ANNUAL REPORT 2000
For the year ended March 31, 2000

Profile
Kuraray Co., Ltd. was established in 1926 in Kurashiki
City, Japan, for the industrial manufacture of chemical
fibers. Since then, the Company has developed innovative
business operations in synthetic resins, chemicals, manmade leather, nonwoven fabrics, medical products, andmany other areas by capitalizing fully on its technological strengths. Many of these operations have grown into
world-class core businesses, including the polyvinyl alcohol fiber “KURALON,” the polyvinyl alcohol resin poval,
the ethylene-vinyl alcohol copolymer “EVAL,” the manmade leather “Clarino,” and isoprene-based fine chemicals for aromachemicals, pharmaceutical, and other specialized applications.
Today, the Kuraray Group, composed of Kuraray, itsconsolidated and unconsolidated subsidiaries, and affiliated companies, consists of about 80 companies with

Forward-Looking Statements

approximately 10,000 employees.

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 that its expectations and assumptions
are reasonable, actual results and trends of Kuraray’s
performance could differ materially from thoseexpressed or implied by such figures or statements due
to risks and uncertainties in the future business circumstances. The factors which may cause such difference
include, without limitation: (1) general market andeconomic conditions in Asia including Japan, the US.,Europe and other regions; (2) fluctuations of currency
exchange rates, especially between the Japanese yen
and the US. dollar and other foreign currencies; (3)changes in raw material and fuel costs; (4) industrial
competition and price fluctuations in Japan and international market; (5) advance or delay in the constructionof new plants and production of new plants and production lines; (6) successful development of new products and technologies; and (7) changes in laws and regulations (including tax and environmental) and legal
proceedings.

Mobilizing the combined power of the Kuraray Groupand capitalizing on its many years of technologicalexpertise in polymerization and synthetics, Kuraray
intends to take its place as a unique chemical enterprisewith worldwide operations.

Contents
Financial Highlights .........................................1
Management Review of Fiscal 1999................2Interview with the President ...........................4
Global Development .......................................7
Review of Operations ....................................10
Research and Development ..........................18
Environmental Preservation...........................19
Contribution to Local Communities ..............20
Financial Section ............................................21
Organization and Board of Directors............37
Kuraray’s History............................................38
List of Consolidated Companies....................39
Introduction of New Products.......................40
Corporate Data...............................................41

In this annual report, the names enclosed in double quotation marks are brand names.

Financial Highlights
Kuraray Co., Ltd. and Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen

2000

Years ended March 31, 2000, 1999 and 1998

Net sales............................................................................. ¥316,444

2000

1999

1998

¥336,466¥347,643$2,985,321

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

7,452

13,171

13,96270,302

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

503,766

487,991

478,861

4,752,509

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

282,755

259,909

233,494

2,667,500

Amounts per share:

Yen

U.S. dollars

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

¥20.00¥36.83¥40.46$0.19

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

19.42

34.56

37.68

0.18

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

9.00

9.00

9.00

0.08

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

56.1

53.3

48.8

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

2.7

5.3

6.3

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

45.4

24.5

22.2

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

7,433

6,823

7,809

Financial ratios:

Note: The United States dollar amounts represent translation of Japanese yen at the rate of ¥106=$1.
As discussed in Notes 2(g) to the financial statements, the Company changed its amortization method for past service liability related to the contributory
pension plan during the year ended March 31, 2000. This change resulted in recording of a "Special provision for retirement benefits" in the amount of¥9,492 million ($89,547 thousand) and reduced net income by ¥5,297 million ($49,972 thousand).
As discussed in Notes 2(h) to the financial statements, the Company changed the method of accounting for foreign translation adjustments during theyear ended March 31, 2000. This change reduced total shareholders' equity by ¥4,496 million ($42,415 thousand).

Net Sales

Net Income

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

(Millions of Yen)

(Millions of Yen)

350,000 330,869 340,112

347,643
336,466

15,000600,000
535,173

13,962

316,444

13,171300,000
12,00011,049514,167

500,000

11,741

250,000

478,861 487,991

503,766

400,000
9,000

200,000

7,452
150,000

300,000
208,635

6,000
200,000

233,494259,909282,755

178,776

100,000
3,000

100,000

50,000
0

’96

’97

’98

’99

’00

0

0

’96

’97

’98

’99

’00

’96

’97

’98

’99

’00

1

Management Review of Fiscal 1999

creation of new business; and (3) buildup of an efficientmanagement system. While maintaining a sound financial
structure, based on this management strategy, theCompany will strive to expand its corporate scale andimplement business operations in harmony with the community and environment.

General State of the Company during theYear under Review
Hiroto Matsuo
Chairmanslow, the yen appreciated rapidly, and raw materials andBasic Management Policy

fuel costs rose, causing a continuation of the harsh busi-

Kuraray aims to maximize its corporate value as a uniqueness environment. Amid this state of affairs, we undertook

chemical enterprise that can operate around the world,

to minimize profit declines through sales expansion ofand it intends to become an enterprise to be supported

our products, centered on unique materials, and throughand favored by all stakeholders, including stockholders,cost reductions. Sales, however, totaled ¥316,444 million

employees and clients and all acquaintances in the local(US$2,985.3 million), a decline of 6.0% from the previous

community. As the managerial strategy to attain theseyear, and operating income was ¥20,321 million

goals, the Company formulated its Fourth Five-year(US$191.7 million), down 25.1%. Net income was ¥7,452

Medium-Term Management Plan and has relied on it

million (US$70.3 million), a decline of 43.4%, as a result

as the basis of management since fiscal 1996. Underof the implementation of various steps, including thethis plan, the Company has been promoting as priority

package write-off of past work service expenses related

measures: (1) reinforcement of corporate strength; (2)to non-consolidated retirement pensions (¥9,492 million).

Net Sales by Segment

Operating Income by Segment

Diversified businesses
12.8%

Diversified businesses
17.3%

Man-made leather,nonwoven fabrics
and fastening
materials
10.5%
Fibers andtextiles31.0%

2

While the pace of domestic business recovery remained

Yasuaki Wakui
President

Chemicalproducts
45.7%

Man-made leather,nonwoven fabrics
and fastening
materials
11.5%
Fibers andtextiles13.2%

Chemicalproducts
58.0%

Based on these business achievements, we decided to pay

the buildup of a recycling-type social system. With regard toa dividend of ¥9 per share for the term under review.

environmental issues, we have participated in responsible
care activities since times in the movement, and as part ofPrincipal Activities during the Yearsuch activities, we have obtained certification under

Under the Fourth Medium-Term Management Plan, we exe-

ISO14001, the international standard for environment-relat-

cuted new investment in core businesses. During the peri-

ed management systems, for the Kashima Plant, Okayama

od, newly installed facilities got off to a smooth start. In

Plant and Nakajo Plant. Regarding the rest of our plants,

Singapore, a poval production plant (productive capacity:

we plan to gain certification by the end of 2000.

40,000 tons/year) under Poval Asia Pte Ltd, a joint venturewith The Nippon Synthetic Chemical Industry Co., Ltd.,

Outlook for the Current Termbegan operation. In Belgium, production of the EVOH resin

Looking ahead at the Company’s business performance for“EVAL” was started in a new plant (productive capacity:

the current fiscal year, we will exert utmost efforts to reg-

10,000 tons/year) at EVAL Europe N.V. In Japan, we com-ister sales of ¥335,000 million and operating income ofpleted new thermoplastic elastomer facilities, putting in¥25,000 million, based on the premise that domestic busi-

place capacity for yearly elastomer production of 19,000

ness recovery will occur in the second half of the fiscal

tons. Further, a semi-commercial plant of new, heat-resis-year and that overseas business will remain flat, despite

tant resin PA9T started up. Hereafter, the Company will besome apprehensions about business decline in the U.S.

united in its efforts to make existing plant and equipment

Net income is expected to be ¥9,000 million, owing to theinvestment reflected in our business achievements as soon

package write-off of non-accumulated retirement

as possible. Kuraray has decided to withdraw from rayon

allowance obligations (¥9,500 million).

production as of March 31, 2001. Activities that offer noprospect of profitability now or in the future will be subject

Finally, we request the continued understanding andsupport of our shareholders in the years to come.

to review. In some cases, this process will lead to Kuraray’s
withdrawal from certain areas of activity.

Consideration to Local Society andEnvironment
Based on the recognition that consideration to the local

Hiroto Matsuo
Chairmancommunity and environment is also the foundation of
corporate activity, we are striving to curtail environmentpolluting substances and to develop products that will contribute to the environment. At the same time, we intend to
implement plant and equipment investment to promote
thermal recycling of waste plastics, thereby contributing to

Yasuaki Wakui
President3Interview with the President

1. Introduction of the New President

Q

Please express your aspirations on theoccasion of your assuming the office ofthe president.

ing and sales sense than others. My leisure interests include
shopping for foods with my wife.

Q

What are the ‘corporate colors’ ofKuraray, and the corporate image to be

Wakui: The speed of changes increated, seen from thethe corporate environment, includ-

standpoint of the presi-

ing the IT revolution, is accelerating

dent?

rapidly. It is amid such rigorous

Wakui: Our company has manytimes, that I have the honor oftheoretical persons with excellent

assuming the presidency. If ouranalytical abilities. Hereafter, I

company is to attain further devel-

would like to create a freer andopment as a ‘unique chemical

more generous corporate culture

enterprise,’ it is important for us tothan before, with a suitable degree

be free of existing ideas from the past and to carry outof tension. I would like to make Kuraray an enterprise in‘reform’ that matches the situation of the times.

which employees can have pride, and whose social evalua-Qtion is high.

Would you tell us a little bit about
yourself and your career?
Wakui: I feel I am the type to hurry to the conclusion.

Management Plan over the latest and current

I have long been in the personnel management sector, andterms, and outlook for its implementation results

I have striven for the reform of the personnel management
system. When I served as the general manager of the Public
Relations Department, I frequently contacted the press, ana-

4

2. Implementation of the Fourth Medium-Term

Q

The Fourth Medium-Term Management
Plan will terminate at the end of this term.

lysts and fund managers. Although I have no marketing andWhat is your evaluation of its results?

sales experience, I am confident that I have no less market-

Wakui: We were scheduled to carry out plant and equip-ment investment of about ¥110,000 million in the fivethe yen’s appreciation on “Clarino” and the sales priceyears from fiscal 1996, and about 70% of the sum isreduction of agrochemical/vitamin intermediates. Other

being used for the growth of our core businesses. The

businesses proceeded steadily. It cannot be denied thatdevelopment of our core businesses has been going as

our business achievements lag behind overall businessplanned, and we have executed business growth throughrecovery, but I am sure that the bottom was reached inconcentrated investment nearly as planned. Namely, we

fiscal 1999.

carried out new equipment buildup or expansion in allof the five core businesses-“KURALON” and “KURALON
K-II,” Poval, “EVAL,” Isoprene chemicals and “Clarino”-

Q

Do you think that business performance
will recover in fiscal 2000?

and we will begin reaping the benefits of these business-

Wakui: During the current fiscal year, facilities that wees from now on. These businesses involve many prod-

newly installed or expanded during fiscal 1999 will con-ucts that enjoy the highest sharetribute to our earnings improve-in their world markets, and it wasment. Additionally, due to a turn-a great achievement that overseas

around to growth for our acrylic

business development was put on

business, our chemical products

the right track.

will improve, and their sales andQearnings are expected to rise. As

But operations posted

for “Clarino,” we have introduced

declines in both sales

new products for interiors, andand net income during

their sales areas are expanding.

fiscal 1999. Why?

We would like to attain an increase in net income in thisWakui: Regarding fiscal 1999, declines in selling prices,

fiscal year, although this greatly depends on the tempo

due to deflationary effects, were coupled with a sharpof overall business recovery in the future.

appreciation of the yen and higher raw materials costs, tocause, quite regrettably, lower sales as well as smaller
net income. Major factors were the unfavorable effect of5

Interview with the President

3. Medium-Range Vision in the Future

Q

Q

Finally, preparation of the next MediumTerm Management Plan will be your first

What is the medium- to long-term

task. Please tell us about your aspira-outlook for core businesses?

tions in that regard.

Wakui: Our core businesses are developing smoothly.

Wakui: Certainly the next Medium-Term Management

Demand for “EVAL,” which grew substantially as foodPlan will be my first task, and it is a great task. Based on

packaging materials, is expanding in its new applications

the present Medium-Term Management Plan, reinforce-such as gasoline tanks and beer bottles. We are alsoment of our business foundation was pursued throughlooking forward to the future‘selection and concentration’

growth of thermoplastic elastomer

under the leadership of Chairman

and pharmaceutical intermediates.

Matsuo. The unfavorable influence of the business recession

Q

What kinds of new busi-

was serious, but we did exactly

ness undertakings arewhat we needed to do, as statedtaking place now?

just now.

Wakui: There are some businessundertakings whose ‘seeds’ were sown during the present

Term Management Plan, clarification of the direction for

Medium-Term Management Plan and whose ‘buds’ haveour future progress and the corporate image to be aimed

already appeared. Even in the case of new business under-at, and preparation of managerial and business strategies

takings, of course we do not conduct any business that will

for these purposes, are more important than specific tar-deviate from our core technologies and know-how. For

get figures. I would like to clarify the stance we should

instance, precise molding technology, which we cultivatedtake in increasingly borderless chemical industry circles

in the field of acrylic product development, is bearing fruits

under the new Medium-Term Management Plan. It willin the production of optical materials. We plan to strength-

also be my responsibility to harvest the crops to be

en resin and resin-processed products related to electronic

realized under the current Fourth Medium-Termand information fields, including the aforementioned

Management Plan in aiming to broaden our business

realms. Promising products are also appearing in the envi-

sphere.

ronment-related sector.
6Regarding the next Medium-Global Development

Foreign Sales

Kuraray is pushing for global business development in which products that cancompete in world markets will be created, and in which production, sales and(¥ billion)

100
93.5

development will be carried out in the most suitable places in the world.

82.2
80

Centered on core businesses, including the operations of poval, the EVOH resin“EVAL” and the man-made leather “Clarino,” whose overseas demand is grow-60

ing, we are striving to improve overseas bases and promoting operational
expansion, centered on our four key geographic areas-Japan, the U.S., Europe

40

and Asia. Management localization is essential from the viewpoint of global
management strategy. For this reason, local people are now being appointed

20

to senior positions in major subsidiaries, and tactics are being tailored to local
0

conditions in each region.

OVERSEAS NETWORK:’99

EVAL COMPANY OF
AMERICA
Demand for the EVOH
resin “EVAL” is particularly high as a food packaging material, and since its
establishment, this company has carried out successive increases in production capacity.

KURARAY EUROPE
GMBH
As our strategic base inEurope, this company
sells Kuraray products,
and provides information
gathering and technicalservices.

HARU-KURARAY
GMBH
Imports and sells manmade leather for clothing
and interior goods applications in Europe, andconducts information
gathering.

KURARAY AMERICA,
INC.
KURARAY SINGAPORE
PTE., LTD.
As our strategic base inSoutheast Asia, this company
develops new markets for our
products, centered on chemical
products, and conducts information gathering.

POVAL ASIA PTE LTD

EVAL EUROPE N.V.
The European production
and sales company for“EVAL” resin, which ismainly used as a foodpackaging material.

’00

This production company wasestablished in a joint venturewith The Nippon Synthetic
Chemical Industry Co., Ltd. tomeet growing demand forpoval resin.

KURARAY HONG KONG
CO., LTD.
This company is responsible for marketing activities
in China and Southeast
Asia, as well as local processing and sales ofKuraray products such as
man-made leather. It is
continuing to develop
the East Asian market,
which has large growthpotential.

This company conducts salesof Kuraray products, market
development, and information gathering.

CLARINO AMERICACORPORATIONThis company is responsible
for the local processing andsales of man-made leather in
the U.S. In particular, by
utilizing the special propertiesof “Clarino,” it works toexpand sales for a wide
variety of applications.

KURARAY SPECIALITIESASIA PTE., LTD.
This company is responsible
for selling the poval resin produced by Poval Asia Pte Ltd
and for providing technicalservices.

7

Global Development

EuropeProduction of the EVOH resin “EVAL” by EVAL Europe
The Office of Kuraray Europe GmbH

N.V. began in Belgium in September 1999. The plant
has a production capacity of 10,000 tons a year, and it
will contribute toward expansion of “EVAL” business in
Europe. As for man-made leather “Clarino,” theCompany invested in Lorica Sud S.r.l. in Italy in March
2000, thereby securing a processing and sales base in
Italy. Car seats and other interior uses were developed
as an effort for expansion, while sales offensives werelaunched in the Spanish, French and Italian markets.
With regard to Kuraray’s dental materials business,
known for the excellent quality of its products, Kuraray
reviewed its sales networks and strengthened agency
functions by turning Kuraray Europe GmbH into its
general agent in Europe. In addition, sales of new
products—the new synthetic fiber “KURALON K-II” andThe Laboratory of Kuraray Europe GmbHthe thermoplastic elastomer “SEPTON” entered into thefull-fledged marketing stage, and efforts were exerted
for their sales expansion.

North America

Asia

EVAL Company of America’s “EVAL” sales in the U.S.

In April 1999, the poval production plant of Poval Asia

grew, centered on gasoline tank and food packaging

Pte Ltd, a joint venture with The Nippon Synthetic

material applications. However, exports to Europe fell

Chemical Industry Co., Ltd., was put into operation inas the European plant of EVAL Europe N.V. was put

Singapore. This plant, with a yearly production capacity

into operation. As in Europe, the sales network wasof 40,000 tons, has continued high-level operations sincereviewed with regard to dental materials, and thethen. Poval manufactured by Poval Asia is distributed

agency function was reinforced by making Kurarayfavorably through Kuraray Specialities Asia Pte., Ltd., its

America, Inc. the general agency in the U.S. In addition,

sales company. Kuraray Hong Kong Co., Ltd., mean-

sales of the thermoplastic elastomer “SEPTON” andwhile, is vigorously pushing for distribution and market

screens for projection TV grew steadily.

cultivation for Kuraray products, centered on man-madeleather products, in China and Southeast Asia.

8

Kuraray America, Inc.

EuropeOperation Room of EVAL Company of America

The Plant of EVAL Europe N.V.

North
America

The Office of Kuraray America, Inc.

Kuraray Hong Kong Co., Ltd.

Asia

Poval Asia Pte Ltd

The Office of Kuraray
Hong Kong Co., Ltd.

Staff of Kuraray
Specialities Asia Pte., Ltd.

9

Review of Operations

Fibers and Textiles
Performance of Fibers and Textiles

Net Sales

Net Sales
31.0%

Operating Income(¥ million)

2000

1999

1998

1997

1996

¥98,088¥103,120¥111,041¥112,937¥112,861

2,769

2,686

3,768

3,790

2,785

Report on the year under review
In the polyester area, we strove to expand the sales of specific value-added
items such as the EVOH fiber “SOPHISTA” and other segmented items, under(¥ million)

112,937
112,861
111,041
103,120
98,088100,000
120,000

a unique segmentation strategy. Furthermore, multilayer, hollow materials,
formaldehyde-adsorption materials and other unique new products were introduced to the market one after another.

80,000

Polyvinyl alcohol fiber “KURALON” fared well in its FRC (fiber reinforced
60,000cement) application as a replacement for asbestos and as a rubber reinforce40,000

ment, although its sales in the form of agricultural- and fishing-use products
stagnated. “KURALON K-II,” a new type of synthetic fiber, sold steadily as FRC

20,000and process auxiliaries.
0

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’97

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MAJOR PRODUCTS:“KURALON” (polyvinyl alcohol fibers)
Synthetic fiber was commercialized by Kuraray for the
first time in the world. It features great strength, considerable hydrophilic properties and excellent weather resistance, so it is used in various kinds of industrial materials.

PolyesterFiber used in a variety of high-added-value materials basedon advanced techniques. It is used in a wide spectrum of
products, ranging from clothing and industrial materials tohousehold goods.

Rayon
Chemical fiber derived from natural pulp. It is characterized by a natural touch, rich draping properties and excellent coloring.
10[Applications]• Materials for agriculture andfisheries, cement reinforcement
materials, etc.

[Applications]• Fabrics and knitted textiles for
clothes, carpets and otherinterior goods, civil engineering materials and other items[Applications]• High-class lining and surface
cloth for apparel, embroidery
threads

Outline

Operating Income

Kuraray’s fiber business is centered around rayon, the chemical fiber that started theCompany, “KURALON,” which pioneered the Japanese synthetic fiber industry and is
now used in a broad variety of industrial materials, and polyester, which has applications in industrial and household goods, such as use in apparel. In 1998, the Company
commenced the mass production of “KURALON K-II,” a new type of synthetic fiber
manufactured by a unique production method.

13.2%

Rayon demand declined both in Japan and abroad, and a deficit wasrecorded as a result. Because little future prospects can be seen for rayon, the(¥ million)

4,000

3,790 3,768

Company decided to terminate those operations in March 2001. Meanwhile,
3,500

the garment business in manufacturing bases in Southeast Asia was in good
3,000

shape, with increased sales recorded as a consequence.

2,785

2,686

2,769

2,500

As a result, sales of fibers and textiles amounted to ¥98,088 million
2,000(US$925.4 million), a decline of 4.9% from the preceding year. Operating
1,500

income was ¥2,769 million (US$26.1 million), up 3.1%.
1,000
500
0

’96

“KURALON K-II” (new synthetic fiber)
Highly functional fiber, featuring high strength, water-solubility at a low temperature and easy splittability. Market
cultivation is proceeding in Japan and abroad.

EVOH fiber “SOPHISTA”
Excellent properties include high absorption, temperature
releasing and fast-drying characteristics. Its use in sportswear, underwear and a variety of other products is being
actively promoted.

Antibacterial deodorizing fiber
Fiber that displays deodorant effects and anti-bacterial
effects when it reacts to light. Its use in carpets and otherhousehold goods is being actively promoted.

’97

’98

’99

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[Applications]• Cement reinforcement materials, woven and knitted textiles
for clothing use, hygienic materials[Applications]• Sports/underwear, women’souterwear, uniforms[Applications]• Household goods, such as
carpets and curtains, clothing,
etc.

11

Review of Operations

Chemical Products
Performance of Chemical Products

Net Sales

Net Sales

2000

1999

1998

1997

1996

¥144,435¥142,071¥150,319¥146,812¥139,113

12,16016,501

16,54014,884

14,555

Operating Income

45.7%(¥ million)

Report on the year under review
Sales of poval products for use as polyvinyl butyral safety glass interlayer for(¥ million)

150,000

150,319
144,435
146,812142,071
139,113

automobiles in Japan and poval films for liquid crystal display units remained
at high levels. Similarly, the production plant in Singapore (Poval Asia Pte Ltd)
started up smoothly. We also exerted efforts to cultivate a market for“EXCEVAL,” a newly developed water-soluble resin.

100,000“EVAL” showed excellent performance, particularly in food packaging
material and gasoline tank applications. An “EVAL” gasoline tank was adopted
50,000by Honda Motor Co., Ltd. for the first time in Japan. In Belgium, a new plant(EVAL Europe N.V.) was put into operation to consummate the establishmentof the tri-polar production setup of Japan, the U.S. and Europe.

0

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Among methacrylic resin products, screens for projection TV use continued

MAJOR PRODUCTS:
Poval resin (Polyvinyl alcohol resin)With features such as water-solubility, adhesiveness andeasy emulsification, this resin is used widely in areas ranging from textile processing agents to LCD films.

EVOH resin “EVAL”
Functional resin that has a high-level gas barrier property.
It is widely used in the fields of food packaging materials
and gasoline tank materials.

Methacrylic resin
Excellent transparency and weather resistance. Used invarious kinds of building materials, displays, projection TV
screens and other products.
12[Applications]• Adhesive agents, textile/paperprocessing agents, polyvinyl
butyral safety glass interlayer
for automobiles, etc.

[Applications]• Food packaging material,
gasoline tank materials, floorheating pipe materials[Applications]• Building materials, automotive
parts, lighting equipment,
optical screens, etc.

Outline

Operating Income

Kuraray has business operations in a wide range of products, including poval, a watersoluble resin the Company led the world in commercializing, “EVAL,” an ethylene-vinyl
alcohol copolymer with superior gas-barrier properties, methacrylic resin featuring outstanding transparency, activated carbon, resin-processed products, and isoprene chemical products such as thermoplastic elastomers, aromachemicals, ingredients for cosmetics, and pharmaceutical and agrochemical intermediates.

58.0%

to sell well. The resin itself registered higher sales, in part due to priceincreases, causing improvement of profitability.

(¥ million)

20,000In the field of isoprene products, “SEPTON” and “HYBRAR”-both thermo16,540 16,501

plastic elastomers whose annual production capacity was raised to 19,000 tons

15,000 14,555

14,884through additional equipment installation-attained steady sales growth.
Regarding other major chemical products, sales of activated carbon

12,16010,000decreased, while related earnings leveled off. Although processed resin products posted reduced sales, higher net income was recorded.

5,000

As a result of the above, sales of chemical products totaled ¥144,435 million (US$1,362.6 million), an increase of 1.7%. Operating income was ¥12,160

0

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million (US$114.7 million), down 26.3%.

Isoprene chemical products
Isoprene-based products with a wide range of applications, ranging from thermoplastic elastomer to pharmaceutical and agrochemical intermediates.

Activated carbon
With the ability to remove or adsorb odor and stains, thisproduct has diversified applications, ranging from water
purification equipment to tobacco filters.

Resin-processed products
Products based on processing/molding techniques forplastics and rubber. Merits for hoses and other items.

[Applications]• Rubber materials, plastic
modifiers, pharmaceutical andagrochemical intermediates,
etc.

[Applications]• Various kinds of activatedcarbon, activated carbonrelated equipment[Applications]• Various kinds of hoses,
laminated products, etc.

13

Review of Operations

Man-made Leather, Nonwoven Fabrics andFastening Materials
Performance of Man-made Leather, Nonwoven Fabrics and Fastening Materials

Net Sales

2000

1999

1998

1997

1996

¥33,290¥35,557¥38,802¥38,114¥36,726

2,402

4,650

5,454

5,060

4,709

10.5%

Net Sales
Operating Income

Report on the year under review
Declines in both sales and earnings were recorded in the “Clarino” operation,(¥ million)

40,00036,726

38,11438,802

because of the adverse effects of the yen’s appreciation and also because of a
falloff in sales of suede for apparel use to Europe. Even so, nubuck-type prod-

35,55735,00033,290ucts were adopted by Gold Pfeil GmbH, a German high-class leather product30,000manufacturer, so that we were able to expand our sales area in the high-class
25,000apparel sector. We also invested in Lorica Sud S.r.l., an Italian man-made20,000leather processing and sales company, thereby securing a processing base in
15,000Italy. In addition, we conducted vigorous marketing in Spain, France, etc.,
10,000steadily executing our market expansion strategy in Europe.
5,000

In the field of nonwoven fabrics, business-use dusting cloths made of
0

’96

’97

’98

’99

’00

“Kuraflex,” dry-laid nonwoven fabric, showed excellent sales performance.

MAJOR PRODUCTS:
Man-made leather “Clarino”
Because of its many features, such as great strength andlight weight, “Clarino” has been extensively used in thefields of shoes, bags and clothing.

Man-made leather “Sofrina”
High-quality man-made leather developed using microlevel technology. Its application is being vigorously
expanded to top-fashion apparel, interior goods and othersophisticated products.

Dry-laid nonwoven fabric “Kuraflex”

14(¥ million)

Excellent water absorption, air permeability and flexibility. This nonwoven fabric has a variety of applications,such as wipers, other household articles and hygienic
materials.

[Applications]• Shoes, bags, sports articles,
high-class clothing, car sheets,
etc.

[Applications]• High-class coats, jackets,
interior, etc.

[Applications]• Wipers, filters, industrial masks,
disposable diapers, etc.

Outline

Operating Income“Clarino” is a world-leading man-made leather extensively used in shoes, bags, apparel,and interior goods. Kuraray’s nonwoven fabrics, which combine the characteristics ofboth fabric and paper, enjoy a wide variety of applications ranging from the householdto the medical sphere. In hook and loop fasteners, which shut tight with just a lighttouch, the Company has the largest share of the domestic market.

11.5%

As for melt-blown nonwoven fabrics, we aggressively tackled the developmentof new applications.

(¥ million)

6,000

In the fastening business, meanwhile, shipment of “Freemagic” functional
hook and loop fasteners expanded, centered on clothing. As a result, nonwoven fabrics and fastening material operations posted slightly increased sales

5,454
5,000

5,060
4,709

4,650

4,000

and a leveling of earnings.
3,000

Sales of man-made leather, nonwoven fabrics and fastening materials
were ¥33,290 million (US$314.1 million), a fall of 6.4% from the previous
year, and operating income stood at ¥2,402 million (US$22.7 million), a

2,402
2,000

1,000

decline of 48.3%.
0’96Melt-blown nonwoven fabrics
Nonwoven fabric, made from super-fine fibers based on
the melt/blowing method, enjoys a wide variety of applications, including food packing materials and other items,
thanks to its excellent filtering functions.

Hook and loop fasteners
Featuring the function of fastening tightly with just a lighttouch, it is widely used in gloves, shoes and medical
articles.

New hook and loop fasteners “Freemagic”
An epoch-making product in which the hook face and theloop face are intermixed on a single tape. Its applications
are spreading in the realms of clothing and nursery care
articles.

’97

’98

’99

’00

[Applications]• Coffee bags, food packing
materials, industrial dust cloths,
etc.

[Applications]• Shoes, automobile sheets,building materials, clothing
fasteners[Applications]• Fastening units for use in sports
articles, care goods andclothing items

15

Review of Operations

Diversified Businesses
Performance of Diversified Businesses

Net Sales
12.8%

Net Sales
Operating Income(¥ million)

2000

1999

1998

1997

1996

¥40,631¥55,718¥47,481¥42,249¥42,149

3,629

3,512

3,482

2,461

3,757

Report on the year under review
Although contact lenses suffered from price declines due to fiercer competition(¥ million)

60,00055,71850,000same earnings level as the previous year, despite declining sales. The primary

47,48142,149with disposable lenses, overall medical product operations maintained thereason was the sales expansion of dental materials, whose overseas sales grew

42,24940,63140,000smoothly. We reviewed our overseas sales network and made our local subsidiaries-Kuraray America, Inc. in the U.S. and Kuraray Europe GmbH in

30,000Germany-our general agencies for their respective regions, with reinforced
20,000agency functions.
In the membranes sector, we earnestly tried to expand our business by

10,000selling PVA membranes, which have superior solvent resistance, and PVA-coated

0

’96

’97

’98

’99

’00

MAJOR PRODUCTS:
Dental materials
High-performance adhesives, fillers and other dental materials for beautiful repair of teeth. Due to their excellent
functions, these products have obtained high market evaluation.

Contact lenses
Both hard and soft contact lenses developed through theuse of unique, characteristic high-polymer materials.

Artificial kidneys
Artificial kidneys, plasma exchange units and artificialorgans designed to remove harmful substances fromblood.
16[Applications]• Dental fillers and adhesives,
hard resin for dental crowns[Applications]• Soft/hard contact lenses, care
articles, etc.

[Applications]• Dialyzers, plasma exchangeequipment, blood purifiers, etc.

Outline

Operating Income

The Company is developing its medical products business, an area where it is active in
artificial kidneys and artificial organs to remove harmful substances from blood, a variety of medical equipment, dental materials to repair and beautify teeth, and contactlenses. It is also involved in membranes that are very useful in preserving the naturalenvironment, engineering operations, and consulting activities, etc.

17.3%

polysulfone membranes, which have excellent resistivity to pollution, forapplication in water purification, hot water recovery and waste liquid/water(¥ million)

5,000

treatment application.

3,757
3,482 3,512

Engineering activities posted substantial revenue reduction, because a

3,629

4,000

large-sized plant-related undertaking in Singapore had terminated in the previ-

2,461
3,000

ous year. The consulting business, on the other hand, registered increased
sales, as ISO-related consulting expanded.

2,000

As a result, sales of diversified business operations were ¥40,631 million
1,000(US$383.3 million), down 27.1%, while operating income totaled ¥3,629 million(US$34.2 million), up 3.3% over the previous fiscal year.

0’96

High-function membranes
Filtering membranes, designed to separate solid particles
from liquid, are offered to various industries in single
units, as well as jointly with related systems.

Engineering
Utilizing unique development technologies, we offer an
integrated service, ranging from design of various kinds ofplants to installation work and trial operation.

Consulting
We are engaged in a variety of consulting activities.
Recently, its support for obtaining ISO certification has
obtained favorable evaluation.

’97

’98

’99

’00

[Applications]• Industrial-use pure-water
manufacturing/recovery,
germ-free water production,
simple water purificationequipment and systems[Applications]• Design, installation work, etc.,
of various sorts of plants[Applications]• Various types of consulting, ISO
certification-obtaining support,
etc.

17

Research and Development

Drawing on its expertise in core technologies regarding polymers
and synthetics, accumulated over many years, Kuraray is vigorously implementing research and development with the objec-

tives of ‘strengthening and expanding its existing core businesses’ and ‘creating new core businesses for the 21st century.’ At present, active R&D efforts
are under way in a wide range of areas including fibers, chemical products,
high-performance resins, man-made leather, medical products, industrial membranes, thermoplastic elastomers, pharmaceutical/agrochemical intermediates

Research and development activities andsupport for business operations by analysis,assays and providing technicalinformation.

and other fine chemical products, opto-electronics/information-use materials,
environmental technologies and activated carbon.
In recent years, we have commercialized a diverse range of uniqueproducts, including the new synthetic fiber, “KURALON K-II,” a new heatresisting resin, PA9T, a new water-soluble resin, “EXCEVAL,” and opticalscreens for projection TVs .
These R&D activities are carried out at the Kurashiki ResearchLaboratories and the Analytical Research Center, the Tsukuba ResearchLaboratories and the R&D departments at each plant. The close cooperation
among all these facilities has achieved solid results.
We intend to continue aggressive research and development and to uti-

Developing new synthetic and polymerize
process and applying to chemical highmolecule synthesis.

lize the fruits of these activities as quickly as possible in order to develop andgrow the business.
Consolidated R&D Expenses(¥ billion)

15
13.4
12.1

12

9

6

3

0

’99

Tsukuba Research Laboratories

18

’00

* Figure in 2000 does not include parent
application expenditure.

Environmental PreservationW

ith a view to conducting business activities that give due
consideration to the environment, we established specialized
environmental countermeasure departments in 1970, and wehave been involved in environmental preservation on our own initiative sincethen. In 1993, we set the Kuraray Action Guidelines on the Global
Environment and subsequently strengthened our commitment to ‘environmentand safety through independent management and self-responsibility.’
Furthermore, we are in the process of obtaining ISO14001 certification,
the environmental management system set forth by the International Standards

Fluidized bed boiler at the Tamashima Plant

Organization (ISO), in order to build up an environmental management system that passes international standards. We have already obtained certificationfor our Kashima Plant, Okayama Plant and Nakajo Plant, and regarding otherplants, efforts are under way to obtain certification within the year 2000.
For effective utilization of resources, at our Tamashima Plant we havedeveloped a unique recycling system centered on ‘thermal recycling’ in which
various kinds of waste are re-utilized as thermal energy. This system hasrecorded great achievements, and we intend to continue business activities,
while placing top priority on harmony with the natural environment in the
future.

Investment in Environmental
Equipment

ISO 14001 Certificate
of Compliance(¥ 100 million)
8
7
6
5

Responsible Care
4
3
2
1
0

’95

’96

’97

’98

’99

19

Contribution to Local Communities

K

uraray is implementing a wide range of activities based on local
community participation. Our ‘Chemistry Classes for Boys andGirls’ are activities started as part of our contributions to local

communities. These classes are held on school holidays for upper elementary
school students living around our plants. Students are given chances to conduct chemical experiments related to our company to spark interest in chemistry and science. Our long-time activities have been rated highly, and Kuraray
was awarded the ‘Prize for the Enterprise Conducting Excellent Corporate

Chemistry classes for boys and girls

Activities Oriented toward Consumers’ by the Ministry of International Tradeand Industry in fiscal 1999.
In addition, we hold a variety of sports meets and summer festivals inorder to deepen our ties with local communities. We have also set up a donation-matching system designed for donations to welfare facilities.
We will continue to contribute to local communities and society as awhole through steady activities, based on our employees’ creativity, and wewill remain committed to good corporate citizenship.

A boy’s baseball tournament
at the Okayama Plant

Cherry blossom viewing party
at the Saijo Plant

20

Christmas festival at the Tamashima Plant

Financial Section
CONSOLIDATED SIX-YEAR SUMMARY
Kuraray Co., Ltd. and Consolidated Subsidiaries
Thousands of
U.S. dollars

Millions of yen

1999

1998

1997

1996

1995

2000

Net sales...................................................... ¥316,444¥336,466¥347,643¥340,112¥330,869¥327,270$2,985,321

Cost of sales................................................

235,603250,195

259,788

255,240

246,768

249,399

2,222,670

administrative expenses ..........................

60,52059,123

58,95758,32458,00856,370570,943

Operating income ......................................

20,321

27,14828,89826,54826,09321,501

191,708

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

7,452

13,171

13,962

11,741

11,0499,617

70,302

Primary ...................................................

20.00

36.83

40.46

34.99

35.43

30.94

0.19

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

19.42

34.56

37.68

32.48

32.71

—

0.18

(Exact yen or U.S. dollar)...............................

9.00

9.00

9.00

9.00

9.00

8.50

0.08

Capital expenditures ..................................

19,76433,49720,806

19,04917,47910,645

186,453

Depreciation and amortization ..................

16,76915,557

14,615

14,111

14,26315,087

158,198

12,097

13,42913,707

13,592

12,646

12,549114,123

Total assets ................................................. ¥503,766¥487,991¥478,861¥514,167¥535,173¥477,874$4,752,509

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

259,909

233,494

208,635

178,776

164,9312,667,500

Years ended March 31

2000

For period:

Selling, general and

Net income per share (Exact yen or U.S. dollar)

Cash dividends applicable to period

Total research anddevelopment expenses............................
At period end:
282,755

Note: The United States dollar amounts represent translation of Japanese yen at the rate of ¥106=$1.
Fully diluted net income per share is required to be disclosed effective from fiscal year ended March 31, 1996.
As discussed in Notes 2(g) to the financial statements, the Company changed its amortization method for past service liability related to the contributory pension plan
during the year ended March 31, 2000. This change resulted in recording of a “Special provision for retirement benefits” in the amount of ¥9,492 million ($89,547 thousand) and reduced net income by ¥5,297 million ($49,972 thousand).
As discussed in Notes 2(h) to the financial statements, the Company changed the method of accounting for foreign translation adjustments during the year ended
March 31, 2000. This change reduced total shareholders’ equity by ¥4,496 million ($42,415 thousand).
Certain reclassifications of previously reported amounts have been made to conform with current classifications.

Contents

Consolidated Six-Year Summary . . . . . . . . 21
Financial Analysis(Based on Consolidated Accounts) . . . . . 22
Consolidated Balance Sheets . . . . . . . . . . . 24
Consolidated Statements of Income . . . . . 26
Consolidated Statementsof Shareholders’ Equity . . . . . . . . . . . . . . 26
Consolidated Statementsof Cash Flows . . . . . . . . . . . . . . . . . . . . . 27
Notes to Consolidated
Financial Statements . . . . . . . . . . . . . . . . 28
Report of Independent Accountants . . . . . . 36

21

Financial Analysis
Results of Operations

totaled ¥12,160 million (US$114.7 million), a fall of 26.3%. Poval

For the fiscal year ended March 31, 2000 (April 1, 1999-March 31,

enjoyed firm sales for use in polyvinyl butyral safety glass interlay-

2000), consolidated net sales totaled ¥316,444 million

ers and poval film for LCDs. Earnings, however, declined as a

(US$2,985.3 million), down 6.0% from the previous fiscal year due

result of higher fuel and raw materials costs and start-up losses

to the sluggish business conditions, the yen's appreciation and therelating to the establishment of a joint venture in Singapore.
Demand in Japan for the EVOH resin “EVAL” was very strong.

sharp rise in prices of crude oil and raw materials.
Gross profit was ¥80,841 million (US$762.7 million), a decline

Business in the U.S. also followed a firm trend, while a new plantof 6.3%, and selling, general and administrative expenses werebegan operation in Belgium. However, both net sales and earnings¥60,520 million (US$570.9 million), an increase of 2.4%. As adeclined, partly as a result of the yen’s appreciation. In the area of

result, operating income totaled ¥20,321 million (US$191.7 mil-methacrylic resin products, sales of projection TV screenslion), a decrease of 25.1% from the previous fiscal year, and theremained firm, while prices of the resin itself rose against theratio of operating income to net sales was 6.4%, a reduction of 1.7

background of a shortfall in supply, leading to a year-on-yearof a percentage point.

growth in net sales. An improvement was also seen in earnings,

Net income for the period amounted to ¥7,452 million (US$70.3

thanks to effective cost-cutting measures.

million), down 43.4%, and net income per share (EPS) was ¥20.00

In the field of isoprene chemical products, strong growth was(US$0.19), a decline of ¥16.83 (US$0.16). Return on equity (ROE)seen in demand for thermoplastic elastomers. However, overall

was 2.7%, a drop of 2.6 percentage point.

net sales and earnings both declined owing to stiff competition in

Looking at performance by segment, net sales of fibers and tex-

the fields of fine chemicals such as agrochemical intermediates

tiles totaled ¥98,088 million (US$925.4 million), a decrease ofand vitamin raw materials. Among other main chemical products,

4.9%, and operating income in this segment was ¥2,769 million

sales of activated carbon products fell, owing to the effect of the(US$26.1 million), an increase of 3.1%. Sales of polyester fell

cutback in the nation’s public investment budget, but earnings

against the background of sluggish demand in the Japanese mar-managed to stay flat thanks to cost reductions. In processed resin

ket, but an improvement was seen in earnings thanks to costproducts, the development of new products and new applications

reductions and expanded sales of high-quality products. Although

led to increased earnings despite a drop in net sales.

sales of “KURALON” for traditional uses stagnated, net sales over-Man-made leather, nonwoven fabrics and fastening materials

all held firm, due to increased sales for use as an asbestos substi-

posted total net sales of ¥33,290 million (US$314.1 million), downtute in fiber-reinforced cement. Growth in demand was also seen

6.4%, and operating income was ¥2,402 million (US$22.7 million),for the new synthetic fiber “KURALON K-II.”a fall of 48.3%. “CLARINO” man-made leather suffered declines in

As a result, net sales increased, while earnings remained flat

both sales and earnings as a result of the appreciation of the yen

compared to the previous year’s level. Meanwhile, the rayon busi-

and a falloff in sales of suede to Europe for apparel use. Sales ofness remained in the red because of a decline in demand in boththe nonwoven fabric “Kuraflex” for use as a sanitary material fell

the Japanese and overseas markets. Results of the garment busi-

due to increased competition, while sales of hook and loop fasten-ness were as expected, posting an increase in net sales over theers were stable.
In our diversified businesses, net sales were ¥40,631 million

previous year.
In the chemicals sector, net sales were ¥144,435 million(US$383.3 million), a decrease of 27.1%, and operating income(US$1,362.6 million), an increase of 1.7%, and operating income

totaled ¥3,629 million (US$34.2 million), a rise of 3.3%. In the

Operating Income & Operating
Income/Net Sales

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

28,89830,00015

300,000

282,755

27,14826,093 26,548
25,00012

250,000

233,494

7.9

7.8

8.3

200,000
8.1

15,000

9

3

0

’96

22

’97

’98

’99

’00

48.8

56.1

53.3

60

40.6
6

10,0000178,776

150,000

6.4

5,000

80

208,635

20,321
20,000100

259,90940

33.4
100,000

20

50,000

0

0

’96

’97

’98

’99

’00

medical products business, the Company’s contact lenses were

new production plant for PA9T, a new heat-resistant polyamide.

hit by severe competition from disposable contact lenses, but den-

The plant was completed in May and has an annual production

tal materials recorded increased sales. As a result, although net

capacity of 1,000 tons. In March, Kuraray completed a new plantsales declined, earnings held steady. The engineering business reg-to produce “Exceval,” a new water-soluble resin. The plant canistered a sharp decrease in sales due to the completion of the

produce 10,000 tons annually.

Singapore plant. Meanwhile, the consulting business recorded

Investments and other assets increased by ¥11,278 million

increased sales thanks to continued brisk business related to the(US$106.4 million) over the previous year’s level to ¥162,130 mil-acquisition of ISO series certifications.

lion (US$1,529.5 million). Reasons for the increase include theacquisition of investment securities.

Financial Position

Total liabilities decreased by ¥7,073 million (US$66.7 million)

Total assets at the end of the fiscal year ended March 31, 2000

to ¥220,639 million (US$2,081.5 million).

amounted to ¥503,766 million (US$4,752.5 million), an increase

Notes and accounts payable were ¥2,767 million (US$26.1 mil-of ¥15,775 million (US$148.8 million) compared to the end of thelion) higher at ¥59,351 million (US$559.9 million), in part because

previous fiscal year.

of increased purchases of raw materials.

Current assets increased by ¥5,180 million (US$48.9 million) to

Short-term bank loans and long-term debt were reduced by¥18,617 million (US$175.6 million) to ¥101,497 million (US$957.5¥213,293 million (US$2,012.2 million).
Cash and cash equivalents were ¥15,048 million(US$ 142.0
million) lower at ¥13,869 million (US$130.8 million), in part
because of investing activities including capital expenditures.

million). Reasons for the reduction include the redemption of
warrant bonds.
Accrued retirement benefits stood at ¥22,164 million

Marketable securities increased by ¥15,961 million (US$150.6(US$209.1 million), an increase of ¥9,480 million (US$89.4 mil-million) to ¥26,033 million (US$245.6 million), primarily becauselion). The increase reflects a change in its method of accountingof transfers from investment securities.

for past service liability related to the contributory pension plan.

Notes and accounts receivable were ¥750 million (US$7.1 mil-

Total shareholders’ equity increased by ¥22,846 millionlion) below the previous year’s level at ¥93,525 million (US$882.3(US$215.5 million) to ¥282,755 million (US$2,667.5 million).

million). However, inventories were ¥4,496 million (US$42.4 mil-Common stock and additional paid-in capital were ¥23,217 mil-lion) higher, at ¥75,120 million (US$708.7 million), in partlion (US$219.0 million) higher, mainly due to the exercise of war-because of the start of production at EVAL Europe N.V.

rants. Retained earnings increased by ¥4,122 million (US$38.9 mil-Property, plant and equipment declined by ¥683 millionlion). Starting in the current fiscal year, cumulative translation(US$6.4 million) to ¥128,343 million (US$1,210.8 million). Capitaladjustments of ¥4,496 million (US$42.4 million) are being deduct-

expenditures amounted to ¥19,764 million (US$186.5 million),ed from shareholders’ equity. This reflects an amendment to thewhile depreciation and amortization totaled ¥16,769 million

Japanese Securities and Exchange Law and related accounting reg-

(US$158.2 million).

ulations.

Major capital investment items included a project to expand

As a result, the shareholders’ equity ratio rose by 2.8 percent-the production capacity of thermoplastic elastomers by 7,000 tons

age points to 56.1%, and shareholders’ equity per share wasper year. Completed in July, the expansion brought total capacity¥24.32 higher at ¥738.53.

to 19,000 tons. Another key investment was the construction of a

EPS & ROE

Capital Expenditures &Retained Cash Flow

(Yen) (%)

(Millions of Yen)

15

45

35,000

40.46
35.43

30,000

36.83

34.99

28,00025,504 33,497
25,53822,511 22,894

12

20,92021,00025,000
30
9
6.4

6.1

6.3

20,80620,00017,47919,764

19,04914,000

20.00
5.3

6

15,00015
10,000

2.7

7,000

3

Capital Expenditures
5,000
Retained Cash Flow

0

0

’96

’97

’98

’99

’00

0

0

’96

’97

’98

’99

’00

Retained Cash Flow=Net income + Depreciation
and amortization - Dividends paid

23

CONSOLIDATED BALANCE SHEETS
Kuraray Co., Ltd. and Consolidated Subsidiaries

Thousands of
U.S. dollars (Note 1)

Millions of yen

2000

1999

2000

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

¥ 13,869¥ 28,917$ 130,840

Marketable securities (Note 3).................................................................

26,033

10,072245,594

Trade ....................................................................................................

89,102

89,466

840,585

Unconsolidated subsidiaries and affiliates .........................................

789

1,316

7,443

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

3,634

3,493

34,283Loans receivable to unconsolidated subsidiaries and affiliates .............

541

509

5,104

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

(696)

(844)

(6,566)

93,37093,940880,849

Inventories (Note 4) .................................................................................

75,12070,624

708,679

Deferred income taxes (Note 7)..............................................................

3,761

3,604

35,481Other current assets .................................................................................

1,140

956

10,755

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

213,293

208,1132,012,198

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

25,17625,397

237,509

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

86,21379,535

813,330

Machinery and equipment.......................................................................

351,695

332,365

3,317,877

Construction in progress..........................................................................

4,356

17,25541,095

467,440

454,552

4,409,811(339,097)(325,526)(3,199,029)

128,343

129,026

1,210,782

Investment securities (Notes 3 and 5).....................................................

80,91077,143

763,302

Investments in unconsolidated subsidiaries and affiliates .....................

2,687

2,983

25,349Unconsolidated subsidiaries and affiliates .........................................

5,345

6,040

50,425

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

1,293

1,329

12,198Deferred income taxes (Note 7)..............................................................

7,196

3,149

67,887

Cumulative translation adjustments.........................................................

—

1,518

—

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

65,98859,567

622,528

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

(1,289)(877)(12,160)

162,130

150,852

1,529,529¥503,766¥487,991$4,752,509

March 31, 2000 and 1999ASSETS
Current assets:

Notes and accounts receivable (Note 10):

Property, plant and equipment (Note 5):Less accumulated depreciation................................................................

Investments and other assets:

Loans receivable to:

See Notes to consolidated financial statements.

24

Thousands of
U.S. dollars (Note 1)

Millions of yen

2000

1999

2000

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:
Short-term bank loans (Note 5)...............................................................
Current portion of long-term debt (Note 5) ...........................................

¥

3,805

¥

5,809

$

35,896

3,467

20,38232,708Trade ....................................................................................................

51,25749,876

483,557

Unconsolidated subsidiaries and affiliates .........................................

1,149

886

10,840

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

6,945

5,822

65,519Accrued income taxes (Note 7)...............................................................

4,312

4,305

40,679Deferred income taxes (Note 7)..............................................................

21

—

198

Accrued expenses and other ...................................................................

16,63621,181

156,943

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

87,592

108,261

826,340

Long-term debt (Note 5) ..........................................................................

94,22593,923888,915

Deferred income taxes (Note 7)..............................................................

3,164

2,866

29,849Accrued retirement benefits (Note 8)......................................................

22,164

12,684

209,094

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

13,494

9,978

127,302

Total long-term liabilities ....................................................................

133,047

119,451

1,255,160

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

372

370

3,509

382,863,603 shares at March 31, 2000 ..........................................

88,955—

839,198

363,913,184 shares at March 31, 1999 ..........................................

—

78,660—Additional paid-in capital ........................................................................

87,14774,225822,142

Retained earnings .....................................................................................

111,151

107,029

1,048,594

Cumulative translation adjustments.........................................................

(4,496)—(42,415)

282,757

259,9142,667,519

Treasury stock at cost ..............................................................................

(2)

(5)

(19)

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

282,755

259,9092,667,500¥503,766¥487,991$4,752,509

Notes and accounts payable:

Long-term liabilities:

Commitments and contingencies (Note 10)

Shareholders’ equity (Note 6):
Common stock with par value of ¥50 ($0.47) per share:
Authorized — 700,000,000 shares
Issued and outstanding —25

CONSOLIDATED STATEMENTS OF INCOME
Kuraray Co., Ltd. and Consolidated Subsidiaries
Thousands of
U.S. dollars (Note 1)

Millions of yen

Years ended March 31, 2000 and 1999

Net sales ........................................................................................................
Cost of sales .................................................................................................
(Gross profit)..............................................................................................
Selling, general and administrative expenses (Note 9) ........................
(Operating income) ...................................................................................
Other income (expenses):
Interest and dividend income ...................................................................
Equity in earnings of affiliates...................................................................
Interest expenses .......................................................................................
Special provision for retirement benefits (Note 8) ..................................
Special charge for pension contribution (Note 8) ...................................
Other, net ...................................................................................................
(Income before income taxes)..................................................................
Income taxes (Note 7)
Current........................................................................................................
Deferred .....................................................................................................
Minority interests in net income of consolidated subsidiaries .......
Net income

2000

1999

¥316,444
235,603
80,841
60,52020,321¥336,466
250,195
86,271
59,12327,148$2,985,321
2,222,670
762,651
570,943
191,708

2000

3,774
83
(2,659)(9,492)—
1,350(6,944)
13,3774,464
6(3,269)—(2,182)(2,326)(3,307)
23,84135,604783(25,085)(89,547)—
12,736(65,509)126,199

9,461(3,560)5,901(24)¥7,452

10,352309
10,661(9)¥ 13,171

89,255(33,585)
55,670(227)$70,302

Yen

Net income per share:
Primary .......................................................................................................
Fully diluted ...............................................................................................

¥20.0019.42

U.S. dollars (Note 1)¥36.83
34.56

$0.19
0.18

See Notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Kuraray Co., Ltd. and Consolidated Subsidiaries

Years ended March 31, 2000 and 1999

Balance at March 31, 1998 ........................................................................
Net income.................................................................................................
Effect of change in accounting for income taxes ....................................
Conversion of convertible debentures .....................................................
Stock issued on exercise of warrants .......................................................
Cash dividends, ¥9.00 per share ...............................................................
Bonuses to directors and statutory auditors.............................................
Effect of changes in reporting entity ........................................................
Balance at March 31, 1999 ........................................................................
Net income.................................................................................................
Conversion of convertible debentures .....................................................
Stock issued on exercise of warrants .......................................................
Cash dividends, ¥9.00 per share ...............................................................
Bonuses to directors and statutory auditors.............................................
Effect of changes in reporting entity ........................................................
Cumulative translation adjustments ..........................................................
Balance at March 31, 2000 ........................................................................

Millions of yen
Commonstock

Additional
paid-in capital

Retainedearnings¥73,694¥67,932¥ 91,877
13,171
6,069

6
4,960

6
6,287

¥78,660¥74,225

114
10,181

114
12,808(3,190)(72)(826)¥107,029
7,452

Cumulativetranslation
adjustments——(3,301)(62)
33¥88,955¥87,147¥111,151(4,496)(¥4,496)

Thousands of U.S. dollars (Note 1)

Balance at March 31, 1999 .......................................................................
Net income.................................................................................................
Conversion of convertible debentures .....................................................
Stock issued on exercise of warrants .......................................................
Cash dividends, $0.08 per share ...............................................................
Bonuses to directors and statutory auditors.............................................
Effect of changes in reporting entity ........................................................
Cumulative translation adjustments ..........................................................
Balance at March 31, 2000 ........................................................................
26

See Notes to consolidated financial statements.

$742,075$700,236

1,076
96,047

1,076
120,830$1,009,708
70,302—(31,142)(585)
311$839,198$822,142$1,048,594(42,415)($42,415)

CONSOLIDATED STATEMENTS OF CASH FLOWS
Kuraray Co., Ltd. and Consolidated Subsidiaries

Thousands of
U.S. dollars (Note 1)

Millions of yen

2000

1999

2000

¥ 7,452¥13,171$ 70,302

Depreciation and amortization .................................................................

16,76915,557

158,198

Write-down of investment securities........................................................

—

130

—

Years ended March 31, 2000 and 1999

Cash flows from operating activities:
Net income .....................................................................................................
Adjustments to reconcile net income to net cash provided
by operating activities –Provision for accrued retirement benefits, net of payment ....................

9,488

1,097

89,509Gain on sales of properties.......................................................................

(948)(1,512)(8,943)Gain on sales of investment securities.....................................................

(2,191)—(20,670)

Exchange loss on loans receivable to subsidiaries..................................

2,559

—

24,142(Increase) decrease in notes and accounts receivable............................

(143)

4,979

(1,349)(Increase) decrease in inventories............................................................

(6,203)

5,119(58,519)

Increase (decrease) in notes and accounts payable................................

2,686(9,591)

25,340

Other, net...................................................................................................

(4,403)(15,406)(41,538)

Net cash provided by operating activities ................................

25,066

13,544

236,472(Increase) decrease in marketable securities ...........................................

(2,498)

7,656(23,566)

Acquisitions of property, plant and equipment.......................................

(19,980)(33,497)(188,491)

Cash flows from investing activities:

Proceeds from sales of properties ............................................................

1,443

3,353

13,613

Payment for purchases of investment securities......................................

(29,327)(21,695)(276,670)

Proceeds from sales of investment securities ..........................................

13,474

12,901

127,113

Other, net...................................................................................................

(5,864)(1,949)(55,320)

Net cash used in investing activities ..........................................

(42,752)(33,231)(403,321)(Decrease) increase in short-term bank loans .........................................

(594)

198

(5,604)

Proceeds from long-term debt..................................................................

7,028

31,77966,302

Repayments of long-term debt .................................................................

(20,457)(16,113)(192,991)

Proceeds from exercise of warrants .........................................................

20,364

9,922

192,113

Dividends paid ..........................................................................................

(3,301)(3,190)(31,141)

Other, net...................................................................................................

—(6,275)—

Net cash provided by financing activities .................................

3,040

16,321

28,679Effect of exchange rate changes on cash & cash equivalents ...........

(553)

(182)

(5,217)

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

151

1,363

1,425

Net decrease in cash and cash equivalents ...........................................

(15,048)(2,185)(141,962)

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

28,917

31,102272,802

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

¥13,869¥28,917$130,840

Cash flows from financing activities:

See Notes to consolidated financial statements.

27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Kuraray Co., Ltd. and Consolidated Subsidiaries

Years ended March 31, 2000 and 1999

1. Basis of presenting consolidated financial statements
These consolidated financial statements are prepared in accordance withthe provisions set forth in the Japanese Securities and Exchange Law andthe related accounting regulations and in conformity with accounting
principles and practices generally accepted in Japan, which are different
in certain respects to the application and disclosure requirements ofInternational Accounting Standards.
In preparing these consolidated financial statements, certain reclassifications have been made to the consolidated financial statements issued
domestically in order to present them in a form which is more familiar toreaders outside Japan. In addition, certain notes included herein are notrequired under accounting principles and practices generally accepted inJapan but are presented as additional information.
The United States dollar amounts included herein are given solely forconvenience and are stated, as a matter of arithmetical computation only,at the rate of ¥106=$1, the approximate exchange rate prevailing on
March 31, 2000. The translations should not be construed as representations that the Japanese yen amounts have been, could have been or
could in the future be, converted into United States dollars at that or any
other rate.

2. Significant accounting policies:(a) Principles of consolidation
These consolidated financial statements include the accounts of KurarayCo., Ltd. (the “Company”) and its significant subsidiaries (Collectively, the“Companies”). During the year ended March 31, 2000, the accounts ofKuraray Specialities Asia Pte., Ltd., Kuraray Finance & Accounting Co.,
Ltd., and nine other companies have been included in consolidation,
because their effect to consolidated financial statements has becomematerial.
In the case of a change in reporting entity, the consolidated financial
statements are not restated, but the effect of the change to retained earnings at the beginning of period is directly charged or credited to retained
earnings during the period.
Investments in unconsolidated subsidiaries and 20%-50% owned
companies(“affiliates”),with minor exception, are accounted for using theequity method.
The difference between the cost of investments and underlying net
equity of investments in consolidated subsidiaries and affiliates accounted for on an equity basis is allocated to identifiable assets based on theirfair values at the date of acquisition. The unallocated cost is being
deferred and amortized over the estimated period of sustainability ofexcess earnings to conform with an amendment to the Japanese
Securities and Exchange Law and related accounting regulations effective
April 1, 1999. Previously the unallocated cost was amortized principallyover five years. The effect of this change is immaterial.

(b) Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments with original maturities of three months or less, which can be withdrawn at leastat face amount at any time without penalty. The Companies changed thescope of cash equivalents to conform with an amendment to theJapanese Securities and Exchange Law and related accounting regulations
effective April 1, 1999. Previously the Companies classified as cash equivalents all time deposits with original maturities of one year or less. The
effect of this change is immaterial.

(c) Inventories
Inventories other than supplies are stated at cost principally determinedusing the weighted average method. Supplies are stated at cost principally determined using the moving average method.

(d) Property, plant and equipment

28

Property, plant and equipment are stated at cost.
Depreciation is principally computed using the declining-balancemethod over estimated useful lives of assets, except for buildings. During
the year ended March 31, 1999 the depreciation method for buildings
was principally changed from the declining balance method to thestraight-line method and the estimated useful lives of buildings wereprincipally reduced from “35 to 65” years to “31 to 50” years. The effectof these changes is immaterial.
Estimated useful lives of assets are principally as follows:
Buildings
31 to 50 years
Machinery and equipment
2 to 10 years
The Companies use machinery and facilities under financing leases
without transferring ownership and such leased assets are not capitalized
in the balance sheet in conformity with accounting principles generally
accepted in Japan.

(e) Marketable securities and investment securities
Marketable securities and investment securities are principally stated atcost, determined using the moving average method for each particular
security.

(f) Income taxes
Accrued income taxes are provided at the amount currently payable.
Interperiod income tax allocation accounting is adopted using the assets
and liabilities method in which deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences
between the tax bases of assets and liabilities and their reported amounts
in the consolidated financial statements.

(g) Retirement benefits
Most of the Companies have unfunded lump-sum benefit plans and funded contributory pension plans, generally covering all employees.
Under the terms of the Companies’ retirement plans, substantially all
employees are entitled to a lump-sum payment at the time of retirement.
The amount of the retirement benefits is, in general, based on the lengthof service, basic salary at the time of retirement, and cause of retirement.
The liability for lump-sum payments is principally stated at 68% based on
the latest actuarial computation of the amount which would be required
if all eligible employees voluntarily retired as of the balance sheet date.
The contributory pension plans of the Company and its domestic
subsidiaries, which cover those employees who retire at age principally
60, or have served with those companies for more than 20 years andretire at age 50 or more, generally provide for pension payments for aperiod of ten years subsequent to retirement.
The annual charge for current service cost of these plans is determined actuarially and funded currently through outside trustee.
During the year ended March 31, 2000, the Company changed its
method of accounting for past service liability related to the contributory
pension plan. Previously, past service liability was charged to income
when contributed. Under the new method, it is charged when incurredand is recorded as provision for past service liability which is included in“Accrued retirement benefits.” The Company believes that the new
method will reflect more appropriately its financial results by allocating
cost of past service liability and enhance its financial position in thefinancial statements. This change in accounting method resulted inrecording of a “Special provision for retirement benefits” in the amountof ¥9,492 million ($89,547 thousand) and reduced net income by ¥5,297
million ($49,972 thousand). The consolidated financial statements in 1999
are not restated retroactively in accordance with accounting practices followed in Japan.
Directors and statutory auditors are entitled, subject to shareholders’approval, to lump-sum payments under the unfunded retirement plan.
The accrued liabilities for their retirement benefits are, in general, based
upon the amounts which would be required by the Companies’ internal
regulation.

(h) Foreign currency items
Foreign currency items are translated into Japanese yen at the rates in
effect at the balance sheet date for short-term assets and liabilities and at
the rates when acquired or incurred for long-term assets and liabilities.
When the historical exchange rates differ significantly from the rates in
effect at the balance sheet date, the rates in effect at the balance sheet
date are used to translate the long-term assets and liabilities. Income andexpenses in foreign currency are translated into Japanese yen at
exchange rates prevailing at the transaction dates.
Foreign currency items, which are covered by forward exchange
contracts including currency swap contracts, are translated into Japanese
yen at the contracted rates.
Resulting exchange differences are charged or credited to income as
incurred, except for exchange differences resulting from the translation of
non-current payables and receivables in foreign currency hedged bylong-term forward exchange contracts including currency swap contracts
which are deferred and amortized over the period until the year of maturity of the payables and receivables.
In preparing the consolidated financial statements, assets and liabilities of foreign subsidiaries are translated into Japanese yen at the rates in

effect at the balance sheet date and income and expenses are translated
at the monthly average rate for the year then ended.
Translation adjustments resulting from this process are charged or
credited to “Shareholders’ equity” as cumulative translation adjustments
in consolidated balance sheets to conform with an amendment to theJapanese Securities and Exchange Law and related accounting regulations
effective April 1, 1999. Previously they were included in assets or liabilities. The consolidated financial statements in 1999 are not restatedretroactively in accordance with accounting practices followed in Japan.

(i) Research and development expenses
Total research and development expenses for the years ended March 31,
2000 and 1999 amounted to ¥12,097 million ($114,123 thousand) and¥13,429 million, respectively.

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

(k) Allowance for doubtful accounts
Allowance for doubtful accounts, principally at management’s estimate ofprobable bad debts, has in some years exceeded the maximum amountpermitted to be charged to income under Japanese tax regulations. Whenthese amounts are reversed into income, then, to that extent, they may
be deducted from taxable income for that year.

(l) Reclassifications
Certain reclassifications of previously reported amounts have been madeto conform with current classifications.

3. Market value information for securities:
At March 31, 2000 and 1999, book value and market value of marketable securities and investment securities, as to which market value information isavailable to obtain, were as follows:
Thousands of
U.S. dollars

Millions of yen

2000
Book
Value

Marketable securities
Stocks ................................................................................ ¥ 537
Bonds ................................................................................
4,339
Investment securities
Stocks ................................................................................ 18,956
Bonds ................................................................................ 27,434¥51,266

1999
Market
Value

2000

Book
Value

Market
Value

Book
Value

MarketValue¥ 1,333
4,309

¥

419
4,542

¥ 1,847
4,569

$

5,066
40,934$ 12,575
40,651

36,701
27,663¥70,006

21,182
27,477¥53,620

37,341
27,558¥71,315

178,830
258,812$483,642

346,236
260,972$660,434

4. Inventories:
Inventories at March 31, 2000 and 1999 consisted of the following:
Millions of yen

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

2000¥51,950
12,531
10,639¥75,120

1999¥47,367
12,867
10,390¥70,624

Thousands of
U.S. dollars

2000$490,094
118,217
100,368$708,679

29

5. Short-term bank loans and long-term debt:
Short-term bank loans are generally represented by 365-day notes with interest rates principally of 1.3% p.a. and 0.98% p.a. at March 31, 2000 and 1999,
respectively. Long-term debt consisted of the following:Thousands of
U.S. dollars

Millions of yen

2000
Loans principally from banks and insurance companies with interest rates
ranging from 0.669% p.a. to 6.405% p.a. maturing serially until 2022:
Secured ............................................................................................................................
Unsecured........................................................................................................................
1.8% yen unsecured bonds due 2003..................................................................................
1.8% yen unsecured bonds due 2003..................................................................................
1.8% yen convertible sinking fund debentures due 2003 ..................................................
1.0% yen convertible debentures due 2003 ........................................................................
2.2% yen convertible debentures due 2002 ........................................................................
2 5/8% United States dollar bonds due 1999 with detachable warrants ...........................
Floating to fixed rate yen Euro medium term notes due March 5, 2004 ..........................
Floating to fixed rate yen Euro medium term notes due March 4, 2003 ..........................
2.27% yen Euro medium term notes due January 30, 2004 ...............................................
2.02% yen Euro medium term notes due March 26, 2003 .................................................
2.00% yen Euro medium term notes due February 7, 2003...............................................
Fixed and floating rate yen Euro medium term notes due March 27, 2002......................
Step-up rate yen Euro medium term notes due April 10, 2007 .........................................
Floating rate yen Euro medium term notes due April 22, 2002.........................................
Floating rate yen Euro medium term notes due April 25, 2002.........................................
Step-up rate yen Euro medium term notes due June 11, 2007..........................................
Floating to fixed rate yen Euro medium term notes due June 18, 2004 ...........................
Floating rate yen Euro medium term notes due June 24, 2002 .........................................
Floating rate yen Euro medium term notes due June 25, 2002 .........................................
Current portion .....................................................................................................................

The 1.8% yen convertible sinking fund debentures due March 31,
2003, which were issued in Japan in November 1987, can be purchased
at any time in their entirety at the option of the Company or may beredeemed, at prices declining from 106% to 100% of their principal
amount from April 1, 1996 until 2003. The debentures are convertible
into common stock of the Company until March 28, 2003 at the conversion price of ¥1,703.4 ($16.07) per share.
The 1.0% yen convertible debentures due March 31, 2003, whichwere issued in Japan in January 1994, can be purchased at any time intheir entirety at the option of the Company or may be redeemed, atprices declining from 103% to 100% of their principal amount from April
1, 1999 until 2003. The debentures are convertible into common stock of
the Company until March 28, 2003 at the conversion price of ¥1,067.3($10.07) per share.
The 2.2% yen convertible debentures due March 29, 2002, whichwere issued in Japan in February 1995, can be purchased at any time intheir entirety at the option of the Company or may be redeemed, atprices declining from 102% to 100% of their principal amount from April
1, 1999 until 2002. The debentures are convertible into common stock of
the Company until March 28, 2002 at the conversion price of ¥1,036.0($9.77) per share.
For the 1.8% yen convertible sinking fund debentures, the Company
is required to contribute to a sinking fund, which amount is reduced by
the amount of debentures converted or redeemed, ¥1,500 million($14,151 thousand) on every March 31 for the consecutive 6 years ending

30

¥
60
20,87915,0005,000
13,957
9,423
14,873
—
3,000
3,000
500
1,000
2,000
1,000
500
500
1,000
600
3,000
2,000
400
97,692(3,467)¥94,225

1999

¥

298
19,91615,0005,000
13,957
9,551
14,973
17,110
3,000
3,000
500
1,000
2,000
1,000
500
500
1,000
600
3,000
2,000
400
114,305(20,382)¥93,923

2000

$

566
196,972
141,50947,170131,670
88,896140,311—28,30228,302
4,717
9,434
18,868
9,434
4,717
4,717
9,434
5,660
28,302
18,868
3,774
921,623(32,708)$888,915

March 31, 2002. At March 31, 2000, investment securities with a net bookvalue of ¥7,245 million ($68,349 thousand), of which market value
approximates the amount of sinking fund requirements were deposited
with a designated bank instead of the sinking fund payment.
The indentures under which the 1.8% yen convertible sinking funddebentures due 2003 were issued place a limitation on the payment ofcash dividends, which relates, in part, to earnings of the Company. At
March 31, 2000, the amount of retained earnings available for the payment of dividends was ¥115,329 million ($1,088,009 thousand) undersuch provision of the indentures.
The indentures under which the 1.0% yen convertible debenturesdue 2003 were issued place a limitation on the payment of cash dividends, which relates, in part, to earnings of the Company. At March 31,
2000, the amount of retained earnings available for the payment of dividends was ¥80,687 million ($761,198 thousand) under such provision of
the indentures.
The indentures under which the 2.2% yen convertible debenturesdue 2002 were issued place a limitation on the payment of cash dividends, which relates, in part, to earnings of the Company. At March 31,
2000, the amount of retained earnings available for the payment of dividends was ¥81,287 million ($766,858 thousand) under such provision of
the indentures.
The conversion prices of the above sinking fund debentures anddebentures are subject to adjustment under certain circumstances, including stock splits pursuant to the relevant agreements.

The number of shares of common stock required for conversion of
the above sinking fund debentures and debentures outstanding at March
31, 2000 at the current conversion prices would have been 31,386 thousand.
The rates of floating to fixed rate yen Euro medium term notes due
March 5, 2004, are as follows:
January 20, 1997 ~ March 4, 1997
Interpolated JPY LIBOR + 0.125%
March 5, 1997 ~ March 4, 2001
6 month JPY LIBOR + 0.2%
March 5, 2001 ~ Due date
3.70% per annum
The rates of floating to fixed rate yen Euro medium term notes due
March 4, 2003, are as follows:
January 23, 1997 ~ March 3, 1997
Interpolated JPY LIBOR – 0.15%
March 4, 1997 ~ Due date
2.00% per annum
The rates of fixed and floating rate yen Euro medium term notes due
March 27, 2002, are as follows:
February 10, 1997 ~ March 26, 1997
1.00%
March 27, 1997 ~ March 26, 1998
4.85% –10 YEAR JPY SWAP RATE (Not less than 0%)
March 27, 1998 ~ March 26, 1999
4.85% –10 YEAR JPY SWAP RATE (Not less than 0%)
March 27, 1999 ~ March 26, 2000
4.85% –7 YEAR JPY SWAP RATE (Not less than 0%)
March 27, 2000 ~ March 26, 2001
4.85% –5 YEAR JPY SWAP RATE (Not less than 0%)
March 27, 2001 ~ Due date
4.85% –3 YEAR JPY SWAP RATE (Not less than 0%)
The rates of step-up rate yen Euro medium term notes due April 10,
2007, are as follows:
February 25, 1997 ~ April 9, 2002
2.50% per annum
April 10, 2002 ~ Due date
3.00% per annum
The rates of floating rate yen Euro medium term notes due April 22,
2002, are as follows:
March 10, 1997 ~ April 21, 1997
1 month JPY LIBOR + 0.40%
April 22, 1997 ~ Due date
6 month JPY LIBOR + 0.40%
The rates of floating rate yen Euro medium term notes due April 25,
2002, are as follows:
March 13, 1997 ~ April 24, 1997
1 month JPY LIBOR + 0.41%
April 25, 1997 ~ Due date
6 month JPY LIBOR + 0.41%
The rates of step-up rate yen Euro medium term notes due June 11,2007, are as follows:
April 24, 1997 ~ June 10, 2002
2.20% per annum
June 11, 2002 ~ Due date
2.80% per annum

The rates of floating to fixed rate yen Euro medium term notes due June18, 2004, are as follows:
May 2, 1997 ~ June 17, 1997
Interpolated JPY LIBOR + 0.125%
June 18, 1997 ~ June 17, 2002
6 month JPY LIBOR + 0.20%
June 18, 2002 ~ Due date
2.80% per annum
The rates of floating rate yen Euro medium term notes due June 24,
2002, are as follows:
May 9, 1997 ~ June 23, 1997
2 month JPY LIBOR + 0.50%
June 24, 1997 ~ Due date
6 month JPY LIBOR + 0.50%
The rates of floating rate yen Euro medium term notes due June 25,
2002, are as follows:
May 14, 1997 ~ June 24, 1997
Interpolated JPY LIBOR + 0.30%
June 25, 1997 ~ Due date
3 month JPY LIBOR + 0.30%

The annual maturities of long-term debt outstanding at March 31,
2000 for the respective years ending March 31 were as follows:2001 .........................................
2002 .........................................
2003 .........................................
2004 .........................................
2005 .........................................
Thereafter................................

Millions of yen

Thousands of U.S. dollars¥ 3,467
19,52535,78026,605
5,104
7,211¥97,692$ 32,708
184,198
337,547
250,991
48,151
68,028$921,623

At March 31, 2000, assets pledged as collateral for short-term bank loans
and long-term debt were as follows:

Property, plant and equipment,
net of accumulated depreciation............
Investment securities .................................

Millionsof yenThousands
U.S. dollars

¥ 75
100
¥175

$ 708
943
$1,651

6. Shareholders’ equity:
The Japanese Commercial Code provides that a portion of retained earnings equal to at least 10% of cash distributions being paid out by meansof appropriation for retained earnings with respect to each financial period be appropriated as a legal reserve until such reserve equals 25% of
the common stock account.
This reserve is not available for dividends but may be capitalized byresolution of the Board of Directors or used to reduce a deficit by resolution of the shareholders. The legal reserve as of March 31, 2000 amounted to ¥6,041 million ($56,991 thousand).
Under the Code, at least 50% of the issue price of new shares, with aminimum of the par value thereof, is required to be accounted for as common stock. The remainder is accounted to additional paid-in capital.

31

7. Income taxes:
The companies are subject to several taxes based on income which, inthe aggregate, resulted in a normal cumulative tax rate of approximately
41.7%(47.3% for 1999) in Japan for the period ended March 31, 2000.
Reconciliation of the difference between normal cumulative tax rateand income tax rate in the accompanying consolidated statement ofincome is as follows:
Normal cumulative tax rate ....................................

2000
41.7%

1999
47.3%

Largely loss by a foreign consolidated subsidiary....
Difference of tax rates between Japan and foreign countries .....
Other .................................................................
Income tax rate per statement of income..............

2.4
––
––
44.1%

––
(1.5)
(1.1)
44.7%

The significant components of deferred tax assets and liabilities at March
31, 2000 are as follows:(1) Current:
Thousands of
U.S. dollars

Millions of yen

2000
Deferred tax assets
Intercompany profits .................. ¥1,397
Accrued enterprise taxes
and other taxes.........................
576
Accrued expenses.......................
826
Other ........................................... 1,032
Total deferred tax assets ............ 3,831
Total deferred tax liabilities .......
70
Net deferred tax assets..................... ¥3,761
Deferred tax liabilities
Other ...........................................
Net deffered tax liabilities................

¥21
¥21

1999

2000

¥1,353$13,180

541
336
1,443
3,673
69
¥3,604

5,434
7,792
9,736
36,142661$35,481

¥
¥

$
$

––
––

(2) Noncurrent:
Thousands of
U.S. dollars

Millions of yen

2000
Deferred tax assets
Accrued retirement benefits ....... ¥6,792
Other ........................................... 1,858
Total deferred tax assets ............ ¥8,650

1999

2000

¥2,971
1,547¥4,518$64,076
17,528$81,604

Deferred tax liabilities
Deferred gain on sales of fixed
assets to public sector..............
896
Special depreciation ...................
248
Other ...........................................
310
Total deferred tax liabilities ....... 1,454
Net deferred tax assets..................... ¥7,196

587
285
497
1,369
¥3,149

8,453
2,340
2,924
13,717$67,887

Deferred tax liabilities
Depreciation ............................... ¥3,164
Net deferred tax liabilities ............... ¥3,164¥2,866¥2,866$29,849$29,849

Deferred tax assets and liabilities of the consolidated subsidiaries in different tax jurisdictions are presented without offsetting each other inaccordance with the Japanese accounting practice.

198
198

8. Retirement benefits:
The charges to consolidated income for retirement and pension plans forthe year ended March 31, 2000 amounted to ¥12,589 million ($118.764
thousands), which included special provision for retirement benefits of
the Company of ¥9,492 million ($89,547 thousand), whereas the charges
for the year ended March 31, 1999 amounted to ¥5,735 million, which

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

Account
2000
Freight and storage .......................... ¥12,574
Research and development ............. 10,806
Salaries and bonuses........................ 16,990

32

1999
¥12,677
12,176
16,096

Thousands of
U.S. dollars

2000$118,623
101,943
160,283

included a special charge for the pension contribution of the Company inthe amount of ¥2,182 million.
The actuarial value of plan assets under the Companies’ contributory
funded pension plans amounted to ¥16,704 million ($157,585 thousand)as of the most recent valuation dates.

10. Commitments and contingencies:
The Companies were contingently liable with respect to discounted tradenotes receivable. The amounts of notes discounted with recourse atbanks at March 31, 2000 and 1999 were ¥16 million ($151 thousand) and¥14 million, respectively.
The Companies were contingently liable for guarantees, mainly forbank loans of unconsolidated subsidiaries, affiliates, and others, of ¥944
million ($8,906 thousand) and ¥921 million at March 31, 2000 and 1999,
respectively.
The amount of guarantees includes that of letters of commitments ofguarantees, letters of awareness, and other similar acts.

11. Lease:(a) Financing Lease
Lease transactions as lessee:
Payments of fee for financing leases without transferring ownership ofleased assets to lessee for the years ended March 31, 2000 and 1999,
which are not required to be capitalized, were ¥533 million ($5,028 thousand) and ¥474 million, respectively.
The future lease payments, including amounts representing interest are
as follows:
Thousands of
U.S. dollars

Millions of yen

2000
Due within one year ........................ ¥ 485
Due later...........................................
623¥1,108

1999
¥ 478
749
¥1,2272000$ 4,576
5,877$10,453

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

Millions of yen

Years ended March 31, 2000

Cost

Machinery and equipment.... ¥2,334
Other......................................
5¥2,339

Accumulated
depreciation

Net

Net

¥1,226
5¥1,231¥1,1080¥1,108$10,453
0$10,453

Millions of yen

Years ended March 31, 1999

Cost

Machinery and equipment .. ¥2,284
Other......................................
5¥2,289

Accumulated
depreciation

Net¥1,0584¥1,062¥1,226
1¥1,227

Lease transaction as lessor is immaterial.

(b) Operating Lease
The future lease payments under noncancellable operating leases are as
follows:
Millions of yen

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

2000
¥ 71
48
¥119

1999
¥132
132
¥264

Thousands of
U.S. dollars

2000
$ 670
453
$1,123

12. Derivative Financial Instruments:
The Companies use various financial instruments with off-balance sheet
market risk to manage their interest rate and foreign currency exchange
rate risks.
The forward foreign currency contracts reduce the Companies‘ risk
due to exchange because gains and losses on these contracts generally
offset losses and gains on the assets, liabilities and transactions being
hedged. The fair values of foreign currency forward contracts are estimated using quotes from banks as of March 31, 2000.
Interest rate swap agreements require payments to be calculated
based upon a notional principal amount. Fair values of these contracts
are estimated using obtaining quotes from banks as of March 31, 2000.
At March 31, 2000, the information related to the above financial
instruments was as follows:

Fair Value
Forward foreign exchange
contracts:
foreign currency salesforeign currency purchases
Interest rate swaps

Millions of yen
Net Unrealized
Gain (loss)

Thousands of U.S. dollars
Net Unrealized Contract orFair Value
Gain (loss)
Notional
Forward foreign exchange
contracts:
foreign currency sales$16,651
foreign currency purchases
8,141

($19)
(38)

$16,632
8,179

Interest rate swaps(962)

611,585(962)

Derivative Financial Instruments as of March 31, 2000 are disclosed
to conform with Japanese Securities and Exchange Law and related
accounting regulations, which are applicable to the Company for fiscal
years beginning on and after April 1, 1999.

Contract or
Notional¥1,765
863

(¥2)
(4)

¥1,763
867

(102)

(102)

64,82833

13. Segment information:
The Companies operate principally within four industrial segments: fibers and textiles; chemical products; man-made leather, nonwoven fabrics and fastening materials; diversified businesses.
A summary of net sales and operating income and identifiable assets, capital expenditures and depreciation and amortization by industrial segments
for the years ended March 31, 2000 and 1999 are as follows:
Net sales and Operating income

Year ended March 31, 2000
Fibers and textiles ....................................
Chemical products ...................................
Man-made leather, nonwoven
fabrics and fastening materials..............
Diversified businesses..............................
Total.....................................................
Elimination................................................
Consolidated total ...............................
Year ended March 31, 1999
Fibers and textiles ....................................
Chemical products ...................................
Man-made leather, nonwoven
fabrics and fastening materials..............
Diversified businesses..............................
Total.....................................................
Elimination................................................
Consolidated total ...............................

Millions of yen
Net sales tooutside customers

Net sales tointersegment¥ 98,088
144,435

Thousands of U.S. dollars

Net sales

OperatingincomeNet sales tooutside customers

Net sales tointersegment

Net sales

Operatingincome¥ 1,817
2,592¥ 99,905
147,027¥ 2,769
12,160$ 925,358
1,362,595$ 17,142 $ 942,500
24,452
1,387,047$ 26,123
114,717

33,29040,631
316,444—¥316,444

338
18,63623,383(23,383)¥—

33,62859,267
339,827(23,383)¥316,444

2,402
3,629
20,960(639)¥20,321314,057
383,3112,985,321—$2,985,321

3,189
317,246
175,811559,122
220,594
3,205,915(220,594)(220,594)$— $2,985,321

22,66034,236
197,736(6,028)$191,708¥103,120
142,071¥ 1,591
1,774¥104,711
143,845¥ 2,686
16,50135,55755,718336,466—¥336,466

421
16,874
20,660(20,660)¥—

35,97872,592
357,126(20,660)¥336,466

4,650
3,512
27,349(201)¥27,148

Identifiable assets, Capital expenditures and Depreciation and amortization
Millions of yen
Identifiable
assetsIdentifiable
assetsCapitalexpenditures

Depreciation andamortization¥ 3,406
9,327$ 740,670
1,387,557$ 27,972
89,896$ 32,132
87,991

1,524
5,746
19,764—¥19,764

2,503
1,533
16,769—¥16,769

347,453
549,792
3,025,472
1,727,037$4,752,509

14,37754,208
186,453—$186,453

23,613
14,462
158,198—$158,198¥ 80,160
151,143¥ 3,919
22,812¥ 3,833
8,212

35,73951,665
318,707169,284¥487,991

4,525
2,241
33,497—¥33,497

2,178
1,334
15,557—¥15,557

Year ended March 31, 2000
Fibers and textiles ........................................... ¥ 78,511
Chemical products .......................................... 147,081
Man-made leather, nonwoven
fabrics and fastening materials.....................
36,830
Diversified businesses.....................................
58,278
Total ........................................................... 320,700
Elimination and corporate .............................. 183,066
Consolidated total...................................... ¥503,766
Year ended March 31, 1999
Fibers and textiles ...........................................
Chemical products ..........................................
Man-made leather, nonwoven
fabrics and fastening materials.....................
Diversified businesses.....................................
Total ...........................................................
Elimination and corporate ..............................
Consolidated total......................................

34

Thousands of U.S. dollars

Capitalexpenditures

Depreciation andamortization¥ 2,965
9,529

A summary of net sales, operating income and identifiable assets by geographic segments for the years ended March 31, 2000 and 1999 are as
follows:
Millions of yen
Net sales tooutside customers

Net sales tointersegment

Net sales

OperatingincomeIdentifiable
assetsYear ended March 31, 2000
Domestic (inside Japan) ................................................
Outside Japan.................................................................
Total .....................................................................
Elimination and corporate .............................................
Consolidated total ...............................................

¥283,491
32,953
316,444—¥316,444¥20,436
3,818
24,254(24,254)¥—¥303,927
36,771
340,698(24,254)¥316,444¥17,862
2,580
20,442(121)¥20,321¥276,542
47,462
324,004
179,762¥503,766

Year ended March 31, 1999
Domestic (inside Japan) ................................................
Outside Japan.................................................................
Total .....................................................................
Elimination and corporate .............................................
Consolidated total ...............................................

¥309,182
27,284
336,466—¥336,466¥17,920
4,104
22,024(22,024)¥—¥327,102
31,388358,490(22,024)¥336,466¥22,467
5,121
27,588(440)¥27,148¥273,939
48,699322,638
165,353¥487,991

Net sales tooutside customers

Net sales tointersegment

Net sales

OperatingincomeIdentifiable
assets$192,792
36,019228,811(228,811)$—$2,867,236
346,8963,214,132(228,811)$2,985,321$168,509
24,341
192,850(1,142)$191,708$2,608,887
447,755
3,056,642
1,695,867$4,752,509

Thousands of U.S. dollars

Year ended March 31, 2000
Domestic (inside Japan) ................................................ $2,674,444
Outside Japan.................................................................
310,877
Total .....................................................................
2,985,321
Elimination and corporate .............................................
—
Consolidated total ............................................... $2,985,321

Foreign sales consisting of export sales of the Company and its domestic consolidated subsidiaries and the sales of foreign consolidated subsidiaries
for the years ended March 31, 2000 and 1999 totaled ¥82,192 million ($775,396 thousand) and ¥93,486 million, respectively, and accounted for 26% and
28% of consolidated net sales, respectively.

14. Subsequent event:(a) The Japanese Commercial Code provides that all appropriations ofretained earnings, except interim cash dividends, must be approved atan ordinary general meeting of shareholders. In accordance with customary practice in Japan, the appropriation of retained earnings is not
accrued in the financial statements for the year to which it relates but
is recorded in the subsequent accounting year after shareholder
approval has been obtained. The following appropriations of retained
earnings of the Company as of March 31, 2000 were approved by theshareholders on June 29, 2000.

Cash dividends, ¥4.50 ($0.04)
per share
Transfer to legal reserve
Bonuses to directors andstatutory auditors

Millionsof yenThousands of
U.S. dollars¥1,723
179$16,255
1,689

60

566

(b) The Company resolved to withdraw from Rayon business during theyear ending March 31, 2001 at the Board of Directors’ meeting heldon May 22, 2000.

The above year-end cash dividends per share and the interim cash
dividends of ¥4.50 ($0.04) per share paid in December 1999 aggregated the annual cash dividends of ¥9.00 ($0.08) per share.

35

REPORT OF INDEPENDENT ACCOUNTANTS
Kuraray Co., Ltd. and Consolidated Subsidiaries

PricewaterhouseCoopers

June 29, 2000

Osaka Center Building
1-3 Kyutaro-machi 4-chome
Chuo-ku, Osaka 541-0056

To the Board of Directors and Shareholders of Kuraray Co., Ltd.
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of shareholders’ equity
and of cash flows present fairly, in all material respects, the financial position of Kuraray Co., Ltd. and its consolidated subsidiaries at
March 31,2000 and the results of their operations and their cash flows for the year then ended in conformity with accounting principles
generally accepted in Japan. These financial statements are the responsibility of the Company's management. Our responsibility is toexpress an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance withauditing standards generally accepted in Japan which require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonablebasis for the opinion expressed above.
As discussed in Notes 2(g) and (h) to the financial statements, the Company changed its amortization method for past service liability
related to the contributory pension plan and the method of accounting for foreign translation adjustments during the year ended March 31,
2000.
The amounts expressed in U.S. dollars, provided solely for the convenience of reader, have been translated on the basis set forth in Note
1 to the accompanying financial statements.

Osaka, JapanTo the Board of Directors and Shareholders of Kuraray Co., Ltd.
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of shareholders’ equity
and of cash flows present fairly, in all material respects, the financial position of Kuraray Co., Ltd. and its consolidated subsidiaries at
March 31, 1999 and the results of their operations and their cash flows for the year then ended in conformity with accounting principles
generally accepted in Japan. These financial statements are the responsibility of the Company’s management; our responsibility is toexpress an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance withgenerally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 2 to the financial statements, the Company changed its method of depreciation during the year ended March 31,
1999.

Kohyoh & Co.
(Certified Public Accountants)
Osaka, Japan/ June 29, 1999

Price Waterhouse(Certified Public Accountants)

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

36Organization and Board of Directors
Organization (As of June 2000)■ Office of Investor Relations
Public Relations and Advertising Department
Finance Department
Accounting Department
General Affairs Department
Legal Department
Intellectual Property Rights Department
Personnel Department■ Chairman■ Purchasing and Logistics Division■ President■ Environment and Technology Division
Technology Development Center
Environmental, Industrial Safety andQuality Management Department■ Research and Development Division
Kurashiki Research Laboratories
Tsukuba Research Laboratories
Analytical Research Center■ Office of Internal Auditors■ Office of Corporate
Administration and Planning■ Office of Secretariat■ Executive Committee
Philanthropy and Ecology
Committee
In-house Ethics Committee■ Administration Committee■ Board of Factory Managers■ Board of Subsidiary Company
Presidents■ Corporate Auditors /Board of Corporate Auditors■ New Business Development Division■ Fiber and Textile Operations
Administration■ Textile Division■ Industrial and Home FurnishingMaterials Division■ Living Goods and Materials Division■ Office of Administration■ Chemicals Operation
Administration I■ Poval Division■ EVAL Division■ Clarino Division■ Medical Products Division■ Office of Administration■ Chemicals Operation
Administration II■ Methacrylate Division■ OPT Division■ Chemicals Division■ Fine Chemicals Division■ Office of Administration■ Tokyo Head Office■ Kurashiki Plant■ Saijo Plant■ Okayama Plant■ Nakajo Plant■ Tamashima Plant■ Kashima Plant
Branch Offices

Directors and Corporate Auditors (As of June 2000)
Representative Director and Chairman

Managing Directors

Directors

Corporate Auditors

Hiroto Matsuo

Koichi Kushida
Masayuki Hayashi
Akira Matsuzawa
Masahiro Kaihara
Tsutomu Yabuta

Tatsuya Nakano
Shinsaku Oda
Shobu Minatono
Katsuhiko Kishi
Yosuke Sekiya
Katsumi Ohashi
Tetsuzo Kimura
Satoru Mizushima
Junsuke Tanaka
Seiji Wajiki
Koichi Kikuchi

Jun Inoue
Taiji Naito
Fumio Ohmori
Teruyuki Ouchi

Representative Director and President

Yasuaki Wakui
Senior Managing Director

Hiromi Maki

Director and Advisor

Hisao Nakamura

37

Kuraray’s History

1920s
1926
•Kurashiki Kenshoku Co. established
1928•Rayon commercialized: production ofrayon filament yarn begun at theKurashiki Plant

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

1965•European Representative Officeestablished in Hamburg, Germany(moved to Düsseldorf in June 1968)
1969•Production of polyester filament started
at Saijo Plant

1970•Company name changed to KurarayCo., Ltd.
•Hong Kong Representative Officeestablished (transferred to Kuraray
Hong Kong Co., Ltd. in June 1998)
1971•Nonwoven fabrics business started(Kuraray Chicopee Co., Ltd.
established)

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

1990s
1990
•“SEPTON” commercialized: Productionof “SEPTON” thermoplastic elastomer
started at Kashima Plant

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

1950s
1950
•“KURALON” commercialized: production of “KURALON” staple started
1958•Poval commercialized: production ofpoval for market sale started

1960s
1960
•Capital participation in Kyowa Gas
Chemical Co., Ltd., which conducts
methacrylic resin business

1972•“EVAL” commercialized: production
facilities for “EVAL” resin completed at
Okayama Plant•Isoprene chemicals business launched:operation at Kashima Plant started,and production of polyisoprene rubber
begun
1975
•Artificial organs business started
1976•NIC (new isoprene chemicals) facilities
completed at Nakajo Plant
1977•Kuraray Engineering Co., Ltd.
established

1962•Production of poval film started
at Saijo Plant

1978•Advanced into the dental materials
field: “CLEARFIL” adhesive dental filler
produced

1964•Production of polyester staple started
at Tamashima Plant•Kuraray Fudosan Co., Ltd. established•“Clarino” commercialized: productionof “Clarino” man-made leather started
at Kurashiki Plant

38

Factory for nonwoven fabrics of Kuraray
Chicopee Co., Ltd. (now Kuraflex Co., Ltd.)1961•Osaka Goseihin Co., Ltd. (now Kuraray
Trading Co., Ltd.) established

1963•New York Representative Officeestablished (transferred to Kuraray
America, Inc. in April 1996)

1983•Cement-reinforcing “KURALON”
developed•EVAL Company of America established,
and marketing of “EVAL” resin in the
U.S. begun (production started in 1986)
1984•Haru-Kuraray GmbH, a man-madeleather sales company, established inGermany jointly with Marubeni Corp.
and Haru Holding & Management
GmbH•Merged with Nippon Velcro Co., Ltd.
which produces hook loop fasteners

1970s

New laboratory of Okayama Plant

1949•Company name changed to Kurashiki
Rayon Co., Ltd.

1980s

1991
•Kuraray Europe GmbH establishedin Düsseldorf, Germany
1995•Kuraray EVAL Europe GmbHestablished in Düsseldorf•Kuraray Hong Kong Co., Ltd. established
1996•Kuraray America, Inc. established in
New York as administrative holding
company in the U. S.
•Kuraray Singapore Pte., Ltd.
established, and capital participationin Poval Asia Pte Ltd
1997•EVAL Europe N.V. established in
Belgium
1998•“KURALON K-II” commercialized
1999•Operations started at Poval Asia Pte Ltd•Operations at EVAL Europe N.V. started

Completion ceremony of EVAL Europe N.V.

“CLEARFIL” adhesive dental filler

2000•The mass-production of a new watersoluble resin “EXCEVAL” was started•The Company made a capital participation in Lorica Sud S.r.l., an Italian
man-made leather processing and sales
company

List of Consolidated Companies

Companies

Head Office

CapitalLines of BusinessCompanies

Head Office(¥ millions, except
where stated)

CapitalLines of Business(¥ millions, except
where stated)

Chemical Products
Kyosei Chemical Co., Ltd.

Tokyo

50

Production of pigments anddyes

Kurashiki Unyu Co., Ltd.

Okayama20

Transportation and cargohandling

Kuraray Niigata Kasei Co., Ltd.

Tokyo

50

Production and sales ofmethacrylic resin

Souryou Co., Ltd.

Okayama

10

Transportation and cargohandling

Kamiko Plastic Co., Ltd.

Saitama14

Molding and pressing of
methacrylic resin*The Kurashiki Kokusai Hotel, Ltd.

Okayama

450

Management of hotel

Kuraray Travel Service Co., Ltd.

Osaka

20

Travel and insurance agency

Production of plastics

Techno Soft Co., Ltd.

Osaka

20

Technical consulting

Securir Co., Ltd.

Tokyo

30

Dispatch of temporary staff
and training

Kuraray Techno Co., Ltd.

Osaka

10

Production on aconsignment basis

Kuraray Techno Nakajo Co., Ltd.

Niigata10

Production on aconsignment basis

Kuraray Techno Kashima Co., Ltd.

Ibaraki

10

Production on aconsignment basis

Kuraray Techno Okayama Co., Ltd.

Okayama10

Production on aconsignment basis

Kuraray Techno Kurashiki Co., Ltd.

Okayama10

Production on aconsignment basis

Kuraray Techno Saijo Co., Ltd.

Ehime

10

Production on aconsignment basis

KRT Tamashima Co., Ltd.

Okayama10

Production on aconsignment basis

Kuraray Finance & Accounting Co., Ltd.

Okayama

100

Provision of accounting andadministration operations*Kuraray Information Systems
Center Co., Ltd.

Okayama50

Provision of information
systems operations*Kuraflex Co., Ltd.

Okayama10

Production of nonwoven
fabrics*Kuraray Nakajo Methacrylic
Processing Co., Ltd.

Niigata10*Nihonkai Acetylene Co., Ltd.

Tokyo

60

Production and sales ofacetylene gas

Kuraray Chemical Co., Ltd.

Osaka

600

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

Okayama

10

Processing of activatedcarbon*KC Engineering Co., Ltd.

Okayama

10

Engineering andconstruction of plantfacilities*Mitsukura Chemical Co., Ltd.

Osaka

10

Production and sales ofactivated carbon*Magictape Co., Ltd.

Fukui

30

Production of “Magictape”

Kuraray Plastics Co., Ltd.

Osaka

180

Production and sales ofsynthetic resins

Ibuki Kosan Co., Ltd.

Gifu

10

Production of rubber
products*Hikari Shoes Co., Ltd.

Tokyo

34

Manufacture and sales ofshoes

Kuraray Family Products Corporation

Osaka

30

Sales of health foods and cosmetics

Fibers*Kuraray Okayama Spinning Co., Ltd.

Okayama50

Production of synthetic fibers

Overseas*Saijo Textured Yarn Co., Ltd.

Ehime

10

Manufacture of polyester yarn

Kuraray America, Inc.

New York, USA*Tamashima Rayon Inspection Co., Ltd.

Okayama

10

Inspection of rayon yarn

US$55.03 million Sales of Kuraray productsin the U.S.

Reihoku Textile Co., Ltd.

Fukui

35

Sizing of raw yarn

EVAL Company of America

Illinois, USA*Kuraray Planning System Co., Ltd.

Osaka

10

Design and sales of uniforms

US$4.15 million Production and sales of“EVAL” resin in the U.S.

Clarino America Corp.

New York, USA

US$0.6 million Sales of man-made leather in
the U.S.

Real Estate/Construction/Housing
Kuraray Fudosan Co., Ltd.

Osaka

282

Sales and management ofland and housing

Kuraray Finance America, Inc.

New York, USA

Kuraray Europe GmbH

Düsseldorf,
Germany

US$0.001 million Loan financing
DM61 million Sales of Kuraray products in
EuropeKuraray EVAL Europe GmbH

Düsseldorf,
GermanyDM0.5 million Sales of “EVAL” resinin Europe

Iruma Country Club Co., Ltd.

Saitama40

Golf course management

Kuraray Ohmiya Estate Co., Ltd.

Osaka

31.25

Leasing of real estate

Kuraray Interior Co., Ltd.

Osaka

330

Manufacture and sales ofhigh-class furniture

EVAL Europe N.V.

Antwerp,
Belgium

BEF1200 million Production and sales of“EVAL” resin in Europe

Kuraray Engineering Co., Ltd.

Osaka

450

Engineering of plantfacilities

Kuraray Finance Europe B.V.

Amsterdam,
Netherlands

NLG0.7 million Financing

Kuraray Saijo Kiko Co., Ltd.

Ehime

10

Manufacture of machinery

Kuraray Hong Kong Co., Ltd.

*S. Urabe Associates
Architects Co., Ltd.

Osaka

11.25

Hong Kong,
China

HK$4.65 million Processing and sales ofKuraray products in China
and Southeast Asia

Kuraray Singapore Pte., Ltd.

Singapore

SP$21.4 million Marketing of Kuraray
products in Southeast Asia

*Poval Asia Pte Ltd

Singapore

SP$40 million Production of Poval resin

Kuraray Specialities Asia Pte., Ltd.

Singapore

SP$0.1 million Sales of Poval resin

Architectural design
and planning

Commerce and Distribution
Kuraray Trading Co., Ltd.

Osaka

500

Export, import andwholesale of fibers, etc.

*Kuratoray Chemitech Co., Ltd.

Osaka

20

Processing of synthetic resin*Kuratoray XA Co., Ltd.

Osaka

10

Sales of Kyowaglas-XA

Kuraray Living Co., Ltd.

Osaka

101.8

Production and salesof packaging-related
products*Company accounted for under the equity method

39Introduction of New Products

Introducing newly commercialized, remarkable products during
the term;

Fibers and Textiles: Formaldehyde-adsorbing
polyesterFormaldehyde is considered to be a cause of so-called ‘sick-house syndrome’the headaches and dizziness some people suffer from in a newly built home.
This textile has a formaldehyde-adsorbing substance on its surface, so the useof carpets or curtains employing this textile will help curb the sick-house syndrome.
Carpet and curtain using
formaldehyde-adsorbing polyester

Chemical products: Heat-resistant polyamide
resin PA9T
Heat-resistant polyamide resin PA9T has excellent heat-resistance qualities,
moldability, dimensional stability and resistance to abrasion. It has an expanded range of applications, including electronic parts and automotive parts. In
May 2000, we decided to start the construction of mass-production facilities
for smooth business expansion in this sector.
SMT connector using PA9T

Man-made leather, Nonwoven Fabrics andFastening Materials: Man-made leather withsheepskin characteristics
This product is a clothing-use man-made leather that faithfully expresses theproperties of sheepskin, which is regarded as the highest-class material among
various kinds of natural leather. The product obtained a high rating in new
product announcement meetings held in Japan, the U.S., Europe and Asia.
Dress made of our man-made leather
with sheepskin characteristics

The Company will accelerate the operation of business by introducing thismaterial to the market.

Diversified business: Wound-dressing material
Kuraray has recently commercialized wound-dressing material. This product isdesigned to absorb and keep decoction liquid from scars, and to promotemoisture wound healing. The product is expected to be greatly helpful in thetreatment of pressure ulcers and burns.
Wound-dressing material40Corporate Data

Kuraray Co., Ltd.

Principal Shareholders

Established: June 24, 1926

The Mitsubishi Trust and Banking Corporation

Capital: ¥88,955 million

The Sumitomo Trust and Banking Co., Ltd.

Shares:Authorized
Issued700,000,000 shares
382,863,603 shares

Nippon Life Insurance Co.
The Industrial Bank of Japan, Ltd.

Number of Shareholders: 26,169

The Daiwa Bank, Ltd.

(as of March 31, 2000)

The Meiji Mutual Life Insurance Co.
The Dai-ichi Mutual Life Insurance Co.

Offices, Laboratories, Plants

The Fuji Bank, Ltd.

Head Offices: Osaka, Tokyo
Offices: Nagoya, Fukui, Fukuoka, Sapporo, Sendai

The Chase Manhattan Bank, N. A., London S. L. Omnibus
Account

Laboratories: Kurashiki, Tsukuba

The Sumitomo Bank, Ltd.

Plants: Kurashiki, Saijo, Okayama, Nakajo, Tamashima,
KashimaTransfer Agent
The Sumitomo Trust and Banking Co., Ltd.
Stock Transfer Agency Department
4-5-33, Kitahama, Chuo-ku, Osaka 540-8639
TEL: 81-6-6833-4700

Share Price Movement
(¥)

2000

High
Low

1500

1,499

1,398

1,522
1,412

1,385

1,424

1,426

1,350
1,267

1,278

1,295

1,302

1,330

1,190
1,306
1,194

1,111

1,244

1,030
1,114

1000

1,021

1,000
853

876

2

3

500

0

’99/4

5

6

7

8

9

10

11

12

’00/1

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

41

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