takeda - wiley€¦ · takeda’s medium-term management plan is now in its fifth year. is the plan...

TAKEDA

A N N U A L R E P O R T 1999Year ended March 31, 1999

Contents

Financial Highlights .................................................................... 1

An Interview with the President ................................................. 2

Feature Section ............................................................................ 6

Innovative and Efficient Research Drives Growth .................... 6

Global Development Speeds Products to Market....................... 8

Overview of Product Status ....................................................... 10

Expanding Participation in Markets Worldwide ...................... 12

Global, Efficient, Environmentally Sound Production .............. 16

Review of Operations ................................................................... 17

Board of Directors, Auditors and Corporate Officers .................. 24

Financial Review .......................................................................... 25

Eleven-Year Summary of Selected Financial Data ..................... 28

Consolidated Balance Sheets ....................................................... 30

Consolidated Statements of Income ............................................ 32

Consolidated Statements of Shareholders’ Equity ...................... 33

Consolidated Statements of Cash Flows ..................................... 34

Notes to Consolidated Financial Statements .............................. 35

Independent Auditors’ Report ..................................................... 43

Directory ....................................................................................... 44

Corporate Data ............................................................................. 46

Years ended March 31, 1999 and 1998

Thousands ofMillions of yen U.S. dollars (Note)

1999 1998 1999

For the years ended March 31:Net sales ....................................................................................................... ¥ 844,643 ¥ 841,816 $ 6,980,521Percentage increase ................................................................................... 0.3% 0.4%

Net income.................................................................................................... 91,755 81,610 758,306Percentage increase .................................................................................. 12.4% 14.3%

Research and development costs................................................................. 77,487 79,039 640,388Capital investments..................................................................................... 29,241 34,091 241,661Depreciation and amortization.................................................................... 32,651 32,763 269,843

Per share amounts (Yen and U.S. dollars)(See Note 11 to the consolidated financial statements):Net income.................................................................................................. ¥103.52 ¥92.97 $0.86Cash dividends ........................................................................................... 29.00 21.25 0.24

At March 31:Total assets................................................................................................... ¥1,326,999 ¥1,296,202 $10,966,934Shareholders’ equity .................................................................................... 907,373 829,381 7,498,950

Number of employees................................................................................... 15,776 16,443Note: The U.S. dollar amounts in this report represent translations of Japanese yen, for convenience only, at the rate of ¥121=US$1, the approximate

exchange rate at March 31, 1999.

NET SALES(¥ Billion)

99989796950

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1,000

200

NET INCOME(¥ Billion)

99989796950

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100

20

RETURN ON EQUITY(%)

99989796950

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9

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11

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R&D COSTS(¥ Billion)

99989796950

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100

20

1

Takeda Chemical Industries, Ltd. and Consolidated Subsidiaries

Financial Highlights

Takeda’s medium-term management

plan is now in its fifth year. Is the plan

proceeding on schedule?

Amid intense global competition, we’ve

continued to move forward with our

medium-term management plan, which

covers fiscal 1995 to fiscal 2000, to generate

international growth as an R&D-driven

pharmaceutical company. Since Takeda

began implementing the plan, both sales

and profits have increased thanks to the

solid performance of our pharmaceutical

business overseas.

However, overseas pharmaceutical

companies, particularly the leading U.S.

manufacturers, have achieved robust

growth in the rapidly expanding U.S.

market, and the gap between Takeda and

these companies has been widening.

Moreover, the speed and scale of changes in

our operating environment have exceeded

the projections we made at the time the

plan was devised. These changes include the

prolonged recession in Japan, economic

turmoil in Asia, and increasingly stringent

government policies to contain healthcare

costs in Japan and other countries. To

respond to these conditions, we have

implemented a stronger revised medium-

term plan for fiscal years 1998 to 2000 with

the objective of creating a structure that will

allow Takeda to make rapid strides toward

becoming an international enterprise by the

end of fiscal 2000.

What issues are included in the revised

plan?

The two main themes are strengthening

growth strategies in our pharmaceutical

business in global markets and promoting

the independence of our non-

pharmaceutical businesses. Through

focused investment of management

resources in our pharmaceutical business,

2

An Interview with the President

Kunio Takeda, President

3

we will further strengthen and promote the

growth of this business, centered on

internationally strategic products. In non-

pharmaceutical businesses, as part of our

emphasis on cultivating high-value-added

businesses and selectively allocating

corporate assets, we are reexamining low-

potential businesses and creating an

operating structure centered on high-value-

added core businesses to make non-

pharmaceutical businesses truly

independent.

What are some specific ways in which

Takeda will strengthen growth

strategies in its pharmaceutical

business?

Although we’ve achieved good

performance overseas up to now, a large

part of that is attributable to the rapid

growth of TAP Holdings Inc., a U.S. affiliate

accounted for by the equity method. So we

have to build on that momentum by

establishing further international bases. We

have already established two holding

companies — Takeda America Holdings,

Inc. in the United States and Takeda Europe

Holdings Ltd. in Europe — and we also

added a second U.S. marketing company,

Takeda Pharmaceuticals America, Inc.

In August 1999, Takeda Pharmaceuticals

America launched the antidiabetic agent

pioglitazone hydrochloride (brand name:

Actos). With once-daily dosing, Actos has

demonstrated its benefits in significantly

improving glycemic control in Type 2

diabetes. In addition, clinical data show that

Actos has a beneficial impact on lipids,

lowering plasma triglycerides and raising

levels of HDL — the so-called good

cholesterol. Unlike other antidiabetic

agents, moreover, Actos does not raise levels

of LDL cholesterol. With these

characteristics, Actos should help to further

boost Takeda’s presence in the U.S.

pharmaceutical market.

What about the domestic market?

Although the Japanese pharmaceutical

market has been shrinking, Takeda has

increased its market share by focusing on

treatments for lifestyle-related diseases

including hypercholesterolemia,

hypertension and diabetes. In May 1999, we

launched cerivastatin sodium, an HMG-

CoA reductase inhibitor, under the brand

name Certa as a treatment for

hypercholesterolemia. Certa, originally

synthesized by Bayer AG of Germany, is a

competitive inhibitor of the enzyme HMG-

CoA reductase that has proven effective in

lowering serum cholesterol.

In June 1999 we launched candesartan

cilexetil, an angiotensin II receptor

antagonist, under the brand name Blopress.

This product selectively binds to

angiotensin II AT1 receptors and thereby

suppresses the action of angiotensin II to

provide long-lasting and assured

hypotensive action with once-daily dosing.

In addition, an application for pioglitazone

hydrochloride, an agent for the treatment of

diabetes mellitus, has been filed.

Please expand upon Takeda’s R&D

strategy for its pharmaceutical

business.

Takeda is focusing on six core areas:

diabetes, cardiovascular diseases, central

nervous system disorders, bone and joint

diseases, allergic diseases and infectious

diseases. We have already achieved a

number of successes in these areas. The

most recent is Actos, which we launched in

the U.S. market. In the competitive

thiazolidinedione class, Actos was approved

for use both as a monotherapy and in

combination with insulin, sulfonylureas or

metformin.

Furthermore, we have implemented our

Marketing-Production-Development-

Research (MPDR) strategy to bring the

results of our research to the market more

quickly. This strategy helps us set

parameters in areas such as product

originality, market need, continuity of

therapeutic area strategies, profitability and

investment risk, and then prioritize R&D

accordingly. Thus we are better able to

allocate resources to projects most likely to

4

G L O B A L O P E R A T I O N S

U.S.A.

Takeda America Holdings, Inc.

Takeda EuropeHoldings Ltd.

Production

Takeda America Research &Development Center Inc.

TAP Holdings Inc.

Takeda PharmaceuticalsAmerica, Inc.

Takeda Europe Research &Development Centre Ltd.

(U.K.)

Laboratoires Takeda(France)

Takeda Pharma GmbH(Germany)

Takeda Italia FarmaceuticiS.p.A.

Takeda UK Limited

EUROPE

Takeda Ireland Ltd.

(This illustration shows Takeda’s pharmaceutical operations outside Japan)

ASIA

Tianjin Takeda Pharmaceuticals Co., Ltd. (China)Takeda IMC Chemical Ltd. (Hong Kong)Takeda Chemical Industries (Taiwan), Ltd. Boie-Takeda Chemicals, Inc. (Philippines)Takeda (Thailand), Ltd.P.T. Takeda Indonesia

generate solid

earnings and

increase the

speed of R&D.

To ensure a

pipeline full of

high-potential

products, we are aggressively promoting

licensing deals and research collaborations

in addition to strengthening and

accelerating our own research.

What is Takeda’s strategy for its group

of companies?

Given the intense competition with U.S.

and European pharmaceutical companies,

we must take full advantage of the

capabilities of the Takeda Group. We are

therefore restructuring the Takeda Group

portfolio and establishing the management

framework necessary to support a strategy

that maximizes group strengths.

Specifically, we are evaluating the

positioning and responsibilities of each

subsidiary and affiliate in light of our group

strategy and the changes in our operating

environment to determine which should be

strengthened, liquidated or consolidated.

Measures to reinforce our core businesses

and raise management efficiency will

include a sweeping restructuring of group

companies and alliances with other

companies.

What fundamental principles provide

the framework for Takeda’s continuing

growth?

Takeda carries out all business activities

on the basis of our corporate philosophy:

contributing to better health and quality of

life for people throughout the world. This

philosophy guides us in creating

pharmaceuticals that meet the expectations

of patients and healthcare professionals,

and we strive to help people by delivering

our products to global markets ever more

quickly.

In addition to an objective management

system for executives and a performance

evaluation system for divisions, we are also

implementing various reforms to fairly

reward employees who produce results.

These include phasing in a merit-based pay

system that is aimed at making Takeda an

attractive company where employees feel a

sense of challenge and satisfaction.

Finally, we are committed to earning the

understanding and trust of shareholders

through timely disclosure of appropriate,

extensive and clear information on

operations and management.

August 1999

Kunio Takeda

President

5

An Interview with the President

Pharmaceutical Discovery Research Division

The role of the Pharmaceutical Discovery Research Division is to discover

the seeds of innovative pharmaceuticals and link them to the creation of

new drugs in the future.

The Pharmaceutical Discovery Research Division has conducted research

into seven-transmembrane receptors and bioactive peptides, discovering

seeds for various receptor antagonists and agonists. Moreover, this division

has focused on disease-related genes, leading to the discovery of enzyme

inhibitors for the treatment of bone and joint diseases and atherosclerosis.

The division has also worked to increase efficiency in gene-related

pharmacological research and promoted functional analysis of genes and

molecular pharmacology.

Today, the Pharmaceutical Discovery Research Division is conducting

intensive research with a focus on the following targeted fields.

• Discovering the seeds of innovative pharmaceuticals based on research in the area of orphan receptors

• Accelerating gene exploration and functional analysis of genes in order to promote the discovery of new drug targets

• Developing original screening systems and discovering new seed compounds by cooperating closely with the Pharmaceutical Research Division

The PharmaceuticalDiscovery ResearchDivision uses HTSrobots to discover leadcompounds withgreater speed andefficiency.

Takeda’s research organization comprises two divisions: Pharmaceutical Discovery

Research and Pharmaceutical Research. These divisions maintain a clear focus on

creating breakthrough drugs for use worldwide.

6

Innovative and Efficient Research Drives Growth

Discovery of New Anti-AIDS Drug

Three years ago, researchers in the

United States identified chemokine

receptor CCR5 as one of the most

critical receptors used by HIV-1 to

enter target lymphocytes and

macrophages. It was also discovered

that some people born without CCR5

are highly resistant to HIV-1 infection

but apparently normal in all other

respects. In other words, CCR5 is a

receptor that is nonessential for

human life, and HIV-1 uses this

unnecessary receptor to infect target

cells.

This suggests that if a substance

were found that could selectively

inhibit the binding of HIV-1 and

CCR5, it could lead to the

development of an anti-AIDS drug

that has a completely different

mechanism of action than current

drugs and has potentially no side

effects. This discovery has sparked a

global R&D race targeting CCR5.

The following are some of the Pharmaceutical Discovery Research Division’s recent

accomplishments.

• Discovery of a new anti-HIV drug candidate (CCR5 antagonist)

• Discovery of a prolactin-releasing peptide

• Discovery of Apelin, a new ligand for an HIV infection-related receptor

• Discovery of a gene for LLPL, a newly discovered enzyme related to atherosclerosis

• Development of a new manufacturing process for human growth hormone

Pharmaceutical Research Division

The Pharmaceutical Research Division focuses on keeping Takeda’s pipeline stocked with new

drug candidates for global use by speeding up pharmaceutical research.

The Pharmaceutical Research Division conducts research into the synthesis, drug action and

pharmacology of investigational medicines for the core disease areas of diabetes, cardiovascular

diseases, central nervous system disorders, bone and joint diseases, allergic diseases and

infectious diseases.

In the area of drug synthesis research, the utilization of advances in molecular pharmacology

and molecular physiology is becoming increasingly important. For example, our researchers

continuously try to uncover the seeds of breakthrough pharmaceuticals through detailed study

of the structure and active relationships of compounds such as enzyme inhibitors and receptor

antagonists. Moreover, in addition to analyzing compounds and conducting structural analysis,

researchers employ advanced technology for molecular design, automatic synthesis and

automatic screening of new active substances.

Currently the Pharmaceutical Research Division is focusing on the following.

• Establishing an efficient system for pharmaceutical research to accelerate priority research themes and advance them to the next stage

• Evaluating safety at an earlier stage of research to increase the probability of creating successful new drug candidates

• Enhancing Takeda’s pipeline by promoting in-licensing activities and research collaborations.

The Pharmaceutical Research Division contributes to the creation of new pharmaceuticals byusing automated machines to synthesize novel compounds and derivatives.

7

8

The progress of the International Conference on Harmonisation (ICH) is enabling the use of

essentially the same clinical data in Japan, Europe and the United States. In response, Takeda has

established the Global Development Committee to create global development plans and coordinate

our tripartite development strategy. Based on Takeda’s MPDR strategy, which links research,

development, production and marketing, the committee adds value through its activities at every

stage, from product development to post-marketing, in accordance with the needs of the marketing

and sales divisions in the above three regions.

Since launching its first international strategic product, leuprolide acetate, in the United States in

1985, Takeda has increased this product’s potential by implementing a global rollout and adding

new indications and formulations. In 1991, we launched lansoprazole in France and subsequently

With progress of the ICH, Takeda America Research & Development Center Inc. has increased inimportance as a vital component of Takeda’s global development strategy.

Global Development Speeds Products to Market

Takeda’s tripartite development organization is centered around the

Pharmaceutical Development Division in Japan; Takeda America Research &

Development Center Inc. and the Development Division of TAP Holdings Inc., a

joint venture with Abbott Laboratories, in the United States; and Takeda Europe

Research & Development Centre Ltd. in the United Kingdom. Together these bases

conduct efficient development operations, focusing on the swift launch of new

products in the global marketplace. At the same time, they help to maximize added

value through clinical development and post-marketing surveillance.

9

Takeda Europe Research & Development Centre Ltd. in London, where the European Agency for theEvaluation of Medicinal Products is based, has contributed to development efficiency.

have expanded the number of countries in which it is marketed and added new indications.

Applications for the use of this product in the treatment of reflux esophagitis (maintenance

therapy) and eradication of Helicobacter pylori are currently being reviewed by the Ministry of

Health and Welfare in Japan. Candesartan cilexetil, a drug for the treatment of hypertension

marketed in Europe, the United States and Japan, is now in Phase III for the indication of

congestive heart failure. Each of these products is marketed in countries around the world.

Our new international strategic product is AD-4833 (pioglitazone hydrochloride), an agent for

the treatment of diabetes mellitus. This drug is a member of a new class of antidiabetic agents that

resulted from Takeda’s many years of research on diabetes. With one dose daily, AD-4833 reduces

insulin resistance in patients suffering from Type 2 (non-insulin-dependent) diabetes. New Drug

Applications were filed in Japan in December 1996, in the United States in January 1999, and in

Europe in March 1999. The U.S. Food and Drug Administration granted AD-4833 priority review

status and approved it in July 1999. AD-4833 was launched in August 1999 in the United States

under the brand name Actos.

Besides AD-4833, development is focusing on new treatments in the fields of diabetes,

cardiovascular diseases, central nervous system disorders, bone and joint diseases, allergic diseases

and infectious diseases. For example, TAK-778-SR, a treatment for bone fractures resulting from

osteoporosis, is now in Phase I in Japan. TAK-661, a substitute for steroid treatment in bronchial

asthma and atopic dermatitis, is in Phase II in Japan and Phase I in Europe. We are endeavoring to

rapidly develop and deliver to the global marketplace candidate compounds that have been selected

for both innovativeness and marketability.

10

Overview of Product StatusProduct Description Indication / Formulation Country (Brand Name) Status Candesartan Angiotensin II Hypertension Japan (Blopress) Launched

cilexetil receptor antagonist U.S. (Atacand) Launched

(TCV-116) U.K. (Amias) Launched

Germany (Blopress) Launched

Other European countries Launched

Congestive heart failure Japan & Europe Phase IIIU.S. Phase III

Prevention of restenosis Japan Phase II

following PTCA

Diabetic nephropathy and Japan Phase II

glomerular nephritis(TCV-116C) Combination of Hypertension Europe Approved 6/98

TCV-116 and a diuretic U.S. Phase IIILeuprolide acetate Luteinizing hormone-releasing Prostate cancer, Japan (Leuplin) Launched

(TAP-144SR) hormone (LH-RH) analog endometriosis, U.S. (Lupron Depot) Launched

uterine fibroids Europe (Enantone, others) Launched

Asia (Enantone, others) Launched

Over 60 countries Launched

Central precocious puberty Japan, U.S., France, Launched

Germany & Italy

Breast cancer Japan, Germany, Launched

Italy & France

Kit-type once-monthly Germany, U.S. & Launched

injectable formulation Japan

Three-month sustained-release U.S., U.K., Germany, Launched

injectable formulation France & Italy

Japan Phase II

Four-month sustained-release U.S. Launched

injectable formulation

Kit-type three-month sustained- U.S. Launched

release injectable formulation

Kit-type four-month sustained- U.S. Launched

release injectable formulation

Lansoprazole Proton pump inhibitor Reflux esophagitis, peptic ulcers Japan (Takepron) Launched

(AG-1749) and Zollinger-Ellison syndrome U.S. (Prevacid) Launched

France (Ogast) Launched

Italy (Lansox) Launched

Germany (Agopton) Launched

Over 90 countries Launched

Maintenance therapy after U.S., U.K., France, Launched

ulcer healing Germany & Italy

Maintenance therapy for Japan Filed 1/99

reflux esophagitis

Eradication of U.S., U.K., Italy, Launched

Helicobacter pylori France & Germany

Japan Filed 2/99

Gastritis Japan Phase II

Dyspepsia U.S. Phase III

U.K. Launched

Germany Filed 1/99

11

Product Description Indication / Formulation Country (Brand Name) Status Lansoprazole IV Proton pump inhibitor Postoperative invasive stress Japan Filed 7/96

(AG-1749 IV) (Injectable formulation) Upper gastrointestinal Japan Phase IIIbleeding

Major stress exerted by Japan Phase II

operation or external stimulus

Pioglitazone Insulin sensitivity enhancer Diabetes mellitus Japan (Actos) Filed 12/96

hydrochloride (monotherapy and combination

(AD-4833) with sulfonylureas)

Diabetes mellitus U.S. (Actos) Launched

(monotherapy and combination

with insulin, sulfonylureas Europe (Actos) Filed 3/99

or metformin)

Combination with Basen Japan Phase III

Combination with insulin

Voglibose Disaccharidase inhibitor Diabetes mellitus Japan (Basen) Launched

(AO-128) U.S. Phase III

Europe Filed 3/98

Impaired glucose tolerance Japan Phase II

Seratrodast Thromboxane A2 Bronchial asthma Japan (Bronica) Launched

(AA-2414) receptor antagonist

Cefozopran Broad spectrum Bacterial infection Japan (Firstcin) Launched

hydrochloride injectable cephalosporin

(SCE-2787) Pediatric use and meningitis Japan (Firstcin) Launched

Cerivastatin sodium HMG-CoA reductase Hypercholesterolemia Japan (Certa) Launched

(BAY w 6228) inhibitor [Joint development

with Bayer Yakuhin]

TAK-147 Acetylcholinesterase inhibitor Dementia of Alzheimer’s type Japan Phase III

Risedronate Bone resorption inhibitor Osteoporosis Japan Phase III

(NE-58095) [Joint development

with Ajinomoto]

TNP-470 Anti-angiogenesis agent Malignant tumor U.S. Phase II

TAK-603 Disease-modifying Rheumatoid arthritis Japan, U.S. & Europe Phase II

anti-rheumatic drug

Idebenone Brain energy-metabolism Dementia of Alzheimer’s type Germany Filed 6/96

(CV-2619) enhancer Italy & Switzerland Filed 2/97

Austria Filed 8/96

U.S. Phase II/III

TAK-751S Verotoxin adsorbent Hemolytic uremic syndrome Japan Phase II

(HUS) [Licensed from Synsorb]

Morphine hydro- High content/concentration Severe pain due to cancers Japan Phase III

chloride (MH-200) preparation [Joint development]

TAK-661 Eosinophil chemotaxis Bronchial asthma and Japan Phase II

inhibitor atopic dermatitis Europe Phase I

MKC-231 Choline uptake enhancer Dementia of Alzheimer’s type Japan Phase II

[Joint development

with Mitsubishi]

12

In 1998, TAP continued its strong performance and achieved net sales that exceeded $2 billion.

TAP is now the seventeenth largest U.S. pharmaceutical company in terms of sales, and expects to

continue moving up the ranks as it fosters current products and introduces new ones.

Net sales of the ulcer treatment Prevacid (lansoprazole), TAP’s leading product, nearly doubled to

$1.3 billion in 1998. One of the reasons for this outstanding growth is the expansion of the drug’s

range of uses. In 1998, TAP received approval from the U.S. Food and Drug Administration (FDA)

for Prevacid delayed-release capsules for the short-term treatment of symptomatic gastroesophageal

reflux disease (GERD), as well as new administration options that allow patients who cannot

swallow a capsule to sprinkle Prevacid on soft food or into juice. In addition, TAP introduced 10-

and 14-day regimens of Prevpac, a new and convenient package for three medications used to treat

Helicobacter pylori infection in patients with duodenal ulcers. The package, which contains

Prevacid, Biaxin (clarithromycin) and Trimox (amoxicillin capsules), provides a simplified, more

convenient regimen for eradicating H. pylori.

The National Sales Meeting at TAP Holdings Inc. boosts sales force effectiveness and morale bygathering U.S. medical representatives (MRs) together to review the past year’s performance anddetermine strategic directions for the year ahead.

Expanding Participation in Markets Worldwide

Takeda markets its ethical drugs through a global marketing organization

spanning Japan, the United States, Europe and Asia. In the United States, the

world’s largest and fastest-growing pharmaceutical market, Takeda’s marketing

organization includes TAP Holdings Inc. (a joint venture with Abbott Laboratories),

and the wholly owned subsidiary, Takeda Pharmaceuticals America, Inc.

13

Lupron Depot (leuprolide acetate for depot suspension), TAP’s synthetic hormone indicated for

the palliative treatment of advanced prostate cancer, endometriosis, anemia caused by uterine

fibroids, and precocious puberty, posted solid sales growth in 1998. It continues to maintain its

dominant position in most of these markets.

In addition to these successful current products, TAP has an active pipeline. In June 1999, TAP

filed a New Drug Application with the FDA for Uprima (apomorphine), an oral treatment for male

erectile dysfunction. Takeda and Abbott Laboratories will jointly develop and co-market

apomorphine in countries outside the United States and Canada. TAP also plans to file an

application for an adult formulation of the antibiotic Spectracef (cefditoren pivoxil) in 1999.

TAP’s research and development teams are focusing on developing a range of promising new

compounds for use in medical fields such as urology, gynecology and oncology, and are also

pursuing additional indications for current products. TAP’s aggressive in-licensing efforts will

continue to fuel the company’s pipeline.

Building on its momentum in the United States, in May 1998 Takeda established its second U.S.

marketing company, Takeda Pharmaceuticals America, Inc. This company launched pioglitazone

hydrochloride, an antidiabetic agent, under the brand name Actos in August 1999 after Takeda

America Research & Development Center Inc. received FDA approval for it in July 1999. A

treatment for lowering blood glucose levels that resulted from Takeda’s many years of research on

diabetes mellitus, Actos is an insulin sensitizer for patients with Type 2 (non-insulin-dependent)

diabetes. Takeda Pharmaceuticals America has built a sales force of more than 500 MRs to launch

Actos. Takeda Pharmaceuticals America’s MRs have undergone extensive education on diabetes

Takeda Pharmaceuticals America, Inc. recruited and trained more than 500 MRs in preparation for thelaunch of the company’s first product, the new pharmaceutical Actos.

14

mellitus and Actos to ensure the successful launch of this product. The company has also

established a marketing organization, distribution capabilities and other key business functions to

fully support the U.S. commercialization of Actos and future products. Actos will be co-promoted

with Eli Lilly and Company, a leader in the U.S. diabetes treatment market.

In Europe, subsidiary Laboratoires Takeda in France, affiliate Takeda Pharma GmbH in Germany

and subsidiary Takeda Italia Farmaceutici S.p.A. in Italy have been increasing sales of original

Takeda products each year, including the prostate cancer treatment leuprolide (brand name:

Enantone), ulcer treatment lansoprazole (brand names: Ogast, Agopton, Lansox), and hypertension

treatment candesartan cilexetil (brand names: Kenzen, Blopress). In addition, in April 1997 we

established the U.K. subsidiary Takeda UK Limited, which is co-promoting candesartan cilexetil

with AstraZeneca PLC in the United Kingdom under the brand name Amias.

In Japan, Takeda’s Pharmaceutical Marketing Division, which is responsible for ethical drug

marketing, has been making steady progress in strengthening Takeda’s market position in the

treatment of lifestyle-related diseases. Hypercholesterolemia, hypertension and diabetes are

representative lifestyle-related diseases that are intricately related to the onset of arteriosclerosis.

They show a high incidence of complications and exhibit increased synergism with arteriosclerosis

as well. In May 1999, the Division launched the HMG-CoA reductase inhibitor cerivastatin sodium

Takeda Pharma GmbH ensures solid coverage of the crucial German market, where Takeda’s strategiesinclude expanding market penetration for Blopress.

15

under the brand name Certa as a treatment for hypercholesterolemia. In June 1999, the Division

also launched the angiotensin II receptor antagonist candesartan cilexetil under the brand name

Blopress for treatment of hypertension. Now being marketed in Europe and the United States,

Blopress is an ideal drug because in addition to its hypotensive action, it has an organ protective

effect and rarely causes coughing, which is a common adverse reaction with ACE inhibitors used to

treat hypertension. Moreover, we filed an application for AD-4833 (pioglitazone hydrochloride), an

agent for the treatment of diabetes mellitus. To ensure the acceptance of our products by specialists

shortly after they are launched, we implement systematic promotions such as launch meetings,

meetings for opinion leaders and medical conferences.

Takeda is conducting regional launch meetings for Blopress in Japan.

Takeda’s Production BasesTakeda produces pharmaceuticals at three domestic plants — the Hikari Plant, Osaka Plant and

Shonan Plant. In Asia, the Company has plants in China, Taiwan, Thailand and Indonesia. In

October 1997, we acquired a

plant in Ireland and established it

as a local manufacturing

subsidiary, Takeda Ireland Ltd.,

our first pharmaceutical plant in

Europe. Takeda Ireland

manufactures lansoprazole

capsules, candesartan cilexetil

tablets, pioglitazone

hydrochloride tablets and other

new products for the European

and U.S. markets. It also

manufactures drugs for clinical

trials of candidate compounds

under development.

The Pharmaceutical Production

Division manages the entire process from the chemical and pharmaceutical development research

stage through the production stage. This division works to minimize total production costs by

analyzing domestic and overseas demand, cost and risk.

Environmental ProtectionTakeda implemented the Responsible Care program in 1995 based on its Basic Principles on the

Environment. Objectives of the program include reducing the volume of industrial waste treated

off-site, reducing the amount of emissions of priority control chemical substances, and promoting

energy conservation. Other focuses are conducting environmental audits for domestic plants and

Tsukuba research laboratories, promoting resource conservation and recycling, pursuing

development of environment-friendly products, and establishing occupational safety and health

management systems.

In December 1998, the Hikari and Tokuyama plants obtained the ISO 14001 certification for their

environmental management systems. The Hikari Plant is Takeda’s main plant, manufacturing

mainly bulk pharmaceuticals, vitamins and agrochemicals. The Tokuyama Plant produces chemical

products, including polyether polyols, polyester polyols, unsaturated polyester resins and succinic

acid. Takeda will continue promoting acquisition of the ISO 14001 certification at its other plants.

Global, Efficient, EnvironmentallySound Production

16

Takeda Ireland Ltd., Takeda’s first European production base,produces drug products to keep up with our expanding sales inEurope and the United States.

PHARMACEUTICALS(Ethical Drugs)

In fiscal 1998, the Takeda Group

focused its core Pharmaceutical

business on discovering and

developing original new drugs for

global use, while also working to

expand its marketing bases in the

United States and Europe. These

efforts further advanced our mission

to be an R&D-driven international

company. Takeda’s sales of

pharmaceuticals, including OTC

drugs, increased 2.9 percent year-on-

year to ¥597.5 billion (US$4,938

million).

In May 1998, we established the

wholly owned subsidiary Takeda

Pharmaceuticals America, Inc., as

our second marketing base in the

United States, the world’s largest

market for pharmaceuticals. This

move creates an organization to

conduct marketing activities for

Actos (pioglitazone hydrochloride),

an antidiabetic drug developed by

Takeda. Furthermore, in March

1998, we established Takeda Europe

Holdings Ltd., a holding company

for our pharmaceutical business in

Europe, and in September we

established Takeda Europe Research

& Development Centre Ltd. in

London, where the European Agency

for the Evaluation of Medicinal

Products is located.

Reviewing Takeda’s main

products, leuprolide acetate

(marketed as Leuplin in Japan,

Lupron Depot in the United States

and Enantone and other names in

Europe), a treatment for prostate

cancer, endometriosis, uterine

fibroids, breast cancer and central

precocious puberty, is sold in more

than 60 countries. We have steadily

developed new formulations for

leuprolide acetate in markets around

the world. Following the original

1 Month Depot, a dual chamber pre-

filled syringe (DPS) launched in

1995, an injectable three-month

formulation, 3 Month Depot, was

launched in 1996, and 4 Month

Depot was launched in the United

States in July 1997. As a result,

leuprolide acetate contributed

strongly to overseas sales in fiscal

1998.

Sales are also expanding steadily

in Japan, where leuprolide acetate

contributes to effective patient

Skilled MRs fromLaboratoires Takeda inFrance give physiciansdetailed explanationsof new products,playing a key role inTakeda’s strategy ofstrengthening itsoperations in France.

17

Review of Operations

18

treatments in a wide range of

therapeutic categories.

Launched in Japan in December

1992 as a treatment for peptic ulcers

and reflux esophagitis, lansoprazole

(marketed under the brand names

Takepron in Japan, Prevacid in the

United States, and Ogast, Agopton

and others in Europe) has become

the leading proton pump inhibitor

because of its superior efficacy.

Following its introduction in major

European countries, lansoprazole

was launched in the United States in

June 1995. Backed by favorable

evaluations from healthcare facilities,

lansoprazole achieved rapid market

penetration, and further increased

its contribution to results in fiscal

1998. It is now sold in more than 90

countries. New indications are being

added to the product profile,

including maintenance therapy

following healing of erosive

esophagitis and duodenal

ulcers, eradication of

Helicobacter pylori and

symptomatic

gastroesophageal reflux

diseases.

In December 1997,

Takeda launched a

promising new product,

candesartan cilexetil, a

novel angiotensin II

receptor antagonist

(AIIRA) for the

treatment of essential hypertension,

under the brand names Blopress in

Germany and Amias in the U.K.

Takeda originally discovered this

compound, the first non-peptide

AIIRA in the world. Its initial launch

was followed by introductions in

major countries including France,

Italy and the United States in 1998.

In 1999, candesartan cilexetil has

been launched as Blopress in some

Asian countries including Japan, and

it is now marketed in 28 countries

worldwide.

In Japan, National Health

Insurance (NHI) drug prices were

significantly reduced for the third

consecutive year in fiscal 1998. In

addition, the pharmaceutical market

has been affected by increased

patient copayments resulting from

revision of the NHI Law in

September 1997. Consequently, the

market in fiscal 1998 was virtually

flat compared with the previous

fiscal year. Starting from fiscal 1999,

the fiscal policy for health insurance

will become more stringent in

response to the declining birth rate

and aging of the population in

Japan. Given the urgent issues raised

recently by healthcare cost

containment measures and the

impact of health insurance reforms,

we must be prepared for an even

more severe operating environment.

However, the graying of Japanese

society is expected to increase the

need for pharmaceuticals, and the

pharmaceutical industry has

excellent potential. The market will

increasingly favor drugs that are

primary medical treatments and

offer clear beneficial effects, as well

as those that match the needs created

by the aging society and changing

lifestyles. Takeda has always focused

on research and development of

MRs at sales offices regularly attend practice study conferences to support the smooth market penetrationof new pharmaceuticals.

pharmaceuticals that offer

characteristics required by healthcare

facilities and on building their

market presence.

One example is Leuplin, a

prostate cancer treatment for which

we have added a succession of new

indications, including endometriosis,

central precocious puberty, uterine

fibroids and breast cancer. Sales have

expanded steadily, and we expect

Leuplin to make an even larger

contribution to results in the future.

Basen, a disaccharidase inhibitor,

was launched in 1994 as a diabetes

treatment with a novel mechanism

of action. It has become the first

choice of many physicians in treating

diabetes.

The addition of planned new

indications for the ulcer treatment

Takepron should contribute to

further growth in sales of this

product.

In fiscal 1999, the hyper-

cholesterolemia treatment Certa

(BAY w 6228), an HMG-CoA

reductase inhibitor, and Blopress, an

angiotensin II receptor antagonist

that provides a novel method for

treating hypertension, have already

been launched. We also plan to

launch the insulin sensitivity

enhancer AD-4833, for which we are

awaiting manufacturing approval.

Because these products have more

concentrated activity, we expect

them to gain a large share of the

market in their respective

therapeutic categories. Furthermore,

we will take advantage of the launch

of these drugs to educate patients

and the general public on the cause,

prevention, treatment and

complications of lifestyle-related

diseases, further boosting Takeda’s

domestic market presence.

Outside Japan, despite intensified

competition accompanying the

reorganization of the industry and

the advancement of policies to

contain healthcare costs, markets for

pharmaceutical products grew

steadily in fiscal 1998. The efforts of

TAP Holdings Inc., a U.S. affiliate

accounted for by the equity method,

to generate sales of lansoprazole in

the United States contributed to net

sales of US$2,062 million and net

income of US$532 million for the

company. Lansoprazole sold strongly

in Europe as well, while sales of

leuprolide acetate, in the face of

strong competition, increased over

the previous fiscal year, a result of

leuprolide acetate’s precise response

to market needs. Moreover, as

mentioned earlier, the hypertension

treatment candesartan cilexetil was

launched in France in September

and in Italy in October 1998.

In August 1999, the antidiabetic

agent Actos (pioglitazone

hydrochloride) was launched in the

United States. We expect to expand

sales of this product in other

overseas markets as well. In addition,

we are steadily carrying out

development activities for

apomorphine, a treatment for

erectile dysfunction. TAP Holdings

Inc. has submitted a New Drug

Application with the U.S. Food and

Drug Administration for

apomorphine under the brand name

Uprima.

To further develop its

pharmaceutical business, Takeda

keeps its pipeline full by efficiently

allocating management resources

toward selected therapeutic

categories and focused development

themes. A key to success in this effort

is our MPDR strategy that

emphasizes cooperation and

collaboration among marketing,

production, development and

research divisions, as well as our

framework for speedily resolving

cross-divisional issues. We will

continue strengthening our MPDR

strategy to promote effective

interdivisional cooperation in order

to maximize the benefits from each

division’s efforts. Employing this

original business structure, we will

advance our global strategy and

further promote Takeda’s position as

an R&D-driven international

company.

19

20

CONSUMERHEALTHCARE(OTC Drugs)

In the domestic

OTC drug market in

fiscal 1998, the lack of

any foreseeable

recovery in consumer

spending, coupled with

unfavorable summer

weather, led to a large

decrease in sales of

health maintenance

products. However,

demand for remedies

for colds, constipation

and athlete’s foot was favorable. As a

result, sales of the Consumer

Healthcare business declined slightly

compared with fiscal 1997.

Sales of Alinamin EX, part of the

Alinamin line of vitamin B1

derivative tablets, expanded steadily.

In June 1999, we launched New

Alinamin A, which contains more

vitamins B6 and B12 than the current

Alinamin A. This product will add

further strength to the Alinamin line.

Sales of Alinamin health tonics

declined from the previous year

because of weakness in this market

segment. Following the easing of

regulations in March 1999, three

products including Alinamin V were

reclassified as non-pharmaceutical

products, allowing them to be sold at

retail stores other than pharmacies.

By expanding sales channels, we

expect to increase sales of these

products in fiscal 1999.

Despite many competing

products, Takeda’s Benza brand,

which includes the cold remedy

Benza Block, achieved a large sales

increase over the previous fiscal year.

Contributing to this gain were the

January 1999 launch of Benza Block

Cough Syrup, an antitussive/

expectorant, and the February 1999

launch of Benza AL, a remedy for

allergic rhinitis.

Takeda will further develop the

Consumer Healthcare business based

on the goal of contributing to better

health and quality of life. In fiscal

1999, we will strengthen this

business by aggressively developing

and launching a steady stream of

new products while continuing our

efforts to earn the trust of

consumers. We will also work to

maintain solid relationships of trust

with retailers and wholesalers.

BULK VITAMIN & FOODTakeda’s Bulk Vitamin and Food

business is engaged primarily in the

manufacture and marketing of bulk

vitamins and food additives. We

contribute to healthier life and better

food culture through our

involvement in the health

supplements, food, beverage and

livestock feed markets.

With a broad lineup of bulk

vitamin products that includes

vitamin C as well as vitamins B1, B2,

B6, folic acid and others, Takeda is

one of the world’s leading

manufacturers of water-soluble

vitamins. Bulk vitamins are highly

Preparations for the launch of New Alinamin A were based on an action plan that was ideally tailored to implement the marketing strategy for this brand.

international products used in a

wide range of applications. Takeda is

therefore aggressively developing this

business overseas through its

subsidiaries in the United States,

Europe and Asia.

In the food additive business,

Takeda manufactures and sells a

variety of products such as flavor

enhancers and food texture

improvers. These include Ribotide, a

ribonucleotide flavor enhancer

originally developed by Takeda. Our

full product lineup and superior

quality assurance system have earned

us a high level of reliance among our

customers.

Results for fiscal 1998 were

affected by intense price competition

worldwide in addition to the

prolonged economic slump in Japan.

Consequently, net sales declined

from the previous fiscal year to ¥78.3

billion (US$647 million). A

continued decline in prices and

lower sales volume led to decreased

sales of vitamin C — the main

product of the bulk vitamin business

— although this decline was partially

offset by the beneficial effects of the

weaker yen. Despite unfavorable

market conditions, Takeda

maintained market share and sales

volume in the food additive business

thanks to relatively firm demand.

However, a sudden and sharp price

erosion of Ribotide resulted in

decreased food additive sales

revenue.

In fiscal 1999, though we foresee

keener competition in the industry,

we will work to strengthen our

competitive edge by pursuing better

efficiency in our production, sales

and research activities.

CHEMICAL PRODUCTSThe mission of Takeda’s Chemical

Products business is to contribute to

greater convenience in people’s lives

by supplying advanced polymer

materials based on our technological

strengths.

Main products include

intermediate materials for industrial

use such as polyurethane (PU)

resins, adhesives, toluene

diisocyanate (TDI), polyethers,

unsaturated polyester resins and

compounds, organic acids and

synthetic latexes.

Chemical Products segment sales,

which include sales of the Life-

Environment business, declined 6.0

percent year-on-year to ¥110.5

billion (US$913 million), due to the

prolonged economic recession in

Japan. Exports of TDI and sales of

adhesives increased, but depressed

building and construction activity in

Japan decreased sales of PU resins

for coating and unsaturated

polyester resins and compounds

mainly used in the housing industry.

In fiscal 1999, the Chemical

Products business will direct

continous efforts toward sales

expansion, R&D and production

efficiency. We will work to expand

sales of highly profitable products

including PU resins and adhesives.

Our research is focused on

developing eco-friendly newTakeda participates in such events as Food Ingredients Europe, heldin Frankfurt, Germany in November 1998.

21

products such as water-based resins,

PVC replacement materials, CFC-

free PU rigid foam systems and

recycling technologies. We plan to

launch new PU dispersions, food

packaging adhesives without

purported endocrine disrupters, and

reactive hot melt adhesives. We will

also carry out capacity expansions of

and cost reductions for TDI and

maleic anhydride.

One of our strategies is to

strengthen our overseas activities.

We are targeting a higher market

share for food packaging adhesives

in China and ASEAN countries and

starting their sales in Europe and the

United States. Expansion in the

export of TDI and synthetic latex for

gloves is also targeted.

AGRO (Plant Protection and Animal

Health Products)

Takeda’s Agro business is

aggressively working to

expand sales in its two

main product areas: plant

protection products and

animal health products.

Core plant protection

products include

insecticides such as Padan,

Bancol and Bestguard;

fungicides such as Validacin

and Blasin; and rice

herbicides such as Award,

Batl, Sheriff, Crush, The

One, and Longet. All of

these are proprietary products of

Takeda. In fiscal 1998, overseas sales

increased sharply

despite the economic

turmoil in Asia,

backed by higher

sales of Padan and

Validacin and the

full-fledged start of

exports of the wheat

herbicide

sulfosulfuron. In

Japan, however, sales

were strongly

impacted by the

reduction of rice

fields, which is

decreasing the scale

of the domestic

agriculture industry.

The result was a moderate decline in

total sales of plant protection

products.

The animal health products

segment covers a broad range of

markets from veterinary medicines

to feed additives and drugs for

fisheries. Fiscal 1998 sales decreased

because of a rise in imports of

livestock products and greater

competition in the market for pet-

related products.

In the plant protection business,

Takeda plans to expand sales of

sulfosulfuron in major advanced

countries. We will also continue

developing world markets for TI-

435, an insecticide with a broad

spectrum of activity against

agricultural pests at low application

The Agricultural Research Laboratory screens plant protectionproducts for effectiveness at its greenhouses while working tocreate breakthrough products.

22

Takeda’s maleic anhydride plant has introduced thelatest technology to detoxify exhaust gas.

rates.

With the need for

increased food production to

support the expanding world

population, continued

growth is foreseen in the

global market for both plant

protection and animal health

products. Takeda is well

prepared to meet global

market demand with a

research organization that is

steadily creating the seeds of

new products.

LIFE-ENVIRONMENT

Takeda’s Life-Environment

business is dedicated to contributing

to the improvement of people’s lives

and the environment with products

such as activated carbon and

preservatives for wood care and

industrial use as well as

environment-related products. The

core mission of this business is to

solve environmental problems and

create comfortable living

environments in fields such as water,

air and housing.

In fiscal 1998, sales of activated

carbon for water purification

expanded. Sales of Xyladecor, which

is used for preservation and

beautification of wood, also

increased, particularly at consumer-

oriented home centers. However,

Takeda discontinued sales of several

products, including boron products.

As a result, Life-Environment sales

decreased slightly from the previous

fiscal year.

In the field of activated carbon,

we are focusing on strengthening

sales of highly functional, high-

value-added products such as

molecular sieving carbon; sales of

environment-related products such

as carbon for dioxin removal; and

marketing of exports in overseas

markets. In November 1998, Takeda

increased its ownership in Davao

Central Chemical Corporation, a

manufacturer of activated carbon

from coconut shells in the

Philippines, from 35 percent to 80

percent, making the company a

consolidated subsidiary.

In the field of wood preservatives,

Takeda is working toward the

development and

speedy market launch

of safer, easy-to-use

and environmentally

sound products for

such applications as

water-based paints and

ant-repellent systems

with minimal

environmental impact.

In addition, as new

housing starts are

forecast to remain

stagnant, we will focus

on cultivating new

sales routes to target

general users. Demand from this

sector has been increasing since fiscal

1998, reflecting steady growth in the

popularity of gardening and do-it-

yourself projects.

In environment-related fields, we

will promote faster development of

products that contribute to clean

environments. In fiscal 1998, we

launched two pollutant test kits,

which measure the concentration of

surfactants in water with a high

degree of sensitivity. New product

introductions planned for fiscal 1999

include additional pollutant test kits

and adsorbents to remove and

reclaim defined ions such as

fluorides or phosphates in sewage or

drainage water.

23

The Life-Environment Research Laboratory carries out a wide rangeof research to improve the environment, including the development ofactivated carbon technologies for eliminating offensive odors at thefacility.

24

Yuzuru TakagiGeneral Manager—Planning & Coordination

Corporate Planning Department

Ken MatsumotoGeneral Manager—General Affairs & Personnel Department

Osamu Nishimura, Ph.D.General Manager—Pharmaceutical Discovery Research

Division

Yasuhiro Sumino, Ph.D.General Manager—Pharmaceutical Research Division

Yasuhiko Hamanaka, M.D., Ph.D.General Manager—Pharmaceutical Development Division

Kiyoshi Kitazawa, Ph.D.General Manager—Strategic Development Department

Pharmaceutical Development Division

Shuji HiguchiManaging Director—Takeda Europe Research and

Development Centre Ltd.

Mikihiko Obayashi, Ph.D.President—Takeda America Research and

Development Center Inc.

Makoto YamaokaGeneral Manager—Marketing Administration Department

Pharmaceutical Marketing Division

Katsumi NozawaGeneral Manager—Ethical Products Marketing Management

Department Pharmaceutical Marketing Division

Naohide MuroPresident—Consumer Healthcare Company

Hiroshi UchiyamaPresident—Vitamin & Food Company

Yoshiro NamazuPresident—Agro Company

Atsuo Kobayashi, Ph.D.President—Life-Environment Company

Hiroshi Akimoto, Ph.D.General Manager—Intellectual Property Department

(as of June 29, 1999)

CHAIRMAN

Masahiko Fujino, Ph.D.

PRESIDENT

Kunio Takeda

SENIOR MANAGING DIRECTORS

Koichi Yanashita

Hideyuki Nagasawa

MANAGING DIRECTORS

Nobuto Nakamura, M.D., Ph.D.

Mitsuo Yashiro

DIRECTORSHiroshi Nagasaki

Hisayoshi Okazaki, Ph.D.General Manager—Pharmaceutical Business

Development Department

Ken-ichi NishinoPresident—Chemical Products Company

Teruji OnoGeneral Manager—Legal Department

Shozo NakamuraGeneral Manager—Pharmaceutical Production Division

Nobutaka SuzukiGeneral Manager—Pharmaceutical Marketing Division

Toshiyuki ArakiGeneral Manager—Finance & Accounting Department

Yoshihiro NaraiGeneral Manager—Corporate Planning Department

Yasuchika HasegawaGeneral Manager—Pharmaceutical International

Division

FULL-TIME CORPORATE AUDITOR

Kunio Ueshima

CORPORATE AUDITORS

Masao AriyasuKiyoshi TauraNaoaki Yoshii

Board of Directors, Auditors and Corporate Officers

Left to right: Koichi Yanashita, SeniorManaging Director; Kunio Takeda,President; Masahiko Fujino, Ph.D.,Chairman; and Hideyuki Nagasawa,Senior Managing Director

CORPORATE OFFICERS

FINANCIAL REVIEW

Net Sales Breakdown(¥ Billion)

0

150

300

450

600

750

900

9998979695

PharmaceuticalsBulk Vitamin & FoodChemical ProductsAgro Products and Others

0

50

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200

0

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9998979695

Overseas SalesPercentage of Net Sales

25

Consolidated Sales and IncomeThe business environment surrounding the Takeda

Group grew more severe during fiscal 1998, the yearended March 31, 1999, due to the effects of global creditinstability and the Asian economic crisis. In the pharma-ceutical industry, Takeda’s principal business, a successionof large-scale mergers and acquisitions, especially bymajor companies in Europe and the United States, com-bined with borderless markets to usher in an era ofintense competition.

Amid these trends, the Takeda Group, which aims to bean R&D-driven international enterprise, is developing itsglobal operations and drawing on the strengths of eachgroup company to improve consolidated financial resultsand raise the value of the Company.

During fiscal 1998, Takeda continued to make rapidstrides in its global business. We established our ownmarketing company in the United States and filed a NewDrug Application for diabetes treatment AD-4833(pioglitazone hydrochloride) in Europe and the UnitedStates.

The tough business environment in Japan continuedduring fiscal 1998 with no sign of economic recovery.Overseas, however, market conditions for ethical drugswere favorable, particularly in the United States. As a result, both net sales and income increased comparedwith the previous fiscal year.

Net sales increased 0.3 percent to ¥844.6 billion(US$6,980 million) as increased sales of ethical drugs inoverseas markets offset a decrease in domestic sales. Netsales to customers outside Japan totaled ¥175.2 billion(US$1,448 million), a year-on-year increase of 29.1 percent, and accounted for 20.7 percent of total net sales,an increase of 4.6 percentage points from fiscal 1997.

In income categories, operating income increased 7.0percent to ¥142.2 billion (US$1,175 million), reflectingTakeda’s success in expanding sales of high-value-addedproducts and other factors. U.S. affiliate TAP HoldingsInc., accounted for by the equity method, achievedgrowth in sales of the proton pump inhibitor lansoprazole(U.S. brand name: Prevacid), an international strategicproduct, which contributed strongly to a 9.3 percentincrease in income before income taxes and minorityinterests to ¥182.1 billion (US$1,505 million). As a result,net income increased 12.4 percent to ¥91.7 billion(US$758 million).

Net income per share was ¥103.52 (US$0.86), ¥10.55higher than in the prior fiscal year. Furthermore, returnon shareholders’ equity increased to 10.6 percent from10.3 percent. Takeda increased cash dividends per share to¥29.00 (US$0.24) from ¥21.25 in fiscal 1997.

Segment InformationThe Company’s operations, as explained in Note 12 of

Overseas Sales(¥ Billion; %)

Net Income and Net Income per Share(¥ Billion; ¥)

0

20

40

60

80

100

0

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40

60

80

100

9998979695

Net IncomeNet Income per Share

0

200

400

600

800

1,000

1,400

1,200

9998979695

26

Total Assets(¥ Billion)

the Notes to Consolidated Financial Statements, are classified into four business segments: Pharmaceuticals,Bulk Vitamin and Food, Chemical Products and Other.

PharmaceuticalsIn keeping with its goal of being an R&D-driven

international enterprise, Takeda focused efforts in itspharmaceutical business on creating and developing original new drugs for the global market. At the sametime, the Company moved quickly to expand its market-ing bases in the United States and Europe.

In the United States, the world’s largest market forpharmaceuticals, we established our second marketingbase, Takeda Pharmaceuticals America, Inc., in May 1998.In Europe, we established Takeda Europe Research &Development Centre Ltd. in September 1998 in theUnited Kingdom, where regulatory affairs for theEuropean pharmaceutical market are centered.

In January 1999 in the United States, and in March1999 in Europe, we filed a New Drug Application for diabetes treatment AD-4833 (pioglitazone hydrochlo-ride). AD-4833, our newest international strategic prod-uct, was launched in August 1999 under the brand nameActos in the United States.

Following introductions in the United States andEurope, in June 1999 we began sales of hypertensiontreatment Blopress in Japan.

In Japan, where policies to contain healthcare costsmake market expansion difficult, Takeda successfullyexpanded sales of core products such as Leuplin, aluteinizing hormone-releasing hormone (LH-RH) analog,and Basen, a disaccharidase inhibitor for preventing postprandial hyperglycemia in diabetes mellitus.However, factors such as the withdrawal from the marketof Avan, a brain-energy metabolism enhancer, resulted ina decrease in domestic pharmaceutical sales.

Outside Japan, sales of lansoprazole (brand name:Prevacid) in the United States contributed strongly tooverseas results.

Total net sales of the Pharmaceuticals business there-fore increased 2.9 percent, to ¥597.5 billion (US$4,938million), and operating income from this businessincreased 8.2 percent to ¥132.7 billion (US$1,097 mil-lion). The Pharmaceuticals business thus increased itsweighting in the overall business of the Takeda Group.

Bulk Vitamin and FoodIn April 1998, the U.S. manufacturing and marketing

subsidiaries merged to bolster earnings potential in theNorth American market. However, price declines for vitamin C and Ribotide led to a decrease of 5.4 percent inBulk Vitamin and Food business sales to ¥78.3 billion(US$647 million).

Although the Bulk Vitamin and Food business postedan operating loss of ¥0.6 billion (US$5 million), this represented an improvement of ¥0.4 billion over the priorfiscal year, in part due to better performance at subsidiaryTakeda Food Products, Ltd.

Shareholders’ Equity & ROE (¥ Billion; %)

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150

300

450

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900

0

2

4

6

8

10

12

9998979695

Shareholders’ EquityROE (Return on Equity)

27

Chemical ProductsThe Chemical Products business, which includes the

Life-Environment business, further developed its overseas presence in fiscal 1998 with the acquisition ofactivated carbon manufacturer Davao Central ChemicalCorporation in the Philippines. However, the economicslump in Japan reduced demand related to housing andautomobiles. Consequently, sales in the ChemicalProducts business declined 6.0 percent to ¥110.5 billion(US$913 million), and operating income fell 13.4 percent to ¥6.8 billion (US$56 million).

Other BusinessesIn the Agro business, sales of agricultural chemicals

and animal health products decreased due to weakdomestic demand. As a result, net sales of other businesses decreased 4.2 percent to ¥58.2 billion(US$481 million), and operating income dropped 8.1percent to ¥3.2 billion (US$26 million).

Financial Position and LiquidityAs of March 31, 1999, total assets were ¥1,326.9 bil-

lion (US$10,966 million), an increase of 2.4 percentfrom a year earlier resulting primarily from an increasein marketable securities and investment securities. Totalliabilities, the sum of current and long-term liabilities,decreased 11.1 percent to ¥389.7 billion (US$3,221 million) as conversion into shares of an issue of 1.9 percent unsecured convertible bonds due in 1998reduced the current portion of long-term debt and

income taxes payable decreased.Higher retained earnings resulted in a 9.4 percent

increase in shareholders’ equity to ¥907.3 billion(US$7,498 million), which accounted for 68.4 percent oftotal assets, compared to 64.0 percent at March 31,1998. Shareholders’ equity per share increased ¥76.79from a year earlier to ¥1,020.35 (US$8.43).

Net cash provided by operating activities decreased¥4.0 billion to ¥104.9 billion (US$867 million). Thisdecrease in cash flow occurred despite increased netincome as accrued expenses and income taxes payabledecreased.

Net cash used in investing activities increased ¥96.6billion from the previous fiscal year to ¥169.3 billion(US$1,399 million). This was due mainly to an increasein purchases of marketable securities.

Net cash used in financing activities increased ¥3.2billion to ¥22.8 billion (US$189 million), primarilybecause of the increase in cash dividends paid for thefiscal year.

Cash and cash equivalents at the end of the yeardecreased ¥85.9 billion to ¥313.7 billion (US$2,593 million) from a year earlier.

Takeda will continue working to improve results anddeploy capital efficiently in order to maintain a soundfinancial structure.

Year 2000 (Y2K) IssueTakeda recognizes the Y2K issue as a critical

management concern, and has charged a director withresponsibility for ensuring that Takeda and its groupcompanies deal with it effectively. To prevent a materialadverse impact caused by external entities such as suppliers on its business operations, the Company isalso working to ensure their Y2K readiness.Remediation and replacement of information systemsand equipment have been progressing according to plan,with remediation and replacement of all critical systemsscheduled for completion in September 1999. TheCompany has also prepared a comprehensive contingency plan detailing responses to foreseeablerisks. Expenses related to Y2K remediation are notexpected to have a material impact on the operations orresults of the Takeda Group.

Legal ProceedingsThe Company’s 100-percent-owned subsidiary,

Takeda Vitamin & Food USA, Inc. (TVFU), which manufactures and sells vitamin bulks in the U.S.A., submitted the documents regarding its vitamin businessto the U.S. Department of Justice according to certainsubpoena issued in May 1998.

The Company and TVFU are among co-defendantswith other companies in class-action law suits broughtin the U.S.A. by plaintiffs claiming that they suffereddamages from an alleged conspiracy of price fixing andmarket allocations in the worldwide vitamins market.


ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA

28

1999 1998 1997 1996

For the years ended March 31:Net sales ............................................................................. ¥ 844,643 ¥ 841,816 ¥ 838,824 ¥ 801,341Operating income............................................................... 142,220 132,952 127,350 112,707Income before income taxes and minority interests ........ 182,142 166,649 147,985 125,787Income taxes....................................................................... 89,019 83,368 75,094 64,837Minority interests .............................................................. 1,368 1,671 1,508 1,106Net income.......................................................................... 91,755 81,610 71,383 59,844Capital investments........................................................... 29,241 34,091 30,741 30,358Depreciation and amortization.......................................... 32,651 32,763 31,473 33,255Research and development costs....................................... 77,487 79,039 71,754 68,006

Per share amounts (Yen and U.S. dollars)(See Note 11 to consolidated financial statements):Net income ...................................................................... ¥103.52 ¥92.97 ¥81.52 ¥68.35Cash dividends................................................................ 29.00 21.25 17.25 15.00

At March 31:Current assets .................................................................... ¥ 913,263 ¥ 877,808 ¥ 826,288 ¥ 787,615Property, plant and equipment ......................................... 224,229 232,092 229,400 231,532Investments and other assets............................................ 189,507 186,302 165,087 153,086Total assets......................................................................... 1,326,999 1,296,202 1,220,775 1,172,233Current liabilities .............................................................. 280,058 324,735 292,873 299,032Long-term liabilities .......................................................... 109,705 113,920 144,198 147,825Minority interests .............................................................. 29,863 28,166 26,565 25,467Shareholders’ equity .......................................................... 907,373 829,381 757,139 699,909

Number of shareholders .................................................... 54,059 59,008 71,172 81,278Number of employees......................................................... 15,776 16,443 16,586 17,258

Notes: 1. The U.S. dollar amounts in this report represent translations of Japanese yen, for convenience only, at the rate of ¥121=US$1, the approximateexchange rate at March 31, 1999.

2. In the year ended March 31, 1995, 35 previously unconsolidated subsidiaries accounted for by the equity method were consolidated. As a result, thenumber of consolidated subsidiaries totaled 47 and 24 companies were accounted for by the equity method.

Years ended March 31

29

Thousands ofMillions of yen U.S. dollars (Note 1)

1995 1994 1993 1992 1991 1990 1989 1999

¥ 771,667 ¥ 727,845 ¥ 720,140 ¥709,686 ¥691,409 ¥697,915 ¥689,381 $ 6,980,52195,285 88,434 76,675 67,963 70,297 78,145 87,931 1,175,372

107,145 103,210 93,029 85,727 104,998 92,767 97,297 1,505,30654,424 54,520 43,827 50,603 58,902 54,849 57,173 735,6941,291 1,064 1,168 1,288 1,607 1,057 1,270 11,306

51,430 47,626 48,034 33,836 44,489 36,861 38,854 758,30636,337 42,965 37,953 39,627 45,726 38,179 29,032 241,66129,768 27,922 27,508 26,199 23,718 21,185 17,805 269,84367,159 62,934 62,277 59,742 53,388 51,163 45,336 640,388

¥58.74 ¥54.43 ¥54.98 ¥38.74 ¥50.98 ¥42.28 ¥44.77 $0.8614.00 13.00 12.00 12.00 12.00 10.00 10.00 0.24

¥ 721,814 ¥ 693,837 ¥ 662,777 ¥641,275 ¥645,414 ¥659,782 ¥621,447 $ 7,547,628241,506 210,236 196,441 188,145 182,200 163,221 123,343 1,853,132147,428 148,350 147,427 149,134 135,385 129,854 141,846 1,566,174

1,110,748 1,052,423 1,006,645 978,554 962,999 952,857 886,636 10,966,934275,636 271,498 249,853 261,689 273,902 304,478 277,677 2,314,529157,323 145,657 158,628 158,081 155,422 151,436 147,296 906,65324,666 21,407 20,508 19,484 18,342 16,846 12,606 246,802

653,123 613,861 577,656 539,300 515,333 480,097 449,057 7,498,950

87,897 89,384 88,446 89,349 87,329 82,282 72,87317,580 15,792 15,781 15,497 15,210 15,137 13,675


CONSOLIDATED BALANCE SHEETS

30


ASSETS 1999 1998 1999

Current assets: Cash and cash equivalents —

Cash ...................................................................................................... ¥ 39,213 ¥ 36,980 $ 324,074Time deposits........................................................................................ 274,585 362,789 2,269,298

Total ....................................................................................... 313,798 399,769 2,593,372

Marketable securities (Note 3) ............................................................... 227,032 92,845 1,876,298Notes and accounts receivable —

Trade notes ........................................................................................... 61,173 69,342 505,562Trade accounts ..................................................................................... 138,621 137,276 1,145,628Due from unconsolidated subsidiaries and affiliates ......................... 28,859 26,946 238,504Allowance for doubtful receivables and losses on sales returns........ (3,775) (4,010) (31,198)

Total ....................................................................................... 224,878 229,554 1,858,496

Inventories (Note 4)................................................................................. 107,767 107,049 890,636Deferred income taxes............................................................................. 28,180 37,367 232,893Other current assets ............................................................................... 11,608 11,224 95,933

Total current assets ................................................. 913,263 877,808 7,547,628

Property, plant and equipment (Note 5):Land ......................................................................................................... 39,603 40,029 327,298Buildings and structures ........................................................................ 229,146 225,402 1,893,769Machinery and equipment ...................................................................... 382,256 371,249 3,159,140Construction in progress......................................................................... 6,887 12,156 56,917

Total ....................................................................................... 657,892 648,836 5,437,124Accumulated depreciation ...................................................................... (433,663) (416,744) (3,583,992)

Net property, plant and equipment ..................... 224,229 232,092 1,853,132

Investments and other assets:Investments in and advances to unconsolidatedsubsidiaries and affiliates (Note 3)....................................................... 73,764 81,846 609,620

Investment securities (Note 3) ............................................................... 50,058 40,596 413,702Deferred income taxes............................................................................. 36,612 38,430 302,579Other assets............................................................................................. 29,073 25,430 240,273

Total investments and other assets ..................... 189,507 186,302 1,566,174

TOTAL ....................................................................................................... ¥1,326,999 ¥1,296,202 $10,966,934See notes to consolidated financial statements.

March 31, 1999 and 1998

31


LIABILITIES AND SHAREHOLDERS’ EQUITY 1999 1998 1999

Current liabilities:

Bank loans (Note 5)................................................................................. ¥ 9,361 ¥ 9,509 $ 77,364

Current portion of long-term debt (Note 5)............................................ 2,119 24,077 17,512

Notes and accounts payable —

Trade notes ........................................................................................... 11,277 12,373 93,198

Trade accounts ..................................................................................... 80,154 78,287 662,430

Due to unconsolidated subsidiaries and affiliates.............................. 21,603 20,101 178,537

Total ....................................................................................... 113,034 110,761 934,165

Accrued expenses .................................................................................... 68,464 76,014 565,818

Income taxes payable .............................................................................. 38,698 54,902 319,818

Other current liabilities .......................................................................... 48,382 49,472 399,852

Total current liabilities........................................... 280,058 324,735 2,314,529

Long-term liabilities:

Long-term debt (Note 5).......................................................................... 9,858 10,896 81,471

Retirement benefits (Note 6) .................................................................. 93,961 96,909 776,537

Reserve for SMON compensation (Note 7)............................................. 5,886 6,115 48,645

Total long-term liabilities....................................... 109,705 113,920 906,653

Minority interests .................................................................................. 29,863 28,166 246,802

Commitments and contingencies (Note 13)

Shareholders’ equity (Notes 8 and 14):

Common stock — authorized, 2,400,000,000 shares;

issued and outstanding shares with par value of ¥50 per share:

March 31, 1999 — 889,272,395 shares

March 31, 1998 — 878,991,506 shares................................................. 63,540 52,468 525,124

Additional paid-in capital ....................................................................... 49,637 38,578 410,223

Legal reserve ........................................................................................... 14,250 12,804 117,769

Retained earnings ................................................................................... 779,946 725,531 6,445,834

Total shareholders’ equity ..................................... 907,373 829,381 7,498,950

TOTAL ....................................................................................................... ¥1,326,999 ¥1,296,202 $10,966,934


CONSOLIDATED STATEMENTS OF INCOME

32


1999 1998 1997 1999

Net sales (Notes 3 and 12)........................................................... ¥844,643 ¥841,816 ¥838,824 $6,980,521

Operating costs and expenses (Note 12):Cost of sales (Note 3) .................................................................. 435,787 443,292 449,228 3,601,546Selling, general and administrative (Note 9)............................ 266,636 265,572 262,246 2,203,603

Total .......................................................................... 702,423 708,864 711,474 5,805,149

Operating income (Note 12)...................................................... 142,220 132,952 127,350 1,175,372

Other income (expenses):Interest and dividend income .................................................... 8,603 6,677 5,783 71,099Interest expense.......................................................................... (1,059) (1,808) (2,257) (8,752)Equity in earnings of unconsolidated subsidiaries and affiliates ........................................................ 35,981 24,193 17,270 297,364

Gain on sale of investment in an affiliate ................................. — 4,833 — —Loss on sales and disposals of property, plant and equipment ................................................................ (332) (666) (37) (2,744)

Exchange gains (losses).............................................................. (734) 1,328 968 (6,066)Other — net ................................................................................ (2,537) (860) (1,092) (20,967)

Total .......................................................................... 39,922 33,697 20,635 329,934

Income before income taxes and minority interests......... 182,142 166,649 147,985 1,505,306

Income taxes (Note 10):Current........................................................................................ 78,014 93,088 78,219 644,744Deferred ...................................................................................... 11,005 (9,720) (3,125) 90,950

Total .......................................................................... 89,019 83,368 75,094 735,694

Income before minority interests .......................................... 93,123 83,281 72,891 769,612Minority interests ...................................................................... 1,368 1,671 1,508 11,306

Net income................................................................................... ¥ 91,755 ¥ 81,610 ¥ 71,383 $ 758,306

Yen U.S. dollars (Note 1)

Amounts per common share (Note 11):Net income .................................................................................. ¥103.52 ¥92.97 ¥81.52 $0.86Cash dividends applicable to the year....................................... 29.00 21.25 17.25 0.24

See notes to consolidated financial statements.

Years ended March 31, 1999, 1998 and 1997


CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

33


1999 1998 1997 1999

Common stock:Balance, beginning of year ......................................................... ¥ 52,468 ¥ 48,948 ¥ 48,942 $ 433,620Shares issued upon conversion of debt...................................... 11,072 3,520 6 91,504

Balance, end of year ................................................................... ¥ 63,540 ¥ 52,468 ¥ 48,948 $ 525,124

Additional paid-in capital:Balance, beginning of year ......................................................... ¥ 38,578 ¥ 35,063 ¥ 35,057 $ 318,826Increase due to conversion of debt............................................. 11,059 3,515 6 91,397

Balance, end of year ................................................................... ¥ 49,637 ¥ 38,578 ¥ 35,063 $ 410,223

Legal reserve:Balance, beginning of year ......................................................... ¥ 12,804 ¥ 12,235 ¥ 12,235 $ 105,818Transfer from retained earnings .............................................. 1,446 569 — 11,951Balance, end of year ................................................................... ¥ 14,250 ¥ 12,804 ¥ 12,235 $ 117,769

Retained earnings:Balance, beginning of year ......................................................... ¥725,531 ¥660,893 ¥603,675 $5,996,124Net income .................................................................................. 91,755 81,610 71,383 758,306Cash dividends paid; ¥24.75 ($0.20) — 1999,¥18.25 — 1998 and ¥15.75 — 1997 (per share)....................... (21,885) (16,001) (13,792) (180,868)

Bonuses to directors and corporate auditors............................. (239) (402) (373) (1,975)Transfer to legal reserve ............................................................ (1,446) (569) — (11,951)Effect on beginning retained earnings of changing fromthe equity method to the cost method of accounting foran investment in a certain former affiliate ............................ (13,770) — — (113,802)

Balance, end of year ................................................................... ¥779,946 ¥725,531 ¥660,893 $6,445,834See notes to consolidated financial statements.



CONSOLIDATED STATEMENTS OF CASH FLOWS

34


1999 1998 1997 1999

Operating activities:Net income ............................................................................................................................ ¥ 91,755 ¥ 81,610 ¥ 71,383 $ 758,306Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization ........................................................................................ 32,651 32,763 31,473 269,843Loss on sales and disposals of property, plant and equipment...................................... 332 666 37 2,744Provision for deferred income taxes ................................................................................ 11,005 (9,720) (3,125) 90,950Undistributed earnings of unconsolidated subsidiaries and affiliates .......................... (7,998) (16,370) (16,252) (66,099)Gain on sale of investment in an affiliate ....................................................................... — (4,833) — —Changes in assets and liabilities, net of effects from consolidatinga former affiliate (Note 2):

Decrease in notes and accounts receivable ............................................................ 4,676 18,312 10,350 38,645Decrease (increase) in inventories........................................................................... (718) (4,643) 802 (5,934)Decrease (increase) in other current assets ............................................................ (384) 342 1,458 (3,174)Decrease (increase) in other assets ......................................................................... (4,853) (13) 3,553 (40,107)Increase (decrease) in notes and accounts payable ................................................ 2,273 (6,784) 2,140 18,785Increase (decrease) in accrued expenses ................................................................. (7,550) 3,593 5,527 (62,397)Increase (decrease) in income taxes payable .......................................................... (16,204) 12,042 (111) (133,917)Increase (decrease) in other current liabilities ....................................................... 1,043 1,839 (13,175) 8,620Decrease in liability for retirement benefits ........................................................... (2,948) (892) (1,079) (24,364)Increase in minority interests.................................................................................. 1,697 1,167 1,098 14,025Other ......................................................................................................................... 202 (98) (21) 1,669

Net cash provided by operating activities ........................................... 104,979 108,981 94,058 867,595

Investing activities:Payment for purchases of property, plant and equipment................................................. (28,932) (33,936) (31,745) (239,107)Proceeds from sales of property, plant and equipment ...................................................... 1,085 89 2,492 8,967Payment for purchases of investment securities ................................................................ (8,652) (337) (3,540) (71,504)Proceeds from sale of investment in an affiliate................................................................. — 5,488 — —Proceeds from sales of investment securities...................................................................... 1,199 1,350 911 9,909Decrease (increase) in investments in and advances to unconsolidated subsidiaries and affiliates ........................................................................ 184 (78) 17 1,521

Net increase in marketable securities ................................................................................. (134,187) (40,191) (13,175) (1,108,984)Cash paid for acquiring a majority interest in a former affiliate, net of cash and cash equivalents from consolidating this subsidiary .............................. — (5,078) — —

Net cash used in investing activities..................................................... (169,303) (72,693) (45,040) (1,399,198)

Financing activities:Redemption of bonds ............................................................................................................ (215) (500) (600) (1,777)Proceeds from issuance of long-term debt ........................................................................... 2,256 2,708 1,995 18,645Repayment of long-term debt .............................................................................................. (2,889) (3,371) (4,777) (23,876)Net increase (decrease) in bank loans ................................................................................. (148) (2,438) 1,972 (1,223)Dividends paid ...................................................................................................................... (21,885) (16,001) (13,792) (180,868)

Net cash used in financing activities .................................................... (22,881) (19,602) (15,202) (189,099)Effect of exchange rate changes (Note 2) ......................................................................... 1,234 (274) (1,907) 10,198Net increase in cash and cash equivalents..................................................................... (85,971) 16,412 31,909 (710,504)Cash and cash equivalents, beginning of year .............................................................. 399,769 383,357 351,448 3,303,876Cash and cash equivalents, end of year .......................................................................... ¥313,798 ¥399,769 ¥383,357 $2,593,372

Additional cash flow information:Interest paid.......................................................................................................................... ¥ 1,061 ¥ 1,779 ¥ 2,452 $ 8,769Income taxes paid ................................................................................................................. 94,218 80,509 78,315 778,661

Noncash financing activity:Convertible debt converted into common stock .................................................................. ¥ 22,131 ¥ 7,035 ¥ 12 $ 182,901

Noncash investing activities:The Company acquired a majority of a certain affiliate in the year ended March 31, 1998 and included it in the consolidation (Note 2). In conjunction with the acquisition, liabilities were assumed as follows:

Assets acquired ................................................................................................................. ¥ — ¥ 6,054 ¥ — $ —Investment eliminated ..................................................................................................... — (723) — —Cash paid to acquire a majority of the capital stock ...................................................... — (5,607) — —Goodwill............................................................................................................................. — 4,885 — —Minority interests ............................................................................................................. — (434) — —

Liabilities assumed........................................................................................................... ¥ — ¥ 4,175 ¥ — $ —

Effect on beginning retained earnings of changing from theequity method to the cost method of accounting for

an investment in a certain former affiliate ..................................................................... ¥ (13,770) ¥ — ¥ — $ (113,802)

See notes to consolidated financial statements.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

35


Note 1

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements are pre-pared from the consolidated financial statements issued fordomestic reporting purposes in accordance with the provisionsset forth in the Japanese Securities and Exchange Law. TakedaChemical Industries, Ltd. (the “Company”) and its domesticconsolidated subsidiaries maintain their accounts and recordsin accordance with the provisions set forth in the JapaneseCommercial Code and in conformity with generally acceptedaccounting principles and practices in Japan, which are differ-ent in certain respects as to application and disclosure require-ments of International Accounting Standards, and its overseassubsidiaries and affiliates in conformity with those of the coun-tries of their domicile.

In preparing the consolidated financial statements, certainreclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in Japanin order to present them in a form which is more familiar to

readers outside Japan. Presentation of a consolidated state-ment of cash flows as an integral part of the basic financialstatements is not required for domestic reporting purposes butis included herein for the convenience of readers. In addition,the accompanying notes include information which is notrequired under generally accepted accounting principles andpractices in Japan but is presented herein as additional information.

The financial statements are stated in Japanese yen, the cur-rency of the country in which the Company is incorporated andoperates. The translations of Japanese yen amounts into U.S.dollar amounts are included solely for the convenience of read-ers outside Japan and have been made at the rate of ¥121 toUS$1, the approximate rate of exchange at March 31, 1999.Such translations should not be construed as representationsthat the Japanese yen amounts could be converted into U.S.dollars at that or any other rate.

Note 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidationThe accompanying consolidated financial statements include theaccounts of the Company and its significant subsidiaries (together the “Companies”). All significant intercompany balances and transactions are eliminated in consolidation.

During the fiscal year ended March 31, 1999, the Companyestablished two new subsidiaries and acquired a majority inter-est of a certain affiliate (defined as ownership from 20% to 50%),previously accounted for by the cost method. During the fiscalyear ended March 31, 1998, the Company established five newsubsidiaries and acquired a majority interest of a certain affili-ate, previously accounted for by the equity method. The consoli-dated financial statements include the balances of such sub-sidiaries and their operations and cash flows from the date oftheir inclusion in the consolidation.

During the fiscal year ended March 31, 1999, due to thedecrease in ownership of a certain company, previously account-ed for by the equity method, the former affiliate has beenaccounted for by the cost method and retained earnings at April1, 1998 has been retroactively adjusted.

Cash and cash equivalentsIn reporting cash flows, the Companies consider cash and timedeposits with maturities of one year or less to be cash and cashequivalents. Such time deposits may be withdrawn on demandwithout diminution of principal.

Marketable securities and investmentsPublicly traded marketable securities included in marketableand investment securities are carried at the lower of cost or mar-

ket value applied on an individual basis. Cost is determined bythe average method. Except for certain insignificant affiliates,the Company’s investments in unconsolidated subsidiaries andaffiliates are stated at their underlying net equity values afterelimination of intercompany profits. Other securities are statedat cost except that appropriate write-downs are recorded forsecurities with values that have been permanently impaired.

InventoriesMerchandise and raw materials are stated at the lower of cost ormarket value and finished products and work-in-process are stat-ed at cost. Cost is primarily determined by the average method.

Property, plant and equipmentProperty, plant and equipment is stated at cost. Depreciation isprimarily computed by the declining-balance method at ratesbased on the estimated useful lives of the assets.

GoodwillThe excess of the purchase price over net assets of a subsidiaryacquired (“goodwill”) is amortized on the straight-line methodover five years. Goodwill at March 31, 1999 and 1998 were¥2,929 million ($24,207 thousand) and ¥3,907 million, net ofamortization of ¥1,956 million ($16,165 thousand) and ¥978million, respectively.

Retirement benefitsThe liability for retirement benefits is stated at an amountwhich would be required to be paid if all employees eligibleunder the Companies’ retirement benefit plans voluntarily ter-

36

minated their employment as of the balance sheet date, lessamounts funded under contributory and non-contributorytrusteed pension plans. The liability includes retirement bene-fits for directors and corporate auditors of the Company, pay-ments of which are subject to the approval of the shareholders.

Stock and bond issue costsStock and bond issue costs are charged to income as incurred.

Foreign currency transactionsForeign currency amounts are translated into Japanese yen atthe rates in effect at each balance sheet date for monetary cur-rent assets and current liabilities, and at historical rates for allother assets and liabilities, except for those covered by forwardexchange contracts which are translated at the contractedrates. However, when there is a significant unrealizedexchange loss related to long-term receivables and payables,such receivables and payables are translated into Japanese yenat the exchange rates in effect at the balance sheet date.Revenue and expense items denominated in foreign currenciesare translated at historical rates. Exchange gains or losses arecredited or charged to income as incurred. However, exchangegains or losses arising from the translation of long-term receiv-ables or payables at forward contract rates are deferred andamortized over the terms of the related contracts.

Foreign currency financial statementsThe financial statements of overseas subsidiaries and affiliatesare translated into Japanese yen by the following principalmethods as set forth by the Financial Accounting Standard onForeign Currency Translation in Japan.

The balance sheet accounts of overseas subsidiaries and affil-iates are translated into Japanese yen at the current exchangerates as of the balance sheet date except intercompany accounts

and shareholders’ equity, which are translated at historicalrates. Revenue and expense accounts of overseas subsidiariesand affiliates are translated into Japanese yen at the averageexchange rate for the year. Differences arising from such translation are included in other assets or liabilities.

Income taxesCurrent income taxes are provided for based on amounts cur-rently payable for each year. Deferred income taxes arisingfrom timing differences in the recognition of income and expens-es for tax and financial reporting purposes are reflected in theconsolidated financial statements. Accrued income taxes onundistributed earnings of overseas subsidiaries and affiliatesare also reflected in the consolidated financial statements.Accrued income taxes on the undistributed earningsof domestic subsidiaries and affiliates are not provided because dividends received from domestic companies are expected to benon-taxable.

At March 31, 1999, deferred tax assets were devalued at anew statutory tax rate, effective at the year end. The amount ofdevaluation of ¥8,009 million ($66,190 thousand) was chargedto income for the year ended March 31, 1999.

Cash dividendsCash dividends charged to retained earnings are those actuallypaid during the year and consist of year-end dividends for thepreceding year and interim dividends for the current year.

ReclassificationsCertain reclassifications have been made to the consolidatedfinancial statements for the year ended March 31, 1999. Theconsolidated financial statements for 1998 have been retroac-tively restated to conform to the 1999 presentation.

Note 3

MARKETABLE SECURITIES AND INVESTMENTS

Current marketable securities, which consisted principally ofdebt securities, approximated aggregate market value at March31, 1999 and 1998. Information regarding non-current

marketable equity and debt securities included in investmentsecurities at March 31, 1999 and 1998 was as follows:

Thousands ofMillions of yen U.S. dollars

1999 1998 1999

Carrying value .................................................................................................................................. ¥ 35,221 ¥ 33,707 $ 291,083Aggregate market value ................................................................................................................... 265,204 205,776 2,191,768Gross unrealized gains ..................................................................................................................... 229,983 172,069 1,900,685

37

At March 31, 1999 and 1998, the Company’s investment inone affiliate (1999) and two affiliates (1998), recorded at¥13,609 million ($112,471 thousand) and ¥29,334 million basedon the equity method, had aggregate quoted market values of¥12,377 million ($102,289 thousand) and ¥31,900 million,

respectively.Financial information with respect to unconsolidated sub-

sidiaries and affiliates, which were recorded based on the equitymethod at March 31, 1999 and 1998 and for each of the threeyears ended March 31, 1999, is summarized as follows:


1999 1998 1999

Current assets ................................................................................................................................... ¥268,528 ¥339,137 $2,219,240Other assets....................................................................................................................................... 99,075 138,814 818,802

Total....................................................................................................................................... 367,603 477,951 3,038,042

Current liabilities ............................................................................................................................. 179,465 211,040 1,483,182Other liabilities ................................................................................................................................. 18,689 31,631 154,455

Net assets .......................................................................................................................................... ¥169,449 ¥235,280 $1,400,405

Thousands of Millions of yen U.S. dollars

1999 1998 1997 1999

Net sales........................................................................................................................ ¥613,588 ¥639,777 ¥590,096 $5,070,975Net income .................................................................................................................... 72,404 53,146 40,178 598,380

Sales to and purchases from unconsolidated subsidiaries and affiliates were as follows:


1999 1998 1997 1999

Sales .............................................................................................................................. ¥128,708 ¥109,862 ¥105,948 $1,063,702Purchases...................................................................................................................... 65,401 58,124 58,384 540,504

Note 4

INVENTORIES

Inventories at March 31, 1999 and 1998 consisted of the following:


1999 1998 1999

Finished products and merchandise ................................................................................................ ¥ 54,413 ¥ 53,051 $449,694Work-in-process................................................................................................................................. 36,393 35,816 300,768Raw materials ................................................................................................................................... 16,961 18,182 140,174

Total .................................................................................................................................. ¥107,767 ¥107,049 $890,636

Investments in and advances to unconsolidated subsidiaries and affiliates at March 31, 1999 and 1998 consisted of the following:


1999 1998 1999

Investments at cost ........................................................................................................................... ¥11,577 ¥13,835 $ 95,678Equity in undistributed earnings..................................................................................................... 58,483 64,224 483,330

Total....................................................................................................................................... 70,060 78,059 579,008Advances............................................................................................................................................ 3,704 3,787 30,612

Total................................................................................................................................ ¥73,764 ¥81,846 $609,620

38

Bank loans consisted of short-term bank loans represented bynotes, generally due in one year. The Companies obtain financ-ing by discounting notes and export drafts with banks. Suchdiscounted notes and drafts and the related contingent liabili-ties were not included in the balance sheets but are disclosed ascontingent liabilities (see Note 13).

The weighted average annual interest rates of short-termbank loans and discounted notes and export drafts at March 31,1999 and 1998 were 1.8% and 2.1%, respectively.

Long-term debt at March 31, 1999 and 1998 consisted of thefollowing:

Note 5

BANK LOANS AND LONG-TERM DEBT


1999 1998 1999

1.9% unsecured convertible bonds due 1998 ....................................................................................... ¥ — ¥22,347 $ —Unsecured loans from banks and financial institutions due through 2023with interest ranging from 1.4% to 6.7% ........................................................................................... 1,582 2,266 13,074

Secured bonds due through 2004 with interest ranging from 1.6% to 4.9%...................................... 1,300 1,200 10,744Collateralized loans from financial institutions due through 2015

with interest ranging from 0.7% to 6.7% ........................................................................................... 9,095 9,160 75,165

Total ........................................................................................................................................... 11,977 34,973 98,983Less current portion.............................................................................................................................. 2,119 24,077 17,512

Total.................................................................................................................................... ¥ 9,858 ¥10,896 $81,471

The annual maturities of long-term debt were as follows:

Thousands ofYear ending March 31 Millions of yen U.S. dollars

2000...................................................................................................................................................................... ¥ 2,119 $17,5122001...................................................................................................................................................................... 6,133 50,6862002...................................................................................................................................................................... 1,588 13,1242003...................................................................................................................................................................... 1,101 9,0992004...................................................................................................................................................................... 210 1,7362005 and thereafter ............................................................................................................................................ 826 6,826

Total.................................................................................................................................................. ¥11,977 $98,983

At March 31, 1999, assets pledged as collateral for long-term debt were as follows:


Property, plant and equipment, net of accumulated depreciation................................................................... ¥12,332 $101,917

As is customary in Japan, security must be given if requestedby a lending bank. Banks have the right to offset cash deposit-ed with them against any debt or obligation that becomes due

or, in case of default and certain other specified events, againstall other debt payable to the banks. None of the lenders hasever exercised this right against the Companies’ obligations.

39

Employees of the Companies terminating their employmenteither voluntarily or upon reaching the mandatory retirementage are entitled to severance payments based on the rate of payat the time of termination, length of service and certain otherfactors. The Company has a contributory trusteed pension planwhich is interrelated with the Japanese government social welfareprogram which consists of a basic portion requiring employee andemployer contributions, plus an additional portion established bythe Company. The Company and certain consolidated subsidiaries

also have non-contributory trusteed pension plans. A portion ofthe above retirement benefits is funded under such pension plans.

At March 31, 1999 and 1998, the assets of the pension plansamounted to ¥116,919 million ($966,273 thousand) and¥109,587 million, respectively.

Charges to income with respect to retirement benefits for theyears ended March 31, 1999, 1998 and 1997 were ¥15,615 mil-lion ($129,050 thousand), ¥15,300 million and ¥22,268 million,respectively.

Note 6

RETIREMENT BENEFITS

The Company was co-defendant with the Japanese governmentand other pharmaceutical companies in legal actions in Japan.The plaintiffs claimed that a certain medicine, a product of oneof the co-defendants, which was distributed by the Company,was a cause of SMON, a neurological disease affecting theplaintiffs.

Compromise settlements have been made with all the plain-tiffs through December 25, 1996.

The Company has made a provision in the accompanying consolidated financial statements for estimated future medicaltreatment payments over the remaining lives of the partiesentitled under the compromise settlements.

Note 7

RESERVE FOR SMON COMPENSATION

Under the Japanese Commercial Code (the “Code”), at least50% of the issue price of new shares, with the minimum of thepar value thereof, is required to be designated as stated capital.

Under the Code, the Company is required to appropriate andset aside as a legal reserve an amount at least equal to 10% ofthe amounts paid as an appropriation of retained earnings,including dividends and other distributions, until such reserveequals 25% of stated capital. This reserve is not available fordividends but may be used to eliminate or reduce a deficit byresolution of the shareholders or may be transferred to commonstock by resolution of the Board of Directors.

The Company may transfer portions of additional paid-incapital to common stock by resolution of the Board of Directors.The Company may also transfer portions of unappropriatedretained earnings, available for dividends, to common stock byresolution of the shareholders.

Under the Code, the amount legally available for dividends isbased upon retained earnings as recorded on the books of theCompany. At March 31, 1999, retained earnings available forfuture dividends amounted to ¥556,414 million ($4,598,463 thousand) subject to legal reserve requirements.

Note 8

SHAREHOLDERS’ EQUITY

Research and development costs are charged to income asincurred. Research and development costs for the years ended

March 31, 1999, 1998 and 1997 were ¥77,487 million ($640,388thousand), ¥79,039 million and ¥71,754 million, respectively.

Note 9

RESEARCH AND DEVELOPMENT COSTS

40

Note 10

INCOME TAXES

The effective income tax rates of the Companies differed from the statutory tax rate for the following reasons:

1999 1998 1997

Statutory tax rate ............................................................................................................................................. 47.7% 51.4% 51.4%

Expenses not deductible for tax purposes ....................................................................................................... 2.2 2.9 3.4Loss in subsidiaries .......................................................................................................................................... 1.3 0.6 0.7Equity in earnings of unconsolidated subsidiaries and affiliates .................................................................. (6.6) (4.5) (4.6)Non-taxable dividend income........................................................................................................................... (0.3) (0.4) (0.3)Tax credits primarily for research and development costs ............................................................................ (0.2) (0.2) (0.7)Effect of statutory tax rate change (see Note 2).............................................................................................. 4.4 — —Other — net ...................................................................................................................................................... 0.4 0.2 0.8

Effective tax rate .............................................................................................................................................. 48.9% 50.0% 50.7%

Deferred income taxes consisted of the following:


1999 1998 1997 1999

Expenses recorded on books of account but not currently deductible for tax purposes .............................................................. ¥(1,976) ¥(9,468) ¥(5,687) $(16,331)

Accrued enterprise tax, deductible when paid ............................................................... 1,901 (1,661) (62) 15,711Accrued income taxes on undistributed earnings of overseas subsidiaries and affiliates .............................................................................. 2,605 3,104 3,343 21,529

Elimination of intercompany profits ............................................................................... 466 (1,695) (719) 3,851Effect of statutory tax rate change (see Note 2) ............................................................. 8,009 — — 66,190

Total...............................................................................................................¥11,005 ¥(9,720) ¥(3,125) $ 90,950

The computations of net income per common share were basedon the weighted average number of shares outstanding. Theaverage number of common shares used in the computationswas 886,393 thousand shares, 877,766 thousand shares and875,700 thousand shares for the years ended March 31, 1999,1998 and 1997, respectively.

The effect of the dilution on net income per common share,assuming full conversion of outstanding convertible bonds at

the beginning of each year (or at the time of issuance, if afterthe beginning of the year) with applicable adjustment for relat-ed interest expense, net of tax, would be immaterial.

Cash dividends per common share are the amounts applica-ble to the respective years, including dividends to be paid afterthe end of the year.

Note 11

AMOUNTS PER COMMON SHARE

41

The Companies’ operations are classified into four business seg-ments: pharmaceuticals, bulk vitamin and food, chemical prod-ucts, and other. The pharmaceuticals segment is composed ofthose operations involved in the production and sale of ethicaland over-the-counter pharmaceuticals and reagents. The bulkvitamin and food segment consists of operations principallyinvolved in the production and sale of vitamins, beverages andfood additives. The chemical products segment is involved inthe production and sale of polyurethane, polyester resins, their

compounds and activated carbon. The other segment mainlyconsists of agro products, real estate management and ware-housing operations. The agro products operations include theproduction and sale of agricultural chemicals such as insecti-cides, herbicides and fungicides, and animal health productssuch as veterinary medicines for pets, feed additives and medicines for fisheries. Summarized financial information bybusiness segment for years ended March 31, 1999, 1998 and1997 is as follows:

Note 12

SEGMENT INFORMATION

Millions of yen Thousands of U.S. dollars

Net sales Operating income Net sales Operating income

1999 1998 1997 1999 1998 1997 1999 1999

Pharmaceuticals .............................. ¥597,552 ¥580,692 ¥565,834 ¥132,794 ¥122,674 ¥119,453 $4,938,446 $1,097,471Bulk vitamin and food ..................... 78,307 82,776 87,505 (695) (1,191) (2,271) 647,165 (5,744)Chemical products ........................... 110,573 117,611 122,340 6,860 7,922 6,895 913,826 56,694Other................................................. 58,211 60,737 63,145 3,261 3,547 3,273 481,084 26,951

Consolidated ......................... ¥844,643 ¥841,816 ¥838,824 ¥142,220 ¥132,952 ¥127,350 $6,980,521 $1,175,372


Identifiable Depreciation Capital Identifiable Depreciation Capital

assets and amortization expenditures assets and amortization expenditures

1999 1998 1999 1998 1999 1998 1999 1999 1999

Pharmaceuticals.............. ¥ 502,238 ¥ 464,380 ¥20,098 ¥19,771 ¥19,101 ¥24,043 $ 4,150,727 $166,099 $157,860Bulk vitamin and food .... 65,979 68,592 3,919 4,410 1,506 1,966 545,281 32,388 12,446Chemical products .......... 123,597 118,532 6,383 6,398 6,603 7,207 1,021,463 52,752 54,570Other................................ 69,948 70,573 2,251 2,184 2,031 875 578,083 18,604 16,785

761,762 722,077 32,651 32,763 29,241 34,091 6,295,554 269,843 241,661Corporate......................... 565,237 574,125 — — — — 4,671,380 — —

Consolidated......... ¥1,326,999 ¥1,296,202 ¥32,651 ¥32,763 ¥29,241 ¥34,091 $10,966,934 $269,843 $241,661

Corporate assets are principally cash and cash equivalents,marketable securities and investment securities.

For fiscal years beginning on and after April 1, 1997, the

Company is required to disclose geographic data for net sales tocustomers outside Japan, as follows:

There were no significant intersegment sales. General corpo-rate administrative expenses are generally allocated among thesegments in proportion to their operating expenses. Incomeand expenses not allocated to business segments include other

income and expense items such as interest and dividendincome, interest expense, and equity in earnings of unconsoli-dated subsidiaries and affiliates.


Net sales to Net sales to Percentage of consolidated net salescustomers outside Japan customers outside Japan

1999 1998 1997 1999 1999 1998 1997

North America ................................. ¥ 82,717 ¥ 53,753 — $ 683,612 9.7% 6.4% —Europe .............................................. 58,895 47,923 — 486,736 7.0 5.7 —Other................................................. 33,649 34,035 — 278,090 4.0 4.0 —

Total.................................................. ¥175,261 ¥135,711 ¥114,153 $1,448,438 20.7% 16.1% 13.6%

42

Commitments outstanding at March 31, 1999 for the purchaseof property, plant and equipment amounted to approximately

¥7,579 million ($62,636 thousand).At March 31, 1999, contingent liabilities were as follows:

Note 13

COMMITMENTS AND CONTINGENCIES

On June 29, 1999, the shareholders of the Company approvedpayment of a year-end cash dividend of ¥16.25 ($0.13) per shareto holders of record at March 31, 1999 totaling ¥14,450 million($119,421 thousand) and bonuses to directors and corporateauditors of ¥182 million ($1,504 thousand).

Note 14

SUBSEQUENT EVENT


Loans guaranteed............................................................................................................................................ ¥12,610 $104,215Notes and export drafts discounted................................................................................................................ 711 5,876

To the Board of Directors and Shareholders ofTakeda Chemical Industries, Ltd.:

We have examined the consolidated balance sheets of Takeda Chemical Industries, Ltd. and consolidated subsidiariesas of March 31, 1999 and 1998, and the related consolidated statements of income, shareholders’ equity, and cash flowsfor each of the three years in the period ended March 31, 1999, all expressed in Japanese yen. Our examinations weremade in accordance with auditing standards, procedures and practices generally accepted and applied in Japan and,accordingly, included such tests of the accounting records and such other auditing procedures as we considered neces-sary in the circumstances.

In our opinion, the consolidated financial statements referred to above present fairly the financial position of TakedaChemical Industries, Ltd. and consolidated subsidiaries as of March 31, 1999 and 1998, and the results of their opera-tions and their cash flows for each of the three years in the period ended March 31, 1999, in conformity with account-ing principles and practices generally accepted in Japan applied on a consistent basis.

Our examinations also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in ouropinion, such translation has been made in conformity with the basis stated in Note 1. Such U.S. dollar amounts arepresented solely for the convenience of readers outside Japan.

June 29, 1999

INDEPENDENT AUDITORS’ REPORT

43

DIRECTORY

44

OFFICES

Head Office1-1, Doshomachi 4-chome,

Chuo-ku, Osaka 540-8645, Japan

Tel : (6) 6204-2111

Fax: (6) 6204-2880

Tokyo Head Office12-10, Nihonbashi 2-chome,

Chuo-ku, Tokyo 103-8668, Japan

Tel : (3) 3278-2111

Fax: (3) 3278-2000

London Office, Agro Company76 New Bond Street, London

W1Y 9DB, United Kingdom

Tel : (171) 355-1966

Fax: (171) 355-1967

BRANCHES

Sapporo, Tohoku, Kitakanto, Saitama,

Chiba, Tokyo, Yokohama, Koshin-etsu,

Nagoya, Kyoto, Osaka, Kobe, Chugoku,

Shikoku, Fukuoka

PLANTS

Shonan, Osaka, Hikari, Takasago,

Kashima, Shimizu, Tokuyama

RESEARCH LABORATORIES

Osaka, Tsukuba

MAIN SUBSIDIARIES AND AFFILIATES

[DOMESTIC]

Wako Pure Chemical Industries, Ltd.1-2, Doshomachi 3-chome,

Chuo-ku, Osaka 541-0045, Japan

Tel : (6) 6203-3741

Fax: (6) 6203-2029

Nihon Pharmaceutical Co., Ltd.9-8, Higashikanda 1-chome,

Chiyoda-ku, Tokyo 101-0031, Japan

Tel : (3) 3864-8411

Fax: (3) 5687-9485

Tokyo Iyakuhin Co., Ltd.7-35, Horinouchi 1-chome,

Suginami-ku, Tokyo 166-8525, Japan

Tel : (3) 3318-5511

Fax: (3) 3318-5527

Mizusawa Industrial Chemicals, Ltd.1-21, Nihonbashi-Muromachi 4-chome,

Chuo-ku, Tokyo 103-0022, Japan

Tel : (3) 3270-3821

Fax: (3) 3246-0280

Takeda Food Products, Ltd.20, Imoji 3-chome, Itami-shi,

Hyogo 664-0011, Japan

Tel : (727) 78-1121

Fax: (727) 72-5155

[OVERSEAS]

[North America]

Takeda America Holdings, Inc.555 Madison Avenue,

New York, NY 10022, U.S.A.

Tel : (212) 421-6954

Fax: (212) 355-5243

TAP Holdings Inc.Bannockburn Lake Office Plaza,

2355 Waukegan Road,

Deerfield, IL 60015, U.S.A.

Tel : (847) 317-5711

Fax: (847) 317-5797

Takeda America Research &Development Center Inc.101 Carnegie Center, Suite 207,

Princeton, NJ 08540 U.S.A.

Tel : (609) 452-1113

Fax: (609) 452-1218

Takeda Pharmaceuticals America, Inc.475 Half Day Road, Suite 500

Lincolnshire, IL 60069, U.S.A.

Tel : (847) 383-3000

Fax: (847) 383-3050

Takeda America, Inc.555 Madison Avenue,

New York, NY 10022-4406, U.S.A.

Tel : (212) 421-6950

Fax: (212) 355-5243

Takeda Vitamin & Food USA, Inc.101 Takeda Drive,

Wilmington, NC 28401, U.S.A.

Tel : (910) 762-8666

Fax: (910) 762-6846

Takeda Finance USA, Inc.32 Loockerman Square, Suite L-100,

Kent County, Dover,

DE 19901, U.S.A.

45

[Europe]

Takeda Europe Holdings Ltd.14 Waterloo Place, St. James, London

SW1Y 4AR, United Kingdom

Tel : (171) 389-9420

Fax: (171) 930-9599

Takeda Europe Research &Development Centre Ltd.Savannah House

11-12, Charles II Street

London SW1Y 4QU,

United Kingdom

Tel : (44) 171-484-9000

Fax: (44) 171-484-9062

Laboratoires Takeda15, Quai de Dion Bouton,

92816 Puteaux Cedex, France

Tel : (1) 4625-1616

Fax: (1) 4697-0011

Takeda UK Limited3 The Courtyard, Meadowbank

Furlong Road, Bourne End,

Buckinghamshire, SL8 5AJ

United Kingdom

Tel : (44) 1628-537-900

Fax: (44) 1628-526-615

Takeda Italia Farmaceutici S.p.A.Via Elio Vittorini, 129,

00144 Rome, Italy

Tel : (06) 502601

Fax: (06) 5011709

Takeda Pharma GmbHViktoriaallee 3-5,

52066 Aachen, Germany

Tel : (241) 941-0

Fax: (241) 941-1120

Takeda Ireland Ltd.Bray Business Park

Kilruddery, Co. Wicklow,

Ireland

Tel : (1) 205-0600

Fax: (1) 205-0601

Takeda Europe GmbHDomstrasse 17,

D-20095 Hamburg, Germany

Tel : (49) 40-3290-50

Fax: (49) 40-3290-5500

[Asia]

Tianjin Takeda PharmaceuticalsCo., Ltd.

No. 11 Xinghua Road, Tianjin Xiqing

Economic Development Area, Tianjin,

China

Tel : (22) 2397-0011

Fax: (22) 2397-2230

Takeda IMC Chemical Ltd.Room 1801-2, 18th Floor,

Fook Lee Commercial Centre,

33 Lockhart Road,

Wanchai, Hong Kong

Tel : 2861-2218

Fax: 2529-4216

Takeda Chemical Industries(Taiwan), Ltd.7th Floor, Great China Bldg.,

No. 217, Sec. 3, Nanking East Road,

Taipei, Taiwan

Tel : (2) 2712-1112

Fax: (2) 2712-1118

Boie-Takeda Chemicals, Inc.12th Floor, Sky Plaza Bldg.,

6788 Ayala Avenue, Oledan Square,

Makati City, Metro Manila, Philippines

Tel : (2) 886-6954/6961

Fax: (2) 886-6952

Takeda (Thailand), Ltd.12Ath Floor, Si Ayutthaya Bldg.,

487/1, Si Ayutthaya Road,

Bangkok 10400, Thailand

Tel : (2) 248-0994/7

Fax: (2) 248-0998

P.T. Takeda IndonesiaPlaza Mashill 15th Floor,

JI. Jend. Sudirman Kav. 25,

Jakarta 12920, Indonesia

Tel : (21) 526-7656

Fax: (21) 526-7657

Takeda Vitamin & Food Asia Pte.Ltd.100 Beach Road, 28-05/08

Shaw Towers, Singapore 189702

Tel : (299) 0833

Fax: (292) 4384

Croslene Chemical Industries, Ltd.11th Floor, No. 22,

Nanking West Road,

Taipei, Taiwan

Tel : (2) 555-6661

Fax: (2) 558-5135

Takeda Agro Seoul, Co., Ltd.Sam Heung Building 1215, 705-9,

Yeok Sam-Dong, Kangnam-ku,

Seoul, Korea

Tel : (2) 558-4810

Fax: (2) 558-4811

Davao Central ChemicalCorporationKm19, Tibungco, Davao City 8000,

Philippines

Tel : (82) 238-0044

Fax: (82) 238-0066

Century Chemical Works Sdn. Bhd.Mk. 1, No. 1026,

Prai Industrial Complex, 13609 Prai,

Province Wellesley, Penang, Malaysia

Tel : (4) 3907795

Fax: (4) 3907817

(as of June 29, 1999)

Founded:June 12, 1781

Date of Incorporation:January 29, 1925

Paid-in Capital:¥63,540 million

Number of Employees:9,139

Number of Shareholders:54,059

Common Shares Issued:889,272,395

Independent Certified Public Accountants:Deloitte Touche Tohmatsu(by Tohmatsu & Co., the Japanese member firmof Deloitte Touche Tohmatsu International)Osaka Kokusai Building3-13, Azuchimachi 2-chomeChuo-ku, Osaka 541-0052, Japan

Stock Exchange Listings:Tokyo, Osaka, Nagoya, Fukuoka, Hiroshima,Sapporo, Niigata

Transfer Agent:The Toyo Trust and Banking Co., Ltd.6-3, Fushimi-machi 3-chomeChuo-ku, Osaka 541-8502, Japan

(as of March 31, 1999)

CORPORATE DATATakeda Chemical Industries, Ltd.

46

Further InformationFor further information, please contact:

Head Office1-1, Doshomachi 4-chome,Chuo-ku, Osaka 540-8645, JapanTel: (6) 6204-2111Fax: (6) 6204-2880

Tokyo Head Office12-10, Nihonbashi 2-chome,Chuo-ku, Tokyo 103-8668, JapanTel: (3) 3278-2111 Fax: (3) 3278-2000

URLhttp://www.takeda.co.jp/

Printed in Japan

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