Semi-annual financial information 2007

Kuraray Co., Ltd.

CONSOLIDATED BALANCE SHEETS
Kuraray Co., Ltd. and its Consolidated Subsidiaries(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents
Marketable securities
Notes and accounts receivable:
Trade
Unconsolidated subsidiaries and affiliates
Other
Loans receivable from unconsolidated subsidiaries, affiliates and others
Allowance for doubtful accounts

Inventories
Deferred income taxes
Other current assets
Total current assets

Property, plant and equipment:
Land
Buildings
Machinery and equipment
Construction-in-progress
Less accumulated depreciation

Investments and other assets:
Goodwill
Other intangible assets
Investment securities
Investments in unconsolidated subsidiaries and affiliates
Loans receivable from:
Unconsolidated subsidiaries and affiliates
Other
Accumulated premiums on insurance
Deferred income taxes
Prepaid pension costs
Other
Allowance for doubtful accounts
TOTAL ASSETS
See Notes(1), (6) and (7) of the end of this financial information

September 30,
2006

Millions of yen
March 31,2006

September 30,
2005

Thousands of
U.S. dollars
September 30,
2006¥26,833
8,987¥28,085−¥11,523−$227,398
76,16189,532
1,270
2,393
1,004
(1,036)
93,16388,677
1,757
4,127
624
(1,015)
94,17081,888
1,369
1,931
371
(958)
84,601

758,746
10,763
20,2808,508(8,780)789,51771,766
6,175
3,050
209,974

69,4316,478
2,504
200,668

68,184
6,964
2,577
173,849

608,186
52,331
25,848
1,779,441

19,71888,684443,178
32,412583,992(418,782)
165,210

19,676
88,265443,689
24,590576,220(416,824)
159,396

20,29394,020431,294
27,359572,966(407,009)
165,957

167,102751,559
3,755,746
274,678
4,949,085(3,549,000)
1,400,085

28,8696,294
34,888
5,681

28,625
6,014
37,9704,512

28,7006,10830,324
4,415

244,653
53,339295,661
48,144

2,422
533
21,511
2,711
6,139
4,724
(88)
113,684¥488,868

2,802
475
29,707
2,650
5,142
3,511
(115)
121,293¥481,357

2,757
557
35,831
2,088
4,775
4,617
(1,307)
118,865¥458,671

20,525
4,517
182,297
22,97452,02540,034(746)
963,423$4,142,949

CONSOLIDATED BALANCE SHEETS(Unaudited)

September 30,
2006

Millions of yen
March 31,2006

September 30,
2005

Thousand of
U.S. dollars
September 30,
2006

LIABILITIESCurrent liabilities:
Short-term bank loans
Current portion of long-term debt
Notes and accounts payable:
Trade
Unconsolidated subsidiaries and affiliates
Other
Accrued income taxes
Accrued expenses and otherTotal current liabilities¥8,3495,000¥6,619390¥10,855
1,931$70,754
42,37339,930
814
9,845
5,364
16,08085,38239,150
1,004
8,130
7,165
16,771
79,22938,361
656
7,837
4,112
14,13577,887338,390
6,898
83,43245,458136,271
723,576

Long-term liabilities:
Long-term debt
Deferred income taxes
Accrued retirement benefits
Other
Total long-term liabilities
TOTAL LIABILITIES

14,25512,30912,916
15,71355,193
140,575

19,256
13,714
13,404
14,27360,647
139,876

15,856
10,012
13,514
16,962
56,344
134,231

120,805
104,314
109,458
133,160
467,737
1,191,313

MINORITY INTEREST

−

2,354

2,302

−

SHAREHOLDERS' EQUITY
Common stock:
Authorized-700,000,000 shares in March 2006
Issued-382,863,603 shares in March 2006
Capital surplus
Retained earnings
Unrealized gain on revaluation of securities
Cumulative translation adjustments
TOTAL SHAREHOLDERS' EQUITY

−
−
−
−
−
−

88,95587,227
155,377
16,426
2,726
350,71188,95587,161
145,701
12,321(157)
333,981

−
−
−
−
−
−

−

(11,584)(11,843)−−

481,357

458,671−

NET ASSETS
Owners' equity:
Paid-in capital:
Authorized-1,000,000,000 shares in September 2006
Issued-382,863,603 shares in September 2006
Capital surplus
Earned surplus
Treasury stock-15,181,671 shares in September 2006
Total owners' equity

88,95587,261
162,068(11,463)
326,821

−
−
−
−
−

−
−
−
−
−

753,856
739,500
1,373,458(97,144)2,769,670

Valuation and translation adjustments
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Translation adjustments
Total valuation and translation adjustments

14,452(91)
4,718
19,079

−
−
−
−

−
−
−
−

122,475(771)
39,982
161,686

Minority interests

2,393

−

−

20,280348,293−−2,951,636−$4,142,949

Treasury stock at cost-15,379,675 shares in March 2006
TOTAL LIABILITIES, MINORITY INTERESTS ANDSHAREHOLDERS' EQUITYTOTAL NET ASSETSTOTAL LIABILITIES AND NET ASSETS
See Notes(1), (4) and (7) of the end of this financial information¥488,868¥−¥

CONSOLIDATED STATEMENTS OF INCOME(Unaudited)

Kuraray Co., Ltd. and its Consolidated Subsidiaries

Millions of yen

Millions of yen
Six months period ended
September 30,
September 30,
2006
2005

Year ended
March 31,2006

Thousands of
U.S. dollars
Six months
period ended
September 30,
2006

Net sales¥191,264¥179,279¥375,073$1,620,881

Cost of sales

137,003

127,337

266,284

1,161,042

54,261

51,942

108,789

459,839

35,11834,84270,512

297,610

19,143

17,10038,277

162,229

819
35
(184)
(1,675)
358
−
211
(314)
−
(2,533)

723
78
(153)
(157)
964
(119)
−
(100)
(1,359)(2,741)

1,294
56
(414)
(1,693)
1,029
(253)
8,446
(492)
(5,455)(6,432)

6,941
297(1,559)(14,195)
3,034(21,467)(3,283)
15,860(2,864)
14,236(3,914)34,363(27,822)
134,407

4,950
974

4,216
767

11,674
1,394

41,949
8,254

5,924

4,983

13,06850,203(54)¥9,882(58)¥9,195(109)¥21,186(458)$83,746(Gross profit)
Selling, general and administrative expenses(Operating income)
Other income (expenses):
Interest and dividend income
Equity in earnings of affiliates
Interest expenses
Restructuring charges
Gain on sales of investment securities
Write-down of investment securities
Gain on sales of property, plant and equipment
Loss on disposal of property, plant and equipment
Impairment loss on property, plant and equipment
Other, net(Income before income taxes and minority interests)
Income taxes:
Current
Deferred

Minority interests in net income of
consolidated subsidiaries
Net income

Yen
Net income per share:
Primary
Fully diluted
See Notes(1) of the end of this financial information¥26.88
26.81

−
1,788
(2,661)−

U.S. dollars¥25.0525.03¥57.51
57.41

$0.23
0.23

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(Unaudited)

Kuraray Co., Ltd. and its Consolidated Subsidiaries

Commonstock¥88,955

Balance at March 31, 2005
Net income
Cash dividends, YEN6.50 per share
Bonuses to directors
Changes in unrealized gain on revaluation of securities
Translation adjustments
Treasury stock acquired, net
Balance at September 30, 2005
¥88,955
Net income
Cash dividends, YEN6.50 per share
Effect of changes in reporting entities
Minimum pension liability adjustment
Changes in unrealized gain on revaluation of securities
Translation adjustments
Treasury stock sold, net
Balance at March 31, 2006
¥88,955
See Notes(1), (3), (5) and (6) of the end of this financial information

Capitalsurplus¥87,156

Millions of yen
Unrealized
gain onRetainedrevaluation of
earnings
securities¥138,951¥9,012
9,195(2,386)(59)
3,309

Cumulativetranslation
adjustments¥679

Treasurystock¥(11,823)(836)
5¥87,161¥145,701
11,991(2,386)56
15¥12,321¥(157)(20)¥(11,843)

4,105
2,883
66
¥87,227¥155,377¥16,426¥2,726259¥(11,584)

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS(Unaudited)

Kuraray Co., Ltd. and its Consolidated Subsidiaries

Millions of yen
Owners' equity
Paid-in
capitalBalance at March 31, 2006
Cash dividends, YEN8.50 per share
Net income
Bonuses to directors
Treasury stock acquired
Treasury stock soldNet changes other than shareholders' equity
Total changes during the current period
Balance at September 30, 2006

Balance at March 31, 2006
Cash dividends, YEN8.50 per share
Net income
Bonuses to directors
Treasury stock acquired
Treasury stock soldNet changes other than shareholders' equity
Total changes during the current period
Balance at September 30, 2006

Capitalsurplus¥88,955

Earnedsurplus¥87,227

Treasurystock¥155,377(3,123)9,882(68)¥(11,584)

(67)
188

¥319,975(3,123)
9,882
(68)
(67)
222

121
¥(11,463)

6,846¥326,821

34−¥88,95534¥87,261

6,691¥162,068

Millions of yen
Valuation and translation adjustments
Valuation
Total
Deferreddifference on
Translation
valuation andgains or losses
available-for-saleadjustments
translation
on hedges
securities
adjustments¥16,426¥−¥2,726¥19,152(1,974)(1,974)¥14,452

(91)
(91)
¥(91)

1,992
1,992
¥4,718Total
Owners'equity(73)(73)¥19,079

Minority
interests¥2,35439
39¥2,393Total
net assets¥341,481(3,123)
9,882
(68)
(67)
222
(34)
6,812
¥348,293

Thousands of U.S. dollars
Owners' equity
Paid-in
capitalBalance at March 31, 2006
Cash dividends, USD 0.07 per share
Net income
Bonuses to directors
Treasury stock acquired
Treasury stock soldNet changes other than shareholders' equity
Total changes during the current period
Balance at September 30, 2006

Capitalsurplus$753,856

Earnedsurplus$739,212$1,316,754(26,466)
83,746
(576)

288

−

288
$739,500$753,856

56,704$1,373,458

Treasurystock$(98,169)

Total
Owners'equity

(568)
1,593

$2,711,653(26,466)
83,746
(576)
(568)
1,881

1,025
$(97,144)

58,017$2,769,670

Thousands of U.S. dollars
Valuation and translation adjustments
Valuationdifference on
available-for-salesecurities

Balance at March 31, 2006
$139,203
Cash dividends, USD 0.07 per share
Net income
Bonuses to directors
Treasury stock acquired
Treasury stock soldNet changes other than shareholders' equity(16,728)
Total changes during the current period(16,728)
Balance at September 30, 2006
$122,475
See Notes(1), (3), (5) and (6) of the end of this financial information

Deferred
gains or losses
on hedges$

Translation
adjustments

Totalvaluation andtranslation
adjustments

Minority
interests―$23,102$162,305$19,949

(771)
(771)
$(771)

16,88016,880$39,982

(619)
(619)
$161,686

331
331$20,280

Total
net assets$2,893,907(26,466)
83,746
(576)
(568)
1,881
(288)
57,729$2,951,636

CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

Kuraray Co., Ltd. and its Consolidated Subsidiaries

Millions of yen
Six months period ended

Years ended

Thousands of
U.S. dollars
Six months
period ended

September 30,
2006

September 30,
2005¥15,860¥14,236¥34,363$134,407

12,778
11
135
−
(211)
314
(358)
−
(819)
184
(262)
(1,831)
444
(720)
(104)
25,421
661(184)(6,773)

11,698
4
62
1,359
−
−
(964)
119
(723)
153
520
(3,867)(3,216)(1,262)(93)
18,026495(129)(5,750)25,186
37
(141)
5,455
(8,446)492(1,029)253(1,294)414(5,838)(4,219)(2,505)(1,630)1,264
42,362
943(388)(10,226)

108,288
93
1,144(6,941)
1,559(2,220)(15,517)
3,763(6,102)(881)
215,432
5,601(1,559)(57,398)

19,125

12,642

32,691

162,076(8,986)(14,157)

3,000(20,234)3,000(36,069)(76,152)(119,974)

296

22

10,5502,508(1,570)(1,356)449(2,175)
(290)
8,705
362

(327)
(136)
3,008
(225)
(464)
29
772

(1,379)
(338)
3,604
(338)
(702)
6,573
1,406

(13,305)(11,491)
3,805(18,432)(2,458)73,771
3,067(18,722)(14,555)(13,693)(158,661)

1,625
−
(398)
(3,123)
222
(67)

1,130
−
(1,831)(2,386)45(60)(3,322)
3,400(3,407)(4,772)461(151)

13,772(3,373)(26,466)
1,881
(568)

(1,741)(3,102)(7,791)(14,754)

86

(207)

134

729

Net (decrease) increase in cash and cash equivalents(1,252)(5,222)

11,341(10,610)

Cash and cash equivalents, beginning of year

28,085

16,743

16,743

238,008

−

2

1

−

¥26,833¥11,523¥28,085$227,398

Cash flows from operating activities
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes and minority
interests to net cash and cash equivalents provided by operating activities:
Depreciation and amortization
Increase in allowance for doubtful accounts
Increase (decrease) in accrued retirement benefits, net
Impairment loss on property, plant and equipment
Gain on sales of property, plant and equipment
Loss on disposal of property, plant and equipment
Gain on sales of investment securities
Write-down of investment securities
Interest and dividend income
Interest expenses(Increase) decrease in notes and accounts receivable
Increase in inventories
Increase (decrease) in notes and accounts payable
Increase in prepaid pension costs
Other, net
Sub-totalInterest and dividend received
Interest paid
Income taxes paid
Net cash and cash equivalents provided byoperating activities
Cash flows from investing activities:(Increase) decrease in marketable securities
Payments for acquisition of property, plant, equipment
and intangible assets
Proceeds from sales of property, plant, equipment
and intangible assets
Payments for purchase of investment securities
Payments for disposal of property, plant, equipment and intangible assets
Proceeds from sales and redemption of investment securities
Payments for acquisition of long term prepaid expenses
Payments of premiums on insurance
Withdrawals from accumulated premiums on insurance
Other, net
Net cash and cash equivalents used ininvesting activities
Cash flows from financing activities:(Decrease) increase in short-term bank loans
Proceeds from long-term debt
Repayments of long-term debt
Dividends paid
Proceeds from sales of treasury stock
Payments for purchase of treasury stock
Net cash and cash equivalents used infinancing activities
Effect of exchange rate changes on cash and cash equivalents

Effect of changes in reporting entities
Cash and cash equivalents, end of year
See Notes(1) and (2) of the end of this financial information

March 31,2006

September 30,
2006−(1,788)2,661(3,034)−−

SEGMENT INFORMATION
Industrial segment information(Unaudited)

Kuraray Co., Ltd. and its Consolidated Subsidiaries

Net sales and operating income

Six months period ended September 30, 2006
Chemicals and resins
Fibers and textiles
High performance materials,
medical products and others
Total
Eliminated on consolidation and corporate
Consolidated total

outside customers¥102,074
53,087

Millions of yen
Net salesinter-segment
total
¥190
¥102,264
455
53,542

Operatingincome¥17,480
4,033

36,103
191,264−

11,466
12,111(12,111)47,569203,375(12,111)3,295
24,808(5,665)¥191,264¥−¥191,264¥19,143

Millions of yen
Net sales
Six months period ended September 30, 2005

outside customers

Operatinginter-segment

total

incomeChemicals and resins¥89,965¥368¥90,333¥14,009

Fibers and textiles

53,668342

54,0105,009

High performance materials,
medical products and others

35,646

13,69849,344

3,558

Total

179,279

14,408

193,687

22,576−¥179,279(14,408)¥ −(14,408)¥179,279(5,476)¥17,100

Eliminated on consolidation and corporate
Consolidated total

Six months period ended September 30, 2006
outside customers
Chemicals and resins$865,034
Fibers and textiles
449,890
High performance materials,
medical products and others
305,957
Total
1,620,881
Eliminated on consolidation and corporate―
Consolidated total$1,620,881
See Notes(1) of the end of this financial information

Thousands of U.S. dollars
Net salesinter-segment
total$1,610$866,644
3,856
453,746
97,170102,636(102,636)$ −403,127
1,723,517(102,636)$1,620,881

Operatingincome$148,136
34,17827,923
210,237(48,008)$162,229

Industrial segment information(Unaudited)

Kuraray Co., Ltd. and its Consolidated Subsidiaries
Identifiable assets, capital expenditure and depreciation and amortization

Six months period ended September 30, 2006
Chemicals and resins
Fibers and textiles
High performance materials,
medical products and others
Total
Eliminated on consolidation and corporate
Consolidated total

Identifiable
assets¥254,269
79,009Millions of yen
Capitalexpenditure¥10,7102,646

Depreciation andamortization¥8,3601,910

69,655402,933
85,935¥488,868

1,389
14,745
1,951¥16,696

1,673
11,943835¥12,778

Millions of yen
Six months period ended September 30, 2005

Identifiable

CapitalDepreciation andassetsexpenditure

amortization

Chemicals and resins¥226,524¥14,486¥7,503Fibers and textiles

75,125

2,187

1,772

High performance materials,
medical products and others

80,391

2,175

1,704

Total

382,040

18,848

10,97976,631¥458,671

624¥19,472719¥11,698

Eliminated on consolidation and corporate
Consolidated total

Six months period ended September 30, 2006
Chemicals and resins
Fibers and textiles
High performance materials,
medical products and others
Total
Eliminated on consolidation and corporate
Consolidated total
See Notes(1) of the end of this financial information

Thousands of U.S. dollars
Identifiable
CapitalDepreciation andassetsexpenditure
amortization$2,154,822$90,763$70,848
669,568
22,424
16,186590,296
3,414,686
728,263$4,142,949

11,771
124,958
16,534$141,492

14,178101,212
7,076$108,288

Geographic segment information(Unaudited)

Kuraray Co., Ltd. and its Consolidated Subsidiaries

Millions of yen
Six months period ended September 30, 2006
Domestic (inside Japan)
North America
EuropeAsia
Total
Eliminated on consolidation and corporate
Consolidated total

outside customers¥136,951
15,71830,347
8,248
191,264−¥191,264

Net salesinter-segment¥13,049
1,493
2,513
1,485
18,540(18,540)¥ −total¥150,000
17,211
32,8609,733
209,804(18,540)¥191,264

Operatingincome (loss)¥21,481
1,359
2,434
(332)
24,942(5,799)¥19,143

Identifiable
assets¥263,441
47,45389,3685,420
405,682
83,186¥488,868

Millions of yen
Net sales
Six months period ended September 30, 2005
Domestic (inside Japan)
North America

EuropeAsia
Total
Eliminated on consolidation and corporate
Consolidated total

outside customers

inter-segment

total

OperatingIdentifiable

income (loss)

assets¥130,711¥14,318¥145,029¥19,294¥250,97814,046
26,352

2,017
994

16,06327,346

1,573
1,342

39,95484,500

8,170

667

8,837

72

9,393

179,279

17,996

197,275

22,281

384,825−¥179,279(17,996)(17,996)¥179,279(5,181)¥17,100

73,846¥458,671

Six months period ended September 30, 2006
outside customers
Domestic (inside Japan)$1,160,602
North America
133,203
Europe257,178
Asia
69,898
Total
1,620,881―
Eliminated on consolidation and corporate
Consolidated total$1,620,881
See Notes(1) of the end of this financial information¥−

Thousands of U.S. dollars
Operating
Net salesinter-segment
total
income (loss)$110,584$1,271,186$182,042
12,653
145,856
11,517
21,297
278,475
20,627
12,58582,483(2,814)
157,119
1,778,000
211,372(157,119)(157,119)(49,144)$ −$1,620,881$162,229

Identifiable
assets$2,232,551
402,144757,356
45,932
3,437,983
704,966$4,142,949

Foreign sales(Unaudited)

Kuraray Co., Ltd. and its Consolidated Subsidiaries

Millions of yen
Six months period ended
September 30, 2006
North America
Europe
Asia
Other
Total

Consolidated
Foreign sales¥19,072
32,331
32,942
4,300¥88,645

Thousands of U.S. dollars
Percentage ofconsolidated

net sales¥ −−−−¥191,264

net sales
10.0 %
16.9
17.2
2.2
46.3 %

Millions of yen
Percentage ofSix months period ended
September 30, 2005

Foreign sales

Consolidated
net sales

consolidated
net sales

North America¥16,821¥ −EuropeAsia

28,781
28,660

−
−

Other
Total

3,520
¥77,782−¥179,279

See Notes(1) of the end of this financial information

9.4 %
16.0
16.0
2.0
43.4 %

Consolidated
Foreign sales$161,627
273,992
279,169$36,441$751,229

net sales
$ −

−
−
−
$1,620,881

Notes:
Note (1) The United States dollar amounts represent translation of Japanese yen at the rate of YEN118=$1
Note (2) The amounts in the cash flow statement of the previous period have been reclassified to conform with the classification of the curren
period as follows:"Increase in prepaid pension costs" out of "Other, net" of Cash flows from investing activitie"Payments for disposal of property, plant, equipment and intangible assets" out of "Other, net" of Cash flows from investing
activities"Payments for acquisition of long term prepaid expenses" out of "Other, net" of Cash flows from operating activitie
Note (3) Effective from the six months period ended September 30, 2006, Kuraray and its subsidiaries in Japan adopted the Accounting Standards
Board of Japan (ASBJ) Statement No.4 "Accounting Standard for Directors' Bonus" issued by ASBJ on November 29, 2005.
The adoption of the new accounting standard has no effect on the semi-annual financial information 2006
Note (4) Effective from the six months period ended September 30, 2006, Kuraray and its subsidiaries in Japan adopted ASBJ Statement No.
"Accounting Standard for Presentation of Net Assets in the Balance Sheet" and ASBJ Guidance No. 8 "Guidance on Accounting
standard for Presentation of Net Assets in the Balance Sheet" both issued by ASBJ on December 9, 2005. The total amountcorresponding to conventional "total shareholders' equity" on the balance sheet of the six months period ended September 30, 200
is 345,991 millions of yen.
Note (5) Effective from the six months period ended September 30, 2006, Kuraray and its subsidiaries in Japan adopted revised ASBJ
Statement No.1 (revised 2005) "Accounting Standard for Treasury Shares and Appropriation of Legal Reserve" and ASBJ Guidanc
No. 2 (revised 2005) "Guidance on Accounting Standard for Treasury Shares and Appropriation of Legal Reserve" both revise
by ASBJ on December 27, 2005. The adoption of the revised accounting standard has no effect on the semi-annual
financial information 2006.
Note (6) Effective from the six months period ended September 30, 2006, Kuraray and its subsidiaries in Japan adopted "Accounting Standard
for Business Combination" issued by Business Accounting Council on October 31, 2003, and ASBJ Statement No.7 "Accounting
standard for Business Divestitures" and ASBJ Guidance No.10 "Guidance on Accounting standard for Business Combinations andAccounting Standard for Business Divestitures" both issued by ASBJ on December 27, 2005
The adoption had an effect that "Other intangible assets" including "Goodwill arising on consolidation adjustment" as of September 30
2005 was described as "Goodwill" as of September 30, 2006. The amounts of "Other intangible assets" including "Goodwill arisingon consolidation adjustment" were 518 millions of yen as of September 30, 2005, and499 millions of yen as of March 31,2006,
respectively.
Note (7) Although the closing date of the fiscal period was a holiday for financial institutions, Kuraray and its subsidiaries in Japan accounted
for the matured notes/accounts on the end of fiscal periods as if notes/accounts were settled on maturity basis.
The amounts of notes/accounts matured on the end of the six months period ended September 30, 2006 and excluded
from the balance sheet were as follows:
Notes receivables
2,488 (unit : millions of yen)Accounts receivable-trade3,211
Notes payable735
Accounts payable-trade
3,575
Accounts payable-other129

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