Annual Report 2007
Fiscal Year Ended March 31, 2007

JSR CORPORATION
Annual Report 2007
Printed in Japan(1,200)PROFILE

INVESTOR INFORMATIONJSR Corporation, which was Japan Synthetic Rubber Co., Ltd.
until 1997 when the company celebrated its 40th anniversary,has a clear policy of achieving an innovation-driven transformation on its own.
The aim is the formulation of a business strategy able to meet projectedmarket trends in the 21st century.
Since its establishment in December 1957,
JSR has been expanding its businesses and building sound management systems.
As a result, JSR has grown to rank among the leading manufacturers of synthetic rubber,
emulsions and plastics. Recently, JSR has entered the rapidly growing information andelectronics industries by applying its polymer technology for opto-electronic materials.
JSR is supplying many types of information electronics materials,
a product category where the company has a high market share.
The renewed JSR will continue to take on new challenges to realize its full potential,
seeking advanced semiconductor materials, display materials, optical materials, andenvironment & energy- and medical care-related materials
that will drive progress in the 21st century.

NUMBER OF SHARES ISSUEDCOMMON STOCK PRICE RANGE

255,885,166 shares(Tokyo Stock Exchange)(As of March 31, 2007)

NUMBER OF SHAREHOLDERS

1st quarter2nd quarter3rd quarter

4th quarter

FY2001

High
Low

1,021
716

945
650

805
665

772
600

FY2002

High
Low

1,005
685

945
599

910
650

963
815

23,972

MAJOR SHAREHOLDERSName

BRIDGESTONE Corporation
Japan Trustee Services Bank, Ltd.
(Trust Account)
The Master Trust Bank of Japan, Ltd.
(Trust Account)
Mizuho Corporate Bank, Ltd.
The Master Trust Bank of Japan, Ltd.
(Pension Account — Pension Trust
Account held for Mitsubishi
Chemical Corporation)
State Street Bank & Trust Company 505103
Chase Manhattan Bank N.A. London
Chase Manhattan Bank 385036
Nippon Life Insurance Company
State Street Bank & Trust Company

Percentageof shares held(%)

Number ofshares held
(thousands)

FY2003

High
Low

1,135
856

1,033
780

1,238
900

1,282
1,109

15.97

40,866

FY2004

High
Low

1,477
1,141

2,080
1,429

2,540
1,795

2,435
2,055

4.72

12,088FY2005

High
Low

2,520
1,892

2,180
1,655

2,265
1,790

2,255
2,040

4.65
4.00

11,89910,249FY2006

High
Low

2,395
2,000

2,635
2,175

3,150
2,370

3,810
3,040

FY2007

High
Low

3,710
2,535

2,930
2,280

3,170
2,505

2,935
2,530

3.86
2.50
2.43
2.43
2.34
2.10

9,888
6,404
6,227
6,223
5,998
5,389

SECURITIES TRADED COMMON STOCKTokyo Stock Exchange
Osaka Securities Exchange

MONTHLY STOCK PRICE
(¥)
4,000

COMPOSITION OF SHAREHOLDERS
Shareholders by category

NumberShares held
(thousands)

Financial Institutions
Securities Companies
Other Corporations
Foreign Corporations
and Individuals
Individuals and Others

133
43
320

93,9171,710
60,884383
23,093

77,97821,394

Total

23,972

255,885

3,500

3,000

2,500

30.48%

23.79%

Foreign investors

Domestic
corporations

By type ofshareholders

8.36%

4.54%
1 tangen or more

10_REVIEW OF OPERATIONS
16_RESEARCH AND DEVELOPMENT AND INTELLECTUAL PROPERTY
19_THE JSR CORPORATE SOCIAL RESPONSIBILITY REPORT
20_CORPORATE GOVERNANCE AND COMPLIANCE

3.97%

23_FINANCIAL SECTION
47_PRODUCTION PROFILE
48_COMPANY NETWORK
50_CORPORATE DATA
51_INVESTOR INFORMATION

10

2006
4

10

2007
4

Financial institutions &securities companies

Contents

04_INTERVIEW WITH THE PRESIDENT
08_AT A GLANCE

2005
4

37.37%

Individuals/others
01_SIX-YEAR SUMMARY
02_TO OUR SHAREHOLDERS

2,000

0.02%
Less than 1 tangen

50 tangen or more

2.00%
Forward-looking Statements
Statements regarding the company’s future plans, strategies, projected performanceand outlook are based on information available at the time of writing. Readers are
cautioned that economic trends in JSR’s target markets and other risks and factors
beyond the company’s control could cause actual results to differ materially from thoseprojected by the management.

500 tangen or more

By number ofshares held

89.47%
1,000 tangen or more

ANNUAL REPORT 2007 51

SIX-YEAR SUMMARYJSR Corporation
Year ended March 31

Thousands of
U.S. dollars

Millions of yen
2002

2003

2004

2005

2006

2007

2007

¥220,058
211,246
8,812
411
(757)

¥247,139
226,345
20,794431(750)¥275,071
242,452
32,619397(693)¥305,368
260,035
45,333519(475)¥338,160
284,80353,357635(420)¥365,831
310,588
55,243
1,030(399)$3,098,951
2,630,988
467,963
8,728(3,376)

7,915
4,728
13,265
16,507

17,855
10,991
16,04816,48930,37819,353
17,156
14,97043,471
27,564
18,134
15,24549,03830,55523,361
16,20653,44033,65522,094
18,133452,693
285,088
187,155
153,608

270,054
22,934135,477
131,752
1.46
1.8
3.6
48.8

281,874
24,208
139,682
139,447
1.59
3.9
7.9
49.5

308,581
13,920146,280
159,497
1.63
6.3
12.9
51.7

325,031
13,857139,249
182,476
1.82
8.7
16.1
56.1

381,097
1,607
164,389
212,751
1.67
8.7
15.5
55.8

408,949
2,745
168,963
235,186
1.75
8.2
15.0
57.5

3,464,203
23,254
1,431,281
1,992,263

18.48
6.00
514.9342.46
7.00
544.9475.12
9.00
623.14107.5414.00
717.13119.63
20.00
836.31133.1024.00
932.47

1.13
0.20
7.90

Results for the year
Net sales
Costs and expenses
Operating income
Interest and dividend income
Interest expenses
Income before income taxes andminority interests
Net income
Capital expenditures
Depreciation

Year-end financial position
Total assets
Long-term debt due after one year
Total liabilities
EquityCurrent ratio (times)
Return on assets (%)
Return on equity (%)
Equity ratio (%)

Per share of common stock(yen and U.S. dollars)
Net income
Cash dividends
EquityNote: U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥118.05=$1, the exchange rate prevailing at March 31, 2007.

Net sales

Operating income

Net income / ROE(Millions of yen)
400,000(Millions of yen)
60,000(Millions of yen, %)40,00020%

300,000

45,00030,00015%

200,000

30,00020,00010%

100,000

15,00010,000

5%

0

0
2003
2004
Petrochemicals

2005
2006
2007
Fine chemicals and other products

0%

0
2003

2004

2005

2006

2007

2003
2004
2005
Net income ROE

2006

2007

ANNUAL REPORT 2007 01

TO OUR SHAREHOLDERS
With chemistry, we can.

we made concerted efforts to increase sales and to raise prices
to improve margins amid a difficult environment where the price ofmajor raw materials increased sharply. Our goal was to stabilize
earnings in these operations. In our fine chemicals and other products segment, which is centered on information electronics
materials, we continued to launch cutting-edge materials basedon our proprietary technology as we worked to enhance our presence in the global marketplace. In addition, the entire JSR Group
implemented the Cost Revolution for Growth-II (CRG-II) costreduction project to improve earnings.
As a result, we recorded higher sales and earnings. Consolidated net sales increased 8.2% year-on-year to ¥365.8 billion,
operating income was up 3.5% to ¥55.2 billion, ordinary income
rose 3.3% to ¥54.7 billion, and net income increased 10.1% to¥33.6 billion.

DIVIDENDS
We increased the interim dividend by ¥2 per share to ¥12, andbased on this year’s performance, we plan to pay a year-end
dividend of ¥12 per share, also up ¥2. This would translate into a
dividend of ¥24 per share applicable to fiscal 2007, ¥4 higher
than the previous fiscal year.

YOSHINORI YOSHIDA, Ph.D.
Representative Director and President

OPERATING ENVIRONMENT AND REVIEW OF BUSINESS RESULTS
In the past fiscal year, the steep rise in the price of crude oil andslowing growth in consumer spending were areas of concern.
However, thanks to increased capital investment, an improved
job market and wages, and other factors, the economy achieved
moderate growth.
Against this backdrop, we viewed the past fiscal year, the final
year of “JSRevolution II,” as a critical period leading to our next
medium-term business plan. With this recognition, we focusedon addressing priority issues. In our petrochemicals operations,

OVERVIEW OF JSRevolution II“JSRevolution II” was launched in fiscal 2005 and was designed toaccelerate growth in the fine chemicals and other products segment
and to generate consistent earnings in the petrochemicals operations, as well as lay the foundations for next-stage growth businesses.
The main industries served by JSR experienced generally
healthy growth in volume terms during this business plan. However,we were also confronted with a business environment that was
far more challenging than we had anticipated at the outset of thisthree-year journey. Surging prices of raw materials was just oneof the challenges we faced.

JSRevolution II – Review of Achievements
Net sales

Operating income

Fine chemicals and other products as apercentage of total sales(Billions of yen)
400.0(Billions of yen)
80.0

(%)
80.0

365.8
OVER
330.0

338.2
300.0

305.4

60.0

60.0
53.4

55.2

OVER
50.0

OVER
50.0

45.3
200.0

40.0

40.0

100.0

20.0

20.0

0.0

0.0
FY2005(Result)

FY2006(Result)

02 JSR CORPORATION

FY2007(Result)(Original target)

40.2

42.2

43.9

FY2006(Result)

FY2007(Result)

0.0
FY2005(Result)

FY2006(Result)

FY2007(Result)(Original target)

FY2005(Result)(Original target)

We responded to this difficult operating environment by tackling a number of key themes in each of our businesses. These
efforts lifted net sales, operating income and ROE higher than our
initial targets.
Although the fine chemicals and other products segment
accounted for a lower share of sales than planned, this was mainly
attributable to sales in petrochemicals operations eclipsing ourplan due to sales price increases.

NEXT-STAGE GROWTH BUSINESSES UNDER JSRevolution II
We have continued to channel resources to the next-stage
growth business.
In the precision processing business, we have begun volume
production of retardation film at our own facilities, as well as madeprogress in making viable businesses out of new film products.
These include protective films, near-infrared cut filters and ITO films.
In the environment & energy field, we pushed ahead with thedevelopment of automotive and mobile device applications forelectrolyte membranes for fuel cells. We chalked up a number ofachievements in turning this product into a viable business.
While we didn’t achieve what we set out to with respect to theoptical materials business and some next-stage growth businesses, we generally achieved our initial performance targets under“JSRevolution II”.

the share of sales derived from value-added products and byincreasing total sales. Even more intense competition is likely in
our fine chemicals and other products segment. We therefore
plan to increase earnings in this segment by continuing to deploy
resources to growing markets and aggressively expanding salesin Japan and overseas. Initiatives for next-stage growth businesses will include establishing a business platform for precision processing and launching a number of environment & energy
and healthcare-related businesses.
We will implement the “E-100” (Efficiency 100%) costreduction project to increase our competitiveness further as we
make efforts to raise the earnings of the JSR Group andstrengthen our operations.
Our new medium-term business plan is discussed in moredetail in the feature section of this annual report.
In addition to strengthening JSR Group management systems,
we will fulfill our social responsibilities by conducting Responsible Care activities and adhering to the highest standards forcorporate ethics. We intend to put forth a collective effort tobecome the company we are striving to be in 2010.
To our shareholders, we ask for your continued cooperationand support.
June 2007

OUTLOOK AND INITIATIVESJapan’s economy is expected to continue on a moderate recovery course, but with further increases in crude oil prices andconcerns of a slowdown in the U.S. economy, we expect thebusiness environment to remain challenging and unpredictable.
In response to this environment—and having achieved mostof the initial targets of “JSRevolution II”—we have decided to launcha new medium-term business plan, “JUMP2010.” This plan will
cover the four-year period from fiscal 2008 to fiscal 2011. In ourpetrochemicals operations, we aim to generate earnings by raising

YOSHINORI YOSHIDA, Ph.D.
Representative Director and President

ROE
(%)
20.0

16.1

15.5

15.0

15.0

OVER
14.0

10.0

5.0

0.0
FY2005(Result)

FY2006(Result)

FY2007(Result)(Original target)

ANNUAL REPORT 2007 03

INTERVIEW WITH THE PRESIDENTJUMP2010
JSR Medium-term Business PlanPOSITIONING OF JUMP20102015 VISION

Q:JSR launched a new medium-term business planon April 1, 2007. How does it relate to the previous
business plan?
A: “JUMP2010”, as we call the new business plan, covers the 4-

Q:What is that vision for 2015, as laid out in the new
medium-term business plan?
A: We have set goals for 2015 in terms of technologies and busi-

year period from April 1, 2007 through March 31, 2011. As
the name suggests, this plan is positioned as the “jump” phaseof a hop, step and jump process.
Through the end of fiscal 2007, we concentrated on changing the structure of businesses, increasing earnings in existing
businesses and paving the way for next-stage growth businesses. “JUMP2010” will see us target further growth in thefine chemicals and other products segment, and increase earnings in petrochemicals operations. We will also create new products in next-stage growth businesses and the fine chemicals
and other products segment. This is a period during which we
aim to continue growing as an advanced chemical company
as we pave the way for achieving longer-term goals we haveset for 2015.

ness domains.
JSR made its start in the elastomer business in petrochemicals operations. Today, our operations extend around the world
and are based on superior materials and technologies in diverse
business fields including information and electronics.
By 2015, we will have evolved even more. Our aim is todevelop new materials and technologies to augment existingones as well as conduct businesses in a whole range of nextgeneration fields harboring exciting growth prospects, such as
semiconductor materials, display materials, optical materials,
environment & energy and healthcare-related businesses.

JUMP2010 (FY2007-FY2011)
Further accelerate growth of fine chemicals and other businesses
Increase earnings of the petrochemicals business
Launch new products in next-stage growth businesses, and fine chemicals
and other products
FY2007 (Result)

FY2011 (Target)

FY2007-FY2011
CAGR

Net Sales (Billions of yen)

365.8

Over 500.0

Over 8%Operating Income (Billions of yen)

55.2

Over 75.0

Over 8%Operating Margin (%)

15.1%

Over 15%—

ROE (%)

15.0%

Over 14%—04 JSR CORPORATIONJUMP2010 NUMERICAL TARGETS

35%), optical materials (over 10%) and other products (over10%). On the profit front, we are aiming for at least 10% annual
growth in operating income.

Q:What are the numerical targets of “JUMP2010”?
A: In fiscal 2011, the final year of this plan, we are targeting
consolidated net sales of ¥500 billion, an operating margin of
15% and ROE of 14%. We will achieve these targets by
expanding existing businesses and launching new ones.

(SEMICONDUCTOR MATERIALS)
Q:The fine chemicals and other products segment will
support increased earnings. What are your basic
strategies and growth targets in each of your threemain businesses—semiconductor materials, FPD
materials and optical materials?
A: In regards to semiconductor materials, we plan to increase

BUSINESS STRATEGY (PETROCHEMICALS BUSINESS)
Q:JSR’s overall goals for JUMP2010 are clear, butwhat are your specific strategies for achieving
them? Please outline your strategies and targets
for the petrochemicals operations.
A: In petrochemical operations—elastomers, emulsions and plas-sales in existing products and aggressively develop new products to further expand this business.
The semiconductor market is expected to achieve midsingle-digit growth on average through 2010. However, we aretargeting an average annual growth rate of 20% in our semiconductor materials business, far in excess of the projectedmarket growth rate. While pursuing this lofty goal, we will work
to bring down raw material expenses and other costs. Together,
these steps will increase our earnings in this business.

tics—our basic strategy is to increase earnings by concentrating on value-added products. Improving productivity, loweringcosts and in terms of our targets for these operations, we aim
to achieve average annual growth over the 4 years of the plan,from fiscal 2008 through fiscal 2011, 3% in net sales and 3%
in operating income.

BUSINESS STRATEGY(FINE CHEMICALS AND OTHER PRODUCTS BUSINESS)(FPD MATERIALS)

Q:How about the fine chemicals and other products
business, which includes information electronics
materials?
A: The fine chemicals and other products segment is centered

Q:Your plan is to expand the semiconductor materials business significantly. What about FPD materials used in LCD TVs?
A: In FPD materials, our basic strategy is to expand sales andon the semiconductor materials, flat panel display (FPD) materials, and optical materials businesses. Our basic strategy is tomaintain and increase earnings through ongoing efforts to cut
variable costs and other expenses and by expanding the scaleof our businesses based on higher sales of existing materials
and the development of new materials.
In this segment, we aim to deliver annual growth in sales ofat least 14% over the 4-year plan period. We also have a goal
for the share of sales within our product portfolio for fiscal 2011:
semiconductor materials (approx. 40%), FPD materials (approx.

maintain profitability by responding to demands for quality
improvements in terms of higher definition and performance ofTVs. We will also enhance our ability to compete on price.
With existing materials, including alignment film and color
pigmented resists, we will develop and expand sales of distinctive products for high-end TVs and new processes. Regarding
new FPD materials for achieving higher definition, we aim todevelop viable products as soon as possible with the goal ofgenerating sales of no less than ¥14 billion in fiscal 2011.

Strategic Review of Petrochemicals Business
Net Sales

Operating Income(Billions of yen)
240.0(Billions of yen)
20.0Over 230.0

Over 20.0
18.0

205.1
180.0

15.0

120.0

10.0

ver 3%CAGR Over 3%CAGR O
5.0

60.0
Plastics
Emulsions
Elastomers

0.0
FY2007(Result)

FY2011(Target)

0.0
FY2007(Result)

FY2011(Target)

ANNUAL REPORT 2007 05

Taking full advantage of manufacturing sites in South Korea
and Taiwan, we will provide timely solutions to customers. Coupledwith a relentless drive to reduce variable costs and other expenses,
we are determined to maintain profitability in this area.
Our target is for at least 7% average annual growth in FPD
materials sales over the period through fiscal 2011.

(OPTICAL MATERIALS)
Q:What about optical materials?
A: This business, which is made up of retardation film andNEXT-STAGE GROWTH BUSINESSES(PRECISION PROCESSING AND ENVIRONMENT & ENERGY)
Q:What are your plans for the precision processing
business, which you have been working on since theprevious business plan? Equally, what have you got
planned for the environment & energy business where
you have already had success with electrolyte
membranes for fuel cells in automotive applications?
A: In precision processing, we will combine superior materials andsophisticated processing technologies with expertise in providing new functions to develop products with the potential to dominate the market. In this way, we aim to expand our business.
The chart on the next page shows specific productexamples. In fields where high market growth is anticipated,
we will use precision processing technologies to processsuperior proprietary materials such as ARTON® and provide
such functions as electrical conductivity and ion conductivity
to develop competitive products.
Collaboration with customers is a key to develop competitive materials, and by enhancing our relations with leading edge
customers, we will continue to develop materials with evenhigher added value.
In the environment & energy field, in addition to binders forrechargeable batteries and electrolyte membranes, which wehave developed, we aim to develop new rechargeable batteries and capacitor and fuel cell materials.

antireflective coating materials for LCDs, optical fiber coating
materials and other products, plans to achieve at least 35%
average annual growth over the 4 years of “JUMP2010”.
Sales of ARTON® retardation film fell appreciably short ofplan under our previous business plan. However, we aredetermined to improve earnings from this film. We will endeavor
to develop and expand sales of products for high-end TVs
thereby responding to an anticipated increase in LCD panel
sizes and higher contrast going forward. At the same time,
another approach will be to continue reducing costs.
In respect of new materials, such as protective films, we areaiming for sales of at least ¥6.0 billion in fiscal 2011.

STRATEGY FOR NEXT-STAGE GROWTH BUSINESSES
Q:That covers the strategy for the existing businesses.
What is your strategy for next-stage growth businesses in the new medium-term business plan?
A: Under “JUMP2010”, our basic strategy is to create multiple corebusinesses that will expand the Company in the future. Thesebusinesses will capture synergies from our superior materials
and process technologies. The goal for these businesses is togenerate sales of at least ¥20.0 billion in fiscal 2011.
The next-generation materials and process technologies wewill develop, combined with our portfolio of existing materials
and process technologies, will power our business expansion
by meeting customer needs in target markets.

NEW PRODUCT SALES TARGETS
Q:You have positioned new products to drive sales
growth in the future. What are your sales targets
for new products in terms of existing businesses
and next-stage growth businesses under“JUMP2010”?
A: Our plan is to generate sales of at least ¥50.0 billion in fiscal
2011, developing new products in the fine chemicals and otherproducts segment and next-stage growth businesses. Of thisStrategic Review of Fine Chemicals and Other Products Business
Net Sales

Operating Income(Billions of yen)
320

(Billions of yen)
60.0Over 55.0
Over 270.0

240

160

40.0

160.0

40.7

20.0

ver 14%
CAGR Over 10%CAGR O

80

0
–3.5

0

Fine chemicals and other productsCompany-wide expenses–20.0
FY2007(Result)

06 JSR CORPORATIONFY2011(Forecast)

FY2007(Result)

FY2011(Forecast)amount, semiconductor materials, display materials, and opticalmaterials will account for sales of ¥10.0 billion, ¥14.0 billionand ¥6.0 billion, respectively. Precision processing andenvironment & energy/medical care-related businesses—
next-stage growth businesses—will account for the remaining¥20.0 billion in targeted sales.

COST-REDUCTION PLAN [E-100]
Q:Cost-reducing is vital for ensuring stable earnings
and is an ongoing initiative at JSR. Have you set
specific cost-reducing targets in the new mediumterm business plan?
A: Our company-wide cost-reducing project during the 3-year
period from fiscal 2005 through fiscal 2007 yielded savings of¥19.7 billion compared with fiscal 2004.
“JUMP2010” seeks to take this a step further, targeting total
cost reductions of ¥28.0 billion over 4 years, by looking atcost-reducing from new perspectives. We have set specifictargets of ¥6.0 billion and ¥22.0 billion for petrochemicals
operations and the fine chemicals and other products segment, respectively. These reductions will help to lift earnings ineach business.

We plan to increase the dividend by ¥4 per share to ¥28 infiscal 2008. We also plan to repurchase our shares, based on
our stock price and other considerations, as part of our policy
for returning profits to shareholders.

CONCLUSION
Q:Please summarize your achievements under
JSRevolution II and your goals for “JUMP2010”.
A: JSR achieved its targets for the previous business plan aheadof schedule, delivering significantly higher sales and earnings
by expanding the fine chemicals and other products segment
and improving earnings in petrochemicals operations since
fiscal 2003.
“JUMP2010” reaches even higher—for net sales and an
operating margin of at least ¥500.0 billion and 15%, respectively, in fiscal 2011. Our aim for 2015 is for even more
dramatic growth.

RETURNING PROFITS TO SHAREHOLDERS
Q:Please explain your policy for returning profits toshareholders.
A: The company is developing new businesses and taking otheractions in order to increase corporate value. At the same time, thereturn of profits to shareholders is a crucial management issue.
In setting dividends, we take into account the funds needed
to support future business expansion. Given that for the time
being we will put emphasis on investments for expanding ourbusinesses, our policy will be to pay stable dividends that are
set in accordance with growth in our consolidated earnings.

Cost-cutting Plan [E-100]

Example Products for Next-Stage Growth Businesses

Achieve 100% material utilization rate to bring loss ratio down to zero(Billions of yen)
32.0

Precision Processing Business
Create new markets and launch diverse
new products using JSR’s proprietary processes

28.0
24.0

Products■■

Retardation films
Protective films■■

Near-infrared cut filters
ITO films and other products

Environment & Energyand Healthcare Businesses

16.0

Products

8.0
Fine chemicals andother products
Petrochemicals

0FY2008(Forecast)

FY2009(Target)

FY2010(Target)

FY2011(Target)Electrolyte membrane for fuel cells(for cell phones, residential co-generation systems
and automobiles)■ Photo-catalyst coating materials(for traffic signs, external wall panels, etc.)■ Biochips and other products■

ANNUAL REPORT 2007 07

AT A GLANCE

Elastomers
BUSINESS OUTLINE
The main products in this segment are synthetic rubber andthermoplastic elastomers (TPE). JSR is one of the world’s largest manufacturers of synthetic rubber. In recent years, JSR has
focused on increasing earnings in this business.

MAIN PRODUCTS AND APPLICATIONSSYNTHETIC RUBBER FOR TIRES: STYRENE-BUTADIENE
RUBBER (SBR), POLYBUTADIENE RUBBER (BR),POLYISOPRENE RUBBER (IR)Sales

Operating income/Operating margin(Billions of yen)
125

(Billions of yen)
15

15%

100

12

12%

75

9

9%

50

6

6%

25

3

3%

0

0

0%

2003 2004 2005 2006 2007

2003 2004 2005 2006 2007
Operating income

Operating margin

Applications: Automotive tires

SYNTHETIC RUBBER FOR NON-TIRES: ACRYLONITRILEBUTADIENE RUBBER (NBR), ETHYLENE-PROPYLENE RUBBER(EPR)

Proportion of sales

Applications: Automotive parts, industrial rubber parts

31.8%

THERMOPLASTIC ELASTOMERS (TPE): BUTADIENE RESIN(RB), STYRENIC THERMOPLASTIC ELASTOMER (SBS, SIS)
Applications: Plastic modifiers, footwear

JSR’s products improve the performanceof racing, energy-conserving and manyother types of tires.

Emulsions
Sales

Operating income/Operating margin(Billions of yen)
25

(Billions of yen)
3.0

15%

20

2.4

12%

15

1.8

9%

PRODUCTS AND APPLICATIONS

10

1.2

6%

LATEX: PAPER COATING LATEX (PCL), ACRYLIC EMULSION
(AE)

5

0.6

3%

BUSINESS OUTLINE
Emulsions are liquids in which synthetic rubber or synthetic resin
have been dispersed in water. As demand for these emulsions isstable, JSR is working on improving profitability in this segment.

Applications: Paper coating, carpet backing, adhesive agents002003 2004 2005 2006 2007

0%2003 2004 2005 2006 2007
Operating income

Operating margin

Proportion of sales

6.6%

Paper coating latex made by JSR is
widely used by paper companies to
produce coated paper that makes publications more attractive.

08 JSR CORPORATION

Plastics
BUSINESS OUTLINE
The major product in this segment is ABS plastics, a material
with well-balanced properties that is used in many applications
worldwide. JSR is boosting profitability by shifting emphasis tovalue-added products.

PRODUCTS AND APPLICATIONSACRYLONITRILE-BUTADIENE STYRENE (ABS) PLASTICS
Applications: Automotive parts, electrical appliances, officeautomation equipment

ACRYLONITRILE-ETHYLENE-PROPYLENE-DIENESTYRENE (AES) PLASTICS

Sales

Operating income/Operating margin(Billions of yen)
75

(Billions of yen)
5

10%

60

4

8%

45

3

6%

30

2

4%

15

1

2%

0

0

0%

2003 2004 2005 2006 2007

2003 2004 2005 2006 2007
Operating income

Operating margin

Proportion of sales

Applications: Automotive parts, electrical appliances, housebuilding materials
17.7%

Synthetic resins are increasingly being
used for automotive parts.

Fine Chemicals andOther Products

BUSINESS OUTLINE

Information electronics materials are the largest component of
this segment. Backed by strong demand for semiconductors
and flat panel displays, sales of products in this segment are
increasing more than in any other segment and driving JSR’s
earnings growth.

Sales

Operating income/Operating margin(Billions of yen)
200

(Billions of yen)
50

50%

160

40

40%

120

30

30%

80

20

20%

40

10

10%

PRODUCTS AND APPLICATIONSSEMICONDUCTOR MATERIALS: PHOTORESISTS,CHEMICAL MECHANICAL PLANARIZATION (CMP) SLURRY
AND PAD, PACKAGING MATERIALSApplications: Semiconductors

002003 2004 2005 2006 2007

0%2003 2004 2005 2006 2007
Operating income

Operating margin

Proportion of sales

DISPLAY MATERIALS: LIQUID CRYSTAL DISPLAY (LCD)
MATERIALS, PLASMA DISPLAY PANEL (PDP) MATERIALSApplications: Flat panel displays

OPTICAL MATERIALS: OPTICAL FIBER COATING MATERIALS,HEAT RESISTANT TRANSPARENT RESIN (ARTON®)

43.9%

Applications: Optical fiber coating materials, retardation film
An LCD television using the ARTON ®
retardation film.

ANNUAL REPORT 2007 09

REVIEW OF OPERATIONSElastomers
SYNTHETIC RUBBER
Strong production of automobile tires along with price increases
linked to the higher cost of raw materials resulted in a significant
year on year increase in sales of general-purpose synthetic rubber
in Japan. Sales of special-function rubber such as ethylene
propylene rubber (EPR) and nitrile rubber increased owing to higher
production of automobiles and price increases.
As a result of efforts to increase sales of solution polymerized
SBR (S-SBR), which is used in high-performance tires, both unit
volume and the monetary value of sales of synthetic rubber exports
increased significantly year on year. Additionally, the monetary valueof sales of nitrile rubber and other special-function rubber increased
owing to higher production of automobiles and price increases.

TPE
Both volume and monetary sales of thermoplastic elastomers (TPE)
increased in Japan over the previous fiscal year on recovery of
demand, efforts to increase sales and price increases. Exports ofbutadiene thermoplastic elastomers were firm due to the recovery of demand. However, while volume decreased as a result of
JSR’s withdrawal from other unprofitable TPE categories, monetarysales were higher due to price increases.

PRODUCTION
Production of ethylene-propylene rubber (EPR) was consolidated
at the Kashima Plant. In addition, JSR also increased annual
production capacity to 36,000 tons in June 2006 and raised its
equity stake to 50% in Kumho Polychem Co., Ltd. (KPC), a Korean
joint venture that manufactures and sells EPR. KPC also plans toraise its annual EPR production capacity to 78,000 tons by August
2007, which will establish the JSR Group as Asia’s foremost
supplier EPR for rubber applications.

EARNINGS
The entire JSR Group has been implementing the CRG-II Project
to reduce costs. However, earnings have been severely impacted
by the higher cost of raw materials. In response, JSR has raised
prices to maintain profit margins despite cost increases.

As a result, consolidated net sales of elastomers increased
11.8% to ¥116,250 million and operating income was up 5.3% to¥12,369 million.

OUTLOOKSYNTHETIC RUBBER
Earnings growth atop firm demandAcross the board, demand in the current fiscal year is expected to
exceed that of the previous year, with robust domestic and export
demand projected for synthetic rubber used in tires. While volume
is likely to be flat, monetary sales should increase, benefiting fromhigher prices made effective in the previous fiscal year. In synthetic
rubber for non-tire sectors, volume exports of EPR are expected to
decline in line with measures to consolidate production facilities,
despite healthy automobile production levels.

TPE
New applications to boost earnings
In addition to higher volume sales due to new applications for the
proprietary JSR RB® (butadiene plastic), earnings are likely to benefit from price increases conducted in the previous year.

STAYING PROFITABLE
Respond quickly to cost changes and accelerate cost-cutting programs
As in the previous year, JSR will stay profitable by responding withspeed to projected changes in the cost of raw materials and accelerating the pace of cost-cutting programs.

ENHANCING HIGH VALUE-ADDED PRODUCTS
Better lineup of products for high-performance tires andautomotive components
To maintain stable profitability in elastomers, JSR is leveraging its
distinctive advantages and superior technology in a focused drive
to enhance its lineup of high value-added products. In Europe,
where demand for S-SBR for high-performance tires is growing,
this effort saw JSR increase production capacity at the end of
2005. Further growth in demand for S-SBR is expected.

Sales and operating income(Billions of yen)
120

16

90

12

60

8

30

4

0

0
2003

2004

10 JSR CORPORATION

2005

2006

2007

JSR’s products improve the performanceof racing, energy-conserving and manyother types of tires.
Sales (left scale)Operating income (right scale)Emulsions
PCL & OTHERS
Volume sales of paper coating latex (PCL), the main product inthis segment, decreased year-on-year due to intensified competition,even though the level of production of coated paper was largely
unchanged from the previous fiscal year. Monetary sales remained
the same as a result of price increases to reflect an upturn in thecost of raw materials. Volume and monetary sales of acrylic emulsions were significantly lower due to a decrease in sales in thebuilding exterior paint market.

expanding sales to match its full production capacity. Volume sales
are thus likely to be slightly higher than in the previous year.
Monetary sales should also see growth, benefiting from higher
product prices made effective last year.

EMULSIONS FOR GENERAL INDUSTRIES
Lower volume sales expected
Volume sales are likely to decline, reflecting JSR’s withdrawal from
unprofitable fields in this sector, with lower monetary sales also
expected compared to the previous year.

EARNINGS
In this sector too, the entire JSR Group has been implementing
the CRG-II Project to substantially reduce costs. However, earnings have been severely impacted by the higher cost of raw
materials. In response, JSR has raised prices to offset a portionof cost increases.
But operating income decreased due to both decline of sales
volume and delay of price raising.
The result of these factors was a 2.3% decrease in consolidated net sales of emulsions to ¥24,362 million and a 30.5%
decrease in operating income to ¥1,777 million.

OUTLOOK
PCL
Higher volume due to healthy demand
In addition to firm domestic demand, coated paper production
should see a slight improvement year on year from increased
exports. Backed by robust demand in PCL, JSR will focus on

EARNINGS
Initiatives to improve profitability
JSR has taken steps to boost production efficiency by consolidating at the Yokkaichi Plant the production of emulsion products that was formerly separated at the Yokkaichi and Kashimaplants. This move is part of efforts to enhance competitivenessin this field.
Also, in a process begun two years ago and running through tolast year, JSR is withdrawing from unprofitable fields, with the aimof raising the profitability by shifting to high value-added sectors.
Looking ahead, JSR will promote the E-100 cost reduction
project outlined in the new medium-term business plan while
conducting product price increases to keep pace with rising costs
for raw materials. In this way, JSR is committed to an ongoing
effort to pursue measures designed to bolster profitability.

Sales and operating income(Billions of yen)
32

4.0

24

3.0

16

2.0

8

1.0

0

0
2003

2004

2005

2006

JSR’s functional particles are used for diagnostic
agents and reagents for research. Looking ahead,
JSR plans to focus even more on sales.
Sales (left scale)Operating income (right scale)

2007

ANNUAL REPORT 2007 11

Plastics
ABS PLASTICSOUTLOOKIn Japan, sales year on year increased for such specialty ABS
plastics as ultra-heat resistant ABS plastics used in automobiles
and weather-resistant AES plastics. However, sluggish demandfor home appliances and the withdrawal from unprofitable product fields caused a decline in volume sales. Monetary sales
increased as a result of efforts to expand sales in special and highvalue-added fields and increase prices.
Outside of Japan, JSR worked to expand sales of special andhigh value-added products and increase prices, but volume andmonetary sales declined due to sluggish demand in the ASEAN
region for motorcycle applications and the withdrawal from
unprofitable product fields.

Lower volume and monetary sales due to withdrawal from
unprofitable fields
While ABS demand is likely to be about the same as in the previous year, production capacity will decline as JSR realigns andraises the efficiency of production facilities. Tracking this move,
JSR will continue to withdraw from unprofitable product grades.
While this will likely result in slightly lower volume sales year-on-year,
monetary sales should rise due to the two price increases enacted
last year.
To enhance profitability, JSR will continue to increase the ratioof specialty and high value-added products in its product mix.
Already accounting for more than 70% of sales in fiscal 2007, thegoal is to bolster profitability further by raising the ratio of theseproducts to 80% in fiscal 2008.

RESTRUCTURING
JSR is currently restructuring the plastics business to build a more
powerful operating framework. To improve sales, JSR isaccelerating the shift to specialty and value-added products. To
improve manufacturing activities, JSR has embarked on an
extensive streamlining program to realign and integrate existingproduction bases.

EARNINGS
The entire JSR Group has been implementing the CRG-II Projectto substantially reduce costs in this sector. However, earnings
have been severely impacted by the higher cost of raw materials. In response, JSR has raised prices to offset a portion of
cost increases.
But operating income decreased due to both decline of sales
volume and delay of price raising.
As a result, consolidated net sales of plastics decreased 2.8%
to ¥64,614 million and operating income was down 8.0% to¥3,865 million.

Realignment of production bases to raise efficiency
JSR has restructured production facilities at the Yokkaichi Plant,
having nearly completed the consolidation of two separate
production plants in the Yokkaichi area.
JSR, meanwhile, has cut back production capacity for ABS
plastics by 60,000 tons to 230,000 tons. In consolidating ABS
facilities, JSR focused on closing down inefficient plants while
concentrating production in high-efficiency plants. These steps
are part of plans to boost overall production efficiency andstrengthen cost competitiveness.
In this way, JSR is seeking to build a more powerful operational base as one of Japan’s leading ABS manufacturers.

Sales and operating income(Billions of yen)
120

6.0

90

4.5

60

3.0

30

1.5

0

0
2003

2004

12 JSR CORPORATION

2005

2006

2007

Specialty ABS plastics sold as technopolymers
are increasingly being used in automotive parts.
Sales (left scale)Operating income (right scale)Fine Chemicals and Other Products
SEMICONDUCTOR MATERIALSOPTICAL MATERIALS

Sales of photoresists, the primary product in semiconductormaterials, increased year-on-year due to growing demand
resulting from higher semiconductor production and strong
exports, mainly to Asia, and in Japan for excimer photoresists.
In particular, sales of ArF (Argon Fluoride) photoresists, a newmaterial, made significant contribution to the growth in excimer
photoresist sales as a result of increased application in cuttingedge fields. Sales increased at subsidiaries in the U.S. andEurope from steady demand for semiconductors. Looking at othernew semiconductor materials, in addition to large increases indemand and sales of chemical mechanical planarization (CMP)
consumables, multilayer materials and packaging materials, salesof semiconductor materials increased significantly overall.

Sales of optical fiber materials increased sharply as sales of
optical fiber coating materials, the main product of this category,were strong both in Japan and overseas due to increased
demand for optical fiber cables, and as demand recovered for
antireflection coating. Sales of ARTON®, a heat-resistant transparent resin, increased significantly as a result of efforts toincrease sales in the area of optical film, the primary demandindustry, although sales fell short of initial projections.

FLAT PANEL DISPLAY MATERIALS
Volume sales of liquid crystal display (LCD) materials increased
with worldwide growth of the LCD TV market. However, due toinventory adjustments of liquid crystal panels, JSR did not meet
its initial projections. Also, monetary sales were the same as theprevious fiscal year due to strong pressure to lower prices caused
by a drop in liquid crystal panel prices. Sales of plasma display
panel (PDP) materials increased year-on-year. Although export
sales remained sluggish due to continued production cutbacks
by primary users, in Japan there was strong production of largesized televisions in the first half of the year. Following JSR’s LCD
materials plant in Korea, an LCD materials plant was completed
in Taiwan, and commercial production began in July 2006. Moreover, JSR launched a second-stage plant, which will expand
JSR’s supply capacity and increase its range of products in
Taiwan. The Start of commercial production is targeted for autumn
of 2007.

PRODUCTION
With the objective of manufacturing materials for next-generation
semiconductor devices, this year JSR built its “ME Line” production facility in the Yokkaichi area, a new high-level concept
consisting of clean rooms with a goal of achieving zero defects.
By enhancing its infrastructure in the form of a precision processing line for next-generation lithography materials, JSR is well positioned to compete in markets for leading-edge materials.

EARNINGS
There was strong pressure to lower prices due to a drop in product prices in primary demand industries. In response, JSR has
strengthened its competitiveness by making efforts to increase
sales of differentiated products and by reducing costs throughthe steady implementation of the CRG-II Project.
As a result, consolidated net sales of fine chemicals and otherproducts increased 12.5% to ¥160,605 million and operating
income rose 6.6% to ¥40,732 million.

Sales and operating income(Billions of yen)
200

60

150

45

100

30

50

15

0

0
2003

2004

2005

2006

2007

Sales (left scale)Operating income (right scale)

Strong semiconductor demand is projected tocontinue in fiscal 2008, and JSR forecasts thatits semiconductor sales will increase at a rate thatexceeds the market growth rate due to increased
sales of new products.

ANNUAL REPORT 2007 13

OUTLOOKSEMICONDUCTOR MATERIALS
Sustaining a competitive edge in growing fields involving
leading-edge applications
In comparison to fiscal 2007, the semiconductor market growthrate is projected to dip slightly in fiscal 2008. Nevertheless,the market for ArF photoresists, used in the manufacture ofstate-of-the-art semiconductors, is expected to continue to post
significant gains. In Asia, meanwhile, new products used in ArF
immersion lithography, a new production technique establishedin the latter half of fiscal 2007, should become more widespread.
As ArF photoresists enjoy healthy sales growth, JSR is working tosteadily expand its share in this field.
JSR is also making steady progress in development activities that closely track upcoming trends in technology. As an
example, JSR is developing high refractive index liquid andothers critical to the next generation of water-based immersion
lithography technology.

Photograph of cross-section of a semiconductor using
Low-K, an insulating material for state-of-the-art
semiconductors. JSR’s Low-K material is highly
acclaimed by leading users.

14 JSR CORPORATION

New materials generate strong growth
JSR has been aggressively marketing CMP slurry and pads, andmultilayer materials, all of which are vital to the production ofadvanced high-density, multi-layer semiconductors. This approachhas enabled JSR to sustain high growth exceeding that of theoverall market, and to develop conditions less vulnerable to theimpact of the silicon cycle. For CMP slurry, two positive results
should emerge from these actions in fiscal 2008—the continuation of expansion seen in the previous year as prominent users inJapan and abroad begin full-scale use of this product, andsubsequent major growth in sales. Where CMP pads areconcerned, users have highly rated products developed from
JSR’s proprietary specialty elastomers. Through increased use of
these products by advanced users, JSR is looking to boost sales
by a substantial margin.
Similarly, sales of packaging materials continue to grow steadily,with thick film photoresists, for which production was doubled in
the previous fiscal year, expected to post a sharp jump in sales in
the current fiscal year.
By steadily growing sales of new materials peripheral to photoresists in this way, JSR is taking steps to sustain a level of sales
growth that outpaces that of the semiconductor market.

Demand for CMP slurry and pads is expanding intandem with the spreading use of high-density multilayer semiconductors. These JSR products are
increasingly being used by many leading users.

JUMP2010, JSR’s new medium-term business plan,calls for R&D investment to be focused on new products in the field of information electronics materials.

FPD MATERIALSOPTICAL MATERIALSMaking LCD materials the first priority
In terms of surface area, expansion in the LCD panel market seenin the previous year, driven primarily by large-sized televisions, isprojected to continue in fiscal 2008. Prices for LCD panels,
however, are widely expected to drop further as these products
come into widespread use.
As always, JSR will give highest priority to the LCD market.
Targeting television applications, a field where distinctive technologies can have the greatest impact, JSR will deliver products
compatible with low-cost production processes. Complementing
this, JSR will seek to expand business by promoting new materials that answer the need for high-performance materials accompanying larger panel sizes and higher image resolutions.

Greater demand for ARTON®
As LCD TVs grow larger and attain better image contrast, thesetrends are expected to spur greater demand for retardation film
for high-end televisions in fiscal 2008. This should, in turn, spark
increased demand for ARTON® film, a cyclo-olefin retardation film
noted for its superior quality. JSR is determined to mount a recovery in ARTON® sales by accelerating the development of differentiated technologies to compete with rival products.

Upgrading infrastructure in South Korea and Taiwan
To enhance its supply system in areas with strong consumer
markets, JSR is upgrading its network of production bases in South
Korea and Taiwan, where demand is rising sharply. Having
completed a second round of construction at South Korea-based
JSR Micro Korea Co., Ltd., JSR has turned to Taiwan, where asecond phase of construction at production base JSR Micro
Taiwan Co., Ltd. is now under way. Full-scale operations at these
upgraded bases are scheduled to commence in the fall of 2007.

More growth in demand for optical fiber
As in the previous fiscal year, fiscal 2008 will likely witness firm
demand for optical fiber in Japan and overseas, with projecteddemand for optical fiber coating materials largely on a par withdemand in fiscal 2007. Against this backdrop, JSR will strive tomaintain its high market share in optical fiber coating materials.
A distinctive approach for display coating materials
JSR hopes to promote synergies between two existing businesses—FPD materials and optical materials—and the display
coating materials business purchased from DSM Desotech Inc.
in March 2006. For JSR, the goal is to quickly develop and launch
products that answer market needs. To this end, JSR is eyeing
major sales growth in fiscal 2008 by focusing on anti-reflection
coating materials for larger panel sizes and improved picture quality.

(JSR Micro Korea Co., Ltd.)(JSR Micro Taiwan Co., Ltd.)JSR is steadily improving its infrastructure in Korea and Taiwan, which are major production areas for flat panel
displays. We will complete the second-phase construction of these two bases by the autumn of fiscal 2009,
thereby putting in place a framework that can respond to increases in demand.

The left side of this LCD television uses the ARTON®
retardation film. The favorable impact on image qualityof the retardation film can be clearly seen when thescreen is looked at from an angle.

ANNUAL REPORT 2007 15

RESEARCH AND DEVELOPMENT AND INTELLECTUAL PROPERTY
1. CORE TECHNOLOGIES AND THE JSR BUSINESS MODEL
Expertise in polymerization gained from the manufacture ofsynthetic rubber and other petrochemical products represents
the core technology of JSR. Leveraging this know-how, JSR
has grown by responding quickly and accurately to the technological demands of customers concerning information electronics materials. Next-generation businesses as well will be rooted
in the even more effective use of this core technology. Throughthis process, JSR is dedicated to developing new materials alongwith new business domains.
Growth at JSR is driven by the following three business models:(1) Global Leadership
Information electronics materials products pose unique challenges. Most become outdated rather quickly and no single product makes a significant contribution to sales. For this reason, it
is imperative to secure powerful market positions worldwide. This
strength provides quick access to information on next-generation
technological breakthroughs that can be used for new research
projects. With this in mind, JSR early on began establishing a
global presence, supplying products to prominent companies inmany countries.

(2) De Facto Standards
By transforming diverse user needs into products suitable formany applications, JSR strives to create products that become
the de facto standard in their respective categories. Success in
the information electronics materials business requires this defacto standard approach. Building ties rooted in trust with themost advanced users in a targeted category is the most effective means of establishing a de facto standard. JSR and thesepartners can then jointly develop innovative products and quickly
bring them to the market.
(3) Clusters
Cluster refers to a business made up of many niche markets,
each with annual sales of a few billion yen. JSR gathers a numberof interrelated products to create a single business unit. The image
is similar to how many grapes combine to make one bunch. Taking
this approach raises the efficiency of research, manufacturing andsales. To generate more benefits, JSR is moving quickly to build
more clusters.
JSR is confident that adherence to these three businessmodels will give the company a solid base for growth for many
years to come.

2. R&D AND INTELLECTUAL PROPERTY ORGANIZATION AND R&D ALLIANCES(1) R&D and Intellectual Property Organization
Research and Development Dept.

R&D strategic initiatives and administration

Intellectual Property Dept.
Yokkaichi
ResearchCenterPolymer ResearchLaboratories

Business related to intellectual property rights
Elastomer Lab.

Rubber for tires, specialty rubber, functional elastomers, thermoplastic elastomers, others

Emulsion Lab.

Latex for paper coating, functional emulsions and particles, water soluble polymers, others

Performance
Products Lab.

ARTON®, others

Semiconductor Materials Semiconductor
Research Laboratories
Materials Lab.

Photoresist for ultra-fine semiconductor processes

Fine Electronic Materials Specialty Materials Lab. Materials for CMP, others
Research Laboratories
Microfabrication
Specialty materials for IC packaging, others
Process Materials Lab.
Hidaka Lab.

Testing fixture for PCBs and ICs, others

Display Materials Research Display Materials Lab.
Laboratories
LCD Materials Lab.

Materials for PDPs, others

Material Characterization & Analysis Lab.

Physical properties, analysis, characterization, CAC, others

Protective coatings, alignment films, color pigment-dispersed resists for LCDs, others

Tsukuba Research Laboratories

Optical fiber coating materials, radiation-cured coating materials, particles for diagnosis and genome
refining, others

Research Fellow Lab. (Tsukuba)

Laboratory for research fellows

16 JSR CORPORATION

(2) R&D Alliances
JSR establishes R&D alliances as required to achieve strategic
objectives. Most alliances are with customers conducting businesses that use leading-edge technologies.

3. SUMMARY OF R&D SEGMENTS AND INTELLECTUAL
PROPERTY
JSR aims to build and enhance intellectual property (IP) networks
in all its R&D segments by creating IP, such as patents, knowhow, designs, and trademarks, as well as by acquiring and utilizing IP on a global scale. By strategically utilizing these networks,
JSR aims to attain a predominant position over competitors in
its businesses.
One priority is information electronics materials and other businesses outside the petrochemicals field. The goal is to acquire IP
that can support global expansion. In this regard, JSR is focusing
not only on Europe and North America, but also on Asia, chiefly
South Korea, Taiwan and China, as a source of IP to build andexpand its IP network.
Another theme is creating IP in fields where JSR aims to create
new businesses that use sophisticated technologies.

4. POLICY FOR ACQUISITION AND MANAGEMENT OFINTELLECTUAL PROPERTY(1) Strategy for Intellectual Property
JSR uses intellectual policy based on an intellectual property strategy that is made up of the following four components.
a. Participation in the creation of intellectual property
JSR takes part in 3C analysis of intellectual property and technological information beginning at the stage of searching for R&D
themes. The results of this analysis are incorporated in R&D activities. Furthermore, by being selective in its intellectual property
rights applications, JSR will enhance consistency between its technological development and patent application strategies.
b. Acquisition of intellectual property
JSR always seeks to secure the broadest possible rights to its
R&D achievements. The aim is to acquire “usable rights” that cancontribute to industry-wide progress and be licensed to othercompanies. Portfolio management of intellectual property is
conducted in accordance with potential earnings and the degreeof innovation. Clearances are received for the use of patents in
JSR products and JSR acquires strategic patents that have thepotential of becoming more valuable in the future.
c. Use of intellectual property rights
JSR makes effective use of its own patent rights and utilizes theintellectual property of other companies by entering into individual
licensing and cross-licensing agreements. The goal is preserving
the continuity of business activities and the freedom of R&D
programs. JSR also assesses and manages potential risks in its
intellectual property portfolio.
d. A global perspective
JSR will secure a competitive edge in its businesses by devisinga global intellectual property strategy that covers not only patents,
but also trademarks and brands. In addition, JSR is upgrading theskills of its Intellectual Property Department and strengthening ties
with patent offices in other countries. This will allow JSR to acquireand utilize intellectual property rights according to the circumstances of each country and region.
(2) Framework for Using Intellectual Property
JSR’s framework for using intellectual property is distinguished by
two elements: a system closely linked to R&D laboratories, which
identifies ideas that should be patented, and a centralized
management system for intellectual property.
JSR’s Intellectual Property Department assigns staff members
to work at the Yokkaichi Research Center and Tsukuba ResearchLaboratories. By maintaining close ties with R&D activities, thisapproach allows the department to help create intellectual property and quickly submit well-prepared patent applications.
In addition, JSR and its group companies use an organizedapproach to effectively use their intellectual property and obtainworldwide patents. All matters concerning intellectual property are
managed by the JSR head office to keep this information confidential and prevent leaks of technological information.
R&D Organization
Yokkaichi
Research Center

Tsukuba
Research
Laboratories

R&D Dept.

Assigned to Yokkaichi
Research Center

Assigned to Tsukuba
Research Laboratories

Intellectual Property Dept.
(centralized management)

ANNUAL REPORT 2007 17

JSR has an intellectual property award and bonus system toincrease motivation to come up with new ideas and follow
through with inventions. The system distributes payments inline with JSR’s workplace invention system when patent applications are submitted, when a patent is registered and when apatent generates earnings.
The following table compares JSR’s global patent application
performance with the average for all Japanese companies. As thefigures show, JSR has much higher global patent application andfinal decision ratios. According to the “Leading Companies in Patent
Strategy Indicators,” published by the Japan Patent Office, JSR’s
global patent application and final decision ratios placed it 8th in
the plastics, rubber and paper industry. In 2006, JSR acquired
62 patent applications in the United States, achieving the highranking of 85th among all Japanese companies.

JSR

All Japanesecompanies

Global patentapplication ratio (2005)1

36.0%

21.9%

Final decision ratio(2004-2006)2

59.5%

49.1%

Source: “Leading Companies in Patent Strategy Indicators,” Japan Patent Office,April 2007
1. The percentage of applications submitted in Japan that are also submitted overseas
2. Number of final decisions/number of final actions

5. CONTRIBUTION OF LICENSING ACTIVITIESAs one means of raising earnings by supplying more distinctive
and competitive products, JSR is making effective use of its
patents. In the field of information electronics materials, where

technologies are becoming increasingly sophisticated andcomplex, success requires the use of a large volume of industrial
intellectual property, including patents held by other companies.
To ensure the sustainability of its operations and the freedom of
R&D programs, JSR gains access to the technologies it requires
by entering into licensing and cross-licensing agreements.
(1) Fee Income From Intellectual Property
07.3

300 ¥100 million (cumulative)
250

Cumulative fee income
Cumulative net fee expenses

200
07.3

150
100
50
0

61.3

65.3

69.3

73.3

77.3

81.3

85.3

89.3

93.3

97.3

01.3

05.3

(2) Time Series Analysis of Expenses for Acquisition and
Preservation of Intellectual Property
Expenses for the acquisition and preservation of intellectual property have been increasing steadily. One reason is the rising numberof patent applications involving optical and electronics materials.
Also responsible for this growth are foreign patent applications
associated with the increasingly global nature of JSR’s operations. JSR expects these expenses to continue to climb as R&D
activities are expanded in line with the ongoing medium-termbusiness plan.

6. CONTRIBUTION OF PATENTS
The following table summarizes patents held by JSR:
Petrochemicals
As ofPatents(Japan)Used

Fine Chemicals andOther Products

OthersTotal

06.3.3107.3.3106.3.3107.3.3106.3.3107.3.3106.3.3107.3.31

102

121

221

263

0

0

323

384

To be used

365

379

494

631

65

73

924

1,083

Total

467

500

715

894

65

73

1,247

1,467

503

516

1,004

1,415

33

30

1,540

1,961

Patents(Overseas)

7. POLICY REGARDING INTELLECTUAL PROPERTY PORTFOLIOJSR follows a policy of retaining rights to intellectual property thatcan be used to give its products a competitive edge. Other intellectual property having potential applications is retained or, if necessary, provided to other companies through licensing
agreements. JSR does not keep rights to intellectual property thathas no potential applications.

18 JSR CORPORATION

8. INFORMATION REGARDING RISK
There are no risks involving JSR’s patents or licensing agreementsthat could have a material impact on cash flows. Furthermore, in
its business operations, JSR exercises care regarding the patents
and rights of other companies, quickly conducting investigations
where necessary and strictly complying with all laws.

THE JSR CORPORATE SOCIAL RESPONSIBILITY REPORTFISCAL 2007 ACCOMPLISHMENTS CONCERNING KEY THEMES AND GOALSJSR has established seven key themes based on the fundamental
policies of the Japan Chemical Industry Association concerning theenvironment and safety. These key themes have been used toformulate specific action plans designed to conduct a Responsible
Care program. Fiscal 2007 goals and major accomplishments arelisted below.

1. CONSIDER SAFETY AND THE ENVIRONMENT WHEN
DEVELOPING PRODUCTS
When developing new products, JSR evaluates the environmental,
safety and health impact at every stage from research and development to manufacture, transport, use and disposal, and works hardon providing products that reflect these considerations.

Fiscal 2007 accomplishments
The Functional Materials Research Center has been established with
Kinki University. Plans call for engaging in basic research connectedwith production development in next-stage growth businesses.

2. PROVIDE SAFETY AND ENVIRONMENTAL INFORMATIONRELATED TO PRODUCTS
JSR has established a system for the management of product-related
safety and environmental information and furnishes Material Safety
Data Sheets (MSDS) and yellow cards to customers, transporters
and others as necessary.

Fiscal 2007 accomplishments
JSR used an MSDS electronic management system to ensure that
customers always receive accurate MSDS concerning prototypes
and products.

3. ENSURE THE SAFETY OF THE PUBLIC AND PROTECT THE
ENVIRONMENT
In consideration of the environmental impact of its business activities,
JSR is taking many actions to protect regional environments, ensure
the safety of its facilities and protect facilities against major earthquakes. JSR’s objective is to earn even greater trust at all of its
business facilities.

Fiscal 2007 accomplishments
There were three complaints during fiscal 2007. Remedial actions
were taken in all cases following an immediate investigation andexplanations were provided to residents in the affected areas.
Regarding measures to eliminate complaints involving odors (measures
to reduce volatile organic compound (VOC) emissions), JSR has
developed a technology for the incineration of synthetic rubber emissions and started installing this incineration equipment in fiscal 2007.
In line with a medium-term plan for taking actions to protect
facilities against major earthquakes, JSR has started to install thenecessary systems ahead of schedule, beginning with the mostimportant equipment.

4. REDUCE THE ENVIRONMENTAL IMPACT
JSR conducts studies of the environmental impact of chemicals andworks toward the systematic reduction of emissions. JSR engages inextensive efforts to reduce emissions, reuse materials and recycle
resources in order to lessen its environmental impact.

Fiscal 2007 accomplishments
To reduce VOC emissions, JSR achieved a further reduction in emissionsof 1, 3-butadiene and dichloromethane. There were small increases inemissions of styrene, toluene and other compounds. As was explainedin the environmental complaint section, JSR has developed technology
for incinerating synthetic rubber emissions to reduce VOC emissions
and started installing these incinerators in fiscal 2007.

5. ENSURE SAFETY AND PROTECT THE ENVIRONMENT IN
INTERNATIONAL OPERATIONSJSR makes every effort to ensure that all environmental and safety
standards are observed at every operating base outside Japan. JSR
cooperates with cross-border transfers of environmental and safety technology and strictly adheres to the regulations of Japan and other nations.

Fiscal 2007 accomplishments
In fiscal 2007, JSR conducted environmental and safety audits atfour overseas group companies. JSR will provide support to improve
environmental and safety activities.

6. ENSURE EMPLOYEE HEALTH AND SAFETY
JSR is improving work processes and equipment by increasing
preliminary evaluations of safety matters related to chemicals and theirhandling. JSR is dedicated to making further improvements in workplace safety and hygiene.

Fiscal 2007 accomplishments
Various systems were upgraded to provide workplaces that are more
fulfilling and supportive for women; JSR has started to establish support
systems that allow employees to work while raising children.

7. MAKE ALL EMPLOYEES AWARE OF THEIR RESPONSIBILITIESJSR’s president has declared that Responsible Care activities are theresponsibility of each and every member of the JSR Group. Every
employee is now aware of his or her obligation to aim for continuous
improvements in environmental and safety matters while complying
with all laws and regulations.

Fiscal 2007 accomplishments
JSR conducted a variety of training and other programs to raise awareness of corporate ethics. For example, JSR held meetings at all business sites to explain the JSR Group Principles of Corporate Ethics, which
was revised in fiscal 2007. Additionally, all JSR directors and management personnel, including individuals at Group companies, participatedin a corporate ethics training program led by external specialists.

ANNUAL REPORT 2007 19

CORPORATE GOVERNANCE AND COMPLIANCE
FUNDAMENTAL POSITION REGARDING CORPORATE
GOVERNANCE
JSR is dedicated to translating into actions its corporate philosophy: Materials Innovation – Supplying new materials and using
the value generated to help create a better world (for people,
society and the environment). JSR’s goal is to constantly generate corporate value by sustaining the efficiency, transparency andsoundness of its operations, while functioning as an exciting
company that earns the trust of and satisfies all stakeholders.
JSR has adopted the corporate auditor system. There are
five corporate auditors, including three from outside the JSRGroup. By fully utilizing the functions of this system, JSR intends
to conduct business operations in a manner that is fair, transparent and speedy.
Since fiscal 2006, JSR has also used the executive officer
system to separate the management decision-making andsupervision function and business execution function. This makes
it possible to reach management and business execution decisions faster as well as to speed up business operations. Anotherpurpose of this separation is to reinforce supervisory functions.
Authority and responsibility are clearly established concerning thedirectors’ role of dealing with company-wide management issues
and the executive officers’ role of executing business operations.
JSR has established a Corporate Social Responsibility (CSR)
Committee in response to the high priority that society now placeson the effectiveness of corporate governance. This committee
clearly defines the company’s stance regarding complianceactivities, ensures strict legal compliance and preserves a soundrelationship with society.
In addition, in accordance with the Corporation Law of Japan,
JSR’s Board of Directors decided in May 2006 on a basic policy toestablish a sound internal control system and the company is working
to strengthen and improve internal controls. In order to ensure theeffectiveness of internal controls, the Internal Audit Department will
carry out systematic audits of the execution of operations andcompliance in each department of the company and in companies
throughout the Group. Based on the results of these audits, JSR isrefining the framework for confirming legal compliance across thecompany and making further improvements.
The internal control system is also designed to ensure the fairness of financial reports. Project teams are formed to conduct
activities in this regard throughout JSR.

MANAGEMENT ORGANIZATION FOR MANAGEMENTDECISION-MAKING, BUSINESS EXECUTION AND
SUPERVISION AND OTHER CORPORATE GOVERNANCE SYSTEMSJSR uses the following management systems to conduct operations in a fair and transparent manner.

1. BOARD OF DIRECTORSAs of June 15, 2007, there were nine directors. They are charged
with studying and reaching decisions concerning important items
associated with the execution of business operations. As a rule,the directors hold monthly meetings that are chaired by JSR’s
president. In addition, the five corporate auditors, including two
external auditors, attend meetings of the Board of Directors andstate opinions as required.

2. EXECUTIVE COMMITTEEThis committee studies items concerning management plans aswell as important items concerning the execution of businessactivities. As required, certain items submitted to this committee
are passed on to the Board of Directors for further study. The
Executive Committee is made up of the president, executive vicepresident, executive managing directors, managing directors, anddirectors, senior executive officers and executive officers namedby the president. By handling important matters concerning theexecution of business activities, the committee contributes tospeedy decision-making and operating efficiency. As a rule, thiscommittee meets every Monday and is chaired by the president.

3. STRATEGIC ISSUES COMMITTEEThis committee performs functions that are supplementary to
those of the Board of Directors and Executive Committee. One
role is to examine items concerning fundamental management
initiatives and management policies. This committee also holds
extensive debates and discussions concerning fundamental
policies associated with specific projects and changes in business strategies. The committee’s activities are then incorporated
in the deliberations conducted by the Board of Directors andExecutive Committee.
The Strategic Issues Committee is made up of the president,
executive vice president, executive managing directors, managing directors and other directors. As a rule, this committee meets
every Tuesday and is chaired by the president.

4. BOARD OF AUDITORSWith five members, including two external auditors, this board
meets every month as stipulated in the regulations governing thisbody. The corporate auditors receive reports on important matters,
hold discussions and reach decisions. In accordance withstandards for audits by corporate auditors, the auditors attend

20 JSR CORPORATION

meetings of the Board of Directors, Executive Committee and otherimportant committees to monitor how important decisions arereached and business activities are executed. The auditors also
receive reports from the independent financial accountants,
directors and others. Through these activities, the Board of Auditors holds discussions in order to form auditing opinions.

5. CSR COMMITTEEThis committee was established for the purposes of ensuring that
JSR fulfills its responsibilities as a corporate citizen and complies
with laws and regulations. There are four regular meetings eachyear that are chaired by the executive managing director responsible for CSR. The other committee members are the executive
vice president and four managing directors. Representatives of the
Responsible Care Committee and Corporate Ethics Committee also
attend these meetings to clarify JSR’s approach to compliance,
deal with any issues and upgrade activities.
Their attendance also helps raise awareness of and executeprograms concerning Responsible Care and corporate ethics.

6. RESPONSIBLE CARE COMMITTEE
JSR conducts a Responsible Care program to fulfill its obligations
to achieve sustainable development. The Responsible Care
Committee was established to ensure that Responsible Care
activities are conducted effectively across the entire company. The
committee is chaired by the president, demonstrating Responsible
Care’s position as a core component of JSR’s management.
This committee approves Responsible Care plans, evaluatesand verifies results of activities, and helps maintain and upgrade
JSR’s programs to eliminate accidents, reduce environmental
impact and handle chemicals responsibly. Details and results of
Responsible Care activities are disclosed through Responsible
Care reports prepared by individual plants as well as for the company as a whole. These reports are audited by third parties toimprove the reliability and transparency of data. Through these
activities, the committee is dedicated to earning greater trust from
customers and preventing any concerns among residents in theneighborhoods of JSR facilities.
Since fiscal 2007, JSR has elevated the position of its CSR
report by revamping it to include more information on CSR activities, based on JSR’s fundamental stance regarding the three coreelements of CSR: the economy, the environment and thecommunity. To make the information widely available, these reports
are posted on the JSR website (http://www.jsr.co.jp/jsr_e/
index.shtml).

7. CORPORATE ETHICS COMMITTEEThe Corporate Ethics Committee was established to implement
corporate ethics standards and prevent improper actions throughout the JSR Group. The JSR Group Principles of Corporate Ethics
has been prepared to provide a code of conduct for executives
and employees. The committee oversees corporate ethics
throughout the Group as well as provides guidance regarding
specific items.
Along with the existing system for submitting reports to thiscommittee, JSR has added a new external reporting channel thatuses an attorney who provides advice from an objective stance.
This provides a means for individuals to receive advice and takeactions at an early stage of a potential ethics problem.

8. DISCLOSURE POLICY COMMITTEEJSR established the Disclosure Policy Committee during fiscal 2006.
This committee holds discussions and reaches decisions concerning information disclosure policies for the purposes of disclosing
information in a more suitable manner and making JSR executives
and employees aware of information disclosure policies.
This committee is made up of the president, executive vicepresident, and executive managing director responsible for CSR
activities, corporate communications and investor relations. As
required, directors and department general managers at departments involved with a particular issue are added to the committee or invited to participate. Committee meetings are held asnecessary and chaired by the executive managing director
responsible for CSR activities, corporate communications andinvestor relations.

9. STATUS OF INTERNAL AUDITS, AUDITS BY CORPORATE
AUDITORS AND FINANCIAL AUDITSJSR has adopted the corporate auditor system. There are
currently five corporate auditors, including three from outside
the JSR Group. These auditors have a staff of one individual.
Audits are performed as described in item 4 concerning theBoard of Auditors.
The corporate auditors work closely with the independent
financial accountant. The corporate auditors receive reports on
the financial accountant’s audit plan and audit results. Furthermore, the corporate auditors and financial accountants exchange
information and opinions as necessary in the course of eachfiscal year.
JSR has established the Internal Audit Department as a
specialized internal auditing unit in order to reinforce all auditing
functions associated with ensuring that internal controls are functioning in accordance with applicable laws and regulations.

ANNUAL REPORT 2007 21

10. NAMES AND AFFILIATIONS OF ACCOUNTANTS AT INDEPENDENT FINANCIAL ACCOUNTING FIRM ASSIGNED TO
AUDIT JSR
The certified public accountants assigned by the independent
financial accounting firm to audit JSR are Teruo Iida, Masao Wadaand Masayuki Kawanishi. All three individuals are employed by
KPMG AZSA & Co. These individuals are assisted by five certified public accountants among others.

11. CONSULTING ATTORNEYS
To receive consultations from attorneys, JSR uses the servicesof the Tokyo Aoyama Aoki Koma Law Office, Shinpo Law Office
and attorney Kiyotaka Ishikawa. JSR asks for advice from theseoffices and person as required.

ACTIONS DURING PAST FISCAL YEAR TO IMPROVECORPORATE GOVERNANCE
1. JSR revamped its Sustainability Report, which is centered on JSR’s
stance regarding the three core elements of CSR—the economy,
the environment and the community—by enhancing information
on CSR activities and renaming it the JSR CSR Report. The report
data undergoes third-party checks to heighten transparency andreliability. (June 2006)

2. To bolster its corporate ethics initiatives, JSR conducted a corporate ethics training program, which included an e-learningcomponent (June-July 2006) and video-based training (OctoberNovember 2006). The program’s objective was to raise awareness of corporate ethics and to share knowledge and values. The
program was for all directors and employees, including those of
JSR Group companies.
3. A risk management drill was conducted by the JSR head officeand plants to strengthen the risk management framework. Thisdrill confirmed that JSR can respond properly to an accident, fireor damage from a natural disaster at a plant. Drills cover the head
office Disaster Response Headquarters, the disaster response
departments at plants, corporate communications units and othercomponents of the JSR organization.
(September 2006)
4. JSR conducts environmental and safety audits at all of its plants,
research facilities and manufacturing subsidiaries in Japan. In fiscal
2006, these audits were extended to include eight JSR Group
companies outside Japan. In fiscal 2007, four overseas groupcompanies conducted audits (July and September 2006, February2007).
5. To reinforce compliance measures, JSR specified laws that apply
uniformly across the company and made progress putting in placea framework to assess and improve the levels of compliance.
Verification and improvement activities will be an ongoing theme
in fiscal 2008.

Shareholders’ Meeting
Selection/
Dismissal

Selection/
Dismissal

Reports
Supervision/
Reports

Board of Auditors
5 Corporate Auditors(including 3 external auditors)

Board of Directors
9 Directors
Selection/
Dismissal

Reports

Selection/
Dismissal

Reports
FinancialauditsIndependent Financial
Accountants

Reports

Representative
Directors

CSR Committee

Responsible Care
Committee

Executive Committee
Information

Corporate Ethics
Committee

Strategic Issues
Committee

Executive Officers
12 Officers

Internal
auditsInternal Audit Department

22 JSR CORPORATIONBusiness Operations

Disclosure Policy
Committee

Financial Section
24_MANAGEMENT’S DISCUSSION AND ANALYSIS
28_CONSOLIDATED BALANCE SHEETS
30_CONSOLIDATED STATEMENTS OF INCOME
31_CONSOLIDATED STATEMENTS OF NET ASSETS
32_CONSOLIDATED STATEMENTS OF CASH FLOWS
33_NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
46_INDEPENDENT AUDITORS’ REPORTMANAGEMENT’S DISCUSSION AND ANALYSISOVERVIEW

With chemistry, we can.

RESULTS BY BUSINESS SEGMENT

During fiscal 2007 in the major industries that use the JSR Group’s
products, production of automobiles and tires was higher than in
the previous year, while production of coated paper was
unchanged. Semiconductor production levels surpassed initial
forecasts due to increased demand for personal computers, cell
phones and digital home electronic products. Growth in flat panel
display (FPD) production was less than initial forecasts, reflecting
the rapid spread of inventory cutbacks of LCD panels in the firsthalf of fiscal 2007 and the early termination in the second half ofthe fiscal year of production aimed at the year-end shopping
season. Regarding raw materials, the costs of crude oil and naphtha increased due to rising global demand for crude oil, Middle
East instability and other factors. The run-up in costs of all key
raw materials used in petrochemicals operations negatively
impacted earnings.
In response to these circumstances, in the petrochemicals
business JSR endeavored to increase sales and to raise prices
to maintain profit margins so as to stabilize earnings. In the finechemicals and other products business, which mainly comprises
information electronics materials, JSR continued to invest in cutting-edge materials based on exclusive technologies as it focused
YOSHINORI
Ph.D.
on developing in the global market
to enable YOSHIDA,
further growth.
Representative Director and President
In addition, the entire JSR Group continued to implement the
Cost Revolution for Growth-II (CRG-II) cost-reduction project,working to reduce costs at all operational stages from raw materials to distribution, to improve earnings.
As a result of the above, consolidated net sales increased
8.2% to ¥365,831 million, operating income was up 3.5% to¥55,243 million, ordinary income rose 3.3% to ¥54,719 million,
and net income for the current fiscal year increased 10.1% to¥33,655 million.

Petrochemicals
Sales in the elastomers segment increased 11.8% to ¥116,250
million, and operating income was up 5.3% to ¥12,369 million.
In the synthetic rubber business, sales of synthetic rubber werehigher than in the previous fiscal year mainly because of healthy
growth in demand for automobiles and price increases. With thermoplastic elastomers (TPE), amid an upturn in demand, bothvolume and monetary sales increased in Japan due to efforts to
expand sales and price increases. Regarding TPE exports,
volumes declined as a result of JSR’s withdrawal from unprofitable categories, The monetary value of sales was higher due toprice increases.
In the emulsions segment, sales decreased 2.3% to ¥24,362
million and operating income fell 30.5% to ¥1,777 million.
Sales volume of paper coating latex, the primary product inthis segment, decreased year-on-year due to stiffer competition,even though production of coated paper was unchanged.
Monetary sales remained the same as a result of price increases
implemented in response to higher prices of raw materials. Bothvolume and monetary sales of acrylic emulsions were significantly
lower due to a drop in sales in the building exterior paint market.
Sales in the plastics segment decreased 2.8% to ¥64,614
million and operating income fell 8.0% to ¥3,865 million. In Japan,
sluggish demand for use in home appliances and JSR’s withdrawal from unprofitable product lines caused a decline in sales
volume. Overseas, JSR worked to expand sales of specialty andhigh value-added products and increase prices, but both sales
volume and monetary sales declined mainly due to sluggish
demand in the ASEAN region for motorcycle applications and thewithdrawal from unprofitable product lines.
Fine Chemicals and Other Products
Sales of photoresists increased year-on-year due to growing
demand resulting from higher semiconductor production andstrong exports. ArF (Argon Fluoride) photoresists, a new material,

Net sales/Gross profit margin

Operating income/Operating margin(Millions of yen)
400,000

40%(Millions of yen)
60,00020%

300,000

30%

45,00015%

200,000

20%

30,00010%

100,000

10%

15,000

5%

0

0%

0

0%

2003

2004

2005

24 JSR CORPORATION

2006

2007

Net sales
Gross profit margin

2003

2004

2005

2006

2007

Operating income
Operating marginTurning to the outlook for fiscal 2008, in the petrochemicals
business JSR anticipates continued pressure on earnings fromrising prices of raw materials, which are being pushed upward by
the high price of crude oil. Nevertheless, JSR expects to generate earnings by raising the share of sales from high value-added
products and by increasing total sales. In the fine chemicals andother products segment, JSR expects even more intensecompetition. Nevertheless, JSR plans to increase earnings bycontinuing to invest resources in growth areas and aggressively
working to expand sales in Japan and overseas.
Consequently, for fiscal 2008 JSR projects consolidated net
sales of ¥397.0 billion (up 8.5% over the previous fiscal year),
operating income of ¥56.0 billion (up 1.4%), ordinary income of¥56.0 billion (up 2.3%) and net income of ¥34.5 billion (up 2.5%).

made a significant contribution to the growth in excimer photoresist sales as a result of increased application in cutting-edge fields.
Looking at other new semiconductor materials, in addition to large
increases in demand and sales of chemical mechanicalplanarization (CMP) consumables, multilayer materials and packaging materials, sales of semiconductor materials increased
significantly overall.
Volume sales of liquid crystal display (LCD) materials increased
with worldwide growth of the LCD TV market. However, due toinventory adjustments of liquid crystal panels, JSR did not meet
its initial projections. Also, monetary sales were the same as theprevious fiscal year due to strong pressure to lower prices caused
by a drop in liquid crystal panel prices.
Sales of optical fiber materials increased sharply as sales of
optical fiber coating materials, the main product of this category,were strong both in Japan and overseas due to increased demandfor optical fiber cables. Sales of ARTON®, a heat-resistant transparent resin, increased significantly as a result of efforts to increase
sales in the area of optical film.
As a result, consolidated net sales of fine chemicals and otherproducts increased 12.5% to ¥160,605 million and operating
income rose 6.6% to ¥40,732 million.

R&D EXPENDITURES
R&D expenditures amounted to ¥17,390 million. JSR madesubstantial investments mainly in the fine chemicals and otherproducts segment and in next-stage growth businesses. As aresult, R&D expenditures increased ¥1,561 million over theprevious fiscal year to ¥17,390 million. Looking ahead, JSR plans
to conduct aggressive R&D investments in product developmentin the cutting-edge field of information electronics materials, in
new product development for next-stage growth businesses,
and elsewhere.

OUTLOOK
Fiscal 2008 is the first year of “JUMP2010”, JSR’s new mediumterm business plan. In line with this plan and based on key technologies and human resources, JSR aims for a period of explosive
growth driven by the creation of next-stage growth businesses
and the expansion of existing businesses followed by sustained
growth as an advanced chemicals company. At the same time,
JSR will strive to sustain and increase earnings by continuing tofocus on strengthening competitiveness by such measures as
implementing E-100 (Efficiency 100%), a new cost-reduction
project designed to ensure that 100% of raw materials procured
are converted into products.

CAPITAL EXPENDITURES
Capital expenditures amounted to ¥22,094 million. In the petrochemicals business, JSR is working to enhance production efficiency by increasing the production capacity for
ethylene-propylene rubber and reorganizing the production facilities for ABS plastics. In the fine chemicals and other products
segment, JSR is constructing experimental and evaluation facilities in the Yokkaichi area with the aim of strengthening R&D forstate-of-the-art materials, mainly information electronics materials. JSR has also constructed a precision manufacturing line for

Net income

Capital expenditures(Millions of yen)
40,000(Millions of yen)
24,00030,00018,00020,00012,00010,000

6,000

0

0
2003

2004

2005

2006

2007

2003

2004

2005

2006

2007

ANNUAL REPORT 2007 25

RISKSthe manufacture of next-generation semiconductors with the aimof bolstering product development capabilities.

The JSR Group is exposed to the following risks that may impact
its operating results, financial position, cash flows and otheraspects of performance. Forward-looking statements in this
discussion are based on JSR’s judgment as of March 31, 2007.
Risks at JSR include, but are not limited to, the following items:(1) Changes in demand due to economic trends
In the major industries where the JSR Group’s products are sold,automobiles and electronics, demand is influenced by the
economic climate in a country or region. An economic slowdown
could reduce demand in an industry and adversely affect the JSRGroup’s operating results.
(2) Higher prices for crude oil, naphtha and other major
raw materials
Higher prices for crude oil and naphtha, or changes in the markets
for JSR’s major raw materials, could raise prices of raw materials
and adversely affect the JSR Group’s operating results, especiallyin the petrochemicals segments of elastomers, emulsions
and plastics.
(3) Procurement of raw materials
The JSR Group works on ensuring a stable supply of raw materials by procuring materials from a number of sources. However,an interruption to the supply of raw materials due to an accident,
bankruptcy or quality problem at a supplier could adversely affectproduction activities and the JSR Group’s operating results.
(4) Development of new products
Rapid technological progress is constantly taking place in the electronics industry, which is the primary source of demand for semiconductor manufacturing materials, FPD materials and opticalmaterials, the major products of the JSR Group’s fine chemicals
and other products business. JSR is constantly working on
developing state-of-the-art materials in line with this progress.
However, unforeseen changes in the industry or market could
prevent the timely development of new products and adversely
affect the JSR Group’s operating results.

FINANCIAL POSITION
Total assets as of March 31, 2007 were ¥408,949 million, an
increase of ¥27,852 million from a year earlier. Current assets
increased ¥18,174 million to ¥249,239 million due mainly toincreases in notes and accounts receivable and inventories.
Non-current assets increased ¥9,678 million to ¥159,710 million,
chiefly because of an increase in construction in progress.
Total liabilities increased ¥4,574 million to ¥168,963 million. Thiswas mostly the result of increases in notes and accounts payable.
Net assets amounted to ¥239,986 million.

CASH FLOWSAs of March 31, 2007, cash and cash equivalents (“cash”) on aconsolidated basis amounted to ¥53,656 million, a decrease of¥7,190 million from the end of the previous fiscal year.
Net cash provided by operating activities increased 3.5% to¥46,472 million. Cash provided rose ¥1,591 million due mainly toincreases in income before income taxes and minority interestsand depreciation and amortization, which outweighed cash
decreases resulting from increases in notes and accounts receivable and income taxes paid.
Net cash used in investing activities increased 16.7% to ¥30,363
million. Cash used rose ¥4,347 million mainly because of higher
payments for purchase of property, plant and equipment andintangible assets, and for purchase of investment securities.
Net cash used in financing activities increased 360.8% to¥23,777 million. Cash used rose ¥18,617 million due to theredemption of bonds, payment of dividends, payments forpurchase of treasury stock and repayments of bank loans.

Total assets

Equity / ROE(Millions of yen)
600,000(Millions of yen)
240,000

20%

450,000

180,000

15%

300,000

120,000

10%

150,000

60,000

5%

0

0

0%

2003

2004

2005

26 JSR CORPORATION

2006

2007

2003

2004

2005

2006

2007

Shareholders’ equity
ROE(5) R&D involving next-stage growth businesses
The JSR Group makes substantial investments in R&D to createnext-stage growth businesses. However, there is no guaranteethat these R&D activities will always yield worthwhile results.
Depending on R&D results, there could be an adverse effect on
the JSR Group’s operating results.
(6) Protection of intellectual property
Protection of intellectual property is extremely important for the JSRGroup’s business activities. JSR has established a system forprotecting its intellectual property and takes various actions as required.
However, a dispute about intellectual property with another company
or an infringement on JSR’s intellectual property by another company
could adversely affect the JSR Group’s operating results.
(7) Product quality assurance and product liability
The JSR Group has a product quality assurance system and product liability insurance. However, damage or injury caused by a
product manufactured by the JSR Group could adversely affect
the JSR Group’s operating results.
(8) Natural disasters and accidents
To minimize the negative effect on its business activities of any
disruption of manufacturing activities, all JSR Group manufacturing facilities have established countermeasures based on the identification of all potential sources of a crisis and conduct periodic
inspections of facilities. The group also works constantly on safetymeasures with regard to earthquakes and other natural disasters.
However, a major natural disaster or accident that damages a
production facility or disrupts manufacturing could adversely affect
the JSR Group’s operating results.
(9) Environmental issues
Positioning environmental protection as an important element of
its operations, the JSR Group complies with all laws and regulations concerning the environment. The group also takes actions
aimed at reducing its environmental impact, lowering and eliminating waste materials, and cutting energy and resource consumption. The group has taken many actions to prevent the external
release of chemicals of all types.

However, in the event that a spill occurs or that environmental
regulations become more strict, the group’s business activities
could be restricted, the group may have to pay compensationand other expenses, or the group may have to make substantial
capital expenditures. Any of these events could adversely affect
the JSR Group’s operating results.
(10) Overseas operations
The JSR Group is aggressively expanding operations on a global
scale, conducting manufacturing, sales and other activities in countries and regions of the United States, Europe, Asia and otherparts of the world. Overseas operations are exposed to a numberof risks that include, but are not limited to, an unfavorable politicalenvironment or economic trends; labor disputes and otherproblems due to differences in labor laws and other working
conditions; difficulty in recruiting and retaining employees; anadverse impact on business activities due to an inadequate social
infrastructure; and the impact of wars, terrorism and other social
instability. Any of these events could adversely affect the JSRGroup’s operating results.
(11) Laws and regulations
In the countries where it operates, the JSR Group is subject tovarious laws and regulations involving business and investment
permits, export and import activities, trade, labor relations, intellectual property, taxes, foreign exchange and other items. The
group has established a clear compliance policy in order to ensure
strict observance of laws and regulations as well as ethical standards. In the event that a law or regulation is violated, or a law or
regulation becomes more strict or is significantly altered, there
could be limitations on the group’s business activities or additional compliance costs. Any of these events could adversely affect
the JSR Group’s operating results.
(12) Litigation
In conjunction with its business activities in Japan and overseas,
the JSR Group may be sued or be involved in other litigation
concerning a dispute with a supplier, customer or other external
party. The outcome of significant litigation could adversely affect
the JSR Group’s operating results.

ANNUAL REPORT 2007 27

CONSOLIDATED BALANCE SHEETSJSR CORPORATIONMarch 31, 2006 and 2007

Thousands of
U.S. dollars(Note 1)Millions of yen

ASSETS

2006

2007

2007

¥ 25,521¥ 15,586

78,316

93,341

790,689

Marketable securities (Notes 4 and 5)

35,35538,418

325,440

Inventories

60,18767,221

569,425

Accounts receivable — other

20,657

24,691

209,161

Deferred tax assets (Note 8)

4,529

5,074

42,978Other current assets (Note 12)

6,645

5,005

42,393

Allowance for doubtful accounts

(145)

(97)

(822)

231,065

249,2392,111,296

Buildings and structures

82,05485,803726,840

Machinery, equipment and vehicles

210,764

217,105

1,839,090

Tools, furniture and fixtures

35,462

38,745328,209Land

17,10916,957

143,644

Construction in progress

2,586

7,580

64,211

347,975

366,190

3,101,994(255,963)(268,008)(2,270,295)

92,012

98,182

831,699

6,131

5,713

48,393

Investment securities (Note 5)

34,917

34,594

293,047

Investments in unconsolidated subsidiaries and affiliated companies

9,628

9,713

82,277Long-term loans receivable

2,762

4,726

40,036

Deferred tax assets (Note 8)

2,178

2,462

20,859Other assets

2,573

4,506

38,169Allowance for doubtful accounts

(169)

(186)

(1,573)51,88955,815472,815¥ 381,097¥ 408,949$ 3,464,203

Current assets:
Cash (Note 4)
Notes and accounts receivable — trade (Note 3)

Total current assets$

132,032

Property, plant and equipment (Notes 6 and 9):

Accumulated depreciation
Net property, plant and equipment

Intangible assets

Investments and other non-current assets:

See accompanying notes.

28 JSR CORPORATION

Thousands of
U.S. dollars(Note 1)Millions of yen

LIABILITIES AND NET ASSETS

2006

2007

2007

Current liabilities:
Notes and accounts payable — trade¥ 78,463¥ 87,952$ 745,043

Short-term loans payable and long-term debt due within one year (Note 6)

29,27815,524

131,502

Income taxes payable (Note 8)

10,975

10,79591,444

Accounts payable — other

6,322

14,455

122,447

Accrued expenses

9,798

11,033

93,461Other current liabilities (Note 12)

3,818

2,341

19,831

138,654

142,100

1,203,728

Long-term debt (Note 6)

1,607

2,745

23,254

Deferred tax liabilities (Note 8)

4,537

3,291

27,876

Employees’ retirement benefits (Note 7)

13,921

14,782

125,221

Allowance for environmental expenses

3,094

3,294

27,906

Total current liabilities
Long-term liabilities:

Other long-term liabilities
Total long-term liabilities

2,576

2,751

23,29625,735

26,863

227,553

23,32023,320

197,545

Contingent liabilities (Note 14)
Net assets (Note 10)
Shareholders’ equity
Common stock:
Authorized — 696,061,000 shares
Issued— 255,885,166 shares in 2006 and 2007

Capital surplus

25,17925,179213,294

Retained earnings

155,434

183,374

1,553,359(2,898)(8,300)(70,308)

11,151

10,08785,450565

1,526

12,923

Less treasury stock, at cost
—1,663,063 shares in 2006 and 3,664,774 shares in 2007
Valuation and translation adjustments
Unrealized gains on securities, net of taxes
Foreign currency translation adjustments
Subscription rights to shares (Note 11)
Minority interests
Total net assets

—

70

595

3,957

4,730

40,064

216,708

239,986

2,032,922¥381,097¥408,949$3,464,203

ANNUAL REPORT 2007 29

CONSOLIDATED STATEMENTS OF INCOMEJSR CORPORATION
Years ended March 31, 2005, 2006 and 2007

Thousands of
U.S. dollars(Note 1)Millions of yen
2005

2006

2007

2007

¥305,368¥338,160¥365,831$3,098,951

Cost of sales

207,689

230,012

252,752

2,141,064

Selling, general and administrative expenses

52,34654,791

57,836

489,924

260,035

284,803

310,588

2,630,988

45,33353,35755,243467,963

Net sales (Note 16)
Costs and expenses (Notes 15 and 16):

Operating income (Note 16)
Other income (expenses):
Interest and dividend income

519

635

1,030

8,728

Interest expenses

(475)

(420)

(399)

(3,376)(2,792)(3,413)(3,268)(27,686)

(678)

(269)

(617)

(5,223)

Loss on disposal and write down of inventories
Gain (loss) on sale and disposal of property, plant and equipment
Gain (loss) on disposition of affiliated companies

73

—

—

—

Exchange gains (losses)

114

1,179

352

2,982

Equity in earnings of affiliated companies

628

1,719

1,439

12,189Loss from disposal of asbestos

—

—

(461)

(3,903)

Impairment loss of fixed assets (Note 9)

—

(580)

—

—

Loss on allowance for environmental expenses—(3,094)(201)(1,705)

Other — net

749

(76)

322

2,724

(1,862)(4,319)(1,803)(15,270)

43,47149,03853,440452,693

Current

15,275

19,222

20,127

170,501

Deferred16(1,487)(1,136)(9,627)

15,291

17,73518,991

160,874

28,18031,30334,449291,819

(616)

(748)

(794)

(6,731)¥ 27,564¥ 30,555¥ 33,655$ 285,088

Income before income taxes and minority interests
Income taxes (Note 8):

Minority interests in net income of consolidated subsidiaries
Net income

U.S. dollars(Note 1)

Yen

Amounts per share of common stock:
Net income
Cash dividends applicable to the year
See accompanying notes.

30 JSR CORPORATION¥ 107.54¥ 119.63¥ 133.10

14.00

20.00

24.00

$

1.13
0.20

CONSOLIDATED STATEMENTS OF NET ASSETSJSR CORPORATION
Years ended March 31, 2005, 2006 and 2007

Millions of yen

Balance at March 31, 2004

Number ofshares ofcommon stock(thousands)

Treasury stock
at costUnrealized
gains onsecurities,
net of taxes

Foreigncurrencytranslation
adjustments

Commonstock

CapitalsurplusRetainedearnings

Subscription
rightsto shares

Minority
interests¥106,385¥ (189)¥ 5,406¥ (604)¥—¥2,804

255,885¥23,320¥25,179

Increase resulting from increase inconsolidated subsidiaries

—

—

—

17

—

—

—

—

—

Net income

—

—

—

27,564

—

—

—

—

—

Change in foreign currencytranslation adjustment

—

—

—

—

—

—

103

—

—

Change in unrealized gains on securities,
net of taxes

—

—

—

—

—

1,185

—

—

—

Increase of treasury stock

—

—

—

—

(2,696)

—

—

—

—

Cash dividends paid

—

—

—

(3,058)

—

—

—

—

—

Bonuses to directors

—

—

—

(136)

—

—

—

—

—

Net changes other thanshareholders’ equity

—

—

—

—

—

—

—

—

502

Balance at March 31, 2005

255,885

23,32025,179130,772(2,885)

6,591

(501)

—

3,306

Decrease resulting from increase inconsolidated subsidiaries

—

—

—

(1,404)

—

—

—

—

—

Decrease resulting from decrease inconsolidated subsidiaries

—

—

—

(8)

—

—

—

—

—

Net income

—

—

—

30,555

—

—

—

—

—

Change in foreign currencytranslation adjustment

—

—

—

—

—

—

1,066

—

—

Change in unrealized gains on securities,
net of taxes

—

—

—

—

—

4,560

—

—

—

Increase of treasury stock

—

—

—

—

(13)

—

—

—

—

Cash dividends paid

—

—

—

(4,322)

—

—

—

—

—

Bonuses to directors

—

—

—

(159)

—

—

—

—

—

Net changes other thanshareholders’ equity

—

—

—

—

—

—

—

—

651

Balance at March 31, 2006

255,885

23,32025,179155,434(2,898)

11,151

565

—

3,957

Net income

—

—

—

33,655

—

—

—

—

—

Change in foreign currencytranslation adjustment

—

—

—

—

—

—

961

—

—

Change in unrealized gains on securities,
net of taxes

—

—

—

—

—

(1,064)———

Increase of treasury stock

—

—

—

—

(5,412)

—

—

—

—

Disposal of treasury stock

—

—

—

(10)

10

—

—

—

—

Cash dividends paid

—

—

—

(5,569)

—

—

—

—

—

Bonuses to directors

—

—

—

(136)

—

—

—

—

—

Net changes other thanshareholders’ equity

—

—

—

—

—

—

—

70

773

255,885¥23,320¥25,179¥183,374¥(8,300)¥10,087¥1,526¥70¥4,730$197,545$213,294$1,316,676$(24,551)$ 94,461$ 4,782$ —$33,521

Net income——

285,088

—

—

—

—

—

Foreign currency translation adjustment

—

—

—

—

—

8,141

—

—

Change in unrealized gains on securities, net of taxes

—

—

—

—

(9,011)———

Increase of treasury stock

—

—

—

(45,841)

—

—

—

—

Disposal of treasury stock

—

—

(84)

84

—

—

—

—

Cash dividends paid——

(47,174)

—

—

—

—

—

Bonuses to directors——(1,147)

—

—

—

—

—

Net changes other than shareholders’ equity

—

—

—

—

—

—

595

6,543

$197,545$213,294$1,553,359$(70,308)$ 85,450$12,923$595$40,064

Balance at March 31, 2007

Thousands of U.S. dollars (Note 1)

Balance at March 31, 2006

Balance at March 31, 2007
See accompanying notes.

ANNUAL REPORT 2007 31

CONSOLIDATED STATEMENTS OF CASH FLOWSJSR CORPORATION
Years ended March 31, 2005, 2006 and 2007

Thousands of
U.S. dollars(Note 1)Millions of yen
2005

2006

2007

2007

¥ 43,471¥ 49,038¥ 53,440$ 452,693

15,245
(519)
475
(628)
678
—

16,206(635)
420(1,719)269
580

18,133(1,030)399(1,439)617—

153,608(8,728)3,376(12,189)
5,223
—

(264)
(1,835)—(6,105)(7,659)
16
47

(124)
(1,057)3,094(7,516)(7,330)15,042(3,857)

(32)
861
200
(14,548)(6,685)
8,814
5,709

(271)
7,293
1,698
(123,235)(56,633)
74,66348,36842,922
1,262(529)(12,410)62,411
1,261(420)(18,371)

64,4392,907(411)(20,463)545,866
24,621(3,480)(173,346)

31,24544,881

46,472

393,661(17,642)
98
(671)
(214)
101
256
(2,828)970(24,845)442(1,145)(65)—
410(1,702)
889(26,218)347—(1,767)—563(2,194)(1,094)(222,089)
2,939(19,930)(26,016)(30,363)(257,207)500(11,133)—(3,055)(107)(2,696)
0

—
(600)
—
(4,320)
(227)
(13)
—

1,558
(4,251)(10,000)(5,566)(106)(5,412)—

13,198(36,007)(84,710)(47,149)(900)(45,841)—

Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents(16,491)
0(5,160)390(23,777)478(201,409)
4,049

Net increase (decrease) in cash
Cash and cash equivalents at beginning of year
Increase in cash resulting from change in consolidation of subsidiaries(5,176)51,519131

14,09546,474277(7,190)60,846—(60,906)
515,425—¥ 46,474¥ 60,846¥ 53,656$ 454,519

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to cash provided by operating activities:
Depreciation and amortization
Interest and dividend income
Interest expenses
Equity in earnings of affiliated companies
Gain on sale and disposal of property, plant and equipment
Impairment loss of fixed assets
Changes in operating assets and liabilities — net:
Decrease in allowance for doubtful accounts
Increase (decrease) in employees’ retirement benefits
Increase in allowance for environmental expenses
Increase in notes and accounts receivable — trade
Increase in inventories
Increase in notes and accounts payable — trade
Other
Total
Interest and dividends received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Payments for purchase of property, plant and equipment andintangible assets
Proceeds from sale of property, plant and equipment and intangible assets
Payments for purchase of unconsolidated subsidiaries and affiliated companies
Payments for purchase of investment securities
Proceeds from sale of investments in consolidated subsidiaries
Proceeds from sale of investment securities
Increase in loans receivable
Other — net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term debt
Repayments of bank loans and long-term debt
Payment for redemption of bond
Dividends paid to shareholders
Dividends paid to minority shareholders
Payments for purchase of treasury stock
Other — net

Cash and cash equivalents at end of year (Note 4)
See accompanying notes.

32 JSR CORPORATION(14,970)—
4,765(18,585)(9,267)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JSR CORPORATION
Years ended March 31, 2005, 2006 and 2007

1. BASIS OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of JSR Corporation (“the Company”) and its consolidated subsidiaries have been prepared inaccordance with the provisions set forth in the Japanese Securities and Exchange Law and its related accounting regulations, and in conformity withaccounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure
requirements from International Financial Reporting Standards.
The accounts of the Company’s overseas subsidiaries are based on their accounting records maintained in conformity with generally accepted
accounting principles prevailing in the respective countries of domicile. The accompanying consolidated financial statements have been restructured andtranslated into English (with some expanded descriptions and the inclusion of consolidated statements of change in net assets for 2007) from theconsolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of
the Ministry of Finance as required by the Securities and Exchange Law. Some supplementary information included in the statutory Japanese language
consolidated financial statements, but not required for fair presentation, is not presented in the accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers outside Japan, using the prevailingexchange rate at March 31, 2007, which was ¥118.05 to U.S. $1.00. The convenience translations should not be construed as representations that theJapanese yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Consolidation — The consolidated financial statements include the accounts of the Company and its significant subsidiaries (26 subsidiaries in
2005, 2006 and 2007).
All significant intercompany accounts and transactions have been eliminated.
TECHNO POLYMER AMERICA, INC. and JSR Micro Korea Co., Ltd. were added to the scope of consolidation by the principle of materiality in2005 and 2006, respectively. Japan Create Co., Ltd., which had ceased to be a subsidiary accompanying a transfer of shares, and Techno Polymer
Singapore Pte Ltd., which had started liquidation, were excluded from the scope of consolidation in 2005 and 2006, respectively.
(b) Equity method — Investments in affiliated companies (all of those 20% to 50% owned and certain others 15% to 20% owned) were accounted
for by the equity method. Unconsolidated subsidiaries and the other affiliated companies are stated at cost since their net income and retained
earnings in the aggregate are not material compared to consolidated net income and retained earnings, respectively.
(c) Cash and cash equivalents — In preparing the consolidated statements of cash flows, cash on hand, readily available deposits and short-term
highly liquid investments with maturities not exceeding three months at the time of purchase are considered to be cash and cash equivalents.
(d) Marketable securities and investment securities — The Company and its consolidated subsidiaries (the “Companies”) had no trading securities
or held-to-maturity debt securities. Equity securities issued by subsidiaries and affiliated companies, which are not consolidated or accounted forusing the equity method, are stated at moving-average cost. Available-for-sale securities with available fair market values are stated at fair market
value and unrealized gains and losses on these securities are reported, net of applicable income taxes, as a separate component of shareholders’equity. Realized gains and losses on sale of such securities are computed using moving-average cost. Available-for-sale securities with no available
fair market values are stated at moving-average cost or amortized cost.
(e) Inventories — Inventories are stated at cost, which is determined by the average method.
( f ) Property, plant and equipment, and depreciation — Property, plant and equipment are stated at cost. Depreciation is computed using thedeclining-balance method at rates based on their estimated useful lives except for buildings acquired after March 31, 1998, which are depreciatedbased on the straight-line method.
(g) Intangible assets — Goodwill is amortized over five years using the straight-line method.
Software for its own use is amortized over the estimated useful life (five years) using the straight-line method.
(h) Impairment of fixed assets — Effective April 1, 2005, the Companies adopted the new accounting standard for impairment of fixed assets(“Opinion Concerning Establishment of Accounting Standard for Impairment of Fixed Assets” issued by the Business Accounting Deliberation Council
on August 9, 2002) and the implementation guidance for the accounting standard for impairment of fixed assets (the Financial Accounting Standard
Implementation Guidance No. 6 issued by the Accounting Standards Board of Japan on October 31, 2003).
As a result of adopting the new accounting standards, income before income taxes and minority interests for the year ended March 31, 2006,
decreased ¥580 million compared with what would have been reported under the previous accounting policy. Accumulated impairment losses are
deducted directly from the related fixed assets.
( i ) Allowance for doubtful accounts — Allowance for doubtful accounts is provided in amounts sufficient to cover possible losses on collection.
Allowance for doubtful accounts consists of the estimated uncollectible amount with respect to specific items, and the amount calculated using theactual percentage of collection losses in the past with respect to other items.
( j ) Severance and retirement benefits — Employees of the Companies are entitled, under most circumstances, to lump-sum severance payments
or pension payments upon reaching the mandatory retirement age, or earlier in the case of voluntary or involuntary termination, based on thecompensation at the time of severance and years of service.
The Companies provided allowances and expenses for employees’ severance and retirement benefits at year-end based on the estimatedamounts of projected benefits obligation and the fair value of the pension assets.

ANNUAL REPORT 2007 33

The prior service costs are recognized as expenses using the straight-line method over three years, which is not more than the estimatedaverage remaining service lives, commencing with the following period. Actuarial differences of the Company are recognized as expenses at once inthe following period, and those of consolidated subsidiaries use the straight-line method over ten years, which is not more than the estimated averageremaining service lives, commencing with the following period.
( i ) The accounting change — Effective April 1, 2005, the Companies adopted “Amendment of Accounting Standard for Retirement Benefits” (theFinancial Accounting Standard No. 3 issued by the Accounting Standard Board of Japan on March 16, 2005) and “Implementation Guidanceof Amendment of Accounting Standard for Retirement Benefits” (the Financial Accounting Standard Implementation Guidance No. 7 issued by
the Accounting Standard Board of Japan on March 16, 2005).
As a result of adopting these accounting standards, income before income taxes and minority interests for the year ended March 31, 2006
increased ¥1,348 million compared with what would have been reported under the previous accounting policy.
(K) Allowance for environmental expenses — An allowance for expenses is provided bases on estimated costs for the disposal of Polychlorinatedbiphenyl (PCB) as mandated by the Law Concerning Special Measures Against PCB Waste.
( l ) Income taxes — The Companies provide for income taxes applicable to all items included in the consolidated statements of income regardlessof when such taxes are payable. Income taxes based on temporary differences between tax and financial reporting purposes are reflected as deferredincome taxes in the consolidated financial statements using the asset and liability method.
(m) Derivative and hedging activities — The Companies use derivative financial instruments to manage their exposures to fluctuations in foreignexchange and interest rates. Foreign exchange forward contracts, foreign currency swaps and interest rate swaps are utilized by the Companies toreduce foreign currency exchange and interest rate risks. The Companies do not enter into derivatives for trading purposes or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as follows:a) All derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions arerecognized in the consolidated statements of income.
b) For derivatives used for hedging purposes, if derivatives qualify for hedge accounting because of high correlation and effectiveness between
the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions.
Short-term and long-term loan receivables denominated in foreign currencies, for which foreign currency swaps are used to hedge the foreign
currency fluctuations, are translated at the contracted rate if the forward contracts or the swap contracts qualify for specific hedge accounting.
The interest rate swaps that qualify for hedge accounting and meet specific matching criteria are not remeasured at market value, but thedifferential paid or received under the swap agreements is recognized and included in interest expense or income as incurred.
( n ) Certain lease transactions — Finance lease transactions, which do not transfer ownership of the leased assets to lessees, are accounted for in
the same manner as operating leases under accounting principles generally accepted in Japan.
(o) Foreign currency transactions — The Companies translate assets and liabilities denominated in foreign currencies into Japanese yen at
exchange rates prevailing at the balance sheet dates. Resulting exchange gains or losses are credited or charged to income as incurred.
( p) Translation of foreign currency financial statements — Financial statements of overseas subsidiaries are translated into Japanese yen using
the respective year-end rate for assets and liabilities, the average rate for revenues and expenses, and the historical rates for shareholders’ equity
accounts. Foreign currency translation adjustments are contained in valuation and translation adjustments and minority shareholders’ interests.
(q) Amounts per share of common stock — The computation of net income per share of common stock is based on the average number of shares
outstanding during each fiscal year. Treasury stock has been excluded in the calculation of amounts per share of common stock. Diluted net income
per share is not disclosed because the effects of the Company’s stock option plans are immaterial (Note 11).
Cash dividends per share represent actual amounts applicable to the respective years.
( r ) Accounting Standard for Presentation of Changes in the Net Assets in the Balance Sheet — Effective for the year ended March 31, 2007,
the Company and consolidated subsidiaries adopted Accounting Standards Board of Japan Statement No. 5 “Accounting Standard for Presentationof Net Assets in the Balance Sheet” issued by the Accounting Standards Board of Japan on December 9, 2005 and Accounting Standards Board ofJapan Guidance No. 8 “Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” issued by the Accounting Standards
Board of Japan on December 9, 2005.
Under the New Accounting Standards, the balance sheet comprises three sections, which are the assets, liabilities and net assets sections.
Previously, the balance sheet comprised the assets, liabilities, minority interests, as applicable, and the shareholders’ equity sections.
Due to the adoption of the New Accounting Standards, the following items are presented differently compared to the previous presentation rules.
Subscription right to shares and minority interests are included in net assets under the New Accounting Standards. Under the previous presentation
rules, subscription right to shares were included in current liabilities, and minority interests were presented between non-current liabilities and theshareholders’ equity section.
The consolidated balance sheets as of March 31, 2006 have been restated to conform to the 2007 presentation. As a result, minority interests
amounting to ¥4,730 million are included in the net assets section as of March 31, 2006. But, there were no effects on the total assets or total
liabilities at March 31, 2006 from applying the New Accounting Standards to the balance sheet as of March 31, 2005.
If the New Accounting Standards had not been adopted and the previous presentation method for shareholders’ equity had been applied, theshareholders’ equity at March 31, 2007, which comprised common stock, capital surplus, retained earnings, unrealized gain on securities net oftaxes, foreign currency translation adjustments and treasury stock, would have been ¥235,186 million ($1,992,263 thousand).
The adoption of the New Accounting Standards had no impact on the consolidated statements of income for the years ended March 31, 2007
and 2006.

34 JSR CORPORATION

(s) Accounting Standard for Statement of Changes in Net Assets — Effective for the year ended March 31, 2007, the Company and its
consolidated subsidiaries adopted new accounting standards, “Accounting Standard for Statement of Change in Net Assets” (Statement No. 6
issued by the Accounting Standard Board of Japan on December 27, 2005), and the implementation guidance for the accounting standard forstatement of changes in net assets (Financial Accounting Standard Implementation Guidance No. 9 issued by the Accounting Standards Board ofJapan on December 27, 2005), (collectively, the “New Accounting Standards”).
Accordingly, the Company prepared the statements of changes in the net assets for the year ended March 31, 2007. In addition, the Company
voluntarily prepared the consolidated statement of change in net assets for 2006 in accordance with the New Accounting Standards. Previously, theconsolidated statements of shareholders’ equity were prepared for the purpose of inclusion in the consolidated financial statements although suchstatements were not required under Japanese GAAP.
( t ) Stock options — Effective from the fiscal year ended March 31, 2007, the Company adopted Accounting Standards Board of Japan Statement
No. 8 “Accounting Standard for Stock-Based Compensation”, of December 27, 2005 and Accounting Standards Board of Japan Guidance No. 11“Guidance on Accounting Standard for Stock-Based Compensation” of May 31, 2006, both issued by the Accounting Standards Board of Japan.
The effects of the adoption of the New Accounting Standards on net income are not material.
(u) Reclassifications — Certain prior years amounts have been reclassified and restated to conform to the current year presentation.
Also, as described in Note 2 (r) and 2 (s), the consolidated balance sheet for 2006 has been restated to conform to the new presentation rulesof 2007. Also, in lieu of the consolidated statement of shareholders’ equity for the year ended March 31, 2006, which was prepared on a voluntarybasis for inclusion in the 2006 consolidated financial statements, the Company prepared the consolidated statement of changes in the net assets forthe year ended March 31, 2006 as well as for the year ended March 2007.
These reclassifications and restatements had no impact on previously reported results of operations or retained earnings.

3. EFFECT OF BANK HOLIDAY ON MARCH 31, 2007
As financial institutions in Japan were closed on March 31, 2007, ¥871 million ($7,380 thousand) of notes receivable maturing on March 31, 2007
were settled on the following business day, April 2, 2007 and accounted for accordingly.

4. CASH AND CASH EQUIVALENTS
Cash and cash equivalents at March 31, 2005, 2006 and 2007 consisted of the following:

2005

Millions of yen
2006

2007

Thousands of
U.S. dollars
2007

Cash
Marketable securities
Time deposits over three months¥22,810
23,799(135)¥25,52135,355(30)¥15,586
38,418(348)$132,032
325,440(2,953)

Cash and cash equivalents¥46,474¥60,846¥53,656$454,519

5. MARKETABLE SECURITIES AND INVESTMENT SECURITIES(1) The following tables summarize the acquisition cost, book value and fair value of available-for-sale securities with available fair value as of March
31, 2006 and 2007:(a) Securities with book value exceeding acquisition cost

Equity securities

Equity securities

Equity securities

Acquisition cost

Millions of yen
2006
Book value

Difference¥10,250¥29,151¥18,901

Acquisition cost

Millions of yen
2007
Book value

Difference¥11,070¥28,177¥17,107

Acquisition costThousands of U.S. dollars
2007Book value

Difference$93,777$238,689$144,912

ANNUAL REPORT 2007 35

(b) Securities with book value not exceeding acquisition cost

Acquisition cost

Millions of yen
2006
Book value

Difference

¥42

¥39

¥(3)

Acquisition cost

Millions of yen
2007
Book value

Difference

¥718

¥695

¥(23)

Acquisition costThousands of U.S. dollars
2007Book value

Difference$6,081$5,886$(195)

Equity securities

Equity securities

Equity securities(2) The following tables summarize the book value of available-for-sale securities with no available fair value as of March 31, 2006 and 2007:

2006

2007

Thousands of
U.S. dollars
2007

Non-listed equity securities
Commercial paper
Preferred subscription certificate¥ 3,227
35,3552,500¥ 3,222
38,4182,500$ 27,294
325,440
21,178

Total¥41,082¥44,140$373,912

Millions of yen(3) Redemption schedule of available-for-sale securities with fixed maturities are as follows:

Withinone yearOver oneyear
withinfive years

Millions of yen
Over fiveyears
withinten years

Over ten
years

Total

March 31, 2006:¥35,355

¥—

¥—

¥—

¥35,355

March 31, 2007:¥38,418

¥—

¥—

¥—

¥38,418

Withinone yearMarch 31, 2007:$325,440

Thousands of U.S. dollars
Over one
Over five
year
years
withinwithinOver ten
five years
ten years
years

$—

$—

$—

Total

$325,440(4) Total sales of available-for-sale securities sold and the related gains and losses for the years ended March 31, 2005, 2006 and 2007 are as follows:

Total sales
Gain
Loss

2005

Millions of yen
2006

2007

Thousands of
U.S. dollars
2007

¥256
142
—

¥410
21
—

¥563
282
—

$4,7652,393—

6. SHORT-TERM LOANS PAYABLE AND LONG-TERM DEBT
Short-term loans payable represent primarily overdrafts from banks bearing interest at 0.7% and 1.2% per annum (weighted average interestrate) at March 31, 2006 and 2007, respectively.

36 JSR CORPORATION

Long-term debt at March 31, 2006 and 2007 consisted of the following:
Millions of yen
2006

1.84% domestic unsecured bonds due 2007
Loans principally from banks and insurance companies due through2013 with interest rates ranging from 0.8% to 10.2% in 2006 and 2007:
SecuredUnsecured2007¥ 10,000

Less amount due within one year¥—

Thousands of
U.S. dollars
2007

$

—

1
3,879

1
3,199

8
27,10013,880(12,273)

3,200
(455)

27,108(3,854)¥ 1,607¥2,745$23,254

At March 31, 2007, property, plant and equipment, at book value of ¥13,637 million ($115,520 thousand) were pledged as collateral for secured loans.
The annual maturities of long-term debt at March 31, 2007 are as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2008
2009
2010
2011
2012
2013 and thereafter

¥ 455
1,245
—
—
—
1,500

$ 3,854
10,547———
12,707¥3,200$27,108

7. EMPLOYEES’ SEVERANCE AND RETIREMENT BENEFITS
Employees’ retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2006 and 2007 consistedof the following:

2006

2007

Thousands of
U.S. dollars
2007¥ 48,799(35,361)¥ 49,230(35,724)$ 417,030(302,620)

Unfunded retirement benefit liabilities
Unrecognized prior service costs
Unrecognized actuarial differences

13,438—438

13,506123(14)114,410
1,038
(116)

Net retirement benefit liabilities
Prepaid pension costs

13,876(45)

13,615(1,167)

115,332(9,889)

Employees’ retirement benefits¥ 13,921¥ 14,782$ 125,221

Millions of yen

Projected benefit obligation
Less fair value of pension assets

Included in the consolidated statements of income for the years ended March 31, 2005, 2006 and 2007 were severance and retirement benefit
expenses consisting of the following:

Service costs — benefits earned during the year
Interest cost on projected benefits obligation
Expected return on plan assets
Amortization of prior service costs
Amortization of actuarial differences
Severance and retirement benefit expenses

2005

Millions of yen
2006

2007

Thousands of
U.S. dollars
2007¥ 1,857906(213)—(2,226)¥ 1,741902(243)—(1,517)¥1,729
878
(341)
(61)
(525)

$14,6437,439(2,885)(519)(4,445)¥¥¥1,680$14,233

324

883

ANNUAL REPORT 2007 37

The discount rate used by the Companies for the years ended March 31, 2006 and 2007 is mainly 1.9%. The rates of expected return on plan
assets used by the Company for the years ended March 31, 2006 and 2007 are 0.7% and 1.0%, respectively. The estimated amount of all retirement
benefits to be paid at the future retirement date is allocated equally to each service year using the estimated number of total service years.
Changes of the Company’s accounting policy of severance and retirement benefits were outlined in Note 2 ( j ).

8. INCOME TAXES
Income taxes in the accompanying consolidated statements of income comprise corporation, enterprise and inhabitants’ taxes. The aggregatednormal effective tax rates were approximately 40.7%.
The following table summarizes the significant differences between the statutory tax rate and the Companies’ effective tax rates for financial
statement purposes for the years ended March 31, 2005, 2006 and 2007:
2005

2006

2007

Statutory tax rate
Dividend income from foreign consolidated subsidiaries and foreign affiliated companies
Non-deductible entertainment expenses
Tax credit on research and development costs
Equity in earnings of affiliated companies
Lower tax rates for foreign consolidated subsidiaries
Foreign tax credits
Non-taxable dividend income
Other

40.7%
0.4
0.3
(3.9)
(0.6)
(0.6)
(0.3)
(0.1)
(0.7)

40.7%
0.4
0.3
(3.2)
(1.4)
(0.5)
(0.4)
(0.1)
0.4

40.7%
0.6
0.2
(2.3)
(1.1)
(1.9)
(0.6)
(0.1)
0.0

Effective tax rate

35.2%

36.2%

35.5%

Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2006 and 2007 were as follows:

2006

2007

Thousands of
U.S. dollars
2007¥ 5,627
1,597
1,258
963
910
827
467
315
2,188

¥ 5,468
1,646
1,337
905
991
959
939
294
2,306

$ 46,318
13,94011,329
7,670
8,392
8,123
7,956
2,487
19,542Sub-total
Valuation allowance

14,152(259)

14,845(298)

125,757(2,526)

Total deferred tax assets

13,893

14,547

123,231

Deferred tax liabilities:
Net unrealized holding gains on securities
Deferred gain on sale of fixed assets
Special depreciation reserve
Other

7,692
2,767
884
863

6,956
2,607
576
793

58,92522,0894,881
6,715

Millions of yen

Deferred tax assets:
Excess retirement benefits
Excess bonuses accrued
Provision for environmental expenses
Enterprise taxes payable
Loss on write down of finished products
Unrealized gain on sale of property, plant and equipment
Unrealized gain on sale of inventories
Loss on devaluation of investment securities
Other

Total deferred tax liabilities

12,206

10,932

92,610Net deferred tax assets¥ 1,687¥ 3,615$ 30,621

38 JSR CORPORATION

9. IMPAIRMENT OF FIXED ASSETS
The loss on impairment of fixed assets for the year ended March 31, 2006 consisted of the following.
Location: Yokkaichi City, Mie Prefecture
Major use
: Some sections of production facilities for ABS resin
Asset category : Machinery and equipment, structures
Amount: ¥580 million
Remarks: Not for business activities
The companies have grouped their fixed assets into business units. Fixed assets that are idle or not being used for business activities areassessed individually.
In case the recoverable amount for fixed assets, which are idle or not being used for business activities, is below their book value, a specific planof use is taken into consideration. Hence, the book value is reduced to a recoverable amount. The resulting impairment loss was recorded as otherexpenses. This recoverable amount is measured as zero because of planned use and attendant costs.

10. NET ASSETSAs described in Note 2 (r), net assets comprises four subsections, which are the shareholders’ equity, valuation and translation adjustments, subscription
rights to shares and minority interests.
Japanese Corporate Law (“the Law”) became effective on May 1, 2006, replacing the Japanese Commercial Code (“the Code”).
Under the Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common stock. However, acompany may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of the price of the new shares as additional
paid-in capital, which is included in capital surplus.
Under the Law, in the case where a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividends or theexcess, if any, of 25% of common stock over the total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in
capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying consolidated balance sheets.
Under the Code, companies were required to set aside an amount equal to at least 10% of the aggregate amount of cash dividends and othercash appropriations as legal earnings reserve until the total of legal earnings reserve and additional paid-in capital equaled 25% of common stock.
Under the Code, legal earnings reserve and additional paid-in capital could be used to eliminate or reduce a deficit by a resolution of theshareholders’ meeting or could be capitalized by a resolution of the Board of Directors. Under the Law, both of these appropriations generally requirea resolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Code, however, on condition that the total
amount of legal earnings reserve and additional paid-in capital remained equal to or exceeded 25% of common stock, they were available for
distribution by the resolution of the shareholders’ meeting. Under the Law, all additional paid-in capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of theCompany in accordance with the Japanese laws and regulations.
At the annual shareholders’ meeting held on June 15, 2007, the shareholders resolved cash dividends amounting to ¥3,026 million ($25,638
thousand). Such appropriations have not been accrued in the consolidated financial statements as of March 31, 2007. Such appropriations arerecognized in the period in which they were resolved.

11. STOCK OPTION PLANS
The shareholders of the Company approved the issuance of stock options to the directors and the executive officers of the Company as follows:
Date of resolution of the general shareholders’ meeting

The maximum number of shares to be issued
Exercisable period of the stock options
Exercise price per share

June 17, 2005

June 16, 2006

62,500 shares
From June 18, 2005
to June 17, 2025
¥1
$0.01

39,100 shares
From August 2, 2006
to June 16, 2026
¥1
$0.01

At the 62nd ordinary general meeting of shareholders held on June 15, 2007, the Company received approval to issue stock acquisition rights
as stock options to its Directors by the resolution of the Board of Directors. An annual maximum amount of stock acquisition rights will not exceed¥100 million (calculated by the fair value of the share price of the Company on the day of allotment of the share acquisition right).

ANNUAL REPORT 2007 39

12. DERIVATIVE TRANSACTIONS(1) Qualitative disclosure about derivatives
The Companies enter into foreign exchange forward contracts, currency swap contracts and interest rate swap contracts as derivative financial
instruments. The Companies deal with foreign exchange forward transactions to hedge exchange rate risk of trade receivables and payables denominated in foreign currency. Currency swap transactions are made in order to mitigate exchange risks on loans receivable denominated in foreign
currencies. Interest rate swap transactions are made in order to reduce interest rate risks on loans payable.
The Companies do not enter into derivatives for speculative transaction purposes. Hedge accounting is used for currency swaps and interest
rate swaps in the case where there is a high degree of correlation between the hedge instruments and the hedge items.
Significant conditions surrounding hedging instruments are the same as those for the items hedged, the risks of which will likely continue to behedged through hedge transactions.
Foreign exchange forward contracts and currency swaps that the Companies entered have risks due to fluctuations in foreign exchange rates.
Interest rate swap contracts that the Companies entered have risks due to fluctuations in interest rates. Due to the fact that counterparties to theCompanies represent major financial institutions that have high creditworthiness, the Companies believe that the overall credit risk related to its
financial instruments is insignificant.
Derivative transactions are executed and controlled based on the Companies’ internal rules and are approved by the responsible officials. Thebalances of such transactions with counterparties are periodically confirmed.
(2) Quantitative disclosure about derivatives
The following contract amounts are only nominal or notional amounts of derivatives, and do not necessarily indicate the magnitude of market risk
associated with the derivative transactions.
Contract amounts, market values and recognized gains or losses on the derivative transactions, except those accounted for using hedge
accounting, at March 31, 2006 and 2007 were as follows:(a) Related to currencies
Millions of yen

March 31, 2006:
Items not traded on exchanges
Foreign exchange forward contracts
Selling: U.S. Dollars
Buying: U.S. Dollars
Euro
Swiss Franc
Total

Contract amountOver one year

Market value

Recognized
gains or losses¥2,634
199
13
1

¥—
—
—
—

¥2,653
199
13
1

¥(19)
(0)
0
0

¥2,847¥—¥2,866¥(19)

Millions of yen

March 31, 2007:
Items not traded on exchanges
Foreign exchange forward contracts
Selling: U.S. Dollars
Buying: U.S. Dollars
Euro
Swiss Franc
Total

40 JSR CORPORATION

Contract amountOver one year

Market value

Recognized
gains or losses¥2,713
174
31
1

¥—
—
—
—

¥2,700
175
31
1

¥13
1
(0)
(0)

¥2,919¥—¥2,907¥14

Thousands of U.S. dollars

March 31, 2007:
Items not traded on exchanges
Foreign exchange forward contracts
Selling: U.S. Dollars
Buying: U.S. Dollars
Euro
Swiss Franc
Total

Contract amountOver one year

Market value

Recognized
gains or losses$22,976
1,472
265
12

$—
—
—
—

$22,872
1,479
264
12

$104
7
(1)
(0)

$24,725$—$24,627$110

Market values are calculated using foreign exchange forward rates.
(b) Related to interests
Interest rate swap contracts, for which hedge accounting is adopted, are excluded from being an object of disclosure.

13. INFORMATION FOR CERTAIN LEASE PAYMENTS
The Company and its domestic consolidated subsidiaries’ finance lease contracts that do not transfer ownership to lessees are not capitalized andare accounted for in the same manner as operating leases with appropriate footnote disclosures. As if capitalized information for significant leased
assets under the finance lease contracts of the Company and its domestic consolidated subsidiaries as of and for the years ended March 31, 2007
and 2006 are as follows:(1) Equivalent amounts of purchase price, accumulated depreciation and book value of leased properties are as follows (including the interest
portion thereon):

2006

2007

Thousands of
U.S. dollars
2007

¥ 47
22

¥ 42
12

$ 356
101

¥ 25

¥ 30

$ 255

¥711
347

¥614
370

$5,199
3,133

¥364

¥244

$2,066

¥758
369

¥656
382

$5,555
3,234

¥389

¥274

$2,321Millions of yen

Machinery, equipment and vehicles:
Purchase price equivalent
Accumulated depreciation equivalentBook value equivalent
Tools, furniture and fixtures:
Purchase price equivalent
Accumulated depreciation equivalentBook value equivalent
Total:
Purchase price equivalent
Accumulated depreciation equivalentBook value equivalent(2) Lease commitments (including the interest portion thereon):

2006

2007

Thousands of
U.S. dollars
2007

¥143
246

¥140
134

$1,185
1,136

¥389

¥274

$2,321Millions of yen

Due within one year
Due over one year

ANNUAL REPORT 2007 41

(3) Lease expenses and depreciation equivalent:

Lease expenses
Depreciation equivalent

2005

Millions of yen
2006

2007

Thousands of
U.S. dollars
2007

¥135
135

¥129
129

¥145
145

$1,2301,230

Depreciation equivalent is computed using the straight-line method over the term of each lease with no residual value.
There is no impairment loss on finance leases.

14. CONTINGENT LIABILITIESAt March 31, 2007, the Company and certain consolidated subsidiaries were contingently liable as guarantors for loans of employees and others in
the amount of ¥462 million ($3,914 thousand) and discounted bills of export exchange at March 31, 2007 were ¥273 million ($2,312 thousand).

15. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses of the Companies for the years ended March 31, 2005, 2006 and 2007 were ¥16,029 million, ¥15,829 millionand ¥17,390 million ($147,312 thousand), respectively, which are included in selling, general and administrative expenses or manufacturing costs.
Costs and expenses in elimination and/or corporate that cannot be allocated to business segments are related mainly to fundamental researchand development. Assets in elimination and/or corporate are related mainly to cash, current and Investment Securities of the Company. Capital
expenditures are recognized on an accrual basis.
Geographic segment information with respect to net sales, costs and expenses, operating income, and identifiable assets for the years ended
March 31, 2005, 2006 and 2007 is as follows:
Millions of yen
Elimination
and/orCorporate

Japan

OthersTotal¥269,858
224,724¥35,51032,412¥305,368
257,136

¥

—
2,899

¥305,368
260,035

Operating income¥ 45,134¥ 3,098¥ 48,232¥ (2,899)¥ 45,333

Identifiable assets¥240,157¥22,224¥262,381¥62,650¥325,031¥292,964
238,984¥45,196
42,450¥338,160
281,434¥¥338,160
284,803For 2005:
Sales to outside customers
Costs and expenses

For 2006:
Sales to outside customers
Costs and expenses

—
3,369

Consolidated

Operating income¥ 53,980¥ 2,746¥ 56,726¥ (3,369)¥ 53,357

Identifiable assets¥269,304¥32,006¥301,310¥79,787¥381,097¥308,459
31,583¥57,372
1,969¥365,831
33,552¥—(33,552)¥365,831—

For 2007:Sales to outside customers
Inter-segment sales/transfers
Costs and expenses

287,357

53,283

340,640(30,052)

310,588

Operating income¥ 52,685¥ 6,058¥ 58,743¥ (3,500)¥ 55,243

Identifiable assets¥299,981¥38,146¥338,127¥70,822¥408,949

42 JSR CORPORATION

Thousands of U.S. dollars

For 2007:Sales to outside customers
Inter-segment sales/transfers

Japan

OthersTotal

Elimination
and/orCorporate$2,612,955
267,541$485,996
16,678$3,098,951
284,219$—(284,219)

Consolidated$3,098,951—

Costs and expenses

2,434,198

451,361

2,885,559(254,571)

2,630,988

Operating income$ 446,298$ 51,313$ 497,611$ (29,648)$ 467,963

Identifiable assets$2,541,137$323,129$2,864,266$ 599,937$3,464,203

The Companies’ business is segmented into Japan and others including China, Thailand, Korea, the U.S.A. and Belgium.
Overseas sales for the years ended March 31, 2005, 2006 and 2007 were as follows:Asia

For 2005:
Overseas sales
Consolidated net sales
Percentage of overseas sales to consolidated sales
For 2006:
Overseas sales
Consolidated net sales
Percentage of overseas sales to consolidated sales
For 2007:
Overseas sales
Consolidated net sales
Percentage of overseas sales to consolidated sales

Total¥ 81,697¥12,070¥10,743¥104,510
305,368

26.8%

3.9%

3.5%

34.2%

¥107,687¥12,955¥10,901¥131,543
338,160

31.9%

3.8%

3.2%

38.9%

¥111,431¥14,089¥15,152¥140,672
365,831

30.5%

3.9%

4.1%

38.5%

Asia

For 2007:
Overseas sales
Consolidated net sales

Millions of yen
North America
Others$943,926

Thousands of U.S. dollars
North America
Others$119,349$128,354

Total$1,191,629
3,098,951

Sales areas are segmented into Asia, North America and others. Asia consists of China, Korea, Taiwan, Thailand and Singapore; North America
consists of the U.S.A.; and others are the EU.

ANNUAL REPORT 2007 43

16. SEGMENT INFORMATIONThe Companies’ business segments are classified into the following four business segments ranked in order of importance: (1) elastomers business(2) emulsions business, (3) plastics business, and (4) fine chemicals and other products business.
A summary of net sales, costs and expenses, operating income, identifiable assets, depreciation, and capital expenditures by segment ofbusiness activities for the years ended March 31, 2005, 2006 and 2007 is as follows:

Elastomers

Emulsions

Plastics

Millions of yen
Fine
chemicals
and otherproducts¥ 93,233
85,931¥23,60221,221¥65,941
63,169¥122,592
86,815¥305,368
257,136

¥

—
2,899

¥305,368
260,035

Operating income

¥

7,302

¥ 2,381¥ 2,772¥ 35,777¥ 48,232¥ (2,899)¥ 45,333

Identifiable assets
Depreciation
Capital expenditures¥ 96,928
4,402
5,042

¥22,058
1,279
1,851

¥33,801
1,627
1,279

¥109,594
7,417
9,061

¥262,381
14,725
17,233¥62,650520
901¥325,031
15,245
18,134¥104,021
92,277¥24,944
22,389¥66,451
62,249¥142,744
104,519¥338,160
281,434

¥

—
3,369

¥338,160
284,803

Operating income¥ 11,744¥ 2,555¥ 4,202¥ 38,225¥ 56,726¥ (3,369)¥ 53,357

Identifiable assets
Depreciation
Capital expenditures¥110,449
4,060
3,982

¥22,324
1,246
1,430

¥32,717
1,391
1,374

¥135,820
8,935
15,434¥301,310
15,632
22,220¥79,787574
1,141¥381,097
16,20623,361¥116,250
536
104,417¥24,362
3,576
26,161¥64,614—60,749¥160,605
12,966
132,839¥365,831
17,078324,166¥—(17,078)(13,578)¥365,831—
310,588

For 2005:
Sales to outside customers
Costs and expenses

For 2006:
Sales to outside customers
Costs and expenses

For 2007:Sales to outside customers
Inter-segment sales/transfers
Costs and expenses

Total

Elimination
and/orcorporate

Consolidated

Operating income¥ 12,369¥ 1,777¥ 3,865¥ 40,732¥ 58,743¥ (3,500)¥ 55,243

Identifiable assets
Depreciation
Capital expenditures¥129,896
4,357
5,916

¥25,031
1,381
1,625

¥35,200
1,523
1,257

¥147,999
10,042
12,382¥338,126
17,303
21,180¥70,823830
914¥408,949
18,13322,094

Thousands of U.S. dollars

For 2007:Sales to outside customers
Inter-segment sales/transfers
Costs and expenses$ 984,749
4,541
884,514$206,371
30,290221,611$547,348—
514,600$1,360,483
109,838
1,125,284$3,098,951
144,669
2,746,009$—(144,669)(115,021)$3,098,951—
2,630,988

Operating income$ 104,776$ 15,050$ 32,748$ 345,037$ 497,611$ (29,648)$ 467,963

Identifiable assets
Depreciation
Capital expenditures$1,100,350
36,90850,113$212,039
11,70013,765$298,177
12,896
10,648$1,253,700
85,068104,888$2,864,266
146,572
179,414$599,937
7,036
7,741

$3,464,203
153,608
187,155

44 JSR CORPORATION

17. RELATED PARTIES
Significant transactions and balances with related parties as of and for the years ended March 31, 2005, 2006 and 2007 were as follows:

2007

Thousands of
U.S. dollars
2007

2005

Millions of yen
2006

BRIDGESTONE Corporation (a major shareholder):Sales
Notes and accounts receivable¥28,016
9,639¥31,951
11,010¥36,542
16,180$309,549
137,062

KRATON JSR Elastomers K.K. (an affiliated company):
Purchases
Notes and accounts payable
Provision of materials for processing
Accounts receivable — other

8,002
3,351
4,032
1,871

—
—
—
—

10,650
5,613
5,604
3,273

90,21747,54447,46927,726

Tobu Butadiene Co., Ltd. (an affiliated company):
Purchases
Notes and accounts payable
Provision of materials for processing
Accounts receivable — other

8,477
3,162
7,048
2,770

9,624
4,455
7,433
3,772

12,419
5,953
10,196
5,077

105,20350,42786,36643,009JSR Micro Korea Co., Ltd. (an unconsolidated subsidiary):
Loan of funds
Long-term loans receivable

3,065
4,315

—
—

—
—

—
—

JSR Micro Korea Co., Ltd. became a consolidated subsidiary in 2006.

18. NET INCOME PER SHARE
Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2006, and 2007 are as follows:

For the year ended March 31, 2006:
Basic EPS
Net income available to common shareholders
Effect of dilutive securities
Stock options
Diluted EPS
Net income for computation
For the year ended March 31, 2007:
Basic EPS
Net income available to common shareholders
Effect of dilutive securities
Stock options
Diluted EPS
Net income for computation

Net income
Millions of yen

Weightedaverage shares
Thousands of shares

Yen

EPS

¥30,412254,224¥119.63

U.S. dollars

48¥30,412254,272¥119.61¥33,655

252,850¥133.10$1.13¥133.06$1.13

83¥33,655

252,933

The Company had no dilutive securities for the year ended December 31, 2005.

19. SUBSEQUENT EVENTSAt the June 15, 2007 annual meeting, the Company’s shareholders approved the following appropriations of retained earnings:
Payment of a year-end cash dividend of ¥12.00 per share aggregating ¥3,026 million ($25,638 thousand)

ANNUAL REPORT 2007 45

INDEPENDENT AUDITORS’ REPORTTo the Shareholders and Board of Directors of
JSR Corporation
We have audited the accompanying consolidated balance sheets of JSR Corporation and consolidated subsidiaries as of March 31,
2007 and 2006, and the related consolidated statements of income, changes in net assets and cash flows for each of the three years
in the period ended March 31, 2007, expressed in Japanese yen. These consolidated financial statements are the responsibility of theCompany’s management. Our responsibility is to independently express an opinion on these consolidated financial statements basedon our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of JSR Corporation and subsidiaries as of March 31, 2007 and 2006, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended March 31, 2007, in conformity with accounting principles generally
accepted in Japan.
Without qualifying our opinion, we draw attention to the following:(1) As discussed in Note 2 (h) to the consolidated financial statements, effective April 1, 2005, JSR Corporation adopted the new
accounting standard for impairment of fixed assets.
(2) As discussed in Note 2 (J) (i) to the consolidated financial statements, effective April 1, 2005, JSR Corporation adopted“Amendment of Accounting Standard for Retirement Benefits” and “Implementation Guidance of Amendment of AccountingStandard for Retirement Benefits”.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2007
are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our
opinion, such translation has been made on the basis described in Note 1 to the consolidated financial statements.

(KPMG AZSA & Co.)Tokyo, Japan
June 15, 2007

46 JSR CORPORATIONPRODUCTION PROFILESEGMENTPRODUCTS

Application/Features

Styrene-butadiene rubber (SBR)

typical general–purpose synthetic rubber;
for tires, conveyor belts, hoses, footwear

Acrylonitrile-butadiene rubber (NBR)

highly oil–resistant; for industrial rubber parts

High-styrene rubber (HSR)a high degree of hardness with low specificgravity; for hardboard, tiles, ebonite, footwear

Production Capacity of Plant

Yokkaichi—255,000 tons/year

general-purpose synthetic rubber;
Polybutadiene rubber (BR)

Solution SBR

Polyisoprene rubber (IR)Elastomers
Ethylene-propylene rubber (EPR)

Emulsionshigh-performance tires
physical properties duplicate those ofnatural rubber; for tires, belts, footwear
specialty synthetic rubber; excellent
weatherability and heat resistance;
for automotive parts, window frames,
electrical cables, industrial goods
a plastic with rubberlike properties;
for plastics modifiers, adhesives

Styrenic thermoplastic elastomer(SBS, JSR SIS®)

for adhesives, plastics modifiers, footwear

Chiba—72,000 tons/year

Yokkaichi—45,000 tons/year
Kashima—41,000 tons/year(Manufactured by KRATON JSR
Elastomers K.K.)

Yokkaichi—45,000 tons/year
Kashima—36,000 tons/year

Chiba—24,000 tons/year
Kashima—45,000 tons/year(Manufactured by KRATON JSR
Elastomers K.K.)

Butadiene

Yokkaichi—148,000 tons/year
Chiba—130,000 tons/year(Manufactured by Kashima-Tobu
Butadiene Co., Ltd.)
Kashima—120,000 tons/year

Isoprene

Kashima—36,000 tons/year

Latex

Acrylonitrile-ethylene-propylenediene-styrene plastics (AES)

for paper coating, carpet backing, tire cord
dipping, adhesive agents, ABS plastics

Yokkaichi—120,000 tons/year

excellent impact resistance; for automotive
parts, electrical appliances, office automationequipment, miscellaneous goods

Yokkaichi—280,000 tons/yearsame mechanical properties as ABS plastics; (Manufactured by Techno Polymer Co., Ltd.)
superior weatherability; for automotive parts

Acrylonitrile styrene plastic (AS)transparent plastics; applications
similar to those of ABS plastics

ARTON®

heat-resistant transparent resin

Chiba—5,000 tons/year
Yokkaichi—400,000 gallons/year
Other—50,000 gallons/year

Fine Chemicals
and
Other Products

specialty SBR for fuel-efficient andButadiene resin (JSR RB®)

Acrylonitrile-butadienestyrene plastics (TECHNO ABS®)
Plastics

low in heat buildup, high in resilience;for tires and golf balls

Photoresists for semiconductors(Manufactured by JSR Micro N.V.)
125,000 gallons/year (Manufactured
by JSR Micro, Inc.)
125,000 gallons/year (Manufactured
by JSR Micro Kyushu Co., Ltd.)ANNUAL REPORT 2007 47

COMPANY NETWORKHEAD OFFICEJSR Corporation
6-10, Tsukiji 5-chome, Chuo-ku, Tokyo 104-8410, Japan
Phone: (03) 5565-6500
Facsimile: (03) 5565-6630

CONSOLIDATED SUBSIDIARIES
Domestic
JSR Trading Co., Ltd.
6-10, Tsukiji 5-chome, Chuo-ku, Tokyo 104-0045, Japan
Sales of synthetic rubber, emulsions and plastics, chemicals, packaging materials and mechanical goods

BRANCH OFFICES
Osaka, Nagoya

PLANTS
Yokkaichi Plant
100, Kawajiri-cho, Yokkaichi, Mie 510-8552, Japan

Elastomix Co., Ltd.
100, Kawajiri-cho, Yokkaichi, Mie 510-0871, Japan
Production and sales of rubber masterbatch

Emulsion Technology Co., Ltd.
6-16, Obata 1-chome, Yokkaichi, Mie 510-0875, Japan

Chiba Plant
5, Chigusakaigan, Ichihara, Chiba 299-0108, Japan

Sales of latex compounding for carpet backing, construction andwaterproofing, and production of acrylic emulsions

Kashima Plant
34-1, Tohwada, Kamisu, Ibaraki 314-0102, Japan

JAPAN COLORING Co., Ltd.
4-6, Tomarikoyanagi-cho, Yokkaichi, Mie 510-0883, JapanRESEARCH LABORATORIES
Yokkaichi Research Center
Polymer Research Laboratories
Performance Materials Research Laboratories
Semiconductor Materials Research Laboratories
Fine Electronic Materials Research Laboratories
Display Research Laboratories
Fine Converting Laboratories

Coloring and compounding of plastics

Excel Tokai Co., Ltd.
335-1, Higashitanaka, Gotenba, Shizuoka 412-0026, Japan
Production and sales of plastic extrusions

JSR Logistics Co., Ltd.
16-13, Obata 2-chome, Yokkaichi, Mie 510-0875, Japan
Transportation and warehousing

100, Kawajiri-cho, Yokkaichi, Mie 510-8552, Japan
Tsukuba Research Laboratories
25, Miyukigaoka, Tsukuba, Ibaraki 305-0841, JapanOVERSEAS OFFICES
Wallisellen Branch
Hertistrasse 2, Bld.C, 8304 Wallisellen, Switzerland

Techno Polymer Co., Ltd.
2-15-5, Shintomi, Chuo-ku, Tokyo 104-0031, Japan
Research, production and sales of plastics

Kyushu Gomu Kako Co., Ltd.
1250, Murata-cho, Tosu, Saga 841-0072, Japan
Compounding of crude rubber and sales of compounded products

Shanghai Office
6FI., Suite D, Orient International Plaza,
85 Loushanguan Road, Shanghai 200336, China

JSR MICROTECH INC.
289-1, Yaenda, Hidaka, Saitama 350-1236, Japan

Seoul Office
29th Fl., STAR TOWER
737 Yeoksam-Dong, Kangnam-ku, Seoul 135-984, South Korea

JSR Micro Kyushu Co., Ltd.
1580-1, Oaza Kamiizumi, Kuboizumi-cho,
Saga 849-0902, Japan

Taiwan Office
6F-3, No. 55, Tungkuang Road, Hsin Chu, Taiwan R.O.C.

Production and sales of printed circuit boards and IC testing fixtures

Production of photoresists and materials for flat panel displays

D-MEC LTD.
6-10, Tsukiji 5-chome, Chuo-ku, Tokyo 104-0045, Japan
Commissioned generation of 3D models, sales of solid modelingsystems and optically hardened resins, and commissioned analysis
by CAE

48 JSR CORPORATIONJNT SYSTEM Co., Ltd.
6-10, Tsukiji 5-chome, Chuo-ku, Tokyo 104-0045, Japan

JSR Micro N.V.
Technologielaan 8, B-3001 Leuven, Belgium

Development and sales of computer software and sales of hardware

Production and sales of photoresists

JSR ENGINEERING CO., LTD.
100 Kawajiri-cho, Yokkaichi, Mie 510-0871, Japan

JSR Micro, Inc.
1280 North Mathilda Ave., Sunnyvale, CA 94089, U.S.A.

Engineering and consultation for chemical engineering equipment

Production and sales of photoresists

JSR Service Co., Ltd.
6-10, Tsukiji 5-chome, Chuo-ku, Tokyo 104-0045, Japan

JSR Micro Korea Co., Ltd.
Ochang Scientific Industrial Complex #7 block, 11115,
Namchon-ri, Okasan-myeon, Cheongwon-gun,Choongcheongbuk-do, Korea

Nonlife insurance agency, purchase, sales, and leasing of real estate,financing, leasing, management of dormitories, company housing, andfacilities

Nichigo Kogyo Co., Ltd.
34-1, Tohwada, Kamisu, Ibaraki 314-0102, Japan
Product packaging, civil engineering and construction

JSR Optech Tsukuba Co., Ltd.
57-1 Sawabe, Tsuchiura, Ibaraki 300-4104, Japan

Production, process, import and export, and sales of industrial-use
chemical products, including materials for flat panel displays and forsemiconductors

Shanghai Rainbow Color Plastics Co., Ltd.
207 Zhongqing Road, Maqiao, Minhang, Shanghai 201111,
China
Coloring and compounding of plastics

Production of UV curing-type optical fiber coating materials

Overseas
JSR AMERICA, INC.
312 Elm St., Suite 1585, Cincinnati, Ohio 45202, U.S.A.
Sales of synthetic rubber

TECHNO POLYMER AMERICA, INC.
38777 West Six Mile Road, Suite 204, Livonia, Michigan
48152, U.S.A.
Sales of plastics, technical services related to plastics in North America

TECHNO POLYMER HONG KONG CO., LTD.
Room 2103A, 21/F, Tower 1,
Admiralty Centre, 18 Harcourt Road, Hong Kong
Plastics sales and technical services in Hong Kong and neighboring
regions

Elastomix (Thailand) Co., Ltd.
No. 7/116, Moo 4,
Tumbol-Mapyangporn A-Pluakdaeng, Rayoug 21140, Thailand(In Amata City Industrial Estate)
Manufacture and R&D of compounded materials, and sales of suchmaterials mainly in Thailand

NON-CONSOLIDATED AFFILIATES ACCOUNTED FOR BY THE
EQUITY METHODJapan Butyl Co., Ltd.
Japan Fine Coatings Co., Ltd.
KRATON JSR Elastomers K. K.
Kumho Polychem Co., Ltd.

OTHER PRINCIPAL AFFILIATE
Tobu Butadiene Co., Ltd.

Techno Polymer (Thailand) Co., Ltd.
The Millennia 19th Floor Room #1902-3, 62 Langsuan Road,
Lumpini, Patumwan, Bangkok 10330, Thailand
Plastics sales and technical services in Thailand

Techno Polymer (Shanghai) Co., Ltd.
6FI., Suite D, Orient International Plaza, 85 Loushanguan
Road, Shanghai 200336, China
Plastics sales and technical services in China

ANNUAL REPORT 2007 49

CORPORATE DATADIRECTORS AND CORPORATE AUDITORS(As of June 15, 2007)

Yoshinori Yoshida
Representative Director and President

Tadahiko Ito

COMPANY NAMEJSR Corporation

ESTABLISHED
December 10, 1957

Representative Director and Executive Vice President, Petrochemicals Sector

Tsugio Haruki
Executive Managing Director, Accounting & Finance, Corporate
Communications, CSR, Logistics

CAPITAL¥23,320,165,484

Seiichi Hasegawa
Managing Director, Strategic Planning, Group Companies, Information
Technology, Purchasing

Mitsunobu Koshiba

EMPLOYEES
4,693

Managing Director, Fine Chemicals Sector, Safety Environmental Affairs

Masaki Hirose
Managing Director, Human Resouces, Legal and General Affairs

Hozumi SatoManaging Director, Research & Development, Business Development

Yasuki Sajima
Director, Senior Officer, Fine Chemicals Sector, General Manager, Display
Materials Div.

Koichi Kawasaki
Director, Senior Officer, Manufacturing & Technology, Product Safety & Quality
Assurance, Petrochemicals Sector, General Manager, Manufacturing &Technology Dept.

MAIN PRODUCTS (BUSINESSES)<Petrochemicals>
Elastomers:
General-purpose Synthetic Rubber, Special-purpose Synthetic
Rubber, Thermoplastic Elastomers, and others
Emulsions:
Paper Coating Latex, General-purpose Latex
Plastics:
ABS, AES, AS, ASA plastics

Fumio Ozaki
Corporate Auditor (Full-time)

Nobuo Bessho
Corporate Auditor (Full-time)

Kunihiro Fukasawa
Corporate Auditor (Full-time)

Akira Nozawa
Corporate Auditor

Kenji Ito
Corporate Auditor

OFFICERS
Tomokazu Ito
Senior Officer, President, Techno Polymer Co., Ltd.

Akira Tsuji
Senior Officer, President, JSR Micro Taiwan Co., Ltd.

Goro Miyabe
Senior Officer, General Manager, Opto-Electronic Materials Business Center

Eitaro Nakamura
Senior Officer, President, ELASTOMIX CO., LTD.

<Fine Chemicals and Other Products>
Semiconductor Materials:
Photoresists, CMP Consumables, Packaging and Assembly
Materials, Antireflective Coating Materials
Display Materials:
Color LCD Materials, PDP Materials
Optical Materials:
Optical Fiber Coating Materials, Functional Coating Materials,
Antireflection Treatment, Heat-resistant Transparent Resinand Film
Performance Chemicals:
Functional Materials, Industrial Particles, Particles forApplication in Clinical Diagnosis

CLOSING DATE
JSR’s books are closed on March 31 each year.

Hisao Hasegawa
Senior Officer, Yokkaichi Plant Manager

Toshiyuki Fujimoto
Senior Officer, General Manager, Purchasing Dept.

Atsushi Kumano

REGULAR GENERAL MEETING
The regular general meeting of shareholders is held in June eachyear. The 2007 regular general meeting was held on June 15.

Senior Officer, General Manager, R&D Dept. and Tsukuba Lab.

Shinichiro Iwanaga
Officer, General Manager, Yokkaichi R&D Center

Yoshiyuki Ohashi
Officer, General Manager, Process Technical Center and Functional Film Dept.

Takashi Wakabayashi
Officer, General Manager, Accounting & Finance Dept.

TRANSFER AGENT AND REGISTERThe Chuo Mitsui Trust and Banking Co., Ltd.

AUDITORSKPMG AZSA & Co.

Tatsushi Kawai
Officer, General Manager, Elastomer Div. and Elastomer Dept.

Takashi Ukaji
Officer, General Manager, Optical Materials Div.

50 JSR CORPORATIONHOME PAGE
URL http://www.jsr.co.jp/jsr_e/index.html

PROFILE

INVESTOR INFORMATIONJSR Corporation, which was Japan Synthetic Rubber Co., Ltd.
until 1997 when the company celebrated its 40th anniversary,has a clear policy of achieving an innovation-driven transformation on its own.
The aim is the formulation of a business strategy able to meet projectedmarket trends in the 21st century.
Since its establishment in December 1957,
JSR has been expanding its businesses and building sound management systems.
As a result, JSR has grown to rank among the leading manufacturers of synthetic rubber,
emulsions and plastics. Recently, JSR has entered the rapidly growing information andelectronics industries by applying its polymer technology for opto-electronic materials.
JSR is supplying many types of information electronics materials,
a product category where the company has a high market share.
The renewed JSR will continue to take on new challenges to realize its full potential,
seeking advanced semiconductor materials, display materials, optical materials, andenvironment & energy- and medical care-related materials
that will drive progress in the 21st century.

NUMBER OF SHARES ISSUEDCOMMON STOCK PRICE RANGE

255,885,166 shares(Tokyo Stock Exchange)(As of March 31, 2007)

NUMBER OF SHAREHOLDERS

1st quarter2nd quarter3rd quarter

4th quarter

FY2001

High
Low

1,021
716

945
650

805
665

772
600

FY2002

High
Low

1,005
685

945
599

910
650

963
815

23,972

MAJOR SHAREHOLDERSName

BRIDGESTONE Corporation
Japan Trustee Services Bank, Ltd.
(Trust Account)
The Master Trust Bank of Japan, Ltd.
(Trust Account)
Mizuho Corporate Bank, Ltd.
The Master Trust Bank of Japan, Ltd.
(Pension Account — Pension Trust
Account held for Mitsubishi
Chemical Corporation)
State Street Bank & Trust Company 505103
Chase Manhattan Bank N.A. London
Chase Manhattan Bank 385036
Nippon Life Insurance Company
State Street Bank & Trust Company

Percentageof shares held(%)

Number ofshares held
(thousands)

FY2003

High
Low

1,135
856

1,033
780

1,238
900

1,282
1,109

15.97

40,866

FY2004

High
Low

1,477
1,141

2,080
1,429

2,540
1,795

2,435
2,055

4.72

12,088FY2005

High
Low

2,520
1,892

2,180
1,655

2,265
1,790

2,255
2,040

4.65
4.00

11,89910,249FY2006

High
Low

2,395
2,000

2,635
2,175

3,150
2,370

3,810
3,040

FY2007

High
Low

3,710
2,535

2,930
2,280

3,170
2,505

2,935
2,530

3.86
2.50
2.43
2.43
2.34
2.10

9,888
6,404
6,227
6,223
5,998
5,389

SECURITIES TRADED COMMON STOCKTokyo Stock Exchange
Osaka Securities Exchange

MONTHLY STOCK PRICE
(¥)
4,000

COMPOSITION OF SHAREHOLDERS
Shareholders by category

NumberShares held
(thousands)

Financial Institutions
Securities Companies
Other Corporations
Foreign Corporations
and Individuals
Individuals and Others

133
43
320

93,9171,710
60,884383
23,093

77,97821,394

Total

23,972

255,885

3,500

3,000

2,500

30.48%

23.79%

Foreign investors

Domestic
corporations

By type ofshareholders

8.36%

4.54%
1 tangen or more

10_REVIEW OF OPERATIONS
16_RESEARCH AND DEVELOPMENT AND INTELLECTUAL PROPERTY
19_THE JSR CORPORATE SOCIAL RESPONSIBILITY REPORT
20_CORPORATE GOVERNANCE AND COMPLIANCE

3.97%

23_FINANCIAL SECTION
47_PRODUCTION PROFILE
48_COMPANY NETWORK
50_CORPORATE DATA
51_INVESTOR INFORMATION

10

2006
4

10

2007
4

Financial institutions &securities companies

Contents

04_INTERVIEW WITH THE PRESIDENT
08_AT A GLANCE

2005
4

37.37%

Individuals/others
01_SIX-YEAR SUMMARY
02_TO OUR SHAREHOLDERS

2,000

0.02%
Less than 1 tangen

50 tangen or more

2.00%
Forward-looking Statements
Statements regarding the company’s future plans, strategies, projected performanceand outlook are based on information available at the time of writing. Readers are
cautioned that economic trends in JSR’s target markets and other risks and factors
beyond the company’s control could cause actual results to differ materially from thoseprojected by the management.

500 tangen or more

By number ofshares held

89.47%
1,000 tangen or more

ANNUAL REPORT 2007 51

Annual Report 2007
Fiscal Year Ended March 31, 2007

JSR CORPORATION
Annual Report 2007
Printed in Japan(1,200)