Nipro group Corporate Management Philosophy: Always keep “Creation and Innovation” in mind, undertake diverse company operations toward the future, strive for self-actualization and contribute to society The Nipro Corporation was founded in 1954. Since then we have seen the pursuit of creative products and technologies as the keys to growth. We are consistently improving the QOL (quality of life) of patients and responding to the issues and needs of medical practice. This is based on our concept "technological innovation" and our corporate philosophy "contribute to society through our business activities." The Nipro Corporation began with the manufacture and sale of tube glass for ampoules and vials, and expanded into the medical and pharmaceutical businesses. In the field of medical devices, Nipro is well regarded worldwide for its technical capabilities and high quality, including our world-leading dialyzer. We have performed strongly in the pharmaceutical business, through product development which captures the needs of medical practice. An example of this is our kit preparations which combine the drug with the administration system. In the glass business we are capitalizing on our excellent production technologies, which we have cultivated since our establishment. These technologies allow us to produce and market highly functional and high quality products. As well as expanding the scope of our business, we have also spread the location of our activities overseas. Today we continue to grow as a global corporation with around 120 sites across the globe. The medical industry is entering a period of unprecedented change. To survive and thrive in this challenging time, we aim to strengthen our research and development, production and marketing foundations, by always basing technological innovations on the “patient perspective” and “user perspective.” As the world's top multidisciplinary medical manufacturer, we will draw together our strengths in the medical, pharmaceutical and glass businesses to further advance diverse business developments.
Contents
11 Profile Consolidated Financial Highlights A Message to Our Shareholders and Investors At a Glance 2 3 7 9 13 15 19 21 22 23 27 29 31 32 33 34 47 48 Global Activities Research and Development Plant and Equipment Status of Corporate Governance Topics Board of Directors and Auditors Financial Review 10 Year Summary Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Changes in Net Assets Consolidated Statements of Cash Flows Notes to Consolidated Financial Statement Report of Independent Auditors Corporate Information Disclaimer regarding Forward-looking Statements This report contains forward-looking statements regarding business indices, strategies and performance representing the expectations and judgments of the management, based on information available to the Company and publishable at t he time this report was prepared. When reading this report, please understand that forward-looking statements involve potential risks and uncertainties; actual future business performance and forecasts may therefore differ materially from those contained in these statements, given the possible emergence of new factors or changes in economic circumstances and/or the business environment.
("1) Effective the fiscal year ended March 31, 2012, the Company has adopted ASBJ Statement No.2 "Accounting Standard for Earnings Per Share" (June 30, 2010), ASBJ Guidance No.4 *Guidance on Accounting Standard for Earnings Per Share* (June 30, 2010) and ASBJ PrIF No.9 *Practical Solution on Accounting for Earnings Per Share" (Aune 30, 2010). In addition, the Company has split one share of common stock into two shares on October 1, 2011 based on the resolution at the board of directors’ meeting held on August 27, 2011. In accordance with this adoption, equity per share, basic earnings per share and diluted earnings per share are calculated on the assumption that the two-for-one stock split of common stock was conducted at t he beginning of fiscal year ended March 31, 2011. The U.S. dollar amounts in this report represent translations of Japanese yen, for convenience only, at the rate of ¥94.05=U.S.$1, the approximate exchange rate on March 31, 2013.
ll  Net Sales (Millions of yen)
ll  Net Income (Milions of yen)
■ Return on Equity (%)
pursuing natural profit
Sales and profit growth in a
changing environment
The world economy has been severely hit by the European credit crisis. Now, the USA is seeing improvements in employment and consumer confidence, and is taking the lead in a gradual world recovery. In Japan there is a sense of anticipation about the growth strategy of the new administration, which has already led to a weakening of the Yen since New Year. The renewed efforts to shrug off deflation are finally beginning to bear fruit. Nevertheless, as a company we remain keenly aware of the challenges we face, such as falling exports due to a strong Yen in the long-term and a retreating Chinese economy. In these circumstances, Nipro group has continuously and unwaveringly striven to consolidate and strengthen its global production and distribution base, and worked to expand sales and increase profits. As a result, consolidated sales this term reached 241.0 billion yen (13.7% up from previous fiscal year). Consolidated operating income was 11.4 billion yen (28.1% down from previous fiscal year), but consolidated net income was 10.2 billion yen (123.1% up from previous fiscal year), due to extraordinary profits.
Patient-focused business
development
Our former president founded our company. He believed that business can’t go o n without growth, that it is important to have ambition, and in the face of failure to have the will to take stock and challenge again. He advocated developing our business by attaining a world-leading market share. We will take on the hopes and ideas of our former president into the future. Nipro group will work together to fulfill our long-term business targets of consolidated net sales of 500 billion yen by fiscal year 2020 and 1 trillion yen by fiscal year 2030. In recent years we have actively invested in establishing overseas production facilities and M&A. I believe that we must continue to realize persistent growth in the global market, and raise profitability. To achieve this, it is essential that we are patient-focused. This is the viewpoint that forms the bedrock of all our business activities. Product value derives from its use by end users, i.e. patients. Providing products and services that are useful to patients and people working in the medical field leads to repeat business and naturally generates profit. I believe the road to natural profit is opened up by reiterating this process.
Reorganization of three into
one
The key to ensuring we operate as a patient-focused business, is to move from a system of generating business value in each of our business fields individually, as medical devices, pharmaceuticals and glass containers, to development which retains a sense of unity. In the 12 months since I was appointed president, I have focused on laying the groundwork for this effort. Every product is essential to medical practice and patients can’t be treated without them. That’s why building up our line-up of full-system products combining the drug and medical device or the drug and container, such as double bags or pre-filled syringes, ensures safety for patients and saves effort for medical practitioners. These full-system products show how we can maximize our strengths by developing across multiple fields. Moving from products to systems and bringing these to market quickly requires a coordinated and dynamic structure. To achieve this, the first step was to set up a pharmaceutical division bringing together drugs and their devices or containers. In the second stage we combined our domestic sales teams for medical devices and drugs. We have launched committees for information management, product planning, production technology, material procurement and plant management. Their goal is to increase production technologies, reduce costs, and set reasonable prices while maintaining high expertise in medicine. The committees function as a horizontal structure within the group, as a counterbalance to divisions, which have jurisdiction over the upstream to downstream movement of products. This interlocking vertical and horizontal matrix ensures close sharing of information and strong cooperation.
Introducing new products that
meet local needs
We are taking positive action to cultivate sales, particularly in emerging markets, and develop distribution bases to achieve a world-leading market share. At the same time we want to efficiently increase sales and market share by introducing new products through existing sales routes used by the Dialyzer, which already has a 25% world market share. The specification required of a product differs depending on the country or region. Infection control safety products such as pre-filled syringes or products with error prevention functions (e.g. the prevention of needle-stick injuries) are currently in high demand in Japan, and these are likely to be needed in advancing nations in the near future. We will continue to provide both high grade and standard grade products to meet local demand and requirements. We are open to strategic partnerships and M&As to demonstrate a competitive advantage in the market. However our policy is to show great discretion in partner selection, investing management resources only into those which will lead to synergies in the future. Nevertheless, I believe our policy should be to actively prepare the building blocks of the future, such as by investing in promising ventures in fields where growth is expected.
The importance of consistent
supply
We have sought to build business bases with local roots, and promote local production for local consumption. Production has begun in India, Indonesia and Bangladesh, with a focus on dialysis products. We also have plans to open a new plant in China in 2013. By setting out the whole chain from production to sale, we can ensure product development and stable supply which meets local needs. We cannot allow patients’ lives to be jeopardized by a lack of supply of essential products to the medical care front line. Stability of supply engenders trust from patients and medical professionals, and leads to a significant advantage in acquiring market share. Our roots are in the development of ampoule production machinery, and our production line automation technology is advanced. We want to bring in labor-saving measures to reduce costs, but we also want to offer stable supply of high quality products. To do this we have set up several independent production technology development units within our Research and Development Laboratory, as ‘production technology centers.’ At the same time we are setting up a production technology development committee to drive all our plants worldwide to join together to take further steps forward.
Continuous increase in
dividends
Nipro group has made profit return to shareholders one of its key business policies. Our sliding-scale system is one of our basic policies in which profit distributions are made to shareholders, employees and managers, according to our performance. Dividends this term included an interim dividend of 12 yen per share and an end of term dividend of 15.5 yen per share, making an annual dividend of 27.5 yen per share. Dividends for next term will continue under the same basic policy, and are expected to be made in consideration of the balance of retained earnings, based on future growth of capital demand.
Integrating production and
distribution to increase sales
Our policy in the medical devices business is for growth in circulatory products, as an additional core product line to add to dialysis and disposable products. In spring this year we took on Goodman Co., Ltd. as a subsidiary, a prominent and established brand in catheter products. We will join with Goodman and make good use of their dominance of the Japanese market, and the management resources of both companies. I look forward to highly synergistic results in terms of development, manufacturing and sales. Looking ahead, we are working to expand manufacture and sales overseas, and to strengthen the business base. In the pharmaceutical business we see the Japanese market making a switch to generic drugs, as a primary strategy of drug cost reduction. This is an opportunity that we cannot afford to miss. I want us to use our highly original manufacturing technologies and abilities to promote generic drugs. We are also aiming for early release of products with complex development, such as anticancer drugs and biosimilars. In the glass business we have invested in a range of production facilities, including a cutting edge furnace in our tube plant in France and a new production line in our German processing plant. In Japan, a new plant is under construction at t he site of our glass business mother plant and is due to open in spring 2014. This will finally enable us to demonstrate our key selling point, of combining the manufacture, processing and sale of a wide range of products, from glass to pharmaceutical rubber plugs and needles, within a single company. We have made it our goal to acquire one third of global market share. Now all we have to do is put it into practice.
Becoming a company worthy of
gratitude
While the end user for any medical manufacturer is the patient, the target for product sales is the medical institution. Japanese medical institutions are sometimes non-profit organizations funded in part by taxes. I believe we must act as a good corporate citizen in our business activities, commensurate with the special status of the field of medicine. We need to think not just about the market, but about the needs of patients and medical professionals. We will not chase short-term returns; rather we will provide support through our high quality products and services, to ensure patients receiving treatment can recover even one extra day of healthy life, to ensure thanks are deserved. Also, to ensure suitable treatments demanded by patients and medical professionals are not delayed, we understand the social role that we must fulfill, by providing a stable supply of our products. As ever, I would like to thank all of our shareholders and investors who have supported us, and for your continued understanding of the unique characteristics of the medical business and your long-term support. Dialyzer
Main Products
• Injection and infusion products • Artificial organ products • Advanced products • Dialysis products • Diabetes products Net Sales Ratio
Our diverse product line support people across the world working in medicine and fighting disease. We have carved out a leading market share worldwide in artificial kidney products (Dialyzer). We have also made our full-scale entry into the diabetes market and aim to make further gains as a leading manufacturer of medical devices. In the Japanese market, the sales of our HDF filter are up significantly on the previous year, while dialysis products such as Dialyzer showed stable growth. We have also acquired Goodman, Co, Ltd., a strong brand in circulatory products, creating a basis for opening up new markets in synergy with our own products. As for overseas sales, we acquired dialysis solution manufacturers and distributors in Brazil and Spain, enhancing our sales power with a more comprehensive dialysis product line. We have also actively developed distribution networks in emerging nations such as Myanmar. Intensive marketing activities in the region have allowed us to effectively introduce our dialysis products and blood glucose meter products, and dramatically extend business performance. Finally, new plants have come online smoothly in India, Indonesia and Bangladesh. NCU-18 As the largest contract manufacturer group in Japan, we have made progress through marketing distinctive products. We also contribute to safety and user-friendliness in the medical field by developing pharmaceutical kit products that combine our technology and knowledge of both medical products and pharmaceuticals. Sales of our oral and injectable drug kits grew well as a result of our research and development efforts into unique drug formulation technologies, as well as our sales activities. New production plants have come online including dedicated facilities for biopharmaceutical and anticancer drugs, and a new facility for infusion. Construction of a new plant in Vietnam is progressing well and is due to open in 2015. We continue to create solid foundations to supply low cost, high quality products reliably, to meet a broad market demand, including overseas corporations. We have also integrated departments for pharmaceutical products and for their containers, to further expand our business base. This is expected to deliver better devices and containers as well as flexible and innovative pharmaceutical product development and contract manufacturing.
We produce high-performance and high-quality glass for use in the medical field, as well as physical and chemical sciences and industry. We also sell heat-resistant, impact-resistant and chemically durable glass, and high-precision glass for medical and industrial use. We have made a successful transition to sales of vials meet demand for vials for vaccine as well as ensuring stable sales of tube glass for vials to meet overseas demand. We have utilized our excellent glass processing technology developed since our establishment for expansion within Japan, and achieved high quality, low cost product growth across Asia in countries such as China, where future growth is anticipated. Our focus with regard to joint business with China has been on pushing capital investment and personnel deployment to places where future demand is expected. This will help us to realize higher quality product manufacture and improved production efficiency. Demand in the global medical market continues to grow. The requirement for medical care is rapidly increasing in emerging countries such as China, India, other Asian countries, as well as Central and South American and African countries. This is due to increasing population, economic growth and improvements to medical infrastructure such as social health insurance systems. We have responded to this environment by producing high quality and safe products at low cost and high volume. In fiscal year 2012 we focused on opening new plants in emerging nations, based on our policy to supply to a range of regions across the world. At the same time we worked to augment our sales offices and reinforce our business base through M&A. As a result, we have achieved substantial growth in consolidated sales, with Nipro group overseas sales of ¥102.1 billion (US$1,085.2 million), a 23.3% increase from previous fiscal year. Currently, Nipro group has 86 sales offices across 40 countries and 33 manufacturing plants across 12 countries (including plants under construction). Our ‘local production for local consumption' system continues to pay dividends. The proportion of products sold overseas increased from 49% in 2012 to 58% in 2013 due to increasing levels of production at our overseas plants. This percentage is expected to rise further to 70% in 2014. This trend enables us to diversify our currency exchange risk and ensure flexibility in responding to customer needs and local specification requirements by having manufacturing close to demand. In 2012 we have supported the establishment of dialysis centers in various countries, including Myanmar, India, Ecuador and Senegal. Emerging nations have growing populations, but often lag behind in terms of advanced medical treatment such as dialysis. We believe it is an important duty to support these new centers, to offer the opportunity for treatment to patients who would not previously have received it. Additionally, the new dialysis centers will use our products and provide a location to introduce doctors and nurses to premium medical care using our products, and provide training, taking the presence of Nipro products to the next level. The environment surrounding our business is challeng- ing, but our medical, pharmaceutical and pharmaceutical packing materials businesses have substantial growth potential. We will continue to expand our business through our global network and our hardworking and high quality human resources in all locations, in order to contribute to medical care around the world. ■ America (Nipro Medical Corporation) Sales in America increased 13.4% from previous fiscal year on a local currency basis. Nipro Medical Ltda. is based in Brazil, and is involved in the manufacture and sale of oxygenator products and the sale of dialysis products. On September 25, 2012, Nipro Medical Ltda. purchased Salbego Laboratorio Farmaceutico Ltda., which manufactures and sells dialysis solution in Brazil. We aim to improve our service by adding dialysis solution to the product line-up and offering a more comprehensive range of related products. Nipro Medical Corporation has continued to expand its sales channel in Central and South America. In 2012 it established offices in Concepcion in Chile, Santa Cruz in Bolivia and Asunción in Paraguay. This brings the number of sales offices in Central and South America to 30, spanning 19 countries. Using these offices as a base, we will implement a service better tuned to local needs, and further enhance the Nipro brand presence in Central and South America. Nipro Diagnostics, Inc. manufactures and sells blood glucose meters and test strips for diabetic patients. Since its purchase in 2010, Nipro Diagnostics has used the Nipro global distribution network for its products, and as of March 2013 supplies products to 71 countries across the globe. This has led to a 23% increase in sales volume of blood glucose test strips in 2012, compared to previous fiscal year. While there are concerns over a reduction of average unit prices due to US health insurance reforms, we plan to counter this by reducing costs through changes to materials and boosting promotion of sales activities. Looking forward, we plan to build a more robust sales platform by developing sales promotion activities on a global scale. In Europe, there was considerable growth in sales of our primary products such as dialysis and diabetes products, with a major upswing in sales of 46.2% from previous fiscal year on a local currency basis. In the dialysis business, we have broadened the range for core products such as the Dialyzer through gradual addition of support products. This has enabled us to respond to bundling, which is the predominant current bidding practice, and expand our business with major dialysis providers. Our headquarters for the European region, Nipro Europe N.V., is involved in sales activities for medical devices across a wide area centered on Europe, including in Russia and Africa. Nipro Europe purchased NEFRO-ION S.L. (name changed to Nipro Renal Solutions Spain S.L.), which manufactures and sells dialysis solution in Spain on November 6, 2012. As in Brazil, our aim is to increase sales in Spain and other key European markets, and increase local market share for dialysis solution from the current 25% to 35% within 5 years. To do this we will further enhance our existing dialysis product line-up. We are currently pushing ahead in Tunisia with the establish- ment of a medical devices distribution company. Africa has a population of 1 billion people, and is currently surging ahead of the global economy. The medical field is no exception, and major market expansion is anticipated going forward. We plan to build a stable distribution network to gain a foothold in the African market with its high growth potential, by opening new branches and developing sales focusing on dialysis products. We continue to make progress in the glass business. We acquired pharmaceutical glass container manufacture and distribution companies in France and Belgium in 2011 and in Germany in 2012. These have become leading sites for glass business within the group, and have helped to ensure a smooth transition in sales of pharmaceutical glass containers in Europe. In the future, we plan to improve production efficiency and quality through installation of a new glass furnace in France, and installation of a glass syringe production line in Germany. We are investing in production equipment and realizing higher quality and lower costs, to build a production base capable of responding to diverse needs, principally those of local pharmaceutical companies. Our joint venture with a local partner company in Russia began production of ampoules and vials in September 2012, distributing within Russia itself. Established businesses such as these will help us to push towards our goal to acquire a world-leading market share in the medical glass industry by fiscal year 2020. Ltd.) In Asia, sales increased 27.4% from previous fiscal year as a result of new plants coming online and a reorganization of distribution systems to meet increasing medical demand. In 2012 new medical device plants which were under construction smoothly began operations. Cannula production began at our Indian plant in November, after which manufacture and sale of all planned production ranges including syringes and the Dialyzer has commenced. This plant is the first in India to produce the Dialyzer. It also has gamma ray sterilization technology, which allows high quality and safe products to reach patients requiring dialysis treatment in India. Our plants in Indonesia and Bangladesh began production of blood tubings in December 2012. The Indonesian plant will phase in production of other ranges throughout 2013. In addition to these sites coming online, we have opened a branch in Myanmar, where further economic growth is anticipated. We have also actively expanded our distribution system, such as by establishing a resident office in Pakistan, which has a population of approximately 180 million. We have invested in our glass business in India to further improve production efficiency and quality, at Nipro Tube Glass Limited, which manufactures and sells pharmaceutical glass containers, and Nipro Glass India Private Limited, which manufactures and sells tube glasses for pharmaceuticals. We have also gathered the managers of all plants in the group to exchange opinions on unifying quality standards and sharing, improving and optimizing production techniques between subsidiaries. These meetings will be held periodically to drive global standardization of the group's glass plants in India and other regions across the world. We are also moving ahead with international expansion in pharmaceuticals. In April 2012 Nipro Pharma Corporation established a pharmaceutical production plant in Vietnam. Its goal is to supply good quality pharmaceuticals at an internationally competitive cost, to take on the intensely competitive international pharmaceuticals market. Construction is scheduled for completion at the end of 2013, with commercial production starting in 2015. Nipro JMI Pharma Ltd. in Bangladesh is making efforts on stronger business strength and increasing trademarking. It is working to acquire a market share in the Bangladesh pharmaceuticals market, which is growing by more than 15% a year. Our sales in China increased 10.8% from previous fiscal year. In China medical needs are rapidly expanding due to economic growth and improved medical infrastructure. The dialysis market is aggressively expanding due to an increase in patient numbers. While competition is fierce, acquiring and maintaining market share in China, with its huge potential, is our highest priority. Nipro Trading (Shanghai) Co., Ltd. is setting up 17 offices across China and putting a system in place to respond to this future demand increase. Work on new plant facilities in Heifei, Anhui Province started in 2011 in an effort to further curtail production costs in preparation for fierce cost-competition in the future. Manufacturing key products such as the Dialyzer in the location of maximum demand not only tackles costs, but has a significant impact in terms of reducing delivery times and adapting quickly to the needs of customers. Construction of the new plant is progressing well, and it is scheduled to begin commercial production in July 2013. We will use it to build a robust system for both manufacture and distribution in the Chinese market. We are also making advances with our glass business in China. The market for pharmaceutical containers such as ampoules has expanded rapidly through an increase in global pharmaceutical contracted manufacturing as well as domestic demand. This market is expected to be the world's largest in the near future. In order to build a solid position in this potential market, we are developing joint ventures for manufacture and sale of pharmaceutical glass containers in Chengdu in Sichuan, Songyuan in Jilin and Anyang in Henan. Participating in the market through a venture and providing financial and technical support using our local partner's base enables us to promote our business aggressively. In recent years, there has been a trend in China to use more appropriate glass containers for drugs, and there is an ever increasing demand for higher quality products on the market. This is why our production plant in Chengdu, Sichuan plans to import tube glasses with low alkaline component loss and establish a plant to process them. This is a rapidly changing market but we are pushing ahead with dynamic business development using local human resources, and aim to acquire market share through increased sales and quality. Nipro group promotes research and development of both medical devices and pharmaceuticals, mainly through our R&D center. Last year we set up a new medical glass development center within the R&D center. Its purpose is to innovate and create glass products with world-class quality and prices. A new branch office of our R&D center was also established by our subsidiary, Nipro Thailand Corporation Limited. It seeks to accelerate the marketing of products and to reflect international needs. We are also currently participating in an industry – university – government research project to develop an automated culture system capable of safe and stable cell culture. This cultivation device includes a specialized bag as a cultivation container to prevent bacterial contamination and to achieve safe cell culture. This automated cell culture system will be of benefit to a range of end users. Additionally, we are actively collaborating with universities that have seed technologies showing potential for use in the fields of cellular and regenerative medicine. We are developing various devices targeted at such fields. Finally, an implantable ventricular assisting device HeartMate II™ (Thoratec Corporation, USA) was approved for production and sale. This product was just brought to market this term.
1. Medical-Related Business
Division of Medical Devices
In diabetes products, a one-time-use safety lancet, LS Lancet™, was launched this term. This product incorporates a number of features that contribute to safer treatment for patients and medical staff. In transfusion products, we released 2-way and 3-way stopcocks as accessories to our needle-free connection SAFETOUCH® series. These products enhance safe and reliable selection and usage of pharmaceuticals, where infusion of several pharmaceuticals is required. In dialysis products, a novel clamp with a side-slip prevention mechanism and a soft lock connector was incorporated into products for improved safety. We have also released a blood tubing with a Luer-Lock connection mechanism to prevent blood loss due to improper connection, using a flexible material for the soft lock connectors. We have also released an enteral nutritional product that has a novel wing-like connector with a safe round shape to provide a secure connection and to reduce pain and reddening during fixation.
Division of Diagnosis and Testing Products
Lithium preparations are often used to treat manic and manic-depressive illnesses. Since their effective and poisonous ranges are very close, monitoring of blood concentration is necessary during dosing. To assist this, we have launched a lithium-measuring reagent ESPA™ Li , which enables simple measurement of blood concentration using a general-purpose device. This term we have also released reagents called Finoscholar™ pTau, Finoscholar™ hTau and Genescholar™ PZA TB. Finoscholar™ pTau and hTau can detect total tau and phosphoric tau, which are helpful markers of cognitive impairment and Creutzfeldt-Jakob disease. Genescholar™ PZA TB can detect drug-resistant tuberculosis that cannot be treated with pyrazinamide, in a quick and simple way.
Division of Functional Pharmaceutical Containers
We have released a vial solution needle called EASYACCESS®. This device is supposed to be used for self-injection by patients with blood coagulation factor VIII. It offers a simple and safe means for dissolution and conditioning of powdered blood plasma protein fraction preparations with injection solvent, and aspiration into a syringe. It also provides mechanisms for prevention of foaming, reduction of residual drug, and a filter for removal of foreign substances. Our group was awarded the Grand Prix of Risk Management Design Award by Koukyo Network Association (A general incorporated association). It was awarded for our kit product enabling easy collection and storage of bloodstains, saliva and semen samples. This kit was developed in a joint project with national organizations.
Division of Circulatory and Interventional Products
This division develops products for percutaneous coronary intervention (PCI) in coronary artery diseases such as acute myocardial infarction or coronary artery occlusion. This term we have developed and released a new thrombus aspiration catheter TVAC®-II with an improved anti-kinking shaft. This product removes thrombi from thrombotic lesions in the coronary artery and aids revascularization. We have released a 7Fr type catheter and a type with a stylet needle, to cover market demand and to improve operability up to the point of reaching the lesion.
Division of Artificial Organs
In Brazil we have released a membrane-type artificial lung with a venous reservoir. This product includes a high efficiency artificial lung that removes carbon dioxide and oxygenates the blood in place of the lungs. The product also incorporates a venous reservoir, which allows the filtration and collection of lost blood, removal of bubbles from blood, and maintenance of bodily blood volume with excellent operability. We have also released a small infant blood concentration device. This product removes excess water from blood that has been diluted by intraoperative pharmaceuticals. Finally, we also released a percutaneous cardiopulmonary support (PCPS) system with excellent durability. This product is used for critical care and heart surgery. The basic concept of our R&D center is to develop and provide high-value added products by approaching medical needs and problems from unique viewpoints. Our primary aim is to carry out exhaustive research of medical devices, and to act as a driving force to produce high-quality Nipro products. Total research and development costs in this business for the current fiscal year were ¥2.6 billion (US$27.7 million).
2. Pharmaceutical-Related Business
In our pharmaceutical business area, we are currently developing high quality generic drugs for various target illnesses and in various forms, to meet the requirements of reducing medical care costs and increasing medical care quality. We are also focused on the development of high-added value products such as kits to make administration easier in medical practice, and orally-disintegrating tablets for patients who find it difficult to swallow. Our main focuses at the Nipro Pharmaceutical Research Center are as follows.
Development of Anti-Cancer Drugs
We are currently developing anti-cancer drugs, where the market is desperate for a generic entry due to the present high costs. We expect to release five products next term. Three of these will be injection format and two will be oral format. We will continue to provide good quality generic products and to participate actively in development.
Injection Kit Products
We are actively progressing with development of injection kits which are very easy to handle in medical practice. We are developing pre-filled syringe solutions for prolonged-action sustained-release injections, premixed bag solutions in a pre-diluted format, and double bag solutions for liquids and powders.
Orally-Disintegrating Tablets
We are currently developing orally-disintegrating tablets (ODT). This is a highly convenient format which makes drugs easier to take for patients with a poor ability to swallow, such as the very elderly. They also enable water intake to be reduced for those who are not allowed to drink water. The anti-allergy drug Fexofenadine (branded version Sanofi's ALLEGRA™) is an ODT in which the bitter taste is masked using our microparticle coating technology. It is scheduled for release in fiscal year 2013.
External Use Products
We are currently developing a tape format and a hydrogel-patch format which are thin, light, adhesive and elastic. During this term we will acquire approval for production and sale of tape, hydrogel-patch and gel formats of the anti-inflammatory pain relief agent loxoprofen sodium (branded version Daiichi Sankyo's LOXONIN™). Release is scheduled for the next term.
Putting Major Generic Drugs on the Market
We are developing generic forms of blockbuster products such as LIPITOR™ (atorvastatin), BLOPRESS™ (candesartan cilexetil) and DIOVAN™ (valsartan). We will be bringing atorvastatin to market this term, with the other major generics to follow next term.
Development of Biosimilars
We are currently progressing with development of biosimilars such as antibody drugs in the rapidly expanding market. Our goal is to bring these to market from 2016. We will achieve this using a dual approach. The first is to select drug substances with excellent cost and quality characteristics and introduce these drug substances to aid faster productization. The second is to create high-expression, easily producible vectors and cell lines and to conduct our own development to enable lower cost productization. Total research and development costs in this business for the current fiscal year were ¥3.9 billion (US$41.0 million).
1. Overview of Capital Investments, etc.
Nipro group has focused on investing in research and development and product areas where growth can be expected in the future. The key aims are energy efficiency, rationalization, product quality improvement, and increasing production capacity. Capital investment (tangible fixed assets on an acceptance basis; figures shown do not include consumption tax, etc.) during this consolidated fiscal year totaled ¥35.1 billion (US$373.4 million). Capital investment broken down by business segment is shown below.

2. Status of Major Plant and Equipment
(1) Nipro Corporation
Medical-Related business segment made capital investments primarily to increase production capacity and for production rationalization at our Odate plant. In addition, Nipro India Corporation Pvt. Ltd., Nipro Medical (Hefei) Co., Ltd. and P.T. Nipro Indonesia Jaya undertook the construc- tion of new plants. In Pharmaceutical-Related business segment Nipro Pharma Corporation made capital investments primarily in anticancer drug production facilities at the Odate plant and ampoule manufacturing facilities at the Ise plant. Glass-Related business segment made capital investments primarily in tube bottle manufacturing facilities at our Otsu plant. Corporate capital investments were made primarily for renovation of Nipro Corporation's Headquarters and preproduction machinery and molds at our Research and Development Laboratory. The required funds were allocated primarily from self-financing and loans. There was no material retirement or disposal of plants and equipment.
(2) Domestic Subsidiaries As of March 31, 2013

(3) Overseas Subsidiaries

(2) <40,681>. <13,162>. <210,000>. <189,877> and <125,297> are the area (m ) of facilities leased from entities other than consolidated subsidiaries. (3) The figures shown above do not include consumption taxes, etc. (4) There are no major facilities currently in abeyance. (5) In addition to the above, the details of major facilities leased from entities other than consolidated subsidiaries are shown below.

3. Plans for New Construction or Disposal of Facilities
(1) New Construction of Major Facilities, etc
Nipro Corporation leads coordination of plans for the new construction of facilities to avoid duplicate investment across Nipro group, since each individual consolidated subsidiary is principally responsible for setting their own capital investment plans. Plans for new construction of major facilities are as shown below.
(2) Disposal of Major Facilities, etc There are no planned disposals, etc., of major facilities.
1. System for Corporate Governance
(1) System for Corporate Governance and Reasons for
Adoption
Nipro Corporation has an established corporate governance system including organizations for the Meeting of Shareholders and directors as required under the Companies Act, in addition to a Board of Directors, auditors, Board of Auditors and an Accounting Auditor. Nipro Corporation has also established internal committees such as the Operational Risk Management Committee. This committee continuously maintains close coordination with external parties such as the company attorney, to enable effective monitoring and supervision of the efficiency and propriety of operations across the company as a whole. Since its establishment, Nipro Corporation has diversified its business and has established an independent management system for each division. Nipro group operations are integrated through mutual collaboration and company-wide governance by Nipro Corporation. The foundations for this system are the management systems of each business unit. Our corporate governance system functions effectively as a traditional and coordinated management system for the Nipro group, by clarifying responsibilities and enhancing management systems.
(2) Internal Control Systems
Nipro Corporation's basic policy for internal control systems, as stipulated in Article 362, Paragraph 5 of the Companies Act, was approved at the Board of Directors meeting convened on April 29 and implemented from May 1, 2006. Nipro Corporation strives to make business units the foundations of its internal control system for the Nipro group overall. Nipro Corporation's directors and auditors, as well as representatives of each of the major companies of the group, hold a group management meeting on a monthly basis. These meetings are used to report on the progress of business activities, decide key operating matters, and deliberate on pending matters. To build awareness of and compliance with laws, regulations and corporate ethics among executives and employees, Nipro Corporation is engaged in efforts to raise awareness and promote compliance. Examples of this are preparing a compliance handbook and legal compliance manuals and making them available on the corporate portal site, implementing an internal reporting system to collect and respond to risk data, and distributing appropriate information via net bulletin boards and the intranet. These internal control systems are targeted at the executives and employees of each company in the Nipro group, and are operated under an integrated management mechanism which seeks to ensure close mutual collaboration.
(3) Risk Management System
Nipro Corporation has established risk management regulations and a system for managing business and other specific risks. Its purpose is to recognize and capture risks that could have a material impact on business operations, in an appropriate and comprehensive manner. Nipro Corporation has also established an Operational Risk Management Committee to ensure cross-sectional management across all group companies. The committee endeavors to further strengthen risk management systems to prevent, avoid and learn from risks and crises. Nipro Corporation has also established a Sanction Committee, chaired by the President, which endeavors to ensure sound business management through the appropriate handling of sanctions.
(4) Basic Structure of Corporate Governance and Risk
2. Internal and Statutory Auditing
(1) Internal Auditing
Nipro Corporation has established an Internal Audit Division, consisting of an Audit Office and an Overseas Audit Office, and conducts audits of accounting and other operations based on internal audit protocols. In addition to the two full-time employees in the Internal Audit Division, employees are dispatched as necessary from the Head Office Management Division or other divisions. Auditors carry out inspections and ensure smooth and efficient performance. Audits are carried out efficiently in accordance with audit policies and schedules as determined each fiscal year. Nipro Corporation endeavors to ensure smooth accounting and statutory audits through mutual collaboration between our auditors and accounting auditors.
(2) Statutory Auditing
For each statutory audit, auditors attend key meetings such as those of the Board of Directors, in accordance with the auditing policy and roles determined by the Board of Auditors. Auditors receive performance reports from directors and employees, and are able to request further explanation when necessary, and inspect key documents. Auditors also undertake other auditing duties such as investigating the state of operations and assets in key places of business. Board of Auditors Meetings are held regularly, or as necessary, in order to exchange views and hold discussions.
3. External Directors and External Auditors
(1) External Directors
Nipro Corporation does not have external directors. <Why external directors are not appointed> Our two external auditors have, through their prior experiences, profound knowledge of and insight into business management. They receive reports on the activities of directors and employees via the full-time auditors, particularly on those matters which may have a material impact on the Nipro group, and on the performance of internal audits. Therefore, they are always able to carry out independent and objective audits. Our external auditors adequately perform the function and role expected of an external director by attending meetings of the Board of Directors to make appropriate statements and offer advice.
(2) External Auditors
Two of the three Auditors are external auditors, one of whom is designated as an independent auditor.
(3) Personal, Capital, Business or Other Interests
between Nipro Corporation and External Auditors
There are no particular interests or relations between Nipro Corporation and the two external auditors.
(4) Function and Role of External Auditors in the
Corporate Governance of Nipro Corporation
External auditors are expected to apply their profound knowledge from past experience of business management to the examination of the management of Nipro Corporation from a broad perspective. They work in close collaboration with the internal auditors, employees of the Audit Office, auditors and accounting auditors of subsidiaries. Their role is to effectively demonstrate an objective auditing function, and to effectively ensure integrated and effective audit activities across the Nipro group as a whole.
(5) Policy and Criteria for Independence from Nipro
Corporation for Election of External Auditors
Nipro Corporation has no criteria or policy in place regarding independence from the filing company with respect to the election of external auditors. However, the evaluation criteria used for the independence of stock exchanges are referenced in such elections.
(6) Approach to the Election of External Auditors
Close coordination with the full-time auditors, employees of the Audit Office and assigned staff from the management section of the head office (as needed) ensures sufficient cover to implement the audit function and role as required by the current corporate governance system. In the event that the number of auditors falls below the legal minimum, a pre-nominated standing auditor who meets the requirements to qualify as an external auditor would be called upon. Should the need arise to improve the audit function in accordance with business developments and future expansion, a review of the audit system would be considered, including an increase in the number of auditors.
(7) Mutual Collaboration between External Audits and
Internal, Statutory and Accounting Audits, and the
Relationship between Internal Control Divisions
External auditors carry out auditing activities including attending key meetings such as meetings of the Board of Directors in accordance with the audit policy and roles determined by the Board of Auditors. They are able to access reports via the full-time auditors or directly from directors and employees, and inspect key documents. External auditors also attend periodic or occasional meetings of the Board of Auditors to contribute to discussion and exchange opinions from an objective and independent viewpoint. External auditors strive to facilitate a smooth audit service through close collaboration with employees of the Audit Office, the full-time auditors, auditors of subsidiaries and the accounting auditor.
4. Remuneration of Directors and Auditors
(1) Total Amount of Remuneration, Total Amount of Remuneration by Type, and Number of Directors and Auditors Eligible for Remuneration

(2) Total Amount of Remuneration etc. for Director and
Auditor
As there was no director or auditor whose total consolidated remuneration exceeded 100 million yen, this information is not disclosed. (3) Policy for Determination of Officer Remuneration • Director's Remuneration, etc. Director's remuneration is determined by the Board of Directors or based on fixed standards set out by the Board of Directors. Annual remuneration is determined considering the market rate and the salary level of employees. Bonuses are calculated by a fixed method based on a sliding scale system in accordance with the performance of the business. Retirement benefits are granted by a resolution of the Board of Directors, up to a ceiling approved by the Meeting of Shareholders. • Auditor Remuneration, etc. The annual remuneration is determined by mutual accord with the auditors. Ceilings on the amounts of remuneration for directors and auditors are determined by a resolution taken at the Meeting of Shareholders. Annual directors' remuneration may be up to 800 million yen, based on a resolution of the 57 th Meeting of Shareholders held on June 25, 2010. Annual auditors' remuneration may be up to 30 million yen, based on a resolution of the 54 th Meeting of Shareholders held on June 27, 2007.
5. Accounting Audits
Name of Accounting Auditor: Osaka Audit Corporation Names of Certified Public Accountants conducting the Audit: Yoshitsugu Hashimoto, Kouichi Aki, Takashi Kinoshita Support Staff for Audits: Certified Public Accountants: 7 people Other staff : 4 people
1. Development of an automated cultivation apparatus for ES/iPS cells*
In November 2012, Nipro and Institute for Integrated Cell-Material Sciences (iCeMS, Kyoto University) released a prototype of an automated cultivation apparatus. It enables safe and efficient production of embryonic stem cells (ES cells) and induced pluripotent stem cells (iPS cells). This apparatus utilizes a special surface-treated bag as a cultivation container. It contributes to reducing the risk of contamination during cultivation and allows a large quantity of cells to be efficiently prepared in a single process. This apparatus was developed as a part of NEDO** research project; “Evaluation and Development of Fundamental Technologies for the Practical Use of Human Stem Cells". *ES/iPS cells: Types of pluripotent stem cells that can differentiate into various cells. ES cells (embryonic stem cells) and iPS cells (induced pluripotent stem cells) can be harvested from fertilized eggs and skin cells, respectively. **NEDO: New Energy and Industrial Technology Development Organization treatment
2. Decision of establishing a training facility for medical professionals,
"Nipro iMEP"
Nipro has decided to establish a technical training facility for medical professionals in its birthplace of Shiga (scheduled for completion in June 2014), and has named it Nipro iMEP after Nipro institute for medical practice. The facility will be located on the same site as our grand hall, R&D laboratory and pharmaceutical research center. Therefore, the facility and hall can be used for combined technical and educational training. We aim to achieve speedy development and improved product quality by collecting medical professionals' opinions and demands directly and quickly.
3. Reinforcement of circulatory business:
new subsidiary, Goodman Co., Ltd.
In March 2013, Goodman Co., Ltd. became a subsidiary of Nipro Corporation as a result of a takeover bid. Our aim is to further reinforce our circulatory business. Our strategy is to foster circulatory medical devices as the third major business, next to dialysis and general disposable products. We aim to achieve sales of ¥30 billion (US$319 million, based on a rate of US$1 = ¥94.05) in the field of circulatory products by fiscal year 2020.
4. Release of an implantable ventricular
assisting device, HeartMate II™
In April 2013, Nipro began sales of HeartMate II™. (Manufacturer: Thoratec Corporation) HeartMate II™ is a device to improve and maintain patient's blood circulation. It is to be implanted in the body of patients with severe heart failure and who require a heart transplantation. The device incorporates a small-type axial pumping mechanism and is particularly aimed at home care after leaving hospital. This device has been already used for over 14,000 patients all over the world (mainly in the U.S and Europe). Nipro continues to develop and supply safer and environment- friendly products for the improvement of patients' QOL and satisfaction of medical professionals.

■ Overview
In the current period under review (the year ended March 31, 2013), the global economy showed gradual signs of recovery, with continued stable personal consumption and an increase in employment in America, despite the shackling effect of the European financial crisis on world economic progress. The Japanese economy, on the other hand, recovered slowly, with demand for reconstruction arising from the Great East Japan Earthquake. Other minor improvements were also seen with expectations of an increase in exports due to the sharp depreciation of the yen over the year, and a departure from prolonged deflation. Nipro group has continued to work hard to expand and strengthen our manufacturing and sales bases in order to increase sales and improve profit.
ll  Consolidated Business Results
Net Sales In the year ended March 31, 2013, consolidated net sales amounted to ¥241.0 billion (US$2,562.7 million), an increase of 13.7% compared with previous fiscal year.
Medical-Related Business
Looking at the domestic market, business conditions remained hostile with an increase in market competition due to the effect of revised medical treatment fees and the reduction of official prices for drugs and medical materials. However, each product group recorded good sales as a result of our aggressive sales activities and improvement of sales efficiency, aiming to expand our share. Our medical device products such as the dialysis system and our dialysis products such as the HDF filter, blood tubings and dialysis pharmaceuticals showed strong growth. Sales of our testing products such as the glucose analysis device (POCT) and vacuum blood drawing system, enteral alimentation products and injection and transfusion products also steadily increased. Overseas sales suffered as a result of the appreciation of the yen against the dollar and the euro over the year. However, we pushed expansion of sales bases across the world and aimed to realize the stable sales activities in each country. As a result of these activities and yen's sharp fall, overseas sales showed a considerable increase from previous fiscal year. On the product level, the sales of dialysis products such as the Dialyzer and blood glucose monitoring device increased steadily as a result of our local based sales activities. In addition, we encouraged expansion of our sales network into developing countries such as Myanmar and Bangladesh based on the concept of "local production for local consumption" to appropriately introduce products needed in medical practice. As a result, net sales of this business increased 15.5% from the previous year to ¥167.5 billion (US$1,781.3 million). Pharmaceutical-Related Business On October 1, 2012, the pharmaceutical business division was newly established to carry out a control function for our group subsidiaries. This business division includes the following departments: the contracted manufacturing department for offering high value-added products to meet customer needs, the collaborative promotion department for handling generic drugs featuring our unique pharmaceutical techniques, the development and sales department for suitable container and dosing devices for each pharmaceutical product, the sales department for pharmaceutical containers and the pharmaceutical research center. This integration is expected to enable more flexible development and contracted manufacture of pharmaceutical products with more suitable devices and containers. It is also expected to provide unique, value-added and high quality pharmaceutical products. Sales of generic drugs are expected to grow in line with the market, due in part to a government policy for the expansion of the market share for generic drugs to over 30% by the end of fiscal year 2012. Consequently a number of policies have been implemented to encourage the use of generic products. Major pharmaceutical manufacturers have made a full-scale entry into the Japanese market and foreign generic manufacturers have strengthened their marketing strategies, making for a more competitive environment surrounding the domestic market. Under these conditions, we worked hard to increase our share of the oral drug market by closely co-operating with drug wholesalers, while reinforcing our sales promotions to dispensing pharmacies prescribing for hospitals and doctors' offices. In addition, as a result of our detailed information service provided mainly to large hospitals, the sales in the current year showed steady growth. Looking at sales in our contracted manufacturing business, we focused on providing a variety of services such as contracted development and supporting high value-added initiatives, other than OEM manufacturing of other companies' brands. We also encouraged contracted manufacturing in collaboration with the generic sales divisions and new drug development divisions of domestic and foreign major pharmaceutical manufacturers. As a result the sales in the current year far exceeded those in the previous year. As for the pharmaceutical containers, medical preparation and administration devices, sales showed a healthy increase. This was a result of providing suitable containers and systems for each pharmaceutical product to meet a variety needs in medical practice, such as bags for antimicrobial agents or osteoporosis and pre-filled syringes, in addition to rubber stoppers for pharmaceutical and vaccine use and kit form containers. These containers and systems were developed by our own development teams or through joint development with pharmaceutical companies based on our processing techniques for plastics, metal and rubber. Furthermore, under the restrictive policy for medical costs, we continue to promote contract manufacturing and development in cooperation with domestic and foreign pharmaceutical companies in general life cycle management of pharmaceuticals. This includes the development of combination products, systematization for self-injection and modification of dosage forms. As a result, net sales of this business increased 10.9% from the previous year to ¥66.2 billion yen (US$704.0 million).
Glass-Related Business
Total sales of tube glass for ampoules and vials decreased slightly from the previous year as the demand for tube glass for ampoules decreased in Japan and abroad, while sales of tube glass for vials performed well. On the other hand, sales of vials increased from the previous year due to an increase in demand for vials for vaccines. As for the pharmaceutical glass business in China, the effect of the campaign to boycott Japanese products caused concerns, however sales increased a little from the previous year as a result of promoting sales activities. Sales of glass for thermos bottles could not match those of the previous year which included the special demand of Great East Japan Earthquake. As the market stabilized, sales decreased from the previous year. In the field of glass for lighting purposes, the order of tube glasses for electric lamps and electric lamp production decreased due to the campaign to boycott Japanese products in China. In addition, a trend away from glass for electric lamps was accelerated by the growing popularity of LEDs, and sales decreased from the previous year. As a result, net sales of this business increased 1.3% from the previous year to ¥7.0 billion (US$74.9 million).
Other Business
Sales from real estate rental income decreased 10.5% from the previous year to ¥0.2 billion (US$2.5 million).
Cost of Sales
The cost of sales increased 17.5% compared with previous fiscal year to ¥175.3 billion (US$1,864.1 million). The increase corresponded to an increase in net sales, however, the ratio of cost of sales to net sales increased by 2.3 percentage points compared with previous fiscal year to 72.8%, mainly due to the effect of exchange rates and the addition to the group of Nipro Glass Germany AG and other glass business companies, which have a higher cost of sales ratio. As a result, gross profit increased 4.7% compared with previous fiscal year to ¥65.7 billion (US$698.6 million) Sales, General and Administrative Expenses Sales, general and administrative expenses increased 15.8% compared with previous fiscal year to ¥54.3 billion (US$577.7 million), mainly as a result of the addition of P.T. Nipro Indonesia Jaya and 5 other companies into the scope of consolidation and an increase in research and development expenses in domestic companies.
Operating Income
As a result of the aforementioned factors, operating income decreased 28.1% compared with previous fiscal year to ¥11.4 billion (US$120.9 million). The ratio of operating income to net sales decreased 2.8 percentage points to 4.7%, owing to an increase in sales, general and administrative expenses.
Operating Income by Business Segment
Medical-Related Business
Operating income in the Medical-Related business decreased 14.8% compared with previous fiscal year to ¥14.6 billion (US$154.8 million), due to the effect of the exchange rate and increases in start-up costs for new plants. Pharmaceutical-Related Business Operating income in the Pharmaceutical-Related business decreased 19.3% compared with previous fiscal year to ¥4.0 billion (US$42.4 million), due to the effect of the Great Earthquake in the previous period on Tohoku Nipro Pharmaceutical Corporation. Glass-Related Business Operating income in the Glass-Related business decreased 27.3% compared with previous fiscal year to ¥0.3 billion (US$3.5 million), due to expenses for improving manufacturing facilities.
Other Business
Operating income in other business amounted to ¥0.2 billion (US$2.4 million), mainly from real estate rental income.
Adjustment
Unallocated corporate costs, consisting mainly of R&D expenses and headquarters administration expenses, increased 12.4% compared with previous fiscal year to ¥7.7 billion (US$82.2 million) mainly due to increases in experimental and research expenses.
Other Income (Expenses)
We recorded other income of ¥6.7 billion (US$71.1 million) compared with other expenses of ¥4.8 billion in previous fiscal year. In the period under review, we recorded ¥3.1 billion (US$32.6 million) in foreign exchange gains, an increase of 253.4% compared with previous fiscal year, and gains on sales of investment securities were ¥4.2 billion (US$44.3 million). Income before Income Taxes and Minority Interests As a result of the factors outlined above, income before income taxes and minority interests increased 63.9% compared with previous fiscal year to ¥18.1 billion (US$192.0 million).
Income Taxes
Income taxes, including deferred taxes, increased 23.9% compared with previous fiscal year to ¥7.4 billion (US$79.1 million) due to the increase in income before income taxes and minority interests. The effective tax rate was 41.2%, lower than the rate of 54.5% for previous fiscal year, mainly because of a decrease in losses for consolidated subsidiaries for which a valuation allowance on deferred tax assets was provided. Minority Interests in Income from Consolidated Subsidiaries Minority interests in net income from consolidated subsidiaries amounted to ¥0.4 billion (US$4.1 million).
Net Income
Net income increased 123.1% compared with previous fiscal year to ¥10.2 billion (US$108.8 million). Net income per share increased to ¥60.0 (US$0.64) from ¥35.3 for previous fiscal year. Return on equity increased 4.7 percentage points to 8.9% from 4.2% for previous fiscal year because of the higher net income.
Net Sales and Operating Income by Geographic Segment
Japan
In Japan, net sales increased 7.5% compared with previous fiscal year to ¥139.0 billion (US$1,477.5 million) due to steady sales in our Medical and Pharmaceutical-Related businesses. America In America, net sales increased 14.3% compared with previous fiscal year to ¥46.3 billion (US$492.4 million). The major reason of the increase was the expansion of our distribution network and a growth in sales of glass products for medical purposes. Europe In Europe, net sales increased 39.9% compared with previous fiscal year to ¥32.4 billion (US$393.9 million) due to healthy sales of dialysis products and glass products for medical purposes and the effect of the acquisition of a glass business in Germany in 2012. Asia In Asia, net sales increased 22.3% compared with previous fiscal year to ¥23.4 billion (US$344.2 million) due to a steady growth of sales of dialysis- and diabetes products in the Asian market.
ll  Financial Position
Total assets as of March 31, 2013 stood at ¥579.3 billion (US$6,159.5 million), an increase of 15.9% from the end of previous fiscal year. Current assets increased 15.0% from the end of previous fiscal year to ¥288.0 billion (US$3,061.9 million), due mainly to the increase in cash and deposits, notes and accounts receivable-trade. Property, plant and equipment, net of accumulated depreciation, stood at ¥174.7 billion (US$1,857.6 million), a slight increase of 19.9% compared with previous fiscal year. Capital investments in property, plant and equipment totaled ¥35.1 billion (US$373.4 million). By business segment, capital investments amounted to ¥23.0 billion (US$244.1 million) in Medical-Related business and ¥10.2 billion (US$108.9 million) in Pharmaceutical-Related business. Intangible assets increased 78.9% to ¥34.3 billion (US$364.3 million) due to an increase in goodwill. Investment and other assets decreased 2.4% to ¥82.4 billion (US$875.7 million), due mainly to the decrease in investment securities. Current liabilities increased 13.1% from the end of previous fiscal year to ¥213.8 billion (US$272.8 million), mainly due to an increase in current portion of long-term debt. Long-term liabilities increased 20.4% from the end of previous fiscal year to ¥236.8 billion (US$2,517.6 million), owing to an increase in long-term debt. Total net assets increased 13% from the end of previous fiscal year to ¥128.8 billion (US$1,369.1 million), due to an increase in retained earnings and foreign currency translation adjustment.
ll  Cash Flow
Net cash provided by operating activities increased 45.9% compared with the previous period to ¥22.6 billion (US$240.2 million), mainly because of an increase in net income and depreciation and amortization. Net cash used in investing activities amounted to ¥37.4 billion (US$398.0 million), mainly due to purchase of available-for-sale securities and purchase of property, plants and equipment. Net cash provided by financing activities amounted to ¥23.4 billion (US$248.4 million) as a result of proceeds from long-term loans. As a result, net cash and cash equivalents increased ¥13.2 billion compared with the end of previous fiscal year to ¥92.6 billion (US$984.8 million).
■ Staff
Total number of employees at the end of the period under review increased 4,761 compared with the end of previous fiscal year to 19,327. Employees in Japan increased 143 to 5,370, and overseas employees increased 4,618 to 13,957.
ll  Basic Policy on Distribution of Profit
As we consider profit return to be an important management measure, our policy is that 50% of the non-consolidated net income is to be distributed to shareholders. Retained earnings are to be invested in sales and production facilities as well as in R&D, in view of enlarging the firms management basis and long-term business developments, so as to ensure stable and continuous growth.
■ Risk Factors
The following are risks that may have an effect on Nipro group's operational results and/or financial condition. The items concerned were determined as of March 31, 2013. (1) Risks Related to Product Safety Nipro group brings all of its capabilities to bear in ensuring product safety in the design, development and manufacturing of medical devices and pharmaceutical products. There are still the risks, however, that accidental defects or adverse effects could result in damages to a third party and our being sued for liability. To cover these risks, we therefore maintain general liability and product liability insurance. In the unlikely event of a successful claim in excess of the insurance coverage, however, there could be a material adverse effect on our operational results and/or financial condition. (2) Risks Related to Supplier Concentration Nipro group procures materials and parts for its operations from a large number of suppliers. Some key materials or parts may be obtained only from a single supplier or a limited group of suppliers. If circumstances at any of these suppliers make it impossible for us to acquire a sufficient quantity of materials or parts to meet our production needs in a timely and cost-effective manner, there could be a material adverse effect on our operational results and financial condition. (3) Risks Related to Changes in Government Healthcare Policies The business sector to which Nipro group belongs is intimately connected with the healthcare system and is subject to the regulations laid out by government organizations, including the National Health Insurance System and the Pharmaceutical Affairs Law. Should circumstances arise in which we were unable to respond to changes in the environment brought about by unforeseeable wholesale changes in government healthcare policies, there could be a material adverse effect on our operational results and financial condition.
(4) Risks Related to Changes in Sale Prices
The products sold by Nipro group include some that are affected on an irregular two year basis by price reductions under the Japanese payment system for medical care, drug prices and reimbursement prices for medical materials and supplies. Moreover, should measures to hold down medical costs also become pervasive worldwide, resulting in intensified competition between corporations and leading to prices falling to a greater degree than anticipated, there could be a material adverse effect on our operational results and financial condition. (5) Risks Related to Changes in Prices of Raw Materials The products manufactured by Nipro group include some that are made from petrochemical products such as plastics. Should the cost of raw materials such as petrochemicals rise, there could be a material adverse effect on our operational results and financial condition.
(6) Risks Related to Overseas Expansion
Nipro group maintains manufacturing bases and sales offices around the world for the production and supply of its products. Should there be unexpected revisions to legal regulations or political or economic changes in these countries or regions, there could be a material adverse effect on our operational results and financial condition.
(7) Risks Related to Intellectual Property
Nipro group owns numerous patents and trademarks, and maintains various proprietary rights for the products it manufactures. Additionally, we take all possible measures to avoid infringing the patents and proprietary rights of any third party, and to avoid breaching any license agreements we have concluded concerning technologies. Nevertheless, if an unanticipated claim for damages were to be made by a third party and the defense of Nipro group were to be rejected, there could be a material adverse effect on its operational results and financial condition.
(8) Risks Related to Environmental Regulations
Nipro group believes it has taken adequate precautions to comply with applicable regulations in the course of its business activities. Should our activities cause an unforeseen environmental problem, however, with a claim for damages made against us, there could be a material adverse effect on our operational results and financial condition.
(9) Risks Related to Exchange Rate Fluctuations
Nipro group, including its overseas subsidiaries, carries out its foreign currency transactions primarily in US Dollars and Euros, but calculates financial statements for its overseas subsidiaries using Japanese Yen for the purpose of producing consolidated financial statements. Fluctuations in exchange rates may therefore have a material adverse effect on our operational results and financial condition.
(10) Risks Related to Investment Value
Nipro group's assets include investments in stocks and other securities. These investments have been made for purposes such as building good business relationships with the issuers of such securities, or for gathering useful information for the development of new products or new business opportunities. Should the value of these investments decline significantly owing to fluctuations in the stock market, circumstances at an issuer, or a change in the accounting methods used to deal with these investments, there could be a material adverse effect on our operational results and financial condition.
(11) Risks Related to Controls on Personal Information
Nipro group has established strict precautions to protect the confidentiality of personal information in our possession. However, if due to unforeseen events or an accident this personal information is leaked outside the group, causing a loss of trust or customers, there could be a material adverse effect on our operational results and financial condition.
(12) Risks Related to Litigation
On December 7, 2007, a damage suit was filed at the Tokyo Higher Court by Naigai Co., Ltd. and Naigai Glass Kogyo Co., Ltd. (collectively the "Plaintiff") against the Company, based on Article 25 of the Antitrust Law. The claimed amount was ¥2,032 million (US$21,606 thousand, based on a rate of US$1=¥94.05). On December 21, 2012, the Tokyo High Court made a judgment that the Company pay to the Plaintiff a sum of ¥133 million (US$1,414 thousand) together with an amount thereon at the rate of 5% per annum until full payment of such sum shall has been made. The Plaintiff was not satisfied with the judgment and a petition for acceptance of final appeal has been filed on January 7, 2013. The purpose is to reverse the part of the original judgment (high court ruling) denying the Plaintiff's appeal and to claim that the Company pay to the Plaintiff a sum of ¥1,352 million (US$14,375 thousand) together with an equivalent amount thereon at the rate of 5% per annum besides the accepted amount in the original judgment. Should the defense of the Company be unsuccessful and a judgment to order the payment of compensation be given to the Company, there could be a material adverse effect on our operational results and financial condition.
(13) Risks Related to Fund Raising
Nipro group relies on debt finance in the form of loans from financial institutions or issuance of corporate bonds and commercial papers, etc. to raise business and investment funds. Due to turmoil in financial markets, reduction of lending from financial institutions to us or a significant downgrade of our credit rating by credit rating agency, we may not be able to raise the necessary funds when we need them on acceptable terms, our fund raising may be restricted or the cost of fund raising could increase, and there could be a material adverse effect on our operational results and financial condition.
(14) Risks Related to M&A and Business Alliances
Nipro group conducts M&A activities and enters into business alliances to reinforce its business base. Prior to concluding these deals, we carry out a thorough investigation of the target company. However, should any problems arise such as the discovery of unrecognized liabilities or should the development of the acquired business not proceed as planned, there could be a material adverse effect on our operational results and financial condition.
(15) Other Risks
Fires, earthquakes, acts of terrorism, wars, epidemics, or other unforeseen man-made or natural disasters affecting areas or facilities where Nipro group conducts its business activities may cause a delay or interruption in production, sales, distribution, or provision of services. Should such a delay or interruption be extended, there could be a material adverse affect on our operational results and financial condition. Nipro Corporation and its Consolidated Subsidiaries
Information" (March 21, 2008). Net sales and operating income for the period for the fiscal year ended March 31, 2010 have been restated to show what the Group's result would have been if the new accounting standards had been applied in that year. Before the fiscal year ended March 31, 2009, net sales and operating income have been stated in compliance with previous accounting rules. In addition, the corporate reorganization was conducted effective on October 1, 2012 in order to enforce Pharmaceutical-Related business and build a strong cooperative relationship arrong Medical-Related, Pharmaceutical-Related and Glass-Related business. As a result of this reorgarization, some business divisions included in Glass-Related business were changed to Pharmaceutical-Related business. The segment information is presented as if the aforementioned reorganization had been conducted at the beginning of the financial year 2012, and the presentation for the prior financial years are not restated. (*2) Operating income at the operating segment level is not adjusted for intra-segment transactions. See Note 16. "Segment Reporting" to the consolidated financial statement (*3) Effective the fiscal year ended March 31, 2012, the Company has adopted ÄSBJ Statement No.2 "Accounting Standard for Earnings Per Share" (June 30, 2010), ASBJ Guidance No.4 "Guidance on Accounting Standard for Earnings Per Share" (June 30, 2010) and ASBJ PITF No.9 "Practical Solution on Accounting for Earnings Per Share" (June 3D, 2010). In addition, the Company has split one share of common stock into two shares on October 1, 2011 based on the resolution at the board of directors' meeting
has been stated in compliance with previous accounting rules. ("4) Equity ratio is the ratio of the sum of total shareholders" equity and accumulated other comprehensive income to total assets at the period end. Return on assets is the operating incorne for the period to average of total assets cluring the period. Return on equity is the ratio of net income for the period to average of the sum of total shareholders' equity and aocumulated other comprehensive income during the period. Prios earnings ratio is the ratio of the closing prioe of the Company's shares listed on the First Section of the Tokyo Stock Exchange on the last trading day in March of each year to basic earnings per share.
Nipro Corporation and its Consolidated Subsidiaries

Consolidated Statements of Comprehensive Income
Nipro Corporation and its Consolidated Subsidiaries For the years ended March 31, 2013 and 2012

1. Basis of Presenting Consolidated Financial Statements
The financial statements of Nipro Corporation ("the Company") and its consolidated domestic subsidiaries have been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange law of Japan and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards. Effective from the year ended March 31, 2009, the Company has adopted the "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements" (PITF No. 18) and as a result, the accounts of consolidated overseas subsidiaries are prepared in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States, with adjustments for the specified five items as applicable.
2. Summary of Significant Accounting Policies
(a) Basis of Consolidation The consolidated financial statements include the accounts of the Company and the significant subsidiaries and affiliated company accounted for by the equity method. Investments in unconsolidated subsidiaries are stated at cost and the equity method is not applied for the valuation of such investments since they are considered immaterial in the aggregate. All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Company and its consolidated subsidiaries is eliminated. The difference between the cost of investments in subsidiaries and affiliates and the equity in their net assets at dates of acquisition is being amortized on a straight-line basis over five to ten years. All accounts herein have been presented on the basis of the twelve months ended March 31, 2013 for the Company, consolidated domestic subsidiaries and some of consolidated overseas subsidiaries, and December 31, 2012 for the other consolidated overseas subsidiaries. Adjustments have been made for any significant intercompany transactions which took place during the period between the end of accounting period of the consolidated overseas subsidiaries and that of the Company.
(b) Translation of Foreign Currencies
Balance sheets of consolidated overseas subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except for shareholders' equity, which is translated at the historical rate. Income statements of consolidated overseas subsidiaries are translated into Japanese yen at the average exchange rate for the period. Resulting translation adjustments are shown as "Foreign currency translation adjustments" in the "Accumulated other comprehensive income" section of net assets.
(c) Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments, generally with original maturities of three months or less, that are readily convertible to cash. (d) Allowance for Doubtful Receivables An allowance for possible losses from notes and accounts receivable, loans and other receivables is provided based on past experience and the Companies' estimates of losses on collection. In preparing the accompanying consolidated financial statements, certain reclassifications have been made to the consolidated financial statements issued domestically, in order to present them in a form which is more familiar to readers outside Japan. However, no adjustment has been made which would change the financial position or the results of operations presented in the original financial statements. In addition, the notes to consolidated financial statements include additional information which is not required under generally accepted accounting principles and practices in Japan. The financial statements presented herein are expressed in Japanese yen and, solely for the convenience of the reader, have been translated into United States dollars at the rate of ¥94.05=US$1, the approximate exchange rate on March 31, 2013. These translations should not be construed as representations that the Japanese yen amounts actually are, have been could be converted into U.S. dollar amounts.
(e) Inventories
Inventories are stated principally at cost, carrying amount in the balance sheet is calculated with consideration of written downs due to the decreased profitability. Cost is determined principally by the average method, except for certain inventories determined by the first-in, first-out method.
(f) Property, Plant and Equipment
Depreciation of property, plant and equipment of the Company and its consolidated domestic subsidiaries is computed principally by the declining-balance method. The straight-line method is applied to buildings acquired by the domestic companies after April 1, 1998, and is principally applied to the property, plant and equipment of consolidated overseas subsidiaries. The range of useful lives is principally from 31 to 50 years for buildings and from 7 to 8 years for machinery and equipment.
(g) Intangible Assets
Amortization of intangible assets, including software for the Company's own use, is computed by the straight-line method over the estimated useful life of the asset. Goodwill is amortized on a straight-line basis over the period the Company benefits from its use.
(h) Investment Securities
Investment securities are classified and accounted for, depending on management's intent, as follows: ī) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent and ability to hold to maturity are reported at amortized cost; and ii) available-for-sale securities, which are not classified as the aforementioned securities, are reported at fair value. Unrealized gain and loss, net of applicable tax, are reported in the "Accumulated other comprehensive income" section of net assets. For the year ended March 31, 2013, there was no held-to-maturity debt securities held by the Company and its consolidated subsidiaries. Non-marketable available-for-sale securities are stated at cost determined by the average method. For other than temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.
(i) Allowance for Loss on Clearance of Business
The company has withdrawn from retail business and a provision for anticipated losses of sales of related fixed assets is provided.
(j) Employees' Retirement and Severance Benefits
The liabilities and expenses for retirement and severance benefits are determined based on amounts actuarially calculated using certain assumptions. The Company and some consolidated subsidiaries provide the allowance for employees' retirement and severance benefits based on the estimated amounts of projected benefit obligation and the fair value of plan assets.
(k) Derivatives
Derivatives are stated at fair value, with changes in fair value included in net income or loss for the period in which they arise, except for derivatives designated as hedging instruments. Please see (m) Hedge Accounting below.
(l) Leases
Finance leases, except for certain immaterial leases, are capitalized in the balance sheet. Amortization of finance lease assets is calculated by straight-line method over the lease period assuming no residual value. The Company and its consolidated domestic subsidiaries account for the finance leases for which ownership is not transferring to the lessee and commenced prior to April 1, 2008. The pro-forma information of such leases on a "as if capitalized" basis is presented in Note 7. "Leases".
(m) Hedge Accounting
<Method of hedge accounting> The deferral hedge accounting method is applied in principle. The allocation method is applied to currency swap and the exceptional accounting method is applied to interest rate swap when the relevant criteria are met. <Hedge instrument and hedge items> (Hedge instrument) (Hedge item) Currency swap Foreign currency denominated loans Interests on loans payable Interest rate swap <Hedge policy> The Company uses interest rate swaps to mitigate the interest rate risk involved in procuring funds and hedge items are identified on an individual contract basis. <Method of efficacy evaluation> The efficacy evaluation for currency swap which meets the relevant criteria of the allocation method and interest rate swaps which meets the relevant criteria of the exceptional accounting method are left out.
(n) Income Taxes
The provision for income taxes is computed based on income for financial statement purpose. The asset and liability approach is used to recognize deferred tax assets and liabilities for the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
(o) Amounts per Common Share
Basic earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities were exercised or converted into common stock. Diluted earnings per share of common stock assume full conversion of the outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an applicable adjustment for related interest expense, net of tax, and full exercise of outstanding warrants.
(p) Changes in Accounting Policies which are Difficult to
Distinguish from Changes in Accounting Estimates Effective the fiscal year ended March 2013, the Company and its domestic subsidiaries have changed the depreciation method for the relevant tangible assets newly acquired after April 1, 2012 according to the amendment of Corporation Tax Act in Japan. As a result, consolidated operating income and consolidated income before income taxes and minority interests increased by 389 million yen (US$ 4,136 thousand) for each compared with the previous method.
(q) Unapplied Accounting Standards, etc.
Accounting Standard for Retirement Benefits (Accounting Standards Board of Japan (ASBJ) Statement No. 26 of May 17, 2012), and Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No.25. of May 17, 2012)
1) Outline
Under the revised accounting standard, actuarial gains and losses and past service costs shall be recognized within net assets on the consolidated balance after adjusting for tax effects, and the accumulated deficit or surplus shall be recognized as a liability or asset. Also, regarding the estimated amount of retirement benefits and the method of attributing them to accounting periods, in addition to the straight line attribution standard, the benefit formula may be used and the method of calculating the discount rate has been revised.
2) Scheduled Date of Adoption
These accounting standards will be adopted from the start of the fiscal year ending March 2014. However, the revision to how retirement benefit obligations and current service costs are determined will be adopted from the start of the year ending March 31, 2015. 3) Impact of Adoption of New Accounting Standard The impact in the consolidated financial statements as a result of the adoption of this accounting standard is currently being evaluated.
(r) Subsequent Event
The purchase of the Company's own shares was executed through the market pursuant to Article 165 Paragraph 3 of the Corporate Law and the Company's article of incorporation. 1) Authorization at the Company's Board of Directors on May 14, 2013 Type of shares to be purchased: Common stock of the Company Total number of shares to be purchased: Up to 37,721 thousand shares Purchase price: ¥862(US$9) per share Total cost of purchase: Up to ¥32,539 million (US$345,976 thousand) Period to be purchased: From May 15, 2013 to June 11, 2013 2) The Result of Purchase Total number of shares purchased: 19,834 thousand shares Total cost of purchase: ¥17,097 million (US$181,786 thousand) Ratio of purchased shares to issued: 11.57%
3. Inventories

4. Income Taxes
The Company and its domestic subsidiaries are subject to Japanese national and local taxes based on income which, in aggregate, resulted in a normal statutory tax rate of approximately 37.8% and 40.5% for the years ended March 31, 2013 and 2012 respectively.
(*2) The statutory tax rate changed from 40.5% to 37.8% due to the "Act for Partial Revision of the income Tax Act, etc. for the Purpose of Creating Taxation System Respondi to Changes in Economic and Social Structures" and the "Act on Special Measures for Securing Financial Resources Necessary to Implement Measures for Reconstruction following the Great East Jspan Earthquake" promulgated on December 2, 2011.
5. Pledged Assets

The above assets were pledged against the following liabilities:

6. Investment Securities
Investment securities as of March 31, 2013 and 2012 consisted of the followings:
Proceeds from sales of securities and gross realized gain or loss on those sales for the years ended March 31, 2013 and 2012 were as follows:
7. Leases
Finance leases entered into prior to April 1, 2008 that do not transfer ownership of leased property to the lessee are accounted for as if they were operating leases. The details of such finance leases accounted for as operating leases at March 31, 2013 and 2012 were as follows:
Lease payments under such leases for the years ended March 31, 2013 and 2012 were ¥56 million (US$595 thousand) and ¥160 million, respectively.
8. Financial Instruments
(1) Circumstances on financial instruments
(a) Policy for financial instruments
The Company and its consolidated subsidiaries manage the temporary surplus funds by deposit with banks that have a high level of safety. The Company and its consolidated subsidiaries raise funds for business operation with mainly bank loans and bonds considering their business investment and cash planning.
(b) Details and risk of financial instruments and its risk
management
Receivable such as trade notes and accounts receivable are exposed to customer's credit risk. Receivables denominated in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates. In order to reduce the customer's risk, the Company monitors the dues and balances by customer in accordance with the Company's regulations of credit administration. Investment securities are exposed to the market fluctuation risk, but mainly consist of equity of the companies which conduct business with the Company. The Company periodically reviews the market price of such securities. Payables such as trade notes, accounts payable and accounts payable other are due within 1 year. Payables denominated in foreign currency are exposed to the risk of fluctuation in foreign currency exchange rates. Short-term loans payable are mainly borrowed to raise operating capital and long-terms loans payable are mainly borrowed to make capital expenditures. A part of long-term loans with the floating interest rate has the risk of interest rate fluctuation, but the Company and its consolidated subsidiaries use interest rate swap to solidify the interest rate. For some of the loans denominated in foreign currency, the Company and its consolidated subsidiaries use currency swap to hedge the currency fluctuation risk. Bonds and commercial papers are mainly issued to raise the funds for bonds retirement. Lease obligations are mainly for the capital expenditures, free from interest-rate risk because the interest rate is fixed. Payables, loans and bonds are exposed the liquidity risk, but the Company and its consolidated subsidiaries manage the risk by establishing cash planning.
(c) Supplemental information on fair values of financial
instruments
Fair values of financial instruments include values based on market price and reasonably estimated values when market price is not available. Because variable factors are counted in the estimation, the estimated values may vary by adopting different assumptions.
(2) Fair values of financial instruments
The book values, fair values and the differences between them as of March 31, 2012 and 2013 are as follows (Financial instruments for which the market value is extremely difficult to determine are not included as described in remark 2.):
Remark 1  Methods used to calculate fair values of financial instruments and the details of securities <Assets> • Cash and cash equivalents, time deposits and trade notes and accounts receivable Cash and cash equivalents and trade notes and accounts receivable are stated at the relevant book value because the settlement periods are short and the fair values are almost the same as the book value. • Investments securities
Equity securities are stated at market value. See Note 6. "Investment securities" <Liabilities> • Trade notes and accounts payable and short-term bank loans and current portion of long-term debt and commercial paper Because the settlement periods of the above items are short and their fair values are almost the same as their book values, the relevant book values are used. • Other notes and account payable Because the settlement periods of the above items are short and their fair values are almost the same as their book values, the relevant book values are used. • Long-term debt The fair value of long-term debt is calculated by applying a discount rate to the total of principal and interest. The discount rate is based on the assumed interest rate if a similar new loan was entered into. Lease obligation The fair value of lease obligations is calculated by applying a discount rate to the total of principal and interest. The discount rate is based on the assumed interest rate if a current lease transaction was renewed.
Because these items have no market value and are difficult to estimate the future cash flow and it is extremely difficult to determine their fair values, they are not includ investment securities above.
Remark 4  Planned repayment amounts after the balance sheet date for monetary payables with maturity dates

9. Derivatives
The Company and its consolidated subsidiaries had the following derivatives contracts outstanding at March 31, 2013.
(1) Derivatives not designated as hedging instruments

("1) The fair value of interest rate swap to which the exceptional accounting method is applied and the fair value of forward foreign exchange contract etc. to which the all method is applied are included in the fair value of long-term loans in Note 8. "Francial Instruments" because such interest rate swap and forward foreign exchange contract etc. are accounted for as a single item with the corresponding long-term loans.
10. Short-Term Loans and Long-Term Debt
Short-term loans comprised overdrafts and promissory notes. The weighted-average interest rates of short-term bank loans for the years ended March 31, 2013 and 2012 were 1.001% and 1.067%, respectively. The weighted-average interest rate of commercial paper for the years ended March 31, 2013 and 2012 were 0.112% and 0.113% respectively.
In March 2008, the Company issued ¥10,000 million (US$106,326 thousand) of 1.37% unsecured bonds due 2013. In March 2008, the Company issued ¥10,000 million (US$106,326 thousand) of 2.04% unsecured bonds due 2018. In March 2011, the Company issued ¥20,000 million (US$212,653 thousand) of 0.877% unsecured bonds due 2016. In March 2013, the Company issued ¥6,000 million (US$63,796 thousand) of 0.83% unsecured bonds due 2016. In March 2013, the Company issued ¥4,000 million (US$42,531 thousand) of 1.09% unsecured bonds due 2018. In March 2010, the Company issued ¥15,000 million (US$158,426 thousand) of zero coupon convertible bonds due 2015. In April 2011, Tohoku Nipro Pharmaceutical Corporation issued ¥1,000 million (US$10,633 thousand) of 0.64% privately-placed bonds due 2016. From November 2010 to September 2011, Goodman Co., Ltd. issued ¥4,424 million (U$$42,039 thousand) of 0.35% – 0.86 unsecure bonds due from 2013 to 2017. The aggregate annual maturities of long-term debt outstanding at March 31, 2013 are as follows:
As is customary in Japan, long-term and short-term bank loans are made under general agreements which provide that additional secunties and guarantees for present and future indebtedness will be given under certain circumstances at the request of the bank. In addition, the agreements provide that the bank has the right to offset cash deposits against any long-term and short-term bank loan that becomes due, and in case of default and certain other specified events, against all other loans payable to the bank.
11. Accrued Pension and Severance Liabilities
The Company and certain consolidated subsidiaries have defined benefit pension plans and unfunded retirement benefit plans, and defined contribution pension plan for employees. The following table sets forth the changes in projected benefit obligation, plan assets and funded status of the Company and its consolidated subsidiaries at March 31, 2013 and 2012.
The breakdown of net pension and severance costs for the years ended March 31, 2013 and 2012 were as follows:

12. Commitments and Contingent Liabilities
The Company and its consolidated subsidiaries had the following commitments and contingent liabilities:

13. Stock Options
The stock options outstanding as of March 31, 2013 were as follows:
In addition to the aforementioned information of the stock options outstanding, the stock option activity is as follows: Consolidated subsidiary (Goodman Co., Ltd.)

14. Business Combination
(1) Outline of the business combination 1) Name of the acquired company Goodman Co., Ltd. 2) Business of the acquired company Import, development, sale and manufacture of medical devices and medical disposables 3) Date of the business combination March 15, 2013 4) Legal form of the business combination Acquisition of shares primarily by takeover bid 5) Ratio of voting rights acquired 54.2%
(2) Period of the performance of the acquired company
in the consolidated statements of income No business performance is included in the consolidated statements of income, as the deemed acquisition date is March 31, 2013.
(3) Acquisition cost

(4) Amount, cause, method and period of amortization of goodwill 1) Amount of goodwill ¥10,432million (US$110,920 thousand)
15. Net Assets
The significant provisions in the Corporate Law of Japan (the "Corporate Law") that influence financial and accounting matters are summarized below:
(a) Dividends
Under the Corporate Law, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders' meeting. For companies that meet certain criteria such as (1) having the board of directors, (2) having independent auditors, (3) having the board of corporate auditors, and (4) the service period of the directors is prescribed as one year rather than the normal term of two years by its articles of incorporation, the board of directors may declare dividends (except for dividends in kind) if the company has prescribed so in its articles of incorporation. The Company's present system meets the first three criteria but the two-year service period of the directors does not meet the fourth criterion. Interim dividends may also be paid once a year by the resolution of the board of directors if the articles of incorporation of the company stipulate so. The Company's articles of incorporation contain such a stipulation, and it pays interim dividend semi-annually by the resolution of the Board of Directors.
16. Segment Reporting
Outline of Reportable Operating Segments Applied ASBJ Statement No.17 ~The Revised Accounting Standard for Disclosures of Segments of an Enterprise and Related Information", the reportable operating segments are components of an entity for which separate financial information is available and such as information is evaluated regularly by the board of directors in deciding how to allocate management resources and in assessing performance. The Company currently operates its business on a stand-alone basis with the divisional organization and evaluates the performance of sales and manufacture of each division regardless of their products. Accordingly, in our business segments, we divide our operations into 3 reportable operating business segments on the basis of its main products which each business segment treats with (Medical-Related business, Pharmaceutical-Related business and Glass-Related business). Medical-Related Domestic division sells injection and infusion products, artificial organ 2) Cause of goodwill Anticipated future profitability 3) Method and period of amortization of goodwill Straight-line method over the period the Company will benefit from its use

(5) Amounts of assets acquired and liabilities assumed
on the day of the business combination
The Corporate Law provides certain limitations on the amounts available for dividends or the purchase of treasury stock.
(b) Increases/Decreases and Transfer of Common Stock,
Reserve and Surplus
The Corporate Law requires that an amount equal to 10% of dividends must be appropriated as legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Corporate Law, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Corporate Law also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions by the resolution of the shareholders' meeting. The Company's legal reserve, which is included in retained earnings, amounted to ¥1,673 million (US$17,788 thousand) as of March 31, 2013, and its additional paid-in capital, which is included in capital surplus, amounted to ¥635 million (US$6,752 thousand) as of March 31, 2013. products, highly functional products, dialysis products and diabetes products. In the Global business division, head office plays the center role and place overseas sales and manufacturing base for medical devices and sales injection and infusion products, artificial organ products and diabetic products.
Pharmaceutical-Related
Pharmaceutical business division sells container for combination products (injectable kit products) and sells pharmaceutical products on a consignment basis from pharmaceutical companies. Domestic subsidiaries sell and manufacture injectable drug, oral drugs and combination products.
Glass-Related
The division sells glass for pharmaceutical purposes including glass for vials and ampoules, and glass & materials products such as glass for thermos bottles and glass for lighting purpose. In addition, the corporate reorganization was conducted effective on October 1, 2012 in order to enforce Pharmaceutical-Related business and build a strong cooperative relationship among Medical-Related, Pharmaceutical-Related and Glass-Related business. As a result of the reorganization, some business divisions included in Glass-Related business were changed to Pharmaceutical-Related business. Accordingly the segment information is presented as if the aforementioned reorganization had been conducted at the beginning of the financial year 2012.
• Adjustment for the operating income at March 31, 2013 and 2012 include ¥(44) milion (US$(465) thousand) and ¥110 milion of elimination of inter-segment transaction and ¥(7,683) million (US$(81,691) thousand) and ¥(6,987) million of corporate cost, respectively. Corporate cost consists primarily of sales, general and administrative expenses and research and development cost which do not belong to the reportable segment. • Adjustment for Identifiable assets at March 31, 2013 and 2012 include ¥(51,045) million (US$(542,743) thousand) and ¥(3,148) million of elimination of inter-segment transaction and ¥181,138 million (US$1,925,976 thousand) and ¥146,347 million of corporate assets, respectively. Corporate assets consisted primarily of cash and deposit, investment securities, assets for development and assets for management division of head office which do not belong to the reportable segment. • Adjustment for depreciation and amortization at March 31, 2013 and 2012 are for corporate assets. Depreciation and amortization and Capital expenditures include long-term prepaid expenses. Adjustment for capital expenditures is increase in corporate assets.

17. Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2013 and 2012 were as follows:

18. Research and Development Expenses
Research and development expenses for the years ended March 31, 2013 and 2012 were ¥6,464 million (US$68,729 thousand) and ¥5,957 million, respectively.
19. Supplemental Disclosures of Cash Flow Information
Supplemental information related to the Consolidated Statements of Cash Flows was as follows:

INDEPENDENT AUDITOR’S REPORT
To the Board of Directors of Nipro Corporation We have audited the accompanying consolidated balance sheet of Nipro Corporation and its consolidated subsidiaries as of March 31, 2013, and the related consolidated statements of income, comprehensive income, changes in net assets and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, all expressed in Japanese yen. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in conformity with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in conformity with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nipro Corporation and its consolidated subsidiaries as of March 31, 2013, and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2013, are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 1 to the consolidated financial statements. Emphasis of Matter We draw attention to Note "(r) Subsequent event" to the financial statements. The Company purchased its own shares through the market with resolution of the Company's Board of Directors on May 14, 2013, pursuant to Article 165 Paragraph 3 of the Corporate Law and the Company's article of incorporation. Our opinion is not qualified in respect of this matter. Osaka, Japan June 26, 2013 PKF Osaka Audit Corporation
Date of Establishment July 8, 1954
Head Office
3-9-3 Honjo-nishi, Kita-ku, Osaka 531-8510, Japan Telephone: +81-6-6372-2331 Facsimile : +81-6-6375-0669 URL: http://www.nipro.co.jp/english/
Tokyo Office
4-3-4 Hongo, Bunkyo-ku, Tokyo 113-0033, Japan Telephone: +81-3-5684-5611 Facsimile : +81-3-5684-5610

Common Stock

Stock Listings
Tokyo Stock Exchange Ticker Code: 8086
Transfer Agent
Mizuho Trust & Banking Co., Ltd., Osaka Branch, Stock Transfer Agency Dpt. 2-11-16 Sonezaki, Kita-ku, Osaka 530-0057, Japan

Stock Price Range(Tokyo Stock Exchange)

NIPRO CORPORATION 3-9-3 Honjo-nishi, Kita-ku, Osaka 531-8510, Japan Telephone: +81-6-6372-2331 Facsimile : +81-6-6375-0669 http://www.nipro.co.jp/en