Profile

Kuraray
Kuraray Co.,
Co., Ltd.
Ltd. waswas establishedestablished inin 1926
1926 inin Kurashiki
Kurashiki City,
City, Japan,
Japan, forfor thethe industrial
industrial manufacture
manufacture ofofchemicalfibers.
Since
then,
the
Companyhasdeveloped
innovative
business
operations
insyntheticchemical fibers. Since then, the Company has developed innovative business operations in
resins, chemicals, man-made leather, nonwoven fabrics, medical products, and many other areas bysynthetic resins, chemicals, man-made leather, nonwoven fabrics, medical products, and many
capitalizing fully on its technological strengths. Many of these operations have grown into world-class coreotherareasincluding
by capitalizing
fully onalcohol
its technologicalstrengths.
Manyof these
operations
havethe ethylenebusiness,the polyvinyl
fiber ‘’KURALON,’’thepolyvinyl
alcoholresin poval,
growninto world-classbusiness,
including the
polyvinyl
alcohol fiber
thefine chemicals
vinyl
alcohol
copolymercore‘’EVAL,’’the man-madeleather‘’AMARETTA,’’and‘’KURALON,’’
isoprene-based
for aromachemicals,
and other alcohol
specialized
applications.
polyvinyl
alcohol resinpharmaceutical,
poval, the ethylene-vinyl
copolymer‘’EVAL,’’ the man-made leather
Today,
theKurarayGroup,
composedofKuraray,
its
consolidated
andpharmaceutical,
unconsolidatedandsubsidiaries,
and‘’AMARETTA,’’ and isoprene-based fine chemicals for aromachemicals,
otheraffiliated companies, consists of about 70 companies with approximately 8,000 employees.
specialized applications.
Mobilizing the combined power of the Kuraray Group and capitalizing on its many years ofToday, theexpertise
Kuraray Group,composed andof Kuraray,
its consolidated
and unconsolidated
technologicalin polymerization
synthetics,
Kuraray intends
to take its place as a uniquesubsidiaries,
and affiliatedcompanies,
consists of about 70 companies with approximately 8,000
chemicalenterprisewith worldwide
operations.
employees.

Forward-Looking Statements

combined
power of thestatements
Kuraray Groupandcapitalizing
on expectations
its many years
ofThis Mobilizing
annual report thecontains
various forward-looking
which arebased
on the current
and assumptionsoffutureevents.
Allfiguresandstatements
withrespect
tothefutureperformance,
projections
andbusinessplansofKurarayandits
technological expertise in polymerization and synthetics, Kuraray intends to take its place as agroup companies constitute forward-looking statements. Although Kuraray believes that its expectations and assumptions arereasonable,
actual results
and trendsof Kuraray’s
performance
could differ materially from those expressed or implied by such
uniquechemicalenterprisewithworldwide
operations.
figures or statements due to risks and uncertainties in the future business circumstances. The factors which may cause suchdifference include, without limitation: (1) general market and economic conditions in Asia including Japan, the U.S., Europe andother regions; (2) fluctuations of currency exchange rates, especially between the Japanese yen and the U.S. dollar and otherforeign currencies; (3) changes in raw material and fuel costs; (4) industrial competition and price fluctuations in Japan and
Forward-Looking
Statementsinternational market; (5) advance or delay in the construction of new plants and productionlines; (6) successful
development of new
products and technologies; and (7) changes in laws and regulations (including tax and environmental) and legal proceedings.
This annual report contains various forward-looking
statements which are based on the current
expectations and assumptions of future events.
All figures and statements with respect to the
future performance, projections and businessplans of Kuraray and its group companies
constitute forward-looking statements. Although
Kuraray believes that its expectations andassumptions are reasonable, actual results andtrends of Kuraray’s performance could differ
materially from those expressed or implied bysuch figures or statements due to risks anduncertainties in the future business
Contents
circumstances. The factors which may cause suchdifference include, without limitation: (1) general
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
To Our Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
market and economic conditions in Asia includingSpecial Message from the President . . . . . . . . . . . . . . . . . . . . . . . . . 4
Japan, the U.S., Europe and other regions; (2)Business Strategies of ‘G-21’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
fluctuations of currency exchange rates, especially
Measures that Support ‘G-21’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Review of Operations
between the Japanese yen and the U.S. dollar andContents
Fibers and Textiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
other foreign currencies; (3) changes in raw
Chemical Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
. . . . . . . . . .Fabrics. . . . . .and
. . . .Fastening. . . . . . . . Materials. . . . . . . . .. .. .. .. .. 14. . . . . . . . . . and. . . . .fuel. . . . . costs;. . . . . . . .(4)
. . . .industrial. . 18
Man-Made
Leather, Non-Woven
Caring for the Environment material
Financial
Highlights
1competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Diversified
Businesses. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 16
Global Action . . . . . . . . . . . . . .andTo OurShareholders2
price
fluctuations
in
Japan
and
international..................................
Caring for
the Environment
Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SpecialMessagefrom the President . . . . . . . . . . . . . . . . . . . . . . . . . 18
4market; (5) advance or delay in the construction of
Global Action . . . . . . . . . . . . . . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 20
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Business
Strategies of ‘G-21’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
new plants. . . . . . .and
. . . . .production. . . . . . . . . . . . .lines;. . 25 (6) successful
Contribution
to
Local
Communities
Measures that
Support‘G-21’
9
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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. . 26and technologies;
developmentofnewproducts
History
Reviewof
Operations
Contribution to Local Communities . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
. . . . . . . . . . in
. . .laws. . . . . . and. . . . .regulations. 27
Organization and Board of Directors
Fibers.and. . . .Textiles. . . . . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 10
and (7) .changes(including
26
History. . . . . .of. . Directors. . . . . . . . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 12
List of Consolidated Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Chemical Products
27
Organization
and Boardtax
andenvironmental)
and
legal
proceedings.
. . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. ..
........................................
28
ListMan-Madeof Consolidated
Companies
14
Leather, Non-Woven
Fabrics and Fastening Materials
29
FINANCIAL
Diversified SECTION
Businesses . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 16
Corporate Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

FINANCIAL SECTION
29
Corporate Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

In this annual report,the names enclosed in double quotation marks are brand names.
In thisannual report,
theandnames
encloseddoublequotation
marks
names.
The years stated in thisdocument‘sgraphstablesrefer to intheyear ended
March
31, arenot brand
the fiscal
year.

Financial Highlights
Kuraray Co., Ltd. and Consolidated Subsidiaries

Thausands of
U.S. dollars

Millions of yen

Years ended March 31, 2001, 2000 and 1999

2001

Net sales.................................................................. ¥313,651

2000

1999

2001

¥316,444¥336,466$2,529,444

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

4,045

7,452

13,171

32,621

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

512,479

503,766

487,991

4,132,895

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

289,469

282,755

259,9092,334,427

Amounts per share

Yen

U.S. dollars

Net income
Primary ...................................................................

¥10.56¥20.00¥36.83$0.09

Fully diluted.............................................................

10.46

19.42

34.56

0.08

Cash dividends applicable to period.............................

9.00

9.00

9.00

0.07

Equity ratio (%)..........................................................

56.5%

56.1

53.3

Return on equity (%)..................................................

1.4

2.7

5.3

Payout ratio (%).........................................................

85.2

45.4

24.5

Number of employees................................................

7,121

7,433

6,823

Financial ratios:

Notes: The United States dollar amounts represent translation of Japanese yen at the rate of ¥124=$1.
As discussed in Notes 2(f) to the financial statements, for the year ended March 31, 2001, the Companies adopted the new accounting standard in Japan“Accounting Standard for Employees’ Retirement Benefits”, effective from April 1, 2000. The effect of adoption of the standard was to decrease net income for theyear ended March 31, 2001 by ¥4,768 million ($38,452 thousand).
As discussed in Notes 2(g) to the financial statements, effective April 1, 2000, the Companies adopted the amended “Accounting Standard for Foreign currency
Transactions, etc”. The effect of adoption of the standard was to increase net income for the year ended March 31, 2001 by ¥647 million ($5,218 thousand).
As discussed in Notes 2(j), (k) and (l) to the financial statements, for the year ended March 31, 2001, the Companies adopted the new accounting standard in Japan“Accounting Standard for Financial instruments”, which is effective from April 1, 2000. The effect of adoption of the standard was immaterial.

Net Sales (Millions of yen)

Net Income (Millions of yen)

Total Assets &Total Shareholders’ Equity(Millions of yen)

336,466
316,444 313,651

350,000

15,000600,000

13,171

487,991
300,000

503,766

512,479

500,000
12,000250,000
400,000
7,452

9,000

200,000

300,000

282,755

289,469

259,909

150,000

6,000

4,045
200,000

100,000
3,000

100,000

50,000

0

0
1999

2000

2001

0
1999

2000

2001

1999

2000
2001
Total Shareholders’ Equity

KURARAY1To Our Shareholders＞＞ Management Review of Fiscal 2000
new businesses and the fostering of their growth, and thecreation of new management systems and a new company
environment.
In fiscal 2000 the Group met the dual challenges ofsoaring raw material costs and a deflationary trend in thedomestic economy. At the same time, we formulated a new
medium-term business plan designed to develop andexpand the achievements of the past five years over the
next five years.
Despite these efforts, the difficulty of the businessenvironment was reflected in results that were below target
levels. Consolidated net sales declined by ¥2,793 million, or
0.9%, to ¥313,651 million, while consolidated operating
income was ¥390 million, or 1.9%, below the previous
year‘s level at ¥19,931 million. Consolidated net income fellby ¥3,407 million, or 45.7%, to ¥4,045 million, in part
because of the need to provide ¥7,596 million for special
provisions for retirement benefits, and an extraordinary lossof ¥8,872 million relating to restructuring charges.
As in the previous year, the dividend per share ofcommon stock was set at 8 yen, together with a special
Hiroto Matsuo
Chairman

Yasuaki Wakui
President

dividend of one yen, making a total of 9 yen. This includes
the interim dividend of 4.5 yen.
Business Environment and Policies
The Kuraray Group faced difficult business conditions during

Performancethe year ended March 2001. Crude oil prices soared close to

The year ended March 31, 2001 (April 1, 2000 to March 31,

the levels reached during the two oil crises, and natural gas

2001) was the final year of the fourth medium-term

prices also rose sharply under the impetus of energy trends

business plan launched in the year ended March 1997. Overin the United States. Another problem was a tightening of

the past five years, the Kuraray Group has used this plan as

supply and demand in the acetic acid market due toits blueprint for efforts to build a unique chemical businessproblems affecting manufacturers’ facilities. The overall

group that continues to develop on a global scale. The three

result was increased raw material costs.

priority policies during this period have been thestrengthening of our corporate power, the generation of2

KURARAY

The Kuraray Group announced increases in the prices ofaffected products. However, while the market acceptednew prices for some chemical products, the prices of textile

Outlook for Fiscal 2001

products actually declined in Japanese and overseas

Economic conditions in Japan are expected to remainmarkets because of increased supplies of low-priced goods

difficult in the year to March 2002. There is particularfrom China and elsewhere. The Japanese economy

concern about the prospect of a continuing deflationary

appeared at one point to be on a recovery trend, but in thetrend affecting the chemical and textile sectors. Overseas,

second half of the fiscal year the deflationary trend

the United States is expected to emerge from a slowdown,

deepened under the impact of an economic slowdown in

but the outlook for the European and Asian economies

the United States. This situation had a negative impact onremains uncertain, in part because of trends in crude oildomestic market prices.

prices.

Kuraray was also adversely affected by exchange rate

The Kuraray Group will work in this environment tomovements. Exports from Japan showed a modest rally inachieve consolidated net sales of ¥325,000 million,

the second half, aided by a downward shift in the value ofconsolidated operating income of ¥23,000 million, andthe yen. However, exports to Europe were hit by the

consolidated net income of ¥12,000 million.

weakness of the euro throughout the year.
The Kuraray Group sought to minimize the effects of thisThis report identifies issues and goals for the Kuraray
Group. It focuses in particular on the ‘G-21’ medium-term

environment by working to expand sales in core areas,business plan, which was formulated as a blueprint for the

reduce sales and production costs, and develop new

solution to our problems and the attainment of our goals.

markets. The Group also laid the foundations for future
growth by investing a total of ¥15,800 million in

We look forward to the understanding and continuing
support of shareholders.

manufacturing facilities for IT- and environment-related
products, including a microorganism carrier PVA gel and PTV
screens made from methacrylic resin. The Group alsodecided to establish Septon Company of America as a U.S.
production subsidiary for the thermoplastic elastomer“SEPTON”, and to build a new factory. In February 2001
Kuraray ceased production of rayon, having decided that
there was no prospect of a future improvement in the
profitability of this product.
These efforts brought increased sales of PTV screensin IT markets, while in the United States a dental material
business started to make a significant contribution.

  
Chairman

However, the Group was unable to overcome the adverse
effects of the harsh business environment. As in theprevious year, slow sales of raw materials for vitamins andman-made leather were also a drag on overall
performance.

    

President

KURARAY

3

Special Message from the President＞＞The ‘G-21’ Medium-Term Business Plan
— Building a Future for Kuraray as an Eco-Friendly Enterprise with Unique Technology
Overview of the Fourth Medium-Term Business Plan

investment centered primarily on the core areas in which

In the five years between the year ended March 1997 and

we are internationally competitive. We also invested an

the year ended March 2001, the Kuraray Groupaverage of 4.3% of annual sales in research andimplemented its fourth medium-term business plan. As I

development. We expect these measures to make anhave stated at the General Meeting of Shareholders and inimportant contribution in the future. In fact, most of our new

other venues, we feel considerable regret that we were

facilities are already operating successfully, including aunable to achieve the targets set down for the final year ofthermoplastic elastomer plant in Japan, a Poval resin plant in

the plan.

Singapore, and an “EVAL” resin plant in Belgium. Our

The results reflect a deflationary trend in the Japanese

IT-related business activities, including PTV screens andeconomy. While the economic environment obviously has

PVA film for LCDs, are yielding results in excess of the

an important influence on business performance, we cannot

planned levels.

attribute our failure to achieve our targets solely to external

Our efforts to generate new businesses have also

factors. In formulating our new plan for the five-year period

yielded many notable successes. For example, we havestarting in the year to March 2002, we examined ourachieved growth in our opto-technology activities, and we

activities over the past five years and rigorously looked athave launched the heat-resistant resin PA9T onto theourselves to determine what changes needed to be made.

market. We have also achieved a successful start-up of ourenvironment-related activities, including PVA gel
manufacturing. These successes are expected to translate
into increased growth under the next medium-term plan. As
far as the creation of new management systems and a newcompany environment, we laid the foundations forcontinuing organizational reforms under the new mediumterm plan. We also worked to improve our financial
fundamentals. The use of this strengthened financial
structure as the foundation for business expansion will be
an important priority under the new medium-term plan.

Under the fourth medium-term business plan, everyone

4

KURARAY

However, in some areas of activity we failed to achievein our organization worked toward establishing a shared

the targets set down in the plan. Difficult structural factors

identity for Kuraray as a unique chemical enterprise capable

had a severe impact on our polyester business in the area ofof achieving sustained global growth. We focused on three

textiles, and also on some aspects of our fine chemicals

priority goals: the strengthening of our corporate powerbusiness, including raw materials for vitamins and(particularly by expanding our business scale), theagrochemical intermediates. It also became necessary to

generation of new businesses and the fostering of theirterminate our rayon business. We aggressively invested in

growth, and the creation of new management systems andmanufacturing facilities for man-made leather in an effort toa new company environment. A variety of measures wereexpand our business in this area, but the increased capacity

implemented to realize these aims.

brought limited benefit because of sluggish demand for

Measures relating to the expansion of our businessapparel suede in Europe. In addition, we were not able toscale included capital investment totaling ¥108,900 million inproceed to the second phase of facility development forJapan and overseas over the five-year period. This

“Kuralon K-II”, a synthetic fiber with enhanced functions,because of development delays at both the technical andmarketing levels.
The common problems in all of these areas were
inadequate awareness of market trends, and delays intaking concrete action in response to changes in thebusiness environment, including the emergence of newcompetitors and structural changes in our markets. The
lessons learned from these problems have been
incorporated into our new medium-term plan, ‘G-21’, which
we began to formulate last July and announced in February
2001. The perspective from which we approached theplanning process was the need to adapt quickly to market
change through market-oriented thinking.
.
The New Medium-Term Business Plan ‘G-21’
Building a New Kuraray for the 21st Century— Four Key Words

Target Corporate Image:An Eco-Friendly Enterprise with Unique Technology
One of the goals of ‘G-21’ is to create a new corporate
image for Kuraray as an Eco-Friendly Enterprise with Unique

The name ‘G-21’ symbolizes the importance of four words

Technology. To achieve this goal, Kuraray will aim for— ‘growth’, ‘green’, ‘group’ and ‘globalization’ — to the

expansion in three directions: internationally competitive

creation of a new Kuraray for the 21st century. Behind these

activities, activities that help to maintain and enhance thefour key words is our recognition that companies will needglobal environment, and activities that can be used toto fulfill five fundamental conditions if they are to survive inpromote Kuraray as an organization with a unique identity inthe globally competitive environment of the future.

the world.

First, companies will need to maintain their international

Particular emphasis will be placed on activities that help

competitiveness by building clearly defined scenarios andto maintain and enhance the global environment. This does

improving their asset efficiency. Second, companies will

not mean that Kuraray will simply respond passively toneed to contribute to the protection of the global

growing world concern about the environment by ensuring

environment by working to develop production systems,

that its activities are environment-friendly. The Kuraray

products and materials procurement systems that reduceGroup has been an enthusiastic participant in markets

the load on the environment. Third, it will be necessary to

relating to environmental protection, and many of its

use information technology and seek out the new growth

products embody highly unique technology developed byopportunities spawned by advances in information

the Group to improve the environment and reduce impact

technology. Fourth, synergies must be maximized throughon it. In the future Kuraray will work even more actively than

the sharing of values and strategies at the group level. Fifth,in the past to build on these activities. At the same time, it

there must be a balanced consideration of all stakeholders.

will strive to meet the targets set down in its medium-term

Details of ‘G-21’ are provided in ‘Targets of G-21’

environmental plan, which include 90% reductions in(Page 7), ‘Business Strategy’ (Page 8) and ‘Measures thatemissions of specified chemical substances and external

Support G-21’ (Page 9). Key points of the plan are explained

disposal of industrial waste.

below to assist readers in understanding this information.

KURARAY

5

Special Message from the President

The Focus of Business Strategy:

For example, we have introduced a variety of products

Responding to Market Change throughMarket-oriented Thinking

relating to information technology. However, we also need

Our basic policy is to develop a strategy that combines ourto recognize the importance of the fact that these products

traditional product-oriented approach with market-oriented

are being supplied into the same market, and we must

thinking. In the past we have tended to place too muchshare information among the various organizational

emphasis on product-oriented approach, with the result thatelements that are involved. This approach will help us to

we have not been sufficiently focused on markets. As adevelop and launch products that match market needs, andresult, we have not always adapted quickly enough toto develop clear, comprehensive market strategies in thischange.

area.

Our strategy will begin with a restructuring of all Kuraray

By developing our business activities in this way, we aim

Group activities along the product axis and the market axis.

to increase our sales in focus business areas from

By viewing our activities from these different perspectives,approximately ¥160,000 million in the current year to

we will be able to accelerate attitude reform, channel¥300,000 million in the year to March 2006. We envision

management resources into products and markets that haveresults in that year that will include consolidated net sales ofgrowth potential, and enhance our ability to respond quickly¥460,000 million and consolidated operating income of

to market change by developing and launching timely¥44,000 million. These figures are equivalent toproducts.

approximately 146.6% and 220.1% respectively of thecurrent year’s results.

Achieving ROA in Excess of Capital Costs:

Key Aspects of Business Management Principles
We regard return on assets (ROA) and cash flows as key
operational standards to guide our efforts to maximize
management efficiency. A particular priority is the
improvement of asset efficiency, including the reduction of
inventory assets. We will also work to increase sales profit,
reduce costs and maximize operating income by channelingSpecifically, we have identified the vinyl acetate related
fields, the isoprene chemical fields and the man-maderaise ROA from 3.9% in the current year to at least 7% inleather fields as our core areas of activity. In all of our

the year to March 2006. Our capital costs are around 7%,

activities, including these core activities, we will target

and we want to raise ROA above that level. We plan tostrategic areas that offer growth potential and opportunities

invest approximately ¥75,000 million, or about 4% of

to take advantage of the unique characteristics of theconsolidated net sales, in R&D over the next five years. This

Kuraray Group. Those areas are electronic information

investment will target strategic areas.

technology, eco-friendly products, environment businesses

KURARAY

In addition, we will undertake timely reviews, based onthat contribute to the maintenance and improvement of the

our reevaluation criteria, of areas of activity in which

environment, and medical products. Our aim is to maximize

performance has declined. At the same time, we will

growth by expanding our presence in focus fields ofstrategically use M&A to strengthen and expand ourbusiness in which our core activities overlap with strategic

activities in areas in which the Kuraray Group excels.

areas.

6

capital investment into focus business areas. Our goal is to‘G-21’ Targets
An Eco-Friendly Enterprise with Unique Technology

Guidelines for Business Policy
Expanding business areas where we have international competitive power
Expanding business areas that can contribute to the global environment
Expanding business areas where we will establish our unique identity

Business Management Principles

Green

Growth● Return on assets (ROA) higher than cost ofcapital● Emphasis on ROA and cash flows as
management indices● Implementation of M&A● Review of business activities affected bydeclining performance according to‘Business Reevaluation Criteria’

Guidelines for Business Organization● Flattening of organization and major‘G-21’Group

Creating a Corporate Culture that Supports
Rapid Adaptation to Environmental Change:

devolution of authority● Increased autonomy for business

Globalization

operations and group companies(introduction of company system)● Maximization of overall group synergies● Development of the pay systems that
better reflect performance● Promotion of BPR and utilization of
information technology

we established the Business Service Center to integrate

Key Aspects of Guidelines for Business
Organization

administrative processes for group companies. The aim of

Our guidelines for business organization calls for thepromotion of business process re-engineering and thedevelopment of a flat organization in which individual

application of information technology. In addition, we havedivisions and group companies will be autonomous anddecided to transfer our polyester apparel textiles business to

self-sufficient. Through these organizational reforms we will

Kuraray Trading in April 2002, to turn our polyester filamentbuild a structure that can adapt quickly to market change by

production operations into a separate company in Octobershifting to a management structure based on a company

2001, and to restructure our medical business into a separate

system that supports the devolution of authority to allow

company in October 2001. Our target is to complete therapid decision-making and action. We also aim to maximize

introduction of the company system within two years.

synergies throughout the Kuraray Group by sharing values

this change is to improve operational efficiency through theOver the next five years we expect change to occur more

and strategies among divisions and group companies. In

rapidly and globally and on a bigger scale than ever before.

addition, we will introduce systems that link employees’

Under the ‘G-21’ plan, which was summarized above,

remuneration more closely with performance.

we intend to write a new history of growth and success for

As the first step in this process, we implemented majororganizational changes on April 1, 2001. At the same time,

the Kuraray Group by providing a growth scenario that we
can all share in this time of dramatic change.

KURARAY

7

Business Strategies of ‘G-21’
Under ‘G-21’ the Kuraray Group will implement the following strategies by product andstrategies by market. It will also work to strengthen its trading functions with a view toglobal business development.

Electronic Information Technology Areas● Demand for PVA films for LCDs, PTV
screens (with screens larger than 40
inches), and separators for batteries is
growing steadily, and Kuraray will
aggressively expand its activities in theseareas in step with market trends.
● Kuraray’s strategy will be to develop PA9T,
a highly heat-resistant resin, and “Vecstar”,
a liquid crystal polymer film for circuitboards, as global products.
● Kuraray will accelerate the development of
new materials for capacitors (Note 2) tomeet market needs in such areas as
automotive applications.

Strategic Areas
Environment Business Areas(Activities that Contribute to the Preservation
and Improvement to the Environment)

Vinyl-Acetate Related Fields● Vinyl-Acetate: Kuraray will work to reduce
costs through measures that include anincrease in in-house production ratios.
● Poval: Kuraray will target global expansion andthe development of related downstream
activities.
● ”EVAL“: Further global expansion will betargeted along with growth through thedevelopment of new applications.
● “Kuralon”“Kuralon K- ”: Kuraray will target
the rapid establishment of new areas ofactivity based on product characteristics.

Isoprene Chemical Fields
Green● Thermoplastic elastomers: Kuraray will strive toestablish a position for itself as a qualitative andquantitative world leader in the field ofhydrogenated styrene type elastomers (Note 1).
● Fine chemicals: Kuraray will work to stabilize its
business through drastic cost reductions and an
expanding involvement in pharmaceuticalintermediates.

Growth

‘G-21’
Group

Globalization● Kuraray will expand its activities relating
to activated carbon, PVA gels andindustrial membranes by focusing not
only on individual products, but also on
the development of water treatment
systems based on combinations of theseproducts.

Man-made Leather Fields● The goal will be to restore Kuraray‘scompetitiveness as a leading manufacturer
through the development of innovative
production processes, drastic cost reductions,
quality improvements, and reinforced
marketing in Europe and North America.

Core Businesses

Eco-Friendly Areas(Low Environmental Impact
Substitutes for High Impact Substances)● The main market for asbestos substitutes
at present is Europe. Kuraray will target
global expansion.
● In the area of gas barrier materials,
Kuraray will develop a comprehensive
range of other materials around its coreproduct, “EVAL”.
● In the area of substitutes forpolychlorinated vinyl and vulcanizedrubber, Kuraray will develop acomprehensive range of new elastomers
in addition to its core product, thethermoplastic elastomer “SEPTON”.

Note 1: Hydrogenated styrene type elastomers
are styrene elastomers in which the double bond
between the carbon atoms is replaced with asingle bond through the addition of hydrogen. This
results in improved weather resistance and heat
resistance compared with conventional styrene
type elastomers.
Note 2: Capacitors are storage cells in whichcarbon materials with the ability to store electricalcharge are used as active materials for bothelectrodes.

Medical Areas● Kuraray will focus on dental materials andartificial organs. It will also target
expansion through the development of anorganization that reflects its businessstyle, including the creation of separate
companies.

Strategies by Product ─ Expansion and Reinforcement of Core Businesses
The core business areas in which Kuraray is internationally competitive are
vinyl-acetate related fields (Poval, the EVOH resin “EVAL”, “Kuralon”“Kuralon K-II”), isoprene chemical fields (thermoplastic elastomers, finechemicals), and man-made leather fields (“AMARETTA”). Activities in theseareas will be strengthened and expanded. At present these core businessareas account for almost 40% of the Group’s sales and about 70% of
operating income. The expansion and development of these activities willbe the basic business strategy.

Strategies by Market ─Expansion of Strategic Areas through Market-Oriented Thinking
Kuraray has identified four strategic business areas: electronic information
technology (PVA films for LCDs, heat-resistant resin PA9T, etc.), eco-friendly
products (substitutes for asbestos, gas barrier materials, substitutes forpolychlorinated vinyl and vulcanized rubber), environment business (activatedcarbon, PVA gel, industrial membranes), and medical products (dental
materials, artificial organs). Efforts will focus primarily on expansion inthese areas combined with product-based core businesses. Expansion will
be targeted through strategies based on market-oriented thinking.

Reinforcement of Trading Functions in Japan, North America, Europe and Asia─ Enhancing the Effectiveness of Product and Market Strategies
As part of its global business development, Kuraray will strengthen thefunctions of Kuraray Group trading companies in Japan, North America,
Europe and Asia (Kuraray Trading Co., Ltd., Kuraray America, Inc., Kuraray

8

KURARAY

Europe GmbH, Kuraray Hong Kong Co., Ltd., Kuraray Specialities Asia Pte.,Ltd.). The aim is to expand the activities of these companies through anaggressive market-oriented thinking.

Measures that Support ‘G-21’
Net sales (¥millions)＞＞Expanding Focus Business Areas
The aim of ‘G-21’ is to use the expansion of core businesses andstrategic areas as the basis for future expansion based on theidentification of these areas as focus business areas. (Aspects ofthese business areas that overlap will be excluded.)

100,000

200,000

0

10,00020,000300,000

400,000

500,000

30,00040,00050,000

2001

2004(Projected)

2006

Focus area sales
Strategic area sales

0(Projected)

Other sales

Operating income

Operating income (¥millions)＞＞ Investment of ¥150,000 Million over Five Years— 85% of New Facilities and Expansion Projects in Strategic Areas
Kuraray plans to make capital investments of ¥150,000 million
over the next five years. Of this amount, 65% will be devoted to
new facilities and expansion projects, of which 85% will be instrategic areas. The main areas targeted for new facilities andexpansion projects will be vinyl-acetate, Poval, PVA films for
LCDs, “EVAL” in Europe and North America, “Kuralon K-II”,
thermoplastic elastomers in Japan and overseas, environmentrelated products (PVA gel, activated carbon), electronic information
technology (capacitor materials, PA9T, PTV screens), and medical
products (dental materials).
In addition to this capital investment, Kuraray will also engage
in M&A activities in areas that offer synergies with its businessactivities.

Strategic areas in newand expansion
investments (85%)

New and expansion
investments (65%)
Capital investment: ¥150,000 million＞＞Improving Asset Efficiency — Emphasis on ROA● Particularly significant is the reduction of the inventory asset levelfrom 2.9 months to 2 months or less. (Financial assets are
expected to remain close to the present level, but it is possiblethat reductions will occur because of M&A and other factors.)● The target for ROA (calculated upon operating income to total
assets) is at least 7% in fiscal 2005.

(¥millions)2001

Notes and accounts receivable
Inventory
Tangible fixed assets
Financial assets
OthersTotal assets

96,70075,500127,500
182,400
30,400512,500

Increase
2006(Projected) (Decrease)130,000
77,000170,000
177,000
30,000584,000+33,300+1,500+42,500-5,400-400+71,500＞＞R&D Focused on Strategic Areas
Kuraray‘s research and development activities will focus primarilyon the strategic areas that form the hub of future businessexpansion efforts. It plans to spend approximately ¥75,000
million, or about 4% of sales, on research and development overthe next five years. The main targets for research will beelectronic information technology and opt-related materials,
biomedical-related materials, environmental protection materials,
and high-performance materials such as nano-composites (Note 3).

Note 3: Nano-composites are advanced functional materials with structures measured in nanometers (billionths of a meter).

＞＞Medium-term Environmental Plan
Kuraray Group will work toward the achievement of the following
reductions for fiscal 2005 (relative to fiscal 1999 levels).
1. 90% reduction of emissions, including substances specified by
the PRTR Law
2. 90% reduction in volume of industrial waste processed externallywithout efficient utilization (target: 1,500 tons/year)
3. Increase of 20-point or more in waste utilization efficiency(60% to 80%)
4. 6% increase in energy efficiency (1% increase per year)＞＞Measures Involving all Group Companies
1. Group companies will be integrated, and the Group will work
toward the introduction of a company system within two years.
2. The head office administrative organization will be streamlined.
The Kuraray Business Service Center established in this April
will be structured as a separate company.

3. The use of e-commerce will be promoted in the areas ofprocurement and sales.

KURARAY9eview of Operations (1)Fibers and Textiles
Performancein the Year Ended March 31, 2001
Consolidated sales in the fibers and textiles
segment amounted to ¥90,822 million, adecline of ¥7,266 million, or 7.4%, fromthe previous year. Operating income fell by¥1,049 million, or 37.9%, to ¥1,720 million.
Trends in key product areas were outlined
below.

Polyester “SOPHISTA”, which ismanufactured from “EVAL” withhydrophilic radicals, was very popular as afabric for sportswear and other items.
There was also market expansion in otherareas. The antibacterial deodorizing fiber
was well supported in the apparel andinterior products markets.
Kuraray worked to maximize sales ofthese and other unique products. However,there was a slump in demand for polyester
filaments and staples, while prices were
pushed down by a rapid influx of cheap
goods manufactured in South Korea,
Taiwan and China. This trend combinedwith a rise in raw material costs and otherfactors to cause a decline in sales and anegative profit result.

“Kuralon” Kuraray enjoyed excellent
sales in areas in which it was able toexploit the characteristics of its highly
original products, including fiber reinforced
cement (FRC), rubber reinforcement
materials, and alkaline battery separators.
However, both sales and income marked
time due to a combination of sluggish
demand for fisheries materials and an
upward trend in the prices of raw
materials.

Rayon Kuraray ceased production at theend of February 2001 and terminated thebusiness after completing stockpiles asrequested by users. Sales dropped anddeficit remained static in this area.
Diversified Products Sustained
demand ensured firm trends in sales ofvarious products. These include apolyarylate fiber, which is used by theJapanese fishing industry for applications
that include ropes, because of its excellent
strength, water absorption and abrasion
resistance.

Forecasts and Policies
for the Coming Fiscal Year
Polyester Product prices are unlikely torise in the present environment ofoversupply and reduced consumption.
Kuraray will therefore work to improveearnings by targeting further cost
reductions and developing new
non-apparel, non-fashion applications
based on its unique polymers. The
medium-term goal is to restructure thisarea from a polyester filament business
into a ‘Super PET’ business by increasing
sales of original polymer materials, such as‘Super PET’, from 20% to 70% of total
filament sales.

“Kuralon” Kuraray will continue to target
increased sales in growth areas, rubber
reinforcement materials, and battery
separators. It will also work aggressively toincrease sales of FRC-related products,
including “Kuralon K-II”. Another priority
will be the maintenance of supply volumes
in traditional areas.

Major Products

10

KURARAY“Kuralon”
In 1950 Kuraray became theworld’s first manufacturer tocommercialize “Kuralon”. In recent
years demand for this fiber as anindustrial material has increased,
and “Kuralon” is increasingly used
as an asbestos substitute and an
alkaline battery separator.

Polyester
Taking maximum advantage of ourcutting-edge technologies, Kuraray
offers a wide variety of high-value
added polyester materials that
contain polymers original to theCompany. Kuraray polyester meets
customer needs ranging fromapparel and industrial fabrics tohousehold applications.

“Kuralon K-II” high-performance fiber“Kuralon K-II” is a highperformance fiber suited to avariety of applications. The
Company is developing variationsof this substance including an ultrastrong type for use in fiberreinforced cement (FRC) in the civilengineering and construction
sectors and – jointly with anapparel manufacturer – a watersoluble type for use in highperformance fabrics in the apparelsector.

EVOH fiber “Sophista”“Sophista” is an EVOH fiber that is
comfortable to wear, offers
excellent moisture control, anddries quickly. This fiber is widelyused in sportswear, innerwear anduniforms.

Fibers and Textiles“Kuralon K- II” This new type ofsynthetic fiber was first launched onto themarket in 1998. It is widely used inapplications that require process auxiliaries
and high-strength fibers, especially fiber
reinforced cement (FRC). Efforts to boost
sales in the coming year will focus
primarily on FRC applications, but Kuraray
will also work to develop new uses in thearea of engineered cementitious
composites (ECC ).
In the medium-range future, Kurarayplans to build a second plant that will morethan double its current annual capacity ofaround 7,000 tons. The aim is to reduce
production costs and further strengthen
Kuraray’s activities in the FRC field.

Net Sales (¥ millions)Operating Income (¥ millions)(before eliminations)
29.0%

8.7%

90,822

1,720

Total 313,651(2001)

Total 19,822(2001)(¥ millions)

120,000(¥ millions)

4,000

112,937 111,041

3,790 3,768

103,120
98,088100,000

90,822
3,000

2,686

80,00060,000

2,769

2,000

1,720
40,0001,000
20,00001997 1998 1999 2000 2001

01997 1998 1999 2000 2001

TopicsAntibacterial Deodorizing fiber
Kuraray’s high-performance
antibacterial deodorizing fiber
reacts to light to deliver
deodorizing and anti-bacterial
effectiveness. A unique productwhose production involves photocatalytic technology, this fiber has
wide applications including
carpeting and household fabrics.
Polyarylate fiber
The Company’s polyarylate fiber ischaracterized by high strength, lowwater absorbency, and excellent
abrasion resistance. Thesefeatures make this fiber highly
suitable for ropes and otherindustrial applications as well as
sporting goods and other uses.

Withdrawal from the rayon businessWith demand for rayon
decreasing each year andno prospects for future
profitability, Kuraray has
decided to withdraw fromthis business. Althoughrayon’s unique sheen andtouch made it highly
popular at one time, inrecent years the growth ofpolyester and othersynthetic fibers has resulted in a contraction of the market. The
Company shut down its production facilities in February of
2001 and will discontinue sales during the first half of the year.
On a related subject, the Company is currently establishing
Business Reevaluation Criteria. In the coming years we will
habitually engage in the strict assessment of the viability of ourbusinesses, reviewing and restructuring them as necessary.

KURARAY11eview of Operations (2)Chemical Products
Performancein the Year Ended March 31, 2001
Sales of chemical products amounted to¥151,007 million, an increase of ¥6,572
million, or 4.6%, compared with theprevious year. Operating income was ¥555
million, or 4.6%, higher at ¥12,715 million.
Trends in key product areas are
summarized below.

Poval Despite sharp rises in raw material
costs, Kuraray was able to achieve growthin both sales and income. This reflects theuse of PVA resin as a safety glass
interlayer film in automobile windshields, adramatic increase in PVA film for LCDs,
and the permeation of new prices.

improvement reflects the recovery ofmarket prices, especially for monomers,
and increased sales of processedpolymers, including PTV screens.

Isoprene Chemical Products Kuraray’s
efforts to develop domestic and overseas
markets for the thermoplastic elastomers“SEPTON” and “HYBRAR” brought
increased sales, and it was decided that a
new plant would be built in the UnitedStates. However, performance was again
affected by falling prices in the areas offine chemicals, including raw materials forvitamins and agrochemicals . As a result,both sales and income declined.
Other Products Both sales and income“EVAL” EVAL Europe N.V. increased its
sales in response to buoyant domestic
demand. Despite higher raw materials
costs, it was able to increase its income.
However, operations in the United States
were severely affected by rise in raw
material costs. While sales increased,
income declined.
Methacrylic Resin Products Bothsales and income grew, moving this area of
business back into the black and making asubstantial contribution to earnings. This

were higher, thanks to increased demandfor environment-related applications basedon activated carbon.
Forecasts and Policies
for the Coming Fiscal Year
Poval Kuraray plans to increase the priceof PVA resin again because of persistently
high raw material costs. Sales of PVA film
for LCDs slowed in the second half of the
fiscal year 2000 but are expected to returnto an expansionary trend around the middleof the coming year. Kuraray will focus on

the expansion of sales of differentiatedproducts. Sales of the new water-soluble
resin “EXCEVAL” are expected to increase
because of demand for applications that
include emulsions and non-woven textiles.

“EVAL” As in the fiscal year 2000,
Kuraray will focus on the expansion ofsales for fuel-related applications, such as
automobile plastic fuel tanks. There is arisk that raw material costs will remain
high, and Kuraray aims to raise andmaintain the price that it announced in thefiscal year 2000.

Methacrylic Resin Products Kuraray
will work to develop and market highadded-value functional products for ITrelated applications, including light guides,
mobile telephones, PTV screens, as well as
emulsified compound resins and other nonvinyl chloride products. Increased demandfor PTV screens necessitated the
expansion of some production facilities
during the fiscal year 2000. The increased
capacity came on line in May 2001. Market
conditions for monomers and generalpurpose products are expected to be evenharsher than in the fiscal year 2000.
Kuraray will work to improve its earnings
through rationalization measures.

Major Products

12

KURARAY

Poval
Kuraray pioneered industrial
production of this highperformance resin. Offering
excellent water solubility,
adhesiveness, and emulsiveness,this resin is highly popular for awide range of applications, fromfiber sizing agents to liquid crystal
display (LCD) film.

“EVAL” gas barrier material“EVAL” is a high-performanceresin that boasts the great gas
barrier properties among allplastics. This characteristic makes“EVAL” advantageous for use infood packaging, automobile
gasoline tanks, and a wide variety
of other applications.

PVA film for LCDs
Kuraray’s PVA film is used to makemost of the polarizing plates usedin the liquid crystal displays
incorporated in many types ofelectronic information-processing
equipment including laptop
computers, cellular telephones andcar navigation systems.

PTV screens
Kuraray‘s PTV screens arefabricated by applying precisionmolding techniques to methacrylic
resin. With the arrival of the age ofdigital high-definition TV, demand
for these screens is expected toincrease.

Chemical Products
Isoprene Chemical Products

Net Sales (¥ millions)International price competition isintensifying in the area of elastomers.
However, Kuraray anticipated increased
demand for “SEPTON” as an alternative tovulcanized rubber, and for “HYBRAR” as a
substitute for vinyl chloride . Outsourcing
of intermediates is becoming increasingly
common in the pharmaceutical industry,
and Kuraray plans to expand its activities inthis area by using materials that it cansource within the group, by exploiting its
unique technology, and by focusing its
R&D efforts on growth areas and areas inwhich it excels.

Operating Income (¥ millions)(before eliminations)
48.1%

64.1%

151,007

12,715

Total 313,651(2001)

Total 19,822(2001)(¥ millions)

150,000

146,812150,319

151,007
144,435(¥ millions)

20,000142,071
16,54016,501125,000

PA9T, “Vecstar” The heat-resistantresin PA9T has been in production at a
semicommercial plant since 1999. In
August 2001 annual production capacity
will be increased from the present level of
300 tons of resins and 1,000 tons ofcompounds to 1,000 tons of resins and
3,000 tons of compounds. In the area ofliquid crystal polymer films for circuitboards, Kuraray plans to increase its salesof “Vecstar” to leading copper-laminateboard manufacturers, and to develop new
applications.

15,000100,000

14,884

12,715
12,16010,00075,00050,0005,000
25,00001997 1998 1999 2000 2001

01997 1998 1999 2000 2001

Topics“SEPTON” thermoplastic elastomer“SEPTON” is a thermoplastic
elastomer that offers the elasticity
of rubber and the ready moldabilityof plastic when subjected to heat.
Because “SEPTON” does not emit
chlorine gas when incinerated, it isincreasingly in demand as a
substitute for polyvinyl chloride
and vulcanized rubber.
Activated carbon
The Group’s Kuraray Chemical Co.,
Ltd. is engaged in the manufactureof activated carbon, a substancethat adsorbs and removes odors
and dirt. Activated carbon is widelyused in water purification facilities
and filters, and demand for thissubstance is increasing due toenhanced awareness ofenvironmental protection issues.

Full-fledged involvement in the “Vecstar”
liquid crystalline polymer film business
The Company haslaunched a full-fledged
program for our “Vecstar”
liquid crystalline polymer
film product. Offering low
water absorption and
excellent dimensional
stability, “Vecstar” ismainly used as a material
in printed circuit boards forelectronic equipment.
Attendant on the spread of information technology, electronicequipment is becoming increasingly miniaturized at the sametime as performance and functionality are enhanced.
Consequently, performance and functionality that differ fromthose of conventional board materials are required of today’s
printed circuit board material. “Vecstar” is a material thatanswers these requirements, and the Company anticipates
growth from this business in the coming years.

KURARAY

13eview of Operations (3)Man-Made Leather, Non-Woven Fabrics and Fastening Materials
Performancein the Year Ended March 31, 2001

Non-Woven Fabrics The dry-laid
nonwoven fabric “Kuraflex” was affected

Consolidated sales of man-made leather,by a downward trend in prices in several
product areas, including wipers for commercial
cleaners. However, sales of raw materials andfinished products were strong in volume terms.
Kuraray was successful in developing newmarkets for an ultrafine non-woven fabricproduced using the melt-blow method. As aresult, both sales and income increased in thearea of non-woven fabrics.

non-woven fabrics and fastening materials
declined by ¥1,649 million, or 5.0%, to ¥31,641
million in the year ended March 2001.
Operating income was ¥374 million, or 15.6%,
lower at ¥2,028 million. Trends in key productareas were outlined below.

Man-Made Leather (“AMARETTA”)
Sales in the domestic market were marginallyhigher than in the previous year, thanks tostrong demand for apparel materials and bags.
In overseas markets, sales trends remained
firm in Southeast Asia and North America.
Kuraray also worked to expand sales ofinterior products based on newly introduced
materials. However, the results fell short of
the target. In Europe sales of apparelmaterials remained slow, and sales were also
affected by the declining value of the Euro. As
a result, both sales and income were lower.

Fastening Materials Kuraray achieved
steady sales of a new fastener where the hooks
and loops are on the same surface,differentiated product, in the area of apparelapplications. However, overall sales and incomein this area remained static.
Forecasts and Policies
for the Coming Fiscal Yearfor shoes and bags. It will also aim to maintainthe growth trend in sales of apparel materials.
In overseas markets, priority will be given to thedevelopment of new materials for sports shoes
in Asia, while in Europe Kuraray will respond to
renewed customer interest in its apparelmaterials, demand for which is now recovering.
In North America efforts will focus on the
expansion of sales of products developed asmaterials for interior products. Kuraray‘s
medium-term business plan calls for an initialemphasis on sales growth, followed by efforts
to improve profitability. It aims to increase
output at production facilities expanded in 1998
to full capacity level by 2003. At the same time,priority will be given to environmental
protection, including the total elimination ofsolvents, and to the development of production
systems that allow a major streamlining ofproduction processes.

Man-Made Leather (“AMARETTA”)

Non-Woven Fabrics Competition is

Kuraray will work to maintain its share of thedomestic market by introducing new materials

expected to escalate in all markets. Kuraray will
work to increase its sales by attracting new

Major Products

14

KURARAY“AMARETTA” man-made leather“AMARETTA” is Kuraray’s worldleading man-made leather product.
Its lightweight, strength and otherproperties make it suitable for awide range of uses including
shoes, bags, and clothing.

“Kuraflex” dry-laid nonwoven
fabric“Kuraflex” is a dry-laid nonwoven
fabric with a distinctive porous
structure. Offering excellent
moisture absorbance, breathability,
and suppleness, this product isused in a variety of applications
ranging from paper diapers andother consumer goods to wipers
and other commercial applications.

“Sofrina” high-grade man-madeleather“Sofrina” is high-grade man-madeleather developed using microlevel technology. It is used in upmarket clothing, interior
furnishings and other high-end
applications. This material has won
acclaim in the market as a highly
fashionable material.

Melt-blown nonwoven fabric
Manufactured using meltblow
technology, Kuraray’s nonwoven
fabric with ultrafine fibers offers
excellent filtering capabilities tocomplement permeability and asoft texture. This fabric is widelyused in coffee bags and foodpackaging.

Man–Made Leather, Nonwoven Fabrics and Fastening Materials
users and developing new applications. It will
also focus on cost minimization as a way ofensuring reasonable income. Medium-termgoals include the development of new
products and applications based on Kuraray’s
unique polymers, and the reduction of total
costs.

Net Sales (¥ millions)Operating Income (¥ millions)(before eliminations)
10.1%

10.2%

31,641

2,028

Fastening Materials Kuraray will target
further growth in sales of differentiatedproducts, such as a new fastener where thehooks and loops are on the same surface. It
will also work to reduce costs and improve
profitability . At present activities are focusing
mainly on woven products, but in the mediumterm future Kuraray aims to build an integrated
fastener business, including molded products.
It will also establish environment-friendly
production systems.

Total 313,651(2001)

Total 19,822(2001)(¥ millions)

40,00038,114 38,802
35,557(¥ millions)

6,000

5,454
5,060

33,29031,641

4,650

30,0004,000

20,000

2,402
2,000

2,028

10,00001997 1998 1999 2000 2001

01997 1998 1999 2000 2001

TopicsHook and loop fastener
Kuraray’s hook and loop fastenerfastens tightly with a light touch of
the hand. This product is themarket share leader in Japan, andis widely used as a fastener forgloves, shoes, and medical
products.

Specialty hook and loop fastener
Kuraray has developed arevolutionary hook and lookfastener that features hooks andloops together on a single strip oftape. This product is increasingly
being used for sporting goods,
nursing care products, and clothing
applications.

Establishment of Kuraflex Ibaraki
In April 2001 the Company
established Kuraflex Ibaraki
Co., Ltd. in a joint venturewith Pigeon Corporation
and Fukuyo Ibaraki Co.,
Ltd. Boasting annual
production capacity of
3,500 tons, the newcompany manufactures
nonwoven fabrics used in
products such as paper
diapers. Establishment of Kuraflex Ibaraki makes it possible for
the Company to secure sales channels for nonwoven fabrics,
secure a production base in the Kanto region, and increase costcompetitiveness. The Company aims to take use establishmentof the joint venture as an opportunity to further expand its
nonwoven fabrics business.

KURARAY

15eview of Operations (4)Diversified Businesses
Performancein the Year Ended March 31, 2001
Consolidated sales from diversified
businesses amounted to ¥40,181 million, adecline of ¥450 million, or 1.1%, from theprevious year. Operating income was ¥270
million, or 7.4%, lower at ¥3,359 million.
Trends in the main product areas aredescribed below.

Medical Products Sales in the area of
medical devices were affected bydiscounting. However, Kuraray achieved
growth in its sales of artificial organs,especially mild dialysis membranes for theelderly. Cost reductions also contributed,
and while sales were lower, income
marked time. Domestic sales of dental
materials stagnated because of a lack ofgrowth in patient numbers. However, thedirect selling systems established in theEuropean and North American markets arebearing fruit in the form of sustained sales
growth. This was reflected in increased
sales and income in this area. In the area ofcontact lenses, the growing popularity ofdisposable products has caused a decline
in demand for conventional lenses. Prices
are also falling, and both sales and incomein this area were below the previous year’slevel. As a result, overall sales and incomein the area of medical products remained
static.

Environmental products Kurarayworked to increase sales of its highperformance membranes to leading water
treatment engineering firms in thesemiconductor industry. The excellent
resistivity to pollution of these membranes
makes them ideal for this field. These
efforts resulted in a gradual upward trend
in orders. It also continued its developmentof large-pore membranes and nextgeneration high-strength membranes in
preparation for the development of newmarkets. Kuraray’s microorganism carrier
PVA gels have an excellent affinity withorganisms. In February 2001 preparations
for mass production were completed with
the installation of facilities with an annual
capacity of 3,000 cubic meters at the Saijo
Plant. Shipments remained buoyant.
Forecasts and Policies
for the Coming Fiscal Year

Medical Products Kuraray expects toface escalating competition in the area ofartificial organs. However, the elderly
population is growing, and the number of
dialysis patients is also increasing. Kuraray
is a leader in the area of mild membranes,
which reduce the physical strain on
patients, and its efforts to expand sales will
focus primarily on these products. In thearea of dental materials, Kuraray will target
a recovery in its sales volumes in thedomestic market by introducing new
products and strengthening its agency
system in the domestic market. Overseas,
it will step up its promotional campaigns
for popular products in the North Americanand European markets, in order to raise its
profile in these regions. Kuraray’s strategy
for contact lenses calls for the expansionof OEM sales of these products, including
its hard lenses, which have been very
popular in the market. Kuraray will also
work to increase sales to leading masssales outlets. The aim is to restore income
performance in this area by combining
these efforts with cost reductions. In themedium-term future, Kuraray plans to
introduce new products in the area ofartificial organs, and to develop and launch
new aesthetic restoration materials in thearea of dental materials.

Major Products

16

KURARAY

Dental materials
Kuraray operates a dental materials
business, providing highperformance adhesives, fillers, andother products for long-lasting andbeautiful dental repair work. Ourdental materials feature excellent
adhesion, high strength and othersuperior performance characteristics
that have drawn acclaim in theJapanese market and overseas.

Contact lenses
Taking advantage of our distinctive
polymeric materials, Kuraraydevelops and markets both soft
contact lenses that offer superb
wearability and hard contact lenses
that can be worn continuously.

Artificial organs
Kuraray offers artificial organs suchas artificial kidneys for removing
toxic substances from the blood of
renal patients and blood plasma
exchange systems. Because
Kuraray‘s hollow fiber membranes
are made of “EVAL”, a substanceharmless to the human body, ourartificial kidneys offer superb
dialysis performance.

High-performance membranes
Kuraray’s filtration membranes forseparating fine particles from liquids
are essential for the production
processes of such diverse industries
as food products, sewage
treatment, and semiconductors. The
Company has developed various
types of high-performancemembranes that can filter out
particles as small as from 0.01 to
0.5 microns in diameter.

Diversified Businesses
Net Sales (¥ millions)

Environmental Products Kuraray has
had considerable success as a supplier ofhigh-performance membranes to thesemiconductor industry. It aims to link thatsuccess to increased sales. Another goal is
to expand the market for large-pore
filtration membranes for use in small-scalewater purification plants, factory watercooling systems and other applications.
Kuraray will also use the heat-resistance ofits membranes to develop applications in
the area of hot water recovery systems.
The three priority areas for PVA gels are
public sewer systems, shared septic tanks,and industrial waste water treatment
facilities. Kuraray will work to establish apresence for itself in these markets.
Medium-term business plan calls formarket expansion through thedevelopment of systems based on largepore membranes and next-generation highstrength membranes, and through theintroduction of full oxidation systems
based on membranes and PVA gels.

Operating Income (¥ millions)(before eliminations)

12.8%

16.9%

40,181

3,359

Total 313,651(2001)

Total 19,822(2001)(¥ millions)

60,000(¥ millions)

4,000

3,629

55,718

3,482
3,512

50,0003,359

47,481
42,24940,0003,000

40,63140,181

30,000

2,461

2,000

20,0001,000
10,00001997 1998 1999 2000 2001

01997 1998 1999 2000 2001

TopicsEngineering businessGroup affiliate Kuraray Engineering
Co., Ltd. is a general engineering
company that engages in the
integrated design, construction, andtest operation of various industrial
plants. The company’s policy for the
future is to expand its business inthe area of environment-related
plants such as sewage treatment
and exhaust treatment facilities.
Consulting businessGroup affiliate Technosoft Co., Ltd.
engages in various consulting
activities, primarily support
services for companies aiming toacquire certification for quality
assurance and environment
management systems incompliance with the ISO series ofinternational standards.

Establishment of technology for a new sewage treatment
system using PVA gel
The Company has
established a new sewage
treatment system thatutilizes PVA gel andsuccessfully introduced thesystem in the market.
Whereas the conventional
activated sludge method ofsewage treatment entails
the problem of surplus
sludge that requires
disposal, the new Kuraray-developed sewage treatment system
uses a combination of PVA gel and industrial membranes tocompletely eliminate the generation of surplus sludge. The new
system has received rave reviews in the market as arevolutionary sewage treatment system, and the Company isaggressively pursuing opportunities in the industrial sewage
treatment and public sewage treatment sectors.

KURARAY17

C

aring for the Environment

The world faces increasingly serious environmental problems, including global warming,ozone layer depletion, and growing volumes of waste. As a member of the global
community, Kuraray is helping to reduce the environmental load and build a society that iscommitted to recycling.
Environmental Activities
Kuraray established the Kuraray Action Guidelines on the Global
Environment in 1993. Since then it has worked actively to develop
sustainable environmental activities and promote environmental
improvement efforts through its business activities. In 2001 thebasic policy was revised, leading to the establishment of theKuraray Group Action Guidelines on the Global Environment. The
new Guidelines provide the basis for an increased commitment toglobal environmental initiatives, and for the sharing of activities
across the entire Kuraray Group. Kuraray is working continuously
under the 2001 Guidelines to contribute to the protection andimprovement of the global environment.
Together with chemical industries throughout the world,
Kuraray participates in the Responsible Care activities, the aim forwhich is to improve public confidence in the chemical sector bymaintaining proper environmental, safety and health standards on a
voluntary basis at all stages from the development of products
through to final disposal. In line with this concept, Kuraray has
made steady progress under annual improvement plans affecting

all aspects of its business operations, including production, R&D
and physical distribution.
Another goal is the establishment of environmental
management systems that measure up to international standards.
Kuraray began to work toward certification under the ISO14001
standard system in 1998, and by December 2000 all plants had
been certified.
Through these activities, Kuraray is working to improve energy
efficiency, reduce industrial waste, and cut emissions of
substances that place a load on the environment.

Medium-term Environmental Plan
In February 2001, the Kuraray Group formulated a Medium-term
Environmental Plan based on the Kuraray Group Action Guidelines
on the Global Environment. The plan sets voluntary targets for
reductions in the use of substances that place a load on
the environment. At the same time, a model plant was established
to explore ways to achieve the targets. The lessons learned will beapplied to the technology and systems used in other plants.

Investment inEnvironmental Equipment(¥ millions)
1,500

1,299
1,163

1,200

900

600

544
445
384

300

0

This is the symbol of
Responsible Care.

1997 1998 1999 2000 2001

ISO14001 Certificate ofCompliance

18

KURARAY

Medium-term Environmental Plan
— Target year: FY2005 (relative to FY1999 levels)
1. 90% reduction of emissions, including substances specified by the PRTR Law
2. 90% reduction in volume of industrial waste processed externally without efficient utilization(target: 1,500 tons/year)
3. Increase of 20-point or more in waste utilization efficiency (60% to 80%)
4. 6% increase in energy efficiency (1% increase per year)
Designation of Environmental Model Plants
Kurashiki Plant:

Model plant for positive LCA promotion

Fluidized bed boiler at theKurashiki Plant (Tamashima)

Kurashiki Plant (Tamashima): Model plant for ecology related business promotion
Saijo Plant:

Model plant for zero residual sludge

Okayama Plant:

Model plant for zero emissions and energy conservation

Nakajo Plant:

Model plant for early adoption of COD total mass regulations

Kashima Plant:

Model plant for positive PRTR Law implementation

Dual Recycling Systems
Unique system ensures effective reutilization of resources

Kuraray is working to ensure the effective
utilization of resources. It has developed a dual
recycling system that combines materials
recycling with thermal recycling.
An example of materials recycling is the useof recovered PET resin to produce polyester
filaments for use in uniforms and otherproducts. Reused fiber materials are recovered
and combined with other waste plastic toproduce solid fuel. This is used in our plants
instead of coal. This effective utilization of heat
energy is a form of thermal recycling.
The ash that remains after solid fuelproduced under the dual recycling system has
been burnt is also utilized effectively. It is soldfor use as a soil improvement material.
In fiscal 2000 recovered PET bottles wereused to produce 1,000 tons of fiber products.
Used fiber products and other waste plastic
were recycled to produce 12,000 tons of solid
fuel. Kuraray sold 3,700 tons of ash from thesolid fuel for use as soil improvement materials
and other products.
Kuraray is using its dual recycling system toincrease the effective utilization of resources.

Recycle—3,700 tons

Landfill—2,800 tons

Diagram of dual
recycling system
Ash from spent fuel—6,500 tons

Thermal energy

PET (plastic) bottles

Coal and other materials — 45,500 tons

Conversion to solid fuel—12,000 tons

Sell
ConsumeRecover

DisposeOther forms of plastic waste

Recover

DisposeRemake into a resource

ConsumeRecycled polyester fiber—1000 tons

Sell

Fiber products
Material recycling
Used PET (plastic) bottles arerecovered and recycled to makefiber products.

Thermal recycling
Used fiber products are recovered
and other kinds of plastic waste
are added to make solid fuel. The
fuel is then burned in the Kuraray‘s
fluidized bed boilers and used asthermal energy.
KURARAY19

lobal Action

Results for Japanese operations in fiscal 2000 were affected by the deflationary trend in Japan’s
domestic economy. Consolidated net sales amounted to ¥276,113 million, a decline of ¥7,377
million, or 2.6% compared with the previous year’s result. Consolidated operating income before
elimination was ¥188 million, or 1.1%, lower at ¥17,674 million. Consolidated net sales in otherregions increased by ¥4,585 million, or 13.9%, to ¥37,538 million. Consolidated operating income
before elimination declined by ¥472 million, or 18.3%, to ¥2,108 million. Strong sales ofthermoplastic elastomers and PTV screens in the North American market had a positive effecton performance trends. While the start-up of EVAL Europe in the previous fiscal year contributed
to performance, Kuraray faced sharp increases in raw materials for “EVAL” in the North
American market and Poval in the Asian market. There was also a decline in demand for manmade leather in the European market.

Foreign Sales(¥ billions)
100

93.5
82.2

86.3

80

60

40

20

The office of Kuraray Europe GmbH
0

1999

2000

2001

Kuraray has three associated companies in
Europe, Kuraray Europe (KEG), EVAL Europe
and Kuraray Finance Europe. EVAL Europe
commenced full-scale production in 1999. It
manufactures and sells “EVAL” resin, which isused mainly in food packaging materials. It is a
key element in the global “EVAL” business,
which spans Japan, North America andEurope. In June 2001 EVAL Europe will
increase its annual production capacity by
2,000 tons to 12,000 tons to meet strong
demand. It has also decided to build additional
production facilities with capacity for another
12,000 tons, bringing the company’s total
capacity to 24,000 tons. The new facilities will
come on line in fiscal 2003.
In March 2000, Kuraray acquired a 30%
shareholding in the Italian company Lorica Sud
Srl as part of a strategy designed to expand

20

KURARAY

Europethe European market for “AMARETTA” manmade leather. Kuraray has had a long business
relationship with Lorica, which processes andsells Kuraray man-made leather. This newcapital link will facilitate the development andprocessing of items that match consumer
needs. The relationship is expected to lead tothe development of increased uses for“AMARETTA” in such areas as interior products
and footwear, and to the reinforcement of the
The production facility
sales network.
of EVAL Europe N.V.
As in the United States, Kuraray has
switched from agency selling to direct selling ofdental materials in the European market. Thischange was reflected in a healthy increase insales. Kuraray also improved its sales
structures for Poval, “SEPTON” and otherproducts, thereby laying the foundations forfurther growth in European sales of its
products.

EVAL Company ofAmerica

North America
In June 2000, the Kuraray Group established
Kuraray Holdings USA (KHA) as a pure holding
company. In October it established Septon
Company of America (SEPCA) as a production
and sales company.
KHU has taken over the coordination andshareholding functions of Kuraray America(KAI), which was established in 1996, allowing
KAI to focus on its trading and consulting
roles. SEPCA is currently building a plant in
Houston, Texas to produce the thermoplastic
elastomers “SEPTON” and “HYBRAR”. The
new plant will become operational in 2002.
SEPCA’s mission is to produce and sell
“SEPTON” and “HYBRAR” to meet growing
demand in the U.S. market. Clarino America
Corporation merged with KAI on April 1, 2001.
The aim of this move was to strengthen manmade leather operations in the United States.
These measures to reinforce Kuraray’s
operations in the U.S. market have resulted in
the creation of a four company structure

consisting of KAI, SEPCA, Eval Company ofAmerica and Kuraray Finance America.
Thermoplastic elastomers, dental materials,
and PTV screens all sold well during fiscal
2000.
In the area of dental materials, Kurarayswitched from agency selling to direct sellingand began to develop its own sales channels.
This strategy was reflected in healthy results
for this product category. Kuraray will continue
to strengthen its sales organization with a view
to increasing its share of the U.S. market.
Kuraray was able to boost demand for PTV
screens through marketing activities focusedon the U.S. market, which has a highconcentration of demand. The PTV market is
expected to expand in step with the growth ofdigital broadcasting and DVD sales. Kuraray has
established a supply structure by increasing its
PTV screens production capacity.

Ground Breaking Ceremony of
Septon Company of America

Staff of Kuraray America, Inc.

Asia

The office of Kuraray
Hong Kong Co., Ltd.

Staff of Kuraray Specialities
Asia Pte., Ltd.

There are four Kuraray Group companies in
Asia, Kuraray Hong Kong, Kuraray Singapore,
Kuraray Specialities Asia and Poval Asia.
Singapore-based Poval Asia produces Poval, forwhich Kuraray has the biggest share of the world
market. Its output is sold by Kuraray Specialities
Asia, which is actively developing new markets,
including India and Pakistan, in addition to its
traditional markets in Southeast Asia.
Kuraray Hong Kong opened an office in
Taiwan in fiscal 2000 as part of efforts tostrengthen the man-made leather business.
Many leading international sports shoes
brands have product planning operations in
Taiwan, and a presence there will allow
Kuraray to monitor customer needs and develop
and propose solutions more quickly. Kuraray will
use these advantages to the full
as it works to expand its man-made leather
business. Another focus in the Asian region
will be the expansion of sales of “SEPTON” andother chemical products.

Poval Asia Pte Ltd
KURARAY21
21

esearch and Development

Kuraray’s research and development activities are based on the unique technology resources that Kuraray havebuilt through its activities in such areas as polymer chemistry and synthetics. By integrating its leading
technologies, including several developed for the first time in the world, Kuraray has been able to accelerate thepace of new product development.

Research and Development
Organization
Kuraray’s basic and applied R&D activities
are carried out under a two-tier structure.
Basic and applied R&D is handled by theKurashiki Research Laboratories, theTsukuba Research Laboratories and theAnalytical Research Center, while R&D
departments in each business area are
responsible for the development of
production technology in preparation forcommercialization. To accelerate thedevelopment process, the researchlaboratories also participate actively in joint
projects with R&D departments in eachbusiness area.
The Kurashiki Research Laboratories
conduct research relating to synthetics andpolymerization, which are Kuraray’s coreareas of technology. Current areas ofresearch include organic synthesis products,
such as pharmaceutical intermediates andfine chemicals, polymer composites, suchas man-made leather and nano-compounds,
environment-friendly products, andelectronic materials.
The Tsukuba Research Laboratories
carries out polymer research and develops
optical materials using precision molding
and optical design technologies. Its
involvement spans all levels from basic
research in such fields as the synthesis of
new engineering plastics and functional
materials, and compounding, molding andprocessing technologies, through totechnical support services.
The Analytical Research Center analyzes
aspects of various substances, including
the molecular structures of solids and thephysical characteristics of polymers. It alsofunctions as an integrated technical support
center through activities that include
information gathering and the assessmentof substances for safety.

Future Strategy
In 1999 Kuraray established the Researchand Development Strategy Council, therole of which is to select R&D themes andcoordinate group R&D activities. The
results of this work are reflected in the
new ‘G-21’ medium-term business plan,
which calls for the application of a marketoriented approach to research anddevelopment. From an organizational

Inspection for opt-related materials

R&D Expenses(¥ billions)15

13.4
12.1 12.3
12

9

6

3

0

1999 2000 2001

Figure in 2000 and 2001 does notinclude patent application expenditure.

22

KURARAY

Kurashiki ResearchLaboratories / Analytical
Research Centerperspective, a Research and New Business
Development Division was established in
April 2001. In addition to the activities ofthe old Research and Development
Division, the new division is also
responsible for the exploration of new areasof business. The aim of these changes is toenhance the pace of product development.
Our basic R&D strategy for electronic
information technology and opt-relatedmaterials focuses on heat-resistant plastics
for use in connectors and circuit boards,
capacitor materials, and MMA molded
optical products, such as PTV screens and
LCD back-lights.
In the area of biomedical-relatedmaterials, Kuraray develops pharmaceuticalintermediates and a variety ofsupplementary materials for use inregenerative medicine, including non-PVC
blood circuits and catheters.
Kuraray also develops environmental

protection materials. These include nextgeneration environment cleansing filters
for use in industry, and VOC-free materials,
such as water-based emulsions and lighthardened resins.
High-performance materials developedby Kuraray include nano-composites*, newbarrier materials, and new elastomers.
Over the next five years, Kuraray plans
to invest approximately ¥75 billion in R&D
focusing primarily on these areas. This isequivalent to about 4% of net sales.
Kuraray will maintain its active involvement
in R&D. Its goal is the commercialization ofresearch achievements under its marketoriented strategy.

Research and development on
synthetics and polymerization* Nano-composites: High-performancematerials with nanometer-scale structures.
(One nanometer equals one-billionth of ameter.)

Tsukuba ResearchLaboratories

Experiment in finechemicals
KURARAY23

roduction

During the year under review the Company launched a number of initiatives as strategic moves aimed at theachievement of its new medium-term business plan ‘G-21’. Focusing on the strategic areas defined in ‘G-21’(electronic information technology, eco-friendly products, environment business, and medical products), theCompany has carried out expansion and enhancement of its production facilities. These strategic businessareas were defined based on the market-oriented thinking, and the product lines that fall under these areas aredesignated as the locomotives for business expansion in the new medium-term business plan. Furthermore,
the plan calls for aggressive production increases centered on our core businesses and the strategic areas,
including planned investment in plant and equipment of ¥150 billion over the next five years.
Electronic information technology areas
In May 2001 an expanded production
facility for the PTV screens went into
operation at the Nakajo Plant, doubling
annual production capacity at the facility tothree million screens. Centered on the U.S.
market, demand for projection televisions
is increasing, and the expansion is aimed atproviding impetus for further growth for
the PTV screens business.
Also at the Saijo Plant, preparations for
expanded production of PVA film for LCDs
are underway and expected to becompleted in August 2001. The expansion
will result in an increase in annual
production capacity from 18 to 31 million
square meters. PVA film for LCDs is apolarizing material essential for the
production of liquid crystal displays (LCD).
The Company anticipates further expansionof the PVA film business attendant on
increased use of this film in various
monitors and laptop computers.
Construction of a mass production
facility for PA9T heat-resistant polyamide
resin is in progress at the Saijo Plant. Withannual production capacity of 1,000 tons,

the facility is expected to be commissionedin August 2001. Offering excellent heatresistance and molding properties, PA9T isused in connectors and other electronic
components and materials. Aiming toachieve further expansion in demand forthis substance, the Company will engage
in a full-fledged product introduction into
the automotive sector.
Eco-friendly areas“SEPTON” is a thermoplastic elastomer
for which demand is surging, primarily as areplacement for vulcanized rubber. Kurarayhas decided to establish Septon Companyof America, a new plant in Houston Texas,
to produce “SEPTON”. Expected to start
production in autumn of 2002, the newplant will have annual production capacityof 12,000 tons.
In May of 2000, elimination of a
production bottleneck at EVAL Company ofAmerica (Texas) resulted in increased
production capacity for EVOH resin“EVAL” of 2,000 tons (for total capacity of
23,000 tons). In addition, in June 2000
EVAL Europe N.V. (Belgium) completed a

2,000-ton expansion of annual production
capacity (total capacity: 12,000 tons).
Attendant on an increase in demand inEurope, in June 2001 the Company
decided to increase capacity at EVAL
Europe by 12,000 tons (total capacity:
24,000 tons). Having augmented
production in Japan, the United States andEurope, the Company will further expand
the “EVAL” business.
Environment business
In February 2001 a PVA gel production
facility (with annual capacity of 3,000 cubic
meters) began its operation at the Saijo
Plant. Consisting of spheres of Poval four
millimeters in diameter, PVA gel houses
microorganisms decompose organic
substances and process sewage. Using
PVA gel it is possible to produce morecompact sewage treatment facilities thanwith conventional treatment methods. A
substance that contributes toenvironmental preservation, PVA gel is apromising product for which demand is
expected to increase.

CapitalExpenditures(¥ billions)
35

LCDs using PVA film

33.5

30

EVAL Companyof America

25

20.8
20

19.0

Saijo Plant

19.8
15.8

Food packaging
materials using“EVAL”

15

PA9T

10

Nakajo Plant
5

0

24

KURARAY

1997 1998 1999 2000 2001

PTV screensontribution to Local Communities

The Kuraray Group is engaged in numerous activities that contribute to thewell being of local communities. For instance, aiming to be a good corporate
citizen we deepen exchanges with local communities by opening facilities tothe public and holding various events.

Kuraray plants conduct ‘ChemistryClasses for Boys and Girls’
Since 1992, the plants have conducted‘Chemistry Classes for Boys and Girls’ forupper year primary school students,
spreading the joy of involvement withchemistry. Covering familiar themes andincorporating numerous experiments,
these activities have proved highly popularwith the children. In March 2001 theprogram was held for the first time at the
Kashima Plant, where experiments inmaking jelly and fragrances wereconducted and the children experienced
the strange and wonderful world ofchemistry.

with 3,500 lights, acting as a beacon for
countless people drawn to view the timehonored symbol of the Yuletide.

Giant Christmas tree is illuminated at
the Kurashiki Plant (Tamashima)
Each year the Kurashiki Plant (Tamashima)
decorates a 43-year-old, 15-meter highHimalayan cedar at the main entrance ofthe plant to celebrate Christmas. In
December 2000 the Christmas tree was
the main attraction of an event open to
area residents and based on the theme ofharmonization with nature. For a period of
two weeks the great tree was adorned

EVAL Europe plant tour
In an event held jointly with other area
companies, EVAL Europe holds an Open
Door Day during which it invites area
residents for a tour of the plant. Held once
every five years, this event involves a bus
tour of area product displays and factories.
Attracting 7,000 visitors, the 2000 Open
Door Day proved an excellent opportunity
for the plant to engage in exchanges witharea residents.

The Saijo Plant holds its customarycherry blossom viewing event
Each year the Saijo Plant opens its grounds
to the general public for cherry blossom
viewing. Since it first opened the plant has
devoted effort to tree planting within theplant grounds, environmental protection,and exchanges with the local community.
This is attested by the cherry blossom
viewing event each spring, and in 2001
about 9,000 visitors enjoyed the sight of
the trees in full bloom.

EVAL Europe Plant tour

Giant Christmas tree

Chemistry Classes forBoys and Girls

Cherry blossom
viewing event
KURARAY

25

History

1920s
1926

1969

•Kurashiki Kenshoku Co. established•Production of polyester filament started at
Saijo Plant

1928•Rayon commercialized: production ofrayon filament yarn begun at theKurashiki Plant

1940s
1940
•Chugoku Sangyo Co., Ltd. (now Kuraray
Chemical Co., Ltd.) established

1970s
1970
•Company name changed to KurarayCo., Ltd.
•Hong Kong Representative Officeestablished (transferred to Kuraray
Hong Kong Co., Ltd. in June 1998)•Merged with Nippon Velcro Co., Ltd.
which produces hook & loop fasteners

1986•Clarino America Corporation, a manmade leather sales company, establishedin the U.S. jointly with Marubeni Corp.

1990s
1990

1971

•“SEPTON” commercialized: Productionof “SEPTON” thermoplastic elastomer
started at Kashima Plant•Nonwoven fabrics business started (Kuraray
Chicopee Co., Ltd. established)

1991•Kuraray Europe GmbH established in
Düsseldorf, Germany

1995•Kuraray EVAL Europe GmbH establishedin Düsseldorf•Kuraray Hong Kong Co., Ltd. establishedNew laboratory of Okayama plant

1943

1996

•Capital participation in Kakuichi RubberCo., Ltd. (now Kuraray Plastics Co., Ltd.)

Factory for nonwoven fabrics of Kuraray ChicopeeCo., Ltd. (now Kuraflex Co., Ltd.)

1949

1972

•Company name changed to Kurashiki
Rayon Co., Ltd.

•“EVAL” commercialized: production
facilities for “EVAL” resin completed at
Okayama Plant•Isoprene chemicals business launched:operation at Kashima Plant started, andproduction of polyisoprene rubber begun

1950s
1950

•EVAL Europe N.V. established in
Belgium

1975

1998

•Artificial organs business started•“KURALON K-II” commercialized

1958

1976

1999

•NIC (new isoprene chemicals) facilities
completed at Nakajo Plant•Operations started at Poval Asia Pte Ltd•Operations at EVAL Europe N.V. started

1960s

1977

1960

•Kuraray Engineering Co., Ltd. established•Capital participation in Kyowa Gas
Chemical Co., Ltd., which conducts
methacrylic resin business

1978

1961

•Advanced into the dental materials field:“CLEARFIL” adhesive dental filler
produced•Osaka Goseihin Co., Ltd. (now Kuraray
Trading Co., Ltd.) establishedCompletion ceremony of EVAL Europe N.V.

2000

1962
•Production of poval film started at Saijo
Plant

2000

1963
•New York Representative Officeestablished (transferred to Kuraray
America, Inc. in April 1996)“CLEARFIL” adhesive dental filler

1980s

1964

1983

•Production of polyester staple started at
Tamashima Plant•Kuraray Fudosan Co., Ltd. established•“Clarino” commercialized: production of“Clarino” man-made leather started atKurashiki Plant•Cement-reinforcing “KURALON”
developed•EVAL Company of America established,
and marketing of “EVAL” resin in the
U.S. begun (production started in 1986)

1984
1965
•European Representative Officeestablished in Hamburg, Germany(moved to Düsseldorf in June 1968)
KURARAY

1997•“KURALON” commercialized:
production of “KURALON” staple started•Poval commercialized: production of
Poval for market sale started

26•Kuraray America, Inc. established in New
York as administrative holding company
in the U.S.
•Kuraray Singapore Pte., Ltd. established,
and capital participation in Poval Asia Pte
Ltd•Haru-Kuraray GmbH, a man-made leather
sales company, established in Germany
jointly with Marubeni Corp. and Haru
Holding & Management GmbH•The mass-production of a new watersoluble resin “EXCEVAL” was started•The Company made a capital participationin Lorica Sud S.r.i., an Italian man-madeleather processing and sales company•Kuraray terminates its rayon business•Kuraray Holdings U.S.A., Inc. isestablished as a holding company in theU.S.
•SEPTON Company of America isestablished in the U.S.

2001
•PVA gel mass-production facilities become
operational•Mass-production facilities for theheat-resistant polyamide resin PA9T
become operational

Organization and Board of Directors
Organization (As of June 2001)

Finance Department
Accounting Department
General Affairs and Legal Department
Intellectual Property Rights Department
Personnel Department

ChairmanPresident

Office of Purchasing and Logistics
Business Service Center
Office of Environment and Technology

Office of Secretariat
Office of Internal Auditors
Office of Corporate Planning
Office of Corporate
Communications

Environmental, Industrial Safety andQuality Management Center
Technology Development Center
Research and New Business Development Division
Kurashiki Research Laboratories
Tsukuba Research Laboratories
Analytical Research Center

Executive Committee

Fibers and Textiles Operation Group

Philanthropy and Ecology Committee
In-house Ethics Committee

Office of Planning and Administration
Fibers and Industrial Materials Division
Fastening and Non-woven Fabrics Division
Clarino Division
Textile Division

Administration Committee
Board of Factory Managers
Board of Subsidiary Company
Presidents

Specialty Polymers Operation Group
Office of Planning and Administration
Poval Division
Eval Division
Methacrylate DivisionCorporate Auditors /Board of Corporate Auditors

Chemicals Operation Group
Office of Planning and Administration
Chemicals Division
Fine Chemicals Division
Elastomer DivisionHigh Performance Materials Division
Medical Products DivisionTokyo Head Office
Kurashiki Plant
Saijo Plant
Okayama Plant
Nakajo Plant
Kashima Plant
Branch offices

Directors and Corporate Auditors (As of June 2001)
Representative Director and Chairman
Hiroto Matsuo
Representative Director and President
Yasuaki Wakui

Managing Directors
Koichi Kushida
Masayuki Hayashi
Akira Matsuzawa
Masahiro Kaihara
Tsutomu Yabuta
Director and Advisor
Hisao Nakamura

Directors
Shobu Minatono
Katsuhiko Kishi
Yosuke Sekiya
Katsumi Ohashi
Tetsuzo Kimura
Satoru Mizushima
Junsuke Tanaka
Seiji Wajiki
Koichi Kikuchi
Nobusuke Takeuchi

Corporate Auditors
Jun Inoue
Fumio Ohmori
Tatsuya Nakano
Kazuhide Kashiwabara

KURARAY27

List of Consolidated Companies(March 31, 2001)

CapitalCompanies

Head office(·millions, except
where stated)

CapitalActivities

Companies

Head office(·millions, except
where stated)

Activities

Chemicals
Kyosei Chemical Co., Ltd.

Tokyo

50

Manufacture ofpigments and dyes

Kuraray Living
Co., Ltd.

Osaka

101

Manufacture and salesof packaging materials

Kuraray Niigata Kasei
Co., Ltd.

Tokyo

50

Manufacture and salesof methacrylic sheets

Kuraray Family Products
Corporation

Osaka

30

Sales of healthfoods, etc.

*Nihonkai Acetylene

Tokyo

60

Manufacture and salesof acetylene gas*The Kurashiki

Okayama450

Hotelmanagement

Co., Ltd.

Kokusai Hotel, Ltd.

Kuraray ChemicalCo., Ltd.

Osaka

600

Manufacture and salesof activated carbon

Kuraray Travel Service
Corporation

Osaka

20

Travel agency*KC Processing

Okayama

20

Processing ofactivated carbon

Techno Soft Co., Ltd.

Osaka

50

Consulting,temporary staffing

Osaka

10

Manufacture and salesof activated carbon

Kuraray TechnoCo., Ltd.

Osaka

10

Production
sub-contracting*Magictape Co., Ltd.

Fukui

30

Manufacture of“Magic Tape”

Kuraray Techno Nakajo
Co., Ltd.

Niigata50

Production
sub-contracting

Kuraray Plastics Co., Ltd.

Osaka

180

Manufacture and salesof plastics

Kuraray Techno KashimaCo., Ltd.

Ibaraki

10

Production
sub-contracting

Ibuki Kosan Co., Ltd.

Gifu

10

Manufacture of
rubber products

Kuraray Techno OkayamaCo., Ltd.

Okayama60

Production
sub-contracting*Houwa Sangyo

Miyagi

10

Sales ofrubber products

Kuraray Techno Kurashiki
Co., Ltd.

Okayama10

Production
sub-contracting

Tokyo

34

Manufacture and salesof shoes

Kuraray Techno Saijo
Co., Ltd.

Ehime

30

Production
sub-contracting

KRT TamashimaCo., Ltd.

Okayama10

Production
sub-contracting

Co., Ltd.
*Mitsukura ChemicalCo., Ltd.

Co., Ltd.
*Hikari Shoes

Co., Ltd.

Textiles*Kuraray Okayama Spinning

Okayama

50

Manufacture ofsynthetic fibers

Kuraray Finance &Accounting Co., Ltd.

Osaka

100

Financial andaccounting services

Ehime

10

Manufacture of processed
polyester yarn

*Kuraray Information

Osaka

50

Information systems
services

Okayama

10

Inspection ofrayon yarn

Fukui

35

Sizing of yarn

10Planning and sales of
uniforms

Kuraray America, Inc.

10

Manufacture and salesof non-woven textile
products

Co., Ltd.
*Saijo Textured Yarn

Co., Ltd.
*Tamashima Rayon

Inspection Co., Ltd.
Reihoku Textile
Co., Ltd.
*Kuraray Planning System

Osaka

Co., Ltd.
*Kuraflex Co., Ltd.

Okayama

Systems Center Co., Ltd.

Overseas
New York,
U.S.A.

company,
US$55.53 million Holding
coordination of U.S.

New York,
U.S.A.

US$8.102 million Importing and sales ofEval Company of America

Illinois,
U.S.A.

and sales
US$4.15 million Manufactureof “EVAL” in the United

Clarino America Corp.

New York,
U.S.A.

of man-made
US$0.6 million Sales
leather in the United
Manufacture and sale of
US$1 million thermoplastic elastomers
in the United States

Kuraray Holdings U.S.A., Inc.

Real Estate, Construction, Housing.

StatesStates

Kuraray FudosanCo., Ltd.

Osaka

282

Iruma Country Club
Co., Ltd.

Saitama40

Golf course
management

Kurary Finance America, Inc.

New York,
U.S.A.

Kuraray Ohmiya EstateCo., Ltd.

Osaka

31

Real estate leasing

Kuraray Europe GmbH

Dusseldorf,¨
Germany

DM61 million Sales of Kurary products

10Real estate leasing

EVAL Europe N.V.

Antwerp,
Belgium

BEF1,200 million Manufacture and sales

SEPTON Company of America

New York,
U.S.A.

US$0.001 million Money lendingin Europe

Kuraray Tsurugashima EstateCo., Ltd.

Osaka

Kuraray InteriorCo., Ltd.

Osaka

330

Manufacture and salesof luxury furniture

Kurary Finance Europe B.V.

Amsterdam,
Netherlands

FLS0.7 million Money lending

Kuraray Engineering
Co., Ltd.

Okayama

450

Plant designand construction

Kuraray Hong Kong Co., Ltd

Hong Kong,
China

and sales of
HK$4.65 million Processing
Kuraray products in China

Fabrication ofmachinery parts

Kuraray Singapore Pte., Ltd.

Singapore

SP$21.4 million products in Southeast*Poval Asia Pte Ltd

Singapore

SP$40 million Manufacture of Poval

Kuraray Specialities Asia
Pte., Ltd.

Singapore

SP$1.4 million Sales of Poval resins

Ehime

10

*: equity method subsidiaryof “EVAL” in Europe

and Southeast Asia

Marketing of Kuraray
Asia

resinsCommerce, Services
Kuraray Trading
Co., Ltd.
KURARAY

Kuraray products

Sales and managementof housing lots andhousing

Kuraray Saijo KikoCo., Ltd.

28

subsidiaries

Osaka

1,500

Importing, exporting,wholesaling of textile
products, etc.

FINANCIAL SECTION

Consolidated Six-Year Summary
Kuraray Co., Ltd. and Consolidated Subsidiaries
Thausands of
U.S. dollars

Millions of yen

Years ended March 31

2001

2000

1999

1998

1997

1996

2001

¥ 316,444¥ 336,466¥ 347,643¥ 340,112¥ 330,869$ 2,529,444

235,603250,195

259,788

255,240

246,768

1,894,726

60,52059,123

58,95758,32458,008473,984

20,321

27,14828,89826,54826,093

160,734

7,452

13,171

13,962

11,741

11,04932,621

10.56

20.00

36.83

40.46

34.99

35.43

0.09

10.46

19.42

34.56

37.68

32.48

32.71

0.08

For period:
Net sales ............................. ¥ 313,651
Cost of sales........................ 234,946
Selling, general andadministrative expenses......
58,774
Operating income .................
19,931
Net income ..........................
4,045
Net income per share(Exact yen or U.S. dollar)

Primary ..............................
Fully diluted ........................
Cash dividends applicable to period(Exact yen or U.S. dollar)...............
Capital expenditure ..............
Depreciation and amortization ....
Total research anddevelopment expenses.......

9.00

9.00

9.00

9.00

9.00

9.00

0.07

15,814

19,76433,49720,806

19,04917,479127,532

16,593

16,76915,557

14,615

14,111

14,263

133,815

12,251

12,097

13,42913,707

13,592

12,646

98,798At period end:
Total assets.......................... ¥ 512,479
Total shareholders’ equity...... 289,469¥ 503,766¥ 487,991¥ 478,861¥ 514,167¥ 535,173$ 4,132,895

282,755

259,909

233,494

208,635

178,776

2,334,427

Notes: The United States dollar amounts represent translation of Japanese yen at the rate of ¥124=$1.
As discussed in Notes 2(f) to the financial statements, for the year ended March 31, 2001, the Companies adopted the new accounting standard in Japan “AccountingStandard for Employees’ Retirement Benefits”, effective from April 1, 2000. The effect of adoption of the standard was to decrease net income for the year ended
March 31, 2001 by ¥4,768 million ($38,452 thousand).
As discussed in Notes 2(g) to the financial statements, effective April 1, 2000, the Companies adopted the amended “Accounting Standard for Foreign currency
Transactions, etc”. The effect of adoption of the standard was to increase net income for the year ended March 31, 2001 by ¥647 million ($5,218 thousand).
As discussed in Notes 2(j), (k) and (l) to the financial statements, for the year ended March 31, 2001, the Companies adopted the new accounting standard in Japan“Accounting Standard for Financial instruments”, which is effective from April 1, 2000. The effect of adoption of the standard was immaterial.
Certain reclassifications of previously reported amounts have been made to conform with current classifications.

FINANCIAL SECTION CONTENTS
Consolidated Six-Year Summary .......................
Financial Review.......................................
Consolidated Balance Sheets ..........................
Consolidated Statements of Income ...................
Consolidated Statements ofShareholders’ Equity .................................
Consolidated Statements of Cash Flows ...............
Notes to Consolidated Financial Statements ...........
Report of Independent Accountants ...................
Corporate Data ........................................

29
30
32
34
34
35
36
46
47

KURARAY

29

Financial Review

Cost of Sales, Selling General and
Administrative Expenses

The following report refers to the consolidated financial
statements for the Kuraray Group for the year ended March
2001 (from April 1, 2000 to March 31, 2001).

The cost of sales reduced by ¥657 million ($5,298 thousand), or
0.3%, to ¥234,946 million ($1,894,726 thousand). The fact thatthe percentage reduction was smaller than the decline in sales is
attributable to sharp rises in the prices of raw materials derived
from crude oil and natural gas. Efforts were made at the factory
level to reduce production costs, but these savings were notsufficient to offset higher raw material costs.
Selling, general and administrative expenses amounted to¥58,774 million ($473,984 thousand). This is ¥1,746 million($14,081 thousand), or 2.9%, lower than in the previous year.
The lower figure reflects a reduction in the amount of salaries andbonuses paid due to the downsizing of personnel numbers.

Note: Percentage comparisons with the previous year’s results have been rounded
to one decimal place.

Sales
Sales of fibers and textiles declined by ¥7,266 million ($58,597
thousand), or 7.4%, from the previous year’s level to ¥90,822
million ($732,436 thousand). Sales of “Kuralon” for applications
based on the unique characteristics of the material, such as paper,
non-woven textiles and rubber materials followed a strong upward
trend. However, polyester sales were affected by a downturn indomestic consumer spending on apparel, and by a price decline
resulting from increased imports of cheap secondary products.
Sales of chemical products increased by ¥6,572 million($53,000 thousand), or 4.6%, to ¥151,007 million ($1,217,798
thousand). Stagnating markets caused a sharp fall in sales of finechemicals, including raw materials for vitamins andagrochemicals. However, Kuraray achieved sales growth in allother areas, including poval, “EVAL” and methacrylic resins.
Sales of man-made leather, non-woven fabrics and fastening
materials amounted to ¥31,641 million ($255,170 thousand),a decrease of ¥1,649 million ($13,298 thousand), or 5.0%,
compared with the previous year’s result. Sales of non-woven
fabrics were higher thanks to increased demand for wiper
materials, while sales of fastening materials were about the sameas in the previous year. However, sales of “AMARETTA” manmade leather were sharply lower due to a fall in apparel-related
demand in Europe and the reduced value of the euro.
Sales from diversified businesses -- medical products and otheritems -- contracted by ¥450 million ($3,629 thousand),or 1.1%, to ¥40,181 million ($324,040 thousand). Despitesustained growth in overseas sales of dental materials, total sales
in this category were affected by a reduction in sales of contactlenses due to escalating competition and falling prices.
Total consolidated sales amounted to ¥313,651 million($2,529,444 thousand), a decline of ¥2,793 million ($22,524
thousand), or 0.9%, from the previous year’s level.

Net Sales(Millions of yen)
340,112

Operating Income and Net Income
Sales were eroded by reduced sales volumes and stagnating
market conditions. Moreover, it was not possible to add the full
impact of higher raw material costs to selling prices.
As a result, operating income fell by ¥390 million ($3,145
thousand), or 1.9%, to ¥19,931 million ($160,734 thousand).
The ratio of operating income to net sales was approximately
6.4%, which is similar to the level in the previous year.
Non-operating income included a ¥3,014 million ($24,306
thousand) gain on sale and appreciation of marketable securities.
This resulted from the sale of shares acquired for trading
purposes, and from valuation gains resulting from the introductionof market value accounting. Non-operating expenses included
restructuring charges of ¥8,872 million ($71,548 thousand),resulting from factors that included Kuraray’s withdrawal from therayon business, and the write-down of products. There was also
special provision for retirement benefits, which amounted to¥7,596 million ($61,258 thousand).
Income before income taxes amounted to ¥7,800 million($62,903 thousand). This is ¥5,577 million ($44,975 thousand), or
41.7%, lower than the previous year’s result. Net income declinedby ¥3,407 million ($27,476 thousand), or 45.7%, to ¥4,045 million($32,621 thousand).

Net Income &Operating Income per Net Sales

Shareholders’ Equity &Equity Ratio(Millions of yen) (%)(Millions of yen) (%)

347,643
336,466

350,000

282,755

13,962
13,171

316,444 313,651

15,000300,000
233,494

11,741300,000

250,000

12,000289,469

259,909

56.1

56.5

53.3
208,63548.8

250,000
200,000
7,452

9,000

200,000

40.6

150,000
7.8

150,000

6,000

8.3

8.1

4,045
6.4 6.4

100,000
100,000
3,000

50,00050,000030

KURARAY

1997 1998 1999 2000 2001

01997 1998 1999 2000 2001
Net Income
Operating Income per Net Sales

0

1997 1998 1999 2000 2001
Shareholders’ Equity
Equity Ratio

Financial Position
Current assets increased by ¥26,361 million ($212,589 thousand),or 12.4%, compared with the level at the end of the previous
accounting period, to ¥239,654 million ($1,932,694 thousand).
This was mainly the result of a ¥26,302 million ($212,113
thousand) increase in cash and cash equivalents, due to the saleand redemption of investment securities, and a ¥7,814 million($63,016 thousand) increase in notes and accounts receivable,
which resulted in part from a holiday falling at the end of theaccounting period.
Tangible fixed assets declined by ¥875 million ($7,056 thousand)from the level at the end of the previous accounting period.
This was mainly because depreciation and amortization amounted
to ¥16,593 million ($133,815 thousand), compared with capital
expenditure of ¥15,814 million ($127,532 thousand).
Investments and other assets declined by ¥16,773 million($135,266 thousand), or 10.3%, to ¥145,357 million($1,172,234 thousand). The main reasons for this reduction weresales of investment securities, and transfers to marketablesecurities.
After adjustment for these factors, total assets amounted to¥512,479 million ($4,132,895 thousand). This represents anincrease of ¥8,713 million ($70,266 thousand), or 1.7%, from theposition at the end of the previous accounting period.
Working capital, which is calculated by deducting current
liabilities from current assets, amounted to ¥129,420 million($1,043,710 thousand), and the current ratio was 217.4%,
a decline of 26.1 points from the previous year’s level. Return on
assets (ROA) fell by 0.2 points to 3.9%.
On the liability side, current liabilities increased by ¥22,642
million ($182,596 thousand), or 25.8%, to ¥110,234 million($888,984 thousand). At ¥112,723 million ($909,056 thousand),
fixed liabilities were ¥20,324 million ($163,903 thousand), or
15.3%, lower than at the end of the previous accounting period.
This resulted primarily from the transfer of loans and convertible
bonds from fixed liabilities to current liabilities.
Retained earnings at the end of the accounting period was ¥471
million ($3,798 thousand) higher than the previous year’s result at

EPS & ROE

Total Assets & ROA(Yen) (%)

(Millions of yen) (%)¥111,622 million ($900,177 thousand).
The application of market value accounting resulted in avaluation gain of ¥3,355 million ($27,056 thousand) on securities
after the deduction of tax benefits. This amount was recorded as acomponent of shareholders’ equity. Cumulative translation
adjustments increased by ¥2,887 million ($23,282 thousand) due
to a fall in the value of the yen at the end of the accounting period.
These factors were reflected in an increase of ¥6,714 million($54,145 thousand), or 2.4%, in shareholders’ equity, whichamounted to ¥289,469 million ($2,334,427 thousand).
The equity ratio improved by 0.4 points to 56.5%. Return on
equity (ROE) was 1.3 points lower at 1.4%. Earnings per share(EPS) amounted to ¥10.56 ($0.09), a decline of ¥9.44 ($0.08), or
47.2%, from the previous year’s level. Retained cash flows, which
are calculated by adding depreciation and amortization to net
income and subtracting share dividends, amounted to ¥17,192
million ($138,645 thousand).

Cash Flows
Cash flows from operating activities were ¥9,179 million($74,024 thousand) below the previous year’s level at ¥15,887
million ($128,121 thousand). The main reason for this was thedecline in net income.
Cash flows from investing activities totaled ¥20,323 million($163,895 thousand). This contrasts sharply with the result for theprevious year, when there was a net outflow of ¥42,752 million($344,774 thousand). The change resulted mainly from a reduction
in expenditure relating to the acquisition of securities, and anincrease in income from the sale and redemption of securities.
Cash flows from financing activities shifted from a net inflow of¥3,040 million ($24,516 thousand) in the previous year to a net
outflow of ¥10,448 million ($84,258 thousand). This was mainly
the result of reduced income from long-term loans.
Cash and cash equivalents at the end of the accounting periodamounted to ¥40,171 million ($323,960 thousand). This is ¥26,302
million ($212,113 thousand) higher than at the end of the previous
accounting period.

Capital Expenditure &Retained Cash Flow
(Millions of yen)
33,497600,000

50

514,16740.46

503,766

478,861
487,991

512,479

36.83

40

6.1

30,000500,000

34.99

25,53825,50425,00020,80622,894

5.8

6.3
5.3

400,000 5.1

5.6

30

20,00019,04920.00

2019,764
15,81420,920300,000
4.1

2.7

35,00010.56

15,00017,1923.9

200,000
10,00010
1.4

01997 1998 1999 2000 2001
EPS
ROE

100,000

0

5,000

1997 1998 1999 2000 2001
Total Assets
ROA

0

1997 1998 1999 2000 2001
Capital Expenditure
Retained Cash Flow

KURARAY

31

Consolidated Balance Sheets
Kuraray Co., Ltd. and Consolidated Subsidiaries

Thousands of
U.S. dollars (Note 1)

Millions of yen

March 31, 2001 and 2000

ASSETS
Current assets
Cash and cash equivalents ....................................................................
Marketable securities (Note 3) ...............................................................
Notes and accounts receivable (Note 11):
Trade .................................................................................................
Unconsolidated subsidiaries and affiliates .............................................
Other.................................................................................................
Loans receivable from unconsolidated subsidiaries and affiliates...............
Allowance for doubtful accounts ............................................................
Inventories (Note 4) ..............................................................................
Deferred income taxes (Note 7) .............................................................
Other current assets .............................................................................
Total current assets ............................................................................
Property, plant and equipment
Land ...................................................................................................
Buildings .............................................................................................
Machinery and equipment ....................................................................
Construction in progress .......................................................................
Less accumulated depreciation .............................................................

Investments and other assets:
Investment securities (Note 3)................................................................
Investments in unconsolidated subsidiaries and affiliates .........................
Loans receivable from:
Unconsolidated subsidiaries and affiliates..............................................
Other.................................................................................................
Deferred income taxes (Note 7) .............................................................
Other ..................................................................................................
Allowance for doubtful accounts ............................................................

See Notes to consolidated financial statements.

32

KURARAY

2001

2000

2001

¥ 40,171¥ 13,869

14,687

26,033

118,444

96,025

89,102

774,395$

323,960

918

789

7,403

4,396

3,634

35,452

640

541

5,161

(689)

(696)

(5,556)

101,290

93,370816,855

75,54575,120609,234

5,355

3,761

43,185

2,606

1,140

21,016239,654

213,2931,932,694

24,34925,176

196,363

86,63586,213

698,669

357,405

351,695

2,882,298

7,897

4,356

63,686476,286

467,440

3,841,016(348,818)(339,097)(2,813,048)

127,468

128,343

1,027,968

71,39780,910575,782

2,755

2,687

22,218

5,616

5,345

45,290

1,326

1,293

10,694

6,323

7,196

50,992

59,24465,988477,773(1,304)(1,289)(10,516)

145,357

162,130

1,172,233¥ 512,479¥ 503,766$ 4,132,895

Thousands of
U.S. dollars (Note 1)

Millions of yen

2001

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:
Short-term bank loans (Note 5) ..............................................................
Current portion of long-term debt (Note 5) ..............................................
Notes and accounts payable:
Trade .................................................................................................
Unconsolidated subsidiaries and affiliates .............................................
Other.................................................................................................
Accrued income taxes (Note 7) ..............................................................
Deferred income taxes (Note 7) .............................................................
Accrued expenses and other .................................................................
Total current liabilities ........................................................................

¥

2000

8,807

¥

2001

3,805

$

71,024

20,2283,467

163,129

54,14751,257436,669

1,277

1,149

10,298

6,160

6,945

49,677

2,196

4,312

17,7102

21

16

17,417

16,636140,461

110,234

87,592888,984

67,527

94,225544,573

3,859

3,164

31,121

25,336Long-term liabilities:
Long-term debt (Note 5) .......................................................................
Deferred income taxes (Note 7) .............................................................
Accrued retirement benefits (Note 8) .....................................................
Other ..................................................................................................
Total long-term liabilities ....................................................................

22,164204,323

16,001

13,494129,040

112,723

133,047

909,057

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

53

372

427

88,95588,955717,379

87,147

87,147

702,798

111,622

111,151

900,177

Commitments and contingencies (Note 11)
Shareholders’ equity (Note 6):
Common stock with par value of ¥50 ($0.40) per share:
Authorized --- 700,000,000 shares
Issued and outstanding --- 382,863,603 shares ......................................
Additional paid-in capital ........................................................................
Retained earnings...............................................................................
Unrealized gain on revaluation of securities (Note 3)................................
Cumulative translation adjustments.......................................................
Treasury stock at cost ...........................................................................
Total shareholders’ equity ..................................................................

3,355

––

27,057(1,609)(4,496)(12,976)

289,470

282,757

2,334,435

(1)

(2)

(8)

289,469

282,755

2,334,427¥ 512,479¥ 503,766$ 4,132,895

See Notes to consolidated financial statements.

KURARAY

33

Consolidated Statements of Income
Kuraray Co., Ltd. and Consolidated Subsidiaries
Thousands of
U.S. dollars (Note 1)

Millions of yen

2001

2000

¥ 313,651
234,946
78,70558,774
19,931¥ 316,444
235,603
80,841
60,52020,321$ 2,529,444
1,894,726
634,718
473,984
160,734

3,659
127(2,377)(8,872)(7,596)3,014(86)(12,131)
7,800

3,774
83
(2,659)(335)(9,492)
1,192
493(6,944)
13,37729,5081,024(19,169)(71,548)(61,258)
24,306(694)(97,831)62,903

6,633(2,879)
3,754
(1)
4,045

9,461
(3,560)
5,901
(24)
7,452

53,492(23,218)
30,274(8)
32,621Years ended March 31, 2001 and 2000
Net sales ...................................................................................
Cost of sales (Note 10).....................................................................
(Gross profit)
Selling, general and administrative expenses (Notes 9 and 10) ..........................
(Operating income)
Other income (expenses):
Interest and dividend income ..............................................................
Equity in earnings of affiliates ..............................................................
Interest expenses .........................................................................
Restructuring charges......................................................................
Special provision for retirement benefits (Note 8) ..........................................
Gain on sales and appreciation of marketable securities ....................................
Other, net .................................................................................
(Income before income taxes) ..............................................................
Income taxes (Note 7)
Current ....................................................................................
Deferred ...................................................................................
Minority interest in net income of consolidated subsidiaries ............................
Net income ................................................................................
Net income per share:
Primary ...................................................................................
Fully diluted ...............................................................................

¥

¥

2001

$

Yen

¥

10.56
10.46

U.S. dollars (Note 1)

¥

20.00
19.42

$

0.09
0.08

See Notes to consolidated financial statements.

Consolidated Statements of Shareholders’ Equity
Kuraray Co., Ltd. and Consolidated Subsidiaries
Millions of yen
Commonstock

Additional
paid-in
capitalRetained
Earnings

Balance at March 31, 1999 ...........................................
Net income .........................................................
Conversion of convertible debentures ................................
Stock issued on exercise of warrants .................................
Cash dividends, ¥9.00 per share ......................................
Bonuses to directors and statutory auditors ...........................
Effect of changes in reporting entity ..................................
Translation adjustments..............................................
Balance at March 31, 2000 ..........................................
Net income .........................................................
Cash dividends, ¥9.00 per share .....................................
Bonuses to directors and statutory auditors...........................
Effect of changes in reporting entity ..................................
Change in unrealized gain on revaluationof securities (Note 3) ................................................
Translation adjustments .............................................
Balance at March 31, 2001 ...........................................

¥ 78,660¥ 74,225¥ 107,029
7,452

114
10,181

114
12,808¥ 88,955¥ 87,147

Balance at March 31, 2000 ..........................................
Net income .........................................................
Cash dividends, $0.07 per share .....................................
Bonuses to directors and statutory auditors ..........................
Effect of changes in reporting entity ..................................
Change in unrealized gain on revaluationof securities (Note 3) ................................................
Translation adjustments .............................................
Balance at March 31, 2001

$ 717,379$ 702,798

Years ended March 31, 2001 and 2000

Unrealized gain on
revaluation of
securities(Note 3)

Cumulativetranslation
adjustments

––

––

––

(4,496)(¥ 4,496)(3,301)(62)
33¥ 88,955¥ 87,147¥ 111,151
4,045(3,446)
(60)
(68)

3,355
¥ 111,622¥ 3,355

2,887(¥ 1,609)

Thousands of U.S. dollars (Note 1)

See Notes to consolidated financial statements.

34

KURARAY$ 896,379
32,621(27,790)
(485)
(548)

($ 36,258)

27,057$ 717,379$ 702,798$ 900,177$ 27,057

23,282($ 12,976)

Consolidated Statements of Cash Flows
Kuraray Co., Ltd. and Consolidated Subsidiaries
Thousands of
U.S. dollars (Note 1)

Millions of yen

Years ended March 31, 2001 and 2000

Cash flows from operating activities:
Net income ............................................................................................
Adjustments to reconcile net income to net cash provided
by operating activities --Depreciation and amortization ................................................................
Provision for accrued retirement benefits, net of payments ......................
Gain on sales of investment securities ....................................................
Gain on sales and appreciation of marketable securities ...........................
Exchange loss on loans receivable from subsidiaries................................
Increase in notes and accounts receivable...............................................
Decrease (increase) in inventories ..........................................................
Increase in notes and accounts payable ..................................................
Other, net ............................................................................................
Net cash provided by operating activities..........................................
Cash flows from investing activities:
Decrease (increase) in marketable securities...........................................
Acquisitions of property, plant and equipment .........................................
Payments for purchases of investment securities.....................................
Proceeds from sales of investment securities..........................................
Other, net ............................................................................................
Net cash provided by (used in) investing activities ............................
Cash flows from financing activities:
Decrease in short-term bank loans .........................................................
Proceeds from long-term debt ...............................................................
Repayments of long-term debt...............................................................
Proceeds from exercise of warrants.......................................................
Dividends paid ......................................................................................
Net cash (used in) provided by financing activities ............................

2001

2000

2001

¥ 4,045¥ 7,452$ 32,621

16,593

16,769133,815

3,280

9,488

26,452––(2,191)––(3,014)(1,192)(24,306)

––

2,559

––

(5,799)(143)(46,766)

1,213(6,203)

9,782

2,122

2,686

17,113(2,553)(4,159)(20,590)

15,88725,066

128,1212,667(2,498)21,508(17,583)(19,980)(141,798)(3,116)(29,327)(25,129)

30,891

13,474249,121

7,464(4,421)60,193

20,323(42,752)

163,895

(948)

(594)

(7,645)

1,550

7,028

12,500(7,604)(20,457)(61,323)––

20,364––(3,446)(3,301)(27,790)(10,448)3,040(84,258)

Effect of exchange rate changes on cash and cash equivalents .............

518

(553)

4,178

Effect of changes in reporting entities...................................................

22

151

177

Net increase (decrease) in cash and cash equivalents ...........................

26,302(15,048)

212,113

Cash and cash equivalents, beginning of period ...................................

13,86928,917

111,847

Cash and cash equivalents, end of period .............................................

¥ 40,171¥ 13,869$ 323,960

See Notes to consolidated financial statements.

KURARAY35

Notes to Consolidated Financial Statements
Kuraray Co., Ltd. and Consolidated Subsidiaries

Years ended March 31, 2001 and 2000

1. Basis of presenting consolidated financial statements
These consolidated financial statements are prepared in accordancewith the provisions set forth in the Japanese Securities and Exchange
Law and the related accounting regulations and in conformity withaccounting principles and practices generally accepted in Japan, which
are different in certain respects the application and disclosure
requirements of International Accounting Standards.
In preparing these 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. In addition, certain

notes included herein are not required under accounting principles andpractices generally accepted in Japan but are presented as additional
information.
The United States dollar amounts included herein are given solely forconvenience and are stated, as a matter of arithmetical computation
only, at the rate of ¥124=$1, the approximate exchange rate prevailingon March 31, 2001. The translations should not be construed as
representations that the Japanese yen amounts have been, could havebeen or could in the future be, converted into United States dollars at or
any other rate.

2. Significant accounting policies:(a) Principles of consolidation
These consolidated financial statements consist of Kuraray Co., Ltd. andits significant 38 subsidiaries (40 subsidiaries at March 31, 2000).
Hereinafter, the Company and its consolidated subsidiaries arecollectively referred to as the “Companies”.
In the case of a change in reporting entity, the consolidated financial
statements are not restated, but the effect of the change to retained
earnings at the beginning of the period is directly charged or credited toretained earnings during the period.
Investments in unconsolidated subsidiaries and 20%-50% owned
companies (“affiliates”), with minor exceptions, are accounted for using
the equity method.
The difference between the cost of investments and the underlying
net equity of investments in consolidated subsidiaries and affiliates
accounted for on an equity basis is allocated to identifiable assets basedon their fair values at the date of acquisition. Unallocated costs arecharged to income when incurred.
(b) Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments withoriginal maturities of three months or less, which can be withdrawn atleast the face amount at any time without penalty.
(c) Inventories
Inventories other than supplies are stated at cost principally determinedusing the weighted average method. Supplies are stated at costprincipally determined using the moving average method.
(d) Property, plant and equipment
Property, plant and equipment are stated at cost.
Depreciation is principally computed using the declining-balancemethod over the estimated useful lives of assets, except for buildings.
The depreciation method for buildings is principally computed using thestraight-line method.
Estimated useful lives of assets are principally as follows:
Buildings
31 to 50 years
Machinery and equipment
2 to 10 years
The Companies use machinery and facilities under financing leases
without transferring ownership and such leased assets are notcapitalized in the balance sheet in conformity with accounting principles
generally accepted in Japan.

36

KURARAY(e) Income taxes
Accrued income taxes are provided at the amount currently payable.
The Companies adopt the interperiod income tax allocation accounting,using the assets and liabilities method in which deferred tax assets andliabilities are recognized for the expected tax consequences of
temporary differences between the tax bases of assets and liabilities
and their reported amounts in the consolidated financial statements.
(f) Retirement benefits
Most of the Companies have unfunded lump-sum benefit plans andfunded contributory pension plans, generally covering all employees.
Under the terms of the Companies’ retirement plans, substantially all
employees are entitled to a lump-sum payment at the time ofretirement. The amount of the retirement benefits is, in general, basedon the length of service, basic salary at the time of retirement, andcause of retirement.
The contributory pension plans of the Company and its domestic
subsidiaries, which cover those employees who retire at age principally
60, or have served with those companies for more than 20 years andretire at age 50 or more, generally provide for pension payments for aperiod of ten years subsequent to retirement. The annual charge for thecurrent service cost of these plans is determined actuarially and fundedcurrently through outside trustees.
For the year ended March 31, 2001, in accordance with the new
accounting standard in Japan “Accounting Standard for Employees’
Retirement Benefits”, effective from April 1, 2000, a company isrequired to recognize a pension liability to cover the extent to which the
projected benefit obligation is in excess of plan assets at fair value,considering unrecognized items. The effect of adoption of the standard
was to decrease net income for the year ended March 31, 2001 by¥4,768 million ($38,452 thousand). The consolidated financial
statements in 2000 are not restated retroactively in accordance withaccounting practices followed in Japan.
For the year ended March 31, 2000, the liability for lump-sum
payments was principally stated at 68% based on the latest actuarial
computation of the amount which would be required if all eligible
employees voluntarily retired as of the balance sheet date. During theyear ended March 31, 2000, the Company changed its method of
accounting for past service liability related to the contributory pension
plan. Previously, past service liability was charged to income whencontributed. Under the new method, it was charged when incurred andwas recorded as provision for past service liability which was included in“Accrued retirement benefits.” This change in accounting method
resulted in recording of a “Special provision for retirement benefits” inthe amount of ¥9,492 million and reduced net income by ¥5,297 million.
Directors and statutory auditors are entitled, subject to shareholders’approval, to lump-sum payments under the unfunded retirement plan.
The accrued liabilities for their retirement benefits are, in general,
based upon amounts required by the Companies’ internal regulations.

(g) Foreign currency items
Effective April 1, 2000, the Companies adopted the amended“Accounting Standard for Foreign currency Transactions, etc”.
Under the new method, income and expenses in foreign currency
are translated into Japanese yen at exchange rates prevailing at thetransaction dates. Foreign currency assets and liabilities not covered byforward exchange contracts, including currency swap contracts, aretranslated into Japanese yen at the rates of the balance sheet date.
Foreign currency assets and liabilities, which are covered by forward
exchange contracts, including currency swap contracts, are translated
into Japanese yen at the contracted rates.
In preparing the consolidated financial statements, assets andliabilities of foreign subsidiaries are translated into Japanese yen at therates in effect at the balance sheet date and income and expenses aretranslated at the monthly average rate for the year then ended.
Translation adjustments resulting from this process are charged or
credited to “Shareholders’ equity” as cumulative translation
adjustments in the consolidated balance sheets.
The effect of adoption of this standard was to increase net income
for the year ended March 31, 2001 by ¥647 million ($5,218 thousand).
For the year ended March 31, 2000, long-term foreign currency
assets and liabilities not covered by forward exchange contracts,
including currency swap contracts, were translated into Japanese yenat the rates when acquired or incurred. Where these historicalexchange rates differed significantly from the rates in effect at thebalance sheet date, the rates in effect at the balance sheet date wereused to translate the long-term assets and liabilities. Income andexpenses in foreign currency were translated into Japanese yen at
exchange rates prevailing at the transaction dates.
(h) Research and development expenses
Expenses relating to research and development activities are charged
to income when incurred.
(i) Net income per share
The computation of primary net income per share is based on theweighted average number of shares outstanding during each financial
period. The computation of fully diluted net income per share is basedon the weighted average number of shares outstanding after
consideration of the effect of dilution of common stock equivalents.
(j) Allowance for doubtful accounts
The Companies provide for doubtful accounts principally at an amountcomputed based on the historical bad debt ratio during a certain
reference period plus the estimated uncollectible amount based on theanalysis of certain individual accounts.
(k) Marketable securities and investment securities
In accordance with the new accounting standard in Japan “AccountingStandard for Financial Instruments”, effective from April 1, 2000,
marketable securities and investment securities are classified into
three categories, i.e. held-to-maturity, trading or available-for-salesecurities. Trading securities are carried at fair values with unrealized
gains or losses to be included in income, and held-to-maturity securities

are carried at amortized cost. Available-for-sale securities are carried atfair value with unrealized gains or losses to be recorded as acomponent of shareholders’ equity, net of applicable taxes. Availablefor-sale securities, whose fair value is not readily determinable, arestated at cost except for debt securities which are stated at amortizedcost. Moreover, available-for-sale securities with maturity of one year orless and trading securities are classified in Investments and otherassets. At the beginning of the year ended March 31, 2001, adoption of
the standard caused reclassifications of securities between current
assets and non-current assets, the net effect of the reclassifications
was to increase securities included in current assets by ¥368 million($2,968 thousand), and decrease securities included in Investments
and other assets by the same amount as of April 1, 2000. For the year
ended March 31, 2000, marketable securities and investments
securities were principally stated at cost, determined using the moving
average method for each particular security. Classification of securities
in the balance sheet as of March 31, 2000 remained unchanged.

(l) Derivative financial instruments and hedging
Derivative financial instruments, which include foreign exchange
forward contracts, interest rate swap agreements, and currency swap
agreements, are used to offset the Companies’ risk of exposure tochanges in interest and currency exchange rates in respect of its
financial assets and liabilities, in accordance with the Companies
internal policies and procedures.
a. Derivatives
All derivatives are stated at fair value, except for derivatives that aredesignated as “hedging instruments”(see below).
b. Hedge accounting
The Companies adopt the method for hedging instruments deferring
any gain or loss over the period of the hedging contract together
with offsetting against the deferred loss or gain of the related
hedged items.
However, when a forward foreign exchange contract meets certain
conditions, account receivables and payables covered by thesecontracts are translated using the contract rate.
In addition, when an interest rate swap agreement meets certain
conditions, the net amount to be paid or received under theagreement is added to or deducted from the interest on the hedged
items.
Hedging instruments and hedged items
Hedging instruments:
Hedged items:
Forward foreign exchange contracts Loans receivable in foreign currency
Accounts receivable and payable in foreign currency
Future transactions in foreign currency
Currency swap agreements
Loans receivable in foreign currency
Interest rate swap agreements
Bonds and debentures
Short-term bank loans and long term debt
c. Hedging policy
The Companies use financial instruments to hedge market
fluctuation risks in accordance with their internal policies andprocedures.

KURARAY37

(m) Reclassifications
Certain reclassifications of previously reported amounts have been
made to conform with current classifications.

d. Assessment method of hedge effectiveness
The Companies evaluate the effectiveness of their hedging activities
by reference to the accumulated gains or losses on the hedging
instruments and the related hedged items from thecommencement of the hedges.

3. Securities:
The following is a summary of securities classified as trading, available-for-sale and held-to-maturity securities at March 31, 2001:
Trading securities at March 31, 2001
Book value (estimated fair value) .......................¥ 771million ($ 6,218 thousand)
Gross unrealized gains .................................¥ 300million ($ 2,419 thousand)Millions of yen
Available-for-sale securities
Cost

March 31, 2001
Equity securities..............................................
Bonds and debentures........................................
Other.........................................................

¥ 17,228
77,1981,000¥ 95,426

Grossunrealized gains

Grossunrealized losses¥ 8,814559–¥ 9,373¥ 2,680858
7¥ 3,545

Book value(estimated fair value)¥ 23,362
76,899993¥ 101,254

Held-to-maturity securities
March 31, 2001
Bonds and debentures........................................
Other.........................................................

Book value(carrying amount)¥ 4,649
1¥ 4,650Grossunrealized gains
¥
¥

–
–
–

Gross
unrealized losses¥(Estimated fair value)

16
–
16

¥

¥ 4,633
1¥ 4,634

Thousand of dollars
Available-for-sale securities
Cost

March 31, 2001
Equity securities..............................................
Bonds and debentures ........................................
Other.........................................................

$ 138,935
622,565
8,065$ 769,565

Grossunrealized gains

Grossunrealized losses$ 71,081
4,508–$ 75,589$ 21,613
6,920
56$ 28,589

Book value(estimated fair value)$ 188,403
620,153
8,009$ 816,565

Held-to-maturity securities
March 31, 2001
Bonds and debentures........................................
Other.........................................................

Book value(carrying amount)$ 37,492
8$ 37,500

Grossunrealized gains
$

–
–
–

Gross
unrealized losses(Estimated fair value)

$ 129
–
$ 129

$ 37,363
8$ 37,371$
At March 31, 2000, the book value and market value of marketable securities and investment securities, as to which market value information isavailable, were as follows:
Millions of yen
Book value(carrying amount)Marketable securities
Equity securities ...................................................................
Bonds and debentures .............................................................
Investment securities
Equity securities....................................................................
Bonds and debentures .............................................................

Market value

Unrealized gain(loss)

537
4,339

¥ 1,333
4,309¥

18,95627,434¥ 51,266

36,701
27,663¥ 70,006

17,745229¥ 18,740

¥

796
(30)

4. Inventories:
Inventories at March 31, 2001 and 2000 consisted of the following:

Finished products.....................................................................................
Semi - finished products and work in process..........................................................
Raw materials and supplies...........................................................................

Millions of yen
2001
2000
¥ 53,474¥ 51,950
11,371
12,531
10,700
10,639¥ 75,545

38

KURARAY¥ 75,120

Thousands of
U.S. dollars
2001$ 431,242
91,70286,290$ 609,234

5. Short-term bank loans and long-term debt:
Short-term bank loans are generally represented by 365-day notes with interest rates principally of 3.8% p.a. at March 31, 2001.
Long-term debt consisted of the following:
Millions of yen

Thousands of
U.S. dollars

2001

2001

¥15,002
15,0005,000
13,957
9,423
14,873
3,000
500
2,000
1,000
500
500

$120,984
120,968
40,323
112,556
75,992
119,944
24,194
4,032
16,129
8,064
4,032
4,032

1,000
600
3,000
2,000
400

8,064
4,839
24,194
16,1293,226

87,755(20,228)

707,702(163,129)¥ 67,527$ 544,573

Loans principally from banks and insurance companies with interest rates
ranging from 0.71% p.a. to 6.61% p.a. maturing serially until 2022
Unsecured ..........................................................................................................
1.8% yen unsecured bonds due 2003 .................................................................................
1.8% yen unsecured bonds due 2003 .................................................................................
1.8% yen convertible sinking fund debentures due 2003 ..............................................................
1.0% yen convertible debentures due 2003 ...........................................................................
2.2% yen convertible debentures due 2002 ...........................................................................
Floating to fixed rate yen Euro medium term notes due March 4, 2003 ................................................
2.27% yen Euro medium term notes due January 30, 2004 ...........................................................
2.00% yen Euro medium term notes due February 7, 2003 ...........................................................
Fixed and floating rate yen Euro medium term notes due March 27, 2002 .............................................
Step-up rate yen Euro medium term notes due April 10, 2007 .........................................................
Floating rate yen Euro medium term notes due April 22, 2002 .........................................................
Floating rate yen Euro medium term notes due April 25, 2002 .........................................................
Step-up rate yen Euro medium term notes due June 11, 2007.........................................................
Floating to fixed rate yen Euro medium term notes due June 18, 2004 ................................................
Floating rate yen Euro medium term notes due June 24, 2002 ........................................................
Floating rate yen Euro medium term notes due June 25, 2002 ........................................................
Current portion ......................................................................................................

The 1.8% yen convertible sinking fund debentures due March 31,
2003, which were issued in Japan in November 1987, can bepurchased at any time in their entirety at the option of the Company or
may be redeemed, at prices declining from 106% to 100% of theirprincipal amount from April 1, 1996 until 2003. The debentures areconvertible into common stock of the Company until March 28, 2003
at the conversion price of ¥1,703.4 ($13.74) per share.
For the 1.8% yen convertible sinking fund debentures, theCompany is required to contribute to a sinking fund, the amount of
which is reduced by the amount of debentures converted orredeemed, ¥1,500 million ($12,097 thousand) every March 31 for theconsecutive 6 years ending March 31, 2002. At March 31, 2001,
investment securities with a net book value of ¥10,642 million($85,823 thousand), for which the market value approximates to theamount of the sinking fund requirements were deposited with adesignated bank instead of the sinking fund payment.
The indentures under which the 1.8% yen convertible sinking funddebentures due 2003 were issued placing a limitation on the paymentof cash dividends, relates, in part, to earnings of the Company. At
March 31, 2001, the amount of retained earnings available for thepayment of dividends was ¥126,542 million ($1,020,500 thousand)under a provision of these indentures.
The 1.0% yen convertible debentures due March 31, 2003, whichwere issued in Japan in January 1994, can be purchased at any time intheir entirety at the option of the Company or may be redeemed, atprices declining from 103% to 100% of their principal amount from
April 1, 1999 until 2003. The debentures are convertible into common
stock of the Company until March 28, 2003 at the conversion price of¥1,067.3 ($8.61) per share.
The indentures under which the 1.0% yen convertible debenturesdue 2003 were issued placing a limitation on the payment of cash
dividends, which relates, in part, to earnings of the Company. At
March 31, 2001, the amount of retained earnings available for thepayment of dividends was ¥91,899 million ($741,121 thousand) undera provision of these indentures.
The 2.2% yen convertible debentures due March 29, 2002, whichwere issued in Japan in February 1995, can be purchased at any timein their entirety at the option of the Company or may be redeemed, atprices declining from 102% to 100% of their principal amount from
April 1, 1999 until 2002. The debentures are convertible into common
stock of the Company until March 28, 2002 at the conversion price of¥1,036.0 ($8.35) per share.
The indentures under which the 2.2% yen convertible debenturesdue 2002 were issued placing a limitation on the payment of cash
dividends, related, in part, to earnings of the Company. At March 31,
2001, the amount of retained earnings available for the payment ofdividends was ¥92,499 million ($745,960 thousand) under a provisionof these indentures.
The conversion prices of the above sinking fund debentures andother debentures are subject to adjustment under certain
circumstances, including stock splits pursuant to the relevant
agreements.
The number of shares of common stock required for conversion of
the above sinking fund debentures and other debentures outstandingat March 31, 2001 at the current conversion prices would have been
31,386 thousand.

KURARAY

39

The rates of the floating to fixed rate yen Euro medium term notes due
March 4, 2003, are as follows:
January 23, 1997 ~ March 3, 1997
Interpolated JPY LIBOR – 0.15%
March 4, 1997 ~ Due date
2.00% per annum

The rates of the floating rate yen Euro medium term notes due June24, 2002, are as follows:
May 9, 1997 ~ June 23, 1997
2 month JPY LIBOR + 0.50%
June 24, 1997 ~ Due date
6 month JPY LIBOR + 0.50%

The rates of the fixed and floating rate yen Euro medium term notes
due March 27, 2002, are as follows:
February 10, 1997 ~ March 26, 1997
1.00%
March 27, 1997 ~ March 26, 1998
4.85% – 10 YEAR JPY SWAP RATE (Not less than 0%)
March 27, 1998 ~ March 26, 1999
4.85% – 10 YEAR JPY SWAP RATE (Not less than 0%)
March 27, 1999 ~ March 26, 2000
4.85% – 7 YEAR JPY SWAP RATE (Not less than 0%)
March 27, 2000 ~ March 26, 2001
4.85% – 5 YEAR JPY SWAP RATE (Not less than 0%)
March 27, 2001 ~ Due date
4.85% – 3 YEAR JPY SWAP RATE (Not less than 0%)

The rates of the floating rate yen Euro medium term notes due June25, 2002, are as follows:
May 14, 1997 ~ June 24, 1997
Interpolated JPY LIBOR + 0.30%
June 25, 1997 ~ Due date
3 month JPY LIBOR + 0.30%

The rates of the step-up rate yen Euro medium term notes due April
10, 2007, are as follows:
February 25, 1997 ~ April 9, 2002
2.50% per annum
April 10, 2002 ~ Due date
3.00% per annum
The rates of the floating rate yen Euro medium term notes due April
22, 2002, are as follows:
March 10, 1997 ~ April 21, 1997
1 month JPY LIBOR + 0.40%
April 22, 1997 ~ Due date
6 month JPY LIBOR + 0.40%
The rates of the floating rate yen Euro medium term notes due April
25, 2002, are as follows:
March 13, 1997 ~ April 24, 1997
1 month JPY LIBOR + 0.41%
April 25, 1997 ~ Due date
6 month JPY LIBOR + 0.41%
The rates of the step-up rate yen Euro medium term notes due June11, 2007, are as follows:
April 24, 1997 ~ June 10, 2002
2.20% per annum
June 11, 2002 ~ Due date
2.80% per annum
The rates of the floating to fixed rate yen Euro medium term notes due
June 18, 2004, are as follows:
May 2, 1997 ~ June 17, 1997
Interpolated JPY LIBOR + 0.125%
June 18, 1997 ~ June 17, 2002
6 month JPY LIBOR + 0.20%
June 18, 2002 ~ Due date
2.80% per annum

40

KURARAY

The annual maturities of long-term debt outstanding at March 31, 2001
for the respective years ending March 31 were as follows:

Millions of yen

Thousands of
U.S. dollars

2002........................

¥20,228$163,129

2003........................

35,503286,315

2004........................

24,202

195,1782005........................

5,312

42,8382006........................

1,107

8,927

Thereafter ...............

1,403

11,315¥87,755$707,702

6. Shareholders’ equity:
The Japanese Commercial Code provides that a portion of retained
earnings equal to at least 10% of cash distributions being paid out bymeans of appropriation of retained earnings with respect to eachfinancial period be appropriated as a legal reserve until such reserve
equals 25% of the common stock account.
This reserve is not available for dividends but may be capitalized byresolution of the Board of Directors or used to reduce a deficit byresolution of the shareholders. The legal reserve as of March 31, 2001
amounted to ¥6,392 million ($51,548 thousand).
Under the Code, at least 50% of the issue price of new shares,
with a minimum of the par value thereof, is required to be accounted
for as common stock. The remainder is accounted for as additional
paid-in capital.

7. Income taxes:
The companies are subject to several taxes based on income which, inaggregate, resulted in a normal cumulative tax rate of approximately
41.7% in Japan for the periods ended March 31, 2001 and 2000.
Reconciliation of the difference between the normal cumulative tax
rate and the income tax rate in the accompanying consolidated
statement of income is as follows:

Normal cumulative tax rate ................................

2001
41.7%

2000
41.7%

Largely loss by consolidated subsidiaries .......
Income tax rate per statement of income ..........

6.4
48.1%

2.4
44.1%

The significant components of deferred tax assets and liabilities at
March 31, 2001 are as follows:’(1) Current:
Thousands of
U.S. dollars

Millions of yen

2001

2000

Deferred tax assets
Intercompany profits....................... ¥ 1,500
Accrued enterprise taxes
and other taxes..............................
351
Accrued expenses ..........................
1,276
Other .............................................
2,253
Total deferred tax assets..................
5,380
Total deferred tax liabilities...............
25
Net deferred tax assets..................... ¥ 5,355
Deferred tax liabilities
Other ..............................................
Net deferred tax liabilities .................

2001¥ 1,397$ 12,097

576
826
1,032
3,831
70
¥ 3,761

2,831
10,29018,16943,387202$ 43,185

¥

2

¥

21 $

16

¥

2

¥

21 $

16

’(2) Non-current:
Thousands of
U.S. dollars

Millions of yen

2001
Deferred tax assets
Accrued retirement benefits ............. ¥ 7,778
Other ...............................................
2,654
Total deferred tax assets .................. 10,432

2000

2001

¥ 6,792 $ 62,726
1,858
21,4038,650
84,129Deferred tax liabilities
Deferred gain on sales of fixed
assets to public sector.....................
Special depreciation .........................

1,419
286

Unrealized gain on revaluation
2,404
of securities ....................................
–
Other ...............................................
4,109
Total deferred tax liabilities ...............
Net deferred tax assets ..................... ¥ 6,323

896
248

11,4442.306–
19,387310–
1,454
33,137¥ 7,196 $ 50,992

Deferred tax liabilities
Depreciation ..................................... ¥ 3,859
Net deferred tax liabilities .................. ¥ 3,859¥ 3,164 $ 31,121¥ 3,164 $ 31,121

Deferred tax assets and liabilities of the consolidated subsidiaries indifferent tax jurisdictions are presented without offset in accordancewith Japanese accounting practice.

8. Retirement benefits:
Charges for the year ended March 31, 2000 amounted to ¥12,589
million, which included a special provision for retirement benefits by
the Company amounting to ¥9,492 million.
The following tables set forth the changes in benefit obligation,plan assets and funded status of the Companies at March 31, 2001.

Benefit obligation at end of year
Fair value of plan assets at end of year
Funded status:
Benefit obligation in excess of plan assets
Unrecognized prior service cost
Unrecognized actuarial loss
Accrued pension liability recognized in the
consolidation balance sheets

Millions of yen

Thousands of
U.S. dollars

2001(¥ 48,153)
21,9582001($ 388,331)
177,081(26,195)
21
1,829(211,250)
169
14,750(¥ 24,345)($ 196,331)

Accrued retirement benefits for Directors amounting to ¥991 million($7,992 thousand) are excluded from the above schedule.

KURARAY

41

Retirement and pension costs of the Companies for the year ended
March 31, 2001 were as follows.
Millions of yen

Service cost ..............................................
Interest cost .............................................
Expected return on plan assets .................
Amortization:
Transition obligation
at date of adoption ................................
Prior service cost .....................................
Actuarial losses .......................................
Net periodic benefit costs .........................

Thousands of
U.S. dollars

2001
2001
¥ 2,101 $ 16,944
1.315
10,604(639)(5,153)

Assumptions used in the accounting for the defined benefit plans for theyear ended March 31, 2001 were as follows:
Discount rate....................................
Long-term rate of return on fund assets .........
Amortization period for transition charges
at date of adoption.............................
Amortization period for prior service cost ........
Amortization period for actuarial losses ..........

7,504
60,516
5
40
(3)
(24)
¥ 10,283 $ 82,927

mainly 3.0%
mainly 4.0%
1 yearmainly 15 years(straight-line method)
mainly 15 years(straight-line method)

9. Selling, general and administrative expenses:
Major components of selling, general and administrative expenses were as follows:
Millions of yen

2001
Account
Freight and storage.................... ¥ 12,469
Research and development ...........
10,937
Salaries and bonuses..................
15,630Thousands of
U.S. dollars

2001
2000
¥12,574 $ 100,556
88,202
10,806
16,990 126,048

10. Research and development expenses:
Total research and development expenses for the years ended March 31,
2001 and 2000 amounted to ¥12,251 million ($98,798 thousand) and¥12,097 million, respectively.

11. Commitments and contingencies:
The companies were contingently liable with respect to discounted
trade notes receivable. The amounts of notes discounted with recourseat banks at March 31, 2001 and 2000 were ¥1 million ($8 thousand) and¥16 million, respectively.
The Companies were contingently liable for guarantees, mainly forbank loans of unconsolidated subsidiaries, affiliates, and others, of ¥854
million ($6,887 thousand) and ¥944 million at March 31, 2001 and 2000,
respectively.
The amount of guarantees includes that of letters of commitments ofguarantees, letters of awareness, and other similar acts.

12. Leases:(a) Financing Leases
Lease transactions as lessee:
Payment of fees for financing leases, whose ownership of the leased
assets is not transferred to the lessee and which were not required tobe capitalized for the years ended March 31, 2001 and 2000, were ¥480
million ($3,871 thousand) and ¥533 million, respectively. Future lease
payments, including amounts representing interest were as follows:
Millions of yen

Due within one year...................
Due later ..............................

2001
¥ 414
553
¥ 967

2000
¥ 485
623
¥ 1,108

AccumulatedYears ended March 31, 2001 Cost
depreciation¥ 1,178
Machinery and equipment ... ¥ 2,145

Years ended March 31, 2000
Machinery and equipment ............
Other .................................

Net¥ 1,1080¥ 1,108

Lease transactions as lessor are immaterial.

Thousands of
U.S. dollars

2001$ 3,3394,459$ 7,798

The leased assets were as follows:
Thousands of
U.S. dollars

Millions of yen

Millions of yen

Accumulated
depreciation¥ 1,226¥ 2,334
5
5¥ 2,339¥ 1,231
Cost

Net

Net

¥ 967

$ 7,798(b) Operating Leases
Future lease payments under non-cancellable operating leases were as
follows:
Millions of yen

Due within one year...................
Due later ..............................

2001
¥ 77
145
¥ 222

2000
¥ 71
48
¥ 119

Thousands of
U.S. dollars

2001
$ 621
1,169
$ 1,790

13. Derivative Financial Instruments:
Derivative financial instruments are utilized by the Companies principally
to reduce interest rate and foreign exchange risks. The Companies haveestablished a control environment which includes policies andprocedures for risk assessment and for the approval, reporting andmonitoring of transactions involving derivative financial instruments.

42

KURARAY

The Companies do not hold or issue derivative financial instruments for
trading purposes.
At March 31, 2001 and 2000, the forward foreign exchange contracts
outstanding were as follows:Millions of yen

2001
Notional
amountForward foreign exchange contracts:
Foreign currency sales ............................................................. ¥Foreign currency purchases........................................................ ¥

–
–

2000

Market
value
¥
¥

–
–

Unrealizedgain(loss)
¥
¥

–
–

Notional
amountMarketvalue

Unrealizedgain(loss)¥ 1,763¥ 867¥ 1,765
¥ 863

(¥ 2)
(¥ 4)

The amounts exclude contracts entered into in order to hedge receivables and payables denominated in foreign currencies, which have been translated
and reflected at the corresponding contracted rates in the accompanying consolidated balance sheets at March 31, 2001.
At March 31, 2001 and 2000, outstanding interest rate swap agreements were as follows:
Thousands of
U.S. dollars

Millions of yen

2001

2000

Notional
amountMarketvalue

Unrealizedgain(loss)

Interest rate swap agreements:
Fixed-rate into variable-rate obligation .......... ¥ 1,700
1,000
Variable-rate into fixed-rate obligation ..........
–
Variable-rate into variable-rate obligation .......
¥ 2,700

¥ 32
(16)
–
¥ 16

2001

Notional
amountMarketvalue

Unrealizedgain(loss)

Notional
amountMarketvalue

Unrealizedgain(loss)¥ 32 ¥ 27,900(16) 26,028–
10,900¥ 16 ¥ 64,828

¥ 370
(598)
126
(¥ 102)

¥ 370
(598)
126
(¥ 102)$ 13,710
8,064–$ 21,774

$ 258
(129)
–
$ 129

$ 258
(129)
–
$129

At March 31, 2001, the amounts exclude certain swap agreements under which the net amount to be paid or received is added or deducted from theinterest on the hedged item.

14. Segment information:
The Companies operate principally within four industrial segments: fibers and textiles; chemical products; man-made leather, nonwoven fabrics andfastening materials; and diversified businesses.
A summary of net sales and operating income and identifiable assets, capital expenditure and depreciation and amortization by industrial segment
for the years ended March 31, 2001 and 2000 were as follows:
Net sales and Operating income

Thousands of
U.S. dollars

Millions of yen

Year ended March 31, 2001
Fibers and textiles.................
Chemical products ...............
Man-made leather, nonwoven
fabrics and fastening materials ...
Diversified businesses ...........
Total ...........................
Eliminated on consolidation.......
Consolidated total .............
Year ended March 31, 2000
Fibers and textiles ................
Chemical products ...............
Man-made leather, nonwoven
fabrics and fastening materials ...
Diversified businesses ...........
Total ...........................
Eliminated on consolidation.......
Consolidated total .............

Net sales to
Net sales
outside customers intersegment

Net sales

Net sales to
Operatingincome outside customers

Net salesintersegment¥ 90,822
151,007

¥

858
2,091

¥ 91,680
153,098¥ 1,720 $ 732,436
12,7151,217,798$

31,64140,181
313,651–¥ 313,651

239
15,85819,046(19,046)¥–

31,88056,039332,697(19,046)¥ 313,651

2,028
255,1703,359
324,040
19,822
2,529,444
109–¥ 19,931 $ 2,529,444¥ 98,088
144,435

¥

1,817
2,592

¥ 99,905
147,027¥ 2,769
12,16033,29040,631
316,444–¥ 316,444

338
18,63623,383(23,383)¥–

33,62859,267
339,827(23,383)¥ 316,444

2,402
3,629
20,960(639)¥ 20,321

Net sales

Operatingincome6,919 $ 739,355
16,863 1,234,661$ 13,871
102,540

1,928
257,098
127,887
451,927
153,597 2,683,041(153,597)(153,597)$– $ 2,529,444

16,35527,089159,855879$ 160,734

KURARAY43

Identifiable assets, Capital expenditure and Depreciation and amortization
Thousands of
U.S. dollars

Millions of yen

Year ended March 31, 2001
Fibers and textiles .................................
Chemical products ................................
Man-made leather, nonwoven
fabrics and fastening materials ...................
Diversified businesses ............................
Total ............................................
Eliminated on consolidation and corporate .........
Consolidated total ..............................
Year ended March 31, 2000
Fibers and textiles .................................
Chemical products ................................
Man-made leather, nonwoven
fabrics and fastening materials ...................
Diversified businesses ............................
Total ............................................
Eliminated on consolidation and corporate .........
Consolidated total ..............................

Identifiable
assetsCapitalexpenditure

Depreciation andamortization¥ 73,841
162,677¥ 2,722
9,439¥

35,23158,304330,053
182,426¥ 512,479

1,556
2,097
15,814–¥ 15,814

2,241
1,530
16,593–¥ 16,593¥ 78,511
147,081¥ 2,965
9,529¥ 3,406
9,327

36,83058,278
320,700
183,066¥ 503,766

1,524
5,746
19,764–¥ 19,764

2,503
1,533
16,769–¥ 16,769

3,246
9,576

Identifiable
assetsCapitalexpenditure

Depreciation andamortization

595,492
1,311,911$ 21,952
76,121$ 26,177
77,226284,121470,194
2,661,718
1,471,177$ 4,132,895

12,54816,911
127,532–$ 127,532

18,073
12,339133,815–$ 133,815$

A summary of net sales, operating income and identifiable assets by geographic segments for the years ended March 31, 2001 and 2000 wereas follows:
Millions of yen

Net salesintersegment

Net sales

OperatingincomeIdentifiable
AssetsYear ended March 31, 2001
Domestic (inside Japan) ............................ ¥ 276,113
Outside Japan ......................................
37,538
Total ............................................
313,651
Eliminated on consolidation and corporate ..........
–
Consolidated total............................... ¥ 313,651¥ 20,231
3,831
24,062(24,062)¥–¥ 296,344
41,369337,713(24,062)¥ 313,651¥ 17,674
2,108
19,782149¥ 19,931¥ 278,770
55,300334,070
178,409¥ 512,479

Year ended March 31, 2000
Domestic (inside Japan)............................. ¥ 283,491
Outside Japan ......................................
32,953
Total ............................................
316,444
Eliminated on consolidation and corporate ..........
–
Consolidated total............................... ¥ 316,444¥ 20,436
3,818
24,254(24,254)¥–¥ 303,927
36,771
340,698(24,254)¥ 316,444¥ 17,862
2,580
20,442(121)¥ 20,321¥ 276,542
47,462
324,004
179,762¥ 503,766

Net sales tooutside customers

Thousands of U.S. dollars

Net sales tooutside customers
Year ended March 31, 2001
Domestic (inside Japan) ............................ $ 2,226,718
Outside Japan ......................................
302,726
Total ............................................ 2,529,444
Eliminated on consolidation and corporate ..........
–
Consolidated total............................... $ 2,529,444

Net salesintersegment

Net sales

OperatingincomeIdentifiable
Assets$163,153
30,895
194,048(194,048)$–$ 2,389,871
333,6212,723,492(194,048)$ 2,529,444$ 142,532
17,000159,532
1,202$ 160,734$ 2,248,145
445,968
2,694,113
1,438,782$ 4,132,895

Foreign sales consisting of export sales of the Company and its domestic consolidated subsidiaries and the sales of foreign consolidated subsidiaries
for the years ended March 31, 2001 and 2000 totaled ¥86,325 million ($696,169 thousand) and ¥82,192 million, respectively, and accounted for 28%
and 26% of consolidated net sales, respectively.

44

KURARAY15. Subsequent events:
The Japanese Commercial Code provides that all appropriations ofretained earnings, except interim cash dividends, must be approved atan ordinary general meeting of shareholders. In accordance withcustomary practice in Japan, the appropriation of retained earnings is not
accrued in the financial statements for the year to which it relates but isrecorded in the subsequent accounting year after shareholder approvalhas been obtained. The following appropriations of retained earnings of
the Company as of March 31, 2001 were approved by the shareholders
on June 28, 2001.

Millions of yen

Thousands of
U.S. dollars

Cash dividends, ¥4.50($0.04) per share ........... ¥ 1,723
Transfer to legal reserve ..........................
178
Bonuses to directors and statutory auditors .......
55$ 13,895
1,435
444

The above year-end cash dividends per share and interim cash dividendsof ¥4.50 ($0.04) per share paid in December 2000 made a total annual
cash dividend of ¥9.00 ($0.07) per share.

KURARAY

45

Report of Independent Accountants
Kuraray Co., Ltd. and Consolidated Subsidiaries

PricewaterhouseCoopers
Nihon Seimei Imabashi Bldg.,
7th Floor 3-1-7, Imabashi,
Chuo-ku, Osaka 541-8582,
Japan

June 28, 2001
To the Board of Directors and Shareholdersof Kuraray Co., Ltd.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of
shareholders equity and of cash flows present fairly, in all material respects, the financial position of Kuraray Co., Ltd. andits consolidated subsidiaries at March 31, 2001 and 2000, and the results of their operations and their cash flows for the year
then ended in conformity with accounting principles generally accepted in Japan. These financial statements are theresponsibility of the Company s management. Our responsibility is to express an opinion on these financial statements basedon our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in Japan
which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principles used and significant estimates made bymanagement, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for the opinion expressed above.
As discussed in Notes 2 (f), (g), (j), (k) and (l) to the financial statements, the Company and its consolidated subsidiaries havechanged their accounting method for employees retirement benefits, foreign currency translation and financial instruments
including hedges and valuation of receivables and securities as they have adopted the new relevant Japanese accounting
standards during the year ended March 31, 2001.
As discussed in Notes 2(f) and (g) to the financial statements, the Company changed its amortization method for past service
liability related to the contributory pension plan and the method of accounting for foreign translation adjustments during theyear ended March 31, 2000.
The amounts expressed in U.S. dollars, provided solely for the convenience of reader, have been translated on the basis set
forth in Note 1 to the accompanying financial statements.

Notice to readers
The accompanying financial statements are not intended to present the financial position and results of operations and cash flows inaccordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan. The standards,
procedures and practices to audit such financial statements are those generally accepted and applied in Japan.

46

KURARAYCorporate Data

Kuraray Co., Ltd.

Transfer Agent

Established: June 24, 1926

The Sumitomo Trust and Banking Co., Ltd.

Capital : ¥88,955 million

Stock Transfer Agency Department

Shares : Authorized
Issued700,000,000 shares

4-5-33, Kitahama, Chuo-ku, Osaka 540-8639, Japan

382,863,603 shares

TEL. 81-6-6833-4700

Number of Shareholders: 26,836(as of March 31, 2001)

Principal Shareholders

Offices, Laboratories, Plants
Head Offices: Osaka, Tokyo

Principal
Shareholders

Offices: Nagoya, Fukui, Fukuoka, Sapporo, Sendai

Number of
Shares Held(thousand)

Percentage ofShares HeldLaboratories: Kurashiki, Tsukuba
Plants: Kurashiki, Saijo, Okayama, Nakajo, Kashima

Share Price Movement
(¥)
2,000

Japan Trustee Services
Bank, Ltd.(Trust Account)

30,922

8.08%

The Mitsubishi Trust andBanking Corporation(Trust Account)

22,861

5.97%

Nippon Life Insurance Co.

12,737

3.33%

The Industrial Bank ofJapan, Ltd.

12,616

3.30%

The Toyo Trust andBanking Co., Ltd.
(Trust Account)

9,655

2.52%

Nippon Life Insurance Co.
(Separate Account)

8,798

2.30%

The Meiji Mutual Life
Insurance Co.

8,066

2.11%

The Dai-ichi Mutual Life
Insurance Co.

7,652

2.00%

The Dai-ichi Mutual Life
Insurance Co.
(Separate Account)

7,371

1.93%

The Fuji Bank, Ltd.

6,984

1.82%

High
Low

1,500
1,240

1,245

1,146
1,010

1,100

1,058

1,000

1,038

1,068

1,050
968
895

1,002
870

1,110

1,130
930

880

1,011
903

906

931

893

850
742

500

0

2000/4

5

6

7

8

9

10

11

12

2001/1

2

3

Share prices according to the market price on the Tokyo Stock Exchange.

KURARAY47

Head Offices
Osaka: Shin-Hankyu Bldg., 1-12-39, Umeda, Kita-ku,
Osaka 530-8611, Japan
TEL. 81-6-6348-2111 FAX. 81-6-6348-2165
Tokyo: Kuraray Nihonbashi Bldg., 3-1-6, Nihonbashi,
Chuo-ku, Tokyo 103-8254, Japan
TEL. 81-3-3277-3111 FAX. 81-3-3277-3295

Printed on recycled paper in Japan.