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KURARAY CO., LTD.
ANNUAL REPORT 2002

ANNUAL REPORT 2002
For the year ended March 31, 2002

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FINANCIAL HIGHLIGHTS
Kuraray Co., Ltd. and Consolidated Subsidiaries

Years ended March 31

Net sales
Operating income
Net income
Capital expenditure
Depreciation and amortization
Gross cash flow
Total research anddevelopment expenses
Total assets
Total shareholders’ equity
Amounts per share:
Net income
Primary
Fully diluted
Cash dividends applicable to period
Total shareholders’ equity
Financial ratios:
Equity ratio (%)
Return on equity (%)
Return on assets (%)
Payout ratio (%)
Number of employees

Millions of yen

Thousands of
U.S. dollars

2002

2001

2000

1999

1998

2002

¥305,862
18,9582,866
50,716
16,05618,922¥313,651
19,931
4,045
15,814
16,593
20,638¥316,444
20,321
7,452
19,764
16,76924,221¥336,466
27,14813,17133,497
15,55728,728¥347,643
28,898
13,96220,806
14,61528,577$2,299,714
142,541
21,549381,325
120,723
142,272

12,131
487,432
290,643

12,251
512,479
289,469

12,097503,766
282,755

13,429487,991
259,90913,707
478,861
233,494

91,211
3,664,902
2,185,286

Yen

U.S. dollars¥ 40.4637.68
9.00
658.99

$0.06
0.06
0.07
5.71

¥

7.49
7.45
9.00
759.25

59.6%
1.0
3.8
120.2
7,115

¥ 10.5610.46
9.00
756.07¥ 20.00
19.42
9.00
738.53

56.5%
1.4
3.9
85.2
7,121

56.1%
2.7
4.1
45.4
7,433

¥ 36.83
34.56
9.00
714.21

53.3%
5.3
5.6
24.5
6,823

48.8%
6.3
5.8
22.2
7,809

Notes: The United States dollar amounts represent translation of Japanese yen at the rate of ¥133=$1.

CONTENTS
1

To Our Shareholders

2

An Interview with the Management

8

Interview with President of Poval Company

10Interview with President of Eval Company

12

At a Glance

14

Review of Operations

15

Chemical Products

18

Fibers and Textiles

20

Man-Made Leather, Non-Woven Fabrics
and Fastening Materials

22

Diversified Businesses

24

Research and Development

26

Caring for the Environment

28

Financial Section

49

Consolidated Companies

50

History51

Directors and Corporate Auditors

52

Investor Information

Forward-Looking Statements
This annual report contains various forward-looking statements, which are
based on the current expectations and assumptions of future events. All figuresand statements with respect to the future performance, projections andbusiness plans of Kuraray and its Group companies constitute forward-looking
statements. Although Kuraray believes that its expectations and assumptions
are reasonable, actual results and trends of Kuraray’s performance could differ
materially from those expressed or implied by such figures or statements due torisks and uncertainties in the future business circumstances. The factors that
may cause such difference include, without limitation: (1) general market andeconomic conditions in Asia including Japan, the U.S., Europe and otherregions; (2) fluctuations of currency exchange rates, especially between theJapanese yen and the U.S. dollar and other foreign currencies; (3) changes in
raw material and fuel costs; (4) industrial competition and price fluctuations inJapan and international markets; (5) advances or delays in the construction of
new plants and production lines; (6) successful development of new products
and technologies; and (7) changes in laws and regulations (including tax andenvironmental) and legal proceedings.

In this annual report, italicized product names are registered trademarks of Kuraray Co., Ltd.
The years stated in this document’s graphs and tables refer to the year ended March 31, not the fiscal year.

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TO OUR SHAREHOLDERSHIROTO MATSUO, Chairman

HIROTO MATSUO, Chairman

YASUAKI WAKUI, Presidentof this strategy is that of an eco-friendly enterprise withunique technology.
The Company took initial steps in a number of areas
during fiscal 2001, in which the above strategy was inaugurated. For instance, Kuraray has acquired other firms tofurther strengthen its polyvinyl alcohol (PVA)-related businesses, and has split off subsidiaries to heighten theagility of its medical business, which handles many
downstream products. In addition, Kuraray implemented
an in-house company system in April 2002, chiefly to promote flexible response to changes in market conditions.
Through these measures and by maximizing the effect of
cost reductions, the Company intends to maintain fiscal
2001 levels and achieve growth in revenues and profits inthe fiscal year ending March 31, 2003. Management
objectives under the “G-21” plan include improving returnon assets (ROA) to over 7% by the fiscal year ending
March 31, 2005. As we make unflagging efforts to attainthese goals, we ask our shareholders for their continued
understanding and support.
June 2002

YASUAKI WAKUI, President

KURARAY

Fiscal 2001, ended March 31, 2002, was extremely
important for Kuraray, as it marked the first year of theCompany’s “G-21” five-year medium-term business plan.
Revenues and profits turned downward in fiscal 1999.
The Company strove to hold the line at the fiscal 2000
level, and to improve performance beginning in fiscal
2001. However, conditions in the Japanese economy
remain unfavorable, marked by serious deflation. In addition, there has been a global economic slowdown,
beginning with the United States. For these reasons,regrettably, a recovery in Kuraray’s performance still lies in
the future. The Company, however, has not been idle.
Recognizing the need to gain a firmer footing amid worsening conditions in the surrounding environment, we havestriven to reduce expenses throughout the Company,
including labor costs and distribution expenses. We
believe that these measures allowed us to minimize thedecline in the Kuraray’s performance.
The Kuraray Group boasts a number of very competitive products that command high shares of world
markets. Under the “G-21” plan, we are intensifying ourcommitment to the entry into new markets, while pursuinga strategy of seeking growth in areas of strength. Our
vinyl-acetate operations (Poval, EVAL and KURALON),
which have a commanding share of their respective markets; our CLARINO and AMARETTA brands of man-madeleather, which have a worldwide market presence; andour isoprene derivatives; are the focus of this effort. This
pursuit entails clearly identifying the markets where thestrengths of these products may be brought to bear, andheightening their growth potential through an aggressive
entry into those markets. The Company has targeted fourdomains that can be expected to show high growth in the
coming era, and has designated them strategic. These
are information technology (IT), environmentally friendly
products, environmental protection, and medical. The
corporate image we seek to create through the execution

1

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AN INTERVIEW WITH THE MANAGEMENT

What is most notable about the Company’s performance during the fiscal year under review?

AN INTERVIEW WITH THE MANAGEMENT

Q
A

2Tougher than anticipated business conditions required even more focus on assets efficiency.
Consolidated net sales of the Kuraray Group edged down 2.5% to ¥305,862 million, operating income declined 4.9% to¥18,958 million, and net income dropped 29.1% to ¥2,866 million. In the first year of our “G-21” medium-term businessplan, we failed to meet its goals.
The principal reasons for the drop in net income were a ¥6,524 million loss on revaluation of investment securities
and a ¥7,925 million extraordinary loss in connection with structural reforms.
Although there were reports of visible recovery in some business sectors during the fiscal year under review, there wasno significant recovery of demand in the chemical and fibers fields, which are the Kuraray Group’s main businesses. The
Japanese economy was also affected by continual asset deflation. Overseas as well, the U.S. economy went into a slowdown, along with sagging Asian economies. Overall, the environment surrounding our Group remained extremely harsh.
The decline in the Group’s net sales during the period under review was chiefly owing to a change in an overseas
subsidiary’s accounting period, the falloff in product sales volume that resulted from shrinking demand, particularly in the
textiles business, and the intensification of cost competition. Conditions in the textiles business were poor, particularly
with regard to polyester filament and staples, as domestic consumption remained stagnant and a worldwide imbalancein supply and demand caused prices to fall. Conversely, the chemicals business was healthy. Although sales of Poval
and acrylic monomer were affected by the slump in Asian markets, sales of EVAL (ethylene vinyl alcohol), Opto-screens,
SEPTON and other high-value-added products expanded, and there was a recovery in demand for fine chemicals,
including agrochemical intermediates. These developments allowed growth in both revenues and profits. Although
recovery in demand for man-made leather is later than anticipated, signs are now becoming visible. Medical and otherbusinesses benefited from healthy sales of dental materials in the United States, as well as from rationalization of costsby subsidiaries, and therefore achieved growth in profits.
As the Company implements the business strategies set forth in its medium-term business plan, asset efficiency is
one focus. First, to further strengthen businesses in which the Company is already strong, financial assets are being
converted to business assets. Kuraray used approximately ¥30.0 billion of its financial assets in M&A activities intended
to expand the Company’s core Poval business. The Company also achieved more efficient application of its assets
through the redemption of approximately ¥16.0 billion in corporate bonds. In addition, the entire Company participated ina successful effort to reduce inventories.
Kuraray plans to achieve ¥6.0 billion in cost reductions during the fiscal year ending March 31, 2003. Could
you tell us about the fundamental policy behind that?

QA
As we do not expect a substantial improvement in business conditions soon,
we need to work harder to improve our earnings structure.
The operating environment for the Kuraray Group can be expected to remain
BREAKDOWN OF¥6.0 BILLION COST REDUCTION
severe, as asset deflation and other adverse conditions in the domestic economy
Personnel expenses:¥1.5 billion
are forecast to persist. We responded to these conditions with an effort to realize aDistribution costs:¥1.0 billion
quick recovery in profitability through thorough rationalization of costs, and we will be
Raw materials and fuel costs: ¥0.5 billion
working toward a ¥6.0 billion reduction. Further, we have implemented an earnings
Plant costs:¥3.0 billion
improvement policy to put us back on the road to profit growth, as called for in the“G-21” plan. We are now channeling our full efforts in this direction.

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An earnings-structure improvement committee was convened in August 2001, which took a fresh look at Kuraray’s
total expenses in every business, factory and support sector. The Company has been implementing specific reform
measures arising out of this reevaluation since the second half of this fiscal year under review. Some effects of thesemeasures appeared during the term, and operating income for the second half exceeded our target level by more than
¥1.0 billion. To address factory-related costs, we employed a consulting firm to assist us in increasing productivity. This
led to the adoption of an efficient manufacturing system called Personal Education Center (PEC) at each of our plants,
which calls for the efficient utilization of both space and human resources. The Company reduced distribution costs byerecting tent warehouses on the grounds of its plants, which reduced payments to second-party warehouses. To
reduce labor costs, we have controlled wage levels, for instance by splitting off a plant to become a subsidiary, while
rationalizing the labor force itself. The Company is endeavoring to secure a stable supply of materials at lower costs byusing the Internet and moving forward with a standardized procurement formula.
On the topic of increased competitiveness, would you tell us about your business portfolio strategy?

QA
We are carefully reviewing the competitive position of each component of our business portfolio.
We are changing our business portfolio in stages. Specifically, on the basis of our “Reevaluation Criteria for
Underperforming Businesses,” we will devise measures to reorganize businesses that lack competitiveness. Where
there is no expectation of improvement in earnings, the operations of such businesses are cut back or terminated.
Making use of the Company’s technological superiority in the marketplace, we are directing our corporate resources
toward selection and concentration in promising businesses.
It is imperative that we improve the profitability of our labor-intensive textile operations. With foreign and domestic
competitors nipping at the Company’s heels, we must employ our proprietary polymer technology to set ourselves apartfrom the crowd, and are working to shift to high-value-added products. It is planned that the excess personnel createdby this process will be absorbed by the chemical products sector and other areas within the Kuraray Group. Our polyester textile operations, for example, will be absorbed by our subsidiary, Kuraray Trading Co., Ltd. This will also
accelerate our growth in the functional textile market, which is one of our areas of expertise. Further, it will bring the rationalization of selling, general and administrative (SG&A) and other costs, and the synergies generated will boost
profitability. As one step in rationalization, we have split off our filament manufacturing operations and are transferring
personnel to the new company. We will also be scaling down manufacturing operations, and working to get the maximum business benefit from the distinctive fibers produced from our proprietary polymers.
Competition in the methyl methacrylate monomer (MMA) market is growing stronger. This business is highly vulnerable to market conditions, but its high-value-added products in the MMA polymer field have a competitive advantage.

KURARAYYASUAKI WAKUI, President3kuraray̲ar̲layout̲p01̲28 02.8.28 5:28 PM ページ 4

AN INTERVIEW WITH THE MANAGEMENT

Resins for light-guide panels and Opto-screens for rear-projection televisions (PTVs) are increasingly polymers rather
than monomers, and these are good examples of value-added products with a high degree of processing. This shift topolymers and high-value-added products will continue, so we will adopt a flexible stance in our monomer production,utilizing alliances with third parties.
EVAL and Poval are two of our core businesses, and we hold a share of approximately 70% and 30%, respectively,of the world markets for these products. Demand is forecast to continue expanding, and we intend to maintain our market share and the profitability of these operations, and to expand EVAL and Poval sales. Measures taken in that regard
during the fiscal year under review included the purchase of the PVA-related business of Clariant AG and the transfer of
those operations to Kuraray Specialities Europe GmbH, which further strengthened the Company’s position in the world
market. We will be trying to create synergies in our production, sales, marketing and R&D divisions to further bolster ourstanding as the top firm in the industry.
What will be the growth sectors, the strategic businesses, in the near future?

Q
A
Our strategic businesses for the medium term are new resins
for the IT industry and environmentally friendly products.
We will primarily be developing high-performance and high-value-added products using our proprietary technology. Two

4
Fiscal 2001

Fiscal 2006 (estimate)
Eval
TPE
Eval

Operating Income Ratio (%)

MedicalIT-related

IT-related

Poval

TPE

Poval

MedicalClarinoKuralon
KuralonEnvironment

MMA

Environment
ClarinoSales Volume (¥ billion)

MMA

25

25

Polyester

Polyester=World No.1 share

Note: The Company has reduced its polyester filament manufacturing capacity from 20,000 tons per year to 13,000 tons per year, and is considering substantial measureswith regard to polyester staple.

strategic products are SEPTON and HYBRAR, which are the mainstays of our isoprene business. These unique styrene
thermoplastic elastomers combine the properties of rubber and plastic, and replace both flexible PVC and vulcanizedrubber. When incinerated they do not emit toxic chlorine gasses, and for this reason demand is expected to grow. The
world market for these elastomers is now approximately 80,000 tons per year. Kuraray can produce 19,000 tons per
year, and in August will commence production at a new plant in Houston, Texas, which will have a production capacityof 12,000 tons per year. We anticipate further expanding production capacity to 50,000 or 60,000 tons per year in thefiscal year ending March 31, 2006. The Company is developing practical applications for a number of products, and we
expect a second surge of growth for EVAL as a result.
In recent years, growth in the sale of PVA film for optical use and Opto-screens has been striking. These products
have already been making a significant contribution to profitability, but we anticipate further growth. Kuraray has a virtual
monopoly in the market for PVA film, which is used for polarized film for liquid crystal displays (LCDs). There are hightechnological barriers to participation in this business, so it will be difficult for competitors to make serious inroads into
our market share.
We expect quite a bit of expansion in the market for Opto-screens for PTVs, particularly in the U.S. and Chinese markets. The Company’s present production capacity is 3 million sheets per year, but this market is predicted to grow to 5
million sheets per year by the fiscal year ending March 31, 2006.
Two strategic businesses for the medium term are new resins for the information technology (IT) industry and environmental businesses. GENESTAR is a heat-resistant polyamide resin (a specific nylon resin) developed using Kuraray’s proprietary
technology. Because it is still manufactured in small lots, production costs are high, but we are beginning to see increased
use of it in connectors and other electronics parts owing to its superior heat and abrasion resistance. Thanks to its heat resistance, GENESTAR can be used in lead-free solder, which makes it ideal for use in connectors and other electronics parts. In
the future, we expect significant demand for GENESTAR for use in automobile engine peripheral components.
Another new product, still at the prototype stage, is a flexible film made from liquid crystalline polymer. Sample shipments for use in flexible printed circuit boards for digital cameras and mobile telephones were highly evaluated, and wehave expectations that this product will sell well to the electronics and computer industries.
PVA gel is used in a wastewater treatment system that the Company developed in cooperation with manufacturers ofwater treatment systems and home water-purification systems that use septic tanks. PVA gel offers good performance,
requires little space and is highly regarded as an efficient wastewater treatment material. The product should, therefore,
attract a good deal of corporate and public-sector environmental investment.
What are your thoughts on the important issue of restoring your man-made leather business?

Q
A
The business is undergoing drastic restructuring.
We are trimming the number of products produced, and have revamped our marketing strategy.
The structure of the man-made leather business is characterized by sales of small lots of diverse products to small andmedium-sized customers, but this has resulted in declining profitability. In many cases, we incur additional expenses in connection with changes to product specifications requested by customers, and the market structure is inefficient. Therefore,
these products have a high cost structure. Through the first half of the 1990s, there was high demand for man-made leathersin Europe for use in apparel. The present slump in our man-made leather business was caused not only by the poor conditionsin the clothing industry, but also by the failure of the clothing, interior furnishings, and shoe industries to rationalize operations. In
1998, despite the decline in demand, production capacity was increased from 12.5 million square meters to 15.5 million
square meters, creating a supply and demand imbalance.

KURARAY

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AN INTERVIEW WITH THE MANAGEMENT

kuraray̲ar̲layout̲p01̲28 02.8.28 5:28 PM ページ 6

6

To achieve a recovery in the profitability of our man-made leather business, we implemented drastic structural changes
during the term under review. First, we decided to reduce the number of man-made leathers we produce by approximately
half. Then, we updated our strategy for marketing to European clothing manufacturers, and decided to challenge our competitors for sales to the interior furnishings industry on their home ground. In the United States, we are working to expand
our business with interior furnishings and clothing firms, and open up new markets for this product for use in car seats andother applications. We are also renewing our efforts to expand sales of our luxurious new product, PARCASSIO.
Inventories have also been an issue, and during the fiscal year under review we achieved substantial inventory reductions.
Kuraray’s man-made leathers are soft and supple to the touch, which makes them ideal for designer apparel, high-end furniture and car seats. We will continue using quality as our selling point in creating demand for man-made leather as a substitutefor natural leather, as well as opening up new markets as we strive to regain our market position in this core business.
Tell us about the in-house company system Kuraray decided to implement in April 2002.

Q
A
The in-house company system is a key strategic initiative that will makefor speedier decisions and more efficient management.
The in-house company system brought sweeping transfers of authority and reduced redundancy, with the objective of
realizing faster and more efficient management. The deflationary economy caused a drop-off in demand, which prompted
reductions in production. Because management was slow to respond to these developments, inventories of some ofour products ballooned, and this prevented a recovery in profits.
The presidents of the in-house companies have
IN-HOUSE COMPANY SYSTEM(9 companies, 2 business divisions)authority over production, sales, development and the rest ofOrganization chart
their respective company’s business operations, and theFibers and Industrial Poval Company
Chemicals Company
Materials Company
responsibility for their company’s performance. Under our previPoval Asia
Kuraray Specialities Asia
ous business division system, profit and loss were the yardstick
Kuraray Specialities Europe
Fastening and Non-Woven
Elastomer Company
by which the performance of managers was evaluated, but from
Fabrics Company
SEPCA
now on the balance sheets and cash flows will be regarded as
Clarino Company
Eval Company
OPT Company
the important indicators as we move forward with inventory
Kuraray Hong Kong
EVALCAEVAL Europe
reductions and improvements in asset utilization. We will also be
Clavella Division
Methacrylate
High-Performanceselecting business fields for concentration of resources andCompany
Materials Division
effort, based on our “Reevaluation Criteria for Underperforming
Businesses.” These criteria require in-house company presidents to prepare restructuring plans for businesses that have been using, rather than providing, cash flows for two years
or whose ROA has been below 3% for three years. If, however, there is no prospect of a recovery in profitability, such abusiness will be downsized or terminated. This decision will be made not by the in-house company presidents, but bycorporate management. The more authority is transferred to in-house company presidents, the more important the roleof corporate management becomes. A common infrastructure for the sharing of personnel, material, funds and information cannot be optimized if it is undertaken piecemeal. Such an infrastructure must be implemented uniformly across theentire Company, and corporate management is responsible for this.
An annual salary system has been established for all personnel in management and executive positions, and together
with the in-house company system, we have implemented a performance-based benefit and compensation system.

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PVA-RELATED OPERATIONS
OF CLARIANT ACQUIREDIn July 2001, Kuraray purchased the PVA-related operations of Clariant AG and transferred them to Kuraray Specialities
Europe. The reasons for this action were as follows:
1. In view of the expanding markets, principally in Japan and Asia but extending to Europe and North America, thismove was necessary to secure the position of our Poval business.
2. Kuraray faced risks in connection with new construction (time required, deterioration of supply and demand balance)
and the acquisition of Clariant’s operations by a competitor, and subsequent decline in Kuraray’s market share.
3. As a result of the acquisition, Kuraray will benefit from corresponding synergies in the areas of technology, R&D andmarketing.
4. The acquisition gives us a stable source of vinyl acetate.
5. Low costs will make expansion possible.

KURARAY

The purchase of Clariant’s Frankfurt PVA-related production base is estimated to have boosted net sales during the fiscal year under review by approximately ¥15.0 billion. Because the Company is accelerating the depreciation of
approximately ¥30.0 billion in goodwill, losses on these operations are forecast for the fiscal years ending March 31,
2003 and 2004. However, with the improvement in profit ratios brought by the synergies created, as well as the lightening of the Company’s depreciation burden, these operations should make a substantial contribution to profits from thefiscal year ending March 31, 2005, onward.

What are your thoughts on increasing shareholder value?

QA
We believe that revenue growth and increased operating efficiency are the keys to enhanced shareholder value.
In addition to dividends, we pass on profits to shareholders through revenue growth in our core businesses, through theefficient utilization of capital, and by fostering growth in corporate value.
Concrete measures include increasing ROA to more than 7%, a goal set forth in our medium-term business plan. To
achieve this, we are moving forward with the more efficient use of assets where needed. We have already begun the
reduction of our financial assets. In the fiscal year ending March 31, 2003, we will redeem all our convertible bonds,
which will require ¥23.4 billion, and will be covered out of cash reserves. We are also working to optimize inventories,
and plan to reduce our on-hand inventory level to two months by the fiscal year ending March 31, 2006. We are discussing an M&A strategy as a prudent use of our financial reserves, and will be considering alliances, the establishmentof new subsidiaries and taking capital positions in existing companies in addition to outright acquisitions, making use of
external capital in various forms to heighten synergistic effects—particularly in our core businesses. The expansion of ourown facilities is not necessarily the best capital investment policy for Kuraray at this point.
In accordance with a change to the Commercial Code of Japan, we have submitted notfication of our intention to buy back
30 million shares of Kuraray stock. This is a countermeasure against the takeover of the Company and will allow us to implement a stock option program. In connection with the latter, the Company has decided to issue stock acquisition rights for 1.2
million shares. It is planned that these stock options shall be granted to the approximately 850 employees of the Kuraray
Group in managerial positions. The scale of this plan is the largest of any in the chemicals and textiles industry in Japan.
The Company will continue to deploy new products and seek new customers, striving through increased sales andreduced costs to achieve new levels of profit. Our efforts to achieve growth in revenues and profits during the fiscal year
ending March 31, 2003, remain at the highest pitch, as we execute a radical reevaluation of our business structure. We
look to the continued support and cooperation of our shareholders in this effort.

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INTERVIEW WITH PRESIDENT OF POVAL COMPANYTOSHIHIDE SAKAIINTERVIEW WITH PRESIDENT OF POVAL COMPANY—TOSHIHIDE SAKAI

Please explain the policies of the Poval Company.

8

Q
A
Kuraray’s “G-21” medium-term business plan lists Poval (PVA) operations as one of the Company’s core businesses.
Kuraray is strongly competitive in international markets for these prodWORLD DEMAND FOR PVA AND
ucts, and the Company’s PVA-related business is the backbone of
KURARAY’ S MARKET SHARE (2000)(Thousands of tons)
these operations.
Kuraray’s Poval and PVA film hold the top shares of their respective
Japan
Europeworld markets, and the Company’s PVA film commands virtually the
140
North
141
America
136
entire market for optical films used in LCD displays for electronic
devices. With such a strong market position as its foundation, theAfricaCompany will maintain and expand this business. In the Poval
Asia
6
South
135
America
Company, conscious of our responsibilities as Kuraray’s core busi19
Oceania
ness, we are striving to increase revenues. Further, in support of3
Note: Demand figures include both
Kuraray’s “selection and concentration” strategy, we are working toexternal sales and use.
strengthen cooperation within the Poval Company to shorten the timerequired to move from development to market.
Could you tell us about your strategies in world markets?

QA
One important event this past fiscal year was the establishment of Kuraray Specialities Europe GmbH (KSE). The PVArelated operations purchased from Clariant AG and transferred to KSE were acquired by Clariant in 1997 from Hoechst,a German chemical manufacturer, and the gain therefore brings with it employees with a wealth of experience in development, manufacturing and marketing. The establishment of KSE raised the Kuraray Group’s annual production
capacity from 144,000 to 194,000 tons—a significant jump—and brings the Group a strong base of operations in
Europe. To the present, the primary focus of our Poval operaPOVAL BUSINESS CONCEPT
tions has been in Japan and the rest of Asia. However, thePoval Production Capacity/Trends in Net Sales (Thousands of tons)
addition of this foothold adds Europe to that mix, and makes
2005
possible operations on a global scale.
< +20,000 tons (Estimate)
2003
As one step toward the reorganization and consolidation of< KSE + 50,000 tons
2000
our marketing system, we are strengthening our European mar0
50
100
150
200
250
keting network. Since Kuraray is selling its products through
PVA Film for LCDs
(Thousands of m2)
2005
KSE’s marketing routes, we previously forecast an increase in< Saijo Plant + 20 million m2 (Estimate)
2003
sales volume of approximately 1,000 tons per year. Kuraray’s< Saijo Plant + 13 million m2
2000
Japanese operations have been exporting approximately
0
10,00020,00030,00040,00050,00060,00010,000 tons of PVA to Europe annually. In the interest of optiNet Sales, Fiscal 2000
Net Sales, Fiscal 2005
mizing manufacturing locations, KSE will assume about 70% ofApprox. ¥30.0 Billion¥50.0 Billion
those marketing responsibilities, which will reduce shipping
costs and customs duties.
The Kuraray Group’s R&D has in the past centered on the development of products conceived by the Group’s technical personnel, but with the establishment of KSE, product development based on ideas born in the marketplace has
become possible. Now, through maximum utilization of R&D themes and tie-ups with users, we are moving forward efficiently with such developmental efforts.

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Striving for Further Growth in Profits
TOSHIHIDE SAKAI, President of Poval Company

We are energetically engaged in exchanges of production technology, and while ensuring that such exchanges aremutually beneficial, will be seeking to generate synergies.
What are the important issues facing the Poval business?

Fifty years have passed since Poval was created, and it has become a mature product. The quality level of generalpurpose products, including those of our competitors, has risen and enhanced cost competitiveness is required tomaintain market superiority. In the coming fiscal year, we will implement process reforms and will enhance the efficiencyof business practices at two plants, thereby achieving reductions in costs.
Overseas, the reconstruction of our operations in Singapore is an important issue, and we are striving to optimize
price levels. Because the scale of the U.S. market for Poval is approximately 100,000 tons per year, growth in the
Kuraray Group’s sales volume in that market is stalled at a low level. In the future, we will endeavor to make new inroads
into the U.S. market and increase sales there through close cooperation with KSE.
What new products are in the works?

QA
To develop and promote special grades, as well as to expand sales, we have recently established a marketing group. This
group is laterally connected with our development, manufacturing and sales organizations, and performs a leadership role.
To contribute to the expansion of the Kuraray Group’s operations, we also supply other business segments in theGroup with new polymers. For instance, using the Company’s melt-spinning technology we developed a special polyester fiber made using our new EXCEVAL water-soluble resin. When the EXCEVAL is dissolved during the dying
process, the result is a polyester thread that is 40% lighter than ordinary polyesters.
Would you tell us something about the issues in the market for PVA film for LCDs?

Q
A
Kuraray has a virtual monopoly in this market, but another firm is scheduled to launch a competing product next fiscal
year. In response, we will be strengthening our PVA film operations by stabilizing and improving product quality, launching a new brand and conducting joint product development with users. This will minimize the impact on Kuraray ofcompetitive entry into the market.
We are closing in on the development of a water-soluble film for use as a package for detergents, and expect tolaunch a new such product in the second half of next fiscal year. In this business area as well, cost reductions are an
important theme, as throughout the entire Poval Company.

KURARAYQ
A

9kuraray̲ar̲layout̲p01̲28 02.8.28 5:28 PM ページ 10

INTERVIEW WITH PRESIDENT OF EVAL COMPANY
JUNSUKE TANAKAINTERVIEW WITH PRESIDENT OF EVAL COMPANY—JUNSUKE TANAKA

Could you please explain the goals of the Eval Company?

10

Q
A
EVOH resin (EVAL) has superior gas-barrier properties, and is widely used in food packaging. The Kuraray Group’s present EVAL production capacity is 45,000 tons—the largest of any firm in the world. EVAL is also used in plastic fueltanks for automobiles, chiefly in the U.S. market, and in multilayer pipes for under-floor heating systems. New sources ofdemand are expected to emerge. In the U.S. market, EVAL is used in about 70% of fuel tanks manufactured (for a consumption of 8,000–9,000 tons per year). In Europe and Japan, however, where regulation of highly volatile gasoline islax, the current rate of usage in fuel tanks does not exceed 5–10%. Tightening of regulations in those markets is forecast
to bring increasing demand for EVAL.
Our researchers are working to improve EVAL, to develop “super barrier” materials that go beyond it and to find new
applications for EVAL outside the food packaging field. In the March 2001 fiscal year, we began to organize our threevector, Japan-U.S.-Europe new business development structure, integrating technology and sales to open up new
applications for our products. In the future, we will be accelerating development and readying of products for market,
with the objective of realizing a high-profit business structure and becoming the world’s top producer of barrier materials.
In April 2002, Eval Company of America and EVAL Europe N.V. of Belgium were brought into the Eval
Company organization. What does this mean for your global strategy?

Q
A
Before the in-house company system was implemented, Eval Company of America, EVAL Europe and Kuraray’s Eval
Division formed a parallel organization. Since April, they have been organized into a single management system with thepresident of the Eval Company at the top, and are conducting operations on a global scale. Responsibilities and lines ofauthority have been clarified.
In addition, we were already moving forward with the
ACTUAL AND PROJECTED PER-CAPITA(g) EVOH CONSUMPTION (by region)building of a support system for global operations before
180
the in-house company system was established. In the
160
March 2001 fiscal year we established technological stan140
dards for information sharing among the three poles of our120
global organization, and in the March 2002 fiscal year built
100
our virtual private network (VPN) intranet over the period of a80
60
year. This made possible the immediate utilization and shar40
ing of new technology and business intelligence. We
20
believe that the development of this infrastructure makes it
0
1997
2000
2003
2005
possible for us to achieve remarkable improvements in the
Japan
North
America
Europespeed of our development, manufacturing and marketing.
We organized a Subcommittee in each of our functional
areas—manufacturing, development, marketing and management—to facilitate information exchange and share ideas
on problem solving. On highly important matters in particular, joint Japan-U.S.-Europe project teams are formed asneeded to hasten the resolution of issues.

kuraray̲ar̲layout̲p01̲28 02.8.28 5:29 PM ページ 11

Becoming the Top Manufacturer of
Gas Barrier Materials
JUNSUKE TANAKA, President of Eval Company

Please give us an overview of your development system.

QA

As one of the Kuraray Group’s core businesses, what kind of earnings structure areyour reforms aimed at building?

Q
A
To expand and grow its business, the Eval Company is working to strengthen the position of its products in the marketplace. In other words, we are trying to secure our superiority in the market by opening up new applications for our
products, as well as improving the properties of existingproducts. Further, by launching unique products, we can(Thousands of tons)
THE EVAL BUSINESS CONCEPT
make it difficult for our competitors to erode our lead.
EVAL Production Capacity/Trends in Net Sales
Through these measures we will build a more profitable2005–
business structure, which will allow the Eval Company to< Eval Company of America +12,000–24,000 tons (Estimate)make a contribution to the improvement of Kuraray’s profit
2004
structure.
< EVAL Europe +12,000 tons (Estimate)
2000
0

20

40

60

80

100

Net Sales, Fiscal 2000

Net Sales, Fiscal 2005

Approx. ¥30.0 Billion¥50.0 Billion

KURARAY

Until recently, Kuraray’s R&D organization has had primary responsibility for development of EVAL products, while Eval
Company of America and EVAL Europe provided mainly technical services. To overcome the intense competition in themarketplace, though, we are changing to separate development organizations for each field in which EVAL is used. As
the pace of operations of some fields in the United States is faster, we will be expanding the R&D capabilities of Eval
Company of America and concentrating development in those fields in the United States.

11kuraray̲ar̲layout̲p01̲28 02.8.28 5:30 PM ページ 12

AT A GLANCE

BUSINESS SEGMENT

NET SALES BY
BUSINESS SEGMENT

NET SALES (¥ Millions)

MAJOR PRODUCTSCHEMICAL PRODUCTS
Poval (polyvinyl alcohol resin)
MOWIOL

PVA film
EVAL(ethylene vinyl alcohol copolymer resin)

49.9%¥152,541
Total: ¥305,862
2002

2002

152,541

2001

151,0072000

144,435

1999

142,0711998

150,319

EVAL film
Methacrylic monomer
Methacrylic resin
Opto-screens

AT A GLANCESEPTON, HYBRAR (thermoplastic elastomer)
Fine chemicals
GENESTAR (heat-resistant polyamide resin)
Activated carbon

12

FIBERS AND TEXTILES
2002

26.2%
¥80,274

Total: ¥305,862
2002

2001

80,274

KURALON

90,822

KURALON K-II (new type of PVA fiber)

2000

98,088

Polyarylate fiber

1999

103,120

Polyester staple

111,041

1998

Polyester filament

MAN-MADE LEATHER, NON-WOVEN FABRICS AND FASTENING MATERIALS
10.5%¥32,101

Total: ¥305,862
2002

2002

32,101

2001

31,641

2000

33,290

CLARINO, AMARETTA (man-made leather)
KURAFLEX (dry-laid non-woven fabric)
Melt-blown non-woven fabric

1999

35,557MAGIC TAPE (hook and loop fastener)
38,802

1998

DIVERSIFIED BUSINESSES
13.4%¥40,946

Total: ¥305,862
2002

2002

40,946

Dental materials

2001

40,181

Medical devices

2000

40,631

Contact lenses

1999

55,718High-performance membranes
PVA gel1998

47,481

PRIMARY APPLICATIONSPRODUCTION FACILITIESANNUAL PRODUCTION CAPACITY

Textiles, paper additives, adhesives, butyral precursor

Okayama Plant (Okayama)
Nakajo Plant (Niigata)
Kuraray Specialities Europe GmbH (Frankfurt, Germany)
Poval Asia Pte., Ltd. (Singapore)

96,000 t
28,000 t
50,000 t
20,000 t

Computers, LCD televisions, monitors

Kuraray Saijo Co., Ltd. (Ehime)

31,000,000 m2

Food packaging material, gasoline tanks

10,000 t
23,000 t

EVAL Europe N.V. (Antwerp, Belgium)

Okayama Plant (Okayama)
Eval Company of America (Texas, U.S.A.)
12,000t

Food packaging material

Okayama Plant (Okayama)

3,000 tSolvents, adhesives, methacrylic resin

Nakajo Plant (Niigata)
Kyodo Monomer Co., Ltd. (Osaka)

68,000 t
20,000 t

Molding material, sheets, synthetic marble

Nakajo Plant (Niigata)53,600 t

PTV screens

Nakajo Plant (Niigata)3,000,000 sheets

PVC and vulcanized rubber substitute, food packaging materials

Kashima Plant (Ibaraki)
Septon Company of America (Texas, U.S.A.)

19,000 t(Manufacturing scheduled for
12,000 t August 2002 startup)

Pharmaceutical and agrochemical intermediate, vitamin precursor

Nakajo Plant (Niigata)—

Electronics parts, auto parts

Kuraray Saijo Co., Ltd. (Ehime)

1,000 t (neat polymer base)

Water purification facilities, gas separators

Kuraray Chemical Co., Ltd. (Okayama)

18,500 t

KURARAY

kuraray̲ar̲layout̲p01̲28 02.8.28 5:30 PM ページ 13

13Agriculture and fishery materials, civil engineering materials

Okayama Plant (Okayama)

40,000 t

Cement reinforcing agents, woven and knitted textiles

Okayama Plant (Okayama)

7,000 tRope, fishing nets, and other industrial products

Kuraray Saijo Co., Ltd. (Ehime)

400 t

Sleepwear, interior furnishings

Kuraray Saijo Co., Ltd. (Ehime)

13,000 t

Woven and knitted textiles, tents, sheets

Kurashiki Plant (Okayama)

40,000 t

Shoes, handbags, sporting goods, luxury clothing, interior furnishings

Okayama Plant (Okayama)

15,500,000 m2

Wiping materials, wet wipes, surgical masks

Kuraflex Co., Ltd. (Okayama)
Kuraflex Ibaraki Co., Ltd. (Ibaraki)

10,500 t
3,500 tCoffee bags, filters

Kuraray Saijo Co., Ltd. (Ehime)

1,800 tClothing, shoes, car seats

Magictape Co., Ltd. (Fukui)

48,000,000 m

Dental adhesives, dental filling materials

Kuraray Medical Inc. (Okayama)

540,000 sets

Artificial kidneys, dialysis machines

Kuraray Medical Inc. (Okayama)

2,700,000 units (artificial kidneys)

Contact lenses, medical-care products

Kuraray Medical Inc. (Okayama)

1,000,000 pairs

Water purification and wastewater treatment

Kurashiki Plant (Okayama)

100,000 m2

Water purification and wastewater treatment

Kuraray Saijo Co., Ltd. (Ehime)

3,000 m3

kuraray̲ar̲layout̲p01̲28 02.8.28 5:30 PM ページ 14

REVIEW OF OPERATIONSREVIEW OF OPERATIONS

Chemical Products•KURALON•KURALON-K-II•New-type polyester
SOPHISTA•Polyarylate fiber•PovalPoval resin
PVA film•EVAL•Methacrylic
Opto-screens
Synthetic marble•Isoprene Chemicals
SEPTONHYBRAR
GENESTAR
Aroma chemicals
Activated carbon

Fibers and Textiles

14

Man-Made Leather,
Non-Woven Fabrics
and Fastening Materials•Medical Products
Dental materials
Artificial kidneys
Contact lenses•Environmental Businesses
Industrial membranes
PVA gel•Man-Made Leather
CLARINOAMARETTAPARCASSIO•Non-Woven Fabrics
KURAFLEX
Melt-blown•Fastening Materials
MAGIC TAPE

Diversified Businesseskuraray̲ar̲layout̲p01̲28 02.8.28 5:30 PM ページ 15

PERFORMANCE IN
THE FISCAL YEAR ENDED MARCH 31, 2002

Poval Adjustments to inventories of polarized film for liquid
crystal displays (LCDs) caused a decline in sales of PVA film
made from Poval, and Kuraray Specialities Asia Pte., Ltd.
changed its accounting period, which negatively affectedsales in this business area. However, sales of Poval resin in
the European and Chinese markets expanded. As a result,
Poval sales remained virtually unchanged from the previous
fiscal year. However, the stable prices of resin combined withgains on foreign exchange transactions and lower costs ofmaterials to allow an increase in profits. During the fiscal year
under review, the Company purchased Clariant AG’s
polyvinyl alcohol (PVA) and polyvinyl butyral (PVB) operations,and Kuraray Specialities Europe GmbH was established totake them over. Since the new company commences operations at the end of December 2001, its contribution to
performance will appear in next fiscal year’s financial report.
EVAL Domestic demand for the EVOH resin EVAL (ethylene
vinyl alcohol) stagnated as a result of poor economic conditions. The heightened pace of commerce within theEuropean Union (EU) following its integration has madeEurope a particularly favorable market. Sales to Asian markets
for food packaging have gradually risen, while prices of basic
materials have declined in the United States, leading to
expanded revenues and profits in this area. To respond to
growing demand in Europe, the Company expanded production facilities at EVAL Europe N.V. in May 2001.
Methacrylic Resin Products Toward the end of the fiscal year under review, competition in world markets drove theprice of methyl methacrylate (MMA) monomers and resins
downward, but demand for Opto-screens for rear-projection
televisions (PTVs) remained strong in the United States,
despite the terrorist attacks of September 11, 2001. Overall,however, sales and profits remained flat. It was feared thatsales of PTVs would be adversely impacted by the advent ofplasma display panel (PDP) TVs. However, as PTVs have a

Chemical Products
4

5 5
6 6

1
10 10

2 2
3 3

7
8
9

Company name1) Kuraray America, Inc.

Capital
US$8.7 million

2) Eval Company of America

US$4.15 million

3) SEPTON Company of America

US$35 million

4) Kuraray Europe GmbH31.2 million

5) EVAL Europe N.V.

29.7 million

6) Kuraray Specialities Europe GmbH20.0 million

7) Kuraray Hong Kong Co., Ltd.

HK$4.65 million

8) Kuraray Specialities Asia Pte., Ltd.
9) Poval Asia Pte Ltd10) Kuraray Co., Ltd.

SP$19.55 million
SP$40 million¥88,955 million•Manufacturing facility•Marketing base
*MOWIOL and MOWITAL are trademarks of KSE.

Activities
Importing and sales of Kuraray
products
Manufacture and sales of
EVAL in the United States
Manufacture and sales ofthermoplastic elastomers
Sales of Kuraray products in
EuropeManufacture and sales of
EVAL in Europe
Manufacture and sale of MOWIOL*(PVA) and MOWITAL* (PVB)
Processing and sales ofKuraray products in China andSoutheast Asia
Sales of Poval resins
Manufacture of Poval resins
Manufacture and sales ofKuraray products

KURARAY

Sales of chemical products rose 1.0%, or ¥1,534 million, to¥152,541 million, and operating income increased 4.6%, or¥583 million, to ¥13,298 million. The domestic market forchemical products remained weak, but the Company succeeded in increasing revenues and profits fromhigh-value-added resins, which have long been a principal
product, as well as from specialty chemicals.

15kuraray̲ar̲layout̲p01̲28 02.8.28 5:30 PM ページ 16

Poval Resin: First developed as a stepin the production of PVA fiber, Poval’s
water solubility, adhesive properties,
emulsibility and oil resistance suit it toa broad range of applications. It is now
used in textile and paper
manufacturing, adhesives, layered
automobile windshields and in manyother industrial processes.

16

Isoprene Chemical Products The European and U.S.
markets for thermoplastic elastomers recorded solid growthduring the fiscal year under review. The Company strove to
reduce costs in its fine-chemical operations, and increased
the sales volume of methyl dichlorochrysanthemate (DCM),
an intermediate in the production of pyrethroid insecticides,
which are less toxic to humans than other insecticides. Salesof aroma chemicals were solid. Sales of vitamin-related products and pharmaceutical intermediates, however, contracted
as a result of falling market prices and weak demand. Overall,sales of isoprene chemical products showed no significant
growth, but profits nonetheless increased.
Other Chemical Products Sales of activated carbon
for pollution-control activities were strong. However, as thisNET SALES

Total:¥305,862
2002

152,541

151,007

144,435

150,319

EVAL: A high-performance resin withthe best gas-barrier properties of any
plastic, EVAL shuts out oxygen toprotect against change ordeterioration, making it a superior
packaging material for foods andcosmetics. Recently, we have createddemand for the use of EVAL in the production of plastic fuel tanks and beerbottles.

142,071(¥ millions)

MAJOR PRODUCTS

REVIEW OF OPERATIONSPVA Film: Its transparency andantistatic properties make PVA film an
ideal wrapping material for textile
products. It is also used to make polarized film for LCD manufacturing.
Accordingly, demand for PVA film
increases with that for LCDs.

price advantage, we are confident in our ability to achieve
steadily growing sales for the foreseeable future.

49.9%¥152,541

98 99 00 01 02

Opto-screens: Rear-projection TV(PTV) screens are produced byapplying precision molding technology
to methacrylic resin. As digital highdefinition TV and DVD players
proliferate, demand for PTVs is
expected to grow, especially in the
United States.

sector was affected by the adverse economic conditions,sales were virtually unchanged from the previous fiscal year,
and profits declined.

REGIONAL CONDITIONSJapan Affected by Japan’s deflationary economy, businessconditions continued to worsen. Exports of Poval and EVAL
declined as a result of the shift of these manufacturing operations overseas. Domestic operations were focused on thedevelopment of new processes and products.

Synthetic Marble: An application of
methacrylic resin, this material has thelook of natural marble, and is being
used in modular kitchens, bathtubs
and sinks.

Europe Although sales of EVAL were strong in Europe,
startup expenses in connection with the establishment ofKuraray Specialities Europe put downward pressure on profits.

kuraray̲ar̲layout̲p01̲28 02.8.28 5:31 PM ページ 17

OUTLOOK
We are intensifying our efforts to expand our Poval, EVAL, thermoplastic elastomers, Opto-screens, and other businesses

98 99 00 01 02

45,541
9,439

9,529

9,497

22,812

13,29812,715

12,16016,501

CAPITAL EXPENDITURE(¥ millions)

16,540OPERATING INCOME(¥ millions)

HYBRAR: With its superior shockabsorbing properties, this polymer isused for sporting goods and autoparts. Combining HYBRAR with
polypropylene yields a highly transparent material that contains no chlorines.
Demand is growing for this material forfood packaging and medical uses.

GENESTAR: A new polyamide resinthat is resistant to heat, water andabrasion, this material is used in
mobile telephones, computers, suchelectronics parts as connectors andswitches, and auto parts.

98 99 00 01 02

that enjoy continuously growing demand in world markets.
In the Poval business, during the term in review the
Company acquired the PVA-related operations of Clariant,established Kuraray Specialities Europe on this basis, andgot the new company up and running smoothly. Adding thisnew firm to operations in Japan and Singapore, we haveachieved an efficient tri-regional structure.
The Company expanded EVAL manufacturing capacity in
May 2001, and is now considering the expansion of facilities in
Europe. In thermoplastic elastomer operations, we are preparing for the startup of a new factory built by our U.S. subsidiary,
SEPTON Company of America. Kuraray is employing its technological expertise to expand its line of distinctive products,
and to further expand its presence in Asian markets.

Aroma Chemicals: The Company
uses isoprene to manufacture over 30
aroma chemicals and base oils for use
in cosmetics and toiletries, including
linalool (lily of the valley scented) andcitral (lemon scented).

Activated Carbon: With its ability toadsorb and eliminate odors and contaminants, this material is used in water
filters, air-conditioning filters and manyother applications.

KURARAY

Asia Kuraray Specialities Asia changed its accounting period,
which had a negative effect on sales of Poval. China had previously been the principal source of demand forgeneral-purpose products, but is now purchasing more specialty goods. We expect demand for EVAL and SEPTON in
Southeast Asia and China to grow in the future.

SEPTON: As elastic as rubber yet as
moldable as plastic, SEPTON is used
as a rubber substitute and a plastics
additive. When incinerated, SEPTON
emits no chlorine gasses, and is therefore in high demand as a substitute forpolyvinyl chloride (PVC) and vulcanizedrubber. Kuraray began construction
last year of a plant in the United States
to produce this material, and manufacturing will commence immediately
upon its completion.

MAJOR PRODUCTS

North America Thermoplastic elastomers, Opto-screensand EVAL continued to perform well in this market, contributing to the growth of sales and profits in the region. Declining
natural gas prices also boosted the profitability of EVAL.

17kuraray̲ar̲layout̲p01̲28 02.8.28 5:31 PM ページ 18

PERFORMANCE IN
THE FISCAL YEAR ENDED MARCH 31, 2002

18

Polyester Domestic polyester sales, chiefly of generalpurpose goods, were affected by the slump in consumer
spending. Worldwide, polyester prices dropped as a result of
an imbalance in supply and demand. Therefore, revenues
and profits both declined. For these reasons, the Company
reduced its polyester manufacturing capacity. This sector
recorded strong sales of new-type polyester products, whichwere developed using the Company’s proprietary polymer
NET SALES

98,08880,274

Fibers and Textiles

26.2%¥80,274

90,822

111,041(¥ millions)
103,120

REVIEW OF OPERATIONSSales of fibers and textiles declined 11.6%, or ¥10,548 million, to ¥80,274 million, and operating income declined
90.6%, or ¥1,559 million, to ¥161 million. To improve theprofit ratio for polyester sales, we split off our polyester manufacturing operations into a separate company during theperiod in review, and are moving forward with reductions inlabor costs and other expenses.

Total: ¥305,862
2002

98 99 00 01 02

2

1
7
5 4

3 3

6

8

Company name1) Kuraray America, Inc.

Capital
US$8.7 million

2) Kuraray Europe GmbH31.2 million

3) Kuraray Co., Ltd.

¥88,955 million

4) Kuraray Trading Co., Ltd. (Hong Kong)
5) Kuraray Trading Co., Ltd. (Hanoi)
6) Kuraray Trading Co., Ltd. (Taipei)
7) Kuraray Trading Co., Ltd. (Shanghai)8) Kuraray Trading Co., Ltd. (Jakarta)•Manufacturing facility•Marketing base

Activities
Importing and sales of Kuraray
products
Sales of Kuraray products in
EuropeManufacture and sales ofKuraray products
Sales of Kuraray products
Sales of Kuraray products
Sales of Kuraray products
Sewing and sales of Kuraray
products
Sewing and sales of Kuraray
products

technology, and of SOPHISTA, a textile made from EVAL
resin, in both cases primarily for use in sportswear.
KURALON KURALON is used in place of asbestos as a
cement-reinforcing agent in fiber reinforced cement (FRC)
and to reinforce rubber. This is a field in which special characteristics of KURALON have won it a firm position, but poor
economic conditions caused a falloff in demand for materials,
and cost competition continued to escalate. For these reasons, sales of KURALON for its traditional applications fell off,and KURALON K-II faced intense competition. Declines wererecorded, therefore, in both sales and profits.
Rayon Kuraray ceased production of rayon in the fiscal year
ended March 31, 2001. During the fiscal year under review,
sales of remaining inventory continued.

REGIONAL CONDITIONSJapan The continuing weakness of demand for polyester
resulted in worsening market conditions for general-purpose

kuraray̲ar̲layout̲p01̲28 02.8.28 5:31 PM ページ 19

goods. Sales of KURALON for fishing nets, tents and othertraditional uses were weak, but sales for civil-engineering andother specialized uses were firm.
Europe Demand for KURALON as a rubber reinforcement
substitute, as well as for ground stabilization and other civilengineering uses, expanded.

KURALON: This product is extremely
strong, retains its shape, is hydrophilic
and is weather-resistant, which makes
KURALON suitable for a broad range
of industrial applications. In recent
years, it has been used instead ofasbestos as a reinforcing material in
cement and for separators in alkali
batteries. Demand continues to growfor KURALON.

North America Sales of KURALON as a rubber reinforcement substitute were solid.

OUTLOOK

98 99 00 01 02

98 99 00 01 02

Kuraray Trading Co., Ltd., a general trading company andmember of the Kuraray Group. The integrated administrationof all areas from polyester textiles to secondary products will
facilitate management that is sensitive to market needs. In
addition, integrated production at all stages, from raw thread
to textiles and secondary products, will make possible therationalization of total production costs and promote synergies from human resource consolidation.
In October 2001, we split off the polyester filament manufacturing operations of our Saijo Plant into an independentcompany, Kuraray Saijo Co., Ltd. We continue to deliberatemeasures aimed at a prompt response to present conditionsin the field of polyester staple. Most countries in the EU will
have regulations governing asbestos use in place by 2005,
and it is therefore forecast that demand for asbestos substitute KURALON will expand. In the domestic market, anumber of major general contractors have decided to use
KURALON K-II as a concrete reinforcing agent, and we
expect this to bring significant growth in demand.

New-type Polyester: This is a new
type of synthetic fiber, made by meltspinning Kuraray’s proprietary
EXCEVAL polymer. When the
EXCEVAL is extracted from thepolyester thread, the result is an ultralight-weight, easily dyed microfiber.

Polyarylate Fiber: A strong, abrasionresistant polyarylate fiber with low
water-absorbency is used in rope, fishing nets and other industrial
applications, as well as in sporting
goods and optical fiber tension
members.

KURARAY

Polyester SOPHISTA: Made from
EVAL, SOPHISTA is a moistureabsorbent, quick-drying synthetic fiber.
Applications that bring it into directcontact with the skin are numerous,
including underwear, sportswear andwomen’s clothing.

MAJOR PRODUCTS

2,877

2,965

2,722

7,263

KURALON K-II: High strength andlow-temperature water solubility make
KURALON K-II suitable for a wide variety of applications, from industrial
materials to upholstery and clothing. It
is also highly regarded in the civil engineering and construction industries asa concrete additive that greatly adds to
its durability.

161

1,720

3,919

2,769

CAPITAL EXPENDITURE(¥ millions)

2,686

OPERATING INCOME(¥ millions)
3,768

In our textile business, we will be reorganizing polyester operations—in particular accelerating the shift to products withspecial characteristics—to achieve revenue improvements.
In addition, we will utilize the unique strength and alkaliresistance of KURALON to expand sales in the textile field.
As one measure to strengthen competitiveness, in April
2002 we transferred our polyester textile operations to19kuraray̲ar̲layout̲p01̲28 02.8.28 5:32 PM ページ 20

PERFORMANCE IN
THE FISCAL YEAR ENDED MARCH 31, 2002

20

Man-Made Leather Demand for CLARINO man-madeleather rose steadily in the Chinese market. Sales in Japan andthe United States for use in apparel and sales in Japan andEurope for use in interior furnishings increased gradually.
However, a recovery in the European market for use in apparelis later than predicted, and domestic sales were affected bypoor economic conditions, with the result that sales andincome were virtually unchanged from the previous fiscal year.
During the fiscal year under review, we introduced a new product, PARCASSIO, which offers the feel of natural leather.

NET SALES

32,10133,29010.5%¥32,101

31,641

Man-Made Leather,
Non-Woven Fabrics andFastening Materials

38,802(¥ millions)
35,557

REVIEW OF OPERATIONSNet sales of man-made leather, non-woven fabrics and fastening
materials increased 1.5%, or ¥460 million, to ¥32,101 million, but
operating income fell 27.6%, or ¥560 million, to ¥1,468 million.
Increased demand for low-priced goods brought an increase insales volume, but a decline in profits.

Total: ¥305,862
2002

98 99 00 01 02

2 5
6 6

1
4 4
3

Company name1) Kuraray America, Inc.

Capital
US$8.7 million

2) Kuraray Europe GmbH31.2 million

3) Kuraray Hong Kong Co., Ltd.

HK$4.65 million

4) Kuraray Co., Ltd.

¥88,955 million5) Haru-Kuraray GmbH

1.0 million

6) Lorica Sud S.r.l.

0.9 million•Manufacturing facility•Marketing base

Activities
Importing and sales of Kuraray
products
Sales of Kuraray products in
EuropeProcessing and sales ofKuraray products in China andSoutheast Asia
Manufacture and sales ofKuraray products
Sales of man-made leather inEuropeProcessing and sales of manmade leather

Non-Woven Fabrics Kuraray holds the top share of thedomestic market in the field of non-woven counter cloths, but
is still striving to expand sales. However, sluggish growth indemand and stiff competition in the field of general-purpose
materials resulted in a decline in profit margins on the sale ofnon-woven fabrics. As a result, profits declined despite aslight gain in sales revenues. Kuraray commands the top
share of the domestic market for fastening materials, andsales of a new type of hook and loop fastener were healthy.
However, sales of these materials for use in apparel wereaffected by weak consumer spending. Sales revenues,
therefore, declined slightly and profits were flat.

REGIONAL CONDITIONSJapan The domestic economy created severe conditions in
the man-made leather sector, but sales of non-woven materials and hook and loop fastener were strong.
Europe The Company strove to increase demand for manmade leathers for use in apparel, and to reduce inventories.
Kuraray also strove to expand sales of PARCASSIO, a high-kuraray̲ar̲layout̲p01̲28 02.8.28 5:32 PM ページ 21

value-added product used in interior furnishings and otherapplications. Our marketing of man-made leathers in Europe
has until recently been limited to Germany, but we are now
expanding our marketing area to include the entire EU.
North America In the existing poor business conditions, theCompany worked to gain a larger share of this market to
expand sales of man-made leather for use in apparel. On April
1, we consolidated Clarino America Corp. (a marketer of CLARINO) with Kuraray America, Inc., and are now proceeding withthe rationalization and strengthening of their marketing structure.
Asia To strengthen the operations of Kuraray Hong Kong
Co., Ltd., we established a Taiwan office on April 1 in a bid tomarket man-made leathers to the Chinese factories of major
athletic shoe manufacturers, and to increase the market penetration of their products.

OUTLOOK

CLARINO: Supple, strong, lightweight,
weather-resistant and easy to care for,
CLARINO is used in shoes, handbags,
athletic shoes, baseball gloves andlarge balls. AMARETTA is anotherbrand of our man-made leather born ofmicrotechnology, and is used in luxury
coats, jackets and interior furnishings.

PARCASSIO: In addition to the superior properties of man-made leathers,
PARCASSIO offers the look and feel ofnatural leather. It is sold throughout
the world for a multitude ofapplications, chiefly shoes andhandbags, and will be a key product inour man-made leather business in the
coming fiscal year.

98 99 00 01 02

1,439

1,556

1,524

2,034

2,028

1,468

2,402

KURAFLEX: A dry-laid non-woven fabric that combines moistureabsorbency, breathability, flexibility
and a texture that is pleasant to thetouch, KURAFLEX is used in products
ranging from cosmetics removers, wetwipes, counter cloths, face towels,
wiping cloths, surgical masks andfilters, to surgical gowns and sheets.

98 99 00 01 02

emphasizing the rationalization of production costs by reducing the number of man-made leathers produced byapproximately half, and is expanding sales of its high-end
product, PARCASSIO, initially for use in shoes. Overseas,
inventory adjustments are proceeding, and we expect thatvalue-added products for use in interior furnishings and carseats will find acceptance in the marketplace, and thatdemand will subsequently grow. Demand in the Chinese
market is rising, chiefly for products used in athletic shoes.
Our agreements with firms in North America, Europe andSoutheast Asia, which conduct final processing on intermediate products shipped from Japan, will in the future contributeto the expansion of sales volume. During the period in review,
the Company improved its capacity utilization to 85%, andplans to improve that figure to 90% by March 31, 2003, andto 100% by March 31, 2004.
The Company is striving for further production cost reductions in its non-woven fabric operations, and to maintainstable profits through strengthened sales of distinctive products with unique properties.

Melt-Blown Non-Woven Fabrics:
Our non-woven microfiber textiles areproduced through the melt-blowing
process. In addition to their superior filtration properties, they are permeable
and soft to the touch, making them suitable for coffee filters and other foodpackaging applications, as well as for
surgical masks and filters.

Hook and Loop Fastener: Used in awide variety of applications, including
clothing, sporting goods and medicalcare products, our MAGIC TAPE holds
the largest share in the domestic market.
The Company also has a molded plastic
hook and loop fastener with higher
bonding strength, suitable for use in car
seats, construction materials and otherindustrial uses.

KURARAY

4,650

4,525

CAPITAL EXPENDITURE(¥ millions)

5,454

OPERATING INCOME(¥ millions)

MAJOR PRODUCTS

In the domestic market, our man-made leather business is21kuraray̲ar̲layout̲p01̲28 02.8.28 5:32 PM ページ 22

PERFORMANCE IN
THE FISCAL YEAR ENDED MARCH 31, 2002
Net sales of diversified businesses increased 1.9%, or ¥765
million, to ¥40,946 million, while operating income jumped
30.6%, or ¥1,029 million, to ¥4,388 million. Profits on salesof medical products increased due to healthy sales of dental
materials. These cost-cutting measures by domestic subsidiaries also contributed to increases in their profits.

22

Other Products Engineering and other domestic subsidiaries pursued the rationalization of costs, which allowed

NET SALES

40,946

40,63140,181

Diversified Businesses

13.4%¥40,946

55,718(¥ millions)
47,481REVIEW OF OPERATIONS

Medical Products Sales of dental materials showedsteady expansion overseas, particularly in North America, andsales of medical devices were strong. Unfortunately, contact
lens sales were under severe pressure from competition withdisposable contact lenses. Total sales in this sector were flat,but profits increased.

Total: ¥305,862
2002

98 99 00 01 02

2
1
3 3

Company name1) Kuraray America, Inc.

Capital
US$8.72 million

2) Kuraray Europe GmbH31.2 million

3) Kuraray Co., Ltd.

¥88,955 million•Manufacturing facility•Marketing base

Activities
Importing and sales of Kuraray
products
Sales of Kuraray products in
EuropeManufacture and sales ofKuraray products

them to maintain healthy operations under adverse economic
conditions, as well as achieve slight growth in net sales andexpansion of profits. As a result of the poor economic conditions, the private sector has been reluctant to invest in
wastewater treatment facilities, and the public sector has
deferred investments in sewage treatment facilities. This has
made the term under review severe for our environmental
business. However, sales were steady of PVA gel in connection with water-purification systems that use septic tanks.

REGIONAL CONDITIONSJapan Since poor economic conditions had a detrimental
effect on sales of artificial organs and dental materials, theCompany concentrated on expanding the markets for new
products during the fiscal year under review. Reductions inkuraray̲ar̲layout̲p01̲28 02.8.28 5:32 PM ページ 23

Asia The Company has almost completed procedures forapproval to market dental materials and contact lenses in China,
and has nearly finished building a network of agents in that market. Marketing of contact lenses has already commenced.

OUTLOOK
Kuraray is working to expand operations in the environmental
and medical fields, as well as other strategic areas.
The business structure of Kuraray’s medical operations is

5,746

4,388

859

2,097

2,241

2,012

3,359

3,629

3,512

CAPITAL EXPENDITURE(¥ millions)

3,482

OPERATING INCOME(¥ millions)98 99 00 01 02

Artificial Kidneys: These products
use hollow-fiber membranes madefrom EVAL, a substance that is notharmful to the body. Kuraray’s
membranes also retard coagulationand have superior dialytic properties.
The Company is expanding themarketing of its filtration plasma
exchange system and the rest of its
artificial organ business.

Contact Lenses: The Company
makes contact lenses from polymers
with special characteristics, including
soft lenses made from hydrophilicacrylic resins, which offer superior
comfort, and continuous-wear hardlenses made from siloxane andfluorinated resins.

98 99 00 01 02

different from its other businesses in that, before the implementation of the in-house company system in April 2002, aneed for prompt decision-making led to its October 2001
split-off to become an independent company, Kuraray
Medical Inc. These measures have accelerated growth inoverseas sales, particularly of dental materials, as well as
product development and entry into new markets. Further,
we project that increased sales and cost reductions will
enable us to absorb the effects of revisions in the official government prices of artificial organs.
The anticipated revival of investments in environmental
countermeasures in both the private and public sectors represents a significant opportunity for the Company. The
installation of systems and equipment that use PVA gel andthe Company’s unique products, such as large-pore membranes, will spur market growth.

Industrial Membranes: Kuraray has
developed microfiltration membranes
capable of filtering microparticles
ranging in size from 0.003 to 3 microns,
and that are widely used in water
filtration, wastewater treatment andother industrial applications.

PVA Gel: Kuraray manufactures PVA
beads in a hive-like structure used totrap microorganisms. Each 4 mm beadis capable of trapping 1 billion microorganisms, which makes this materialvery useful in wastewater treatment.

KURARAY

Europe and North America Sales of dental materials
were strong in Europe and North America. Acceptance of theCompany’s new bonding agent increased, particularly in
America, and sales volume grew substantially.

Dental Materials: High-performancedental adhesives and filling materials
produced by Kuraray Medical Inc. haveestablished a strong presence in themarket by virtue of their superior adhesiveness, strength and ease of use.
The Company also markets an allpurpose cement that bonds metal caps
and implants, and dental resin
developed for aesthetic dental repair.

MAJOR PRODUCTS

costs kept domestic subsidiaries healthy, allowing them tocontribute to the recovery of profits.

23kuraray̲ar̲layout̲p01̲28 02.8.28 5:32 PM ページ 24

RESEARCH AND DEVELOPMENTRESEARCH AND DEVELOPMENTCORPORATE RESEARCH
FACILITIES
Kuraray has three corporate research facilities: theKurashiki Research Laboratories, the Tsukuba ResearchLaboratories and the Analytical Research Center. Thesefacilities are intensely involved in research and development (R&D) activities, with the primary objectives ofcreating new core businesses, strengthening andexpanding existing businesses, and deepening and reinforcing basic technologies, and seek effective
collaboration with organizations both inside and outside
the Company.
The Kurashiki Research Laboratories are engaged
chiefly in research involving chemicals used in organic
synthetics and polymer synthesis (monomers, pharmaceutical and agrochemical intermediates, etc.), and thedevelopment of such high-performance, sophisticatedmaterials as nanocomposites and new polymers.
The Tsukuba Research Laboratories are developing
new elastomers, optical products and molded products,

based primarily on research in the areas of polymer synthesis and molding and processing technology.
The Analytical Research Center conducts a broad
range of analysis and structural analysis in support of thedevelopment of materials and products. The Center’s primary function is evaluating the safety of materials in termsof toxicity, biodegradability and environmental hormone
activity. Beyond R&D, the Center supports the Kuraray
Group’s business activities, including manufacturing
processes and marketing.
Through the above R&D activities, the Company isable to establish operations in new areas where successis predicted, as well as to formulate innovative technology
for application in existing business areas. Basic responsibility for product development and production technology
R&D rests with the in-house companies and subsidiaries.
As needed, however, the parent company will support
them with its corporate research assets. This organizational structure achieves the acceleration of movementfrom product development to market.

CORPORATE RESEARCH FACILITIES

24
Kurashiki Research Laboratories
Organic synthesis technologies

Tsukuba Research Laboratories

Polymer synthesis technologies

Polymer synthesis technology•Synthesis research (fine chemicals, polymerism)•Process and catalyst research•Polycondensed polymers•PVA and EVOH research•High-performance materials (electrochemicals, nanocomponents)

Molding technology•Elastomers•Acrylics research•Development of optical products•Development of molded products•Precision polymerization
Analytical Research Center
Production analysis technology

Analysis

Biotechnology•Development of new materials (textiles and PVA materials)•Analysis support•Biotech-related research

ESTABLISHMENT OF NEW BUSINESS DEVELOPMENT
DEPARTMENT AND R&D&M STRUCTURE

IMPORTANT R&D AREAS AND
FUNDAMENTAL TECHNOLOGIES OF “G-21” PLAN

In the fiscal year ended March 31, 2001, Kuraray established the New Business Development Department within
its R&D organization to speed the planning, proposal andprogress of new businesses projects. The new department’s two primary objectives are: (1) opening channels
for the flow of new technological, operational and market
information, and (2) taking a new approach based on the
proposal of business development themes that connect
technological possibilities with market needs. These two
measures are intended to strengthen the Company’s ability to open up new business areas by formulating a
corporate project directed at market entry.

The “G-21” plan names four important development
themes as strategic areas to be targeted by the corporate
research organization. These are electronics, informationand optical materials, biomedical-related materials, environmental-protection-related materials, and high-performancematerials with new and exciting properties. The Company
plans to invest ¥75 billion (approximately 4% of net sales)in R&D by fiscal 2005. By concentrating R&D resourcesin areas in which we are strong—electrical and electronicparts (capacitors, new heat-resistant resins), optical materials (display devices, optics-related components),
medical materials (regenerative medicine components,

kuraray̲ar̲layout̲p01̲28 02.8.28 5:33 PM ページ 25

medical devices), pharmaceutical materials (pharmaceutical intermediates), and environment-related products(industrial membranes, VOC-free materials)—and with theCompany’s basic technologies (synthesis, polymerization,complex compounds, and molding and processing technology) as the common ground, we are able to move
rapidly from concept to actual business operations.

IMPORTANT R&D DOMAINS AND BASIC TECHNOLOGIES UNDER THE MEDIUM-TERM BUSINESS PLAN
Electronics and Information

Biomedical

Environment-related products

High-performance materials•Electrical and electronics parts •Optical materials•Capacitors •Display devices•Heat-resistant resins •Optics-related components•Medical materials •Medical devices•Regenerative medicinal components•Pharmaceutical materials•Pharmaceutical intermediates•Environmental cleanup •Environmental harmony•Industrial membranes•VOC-free materials•Nanocomponents•Elastomers

Surface functionality

Reactive molding
Systems engineering

Organic and inorganic

Optical design
Compounding technology

Precision molding

Precision production control
Biotechnology

New catalyst technology

Precision synthesis

Precision polymerization

DEVELOPMENTIN GROWTH FIELDSRESEARCH & TECHNICAL CENTER
TO BE ESTABLISHED

In the pursuit of long-term growth, we are scaling back or
terminating business operations whose competitivenesshas declined, while strengthening and expanding corebusinesses. In addition, R&D is indispensable to the creation of businesses in growth fields. The Kuraray Groupsees IT, environmental businesses, biotechnology, medicine and health care and new materials as growth fields,
and is taking aggressive steps to position itself accordingly.
In the IT field, we are employing the high level of precision molding and processing technology accumulated in
manufacturing such products as laser discs, light-guidepanels and metal stampers in the development of newmaterials for displays, abrasives for use in semiconductor
manufacturing, and highly heat-resistant polyamide
resins.
Our environmental businesses include the marketing offlexible acrylic resin, which is a substitute for PVC and canbe recycled or incinerated without special controls. In
addition, to reduce the environmental burden arising fromour manufacturing processes, we are developing anadhesive that does not contain organic solvents.
In the area of medicine and health care, we are developing alternative materials for use in regenerative medicine,and PVC substitutes for use in medical equipment.
Kuraray is using nanotechnology to develop new gasbarrier nanocomposite materials, metal substitutes andother new materials with new properties.

As Kuraray moves forward with the global expansion of allits businesses, the Company is increasingly aware of thedesirability of having bases in local markets to facilitate thelinkage of R&D with all available information, including
market research and evaluation. We have reinforced our
R&D capabilities in the U.S. market, where growth has
been striking. In autumn 2003, we will complete the construction of our Research & Technical Center, which will
provide R&D support to the entire Kuraray Group.
At present, we are pressing forward with expansion ofoperations, including production of our EVAL brand of
EVOH resin and our SEPTON thermoplastic elastomer.
We have manufacturing facilities for these products in the
United States, and are developing new applications forthem, as well as new products related these materials. In
the future, we will be broadening R&D in connection withsuch other businesses as Poval and Opto-screens,which we have been marketing in the United States.
R&D EXPENDITURES(Millions of yen)

FY 2001

12,131

FY 2000

12,251FY 1999

12,097
13,429FY 1998
13,707FY 1997
0

2,000

4,000

6,000

8,000

10,00012,00014,000KURARAY

Carbonation and activation25

kuraray̲ar̲layout̲p01̲28 02.8.28 5:33 PM ページ 26

CARING FOR THE ENVIRONMENTKURARAY’S ENVIRONMENTALPRESERVATION PROGRAMS
An important issue for the 21 century is the developmentof a recycling-oriented, sustainable society that can exist
in harmony with the planet. The Kuraray Group is contributing to the realization of such a society by reducing
the burden its operations impose on the environment,
and by reducing the amount of waste it generates. The
Group’s energetic environmental preservation activities
also include the development of environmentally friendly
products, and supporting both humanity and the planetby providing products that contribute to environmental
improvement.

CARING FOR THE ENVIRONMENTst

26

ENVIRONMENTALPRESERVATION ACTIVITIESIn the interest of environmentally friendly operations, in
1993 Kuraray crafted its “Kuraray Action Guidelines on
the Global Environment” and inaugurated its environmental preservation activities. In February 2001, theseguidelines were expanded to become the “Kuraray Group
Action Guidelines on the Global Environment,” taking
environmental preservation and improvement to theGroup level.
Kuraray has been a member of the Japan Responsible
Care Council (JRCC) since its establishment in 1995. The
council is made up of producers and handlers of chemicals, and calls for measures to protect the environment,
safety and health at each stage of a chemical product’s
life cycle, from product development to disposal.
Based on the Kuraray Group Action Guidelines on the
Global Environment, the Company has moved forwardwith effective environmental preservation activities, andfrom 1998 forward each of its operations has been taking
steps to acquire ISO 14001 certification for environmental
management systems. In December 2001, all ofKuraray’s domestic plants and laboratories acquired certification, and the rest of the Group is quickly moving
toward certification. In the future as well, the entire
Kuraray Group will be employing its environmental management systems, based on its ISO 14001 certification,
to further reduce the environmental burden.

KURARAY GROUP ACTION GUIDELINES
ON THE GLOBAL ENVIRONMENT
Basic Guideline
We will fulfill our responsibility to future generations
through corporate operations that are in harmony
with the global environment and the local community.
• Kuraray will undertake the following actions
to realize the above basic guideline.
(1) We will assign the highest priority to the environment and safety when undertaking corporate
operations.
(2) We will work to improve the global environment
and ensure its sustainability.
(3) We will develop technologies and product that
contribute to the goal of improving the global
environment.
Action Principles(1) Continual reduction of emissions of specified
chemical substances into the environment(2) Contribution to the prevention of global warming
through the promotion of energy conservation(3) Promotion of conservation, reuse, and recyclingof resources(4) Development and supply of technologies for
improving the environment with products having
low environmental impact(5) Utilization of environmentally friendly products(6) Public disclosure of environmental informationand dialog with community(7) Raising the level of environmental awareness andthe level of environmental management

OUR MEDIUM-TERM
ENVIRONMENTAL PLAN
The Kuraray Group’s “G-21” medium-term business planalso contains the Medium-Term Environmental Plan,
which will end in fiscal 2005. This plan calls for the voluntary reduction of environmental pollutants, and by 2001
the Company had reduced industrial waste processed byoutside contractors by 8,000 tons, or 55%, from 1999
levels. Through reuse and recycling, Kuraray’s effective

kuraray̲ar̲layout̲p01̲28 02.8.28 5:33 PM ページ 27

reuse rate, or recycling rate, rose by 10 percentage
points. In pursuing these measures, we achieved the firstyear’s goals of our Medium-Term Environmental Plan,
which we consider a success. Kuraray will continue striving to maintain the standards set forth in the plan.
CAPITAL EXPENDITURES FOR ENVIRONMENT(Millions of yen)

FY 2001

1,287
1,299

FY 2000
FY 1999

1,163

FY 1998384
544

FY 1997
0

200

400

600

800

1,000

1,200

1,400

Significant Actions Taken•The Company has installed equipment to incinerate
toluene, dimethylformamide, formaldehyde and otherwaste gasses, thereby reducing environmental impact
from the emission of toxic chemicals.
•We are moving forward with the production of solid fuelfrom waste plastic and other materials (refuse-derived
fuel, or RDF), and thermal recycling.
•We decided to convert the boiler fuel at our Nakajo
Plant from heavy oil to natural gas, and made the necessary capital investments in fiscal 2001. When theplant is restarted at the end of June 2002, emissions ofsulfur oxides (SOX) and carbon dioxide (CO2) will be
substantially lower.

TargetUnits

Fiscal 1999

Fiscal 2001

Fiscal 2005

Reduction of 90% in emissions of substances coveredby Pollutant Release and Transfer Register (PRTR)

Tons

5,968 (100%)

4,557 (76%)

597 (10%)

Reduction of 90% in industrial waste sent
to waste disposal firms

Kilotons

14.6 (100%)

6.6 (45%)

1.5 (10%)

Increase of 20 percentage points in effective utilizationof industrial waste (60–80%)

%

60

70

80

Increase of 6% in energy usage efficiency (1% per year)

%

—

3.1

6

Note: Figures in parentheses above are year-on-year changes, with fiscal 1999 = 100%.

ENVIRONMENT-RELATEDBUSINESSES
The “G-21” plan identifies environment-related businesses
as a strategic area, and the Kuraray Group is expanding
its presence in this area.
The Group’s environment-related businesses are divided
into two areas: the Eco-friendly Areas and theEnvironment Business Areas. In the Eco-friendly Areas,
our goal is to expand sales of substitutes for environmentally harmful substances to ¥80 billion by fiscal 2005,
through such products as KURALON as a substitute forasbestos, EVAL as a gas barrier, and SEPTON, HYBRAR
and soft acrylics substitutes for PVC and vulcanized rubber. In the Environment Business Areas, which
encompasses areas that contribute to environmental
preservation and reform, the Company is engaged in the
NET SALES BY CATEGORY(Billions of yen)

FY 200580(Consolidated
Net sales ¥460)

25

FY 200145(Consolidated
Net sales ¥306)

10

FY 2000

40(Consolidated
Net sales ¥314)

10
0

10

20

Eco-friendly Areas

30

40

50

60

Environment Business Areas7080

development and sale of treatment systems for water
purification and wastewater. We plan to expand our sales
in this area to ¥25 billion by fiscal 2005.

REGULATORYCOMPLIANCE
To clarify administrative procedures for compliance withenvironmental regulations, the Company has established
its internal regulation as a part of its environmental management systems. Further, since even a small incident or
unexpected situation in a factory can have expanding
effects on the environment, and to ensure that we are able
to efficiently comply with relevant regulations, we haveestablished standards for atmospheric and wastewater
emissions that are stricter than existing laws and regulations. There were no environmental regulatory complianceproblems within the Kuraray Group during fiscal 2001.
Since 1998, Kuraray has published its Environmental
Activities Report annually, in the interests of disclosing
environmental information. Detailed information regarding
fiscal 2001 can be found in the 2002 edition of this report.

KURARAYSTATUS OF THE MEDIUM-TERM ENVIRONMENTAL PLAN

27

kuraray̲ar̲layout̲p01̲28 02.8.28 5:33 PM ページ 28

FINANCIAL SECTION
Consolidated Six-Year Summary
Kuraray Co., Ltd. and Consolidated Subsidiaries

Millions of yen

FINANCIAL SECTION

Years ended March 31

28

2002

2001

2000

1999

1998

1997

Thousands of
U.S. dollars
2002

Net sales¥305,862 ¥313,651 ¥316,444 ¥336,466 ¥347,643 ¥340,112 $2,299,714
Cost of sales
228,184 234,946 235,603 250,195 259,788 255,240
1,715,669
Selling, general andadministrative expenses
58,72058,77460,52059,123
58,95758,324
441,504
Operating income
18,95819,931
20,321
27,14828,89826,548142,541
Net income
2,866
4,045
7,452
13,171
13,962
11,741
21,549
Capital expenditure
50,716
15,814
19,76433,49720,806
19,049381,325
Depreciation and amortization
16,056
16,593
16,76915,557
14,615
14,111
120,723
Gross cash flow
18,922
20,63824,221
28,72828,57725,852
142,272
Total research anddevelopment expenses
12,131
12,251
12,097
13,42913,707
13,592
91,211
Total assets
487,432 512,479 503,766 487,991 478,861 514,167
3,664,902
Total current assets
198,474 239,654 213,293 208,113 216,416 223,543
1,492,286
Property, plantand equipment, net
134,907 127,468 128,343 129,026 115,099
97,3271,014,338
Total current liabilities
122,274 110,234
87,592 108,261 135,170 186,925
919,353
Total long-term liabilities
74,460 112,723 133,047 119,451 109,826 118,262
559,850
Total shareholders’ equity
290,643 289,469 282,755 259,909 233,494 208,635
2,185,286
Amounts per share:
Net income
Primary
Fully diluted
Cash dividends applicableto period
Total shareholders’ equity
Financial ratio:
Ratio of cost of sales (%)
Equity ratio (%)
Return on equity (%)
Return on assets (%)
Number of employees

Yen

U.S. dollars

¥7.49
7.45

¥10.56
10.46¥20.0019.42¥36.8334.56¥40.4637.68¥34.99
32.48

$0.06
0.06

9.00
759.259.00
756.079.00
738.539.00
714.219.00
658.999.00
613.26

0.07
5.71

74.6%
59.6
1.0
3.8
7,115

74.9%
56.5
1.4
3.9
7,121

74.5%
56.1
2.7
4.1
7,433

74.4%
53.3
5.3
5.6
6,823

74.7%
48.8
6.3
5.8
7,809

75.0%
40.6
6.1
5.1
6,606

Notes: The United States dollar amounts represent translation of Japanese yen at the rate of ¥133=$1.
Certain reclassifications of previously reported amounts have been made to conform with current classifications.

CONTENTS
28

Consolidated Six-Year Summary

29

Financial Review

34

Consolidated Balance Sheets

36

Consolidated Statements of Income

37

Consolidated Statements of Shareholders’ Equity

38

Consolidated Statements of Cash Flows

39

Notes to Consolidated Financial Statements

48

Report of Independent Accountants

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 29

The following report refers to the consolidated financial
statements of the Kuraray Group for the year ended
March 2002 (from April 1, 2001, to March 31, 2002).
Note: Percentage comparisons with the previous year’s results have been rounded
to one decimal place.

Sales
Total consolidated net sales fell 2.5%, or ¥7,789 million(US$58,564 thousand), to ¥305,862 million (US$2,299,714
thousand) for the fiscal year under review. Sales of fibers
and textiles declined ¥10,548 million (US$79,308 thousand), or 11.6%, to ¥80,274 million (US$603,564
thousand), largely due to a withdrawal from rayon operations, and price as well as volume declines in polyester
products. Polyester filament suffered significant deterioration due to stagnant consumption and operating cutbacks
in women’s wear and the uniforms segment, while polyester staple was hurt by competition from Chinese imports.
Sales of KURALON in applications using such unique characteristics as FRC and rubber reinforcement materials saw
firm demand, but demand for traditional applications and
KURALON K-II were weak.
Sales of chemical products grew 1.0%, or ¥1,534
million (US$11,534 thousand), to ¥152,541 million(US$1,146,924 thousand).
Poval sales volumes declined due to a change in theaccounting period for Kuraray Specialities Asia Pte., Ltd.,
while domestic prices remained stable and sales to China
and Europe were firm. Kuraray purchased Clariant AG’s
businesses and established Kuraray Specialities EuropeGmbH during the fiscal year under review. However, as
the new firm has a December accounting year, its business results will be reflected from next fiscal year.
EVAL volumes were up owing to good demand fromNET SALES & OPERATINGINCOME PER NET SALES(Millions of yen)
350,000

Europe, and prices as a whole were stable. MMA
monomer revenues were adversely affected by noticeable
unit price declines, while strong demand continued for
opto-screens and methacrylic resin used in light-guidepanels. SEPTON and HYBRAR sales recorded increases,
while the performance of commodity chemical products
was stunted by weak demand. On the other hand, finechemicals saw increased sales volumes of agrochemicals
as well as foreign exchange rate benefits. For other products, Kuraray Chemical Co., Ltd.’s revenues increased,
while other chemical product revenues were weak.
Sales of man-made leather, non-woven fabrics andfastening materials increased 1.5%, or ¥460 million(US$3,459 thousand), to ¥32,101 million (US$241,361
thousand). CLARINO sales in Europe recovered slower
than our original projections, but the recovery picked up
towards the end of the year. However, due to the weakdomestic economy and the effects of the September 11
terrorist attacks in the United States, overall sales were
flat. Non-woven fabric sales volumes increased thanks tocontributions from wet wiper products and others, butintensified price competition led to declines in sales value.
Fastening materials were negatively affected by weak
consumption, but brisk sales of new products helped
produce an overall sales gain.
Sales from diversified businesses, comprising medical
products and other items, grew 1.9%, or ¥765 million(US$5,752 thousand), to ¥40,946 million (US$307,865
thousand), compared with the previous fiscal year. In
terms of contribution to growth, sales of dental materials
continued to be strong in the U.S. and in Europe, andthere was also brisk demand for artificial organs. In addition, our domestic affiliated companies showed good
NET SALESBY BUSINESS SEGMENT(%)(Millions of yen)
350,000

10

347,643

111,041
336,466

300,000

250,000

103,120
316,444 313,651

8.3

9305,862

300,000

8

250,000

7

200,000

6

150,000

5

100,000

8.1

200,000
6.4

150,000

6.4

6.2

100,000

4

50,000

0

98

99

00

01

02

3

98,08890,82280,274150,319 142,071 144,435

38,802

151,007 152,541

35,55733,29031,641

32,10150,000Net sales
Operating income
per net sales

047,481

55,71840,631

98

99

00

40,181

01

40,94602

Fibers and textiles
Chemical products
Man-made leather,
non-woven fabrics andfastening materials
Diversified businesses

KURARAY

Financial Review

29FINANCIAL SECTION

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 30

30

performance thanks to cost savings as a result of
rationalization.
By geographic area, domestic sales in Japan, which
struggled because of the deflationary economy, declined
4.5% to ¥263,788 million (US$1,983,368 thousand) during the fiscal year under review. As a result, Japan’s
percentage of total net sales declined 1.8% to 86.2%
compared with 88.0% in the previous fiscal year. Since
our assets in Europe now exceed 10% of total consolidated
assets, we created a separate “Europe” sales division fromthe fiscal year ended March 31, 2002. European sales
were supported by favorable sales of EVAL, and grew
13.6% to ¥12,273 million (US$92,278 thousand) eventhough inventory liquidations in man-made leather andother products were a limiting factor. As a percentage of
total net sales, Europe increased 0.6% to 4.0% comparedwith 3.4% in the previous fiscal year. Sales to all otherareas increased 11.5% to ¥29,801 million (US$224,068
thousand), representing 9.7% of total net sales, comparedwith 8.5% in the previous fiscal year. In North America,
sales were boosted by favorable demand for SEPTON
and HYBRAR thermoplastic elastomers, opto-screens for
PTVs and EVAL. Sales in Asia were lower than in the previous fiscal year due to a change in the accounting period at
Kuraray Specialities Asia.

cost reduction efforts.
Selling, general and administrative expenses were basically flat compared with the previous fiscal year at ¥58,720
million (US$441,504 thousand), and therefore rose as apercentage of total net sales from 18.7% last year to19.2%. Increased expenditure to strengthen our overseas
sales organization and other miscellaneous expenses prevented a more noticeable decline in these expenses.
This notwithstanding, Kuraray was able to trim overall
operating costs by approximately ¥1,800 million as aresult of Group-wide cost reductions implemented during
the fiscal year under review, particularly in personnel,
logistics and raw materials.
Operating Income and Net Income
Because of ongoing domestic deflation and a global IT
recession, both sales volumes and average selling prices
declined. This was partially offset by a weaker average
yen rate against the U.S. dollar and the euro as well as bylower oil and natural gas prices. The net result was a
4.9% decline in operating income to ¥18,958 million(US$142,541 thousand) from ¥19,931 million in the previous fiscal year. Thus, the operating income ratio
deteriorated only slightly to 6.2% from 6.4% in the previous fiscal year.
The other income and expenses deficit decreased to¥12,757 million (US$95,917 thousand) from ¥12,131
million in the previous fiscal year. Interest and dividend
income fell ¥1,188 million (US$8,932 thousand) to¥2,471 million (US$18,579 thousand). In addition to theabsence of the ¥3,014 million gain on sale and appreciation of marketable securities recorded last year, a loss

Operating Costs
The cost of sales fell ¥6,762 million (US$50,842 thousand) to ¥228,184 million (US$1,715,669 thousand), andrepresented 74.6% of total net sales, versus 74.9% in theprevious fiscal year. The decline in cost of sales was
mainly attributable to the decline in total net sales, and to

NET SALESBY GEOGRAPHIC SEGMENT

NET INCOME &NET INCOME PER SHARE(Millions of yen)

(Millions of yen)

15,000350,000
347,64350

26,731(Millions of yen)
150,000

13,17129,801

32,95340

12,000125,000

12,273250,000

120,11440.46

10,807

105,492

36.83

101,497

100,000

309,182

96,56230

9,000

200,000

79,5837,452

150,000

75,000

6,000

20
20.00

100,000

50,000
4,045

283,491 276,113
263,788

50,0000

INTEREST-BEARING DEBT

13,962

27,284300,000

(Yen)

98

99

00

01

Domestic
Outside Japan
EuropeOther

02

Note: Full geographic segment breakdowns were notreleased before FY01

2,866

3,000

10.56

10
25,000

7.49

0

98

99

00

01

02

0

Net income
Net income per share (primary)

0

98

99

00

01

02

on write-down of investment securities of ¥6,524 million (US$49,053 thousand) was recorded, which waslargely attributable to significant declines in the market
value of our holdings of bank stocks. Restructuring
charges of ¥7,925 million (US$59,586 thousand) consisted of an approximate ¥4,900 million charge forliquidation and write-downs of inventories, and an
approximate ¥3,000 million charge for the split-off ofour polyester filament operations. Conversely, a¥7,596 million charge for a special provision for retirement benefits recorded in the previous fiscal year wasabsent this year.
Income before income taxes declined ¥1,599 million(US$12,023 thousand) to ¥6,201 million (US$46,624
thousand), representing a 20.5% decline from the previous fiscal year. Net income fell 29.1%, or ¥1,179 million(US$8,865 thousand), to ¥2,866 million (US$21,549
thousand) for the fiscal year under review. Consequently,
fully diluted earnings per share fell 28.8% from the previous fiscal year to ¥7.45 (US$0.06) per share, comparedwith ¥10.46 per share in the previous fiscal year.

sales activity led to a ¥7,420 million (US$55,789 thousand)decline in notes and accounts receivable, trade to ¥88,605
million (US$666,203 thousand).
The reported reduction in inventories was ¥4,351 million(US$32,759 thousand) falling to ¥71,194 million(US$535,293 thousand). However, actual inventory reductions of approximately ¥7,000 million were partially offset by
the addition of approximately ¥2,000 million of inventories
from the newly formed Kuraray Specialities Europe, and an
approximate ¥1,000 million effect from the weaker yen.
Property, plant and equipment, excluding accumulated depreciation, increased ¥7,439 million (US$55,932
thousand) to ¥134,907 million (US$1,014,338 thousand),largely owing to the recording of machinery and equipment assets related to Kuraray Specialities Europe, andan increase in construction-in-progress due to the construction of a new plant by Septon Company of America.
Investments and other assets increased ¥8,694 million(US$65,368 thousand) to ¥154,051 million (US$1,158,278
thousand). This was largely due to the recording of ¥29,591
million (US$222,489 thousand) of goodwill resulting fromthe purchase of assets related to Kuraray Specialities
Europe. Conversely, there was an approximate ¥20,000
million decline in investment securities.
Working capital (the difference between the balanceof notes and accounts receivable plus inventories, andnotes and accounts payable) was ¥106,496 million(US$800,721 thousand), down ¥8,804 million(US$66,195 thousand) from the previous fiscal year. As aresult, the current ratio declined to 162.3% from 217.4%
in the previous fiscal year. Return on total assets (ROA)
declined 0.1 point from 3.9% to 3.8%.

Financial Position
Current assets declined ¥41,180 million (US$309,624
thousand) to ¥198,474 million (US$1,492,286 thousand),primarily due to a ¥26,675 million (US$200,564 thousand)decrease in cash and cash equivalents to ¥13,496 million(US$101,474 thousand), and to a ¥7,223 million(US$54,308 thousand) drop in marketable securities, to¥7,464 million (US$56,120 thousand). These declines inliquidity were attributable to our purchase of Clariant’s businesses, and reduction of interest-bearing debt. Slower

NUMBER OF MONTHS’SALES IN INVENTORIES(Millions of yen)(Months)
3.0

250,000

2.9(Millions of yen)
300,000

239,654282,755

2.8

2.8

216,416

2.6

208,113

2.5

2.5

SHAREHOLDERS’ EQUITY &EQUITY RATIOTOTAL CURRENT ASSETS &TOTAL CURRENT LIABILITIES(%)
289,469 290,643

100

259,909

213,293
198,474

200,000

250,000
233,494

200,000

2.0

70

150,000
135,170
122,2741.5

59.6

150,000

56.1

110,234

108,261

56.5

53.3
48.8

100,000

87,592100,000

1.0

40

50,0000.5

050,000

98

99

00

01

02

0

98

99

00

01

Total current assets
Total current liabilities

02

0

98

99

00

01

Shareholders’ equity
Equity ratio

02

10

KURARAY

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 31

31

FINANCIAL SECTION

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 32

32

In liabilities and shareholders’ equity, total liabilities
declined ¥26,223 million (US$197,165 thousand) to¥196,734 million (US$1,479,203 thousand). Total current
liabilities increased ¥12, 040 million (US$90,526 thousand)to ¥122,274 million (US$919,353 thousand), mainly
because of the transfer of long-term debt due within one
year to current liabilities. Without these transfers, current liabilities actually decreased. Long-term liabilities declined¥38,263 million (US$287,692 thousand), on account of
the noted transfers of long-term debt due within one year tocurrent liabilities, and a net ¥18,643 million (US$140,173
thousand) decline in long-term debt. In addition, accrued
retirement benefits declined ¥4,675 million (US$35,150
thousand), mainly due to special severance payments
accrued in the previous fiscal year being paid out.
Shareholders’ equity increased ¥1,174 million(US$8,827 thousand) to ¥290,643 million (US$2,185,286
thousand), mainly on account of the reversal of a ¥1,609
million cumulative translation adjustment resulting in an
overall ¥1,789 million (US$13,451 thousand) gain. This
offset a ¥1,353 million (US$10,173 thousand) reduction in
the unrealized gain on revaluation of securities. Retained
earnings decreased ¥824 million (US$6,195 thousand) to¥110,798 million (US$833,068 thousand) compared withthe previous fiscal year.
The equity ratio on the average equity for the period
under review improved 3.1 percentage points to 59.6%,
largely due to the decline in interest-bearing debt.
Cash FlowsNet cash provided by operating activities recorded a surplusof ¥18,697 million (US$140,579 thousand), compared with

ROE

¥15,887 million in the previous fiscal year. As depreciation
and amortization expenses were largely unchanged at¥16,056 million (US$120,722 thousand), the ¥6,524(US$49,053 thousand) loss on the write-down of investment securities was a major factor in the cash flow increase.
Another significant contributor to increased operating cash
flow was a ¥5,513 million (US$41,451 thousand) decrease
in inventories. Conversely, a ¥7,358 million (US$55,323
thousand) decrease in notes and accounts payable, and a¥4,699 million (US$35,331 thousand) decrease in accrued
retirement benefits worked against the improved cash flows.
Net cash used in investing activities was ¥24,225 million (US$182,143 thousand), largely due to theacquisitions of property, plant, equipment and intangible
assets, which amounted to ¥48,478 million (US$364,496
thousand), the majority of which was attributable to theacquisition of the Clariant (Kuraray Specialities Europe)businesses. Conversely, proceeds from sales of investment securities amounting to ¥24,495 million(US$184,173 thousand) partially offset these cash outflows.
Net cash used in financing activities amounted to¥21,450 million (US$161,278 thousand), largely due tothe repayments of long-term debt totaling ¥20,233 million(US$152,128 thousand). This was in keeping with theCompany’s continuing efforts to strengthen its balance
sheet.
Overall, there was a net decrease in cash and cash
equivalents of ¥26,675 million (US$200,564 thousand),
which resulted in ¥13,496 million (US$101,474 thousand) worth of cash and cash equivalents, at the end of
the period.

TOTAL ASSETS & ROA(%)(Millions of yen)

7

GROSS CASH FLOWS

(%)
6.0

600,000

30,000(Millions of yen)

50

5.8
6.3

14,6155.6

6500,000 478,861 487,991

503,766 512,479

15,557487,432

24,0005.3

40

16,76955.0

400,000

16,593
16,05618,000430

300,000
13,962

3

12,0002.7

200,000

4.1

13,171

20

4.0

3.9
3.8

2

7,452

6,000
1

10

100,000

1.4

4,045

1.0

2,866

0

98

99

00

01

02

0

98

99

00

Total assets
ROA

01

02

3.0

0

98

99

00

01

02

0

Depreciation and amortization
Net incomekuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 33

Capital Expenditure
Capital expenditure for the year under review was¥50,716 million (US$381,325 thousand), significantly
higher than ¥15,814 million in the previous fiscal year.
The bulk of this expenditure, ¥45,541 million(US$342,414 thousand), was in our core chemical products businesses. Kuraray expanded its overseas PVA
capacity through the purchase of Clariant’s businesses,
and expanded production capacity for SEPTON thermoplastic elastomer in the United States. Other capacity
expansions included that for PVA film used for LCDs and
GENESTAR heat-resistant polyamide resin. At the sametime, in order to improve rationalization and production
efficiency in fibers and textiles, man-made leather andnon-woven fabrics and fastening materials, the Company

invested ¥2,877 million (US$21,632 thousand) and¥1,439 million (US$10,820 thousand), respectively. In
medical products and other diversified businesses, ¥859
million (US$6,459 thousand) was invested to further rationalize the production processes.
OutlookIn the fiscal year ending March 31, 2003, the Japaneseand world economies are forecast to recover, but numerous uncertainties remain. For Japan, it is expected thatcurrent deflationary trends will continue.
Since a significant improvement in the external operating environment is unlikely, it is imperative that Kuraray
concentrate its internal efforts on improving profitability.
The Company is making every effort to achieve its statedobjective of reducing overall operating costs by approximately ¥6 billion over the next fiscal year. As regards
specific product division strategies, Kuraray will continue
to restructure its polyester business and work to ensure asolid recovery in the man-made leather business. In addition, the Company will strive to further enhance the profit
contribution of its chemical businesses, particularly ofhigh-performance resins centering on EVAL, SEPTON
and others, as well as of opto-screens, PVA film and ITrelated materials.
Kuraray will also continue to pursue its financial goalsof further reductions in inventory levels, and a more strategic use of financial assets, to achieve continued
improvements in asset efficiency that will contribute to theCompany’s goal of achieving an ROA in excess of 7% by
the fiscal year ending March 31, 2006.

TOTAL R&D EXPENDITURE
BY BUSINESS SEGMENT

CAPITAL EXPENDITURE
BY BUSINESS SEGMENT(Millions of yen)

(Millions of yen)
15,000600,000
13,707

13,42912,097

12,25150,716
12,131500,000

2,877

12,0001,889

400,000
9,000

33,4973,919

300,000
6,983

45,541

6,000

20,806

19,764
2,965
15,814200,000

3,000

1,410

1,849

0

98

99

00

01

02

Fibers and textiles
Chemical products
Man-made leather,
non-woven fabrics andfastening materials
Diversified businesses

7,263

22,812

2,722

100,000

0

9,529
9,497
2,034
2,012

98

1,524

9,439

5,746

1,556
2,097

4,525
2,241

99

00

01

1,439
859

02

Fibers and textiles
Chemical products
Man-made leather,
non-woven fabrics andfastening materials
Diversified businesses

KURARAY

Research and Development
Kuraray’s research and development (R&D) activities havebeen refocused to maximize the commercial potential of
its unique technological resources, and to facilitate accelerated development of new, high-value-added products.
For the year under review, total R&D expenditure was¥12,131 million (US$91,211 thousand), 4.0% of total
sales. Chemical products R&D (including research onelectronic materials and other fine chemicals in addition to
nano-composites) accounts for the largest portion of thisexpenditure at ¥6,983 million (US$52,504 thousand) or
57.6% of the total, followed by fibers and textiles at¥1,889 million (US$14,203 thousand), medical products
and others at ¥1,849 million (US$13,902 thousand) andman-made leather and non-woven fabrics at ¥1,410 million (US$10,602 thousand).

33

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 34

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

Millions of yen
March 31, 2002 and 2001

FINANCIAL SECTIONASSETS
Current assets:
Cash and cash equivalents
Marketable securities (Note 3)
Notes and accounts receivable (Note 11):
Trade
Unconsolidated subsidiaries and affiliates
OthersLoans receivable from unconsolidated subsidiaries and affiliates
Allowance for doubtful accounts

34

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:
Goodwill
Other intangible fixed assets
Investment securities (Note 3)
Investments in unconsolidated subsidiaries and affiliates
Loans receivable from:
Unconsolidated subsidiaries and affiliates
OthersDeferred income taxes (Note 7)
OthersAllowance for doubtful accounts

See notes to consolidated financial statements.

2002

Thousands of
U.S. dollars(Note 1)

2001

¥ 13,496 ¥ 40,171 $7,464
14,687

2002

101,474
56,12088,605
1,187
2,000
368
(486)
91,67496,025
918
4,396
640
(689)
101,290666,203
8,925
15,0372,767(3,654)689,278

71,194
6,947
7,699
198,474

75,5455,355
2,606
239,654535,293
52,23357,8881,492,286

24,23924,349182,248
87,704
86,635
659,429
370,649 357,405
2,786,835
15,7997,897
118,789
498,391 476,286
3,747,301(363,484) (348,818) (2,732,963)
134,907 127,468
1,014,338

29,591
1,582
50,423
2,822—
763
71,397
2,755

222,489
11,895379,120
21,2185,281
5,616
39,707
1,275
1,326
9,586
5,625
6,323
42,29358,76258,481
441,820(1,310)(1,304)(9,850)154,051 145,357
1,158,278¥ 487,432 ¥ 512,479 $ 3,664,902

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 35

2002

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
Others
Accrued income taxes (Note 7)
Deferred income taxes (Note 7)
Accrued expenses and otherTotal current liabilities
Long-term liabilities:
Long-term debt (Note 5)
Deferred income taxes (Note 7)
Accrued retirement benefits (Note 8)
OthersTotal long-term liabilities

Minority interests

2001¥ 10,471 ¥ 8,807 $
36,56020,228

2002

78,729274,887

47,647
791
8,052
1,799
3
16,951
122,274

54,147
1,277
6,160
2,196
2
17,417110,234

358,248
5,947
60,542
13,526
23
127,451
919,353

32,552
4,631
20,661
16,616
74,46067,527
3,859
25,336
16,001
112,723

244,752
34,820155,346
124,932
559,850

55

53

413

Commitments and contingencies (Note 11)

Shareholders’ equity (Note 6):
Common stock:
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

88,95588,955
668,835
87,147
87,147655,241
110,798 111,622
833,068
2,002
3,355
15,052
1,789(1,609)13,451
290,691 289,470
2,185,647
(48)
(1)
(361)
290,643 289,469
2,185,286¥ 487,432 ¥ 512,479 $ 3,664,902

KURARAY

Millions of yen

Thousands of
U.S. dollars(Note 1)35

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 36

Consolidated Statements of Income
Kuraray Co., Ltd. and Consolidated Subsidiaries

Millions of yen
Years ended March 31, 2002 and 2001

FINANCIAL SECTION

Net sales
Cost of sales (Note 10)(Gross profit)
Selling, general and administrative expenses (Notes 9 and 10)(Operating income)

36

2002

2,471
169
(2,053)(7,925)(6,524)——
1,105(12,757)
6,201(Income before income taxes)
Income taxes (Note 7):
Current
Deferred

Net income per share:
Primary
Fully diluted
See notes to consolidated financial statements.

2001

2002

¥ 305,862 ¥ 313,651 $ 2,299,714
228,184 234,946
1,715,669
77,67878,705584,045
58,72058,774
441,504
18,95819,931
142,541

Other income (expenses):
Interest and dividend income
Equity in earnings of affiliates
Interest expense
Restructuring charges
Loss on write-down of investment securities
Special provision for retirement benefits (Note 8)
Gain on sale and appreciation of marketable securities
Other, net

Minority interests in net income of consolidated subsidiaries
Net income

Thousands of
U.S. dollars(Note 1)

¥

3,107
217
3,324
(11)
2,866 ¥

¥ 7.49
7.45

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

18,5791,271(15,436)(59,586)(49,053)——
8,308(95,917)46,624

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

23,361
1,631
24,992(83)
21,549Yen

U.S. dollars(Note 1)

¥10.56
10.46$ 0.060.06

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 37

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

Millions of yen
Unrealized
gain
on revaluation
Cumulative
Retainedof securities
translation
earnings(Note 3) adjustments

Commonstock

Additional
paid-in
capitalBalance at March 31, 2000
Net income
Cash dividends, ¥9.00 per share
Bonuses to directors and statutory auditors
Effect of changes in reporting entities
Changes in unrealized gain on revaluationof securities
Translation adjustments
Balance at March 31, 2001
Net income
Cash dividends, ¥9.00 per share
Bonuses to directors and statutory auditors
Effect of changes in reporting entities
Effect of change in an accounting standard
for a foreign affiliate
Changes in unrealized gain on revaluationof securities
Translation adjustments
Balance at March 31, 2002

¥ 88,955¥87,147¥ 88,955¥87,147¥110,798

Balance at March 31, 2001
Net income
Cash dividends, $0.07 per share
Bonuses to directors and statutory auditors
Effect of changes in reporting entities
Effect of change in an accounting standard
for a foreign affiliate
Changes in unrealized gain on revaluationof securities
Translation adjustments
Balance at March 31, 2002

$668,835$655,241$ 839,263
21,549(25,909)(414)
0¥111,151
4,045(3,446)
(60)
(68)

¥

—

¥(4,496)

3,355¥ 88,955¥87,147¥111,622
2,866(3,446)(55)
0¥3,355

2,887¥(1,609)

KURARAY

Years ended March 31, 2002 and 2001

(189)

37

(1,353)¥2,002

3,398¥ 1,789

Thousands of U.S. dollars (Note 1)

See notes to consolidated financial statements.

$ 25,225$ (12,098)(1,421)(10,173)$668,835$655,241$ 833,068$ 15,052

25,549$ 13,451

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 38

Consolidated Statements of Cash Flows
Kuraray Co., Ltd. and Consolidated Subsidiaries

Millions of yen

FINANCIAL SECTION

Years ended March 31, 2002 and 2001

38

Thousands of
U.S. dollars(Note 1)

2002

2001

2002

¥ 2,866¥ 4,045$ 21,549

16,056(4,699)
—
6,524
7,971
5,513
(7,358)(8,176)
18,697

16,593
3,280(3,014)—(5,799)1,213
2,122(2,553)
15,887

120,722(35,331)—
49,05359,932
41,451(55,323)(61,474)
140,579(3,349)(48,478)(20)
24,495
3,127(24,225)

2,667(17,583)(3,116)30,891
7,464
20,323(25,180)(364,496)(150)
184,173
23,510(182,143)

1,204
1,025
(20,233)(3,446)(21,450)

(948)
1,550
(7,604)(3,446)(10,448)

9,053
7,707
(152,128)(25,910)(161,278)

Effect of exchange rate changes on cash and cash equivalents

303

518

2,278

Effect of changes in reporting entities

—

22

—

Net (decrease) increase in cash and cash equivalents(26,675)

26,302(200,564)

Cash and cash equivalents at beginning of year

40,171

13,869302,038¥ 13,496¥ 40,171$ 101,474

Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization(Decrease) increase in accrued retirement benefits
Gain on sale and appreciation of marketable securities
Loss on write-down of investment securities
Decrease (increase) in notes and accounts receivable
Decrease in inventories(Decrease) increase in notes and accounts payable
Other, net
Net cash provided by operating activities
Cash flows from investing activities:(Increase) decrease in marketable securities
Acquisition of property, plant, equipment and intangible assets (Note 2)
Payments for purchase of investment securities
Proceeds from sale of investment securities
Other, net
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Increase (decrease) in short-term bank loans
Proceeds from long-term debt
Repayments of long-term debt
Dividends paid
Net cash used in financing activities

Cash and cash equivalents at end of year
See notes to consolidated financial statements.

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 39

Notes to Consolidated Financial Statements
Kuraray Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2002 and 2001

1. Basis of presenting consolidated financial statements:
These consolidated financial statements are prepared in accordance with the provisions set forth in the Japanese Securities andExchange Law and the related accounting regulations, and in
conformity with accounting principles and practices generally
accepted in Japan, which are different in certain respects from theapplication 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 to present them in a form, morefamiliar to readers outside Japan. In addition, certain notes includ-ed herein are not required under accounting principles and practices generally accepted in Japan but are presented as additional
information.
The United States dollar amounts included herein are provided
solely for convenience and are stated, as a matter of arithmeticalcomputation only, at the rate of ¥133=$1, the approximate
exchange rate prevailing on March 31, 2002. The translations
should not be construed as representations that the Japanese
yen amounts have been, could have been or could in the future
be, converted into United States dollars at this or any other rate.

2. Significant accounting policies:(b) Cash and cash equivalents
Cash and cash equivalents include all highly liquid investmentswith original maturity of three months or less, for which at least theface amount can be withdrawn at any time without penalty.
(c) Inventories
Inventories, other than supplies, are stated at cost principally determined using the weighted average method. Supplies are stated atcost principally determined using the moving average method.
(d) Property, plant and equipment
Property, plant and equipment are stated at cost.
Depreciation, except for buildings, is principally computed
using the declining-balance method over the estimated useful
lives of the assets. The depreciation method for buildings is principally computed using the straight-line method.
The 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 equipment under financing leases that do not transfer ownership, and such leased assets
are not capitalized on the balance sheet in conformity withaccounting principles generally accepted in Japan.
(e) Goodwill
Goodwill is stated at cost less amortization.
Amortization is principally computed over 15 years, using thestraight-line method.
For the year ended March 31, 2002, a subsidiary of theCompany purchased the property, plant, equipment and goodwill
relating to the PVA / PVB business from Clariant AG. The consideration of ¥28,468 million ($214,045 thousand) was included in“Acquisition of property, plant equipment and intangible assets” inthe consolidated statements of cash flows.

(f) Income taxes
Accrued income taxes are provided at the amount currently
payable. The Companies adopt interperiod income tax allocationaccounting, using the assets and liabilities method in which
deferred tax assets and liabilities 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.
(g) Retirement benefits
Most of the Companies have unfunded lump-sum benefit plans
and funded 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 timeof retirement. The amount of the retirement benefits is, in general,
based on the length of service, basic salary at the time of retirement, and reason for retirement.
The contributory pension plans of the Company and its
domestic subsidiaries, which principally cover those employees
who retire at age 60, or who have served with those companies
for more than 20 years and are age 50 or more, generally provide
for pension payments for a period of ten years subsequent to age
60. The annual charge for the current service cost of these plans
is determined actuarially and funded currently through outsidetrustees.
In accordance with the new accounting standard in Japan“Accounting Standard for Employees’ Retirement Benefits”, effective from April 1, 2000, a company is required to recognize apension liability to cover the extent to which the projected benefit
obligation is in excess of plan assets at fair value, considering
unrecognized items.
Directors and statutory auditors are entitled, subject to shareholder approval, to lump-sum payments under the unfunded
retirement plan. The accrued liabilities for their retirement benefits
are, in general, based upon the amounts required by theCompanies' internal regulations.
(h) Foreign currency items
In accordance with the new accounting standard in Japan“Accounting Standard for Foreign Currency Transactions, etc.,”
effective from April 1, 2000, income and expenses in foreign currency are translated into Japanese yen at exchange rates
prevailing at the transaction dates. Foreign currency assets andliabilities not covered by forward exchange contracts, including
currency swap contracts, are translated into Japanese yen at therates prevailing at the balance sheet date. Foreign currency
assets and liabilities, which are covered by hedging forward
exchange contracts, including currency swap contracts, aretranslated into Japanese yen at the contracted rates.
In preparing the consolidated financial statements, assets andliabilities of foreign subsidiaries are translated into Japanese yen at
the rates in effect at the balance sheet date, and income andexpenses are translated at the monthly average rate for the year
then ended. Translation adjustments resulting from this process

KURARAY(a) Principles of consolidation
These consolidated financial statements include the financial
statements of Kuraray Co., Ltd. (the “Company”) and its significant
39 subsidiaries (38 subsidiaries at March 31, 2001). Hereinafter,
the Company and its consolidated subsidiaries are collectively
referred to as the “Companies”.
In the case of a change in reporting entities, 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 to retained earnings during the period.
Investments in unconsolidated subsidiaries and 20%–50%
owned companies (“affiliates”), with minor exceptions, areaccounted for using the equity method.
The difference between the cost of investment and the underlying net equity of investments in consolidated subsidiaries andaffiliates accounted for on an equity basis is allocated to identifiable assets based on their fair values at the date of acquisition.
Unallocated costs are charged to income when incurred.

39

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 40

are charged or credited to “Shareholders' equity” as “Cumulativetranslation adjustments” in the consolidated balance sheets.

a. Derivatives
All derivatives are stated at fair value, except for derivatives thatare designated as “hedging instruments” (see below).

(i) Research and development expenses
Expenses relating to research and development activities arecharged to income when incurred.

b. Hedge accounting
The Companies adopt the method for hedging instruments
whereby any gain or loss is deferred over the period of thehedging contract and is offset against the deferred loss or gainon the related hedged items.
However, when forward foreign exchange contracts meetcertain conditions, account receivables and payables coveredby these contracts are translated using the contract rates.
In addition, when an interest rate swap contract meets certain conditions, the net amount to be paid or received under
the contract is added to or deducted from the interest on thehedged items.

(j) Net income per share
The computation of primary net income per share is based on theweighted average number of shares outstanding during eachfinancial period. The computation of fully diluted net income pershare is based on the weighted average number of shares outstanding after consideration of the effect of dilution of common
stock equivalents.

FINANCIAL SECTION(k) Allowance for doubtful accounts
The Companies provide for doubtful accounts principally at an
amount computed based on the historical bad debt ratio during acertain reference period plus an estimated uncollectible amountbased on the analysis of certain individual accounts.

40(l) Marketable securities and investment securities
In accordance with the new accounting standard in Japan“Accounting Standard for Financial Instruments”, effective from
April 1, 2000, marketable securities and investment securities areclassified into three categories, i.e. held-to-maturity, trading andavailable-for-sale securities. Trading securities are carried at fairvalue with unrealized gains or losses included in income, andheld-to-maturity securities are carried at amortized cost. Availablefor-sale securities are carried at fair value with unrealized gains orlosses recorded as a component of “Shareholders' equity,” net of
applicable taxes. Available-for-sale securities, whose fair value is
not readily determinable, are stated at cost except for debt securities, which are stated at amortized cost. Moreover,available-for-sale securities with maturity of one year or less andtrading securities are classified in “Current assets.”(m) Derivative financial instruments and hedging
Derivative financial instruments, which include forward foreignexchange contracts, interest rate swap contracts and currency
swap contracts, are used to offset the Companies' risk of exposure to changes in interest and currency exchange rates inrespect of its financial assets and liabilities, in accordance with theCompanies’ internal policies and procedures.

Hedging instruments and hedged items
Hedging instruments:
Hedged items:
Forward foreign
Accounts receivable and payableexchange contracts
in foreign currency
Future transactions in foreign
currency
Interest rate swap contracts
Marketable securities andinvestment securities
Bonds and debentures payablec. Hedging policy
The Companies use financial instruments to hedge market fluctuation risks in accordance with their internal policies andprocedures.
d. Assessment method for hedging 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.
(n) Reclassifications
Certain reclassifications of previously reported amounts havebeen made to conform with current classifications.

3. Securities:
The following is a summary of securities classified as trading, available-for-sale and held-to-maturity securities at March 31, 2002 and2001:
Millions of yen
Available-for-sale securities
Gross
Gross
Book value
unrealized
unrealized(estimatedMarch 31, 2002
Cost
gains
lossesfair value)

Equity securities
Bonds and debentures
Other

March 31, 2001

Equity securities
Bonds and debentures
Other¥ 9,858
44,895
1,000¥55,753¥5,142297—¥5,439Cost

Grossunrealized
gains¥17,228
77,1981,000¥95,426¥8,814559—¥9,373

¥ 944
974
12
¥1,930¥14,056
44,218988¥59,262

Millions of yen
Available-for-sale securities
Gross
Book value
unrealized(estimatedlossesfair value)¥ 2,680858
7¥ 3,545¥ 23,362
76,899993¥ 101,254

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 41

March 31, 2001

Bonds and debentures
Other
Trading securities at March 31, 2001
Book value (estimated fair value)
Gross unrealized gains

Book value(carryingamount)Grossunrealized
gains¥ 4,649
1¥ 4,650¥ ——¥—Millions of yen
Held-to-maturity securities
Gross
Book value
unrealized(Estimatedlossesfair value)

¥ 16
—
¥ 16

¥ 4,633
1¥ 4,634¥771 million¥300 million

March 31, 2002

Equity securities
Bonds and debentures
Other

Cost

Gross
unrealized
gains$ 74,120
337,556
7,519$ 419,195$ 38,662
2,233—$ 40,895

Thousands of U.S. dollars
Available-for-sale securities
Gross
Book value
unrealized(estimatedlossesfair value)$ 7,098
7,323
90$14,511$ 105,684
332,466
7,429$ 445,579

The securities with original maturity of three months or less are transferred to cash and cash equivalents.

Inventories at March 31, 2002 and 2001 consisted of the following:
Millions of yen

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

Thousands of
U.S. dollars

2002

2001

2002

¥ 51,308
9,941
9,945
¥ 71,194¥ 53,474
11,371
10,700¥ 75,545$ 385,775
74,74474,774$ 535,293

5. Short-term bank loans and long-term debt:
Short-term bank loans generally represent 365-day notes with interest rates principally of 3.6% p.a. at March 31, 2002.
Long-term debt consisted of the following:

Unsecured loans principally from banks and insurance companies with interest rates
ranging from 0.58% p.a. to 6.61% p.a. maturing serially until 2022

1.8% yen unsecured bonds due May 7, 2003
1.8% yen unsecured bonds due May 7, 2003
1.8% yen convertible sinking fund debentures due March 31, 2003
1.0% yen convertible debentures due March 31, 2003
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
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

Millions of yen

Thousands of
U.S. dollars

2002

2002

¥ 12,232$

15,0005,000
13,957
9,423
3,000
500
2,000
500
500
1,000
600
3,000
2,000
400
69,112(36,560)

112,782
37,594
104,940
70,85022,556
3,759
15,038
3,759
3,759
7,519
4,511
22,55615,038
3,008
519,639(274,887)

91,970¥ 32,552$ 244,752

KURARAY

4. Inventories:

41

FINANCIAL SECTION

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 42

42

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 theCompany or may be redeemed, at prices declining from 106% to100% of their principal amount from April 1, 1996 until 2003. The
debentures are convertible into common stock of the Company
until March 28, 2003 at the conversion price of ¥1,703.4 ($12.81)
per share.
For the 1.8% yen convertible sinking fund debentures, theCompany is required to contribute to a sinking fund, the amountof which is reduced by the amount of debentures converted orredeemed, ¥1,500 million ($11,278 thousand) every March 31 forthe consecutive 6 years ending March 31, 2002. At March 31,
2002, investment securities with a net book value of ¥13,857 million ($104,188 thousand), for which market value approximates tothe amount of the sinking fund requirements, were deposited witha designated bank instead of the sinking fund payment.
The indentures, under which the 1.8% yen convertible sinking
fund debentures due 2003 were issued place a limitation on thepayment of cash dividends, relates, in part, to earnings of theCompany. At March 31, 2002, the amount of retained earnings
available for the payment of dividends under a provision of theseindentures was ¥137,710 million ($1,035,414 thousand).
The 1.0% yen convertible debentures due March 31, 2003,
which were issued in Japan in January 1994, can be purchased
at any time in their entirety at the option of the Company or may
be redeemed, at prices declining from 103% to 100% of theirprincipal 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 ($8.02) per share.
The indentures, under which the 1.0% yen convertible debentures due 2003 were issued place a limitation on the payment ofcash dividends, which relates, in part, to earnings of theCompany. At March 31, 2002, the amount of retained earnings
available for the payment of dividends under a provision of theseindentures was ¥103,067 million ($774,940 thousand).
The conversion prices of the above sinking fund debenturesand other 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
outstanding at March 31, 2002, at the current conversion prices,would have been 17,030 thousand.

3.00% per annum
April 10, 2002
Redeemed before maturity

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
June 25, 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

The annual maturities of long-term debt outstanding at March 31,
2002 for the respective years ending March 31 were as follows:

2003
2004
2005
2006
2007
Thereafter

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
June 11, 2007, are as follows:
April 24, 1997 – June 10, 2002
2.20% per annum
June 11, 2002 – Due date
2.80% per annum
June 11, 2002
Redeemed before maturity
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
June 18, 2002
Redeemed before maturity
The rates of the floating rate yen Euro medium term notes due
June 24, 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%

Millions of yen

Thousands of
U.S. dollars¥ 36,560
24,758
5,693
1,178
317
606

$ 274,887
186,150
42,805
8,857
2,384
4,556

¥ 69,112$ 519,639

The step-up rate yen Euro medium term notes due June 11, 2007, and the floating to fixed rate yen Euro medium term notes due June18, 2004, were redeemed before maturity. These redemptions are therefore not reflected in the above table.

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 43

6. Shareholders’ equity:
The Company is subject to the Japanese Commercial Code (the"Code"), to which certain amendments became effective on
October 1, 2001.
Prior to October 1, 2001, the Code required at least 50% of
the issue price of new shares with a minimum of the par value
thereof, to be designated as stated capital following the passingof a resolution by the Board of Directors. Proceeds in excess of
the amounts designated as stated capital were credited to“Additional paid-in capital.” Effective October 1, 2001, the Codewas revised to eliminate common stock par value resulting in all
shares being recorded with no par value. And the Code required
at least 50% of the issue price of new shares to be designated asstated capital following the passing of a resolution by the Board of
Directors. Proceeds in excess of the amounts designated as statedcapital are credited to “Additional paid-in capital.”
The Code provides that an amount equal to at least 10% of
cash dividends and directors bonuses, etc., to be paid should beappropriated as a legal reserve. Before September 30, 2001, nofurther appropriation was required when the legal reserve equaled
25% or more of common stock. Pursuant to the amendments to
the Code, no further appropriation is required when the sum of“Additional paid-in capital” and the legal reserve equals 25% ormore of common stock. If the amount of accumulated “Additional
paid-in capital” and the legal reserve exceeds the required amount,the excess amount is allowed to be appropriated following thepassing of a resolution at the ordinary general meeting of shareholders. A legal reserve may be used to reduce a deficit or may betransferred to common stock by appropriate legal procedures.

7. Income taxes:
Reconciliation of the difference between the normal cumulative
tax rate and the income tax rate in the accompanying consolidated
statements of income is as follows:
2002

2001

Normal cumulative tax rate
Largely loss by consolidated subsidiaries

41.7%
11.9

41.7%
6.4

Income tax rate per statements of income

53.6%

48.1%

Millions of yen

Thousands of
U.S. dollars

The significant components of deferred tax assets and liabilities at March 31, 2002 and 2001 were as follows:(1) Current:

2002

2001

2002

¥ 194
1,574
5,205
6,973

¥ 351
1,276
3,753
5,380

$ 1,459
11,834
39,13552,428

26

25

195

Net deferred tax assets¥6,947¥5,355$ 52,233

Deferred tax liabilities
Other

¥

3

¥

2

$

23

Net deferred tax liabilities

¥

3

¥

2

$

23

Deferred tax assets
Accrued enterprise taxes and other taxes
Accrued bonuses
Other
Total deferred tax assets
Total deferred tax liabilities(2) Non-current:
Millions of yen

Thousands of
U.S. dollars

2002

2001

2002

Deferred tax assets
Accrued retirement benefits
Other¥5,941
2,773¥ 7,778
2,654$ 44,669
20,850Total deferred tax assets

8,714

10,43265,519Deferred tax liabilities
Deferred gain on sale of fixed assets to public sector
Special depreciation
Unrealized gain on revaluation of securities

1,435
224
1,430

1,419
286
2,404

10,7901,684
10,752

3,089

4,109

23,226

Net deferred tax assets

Total deferred tax liabilities¥5,625¥ 6,323$ 42,293

Deferred tax liabilities
Depreciation¥4,631¥ 3,859$ 34,820

Net deferred tax liabilities¥4,631¥ 3,859$ 34,820

KURARAY

The Companies are subject to several taxes based on income
which, in aggregate, resulted in a normal cumulative tax rate of
approximately 41.7% in Japan for the periods ended March 31,
2002 and 2001.

43

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 44

The deferred tax assets and liabilities of consolidated subsidiaries in different tax jurisdictions are presented without offset in accordancewith Japanese accounting practice.

8. Retirement benefits:
The following tables set forth the changes in the benefit obligation, plan assets and funded status of the Companies at March 31, 2002
and 2001. Charges for the year ended March 31, 2001 included a special provision for retirement benefits by the Company amounting to¥7,596 million.
Thousands ofMillions of yen
U.S. dollars
2002

2001

2002

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¥(49,162)
24,602¥(48,153)
21,958$ (369,639)
184,977(24,560)(1,067)
6,005(26,195)
21
1,829(184,662)(8,022)45,150Accrued pension liability recognized in the consolidated balance sheets¥(19,622)¥(24,345)$ (147,534)

FINANCIAL SECTION

Accrued retirement benefits for Directors and statutory auditors at March 31, 2002 and 2001 amounting to ¥1,039 million ($7,812 thousand) and ¥991 million are excluded from the above schedule.

44

Retirement and pension costs of the Companies for the years ended March 31, 2002 and 2001 were as follows:
Millions of yen

Thousands of
U.S. dollars

2002

2001

2002

Service cost
Interest cost
Expected return on plan assets
Amortization:
Transition obligation at date of adoption
Prior service cost
Actuarial losses¥ 2,067
1,369
(861)

¥ 2,101
1,315
(639)

$ 15,541
10,293(6,473)

—
6
124

7,504
5
(3)

—
45
932

Net periodic benefit costs¥ 2,705¥10,283$ 20,338

Assumptions used in accounting for the defined benefit plans forthe year ended March 31, 2002 are as follows:
Discount rateLong-term rate of return on fund assets

Mainly 3.0%
Mainly 4.0%

Amortization period for transition charges
at date of adoption
Amortization period for prior service cost
Amortization period for actuarial losses

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
Account

Freight and storage
Research and development
Salaries and bonuses

Thousands of
U.S. dollars

2002

2001

2002

¥11,530
10,85015,757¥12,469
10,937
15,630$ 86,692
81,579118,474

10. Research and development expenses:
Total research and development expenses for the years ended
March 31, 2002 and 2001 amounted to ¥12,131 million($91,211 thousand) and ¥12,251 million, respectively.

11. Commitments and contingencies:
The Companies are contingently liable for discounted trade notes
receivable. The amount of notes discounted with recourse atbanks at March 31, 2002 and 2001 was ¥0 and ¥1 million,
respectively.
The Companies were contingently liable for guarantees, mainly
for bank loans of unconsolidated subsidiaries, affiliates and oth-ers, of ¥822 million ($6,180 thousand) and ¥854 million at March
31, 2002 and 2001, respectively.
These guarantees include letters of commitment for guarantees, letters of awareness and other items of a similar nature.

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 45

12. Leases:(a) Financing Leases
Lease transactions as a lessee:
Payment of fees for financing leases, where ownership of theleased assets is not transferred to the lessee and which are notrequired to be capitalized, for the years ended March 31, 2002
and 2001, were ¥447 million ($3,361 thousand) and ¥480 million,
respectively. Future lease payments, including amounts representing interest were as follows:
Thousands of
U.S. dollars

Millions of yen

Due within one year
Due after more than one year

2002

2001

2002

¥ 409
574

¥ 414
553

$ 3,075
4,316

¥ 983

¥ 967

$ 7,391

The leased assets were as follows:
Millions of yen
Accumulated
Cost depreciation
Net

Year ended March 31, 2002

Machinery and equipment¥ 2,151¥ 1,168

Thousands of
U.S. dollars
Net

¥ 983

$7,391

Year ended March 31, 2001

Machinery and equipment¥ 2,145¥ 1,178

KURARAY

Millions of yen
Accumulated
Cost depreciation
Net

¥ 967

Lease transactions as a lessor are immaterial.
(b) Operating Leases
Future lease payments under non-cancellable operating leases were as follows:

45
Millions of yen

Due within one year
Due after more than one year

Thousands of
U.S. dollars

2002

2001

2002

¥ 167
1,414

¥ 77
145

$ 1,256
10,631¥ 1,581¥ 222$ 11,887

13. Derivative financial instruments:
Derivative financial instruments are utilized by the Companies principally to reduce interest rate and foreign exchange rate risks. The
Companies have established a control environment, which
includes policies and procedures for risk assessment and for theapproval, reporting and monitoring of transactions involving deriva-

Forward foreign exchange contracts:
Foreign currency sales
Currency swap contracts:
Yen into foreign currency obligation

tive financial instruments. The Companies do not hold or issue
derivative financial instruments for trading purposes.
At March 31, 2002 and 2001, the forward foreign exchange
contracts and currency swap contracts outstanding were as follows:

Notional
amount2002
Market Unrealized Notional
value gain (loss) amountMillions of yen
Thousands of U.S. dollars
2001
2002
Market Unrealized Notional Market Unrealized
value gain (loss) amountvalue gain (loss)¥2,480¥(501)¥ —¥(501)

¥ —

2,975

(247)

(247)

—

—

¥5,455¥(748)¥(748)¥ —¥ —The amounts include contracts entered into in order to hedge foreign currency transactions between the Companies. The amounts
exclude contracts entered into in order to hedge receivables andpayables denominated in foreign currencies, which have beentranslated and reflected at the corresponding contracted rates in¥ — $18,647 $(3,767) $(3,767)—

22,368(1,857)(1,857)¥ — $41,015 $(5,624) $(5,624)

the accompanying consolidated balance sheets at March 31,
2002.
At March 31, 2002 and 2001, outstanding interest rate swap
contracts were as follows:kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 46

Notional
amountInterest rate swap contracts:
Fixed-rate into variable-rate obligation
Variable-rate into fixed-rate obligation

2002
Market Unrealized Notional
value gain (loss) amountMillions of yen
Thousands of U.S. dollars
2001
2002
Market Unrealized Notional Market Unrealized
value gain (loss) amountvalue gain (loss)¥1,200
500

¥14
(5)

¥14 ¥1,700(5) 1,000

¥32
(16)

¥32 $ 9,023
(16)
3,759

$105
(37)

$105
(37)

¥1,700¥ 9¥ 9 ¥2,700¥16¥16 $12,782

$ 68

$ 68

The amounts include contracts entered into in order to hedge foreign currency transactions between the Companies.The amounts
exclude certain swap contracts under which the net amount to be

paid or received is added or deducted from the interest on thehedged item.

14. Segment information:
The Companies operate principally within four industrial segments:
fibers and textiles; chemical products; man-made leather, nonwoven fabrics and fastening materials; and diversified businesses.
A summary of “Net sales” and “Operating income”, and identifi-

able assets, capital expenditure and “Depreciation and amortization” by industrial segment for the years ended March 31, 2002
and 2001 is as follows:

FINANCIAL SECTION

Net sales and operating income

46

Millions of yen

Thousands of U.S. dollars
Net sales tooutside Net sales to
Operatingcustomers inter-segment
Net sales
incomeNet sales tooutside Net sales tocustomers inter-segment

Net sales¥ 80,274
152,541¥ 1,571
2,380¥ 81,845
154,921¥161 $ 603,564
13,298 1,146,924$ 11,812 $ 615,376
17,895 1,164,819$ 1,21199,985

32,10140,946
305,862—¥305,862

221
24,61028,782(28,782)¥—

32,32265,556334,644(28,782)¥305,862

1,468
241,361
4,388
307,865
19,315 2,299,714(357)—¥18,958 $2,299,714

1,662
243,023
185,037
492,902
216,406 2,516,120(216,406)(216,406)$— $2,299,714

11,03832,992
145,226(2,685)$142,541¥ 90,822
151,007

¥

858
2,091

¥ 91,680
153,098¥ 1,720
12,71531,64140,181
313,651—¥313,651

239
15,85819,046(19,046)¥—

31,88056,039332,697(19,046)¥313,651

2,028
3,359
19,822
109¥19,931

OperatingincomeYear ended March 31, 2002

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

Fibers and textiles
Chemical products
Man-made leather, non-woven
fabrics and fastening materials
Diversified businesses
Total
Eliminated on consolidation
Consolidated total

Identifiable assets, capital expenditure and depreciation and amortization

Identifiable
assetsMillions of yen
Depreciation
Capitalandexpenditure amortization

Thousands of U.S. dollars
Depreciation
Identifiable
Capitalandassets expenditure amortization

Year ended March 31, 2002

Fibers and textiles
Chemical products
Man-made leather, non-woven
fabrics and fastening materials
Diversified businesses
Total
Eliminated on consolidation and corporate
Consolidated total¥ 64,864
204,290¥ 2,877
45,541¥ 2,808 $ 487,699
9,631 1,536,015$ 21,632
342,414$ 21,113
72,41434,31857,352360,824
126,608¥487,432

1,439
859
50,716—¥50,716

2,018
258,030
1,599
431,218
16,056 2,712,962—
951,940¥16,056 $3,664,902

10,8206,459
381,325—$381,325

15,173
12,023
120,723—$120,723¥ 73,841
162,677¥ 2,7229,439¥ 3,246
9,576

35,23158,304330,053
182,426¥512,479

1,556
2,097
15,814—¥15,814

2,241
1,530
16,593—¥16,593

Year ended March 31, 2001

Fibers and textiles
Chemical products
Man-made leather, non-woven
fabrics and fastening materials
Diversified businesses
Total
Eliminated on consolidation and corporate
Consolidated total

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 47

A summary of net sales, operating income and identifiable asset by geographic segment for the years ended March 31, 2002 and 2001
is as follows:
Millions of yen
Net sales
to outside
Net sales to
OperatingIdentifiable
customers inter-segment
Net sales
incomeassetsYear ended March 31, 2002
Domestic (inside Japan)¥ 263,788¥ 21,854¥ 285,642¥16,157¥263,048
Europe12,273
111
12,384315
56,433Other
29,801
2,937
32,7382,610
47,050Total
305,862
24,902
330,764
19,082366,531
Eliminated on consolidation and corporate—(24,902)(24,902)(124)
120,901

Consolidated total¥ 305,862¥—¥ 305,862¥18,958¥487,432¥ 276,113
10,807
26,731
313,651—¥ 20,231
904
2,927
24,062(24,062)¥ 296,344
11,711
29,658337,713(24,062)¥17,674623
1,485
19,782
149¥278,770
19,31435,986
334,070
178,409¥ 313,651¥¥ 313,651¥19,931¥512,479

Year ended March 31, 2001

Domestic (inside Japan)
EuropeOther
Total
Eliminated on consolidation and corporate
Consolidated total—

Net sales tointer-segment

Net sales

OperatingincomeIdentifiable
assets$ 1,983,368
92,278224,068
2,299,714—$164,316
835
22,082
187,233(187,233)$2,147,684
93,113
246,150
2,486,947(187,233)$121,481
2,368
19,624143,473(932)$1,977,805
424,308
353,759
2,755,872
909,030$ 2,299,714$$2,299,714$142,541$3,664,902

Year ended March 31, 2002

Domestic (inside Japan)
EuropeOther
Total
Eliminated on consolidation and corporate
Consolidated total—

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, 2002 and 2001 were as follows:
Millions of yen
Thousands of U.S. dollars
Percentage ofConsolidated
consolidated
Consolidated
Foreign sales
net sales
net sales
Foreign sales
net salesYear ended March 31, 2002
Asia
¥ 32,267¥—
10.6%$ 242,609$—
Other
60,067—19.6
451,632—

Total¥ 92,334

Foreign sales¥ 305,862

30.2%

Consolidated
net sales

Millions of yen
Percentage ofconsolidated
net sales$ 694,241$ 2,299,714

Year ended March 31, 2001

Asia
Other
Total

¥ 30,981
55,344

¥

—
—

9.9%
17.6

¥ 86,325¥ 313,651

27.5%

15. Subsequent events:
The Japanese Commercial Code provides that all appropriationsof retained earnings, except interim cash dividends, must be
approved at an ordinary general meeting of shareholders. In
accordance with customary practice in Japan, the appropriationof retained earnings is not accrued in the financial statements for

Cash dividends, ¥4.50 ($0.03) per share
Bonuses to directors and statutory auditors

the year to which it relates but is recorded in the subsequentaccounting year after shareholder approval has been obtained.
The following appropriations of retained earnings of the Company
as of March 31, 2002 were approved by the shareholders on
June 27, 2002.
Thousands ofMillions of yen
U.S. dollars¥ 1,72337$

12,955278

The above year-end cash dividends per share and interim cash dividends of ¥4.50 ($0.03) per share paid in December 2001 made a
total annual cash dividend of ¥9.00 ($0.07) per share.

KURARAY

Thousands of U.S. dollars
Net sales
to outside
customers

47

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 48

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 27, 2002

FINANCIAL SECTION

To the Shareholders and Board of Directorsof Kuraray Co., Ltd.

48

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.
and its consolidated subsidiaries at March 31, 2002 and 2001, and the results of their operations and their cash flows
for the years then ended in conformity with accounting principles generally accepted in Japan. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesefinancial statements based on 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 are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, and evaluating the overall financial
statements presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 2 (g), (h) 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.
The amounts expressed in U.S. dollars, provided solely for the convenience of readers, have been translated on thebasis 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.

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 49

CONSOLIDATED COMPANIES(As of July 31, 2002)

Companies

Head
officeCapitalActivities

Companies(¥milllons, except
where stated)

CHEMICALS
Kuraray Medical Inc.

Tokyo

2,500

Manufacture and sales of
medical products

Kuraray Chemical Co., Ltd.

Osaka

600

Manufacture and sales ofactivated carbon*KC Processing Co., Ltd.

Okayama

20

Processing of activated carbon*Mitsukura Chemical Co., Ltd.

Osaka

10

Manufacture and sales ofactivated carbon

Kuraray Plastics Co., Ltd.

Osaka

180

Manufacture and sales ofplastics

lbuki Kosan Co., Ltd.

Gifu

10

Manufacture of rubber products

Kuraray Saijo Co., Ltd.

Ehime

10

Manufacture of chemical
products and synthetic fiber

HeadofficeCapitalActivities(¥milllons, except
where stated)

Kuraray Family Products
Corporation

Osaka

30

Sales of health foods, etc.

Kuraray Techno Co., Ltd.

Osaka

10

Production sub-contracting

Kuraray Techno Nakajo
Co., Ltd.

Niigata50

Production sub-contracting

Kuraray Techno KashimaCo., Ltd.

lbaraki

10

Production sub-contracting

Kuraray Techno OkayamaCo., Ltd.

Okayama60

Production sub-contracting

Kuraray Techno Kurashiki
Co., Ltd.

Okayama10

Production sub-contracting

Kuraray Techno Saijo Co., Ltd.

Ehime

30

Production sub-contracting

Techno Soft Co., Ltd.

Osaka

50

Consulting, temporary staffing

Tokyo

50

Manufacture and sales ofmethacrylic sheets

Kuraray Travel Service
Corporation

Osaka

20

Travel and insurance agency

Kyosei Chemical Co., Ltd.

Tokyo

50

Manufacture of pigments anddyes

Kuraray Business Service
Co., Ltd.

Osaka

100

Accounting, personnel andinformation system services*Nihonkai Acetylene Co., Ltd.

Tokyo

60

Manufacture and sales of acetylene gas*The Kurashiki Kokusai
Hotel Ltd.

Okayama450

Hotel management*Hikari Shoes Co., Ltd.

Tokyo

34

Manufacture and sales of shoes*Magictape Co., Ltd.

Fukui

30

Manufacture of MAGIC TAPEOVERSEAS*Kuraray Okayama SpinningCo., Ltd.

Okayama

50

Manufacture of synthetic fibers

Kuraray Holdings U.S.A., Inc.

New York,
U.S.A.

US$55.53 Holding company, coordination
millionof U.S. subsidiaries

CONSOLIDATED COMPANIES

Kuraray Niigata Kasei Co., Ltd.

*Kuraflex Co., Ltd.

Okayama

10

Manufacture and sales of nonwoven fabric products

Kuraray America, Inc.

New York,
U.S.A

US$8.7
millionImporting and sales of Kuraray
products

49*Kuraflex Ibaraki Co., Ltd.

Ibaraki

30

Manufacture and sales of nonwoven fabric products

Eval Company of America

Texas,U.S.A.

US$4.15
million

Manufacture and sales of
EVAL in the United States*Saijo Textured Yarn Co., Ltd.

Ehime

10

Manufacture of processed
polyester yarn

SEPTON Company of America Texas,
U.S.A.

US$35
million

Manufacture and sale ofthermoplastic elastomers*Kuraray Planning System
Co., Ltd.

Osaka

10

Design of uniforms

Kuraray Finance America, Inc. New York,U.S.A.

US$0.001 Fund procurement andmillionmanagement for Group companies

Kuraray Europe GmbH

Düsseldorf,
Germany

31.2
million

Sales of Kurary products in
EuropeEVAL Europe N.V.

Antwerp,
Belgium

29.7
milIion

Manufacture and sales of
EVAL in Europe

Kuraray Specialities Europe
GmbHFrankfurt,
Germany

20
million

Manufacture and sales of MOWIOL**(PVA) and MOWITAL** (PVB)

Kuraray Finance Europe B.V.

Amsterdam, 0.3
Netherlands milIion

Fund procurement andmanagement for Group companies

Kuraray Singapore Pte., Ltd.

Singapore

SP$66.8
millionHolding company, coordinationof local subsidiaries

Kuraray Specialities Asia
Pte., Ltd.

Singapore

SP$19.6
million

Sales of Poval resins*Poval Asia Pte Ltd

Singapore

SP$40
million

Manufacture of Poval resins

Kuraray Hong Kong Co., Ltd.

Hong Kong, HK$4.65
China
millionTEXTILESCONSTRUCTION, REAL ESTATE, HOUSING
Kuraray Engineering Co., Ltd.

Okayama

450

Plant design and construction

Kuraray Saijo Kiko Co., Ltd.

Ehime

10

Fabrication of machinery parts

Kuraray Fudosan Co., Ltd.

Osaka

382

Sales and management of houses and housing lots

lruma Country Club Co., Ltd.

Saitama40

Golf course management

Kuraray Ohmiya Estate Co., Ltd. Osaka

31.25

Real estate leasing

Kuraray Tsurugashima EstateCo., Ltd.

Osaka

10

Real estate leasing

Kuraray Interior Co., Ltd.

Osaka

330

Manufacture and sales of luxury
furniture

COMMERCE, SERVICES
Kuraray Trading Co., Ltd.

Osaka

2,000

Importing, exporting, wholesaling,
manufacture and sales of textile
products, chemicals, etc.

Kuraray Living Co., Ltd.

Osaka

101.8

Manufacture and sales of
packaging materials* Equity method subsidiary** MOWIOL and MOWITAL are trademarks of KSE.

Processing and sales of Kuraray
products in China and SoutheastAsiakuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 50

HISTORY

1920s

1970s

1990s

1926 •Kurashiki Kenshoku Co.
established1970 •Company name changed toKuraray Co., Ltd.

1990 •SEPTON commercializcd:
Production of SEPTON
thermoplastic elastomer started at
Kashima Plant

1928 •Rayon commercialized: productionof rayon filament yarn begun at theKurashiki Plant
1940s
1940 •Chugoku Sangyo Co., Ltd. (nowKuraray Chemical Co., Ltd.) established•Hong Kong Representative Officeestablished (transferred to Kuraray
Hong Kong Co., Ltd. in June
1998)
1971 •Non-woven fabrics businessstarted (Kuraray Chicopee Co.,
Ltd. established)1991 •Kuraray Europe GmbH establishedin Düsseldorf, Germany
1995 •Kuraray EVAL Europe GmbHestablished in Düsseldorf•Kuraray Hong Kong Co., Ltd.
established1996 •Kuraray America, Inc, establishedin New York as administrative holding company in the U.S.
•Kuraray Singapore Pte., Ltd. established, and capital participation in
Poval Asia Pte Ltd

Factory for non-woven fabrics ofKuraray Chicopee Co., Ltd. (nowKuraflex Co., Ltd.)New laboratory of Okayama Plant

HISTORY

1943 •Capital participation in Kakuichi
Rubber Co., Ltd. (now Kuraray
Plastics Co., Ltd.)

50

1949 •Company name changed toKurashiki Rayon Co., Ltd.

1972 •EVAL commercialized: production
facilities for EVAL resin completed
at Okayama Plant•Isoprene chemicals businesslaunched: operation at Kashima
Plant started, and production ofpolyisoprene rubber begun

1997 •EVAL Europe N.V. established in
Belgium
1998 •KURALON K-ll commercialized
1999 •Operations started at Poval Asia
Pte Ltd•Operations at EVAL Europe N.V.
started1950s

1975 •Artificial organs business started

2000s

1950 •KURALON commercialized:
production of KURALON staple
started1976 •NlC (new isoprene chemicals) facilities completed at Nakajo Plant

2000 •The mass-production of a newwater-soluble resin EXCEVAL wasstarted1958 •Poval commercialized: productionof Poval for market sale started

1977 •Kuraray Engineering Co., Ltd.
established1978 •Advanced into the dental materials
field: CLEARFIL adhesive dental
filler produced•Kuraray terminated its rayon
business

1960s1960 •Capital participation in Kyowa Gas
Chemical Co., Ltd., which
conducts methacrylic resin
business
1961 •Osaka Goseihin Co., Ltd. (nowKuraray Trading Co., Ltd.)established1962 •Production of PVA film started at
Saijo Plant
1963 •New York Representative Officeestablished (transferred to Kuraray
America, Inc. in April 1996)
1964 •Production of polyester staple
started at Tamashima Plant•Kuraray Fudosan Co., Ltd.
established•CLARINO commercialized: production of CLARINO man-madeleather started at Kurashiki Plant
1965 •European Representative Officeestablished in Hamburg, Germany(moved to Düsseldorf in June
1968)
1969 •Production of polyester filament
started at Saijo Plant•The Company made a capital
participation in Lorica Sud S.r.l., an
Italian man-made leather
processing and sales company•Kuraray Holdings U.S.A., Inc. isestablished as a holding company
in the U.S.
•SEPTON Company of America isestablished in the U.S.
CLEARFIL adhesive dental filler

1980s
1983 •Cement-reinforcing KURALON
developed•Eval Company of America
cstablished, and marketing of
EVAL resin in the U.S. begun(production started in 1986)
1984 •Haru-Kuraray GmbH, a man-madeleather sales company, establishedin Germany jointly with Marubeni
Corp. and Haru Holding &Management GmbH

2001 •PVA gel mass-production facilities
become operational•Mass-production facilities for theheat-resistant polyamide resin
GENESTAR become operational•Kuraray Specialities Europe GmbHestablished in Frankfurt, Germany•Kuraray Medical Inc. established•Acquired PVA and PVB operationsof Clariant AG•Merged with Nippon Velcro Co.,
Ltd. which produces hook & Ioop
fasteners
1986 •Clarino America Corporation, a
man-made leather sales company,
established in the U.S. jointly with
Marubeni Corp.

Finalizing the aquisition of Clariant’s
PVA operations

kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 51

DIRECTORS AND CORPORATE AUDITORS(As of June 2002)

Representative Director and Chairman

Director and Advisor

Hiroto Matsuo

Hisao Nakamura

Representative Director and President

Directors

Yasuaki Wakui

Katsuhiko Kishi
President of Fibers and Industrial Materials Company

Koichi Kushida
Responsible for Corporate Management Division, Poval Company,
Eval Company & High-performance Materials Division

Katsumi Ohashi
President, Kuraray Medical Inc.

Tetsuzo Kimura
General Manager, Corporate Management Division

Satoru Mizushima
Managing Directors
Masayuki Hayashi
Responsible for Fibers and Industrial Materials Company, Fastening andNon-woven Fabrics Company, Clarino Company & Clavella Division,
General Manager, Clavella Division

Akira Matsuzawa
Responsible for Methacrylate Company, Chemicals Company,
Elastomer Company & OPT Company

Masahiro Kaihara
Responsible for Environment and Technology & Plants (Kurashiki,
Okayama, Nakajo, Kashima)

Tsutomu Yabuta
Responsible for Purchasing and Logistics Division, Accounting and Finance
Department, General Affairs and Legal Department, Personnel Department& Kuraray Business Service Co., Ltd.

Shobu Minatono
Responsible for Research and New Business Development Division

General Manager, High-performance Materials Division

Junsuke Tanaka
President of Eval Company

Seiji Wajiki
General Manager, Okayama Plant

Koichi Kikuchi
General Manager, Tokyo Head Office,Deputy General Manager, Corporate Management Division

Nobusuke Takeuchi
General Manager, Kurashiki Plant

Noriaki Yoshimura
General Manager, Research and New Business Development DivisionCorporate Auditors
Jun Inoue
Tatsuya Nakano
Kazuhide Kashiwabara
Ichiro Kobayashi

DIRECTORS AND CORPORATE AUDITORS

Senior Managing Director

51kuraray̲ar̲layout̲p29̲52 02.8.28 5:38 PM ページ 52

INVESTOR INFORMATION

Kuraray Co., Ltd.
Established: June 24, 1926
Capital: ¥88,955 million
Shares: Authorized 700,000,000 shares
Issued382,863,603 shares
Number of Shareholders: 26,977

Transfer Agent
The Sumitomo Trust and Banking Co., Ltd.
Stock Transfer Agency Department
1-10, Nikko-cho, Fuchu, Tokyo 183-8701, Japan
TEL. 81-42-351-2211(as of March 31, 2002)

Principal Shareholders

INVESTOR INFORMATION

Offices, Laboratories, Plants
Head Offices: Osaka, Tokyo
Offices: Fukui, Fukuoka
Laboratories: Kurashiki, Tsukuba
Plants: Kurashiki, Saijo, Okayama, Nakajo, Kashima

(Yen)
1,000

Nikkei Stock Average(Points)
Volume15,000High Closing
High Opening
Low Opening Low Closing
Black: opening price>closing priceWhite: closing price>opening price

Share Price Movement800

12,00052(Thousandsof shares)
600

30,000,000

20,000,000

10,000,000

0
’01/4

5

6

7

8

9

10

11

12 ’02/1

2

3

4

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

5

6

Principal
Shareholders

Number of
Shares Held

Percentage ofShares Held(thousands)

The Mitsubishi Trust and Banking
Corporation (Trust Account)

35,444

9.26%

Japan Trustee Services
Bank Ltd. (Trust Account)

34,190

8.93%

UFJ Trust Bank Limited (Trust Account A)

18,764

4.90%

Nippon Life Insurance Co.

12,737

3.33%

The Industrial Bank of Japan, Ltd.

12,616

3.30%

The Meiji Mutual Life Insurance Co.

8,066

2.11%

The Dai-ichi Mutual Life Insurance Co.

7,652

2.00%

The Fuji Bank, Ltd.

6,984

1.82%

Mitsui Asset Trust and Banking
Company, Limited (Pension Tokkin)

6,050

1.58%

Mitsui Asset Trust and Banking
Company, Limited (Investment Trust)

5,683

1.48%

kurary̲ar̲cover 02.8.28 5:24 PM ページ 4

kurary̲ar̲cover 02.8.28 5:23 PM ページ 1

KURARAY CO., LTD.
ANNUAL REPORT 2002

Head Offices
Osaka: Shin-Hanku Bldg., 1-12-39, Umeda, Kita-ku,
Osaka 530-8611, Japan
TEL. 81-6348-2111 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