Annual Report 2005
Year Ended March 31, 2005

Meet theGas Professionals

TAIYO NIPPON SANSO Corporation

Profile
Taiyo Nippon Sanso Corporation is the fruit of the merger of Nippon Sanso Corporation and Taiyo
Toyo Sanso Corporation on October 1, 2004. The Company is drawing on the capabilities of its
two predecessors in its drive to become a leading player in Asia and around the world.

Management Philosophy“Market-driven collaborative innovation: improving the future through gases”

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Financial Highlights
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries
Years ended March 31, 2005 and 2004

Operating Results
Net sales
Net income

Per share data:
Net income 2
Cash dividends

Millions of yen

Thousands of
U.S. dollars1

2005

2004

2005

¥300,055
11,568¥230,272
4,541$2,794,068
107,720

Yen

U.S. dollars1¥

Corporate Position
Total assets
Total shareholders’ equity

32.76
9.00

¥

15.38
6.00

$

Change (%)

30.3%
154.7
Change (%)

0.305
0.084

Millions of yen

Thousands of
U.S. dollars1

2005

2004

2005

¥404,668
154,207¥263,595
94,802$3,768,209
1,435,953

113.0%
50.0

Change (%)

53.5%
62.7

Notes: 1. U.S. dollar amounts have been translated, solely for convenience, at the rate of ¥107.39=U.S.$1, theapproximate rate of exchange at March 31, 2005.
2. Net income per share is computed based on the weighted average number of shares of common
stock outstanding during each year, as adjusted retroactively for free share distributions made during
the period.
3. Since the merger of Nippon Sanso and Taiyo Toyo Sanso took place in October 2004, consolidated
figures for fiscal 2005, ended March 31, 2005, exclude the figures for the former Taiyo Toyo Sanso forthe six months ended September 30, 2004. Taiyo Nippon Sanso’s results for fiscal 2005 are comparedto the fiscal 2004, ended March 31, 2004, totals of the former Nippon Sanso.
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1 Operational Highlights
2 To Our Stakeholders
3 An Interview with the President
5 Corporate Governance6 Special Feature
10 Segment Overview
12 Our Businesses
19 Corporate Social Responsibility
20 Directors, Corporate Auditors and Corporate Officers
21 Financial Section
45 Investor Information

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Disclaimer Regarding Forward-Looking Statements
This annual report contains forward-looking statements
regarding the future plans, strategies, activities andperformance of Taiyo Nippon Sanso Corporation. Forwardlooking statements reflect management’s assumptions andbeliefs based on information available as of the date of thisdocument’s publication and inherently involve risks anduncertainties. Actual results may thus differ substantiallyfrom these statements. Risks and uncertainties include,
but are not limited to, changes in general economic an
specific market conditions, currency exchange rate
fluctuations and evolving trends in demands for theCompany’s products and services.

Operational Highlights

2005

Increased Combined Revenues andRecord Earnings(The following outlines Taiyo Nippon Sanso’s performance in fiscal 2005, ended March 31, 2005,
during which time its two predecessors merged.)

In November 2004, Taiyo Nippon Sanso acquired a
portion of the U.S. operations of the Air Liquide
Group through its subsidiary Matheson Tri-Gas, Inc.
This move doubled the liquid gas production capacity of our U.S. business, which is now approximately
70% of our capacity in Japan.
In China, we began operating an air separation
plant with the aim of providing stable supplies
of high-purity nitrogen and industrial gases toelectronics makers in the Shanghai area.
We invested heavily in core businesses. We
installed a new air separation plant—which produceda larger volume of oxygen than any other air separation plant in Japan—at JFE Steel Corporation’s
facilities in the Keihin district, thereby establishinga low-cost system for producing inexpensive gases.
Combined consolidated net sales of the Company’s two predecessors amounted to ¥366,412
million, reflecting steady growth in domestic production and overseas gas sales. Operating profit was¥23,790 million, owing to savings from enhanced
efficiencies at our gas production facilities and contributions from Matheson Tri-Gas and other Group
companies. Net income totaled ¥13,429 million. Thiswas due largely to a gain on sales of property, plantand equipment as the result of an eminent domain
proceeding, which offset extraordinary losses related
to the merger.
The chart below shows the consolidated
statements of income and segment sales of theCompany and its two predecessors.

• • • • • see page 21

New
Corporate
Logo

Combined Results of Taiyo Nippon Sanso and Taiyo Toyo Sanso
Years ended March 31
Billions of yen
ChangeTaiyo
NipponSanso

Taiyo Toyo
Sanso(six-month
period)Total

NipponSanso

Taiyo Toyo
Sanso

Total

Results by Operating Segment
Net sales
Gas
Plant and Gas Equipment
Other
Total

¥207.082.6
10.3¥300.0

¥45.8
14.9
5.5
¥66.3

¥252.897.6
15.8¥366.4¥155.668.9
5.6¥230.2¥088.428.1
10.8¥127.4¥244.197.0
16.5¥357.7

¥ 8.7
0.5
(0.6)
¥ 8.7

Results by Geographical Segment
Net sales
Japan
North America
Other countries (Singapore, Malaysia, PRC, Taiwan)
Total¥247.137.3
15.5¥300.0

¥64.4
—
1.8
¥66.3

¥311.637.3
17.3¥366.4¥184.834.9
10.4¥230.2¥123.4—39.0¥127.4¥308.334.9
14.4¥357.7

¥ 3.3
2.4
2.9
¥ 8.7

¥300.0
94.3
73.6
20.7

¥66.3
18.2
15.1
3.0

¥366.4
112.5
88.8
23.7

¥230.2
69.8
55.5
14.3

¥127.4
34.2
29.7
4.4

¥357.7
104.0
85.3
18.7

¥ 8.7
8.5
3.4
5.0

3.1
3.1
5.4
5.0
21.2
5.9
2.8
0.8
¥011.5

0.6
0.1
0
0.2
3.3
1.2
0.1
0
¥01.8

3.8
3.2
5.5
5.2
24.6
7.1
3.0
0.9
¥013.4

2.3
3.1
0.7
5.4
8.7
4.4
(0.7)
0.5
¥004.5

1.1
3.4
0.4
3.5
0.9
1.7
1.2
6.7
4.8
13.6
2.8
7.2
(0.5)
(1.2)
0.2
0.8
¥002.2 ¥006.8

0.3
(0.2)
3.7
(1.4)
10.9
(0)
4.3
0.1
¥ 6.6

Condensed Statements of Income
Net sales
Gross profit
Selling, general and administrative expenses
Operating profit
Other income (expenses):Non-operating income
Non-operating expense
Extraordinary profit
Extraordinary loss
Income before income taxes
Income taxes—current
Income tax—deferred
Minority interests in subsidiaries
Net income

Notes: 1. Figures in the “Total” column for fiscal 2005 represent the simple addition of the fiscal 2005 consolidated results of Taiyo Nippon Sanso
and the results of Taiyo Toyo Sanso for the six months ended September 30, 2004. These figures are compared with the combined
consolidated results of Nippon Sanso and Taiyo Toyo Sanso in fiscal 2004.
2. Figures have been truncated.

ANNUAL REPORT 2005

2004

TAIYO NIPPON SANSO CORPORATION

2005

1

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Right:
Konosuke Ose
Left:
Hiroshi Taguchi

Tomorrow’s Taiyo Nippon Sanso
In fiscal 2006, ending March 31, 2006, we aim to
optimize merger synergies and increase earnings.
For the year, we project net sales of ¥380,000
million and net income of ¥13,000 million. We plan
to issue cash dividends of ¥8.00 per share for theterm. While striving to improve performance, wewill continue to focus on the needs of customers
and meet our obligations in terms of ethics, safety
and quality guarantees to earn the broad trust ofsociety.
In closing, on behalf of the Board of Directors I
would like to say that I am confident our decisions
have positioned the Company optimally for the
future and will allow us to satisfy the expectationsof our shareholders and other stakeholders.

Konosuke Ose
Chairman

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Challenges
The Group’s long-term goal is to become a global
leader with net sales in excess of ¥500,000 million.
As part of our efforts, we will invest in a piped gas
business in Suzhou that will be our third
production base in China and upgrade a large
liquid oxygen plant in Southern California. We will
also reinforce our technological development
capabilities in the electronics, medical and otheradvanced fields, according top priority to growthin key areas. As part of an overall drive to merge
Group operations, we will integrate and strengthen
domestic sales channels and consolidate andreorganize affiliated companies. Additionally, we
will streamline management and solidify thefoundations for the Group’s comprehensive
capabilities, thereby increasing enterprise value.

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Progress Following Merger
The October 2004 merger that marked theestablishment of Taiyo Nippon Sanso created agroup with more than 250 subsidiaries and affiliated companies in Japan and overseas, bases in
11 countries outside Japan, including in the UnitedStates, and over 7,000 employees on a consolidated basis. The merger allowed us to pursue
greater economies of scale and has provided sufficient cash flows for management to invest inlarger projects. We are confident that theseassets will drive our long-term growth.
A favorable operating climate in fiscal 2005,
ended March 31, 2005, reflected expanded
demand in the key domestic steel and chemicalindustries and buoyant conditions in Asian markets. The electronics sector experienced a correction following inventory rises owing to thegreater penetration of digital appliances andincreased supply capabilities.
Against this backdrop, Taiyo Nippon Sanso’s
domestic and overseas gas deliveries remainedsolid, translating into consolidated net sales of¥300,055 million. Operating profit was ¥20,727
million, owing to improved capacity utilization
rates at our gas production facilities, which helped
lower costs, and strong performances by
Matheson Tri-Gas and other subsidiaries. After
posting extraordinary losses related to the merger
and recording a gain on sales of property, plantand equipment as the result of an eminent domain
proceeding, net income totaled ¥11,568 million.

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TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

To Our Stakeholders

June 29, 2005

Hiroshi Taguchi
President

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ANNUAL REPORT 2005
TAIYO NIPPON SANSO CORPORATION

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The United States is central to strengthening ouroverseas operations. We plan to reinforce our U.S.
production and sales of standard gases. With many
independent local industrial gas manufacturers
ripe for acquisition, we are confident we will beable to create a stable earnings base. In 2004, theTaiyo Nippon Sanso Group acquired the industrial
gas division of Air Liquide’s U.S. operations, soonafter which we began a plant upgrade in Southern
California to cater for increased demand.

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We are now at the development and growth stage,
and are concentrating on our electronics-related,
onsite and medical-related businesses. In ourelectronics-related business, we are emphasizing
total solutions and marketing of gases andequipment for the fast-expanding flat-panel
display (FPD) and compound semiconductor
markets. The priorities for our onsite business areto maintain a stable mass supply structure forindustrial gases, manufacturing and installing highperformance plants while securing new demandfor piped gas. In the medical-related business, weare striving to expand on several fronts andworking to increase stable isotope (SI) sales of,notably Water –18O, used in positron emission○

What about your overseas operations?

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Q
A

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tomography (PET) diagnostics. We are pushingahead with mergers and acquisitions to reinforce
our marketing capabilities for medical gases andequipment. Moreover, we are cultivating hydrogenenergy for fuel cell vehicles not only by innovatinghydrogen station technologies but also by developing technologies that will allow us to increase
production, transport and sales of hydrogen as
demand grows.

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What are your specific focuses?

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A

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It has proven to be an ideal merger because wehave been able to consolidate operations effectively.
We have broadened our customer base, shared
more information internally and expanded productlines. We have also been better able to respond to
customer needs. Nippon Sanso’s main strength wasin serving manufacturers. Taiyo Toyo Sanso had
considerable trading house expertise, so it wasgood at matching product development to customer
requirements. In addition, Taiyo Toyo Sanso had
only minimal interest-bearing debt, which has given
us ample scope for securing more funding.

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A

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What have been the prime benefits of themerger?

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Q

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An Interview with the President

3

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Q
What is Taiyo Nippon Sanso doing to remain atrusted corporate citizen?

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We are targeting consolidated net sales of¥400,000 million and a return on equity of 10% forfiscal 2008, ending March 31, 2008. The combined
consolidated net sales of our two predecessors infiscal 2005 amounted to ¥366,412 million, while
return on equity was 8.7%, so we are positioned
well to work as one company toward these targets.

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A

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What are your management benchmarks for
Taiyo Nippon Sanso?

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TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

Q

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We are also very active in the Chinese market.
In Shanghai, for example, we manufacture and sellhigh-purity industrial gases for the electronics
industry, as well as import and market electronicmaterials gases. In the years ahead, we plan tolimit ourselves to electronics-related businesses
in China. As part of efforts to bolster Group marketing capabilities in Taiwan and Korea, we arerelocating our Asian electronics-related equipment
production to Taiwan and localizing production ofelectronic materials gases in Korea.

A
As a responsible corporate citizen, our fundamental management priority is to ensure the safe andsecure management of high-pressure and electronic materials gases. We are currently seeking
ISO 14001 certification for the environmental management systems of all our operations. As well, we
are drawing on our superior gas usage expertiseto meet new technological challenges and contribute to a better society through product innovations. I also believe we can contribute to society
by offering environment-friendly offerings. We also
continue to participate in a range of community
initiatives. Buttressing all of these activities is
a compliance policy that encompasses all Group
executives and employees.

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Group safety and quality. We have also appointed
managers from each business to four other committees—Security Management, Environmental
Management, Quality and Product Safety andIntellectual Property Management—which areresponsible for implementing the decisions of theTechnology Risk Management Committee.
Two of the four members on our Board of Auditors are external, while two are internal. We have also
assigned two individual staff members to the Board
to monitor compliance and management efficiency.
To assess the suitability and efficiency of our operations, we created the Auditing Office, which reports
directly to the president. This office is designed toenhance oversight by maintaining close communications between the auditors and our independentaccountants. As part of efforts to increase physicalsecurity, expert maintenance personnel patrol eachof our domestic and overseas plants.

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Taiyo Nippon Sanso is currently assessing ways
to build a corporate governance system that ismore transparent and better suited to the natureof its businesses. We took advantage of the merger
to create a 16-member Board of Directors and fourmember Board of Auditors. To accelerate decision
making, we have also established the Management
Council, comprising standing directors andauditors, to deliberate on important matters.
As part of an effort to enhance our risk management structure, we established the Compliance
Committee and the Taiyo Nippon Sanso Group
Helpline, to which employees can report compliance issues. In the gas business, our principal priority is to ensure safety and quality. Accordingly,
we recognize the need to cover the technologicalrisks of all Group companies in Japan and abroad.
This prompted us to set up the Technology Risk
Management Committee to spearhead decision
making on quality and other issues related to○

Corporate GovernanceOversight and Risk Management Structure

Board of Directors

Independent
Accountants

President

Management Council

Compliance
Committee

Technology Risk
Management
Committee

Auditing Office

TAIYO NIPPON SANSO CORPORATION

Board of Auditors

ANNUAL REPORT 2005

Shareholders

5Special Feature
Advantages of Merger

Taiyo Nippon Sanso:
a win–win merger thatwill enable net savings ofapproximately¥10.0 billion
As a result of the merger, we aim to becomea leading provider of industrial gases in Asia,
drawing on our accumulated technologies
to contribute to the electronics, medical andother advanced industries. Through the merger,
we aim to further reduce costs and increase
sales to bolster earnings, for net savings ofapproximately ¥10.0 billion.

Single entity withsignificantly greater
earnings potential
Sales channels

Technological resources

Distribution capabilities

Production capacity

Complementary technological capabilities
and market positions

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

NIPPON SANSO

6

TAIYO TOYO SANSO

Operational Fitness

Success Measurement

Expand earnings throughnet sales improvement:
Approximately¥3.8 billion• Pursue acquisitions• Launch new products

Savings from logistics
rationalization and cheaper
procurement:
Approximately ¥2.9 billion• Cut redundant transportation• Eliminate surplus vehicles• Increase drop-off rates andmultishipment efficiency• Relocate truck depots• Consolidate transportation company
network• Change procurement routes• Boost capacity utilization rates ofplants and lower their costs

Integrate sites:
Save approximately ¥0.6 billion• Merge overlapping sites• Cease property leasing

Personnel cost reductions:
Approximately ¥2.6 billion• Cut redundant positions• Transfer employees to affiliatedcompanies

Cost reductions:
Approximately¥6.2 billion

Moving Ahead

Targeting Consolidated Net Sales in Excess of ¥500
Billion in our Drive to become Global Leader
1. Business Strategies

As part of our efforts, we will invest
in a piped gas business in Suzhou
that will be our third Chinese
production base. We will upgrade alarge liquid oxygen plant inSouthern California. We will also
reinforce our technologicaldevelopment capabilities in theelectronics, medical and otheradvanced fields, according toppriority to growth in key areas.

Enhance
Competitivenessin Japan andOverseas

Create an
Efficient
Organization

ReinforceMarket Share

Increase
VolumeEstablish an
Effective
Compliance
System

We will integrate and strengthen
domestic sales channels andconsolidate and reorganize affiliatedcompanies as part of our overall
drive to merge Group operations. We
will also streamline management andsolidify the foundations for theGroup’s comprehensive capabilities,
thereby increasing enterprise value.

ANNUAL REPORT 2005

Strengthen
Risk
Management

As Japan’s largest and strongest
producer of industrial gases, we aim
to achieve our initial post-merger
target of consolidated net sales of¥400,000 million and net income of¥14,000 million by fiscal 2008. Our
long-term objective is to achieve net
sales in excess of ¥500,000 million in
our drive to become a global leader.

TAIYO NIPPON SANSO CORPORATIONThe October 2004 establishment of
Taiyo Nippon Sanso created agroup with more than 250 subsidiaries and affiliated companies inJapan and overseas, bases in 11
countries outside Japan, includingin the United States, and over 7,000
employees on a consolidated basis.
The merger allowed us to pursue
greater economies of scale and has
provided sufficient cash
flows for management toinvest in larger projects.
Grow
We are confident that
Operatingthese assets will drive
Profitour long-term growth.

7

Special Feature

2. Priority Markets

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

Electronics-Related Business
The Group offers total solutions forthe electronics market, providing bothgases and equipment. Since the merger, wehave become a world-class supplier of gases
and equipment to electronics customers. We
have built highly competitive total solutions
capabilities, drawing on our strong ties withJapanese electronics manufacturers to launch
new technologies and products for growthmarkets. They include liquid crystal (LC)based and other flat-panel displays,
next-generation semiconductors andcompound semiconductors.

8

Onsite andPlant Businesses
We plan to expand our piped gas
business, centered on plant replacements
and large facilities, thereby harnessing ourhighly competitive and innovative separation
technologies. We also seek to build hydrogen andcarbon monoxide plants and offer engineering
services for other gas facilities. We will push ahead
with technological development in the area of
manufacturing and supplying liquid oxygen.
These efforts will better position us to harness
synergies with our hydrogen station
operations for fuel cell vehicles andserve growing environmental
demand.

Medical-Related BusinessWe are endeavoring to expand sales ofstable isotope (SI) Water –18O, which we now
mass-produce. Water –18O is a registered trademark
for isotopes made from enriched oxygen –18 (–18O).
Demand is surging worldwide for the use of Water –18O
as a pharmaceutical ingredient for reagents used inpositron emission tomography (PET) diagnostics, andshould contribute significantly to earnings in the years
ahead. One of our great strengths is that we maintaina nationwide oxygen supply network, positioning us
solidly to serve the home oxygen therapy market withmedical gases and equipment. We will draw onthese capabilities to build a new business model
encompassing quality control for medicalrelated gases while enhancing oursales channels to support
marketing.

3. Global Presence

April 2005

JAPAN
September 2005

Will establish Japan Liquid Carbonic Holding Co., Ltd., a holding company
responsible for overseeing the operations of Ekika Carbon Dioxide Co., Ltd., andNippon Tansan Company Limited, and complete a full merger within three years tomake this holding company a top player in the domestic market, with estimated net
sales of ¥35 billion

Will merge Suzusho Medical Co., Ltd., YAMATO
SANKI CO., LTD., and K.K. Ozawa Sanso to launch
Nippon Megacare Corporation, a medical-related
gas and equipment sales company

United States
In 2004, acquired a portion of the the U.S.
operations of Air Liquide, comprising six
plants in Texas, California, Louisiana andMississippi; by fall 2006, plan to build alarge plant with a liquid oxygen production
capacity of 18,000 m3/hSoutheast Asia
Vietnam
Opened our second plant, thereby doubling
supply capacity

Asia
China
Started pipeline supplies of nitrogen in Suzhou(our third base in China after Shanghai and Dalian)Singapore
Plan to construct four large tanks in 2006,
adding 1,200 metric tons in storage andcomplementing two other tanks with a
combined capacity of 600 metric tons

In July 2005, merged our electronic materials gas
company and a related equipment importing andsales subsidiary
TaiwanIn July 2005, integrated our electronic materials
gas and related equipment companies

ANNUAL REPORT 2005

OVERSEASTAIYO NIPPON SANSO CORPORATION

October 2005

Merged Nissan Kogyo Co., Ltd., and Dia Reiki Kogyo
Co., Ltd., to form Cryo One Inc. to manufacture andsell cryogenic equipment

9Segment Overview
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Sales Share*¥207,049 million○○

Gas Business

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Volumes and sales of oxygen, nitrogen and argon were favorable during the year, reflecting
solid capacity utilizations in related industries. Sales of oxygen to steelmakers and shipbuilders
were strong. We also did well in compact onsite supplies of nitrogen to electronics companies
and in supplying liquefied gas to companies in a broad range of sectors, including automakers
and food producers. We enjoyed strong demand for argon for use in stainless steel production
and welding applications and increased shipments to silicon crystal manufacturers benefitingfrom favorable production of 300 mm wafers. Sales of specialty gas were also strong, owing tohigher demand from domestic electronics makers stepping up capital investment and strong
production levels throughout Asia.
As a result of these factors, sales of the gas business were ¥207,049 million, with operating
income of ¥16,062 million.
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Sales Share*¥82,697 million

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Fiscal 2005 sales were solid in electronic materials-related operations, reflecting high demand
among electronics makers in the United States and elsewhere overseas on the back of heavy
capital investment. Unit shipments of our metal organic chemical vapor deposition (MOCVD)
equipment rose steadily owing to increased capital spending among device manufacturers in
response to increased demand for DVD pickup lasers, cell phone light-emitting diodes andother optical devices. Sales of air separation plants were down, however, as the number oflarge projects peaked in the previous year. Cutting and welding equipment sales were strong
domestically and abroad, led by laser cutters and numerically controlled (NC) cutters, owing tosteady demand from steelmakers, shipbuilders and construction machinery makers.
Equipment business sales were thus ¥82,697 billion, while operating income was ¥5,625 billion.

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Thermos K.K. spearheads the manufacture and sale of our housewares. Sales were strong in
the year under review. This reflected the impact of an extraordinarily hot summer, which drove
sales of our “Easy Drink” thermal insulation bottles.
Segment sales were ¥10,308 million, with operating income of ¥1,303 million.

Sales Share*¥10,308 million○

Housewares Business and Others

10

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TAIYO NIPPON SANSO CORPORATION○○ANNUAL REPORT 2005

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* Excluding intersegment
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• Reinforced popular range of “Easy Drink”
thermal insulation bottles• Augmented line of tabletop pots to increase
market share○• Stainless steel
vacuum bottles• Cooking pans
• Commercial kitchen
appliances

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ANNUAL REPORT 2005○○

TAIYO NIPPON SANSO CORPORATION

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• Installed Japan’s largest air separation plantat the Keihin facilities of JFE Steel• Nissan Tanaka Co., Ltd., enjoyed solid salesof laser cutters and NC cutters• Orders strong for MOCVD equipment• Developed a 70-MPa dispenser for hydrogenstations○• Large air separation
plants• Compact high-purity
nitrogen gas
generators• MOCVD equipment• Cutting and welding
equipment

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Main Products

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• Industrial gas production structures
strengthened in the United States and China• Mass-production position established in
Water –18O○

• Oxygen• Nitrogen• Argon• Medical-related
gases• Semiconductormaterials gases
• SI

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Main Products

11

Our Businesses

12

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Semiconductors are becoming denser and liquid
crystal display (LCD) panels are getting larger, driving new demand in the digital appliances andautomotive markets. These trends have boosted
the need among electronics manufacturers forhigher quality and productivity. We can pipe highvolumes of high-purity nitrogen, an inert gas thatis essential to production processes for semiconductors and LCDs, and ensure stable supplies ofelectronic materials gases for layers.
In constructing special piping, we draw on our
industrial gas supply technologies and other○

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

ELECTRONICS-RELATED BUSINESS

capabilities to optimally install gas purification andabatement systems. We also provide remotemonitoring of safety levels and design alarmsystems as part of our broad range of solutions
for semiconductor and LCD manufacturing
processes.
Taiyo Nippon Sanso operates globally as a partner for Japanese and overseas electronics manufacturers. We produce and sell high-purity
industrial gases, electronic materials gases andelectronics-related equipment in the United States,
Taiwan, China and Singapore.

Principal operations:

High-purity nitrogen and argon
Electronic materials gases, including Safe Delivery Source(SDS)
MOCVD equipment
Purification and abatement systems
High-purity gas supply equipment and systems engineering

Market needs:

Comprehensive gas supplies
Total solutions for gas and equipment
Global supply capabilities

Our advantages:

Strong ties with domestic electronics manufacturers• Close relationships with users who employ advanced
technologies• Superior marketing clout through total solutions forgas and equipment• Total solutions through world-class technologies• Engineering operations and gas center network• Supply structure covering the world’s key markets(Japan, Korea, China, Taiwan, Southeast Asia, theUnited States and Europe)

Highlights:

Target:Secured four onsite supply contracts for large users
Merger and acquisition (M&A) activities in the area ofelectronic materials gases have strengthened our
position with manufacturers
Expansion of production facilities enabled us to maintainstrong orders for equipment installation
Achieved record sales of MOCVD equipment
Recorded favorable sales of electronic materials gases,
consumables and semiconductor-related equipment¥117,000 million in sales in fiscal 2008
Focusing on growing FDP and compound semiconductor
markets(Billions of yen)

117

Fiscal
2008

102

Fiscal2005

0

ANNUAL REPORT 2005

Approximately ¥102,000 million

TAIYO NIPPON SANSO CORPORATION

Sales:

13

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The Company supplies oxygen, nitrogen, argon
and a host of other industrial gases that are crucial to the advanced production processes ofmodern industry. These processes include cutting,welding, combusting, melting, chilling and freezing. Our stable supply system encompasses
pipelines, tank trucks and cylinders.
We have built a strong technological base overmany years, encompassing high temperatures andpressures, vacuums and gas controls. We draw○

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

GAS BUSINESS

on these capabilities to manufacture, supply andtransport gases and provide a range of storage
equipment. We are thus helping industrial customers enhance their productivity and quality while
supporting efforts to improve the environment.
We maintain Japan’s largest industrial gas supply network and are expanding our manufacturing
and supply networks in the United States, China
and Southeast Asia.

Principal operations:

Oxygen, nitrogen, argon, carbon dioxide, hydrogen, heliumand other industrial gases
Gas supply (filling, transportation and storage) equipment
and facilities installation and construction
Gas equipment (including for cutting, welding, combustion
and freezing)

Market needs:

Using gas to enhance productivity, achieve high quality,
save energy and improve the environment
Optimal, stable and economic gas supplies

Our advantages:

Japan’s largest and strongest industrial gas producer
Low costs and strong price competitiveness• Production and supply capabilities• Balanced production base covering entire nation• Liquefaction capabilities, accounting for 33% ofdomestic market
Logistics capabilities• Approximately 500 filling stations can serve around
40% of Japanese market• Large truck fleet and extensive shipment base network• Strong marketing network, including approximately
250 sales agents
Strengthening operations in China and the United States• Operations in Shanghai and Suzhou• Expanding U.S. business of Matheson Tri-Gas, which
offers hydrogen station engineering services andmaintains gas distribution businessHigh market shares for other industrial gases• No. 1 in Japan in carbon dioxide and No. 2 in helium
and acetylene

Highlights:

Target:Constructed and operating hydrogen gas filling station forthe 2005 World Exposition in Aichi, Japan
Bolstered production capacity in regular high-pressuregases in the United States
Strengthened gas and production operations in China
Upgraded industrial gas production facilities in Southeast
Asia and focused on expanding sales¥165,000 million in sales in fiscal 2008
Focused efforts to cultivate new gas demand and broaden
overseas operations(Billions of yen)

165

Fiscal
2008

150

Fiscal2005

0

ANNUAL REPORT 2005

Approximately ¥150,000 million

TAIYO NIPPON SANSO CORPORATION

Sales:

15

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In the onsite business, we construct large cryogenic air separation plants on the premises of thelargest consumers of industrial gases, notably
steel mills and chemical complexes. The largest

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ONSITE AND PLANT BUSINESSES

of our plants can produce up to 65,000 m3/h. We
provide stable supplies of oxygen and nitrogenthrough our pipelines. Our onsite business operates around the clock every day of the year, earning us the trust of steelmakers and chemicals
manufacturers for consistent supplies of large
volumes of industrial gases.
Our plant business builds various compact air
separation plants that are the foundation of theindustrial gases business. We have drawn on our
expertise in making and supplying industrial
gases to not only serve industrial gas producers
but to also build a strong track record in manufacturing air separation plants, exporting numerous
units around the globe. We provide many different
types of experimental equipment. This includes
space simulation chambers that replicate the conditions of space. We also supply equipment for
exploring basic physics and discovering new
functional materials.

(Billions of yen)

Sales:

Approximately ¥53,000 million

Principal operations:

Onsite: Supplies of oxygen, nitrogen and argon via pipeline

58

Plant: Cryogenic air separation plants, pressure swing
adsorption (PSA) air separation plants, ultralowtemperature vacuum equipment, and otherchemical equipment

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

Market needs:

16

Onsite: Large and stable supply system

Fiscal
2008

Plant: Production and installation of high-performance
plants53
Our advantages:

Have established plant and engineering businesses bydrawing on our capabilities as a manufacturer of industrial
gases and our global business scale, thus enabling us to
optimize facilities and operating efficiency

Highlights:

Received favorable formal and prospective orders fromsteelmakers and electronics manufacturers in Japan andvarious customers overseas

Target:¥58,000 million in sales in fiscal 2008
Secure new piped gas demand

Fiscal2005

0

We are building special filling facilities for medical
gases throughout our industrial gas production
and sales network to help ensure stable suppliesof medical oxygen and other high-quality gases
for medical institutions. We are helping improvesafety and reliability in the medical treatment fieldby developing pure air supply systems and othermedical support equipment, as well as devices forhome oxygen therapy.
We are applying our top-quality gas technologies to stable isotope (SI) manufacturing andsales in addition to specialty gases for advanced
diagnostics and treatment.

Approximately ¥12,000 million

Principal products:

Medical-related oxygen and other gases
Synthesized (pure) air supply facilities, portable oxygen
cylinders and medical-use oxygen compressors
Stable isotope (SI)Market needs:

Quality control and assurance for medical gases
Mass production and steady supplies of SIs used incancer diagnostics

Our advantages:

Production and sales of pharmaceutical ingredients for
PET examinations
Strong position as a manufacturer of Water –18O, apharmaceutical ingredient for reagents used in positronemission tomography (PET) diagnostics, and an 80%
domestic market share
Have started shipments of world-class pharmaceuticalingredients to leading manufacturers offluorodeoxyglucose (FDG) PET reagents in Europe andthe United States

Highlights:

Responded to revision of Pharmaceutical Affairs Law
Set up channels and secured manufacturing and sales
authorization to optimize clout with sales agents

Target:¥15,000 million in sales in fiscal 2008
Expand SI sales and pursue M&A activities to strengthenmarketing capabilities in medical gases and equipment(Billions of yen)

15

Fiscal
2008

12

Fiscal2005

0

ANNUAL REPORT 2005

Sales:TAIYO NIPPON SANSO CORPORATION

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MEDICAL-RELATED BUSINESS17

LP gas is becoming popular as a clean energy
source. The expanding range of applications
includes commercial air conditioning and heating
equipment, independent power production andhot water systems, as well as fuel for taxi fleets.
LP gas is also used as an aerosol gas to replace
chlorofluorocarbons and protect the environment.
We satisfy a broad range of industrial needs
through an integrated structure that encompasses everything from tank truck deliveries ofbulk LP gas for air conditioning facilities todesigning cogeneration systems.
We supply 450,000 households around Japan
with LP gas for heating, hot water and air conditioning. Our energy business will likely become afocus of attention in the years ahead as residential
fuel cells penetrate the market.

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LP GAS BUSINESSTAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

(Billions of yen)

18

Sales:

Approximately ¥34,000 million

Principal operations:

Supply of LP gas for residential and industrial customers(Annual sales: 460,000 metric tons)

Market needs:

Stable supplies for household fuel to 25 million
households in areas not adequately served by electric
power and city gas services

Our advantage:450,000 customers (ranked sixth in Japan)

Highlights:

Streamlined efficiency by transferring filling and sales
operations and merging LP gas affiliates

Target:38

Fiscal2008

34¥38,000 million in sales in fiscal 2008
Annual sales of 500,000 metric tons
Expanded cogeneration business
Fiscal2005

0ANNUAL REPORT 2005

certification for the environmental management
systems of all our operations.
We have taken various steps to serve community needs. Over the past 15 years, for example,
we have held soccer clinics for elementary schoolage players in Chiba, and in the near future will
extend this program to Osaka. In the year underreview, we responded decisively to the impact of
the Indian Ocean tsunami. We and our U.S.,
Malaysian and Thai subsidiaries donated funds to
the Red Cross. Our Singaporean subsidiary also
donated to the local Red Cross and provided
Sri Lanka with medical oxygen free of charge. We
also provided ongoing support after the earthquake that struck Niigata Prefecture in October
2004. Efforts included conducting emergency
safety inspections of supply facilities for industrial gas users and promptly delivering oxygen
cylinders for home oxygen therapy patients. As
well, we donated money to quake victims andoffered to provide stainless steel vacuum bottles
manufactured by Thermos.
Going forward, we will continue to contributebroadly to society and remain committed topursuing mutual progress.

TAIYO NIPPON SANSO CORPORATION

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As a responsible corporate citizen, Taiyo Nippon
Sanso believes it is essential not only to operate
ethically and with respect for social mores, but also
to instill a Companywide commitment to ensuring
the safety and quality of its high-pressure gas andm e d i c a l - re l a t e d g a s o p e r a t i o n s a n d t h etransparency of its management. We establisheda code of conduct for all executives, as well as astringent compliance structure. With the aim of
fostering the ability of individuals to recognize andresolve issues internally, we set up the Taiyo
Nippon Sanso Group Helpline, which has become
part of our commitment to fulfilling our social
obligations.
With the aim of helping to realize a sustainable
society, we collaborate with environment-related
businesses and businesses that perform important community roles. For example, we are contributing to efforts to ameliorate global warming
by supporting the Japan Hydrogen & Fuel Cell
Demonstration Project of the Ministry of Economy,
Trade and Industry. At the 2005 World Expositionin Aichi, Japan, we are collaborating with Nippon
Steel Corporation and Toho Gas Co., Ltd., tooperate a hydrogen gas filling station for large
buses transporting people around the site. We
are also conducting pilot research on the use offuel cell-powered buses as part of tomorrow’s
mass transit systems.
During the year under review, the Taiyo Nippon
Sanso Group drew on the initiatives of the former
Nippon Sanso to establish medium- and long-term
environmental objectives. These encompass
preventing global warming and reducing substancemanagement, resource conservation and recycling.
We have begun preparations to obtain ISO 14001○

Corporate Social Responsibility

19

Directors, Corporate Auditors and Corporate Officers

Directors

Corporate Auditors

Chairman
Konosuke Ose

Toshiro Hatagami
Yoshinori Kobayashi
Yasusuke Nakanishi
Kiyoshi Fujita

President
Hiroshi Taguchi
Executive Vice Presidents
Hirosuke Matsueda
Yasunobu Kawaguchi
Osami Yamashita
Senior Managing Directors
Mikio Abe
Kazuya Ito
Soichi Hirabayashi
Hiroyuki Miura
Keiji FutamatsuManaging Directors
Takumi Iida
Yutaka Kurosawa
Kenichiro Ebisawa
Fumio Hara

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

Executive Directors
Ryuichi Tomizawa
William J. Kroll

20

Corporate Officers
Senior Corporate Executive Officer
Yataro Inada
Corporate Executive Officers
Kazuhiro YoshidaToyoo Go
Masashi Yamashita
Katsuji Tsukada
Hiroshi Kanno
Kenichi Kasuya
Toshio Sato
Corporate Officers
Akira Ito
Shinji Tanabe
Yoshihisa Shibata
Takeo Toyama
Junichi Ishimaru
Toshio Suwa
Kunishi Hazama
Tadashige Maruyama
Yasuharu Kamioka
Yoshikazu Yamano
Shigeto Umatani
Masayuki Tanino
Yujiro Ichihara
Shigeru Amada(As of June 29, 2005)

22 Analysis of Operating Results and Financial Position
24 Consolidated Financial Statements
29 Notes to Consolidated Financial Statements
43 Report of Independent Auditors
44 Six-Year Summary

TAIYO NIPPON SANSO CORPORATIONCONTENTSANNUAL REPORT 2005

Financial Section21

Analysis of Operating Results and Financial Position

Nippon Sanso and Taiyo Toyo Sanso merged effective October
2004 to form Taiyo Nippon Sanso. The following is an analysisof the combined operating results and financial position of
Taiyo Nippon Sanso for fiscal 2005, which exclude the figures
for the former Taiyo Toyo Sanso for the six months ended
September 30, 2004.

Total shareholders' equity increased ¥59,405 million, to¥154,207 million. The equity ratio increased 2.1 percentage
points, to 38.1%.
As of March 31, 2005, total assets were up ¥141,073 million
from a year earlier, at ¥404,668 million.
Cash Flow Analysis

Operating Results
Consolidated net sales in fiscal 2005 amounted to ¥300,055
million. This reflected favorable sales in Japan and abroad ofmainstay gases.
Cost of sales totaled ¥205,713 million, while selling, generaland administrative expenses were ¥73,614 million.
Operating profit reached ¥20,727 million, reflecting improved
capacity utilization rates at our gas production facilities, which
helped us lower costs, and strong performances by Matheson
Tri-Gas and other subsidiaries.
Despite extraordinary losses related to the merger and gainon sales of property, plant and equipment as the result of aneminent domain proceeding, net income amounted to ¥11,568
million. Net income per share was ¥32.76.

Net cash provided by operating activities was ¥27,703 million.
Interest coverage increased 6.1 points, to 16.7 times.
Net cash used in investing activities was ¥32,235 million.
This primarily reflected the purchase of a business by theCompany’s U.S. subsidiary, resulting in ¥30,263 million inpurchases of property, plant and equipment.
Net cash used in financing activities was ¥2,679 million.
The main factors here were ¥14,467 million in proceeds fromissuance of long-term debt and ¥20,300 million in redemptionof bonds.
Consequently, after the addition of ¥11,751 million in cashfrom newly consolidated subsidiaries, cash and cash equivalents at the end of the year totaled ¥17,839 million, an increaseof ¥4,579 million.

Financial Position

Business Risks

At year-end, total current assets were ¥51,851 million higher, at¥160,651 million. This gain reflected the impact of the merger.
Total current liabilities rose ¥35,992 million, to ¥136,712 million.
The current ratio thus increased 0.1 point, to 1.18 times. Total
long-term liabilities increased ¥42,992 million, to ¥106,210
million. As a consequence, interest-bearing debt increased¥8,200 million, to ¥122,000 million.

External Factors

Net Income(Billions of yen)(%)(Billions of yen)(%)(Billions of yen)

ANNUAL REPORT 2005

Operating Income

350

30

25

10

15

40

280

24

20

8

12

32

210

18

15

6

9

24

TAIYO NIPPON SANSO CORPORATIONNet Sales

Foreign Exchange Risk
Interest-rate trends could have a material impact on performance, as the Company maintains large-scale gas supply
facilities for large customers and needs to spend heavily tomaintain and expand these facilities.

140

12

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6

16

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0
2001 2002 2003 2004 2005
Gas business
Plant and gas equipment businessHousewares business and others
Overseas sales ratio (right scale)002001 2002 2003 2004 2005
Gas business
Plant and gas equipment businessHousewares business and others
Operating income ratio (right scale)

0

22

(Yen)

0
2001 2002 2003 2004 2005
Net income per share (right scale)Notes: 1. Since the merger of Nippon Sanso and Taiyo Toyo Sanso took place in October 2004, consolidated figures for fiscal 2005, ended March
31, 2005, exclude the figures for the former Taiyo Toyo Sanso for the six months ended September 30, 2004. Taiyo Nippon Sanso’s
results for fiscal 2005 are compared to the fiscal 2001 to 2004 totals of the former Nippon Sanso.
2. In fiscal 2001 and 2002, Nippon Sanso reported results in two segments: gases, gas equipment and gas-related business, and living
and housewares business. Accordingly, only gross figures are available for these two periods.

The Company uses various means to minimize currency
exposure with imports and exports, including the purchase offoreign exchange forward contracts. Nonetheless, large
fluctuations in exchange rates could affect the Company's
results. Overseas sales and expenses and the assets ofsubsidiaries affect the Company's financial position.

Technical and Safety Factors

Reliance on Specific Industries
Developments in the key semiconductor industry cansignificantly affect results.

Intellectual Property
The Company obtains required intellectual property rights for
proprietary technologies, but there are no guarantees ofcomplete protection of the Group's technologies and products.
Product Defects
The Company manufactures and sells high-pressure gases,
and some of its semiconductor gases are toxic. Although theCompany maintains a strict risk management structure, itcannot guarantee that none of its products are defective.

Competition

Other Factors

Gas Prices
The Company is exposed to competitive forces and may beunable to withstand falling gas prices.

Retirement Benefit Liabilities
Further decreases in the discount rate and a sudden deterioration in retirement plan returns may materially affect results.

Changes in Socioeconomic Climate and Laws
The Company maintains gas operations overseas, primarily
in the United States and Asia. The costs of responding topolitical and economic changes in overseas markets,
including the fast-growing Chinese market, and to revisions
to and implementations of laws and ordinances affecting
production bases and revisions to environmental legislation
may materially affect results.

Natural Disasters
Natural disasters may affect the Company's results andfinancial position by lowering the productivity of its manufacturing operations, delaying production activity or resulting in
the incurrence of significant recovery costs.

Shareholders’ Equity

Return on Equity (ROE) and
Return on Assets (ROA)(Billions of yen)(Billions of yen)

(%)

(%)

450

200

45

10

360

160

36

8

270

120

27

6

180

80

18

4

90

40

9

2

0

0

0

0
2001 2002 2003 2004 2005

2001 2002 2003 2004 2005
Equity ratio (right scale)

ANNUAL REPORT 2005

Total Assets

2001 2002 2003 2004 2005ROE
ROA

TAIYO NIPPON SANSO CORPORATION

Risk of Oil Price Fluctuations Causing Profitability of
Products to Decline
Electricity is a key component of manufacturing costs for suchcore offerings as oxygen, nitrogen, and argon. It may be impossible for the Company to reflect higher electricity charges
resulting from higher oil costs in the pricing of its products.

Technological Development
The creation of new products and technologies—a key focus
for the Company—carries uncertainties because of the relianceon technological development activities in such areas asorganic semiconductors, the environment and energy.

23Consolidated Financial Statements
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries
Millions of yen

Thousands of
U.S. dollars(Note 3)

2004

2004

2005

NipponSanso

Taiyo Toyo
Sanso

Consolidated Balance Sheets

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

March 31

24

2005

AssetsCurrent assets:
Cash and cash equivalents (Note 4)
Short-term investments (Notes 4 and 5)
Notes and accounts receivable—trade (Note 6)
Inventories (Note 7)
Deferred income taxes (Note 11)
Other current assets
Allowance for doubtful receivables
Total current assets¥ 17,839
1,260
102,378
29,156
4,333
6,386
(704)
160,651¥ 13,260
896
72,033
16,250
2,764
4,017
(424)
108,799¥007,906
630
40,572
7,145
1,287
2,058
(140)
59,460$ 166,114
11,733
953,329
271,496
40,34859,465(6,556)
1,495,959

Property, plant and equipment (Notes 9 and 10)
Accumulated depreciation
Property, plant and equipment, net

443,621(275,249)
168,372

298,044(196,882)
101,161

118,503(68,205)
50,2984,130,934(2,563,078)
1,567,855

Investments and other assets:
Investment securities (Note 5)Long-term loans receivable
Intangible assets, net
Prepaid pension expenses (Note 14)
Deferred income taxes (Note 11)
Other assets
Valuation allowance for investments
Allowance for doubtful receivables
Total investments and other assets
Total assets

44,931
1,414
14,474
10,123
1,066
5,042
(270)
(1,137)75,645¥404,668

36,298
402
6,042
8,126
339
3,297
—
(873)
53,633¥263,595

9,211
748
5,496
—
804
1,840
—
(263)
17,838¥127,598

418,391
13,167
134,780
94,264
9,926
46,950(2,514)(10,588)704,395$3,768,209

See notes to consolidated financial statements.

March 31

2005

Millions of yen

Thousands of
U.S. dollars(Note 3)

2004

2004

2005

NipponSanso

Taiyo Toyo
Sanso

Liabilities and shareholders’ equity
Current liabilities:
Short-term bank loans and current portionof long-term debt (Notes 8 and 9)
Notes and accounts payable—trade
Accrued income taxes (Note 11)
Consumption taxes payable
Other current liabilities
Total current liabilities¥ 40,451
64,783
4,853—
26,623
136,712¥ 40,615
40,987
4,522—
14,594
100,720¥ 11,019
25,527
2,156
398
6,144
45,246$ 376,674
603,250
45,190—247,909
1,273,042

Long-term liabilities:
Long-term debt (Notes 8 and 9)
Pension and severance indemnities (Note 14)
Deferred income taxes (Note 11)
Consolidation adjustment account
Other liabilities
Total long-term liabilities

71,495
5,672
18,990407
9,644
106,21045,7092,322
13,422—
1,762
63,218

16,529
3,777
1,633
833
8,100
30,876

665,751
52,817
176,832
3,790
89,804
989,012

7,537

4,853

3,103

70,18327,03944,807
83,672
9,300(10,132)

27,03919,502
51,2746,544(9,492)

14,52012,242
22,1691,223(75)

251,783
417,236
779,141
86,600(94,348)(479)
154,207¥404,668(66)
94,802¥263,595(1,708)48,371¥127,598(4,460)1,435,953$3,768,209

Shareholders’ equity (Notes 12 and 21):
Common stock:
Authorized—600,000,000 shares in 2005,(Nippon Sanso) 589,259,193 shares in 2004
(Taiyo Toyo Sanso) 378,288,000 shares in 2004
Issued—405,892,837 shares in 2005,(Nippon Sanso) 292,892,053 shares in 2004
(Taiyo Toyo Sanso) 145,069,821 shares in 2004
Capital surplus
Retained earnings
Unrealized holding gain on securities
Foreign currency translation adjustments
Less:
Treasury stock, at cost—
1,094,323 shares in 2005 and 67,428 shares in 2004
Total shareholders’ equity
Total liabilities and shareholders’ equity

TAIYO NIPPON SANSO CORPORATION

Minority interests in consolidated subsidiaries

ANNUAL REPORT 2005

Contingent liabilities (Note 15)25

Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries
Millions of yen

Thousands of
U.S. dollars(Note 3)

2004

2004

2005

NipponSanso

Taiyo Toyo
Sanso

¥300,055
205,713
94,341
73,614
20,727¥230,272
160,394
69,87855,561
14,317¥127,430
93,22334,206
29,7964,410$2,794,068
1,915,569
878,490
685,483
193,007517(1,824)282—
4,802(1,882)
(614)
280
—
—
(192)
—
1,053
411
(411)
—
(149)
(270)

325
(1,878)————(1,428)780—(754)(1,735)—(1,254)
859
—
—
—
—
—

135
(348)
410
65
869
—
(470)
—
(0)
—
—
(24)
—
92
—
—
(588)
—
—

4,814
(16,985)
2,626—
44,716(17,525)(5,717)2,607——(1,788)
—
—
9,805
3,827
(3,827)—(1,387)(2,514)—(1,873)—391
520
21,246———(442)(5,528)
8,789

(139)
—
(56)
483
427
4,836

(1,294)(17,441)
—
3,641
4,842
197,840

5,921
2,884
8,805
872
¥ 11,568

4,409
(734)
3,675
572
4,541

2,838
(511)
2,327
229
2,279

55,13526,85581,991
8,120$ 107,720

Yen

U.S. dollars(Note 3)¥347.12
15.82
6.00$3.5450.305
0.084

Consolidated Statements of Income
Years ended March 31

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses (Note 17)
Operating profit
Other income (expenses):
Interest and dividend income
Interest expense
Amortization of consolidation adjustment accountCommission income
Gain on sales of property, plant and equipment (Note 18)
Loss on sales of property, plant and equipment (Note 18)
Loss on disposal of property, plant and equipment
Gain on sales of investment securities
Loss on sales of investment securities
Loss on devaluation of investment securities
Early retirement expense
Loss on devaluation of memberships at golf clubs
Loss on devaluation of goodwill
Equity in earnings of affiliates
Income on receiving of national subsidy
Loss on replacement of fixed assets
Impairment loss
Loss on liquidation of affiliates
Loss on revaluation of investments
Amortization of difference arising from change ofretirement benefit accounting
Merger expense
Write-off loss
Other, net

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

Income before income taxes and minority interests

26

Income taxes (Note 11):
Current
Deferred
Minority interests in earnings of consolidated subsidiaries
Net income

Amounts per share:
Net assets
Net income
Cash dividends
See notes to consolidated financial statements.

2005¥380.70
32.76
9.00

¥

¥323.74
15.38
6.00

¥

Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity
Millions of yen

Balance at March 31, 2003
Increase in retained earnings resulting
from merger of consolidated subsidiaries
Bonuses to directors andcorporate auditors
Cash dividends paid
Net income for the year ended
March 31, 2004
Unrealized holding gain on securities
Foreign currency translation adjustments
Net change in treasury stock
Balance at March 31, 2004
Increase by merger
Gain on disposal of treasury stock
Adjustments of retained earnings for
newly consolidated subsidiaries
Bonuses to directors andcorporate auditors
Cash dividends paid
Other
Net income for the year ended
March 31, 2005
Unrealized holding gain on securities
Foreign currency translation adjustments
Net change in treasury stock
Balance at March 31, 2005

Number ofshares ofcommonstock

Foreigncurrencytranslation Treasury
adjustmentsstockCommonstock

CapitalsurplusRetainedearnings

Unrealized
holding gain
on securities

292,892,053¥27,039¥19,502¥48,506¥1,259¥ (7,090)¥ (35)

—

—

—

15

—

—

—

—
—

—
—

—
—

(31)
(1,757)

—
—

—
—

—
—

—
—
—
—
292,892,053
113,000,784
—

—
—
—
—
27,039——————19,502
25,200
104

4,541
—
—
—
51,274
18,458
—

—
5,285
—
—
6,544
—
—

—
—
(2,402)—(9,492)
—
—

—
—
—
(31)
(66)
—
—

—

—

—

4,181

—

—

—

—
—
—

—
—
—

—
—
—

(42)
(1,756)
(11)

—
—
—

—
—
—

—
—
—

—
—
—
—
405,892,837————¥27,039————¥44,807

11,568———¥83,672

—
2,756
—
—
¥9,300——(640)—¥(10,132)

—
—
—
(413)
¥(479)

Foreigncurrencytranslation Treasury
adjustments
stock$251,783 $181,600 $477,456— 234,659 171,878—
968—$60,937——$(88,388) $ (615)————Commonstock

Balance at March 31, 2004
Increase by merger
Gain on disposal of treasury stock
Adjustments of retained earnings for
newly consolidated subsidiaries
Bonuses to directors andcorporate auditors
Cash dividends paid
Other
Net income for the year ended
March 31, 2005
Unrealized holding gain on securities
Foreign currency translation adjustments
Net change in treasury stock
Balance at March 31, 2005
See notes to consolidated financial statements.

Capitalsurplus——38,933

—

—

—

—
—
—

—
—
—

(391)
(16,352)
(102)

—
—
—

—
—
—

—
—
—

—
— 107,720
—
—
—
—
—
—
—
—
—
$251,783 $417,236 $779,141—
25,663——$86,600————(5,960)—— (3,846)$(94,348) $(4,461)

TAIYO NIPPON SANSO CORPORATION

Retainedearnings

Unrealized
holding gain
on securities

ANNUAL REPORT 2005

Thousands of U.S. dollars (Note 3)27

Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries
Millions of yen

Thousands of
U.S. dollars(Note 3)

2004

2004

2005

NipponSanso

Taiyo Toyo
Sanso

Interest and dividend received
Interest paid
Other
Income taxes paid
Net cash provided by operating activities¥21,246
14,592
—
(122)
(517)
1,824
(1,053)(2,340)
(292)
—
—
—
(870)
10,583—(4,219)(3,668)(582)—(1,996)—3,140
35,723897(1,654)—(7,263)27,703¥ 8,789
11,627
—
—
(326)
1,878
(859)
1,300
(770)
759
1,254
—
1,156
(10,325)
—
1,841
4,025
1,011
—
(747)
—
911
21,528542(1,906)—
3
20,169¥ 4,836
6,499
588
(221)
(136)
348
(92)
(411)
(32)
—
—
24
—
(2,772)(119)(200)(1,456)
—
548
—
494
(143)
7,755
134
(346)
223
(2,192)
5,573$197,840
135,879—(1,136)(4,814)
16,985(9,805)(21,790)(2,719)———(8,101)
98,547—(39,287)(34,156)(5,419)—(18,586)—
29,239332,647
8,353(15,402)—(67,632)
257,966

Investing activities(Decrease) increase in short-term investments
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Proceeds from sales of intangible assets
Payment for acquisition of goodwill
Payment for purchase of investment securities
Proceeds from sales of investment securities
Long-term loans madeCollection of long-term loans receivable
Other
Net cash used in investing activities(14)(30,263)2,274(5,402)
17
—
(295)
741
—
—
706
(32,235)

155(10,429)
841
(758)
—
—
(3,815)
1,397
—
—
(259)
(12,867)

209(7,157)
1,314——(4,237)
(642)
331
(427)
877
(95)
(9,827)(130)(281,805)
21,175(50,303)158—(2,747)
6,900
—
—
6,574
(300,168)

Financing activities(Repayment of) proceeds from short-term bank loans
Proceeds from commercial paper
Proceeds from issuance of long-term debt
Repayment of long-term debt
Proceeds from issuance of bonds
Redemption of bonds
Cash dividends to shareholders
Dividends paid to minority interests
Redemption of treasury stock
Proceeds from sales of treasury stocks
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase by merger
Increase by change in the scope of consolidation
Increase by newly consolidated subsidiaries
Increase by merger of previously non-consolidated subsidiaries
Cash and cash equivalents at end of the year (Note 4)

(689)
5,000
14,467(14,182)
15,000(20,300)(1,756)
(132)
(356)
270
—
(2,679)39(7,172)
13,260
6,032
749
4,970
—
¥17,8392,229—
12,877(17,959)—(200)(1,757)
(116)
(28)
—
—
(4,954)(256)
2,091
11,168————¥13,260(2,330)—9,742(1,733)—(2,000)(849)(120)(1,062)
—
0
1,645
(42)
(2,650)10,144—400—
12¥ 7,906(6,416)46,559134,715(132,061)
139,678(189,031)(16,352)(1,229)(3,315)2,514—(24,946)363(66,785)
123,475
56,1696,975
46,280—$166,114

Consolidated Statements of Cash Flows
Years ended March 31

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

Operating activities
Income before income taxes and minority interests
Depreciation and amortization
Impairment loss
Amortization of consolidation adjustment accountInterest and dividend income
Interest expense
Equity in earnings of affiliates
Gain (loss) on disposal and sales of property, plant and equipment
Gain on sales of investment securities
Loss on devaluation of investment securities
Loss on devaluation of goodwill
Loss on devaluation of golf club membership(Increase) decrease in receivables
Decrease (increase) in accounts receivable
Decrease in allowance for doubtful receivables(Increase) decrease in inventories(Decrease) increase in payables(Decrease) increase in accrued expenses
Increase in consumption taxes payable
Increase in prepaid pension expenses
Increase in pension and severance indemnities
Other

28

See notes to consolidated financial statements.

2005

Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
1. Basis of Consolidated Financial Statements
The accompanying consolidated financial statements of Taiyo Nippon Sanso Corporation (the “Company”) and consolidated
subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements of International Financial Reporting Standards, and are compiled fromthe consolidated financial statements prepared by the Company as required by the Securities and Exchange Law of Japan.
As permitted by the Securities and Exchange Law of Japan, amounts of less than one million yen have been omitted.
As a result, the totals shown in the accompanying consolidated financial statements (both in yen and in U.S. dollars) do notnecessarily agree with the sums of the individual amounts.
Certain amounts previously reported have been reclassified to conform to the current year presentation.
2. Summary of Significant Accounting Policies(a) Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its 56 significant subsidiaries.
All significant intercompany accounts and transactions have been eliminated in consolidation.
In accordance with the regulations for the preparation of consolidated financial statements under the Securities andExchange Law of Japan, investments in certain unconsolidated subsidiaries and significant affiliates are accounted forby the equity method of accounting.
The differences at the dates of acquisition between the cost and the underlying net equity in investments in consolidated
subsidiaries and the companies accounted for by the equity method are amortized by the straight-line method over a periodof five years.
Investments in unconsolidated subsidiaries and affiliates other than those which are accounted for by the equity method
are principally stated at cost.
(b) Cash equivalents
For purposes of the statements of cash flows, the Company considers all highly liquid instruments with maturity of threemonths or less when purchased to be cash equivalents.

(e) Property, plant and equipment
Property, plant and equipment is stated at cost, and for the Company and its domestic subsidiaries, depreciation is computed by the straight-line method for buildings and leased equipment and by the declining-balance method for other equipment based on the estimated useful lives of the respective assets. As for overseas consolidated subsidiaries, depreciation
is principally computed by the straight-line method based on the estimated useful lives of the respective assets.
The useful lives are as follows:
Buildings
3 to 50 years
Machinery
4 to 13 years

TAIYO NIPPON SANSO CORPORATION(d) Inventories
Inventories of the Company and its domestic subsidiaries are stated at cost determined by the average method, the specificidentification method or the moving average method.
As for overseas consolidated subsidiaries, inventories are stated at the lower of cost or market, cost being determined by
the first-in, first-out method.

ANNUAL REPORT 2005(c) Marketable and investment securities
Marketable securities and investment in securities are classified by their holding objectives into: held-to-maturity and othersecurities. Held-to-maturity securities are stated at amortized cost. Marketable securities classified as other securities arecarried at fair value with any changes in unrealized holding gain or loss, net of the applicable income taxes, included directly inshareholders’ equity. Non-marketable securities classified as other securities are carried at cost.

29

(f) Translation of foreign currency transactions
All monetary assets and liabilities, regardless of short-term or long-term, denominated in foreign currencies other thanreceivables and payables hedged by qualified foreign exchange forward contract are translated into yen at the exchange rates
prevailing as of the fiscal year-end, and resulting gains and losses are included in income.
The accounts of the overseas subsidiaries are translated into yen at the year-end exchange rates, except for shareholders’ equity, which is translated at historical rates. Differences arising from the translations are stated under “Foreign
currency translation adjustments” and minority interests in consolidated subsidiaries in the accompanying consolidatedbalance sheets.
(g) Pension and severance indemnities
Allowance for employees’ retirement benefits is recognized at the net total of the present value of the defined benefit
obligation at the balance sheet date, plus any actuarial gains (less any actuarial losses) not yet recognized, minus the fairvalue of plan assets (if any) at the balance sheet date out of which the obligations are to be settled directly. If the amountdetermined above is negative (an asset), such asset should be recorded as prepaid pension expenses.
Net retirement benefit expense or income is recognized as the net total of current service cost and interest cost, minus
the expected return on any plan assets, minus any actuarial gains (less any actuarial losses) and past service cost recognized
during the year, plus any retirement benefits paid at a lump sum.
To determine the present value of a defined benefit obligation and the related current service cost and, where applicable,
past service cost, the project unit credit method are used.
Actuarial gains or losses and past service cost are recognized for each defined benefit plan over a period not exceeding
the expected average remaining service years of the employees participating in the plan. The Company and its domestic
subsidiaries recognize actuarial gains or losses evenly over the 16 years following the respective fiscal years when suchgains or losses are identified. (As for 2004 of Taiyo Toyo Sanso Corporation, 5 years). Past service cost is amortized using
the straight-line method over 16 years.
The Company recognized the amount of unrecognized past service cost due to the revision of the retirement rule at April
1, 2003.
For transition benefit liability, the Company established the pension and severance indemnity trust by contribution of shares
owned by the Company, and the remaining transition benefit liability is being recognized over a period of 15 years.

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005(h) Allowance for directors’ and corporate auditors’ retirement benefits
The allowance for directors’ and corporate auditors’ retirement benefits of the Company and certain of its domestic
subsidiaries is provided at the amount which would have been required to be paid if all directors and corporate auditors had
voluntarily terminated their services as of the balance sheet date. This amount has been determined in accordance with theinternal rules of the respective companies. The allowance included ¥157 million ($1,462 thousand) for corporate officers at
March 31, 2005.

30(i) Research and development expenses
Research and development expenses are charged to operations as incurred.
(j) Income taxes
Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases ofassets and liabilities and are measured using the enacted tax rates and laws which will be in effect when the differences are
expected to reverse.
(k) Amounts per share
Presentation of diluted net income per share is not applicable as there were no potentially dilutive securities for the years
ended March 31, 2005 and 2004.
(l) Allowance for doubtful receivables
To cover possible losses on collection of receivables, the Company and its domestic subsidiaries provided for an allowancewith respect to specific debts of which recovery is doubtful, based on estimated write-off amounts, after considering the
likelihood of recovery on an individual basis.
(m) Valuation allowance for investments
To state the investment amount fairly, the allowance is provided by considering the related parties’ assets and other factors.

(n) Derivative and hedging transactions
The Company and certain of its subsidiaries have used foreign exchange forward contract in order to solely hedge against
risks of fluctuations in foreign currency exchange rates relating to its receivables and payables denominated in foreign currencies, and have used interest-rate swap agreements in order to solely hedge against risks of fluctuations in interest rates
relating to its long-term debt, and also have used currency exchange swap agreement in order to solely hedge against risksof fluctuations in foreign exchange of long-term debt denominated in foreign currencies, in compliance with the internal rulesof respective companies.
Under the “Accounting Standard for Financial Instruments,” derivative transactions are valued at market prices, except
for hedging transactions whose gains or losses are deferred and recorded in the balance sheet until the hedged transactions are settled. Moreover, if interest-rate swaps in Japan are specifically tied to the hedged loan transactions, unrealized
gains or losses on those swaps are not recognized in the consolidated financial statements as such gains or losses are to
be offset with those on the hedged transactions. Deferred hedge accounting is applied to currency swaps.
Receivables and payables hedged by qualified foreign exchange forward contract are translated at the corresponding
foreign exchange forward contract rates.
(o) Goodwill and other intangible assets in the United States
Effective the fiscal year ended March 31, 2003, consolidated subsidiaries in the United States adopted Statements ofFinancial Accounting Standards (SFAS) No. 142 “Goodwill and Other Intangible Assets.” SFAS No. 142 requires that goodwill
and other intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least
annually and written off when impaired.
(p) Segment information
Effective from the year ended March 31, 2004, the “gas, plant and gas equipment business” was reclassified into “gasbusiness” and “plant and gas equipment business” to better present the operating results.
3. U.S. Dollar Amounts
The translation of Japanese yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmeticalcomputation only, at the rate of ¥107.39=U.S.$1, the approximate rate of exchange at March 31, 2005. The translation should
not be construed as a representation that Japanese yen have been, could have been, or could in the future be converted into
U.S. dollars at the above or any other rate.
4. Cash and Cash Equivalents

Cash and deposits
Time deposits with maturities of more than three months¥18,593(754)¥17,839

Thousands of
U.S. dollars
2005

2004

2004

NipponSanso

Taiyo Toyo
Sanso

¥13,657(396)¥13,260¥8,430(524)¥7,906$173,135(7,021)$166,114

5. Marketable and Investment Securities
At March 31, 2005 and 2004, information with respect to other securities for which market prices were available was summarized
as follows:
Millions of yen

Thousands of U.S. dollars

2005

Unrecognized gain items:
Stock
Unrecognized loss items:
Stock
Total

Cost

Balance sheet
amountUnrecognizedgain (loss)¥10,609¥26,300

208¥10,818200¥26,501

2005
Cost

Balance sheet
amountUnrecognizedgain (loss)¥15,691$ 98,789$244,902$146,112(8)¥15,682

1,937$100,736

1,862$246,773(74)$146,028

TAIYO NIPPON SANSO CORPORATION

2005

Millions of yen

ANNUAL REPORT 2005

The components of cash and cash equivalents at March 31, 2005 and 2004 were as follows:31

Millions of yen
2004
Nippon Sanso

Unrecognized gain items:
Stock
Unrecognized loss items:
Stock
Total

Taiyo Toyo Sanso

Cost

Balance sheet
amountUnrecognizedgain (loss)

Cost

Balance sheet
amountUnrecognizedgain (loss)¥8,366¥19,430¥11,064¥2,473¥4,594¥2,121

24¥8,39020¥19,451(3)¥11,061

147¥2,621132¥4,727(14)¥2,106

Proceeds from sales of securities classified as other securities amount to ¥77 million ($717 thousand) with an aggregate gainon sales of ¥30 million ($279 thousand) for the year ended March 31, 2005.
The balance sheet amount of non-marketable securities classified as held-to-maturity securities and other securities at
March 31, 2005 and 2004 were as follows:2005

Held-to-maturity securities:
Discounted bank debentures
Other securities:
Unlisted securities (except for OTC securities)
Preferred securities
Preferred stock

Millions of yen

Thousands of
U.S. dollars
2005

2004

2004

NipponSanso

Taiyo Toyo
Sanso

¥ 506

¥ 499

¥

—

$ 4,712

2,355
1,000
1,000

1,072
1,000
1,000

2,046
—
—

21,9299,312
9,312

The redemption schedule for securities with maturity dates classified as held-to-maturity securities and other securities at
March 31, 2005 and 2004 are summarized as follows:
Millions of yen

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

Bonds:
Bank debenture
Other

32

Thousands of U.S. dollars

2005

2005

Due in one
year or lessDue after one
year throughfive years

Due in one
year or lessDue after one
year throughfive years

¥506
—
¥506

¥—
—
¥—

$4,712—$4,712$——$—Millions of yen
2004

Nippon Sanso

Bonds:
Bank debenture
Other

Taiyo Toyo Sanso

Due in one
year or lessDue after one
year throughfive years

Due in one
year or lessDue after one
year throughfive years

¥499
—
¥499

¥—
—
¥—

¥106
—
¥106

¥—
—
¥—

Millions of yen

Thousands of
U.S. dollars¥1,901¥7,146$17,702$66,543

6. Notes and Accounts Receivable(a) Notes and accounts receivable liquidated at March 31, 2005 were as follows:

Accounts receivable transferred by liquidation
Notes receivable transferred by liquidation

(b) Notes receivable discounted at March 31, 2005 and 2004 were as follows:

2005

Notes receivable discounted¥35

Millions of yen

Thousands of
U.S. dollars
2005

2004

2004

NipponSanso

Taiyo Toyo
Sanso

¥10

¥536

$326

Millions of yen

Thousands of
U.S. dollars
2005

7. Inventories
Inventories at March 31, 2005 and 2004 consisted of the following:

2005

Merchandise
Finished products
Semifinished products and work in process
Raw materials and supplies¥10,172
2,773
11,973
4,236¥29,156

2004

2004

NipponSanso

Taiyo Toyo
Sanso

¥ 6,953
1,329
6,308
1,658
¥16,250¥2,398—
3,861
884¥7,145$ 94,720
25,822
111,491
39,445$271,496

8. Short-Term Borrowings and Long-Term Debt
At March 31, 2005 and 2004, short-term borrowings and the current portion of long-term debt consisted of the following:¥17,676
22,774¥40,451

2005

2004

2004

NipponSanso

Taiyo ToyoSanso

¥ 8,850
31,765¥40,615¥ 8,5102,509¥11,019$164,596
212,068$376,674

The average interest rates applicable to short-term bank loans outstanding at March 31, 2005 and 2004 were 1.23% and1.10%, respectively.
Long-term debt at March 31, 2005 and 2004 comprised the following:

2005

Loans from banks due through 2011 at averageinterest rate of 1.69% in 2005 and 2.06% in 2004
0.92% unsecured bonds, payable in yen, due 2007
0.95% unsecured bonds, payable in yen, due 2009
Secured bonds of consolidated subsidiary,
payable in yen, due through 2006 at 0.99%

Millions of yen

Thousands of
U.S. dollars
2005

2004

2004

NipponSanso

Taiyo Toyo
Sanso

¥46,495
10,00015,000¥35,609
10,000—¥16,529——$432,955
93,119139,678—¥71,495

100¥45,709—¥16,529—$665,751

0.22% commercial paper (¥5,000 million) was included in other current liabilities at March 31, 2005.

ANNUAL REPORT 2005

Bank loans
Current portion of long-term debt
Total

Thousands of
U.S. dollars

TAIYO NIPPON SANSO CORPORATION

2005

Millions of yen

33

The annual maturities of long-term debt are summarized as follows:
Years ending March 31

Millions of yen

Thousands of
U.S. dollars

2006
2007
2008
2009
2010
2011 and thereafter¥22,774
10,1009,300
19,035
6,032
2,027¥69,270$212,068
94,05086,600177,251
56,16918,875$645,032

9. Pledged Assets
Assets pledged as collateral for short-term bank loans of ¥2,031 million ($18,912 thousand), long-term debt of ¥1,434 million($13,353 thousand) and other liabilities of ¥3,073 million ($28,615 thousand) at March 31, 2005 were as follows:

Property, plant and equipment, at net book value

Millions of yen

Thousands of
U.S. dollars¥10,063$93,705

Millions of yen

Thousands of
U.S. dollars¥411$3,827

10. Assets Replaced by National Subsidy
Assets replaced by national subsidy were as follows:

Property, plant and equipment

11. Income Taxes
Income taxes applicable to the Company comprise corporation, enterprise and inhabitants’ taxes, which, in the aggregate,
resulted in statutory tax rates of 40.7% for 2005 and 42.1% for 2004.
The effective tax rate reflected in the statements of income for the year ended March 31, 2004 differs from the statutory tax
rate for the following reasons:
2004

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

Nippon Sanso

34

Statutory tax rate
Effect of:
Expenses permanently not deductible for income tax purposes
Dividend income deductible for income tax purposes
Per capita levy
Change in valuation allowance
Equity in earnings of affiliates
Other, net
Effective tax rate

Taiyo Toyo Sanso

42.1.%

42.0.%

7.1.
(1.1.)
1.2.
4.3.
(4.1.)(7.7.)
41.8.%

4.4.
(2.3.)
2.3.
—
—
1.7.
48.1.%

Significant components of the Company’s deferred tax assets and liabilities at March 31, 2005 and 2004 were as follows:

2004
Taiyo Toyo
Sanso

¥1,802
229
945
1,356
4,333
—
4,333
—
¥4,333¥1,036
375
589
763
2,764
—
2,764
—
¥2,764

¥ 599
—
—
688
1,287
—
1,287
—
¥1,287$16,780
2,132
8,800
12,62740,348—40,348—$40,348

¥

¥

¥

$

¥

(2)
—
(2)
—
(2)

¥

2005

Non-current deferred tax assets and liabilities
Deferred tax assets:
Depreciation
Reserve for retirement benefits
Net operating loss carryforward for tax purposes
Other
Deferred tax assets—subtotal
Valuation allowance
Deferred tax assets—net
Deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities:
Valuation difference on other securities
Reserve for replacement of fixed assets
Reserve for replacement of fixed assets—special
Depreciation
Other
Deferred tax liabilities—subtotal
Deferred tax assets
Net deferred tax liabilities

2005

2004
Nippon
Sanso

(1)
—
(1)
—
(1)

¥

—
—
—
—
—

$

(19)
—
(19)
—
(19)

Millions of yen

Thousands of
U.S. dollars

2004

2004

2005

NipponSanso

Taiyo Toyo
Sanso

¥

586
1,581
2,608
6,624
11,400(4,485)
6,914(5,848)¥ 1,066

¥

699
564
3,301
3,139
7,703
(3,261)
4,442(4,102)
¥
339

¥

—
1,648
—
1,229
2,878
—
2,878
(2,073)¥ 804$(005,457
14,722
24,28561,682
106,155(41,764)
64,382(54,456)$(009,926¥ (6,448)(5,097)(1,375)(4,670)(7,247)(24,838)
5,848¥(18,990)¥ (4,501)(3,158)—(4,499)(5,365)(17,525)
4,102¥(13,422)¥ (928)(2,171)——(606)(3,707)
2,073¥(1,633)$ (60,043)(47,463)(12,804)(43,486)(67,483)(231,288)
54,456$(176,832)

The reconciliation between the effective tax rate and the statutory tax rate has been omitted for the year ended March 31, 2005
because the difference was less than 5% of the statutory tax rate.

ANNUAL REPORT 2005

Current deferred tax assets and liabilities
Deferred tax assets:
Accrued bonus
Loss from valuation of inventory
Accrued expenses
Other
Deferred tax assets—subtotal
Valuation allowance
Deferred tax assets—net
Deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities:
Adjustment of allowance for doubtful receivables
Other
Deferred tax liabilities—subtotal
Deferred tax assets
Net deferred tax liabilities

Thousands of
U.S. dollars

TAIYO NIPPON SANSO CORPORATION

2005

Millions of yen

35

12. Shareholders’ Equity
In accordance with the Commercial Code of Japan (the “Code”), the Company has provided a legal reserve, which was included
in retained earnings. The Code provides that an amount equal to at least 10% of the amount to be disbursed as a distribution of
earnings be appropriated to the legal reserve until the total of such reserve and the additional paid-in capital account equals
25% of the common stock account.
The Code provides that neither the additional paid-in capital nor the legal reserve is available for dividends, but both may be
used to reduce or eliminate a deficit by resolution of the shareholders or may be transferred to common stock by resolution of
the Board of Directors. On October 1, 2001, an amendment to the Code (the “Amendment”) became effective. The Amendment
provides that if the total amount of the additional paid-in capital and the legal reserve exceeds 25% of the amount of common
stock, the excess may be distributed to the shareholders either as a return of capital or as dividends subject to the approval of
the shareholders. The Amendment also provides that all share issuances after September 30, 2001 will be of shares with no parvalue. Prior to the date on which the Amendment came into effect, the Company’s share had a par value of ¥50.
13. Leases(a) The following pro forma amounts represent the acquisition costs, accumulated depreciation and net book value of leased
property at March 31, 2005 and 2004 which would have been reflected in the consolidated balance sheets if finance leaseaccounting had been applied to the finance lease transactions currently accounted for as operating leases:

2005

Acquisition costs:
Property, plant and equipment
Other assets
Accumulated depreciation:
Property, plant and equipment
Other assets

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

Net book value:
Property, plant and equipment
Other assets

36

Millions of yen

Thousands of
U.S. dollars
2005

2004

2004

NipponSanso

Taiyo Toyo
Sanso

¥7,419327¥7,747¥6,152
147¥6,299¥ 425
867¥1,293$69,085
3,045$72,139¥3,340144¥3,485¥2,37278¥2,451

¥ 166
463
¥ 629

$31,102
1,341$32,452¥4,077183¥4,261¥3,77968¥3,848

¥ 259
403
¥ 663

$37,964
1,704$39,678

Lease payments relating to finance lease transactions accounted for as operating leases amounted to ¥1,194 million ($11,118
thousand) and ¥1,477 million, which were equal to the depreciation expense of the leased assets computed by the straight-line
method over the respective lease terms for the years ended March 31, 2005 and 2004, respectively.
Future minimum lease payments (including the interest portion thereon) subsequent to March 31, 2005 and 2004 for financelease transactions accounted for as operating leases are summarized as follows:
Years ended/ending March 31

2005
2006
2007 and thereafter
Total
2004
Nippon Sanso
2005
2006 and thereafter
Total
Taiyo Toyo Sanso
2005
2006 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥1,0503,210¥4,261$ 9,777
29,891$39,678

¥ 860
2,988
¥3,848
¥ 217
446
¥ 663

(b) Future minimum lease payments subsequent to March 31, 2005 and 2004 for non-cancelable operating leases are summarized
as follows:
Years ended/ending March 31

2005
2006
2007 and thereafter
Total
2004
Nippon Sanso
2005
2006 and thereafter
Total
Taiyo Toyo Sanso
2005
2006 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥1,4655,300¥6,765$13,642
49,353$62,995¥1,7406,530¥8,271———

14. Pension and Severance Indemnities
The Company and certain of its domestic subsidiaries had, jointly or severally, defined benefit plans, including funded noncontributory tax-qualified retirement pension plans and a lump-sum retirement benefit plan, which together cover substantially
all full-time employees who meet certain eligibility requirements.
The funded status and amounts recognized in the accompanying consolidated balance sheets at March 31, 2005 and 2004
and the components of net retirement benefit expenses recognized in the accompanying consolidated statement of income forthe years ended March 31, 2005 and 2004 are summarized as follows:

Projected benefit obligation
Plan assets at fair market value
Unfunded retirement benefit liabilities
Net unrecognized actuarial losses
Difference at change of accounting standard
Unrecognized prior service cost
Prepaid pension expenses
Allowance for employees’ retirement benefits¥ 40,652(35,614)
5,038(7,786)(5,391)
2,590
10,123(4,573)Thousands of
U.S. dollars
2005

2004

2004

NipponSanso

Taiyo Toyo
Sanso

¥ 28,909(24,402)
4,507(7,962)(5,913)
2,775
8,126(1,533)¥11,854(7,787)
4,066(1,129)(151)——(2,785)$ 378,545(331,632)
46,913(72,502)(50,200)
24,11894,264(42,583)

Millions of yen

Thousands of
U.S. dollars
2005(b) Net retirement benefit expenses

2005

Current service cost
Interest cost
Expected return on plan assets
Expense of actuarial loss
Net loss on change in accounting standard for
employees’ retirement benefits
Adjustment for prior service cost
Total

2004

2004

NipponSanso

Taiyo Toyo
Sanso

¥1,449
636
(502)
761

¥1,152
652
(417)
810

¥ 524
335
(73)
433

$13,493
5,922(4,675)
7,086

589
(185)
¥2,748537(185)¥2,550139—¥1,3605,485(1,723)$25,589TAIYO NIPPON SANSO CORPORATION

2005

Millions of yen

ANNUAL REPORT 2005(a) Retirement benefit liabilities

37

(c) The principal assumption used in determining retirement benefit obligations and other components for the Company andcertain of its domestic subsidiaries’ plans are shown below:
2005

2004

2004

Nippon Sanso

Taiyo Toyo Sanso

2.0%
2.5%
Mainly 5 years
1 year for the company
Mainly 5 years forconsolidated subsidiaries—
Evenly for period

Discount rate
Rate of return on assets
Period of recognition of actuarial gains or losses
Period of recognition of transition gains or losses

Mainly 2.0%
Mainly 2.5%
Mainly 16 years
Mainly 15 years

Mainly 2.0%
Mainly 2.5%
Mainly 16 years
Mainly 15 years

Period of recognition of prior service cost
Allocation method of estimated retirement benefits

16 years
Evenly for period

16 years
Evenly for period

15. Contingent Liabilities
At March 31, 2005, the Company and certain of its subsidiaries had contingent liabilities as guarantor of indebtedness, amounting to ¥9,901 million ($92,197 thousand), which included reguarantees by joint investors amounting to ¥1,293 million ($12,040
thousand) and commitments to guarantee amounting ¥2,300 million ($21,417 thousand).
16. Derivative and Hedging Activities

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005(a) Outline of transactions and conditions
The Company and certain of its subsidiaries have used foreign exchange forward contract and interest-rate swap agreements
and currency swap agreements to hedge against the risk of fluctuations in interest rates and currency exchange relating to theirshort-term receivables and payables and long-term debt.
No market risk is anticipated as such derivatives have been entered into in order to offset or mitigate gains or losses resulting
from the hedged loan and other transactions.
The Company and certain of its subsidiaries do not anticipate non-performance by any of the counterparties to the abovetransactions, all of whom are leading financial institutions which are deemed highly creditworthy.
The Company and certain of its subsidiaries have established rules for the authorization of derivative transactions and related
risk management rules which stipulate the limits on derivative transactions for each contract amount. All derivative transactions
have been entered into in compliance with these rules.
Risk management for derivative transactions has been under the control of the Finance Department of the Company which
reports regularly or as necessary to the responsible officer.

38(b) Interest-related derivatives
At March 31, 2005 and 2004 the contracted amounts, market value and unrealized loss on derivatives were as follows:
Millions of yen
March 31, 2005

Contracted amounts

Market value

Unrealized loss

¥413
¥413

¥(1)
¥(1)

¥(1)
¥(1)

Contracted amounts

Market value

Unrealized loss

Interest rate swaps:
Receive/floating and pay/fixed

Millions of yen
March 31, 2004

Interest rate caps
(Option premium)Interest rate swaps:
Receive/floating and pay/fixedNipponSanso

Taiyo Toyo
Sanso

NipponSanso

Taiyo Toyo
Sanso

NipponSanso

Taiyo Toyo
Sanso

¥ 629
(4)

—
—

¥0

—

¥ (4)

—

723
¥1,353

—
—

(5)
¥(5)

—
—

(5)
¥(10)

—
—

Thousands of U.S. dollars
March 31, 2005

Contracted amounts

Market value

Unrealized loss

$3,846$(9)$(9)$3,846$(9)$(9)

Interest rate swaps:
Receive/floating and pay/fixed

The market value and unrealized loss presented above represent the amounts furnished by the respective financial institutions.
(c) Currency-related derivatives
Market value information at March 31, 2005 and 2004 is not required as all of the Company and certain of its subsidiaries’
derivative transactions are accounted for as hedging transactions.
17. Research and Development Costs
Research and development costs of ¥2,056 million ($19,145 thousand) is included in cost of sales and selling, general andadministrative expenses for the year ended March 31, 2005. Included in cost of sales and selling, general and administrative
expenses was ¥2,292 million for Nippon Sanso and in selling, general and administrative expenses was ¥776 million for Taiyo
Toyo Sanso for the year ended March 31, 2004.
18. Gain and Loss on Sales of Property, Plant and Equipment
Significant components of the gain on sales of property, plant and equipment of ¥4,802 million ($44,716 thousand) for the year
ended March 31, 2005 were as follows:
Millions of yen

Thousands of
U.S. dollars¥4,792$44,622Land

Significant components of the loss on sales of property, plant and equipment of ¥1,882 million ($17,525 thousand) for the year
ended March 31, 2005 were as follows:
Millions of yen

Thousands of
U.S. dollars¥1,878$17,488

Land(a) Business Segments
Millions of yen

Year ended or as of March 31, 2005

Gas
business

Plant and gas
equipment
business

Housewares
businessand others

Total

Eliminations
or corporate

I. Sales:(1) Sales to third parties(2) Intersegment sales
Total sales
Operating costs and expenses
Operating income

Consolidated¥207,049241
207,290
191,228¥ 16,062¥82,697
8,626
91,32385,698¥ 5,625¥10,30881
10,3899,086¥ 1,303¥300,055
8,949
309,004
286,013¥ 22,990¥—(8,949)(8,949)(6,686)¥(2,263)¥300,055—
300,055
279,327¥ 20,727

II. Assets, depreciation expenses,
capital expenditure:
AssetsDepreciation expenses
Capital expenditure¥275,396¥ 12,501¥ 36,376¥47,422¥ 1,317¥551¥23,061
¥
547
¥
348

¥345,880¥ 14,366¥ 37,276¥58,787
¥
225
¥
815

¥404,668¥ 14,592¥ 38,092

TAIYO NIPPON SANSO CORPORATIONThe business and geographic segment information of the Company and its consolidated subsidiaries for the years ended March
31, 2005 and 2004 is summarized as follows:

ANNUAL REPORT 2005

19. Segment Information

39

Millions of yen

Year ended or as of March 31, 2004

Gas
business

Plant and gas
equipment
business

Housewares
businessand others

Total

Nippon Sanso
I. Sales:(1) Sales to third parties(2) Intersegment sales
Total sales
Operating costs and expenses
Operating income¥155,660
177
155,837
143,615¥ 12,222¥68,919
6,869
75,78972,753¥ 3,035¥5,692
124
5,816
5,102
¥ 713

¥230,272
7,170
237,443
221,471¥ 15,971¥—(7,170)(7,170)(5,516)¥ (1,654)¥230,272—
230,272
215,955¥ 14,317

II. Assets, depreciation expenses,
capital expenditure:
AssetsDepreciation expenses
Capital expenditure¥164,113¥ 9,894¥ 7,087¥49,930¥ 1,242¥ 368¥9,380¥ 218¥ 109¥223,424¥ 11,355¥ 7,565¥40,170¥ 272¥ (151)¥263,595¥ 11,627¥ 7,413

Eliminations
or corporate

Consolidated

Millions of yen

Year ended or as of March 31, 2004

Gas
business

Plant and gas
equipment
business

Taiyo Toyo Sanso
I. Sales:(1) Sales to third parties(2) Intersegment sales
Total sales
Operating costs and expenses
Operating income¥88,469
91
88,56084,417¥ 4,143¥28,147
124
28,271
28,069¥ 202¥1,581
—
1,581
861
¥ 719

¥ 9,232
1,663
10,896
10,702¥ 193¥127,430
1,879
129,309
124,050¥ 5,259¥—(1,879)(1,879)(1,031)¥ (848)¥127,430—
127,430
123,019¥ 4,410

II. Assets, depreciation expenses,
capital expenditure:
AssetsDepreciation expenses
Impairment loss
Capital expenditure¥81,196¥ 4,392—¥ 7,415¥24,259
¥ 552
¥ 147
¥ 312

¥6,884
¥ 438
—
¥ 20

¥ 8,186¥ 1,039—¥ 696¥120,527¥ 6,422¥147¥ 8,444¥ 7,071
¥
77
¥ 441
¥
25

¥127,598¥ 6,499¥588¥ 8,470

Real-estate
rent business

Other

Total

Eliminations
or corporate

Consolidated

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

Thousands of U.S. dollars

40Year ended or as of March 31, 2005

I. Sales:(1) Sales to third parties(2) Intersegment sales
Total sales
Operating costs and expenses
Operating income
II. Assets, depreciation expenses,
capital expenditure:
AssetsDepreciation expenses
Capital expenditureGasbusiness

Plant and gas
equipment
business

Housewares
businessand others$1,928,010
2,244
1,930,254
1,780,687$ 149,567$770,062
80,324
850,386
798,007$ 52,379$ 95,987 $2,794,068
754
83,332
96,741
2,877,400
84,6082,663,311$ 12,133 $ 214,080— $2,794,068(83,332)—(83,332) 2,794,068(62,259) 2,601,052$ (21,073) $ 193,007$2,564,447$ 116,407$ 338,728$441,587$ 12,264$ 5,131$214,741 $3,220,784$ 5,094 $ 133,774$ 3,241 $ 347,109$547,416 $3,768,209$ 2,095 $ 135,879$ 7,589 $ 354,707

Total

Eliminations
or corporate

Consolidated$

(b) Geographic Segments
Millions of yen
Japan

North
AmericaOthercountries

Total¥247,129
2,647
249,777
232,148¥ 17,628¥265,967¥37,393
6,809
44,20340,462¥ 3,741¥53,553¥15,531
1,385
16,917
15,810¥ 1,106¥23,367¥300,055
10,842
310,897
288,421¥ 22,476¥342,888¥184,840
1,838
186,679
175,889¥ 10,790¥167,003¥34,942
5,017
39,95937,486¥ 2,473¥35,423¥10,490
1,205
11,695
10,571¥ 1,123¥13,775¥230,272
8,061
238,334
223,946¥ 14,387¥216,202—(8,061)(8,061)(7,991)¥(70)¥47,392

Japan

North
AmericaOthercountries

Total

Eliminations
or corporate$2,301,229
24,6482,325,887
2,161,728$164,149$2,476,646$348,198
63,404
411,612376,776$ 34,836$498,678

Year ended or as of March 31, 2005

Sales:
Sales to third parties
Intersegment sales
Total sales
Operating costs and expenses
Operating income
AssetsEliminations
or corporate¥—(10,842)(10,842)(9,093)¥ (1,749)¥ 61,780

Consolidated¥300,055—
300,055
279,327¥ 20,727¥404,668

Year ended or as of March 31, 2004

Nippon Sanso
Sales:
Sales to third parties
Intersegment sales
Total sales
Operating costs and expenses
Operating income
Assets¥¥230,272—
230,272
215,955¥ 14,317¥263,595

Thousands of U.S. dollars
Year ended or as of March 31, 2005

Sales:
Sales to third parties
Intersegment sales
Total sales
Operating costs and expenses
Operating income
Assets$144,622 $2,794,068
12,897
100,959
157,529
2,895,027
147,220
2,685,734$ 10,299 $ 209,293$217,590 $3,192,923

Consolidated$— $2,794,068(100,959)—(100,959) 2,794,068(84,673) 2,601,052$ (16,286) $ 193,007$ 575,286 $3,768,209

Year ended or as of March 31, 2005

Overseas sales
Consolidated net sales
Ratio of overseas sales to consolidated net sales

Other

Total

¥32,032

Thousands of U.S. dollars
North
America¥29,881 ¥ 61,914$298,277
300,055
10.6.%
9.9.%
20.6.%

Other

Total

$278,248 $ 576,534
2,794,068

Millions of yen
Year ended or as of March 31, 2004

Nippon Sanso
Overseas sales
Consolidated net sales
Ratio of overseas sales to consolidated net sales

North
AmericaOther¥30,064¥22,34813.0.%

Total¥ 52,413
230,272
9.7.%
22.7.%

Non of information by geographic segments nor overseas sales of Taiyo Toyo Sanso for 2004 is shown as domestic net sales
and assets located in Japan represent more than 90% of the consolidated assets and overseas sales represent less than 10%of the consolidated sales.

TAIYO NIPPON SANSO CORPORATION

Millions of yen
North
America

ANNUAL REPORT 2005(c) Overseas Sales
Overseas sales, which include export sales of the Company and its domestic consolidated subsidiaries and sales (other thanexports to Japan) of its foreign consolidated subsidiaries, for the years ended March 31, 2005 and 2004 are summarized
as follows:4120. Assets and Liabilities Acquired by Merger
Assets and liabilities acquired by merger with Taiyo Toyo Sanso Corporation effective in the year ended March 31, 2005 consistedof following:
Millions of yen

Thousands of
U.S. dollars

Current assets
Fixed assets
Total assets¥42,843
47,517¥90,361$398,947
442,471$841,428

Current liabilities
Fixed liabilities
Total liabilities¥25,284
18,898¥44,182$235,441
175,975$411,416

Capital surplus increased ¥26,625 million ($247,928 thousand) as a result of the merger.
21. Subsequent Events
Appropriation of retained earnings
The following appropriations of retained earnings, which have not been reflected in the accompanying financial statements forthe year ended March 31, 2005, were approved at a shareholders’ meeting held on June 29, 2005:

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

Cash dividends—¥6.00 ($0.056) per share
Bonuses to directors

42

Millions of yen

Thousands of
U.S. dollars¥2,42893$22,609866

Certified Public Accountants
Hibiya Kokusai Bldg.
2-2-3, Uchisaiwai-cho
Chiyoda-ku, Tokyo, Japan 100-0011
C.P.O. Box 1196, Tokyo, Japan 100-8641

Tel:
Fax:

03 3505 1100
03 3503 1197

Report of Independent Auditors

The Board of Directors
Taiyo Nippon Sanso Corporation
We have audited the accompany consolidated balance sheets of Taiyo Nippon Sanso Corporationand consolidated subsidiaries as of March 31, 2005 and 2004, and the related consolidated
statements of income, shareholders’ equity and cash flows for the years then ended, allexpressed in yen. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statement based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimate made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Taiyo Nippon Sanso Corporation and consolidated
subsidiaries at March 31, 2005 and 2004, and the consolidated results of their operations andtheir cash flows for the years then ended in conformity with accounting principles generally
accepted in Japan.

TAIYO NIPPON SANSO CORPORATION

June 29, 2005

ANNUAL REPORT 2005

The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2005, are presented solely for convenience. Our audit also included thetranslation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been
made on the basis described in Note 3.

43Six-Year Summary
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries

Millions of yen
Years ended March 31

Net sales
Operating profit
Net income
Selling, general and administrative expenses/
Net sales (%)
Return on equity (%)
Return on assets (%)
Capital expenditure
Depreciation and amortization
Research and development expenses
Interest-bearing debt
Total shareholders’ equity
Total assets

2005

2004

2003

2002

2001

2000

¥300,055
20,727
11,568¥230,272
14,317
4,541¥238,445
10,313
4,263¥241,546
9,758
3,134

¥257,804
13,6791,736¥258,688
10,104
1,682

24.5.%
24.1.%
24.8.%
25.0.%
24.0.%
25.7.%
8.7.%3
4.9.%
4.7.%
3.5.%
1.9.%
1.8.%
3.3.%3
1.8.%
1.6.%
1.1.%
0.6.%
0.6.%
38,092
7,413
17,693
17,284
11,94814,123
14,592
11,627
13,70914,213
14,317
24,976
2,056
2,296
2,508
3,454
3,451
3,986
122,089
86,32590,489106,021
115,073
80,832
154,207
94,802
89,18290,70487,027
91,670404,668
263,595
253,698
275,649
303,950
286,149
Yen

Per share data:
Net income 1
Cash dividends¥ 32.76.
9.00.

¥ 15.38.
6.00.

¥14.36.
6.00.

¥10.58.
6.00.

¥5.86.
3.00.

¥5.58.
6.00.
Times

Price earnings ratio

19.17.

31.21.

22.98.

31.19.

82.59.

51.79.

TAIYO NIPPON SANSO CORPORATIONANNUAL REPORT 2005

Notes: 1. Net income per share is computed based on the weighted average number of shares of common stock outstanding during each year,
as adjusted retroactively for free share distributions made during the period.
2. Since the merger of Nippon Sanso and Taiyo Toyo Sanso took place in October 2004, consolidated figures for fiscal 2005, ended March
31, 2005, exclude the figures for the former Taiyo Toyo Sanso for the six months ended September 30, 2004. Taiyo Nippon Sanso’s
results for fiscal 2005 are compared to the fiscal 2000 to 2004 totals of the former Nippon Sanso.
3. ROE and ROA for fiscal 2005 are computed based on the combined net incomes of Taiyo Nippon Sanso for fiscal 2005 and the former
Taiyo Toyo Sanso for the six months ended September 30, 2004.

44

Investor Information(At March 31, 2005)

Head Office:Toyo Building, 1-3-26, Koyama, Shinagawa-ku, Tokyo 142-8558, Japan

Number of Employees:

7,108

Date of Incorporation:

October 1910

Number of Shares:

Authorized—600,000,000

Number of Stockholders:

23,174

Issued—405,892,837

Major Stockholders:Thousands ofShares Owned

Major Stockholders

Mitsubishi Chemical Corporation
The Master Trust Bank of Japan Ltd. (Trust Account)
Taiyo Nippon Sanso Client Shareholding Society
Meiji Yasuda Life Insurance Company
JFE Steel Corporation
Japan Trustee Services Bank, Ltd. (Trust Account)
Mizuho Corporation Bank, Ltd.
The Norinchukin Bank
Dai-ichi Mutual Life Insurance Company
Nippon Life Insurance Company

Percentage of
Total

40,94718,18017,243
16,491
15,293
14,86014,484
11,42810,037
6,565
165,532

10.09%
4.48
4.25
4.06
3.77
3.66
3.57
2.82
2.47
1.62
40.78%

Common Stock Price Range and Trading Volume:
1,000 (Yen)(Thousand Shares)

800

80,000400

Trading Volume200

040,00020,000

1st Quarter

2nd Quarter

3rd Quarter

Fiscal 2004

4th Quarter

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter0

Fiscal 2005

Note: Data for the third and fourth quarters of fiscal 2005 is for Taiyo Nippon Sanso. Data for prior quarters is forthe former Nippon Sanso.

ANNUAL REPORT 2005

60,000Common Stock Price Range

TAIYO NIPPON SANSO CORPORATION

600

100,00045

Toyo Building, 1-3-26, Koyama,
Shinagawa-ku, Tokyo 142-8558, Japan
Tel: 81-3-5788-8000
www.tn-sanso.co.jp

Printed in Japan