NISSHINBO ANNUAL REPORT 2004 Year ended March 31, 2004

2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku, Tokyo 103-8650, Japan
Tel: 03-5695-8833 Fax: 03-5695-8970
URL: http://www.nisshinbo.co.jp/

Printed in Japan

Annual Report 2004
(Year ended March 31, 2004)

Financial Highlights(Years ended 31st March)

Consolidated:(millions of
US dollars)(millions of yen)

Net Sales
Net Income
Shareholders’ Equity

2004

2003

2004

¥ 226,883
3,919
214,132¥ 231,193
777
186,028$ 2,161
37
2,039

Per Share:(Yen)

CONTENTSNet Income
Shareholders’ Equity
Cash Dividends¥ 17.86
1,030.98
7.00(US dollars)¥

3.18
860.52
7.00

$

0.17
9.82
0.07

Profile — 1
Business Lineup — 2

The United States dollar amounts in this report are given for convenience only andrepresent translations of Japanese yen at the rate of ¥105=US$1.

What Does the New Nisshinbo Stand for ?
Interview with the President — 4
Three-year Management Plan 2006 — 4Major Divisional Strategies — 5
Review of Operations — 12
Six-year Summary —16

Net Sales

Net Income(billions of yen)(billions of yen)

Shareholders’EquityFinancial Review — 17(billions of yen)

Financial Section — 18
Nisshinbo History — 30
Nisshinbo Group — 31
Board of Directors/Corporate Data — 32

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200

Organization Chart —33

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The paper used for this Annual Report is fromNisshinbo’s VENT NOUVEAU series of fine papers.

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In this annual report, statements other than historical facts are forward-looking statements that reflect our plans andexpectations. These forward-looking statements involve risks, uncertainties and other factors that may cause ouractual results and achievements to differ materially from those anticipated in these statements.

NISSHINBO Industries, Inc. (the “Company”) was founded in 1907 as a manufacturer of cotton yarns and threads, and quickly
assumed a position of leadership in the industry. Our nearly 100-year history has been characterized by strategic moves taken inadvance of competitors and designed to raise productivity, improve quality and add value. Today, we are a total textiles manufacturer,
controlling operations from spinning to finishing. This, together with our accumulated high levels of technology, gives us anadvantage in the development of truly distinctive products and in quality control.
Through the application in other fields of technologies and expertise originally developed in the textiles area, we have diversified
our operations into the manufacture of automobile brakes, papers, chemical products, machine tools and others. These non-textile
lines have grown steadily and now account for over 70% of consolidated net sales.
We offer a truly diverse range of products tailored to customer needs: high value-added finishing processing and products in the
textiles segment, including SUPER SOFT (SS), SUPER SOFT PEACHPHASE (SSP) and NON CARE, as well as new-generationelectronic braking systems, high heat-insulation panels, bipolar plates for fuel cell and filters for plasma display panels (PDPs).
“Nisshinbo”, comprising the Company and its consolidated subsidiaries and affiliates, aims to be a 21st century manufacturer
offering a lineup of highly efficient leading-edge production systems and a diverse range of high value-added products. With its
approach that emphasizes innovation, Nisshinbo will strive to solidify its position as a highly profitable company that contributes tosociety through its diverse product lineup.

1

Business Lineup

TextilesNon-textiles

Textile products have been the mainstay of our business since ourfoundation. We lead the Japanese textiles industry with our highquality products, backed up by our accumulated technology, andhave gained the trust of customers. We have the top share in thedomestic markets for shirt materials, denim, and polyester andcotton blended uniform materials.
We undertake comprehensive operations including spinning andfinishing, and by integrating manufacturing and sales activities wehave established a flexible system enabling supply of original
products that overseas manufacturers cannot match for quality.
One of our particular strengths is an ability to respond quickly tothe precise needs of customers. We offer a variety of unique, highvalue-added textile finishing processes and products, including SS
soft and easy-care fabrics, SSP wrinkle-free fabrics, CELTOPIA
cotton/wool blended fabrics, NON CARE ultimate wrinkle-freefabrics, Nisshinbo Mobilon spandex and OIKOS non-woven cotton
fabrics. Nisshinbo has also entered the shirt apparel sector throughits subsidiaries as a means of strengthening activities in areas close
to consumers.
We are taking aggressive measures to expand our overseas
operations, targeting both domestic and overseas markets. To
strengthen its global competitiveness, Nisshinbo has upgraded andexpanded its production facilities in China and Indonesia, and is
working to promote sales of high-quality products. In addition, we
also operate NISSHINBO (SHANGHAI) CO., LTD., our sales
base in China, and the Global Operation Promotion Office, which
was set up to provide maximum support for our overseas operations.

AUTOMOBILE BRAKESWe are one of Japan’s leading manufacturers of friction materials andautomobile brakes, and this sector has an important role in our drive
toward diversification. By obtaining a clear picture of customer
needs, we look to the future and undertake technology development
and investments in areas related to high coefficient of friction,
noise/vibration characteristics, improvements of brake pad life,
application of new, eco-friendly technologies, construction methods
and materials. Our product development emphasis is on “green” pads
using environment-friendly materials.
Through our affiliates, Nisshinbo also offers a diverse range ofcontrol systems, including the Anti-lock Brake System (ABS), as
well as Stability Control Systems, which help avoid dangerous
situations by controlling directional movement of a vehicle to enablesafe driving. Our original, compact, lightweight and low-cost NT
series ABS is available in a wide lineup and is sold in markets
worldwide.
In parallel with the development of our own technologies, we
engage in technology exchange and collaborate with major overseas
brake manufacturers. We have also set up production bases forfriction materials and automobile brakes in the United States,
Thailand and South Korea in order to strengthen our presence inthose markets.

2

PAPERS
We manufacture a wide range of paper and paper-related products,
including household papers, such as tissue paper, toilet paper andkitchen-use paper towels, fine papers used for quality printing,publications and packaging, synthetic papers and labels. Our valueadded products include COTTON FEEL, a household paper madeusing our spinning technologies, VENT NOUVEAU and MILT GA,
natural-feel fine papers for high-quality printing, and synthetic
papers for fine digital printing.

Consolidated Sales Composition(%)
100

CHEMICAL PRODUCTS
We produce rigid-type polyurethane foam used for heat-insulationmaterial, flexible types used for cushion material, and a glass fiberreinforced polyurethane foam, which is a lightweight, strong,
corrosion-resistant material widely used in the water treatment andconstruction industries. In the civil engineering field, we provide
products such as SET FOAM. We are also a pioneer in the
introduction of environment-friendly, non-fluorocarbon polyurethane
foam for application as heat-insulation material in the construction
field. Moreover, we are expanding the applications of our original
polyurethane elastomer Nisshinbo Mobilon, which has excellent
elasticity and water-resistance characteristics and is used in a numberof industrial products and consumer goods fields. In addition, we
provide new carbon products for application mainly insemiconductor production and other electronics sectors.
Other materials produced by Nisshinbo include APG® (Aqua
Porous Gel), BCN® (Bio Contact N) and Vacuum Insulation Panel.
We also produce molded plastic cross-flow fans for air conditioners
for electric appliance markets, mainly in China and Southeast Asia.
OTHER PRODUCTS• Machine Tools
We are an acknowledged specialist in the manufacture and sale ofcustomized machine tools and CNC sheet-metal machinery. Thisbusiness supplies its FMS hardware/software systems to suchleading-edge industries as the automotive, electronics and aircraft
industries through its domestic and overseas sales networks. We also
supply environment-related products, including a photovoltaic
module manufacturing system and a kitchen waste disposal unit forcommercial use, as well as precision processing products to theautomobile and other industries on an OEM basis.

Sales by Segment in
Fiscal 2004(%)
Textiles 30.1

80
60

Automobile Brakes 23.0

40

Papers 12.8
Chemical Products 14.1

20

Other Products 17.8
0Real Estate Leasing 2.2
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Note: Chemical Products, previously included in the Other Products sector, was treatedindependently from fiscal 2003 due to the growing importance and potential of the sector.
Figures for previous fiscal years have been adapted to take account of this change.

• Others
We manufacture medical-use electronic equipment, including
ultrasound diagnostic devices and surgical equipment, applied
electronic equipment, including “handy” terminals and CRT graphic
displays, and radio communications equipment, including mobile
telephones and PHSs. In the digital household electronics field, we
manufacture and market optical filters for PDPs. We also provide
bipolar plates for fuel cell which are widely regarded as nextgeneration energy system parts, and develop and supply the
production systems that integrate the CHOSHOKU SENKA fuzzy
logic computer color matching (CCM) system, manufacturing
process support system and enterprise resource planning packages.
All are based on our original technologies.
REAL ESTATE LEASING
We are engaged in the real estate leasing business for the purpose of
efficient utilization of unused land. We lease office and residentialbuildings in Tokyo, and land previously occupied by our factory
facilities for use as shopping centers and model homes.

3Interview with the President

you give us a brief overview of fiscal 2004,
Q1. Could
ended March 31, 2004, and summarize yourconsolidated business results?
During fiscal 2004, the Japanese economy was characterized by
improved conditions in several industries amid a pickup in personal
consumption and greater willingness by companies to make capital
investments. Growing expectations of an economic recovery in thesecond half were further underpinned by rising stock prices.
Under these conditions, consolidated net sales decreased 1.9%
from the previous fiscal year to ¥226,883 million (US$2,161
million). Nonetheless, operating income jumped 41.9% to ¥8,496
million (US$81 million) and net income was ¥3,919 million (US$37
million). By business segment, sales for the Textiles decreased 7.6%
to ¥68,403 million (US$651 million), and sales for the Non-textiles
edged up 0.8% to ¥158,480 million (US$1,509 million). The ratio of
Non-textiles sales to total sales increased 1.9 percentage points to
69.9%, while the ratio of Textiles sales to total sales decreased 1.9
percentage points to 30.1%.
Fiscal 2004 saw Nisshinbo launch a new three-year management
plan to “strengthen profit-making capabilities andincrease corporate value.” Unfortunately, we fell
short of the plan’s first-year targets ofconsolidated net sales of ¥237,000 million andoperating income of ¥9,000 million. Lower sales
in the Textiles resulted from such factors as anindustry-wide preference for lower prices andNisshinbo’s closing of domestic plants and shift tooverseas production in response to an influx ofgarments from overseas. Conversely, in theThree-year Management Plan 2006
Basic Objective•Increase profitability with the aim of enhancing corporate value
Key Tasks• Business plan: Formulate business plans for each segment and verify progress• Performance assessment: Assess segment performances every term based on the performanceassessment criteria• Consolidated management: Reinforce management capabilities of the Group companies• New businesses: Promote commercialization of R&D themes companywide
Promotional Measures
In response to changing public perspectives on companies and globalization of management, the Company
will promote the following measures to take a more central role in the market.
1. Stress Customer Satisfaction (CS)
2. Improve asset efficiency
3. Establish globally optimized production and distribution systems
4. Form flexible corporate alliances and concentrate management resources on key areas of strength
5. Develop and reinforce new businesses
6. Enhance investor relations
7. Ensure full compliance4Non-textiles, several divisions reported improved results. However,
the results of our mainstay Automobile Brakes business was
significantly affected by a shift of its ABS products business toContinental Teves Corporation (CTC), a joint venture.
I view our ability to increase profits despite a decline in sales as asignificant accomplishment. This is irrefutable evidence thatmeasures taken to rebuild our businesses have begun to yield
tangible results.
would you assess the specific accomplishments
Q2. How
made during the first year of the three-year plan?

Rather than being a result of activities undertaken in a single year, I
feel strongly that all our past efforts to reform our business structure
have finally begun to bear fruit. During fiscal 2004, we focused on
the theme “thorough goal management and increased profitability,”
as we strived to achieve the first-year targets of our three-year
management plan. Specifically, we focused on accelerating the paceof reforms in our business structure.
In line with our “thorough goal management,” during the fiscal
year we put into place our “Program for Promoting Annual
Management Goals,” which closely monitors and evaluates the
management goals of each segment headquarters, and our “N21
System,” a management system based on the aforementioned
program that reflects the achievements of each segment based on theperformance evaluation of individual employees. We are also
promoting self-reliance that will encourage greater independence ofeach division. To maintain the benefits of results-oriented
operations, we will make ongoing adjustments to ensure ourmanagement systems remain highly effective.

We are also focusing on “strengthening profit-making
capabilities” and are solidifying our base for raising profitability that
we established in fiscal 2003. Each business division continues tomake progress in disposing of unprofitable businesses, reducing
production costs and streamlining inventories, which is rewarding uswith rising profitability. Particularly noteworthy is the Textiles
segment, which has trimmed excess production facilities andpersonnel in Japan and has nearly finished its business restructuring
process with the closure of the Hamamatsu Plant in fiscal 2004.
you explain the outlook for fiscal 2005 andQ3. Could
describe some of the policies that you will implementin the coming year?
The positive effects of our restructuring surfaced during the second
half of fiscal 2004. I expect these benefits will remain evident
throughout fiscal 2005. The profitability of Nisshinbo Group
companies has improved, thanks in part to a favorable turnaround in
the business environment. Moreover, I anticipate that the additionof CHOYA CORP. and Naigai Shirts Co., Ltd., which became
consolidated subsidiaries during the year, will also make positive
contributions to our business results. In addition, as we also expect
to record an extraordinary gain from the return of the proxy portionof employee pension funds to the government, the outlook for bothsales and income is bright.
A principal theme in fiscal 2005 will be to “strengthen
profitability and expand sales.” Using the foundation built throughvarious activities undertaken to the present aimed at “reducing
losses,” we will now focus on “generating profits,” as we enter aphase for establishing a high-profit business structure.

Business Seeds Sprouting Roots
The Research and Development Division is working actively to establish
two new businesses, electric double layer capacitors and CARBODILITE,
which have emerged from the seed stage of development. This division is
also progressing with research in such biotechnology-related areas as
DNA microarray. From the perspective of protecting the environment,a recent trend in the automobile and electronics industries is the movetoward the use of biodegradable plastic components. To ensure thatthese plastics do not dissolve prematurely, it is necessary to add plastics
that strengthen the functions of materials. CARBODILITE is outstanding interms of strengthening this function and has been highly acclaimed byusers. In view of the expected large growth in the CARBODILITE business,
we plan to increase production facilities for this product at ourTokushima Plant.
Turning to capacitors, which are expected to be widely used in electriccars, Nisshinbo developed an electric double layer capacitor by applying
its original “ionic liquid” as an electrolyte. We are currently progressing
with the development of this business with Japan Radio Co., Ltd., which
possesses know-how in the actual manufacture of capacitors.

We are currently supplying DNA microarray, which have applications
in pharmaceutical products, in vitro diagnostic and food inspection fields
in collaboration with other leading companies.
Through its involvement in these product fields, Nisshinbo is acquiring
valuable experience and know-how and is establishing a structure thatwill enable it to realize a speedy and efficient development structure.
During fiscal 2004, Nisshinbo’s R&D expenditures amounted to¥6,220 million (US$59 million), up 5.1% over the previous fiscal year.
As of March 31, 2004, the number of domestic and overseas patents
held by Nisshinbo was 801, while patent applications outstanding
amounted to 1,522.

R&D Expenditure(billions of yen)

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DNA microarray5

Interview with the President

We have already laid the groundwork for achieving this objective
in fiscal 2004. Specifically, we will adopt such measures asdeveloping new materials, cultivating new growth businesses,
expanding our business through M&A activities and alliances,
responding to globalization, establishing a new business promotion
organizational structure, and carrying out selective capital
investment to attain further growth in businesses where we have
carved out strong positions. By taking these steps, we are sewing
additional seeds for further growth in sales and profits. I believe thatmaking efficient use of our assets will also be key to the realizationof these objectives.
are your thoughts on developing new materials
Q 4. Whatand cultivating new businesses?

Our basic direction is toward the pursuit of production innovation.
To the present, Nisshinbo and other Japanese manufacturers havebuilt their profit structures based on process innovation. However,process innovation has now spread worldwide and no longer
represents a competitive strength. I believe that greater emphasis on
originality, the basis of production, will be the key factor underlying
competitiveness in the future. However, thisapproach also carries risks. Developing thehighest-quality products is meaningless if it
does not accurately reflect market needs or acompany does not possess a leadership
position for that product. This is perhaps thebiggest risk facing manufacturers. Conversely,pressing ahead with new approaches anddistributing risk are also paramount. Moreover,

A Business Commercialization Process that Responds Quickly to Change
The Business Developing Division is involved in commercialization in growth fields characterized bydramatic changes. Therefore, this department strives to make effective use of goal management as it
works to create a structure with an emphasis on speed. Looking at our various businesses, in opticalfilters for PDPs, a sector expected to grow in tandem with increased demand for large-size, thinscreen TVs, we successfully developed new products using our superior production methods. In April
2004, we put the final touches on a structure for mass production of optical filters at the Harisaki
Plant and are now placing top priority on securing new customers.
Regarding bipolar plates for fuel cell, fuel cell manufacturers still remain in the development
process phases and therefore we anticipate that more time will be needed for commercialization.
Nisshinbo is still focusing its efforts on development of prototypes for bipolar plates for fuel cell.
On a different front, we are introducing management systems that clearly define the differences
between R&D and business operations. During fiscal 2004, we
obtained ISO9001:2000 certification-the international standard for
management systems-at the Business Developing Division.

Next-generation condenser device (Original “ionic liquid” as electrolyte
in capacitor)6it is essential to accurately gauge market conditions. We are forminga business commercialization process that makes accurate
assessments of market outlooks through a mutually complementary
structure composed of our Research and Development Division,
which handles development of new materials and products, and theBusiness Developing Division, which is in charge ofcommercialization. The Business Developing Division is currently
actively moving ahead with projects for optical filters for PDPs andbipolar plates for fuel cell. We also have several other promising newmaterials and products in the development stage that have strong
potential for commercialization. These include CARBODILITE, ahigh functional polymer resin, and an electric double layer capacitor
that uses our ionic liquid as an electrolyte.
We are also continuing our energetic development efforts in our
existing fields. We have developed a host of highly competitive andunique products that have received widespread plaudits in theirrespective markets. These include such textile products as our NON
CARE pure cotton wash-and-wear shirts with no need for ironingthat integrate nanotechnologies, as well as chemical products that
include N’s VIP high-function vacuum heat insulation panel. We
will continue to aggressively allocate management resources to thedevelopment of materials and new businesses.
you please tell us about the aims of yourQ5. Will
aggressive pursuit of business alliances?

Over the years, Nisshinbo has undertaken totally integrated
operations from development and manufacturing to marketing.
Without a doubt, integrated operations furnish a number ofimportant benefits, chief among them being the ability to control

our entire business operations and generate significant profits during
times of business expansion. This approach has delivered crucial
results. Nevertheless, the breathtaking pace of changes in today’ssociety and markets brings a significant risk of being late to themarket. Even if we develop outstanding materials for which there isa market, there is an ever-present danger of being pushed out of thismarket by late entrants during the time it takes to independently
prepare new production facilities and establish new sale routes.
Therefore, to achieve speed in our business activities, we seek tocollaborate with leading companies possessing functions that
Nisshinbo lacks, and thus strive to form alliances between twostrong companies while mutually sharing profits from thiscooperation. Nisshinbo boasts outstanding products and materials.
We intend to adopt a business style that allows us to effectively
deploy such strengths to expand our markets and business domains.
you describe your thinking regarding M&A,
Q 6. Could
which is also one means of expanding your businesses?
We do not intentionally focus on M&A beforehand as an end in
itself. Rather, we view M&A as one means of forming alliances andundertake M&A on a case-by-case basis. In our Textiles business,during fiscal 2004 we increased our holdings in CHOYA CORP.
and Naigai Shirts Co., Ltd. and made these consolidated Nisshinbo
subsidiaries, thereby launching our entry into the apparel business.
In the textiles industry, materials manufacturers such as Nisshinbo
once led the business. However, the entire structure of this businesshas undergone a dramatic transformation, with the pendulum of
power swinging toward apparel makers and sales companies that
operate in markets close to consumers. With operations ranging

Strategies for Expanding Our Textiles BusinessIn our Textiles business, we have virtually completed the rebuilding of our domestic operations
and intend to implement aggressive strategies to expand our markets deploying our worldwide
optimal production and sales scheme. We are working to introduce high-quality “Nisshinbo
Quality” mainstay products produced at our Indonesia and China joint ventures in markets
worldwide, while the Global Operation Promotion Office is coordinating strategies as we strive
to maximize profits. In China, NISSHINBO (SHANGHAI) CO., LTD. is working to expand sales inthat country. In Japan, we have established a supply structure for high value-added productsthat integrate manufacturing and sales functions, and we also intend to expand sales of highvalue-added products made in Japan including shirts, Nisshinbo Mobilon spandex and casual
wear, in China, Europe and the United States.
In spring 2004, Nisshinbo introduced original shirts under the brand name of Nisshinbo.
Nisshinbo has also launched full-scale efforts to expand its business for garments by turning
to the subsidiaries Naigai Shirts Co., Ltd. and CHOYA CORP., which engage in catalog sales of
COMFORT PROPOSAL garments. Nisshinbo aims to achieve synergies by compartmentalizing
the functions of CHOYA CORP., which has built an upscale brand image for its shirts and offers
highly functional products such as water and oil repellent and skincare products and NON
CARE shirts that dramatically stabilize shapes, with Naigai Shirts Co., Ltd.’s mass-market
products. We will also focus on providing OEM products through joint development and sales

tie-ups with large-scale retailers while also promoting our own brands. In addition, we will
strengthen our activities close to end users, which will allow us to quickly develop and supply
products that match customer needs.
Nisshinbo is working to develop products that integrate nanotechnologies and these efforts
are paying off. Besides NON CARE shirts, we have developed Agfresh silver nano antibacterial
and deodorizing technologies that use nano-sized silver particles and we are expanding theapplications of this technology to such items as uniforms, shirts and knitted products. We arealso developing water and oil repellent items, deodorants and skincare products with
distinctive features. In spring 2004, we began marketing these items under our Nanoscience
series brand name. We also commercialized our banana-based fibers, an environment-friendly
material, marking the first time in the industry that banana stalks disposed of after harvesting
have been commercially converted into
a textile material.

Nanoscience series waterproof shirt

7

Interview with the President

from materials to processing, Nisshinbo also seeks to engage inactivities close to consumers. Our recent M&A activities havepermitted us to realize this objective. Let me point out, however,that we lack the requisite know-how in sectors such as women’s
apparel, which is significantly and easily affected by rapid changes in
popular fashion. With this in mind, Nisshinbo decided to target
shirts, an apparel sector where we possess the necessary capabilities.
This sector is not subject to significant swings and we are confident
we can secure an adequate level of sales by applying our accumulated
know-how.
We are also cultivating new markets for Nisshinbo’s new
materials by using the sales channels of our subsidiary, Iwao & Co.,
Ltd. Although these sales are comparatively small, we believe these
new materials have significant long-term potential.
Our M&A activities are not aimed solely at investing funds togenerate profits but are also intended to upgrade and expand Groupmanagement. In addition, M&A activities generate synergies andyield benefits that exceed those realized through ordinary
investments.
strategies are you implementing to respond to
Q 7. What
globalization?

Our strategies are dictated by the business environment, primarily
for our Textiles and Automobile Brakes businesses. Our Textiles
business has been buffeted by an influx of garments from overseas,
which has made it difficult to earn profits on our mainstay domestic
products. In Japan, we are scaling down our production facilities asmuch as possible and specializing in distinctive products, whileraising the percentage of mainstay products manufactured overseas.

Overseas Network

Automobile Brakes Business Focusing
on Overseas Business

Saeron Automotive Corporation
Nisshinbo
Automotive Corporation

Automobile production in Japan is gradually trending
downward as a result of the shift to overseas
manufacturing. The strategy of the Automobile Brakes
business focuses on maintaining its current level ofbusiness in Japan by raising market share while
expanding its profits in its overseas operations. At
present, this division has a 2:1 domestic-overseas
production ratio and aims to achieve a 1:1 ratio withinseveral years. Based on its policy of “optimizing
overall business” for its domestic and overseas
business activities, this division established a Global
Business Department that will serve a headquartersfunction to respond quickly to globalization. Moving
forward, this division will strive to improve its
competitiveness in terms of quality and cost to meetthe expectations of customers.

Nisshinbo Europe B.V.
Nisshinbo Automotive
Manufacturing Inc.
Rane Brake Linings Ltd.
Kohbunshi (Thailand) Ltd.
Nisshinbo Somboom
Automotive Co., Ltd.
P.T. Nikawa Textile Industry
P.T. Gistex Nisshinbo Indonesia
P.T. Naigai Shirts Indonesia

Nisshinbo Do Brasil
Industria Textil LTDA.
Mingly Textile (Changzhou) Limited
Hangzhou Yimian Ltd.
Shanghai Choya Fashion Co., Ltd.
Shanghai Kaikai Non-Ironing Garment Co., Ltd.
Ningbo Sunrise Textile Dyeing And Finishing Co., Ltd.
Ningbo Veken Textile Co., Ltd.
Pudong Kohbunshi (Shanghai) Co., Ltd.
Shanghai Sun-Rich Arts & Craft Co., Ltd.
NISSHINBO (SHANGHAI) CO., LTD.
CONTINENTAL TEVES CORPORATION(LIAN YUN GANG) CO., LTD.
SAERON AUTOMOTIVE BEIJING CORPORATION
Shanghai Office

Our brake parts

8

At present, we operate a structure in our Textiles business for
producing 250,000 spindles in Japan and 350,000 overseas. We
export mainstay products produced at our overseas bases to Japanand other global markets. We are also working to expand sales in theregions where these products are manufactured. By building a global
production structure and emphasizing distinctive products, we aretransforming our Textiles segment into a highly competitive business.
In our Automobile Brakes business, we have established overseas
bases to respond to the overseas production of Japanese automakers
as well as the U.S. Big Three and European automakers. During thisprocess, we have also forged valuable relationships with prominent
overseas automakers and worked to expand our sales. I believe thetrend toward globalization of the automobile industry is likely togather momentum in the years ahead. In a noteworthy development
during fiscal 2004, we established a base in the China automobile
brake business through our subsidiary in Korea. In addition tohaving outstanding technological capabilities, the Automobile
Brakes business requires the ability to make capital investments.
We will utilize our strong capital investment capabilities, which also
reflect our abundant financial resources, to ensure we can respondflexibly and quickly to the needs of the market.
you talk about the establishment of theQ 8. Could
business promotion structure?

In April 2004, we merged our Mechatronics Division with the ABS
Division to form the new Precision Instrument & Machinery
Division. Although our mechatronics business was operating in thered, we have achieved important progress in reforming our businessstructure into a well-balanced organization consisting of threebusinesses—specialized machinery, OEM automobile precisioncomponents, and general sheet metal processing machinery. Thesebusinesses achieved a profit in fiscal 2004. On the other hand, theABS Division is transferring its business to CTC, and plans call forthe division to shift its focus to specialization in ABS components
processing in the near future. By combining the components
processing technologies of the ABS Division with the development
and design know-how and marketing structure of the Mechatronics
Division, we aim to create synergies as we redouble efforts to build
these operations into a core business. The recently established
Precision Instrument & Machinery Division will participate inprojects for providing technology to Chinese companies and use
such activities as a springboard for cultivating new markets.
you explain your thinking underlying the
Q 9. Could
various measures you have implemented?

In 2007, Nisshinbo will celebrate the 100th anniversary of its
establishment. We are a company that was born in Japan and our
so-called “Nisshinbo DNA,” which has been developed throughout
our long history, permeates our operations. To ensure that we evolve
properly from the present point in time, which marks a turning point
for us as a company, I believe we must also significantly alter ourown “Nisshinbo DNA.” From a long-term perspective, management
must create opportunities to allow us to change our DNA.
do you mean when you say “change theQ10. What
Nisshinbo DNA?”A chief characteristic of “Nisshinbo DNA” is an emphasis on“stock-type” management, which is Japanese-style management that

International Technical Agreements
As licensee:• Taltech Limited of the British Virgin Islands for Pucker Free Seam Technology• Continental Teves AG & Co. oHG of Germany for MK60 ABS and ESP TCS technologies• Meritor Heavy Vehicle Systems, LLC of the U.S. for disc brake and drum brake technologies
As licensor:• Jiangsu yawei machine tool Co., LTD. of China for CNC turret punch press technology• Rane Brake Linings Ltd. of India for friction materials technology• Heng Tong Auto Parts Inc. of Taiwan for friction materials and passenger car disc brake technologies
As cross-licensing partners:• TMD Friction Beteiligungs GmbH & Co KG of Germany for friction materials technology• TRW Inc. of the U.K. for drum brake technology• Continental Teves AG & Co. oHG of Germany for passenger car disc brake technology• Continental Teves AG & Co. oHG of Germany for NT20/MK20 ABS and TCS technologies

9Interview with the President

focuses on long-term sustained growth, the accumulation of various
types of assets and payment of stable dividends. Our efforts tochange our DNA are focused on adding an element of “flow-type”
management, which stresses short-term profits and dividends. We
are undertaking our current three-year management plan with an eye
toward changing our DNA. Our principal theme in fiscal 2005,“strengthen profitability and expand sales,” is based on our emphasis
on “flow-type” management. In other words, we aim to aggressively
utilize our assets and expand profits during the coming fiscal year.
Let me point out, however, that we do not intend to suddenly shift
radically to flow-type management with the top priority on profits.
Instead, we will adopt a perspective aimed at raising profit levels
over the long term. We do not intend to achieve this objective
during the short three-year duration of our management plan but
will make a gradual transformation over a longer period.
Various other business activities that I have referred to are also
aimed at changing the “Nisshinbo DNA” and raising our growthcapabilities and our ability to survive in the future. Through such
attitudes, we intend to transform our awareness and create
additional sources of fresh power.
On the other hand, our “Nisshinbo DNA” still retains featuresthat function as the very core of our existence as a company. These
include undertaking fair business activities and contributing to thebetterment of society. The raison d’etre of companies is not solely toearn profits. Companies also play a crucial role as members ofsociety. As such, Nisshinbo will strive to strike a balance between its
business activities and the expectations and needs of numerous
stakeholders, which include shareholders, customers business
partners, employees, local communities and public institutions.

Chemical Products Business Rapidly Building a High-Profit
Structure through Selection and Concentration
The Chemical Products Division executes systematic selection and concentration of its
businesses and is making notable headway in rapidly reorganizing into a high-profit
structure, focusing on four areas: expanding high-profit businesses, reducing production
costs, withdrawing from unprofitable businesses and expanding sales in overseas
markets. Because the development of new materials is key to success in this industry,
the Chemical Products Division devotes its efforts to product development. This division
is working to cultivate its business for environment-related products such as N’s VIPheat insulation materials that are effective in preventing global warming, APG® (Aqua
Porous Gel) and BCN® (Bio Contact N) for water purifying, and CFC-free polyurethanefoam, as well as such health and medicalrelated products as low resilience foam andseats used in railway cars.
In overseas markets, we have achieved
progress in strengthening our sales structure
and are working to expand sales ofelastomers, carbon and N’s VIP products.
BCN® has a high water-absorbing capability

10

are you doing to ensure fair businessQ11. Whatactivities?

We are confident we are taking the correct approach to corporate
governance under our present structure for monitoring through theBoard of Directors. We considered shifting to a method more in linewith global standards, however, merely adopting such a system inform only is unlikely to yield any meaningful results. We must
undertake sufficient deliberations to ensure a means of effective
corporate governance that befits Nisshinbo. Under our present
system, we appointed an additional external auditor to ensure

Paper Products Division Formulating a Differentiation Strategy
The Paper Products Division is working to promote products for which it quickly
implemented a differentiation strategy. With our activities concentrated on promoting
distinctive products, developing new products and cultivating new fields, we will makeunprecedented efforts to reduce costs by trimming expenses at production plants andstrengthen our ability to respond flexibly to changes in the market. We will also focus on
overseas procurement and supply of OEM products as we work to build a structure thatcan secure profits. This division’s household papers have won especially high acclaim
from consumers. In June 2004, the Shimada Plant, which produces household papers,
completed work on expanding and strengthening production facilities, and the Papers
business has now firmly put into place a structure for expanding sales. In our label
printing-related business, we will use thetransfer of production to our Kawagoe Plant
as a springboard for strengthening ouraffiliations with subsidiaries and carryingout efficient business activities.

COTTON FEEL, our household paper brandtransparency in management. This corporate governance structure isaugmented by timely advice from advisory lawyers, auditing byseveral certified public accounting offices, and our own exhaustive
efforts to ensure fair financial auditing. In addition, we establishedthe Auditing Department to enhance the effectiveness of ouroperational and accounting audits. We also proactively promote
information disclosure, beginning with such IR information as ourquarterly results.
In striving to strengthen compliance, under our Corporate
Conduct Charter we seek to imbue all employees with a deep senseof corporate ethics, which cover thorough compliance with laws andpreserving human rights. Moreover, under the auspices of our
Corporate Ethics Committee we have established a Corporate
Ethics Reporting System, which offers a point of contact fromwithin the company and overseas.
In accordance with our Corporate Conduct Charter, we are also
making earnest and extensive efforts to manage and respond tovarious risks, beginning with those related to product safety.
We also place top priority on protecting the environment.
Guided by the Nisshinbo Environmental Charter, we are making
smooth progress in reducing the volume of waste materials as well as
lowering the environmental load. We are also strengthening ouractivities for securing ISO14001, the international standard for
management systems. Additionally, we are making important
headway in promoting our environment-related products andbusinesses, which include banana fibers using discarded banana
stalks, recycling PET bottles into materials and recycling usedpaper. We provide details on our environment-related activities on
our website.

do you have any special message to convey
Q12. Finally,
to shareholders?

Although we will introduce flow-type management, we must still
meet stakeholder expectations for long-term prosperity. To achieve
this objective, we must strengthen the stability of our financial
structure and make such deliberations as reviewing our asset
portfolio. Regarding the redistribution of profits, Nisshinbo
implements a policy of maintaining stable dividends that are
unaffected by fluctuations in profits during any fiscal year. Our cash
dividends per share for fiscal 2004 will be ¥7.00 (US$0.07) per
common share. When we determine that we have established aneven stronger profit structure, we would like to raise our dividends inline with increases in profit as a means of redistributing profits.
Companies are vital entities serving as cornerstones of freemarket economies and play a key role in society, which includes
providing people with useful products and services, contributing to
the betterment of local communities, providing stable employment
and helping to protect the environment. Also, based on a spirit ofself-responsibility, companies must allocate a portion of their assets
and profits to renewing and expanding facilities, engaging in R&D
and undertaking M&A activities. Through the vitality of ourbusiness activities, we aim to contribute to the further developmentof society. In closing, I ask for the continued support of ourshareholders, customers and friends.

Achieving Growth of Our Precision
Instrument & Machinery Businessthrough Collaboration
In April 2004, the Precision Instrument & Machinery
Division began operations after being established by amerger of our Mechatronics and ABS division following
a review of our business promotion organization. In
sheet metal processing, we provided YAWEI Co., Ltd.,in China with technology for turret punch presses, andare supporting the building of a structure for thatcompany to carry out sales and manufacturing of turretpresses. We aim to expand our share of the Chinese
market by introducing affordably priced products
targeted at selected markets. We will bolster our sales
affiliations with Marubeni Corporation for solar panels
and strengthen our ties with CTC in ABS components.
We will also carry out business that will allow us tocooperate with companies with strong technology andsales capabilities.

Yoshikazu Sashida
President

Real Estate Leasing Business Contributing
to Business Results
From April 2004, our real estate leasing business began
operating as the Real Estate Department. This department isdiversifying methods for making effective use of idle land to
expand transactions and carrying out negotiations on rent
review with current lessees to secure profits from currentlyleased properties. In fiscal 2005, the department will pursue
the development of the grounds of the former Tokyo andHamamatsu Plants.

APITA Shimada Shopping Center(Shizuoka Prefecture, Japan)

11Review of Operations

TextilesIn fiscal 2004, ended March 31, 2004, Japan’s
consumption of textiles showed few signs of recovery
amid a harsh environment that exhibited growing
preference for low-priced items and an ongoing shift
to overseas production, mainly for garments. Against
this background, the Textiles segment moved tostrengthen its competitiveness by reorganizing
domestic production plants, which included closing
its Hamamatsu Plant at the end of March 2004, while
also bolstering its overseas business. In addition, thesegment strengthened its earnings foundation,
focusing efforts on continuing to develop new
products, fortifying sales capabilities and reducing
sales and administrative expenses. Despite suchnegative factors as sluggish sales of denim and anincrease in retirement benefit expenses, the Textiles
segment achieved a sharp improvement in operating
income by reducing valuation losses on idle
inventories, pruning fixed costs and achieving growth
in income at overseas subsidiaries. Consolidated net
sales of the Textiles segment amounted to ¥68,403
million (US$651 million), a year-on-year decrease of
7.6% and accounting for 30.1% of total consolidated
net sales, down 1.9 percentage points from theprevious year. Operating income totaled ¥725 million(US$7 million).
With regard to yarns for textiles and knitted

Sales of Textiles(billions of yen)

100

80

60

40

20

0

’00

’01

’02

’03

’04

products, despite an unavoidable decline in sales andoperating income for denim products due to
production adjustments in Japan and scant exports to
Europe and the United States, the division recorded
growth in income for all other categories. Of
particular note, operating income for commercial
yarns jumped steeply, thanks to efforts to reduce costs
and expand sales of differentiated yarns. Similarly,
operating income for uniforms and others rose steeply,
due to a recovery in demand and the use of products
produced overseas.
Amid a decline in sales of shirt materials resulting
from sluggish shipments both in Japan and overseas,
we moved to strengthen Nisshinbo’s overallcapabilities in the textiles industry and took measures
to expand our business into domains closer toconsumers by increasing our shares in the shirt apparelcompanies, CHOYA and Naigai Shirts, thereby
making these companies into Nisshinbo subsidiaries.
Sales of spandex retreated owing to a slump in
domestic demand for pantyhose products. However,operating income advanced thanks to efforts to offerdifferentiated products.
Nisshinbo worked to develop new products
throughout the fiscal year and introduced a wide
range of healthy, comfortable and environmentfriendly products. These included NON CARE purecotton wash-and-wear shirts with no need for ironing,
deodorized antibacterial GAIA COT with enhanced

NON CARE pure cotton wash-and-wear shirts with no need for ironing(Left: NON CARE shirt Right: Ordinary shirt)

Our COMFORT PROPOSAL direct marketing business offers highvalue-added products, such as those in our prestigious SUPER SOFT line

12

An entry at the Annual Nisshinbo
Fashion Contest

functions, the world’s first ecology material that uses
banana fibers, and antibacterial deodorized Agfresh
products, which utilize nanotechnologies andsilver-based materials.
Overseas, P.T. Nikawa Textile Industry shifted its
operations in Indonesia toward high value-added
products and achieved increases in sales and operating
profit. Nisshinbo Do Brasil Industria Textil LTDA.
also achieved steady growth in its business results. In
China, we made progress in our cooperative
production system with Mingly Textiles (Changzhou)
Limited and Hangzhou Yimian Ltd., while Ningbo
Sunrise Textile Dyeing And Finishing Co., Ltd. andNingbo Veken Textile Co., Ltd., commenced
operations at a new plant and expanded theirproduction of spun yarn and woven fabrics.

¥7,771 million (US$74 million). Sales in the Nontextiles segment accounted for 69.9% of total sales, up
1.9 percentage points from the previous fiscal year.

Sales of Automobile
Brakes(billions of yen)
60

Automobile Brakes
50

40

30

20

10

0

’00

’01

’02

’03

’04

Non-textiles
In the Non-textiles segment, excluding the Other
Products sector, sales were lower in our Automobile
Brakes business, a main pillar of this segment. Thisdecrease was due to the transfer of ABS products toContinental Teves Corporation (CTC) and sluggish
sales of vehicles equipped with our products.
Nevertheless, favorable results in the Papers andChemical Products sectors supported a 0.8% rise in
net sales for this segment, to total ¥158,480 million(US$1,509 million). Operating income rose 16.4% toSales in the Automobile Brakes sector declined 7.6%
to ¥52,076 million ($496 million). Operating income
fell 12.5% to ¥4,812 million (US$46 million).
Although overseas subsidiaries posted gains in neworders for automobile brakes, owing to an expansion ofsales to the U.S. Big Three and European automakers,
the value of this growth was inevitably curtailed by theappreciation of the yen. In Japan, an increase inproduction of commercial vehicles accompanying thetightening of exhaust emission regulations supported
our performance. However, a slump in sales ofvehicles equipped with our products and lower orders
for spare parts resulted in only a slight rise in sales anda decrease in operating income. Sales and operating
income of ABS declined owing to the transfer ofthese operations to the equity method affiliate,
Continental Teves Corporation (CTC). The transferof this business was also the primary reason for the
decline in sales and operating income in the Automobile
Brakes sector. However, CTC achieved growth in its
business results that surpassed its own targets.

PapersSales of paper products rose 7.3% to ¥29,009 million

Sales of Papers(billions of yen)

30

25

Our brake parts20

15
Our fine paper products used in printing, publications
and packagings

10

5

0

’00

’01

’02

’03

’04

13

ongoing slump in demand and lack of visible signs ofa recovery in market conditions in the construction
and civil engineering industries, which are primarysources of demand, we achieved improved income inpolyurethane foam by expanding sales of such highly
functional products as N’s VIP, vacuum heatinsulation panels and heat insulation panels for
LNG tanks.
In polyurethane elastomers, we worked to expand
sales of our favorably performing apparel tapes foroverseas markets. However, sales and operating
income for polyurethane elastomers rose only slightly
due to the effects of the appreciation of the yen.
Sales of carbon products increased due to growthin sales of plates for semiconductor manufacturingsystems. Operating income in carbon products also
improved despite an increase in expenses fordeveloping our overseas business.
Sales and operating income in molded plastic
cross-flow fans for air conditioners rose from theprevious fiscal year thanks to a rise in orders fromoverseas subsidiaries owing to a heat wave in Europe
and an expansion of the market in Southeast Asia.

(US$276 million). Operating income increased
11.0% to ¥2,024 million (US$19 million) as stableprices for raw pulp material compensated for a risein costs for transferring production plants in ourlabel-related business.
Despite dwindling market prices, sales andoperating income in household papers increased,
thanks to an expansion of sales of distinctive new
products as well as continued low procurement prices
for pulp.
Amid a constricted market, we also posted growthin sales and operating income in fine papers,
reflecting favorable results for such products as highquality printing papers. Although sales of synthetic
paper products rose, operating income declined
because of weak market prices and a rise inproduction costs.
Operating income for standard molded products
increased owing to the effects of cost reductions.
Despite a rise in sales and the receiving of large orders
for label-related products, an increase in costs
accompanying the transfer of facilities from theformer Tokyo Plant to the Kawagoe Plant resulted ina decline in operating income.

Other Products
Chemical Products

Sales in the Other Products sector rose 5.6% to¥40,356 million (US$384 million). An operating lossof ¥1,156 million (US$11 million) was recorded,¥1,530 million less than in the previous year.

Sales of chemical products increased 4.3%, to ¥32,098
million (US$306 million). Operating income soared
146.8% to ¥612 million (US$6 million). Despite an

Sales of Chemical
Products(billions of yen)
35

30

25

20

Our polyurethane foams for heat insulation in a large scale
project

15

CNC Turret punch press HIQ-3048

10

5

0

14

’00

’01

’02

’03

’04

Note: Chemical Products, previously included in the Other Products sector, was treated independently from fiscal 2003
due to the growing importance and potential of the sector. Figures for previous fiscal years have been adapted to takeaccount of this change.

• Machine Tools
Sales and operating income of machine tools
increased, as a recovery in domestic capital investment
underpinned robust demand, while orders for OEM
products, mainly automobile-related components,
were strong. In the Machine Tools business, we
progressed with a reform of our business structurethat had been over-reliant on sheet metal processing
machines. We have nearly completed ourreorganization into a balanced structure comprising
three categories: customized machine tools that
include solar cell production machinery; OEMmachine tools, including precision machinery for
automobiles; and sheet metal machinery. From fiscal
2005, the Machine Tools business will make a newstart when it is merged into the operations of thePrecision Instrument & Machinery Division, which
combines our ABS and Mechatronics division.

Sales of Other Products(billions of yen)

50

40

30

20

optical filters for PDPs from achieving an operating
profit, although the size of the operating loss declined.
Performance in our fuel cell business was sluggish,as demand for these products remains low with thebusiness still in its early development stages. With aneye to the future, we are working to establish
technologies for mass production while engaging in
the development of new products to expand business,and hence, demand.
In CCM systems, we focused on strengthening
our technological capabilities and progressed with two
projects: developing distinctive CCM systems anddeveloping enterprise resource planning packages.

10

Real Estate Leasing
0

’00

’01

’02

’03

’04

• Others
Despite the effects of declining prices, sales ofelectronic communications equipment increased
thanks to favorable conditions in IT-related industries.
In addition, the implementation of rationalization
measures enabled a large reduction in the operating
loss of electronic communications equipment.
Sales of optical filters for PDPs increased alongwith an expansion of the market. However, strong
requests for price decreases from users prevented

Our Real Estate Leasing business is steadily
expanding, as evidenced by a 3.3% rise in sales overfiscal 2003 to ¥4,941 million (US$47 million).
Operating income edged up 1.8% to ¥2,614 million(US$25 million). The continued growth in sales andoperating income was due in part to the contribution
made from the leasing of the grounds of the former
Notogawa Plant to a distribution company.

Sales of Real Estate
Leasing(billions of yen)
5

4

Our optical filters for plasma display panels (PDP)

Friend Mart Shopping Center (Shiga Prefecture, Japan)

3

2

1

0

’00

’01

’02

’03

’04

15

Six-year Summary(millions of yen)

Net Sales
Operating Income
Net Income
Shareholders’ Equity
Total Assets
Shareholders’ Equity Ratio (%)
Return on Equity (%)
Capital Investment
Depreciation and Amortization

1999
226,800
373
4,161
200,779
359,390
55.9
2.1
23,002
13,411

2000
227,452
4,140
2,648
194,685
339,373
57.4
1.3
23,232
14,228

2001
233,535
5,751
517
192,331
334,460
57.5
0.3
17,093
13,134

2002
225,836
3,968-2,649213,665
364,16158.7-1.3
13,243
13,422

2003
231,193
5,989
777
186,028
312,909
59.5
0.4
9,057
12,758

2004
226,883
8,496
3,919
214,132
368,444
58.1
2.0
8,989
11,776Per Share (in yen):
Net Income
Shareholders’ Equity
Cash Dividends

17.60
843.177.00

11.36
857.057.00

2.32
868.497.00-12.03988.027.00

3.18
860.52
7.00

17.86
1,030.98
7.00

Number of Employees

8,452

8,235

8,104

8,456

8,627

9,875

Operating Income

Total Assets(billions of yen)(billions of yen)

Shareholders’Equity Ratio

Return on Equity
(%)

(%)
9

400

80

300

60

3.0

6

1.5
200

40

100

20

3

0.0

0
’99

’00

’01

’02

’03

’04

Capital Investment

0
’00

’01

’02

’03

’99

’04

Depreciation andAmortization(billions of yen)

-1.5

0
’99

’00

’01

’02

’03

’04

Net Income per Share

’00

’01

’02

’03

’04

’02

’03

Shareholders’Equity per Share(yen)(billions of yen)

(yen)

15

25

’99

20

1,200

15

1,000

20
10

10
15

800

5
600
0

10
5

400

-5
5

200

-10
0

0
’99
16

’00

’01

’02

’03

’04

’99

’00

’01

’02

’03

’04

0

-15
’99

’00

’01

’02

’03

’04

’99

’00

’01

’04

Financial Review

Operating Results
Consolidated net sales for fiscal 2004, ended March 31st, 2004 amounted
to ¥226,883 million (US$2,161 million), down 1.9% from fiscal 2003.
Net sales of the Textiles segment declined 7.6% to ¥68,403
million (US$651 million), reflecting a decrease in domestic sales caused
by preferences for low-price goods and an ongoing shift to overseas
production, mainly for garments. Nonetheless, the Textiles segment
achieved a sharp improvement in profitability and recorded an operating
profit by taking such measures as reorganizing its production facilities,
including the closing of a domestic plant; strengthening its overseas
business in China and Indonesia; developing new products; bolstering
its sales capabilities; and reducing selling, general and administrative(SG&A) expenses. The percentage of Textiles sales to total sales was
30.1%, down 1.9 percentage points from the previous fiscal year.
Despite a decline in sales in the Automobile Brakes business along withthe transfer of the ABS products-related business to an affiliate, overallsales in the Non-textiles segment rose 0.8% to ¥158,480 million(US$1,509 million), due largely to higher sales in Papers and Chemical
Products. The percentage of Non-textiles sales to total sales was 69.9%,
up 1.9 percentage points from the previous fiscal year.
Cost of sales decreased 3.4% to ¥192,480 million (US$1,833 million).
The ratio of cost of sales to net sales decreased 1.4 percentage points to
84.8%. SG&A expenses declined 0.1% to ¥25,907 million (US$247
million). Cost and expenses totaled ¥218,387 million (US$2,080
million), a decrease of 3.0% from the previous fiscal year. Therefore,
operating income rose 41.9% to ¥8,496 million (US$81 million).
In other income (expenses), equity in earnings of affiliates was ¥233
million (US$2 million), an improvement of ¥543 million from equity inloss of affiliates recorded in the previous fiscal year. This improvement
reflected the recording of profits in fiscal 2004 by affiliates accounted forby the equity method. Other, net amounted to expenses of ¥2,471 million (US$24 million). This included gain on sale of securities of ¥2,555
million (US$24 million), an improvement of ¥3,004 million from loss
on sale of securities in the previous year. Conversely, expenses included
provision for loss from guarantee of indebtedness of affiliated companiesof ¥506 million (US$5 million) and retirement benefits paid due torestructuring of business operations of ¥2,836 million (US$27 million),
an increase of ¥2,778 million, that mainly resulted from the closing ofa production plant in the Textiles segment. As a result, other expenses
amounted to ¥1,715 million (US$16 million), a decrease of ¥720 million
from fiscal 2003.
Due to the previous factors, income before income taxes andminority interests jumped ¥3,227 million to ¥6,781 million (US$65 million). After deducting income taxes of ¥2,807 million (US$27 million)
and subtracting minority interests in net income of $55 million (US$0.5
million), net income for fiscal 2004 amounted to ¥3,919 million (US$37
million). Net income per share was ¥17.86 (US$0.17), an increase of¥14.68 from the previous fiscal year. ROE was 2.0%, up 1.6 percentage
points from the previous fiscal year. Total cash dividends per share were¥7.0 (US$0.07), the same as for fiscal 2003. Cash dividends paid totaled¥1,484 million (US$14 million). Taking a long-term perspective, wewill continue to implement our basic policy of maintaining dividends at
a stable level.

Financial Position
Total assets amounted to ¥368,444 million (US$3,509 million), up
17.7% from the previous fiscal year-end. Current assets rose 2.2% to¥140,663 million (US$1,339 million). Although cash and cash equivalents and deferred tax assets declined, current assets rose because of an
expansion in inventories and receivables accompanying an increase in
the number of newly consolidated subsidiaries in the Textiles segment.
Property, plant and equipment decreased 1.5% to ¥103,003 million(US$981 million). Investment and other assets soared 76.3% to ¥124,808
million (US$1,189 million) mainly due to a rise in unrealized gains on
investment securities attributable to a recovery in stock markets.
On the liabilities side, total current liabilities rose 5.4% to ¥83,152
million (US$792 million), due to a rise in payables. Long-term liabilities
jumped 54.4% to ¥66,091 million (US$629 million) owing to rises inlong-term debt and deferred tax liabilities. Total current and long-term
liabilities increased 22.6% to ¥149,243 million (US$1,421 million).
Shareholders’ equity increased 15.1% to ¥214,132 million (US$2,039
million). The shareholders’ equity ratio declined 1.4 percentage points
to 58.1%. Shareholders’ equity per share was ¥1,030.98 (US$9.82), an
increase of ¥170.46 from the previous year.
Cash Flows
Cash flows from operating activities

Net cash provided by operating activities amounted to ¥8,911 million(US$85 million). This resulted from making adjustments for such items
as income taxes-paid of ¥4,091 million (US$39 million) and depreciation
and amortization of ¥11,776 (US$112 million) to income before income
taxes and minority interests of ¥6,781 million (US$65 million).
Cash flows from investing activities

Net cash used in investing activities was ¥4,078 million (US$39
million). This was primarily due to such cash outflows as payment forpurchase of property, plant and equipment of ¥8,674 million (US$83
million) as well as cash inflows that included proceeds from sale ofinvestment securities and investments in and advances to unconsolidated
subsidiaries and affiliates of ¥5,445 million (US$52 million).
Cash flows from financing activities

Net cash used in financing activities amounted to ¥12,486 million(US$119 million). This was due to a decrease in short-term bank loansof ¥5,043 million (US$48 million) owing to the repayment of thesefunds to financial institutions along with the introduction of a CashManagement System (CMS), as well as payment for purchase oftreasury stock of ¥5,027 million (US$48 million).
As a result of the above, cash and cash equivalents at the end of the
fiscal year totaled ¥21,787 million (US$207 million), down ¥7,736
million over fiscal 2003.

* For details of divisional results, see “Review of Operations.”17

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Balance Sheets
31st March, 2004 and 2003

(millions of yen)
2004
2003

(thousands of
US dollars)(Note 1)
2004

21,787
6,012
656

29,5235,273
592$ 207,495
57,257
6,248

13,45846,465
5,897
695
66,515(980)
65,535
43,117
1,984
1,542
140,633

12,09341,888
7,493
675
62,149(1,215)60,93437,351
2,552
1,350
137,575

128,171442,524
56,162
6,619
633,476(9,333)624,143
410,638
18,895
14,686
1,339,362

18,723103,247
191,140
1,727
314,837(211,834)
103,003

16,76098,277
193,129711
308,877(204,325)
104,552

178,314983,305
1,820,381
16,4482,998,448(2,017,467)
980,981

115,162

64,297

1,096,781

4,930
254
1,920
2,542
124,808¥ 368,444

3,870
368
—
2,247
70,782¥ 312,909

46,952
2,419
18,28624,2091,188,647$3,508,990

ASSETS
Current assets:
Cash and cash equivalents.............................................................................
Time deposits................................................................................................
Marketable securities (Note 4) ......................................................................
Receivables
Notes receivable, trade ..............................................................................
Accounts receivable, trade.........................................................................
Unconsolidated subsidiaries and affiliates .................................................
Other ........................................................................................................
Less allowance for doubtful accounts ........................................................
Inventories (Note 3)......................................................................................
Deferred tax assets (Note 7) ..........................................................................
Other current assets ......................................................................................
Total current assets ...............................................................................

Property, plant and equipment:
Land..............................................................................................................
Buildings and structures ................................................................................
Machinery, equipment and tools...................................................................
Construction in progress ...............................................................................
Less accumulated depreciation......................................................................

Investments and other assets:
Investment securities (Note 4) ......................................................................
Investments in and advances to unconsolidated
subsidiaries and affiliates...........................................................................
Deferred tax assets (Note 7) ..........................................................................
Intangibles.....................................................................................................
Other.............................................................................................................

See Notes to Consolidated Financial Statements.

18

¥

¥

LIABILITIES AND SHAREHOLDERS’ EQUITY(millions of yen)
2004
2003

(thousands of
US dollars)(Note 1)
2004

Current liabilities:
Short-term bank loans (Note 5)....................................................................
Current portion of long-term debt (Note 5) .................................................
PayablesNotes and accounts payable, trade ............................................................
Unconsolidated subsidiaries and affiliates.................................................
Other ........................................................................................................
Employees’ savings deposits ..........................................................................
Accrued expenses ..........................................................................................
Accrued income taxes....................................................................................
Other current liabilities .................................................................................
Total current liabilities.........................................................................
Long-term liabilities:
Long-term debt (Note 5) ..............................................................................
Accrued severance benefits (Note 6) .............................................................
Deferred tax liabilities (Note 7).....................................................................
Other long-term liabilities ............................................................................

Minority interests in consolidated subsidiaries ..........................................................................

37,5703,282$ 359,124
23,01026,521451
4,386
31,358
3,534
3,753
1,697
2,686
83,152

20,859405
3,557
24,821
4,021
3,695
3,831
1,685
78,905

252,581
4,295
41,771
298,647
33,65735,743
16,16225,581
791,924

9,820
22,54225,925
7,804
66,091

7,574
23,574
3,553
8,107
42,80893,524
214,686
246,904
74,324629,438

5,069

5,168

48,276

27,58820,401
133,757
41,194(3,582)

27,58820,401
131,5319,628(2,921)

262,743
194,295
1,273,876
392,324(34,114)(5,226)214,132¥ 368,444(199)
186,028¥ 312,909(49,772)
2,039,352$3,508,990¥

37,7082,416¥Commitments and contingencies (Note 12)
Shareholders’ equity (Notes 10 and 13):
Common stock:
Authorized — 380,137,000 shares
Issued ——— 216,580,939 shares ...........................................................
Additional paid-in capital .............................................................................
Retained earnings..........................................................................................
Net unrealized gain on available-for-sale securities.......................................
Foreign currency translation adjustments.......................................................
Less shares in treasury
2004 — 8,965,904 shares
2003 — 504,285 shares .........................................................................

19

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Statements of Income
Years ended 31st March, 2004 and 2003

(millions of yen)
2004
2003

Net sales .......................................................................................................................................

¥ 226,883¥ 231,193$2,160,790

192,480
25,907
218,387

199,272
25,932
225,204

1,833,143
246,733
2,079,876

8,496

5,989

80,9141,530(1,007)233(2,471)(1,715)

1,957(1,464)(310)(2,618)(2,435)

14,571(9,590)2,219(23,533)(16,333)

6,781

3,554

64,581

1,929
878
2,807

4,529
(1,558)2,971

18,371
8,362
26,733

3,974
(55)
3,919

583
194
777

37,848(524)
37,324

Costs and expenses:
Cost of sales ..................................................................................................
Selling, general and administrative expenses.................................................

Operating income .......................................................................................................................
Other income (expenses):
Interest and dividend income........................................................................
Interest expenses ...........................................................................................
Equity in earnings (losses) of affiliates ..........................................................
Other, net (Note 11) .....................................................................................

Income before income taxes and minority interests ...................................................................
Income taxes (Note 7)
Current..........................................................................................................
Deferred ........................................................................................................

Income before minority interests ................................................................................................
Minority interests in net income.................................................................................................
Net income...................................................................................................................................

(thousands of
US dollars)(Note 1)
2004

¥

¥

(yen)

$

(US dollars)

Per share:
Net income....................................................................................................
Cash dividends ..............................................................................................

See Notes to Consolidated Financial Statements.

20

¥

17.86
7.00

¥

3.18
7.00

$

0.17
0.07

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Statements of Shareholders’ Equity
Years ended 31st March, 2004 and 2003

(millions of yen)
2004
2003

(thousands of
US dollars)(Note 1)
2004¥

27,588¥27,588$ 262,743¥

27,588¥27,588$ 262,743

Additional paid-in capital:
Balance at beginning of year .........................................................................

¥

20,401¥

20,401$ 194,295

Balance at end of year ...................................................................................

¥

20,401¥

20,401$ 194,295

Balance at beginning of year .........................................................................
Adjustments due to decrease in affiliates
accounted for by the equity method ..........................................................
Adjustments due to decrease in a subsidiary of
an affiliate accounted for by the equity method ........................................
Net income....................................................................................................
Cash dividends ..............................................................................................
Directors’ and statutory auditors’ bonuses .....................................................

¥ 131,531¥ 141,022$1,252,676—(8,667)

—

(92)
3,919
(1,512)(89)¥ 133,757—
777(1,515)(86)¥ 131,531(876)
37,324(14,400)(848)$1,273,876

¥

¥

$

2,921) (¥(661)
3,582) (¥1,151) ($(1,770)2,921) ($Common stock:
Balance at beginning of year
(2004 and 2003 — 216,580,939 shares)....................................................
Balance at end of year
(2004 and 2003 — 216,580,939 shares)....................................................

Retained earnings:

Net unrealized gain on available-for-sale securities:
Balance at beginning of year .........................................................................
Net changes...................................................................................................
Balance at end of year ...................................................................................
Foreign currency translation adjustments:
Balance at beginning of year .........................................................................
Net changes...................................................................................................
Balance at end of year ...................................................................................
Treasury stock at cost:
Balance at beginning of year .........................................................................
Add: acquired................................................................................................
Balance at end of year ...................................................................................

¥

(¥
(¥

(¥
(¥

9,628
31,566
41,19425,715(16,087)¥9,628199) (¥(5,027)5,226) (¥91,695
300,629$ 392,324

27,819)(6,295)
34,114)80) ($
1,896)(119)(47,876)199) ($ 49,772)

See Notes to Consolidated Financial Statements.

21

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Statements of Cash Flows
Years ended 31st March, 2004 and 2003

(millions of yen)
2004
2003

Cash flows from operating activities:
Income before income taxes and minority interests .................................................
Adjustments to reconcile net income to net cash provided by operating activities:
Income taxes-paid ...........................................................................................
Depreciation and amortization........................................................................
Equity in (earnings) losses of affiliates ............................................................
Provision for doubtful receivables....................................................................
Provision for accrued pension and severance benefits......................................
Payment of accrued pension and severance benefits ........................................
Directors’ and statutory auditors’ bonuses paid ...............................................
(Gain) loss on sale of property, plant and equipment......................................
(Gain) loss on sale of investment securities and investments inand advances to unconsolidated subsidiaries and affiliates ..........................
Write-down of investment securities...............................................................
Loss on plant closures......................................................................................
Other...............................................................................................................
Changes in operating assets and liabilities:
Receivables ......................................................................................................
Inventories.......................................................................................................
Payables ...........................................................................................................
Other...............................................................................................................
Net cash provided by operating activities........................................

¥

6,781

¥

3,554

(thousands of
US dollars)(Note 1)
2004$

64,581(4,091)
11,776
(233)
399
4,422
(6,384)(96)(156)(1,154)
12,758
310
713
2,920
(2,329)(92)421(38,962)
112,152(2,219)3,800
42,114(60,800)(914)(1,486)(2,555)
10
879
(418)

449
473
709
(1,006)(24,333)
95
8,371(3,981)(532)(1,277)
1,282
(896)
8,911

1,293
5,615
(405)
(198)
24,031(5,066)(12,162)
12,210(8,533)84,867921

14,071

8,772

5,445
(8,674)

3,427(10,242)

51,857(82,609)

Cash flows from investing activities:
Proceeds from sale of property, plant and equipment..............................................
Proceeds from sale of investment securities and investments
in and advances to unconsolidated subsidiaries and affiliates ..............................
Payment for purchase of property, plant and equipment .........................................
Payment for purchase of investment securities andinvestments in and advances to unconsolidated subsidiaries and affiliates...........
Decrease in loans receivable.....................................................................................
(Increase) decrease in time deposits .........................................................................
Cash acquired from newly consolidated subsidiaries,
net of payment for purchase of companies
Other, net ................................................................................................................
Net cash provided by (used in) investing activities..........................

(2,209)
(295)
(190)

(563)
(471)
809

(21,038)(2,810)(1,810)663
261(4,078)

—
(976)
6,055

6,314
2,486
(38,838)

Cash flows from financing activities:
Proceeds from issuance of long-term debt...............................................................
Repayment of long-term debt..................................................................................
Decrease in short-term bank loans ..........................................................................
Cash dividends paid.................................................................................................
Payment for purchase of treasury stock....................................................................
Other .......................................................................................................................
Net cash used in financing activities ...............................................

2,106(2,973)(5,043)(1,512)(5,027)(37)(12,486)

1,101(2,378)(10,514)(1,515)(149)(462)(13,917)

20,057(28,314)(48,029)(14,400)(47,876)(352)(118,914)

Effect of exchange rate changes on cash .....................................................................................
Net increase (decrease) in cash and cash equivalents .................................................................
Cash and cash equivalents of newly consolidated subsidiaries at beginning of year .................
Cash and cash equivalents of decreased consolidated subsidiaries at beginning of year...........
Cash and cash equivalents at beginning of year..........................................................................

(83)(7,736)——29,523(327)
15,842282(20)
13,419(791)(73,676)——
281,171

29,523$ 207,495

Cash and cash equivalents at end of year ....................................................................................

See Notes to Consolidated Financial Statements.

22¥

21,787¥

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
1. BASIS OF PRESENTING FINANCIAL STATEMENTS:
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Securities
and Exchange Law and its related accounting regulations, and in conformity with accounting principles and practices generally accepted inJapan, which are different in certain respects as to application and disclosure requirements of International Accounting Standards. The
consolidated financial statements are not intended to present the financial position, results of operations and cash flows in accordance withaccounting principles and practices generally accepted in countries and jurisdictions other than Japan.
In addition, the accompanying footnotes include information which is not required under generally accepted accounting principles andpractices in Japan but is presented herein as additional information.
The United States dollar ($) amounts included herein are given solely for convenience and are stated, as a matter of arithmetical computation
only, at the rate of ¥105 = $1, the approximate exchange rate at 31st March, 2004. The translations should not be construed as representations
that the Japanese yen amounts have been, could have been, or could in the future be, converted into United States dollars.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:(a) Consolidation
The consolidated financial statements include the accounts of Nisshinbo Industries, Inc. (the “Company”) and its significant subsidiaries(together, the “Group”).
Under the control or influence concept, those companies in which the Parent, directly or indirectly, is able to exercise control over
operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted forby the equity method.
Investments in unconsolidated subsidiaries and associated companies are accounted for by the equity method.
Investments in the remaining unconsolidated subsidiaries and associated companies are stated at cost. If the equity method of accounting
had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets
resulting from transactions within the Group is eliminated.
(b) Foreign currency transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at theexchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the income statement to theextent that they are not hedged by forward exchange contracts.
Investments in and advances to unconsolidated subsidiaries and affiliates in foreign currencies are translated at the historical rates effectiveat the dates of transaction from which such accounts were originated.
(c) Foreign currency financial statements
The balance sheet accounts, revenue and expense accounts of the consolidated foreign subsidiaries are translated into Japanese yen at thecurrent exchange rate as of the balance sheet date except for shareholders’ equity, which is translated at the historical rate.
(d) Cash equivalents
Cash equivalents include time deposits which mature or become due within six months of the date of acquisition.
(e) Marketable and investment securities
Marketable and investment securities classified as available-for-sale securities are reported at fair value, with unrealized gain and losses, netof applicable taxes, reported in a separate component of shareholders’ equity.
(f) Inventories
Inventories are stated principally at the lower of cost or market, cost being substantially determined by the average cost method.
(g) Property, plant and equipment
Property, plant and equipment is stated at cost. Depreciation is computed principally on the declining balance method over their estimateduseful lives.
(h) Retirement and pension plans
Under the employees’ retirement plans for the Company and certain consolidated subsidiaries, the annual provision for retirement benefits
is calculated to state the liability for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date.
Retirement benefits to directors and corporate auditors are provided at the amount which would be required if all directors and corporate
auditors retired at the balance sheet date.
(i) Income taxes
The provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The asset andliability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to thetemporary differences.
(j) Derivative financial instruments
The Group uses a variety of derivative financial instruments, including foreign currency forward contracts and interest rate swaps as a meansof hedging exposure to foreign currency and interest rate risks. The Group does not enter into derivatives for trading or speculative purposes.
23

The foreign currency forward contracts are utilized to hedge foreign currency exposures in procurement of raw materials from overseas suppliers.
Trade payables denominated in foreign currencies are translated at the contracted rates if the forward contracts qualify for hedge accounting.
Interest rate swaps are utilized to hedge interest rate exposures of long-term debt. These swaps which qualify for hedge accounting and meet
specific matching criteria are not remeasured at market value but the differential paid or received under the swap agreements are recognized
and included in interest expense or income.
3. INVENTORIES:
Inventories at 31st March, 2004 and 2003 were as follows:

Finished products .........................................................................................................................
Work in process ............................................................................................................................
Materials and supplies...................................................................................................................

(millions of yen)
2004
2003

(thousands of
US dollars)
2004

25,756
7,082
10,27943,117$ 245,295
67,44897,895$ 410,638

¥

¥

¥

¥

20,916
7,776
8,659
37,351

4. MARKETABLE AND INVESTMENT SECURITIES:The carrying amounts and aggregate fair value of securities available-for-sale included in marketable and investment securities at 31st March,
2004 and 2003 were as follows:(thousands of
US dollars)
2004(millions of yen)
2004
2003

Cost ..........................................................................................................................................
Unrealized gains........................................................................................................................
Unrealized losses .......................................................................................................................
Fair value ..................................................................................................................................

¥

37,71270,324(276)¥ 107,760¥¥

39,93623,963(7,445)56,454$ 359,162
669,752(2,628)$1,026,286

5. SHORT-TERM BANK LOANS AND LONG-TERM DEBT:
The annual interest rates applicable to the short-term bank loans at 31st March, 2004 and 2003 were 0.6% to 8.8%.
Long-term debt at 31st March, 2004 and 2003 consisted of the following:(thousands of
US dollars)
2004(millions of yen)
2004
2003

Long-term debt with collateral:
Loans from banks maturing serially to 2011, ranging from 1.7% to 4.8% ................................
2.4% bonds due in 2007............................................................................................................
Long-term debt without collateral:
Loans from banks maturing serially to 2016, ranging from 1.3% to 7.0% ................................

¥

2,669
1,000

Capital lease obligations, due through 2019 .............................................................................
Less current portion......................................................................................................................
¥

¥

624
—

$

25,419
9,524

3,082

4,282

29,353

5,485
12,236(2,416)
9,820

5,950
10,856(3,282)
7,574

52,238
116,534(23,010)$ 93,524¥

Annual maturities of long-term debt were as follows:Year ending 31st March,
2005.....................................................................................................................................................
2006 ......................................................................................................................................
2007 ......................................................................................................................................
2008 ......................................................................................................................................
2009 and thereafter ...............................................................................................................

(millions of yen)¥¥(thousands of US dollars)

2,416
2,208
2,283
2,365
2,964
12,236$23,01021,02821,74322,52428,229$ 116,534

At 31st March, 2004 and 2003, net book value of assets pledged as collateral for short-term bank loans and long-term debt were as follows:(millions of yen)
2004
2003

Property, plant and equipment .....................................................................................................
Notes receivable, trade ..................................................................................................................

¥

Inventories.............................................................................................................................................

¥

24

8,914
21
2,018
10,953

¥

¥

6,443
—
—
6,443

(thousands of
US dollars)
2004$

84,895200
19,219$ 104,314

6. RETIREMENT AND PENSION PLANS:
Under most circumstances, employees terminating their employment are entitled to lump-sum severance payments based on the rate of pay
at termination, years of service and certain other factors.
The liability for retirement benefits for directors and corporate auditors at 31st March, 2004 and 2003 were ¥698 million ($6,648 thousand)and ¥847 million. The retirement benefits for directors and corporate auditors are paid subject to the approval of the shareholders.
The liability for employees’ retirement benefits at 31st March, 2004 and 2003 consisted of the following:(millions of yen)
2004
2003

Projected benefit obligation ..................................................................................................
Fair value of plan assets ....................................................................................................................
Unrecognized prior service cost ............................................................................................
Unrecognized actuarial loss...................................................................................................
Unrecognized transitional obligation ....................................................................................
Net liability .......................................................................................................................

¥

65,163(33,040)
32,123
2,663(12,542)(400)¥ 21,844¥

65,064(25,594)
39,470
3,043(19,786)—¥ 22,727(thousands of
US dollars)
2004$ 620,600(314,667)
305,933
25,362(119,448)(3,809)$ 208,038

The components of net periodic benefit costs for the years ended 31st March, 2004 and 2003 were as follows:(millions of yen)
2004
2003

Service cost............................................................................................................................
Interest cost...........................................................................................................................
Expected return on plan assets ..............................................................................................
Amortization of prior service cost .........................................................................................
Recognized actuarial loss ......................................................................................................
Amortization of transitional obligation.................................................................................
Net periodic benefit costs..................................................................................................

¥

¥

1,878
1,653
(531)
(203)
1,416
57
4,270

¥

¥

1,660
1,802
(1,220)
(195)
712
—
2,759

(thousands of
US dollars)
2004

$

$

17,886
15,743(5,057)(1,933)
13,485543
40,667

Assumptions used for the years ended 31st March, 2004 and 2003 were set forth as follows:
Discount rate................................................................................................................................
Expected rate of return on plan assets..........................................................................................
Amortization period of prior service cost .....................................................................................
Recognition period of actuarial gain / loss ...................................................................................
Amortization period of transitional obligation.............................................................................

2004
2.0%~2.5%
0.0%~4.0%
10~15 years
10~15 years
10 years

2003
2.5%~3.0%
3.5%~4.0%
15 years
15 years—

7. INCOME TAXES:
The tax effects of significant temporary differences and loss carryforwards which resulted in deferred tax assets and liabilities at 31st March,
2004 and 2003 were as follows:(millions of yen)
2004
2003

Deferred tax assets:
Inventories ............................................................................................................................
Tax loss carryforwards...........................................................................................................
Allowance for doubtful accounts...........................................................................................
Accrued employees’ bonuses .................................................................................................
Accrued severance benefits....................................................................................................
Other ....................................................................................................................................
Less valuation allowance .......................................................................................................

¥¥
Deferred tax liabilities:
Unrealized gain on available-for-sale securities.....................................................................
Deferred gains on sale of property ........................................................................................
Other ....................................................................................................................................

Net deferred tax ............................................................................................................................

(¥

693
6,130
432
928
9,301
1,877
(8,655)
10,706

¥

¥

411
666
597
912
9,110
1,479
(1,744)
11,431(thousands of
US dollars)
2004

$

6,600
58,381
4,114
8,838
88,581
17,876(82,428)$ 101,962(¥

28,565) (¥(4,245)(1,583)34,393) (¥6,778) ($ 272,048)(4,469)(40,428)(817)(15,076)
12,064) ($ 327,552)(¥

23,687) (¥633) ($ 225,590)

25

A reconciliation between the normal effective statutory tax rate for the years ended 31st March, 2004 and 2003 and the actual effective tax
rates reflected in the accompanying consolidated statement of income was as follows:
2003
2004
42.0%
42.0%
Normal effective statutory tax rate........................................................................................................................
(2.0)
(0.5)
Dividend income not taxable........................................................................................................................
2.2
1.2
Expenses not deductible for income tax purposes.........................................................................................
7.2
1.2
Tax benefits not recognized on operating losses of subsidiaries ...................................................................
3.7
(1.4)
Equity in (earnings) losses of affiliates..........................................................................................................
(4.1)
(2.9)
Lower income tax rates applicable to income in certain foreign countries....................................................
18.9—
Consolidation adjustment of gain on 20%-50% owned affiliate securities sold ............................................
4.1
0.8
Decrease in deferred tax assets due to effect of tax rate ................................................................................
11.6
1.0
Other ............................................................................................................................................................
83.6%
41.4%
Actual effective tax rate ........................................................................................................................................
8. LEASES:
The Group leases certain machinery, computer equipment and other assets.
Total rental expenses for the years ended 31st March, 2004 and 2003 were ¥387 million ($3,686 thousand) and ¥447 million, respectively,
including ¥387 million ($3,686 thousand) and ¥432 million of lease payments under finance leases.
Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligation under finance lease, depreciation
expense of finance leases that do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis for the years ended
31st March, 2004 and 2003 was as follows:(millions of yen)
2004
2003

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

¥

2,058
(1,168)
890

¥

¥
¥

2,229
(1,595)634(thousands of
US dollars)
2004$

19,600(11,124)$
8,476

Obligations under finance leases:(millions of yen)
2004
2003

Due within one year..............................................................................................................
Due after one year.................................................................................................................
Total .....................................................................................................................................

¥

310
580
890

¥

¥
¥

253
381
634

(thousands of
US dollars)
2004

$
$

2,952
5,524
8,476

Depreciation expense under finance leases:(millions of yen)
2004
2003

Depreciation expense ............................................................................................................

¥

387

¥

432

(thousands of
US dollars)
2004

$

3,686

Depreciation expense, which is not reflected in the accompanying statements of income, is computed by the straight-line method.
9. DERIVATIVES:The Group enters into foreign currency forward contracts to hedge exchange risk associated with certain assets and liabilities denominatedin foreign currencies. Foreign currency forward contracts which qualify for hedge accounting for the years ended 31st March, 2004 and 2003
and such amounts which are assigned to the associated assets and liabilities and are recorded on the balance sheets at 31st March, 2004 and2003, are excluded from disclosure of market value information.
The Group also enters into interest rate swap contracts to manage its interest rate exposures on certain liabilities. Such contracts outstandingat 31st March, 2004 and 2003 were as follows:(millions of yen)Contract
amountInterest rate swaps:
Fixed rate payments, floating rate receipt ....

26

¥ 2,910 (¥

2004
Fair
value

Unrealized Contract
amountloss16) (¥

16) ¥ 1,495 ¥

2003
Fair
value

(thousands of US dollars)
2004
Fair
Unrealized
Unrealized Contract
value
loss
amountgain

9 ¥9 $27,714 ($152) ($

152)

10. SHAREHOLDERS’ EQUITY:The Japanese Commercial Code provides that an amount equal to at least 10% of all cash payments which are made as an appropriation ofretained earnings be appropriated as a legal reserve (a component of retained earnings) until such reserve and additional paid-in capital equal
25% of common stock. This reserve is not available for dividends but may be used to reduce a deficit by resolution of the shareholders or may
be capitalized by resolution of the Board of Directors.
Dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the dividend is applicable. In addition,
a semi-annual interim dividend may be paid upon resolution of the Board of Directors, subject to limitations imposed by the Code.
The computation of net income per share is based on the weighted average number of shares of common stock outstanding during eachfiscal year.
11. OTHER INCOME (EXPENSES) — OTHER, NET:
Other income (expenses) — Other, net consisted of the following:(millions of yen)
2004
2003

Gain (loss) on sale of property, plant and equipment ...................................................................
Gain (loss) on sale of securities .....................................................................................................
Write-down of securities ..............................................................................................................
Write-off of inventories ................................................................................................................
Loss on plant closures ...................................................................................................................
Provision for loss from guarantee of indebtedness of affiliated .....................................................
Retirement benefits paid due to restructuring of business operations ...........................................
Other, net .....................................................................................................................................

¥

156 (¥
2,555
(10)
(13)
(879)
(506)
(2,836)(938)
2,471) (¥(¥(thousands of
US dollars)
2004421) $
1,486(449)
24,333
(473)
(95)
(239)
(124)
(709)
(8,371)—(4,819)(58)(27,010)(269)(8,933)2,618) ($ 23,533)

12. COMMITMENTS AND CONTINGENCIES:
Contingent liabilities at 31st March, 2004 and 2003 for trade notes discounted with banks amounted to ¥106 million ($1,010 thousand)and ¥318 million, respectively. Contingent liabilities at 31st March, 2004 and 2003 for loans guaranteed amounted to ¥3,456 million ($32,914
thousand) and ¥2,208 million, respectively.
Commitments for capital expenditures outstanding at 31st March, 2004 and 2003 were in the approximate amounts of ¥1,949 million ($18,562
thousand) and ¥1,113 million, respectively.
13. SUBSEQUENT EVENT:
Appropriation of retained earnings
On 29th June, 2004, Nisshinbo’s shareholders authorised the appropriation of retained earnings as follows:(millions of yen)

Cash dividends (¥3.50 per share) ..............................................................................................
Directors’ bonuses.....................................................................................................................

¥

727
60

(thousands of US dollars)

$

6,924
571

Pension plans
The Company and certain domestic subsidiaries have two types of pension plans for employees; a non-contributory and a contributory funded
defined benefit pension plan. The contributory funded defined benefit pension plan, which is established under the Japanese Welfare Pension
Insurance Law, covers a substituational portion of the governmental pension program managed by the Company on behalf of the government
and a corporate portion established at the discretion of the company. According to the enactment of the Defined Benefit Pension Plan Law,
the Company applied for an exemption from obligation to pay benefits for future employee services related to the substituational portion which
would result in the transfer of the pension obligations and related assets to the government. The Company obtained an approval of exemption
from future obligation by the Ministry of Health, Labor and Welfare on 1st April, 2004.
As a result of this exemption, the Company and certain subsidiaries will recognize a gain on exemption from future pension obligation of
the governmental program in the amount of ¥5,030 million in the following year ending 31st March, 2005.

27

14. SEGMENT INFORMATION:
Information about industry segments, geographic segments and sales to foreign customers of the Company and its consolidated subsidiaries
for the years ended 31st March, 2004 and 2003 were as follows:(1) Industry Segments(millions of yen)
2004
ChemicalReal Estate
Products
Leasing

Automobile
BrakesPapers¥ 52,076—
52,07647,264¥ 4,812¥ 29,009
11
29,02026,996¥ 2,024¥ 32,098
865
32,96332,351¥
612¥

II. Total Assets, Depreciation and Capital Expenditures
Total assets ..................................... ¥ 92,695 ¥ 56,375
Depreciation ................................... ¥ 3,586 ¥ 3,819
Capital expenditures ....................... ¥ 1,480 ¥ 3,489¥ 20,262¥ 1,251¥ 1,824¥ 23,768¥ 1,052¥795¥ 15,879
¥
852
¥
663

TextilesI. Sales and Operating Income
Sales to customers ........................... ¥ 68,403
0Intersegment sales...........................
68,403
Total sales....................................
67,678Operating expenses .........................
725
Operating income (loss).................. ¥TextilesAutomobile
BrakesPapers¥Eliminations/
Corporate

4,941 ¥ 40,356 ¥
1,652
320
42,008
5,261
43,1642,647
2,614 (¥ 1,156) (¥(millions of yen)
2003
ChemicalReal Estate
Products
Leasing

I. Sales and Operating Income
Sales to customers ........................... ¥ 74,034 ¥ 56,352
0—Intersegment sales...........................
74,03456,352
Total sales....................................
74,72150,851
Operating expenses .........................
687) ¥ 5,501
Operating income (loss).................. (¥¥ 27,024
14
27,03825,215¥ 1,823¥ 30,778
887
31,66531,416¥
249¥

II. Total Assets, Depreciation and Capital Expenditures
Total assets ..................................... ¥ 80,223 ¥ 61,626
Depreciation ................................... ¥ 4,202 ¥ 4,328
Capital expenditures ....................... ¥ 2,842 ¥ 2,261¥ 19,918¥ 1,250¥ 1,331¥ 21,436¥ 1,086¥615¥ 16,850
¥
862
¥
586

¥

Others— ¥ 226,883(2,848)—(2,848)226,883(1,713)
218,387
1,135) ¥8,496¥ 33,267¥ 1,216¥738¥ 126,198¥—¥—¥ 368,444¥ 11,776¥
8,989

OthersEliminations/
Corporate

Consolidated

4,785 ¥ 38,220 ¥
1,386
304
39,606
5,089
42,2922,520
2,569 (¥ 2,686) (¥(thousands of US dollars)
2004
ChemicalReal Estate
Products
Leasing

Consolidated¥ 29,835¥ 1,030¥ 1,422¥¥¥— ¥ 231,193(2,591)—(2,591)
231,193(1,811)
225,204780) ¥
5,989

83,021——¥ 312,909¥ 12,758¥
9,057

Eliminations/
Corporate

Consolidated

Automobile
BrakesPapers$ 495,962—
495,962
450,133$ 45,829$ 276,276
105
276,381257,105$ 19,276$ 305,695
8,238
313,933
308,104$ 5,829$ 47,057 $ 384,343 $— $2,160,790
15,733
3,048(27,124)—400,076
50,105(27,124) 2,160,790
411,086
25,210(16,314) 2,079,876$ 24,895 ($ 11,010) ($ 10,810) $ 80,914

II. Total Assets, Depreciation and Capital Expenditures
Total assets ..................................... $ 882,809 $ 536,905
Depreciation ................................... $ 34,152 $ 36,372
Capital expenditures ......................... $ 14,095 $ 33,229$ 192,971$ 11,914$ 17,372$ 226,362$ 10,019$ 7,571$ 151,228$ 8,114$ 6,314

TextilesI. Sales and Operating Income
Sales to customers ........................... $ 651,457
0Intersegment sales...........................
651,457
Total sales....................................
644,552
Operating expenses .........................
Operating income (loss).................. $ 6,905

28

Others$ 316,829$ 11,581$ 7,029$1,201,886$—$—$3,508,990$ 112,152$ 85,610

(2) Geographical Segments
The geographical segments of the Company and its consolidated subsidiaries for the years ended 31st March, 2004 and 2003 were as follows:(millions of yen)
2004
Eliminations/
OthersCorporate

Japan

Sales to customers ......................... ¥ 201,431
3,683Interarea transfer ...........................
205,114
Total sales..................................
197,595
Operating expenses .......................
7,519
Operating income (loss) ................ ¥¥¥25,452 ¥3,353
28,80526,646
2,159 (¥

Total assets.................................... ¥ 224,214¥

18,031

Japan

Consolidated— ¥ 226,883(7,036)—(7,036)
226,883(5,854)
218,387
1,182) ¥8,496¥ 126,199¥ 368,444(thousands of US dollars)
2004
Eliminations/
OthersCorporate

Consolidated

Sales to customers ......................... $1,918,390
Interarea transfer ...........................
35,076
Total sales.................................. 1,953,466
Operating expenses ....................... 1,881,857
Operating income (loss) ................ $ 71,609$ 242,400 $— $2,160,790
31,933(67,009)—274,333(67,009) 2,160,790
253,771(55,752) 2,079,876$ 20,562 ($ 11,257) $ 80,914

Total assets.................................... $2,135,371$ 171,724$1,201,895

2003
Eliminations/
OthersCorporate

Japan

Consolidated¥ 208,448
2,569
211,017
206,017¥ 5,000¥ 22,745 ¥— ¥ 231,193
3,116(5,685)—25,861(5,685) 231,193
24,133(4,946) 225,204¥ 1,728 (¥739) ¥ 5,989¥ 209,793¥ 20,095¥ 83,021¥ 312,909$3,508,990(3) Sales to Foreign Customers
Sales to foreign customers for the years ended 31st March, 2004 and 2003 amounted to ¥42,210 million ($402,000 thousand) and ¥41,210
million, respectively.

Independent Auditors’ Report
To the Board of Directors of
Nisshinbo Industries, Inc.
We have audited the consolidated balance sheets of Nisshinbo Industries, Inc. and consolidated subsidiaries as of 31st March,
2004 and 2003, and the related consolidated statements of income, shareholders’ equity, and cash flows for the years then ended, allexpressed in Japanese yen. These financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these 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 obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made bymanagement, 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 financial positionof Nisshinbo Industries, Inc. and consolidated subsidiaries as of 31st March, 2004 and 2003, and the results of their operations andtheir cash flows for the years then ended, in conformity with accounting principles and practices generally accepted in Japan.
The United States dollar amounts shown in the consolidated financial statements have been translated solely for convenience. We
have reviewed this translation and, in our opinion, the consolidated financial statements expressed in Japanese yen have beentranslated into US dollars on the basis described in Note 1.

Masami Tsukeshiba
Certified Public Accountant

Etsuko Nagashima
Certified Public Accountant

29th June, 2004
Tokyo, Japan

29

Nisshinbo History

1907
1908
1920

1921
1924
1925

1926
1933
1937
1938
1940
1945
1947

1949

1950
1952
1958

1961
1962
1966
1972
1978
1981
1984
1985

30

Nisshin Cotton Spinning Co., Ltd.
established.
The former Kameido Head OfficePlant began operations.
Office opened in Nihonbashi, andthereafter became the head office ofNisshin Cotton Spinning.
Nisshin Cotton Spinning mergedwith Okazaki Boseki Co., Ltd.
(the present Harisaki Plant).
Nagoya Plant began operations (completely burnt down in1945 due to the war, restored in 1951).
Nisshin Cotton Spinning merged with Tokyo BosekiCo., Ltd.
Branch office opened in Nagoya (the present Nagoya
Branch).
Branch office opened in Osaka (the present Osaka
Branch).
Hamamatsu Plant began operations.
Toyama Plant began operations.
Nisshin Cotton Spinning acquired Kawagoe Boseki Co.,
Ltd. (the present Kawagoe Plant).
Nisshin Cotton Spinning merged with Nisshin Rayon Co.,
Ltd. (the present Miai Plant).
Toa Jitsugyo Co., Ltd. established (the company namechanged to Nissin Toa Inc. in 1990).
Nisshin Cotton Spinning acquired the Meiji Plant ofNanshin Seiki Co., Ltd. (the present Fuji Plant).
Non-textiles Division set up and thereafter expanded
operations to include automobile brakes, chemical
products, papers and machine tools.
Nihon Postal Franker Co., Ltd. established.
Nisshin Cotton Spinning listed on the Tokyo Stock
Exchange.
Nitto Asbestos Co., Ltd. established (the company namechanged to Nisshinbo Brake Sales Co., Ltd. in 1987).
Ueda Japan Radio Co., Ltd. established.
Shimada Plant began operations.
Tokushima Plant began operations.
Nippon Kohbunshikan Co., Ltd. established (the company
name changed to Nippon Kohbunshi Co., Ltd. in 1986).
Nisshin Cotton Spinning listed on the first section of theTokyo Stock Exchange.
Nisshin Cotton Spinning’s English company namechanged to Nisshin Spinning Co., Ltd.
Fujieda Plant began operations.
Nisshinbo Do Brasil Industria Textil LTDA. (Brazil)
established.
Nisshin Spinning acquired Tokai Seishi Kougyou
Co., Ltd.
Tatebayashi Chemical Plant (the present Tatebayashi
Plant) began operations.
Nisshin Spinning’s English company name changed to
Nisshinbo Industries, Inc.
Nisshinbo Industries acquired Nisshin Denim Inc.

1986

1987
1989
1992
1993

1995

1996
1997

1998
1999

2000

2001
2002

2004

The Machine Tools Department of the Miai Plant spun
off to create the Miai Mechatronics Plant.
Anti-skid Brake System (now ABS) Division set up.
Hamakita Plant began operations.
Kohbunshi (Thailand) Ltd. established.
Chiba Plant began operations.
The head office relocated to its present
location in Ningyo-cho, Nihonbashi,
Chuo-ku, Tokyo.
Pudong Kohbunshi (Shanghai) Co.,
Ltd. (China) established.
Nisshinbo Automotive Corporation(U.S.A.) established.
Nisshinbo Urban Development Co.,
Ltd. established.
Nisshinbo Somboon Automotive Co., Ltd. (Thailand)established.
Nisshinbo Automotive Manufacturing Inc. (U.S.A.)
established through complete financing from the subsidiary
Nisshinbo Automotive Corporation.
P.T. Gistex Nisshinbo Indonesia established as a joint
venture.
Saeron Automotive Corporation (South Korea)
established.
Research & Development
Center established.
P.T. Nikawa Textile
Industry (Indonesia)
established as a subsidiarythrough the additional
acquisition of stocks.
Continental Teves Corporation established as a joint venture.

Ningbo Sunrise Textile Dyeing And Finishing Co., Ltd.
(China) established as a joint venture.
Ningbo Veken Textile Co.,
Ltd. (China) established asa joint venture.
Nisshinbo Industries
acquired all shares of Iwao
& Co., Ltd.
NISSHINBO(SHANGHAI) CO.,LTD. (China) began operations.
CONTINENTAL TEVES CORPORATION (LIAN
YUN GANG) CO., LTD. (China) established.
Nisshinbo Industries acquired additional stock in Naigai
Shirts Co., Ltd. and CHOYA CORP.

Nisshinbo GroupThe Nisshinbo Group consists of Nisshinbo Industries, Inc., its 43 subsidiaries, and 7 affiliates.

Main Group Companies (As of March 31, 2004)
Consolidated Subsidiaries
Company
Nisshin Toa Inc.
Ebisu Syokuhu Co., Ltd.
Nisshinbo Yarn Dyed Co., Ltd.
Nisshin Denim Inc.
Nisshin Tex Co., Ltd.
Naigai Shirts Co., Ltd.
Nisshinbo Mobix Co., Ltd.
CHOYA CORP.
Nisshinbo Do Brasil Industria Textil LTDA.
P.T. Naigai Shirts Indonesia
Shanghai Choya Fashion Co., Ltd.
P.T. Nikawa Textile Industry
P.T. Gistex Nisshinbo Indonesia
Nisshinbo Brake Sales Co., Ltd.
Nisshinbo Automotive Corporation
Nisshinbo Automotive Manufacturing Inc.
Nisshinbo Somboon Automotive Co., Ltd.
Saeron Automotive Corporation
Tokai Seishi Kougyou Co., Ltd.
Nihon Postal Franker Co., Ltd.
Nisshinbo Engineering Co., Ltd.
Nippon Kohbunshi Co., Ltd.
Kohbunshi (Thailand) Ltd.
Pudong Kohbunshi (Shanghai) Co., Ltd.
Iwao & Co., Ltd.

Location
Tokyo, Japan
Shizuoka, Japan
Nagoya, Japan
Tokushima, Japan
Osaka, Japan
Osaka, Japan
Wakayama, JapanTokyo, Japan
BrazilIndonesia
China
Indonesia
Indonesia
Tokyo, Japan
U.S.A.
U.S.A.
ThailandSouth Korea
Shizuoka, JapanTokyo, JapanTokyo, JapanTokyo, Japan
ThailandChina
Osaka, Japan

Nisshinbo Urban Development Co., Ltd.
Tokyo, Japan
Kansai Nisshinbo Urban Development Co., Ltd. Osaka, Japan
Nisshinbo Europe B.V.
The Netherlands
Nisshinbo Kikai Hanbai Co., Ltd.
Tokyo, Japan
Ueda Japan Radio Co., Ltd.
Nagano, Japan

Capital¥450 million¥50 million¥80 millon¥200 million¥10 million¥90 million¥80 millon¥2,844 million
R$20.075 million
US$0.85 million
34 million Yuan
US$75 million
US$10 million¥150 million
US$88 million
US$15.44 million
BAHT732.6 million
WON8,160 million¥300 million¥310 million¥10 million¥310 million
BAHT100 million
US$7 million¥250 million¥480 million¥30 million
EUR2.165 million¥30 million¥700 million

Business
Textiles, Food Ingredients, Papers
TextilesTextilesTextilesTextilesTextilesTextilesTextilesTextilesTextilesTextilesTextilesTextilesAutomobile Brakes
Automobile Brakes
Automobile Brakes
Automobile Brakes
Automobile Brakes
PapersPapers, Chemical Products
Chemical Products
Plastic Molded Products
Plastic Molded Products
Plastic Molded Products
Textiles, Chemical Products,
Real Estate Leasing
Real Estate Leasing
Real Estate Leasing
Real Estate Leasing
Machine Tools
Electronics

Capital¥2,890 million¥161 million

Business
Automobile Brakes
Chemical Products

Subsidiary and Affiliates Accounted for by the Equity Method
Company
Continental Teves Corporation
ASAHI CHEMITECH CO., LTD.

Location
Tokyo, JapanTokyo, Japan

31

Board of Directors and Statutory Auditors

President

Executive Director

DirectorStanding Statutory Auditor

Yoshikazu Sashida

Yasuo Takeuchi

Masashi Shinagawa

Kenji Tasaki

Executive Director

Director

Statutory Auditor

Masao Kinoshita

Yoshihito Onda

Shoichi Hayashi

Senior Executive Director

Executive Director

Director

Statutory Auditor

Takashi Iwashita

Hajime Takagiwa

Hideo Yakuden

Tomofumi Akiyama

Senior Executive Director

Executive Director

Director

Statutory Auditor

Kunihiro Toda

Shizuka Uzawa

Kinjirou Kawashima

Yoshikuni Utsunomiya

Director

Statutory Auditor

Seiichiro Tomizawa

Takehiko Urushihara

Director

Yoshihiro Sakaki
Director

Kazuo Manaka
Director

Yoshio Ide
Director

Masaaki Isobe

Corporate Data
(As of March 31, 2004)

Founded:February 5, 1907

Head Office:2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku, Tokyo 103-8650, Japan
Tel: 03-5695-8833 Fax: 03-5695-8970
URL: http://www.nisshinbo.co.jp/

Osaka Branch:

2-4-2, Kitakyuhoji-machi, Chuo-ku, Osaka 541-0057, Japan
Tel: 06-6267-5501 Fax: 06-6267-5679

Nagoya Branch:

5-2-38, Sakae, Naka-ku, Nagoya 460-0008, Japan
Tel: 052-261-6151 Fax: 052-263-9480

Employees:

Parent Company
Subsidiaries
Total

3,143
6,732
9,875

Common Stock:32

Authorized:

380,137,000 shares

Issued:216,580,939 shares¥27,588 million — US$263 million

Shareholders:

12,865

Listings:

Tokyo, Osaka, Nagoya, Fukuoka and Sapporo

Transfer Agent:

UFJ Trust Bank Limited
1-4-3, Marunouchi, Chiyoda-ku, Tokyo 100-0005, Japan

Organization Chart

General Affairs Dept.
Secretary Dept.
Purchasing Dept.
Real Estate Dept.

General Affairs Division

Accounting and Finance Division

Finance Dept.
Accounting Dept.
Internal Audit Dept.

Human Resources Division

Human Resources Dept.
Labor Administration Dept.
Health and Medicine Dept.
Human Rights Team

Engineering Administration Division

Utilities, Construction and Environmental Affairs Dept.

Research and Development Division

Research Planning Dept.
Research Administration Dept.
Business Implementing Dept.
Intellectual Property Dept.

Board of Directors

Chairperson
President

Trademark Committee

Research and Development Center

Policy Board

Administration Dept.
Fuel Cell Dept.
Optical Dept.

Business Developing Division

Board of
Statutory Auditors

Textile DivisionFirst Group

Raw Materials Dept.
Mobilon Dept.
Direct Marketing Dept.
Industrial Materials Dept.

Second Group

Knits Dept.
Shirt Fabrics Dept.
Home Textiles Dept.
Outer-Wear Fabrics Dept.

Third GroupTokyo Textiles Dept.

Fourth Group

Textiles Control Dept.
Engineering Dept.

Statutory
Auditors

Textile Research and Development Center
Marketing Dept.
Global Operation Promotion Office
Shanghai Office

Precision Instrument & Machinery DivisionMarketing Dept.
Engineering Dept.

Brake Division

Global Business Dept.
Quality Assurance Dept.
Friction Material R&D Dept.

Chemical Products DivisionMarketing Dept.
Engineering Dept.
New Carbon Dept.

Paper Products Division

Household Paper Sales Dept.
Specialty Paper Sales Dept.
Engineering Dept.
Color Systems Dept.
Administration Dept.

Osaka Branch

Nagoya BranchBusiness Planning OfficeInformation Systems OfficeEnvironmental Affairs Committee
Advertising Committee
Product Safety Committee

Information Dissemination
Committee

Shimada Plant
Fujieda Plant
Toyama Plant
Nagoya Plant
Harisaki Plant
Kawagoe Plant
Miai Plant

Miai Machinery Plant
Hamakita Plant
Tokushima Plant
Tatebayashi Plant
Chiba Plant
Fuji Plant

Human Rights Committee
Corporate Ethics Committee

33

NISSHINBO ANNUAL REPORT 2004 Year ended March 31, 2004

2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku, Tokyo 103-8650, Japan
Tel: 03-5695-8833 Fax: 03-5695-8970
URL: http://www.nisshinbo.co.jp/

Printed in Japan

Annual Report 2004
(Year ended March 31, 2004)