Developing Our Existing
Strengths into New
Growth Drivers
Annual Report 2016
For the year ended December 31, 2016

Kuraray was established in 1926 to commercialize the chemical fiber rayon, which wasstate-of-the-art at the time. As a pioneer in Japan’s emerging synthetic fiber
production industry, the Company moved to the industry forefront in 1950 with theaccomplishment of commercial production of polyvinyl alcohol (PVA) fiber KURALON.
Over the last half century, Kuraray’s technological expertise has developed numerous
distinctive products that have expanded the Company’s presence in markets worldwide.
In particular, several of our current products command the top share in the global
market, including PVA resin, a first in the world product commercialized by Kuraray
offering outstanding adhesive properties and water solubility; optical-use PVA film, an
indispensable element in liquid crystal displays (LCDs); EVAL resin, a high gas barrier
resin used for food packaging and fuel tanks; heat-resistant polyamide resin
GENESTAR and man-made leather CLARINO.

Corporate Statements

Our
MissionWe are committed to developing new fields of business using
pioneering technology that improves the environment and enhances
the quality of life throughout the world.
For people and the planet – to achieve what no one else can.

Our
Values(Philosophy)(Guiding Principles)• Respect for individuals• Safety is the cornerstone ofeverything we do• Close cooperation to attainshared goals• Constant creation of new value• Customers’ needs are our top
priority• We act on ideas in the workplace

Our
Commitment• We will constantly develop and provide safe, high-quality products
and services.
• We will maintain a sound relationship with society through goodcommunication.
• We will strive to preserve and improve the global environment, andto secure safety and health in all our workplaces.
• We will value all members of the Kuraray community and respect
their rights.
• We will always conduct businesses in a free, fair and transparent
manner.
• We will honor all intellectual property and secure data and information
in a proper manner.

To Our Shareholders and Investorsof the United Kingdom with European countries due to its
withdrawal from the European Union, and national elections
scheduled in major European countries remains difficult topredict. Moreover, the Company’s results benefited from cost
reductions made possible by declines in raw material and fuelprices up to 2016, but in fiscal 2017 prices of raw materials
and fuel are expected to rise, with an accompanying increasein manufacturing costs. On the other hand, because a timelag arises in adjusting selling prices of products, there areconcerns about continuing decreases in selling prices ofsome products in fiscal 2017.
Under the first two years of the GS-STEP medium-term
I would like to express my sincere gratitude to all our share-

management plan, Kuraray has been steadily implementing

holders and investors.

concrete measures for the five main management strategies

In fiscal 2016 (January 1, 2016 to December 31, 2016), aput forth in the plan (deepening of core businesses, techno-

gradual economic recovery was apparent in Japan due tological innovation, next-generation growth model, optimum

brisk exports resulting from the depreciation of the yen at theallocation of management resources, and contribution to theend of the period. Business conditions in the United Statesenvironment). In fiscal 2017, which is the final year of

were favorable, backed by positive employment conditions in

GS-STEP, the Company will steadily implement the remaining

addition to personal consumption. In Europe, the economy

measures in its main management strategies, and will work

continued to gradually improve. Although the United

to achieve high profit and build a business foundation for

Kingdom’s decision to leave the European Union cast afurther growth.

shadow on Europe’s outlook, there has currently been no

Based on this outlook, in fiscal 2017 the Kuraray Group fore-

major impact. Meanwhile, the deceleration of China’s

casts net sales of ¥530.0 billion, operating income of ¥70.0

economy was halted by the government’s successful mea-

billion, ordinary income of ¥68.0 billion, and net income attrib-

sures to stimulate consumption. An economic slowdown con-utable to owners of the parent of ¥42.0 billion.

tinued in emerging countries.
Under these circumstances, the Kuraray Group has been

The distribution of profits to shareholders is one ofKuraray’s top management priorities, and during GS-STEP thesuccessively implementing the business strategies outlined inCompany has a basic policy of increasing distribution of

GS-STEP, its medium-term management plan for fiscal 2015

profits through continuous improvement in business results.

through fiscal 2017, to realize “a high-profit specialty chemical

Kuraray has set a total return ratio of 35% or more relative tocompany with a global presence.”

net income attributable to owners of the parent and annual

Regarding results of operations for fiscal 2016, net sales

dividends per share of ¥36 or higher. Kuraray paid a year-end

decreased ¥36,529 million, or 7.0%, compared with the previ-

dividend of ¥21 per share for fiscal 2016, an increase of ¥1

ous fiscal year to ¥485,192 million; operating income

per share from the initial forecast. As a result, total annual div-

increased ¥1,749 million, or 2.6%, to ¥67,827 million; ordinary

idends for fiscal 2016, including the interim dividend, wereincome increased ¥1,645 million, or 2.5%, to ¥66,181 million;¥41 per share, for a dividend payout ratio of 35.7%.

and net income attributable to owners of the parent increased¥4,650 million, or 13.0%, to ¥40,400 million.
In fiscal 2017, business conditions in the United States are
forecast to remain generally brisk, and in Japan and Europe, amoderate recovery is expected to continue. In China, a con-

For fiscal 2017, Kuraray plans annual dividends of ¥42 pershare (payout ratio of 35.2%), assuming a forecast for net
income attributable to owners of the parent of ¥42.0 billion.
The Kuraray Group requests your continued understanding
and support.

tinuation of the temporary calm is expected with the halt of
the deceleration of the economy. In emerging countries,
there are concerns about a continued slowdown in growth.
However, the operating environment is becoming increasingly
unclear, as the real economic impact of factors such as thepolicies of the new U.S. president, changes in the relationship

Masaaki Ito
Representative Director and President

Annual Report 2016

1

Kuraray's Overview

Our Business Portfolio
Kuraray is using its superior technology platform to expand its businesses in the fields of high-performancefibers, resins and chemicals. The Company currently operates in the six segments of Vinyl Acetate, Isoprene,
Functional Materials, Fibers and Textiles, Trading, and Others,with a wide-ranging lineup of products.

Vinyl Acetate
Share

40% No.1in the world
1

Share

KURARAY POVAL, ELVANOL(PVA resin)

Share

80% No.1in the world

2

1

2

No. in the world

PVA film

65% No.1in the world

EVAL resin (EVOH resin) /EVAL film (EVOH film)

TROSIFOL, BUTACITE (PVB film)

PLANTIC 3

SEPTON, HYBRAR(Thermoplastic elastomer)

Isoprene chemicals

Liquid rubber

KURARITY(Acrylic thermoplastic elastomer)

Isoprene

Share

100% No.1in the world

GENESTAR(Heat-resistant polyamide resin)

4

1. Excluding China 2. The number-one PVA film in the world for optical applications and for single-use packages for detergents.
3. Kuraray acquired Plantic Technologies Limited in 2015. 4. The world’s only industrialized PA9T resin.

2

Kuraray Co., Ltd.

Functional Materials
Share

25% No.1in the world1

No. in Japan

CLARINO (Man-made leather)

Methacrylic resin

Dental materials

Fibers and Textiles
100% No.1in the world

5

Share

KURALON (PVA fiber)

1

1

6

No. in Japan

No. in the world

MAGIC TAPE
(Hook and loop fastener)

VECTRAN(Polyarylate fiber)

KURAFLEX, FELIBENDY(Non-woven fabric)

Trading, Others
1

No. in Japan

KURARAY COAL (Activated carbon)

5. Excluding China

Polyester filament

Environmental business6. The world’s only industrialized polyarylate fiber.

Annual Report 2016

3

Kuraray's Overview

Our Progress
From its establishment in 1926, Kuraray’s principal business was the manufacture and sale ofsynthetic fibers. By accelerating the intensive development of its resins and chemicals
businesses since the 1980s, Kuraray has become a global specialty chemical company, withresins and chemicals accounting for approximately 80% of net sales.

Trends in Net Sales and Operating Income
Chemicals
FibersOperating Income¥485.2billion¥277.0billion

Net
Sales

¥67.8

54.7

billion

40.2

Operating
Income¥17.5
billion

23.8

23.7

1991

1996

19.0

11.8

1981

FY

1986

2001

2006

2011

2016

History of Commercialization of Kuraray’s Proprietary Technologies
1978

1990

2002

2011

‌ tartedS
production ofdentalmaterials

Commercialized
VECTRAN / SEPTON

Started production of
SEPTON in the U.S.

Commercialized
KURARITY

1986
Started production of
EVAL in the U.S.
1983

Developed cementreinforcing KURALON

1999
Commercialized GENESTARStarted production of
PVA resin in Singapore
Started production of
EVAL resin in Belgium

Prior to 1978

4

1950

‌C ommercialized KURALON

1962

Commercialized PVA film

1958

Commercialized PVA

1964

Commercialized CLARINO

Kuraray Co., Ltd.

1972

‌C ommercialized
EVAL / Isoprene chemicals

Our Global Presence
Kuraray is cultivating a lineup of world-class products with a large market share. At the sametime, the Company is expanding its global network with local production and sales in responseto the growth of markets worldwide by developing overseas businesses that make full use of its
proprietary technologies.

Centered on a product lineup developed
using its proprietary technologies,
Kuraray works to uncover new needs
worldwide and further expand its market
share. Sales to date have focused
primarily on developed nations, buttoday we are committed to increasing
sales in emerging markets such as the
BRICs, where further demand growth isforecast.

Overseas Sales Ratio
Overseas Sales
Domestic Sales

FY200028 %72%¥227.3billion

FY201637

63%%¥180.1billion¥305.1billion¥86.3
billionKuraray’s Global Network
Since establishing a foothold in the United States with the launch of local production of EVAL at a U.S. joint venture in 1986,
Kuraray has worked to localize production and sales in response to growing markets around the world. We also work tostrengthen our international competitiveness by enhancing our sales offices and other initiatives in unexplored fields in countries
and regions where we operate.

Main Production Facilities, Sales Facilities and Laboratory Facilities outside Japan(As of December 2016)

EVAL Europe N.V.
Hartlebury

Nizhny Novgorod (Russia)

AntwerpFrankfurt

Kuraray Europe GmbH

Monosol, LLC

Kuraray Korea Ltd.

Merrillville

Kuraray (Shanghai) Co., Ltd.

Troisdorf HolesovTurkeyKuraray India Private Limited
UAE

New Delhi

Kuraray (Thailand) Co., Ltd.

Washington WV

Ulsan

ShanghaiHong Kong

Kuraray America, Inc.

HoustonNew York
Wilmington
Fayetteville

MexicoBangkok Kuraray Hong Kong Co., Ltd.

Malaysia

Singapore

Kuraray Asia Pacific Pte. Ltd.

Production, sales andlaboratory facilities in27

countries

Colombia

Kuraray South America Ltda.
São Paulo
Chile
Argentina

Production facilities
Sales facilities
Laboratory facilities

Plantic Technologies Ltd.

Annual Report 20165

Consolidated Financial Highlights
Kuraray Co., Ltd. and its Consolidated Subsidiaries

Millions of yen

Millions of
U.S. dollars(Note 4)

Millions ofEuro(Note 5)FY2014

Net sales ...............................................................
Cost of sales..........................................................
Selling, general andadministrative expenses....................................
Operating income..................................................
Net income............................................................
Capital expenditures..............................................
Depreciation and amortization...............................
Gross cash flow.....................................................
Total research anddevelopment expenses.....................................
Total assets............................................................
Total current assets...............................................
Total tangible fixed assets.....................................
Total current liabilities............................................
Total noncurrent liabilities......................................
Total net assets.....................................................
Segment information (Note 6)
		Vinyl Acetate
			Net sales....................................................
			Operating income......................................
		Isoprene
			Net sales....................................................
			Operating income......................................
		Functional Materials
			Net sales....................................................
			Operating income......................................
		Fibers and Textiles
			Net sales....................................................
			Operating income......................................
		Trading			Net sales....................................................
			Operating income......................................
		Other Business			Net sales....................................................
			Operating income......................................

FY2016(Note 1)FY2015(Note 1)

(Adjusted)(Jan. - Dec. 2014)(Note 2)

¥485,192
317,748¥521,721
355,137¥484,969
343,168

FY2013¥413,485
286,179

FY2012¥369,431
249,485

FY2016$4,1832,739

FY2016€3,945
2,583

99,61667,82740,400¥ 53,608
41,555
81,955100,506
66,07735,749¥ 45,014
44,10279,851

66,68751,382
27,454¥ 47,191
42,006
69,46077,76049,54529,390¥ 59,740
34,97264,36270,74849,197
28,798¥ 45,519
30,95259,750

859
585
348
$ 462
358
707

810
551
328
€ 436
338
666

19,830¥725,433
324,974
271,827
96,136108,318
520,978

19,132¥701,770
296,486
262,019
95,450102,729
503,589

18,066¥691,538
269,200
262,388
109,936
99,775
481,826

17,103¥634,252
302,402222,219
89,14592,647452,459

16,431¥587,254
257,212181,274
111,449
74,279401,307171$6,254
2,802
2,343
829
934
4,491

161
€5,898
2,642
2,210
782
881
4,236

¥253,175
58,517¥274,746
55,740¥237,615
46,183¥179,261
46,658¥155,163
48,877$2,183504€2,058476

51,083
6,934

54,985
6,922

55,712
6,405

53,027
5,471

44,817
3,870

440
60

415
56

52,246
4,631

56,8795,564

53,8091,952

48,552
1,500

45,144
1,929

450
40

425
38

48,566
5,958

46,3444,108

47,651
2,871

46,932
2,633

46,216
1,772

419
51

395
48

119,498
3,833

119,640
3,882

119,266
3,879

108,991
3,582

108,760
3,358

1,030
33

972
31

63,8382,017

69,601
2,773

68,7082,600

67,3342,493

64,442
4,001

550
17

519
16

Amounts per share:

U.S. dollars(Note 4)Yen

Net income:Basic net income per share...............................
Diluted net income per share............................
Cash dividends applicable to period (Note 3)...........
Shareholders’ equity..............................................

¥ 114.98
114.7541.00
1,459.34¥ 101.84
101.5740.00
1,412.46

Financial ratios:
Cost of sales ratio (%)...........................................
Equity ratio (%)......................................................
Return on equity (ROE) (%)...................................
Return on assets (ROA) (%) (Note 7)...........................
Payout ratio (%) (Note 3).......................................

65.5
70.7
8.0
9.5
35.7

68.1
70.7
7.4
9.5
39.3

70.7
68.7
6.0
7.8
44.4

69.2
70.3
7.0
8.1
42.9

67.5
67.2
7.6
8.8
43.6

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

8,590

8,405

8,316

7,550

7,332

¥

78.41
78.25
27.0
1,354.21

¥

83.93
83.75
36.0
1,272.68

¥

82.62
82.52
36.0
1,132.07$ 0.99
0.99
0.35
12.58

Euro
(Note 5)

€ 0.93
0.93
0.33
11.86

Notes: 1. The Company changed its fiscal year-end from March 31 to December 31. From fiscal 2015, the consolidated reporting period for the Company and its consolidated
domestic and overseas subsidiaries is from January 1 to December 31.
2. The figures for fiscal 2014 (adjusted) reflect the 12 months from January to December for the Company and its consolidated domestic and overseas subsidiaries. Thesefigures are unaudited and for comparison purposes only.
3. Cash dividends per share and payout ratio for FY2014 are for the period April 1 to December 31, 2014.
4. The United States dollar amounts represent the translation of Japanese yen at the rate of ¥116 = $1.
5. Euro amounts represent the translation of Japanese yen at the rate of ¥123 = €1.
6. From fiscal 2013 (the year ended March 31, 2014), business segments have been reclassified from “Resins,” “Chemicals,” “Fibers and Textiles,” “Trading” and “Others” tothe six segments “Vinyl Acetate,” “Isoprene,” “Functional Materials,” “Fibers and Textiles,” “Trading” and “Others.” Figures for FY2012 have been restated for comparison.
7. Return on assets = Operating income / Average total assets x 100 (%)
Figures have been rounded down to the nearest million yen, U.S. dollar and euro.

6

Kuraray Co., Ltd.

Net Sales &Overseas Sales Ratio

Operating Income &Operating Income Margin(Millions of yen, %)(Millions of yen, %)Net Sales
Overseas Sales Ratio-7.0%

369,431

60.9

49.6

12

13

62.9

64.7

-1.8pts

14
15(Adjusted)

Net Income
ROE

66,077 67,827

485,192

413,485

54.9(Millions of yen, %)Operating Income
Operating Income Margin521,721484,969

Net Income & ROE+2.6%

Capital Expenditure

51,382

49,197 49,545
13.3

(FY)

16

12

12.0

13

+1.3pts

12.7+13.0%

35,74928,798 29,390

14.0

7.6

10.6

27,4548.0+0.6pts

7.4

7.0
6.0

14
15
(Adjusted)

(FY)

16

R&D Expenses &R&D Expenses Ratio(Millions of yen)

40,400

12

13

14
15
(Adjusted)

(FY)

16

Gross Cash Flow*(Millions of yen)

(Millions of yen, %)R&D Expenses
R&D Expenses Ratio

59,74053,60847,19145,519+19.1%

45,014

16,43113

14
15(Adjusted)

(FY)

16

Total Assets &Total Net Assets

17,103

19,132

19,83079,851+3.6%
59,7504.4

12

18,06612+2.6%

69,460

4.1

4.1

13

64,362

81,9553.7+0.4pts

3.7

14
15(Adjusted)

16

(FY)

12

13

14
15
(Adjusted)

(FY)

16

* Gross Cash Flow
= Net income + Depreciation and amortization

Equity Ratio

Cash Dividends per Share &Payout Ratio(%)(Millions of yen)

(Yen, %)

Total Assets
Total Net Assets

691,538 701,770
634,252
587,254452,459

481,826

Cash Dividends per Share
Payout Ratio

725,433

503,589

40.00

+3.4%

36.00

520,978+3.5%

401,307

67.2

70.3

68.7

70.7

70.7

41.00

+¥1.0036.00

No change

27.00
43.6

42.9

44.4
35.7

39.3

-3.6pts

12

13

14

15

16

(FY)

12

13

14

15

16

(FY)

12

13

14

15

16

(FY)

Note:	The figures for fiscal 2014 (adjusted) reflect the 12 months from January to December for the Company and its consolidated domestic and overseas subsidiaries.
These figures are unaudited and for comparison purposes only. However, cash dividends per share and payout ratio are for the period April 1 to December 31, 2014.

Annual Report 20167

CONTENTS
1

To Our Shareholders and Investors

2

Kuraray’s Overview

6

Consolidated Financial Highlights

9

An Interview with Kuraray President Masaaki Ito

12

FeatureGlobal Strategy for the PVA Resin Business
Production in Six Locations and Four Key Regions
Established with the Startup of a New Plant inNorth America

14

Kuraray at a Glance

16

Review of Operations

18

Corporate Governance and Internal Control

20

Board of Directors, Corporate Auditorsand Executive Officers

22

Financial Section

76

Main Group Companies

77

Investor Information• Please follow the link http://www.kuraray.co.jp/en/csr/ for informationon our CSR activities.
• For all other information, please visit our website at
http://www.kuraray.co.jp/en/
FORWARD-LOOKING STATEMENTS
This annual report contains various forward-looking statements, which are based on the current expectations and assumptions of future
events. All figures and statements with respect to the future performance, projections and business plans of Kuraray and its Group
companies constitute forward-looking statements. Although Kuraray believes 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 future business circumstances. The factors that may cause such differences include, without limitation: (1) generalmarket and economic conditions in Asia, including Japan, the United States, Europe and other regions; (2) fluctuations of currency exchange
rates, especially between the Japanese yen and the U.S. dollar and other foreign currencies; (3) changes in raw material and fuel costs;(4) industrial competition and price fluctuations in Japan and international markets; (5) advances or delays in the construction of new plants
and production lines; (6) successful development of new products and technologies; (7) changes in laws and regulations (including tax andenvironmental) and legal proceedings; and (8) unforeseeable risks, including natural disasters.
In this annual report, italicized product names are trademarks of Kuraray Co., Ltd.

8

Kuraray Co., Ltd.

An Interview with Kuraray President Masaaki Ito

We achieved record profits for the second
consecutive year, and will steadily do what
we need to do in the final year of GS-STEP.

Q.1

What is your assessment looking back at fiscal 2016?
In fiscal 2016, sales declined to ¥485.2 billion due to the effect of currency translation and a decrease inexternal sales of vinyl acetate monomer because we increased consumption in-house for our own products.
However, operating income was ¥67.8 billion, ordinary income was ¥66.2 billion and net income attributableto owners of the parent was ¥40.4 billion, each a record high for the second consecutive year.
By business, in the PVA resin business, production did not start on schedule at our new plant in the UnitedStates, but we increased sales volume in most businesses, as the EVAL gas barrier resin and PVB film businesses
expanded steadily and sales of high-value-added products in the fibers and textiles business also increased.

Annual Report 2016

9

Q.2

What measures did you implement in fiscal 2016?
Based on the key management strategies of GS-STEP, we made proactive capital investments and considered production facility expansions to establish a supply network to meet new demand in core businesses
and support expansion of our sales regions.
The start of operation at our new U.S. plant was delayed significantly, but with the commencement ofoperation we reinforced our four-region production structure for PVA resin covering Japan, the United States,
Europe and Asia. In addition, we completed an 11,000-ton expansion of production capacity for EVAL in
Belgium in the second half of the year, and decided to invest in an 11,000-ton capacity expansion in the
United States, which is scheduled to come online in mid-2018. With these investments, we will meet the
expected global increase in demand for use in food packaging materials, automotive gas tanks and otherapplications. For water-soluble PVA film, we completed a new plant and began operation in the first half ofthe year. We will continue to consider timely expansions of production capacity to meet strong demand forwater-soluble PVA film for single-use packages for detergents. For PVB film, we decided to expand production capacity at our plant in South Korea, with the start of operation planned in early 2018. The plant willproduce high-performance film for automotive applications, primarily in Asia. In the isoprene business, webegan feasibility studies for commercialization, including construction of a new plant in Thailand for isoprene,elastomer and GENESTAR. In production technology innovation, we established a new manufacturing
process that will lead to higher production efficiency for VECTRAN.
Since our acquisition of a vinyl acetate-related business from DuPont in 2014, our overseas operations
have expanded significantly, increasing the need to obtain management information globally in real time.
Therefore, as part of our construction of a global IT system, we will adopt a global SAP system in fiscal 2017
to enable real-time unified management of data.

Q.3

What will your priority be during fiscal 2017?
We will steadily implement concrete measures based on the main strategies of GS-STEP.
For deepening our core businesses, we will increase PVA resin production efficiency and further
strengthen sales and development with the normalization of production at our new plant in the United States,
which hadn’t been able to operate as planned in fiscal 2016, giving us a production structure covering four
regions worldwide. We will also quickly launch a new facility for optical-use PVA film. To meet steadily
growing demand for water-soluble PVA film for single-use packages for detergents, we will consider a further
capacity expansion following the start of operation of a new facility last year. We will strengthen marketingfor automotive applications for PVB film, and carry out active market development globally for high-performance PVB film and other products. In addition, we will make a decision on commercialization of isoprene,elastomer and GENESTAR at a new plant in Thailand, the feasibility of which we began studying in fiscal 2016.
As measures based on technological innovation, to make maximum use of our advantage of integrated
production of raw materials, we will develop new proprietary technologies for PVA resin, a raw material
used in film products such as optical-use and water-soluble PVA film and PVB film. This will allow us to10

Kuraray Co., Ltd.

An Interview with Kuraray President Masaaki Itofurther shift to high-value-added products such as high-performance films that match the needs of customers. In addition, we will continue to develop catalysts for use in applications such as the polymerization
process of high-performance polymers.
In our next-generation growth model, we will promote expansion of applications and sales regions for
activated carbon in the newly established Carbon Materials Division. We also aim to strengthen and expand
business in battery materials and other energy-related materials as growth drivers.
For optimum allocation of management resources, we will introduce and use global information management and sharing systems. Specifically, we will introduce a global SAP system for management information and accounting information and begin operation of a global personnel system as part of our efforts
to strengthen global human resource development.
In GS-STEP, our medium-term management plan, we have set net sales of ¥650.0 billion and operating
income of ¥90.0 billion as performance targets for fiscal 2017, the final year of the plan. However, it will bedifficult to achieve these targets, partly because the speed of expansion was delayed in some businesses
and we had to adjust strategies in others due to changes in the operating environment. We are taking thissituation seriously, and will steadily execute the remaining tasks in fiscal 2017, the final year of GS-STEP. At
the same time, we will adjust our strategies in businesses in which our measures have been slow to takeeffect and businesses that require reassessment due to changes in the market environment. This process
will lead to the next medium-term management plan that will begin in fiscal 2018.

Q.4

What steps are you taking for work-style reforms?
In fiscal 2016, we launched a broad range of activities to promote women in the workplace. We took steps
such as expanding workplaces in which women can play prominent roles and enhancing systems that enable
them to continue to work while balancing job and family obligations. The workplace environment we aim toachieve with work-style reforms, including activities to promote the participation of women, is as follows:
1) A company where employees can feel pride and happiness through their work2) A company where employees can apply their individual strengths to achieve results3) A company where employees value how they spend their limited time, and do their jobs with an awareness of regular working hours
To realize this vision, it will be important to rethink ways of working efficiently according to objectives, tocommunicate with the awareness that our employees are diverse and have different attributes and ways ofthinking, and to clearly inform employees about the purpose and background of jobs so that work is donewith mutual understanding. This is the first step in diversity management, which includes not just women
but also local employees overseas, the number of whom is increasing with our global expansion. I believe
such steps are essential to enabling every Kuraray Group employee worldwide to work with enthusiasm.
As a first step, in fiscal 2016, we reaffirmed the necessity of promoting women in the workplace, and held
workshops for directors, department managers, division managers and site managers to ensure that everyone is moving in the same direction. As we continue to implement various initiatives, our promotion of
women in the workplace, just one measure in work-style reforms, will not only benefit women; it will also tie
into measures aimed at creating an environment for employees’ work/life balance to accommodate diverse
work styles regardless of gender.

Annual Report 201611

Feature

Global Strategy for the
Production in Six Locations and Four Key Regions Established with
The Core Vinyl Acetate Material: PVA Resin
In April 2016, Kuraray established a PVA
resin production system with six

No.1

No.2
in theworld

locations in four key regions to achieve
further growth. As the leading global
manufacturer of PVA resin, Kuraray willcontinue to offer products that areworld-class in terms of function, quality
and service.

No.1

in theworld

Optical-use
PVA film

PVB film

in theworld

No.1
in theworld

PVB resin

EVAL

Water-soluble
PVA film

No.1
in theworld

PVA resin

Vinyl Acetate Monomer (VAM)

Main Uses of PVA Resin
A high-performance resin first commercialized by Kuraray, PVA

Until the 1990s, Kuraray met growing demand with expansions

resin is used as a raw material in the production of PVA fiberof its two production bases in Japan, the Okayama Plant and

KURALON. It is water-soluble, a unique property among

the Niigata Plant. In 1999, Kuraray began production insynthetic resins, and has superior formability, adhesiveness,

Singapore to expand its business in overseas markets andemulsibility, oil resistance and chemical resistance. Initially it

boost its international competitiveness. With the acquisition of

was used only in-house as a raw material for KURALON, but

the PVA-related business of Clariant AG in 2001, Kuraraybecause of expected growth in demand for the material as aobtained its own production base in Germany. Owning a plantfiber processing agent and paper processing agent, Kurarayin the United States had been a long-held aspiration, and inbegan commercial sales of PVA resin in 1958.

2012 Kuraray decided to build a new plant in the United States

Today, PVA resin is used in a wide range of applications,and began construction. Kuraray later obtained a U.S.

including as an adhesive agent, a polymerization stabilizer for

production base with the acquisition of the vinyl acetate-related

polyvinyl chloride in addition to its traditional applications as an

business (glass laminating solutions (GLS) business) of E.I. duagent in areas such as fiber and textile processing and paper

Pont de Nemours and Company in 2014. The addition of this newprocessing. PVA resin is also used as a raw material in

U.S. plant instantly gave the company the capacity to expand its

Kuraray’s own products, such as KURALON, optical-use PVA

business in North America and Central and South America.

film and water-soluble PVA film. Moreover, it is a key resin in
Kuraray’s core vinyl acetate business. For example, PVB resin,a raw material used as an interlayer in laminated safety glass
for automobile windshields and other applications, ismanufactured from PVA resin.

12

History of the Globalization of the
PVA Business

Kuraray Co., Ltd.

PVA Resin Businessthe Startup of a New Plant in North America

About the New U.S. Plant

Global Strategy of the PVA Business

The dedication ceremony for Kuraray’s new U.S. plant was held

With the start of operation at the new U.S. plant, Kuraray’son April 21, 2016. Approximately 120 people attended the event,global production capacity for PVA resin totals 361,000 tons

including officials from Harris County, Texas, where the plant isper year: 124,000 tons in Japan (96,000 tons at the Okayama

located, the mayor of La Porte, the Japanese Consul General in

Plant and 28,000 tons at the Niigata Plant), 40,000 tons in

Houston, and Kuraray customers. The event featured a JapaneseSingapore, 94,000 tons in Germany, and 103,000 tons in thesake barrel-breaking ceremony called kagami biraki.

United States (63,000 tons at the plant of the former GLS

With a production capacity of 40,000 tons per year, the new

business and 40,000 tons at the new plant). This optimized

U.S. plant will enable integrated production from vinyl acetateproduction system spanning six locations in four key regions ofmonomer (VAM), a PVA raw material obtained with thethe world will serve as the foundation for providing stableacquisition of DuPont’s vinyl acetate (GLS) business. The plant

supplies of high-quality products globally. In addition, Kuraray

will be highly cost competitive due to its ability to use shale

will advance a differentiation strategy utilizing the unique

gas and other inexpensive raw materials and fuels.

strengths of each plant, and increase the proportion of high-

The new plant also has production capacity for EXCEVAL, avalue-added and high-performance applications.

differentiated product with superior water resistance, viscosity

Furthermore, the operation of unified global production,

stability of its aqueous solution and biodegradability compareddevelopment and sales teams will be strengthened, allowing

to conventional PVA resins.

Kuraray to provide products and services that better anticipate

The integration of the GLS business was completed in July
2015, and the new U.S. plant and the PVA resin (ELVANOL)

customer and market needs as a solution provider.
Global demand for PVA resin is projected to continue toplant of the former GLS business are now conducting

grow. By smoothly executing these strategies, Kuraray will

integrated operations. This will allow the two plants to

expand its business and further strengthen its businessmaximize synergy through a broader range of PVA resin brands

foundation to solidify its position as the world’s leading

and increased sales channels, and lead to expanded business

manufacturer of PVA resin.

in the North American and Central and South American markets.
In addition, Kuraray will further strengthen joint development ofwater-soluble PVA film with MonoSol, LLC, which will lead toexpansion of the water-soluble PVA film business.

The new U.S. PVA plant

Sake barrel-breaking at
the dedication ceremony(Fourth from left: Kuraray
President Masaaki Ito; farright: Kuraray America
President George Avdey)

Annual Report 2016
2015

13

Kuraray at a Glance

Vinyl Acetate
Share of Net Sales

43.0%
Net Sales
300,000
300,000

The Vinyl Acetate segment domestically
produces PVA resin, optical-use PVA film
and EVAL gas barrier resin. The segment
also produces and sells PVA resin, watersoluble PVA film, PVB resin and film,
SentryGlas ® and EVAL in the United States,
PVA resin, PVB resin and film, and EVAL in
Europe and PVA resin and PVB film in Asia.

(Millions of yen)

274,746
274,746

Isoprene

Operating Income
60,00060,000253,175
253,175

200,000
200,000

55,74055,740(Millions of yen)

58,51758,517

Share of Net Sales

8.7%
Net Sales
60,00060,00040,00040,00054,98554,985The Isoprene segment domestically
produces isoprene, fine chemicals,
GENESTAR, SEPTON, liquid rubber,
KURARITY acrylic thermoplastic elastomer and other goods for sale in Japanand abroad. The segment also produces
and sells SEPTON in the United States.

(Millions of yen)

Operating Income
8,000
8,000
6,922
6,922

51,08351,083(Millions of yen)

60,00060,000

6,934
6,934

6,000
6,000

40,00040,000

5
56,

40,00040,0004,000
4,000
100,000
100,000

20,00020,00000

20,00020,000

00
1515

1616

(FY)
(FY)

00
1515

1616

(FY)
(FY)

00
1515

1616

Main Products

Main Products

KURARAY POVAL, ELVANOL (PVA resin)
Global Market Share: 40%(excluding China)

Isoprene chemicals

(FY)
(FY)

Pharmaceutical and agrichemical intermediates,
ingredients for fragrances, cosmetics

Paper / fiber processing agents, adhesives and others

Optical-use PVA film
Global Market Share: 80%
LCD televisions, mobile phone screens and others

SEPTON, HYBRAR(Thermoplastic elastomer)
Global Market Share: 20%
Substitute for rubber: Automobile parts, electronicparts, stationery, toys, sporting goods and others

Water-soluble PVA film
Water-soluble delivery system and others

GENESTAR (Heat-resistant polyamide resin)
Global Market Share: 100%
Mobile phones, personal computers, digital cameras,
LCDs, LED reflector applications, automobiles andothersTROSIFOL, BUTACITE (PVB film)

Liquid Rubber

Interlayers for laminated safety glass andphotovoltaic module encapsulation

Additive agent for automobile tires and others

EVAL resin (EVOH resin) /EVAL film (EVOH film)
Global Market Share: 65%

KURARITY(Acrylic thermoplastic elastomer)

Food packaging, automobile tanks / vacuum insulation
panels for refrigerators and others

PLANTIC
Bio-based barrier material with applications that include
fresh food packaging and industrial uses

14

Kuraray Co., Ltd.

20,00020,000

2,000
2,000

Adhesives, molding materials and others

00
1515

1616

(FY)
(FY)

1

Functional Materials
Share of Net Sales

8.9%
Net Sales(Millions of yen)

Operating Income
6,0006,000

52,24652,246(Millions of yen)

4,0004,000

20,00020,0002,0002,000

Product is the only oneof its kind in the world

The Fibers and Textiles segment
produces and sells KURALON, polyester staple, KURAFLEX, hook and loop
fasteners and other products.

Share of Net Sales

8.3%
Net Sales
50,00050,000

5,564
5,564

4,631
4,631

40,00040,000

Only One

Fibers and Textiles

The Functional Materials segment
domestically produces methacrylic
resin, CLARINO, and dental materials in
the medical business. The segment
also produces methacrylic resin and
CLARINO in China.

60,000 56,879
60,00056,879934

16

Product holds the world’s
number-one market share

No.1

Operating Income(Millions of yen)

48,566
48,5666,0006,000

46,344
46,34440,00040,0004,0004,000

30,00030,00020,00020,000(Millions of yen)

5,958
5,958
4,108
4,108

2,0002,000

10,00010,0000(FY)(FY)

0

0
15 15

16 16

0

(FY)(FY)

0
15 15

16 16

(FY)(FY)

0

0
15 15

16 16

Main Products

Main Products

CLARINO (Man-made leather)
Global Market Share: 25%

KURALON (PVA fiber)
Global Market Share: 100%(excluding China)

Men’s and women’s shoes, bags, athletic footwear
and large inflatable sports balls

0(FY)(FY)

15 15

16 16

(FY)(FY)

Reinforcing material for cement and concrete andothersMethacrylic resin

KURAFLEX, FELIBENDY(Non-woven fabric)

Light guide plates for LCDs, automobile light covers,
signboards, construction material and others

Everyday goods, industrial products(wipers, automobile applications) and others

Dental materials

MAGIC TAPE
(Hook and loop fastener)

Materials for treating cavities to restore teeth to anear-natural state

Clothing, sporting goods, industrial
materials and others

VECTRAN(Polyarylate fiber)
Rope, fishing nets and other industrial products

Trading, Others
The Trading segment includes importing and exporting as well as the wholesaling of fibers and textiles such aspolyester filament and chemicals. These activities are operated by KURARAY TRADING CO., LTD. and its subsidiaries.
Others include the production and sale of such items as high-performance membranes, activated carbon and others.
Main Products
KURARAY COAL
(Activated carbon)
Water purification
facilities, gas separatorsand capacitor materials

Polyester filament
Materials for non-woven
fabrics and industrial
materials / Woven andknitted textiles, tents andsheetsEnvironmental
business
Water purification,
wastewater treatment,
ballast water management
system and others

Annual Report 201615

Review of Operations

Results for Fiscal 2016
Sales of PVA resin were not able to absorb the depreciation and other costs of the new
U.S. plant because it did not achieve stable production. Sales volume of optical-use PVA
film was solid as demand for use in LCD panels recovered. Sales of water-soluble PVA film

Vinyl
Acetatewere firm. Sales of PVB film were favorable for both architectural and automotive applications. Sales of EVAL ethylene vinyl alcohol copolymer (EVOH resin) grew favorably forboth food packaging and automotive gas tank applications.
As a result, segment sales decreased 7.9% year on year to ¥253,175 million, andsegment income increased 5.0% year on year to ¥58,517 million.

In isoprene chemicals, sales of fine chemicals, SEPTON thermoplastic elastomer and liquid rubber were all firm. Sales of GENESTAR heat-resistant polyamide resin continued to

Isoprene

expand for automotive applications and rebounded for connector applications. On theother hand, sales for LED reflector applications continued to struggle.
As a result, segment sales decreased 7.1% year on year to ¥51,083 million, andsegment income increased 0.2% to ¥6,934 million.

For methacrylic resins, a severe operating environment continued, but sales volume recovered at the end of the period. In the medical business, sales of dental materials were

Functional
Materials

favorable due to an expanded range of new product offerings and greater synergies
through business integration on the sales front. Sales of CLARINO man-made leather
were unable to absorb the impact of the stronger yen in currency translation.
As a result, segment sales decreased 8.1% year on year to ¥52,246 million, andsegment income decreased 16.8% year on year to ¥4,631 million.

Sales of KURALON for high-value-added applications were brisk. In addition, sales ofFibers andTextilesconsumer goods and materials, especially KURAFLEX, were favorable.
As a result, segment sales increased 4.8% year on year to ¥48,566 million, andsegment income increased 45.1% year on year to ¥5,958 million.

Trading
Results from chemical-related businesses were firm, while sales in fiber-related businesses
bore the brunt of weak domestic demand, except for certain applications.
As a result, segment sales decreased 0.1% year on year to ¥119,498 million, andTrading,
Otherssegment income decreased 1.3% to ¥3,833 million.
Other BusinessIn other businesses, development costs rose due to the addition of the energy materials
business in the first quarter.
As a result, segment sales decreased 8.3% year on year to ¥63,838 million, andsegment income decreased 27.2% to ¥2,017 million.

16

Kuraray Co., Ltd.

Performance Forecast for Fiscal 2017
Regarding the operating environment in fiscal 2017, the outlook
for the global economy is increasingly unclear, with factors suchdecreases in selling prices of some products in fiscal 2017.
Under the two years to date of GS-STEP (FY2015-FY2017), its

as the policies of the new U.S. president, the issue of themedium-term management plan, the Company has been

United Kingdom’s withdrawal from the European Union andsteadily implementing concrete measures for the five main

national elections scheduled in major European countries. Amid

management strategies put forth in the plan (deepening of corethese conditions, moderate economic recovery is expected inbusinesses, technological innovation, next-generation growth

Japan. Business conditions in the United States are forecast tomodel, optimum allocation of management resources, and con-remain generally brisk, and in Europe, a moderate recovery is

tribution to the environment). In fiscal 2017, which is the final

forecast to continue. In China, temporary calm is expected toyear of GS-STEP, the Company will implement the remaining

continue with the halt of the recession. In emerging countries,

measures and to revise its strategies for businesses that are

there are concerns about a continued slowdown in growth.

late in displaying results from the measures and businesses

Until now, the Company’s results benefited from cost reduc-that require reconsideration due to changes in the market envi-

tions resulting from declines in raw material and fuel prices up toronment, which will lead to its next medium-term management

2016. However, in fiscal 2017 prices of raw materials and fuel areplan that will begin in 2018.

expected to rise, with an accompanying increase in manufactur-

Based on these circumstances, the forecast of operatinging costs. On the other hand, because a time lag arises in adjust-results for fiscal 2017 is as shown below.

ing selling prices of products, there are concerns about continuing(Billions of yen, rounded to the nearest hundred million)
Fiscal 2016

Forecast for Fiscal 2017

ChangeNet Sales

485.2

530.0

+9.2%

Operating Income

67.8

70.0

+3.2%

Ordinary Income

66.2

68.0

+2.7%

Net Income Attributableto Owners of the Parent

40.4

42.0

+4.0%

For the forecast of operating results for fiscal 2017, we

segment. In connection with the merger by absorption ofassume average exchange rates of ¥110 to the U.S. dollar andKuraray Chemical Co., Ltd. on January 1, 2017, the Company¥120 to the euro, as well as a domestic naphtha price ofhas decided to integrate these businesses into the “carbon¥36,000 per kiloliter.

materials business” and reclassify it into the Functional
Materials segment in fiscal 2017.

Change in Segment Classification

The following compares the forecast for fiscal 2017 andIn fiscal 2016, the “activated carbon business” and “energy

restated results for fiscal 2016 after the change inmaterials business” were classified in the Other Businessclassification.

[Reference] Forecast of Results by Segment for Fiscal 2017
(Billions of yen, rounded to the nearest hundred million)

Net Sales

Operating Income

Fiscal 2016 (Reclassified)

Forecast for Fiscal 2017

Fiscal 2016 (Reclassified)

Forecast for Fiscal 2017

Vinyl Acetate

253.2

269.0

58.5

60.5

Isoprene

51.1

57.5

6.9

7.5

Functional Materials

68.0

73.5

4.5

5.5

Fibers and Textiles

48.6

52.0

6.0

5.5

Trading

119.5

125.0

3.8

4.0

Other Business

46.3

54.5

1.4

2.0

Elimination & Corporate(101.4)(101.5)(13.3)(15.0)

Total

485.2

530.0

67.8

70.0

Annual Report 201617

Corporate Governance and Internal Control

Corporate Governanceincluding two outside directors. Outside director candidates

Basic Philosophy on Corporate Governanceshould have careers and professional experience that enable

Kuraray believes that the maintenance of appropriate relation-

them to be independent. No personal, capital, transactional or

ships with various stakeholders, including shareholders, andother relationship that would present a conflict of interest

the fulfillment of social responsibilities are consistent with its

exists between Kuraray and the outside directors.

objective of achieving long-term improvement in business

Kuraray has entered into agreements with its outside

results and sustainable growth as a global company. Kuraraydirectors, limiting their liability for damage as stipulated inbelieves it is a fundamental and important obligation to fulfill its

Article 423, Paragraph 1 pursuant to Article 427, Paragraph 1social responsibilities by enhancing corporate governance andof the Companies Act of Japan. Such agreements limit theestablishing highly transparent and fair corporate management.

liability amount as set forth in such Act. However, such limi-

As a company with a Board of Corporate Auditors, Kuraraytation of liability is approved only if the applicable outside

has established a corporate governance system centered on its

director has executed his duties in good faith without knowl-

Board of Directors and Board of Corporate Auditors to improveedge of or committing gross negligence. As the chief execu-

the effectiveness of supervisory and monitoring functions

tive responsible for business execution, the president

while maintaining management efficiency and to provide guid-appointed by the Board of Directors exercises control overance for issues including management compensation, selection

the execution of business in the Kuraray Group. Every execu-

of new company officers, internal controls and risk management.

tive officer (one-year term of office) appointed by the Boardof Directors is responsible for business execution in the
Kuraray Group organization. As the heads of internal compa-

Corporate Governance Systems

nies, divisions and major functional organizations, the execu-

1. Board of Directors and Executive Organization

tive officers bear responsibility for operations and profit.

The Board of Directors (convenes at least once a month),Some directors hold concurrent positions as executive officers.

according to the Board of Directors’ Regulations, deliberates

The president has established the Executive Committee

and decides important management matters, including legal(in principle, convenes twice a month) and various othermatters, and supervises the execution of business. The

councils and committees to deliberate and report on

maximum number of directors is twelve, and the term ofimportant matters concerning the Group’s management

office is one year. There are currently ten board members,

policies and business execution.

Shareholders Meeting
Appointment / Dismissal

Ten directors(including two outside directors)
Presided over by President
Financial reporting /Internal control reporting

Internal Auditors OfficeEvaluation

Auditing

Appointment /Dismissal

Internal
audit
reportingAppointment / Dismissal

Appointment / Dismissal
ReportingBoard of Directors
Auditing

Selection /Dismissal /Supervision

ReportingBoard of Corporate Auditors
Five corporate auditors(including three outside auditors)
Auditing

President
Instructions

Accounting Auditor

Bringing up/reporting importantmatters for deliberation

Executive Committee

AdviceProposing /ReportingManagement Advisory Council
Seven permanent members(including four outside experts)

CSR Committee(Deliberation on important matters)
Reporting on results of deliberations

Executive Officers(Execution of business)

Internal Companies, Functional Organizations, Group Companies

18

Kuraray Co., Ltd.

2. Board of Corporate Auditors

pursuant to Article 427, Paragraph 1 of the Companies Act of

The Board of Corporate Auditors consists of five corporate audi-

Japan. Such agreements limit the liability amount as set forth intors, including three outside corporate auditors with extensive

such Act. However, such limitation of liability is approved only if

experience in areas including finance, law and management

the applicable outside auditor has executed his duties in good

who perform their duties from a third-party standpoint. Outside

faith without knowledge of or committing gross negligence.

corporate auditor candidates should have careers and professional experience that enable them to be independent. No per-3. Management Advisory Council

sonal, capital, transactional or other relationship that would

Kuraray has established the Management Advisory Council topresent a conflict of interest exists between Kuraray and theserve as a consultative body to give the president advice fromoutside corporate auditors. The corporate auditors attend meet-the perspectives of compliance, the protection of shareholder

ings of the Board of Directors and other important meetings,

rights and management transparency. The Council currently

and monitor the directors’ performance of duties through inqui-consists of seven permanent members, comprising four out-ries conducted by such means as the examination of importantside experts with a wealth of experience and broad insight indocuments and requests for explanations of the state of businesseconomics, finance, corporate management and other fields, asaffairs. In principle, the Board of Corporate Auditors convenes

well as one inside director (the president of the Company) andmonthly. The corporate auditors regularly have meetings with

two others (an advisor and an outside director), with the advisor

the accounting auditor, PricewaterhouseCoopers Aarata LLC,

serving as chairman. The Council convenes twice a year toand the Internal Auditors Office (consisting of eight members),

advise the president on such matters as important manage-

which conducts internal audits. In these meetings, they receive

ment policies and issues, succession of the president, selection

reports on audit content and share information concerning audit

of successor candidates and compensation for the president.

planning, implementation and related matters. The corporate
auditors also serve as corporate auditors of core subsidiary

4. Status of Accounting Auditor

companies to ensure subsidiary audits are performed appropri-

No special interests exist between Kuraray and the accounting

ately and attend periodic Group Auditor Liaison Meetings con-auditor, PricewaterhouseCoopers Aarata, or the engagement

sisting of the subsidiary auditors to deepen their understanding

partners of such auditing firm who audit Kuraray. In addition,of each company.

such auditing firm voluntarily takes steps to ensure the engage-

Kuraray has entered into agreements with its auditors, limiting
their liability for damage as stipulated in Article 423, Paragraph 1

ment partners are not involved in audits of Kuraray for longer
than the prescribed period of time.

Internal Control
Basic Policy for Establishment of an Internal Control System
The Kuraray Group recognizes that establishing and operatinginternal control systems is an important management task, andits Board of Directors has set forth the following Basic Policy
for Establishment of Internal Control Systems.
1. Systems to ensure compliance of execution of duties of
Directors and employees with laws, regulations and the
Articles of Incorporation
2. Systems concerning storage and management of
information regarding execution of duties of Directors
3. Regulations and other systems regarding management ofrisk of loss
4. Systems to ensure efficient execution of duties by Directors

5. Systems to ensure the propriety of business operations at
the corporate group, composed of the Company andsubsidiaries
6. Independence from Directors of employees assisting theduties of Company Auditors and items regarding ensuring
the effectiveness of instructions given to these employees
7. Systems regarding reporting to Company Auditors of theCompany and systems to ensure persons who makereports do not receive detrimental treatment as a result of
making a report
8. Items regarding prepayment of expenses, procedures forreimbursement, and policies regarding processing of otherexpenses and liabilities arising from execution of duties byCompany Auditors
9. Other systems to ensure that audits by Company Auditors
are made effectively

Annual Report 201619

Board of Directors, Corporate Auditors and Executive Officers(As of March 24, 2017)

Board of Directors
Representative Director and President

Representative Director and Primary Executive Officer

April
June
April

1980 Entered Kuraray Co., Ltd.
2012 	‌Executive Officer
2013 	‌Vice President of Functional Materials
Company
June2013 Senior Executive Officer
April2014 	‌Officer Responsible for Corporate
Management Planning Division and CSR
Division, and General Manager of Corporate
Management Planning DivisionJune
2014	‌Director and Senior Executive Officer
January 2015	‌Representative Director and President(Current position)

April
June
April
June
April

Sadaaki Matsuyama

Masaaki Ito

Director and Primary Executive Officer

Kazuhiko Kugawa

President of Functional Materials Company

Director and Primary Executive Officer

Officer Responsible for Corporate Management Planning
Office and Administrative Unit

President of Vinyl Acetate Resin Company and Vinyl Acetate
Film Company

April1976 Entered Kuraray Co., Ltd.
June
2012 Executive Officer
April2013 	‌Vice President of Vinyl Acetate Company
June2013 Senior Executive Officer
June2014	Director and Senior Executive Officer
January 2015 President of Vinyl Acetate Resin Company
January 2016	Officer Responsible for Corporate
Management Planning Office (Current
position), Officer Responsible for
Administrative Unit (Current position)
March 2016	Director and Primary Executive Officer(Current position)

April
April

Director and Senior Executive Officer

Hiroaya Hayase

1980	Entered Kuraray Co., Ltd.
2012	General Manager, Kurashiki Plant, General
Manager of Technology Development
Center, Technology DivisionJune
2012	Executive Officer
April2013	General Manager of Global Business
Planning Division, Vinyl Acetate Company
April2014	General Manager of Technology Division
January 2016	Officer Responsible for Technology Division,
Environmental Business Development andPromotion Division and Plants in Japan(Current position)
March 2016	Director and Senior Executive Officer(Current position)

President of Isoprene Company

April
April

1980	Entered Kuraray Co., Ltd.
2012	General Manager of Corporate Management
Planning DivisionJune
2012	Executive Officer
April2013	General Manager of New Business
Development Division
January 2016	President of Isoprene Company(Current position)
March 2016	Director and Senior Executive Officer(Current position)

April
April

Director and Senior Executive Officer

Kenichi Abe

Director and Senior Executive Officer

Vice President of Functional Materials Company, General
Manager of Carbon Materials Division, Functional Materials
Company

President of Fibers and Textiles Company, Officer Responsible
for Osaka Head Office

April
April

April
April

Yoshimasa Sano

20

Kuraray Co., Ltd.

1980	Entered Kuraray Co., Ltd.
2010 	‌General Manager of Elastomer Division,
Chemicals Company
June2012 	‌Executive Officer
April2014 	‌General Manager of Methacrylate Division,
Functional Materials Company
January 2016	Vice President of Functional Materials
Company (Current position)
March 2016	Director and Senior Executive Officer(Current position)
January 2017	General Manager of Carbon Materials
Division, Functional Materials Company(Current position)

1980 Entered Kuraray Co., Ltd.
2012	General Manager of Poval Resin Division,
Resin Company
June2012 Executive Officer
April2013	General Manager of Poval Resin Division
and Production and Technology Management Division, Vinyl Acetate Company
June2014 Senior Executive Officer
January 2015	President of Vinyl Acetate Film Company(Current position)
March 2015	Director and Senior Executive Officer
January 2016	President of Vinyl Acetate Resin Company(Current position)
March 2016	Director and Primary Executive Officer(Current position)

Director and Senior Executive Officer

Officer Responsible for Technology Division, Environmental
Business Development and Promotion Division and Plants in Japan

Kazuhiro Nakayama

June
March
June

1975 	‌Entered Kuraray Co., Ltd.
2010 Executive Officer
2012 	‌Representative Director and President ofKuraray Noritake Dental Inc.
2012 	‌Senior Executive Officer
2013 	‌President of Functional Materials Company(Current position) and General Manager ofMedical Division, Functional Materials
Company
2013 	Director and Senior Executive Officer
2016	Director and Primary Executive Officer
2016	Representative Director and Primary
Executive Officer (Current position)

Hitoshi Toyoura

1982	Entered Kuraray Co., Ltd.
2010	General Manager of Fibers and Industrial
Materials Division, Fibers and Textiles Company
June2013	Executive Officer
January 2015	General Manager of Consumer Goods andMaterials Division, Fibers and Textiles Company
March 2015	President of Kuraray Fastening Co., Ltd.
January 2016	President of Fibers and Textiles Company(Current position), Officer Responsible for
Osaka Head Office (Current position)
March 2016	Director and Senior Executive Officer(Current position)

Director

Director
April

Tomokazu Hamaguchi1

1967	Entered Nippon Telegraph and Telephone
Public Corporation
June
1995	Senior Vice President, NTT Data Communications Systems Corporation (Currently NTT
Data Corporation)June
1997	Executive Vice President, NTT Data
CorporationJune
2001	Senior Executive Vice President, NTT Data
CorporationJune
2003	President and CEO, NTT Data CorporationJune
2007	Director and Senior Corporate Advisor, NTT
Data Corporation
April
2008	Board Director, IHI Corporation (Current
position)June2009	Senior Corporate Advisor, NTT Data
CorporationJune
2010	Director, East Japan Railway Company(Current position)June
2013	Director, Kuraray Co., Ltd. (Current position)
October 2014	Director, FPT Corporation (Current position)

April
1974	Entered Economic Planning Agency of Japan
July
1999	Director, Minister’s Secretariat Division, EPA
January 2001	Director, Personnel Division, Minister’s
Secretariat, Cabinet Office
January 2002	Deputy Director General for Economic andFiscal Management, Cabinet OfficeJuly
2004	Director General for Economic and Fiscal
Management, Cabinet OfficeJuly2006	Vice-Minister for Policy Coordination,
Cabinet OfficeJuly2008	Deputy Vice-Minister, Cabinet OfficeJuly2009	Vice-Minister, Cabinet Office
January 2012	Advisor, Cabinet Office
April2013	Executive Advisor, DENTSU INC.
(Current position)June
2014	Director, Ohara Memorial Healthcare
Foundation (Current Position)June
2015	Chairman, the Institute for Science of Labour
September 2015	Chairman, the Ohara Memorial Institute for
Science of Labour (Current Position)
March 2016	Director, Kuraray Co., Ltd. (Current position)

Jun Hamano1

Corporate Auditors
Standing Corporate Auditors

Corporate Auditors

Keiji Murakami

Mie Fujimoto2

Kunio Yukiyoshi

Yoshimitsu Okamoto2

Mikio Nakura2

Notes: 1.	Directors Tomokazu Hamaguchi and Jun Hamano are independent outside Directors.
2.	Corporate Auditors Mie Fujimoto, Yoshimitsu Okamoto and Mikio Nakura are independent outside Corporate Auditors.

Senior Executive Officer
Tsugunori Kashimura
Officer Responsible for Research and Development Division, General Manager of Research and Development Division

Executive Officers
Matthias Gutweiler

Koichi Takano

President of Kuraray Europe GmbH

General Manager of Elastomer Division, Isoprene Company

George Avdey

Nobuhiko Takai

President of Kuraray America, Inc.

General Manager of Genestar Division, Isoprene Company

Yukinori Yamane

Toshihiro Omatsu

General Manager of Purchasing and Logistic Division

General Manager of Isoprene Chemical Division, Isoprene Company

Akira Omura

Hitoshi Kawahara

Vice President of Vinyl Acetate Resin Company,
General Manager of Production and Technology Management Division, Vinyl Acetate Resin Company
General Manager of Production and Technology Management Division, Vinyl Acetate Film Company

Vice President of Vinyl Acetate Film Company,
General Manager of Poval Film Division, Vinyl Acetate Film Company

Hirohide Hayashi

Vice President of Kuraray America, Inc.

General Manager of Technology Division

P. Scott Bening

Hajime Suzuki
Ikuo Nakamura
General Manager of Clarino Division, Functional Material Company

General Manager of WS Film Division, Vinyl Acetate Film Company,
President of MonoSol, LLC.

Ichiro Matsuzaki

Stephen Cox

Keiji Taga

General Manager of PVB Division, Vinyl Acetate Film Company

Toshinori Tsugaru

General Manger of Kurashiki Plant
General Manager of Medical Division, Functional Material Company

General Manager of Okayama Plant

Annual Report 201621

Financial Section:

Financial Review
Kuraray Co., Ltd. and its consolidated subsidiaries

Business Environment

Sales

In the fiscal year ended December 31, 2016 (“fiscal 2016”),(Billions of yen, rounded to the nearest hundred million)

signs of economic recovery were apparent in Japan due to thedepreciation of the yen at the end of the period. In the global
economy, business conditions in the United States were brisk,
backed by positive employment conditions in addition topersonal consumption. In Europe, the economy continued to

Net Sales...................
Operating Income......
Ordinary Income........
Net Income Attributable to
Owners of the Parent.......

Fiscal 2016

Fiscal 2015

Change

485.2
67.8
66.2

521.7
66.1
64.5

-7.0%
+2.6%
+2.5%

40.4

35.7

+13.0%

gradually improve. Although the United Kingdom’s decision toleave the European Union cast a shadow on Europe’s outlook,

The Kuraray Group’s consolidated net sales for fiscal 2016

there has currently been no major impact. Meanwhile, thedecreased ¥36,529 million ($315 million), or 7.0%, compareddeceleration of China’s economy was halted by thewith the previous fiscal year to ¥485,192 million ($4,183 mil-government’s successful measures to stimulate consumption.

lion); operating income increased ¥1,749 million ($15 million),

An economic slowdown continued in emerging countries.

or 2.6%, to ¥67,827 million ($585 million); ordinary income

Under these circumstances, the Kuraray Group has been

increased ¥1,645 million ($14 million), or 2.5%, to ¥66,181 mil-successively implementing the business strategies outlined inlion ($571 million); and net income attributable to owners of

GS-STEP, its medium-term management plan that started in

the parent increased ¥4,650 million ($40 million), or 13.0%, tofiscal 2015, to realize “a high-profit specialty chemical¥40,400 million ($348 million).

company with a global presence.”

Results by Business Segment(Billions of yen, rounded to the nearest hundred million)
Net Sales

Operating Income

Fiscal 2016

Fiscal 2015

Fiscal 2016

Fiscal 2015

253.2

274.7

58.5

55.7

Isoprene..................................................................

51.1

55.0

6.9

6.9

Functional Materials................................................

52.2

56.9

4.6

5.6

Fibers and Textiles..................................................

48.6

46.3

6.0

4.1

Trading....................................................................

119.5

119.6

3.8

3.9

Other Business.......................................................

63.8

69.6

2.0

2.8

Elimination & Corporate..........................................

(103.2)(100.5)(14.1)(12.9)

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

485.2

521.7

67.8

66.1

Vinyl Acetate...........................................................

Vinyl Acetate

Isoprene

Sales in this segment decreased 7.9% year on year toSales in this segment decreased 7.1% year on year to ¥51,083¥253,175 million ($2,183 million), and segment income rose

million ($440 million), and segment income increased 0.2%

5.0% year on year to ¥58,517 million ($504 million).

year on year to ¥6,934 million ($60 million).

1)	Sales of PVA resin were not able to absorb the depreciation1)	In isoprene chemicals, sales of fine chemicals, SEPTON

and other costs of the new U.S. plant because it did notthermoplastic elastomer and liquid rubber were all firm.

achieve stable production. Sales volume of optical-use PVA2)	Sales of GENESTAR heat-resistant polyamide resin contin-

film recovered as LCD panels reached the end of a stage ofued to expand for automotive applications and rebounded

production adjustments. Sales of water-soluble PVA film

for connector applications. On the other hand, sales for LED

were firm. Sales of PVB film were favorable.

reflector applications continued to struggle.

2)	Sales of EVAL ethylene vinyl alcohol copolymer (EVOH
resin) grew favorably for both food packaging and automotive gas tank applications.

22

Kuraray Co., Ltd.

Functional Materials

work-in-process, and raw materials and supplies) decreased

Sales in this segment decreased 8.1% year on year to ¥52,246¥918 million ($8 million) to ¥111,268 million ($959 million), andmillion ($450 million), and segment income decreased 16.8%

inventory turnover (the number of months’ sales in inventory)

year on year to ¥4,631 million ($40 million).

was 2.8 months. Current assets increased ¥28,488 million1)	For methacrylic resins, a severe environment continued, but($246 million) or 9.6% to ¥324,974 million ($2,802 million).

sales volume recovered at the end of the period.
2)	In the medical business, sales of dental materials werefavorable due to an expanded range of new product offerings and greater synergies through business integration on
the sales front.

Working capital (current assets less current liabilities)
increased ¥27,802 million ($240 million) to ¥228,838 million($1,973 million).
The current ratio (current assets divided by current liabilities)
at December 31, 2016 increased to 338.0% from 310.6% at3)	For CLARINO man-made leather, sales were unable toDecember 31, 2015. Tangible fixed assets increased ¥9,807

absorb the impact of the stronger yen in currency

million ($85 million) to ¥271,827 million ($2,343 million). Thistranslation.

included factors such as an increase in machinery, equipment
and vehicles (net) of ¥35,000 million ($302 million) to ¥162,963

Fibers and Textiles

million ($1,405 million) and a decrease in construction in prog-

Sales of KURALON for high-value-added applications wereress of ¥26,705 million ($230 million) to ¥29,904 million ($258

brisk. In addition, sales of consumer goods and materials,

million). Intangible fixed assets decreased ¥4,438 million ($38

especially KURAFLEX, were favorable. As a result, sales in thismillion) to ¥79,537 million ($686 million). Investments andsegment increased 4.8% year on year to ¥48,566 million ($419

other assets decreased by ¥10,193 million ($88 million) tomillion), and segment income increased 45.1% year on year to¥49,093 million ($423 million) due mainly to a decrease in¥5,958 million ($51 million).

investment securities of ¥12,034 million ($104 million) to¥34,023 million ($293 million). Total assets increased ¥23,663

Trading

million ($204 million) to ¥725,433 million ($6,254 million), andResults from chemical-related businesses were firm, while

return on assets (operating income divided by average total

sales in fiber-related businesses bore the brunt of weakassets for the period) was 9.5%, the same level as for the previ-

domestic demand, except for certain applications. As a result,ous fiscal year.

segment sales decreased 0.1% year on year to ¥119,498

Current liabilities increased ¥685 million ($6 million) tomillion ($1,030 million), and segment income decreased 1.3%

¥96,136 million ($829 million), with the main factors being a

to ¥3,833 million ($33 million).

decrease in income taxes payable of ¥7,057 million ($61
million) to ¥7,635 million ($66 million) and an increase in other

Other Businesscurrent liabilities of ¥8,950 million ($77 million) to ¥28,430

In other businesses, development costs rose due to the addi-

million ($245 million).

tion of the energy materials business in the first quarter. As a

Noncurrent liabilities increased ¥5,588 million ($48 million)

result, segment sales decreased 8.3% year on year to ¥63,838

to ¥108,318 million ($934 million). Net assets rose ¥17,389

million ($550 million), and segment income decreased 27.2%

million ($150 million) to ¥520,978 million ($4,491 million), due

to ¥2,017 million ($17 million).

mainly to an increase in retained earnings and foreign currencytranslation adjustment. Equity attributable to owners of theparent amounted to ¥512,959 million ($4,422 million), for an

Financial Position

equity ratio of 70.7%.

As of December 31, 2016, cash and deposits stood at ¥51,437

Cash Flows from Operating Activities

million ($443 million), an increase of ¥14,441 million ($124

Net cash provided by operating activities totaled ¥93,923

million) compared to December 31, 2015. Notes and accounts

million ($810 million). Cash provided included ¥60,512 million

receivable – trade increased ¥2,931 million ($25 million) to($522 million) from income before income taxes and noncon-¥105,010 million ($905 million). Short-term investment securi-

trolling interests and ¥41,555 million ($358 million) from depre-

ties increased ¥20,258 million ($175 million) to ¥39,064 million

ciation and amortization. Cash used included ¥3,080 million($337 million). Inventories (merchandise and finished goods,($27 million) due to an increase in inventories and a decrease

Annual Report 201623

in notes and accounts payable – trade, and ¥24,412 million($210 million) in income taxes paid. Net cash provided by operating activities increased ¥695 million ($6 million) comparedwith the previous fiscal year.

Cash Flows from Investing Activities

Outlook for the Fiscal Year Ending
December 31, 2017
Regarding the operating environment in fiscal 2017, the outlook
for the global economy is increasingly unclear, with factors
such as the policies of the new U.S. president, the issue of the

Net cash used in investing activities totaled ¥49,300 million.

United Kingdom’s withdrawal from the European Union andProceeds from sale and redemption of investment securities

national elections scheduled in major European countries.

provided cash of ¥3,551 million, while uses of cash included

Amid these conditions, moderate economic recovery is¥49,992 million for purchase of tangible fixed assets and intan-

expected in Japan. Business conditions in the United Statesgible fixed assets.

are forecast to remain generally brisk, and in Europe, a moder-

Cash Flows from Financing Activities

ate recovery is forecast to continue. In China, a continuation of
the temporary calm is envisaged with the halt of the reces-

Net cash used in financing activities was ¥14,701 million ($127sion. In emerging countries, there are concerns about a contin-

million). Cash provided included ¥691 million ($6 million) from aued slowdown in growth.

net increase in loans and sale of treasury stock while uses of cash

Until now, the Company’s results benefited from cost reduc-included cash dividends paid totaling ¥14,753 million ($127 million).

tions resulting from declines in raw material and fuel prices up
to 2016. However, in fiscal 2017 prices of raw materials andIn addition to the above factors, due to the effect of exchange

fuel are expected to rise, with an accompanying increase inrate changes on cash and cash equivalents, cash and cash equiv-

manufacturing costs. On the other hand, because a time lagalents at the end of the fiscal year increased ¥28,639 million

arises in adjusting selling prices of products, there are con-($247 million) from the end of the previous fiscal year to ¥83,389

cerns about continuing decreases in selling prices of somemillion ($719 million).

products in fiscal 2017.
Under the two years to date of GS-STEP (FY2015-FY2017),

Capital Expenditure

its medium-term management plan, the Company has beensteadily implementing concrete measures for the five main
management strategies put forth in the plan (deepening ofCapital investment by the Kuraray Group (Kuraray and consoli-core businesses, technological innovation, next-generation

dated subsidiaries) amounted to ¥53,608 million ($462 million)

growth model, optimum allocation of management resources,in fiscal 2016, mainly for expansion of production capacity

and contribution to the environment). In fiscal 2017, which isfor PVA resin. By segment, capital investment amounted to

the final year of GS-STEP, the Company will implement the¥35,350 million ($305 million) in the Vinyl Acetate segment,

remaining measures and to revise its strategies for businesses¥2,070 million ($18 million) in the Isoprene segment, ¥3,726

that are late in displaying results from the measures and busi-

million ($32 million) in the Functional Materials segment,

nesses that require reconsideration due to changes in the¥5,176 million ($45 million) in the Fibers and Textiles segment,

market environment, which will lead to its next medium-term¥114 million ($1 million) in the Trading segment, and ¥2,548

management plan that will begin in 2018.

million ($22 million) in the Others segment. General (non-segment)

Taking these circumstances into account, our forecasts forcapital investment amounted to ¥4,621 million ($40 million).

the period ending December 31, 2017 are net sales of ¥530.0
billion, operating income of ¥70.0 billion, ordinary income of¥68.0 billion and net income attributable to owners of theparent of ¥42.0 billion. We assume average exchange rates of¥110 to the U.S. dollar and ¥120 to the euro, as well as adomestic naphtha price of ¥36 thousand per kiloliter.

24

Kuraray Co., Ltd.

Risk Management

Risks that could have a significant impact on the Kurarayor halt of manufacturing operations for long periods.

Group’s performance (results of operations and financial posi-

In the event of accidents or disasters at suppliers who dis-tion) are discussed below. Forward-looking statements in the

charge such functions as providing important raw materials,

following text represent the Kuraray Group’s best judgment as

facilities, maintenance parts and services, there are risks thatof December 31, 2016.

could affect our product supply.

1) Risks associated with the changes inbusiness environment3) Risks associated with litigation and violation oflaws and regulations

The Kuraray Group has a diversified business portfolio and its

The Kuraray Group operates numerous businesses based on

products are geared to global markets with a variety of uses

its proprietary technologies, posing the risks of serious

and applications. Many of our products are original specialty

infringement of its intellectual properties, or litigation involving

chemical materials that are less susceptible to the fluctuations

its rights in the future.

in the commodity markets compared with those in other

Meanwhile, we are supplying many products that play signifi-

industries, but in recent years more and more of our products

cant roles in assuring the quality of the final products in areas

are geared to the growing business areas including electric

such as automotive products, electric and electronic materials,

and electronic materials, automotive and environmental appli-

medical products and food packaging. We have introduced acations on which our overall business performance is increas-

product quality management system at each major production

ingly dependent. In these areas, market environment canbase of the Kuraray Group and work to improve product quality,

undergo drastic changes as a result of a reverse in industry de

but in the event of a large-scale product recall caused by defec-

facto standards for final products, shorter product cycles andtive quality, there are risks of major financial losses including

worldwide competition in product development. Therefore, we

liability losses that cannot be fully covered by existing productmay also face drastic changes in market environment andliability insurance.

competitive conditions for our products.
Meanwhile, we manufacture products such as chemicalAlso, despite our construction of a compliance system andour utmost efforts to comply with laws and regulations at eachproducts, synthetic resins, synthetic fibers and textiles out ofof our operating facilities, there are risks that our businessthe raw materials such as ethylene and other petrochemical

activities could be interrupted in the event of a major breach of

products that are susceptible to the fluctuations in the markets

legal compliance, changes in current laws and regulations orof crude oil and natural gas. As a result, market fluctuations

the addition of new laws and regulations.

exceeding expectations could affect the Kuraray Group’s business results.
The Kuraray Group is exposed to the risk that it will be4) Risks associated with changes inexchange rates

forced to downsize or close down certain areas of its main

The Kuraray Group is expanding its manufacturing and sales

businesses as a consequence of the changes in its business

operations in Japan and in various overseas regions, including

environment as described above.

Europe, North America, Asia and Australia. Export prices of theKuraray Group’s domestically manufactured products are2) Risks associated with accidents and disasters

affected by changes in exchange rates. In sales of products

The Kuraray Group has manufacturing facilities in Japan, Europe,

manufactured at our overseas bases, procurement and sales

North America, Asia and Australia. Many of these are large-scale

prices in different currency blocks and the value of foreign-chemical plants. We work to prevent accidents and disasters

currency-denominated assets and liabilities are affected bysuch as explosions, fires and leaks of toxic substances and tochanges in exchange rates. It is possible that the Kurarayminimize injuries when they occur, and conduct risk manage-

Group will be affected negatively by exchange rate fluctuations

ment for important production plants by geographically spreading

if they exceed the scope of our assumption.

their locations and arranging property and casualty insurance
on them. However, in the event of serious security incidents,

5) Other risks

release of pollutants or natural disasters, there are risks that

With the global development of our businesses, there are

could cause personal injury or property damage to employeesrisks that fortuitous external events such as war, riot, terrorism

or third parties, or damage to the assets of the Kuraray Group,or an epidemic could disrupt our business activities.

Annual Report 201625

Consolidated Balance Sheet
Kuraray Co., Ltd. and its Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen

December 31,
2016

December 31,
2015

December 31,
2016

1 Cash and deposits*6............................................................................

¥ 51,437¥ 36,996$ 443,422

2 Notes and accounts receivable–trade*7...............................................

105,010102,079905,258

3 Short-term investment securities.......................................................

39,06418,805

336,758

4 Merchandise and finished goods........................................................

73,504

77,582

633,655

5 Work-in-process..................................................................................

12,26011,293

105,689

6 Raw materials and supplies................................................................

25,504

23,310219,862ASSETSI

Current assets:

7 Deferred tax assets.............................................................................

5,974

7,598

51,5008 Other ..................................................................................................

12,66919,430109,2159 Allowance for doubtful accounts.........................................................

(451)

(611)

(3,887)

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

324,974

296,486

2,801,500

II

Noncurrent assets:
1 Tangible fixed assets:		 (1) Buildings and structures, net*2 and 6.................................................

54,343

53,959468,474		 (2) Machinery, equipment and vehicles, net*2.....................................

162,963

127,962

1,404,853

		 (3) Land*2 and 6.......................................................................................

19,526

18,508168,327

		 (4) Construction in progress................................................................

29,90456,609257,793		 (5) Other, net .....................................................................................

5,090

4,978

43,879

		 Total tangible fixed assets*1...............................................................

271,827

262,019

2,343,336

		 (1) Goodwill.........................................................................................

26,25628,564

226,344		 (2) Customer-related assets................................................................

28,88032,244

248,965		 (3) Other..............................................................................................

24,401

23,167

210,353

		 Total intangible fixed assets..............................................................

79,537

83,976685,663		 (1) Investment securities*3 and 6............................................................

34,02346,057

293,301		 (2) Long-term loans receivable............................................................

260

239

2,241

		 (3) Net defined benefit assets.............................................................

827

791

7,129

		 (4) Deferred tax assets........................................................................

7,097

6,361

61,181

		 (5) Other..............................................................................................

6,929

5,887

59,732*2

2 Intangible fixed assets:

3 Investments and other assets:		 (6) Allowance for doubtful accounts....................................................

(43)

(50)

(370)

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

49,09359,287423,215

		 Total noncurrent assets.....................................................................

400,458

405,284

3,452,224

TOTAL ASSETS......................................................................................

¥725,433¥701,770$6,253,732

The accompanying notes are an integral part of the financial information.

26

Kuraray Co., Ltd.

Thousands of
U.S. dollars

Millions of yen

December 31,
2016

December 31,
2015

December 31,
2016

1 Notes and accounts payable–trade*7...................................................

¥ 36,424¥ 38,331$ 314,000

2 Short-term loans payable*6..................................................................

7,626

7,187

65,741

LIABILITIESICurrent liabilities:

3 Accrued expenses...............................................................................

10,71910,46892,4054 Income taxes payable.........................................................................

7,635

14,69265,8185 Provision for bonuses..........................................................................

5,296

5,259

45,655

6 Other provisions..................................................................................

4

31

34

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

28,43019,480245,086

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

96,13695,450828,758

10,00010,00086,206

2 Long-term loans payable ...................................................................

42,17242,257363,551

3 Deferred tax liabilities.........................................................................

25,442

24,102

219,327

4 Provision for directors’ retirement benefits.........................................

209

185

1,801

5 Provision for environmental measures................................................

3,580

353

30,8626 Net defined benefit liabilities..............................................................

11,542

11,24799,5007 Asset retirement obligations...............................................................

4,192

3,615

36,137

7 Other*6 and 7

II

Noncurrent liabilities:
1 Bonds payable.....................................................................................
*6

8 Other ..................................................................................................

11,178

10,96696,362

		 Total noncurrent liabilities.................................................................

108,318

102,729

933,775

TOTAL LIABILITIES................................................................................

204,454

198,180

1,762,534

88,95588,955

766,853

NET ASSETS

I

Shareholders’ equity:
1 Capital stock........................................................................................
2 Capital surplus....................................................................................

87,17887,147

751,534

3 Retained earnings...............................................................................

304,277

278,8992,623,077

4 Treasury stock.....................................................................................

(3,972)(4,319)(34,241)

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

476,439

450,682

4,107,232

10,913

10,80894,077

II

Accumulated other comprehensive income:1 Valuation difference on available-for-sale securities............................
2 Deferred gains or losses on hedges...................................................

(110)

(4)

(948)

3 Foreign currency translation adjustment.............................................

30,05439,377

259,086

4 Remeasurements of defined benefit plans.........................................

(4,336)(4,801)(37,379)

		 Total accumulated other comprehensive income............................

36,52045,380314,827

III Subscription rights to shares...............................................................

719

831

6,198

IV Noncontrolling interests......................................................................

7,300

6,695

62,931TOTAL NET ASSETS..............................................................................

520,978

503,589

4,491,189

TOTAL LIABILITIES AND NET ASSETS.......................................................

¥725,433¥701,770$6,253,732

The accompanying notes are an integral part of the financial information.

Annual Report 201627

Consolidated Statement of Income andConsolidated Statement of Comprehensive Income
Kuraray Co., Ltd. and its Consolidated Subsidiaries

Consolidated Statement of IncomeI
II

Net sales................................................................................................
Cost of sales*2........................................................................................
		 Gross profit.........................................................................................
III Selling, general and administrative expenses:
1 Selling expenses..................................................................................
2 General and administrative expenses*2...............................................
		 Total selling, general and administrative expenses*1......................
		 Operating income..............................................................................
IV Non-operating income:1 Interest income...................................................................................
2 Dividend income..................................................................................
3 Equity in earnings of an affiliate...........................................................
4 Other ..................................................................................................
		 Total non-operating income..............................................................
V Non-operating expenses:
1 Interest expenses................................................................................
2 Foreign exchange losses.....................................................................
3 Personnel expenses for seconded employees....................................
4 Other ..................................................................................................
		 Total non-operating expenses...........................................................
		 Ordinary income................................................................................
VI Extraordinary income:
1 Gain on reversal of asset retirement obligations.................................
2 Gain on reversal of provision for environmental measures.................
3 Gain on sales of tangible fixed assets*3...............................................
		 Total extraordinary income...............................................................
VII Extraordinary loss:
1 Provision for environmental measures................................................
2 Impairment loss*4................................................................................
3 Loss on disposal of tangible fixed assets*5..........................................
4 Loss in construction for delay *6...........................................................
5 Loss on valuation of investment securities.........................................
		 Total extraordinary loss.....................................................................
		 Income before income taxes.............................................................
Income taxes–current.............................................................................
Income taxes for prior periods*7.............................................................
Income taxes–deferred...........................................................................
Total income taxes................................................................................
		 Net income.........................................................................................
		 Net income attributable to noncontrolling interests........................
		 Net income attributable to owners of the parent.............................

Consolidated Statement of Comprehensive IncomeI
II

Net income............................................................................................
Other comprehensive income:1 Valuation difference on available-for-sale securities.............................
2 Deferred gains or losses on hedges....................................................
3 Foreign currency translation adjustment.............................................
4 Remeasurements of defined benefit plans.........................................
Total other comprehensive income*1...................................................
III Comprehensive income.......................................................................
Comprehensive income attributable to
1 Owners of the parent..........................................................................
2 Minority interests................................................................................
The accompanying notes are an integral part of the financial information.

28

Kuraray Co., Ltd.

Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

(January 1, 2016 to
December 31, 2016)(January 1, 2015 to
December 31, 2015)(January 1, 2016 to
December 31, 2016)¥485,192
317,748
167,444¥521,721
355,137
166,583$4,182,689
2,739,206
1,443,482

27,23872,37899,61667,827

27,24973,257
100,506
66,077

234,810
623,948858,758
584,715

223
2,695
1
1,999
4,919

239
2,741
0
936
3,918

1,922
23,232
8
17,232
42,405

739
774
666
4,384
6,565
66,181

724
435
687
3,612
5,459
64,535

6,370
6,672
5,741
37,79356,594570,525

—
—
—
—

461
342
278
1,082

—
—
—
—

3,293
2,179
196
—
—
5,669
60,512
17,469—1,838
19,30841,204804¥ 40,400

—
4,847
425
964
866
7,104
58,514
18,2971,497
2,252
22,046
36,467718¥ 35,749

28,387
18,784
1,689——
48,870521,655
150,594—
15,844
166,448355,206
6,931$ 348,275

Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

(January 1, 2016 to
December 31, 2016)(January 1, 2015 to
December 31, 2015)(January 1, 2016 to
December 31, 2016)¥41,204¥36,467$355,206

105(114)(9,221)464(8,765)32,4381,531(69)(7,521)267(5,792)30,675905(982)(79,491)
4,000(75,560)
279,637

31,642796

29,956
718

272,775
6,862

Consolidated Statement of Changes in Net Assets
Kuraray Co., Ltd. and its Consolidated Subsidiaries

Millions of yen
Shareholders’ equity

Fiscal 2016 (January 1, 2016 to December 31, 2016)

Balance at January 1, 2016..........................

Capital stock¥88,955

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equity¥87,147 ¥278,899¥(4,319) ¥450,682

Cash dividends........................................

(14,753)(14,753)

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

40,40040,400Changes of scope of consolidation..........

(267)

Changes of items during the period

Purchase of treasury stock......................
Disposal of treasury stock.......................

30

(267)
(5)

(5)

353

383

347

25,756

Net changes of items other thanshareholders’ equity..............................
Total changes of items during the period
Balance at December 31, 2016.....................

——¥88,955

30

25,378¥87,178 ¥304,277¥(3,972) ¥476,439

Millions of yen
Accumulated other comprehensive income
Valuationdifference on
Deferred gains
available-for-saleor losses
securities
on hedges

Balance at January 1, 2016

¥10,808¥ (4)Foreigncurrencytranslation
adjustment¥39,377

Total
accumulated
Remeasurements
otherof definedcomprehensive
benefit plansincome¥(4,801)¥45,380

Subscription
rights toshares¥ 831

Noncontrollinginterests

Total net
assets¥6,695 ¥503,589

Changes of items during the period
Cash dividends........................................

(14,753)

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

40,400Changes of scope of consolidation..........

(267)

Purchase of treasury stock......................

(5)

Disposal of treasury stock.......................

383

Net changes of items other thanshareholders’ equity..............................

104

(105)

(9,323)464(8,859)(112)

Total changes of items during the period......

104

(105)

(9,323)464(8,859)(112)

Balance at December 31, 2016.....................

¥10,913¥(110)¥30,054¥(4,336)¥36,520

¥ 719

604

(8,367)604

17,389¥7,300 ¥520,978

Annual Report 201629

Thousands of U.S. dollars
Shareholders’ equity

Fiscal 2016 (January 1, 2016 to December 31, 2016)

Balance at January 1, 2016..........................

Capital stock$766,853

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equity$751,267 $2,404,301$(37,232) $3,885,189

Cash dividends........................................

(127,181)(127,181)

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

348,275

348,275

Changes of scope of consolidation..........

(2,301)

Changes of items during the period

Purchase of treasury stock......................
Disposal of treasury stock.......................

258(2,301)
(43)

(43)

3,043

3,301

2,991

222,034

Net changes of items other thanshareholders’ equity..............................

—

Total changes of items during the period......

—

Balance at December 31, 2016.....................

$766,853

258

218,775$751,534 $2,623,077$(34,241) $4,107,232

Thousands of U.S. dollars
Accumulated other comprehensive income
Valuationdifference on
Deferred gains
available-for-saleor losses
securities
on hedges

Balance at January 1, 2016..........................

$93,172

Foreigncurrencytranslation
adjustment$ (34) $339,456

Total
accumulated
Remeasurements
otherof definedcomprehensive
benefit plansincomeSubscription
rights toshares$(41,387) $391,206$7,163

Noncontrollinginterests

Total
net assets$57,715 $4,341,284

Changes of items during the period
Cash dividends........................................

(127,181)

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

348,275

Changes of scope of consolidation..........

(2,301)

Purchase of treasury stock......................

(43)

Disposal of treasury stock.......................

3,301

Net changes of items other thanshareholders’ equity..............................

896

Total changes of items during the period......

896

Balance at December 31, 2016.....................

$94,077

The accompanying notes are an integral part of the financial information.

30

Kuraray Co., Ltd.

(905)

(80,370)

4,000(76,370)

(965)

(905)

(80,370)

4,000(76,370)(965)$(948) $259,086$(37,379)$314,827$6,1985,206(72,129)5,206

149,905$62,931 $4,491,189

Consolidated Statement of Changes in Net Assets

Millions of yen
Shareholders’ equity

Fiscal 2015 (January 1, 2015 to December 31, 2015)

Balance at January 1, 2015..........................

Capital stock¥88,955

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equity¥87,181 ¥285,561 ¥ (38,110) ¥423,588

Changes of items during the period
Cash dividends........................................

(9,474)

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

35,749Purchase of treasury stock......................

(9,474)35,749(10)(10)

Disposal of treasury stock.......................

84

745

830

Retirement of treasury stock...................

(33,054)

33,054—

Transfer to capital surplus fromretained earnings.................................

32,936(32,936)(33)(6,662)—

Net changes of items other thanshareholders’ equity.............................

—

Total changes of items during the period......

—

Balance at December 31, 2015.....................

¥88,955¥87,147 ¥278,899

33,79027,094¥ (4,319) ¥450,682

Millions of yen
Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities

Balance at January 1, 2015..........................

¥ 9,276

Deferred
gains orlosseson hedges¥ 65

Foreigncurrencytranslation
adjustment¥46,899

Total
accumulated
Remeasurements
otherof definedcomprehensive
benefit plansincome¥ (5,069)¥51,172

Subscription
rights toshares¥ 977

Noncontrollinginterests

Total
net assets¥6,087 ¥481,826

Changes of items during the period
Cash dividends........................................

—(9,474)

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

—

35,749Purchase of treasury stock......................

—

(10)

Disposal of treasury stock.......................

—

830

Retirement of treasury stock...................

——

Transfer to capital surplus fromretained earnings.................................

——Net changes of items other thanshareholders’ equity.............................

1,531

(69)

(7,521)267(5,792)(145)

Total changes of items during the period......

1,531

(69)

(7,521)267(5,792)(145)

Balance at December 31, 2015.....................

¥10,808¥ (4)¥39,377¥ (4,801)¥45,380

¥ 831

607

(5,331)

607

21,763¥6,695 ¥503,589

Annual Report 201631

Consolidated Statement of Cash Flows
Kuraray Co., Ltd. and its Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen

I Net cash provided by (used in) operating activities:
		 1 Income before taxes and minority interests.....................................
		 2 Depreciation and amortization..........................................................
		 3 Increase (decrease) in allowance for doubtful accounts...................
		 4 Gain on reversal of asset retirement obligations..............................
		 5 Gain on reversal of provision for environmental measures..............
		 6 Loss on disposal of tangible fixed assets.........................................
		 7 Impairment loss................................................................................
		 8 Provision for environmental measures.............................................
		 9 Foreign exchange losses (gains).......................................................
		10 Interest and dividends income.........................................................
		11 Interest expenses.............................................................................
		12 Decrease (increase) in notes and accounts receivable–trade...........
		13 Decrease (increase) in inventories....................................................
		14 Increase (decrease) in notes and accounts payable–trade...............
		15 Loss on valuation of investment securities......................................
		16 Increase (decrease) in provision for bonuses...................................
		17 Increase (decrease) in net defined benefit liabilities.........................
		18 Decrease (increase) in net defined benefit assets...........................
		19 Other, net.........................................................................................
Sub-total................................................................................................
		20 Interest and dividends income received...........................................
		21 Interest expenses paid.....................................................................
		22 Income taxes (paid) refund...............................................................
Net cash provided by (used in) operating activities............................
II Net cash provided by (used in) investment activities:
		 1 Purchase of investment securities....................................................
		 2 Proceeds from sales and redemption of investment securities.......
		 3 Purchase of tangible fixed assets and intangible fixed assets..........
		 4 Payments for disposal of tangible fixed assets and		 intangible fixed assets....................................................................
		 5 Proceeds from sales of tangible fixed assets and		 intangible fixed assets....................................................................
		 6 Purchase of shares of subsidiaries resulting in change in		 scope of consolidation*2.................................................................
		 7 Proceeds from transfer of business.................................................
		 8 Payments for acquisition of business...............................................
		 9 Other, net.........................................................................................
Net cash provided by (used in) investment activities.........................
III Net cash provided by (used in) financing activities:
		 1 Net increase (decrease) in short-term loans payable........................
		 2 Net increase (decrease) in commercial papers.................................
		 3 Repayment of long-term loans payable............................................
		 4 Purchase of treasury stock...............................................................
		 5 Proceeds from sales of treasury stock.............................................
		 6 Cash dividends paid..........................................................................
		 7 Cash dividends paid to minority shareholders..................................
		 8 Other, net.........................................................................................
Net cash provided by (used in) financing activities.............................
IV Effect of exchange rate changes on cash and cash equivalents.......
V Net increase (decrease) in cash and cash equivalents......................
VI Cash and cash equivalents, beginning of year..................................
VII Increase in cash and cash equivalents from newly consolidated subsidiaries.....
VIII Cash and cash equivalents, end of year*1...........................................
The accompanying notes are an integral part of the financial information.

32

Kuraray Co., Ltd.

Fiscal 2016

Fiscal 2015

Fiscal 2016

(January 1, 2016 to
December 31, 2016)(January 1, 2015 to
December 31, 2015)(January 1, 2016 to
December 31, 2016)¥ 60,512
41,555
(160)
—
—
196
2,179
3,293
1,281
(2,919)739(4,386)(1,645)(1,435)
—
130
264
(297)
16,854
116,162
2,912(739)(24,412)93,923¥ 58,514
44,102
46
(461)
(342)
425
4,847
—
664
(2,981)724
1,526(6,617)(4,241)
866
325
885
(325)
42
98,001
2,974(724)(7,023)
93,228$ 521,655
358,232(1,379)——1,689
18,78428,387
11,043(25,163)
6,370(37,810)(14,181)(12,370)
—
1,120
2,275
(2,560)145,293
1,001,396
25,103(6,370)(210,448)
809,681

(489)
3,551
(49,992)(2,196)
4,385(43,099)(4,215)30,612(430,965)

(516)

(971)

(4,448)

52

558

448

—
—
—
(1,905)(49,300)(5,564)
1,259(120)(2,804)(48,553)———(16,422)(425,000)

495
—
(142)
(5)
195
(14,753)
(191)
(299)
(14,701)(1,514)28,40754,750231¥ 83,389(4,940)(10,000)
(144)
(10)
611
(9,474)(100)(294)(24,353)(958)
19,36235,388—¥ 54,750

4,267—(1,224)(43)
1,681(127,181)(1,646)(2,577)(126,732)(13,051)
244,887
471,982
1,991$ 718,870

Notes to Consolidated Financial Statements
Kuraray Co., Ltd. and its Consolidated Subsidiaries / Years ended December 31, 2016 and December 31, 2015

1

Significant Accounting Policies
were added to the scope of consolidation due to their

1. Basis of presenting consolidated financial statements
The accompanying consolidated financial statements ofKuraray Co., Ltd. (the “Company”) and its consolidated

increased significance.
(2) Names of major unconsolidated subsidiaries

subsidiaries are prepared on the basis of accounting principles

		

generally accepted in Japan, which are different in certain

			 Kuraray Okayama Spinning CO., LTD.

respects as to application and disclosure requirements of

			 Kuraray South America Ltda.

International Financial Reporting Standards, and are filed with		

the Japanese Ministry of Finance (the “MOF”) as required by			 The total assets, total sales and net income and loss

(Major unconsolidated subsidiaries)(Reasons for excluding from the scope of consolidation)

the Financial Instruments Exchange Law of Japan. The(amount corresponding to the owned interest) andaccompanying consolidated financial statements are

retained earnings (amount corresponding to the owned

translations of those filed with MOF.

interest) of the unconsolidated subsidiaries have no

Each amount in the consolidated financial statements andmaterial effect on the consolidated financial statements.

notes is rounded down to the nearest 1 million yen (in thecase of the translation into the United States dollars, they
have been rounded down to the nearest 1 thousand dollars).
The United States dollar amounts included herein are

3.	Scope of application of equity method affiliates andsubsidiaries(1) Number of unconsolidated subsidiaries accounted forprovided solely for the convenience of readers outside Japan

using the equity method

and are stated, at the rate of ¥116=$1, the approximate
exchange rate prevailing on December 31, 2016. The

Fiscal 2016

Fiscal 2015

1

1

Number of unconsolidated
subsidiaries accounted forusing the equity method

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 the United States dollars

		(Name of unconsolidated subsidiaries)

at this or any other rate.

		

Kuraray Okayama Spinning CO., LTD.

(2) Unconsolidated subsidiaries and affiliates (Hexin Kuraray

2. Scope of consolidation

Micro Fiber Leather (Jiaxing) Co., Ltd., and other(1) Number of consolidated subsidiaries
Number of consolidated
subsidiaries		

Fiscal 2016

Fiscal 2015

38

36

affiliates) have not been accounted for using the equity
method, because their net income and loss and retained
earnings (amount corresponding to the owned interest)
have no material effect on the consolidated financial(Major consolidated subsidiaries)

statements.

			 KURARAY TRADING Co., LTD., KURARAY CHEMICAL
CO., LTD., Kuraray Plastics Co., Ltd., KURARAYENGINEERING CO., LTD., KURARAY LIVING CO., LTD.,
Kuraray Techno Co., Ltd., KURARAYKURAFLEX CO.,LTD., TECHNO SOFT CO., LTD., Kuraray Travel Service
Corporation, KURARAY SAIJO CO., LTD., KURARAYTAMASHIMA COMPANY, LIMITED, Iruma Country Club
Co., Ltd., KURASHIKI KOKUSAI HOTEL LTD., KURARAYFASTENING CO., LTD., OKAYAMA RINKOH CO., LTD.,
Kuraray Noritake Dental Inc., KURARAY AQUA CO.,LTD., Kuraray Holdings U.S.A., Inc., Kuraray America,
Inc., Kuraray Europe GmbH, EVAL Europe N.V., Kuraray
Hong Kong Co., Ltd., Kuraray Asia Pacific Pte. Ltd.,
Kuraray (Shanghai) Co., Ltd., MonoSol Holdings, Inc.,
Kuraray China Co., Ltd., Kuraray Korea Ltd., Plantic
Technologies Limited and 10 other consolidated
subsidiaries.
			 During the fiscal year ended December 31, 2016,
Kuraray Europe Moravia and Kuraray Dental Benelux

4. Fiscal years of consolidated subsidiaries
	The closing date of the consolidated subsidiaries is thesame as the consolidated closing date.
5. Accounting policies(1) Valuation standards and methods for significant assets		a) Investment securities			Available-for-sale securities for which a market price isavailable are stated at fair value at the year-end. (Netunrealized gains or losses on these securities arerecorded as a separate component in “Net assets”,
net of tax amount. The cost of securities sold isdetermined based on the moving-average cost of all
such securities held at the time of sale.) Other
securities for which a market price is not available arestated at cost determined by the moving-averagemethod.

Annual Report 2016

33

		

b) Derivative financial instruments(3) Accounting for significant allowance

			 All derivatives are stated at fair value.

							The Company and its consolidated subsidiaries providec) Inventories

			Finished goods, raw materials, and work-in-process area) Allowance for doubtful accounts
for doubtful accounts principally at an amountprincipally stated at the lower of cost determined bycomputed based on the historical bad debt ratio during

the weighted average method or net realizable value.

a certain reference period plus an estimated				 Supplies are principally stated at the lower of cost

uncollectible amount based on the analysis of certain

determined by the moving-average method or net
realizable value.

individual accounts.
		b) Provision for bonuses			Provision for bonuses is stated at the estimated(2) Depreciation method of significant depreciable assets
		amount of the bonuses to be paid to employees baseda) Tangible fixed assets (excluding lease assets)			Depreciation, except for buildings, is primarily
computed using the declining-balance method over theon services provided for the fiscal year.
		c) Provision for directors’ retirement benefits			Some of the consolidated subsidiaries accrue theestimated useful lives of the assets. However,liabilities for their retirement benefits for directors anddepreciation for structures purchased on or after April

corporate auditors, which is, in general, based upon

1, 2016 is computed using the straight-line method.

the amounts required by the subsidiaries’ internal

The depreciation method for buildings is primarily

regulations.

computed using the straight-line method.

						 The estimated useful lives of assets are primarily asd) Provision for environmental measures			In order to provide for payments on disposal of waste

follows:

polychlorinated biphenyl (PCB) removed from the			 • Buildings and structures...................... 31 to 50 years

noncurrent assets and stored, a provision is made			 • Machinery, equipment and vehicles....

based on the estimated disposal cost.

		

4 to 9 yearsb) Intangible assets (excluding lease assets)			Amortization is primarily computed using thestraight-line method.

(4) Accounting treatment of retirement benefit plan						 The numbers of years for amortization are primarily

to individual periods of service

as follows:In calculating benefit obligation, the benefit formula			• Goodwill............................................... 15 or 20 years			 • Customer-related assets......................

basis was used to attribute estimated retirement

9 or 20 years				 However, minor amounts are charged or credited tobenefits to periods up to December 31, 2016.
		

income directly in the year of acquisition.
		a) Method for attributing estimated retirement benefitsc) Lease assetsb) Calculation of net actuarial gain or loss and priorservice cost			Prior service cost is amortized on a straight-line basis			Amortization is primarily computed using the straight-

over a certain period (mainly 15 years), which falls

line method.

within the average remaining years of service of theeligible employees. Actuarial gains or losses areamortized on a straight-line basis over a certain period(mainly 15 years), which falls within the averageremaining years of service of the eligible employees,
allocated proportionately commencing the year
following the year in which each respective gain orloss occurred.
		c) Use of simplified method among small companies

			Certain consolidated subsidiaries calculate retirement
benefit liabilities and expenses using the simplified
method that assumes their benefit obligation is equal
to the benefits payable if all employees voluntarily
retired at fiscal year-end.

34

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements(5) Significant hedge accounting		(6) Amortization of goodwilla) Hedge accounting		The Company amortizes goodwill using the straight-line			The Company and its consolidated subsidiaries adopt

method over the estimated period of benefit with thethe method for hedging instruments whereby any

exception of minor amounts, which are charged orgains or losses are deferred over the period of thecredited to income directly in the year of acquisition.

hedging contract and are offset against the deferredlosses or gains on the related hedged items. However,deferral hedge accounting is applied to forward foreign(7) Cash and cash equivalents		Cash and cash equivalents include all highly liquid

exchange contracts used to hedge foreign currency-

investments with a maturity of three months or less, that

denominated loans, and when an interest rate swap

are readily convertible to known amounts of cash which

contract meets certain conditions, the net amount toare subject to an insignificant risk of changes in value.

be paid or received under the contract is added to or
deducted from the interest on the hedged items.
		b) Hedging instruments and hedged items
Hedging instruments

		Hedged items

Forward foreign exchange
contracts

Foreign currency-denominatedloans
Future transactions inforeign currency

Interest rate swap contracts

Interest expenses(8) Other accounting policies
		Accounting for consumption tax
Consumption tax and local consumption tax on goods
and services are not included in the revenue andexpenses amounts.

c) Hedging policy			The Company and its consolidated subsidiaries use
financial instruments to hedge interest rate fluctuationand exchange fluctuation risks in accordance with theirinternal policies and procedures.
		d) Assessment method for hedge accounting			The Company identifies and confirms the material
conditions and measures the effectiveness of forward
foreign exchange contracts associated with plannedtransactions denominated in foreign currencies.
				 Measurement of hedge effectiveness is notconsidered necessary for forward foreign exchange
contracts that meet the requirements for deferral
hedge accounting and interest rate swaps that meetthe requirements for special accounting because theCompany identifies and confirms the material
conditions at the time of transaction.

2

Changes in Accounting Policies

1. Application of Accounting Standard for Business
Combinations

resulting from changes in ownership interest in a subsidiary
when control over the subsidiary is retained are recorded

On September 13, 2013, the Accounting Standards Board ofunder capital surplus, and costs related to acquisition ofJapan (ASBJ) issued ASBJ Statement No. 21 “Revised

increased ownership interest are recognized in the period in

Accounting Standard for Business Combinations,” ASBJ

which they arise. Also, transitional accounting is applied toStatement No. 22 “Revised Accounting Standard forbusiness combinations performed on or after the beginning ofConsolidated Financial Statements,” and ASBJ Statement No.

the fiscal year ended December 31, 2016, with revision of

7 “Revised Accounting Standard for Business Divestitures.”purchase price allocation applied to the consolidated financial

These revised accounting standards are applied from the fiscal

statements during the fiscal year in which the date of theyear ended December 31, 2016, whereby differencesbusiness combination occurs. The presentation method of net

Annual Report 201635

income was amended, and “minority interests” were changed

with the acquisition or sale of stock of subsidiaries not

to “noncontrolling interests.” For comparison purposes,

associated with a change in the scope of consolidation is presented

information for the fiscal year ended December 31, 2015 isunder “Net cash provided by (used in) operating activities.”shown in accordance with the new standards in the

These changes have no effect on the consolidated financial

accompanying consolidated financial statements.

statements or per share information for the fiscal year ended

Transitional accounting in accordance with Article 58,

December 31, 2016.

Paragraph 2, Item 4, of ASBJ Statement No. 21, Article 44,
Paragraph 5, Item 4, of ASBJ Statement No. 22, and Article

2. Change in Depreciation Method Due to Tax Reforms

57, Paragraph 4, Item 4, of ASBJ Statement No. 7 is applied

The ASBJ issued PITF No. 32 “Practical Solution on a change

from the beginning of the fiscal year ended December 31, 2016.

in depreciation method due to Tax Reform 2016” on June 17,

The consolidated statements of cash flows for the fiscal

2016. This revised accounting standard is applied from theyear ended December 31, 2016 have been changed to a method

fiscal year ended December 31, 2016. The Company has

in which cash flows related to the acquisition or sale of stock

switched the method of depreciation for structures purchasedof subsidiaries not associated with a change in the scope ofon or after April 1, 2016, from the declining-balance method toconsolidation is presented under “Net cash provided by (usedthe straight-line method.

in) financing activities” and cash flows related to expenses for

The effect of this change on operating income, ordinaryacquisition of stock of subsidiaries associated with a change inincome and income before taxes and noncontrolling interests

the scope of consolidation or expenses incurred in connection

for the fiscal year ended December 31, 2016 is immaterial.

3

Accounting Standards Issued but Not Yet Applied

1. Implementation Guidance on Recoverability of Deferred
Tax Assets
	“Implementation Guidance on Recoverability of Deferred Tax
Assets” (ASBJ Guidance No. 26, March 28, 2016)

differences of business entities in Category 2
		 ④ Treatment of reasonably estimable period for taxable
income before taxable or deductible temporary
differences of business entities in Category 3
		 ⑤ Treatment in cases where business entities that meet(1) Outline
		The Guidance basically follows the framework used in

he requirements of Category 4 qualify as Category 2
or Category 3

Japanese Institute of Certified Public Accountants(JICPA) Auditing Guidance No. 66, “Auditing Treatment
for Judgment of Recoverability of Deferred Assets,”(2) Expected Application Date		The Company plans to apply this accounting standard

namely that the amount of deferred tax assets isfrom the beginning of the fiscal year ending December

assessed based on five categories of business entities,

31, 2017.

with the following necessary changes in accounting
treatment.
① Treatment of business entities that do not meet anyof the requirements of Category 1 through Category 5
		 ② Matters of classification related to Category 2 andCategory 3(3) Effect of Applying the Accounting Standard		The Company is currently assessing the effect ofapplying the accounting standards in preparing thefinancial statements for the fiscal year ended December
31, 2016.

		 ③ Treatment of unscheduled deductible temporary

4

Changes in Presentation(Consolidated Statement of Income)restated to reflect this change in presentation method.

From fiscal 2016, “Foreign exchange losses,” which was

As a result, ¥4,048 million presented in the Consolidated

included in “Other” under “Non-operating expenses” in theStatement of Income for the previous fiscal year as “Other”

previous fiscal year, is presented separately because its

under “Non-operating expenses” was reclassified as ¥435

amount is more than 10/100 of total non-operating expenses.

million in “Foreign exchange loss” and ¥3,612 million in “Other.”

The financial statements for the previous fiscal year have been

36

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

5

Changes in Accounting Estimates(Provision for Environmental Measures)

expenses are recorded under extraordinary loss as provision

In the fiscal year ended December 31, 2016, in addition tofor environmental measures.

provision recorded previously for expenses of disposal of

As a result of this change in estimate, income before

PCB wastes, it became possible to rationally estimate

income taxes decreased by ¥3,293 million (US$28,387

expenses for disposal of other PCB wastes, and suchthousand) in the fiscal year ended December 31, 2016.

6

Additional Information

In January 2016, the European Commission ruled that a

In fiscal 2015, Kuraray’s Belgian subsidiary recorded thepreferential tax treatment scheme under the tax law of

estimated amount based on the possible exposures to

Belgium, which Kuraray’s Belgian subsidiary had applied inadditional income tax payments, which was ¥2,994 million,

prior fiscal years, was an illegal state aid, and ordered thetaking into consideration the final tax burden risk. The

Belgian government to charge additional taxes to recover thesubsidiary changed this estimate in accordance with aamount that had previously been exempted. The Belgian

decision by the Belgian government in December 2016

government had already filed an appeal against the European

regarding the amount of the additional tax levy. The effect ofCommission’s decision, and the Belgian subsidiary also

this change in the fiscal year ended December 31, 2016 isappealed the decision in July 2016.

immaterial.

7

Notes to Consolidated Balance Sheet*1. Accumulated depreciation of tangible fixed assets
Thousands of
U.S. dollars

Millions of yen

Accumulated depreciation of tangible fixed assets..................................................

Fiscal 2016

Fiscal 2015

Fiscal 2016

¥684,246¥656,351$5,898,672*2. Accumulated amount of reduced-value entry as a result of receiving government subsidies, and so on that are subtracted fromthe acquisition price of tangible fixed assets
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

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

¥2,094¥2,094$18,051

Machinery, equipment and vehicles.........................................................................

1,509

997

13,008Land..........................................................................................................................

1,257

1,257

10,836

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

30

36

258

(Deduction for this fiscal year) .................................................................................

(0)

(—)

(0)

*3. Investments in unconsolidated subsidiaries and affiliates
Thousands of
U.S. dollars

Millions of yen

Investment securities (equity) ................................................................................

Fiscal 2016

Fiscal 2015

Fiscal 2016

¥5,632¥8,359$48,551

Annual Report 201637

*4. Commitments and contingencies
The Company is contingently liable for guarantees for bank loans of unconsolidated subsidiaries, affiliates and others.
The company names and the guarantees of their liabilities are as follows:
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

Social welfare corporation Ishii Kinen Aizenen (Joint and several guarantee)..........

¥1,052¥1,183$9,068

Kuraray India Private Limited....................................................................................

48

—

413

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

¥1,100¥1,183$9,482*5. Additional payment under share purchase agreement
The acquisition of Plantic Technologies Limited and subsidiaries includes an earn-out provision, whereby, based on specified
performance targets, up to an additional $86.7 million may be required to be paid.
*6. Assets pledged as collateral and secured liabilities
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016
Cash and deposits....................................................................................................

¥

Fiscal 2015
¥

—

61

Fiscal 2016$—

Investment securities*.............................................................................................

46

46

396

Buildings...................................................................................................................

747

721

6,439

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

1,001

1,001

8,629

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

¥1,794¥1,831$15,465
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Other (Current liabilities)...........................................................................................

¥ —

¥ 18

$

Collateral for short-term loans..................................................................................

180

195

1,551

Collateral for long-term loans....................................................................................

13

13

112

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

¥193

¥226

$1,663Fiscal 2016—

* The above investment securities have been provided as collateral for loans of Mizushima Eco-works Co., Ltd.

*7. Accounting for notes with maturity dates at fiscal year-end
Notes with maturity dates at fiscal year-end and fixed-date cash settlements (a method of cash settlement on the same terms
as notes) are accounted for and settled as of the date of maturity. As the fiscal year-end fell on a bank holiday, the following
amounts of notes and accounts receivable and payable with maturity dates at fiscal year-end were accounted for and settled asof the date of maturity.
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

Notes and accounts receivable–trade.......................................................................

¥5,453¥5,827$47,008

Notes and accounts payable–trade...........................................................................

3,108

3,455

26,793

Other (Current liabilities) ..........................................................................................

266

491

2,293

38

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

8

Notes to Consolidated Statement of Income*1. Major items and the amounts under “Selling, general and administrative expenses” are as follows:
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

Freight and storage...................................................................................................

¥18,996¥18,907$163,758

Research and development......................................................................................

18,536

18,295

159,793

Salaries and legal welfare expense...........................................................................

18,42018,117

158,793

Provision for bonuses...............................................................................................

5,062

5,190

43,637Retirement benefit expenses...................................................................................

1,454

1,605

12,534

Provision for directors’ retirement benefits..............................................................

12

26

103

*2. Research and development expenses included in general, administrative and current manufacturing expenses
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

¥19,830¥19,132$170,948*3. Gain on sales of tangible fixed assets
		Attributable to sales of land and building of a subsidiary.
*4. Impairment loss
		The significant component of impairment loss is as follows:
Fiscal 2016

Location

Assets

Usage

Type

Impairment loss
Thousands ofMillions of yen
U.S. dollars

Saijo City, Ehime
Prefecture
Kamisu City,
Ibaraki Prefecture

Business assets

Assets for E&E materials
business

Machinery andequipment¥942$8,120U.S.A.

Business assets

Result of researchand development
activities related
to industrial-use film

In-process researchand development

489

4,215

Fiscal 2015
Impairment loss
Location

Assets

Usage

Type

Millions of yen

Iruma-gun,
SaitamaPrefecture

Business assets

Golf course

Buildings and land

¥4,302

U.S.A.

Business assets

Result of researchand development
activities related
to industrial-use film

In-process researchand development544

		(Identifying the cash-generating unit to which an asset belongs)
		As a minimum unit for generating cash flow, business assets are grouped into sections used for management accounting,and leased assets, idle assets, and assets associated with discontinued or reorganized businesses are assessed individually.
			 Other head office and research facilities are shared assets.

Annual Report 201639

		(Method for calculating the recoverable amount)
		After separately examining the indications for impairment with respect to those businesses whose income from operations
continues to be negative, for businesses whose recoverable amount falls short of the book value, the book value is to be
reduced to the recoverable amount. The recoverable amount is measured based on the value in use, and is calculated bydiscounting expected future cash flows at a rate of 4%.
			 Idle assets are categorized into “assets held for sale,” “assets that can be put to use in other businesses” and “assets tobe discarded” and for items to be sold or discarded, the net book value of the assets is to be reduced to their recoverable
amount. The recoverable amount of the assets is measured based on the net sale price and calculated by deducting theestimated disposal cost from the estimated sale price.
*5. Expense for removing equipment rendered unnecessary by business closure, etc.
*6. Loss in construction for delay
		Fixed expenses incurred during the delay of the construction of the PVA resin manufacturing facility in the United States,
which did not contribute to business.
*7. Income taxes for prior periods
		The European Commission has issued a ruling that a preferential tax treatment scheme under the tax law of Belgium, which a
Belgian subsidiary has applied in prior fiscal years, is illegal under European Union law. Upon the decision of the European
Commission, the Belgian subsidiary recorded the estimated amount based on the possible exposures to additional income tax
payments, which is ¥2,994 million (US$25,810 thousand), with the consideration of the final tax burden risk.

9Notes to Consolidated Statement of Comprehensive Income

Reclassification adjustments and tax effect adjustments relating to other comprehensive income (loss) for the fiscal years ended
December 31, 2016 and December 31, 2015, are as follows:
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

¥ (617)¥ 1,640$ (5,318)

Valuation difference on available-for-sale securities
Amount recorded during the period.....................................................................
Reclassification adjustments................................................................................

384

78

3,310

		 Before tax effect adjustments..........................................................................

(232)

1,719

(2,000)		Tax effect..........................................................................................................

337

(187)

2,905

		 Valuation difference on available-for-sale securities..........................................

105

1,531

905

(205)

12

(1,767)

Deferred gains or losses on hedges
Amount recorded during the period.....................................................................
Reclassification adjustments................................................................................

34

(120)

293

		 Before tax effect adjustments..........................................................................

(170)

(107)

(1,465)

		Tax effect..........................................................................................................

56

37

482

		 Deferred gains or losses on hedges.................................................................

(114)

(69)

(982)

(9,221)(7,521)(79,491)

Foreign currency translation adjustment
Amount recorded during the period.....................................................................
Reclassification adjustments................................................................................

—

—

—

		 Before tax effect adjustments..........................................................................

(9,221)(7,521)(79,491)

		Tax effect..........................................................................................................

—

—

—

		 Foreign currency translation adjustment..........................................................

(9,221)(7,521)(79,491)

Remeasurements of defined benefit plans
Amount recorded during the period.....................................................................

(490)

(830)

(4,224)

Reclassification adjustments................................................................................

1,229

1,431

10,594

		 Before tax effect adjustments..........................................................................

739

600

6,370

		Tax effect..........................................................................................................

(274)

(333)

(2,362)

		 Remeasurements of defined benefit plans.......................................................

464

267

4,000

			 Total other comprehensive income...............................................................

¥(8,765)¥(5,792)$(75,560)

40

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

10Notes to Consolidated Statement of Changes in Net Assets

Fiscal 2016
1. Type and number of issued shares of common stock and treasury stock
Number of shares asof December 31, 2015
(Thousands of shares)

Increase in the numberof shares(Thousands of shares)

Decrease in the numberof shares(Thousands of shares)

Number of shares asof December 31, 2016
(Thousands of shares)

Number of outstanding shares
Common stock		Total354,863——354,863354,863——354,863

3,658

3

299

3,363

3,658

3

299

3,363

Number of treasury stocks
Common stock (Notes 1, 2)
		TotalNotes: 1. The increase in treasury stock (common stock) is attributable to the purchase of less-than-one unit shares (3 thousand shares).
2. The decrease in treasury stock (common stock) is attributable to a transfer of shares upon the exercise of subscription rights (299 thousand shares) and theacquisition of less-than-one unit shares by the shareholders (0 thousand shares).

2.Subscription rights to shares
The Company granted its directors, executive officers, employees, and directors and employees of its subsidiaries subscription
rights to the Company shares as stock options. The balance of the subscription rights to shares as of December 31, 2016 is ¥719
million (US$6,198 thousand).
3. Dividends(1) Amount of dividends paid
Type of share

Amount of dividends(Millions of yen)

Dividend per share(Yen)

Record date

Effective date

General shareholders’ meeting
held on March 29, 2016

Common stock¥7,726(US$66,603 thousand)¥22.00(US$1.89)

December 31,
2015

March 30,
2016

Board of directors’ meeting
held on August 4, 2016

Common stock¥7,027(US$60,577 thousand)¥20.00(US$1.72)

June 30,2016

September 1,
2016

Resolution(2) Dividends whose effective date is after the end of Fiscal 2016 and record date is included in Fiscal 2016.
Resolution

General shareholders’ meeting
held on March 24, 2017

Type of share

Amount of dividends(Millions of yen)

Source ofdividends

Dividend pershare (Yen)Record date

Effective dateCommon stock¥7,381(US$63,629 thousand)

Retainedearnings¥21.00(US$1.81)

December 31,
2016

March 27,2017

Fiscal 2015
1. Type and number of issued shares of common stock and treasury stock
Number of shares as ofDecember 31, 2014
(Thousands of shares)

Increase in the numberof shares(Thousands of shares)

Decrease in the numberof shares(Thousands of shares)

Number of shares asof December 31, 2015
(Thousands of shares)

Number of outstanding shares
Common stock		Total382,863—

28,000354,863

382,863—

28,000354,863

32,283

6

28,631

3,658

32,283

6

28,631

3,658

Number of treasury stocks
Common stock (Notes 1, 2)
		TotalNotes: 1.		The increase in treasury stock (common stock) is attributable to the purchase of less-than-one unit shares (6 thousand shares).
2. The decrease in treasury stock (common stock) is attributable to retirement of treasury stock (28,000 thousand shares), a transfer of shares upon the exercise ofsubscription rights (631 thousand shares) and the acquisition of less-than-one unit shares by the shareholders (0 thousand shares).

2. Subscription rights to shares
The Company granted its directors, executive officers, employees, and directors and employees of its subsidiaries subscription
rights to the Company shares as stock options. The balance of the subscription rights to shares as of December 31, 2015 is ¥831
million.
Annual Report 201641

3. Dividends(1) Amount of dividends paid
Resolution

Type of share

Amount of dividends Dividend per share(Millions of yen)
(Yen)

Record date

Effective date

General shareholders’ meeting
held on March 27, 2015

Common stock¥3,155¥ 9.00December 31,
2014

March 30,
2015

Board of directors’ meeting
held on August 6, 2015

Common stock¥6,319¥18.00June 30,2015

September 1,
2015(2) Dividends whose effective date is after the end of Fiscal 2015 and record date is included in Fiscal 2015.
Resolution

General shareholders’ meeting
held on March 29, 201611

Type of share

Common stock

Amount of dividends(Millions of yen)

Source ofdividends¥7,726

Retainedearnings

Dividend pershare (Yen)Record date

Effective date

¥22.00December 31,
2015

March 30,
2016

Notes to Consolidated Statement of Cash Flows*1.Cash and cash equivalents at December 31, 2016 and December 31, 2015 are reconciled to the accounts reported in the
consolidated balance sheet as follows:
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

Cash on hand and in banks.......................................................................................

¥51,437¥36,996$443,422

Time deposits with a deposit period of 3 months or more......................................

(1,048)(1,051)(9,034)Marketable securities with original maturities of 3 months or less..........................

32,99918,805

284,474

Cash and cash equivalents.......................................................................................

¥83,389¥54,750$718,870*2. Breakdown of assets and liabilities of companies that became newly consolidated subsidiaries through acquisition of shares		 Fiscal 2015
		Plantic Technologies Limited and its subsidiaries were newly added to consolidation through acquisition of shares. The relationships
between the breakdown of assets and liabilities of the corporation at the time of the acquisition, the acquisition price of Plantic
Technologies Limited and cost of the acquisition are as follows:
Millions of yen

42

Current assets.........................................................................................................................................

¥1,362

Noncurrent assets...................................................................................................................................

2,743

Goodwill...................................................................................................................................................

2,457

Current liabilities......................................................................................................................................

(543)

Noncurrent liabilities................................................................................................................................

(414)

Purchase price.........................................................................................................................................

5,604

Cash and cash equivalents......................................................................................................................

(40)

Expenditure for purchase.........................................................................................................................

¥5,564

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

12

Leases

1. Finance lease transactions(1) Lease transactions as a lessee
		Finance leases without transfer of ownership		1) Details of lease assets

			 a) Tangible fixed assets				Mainly vehicles used at plants, including forklifts, buildings and equipment, etc., related to manufacturing (“Machineryand Equipment”, “Buildings and Structures”), OA equipment, including personal computers and printers, and servers(“Other”).
			 b) Intangible fixed assets
				Software (“Other”)		2) Depreciation method of lease assets

			As described in the basis of presenting consolidated financial statements “1. Significant Accounting Policies, 5. Accounting
policies (2) Depreciation method of significant depreciable assets”(2) Lease transactions as a lessor		Finance lease transactions without transfer of ownership that commenced on or before March 31, 2008 are accounted for on
a basis similar to operating leases. The details of such transactions are as follows.
		Disclosure of finance lease transactions which commenced on or after April 1, 2008 is omitted due to less materiality.

		1)	Lease acquisition costs, accumulated depreciation and net book value as of December 31, 2016 and December 31, 2015
are as follows:
December 31, 2016
Millions of yen
Accumulated
depreciation

Acquisition cost

Net book value

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

¥197

¥101

¥95

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

¥197

¥101

¥95

Thousands of U.S. dollars
Accumulated
depreciation

Acquisition cost

Net book value

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

$1,698$870$818

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

$1,698$870$818

December 31, 2015
Millions of yen
Accumulated
depreciation

Acquisition cost		Net book value

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

¥197

¥98

¥99

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

¥197

¥98

¥99

2) Future lease payment obligations at December 31, 2016 and December 31, 2015 are as follows:
Thousands of U.S.
dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

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

¥13

¥13

$112

Due after one year.......................................................................................

56

69

482

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

¥69

¥83

$594

Annual Report 2016

43

		

3) Lease revenue and depreciation expense for the years ended December 31, 2016 and December 31, 2015 are as follows:
Thousands of U.S.
dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

Lease revenue.............................................................................................

¥13

¥13

$112

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

3

3

25

2. Operating leases
Lease transactions as a lessee:
Future lease payment obligations under operating leases at December 31, 2016 and December 31, 2015 are as follows:
Thousands of U.S.
dollars

Millions of yen

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

Fiscal 2016

Fiscal 2015

Fiscal 2016

¥ 2,396¥ 2,309$ 20,655

Due after one year....................................................................................................

9,465

10,25281,594

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

¥11,862¥12,561$102,258

13

Financial Instruments

1. Outline of financial instruments(1) Policy for financial instruments		The Group raises funds necessary to conduct its business mainly through bank loans or issuance of bonds. Temporary cash
surpluses, if any, are invested in low risk financial assets. Derivatives are used, not for speculative purposes, but to manage
exposure to financial risks as described below.
(2) Nature and extent of risks arising from financial instruments
		Receivables such as notes and accounts receivable–trade are exposed to customer credit risk. Trade receivables denominatedin foreign currencies are exposed to foreign currency exchange fluctuation risk.
			 Short-term investment securities and investment securities, mainly consisting of beneficiary securities on investment
trusts, certificates of deposit and others held for management of capital surpluses and stocks in companies with which theCompany has a business relationship are exposed to the risk of market price fluctuations.
			 Payment terms of payables, such as notes and accounts payable–trade, are mostly less than one year. Payables in foreign
currencies incurred mainly from import of raw materials are exposed to foreign currency exchange fluctuation risk. Those risks
are mostly offset by receivable balances denominated in the same foreign currency.
			 Loans, bonds and lease obligations related to finance lease transactions, used to raise funds for working capital and capital
expenditures, have maturities of at the longest 30 years from the balance sheet date. The debts bearing floating interest rates
are exposed to interest rate fluctuation risk, although a part of the exposure is hedged through use of derivatives (interest rate
swaps).
			 Derivative transactions include forward foreign currency contracts and currency swaps for the purpose of hedging foreign
currency exchange fluctuation risk resulting from receivables and payables denominated in foreign currencies and interest rate
swaps for the purpose of hedging interest rate fluctuation risk resulting from variable interest expenses on debts. Please referto “(5) Significant hedge accounting” under “1. Significant Accounting Policies, 5. Accounting policies” for a description of theCompany’s accounting policy relating to hedging activities.
(3) Risk management for financial instruments
		 a. Credit Risk Management (customers’ default risk)
			The Company manages and mitigates customer credit risk from trade receivables on the basis of internal rules concerning
credit management, which include monitoring of payment terms and balances of customers to identify default risk at an
early stage. With respect to loan receivables and liability guarantee agreements, the Company manages its exposure tocredit risk by periodically identifying the financial position of the debtors. With respect to financial assets held for managing

44

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

capital surplus, its credit risk is minimal because the investments are limited to issuers with high credit ratings inaccordance with internal rules concerning fund management. The Company enters into derivative transactions only withfinancial institutions that have high credit ratings in order to mitigate counterparty risks.
		 b. Market Risk Management (foreign currency exchange and interest rate fluctuation risks)			The Company and certain consolidated subsidiaries principally use forward foreign exchange contracts to hedge foreign
currency exchange fluctuation risk exposure in connection with trade receivables and payables denominated in foreign
currencies. Depending on foreign currency exchange rate conditions, trade receivables and payables denominated in foreign
currencies that are expected to be generated based on export and import forecasts are hedged using forward foreignexchange contracts with limited contract periods of around half a year. The Company also hedges certain scheduled
nontrading transactions denominated in foreign currencies that it expects to generate.
				 In addition, the Company uses currency swap and interest rate swap contracts to mitigate foreign currency exchange
fluctuation risk exposure in connection with long-term loans receivable in foreign currencies and interest rate fluctuation risk
exposure in connection with long-term loans payable.
				 With respect to short-term investment securities and investment securities, the Company periodically monitors fairvalues or financial status of the related issuers. With respect to stocks in companies with which the Company has abusiness relationship, the Company continuously checks the necessity for holding them, taking into account the business
relationship.
				 The Company manages derivative transactions in accordance with internal rules that regulate delegation of authority
concerning derivative transactions.
		 c. Liquidity Risk Management on Fund Raising			Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full at the respective maturity
dates. The Group manages its liquidity risk by diversifying its fund raising instruments, obtaining commitment lines fromseveral financial institutions and adjusting short-term and long-term funding balances in consideration of market
environments.
(4) Supplementary explanation concerning fair values of financial instruments
		

Fair values of financial instruments comprise values determined based on market prices and values determined reasonably
when there is no market price. Since variable factors are incorporated in computing the relevant fair values, such fair values
may vary depending on the different assumptions. The notional amounts and other information described in Note 15.
“Derivative Financial Instruments” are not indicative of market risk exposure to derivative transactions.

2. Fair values of financial instruments
Carrying amount, fair value and unrealized gain/loss of the financial instruments as of December 31, 2016 and December 31, 2015
are as follows: Financial instruments whose fair values are not readily determinable are excluded from the following table:
Fiscal 2016
Millions of yen
Carrying amount

Fair value(1) Cash and deposits...............................................................................................

¥ 51,437¥ 51,437(2) Notes and accounts receivable–trade..................................................................

105,010

		 Allowance for doubtful accounts......................................................................

Unrealized gain (loss)

¥

—

(451)
104,559

104,559—(3) Short-term investment securities and investment securities
		Available-for-sale securities...............................................................................

64,52564,525—

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

220,522

220,522—(1) Notes and accounts payable–trade......................................................................

36,42436,424—................................................................................

42,25744,035

1,777

Total liabilities...........................................................................................................

78,68180,4591,777

Derivative transactions (*2) ........................................................................................

(5,836)(5,836)—(2) Long-term loans payable(*1)

Annual Report 201645

Thousands of U.S. dollars
Carrying amount

Fair value(1) Cash and deposits...............................................................................................

$ 443,422$ 443,422(2) Notes and accounts receivable–trade..................................................................

905,258

		 Allowance for doubtful accounts......................................................................

Unrealized gain (loss)$—(3,887)
901,370

901,370—(3) Short-term investment securities and investment securities
		Available-for-sale securities...............................................................................

556,250

556,250—

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

1,901,051

1,901,051—(1) Notes and accounts payable–trade......................................................................

314,000

314,000—(2) Long-term loans payable (*1) ................................................................................

364,284

379,61215,318

Total liabilities...........................................................................................................

678,284

693,61215,318........................................................................................

(50,310)(50,310)—

Derivative transactions(*2)

Fiscal 2015
Millions of yen
Carrying amount

Fair value¥ 36,996(1) Cash and deposits...............................................................................................

¥ 36,996(2) Notes and accounts receivable–trade..................................................................

102,079

		 Allowance for doubtful accounts......................................................................

(611)

Unrealized gain (loss)¥—

101,467

101,467—

		Available-for-sale securities...............................................................................

53,28553,285—

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

191,749

191,749—(1) Notes and accounts payable–trade......................................................................

38,331

38,331—(3) Short-term investment securities and investment securities(2) Long-term loans payable (*1) ................................................................................

42,40544,177

1,772

Total liabilities...........................................................................................................

80,73682,508

1,772

Derivative transactions (*2).........................................................................................

816

816

—

(*1) Long-term loans payable include the current portion of long-term loans payable.
(*2) Receivables and payables incurred as a result of derivative transactions are presented on a net basis. Net payables are presented in parentheses.
Notes: 1. Calculation method of fair values of financial instruments and securities and derivative transactions
		Assets:
		(1) Cash and deposits and (2) Notes and accounts receivable–trade
			 These assets are recorded using book values because fair values approximate book values because of their short-term maturities.
		(3) Short-term investment securities and investment securities
			 The fair values of these assets are determined using the quoted market price on applicable stock exchanges. Other instruments are determined using the quoted
price obtained from financial institutions.
		Liabilities:
		(1) Notes and accounts payable–trade
			 These payables are recorded using book values because fair values approximate book values because of their short-term maturities.
		(2) Long-term loans payable			The fair values of long-term loans payable are determined by discounting the aggregated values of the principal and interest using an assumed interest rate basedon the interest rate that would be applied to a new loan of a similar nature.
				 Long-term loans payable bearing floating interest rates are hedged using interest rate swap contracts and the fair values of these loans payable are determinedby discounting the aggregated values of the principal and interest accounted for together with the related interest rate swap contracts using a reasonably
estimated interest rate based on the interest rate that would be applied to a new loan of a similar nature.
		Derivative financial instruments:
			 Please see Note 15. “Derivative Financial Instruments.”
2. Financial instruments whose fair values are not readily determinable
Millions of yen

Thousands of U.S.
dollars

Carrying amount

Carrying amount

Category

Fiscal 2016

Fiscal 2015

Fiscal 2016

Unlisted equity securities.............................................................................

¥8,562¥11,577$73,810

		These items are not included in “(3) Short-term investment securities and investment securities,” because there is no market price, future cash flows cannot be
estimated and it is very difficult to identify fair values.

46

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

3. Redemption schedule of monetary assets and securities with contractual maturities
		Fiscal 2016
Millions of yen
Within one year

Cash and deposits.......................................................................
Notes and accounts receivable–trade..........................................
Short-term investment securities and investment securities:
o/w Securities with contractual maturities:		 (1) Bonds (Corporate)...........................................................
		 (2) Bonds (Others) ...............................................................
		(3) Others.............................................................................
Total.........................................................................................

One to five years

Five to ten years

Over ten years¥ 51,437
105,010

¥—
—

¥—
—

¥—
—

9,000
—
30,000¥195,448

—
—
—
¥—

—
—
—
¥—

—
—
—
¥—

Thousands of U.S. dollars
Within one year

Cash and deposits.......................................................................
Notes and accounts receivable–trade..........................................
Short-term investment securities and investment securities:
o/w Securities with contractual maturities:		 (1) Bonds (Corporate) ..........................................................
		 (2) Bonds (Others) ...............................................................
		(3) Others ............................................................................
Total.........................................................................................

One to five years

Five to ten years

Over ten years$ 443,422
905,258

$—
—

$—
—

$—
—

77,586—258,620$1,684,896

—
—
—
$—

—
—
—
$—

—
—
—
$—

		Fiscal 2015
Millions of yen
Within one year

One to five years¥ 36,996
102,079

¥

—
—

¥—
—

¥—
—

—
—
15,000¥154,075

6,000
—
3,019
¥9,019

—
—
—
¥—

—
—
—
¥—

Cash and deposits.......................................................................
Notes and accounts receivable–trade..........................................
Short-term investment securities and investment securities:
o/w Securities with contractual maturities:		 (1) Bonds (Corporate) ..........................................................
		 (2) Bonds (Others) ...............................................................
		(3) Others ............................................................................
Total.........................................................................................

Five to ten years

Over ten years

4. Redemption schedule of bonds, long-term loans payable and lease obligations after the balance sheet date:		Fiscal 2016
Millions of yen
Within one
year

One to twoyears

Two to three
years

Three to four
years

Four to five
years

Over fiveyears

Bonds...............................................................................
Long-term loans payable...................................................
Lease obligations..............................................................

¥ —
85
363

¥ —
72
305

¥
—
12,050
245

¥ —
33
198

¥10,000
15
150¥

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

¥448

¥377

¥12,295¥231¥10,166¥30,626

Within one
year

One to twoyears

Two to three
years

Three to four
years

Four to five
years

Over five
years

$

—
732
3,129

$

—
620
2,629

$
—
103,879
2,112

$

—
284
1,706

$86,206
129
1,293

$
—
258,620
5,396$3,862$3,250$105,991$1,991$87,637$264,017

Within one
year

One to twoyears

Two to three
years

Three to four
years

Four to five
years

Over fiveyears

Bonds...............................................................................
Long-term loans payable...................................................
Lease obligations..............................................................

¥ —
147
369

¥ —
19
291

¥ —
6
222

¥
—
12,049
174

¥ —
—
138

¥10,000
30,182
711

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

¥ 517

¥ 311

¥228

¥12,223¥138¥40,894—
30,000626

Thousands of U.S. dollars

Bonds...............................................................................
Long-term loans payable...................................................
Lease obligations..............................................................
Total..............................................................................
		Fiscal 2015

Millions of yen

Annual Report 2016

47

14

Securities

1. Available-for-sale securities with market value
Fiscal 2016
Millions of yen
Book value(estimated fair value)

Thousands of U.S. dollars
Book value(estimated fair value

Cost

Net

Cost

Net

¥25,234¥ 10,370¥14,863$217,534$89,396$128,129

		 Government and municipal..................

—

—

—

—

—

—

		Corporate.............................................

6,064

6,000

64

52,27551,724551

		Others..................................................

—

—

—

—

—

—

Others......................................................

—

—

—

—

—

—

Subtotal.......................................................

31,29816,37014,928269,810141,120

128,689

226

241

(15)

1,948

2,077

(129)

		 Government and municipal..................

—

—

—

—

—

—

		Corporate.............................................

2,999

2,999

—

25,85325,853—		Others..................................................

—

—

—

—

—

—

Others......................................................

30,00030,000—258,620

258,620—

Securities with book value exceeding theiracquisition cost
Equity securities......................................
Bonds

Securities with book value not exceeding
their acquisition cost
Equity securities......................................
Bonds

Subtotal.......................................................

33,22633,241(15)

286,431

286,560(129)

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

¥64,525¥49,612¥14,913$556,250$427,689$128,560

Note: Unlisted equity securities amounting to ¥2,930 million (US$25,258 thousand) are excluded from the above table, because there is no market price and it is very difficult
to identify fair values.

Fiscal 2015
Millions of yen
Book value(estimated fair value)

Cost

Net

¥ 9,637¥15,131

Securities with book value exceeding theiracquisition cost
Equity securities......................................

¥24,768

Bonds
		 Government and municipal..................

—

—

—

		Corporate.............................................

6,069

6,000

69

		Others..................................................

—

—

—

Others......................................................

3,047

3,019

27

Subtotal.......................................................

33,88518,656

15,228

595

694

(99)

		 Government and municipal..................

—

—

—

		Corporate.............................................

—

—

—
—

Securities with book value not exceeding
their acquisition cost
Equity securities......................................
Bonds

		Others..................................................

——

Others......................................................

18,80518,805—

Subtotal.......................................................

19,40019,500(99)

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

¥53,285¥38,156¥15,129

Note: Unlisted equity securities amounting to ¥3,217 million are excluded from the above table,
because there is no market price and it is very difficult to identify fair values.

48

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

2. Available-for-sale securities sold during the fiscal year
Fiscal 2016
Millions of yen
Category

Thousand of U.S. dollars

Proceeds from sales

Total gain

Total loss

Proceeds from sales

Total gain

Total loss

Others.......................................

¥3,498¥384¥—$30,155$3,310$—Total ..........................................

¥3,498¥384¥—$30,155$3,310$—Notes: 1. Attributable to cancellation of an investment trust and sale of stock.
2. Securities for which it is difficult to identify fair value are excluded from the above table.

Fiscal 2015
Millions of yen
Category

Proceeds from sales

Total gain

Total loss

Others.......................................

¥4,241¥172¥—

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

¥4,241¥172¥—

Notes: 1. Mainly attributable to the sale of stock.
2. Securities for which it is difficult to identify fair value are excluded from the above table.

3. Impairment loss on securities
The Company recognized impairment loss on securities of ¥154 million (US$1,327 thousand) in fiscal 2016. The Company
recognized impairment loss on securities of ¥866 million in fiscal 2015.
As for the available-for-sale securities for which market prices are available, the Company recognizes impairment loss when thefair value of such securities as of the fiscal year end declines to less than 50% of acquisition cost. When the fair value declines tobetween 30% and 50% of the acquisition cost, the Company considers the recoverability of each security and recognizes
impairment for the amount deemed necessary. As for the available-for-sale securities for which market prices are not available, theCompany recognizes impairment loss in the amount deemed necessary when the fair value of such securities declines
significantly.

15

Derivative Financial Instruments

1. Derivative transactions to which hedge accounting is not applied(1) Currencies
Fiscal 2016
Millions of yen
Category

Transactions other thanmarket transactions

Classification

NominalamountNominal amountdue after one year

Marketvalue

Unrealized
gain (loss)

Forward foreign exchange contracts:
Yen into U.S. dollar obligation................

¥34,445¥—¥(4,216)¥(4,216)

Yen into Euro obligation.........................

20,305

1,404(1,067)(1,067)

Yen into Yuan obligation.........................

536

—

(37)

(37)

Yen into Australian dollar obligation.......

2,741

253

(192)

(192)

U.S. dollar into Yen obligation.................

356

—

10

10

Euro into Yen obligation..........................

336

—

22

22

Yen into Won obligation.........................

3,079

—

(179)

(179)

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

¥61,800¥1,657¥(5,659)¥(5,659)

Non-deliverable forward foreignexchange transaction:

Annual Report 201649

Thousands of U.S. dollars
Category

Transactions other thanmarket transactions

Classification

NominalamountNominal amountdue after one year

Marketvalue

Unrealized
gain (loss)—$ (36,344)$ (36,344)(9,198)Forward foreign exchange contracts:
Yen into U.S. dollar obligation................

$296,939$

Yen into Euro obligation.........................

175,043

12,103(9,198)

Yen into Yuan obligation.........................

4,620

—

(318)

(318)

Yen into Australian dollar obligation.......

23,6292,181(1,655)(1,655)

U.S. dollar into Yen obligation.................

3,068

—

86

86

Euro into Yen obligation..........................

2,896

—

189

189

Non-deliverable forward foreignexchange transaction:
Yen into Won obligation.........................

26,543

—

1,543

1,543

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

$532,758$14,284$ (48,784)$ (48,784)

Note: 1. Market values of forward foreign exchange contracts and non-deliverable forward foreign exchange transaction at the end of the fiscal year are calculated using
forward exchange rates.
2. The forward foreign exchange contracts and non-deliverable forward foreign exchange transaction above are mainly those set with claims and liabilities to consolidated
subsidiaries as the hedged items.

Fiscal 2015
Millions of yen
Category

Transactions other thanmarket transactions

Classification

NominalamountNominal amountdue after one year

Marketvalue

Unrealized
gain (loss)

Forward foreign exchange contracts:
Yen into U.S. dollar obligation................

¥55,210

¥ —

¥797

¥797

Yen into Euro obligation.........................

11,357—45

45

Yen into Yuan obligation.........................

550

—

11

11

Yen into Australian dollar obligation.......

1,222

342

4

4

U.S. dollar into Yen obligation.................

898

—

(21)

(21)

Euro into Yen obligation..........................

194

—

(0)

(0)

Australian dollar into U.S. dollar obligation

199

—

(5)

(5)

Australian dollar into Euro obligation......

58

—

(0)

(0)

U.S. dollar into Won obligation...............

3,256

—

(9)

(9)

Non-deliverable forward foreignexchange transaction:
Yen into Chilean peso obligation............

92

—

1

1

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

¥73,041

¥342

¥822

¥822

Note: 1. Market values of forward foreign exchange contracts and non-deliverable forward foreign exchange transaction at the end of the fiscal year are calculated using
forward exchange rates.
2. The forward foreign exchange contracts and non-deliverable forward foreign exchange transaction above are mainly those set with claims and liabilities to consolidated
subsidiaries as the hedged items.

50

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

2. Derivative transactions to which hedge accounting is applied(1) Currencies
Fiscal 2016
Fiscal 2016 (As of December 31, 2016)
Millions of yen
Hedge accounting
methodAllocation method

Classification

Major hedged items

NominalamountNominalamount over
one yearThousands of U.S. dollars

Market value

NominalamountNominalamount over
one yearMarket value

Forward foreignexchange contracts:
Yen into U.S. dollar
obligation

Accounts
receivable–trade

¥ 728

¥—

Note

$6,275$—Note

Yen into Euro
obligation

Accounts
receivable–trade

7

—

Note

60

—

Note

Yen into Baht
obligation

Loans receivable

226

—

Note

1,948

—

Note

U.S. dollar into Yen
obligation

Accounts
payable–trade

109

—

Note

939

—

Note

¥1,072¥—

Note$9,241$—

Note

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

Note: With respect to forward foreign exchange contracts whose exchange rates are used for translating accounts receivable–trade, loans receivable or accounts payable–
trade, market values of forward foreign exchange contracts are included in the market values of the relevant accounts receivable–trade, loans receivable or accounts
payable–trade, since they are used for recording accounts receivable–trade, loans receivable or accounts payable–trade as hedged items
Fiscal 2016 (As of December 31, 2016)
Millions of yen
Hedge accounting
methodDeferred hedge
methodMajor hedged items

NominalamountNominalamount over
one year

Yen into U.S.
dollar obligation

Forecasted transactions
in foreign currencies¥4,845

Yen into Euro
obligation

Forecasted transactions
in foreign currencies

Yen into Yuan
obligation

Thousands of U.S. dollars

Market value

NominalamountNominalamount over
one year¥—¥(238)$41,767$—$(2,051)

1,414

—

(18)

12,189—(155)

Forecasted transactions
in foreign currencies

70

—

0

603

—

0

U.S. dollar into
Yen obligation

Forecasted transactions
in foreign currencies

1,026

—

79

8,844

—

681

Euro into Yen
obligation

Forecasted transactions
in foreign currencies

4

—

(0)

34

—

(0)

¥7,361¥—¥(176)$63,456$—$(1,517)Classification

Market value

Forward foreignexchange contracts:

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

Note: Market values of forward foreign exchange contracts at the end of the fiscal year are calculated using forward exchange rates.

Fiscal 2015
Fiscal 2015 (As of December 31, 2015)
Millions of yen
Hedge accounting
methodAllocation method

Major hedged items

NominalamountNominal amountover one year

Marketvalue

Yen into U.S. dollar obligation

Accounts
receivable–tradeand loans receivable

¥ 800

¥—

Note

Yen into Euro obligation

Accounts
receivable–trade

6

—

Note

Yen into Baht obligation

Loans receivable

233

—

Note

U.S. dollar into Yen obligation

Accounts
payable–trade

382

—

Note

¥1,424¥—

Note

Classification

Forward foreignexchange contracts:

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

Note: With respect to forward foreign exchange contracts whose exchange rates are used for translating accounts receivable–trade, loans receivable or accounts payable–
trade, market values of forward foreign exchange contracts are included in the market values of the relevant accounts receivable–trade, loans receivable or accounts
payable–trade, since they are used for recording accounts receivable–trade, loans receivable or accounts payable–trade as hedged items.

Annual Report 201651

Fiscal 2015 (As of December 31, 2015)
Millions of yen
Hedge accounting
methodMajor hedged items

NominalamountNominal amountover one year

Yen into U.S. dollar obligation

Forecasted transactions inforeign currencies¥2,971¥—¥    (2)

Yen into Euro obligation

Forecasted transactions inforeign currencies

1,393

—

5

U.S. dollar into Yen obligation

Forecasted transactions inforeign currencies

708

—

(8)

Euro into Yen obligation

Forecasted transactions inforeign currencies

2

—

—

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

¥5,076¥—¥    (6)Deferred hedge
methodClassification

Market value

Forward foreignexchange contracts:

Note: Market values of forward foreign exchange contracts at the end of the fiscal year are calculated using forward exchange rates.

(2) Interest rate
Fiscal 2016
Hedge accounting
methodSpecial treatment forinterest rate swaps

Hedge accounting
methodSpecial treatment forinterest rate swaps

Classification

Interest rate swaps:
Floating rate into fixed rate

Classification

Interest rate swaps:
Floating rate into fixed rate

Major hedged items

NominalamountMillions of yen
Nominal amountover one year

Marketvalue

Long-term loans payable¥26,000¥26,000

Note

Major hedged items

NominalamountThousands of U.S. dollars
Nominal amountover one year

Marketvalue

Long-term loans payable$224,137$224,137

Note

Note: With respect to interest rate swap contracts which meet certain conditions, market values of the interest rate swap contracts are included in the market values of therelevant long-term loans payable, since they are used for recording long-term loans payable as hedged items.

Fiscal 2015
Hedge accounting
methodSpecial treatment forinterest rate swaps

Classification

Interest rate swaps:
Floating rate into fixed rate

Major hedged items

NominalamountMillions of yen
Nominal amountover one year

Marketvalue

Long-term loans payable¥26,000¥26,000

Note

Note: With respect to interest rate swap contracts which meet certain conditions, market values of the interest rate swap contracts are included in the market values of therelevant long-term loans payable, since they are used for recording long-term loans payable as hedged items.

52

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

16

Retirement Benefits

Fiscal 2016 (January 1, 2016 to December 31, 2016)
1. Summary of retirement benefit plan
The Company and certain consolidated subsidiaries provide retirement benefits to employees with funded and unfunded defined
benefits plans and a defined contribution plan. Certain consolidated subsidiaries participate in a multi-employer plan and account for
their contributions to this fund as a retirement benefit expense because the plan assets that correspond to the contribution of eachparticipant cannot be reasonably calculated.
The funded defined benefits plan provides a lump sum payment or a pension primarily based on qualifications and length ofservice. The Company and certain consolidated subsidiaries are introducing a cash-balance plan to the defined benefits plan. The
cash-balance plan establishes hypothetical individual employee accounts representing each employee’s share of plan funding andassets. Interest credits based on money market rate movements and credits primarily based on qualifications and length of service
accumulate in the hypothetical individual employee accounts.
The unfunded retirement benefit plan is a lump sum retirement plan. It functions as a retirement savings plan because theCompany has established a retirement benefits trust for it. This plan provides lump sum retirement benefits primarily based on
qualifications and length of service.
Certain consolidated subsidiaries use a simplified method to calculate liabilities and expenses associated with their defined
benefit and lump sum plans.
2. Defined benefit plan
(1) Reconciliations of beginning and ending balance of retirement benefit plan (excluding simplified method)
Millions of yen

Thousands of
U.S. dollars

Retirement benefit obligations at beginning of year....................................

¥44,283$381,750

Service costs...........................................................................................

2,093

18,043

Interest costs...........................................................................................

518

4,465

Actuarial gain or loss................................................................................

819

7,060

Benefits paid............................................................................................

(2,906)(25,051)

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

(186)(1,603)Retirement benefit obligations at end of year.............................................

¥44,621$384,663(2) Reconciliations of beginning and ending balance of plan assets (excluding simplified method)
Millions of yen

Thousands of
U.S. dollars

Plan assets at beginning of year..................................................................

¥35,343$304,681

Expected return on plan assets...............................................................

766

6,603

Actuarial gain or loss................................................................................

329

2,836

Contribution from entrepreneur...............................................................

951

8,198

Benefits paid............................................................................................

(1,921)(16,560)

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

14

120

Plan assets at end of year...........................................................................

¥35,483$305,887

Annual Report 201653

(3) Reconciliations of beginning and ending net defined benefit liabilities using the simplified method

Net defined benefit liabilities at beginning of year.......................................

Millions of yen

Thousands of
U.S. dollars¥1,517$13,077

Retirement benefit expenses......................................................................

295

2,543

Benefits paid................................................................................................

(136)(1,172)Contribution to plan assets................................................................................

(92)

(793)

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

(6)

(51)

Net defined benefit liabilities at end of year................................................

¥1,576$13,586(4)	Reconciliations of net amount of retirement benefit liabilities and plan assets and net amount of net
defined benefit obligation and net defined benefit asset recognized on the consolidated balance sheet
Millions of yen

Thousands of
U.S. dollars

Installment type retirement benefit obligation............................................

¥ 38,207$ 329,370

Plan assets .................................................................................................

(36,004)(310,379)

2,202

18,982

Non installment type retirement benefit obligation.....................................

8,512

73,379Net amount of net defined benefit obligation and net defined benefit
asset recognized on the consolidated balance sheet..............................

10,71592,370Net defined benefit obligation...........................................................................

11,54299,500Net defined benefit asset............................................................................

(827)(7,129)Net amount of net defined benefit obligation and net defined benefit
asset recognized on the consolidated balance sheet..............................

¥ 10,715$ 92,370

Millions of yen

Thousands of
U.S. dollars

Service costs...............................................................................................

¥2,093$18,043

Interest costs...............................................................................................

518

4,465

Note: Includes plan that uses the simplified method.

(5) The components of retirement benefit expenses

Expected return on plan assets...................................................................

(766)(6,603)

Amortization of actuarial gains or losses.....................................................

1,333

11,491

Amortization of prior service costs..............................................................

(103)

(887)

Retirement benefit expenses calculated by simplified method.........................

295

2,543

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

(22)

(189)

Retirement benefit expense pertaining to defined benefit plan..................

¥3,348$28,862(6) Remeasurements of defined benefit plans (Consolidated comprehensive income)		The following is a breakdown of remeasurements of defined benefit plans (before deductions for the effectof income taxes).

54

Millions of yen

Thousands of
U.S. dollars

Prior service costs.......................................................................................

¥(103)$ (887)

Actuarial gain or loss....................................................................................

842

7,258

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

¥ 739$6,370Kuraray Co., Ltd.

Notes to Consolidated Financial Statements(7) Remeasurements of defined benefit plans (Consolidated balance sheet)		The following is a breakdown of items recorded in cumulative remeasurements of defined benefit plans (before deductions
for the effect of income taxes).
Millions of yen

Thousands of
U.S. dollars

Unrecognized prior service costs................................................................

¥ (352)$ (3,034)

Unrecognized actuarial gain or loss.............................................................

(6,139)(52,922)

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

¥(6,492)$(55,965)(8) Plan assets
		a. The components of plan assets
Debt securities............................................................................................

44%

Equity securities..........................................................................................

13%..........................................

21%

Cash and deposits.......................................................................................

1%

Other assets................................................................................................

22%.....................................................................................................

100%

Life insurance company general accounts

Total(Note 1)

(Note 2)

Notes: 1.	Life insurance companies manage the assets in, assume the asset management risk for, and guarantee a fixed return to policyholders forlife insurance general accounts.
2. Total retirement plan assets include 53% of the retirement benefits trust established for the lump sum retirement plan.

		b. Determination of long-term expected rate of return on plan assets

			The long-term expected rate of return on plan assets is determined with due consideration of current and future distributionof plan assets and current and expected returns on the various types of plan assets.
(9) Actuarial assumptions
		Discount rate............................................................ Mainly 0.7% or 0.8%

		Long-term expected rate of return........................... Mainly 1.0% or 3.3%

3. Defined contribution plan
The contribution to the defined contribution plan of the Company and its consolidated subsidiaries is ¥821 million (US$7,077
thousand).
4. Multi-employer plan
The contribution to the multi-employer plan is ¥135 million (US$1,163 thousand), and is accounted for in the same manner as thecontribution to the defined contribution plan of the Company and its consolidated subsidiaries.
Multi-employer plan in which domestic consolidated subsidiaries participate(1) Accumulated funds for the plan (As of March 31, 2016)

Plan assets..................................................................................................

Millions of yen

Thousands of
U.S. dollars¥ 63,647$548,681

Total of actuarial pension liabilities and plan’s minimum reserve.................

75,201

648,284

Difference....................................................................................................

¥(11,553)$ (99,594)

Note: Item presented as “Projected benefit obligation” in previous fiscal year.

(2) Ratio of total salaries of the consolidated subsidiary to total funds of the plan (As of March 31, 2016)
		 2.6%(3) Supplementary explanation (As of March 31, 2016)
		The main reasons behind the difference in amounts described above in (1) are as follows. The method of depreciation of prior

Annual Report 201655

service cost in the current fiscal year is to evenly split principals thereof over a period of 9 years and 10 months, and isscheduled to be terminated in January 2026.

		Millions of yen

Thousands of
U.S. dollars

Balance of prior service cost.......................................................................

¥16,383$141,232

Deficient amount carried forward................................................................

4,829

41,629The ratio in the above (2) does not match with the ratio of the actual burden of the consolidated subsidiary.

Multi-employer plan in which overseas consolidated subsidiaries participate(1) Accumulated funds for the plan (As of June 30, 2016)
Millions of yen

Thousands of
U.S. dollars

Plan assets..................................................................................................

¥ 47,179$406,715

Total of actuarial pension liabilities and plan’s minimum reserve.................

51,343442,612Difference....................................................................................................

¥ (4,163)$ (35,887)(2) Ratio of total salaries of the consolidated subsidiary to total funds of the plan (As of June 30, 2016)
		 3.1%
		

The ratio in the above (2) does not match with the ratio of the actual burden of the consolidated subsidiary.

Fiscal 2015 (January 1, 2015 to December 31, 2015)
1. Summary of retirement benefit plan
The Company and certain consolidated subsidiaries provide retirement benefits to employees with funded and unfunded defined
benefits plans and a defined contribution plan. Certain consolidated subsidiaries participate in a multi-employer plan and account for
their contributions to this fund as a retirement benefit expense because the plan assets that correspond to the contribution of eachparticipant cannot be reasonably calculated.
The funded defined benefits plan provides a lump sum payment or a pension primarily based on qualifications and length ofservice. The Company and certain consolidated subsidiaries are introducing a cash-balance plan to the defined benefits plan. The
cash-balance plan establishes hypothetical individual employee accounts representing each employee’s share of plan funding andassets. Interest credits based on money market rate movements and credits primarily based on qualifications and length of service
accumulate in the hypothetical individual employee accounts.
The unfunded retirement benefit plan is a lump sum retirement plan. It functions as a retirement savings plan because theCompany has established a retirement benefits trust for it. This plan provides lump sum retirement benefits primarily based on
qualifications and length of service.
Certain consolidated subsidiaries use a simplified method to calculate liabilities and expenses associated with their defined
benefit and lump sum plans.
2. Defined benefit plan
(1) Reconciliations of beginning and ending balance of retirement benefit plan (excluding simplified method)
Millions of yen

56

Retirement benefit obligations at beginning of year....................................

¥43,851

Service costs...........................................................................................

2,270

Interest costs...........................................................................................

513

Actuarial gain or loss................................................................................

(158)

Benefits paid............................................................................................

(3,023)

Prior service costs incurred.....................................................................

611

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

217

Retirement benefit obligations at end of year.............................................

¥44,283

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements(2) Reconciliations of beginning and ending balance of plan assets (excluding simplified method)
Millions of yen

Plan assets at beginning of year..................................................................

¥35,987

Expected return on plan assets...............................................................

788

Actuarial gain or loss................................................................................

(377)

Contribution from entrepreneur...............................................................

412

Benefits paid............................................................................................

(1,491)Other.......................................................................................................

24

Plan assets at end of year...........................................................................

¥35,343(3) Reconciliations of beginning and ending net defined benefit liabilities using the simplified method
Millions of yen

Net defined benefit liabilities at beginning of year.......................................

¥1,372Retirement benefit expenses......................................................................

255

Benefits paid................................................................................................

(84)

Contribution to plan assets..........................................................................

(36)

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

9

Net defined benefit liabilities at end of year................................................

¥1,517(4)	Reconciliations of net amount of retirement benefit liabilities and plan assets and net amount of net defined benefit obligationand net defined benefit asset recognized on the consolidated balance sheet
Millions of yen

Installment type retirement benefit obligation............................................

¥38,402

Plan assets..................................................................................................

(35,785)
2,617

Non installment type retirement benefit obligation.....................................

7,839

Net amount of net defined benefit obligation and net defined benefit
asset recognized on the consolidated balance sheet..............................

10,456

Net defined benefit obligation...........................................................................

11,247

Net defined benefit asset............................................................................

(791)

Net amount of net defined benefit obligation and net defined benefit
asset recognized on the consolidated balance sheet..............................

¥10,456

Note: Includes plan that uses the simplified method.

(5) The components of retirement benefit expenses
Millions of yen

Service costs...............................................................................................

¥2,270Interest costs...............................................................................................

513

Expected return on plan assets...................................................................

(788)

Amortization of actuarial gains or losses.....................................................

1,366

Amortization of prior service costs..............................................................

64

Retirement benefit expenses calculated by simplified method...................

255

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

(22)

Retirement benefit expense pertaining to defined benefit plan..................

¥3,659Annual Report 201657

(6) Remeasurements of defined benefit plans (Consolidated comprehensive income)		

The following is a breakdown of remeasurements of defined benefit plans (before deductions for the effect of income taxes).
Millions of yen

Prior service costs.......................................................................................

¥ (547)

Actuarial gain or loss....................................................................................

1,147

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

¥ 600(7) Remeasurements of defined benefit plans (Consolidated balance sheet))The following is a breakdown of items recorded in cumulative remeasurements of defined benefit plans (before deductions
for the effect of income taxes).
Millions of yen

Unrecognized prior service costs................................................................

¥ (346)

Unrecognized actuarial gain or loss.............................................................

(6,885)

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

¥(7,231)(8) Plan assets
		a. The components of plan assets
Debt securities............................................................................................

59%

Equity securities..........................................................................................

13%.........................................

22%

Cash and deposits.............................................................................................

1%

Other assets................................................................................................

5%....................................................................................................

100%

Life insurance company general accounts

Total(Note 2)

(Note 1)

Notes: 1. Life insurance companies manage the assets in, assume the asset management risk for, and guarantee a fixed return to policyholders for life insurance generalaccounts.
2. Total retirement plan assets include 52% of the retirement benefits trust established for the lump sum retirement plan.

		b. Determination of long-term expected rate of return on plan assets

			The long-term expected rate of return on plan assets is determined with due consideration of current and future distributionof plan assets and current and expected returns on the various types of plan assets.
(9) Actuarial assumptions
		Discount rate............................................................ Mainly 0.7% or 0.8%

		Long-term expected rate of return........................... Mainly 1.0% or 3.3%

3. Defined contribution plan
The contribution to the defined contribution plan of the Company and its consolidated subsidiaries is ¥851 million.
4. Multi-employer plan
The contribution to the multi-employer plan is ¥94 million, and is accounted for in the same manner as the contribution to thedefined contribution plan of the Company and its consolidated subsidiaries.
Multi-employer plan in which domestic consolidated subsidiaries participate(1) Accumulated funds for the plan (As of March 31, 2015)
Millions of yen

58

Plan assets..................................................................................................

¥ 67,088

Total of actuarial pension liabilities and plan’s minimum reserve.................

82,865Difference....................................................................................................

¥(15,776)

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements(2) Ratio of total salaries of the consolidated subsidiary to total funds of the plan (As of March 31, 2015)
		 2.5%		

The ratio in the above (2) does not match with the ratio of the actual burden of the consolidated subsidiary.

Multi-employer plan in which overseas consolidated subsidiaries participate(1) Accumulated funds for the plan (As of June 30, 2015)
Millions of yen

Plan assets..................................................................................................

¥55,262

Total of actuarial pension liabilities and plan’s minimum reserve.................

58,076

Difference....................................................................................................

¥ (2,813)(2) Ratio of total salaries of the consolidated subsidiary to total funds of the plan (As of June 30, 2015)
		 2.9%		The ratio in the above (2) does not match with the ratio of the actual burden of the consolidated subsidiary.

Annual Report 2016

59

17

Stock-Based Compensation Plans

1. Item and amount of expenses for stock options
Thousands of
U.S. dollars

Millions of yen

Selling, general and administrative expenses...........................................................

Fiscal 2016

Fiscal 2015

Fiscal 2016

¥82

¥80

$706

2. Details including size and changes of stock options(1) Stock options plans
Stock options June 2007

Stock options June 2008

Stock options June 2009

Number of eligible persons
by position

Directors of the Company: 10
Executive officers of the Company(excluding those who concurrently
serve as directors of the Company
and those working overseas): 11

Directors of the Company: 10
Executive officers of the Company(excluding those who concurrently
serve as directors of the Company
and those working overseas): 16

Directors of the Company: 9
Executive officers of the Company(excluding those who concurrently
serve as directors of the Company
and those working overseas): 15

Total number and type ofstocks granted

56,500 shares of common stock

78,500 shares of common stock

86,500 shares of common stock

Grant dateJune 5, 2007

June 10, 2008

June 9, 2009

Prerequisite to be vested

No vesting conditions are set.

No vesting conditions are set.

No vesting conditions are set.

Required service period

There is no provision for a required
service period.

There is no provision for a required
service period.

There is no provision for a required
service period.

Exercise period

From June 6, 2007 to June 5, 2022;
provided that, if the final date of theexercise period is a holiday for theCompany, the final date should be
the business date immediately
preceding the date.

From June 11, 2008 to June 10,
From June 10, 2009 to June 9, 2024;
2023; provided that, if the final date provided that, if the final date of theof the exercise period is a holiday for exercise period is a holiday for the
the Company, the final date should Company, the final date should be
be the business date immediately
the business date immediately
preceding the date.
preceding the date.

Number of eligible persons
by position

Directors of the Company: 9
Executive officers of the Company(excluding those who concurrently
serve as directors of the Company
and those working overseas): 16

Directors: 25
Employees: 3,924
Directors or employees of theCompany’s subsidiaries: 2,010

Directors of the Company: 10
Executive officers of the Company(excluding those who concurrently
serve as directors of the Company
and those working overseas): 14

Total number and type ofstocks granted

83,500 shares of common stock

4,074,500 shares of common stock

89,500 shares of common stock

Grant dateJune 9, 2010

October 1, 2010

May 19, 2011

Prerequisite to be vested

No vesting conditions are set.

Note

No vesting conditions are set.

Required service period

There is no provision for a required
service period.

From October 1, 2010 to June 24,
2012

There is no provision for a required
service period.

Exercise period

From June 10, 2010 to June 9, 2025; From June 25, 2012 to June 24,
provided that, if the final date of the 2020
exercise period is a holiday for theCompany, the final date should be
the business date immediately
preceding the date.

Stock options June 2010

60

Kuraray Co., Ltd.

Stock options October 2010

Stock options May 2011

From May 19, 2011 to May 18, 2026;
provided that, if the final date of theexercise period is a holiday for theCompany, the final date should be
the business date immediately
preceding the date.

Notes to Consolidated Financial Statements

Stock options May 2012

Stock options May 2013

Stock options May 2014

Number of eligible persons
by position

Directors of the Company:10
Executive officers of the Company(excluding those who concurrently
serve as directors of the Company
and those working overseas):13

Directors of the Company:10
Executive officers of the Company(excluding those who concurrently
serve as directors of the Company
and those working overseas):17

Directors of the Company:10
Executive officers of the Company(excluding those who concurrently
serve as directors of the Company
and those working overseas):17

Total number and type ofstocks granted

86,500 shares of common stock

88,000 shares of common stock

78,500 shares of common stock

Grant date

May 17, 2012

May 15, 2013

May 15, 2014

Prerequisite to be vested

No vesting conditions are set.

No vesting conditions are set.

No vesting conditions are set.

Required service period

There is no provision for a required
service period.

There is no provision for a required
service period.

There is no provision for a required
service period.

Exercise period

From May 17, 2012 to May 16, 2027;
provided that, if the final date of theexercise period is a holiday for theCompany, the final date should be
the business date immediately
preceding the date.

From May 15, 2013 to May 14, 2028; From May 15, 2014 to May 14, 2029;
provided that, if the final date of the provided that, if the final date of theexercise period is a holiday for the
exercise period is a holiday for theCompany, the final date should be
Company, the final date should be
the business date immediately
the business date immediately
preceding the date.
preceding the date.

Number of eligible persons
by position

Directors of the Company:12
Executive officers of the Company(excluding those who concurrently
serve as directors of the Company
and those working overseas): 11

Directors of the Company: 12
Executive officers of the Company(excluding those who concurrently
serve as directors of the Company
and those working overseas): 10

Total number and type ofstocks granted

59,500 shares of common stock

69,000 shares of common stock

Grant dateFebruary 17, 2015

February 10, 2016

Prerequisite to be vested

No vesting conditions are set.

No vesting conditions are set.

Required service period

There is no provision for a required
service period.

There is no provision for a required
service period.

Exercise period

From February 17, 2015 to February
16, 2030; provided that, if the final
date of the exercise period is aholiday for the Company, the final
date should be the business date
immediately preceding the date.

From February 10, 2016 to February
9, 2031; provided that, if the final
date of the exercise period is aholiday for the Company, the final
date should be the business date
immediately preceding the date.

Stock options February 2015

Stock options February 2016

Note: Eligible persons shall be directors, executive officers, counselors, full-time consultants or employees of the Company or the Companies’ subsidiaries at the time of
exercise. However, those who were directors, executive officers or associate executive officers of the Company or presidents of the significant subsidiaries of theCompany (Kuraray Engineering Co., Ltd., Kuraray Chemical Co., Ltd., Kuraray Trading Co., Ltd., Kuraray Plastics Co., Ltd., Kuraray Techno Co., Ltd., Kuraray America, Inc.,
Kuraray Europe GmbH and EVAL Europe N.V.) can exercise even after retirement.
		 Other conditions are prescribed in the “Contracts on Subscription Rights to Shares” to be entered into between the Company and eligible persons who were granted
subscription rights to shares.

Annual Report 2016

61

(2) Size and changes of stock options
		

Stock options that existed in current fiscal years were converted into shares.

		1) Number of stock options
Stock options
June 2007

Stock options
June 2008

Stock options
June 2009

Stock options
June 2010

Stock options
October 2010

At the beginning of the fiscal year

—

—

—

—

—

Granted

—

—

—

—

—

Forfeited

—

—

—

—

—

Vested

—

—

—

—

—

At the end of the fiscal year

—

—

—

—

—

4,000

7,500

17,50017,0002,119,000

Unvested stock options (shares)

Vested stock options (shares)
At the beginning of the fiscal year
Vested

—

—

—

—

—

Exercised

—

1,000

3,000

4,000

181,500

Forfeited

—

—

—

—

30,500

4,000

6,500

14,50013,0001,907,000

Stock options
May 2011

Stock options
May 2012

Stock options
May 2013

Stock options
May 2014

Stock options
February 2015

At the beginning of the fiscal year

—

—

—

—

—

Granted

—

—

—

—

—

Forfeited

—

—

—

—

—

Vested

—

—

—

—

—

At the end of the fiscal year

—

—

—

—

—

29,00031,50045,50053,00048,500At the end of the fiscal year

Unvested stock options (shares)

Vested stock options (shares)
At the beginning of the fiscal year
Vested

—

—

—

—

—

Exercised

13,50016,00019,50022,00016,500Forfeited

—

—

—

—

—

15,50015,50026,00031,00032,000At the end of the fiscal year

Stock options
February 2016

Unvested stock options (shares)
At the beginning of the fiscal year
GrantedForfeited
VestedAt the end of the fiscal year—
69,000—69,000—

Vested stock options (shares)
At the beginning of the fiscal year

69,000Exercised

22,000Forfeited—

At the end of the fiscal year

62—

VestedKuraray Co., Ltd.

47,000Notes to Consolidated Financial Statements		2) Price information
Yen
Stock options
June 2007

Exercise prices¥

1

Stock options
June 2008¥

1¥

Stock options
October 2010

1

¥1,078

1,332

1,332

1,332

1,591

1,318

1,264

947

1,054

247

Stock options
May 2011

Stock options
May 2012

Stock options
May 2013

Stock options
May 2014

Stock options
February 2015

Fair value at the grant date1

Stock options
June 2010—

Weighted-average exercise date stock price¥

Stock options
June 2009

Yen

Exercise prices

¥

1

¥

1

¥

1

¥

1

¥

1

Weighted-average exercise date stock price

1,332

1,332

1,332

1,332

1,332

Fair value at the grant date

1,174

1,046

1,482

1,119

1,352

Stock options
June 2007

Stock options
June 2008

Stock options
June 2009

Stock options
June 2010

Stock options
October 2010

$ 0.00$ 0.00$ 0.00$ 0.00$ 9.29

—

11.48

11.48

11.48

13.71

11.36

10.89

8.16

9.08

2.12

Stock options
May 2011

Stock options
May 2012

Stock options
May 2013

Stock options
May 2014

Stock options
February 2015

Exercise prices$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00Weighted-average exercise date stock price

11.48

11.48

11.48

11.48

11.48

Fair value at the grant date

10.12

9.01

12.77

9.64

11.65

Yen
Stock options
February 2016

Exercise prices¥

1

Weighted-average exercise date stock price

1,332

Fair value at the grant date

1,200
U.S. dollars

Exercise prices
Weighted-average exercise date stock price
Fair value at the grant date

U.S. dollars

U.S. dollars
Stock options
February 2016

Exercise prices$ 0.00Weighted-average exercise date stock price

11.48

Fair value at the grant date

10.34

Annual Report 201663

3. Method to estimate fair value of stock options
The fair value of the February 2016 stock options, which were granted in fiscal 2016, are estimated as follows.
1) Valuing method: Black-Scholes model2) Major basic figures and estimating method
February 2016 stock options

Stock price volatility (Note 1)

25.1%

Expected remaining life

1.50 year

Expected dividend(Note 2)

(Note 3)

Risk-free interest rate (Note 4)¥40/share (US$0.344 )-0.22 %

Notes: 1. Calculated weekly based on the weekly stock price information over a period from the week that contains August 4, 2014 to the week that contains February 1, 2016.
2. Calculated by subtracting the average period of service of directors and executive officers who are currently in office as of the day of grant from the past average
period of service of directors and executive officers.
3. Based on the dividend paid for the fiscal year ended December 2015.
4. Government bond yield over a period corresponding to the expected remaining life.

4. Method to estimate number of vested stock options
Stock options February 2016
The number of vested stock options is the same as the number of stock options granted, since the stock options were vested on
the day following the day of the grant.

64

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

18

Income Taxes

1. Significant components of deferred tax assets and liabilities at December 31, 2016 and December 31, 2015
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

Net defined benefit liabilities................................................................................

¥ 8,299¥ 8,389$ 71,543

Impairment loss....................................................................................................

2,504

2,355

21,586

Provision for bonuses...........................................................................................

1,082

1,140

9,327

Write-down of investment securities....................................................................

1,070

1,077

9,224

Write-down of inventories....................................................................................

514

319

4,431

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

18,042

20,287

155,534

Subtotal deferred tax assets.....................................................................................

31,51333,571

271,663

Valuation allowance..................................................................................................

(9,090)(9,179)(78,362)

Total deferred tax assets..........................................................................................

22,422

24,391

193,293

Net defined benefit assets...................................................................................

(251)

(214)

(2,163)

Reserve for reduction entry..................................................................................

(1,267)(1,410)(10,922)

Unrealized gain on revaluation of securities.........................................................

(4,043)(4,402)(34,853)

Adjustment to book value of assets stated at fair value.......................................

(10,890)(12,054)(93,879)

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

(18,341)(16,452)(158,112)

Total deferred tax liabilities.......................................................................................

(34,793)(34,532)(299,939)

Net deferred tax assets (liabilities)...........................................................................

¥(12,370)¥(10,141)$(106,637)

Deferred tax assets:

Deferred tax liabilities:

Net deferred tax assets are included in the following items in the consolidated balance sheet:
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

¥ 5,974¥ 7,598$ 51,500

7,097

6,361

61,181(25,442)(24,102)(219,327)

Current assets:
Deferred tax assets..............................................................................................
Noncurrent assets:
Deferred tax assets..............................................................................................
Noncurrent liabilities:
Deferred tax liabilities...........................................................................................

Annual Report 201665

2.	Reconciliation of the differences between the normal effective tax rate and the income tax rate in the accompanying
consolidated statement of income at December 31, 2016 and December 31, 2015
Fiscal 2016

Fiscal 2015

Normal effective tax rate.........................................................................................................................

32.8%

35.4%

Non-taxable income.................................................................................................................................

(0.6)

(0.8)

Tax credit primarily for research and development expenses..................................................................

(3.5)

(3.1)

Decrease in deferred tax assets at fiscal year-end due to change in tax rate..........................................

0.8

1.4

Income taxes for prior periods.................................................................................................................

—

2.6

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

2.4

2.1

Income tax rate per the consolidated statement of income...................................................................

31.9%

37.7%

3. Revision of deferred tax assets and liabilities due to a change in the income tax rate
The “Act for Partial Revision of the Income Tax Act, etc.” and the “Act for Partial Revision of the Local Tax Act, etc.” were
promulgated on March 29, 2016, and the “Act for Partial Revision of the Act for Partial Revision of the Consumption Tax Act toMake Sweeping Reforms to the Tax System to Secure Revenue to Fund the Increased Cost of Social Security” and the “Act for
Partial Revision of the Act for Partial Revision of the Local Tax Act and the Local Allocation Tax Act to Make Sweeping Reforms to
the Tax System for Securing Revenue to Fund the Increased Cost of Social Security” were promulgated on November 18, 2016.
Accordingly, the effective statutory tax rate used to measure deferred tax assets and liabilities (limited to those to be eliminated on
or after January 1, 2017) changed from 32.0% in the previous fiscal year to 30.7% for those expected to be recovered or paid fromJanuary 1, 2017 to December 31, 2018, and 30.4% for those expected to be recovered or paid on or after January 1, 2019.
As a result of these changes, deferred tax assets net of deferred tax liabilities have decreased by ¥307 million (US$2,646
thousand), income taxes–deferred have increased by ¥476 million ($4,103 thousand), valuation difference on available-for-salesecurities has increased by ¥211 million ($1,818 thousand), deferred gains or losses on hedges has decreased by ¥2 million ($17thousand), and remeasurements of defined benefit plans have decreased by ¥44 million ($379 thousand).

19

Asset Retirement Obligations

Asset retirement obligations recorded in the consolidated balance sheet are as follows:
Overview of asset retirement obligations
Some tangible fixed assets of the Company include assets containing asbestos, PCB and fluorocarbon which must be treated in
the manner stipulated by the laws and ordinances when they are scrapped or removed.
Accordingly, asset retirement obligations are recognized based on the estimated disposal costs, excluding removal costs for
aforementioned toxic substances incurred through the repair and maintenance activities in the normal service of the tangible fixed
assets. The grounds laws and ordinances are as follows:
Disposal costs for asbestos

The Ordinance on Prevention of Asbestos Hazards

Disposal costs for equipment containing PCB

The Law concerning Special Measures for Promotion of Proper
Treatment of PCB Wastes (PCB Special Measures Law)

Disposal costs for equipment containing fluorocarbon

Law concerning the Recovery and Destruction of Fluorocarbons(Fluorocarbons Recovery and Destruction Act)

Certain consolidated subsidiaries including overseas subsidiaries recognize asset retirement obligations for recovery obligations on
rental agreements on plant sites and lease contracts.
Calculation method for the amount of asset retirement obligations
The Company
The Company recognizes asset retirement obligations for tangible fixed assets planned to be removed or assets, which have been
removed, but not scrapped yet. Tangible fixed assets planned to be removed mainly consist of assets, which are in use for thereason that they are still usable although useful lives have elapsed and assets, which need immaterial time to remove. Since the66

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

payment terms for disposal of these assets are considered to have matured, removal costs, which are reasonably estimatedwithout discounting future cash flows, are recorded as asset retirement obligations.
Consolidated subsidiaries
Consolidated subsidiaries determine the amounts of asset retirement obligations using discount rates ranging from 1.9% to 5.0%
for the net cash flows, estimating the period of use to be 22 to 40 years after acquisition.
Increase or decrease of the total amount of asset retirement obligations during the fiscal years ended December 31, 2016
and December 31, 2015:
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

Beginning balance....................................................................................................

¥3,620¥3,500$31,206

Increase due to decisions to remove.......................................................................

562

885

4,844

Adjustments due to the elapse of time....................................................................

65

64

560

Decrease due to payment for the obligations..........................................................

(88)

(136)

(758)

Other increase (decrease) .......................................................................................

37

(692)

318

Ending balance.........................................................................................................

¥4,197¥3,620$36,181

20 Segment Information
Segment information
1. Segment overview
	The business segments reported by Kuraray are the business units for which the Company is able to obtain respective financial
information separately in order for the Board of Directors to conduct periodic investigations to determine distribution ofmanagement resources and evaluate their business results.
		

Kuraray adopts an in-house company system where each in-house company conducts business activities and establishes its

own comprehensive strategy, both for Japan and for overseas markets, for the products it handles. In addition, among Kuraray
subsidiaries, Kuraray Trading Co., Ltd. independently conducts proprietary planning and sales activities, including the processing
and sale of Kuraray Group products as well as other companies’ products.
		Consequently, Kuraray has created five business segments for reporting - “Vinyl Acetate,” “Isoprene,” “Functional

Materials,” “Fibers and Textiles” and “Trading” - categorized by product group based on the respective in-house companies andthe Trading segment.
		

The Vinyl Acetate segment manufactures and markets functional resins and film, including PVA, PVB and EVAL. The Isoprenesegment manufactures and markets SEPTON thermoplastic elastomers and KURARITY, isoprene-related products and
GENESTAR. The Functional Materials segment manufactures and markets methacrylic resin, CLARINO man-made leather andmedical products. The Fibers and Textiles segment manufactures and markets synthetic fibers and textiles, non-woven fabrics
and others. The Trading segment mainly processes and sells synthetic fibers and man-made leather, and conducts planning andmarketing for other products produced by the Kuraray Group and other companies.
2. Methods for calculating reporting segment net sales, income and loss, assets and other items
	The accounting method applied to reported business segments is the same as that stated in “Significant Accounting Policies.”
Profits from reported segments are operating income, and inter-segment sales and transfers are based on the prevailing market
prices.
		

As stated in the Changes in Accounting Policies, the method of depreciation for structures purchased on or after April 1, 2016changed to the straight-line method from the declining-balance method due to tax reforms. Accordingly, the same change wasmade to the method of depreciation for reported segments.
		The effect of this change on segment income (loss) for the fiscal year ended December 31, 2016 is immaterial.

Annual Report 201667

3. Information on sales, income and loss, assets, and other amounts by reporting segment
Fiscal 2016 (January 1, 2016 to December 31, 2016)
Millions of yen
Vinyl
AcetateIsoprene

Reporting Segments
Functional
Fibers andMaterials
Textiles(1) Outside customers....... ¥223,447¥27,637¥34,151(2) Inter-segment sales
		and transfers.................

29,72723,44518,094

11,261

2,931

85,46017,754103,214(103,214)—

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

253,175

51,08352,246

48,566

119,498

524,568

63,838588,407(103,214)

485,192

Trading

Total

Other
Business

Total

Consolidated
Financial
Adjustment Statements

Net sales¥37,305¥116,566 ¥439,108¥46,083 ¥485,192 ¥— ¥485,192

Segment income (loss) .....

58,517

6,934

4,631

5,958

3,833

79,876

2,017

81,894(14,067)

67,827

Segment assets.................

400,326

49,77844,85149,082

41,464

585,50353,082

638,585

86,847725,433

Depreciation andamortization(other than goodwill)......

22,815

4,333

3,352

3,446

45

33,993

2,114

36,1071,767

37,874

Impairment loss.................

489

83

25

—

—

599

1,580

2,179

—

2,179

Amortization of goodwill....

3,543

—

135

—

—

3,678

2

3,680

—

3,680

Balance of goodwill at
end of current period......

25,100

—

1,151

—

—

26,251

4

26,256—

26,256

Investments in equity
method affiliates.............

—

—

—

109

—

109

—

109

—

109

Increase in tangible fixed
assets and intangible
fixed assets ...................

35,350

2,070

3,726

5,176

114

46,4382,548

48,986

4,621

53,608Other items

Thousands of U.S. dollars
Vinyl
AcetateIsoprene

Reporting Segments
Functional
Fibers andMaterials
Textiles(1) Outside customers....... $1,926,267$238,250$294,405

Trading

Total

Other
Business

Total

Consolidated
Financial
Adjustment Statements

Net sales$321,594 $1,004,879 $3,785,413$397,267 $4,182,689$— $4,182,689(2) Inter-segment sales
		and transfers.................

256,267

202,112

155,982

97,07725,267736,724

153,051

889,775(889,775)—

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

2,182,543

440,370

450,396

418,672

1,030,155

4,522,137

550,327

5,072,474(889,775)

4,182,689

Segment income (loss) .....

504,456

59,77539,92251,362

33,043

688,586

17,387705,982(121,267)

584,715

Segment assets.................

3,451,086

429,120

386,646

423,120

357,448

5,047,439

457,6035,505,043

748,681

6,253,732

Depreciation andamortization(other than goodwill)......

196,681

37,35328,89629,706387

293,043

18,224

311,267

15,232

326,500

Impairment loss.................

4,215

715

215

—

—

5,163

13,62018,784—

18,784

Amortization of goodwill....

30,543

—

1,163

—

—

31,70617

31,724—31,724

Balance of goodwill at endof current period ............

216,379

—

9,922

—

—

226,30134

226,344—

226,344

Investments in equity
method affiliates.............

—

—

—

939

—

939

—

939

—

939

Increase in tangible fixed
assets and intangible
fixed assets....................

304,741

17,844

32,12044,620982

400,327

21,965422,293

39,836462,137

Other items

Notes: 1.	The “Other Business” category incorporates operations not included in reporting segments, including activated carbon, environmental business and engineeringbusiness.
2. Adjustment is as follows: Included within segment income (loss) of ¥14,067 million (US$121,267 thousand) is the elimination of inter-segment transactions of ¥1,435
million (US$12,370 thousand) and corporate expenses of ¥15,502 million (US$133,637 thousand). Corporate expenses mainly comprise headquarters’ general andadministrative expenses and the Company’s basic research expenses.
3. Segment income is adjusted with operating income under the Consolidated Statement of Income.
4. Adjustment is as follows: Included within segment assets of ¥86,847 million (US$748,681 thousand) is the elimination of inter-segment transactions of ¥35,872
million (US$309,241 thousand) and corporate assets of ¥122,720 million (US$1,057,931 thousand). Major corporate assets are surplus funds, long-term investment
funds, assets related to basic research and corporate administrative divisions of the Company.

68

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

Fiscal 2015 (January 1, 2015 to December 31, 2015)
Millions of yen
Vinyl
AcetateIsoprene

Reporting Segments
Functional
Fibers andMaterials
Textiles(1)	Outside customers....... ¥243,154¥31,447¥38,923¥35,398 ¥117,384 ¥466,309¥55,412 ¥521,721 ¥(2)	Inter-segment sales
and transfers.................

31,591

23,537

17,955

10,9452,255

86,28614,189100,475(100,475)—

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

274,746

54,98556,87946,344

119,640

552,595

69,601

622,197(100,475)

521,721

Trading

Total

Other
Business

Consolidated
Financial
Adjustment Statements

Total

Net sales— ¥521,721

Segment income (loss)......

55,740

6,922

5,564

4,108

3,882

76,2192,773

78,993(12,915)

66,077

Segment assets.................

398,050

54,07644,21046,54239,470582,350

53,965636,316

65,454

701,770

Depreciation andamortization(other than goodwill)......

25,004

4,802

3,334

3,485

43

36,6702,079

38,7501,489

40,239Impairment loss.................

544

—

—

—

—

544

4,302

4,847

—

4,847

Amortization of goodwill....

3,761

—

98

—

—

3,859

2

3,862

—

3,862

Balance of goodwill at
end of current period......

27,543

—

1,014

—

—

28,557

7

28,564—28,564

Negative goodwill..............

—

—

—

—

—

—

2

2

—

2

Investments in equity
method affiliates.............

—

—

—

108

—

108

—

108

—

108

Increase in tangible fixed
assets and intangible
fixed assets....................

30,221

2,398

3,239

4,073

27

39,9602,083

42,0442,969

45,014

Other items

Notes: 1.	The “Other Business” category incorporates operations not included in reporting segments, including activated carbon, environmental business and engineeringbusiness.
2. Adjustment is as follows: Included within segment income (loss) of ¥12,915 million is the elimination of inter-segment transactions of ¥1,712 million and corporate
expenses of ¥14,628 million. Corporate expenses mainly comprise headquarters’ general and administrative expenses and the Company’s basic research expenses.
3. Segment income is adjusted with operating income under the Consolidated Statement of Income.
4. Adjustment is as follows: Included within segment assets of ¥65,454 million is the elimination of inter-segment transactions of ¥32,178 million and corporate assetsof ¥97,632 million. Major corporate assets are surplus funds, long-term investment funds, assets related to basic research and corporate administrative divisions of
the Company.

(Related Information)
Fiscal 2016 (January 1, 2016 to December 31, 2016)
1. Information about products and services
Vinyl Acetate

Net sales to outside customers ..................

Net sales to outside customers ..................

¥254,383

Isoprene¥47,808

Millions of yen
Functional
Materials
Fibers and Textiles¥55,045¥71,188

Vinyl Acetate

Isoprene

Thousands of U.S. dollars
Functional
Materials
Fibers and Textiles$2,192,956$412,137$474,525$613,689

Other Business¥56,766

Other Business$489,362

Total¥485,192

Total$4,182,689

Note: Principal products of each segment are as follows:
Vinyl Acetate:
PVA resin and film, EVAL resin and others
Isoprene:
SEPTON thermoplastic elastomers and KURARITY, isoprene chemicals, GENESTAR heat-resistant polyamide resin and others
Functional Materials: Methacrylic resin, CLARINO man-made leather, medical products and others
Fibers and Textiles: KURALON, KURAFLEX non-woven fabrics, MAGIC TAPE hook and loop fasteners, polyester and others
Others:Activated carbon, environmental business and engineering business and others

Annual Report 201669

2. Performance by geographical segment(1) Net sales
Japan

United States

China

Millions of yen
EuropeAsia

Other Area

Total

¥180,101¥62,837¥49,302¥97,165¥73,952¥21,832¥485,192

Japan

United States

China

Thousands of U.S. dollars
EuropeAsia

Other Area

Total

$1,552,594$541,698$425,017$837,629$637,517$188,206$4,182,689

Note: Net sales are classified by country or area based on customer location.

(2) Tangible fixed assets
Japan

United States¥126,819¥94,340

Millions of yen
Germany
Other Overseas¥24,989¥25,678

Thousands of U.S. dollars
United States
Germany
Other Overseas

Total

Japan

¥271,827$1,093,267$813,275$215,422$221,362

Total$2,343,336

3. Major customers
No information is available as there is no single outside customer accounting for 10% or more of the Company’s total net sales.
Fiscal 2015 (January 1, 2015 to December 31, 2015)
1. Information about products and services

Net sales to outside customers...................

Vinyl Acetate

Isoprene

Millions of yen
Functional
Materials
Fibers and Textiles¥274,164¥51,544¥60,313

Other Business

Total¥65,791¥521,721¥69,908

Note: Principal products of each segment are as follows:
Vinyl Acetate:
PVA resin and film, EVAL resin and others
Isoprene:
SEPTON thermoplastic elastomers and KURARITY, isoprene chemicals, GENESTAR heat-resistant polyamide resin and others
Functional Materials: Methacrylic resin, CLARINO man-made leather, medical products and others
Fibers and Textiles: KURALON, KURAFLEX non-woven fabrics, MAGIC TAPE hook and loop fasteners, polyester and others
Others:Activated carbon, environmental business and engineering business and others

2. Performance by geographical segment(1) Net sales
Japan

United States

China

Millions of yen
EuropeAsia

Other Area

Total

¥184,324¥82,266¥49,409¥103,030¥78,833¥23,856¥521,721

Note: Net sales are classified by country or area based on customer location.

(2)Tangible fixed assets
Japan

United States¥122,921¥97,865

Millions of yen
Germany
Other Overseas¥25,633¥15,599

Total¥262,019

3. Major customers
No information is available as there is no single outside customer accounting for 10% or more of the Company’s total net sales.
Information about impairment loss of fixed assets by reporting segment
Fiscal 2016: This information is omitted since similar information is disclosed in the segment information.
Fiscal 2015: This information is omitted since similar information is disclosed in the segment information.
Information about amortization of goodwill and unamortized balance of goodwill by reporting segment
Fiscal 2016: This information is omitted since similar information is disclosed in the segment information.
Fiscal 2015: This information is omitted since similar information is disclosed in the segment information.

70

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

Information about gain on negative goodwill
Fiscal 2016: Not applicable.
Fiscal 2015: This information is omitted since similar information is disclosed in the segment information.

21 Related Party Disclosures
Fiscal 2016: Not applicable
Fiscal 2015: Not applicable

22 Per Share Information
Yen

U.S. dollars

Fiscal 2016

Fiscal 2015

Fiscal 2016

Net assets per share................................................................................................

¥1,459.34¥1,412.46$12.58

Basic net income per share......................................................................................

114.98101.84

0.99

Diluted net income per share...................................................................................

114.75101.570.98

Note:	1. The basis for computation of basic and diluted net income per share is as follows:
2. As stated in Changes in Accounting Policies, the Accounting Standard for Business Combinations is applied. This change has no effect on the consolidated financial
statements and per-share information in the fiscal year ended December 31, 2016.
Thousands of
U.S. dollars

Millions of yen

Fiscal 2016

Fiscal 2015

Fiscal 2016

Net income attributable to owners of the parent.....................................................

¥ 40,400¥ 35,749$348,275

Amount unallocated to common stock.....................................................................

—

—

—

Net income attributable to owners of the parent allocated to common stock.........

40,40035,749348,275

Average number of common stock outstanding during the fiscal year
(thousand shares) ................................................................................................

351,351

351,015

351,351

Adjustment made on net income.............................................................................

—

—

—

Increase of common stocks (thousand shares)........................................................

723

948

723

(New subscription rights to shares (thousand shares)) ...........................................

(723)

(948)

(723)

Outline of the residual securities which were not included in the calculation of
the diluted net income per share because there was no dilutive effect...............

—

—

—

Basic net income per share

Diluted net income per share

Annual Report 201671

23 Supplementary Schedule
Bond schedule
Company name

Kuraray

Issue

Date of issue

No. 4 Unsecured
bonds

December 9,
2011

Total

—

Balance at
beginning of period

Balance at endof period¥10,000¥10,000(US$86,206 thousand)(US$86,206 thousand)¥10,000¥10,000(US$86,206 thousand)(US$86,206 thousand)

Yield

Security

Date of redemption

1.24%

None

December 9,
2021

—

—

—

Note: Total amount of corporate bonds to be redeemed each year within five years of the consolidated fiscal year-end:(Millions of yen)
Due within 1 year

Due in 1-2 years

Due in 2-3 years

Due in 3-4 years

—

—

—

—

Due in 4-5 years¥10,000(US$86,206 thousand)Supplementary schedule of loans payable(Millions of yen)
Balance as ofJanuary 1, 2016

Balance as ofDecember 31, 2016

Averageinterest rate(%)

Short-term loans............................................................................

¥ 7,040¥ 7,541

0.4

Current portion of long-term loans due within one year................

147

CategoryDue date(US$65,008 thousand)

¥

85

1.8

(US$732 thousand)Current portion of long-term lease due within one year (Note 2) .........

369

¥

363

—

(US$3,129 thousand)Long-term loans (Excluding current portion) (Note 3) ........................

42,257¥42,172

1.2

From January 2018
to March 2024—

From January 2018
to September 2046

(US$363,551 thousand)Lease liabilities (Excluding current portion) (Notes 2, 3) .......................

1,537¥ 1,524(US$13,137 thousand)

Other interest-bearing debts (Commercial papers).......................

—

—

—

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

¥51,352¥51,686—(US$445,568 thousand)Notes: 1. The average interest rate is calculated based on the interest rate and the ending balance.
2.	The average interest rate on lease liabilities is not reported, since interest payment equivalents included in total lease payments are allocated to each consolidated
fiscal year using the straight-line method.
3. Repayments of long-term loans and lease liabilities (excluding those due within one year) within 5 years after the Consolidated Balance Sheet date are as follows:(Millions of yen)
Due after 1 year but
within 2 years

Due after 2 years but
within 3 years

Due after 3 years but
within 4 years

Due after 4 years but
within 5 years

Long-term loans......................................................

¥ 72¥12,050

¥ 33

¥ 15

Lease liabilities.......................................................

305

245

198

150

Due after 1 year but
within 2 years

Due after 2 years but
within 3 years

Due after 3 years but
within 4 years

Due after 4 years but
within 5 years

Category(Thousands of U.S. dollars)
Category

Long-term loans......................................................

$ 620$103,879

$ 284

$ 129

Lease liabilities.......................................................

2,629

2,112

1,706

1,293

Supplementary schedule of asset retirement obligations
The schedule of asset retirement obligations is omitted since the amount of asset retirement obligations is not more than one
hundredth of total liabilities and net assets as of January 1, 2016 and December 31, 2016.

72

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

Other
Quarterly information in Fiscal 2016

(Millions of yen)

AccumulatedFirst quarter
From January 1
to March 31, 2016

Second quarter
From January 1
to June 30, 2016

Third quarter
From January 1
to September 30, 2016

Fiscal 2016

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

¥120,710¥244,099¥360,787¥485,192

Income (loss) before income taxes........................

18,42333,681

51,68260,512

Net income (loss) attributable to ownersof the parent ......................................................

11,924

22,37634,35240,400Net income (loss) per share (Yen) ..........................

33.95

63.70

97.78

114.98

Quarterly

Net income (loss) per share (Yen) ..........................

First quarter
From January 1
to March 31, 2016

Second quarter
From April 1
to June 30, 2016

Third quarter
From July 1
to September 30, 2016

Fourth quarter
From October 1
to December 31, 2016

33.95

29.75

34.08

17.21

(Thousands of U.S. dollars)

AccumulatedFirst quarter
From January 1
to March 31, 2016

Second quarter
From January 1
to June 30, 2016

Third quarter
From January 1
to September 30, 2016

Fiscal 2016

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

$1,040,603$2,104,301$3,110,232$4,182,689

Income (loss) before income taxes........................

158,818

290,353445,534

521,655

Net income (loss) attributable to ownersof the parent.......................................................

102,793

192,896

296,137

348,275

Net income (loss) per share (Dollars)......................

0.29

0.54

0.84

0.99

QuarterlyFirst quarter
From January 1
to March 31, 2016

Second quarter
From April 1
to June 30, 2016

Third quarter
From July 1
to September 30, 2016

Fourth quarter
From October 1
to December 31, 2016

Net income (loss) per share (Dollars) .....................

0.29

0.25

0.29

0.14

Annual Report 201673

Independent Auditor’s Report

74

Kuraray Co., Ltd.

Annual Report 201675

Main Group Companies(As of December 31, 2016)
Company

Head office

Capital(¥ million)

Activities

JAPAN 1
Kuraray Trading Co., Ltd.

Osaka

¥2,200Kuraray Chemical Co., Ltd.

Osaka

600

Manufacture and sales of activated carbon and related products

Kuraray Engineering Co., Ltd.

Osaka

150

Plant design and construction

Kuraray Noritake Dental Inc.

Tokyo

300

Manufacture and sales of dental materials and medical-related products

Kuraray Plastics Co., Ltd.

Osaka

180

Manufacture and sales of plastics

Kurarayliving Co., Ltd.

Osaka

101

Manufacture and sales of packaging materials

Kuraray Techno Co., Ltd.

Osaka

100

Production subcontracting, Temporary personnel service

Kuraray Kuraflex Co., Ltd.

Osaka

100

Manufacture and sales of non-woven fabric products

Kuraray Fastening Co., Ltd.

Osaka

100

Manufacture and sales of MAGIC TAPE

2

Import, export, manufacture, and sales of textile products, chemicals, etc.

OVERSEAS1
Kuraray America, Inc.

Texas, U.S.A.

US$10.1 million

Import, export and sales of textile products, resins and chemical
products. Manufacture and sales of PVA resins, PVB resins and film,
EVAL resins and SEPTON.

MonoSol, LLC

Indiana, U.S.A.

US$59.0 million

Manufacture and sales of PVA film

Kuraray South America Ltda.

Saõ Paulo, Brazil

R$48.2 million

Market development and sales promotion of Kuraray Group products
in South America

Kuraray Europe GmbH

Frankfurt, Germany€31.1 million

Import and sales of Kuraray products in Europe,
Manufacture and sales of PVA and PVB resins and PVB film

EVAL Europe N.V.

Antwerp, Belgium€29.7 million

Manufacture and sales of EVAL resins in Europe

Kuraray China Co., Ltd.

Shanghai, China

US$3.0 million

Business expansion, market entry planning and othersupplemental activities

Kuraray (Shanghai) Co., Ltd.

Shanghai, China

US$8.0 million

Import and sales of Kuraray products in China

Kuraray Hong Kong Co., Ltd.

Hong Kong, China

HK$4.6 million

Processing and sales of Kuraray products in China and Southeast Asia

Kuraray Asia Pacific Pte. Ltd.

Singapore

US$29.7 million

Manufacture and sales of PVA resins

Kuraray India Private Limited

Delhi, India

Rupees 272 million

Kuraray (Thailand) Co., Ltd.

Bangkok, Thailand

Kuraray Korea Ltd.
Plantic Technologies Limited

Import and sales of Kuraray products in India and market development

THB8.0 million

Sales and market development of Kuraray products in Thailand

Ulsan, Korea

KWR662 million

Manufacture and sales of PVB film

Victoria, Australia

AU$131.5 million

Manufacture and sales of biomass-derived PLANTIC film

Notes: 1. Kuraray Co., Ltd. has 24 affiliated companies in Japan and 44 overseas.
2. On January 1, 2017, Kuraray Co., Ltd. absorbed Kuraray Chemical Co., Ltd., which had previously been a consolidated subsidiary.

76

Kuraray Co., Ltd.

Investor Information(As of December 31, 2016)

KURARAY CO., LTD.

Shareholder Register Agent for
Common Stock

Established:

June 24, 1926

Capital:¥88,955 million

Shares Authorized:

1,000,000,000 shares

Issued:354,863,603 shares

Sumitomo Mitsui Trust Bank, Limited
Stock Transfer Agency Business Planning Department
1-4-1, Marunouchi, Chiyoda-ku, Tokyo 100-8223, Japan

Number of Shareholders: 41,848
Tokyo, Osaka

Head Offices:

Principal Shareholders
Number of Shares
Held (thousands)

Percentage ofShares Held

The Master Trust Bank of Japan, Ltd.
-Trust Account-.............................................

29,1208.29%

Japan Trustee Services Bank, Ltd.
-Trust Account-.............................................

19,555

5.56%

Nippon Life Insurance Company..................

10,4482.97%

National Mutual Insurance Federation ofAgricultural Cooperatives.............................

10,102

2.87%

TRUST & CUSTODY SERVICES BANK,
LTD -Trust Collateral Acc.-............................

7,280

2.07%

Meiji Yasuda Life Insurance Company.........

5,969

1.70%

NOTHERN TRUST CO. (AVFC)
RE - SSD00..................................................

5,907

1.68%

STATE STREET BANK AND TRUSTCOMPANY 505001......................................

5,738

1.63%

STATE STREET BANK WEST CLIENT- TREATY 505234.........................................

5,211

1.48%

Japan Trustee Services Bank, Ltd.
-Trust Account7-...........................................

4,917

1.40%

Name or Company Name

Share Price Movement
Share prices according to the market price on the Tokyo Stock Exchange (left scale)
High

High

Closing
Opening
Low

Opening
Closing

Nikkei Stock Average (right scale)

Low

(¥)

(¥)

2,000

25,0001,500

20,0001,000

15,000Note: Although the Company owns 3,363,405 shares of treasury stock, it is excluded
from the major shareholders listed above.
10,000

500

0

15/1

3

5

7

9

11

16/1

3

5

7

9

11

17/1

0

Breakdown of Issued Shares 			by Type of Shareholder

Trading Volume
11.94%(Thousands of shares)

Individuals andOthers60,0000.95%

Shares Held byKuraray Co., Ltd.

Trust and Banking
Companies

3.07%

40,000

Securities
Corporations

6.94%

3.26%

Life Insurance
Companies

34.58%

10.97%

Other Domestic
Corporations

20,000Foreign Investors
0

28.29%

15/1

3

5

7

9

11

16/1

3

5

7

9

11

17/1

Major Commercial
Banks and
Other Financial
Institutions

Annual Report 2016

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