.

37

345 shares
1,000,000 shares
166 shares

FINANCIAL REPORT 2019

Financial Section

3. Subscription rights to shares

(Millions of yen)
Number of shares

Name ofcompany
The filingcompany

BreakdownType of shares

Beginning offiscal 2019

Subscription
rights to sharesas stock option——

Increase—

Decrease

End offiscal 2019

Balance at theend of the fiscal
2019

—

—

392

4. Dividends(1) Dividends paid

(Millions of yen)

(Yen)

Resolution

Type of shares

Total dividends

Dividends per share

Record date

May 24, 2018
Annual general meeting ofshareholders

Payment dateCommon stock

3,431

41.0

February 28, 2018

May 25, 2018

October 10, 2018
Board of Directors meeting

Common stock

3,452

41.25

August 31, 2018

November 7, 2018

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

Resolution

Type of shares

Total dividends

Dividends per share

Record date

May 24, 2018
Annual general meeting ofshareholders

Common stock

30,9460.37

February 28, 2018

May 25, 2018

October 10, 2018
Board of Directors meeting

Common stock

31,1360.37

August 31, 2018

November 7, 2018

(2) Dividends with a record date in fiscal 2019 but a payment date in fiscal 2020
(Millions of yen)

(Yen)

Resolution

Type of shares

Source of dividend

Total dividends

Dividends per share

Record date

Payment date

May 23, 2019
Annual general meeting ofshareholders

Common stock

Retained earnings

3,411

41.25

February 28, 2019

May 24, 2019

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

Resolution

Type of shares

Source of dividend

Total dividends

Dividends per share

Record date

Payment date

May 23, 2019
Annual general meeting ofshareholders

Common stock

Retained earnings

30,7660.37

February 28, 2019

May 24, 2019

HISAMITSU PHARMACEUTICAL CO., INC.

38

FINANCIAL REPORT 2019

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 2018

Fiscal 2019

Fiscal 2019

Cash and deposits

117,189

110,283

994,706

Cash equivalents included in short-term investment securities

12,631

17,934

161,757

Total

129,820

128,217

1,156,463(3,251)(39,435)(355,687)

126,569

88,782

800,776

Term deposits longer than three months
Cash and cash equivalents

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, this risk
is managed through regular checks on the business and credit position of customers.
Short-term investment securities and investment securities, mainly consisting of stocks of corporations that theCompany has business relationships with, are exposed to the risk of market price fluctuations. This risk is managed
through periodic monitoring of market value and the financial status of the related issuers. With respect to stocks incompanies that have a business relationship, the Company checks necessity for holding them, taking into account thebusiness relationship.
Payment terms of operating payables, such as notes and accounts payable – trade, electronically recorded obligations –operating, accounts payable – other, and income taxes payable are less than one year. Borrowings are mainly for funding
required for corporate acquisitions and capital investment. Although operating payables and borrowings are exposed toliquidity 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.

39

FINANCIAL REPORT 2019

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 (Note2)):
Fiscal 2018 (February 28, 2018)(Millions of yen)
Unrealized gain
(loss)

Carrying amountMarket value(1) Cash and deposits

117,189

117,189—(2) Notes and accounts receivable – trade35,18535,185—( i ) Held-to-maturity bonds

5,028

5,025

(2)

( ii ) Available-for-sale securities

60,35260,352—(iii) Stock of affiliated companies

2,235

1,870

(364)

(3) Short-term investment securities and investment securities:(4) Long-term deposits
Total assets(1) Notes and accounts payable – trade

210

220

9

220,201

219,844

(357)

7,709

7,709

—

(2) Electronically recorded obligations – operating

6,202

6,202

—

(3) Short-term loans payable

1,390

1,390

—

(4) Accounts payable – other

7,278

7,278

—

(5) Income taxes payable

4,891

4,891

—

(6) Long-term loans payable (*)
Total liabilities
Derivative transactions

576

576

—

28,04928,049————(*) Includes current portion of long-term loans payable.

HISAMITSU PHARMACEUTICAL CO., INC.

40

FINANCIAL REPORT 2019

Financial Section

Fiscal 2019 (February 28, 2019)(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

110,283

110,283—

994,706

994,706—(2) Notes and accounts receivable – trade39,961

39,961—

360,431360,431—( i ) Held-to-maturity bonds

5,218

5,216

(2)

47,06447,046(18)( ii ) Available-for-sale securities

62,59662,596—564,589564,589—(iii) Stock of affiliated companies

2,392

1,411

(980)

21,575

12,727(8,839)

691

732

41

6,233

6,602

370

221,144

220,202(941)

1,994,624

1,986,128(8,487)(3) Short-term investment securities andinvestment securities:(4) Long-term deposits
Total assets(1) Notes and accounts payable – trade

8,290

8,290

—

74,772

74,772—(2) Electronically recorded obligations –operating

5,864

5,864

—

52,891

52,891—(3) Short-term loans payable

1,290

1,290

—

11,635

11,635—(4) Accounts payable – other

5,936

5,936

—

53,54053,540

—

868

868

—

7,829

7,829

—

(5) Income taxes payable(6) Long-term loans payable (*)
Total liabilities
Derivative transactions

504

504

—

4,546

4,546

—

22,75422,754—205,231205,231

—

—

—

—

—

—

—

(*) 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
The market values of these assets are based on the quoted market price on applicable stock exchanges or the prices
obtained from financial institutions. MMFs are recorded using book values because market values approximate bookvalues because of their short-term maturities.
(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 – other, 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.

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FINANCIAL REPORT 2019

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, 2019

February 28, 2018

February 28, 2019

4,259

4,312

38,414

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 2018 (February 28, 2018)(Millions of yen)
Due within
one year

Due after one Due after five
year but within years but within
ten years
five years

Due after
ten years

Cash and deposits

117,189———

Notes and accounts receivable – trade35,185

—

—

—

4,857

170

—

—

—

210

—

—

157,232

381——

Short-term investment securities and investment securities:
Held-to-maturity bonds
Long-term deposits
Total

Fiscal 2019 (February 28, 2019)(Millions of yen)
Due after
one year
Due within but within
one year five years(Thousands of U.S. dollars)

Due after
Due after
five years
one year
but within Due after Due within but within
ten years ten years one year five years

Due after
five years
but within Due after
ten years ten years

Cash and deposits

110,283———

994,706———

Notes and accounts
receivable – trade39,961———

360,431

—

—

—

5,107

110

—

—

46,063

992

—

—

5,000

—

—

—

45,098

—

—

—

—

691

—

—

—

6,233

—

—

160,353802——

1,446,316

7,234

—

—

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

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FINANCIAL REPORT 2019

Financial Section

Note 4: Redemption schedule of short-term loans payable and long-term loans payable after the balance sheet dateFiscal 2018 (February 28, 2018)(Millions of yen)

Due within
one year

Due after
one year
but within
five years

Due after
five years
but within
ten years

Due after
ten years

Long-term loans payable

71

285

219

—

Total

71

285

219

—

Fiscal 2019 (February 28, 2019)(Millions of yen)
Due after
one year
Due within but within
one year five years(Thousands of U.S. dollars)

Due after
Due after
five years
one year
but within Due after Due within but within
ten years ten years one year five years

Due after
five years
but within Due after
ten years ten years

Long-term loans payable

71

285

147

—

640

2,571

1,326

—

Total

71

285

147

—

640

2,571

1,326

—

SECURITIES
1. Held-to-maturity bonds
Fiscal 2018 (February 28, 2018)(Millions of yen)
Category

Carrying amountMarket value

DifferenceMarket value higher than carrying amount

226

226

0

Market value lower than carrying amount

4,801

4,799

(2)

Total

5,028

5,025

(2)

Fiscal 2019 (February 28, 2019)(Millions of yen)
Category

Carrying amount Market value(Thousands of U.S. dollars)
Difference

Carrying amount Market value

DifferenceMarket value higher than carrying amount

285

285

0

2,571

2,571

0

Market value lower than carrying amount

4,933

4,930

(2)

44,494

44,466

(18)

Total

5,218

5,216

(2)

47,06447,046(18)

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FINANCIAL REPORT 2019

Financial Section

2. Available-for-sale securities
Fiscal 2018 (February 28, 2018)(Millions of yen)
Category

Carrying amount

Acquisition cost

Difference(1) Stocks

50,142

23,82526,316(2) Bonds———(3) Other———

Subtotal

50,142

23,82526,316

309

316

(7)

Carrying amount higher than acquisition cost:

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

9,901

9,901

—

Subtotal

10,21010,218(7)

Total

60,352

34,04426,308

Fiscal 2019 (February 28, 2019)(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

44,921

20,88724,034405,168

188,392

216,776(2) Bonds

—

—

—

—

—

—

(3) Other

—

—

—

—

—

—

Subtotal

44,921

20,88724,034405,168

188,392

216,776(1) Stocks

1,836

2,016

(180)

16,56018,183(1,624)(2) Bonds

—

—

—

—

—

—

(3) Other

15,83815,838—142,852

142,852—

Subtotal

17,675

17,855(180)

159,421161,044(1,624)

Total

62,59638,74323,853564,589

349,445

215,144

Carrying amount lower than acquisition cost:

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FINANCIAL REPORT 2019

Financial Section

3. Available-for-sale securities sold during the fiscal year
Fiscal 2018 (March 1, 2017–February 28, 2018)(Millions of yen)
Category

Total gains
on salesSales

Total losses on sales

Stocks

801

487

—

Bonds

—

—

—

Other

—

—

—

Total

801

487

—

Fiscal 2019 (March 1, 2018–February 28, 2019)(Millions of yen)
Category

Sales(Thousands of U.S. dollars)

Total gains
on salesTotal losses
on salesSales

Total gains
on salesTotal losses
on sales

Stocks

2,573

1,312

—

23,207

11,834

—

Bonds

—

—

—

—

—

—

Other

—

—

—

—

—

—

Total

2,573

1,312

—

23,207

11,834—HISAMITSU PHARMACEUTICAL CO., INC.

45

FINANCIAL REPORT 2019

Financial Section

RETIREMENT BENEFITS
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 some 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)

Fiscal 2018

Fiscal 2019

Fiscal 201917,44817,395

156,895

Service costs

907

907

8,181

Interest costs

68

68

613

Actuarial differences incurred

(572)

(111)

(1,001)

Payment of retirement benefits

(435)

(486)

(4,384)

Other

(21)

(98)

(884)

17,395

17,673

159,403

Beginning balance of retirement benefit obligations:Ending balance of retirement benefit obligations(2) Reconciliation of beginning and ending balances of pension assets(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2018

Fiscal 2019

Fiscal 2019

Beginning balance of pension assets:

12,704

13,188

118,950

Expected return on plan assets

215

224

2,020

Actuarial differences incurred

186

(123)

(1,109)

Employer contributions

359

365

3,292

Payment of retirement benefits

(278)

(279)

(2,516)

Ending balance of pension assets

13,18813,374

120,628

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FINANCIAL REPORT 2019

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)

Fiscal 2018

Fiscal 2019

Fiscal 2019

Retirement benefit obligations for funded plans

10,097

10,20892,072

Pension assets(13,188)(13,374)(120,628)(3,090)(3,165)(28,547)

Retirement benefit obligations for unfunded plans

7,297

7,465

67,331

Net amount of liabilities and assets in consolidated balance sheets

4,207

4,299

38,775Net defined benefit liability

7,297

7,465

67,331

Net defined benefit asset(3,090)(3,165)(28,547)

Net amount of liabilities and assets in consolidated balance sheets

4,207

4,299

38,775(4) Breakdown of retirement benefit expenses(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2018

Fiscal 2019

Fiscal 2019

Service costs

907

907

8,181

Interest costs

68

68

613

Expected return on plan assets

(215)

(224)

(2,020)

Amortization of actuarial differences

379

322

2,904

1,138

1,073

9,678

Retirement benefit expenses for defined benefit plans(5) Remeasurements of defined benefit plans, net of tax
Items recorded in remeasurements of defined benefit plans (before related tax effects) are as follows:(Millions of yen)
Actuarial differences(Thousands of U.S. dollars)

Fiscal 2018

Fiscal 2019

Fiscal 2019

1,138

310

2,796

(6) Remeasurements of defined benefit plans
Items recorded in remeasurements of defined benefit plans (before related tax effects) are as follows:(Millions of yen)
Unrecognized actuarial differences

HISAMITSU PHARMACEUTICAL CO., INC.

47

(Thousands of U.S. dollars)

Fiscal 2018

Fiscal 2019

Fiscal 2019

439

128

1,155

FINANCIAL REPORT 2019

Financial Section(7) Pension assets
1) Breakdown by main items of pension assets
The proportions of main items to the total pension assets are as follows:
Fiscal 2018

Fiscal 2019

Bonds

54%

53%

Stocks27%

29%

General account

10%

9%

Other

9%

9%

Total

100%

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.
(8) Basis for actuarial calculation
Fiscal 2018

Fiscal 2019

Discount rate

0.4%

0.4%

Long-term expected rate of return on plan assets

1.7%

1.7%

HISAMITSU PHARMACEUTICAL CO., INC.

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FINANCIAL REPORT 2019

Financial Section

MATTERS RELATED TO STOCK OPTIONS, ETC
1. Expenses related to stock options and its items(Millions of yen)
Expenses for stock option as compensation of selling,
general and administrative expenses(Thousands of U.S.dollars)

Fiscal 2018

Fiscal 2019

Fiscal 2019

95

93

839

2. Description, scale and transition of stock options(1) Description of stock options

Resolution dateHisamitsu Pharmaceutical Co., Inc.
The first subscription rights to shares

Hisamitsu Pharmaceutical Co., Inc.
The second subscription rights to shares

July 10, 2015

July 8, 2016

Classification and number of persons to be granted 10 directors of the Company

10 directors of the Company

Class and number of shares

Common stock of 35,800 shares

Common stock of 17,900 shares

Date of grant

July 27, 2015

July 25, 2016

Vesting conditions

No vesting conditions are applied.

No vesting conditions are applied.

Requisite service period——

Exercise period

From July 28, 2015 to July 27, 2065

From July 26, 2016 to July 25, 2066

Hisamitsu Pharmaceutical Co., Inc.
The third subscription rights to shares

Hisamitsu Pharmaceutical Co., Inc.
The fourth subscription rights to shares

July 7, 2017

July 6, 2018

Resolution date

Classification and number of persons to be granted 10 directors of the Company

10 directors of the Company

Class and number of shares

Common stock of 21,900 shares

Common stock of 12,500 shares

Date of grant

July 25, 2017

July 24, 2018

Vesting conditions

No vesting conditions are applied.

No vesting conditions are applied.

Requisite service period——

Exercise period

From July 26, 2017 to July 25, 2067

From July 25, 2018 to July 24, 2068

(2) Scale and transition of stock options
The following is applicable to the stock options prevalent in the fiscal year under review (FY2/19), whereby the number ofstock options is converted into number of shares.

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FINANCIAL REPORT 2019

Financial Section( i ) Number of stock options(Shares)
Hisamitsu
Hisamitsu
Hisamitsu
Hisamitsu
Pharmaceutical Co., Inc. Pharmaceutical Co., Inc. Pharmaceutical Co., Inc. Pharmaceutical Co., Inc.
The first subscription
The second subscription The third subscription
The fourth subscription
rights to sharesrights to sharesrights to sharesrights to shares
Date of resolution

July 10, 2015

July 8, 2016

July 7, 2017

July 6, 2018

End of fiscal 2018

—

—

—

—

Granted

———12,500

Expired

—

—

—

—

Vested———12,500

Outstanding prior to vesting

—

—

—

—

35,80017,90021,900—

Vested———12,500Exercised

—

—

—

—

Expired

—

—

—

—

35,80017,90021,90012,500Prior to vesting:Post-vesting:End of fiscal 2018

Outstanding prior to exercise(ii) Unit price information(Yen)
Hisamitsu Pharmaceutical Hisamitsu Pharmaceutical Hisamitsu Pharmaceutical Hisamitsu PharmaceuticalCo., Inc.
Co., Inc.
Co., Inc.
Co., Inc.
The first subscription
The second subscription The third subscription
The fourth subscription
rights to sharesrights to sharesrights to sharesrights to shares
Date of resolution

July 10, 2015

July 8, 2016

July 7, 2017

July 6, 2018

Exercise price

1

1

1

1

Average share priceat the time of exercise

—

—

—

—

3,796

5,032

4,463

7,328

Fair valuation unit price asat the grant date

3. Method for estimating fair valuation unit price of the stock options
granted during the fiscal year under review(1) Valuation method used: Black-Scholes model(2) Main base number and the method for the estimation thereof
Share price volatility (Note 1)

27.826%

Expected remaining period (Note 2)

10 years

Expected dividends (Notes 3)¥82 per share

Risk-free interest rate (Note 4)

0.080%

Notes: 1. Calculated based on the actual share price over a ten-year period (from July 2008 to July 2018).
2. Period from the grant date up to the estimated average timing of exercise.
3. Based on the actual dividend paid for FY2/18.
4. Japanese government bond yields corresponding to the expected remaining period.
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FINANCIAL REPORT 2019

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 2018

Fiscal 2019

Fiscal 2019

2,066

2,182

19,681

Provision for directors’ retirement benefits (long-term accounts payable)

398

398

3,590

Accrued enterprise tax

281

47

424

Allowance for doubtful accounts

128

142

1,281

Inventories

100

74

667

Excess depreciation

744

732

6,602

Valuation losses on memberships

186

142

1,281

Loss on valuation of investment securities

780

666

6,007

Deferred tax assets:
Net defined benefit liability

449

433

3,905

Outsourced research and development

2,377

713

6,431

Other

4,295

4,700

42,392Sub-total deferred tax assets

11,808

10,23492,306

Valuation allowance(3,214)(3,198)(28,845)

Total deferred tax assets

8,594

7,036

63,462

(929)

(929)

(8,379)Valuation difference on available-for-sale securities(7,598)(7,059)(63,669)

Other(2,026)(2,264)(20,420)

Total deferred tax liabilities(10,554)(10,252)(92,469)(1,960)(3,216)(29,007)

Provision for bonuses

Deferred tax liabilities:
Net defined benefit asset

Net deferred tax assets

Note: The net value of deferred tax assets are included in the following consolidated balance sheet categories:(Millions of yen)
Current assets: deferred tax assets
Non-current assets: deferred tax assets
Non-current liabilities: deferred tax liabilities

HISAMITSU PHARMACEUTICAL CO., INC.

51

(Thousands of U.S. dollars)

Fiscal 2018

Fiscal 2019

Fiscal 2019

3,840

2,151

19,401

353

388

3,500

(6,153)(5,756)(51,917)

FINANCIAL REPORT 2019

Financial Section

2. Breakdown by main items that caused major differences in statutory tax rate and income tax rate
after application of tax effect accounting

Statutory tax rate

Fiscal 2018
(February 28, 2018)

Fiscal 2019
(February 28, 2019)

—

30.7%

(Reconciliation)
Non-deductible expenses, such as entertainment expenses

—

0.5%

Special tax exemption for experimental research and development—(3.8)%

Effects of tax rate differences between the parent company and consolidated subsidiaries—(2.9)%

Share of (profit) loss of entities accounted for using equity method—(0.7)%

Other

—

0.7%

—

24.5%

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 less than five
percent of the statutory tax rate, notes for Fiscal 2018 are omitted.

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

SEGMENT INFORMATION
1. Outline of reportable segments
The Company engages in business activities primarily in research and development, manufacturing, purchase, and 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
by reportable 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.

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FINANCIAL REPORT 2019

Financial Section

RELATED INFORMATION
Fiscal 2018 (March 1, 2017 – February 28, 2018)

1. Information by product/service segment
This information is omitted, as net sales to external customers in single product/service segment accounts for more than
90% of net sales in the consolidated statements of income.

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

USA

Other

Total

103,799

27,883

16,783

148,466

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

(2) Property, plant and equipment(Millions of yen)
Japan

USA

Other

Total

30,596

6,670

2,798

40,064

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

Net sales

Related segment

Alfresa Holdings Corporation

22,003

Pharmaceuticals

MEDIPAL HOLDINGS CORPORATION

21,944

Pharmaceuticals

Fiscal 2019 (March 1, 2018 – February 28, 2019)

1. Information by product/service segment
This information is omitted, as net sales to external customers in single product/service segment accounts for more than
90% of net sales in the consolidated statements of income.

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

USA

Other

Total

99,36026,765

17,282

143,408

Japan

USA

Other

Total

896,185

241,409155,876

1,293,479(Thousands of U.S. dollars)Note: Net sales are segmented into countries or territories according to the location of the customer.

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FINANCIAL REPORT 2019

Financial Section(2) Property, plant and equipment(Millions of yen)
Japan

USA

Other

Total

29,854

7,267

2,434

39,556

Japan

USA

Other

Total

269,270

65,545

21,954

356,778(Thousands of U.S. dollars)

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

Net sales

Related segment

Alfresa Holdings Corporation

20,400

Pharmaceuticals

MEDIPAL HOLDINGS CORPORATION

20,224

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

Net sales

Related segment

Alfresa Holdings Corporation

183,999

Pharmaceuticals

MEDIPAL HOLDINGS CORPORATION

182,412

Pharmaceuticals

Information on the impairment loss of non-current 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.

RELATED PARTY INFORMATION
Fiscal 2018 (March 1, 2017–February 28, 2018)
Because the item is not material, this item is not stated.
Fiscal 2019 (March 1, 2018–February 28, 2019)
Because the item is not material, this item is not stated.

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FINANCIAL REPORT 2019

Financial Section

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

Fiscal 2018

Fiscal 2019

Fiscal 2019

2,912.83

2,981.63

26.89

Profit per share

228.52230.082.08

Diluted profit per share

228.35229.86

2.07

Net assets per share

Notes: 1. The basis for the calculation of profit per share and diluted profit per share is as follows.
(Millions of yen)(Thousands of U.S. dollars)

Fiscal 2018

Fiscal 2019

Fiscal 201919,11919,204

173,212

Profit per share:
Profit attributable to owners of parent

—

—

—

Profit attributable to owners of parent attributable to common stock

19,11919,204

173,212

Average common stock during year (Thousands of shares)

83,66583,468—Adjusted profit attributable to owners of parent

—

—

—

Increase in common stock (Thousands of shares)

64

81

—

(Subscription rights to shares (Thousands of shares))

(64)

(81)

—

Outline of residual securities that were not included in calculating
diluted profit per share as they had no dilutive effect

—

—

—

Amount not attributable to common shareholders

Diluted profit per share:

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

Fiscal 2018

Fiscal 2019

Fiscal 2019245,227

248,161

2,238,306

Amount deducted from total net assets:

1,526

1,687

15,216(Subscription rights to shares)

(299)

(392)

(3,536)(1,227)(1,295)(11,680)

Net assets attributable to common stock as at the end of the fiscal year

243,700

246,473

2,223,081

Common stock used in calculating net assets per share as at the end of
the fiscal year (Thousands of shares)

83,664

82,664—

Total net assets(Non-controlling interests)

SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.

HISAMITSU PHARMACEUTICAL CO., INC.

55

FINANCIAL REPORT 2019

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 2019of Fiscal 2019of Fiscal 2019of Fiscal 2019
Average interest rate

Category
Short-term loans

1,390

1,290

12,537

11,635

0.38

—

71

71

640

640

0.64

—

29

26

262

235

—

—

504

433

4,546

3,905

0.64

64

70

577

631

—

—

—

—

—

—

—

2,061

1,891

18,58917,056——

Current portion of long-term
loans
Current portion of long-termlease obligation
Long-term loans(excluding current portion)
Lease obligation(excluding current portion)
Other interest-bearing liabilities
Total

Due date

March 2020 toMarch 2026
March 2020 to
September 2025

Notes: 1. Average interest rate is the weighted average interest rate for the year-end balances of loans, etc.
2. 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.
3. Long-term loans and lease obligations (both excluding current portion) within five years after the consolidatedbalance 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

65

77

71

71

Lease obligations

25

24

7

4

(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

586

695

640

640

Lease obligations

225

216

63

36

Category

Supplementary schedule of asset retirement obligations
Not applicable.

HISAMITSU PHARMACEUTICAL CO., INC.

56

FINANCIAL REPORT 2019

Financial Section

Other
Quarterly consolidated financial information for Fiscal 2019
(Millions of yen)Three months ended
May 31, 2018

Six months ended
August 31, 2018

Nine months ended
November 30, 2018

Fiscal 2019

Net sales

33,507

69,400102,587

143,408

Profit before income taxes

4,449

12,221

17,621

25,673

Profit attributable to ownersof parent

3,452

9,158

13,32919,204

Profit per share (yen)41.27

109.46

159.35230.08Three months ended
May 31, 2018

Six months ended
August 31, 2018

Nine months ended
November 30, 2018

Fiscal 2019

Net sales

302,219

625,958925,291

1,293,479

Profit before income taxes

40,128110,228

158,934

231,559

Profit attributable to ownersof parent

31,136

82,601

120,222173,212

Profit per share (U.S. dollars)

0.37

0.99

1.44

2.08

(Cumulative)(Thousands of U.S. dollars)(Cumulative)(Yen)(Quarterly)
Profit per shareFirst quarter

Second quarter

Third quarter

Fourth quarter

41.27

68.19

49.89

70.84

(U.S. dollars)(Quarterly)
Profit per shareFirst quarter

Second quarter

Third quarter

Fourth quarter

0.37

0.62

0.45

0.64

Note: “Royalty income,” which had been previously been presented under non-operating income, has been included in and presented
under “Net sales” starting from the end of the fiscal year under review. The amount from the three months ended May 31, 2018, tothe nine months ended November 30, 2018 reflect this change in presentation method.

HISAMITSU PHARMACEUTICAL CO., INC.

57

FINANCIAL REPORT 2019

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(Shares)

Type of shares

Shares issued at year end
Fiscal 2019
(February 28, 2019)

Shares issued on
filing date
(May 27, 2019)

Names of listing stock
exchanges or registeredsecurities dealers
associations

Common stock

95,164,895

95,164,895

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

Total

95,164,895

95,164,895—

Details
All voting shares, standard
shares with unlimited rights(Voting units: 100 shares)—(2) Status of share subscription rights to shares
1) Details of stock option system
It was resolved at the annual general meeting of shareholders that the Company awards stock options as compensation
for the Company’s directors (excluding outside directors) in accordance with Article 361 of the Companies Act.
The description of the relevant system is as follows.
The first subscription rights to shares (resolved on July 10, 2015, issued on July 27, 2015)
As of the end of the fiscal year under review As at the end of the month preceding the filing date(February 28, 2019)(April 30, 2019)
Number of subscription rights to shares (Units)

358 (Note 1)

Same as left

Class of shares to be issued upon exercise ofsubscription rights to shares
Number of shares to be issued upon exerciseof subscription rights to shares (Shares)
Cash payment upon exercise of subscription
rights to shares (yen)Common stock

Same as left

35,800 (Notes 1, 2)Same as left

1

Same as left

Exercise period of subscription rights to shares

July 28, 2015 to July 27, 2065

Same as left

Price of the shares to be issued upon exerciseof subscription rights to shares, and the amountto be incorporated into capital stock (yen)Price of shares issued: 3,797
Amount to be incorporated into
capital stock: 1,899 (Note 3)

Same as left

(Note 4)Same as left

Matters concerning the transfer of subscription
rights to shares

Acquisition of subscription rights to sharesby transfer shall be subject to the approval
based on the resolution of the board of
directors of the Company.

Same as left

Matters concerning the issuance of subscription rights
to shares associated with organizational restructuring(Note 5)Same as left

Conditions for the exercise of subscription
rights to shares

HISAMITSU PHARMACEUTICAL CO., INC.

58

FINANCIAL REPORT 2019

Corporate Information

Notes: 1. Class and number of allottees of subscription rights to shares, as well as number of subscription rights to shares tobe allotted are as follows:			
Directors of the Company (excluding outside directors): 10 persons; 358 subscription rights to shares		Number of shares to be issued upon exercise of each subscription right to shares (hereinafter “number of shares
granted”) shall be 100.
2.	In the event the Company conducts a stock split of the shares of its common stock (including a gratis allotment of
its common stocks; hereinafter the same in every reference to stock splits), on and after the date on which
subscription rights to shares are allotted (hereinafter the “allotment date”), or a reverse stock split, the number ofshares granted shall be adjusted according to the following formula, and fractions less than one share resulting
from the calculation shall be rounded down.
			
Number of shares granted after adjustment = Number of shares granted before adjustment × Ratio of stock
splits or reverse stock splits		Number of shares granted after adjustment shall, in the case of a stock split, be applicable on and after the day
following the record date thereof (if a record date is not established, effective date thereof), while in the case of areverse stock split, effective date thereof. However, in the case where a stock split is conducted subject to theapproval at the general meeting of shareholders, of a proposal to increase capital stock or additional paid-in-capitalby reducing surplus, if a date prior to the conclusion of such general meeting of shareholders is set as the record
date for the stock split, number of shares granted after adjustment shall, for the period on and after the day
following the conclusion of such general meeting of shareholders, become applicable retroactively on such record
date.
		Subsequent to the allotment date, in the event of a need for an adjustment to the number of shares granted inassociation with a merger or company split of the Company or otherwise, the Company may make an adjustment
to the number of shares granted as appropriate, within a reasonable extent.
		In the event of an adjustment to the number of shares granted, within the period up to the day before the date on
which the number of shares granted after adjustment becomes applicable, the Company shall notify each holder ofsubscription rights to shares registered in the original register of subscription rights to shares (hereinafter the“holder of subscription rights to shares”), of the matters required to be communicated thereto, via personal or public
notice. However, if such personal or public notice cannot be delivered in the aforementioned period, it shall bedelivered as soon as possible.
3. (1)	The amount of an increase in capital associated with the issuance of shares as a result of the exercise ofsubscription rights to shares, shall be half of the maximum amount of an increase in capital stock calculated inaccordance with Article 17-1 of the Company Accounting Ordinance, where any fraction less than ¥1 resulting
therefrom shall be rounded up.
		 (2)	The amount of an increase in additional paid-in capital associated with the issuance of shares as a result of
the exercise of subscription rights to shares, shall be calculated by subtracting the amount of an increase incapital stock described in (1) above, from the maximum amount of an increase in capital stock, etc., also
described in (1) above.
4. (1)	A holder of subscription rights to shares shall, on or after the day following the date of loss of his/her position
as a director, be entitled to exercise the subscription rights to shares allotted to him/her based on such loss.
		 (2)	In the event of death of a holder of subscription rights to shares, only if all of the subscription rights to shares
held by such holder are succeeded by one person who is his spouse, child, parents or sibling among all hisheirs (hereinafter such heir who succeed the subscription rights to shares shall be called the “successor”), thesuccessor shall be entitled to exercise subscription rights to shares.
		 (3)	Once having abandoned subscription rights to shares, a holder of subscription rights to shares shall not be
entitled to exercise such subscription rights to shares.

HISAMITSU PHARMACEUTICAL CO., INC.

59

FINANCIAL REPORT 2019

Corporate Information

		 (4)	A holder of subscription rights to shares must exercise the whole of the subscription rights to shares allotted tohim/her at once (subscription rights to shares remaining after the partial abandonment, if such partial
abandonment is conducted).
5.	In the event the Company engages in a merger (referring only to the merger in which the Company is an absorbed
company), absorption-type or incorporation-type company split (referring only to the company split in which theCompany is a split company), or share exchange or share transfer (referring only to the share exchange or sharetransfer in which the Company becomes a wholly-owned subsidiary) (hereinafter collectively an “organizational
restructuring”), the Company shall issue subscription rights to shares in the stock company listed in (a) to (e) ofArticle 236-1, Item 8 of the Companies Act (hereinafter the “restructured company”) in the respective type of theaforementioned organizational restructuring, to the holder of subscription rights to shares who holds thesubscription rights to shares remaining immediately prior to the effective date of such organizational restructuring(hereinafter the “residual subscription rights to shares”) the Company engages in (effective date of the absorptiontype merger in the case of an absorption-type merger; date of establishment of the new stock company created asa result of the incorporation-type merger in the case of an incorporation-type merger; effective date of theabsorption-type company split, in the case of an absorption-type company split; date of establishment of the newstock company created as a result of the incorporation-type company split in the case of an incorporation-typecompany split, effective date of the share exchange in the case of an share exchange; the date of establishment of
the wholly-owned parent created as a result of the share transfer, in the case of the share transfer; hereinafter thesame shall apply). However, the aforementioned issuance shall be subject to the creation of provisions to the effectthat the subscription rights to shares in the restructured company be issued in accordance with the items as follows
in the absorption-type merger agreement, incorporation-type merger agreement, absorption-type company split
agreement, incorporation-type company split plan, share exchange agreement or share transfer plan.
		 (1)	Number of the subscription rights to shares in the restructured company to be issued
			Subscription rights in the restructured company shall be issued to each holder of subscription rights to shares,in the same number as the number of residual subscription rights to shares held by each such holder.
		 (2)	Type of shares in the restructured company to be issued upon exercise of subscription rights to shares			Common stock of the restructured company.
		 (3) Number of shares in the restructured company to be issued upon exercise of subscription rights to shares			It shall be determined in the same manner as described in 1. and 2. above, in consideration of the conditions
for the organizational restructuring.
		 (4) The value of asset to be contributed at the time of the exercise of subscription rights to shares			The value of asset to be contributed at the time of the exercise of each subscription right to shares to beissued, shall be the amount calculated by multiplying the post-restructuring exercise price as determined asfollows, by the number of shares in the restructured company to be issued upon exercise of the subscription
rights to shares as determined in (3) above. The post-restructuring exercise price shall be ¥1 for each share in
the restructured company, which can be granted upon exercise of each subscription right to shares issued.
		 (5) Period during which the subscription rights to shares can be exercised			It shall be the period beginning on the inception date of the period prescribed in the aforementioned “Exercise
period of subscription rights to shares,” or the effective date of the organizational restructuring, whicheverlater, ending on the expiry date of the period prescribed in the aforementioned “Exercise period of subscription
rights to shares.”		 (6)	Matters concerning capital stock and additional paid-in capital, in the case of issuance of shares upon exerciseof subscription rights to shares			It shall be decided in the same manner as described in 3. above.

HISAMITSU PHARMACEUTICAL CO., INC.

60

FINANCIAL REPORT 2019		 (7) Restriction on the acquisition of subscription rights to shares by transfer
			Acquisition of subscription rights to shares by transfer shall require the approval based on the resolution of theboard of directors of the restructured company (“general meeting of shareholders” if the restructured company
is not a company with board of directors).
		 (8) Terms of acquisition of subscription rights to shares			It shall be decided in the way described as follows.
			Upon the approval at general meeting of shareholders of the Company on the proposals (i), (ii), (iii), (iv) and(v) as follows (or upon the resolution of the board of directors of the Company, if resolution of the general
meeting of shareholders is not required), the Company shall be entitled to acquire the subscription rights toshares without compensation on the date as separately specified by the board of directors of the Company.
			(i) Proposal for the approval of the merger agreement in which the Company becomes the absorbed company
			(ii)	Proposal for the approval of the company split agreement in which the Company becomes the split
company, or on the plan for such company split			(iii)	Proposal for the approval of the share exchange agreement or plan for the share transfer, in which theCompany becomes a wholly-owned subsidiary			(iv)	Proposal for the approval of the amendment to the Company’s articles of incorporation to create newprovisions to the effect that that acquisition of all of the shares issued by the Company by transfer, shallrequire the approval of the Company.
			(v)	Proposal for the approval of the amendment to the Company’s articles of incorporation to create provisions
to the effect that that acquisition of the type of shares to be delivered upon exercise of subscription rights
to shares by means of transfer, shall require the approval of the Company, or the provisions that govern
the acquisition of all shares of such type based on the resolution of general meeting of shareholders of theCompany.
		 (9) Other conditions for the exercise of subscription rights to shares			It shall be decided in the same manner as described in 4. above.

HISAMITSU PHARMACEUTICAL CO., INC.

61

FINANCIAL REPORT 2019

The second subscription rights to shares (resolved on July 8, 2016, issued on July 25, 2016)
As of the end of the fiscal year under review As at the end of the month preceding the filing date(February 28, 2019)(April 30, 2019)
Number of subscription rights to shares (Units)

179 (Note 1)

Same as left

Common stock

Same as left

17,900 (Notes 1, 2)Same as left

1

Same as left

Exercise period of subscription rights to shares

July 26, 2016 to July 25, 2066

Same as left

Price of the shares to be issued upon exerciseof subscription rights to shares, and the amountto be incorporated into capital stock (yen)Price of shares issued: 5,033
Amount to be incorporated into
capital stock: 2,517 (Note 3)

Same as left

(Note 4)Same as left

Matters concerning the transfer of subscription
rights to shares

Acquisition of subscription rights to sharesby transfer shall be subject to the approval
based on the resolution of the board of
directors of the Company.

Same as left

Matters concerning the issuance of subscription rights
to shares associated with organizational restructuring(Note 5)Same as left

Class of shares to be issued upon exercise ofsubscription rights to shares
Number of shares to be issued upon exerciseof subscription rights to shares (Units)
Cash payment upon exercise of subscription
rights to shares (yen)Conditions for the exercise of subscription
rights to shares

Notes: 1. Class and number of allottees of subscription rights to shares, as well as number of subscription rights to shares tobe allotted are as follows:			
Directors of the Company (excluding outside directors): 10 persons; 179 subscription rights to shares		Number of shares to be issued upon exercise of each subscription right to shares (hereinafter “number of shares
granted”) shall be 100.
2. Notes 2 through 5 are the same as the corresponding notes in the first subscription rights to shares.

HISAMITSU PHARMACEUTICAL CO., INC.

62

FINANCIAL REPORT 2019

The third subscription rights to shares (resolved on July 7, 2017, issued on July 25, 2017)
As of the end of the fiscal year under review As at the end of the month preceding the filing date(February 28, 2019)(April 30, 2019)
Number of subscription rights to shares (Units)

219 (Note 1)

Same as left

Common stock

Same as left

21,900 (Notes 1, 2)Same as left

1

Same as left

Exercise period of subscription rights to shares

July 26, 2017 to July 25, 2067

Same as left

Price of the shares to be issued upon exerciseof subscription rights to shares, and the amountto be incorporated into capital stock (yen)Price of shares issued: 4,464
Amount to be incorporated into
capital stock: 2,232 (Note 3)

Same as left

(Note 4)Same as left

Matters concerning the transfer of subscription
rights to shares

Acquisition of subscription rights to sharesby transfer shall be subject to the approval
based on the resolution of the board of
directors of the Company.

Same as left

Matters concerning the issuance of subscription rights
to shares associated with organizational restructuring(Note 5)Same as left

Class of shares to be issued upon exercise ofsubscription rights to shares
Number of shares to be issued upon exerciseof subscription rights to shares (Units)
Cash payment upon exercise of subscription
rights to shares (yen)Conditions for the exercise of subscription
rights to shares

Notes: 1. Class and number of allottees of subscription rights to shares, as well as number of subscription rights to shares tobe allotted are as follows:			
Directors of the Company (excluding outside directors): 10 persons; 219 subscription rights to shares		Number of shares to be issued upon exercise of each subscription right to shares (hereinafter “number of shares
granted”) shall be 100.
2. Notes 2 through 5 are the same as the corresponding notes in the first subscription rights to shares.

HISAMITSU PHARMACEUTICAL CO., INC.

63

FINANCIAL REPORT 2019

The fourth subscription rights to shares (resolved on July 6, 2018, issued on July 24, 2018)
As of the end of the fiscal year under review As at the end of the month preceding the filing date(February 28, 2019)(April 30, 2019)
Number of subscription rights to shares (Units)

125 (Note 1)

Same as left

Common stock

Same as left

12,500 (Notes 1, 2)Same as left

1

Same as left

Exercise period of subscription rights to shares

July 25, 2018 to July 24, 2068

Same as left

Price of the shares to be issued upon exerciseof subscription rights to shares, and the amountto be incorporated into capital stock (yen)Price of shares issued: 7,329
Amount to be incorporated into
capital stock: 3,665 (Note 3)

Same as left

(Note 4)Same as left

Matters concerning the transfer of subscription
rights to shares

Acquisition of subscription rights to sharesby transfer shall be subject to the approval
based on the resolution of the board of
directors of the Company.

Same as left

Matters concerning the issuance of subscription rights
to shares associated with organizational restructuring(Note 5)Same as left

Class of shares to be issued upon exercise ofsubscription rights to shares
Number of shares to be issued upon exerciseof subscription rights to shares (Units)
Cash payment upon exercise of subscription
rights to shares (yen)Conditions for the exercise of subscription
rights to shares

Notes: 1. Class and number of allottees of subscription rights to shares, as well as number of subscription rights to shares tobe allotted are as follows:			
Directors of the Company (excluding outside directors): 10 persons; 125 subscription rights to shares		Number of shares to be issued upon exercise of each subscription right to shares (hereinafter “number of shares
granted”) shall be 100.
2. Notes 2 through 5 are the same as the corresponding notes in the first subscription rights to shares.

2) Details of rights plans
Not applicable.

3) Other status of share subscription rights to shares
Not applicable.

(3) Execution of warrant bonds, etc. with clause allowing change in exercise priceNot applicable.

HISAMITSU PHARMACEUTICAL CO., INC.

64

FINANCIAL REPORT 2019

(4) Changes in shares issued, capital stock, and other items(Shares)
Date

Change in sharesissued—(Millions of yen)

Shares issued

Change in capitalstock

Capital stock

Change in additional
paid-in capital

Additional paid-in
capital95,164,895

—

8,473

(6,123)

2,118

Change in sharesissuedShares issued

Change in capitalstock

Capital stock

Change in additional
paid-in capital

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

76,423(55,227)

19,103

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

(5) Details of shareholders
As of February 28, 2019
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)

—

47

33

182

446

4

3,855

4,567

—

Shares owned(units)—445,347

18,253

179,214

101,48512

206,915

951,226

42,295

Ratio (%)

—

46.82

1.92

18.84

10.67

0.00

21.75

100.00—Note: ‌Treasury stock of 12,472,588 are listed as 124,725 units in the individuals and other column and as 88 shares in the shares
under one unit column. The 12,472,588 treasury stock figure is the number of shares listed in the shareholder registry.

HISAMITSU PHARMACEUTICAL CO., INC.

65

FINANCIAL REPORT 2019(6) Principal shareholders
As of February 28, 2019
Percentage ofshares outstanding
Shares owned(excluding treasury(thousand shares)
stock) (%)

Name

Address

Japan Trustee Service Bank, Ltd. (trust account)

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

6,527

7.89

5,002

6.05

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

4,387

5.31

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

4,370

5.28

Nippon Life Insurance Company

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

3,910

4.73

The Bank of Fukuoka, Ltd.

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

3,621

4.38

The Bank of Saga, Ltd.

2-7-20 Tojin, Saga

2,356

2.85

408 Tashiro Daikan-machi, Tosu-shi Saga

2,280

2.76

1-3-1 Nishi-Shimbashi, Minato-ku, Tokyo

2,064

2.50

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

1,834

2.22

36,352

43.96

The Master Trust Bank of Japan, Ltd. (trust account) 2-11-3 Hamamatsucho, Minato-ku, Tokyo
The Nomura Trust and Banking Co., Ltd.
(MUFG Bank, Ltd. pension trust account)
Japan Trustee Service Bank, Ltd.
(Resona Bank, Ltd. retrust account, The NishiNippon City Bank, Ltd. pension trust account)Hisamitsu Business Partners’ Shareholding
Association
SMBC Trust Bank Ltd.
(Sumitomo Mitsui Banking Corporation pension
trust account)
TKY
Total

Notes: 1. The number of the foregoing shares related to fiduciary services is as follows.
Japan Trustee Service Bank, Ltd.: 10,897 thousand shares
The Master Trust Bank of Japan, Ltd.: 5,002 thousand shares
The Nomura Trust and Banking Co., Ltd.: 4,387 thousand shares
SMBC Trust Bank Ltd.: 2,064 thousand shares
2. In addition to the shares listed above, the company owns treasury stock of 12,472 thousand shares.

HISAMITSU PHARMACEUTICAL CO., INC.

66

FINANCIAL REPORT 2019

(7) Stock Administration of the Filing Company
Fiscal year

From March 1 to end of February

Annual general meeting of shareholders In May
Record date

End of February

Record date for distribution of surplus

End of August
End of February

Number of shares constituting one unit

100 shares

Purchase of shares less than one unit
Handling officeTransfer agent

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

Transfer office—

Purchasing fee

FreeMethod of public notice

The Company’s public notice shall be by electronic public notice. However, if electronic public notice
is not available due to accident or other unavoidable reason, the public notice shall be posted on the
Nihon Keizai Shimbun.
The Company’s electronic public notice is posted on our website at the following address:
http://www.hisamitsu.co.jp/ir/koukoku.html

Shareholders’ privileges

None

Notes: 1. For the Company’s shares less than one unit, rights other than the following cannot be exercised:
1) The rights set out in each item of Article 189, Paragraph 2 of the Companies Act.
2) The right to claim pursuant to Article 166, Paragraph 1 of the Companies Act.
3) The right to receive an allotment of shares for subscription or subscription rights to shares for subscription.

HISAMITSU PHARMACEUTICAL CO., INC.

67

FINANCIAL REPORT 2019

Corporate Information

Group Companies
Our corporate group comprises Hisamitsu Pharmaceutical, 18 consolidated subsidiaries, and 3 equity-method affiliates.

Name

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

Main businessactivities

Votingrights(%)

Kurume,Fukuoka
Saga, Saga

¥1,115 million Other businesses

69.50

3

—

—

—

—

¥605 million Other businesses

70.12

2

1

—

—

—

Tosu, Saga

¥50 million Other businesses

100

2

2

—

Hisamitsu
leases land

Kurume,Fukuoka¥25 million Other businesses

100
(100)

1

1

—

Agent for casualty
insurance contracts
for Hisamitsu
Provide advertising
agency services to
Hisamitsu

Pharmaceuticals

100

1

—

—

Pharmaceuticals

100
(100)
100
(100)
100

1

1

—

2

—

—

3

GBP Pharmaceuticals
120 thousands
EUR Pharmaceuticals
10,000VND Pharmaceuticals
258,775 million

100

—

2

100

1

2

100

—

3

Beijing,
China

CNY Pharmaceuticals
1,206 thousand

100

2

1

Jiangsu,China

CNY Pharmaceuticals
5,973 thousand

100

1

—

—

Kowloon,Hong Kong¥10 million Pharmaceuticals

100

1

1

Selling products—Working
capital loans supplied by Hisamitsu

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

— —

—

—

—

—

Location

Capital orinvestment

Other

Remarks

Consolidated subsidiaries
CRCC Media Co., Ltd.
Saga City-Vision Co.,Ltd.
Taiyo Co., Ltd.

Hisamitsu Agency Co.,Ltd.

Hisamitsu U.S., Inc.

Delaware
USD
USA
10
Hisamitsu America, Inc. New Jersey,
USD
USA
3,000 thousands
Noven Pharmaceuticals, Florida,
USD
Inc.
USA
10
Hisamitsu Farmaceutica Manaus,
BRL
do Brasil Ltda.
Brazil15 million

Hisamitsu UK Ltd.

London, UK

Hisamitsu Italia S.r.l.

Milan, Italy

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

Hisamitsu
Pharmaceutical
Technology Consulting(Beijing) Co., Ltd.
Hisamitsu
Pharmaceutical(China) Co., Ltd
Hisamitsu
Pharmaceutical(Hong Kong) Co., Ltd
PT. Hisamitsu PharmaIndonesia

3 other companies—

HISAMITSU PHARMACEUTICAL CO., INC.

Pharmaceuticals
Pharmaceuticals

68—

Hisamitsu
leases partof a leasebuilding—
Note 3

Selling products—
supplied by Hisamitsu—
Hisamitsu outsources —development
Working
Manufacture and sell —capital loans products in Brazil,
with products andsome raw materials
supplied by Hisamitsu—
Hisamitsu outsources —development—
Hisamitsu outsources —development—
Manufacture and sell —products in Vietnam,with products andsome raw materials
supplied by Hisamitsu—
Hisamitsu outsources —medical marketing

Selling products—
supplied by Hisamitsu—

Note 3Note 3Note 3Note 3Note 3—

FINANCIAL REPORT 2019

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

3

—

Yutoku PharmaceuticalInd. Co., Ltd.

Kashima,Saga¥120 million Pharmaceuticals

15.0

2

—

—

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

39.8

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 income(3) p rofit attributable toowners of parent(4) Net assets(5) Total assets

HISAMITSU PHARMACEUTICAL CO., INC.

(Millions of yen)
17,808
2,633(Thousands of U.S. dollars)
160,621
23,7492,024

18,25628,596
36,660257,924
330,658

69

FINANCIAL REPORT 2019

Corporate Information

Management
Chairman

NAKATOMI Hirotaka

Standing Corporate Auditor

NAKATOMI Nobuyuki

President & CEO

NAKATOMI KazuhideStanding Corporate Auditor

HIRANO MunehikoSenior Managing Director

SUGIYAMA Kousuke

Corporate Auditor

ONO Keinosuke

Managing Director

AKIYAMA Tetsuo

Corporate Auditor

TOKUNAGA Tetsuo

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 & CEO, is the first son of NAKATOMI Hirotaka, Chairman.
2. NAKATOMI Nobuyuki, Standing Corporate Auditor, is the younger brother of NAKATOMI Hirotaka,
Chairman.
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, Kazuhide, President & CEO¥8,473,839,816

Fiscal year
Number of employees

March 1–End of February(As of February 28, 2019)
Business segment
Pharmaceuticals

Employees
2,735 [629]Other businesses
Total

57 [7]
2,792 [636]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 the employees column.

HISAMITSU PHARMACEUTICAL CO., INC.

70

FINANCIAL REPORT 2019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