Logitem Tsumura Co.,Ltd TSUMURA USA, INC TSUMURA & CO.

Transcription

1 Integrated Report 企业报告书 218

2 Logitem Tsumura Co.,Ltd TSUMURA USA, INC TSUMURA & CO.

3 ESG 11 Consolidated Balance Sheets Consolidated Statements of Income / Consolidated Statements of Comprehensive Income Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements Reference E Integrated Report 218 1

4 % 2.5% OTC 28 TU LAO TSUMURA CO., LTD. 2 TSUMURA & CO.

5 3.9% 83.9% 74.8% 25.2% 1 3.9%* 1 2.6%* %* 2 *1 Copyright 218 IQVIA. JPM29 3 MAT MAT Reprinted with permission *2 Copyright 218 IQVIA. JPM218 3 MAT Reprinted with permission 74.8% 25.2% 1 * 3 * Integrated Report 218 3

6 TSUMURA & CO.

7 GrowingGrowing % Integrated Report 218 5

8 致各位利益相关方 代表取缔役社长 加藤 照和 守护前人所建传统的同时 顺应时代变化 不断创新 通过汉方为人类健康做贡献 实现企业价值的持续提升 6 TSUMURA & CO.

9 , ,7 117,879 2, % 2, % 17,6 17, % 1,67 6.7% 12,7 14,54 1, % 2, % 14.6% 14.5% Integrated Report 218 7

10 * * 225 SDGs 129 / % 14, ,879 7, TSUMURA & CO.

11 Integrated Report 218 9

12 种植 采购 品质检测 保管 TSUMURA 1 & CO.

13 生产 销售 启蒙 普及 WHAT IS KAMPO? * 1 *1 8% * 2 *2 Integrated Report

14 SDGs * * 12 TSUMURA & CO.

15 SDGs 1 6 * P21 P22 P23 P25 P25 CO2 P28 P31 P32 P32 3 P15,29 P16-19 P34-37 P46 * 6 Integrated Report

16 221 KAMPO TSUMURA216 6 KAMPO TSUMURA TU-1 HOP STEP JUMP % 14, 3 117,879 7, , ROE 14 TSUMURA & CO.

17 1 * 3 * % , Integrated Report

18 216 *1 * *3 No.1 TSUMURA *1 *2 * ,749* 14 8,7 * *1,7 * 华 业 CFDA 药经济 *4 OTCHC *4 16 TSUMURA & CO.

19 1% % 49% 56% 63%* 1%* * Integrated Report

20 TSUMURA & CO.

21 56% 44% * * 1,6 5, Integrated Report

22 8% 15%5% * * 16 SDGs 2 TSUMURA & CO.

23 GACP* P28 * GACP Good Agricultural and Collection Practice / 14, 7, 12,371 1, Integrated Report

24 15% 6 1, 2, 218 4MyFarm Temiru Farm Temiru FarmHarunire Temiru Farm 22 TSUMURA & CO.

25 Integrated Report

26 / / CO2 SDGs 24 TSUMURA & CO.

27 生 工 生药自动仓库 生药 BOX 切制机 提取储存罐 喷雾干燥机 (SD) 浸膏粉末 乳糖 颗粒容器 称重器 混合机 压片机 切制品 调配 分离 浓缩 浸膏粉末 运往中间品自动仓库 滚碎机分级浸膏颗粒 运往中间品自动仓库 挑选加工 保管工序 切制工序 称重 调配工序 提取 分离 浓缩工序 干燥工序造粒工序包装 标识工序 压片 破碎 分级 浸膏粉末 片剂 颗粒 提 动生 生 中 机器 间 中 中 % 动生 217 8% 215 动生 ~ 21 运 生 运 制 级 浸膏制剂生 中 浓缩 浓缩 压缩 动 离 调 Integrated Report

28 , 1, 11,9 5, SCM* SCM * SCM SCM SCM / SCM / / 26 TSUMURA & CO.

29 PIC/S * PIC/S Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme GMP KAMPO SDGs Integrated Report

30 GACP GACP GACPGACP /// / / 28 TSUMURA & CO.

31 WHAT IS KAMPO? // MR Medical Representatives 3 SDGs Integrated Report

32 24 8, 5.1 6,48 % 6 4, * Growing* , 8, 4, Growing Growing 49 57,155 % 24,898 3, *1 5 *2 Growing 5 3 TSUMURA & CO.

33 Growing 5 ADME* 1 *1 ADME Absorption Distribution Metabolism Excretion No. RCT* 2 ADME TJ TJ BPSD* 3 2 TJ / TJ / TJ-14 6 TJ-41 1 TJ Growing TJ-29 5 TJ-24 4 / TJ-17 4 *2 Randomized Controlled Trial *3 Behavioral and Psychological Symptoms of Dementia Integrated Report

34 TU-1 / / TU-1 FDA IBS POI 217 Phase POI * POITU-1 218POI TU * / /4 32 TSUMURA & CO.

35 * 1 1 * 2 MR MR MR 218 *1 *2 Integrated Report

36 SDGs * * 34 TSUMURA & CO.

37 / / OJT Off-JT K3 K2 P2 K1 P1 S E5 S E4 S E3 S E2 S E1 O JT/ / //DVD I K3 K3 P1 SE K1 K Integrated Report

38 MR MR MR MR MR MR 6 MR* MR MR MR MR 75 * MRMR1997 MR MR / MR MR TSUMURA & CO.

39 MR MR MR Platina Kurumin 1.% % Lboshi % 2.2% 71.4% % / Platina Kurumin Lboshi Integrated Report

40 公司治理 取缔役 218 年 6 月 28 日数据 后排左起 大河内 公一 松下 满俊 藤 康范 加藤 照和 安达 晋 杉本 茂 三宅 博 前排左起 羽石 清美 松井 宪一 38 TSUMURA & CO.

41 , , , TSUMURA USA,INC UFJ CSR CSR , , EY Hulic-Reit Industrial Paper Supply , 217 1, Ernst & Young EY AZSA AZSA MAXVALU PACIFIC SYSTEMS Integrated Report

42 / / / // / / / / / / / / 9 5 / 1 /5 4 TSUMURA & CO.

43 PwC Arata Integrated Report

44 , , , / 1. 6, TSUMURA & CO.

45 REO [] * ) 1 % 12% ,2 14 ROE 6% , PDCA Integrated Report

46 PDCA 44 TSUMURA & CO.

47 PDCA / ESG* SDGs * ESGEnvironment Social GovernanceESG ESG Integrated Report

48 SDGs (BCP) 46 TSUMURA & CO.

49 % Integrated Report

50 11ESG * TJ 1,176 1,16 1,257 GJ/t CO 2 t-co2 62,9 63,4 65,9 CO 2 t-co2/t ,595 1,61 1,728 1,466 1,455 1,483 t/t ,454 5,683 5,261 2,773 2,631 2,72 * 2 * * * * % * 3 % * 3 % *1 Logitem Tsumura * * CO2 /CO2 / t-co2 12, t-co2/t 1 1,8 t/t 24 12, ,54 87,47 9, , , CO2 CO TSUMURA & CO.

51 ,269 1,357 1,343 1,473 1,395 1,428 1,58 1, ,885 69,77 73,82 8,414 8,44 78,948 87,52 87, ,379 1,565 1,528 1,622 1,466 1,492 1,547 1,54 1,132 1,274 1,228 1,353 1,312 1,34 1,339 1, ,99 5,473 7,257 8,758 9,115 1,411 11,89 9,32 2,717 2,784 2,831 2,898 3,335 3,242 3,331 3, Integrated Report

52 ,799 9,16 9,933 * 31,69 29,28 28,518 63,19 6,987 62,414 47,369 44,54 43,475 15,82 16,483 18,938 15,258 16,622 19,71 14,65 17,94 18,71 9,139 1,777 1,74 19,651 19,81 22,335 4,251 38,754 4,857 14,44 8,97 8,773 62,734 52,855 5,944 72,411 73,968 83, , , ,697 3,124 5,479 5,237 4,368 3,958 3,77 3,396 3,298 3,225 1,39 7,293 5,864 5,358 1,634 12,19 4,49 3,341 6,155 7,419 6,354 5,85 13,718 14,596 15, , , ,175.4 % ROE ROA * 5 TSUMURA & CO.

53 ,778 95,45 15,638 11,57 11, , , ,879 29,435 29,944 35,927 38,787 41,859 45,55 49,454 49,63 65,342 65,55 69,711 71,269 68,578 67,569 65,499 68,275 43,789 44,271 46,586 48,88 49,87 47,743 49,516 51,224 21,553 21,233 23,124 22,461 19,491 19,826 15,983 17,5 21,725 21,783 24,31 23,966 21,583 19,494 16,399 17,914 21,58 22,448 24,62 28,118 2,78 18,898 17,184 2,284 12,945 13,431 15,373 18,5 14,75 12,557 12,488 14,54 22,57 3,57 35,565 43,424 5,716 52,348 52,138 49,994 42,154 44,869 5,657 57,148 6,624 62,822 64,686 71,329 8,587 8,93 9,448 9,126 23,339 23,63 32,727 48,42 5,394 49,633 51,929 54,35 64,76 66,765 64,611 97,168 91,154 12,24 118, ,318 15, ,72 157, , , ,874 17, , , , ,8 293,71 5,264 6,425 9,328 8,991 8,428 9,638 6,438 11,9 4,123 4,565 4,94 5,949 6,252 5,968 6,87 6,48 3,453 3,85 4,49 4,871 5,387 5,59 5,629 6,157 5,232 1,972 3,988 4,214 5,691 1,19 14,614 2,288 12,47 7,314 12,11 5,98 4,992 17,57 21,65 21,66 6,815 5,342 8,22 1,694 1,683 7,461 6,451 23,354 3,355 5,272 4,275 4,575 1,48 4,68 9,572 5,35 17,198 13,96 13,762 14,418 19,343 25,128 29,91 78, , , , , ,13.4 2, , , Integrated Report

54 * 1 1,59 * %* 2 2.6%* % 129 3% 3.5% *1 Copyright 218 IQVIA. JPM218 3 MAT Reprinted with permission *2 Copyright 218 IQVIA. JPM29 3 MAT MAT Reprinted with permission 2, ,59 % 1 12, 111,119 1, 5 6, *1 Copyright 218 IQVIA. JPM MAT ~ MAT Reprinted with permission TSUMURA & CO.

55 * , , ,879 65,499 68, % 57.9% 15,983 17,5 13.9% 14.5% 16,399 17,914 17,184 2,284 12,488 14,54 * / 14, 14, 4 117, ,274 7, 7, No TJ-1 1,328 1, % 2 TJ-54 7,33 7, % 3 TJ-41 6,947 7, % 4 TJ-43 6,863 7, % 5 TJ-68 4,853 5, % 6 TJ-24 4,465 4, % 7 TJ-29 4,511 4,511. % 8 TJ-17 3,363 3, % 9 TJ-17 3,733 3, % 1 TJ-1 3,277 3, % 21 TJ-14 1,276 1, % , ,274 2, % Integrated Report

56 2172.5% 1, %5 2.3% Growing 3.1% ,59 * 83.9%* * Copyright 218 IQVIA. JPM218 3 MAT Reprinted with permission.3%4, % 3.5% % 1.6%3, 2 9.4% % , ,67 6, % ,224 8, % ,48 3, 25 3, 25 4, ROE 3, 2, % 3 15, 216 财年 15,983 销售收入增加 2,924 销售成本增加 (149) 销售管理费增加 (1,78) 217 财年 17,5 1, 14, ROE 54 TSUMURA & CO.

57 ,535 3,2 5,629 6,157 3,92 4, ,87 6,48 6.7% % 9.2% % ,217 5,98676, , 5,35 3, 21,66 (23,354) (3.) ,66 23,354 +5,35 45, 9, 29,91 78,313 Integrated Report

58 ,65 21,66 6,451 23,354 9,572 5,35 29,91 78, ,8 293,71 64,611 97,168 * 37,88 64, , ,533 * , , ,937 1 ROA 4, % 2 8, % 8 24, % 8 293,71 64, , , 1 4, 4 12, ROA 56 TSUMURA & CO.

59 , TSUMURA 217 3, , 3, , Integrated Report

60 217 12, % ROE ROA ( ) ROE217 ROE ROA % 14, 12, % , TSUMURA & CO.

61 % ,485 2,55 2,715 2,61 2,391 3,475 2,48 2,971 2,72 3,49 3, , % 12, , % +.pt 18, , , 25, 4, 2, 3, 15, 2, 1, 1, 5, 214 年 4 月 215 年 4 月 216 年 4 月 217 年 4 月 218 年 4 月 Integrated Report

62 FINANCIAL SECTION Consolidated Balance Sheets TSUMURA & CO. and consolidated subsidiaries March 31, 217 and 218 in millions US$ in thousands (Note 3) Assets Current assets Cash and deposits 29,931 83,52 $ 786,144 Notes and accounts receivable trade 4,347 42,96 43,859 Securities 3,5 32,944 Merchandise and finished goods 8,122 8,8 75,376 Work in process 14,547 12,797 12,453 Raw materials and supplies 29,467 29, ,736 Deferred tax assets 1,325 1,512 14,231 Other 1,941 1,971 13,266 Allowance for doubtful accounts (4) (4) (37) Total current assets 134, ,41 1,811,3 Non-current assets Property, plant and equipment Buildings and structures (Note 4 (d)) 64,429 64,778 69,732 Machinery, equipment and vehicles (Note 4 (d)) 47,92 5, ,894 Tools, furniture and fixtures (Note 4 (d)) 1,139 1,52 98,851 Land (Note 4 (a)) 9,52 9,52 85,23 Construction in progress 3,88 11, ,812 Other ,143 Accumulated depreciation (71,44) (75,776) (713,253) Total property, plant and equipment 64,686 71, ,394 Intangible assets ,951 Investments and other assets Investment securities (Note 4 (b)) 17,53 14, ,461 Net defined benefit asset 1,58 1,98 17,959 Deferred tax assets Other (Note 4 (b)) 3,743 13, ,367 Allowance for doubtful accounts () () () Total investment and other assets 22,376 29, ,136 Total non-current assets 87,329 11,3 953,51 Total assets 222,8 293,71 $2,764,54 6 TSUMURA & CO.

63 in millions US$ in thousands (Note 3) Liabilities Current liabilities Notes and accounts payable trade 6,696 5,57 $51,835 Short-term loans payable 12,581 1,314 97,82 Current portion of long-term loans payable 15, 141,189 Accounts payable other 6,2 7,823 73,635 Income taxes payable 1,91 3,538 33,31 Provision for sales returns Other 4,67 6,573 61,869 Total current liabilities 31,883 48, ,17 Non-current liabilities Bonds payable 3, 282,379 Long-term loans payable 24,376 9,376 88,253 Deferred tax liabilities 1,733 2,21 2,81 Deferred tax liabilities for land revaluation (Note 4 (a)) 1,179 1,179 11,97 Net defined benefit liability Other 5,353 5,547 52,211 Total non-current liabilities 32,727 48,42 455,591 Total liabilities 64,611 97, ,68 Net assets Shareholders equity Capital stock 19,487 3, ,716 Capital surplus 1,94 14,27 132,31 Retained earnings 129,937 14,4 1,318,147 Treasury shares (5,393) (814) (7,661) Total shareholders equity 145, ,396 1,726,242 Accumulated other comprehensive income Valuation difference on available-for-sale securities 3,845 4,748 44,691 Deferred gains or losses on hedges ,4 Revaluation reserve for land (Note 4 (a)) 2,673 2,673 25,16 Foreign currency translation adjustment 1,47 2,31 21,658 Remeasurements of defined benefit plans (12) 157 1,477 Total accumulated other comprehensive income 8,811 1,23 96,37 Non-controlling interests 2,613 2,933 27,67 Total net assets 157, ,533 1,849,896 Total liabilities and net assets 222,8 293,71 $2,764,54 See notes to consolidated financial statements. Integrated Report

64 FINANCIAL SECTION Consolidated Statements of Income TSUMURA & CO. and consolidated subsidiaries For the years ended March 31, 217 and 218 in millions US$ in thousands (Note 3) Net sales 114, ,879 $1,19,553 Cost of sales (Note 5 (a)) 49,457 49,67 466,933 Gross profit before provision for sales returns 65,496 68, ,62 Reversal of provision for sales returns Gross profit 65,499 68, ,648 Selling, general and administrative expenses (Notes 5 (b) and (c)) 49,516 51, ,153 Operating profit 15,983 17,5 16,485 Non-operating income Interest income ,562 Dividend income ,595 Share of profit of entities accounted for using equity method ,49 Other ,687 Total non-operating income 962 1,371 12,94 Non-operating expenses Interest expenses ,788 Bond issuance cost 143 1,346 Share issuance cost 18 1,16 Foreign exchange losses Other Total non-operating expenses ,772 Ordinary profit 16,399 17, ,618 Extraordinary income Gain on sales of non-current assets (Note 5 (d)) Gain on sales of investment securities 873 1,498 14,1 Subsidy income (Note 5 (e)) 1, 9,412 Total extraordinary income 876 2,59 23,616 Extraordinary losses Loss on sales of non-current assets (Note 5 (f)) Loss on retirement of non-current assets (Note 5 (g)) Loss on disaster (Note 5 (h)) 7 Environmental expenses (Note 5 (i)) Total extraordinary losses ,317 Profit before income taxes 17,184 2,284 19,926 Income taxes current 4,342 5,44 51,24 Income taxes deferred Total income taxes 4,446 5,489 51,666 Profit 12,738 14, ,25 Profit attributable to non-controlling interests ,72 Profit attributable to owners of parent 12,488 14,54 $136,521 See notes to consolidated financial statements. Consolidated Statements of Comprehensive Income TSUMURA & CO. and consolidated subsidiaries For the years ended March 31, 217 and 218 US$ in thousands in millions (Note 3) Profit 12,738 14,794 $139,25 Other comprehensive income Valuation difference on available-for-sale securities ,49 Deferred gains or losses on hedges 445 (61) (5,657) Revaluation reserve for land 159 Foreign currency translation adjustment (2,342) 92 8,49 Remeasurements of defined benefit plans, net of tax ,447 Share of other comprehensive income (loss) of entities accounted for using equity method (49) Total other comprehensive income (loss) (Note 6) (1,393) 1,477 13,92 Comprehensive income 11,344 16,271 $153,153 Comprehensive income attributable to Comprehensive income attributable to owners of parent 11,48 15,896 $149,623 Comprehensive income attributable to non-controlling interests (64) 374 3,52 See notes to consolidated financial statements. 62 TSUMURA & CO.

65 Consolidated Statements of Changes in Equity TSUMURA & CO. and consolidated subsidiaries For the years ended March 31, 217 and 218 Capital stock Capital surplus Retained earnings Treasury shares in millions Shareholders equity Total shareholders equity Balance at April 1, ,487 1,94 122,47 (392) 143,84 Changes of items during period Dividends of surplus (Note 7 (d)) (4,476) (4,476) Profit attributable to owners of parent 12,488 12,488 Change of scope of consolidation (15) (15) Increase by merger Purchase of treasury shares (5,1) (5,1) Net changes of items other than shareholders equity Total changes of items during period 7,889 (5,1) 2,888 Balance at March 31, ,487 1,94 129,937 (5,393) 145,972 Valuation difference on available-forsale securities Deferred gains or losses on hedges Revaluation reserve for land Foreign currency translation adjustment Accumulated other comprehensive income Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests in millions Total net assets Balance at April 1, 216 3, ,513 3,549 (485) 9,891 2, ,72 Changes of items during period Dividends of surplus (4,476) Profit attributable to owners of parent 12,488 Change of scope of consolidation (15) Increase by merger 27 Purchase of treasury shares (5,1) Net changes of items other than shareholders equity (2,78) 383 (1,8) (113) (1,193) Total changes of items during period (2,78) 383 (1,8) (113) 1,694 Balance at March 31, 217 3, ,673 1,47 (12) 8,811 2, ,397 See notes to consolidated financial statements. Integrated Report

66 FINANCIAL SECTION Retained earnings Treasury shares in millions Shareholders equity Total shareholders equity Capital stock Capital surplus Balance at April 1, ,487 1,94 129,937 (5,393) 145,972 Changes of items during period Issuance of new shares 1,654 1,654 21,39 Dividends of surplus (Note 7 (d)) (4,42) (4,42) Profit attributable to owners of parent 14,54 14,54 Purchase of treasury shares (1) (1) Disposal of treasury shares 1,432 4,58 6,12 Net changes of items other than shareholders equity Total changes of items during period 1,654 12,87 1,12 4,579 37,423 Balance at March 31, 218 3,142 14,27 14,4 (814) 183,396 Valuation difference on available-forsale securities Deferred gains or losses on hedges Revaluation reserve for land Foreign currency translation adjustment Accumulated other comprehensive income Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests in millions Total net assets Balance at April 1, 217 3, ,673 1,47 (12) 8,811 2, ,397 Changes of items during period Issuance of new shares 21,39 Dividends of surplus (4,42) Profit attributable to owners of parent 14,54 Purchase of treasury shares (1) Disposal of treasury shares 6,12 Net changes of items other than shareholders equity 92 (61) , ,712 Total changes of items during period 92 (61) , ,135 Balance at March 31, 218 4, ,673 2, ,23 2, ,533 Retained earnings US$ in thousands (Note 3) Shareholders equity Treasury shares Total shareholders equity Capital stock Capital surplus Balance at April 1, 217 $183,424 $ 18,26 $1,223,51 $(5,762) $1,373,983 Changes of items during period Issuance of new shares 1,282 1,282 2,574 Dividends of surplus (Note 7 (d)) (41,434) (41,434) Profit attributable to owners of parent 136, ,521 Purchase of treasury shares (9) (9) Disposal of treasury shares 13,478 43,19 56,588 Net changes of items other than shareholders equity Total changes of items during period 1, ,77 95,86 43,1 352,249 Balance at March 31, 218 $283,716 $132,31 $1,318,147 $ (7,661) $1,726,242 Valuation difference on available-forsale securities Deferred gains or losses on hedges Revaluation reserve for land Foreign currency translation adjustment Accumulated other comprehensive income Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests US$ in thousands (Note 3) Total net assets Balance at April 1, 217 $36,191 $ 8,76 $25,16 $13,836 $ (96) $82,934 $24,595 $1,481,522 Changes of items during period Issuance of new shares 2,574 Dividends of surplus (41,434) Profit attributable to owners of parent 136,521 Purchase of treasury shares (9) Disposal of treasury shares 56,588 Net changes of items other than shareholders equity 8,49 (5,657) 7,812 2,447 13,12 3,2 16,114 Total changes of items during period 8,49 (5,657) 7,812 2,447 13,12 3,2 368,364 Balance at March 31, 218 $44,691 $ 3,4 $25,16 $21,658 $1,477 $96,37 $27,67 $1,849,896 See notes to consolidated financial statements. 64 TSUMURA & CO.

67 Consolidated Statements of Cash Flows TSUMURA & CO. and consolidated subsidiaries For the years ended March 31, 217 and 218 in millions US$ in thousands (Note 3) Cash flows from operating activities Profit before income taxes 17,184 2,284 $ 19,926 Depreciation 5,629 6,157 57,953 Increase (decrease) in allowance for doubtful accounts (2) Interest and dividend income (449) (548) (5,158) Interest expenses ,788 Bond issuance cost 143 1,346 Share issuance cost 18 1,16 Share of (profit) loss of entities accounted for using equity method (31) (324) (3,49) Loss (gain) on sales and retirement of property, plant and equipment Decrease (increase) in notes and accounts receivable trade 1,465 (2,529) (23,84) Decrease (increase) in inventories (1,123) 2,566 24,152 Increase (decrease) in notes and accounts payable trade 1,255 (1,34) (12,274) Loss (gain) on sales of short-term and long-term investment securities (873) (1,498) (14,1) Decrease (increase) in net defined benefit asset (281) (422) (3,972) Increase (decrease) in net defined benefit liability (89) (47) (442) Other 3,272 1,715 16,142 Subtotal 26,182 24, ,221 Interest and dividend income received ,54 Interest expenses paid (142) (161) (1,515) Income taxes paid (5,444) (3,875) (36,474) Net cash provided by operating activities 21,65 21,66 198,286 Cash flows from investing activities Purchase of property, plant and equipment (8,211) (1,463) (98,484) Proceeds from sales of property, plant and equipment Purchase of intangible assets (88) (318) (2,993) Purchase of short-term and long-term investment securities (18) (13,51) (127,164) Proceeds from sales and redemption of short-term and long-term investment securities 1,874 16, ,51 Payments for investments in capital of subsidiaries and affiliates (238) Payments of loans receivable (3) (4) (37) Collection of loans receivable Payments into time deposits (34) (21,569) (23,21) Proceeds from withdrawal of time deposits 36 6,383 6,8 Other 197 (49) (461) Net cash used in investing activities (6,451) (23,354) (219,823) Cash flows from financing activities Decrease in short-term loans payable (2,267) (21,338) Proceeds from issuance of bonds 29, ,24 Proceeds from issuance of common shares 21,21 199,557 Purchase of treasury shares (5,1) (1) (9) Proceeds from sales of treasury shares 6,12 56,588 Cash dividends paid (4,478) (4,44) (41,453) Dividends paid to non-controlling interests (49) (49) (461) Other (43) (43) (44) Net cash provided by (used in) financing activities (9,572) 5,35 473,53 Effect of exchange rate change on cash and cash equivalents (588) 394 3,78 Net increase (decrease) in cash and cash equivalents 4,453 48, ,685 Cash and cash equivalents at beginning of period 25,128 29,91 281,447 Increase in cash and cash equivalents from newly consolidated subsidiary 29 Increase in cash and cash equivalents resulting from merger with unconsolidated subsidiaries 28 Cash and cash equivalents at end of period (Note 8) 29,91 78,313 $ 737,132 See notes to consolidated financial statements. Integrated Report

68 FINANCIAL SECTION Notes to the Consolidated Financial Statements TSUMURA & CO. and consolidated subsidiaries March 31, 217 and Summary of Significant Accounting Policies (a) Basis of presentation The accompanying consolidated financial statements of TSUMURA & CO. (the Company ) and its consolidated subsidiaries (collectively, the Group ) are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Act of Japan (the FIEA ). As permitted by the FIEA, amounts of less than one million yen have been omitted. As a result, the totals shown in the accompanying consolidated financial statements (both in yen and in U.S. dollars) do not necessarily agree with the sums of the individual amounts. Certain amounts in the prior year s financial statements have been reclassified to conform to the current year s presentation. (b) Consolidation (1) Scope of consolidation 1) Number of consolidated subsidiaries: six (of which, four companies are located overseas) for the year ended March 31, 218 Names of consolidated subsidiaries: LOGITEM TSUMURA CO., LTD. TSUMURA USA, INC. SHENZHEN TSUMURA MEDICINE CO., LTD. SHANGHAI TSUMURA PHARMACEUTICALS CO., LTD. YUBARI TSUMURA CO., LTD. Tsumura China Inc. Effective from the year ended March 31, 218, the Company included Tsumura China Inc., which was previously a nonconsolidated subsidiary, in the scope of consolidation upon the completion of investment. 2) Name of major non-consolidated subsidiaries: LAO TSUMURA CO., LTD. and another company 3) Reason for excluding non-consolidated subsidiaries from the scope of consolidation The Company excluded these two non-consolidated subsidiaries from the scope of consolidation since each of them is small in size and its assets, sales, and profit (for the holding interest) and retained earnings (for the holding interest) are insignificant to the Company s consolidated financial statements. (2) Equity method 1) Number of affiliates accounted for using the equity method:one SICHUAN CHUANCUN TRADITIONAL CHINESE MEDICINES CO., LTD. 2) Name of major non-consolidated companies and affiliates not accounted for using the equity method LAO TSUMURA CO., LTD. and two other companies 3) Reason for excluding non-consolidated subsidiaries and affiliates from the scope of equity method accounting The Company excluded the three non-consolidated subsidiaries and affiliates from the scope of equity method accounting since each of them is small in size and its assets, sales, and profit (for the holding interest) and retained earnings (for the holding interest) are insignificant to the Company s consolidated financial statements, and the impact is insignificant as a whole. 4) Special notes to application of equity method accounting When the fiscal year-end of a company accounted for using the equity method is not consistent to that of the Company, the financial statements of the company as of its own balance sheet date is used. (c) Fiscal year-end of consolidated subsidiaries Of consolidated subsidiaries, SHENZHEN TSUMURA MEDICINE CO., LTD., SHANGHAI TSUMURA PHARMACEUTICALS CO., LTD., Tsumura China Inc., and TSUMURA USA, INC. have fiscal years ending on December 31. Their financial statements as of December 31 are used for consolidation. The Company makes necessary adjustments on consolidation if there are any significant transactions during the intervening period. (d) Accounting policies (1) Basis and method to measure significant assets 1) Securities Available-for-sale securities With readily determinable market value Stated at fair value based on market quotes as of the balance sheet date. Any changes in unrealized holding gain or loss are included in net assets. The cost of securities sold is principally computed based on the moving-average method. Without readily determinable market value Stated at cost determined by the moving-average method. 2) Inventories Stated at the lower of cost determined principally by the averagecost method or net selling value. 3) Derivatives Stated at fair value. (2) Depreciation methods of significant depreciable assets 66 TSUMURA & CO.

69 1) Property, plant and equipment, excluding leased assets Straight-line method The estimated useful lives of the major depreciable assets are as follows: Buildings and structures 3 to 65 years Machinery, equipment and vehicles 3 to 8 years 2) Intangible assets, excluding leased assets Straight-line method Cost of software purchased for internal use is amortized by the straight-line method over the internal useful life of five years. 3) Leased assets Leased assets under finance lease transactions that do not transfer ownership to the lessee are depreciated under the straight-line method over the lease term with no residual value. Monetary assets and liabilities denominated in foreign currencies are translated into yen at the rates in effect at the consolidated balance sheet date, and the resulting exchange gains and losses are recognized in profit or loss. Assets, liabilities, profit and loss of overseas consolidated subsidiaries and affiliates are translated into yen at the spot rates as of the balance sheet date. Foreign exchange gains and losses arising from the translation are credited or charged to foreign currency translation adjustment and non-controlling interests under net assets. (7) Significant hedge accounting 1) Hedge accounting method The Company primarily applies deferral hedge accounting. As for forward exchange contracts, the Company applies the allocation method if requirements are met. (3) Accounting treatment of significant deferred assets Bond issuance cost and share issuance cost are charged to expenses when incurred. (4) Basis of significant provisions 1) Allowance for doubtful accounts The Group provides allowances for uncollectible notes and accounts receivable trade at the amounts calculated based on past experience and the amounts estimated specifically on each doubtful receivable from a customer with financial difficulty. 2) Provision for sales returns Provision for sales returns is provided for estimated losses on sales returns subsequent to the balance sheet date. (5) Accounting treatment of retirement benefits 1) Method of attributing expected benefits The benefit formula method is used as the method of attributing expected benefits to the current period in calculating retirement benefit obligations. 2) Hedging instruments and hedged items Hedging instruments forward exchange contracts Hedged items forecasted transactions denominated in foreign currencies 3) Hedge policy As a policy, the Company hedges the foreign currency fluctuation risk in accordance with the internal policies and procedures. 4) Method of evaluating hedge effectiveness The Company omits the evaluation of hedge effectiveness since the allocation method is applied for all hedging transactions. (8) Cash and cash equivalents in the consolidated statements of cash flows Cash and cash equivalents in the consolidated statements of cash flows consist of cash on hand, demand deposits, and short-term investments with a maturity of three months or less from acquisition date that are readily convertible and with minimum risk of price fluctuations. 2) Treatment of actuarial gain or loss and prior service costs Actuarial gain or loss is amortized and expensed using the straight-line method over 1 years, which is within the estimated average of remaining service years of employees, from the following year in which the gain or loss is recognized. Prior service costs are amortized and expensed using the straight-line method over 1 years, which is within the estimated average of remaining service years of employees. (9) Other significant matters for the preparation of the consolidated financial statements 1) Accounting for consumption taxes Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Consumption taxes paid by the Group on the purchases of goods and services that are not deductible under the consumption tax law are expensed as incurred. 3) Application of simplified method for small-sized enterprises The Company s consolidated subsidiaries use the simplified method in calculating net defined benefit liability and retirement benefit expenses. Under this method, the payment amount to be required at the year-end for voluntary termination is deemed as retirement benefit obligations. 2) Consolidated taxation system The Company has applied the consolidated taxation system. (6) Translation of foreign currencies Integrated Report

70 FINANCIAL SECTION 2 New Accounting Standards Not Yet Applied ASBJ Statement No. 29, Accounting Standard for Revenue Recognition (issued on March 3, 218) ASBJ Guidance No. 3, Implementation Guidance on Accounting Standard for Revenue Recognition (issued on March 3, 218) (1) Overview The International Accounting Standards Board ( IASB ) and the Financial Accounting Standards Board ( FASB ) in the US conducted a joint project to clarify the comprehensive principles for recognizing revenues and published the Revenues from Contracts with Customers (IFRS 15 by IASB and Topic 66 by FASB) in May 214. IFRS 15 will be applied from a fiscal period beginning on or after January 1, 218 and Topic 66 will be applied from a fiscal period beginning on or after December 15, 217. Under these circumstances, ASBJ also developed a comprehensive accounting standard for revenue recognition and published a new standard together with its implementation guidance. As a basic policy for the development of the new standard, ASBJ determined to adopt the core principles of IFRS 15 in order to enhance comparability of financial statements, which is one of the benefits of ensuring consistency with IFRS 15. In addition, for any practical issue to be considered in Japan, ASBJ is supposed to add alternative treatment to the extent that comparability is not impaired. (2) Scheduled date of application The Company will apply the new standard and guidance from the beginning of the fiscal year ending March 31, 222. (3) Effect from the application of the new accounting standard and guidance The effect from the application of the new accounting standard and guidance is currently under evaluation. 3 Basis of Translation The consolidated financial statements presented herein are expressed in yen and, solely for the convenience of the reader, have been translated into U.S. dollars at 16.24=US$1., the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market on March 31, 218. This translation should not be construed as a representation that the amounts shown could have been, or could in the future be, converted into U.S. dollars at that or any other rate. Each amount in the consolidated financial statements and notes is rounded down to the nearest 1 million yen (in the case of translation into U.S. dollars, they have been rounded down to the nearest 1 thousand dollars). 4 Notes to the Consolidated Balance Sheets (a) Land revaluation The Group revalued land used for business activities in accordance with the Act on Revaluation of Land (Act No. 34, dated March 31, 1998) and the Act on Partial Revision of the Act on Revaluation of Land (Act No. 19, dated March 31, 21). Revaluation reserve for land, net of related deferred taxes, has been presented as a component of net assets. Method of revaluation The Company applies the method to make reasonable adjustments to the value determined by the property tax value as prescribed in Paragraph 2, item 3 of the Order for Enforcement of the Act on Revaluation of Land (Act No. 119, dated March 31, 1998, hereinafter Ordinance No.119 ) and the professional appraisal value as prescribed in Paragraph 2, item 5 of Ordinance No Date of revaluation March 31, 22 in millions US$ in thousands As of March 31, Difference between fair value of land at the year end and carrying value after the revaluation (2,537) (2,542) $(23,926) (b) Investments in non-consolidated subsidiaries and affiliates are as follows: in millions US$ in thousands As of March 31, Investments and other assets: Investment securities (stocks) 1 $ Investments in capital 1,217 1,485 13, TSUMURA & CO.

71 (c) Guarantee obligations The Company guarantees bank loans made by companies other than consolidated subsidiaries. in millions US$ in thousands As of March 31, Tianjin China Medico Technology Co., Ltd. 1,92 1,92 $18,72 China Medico Corporation 1,8 1,8 1,165 Total 3, 3, $28,237 (d) Reduction entry Reduction entry is an accounting treatment to defer taxation, which has an effect to reduce tax burden for the year when a company acquires property, plant and equipment with proceeds such as subsidies by recording loss to lower the acquisition cost. Among property, plant and equipment acquired in previous years, amounts of reduction entry due to national subsidies and the breakdown are as follows: in millions US$ in thousands As of March 31, Buildings and structures $1,261 Machinery, equipment and vehicles Tools, furniture and fixtures Total $2,117 5 Notes to the Consolidated Statements of Income (a) Inventories at the balance sheet date are stated at the lower of cost or net selling value. Loss on valuation of inventories included in cost of sales for the years ended March 31, 217 and 218 are as follows: in millions US$ in thousands $1,289 (b) Major expenses included in selling, general and administrative expenses are as follows: in millions US$ in thousands For the years ended March 31, Sales promotion expenses 3,92 4,75 $ 38,356 Sales rebates 9,519 9,798 92,225 Salaries and allowances 17,28 17, ,371 Research and development expenses 6,87 6,48 56,927 Retirement benefit expenses 1,246 1,37 9,76 Provision of allowance for doubtful accounts (c) Research and development expenses included in selling, general and administrative expenses and cost of sales for the years ended March 31, 217 and 218 are as follows: in millions US$ in thousands ,87 6,48 $56,927 (d) The breakdown of gain on sales of non-current assets is as follows: in millions US$ in thousands For the years ended March 31, Buildings and structures 1 $ 9 Machinery, equipment and vehicles Tools, furniture and fixtures 2 18 Integrated Report

72 FINANCIAL SECTION (e) Subsidy income For the year ended March 31, 217 Not applicable. For the year ended March 31, 218 The Company received a subsidy of 1, million ($9,412 thousand) for a new industrial development project from Shizuoka Prefecture and recognized subsidy income under extraordinary income. (f) The breakdown of loss on sales of non-current assets is as follows: in millions US$ in thousands For the years ended March 31, Machinery, equipment and vehicles $122 Land 18 (g) The breakdown of loss on retirement of non-current assets is as follows: in millions US$ in thousands For the years ended March 31, Buildings and structures $329 Machinery, equipment and vehicles Tools, furniture and fixtures (h) Loss on disaster For the year ended March 31, 217 Loss on disaster consisted of a 5 million loss on product damage incurred from the Kumamoto Earthquake and a 2 million loss from typhoon damage in Hokkaido. For the year ended March 31, 218 Not applicable. (i) Environmental expenses For the year ended March 31, 217 Not applicable. For the year ended March 31, 218 Since an oil spill accident occurred in Takigawa Farm owned by YUBARI TSUMURA CO., LTD., the Company recognized 66 million (US$621 thousand) of environmental expenses under extraordinary losses including estimated costs to decontaminate the soil and to prevent damages from spreading on a reasonable basis. 7 TSUMURA & CO.

73 6 Notes to the Statements of Comprehensive Income Reclassifications and adjustments and income tax effects attributable to other comprehensive income (loss) for the years ended March 31, 217 and 218 are as follows: in millions US$ in thousands For the years ended March 31, Valuation difference on available-for-sale securities: Amount arising during the year 877 2,82 $ 26,374 Reclassifications and adjustments (873) (1,498) (14,1) Before income tax effects 4 1,34 12,274 Income tax effects 5 (41) (3,774) Valuation difference on available-for-sale securities 9 92 $ 8,49 Deferred gains or losses on hedges: Amount arising during the year 641 (869) $ (8,179) Income tax effects (196) 267 2,513 Deferred gains or losses on hedges 445 (61) $ (5,657) Revaluation reserve for land: Income tax effects 159 $ Revaluation reserve for land 159 $ Foreign currency translation adjustment: Amount arising during the year (2,342) 92 $ 8,49 Foreign currency translation adjustment (2,342) 92 $ 8,49 Remeasurements of defined benefit plans, net of tax: Amount arising during the year $ 969 Reclassifications and adjustments ,55 Before income tax effects ,529 Income tax effects (169) (114) (1,73) Remeasurements of defined benefit plans, net of tax $ 2,447 Share of other comprehensive income (loss) of entities accounted for using equity method Amount arising during the year (49) 13 $ 122 Share of other comprehensive income (loss) of entities accounted for using equity method (49) Total other comprehensive income (loss) (1,393) 1,477 $ 13,92 Integrated Report

74 FINANCIAL SECTION 7 Notes to Consolidated Statements of Changes in Equity For the year ended March 31, 217 (a) Type and number of issued shares Thousands of shares Type Beginning of the year Increase Decrease End of the year Common stock 7,771 7,771 (b) Type and number of treasury shares Thousands of shares Type Beginning of the year Increase Decrease End of the year Common stock 247 1,741 1,989 Reason for changes in number of shares: The major breakdown of increase is as follows: Increase due to acquisition of treasury shares by resolution of the Board of Directors meeting Increase due to purchase of shares less than one unit 1,741 thousand shares thousand shares (c) Subscription rights to shares Not applicable. (d) Dividends (1) Dividends paid Resolution Ordinary general meeting of shareholders held on June 29, 216 Board of Directors meeting held on November 9, 216 Type of share Total amount of dividend ( in millions) Common stock 2, Common stock 2, Dividend per share ( ) Record date Effective date March 31, 216 September 3, 216 June 3, 216 December 5, 216 (2) Dividends whose effective date is subsequent to March 31, 217 Resolution Ordinary general meeting of shareholders held on June 29, 217 Type of share Common stock Source of dividend Total amount of dividend ( in millions) Dividend per share ( ) Retained earnings 2, Record date March 31, 217 Effective date June 3, 217 For the year ended March 31, 218 (a) Type and number of issued shares Thousands of shares Type Beginning of the year Increase Decrease End of the year Common stock 7,771 5,986 76,758 Reason for changes in number of shares: The major breakdown of increase is as follows: Increase due to a third-party allotment 5,986 thousand shares 72 TSUMURA & CO.

75 (b) Type and number of treasury shares Thousands of shares Beginning of Type the year Increase Decrease End of the year Common stock 1,989 1,689 3 Reason for changes in number of shares: The major breakdown of increase is as follows: Increase due to purchase of shares less than one unit thousand shares The major breakdown of decrease is as follows: Decrease due to disposal of treasury shares through a third-party allotment 1,689 thousand shares (c) Subscription rights to shares Not applicable. (d) Dividends (1) Dividends paid Resolution Ordinary general meeting of shareholders held on June 29, 217 Board of Directors meeting held on November 8, 217 Type of share Total amount of dividend ( in millions) Dividend per share ( ) Total amount of dividend (US$ in thousands) Dividend per share (US$) Record date Effective date Common stock 2, $2,717 $.3 March 31, 217 June 3, 217 Common stock 2, ,717.3 September 3, 217 December 5, 217 (2) Dividends whose effective date is subsequent to March 31, 218 Resolution Ordinary general meeting of shareholders held on June 28, 218 Type of share Common stock Source of dividend Total amount of dividend ( in millions) Dividend per share ( ) Total amount of dividend (US$ in thousands) Retained earnings 2, $23,23 $.3 Dividend per share (US$) Record date Effective date March 31, 218 June 29, Notes to Consolidated Statements of Cash Flows The reconciliation of cash and cash equivalents in the consolidated statements of cash flows at March 31, 217 and 218 to the accounts and amounts on the accompanying balance sheets is summarized as follows: in millions US$ in thousands As of March 31, Cash and deposits 29,931 83,52 $786,144 Less: Time deposits with a maturity in excess of three months (3) (5,27) (49,11) Cash and cash equivalents 29,91 78,313 $737,132 Integrated Report

76 FINANCIAL SECTION 9 Leases LESSEE (a) Finance leases Finance lease transactions that do not transfer ownership 1) Details of leased assets Leased assets consist of forklifts in factories. 2) Depreciation method of leased assets Depreciation method is stated in Note 1. Summary of Significant Accounting Policies, (d) Accounting policies, (2) Depreciation methods of significant depreciable assets, 3) Leased assets. (b) Operating leases Future minimum lease payments for non-cancellable operating leases in millions US$ in thousands As of March 31, Within one year $48 Over one year Total $762 1 Financial Instruments (a) Status of financial instruments (1) Policy on financial instruments The Group finances necessary funds through bank loans and issuance of bonds, considering capital investments for the pharmaceutical production and selling business. Temporary excess funds are invested in highly secure financial assets. Derivative transactions are only utilized to hedge the following risks, and it is the Group s policy not to enter into derivative transactions for speculative purposes. (2) Overview and risks of financial instruments and the Group s risk management policy Operating receivables such as notes and accounts receivable trade are exposed to credit risk. The Group monitors the due date and balance by each customer in accordance with internal rules and ask for deposits to secure receivables depending on the customer s credit conditions. Investment securities mainly consist of stocks of companies with business relationships and are exposed to market fluctuation risk. The market value of the investment securities is regularly reported to the officer responsible for accounting and finance. Operating payables such as notes and accounts payable trade are due within one year. Some of the operating payables relating to imports of raw materials are denominated in foreign currencies and are therefore exposed to foreign currency fluctuation risk. The Group utilizes forward exchange contracts to hedge the risk. Short-term loans payable is used to finance operating capital and are exposed to interest rate fluctuation risk. Bonds payable and long-term loans payable are mainly used to finance capital investment, and interest rate fluctuation risk is mitigated by using fixed interest rate borrowings in large part. Accounts payable other and income taxes payable are each due within one year. The Group utilizes derivative financial instruments such as forward exchange contracts and non-deliverable forward (NDF) to hedge the foreign currency fluctuation risk of forecasted transactions denominated in foreign currencies. Please refer to Note 1. Summary of Significant Accounting Policies, (7) Significant hedge accounting for hedging instruments, hedged items, hedge policy and method of evaluating hedge effectiveness. Derivative transactions are executed and monitored based on internal rules where the authorization policy is prescribed. The Group only enters into derivative transactions with highly rated financial institutions to mitigate credit risk. Operating payables and loans are exposed to liquidity risk. The Group manages the risk by preparing the cash management plans monthly. (3) Supplemental explanation regarding fair value of financial instruments The contract amounts and other information regarding derivative transactions described in Note 12. Derivatives do not indicate market risk related to derivative transactions. (b) Fair value of financial instruments The following table summarizes carrying value reported on the consolidated balance sheets, fair value, and their differences. The financial instruments whose fair value is extremely difficult to determine are not included in the table. Please see 2. The carrying value of financial instruments whose fair value is extremely difficult to determine on page TSUMURA & CO.

77 As of March 31, 217 in millions Carrying value Fair value Difference (1) Cash and deposits 29,931 29,931 (2) Notes and accounts receivable trade 4,347 4,347 (3) Investment securities Available-for-sale securities 17,423 17,423 Total assets 87,71 87,71 (1) Notes and accounts payable trade 6,696 6,696 (2) Short-term loans payable 12,581 12,581 (3) Accounts payable other 6,2 6,2 (4) Income taxes payable 1,91 1,91 (5) Long-term loans payable 24,376 24,326 (49) Total liabilities 51,575 51,526 (49) Derivative transactions * 1 1,335 1,335 *1 A receivable or payable arisen from derivative transactions is shown in net. Net payable is shown in parentheses. As of March 31, 218 in millions US$ in thousands Carrying value Fair value Difference Carrying value Fair value Difference (1) Cash and deposits 83,52 83,52 $ 786,144 $ 786,144 $ (2) Notes and accounts receivable trade 42,96 42,96 43,859 43,859 (3) Securities and investment securities Available-for-sale securities 17,582 17, , ,493 Total assets 144,8 144,8 $1,355,496 $1,355,496 $ (1) Notes and accounts payable trade 5,57 5,57 $ 51,835 $ 51,835 $ (2) Short-term loans payable 1,314 1,314 97,82 97,82 (3) Current portion of long-term loans payable 15, 15, 141, ,189 (4) Accounts payable other 7,823 7,823 73,635 73,635 (5) Income taxes payable 3,538 3,538 33,31 33,31 (6) Bonds payable 3, 29,968 (32) 282, ,78 (31) (7) Long-term loans payable 9,376 9,33 (45) 88,253 87,82 (423) Total liabilities 81,558 81,481 (77) $ 767,676 $ 766,952 $(724) Derivative transactions * $ 4,376 $ 4,376 $ *1 A receivable or payable arisen from derivative transactions is shown in net. Net payable is shown in parentheses. Notes: 1. Fair value measurement of financial instruments and matters regarding securities and derivatives Assets (1) Cash and deposits and (2) Notes and accounts receivable trade The carrying value is deemed as the fair value since these items are scheduled to be settled in a short period of time. (3) Securities and investment securities The fair value of stocks is based on the quoted market prices. The fair value of bonds is based on the price provided by the counterparty financial institutions. Please refer to Note 11. Investment Securities for information regarding securities by holding purposes. Liabilities (1) Notes and accounts payable trade, (2) Short-term loans payable, (3) Current portion of long-term loans payable, (4) Accounts payable other, and (5) Income taxes payable The carrying value is deemed as the fair value since these items are scheduled to be settled in a short period of time. (6) Bonds payable The fair value of bonds payable is measured at market values. (7) Long-term loans payable The fair value of long-term loans payable is calculated by discounting the total of principal and interest using an assumed interest rate applicable to a similar type of new borrowings. Derivative transactions Please refer to Note 12. Derivatives. Integrated Report

78 FINANCIAL SECTION 2. The carrying value of financial instruments whose fair value is extremely difficult to determine in millions US$ in thousands As of March 31, Unlisted stocks $913 It is extremely difficult to determine the fair value of the above unlisted stocks since no market quote is available. Thus, these amounts are not included in (3) Securities and investment securities above. 3. The redemption schedule of monetary assets and securities with maturity dates As of March 31, 217 Within one year Over one year within five years Over five years within 1 years in millions Over 1 years Cash and deposits 29,91 Notes and accounts receivable trade 4,347 Total 7,258 As of March 31, 218 Within one year Over one year within five years Over five years within 1 years in millions Over 1 years Cash and deposits 83,51 Notes and accounts receivable trade 42,96 Securities and investment securities: Available-for-sale securities with maturity dates (Jointly operated designated money trust) 3,5 Total 129,97 Within one year Over one year within five years Over five years within 1 years US$in thousands Over 1 years Cash and deposits $ 785,965 $ $ $ Notes and accounts receivable trade 43,859 Securities and investment securities: Available-for-sale securities with maturity dates (Jointly operated designated money trust) 32,944 Total $1,222,769 $ $ $ 4. The aggregate annual maturities of bonds payable, long-term loans payable, lease obligations, and other interest-bearing debt subsequent to the fiscal year-end As of March 31, 217 Within one year Over one year within two years Over two years within three years Over three years within four years Over four years within five years in millions Over five years Short-term loans payable 12,581 Long-term loans payable 15, 9,376 Lease obligations Total 12,615 15, , As of March 31, 218 Within one year Over one year within two years Over two years within three years Over three years within four years Over four years within five years in millions Over five years Short-term loans payable 1,314 Bonds payable 3, Long-term loans payable 15, 9,376 Lease obligations Total 25, , ,2 Within one year Over one year within two years Over two years within three years Over three years within four years Over four years within five years US$ in thousands Over five years Short-term loans payable $ 97,82 $ $ $ $ $ Bonds payable 282,379 Long-term loans payable 141,189 88,253 Lease obligations Total $238,648 $357 $32 $88,57 $225 $282, TSUMURA & CO.

79 11 Investment Securities (a) Available-for-sale securities As of March 31, 217 in millions Carrying value Acquisition cost Difference Securities with book value exceeding their acquisition cost Stocks 17,264 11,817 5,446 Subtotal 17,264 11,817 5,446 Securities with book value not exceeding their acquisition cost Stocks (11) Subtotal (11) Total 17,423 11,987 5,435 (Note) Unlisted stock with carrying value of 97 million is not included in the table above since it is extremely difficult to determine the fair value due to no market quotes. As of March 31, 218 in millions US$ in thousands Carrying value Acquisition cost Difference Carrying value Acquisition cost Difference Securities with book value exceeding their acquisition cost Stocks 13,825 7,62 6,763 $13,129 $ 66,472 $63,657 Subtotal 13,825 7,62 6,763 $13,129 $ 66,472 $63,657 Securities with book value not exceeding their acquisition cost Stocks (23) $ 2,49 $ 2,635 $ (216) Jointly operated designated money trust 3,5 3,5 32,944 32,944 Subtotal 3,756 3,78 (23) $ 35,353 $ 35,579 $ (216) Total 17,582 1,842 6,739 $165,493 $12,51 $63,431 (Note) Unlisted stock with carrying value of 97 million (US$913 thousand) is not included in the table above since it is extremely difficult to determine the fair value due to no market quotes. (b) Available-for-sale securities sold during the year For the year ended March 31, 217 in millions Proceeds from sales Gain on sale Loss on sale Stocks 1, Total 1, For the year ended March 31, 218 in millions US$ in thousands Proceeds Proceeds Gain on sale Loss on sale from sales from sales Gain on sale Loss on sale Stocks 6,154 1,498 $57,925 $14,1 $ Total 6,154 1,498 $57,925 $14,1 $ Integrated Report

80 FINANCIAL SECTION 12 Derivatives (a) Derivatives transactions for which hedge accounting has not been applied Not applicable. (b) Derivatives transactions for which hedge accounting has been applied Currency-related As of March 31, 217 Hedge accounting method Transaction Hedged item Forward exchange contracts Contract amount in millions Contract amount over one year Fair value Buy-USD 17,27 5,14 1,42 Forecast transactions Allocation Buy-CNY 12,219 4,843 (12) denominated in foreign method Non-deliverable currencies forward contracts (NDF) Buy-CNY 4,917 (54) Total 34,47 9,947 1,335 Fair value is based on quotes obtained from counterparty financial institutions. As of March 31, 218 Hedge accounting method Transaction Hedged item Forward exchange contracts Buy-USD Allocation method Contract amount Contract amount over one year in millions US$ in thousands Fair value Contract amount Contract amount over one year Fair value 14,743 2,49 (2) $138,77 $19,286 $ (188) Forecast transactions Buy-CNY 11,233 2, ,732 25,574 6,824 denominated in foreign currencies Non-deliverable forward contracts (NDF) Buy-CNY 8,673 (239) 81,635 (2,249) Total 34,65 4, $326,148 $44,87 $ 4,376 Fair value is based on quotes obtained from counterparty financial institutions. 13 Employees Retirement Benefits (a) Outline of the retirement benefit plans adopted by the Company The Company adopts a combination plan of a funded and unfunded defined benefit plan, defined contribution plan, and employees pension fund plan (multi-employer pension plan). The Company maintains a cash-balance plan, which is a contract-type corporate pension plan, as a defined benefit corporate pension plan (funded). Under this plan, a hypothetical individual account balance corresponding to each participant s funded amount and the basis of the pension amount is established. An earned interest credit based on market interest rate trends and a point allocation, which is determined by the number of service years and employee rank multiplied by a unit value of point, are accumulated in this hypothetical individual account balance. Under the lump-sum payment plan (unfunded), employees who terminate their employment are entitled to lump-sum benefits based on their length of service and level of compensation at the time of the termination. The Company s consolidated subsidiaries maintain a defined benefit corporate pension plan, defined contribution corporate pension plan, and employees pension fund plan (multi-employer pension plan). For the defined benefit corporate pension plan, the Company s consolidated subsidiaries use the simplified method for the calculation of net defined benefit liability and retirement benefit expenses. In addition, the Group may pay meritorious service awards to employees in excess of the prescribed formula. The employees pension fund, in which the Group participates, is a multi-employer type. Since it is difficult to reasonably calculate companies portion of the plan assets corresponding to its contributions, the contributions to the plan assets are recorded as retirement benefit expenses. 78 TSUMURA & CO.

81 (b) Defined benefit plan (1) The changes in retirement benefit obligations for the years ended March 31, 217 and 218 are as follows: in millions US$ in thousands For the years ended March 31, Balance at beginning of year 15,653 15,942 $15,56 Service cost ,47 Interest cost Actuarial gain or loss (7) Benefit paid (586) (372) (3,51) Other Balance at end of year 15,942 16,541 $155,694 (2) The changes in plan assets for the years ended March 31, 217 and 218 are as follows: in millions US$ in thousands For the years ended March 31, Balance at beginning of year 15,79 16,917 $159,233 Expected return on plan assets ,56 Actuarial gain or loss ,374 Employer s contribution 1,56 1,72 1,9 Benefit paid (583) (36) (3,388) Other 4 () () Balance at end of year 16,917 18,36 $172,816 (3) The reconciliation between the year-end balances of retirement benefit obligations and plan assets and the amounts of asset and liability related to retirement benefits on the consolidated balance sheets as of March 31, 217 and 218 are as follows: in millions US$ in thousands For the years ended March 31, Funded retirement benefit obligations 15,892 16,494 $ 155,252 Plan assets (16,917) (18,36) (172,816) (1,24) (1,866) (17,564) Unfunded retirement benefit obligations Net liability (asset) on the consolidated balance sheet (974) (1,819) (17,121) Net defined benefit liability Net defined benefit asset (1,58) (1,98) (17,959) Net liability (asset) on the consolidated balance sheet (974) (1,819) $ (17,121) (4) The components of retirement benefit expenses for the years ended March 31, 217 and 218 are as follows: in millions US$ in thousands For the years ended March 31, Service cost $ 8,47 Interest cost on benefit obligation Expected return on plan assets (543) (585) (5,56) Amortization of actuarial gain or loss ,494 Amortization of prior service cost Other Retirement benefit expenses $ 5,958 Integrated Report

82 FINANCIAL SECTION (5) The components of remeasurements of defined benefit plans (before income tax effect) in other comprehensive income for the years ended March 31, 217 and 218 are as follows: in millions US$ in thousands For the years ended March 31, Prior service cost 6 6 $ 56 Actuarial gain or loss ,463 Total $3,529 (6) The components of remeasurements of defined benefit plans (before income tax effect) in accumulated other comprehensive income as of March 31, 217 and 218 are as follows: in millions US$ in thousands For the years ended March 31, Unrecognized prior service cost 6 $ Unrecognized actuarial gain or loss 118 (25) (2,353) Total 125 (25) $(2,353) (7) The components of plan assets as of March 31, 217, and 218 are as follows: 1) The components of plan assets For the years ended March 31, Bonds 29% 31% Stocks 33% 3% General accounts 35% 35% Other 3% 4% Total 1% 1% 2) Determination of expected long-term rate of return on plan assets The expected long-term rate of return on plan assets is determined considering the allocation of assets and the long-term rates of return, which are expected currently and in the future, from the various components of the plan assets. (8) The assumptions used for the years ended March 31, 217 and 218 are as follows: For the years ended March 31, Discount rate.4%.4% Expected long-term rate of return on plan assets 3.5% 3.5% (Note) The expected future salary increase rate is not presented since retirement benefit obligations are calculated without taking into account estimated future accumulated points according to the benefit formula method. (9) Simplified method The plan for which the simplified method is applied are not separately disclosed but included in the above tables due to their immateriality. (c) Defined contribution plan The required contributions to the defined contribution plan (including the multi-employer pension plan accounted for in the same way as the defined contribution plan) are 932 million and 644 million (US$6,61 thousand) for the years ended March 31, 217 and 218, respectively. The following summarizes the multi-employer pension plan for which the required contributions are recorded as retirement benefit expenses: (1) The overall funding status as of March 31, 217 and 218 is as follows: in millions US$ in thousands As of March 31, Plan assets 531, ,912 $5,176,129 Total of actuarial obligation and minimum actuarial reserve 538,16 547,838 5,156,67 Difference (6,243) 2,74 $ 19,521 (Note) The amounts in the above table are provided based on the most recently available information (as of March 31, 216 and 217 for fiscal 217 and 218, respectively). 8 TSUMURA & CO.

83 (2) The contribution ratios of the Company to the entire plan during the years ended March 31, 217 and 218 are 3.9% and 4.3%, respectively. (3) Supplemental information As of March 31, 217, the difference described in (1), (6,243) million, was calculated by the sum of the balance of the unamortized prior service cost of (34,54) million, deficient amount carry forward of (21,454) million, and voluntary reserve of 49,751 million. As of March 31, 218, the difference described in (1), 2,74 million (US$19,521 thousand), was calculated by the sum of the balance of the unamortized prior service cost of (28,872) million (US$(271,762) thousand), earnings of the fund of 2,65 million (US$24,943 thousand), and voluntary reserve of 28,296 million (US$266,34 thousand). The balance of unamortized prior service cost represents the present value of special premium income and is amortized using the straight-line method with a 15.5 premium ratio burdened by the employer. The remaining amortization periods are five years and zero months as of March 31, 217. The ratios in (2) are not equal to the actual share ratio. 14 Stock options Not applicable. 15 Income Taxes (a) The significant components of deferred tax assets and liabilities as of March 31, 217 and 218 are as follows: in millions US$ in thousands As of March 31, Deferred tax assets: Net defined benefit liability $ 254 Accrued bonuses ,88 Accrued business office taxes ,324 Consigned research expenses ,8 Loss on valuation of inventories Other ,628 Total deferred tax assets 2,159 2,311 21,752 Deferred tax liabilities: Valuation difference on available-for-sale securities (1,59) (1,991) (18,74) Deferred gains or losses on hedges (41) (146) (1,374) Net defined benefit asset (324) (584) (5,496) Other (199) (25) (2,353) Total deferred tax liabilities (2,524) (2,972) (27,974) Net deferred tax assets (liabilities) (365) (661) $ (6,221) (Note) Net deferred tax assets and liabilities are included in the following accounts: in millions US$ in thousands As of March 31, Current assets deferred tax assets 1,325 1,512 $ 14,231 Non-current assets deferred tax assets Non-current liabilities deferred tax liabilities (1,733) (2,21) (2,81) Integrated Report

84 FINANCIAL SECTION (b) The significant differences between the statutory tax rate and the actual effective tax rate are as follows: As of March 31, Statutory tax rate 3.9% 3.9% Effect of: Inhabitants per capita taxes.5%.4% Permanent differences (non-deductible) such as entertainment expenses.3%.4% Permanent differences (non-taxable) such as dividend income (.2)% (.3)% Tax credit for research and development expenses (2.8)% (2.5)% Tax credit for taxation scheme to promote production facilities investment (.3)% % Decrease in valuation allowance (1.1)% % Other (1.4)% (1.8)% Actual effective tax rate 25.9% 27.1% 16 Asset Retirement Obligations Disclosure omitted due to insignificancy. 17 Segment Information (Segment information) Information by reportable segments for the years ended March 31, 217 and 218 is omitted since the Group has categorized its reportable segments into a single segment, pharmaceutical products operation. (Related information) (1) Information by products and services Information by products and services for the years ended March 31, 217 and 218 is omitted since more than 9% of sales and services to external customers consisted of single category of product and service. (2) Information by geographical areas 1) Sales Information on sales by geographical area for the years ended March 31, 217 and 218 is omitted since sales to external customers in Japan exceeded 9% of net sales in the consolidated statements of income. 2) Property, plant and equipment Information on property, plant and equipment by geographical area for the years ended March 31, 217 and 218 is as follows: As of March 31, 217 in millions Japan China Other Total 54,54 1,145 64,686 As of March 31, 218 in millions US$ in thousands Japan China Other Total Japan China Other Total 6,371 1,957 71,329 $568,251 $13,134 $ $671, TSUMURA & CO.

85 (3) Information on major customers in millions US$ in thousands For the years ended March 31, Related segment Sales to: Alfresa Holdings Corporation Pharmaceutical products 28,65 29,852 $28,986 MEDIPAL HOLDINGS CORPORATION Pharmaceutical products 25,5 25,86 242,92 SUZUKEN CO., LTD. Pharmaceutical products 19,642 2,16 188,43 TOHO HOLDINGS CO., LTD. Pharmaceutical products 14,478 13,899 13,826 (Related party information) For the year ended March 31, 217 Not applicable. For the year ended March 31, 218 Classification Major shareholder Name of the company Ping An Life Insurance Company of China, Ltd. Location Guangdong, China Chinese yuan in millions Stated capital 33,8 Type of business Life insurance % of voting rights (owned) Direct 1.4 (Owned) Business relationship Capital and business alliance (Note 2) Type of transaction Issuance of new shares (Note 1) Disposal of treasury shares (Note 1) in millions US$ in thousands Transaction amount Account title in millions US$ in thousands Balance at the end of the year 21,39 $2,574 6,12 56,588 Notes: 1. Ping An Life Insurance Company of China, Ltd. subscribed the Company s shares at 3,559.5 (US$33.5) per share upon the Company s issuance of new shares and disposal of treasury shares though a third-party allotment. The issue price was determined by negotiation with reference to the market price. 2. The capital and business alliance agreement has been concluded on September 22, Amounts per Share in millions US$ in thousands Net assets per share 2, , $23.83 Profit per share Notes: 1. Diluted profit per share is not stated since there are no dilutive shares. 2. Basis of calculation 1) The basis of calculation of net assets per share is as follows: in millions US$ in thousands As of March 31, Total net assets 157, ,533 $1,849,896 Amounts to be deducted from total net assets 2,613 2,933 27,67 [Of which, non-controlling interests] [2,613] [2,933] [27,67] Amounts attributable to shareholders of common stock 154, ,599 $1,822,279 Number of shares outstanding at the end of the year (Shares in thousands) 68,782 76,457 2) The basis of calculation of profit per share is as follows: in millions US$ in thousands As of March 31, Profit attributable to owners of parent 12,488 14,54 $136,521 Amounts not attributable to owners of parent Amounts attributable to owners of parent related to common stock 12,488 14,54 $136,521 Weighted-average number of shares outstanding (Shares in thousands) 69,592 72,324 Integrated Report

86 FINANCIAL SECTION 19 Subsequent Events Not applicable. 2 Supplemental Information (1) Corporate Bonds in millions US$ in thousands Issuer Type of issue Issue date Interest rate (%) Redemption period TSUMURA & CO. The 1st unsecured corporate bond with limited inter-bond pari passu clause June 2, May 31, , $141,189 TSUMURA & CO. The 2nd unsecured corporate bond with limited inter-bond pari passu clause June 2, June 2, , 141,189 Total 3, $282,379 Note: The annual redemption schedule for five years after the balance sheet date is as follows: in millions Over one year Over two years Over three years Over four years Within one year within two years within three years within four years within five years (2) Short-term loans payable, long-term loans payable, and lease obligations in millions US$ in thousands As of March 31, Average interest rates (%) Maturity due Short-term loans payable.4 12,581 1,314 $ 97,82 Current portion of long-term loans payable.3 15, 141,189 Current portion of lease obligations Long-term loans payable excluding current portion.3 September ,376 9,376 88,253 Lease obligations excluding current portion April 219 to January ,364 Other interest-bearing debt Total 37,88 34,876 $328,275 Notes: 1. Average interest rate represents the weighted-average interest rate of loans as of the balance sheet date. 2. Long-term guarantee deposited is not included above, although the amount equivalent to the interest is recognized. 3. Lease obligations on the balance sheet include the amount equivalent to the interest portion of total lease payments. Therefore, average interest rate of lease obligations is not stated. 4. The annual repayment schedule of long-term loans payable and lease obligations excluding current portion for five years after the balance sheet date is as follows: in millions Over one year within two years Over two years within three years Over three years within four years Over four years within five years Long-term loans payable 9,376 Lease obligations US$ in thousands Over one year within two years Over two years within three years Over three years within four years Over four years within five years Long-term loans payable $ $ $88,253 $ Lease obligations (3) Details of Asset Retirement Obligations Not Applicable. 84 TSUMURA & CO.

87 21 Other Quarterly information (Year-to-date) First quarter Second quarter Third quarter Fiscal year Net sales (millions) 29,68 58,282 9, ,879 Profit before income taxes (millions) 4,561 9,238 17,14 2,284 Profit attributable to owners of parent (millions) 3,194 6,614 12,32 14,54 Profit per share (yen) (Quarterly) First quarter Second quarter Third quarter Fourth quarter Profit per share (yen) (Year-to-date) First quarter Second quarter Third quarter Fiscal year Net sales (thousands) $273,66 $548,588 $855,713 $1,19,553 Profit before income taxes (thousands) 42,931 86, ,332 19,926 Profit attributable to owners of parent (thousands) 3,64 62, , ,521 Profit per share (dollar) (Quarterly) First quarter Second quarter Third quarter Fourth quarter Profit per share (dollar) $.43 $.46 $.71 $.27 Integrated Report

88 FINANCIAL SECTION Reference The aforementioned consolidated financial statements and notes to the consolidated financial statements as well as the following independent auditor s report can be found in the English-language version of the Company s 218 integrated report. 86 TSUMURA & CO.

89 Integrated Report

90 ,453 UFJ PwC Arata 25,, 76,758,362 3,382 12, %....87% % % * % * 3,382 BANK OF CHINA HONG KONG LIMITED-PING AN LIFE INSURANCE COMPANY OF CHINA, LIMITED 7, Trustee Service 5, Master Trust 4, Trustee Service9 3, UFJ 2, THE BANK OF NEW YORK , , BRIGHT RIDE LIMITED 1, JP MORGAN CHASE BANK , Trustee Service5 1, , UFJ UFJ 88 TSUMURA & CO.

91 Logitem Tsumura Co.,Ltd TSUMURA USA, INC LAO TSUMURA CO., LTD Integrated Report

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