R

Annual Report 2005
Year Ended March 31, 2005

Consolidated Financial Highlights
Nipro Corporation and its consolidated subsidiaries
Years ended March 31, 2005 and 2004

Thousands of
U.S. dollars

Millions of yen

2005

2004

2005

For the year:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
R&D expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 192,320
10,404
4,519
16,312
10,266
3,422¥ 188,700
12,557
4,216
14,5009,819
3,074$ 1,790,856
96,882
42,080151,895
95,59531,865

At year-end:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 293,749
96,700¥ 279,701
94,711$ 2,735,347
900,456¥¥

Per share data (in yen and U.S. dollars):
Net income:Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69.4
-

38.5
1,519.6

$

64.9
30.5
1,487.5

0.65
-

0.36
14.15

The U.S. dollar amounts in this report represent translations of Japanese yen, for convenience only, at the rate of ¥107.39=US$1, the approximate exchange rate on March 31, 2005.

Net Sales (Millions of yen)

Net Income (Millions of yen)
152,072

2001

171,217

2002

180,370

2003

2004

188,700

2004

2005

192,3202005

50,000100,000

150,000

200,000

5,842
5,078
4,216
4,519
0

1,000 2,000

3,000 4,000 5,000 6,000

Disclaimer Regarding Forward-Looking Statements
This report contains forward-looking statements regarding business performance andenvironment, in addition to current and historical facts of the Company, its subsidiaries andaﬃliates (“the Nipro Group”). These forward-looking statements represent the expectations
and judgments of the management, based on the information available to the Company atthe time they were prepared. When reading this report, please consider that forward-looking
statements involve known and unknown risks and uncertainties; therefore, the actual futurebusiness performance and environment may diﬀer materially, from what is forecasted in thesestatements. The Nipro Group assumes no responsibility or liability for potential problems.

1

5.1

2001

2002

2003

0

Return on Equity (%)

3,401

2001

2002

8.0

2003

6.4

2004

4.7

2005

4.7

0

1

2

3

4

5

6

7

8

Contents
1 Consolidated Financial Highlights
2 Proﬁle3 To Our Shareholders and Friends
6 Strategy for Future Growth
Review of Operations

Supporting healthcare
at its cutting edge:
Nipro is a supplier of reliable medical equipment andpharmaceuticals
From the top maker of dialyzers to a comprehensive
manufacturer of artiﬁcial organs
Dialyzers are used to remove waste and excess water from blood to purify it during
dialysis treatment. Nipro manufactures the world’ s top brand of dialyzers. We also
oﬀer a wide-ranging lineup of dialysis-related products such as blood lines anddialysis machines, and in recent years has moved into artiﬁcial organs such as heart
and lungs. In future we will expand our lineup of artiﬁcial organs still further.
Medical safety is currently the focus of severe scrutiny. We will not only
continue to pursue high quality in medical equipment but will also develop
products that take safety into account, supplying these not only to Japan but
throughout the world.

Taking a leap into the future as a maker of both injectable andoral generic drugs
The Nipro Group is also expanding its pharmaceutical business. We are alreadyJapans’ top-ranked maker in the ﬁeld of contract manufacturing of injectable drugs.
Currently, we are strengthening oral drugs business in terms of both contract
manufacturing and generic drugs. Our aim is to take a fresh leap into the future as a
total healthcare manufacturer.

11

Medical Business15

Pharmaceutical Business

19

Glass & Materials Business

20

Store Business21 Corporate Governance
22 Financial Section
23

Financial Review

28

Five-Year Summary

29

Consolidated Balance Sheets

31

Consolidated Statements of Income

32

Consolidated Statements of Shareholders’ Equity

33

Consolidated Statements of Cash Flows

34

Notes to Consolidated Financial Statements

42

Report of Independent Certiﬁed Public Accountantson The Consolidated Financial Statements

43 Board of Directors and Auditors
44 Corporate Information

Even further out on the cutting edge of technology:
Investing more aggressively in R&D
Not content with aggressively expanding our medical equipment andpharmaceutical businesses, we are moving forward with R&D in the cutting-edge
ﬁelds of regenerative, tailor-made medicine and applications of “recombinanthuman serum albumin”. As the results of this research bear fruit in turn, they will
ensure our growth well into the future.
2

To Our Shareholders and Friends

Strategy for Future Growth

Minoru Sano
President

During the ﬁrst half of ﬁscal year 2004 (the year
ended March 31, 2005) the Japanese economy
seemed to be showing signs of beginning toescape from deﬂation, thanks to strong exports
and capital investment. Increased concerns about
the slowdown in the global economy and risingoil prices, however, mean that the outlook has
again shifted to one of uncertainty.
Healthcare-related industries such as the Nipro
Group are also facing an era of signiﬁcant change,
with the revised Pharmaceutical Aﬀairs Law
implemented in April 2005 and the Medical Care
Law expected to be amended in 2006 in thecontext of the government policy of holding
down medical costs and increasingly ﬁerce pricecompetition.
On the basis of this situation, the Nipro Group
regards the three-year period from 2003 to 2005
as a time for building up and strengthening asecure business foundation, with the aim ofachieving consolidated net sales of 300 billion yen
and a consolidated recurring income of 20 billion
yen in ﬁscal 2010.
Here is a brief overview of each segment of ourbusiness for ﬁscal 2004.
Our domestic medical business has beenaﬀected by the further progress of government
policies to hold down the cost of medical care.
These include revisions to the Health Insurance
Law that came into eﬀect in April 2004, which haverevised both the system of medical fee and thereimbursement prices for speciﬁed medical
materials and supplies, as well as the3transformation of national hospitals into
independent administrative institutions. In thissituation, we have continued our rationalization ofdomestic distributor inventories of medical
equipment that was begun the previous year, andit was virtually completed in ﬁscal 2004. At thesame time we improved sales eﬃciency, and strove
to develop new products and expand sales.
Despite increased sales volume, however, therevisions to the medical fee system and the eﬀect
of increasingly ﬁerce competition between
companies caused unit prices to fall, meaning thatturnover did not rise as hoped. Internationally, sales
increased greatly thanks to our eﬀorts tostrengthen the Nipro Group’ s sales bases overseas.
In the OEM business, too, we established ourselves
on ﬁrmer ground mainly on the basis of
dialysis-related and diabetes-related products.
The progress of government policies to holddown healthcare costs, such as NHI (Natural healthinsurance) drug price and the increasingly swift
introduction of the all-inclusive payment system
based on diagnosis category, are also aﬀecting ourpharmaceutical business. Faced with this situation,
we have worked to expand sales of dialysis-related
products such as powdered dialysis solution andsubstitution ﬂuids for HF and HDF. In addition,
expansion of production of pre-ﬁlled syringes
enabled us to increase turnover despite falling prices.
In our glass and materials business, while
increased demand for glass for use in lighting,there was a reduction in glass for medical use
such as glass tubes for ampoule.

In our store business, supermarket revenues
were down as the result of factors including ﬁerce
competition with similar operators and customers
being conservative about consumption by an
inﬂuence of displaying tax-inclusive prices.
Drugstore revenues rose thanks to the eﬀect of newstores opening, but the increasingly ﬁerce
competition faced by existing stores and theincreased costs associated with opening new stores
were both major causes for holding down proﬁt.
As a result of the factors outlined above,
consolidated net sales for the ﬁnancial year ended
March 31, 2005 were 192,320 million yen, a 1.9%
increase over the previous year. Consolidated
operating income was 10,404 million yen, adecrease of 17.1%, but consolidated net income
increased by 7.2% to 4,519 million yen. The ﬁscal
year ended March 31, 2005 was a period ofadjustment for the Nipro Group that will lead tofuture growth. Our overall judgment, however, isthat the Nipro Group is making real progress
toward the achievement of our goals, boththrough investment in expanding our production
capacity for dialyzers and pre-ﬁlled syringes, andalso in actively enhancing our abilities both insales and R&D.

Nipro is taking the initiative inenhancing its oral drug businessOne of the most important initiatives in the Nipro
Group is to strengthen our oral drug business. In
practical terms, this means both improving ourNipro has aggressively driven
its business in the Medical Field.
Disposable
MedicalEquipment

production technology through contract
manufacture, and also expanding our genericdrug business.

Improving manufacturing
technology for oral drugs
Nipro Pharma and Nipro Genepha alreadymanufacture and sell oral drugs, but further, inJune 2005, we took over Kagamiishi Plant of
Chugai Pharmaceutical Co., Ltd. which was its
major production facility for solid-form drugs, andmade it a subsidiary named Tohoku Nipro
Pharmaceutical Corporation. This has increased
the production of the Nipro Group for oral drugs
ﬁvefold. From July 2005, Tohoku Nipro
Pharmaceutical will carry out contract
manufacture of oral drugs as the Nipro Group’ s
core pharmaceutical production center. Ourpolicy for the future will be for the entire Nipro
Group to make concerted eﬀorts to improve our
production technology in oral drugs. We aim to
expand the contract manufacturing business byoﬀering high-quality products, and expect further
to enhance in productivity.

Expanding the generic drug
business
The Nipro Group is currently pressing ahead withan expansion to its generic drug business. Genericdrugs have been attracting attention in recent
years as an eﬀective means of holding down
healthcare costs, since they possess theequivalent eﬃcacy to new drugs but at a lower
cost. Generic drugs have yet to gain widespread
acceptance in Japan, but in future they are
expected to become as widely used as they are in
the USA and Europe. We expect that the Nipro
Group will be able to win public trust in thegeneric drugs market by oﬀering high-quality
products at a low cost.

Aiming to distinguish Nipro
products from the competition
Until now, the Nipro Group has concentrated on
developing, manufacturing and marketing
innovative drug administration systems such as
kit products in the ﬁeld of injectable drugs. We are

Artiﬁcial
OrgansInjectable
Drugs

Oral Drugs

now also rising to the challenge of creating
formulations for oral drugs that utilize our unique
technologies. In addition to our existing record ofsuccess with low-dose speciﬁcation formulations,
we are currently working on the development oftablets that can be taken without water, small
tablets that are easily swallowed, and otherproducts. Generally speaking, oral drugs are less
eﬀective in terms of both potency and speed ofaction than are injectables, which areadministered directly into the blood vessels. We
are currently researching new drug delivery
system (DDS) technology, which we hope to use
to develop oral drugs that are just as potent andquick-acting as injectable drugs.
To demonstrate the potency and quickness in
acting of the Nipro Group pharmaceuticalproducts via clinical data, we will strengthen ourscientiﬁc division and enhance the superiority
and reliability of our pharmaceutical products.

Creating a sales network forgeneric drugs
There are two major routes for the distribution ofpharmaceutical products in Japan: the“nationwide distributor” mainly focused on major
hospitals such as university hospitals, and the“local distributor” that mainly focuses on small
and medium-sized hospitals and clinics.
Until now, the Nipro Group subsidiary Nipro
Pharma has manufactured generic drugs andsupplied them via the nationwide distributor. In
contrast to this, the oral drugs manufacturer Nipro
Genepha, which has recently come under theumbrella of the Nipro Group, supplies genericdrugs via the local distributor.
In future, these two companies will complement
each other to distribute the injectable and oral
medications produced by the Nipro Group via boththe nationwide and local distributor.

Improving the brand image ofNipro drugs
There are many companies in Japan
manufacturing and marketing the same genericdrugs. As these all have the same active
ingredients and eﬃcacy, improving our brandrecognition and reputation for reliability are vital

Cutting Edge
Fields ofMedicalTreatment

when it comes to being chosen by medical
institutions and patients.
For this purpose, from April 2005 we haveincreased the frequency of television commercials
by the Nipro Group by 50% in order to improve
our brand image by appealing directly to viewers.
Our aim is to build a reputation for reliability withthe concept “You can trust it because it's Nipro”
and to gain market support.

For injectable drugs, we willcontinue to move ahead withconversion to pre-ﬁlled syringes
The Nipro Group has already secured itself a
top-class place among Japanese pharmaceuticalmanufacturers in the ﬁeld of injectable drugs. With
the implementation of the revised PharmaceuticalAﬀairs Law in April 2005, more and morecompanies are outsourcing the manufacture of
injectable drugs, which requires massive capital
investment in facilities. The Nipro Group alreadyundertakes signiﬁcant contract manufacturing inthe ﬁeld of injectable drug production, and we aim
to expand this business further. In future, thepre-ﬁlled syringe business is expected to undergo
major development. The Nipro Group has been
actively involved in recent years in thedevelopment and manufacture of pre-ﬁlled
syringes, which make an even greater contribution
to the prevention of medical errors and hospital
infections than do other forms of injectable drugs.
The Medical Care Law is due to be revised
during 2006, and this will lead to full-scalecompetition between medical institutions. In
other words, we are entering an era when thepatient will choose the hospital. Hospitals thatemphasize safety are increasingly believed to be
adopting pre-ﬁlled syringes in response to theirpatients’ needs.
The project currently underway at the Nipro
Pharma’ s Odate Factory, to improve production
facilities for pre-ﬁlled syringes is expected to becompleted by April 2006. Its completion will
mean that the Nipro Group’ s production capacity
for pre-ﬁlled syringes will increase dramatically.
The Nipro Group expects that its endeavors until
now will bear fruit all at once in the year endingon March 31, 2007, and is planning the launch ofa large number of pre-ﬁlled syringe products.

4

To Our Shareholders and Friends

Proceeding with rationalizationand sales expansion in our core
medical equipment business
The medical equipment business, which forms
the core of the Nipro Group, is currently facing
ﬁerce competition, with prices on a downward
trend. To win in this environment, we are putting
great eﬀort into increasing our sales and volume
reducing costs through rationalization of
production.
One measure we are taking to increase sales
volume is to clarify market alignments, both of
Nipro brand-name sales and OEM sales. For the
Nipro brand-name sales, we are expanding oursales bases and strengthening our sales activities
to match the market. For OEM sales, we areendeavoring to increase the volume of sales bysupplying high-quality products at low cost.
A measure taken to rationalize production is to
shift production overseas, mainly of products withlow added value. In particular, we are increasing
the proportion of needles, syringes, and infusion
sets produced mainly in our factory in Thailand.

Expanding our product lineup to
respond to the needs of the market
The strength of the Nipro Group in the medical
equipment ﬁeld is the wide range of options
available for our products. In the dialysis ﬁeld inparticular, we are expanding sales thanks to ourcomprehensive supply of dialyzers and dialysis
machines, as well as related disposable products.
In future we will expand our dialyzer productlineup still further, to respond to the varied needsof patients.
In line with the increased sales of dialyzers, weare also enhancing our production capacity. At
the Nipro Corporation’ s Odate Factory, our main
center for the manufacture of dialyzers, we
increased production capacity by 25% from April
2005 to a total of 25 million units annually. We willproceed with the introduction of further new
products and improve production capacity by
April 2006, with the aim of establishing a
production system for 30 million units annually.

Nipro Corporation’ s Odate Factory

Nipro Pharma’ s Odate Factory

Becoming even more active in thedevelopment of artiﬁcial organs
and cutting-edge ﬁelds

competition between corporations is becoming
ever more ﬁerce. In this situation, we will continue
to work on the development of new products
and on strengthening productivity and sales, withthe aim of improving our proﬁtability. We will
mount a bold challenge in ﬁelds that hold goodprospects for growth and in which we can makeeﬀective use of the skills already built up within
the Nipro Group, operating a comprehensive
medical manufacturer.
As a group engaged in the healthcare business,
we believe that quality assurance is our primary
responsibility. We set up a new system forhandling quality claims in April 2005, which is
now in operation. Our aim is to clarify
responsibility for quality control, and to oﬀer
rigorous quality assurance.
Impairment accounting for ﬁxed asset will becompulsorily adopted in ﬁscal 2005. It is expectedthat impairment will also have an impact on theﬁxed assets held by the Nipro Group. Based on
the sliding wage scale system we are rigorously
implementing, however, we are in the process ofenhancing the system of responsibility for theoperations of each division, and are striving tosecure revenues year by year. While securing
revenue, we are adhering to a 50% dividend
payout ratio and working to provide a return forshareholders.
It is my honor to request the further support ofshareholders and stakeholders, both now and in
the future.

As part of our active development of artiﬁcial
organs, in April 2005 we established a Research &Development Institute for Artiﬁcial Organs within
our Research & Development Laboratory. We
invited the former director of the Advanced
Medical Engineering Center of the National
Cardiovascular Center to be the new Center’ s ﬁrst
director, and set up advanced research anddevelopment facilities for work on left venticularassist devise and other projects. In the artiﬁcial
heart ﬁeld we expect to be able to introduce our
new implantable left venticular assist device
within Japan during 2006.
In April 2005 we purchased the artiﬁcial lungbusiness of Dainippon Ink and Chemicals
Incorporated, taking over their 13% share of thedomestic market. In the artiﬁcial pancreas ﬁeld weare moving forward with the development of adiabetes-related insulin pump, and theﬁrst-generation product already obtained
approval of the US FDA in May 2005.
In addition, development is proceedingsmoothly in the cutting-edge ﬁelds of pericardial
regeneration membrane and nerve regeneration
tubes used in regenerative medicine, as well as
artiﬁcial blood using recombinant human serum
albumin. We expect to be able to put these on
the market by around 2010.

2005.7

Initiatives for ﬁscal year ending
March 31, 2006
Both the domestic and international market
environments in which the Nipro Group operates
are undergoing rapid change, and globalized

5

Minoru Sano
PresidentStrategy for Future GrowthMoving Forward6Pre-ﬁlled
Syringe
Pre-ﬁlled syringes contribute to
medical safety by preventing the
introduction of foreign substances
into injectable drugs and bacterial
infection. Nipro currently has themachine capacity to produce 118
million pre-ﬁlled syringes a year,
and intends to increase this still
further.

7

Pre-ﬁlled syringes, which have their barrels
ﬁlled with a drug in advance, help prevent
medical errors such as picking up the wrong
drug or the introduction of foreign
substances. They can also make drugs
administration services in hospitals andclinics more eﬃcient, and their adoption by
medical institutions is increasing.
Nipro Pharma’ s Ise Factory has been
undertaking contract manufacturing of
pre-ﬁlled syringes. In ﬁscal 2004 it produced
24 million pre-ﬁlled syringes. In the second
half of ﬁscal 2004, we commenced
operation of a production line for 20-mL
plastic pre-ﬁlled syringes at Nipro Pharma’ s
Odate Factory. When this is included, we
now have the current machine capacity to
produce 118 million pre-ﬁlled syringes
a year.

In two years from 2005, we are planningto bring three more production lines for
pre-ﬁlled syringes into operation at Odate
Factory, while maintaining the production at
the Ise Factory. Completion of these new
production lines will enable us to
manufacture a whole range of diverse
products: not only both glass and plastic
syringes, but also syringes ranging in size
from tiny 5-mL to large 50-mL models. We
will have the machine capacity to produce
over 250 million pre-ﬁlled syringes a year.
To increase the added value of our kit
products such as these pre-ﬁlled syringes,
Nipro will carry out comprehensive contract
manufacturing that covers all the stages
from bulk pharmaceutical puriﬁcation
through to ﬁnished products.

At present, the Nipro Group is actively
involved in the development andmanufacture of oral drugs as one of themain pillar of its activities. By April 2005, ourproduction of oral drug products had
reached its 151st product, manufactured by
Nipro Pharma Corporation and Nipro
Genepha Corporation. Adding to our 125
injectable drug products and 35 drug
products for external use, the immediate
aim of the Nipro Group is to increase thenumber of our generic drug products to
500, and we are enhancing our R&D
activities to meet this goal. We will also
make use of mergers and acquisitions tobuild up our production system forpharmaceuticals, both by expanding
production capacity and improving the levelof our production technology.

Nipro Pharma and Nipro Genephaalready produce oral drugs. In addition,
Tohoku Nipro Pharmaceutical Corporation,
which just began operation in July 1, 2005*,
has a yearly production capacity of around
1.3 billion tablets. As a result the Nipro
Group’ s total production capacity willamount to around 1.7 billion tablets a year.
From now on Tohoku Nipro
Pharmaceutical will become our main
center for the manufacture of oral drugs,
and we also intend to expand contract
manufacturing there.

Oral Drugs
By the government's policy ofholding down medical costs, it isanticipated that demand forgeneric drugs will rise in Japan in
future. The Nipro Group will bothincrease its product lineup ofgeneric oral drugs and increasingly* Launched in June 30, 2005, this company consists of thesolid-formulation production plant taken over by Nipro
from Chugai Pharmaceutical Co., Ltd.

expand manufacturing
productivity.

8

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International
Business
The overseas healthcare market iscontinuing its further expansion.
In order to gain an accurate graspof the needs of the market andrespond promptly, we are
increasing the number of ouroverseas sales bases every year.

9

During the ﬁrst months of 2005 we openeda sales base in Costa Rica in January, one in
Puerto Rico in February, and one in the UK in
April. More openings of new sales bases areplanned during ﬁscal 2005 in Guatemala,South Africa, Germany, France and Poland,
which will bring the total number of oursales bases to 37 in 32 countries. During theyear we will continue to improve andexpand our direct sales system, with the aimof enhancing sales activities.
The Nipro Group currently supplies adiverse product range of high-performance

dialyzers worldwide, and is known as a
top-class maker of dialysis-related products.
We also oﬀer sets of the peripheral products
necessary for dialysis treatment: dialysis
machines, blood lines, and needles. Nipro ishighly regarded in the ﬁeld of dialysis
treatment.
One of our future aims is to oﬀer a fullrange of products related to artiﬁcial organs,such as artiﬁcial pancreas and lungs, toestablish the association of the Nipro brandimage with artiﬁcial organs.

We are organizing the launch of theimplantable left ventricular assist device,
LVAD into the Japanese market. This LVAD
supports the patients at the risk of death andwaiting for the heart transplantation until thedonor heart is available. The longest support
duration is recorded as 1,845days in the
United States with this device. In Japan, theorgan donor is very scarce. Therefore, the
LVAD plays very important role to maintainthe life of those who are waiting for the hearttransplantation. This LVAD we are
introducing to the Japanese market is widelyused in overseas with positive outcomessuch as long-term use availability and lessrisk of infections. This is the only heart assist

device that actually beneﬁts for the patientsfacing the risk of imminent death.
Nipro founded the Research &Development Institute for Artiﬁcial Organs
within our Research & Development
Laboratory in April 2005 to enhance our
artiﬁcial organs related research anddevelopment. This center gathers wide
variety of researchers with their own
expertise. Then, we proceed the researchand development with ﬂexible structural
system. From now on, we will speed up ourdevelopment and marketing of not only themechanical artiﬁcial organs such as LVAD
and oxygenator but also the hybrid artiﬁcial
organs.

ArtiﬁcialHeart
Nipro is providing various types of
artiﬁcial organ throughout theworld, and the dialyzer or theartiﬁcial kidney is the mostsigniﬁcant among them. We arewidening our product lines in
addition to the highly recognizedheart assist devices or the artiﬁcial
heart by initiating the production
and distribution of the oxygenatoror so-called the artiﬁcial lung inthe ﬁscal year 2006.

10

Review of Operation

Medical Business
Aiming to increase sales volume by making good useof our wide-ranging product line-up

11

FY2004 Overview
Increased sales volume hard totranslate into increased proﬁt
Within Japan, we faced a diﬃcult operating
environment owing to the drop in prices
resulting from the downward revisions to
the reimbursement prices for speciﬁed
medical materials and supplies in 2004. In
addition, as one aspect of the government’ smeasures to hold down medical costs, acomprehensive payment system based on
diagnosis-procedure combination (DPC)
was introduced in April 2003 for speciﬁc
hospitals certiﬁed to oﬀer advanced
treatment throughout Japan. As a result,hospitals increasingly held oﬀ on purchasing
medical equipment and demanded
reductions in price, leading to a declining
trend in the volume of medical equipmentused per hospital. In this situation our aim
was to raise sales eﬃciency to a new level,
and we worked hard to strengthen our sales

oﬃces. In order to acquire new customers,
we have been making full use of thewide-range of dialysis-related products thatis the strength of the Nipro Group by sellingthe blood lines, substitution ﬂuid for HF and
HDF, powdered dialysate solution, dialysis
machine, heparin for dialysis in pre-ﬁlled
syringes, and other products necessary fordialysis treatment as a combined package,in addition to the dialyzers that form theMedical Business’ s main product.
We have also enhanced sales anddevelopments of products related to
cardiovascular treatment and diabetes
treatment, as well as disposable injection
and infusion products such as infusion sets
and syringes, and have been working toincrease our market share.
The impact of the drop in prices,
however, resulted in a decline in sales
despite increased sales volume comparedwith the previous year.
Internationally, as a result of our eﬀorts todevelop a direct sales organization, net salesof Nipro-brand products rose in terms of

Net Sales(millions of yen)

Operating income

2001
2002
2003
2004
2005

66,41377,57276,00978,72782,504

2001
2002
2003
2004
2005

0

20,00040,00060,00080,000 100,000

Dialyzer
Nipro has been well-known as one of theleading dialyzer manufacturers for many years.
The main functions of the dialyzers are to
maintain body ﬂuid balance and remove fromblood not only low molecular substances, butalso low molecular proteins such as beta 2
microglobulin and balance to the level ofmolecular weight of albumin.
The recent progress of the dialyzers reduces
patient mortality and improves quality of life byrelieving complications of renal patients.
The wide range of dialyzers Nipro carries helps
treat a variety of patients with renal diseases andtheir complications.
In the latter half of 2005, a new series of thesynthetic PES membrane, SurelyzerTM PES-DL
series, will be added to the existing FB(Diacetate), SureﬂuxTM(Triacetate), andSurelyzerTM(Polyethersulfone) series. This newseries featureexcellentclearances ofsmall
molecules
even with low
water removal
rate.

(millions of yen)

11,91315,016
14,175
12,117
11,0390

5,000

10,00015,00020,00012

Review of Operation

products related to dialysis, and injection
and infusion devices, and sales increased
accordingly. The OEM business also saw
strong sales of products related to dialysis,
blood collection, and diabetes treatment,with an increased volume of transactions.
In the ﬁeld of dialysis-related products,
the overseas market is shifting toward theincreasing adoption of single-use rather
than multiple-use dialyzers, resulting in asigniﬁcant jump in the quantity used. The
number of patients receiving dialysis
treatment is also rising, mainly in China andIndia, resulting in a dramatic expansion of
the dialysis market. Despite this market
expansion, however, competition isintensifying, requiring a swift response to
the market needs including pricing. For thisreason, the Medical Business is moving
ahead with the establishment of new sales
base, three of which were opened in ﬁscal
2004. We have clariﬁed market-sharing
arrangements with our OEM customers, andexpanded sales both of OEM supplies and of
Nipro-brand products.

13

Medical safety is now the subject ofemphasis worldwide, particularly in the USA
and Europe. Alongside the growing need for
medical equipment incorporating safety
features, quality requirements are becoming
ever more stringent. One of the reasons that
we have successfully expanded our sales
volume is our tireless eﬀorts to supply
products featuring safety and functionality
as well as high quality.
The combined impact of the cost oforganizational restructuring in a newly
consolidated subsidiary and intensifying
price competition, however, has meant that
although we achieved our sales targets, we
could not maintain as much proﬁt as
expected. As a result, net sales for thisbusiness were ¥82.5 billion, an increase of
4.8% compared with the previous year, andoperating income was ¥11.0 billion, adecline of 8.9% compared with the previous
year.

Dialysis Machine (DIAMAXTM)
In an eﬀort to adapt to the advanced dialysis
treatment required in overseas markets, we aredeveloping a new dialysis machine (DIAMAXTM)
with various new functions and highexpandability. DIAMAXTM meets the safety
speciﬁcation standards in Europe and the UnitedStates. It has new functions to provide better
treatment, as well as functions to support
medical staﬀ
engaged in dialysis
treatment.
DIAMAXTM has
already beenmarketed in Asianand Latin America
markets and will
be applied to CE
marking by the
beginning of 2006.

Outlook
Specialist sales teams for group
hospitals
Revision of the Medical Care Law, currently
under consideration and scheduled forlegislation during 2006, will probably resultin major changes to the domestic market.
The trend toward holding down medical
costs is anticipated to continue, with pricecompetition expected to become evenmore intense. Throughout Japan the trend istoward the organization of groups of large
hospitals, and it is becoming necessary to
respond to individual hospitals on the basisof a thorough understanding of thesituation of its particular group.
We will increase the number of our
medical representatives, and establish
specialist teams responsible for large
hospitals and hospital groups in Japan's
main regions. We will implement
thoroughgoing education and training to

improve their sales abilities. We will alsoenhance our collaboration with distributors,
with the aim of expanding our market shareamong private clinics.

Associating the Nipro brand with
artiﬁcial organs
Despite the risk posed by a potential
appreciation of the yen, we will improve ourdirect sales organizations to expand sales
volume, and respond to the needs of the
expanding international market.
In succession to the one already opened in
the UK, we will establish ﬁve more new sales
bases during ﬁscal 2005, and develop sales
networks rooted in the region. We will alsopress forward with obtaining approval for
new products, including those newly
introduced, and with obtaining the CE markfor our leading products. By expanding
sales volume, we will further improve
production eﬃciency and reduce
manufacturing costs.
As well as beginning manufacture andsales of our newly introduced artiﬁcial lung,we will proceed with the introduction in
Japan of our implantable left ventricularassist device, with the aim of associating the
Nipro brand image with artiﬁcial organs.

AQUALinerTM Hydrophilic Ni-Ti Alloy
Guidewire
AQUALinerTM Hydrophilic Ni-Ti Alloy Guidewire is a
medical device, which guides catheter to a target
point through arterial or venous for diagnosis ortreatment by guiding a catheter through a vessel isgenerally called intervention.
Our AQUALinerTM, s advanced coating technology
produces a “cushion” of moisture between the wire
surface and either vessel walls or instrumentation,
promoting smooth, frictionless navigation. Thatstandard of excellence is available today in the
AQUALinerTM
Hydrophilic guidewire,
which oﬀers all theperformanceadvantages of theleading brand...plus ahydrophilic coatingthat lasts as long as
your procedure does.

14

Review of Operation

Pharmaceutical Business
Rising to the challenge of expanding our business through contract
manufacturing and the development and sales of generic drugs

15

FY2004 Overview
Continuing steady sales growth
The impact of the government’ s measures
to hold down medical costs not only meantthat the amount of drugs used fell duringﬁscal 2004, but also resulted in an extremely
tough business environment owing toincreasingly ﬁerce price competition
between competing products.
In this diﬃcult environment, thePharmaceutical Business increased sales of
products such as blood glucose monitoring
system, powdered dialysate solution andsubstitution ﬂuid kits for HF and HDF, andendeavored to expand revenue frompre-ﬁlled syringes.
As a result, net sales in the Business were¥26.2 billion, a rise of 3.4% compared withthe previous year, and operating income
was ¥2.3 billion, a decline of 8.5% comparedwith the previous year.

Net Sales(millions of yen)

14,12015,946
21,97925,33926,207

2001
2002
2003
2004
2005
0

20,00040,000Kit products, which combines drugs or solutions
with a medical device, will help improve thequality of care in terms of safety, hygiene andwork eﬃciency at medical work place.
The Nipro has been working on thedevelopment and manufacturing of various typeof kit products.

New pre-ﬁlled syringe products
and ingenuity in oral drugs
We have already been working on oﬀering awide-ranging product line-up of injectabledrugs, such as double-bag kit(liquid-and-powder) and pre-ﬁlled syringes.

Operating income

80,000 100,000* Drugs to be sold with the approval of the Ministryof Health, Labour and Welfare after the expirationof patents for brand-name drugs whoseeﬀectiveness and safety have been fully
demonstrated. While having the same active
ingredients and eﬀect as brand-name drugs, theprice of generic drugs is more economical because
the cost of development is lower.

(millions of yen)

844
1,104
1,981
2,471
2,261

2001
2002
2003
2004
2005
60,000In December 2004 we began full-scale
sales of heparin pre-ﬁlled syringes for use indialysis treatment, and sales of these arerising briskly. Our subsidiary Nipro Pharma
launched sales of eight pre-ﬁlled syringe
products during ﬁscal 2004, including
sodium chloride, glucose and xylitol.
We also began contract manufacturing ofvials of topical anesthetic andanticoagulants, and pre-ﬁlled syringes withpain relievers.
Another major initiative for the Nipro
Group is oral drugs. The Kasukabe Factory of
Nipro Genepha Corporation, which becamea Nipro subsidiary in April 2004, wasoverhauled in October 2004 and its
oral-drug production capacity expanded.
The oral drugs now being developed andmanufactured by the Nipro Group are
generic drugs* on which the patents held

0

5,000

10,00015,00020,00016

Review of Operation

by brand-name pharmaceutical companies
have expired. To diﬀerentiate them from thecompetition, we aim both to improve thestability of our generic drugs in comparison
with brand-name drugs and to make themeasier for patients to take and use.
Examples of our innovations include
producing half doses of tablets that formerly
had to be broken in half when they wereprescribed for children or the elderly, andusing packaging that can easily be
distinguished by persons with sight
impairment.

Half doses of tablets

Multi-layered tablets

The dosage contained in regular tablets is often
too high for patients whose kidney functions
are impaired or who cannot fully metabolize
drugs, and in the past it has been the practiceto break tablets in half for administration. Whentablets are taken out of their PTP(press-through package) sheet and broken in
half, however, not only does moisture renderthem less stable, but contamination is also aworry; in addition, the amount of drug may
diﬀer between pieces. Half-dose tablets resolve
all these problems at the start.

Multiple separate drugs that need to betaken together but which are unstable whenmixed as powders are combined in a single
multi-layer tablet.

Orally disintegrating tablets
The Nipro is proceeding to enhance theoral-drug business in addition to the ﬁrmly
established injectable-drug business.

Tohoku Nipro Pharmaceutical Corporation

17

Tablets that can be taken without water. A
ﬁne-grained coating means that even bitter
drugs can be taken without the addition ofsweeteners.

Dry-coated tablets
Two separate drugs that need to be taken
together but which are unstable when mixed
as powders are combined by means of acoating.

Weekly sheet
Normally, PTP tablet sheets are packaged
with 10 tablets each. Producing sheets withseven tablets as a supply for a single week
makes it easy to grasp the number of tablets
taken.

Outlook
Soon to rank as a major genericdrug manufacturer
Contract manufacturing and generic drug
manufacture are the PharmaceuticalBusiness’ s key words for ﬁscal 2005.
The revisions to the PharmaceuticalAﬀairs Law that came into eﬀect in April
2004 now permit complete outsourcing ofpharmaceutical manufacturing, and we
intend aggressively to expand our businessin this area in future.
The Nipro Pharma Odate Factory is our
main base for contract manufacturing of
pre-ﬁlled syringes, and we have alreadyincreased its production facilities for theseproducts. From ﬁscal 2005 we will continue
to expand its series of production lines.
To expand our generic drug
manufacturing business, we will engage ineven more positive development toincrease the number of our products.
Currently the Nipro Group has 311 genericdrugs on sale, and a further 27 arescheduled to be added during ﬁscal 2005 tobring the total number to 338. We are in theprocess of applying for another 36 productsthat are scheduled for launch during ﬁscal
2006, and if all these can be put on themarket this will bring us
shoulder-to-shoulder with the major
manufacturers of generic drugs.
Collecting and providing scientiﬁc datafor drugs is one of the most important
activities for marketing generic drugs. In
future the Nipro Group plans to establish a
Scientiﬁc Department based around the
R&D section, which will assist the medical
representatives. We will move forward withthe preparation of scientiﬁc materials for use
at medical institutions, as well as educationand training for medical representatives.

Recombinant human serum
albumin to oﬀer new boost
In our pharmaceutical business, we arecontinuing to research applications of“recombinant human serum albumin” .
Recombinant human serum albumin isdeveloped with a view to sale by Bipha
Corporation, an aﬃliate. Albumin binds to
drugs within the body and acts as atransporter. The production of recombinanthuman serum albumin would give a major
boost to the development of DDS drugs
currently underway in the Nipro Group.
Work is also in progress on the developmentof artiﬁcial blood using recombinant humanserum albumin.

Donations for victims of Sumatra
Earthquake and Tsunami Disaster Areas
The Nipro Group supported the victims of
Sumatra earthquake and tsunami areas withdonations and others.
Our supports consisted of the following:(1) 10,000 kits of double-bag antibiotic kit
provided by Nipro Pharma Corporation to a
non-governmental organization AMDA
(Association of Medical Doctors of Asia).
(2) 60,000 pieces of syringe provided by Nipro(Thailand) Corporation Ltd. to Thai Food andDrug Administration(3) Donations of cash contributed by employees
and others and raised by the collection boxes aswell as at the charity bazaar held by volunteer
employees.

18

Review of Operation

Outlook
Developing innovative applications

FY2004 Overview
Rising demand for LCD backlights
set to continue
In our Glass & Materials Business, sales ofglass for lighting purposes increased. This
was thanks to increased demand for glassmaterials both for small light bulbs for use in
vehicles, and for liquid crystal display (LCD)
backlights. Demand for glass for use inbacklights is predicted to continue toincrease in line with the expanding market
for LCD televisions.

Sales of glass for pharmaceutical
purposes fell in line with continuingchanges to the types of medical containers
in current use, including the shift toampoules made of plastic and the adoptionof pre-ﬁlled syringes.
The stagnation in which mass-market
retailers now ﬁnd themselves also caused adownturn in products for general
consumers.
As a result, net sales in the business were
¥11.7 billion, a decrease of 1.9% over theprevious year, while operating income was ¥1.9
billion, a 3.9% increase over the previous year.

We will continue to proceed with innovations
to our glass processing technologies, and shift
to the active development of applied use ofglass bottles.
In line with the expanding market for ﬂat
panel displays (FPD), we will endeavor to
expand sales of LCD backlight-relatedmaterials, as well as improving sales ofmaterials for general small-scale lighting
purposes.
In the market of glass tubes for medical
container, we believe that a decline indomestic sales of vials and ampoules isunavoidable, owing to the impact of the shift
to plastic containers and other factors. We
also intend to make the most of ourhigh-level processing technology to expand
the manufacture of glass barrels for pre-ﬁlled
syringes.

Glass & Materials BusinessResponding appropriately to change, with the aim of becoming an
indispensable presence in the industry
Net Sales
11,784
11,234
11,064
11,891
11,667

2001
2002
2003
2004
2005
0

19

(millions of yen)

20,00040,000Operating income
1,773
1,806
1,777
1,819
1,889

2001
2002
2003
2004
2005
60,00080,000 100,000(millions of yen)

0

5,000

10,00015,00020,000Review of Operation
OutlookThe quest for customer satisfaction

FY2004 Overview
Diﬃcult business environment
The continuing low level of personal
consumption means that business in our
supermarkets has remained sluggish. To add
to this, the increasingly ﬁerce competition
resulting from our competitors opening
new stores and renovating existing outlets
as well as a drop in unit sales per customer
owing to the requirement to display
tax-inclusive prices has led to an
exceptionally diﬃcult business environment.

In this situation, improved cost eﬃciency
has enabled us to secure a proﬁt, although
net sales of declined from the previous year.
Net sales of our drugstores increased thanks
to strong sales of pollinosis-related products
and the opening of new stores. Owing to adrop in cost eﬃciency caused by delays inopening new stores, however, proﬁt
declined signiﬁcantly from the previous year.
As a result, net sales in this business were
70.8 billion yen, a 0.7% decrease from theprevious year, and operating income was ¥0.1
billion, a decline of 72.7% compared with theprevious year.

Our entire action agenda for the supermarket
business will be governed by the “Pursuingcustomer satisfaction”. We will strive to
respond swiftly to the needs of customers in
the local community, creating outstanding
stores that will attract customers. We will
work to secure stable proﬁts by promoting
increased cost eﬃciency.
We will endeavor to oﬀer the products
customers want in our supermarkets, andwill vitalize stores by renovating existingoutlets. We will also improve work eﬃciency
by means of our Labor Scheduling Program,and implement customer management.
We will strengthen the existing
specialization of our drugstores in the ﬁeldof pharmaceuticals, health foods andsupplements, and cosmetics, aiming totransform them into high-quality drugstores.
During the past few years, the main goal of
our activities was to expand the number ofstores. Despite prior investments, however,we were unable to maintain a suﬃcientnumbers of pharmacists, and as a result the
number of stores opened did not reach our
initial goal. This factor has exerted adownward pressure on income. In future wewill maintain the number of stores at its
present level of around 90, while working tostrengthen our operational base.

Store Business
Pursuing customer satisfaction and creating stores rooted in the local
community
Net Sales(millions of yen)

56,88264,76469,56071,357
70,841

2001
2002
2003
2004
2005
0

20,00040,00060,00080,000 100,000

Operating income(millions of yen)

2001 20
1,037
2002
1,109
2003
2004 420
2005 115
0

5,000

10,00015,00020,00020

Corporate GovernanceFundamental perspective on
corporate governance

Shareholders Meeting

President(Appointment)

Increasing globalization and the borderless
economy are dramatically transforming theenvironment in which the Nipro Group
operates. Along with this changing businessenvironment, recent years have seen theincreasing emergence of a range of scandals
and other signiﬁcant operational risks thataﬀect corporate survival. An improved
business management system that takes
account of the diversity of stakeholders isproving indispensable in response to thesedramatic changes in the businessenvironment.
The Nipro Group regards improved
corporate governance as a vitalmanagement issue from the perspective ofcorporate social responsibility. We areendeavoring to strengthen our businessadministration system on the basis of ourdivisional system, and to create a sound andeﬃcient management structure.

Implementation of measuresrelated to corporate governanceInstitutions within the company
The basis of our management
decision-making, implementation andsupervision is the system of board of
directors and auditors laid down in theJapanese Commercial Code. Speciﬁcally,
we have established an independent
management administration framework
for each business division, each of which
has clearly deﬁned responsibilities and is
improving its management system.
In principle, the board of directors meetsonce a month. In addition to taking
important decisions it hears reports on
and discusses the state of company aﬀairs.
At present all three statutory auditors are
external auditors, as provided in article
18, paragraph 1 of the Law for Special
Provisions for the Commercial Code
Concerning Audits, Etc. Currently no
external directors have been appointed
to the board, nor are there any full-time
staﬀ engaged for external directors or
external auditors.

21

Accounting
Auditor(Auditors)
Board ofAuditors(Directors)
Board ofDirectors

Committees(Decision Making)Accounting
Audit

Operational
Audit

Supervisionof Directors’
policyexecution

Internal control system and auditing
Within the Nipro Group, importantbusiness matters are debated anddecided in regular management meetings
held once a month. In addition to thecompany’ s representative directors andauditors, representatives of all the main
Nipro Group companies also attend. They
discuss details of the progress of businessactivities and matters of concern, and areable to make decisions ﬂexibly.
In line with auditing policy laid down by
the board of auditors and with theiradministrative responsibilities, each
auditor not only attends important
meetings such as board meetings but also
carries out auditing functions that include
hearing reports from directors and staﬀ
and reading important documents. They
hold both regular and special meetings ofthe board of auditors for exchange ofviews and discussion.
The Nipro Group has also established aninternal audit section independent of ourcorporate organization. Not only are wecarrying out oﬃcial internal auditing on
the basis of auditing policy and yearlyplanning, but we are also working toensure our corporate organization’ scompliance with legislation, to prevent
improprieties and mistakes, and to
improve our internal system of control, on
the basis of mutual collaboration between
audits by auditors and accountants.

Building up our risk management system
The Nipro Group has established an
Management Risk Control Committee,

Thirdpartiessuch aslawyersandaccountants etc.

Rewards andPunishments
Committee
Directors

Management
Risk Control
Committee

Division Managers
General Managers,
Section Managers,etc.

which is working to improve further bothcontrol of management risks and thecompany’ s system for promoting
compliance with legislation and corporate
ethics. We have also established a Rewards
and Sanctions Committee chaired by the
President of Nipro Corporation, and areworking to promote operational soundness
through appropriate management
regarding compensation and sanctions.

Personal, capital, or transactional
and/or other relationships of interest
between the Nipro Group and its
external directors and auditors
There are no such special relationships
between the Nipro Group and its external
auditors.

Initiatives toward improved corporate
governance during the past year
As well as improving our organizational
system to ensure compliance with recent
legal changes, such as the revisions to thePharmaceutical Aﬀairs Law and theimplementation of legislation protecting
personal information, we have produced
and distributed to our employees a revised
version of our Code of Conduct forCompliance with Laws, Ordinances, andCorporate Ethics. In addition, we areworking to enhance our systems ofcompliance and operational risk
management by regularly publishing
related articles in our company magazine
and carrying out staﬀ training, to ensure afull level of consciousness and awareness on
the part of each individual employee.

Financial Section
2005
Nipro Corporation and its Consolidated Subsidiaries
Year ended March 31, 2005 (ﬁscal 2004)

23 Financial Review
28 Five-Year Summary
29 Consolidated Balance Sheets
31 Consolidated Statements of Income
32 Consolidated Statements of Shareholders’ Equity
33 Consolidated Statements of Cash Flows
34 Notes to Consolidated Financial Statements
42 Report of Independent Certiﬁed Public Accountantson The Consolidated Financial Statements

22

Financial Review

The following sections are a review ofNipro Corporation’s ﬁnancial positionand operating performance for the year
ended March 31, 2005. All ﬁgures are ona consolidated basis and include theaccounts of Nipro Corporation,
Nipro Medical Industries, Ltd.,
Nipro (Thailand) Corporation Ltd.,
Fuzhou Nipro Co., Ltd.,
Nipro (Shanghai) Co., Ltd.,
Nipro Medical LTDA.,
Nipro Europe N.V.,
Nipro Medical Corporation,
Nipro Medical Panama S.A.,
Nipro Medica de Mexico S.A. DE C.V.,
Nipro Diabetes Systems, Inc.,
Nipro Pharma Corporation,
Shinwa Shoji Co., Ltd.,
Shanghai Nissho Vacuum Flask Reﬁll Co., Ltd.,
Nissho Corporation,
Nissho Drug Co., Ltd., and Bipha
Corporation.

** Afﬁliate accounted for by the equity method.

In the medical equipment andpharmaceutical industries that are our main
businesses, the government has beenpressing further ahead with revisions to the
medical care system with the aim of holding
down the cost of medical care andimproving the quality and eﬃciency of
medical treatment. The changes include
revisions in April 2004 to the system of
payment for medical care and the National
Health Insurance (NHI) drug price standards,
as well as to the reimbursement prices for
speciﬁed medical materials and supplies. In
addition, eﬀorts to ensure safer medical careare being enhanced, including measures toprevent medical accidents. Large-scale
corporate restructuring is also underway
overseas, with intensifying global-levelcompetition for sales.
In this situation, the Nipro Group
continued to strive to develop new
products and to strengthen both its
productivity and sales capabilities.

Net Sales

Overview
In the ﬁscal year that ended March 31,
2005, the Japanese economy showed signsof an incipient recovery, both in terms ofincreased exports and of expanded capital
investment thanks to improved corporate
revenue. Conditions have remained toughin terms of both employment and income,however, for individual consumers there
has been little mood of recovery.

Net Sales (Millions of yen)

171,217

2002

MedicalThe domestic environment has become
tougher, as the revisions implemented in
April 2004 to the system of payment for

14,8992003

2004

188,700

2004

2005

192,3202005

150,000

200,000

12,557

3,000

6,000

9,000

12,00011,617
8,781

2004

8,044

2005

10,404
0

6,641

2001
2002

2003

100,000

9,729
14,435

180,370

50,000

Income before income taxes (Millions of yen)

2002

2003

0

23

Net Sales by Business Segment

2001

Pharmaceutical
For the Pharmaceutical Business, the impactof the average 4.2% decrease in prices for
the NHI drug price standard has led to an
environment of ever more intense pricecompetition. In this situation, the Nipro
Group is endeavoring to expand production

Operating income (Millions of yen)
152,072

2001

In ﬁscal 2004 consolidated net sales were¥192.3 billion (US$1,790.9 million), an
increase of 1.9% over the previous year due
to increased revenue from the medical
equipment and pharmaceutical businesses.

medical care and the reimbursement prices
for speciﬁed medical materials and supplies
have resulted in a greater drop than normal
in market prices and even more intensiﬁed
price competition. In this situation, we haveworked to strengthen its sales force and has
made progress in expanding its productlineup of products for dialysis, devices of
injection and infusion, and cardiovasculartreatment. The reduction in reimbursement
prices in the ﬁeld of dialysis had a major
impact, however, with revenue decreasingin comparison with the previous year.
Overseas, despite the eﬀect of exchange
rates, the OEM business has become steadyin the ﬁelds of dialysis and diabetes-related
products. Overseas sales of the Nipro brandproducts were aﬀected by the impact of
exchange rate ﬂuctuation and intensifying
price competition in Europe, but net sales
increased signiﬁcantly in Central and SouthAmerica, where we have been working tostrengthen our sales oﬃces in recent years,
particularly for dialysis-related products suchas dialyzers.
As a result, net sales rose by 4.8% overthe previous year to ¥82.5 billion (US$768.3
million).

15,0008,660
02,000 4,000 6,000

8,000 10,000 12,000

of infusion kit products such as half-type
kits, double-bag kits, and pre-ﬁlled syringes,
as well as injection preparations. We havebeen improving our production facilities for
pre-ﬁlled syringes in recent years, and a new
production line has partially started
operation. In the second half of ﬁscal 2004
production of eight new products began.
We have also worked to expand sales ofboth dialysates and blood glucose
monitoring systems, owing to which net
sales of these have also risen. As a result, net
sales in the Pharmaceutical Business rose by
3.4% compared with the previous year to¥26.2 billion (US$244.0 million).

and the requirement introduced in April
2004 to display tax-inclusive prices has also
exerted a downward pressure on sales. In
this situation, we have made improving
customer satisfaction our ﬁrst priority andhave striven to create stores ﬁrmly rooted in
the local community. Even so, revenue
declined amid this tough environment.
In the drugstore business we opened
nine new stores, as well as closing eight
unproﬁtable outlets.
As a result, net sales in the StoreBusiness declined by 0.7% compared withthe previous year to ¥70.8 billion (US$659.7
million).

Glass & Materials

Other

Sales of glass for lighting purposes rose
thanks to increasing demand for small
lightbulbs for use in vehicles and for liquid
crystal display (LCD) backlights. Sales ofglass for pharmaceutical purposes such as
glass tubes for ampoule and vial fell,
however, owing to the impact of the current
switch away from glass materials. As a result,net sales in the Glass & Materials Businessdeclined by 1.9% compared with theprevious year to ¥11.7 billion (US$108.6
million).

Other sales are mainly of machinery for
manufacturing medical equipment and realestate rental income. This portion of net
sales declined by 20.6% compared with theprevious year to ¥1.1 billion (US$ 10.3
million).

Store
The Store Business is made up of foodsupermarkets and drugstores. The foodsupermarket business is becoming evenmore ﬁercely competitive amid the
protracted slump in individual consumption,

3,401
5,842

2003

5,078
4,216

2005

4,519
0

14,295

2001

2002

2004

The cost of sales rose by 2.1% comparedwith the previous year to ¥140.1 billion(US$1,304.3 million). The ratio of cost of sales
to net sales rose by 0.1 percentage point
year-on-year to 72.8%. Although we areworking to increase production eﬃciency,
we ware aﬀected by a drop in sales prices
by the inﬂuence of the reductions in the NHI
drug price standards and thereimbursement prices for speciﬁed medical

Capital expenditures (Millions of yen)

Net income (Millions of yen)
2001

Cost of Sales

1,000 2,000 3,000 4,000 5,000 6,000

2003

20,775

2004

14,5002005

16,3120

5,000

10,00015,00020,000

Selling, General and
Administrative Expenses
Selling, general and administrative expenses
rose by 7.3% compared with the previous
year to ¥41.8 billion (US$389.6 million). Oneof the main reasons for this rise is theincreased staﬀ costs and rental costs
stemming from the opening of new
drugstores since the previous year. Anotherreason is that the selling, general andadministrative expenses of a newconsolidated subsidiary are also
incorporated, and a portion of corporate
enterprise tax is now allocated as selling,
general and administrative expenses in linewith the introduction of the factor-based tax
system for corporate enterprise taxes (until
the previous year the entire sum wasallocated as income taxes). A further factor
in this increase is that we are continuing toenhance our sales, administration, and R&D
systems in the medical equipment andpharmaceutical ﬁelds.

Operating Income
As a result of the factors outlined above,
operating income declined by 17.1%
compared with the previous year to ¥10.4
billion (US$96.9 million). Operating incomesfor each business segment are given below.

Total assets (Millions of yen)
228,918

2001

17,166

2002

materials and supplies in Japan, and theincreasingly intense global sales pricecompetition. This resulted in a rise in theratio of cost of sales to net sales.

25,0002002

245,4032003

252,848

2004

279,701

2005

293,7490

100,000

200,000

300,000

24

Financial Review

MedicalThe impact of the intensifying pricecompetition as a result of the domestic
reduction in reimbursement prices for
speciﬁed medical materials and supplies, theinclusion of the loss of our newly
consolidated US subsidiary, and the eﬀects
of exchange rates, have together resulted ina decline in operating income of 8.9%
compared with the previous year to ¥11.0
billion (US$102.8 million).

Pharmaceutical
Within the Pharmaceutical Business, theeﬀect of the reductions in the NHI drug
price standards, combined with the costs
associated with strengthening ourorganizational structure in preparation for
the revisions to the Pharmaceutical Aﬀairs
Law in April 2005, have resulted in a decline
in operating income of 8.5% compared withthe previous year to ¥2.3 billion (US$21.1
million).

Glass & Materials
Net sales declined, but as a result of oureﬀorts to rationalize expenses operating
income rose by 3.9% compared with theprevious year to ¥1.9 billion (US$17.6
million).

Store
The food supermarket business saw adecline in net sales, but by our eﬀorts torationalize expenses we secured an
operating income in the same way as the

Shareholders’ equity (Millions of yen)
69,196

2001

2003

The operating proﬁt of “Other” declined
28.7% compared with the previous year to¥0.3 billion (US$2.7 million) owing todecreased revenue.

Eliminations/Corporate
Eliminations/Corporate consists mainly of
our R&D costs and headquarters
administration costs. The main factors were
the increased R&D costs and the inclusion of
corporate enterprise taxes, which resulted ina rise of 11.0% compared with the previous
year to ¥5.2 billion (US$48.3 million).

Income before Income Taxes
As a result of the factors outlined above,
income before income taxes rose by 7.7%
compared with the previous year to ¥8.7
billion (US$80.6 million).

Net Income
The eﬀective tax rate for corporate taxes
after the eﬀect of deferred tax accounting
was 49.0% this ﬁscal year compared with
47.9% for the previous year. Minority
interests saw a loss of ¥0.1 billion (US$1.0
million) this ﬁscal year. As a result, net
income rose by 7.2% compared with theprevious year to ¥4.5 billion (US$42.1
million).
Basic earnings per common share were¥69.4 (US$0.65) compared with ¥64.9 for theprevious year. Cash dividends per commonshare were ¥38.5 (US$0.36) compared with¥30.5 for the previous year.

Other Expenses

Financial Position

Other expenses, net of other income,decreased by 61.4% compared with theprevious year to ¥1.7 billion (US$16.2
million). The main factor in this decrease wasthe ¥0.2 billion (US$1.6 million) in exchange
gain recorded in ﬁscal 2004, compared with
¥1.4 billion in exchange loss for the previous
year. In addition, we recorded a proﬁt onsales of securities of ¥1.1 billion (US$10.3
million), in comparison with ¥0.1 billion forthe previous year.

Total assets as at March 31, 2005 stood at¥293.7 billion (US$2,735.3 million), a 5.0%
increase over the previous year. Current
assets increased by 8.3% over the previous
year to ¥135.4 billion (US$1,260.5 million).
The main factor in this increase was anincrease of ¥11.5 billion in cash and cash
equivalents owing to ﬁnancing for capital
investment.
Property, plant and equipment
increased by 5.1% compared with theprevious year to ¥98.8 billion (US$919.9

Basic earnings per share (Yen)

Number of employees

60.8
104.4

2003

6,818

2001

2002

83,533

84.3

2002

7,835

2003

8,029

2004

94,711

2004

64.9

2004

8,132

2005

96,700

2005

69.4

2005

8,617

0

25

Other

2001

76,0992002

previous year. In the drugstore business,
however, proﬁt declined signiﬁcantly owing
to the pressure exerted by staﬀ and rental
costs incurred by the opening of new stores.
As a result, operating income declined by
72.7% compared with the previous year to¥0.1 billion (US$1.1 million).

20,00040,00060,00080,000 100,000

0

20

40

60

80

100

120

0

2,000

4,000

6,000

8,000

10,000million). We made a capital investment of¥15.4 billion (US$143.3 million) in property,
plants and equipment. Capital investmentin property, plants and equipment
amounted to ¥5.3 billion (US$49.5 million) in
the Medical Business, ¥7.3 billion (US$67.5
million) in the Pharmaceutical Business, ¥1.4
billion (US$13.4 million) in the Glass &Materials Business, ¥0.9 billion (US$8.1
million) in the Supermarket Business, and¥0.5 billion (US$4.8 million) in other areas.
Investments and other assets declined
by 1.9% compared with the previous year to¥59.6 billion (US$554.9 million).
Current liabilities declined by 0.1%
compared with the previous year to ¥96.2
billion (US$896.2 million).
Long-term liabilities rose by 14.1%
compared with the previous year to ¥99.2
billion (US$923.7 million). The main factor
underlying this increase was an increase inlong-term loans of ¥12.0 billion to raise
plant and equipment funds.
Minority interests declined by 5.0%
compared with the previous year to ¥1.6
billion (US$15.0 million).
Shareholders’ equity rose by 2.1%
compared with the previous year to ¥96.7
billion (US$900.5 million). The main reason
for this rise was an increase of ¥1.6 billion inretained earnings.

Net cash provided by operating activities
rose by 12.3% compared with the previous
year to ¥17.5 billion (US$162.6 million).
Net cash utilized in investment activities
declined by 1.2% compared with theprevious year to ¥12.7 billion (US$117.6
million). In ﬁscal 2004 we reported proceedsof ¥1.7 billion (US$16.2 million) from sales ofavailable-for-sale securities, but owing toincreased payments of purchase of property,
plant and equipment we recorded a net
outward ﬂow of cash in the same way as theprevious year.
Net cash provided by ﬁnancial
activities declined by 32.0% compared withthe previous year to ¥7.0 billion (US$65.2
million). Proceeds from long-term loans roseby ¥18.5 billion in comparison with theprevious year, while repayment of bonds
amounted to ¥10.0 billion (US$93.1 million)
and proceeds from issuance of bonds
decreased to ¥3.0 billion (US$27.7 million)
from ¥13.9 billion for the previous year.

Cash Flow

Basic Policy on Distributionof Proﬁts

Cash and cash equivalents rose by 27.2%
compared with the previous year to ¥53.7
billion (US$500.4 million).

Shareholders’ equity ratio (%)

shareholders. Employees’ bonuses are
determined according to the businessperformance of the division to which theemployees belong, and bonuses for
directors and statutory auditors are
determined on the basis of the businessperformance.
Retained earnings are to be invested insales and production facilities as well as inresearch and development, with a view toestablishing the ﬁrm management basis andlong-term business developments, so as toensure stable proﬁts for the future.

Staﬀ
The total number of staﬀ (employees) as at
March 31, 2005 increased by 485 comparedwith the end of the previous year to 8,617.
The number of staﬀ in Japan increased by
56 to 4,194 and the number overseas
increased by 429 to 4,423.

Our policy is that 50% of non-consolidated
net income is to be distributed toReturn on assets (%)

Return on equity (%)
4.4

2001

30.2

2001

2002

31.0

2002

6.1

2002

6.0

2003

2003

33.0

2003

2004

33.9

2004

2005

32.9

2005

0

5

10

15

20

25

30

35

4.7
3.6
0

1

2

3

4

5

5.1

2001

6

7

8

8.0
6.4

2004

4.7

2005

4.7
0

1

2

3

4

5

6

7

8

26

Financial Review

Risk Factors
The following are risks that may have aneﬀect on the Nipro Group’ s results ofoperations or its ﬁnancial condition. The
items concerned were so adjudged as at theend of ﬁscal 2004.
(1) Risks Related to Product Safety
The Nipro Group brings all of its capabilities
to bear in securing product safety in thedesign, development and manufacturing
stages of medical equipment andpharmaceutical products. There is still therisk, however, that accidental defects or side
eﬀects could result in damages to a third
party and our being sued for liability.
To cover these risks, we therefore
maintain general liability and productliability insurance. In the unlikely event of a
successful claim in excess of the insurance
coverage, however, there could be amaterial adverse eﬀect on our results ofoperations and ﬁnancial condition.
(2) Risks Related to Supplier
Concentration
The Nipro Group procures materials andparts for its operations from a large numberof suppliers. Some key materials or parts
may be obtained only from a single supplieror a limited group of suppliers. If
circumstances at any of these suppliers
make it impossible for us to acquire a
suﬃcient quantity of materials or parts tomeet our production needs in a timely andcost-eﬀective manner, there could be amaterial adverse eﬀect on our results ofoperations and ﬁnancial condition.
(3) Risks Related to Changes in
Government Healthcare Policies
The business sector to which the Nipro
Group belongs is intimately connected withthe healthcare system and is subject to theregulations laid out by governmentorganizations, including the National Health
Insurance System and the PharmaceuticalAﬀairs Law. Should circumstances arise inwhich we were unable to respond tochanges in the environment brought about
by unforeseeable wholesale changes ingovernment healthcare policies, there could
be a material adverse eﬀect on our results ofoperations and ﬁnancial condition.
(4) Risks Related to Changes in Sale Prices
The products sold by the Nipro Group
include some that are, in general, subject
once every two years to the eﬀect of price27

reductions in the system of payment for
medical care, drug prices andreimbursement prices for medical materials
and supplies. Should measures to holddown medical costs also become pervasive
worldwide, resulting in intensiﬁed
competition between corporations andleading to prices falling to a greater degree
than anticipated, there could be a material
adverse eﬀect on our results of operations
and ﬁnancial condition.
(5) Risks Related to Changes in Prices of
Raw Materials
The products manufactured by the Nipro
Group include some that are made frompetrochemical products such as plastics.
Should the cost of raw materials such as
petrochemical products rise, leading toincreased procurement costs, there could bea material adverse eﬀect on our results ofoperations and ﬁnancial condition.
(6) Risks Related to Overseas Expansion
The Nipro Group maintains manufacturingbases and sales oﬃces around the world forthe production and supply of our products.
Should there be unexpected revisions tolegal regulations or political or economicchanges in these countries or regions, there
could be a material adverse eﬀect on our
results of operations and ﬁnancial condition.
(7) Risks Related to Intellectual Property
The Nipro Group owns numerous patents
and trademarks, and maintains various
proprietary rights for the products it
manufactures. Additionally, we take all
possible measures to avoid infringing thepatents and proprietary rights of any third
party, and to avoid breaching any license
agreements we have concluded concerningtechnologies. Nevertheless, if anunanticipated claim for damages were to bemade by a third party and the defense of
the Nipro group were to be rejected, there
could be a material adverse eﬀect on our
results of operations and ﬁnancial condition.
(8) Risks Related to Environmental
Regulations
The Nipro Group believes it has taken
adequate precautions to comply withapplicable regulations in the course of its
business activities. Should our activities
cause an unforeseen environmental
problem, however, with a claim for damages
made against us, there could be a material
adverse eﬀect on our results of operations
and ﬁnancial condition.

(9) Risks Related to Exchange Rate
Fluctuations
The Nipro Group, including its overseas
subsidiaries, carries out its foreign currencytransactions primarily in US dollars and euro,
but calculates ﬁnancial statements of its
overseas subsidiaries using Japanese yen forthe purpose of producing consolidated
ﬁnancial statements. Fluctuations in
exchange rates may therefore have amaterial adverse eﬀect on our results ofoperations and ﬁnancial condition.
(10) Risks Related to Investment Value
The Nipro Group’ s assets include
investments in stocks and other securities.
These investments have been made forpurposes such as building good business
relationships with the issuers of suchsecurities, or for gathering useful
information for the development of new
products or for new business opportunities.
Should the value of these investments
decline signiﬁcantly owing to ﬂuctuations inthe stock market, circumstances at an issuer,
or a change in the accounting methods
used to deal with these investments, there
could be a material adverse eﬀect on our
results of operations and ﬁnancial condition.
(11) Risks Related to Lawsuits
On June 24, 2002, Tomita PharmaceuticalCo., Ltd. ( “Tomita” ) ﬁled a lawsuit against
the Nipro Group alleging infringement of
their patent by Lympack and Lympack No. 3,
powdered dialysate solutions. We asserted
that Tomita’ s patent concerning powdereddialysate solution was invalid, and on
December 12, 2004 the Tokyo High Court
issued a ruling accepting our contention inits entirety. Tomita subsequently appealed
to the Supreme Court for this ruling to bereversed, but on March 29, 2005, theSupreme Court ruled that Tomita’ s appeal
be dismissed, accepting our contention inits entirety and conﬁrming the ruling of theTokyo High Court.
(12) Other Risks
Fire, earthquake, terrorist act, war, epidemic,
or other unforeseen man-made or natural
disasters aﬀecting areas or facilities where
the Nipro Group conducts its businessactivities may possibly cause a delay orinterruption in production, sales,
distribution, or provision of services. Shouldsuch a delay or interruption become
extended, there could be a material adverse
aﬀect on our results of operations andﬁnancial condition.

Five -Year Summary

Nipro Corporation and Consolidated Subsidiaries
Years ended March 31,

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

2005

2004

2003

2002

2001

2005

Income Statement Data:
Net Sales ............................................ ¥Medical ............................................
Pharmaceutical ................................
Glass and Materials ..........................
Store ...............................................
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses ....
Operating income ................................
Medical (1) .......................................
Pharmaceutical (1) ............................
Glass and Materials (1)......................
Store (1) ...........................................
Income before income taxes .................
Net income ..........................................
Capital expenditures .............................
Depreciation and amortization ...............
R&D expenses .....................................

192,320
82,504
26,207
11,667
70,841140,072
41,844
10,404
11,039
2,261
1,889
115
8,660
4,519
16,312
10,266
3,422¥

188,700
78,72725,33911,891
71,357137,153
38,99012,557
12,117
2,471
1,819
420
8,044
4,216
14,500
9,819
3,074

¥

180,370
76,00921,97911,06469,560128,776
36,695
14,89914,175
1,981
1,777
1,109
8,781
5,078
20,775
8,767
2,328

¥

171,217
77,572
15,946
11,23464,764122,092
34,69014,43515,016
1,104
1,806
1,037
11,617
5,842
17,166
7,215
2,553

¥

152,072 $ 1,790,856
66,413
768,266
14,120244,036
11,784
108,641
56,882659,661
110,608
1,304,330
31,735
389,644
9,729
96,882
11,913
102,794
844
21,054
1,773
17,589
20
1,071
6,641
80,641
3,401
42,08014,295
151,895
6,898
95,595
3,048
31,865

Balance Sheet Data:
Total assets ......................................... ¥Property, plant and equipment-net ........
Working capital ....................................
Current liabilities ..................................
Long-term liabilities ..............................
Common stock ....................................
Capital surplus .....................................
Shareholders’ equity.............................

293,749
98,78839,12396,242
99,19828,66329,972
96,700¥279,701
94,00528,57096,36486,932
28,66329,972
94,711¥

252,848
91,14727,542
88,88978,65728,66329,972
83,533¥

245,403
81,029
9,792
105,764
61,952
23,11324,43576,099¥228,918 $ 2,735,347
72,061
919,899
35,770364,308
74,995896,191
83,260923,717
22,563266,906
23,886
279,095
69,196
900,456
U.S. dollars (Note 1)

Yen

Per share data:
Basic earnings (2) ................................. ¥Diluted earnings (2) ...............................
Cash dividends ....................................
Shareholders’ equity.............................

69.4
—
38.5
1,519.6

¥

64.9
—
30.5
1,487.5

¥

84.3
78.5
32.0
1,310.7¥

104.4 ¥
92.4
47.0
1,343.7

60.8 $
54.3
31.0
1,236.6

Number of common shares issued .......
Number of employees ..........................

63,878,505
8,617

63,878,505
8,132

63,878,505
8,029

56,670,149
7,835

55,956,987
6,818

Selected Data and Ratios:
Shareholders’ equity ratio (3) (%) ..........
Return on assets (3) (%) .......................
Return on equity (3) (%) .......................
Price earnings ratio (times) ...................

32.9
3.6
4.7
25.6

33.9
4.7
4.7
24.1

33.0
6.0
6.4
21.5

31.0
6.1
8.0
17.4

30.2
4.4
5.1
16.5

0.65
—
0.36
14.15

Note:
(1) Operating income at the operating segment level is not adjusted for intra-segment transactions. See note 13 to the consolidated ﬁnancial statements.
(2) Effective April 1, 2002, the Company adopted a new accounting standard for earnings per share of common stock issued by the Accounting Standards
Board of Japan. Basic earnings and diluted earnings per share for the year ended March 31, 2003 and thereafter are computed in accordancewith the new standard. Basic earnings and diluted earnings per share for the prior years are not translated to reﬂect the new standard’s provision, based on the weighted
average number of outstanding shares for the period.
(3) Shareholders’ equity ratio is the ratio as of the period end of shareholders’ equity to total assets. Return on assets is the ratio of operating income for the period
to average total assets during the period. Return on equity is the ratio of net income for the period to average shareholders’ equity during the period.

28

Nipro Corporation and Consolidated Subsidiaries
As of March 31, 2005 and 2004

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

2005

2004

2005

AssetsCurrent assets :Cash and cash equivalents (Note 2) ..................................................... ¥ 53,735¥ 42,229$

500,372

Time deposits (Over three months) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,418

3,013

22,516

Trade notes and accounts receivable ..................................................

40,145

41,524

373,824

Allowance for doubtful receivables .......................................................

(210)

(209)

(1,955)Inventories (Note 3) .............................................................................

33,64932,541

313,335

Deferred income taxes (Note 10) .........................................................

2,204

1,735

20,523

Other current assets .................................................. . . . . . . . . . . . . . . . . . . . . . . . . .

3,424

4,101

31,884

Total current assets .....................................................................

135,365

124,934

1,260,499

Land ...................................................................................................

22,83922,456

212,673

Buildings .............................................................................................

84,93081,747

790,856

Machinery and equipment ...................................................................

80,54573,581750,023

Construction in progress .....................................................................

7,232

6,144

67,343

195,546

183,928

1,820,895

Accumulated depreciation ...................................................................

(96,758)(89,923)(900,996)

Property, plant and equipment-net ..............................................

98,78894,005919,899

and affiliate accounted for by the equity method (Note 2) ................

5,407

6,113

50,349Investment securities (Notes 2 and 6) ..................................................

36,30036,410338,020

Lease deposits ....................................................................................

11,514

11,774

107,217

Deferred income taxes (Note 10) .........................................................

238

194

2,216

Other ..................................................................................................

6,137

6,271

57,147

Total investments and other assets ..............................................

59,596

60,762554,949

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 293,749¥ 279,701$ 2,735,347

Property, plant and equipment (Note 2 and 7) :Investments and other assets:
Investment in unconsolidated subsidiaries

The accompanying notes are an integral part of these statements.

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

2005

2004

2005

Liabilities, minority interests and shareholders’ equity
Current liabilities:
Short-term bank loans (Note 4) ............................................................ ¥ 28,730
14,714Current portion of long-term debt (Note 4) ...........................................

¥ 27,246$

267,530

18,257137,015

Trade notes and accounts payable ......................................................

29,08429,048

270,826

Accrued income taxes .........................................................................

3,493

1,581

32,526

Accrued expenses................................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper (Note 4) ........................................ . . . . . . . . . . . . . . . . . . . . . . . . .

6,021

6,214

56,067

7,000

6,500

65,183

Other current liabilities .........................................................................

7,200

7,518

67,044

Total current liabilities....................................................................

96,24296,364896,191

Long-term liabilities:
Long-term debt (Note 4) ......................................................................

86,18374,184

802,524

Accrued pension and severance liabilities (Note 8)...............................

2,868

2,528

26,706

Deferred income taxes (Note 10) .........................................................

6,753

6,689

62,883

Other long-term liabilities .....................................................................

3,394

3,531

31,604

Total long-term liabilities...............................................................

99,19886,932

923,717

Minority interests .................................................................................
Commitments and contingent liabilities (Note 12)

1,609

1,694

14,983

28,663

28,663266,906

Capital surplus ....................................................................................

29,972

29,972

279,095

Retained earnings ................................................................................

32,182

30,610299,674

Unrealized gain on available-for-sale securities (Note 2 and 6) . . . . . . . . . . . . .

12,76012,462

118,819

Shareholders’ equity (Note 9):
Common stock ....................................................................................
Authorized: 200,000,000 shares
Issued : 63,878,505 shares

Foreign currency translation adjustments.............................................

(6,290)(6,490)(58,572)

97,287

95,217905,922(312,968 shares in 2005 and 264,938 shares in 2004) .....................

(587)

(506)

(5,466)

Total shareholders’ equity ..................................................................

96,70094,711

900,456

Total liabilities, minority interests and shareholders’ equity .............

¥ 293,749¥ 279,701$ 2,735,347

Less cost of common shares of treasury stock

The accompanying notes are an integral part of these statements.

Nipro Corporation and Consolidated Subsidiaries
For the years ended March 31, 2005 and 2004

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

2005

2004

2005

Net sales (Note 13): ............................................................................. ¥ 192,320¥188,700$1,790,856

Cost of sales ........................................................................................

140,072

137,153

1,304,330

Gross profit ........................................................................................

52,24851,547

486,526

Selling, general and administrative expenses
Operating income (Note 13) ................................................................

41,84438,990389,644

10,404

12,55796,882Other income (expenses) :Interest and dividend income ..............................................................
Interest expense (Note 4) ....................................................................

329

345

3,064

(1,594)(1,636)(14,843)

Loss on sale and disposal of property, plant and equipment-net . . . . . . . . . . . . .

(348)

(415)

(3,241)

Exchange gain (loss) .......................... . ................................................

174(1,429)1,620

Equity in loss of an affiliated company .................................................

(741)

(772)

(6,900)Gain on sale of available-for-sale securities (Note 6) . . .... . . . . . . . . . . . . . . . . . . . .

10,3181,108

140

Loss on devaluation of available-for-sale securities .. ..... . . . . . . . . . . . . . . . . . . . ..

—

(103)

—

Abnormal manufacturing cost .............................................................

(344)

(272)

(3,204)

Bond issue expense ...........................................................................

(20)

(78)

(186)

Bad debt loss .....................................................................................

—

(291)

—

Other income (loss)-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(308)

(2)

(2,869)

Income before income taxes ..............................................................

8,660

8,044

80,641

Current ...............................................................................................

4,901

3,766

45,638Deferred .............................................................................................

(654)

85

(6,090)Minority interests in income (loss) of consolidated subsidiaries ...

(106)

(23)

(987)

Net income .........................................................................................

¥ 4,519¥ 4,216$ 42,080

Income taxes (Note 10):

U.S. dollars(Note 1)

Yen

Amounts per common share (Note 2):
Basic earnings ....................................................................................

69.4

¥

64.9

$

0.65

—

—

—

Cash dividends ...................................................................................

38.5

30.5

0.36

The accompanying notes are an integral part of these statements.

31¥

Diluted earnings..................................................................................

Nipro Corporation and Consolidated Subsidiaries
For the years ended March 31, 2005 and 2004

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

2005

2004

2005

Opening balance -63,878,505 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 28,663¥ 28,663$ 266,906

Closing balance -63,878,505 shares ...................................................

¥ 28,663¥ 28,663$ 266,906

Opening balance .................................................................................

¥ 29,972¥ 29,972$ 279,095

Closing balance ...................................................................................

¥ 29,972¥ 29,972$ 279,095

Opening balance .................................................................................

¥ 30,610¥ 27,905$ 285,036

Net income ..........................................................................................

4,519

4,216

42,080of new subsidiary in consolidation ....................................................

1

—

10

Cash dividends paid ............................................................................

(2,862)(1,400)(26,651)

Bonuses to directors and statutory auditors.........................................

(86)

(111)

(801)

Closing balance ...................................................................................

¥ 32,182¥ 30,610$ 299,674

Opening balance .................................................................................

¥ 12,462¥ 2,851$ 116,044

Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

298

9,611

2,775

Closing balance ...................................................................................

¥ 12,760¥ 12,462$ 118,819

Opening balance .................................................................................

¥ (6,490)¥ (5,407)$ (60,434)

Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200(1,083)

1,862

Closing balance ...................................................................................

¥ (6,290)¥ (6,490)$ (58,572)

Common stock:

Capital surplus:

Retained earnings:

Increase in retained earnings due to inclusion

Unrealized gain on available-for-sale securities:

Foreign currency translation adjustments:

Treasury stock:
Opening balance .................................................................................

¥Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance ...................................................................................

(506)

¥

(81)
¥

(587)

(451)

$

(754)

(55)
¥

(506)

(4,712)$(5,466)

The accompanying notes are an integral part of these statements.

32

Nipro Corporation and Consolidated Subsidiaries
For the years ended March 31, 2005 and 2004

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

2005

2004

2005

4,519

¥ 4,216$ 42,080

10,266741
57(1,108)
—
(654)
413
348
135

9,819
772
(14)
(140)
103
85
502
415
461

95,595
6,900
531(10,318)—(6,090)
3,846
3,241
1,257

Changes in operating assets and liabilities:
Trade receivables .............................................................................
Inventories .......................................................................................
Other current assets ........................................................................
Trade payables ................................................................................
Accrued income taxes .....................................................................
Other, net ........................................................................................
Total adjustments.........................................................................
Net cash provided by operating activities .....................................

1,330(1,159)
(191)
76
1,913
776
12,943
17,462

1,094(1,515)(982)
2,172(1,039)(406)
11,327
15,543

12,385(10,792)(1,779)708
17,814
7,226
120,524
162,604

Investing activities:
Purchase of property, plant and equipment .....................................
Proceeds from sale of property, plant and equipment ......................
Purchase of available-for-sale securities ..........................................
Proceeds from sale of available-for-sale securities ...........................
Investment in unconsolidated subsidiaries ...........................................
Deposits (Over three months) ...........................................................
Other, net ........................................................................................
Net cash used in investing activities .............................................

(14,957)
206
(13)
1,737
(108)
564
(57)
(12,628)(13,146)
579
(15)
449
(526)
53
(180)
(12,786)(139,277)
1,918
(121)
16,175(1,006)
5,252(531)(117,590)

Financing activities:
Net increase (decrease) in short-term loans .....................................
Proceeds from long-term loans ........................................................
Repayment of long-term loans .........................................................
Proceeds from issuance of bonds ....................................................
Repayment of bonds .......................................................................
Reimbursement of the repayment money for convertible bonds*......
Net increase (decrease) in commercial paper ...................................
Cash dividends paid.........................................................................
Bonuses to directors and statutory auditors .....................................
Other, net ........................................................................................
Net cash provided by financing activities ......................................

1,484
24,600(9,144)2,980(10,000)—
500(2,858)
(86)
(474)
7,002

(1,764)
6,127(7,734)
13,922(2,000)4,108(500)(1,400)(111)(358)
10,29013,819229,072(85,148)
27,749(93,119)—
4,656(26,613)(801)(4,414)65,201

Effect of exchange rate changes on cash and cash equivalents ....
Net increase(decrease) in cash and cash equivalents .....................
Cash and cash equivalents, beginning of period (Note 2) ...............
Cash and cash equivalents of newly consolidated subsidiary, beginning of period.......
Cash and cash equivalents, end of period (Note 2) ..........................

(350)
11,48642,22920¥ 53,735(211)
12,83629,393¥ 42,229(3,259)106,956
393,230
186$500,372

Operating activities:
Net income .........................................................................................
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ..........................................................
Equity in loss of an affiliated company ..............................................
Allowance for doubtful receivables ...................................................
Gain on sale of marketable securities for investments ..........................
Loss on devaluation of marketable securities ...................................
Provision for deferred taxes ..............................................................
Exchange loss (gain) ........................................................................
Loss on sale and disposal of property, plant and equipment-net ..........
Other, net .........................................................................................

¥

The accompanying notes are an integral part of these statements.
Company had advanced the fund for repayment of convertible bonds to a bank on March 26, 2003. The fund was, however, partially reimbursed to the Company on April 15, 2003, because the*Theconversion of convertible bonds occurred after the deposit of the fund.

Nipro Corporation and its Consolidated Subsidiaries

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements are prepared fromthe consolidated financial statements issued for domestic reporting
purposes. Nipro Corporation (the “Company”) and its domestic
consolidated subsidiaries maintain their accounts and records inaccordance with the provisions set forth in the Japanese Securities andExchang Law and its related acounting regulations, and in conformity withgenerally accepted accounting principles and practices in Japan. Itsforeign subsidiaries maintain their accounts in conformity with those ofeach country of their domicile.
In preparing the accompanying consolidated financial statements,
certain reclassifications have been made to the consolidated financial
statements issued domestically in order to present them in a form which ismore familiar to readers outside Japan.

The presentation of consolidated statements of shareholders’ equity is not
required for domestic reporting purposes. It is, however, presented herein
for the readers’ convenience.
In addition, the notes to consolidated financial statements include
additional information which is not required under generally accepted
accounting principles and practices in Japan.Certain reclassifications havebeen made to the 2004 amounts to conform with the 2005 presentation.
The financial statements presented herein are expressed in Japanese
yen and, solely for the convenience of the reader, have been translated
into United States dollars at the rate of ¥107.39=US$1, the approximate
exchange rate on March 31, 2005. These translations should not be
construed as representations that the Japanese yen amounts actually are,have been or could be converted into U.S. dollar amounts.

2. Summary of Significant Accounting Policies(a) Basis of Consolidation
The consolidated financial statements include the accounts of theCompany and the following significant subsidiaries and affiliated company
accounted for by the equity method;
Nipro Medical Industries, Ltd.
Nipro (Thailand) Corporation Ltd.
Fuzhou Nipro Co., Ltd.
Nipro (Shanghai) Co., Ltd.
Nipro Medical LTDA.
Nipro Europe N.V.
Nipro Medical Corporation
Nipro Medical Panama S.A.
Nipro Medica de Mexico S.A. DE C.V.
Nipro Diabetes Systems, Inc.
Nipro Pharma Corporation
Shinwa Shoji Co., Ltd.
Shanghai Nissho Vacuum Flask Refill Co., Ltd.
Nissho Corporation
Nissho Drug Co., Ltd.
Bipha Corporation

*

**

*
**
Investment in unconsolidated subsidiaries and affiliates (20% to 50%

As from the year ended March 31, 2005, Nipro Diabetes Systems, Inc. has been includedin the consolidated financial statements.
Affiliate applied equity method

owned) are stated at cost and the equity method is not applied for thevaluation of such investments since they are considered immaterial in theaggregate.
The difference between the cost of investments in subsidiaries andaffiliates and the equity in their net assets at dates of acquisition in being
amortized over five years.
All significant intercompany balances and transactions have been
eliminated in consolidation. All material unrealized profit included in assets
resulting from transactions within the Company and its consolidated
subsidiaries is eliminated.
(b) Translation of Foreign Currencies
Balance sheets of consolidated overseas subsidiaries are translated into
Japanese yen at the current exchange rate as of the balance sheet date
except for shareholders’ equity, which is translated at the historical rate.
Income statements of consolidated overseas subsidiaries are translated into
Japanese yen at the average exchange rate for the period. Resulting
translation adjustments are shown as “Foreign currency translation
adjustments” in a separate component of shareholders’ equity.

(c) Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments, generally withoriginal maturities of three months or less, that are readily convertible to cash.
(d) Investment Securities
Investment securities are classified and accounted for, depending on
management’s intent, as follows:i) held-to-maturity debt securities, which are excepted to be held to maturity
with the positive intent and ability to hold to maturity are reported at amortized
cost; andii) Available-for-sale securities, which are not classified as the aforementioned
securities, are reported at fair value, with unrealized gains and losses, net of
applicable taxes, reported in a separate component of shareholders’ equity.
For the year ended March 31, 2005 there was no held-to-maturity debt
securities held by the Company.
Non-marketable available-for-sale securities are stated at cost determinedby the average method.
For other than temporary declines in fair value, investment securities are
reduced to net realizable value by a charge to income.
(e) Inventories
Inventories are stated principally at cost. Cost is determined principally by
the average method for the medical, pharmaceutical and glass andmaterials segment, except for certain inventories determined by the firstin, first-out method. Cost of inventories held by the store segment isdetermined principally by the retail method.
( f) Depreciation
Depreciation of property, plant and equipment of the Company and its
domestic subsidiaries is computed principally by the declining-balancemethod. The straight-line method is applied to buildings acquired by thedomestic companies after April 1, 1998, and is principally applied to theproperty, plant and equipment of foreign subsidiaries.
The range of useful lives is principally from 31 to 50 years forbuildings and from 7 to 12 years for machinery and equipment.
( g) Income Taxes
The provision for income taxes is computed based on income for financial
statement purpose. The asset and liability approach is used to recognize
deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for income tax purposes.

( h) Leases
Finance leases which are not considered to transfer ownership of theleased property to lessee are accounted for in the same manner as
operating leases in accordance with Japanese accounting standards forleases.
(i) Amounts per Common Share
Basic earnings per share is computed by dividing net income available tocommon shareholders by the weighted-average number of commonshares outstanding for the period. Diluted earnings per share reflects thepotential dilution that could occur if securities were exercised or converted
into common stock. Diluted earnings per share of common stock
assumes full conversion of the outstanding convertible notes and bonds atthe beginning of the year (or at the time of issuance) with an applicableadjustment for related interest expense, net of tax, and full exercise ofoutstanding warrants. For the year ended March 31, 2005, there was nocommon stock equivalents that have a dilutive effect.
Cash dividends per share presented in the accompanying
consolidated statements of income are dividends applicable to therespective years including dividends to be paid after the end of the period.

3. Inventories
Inventories consisted of the following:
Millions of yen

2005
Food and groceries ................................................................
Household goods ..................................................................
Medicine (in stores) .................................................................
Finished goods .....................................................................
Raw materials ......................................................................
Work in process ....................................................................
Packing and other ..................................................................

¥

698
3,665
1,457
21,038
3,625
2,042
1,124
¥ 33,649

Thousands of U.S. dollars (Note 1)

2004
¥

667
3,275
1,182
20,394
3,749
2,176
1,098
¥ 32,541

2005
$

6,500
34,12813,567
195,90333,75519,015
10,467$ 313,335

4. Short-Term Loans and Long-Term Debt
Short-term loans comprised overdrafts and promissory notes.
The interest rates of short-term bank loans and commercial paper as of March 31, 2005 and 2004 ranged from 0.013% to 3.000% andfrom 0.032% to 1.875%, respectively.
Long-term debt comprised the following:
Millions of yen

Zero coupon convertible bonds due 2023 ........................................
2.325% unsecured bonds due 2004 ..............................................
3.2% unsecured bonds due 2008 .................................................
3.0% unsecured bonds due 2006 .................................................
0.67% unsecured bonds due 2006 ...............................................
1.07% unsecured bonds due 2010 ...............................................
1.18% unsecured bonds due 2009 ...............................................
Loans, primarily from banks due 2005-2018, with interest ranging from
0.1500% to 10.64% ............................................................
Less current portion of long-term debt ............................................

In November 1997, the Company issued ¥10,000 million (US$93,119
thousand) of 2.325% unsecured bonds due 2004.
In June 1998, the Company issued ¥10,000 million (US$93,119
thousand) of 3.2% unsecured bonds due 2008.
In June 1998, the Company issued ¥10,000 million (US$93,119
thousand) of 3.0% unsecured bonds due 2006.
In March 2003, the Company issued ¥3,000 million (US$27,936
thousand) of 0.67% privately placed bonds due 2006.

Thousands of U.S. dollars (Note 1)

2005

2004

2005

¥ 14,000—
10,00010,000
3,000
3,000
3,000

¥ 14,000
10,00010,00010,000
3,000
3,000
—

$ 130,366—
93,11993,11927,93627,93627,93657,897(14,714)¥ 86,183

42,441(18,257)¥ 74,184

539,127(137,015)$ 802,524

In March 2003, the Company issued ¥3,000 million (US$27,936
thousand) of 1.07% privately placed bonds due 2010.
In July 2003, the Company issued ¥14,000 million (US$130,366
thousand) of zero coupon convertible bonds due 2023.
In July 2004, the Company issued ¥3,000 million (US$27,936
thousand) of 1.18% privately placed bonds due 2009.

The aggregate annual maturities of long-term debt outstanding at March 31, 2005 are as follows:
Millions of yen

Years ending March 31

2006 ...............................................................................
2007 ...............................................................................
2008 ...............................................................................
2009 and thereafter ...............................................................
As is customary in Japan, long-term and short-term bank loans are madeunder general agreements which provide that additional securities andguarantees for present and future indebtedness will be given under certain
circumstances at the request of the bank, and that any collateral so
furnished will be applicable to all indebtedness due to the bank.

Thousands of U.S. dollars (Note 1)

2005

2005

¥ 14,714
19,951
18,65147,581¥ 100,897$ 137,015
185,781
173,675
443,068$ 939,539

In addition, the agreements provide that the bank has the right to offset
cash deposits against any long-term and short-term bank loan that
becomes due, and in case of default and certain other specified events,
against all other loans payable to the bank. Such rights have never been
exercised by banks against the Company or its Consolidated Subsidiaries.

5. Leases
Information relating to finance leases, except for which the ownership of the leased property is considered to be transferred to the lessee.
The pro forma information of leased assets under finance leases that do not transfer ownership of the leased property to the lessee on an“as if capitalized” basis for the year ended March 31, 2005 and 2004 was as follows:
Millions of yen

Acquisition cost ..................................................................
Accumulated depreciation ......................................................
Net leased property .............................................................

2004

2005

¥ 7,237
4,940¥ 2,297¥ 9,435
6,456¥ 2,979$ 67,390
46,001$ 21,389

Millions of yen

Payments due within one year...................................................
Payments due after one year ....................................................

Thousands of U.S. dollars (Note 1)

2005

Thousands of U.S. dollars (Note 1)

2005

2004

2005

¥ 1,304984¥ 2,288¥ 1,162
2,371¥ 3,533$ 12,143
9,163$ 21,306

Lease payments under such leases for the year ended Mach, 2005 and 2004 were ¥1,317 million (US$12,264 thousand) and ¥2,150 million, respectively.

6. Investment Securities
Investment securities as of March 31, 2005, and 2004 consisted of the followings:
Millions of yen

Non-current:
Marketable:
Marketable equity securities ...............................................
Investment trust funds and other ..........................................

Sub total ....................................................................
Non-marketable securities ....................................................
Total .....................................................................

Thousands of U.S. dollars (Note 1)

2005

2004

2005

¥ 31,81055¥ 31,865¥ 4,435¥ 36,300¥ 31,93755¥ 31,992¥ 4,418¥ 36,410$ 296,210
512$ 296,722$ 41,298$ 338,020

The fair value of other investments, which are non-marketable securities, was not readily determinable as of March 31, 2005 and 2004.

The carrying amounts and aggregate fair values of marketable securities for investments as of March 31, 2005 and 2004 were as follows:
Millions of yen

2005
Available-for-sale securities
Equity securities ................................................
Debt securities and other ......................................
Total .........................................................

Cost

Unrealized Gain

¥ 11,78760¥ 11,847¥ 20,024—¥ 20,024

Unrealized Loss¥

Fair Value

1
5
6

¥

¥ 31,81055¥ 31,865

Thousands of U.S. dollars (Note 1)

2005
Available-for-sale securities
Equity securities ................................................
Debt securities and other ......................................
Total .........................................................

Cost

Unrealized Gain

$ 109,759
559$ 110,318$ 186,460—$ 186,460

Unrealized Loss$$

Fair Value

9
47
56

$ 296,210
512$ 296,722

Millions of yen

2004
Cost

Available-for-sale securities
Equity securities ................................................
Debt securities and other ......................................
Total .........................................................

¥¥

Unrealized Gain

12,41560
12,475¥

Unrealized Loss

19,527—
19,527¥¥¥

Fair Value

5
5
10¥ 31,93755¥ 31,992

Proceeds from sales of securities and gross realized gains on those sales for the year ended March 31, 2005 and 2004 were as follows:
Millions of yen

Thousands of U.S. dollars (Note 1)

2005
Proceeds .........................................................................
Gains on sales ...................................................................

¥

2004

1,737
1,108

¥

449
140

2005
$

16,175
10,318

7. Pledged Assets
The following assets were pledged as collateral:
Millions of yen

2005
Land ..............................................................................
Buildings .........................................................................
Notes receivable .................................................................
Certificate of deposit ............................................................

Thousands of U.S. dollars (Note 1)

2004

¥

6,011
8,773
1,551
165
¥ 16,500

¥

5,175
7,951
2,277
392
¥ 15,795

2005$

55,974
81,693
14,443
1,536$ 153,646

Bank loans due within one year and due after one year at March 31, 2005 and 2004 as collateral were as follows:
Millions of yen

2005
Bank loans due within one year .................................................
Bank loans due after one year ..................................................

¥
¥

3,676
4,411
8,087

Thousands of U.S. dollars (Note 1)

2004
¥
¥

4,015
5,120
9,135

2005
$
$

34,23041,07575,305

The carrying amounts and aggregate fair values of marketable securities for investments as of March 31, 2005 and 2004 were as follows:
Millions of yen

2005
Available-for-sale securities
Equity securities ................................................
Debt securities and other ......................................
Total .........................................................

Cost

Unrealized Gain

¥ 11,78760¥ 11,847¥ 20,024—¥ 20,024

Unrealized Loss¥

Fair Value

1
5
6

¥

¥ 31,81055¥ 31,865

Thousands of U.S. dollars (Note 1)

2005
Available-for-sale securities
Equity securities ................................................
Debt securities and other ......................................
Total .........................................................

Cost

Unrealized Gain

$ 109,759
559$ 110,318$ 186,460—$ 186,460

Unrealized Loss$$

Fair Value

9
47
56

$ 296,210
512$ 296,722

Millions of yen

2004
Cost

Available-for-sale securities
Equity securities ................................................
Debt securities and other ......................................
Total .........................................................

¥¥

Unrealized Gain

12,41560
12,475¥

Unrealized Loss

19,527—
19,527¥¥¥

Fair Value

5
5
10¥ 31,93755¥ 31,992

Proceeds from sales of securities and gross realized gains on those sales for the year ended March 31, 2005 and 2004 were as follows:
Millions of yen

Thousands of U.S. dollars (Note 1)

2005
Proceeds .........................................................................
Gains on sales ...................................................................

¥

2004

1,737
1,108

¥

449
140

2005
$

16,175
10,318

7. Pledged Assets
The following assets were pledged as collateral:
Millions of yen

2005
Land ..............................................................................
Buildings .........................................................................
Notes receivable .................................................................
Certificate of deposit ............................................................

Thousands of U.S. dollars (Note 1)

2004

¥

6,011
8,773
1,551
165
¥ 16,500

¥

5,175
7,951
2,277
392
¥ 15,795

2005$

55,974
81,693
14,443
1,536$ 153,646

Bank loans due within one year and due after one year at March 31, 2005 and 2004 as collateral were as follows:
Millions of yen

2005
Bank loans due within one year .................................................
Bank loans due after one year ..................................................

¥
¥

3,676
4,411
8,087

Thousands of U.S. dollars (Note 1)

2004
¥
¥

4,015
5,120
9,135

2005
$
$

34,23041,07575,305

8. Accrued Pension and Severance Liabilities
The Company and certain consolidated subsidiaries have defined benefit
pension plans and unfunded retirement benefit plans for employees.
Effective April 1, 2000 the Company and its consolidated
subsidiaries adopted a new accounting standard for employees’
retirement benefits and accounted for the liability for retirement benefits

based on the projected benefit obligations and plan assets at thebalance sheet date.
The transitional obligation of ¥519 million determined as of April 1,
2000 is amortized over five years and presented as other expense in theincome statement.

The following table sets forth the changes in projected benefit obligation, plan assets and funded status of the Company and its consolidated subsidiaries at
March 31, 2005 and 2004.
Millions of yen

1) Projected benefit obligation at end of year ................................
2) Fair value of plan assets at end of year ....................................
3) Projected benefit obligation in excess of plan assets 1)+2) . . . . . . . . . . . . .
4) Unrecognized actuarial (gain) loss .........................................
5) Unrecognized transition obligation at date of adoption ..................
6) Accrued pension and severance liabilities 3) + 4) + 5)

Thousands of U.S. dollars (Note 1)

2005

2004

2005

¥ (9,134)
6,367¥ (2,767)(101)—¥ (2,868)¥ (8,794)
5,795¥ (2,999)
367
104¥ (2,528)$ (85,054)
59,289$ (25,765)(941)—$ (26,706)

The breakdown of net pension and severance costs for the years ended March 31, 2005 and 2004 were as follows:
Millions of yen

Thousands of U.S. dollars (Note 1)

2005
Service cost ......................................................................
Interest cost ......................................................................
Expected return on plan assets .................................................
Amortization:
Retirement benefit obligation at transition ...................................
Actuarial losses ..............................................................
Net periodic benefit cost ........................................................

¥

594
218
(87)

104
223
¥ 1,052

2004
¥

601
215
(73)

104
394
¥ 1,241

2005
$

$

5,531
2,030
(810)
—
968
2,077
9,796

The assumptions used in the accounting for the above benefit plans were as follows:

Discount rate .............................................................................
Expected rate of return on plan assets .................................................
Amortization period for transition obligation at date of adoption .......................
Amortization period for actuarial gain / loss ............................................

2005

2004

Primarily 2.5%
1.5%
5 years
5 years

Primarily 2.5%
1.5 %5 years
5 years

9. Shareholders’ Equity
25% of common stock.
(i) Japanese companies are subject to the Japanese Commercial Code (the“Code”).
The amount of total additional paid-in capital and legal reserve which
The Code requires that all shares are recorded with no par value andexceeds 25% of stated capital can be transferred to retained earnings by
at least 50% of the issue price of new shares is required to be recorded as
resolution of the shareholders, which may be available for dividends. The
common stock and the remaining net proceeds as additional paid-in
Company’s additional paid-in capital was presented as capital surplus
capital, which is included in capital surplus.
and legal reserve, which was included in retained earnings, amounted to
The Code allows Japanese companies to repurchase treasury stock¥1,196 million(US$11,137thousand) at both March 31, 2005 and 2004.
by a resolution of the Board of Directors, if authorized by the Articles ofUnder the Code, the amount legally available for dividends is based
Incorporation. Accordingly, in order to be able to execute flexible capitalon retained earnings as recorded in the Company’s book. At March 31,
strategies, the Company established a new article on repurchase of2005, retained earnings available for future dividends amounted totreasury stock authorized by the resolution of the shareholders at the¥38,012 million(US$353,962 thousand).
general shareholders meeting on June 29, 2004. The repurchased(ii) The following appropriation of retained earnings was approved byamount of treasury stocks can not exceed the amount available for future
the Shareholders’ Meeting held on June 29, 2005.
dividend plus amount of common stock, additional paid-in capital or legal
reserve to be reduced, in the case where such reduction was resolved atThousands ofthe general shareholders meeting.
Millions of yen
U.S. dollars (Note 1)
The Code also provides that an amount at least equal to 10% of theaggregate amount of cash dividends and certain other appropriations ofCash dividends paid ................
¥ 826$ 7,692
retained earnings associated with cash outlays applicable to each period
Bonuses to directors andshall be appropriated as a legal reserve(a component of retained earnings)
106987
statutory auditors ...............
until the total amount of such reserve and additional paid-in capital equals

8. Accrued Pension and Severance Liabilities
The Company and certain consolidated subsidiaries have defined benefit
pension plans and unfunded retirement benefit plans for employees.
Effective April 1, 2000 the Company and its consolidated
subsidiaries adopted a new accounting standard for employees’
retirement benefits and accounted for the liability for retirement benefits

based on the projected benefit obligations and plan assets at thebalance sheet date.
The transitional obligation of ¥519 million determined as of April 1,
2000 is amortized over five years and presented as other expense in theincome statement.

The following table sets forth the changes in projected benefit obligation, plan assets and funded status of the Company and its consolidated subsidiaries at
March 31, 2005 and 2004.
Millions of yen

1) Projected benefit obligation at end of year ................................
2) Fair value of plan assets at end of year ....................................
3) Projected benefit obligation in excess of plan assets 1)+2) . . . . . . . . . . . . .
4) Unrecognized actuarial (gain) loss .........................................
5) Unrecognized transition obligation at date of adoption ..................
6) Accrued pension and severance liabilities 3) + 4) + 5)

Thousands of U.S. dollars (Note 1)

2005

2004

2005

¥ (9,134)
6,367¥ (2,767)(101)—¥ (2,868)¥ (8,794)
5,795¥ (2,999)
367
104¥ (2,528)$ (85,054)
59,289$ (25,765)(941)—$ (26,706)

The breakdown of net pension and severance costs for the years ended March 31, 2005 and 2004 were as follows:
Millions of yen

Thousands of U.S. dollars (Note 1)

2005
Service cost ......................................................................
Interest cost ......................................................................
Expected return on plan assets .................................................
Amortization:
Retirement benefit obligation at transition ...................................
Actuarial losses ..............................................................
Net periodic benefit cost ........................................................

¥

594
218
(87)

104
223
¥ 1,052

2004
¥

601
215
(73)

104
394
¥ 1,241

2005
$

$

5,531
2,030
(810)
—
968
2,077
9,796

The assumptions used in the accounting for the above benefit plans were as follows:

Discount rate .............................................................................
Expected rate of return on plan assets .................................................
Amortization period for transition obligation at date of adoption .......................
Amortization period for actuarial gain / loss ............................................

2005

2004

Primarily 2.5%
1.5%
5 years
5 years

Primarily 2.5%
1.5 %5 years
5 years

9. Shareholders’ Equity
25% of common stock.
(i) Japanese companies are subject to the Japanese Commercial Code (the“Code”).
The amount of total additional paid-in capital and legal reserve which
The Code requires that all shares are recorded with no par value andexceeds 25% of stated capital can be transferred to retained earnings by
at least 50% of the issue price of new shares is required to be recorded as
resolution of the shareholders, which may be available for dividends. The
common stock and the remaining net proceeds as additional paid-in
Company’s additional paid-in capital was presented as capital surplus
capital, which is included in capital surplus.
and legal reserve, which was included in retained earnings, amounted to
The Code allows Japanese companies to repurchase treasury stock¥1,196 million(US$11,137thousand) at both March 31, 2005 and 2004.
by a resolution of the Board of Directors, if authorized by the Articles ofUnder the Code, the amount legally available for dividends is based
Incorporation. Accordingly, in order to be able to execute flexible capitalon retained earnings as recorded in the Company’s book. At March 31,
strategies, the Company established a new article on repurchase of2005, retained earnings available for future dividends amounted totreasury stock authorized by the resolution of the shareholders at the¥38,012 million(US$353,962 thousand).
general shareholders meeting on June 29, 2004. The repurchased(ii) The following appropriation of retained earnings was approved byamount of treasury stocks can not exceed the amount available for future
the Shareholders’ Meeting held on June 29, 2005.
dividend plus amount of common stock, additional paid-in capital or legal
reserve to be reduced, in the case where such reduction was resolved atThousands ofthe general shareholders meeting.
Millions of yen
U.S. dollars (Note 1)
The Code also provides that an amount at least equal to 10% of theaggregate amount of cash dividends and certain other appropriations ofCash dividends paid ................
¥ 826$ 7,692
retained earnings associated with cash outlays applicable to each period
Bonuses to directors andshall be appropriated as a legal reserve(a component of retained earnings)
106987
statutory auditors ...............
until the total amount of such reserve and additional paid-in capital equals10. Income Taxes
The Company and its domestic subsidiaries are subject to Japanesenational and local taxes based on income which, in aggregate, resulted ina normal statutory tax rate of approximately 41.9% and 40.5% for the year
ended March 31, 2005 and 2004, respectively.

The significant components of deferred tax assets and liabilities were as follows:
Thousands of U.S. dollars (Note 1)

Millions of yen

Deferred tax assets
Operating loss carry forwards for tax purposes ......................
Intercompany profits ....................................................
Allowance for bonuses to employees .................................
Accounts receivable ..................................... . . . . . . . . . . . . . . .
Accrued pension and severance liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued corporate enterprise taxes ..................... . . . . . . . . . . . . . .
Other .....................................................................
Gross deferred tax assets .................................................
Less: Valuation allowance .................................................
Total deferred tax assets ..................................................
Deferred tax liabilities
Unrealized gain on available-for-sale securities ..........................
Other ........................................................................
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2005

2004

2005

¥ 2,099
479
571
360
1,083
330
785
¥ 5,707(1,741)¥ 3,966¥ 1,739
430
587
247
901
140
941
¥ 4,985(1,634)¥ 3,351$¥ 8,119158¥ 8,277¥ (4,311)¥ 7,910201¥ 8,111¥ (4,760)$

19,546
4,460
5,317
3,352
10,085
3,073
7,309$ 53,142(16,212)$ 36,930
75,603
1,471$ 77,074$ (40,144)

Reconciliation of the differences between the statutory tax rates and the effective income tax rates was as follows:

Statutory tax rate .....................................................................................................................
Expenses not deductible for tax purposes .......................................................................................
Non-taxable dividend income .....................................................................................................
Loss in subsidiaries ...............................................................................................................
Other ...............................................................................................................................
Effective tax rate ......................................................................................................................

2005

2004

40.5%
2.0
(0.3)
6.2
0.6
49.0%

41.9%
2.3
(0.8)
3.5
0.5
47.9%

11. Research and Development Expenses
Research and development expenses for the year ended March 31, 2005 and 2004 were ¥3,422 million (US$31,865 thousand) and ¥3,074million, respectively.

12. Commitments and Contingent Liabilities
The Company and Consolidated Subsidiaries have the following commitments and contingent liabilities:
Millions of yen

2005
Liabilities for guarantees .......................................... ..............
Export drafts discounted .......................................................

¥
¥

2,183
76
2,259

¥
¥

Thousands of U.S. dollars (Note 1)

2004

2005

2,728
51
2,779

$ 20,328
708$ 21,036

13. Segment Reporting
The Company and Consolidated Subsidiaries are primarily engaged in thebusiness consisting of four major segments: medical equipment,
pharmaceutical products, glass and material products and store. The
Company is organized into operating segments based on the market natureof products.
The medical segment manufactures and sells disposable medical
equipment. Their medical equipment sold includes dialyzers, dialysis-related
devices, and injection-related products.
The pharmaceutical segment manufactures and sells a range ofpharmaceutical products and devices, such as prescribed specialized anddiagnostic products for hospital use, and medical equipment incorporating
solutions and drugs, such as pre-filled syringes and infusion kits.
The glass and materials segment sells internal glass sections for vacuum
flasks, glass tubes for ampoule and vial production, glass tube vials and otherglass products.
The store segment encompasses a supermarket business and adrugstore business. The store segment sells fresh and daily foods, generalgrocery, household goods, medicine and other merchandise.
The sales of “Other” include the sales of machinery for manufacture of
medical equipment and real estate rental income.

Business segment information for the year ended March 31, 2005 and 2004 was as follows:
Millions of yen

2005
Net sales:
Outside .............................
Intersegment .......................
Total ................................
Cost and expenses ...................
Operating income .....................
Identifiable assets .....................
Depreciation ...........................
Capital expenditures . . . . . . . . . . . . . . . . . .

MedicalPharmaceutical

Glass &
Materials¥ 82,504
876¥ 83,380
72,341¥ 11,039¥ 86,062
4,407
6,056

¥ 26,207—¥ 26,207
23,946¥ 2,261¥ 56,557
3,450
7,269

¥ 11,667
2,384¥ 14,051
12,162¥ 1,889¥ 13,825
631
1,452

Store

Other

Total

¥ 70,841—¥ 70,841
70,726¥115¥ 42,960
1,170
1,006

¥ 1,101553¥ 1,654
1,366
¥
288
¥
858
26
2

¥192,320
3,813¥196,133
180,541¥ 15,592¥200,262
9,684
15,785

Eliminations /Corporate

Consolidated¥192,320——¥ (3,813)¥ (3,813) ¥192,320
1,375 (1) 181,916¥ (5,188) ¥ 10,404¥ 93,487 (2) ¥293,749
582
10,266527
16,312Thousands of U.S. dollars (Note 1)

2005
Net sales:
Outside .............................
Intersegment .......................
Total ................................
Cost and expenses ...................
Operating income .....................
Identifiable assets .....................
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures ..................

Eliminations /Corporate

MedicalPharmaceutical

Glass &
Materials$768,266
8,157$776,423
673,629$102,794$244,036—$244,036
222,982$ 21,054$ 108,641
22,199$130,840
113,251$ 17,589$659,661—$659,661
658,590$ 1,071$ 10,252
5,150$ 15,402
12,719$ 2,683$1,790,856
35,506$1,826,362
1,681,171$ 145,191— $1,790,856—$ (35,506)$ (35,506) $1,790,856
12,803 (1) 1,693,974$ (48,309) $ 96,882$801,397
41,03756,393$526,650
32,126
67,688$128,736
5,876
13,521$400,037
10,8959,368$$1,864,810
90,176
146,988$870,537 (2) $2,735,347
5,419
95,595
4,907
151,895

Store

Other

Total

7,990
242
18

Consolidated

Millions of yen

2004
Net sales:
Outside .............................
Intersegment .......................
Total ................................
Cost and expenses ...................
Operating income .....................
Identifiable assets .....................
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . .

MedicalPharmaceutical

Glass &
Materials

Store

Other

Total

Eliminations /Corporate

Consolidated¥ 78,727
639¥ 79,366
67,249¥ 12,117¥ 83,785
3,834
5,232

¥ 25,339—¥ 25,339
22,868¥ 2,471¥ 54,037
3,638
6,747

¥ 11,891
2,357¥ 14,248
12,429¥ 1,819¥ 13,208
630
625¥ 71,357—¥ 71,357
70,937¥420¥ 43,103
1,164
1,451

¥ 1,386597¥ 1,983
1,579¥
404¥ 1,15532
4¥ 188,700
3,593¥ 192,293
175,062¥ 17,231¥ 195,288
9,298
14,059—¥ (3,593)¥ (3,593)
1,081 (1)
¥ ( 4,674)¥ 84,413 (2)521441¥ 188,700—¥ 188,700
176,143¥ 12,557¥ 279,701
9,819
14,500Note:(1)Cost and expenses of “Eliminations / Corporate” for the year ended March 31, 2005 and 2004 included unallocated corporate costs of ¥5,188 million ($48,309 thousand) and¥4,674 million, respectively. Their unallocated corporate costs consisted primarily of research and development costs and headquarters administration costs.
(2)Assets of “Eliminations / Corporate” at March 31, 2005 and 2004 included ¥93,563million ($871,245thousand) and ¥84,558 million of corporate assets, respectively,
consisting primarily of cash and cash equivalents, investment securities, research and development-related equipment and headquarters administration-related assets.

The information by geographic area for the year ended March 31, 2005 and 2004 was as follows:
Millions of yen

2005
Japan

Net sales:
Outside ...............................................
Intersegment .........................................
Total ...................................................
Cost and expenses ......................................
Operating income (loss) .................................
Identifiable assets .......................................

¥ 175,328
12,262¥ 187,590
171,827¥ 15,763¥ 179,626

America*

Europe**

¥

¥

9,791
384
¥ 10,175
10,699(524)¥¥ 8,838¥¥¥

Eliminations /Corporate

Asia***

5,816
4
5,820
6,167
(347)
3,056

—
¥ (22,663)¥ (22,663)(17,412) (1)¥ (5,251)¥ 84,322 (2)

¥

1,385
10,013¥ 11,398
10,635¥763¥ 17,907

Consolidated¥ 192,320—¥ 192,320
181,916¥ 10,404¥ 293,749

Thousands of U.S. dollars (Note 1)

2005
Net sales:
Outside ...............................................
Intersegment .........................................
Total ...................................................
Cost and expenses ......................................
Operating income (loss) .................................
Identifiable assets .......................................

Japan

America*

Europe**Asia***$1,632,629
114,182$1,746,811
1,600,028$ 146,783$1,672,651$ 91,172
3,576$ 94,748
99,627$ (4,879)$ 82,298$ 54,15837$ 54,195
57,426$ (3,231)$ 28,457$ 12,897
93,240$106,137
99,031$ 7,106$166,747

Eliminations /Corporate

Consolidated—$ (211,035)$ (211,035)(162,138) (1)$ (48,897)$ 785,194 (2)$1,790,856—$1,790,856
1,693,974$ 96,882$2,735,347

Eliminations /Corporate

Consolidated

Millions of yen

2004
Net sales:
Outside ...............................................
Intersegment .........................................
Total ...................................................
Cost and expenses ......................................
Operating income (loss) .................................
Identifiable assets .......................................

Japan

America*

Europe**Asia***¥176,374
9,609¥185,983
169,172¥ 16,811¥174,610¥ 4,707378¥ 5,085
5,265¥ (180)¥ 6,081¥ 5,92227¥ 5,949
5,833¥
116¥ 3,346¥ 1,697
8,471¥10,168
9,756¥ 412¥17,210—¥ (18,485)¥ (18,485)(13,883) (1)¥ (4,602)¥ 78,454 (2)¥188,700—¥188,700
176,143¥ 12,557¥279,701

Note:(1) Cost and expenses of “Eliminations / Corporate” for the year ended March 31, 2005 and 2004 included unallocated corporate costs of ¥5,188 million ($48,309 thousand) and¥4,674 million, respectively. The unallocated corporate costs primarily of research and development costs and headquarters administration costs.
(2) Assets of “Eliminations / Corporate” at March 31, 2005 and 2004 included ¥93,563 million ($871,245 thousand) and ¥84,558 million of corporate assets, respectively,
consisting primarily of cash and cash equivalents, investment securities, research and development-related equipment and headquarters administration-related assets.
(3) America* : The United States of America and Brazil
Europe** : Belgium
Asia*** : China and Thailand

Sales to foreign customers were as follows:
Millions of yen

2005
America

Export sales and sales byoverseas subsidiaries ...................... ¥ 29,954
Percentage of such sales against
15.6%
consolidated net sales .....................

Europe¥ 18,314

¥

9.5%

2004
Asia

Total

America

Europe

Asia

Total

5,234

¥ 53,502¥ 21,136¥ 18,862¥ 5,425¥ 45,423

2.7%

27.8%

11.2%

10.0%

2.9%

24.1%

Thousands of U.S. dollars (Note 1)

2005
America

Export sales and sales byoverseas subsidiaries ..................... $278,927
Percentage of such sales against
15.6%
consolidated net sales ....................

Europe

Asia

Total

$170,537$ 48,738$498,202

9.5%

2.7%

27.8%

To the Board of Directorsof Nipro Corporation

We have audited the accompanying consolidated balance sheets of Nipro Corporation and 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, all expressed in Japanese yen.
These consolidated financial statements are the responsibility of Nipro Corporation’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards, procedures and practices generally
accepted and applied in Japan. Those standards require that we plan and perform the audit to obtainreasonable 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 estimates madeby 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 consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Nipro Corporation and consolidated subsidiaries as of March
31, 2005 and 2004 and the consolidated results of their operations and their cash flows for the years thenended in conformity with accounting principles and practices generally accepted in Japan.

Osaka, Japan
July 31, 2005
Tomei Audit Corporation

Board of Directors and Auditors (As of June 29, 2005)

President

Minoru Sano *Senior Managing Director

Shigeki Tanaka
Manufacturing technology / R&D division

Managing Director

Managing Director

Seiya Ishida

Shuichi Tsuzuki

International division

Domestic division

Director

Director

Masato Naganami

Noriaki Watanabe

Glass & material development divisionInternational division

Director

Director

Akihiko Yamabe

Kazuo Wakatsuki

Accounting & Corporate planning divisionInternational division

Director

Director

Hiroshi Ikeuchi

Hiroyuki Hattori

Human resource / General aﬀairs division

Research & Development Laboratory

DirectorStanding Statutory Auditor

Makoto Sato

Hiroshi Kobayashi

Pharmaceutical Research Center
Director

Yoshihiko Sano

Statutory Auditor

Shigeru Kobayashi

Domestic division

Statutory Auditor

Director

Masamichi Wada

Masataka Yanai
Medical Administration Division

43* Representative Director

(As of March 31, 2005)

Common Stock
Authorized
200,000,000 shares
Issued63,878,505 shares
Outstanding
63,565,537 shares
Number of Shareholders
12,030Date of Establishment
July 8, 1954
Head Office
3-9-3 Honjo-nishi, Kita-ku, Osaka 531-8510, Japan
Telephone: +81-6-6372-2331
Facsimile : +81-6-6375-0669
http://www.nipro.co.jp/english/

Stock Listings
Tokyo Stock Exchange, Osaka Securities Exchange
Ticker Codes: 8086

Tokyo Office
4-3-4 Hongo, Bunkyo-ku, Tokyo 113-0033, Japan
Telephone: +81-3-5684-5611
Facsimile : +81-3-5684-5610

Transfer Agent (As of June 30, 2005)
Mizuho Trust & Banking Co., Ltd.
2-11-16, Sonezaki, Kita-ku, Osaka 530-0057, Japan

Number of Employees

Stock Price Range (Tokyo Stock Exchange)

Parent company .............................................. 1,844
Consolidated subsidiaries .................................... 6,773
Total ........................................................... 8,617

(Yen)
2,500

2,000

2,000

1,500

1,500

Principal Shareholders
Number ofPercentage ofShares Held Total Shares in(in thousands)
Issue (%)

Sanri Kosan Co., Ltd. ................................. 12,920
Japan Trustee Services Bank, Ltd. (Trust Account) ....... 7,236
The Master Trust Bank of Japan, Ltd. (Trust Account) .... 4,642
Trust & Custody Service Bank, Ltd. (Trust Account) ...... 2,704
Minoru Sano........................................... 1,993
Resona Bank Limited ................................. 1,380
829
The Dai-ichi Mutual Life Insurance Company ..........
782
Mizuho Corporate Bank, Ltd. ..........................
The Chase Manhattan Bank, N.A. London
738
S.L. Omnibus Account ................................
583
JP Morgan Chase Bank 385050 ......................
33,808
Total

20.23
11.33
7.27
4.23
3.12
2.16
1.30
1.23

1,000

500

0

12

3

6

2003

9

12

3

6

9

2004

2005

1.16
0.91
52.93

Subsidiaries and affiliates (As of June 30, 2005)
Area

Asia

CountryJapan

Thailand
China

America

EuropeSingapore
BrazilU.S.A.
PanamaMexicoPuerto Rico
U.S.A.
BelgiumCompany

Nipro Medical Industries,Ltd.
Nipro Pharma Corporation
Nipro Genepha Corporation
Tohoku Nipro Pharmaceutical Corporation
Shinwa Shoji Co.,Ltd.
Nissho Corporation
Nissho Drug Co.,Ltd.
Nissho Insurance Services Co.,Ltd.
Bipha Corporation*
Nipro (Thailand) Corporation Ltd.
Fuzhou Nipro Co.,Ltd.
Nipro (Shanghai) Co.,Ltd.
Nipro Trading (Shanghai) Co.,Ltd.
Shanghai Nissho Vacuum Flask Refill Co.,Ltd.
Nipro Asia Pte. Ltd.
Nipro Medical LTDA.
Nipro Medical Corporation
Nipro Medical Panama S.A.
Nipro Medica de Mexico, S.A. DE C.V.
Nipro Medical Puerto Rico Inc.
Nipro Diabetes Systems, Inc.
Nipro Europe N.V.

Note: (1) *Affiliate applied equity method(2) Sanri Kosan Co.,Ltd., an Affiliate Company, manages rental of real property estate.

Segment

MedicalPharmaceuticalPharmaceuticalPharmaceutical
Glass & Materials
Store
Store
Other
Pharmaceutical
Medical
Medical
Medical
MedicalGlass & Materials
Medical
Medical
Medical
Medical
Medical
Medical
Medical
Medical12

Principal business

Manufacturing
Manufacturing and Marketing
Manufacturing and Marketing
Manufacturing
Manufacturing and Marketing
Supermarket management
Drugstore management
Insurance agency
R&D and Manufacturing
Manufacturing and Marketing
Manufacturing and Marketing
Manufacturing and Marketing
Marketing
Manufacturing and Marketing
Marketing
Manufacturing and Marketing
MarketingMarketingMarketingMarketing
R&D and Marketing
Marketing

3

NIPRO CORPORATION
3-9-3 Honjo-nishi, Kita-ku, Osaka 531-8510, Japan
Telephone: +81-6-6372-2331
Facsimile : +81-6-6375-0669
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Printed with environmentallyfriendly soy ink.

Printed on 100% recycled paper.