The Pursuit of Excellence

BUSINESS REPORT

2010
Year ended March 31, 2010

Profile
Kureha takes pride in its history of developing original, innovative technology

Kureha is a leading diversified chemical products manufacturer that has applied its technological development
expertise to create original products in fields including advanced products, pharmaceuticals, agrochemicals,
and packaging materials. Since its establishment in 1944, Kureha’s growth and development has comeexclusively from producing innovative products developed in-house rather than from using outside technology.
Since 2001, Kureha has undergone a major transformation to enable it to constantly develop products to meetthe ever-changing needs of customers. As part of this transformation, it moved away from manufacturingcommodity chemicals to focus on key strategic business areas–including advanced products, pharmaceuticals andagrochemicals, and high-barrier packaging materials–where the company can benefit from its original technology
and marketing strengths to secure steady growth.
To support its transformation, Kureha developed a new mission, “the pursuit of excellence,” with the aim of
becoming a leading global specialty products company. Kureha also changed its name from Kureha Chemical
Industry Co., Ltd., to Kureha Corporation on October 1, 2005.
These moves have already reaped rewards, with Kureha displaying significant development, production, andmarketing abilities. Kureha’s goal is to foster future growth by advancing a model that takes a global perspective andfocuses on winnable markets in each of its business areas, including those that are still in the developmental phase.

Corporate Identity
MissionThe pursuit of excellence

Corporatephilosophy•We treasure people and the natural environment•We constantly evolve through innovation•We contribute to society by developing beneficial products

Employeecode ofconduct

We always act as global corporate citizens, recognizing our corporate social responsibilities.
•In relation to our clients:
Customer satisfaction is our prime priority•In relation to our work:
We will always pursue progress and innovation
We will maintain a global perspective as we respond to change•In relation to our colleagues: Mutual respect and teamwork will always be fundamental tosound employee relationships

Contents
1
2
4
6
10
11
12
14
15
18
20
21
22
23
44
45
45

Consolidated Financial Highlights
Message from the President
The Year’s Highlights
Review of Operations
Research & Development
Responsible Care
Corporate GovernanceConsolidated Five-Year Summary
Management Discussion and Analysis
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes on Consolidated Financial Statements
Main Group Companies by Segment
Executives
Investor Information

Forward-looking statements
This report contains forward-looking statements that are
based on management’s assumptions and beliefs in light of
the information currently available to it. These statements
are subject to risks and uncertainties that could cause actual
results to differ materially from those discussed in thisreport. Such risks include but are not limited to market
trends and economic conditions.

Consolidated Financial Highlights
KUREHA CORPORATION and Consolidated Subsidiaries
Years ended March 31, 2010 and 2009

Millions of yen

For the year:
Net sales
Operating income
Net income
Capital expenditure
Depreciation
R&D expenses
Year-end:
Total assets
Net assets
Interest-bearing debt

Thousands of
U.S. dollars

2010/2009

2010

2010

2009

¥134,606
5,706
1,571
16,943
11,1266,240¥143,741
9,456
3,373
17,82910,304
6,085

-6.4%
-39.7
-53.4
-5.0
8.0
2.5

$1,446,754
61,32816,885
182,104
119,582
67,067¥184,623
96,82247,969¥182,224
97,07544,033

1.3%
-0.3
8.9

$1,984,340
1,040,649
515,573

Yen

Amounts per share:
Net income – basic
Net assets

Percentage change¥

Percentage change¥

8.77
538.1018.75
533.45-53.2%
1.0

Percent

Ratios:
Net income to net sales
Return on equity
Return on assets
Equity ratio

U.S. dollars

$

0.09
5.78

Change

2.3%
3.4
4.7
52.4

1.2%
1.6
3.0
52.2

-1.1%
-1.8
-1.7
-0.2

Notes: 1. For convenience only, U.S. dollar amounts have been translated from Japanese yen at the rate of ¥93.04 to US$1, the rate of exchange prevailing on the Tokyo Foreign
Exchange Market on March 31, 2010.
2. For amounts per share, see Note 20 of the Notes on Consolidated Financial Statements.
3. Return on equity = [Net income / (Average net assets - Average minority interests - Average stock subscription rights)] x 100.
4. Return on assets = (Recurring income / Average total assets) x 100.

Net Sales

Operating Income

Net Income(Millions of yen)

Sales by Segment(Millions of yen)

(Millions of yen)

6,097

5,832

5,172

12,722

(Yen)

9,456

9,708

11,841

134,606

Net Income per Share
143,741

149,776

146,256

135,627(Millions of yen)

¥27,92120.8%¥28,423
21.1%

3,373

2006 2007 2008 2009 20102006 2007 2008 2009 2010

¥35,831
26.6%

1,571

¥42,430
31.5%

8.77

18.75

33.39

31.58

27.61

5,706

2010

2006 2007 2008 2009 2010

Advanced Materials Division
Specialty Chemicals Division
Specialty Plastics Division
Other Operations Division1

Looking into the future transformation of industrial frameworkThe current turbulent economic environment has provided a suitable opportunity toreconsider Kureha’s identity. Here I would like to provide a brief recap of our progress overthe past year and also offer a longer-term view of our business development.
Industry globally is undergoing a period of dynamic change. An appropriate illustration of this is
the automobile. If the era of the electric vehicle begins in earnest, the core technologicalcomponents relating to the combustion engine might not stay in the mainstream. A fundamental
technological shift will become inevitable.
Further considering the implications of such a shift, if the energy source for electric vehicles isderived from renewable sources such as solar or wind generation, the world’s industrial framework
would be entirely transformed. The current economic crisis could, I believe, trigger a revolution in
global industry on the scale of the Industrial Revolution in Britain that followed the invention of
the steam engine, or the IT revolution in the U.S. that accompanied the emergence of the personal
computer. The era we are entering may come to be known as the “Environmental Technology
Revolution.”
This is a natural opportunity for Japan, which has been acclaimed for the way it has overcome alack of natural resources and achieved prosperity based on its technological prowess. Kureha should
leverage its technological and manufacturing strengths to meet these challenges. I hope that Kureha
plays an important role in the global technological value chain that will gradually be established.

Mid-term plan
In view of the mid-term business plan, “Grow Globally”, Kureha has been intensifying efforts
towards securing global growth and sustained results in new business areas. The mid-term plan also
underscores Kureha’s commitment to always act as a global corporate citizen, recognizing corporatesocial responsibilities and focusing on the environment and the needs of daily life. Many of Kureha’s
core products relate to “environmental”, “energy-efficiency” and “healthcare” areas, all of which areessential to sustainable development and demonstrate Kureha’s ability to meet a global society’s
evolving needs.
Kureha will continue to build on its strengths in business sectors where it already commands acompetitive edge and to cultivate and expand new unique businesses.

Advancing existing initiatives
Sectors that we intend to reinforce and build on market-leading positions include carbon fiber
materials. Kureha’s products command a 50% global market share and stable demand exists for use
as an insulating material in silicon ingot production for semiconductors and solar batteries.
PPS resin, the super engineering plastic utilized in a diverse range of applications including
automotive and electronic parts due to its tough and heat-resistant properties, remains one of thecompany’s key strategic growth products.
In addition, Kureha’s PVDF resin holds a 70% global share in the market for lithium-ion batterybinders, used in mobile phones, PCs and other applications, and further demand growth isexpected.

Net Sales

Operating Income

2011(plan)

2008

2009

6,000

Rolling Plan Initiatives >>

5,706

9,456

2010

12,722

2009

140,000

2008(Millions of yen)

134,606

143,741(Millions of yen)
149,776

The Pursuit of Excellence

2

Message from the President

2010

2011
(plan)

Another strategic product area is Kureha’s hard carbon negative-electrode material for hybrid-electric vehicle
batteries. The company’s R&D experts are currently working with automotive and battery manufacturers to deliverproducts that ensure a competitive edge and meet specific market needs.
Global growth is also demonstrated by products including Kremezin, the therapeutic agent for chronic kidneydisease, which is undergoing Phase III clinical trials in the U.S. and Europe.
Moreover, Kureha’s agricultural fungicide, Metconazole, has continued to expand sales in Europe and the U.S.

Next-generation product development
One important example of Kureha’s efforts to cultivate next generation global products is PGA (polyglycolic acid).
Kureha has completed development of breakthrough technology and confirmed intellectual property rights inrelation to PGA, while the PGA Division was newly established as of April 2010. With the strong support of
DuPont, the production plant in the U.S. at DuPont site is to be completed by the end of August, with PGA
products due to be available from the early 2011.
PGA’s characteristics are ideally suited to high-performance packaging and industrial applications. Applications
include PET bottles, where adding a layer of PGA can improve carbon dioxide retention for carbonated soft drinks
and lead to resource savings due to reduced PET usage. Kureha is working to expand the list of PGA applications
and expects the product to become a centerpiece of the company’s strategy of focusing on value-added, highlydifferentiated products.

Earnings performance and outlook
Fiscal 2009 (year ended March 2010) was a challenging year, in which Kureha experienced a 40% year-on-year
decline in consolidated operating income on sales of ¥134.6 billion.
Signs of a recovery based on external demand have emerged, but the macro-economic environment remains
challenging due to consumer spending constraints, deteriorating employment conditions and volatile currency
movements. Carbon fiber products along with construction and environmental engineering businesses sufferedduring FY2009, while the specialty chemicals and specialty plastics divisions performed steadily.
For fiscal 2010 Kureha forecasts operating income of ¥6.0 billion, up 5.2% year-on-year on ¥140.0 billion sales.
Kureha expects the advanced materials division and specialty plastics division to record a gradual improvement inresults. In addition, the PGA business is set to begin contributing to earnings from the latter part of this fiscal year.
Positioned as the centerpiece of Kureha’s strategy of focusing on value-added and highly differentiated products, thehope is that PGA and lithium-ion batteries become a future driver of the Company’s growth.
Despite the current slowdown, the business scenario envisaged in our mid-term business plan remains intact. We
continue to have full confidence our strategy and we will strive to realize our responsibilities to stakeholders andmeet customer needs.
We look forward to your continued support.
July 2010

Takao Iwasaki
President & Chief Executive Officer

3

The Year’s Highlights
Production of food packaging film
begins at Vietnam plantKureha provides food producers with films utilizing resins resistantto oxygen and moisture permeation. Polyvinylidene chloride film
developed by Kureha is widely used as a packaging film for fish-basedsausages in Japan and for meat sausages elsewhere in Asia. In Europe, Kureha
has a production facility in the Netherlands that supplies heat-shrinkable multilayer films with exceptional barrier properties for use as packaging films forcheese, meat and other products. These products contribute to the effective
distribution and preservation of food by maintaining taste and safety standards.
In 2007 Kureha began constructionof a packaging film production plantin Vietnam, in anticipation of demand
growth in South East Asia and Oceania.
This plant began operations in summer
2009. During the fiscal year ending
March 2011 all film
production operations willbe transferred from Japan toVietnam, which will in turnsupply highly competitive
products to Japan and otherparts of Asia.

PGA (polyglycolic acid) resin plant
to be completed in August 2010

K

4

ureha announced its plans to commercialize PGA (polyglycolicacid) resin in December 2007 and established Kureha PGA LLC in
West Virginia, U.S. in January 2008 for the production of this highperformance polymer. A ground-breaking ceremony was held in April 2008 for
the PGA production facility being built on the premise of DuPont’s Belle Plant
in West Virginia. The plant construction is scheduled to complete in August
2010, with commercial production targeted for early 2011.
Kureha’s PGA resins Kuredux™ and Kuresurge™ feature excellent gas barrier
properties (resistance to oxygen and carbon dioxide gas permeation), controllablehydrolysis (dissolvable in contact with water), and high mechanical strength.
One promising application is for use in PET (polyethylene terephthalate)bottles for carbonated drinks. A multilayer PET bottle incorporating Kuredux™
barrier layer can well retain carbon dioxide while using a reduced amount of
PET for the bottle, thus cutting down petroleum comsumption. PGA can also
help lessen the environmental load in a variety ofother ways, such as using it in combination withpolylactic acid to make compostable food packages
or in applications to efficiently recover cruide oilfrom oil fields. The medical-grade Kuresurge™ istargeted for use in surgical sutures, which can benatually absorbed in the body and lessen the burden
on patients by making suture removal unnecessary.
The superior performance of Kureha’s PGA resin isdriving market development around the world witha wide range of applications including packaging,industrial applications and medical uses.

Progress towards
global expansion of KremezinKremezin, a treatment for chronic kidney disease, is an oral adsorbent
made of high-purity multiporous spherical activated carbon that helps
to relieve uremic symptoms and delay the commencement of dialysis.
It is currently marketed in Japan, South Korea and Taiwan as an ethical drug
providing active and positive therapy for chronic kidney disease during themaintenance period. Sales have risen with the increase in the number of kidneydisease patients and the widespread acceptance of Kremezin as a treatment.
In U.S. and European markets, Kureha licensed the rights to develop anddistribute Kremezin to Mitsubishi Tanabe Pharma in November 2006. Phase III
clinical trials are currently underway, with sales in the U.S. and Europe expected
to begin in 2013.
In other Asian markets, Kureha licensed development and distribution
rights in the Philippines to Detoxicare Philippines, Inc. in September 2008
and in India to LG Life Sciences India Pvt. Ltd. in February 2009. We expect
Kremezin sales to begin in the Philippines from 2010
and in India from 2013.
Manufacturing capacity for
Kremezin at Kureha’s Iwaki Factory
was expanded in the fiscal year
ended March 2010 in preparation
for the increase in sales.

Improvements to New Krewrap recognizedwith awards in Japan and overseas

Kureha has completed product renewal of New Krewrap,
the household wrapping film manufactured frompolyvinylidene chloride resin, annually since 2004.
This was the seventh consecutive year of improvements. In
2009 the revised packaging was recognized with awards bothin Japan and overseas.
Kureha received a “WorldStar Packaging Award” from theWorld Packaging Organisation (WPO), which recognizes
global leaders in wrapping and packaging technology. We also
received “AsiaStar” awards in the “design” and “product” categories from theAsia Packaging Federation (APF) at the AsiaStar 2009 awards. In Japan, Kureha
received the “Food Wrapping Division Award” at the 2009 Japan Packaging
Contest, a “Good Design Award” and “Good Design Long Life Design Award”
at the Good Design Awards 2009, as well as the “Third Prize” in the Large
Manufacturer and Importer Category of the FY2009 METI Minister Awards
for Best Contributors to Product Safety. Thesehonors are the direct result of our efforts in
response to the valued opinions and feedbackof customers.
Kureha will continue to strive to enhancecustomer satisfaction and make New Krewrap
the best product of its kind.

5

Review of Operations

ADVANCED
MATERIALS
DIVISION

Heat-resistance materials forheat-treatment furnaces

Fortron KPS, used in electrical andelectoronic parts

Major product areas:advanced plastics (PPS resin, PVDF resin), carbon productsA

dvanced materials division sales were down 12% year-on-year to ¥28.4
billion, with the division reporting an operating loss of ¥3.6 billion.
Sales of advanced plastics improved slightly, while carbon fiber products
experienced a sharp decline.

Major Product Areas• PPS resin• PVDF resin• Carbon fiber• Bead-shaped activated carbon• Specialty carbon material

Advanced plastics demand recovering
Sales of advanced plastics were up 8% from ¥11.8 billion to ¥12.8 billion. In
particular, PPS resin registered solid volume growth due to demand recovery
in the electrical, electronics and automotive industries. However, inventory
adjustment from the previous year and the severe operating climate affecting the
U.S. joint venture had a negative impact at the profit level. PVDF experienced
an expansion in sales for use in electrode binders for lithium-ion batteries, but adecline for use in various other industrial applications.

Carbon fiber sales decline

6

38,915–3,645678

4,378

28,42332,42435,12931,578(Millions of yen)

4,258

Outlook: FY2010 divisional sales are forecast to increase by 13% to ¥32.0, while
the operating loss is expected to shrink to ¥1.8 billion from ¥3.6 billion. Kureha
anticipates that PPS resin will experience solid growth on the back of expanding
demand from hybrid cars. PPS resin production at the Iwaki factory is due toreach full capacity during the current fiscal year, while operational capacity at
the U.S. plant is expected to expand as demand recovers. Growth of PVDF resin
sales is also forecast, especially for lithium-ion battery binder applications, withproduction levels expected to reach 90% of capacity. Demand for carbon fibers
is forecast to recover from the second half, with production levels set to reacharound 60%.

Net Sales
Operating Income

3,923

Demand for carbon fiber, for an insulating material in silicon wafers forsemiconductors and solar powered equipment, is yet to recover and higher
depreciation costs also dragged on profits. Sales of carbon products in FY2009
were ¥5.4 billion, down from ¥7.8 billion a year ago. However, demand
for negative electrode materials is expanding and contributing to growth inoperating profits. Additionally, Kureha’s negative electrodes and binders forlithium-ion batteries used in electronic vehicles have been positively evaluatedby automotive companies.

2006 2007 2008 2009 2010

SPECIALTYCHEMICALSDIVISION

Agricultural fungicide(Metconazole)

Therapeutic agent forchronic renal failure (KREMEZIN ®)Major product areas:industrial chemicals, agrochemicals, pharmaceuticals

Major Product Areas• Caustic soda
• Hydrochloric acid
• Liquid chlorine• Sodium hypochlorite• Monochlorobenzene• para-Dichlorobenzene• ortho-Dichlorobenzene• Anti cancer agent• Therapeutic agent for chronic
kidney disease• Agricultural and horticulture
fungicide• Fertilized granulated soils

S

pecialty chemicals division sales were up 6% year-on-year to ¥35.8 billion,
while operating income increased by 15% to ¥6.6 billion in part due tothe strong performance of the pharmaceutical business.

Pharmaceuticals record significant growth
Sales of pharmaceutical products increased from ¥10.1 billion to ¥12.7 billion
in FY2009, with continued sales expansion of Kremezin, a chronic kidneydisease treatment, and Krestin, a cancer immunotherapy treatment. One-off
revenue contribution from a domestic marketing contract also helped boost
profit.

Industrial chemicals slowed
Sales of industrial chemicals declined slightly from ¥10.3 billion to ¥10.2
billion, while operating profit declined. Unit prices of Chlorobenzenes andrelated products declined sharply, despite the sales volume having increased.
Sales volume of caustic soda and other chlorine-based chemicals remained
unchanged from the previous year.

Net Sales
Operating Income
35,831

Agrochemicals suffer from volatile Euro
Sales of agrochemical products were down 7% year-on-year from ¥7.4 billion
to ¥6.9 billion. Metconazole, an agricultural fungicide, saw an increase in sales
volume but profits deteriorated due to the weaker euro and declining license
revenues.

6,619

33,898
5,731

32,522
3,482

3,348

3,493

30,54331,295(Millions of yen)2006 2007 2008 2009 2010

Outlook: FY2010 divisional sales are expected to decline by 8%, from ¥35.8
billion to ¥33.0 billion, with operating income projected to decrease by 37%
to ¥4.2 billion. Further sales growth of Metconazole in overseas market is
expected, with the product continuing to enjoy stable demand in Europe anddue to be utilized in corn cultivation in North America. The sales volume
of both Kremezin and Krestin is expected to increase, although upcoming
pharmaceutical price cuts and the loss of one-off payments for Kremezin will
have a negative impact on results. Demand for industrial chemicals is expected
to remain unchanged.

7

SPECIALTY
PLASTICSDIVISIONNEW Krewrap

Food packaging film Krehalon
application example

NEW Krewrap struggles amid competition

Net Sales
Operating Income

Sales of household products were down by 6% to ¥21.5 billion. Despite productrenewal and improvement efforts, New Krewrap sales and profitability declined
due to increased material costs and severe competition in the market.

43,53842,430
1,948

8

607

Outlook: FY2010 divisional sales are forecast to increase by 6% to reach ¥45.0
billion due to an increase in packaging material sales in China, where PVDC
compound continues to experience strong demand. Divisional operating
income is forecast to expand by 59% from ¥1.9 billion to ¥3.1 billion, due inpart to exceptional factors including reduced pension expenses in Europe forthe period and the removal of PGA-related costs. The strategy of providing highvalue-added products continues, as does price optimization efforts for consumer
products such as New Krewrap and the Kichinto-San series.

1,655

The timely launch of new Seaguar series products succeeded in boosting sales by
27%, from ¥1.0 billion to ¥1.3 billion.

45,262

Fishing line sales grow(Millions of yen)
48,765

Sales of food packaging materials were up by 8% to ¥10.8 billion thanks togrowth of PVDC compound in China as a result of increased demand from
Chinese sausage manufacturers. The steady growth in sales of multi-layer
shrinkable film for meat and cheese packaging in Europe also supported theimproved results, while PVDC compound profitability also improved.

3,358

Packaging materials business improves• PVDC film
• PVDC compound• Multilayer shrinkable film
• Multilayer non-shrinkable film
• Multilayer bottle• High barrier lamination film
• Household wrapping film
• Kitchen sink use garbage bags
• Plastic containers• PVDF fishing lines• Machinery for auto-seal foodpackaging

48,399S

pecialty plastics division sales declined by 3% year-on-year to ¥42.4
billion, while operating income increased by 18% to ¥1.9 billion. Salesof packaging materials and fishing line products were up, but householdproducts dropped due to the severe competitive environment.

Major Product Areas

2,212

Major product areas:
food packaging materials, household products, fishing lines

2006 2007 2008 2009 2010

OTHEROPERATIONSDIVISION

Transport andwarehousing-related businesses

Construction-related
businesses

Industrial waste treatment-related businesses

Major Product Areas• Environmental engineeringand industrial waste treatment
businesses• Industrial facility design,
construction and managementbusinesses• Civil engineering andconstruction contracting
businesses• Transport and warehousingbusinesses

Major product areas:
environmental engineering, construction and transport/warehousing-related
businessesOther operations division sales declined by 18% year-on-year to ¥27.9
billion, with operating income down by 34% to ¥1.4 billion, mainly
due to the economic slowdown. Competition in the environmental
engineering and construction related sectors also intensified.

Environmental engineering sales decline
Environmental engineering sales were down 23% to ¥5.0 billion due to the
combination of intensifying competition and decreased levels of industrial waste
due to the sluggish economic environment.

Construction related earnings deteriorate
Sales at construction-related businesses dropped 18% to ¥28.5 billion; having
also faced increased competition and the lack of a large-scale plant construction
project as in the previous year.

Net Sales
Operating Income

Logistics and warehousing businesses largely unchanged

33,881

Logistics and warehousing business sales declined by 13% to ¥10.8 billion, witha fall in logistics business activity and intensified competition.

27,921

29,57427,49232,185(Millions of yen)

1,379

2,104

1,620

2,289

2,100

Outlook: FY2010 divisional sales are projected to increase by 7% to ¥30.0,
although operating income is expected to decline by 35% to ¥0.9 billion.
Environmental engineering sales are forecast to grow by 31% through efforts
to expand the business in the Kanto and Western region of Japan with the
opening of new plant in Kanagawa this April. Revenues at construction-related
businesses are expected to fall as a result of reduced investment, mainly atengineering-related businesses.

2006 2007 2008 2009 20109

Research & Development

Research Center

Biomedical Research Laboratories

Polymer Processing & Products
Research Labratories

Kureha Corporation conducts research and development (R&D) for the Kureha Group. The R&D
headquarters designates priority research areas by indentifying fields with a high degree of social value, suchas environment, resources and health, and in which Kureha is able to leverage its technological strengths.
Kureha’s R&D efforts are operated in a manner that ensures efficiency, speed and maximizes business profitability.
Kureha currently has three R&D facilities, the Research Center, Biomedical Research Laboratories, and Polymer
Processing & Products Research Laboratories. These facilities, together with the Process Development Division,
employ approximately 300 staff members who conduct basic and exploratory research, and research on priority
themes for timely commercialization. They also conduct research in conjunction with specific business divisions or
manufacturing divisions in affiliated companies to improve product quality and enhance productivity.
Kureha’s commitment to R&D is evident by the Company spending ¥6,240 million on R&D activities in thefiscal year ended March 31, 2010.

1. ADVANCED MATERIALS DIVISION <R&D spending amounted to ¥1,787 million>
In engineering plastics, Kureha is studying ways to improve quality, lower costs and enhance productivity of Fortron
KPS, which is widely used in automobiles and electronic devices, in order to secure a competitive advantage andexpand the market. For PVDF (polyvinylidene fluoride) resin, which is used as a binder in lithium-ion batteries,
Kureha is continuing to develop high-performance grades that will allow us to maintain and expand market share.
Kureha is vigorously working to develop applications for PGA as efforts continue toward commercialization
during fiscal 2010. For use in multilayer bottles for carbonated beverages, where PGA provides excellent gas barrier
and biodegradable properties, we are conducting final market assessments with bottle manufacturers and beveragecompanies in Japan and overseas. Kureha is also undergoing evaluation of PGA for surgical suture applications
leveraging the material’s biodegradability and strength. In addition, we are working in cooperation the New Business
Promotion Division (currently the PGA Business Division) to broaden the range of applications for PGA by utilizing
its varied characteristics.
In carbon materials, Kureha is providing R&D support to ensure competitiveness in negative-electrode materials
for the large-scale lithium ion batteries, which are currently a focus of intense development efforts by automakers.

2. SPECIALTY CHEMICALS DIVISION <R&D spending amounted to ¥3,372 million>
For Kremezin, a therapeutic agent for chronic kidney disease (CKD), Kureha is conducting research to support
market expansion. This includes collecting evidence of the drug’s efficacy for disorders related to CKD, such asarteriosclerosis and other cardiovascular diseases, an area that has been a focus of recent attention. Phase III clinical
trials are being conducted in Europe and North America in collaboration with other companies.
In agrochemicals, Kureha is working to expand applications and markets, both in Japan and overseas, for the
agricultural fungicide Metconazole and the seed treatment fungicide Ipconazole. We are further researching ways toimprove yields and increase production of Metconazole to meet robust demand. We also provide support for the
expansion of production facilities.

3. SPECIALTY PLASTICS DIVISION <R&D spending amounted to ¥1,080 million>
For Krehalon (polyvinylidene chloride resin), Kureha provides technical support to ensure stable production andimprove quality at its production facility in Vietnam. We also provide technical support to customers both in Japanand overseas.
For the high gas barrier lamination material Besela, Kureha is conducting market analysis aimed at expansion in
Japan and overseas. We are also researching ways to enhance productivity to maintain our competitive advantage.

10

Responsible Care

Kureha General Hospital

Disaster drill

Kureha was an inaugural member of the Japan Responsible
Care Council and stated its commitment to implementing
Responsible Care in April, 1995. As a global corporate citizen,
Kureha takes its commitments to society very seriously, for example
including in areas such as the environment and health and safety.

Responsible Care implementation
Together, all Kureha group companies have established the All
Kureha Responsible Care Committee. Through this committee, thecompany is working to enhance its efforts in various fields, including
environmental protection, security and disaster response, labor safety
and hygiene, product safety and quality assurance, logistics safety,
energy conservation, and community relations.
Kureha has obtained ISO 14001, the international standard
for environmental management, as well as ISO 9001 for productquality management and OHSAS 18001 for labor safety and hygiene
management. The Company is further enhancing efforts aimed at
improving responsible care activities through a “plan, do, check, act”
activity cycle.

We will comply
with international
policies andregulations
We will consider
the global
environmentand operatesafelyRC
PolicyWe will manage
and utilize
environmental
and safety
information

We will provide
safe products
to society

We will establish
better relations
with society

Reducing the burden on the environment
Since its establishment, Kureha has developed technologies and products with a view to reducing the burden on theenvironment. In the case of the Iwaki Factory, Kureha seeks to create a manufacturing facility that minimizes stresson the environment by implementing measures such as air and water pollution prevention, reduction of chemicalmaterial and industrial waste, odor control, and adoption of the Energy Consumption Index.

116

125

135

133

79

Disaster prevention
Safety and disaster prevention are among the most important responsibilities ofa manufacturing factory. In order to respond to the trust the community placesin the company, Kureha manages its facilities and operations in strict compliancewith the relevant laws. In addition, the company implements a safety anddisaster prevention program which includes its own voluntary control criteria,
activities and training.

69
67

68

Contributing to the community
66

145

CO2 Production(Thousands of tonnes)
Specific Energy Consumption
Efficiency and Usage Method
at the Iwaki Factory

In addition to Kureha General Hospital being used as a community medical
facility in the southern part of Iwaki City, Kureha contributes to the local
community in a variety of different ways. These include opening company
sports facilities for public use, volunteering for clean up activities, offeringscience classes at elementary schools and holding community meetings to initiate
dialogue with local neighborhood associations.

2006 2007 2008 2009 2010
*Data revised from previous year.

11

Corporate GovernanceMaximizing the corporate value of all group companies is a fundamental policy of Kureha. In order toachieve this goal, Kureha is working to enhance governance and other internal control functions, guarantee
business transparency and fair disclosure of information, and to implement Responsible Care policies.

Compliance program framework
Kureha has in place a compliance program framework, based on the Kureha Group Ethical Charter and its
Compliance Rules. Kureha’s compliance objective is to ensure that all executives and employees act in a manner thatis consistent with legal compliance and that also meets the standards of our society. This framework is constantly
being improved and reinforced so as to cultivate a compliance-focused corporate culture.
The Compliance Committee, led by the President & Chief Executive Officer (CEO), keeps employees informedof compliance issues through training programs and other activities based on the Compliance Handbook andthe Compliance Standards. In addition, direct access to internal and external (lawyers) advisers for inquiries andreporting on compliance issues is maintained so that legal violations, confirmed or suspected, can be detected anddeterred at an early stage.

Management, execution and decision-making framework
1. Supervisory and executive responsibilities are clearly distinguished to strengthen corporate governance andaccelerate managerial decision-making and execution.
The Board of Directors is 10 directors (including 2 external directors). The Board, presided over by the
President & CEO, meets once a month in principle, to make decisions on important administrative matters andpursue supervision.
The Executive Committee, chaired by the President & CEO and comprised of executive officers appointed
by the President & CEO, meets twice a month in principle. The committee considers mid- and long-term
management strategy and basic policies that cover all aspects of general management, and passes resolutions andimplements these policies.
To clarify responsibilities for fiscal year results, a one-year term was established for directors and executive
officers.
The Consolidated Executive Committee, chaired by the President & CEO, serves as a forum to exchange viewson basic management policies and other matters relating to the Kureha Group, thereby reinforcing the efforts ofthe consolidated management team.
2. A total of four corporate four auditors (including two external auditors) undertake auditing activities. This group
works within a framework that allows them to monitor the deliberation processes of board resolutions and reports,
as well as have a representative corporate auditor attend and monitor meetings of the Executive Committee. In
addition, auditors are able to access documentation including all documents requiring senior approval, results ofinternal audits, and documentation on the status of customer inquiries.
Corporate auditors interact with according and internal control functions, for example to exchange opinions
on audit planning and progress.
In addition, an Internal Control and Auditing Department acts independently of other departments and under
direct management and supervision of the President & CEO. Based on an annual internal audit plan approvedby the Board of Directors, this department assesses the suitability and effectiveness of internal management
control systems including compliance and risk management. It then proposes necessary or desired changes andimprovements, so as to enhance both management efficiency and public trust in Kureha.

Internal control system
To further strengthen its internal control system, Kureha has established a set of basic policies, committees andinternal rules to ensure that it observes laws and regulations and conducts its business operations in an appropriate
and fair manner.
Under this system, Kureha publishes Internal Control Reports under the responsibility of the President & CEO.
In addition, Kureha has also established a set of Basic Rules for Internal Control of Financial Reports to ensure
the reliability of the financial reports and to guarantee implementation of management’s assessment and certified
public accountant’s auditing of the effectiveness of internal control of financial reports, as stipulated in the Financial
Instruments and Exchange Law.

12

Diagram of Internal Control Systems
General Meeting of Shareholders
Appoints

Appoints

Board of Directors(Ten members, including
two external members)

LiaiseAudit

LiaiseAppoints

Board of Corporate Auditors(Four members, including
two external members)
LiaisePresident &Chief Executive Officer

Independent
AuditorCompliance Committee
Antitrust Committee
Trade Control (Export/Import) Committee
Labeling and Trade Promotions Committee
Personal Information Protection Committee

Executive
Committee

Internal Control and
Auditing Department
Audit

Responsible Care Committee

All division ofKureha Corporation

Audit
Audit

Information Management
Committee
Information Disclosure Committee
Information Security Committee

Kureha Group companies

Risk Management Committee

Internal Control ofFinancial Reporting Committee*

Risk management system
To enable the Company to recognize and minimize the risks it is exposed to during business activities, Kureha hasestablished a Risk Management Committee. The committee proposes concrete measures to the President & Chief
Executive Officer aimed at reducing and avoiding risk and manages the implementation of such measures. In
addition, to respond to unforeseen circumstances, a system is in place for the establishment of an emergency responsetask force, with the objective of prioritizing the safety of personnel, minimizing economic damage, and ensuring thecontinuation of corporate activities.
Kureha has also established an Information Management Committee to identify a clear set of information
management rules and promote procedures for the appropriate control of Company information. Suitable measures
are also being taken for the management of information security and disclosure.
To address environmental and safety risks, management procedures for the environment, quality, and labor safety
have been established that comply with ISO 14001, ISO 9001, and OHSAS 18001 standards. In addition, Kureha iscontinuing with ongoing efforts to improve environmental conservation, quality assurance, and occupational healthand safety.

13

Consolidated Five-Year Summary
KUREHA CORPORATION and Consolidated Subsidiaries
Years ended March 31, 2010, 2009, 2008, 2007 and 2006

Thousands of
U.S. dollars

Millions of yen

For the year:
Net sales:
Domestic
Overseas
Net sales by segment:
Advanced materials
Specialty chemicals
Specialty plastics
Other operations
Operating income
Advanced materials
Specialty chemicals
Specialty plastics
Other operations
Elimination or corporate
Net income
Capital expenditure
Depreciation
R&D expenses
Advanced materials
Specialty chemicals
Specialty plastics
Other operations

2010

2009

2008

2007

2006

¥134,606
107,740
26,866¥143,741
116,182
27,559¥149,776
116,666
33,110¥146,256
116,50329,753¥135,627 $1,446,754
107,584
1,157,996
28,043
288,757

28,42335,83142,43027,921
5,706(3,645)
6,619
1,948
1,379
(595)
1,571
16,943
11,126
6,240
1,787
3,372
1,080
—
15,847(17,682)
1,999

32,42433,89843,53833,881
9,456
678
5,732
1,655
2,104
(713)
3,373
17,82910,304
6,085
1,960
2,956
1,125
45
11,420(20,518)
10,70538,91532,522
48,76529,574
12,722
4,378
3,482
3,358
1,620
(116)
6,097
10,085
10,148
6,543
1,578
3,288
1,658
20
14,996(8,584)(4,758)35,12930,543
48,39932,185
11,841
4,259
3,348
2,213
2,289
(268)
5,832
10,678
9,115
6,865
1,583
3,467
1,805
10
13,949(11,987)(4,835)¥184,623
96,82247,969¥182,224
97,07544,033¥187,349
104,582
32,040¥196,107
107,349
32,470Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities

Year-end:
Total assets
Net assets
Interest-bearing debt

31,57831,29545,262
27,492
9,708
3,923
3,493
607
2,100
(416)
5,172
11,984
7,899
7,406
1,507
4,134
1,749
17
11,308(9,648)(1,089)¥8.77
538.1010¥

18.75
533.45
10¥33.39
572.2410

305,492
385,113456,040
300,096
61,328(39,176)
71,141
20,937
14,821(6,395)
16,885
182,104
119,582
67,067
19,20636,242
11,607—
170,324(190,047)
21,485¥185,203 $1,984,340
99,5881,040,649
35,383
515,573

Yen

Amounts per share:
Net income – basic
Net assets
Cash dividends

2010

U.S. dollars

¥

31.58
578.0910¥27.61 $
535.26
9

0.09
5.78
0.10

Percent

Ratios:Operating income to net sales
Net income to net sales
Return on equity
Return on assets
Equity ratio

4.2%
1.2
1.6
3.0
52.2

6.6%
2.3
3.4
4.7
52.4

8.5%
4.1
5.8
6.6
55.2

8.1%
4.0
5.7
6.1
54.2

7.2%
3.8
5.4
5.1
53.1

Notes: 1. For convenience only, U.S. dollar amounts have been translated from Japanese yen at the rate of ¥93.04 to US$1, the rate of exchange prevailing on the Tokyo Foreign
Exchange Market on March 31, 2010.
2. For amounts per share, see Note 20 of the Notes on Consolidated Financial Statements.

14

Management Discussion and Analysis

134,606

143,741

149,776

146,256

135,627(Millions of yen)

11,841(%)

12,722

Operating Income to
Net Sales

9,456
5,706

8.5

8.1

4.2

6.6

2006 2007 2008 2009 2010

Net Income(Millions of yen)

Net Income to Net Sales

1,571

3,373

6,097
4.1

4.0

5,832

(%)

1.2

The balance of cash and cash equivalents (“cash”) at the end of the subject fiscal
year (March 31, 2010) amounted to ¥7.2 billion, down ¥51 million from theend of the previous fiscal year (March 31, 2009).
An outline of individual cash flows and the main factors affecting each is asfollows.

Operating Income

2.3

Cash flows

Domestic
Overseas

9,708

Sales for the fiscal year declined ¥9.1 billion year-on-year to ¥134.6 billion, due
to sharp declines in revenue in the Advanced Materials and Other Operations
divisions. Gross profit declined ¥4.6 billion to ¥34 billion, while the gross profit
margin fell from 26.8% in the previous fiscal year to 25.2%. The principal
decline in sales was in the Other Operations Division, while the principal
decline in gross profit was in the Advanced Materials Division. A substantial
portion of the decrease in sales in the Advanced Materials Division was theresult of the change in status of Kakogawa Plastics Co., Ltd. from consolidated
subsidiary to equity-method affiliate from the second quarter of the subject
fiscal year. Rather than resulting from the decline in sales, the decrease in grossprofit was mainly due to a one-time event: the simultaneous occurrence of the
beginning of amortization for capacity expansion efforts and a rise in the cost
rate of pre-product inventory from the previous fiscal year stemming from anacute fall in capacity utilization in the second half.
Sales and general administrative expenses totaled ¥28.3 billion, down
¥840 million from the previous year. This was due mainly to efforts to trim
costs in response to the difficult business conditions during the subject fiscal
year, despite an increase in development expenditure aimed at growing future
markets. Operating income declined ¥3.8 billion from the previous fiscal year to¥5.7 billion, while the operating income margin fell to 4.2%, from 6.6% a year
earlier.
Non-operating profit/loss - total non-operating income less non-operating
expenses –amounted to a non-operating loss of ¥207 million, a decrease of ¥598
million from the previous fiscal year. This was due mainly to reduced bondissuance expenses and foreign exchange losses. Extraordinary gain/loss improved
due to a reduction in losses on valuation of investments in securities, though tax
expenditure increased as a result of the sale of shares in affiliated companies. As
a result, net income for the subject fiscal year declined 53.4% to ¥1.6 billion.
Looking ahead, Kureha will continue to invest in facilities and R&D in linewith its proactive investment program. We also recognize that deep cuts in nonessential expenses will be necessary to achieve the “Grow Globally” mediumterm business plan.

2006 2007 2008 2009 2010

7.2

Analysis of business results(Millions of yen)

5,172

T

he Japanese economy showed signs of a recovery in exports during
the fiscal year ended March 2010, due mainly to public spending andeconomic stimulus measures by countries around the world. Economic
growth in China and other newly emerging markets also contributed to thistrend. However, the private sector maintained curbs on capital expenditure,
while consumer spending, with the exception of certain areas boosted bygovernment policy measures, failed demonstrate an overall recovery.
In the chemicals industry, difficult conditions remained. Despite positive
factors such as an increase in exports to China and other parts of Asia, recovery
in demand for products used in automobiles, electronics and other appliances,
and a rise in capacity utilization rates, downward pressure on prices persisted.
This was largely the result of general sluggishness of internal demand, alongwith the continued high value of the yen in foreign exchange markets.

Net Sales

3.8

Business environment

2006 2007 2008 2009 201015

Cash flow from operating activities

Cash Flows fromOperating Activities
Cash Flows from
Investing Activities

Net cash provided by operating activities amounted to ¥15.8 billion, an increaseof ¥4.4 billion from the previous fiscal year. This was due mainly to an increase
in inventories and decrease in income taxes paid.

15,847

11,42014,996(20,518)(17,682)(8,584)

13,94911,3082006 2007 2008 2009 2010

Total Assets

184,623

182,224(Millions of yen)
187,349

The Kureha Group procures needed capital by borrowing from financial
institutions and issuing bonds. Kureha has also introduced a cash management
system for the corporate group with the aim of effective utilization of capitaland reduced financing expenses.
Kureha ensures capital liquidity by retaining cash and cash equivalents andby concluding commitment line agreements with financial institutions.

(11,987)

Net cash provided by financing activities amounted to ¥2.0 billion, a decreaseof ¥8.7 billion from the previous fiscal year. The decline was primarily the resultof lacking proceeds from corporate bonds proceeds, as had been the case in theprevious year.

196,107

Cash flow from financing activities(9,648)Net cash used in investment activities amounted to ¥17.7 billion, a decreaseof ¥2.8 billion from the previous fiscal year. This was due mainly to decreased
expenditure for purchases of investment securities and payment for investment
in interests, as well as increased proceeds from the sale of investment securities
and the sale of shares in an affiliated company.

185,203

Cash flow from investment activities(Millions of yen)

Balance sheet analysis

16

2006 2007 2008 2009 2010

Net Assets(Millions of yen)

97,07596,822

52.4

52.2

104,582

54.2

55.2

99,588(%)

107,349

Equity Ratio

53.1

Total assets at March 31, 2010, amounted to ¥184.6 billion, an increase of¥2.4 billion from the end of the previous fiscal year. Current assets totaled¥65.6 billion, down ¥3.0 billion from a year earlier. Although the increase inreceivables stemming from sales growth in the fourth quarter exceeded thedecrease resulting from a decline in construction-related sales, this was surpassedby the decrease in inventories. Property and equipment totaled ¥81.8 billion, up¥4.4 billion from a year earlier, due mainly to a high level of capital expenditure
including in overseas production facilities, which exceeded the increase indepreciation. Investment and other assets totaled ¥37.3 billion, up ¥990
million, due mainly to a recovery in the market value of investment securities
from the end of the previous fiscal year, along with an increase in shares ofaffiliates and a decrease in investments resulting from changes in the scope of
consolidation.
Total liabilities at the end of the fiscal year amounted to ¥87.8 billion, an
increase of ¥2.7 billion from the end of the previous fiscal year. Interest-bearing
debt increased by ¥3.9 billion from a year earlier to ¥48.0 billion, due mainly
to an increase in long-term debt, along with a decline in short-term borrowings.
Deferred tax liabilities increased due to decreases in construction-related
accounts payable and the market valuation of securities investments.
Total net assets for the subject fiscal year amounted to ¥96.8 billion, adecline of ¥253 million from the previous fiscal year. This was due mainly toa ¥280 million decrease in earned surplus following a dividend payout fromretained earnings on net income of ¥1.6 billion, along with an increase inunrealized gains on other securities and a decline in minority interests following
a change in the scope of consolidation.
The changes in total assets were due mainly to contraction of inventories in
response to the economic slowdown, along with additional capital procurement
and other forms for business development related to capital investments inJapan and overseas, and the launch of operations at certain facilities.

2006 2007 2008 2009 2010

Return on Assets
Return on Equity

Overview of capital expenditures

6.6
6.1

1.6

3.4

3.0

4.7

5.8

5.7

5.4

2006 2007 2008 2009 2010

Interest-Bearing Debt

Business risks

32,04044,03347,969(Millions of yen)

32,470The Advanced Materials Division invested ¥10.3 billion, mainly for
PPS (polyphenylene sulfide) resin production facilities (Kureha); PVDF
(polyvinylidene fluoride) resin production facilities (Kureha); carbon productmanufacturing facilities (Kureha and Kureha Chemicals Shanghai Co., Ltd.);
and PGA (polyglycolic acid) resin production facilities (Kureha PGA LLC).
The Specialty Chemicals Division invested ¥1.6 billion, mainly on
production facilities for chlorine and caustic soda.
The Specialty Plastics Division invested ¥3.0 billion, primarily for
manufacturing facilities for food packaging materials (Kureha, Kureha Plastics
Co., Ltd. and Kureha Vietnam Co., Ltd.).
The Other Operations Division invested ¥2.0 billion, mainly on industrial
waste processing facilities (Kureha Ecology Management Co., Ltd.).
In addition, as a joint initiative, the Advanced Materials, Specialty
Chemicals, and Specialty Plastics divisions completed further investments insuch areas as environmental conservation projects, and electric transmission
plant facilities.
Capital required for these investments was funded by cash-at-hand andborrowings.

5.1

Capital expenditure by business division:(%)

35,383

Kureha’s core businesses are advanced materials, packaging materials,
pharmaceuticals and agrochemicals, and environment-related businesses, andas such the Company actively invests in these areas. Total capital expendituresduring the fiscal year ended March 31, 2010, amounted to ¥16.9 billion.

Factors with a potential impact on the Kureha Group’s business performance,
share price, and financial position, include the following. Forward-looking
statements are based on assessments made as of the date of submission of theCompany’s annual securities filing (June 25, 2010).

Factors affecting business results2006 2007 2008 2009 2010

Capital Expenditure
Depreciation(Millions of yen)

16,943
11,126

10,304

10,085
10,148

11,984
7,899

The Kureha Group has established the “Kureha Group Ethical Charter,”“Compliance Rules” and “Compliance Standards,” and strives to ensure that
the Company strictly complies with all laws, regulations and societal norms.
However, there is a risk that the Company’s domestic or overseas businesses
could be the target of lawsuits or administrative measures. Should a major
lawsuit or other action be taken against the Company, it could have an impact
on the Kureha Group’s business performance and financial position.
On November 9, 2009, Kureha was ordered to pay approximately ¥270
million in fines for violation of the Anti-Monopoly Law related to Kureha’s
plastic additives business. Despite differences between the conclusion of theJapan Fair Trade Commission reflected in this ruling and Kureha’s opinion,
including regarding the facts of the case, in consideration of the time, expenseand other factors necessary to make an appeal, the Company decided not toappeal the ruling, and to pay the fine.

17,829Other risks

10,678
9,115

Potential risks for Kureha in conducting its business operations include domestic
and international economic trends; shifts in market prices for products;
fluctuations in prices for naphtha, coal and other raw materials; unforeseen
quality issues; drug price revisions under Japan’s medical insurance system;
country risks for overseas businesses; and exchange rate fluctuations; damage to
production facilities as a result of natural disaster or accident; and fluctuationsin the market price of investment securities.

2006 2007 2008 2009 201017

Consolidated Balance Sheets
Kureha Corporation and its Consolidated Subsidiaries
As of March 31, 2010 and 2009

Thousands of
U.S. dollars(Note 2)Millions of yen

2010

2009

2010

ASSETS
Current assets:
Cash and time deposits (Note 5)
Trade notes and accounts receivable
Marketable securities (Note 8)Inventories (Note 6)
Deferred tax assets (Note 13)
OthersLess: Allowance for doubtful accounts
Total current assets¥ 7,213
31,837—
20,747
2,356
3,528
(112)
65,571¥ 7,265
30,137
6
25,741
2,415
3,183
(154)
68,592$Property and equipment, net (Note 10):
Buildings and structures
Machinery, equipment and vehicles
Land
Construction in progress
OthersTotal property and equipment

28,41324,713
13,04813,642
1,976
81,79426,93025,113
13,237
10,0602,023
77,364

305,384
265,616140,240
146,625
21,238879,127

Investment and other assets:
Investments in securities (Notes 8 & 10)
Long-term receivables
Deferred tax assets (Note 13)
OthersLess: Allowance for doubtful accounts
Total investments and other assets

27,782
2,027
1,314
6,560
(428)
37,257

26,448
2,092
1,543
6,678
(495)
36,308298,60221,786
14,12270,507(4,600)400,440¥184,623¥182,224$1,984,340

Total assets
The accompanying notes are an integral part of these statements.

18

77,525342,186—
222,990
25,322
37,919(1,203)704,761

Thousands of
U.S. dollars(Note 2)Millions of yen

2009

2010

2010

LIABILITIES AND NET ASSETS
Current liabilities:
Trade notes and accounts payable (Note 10)¥ 16,833¥ 18,229$ 180,922

Short-term loans including current portion of
long-term debt (Notes 9 & 10)

14,80917,353

159,168

5,430
1,740
4,990
2,172
2,456
48,433

5,512
1,216
5,047
2,288
2,790
52,43658,361
18,701
53,632
23,344
26,397
520,561

33,1603,518
1,231

26,6802,676
2,048

356,405
37,811
13,230

361

433

3,880

173
923
39,36787,801—876
32,71485,1501,859
9,920
423,119
943,690

12,46012,460133,920

9,948
72,500(1,253)93,655

10,01472,780(1,265)93,988106,921779,234(13,467)
1,006,610

4,990—(2,225)
2,764
54
347
96,822¥184,623

3,757(5)(2,165)
1,587
47
1,452
97,075¥182,224

53,632—(23,914)29,707580
3,729
1,040,649$1,984,340

Other payables
Accrued income taxes (Note 13)
Accrued expenses
Accrued bonuses
OthersTotal current liabilities
Long-term liabilities:
Long-term debt (Notes 9 & 10)
Deferred tax liabilities (Note 13)
Reserve for employees’ retirement benefits (Note 12)
Retirement allowance for directors and corporate
auditors
Reserve for environmental measures
OthersTotal long-term liabilities
Total liabilities
Commitments and contingent liabilities (Note 14)
Net assets:
Shareholders’ equity (Note 15):
Capital, non par value
Authorized: 2010 and 2009 – 600,000,000 shares
Issued: 181,683,909 shares in 2010 and 2009
Capital surplus
Earned surplus
Less: Treasury stock, at cost
Total shareholders’ equity
Valuation and translation adjustments:
Unrealized gain on other securities (Note 8)
Deferred losses on hedges
Translation adjustments
Total valuation and translation adjustments
Stock subscription rights
Minority interests
Total net assets
Total liabilities and net assets

19Consolidated Statements of Income
Kureha Corporation and its Consolidated Subsidiaries
For the years ended March 31, 2010 and 2009

Thousands of
U.S. dollars(Note 2)Millions of yen

2010¥134,606
100,648
33,9582009¥143,741
105,194
38,5472010$1,446,754
1,081,771
364,982

Selling, general and administrative expenses (Note 18)
Operating income

28,251
5,706

29,091
9,456

303,643
61,328Other income (expenses):
Interest and dividend income
Interest expenses
Gain on sales of property and equipment (Note 19)
Gain on sales of investments in securities (Note 8)
Compensation for transfer of property
Loss on disposal of property and equipment (Note 19)
Loss on impairment of property and equipment (Note 20)
Loss on valuation of investments in securities
Loss on business withdrawal
Provision for environmental measures
Loss on valuation of inventories
Other, net
Other expenses – net

659
(749)
96
205
379
(1,546)
(119)
—
(581)
(173)
—
(413)
(2,241)

748
(733)
76
13
—
(660)
(479)
(627)
—
(870)
(914)
(3,446)

7,082(8,050)
1,031
2,203
4,073
(16,616)(1,279)—(6,244)(1,859)—(4,438)(24,086)

Income before income taxes and minority interests

3,465

6,010

37,242

Income taxes (Note 13):
Current
Deferred
Total income taxes

1,721
258
1,979

2,353
366
2,720

18,497
2,773
21,270(85)¥ 1,571(83)¥ 3,373

Net sales
Cost of sales
Gross profit

Minority interests
Net income
The accompanying notes are an integral part of these statements.

20

—

$

(913)
16,885

Consolidated Statements of Changes in Net Assets
Kureha Corporation and its Consolidated Subsidiaries
For the year ended March 31, 2010

Number ofcommon stock

BALANCE-MARCH 31, 2009
181,683,909
Dividends from surplus
Net income
Acquisition of treasury stock
Disposal of treasury stockDecrease resulting from the change in scope of
consolidation
Contribution to employees’ welfare fund
Offset against deficit
Net changes of items other than shareholders’ equity—
BALANCE-MARCH 31, 2010
181,683,909
Unrealized gainon othersecurities

BALANCE-MARCH 31, 2009
Dividends from surplus
Net income
Acquisition of treasury stock
Disposal of treasury stock
Decrease resulting from the change in scope of
consolidation
Contribution to employees’ welfare fund
Offset against deficit
Net changes of items other than shareholders’ equity
BALANCE-MARCH 31, 2010

BALANCE-MARCH 31, 2009
Dividends from surplus
Net income
Acquisition of treasury stock
Disposal of treasury stock
Decrease resulting from the change in scope of
consolidation
Contribution to employees’ welfare fund
Offset against deficit
Net changes of items other than shareholders’ equity
BALANCE-MARCH 31, 2010

Millions of yen
Shareholders’ equity
TreasuryTotalstock,
shareholders’at costequityCapitalCapitalsurplus

Earnedsurplus¥12,460¥10,013¥72,779(1,791)
1,571

1

—

—
¥12,460¥(1,265)
(6)
17

(124)

(124)

(66)

(1)
66

(1)
—

¥ 9,948¥72,500

Valuation and translation adjustments
Stock
Deferred
Total valuation
lossesTranslation and translation subscription
rightson hedges
adjustments adjustments¥3,756¥  (5)¥93,988(1,791)
1,571
(6)
19

¥(2,165)¥1,586¥47¥(1,253)¥93,655

Minority
interests

Total net
assets¥1,452¥97,074(1,791)
1,571
(6)
19
(124)

1,233
¥4,9905¥—(60)¥(2,225)

1,178¥2,764

7¥54

Thousands of U.S. dollars (Note 2)
Shareholders’ equity
TreasuryTotalstock,
shareholders’at costequityCapitalCapitalsurplus

Earnedsurplus$133,920$107,620$782,233(19,249)
16,885

10——$133,920(1,105)¥  347(1)—
80¥96,822$(13,596)(64)
182$1,010,189(19,249)
16,885(64)
204(1,332)(1,332)

(709)

(10)
709

(10)

$106,921$779,234$(13,467)$1,006,610

Valuation and translation adjustments

Unrealized
gain on othersecurities

BALANCE-MARCH 31, 2009
Dividends from surplus
Net income
Acquisition of treasury stock
Disposal of treasury stock
Decrease resulting from the change in scope of
consolidation
Contribution to employees’ welfare fund
Offset against deficit
Net changes of items other than shareholders’ equity
BALANCE-MARCH 31, 2010
The accompanying notes are an integral part of these statements.

$40,369

Deferred
losseson hedges

Total valuation
Translation and translation
adjustments adjustments$(53) $(23,269)$17,046

Stocksubscription
rights$505

Minority
interests

Total net
assets$15,606 $1,043,357(19,249)
16,885(64)
204(1,332)

13,252$53,632

53
$  —

(644)
$(23,914)

12,661$29,707

75
$580

(10)
—
859
(11,876)$ 3,729 $1,040,649

21

Consolidated Statements of Cash Flows
Kureha Corporation and its Consolidated Subsidiaries
For the years ended March 31, 2010 and 2009

Thousands of
U.S. dollars(Note 2)Millions of yen

2009

2010

22

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation
Loss on impairment
Amortization of negative goodwill
Decrease in allowance for doubtful accounts
Decrease in reserve for employees’ retirement benefits
Decrease in retirement allowance for directors andcorporate auditors
Increase (decrease) in prepaid pension expense
Interest and dividend income
Interest expenses
Loss on sales of property and equipment
Gain on sales of marketable securities(Increase) decrease in trade notes and accounts receivable
Decrease (increase) in other inventories(Increase) decrease in other current assets
Decrease in trade notes and accounts payable
Increase (decrease) in other liabilities
Other, net
Subtotal
Dividends and interest received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Payments for purchases of tangible and intangible fixed assets
Payments for removal of tangible fixed assets
Proceeds from sales of tangible and intangible fixed assets
Purchase of investment securities
Payment for investment in interest
Proceeds from sales of investment securities
Issuance of loans receivableCollection of loans receivable
Purchase of shares in subsidiaries
Proceeds from sales of shares in subsidiaries
Payment for business transfer
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Net (decrease) increase in short-term loans
Proceeds from long-term debt
Repayments of long-term debt
Payments for purchases of treasury stock
Proceeds from sales of treasury stock
Dividends paid
Dividends paid to minority shareholders
Proceeds from issuance of bonds
Payment from minority shareholders
Other, net
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents resulting from
inclusion of consolidated subsidiaries
Cash and cash equivalents at end of year (Note 5)
The accompanying notes are an integral part of these statements.

2010¥ 3,465¥ 6,010$ 37,242

11,126
119
(100)
(88)
(830)

10,304
479
(86)
(42)
(249)

119,582
1,279(1,074)(945)(8,920)

(61)

(19)

(655)

107
(659)
749
1,449
(204)
(2,003)
4,720(341)(1,299)553
175
16,877933(751)(1,212)
15,847

(474)
(748)
733
584
(13)
4,207
(3,906)780(814)(1,513)(237)
14,995748(663)(3,660)11,4201,150(7,082)
8,050
15,573(2,192)(21,528)
50,730(3,665)(13,961)
5,943
1,880
181,395
10,027(8,071)(13,026)
170,324(17,969)
(498)
225
(118)
(103)
417
(24)
130
—
547
—
(289)
(17,682)(17,508)
(185)
190
(737)
(615)
46
(570)
120
(208)
—
(598)
(449)
(20,518)(193,131)(5,352)
2,418(1,268)(1,107)
4,481
(257)
1,397
—
5,879
—
(3,106)(190,047)(3,936)
11,784(3,975)(6)
0(1,791)
(3)
—
—
(71)
1,999
(261)
(97)
7,264

6
7,212
(4,524)(776)
60(1,804)(35)(42,304)
126,655(42,723)(64)

45¥ 7,213

9,942
716
(92)

0

(19,249)(32)——

10,705
(462)
1,144
6,120

(763)
21,485(2,805)(1,042)
78,073—¥ 7,265483$ 77,525

Notes on Consolidated Financial Statements
Kureha Corporation and its Consolidated Subsidiaries
Years ended March 31, 2010 and 2009

1. Basis of Presenting Consolidated Financial Statements

The accompanying consolidated financial statements have been prepared based on the accounts maintained by Kureha
Corporation (the “Company”) and its subsidiaries (collectively the “Group”) in accordance with the provisions set forth in the
Corporation Law of Japan and the Financial Instruments and Exchange Law (formerly, the Securities and Exchange Law), andinconformity with accounting principles generally accepted in Japan, which are different, in certain respects, from theapplication and disclosure requirements of International Financial Reporting Standards.
As permitted by the Financial Instruments and Exchange Law, amounts of less than one million yen have been omitted.
Consequently, the totals shown in the accompanying consolidated financial statements do not necessarily agree with the sums of
the individual amounts.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to theCompany’s consolidated financial statements issued domestically in order to present them in a format which is more familiar toreaders outside Japan.

2. U.S. Dollar Amounts

The accounts of consolidated financial statements presented herein are originally expressed in Japanese yen. The U.S. dollar
amounts shown in the accompanying consolidated financial statements and notes thereto have been translated from Japanese yen
into U.S. dollars on the basis of ¥93.04 to U.S. $1, the rate of exchange prevailing at March 31, 2010. And, the amount oftranslation of millions of Japanese yen herein is rounded down to thousands of U.S. dollar. These U.S. dollar amounts are notintended to imply that the Japanese yen amounts have been or could be converted, realized or settled in U.S. dollars at this or
any other rate.

3. Principles of Consolidation(1) Scope of consolidation
The Company consolidated 33 (34 in 2009) subsidiaries by the full consolidation method and two affiliates (one in 2009) by
the equity method as at March 31, 2010 and 2009. The accounts of a subsidiary and other affiliates were not consolidated, as
they would not have a material effect on the accompanying consolidated financial statements.
(2) Fiscal terms of consolidated subsidiaries
The fiscal terms of 10 consolidated subsidiaries close their accounts at December 31. In preparing the consolidated financial
statements, those accounts at December 31, 2009 are used, but major transactions which were executed during the three months
between December 31 and March 31 are adjusted as necessary for consolidation.
(3) Valuation of assets and liabilities of consolidated subsidiaries
The Company adopted “full fair value method” so that the full portion of the assets and liabilities of the consolidated
subsidiaries was measured at their fair value at the time of acquisition of the control.
(4) Goodwill on consolidation
In preparing the consolidated financial statements, positive or negative difference between the cost of investment and theamount of the underlying equity in net assets of the consolidated subsidiary was deferred and amortized over an estimated usefulperiod or 5 years on a straight-line basis.
(5) Unification of accounting policies applied to foreign subsidiaries for the consolidated financial statements
On May 17, 2006, the Accounting Standards Board of Japan (ASBJ) issued ASBJ Practical Issue Task Force (PITH) No.18,“Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial
Statements”. The Group adopted this accounting standard and made necessary adjustments for consolidation effective the year
ended March 31, 2009. The effect of this change on net income for the year ended March 31, 2009 was immaterial and also theeffect of the change on segments was omitted in the segment information since it was immaterial.

4. Summary of Significant Accounting Policies(1) Securities
Securities included in marketable securities and investments in securities consisted of investments in unconsolidated subsidiaries
and affiliate and other securities and are stated as follows:
Investments in unconsolidated subsidiaries and affiliates are stated at acquisition cost.
Other securities with market quotations are stated at the average market price during a month before the balance sheet date.
Valuation difference on these securities is reported at net of taxes as a separate component of net assets. The cost of securities soldis determined based on the moving average cost at the time of sale.
Other securities without market quotations are stated at cost by the moving average method.

23

(2) Inventories
Inventories are stated at cost in principle determined by the gross average method. Inventories held for sale in the ordinary courseof business are measured at the lower of cost or net selling value, which is defined as the selling price less incremental estimatedmanufacturing costs and estimated direct selling expenses.
(3) Depreciation and amortization of fixed assets
Property and equipment except for leased assets
Property and equipment are principally stated at cost. Depreciation except for buildings is computed in accordance with the
declining balance method based on the useful lives and residual value prescribed by the Japanese tax laws. The depreciation ofbuildings is computed on the straight-line method. Accumulated depreciation which were directly deducted from property andequipment as at March 31, 2010 and 2009 were ¥158,875 million ($1,707,598 thousand) and ¥157,052 million, respectively.
The useful lives of major property, plant and equipment are summarized as follows:
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures10 to 50 years
7 to 15 years
4 to 10 years

Maintenance and repairs, including minor renewals and improvements, are charged to income as incurred.
Intangible fixed assets except for leased assets
Intangible fixed assets except for software are amortized by the straight-line method based on the useful lives prescribed by theJapanese tax laws.
Software for in-house use is amortized by the straight-line method based on the estimated useful lives (5 years).
Leased assets
Leased assets under finance lease arrangements which do not transfer ownership of the leased assets to the lessee are depreciatedby the straight-line method over respective lease periods without salvage value.
(4) Accounting for impairment of fixed assets
In accordance with the accounting standard for impairment of fixed assets, the Company and its consolidated subsidiaries
periodically review their fixed assets for impairment by grouping the assets in income generating units whenever there is any
indication of a significant decline in the fair value against its book value based on an independent appraisal, and when theexistence of any impairment for the group of the assets is identified, an impairment loss will be recognized and such amount isdirectly deducted from the related assets.
(5) Allowance for doubtful accounts
Allowance for doubtful accounts of general receivables was established to provide for future losses, which are estimated based on
the past credit loss experience.
In addition, uncollectible amount is estimated individually for doubtful receivables.
(6) Reserve for employees’ retirement benefits
The reserve for employees’ retirement benefits is recorded based on the estimated present value of projected benefit obligations
in excess of the fair value of the plan assets at the end of the fiscal year. However, certain domestic consolidated subsidiaries
calculate their retirement benefit obligations using the liability which would be paid if all the employees voluntarily retired ateach consolidated balance sheet date or liability reserve for pension financing calculation purpose.
The unrecognized transition amount which arose from adopting a new standard has been fully amortized when incurred.
Past service cost is fully amortized when incurred. Actuarial gain or loss is amortized in the year following the year in which thegain or loss is recognized, on a straight-line basis over certain periods within the employees’ average remaining service years.
On July 31, 2008, the ASBJ issued a partial amendment to ASBJ Statement No. 19 “Accounting Standard for Retirement
Benefits (Part3)”. The Company and its consolidated subsidiaries applied the amended accounting standard effective April 1,
2009. The effect of this change on the income is nil, as the unrecognized actuarial gain or loss is amortized in the following
year in which the gain or loss is recognized. Unrecognized net actuarial loss incurred from adoption of this amendment is ¥539
millions (US$5,793 thousands) at March 31, 2010.
(7) Retirement allowance for directors and corporate auditors
The retirement allowance for directors and statutory auditors is recorded based on the amount that would be required inaccordance with the internal rule at the balance sheet date to provide for the payment for the retirement benefits.

24

(8) Treasury stock
Treasury stocks owned by the Group are recorded at acquisition cost as a component under the shareholders’ equity. The
numbers of treasury stocks held by the Group as at March 31, 2010 and 2009 were 2,498,103 and 2,520,011 commonshares, respectively.
(9) Leases
All finance leases which commenced on and after April 1, 2008 are capitalized as if those leased assets were acquired in theordinary buy or sell transactions. Finance leases which commenced prior to April 1, 2008 and do not transfer ownership of theleased assets to the lessee are accounted for as operating lease transactions.
(10) Investment property
On November 28, 2008, the ASBJ issued ASBJ Statement No. 20 “Accounting Standard for Investment Property and Related
Disclosures” and issued ASBJ Guidance No.23 “Guidance on Accounting Standard for Investment Property and Related
Disclosures”. This accounting standard and the guidance are applicable to investment property and related disclosures at the endof the fiscal years ending on or after March 31, 2010. The Group applied the new accounting standard and guidance effective
March 31, 2010.
Information on the investment properties is not included herein, as the aggregate amount is immaterial.
(11) Construction contracts
In December 2007, the ASBJ issued ASBJ Statement No. 15 “Accounting Standard for Construction Contracts” and ASBJ
Guidance No. 18 “Guidance on Accounting Standard for Construction Contracts”. Under the previous Japanese GAAP, either
the completed-contract method or the percentage-of-completion method was permitted to account for construction contracts.
Under this new accounting standard, the construction revenue and construction costs should be recognized by the percentageof-completion method, if the outcome of a construction contract can be estimated reliably. When total construction revenue,
total construction costs and the stage of completion of the contract at the balance sheet date can be reliably measured, theoutcome of a construction contract can be estimated reliably. If the outcome of a construction contract cannot be reliably
estimated, the completed-contract method should be applied. This standard is applicable to construction contracts and softwaredevelopment contracts which started on or after April 1, 2009. The Company applied the new accounting standard effective
April 1, 2009. The effect of this change was to increase net sales by ¥1,445 million ($15,531 thousand) and gross profit,
operating income, and income before income taxes and minority interests by ¥126 million ($1,354 thousand), respectively, forthe year ended March 31, 2010.
(12) Consumption taxes
The consumption taxes withheld and consumption taxes paid are excluded from revenues and expenses in the accompanying
consolidated financial statements. The net balance of the consumption taxes withheld and consumption taxes paid is included incurrent liabilities of the consolidated balance sheet as of the end of the fiscal year.
(13) Appropriations of retained earnings
Appropriations of retained earnings are accounted for and reflected in the accompanying consolidated financial statements whenapproved by the shareholders.
(14) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows consist of cash on hands, bank deposits payable on
demand and short-term investments due within three months from acquisition with minor value fluctuation risk.
(15) Income taxes
The Group is generally subject to national corporate income tax, local inhabitant tax and enterprise tax which are principally
based on income.
Deferred income taxes are determined using the asset and liability approach, whereby deferred tax assets and liabilities arerecognized in respect of temporary differences between the tax basis of assets and liabilities and those as reported in the financial
statements.

5. Cash and Cash Equivalents

The following table represents a reconciliation of cash and cash equivalents at March 31, 2010 and 2009:
Thousands of
U.S. dollars

Millions of yen

Cash and time deposits
Cash and cash equivalents

2010¥7,213¥7,213

2009¥7,264¥7,264

2010$77,525$77,525

25

6. Inventories
Inventories at March 31, 2010 and 2009, respectively, consisted of the following:Thousands of
U.S. dollars

Millions of yen

Finished products
Work-in-process
Raw materials and supplies
Total

2010
¥14,514
1,123
5,110¥20,7472009¥17,773
2,005
5,962¥25,740

2010$155,997
12,07054,922$222,990

7. Financial Instruments and Related Disclosures
On March 10, 2008, the ASBJ revised ASBJ Statement No.10 “Accounting Standard for Financial Instruments” and issued ASBJ
Guidance No.19 “Guidance on Accounting Standard for Financial Instruments and Related Disclosures”. This accounting
standard and the guidance are applicable to financial instruments and related disclosures at the end of the fiscal years ending on
or after March 31, 2010 with early adoption permitted from the beginning of the fiscal years ending before March 31, 2010. The
Group applied the revised accounting standard and the new guidance effective March 31, 2010.
(1) Group policy for financial instruments
The Group uses financial instruments, mainly bank loans, and convertible bonds for the purpose of raising its necessary fund forequipment investment plan. Cash surpluses, if any, are invested only in short-term deposits, etc. Working capitals for short-term
ongoing operations are procured from short-term bank loans. Derivatives are used, not for speculative purposes, but to manage
exposure to financial risks as described below.
(2) Nature and extent of risks arising from financial instruments
Receivables such as trade notes and trade accounts are exposed to customer credit risk. Although receivables in foreign currencies
are exposed to the market risk of fluctuation in foreign currency exchange rates, the position, net of payables in foreign
currencies, is hedged by using forward foreign currency contracts. Marketable and investment securities, mainly held-to-maturity
securities and equity instruments of customers and suppliers of the Group, are exposed to the risk of market price fluctuations.
And long-term loans receivable are made to the employees.
Payment terms of payables, such as trade notes and trade accounts, are less than one year. Although payables in foreign
currencies, partly accompanied by the export of materials, are exposed to the market risk of fluctuation in foreign currency
exchange rates, those risks are almost netted against the balance of receivables denominated in the same foreign currency as noted
above. And, the payables in Euro are always within the balance of receivables in Euro.
Although a part of such bank loans, convertible bonds and lease obligation, which are mainly for the purpose of equipment
investment, are exposed to market risks from changes in variable interest rates; those risks are mitigated by using mostly
derivatives of interest-rate swaps.
Derivatives mainly include forward foreign currency contracts and interest-rate swaps, which are used to manage exposure tomarket risks from changes in foreign currency exchange rates of receivables and payables, and from changes in interest rates ofbank loans and convertible bonds. Please see Note 21 for more detail about derivatives.
(3) Risk management for financial instruments
Credit Risk Management (risk of counterparty’s failure to repay)
Credit risk is the risk of economic loss arising from counterparty’s failure to repay or service debt according to the contractual
terms. The Company manages its credit risk from receivables on the basis of internal guidelines, which include setting up an
individual credit limit and monitoring of payment term and balances of major customers by each business administration
department to identify the default risk of customers in early stage. A credit limit is changed, if necessary, based on a periodic
monitoring of customers’ financial position. And the Company manages to mitigate the risk of receivable collection due todeteriorating financial position by utilizing such facilities as credit insurance or factoring. In using derivatives, the Group chooses
highly creditworthy financial institutions to avoid a counter party risk.

26

Market risk management (foreign exchange risk and interest rate risk)
The Company and certain consolidated subsidiaries manage market risk resulting from fluctuations in foreign currency exchange
rates of foreign currency trade receivables and payables, which are to be identified through management per month and per
currency. Such foreign exchange risk is hedged principally by forward foreign currency contracts.
Interest-rate swaps are used to manage exposure to market risks from changes in interest rates of loan payables and bondpayables.
Marketable and investment securities are managed by monitoring market values and financial position of issuers on a regularbasis.

Basic principles of derivative transactions have been based on the internal guidelines which prescribe the authority and thelimit for each transaction. The same principles are applicable to the consolidated subsidiaries.
Liquidity risk management (risk of the Group’s failure to pay at maturity)
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on maturity dates. The Groupmanages its liquidity risk by controlling a monthly cash flow plan, and the Company manages it by using commitment line.
(4) Fair values of financial instruments
Fair values of financial instruments are based on quoted price in active markets. If quoted price is not available, other rational
valuation techniques are used instead. The fair values hereof may vary upon applying various procedures, as the valuation
techniques include variable factors. Also please note that the contract amounts themselves shown in Note 21 Derivatives andHedging Activities do not imply the market risk exposure regarding derivative transactions.
(a) Fair value of financial instruments
Carrying amount, fair value and the differences at March 31 are as follows:(This information excludes financial instruments whose fair value cannot be reliably determined)
Millions of yen
March 31, 2010

Cash and time deposits
Notes receivable and accounts receivable
Allowance for doubtful accounts
Sub-total
Investment securities
Other securities
Long-term loans receivable including current portion
Total assets
Notes payable and accounts payable
Short-term loans
Accrued expenses
Bonds
Long-term debts including current portion
Total
Derivatives
Not qualifying for hedge accounting
Qualifying for hedge accounting

Carrying
amountUnrealized
gain/loss

Fair value¥ 7,213
31,837(112)
31,724¥ 7,213—

31,724—

17,512
2,086
58,537(16,833)(9,761)(5,430)(15,000)(23,208)¥(70,233)

17,512
2,055
58,506(16,833)(9,761)(5,430)(15,498)(23,454)¥(70,977)

—
(30)
(30)
—
—
—
(498)
(245)
(743)

(29)
—

(29)
—

—
—

27

Thousands of U.S. dollars
March 31, 2010

Cash and time deposits
Notes receivable and accounts receivable
Allowance for doubtful accounts
Sub-total
Investment securities
Other securities
Long-term loans receivable including current portion
Total assets
Notes payable and accounts payable
Short-term loans
Accrued expenses
Bonds
Long-term debts including current portion
Total
Derivatives
Not qualifying for hedge accounting
Qualifying for hedge accounting

Carrying
amountUnrealized
gain/loss

Fair value$ 77,525
342,186(1,204)340,971$ 77,525—

188,220
22,420629,159(180,922)(104,911)(58,362)(161,221)(249,441)(754,868)

188,220
22,087
628,826(180,922)(104,911)(58,362)(166,573)(252,085)(762,865)

(322)
(322)
—
—
—
(5,353)(2,633)(7,985)

(311)
—

(311)
—

—
—

340,971

Cash and time deposits, and Notes receivable and accounts receivable
The carrying amounts of cash and time deposits, and notes receivable and accounts receivable approximate fair value because of
their short maturities.
Investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for the equity instruments.
Long-term loans receivable
The fair values of long-term loans receivable are measured at the present value of the future cash flows discounted by a rate of
return, an appropriate rate such as national bond rate added to a credit spread, with respect to each credit risk segment of credit
control.
Notes payable and accounts payable, short-term loans, and accrued expenses
The carrying amounts of these accounts approximate fair value because of their short maturities.
Bonds
The fair values of the bond issued by the Company are measured based on the market price.
Long-term debts
The fair values of long-term debts are measured by discounting the principal and interest discounted by an assumed new
borrowing rate. As a part of long-term debts with floating interest rates are subject to deferral method of interest rate swaps, thefair values of the said interest rate swaps are included in the long-term debts.
Derivatives
The information of the fair value for derivatives is included in Note 21.
(b) Financial instruments whose fair value cannot be reliably determinedBook value

March 31, 2010

Investments in equity instruments that do not have a quoted
market price in an active market

28

Millions of yen¥2,143Thousands of
U.S. dollars$23,033

(5) The aggregate annual maturities of financial assets at March 31,2010
Millions of yen
March 31, 2010

Cash and time deposits
Notes receivable and accounts receivable
Long-term loans receivable
Total

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

—
—
495
¥495

—
—
600
¥600

Due after one year
through five years

Due after five years
through ten years

—
—
5,320
$5,320——6,448$6,448¥ 7,21331,837
58¥39,109

Due after
ten years

—
—
931
¥931
Thousands of U.S. dollars

March 31, 2010

Cash and time deposits
Notes receivable and accounts receivable
Long-term loans receivable
Total

Due in one
year or less

$ 77,525
342,186623$420,346

Due after
ten years——
10,006$10,006(6) The aggregate annual maturities of bonds and long-term debts at March 31,2010
Millions of yen

March 31, 2010

Bonds
Long-term debts
Total

Due in one
year or less—
¥5,048¥5,048Due after one Due after two Due after three Due after four
year through year through year through years through Due after five
two years
three years
four years
five years
years—¥4,943¥4,943¥5,0004,458¥9,458—¥4,238¥4,238—¥2,081¥2,081¥10,000
2,438¥12,438

Thousands of U.S. dollars

March 31, 2010

Due in one
year or less

Bonds
Long-term debts
Total—$54,256$54,256

Due after one Due after two Due after three Due after four
year through year through year through years through Due after five
two years
three years
four years
five years
years—$53,127$53,127$ 53,740
47,914$101,655—$45,550$45,550—$22,366$22,366

107,480
26,203$133,684

8. Securities
Investments in unconsolidated subsidiaries and affiliates amount to ¥3,749 million ($40,294 thousand) and ¥3,857 million atMarch 31, 2010 and 2009, respectively.
The acquisition cost and carrying amount of other securities whose fair value were available as at March 31, 2010 were as follows:
Millions of yen
Acquisition
cost

Securities with unrealized gains:
Equity securities
Sub-total
Securities with unrealized losses:
Equity securities
Sub-total
Total

Carrying
amountUnrealized gains(losses)¥6,768
6,768¥15,583
15,583¥8,815
8,815

2,209
2,209
¥8,977

1,928
1,928¥17,512

(280)
(280)
¥8,53429

Thousands of U.S. dollars
Acquisition
cost

Securities with unrealized gains:
Equity securities
Sub-total
Securities with unrealized losses:
Equity securities
Sub-total
Total

Carrying
amountUnrealized gains(losses)$72,742
72,742$167,487
167,487$94,744
94,74423,742
23,742$96,485

20,722
20,722$188,220(3,009)(3,009)$91,725

The acquisition cost and carrying amount of available-for-sale securities whose fair values were available as at March 31,
2009 were as follows:
Millions of yen
Acquisition
cost

Securities with unrealized gains:
Equity securities
Sub-total
Securities with unrealized losses:
Equity securities
Sub-total
Total

Carrying
amountUnrealized gains(losses)¥5,8305,830¥12,978
12,978¥7,147
7,147

3,381
3,381
¥9,211

2,632
2,632¥15,610

(748)
(748)
¥6,399Proceeds from sales of available-for-sale securities and related gross realized gains and losses on those sales for the years ended
March 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen

2009

2010
Proceeds from sales
Gross realized gains
Gross realized losses

¥964
205
(0)

¥35
12
—

2010
$10,361
2,203—

Major securities whose fair value is not readily determinable at March 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen

2009

2010
Available-for-sale securities:
Unlisted equity securities
Preferred investment securities
Discounted bank debentures

—
—
—

2010

¥2,405—
5———The details of maturity dates of available-for-sale securities as at March 31, 2010 were as follows:
Millions of yen
Due in one year
or less

Discounted bank debentures¥—

Due after one year
through five years

Due after five years
through ten years¥—¥—

Due after one year
through five years

Due after five years
through ten years$—$—

Due after
ten years¥—
Thousands of U.S. dollars

Due in one year
or less

30
Discounted bank debentures$—

Due after
ten years$—

9. Short-term Loans, Long-term Debt and Lease Obligations
Short-term loans and long-term debt as at March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Short-term loans with average interest rate of 1.21%
Current portion of long-term debt with averageinterest rate of 1.61%
Total
Unsecured bonds maturing on March 8, 2013 with theinterest rate of 1.60%
Unsecured bonds maturing on June 17, 2015 with theinterest rate of 2.06%
Long-term debt maturing in 2011 through 2028 with averageinterest rate of 1.61%
Total

2010
¥ 9,7612009¥13,482

2010$104,911

5,048
14,8093,871
17,38554,256
159,168

5,000

5,000

53,74010,00010,000107,480

18,160¥47,969

11,680¥44,032

195,184$515,573

The aggregate annual maturities of long-term debt at March 31, 2010 were as follows:Year ending
March 31

Millions of yen

2012
2013
2014
2015

¥4,943
4,458
4,238
2,081

Thousands of
U.S. dollars$53,127
47,91445,55022,366

The aggregate annual maturities of lease obligations at March 31, 2010 were as follows:Year ending
March 31

Millions of yen

2011
2012
2013
2014
2015 and thereafter

¥ 70
59
57
37
8

Thousands of
U.S. dollars$ 752
634
612
397
86

Average interest rate on lease obligations is omitted since above lease obligations recorded in the consolidated balance sheet atMarch 31, 2010 include interest equivalent amounts.

10. Assets Pledged as Collateral
The following assets of the Group are pledged as collateral for trade notes and accounts payable, short-term loans and long-term
debts in the amount of ¥3,661 million (US$39,348 thousand) and ¥4,033 million as at March 31, 2010 and 2009, respectively:
Thousands of
U.S. dollars

Millions of yen

Buildings and structures
Machinery, equipment and vehicles
Land
Investments in securities
Total

2010
¥15,082
12,202
4,768
5,574¥37,628

2009¥15,321
13,1975,363
5,131¥39,0142010$162,102
131,147
51,24659,909$404,4283111. Loan Commitment Agreements
The Company and its consolidated subsidiaries entered into loan commitment agreements and overdraft agreements with thefinancial institutions. The outstanding balance as at March 31, 2010 and 2009 was as follows:
Thousands of
U.S. dollars

Millions of yen

Total commitment available
Amount utilized
Balance available

2010¥11,760
490¥11,269

2009¥9,150—¥9,1502010$126,397
5,266$121,11912. Reserve for Employees’ Retirement Benefits
The Company and its consolidated subsidiaries have principally tax qualified pension plans and lump-sum retirement benefit
plans. In addition, in some cases, merit allowances which are not included in the actuarial calculation of projected benefit
obligations may be paid upon the retirement of certain employees.
The reserve for employees’ retirement benefits as at March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Projected benefit obligations
Plan assets
Funded status
Unrecognized actuarial differences
Sub-total
Prepaid pension costReserve for retirement benefits

2010¥(23,011)
18,687(4,324)
5,402
1,078
2,309
¥ (1,231)

2009¥(24,459)
18,615(5,844)
6,234
390
2,437
¥ (2,098)

2010$(247,323)
200,849
46,47458,061
11,587
24,817$ (13,230)

Net pension expenses related to the retirement benefits for the years ended March 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial differences
Amortization of past service liabilities
Net pension expense

2010¥1,033
635
(521)
603
(839)
¥ 9102009¥1,021
657
(619)
192
(512)
¥ 740

2010$11,102
6,825(5,599)6,481(9,017)$ 9,780

Note: In addition to above expenses, the Company and its domestic consolidated subsidiaries recorded merit allowances
amounting to ¥29 million ($311 thousand) and ¥76 million for the years ended March 31, 2010 and 2009, respectively.

32

Assumptions used in calculation of the above information for the years ended March 31, 2010 and 2009 were as follows:
2010
2009
1.736%
2.5%
2.5%
2.5%
Straight-line basis
Straight-line basis
Fully amortized
Fully amortizedwhen incurred
when incurred
Amortization period of actuarial differences**
Amortization period of transitional differences
Fully amortized
Fully amortized
resulting from a change in accounting standards
when incurred
when incurred* The actuarial differences are amortized on a straight-line method over certain years within the employees’ average remaining
service years when incurred and charged to income from the subsequent year.

Discount rate
Expected rate of return on plan assets
Method of attributing the projected benefits to periods of services
Amortization period of past service liabilities

13. Income Taxes
The Group is subject to certain different income taxes in Japan, which in the aggregate resulted in a normal statutory income tax
rate of approximately 40.44%.
The significant components of deferred tax assets and liabilities at March 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen

2010
Deferred tax assets:
Unrealized gains on fixed assets
Reserve for employees’ retirement benefits
Retirement allowance for directors and corporate auditors
Accrued bonuses
Research and development costs
Loss on disposal or sales of fixed assets
Accrued expenses
Write-down of inventories
Accrued enterprise tax and business place tax
Loss on impairment
Tax loss carried forward
Allowance for doubtful accounts
OthersSub-total
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Net unrealized gains on other securities
Prepaid pension expenses
Shortfall in depreciation
Sale of affiliate shares
Retained earnings of subsidiaries
OthersTotal deferred tax liabilities
Net deferred tax assets

2009

2010

¥1,068
444
147
864
339
241
541
810
215
591
1,408
100
566
7,339
(1,639)5,700¥ 1,082
782
176
899
362
128
756
206
154
443
578
124
360
6,050
(1,258)
4,792$11,478
4,772
1,580
9,286
3,643
2,590
5,814
8,705
2,310
6,352
15,133
1,074
6,083
78,880(17,616)
61,263(3,452)
(751)
(684)
(338)
(189)
(131)
(5,547)¥ 152(2,587)
(817)
—
—
—
(108)
(3,512)¥ 1,281(37,102)(8,071)(7,351)(3,632)(2,031)(1,408)(59,619)$ 1,633

33

Reconciliations of the difference between the statutory income tax rate and the effective income tax rate for the years ended
March 31, 2010 and 2009 were as follows:

Statutory income tax rate:
Expense not deductible for tax purpose
Non-taxable revenue
Tax credit for research and development costs
Sale of affiliate shares
Retained earnings of overseas subsidiaries
Valuation allowance
Others
Effective income tax rate

2010
40.44%
5.65(3.65)(7.87)
8.26
5.47
9.24
(0.42)
57.12%

2009
40.44%
5.45(5.42)(3.04)——
8.87(1.05)
45.25%

14. Commitments and Contingent Liabilities
The Group guarantees employees’ bank loans to the amounts of ¥302 million ($3,245 thousand) and ¥397 million as at March
31, 2010 and 2009, respectively.

15. Shareholders’ Equity
The new Corporation Law of Japan (the “Law”), which superseded most of the provisions of the Commercial Code came into
effect on May 1, 2006. The Law provides that an amount equal to 10% of the amount to be disbursed as distributions of capitalsurplus (other than the capital reserve) and earned surplus (other than the legal reserve) be transferred to the capital reserve andthe legal reserve, respectively, until the sum of the capital reserve and legal reserve equals 25% of the stated capital. Such
distributions can be made at any time by resolution of the shareholders or by the Board of Directors if certain conditions are met.
The above mentioned legal reserve is included in earned surplus in the accompanying consolidated balance sheets.

16. Stock Option Plan
The Company issued stock subscription rights (stock options) in accordance with the provisions of the Article No. 236, 238 and240 of the Corporation Law based on the resolution of the general shareholders’ meeting and the Board of Directors’ meeting
held on June 27, 2007 as follows:(1) Accounting for stock option related expenses
Share-based compensation included in selling, general and administrative expenses: ¥27 million ($290 thousand)(2) Details of stock options, volume and activity
a. Detail of stock options

Persons granted
Number of stock options by type of shares
Grant date
Vesting conditions

1st Stock Option Plan
8 directors of the Company
Common stock 47,500 shares
July 18, 2007
aaa The eligible director shall exercise options collectively during
the period from the following day after he or she retired fromthe position as a director of the Company and through the 10thday.
bbb If the eligible director resigned from its position due to certain
reasons, the number stock options may be reduced dependingon the service period.

34

Eligible service period
Exercise period

ccc If the eligible director gives up the subscription rights, he or
she cannot exercise the stock options given up.
From June 27, 2007 to June 26, 2008
From July 18, 2007 to July 17, 2037

Persons granted
Number of stock options by type of shares
Grant date
Vesting conditions

2nd Stock Option Plan
8 directors of the Company
Common stock 49,400 shares
July 23, 2008
ddd The eligible director shall exercise options collectively during
the period from the following day after he or she retired fromthe position as a director of the Company and through the 10thday.
eee If the eligible director resigned from its position due to certain
reasons, the number stock options may be reduced dependingon the service period.

Eligible service period
Exercise period

Persons granted
Number of stock options by type of shares
Grant date
Vesting conditions

fff If the eligible director gives up the subscription rights, he or
she cannot exercise the stock options given up.
From June 26, 2008 to June 25, 2009
From July 23, 2008 to July 22, 2038
3rd Stock Option Plan
8 directors of the Company
Common stock 55,500 shares
July 22, 2009aaa The eligible director shall exercise options collectively during
the period from the following day after he or she retired fromthe position as a director of the Company and through the 10thday.
bbb If the eligible director resigned from its position due to certain
reasons, the number stock options may be reduced dependingon the service period.

Eligible service period
Exercise period

ccc If the eligible director gives up the subscription rights, he or
she cannot exercise the stock options given up.
From June 25, 2009 to June 24, 2010
From July 22, 2009 to July 21, 2039

b. Volume and activity of stock options:
Volume of stock options:

Before vesting:
At March 31, 2009
GrantedForfeited
VestedOutstanding
After vesting;
At March 31, 2009
VestedExercised
Forfeited
Outstanding

1st Stock Option Plan

2nd Stock Option Plan

3rd Stock Option Plan

47,500——17,10030,40049,400——17,40032,000—55,500——55,500—17,10017,100———17,40017,400
—
—

—
—
—
—
—

35

Price information:

Exercise price
Average stock price at the time of exercise
Fair value at the date of grant

1st Stock Option Plan
Exercised Outstanding
Yen
—
¥1
463
—
—
¥551

2nd Stock Option Plan
Exercised Outstanding
Yen
—
¥1
463
—
—
¥566

3rd Stock Option Plan
Exercised Outstanding
Yen
—
¥1
—
—
—
¥487

c. Valuation method for fair value of stock options:
The valuation method for fair value of 2009 stock options granted during the year ended March 31, 2010 is as follows:
Valuation method: Black-Scholes formula
Major basic numerical values and valuation method:

Stock price volatility
Expected years to expiration
Expected dividends
Risk-free interest rate

1st Stock Option Plan
21.1%
5.9 years¥10 per share
1.61%

2nd Stock Option Plan
21.3%
4.9 years¥10 per share
1.20%

3rd Stock Option Plan
30.2%
5.0 years¥10 per share
0.72%

d. Estimation method for the vested number of stock options
Since it is difficult to make a reasonable estimate on future forfeited stock options, actual number of forfeited stock options isreflected in the estimation.

17. Leases
Finance leases which commenced prior to April 1, 2008 and do not transfer ownership of the leased assets to the lessee areaccounted for as operating lease transactions as permitted by the revised accounting standard.
Information on finance leases other than those deemed to transfer ownership of the leased assets to the lessee for the years
ended March 31, 2010 is not included herein, as it would have no material effect on the accompanying consolidated financial
statements.

18. Selling, General and Administrative Expenses
Major components of selling, general and administrative expenses for the years ended March 31, 2010 and 2009 are as follows:
Thousands of
U.S. dollars

Millions of yen

2010
Sales distribution expenses
Salaries and wages
Provision for bonuses
Provision for directors’ bonuses
Retirement benefit expenses
Research and development expenses
Depreciation

36—¥6,690
893
—
129
6,240
—

2009
¥1,457
6,590
928
64
288
6,085
677

2010
—
$71,904
9,598
—
1,386
67,067—

19. Gain or Loss on Property and Equipment
Gains on sales of property and equipment and losses on sales and disposal of property and equipment for the years ended March
31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen

2009

2010
Gain on sales of property and equipment:
Buildings and structures
Machinery, equipment and vehicles
OthersLand
Total
Loss on disposal of property and equipment:
Buildings and structures
Machinery and equipment
Others
Total
Loss on sales of property and equipment:
Machinery and equipment
Land
Total

2010

39
8
—
48
96

¥ 34
5
1
36
¥ 76

$

¥ 3481,084
85¥1,518

¥197
411
43
¥652

$ 3,740
11,650913$16,315

¥

¥ —
8
¥ 8

$

¥

¥

¥

27
—
27

419
86
—
515
$ 1,031

$

290
—
290

37

20. Loss on Impairment of Property and Equipment
The Group recorded a loss on impairment for the following asset group for the years ended March 31, 2010 and 2009:
Year ended March 31
2010

Use

Type of assets

Manufacturing
equipment

Buildings and structures, Iwaki city, Fukushimamachinery, equipment Pref.
and vehicles and others(tools, furniture andfixtures)
Buildings and structures, Kasumigaura city,machinery, equipment Ibaraki Pref.
and vehicles
Buildings and structures Komitama city, Ibaraki
Pref.

Manufacturing
equipment
Welfare facilities

Location

Condition
Deteriorated operating
ratio due to businesswithdrawal

Deteriorated operating
ratio due to businesswithdrawal
To be disposed

2009
Manufacturing
equipment

Buildings and structures, Kasumigaura city,
Deteriorated operatingmachinery, equipment Ibaraki Pref.
ratio
and vehicles and others(tools, furniture andfixtures)
Manufacturing
Buildings and structures, Iwaki city, Fukushima
Idle
equipmentmachinery, equipment Pref.
and vehicles
Welfare facilities
Buildings and structures, Komitama city, Ibaraki Idle
others (tools, furniture Pref.
and fixtures)
Total losses on impairment on above asset group for the years ended March 31, 2010 and 2009 amounted to ¥371 million($3,987 thousand) and ¥478 million, respectively.
The Group periodically reviews their fixed assets for impairment by grouping the assets in income generating units by businesssegment or by properties for real estate for rent or idle assets whenever there any indication of impairment. Although there was
no indication of a significant decline in the fair value against its book value, the Group wrote down the assets whose operating
ratio is significantly deteriorated and the idle assets to the recoverable value since there was no plan to use in future. The
recoverable value, in case of deteriorated operating ratio, was measured at the value in use and computed by discounting future
cash flows using a discount rate of 5.1% and, in case of idle assets, measured at net selling value, which is computed from anestimated salable value less estimated disposal expenses.

38

21. Derivatives and Hedging Activities
The Company and its consolidated subsidiaries utilize foreign exchange forward contracts to avoid the risk from future exchange
rate fluctuations in connection with the foreign currency denominated receivables and payables and also interest rate swaps toreduce the financing costs related to long-term debts and short-term borrowings as a means to manage the interest rate risk.
Certain foreign exchange forward contracts utilized by the Company and certain consolidated subsidiaries are exposed to an
exchange rate fluctuation risk and interest rate risk from the movement of the interest rates is mitigated by converting floatinginterest rates to fixed interest rates using interest rate swap agreements. Interest rate swaps are accounted for in principle by thedeferral method, under which the revaluation gain or loss on the hedging instruments are deferred as assets or liabilities until thegain or loss on hedged items will be recognized. However, certain interest swap agreements which qualify for hedge accounting
and meet specific matching criteria are not revaluated at market value, but the differential paid or received under the swap
agreements are recognized and included in interest expenses or income.
Counterparties which the Company and its consolidated subsidiaries enter into derivative financial instruments are limited
to highly creditworthy financial institutions they have normal banking transactions in the normal course of business andtherefore, the Company does not expect any losses to be incurred due to the defaults by these counterparties.
The Company and its consolidated subsidiaries have established internal rules regarding the authorization limits and theexecution and control of the derivative transactions are done by the Finance Division. The execution of derivative transactions
are exclusively authorized by the Finance Director and the status of outstanding position balances and revaluation profit and loss
are periodically reported to the Finance Director.
Derivative contracts to which hedge accounting is not applied at March 31, 2010 and 2009 are as follows:
Millions of yen

2009

2010
Contract
amountForeign exchange forward contracts:
Selling:
U.S. dollars
Euro
Buying:U.S. dollars
Euro
Total

Fair value

Unrealized
gain (loss)

Contract
amountFair value

Unrealized
gain (loss)

¥466
559

¥481
575

¥(14)
(15)

¥324
437

¥333
467

¥ (9)
(30)

¥ 92
37
—

¥ 93
36
—

¥ 0
(0)
¥(29)

—
—
—

—
—
—

—
—
¥(40)

Thousands of U.S. dollars

2010
Contract
amountForeign exchange forward contracts:
Selling:
U.S. dollars
Euro
Buying:U.S. dollars
Euro
Total

Fair value

Unrealized
gain (loss)$5,008
6,008$4,4926,180$(150)(161)$ 989398—$ 999387—$$(311)

Fair value is calculated using the forward rates.

39

Derivative contracts to which hedge accounting is applied at March 31, 2010 are as follows:
Millions of yen

At March 31, 2010
Hedge accounting
methodClassification of derivative
contracts

Major hedged items

Interest rate swaps
meeting certain
conditions

Interest rate swaps:(fixed rate
payment, floating
rate receipt)

Long-term debt

Contract
amountover one year

Contract
amount¥4,997

Fair value¥3,443(Note 2)Thousands of U.S. dollars

At March 31, 2010
Hedge accounting
methodClassification of derivative
contracts

Major hedged items

Interest rate swaps
meeting certain
conditions

Interest rate swaps:(fixed rate
payment, floating
rate receipt)

Long-term debt

Contract
amountover one year

Contract
amount$53,708

Fair value$37,005(Note 2)

Notes: 1. Fair value is calculated using prices quoted by financial institutions.
2. With respect to interest rate swap contracts which meet certain conditions, fair values of the interest rate swap contracts
are included in the fair values of the relevant long-term debt, since they are used for recording long-term debt as hedged
items.

22. Per Share Information
Net assets per share at March 31, 2010 and 2009 and net income per share for the years then ended were as follows:
Yen

U.S. dollars

2009¥533.45
18.75
18.74

2010
¥538.10
8.77
8.77

Net assets per share
Basic net income per share
Diluted net income per share

2010
$5.78
0.09
0.09

Above per share information was computed using the following data:
Thousands of
U.S. dollars

Millions of yen or shares

40

Net assets per share:
Total net assets per consolidated balance sheets
Net assets attributed to common stock
Differences – Minority interests– Stock subscription rights
Number of outstanding shares of common stock
Number of treasury stockNumber of common stock used in computing net assets
per share
Basic net income per share:
Net income per consolidated income statements
Net income attributed to common stock
Weighted average number of common stock during theperiodDiluted net income per share:
Number of increased common stock used in computing
diluted net income per share (stock subscription rights)

2010

2009

¥
96,822¥
96,420¥
347¥
54
181,683,909
2,498,103¥
97,075¥
95,575
¥
1,452
¥
47
181,683,909
2,520,011

179,185,806

179,163,898

¥
¥

¥
¥

1,571
1,571

2010

3,373
3,373

179,182,518

179,890,186

108,770

81,441

$
$
$
$

1,040,649
1,036,328
3,729
580

$
$

16,885
16,885

23. Segment Information
Business segment information of the Group for the years ended March 31, 2010 and 2009 was as follows:
Millions of yen
Year ended March 31, 2010

Advanced
Materials

I. Sales and operating income
Outside customers¥28,423
Inter-segment
668
Total
29,092
Operating expenses
32,738Operating income¥(3,645)
II. Assets, depreciation and capital expenditure
Assets¥62,570
Depreciation
5,261
Loss on impairment
21
Capital expenditure
10,303

Year ended March 31, 2010

Advanced
Materials

I. Sales and operating income
Outside customers$305,492
Inter-segment
7,179
Total
312,682
Operating expenses
351,870
Operating income$(39,176)
II. Assets, depreciation and capital expenditure
Assets$672,506
Depreciation
56,545
Loss on impairment
225
Capital expenditure
110,737

Specialty
Chemicals

Specialty
Plastics

Other
Operations

Total

EliminationorCorporate

Consolidated¥35,831165
35,997
29,377¥ 6,619¥42,430
1,284
43,714
41,765¥ 1,948¥27,921
15,95743,87842,499¥ 1,379¥134,606
18,076
152,683
146,381¥   6,301¥
—(18,076)(18,076)(17,481)¥ (595)¥134,606—
134,606
128,900¥   5,706¥30,829
2,773
252
1,599

¥36,972
2,193
98
3,005

¥26,479
898
—
2,035

¥156,851
11,126371
16,943¥27,771———¥184,623
11,126371
16,943Thousands of U.S. dollars
EliminationorCorporate
Consolidated

Specialty
Chemicals

Specialty
Plastics

Other
Operations$385,113
1,773
386,898
315,745$ 71,141$456,040
13,800469,840
448,892$ 20,937$300,096 $1,446,754 $
— $1,446,754
171,506
194,282(194,282)—
471,603 1,641,046(194,282) 1,446,754
456,782 1,573,312(187,886) 1,385,425$ 14,821 $    67,723 $ (6,395) $    61,328$331,352
29,804
2,708
17,186$397,377
23,5701,053
32,297$284,598 $1,685,844 $298,484 $1,984,340
9,651
119,583—
119,583
—
3,987
—
3,987
21,872
182,104—
182,104

Total

Millions of yen
Year ended March 31, 2009

Advanced
Materials

I. Sales and operating income
Outside customers¥32,424
Inter-segment
569
Total
32,993Operating expenses
32,315
Operating income¥ 678
II. Assets, depreciation and capital expenditure
Assets¥59,593
Depreciation
4,915
Loss on impairment
428
Capital expenditure
10,157

Specialty
Chemicals

Specialty
Plastics

Other
Operations

Total

EliminationorCorporate

Consolidated¥33,898
194
34,09228,361¥ 5,732¥43,538
1,212
44,75043,095¥ 1,655¥33,881
19,20353,08450,980¥ 2,104¥143,741
21,178
164,919
154,750¥ 10,169¥
—(21,178)(21,178)(20,465)¥ (712)¥143,741—
143,741
134,285¥ 9,456¥30,786
2,447
—
3,943

¥35,962
2,007
51
2,954

¥30,173935—
773¥156,514
10,304479
17,829¥25,711———¥182,224
10,304479
17,82941

Geographic segment information of the Group for the years ended March 31, 2010 and 2009 was as follows:
Millions of yen
Year ended March 31, 2010

I. Sales and operating income
Outside customers
Inter-segment
Total
Operating expenses
Operating income
II. Assets

Year ended March 31, 2010

I. Sales and operating income
Outside customers
Inter-segment
Total
Operating expenses
Operating income
II. Assets

Japan¥123,570
4,810
128,381
122,251¥ 6,129¥143,399

EuropeOther
regions¥9,596
19
9,616
8,962
¥ 653¥6,096¥ 1,439
822
2,262
3,364
¥(1,101)¥19,469

Total¥134,606
5,653
140,260
134,578¥ 5,681¥168,966

EliminationorCorporate¥—(5,653)(5,653)(5,678)¥
24¥15,657

Consolidated¥134,606—
134,606
128,900¥ 5,706¥184,623

Thousands of U.S. dollars
EliminationorCorporate
Consolidated

Japan

EuropeOther
regions$1,328,138
51,6981,379,847
1,313,961$ 65,874$1,541,261$103,138
204
103,353
96,324$ 7,018$65,520$ 15,466 $1,446,754
8,834
60,75824,312 1,507,523
36,156 1,446,453$(11,833) $ 61,059$209,254 $1,816,057$— $1,446,754(60,758)—(60,758) 1,446,754(61,027) 1,385,425$
258 $ 61,328$168,282 $1,984,340

EuropeOther
regions

Total

EliminationorCorporate¥9,536
92
9,628
8,984
¥ 644¥6,095¥ 2,158
887
3,045
2,821
¥ 224¥10,690¥143,741
6,371
150,112140,743¥ 9,370¥163,349

Total

Millions of yen
Year ended March 31, 2009

I. Sales and operating income
Outside customers
Inter-segment
Total
Operating expenses
Operating income
II. Assets

Japan¥132,047
5,392
137,440
128,939¥ 8,501¥146,564¥
—(6,371)(6,371)(6,458)¥
87¥18,876

Consolidated¥143,741—
143,741
134,285¥ 9,456¥182,224

Overseas sales information of the Group for the years ended March 31, 2010 and 2009 was as follows:
Millions of yen
Year ended March 31, 2010

EuropeAsia

I Overseas sales
II Consolidated sales
III % of consolidated sale

¥13,582¥9,755¥3,527

10.1%

7.2%

2.6%

Year ended March 31, 2010

I Overseas sales
II Consolidated sales

42

Other
regions

Europe$145,980

Asia$104,847

Total¥ 26,866
134,606
20.0%

Thousands of U.S. dollars
Other
regions
Total$37,908$ 288,757
1,446,754

Millions of yen
Year ended March 31, 2009

I Overseas sales
II Consolidated sales
III % of consolidated sale

Europe¥14,137
9.8%

Asia¥9,894
6.9%

Otherregions¥3,527
2.5%

Total¥ 27,559
143,741
19.2%

24. Subsequent Events
The following appropriation of retained earnings has been approved by the general meeting of shareholders held on April 20,
2010
Millions of yen

Cash dividends at ¥5.00 per share¥895

Thousands of
U.S. dollars$9,61943

Main Group Companies by Segment (As of March 31, 2010)T

he Kureha Group consists of Kureha Corporation, 35 subsidiaries (of which 33 are consolidated), and 5
affiliates (of which 2 applies the equity method). The group is engaged in the manufacture and sales of
products in three main business segments: Advanced Materials, Specialty Chemicals, and Specialty Plastics.
In addition, it undertakes construction and maintenance operations associated with each main business segment,
transport operations, environmental management services, and other service operations.

ADVANCED MATERIALS
Kureha Corporation
Manufactures and sells advanced plastics and carbon products.
Resinous Kasei Co., Ltd.
A subsidiary of Kureha Trading Co., Ltd., the company
manufactures and sells advanced materials.
Nihon Extron Co., Ltd.
Manufactures and sells advanced materials. Sells someproducts to Kureha.
Kureha GmbH
Sells Kureha’s advanced materials and other products in
Europe.
Kureha PGA LLC
Establish for manufactures PGA.
Kureha America, Inc.
Sells Kureha’s advanced materials and other products in the
U.S. Has a controlling stake in Kureha PGA LLC, Kureha
Advanced Materials Inc. and Fortron Industries LLC.

Kureha Europe B.V.
Holds controlling stakes in Krehalon Industrie B.V. and threesubsidiaries engaged in making food packaging materials.
Kureha Vietnam Co., Ltd.
Manufactures and sells food packaging materials. Purchases
raw materials from and sells produces to Kureha.
Nantong SKT New Material Co., Ltd.
Manufactures and sells food packaging materials. Receives
technology under license from Kureha.

OTHER OPERATIONS
Nishiki Trading Co., Ltd.
(Change the company’s name to Kureha Trading Co., Ltd. on
April 1, 2010)
Sells and supplies advanced materials, specialty chemicals,
specialty plastics, and other products.

Kureha Advanced Materials, Inc.
Manufactures and sells carbon products in the U.S.

Kureha Unyu Group(Kureha Unyu Co., Ltd., and six subsidiaries)
Undertakes transportation and storage operations.

Kureha Chemicals Shanghai Co., Ltd.
Manufactures and sells carbon products. Purchases raw
materials from and sells products to Kureha.

Kurehanishiki Construction Group(Kurehanishiki Construction Co., Ltd., and three subsidiaries)
Undertakes engineering and construction work.

SPECIALTY CHEMICALS

Kureha Service Co., Ltd.
Conducts real estate transactions, leasing and management,
and other services. Performs certain operations for Kureha.

Kureha Corporation
Manufactures and sells inorganic chemicals, organic
chemicals, pharmaceuticals, pharmaceuticals for animals, andagrochemicals and other materials for agricultural use.

SPECIALTY PLASTICS
Kureha Corporation
Manufactures and sells food packaging materials, householdproducts, and synthetic fiber products and sells the raw
materials used to make these products.
Kureha Gosen Co., Ltd.
Manufactures and sells synthetic fibers. Purchases raw
materials from and sells some products to Kureha.

44

Krehalon Industrie B.V.
Manufactures and sells food packaging materials in the
Netherlands. Receives raw materials from Kureha.

Kureha Plastics Co., Ltd.
Manufactures and sells food packaging materials. Purchases
raw materials from and sells products to Kureha.

Kureha Ecology Management Co., Ltd.
Undertakes industrial waste and medical waste processing.
Kureha Engineering Group
Undertakes plant engineering and management operations,safety-related operations, and environmental protection
services.
Kureha Special Laboratory Co., Ltd.
Analyzes, measures, and performs environmental assessmentsfor various substances. Performs tests for some Kureha
products.
Kureha Staff Service Co., Ltd.
Undertakes temporary support operations and contracting
services for manufacturing and logistics businesses. Kureha
outsources part of its business to Kureha Staff Service.

Executives (As of June 25, 2010)

Investor Information (As of March 31, 2010)

Board Of Directors

Corporate Data

Takao IWASAKI
Koji HAGINO
Naoya SUZUKI
Keikichi MUNAKATA
Yutaka KOBAYASHI
Tadashi SAGAWA
Norikazu SUNOU
Yoshiki SHIGAKI
Kunihiko SAITO
Takeshi TAKAHASHI

Corporate Name
Headquarters

President & Chief Executive Officer
Executive Vice President
Executive Vice President
Executive Vice President
Senior Vice President
Senior Vice President
Senior Vice President
Senior Vice President
Independent Outside Director
Independent Outside Director

Date of Establishment
Paid-in Capital
Number of Employees
Independent Auditor

KUREHA CORPORATION
3-3-2, Nihonbashi-Hamacho,
Chuo-ku, Tokyo 103-8552, Japan
Tel: 81-3-3249-4666
Fax: 81-3-3249-4744
June 21, 1944
¥12,460 million
4,101 (consolidated)
1,352 (non-consolidated)
Nihombashi Corporation

Board Of Corporate Auditors

Stock Information

Yasumasa HIRANO
Corporate Auditor
Hiromichi KAMEYAMA Corporate Auditor
Yutaka AKUNE
Corporate Auditor
Kazutoshi KIMURA
Corporate Auditor

Number of Shares ofCommon Stock Issued 181,683,909 shares
Number of Shareholders 16,308
Number of Shares Held byForeign Shareholders 31,740,000 (17.5% of total)
Stock Exchange Listings Tokyo Stock Exchange,
Osaka Securities Exchange
Transfer Agent
Mizuho Trust & Banking Co., Ltd.

Executive Officers
Takao IWASAKI
Koji HAGINO
Naoya SUZUKI
Keikichi MUNAKATA
Yutaka KOBAYASHI
Tadashi SAGAWA
Norikazu SUNOU
Yoshiki SHIGAKI
Nobuyuki HIRUTA
Yukihiro SHIBUYA
Naoki FUKUZAWA
Naoki UEDA
Hideo NAKATANI
Shusuke MATSUO
Takashi YAMAMOTO
Yoshiharu OGUCHI

President & Chief Executive Officer
Executive Vice President
Executive Vice President
Executive Vice President
Senior Vice President
Senior Vice President
Senior Vice President
Senior Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President

Major Stockholders
Japan Trustee Service Bank, Ltd. (trust account)
Meiji Yasuda Life Insurance Company
Tokio Marine & Nichido Fire Insurance Co., Ltd.
The Master Trust Bank of Japan, Ltd. (trust account)
SSB Client Omnibus OM 04
Daiichi Sankyo Company, Ltd.
JuniperMizuho Corporate Bank, Ltd.
Japan Trustee Service Bank, Ltd. (trust account 9)
Sonpo Japan Insurance Inc.

45

http://www.kureha.co.jp/