Annual Report 2014
For the year ended March 31, 2014

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

MAN
NAGEM
MENT PHILO
OSOPHYFor the Kuraray Group, cor
o porate soc
ocia
al re
resp
s on
o sibility means activities to fulfill our
Corporate Mission, which
ch is to dischhara geg our responsibbillity to society, by ensuring thatin the conduct of businesss all emp
ployees grooun
u d theiir at
a titudes and behaviors in the
Corporate Philosophy and Guidelines for Ac
Action.

CORPORATE PHILOSOPHY

GUIDELINES for ACTION(Established in 1986)(Established in 1986)• Respect for individuals• Cooperation in shared goals• Creation of values• Act on customers’ needs• Act on ideas in the working place• Act on your own initiative

CORPORATE MISSION(Established in 2003)

We in the Kuraray Group are committed to opening new fields of business using pioneering
technology and contributing to an improved natural environment and quality of life.

PRINCIPLES for BUSINESS CONDUCT(Established in 1998)• We will develop and provide products and services, giving full consideration to safety.
• We will conduct businesses in a free, fair and transparent manner.
• We will maintain good communications and build a sound relationship with society.
• We will strive to preserve and improve the global environment and to secure safety and health.
• We will respect intellectual properties including trade secrets and control information properly.

Contents
Kuraray’s Overview ...................................................................................... 2
Consolidated Financial Highlights................................................. 6
To Our Shareholders .................................................................................... 8
An Interview with Kuraray President
Fumio Ito ............................................................................................................ 9

Kuraray’s
Major Growth Drivers:
Three Case Studies.....................................................

12

Kuraray at a Glance ................................................................................... 16
Review of Operations ............................................................................ 18
Corporate Governance and Internal Control.................. 20
Board of Directors, Corporate Auditorsand Executive Officers ................................................................ 22
Financial Section......................................................................................... 24
Main Group Companies...................................................................... 74
Investor Information ............................................................................... 75• Please follow the link http://www.kuraray.co.jp/en/csr/ for information on our CSR activities.
• For all other information, please visit our website at http://www.kuraray.co.jp/en/

FORWARD-LOOKING STATEMENTS
This annual report contains various forward-looking statements, which are based on the current expectations and assumptions of future events. All
figures and statements with respect to the future performance, projections and business plans of Kuraray and its Group companies constituteforward-looking statements. Although Kuraray believes its expectations and assumptions are reasonable, actual results and trends of Kuraray’s
performance could differ materially from those expressed or implied by such figures or statements due to risks and uncertainties in future businesscircumstances. The factors that may cause such differences include, without limitation: (1) general market and economic conditions in Asia, including
Japan, the United States, Europe and other regions; (2) fluctuations of currency exchange rates, especially between the Japanese yen and the U.S.
dollar and other foreign currencies; (3) changes in raw material and fuel costs; (4) industrial competition and price fluctuations in Japan and international markets; (5) advances or delays in the construction of new plants and production lines; (6) successful development of new products andtechnologies; (7) changes in laws and regulations (including tax and environmental) and legal proceedings; and (8) unforeseeable risks, including
natural disasters.
In this annual report, italicized product names are trademarks of Kuraray Co., Ltd.

Annual Report 2014

1

Kuraray’s Overview
Kuraray is using its superior technology platform
to expand its businesses in the fields of highperformance fibers, resins and chemicals.
The Company currently operates in the six
segments of Vinyl Acetate, Isoprene, Functional
Materials, Fibers and Textiles, Trading, andOthers, with a wide-ranging lineup of products.

Our Business
Portfolio

KURARAY POVAL,MOWIOL
Optical-use (PVA resin)
PVA film

Isoprene chemicals

Water-soluble
PVA film

SEPTON, HYBRAR(Thermoplastic
elastomer)

TROSIFOL(PVB film)

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

GENESTAR(Heat-resistantpolyamide resin)

Vinyl
AcetateIsoprene

KURALON(PVA fiber)

Fibers andTextiles
KURAFLEX,FELIBENDY(Non-woven fabric)

Functional
Materials
Trading,
OthersMethacrylic resin

MAGIC TAPE
(Hook and loop
fastener)
VECTRAN(Polyarylate fiber)

Dental materials

KURARAY COAL
(Activated carbon)

Aqua business

Polyester filament

2

Kuraray Co., Ltd.

CLARINO(Man-madeleather)Our Progress

From its establishment in 1926, Kuraray’s
principal business was the manufacture andsale of synthetic fibers. By accelerating theintensive development of its resins andchemicals businesses since the 1980s, Kurarayhas become a global specialty chemicalcompany, with resins and chemicals
accounting for approximately 80% of net sales.

Trends in Net Sales and Operating Income

¥

413.5

billionChemicals
Fibers209.4

Net Sales ¥¥billion

27.1
Operatingg
Income ¥

8.7

16.8

1978

1983

20.1

49.5

billion

29.3

28.0

17.7

billion

FY

1988

1993

1998

2003

2008

2013

History of Commercialization of Kuraray’s Proprietary Technologies

1983

1999

Developed
cementreinforcing
KURALON

1990

2011

StartedCommercialized
production of
VECTRAN /PVA resin in
SEPTON
Singapore

1978

Startedproduction ofdentalmaterials

Commercialized
GENESTAR

1986

Commercialized
KURARITY
2002

Started production of
EVAL in the U.S.

Startedproduction of Started production of
EVAL resin in SEPTON in the U.S.
Belgium

Prior to 19781950 Commercialized KURALON

1962 Commercialized PVA film

1958 Commercialized PVA

1964 Commercialized CLARINO

1972

Commercialized
EVAL / Isoprene chemicals

Annual Report 20143

Backed by its commitment to “contributing to
the world and individual well-being throughactions that others are unable to produce” asa good corporate citizen, Kuraray uses its
original strengths in polymer and synthesis
technologies to continuously create innovative
world-class products.

Our Market
Share
Global
PVA resin(Excluding China)

80%

65%

No.1

No.1

No.1

market sharemarket sharemarket share

SEPTONKURALON

100% 20%80%

Only One

No.2

No.1

of its kindmarket sharemarket share

CLARINO

Dental materials(Excluding China)

MAGIC TAPE

(Hook and loop fastener)

25%

35%

60%

No.1

No.1

No.1

market share

Kuraray Co., Ltd.

EVAL

35%
GENESTAR

4

Optical-use
PVA film

market sharemarket share

Domestic

Kuraray’s Overview

Kuraray is cultivating a lineup of world-classproducts with a large market share. At the sametime, the Company is expanding its global
network with local production and sales in
response to the growth of markets worldwide
by developing overseas businesses that makefull use of its proprietary technologies.

Our Global
Presence

FY2013

Overseas Sales Ratio

Centered on a product lineup developed
using its proprietary technologies,
Kuraray works to uncover new needs

Overseas Sales

worldwide and further expand its market

Domestic Sales¥186.5billionshare. Sales to date have focused
primarily on developed nations, but today

FY2000

we are committed to increasing sales inemerging markets such as the BRICs,

28%

where further demand growth is forecast.

¥227.3billion¥86.3
billion45%

55%¥227.0billion72%

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

Main Production Facilities and Sales Facilities outside Japan(As of July 2014)

Production andsales facilities in

Production facilities
Sales facilities
Facilities added with the acquisition of DuPont’s
glass laminating solutions/vinyls business

28

countries
Annual Report 20145

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

Millions of yen

Net sales....................................
Cost of sales ..............................
Selling, general andadministrative expenses ..........
Operating income ......................
Net income ................................
Capital expenditures ..................
Depreciation and amortization ...
Gross cash flow .........................
Total research anddevelopment expenses ...........
Total assets ................................
Total current assets ...................
Total tangible fixed assets .........
Total current liabilities ................
Total noncurrent liabilities ..........
Total net assets..........................
Segment information (Note 4)
Vinyl Acetate
Net sales ........................
Operating income ..........
Isoprene
Net sales ........................
Operating income ..........
Functional Materials
Net sales ........................
Operating income ..........
Fibers and Textiles
Net sales ........................
Operating income ..........
Trading
Net sales ........................
Operating income ..........
Others
Net sales ........................
Operating income ..........

Millions of
U.S. dollars(Note 1)Millions ofEuro(Note 2)FY2013

FY2013

FY2013

FY2012FY2011FY2010FY2009FY2013/2012¥413,485
286,179¥369,431
249,485¥368,975
246,538¥363,191
243,564¥332,880
237,198

11.9 %
14.7$4,014
2,778€2,911
2,015

77,76049,54529,390¥ 59,740
34,97264,36270,74849,197
28,798¥ 45,519
30,95259,75067,70354,733
31,469¥ 39,006
30,737
62,206

66,53153,09528,742¥ 20,558
33,53662,27865,23030,451
16,315¥ 19,879
36,48952,8049.9
0.7
2.1
31.2 %
13.0
7.7

754
481
285
$ 580
339
624

547
348
206
€ 420
246
453

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

16,431¥587,254
257,212181,274
111,449
74,279401,307

16,175¥523,247
269,083
152,877
81,68475,248366,314

15,772¥507,328
310,594
145,238
86,21474,288346,825

15,292¥502,815
249,326
163,70976,55088,446
337,818

4.1
8.0 %
17.6
22.6
(20.0)
24.7
12.7

166
$6,157
2,935
2,157
865
899
4,392

120
€4,466
2,129
1,564
627
652
3,186

¥179,261
46,658¥155,163
48,87715.5 %(4.5)$1,740452€1,262328

53,027
5,471

44,817
3,870

18.3
41.4

514
53

373
38

48,552
1,500

45,144
1,929

7.5(22.2)

471
14

341
10

46,932
2,633

46,216
1,772

1.5
48.6

455
25

330
18

108,991
3,582

108,760
3,358

0.2
6.7

1,058
34

767
25

67,3342,493

64,4424,001

4.5(37.7)

653
24

474
17

Amounts per share:

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

Percentchange

Yen

¥

83.93
83.75
36.0
1,272.68

¥

82.62
82.52
36.0
1,132.07

90.35
90.21
33.00
1,033.48¥ 82.55
82.40
27.00
985.22¥ 46.86
46.81
16.00
961.24¥

Financial ratios:
Cost of sales ratio (%) ...............
Equity ratio (%) ..........................
Return on equity (ROE) (%) .......
Return on assets (ROA) (%) (Note 5) ...
Payout ratio (%) .........................

69.2
70.3
7.0
8.1
42.9

67.5
67.2
7.6
8.8
43.6

66.8
68.8
9.0
10.6
36.5

67.1
67.6
8.5
10.5
32.7

71.3
66.5
5.0
6.2
34.1

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

7,550

7,332

6,776

6,544

6,630

1.6 %
1.5
—
12.4

U.S. dollars(Note 1)Euro
(Note 2)

$ 0.81
0.81
0.34
12.35

€0.59
0.58
0.25
8.96

Notes: 1. The United States dollar amounts represent the translation of Japanese yen at the rate of ¥103 = $1.
2. Euro amounts represent the translation of Japanese yen at the rate of ¥142 = €1.
3. Certain reclassifications of previously reported amounts have been made to conform with current classifications.
4. From fiscal 2013 (the year ended March 31, 2014), business segments have been reclassified from “Resins,” “Chemicals,” “Fibers and Textiles,” “Trading” and “Others”
to the six segments “Vinyl Acetate,” “Isoprene,” “Functional Materials,” “Fibers and Textiles,” “Trading” and “Others.” Figures for FY2012 have been restated for comparison.
5. Return on assets = Operating income / Average total assets x 100 (%)
Figures have been rounded down to the nearest million yen, U.S. dollar and Euro.

6

Kuraray Co., Ltd.

Net Sales &Overseas Sales Ratio

Operating Income &Operating Income Margin(¥ Million, %)Operating Income
Operating Income Margin(¥ Million, %)Net Sales
Overseas Sales Ratio

413,485

332,880

48.3

49.9

49.6

54,733

31,469

13.3

7.6

10

11

13

12

(FY)

5.0

09

10

11

13

12

(FY)

R&D Expenses &R&D Expenses Ratio

Capital Expenditures(¥ Million)

15,292

15,772

09

10

11

13

12

(FY)

Gross Cash Flow*

R&D Expenses
R&D Expenses Ratio

59,740+31.2%-0.6 pts

7.0
16,315

9.1

09

+2.1%

9.0

8.5

-1.3 pts

12.0

30,451

28,798 29,390

28,742+0.7 %

14.8

14.6(¥ Million, %)Net Income
ROE

49,197 49,545+5.3 pts

54.9
47.9

53,095+11.9%

363,191 368,975 369,431

Net Income & ROE(¥ Million)(¥ Million, %)16,175 16,431

17,103+4.1%

62,278 62,206

64,362+7.7%

59,75052,80445,51939,006

4.6

4.3

4.4

4.4

19,879 20,558

09-0.3 pts

4.1

10

11

13

12

(FY)

09

10

11

12

13

(FY)

09

10

11

13

12

(FY)

* Gross Cash Flow
= Net income + Depreciation and amortization

Total Assets &Total Net Assets

Cash Dividends per Share &Payout Ratio

Equity Ratio

Total Assets
Total Net Assets(%)(¥ Million)(¥, %)Cash Dividends per Share
Payout Ratio

634,252
587,254502,815 507,328

+8.0%

36.00

452,459
401,307337,818 346,825+12.7%

366,314

66.5

67.6

68.8

67.2

70.3

+3.1 pts

11

12

13

(FY)

09

10

11

12

13

(FY)

09

43.6

36.5

32.7

34.1

10

(No change)

27.00

16.00

09

36.00

33.00

523,24710

11-0.7 pts

42.9

12

13

(FY)

Annual Report 20147

To Our Shareholders

To begin, I would like to thank all of you for your support.

global business management. Fiscal 2014 will be theIn fiscal 2013, the year ended March 31, 2014, thenine-month period from April to December 2014 fordepreciation of the yen that began near the end of fiscal

Kuraray Co., Ltd. and its consolidated subsidiaries in2012 continued, while the economy of the United States

Japan, and the twelve-month period from January to

was robust. However, economies in Europe and China

December 2014, as it was previously, for consolidated

remained stagnant and the pace of growth in emerging

subsidiaries outside Japan.

countries slowed, causing overall demand to fall short ofGiven these factors, the Kuraray Group is promoting

expectations. In Japan, although there were expecta-

various measures based on the core management

tions of an economic recovery due to an exit fromstrategies of GS-III, the medium-term management plan

deflation as a result of “Abenomics” and a last-minutethe Group has been carrying out since fiscal 2012, and issurge in demand ahead of an increase in the consump-aiming for ¥385.0 billion in net sales, ¥44.0 billion intion tax rate, the markets in which the Kuraray Group

operating income, ¥43.0 billion in ordinary income andoperates could not be said to be in a full-fledged recovery.

¥26.0 billion in net income in fiscal 2014.

In this operating environment, the Kuraray Group’s

The distribution of profits to shareholders is one of

consolidated net sales for fiscal 2013 increased 11.9%

Kuraray’s top management issues. Under a basic policy

compared with the previous fiscal year to ¥413.5 billion.

of increasing dividends through ongoing improvement in

Operating income increased 0.7% to ¥49.5 billion,

results, Kuraray is targeting a dividend payout ratio of

ordinary income increased 1.6% to ¥49.3 billion, and net

35% or more relative to consolidated net income duringincome increased 2.1% to ¥29.4 billion.

fiscal years 2012 to 2014, the period of medium-term

Under these circumstances, the Kuraray Group is

management plan GS-III. Pursuant to this dividend policy,

accelerating its global strategy for expansion of its core

the Company has set a year-end dividend of ¥18 perbusinesses to achieve sustained growth while proac-share for fiscal 2013, as initially forecast. The total of thistively developing new businesses in the water treat-

year-end dividend and the interim dividend will be ¥36ment, environment, energy, optical and electronics fields

per share, and the dividend payout ratio will be 42.9%.

to secure future growth.
Regarding fiscal 2014, there are concerns about a

For fiscal 2014, because it will be a nine-month period
due to the change in the fiscal year end to December 31,

temporary economic slowdown in Japan due to thethe Company plans to pay annual dividends of ¥27 perincrease in the consumption tax rate. Overseas, eco-share, consisting of an interim dividend of ¥18 per sharenomic forecasts call for a continuing strong economy in

and a year-end dividend of ¥9 per share, assuming con-the United States, a moderate recovery in Europe, asolidated net income of ¥26.0 billion. The dividend payout

slowdown in China and patchy conditions in otherratio will be 36.4%.

emerging countries.
Moreover, in light of the growth in net sales overseas,

The Kuraray Group requests your continued understanding and support.

the Kuraray Group has decided to change its fiscal year
end to December 31 from fiscal 2014 in order to handle
August 2014

Fumio Ito
Representative Director and President

8

Kuraray Co., Ltd.

An Interview with Kuraray President Fumio Ito

Kuraray is strengthening its
business base with the aimof being “a specialty
chemical company witha global presence.”

Question

1

Looking back, what kind of year was fiscal 2013?
There were positive aspects during fiscal 2013, such as the ongoing depreciation of the yen from theend of the previous fiscal year and the robust U.S. economy. However, economies in Europe andChina remained stagnant and the pace of growth in emerging countries slowed. Consequently, we
did not reach the level of demand forecast in our initial assumption for the year. In Japan, although
there were expectations of an economic recovery as a result of “Abenomics” and a last-minutesurge in demand ahead of the increase in the consumption tax rate, the markets in which theKuraray Group operates could not be said to be in a full-fledged recovery.
Against this backdrop, the Kuraray Group’s sales in fiscal 2013 grew compared with the previous
fiscal year, and we were able to increase income, albeit slightly. Demand for optical-use PVA film
decreased, while costs rose due to the prolonged shutdown of certain plants in Europe for construction to improve energy efficiency, and PVB film and liquid rubber struggled as a result of economic
stagnation in Europe. However, these and other negative factors were compensated for by growth insales of EVAL gas barrier resin, water-soluble PVA film, for which demand is growing for single-use
packets for detergents, and GENESTAR heat-resistant polyamide resin, which Kuraray introduced to
the world.
In addition, Kuraray agreed to acquire the glass laminating solutions/vinyls business of E.I. du
Pont de Nemours and Company (“DuPont”) of the United States in November 2013. The transfer ofthe business was completed in June 2014. This acquisition will further strengthen the business baseof the Kuraray Group by giving us a location in the United States for production of vinyl acetate,
which is a raw material for PVA and EVAL, in addition to generating synergy with the Group’s vinyl
acetate business.

Annual Report 20149

Question

2

What other major initiatives did you carry out in fiscal 2013?
To strengthen our core businesses, we completed a 12,000-ton capacity expansion in the UnitedStates for EVAL gas barrier resin, which is used in applications including food packaging and automobile fuel tanks. Operations began in October 2013.
Also in the United States, we decided to expand our production facilities for water-soluble PVA
film, a product for which business operations are expanding steadily due to the growth of the market
for detergent in single-use packets. Operation of the facilities is scheduled to start in July 2014. In
Japan, we completed construction to expand production capacity of GENESTAR by 3,000 tons at
our Kashima Plant in August 2013.
To create and expand new businesses, we decided to increase production capacity of VECSTAR,a film for high-speed printed circuit boards. We are also promoting business development for the
future, including construction of a new plant for anode materials for lithium-ion batteries.

Question3

Can you provide some details about the change in the Kuraray Group’s
fiscal year end that will occur in fiscal 2014?
In fiscal 2013, overseas sales grew to account for 55% of net sales. Under these circumstances, ourmain objective in fiscal 2014 is to standardize the accounting periods of Kuraray Group companies inJapan and overseas. A resolution to change the fiscal year end was approved at the General Meetingof Shareholders, and we will standardize accounting periods in fiscal 2014. This will enable timely
and accurate disclosure of corporate information and increase management transparency. We will
also be able to efficiently conduct global business management.
As for the specific method of adjustment, we will make December the fiscal year end for all
Kuraray Group companies. Fiscal 2014 will be an irregular accounting period consisting of the ninemonths from April to December for Group companies in Japan, and the twelve months from January
to December for Group companies outside Japan. This adjustment will align the fiscal year ends ofdomestic and overseas Group companies as of the end of fiscal 2014.

Question

4

What is the outlook for the Kuraray Group’s business results infiscal 2014?
In Japan, there are concerns about a temporary economic slowdown due to the increase in the
consumption tax rate. Overseas, economic forecasts call for a continuing strong economy in the
United States, a moderate recovery in Europe, a slowdown in China and patchy conditions in otheremerging countries. Under these circumstances, we are aiming for net sales of ¥385.0 billion andoperating income of ¥44.0 billion in fiscal 2014 based on an accounting period of nine months forKuraray Group companies in Japan and twelve months for overseas Group companies, due to thechange in the fiscal year end to December. Using the previous twelve-month accounting period basis
from April 2014 to March 2015 for companies in Japan and from January to December 2014 forcompanies overseas, these targets would be net sales of ¥460.0 billion and operating income of¥57.0 billion. Accordingly, the decrease in our targets compared with fiscal 2013 is the result of thechange in the fiscal year end. In real terms, we are aiming for substantial increases in sales andincome.

10

Kuraray Co., Ltd.

In addition, fiscal 2014 is the final year of GS-III, the medium-term management plan we havebeen carrying out since fiscal 2012. During fiscal 2014, we will work to strengthen our capacity for
generating earnings unaffected by market conditions through measures such as using technologicalinnovation to accelerate development of new products and applications, expanding our businesses infields and markets with growth potential in Japan or overseas, and further reducing costs. These
measures will lead into our next medium-term management plan, which will begin in fiscal 2015.

Net Sales & Operating Income(¥ Billion)
460.0

Net Sales
Operating Income
363.2
332.9

413.5

53.1

385.0

369.4

369.0

57.0

54.7
49.2

49.5
44.0

Change in
Fiscal Year*

30.5

(FY)

09

10

11

12

13

14
Twelve-monthforecast

14
Nine-monthforecast* Due to the change in fiscal year end, the forecast for fiscal 2014 is for the nine-month period from April to December 2014.

Question

5

What are your priority initiatives for fiscal 2014?
Early generation of synergy with the glass laminating solutions/vinyls business we acquired from
DuPont of the United States is the top issue for our management. We are considering initiatives forthis purpose and will speedily carry them out.
In addition, we will carry out initiatives based on technological innovation. These include developing differentiated optical-use PVA film products; starting operation of facilities with increased production capacity for VECSTAR materials for high-speed printed circuit boards and promoting their sale;
expediting development of an innovative new manufacturing process for KURALON; and developing
ultra-barrier films that apply the technology of a U.S. venture company and the gas barrier technology
Kuraray has accumulated with EVAL. As for initiatives based on geographical expansion, we aim to
expand the PVA resin market in the Americas ahead of the start-up of our PVA resin production
facilities in North America that are currently under construction.
For EVAL, we will concentrate on expanding markets in emerging nations, where growth indemand for food packaging and automotive applications is expected. In addition, we intend to
conduct a global rollout of water-soluble PVA film for single-use packets for detergents.

Question

6

What can you tell us about the direction of the Kuraray Group’s next
medium-term management plan, which will start in fiscal 2015?
Backed by its corporate culture of “contributing to the world and individual well-being throughactions that others are unable to produce,” the Kuraray Group aims to be the “specialty chemicalcompany with a global presence” called for in its Long-Term Corporate Vision. During fiscal 2014, we
will formulate specific strategies for our next medium-term management plan to become such a
company.

Annual Report 201411

Feature

Kuraray’s
Major Growth Drivers:
Three Case Studies

FY2013

The Kuraray Group is implementing various measures basedon its core management strategies for growth to become
the “specialty chemical company with a global presence”
called for in its Long-Term Corporate Vision. Thissection covers three of the major growth drivers
that are expanding to become Kuraray’s core
FY200000
0businesses and explains their advantages
and growth potential. Including thesets
products, Kuraray has approximately 10cduproducts that have established top globalormarket share. Backed by its corporategPniculture of “contributing to the world andellS
individual well-being through actions thatopTla
Global Top-Selling Products
others are unable to produce,” Kuraray will
Glob
Otherscontinue to cultivate world-class products.

Three Case Studies of Major Growth Drivers
1

EVAL (EVOH: Ethylene vinyl
alcohol copolymer resin)

2

Polyvinyl alcohol(PVA) film

GENESTAR

Product Overview

Product Overview

Product Overview

Kuraray was the first in the world toKuraray was the first in the world to

A new heat-resistant polyamide resin

commercialize this functional resin,industrialize this plastic film made from

whose primary raw material iswhich has the highest level of gas barrier

PVA resin, which is the raw material of

1,9-Nonanediamine, a monomer that

performance among plastics. EVAL is

KURALON synthetic fiber. PVA film is

Kuraray was the first in the world towidely used as a packaging material forused in a wide range of fields. As an

industrialize. In addition to electronic

foods, cosmetics, pharmaceuticals andoptical-use film, its applications include

components for mobile phones,

other products because it acts as an

the base film of polarizing plates that is

personal computers and other products,

oxygen barrier that prevents the contents

indispensible for the production of liquid

applications are expanding in LEDs andfrom deteriorating and their aromas fromcrystal displays (LCDs) in products suchthe automotive field.

escaping. It is also used in plastic fuelas large flat-screen televisions andtanks for automobiles to help prevent gas

tablets. As a water-soluble film, it isleakage into the atmosphere and to

employed in single-use packets for

reduce weight.

detergents, agrichemicals and otherproducts. A look at water-soluble film
follows on page 14.

123

Kuraray Co., Ltd.

Gas Barrier
Resin
Case 1The Highest Level of Gas Barrier
Performance among Plastics

Prospects for Long-TermBusiness Expansion

EVAL’s superior gas barrier properties are approximately

Because EVAL is widely used in consumer goods such as food

10,000 times more effective than general-purpose

packaging and automobile fuel tanks, demand tends to rise inpolyethylene. Using just a small amount in food packaging

tandem with a country’s economic growth. Consequently,

materials (as an intermediate layer between nylon andKuraray foresees significant potential demand in emerging

polyolefin layers, among other applications) helps to extend

countries where growth is forecast, in addition to developed

shelf life, lighten containers and reduce waste. Food packaging

countries.

applications include containers for mayonnaise, salad oil, dried

In response, Kuraray has been opening up new markets forbonito flakes, refrigerated beverages and aromatic spices.

EVAL. In May 2012, Kuraray established a local subsidiary in

EVAL is a recyclable material.

Thailand, which is a global food processing base with a thriving
automobile industry, followed by a 12,000-ton increase inannual production capacity at U.S. subsidiary Kuraray America,

New Applications andMarket Expansion

Inc. in October 2013. Kuraray will expand the EVAL business by

In addition to the food packaging and plastic fuel tanks

countries while increasing production capacity to meet

described above, other uses of EVAL that take advantage of its

growing global demand.

using its overseas subsidiaries in countries including China,
Thailand, India and Brazil to enter the markets of emerging

gas and solvent barrier properties include under-floor heating
pipes (an alternative to metal pipes that reduces corrosion),bottles for agrichemicals, agricultural-use film, vacuum
insulation panels for large refrigerators (an alternative to metalthat reduces insulating material volume and conserves energy)
and pressurized ink cartridges for ballpoint pens. Moreover,demand is growing worldwide as applications diversify into
areas such as stain-resistant wallpaper for home interiors thattakes advantage of EVAL’s solvent resistance and low
electrostatic properties.

Annual Report 201413

Case 2
Expanding Business with theAcquisition of MonoSol

Strong Relationships with
Customers

The raw materials and processing conditions of PVA film give it

MonoSol was recognized as an External Business Partner ofa water-soluble property. PVA film that takes advantage of thisthe Year in 2013 by The Procter & Gamble Company (P&G), one

property is now used in a wide range of applications.

of its customers, following its selection by P&G as its Connect

As part of its strategy to expand its vinyl acetate chemical+ Develop Partner of the Year in 2012.

chains business, in June 2012 Kuraray acquired U.S.-based
MonoSol, LLC, which manufactures and sells PVA film.
MonoSol is a leading company in the field of water-soluble film
for applications including single-use packets for detergents,
agrichemicals, dyes and other products. The acquisition

Increasing Production Capacity to
Prepare for Growing Global Demand

therefore made the Kuraray Group a global leader in PVA film

To maintain stable supply of water-soluble PVA film at

not only in the optical field, but in a wide range of industries.

MonoSol to meet brisk demand, mainly in the United States

Over the past few years, growth has been particularly

and Europe, Kuraray decided in May 2013 to expand

notable at MonoSol in the application of film for single-use

production capacity at MonoSol in the United States at anpackets for detergents. Detergents in single-use packets areinvestment of approximately $35 million.

growing in popularity in the United States and Europe, andtheir rollout is expected in Japan and elsewhere in Asia.

Kuraray will further accelerate the expansion andstrengthening of its vinyl acetate chemical chains businessthrough organic linkage among its bases in Japan, the UnitedStates, Europe and Asia.

Water-Soluble

14

Kuraray Co., Ltd.

FeatureIntercooler tankTh
Thermostat
Wiper motor gear

Wire harness
beprotective tube

Fuel line

Roller for sliding door

Heat-Resistant
Polyamide Resin

Case 3The Only Business of Its Kind in
the World(2) polymerization for optimum performance andIn 1999, Kuraray was the first in the world to industrialize thisslidability achieved with these technologies, full-scale adoption

new heat-resistant polyamide resin using its originalof GENESTAR in automobile parts has been gaining momentum

technology and has a 100%* global market share of thisin recent years. Backed by stricter exhaust emissions regulations

one-of-a-kind material.

in various countries and needs to increase fuel efficiency* As of March 31, 2014

through reduced vehicle weight, an increasing number of(3) compounding for improvement in practical performance.
With the positive evaluation of the heat resistance and highautomotive parts are now made of plastic instead of metal.
Consequently, demand is growing, primarily for use in fuel- and

A New Polymer with Many
Featurescooling-system components and sliding parts.

GENESTAR’s numerous features include high heat resistance,

9,000 tons in August 2013. Current sales are mainly in thechemical resistance and slidability (resistance to repeateddomestic market, but Kuraray plans to expand sales regionallyabrasion), low water absorption and superior dimensional

as it expands applications for GENESTAR in Japan and overseas.

With the growth in global demand, Kuraray increased annual
production capacity at its Kashima Plant from 6,000 tons toprecision.

Proactive Expansion ofApplications and Sales Regions
GENESTAR combines the advantages of a plastic that can be
freely molded with the strength of metal, and is already used inapplications including connectors for electronic devices such as
personal computers, digital cameras and mobile phones, as wellas LED reflectors. It is the result of Kuraray’s originaltechnologies in areas including (1) monomer synthesis,
Annual Report 201415

Kuraray at a Glance

Vinyl Acetate
The Vinyl Acetate segment

Share of Net Sales

chemicals, GENESTAR, SEPTON,EVAL gas barrier resin. The

KURARITY acrylic thermoplastic

segment also produces and sells

elastomer and other goods forsegment also produces andsells SEPTON in the United

Europe and PVA resin in Asia.

States.

Operating Income(¥ Million)

60,000Net Sales(¥ Million)

60,00048,877+15.5%

150,000

sale in Japan and abroad. The%

PVB resin and film, and EVAL in

179,261
155,163

10.5

in the United States, PVA resin,(¥ Million)

200,000

cally produces isoprene, fineresin, optical-use PVA film andwater-soluble PVA film and EVAL%

The Isoprene segment domesti-

Share of Net Sales

domestically produces PVA

35.5
Net Sales

Isoprene

46,658(¥ Million)

5,471

6,000

53,027+41.4%+18.3%

44,817-4.5%

40,000Operating Income

40,0004,000

20,000

2,000

3,870

100,000
20,00050,000
0

0
12

13

(FY)

0

0
12

13

(FY)

Main Products

12

13

(FY)

Main Products

KURARAY POVAL, MOWIOL (PVA resin)
Global Market Share: 35%(excluding China)

Paper / fiber processing agents, adhesives
and others

Optical-use PVA film

Isoprene chemicals
Pharmaceutical and agrichemicalintermediates, ingredients forfragrances, cosmetics

Global Market Share: 80%
LCD televisions, mobile phone screens andothersSEPTON, HYBRAR (Thermoplastic
elastomer)
Global Market Share: 20%

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

Substitute for rubber: Automobile parts,
electronic parts, stationery, toys,
sporting goods and others

TROSIFOL (PVB film)

GENESTAR (Heat-resistantpolyamide resin)Interlayers for laminated safety glass andphotovoltaic module encapsulation

Global Market Share: 100%

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

Mobile phones, personal computers,
digital cameras, LCDs, LED reflector
applications, automobiles and others

Global Market Share: 65%

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

Trading, Others

Main Products

The Trading segment includes importing and exporting as well as thewholesaling of fibers and textiles such as polyester filament andchemicals. These activities are operated by KURARAY TRADING CO.,LTD. and its subsidiaries. Others include the production and sale of suchitems as high-performance membranes, activated carbon and others.

16

Kuraray Co., Ltd.

KURARAY COAL
(Activated carbon)
Water purification facilities, gas
separators and capacitor materials

12

13

(FY)

No. 1

Product holds the world’s
number-one market share

Functional Materials
ment domestically produces

9.6

KURALON, polyester staple,

and dental materials in the

KURAFLEX, hook and loop

medical business. The segment

fasteners and other products.

9.3%

and CLARINO in China.

Operating Income(¥ Million)

Net Sales

48,552+7.5%(¥ Million)

46,216(¥ Million)

46,932+1.5%

40,0004,000

Operating Income
6,000

60,0006,000

60,00040,000ment produces and sells

methacrylic resin, CLARINO,(¥ Million)

45,144

The Fibers and Textiles seg-Share of Net Sales

also produces methacrylic resin%

Net Sales

Fibers and Textiles

The Functional Materials seg-Share of Net Sales

Product is the only oneof its kind in the world

Only One

4,000

2,633
20,000

2,000

0

0

1,929

1,500

2,000

20,000+48.6%

1,772-22.3%

12

13

(FY)

Main Products

0

0
12

13

(FY)

12

13

(FY)

12

13

(FY)

Main Products

KURALON (PVA fiber)
CLARINO(Man-made leather)
Global Market Share: 25%
Men’s and women’s shoes, bags, athletic
footwear and large inflatable sports balls

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

Global Market Share: 80%(excluding China)
Reinforcing material for cement andconcrete and others

KURAFLEX, FELIBENDY(Non-woven fabric)
Everyday goods, industrial products(wipers, automobile applications) andothersMAGIC TAPE
(Hook and loop fastener)
Clothing, sporting goods, industrial
materials and others

Dental materials
Materials for treating cavities to restore
teeth to a near-natural state

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

Polyester filament

Aqua business

Materials for non-woven fabrics andindustrial materials / Woven and knitted
textiles, tents and sheets

Water purification, wastewater
treatment, ballast water management
system and others

Annual Report 201417

Review of Operations

Results for Fiscal 2013
Vinyl Acetate

Sales of optical-use PVA film edged down as LCD

Sales of EVAL ethylene vinyl alcohol copolymer

panel inventory adjustment continued amid sluggish(EVOH) resin favorably expanded, particularly in the

demand for LCD televisions. Although sales volume

United States and Asia. In the United States, con-of PVA resin grew, the prolonged operational shut-struction to expand production capacity by 12,000

down at certain plants in Europe for construction totons was completed and operations started.

improve their energy efficiency resulted in a tempo-

Isoprenerary increase in costs. Sales of PVB film wereyear to ¥179,261 million, while segment income fell

strongly affected by economic stagnation in Europe

4.5% year on year to ¥46,658 million.

and bore increased costs related to developing prod-

In November 2013, Kuraray reached an agree-

ucts for automotive applications. On the other hand,ment with E.I. du Pont de Nemours and Company

sales of water-soluble PVA film grew favorably on(“DuPont”) to acquire the DuPont group’s glass

the back of brisk demand. In response, Kuraraylaminating solutions/vinyls business with the aim ofdecided to expand its water-soluble PVA film facili-

securing sustainable growth in this businessties in the United States.

segment.

In isoprene chemicals, although demand was slug-

the Kashima Plant, construction to expand produc-gish for liquid rubber, demand for fine chemicals andtion capacity by 3,000 tons was completed and

SEPTON thermoplastic elastomer rebounded. Sales

operations started.

of GENESTAR heat-resistant polyamide resin pro-

Functional
Materials

As a result, segment sales grew 15.5% year on

As a result, segment sales grew 18.3% year on

gressed amid favorable demand related to LED

year to ¥53,027 million, and segment income

reflector, connector and automotive applications. At

increased 41.4% year on year to ¥5,471 million.

The decrease in profits for methacrylic resin contin-

were not as brisk as expected, although the transfer

ued due to intensifying competition and higher raw

of the existing process to China as part of structural

material and fuel prices. In the medical business,

improvements proceeded smoothly.

sales of dental materials were firm. Overall sales of

As a result, segment sales grew 7.5% year on

CLARINO man-made leather remained sluggish asyear to ¥48,552 million, while segment income fellsales of products created using new processes

22.3% year on year to ¥1,500 million.

Fibers andTextilesThe performance of KURALON was favorable in

Trading,
Othersautomotive brake hose applications and use as anyear to ¥46,932 million, and segment income

asbestos substitute in fiber reinforced cement (FRC).

increased 48.6% year on year to ¥2,633 million.

In the Trading segment, although some businesses

grew steadily. Other items were affected overall by

were impacted by the weak economy, sales in otherthe weak economy. In addition, the performance ofbusinesses such as fiber-related materials were firm.

this segment was affected by increases in develop-

As a result, segment sales increased 0.2% year

ment costs in the aqua business and electronics

on year to ¥108,991 million, and segment income
increased 6.7% to ¥3,582 million.
In Others, sales of activated carbon for use inwater purification and energy-related applications

18

Kuraray Co., Ltd.

As a result, segment sales grew 1.5% year oncomponents business.
As a result, segment sales increased 4.5% year
on year to ¥67,334 million, and segment income
decreased 37.7% to ¥2,493 million.

Performance Forecast for Fiscal 2014
Regarding the operating environment in fiscal 2014, there are

and overseas, and further reducing costs. These measures willconcerns about a temporary economic slowdown in Japan due

lead into the new medium-term management plan that begins

to the increase in the consumption tax rate. Overseas, eco-in fiscal 2015.

nomic forecasts call for a continuing strong economy in theBased on these circumstances, the forecast of operating

United States, a moderate recovery in Europe, a slowdown inresults for fiscal 2014 is as shown below.

China and patchy conditions in other emerging countries. In the

In light of the growth in net sales overseas, we plan to

final fiscal year of GS-III (fiscal years 2012 to 2014), the medium-change our fiscal year end to December 31 from fiscal 2014 interm management plan the Kuraray Group has been carrying

order to standardize accounting periods and handle global busi-

out since fiscal 2012, we will strengthen our capacity for gener-

ness management. Fiscal 2014 will be the nine-month period

ating earnings unaffected by market conditions through mea-

from April to December 2014 for Kuraray Co., Ltd. and its con-sures such as using technological innovation to accelerate

solidated subsidiaries in Japan, and the twelve-month period

development of new products and applications, expanding

from January to December 2014, as it was previously, for con-businesses in fields and markets with growth potential in Japansolidated subsidiaries outside Japan.
(Billions of yen, rounded to the nearest hundred million)

Fiscal 2013 (April 1, 2013 to
December 31, 2013)(Adjusted)

Fiscal 2014 (April 1, 2014 toDecember 31, 2014)(Forecast)

Change(Adjusted)(Reference) Forecast for the
Next Fiscal Year Based on thePrevious Accounting Period

Net Sales

339.9

385.0

+13.3%

460.0

Operating Income

38.3

44.0

+14.9%

57.0

Ordinary Income

38.4

43.0

+12.0%

56.0

Net Income

23.1

26.0

+12.6%

34.5

For fiscal 2014, we assume average exchange rates of ¥105 to the U.S. dollar and ¥140 to the euro, as well as a domestic
naphtha price of ¥72,000 per kiloliter.
(Reference) Forecast of Results by Segment for Fiscal 2014
(Billions of yen, rounded to the nearest hundred million)

Net Sales

Operating Income

Fiscal 2013 (April 1, 2013 to
December 31, 2013)(Adjusted)

Fiscal 2014 (April 1, 2014 toDecember 31, 2014)(Forecast)Fiscal 2013 (April 1, 2013 to
December 31, 2013)(Adjusted)

Fiscal 2014 (April 1, 2014 toDecember 31, 2014)(Forecast)

Vinyl Acetate

160.7

187.5

36.2

39.5

Isoprene

42.0

48.0

3.9

5.0

Functional Materials

38.8

45.5

1.1

2.0

Fibers and Textiles

34.7

35.5

2.1

2.0

Trading

80.9

85.0

2.5

2.5

Others

50.2

53.0

1.7

2.0

Corporate and eliminations(67.3)(69.5)

(9.3)

(9.0)

Total

339.9

385.0

38.3

44.0

Annual Report 201419

Corporate Governance and Internal Control

Corporate Governance
Basic Philosophy on Corporate Governancethem to be independent. No personal, capital, transactional or

Kuraray believes that the maintenance of appropriate relation-other relationship that would present a conflict of interest

ships with various stakeholders, including shareholders, andexists between Kuraray and the outside directors.

the fulfillment of social responsibilities are consistent with its

Kuraray has entered into agreements with its outside

objective of achieving long-term improvement in businessdirectors, limiting their liability for damage as stipulated inresults and sustainable growth as a global company. Kuraray

Article 423, Paragraph 1 pursuant to Article 427, Paragraph 1

believes it is a fundamental and important obligation to fulfill itsof the Companies Act of Japan. Such agreements limit thesocial responsibilities by enhancing corporate governance andliability amount as set forth in such Act. However, such limi-

establishing highly transparent and fair corporate management.

tation of liability is approved only if the applicable outside

As a company with a Board of Corporate Auditors, Kuraraydirector has executed his duties in good faith without knowl-has established a corporate governance system centered on its

edge of or committing gross negligence. As the chief execu-

Board of Directors and Board of Corporate Auditors to improve

tive responsible for business execution, the president

the effectiveness of supervisory and monitoring functions

appointed by the Board of Directors exercises control overwhile maintaining management efficiency and to provide guid-the execution of business in the Kuraray Group. Every execu-

ance for issues including management compensation, selection

tive officer (one-year term of office) appointed by the Boardof new company officers, internal controls and risk management.

of Directors is responsible for business execution in the
Kuraray Group organization. As the heads of internal compa-

Corporate Governance Systems

nies, divisions and major functional organizations, the execu-

1. Board of Directors and Executive Organization

tive officers bear responsibility for operations and profit.

The Board of Directors (convenes at least once a month),Some directors hold concurrent positions as executive officers.
The president has established the Executive Committee

according to the Board of Directors’ Regulations, deliberates
and decides important management matters, including legal(in principle, convenes twice a month) and various othermatters, and supervises the execution of business. The

councils and committees to deliberate and report on

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

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

policies and business execution.

including two outside directors. Outside director candidates
should have careers and professional experience that enable

Shareholders Meeting
Appointment / Dismissal

Twelve directors(including two outside directors)
Appointment /Dismissal

Internal Auditors Ofﬁce
Auditing

ReportingAppointment / Dismissal

Appointment / Dismissal
ReportingBoard of Directors
Auditing

Appointment /Dismissal /Supervision

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

Approval of selection and reappointment

Staff for Corporate Auditors

Auditing

President
Instructions

Accounting Auditor

Reporting on results of deliberations

Executive Committee

AdviceManagement Advisory Council
Six permanent members(including four outside experts)

CSR Committee(Deliberation on important matters)
Bringing up important matters for deliberation

Executive Ofﬁcers(Execution of business)

Internal Companies, Functional Organizations, Group Companies

20

Kuraray Co., Ltd.

2. Board of Corporate Auditors

Kuraray has entered into agreements with outside auditors,

The Board of Corporate Auditors consists of five corporate audi-

limiting their liability for damage as stipulated in Article 423,

tors, including three outside corporate auditors with extensive

Paragraph 1 pursuant to Article 427, Paragraph 1 of theexperience in areas including finance, law and management

Companies Act of Japan. Such agreements limit the liability

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

amount as set forth in such Act. However, such limitation of

corporate auditor candidates should have careers and profes-

liability is approved only if the applicable outside auditor has

sional experience that enable them to be independent. No per-executed his duties in good faith without knowledge of or

sonal, capital, transactional or other relationship that would

committing gross negligence.

present a conflict of interest exists between Kuraray and theoutside corporate auditors. The corporate auditors attend meet-

3. Management Advisory Council

ings of the Board of Directors and other important meetings,

Kuraray has established the Management Advisory Council toand monitor the directors’ performance of duties through inqui-serve as a consultative body to give the president advice fromries conducted by such means as the examination of importantthe perspectives of compliance, the protection of shareholder

documents and requests for explanations of the state of businessrights and management transparency. The Council consists ofaffairs. In principle, the Board of Corporate Auditors convenes

six permanent members, including a majority of four outsidemonthly. The corporate auditors regularly have meetings withexperts with a wealth of experience in corporate management

the accounting auditor, PricewaterhouseCoopers Aarata, andor corporate legal affairs. The Council convenes twice a year to

the Internal Auditors Office (consisting of eight members),

advise the president on such matters as important manage-

which conducts internal audits. In these meetings, they receive

ment policies and issues, succession of the president, selection

reports on audit content and share information concerning audit

of successor candidates and compensation for the president.

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

4. Status of Accounting Auditor

companies to ensure subsidiary audits are performed appropri-

No special interests exist between Kuraray and the accounting

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

sisting of the subsidiary auditors to deepen their understanding

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

such auditing firm voluntarily takes steps to ensure the engagement partners are not involved in audits of Kuraray for longer
than the prescribed period of time.

Internal Control
Basic Philosophy on Internal Control
The Kuraray Group recognizes that maintaining and operatinginternal controls are important management tasks. The Boardof Directors has determined the following five categories basedon the Basic Policy for Establishment of an Internal Control

3. Systems to ensure appropriate work practices of thecorporate group
4. Systems to ensure effective execution of the corporate
auditors’ duties
5. Internal control maintenance and operation is administered

System.

such that the Internal Auditors Office conducts internal

1. Systems for risk management and to ensure compliance

audits of the Kuraray Group and the corporate auditorswith laws and regulations by directors and employees

conduct audit and oversight of the execution of duties by

2. Systems to ensure efficient execution of duties by the

directors

directors and the storage and management of information
regarding such execution

Annual Report 201421

Board of Directors, Corporate Auditors and Executive Officers(As of June 20, 2014)

Board of Directors
Representative Director and President
April
June
June
June
April

1971
2003
2004
2006
2008

Representative Director and Primary Executive Officer

Entered Kuraray Co., Ltd.
Executive Officer
Senior Executive Officer
Managing Director
Representative Director and President(Current position)

Fumio Ito

Chief Technology Officer (CTO),
Officer Responsible for Research and Development Division and
New Business Development Division

April
June
June
June
April

Setsuo Yamashita

Director and Primary Executive Officer

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

April 1973 Entered Kuraray Co., Ltd.
April 2005 President of EVAL Company, Specialty Resin and Film
SectorJune 2006 Executive Officer
April 2010 President of Resin Company
June 2010 Director and Senior Executive Officer
April 2013 President of Vinyl Acetate Company (Current position)
June 2013 Director and Primary Executive Officer (Current position)

April 1974 Entered Kuraray Co., Ltd.
April 2005 President of Fibers and Industrial Materials Company,
Fibers and Textiles Sector
June 2007 Executive Officer
April 2010 President of Fibers and Textiles Company (Current position)
June 2010 Director and Senior Executive Officer (Current position)
October 2011 Officer Responsible for Osaka Head Office (Current
position)

Kazuhiro Tenkumo

Director and Senior Executive Officer

Director and Senior Executive Officer

Officer Responsible for Accounting and Finance Division

Officer Responsible for Technology Division and Plants in Japan

April
June
June
April

April 1975 Entered Kuraray Co., Ltd.
June 2010 Executive Officer
April 2012 Officer Responsible for Technology Division (Current
position) and Plants in Japan (Current position)
June 2012 Director and Senior Executive Officer (Current position)

Entered Kuraray Co., Ltd.
Executive Officer
Senior Executive Officer (Current position)
Officer Responsible for Corporate Management Planning
Division, Accounting and Finance Division (Current
position) and CSR Division
June 2012 Director (Current position)

1973
2006
2010
2012

Yuichi Kawarasaki

Kunio Yukiyoshi

Director and Senior Executive Officer

Director and Senior Executive Officer

Officer Responsible for General Affairs and HR Division, Purchasing
and Logistics Division and Environmental Business Development
and Promotion DivisionNobuo Fujii

22

Kuraray Co., Ltd.

Entered Kuraray Co., Ltd.
Executive Officer
Director and Executive Officer
Director and Senior Executive Officer
Chief Technology Officer (CTO) (Current position),
Officer Responsible for New Business Development
Division (Current position)
June 2012 Representative Director and Primary Executive Officer(Current position)
April 2013 Officer Responsible for Research and Development
Division (Current position)

Director and Senior Executive Officer

President of Vinyl Acetate Company

Keiji Murakami

1975
2009
2010
2011
2012

April 1975 Entered Kuraray Co., Ltd.
June 2010 Executive Officer
April 2012 Officer Responsible for General Affairs and HR Division(Current position), Purchasing and Logistics Division(Current position), Global Business Management Division
and Overseas Affiliated Companies
June 2012 Senior Executive Officer (Current position)
April 2013 Officer Responsible for Environmental Business
Development and Promotion Division (Current position)
June 2013 Director (Current position)

President of Functional Materials Company

April
June
April
June
April

Entered Kuraray Co., Ltd.
Executive Officer
President of Kuraray Noritake Dental Inc.
Senior Executive Officer (Current position)
President of Functional Materials Company (Current
position)
June 2013 Director (Current position)

Sadaaki Matsuyama

1975
2010
2012
2012
2013

Director and Senior Executive Officer

Director and Senior Executive Officer

Vice President of Vinyl Acetate Company,
General Manager of EVAL Division, Vinyl Acetate Company

Officer Responsible for Corporate Management Planning Division
and CSR Division,
General Manager of Corporate Planning Division

April 1976 Entered Kuraray Co., Ltd.
June 2012 Executive Officer
April 2013 Vice President of Vinyl Acetate Company (Current
position),
General Manager of EVAL Division, Vinyl Acetate Company(Current position)
June 2013 Senior Executive Officer (Current position)
June 2014 Director (Current position)

Kazuhiko Kugawa

Masaaki Ito

Director

April 1980 Entered Kuraray Co., Ltd.
June 2012 Executive Officer
April 2013 Vice President of Functional Materials Company,
General Manager of Methacrylate Division, Functional
Materials Company
June 2013 Senior Executive Officer (Current position)
April 2014 Officer Responsible for Corporate Management Planning
Division (Current position), CSR Division (Current
position), General Manager of Corporate Management
Planning Division (Current position)
June 2014 Director (Current position)

Director
April 1966
July 1990
June 1993
July 1997
June 1998
February 2000

Entered Economic Planning Agency of Japan (EPA)
Director, Minister’s Secretariat Division, EPA
Deputy Director-General, Social Policy Bureau, EPA
Director-General, Coordination Bureau, EPA
Administrative Vice-Minister, EPA
President, National Institute for Research Advancement(NIRA)
June 2008 Director, Kuraray Co., Ltd. (Current position)
Chairman, Economic Research Association
October 2009 Chairman, the Institute for Science of Labour (Current
position)Takafusa Shioya1

Tomokazu Hamaguchi1

April 1967 Entered Nippon Telegraph and Telephone Public
Corporation
June 1995 Senior Vice President, NTT Data Communications Systems
Corporation (Currently NTT Data Corporation)
June 1997 Executive Vice President, NTT Data Corporation
June 2001 Senior Executive Vice President, NTT Data Corporation
June 2003 President and CEO, NTT Data Corporation
June 2007 Director and Senior Corporate Advisor, NTT Data
Corporation
June 2008 Board Director, IHI Corporation (Current position)
June 2009 Senior Corporate Advisor, NTT Data Corporation
June 2010 Director, East Japan Railway Company (Current position)
June 2013 Director, Kuraray Co., Ltd. (Current position)

Corporate Auditors
Standing Corporate Auditors

Yoichi Ninagawa

Corporate Auditors

Mitsuaki Manabe

Mie Fujimoto2

Yoshimitsu Okamoto2

Mikio Nakura2

1. Directors Takafusa Shioya and Tomokazu Hamaguchi are independent outside Directors.
2. Corporate Auditors Mie Fujimoto, Yoshimitsu Okamoto and Mikio Nakura are independent outside Corporate Auditors.

Executive Officers
Senior Executive Officers

Yukiatsu Komiya
President of Isoprene Company

Hiroaya Hayase
General Manager of Poval Resin Division, General Manager ofInternational Business Planning Division, Vinyl Acetate Company

Executive Officers

Matthias Gutweiler

Masanori Onodera

Hitoshi Toyoura

General Manager of Okayama Plant

General Manager of Fibers and Industrial Materials Division,
Fibers and Textiles Company

Kazuhiro Nakayama
General Manager of Technology Division

Kenichi Abe

Yukinori Yamane
General Manager of Purchasing and Logistics Division

General Manager of New Business Development Division

Akira Omura

Yoshimasa Sano

General Manager of Production and Technology Management
Division, Vinyl Acetate Company

General Manager of Methacrylate Division, Functional Materials
Company

KEG President, General Manager of PVB Division

George Avdey

Shuichi Takemoto

KAI President

Tsugunori Kashimura
General Manager of Research and Development Division

General Manager of CSR Division

Annual Report 201423

Financial Section:

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

Business Environment

Sales

In the period under review (the fiscal year ended March 31,

Consolidated net sales for the fiscal year ended March 31, 20142014), the depreciation of the yen, which began near the end of(April 1, 2013 to March 31, 2014) increased by ¥44,054 million

the previous fiscal year, continued, while the economy of the($427 million), or 11.9%, compared with the previous fiscal year to

United States was robust. However, economies in Europe and¥413,485 million ($4,014 million). Operating income increased by

China remained stagnant and the pace of growth in emerging¥347 million ($3 million), or 0.7%, to ¥49,545 million ($481 million);countries slowed, causing overall demand to fall short of expecta-

ordinary income increased by ¥753 million ($7 million), or 1.6%, totions. In Japan, although there were expectations of an economic¥49,343 million ($479 million); and net income increased by ¥592

recovery due to an exit from deflation as a result of “Abenomics”

million ($5 million), or 2.1%, to ¥29,390 million ($285 million).

and a last-minute surge in demand ahead of an increase in the
consumption tax rate, the markets in which the Company oper-

Results by Business Segment

ates could not be said to be in a full-fledged recovery.

In line with the structural reorganization carried out on April 1,

Under these circumstances, the Kuraray Group accelerated

2013, the Company has changed its reporting segments fromthe global expansion of its core business to achieve sustained

the first quarter of the fiscal year under review. Comparisons

growth while proactively developing new businesses in theand analyses for the fiscal year are based on segment divisions

water treatment, environment, energy, optical and electronics

following the change.

fields to secure future growth.

Vinyl Acetate
Sales in this segment grew by 15.5% year on year to ¥179,261
million ($1,740 million), while segment income fell by 4.5% year
on year to ¥46,658 million ($452 million). In addition, Kurarayreached an agreement with E.I. du Pont de Nemours andCompany (“DuPont”) of the United States to purchase DuPont’s
vinyl acetate-related operations, with the aim of securing sustainable growth in the Company’s Vinyl Acetate segment.

Net Sales &Operating Income Margin

Net Sales by
Business Segment(¥ Million, %)Net Sales
Operating Income Margin

Vinyl Acetate
Functional Materials
Trading(¥ Million)
Isoprene
Fibers and Textiles
Others413,485
363,191 368,975 369,431
332,880
14.6

14.8
13.3

12.0
9.1

09

24

179,261

155,163

10

Kuraray Co., Ltd.

11

12

13

(FY)

44,81753,02745,14448,552

46,216

46,932

108,760

108,991

64,442

67,334

12

13

(FY)

2) Sales of GENESTAR heat-resistant polyamide resin pro-1) Sales of optical-use PVA films edged down due to sluggish
demand for LCD TVs and continued LCD panel inventory

gressed amid favorable demand related to LED reflector,

adjustment. Although sales volume of PVA resins expanded,

connector and automotive applications. At the Kashima Plant,

this business saw a temporary cost increase resulting fromconstruction to expand production capacity by 3,000 tons

the prolonged operational shutdown at certain plants in Europe

was completed and operations started.

for construction aimed at improving energy efficiency. Sales of
PVB films were strongly affected by economic stagnation in

Functional Materials

Europe and bore increased costs related to developing prod-

Sales in this segment grew by 7.5% year on year to ¥48,552

ucts for automotive applications. On the other hand, sales of

million ($471 million), while segment income fell by 22.3% year

water-soluble PVA films grew favorably on the back of brisk

on year to ¥1,500 million ($14 million).

demand. In response, the Company decided to expand its

1) The decrease in profits for methacrylic resin continued due towater-soluble PVA film facilities in the United States and isintensifying competition and higher raw material and fuel prices.

moving ahead with construction, with start-up scheduled for2) In the medical business, sales of dental materials were firm.

July 2014.

3) Overall sales of CLARINO man-made leather remained slug-2) Sales of EVAL ethylene vinyl alcohol copolymer (EVOH resin)gish as sales of products created using new processes wereexpanded favorably, particularly in the United States and Asia.

not as brisk as expected, although the transfer of the exist-

In the United States, construction to increase production

ing process to China as part of structural improvements pro-capacity by 12,000 tons was completed and operations started.

ceeded smoothly.

Isoprene

Fibers and Textiles

Sales in this segment grew by 18.3% year on year to ¥53,027

The performance of KURALON was favorable in automotive

million ($514 million), and segment income increased by 41.4%

brake hose applications and for use as an asbestos substitute inyear on year to ¥5,471 million ($53 million).

fiber reinforced cement (FRC). As a result, sales in this seg-1) In isoprene chemicals, although demand was sluggish forment grew by 1.5% year on year to ¥46,932 million ($455 mil-liquid rubber, demand for fine chemicals and SEPTON ther-lion), and segment income increased by 48.6% year on year to

moplastic elastomer rebounded.

¥2,633 million ($25 million).

Net Sales byGeographic Segment
Asia
EuropeNorth America
Domestic

Net Income &Net Income per Share (Primary)(¥ Million)

Net Income
Net Income per Share (Primary)(¥ Million, ¥)28,798 29,390

28,742

49,08590.35

71,575
82.55

56,177(¥ Million)

74,66031,46925,203
18,112 17,355 18,362
25,842 33,222
16,407 25,770
21,73757,944 59,982 56,792

Interest-Bearing Debt

82.62

83.93

12

13

65,773 65,762

69,08965,33016,315

238,55609

261,36310

265,795

11

261,05412

267,620

13

(FY)

46.86

09

10

11

(FY)

09

10

11

12

13

Annual Report 2014

(FY)

25

Trading

finished goods, work-in-process, and raw materials andAlthough some businesses were impacted by the weak econo-

supplies) increased by ¥5,341 million ($51 million) to ¥88,634

my, sales in other businesses such as fiber-related materials

million ($860 million), and inventory turnover (the number ofwere firm. As a result, segment sales increased by 0.2% year

months’ sales in inventory) was 2.6 months. Current assets

on year to ¥108,991 million ($1,058 million), and segment

increased by ¥45,190 million ($438 million) or 17.6% toincome increased by 6.7% to ¥3,582 million ($34 million).

¥302,402 million ($2,935 million). Working capital (current
assets less current liabilities) increased by ¥67,494 million ($655

Othersmillion) to ¥213,257 million ($2,070 million).

Sales of activated carbon for use in water purification and

The current ratio (current assets divided by current liabilities)

energy-related applications grew steadily. Other items wereincreased to 339.2% from fiscal 2012’s 230.8%. Tangible fixed

affected overall by the weak economy. In addition, the perfor-

assets increased by ¥40,945 million ($397 million) to ¥222,219

mance of this segment was affected by increases in development

million ($2,157 million). This included factors such as ancosts in the aqua business and the electronics components

increase in buildings and structures (net) of ¥2,769 million ($26business. As a result, segment sales increased by 4.5% year on

million) to ¥44,707 million ($434 million), an increase inyear to ¥67,334 million ($653 million), and segment income

machinery, equipment and vehicles (net) of ¥9,623 million ($93

decreased by 37.7% to ¥2,493 million ($24 million).

million) to ¥91,921 million ($892 million) and an increase inconstruction in progress of ¥26,813 million ($260 million) to¥59,139 million ($574 million). Intangible fixed assets increased

Financial Positionby ¥5,874 million ($57 million) to ¥57,198 million ($555 million).
Investments and other assets decreased by ¥45,011 million

As of March 31, 2014, cash and deposits stood at ¥49,746($437 million) to ¥52,431 million ($509 million). Total assets

million ($482 million), an increase of ¥3,595 million ($34 million)

increased by ¥46,998 million ($456 million) to ¥634,252 million

compared to the end of the previous fiscal year. Notes and($6,157 million), and return on assets (operating income divided

accounts receivable – trade increased by ¥7,276 million ($70by average total assets for the period) decreased by 0.8 points

million) to ¥91,119 million ($884 million). Short-term investment

from the previous fiscal year to 8.1%.

securities increased by ¥26,605 million ($258 million) to

Current liabilities decreased by ¥22,304 million ($216 million)¥58,301 million ($566 million). Inventories (merchandise andNumber of Months’
Sales in Inventory

to ¥89,145 million ($865 million), due primarily to a decrease in

Total Current Assets &Total Current Liabilities(Months)

Total Current Assets
Total Current Liabilities(¥ Million)

310,594
2.7

2.6

2.1

Shareholders’ Equity
Equity Ratio(¥ Million, %)445,836

302,402
269,083

249,326

2.4

Shareholders’ Equity* &Equity Ratio

394,756
334,583 343,105

257,212360,020

2.0
66.5

67.6

68.8

67.2

09

10

11

12

70.3

111,449

89,14576,550 86,214 81,684

09

10

11

12

13

(FY)

09

10

11

12

13

(FY)

13

(FY)

* Shareholders’ equity = Total net assets – Minority interests– Subscription rights to shares

26

Kuraray Co., Ltd.

Financial Review

notes and accounts payable – trade of ¥1,655 million ($16

retirement benefits trust of ¥7,000 million ($67 million) andmillion) to ¥35,393 million ($343 million) and a decrease inincome taxes paid of ¥17,273 million ($167 million).

short-term loans payable of ¥17,775 million ($172 million) to

Cash Flows from Investing Activities¥13,143 million ($127 million).
Noncurrent liabilities increased by ¥18,150 million ($176

Net cash provided by investing activities totaled ¥22,293 million

million) to ¥92,647 million ($899 million).

($216 million). The major component providing cash was a net

Net assets increased by ¥51,152 million ($496 million) to

decrease in invested assets including investment securities of¥452,459 million ($4,392 million). Subtracting minority interests¥85,843 million ($833 million). Major components using cash

and subscription rights to shares totaling ¥6,623 million ($64included the purchase of tangible fixed assets and intangible

million), shareholders’ equity was ¥445,836 million ($4,328

fixed assets of ¥58,414 million ($567 million) and payments formillion) mainly due to an increase in retained earnings andacquisition of business of ¥1,379 million ($13 million).

positive foreign currency translation adjustment. The equity
ratio for the period was 70.3%, up 3.1% from March 31, 2013.

Cash Flows from Financing Activities
Net cash used in financing activities was ¥15,427 million ($149

Cash Flows from Operating Activities

million). The major component providing cash was proceeds

Net cash provided by operating activities totaled ¥61,175 million

from long-term loans payable of ¥20,129 million ($195 million).

($593 million) in the fiscal year ended March 31, 2014, a

Major components using cash included repayment of long-term

decrease of ¥5,736 million ($55 million) compared with the pre-loans payable of ¥24,008 million ($233 million) and cash divi-

vious fiscal year. Major components providing cash included

dends paid of ¥12,584 million ($122 million).

income before income taxes and minority interests of ¥45,598

Taking into account the effect of exchange rate changes on

million ($442 million), depreciation and amortization of ¥34,972

cash and cash equivalents and the increase in cash and cash

million ($339 million) and a decrease in inventories of ¥1,835

equivalents from newly consolidated subsidiaries, in addition tomillion ($17 million). Major components using cash included an

the aforementioned factors, cash and cash equivalents at theincrease in notes and accounts receivable – trade of ¥2,473 mil-end of the fiscal year increased by ¥70,756 million ($686 mil-lion ($24 million), a decrease in notes and accounts payable –lion) from the end of the previous fiscal year to ¥100,642 million

trade of ¥3,894 million ($37 million), contribution to employees’($977 million).

ROE

Total Assets & ROA(%)

Gross Cash Flow

Total Assets
ROA(¥ Million, %)Net Income
Depreciation and Amortization(¥ Million)

634,252
587,254502,815 507,328
8.5

523,247

62,278 62,206

9.0
52,804
10.5

10.6
16,315

7.6

28,742 31,469

29,39028,798

8.8

7.0

8.1
6.2

5.0

36,48909

64,36259,750

10

11

12

13

(FY)

09

10

11

12

13

(FY)

09

33,53630,737 30,952

10

11

12

34,972

13

Annual Report 2014

(FY)

27

Capital Expenditure

Regarding the operating environment in the fiscal period ending December 31, 2014, there are concerns about a temporary

Capital investment by the Kuraray Group (Kuraray and consoli-

economic slowdown in Japan due to the increase in the con-dated subsidiaries) amounted to ¥59,740 million ($580 million)

sumption tax rate. Overseas, economic forecasts call for ain fiscal 2013, mainly for expansion of production capacity forstrong economy in the United States, a moderate recovery in

PVA resin. By segment, capital investment amounted toEurope, a slowdown trend in China and patchy conditions in¥41,191 million ($399 million) in the Vinyl Acetate segment,

other emerging countries. In the final fiscal year of GS-III (fiscal¥5,236 million ($50 million) in the Isoprene segment, ¥3,807

years 2012 to 2014), the medium-term management plan the

million ($36 million) in the Functional Materials segment, ¥4,241

Company has been carrying out since fiscal 2012, we will work

million ($41 million) in the Fibers and Textiles segment, ¥93 mil-to accelerate the development of new products and applica-

lion ($0 million) in the Trading segment, and ¥3,561 million ($34

tions through technological innovations, expand businesses inmillion) in the Others segment. General (non-segment) capital

markets and business areas with growth potential in Japan andinvestment amounted to ¥1,608 million ($15 million).

overseas, and strengthen our capacity for generating earnings
unaffected by the market environment through measures suchas additional cost reductions. These measures will lead into the

Outlook for the Fiscal Period Ending
December 31, 2014

new medium-term management plan that begins in fiscal 2015.
Taking these circumstances into account, our forecasts for theperiod ending December 31, 2014 are net sales of ¥385.0 billion,

Please note that in light of the growth in net sales overseas, weoperating income of ¥44.0 billion, ordinary income of ¥43.0 billion

plan to change our fiscal year end to December 31 from theand net income of ¥26.0 billion. We assume average exchange

next fiscal year in order to standardize accounting periods andrates of ¥105 to the U.S. dollar and ¥140 to the euro, as well as ahandle global business management. Fiscal 2014 will be thedomestic naphtha price of ¥72 thousand per kiloliter.

nine-month period from April to December 2014 for theCompany and its consolidated subsidiaries in Japan, and thetwelve-month period from January to December 2014, as it waspreviously, for consolidated subsidiaries outside Japan.

Capital Expenditure by
Business Segment
Vinyl Acetate
Functional Materials
Trading
Corporate(¥ Million)
Isoprene
Fibers and Textiles
Others41,191
26,450

5,521

5,236

3,818

3,807

4,436
40

4,241
3,892

1,358

12

28

Kuraray Co., Ltd.

3,561

1,608

13

93

(FY)

Risk Management

Risks that could have a significant impact on the Kurarayparties, or damage to the assets of the Kuraray Group, or halt ofGroup’s performance (results of operations and financial

manufacturing operations for long periods.

position) are discussed below. Forward-looking statements inIn the event of accidents or disasters at suppliers who

the following sections represent the Kuraray Group’s best

discharge such functions as providing important raw materials,

judgment as of March 31, 2014.

facilities, maintenance parts and services, there are risks that
could affect our product supply.

i) Risks associated with the changes inbusiness environment
The Kuraray Group has a diversified business portfolio and ouriii) Risks associated with litigation and violation oflaws and regulations

products are geared to global markets with a variety of uses

The Kuraray Group operates numerous businesses based on

and applications. Many of our products are original specialty

our proprietary technologies, posing the risks of serious

chemical materials that are less susceptible to the fluctuations

infringement of our intellectual properties, or litigation involving

in the commodity markets compared with those in otherour rights in the future.

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

Meanwhile, we are supplying many products that play

are geared to the growing business areas including electric andsignificant roles in assuring the quality of the final products inelectronic materials, automotive and environmental applications

areas such as automotive products, electric and electronic

on which our overall business performance is increasingly

materials, medical products and food packaging. As such, in thedependent. In these areas, market environment can undergo

event of a large-scale product recall caused by defective quality,

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

there are risks of major financial losses including liability losses

standards for final products, shorter product cycles andthat cannot be fully covered by existing product liability insurance.

worldwide competition in product development. Therefore, we

Also, despite our utmost efforts to comply with laws andmay also face drastic changes in market environment andregulations at each of our operating facilities, there are risks

competitive conditions for our products.

that a major breach of legal compliance could interrupt our

Meanwhile, we manufacture products such as chemicalbusiness activities.

products, synthetic resins, synthetic fibers and textiles out of
the raw materials such as ethylene and other petrochemicaliv) Risks associated with changes in exchange rates

products that are susceptible to the fluctuations in the markets

The Kuraray Group is expanding our manufacturing and salesof crude oil and natural gas. Violent fluctuations in these raw

operations in Japan and in various overseas regions, including

material markets could significantly impact our production costs.

Europe, North America and Asia. Export prices of the Kuraray

The Company is exposed to the risk that it will be forced toGroup’s domestically manufactured products are affected bydownsize or close down certain areas of our main businesseschanges in exchange rates. In sales of products manufactured

as a consequence of the changes in the business environment

at our overseas bases, procurement and sales prices inas described above.

different currency blocks and the value of foreign-currencydenominated assets and liabilities are affected by changes inii) Risks associated with accidents and disasters

exchange rates. It is possible that the Kuraray Group will be

The Kuraray Group has manufacturing facilities in Japan,

affected negatively by exchange rate fluctuations if they exceed

Europe, North America and Asia. Many of these facilities are

the scope of our assumption.

large-scale chemical plants. Although risk management is inplace by geographically spreading the locations of importantv) Other risks

production plants and arranging property and casualty insuranceWith the global development of our businesses, there are risks

on them, in the event of serious security incidents, release ofthat fortuitous external events such as war, riot, terrorism or an

pollutants or natural disasters, there are risks that could cause

epidemic could disrupt our business activities.

personal injury or property damage to employees or third

Annual Report 201429

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

Thousands of
U.S. dollars

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013

1 Cash and deposits ..........................................................................

¥ 49,746¥ 46,151$ 482,970

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

91,11983,843884,650

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

58,301

31,696566,029

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

60,98457,823592,077

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

11,992

10,332

116,427

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

15,65815,138152,019

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

5,889

5,732

57,1748 Other ..............................................................................................

9,175

7,237

89,0779 Allowance for doubtful accounts ....................................................

(465)

(742)

(4,514)

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

302,402257,2122,935,941(1) Buildings and structures, net*2 and 5..............................................

44,70741,938434,048(2) Machinery, equipment and vehicles, net*2 .................................

91,921

82,298892,436(3) Land..................................................................................

21,481

20,425208,553(4) Construction in progress ............................................................

59,13932,326574,165

March 31, 2013 and 2014ASSETSI

Current assets:*6II

Noncurrent assets:
1 Tangible fixed assets:*2 and 5(5) Other, net ................................................................................

4,970

4,285

48,252

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

222,219

181,274

2,157,466(1) Goodwill .....................................................................................

26,59824,659258,233(2) Other..........................................................................................

30,60026,664

297,087

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

57,19851,324555,320(1) Investment securities*3 and 5 ........................................................

39,28583,543

381,407(2) Long-term loans receivable ........................................................

297

679

2,883

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

2,031

—

19,718(4) Deferred tax assets ....................................................................

6,260

2,744

60,776(5) Prepaid pension cost ..................................................................

—

5,437

—

(6) Other..........................................................................................

4,604

5,114

44,699*22 Intangible fixed assets:

3 Investments and other assets:(7) Allowance for doubtful accounts ................................................

(47)

(76)

(456)

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

52,431

97,442509,038

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

331,849

330,041

3,221,834

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

¥634,252¥587,254$6,157,786

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

30

Kuraray Co., Ltd.

Thousands of
U.S. dollars

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013

1 Notes and accounts payable–trade*6 ...............................................

¥ 35,393¥ 37,048$ 343,621

2 Short-term loans payable ..............................................................

13,14330,918

127,601

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

8,073

8,650

78,3784 Income taxes payable .....................................................................

7,272

7,687

70,601

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

6,931

6,590

67,291March 31, 2013 and 2014

LIABILITIESICurrent liabilities:*5

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

51

21

495

7 Other .............................................................................................

18,28020,531

177,475

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

89,145

111,449

865,485

1 Bonds payable ................................................................................

10,00010,00097,087

2 Long-term loans payable*5 ..............................................................

42,18728,171

409,582

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

18,343

14,872

178,087

4 Provision for retirement benefits ....................................................

—

6,665

—

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

161

178

1,563

6 Provision for environmental measures............................................

886

1,051

8,601

7 Net defined benefit liabilities ..........................................................

5,448

—

52,8938 Asset retirement obligations ...........................................................

2,656

2,336

25,786

9 Other ..............................................................................................

12,962

11,221

125,844

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

92,64774,497899,485

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

181,793

185,947

1,764,980

1 Capital stock ..................................................................................

88,95588,955

863,640

2 Capital surplus ................................................................................

87,147

87,147

846,087

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

279,616

263,2622,714,718

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

(38,425)(40,169)(373,058)

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

417,293

399,195

4,051,388

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

6,944

6,076

67,417

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

(4)

(17)

(38)

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

27,025(9,877)

262,378

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

(5,424)(622)(52,660)

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

28,541(4,440)277,097

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

1,005

1,221

9,757

*6

II

Noncurrent liabilities:

NET ASSETS

I

II

Shareholders’ equity:

Accumulated other comprehensive income:IV Minority interests.............................................................................

5,618

5,330

54,543TOTAL NET ASSETS ........................................................................

452,459

401,3074,392,805

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

¥634,252¥587,254$6,157,786

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

Annual Report 201431

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

Consolidated Statements of Income

Thousands of
U.S. dollars

Millions of yen

Years ended March 31, 2013 and 2014

Fiscal 2013

Fiscal 2012

Fiscal 2013

III

¥413,485
286,179
127,306¥369,431
249,485
119,946$4,014,417
2,778,436
1,235,980

19,66658,094
77,76049,545

18,841
51,90670,74849,197

190,932
564,019754,951
481,019

1 Interest income ..............................................................................
2 Dividends income ...........................................................................
3 Equity in earnings of affiliates .........................................................
4 Other ..............................................................................................
Total non-operating income .........................................................

583
2,437
1
1,215
4,236

449
2,475
2
1,234
4,161

5,660
23,6609
11,796
41,126

Non-operating expenses:
1 Interest expenses ...........................................................................
2 Personnel expenses for seconded employees ................................
3 Loss on disposal of tangible fixed assets........................................
4 Other ..............................................................................................
Total non-operating expenses .....................................................
Ordinary income ...........................................................................

936
684
564
2,251
4,438
49,343

966
719
560
2,522
4,769
48,590

9,087
6,640
5,475
21,85443,087
479,058

VI Extraordinary loss:
1 Expenses incurred upon acquisition*3 and 4........................................
2 Expenses for suspension of operation*5..........................................
3 Loss on disposal of tangible fixed assets*6 .....................................
4 Impairment loss*7............................................................................
5 Loss on valuation of investment securities*8 ...................................
6 Business structure improvement losses*9 .......................................
7 Amortization of goodwill*10 ..............................................................
8 Environmental expenses.................................................................
Total extraordinary loss ...............................................................
Income before income taxes and minority interests ..................

2,174
829
621
118
—
—
—
—
3,744
45,598

743
—
613
534
613
597
451
136
3,689
44,901

21,106
8,048
6,029
1,145
—
—
—
—
36,349442,699

Income taxes — current .....................................................................
Income taxes — deferred...................................................................
Total income taxes........................................................................

16,292(519)
15,772

15,882
6
15,889158,174(5,038)153,126

Income before minority interests.................................................
Minority interests ..........................................................................
Net income ....................................................................................

29,826435¥ 29,390

29,011
213¥ 28,798

289,572
4,223$ 285,339

Net sales ...........................................................................................
Cost of sales*2 ...................................................................................
Gross profit ...................................................................................

III Selling, general and administrative expenses:

1 Selling expenses .............................................................................
2 General and administrative expenses*2 ...........................................
Total selling, general and administrative expenses*1 .................
Operating income .........................................................................

IV Non-operating income:V

Consolidated Statements of Comprehensive Income
Years ended March 31, 2013 and 2014

I
II

Income before minority interests ...................................................
Other comprehensive income:1 Valuation difference on available-for-sale securities ........................
2 Deferred gains or losses on hedges ...............................................
3 Foreign currency translation adjustment .........................................
4 Remeasurements of defined benefit plans .....................................
Total other comprehensive income .............................................

Thousands of
U.S. dollars

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013

¥29,826¥29,011$289,572

868
13
36,90221
37,8063,313
14
14,542(228)
17,6418,472
126358,271203
367,048

67,632

46,653656,621

67,196436

46,439213

652,388
4,233

III Comprehensive income
Comprehensive income attributable to
1 Owners of the parent .....................................................................
2 Minority interests ...........................................................................
The accompanying notes are an integral part of the financial information.

32

Kuraray Co., Ltd.

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

Millions of yen
Shareholders’ equity
CapitalsurplusRetainedearnings¥88,955¥87,147¥263,262¥(40,169) ¥399,195

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

(12,584)(12,584)

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

29,39029,390Change of scope of consolidation .................

(402)

(402)

Balance at April 1, 2013 ..................................

Treasury
stock

Total
shareholders’equityCapital stock

Fiscal 2013 (Year ended March 31, 2014)

Changes of items during the period

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

(49)

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

49

(10)

(10)

1,754

1,705

(49)

—

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

—

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

——

16,353

Balance at March 31, 2014 .............................

¥88,955¥87,147¥279,616

1,743

18,097¥(38,425) ¥417,293

Millions of yen
Accumulated other comprehensive income
Valuation
Foreign
Total
Subscription
Deferreddifference on
currency Remeasurements accumulated otherrights toof definedcomprehensive
available-for-sale gains or losses
translation
sharesbenefitplansonhedgesincomesecurities
adjustment

Balance at April 1, 2013 ..................................

¥6,076¥(17) ¥ (9,877) ¥ (622)¥ (4,440)¥1,221

Minority
interests

Total
net assets¥5,330 ¥401,307

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

—(12,584)

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

—

29,390Change of scope of consolidation .................

—

(402)

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

—

(10)

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

—

1,705

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

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

868

13

36,902(4,802)

32,982(215)

287

33,054

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

868

13

36,902(4,802)

32,982(215)

287

51,152

Balance at March 31, 2014 .............................

¥6,944¥ (4) ¥27,025¥(5,424)¥28,541¥1,005¥5,618 ¥452,459

Annual Report 201433

Thousands of U.S. dollars
Shareholders’ equity
Fiscal 2013 (Year ended March 31, 2014)

Balance at April 1, 2013 ..............................

Capital stock

CapitalsurplusRetainedearnings$863,640$846,087

Treasury
stock

Total
shareholders’equity$2,555,941 $(389,990) $3,875,679

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

(122,174)(122,174)

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

285,339

285,339

Change of scope of consolidation .............

(3,902)(3,902)

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

(475)

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

475

(475)

158,766

(97)

(97)

17,02916,553—

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

—

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

——

Balance at March 31, 2014 .........................

$863,640$846,087

16,922

175,699$2,714,718 $(373,058) $4,051,388

Thousands of U.S. dollars
Accumulated other comprehensive income
Valuation
Foreign
Total
Subscription
Deferreddifference on
currency Remeasurements accumulated otherrights toof definedcomprehensive
available-for-sale gains or losses
translation
sharesonhedgesbenefitplans
incomesecurities
adjustment

Balance at April 1, 2013 ..............................

$58,990$(165)$ (95,893) $ (6,038)$ (43,106) $11,854

Minority
interests

Total
net assets$51,747 $3,896,184

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

—(122,174)

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

—

285,339

Change of scope of consolidation .............

—(3,902)

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

—

(97)

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

—

16,553

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

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

8,427

126

358,271(46,621)

320,213(2,087)

2,786

320,912

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

8,427

126

358,271(46,621)

320,213(2,087)

2,786

496,621

Balance at March 31, 2014 .........................

$67,417$ (38)

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

34

Kuraray Co., Ltd.

$262,378 $(52,660)$277,097 $ 9,757$54,543 $4,392,805

Consolidated Statements of Changes in Net Assets

Millions of yen
Shareholders’ equity
Fiscal 2012 (Year ended March 31, 2013)

Balance at April 1, 2012 ..................................

Capital stock

CapitalsurplusRetainedearnings

Treasurystock¥88,955¥87,147¥246,733

Total
shareholders’equity¥(40,732) ¥382,103

Cumulative effects of changes inaccounting policies
Restated balance ..............................................

—¥88,955¥87,147¥246,733¥(40,732) ¥382,103

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

(12,195)(12,195)

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

28,798Changes of items during the period
28,798Purchase of treasury stock ...........................
Disposal of treasury stock.............................

(73)

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

73

(5)

(5)

569

495

(73)

—

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

—

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

——

16,528

Balance at March 31, 2013 .............................

¥88,955¥87,147¥263,262

563

17,092¥(40,169) ¥399,195

Millions of yen
Accumulated other comprehensive income
Valuation
Foreign
Total
Subscription
Deferreddifference on
currency Remeasurements accumulated otherrights toof definedcomprehensive
available-for-sale gains or losses
translation
sharesbenefitplansonhedgesincomesecurities
adjustment

Balance at April 1, 2012 ..................................

¥2,763¥(32) ¥(24,419)

Cumulative effects of changes inaccounting policies
Restated balance ..............................................

¥(396) ¥(22,084)(148)¥2,763¥(32) ¥(24,419)¥1,151

Minority
interests¥5,143 ¥366,314(148)¥(545) ¥(22,233)

Total
net assets(148)¥1,151¥5,143 ¥366,165

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

—(12,195)

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

—

28,798Purchase of treasury stock ...........................

—(5)

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

—

495

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

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

3,312

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

3,312

Balance at March 31, 2013 .............................

¥6,076

14

14,542

14

14,542¥(17) ¥ (9,877)(77)

17,792

69(77)

17,79269¥(622) ¥ (4,440)¥1,221

187

18,049187

35,141¥5,330 ¥401,307

Annual Report 201435

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

Thousands of
U.S. dollars

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013

Net cash provided by (used in) operating activities:
1 Income before taxes and minority interests ...................................
2 Depreciation and amortization ........................................................
3 Increase (decrease) in allowance for doubtful accounts .................
4 Increase (decrease) in provision for retirement benefits.................
5 Increase (decrease) in net defined benefit liabilities .......................
6 Expenses incurred upon acquisition ...............................................
7 Loss on disposal of tangible fixed assets .......................................
8 Impairment loss ..............................................................................
9 Loss on valuation of investment securities .....................................
10 Amortization of goodwill .................................................................
11 Environmental expenses.................................................................
12 Interest and dividends income ........................................................
13 Interest expenses ...........................................................................
14 Decrease (increase) in notes and accounts receivable–trade .........
15 Decrease (increase) in inventories ..................................................
16 Increase (decrease) in notes and accounts payable–trade ..............
17 Contribution to employee’s retirement benefits trust .....................
18 Decrease (increase) in prepaid pension cost ..................................
19 Decrease (increase) in net defined benefit assets ..........................
20 Other, net........................................................................................
Sub-total ..............................................................................................
21 Interest and dividends income received .........................................
22 Interest expenses paid....................................................................
23 Income taxes (paid) refund .............................................................
Net cash provided by (used in) operating activities.........................

¥ 45,598
34,972
(320)
—
1,070
2,174
621
118
—
—
—
(3,020)936(2,473)
1,835(3,894)(7,000)—300
5,345
76,265
3,121(937)(17,273)
61,175¥ 44,901
30,952
(67)
532
—
743
613
534
613
451
136
(2,925)966
140(4,789)
2,359
—
385
—
6,885
82,432
2,822(988)(17,354)
66,911$ 442,699
339,533(3,106)—
10,388
21,106
6,029
1,145
—
—
—
(29,320)
9,087(24,009)
17,815(37,805)(67,961)—
2,912
51,893
740,436
30,300(9,097)(167,699)
593,932

Net cash provided by (used in) investment activities:
1 Net decrease (increase) in time deposits........................................
2 Net decrease (increase) in short-term investment securities .........
3 Purchase of investment securities ..................................................
4 Proceeds from sales and redemption of investment securities......
5 Purchase of tangible fixed assets and intangible fixed assets ........
6 Payments for disposal of tangible fixed assets and intangible fixed assets....
7 Proceeds from sales of tangible fixed assets and intangible fixed assets ......
8 Purchase of investments in a subsidiary resulting in change in scope of consolidation ...
9 Payments for acquisition of business .............................................
10 Other, net........................................................................................
Net cash provided by (used in) investment activities ......................

22,55918,000(5,158)50,442(58,414)(1,303)
189—(1,379)(2,643)22,293(21,314)
41,991(9,276)
1,366(43,200)(1,360)53(31,233)—(648)(63,622)219,019
174,757(50,077)
489,728(567,126)(12,650)
1,834—(13,388)(25,660)
216,436

1 Net increase (decrease) in short-term loans payable ......................
2 Proceeds from long-term loans payable..........................................
3 Repayment of long-term loans payable ...........................................
4 Purchase of treasury stock ..............................................................
5 Proceeds from sales of treasury stock ...........................................
6 Cash dividends paid ........................................................................
7 Cash dividends paid to minority shareholders ................................
8 Other, net ........................................................................................
Net cash provided by (used in) financing activities .........................

120
20,129(24,008)(10)
1,366(12,584)
(147)
(291)
(15,427)(4,642)
10,230(3,657)(5)368(12,195)(24)(313)(10,239)

1,165
195,427(233,087)(97)
13,262(122,174)(1,427)(2,825)(149,776)

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

2,688
70,73029,88526¥100,642

2,024(4,926)34,811—¥ 29,885

26,097
686,699
290,145252$ 977,106Years ended March 31, 2013 and 2014

I

II

III Net cash provided by (used in) financing activities:

V Net increase (decrease) in cash and cash equivalents ....................
VI Cash and cash equivalents, beginning of year.................................
VII Increase in cash and cash equivalents from newly consolidated subsidiaries ..
VIII Cash and cash equivalents, end of year*1 .........................................
The accompanying notes are an integral part of the financial information.

36

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements
Kuraray Co., Ltd. and its Consolidated Subsidiaries / Years ended March 31, 2014 and 2013

1

Significant Accounting Policies

1. Basis of presenting consolidated financial statementsfrom the scope of consolidation as a result of its

The accompanying consolidated financial statements ofabsorption merger with Kuraray Co., Ltd.

Kuraray Co., Ltd. (the “Company”) and its consolidated
subsidiaries are prepared on the basis of accounting principles(2) Names of major unconsolidated subsidiaries

generally accepted in Japan, which are different in certain(Major unconsolidated subsidiaries)

respects as to application and disclosure requirements ofKuraray Okayama Spinning CO., LTD.

International Financial Reporting Standards, and are filed with

(Reasons for excluding from the scope of consolidation)

the Japanese Ministry of Finance (the “MOF”) as required by

The total assets, total sales and net income and loss

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

retained earnings (amount corresponding to the owned

translations of those filed with MOF.

interest) of the unconsolidated subsidiary have no

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

notes is rounded down to the nearest 1 million yen (in thecase of the translation into U.S. dollars, they have been

3. Scope of application of equity method affiliates andsubsidiaries

rounded down to the nearest 1 thousand dollars).
The United States dollar amounts included herein areprovided solely for the convenience of readers outside Japan(1) Number of unconsolidated subsidiaries accounted forusing the equity method

and are stated, at the rate of ¥103=$1, the approximate
exchange rate prevailing on March 31, 2014. The translations
should not be construed as representations that the Japanese
yen amounts have been, could have been, or could in the

Fiscal 2013

Fiscal 2012

1

1

Number of unconsolidated
subsidiaries accounted forusing the equity method

future be, converted into United States dollars at this or any(Name of unconsolidated subsidiaries)

other rate.

Kuraray Okayama Spinning CO., LTD.
(2) Unconsolidated subsidiaries and affiliates (Hexin Kuraray

2. Scope of consolidation

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

Fiscal 2013

Fiscal 2012

affiliates) have not been accounted for using the equity

33

32

method, because their net income and loss and retained(Major consolidated subsidiaries)
KURARAY TRADING Co., LTD., KURARAY CHEMICAL
CO., LTD., Kuraray Plastics Co., Ltd., KURARAYENGINEERING CO., LTD., KURARAY LIVING CO., LTD.,
Kuraray Techno Co., Ltd., KURARAYKURAFLEX CO.,LTD., TECHNO SOFT CO., LTD., Kuraray Travel Service
Corporation, KURARAY SAIJO CO., LTD., KURARAYTAMASHIMA COMPANY, LIMITED, Iruma Country Club
Co., Ltd., KURASHIKI KOKUSAI HOTEL LTD., KURARAYFASTENING CO., LTD., OKAYAMA RINKOH CO., LTD.,
Kyosei Chemical Co., Ltd., Kuraray Noritake Dental Inc.,
KURARAY AQUA CO., LTD. Kuraray Holdings U.S.A., Inc.,
Kuraray America, Inc., Kuraray Europe GmbH, EVAL
Europe N.V., Kuraray Hong Kong Co., Ltd., Kuraray Asia
Pacific Pte. Ltd., Kuraray (Shanghai) Co., Ltd., MonoSol
Holdings, Inc., Kuraray China Co., Ltd. and 6 otherconsolidated subsidiaries.
KURARAY AQUA CO., LTD. and Kuraray China Co., Ltd.
were added to the scope of consolidation during the
fiscal year ended March 31, 2014 because of theirincreasing significance. Consolidated subsidiary
KURARAY BUSINESS SERVICE CO., LTD. was removed

earnings (amount corresponding to the owned interest)
have no material effect on the consolidated financial
statements.
4. Fiscal years of consolidated subsidiaries
The fiscal year-end of the Company’s foreign consolidated
subsidiaries is December 31. The consolidated financial
statements incorporate the accounts of these companies withadjustments for significant transactions arising during theperiod from December 31 to March 31.
Kuraray Europe GmbHOOO TROSIFOLEVAL Europe N.V.
Kuraray Asia Pacific Pte. Ltd.
Kuraray Hong Kong Co., Ltd.
Kuraray (Shanghai) Co., Ltd.
Kuraray Trading (Shanghai) Co., Ltd.
Kuraray China Co., Ltd
Kuraray Holdings U.S.A., Inc.
Kuraray America, Inc.
MonoSol Holdings, Inc.
MonoSol, LLC
MonoSol AF, LTD.
Annual Report 201437

5. Accounting policies(1) Valuation standards and methods for significant assetsa) Investment securities
Available-for-sale securities for which a market price isavailable are stated at fair value at the year-end.
(Net unrealized gains or losses on these securities

individual accounts.
b) Provision for bonuses
Provision for bonuses is stated at the estimatedamount of the bonuses to be paid to employees basedon services provided for the fiscal year.
c) Provision for directors’ retirement benefits

are recorded as a separate component in “Net assets”,

Some of the consolidated subsidiaries accrue thenet of tax amount. The cost of securities sold is

liabilities for their retirement benefits for directors anddetermined based on the moving average cost of all

corporate auditors, which is, in general, based uponsuch securities held at the time of sale.)

the amounts required by the subsidiaries’ internal

Other securities for which a market price is notavailable are stated at cost determined by the moving
average method.
b) Derivative financial instruments
All derivatives are stated at fair value.
c) Inventories

regulations.
d) Provision for environmental measures
In order to provide for payments on disposal of waste
polychlorinated biphenyl (PCB) removed from thenoncurrent assets and stored, a provision is madebased on the estimated disposal cost.

Finished goods, raw materials, and work-in-process are
principally stated at the lower of cost determined by theweighted average method or net realizable value.
Supplies are principally stated at the lower of cost(4) Accounting treatment of retirement benefit plana) Method for attributing estimated retirement benefits
to individual periods of service

determined by the moving-average method or net

In calculating benefit obligation, the straight-line

realizable value.

method was used to attribute estimated retirement
benefits to periods up to March 31, 2014.

(2) Depreciation method of significant depreciable assetsa) Tangible fixed assets (excluding lease assets)b) Calculation of net actuarial gain or loss and priorservice cost

Depreciation, except for buildings, is primarily

Prior service cost is amortized on a straight-line basis

computed using the declining-balance method over

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

the estimated useful lives of the assets. The

within the average remaining years of service of thedepreciation method for buildings is primarily

eligible employees. Actuarial gains or losses arecomputed using the straight-line method.

amortized on a straight-line basis over a certain period

The estimated useful lives of assets are primarily as(mainly 15 years), which falls within the averagefollows:

remaining years of service of the eligible employees,• Buildings and structures............ 31 to 50 years

allocated proportionately commencing the year

• Machinery, equipment and vehicles ....... 4 to 9 years

following the year in which each respective gain orb) Intangible assets (excluding lease assets)
Amortization is primarily computed using the straightline method.
The numbers of years for amortization are primarily

loss occurred.
c) Use of simplified method among small companies
Certain domestic consolidated subsidiaries calculate
retirement benefit liabilities, assets and expenses

as follows:

using the simplified method that assumes their• Goodwill............ 15 or 20 years

benefit obligation is equal to the benefits payable if all

However, minor amounts are charged or credited
to income directly in the year acquisition.
c) Lease assets

employees voluntarily retired at fiscal year-end.
(Additional Information)
The Company provided ¥7.0 billion to its retirement

Amortization is primarily computed using the straight-

benefit trust during the fiscal year ended March 31, 2014line method.

to increase the soundness of its retirement benefit
finances.

(3) Accounting for significant allowancea) Allowance for doubtful accounts
The Company and its consolidated subsidiaries provide

38(5) Significant hedge accountinga) Hedge accounting

for doubtful accounts principally at an amountThe Company and its consolidated subsidiaries adopt

computed based on the historical bad debt ratio during

the method for hedging instruments whereby any

a certain reference period plus an estimatedgains or losses are deferred over the period of theuncollectible amount based on the analysis of certain

hedging contract and are offset against the deferred

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

losses or gains on the related hedged items. However,Measurement of hedge effectiveness is notwhen an interest rate swap contract meets certain

considered necessary for interest rate swaps thatconditions, the net amount to be paid or received

meet the requirements for special accounting because

under the contract is added to or deducted from thethe Company identifies and confirms the materialinterest on the hedged items.

conditions at the time of transaction.

b) Hedging instruments and hedged items
Hedging instruments

Hedged items(6) Amortization of goodwill

Forward foreign exchange
contracts

Future transactions in foreign
currency

The Company amortizes goodwill using the straight-line

Currency swap contracts

Future transactions in foreign
currency

exception of minor amounts, which are charged orInterest rate swap contracts

Interest expensesc) Hedging policy

method over the estimated period of benefit with thecredited to income directly in the year of acquisition.
(7) Cash and cash equivalents

The Company and its consolidated subsidiaries use

Cash and cash equivalents include all highly liquid

financial instruments to hedge interest rate fluctuation

investments with a maturity of three months or less, thatand exchange fluctuation risks in accordance with their

are readily convertible to known amounts of cash whichinternal policies and procedures.

are subject to an insignificant risk of changes in value.

d) Assessment method for hedge accounting
The Company identifies and confirms the material

2(8) Other accounting policies

conditions and measures the effectiveness of forward

Accounting for consumption tax

foreign exchange contracts and currency swaps

Consumption tax and local consumption tax on goods

associated with planned transactions denominated inand services are not included in the revenue andforeign currencies.

expenses amounts.

Changes in Accounting Policies Accompanying Revision or Other Changes in Accounting and Other Standards(1) Application of “Employee Benefits”(except for the provisions set forth in Clause 35 of the

From the fiscal year ended March 31, 2014, for someAccounting Standard for Retirement Benefits and Clauseforeign subsidiaries, the Company applied “Employee

67 of the Guidance on Retirement Benefits).

Benefits” (International Accounting Standards Board,

The Company has changed its accounting method toInternational Accounting Standard No. 19, June 16, 2011).

post retirement benefit obligations less pension assets as

Accordingly, the Company makes adjustments in the

net defined benefit liabilities or assets and posts therecognition and presentation methods for actuarial gain or

unrecognized actuarial gain or loss and unrecognized priorloss, past service costs, net interest costs and other items.

service costs as net defined benefit liabilities and assets.

The changes to the corresponding accounting policies

The application of the Accounting Standard forhave been applied retroactively, and the consolidated

Retirement Benefits and the Guidance on Retirement

financial statements for the previous fiscal year have been

Benefits is subject to the transitional accounting treatment

retroactively adjusted. The effect of this retroactive

set forth in Clause 37 of the Accounting Standard for

adjustment on results of the previous fiscal year is minor.

Retirement Benefits. In the fiscal year ended March 31,

The effect on per share information is presented in the2014, the effect of the relevant change has been added to

relevant section.

or deducted from accumulated other comprehensive
income (Remeasurement of defined benefit plans).

(2) Application of Accounting Standard for Retirement Benefits

As a result, as of March 31, 2014 the balance of net

From March 31, 2014, the Company applied “Accounting

defined benefit liabilities was ¥5,448 million and theStandard for Retirement Benefits” (Accounting Standards

balance of net defined benefit assets was ¥2,031 million.

Board of Japan (ASBJ) Statement No. 26, May 17, 2012;

In addition, accumulated other comprehensive income

hereinafter the “Accounting Standard for Retirement

decreased by ¥4,802 million.

Benefits”) and “Guidance on Accounting Standard for
Retirement Benefits” (ASBJ Guidance No. 25, May 17,

The effect on per share information is presented in therelevant section.

2012; hereinafter the “Guidance on Retirement Benefits”)

Annual Report 201439

3

Accounting Standards Issued but Not Yet Applied(Accounting Standards Not Yet Applied)

Divestitures” (ASBJ Guidance No. 10, September 13, 2013).

1. Accounting Standards for Retirement Benefits“Revised Guidance on Accounting Standard for Earnings Per• “Accounting Standard for Retirement Benefits”(Accounting Standards Board of Japan (ASBJ) Statement
No. 26, May 17, 2012)

Share” (ASBJ Guidance No. 4, September 13, 2013)(1) Outline
The main revisions are as follows.

• “Guidance on Accounting Standard for Retirement• A parent company recognizes in retained earnings

Benefits” (ASBJ Guidance No. 25, May 17, 2012)changes in equity in earnings of subsidiaries over

(1) Outline
This accounting standard was revised to improvefinancial reporting and accommodate international
convergence, with a focus on the treatment of
unrecognized actuarial gain or loss and unrecognizedprior service cost, the determination of projected benefit
obligations and current service cost, and enhancementof disclosure.
(2) Expected Application Date

which they exercise ongoing control. In the revised
standard, the term “minority interest” was changed to“non-controlling interest.”• Expenses associated with acquisitions in a businesscombination are recognized in the consolidated fiscal
year in which they are incurred.
• When provisional accounting treatment is adopted in
the fiscal year following a business combination,
appropriations for acquisition cost must be presented

The Company will apply the revised calculation ofusing the newly adopted accounting treatment whenretirement benefit liabilities and service cost from therestating the prior year financial statements to conform

start of the fiscal year ending December 31, 2014.

with the current year statements prepared using the(3) Effect of Applying the Accounting Standard
The effect of applying the accounting standard on

newly adopted accounting treatment.
• Pre-revision “income before minority interests” wasoperating income, ordinary income and income beforechanged to “net income,” and pre-revision “netincome taxes and minority interests for the fiscal year

income” was changed to “net income attributable toending December 31, 2014 will be minor.

shareholders of the parent company.”(2) Expected Application Date

2. Accounting Standards for Business Combinations

The Company plans to apply this accounting standard“Revised Accounting Standard for Business Combinations”

from the start of the fiscal year ending December 31,(ASBJ Statement No. 21, September 13, 2013)2016. In addition, the Company plans to apply the“Revised Accounting Standard for Consolidated Financial

approach to provisional accounting treatment to businessStatements” (ASBJ Statement No. 22, September 13, 2013)combinations executed after the start of the fiscal year

“Revised Accounting Standard for Business Divestitures(ASBJ Statement No. 7, September 13, 2013)

ending December 31, 2016.
(3) Effect of Applying the Accounting Standard“Revised Accounting Standard for Earnings Per Share” (ASBJ

The Company is currently assessing the effect ofStatement No. 2, September 13, 2013)

applying the accounting standards in preparing the“Revised Guidance on Accounting Standard for Businessfinancial statements for the fiscal year ending December

Combinations and Accounting Standard for Business

31, 2014.

40

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

4

Changes in Presentation(Consolidated Statements of Income)due to a revision of the Accounting Standard for Retirement

For the fiscal year ended March 31, 2014, “Expenses for

Benefits. The consolidated financial statements for thesuspension of operation,” which was presented separately

previous fiscal year have been reclassified to reflect theunder “Non-operating expenses” in the previous fiscal year,change in presentation method.

is included in “Other” because its amount was less than
10/100 of total non-operating expenses.
As a result, ¥608 million presented on the consolidated

As a result, “Pension liability adjustment” of negative¥622 million that was included in “Accumulated othercomprehensive income” under “Net assets” in thestatement of income for the previous fiscal year as

consolidated balance sheets for the previous fiscal year

“Expenses for suspension of operation” under “Non-has been reclassified as “Remeasurements of defined

operating expenses” was reclassified in “Other.”

benefit plans.” “Pension liability adjustment” of negative¥228 million that was included in “Other comprehensive(Changes in Presentation Method Associated with Application

income” in the consolidated statements of comprehensiveof Accounting Standard for Retirement Benefits)

income for the previous fiscal year has been reclassified as“Pension liability adjustment,” which had been included in“Remeasurements of defined benefit plans.” “Pension“Accumulated other comprehensive income” under “Netliability adjustment” that was included in “Accumulated otherassets” in the consolidated balance sheets for the previous

comprehensive income” in the consolidated statements offiscal year, is presented as “Remeasurements of definedchanges in net assets for the previous fiscal year has been

benefit plans” from the fiscal year ended March 31, 2014,

reclassified as “Remeasurements of defined benefit plans.”

5

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

Millions of yen

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

Fiscal 2013

Fiscal 2012

Fiscal 2013

¥597,120¥557,920$5,797,281*2. Accumulated amount of reduced-value entry as a result of receiving government subsidies, and so on that are subtracted fromthe acquisition price of tangible fixed assets
Thousands of
U.S. dollars

Millions of yen

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

Fiscal 2013

Fiscal 2012

Fiscal 2013

¥2,095¥2,095$20,339(Deduction for this ﬁscal year) ...............................................................................

(—)

(68)

(—)

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

975

983

9,466

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

(1)

(49)

(9)

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

1,257

1,257

12,203

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

36

36

349

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

Millions of yen

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

Fiscal 2013

Fiscal 2012

Fiscal 2013

¥5,005¥3,807$48,592

Annual Report 201441

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

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013

¥1,413¥1,545$13,718

Social welfare corporation Ishii Kinen Aizenen(Joint and several guarantee) ...............................................................................
Kureha Battery Materials Japan Co., Ltd. ..............................................................

279

288

2,708

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

¥1,693¥1,833$16,436*5. Assets pledged as collateralThousands of
U.S. dollars

Millions of yen

Fiscal 2013
Investment securities* ..........................................................................................

¥

Fiscal 2012

46

¥

46

Fiscal 2013$446

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

750

753

7,281

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

1,001

1,001

9,718

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

¥1,798¥1,800$17,456

Thousands of
U.S. dollars

Millions of yen

Fiscal 2012

Fiscal 2013

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

Fiscal 2013
¥180

¥230

$1,747

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

78

137

757

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

¥258

¥367

$2,504* The above investment securities have been provided as collateral for loans of Mizushima Eco-works Co., Ltd.

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

Millions of yen

Fiscal 2013

42

Fiscal 2012

Fiscal 2013

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

¥—¥5,379$—Notes and accounts payable–trade ........................................................................

—

3,415

—

Other (current liabilities) ........................................................................................

—

880

—

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

6

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

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013

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

¥14,160¥12,546$137,475

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

16,405

15,749159,271

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

14,53012,215141,067

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

4,040

3,742

39,223Retirement beneﬁt expenses ................................................................................

1,181

1,207

11,466

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

45

36

436

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

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013¥17,103¥16,430$166,048*3. Expenses incurred upon acquisition of MonoSol Holdings, Inc. and its three wholly owned subsidiaries.
*4. Expenses incurred upon acquisition of the vinyl acetate related business of E.I. du Pont de Nemours and Company and its
group companies.
*5. Mainly the amount of overhead cost during the temporary production shutdown*6. Expense for removing equipment rendered unnecessary by business closure, etc.
*7. Impairment loss
The significant component of impairment loss is as follows:
Fiscal 2013
Impairment loss
Location

Ehime
SaijyoAssetsUsage

Idle assets (demolition was decided Employee welfare facility andupon due to obsolescence andproperty leased to external
completed in ﬁscal 2013 )tenants

Type

Millions of yen

Thousands of
U.S. dollars

Building¥118$1,145

Fiscal 2012
Impairment loss
Location

OkayamaKurashiki
Niigata
TainaiAssets

Usage

Type

Millions of yen

Business assets

Synthetic ﬁber production
equipment

Machinery andequipment¥202

Assets to be scrapped

Paint production
equipment

Machinery andequipment

185(Identifying the cash-generating unit to which an asset belongs)
As a minimum unit for generating cash flow, business assets are grouped into sections used for management accounting,and leased assets, idle assets, and assets associated with discontinued or reorganized businesses are assessed individually.
Other head office and research facilities are shared assets.
(Method for calculating the recoverable amount)
After separately examining the indications for impairment with respect to those businesses whose income from operations
continue to be negative, and the recoverable amount falls short of the book value, the book value is to be reduced to therecoverable amount. The recoverable amount is measured based on the value in use and calculated with a 5% discount off the
future cash flow. Assets associated with discontinued or reorganized business are categorized into “assets held for sale,”Annual Report 201443

“assets which can be converted for use into other business” and “assets to be discarded” and for items to be sold or
discarded, the net book value of the assets is to be reduced to their recoverable amount. The recoverable amount of theassets to be used for certain future years is measured based on the value of use during the estimated residual useful life andis calculated by discounting future cash flows by 5% and the recoverable amount of the assets to be discarded is measured
based on the net sale price and calculated by deducting the estimated disposal cost from the estimated sale price.
*8. The loss is incurred due to the write-down of stocks.
*9. Primary business restructuring expenses at affiliates*10. Goodwill is amortized based on paragraph 32 of Accounting Practice Committee Statement No. 7, ”Practical Guidelines on
Accounting Standards for Capital Consolidation Procedures in Preparing Consolidated Financial Statements” (Final Revision,
January 12, 2011, Japan Institute of Certified Public Accountants).

7

Notes to Consolidated Statements of Comprehensive Income

Reclassification adjustments and tax effect adjustments relating to other comprehensive income (loss) for the fiscal years ended
March 31, 2014 and 2013, are as follows:
Thousands of
U.S. dollars

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013

Amount recorded during the period ...................................................................

¥ 1,202¥ 4,544$ 11,669

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

(241)

371

(2,339)Before tax effect adjustments ........................................................................

961

4,916

9,330

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

(92)(1,603)(893)

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

868

3,313

8,427

Amount recorded during the period ...................................................................

9

1

87

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

11

22

106

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

21

23

203

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

(8)

(9)

(77)

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

13

14

126

Amount recorded during the period ...................................................................

36,902

14,542358,271

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

—

—

—

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

36,902

14,542358,271

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

—

—

—

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

36,902

14,542358,271

Amount recorded during the period ...................................................................

(32)

(398)

(310)

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

79

51

766

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

46

(346)

446

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

(25)

118

(242)

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

21

(228)

203

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

¥37,806¥17,641$367,048

Valuation difference on available-for-sale securities

Deferred gains or losses on hedges

Foreign currency translation adjustment

Remeasurements of deﬁned beneﬁt plans

44

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

8

Notes to Consolidated Statements of Changes in Net Assets

Fiscal 2013
1. Type and number of issued shares of common stock and treasury stock
Number of shares as ofMarch 31, 2013
(Thousands of shares)

Increase in the numberof shares(Thousands of shares)

Decrease in the number Number of shares as ofof shares
March 31, 2014
(Thousands of shares)(Thousands of shares)

382,863——

382,863

382,863——

382,863

34,0298

1,486

32,551

34,0298

1,486

32,551

Number of outstanding shares
Common stock
Total
Number of treasury stocks
Common stock (Notes 1, 2)
Total

Notes: 1. The increase in treasury stock (common stock) is attributable to the purchase of less-than-one unit shares (8 thousand shares).
2. The decrease in treasury stock (common stock) is attributable to a transfer of shares upon the exercise of subscription rights (1,486 thousand shares) and theacquisition of less-than-one unit shares by the shareholders (0 thousand shares).

2. Subscription rights to shares
The Company granted its directors, executive officers, employees, and directors and employees of its subsidiaries subscription
rights to the Company shares as stock options. The balance of the subscription rights to shares as of March 31, 2014 is ¥1,005
million (US$9,757 thousand).
3. Dividends(1) Amount of dividends paid
Resolution

Type of share

General shareholders’ meeting
held on June 21 2013

Common stock

Board of directors’ meeting
held on October 29 2013

Common stock

Amount of dividends(Millions of yen)

Dividend per share(Yen)¥6,279¥18.00(US$60,961 thousand)(US$0.17)¥6,305¥18.00(US$61,213 thousand)(US$0.17)

Record date

Effective date

March 31, 2013

June 24, 2013

September 30, 2013

December 2, 2013

(2) Dividends whose effective date is after the end of Fiscal 2013 and record date is included in Fiscal 2014.
Resolution

Type of share

General shareholders’ meeting
held on June 20 2014

Common stock

Amount of dividends(Millions of yen)

Source ofdividends

Dividend pershare (Yen)¥6,305Retainedearnings(US$0.17)(US$61,213 thousand)¥18.00Record date

Effective date

March 31, 2014

June 23, 2014

Fiscal 2012
1. Type and number of issued shares of common stock and treasury stock
Number of shares as ofMarch 31, 2012
(Thousands of shares)

Increase in the numberof shares(Thousands of shares)

Decrease in the number Number of shares as ofof shares
March 31, 2013
(Thousands of shares)(Thousands of shares)

382,863——

382,863

382,863——

382,863

34,506

5482

34,02934,506

5482

34,029Number of outstanding shares
Common stock
Total
Number of treasury stocks
Common stock (Notes 1, 2)
Total

Notes: 1. The increase in treasury stock (common stock) is attributable to the purchase of less-than-one unit shares (5 thousand shares).
2. The decrease in treasury stock (common stock) is attributable to a transfer of shares upon the exercise of subscription rights (481 thousand shares) and theacquisition of less-than-one unit shares by the shareholders (1 thousand shares).

2. Subscription rights to shares
The Company granted its directors, executive officers, employees, and directors and employees of its subsidiaries subscription rights
to the Company shares as stock options. The balance of the subscription rights to shares as of March 31, 2013 is ¥1,221 million.

Annual Report 201445

3. Dividends(1) Amount of dividends paid
Resolution

Type of share

Amount of dividends(Millions of yen)

Dividend per share(Yen)

Record date

Effective date

General shareholders’ meeting
held on June 22, 2012

Common stock¥5,922¥17.00March 31, 2012

June 25, 2012

Board of directors’ meeting held on
November 1, 2012

Common stock¥6,273¥18.00

September 30, 2012

December 3, 2012

(2) Dividends whose effective date is after the end of Fiscal 2012 and record date is included in Fiscal 2012.
Resolution

Type of share

General shareholders’ meeting
held on June 21, 2013

Common stock

9

Amount of dividends(Millions of yen)

¥6,279Source ofdividends

Dividend pershare (Yen)

Retainedearnings¥18.00Record date

Effective date

March 31, 2013 June 24, 2013

Notes to Consolidated Statements of Cash Flows

1. Cash and cash equivalents at March 31, 2014 and 2013 are reconciled to the accounts reported in the consolidated balance sheets
as follows:
Thousands of
U.S. dollars

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013

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

¥ 49,746¥ 46,151$482,970

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

(2,406)(24,966)(23,359)

Marketable securities with original maturities of 3 months or less .......................

53,301

8,699

517,485

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

¥100,642¥ 29,885$977,106

2. Amounts and breakdown of assets and liabilities for subsidiaries that were added to the scope of consolidation due to acquisitionof shares
MonoSol Holdings, Inc. and two of its three wholly owned subsidiaries were added to the scope of consolidation due to acquisitionof shares. The amounts and breakdown of assets and liabilities upon consolidation, cost of shares acquired and share acquisition
expense are as follows:
Millions of yen

46

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

¥ 3,550

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

29,577

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

13,523Current liabilities ...................................................................................................................................

(1,480)Noncurrent liabilities .............................................................................................................................

(13,777)

Purchase price of stock ........................................................................................................................

31,392

Expense ................................................................................................................................................

743

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

(1,093)

Translation adjustment of foreign currency ...........................................................................................

191

Expenditure of purchase .......................................................................................................................

¥ 31,233

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

10

Leases

1. Finance lease transactions(1) Lease transactions as a lessee
Finance leases without transfer of ownership
1) Details of lease assetsa) Tangible fixed assets
Mainly vehicles used at plants, including forklifts, buildings and equipment, etc., related to manufacturing (“Machinery andEquipment“, “Buildings and Structures”), OA equipment, including personal computers and printers, and servers (“Other”).
b) Intangible fixed assets
Software (“Other”)
2) Depreciation method of lease assets
As described in the basis of presenting consolidated financial statements “1. Significant Accounting Policies, 5. Accounting
policies (2) Depreciation method of significant depreciable assets”.
(2) Lease transactions as a lessor
Finance lease transactions without transfer of ownership that commenced on or before March 31, 2008 are accounted for on abasis similar to operating leases. The details of such transactions are as follows.
Disclosure of finance lease transactions which commenced on or after April 1, 2008 is omitted due to less materiality.
1) Lease acquisition costs, accumulated depreciation and net book value as of March 31, 2014 and 2013 are as follows:
March 31, 2014
Millions of yen
Acquisition cost

Accumulated
depreciation

Net book value

¥196
49
¥245

¥ 92
45
¥137

¥104
3
¥107

Buildings and structures ...................................................................................
Machinery, equipment and vehicles .................................................................
Total .............................................................................................................

Thousands of U.S. dollars
Acquisition cost

Accumulated
depreciation

Net book value$1,902475$2,378$ 893
436$1,330$1,00929$1,038

Buildings and structures ...................................................................................
Machinery, equipment and vehicles .................................................................
Total .............................................................................................................
March 31, 2013

Millions of yen
Acquisition cost

Accumulated
depreciation

Net book value

¥196
49
¥245

¥ 88
44
¥133

¥107
4
¥112

Buildings and structures ...................................................................................
Machinery, equipment and vehicles .................................................................
Total .............................................................................................................

2) Future lease payment obligations at March 31, 2014 and 2013 are as follows:
Millions of yen

Due within one year ......................................................................................
Due after one year .........................................................................................
Total ..........................................................................................................

Fiscal 2013
¥ 14
93
¥108

Fiscal 2012
¥ 14
107
¥122

Thousands of
U.S. dollars

Fiscal 2013
$ 135
902
$1,0483) Lease revenue and depreciation expense for the years ended March 31, 2014 and 2013 are as follows:
Millions of yen

Lease revenue ...............................................................................................
Depreciation expense ....................................................................................

Fiscal 2013
¥14
4

Fiscal 2012¥14
4

Thousands of
U.S. dollars

Fiscal 2013$135
38

Annual Report 201447

2. Operating leases
Lease transactions as a lessee:
Future lease payment obligations under operating leases at March 31, 2014 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013

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

¥ 2,260¥1,523$ 21,941

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

11,4352,227

111,019

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

¥13,696¥3,750$132,970

11

Financial Instruments

1. Outline of financial instruments(1) Policy for financial instruments
The Group raises funds necessary to conduct its business mainly through bank loans or issuance of bonds. Temporary cash
surpluses, if any, are invested in low risk financial assets. Derivatives are used, not for speculative purposes, but to manage
exposure to financial risks as described below.
(2) Nature and extent of risks arising from financial instruments
Receivables such as notes and accounts receivable–trade are exposed to customer credit risk. Trade receivables denominatedin foreign currencies are exposed to foreign currency exchange fluctuation risk.
Short-term investment securities and investment securities, mainly consisting of beneficiary securities on investment
trusts, certificates of deposit and others held for management of capital surpluses and stocks in companies that have abusiness relationship are exposed to the risk of market price fluctuations.
Payment term of payables, such as notes and accounts payable–trade, are mostly less than one year. Payables in foreign
currencies incurred mainly from import of raw materials are exposed to foreign currency exchange fluctuation risk. Those risks
are mostly offset by receivable balances denominated in the same foreign currency.
Loans, bonds and lease obligations related to finance lease transactions, used to raise funds for working capital and capital
expenditures, have maturities of at the longest 13 years from the balance sheet date. The debts bearing floating interest rates
are exposed to interest rate fluctuation risk, although a part of the exposure is hedged through use of derivatives (interest rate
swaps).
Derivative transactions include forward foreign currency contracts and currency swaps for the purpose of hedging foreign
currency exchange fluctuation risk resulting from receivables and payables denominated in foreign currencies and interest rate
swaps for the purpose of hedging interest rate fluctuation risk resulting from variable interest expenses on debts. Please referto “(5) Significant hedge accounting” under “1. Significant Accounting Policies” “5. Accounting policies” for a description of
the Company’s accounting policy relating to hedging activities.
(3) Risk management for financial instruments
a. Credit Risk Management (customers’ default risk)
The Company manages and mitigates customer credit risk from trade receivables on the basis of internal rules concerning
credit management, which include monitoring of payment terms and balances of customers to identify default risk at an
early stage. With respect to loan receivables and liability guarantee agreements, the Company manages its exposure tocredit risk by periodically identifying the financial position of the debtors. With respect to financial assets held for managing
capital surplus, its credit risk is minimal because the investments are limited to issuers with high credit ratings inaccordance with internal rules concerning fund management. The Company enters into derivative transactions only withfinancial institutions that have high credit ratings in order to mitigate counterparty risks.
b. Market Risk Management (foreign currency exchange and interest rate fluctuation risks)
The Company and certain consolidated subsidiaries principally use forward foreign exchange contracts to hedge foreign
currency exchange fluctuation risk exposure in connection with trade receivables and payables denominated in foreign
currencies. Depending on foreign currency exchange rate conditions, trade receivables and payables denominated in foreign
currencies that are expected to be generated based on export and import forecasts are hedged using forward foreignexchange contracts with limited contract periods of around half a year. The Company also hedges certain scheduled
non-trading transactions denominated in foreign currencies that it expects to generate.

48

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

In addition, the Company uses currency swap and interest rate swap contracts to mitigate foreign currency exchange
fluctuation risk exposure in connection with long-term loans receivable in foreign currencies and interest rate fluctuation risk
exposure in connection with long-term loans payable.
With respect to short-term investment securities and investment securities, the Company periodically monitors fair values
or financial status of the related issuers. With respect to stocks in companies that have a business relationship, theCompany continuously checks the necessity for holding them, taking into account the business relationship.
The Company manages derivative transactions in accordance with internal rules that regulate delegation of authority
concerning derivative transactions.
c. Liquidity Risk Management on Fund Raising
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full at the respective maturity
dates. The Group manages its liquidity risk by diversifying its fund raising instruments, obtaining commitment lines fromseveral financial institutions and adjusting short-term and long-term funding balances in consideration of market
environments.
(4) Supplementary explanation concerning fair values of financial instruments
Fair values of financial instruments comprise values determined based on market prices and values determined reasonably
when there is no market price. Since variable factors are incorporated in computing the relevant fair values, such fair values
may vary depending on the different assumptions. The notional amounts and other information described in Note 13.
“Derivative Financial Instruments” are not indicative of market risk exposure to derivative transactions.
2. Fair values of financial instruments
Carrying amount, fair value and unrealized gain/loss of the financial instruments as of March 31, 2014 and 2013 are as follows:
Financial instruments whose fair values are not readily determinable are excluded from the following table:
Fiscal 2013
Carrying amountMillions of yen
Fair value(1) Cash and deposits ...............................................................................................

¥ 49,746¥ 49,746(2) Notes and accounts receivable–trade..................................................................

91,119Allowance for doubtful accounts ......................................................................

Unrealized gain (loss)

¥

—

(465)
90,65390,653——(3) Short-term investment securities and investment securities
Available-for-sale securities ..............................................................................

89,85989,859Total assets ...............................................................................................................

230,259

230,259—(1) Notes and accounts payable–trade ......................................................................

35,39335,393—(2) Long-term loans payable (*1)...............................................................................

48,30149,405

1,104

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

83,69484,798

1,104

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

(151)

(151)

—

Carrying amount(1) Cash and deposits ...............................................................................................

$ 482,970(2) Notes and accounts receivable–trade..................................................................

884,650

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

Thousands of U.S. dollars
Fair value
Unrealized gain (loss)$ 482,970$—(4,514)880,126

880,126—(3) Short-term investment securities and investment securities
Available-for-sale securities ..............................................................................

872,417872,417—

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

2,235,524

2,235,524—(1) Notes and accounts payable–trade ......................................................................

343,621343,621—(2) Long-term loans payable (*1)...............................................................................

468,941

479,660

10,718

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

812,563823,281

10,718Derivative transactions (*2) ......................................................................................

(1,466)(1,466)—

Annual Report 201449

Fiscal 2012
Carrying amountMillions of yen
Fair value

Unrealized gain (loss)(1) Cash and deposits ...............................................................................................

¥ 46,151¥ 46,151¥(2) Notes and accounts receivable–trade..................................................................

83,843

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

—

(742)
83,10083,100—(3) Short-term investment securities and investment securities
Available-for-sale securities ..............................................................................

109,096

109,096—

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

238,348

238,348—(1) Notes and accounts payable–trade ......................................................................

37,04837,048(2) Long-term loans payable (*1)...............................................................................

52,18053,494

1,314

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

89,22890,543

1,314

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

(142)

(142)

—

(*1) Long-term loans payable include the current portion of long-term loans payable.
(*2) Receivables and payables incurred as a result of derivative transactions are presented on a net basis. Net payables are presented in parentheses.
Notes: 1. Calculation method of fair values of financial instruments and securities and derivative transactions
Assets:(1) Cash and deposits and (2) Notes and accounts receivable–trade
These assets are recorded using book values because fair values approximate book values because of their short-term maturities.
(3) Short-term investment securities and investment securities
The fair values of these assets are determined using the quoted market price on applicable stock exchanges. Other instruments are determined using the quoted
price obtained from financial institutions.
Liabilities:(1) Notes and accounts payable–trade
These payables are recorded using book values because fair values approximate book values because of their short-term maturities.
(2) Long-term loans payable
The fair values of long-term loans payable are determined by discounting the aggregated values of the principal and interest using an assumed interest rate basedon the interest rate that would be applied to a new loan of a similar nature.
Long-term loans payable bearing floating interest rates are hedged using interest rate swap contracts and the fair values of these loans payable are determinedby discounting the aggregated values of the principal and interest accounted for together with the related interest rate swap contracts using a reasonably
estimated interest rate based on the interest rate that would be applied to a new loan of a similar nature.
Derivative financial instruments:
Please see Note 13. “Derivative Financial Instruments.”
2. Financial instruments whose fair values are not readily determinable
Millions of yen
Carrying amountFiscal 2013
Fiscal 2012

Category

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

¥7,727¥6,143Thousands of
U.S. dollars
Carrying amountFiscal 2013

$75,019

These items are not included in “(3) Short-term investment securities and investment securities,” because there is no market price, future cash flows cannot be
estimated and it is very difficult to identify fair values.
3. Redemption schedule of monetary assets and securities with contractual maturities
Fiscal 2013
Within one year

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

50

Kuraray Co., Ltd.

Over ten years¥ 49,746
91,119

¥

—
—

¥—
—

¥—
—

5,000
9,000
44,302¥199,168

6,000
—
7,051
¥13,051

—
—
—
¥—

—
—
—
¥—

Within one year

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

Millions of yen
One to ﬁve years
Five to ten years

Thousands of U.S. dollars
One to ﬁve years
Five to ten years

Over ten years$ 482,970
884,650

$

—
—

$—
—

$—
—

48,54387,378430,116$1,933,669

58,252—
68,456$126,708

—
—
—
$—

—
—
—
$—

Notes to Consolidated Financial Statements

Fiscal 2012
Millions of yen
One to ﬁve years
Five to ten years

Within one year

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

Over ten years¥ 46,151
83,843

¥

—
—

¥—
—

¥—
—

16,996
2,999
52,697¥202,689

6,172
9,375
4,094
¥ 19,642

—
—
—
¥—

—
—
—
¥—

4. Redemption schedule of bonds, long-term loans payable and lease obligations after the balance sheet date:
Please see Note 21. “Supplementary Schedule.”

12

Securities

1. Available-for-sale securities with market value
Fiscal 2013
Millions of yen

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

Book value(estimated fair value)

Cost

Net

¥17,931¥ 8,136¥9,794

Net

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

$174,087$ 78,990$95,087

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

—

—

—

—

—

—

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

6,118

6,000

118

59,39858,252

1,145

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

—

—

—

—

—

—

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

4,117

4,051

66

39,97039,330640

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

28,16718,187

9,979

273,466

176,572

96,883

400

454

(53)

3,883

4,407

(514)

—

—

—

—

—

—

Securities with book value not exceeding
their acquisition cost
Equity securities .....................................
Bonds
Government and municipal ................
Corporate ...........................................

5,000

5,000

—

48,54348,543—

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

8,999

8,999

—

87,36887,368—Others ....................................................

47,29247,302(9)459,145459,242(87)

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

61,692

61,756(63)

598,951599,572(611)

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

¥89,859¥79,943¥9,915$872,417$776,145$96,262

Note: Unlisted equity securities amounting to ¥2,722 million (US$26,427 thousand) are excluded from the above table, because there is no market price and it is very difficult
to identify fair values.

Annual Report 201451

Fiscal 2012
Millions of yen
Book value(estimated fair value)

Cost

Net

6,274

¥8,293

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

¥ 14,567¥

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

—

—

—

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

9,173

9,000

173

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

4,716

4,702

14

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

45,092

44,415676

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

73,54964,392

9,157

2,192

2,298

(106)
—

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

——

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

13,996

14,000(3)

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

7,659

7,702

(43)

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

11,70011,700—Subtotal ....................................................

35,54735,700(153)

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

¥109,096¥100,093¥9,003

Note: Unlisted equity securities amounting to ¥2,336 million are excluded from the above table, because there is no market
price and it is very difficult to identify fair values.

2. Available-for-sale securities sold during the fiscal year
Fiscal 2013
Millions of yen
Category

Thousand of U.S. dollars

Proceeds from sales

Total gain

Total loss

Proceeds from sales

Total gain

Total loss

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

¥50,408¥241¥—$489,398$2,339$—Total .......................................

¥50,408¥241¥—$489,398$2,339$—Notes: 1. This is attributable to the redemption of investment trusts on maturity.
2. Securities with fair values that are difficult to identify fair value are excluded from the above table.

Fiscal 2012
Not applicable.
3. Impairment loss on securities
The Company did not recognize impairment loss on securities in fiscal 2013. Impairment loss on securities was ¥613 million in
fiscal 2012.
As for the available-for-sale securities of which market prices are available, the Company recognizes impairment loss when thefair value of such securities as of the fiscal year end declines to less than 50% of acquisition cost. When the fair value declines tobetween 30% and 50% of the acquisition cost, the Company considers the recoverability of each security and recognizes
impairment for the amount deemed necessary. As for the available-for-sale securities of which market prices are not available, theCompany recognizes impairment loss in the amount deemed necessary when the fair value of such securities declines significantly.

52

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

13

Derivative Financial Instruments

1. Derivative transactions to which hedge accounting is not applied(1) Currencies
Fiscal 2013

Category

Transactions other thanmarket transactions

Classiﬁcation

NominalamountMillions of yen
Nominal amountMarketdue after one year
value

Unrealized
gain (loss)

Currency swap contracts:
Yen into Euro obligation .................

¥ 1,179¥—¥ (37)¥ (37)

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

7,652

86

(30)

(30)

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

5,132

—

(82)

(82)

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

24

—

(0)

(0)

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

319

—

6

6

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

¥14,309¥86¥(145)¥(145)Classiﬁcation

NominalamountForward foreign exchange contracts:

Category

Transactions other thanmarket transactions

Thousands of U.S. dollars
Nominal amountMarketdue after one year
value

Unrealized
gain (loss)

Currency swap contracts:
Yen into Euro obligation .................

$ 11,446$ —$ (359)$ (359)

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

74,291

834

(291)

(291)

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

49,825

—

(796)

(796)

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

233

—

(0)

(0)

Forward foreign exchange contracts:

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

3,097

—

58

58

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

$138,922$834$(1,407)$(1,407)

Notes: 1. Market values of swap transactions at the end of the fiscal year are calculated using prices quoted by financial institutions. Market values of forward foreign exchange
contracts at the end of the fiscal year are calculated using forward exchange rates.
2. The amounts include currency swap contracts entered into in order to hedge inter-company transactions for loan transactions, which are not accounted for by hedge
accounting, but by the primary method of accounting for the instruments in accordance with the Accounting Standard for Financial Instruments.

Fiscal 2012

Category

Transactions other thanmarket transactions

Classiﬁcation

NominalamountMillions of yen
Nominal amountMarketdue after one year
value

Unrealized
gain (loss)

Currency swap contracts:
Yen into Euro obligation .................

¥1,992¥1,138¥273¥273

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

393

118

(68)

(68)

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

724

—

(3)

(3)

Forward foreign exchange contracts:

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

94

—

(0)

(0)

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

¥3,203¥1,257¥200¥200

Notes: 1. Market values of swap transactions at the end of the fiscal year are calculated using prices quoted by financial institutions. Market values of forward foreign exchange
contracts at the end of the fiscal year are calculated using forward exchange rates.
2. Hedge accounting was not applied to the transactions above because the Company employed the generally accepted accounting method for derivative transactions
in derivative transactions for financial transactions between consolidated companies as well as derivative transactions to cover anticipated foreign currencytransactions, except for imports and exports.

Annual Report 201453

2. Derivative transactions to which hedge accounting is applied(1) Currencies
Fiscal 2013
Fiscal 2013 (As of March 31, 2014)

Hedge accounting
methodAllocation method

Millions of yen
Nominalamount over
one yearThousands of U.S. dollars
NominalNominalamountMarketamountover one year
value

Major hedged items

NominalamountYen into U.S. dollar
obligation

Accounts
receivable–trade andloans receivable

¥538

—

Note

$5,223—Note

Yen into Euro
obligation

Accounts
receivable–trade

27

—

Note

262

—

Note

U.S. dollar into Yen
obligation

Accounts
payable–trade

126

—

Note

1,223

—

Note

¥693

—

Note

$6,728—

Note

Classiﬁcation

Marketvalue

Forward foreignexchange contracts:

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

Note: With respect to forward foreign exchange contracts whose exchange rates are used for translating accounts receivable or payable–trade, market values of forward
foreign exchange contracts are included in the market values of the relevant accounts receivable or payable–trade, since they are used for recording accounts receivableor payable–trade as hedged items.
Fiscal 2013 (As of March 31, 2014)

Major hedging items

NominalamountMillions of yen
Nominalamount over
one year

Yen into U.S.
dollar obligation

Forecasted transactions inforeign currencies¥1,808¥—¥ 1$17,553$—

Yen into Euro
obligation

Forecasted transactions inforeign currencies

1,291

—

(12)

12,533—(116)

U.S. dollar into Yen
obligation

Forecasted transactions inforeign currencies

490

—

4

4,757

—

38

Euro into Yen
obligation

Forecasted transactions inforeign currencies

0

—

0

0

—

0

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

¥3,591¥—¥ (6)$34,864$—$ (58)

Hedge accounting
methodClassiﬁcation

Deferred hedge
methodForward foreignexchange contracts:

Marketvalue

Thousands of U.S. dollars
NominalNominalamountMarketamountover one year
value

$

9

Note: Market values of swap transactions at the end of the fiscal year are calculated using prices quoted by financial institutions. Market values of forward foreign exchange
contracts at the end of the fiscal year are calculated using forward exchange rates.

Fiscal 2012
Fiscal 2012 (As of March 31, 2013)
Hedge accounting
methodPrimary method

Classiﬁcation

Major hedged items

NominalamountYen into U.S. dollar obligation

Accounts
receivable–trade¥ 6,623¥—¥(289)

Yen into Euro obligation

Accounts
receivable–trade

3,217

—

(30)

U.S. dollar into Yen obligation

Accounts
payable–trade

374

—

1

¥10,216¥—¥(318)

Note: Market values of forward foreign exchange contracts at the end of the fiscal year are calculated using forward exchange rates.

Kuraray Co., Ltd.

Marketvalue

Forward foreign exchange contracts:

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

54

Millions of yen
Nominal amountover one year

Notes to Consolidated Financial Statements

Fiscal 2012 (As of March 31, 2013)
Hedge accounting
methodAllocation method

Classiﬁcation

Major hedged items

NominalamountMillions of yen
Nominal amountover one year

Marketvalue

Forward foreignexchange contracts:
Yen into U.S. dollar obligation

Accounts
receivable–trade

¥376

¥—

Note

Yen into Euro obligation

Accounts
receivable–trade

95

—

Note

U.S. dollar into Yen obligation

Accounts
payable–trade

101

—

Note

¥572

¥—

Note

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

Note: With respect to forward foreign exchange contracts whose exchange rates are used for translating accounts receivable or payable–trade, market values of forward
foreign exchange contracts are included in the market values of the relevant accounts receivable or payable–trade, since they are used for recording accounts receivableor payable–trade as hedged items.
Fiscal 2012 (As of March 31, 2013)
Hedge accounting
methodDeferred hedge
methodClassiﬁcation

Major hedging items

NominalamountMillions of yen
Nominal amountover one year

Marketvalue

Currency swap contracts:
Yen into Euro obligation

Forecasted transactions
in foreign currencies¥1,992¥1,138¥(41)

Yen into U.S. dollar obligation

Forecasted transactions
in foreign currencies

1,971

—

0

Yen into Euro obligation

Forecasted transactions
in foreign currencies

Forward foreign exchange contracts:

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

737

—

0

¥4,701¥1,138¥(40)

Note: Market values of swap transactions at the end of the fiscal year are calculated using prices quoted by financial institutions. Market values of forward foreign exchange
contracts at the end of the fiscal year are calculated using forward exchange rates.

(2) Interest rate
Fiscal 2013
Hedge accounting
methodSpecial treatment forinterest rate swaps

Hedge accounting
methodSpecial treatment forinterest rate swaps

Classiﬁcation

Interest rate swaps:
Floating rate into ﬁxed rate

Classiﬁcation

Interest rate swaps:
Floating rate into ﬁxed rate

Major hedged items

NominalamountMillions of yen
Nominal amountover one year

Marketvalue

Long-term loans payable¥26,000¥26,000—

Major hedged items

NominalamountThousands of U.S. dollars
Nominal amountover one year

Marketvalue

Long-term loans payable$252,427$252,427—

Note: With respect to interest rate swap contracts which meet certain conditions, market values of the interest rate swap contracts are included in the market values of therelevant long-term loans payable, since they are used for recording long-term loans payable as hedged items.

Fiscal 2012
Hedge accounting
methodSpecial treatment forinterest rate swaps

Classiﬁcation

Interest rate swaps:
Floating rate into ﬁxed rate

Major hedged items

NominalamountMillions of yen
Nominal amountover one year

Marketvalue

Long-term loans payable¥10,000¥10,000

Note

Note: With respect to interest rate swap contracts which meet certain conditions, market values of the interest rate swap contracts are included in the market values of therelevant long-term loans payable, since they are used for recording long-term loans payable as hedged items.

Annual Report 2014

55

14

Retirement Benefits

Fiscal 2012 (April 1, 2012 to March 31, 2013)
1. Summary of retirement benefit plan
The Company and some of its domestic consolidated subsidiaries have established a retirement benefit plan and a lump sum
benefit plan, and have adopted cash balance plans and defined contribution pension plans as the retirement benefit system. In
addition, a retirement benefit trust has been established in the Company’s lump sum benefit system.
One consolidated subsidiary has adopted a jointly-established employee pension fund plan (multi-employer plan), and records
required contribution amounts as retirement benefit expenses.
The status of the multi-employer plan is as follows:(1) Accumulated funds for the plan (As of March 31, 2012)
Millions of yen

Plan assets ................................................................................................

¥ 58,766

Projected beneﬁt obligation .......................................................................

84,994

Difference ..................................................................................................

¥(26,227)(2) Ratio of total salaries of the consolidated subsidiary to total funds of the plan (As of March 31, 2012)
2.4%(3) Supplementary explanation (As of March 31, 2012)
The main reasons behind the difference in amounts described above in (1) are as follows. The method of depreciation of priorservice cost in the current fiscal year is to evenly split principals thereof over a period of 19 years, and is scheduled to beterminated in March 2029.
Millions of yen

Balance of prior service cost .....................................................................

¥19,759

Deﬁcient amount carried forward ..............................................................

6,467

The ratio in the above (2) does not match with the ratio of the actual burden of the consolidated subsidiary.
2. Retirement benefit obligations
Millions of yen

Fiscal 2012

(As of March 31, 2013)

a. Retirement benefit obligations .......................................................................

¥(37,509)

b. Plan assets .....................................................................................................

27,321c. Unfunded retirement benefit obligations (a+b)...............................................

(10,187)

d. Unrecognized actuarial gains or losses ...........................................................

9,515

e. Unrecognized prior service cost .....................................................................

(555)

f. Net retirement benefit obligations recognized in the consolidated balance
sheets (c+d+e) ................................................................................................

(1,227)g. Prepaid pension costs ....................................................................................

5,437

h. Provision for retirement benefits (f-g) .............................................................

¥ (6,665)

Note: Domestic consolidated subsidiaries use a simplified method in the calculation of retirement benefit obligations.

56

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

3. Retirement benefit expenses
Millions of yen

Fiscal 2012

(As of March 31, 2013)

a. Service costs (Note) .......................................................................................

¥1,674b. Interest costs..................................................................................................

561

c. Expected return on plan assets ......................................................................

(630)

d. Amortization of actuarial gains or losses ........................................................

1,411

e. Amortization of prior service costs .................................................................

(97)

f. Retirement benefit expenses (a+b+c+d+e) ....................................................

2,918

g. Defined contribution pension plans installment .............................................

550

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

¥3,469Note: The retirement benefit expenses for consolidated subsidiaries that have adopted the simplified method are included in “Service costs.”

4. Assumptions used in accounting for the defined benefit plan
Fiscal 2012
a. Method of attributing the projected benefit obligations to periodsof service ......................................................................................................

Straight-line

b. Discount rate ..................................................................................................

Mainly 1.4%

c. Expected rate of return on plan assets ...........................................................

Mainly 1.0% or 3.3%

d. Amortization period for prior service cost.......................................................

Mainly 15 years(On a straight-line basis over a certain period, which falls
within the average remaining years of service of the eligible
employees.)

e. Amortization period for actuarial gains or losses ............................................

Mainly 15 years(On a straight-line basis over a certain period, which falls
within the average remaining years of service of the eligible
employees, allocated proportionally commencing the year
following the year in which each respective gain or loss
occurred.)Fiscal 2013 (April 1, 2013 to March 31, 2014)
1. Summary of retirement benefit plan
The Company and certain consolidated subsidiaries provide retirement benefits to employees with funded and unfunded defined
benefits plans and a defined contribution plan. A certain consolidated subsidiary participates in a multi-employer plan and accounts
for its contributions to this fund as a retirement benefit expense because the plan assets that correspond to the contribution ofeach participant cannot be reasonably calculated.
The funded defined benefits plan provides a lump sum payment or a pension primarily based on qualifications and length ofservice. The Company and certain consolidated subsidiaries are introducing a cash-balance plan to the defined benefits plan. The
cash-balance plan establishes hypothetical individual employee accounts representing each employee’s share of plan funding andassets. Interest credits based on money market rate movements and credits primarily based on qualifications and length of service
accumulate in the hypothetical individual employee accounts.
The unfunded retirement benefit plan is a lump sum retirement plan. It functions as a retirement savings plan because theCompany has established a retirement benefits trust for it. This plan provides lump sum retirement benefits primarily based on
qualifications and length of service.
Certain consolidated subsidiaries use a simplified method to calculate the assets, liabilities and expenses associated with theirdefined benefit and lump sum plans.

Annual Report 201457

2. Defined benefit plan
(1) Reconciliations of beginning and ending balance of retirement benefit plan (excluding simplified method)
Millions of yen

Thousands of
U.S. dollars

Retirement beneﬁt obligations at beginning of year ..................................

¥33,970$329,805

Service costs ...........................................................................................

1,421

13,796

Interest costs...........................................................................................

574

5,572

Actuarial gain or loss ................................................................................

2

19

Beneﬁts paid ............................................................................................

(2,334)(22,660)

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

602

5,844

Retirement beneﬁt obligations at end of year............................................

¥34,237$332,398(2) Reconciliations of beginning and ending balance of plan assets (excluding simplified method)
Millions of yen

Thousands of
U.S. dollars

Plan assets at beginning of year ................................................................

¥25,800$250,485

Expected return on plan assets ...............................................................

636

6,174

Actuarial gain or loss ................................................................................

274

2,660

Contribution from entrepreneur...............................................................

350

3,398

Beneﬁts paid ............................................................................................

(1,340)(13,009)

Contribution to pension trust fund ...........................................................

7,000

67,961Other .........................................................................................................

194

1,883

Plan assets at end of year .........................................................................

¥32,915$319,563(3) Reconciliations of beginning and ending net defined benefit liabilities using the simplified method
Millions of yen

Thousands of
U.S. dollars

Net deﬁned beneﬁt liabilities at beginning of year.....................................

¥2,018$19,592

Retirement beneﬁt expenses ....................................................................

195

1,893

Beneﬁts paid ..............................................................................................

(109)(1,058)Contribution to plan assets ........................................................................

(60)

(582)

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

51

495

Net deﬁned beneﬁt liabilities at end of year ..............................................

¥2,094$20,330(4) Reconciliations of net amount of retirement benefit liabilities and plan assets and net amount of net defined benefit obligationand net defined benefit asset recognized on the consolidated balance sheets
Millions of yen

Thousands of
U.S. dollars

Installment type retirement beneﬁt obligation ..........................................

¥ 33,551$ 325,737Plan assets ................................................................................................

(34,619)(336,106)(1,067)(10,359)

Non installment type retirement beneﬁt obligation ...................................

4,485

43,543

Net amount of net deﬁned beneﬁt obligation and net deﬁned beneﬁt
asset recognized on the consolidated balance sheets ............................

3,417

33,174

Net deﬁned beneﬁt obligation ...................................................................

5,448

52,893Net deﬁned beneﬁt asset ..........................................................................

(2,031)(19,718)

3,417$ 33,174

Net amount of net deﬁned beneﬁt obligation and net deﬁned
beneﬁt asset recognized on the consolidated balance sheets ................
Note: Includes plan that uses the simplified method.

58

Kuraray Co., Ltd.

¥

Notes to Consolidated Financial Statements(5) The components of retirement benefit expenses
Millions of yen

Thousands of
U.S. dollars

Service costs .............................................................................................

¥1,421$13,796

Interest costs.............................................................................................

574

5,572

Expected return on plan assets .................................................................

(636)(6,174)

Amortization of actuarial gains or losses ...................................................

1,377

13,368

Amortization of prior service costs ............................................................

(98)

(951)

Retirement beneﬁt expenses calculated by simpliﬁed method .................

195

1,893

Retirement beneﬁt expense pertaining to deﬁned beneﬁt plan ................

¥2,833$27,504(6) Remeasurements of defined benefit plans (Consolidated comprehensive income)Millions of yen

Prior service costs .....................................................................................

¥ 5

Thousands of
U.S. dollars$ 48

Actuarial gain or loss ..................................................................................

41

398

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

¥46

$446

(7) Remeasurements of defined benefit plans (Consolidated balance sheet)
Millions of yen

Thousands of
U.S. dollars

Unrecognized prior service costs ..............................................................

¥

428$ 4,155

Unrecognized actuarial gain or loss ...........................................................

(8,820)(85,631)

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

¥(8,391)$(81,466)(8) Plan assets
a. The components of plan assets
Debt securities ......................................................................................

59%

Equity securities ....................................................................................

13%

Life insurance company general accounts.............................................

25% Note 1

Cash and deposits .................................................................................

0%

Other assets ..........................................................................................

3%

Total

100% Note 2

Note 1: Life insurance companies manage the assets in, assume the asset management risk for, and guarantee a fixed return to policyholders
for life insurance general accounts.
Note 2: Total retirement plan assets include 51% of the retirement benefits trust established for the lump sum retirement plan.

b. Determination of long-term expected rate of return on plan assets
The long-term expected rate of return on plan assets is determined with due consideration of current and future distributionof plan assets and current and expected returns on the various types of plan assets.

(9) Actuarial assumptions
Discount rate .......................................................... Mainly 1.4%
Long-term expected rate of return ......................... Mainly 1.0% or 3.3%
3. Defined contribution plan
The contribution to the defined contribution plan of Kuraray Co., Ltd. and consolidated subsidiaries is ¥723 million (US$7,019 thousand).

Annual Report 201459

4. Multi-employer plan
The contribution to the multi-employer plan is ¥77 million (US$747 thousand), and is accounted for in the same manner as thecontribution to the defined contribution plan of Kuraray Co., Ltd. and consolidated subsidiaries.
(1) Accumulated funds for the plan (As of March 31, 2013)
Millions of yen

Thousands of
U.S. dollars

Plan assets .................................................................................................................................

¥ 60,783$ 590,126

Projected beneﬁt obligation ........................................................................................................

87,743851,873

Difference ...................................................................................................................................

¥(26,959)$(261,737)(2) Ratio of total salaries of the consolidated subsidiary to total funds of the plan (As of March 31, 2013)
2.5%(3) Supplementary explanation (As of March 31, 2013)
The main reasons behind the difference in amounts described above in (1) are as follows. The method of depreciation of priorservice cost in the current fiscal year is to evenly split principals thereof over a period of 17 years, and is scheduled to beterminated in March 2029.
Millions of yen

Thousands of
U.S. dollars

Balance of prior service cost ......................................................................................................

¥18,699$181,543

Deﬁcient amount carried forward ...............................................................................................

8,260

80,194

The ratio in the above (2) does not match with the ratio of the actual burden of the consolidated subsidiary.

15

Stock-Based Compensation Plans

1. Item and amount of expenses for stock options in this fiscal year
Thousands of
U.S. dollars

Millions of yen

Fiscal 2013

Fiscal 2012

Cost of goods manufactured .................................................................................

¥ —

¥ 65

Fiscal 2013$

Selling, general and administrative expenses ........................................................

130

149

1,262

Non-operating expense .........................................................................................

—

0

—

—

2. Details including size and changes of stock options(1) Stock options plans

60

Stock options 2003

Stock options June 2007

Stock options June 2008

Number of eligible persons
by position

Employees:
2,200
Employees of subsidiaries: 3,422

Directors of the Company:
10
Executive ofﬁcers of theCompany (excluding those
who concurrently serve as
directors of the Company andthose working overseas):
11

Directors of the Company:
10
Executive ofﬁcers of theCompany (excluding those
who concurrently serve as
directors of the Company andthose working overseas):
16

Total number and type ofstocks granted

2,811,000 shares ofcommon stock

56,500 shares ofcommon stock

78,500 shares ofcommon stock

Grant date

October 1, 2003

June 5, 2007

June 10, 2008

Prerequisite to be vested

Directors, corporate auditors,
executive ofﬁcers and employeesof the Company and its
subsidiaries.

No vesting conditions are set.

No vesting conditions are set.

Required service period

From October 1, 2003 toJune 26, 2005

There is no provision for arequired service period.

There is no provision for arequired service period.

Exercise period

From June 27, 2005 toJune 26, 2013

From June 6, 2007 to June 5,2022; provided that, if the ﬁnal
date of the exercise period is aholiday for the Company, the ﬁnal
date should be the business date
immediately preceding the date.

From June 11, 2008 to June 10,2023; provided that, if the ﬁnal
date of the exercise period is aholiday for the Company, the ﬁnal
date should be the business date
immediately preceding the date.

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

Stock options June 2009

Stock options June 2010

Stock options October 2010

Number of eligible persons
by position

Directors of the Company:
9
Executive ofﬁcers of theCompany (excluding those
who concurrently serve as
directors of the Company andthose working overseas):
15

Directors of the Company:
9
Executive ofﬁcers of theCompany (excluding those
who concurrently serve as
directors of the Company andthose working overseas):
16

Directors:
25
Employees:
3,924
Directors or employees of
the Company’s subsidiaries: 2,010

Total number and type ofstocks granted

86,500 shares ofcommon stock

83,500 shares ofcommon stock

4,074,500 shares ofcommon stock

Grant dateJune 9, 2009

June 9, 2010

October 1, 2010

Prerequisite to be vested

No vesting conditions are set.

No vesting conditions are set.

Note

Required service period

There is no provision for arequired service period.

There is no provision for arequired service period.

From October 1, 2010 toJune 24, 2012

Exercise period

From June 10, 2009 to June 9,2024; provided that, if the ﬁnal
date of the exercise period is aholiday for the Company, the ﬁnal
date should be the business date
immediately preceding the date.

From June 10, 2010 to June 9,2025; provided that, if the ﬁnal
date of the exercise period is aholiday for the Company, the ﬁnal
date should be the business date
immediately preceding the date.

From June 25, 2012 toJune 24, 2020

Stock options May 2011

Stock options May 2012

Stock options May 2013

Number of eligible persons
by position

Directors of the Company:
10
Executive ofﬁcers of theCompany (excluding those
who concurrently serve as
directors of the Company andthose working overseas):
14

Directors of the Company:
10
Executive ofﬁcers of theCompany (excluding those
who concurrently serve as
directors of the Company andthose working overseas):
13

Directors of the Company:
10
Executive ofﬁcers of theCompany (excluding those who
concurrently serve as directors of
the Company and those working
overseas):
17

Total number and type ofstocks granted

89,500 shares ofcommon stock

86,500 shares ofcommon stock

88,000 shares ofcommon stock

Grant date

May 19, 2011

May 17, 2012

May 15, 2013

Prerequisite to be vested

No vesting conditions are set.

No vesting conditions are set.

No vesting conditions are set.

Required service period

There is no provision for arequired service period.

There is no provision for arequired service period.

There is no provision for arequired service period.

Exercise period

From May 19, 2011 to May 18,
2026; provided that, if the ﬁnal
date of the exercise period is aholiday for the Company, the ﬁnal
date should be the business date
immediately preceding the date.

From May 17, 2012 to May 16,2027; provided that, if the ﬁnal
date of the exercise period is aholiday for the Company, the ﬁnal
date should be the business date
immediately preceding the date.

From May 15, 2013 to May 14,2028; provided that, if the ﬁnal
date of the exercise period is aholiday for the Company, the ﬁnal
date should be the business date
immediately preceding the date.

Note: Eligible persons shall be directors, executive officers, counselors, full-time consultants or employees of the Company or the Companies’ subsidiaries at the time of
exercise. However, those who were directors, executive officers or associate executive officers of the Company or presidents of the significant subsidiaries of theCompany (Kuraray Engineering Co., Ltd., Kuraray Chemical Co., Ltd., Kuraray Trading Co., Ltd., Kuraray Plastics Co., Ltd., Kuraray Techno Co., Ltd., Kuraray America, Inc.,
Kuraray Europe GmbH and EVAL Europe N.V.) can exercise even after retirement.
Other conditions are prescribed in the “Contracts on Subscription Rights to Shares” to be entered between the Company and eligible persons who were granted
subscription rights to shares.

Annual Report 201461

(2) Size and changes of stock options
Stock options that existed in current fiscal years were converted into shares.
1) Number of stock options
Stock options
2003

Stock options
June 2007

Stock options
June 2008

Stock options
June 2009

Stock options
June 2010

At the beginning of the ﬁscal year

—

—

—

—

—

Granted

—

—

—

—

—

Forfeited

—

—

—

—

—

Vested

—

—

—

—

—

At the end of the ﬁscal year

—

—

—

—

—

915,000

19,00027,00042,50042,000

—

—

—

—

—

Exercised604,500

12,00015,00019,50017,000Forfeited

310,500

—

—

—

—

—

7,000

12,00023,00025,000Stock options
October 2010

Stock options
May 2011

Stock options
May 2012

Stock options
May 2013

Unvested stock options (shares)

Vested stock options (shares)
At the beginning of the ﬁscal year
VestedAt the end of the ﬁscal year

Unvested stock options (shares)
At the beginning of the ﬁscal year

—

—

—

—

Granted———88,000Forfeited

—

—

—

—

Vested———88,000At the end of the ﬁscal year

—

—

—

—

3,764,000

66,50067,000————88,000Exercised753,000

22,00020,50023,500Forfeited

28,500———2,982,500

44,50046,50064,500Stock options
2003

Stock options
June 2007

Yen
Stock options
June 2008

Stock options
June 2009

Vested stock options (shares)
At the beginning of the ﬁscal year
VestedAt the end of the ﬁscal year

2) Price information

Exercise prices

¥ 918

¥

Weighted-average exercise date stock price

1,471

1,371

1,371

1,371

1,371

—

1,318

1,264

947

1,054

Fair value at the grant date

1

¥

1

¥

1

Yen
Stock options
October 2010

Stock options
May 2011¥

1

Stock options
May 2013¥1,078¥Weighted-average exercise date stock price

1,458

1,371

1,371

1,371

247

1,174

1,046

1,482

Kuraray Co., Ltd.

1

Stock options
May 2012

Exercise prices

Fair value at the grant date

62

Stock options
June 2010

¥

1

¥

1

Notes to Consolidated Financial Statements

Stock options
2003

Stock options
June 2007

U.S. dollars
Stock options
June 2008

Stock options
June 2009

Stock options
June 2010

Exercise prices$ 8.91$ 0.00$ 0.00$ 0.00$ 0.00Weighted-average exercise date stock price

14.28

13.31

13.31

13.31

13.31

—

12.79

12.27

9.19

10.23

Fair value at the grant date

Stock options
October 2010

U.S. dollars
Stock options
Stock options
May 2011
May 2012

Stock options
May 2013

Exercise prices$10.46$ 0.00$ 0.00$ 0.00Weighted-average exercise date stock price

14.15

13.31

13.31

13.31

Fair value at the grant date

2.39

11.39

10.15

14.38

3. Method to estimate fair value of stock options
The fair value of the May 2013 stock options, which were granted in fiscal 2013, are estimated as follows.
1) Valuing method: Black-Scholes model2) Major basic figures and estimating method
May 2013 stock options

Stock price volatility (Note 1)

21.1%

Expected remaining life (Note 2)

2 years

Expected dividend (Note 3)
Risk-free interest rate (Note 4)¥ 36.00/share (US$0.34)
0.14%

Notes: 1. Calculated weekly based on the weekly stock price information over a period from the week that contains May 9, 2011 to the week that contains May 6, 2013.
2. Calculated by subtracting the average period of service of directors and executive officers who are currently in office as of the day of grant from the past average
period of service of directors and executive officers.
3. Based on the dividend paid for the fiscal year ended March 2013.
4. Government bond yield over a period corresponding to the expected remaining life.

4. Method to estimate number of vested stock options
Stock options May 2013
The number of vested stock options is the same as the number of stock options granted, since the stock options were vested on
the day following the day of the grant.

Annual Report 2014

63

16

Income Taxes

1. Significant components of deferred tax assets and liabilities at March 31, 2014 and 2013
Thousands of
U.S. dollars

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013¥

¥ 5,321$

Deferred tax assets:
Provision for retirement beneﬁts ......................................................................

——Net deﬁned beneﬁt liabilities.............................................................................

8,020

—

77,864

Impairment loss ................................................................................................

1,261

1,633

12,242

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

2,127

2,293

20,650

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

1,157

1,144

11,233

Write-down of inventories ................................................................................

237

369

2,300

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

12,945

11,613

125,679

Subtotal deferred tax assets..................................................................................

25,75022,375250,000

Valuation allowance ...............................................................................................

(5,233)(4,898)(50,805)

Total deferred tax assets .......................................................................................

20,517

17,476

199,194

Prepaid pension cost.........................................................................................

—(1,896)—

Deferred tax liabilities:

Net deﬁned beneﬁt assets ................................................................................

(1,813)—(17,601)

Reserve for reduction entry ..............................................................................

(1,711)(1,829)(16,611)

Unrealized gain on revaluation of securities......................................................

(2,937)(2,845)(28,514)

Adjustment to book value of assets stated at fair value ...................................

(11,656)(10,140)(113,165)

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

(8,593)(7,160)(83,427)

Total deferred tax liabilities ....................................................................................

(26,712)(23,873)(259,339)

Net deferred tax assets (liabilities) ........................................................................

¥ (6,194)¥ (6,396)$ (60,135)

Net deferred tax assets are included in the following items in the consolidated balance sheets:
Thousands of
U.S. dollars

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013

¥ 5,889¥ 5,732$ 57,174

6,260

2,744

60,776(18,343)(14,872)(178,087)

Current assets:
Deferred tax assets...........................................................................................
Noncurrent assets:
Deferred tax assets...........................................................................................
Noncurrent liabilities:
Deferred tax liabilities .......................................................................................

2. Reconciliation of the differences between the normal effective tax rate and the income tax rate in the accompanying
consolidated statements of income at March 31, 2014 and 2013

64

Fiscal 2013

Fiscal 2012

Normal effective tax rate ......................................................................................................................

37.7%

37.7%

Non-taxable income ..............................................................................................................................

(1.1)

(0.9)

Tax credit primarily for research and development expenses ...............................................................

(2.8)

(2.4)

Decrease in deferred tax assets at ﬁscal year-end due to change in tax rate .......................................

0.8—

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

(0.0)

0.9

Income tax rate per the consolidated statements of income...............................................................

34.6%

35.4%

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

3. Revision to the amounts of deferred tax assets and deferred tax liabilities due to change in effective statutory tax rate
The “Act for Partial Revision of the Income Tax Law” (Act No. 10 of 2014) was enacted on March 31, 2014. Accordingly, the Special
Corporation Tax for Reconstruction has been abolished for fiscal years beginning on or after April 1, 2014. As a result, the applicable
income tax rate used to calculate deferred tax assets and deferred tax liabilities will be changed from 37.7% to 35.3% for
temporary differences expected to be reversed effective the fiscal year beginning April 1, 2014.
Consequently, for the fiscal year ended March 31, 2014 net deferred tax assets (after deducting deferred tax liabilities) decreasedby ¥335 million (US$3,252 thousand), income taxes – deferred and deferred gains or losses on hedges increased ¥335 million(US$3,252 thousand) and ¥0 million (US$0 thousand), respectively.

17

Asset Retirement Obligations

Asset retirement obligations recorded in the consolidated balance sheets are as follows:
Overview of asset retirement obligations
Some tangible fixed assets of the Company include assets containing asbestos, PCB and fluorocarbon which must be treated in
the manner stipulated by the laws and ordinances when they are scrapped or removed.
Accordingly, asset retirement obligations are recognized based on the estimated disposal costs, excluding removal costs for
aforementioned toxic substances incurred through the repair and maintenance activities in the normal service of the tangible fixed
assets. The grounds laws and ordinances are as follows:
Disposal costs for asbestos

The Ordinance on Prevention of Asbestos Hazards

Disposal costs for equipment containing PCB

The Law concerning Special Measures for Promotion of Proper
Treatment of PCB Wastes (PCB Special Measures Law)

Disposal costs for equipment containing ﬂuorocarbon

Law concerning the Recovery and Destruction of Fluorocarbons(Fluorocarbons Recovery and Destruction Act)

Certain consolidated subsidiaries including overseas subsidiaries recognize asset retirement obligations for recovery obligations on
rental agreements on plant sites and lease contracts.
Calculation method for the amount of asset retirement obligations
The Company
The Company recognizes asset retirement obligations for tangible fixed assets planned to be removed or assets, which have been
removed, but not scrapped yet. Tangible fixed assets planned to be removed mainly consist of assets, which are in use on thereason that they are still usable although useful lives have elapsed and assets, which need immaterial time to remove. Since thepayment terms for disposal of these assets are considered to have been matured, removal costs, which are reasonably estimatedwithout discounting future cash flows are recorded as asset retirement obligations.
Consolidated subsidiaries
Consolidated subsidiaries determine the amounts of asset retirement obligations using discount rates ranging from 2.1% to 5.0%
for the net cash flows, estimating the period of use to be 30 to 60 years after acquisition.
Increase or decrease of the total amount of asset retirement obligations during the fiscal year ended March 31, 2014
and 2013:
Thousands of
U.S. dollars

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013

Beginning balance .................................................................................................

¥2,336¥2,224$22,679

Increase due to decisions to remove.....................................................................

70

67

679

Adjustments due to the elapse of time .................................................................

48

49

466

Decrease due to payment for the obligations........................................................

(165)

(127)

(1,601)Other increase (decrease) .....................................................................................

367

122

3,563

Ending balance ......................................................................................................

¥2,656¥2,336$25,786

Annual Report 2014

65

18

Segment Information

Segment information
1. Segment overview
The business segments reported by Kuraray are the business units for which the Company is able to obtain respective financial
information separately in order for the Board of Directors to conduct periodic investigations to determine distribution ofmanagement resources and evaluate their business results.
Kuraray adopts an in-house company system where each in-house company conducts business activities and establishes its
own comprehensive strategy, both for Japan and for overseas markets. In addition, among Kuraray subsidiaries, Kuraray Trading
Co., Ltd. independently conducts propriety planning and sales activities, including the processing and sale of Kuraray Group
products as well as other companies’ products.
Consequently, Kuraray has created five business segments for reporting – “Vinyl Acetate,” “Isoprene,” “Functional Materials,”“Fibers and Textiles” and “Trading” – categorized by product group based on the respective in-house companies and theTrading segment.
The Vinyl Acetate segment manufactures and markets functional resins and film, including PVA, PVB and EVAL. The Isoprenesegment manufactures and markets thermoplastic elastomers SEPTON and KURARITY, isoprene-related products and
GENESTAR. The Functional Materials segment manufactures and markets methacrylic resin, man-made leather and medical
products. The Fibers and Textiles segment manufactures and sells synthetic fibers and textiles, non-woven fabrics and others. The
Trading segment mainly processes and sells synthetic fibers and man-made leather, and conducts planning and marketing forother products produced by the Kuraray Group and other companies.
Please note that Kuraray has changed the classification of its reporting segments from the fiscal year ended March 31, 2014as stated in “4. Change in segment classification.”
2. Methods for calculating reporting segment net sales, income and loss, assets and other items
The accounting method applied to reported business segments is the same as that stated in “Significant Accounting Policies.”
Profits from reported segments are operating income, and inter-segment sales and transfers are based on the prevailing market
prices.
As noted in “Changes in Accounting Policies Accompanying Revision or Other Changes in Accounting and Other Standards,”
due to the application of “Employee Benefits,” changes to accounting policies in the fiscal year ended March 31, 2014 have been
retroactively applied to the consolidated financial statements of the previous fiscal year. The effect of this change is minor.

66

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

3. Information on sales, income and loss, assets, and other amounts by reporting segment
Fiscal 2013 (April 1, 2013 to March 31, 2014)
Millions of yen
Reporting Segments
Vinyl
Acetate(1) Outside customers ...... ¥155,503

Consolidated
Financial
Adjustment Statements

Isoprene

Functional
Materials

Fibers andTextiles¥31,388¥32,795¥36,339 ¥106,553 ¥362,580¥50,905 ¥413,485¥

Trading

Other
Business

Total

Total

Net sales— ¥413,485(2) Inter-segment sales
and transfers ................

23,757

21,63815,757

10,593

2,437

74,183

16,42990,612(90,612)—

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

179,261

53,02748,552

46,932

108,991

436,764

67,334504,098(90,612)413,485

Segment income (loss) .....

46,658

5,471

1,500

2,633

3,582

59,847

2,493

62,340(12,795)

49,545

Segment assets................

278,042

57,221

44,08841,68935,645456,688

54,180510,869

123,383

634,252

Depreciation andamortization (other than
goodwill) .........................

16,721

4,636

3,670

3,421

37

28,487

1,934

30,422

1,332

31,754

Impairment loss ................

—

—

—

—

—

—

—

—

118

118

Amortization of goodwill ...

3,118

—

98

—

—

3,217

—

3,217

—

3,217

Balance of goodwill at endof current period .............

25,411

—

1,187

—

—

26,598—26,598—26,598Gain on negative goodwill ...

—

—

—

—

—

—

0

0

—

0

Investments in equity
method afﬁliates .................

—

—

—

106

—

106

—

106

—

106

Increase in tangible ﬁxed
assets and intangible
ﬁxed assets ....................

41,191

5,236

3,807

4,241

93

54,5703,561

58,131

1,608

59,740

Other items

Thousands of U.S. dollars
Reporting Segments
Vinyl
AcetateIsoprene

Fibers andTextiles(1) Outside customers ...... $1,509,737$304,737$318,398$352,805 $1,034,495 $3,520,194$494,223 $4,014,417(2) Inter-segment sales
and transfers ................

230,650

210,077

152,980

102,844

23,660720,223

159,504

879,728(879,728)—

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

1,740,398

514,825

471,378455,650

1,058,165

4,240,427

653,728

4,894,155(879,728)

4,014,417

Trading

Other
Business

Consolidated
Financial
Adjustment Statements

Functional
Materials

Total

Total

Net sales$— $4,014,417

Segment income (loss) .....

452,990

53,116

14,56325,563

34,776

581,038

24,203605,242(124,223)

481,019

Segment assets................

2,699,436

555,543

428,038

404,747

346,067

4,433,864

526,019

4,959,893

1,197,893

6,157,786

Depreciation andamortization (other than
goodwill) .........................

162,339

45,00935,631

33,213359

276,572

18,776295,359

12,932308,291

Impairment loss ................

—

—

—

—

—

—

—

—

1,145

1,145

Amortization of goodwill ...

30,271

—

951

—

—

31,233—

31,233—

31,233

Balance of goodwill at endof current period .............

246,708—

11,524——258,233—

258,233—

258,233

Gain on negative goodwill ..

—

—

—

—

—

—

0

0

—

0

Investments in equity
method afﬁliates .................

—

—

—

1,029

—

1,029

—

1,029

—

1,029

Increase in tangible ﬁxed
assets and intangible
ﬁxed assets ....................

399,91250,83436,961

41,174902

529,805

34,572564,378

15,611580,000

Other items

Notes: 1. The “Other Business” category incorporates operations not included in reporting segments, including activated carbon, water treatment related business andengineering.
2. Adjustment is as follows: Included within segment income (loss) of ¥12,795 million (US$124,223 thousand) is the elimination of inter-segment transactions of ¥1,025
million (US$9,951 thousand) and corporate expenses of ¥13,820 million (US$134,174 thousand). Corporate expenses mainly comprise headquarters’ general andadministrative expenses and the Company’s basic research expenses.
3. The total amounts of segment income (loss) is adjusted to operating income described in the consolidated statements of income.
4. Adjustment is as follows: Included within segment assets of ¥123,383 million (US$1,197,893 thousand) is the elimination of inter-segment transactions of ¥28,674
million (US$278,388 thousand) and corporate assets of ¥152,057 million (US$1,476,281 thousand). Major corporate assets are surplus funds, long-term investment
funds, assets related to basic research and corporate administrative divisions of the Company.

Annual Report 2014

67

Fiscal 2012 (April 1, 2012 to March 31, 2013)
Millions of yen
Reporting Segments
Vinyl
Acetate(1) Outside customers ..... ¥126,133

Isoprene

Functional
Materials

Fibers andTextiles¥27,826¥27,642¥35,794 ¥105,632 ¥323,029

Trading

Total

Other
Business

Total

Consolidated
Financial
Adjustment Statements

Net sales¥46,402 ¥369,431 ¥— ¥369,431(2) Inter-segment sales
and transfers ...............

29,03016,991

17,502

10,422

3,127

77,07318,04095,113(95,113)—

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

155,163

44,81745,144

46,216

108,760

400,10264,442

464,545(95,113)369,431

Segment income (loss) ....

48,877

3,870

1,929

1,772

3,358

59,8084,001

63,810(14,612)49,197

Segment assets...............

226,677

55,254

46,99639,74536,625405,299

52,650457,950

129,303587,254

Depreciation andamortization (other than
goodwill) ........................

14,399

4,819

2,813

3,271

34

25,3372,206

27,543

1,118

28,662

Impairment loss ...............

4

—

—

202

—

207

326

534

—

534

Amortization of goodwill...

2,191

—

98

—

—

2,290

—

2,290

—

2,290

Balance of goodwill at endof current period ............

451

—

—

—

—

451

—

451

—

451

Other items

Gain on negative goodwill ...

23,373

—

1,286

—

—

24,659—24,659—24,659Investments in equity
method afﬁliates ..............

—

—

—

105

—

105

—

105

—

105

Increase in tangible ﬁxed
assets and intangible
ﬁxed assets ...................

26,450

5,521

3,818

4,436

40

40,268

3,892

44,1601,358

45,519Notes: 1. The “Other Business” category incorporates operations not included in business segment reporting, including the activated carbon, water treatment related
business and engineering business.
2. Adjustment is as follows: Included within segment income (loss) of ¥14,612 million is the elimination of intersegment transactions of ¥520 million and corporate
expenses of ¥14,092 million. Corporate expenses mainly comprise headquarters’ general and administrative expenses and the submitting company’s basic
research expenses.
3. Segment income is adjusted with operating income under consolidated statements of income.
4. Adjustment is as follows: Included within segment assets of ¥129,303 million is the elimination of intersegment transactions of ¥33,969 million and unallocatedcorporate assets of ¥163,273 million. Major corporate assets are surplus funds, long-term investment funds, assets related to basic research and corporate
administrative divisions of the Company.

4. Change in segment classification
Due to a reorganization conducted in the fiscal year ended March 31, 2014, the former reporting segments of “Resins,”“Chemicals,” “Fibers and Textiles” and “Trading” have been changed to “Vinyl Acetate,” “Isoprene,” “Functional Materials,” “Fibers
and Textiles” and “Trading.”
Segment information for the previous fiscal year has been restated to reflect the change in the method of classification.
(Related Information)
Fiscal 2013 (April 1, 2013 to March 31, 2014)
1. Information about products and services

Net sales to outside customers.................

Net sales to outside customers.................

Vinyl Acetate

Isoprene

Millions of yen
Functional
Materials
Fibers and Textiles¥179,632¥50,187¥52,704

Vinyl Acetate

Isoprene

Thousands of U.S. dollars
Functional
Materials
Fibers and Textiles$1,744,000$487,252$511,689¥69,771$677,388

Other Business

Total¥61,190¥413,485

Other Business

Total$594,077$4,014,417

Notes: Principal products of each segment are as follows:
Vinyl Acetate:
PVA resin and film, EVAL resin and others
Isoprene:
Thermoplastic elastomers SEPTON and KURARITY, isoprene chemicals, GENESTAR heat-resistant polyamide resin and others
Functional Materials: Methacrylic resin, CLARINO man-made leather, medical products and others
Fibers and Textiles: KURALON, KURAFLEX non-woven fabrics, MAGIC TAPE hook and loop fasteners, polyester and others
Others:Activated carbon, aqua business and engineering and others

68

Kuraray Co., Ltd.

Notes to Consolidated Financial Statements

2. Performance by geographical segment(1) Net sales
Millions of yen
Japan

North America

EuropeAsia

Other Area

Total

¥186,504¥39,963¥81,309¥94,070¥11,637¥413,485

Japan

North America

EuropeAsia

Other Area

Total

$1,810,718$387,990$789,407$913,300$112,980$4,014,417

Thousands of U.S. dollars

Note: Net sales are classified by country or area based on customer location.

(2) Tangible fixed assets
Thousands of U.S. dollars

Millions of yen
Japan

U.S.A.

Germany

Other Overseas

Total

Japan

U.S.A.

Germany

Other Overseas

Total¥135,950¥51,600¥24,544¥10,124¥222,219$1,319,902$500,970$238,291$98,291$2,157,466

3. Major customers
No information is available as there is no single outside customer accounting for 10% or more of the Company’s total net sales.
Fiscal 2012 (April 1, 2012 to March 31, 2013)
1. Information about products and services

Net sales to outside customers.................

Vinyl Acetate

Isoprene

Millions of yen
Functional
Materials
Fibers and Textiles¥154,355¥43,056¥48,458

Other Business

Total¥55,884¥369,431¥67,676

Notes: Principal products of each segment are as follows:
Vinyl Acetate:
PVA resin and film, EVAL resin and others
Isoprene:
Thermoplastic elastomers SEPTON and KURARITY, isoprene chemicals, GENESTAR heat-resistant polyamide resin and others
Functional Materials: Methacrylic resin, CLARINO man-made leather, medical products and others
Fibers and Textiles: KURALON, KURAFLEX non-woven fabrics, MAGIC TAPE hook and loop fasteners, polyester and others
Others:Activated carbon, aqua business and engineering and others

2. Performance by geographical segment(1) Net sales
Millions of yen
Japan

North America

EuropeAsia

Other Area

Total

¥186,014¥27,412¥62,981¥83,090¥9,932¥369,431

Note: Net sales are classified by country or area based on customer location.

(2) Tangible fixed assets
Millions of yen
Japan

U.S.A.

Germany

Other Overseas

Total¥129,218¥29,287¥14,297¥8,470¥181,274

3. Major customers
No information is available as there is no single outside customer accounting for 10% or more of the Company’s total net sales.
Information about impairment loss of fixed assets by reporting segment
Fiscal 2013: This information is omitted since similar information is disclosed in the segment information.
Fiscal 2012: This information is omitted since similar information is disclosed in the segment information.
Information about amortization of goodwill and unamortized balance of goodwill by reporting segment
Fiscal 2013: This information is omitted since similar information is disclosed in the segment information.
Fiscal 2012: This information is omitted since similar information is disclosed in the segment information.
Information about gain on negative goodwill
Fiscal 2013: This information is omitted since similar information is disclosed in the segment information.
Fiscal 2012: No gain on negative goodwill to report.
Annual Report 2014

69

19

Related Party Disclosures

Fiscal 2013: Not applicable
Fiscal 2012: Not applicable

20

Per Share Information
Yen

U.S. dollars

Fiscal 2013

Fiscal 2012

Fiscal 2013

Net assets per share .............................................................................................

¥1,272.68¥1,131.64$12.35

Basic net income per share ...................................................................................

83.93

82.62

0.81

Diluted net income per share ................................................................................

83.75

82.52

0.81

Note: The basis for computation of basic and diluted net income per share is as follows:

Thousands of
U.S. dollars

Millions of yen

Fiscal 2013

Fiscal 2012

Fiscal 2013

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

¥29,390¥28,798$285,339

Net income unallocated to common stock .......................................................

—

—

—

Net income allocated to common stock ...........................................................

29,39028,798285,339

Average number of common stock outstanding during the ﬁscal year
(thousand shares)............................................................................................

350,162

348,552

Adjustment made on net income .....................................................................

——

Increase of common stocks (thousand shares) ................................................

775

419

(New subscription rights to shares (thousand shares)) .....................................

(775)

(419)

Outline of the residual securities which were not includedin the calculation of the diluted net income per share because
there was no dilutive effect. ................................................................................

——

Basic net income per share

Diluted net income per share——

1. As noted in “2. Changes in Accounting Policies Accompanying Revision or Other Changes in Accounting and Other Standards,”
due to the application of “Employee Benefits,” changes to accounting policies in the fiscal year ended March 31, 2014 havebeen retroactively applied to the consolidated financial statements of the previous fiscal year. As a result, net assets per sharefor the previous fiscal year decreased by ¥0.43 compared with the amount before retroactive application of the change.
2. As noted in “2. Changes in Accounting Policies Accompanying Revision or Other Changes in Accounting and Other Standards,”
the application of the Accounting Standard for Retirement Benefits and the Guidance on Retirement Benefits is subject to thetransitional accounting treatment set forth in Clause 37 of the Accounting Standard for Retirement Benefits. As a result, net
assets per share for the fiscal year ended March 31, 2014 decreased by ¥13.77 (US$0.13).

21

Supplementary Schedule

Bond schedule(Millions of yen)Company name

Kuraray

Issue

Date of issue

No. 4 Unsecured December 9,
bonds

2011

Total

—

Balance at
beginning of period

Balance at endof period¥10,000¥10,000(US$97,087 thousand) (US$97,087 thousand)¥10,000¥10,000(US$97,087 thousand) (US$97,087 thousand)Note: There are no corporate bonds to be redeemed within 5 years of the consolidated fiscal year-end.

70

Kuraray Co., Ltd.

Yield

Security

1.24%

None

—

—

Date of redemption

December 9,2021—

Notes to Consolidated Financial Statements

Supplementary schedule of loans payable(Millions of yen)

Category

Balance as ofApril 1, 2013

Balance as ofMarch 31, 2014

Averageinterest rate(%)

Due date

Short-term loans ...........................................................................

¥ 6,910¥ 7,030

0.4

—

1.9

—

—

—

1.2

From April 2015
to March 2024—

From April 2015
to Nov. 2026——

(US$68,252 thousand)Current portion of long-term loans due within one year ...............

24,0086,113(US$59,349 thousand)

366

Current portion of long-term lease due within one year (Note 2) ..

378(US$3,669 thousand)Long-term loans (Excluding current portion) (Note 3) ...................

28,171

42,187(US$409,582 thousand)Lease liabilities (Excluding current portion) (Notes 2, 3) ...............

1,863

1,752
(US$17,009 thousand)Total ..............................................................................................

¥61,320¥57,461(US$557,873 thousand)Notes: 1. The average interest rate is calculated based on the interest rate and the ending balance.
2. The average interest rate on lease liabilities is not reported, since interest payment equivalents included in total lease payments are allocated to each consolidated
fiscal year using the straight-line method.
3. Repayments of long-term loans and lease liabilities (excluding those due within one year) within 5 years after the consolidated balance sheet date are as follows:(Millions of yen)
Due after 1 year but
within 2 years

Due after 2 years but
within 3 years

Due after 3 years but
within 4 years

Due after 4 years but
within 5 years

Long-term loans.....................................................

¥ 67

¥ 43

¥ 40

¥ 35

Lease liabilities ......................................................

325

255

181

130

Due after 1 year but
within 2 years

Due after 2 years but
within 3 years

Due after 3 years but
within 4 years

Due after 4 years but
within 5 years

Long-term loans.....................................................

$ 650

$ 417

$ 388

$ 339

Lease liabilities ......................................................

3,155

2,475

1,757

1,262

Category(Thousands of U.S. dollars)
Category

Supplementary schedule of asset retirement obligations
The schedule of asset retirement obligations is omitted since the amount of asset retirement obligations is not more than
one-hundredth of total liabilities and net assets as of March 31, 2014.

Other
Quarterly information in Fiscal 2013
Accumulated(Millions of yen)First quarter
From April 1
to June 30, 2013

Second quarter
From July 1
to September 30, 2013

Third quarter
From October 1
to December 31, 2013

Fiscal 2013

Net sales ...................................................

¥93,158¥199,269¥301,970¥413,485

Income (loss) before income taxes ...........

10,137

24,49534,27745,598Net income (loss) ......................................

6,555

15,765

22,151

29,390Net income (loss) per share (Yen) .............

18.74

45.04

63.27

83.93

First quarter
From April 1
to June 30, 2013

Second quarter
From July 1
to September 30, 2013

Third quarter
From October 1
to December 31, 2013

Fourth quarter
From January 1
to March 31, 2014¥18.74¥26.29¥18.23¥20.66

Quarterly

Net income (loss) per share (Yen) ..............

Annual Report 2014

71

(Thousands of U.S. dollars)

AccumulatedFirst quarter
From April 1
to June 30, 2013

Second quarter
From July 1
to September 30, 2013

Third quarter
From October 1
to December 31, 2013

Fiscal 2013

Net sales ...................................................

$904,446$1,934,650$2,931,747$4,014,417

Income (loss) before income taxes ...........

98,417

237,815332,786

442,699

Net income (loss) ......................................

63,640153,058

215,058

285,339

Net income (loss) per share (U.S. dollars) ...

0.18

0.43

0.61

0.81

First quarter
From April 1
to June 30, 2013

Second quarter
From July 1
to September 30, 2013

Third quarter
From October 1
to December 31, 2013

Fourth quarter
From January 1
to March 31, 2014

$0.18

$0.25

$0.17

$0.20

Quarterly

Net income (loss) per share (U.S. dollars) ...

22

Subsequent Events(Business combination through Acquisition)
The Company reached an agreement to acquire the Vinyl Acetate related business, which consists of vinyl acetate monomer (VAM),
PVA resin, PVB resin and film, from E. I. du Pont de Nemours and Company (“DuPont”) on November 21, 2013 (“the Acquisition”),
and completed the Acquisition on June 1, 2014.
1. Summary of the Acquisition(1) Company name and description of acquired businessCompany name: E. I. du Pont de Nemours and Company
Description of acquired business: The manufacture and sale of Vinyl Acetate related products (VAM, PVA, PVB, etc.)(2) Purpose for the Acquisition
The Company executes the Acquisition as part of its expansion plan in Vinyl Acetate related business, which is one of its corebusinesses.
Ahead of its global competitors, the Company successfully industrialized PVA resin and it has a leading global presence in
PVA resin which applies vinyl acetate as its raw material, PVA film, PVB resin and film, EVOH resin, which is trademarked as
EVAL, and PVA fiber (vinylon). Through the Acquisition, the fusion of DuPont’s technology, R&D, sales capabilities, andmanufacturing and sales network with the Company’s operations will be a key driver of the Company’s sustainable growth.
(3) Closing dateJune 1, 2014.
(4) Legal form of business combination
Cash purchase of assets and shares(5) Form and name of acquired company after business combination
Kuraray America Inc. and other subsidiaries(6) Reason for decision on the acquiring company
Mainly subsidiaries of Kuraray proposed to acquire assets and shares with cash
2. Acquisition cost of the acquired business
The amount of consideration: US$638 million (¥64,927 million)
Acquisition cost: US$638 million (¥64,927 million)
As per the Sale and Purchase Agreement, however, the amount of consideration is provisional because it is subject toadjustment pursuant to a review of changes in working capital and other matters.
Note: The yen amount in parentheses is a conversion based on the exchange rate as of May 31, 2014. Payment will be denominated in U.S. dollars, euros and othercurrencies according to the country in which businesses are transferred.

3. Amount of goodwill, reason for its recognition, amortization method and amortization period
Undetermined at the present time
4. The amounts and breakdown of acquired assets and assumed liabilities on the date of business combination
Undetermined at the present time
(Grant of subscription rights to shares)
At the meetings of the Board of Directors held on April 25 and May 14, 2014, the Company resolved to grant directors andexecutive officers of the Company subscription rights to shares as a stock option in accordance with Article 238, paragraphs 1 and
2 and Article 240, paragraph 1 of the Companies Act.

72

Kuraray Co., Ltd.

Independent Auditor’s Report

Annual Report 201473

Main Group Companies(As of March 31, 2014)
Company

Head office

Capital(¥ million)

Activities

JAPAN
KURARAY TRADING CO., LTD.

Osaka

¥2,200KURARAY CHEMICAL CO., LTD.

Osaka

600

Manufacture and sales of activated carbon and related products

KURARAY ENGINEERING CO., LTD.

Osaka

150

Plant design and construction

Kuraray Noritake Dental Inc.

Tokyo

300

Manufacture and sales of dental materials and medical-related products

Kuraray Plastics Co., Ltd.

Osaka

180

Manufacture and sales of plastics

KURARAYLIVING CO., LTD.

Osaka

101

Manufacture and sales of packaging materials

Kuraray Techno Co., Ltd.

Osaka

100

Production subcontracting, Temporary personnel service

KURARAYKURAFLEX CO., LTD.

Osaka

100

Manufacture and sales of non-woven fabric products

KURARAY FASTENING CO., LTD.

Osaka

100

Manufacture and sales of MAGIC TAPE

Import, export, manufacture, and sales of textile products, chemicals, etc.

OVERSEAS
Kuraray America, Inc.

Texas, U.S.A.

US$10.1 million Import and sales of Kuraray products in the U.S.,
Manufacture and sales of EVAL resins and SEPTON

MonoSol, LLC

Indiana, U.S.A.

US$59.0 million Manufacture and sales of PVA film

Kuraray South America Ltda.

Saõ Paulo, Brazil

R$4.2 million Market development and sales promotion of Kuraray Group products
in South America

Kuraray Europe GmbH

Frankfurt, Germany€31.1 million Import and sales of Kuraray products in Europe,
Manufacture and sales of PVA and PVB resins and PVB film

EVAL Europe N.V.

Antwerp, Belgium€29.7 million Manufacture and sales of EVAL resins in Europe

Kuraray China Co., Ltd.

Shanghai, China

US$3.0 million Business expansion, market entry planning and othersupplemental activities

Kuraray (Shanghai) Co., Ltd.

Shanghai, China

US$5.0 million Import and sales of Kuraray products in China

Kuraray Hong Kong Co., Ltd.

Hong Kong, China

HK$4.6 million Processing and sales of Kuraray products in China and Southeast Asia

Kuraray Asia Pacific Pte. Ltd.

Singapore

US$27.7 million Manufacture and sales of PVA resins

Kuraray India Private Limited

Delhi, India

Kuraray (Thailand) Co., Ltd.

Bangkok, Thailand

Note: Kuraray Co., Ltd. has 28 affiliated companies in Japan and 36 overseas.

74

Kuraray Co., Ltd.

Rupees 102 million Import and sales of Kuraray products in India and market development
THB8.0 million Sales and market development of Kuraray products in Thailand

Investor Information(As of March 31, 2014)

KURARAY CO., LTD.

Shareholder Register Agent for Common Stock

Established:

June 24, 1926

Capital:¥88,955 million

Shares Authorized:

1,000,000,000 shares

Issued:Sumitomo Mitsui Trust Bank, Limited
Stock Transfer Agency Business Planning Department
1-4-1, Marunouchi, Chiyoda-ku, Tokyo 100-8223, Japan

382,863,603 shares

Number of Shareholders: 53,741
Head Offices:Tokyo, Osaka

Principal Shareholders
Name or Company Name

The Master Trust Bank of Japan, Ltd.
-Trust Account- ..............................................

Share Price Movement
Share prices according to the market price on the Tokyo Stock Exchange (left scale)
High

High

Closing
Opening
Low

Opening
Closing

Number of Shares Percentage ofHeld (thousands) Shares Held

Nikkei Stock Average (right scale)

Low

(¥)

(¥)

2,000

25,0001,500

20,0001,000

15,00021,835

5.70%

Japan Trustee Services Bank, Ltd.
-Trust Account- ..............................................

17,610

4.60%

Nippon Life Insurance Company.....................

11,755

3.07%

National Mutual Insurance Federationof Agricultural Cooperatives ..........................

11,0022.87%

Meiji Yasuda Life Insurance Company ...........

5,969

1.56%

NORTHERN TRUST CO (AVFC) RE- SSDOO ........................................................

5,532

1.45%

BBH BOSTON CUSTODIAN FOR BLACKROCKGLOBAL ALLOCATION FUND, INC. ...................

5,462

1.43%

THE BANK OF NEW YORK MELLON
SA/NV.............................................................

5,241

1.37%

TRUST CUSTODY SERVICES BANK, LTD-Trust Account- ..............................................

4,535

1.18%

STATE STREET BANK WEST CLIENT-TREATY..

4,358

1.14%

Note: Although the Company owns 32,551,718 shares of treasury stock, it is
excluded from the major shareholders listed above.
10,000

500

0

12/4

6

8

10

12 13/ 2

4

6

8

10

12 14/ 2

4

0

Breakdown of Issued Shares
by Type of Shareholder

Trading Volume
14.87%

Individuals andOthers(Thousands of shares)

80,0008.50%

Shares Held byKuraray Co., Ltd.

60,00019.52%

Trust and Banking
Companies

3.52%

Securities
Corporations

40,0002.99%

Other Domestic
Corporations

20,00034.22%

Non-Japanese
Investors
0

12/4

6

8

10

12 13/ 2

4

6

8

10

12 14/ 2

7.07%

Life Insurance
Companies

9.31%

Major Commercial
Banks and
Other Financial
Institutions

4

Annual Report 201475

TOKYO HEAD OFFICEOte Center Bldg., 1-1-3, Otemachi,
Chiyoda-ku, Tokyo 100-8115, Japantel. +81-3-6701-1000 fax. +81-3-6701-1005

OSAKA HEAD OFFICE
Umeda Hankyu Building Office Tower, 8-1,
Kakudacho, Kita-ku, Osaka 530-8611, Japantel. +81-6-7635-1000 fax. +81-6-7635-1005