Annual Report 2007
Year Ended March 31, 2007

Reaching for the Future

ProﬁleReaching
for the Future
Since its founding in 1954, the Nipro Grouphas enjoyed continuing growth thanks to thetrust it has achieved worldwide through the
manufacture and sale of medical equipment
and high-value-added pharmaceuticals. Key
themes that propel our ongoing growth are
the dedicated pursuit of technology thathelps improve the quality of life of patientsand the development of original products inline with our corporate philosophy ofcontributing to society throughtechnology-oriented business activities.
The Nipro brand has an extensive
following both in Japan and overseas, andour equipment has earned a strong
international reputation for the advanced
technologies it employs, as well as theC o n t e n t s
1 Profile
2 Consolidated Financial Highlights
3 To Our Shareholders and Other Investors
Business Activity Report
Manufacturing System
7
Sales and Maketing
9
Research and Development
11
Review of Operations
Medical Equipment Business13
Pharmaceutical Business
15
Glass & Materials Business17
18 News & Highlights
19 Corporate Governance
21 Board of Directors and Auditors
22 Financial Section 2007

1

resulting product quality. The Nipro Group’s
efforts have been recognized through its
ranking among the leading names in theJapanese generic pharmaceutical industry
for number of product lines marketed.
The Nipro Group researches anddevelops highly functional and safe medical
equipment, as well as replacement
equipment and reconstruction technology
for all organs and bodily systems, including
artificial kidneys, hearts, lungs, pericardia,
skin and blood. We are on our way toreaching our goal of becoming one of theworld’s top manufacturers of artificialorgans.

Consolidated Financial Highlights

Nipro Corporation and its consolidated subsidiaries
Years ended March 31, 2007 and 2006

Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

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

¥ 184,363
13,053
8,555
23,093
12,4704,461¥ 206,801
12,332
4,513
20,874
12,3153,760$ 1,561,737
110,572
72,469195,621
105,633
37,789At year-end:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 336,660
125,651¥ 338,741
112,391$ 2,851,843
1,064,388¥¥$

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

134.7

69.6

1.14

-

-

-

80.0
1,979.2

37.5
1,767.7

0.68
16.77

The U.S. dollar amounts in this report represent translations of Japanese yen, for convenience only, at the rate of ¥118.05=US$1, the approximate exchange rate on March 31, 2007.

Net Sales (Millions of yen)
2003
2004
2005
2006
2007

Operating Income (Millions of yen)
180,370
188,700
192,320
206,801
184,363

Net Income (Millions of yen)
2003
2004
2005
2006
2007

2003
2004
2005
2006
2007

14,89912,557
10,404
12,332
13,053Return on Equity (%)
5,078
4,216
4,519
4,513
8,555

2003
2004
2005
2006
2007

6.4
4.7
4.7
4.3
7.2

Disclaimer regarding Forward-looking Statements
This report contains forward-looking statements regarding business indices, strategies and performance representing the expectations
and judgments of the management, based on information available to the Company and publishable at the time this report was
prepared. When reading this report, please understand that forward-looking statements involve potential risks and uncertainties;
actual future business performance and forecasts may therefore differ materially from those contained in these statements, given thepossible emergence of new factors or changes in economic circumstances and/or the business environment.

2

To Our Shareholders and Other Investors

Having ﬁnished construction of thebusiness foundations designed toestablish us as a leading global
manufacturer, now we areconcentrating on meeting our
FY2010 targets.
Overview of Activities andOperating Performance
Pursuing Measures to Prepare theFoundations for Our Next Leap Forward
During FY2006 (the year ended March 31, 2007),
ongoing Japanese government initiatives to stem
rising medical costs resulted in increasingly
severe price competition in the medical carebusiness. Market fluctuations caused sales
competition for general-purpose medical
equipment to increase overseas, as well.
In this operating environment, the Nipro
Group concentrated on developing new

Minoru Sano
President

3

Net sales and capital investments(Millions of yen)
12,00011,466160,000

10,520140,000

10,17010,000

9,624
9,171

120,000

7,814

7,772

8,000

7,250

100,000

6,709

77,57280,00076,00997,30090,86882,50478,7276,000

66,41360,00040,00020,0000

Net sales:

42,152

14,120

2000

4,000

35,220

3,617
2,847

5,314

4,976

3,665

15,946

2001

Medical Equipment Business

21,9792002
Pharmaceutical Businessproducts, expanding sales, raising production
efficiency and extending its operational bases. At
the same time, in the area of general-purpose
products, we pursued the management strategy
of raising our market share by offering
inexpensive, quality mass-produced items andpromoting measures to become a leading global
manufacturer.
In our mainstay Medical Equipment
Business, we constructed an integrated
production system to expand our core businessin dialyzers. In an area we are cultivating as asecond business pillar, in April 2005 we acquired
the artificial lung business of Dainippon Ink andChemicals, Incorporated. In December 2006, we
also bought an artificial lung business from theBrazilian affiliate of Edwards Lifesciences
Corporation. These acquisitions are in line with
the Nipro Group’s efforts to develop its artificiallung business on a global scale.
In the Pharmaceutical Business, during
FY2006 we included into our scope of
consolidation Zensei Pharmaceutical Industries
Co., Ltd., which manufactures and sells solid
formulations, in a bid to expand our pharmaceuticalproduct business. The Nipro Group also enteredinto cooperation with Nichi-Iko Pharmaceutical Co.,
Ltd., with a view to expansion in generic drugs,
which are on the way to becoming a pillar of
support for the pharmaceutical product segment.
To focus our management resources on the
medical equipment and pharmaceutical fields, wetransferred our shares in consolidated
subsidiaries that handled the Store Business andpulled out of retail operations entirely.

26,20725,3392003

2004

Capital investments:

2,000

2005
Medical Equipment Business

2006

0

Pharmaceutical BusinessAs a result of these efforts, during FY2006
the Nipro Group posted consolidated net sales of¥184.4 billion, down 10.9 % from the previous year
because of our discontinuation of the StoreBusiness. Operating income rose 5.9%, to ¥13.1
billion, and net income surged 89.6%, to ¥8.6
billion, benefiting from a gain on sale ofinvestments in consolidated subsidiaries.

Management Strategies andCapital Investment Plans
Aggressive Capital Investment to Raise
Dialyzer Production Capacity to 60 Million
Units, Becoming the World’s Leading
Manufacturer
As medium-term management goals, the Nipro
Group has announced financial objectives that it
intends to achieve by FY2010: consolidated net
sales of ¥200 billion, ordinary income of ¥20
billion and return on equity of 10%. Our
previously announced sales target was ¥300
billion. However, we have revised that figure
downward as a result of the sale of our StoreBusiness. Our income targets, however, remainunchanged.
Achieving these targets will require the
Nipro Group to emerge a victor for global costcompetition in the field of general-purpose
medical products. We are pursuing ongoing cost
cuts through mass production to meet our goals.
Raising annual dialyzer production to 60
million units is one key to meeting our targets for4

To Our Shareholders and Other Investors

FY2010. By manufacturing in-house the hollow
fibers that are a principal dialyzer component, we
will raise quality and reduce costs. Ultimately, we
expect this effort to earn us the leading positionin this industry. Simultaneously, we are extending
our overseas sales network. In the medical
equipment field, we are cultivating global
products to expand our artificial lung business.
In the pharmaceutical field, we are focusing
on two pillars of activity with relation to
manufacturing and selling pharmaceuticalproducts: contract manufacturing ofpharmaceuticals and the production and sales ofgeneric drugs. Supporting these two businessfocuses, we have created systems that enable us
to manufacture a variety of pharmaceuticals on aconsignment basis.
We aim to enhance our cost competitivenessby improving quality and cost performance inJapan as well as by developing our business inoverseas markets.
To achieve our goals, in FY2006 we madecapital investments totaling ¥21.8 billion. Of thisamount, we invested ¥10.2 billion in the Medical
Equipment Business to enhance our dialyzer
production facilities and ¥9.2 billion related tofreeze-dried drugs and pharmaceutical ingredientrefinement. In FY2007, we plan capital
investments of ¥25.5 billion as we continue toexpand our capacity to manufacture suchmainstay products as medical equipment andpharmaceutical products.

Forecast for FY2007
Planning for Robust Improvement of
Operating Performance
In FY2007, we expect the economic environment
to remain challenging, as the Japanese economy
reacts to sharply higher crude oil prices andinterest rate increases. We also anticipate major
swings in currency exchange rates. In thisenvironment, the Nipro Group will continue
working to improve its operating performance byfocusing on new product development andenhancing its production and sales prowess ineach of its businesses.
We expect consolidated net sales to decline
12.1% in FY2007, to ¥162.0 billion, as the resultof our sale of the Store Business. Meanwhile, we
anticipate an 8.0% rise in operating income, to¥14.1 billion, as we expand business in products
related to artificial organs. Absent theextraordinary gain that we recorded in FY2006
from the sale of the Store Business, in FY2007
we expect net income to decline 22.9%, to ¥6.6
billion.
I thank our shareholders and other investors
for your confidence to date, and ask for yourcontinued support.

August 2007

Dividend Policy
Aiming for a 50% Payout Ratio
On a non-consolidated basis, the Nipro Groupaims for a cash dividend payout ratio of 50%.
While using retained earnings to strengthen ourmanagement structure and develop longer-termbusiness, we invest these funds aggressively in
our sales, production and research anddevelopment departments with the aim of
ensuring stable future profits.
In line with this income distribution
philosophy, the Nipro Group awarded interim
dividends of ¥43 per share and a year-end
dividend of ¥37, bringing the total for the fiscal
year to ¥80. In the upcoming fiscal year, as well,
the Company plans to pay dividends inaccordance with its policy of a 50%
non-consolidated payout ratio.

5

Minoru Sano
President

Business Activity Report

Our Three Growth Focuses

Bu s i n es s Act ivit y Report
7 Manufacturing System
9 Sales and Maketing
11 Research and Development

Manufacturing System

Production Capacity
We have taken measures signiﬁcantly to improve quality and reinforce production
capacity to lay foundations for the Nipro Group as a leading manufacturer ofMedical Equipment and Pharmaceuticals.

Bolstering Production for a System
Capacity of 60 Million Dialyzers
As a specialist manufacturer of medical
equipment and pharmaceuticals, we are carryingout business development that targets
world-class levels in terms of quality, volume andcost. Our mainstay products, dialyzers, are thelinchpin to these endeavors. Targeting the top
world market share for dialyzers, during FY2006
we established a production system for hollow
fibers at our Odate factory and built an integrated
system from materials through to productdevelopment and manufacturing, facilitating
enhanced quality control and an improved
product lineup tailored to customer needs. Suchin-house manufacturing initiatives also hone ourcompetitive edge in terms of costs.
In the future, our policy is to further raise
dialyzer production capacity. Having reachedannual production capacity of 35 million units at
the end of FY2006, we are aiming for 47 million
units by the end of FY2007, with a view toachieving our target for annual production
capacity of 60 million units in the near future. The
global market we aim to dominate currently
consumes 160 million units per year. Promotionof technological development is propelling us
toward our goal of a 60-million-unit annual
production system with more stable, lower-cost
manufacturing.

Reinforcing our Production System
and Contract Manufacturingin the Pharmaceutical BusinessIn line with the 2005 Pharmaceutical Affairs Law
revisions, original drug manufacturers arerationalizing management and increasing
outsourced production. As a result, contract
manufacture business is expanding. On the other
hand, generic drugs are noticed in the field of
medical treatment , accompanied by thegovernment’s efforts to hold down healthcare
costs in Japan. We consider that the growth ofcontract manufacture business and generic drug
marketing are key factors in the growth of ourpharmaceutical business and we are pursuing an
aggressive expansion strategy. Competition onthese businesses is entering a global arena, so weneed to boost competitiveness in terms of both
quality and costs, for imminent expansion into theworld market, as well as the domestic market.

Odate factory (NIPRO CORPORATION)

7

Over the past few years, the Nipro Grouphas pursued an aggressive policy of mergers andacquisitions of companies with strengths in theoral drugs field. In 2004, we acquired Takeshima
Pharmaceutical Co., Ltd. (renamed Nipro
Genepha Corporation), and in 2005 we took over
the Kagamiishi Factory (Fukushima Prefecture)
and Tohoku Chugai Pharmaceutical Co. Ltd.,
from Chugai Pharmaceutical Co.,Ltd., to establish
Tohoku Nipro Pharmaceutical Corporation.
Further, we have acquired a stake in Yuki Gosei
Kogyo Co., Ltd., establishing a full-scale
manufacturing system from active pharmaceuticalingredients/intermediates onward. In April 2006,
we acquired shares in Zensei PharmaceuticalIndustries Co., Ltd., a medium-size generic drug
company with a strong performance record andconverted the company to a subsidiary. These
measures have bolstered the oral drug production
capacity of the Group overall to 4 billion pills ormore annually. Tohoku Nipro is considering a newplant design and is planning to raise production
capacity in the near future.
The Nipro Group is already a leader inJapan of contract manufacturing of
injectable products and oral drugs. In
the future, we plan to extend contract
manufacturing beyond its mainstay
sector of injectable products to form a
responsive production system forvarious types of drugs, thus

consolidating our position as an industry leader incontract manufacture operations.
Having previously strengthened ourrelationship with Tanabe Seiyaku Co., Ltd., byacquiring shares in the company, in FY2006 theNipro Group commenced contract manufacturingof their injectable products. In the future, we shallbuild various cooperative relationships that
include the contract manufacturing of oral
preparations, paving the way for the developmentof new business models that are responsive todrug supply and contract manufacturing with theentry of new pharmaceutical firms into thegeneric market.

Odate factory (NIPRO PHARMA CORPORATION)

8

Sales and Maketing

Closeness
We are aggressively establishing sales locations overseas to boost theperformance of Nipro brand medical equipment. Meanwhile, we are emphasizing
generic drug sales and contract manufacturing in Japan.

Better Utilizing Our Upgraded
Global Sales Network
We are developing the Nipro Group’s overseas
operations through original equipment manufacturing(OEM) and sales of the Nipro brand products.
Specifically, we have been reinforcing sales ofCompany-brand products by upgrading overseas
branches to local company status, while simultaneously
establishing new branches and companies,
accompanied by an escalated conversion of marketing
to direct sales. Aggressive competitiveness is aprerequisite for participation in overseas markets. We
are raising our market share and deepening
penetration of the Nipro brand through meticulous
services tailored to local conditions. These objectives
will be achieved by unifying sales and manufacturing in
the development and supply of high-quality productsthat are attuned to customer needs.
The Nipro Group opened
new sales locations in the
United Kingdom,
Russia andGuatemaladuring
FY2005,9followed by France, South Africa, India, Thailand and
Honduras during FY2006, also upgrading the United
Arab Emirates sales branch to a local
corporation. Through such initiatives, wehave boosted the Group’s overseas
network to 41 locations, including four
production sites in Thailand, Brazil
and China that complement our
production base in Japan.
During FY2007, we plan toconstruct a distribution center in
the United States, as well as
establishing locations in Philippines,
Uruguay, Brazil (Sao Paulo) and North
Africa (Tunisia). Moreover, planning isunderway for the opening of a branch inGermany, Europe’s largest market, to consolidate
our direct-sales system in the European market.

Nipro Group Network (As of June 30, 2007)
Brussels (Belgium)

Breda (The Netherlands)

Moscow (Russia)

Warsaw (Poland)Peterborough (U.K.)

Beijing (China)

Paris (France)
Madrid (Spain)

Osaka ( Japan)

Milan (Italy)

Shanghai (China)
Calcutta (India)

Miami (U.S.A.)
Mexico City (Mexico)
Puerto Rico
Guatemala City (Guatemala)Tegucigalpa (Honduras)
Managua (Nicaragua)

Istanbul (Turkey)
Riyadh (Saudi Arabia)

New Delhi (India)
Headquarters
Principal Sales Locations
Principal Factories
R&D

San Salvador (El Salvador)

Chennai(India)Dubai (U.A.E.)

Mumbai (India)[ Japan ]Additional factories

Bogota (Colombia)

Singapore

Sao Paulo (Brazil)

Lima (Peru)

Bangkok (Thailand)
Johannesburg (South Africa)

Panama City (Panama)

San Jose (Costa Rica)
San Carlos (Ecuador)

Ayuthaya (Thailand)

Buenos Aires (Argentine)

Santiago (Chile)

R&D

Nipro Corporation Research & Development Laboratory
Nipro Corporation Odate Factory
Nipro Corporation Pharmaceutical Research Center
Nipro Medical Industries, Ltd.
Nipro Pharma Corporation Shirokita Factory
Nipro Pharma Corporation Shiki Factory
Nipro Pharma Corporation Ise Factory
Nipro Pharma Corporation Odate Factory
Nipro Genepha Corporation
Tohoku Nipro Pharmaceutical Corporation
Zensei Pharamaceutical Industries Co., Ltd.
Saitama Daiichi Pharmaceutical Co., Ltd. Kasukabe Factory
Saitama Daiichi Pharmaceutical Co., Ltd. Hanyu Factory

Nipro’s Pharmaceutical BusinessCentered on Generic Drug Sales andContract Manufacturing
The Nipro Group’s Pharmaceutical Business is
supported by two pillars: generic drug sales andcontract manufacture. The former is conducted
through a Nipro Genepha sales route targetingsmall to medium-size hospitals and clinics.
Complemented by this approach is a nationwide
distributor sales channel to university and otherfoundation hospitals by Nipro Pharma. Through thisdual sales approach we promote deeper market
penetration of the Nipro brand.
Over the past few years, we have radically
expanded our contract manufacture of oral andinjectable drugs, including through mergers andacquisitions. This strategy has transformed thescope of our contract manufacture operations from
simple drug production to a contract manufacturingsystem that is responsive to the various needs ofclients of consignment contracts.
Currently, the Nipro Group’s contract
manufacturing is almost entirely aimed at domestic
companies, but the future expansion of contract
manufacture will include non-domestic companies
targeting the domestic market.

[ Overseas ]Sales Locations

Factories

Asia
11 locations

Asia
2 locations

America
14 locations

America
2 location

Europe10 locations

R&D

Africa1 location

America
1 location

Boosting Sales Staff andEnhancing Our Brand Image
Qualified Medical Representatives (MRs) are crucial
in selling pharmaceutical products. Since the MR
certification system was introduced in Japan, theNipro Group has encouraged all its sales personnel—spanning medical equipment as well as
pharmaceutical sales sections—to acquire MR
accreditation as part of its drive to nurture humanresources with specialized knowledge. We havebeen putting this strength to use in medical
equipment sales by supplementing agent sales withdirect visits by sales personnel to large hospitals
and other potential sites to cultivate new customers.
As system products with medical equipment andpharmaceutical components grow in importance,
we will build up our MR activities and reinforce ouracademic efforts to support future sales.

10Research and Development

UniquenessTo optimize our dual strengths in Medical Equipment and Pharmaceuticals,
we are accelerating our high-value-added product development through the fusionof these two technologies, aggressively expanding the scope of our R&D andstrengthening our research system.

11

Fortifying Our Artiﬁcial Lung
(Oxygenator) Operations

Development ofOriginal Pharmaceuticals

Aiming to be a world-leading manufacturer ofartificial organs, the Nipro Group, which holds adominant world market share for equipment related
to artificial kidneys (dialysis), promotes thedevelopment of artificial hearts, artificial bloodvessels and artificial pericardia.
In addition to boosting artificial kidneys as thecornerstone for expansion in the field of artificialorgans, recently the Nipro Group has been placing
strategic emphasis on its artificial lung business. To
this end, in 2005 we acquired the extracorporeal
membrane oxygenator department of Dainippon Ink
and Chemicals, Incorporated, with productioncommencing in FY2006. Furthermore, the Nipro
Group is pushing forward with research anddevelopment for its proprietary artificial heart-lungsystem based around the oxygenator. Development
themes for post-perfusion circuits that are vital for
cardiac surgery include reservoirs, in addition tocentrifugal pumps and related cannula. We are also
developing a percutaneous cardiopulmonary
support system (PCPS) that aids the heart andlungs.
In December 2006, we acquired business
operations relating to cardiopulmonary systems
from Edwards Lifesciences Comercio e Industria deProdutos Medico-Cirurgicos Ltda. (Edwards CPP),
the Brazil-based affiliate of Edwards Lifesciences
Corporation. By inheriting Edwards CPP’s lineup of
artificial heart-lung related products and sales
channels extending over approximately 40
countries, the Nipro Group steps up a level in its
worldwide artificial heart-lung business.

The Nipro Group is promoting development andexpanding its lineup of kit-form preparations that
contribute to improving the quality of healthcare interms of safety, hygiene and operating efficiency.
During FY2006, we gained approval for two
ingredients and three items of pre-filled syringe kit
preparations that render unnecessary the shift fromvials or ampoules and which we plan to market
during FY2007. Applications for sales andmanufacturing approval of three ingredients andseven items are still pending. Furthermore, we aredeveloping double-chamber type pre-filled syringe
kit preparations* and plan to apply for production
and sales approval for two items during FY2007. We
have commenced sales of our ready-to-use“liquid/powder” double bag kit preparation (three
new antibiotic items), with one further item underdevelopment and earmarked for production andsales approval application in the next year. In

Oxygenator
December 2006, the Nipro Group acquired a
cardiopulmonary business from Edwards Lifesciences.
Our cardiopulmonary business has been a main player inthe ﬁeld for 48 years by offering sophisticated products
and well organized distribution channels. Our oxygenator“VITAL” for adult has a unique concept that heat-exchanger
is located inside the venous reservoir. It achieves low priming
volume, low share stress and low macrobubble, andhas been favorably operated by perfusionists
and doctors all over the world.
In the spring of 2007, theNipro Group has launched an
oxygenator “Thymus”. “Thymus”
can be used for both pediatric andinfant. The unique concept is also
adopted as same as “VITAL”. the Nipro
Group delivers our products with safety andquality to our customers.

addition, we have commenced development of
pre-mixed bag preparations that reduce medical
error through advance dilution of
fixed-concentrations drug solutions.
The Nipro Group is also intensifying
development in the expanding areas of generic andoral drugs. We have added two new ingredients to
our low-dose specification drugs targeting geriatric,
functionally impaired and other patients with
reduced renal and drug
metabolizing functions,bringing the total to
five ingredients, with
one additional
ingredientmarketed during
FY2006 andanother withapplication for

production and sales underway. Marketing of oral
preparations for FY2006 featured five ingredientsand eight items, with a production and sales
approval gained for a further three ingredients andsix items. New production and sales approval
applications covered 10 ingredients and 17 items,with plans to apply for a further easy-to-take oral
preparation during FY2007. Nipro is also working topromote new technological research on oral formsof drugs that are difficult to absorb in the digestive
tract, as well as drugs that highlight its ingenuity.
* Double-chamber type pre-ﬁlled kit preparation: a drug
unstable in solution is kept in powder form separately from thesolution, yet in the same syringe, to be dissolved only whenneeded for use.

Steady Progress of R&D in the Fieldof Advanced Healthcare
The Nipro Group is promoting research anddevelopment to project its advanced healthcaretechnologies into the next era. In the field of medical
equipment, during FY2006 we developed andmarketed a basket catheter that is temporarily
inserted into blood vessels to eliminate or trap
intravascular obstructions. This development, which
enhances the safety of interventional therapy, has
drawn widespread praise from hospitals. We havealso gained successive development breakthroughsin the field of regenerative medicine, spanningculture bags for cell culture and preservation,
cryopreservation bags, nerve-regeneration tubes
and pericardial regeneration membrane.
In the Pharmaceutical Business, affiliate Bipha
Corporation has been involved in preparations forthe marketing of recombinant human serum
albumin (rHSA), and through joint research with
university research bodies, the Nipro Group is
steadily progressing toward realizing applications in
DDS preparations, including as anti-cancer drugs.
Blood substitutional research in collaboration
with academia and industry has spawned an artificial
oxygen carrier comprising hemoglobin-encapsulating
liposomes. This has been designated a Ministry of
Health, Labor and Welfare project, and developments
are underway for construction of a production facility
for drugs undergoing clinical trials. We are also
promoting a joint research project with university
institutes, to develop artificial oxygen carriers usingsynthetic heme and recombinant hemoglobin notderived from human blood.

12

Review of Operations

Market Overview
During FY2006, National Health Insurance (NHI) pricerevisions came into force and the Japanese government
introduced five new classifications for dialyzers, theNipro Group’s mainstay product. The new classifications
were based on dialyzer’s performance in removing
low-molecular protein, ß2 microglobulin. As part of thegovernment’s efforts to curtail healthcare expenditures,
reimbursement prices were revised downward
substantially, amounting to more than 30% on somelines. In this environment, hospital groups’ joint
procurement of consumables intensified sales
competition with other companies, exacerbated by pricecuts, resulting in harsh market conditions.
Overseas, the move toward inclusive pricing
progressed with the objective of curtailing healthcare
expenses and price competition in the sales of medical
equipment grew increasingly severe. Also contributing
to this building pressure were increasingly aggressive
marketing efforts by general medical productmanufacturers in developing countries.

Responses and Results

MedicalEquipment
Business
13

In Japan, the Nipro Group upgraded sales efficiency
and reinforced its sales team. Furthermore, wedeveloped new products in such fields as dialysis,
circulatory organ therapy, injection/infusion and medical
testing, and progressed toward the market launch ofthese products. At the customer proposal stage, weaggressively promoted sales of customized productpackages that include related products, as opposed tosingle-item deals. These initiatives expanded market
share and increased net sales.
In the international arena, the Nipro Group’s
vigorous efforts over the past few years to strengthen
direct sales systems in Europe, the Americas and BRICs
countries bore fruit. During FY2006, we attained growth insales in Latin America and Asia, primarily attributable toperformance by dialysis-related products. During theyear, we also continued to reinforce our sales system forthe future, forming a local corporation in Dubai, United
Arab Emirates, in April 2006. This step was followed by
the establishment of successive sales locations: Nipro

AVF
The Nipro Group has been recognized as one of the world
largest dialysis product manufacturers with the concept
of continuous product development. As a part of thisproduct development, the Nipro Group has
developed the new arterial venous ﬁstula needle
with safety function “SAFETOUCH TULIP™ AVF”.
In summer of 2007, the Nipro Group has launched“SAFETOUCH TULIP™ AVF” which has a concept of“easy to use for clinic technician” and “Comfortablefor patients” in the United States of America and will bemarketed in all over the world for the improvement of thequality of medical both for patients and clinic technician.

Dialyzer
The Nipro Group has been recognized as leading company of
the world dialyzer manufacturers for many years. The Nipro
Group has been manufacturing CTA dialyzers “FB/SUREFLUX™
series” for over 25 years. Recently the Nipro Group haslaunched the PES dialyzers “SURELYZER™
PES series”, and has steadily developed
the market share of the synthetic
dialyzers in the world. In the
result, the Nipro Group has soldthe CTA and PES dialyzers allover the world. In June,
2007, the Nipro Group haslaunched the new low ﬂux
series of CTA, “SUREFLUX™-N
series” and PES
dialyzers, ”PUREFLUX™-L
series”.

Medical (India) Pvt Ltd. in November 2006; Nipro South
Africa Pty Ltd. in December 2006; and Nipro Sales(Thailand) Co., Ltd. in January 2007.
We are stepping up our marketing strategies
against general medical products made in developing
countries. As the marketing efforts of general-purpose
medical product manufacturers in developing countries
grow more aggressive and because their products areadequate for their respective markets in terms of
quality, our success in to provide guidance on productquality for manufacturers of Nipro brand products hasboosted our market share. The artificial lung
(oxygenator) business of Edwards CPP, which we
acquired in December 2006, has commenced and is
expanding sales in various countries. In sales of
dialysis-related products, Nipro brand products clearly
outperformed our existing sales of OEM products interms of net and unit sales.
During FY2006, reinforcement of direct sales
systems in Europe, the Americas, BRICs countries andother regions contributed to a rise in net sales ofMedical Equipment of 7.1% from the preceding year, to¥97.3 billion. Operating income grew 6.7%
year-on-year, to ¥14.3 billion.

OutlookDuring FY2007, the environment both in Japan andoverseas is expected to see ongoing competition, withrival companies continuing to vie for market share.
In a bid to win greater market share in Japan, we
will focus on reinforcing development and sales of new
product lines that meet market needs, led by dialyzers,
blood lines for dialysis, dialysis machines and otherrelated products in the dialysis field. We will bolster our
lineup of circulatory-organ-related products throughdevelopment and introduction of PTCA balloon
catheters, blood-clot trapping device, stents and otherequipment, which combined with promotion of market

development and sales capacity expansion should
secure gains in market share. We also aim to expand
our market share for such injection/infusion-related
products as catheters and syringes, while developing
nutrition-related products, aggressively expanding ourmarkets and bolstering sales capacity. The Nipro Groupwill pursue greater market share for medical testingproducts by boosting sales of blood collection tubes.
Internationally, markets for our major products stillrequire further expansion and stable supply, so we willcontinue to reinforce our sales network to cover all
markets. The Nipro Group is investigating theestablishment of three or four new overseas sales
locations to supplement the current total of 37. In termsof dialysis-related products, we plan to boost
production of such highly performance models as PES
hollow-fiber dialyzers to attain our goal of the top shareof the world dialyzer market, with anticipation of sales
start-up during FY2007. Furthermore, supply of highly
reliable dialysis machines is vital for sales expansion ona global scale. In a collaborative arrangement, we
agreed to sell highly reliable dialysis machines
manufactured by Nikkiso Co., Ltd., through the
Nipro Group’s overseas sales channels. Thisinitiative facilitates further overseas sales
expansion. Although conditions for our major
OEM products are harsh, as similar models flood
the market, we are focusing on raising ourcompetitiveness and expanding sales. We areemphasizing the securing and training of
personnel as indispensable elements in keeping
pace with market expansion, as well as expansionof sales and marketing. In addition, we willcontinue to impose strict quality control for both
Nipro brand and OEM products.
The Nipro Group will continue to improveand enhance its global sales systems andaggressively to expand sales. Accordingly, we
anticipate a rise of 4.8% in net sales for Medical
Equipment during FY2007, to ¥102.0 billion.

SURDIALTM55, the next standardof dialysis machine.
SURDIAL™55 the dialysis machine which was developedby the Nipro Group with market needs abroad in order toprovide better dialysis treatment to all customers. The UF
and A,B solution proﬁle and user friendly turnable touch
panel display are equipped as a standard. Those functions
contribute to accurate and safe treatment. CE marking on
this machine stands for its reliability and accuracy which
are the ﬁrst priority of the dialysis machine. Also,
SURDIAL™55 has already been updated few times toserve better quality to customers. SURDIAL™55 has
been marketed for nearly 2 years and its achievement
would make furthermore credibility.

14

Review of Operations

Market Overview
During FY2006, the pharmaceutical market
experienced unprecedentedly harsh conditions,largely arising from the Japanese government’s
restrictive policy on medical costs, and intensified
price competition from other companies. However,enactment of the revised Pharmaceutical Affairs Law
in Japan has facilitated full-blown consignment ofdrug production, providing a strong stimulus tocompanies, including the Nipro Group, aggressively
pursuing contract manufacturing. In addition tocontract manufacturing, generic drug operations area key component of the Nipro Group’s
Pharmaceutical Business. Although Japan still lags
behind the Europe and the United States in the
adoption of generic drugs, its share of the domestic
pharmaceutical market is expected to benefit from awave of expirations of major original drugs’ patents
and policies to promote the use of generic drugs.

Responses and Results

PharmaceuticalBusiness

15

In an operating environment marked by severe pricecompetition, we endeavored to boost sales ofpowdered dialysate solution for artificial kidneys,
hemofiltration substitution fluid kit products,
pre-filled syringe preparations and other products. In
addition, we worked aggressively to boost sales ofliquid/powder double-bag kit and plastic ampoule
products, among others. During FY2006, to further
strengthen our oral drug operations, we included
Zensei Pharmaceutical Industries Co., Ltd., as aconsolidated company, which contributed to net
sales. Both Nipro brand and contract manufacture
drug products performed steadily during the year.
The former benefited from favorable
across-the-board performance by injection kit
preparations, with sales growth recorded byhalf-type kit, double-bag kit and pre-filled syringe kit
products. Sales of contract manufacture productsrose, with reduced sales of half-type kit products
arising from completion of consignments offset bystartups in contracts for double-bag kit products andthe consolidation of Zensei PharmaceuticalIndustries.
As a result of these factors, FY2006 net sales
from our Pharmaceutical Business climbed 19.7%, to¥42.2 billion. In light of this sales increase, earnings
recoveries by factories and new consolidation,
operating income soared 56.2%, to ¥3.3 billion.

Outlook
Tough market conditions, arising from stricter medical
expense restrictions, are anticipated for FY2007. The
Nipro Group will continue to boost its PharmaceuticalBusiness in line with its expansion strategy for genericdrug and contract manufacture operations. We willcontinue to steadily develop injectable drugs, such as
injection kit preparations and oral drugs.
Specifically, we will pursue development ofsuch new products as “liquid/powder” double-bag
antibiotic kit and pre-filled syringe kit and plastic
ampoule preparations, while aggressively
implementing product improvements, such as
through measures to prevent errors in medical
treatment. Furthermore, we will expand the portionof oral drugs that are already under development as
Nipro development items and continue with joint
development and development of newpharmaceutical form. In May 2007, we included
Saitama Daiichi Pharmaceutical Co., Ltd., as aconsolidated company, offering specialist
technology in the field of transdermal therapeutic

systems (TTS). This initiative opens up the possibilityof contract manufacturing of all pharmaceuticalforms and is expected to broaden the Nipro Group’s
portfolio of contract manufacture items.
We will also strive to swiftly realize marketableproducts in such fields as parenteral nutrition andelectrolyte solutions and such new areas as genetically
recombined erythropoietin preparations, artificial bloodand DDS preparations.
Further to the above endeavors, we shallpromote the expansion of contract manufacturing,
including development support of a high-value-added
pharmaceutical preparation, and sales channels andupgrade productivity at Nipro Group pharmaceuticalproduction plants. These strategies should yield a
9.1% increase in net sales from our PharmaceuticalBusiness during FY2007, to ¥46.0 billion.

Kit Preparations
Kit preparations are the pharmaceutical products that enable
provision of safe and reliable medical care in a simple form.
They contribute to prevention of contamination of preparation
process, avoidance of medical errors and saving of the laborof medical staffs.
One of the reasons why the Nipro Group has been highly
evaluated in the ﬁeld of kit preparations is that it has not only
its own research institutes of medical devices andpharmaceuticals but also its own production plant. The Nipro
Group has the integrated system from development ofcontainers and pharmaceuticals to their production.
This self-development and production systemenables the Nipro Group to provide high-quality products
rapidly at low costs.

Pre-ﬁlled syringe

Half-type kit

Double-bag kit (Liquid/Powder)16

Review of Operations

Market Overview
The field of glass for pharmaceutical purposescontinued to contract, arising from a falloff indomestic demand caused by changing container
types and the increasing use of plastics. Against thebackground of an expanding global LCD market,
glass for lighting purposes enjoyed expanding
demand for LCD backlight glass.

Responses and Results

Glass &
Materials
Business

17

Although performance in glass for pharmaceutical
purposes was negatively impacted by a decline indomestic demand for glass for ampoules as a resultof changing container types, sales of glass for tubes
and bottles were buoyant, reflecting growth indemand for vaccine-related products. Furthermore,
pre-filled syringe barells, cartridges and otherproducts begin to take off, recording relatively soundresults.
Exports of thermos bottle glass made a strong
showing, but the influence of a domestic slump
resulted in an overall decline in glass equipment
sales. In our glass for lighting purposes operations,
expansion of the LCD market spurred sales of glassfor LCD backlights and related commercial materials,
offsetting inventory adjustments by manufacturers ofpanels for LCD TVs.
As a result, net sales of the Nipro Group’s
Glass & Materials Business rose 8.3% year on year,to ¥12.9 billion, with operating income increasing
1.6%, to ¥1.9 billion.

OutlookDuring FY2007, the Nipro Group will continue to
strive for technological innovations in glassprocessing to meet the needs of the pharmaceuticalindustry, while spearheading its sales expansion
drive for glass for pharmaceutical purposes withtubes and bottles. We will also aggressively pursue
development of new commercial materials.
Our strategy regarding glass for lighting
purposes is to continue increasing our sales of glassfor LCD backlights and related commercial materials
in response to global expansion of the LCD market.
We shall use our fundamental strengths in glassprocessing technologies to bolster competitivenessthrough cost reductions and spur global sales
development.
As result of these strategies, we forecast net
sales for FY2007 in the Glass & Materials Business of¥13.5 billion, an increase of 4.5% from FY2006.

News & Highlights
Nipro Wins Award for Intellectual
Property Activities
In April 2007, the Nipro Group won the Japan Patent Office
Chief Honor Award, the fiscal 2007 intellectual property meritaward of the Japan Patent Office. The Japan Patent Officeaccords this honor to companies that contribute to the effective
application, dexterous operation and development of industrial
property rights systems.
In receiving this award, two aspects of the Nipro Group’s
design activities were cited as particularly meritworthy. First,
since the January 1999 introduction of a system to employ
related and sectional designs, the Nipro Group has continued tofile for rights aggressively in accordance with revised legislation.
Second, the office noted the Nipro Group’s attention to designin the medical equipment field, where design functionality
traditionally has taken second chair, creating designs featuring
easy on-site operation by physicians and other healthcare

Completion of Nipro Hall,a Large-Scale Training Facility

providers, as well as the Nipro Group’s focus on securing its
rights in this area as with patents.
In the future, the Nipro Group plans to remain proactive in
its research and development efforts. Furthermore, we intend to
make effective use of the intellectual property that we create
through such activities.

training conferences and lectures. The hall will be used topromote the dissemination of information throughout the
medical equipment and pharmaceutical industries.

March 2007 marked the completion of Nipro Hall, alarge-scale training facility located in the compound of our
Research & Development Laboratory and Pharmaceutical
Research Center, which together constitute the nerve centerof Nipro Group’s R&D activities. On the first floor of the hall isa showroom. The second floor houses training rooms specificto such areas as dialysis machines, artificial heart-lung,intervention, regenerative medicine and pharmaceuticals. On
the third floor is a large lecture hall that seats 525 people.
The leading-edge facilities installed at Nipro Hall makethe facility an excellent venue for academic conferences,

Contribution of Dialysis Machines to
Kenya’s Largest State-Run HospitalWith a population of 35 million, Kenya has dialysis centers at
only 11 locations, and a nationwide total of 50 dialysis
machines, which are hardly sufficient to meet the needs of
Kenyan patients who suffer from kidney dysfunction. In linewith its ideal of a world in which all people who suffer
illnesses are able to receive health care when needed, inFebruary 2007 the Nipro Group donated two SURDIAL™
dialysis machines to the Kenyatta National Hospital in
the capital of Nairobi. Going forward, the Nipro Groupplans to promote the advancement of healthcare
conditions for patients throughout the world.

18

Corporate Governance/Compliance
The Nipro Group’ s priority tasks are to establish fair and highly transparent corporate governanceand enforce thorough compliance. To these ends, appropriate organizational frameworks and control
systems have been created and are being constantly improved.

Management control system
In compliance with Japan’s Corporate Law, the Nipro Group has
the following bodies in place, in addition to the Meeting of
Shareholders and Directors. The Board of Directors, Auditors,
the Board of Auditors and Accounting Auditor.
The management control systems that relates tomanagement decision-making, execution and supervision
basically operates through the Board of Directors and the
Auditors. This entails a management control systems thatoversees autonomous corporate business divisions. The
systems endeavor to ensure clear assignment ofresponsibilities and to reinforce systems of control.
The Nipro Group’s Board of Directors meets at least oncea month, in principle, to make important decisions, report on
operational execution and hold discussions. At present, two of
the three Auditors are external auditors, as stipulated by the
Corporate Law. No external director is in office at present. Thereis no staff exclusively assigned to external auditors.

Internal control systems and auditing
The Group Management Meeting, held regularly once a month,discusses important operational execution and makes decisions.
The Nipro Group’s directors and statutory auditors, as well as
representatives of major Group companies, attend this Meeting todiscuss the progress of business activities and any issues
pending, so as to make dynamic management decisions.
In accordance with the auditing policy and the divisionof labor as agreed upon by the Board of Auditors, eachstatutory auditor attends important meetings, including Boardof Directors meetings, and receives reports from Directors andemployees, in addition to inspecting important documents andundertaking other auditing duties. The statutory auditors hold
Board of Auditors Meeting regularly, or as necessary, in order

to exchange views and hold discussions.
An Auditing Section has been set up, independent fromthe operational organization. It implements auditing policy andconducts impartial internal audits based on the annual plan.
Mutual coordination takes place between the statutory
auditors’ audit and the accountant’s audit, ensuring themanagement director’s compliance with the law, preventing ofillegal practices and errors and improving of the internal
control systems.

Status of the compliance/
management risk control system
The Nipro Group set up a Management Risk Control
Committee in an effort to control management risks andfurther strengthen systems that promote legal complianceand observation of corporate ethics.
We also distribute handbooks to executives andemployees to foster an understanding of laws and regulations
and encourage compliance with corporate ethics, implement
internal reporting systems and introduce educational andawareness activities through an internal newsletter.
With respect to the timely disclosure of corporate
information, the Nipro Group aims to disclose importantcompany information to its investors speedily, accurately andfairly. An Information Manager has been appointed in the
Human Resources and General Affairs Division, as part of the
Nipro Group’s drive to improve the corporate information
control system.
Should persons not belonging to the company
observe the Nipro Group employee commit an illegal act, or
should they be adversely affected by the Nipro Group
employee, a similar alarm-raising facility for external use isin place so that the Management Risk Control Committee
can be alerted directly.

Conceptual Diagram of Corporate GovernanceAccounting
Auditor(Auditors)
Board ofAuditors(Directors)
Board ofDirectors

Decision-making
Accounting
Audit

19

Operational
Audit

Supervisionof Directors’
executionof duties

Committees

President

Directorwithresponsibility
for operation

Division General Manager,
Manager, Assistant Manager

Management Risk Control Committee

Election

Third Party (i.e. lawyer, accountant)

Meeting of Shareholders

Basic Policy on Internal Control(1) A system to ensure that the execution of duties byDirectors and employees is in compliance with legislationand the Article of Incorporation
This system is designed to clarify the responsibilities of
directors and employees, ensure the appropriate exercise of
authority, prevent illegal and inappropriate behavior and,should such behavior occur, implement measures to prevent a
recurrence. For these reasons, the Company establishesinternal regulations, distributes materials and conducts
awareness activities among executives and employees(hereinafter, “employees and other personnel”) about the needfor compliance with laws and other regulations, as well as withcorporate ethics. We have introduced a portal site-based
hotline as part of our efforts to create an effective in-housesystem to call attention quickly to any misconduct.
(2) A system to deal with the storage and control of
information concerning the execution of duties by the
Directors
This system clarifies directors’ and employees’ handling of
documents (including electronic documents) pertaining to the
execution of their duties. The system establishes internal
regulations concerning the creation, storage and disposal of
documents, including those containing information on the
Board of Directors’ decisions. The system also specifies
documentation procedures for the submission and return ofapplications and final decision-making. The Company’s
documentation system allows directors and statutory auditors
to browse the documents to which they have legal access.
Any alterations or improvements to the Company’s internal
regulations about the handling of important documents require
the approval of the Board of Directors.
(3) Regulation and other systems that deal withloss-related risk management
The Company has established risk management procedures
to ensure the comprehensive and appropriate recognition andevaluation of the dangers of loss (risks) that could materially
impact management. A core management system is in place
to counter operating and other specific risks. By employing aflat organizational structure that encompasses representativesof each Group company and business unit, the system helps
prevent major risks from materializing, prevents recurrence
and contributes to swift responses. The system also enables
the Group to respond flexibly to legal and regulatory changes
and sudden changes in the business environment.
(4) A system to ensure efﬁcient execution of duties by the
Directors
The Company employs efficient budget enforcement andother management supervisory systems, with each business
unit responsible for its own profits and losses. We haveestablished a Group Management Meeting of directors,
statutory auditors and representatives of major subsidiaries.
Taking a multifaceted approach, this council addresses
important topics that affect the Group. Other meetings areheld regularly or as necessary to raise operating efficiency.
We have introduced an Intranet to which nearly all employees
and other personnel have access. Such additions to our
information infrastructure play a crucial role in improving
business efficiency.
(5) A system to ensure the existence of a suitable control
system within the corporate group
We have established a control environment thatencompasses groupwide human and financial resources andinformation control. This master control system provides
instructions for directors and employees of each Group
company, including those overseas, on creating their own
control environments that retain the spirit of the Group’s
basic policy, as well as information on control awareness andother topics. We also promote communications among
Group companies and actively approach the internal control
issues that arise from business expansion or the extension ofbusiness foundations. For affiliated companies that request
our involvement, we help formulate and implement internal
regulations and assist with important decision-making. The
Company’s statutory auditors liaise with subsidiaries’
auditors to implement audit practices and confirm thatsubsidiaries are conducting these activities properly.
(6) A system to ensure the trustworthiness of disclosuresrelating to ﬁnancial reports
To maintain the reliability of the corporate information provided
through annual security and other financial reports, theCompany comprehensively gathers important information andthoroughly discloses it in a timely and appropriate manner. To
this end, we work to create disclosure systems, formulate andimplement internal regulations and create IT-compliant
systems to transmit and monitor information.
(7)A system to deal with reports to Auditors
In addition to legally stipulated items, the Company has
created a system for directors and employees to report swiftly
to statutory auditors any items with the potential to materially
impact the Company and Group companies. They can also
report the implementation status of internal audits and othersignificant information through the internal hotline.
(8) A system to ensure effective execution of
the Auditors’ audit
In the course of audits performed by statutory auditors,
employees and personnel report on the status of theirbusiness activities and provide materials related to theirassigned duties. As necessary, statutory auditors confer withaccounting auditors, attorneys and other specialists, andsubmit any suggestions involving significant revisions to theBoard of Directors. In the event that employees are required
to assist in the statutory auditors’ tasks, these personnel are
assigned specifically to auditing duties, in consideration of
the need for independence. Statutory auditors participate indeliberations involving the selection of personnel.

20

Board of Directors and Auditors (As of June 27, 2007)

President

Minoru Sano

Senior Managing Director

Managing Director

Shigeki Tanaka

Seiya Ishida

Manufacturing technology /R&D divisionInternational division

Managing Director

Managing Director

Yoshihiko Sano

Makoto Sato

Domestic division

Pharmaceutical R&D Dept

Director

DirectorStanding Statutory Auditor

Masato Naganami

Masataka Yanai

Hiroshi Kobayashi

Glass & material development division

The President of Nipro (Thailand) Corporation Ltd.

Director

Director

Statutory Auditor

Kazuo Wakatsuki

Noriaki Watanabe

Shuichi Tsuzuki

International divisionInternational division

Director

Director

Statutory Auditor

Akihiko Yamabe

Hiroyuki Hattori

Masamichi Wada

Accounting & corporate planning division

Research & Development Laboratory

Director

Director

Hiroshi Ikeuchi

Kiyotaka Yoshioka

Human resources / general affairs division

Domestic division
Representative Director

21

Financial
Section2007
23 Financial Review
27 10 year summary
29 Consolidated Balance Sheets
31 Consolidated Statements of Income
32 Consolidated Statements of Changes in Net Assets
33 Consolidated Statements of Cash Flows
34 Notes to Consolidated Financial Statements
45 Report of Independent Certified Public Accountantson The Consolidated Financial Statements
46 Corporate Information

22

Financial Review
Overview
In the ﬁscal year ended March 31, 2007, ﬁrm capital investment
and individual consumption appeared to support the gradual
recovery of the Japanese economy. Nevertheless, concern
remained that the Bank of Japan’s lifting of its “quantitativeeasing” policy, coupled with the end of zero interest rates, would
negatively affect corporate earnings.
Under such circumstances, we continued to focus on thedevelopment of innovative products. We also reinforced
production capacity and sales capability and enhanced ourbrand recognition by upgrading the qualities of our basic
products. Furthermore, we divested the consolidated
subsidiaries of the Store Business (Nissho Corporation andNissho Drug Co., Ltd.) so that we could invest more operational
resources into our Medical Equipment and Pharmaceuticalbusinesses.

Consolidated Business Results
Net Sales
In the ﬁscal year ended March 31, 2007, consolidated net sales
were ¥184.4 billion (US$1,561.7 million), a decrease of 10.9%,
compared with the previous year, mainly reﬂecting the divesture of
the Store Business during the period, despite the Medical
Equipment and Pharmaceutical businesses achieving strong
performances.
Net Sales by Business Segment
Medical Equipment
Net sales in the Medical Equipment Business rose 7.1%
compared with the previous year, to ¥97.3 billion (US$824.2
million). Sales of artiﬁcial organs including dialysis productsrose 5.5%, to ¥46.5 billion (US$394.3 million), and those of
injection and infusion related devices rose 8.6%, to ¥50.8
billion (US$ 430.0 million).
The domestic business environment remained severe
due to factors such as restraining medical costs as evidenced
by the performance-based classiﬁcation of dialyzers and thelowering of prescription prices. Moreover, the government’s
promotion of joint purchases of consumables among medical
institutions intensiﬁed marketing and price competition,
leading to lower sales prices. Under such circumstances, wesought to enhance sales efﬁciency and increase our sales
force. We also sought to develop and market new products indialysis, treatment of circulatory organs, injection andinfusion, and examination, as well as to promote businessexpansion with product offerings in a systematized package,thereby expanding our market shares and sales.
Overseas sales grew constantly in all product groups,
aided by the lack of big ﬂuctuations in currency exchange
rates. The market for basic medical products remained

Net Sales (Millions of yen)
2003
2004
2005
2006
2007

23

severe due to aggressive sales of products made in
developing countries. As the qualities of these products havebeen greatly improved to better meet demand, we sought to
add them as our OEM products, under our quality
instructions, to expand our market share. We started selling
artiﬁcial lungs, a newly acquired business, which has enrichedsales bases worldwide as we improved local service. In theﬁeld of dialysis-related products, the sales of Nipro-brandproducts greatly surpassed OEM sales, which had historicallyaccounted for the majority of international sales in terms ofunits and monetary amounts.
Pharmaceutical
Net sales in the Pharmaceutical Business rose 19.7% comparedwith the previous year, to ¥42.2 billion (US$357.1 million). In thisbusiness, the market environment also remained severe, due tothe governmental controls to suppress drug costs and intensive
price competition among competitors.
In terms of injectable kit preparations, in line with the expansion of
our production capability, our sales of injectable kits obtained via
contract manufacturing also increased. We worked aggressively to
expand sales of generic injectable kit products such as pre-ﬁlled
syringe kit preparations and liquid/powdered double bag antibiotic
kit preparations. As a result, sales of injectable kit preparations
increased 9.8%, to ¥14.3 billion (US$121.5 million). In terms ofsolid-form drugs, the inclusion of Zensei Pharmaceutical Industries
Co., Ltd., in our consolidated Group boosted sales by 53.0 %, to¥12.6 billion (US$106.4 million).
Glass & Materials
Net sales in the Glass & Materials Business rose 8.3%
compared with the previous year, to ¥12.9 billion (US$ 109.4
million). Sales of glass for pharmaceutical purposes declined
7.1% compared with the previous year, to ¥3.3 billion(US$28.2 million), affected by the change of container forms
and materials. Sales of glass for lighting purposes, such as
glass for liquid crystal display (LCD) backlights and relatedmaterials, rose 14.9%, to ¥9.6 billion (US$81.2 million), due
mainly to the expansion of the LCD market.
Store
In the Store Business, we divested all the shares of Nissho
Corporation in July 2006 and those of Nissho Drug Co., Ltd. in
December 2006.
As a result, net sales of this business decreased 54.0%
compared with the previous year, to ¥31.0 billion (US$262.4
million).
Other
Other sales are mainly of machinery for manufacturing medical
equipment and real estate rental income. Net Other sales decreased
33.0% compared with the previous year, to ¥1.0 billion (US$ 8.6
million), due to the decline of real estate rental income.

Operating Income (Millions of yen)
180,370
188,700
192,320
206,801
184,363

2003
2004
2005
2006
2007

14,89912,557
10,404
12,332
13,053

Income Before Income Taxes
and Minority Interests (Millions of yen)
2003
2004
2005
2006
2007

8,781
8,044
8,660
9,061
16,776

Cost of Sales
The cost of sales decreased 11.9% compared with the previous
year, to ¥132.1 billion (US$1,119.4 million). The main reason forthe decrease was the divesture of the Store Business. The costof sales ratio was 71.7%, down 0.8 percentage point from theprevious year, mainly due to the improved proﬁtability in the
Pharmaceutical Business, reﬂecting among others factors the
newly commenced contract manufacturing of double bag kits
and the effect of a newly consolidated subsidiary that had arelatively lower cost of sales ratio. As a result, gross proﬁt
decreased 0.8 % compared with the previous year, to ¥52.2
billion (US$442.4 million).
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased 12.0%
compared with the previous year, to ¥39.2 billion (US$331.8
million), mainly due to the decrease of salary, rent andadvertisement expenses resulting from the divesture of theStore Business.
Operating Income
As a result of the factors outlined above, operating income rose
5.9% compared with the previous year, to ¥13.1 billion(US$110.6 million), and the operating income margin improved
1.1 percentage points to 7.1%.
Operating Income by Business Segment
Medical Equipment
Operating income of the Medical Equipment Business increased
6.7% compared with the previous year, to ¥14.3 billion(US$121.4 million), mainly because of higher overseas sales of
dialysis-related products.
Pharmaceutical
Operating income of the Pharmaceutical Business rose 56.2%
compared with the previous year, to ¥3.3 billion (US$27.9
million), mainly owing to the newly consolidated subsidiary andthe improved proﬁtability of the factories.
Glass & Materials
Operating income of the Glass & Materials Business increased
1.6% compared with the previous year, to ¥1.9 billion (US$15.8
million), reﬂecting the rise in net sales.
Store
As a result of the divestures of Nissho Corporation and Nissho
Drug Co., Ltd., operating income in the Store Businessdeclined 53.2% compared with the previous year, to ¥0.3
billion (US$2.3 million).

Net Income (Millions of yen)
2003
2004
2005
2006
2007

Other
Other operating income decreased 71.5% compared with theprevious year, to ¥0.2 billion (US$1.3 million), due to thedecrease of real estate rental income.
Elimination/Corporate
The unallocated corporate costs, which consisted mainly of the
R&D costs and headquarter administration costs, increased
11.6% compared with the previous year, to ¥6.9 billion (US$58.1
million), mainly due to higher R&D costs.
Other Income (Expenses)
We recorded other income, net of other expenses, of ¥3.7 billion(US$31.5 million), compared with other expenses, net of otherincome, of ¥3.3 billion in the previous year. This immense increaseof other income occurred mainly because we recorded a gain onsale of investments in consolidated subsidiaries that amounted to¥12.7 billion (US$107.6 million). On the other hand, we recorded
an allowance for loss on clearance of business of ¥2.0 billion(US$16.6 million) and a loss on doubtful debts of ¥2.4 billion(US$20.0 million) in the ﬁscal year under review.
Income before Income taxes
As a result of the factors outlined above, income before income
taxes and minority interests rose 85.1% compared with theprevious year, to ¥16.8 billion (US$142.1 million).
Net Income
The effective tax rate for corporate taxes following deferred tax
accounting was 48.8% compared with 51.9% for the previous
year. Minority interests showed income of ¥0.04 billion (US$0.3
million) compared with a loss of ¥0.2 billion in the previous year.
As a result, net income rose 89.6%, to ¥8.6 billion (US$72.5
million). Basic earnings per common share were ¥134.7(US$1.14) compared with ¥69.6 for the previous year. Cashdividends per common share were ¥80.0 (US$0.68) comparedwith ¥37.5 for the previous year.
Net Sales and Operating Income by Geographic Segment
In Japan, net sales decreased 15.3% compared with the previous
year, to ¥156.0 billion (US$1,321.8 million). This decrease wascaused by the divesture of the Store Business, which offset ﬁrm
growth in sales of injection/infusion–related products in the
Medical Equipment Business and sales of injectable kit
preparations and solid-form drugs in the PharmaceuticalBusiness. Operating income increased 8.2% compared with theprevious year, to ¥20.4 billion (US$ 172.8 million), due to theincreased transactions and improved proﬁtability in the Medical
Equipment and Pharmaceutical businesses.
In America, net sales increased 18.4% compared withthe previous year, to ¥17.4 billion (US$147.2 million), due to

Capital Expenditures (Millions of yen)
5,078
4,216
4,519
4,513
8,555

2003
2004
2005
2006
2007

20,775
14,50016,312
20,87423,093

Total Assets (Millions of yen)
2003
2004
2005
2006
2007

252,848279,701
293,749
338,741
336,660

24

Financial Review

higher sales of dialysis-related products. Operating loss
amounted to ¥0.9 billion (US$8.0 million), up slightly from a lossof ¥0.6 billion in the previous year. This loss was caused mainlyby the U.S. subsidiary’s R&D expenses for diabetes-related
medical equipment and the Brazilian manufacturing subsidiary’s
decline in proﬁtability because of the appreciation of the local
currency.
In Europe, net sales increased 12.5% compared with theprevious year, to ¥7.1 billion (US$60.2 million), boosted by the
new sales network. Operating income amounted to ¥0.1 billion(US$1.2 million) compared with the operating loss of ¥0.2 billion
in the previous year.
In Asia, net sales increased 132.1% compared with theprevious year, to ¥3.8 billion (US$ 32.5 million), due to theinclusion of a new subsidiary in consolidation. Operating
income decreased 47.1% compared with the previous year, to¥0.5 billion (US$3.8 million), due to the manufacturingsubsidiary’s lower proﬁtability resulting from exchange rate
ﬂuctuations.

Financial Position
Total assets as at March 31, 2007 stood at ¥336.7 billion(US$2,851.8 million), a 0.6% decrease compared with theprevious year. Current assets increased 0.9% compared withthe previous year, to ¥147.2 billion (US$1,247.2 million), mainly
due to higher trade notes and accounts receivable resulted
from increased transactions in the Medical Equipment andPharmaceutical businesses. Net property, plant and equipment
decreased 1.2% compared with the previous year, to ¥104.9
billion (US$888.5 million). This decrease was mainly attributable
to the divesture of the Store Business. Capital investments inproperty, plant and equipment totaled ¥21.8 billion (US$184.5
million). By business segment, capital investments amounted to¥10.2 billion (US$86.1 million) in the Medical Equipment
Business, ¥9.2 billion (US$77.7 million) in the PharmaceuticalBusiness, ¥0.2 billion (US$1.4 million) in the Glass & Materials
Business, ¥0.04 billion (US$0.3 million) in the Store Business,and ¥2.2 billion (US$18.9 million) in other areas. Investments
and other assets decreased 2.5% compared with the previous
year, to ¥84.5 billion (US$716.2 million). This was mainly
because of the decrease in lease deposits resulting from thedivesture of the Store Business. Current liabilities decreased
6.5% compared with the previous year, to ¥104.1 billion(US$881.9 million), due to the redemption of bonds andrepayment of commercial paper. Long-term liabilities decreased
7.0% compared with the previous year, to ¥105.5 billion(US$894.0 million), mainly because of the transfer of the current
portion of long-term debt to the current liabilities.
Total net assets including minority interests increased
11.4% compared with the previous year, to ¥127.0 billion(US$1,076.0 million), mainly due to higher retained earnings.

Net Assets (Millions of yen)
2003
2004
2005
2006
2007

25

Cash Flow
Net cash and cash equivalents decreased ¥3.9 billion
compared with the previous year, to ¥46.1 billion (US$390.6
million). Net cash provided by operating activities increased¥7.8 billion compared with the previous year, to ¥14.6 billion(US$123.5 million), mainly because of the increase in net
income.
Net cash used in investing activities decreased ¥24.6
billion compared with the previous year, to ¥2.9 billion (US$24.8
million), attributable to the proceeds from the sale of the StoreBusiness. Net cash used in ﬁnancing activities amounted to¥15.8 billion (US$133.4 million), compared with ¥15.6 billion
provided by ﬁnancing activities in the previous year.
Repayments for commercial paper, long-term debt and bonds
increased in the ﬁscal year ended March 31, 2007.

Staff
The total number of employees at March 31, 2007 decreased
241 compared with the previous year, to 8,807. Employees inJapan decreased 537 to 4,075, and the number overseas
increased 296 to 4,732.

Basic Policy on Distribution of Proﬁts
Our policy is that 50% of non-consolidated net income is to be
distributed to shareholders. Employees’ bonuses are
determined according to the business performance of thedivision to which the employees belong. Bonuses for directors
and statutory auditors are determined on the basis of corporate
business performance.
Retained earnings are invested in sales and production
facilities as well as in R&D, with a view to establishing the ﬁrm
management basis and long-term business development,
which in turn should ensure stable proﬁts in the future.

Risk Factors
The following are risks that may have an effect on the Nipro
Group’s results of operations and/or its ﬁnancial condition. The
items concerned were determined as at March 31, 2007.
(1) Risks Related to Product Safety
The Nipro Group brings all of its capabilities to bear in securing
product safety in the design, development and manufacturing of
medical equipment and pharmaceutical products. There are still
the risks, 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 product liability insurance. In the unlikely event of a
successful claim in excess of the insurance coverage, however,there could be a material adverse effect on our results ofoperations and ﬁnancial condition.

Basic Earnings Per Share (yen)83,533
94,711
96,700112,391
125,651

2003
2004
2005
2006
2007

84.3
64.9
69.4
69.6
134.7

Number of Employees
2003
2004
2005
2006
2007

8,029
8,132
8,617
9,048
8,807

(2) Risks Related to Supplier Concentration
The Nipro Group procures materials and parts for its
operations from a large number of suppliers. Some key
materials or parts may be obtained only from a single supplieror a limited group of suppliers. If circumstances at any ofthese suppliers make it impossible for us to acquire a
sufﬁcient quantity of materials or parts to meet our productionneeds in a timely and cost-effective manner, there could be amaterial adverse effect on our results of operations andﬁnancial condition.
(3) Risks Related to Changes in Government Healthcare
Policies
The business sector to which the Nipro Group belongs is
intimately connected with the healthcare system and is subject
to the regulations laid out by the government organizations,
including the National Health Insurance System and thePharmaceutical Affairs Law. Should circumstances arise inwhich we were unable to respond to changes in theenvironment brought about by unforeseeable wholesalechanges in the government healthcare policies, there could bea material adverse effect on our results of operations andﬁnancial condition.
(4) Risks Related to Changes in Sale Prices
The products sold by the Nipro Group include some that are, in
general, subject every two years to the effect of price reductions inthe system of payment for medical care, drug prices andreimbursement prices for medical materials and supplies. Shouldmeasures to hold down medical costs also become pervasive
worldwide, resulting in intensiﬁed competition between
corporations and leading to prices falling to a greater degree than
anticipated, there could be a material adverse effect on our resultsof operations and ﬁnancial condition.
(5) Risks Related to Changes in Prices of Raw Materials
The products manufactured by the Nipro Group include somethat are made from petrochemical products such as plastics.
Should the cost of such raw materials rise, leading to increased
procurement costs, there could be a material adverse effect on
our results of operations and ﬁnancial condition.
(6) Risks Related to Overseas Expansion
The Nipro Group maintains manufacturing bases and salesofﬁces around the world for the production and supply of its
products. Should there be unexpected revisions to legal
regulations or political or economic changes in these countries orregions, there could be a material adverse effect on our results ofoperations and ﬁnancial condition.
(7) Risks Related to Intellectual Property
The Nipro Group owns numerous patents and trademarks, andmaintains various proprietary rights for the products it
manufactures. Additionally, we take all possible measures toavoid infringing on the patents and proprietary rights of any third

Equity Ratio (%)
2003
2004
2005
2006
2007

party, and to avoid breaching any license agreements we haveconcluded concerning technologies. Nevertheless, if anunanticipated claim for damages were to be made by a third
party and the defense of the Nipro Group were to be rejected,
there could be a material adverse effect on its results ofoperations and ﬁnancial condition.
(8) Risks Related to Environmental Regulations
The Nipro Group believes it has taken adequate precautions tocomply with applicable regulations in the course of its businessactivities. Should our activities cause an unforeseen
environmental problem, however, with a claim for damages madeagainst us, there could be a material adverse effect on our resultsof operations and ﬁnancial condition.
(9) Risks Related to Exchange Rate Fluctuations
The Nipro Group, including its overseas subsidiaries, carries out
its foreign currency transactions primarily in US dollars and euro,
but calculates ﬁnancial statements for its overseas subsidiaries
using Japanese yen for the purpose of producing consolidated
ﬁnancial statements. Fluctuations in exchange rates may
therefore have a material 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 othersecurities. These investments have been made for purposes suchas 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 ofthese investments decline signiﬁcantly owing to ﬂuctuations in thestock market, circumstances at an issuer, or a change in theaccounting methods used to deal with these investments, there
could be a material adverse effect on our results of operations andﬁnancial condition.
(11) Risks Related to controls on Personal Information
The Nipro Group set the strict precautions to protect the
conﬁdential personal information that the Group possesses. In
the unforeseen events or accidents that the personal informationis leaked outside the Group, causing loss of trust or customers,
there could be a material adverse effect on its results ofoperations and ﬁnancial condition.
(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 business activities
may possibly cause a delay or interruption in production, sales,
distribution, or provision of services. Should such a delay orinterruption become extended, there could be a material
adverse affect on our results of operations and ﬁnancial
condition.

Return on Assets (%)
33.0
33.9
32.9
33.2
37.3

2003
2004
2005
2006
2007

Return on Equity (%)
6.0
4.7
3.6
3.9
3.9

2003
2004
2005
2006
2007

6.4
4.7
4.7
4.3
7.2

26

10 year summary
Nipro Corporation and its Consolidated Subsidiaries
Years ended March 31
Millions of yen

2007
Income Statement Data:
Net sales ..................................................................................
Medical Equipment ..........................................................
Pharmaceutical .................................................................
Glass and Materials ..........................................................
Store ...................................................................................
Cost of sales ...........................................................................
Selling, general and administrative expenses ...................
Operating income ..................................................................
Medical Equipment (1) .....................................................
Pharmaceutical (1) ............................................................
Glass and Materials (1) ....................................................
Store (1) ..............................................................................
Income before income taxes ...............................................
Net income .............................................................................
Capital expenditures ..............................................................
Depreciation and amortization ............................................
R&D expenses .......................................................................
Balance Sheet Data :Total assets .............................................................................
Property, plant and equipment-net .....................................
Working capital ......................................................................
Current liabilities ....................................................................
Long-term liabilities ...............................................................
Common stock ......................................................................
Capital surplus ........................................................................
Net assets (2) ..........................................................................

2006

2005

2004

¥

184,363
97,30042,152
12,91930,973
132,142
39,16813,053
14,334
3,298
1,865
270
16,776
8,555
23,093
12,4704,461¥

206,801
90,86835,22011,934
67,261
149,971
44,49812,332
13,430
2,111
1,836
578
9,061
4,513
20,874
12,315
3,760¥

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

¥

336,660
104,882
43,128104,105
105,535
28,66329,973
125,651¥

338,741
106,195
34,579111,285
113,453
28,66329,972
112,391¥

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

69.4—
38.5
1,519.6

¥

64.9
—
30.5
1,487.5Yen

Per share data :Basic earnings (3) .................................................................
Diluted earnings (3) ..............................................................
Cash dividends .......................................................................
Equity .......................................................................................

¥

134.7
—
80.0
1,979.2

¥

69.6
—
37.5
1,767.7¥

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

63,878,505
8,807

63,878,505
9,048

63,878,505
8,617

63,878,505
8,132

Selected Data and Ratios:
Equity ratio (4) (%) ................................................................
Return on assets (4) (%) .....................................................
Return on equity (4) (%) .....................................................
Price earnings ratio (times) ..................................................

37.3
3.9
7.2
17.1

33.2
3.9
4.3
26.0

32.9
3.6
4.7
25.6

33.9
4.7
4.7
24.1

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, 2006, the Company adopted a new accounting standard for presentation of net assets in the balance sheet issued by the Accounting Standard
Board of Japan. In the new accounting standard, net assets refer to the sum of total shareholders’ equity, total valuation, translation adjustments and others,
and minority interests. Minority interests, however, have not been included in net assets above to conform to the prior years’ presentation. For further details
regarding the new accounting standard, please refer to page 37, Note 2 (h) “Presentation of net assets in the balance sheet.”(3) 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.

27

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

2003

2002

2001

2000

1999

1998

2007

¥

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
66,413
14,12011,78456,882
110,608
31,735
9,729
11,913
844
1,773
20
6,641
3,401
14,295
6,898
3,048

¥

143,700
65,71813,47812,021
51,034
104,734
30,344
8,622
10,422
516
1,758
637
5,930
2,621
8,463
7,124
2,278

¥

141,635
64,73011,96911,907
51,199101,965
29,328
10,342
12,272
71
1,780
888
4,440
1,793
12,362
6,681
2,889

¥

132,655
61,126
10,895
12,493
46,461
95,52928,467
8,659
10,698
(657)
2,067
785
7,818
3,366
7,062
6,458
2,355

$ 1,561,737
824,227
357,069
109,437
262,372
1,119,373
331,792
110,572
121,423
27,937
15,7992,287
142,109
72,469195,621
105,633
37,789¥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
72,06135,77074,99583,26022,56323,886
69,196¥

217,455
64,49752,06575,00875,58522,56323,88665,368¥205,558
62,91944,82073,39864,47822,56323,88665,563¥

182,389
56,991
18,762
77,66637,526
22,56323,886
65,236$ 2,851,843
888,454
365,338
881,872
893,986
242,804
253,900
1,064,388
U.S. dollars(Note 1)

Yen

¥

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

¥

46.9
42.1
34.5
1,168.2

¥

32.0
28.1
19.0
1,171.7

¥

60.2
49.9
30.5
1,165.9

63,878,505
8,029

56,670,149
7,835

55,956,987
6,818

55,956,987
6,636

55,956,987
6,064

55,956,987
5,729

33.0
6.0
6.4
21.5

31.0
6.1
8.0
17.4

30.2
4.4
5.1
16.5

30.1
4.1
4.0
18.6

31.9
5.3
2.7
34.6

35.8
4.8
5.2
16.8

$

1.14
—
0.68
16.77

Basic earnings and diluted earnings per share for the year ended March 31, 2003 and thereafter are computed in accordance with the new standard. Basic earnings anddiluted 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.
(4) Equity ratio is the ratio of the sum of total shareholders’ equity and total valuation, translation adjustments and others to total assets at the period end. Return on
assets is the ratio of operating income for the period to the average total assets during the period. Return on equity is the ratio of net income for the period to theaverage of the sum of total shareholders’ equity and total valuation, translation adjustments and others during the period. Price earnings ratio is the ratio of the closing
price of the Company’s shares listed on the First Section of the Tokyo Stock Exchange on the last trading day in March of each year to basic earnings per share.

28

Consolidated Balance Sheets
Nipro Corporation and its Consolidated Subsidiaries
As of March 31, 2007 and 2006
Thousands of U.S. dollars(Note 1)Millions of yen

2007

2006

2007

AssetsCurrent assets:
Cash and cash equivalents (Note 2) ........ ............................ ¥46,110Time deposits (over three months) ........... ............................

1,825

3,481

15,460Trade notes and accounts receivable (Note 5 and 11) .....

50,97245,795

431,783

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

(502)

(358)

(4,252)Inventories (Note 2 and 3) .......................... ............................

40,21340,559340,644

Deferred income taxes (Note 2 and 4) ..... ............................

3,034

2,152

25,701Other current assets ...............................................................

5,581

4,320

47,277

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

147,233

145,864

1,247,210

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

18,032

23,080152,749

Buildings and structures .........................................................

79,482

91,154

673,291

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

103,81491,367879,407

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

12,857

8,210

108,911¥49,915$

390,597

Property, plant and equipment (Note 2, 5 and 6) :214,185

213,811

1,814,358

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

(109,303)(107,616)(925,904)

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

104,882

106,195

888,454

method (Note 2) ...................................... ............................

3,382

4,094

28,649Investment securities (Note 2 and 7) ...................................

73,92264,219626,192

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

2,591

11,003

21,948Deferred income taxes (Note 2 and 4) ..... ............................

62

431

525

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

4,588

6,935

38,865

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

84,54586,682

716,179

Total ........................................................................ ............................

¥ 336,660¥ 338,741$ 2,851,843

Investments and other assets :Investment in unconsolidated subsidiaries
and an afﬁliate accounted for by the equity

The accompanying notes are an integral part of these statements.

29

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

2007

2006

2007

Liabilities and net assets
Current liabilities :Short-term bank loans (Note 9) ............................................... ¥Current portion of long-term debt (Note 9) ........ ...................

26,96423,30522,542

197,416

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

26,54731,425

224,879

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

8,405

3,332

71,199Accrued expenses .................................................. ...................

9,348

7,626

79,187

Allowance for loss on clearance of business ........................
Commercial paper (Note 9) ......................................................

1,955

—

16,561

—

9,000

—

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

7,581

5,707

64,218

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

104,105

111,285

881,872

Long-term liabilities:
Long-term debt (Note 9) ........................................ ...................

84,216

92,069713,393

Accrued pension and severance liabilities (Note 10) ...........
Deferred income taxes (Note 2 and 4) ...................................

2,565

2,979

21,72817,417

15,055

147,539

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

1,337

3,350

11,326

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

105,535

113,453

893,986

28,663

28,663242,804

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

29,97329,972

253,900

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

39,149(741)

34,546(649)

331,631(6,277)

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

97,04492,532822,058

Unrealized gain on available-for-sale securities ....................
Foreign currency translation adjustments ..............................

29,884(1,277)25,564(5,705)

253,147(10,817)

Total valuation, translation adjustments and others .........

28,607

19,859242,330

Minority interests ..................................................... ...................

1,369

1,612

11,597

Total net assets ................................................ ...................

127,020

114,003

1,075,985

Total ................................................................................. ...................

¥ 336,660¥ 338,741$ 2,851,843¥

31,653$

228,412

Commitments and contingent liabilities (Note 11)
Net assets (Note 2, 7 and 12) :Common stock ........................................................ ...................
Authorized : 200,000,000 shares
Issued : 63,878,505 shares

Less cost of common shares of treasury stock ...................
(393,067shares in 2007 and 349,589 shares in 2006)

The accompanying notes are an integral part of these statements.

30

Consolidated Statements of Income
Nipro Corporation and its Consolidated Subsidiaries
For the years ended March 31, 2007 and 2006
Thousands of U.S. dollars(Note 1)Millions of yen

2007
Net sales (Note 13) ............................................ ............................ ¥ 184,363
Cost of sales (Note 15) .................................... ............................
132,142
Gross proﬁt ................................................... ............................
52,221

2006

2007¥ 206,801
149,971
56,830$ 1,561,737
1,119,373
442,364

Selling, general and administrative expenses (Note 14 and 15)
Operating income ........................................ ............................

39,16813,05344,49812,332331,792
110,572

Other income (expenses) :Interest and dividend income ................................................
Interest expense (Note 9) .......................................................

869(1,645)688(1,552)

7,361(13,935)

(485)
314
(791)

(385)
1,476
(703)

(4,108)(4)
12,706(1,287)(246)

16—(1,998)
(158)
(79)

(34)
107,632(10,902)(2,084)

Loss on sale and disposal of property,
plant and equipment - net .................................................
Exchange gain (loss) ................................... ............................
Equity in loss of an afﬁliated company .................................
Gain (loss) on sale of investment securities (Note 7) .........
Gain on sale of investments in consolidated subsidiaries ...
Loss on impairment of ﬁxed assets (Note 6 and 13) ........
Abnormal manufacturing cost ...............................................
Bond issue expense ................................... ............................
Allowance for loss on clearance of business ......................
Loss on doubtful debts .............................. ............................
Loss on disposal of inventories .............................................
Loss on investment securities ...............................................
Other income (loss)-net .............................. ............................
Income before income taxes and minority interests ........

—
(381)

—
(16,561)(20,000)(2,143)(2,279)(7,369)16,776

9,061

142,109

Income taxes (Note 2 and 4) :Current ......................................................................................
Deferred ....................................................................................

10,059(1,873)

5,241
(541)

85,210(15,866)

Minority interests in income (loss) ofconsolidated subsidiaries .......................... ............................
Net income ................................................... ............................ ¥

35
8,555

(152)

296
72,469—(1,955)(2,361)
(253)
(269)
(870)

—
—
(195)

¥

4,513

Amounts per common share (Note 2) :Basic earnings .............................................. ............................
Diluted earnings ........................................... ............................
Cash dividends ............................................. ............................
The accompanying notes are an integral part of these statements.

134.7
—
80.0

$

U.S. dollars(Note 1)

Yen

31

2,660
(6,701)

69.6
—
37.5

1.14
—
0.68

Consolidated Statements of Changes in Net Assets
Nipro Corporation and its Consolidated Subsidiaries
For the years ended March 31, 2007 and 2006
Thousands of U.S. dollars(Note 1)Millions of yen

2007

2006

2007

Common stock :Opening balance-63,878,505 shares ............... ................... ¥28,663¥

28,663$242,804

Closing balance-63,878,505 shares ................. ................... ¥28,663¥

28,663$242,804

29,972¥

29,972$

253,892

Capital surplus
Opening balance ...................................................................... ¥Disposal of treasury stock ................................... ...................
.................................................... ...................

1

8

—

¥

29,973¥29,972$

253,900

Opening balance .................................................. ................... ¥34,546¥32,182$

292,639

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

8,555

4,513

72,469

437

—

3,702

(201)
(4,097)(198)(1,843)(108)(1,703)(34,706)

Closing balance
Retained earnings :Increase(decrease) in retained earnings due to
exclusion of subsidiaries from consolidation .................
Increase(decrease) in retained earnings due toinclusion of new subsidiaries in consolidation ...............
Cash dividends paid............................................ ...................

(91)

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

(770)

¥

39,149¥34,546$331,631

Opening balance-349,589 shares ........................................ ¥

(649)

¥

(587)

$

(5,498)

Closing balance
Treasury stock :Purchase of treasury stock(101)....................................................

......................................................

(855)

(63)

¥

9
(741)

¥

1
(649)

$

76
(6,277)

Opening balance .................................................. ................... ¥25,564¥

12,760$216,552

Disposal of treasury stock

Closing balance-393,067 shares..........................................

Unrealized gain on available-for-sale securities
Net change............................................................ ...................
.................................................... ...................

4,320

36,59512,804¥29,884¥25,564$

253,147

Opening balance ................................................... ................... ¥(5,705)¥(6,290)$(48,327)¥585(5,705)$37,510(10,817)

1,609$

13,655(2,058)$

11,597

Closing balance

Foreign currency translation adjustments :Net change............................................................ ...................

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

¥

4,428
(1,277)

Minority interests
Opening balance ................................................... ................... ¥

1,612
(243)

¥

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

1,369

¥

3
1,612

The accompanying notes are an integral part of these statements.

32

Consolidated Statements of Cash Flows
Nipro Corporation and its Consolidated Subsidiaries
For the years ended March 31, 2007 and 2006
Thousands of U.S. dollars(Note 1)Millions of yen

2007
Operating activities :Net income ................................................................................... ¥8,555
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization .................. ............................
12,470Loss on impairment of ﬁxed assets .......... ............................
1,287
Equity in loss of an afﬁliated company ..... ............................
791(93)
Allowance for doubtful receivables ........... ............................
Loss on doubtful debts ...........................................................
2,361
Allowance for loss on business clearance ..........................
1,955
Gain on sale of investment securities ....... ............................
4(12,706)
Gain on sale of investments in consolidated subsidiaries ....
(1,873)
Provision for deferred taxes ...................................................
(68)
Exchange loss (gain) ...............................................................
Loss on sale and disposal of property, plant and equipment-net ....
485
Other, net ....................................................... ............................
1,218
Changes in operating assets and liabilities:
Trade receivables .....................................................................
Inventories ..................................................... ............................
Other current assets ...............................................................
Lease deposits .........................................................................
Trade payables .........................................................................
Accrued income taxes ............................................................
Other, net ..................................................................................
Total adjustments ................................................................
Net cash provided by operating activities ......................
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 investment securities ...........................
Purchase of investments in consolidated subsidiaries
affecting scope of consolidation ...........................................
Proceeds from sale of investments in consolidated
subsidiaries affecting scope of consolidation .....................
Net decrease (increase) in short-term loans to afﬁliates ........
Deposits (Over three months) ........................ ............................
Other, net .......................................................................................
Net cash used in investing activities .... ............................
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 ...................................................................
Net increase (decrease) in commercial paper ........................
Cash dividends paid ........................................ ............................
Bonuses to directors and statutory auditors ...........................
Other, net .......................................................................................
Net cash provided by (used in) ﬁnancing activities .......
Effect of exchange rate changes on cash and cash equivalents ....
Net increase (decrease) in cash and cash equivalents ........
Cash and cash equivalents, beginning of period (Note 2) ....
Cash and cash equivalents of newly consolidated
subsidiary, beginning of period (Note 2) ...........................
Cash and cash equivalents, end of period (Note 2) ............... ¥The accompanying notes are an integral part of these statements.

33

2006
¥

4,513

2007
$

72,46912,315
1,998
703
132
—
—
(16)
—
(541)
(1,377)385
373

105,633
10,902
6,701(788)
20,00016,561
34(107,632)(15,866)
(576)
4,108
10,318(2,187)(3,061)(565)
502(1,982)
5,072
2,419
6,029
14,584(4,894)(5,754)(1,372)
485
1,118
(190)
(1,069)
2,296
6,809

(18,526)(25,930)(4,786)
4,252(16,789)
42,965
20,49251,073
123,542(19,236)273(2,245)24(20,052)376(9,414)
3,126(162,948)
2,313(19,017)203(1,220)(27)(10,335)

19,372(1,078)1,873(687)(2,924)

—
—
(822)
(743)
(27,556)

164,100(9,132)
15,866(5,819)(24,769)

122
20,853(13,181)—(10,060)(9,000)(4,091)(97)(297)(15,751)

2,888
13,384(12,261)
14,922(3,020)2,000(1,840)(108)(361)
15,604

1,033
176,645(111,656)—(85,218)(76,239)(34,655)(822)(2,515)(133,427)

209(3,882)
49,915

1,181(3,962)53,735

1,770(32,884)
422,829

77
46,110¥142
49,915$652
390,597

Notes to Consolidated Financial Statements
Nipro Corporation and its Consolidated Subsidiaries

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated ﬁnancial statements are preparedfrom the consolidated ﬁnancial statements issued for domestic
reporting purposes. Nipro Corporation (the “Company”) and its
consolidated domestic subsidiaries maintain their accounts andrecords in accordance with the provisions set forth in the Japanese
Securities and Exchange Law and its related accounting regulations,and in conformity with generally accepted accounting principles andpractices in Japan. Its overseas subsidiaries maintain their accounts
in conformity with those of each 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 aform which is more familiar to readers outside Japan.

In addition, the notes to consolidated ﬁnancial statements
include additional information which is not required undergenerally accepted accounting principles and practices inJapan. Certain reclassiﬁcations have been made to the 2006
amounts to conform with the 2007 presentation.
The ﬁnancial statements presented herein are expressed inJapanese yen and, solely for the convenience of the reader,have been translated into United States dollars at the rate of¥118.05=US$1, the approximate exchange rate on March 31,
2007. 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
the Company and the signiﬁcant subsidiaries and afﬁliatedcompany accounted for by the equity method.
Investments in unconsolidated subsidiaries are stated atcost and the equity method is not applied for the valuation ofsuch investments since they are considered immaterial in theaggregate.
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.The
difference between the cost of investments in subsidiaries andafﬁliates and the equity in their net assets at dates ofacquisition is being amortized over ﬁve years.
All accounts herein have been presented on the basis of
the twelve months ended March 31, 2007 for the Company
and for consolidated domestic subsidiaries, and December
31, 2006 for all consolidated overseas subsidiaries.
Adjustments have been made for any signiﬁcantintercompany transactions which took place during the period
between the end of accounting period of the overseas
subsidiaries and that of the Company. Besides, the following
subsidiaries were excluded from consolidation at the end of
the consolidated accounting period because all the shares
held of Nissho Corporation were transferred on July 31, 2006
as well as Nissho Drug Co., Ltd. on December 15, 2006 andFuzhou Nipro Co., Ltd. was liquidated on November 30, 2006,
and statement of income of each company to the date oftransfer or liquidation was consolidated.
(b) Translation of Foreign Currencies
Balance sheets of consolidated overseas subsidiaries aretranslated into Japanese yen at the current exchange rate asof the balance sheet date except for shareholders’ equity,which is translated at the historical rate. Income statements ofconsolidated 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 the “valuation, translation
adjustments and others” section of net assets.
(c) Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid
investments, generally with original maturities of three months
or less, that are readily convertible to cash.
(d) Inventories
Inventories are stated principally at cost. Cost is determinedprincipally by the average method for the medical equipment,
pharmaceutical and glass and materials segment, except for
certain inventories determined by the ﬁrst-in, ﬁrst-out method.
(e) Impairment of Fixed Assets
In accordance with the accounting standard for impairmentof ﬁxed assets, the Company and its consolidated
subsidiaries review ﬁxed assets for impairment whenever
events or changes in circumstance indicate the carrying
amount of an asset or asset group may not be recoverable.
An impairment loss would be recognized if the carrying
amount of an asset or asset group exceeds the sum of theundiscounted future cash ﬂows expected to result from thecontinued use and eventual disposition of the asset or asset
group. The impairment loss would be measured as theamount by which the carrying amount of the asset or the net
selling price at disposition.
( f ) Depreciation
Depreciation of property, plant and equipment of the Company
and its domestic subsidiaries is computed principally by the
declining-balance method. The straight-line method is applied
to buildings acquired by the domestic companies after April 1,
1998, and is principally applied to the property, plant andequipment of overseas subsidiaries.
The range of useful lives is principally from 31 to 50 years forbuildings and from 7 to 12 years for machinery and equipment.

34

(g) Investment Securities
Investment securities are classiﬁed and accounted for,depending on management’s intent, as follows:i ) held-to-maturity debt securities, which are expected to beheld to maturity with the positive intent and ability to hold tomaturity, are reported at amortized cost; andii ) available-for-sale securities, which are not classiﬁed as theaforementioned securities, are reported at fair value, withunrealized gain and loss, net of applicable tax, reported in the“valuation, translation adjustments and others” section of net
assets. For the year ended March 31, 2007, there was noheld-to-maturity debt securities held by the Company and its
consolidated subsidiaries.
Non-marketable available-for-sale securities are stated atcost determined by the average method.
For other than temporary declines in fair value, investment
securities are reduced to net realizable value by a charge to income.
(h) Presentation of Net Assets in the Balance Sheet
Effective from the year ended March 31, 2007, the Company
and its consolidated subsidiaries adopted “AccountingStandard for Presentation of Net Assets in the Balance Sheet”(Accounting Standards Board of Japan Statement No. 5
issued on December 9, 2005) and “Guidance on AccountingStandard for Presentation of Net Assets in the Balance Sheet”(Accounting Standards Board of Japan Guidance No. 8 issued
on December 9, 2005). Due to the adoption of theseaccounting standards, minority interests are included in net
assets at March 31, 2007. Under the previous presentation
rules, minority interests were presented as a separate
component in the consolidated balance sheets. The adoptionof these accounting standards had no impact on the
consolidated statement of income for the year ended March
31, 2007. The previously presented shareholders’ equity andcertain other balance sheet items for 2006 have been restatedto conform to the 2007 presentation. As a result, minority
interests amounting to ¥1,612 million are included in the net
assets section as of March 31, 2007. For the year ended
March 31, 2007, the amount of shareholders’ equity would
have been ¥125,651 million (US$1,064,388 thousand), if theprevious year’s presentation was applied.
( i ) Income Taxes
The Company and its consolidated subsidiaries recognized
tax effects of temporary differences between the carrying
amounts of assets and liabilities for tax and ﬁnancial reporting.
The asset and liability approach is used to recognize deferredincome tax assets and liabilities for the expected future tax
consequences of temporary differences.
( j ) Amounts per Common Share
Basic earnings per share is computed by dividing net income
available to common shareholders by the weighted-average
number of common shares outstanding for the period,
retroactively adjusted for stock splits. Diluted earnings per share
reﬂects the potential dilution that could occur if securities were
exercised or converted into common stock. Diluted earnings
per share of common stock assumes full conversion of theoutstanding convertible notes and bonds at the beginning of theyear (or at the time of issuance) with an applicable adjustment
for related interest expense, net of tax, and full exercise ofoutstanding warrants. For the year ended March 31, 2007, there
was no common stock equivalents that have a dilutive effect.
Cash dividends per share presented in the accompanying
consolidated statements of income are dividends applicable to
the respective years including dividends to be paid after theend of the period.
Appropriation of retained earnings at each year-end isreﬂected in the ﬁnancial statements for the following year uponshareholders’ approval.

3. Inventories
Inventories consisted of the following:Thousands of U.S. dollars (Note 1)

Millions of yen

2007
Food and groceries ..........................................................................

¥
Household goods .............................................................................
Medicine (in stores) ...........................................................................
Finished goods ..................................................................................
Raw materials ....................................................................................
Work in process ................................................................................
Packing and other ............................................................................
Total ............................................................................................ ¥

35

—
—
—
28,752
5,815
3,675
1,971
40,213

2006
¥

¥

644
3,821
1,268
24,786
4,922
3,656
1,462
40,559

2007
$

$

—
—
—
243,558
49,25931,131
16,696
340,644

4. Income Taxes
The Company and its domestic subsidiaries are subject to Japanese national and local taxes based on income which, in aggregate,
resulted in a normal statutory tax rate of approximately 40.5% for the years ended March 31, 2007 and 2006.
The signiﬁcant components of deferred tax assets and liabilities were as follows:
Thousands of U.S. dollars (Note 1)

Millions of yen

2007
Deferred tax assets
Operating loss carryforwards for tax purposes ..................
Intercompany proﬁts ............................................ ...................
Allowance for bonuses to employees ..................................
Allowance for loss on clearance of business ......................
Accounts receivable ............................................. ...................
Loss on impairment of ﬁxed assets ......................................
Excess of allowance for doubtful accounts over tax allowable amounts ...
Accrued pension and severance liabilities ..........................
Accrued 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) ..................................................

¥

2006

2,467
718
592
792
203
848
963
1,010
619
502
8,714
(2,545)
6,169¥

20,40387¥ 20,490¥ (14,321)

¥

¥
¥
¥

2007

2,143
647
652
—
199
653
153
1,172
282
596
6,497
(1,973)
4,524$

16,860136¥ 16,996¥ (12,472)

$

¥
¥

$
$

20,898
6,082
5,015
6,709
1,720
7,183
8,158
8,556
5,244
4,252
73,817(21,559)
52,258172,834737$ 173,571$ (121,313)

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 ..................................................................................................................
Tax credits primarily for research and development costs ................................................
Equity in loss of an afﬁliated company ..................................................................................
Other ............................................................................................................................... ............
Effective income tax rate .............................................................................................................

2007

2006

40.5%
2.3
(0.6)
4.6
(2.0)
1.9
2.1
48.8%

40.5%
2.3
(0.3)
11.6
(4.5)
3.1
(0.8)
51.9%

5. Pledged Assets
The following assets were pledged as collateral:Thousands of U.S. dollars (Note 1)

Millions of yen

2007
Land ................................................................................. ...................

¥
Buildings and structures ............................................... ...................
Notes receivable ............................................................. ...................
Certiﬁcate of deposit ..................................................... ...................
Total ......................................................................... ................... ¥

3,362
6,435
3,938
—
13,735

2006
¥

¥

6,131
9,027
1,699
221
17,0782007$$

28,47954,51133,359—116,349

36

The above assets were pledged against the following liabilities:
Thousands of U.S. dollars (Note 1)

Millions of yen

2007
Short term bank loans .......................................... ............................ ¥Current portion of long-term debt ...................... ............................
Long-term debt .................................................................................
Total ............................................................................................ ¥

2006
¥

4,885
939
2,251
8,075

2007

2,577
951
3,665
7,193

¥

$

$

41,381
7,954
19,06868,403

The following assets were pledged against the bank loans of Nissho Corporation amounting to ¥949 million (US$8,039 thousand):Millions of yen

Thousands of U.S. dollars (Note 1)

2007

2007

Buildings and structures ....................................... .............................................

¥

Land ......................................................................... .............................................
Total ................................................................ .............................................

¥

$

1,023
1,421
2,444

$

8,666
12,037
20,703

6. Loss on Impairment of Fixed Assets
The Company and its consolidated subsidiaries reviewed their ﬁxed assets for impairment as of March 31, 2007 and, as a result,recognized impairment loss of ¥1,287 million (US$10,902 thousand) as follows:
Use

Type of asset

Location

Millions of yen

1 site in Osaka Pref.
Leased Assets LandStore
Buildings and structures, and other 1 site in Hyogo Pref.
Total ................................................................ ................................................
The ﬁxed assets of the Company and its consolidated
subsidiaries are categorized principally into assets for business
use, leased assets, idle assets and assets for common use. The
assets for business use are divided into groups on which
separate ﬁnancial information is reported for management
accounting purposes and individual store, whereas the leased
assets and idle assets are categorized individually. Headquarters
assets, R&D facilities, dormitories and company-offered houses
are categorized into assets for common use, since these assets
can not generate identiﬁable cash ﬂows.
The carrying amount of asset groups whose land has
signiﬁcantly depreciated, or which incurred consecutive
operating losses, were reduced to recoverable amounts, and¥Amount of loss
Thousands of U.S. dollars(Note 1)

1,272
15
1,287

¥

$

10,775127
10,902$such deducted amounts were recorded as loss on impairmentof ﬁxed assets.
The loss on impairment of ﬁxed assets consisted of a loss onbuildings and structures of ¥14 million (US$119 thousand), on
machinery and equipment of ¥1 million (US$8 thousand), and on
land of ¥1,272 million (US$ 10,775 thousand). The recoverable
amount of such asset groups was measured by their net realizablevalue. In the case where net selling values were used as realizablevalue of assets, relevant assets were evaluated based on the realestate appraisal standards and, the price of land fronting majorroads, which was used for immaterial asset. The asset groups
which were difﬁcult to sell or which could not be used for otherpurpose, however, were evaluated as a minimum unit price.

7. Investment securities
Investment securities as of March 31, 2007 and 2006 consisted of the followings:
Thousands of U.S. dollars (Note 1)

Millions of yen

2007
Non-current:
Marketable:
Marketable equity securities ..................................................
Investment trust funds and other ..........................................
Sub total ........................................................ ............................
Non-marketable securities ..........................................................
Total ............................................................................................

37

¥
¥
¥
¥

72,66581
72,746
1,176
73,922

2006

¥
¥
¥
¥

62,675
109
62,784
1,435
64,219

2007

$
$
$
$

615,544686
616,230
9,962
626,192

The carrying amounts and aggregate fair values of marketable securities for investments as of March 31, 2007 and 2006 were as follows:
Millions of yen

2007
Available-for-sale securities
Equity securities ...................................................... ¥Debt securities and other ......................................
Total ...................................................................... ¥Cost

Unrealized gain

Unrealized loss

23,267
61
23,328¥¥49,42820
49,448¥¥Fair Value

30
—
30

¥
¥

72,66581
72,746

Thousands of U.S. dollars (Note 1)

2007
Cost

Available-for-sale securities
Equity securities ...................................................... $ 197,094
Debt securities and other ......................................
517
Total ...................................................................... $ 197,611

Unrealized gain

Unrealized loss

$ 418,704
169$ 418,873$$

Fair Value

254
—
254

$ 615,544
686$ 616,230

Millions of yen

2006
Available-for-sale securities
Equity securities ...................................................... ¥Debt securities and other ......................................
Total ...................................................................... ¥Cost

Unrealized gain

Unrealized loss

21,15888
21,246¥¥

41,51721
41,538¥¥Fair Value

—
—
—

¥
¥

62,675
109
62,784

Proceeds from sales of available-for-sale securities and gross realized gain and loss on those sales for the years ended March 31, 2007
and 2006 were as follows:
Thousands of U.S. dollars (Note 1)

Millions of yen

2007
Proceeds ............................................................................................

¥

Gain (loss) on sales ........................................................ ...................

2006

24
(4)

¥

3,126
16

2007
$

203
(34)

8. Leases
The pro forma information of leased property under ﬁnance leases that do not transfer ownership of the leased property to thelessee on an “as if capitalized” basis as of March 31, 2007 and 2006 was as follows:
Thousands of U.S. dollars (Note 1)

Millions of yen

2007
Acquisition cost .............................................................. ................... ¥Accumulated depreciation ..............................................................
Net leased property ....................................................... ................... ¥

2006

3,895
2,570
1,325

¥
¥

4,498
3,220
1,278

2007
¥
Payments due after one year ..........................................................
Total ............................................................................................ ¥

523
631
1,154

$
$

2006
¥
¥

32,994
21,770
11,224

Thousands of U.S. dollars (Note 1)

Millions of yen

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

2007

545
653
1,198

2007
$
$

4,430
5,345
9,775

Lease payments under such leases for the years ended March, 2007 and 2006 were ¥586 million (US$4,964 thousand) and ¥941 million, respectively.

38

9. Short-Term Loans and Long-Term Debt
Short-term loans comprised overdrafts and promissory notes.
The weighted-average interest rate of short-term bank loans for the years ended March 31, 2007 and 2006 was 1.211% and0.654%, respectively.
The weighted-average interest rate of commercial paper for the year ended March 31,2006 was 0.080%.
Long-term debt comprised the following:Thousands of U.S. dollars (Note 1)

Millions of yen

2007
Zero coupon convertible bonds due 2023 ...... ............................ ¥ 14,000
3.2% unsecured bonds due 2008 .................................................
10,0003.0% unsecured bonds due 2006 .................................................
—
1.42% unsecured bonds due 2011 ................... ............................
10,0001.07% unsecured bonds due 2010 .................. ............................
3,000
1.18% unsecured bonds due 2009 .................. ............................
3,000
0.67% unsecured bonds due 2008 .................. ............................
30
1.18% unsecured bonds due 2009 .................. ............................
5,000
0.72% unsecured bonds due 2008 .................. ............................
100
1.28% unsecured bonds due 2009 .................. ............................
100
0.7% unsecured bonds due 2010 .................................................
60
0.95% unsecured bonds due 2010 .................. ............................
100
0.79% unsecured bonds due 2010 .................. ............................
70
1.55% unsecured bonds due 2011 .................. ............................
50
Long-term bank loans due through 2019, with weighted-averageinterest rate of 1.218% for the year ended March 31, 2007, andof 1.044% for the year ended March 31, 2006. ...........................
62,011(23,305)
Less current portion of long-term debt ............. ............................
Total ................................................................ ............................ ¥ 84,216
In June 1998, the Company issued ¥10,000 million(US$84,710 thousand) of 3.2% unsecured bonds due 2008.
In March 2003, the Company issued ¥3,000 million (US$25,413
thousand) of 1.07% privately-placed bonds due 2010.
In July 2003, the Company issued ¥14,000 million (US$118,594
thousand) of zero coupon convertible bonds due 2023.
In July 2003 , Zensei Pharmaceutical Industries Co., Ltd.
issued ¥100 million (US$847 thousand) of 0.72%
privately-placed bonds due 2008.
In September 2003, Nipro Genepha Corporation issued¥100 million (US$847 thousand) of 0.67% privately-placedbonds to be serially redeemed by 2008.
In July 2004, the Company issued ¥3,000 million (US$25,413
thousand) of 1.18% privately-placed bonds due 2009.
In July 2004, Zensei Pharmaceutical Industries Co., Ltd.
issued ¥100 million (US$847 thousand) of 1.28%
privately-placed bonds due 2009.

39

2007

2006
¥

14,00010,00010,00010,000
3,000
3,000
50
5,000
—
—
—
—
—
—

59,561(22,542)¥ 92,069$

118,594
84,710—84,71025,41325,413254
42,355
847
847
508
847
593
424

525,294(197,416)$ 713,393

In January 2005, Zensei Pharmaceutical Industries Co., Ltd.
issued ¥100 million (US$847 thousand) of 0.7%
privately-placed bonds to be serially redeemed by 2010.
In August 2005, Zensei Pharmaceutical Industries Co., Ltd.
issued ¥100 million (US$847 thousand) of 0.95%
privetely-placed bonds due 2010.
In August 2005, Zensei Pharmaceutical Industries Co., Ltd.
issued ¥100 million (US$847 thousand) of 0.79%
privately-placed bonds to be serially redeemed by 2010.
In March 2006, the Company issued ¥10,000 million(US$84,710 thousand) of 1.42% unsecured bonds due 2011.
In March 2006, the Company issued ¥5,000 mllion(US$42,355 thousand) of 1.18% privately-placed bonds due 2009.
In March 2006, Zensei Pharmaceutical Industries Co., Ltd.
issued ¥50 million (US$424 thousand) of 1.55%
privately-placed bonds due 2011.

The aggregate annual maturities of long-term debt outstanding at March 31, 2007 were as follows:
Thousands of U.S. dollars (Note 1)

Millions of yen

2007
2008 ................................................................................. ...................
2009 ................................................................................. ...................
2010 ................................................................................. ...................
2011 and thereafter ....................................................... ...................
Total ......................................................................... ...................
As is customary in Japan, long-term and short-term bankloans are made under general agreements which provide that
additional securities and guarantees for present and futureindebtedness will be given under certain circumstances at therequest of the bank, and that any collateral so furnished will beapplicable to all indebtedness due to the bank.

2007

¥

23,30526,314
16,291
41,611¥ 107,521$$

197,416
222,906
138,001
352,486
910,809

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

10. Accrued Pension and Severance Liabilities
The Company and certain consolidated subsidiaries have deﬁned beneﬁt pension plans and unfunded retirement beneﬁt plans for
employees. The following table sets forth the changes in projected beneﬁt obligation, plan assets and funded status of theCompany and its consolidated subsidiaries at March 31, 2007 and 2006.
Thousands of U.S. dollars (Note 1)

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) Accrued pension and severance liabilities 3)+4) .................... ¥

2007

2006

(7,750)6,539(1,211)(1,354)(2,565)(9,601)
7,967(1,634)(1,345)(2,979)

¥

¥

2007
$

$

(65,650)
55,392(10,258)(11,470)(21,728)

The breakdown of net beneﬁt cost for the years ended March 31, 2007 and 2006 was as follows:
Thousands of U.S. dollars (Note 1)

Millions of yen

2007
Service cost .................................................................... ...................

¥

Interest cost .................................................................... ...................
Expected return on plan assets .................................. ...................
Amortization of actuarial differences ..............................................
Other ................................................................................ ...................
Net periodic beneﬁt cost .............................................. ................... ¥

2006

586
204
(99)
(166)
—
525

¥

¥

641
227
(96)
175
114
1,061

2007
$

$

4,964
1,728
(839)
(1,406)—
4,447

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 actuarial differences ............. .....................................

2007

2006

Primarily 2.5%
1.5%
5 years

Primarily 2.5%
1.5%
5 years40

11. Commitments and Contingent Liabilities
The Company and consolidated subsidiaries had the following commitments and contingent liabilities:
Thousands of U.S. dollars (Note 1)

Millions of yen

2007
Liabilities for guarantees ..................................................................

¥
Export drafts discounted .................................................................
Trade notes receivable discounted .................... ............................
Total ............................................................................................. ¥

1,094
24
63
1,181

2006
¥

¥

2007

1,639
25
198
1,862

$

9,267
203
534
10,004$

12. Net Assets( i ) Japanese Corporate Law (“the Law’’) became effective on
May 1, 2006, replacing the Japanese Commercial Code (“theCode’’). Under the Law, the entire amount paid for new sharesis required to be designated as common stock. A company
may, however, by a resolution of the Board of Directors,
designate an amount not exceeding one half of the price of the
new shares as additional paid-in capital, which is included incapital surplus. Under the Law, in case where dividend
distribution of surplus is made, the smaller of an amount equal
to 10% of the dividend or the excess, if any, of 25% ofcommon stock over the total of additional paid-in capital andlegal earnings reserve must be set aside as additional paid-in
capital or legal earnings reserve. Legal earnings reserve is
included in retained earnings in the accompanying
consolidated balance sheets. Under the Code, companies
were required to set aside an amount equal to at least 10% of
cash dividends and other cash appropriations as legal earnings
reserve until the total of legal earnings reserve and additional
paid-in-capital equaled to 25% of common stock. Under theCode, legal earnings reserve and additional paid-in capital
could be used to eliminate or reduce a deﬁcit by a resolution of
the shareholders’ meeting or could be capitalized by aresolution of the Board of Directors. Under the Law, both ofthese appropriations generally require a resolution of theshareholders’ meeting. Additional paid-in capital and legal
earnings reserve may not be distributed as dividends. Under
the Code, however, additional paid-in capital and legal earnings
reserve could be transferred to retained earnings by the
resolution of the shareholders’ meeting as long as the total
amount of legal earnings reserve and additional paid-in capitalremained equal to or exceeded 25% of common stock. Under

the Law, all additional paid-in capital and all legal earnings
reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available
for dividends. The maximum amount that the Company can
distribute as dividends is calculated based on the
non-consolidated ﬁnancial statements of the Company inaccordance with the Law. Under the Law, companies can pay
dividends at any time during the ﬁscal year in addition to theyear–end dividend upon resolution at the shareholders’meeting. For companies that meet certain criteria such as: (1)having the Board of Directors. (2) having independent auditors.
(3) having the Board of Corporate Auditors. (4) the term ofservice of the directors is prescribed as one year rather than
two years of normal term by its articles of incorporation, and (5)the opinion of independent auditors is unqualiﬁed, the Board of
Directors may declare dividends if the company has prescribedso in its articles of incorporation. Semiannual interim dividends
may also be paid once a year upon resolution by the Board of
Directors if the articles of incorporation of the company sostipulated. Under the Law, certain limitations are imposed on
the amount of capital surplus and retained earnings available
for dividends. The amount of capital surplus and retained
earnings available for dividends under the Law was ¥47,106
million (US$399,034 thousand) as of March 31, 2007. Cashdividends charged to retained earnings during the ﬁscal year
were year-end cash dividends for the preceding ﬁscal year andinterim cash dividends for the current ﬁscal year.
( ii ) The following appropriation of retained earnings was approvedby the Shareholders’ Meeting held on June 27, 2007:
Millions of yen

Cash dividends .......... ¥2,349

Thousands of U.S. dollars(Note 1)$

19,898

13. Segment Reporting
The Company and its consolidated subsidiaries are primarily
engaged in the business consisting of four major segments:
Medical Equipment, Pharmaceutical, Glass and Materials andStore. These business segments are based on the market
nature of products.
The Medical Equipment segment manufactures and sells
disposable medical equipment. The medical equipment soldincludes dialyzers, dialysis-related devices, andinjection-related products.
The Pharmaceutical segment manufactures and sells a
range of pharmaceutical products and devices, such as

41

prescribed specialized and diagnostic products for hospitaluse, and medical equipment incorporating solutions anddrugs, 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 tubes for light bulbs and other glass products.
The Store segment encompasses a supermarket business anda drugstore business. The store segment sells fresh and daily foods,
general grocery, 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 years ended March 31, 2007 and 2006 was as follows:
Millions of yen

2007
MedicalEquipment

Pharmaceutical

Net sales:
Outside ................................... ¥ 97,300 ¥Intersegment .........................
4
Total ........................................
97,304
Operating expenses ..................
82,970Operating income ..................... ¥ 14,334 ¥Identiﬁable assets ...................... ¥ 114,946 ¥Depreciation and amortization ....
5,327
Loss on impairment of ﬁxed assets ....
—
Capital expenditures .................
11,06542,152 ¥—42,15238,854
3,298 ¥
80,342 ¥
5,496
—
9,490

Glass &
Materials

12,919 ¥3,445
16,364
14,4991,865 ¥
12,482 ¥
534
—
167

Store

Other

30,973 ¥—30,97330,703
270 ¥
— ¥
383
15
58

Total

Eliminations/
Corporate

Consolidated— ¥ 184,363
1,019 ¥ 184,363—
3,669 ¥ (3,669)
220(3,669)184,363
188,032
1,239
171,310
3,196
168,1141,088
151 ¥ 19,918 ¥ (6,865) ¥ 13,053
6,009 ¥ 213,779 ¥ 122,881 ¥ 336,660
12,470641
11,829
89
1,287
—
1,287
1,272
23,093
2,227
20,866
86

Thousands of U.S. dollars (Note 1)

2007
MedicalEquipment

Pharmaceutical

Glass &
Materials

Store

Other

Net sales:
Outside ................................... $ 824,227 $ 357,069 $ 109,437 $ 262,372 $Intersegment .........................
—
29,183—34
Total ........................................
262,372
138,620
357,069
824,261
Operating expenses ..................
260,085
122,821329,132
702,838
Operating income ..................... $ 121,423 $ 27,937 $ 15,799 $
2,287 $
Identiﬁable assets ...................... $ 973,706 $ 680,576 $ 105,736 $— $Depreciation and amortization ....
3,244
4,524
46,55645,125
Loss on impairment of ﬁxed assets ....
127
—
—
—
Capital expenditures .................
491
1,415
80,39093,731

Total

Eliminations/
Corporate

Consolidated— $$1,561,737
8,632 $1,561,737—
31,080 $ (31,080)
1,863(31,080) 1,561,737
10,495 1,592,817
27,073 1,451,165
9,216 1,424,092
1,279 $ 168,725 $ (58,153) $ 110,572
50,902 $1,810,920 $1,040,923 $2,851,843
105,633
5,430
100,203754
10,902—
10,902
10,775
195,62118,865
176,756
729

Millions of yen

2006
MedicalEquipment

Net sales:
Outside ................................... ¥Intersegment .........................
Total ........................................
Operating expenses ..................
Operating income ..................... ¥Identiﬁable assets ...................... ¥Depreciation and amortization ....
Loss on impairment of ﬁxed assets ....
Capital expenditures .................

Pharmaceutical

90,868 ¥090,86877,43813,430 ¥98,093 ¥
4,489
31
8,959

35,220 ¥—35,22033,1092,111 ¥
68,870 ¥5,608—
10,621Glass &
Materials

11,934 ¥3,402
15,336
13,5001,836 ¥
16,188 ¥
608
—
233

Store

67,261 ¥35
67,296
66,718578 ¥
39,245 ¥
996
1,491
349

Other

Total

Eliminations/
Corporate

Consolidated— ¥ 206,801
1,518 ¥ 206,801—
3,954 ¥ (3,954)
517(3,954)
206,801
210,755
2,035
194,469
2,198
192,271
1,506
529 ¥ 18,484 ¥ (6,152) ¥ 12,332
1,239 ¥ 223,635 ¥ 115,106 ¥ 338,741
12,315608
11,707
6
1,998
—
1,998
476
20,874692
20,18220Note:(1) Operating expenses of “Eliminations/Corporate” for the years ended March 31, 2007 and 2006 included unallocated corporate costs of ¥6,865 million (US$58,153
thousand) and ¥6,152 million, respectively. The unallocated corporate costs consisted primarily of research and development costs and headquarters administration costs.
(2) Assets of “Eliminations/Corporate” at March 31, 2007 and 2006 included ¥122,931million (US$1,041,347 thousand) and ¥115,321 million of corporate assets, respectively,
consisting primarily of cash and cash equivalents, investment securities, research and development-related equipment and headquarters administration-related assets.

42

The information by geographic area for the years ended March 31, 2007 and 2006 was as follows:
Millions of yen

2007
Japan

Net sales:
Outside ................................... ¥Intersegment .........................
Total ........................................
Operating expenses..................
Operating income (loss) ........... ¥Identiﬁable assets ...................... ¥America

156,043
23,611
179,654
159,255
20,399214,819

Europe17,382805
18,187
19,133
(946)
6,427

¥

¥
¥

7,102
86
7,188
7,050
138
3,112

¥

¥
¥

Eliminations/
Corporate

Asia

3,836
12,374
16,21015,756
454
6,370

¥

¥
¥

¥

¥
¥

Consolidated—(36,876)(36,876)(29,884)(6,992)
105,932¥¥¥

184,363—
184,363
171,310
13,053
336,660

Thousands of U.S. dollars (Note 1)

2007
Japan

America

Net sales:
Outside ................................... $ 1,321,838
Intersegment .........................
200,008
Total ........................................ 1,521,846
Operating expenses.................. 1,349,047
Operating income (loss) ........... $ 172,799
Identiﬁable assets ...................... $ 1,819,729$$$

Europe147,243
6,819
154,062
162,075(8,013)54,443$$$Eliminations/
Corporate

Consolidated—$ (312,376)(312,376)(253,147)$ (59,229)$ 897,349$ 1,561,737—
1,561,737
1,451,165$ 110,572$ 2,851,843

Eliminations/
Corporate

Consolidated

Asia

60,161729
60,89059,721
1,169
26,362$$$32,495
104,820
137,315
133,469
3,846
53,960Millions of yen

2006
Japan

Net sales:
Outside ................................... ¥Intersegment .........................
Total ........................................
Operating expenses ..................
Operating income (loss) ........... ¥Identiﬁable assets ...................... ¥America

184,155
15,829199,984
181,129
18,855201,235¥

Europe14,682451
15,133
15,711(578)
11,814

¥
¥

¥

¥
¥

6,312
5
6,317
6,558
(241)
¥3,538

Asia

¥

1,652
10,804
12,456
11,598858
19,739

¥
¥

¥

¥
¥

—
(27,089)(27,089)(20,527)(6,562)
102,415¥¥¥

206,801—
206,801
194,469
12,332
338,741Note:(1) Operating expenses of “Eliminations/Corporate” for the years ended March 31, 2007 and 2006 included unallocated corporate costs of ¥6,865 million (US$58,153
thousand) and ¥6,152 million, respectively. The unallocated corporate costs consisted primarily of research and development costs and headquarters administration costs.
(2) Assets of “Eliminations/Corporate” at March 31, 2007 and 2006 included ¥122,931 million (US$1,041,347 thousand) and ¥115,321 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) The main countries of each geographic area were:
America : The United States of America and Brazil
Europe : Belgium
Asia: China, Thailand and Singapore

Sales to foreign customers were as follows:
Millions of yen

2007
America

Export sales and sales byoverseas subsidiaries . . . . . . . . . . . ¥ 31,899
Percentage of such sales against
consolidated net sales . . . . . . . . . . . . .
17.3%

Europe2006
Asia¥ 15,071

¥

8.2%

Total

America

Europe7,568¥ 54,538¥ 28,877¥ 14,074

4.1%

29.6%

14.0%

6.8%

Thousands of U.S. dollars (Note 1)

2007
America

Export sales and sales byoverseas subsidiaries . . . . . . . . . . . $ 270,216
Percentage of such sales against
consolidated net sales . . . . . . . . . . . . .
17.3%

43

Europe

Asia

Total

$ 127,666$ 64,108$ 461,990

8.2%

4.1%

29.6%

Asia

¥

Total

6,407

¥ 49,358

3.1%

23.9%

14. Selling, General and Administrative Expenses
Signiﬁcant components of selling, general and administrative expenses for the years ended March 31, 2007 and 2006 were as follows:
Thousands of U.S. dollars (Note 1)

Millions of yen

2007
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2006

2,944
10,953¥

4,440
13,561

2007$

24,93992,783

15. Reseach and Development Expenses
Research and development expenses for the years ended March 31, 2007 and 2006 were ¥4,461 million (US$37,789 thousand) and¥3,760 million, respectively.

16. Supplemental Disclosures of Cash Flow Information
Supplemental information related to the Consolidated Statements of Cash Flows was as follows:
Thousands of U.S. dollars (Note 1)

Millions of yen

2007
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,698
5,320

2006
¥

1,468
5,668

2007
$

14,38445,066

17. Post Balance Sheet Event
Acquisition of the shares of Saitama Daiichi Pharmaceutical Co., Ltd. (to be a subsidiary).
We acquired all the issued shares of Saitama Daiichi Pharmaceutical Co., Ltd. from Daiichi Sankyo Company, Limited.

1. The reason of acquisition of the shares
Our pharmaceutical business has conducted two main businesses, OEM business and Generic drug business and we have
had prominent results mainly in the ﬁeld of injection drug and oral drug in domestic market. As we are engaged indevelopment of Drug Delivery System and new drug administer systems for further expansion of OEM, we are viewing
Transdermal Therapeutic System (TTS) ﬁeld to extend our possible OEM.
In our expectation that Saitama Daiichi Pharmaceutical Co., Ltd could be a part of our group OEM manufacturer withresearch and development in the ﬁeld of TTS, as the company had accumulated the technology of drugs to be absorbed
via skin under Daiichi Pharmaceutical Co., Ltd. (currently Daiichi Sankyo Company, Limited) and had their own researchand development department, we acquired the shares of the company, believing it will contribute to the expansion of
our group pharmaceutical business.

2. Overview of Saitama Daiichi Pharmaceutical Co., Ltd.
(1) Company name(2) Representative(3) Address(4) Established date(5) Main business(6) Capital

Saitama Daiichi Pharmaceutical Co., Ltd.
Koshiro Nakamura, President
8-1, Minamisakae-cho, Kasukabe, Saitama
February 15, 1963
Research, development, manufacturing, marketing, importing and exporting of pharmaceuticalproducts, mainly of drugs to be absorbed via skin.
¥1,005 million

3. Overview of Daiichi Sankyo Company, Limited.
(1) Company name(2) Representative(3) Address(4) Established date(5) Main business(6) Capital

Daiichi Sankyo Company, Limited.
Takashi Shoda, President
3-5-1, Nihonbashi-honcho, Chuo-ku, Tokyo
Septemeber 28, 2005
Research & Development, Manufacturing, Import, and Sales & Marketing of pharmaceutical products.
¥50 billion

4. Number of the shares acquired and the share holding status before and after acquisition(1) Number of the shares held(2) Number of the shares acquired(3) Number of the shares held after acquisition

5. Acquisition date0 shares (Holding ratio 0%)
297,000 shares
297,000 shares (Holding ratio 100.0%)

May 15, 2007
44

Report of Independent Certiﬁed Public Accountantson The Consolidated Financial Statements

To the Board of Directorsof Nipro Corporation

We have audited the accompanying consolidated balance sheets of Nipro Corporation and its Consolidated
Subsidiaries as of March 31, 2007 and 2006, 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 Niporo 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 its Consolidated Subsidiaries as of March 31, 2007
and 2006 and the consolidated results of their operations and their cash ﬂows for the years then ended inconformity with accounting principles and practices generally accepted in Japan.

Osaka, Japan
July 31, 2007
Tomei Audit Corporation

45

Corporate Information (As of March 31, 2007)

Date of Establishment

Common Stock

July 8, 1954

Authorized
IssuedOutstanding
Number of Shareholders

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/

200,000,000 shares
63,878,505 shares
63,485,438 shares
12,516

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

Tokyo Ofﬁce

Transfer Agent

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

Mizuho Trust & Banking Co., Ltd., Osaka Branch,
Stock Transfer Agency Dpt.
2-11-16 Sonezaki, Kita-ku, Osaka 530-0057, Japan

Number of Employees
Parent Company ............................................................... 1,966
Consolidated subsidiaries ................................................. 6,841
Total .................................................................................. . 8,807

Stock Price Range (Tokyo Stock Exchange)

Principal Shareholders
Number of Shares Held(in thousands)

Percentage of Total
Shares in Issue (%)

Sanri Kosan Co., Ltd. ......................... 12,920
Japan Trustee Services Bank, Ltd. ...... 5,252
The Master Trust Bank of Japan, Ltd. ... 3,404
Minoru Sano ..................................... 1,993
Trust & Custody Services Bank, Ltd. ... 1,765
Resona Bank, Limited ........................ 1,380
782
Mizuho Corporate Bank, Ltd. ..............
State Street Bank and777
Trust Company 505019 .....................
Deutsche Bank AG London PB Irish
768
Residents 619 ...................................
The Dai-ichi Mutual Life Insurance
611
Company ..........................................
Total ................................................. 29,653

20.23
8.22
5.33
3.12
2.76
2.16
1.23

(Yen)
2,800

2,400

2,000

1,600

1,200

1.22

800

1.20

400

0.96
46.42

0

12

2005

3

6

9

12

2006

3

6

9

12

3

2007

Subsidiaries and afﬁliates (As of June 30, 2007)
Area
Domestic

CountryJapan

Company
Nipro Medical Industries, Ltd.
Nipro Pharma Corporation
Nipro Genepha Corporation
Tohoku Nipro Pharmaceutical Corporation
Zensei Pharmaceutical Industries Co., Ltd.
Saitama Daiichi Pharmaceutical Co., Ltd.
Shinwa Shoji Co., Ltd.
Nissho Insurance Services Co., Ltd.
Bipha Corporation*

Segment
Medical Equipment
PharmaceuticalPharmaceuticalPharmaceuticalPharmaceuticalPharmaceutical
Glass & Materials
Other
Pharmaceutical

Principal business
Manufacturing
Manufacturing and Marketing
Manufacturing and Marketing
Manufacturing
Manufacturing and Marketing
Manufacturing and R&D
Manufacturing and Marketing
Insurance agency
R&D and Manufacturing

Overseas

ThailandNipro (Thailand) Corporation Ltd.
Nipro Sales (Thailand) Co., Ltd.
Nipro Medical (India) Pvt Ltd.
Nipro (Shanghai) Co., Ltd.
Nipro Trading (Shanghai) Co., Ltd.
Shanghai Nissho Vacuum Flask Reﬁll Co., Ltd.
Nipro Asia Pte. Ltd.
Nipro Middle East FZE
Nipro South Africa Pty Ltd.
Nipro Medical LTDA.
Nipro Industria e Comercio de Produtos Cardiopulmonares LTDA
Nipro Medical Corporation
Nipro Diabetes Systems, Inc.
Nipro Medical Panama S.A.
Nipro Medica de Mexico, S.A. DE C.V.
Nipro Medical Puerto Rico Inc.
Nipro Europe N.V.
OOO Nipro Medical

Medical Equipment
Medical Equipment
Medical Equipment
Medical Equipment
Medical Equipment
Glass & Materials
Medical Equipment
Medical Equipment
Medical Equipment
Medical Equipment
Medical Equipment
Medical Equipment
Medical Equipment
Medical Equipment
Medical Equipment
Medical Equipment
Medical Equipment
Medical Equipment

Manufacturing and Marketing
MarketingMarketing
Manufacturing and Marketing
MarketingMarketingMarketingMarketingMarketing
Manufacturing and Marketing
Manufacturing and Marketing
Marketing
R&D and Marketing
MarketingMarketingMarketingMarketingMarketing

India
China
Singapore
U.A.E.
South Africa
BrazilU.S.A.
PanamaMexicoPuerto Rico
Belgium
RussiaNote:(1) * Afﬁliate accounted for by the equity method

46

NIPRO CORPORATION
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/

Printed with environmentallyfriendly soy ink.

Printed on 100% recycled paper.