Annual Report

2004“Making human life richer and more comfortable through technological innovations”

Profile

Contents
Financial Highlights ......................... 1
To Our Shareholders ........................ 2
Basic Stance on Corporate
Governance and Measures ............ 5
Review of Operations ....................... 6
Responsible Care .............................. 8
Management Indices ...................... 10
Financial Section
Report of Independent Auditors . 13
Consolidated Balance Sheets ...... 14
Consolidated Statements ofIncome ..................................... 16
Consolidated Statements ofShareholders’ Equity ............... 17
Consolidated Statements ofCash Flows .............................. 18
Notes to Consolidated Financial
Statements ............................... 20
Corporate Data ............................... 31

Since the establishment in 1941, we have carried out original research and development in 4 major fields such as polymer
synthesis, environment preservation systems, and organic synthesis,that is, our core catalyst technology.
Our major products are 1) Basic Chemicals, such as acrylicacid, and ethylene oxide, higher alcohol surfactants, 2) Functional
Chemicals, such as super absorbent polymers, concrete admixture
and unsaturated polyester resins...etc., and 3) Environment andCatalysts, such as catalysts for cleaning automobile exhaust gases,
process catalysts and dioxins decomposition/elimination equipments. Created through our company’s original technologies andknow-how, our products above have made various contributions to
our society and people’s daily lives.
In addition, our technologies for manufacturing chemical
products are appreciated in foreign countries as well as our diversified line of products. We have exported our technologies for processing acrylic acids and esters, methacrylic acids and esters, etc. toEurope, Asia, the U.S.A, etc.
In recent years, we have made efforts to reinforce our business base with active overseas expansion strategy. Our factories inNorth America, East and Southeast Asian are producing 450 thousand tons of acrylic acid annually. Besides, we are currently establishing our super absorbent polymer production bases in North
America, Europe, and Japan. In conjunction with the constructionof new production facilities at Nisshoku Chemical Industry(Zhangjiagang) Co., Ltd., in China, our Group’s production capacity for super absorbent polymers will rise to 320 thousand tons per
year.
Under our corporate philosophy of “Techno Amenity,”
which seeks to harmonize “Technology” and “Natural Environment,” focusing on our ultimate objective, “making human lifericher and more comfortable through technological innovations,”
we are aiming to become a “global company creating new values
through unique technologies.” approaching this goal, we have been
establishing a solid business foundation for the 21st century bystrengthening our overall corporate structure. Further, for reinforcing our core businesses, promoting the development of new products, and developing our environmental business, we are carefully
considering the direction of individual businesses and being selective and focused on our allocation of business resources.

Financial Highlights
Nippon Shokubai Co., Ltd. and Consolidated Subsidiaries
Years ended March 31

Millions of yen

Thousands of
U.S. dollars

2004

2003

2002

2004

For the YearNet Sales ........................................
Operating Income ..........................
Ordinary Income ...........................
Net Income ....................................

¥169,733
15,45017,212
8,822¥163,514
12,757
10,971
5,516¥159,722
8,963
5,558
1,590

$1,605,799
146,168
162,838
83,463

At Year-End
Total Assets ...................................
Total Shareholders’ Equity ...........

220,185
131,685¥216,756
121,297¥230,253
120,238$2,083,113
1,245,837

Yen

Per Share Amounts
Net Income ....................................
Cash Dividends .............................

¥45.37
9.00

U.S. dollars¥27.97
7.00

¥8.16
7.00

$0.43
0.09

Foreign Exchange Rate: US$1.00 = ¥105.7

Net Sales

Net Income

Shareholders’ Equity(Billions of yen)(Billions of yen)(Billions of yen)

10

200

162 161 160 164

150
131.7

8.8

170

8

120

118.8 117.3 120.2

121.3

ʼ00

ʼ0 3 ʼ04

150

6

5.5

90

100
4

60
2.7

50
2

30

1.6
1.2

0

ʼ00

ʼ01

ʼ02

ʼ0 3 ʼ04

0

ʼ00

ʼ01

ʼ02

ʼ0 3 ʼ04

0

ʼ01

ʼ02

| Nippon Shokubai Co., Ltd. | 1 |To Our Shareholders
It gives me great pleasure to report on theperformance of Nippon Shokubai Co., Ltd., for the
fiscal year ended March 31, 2004.

Performance
In fiscal 2003, ended March 31, 2004, Japan’s
economy showed steady signs of recovery. Supported
by growing private sector capital investment andexports, personal consumption and employment
conditions began to move steadily upward in thesecond half of the fiscal year.
Despite pressure on profitability from the steep risein the price of raw materials, the chemical industry
overall enjoyed strongly expanded exports mainly toAsia, and our business performance began to improve.
In such circumstances, consolidated net sales
increased by ¥6,219 million, or 3.8%, to ¥169,733
million, owing to the sales growth of ethylene glycols,acrylic acid, acrylic esters, and other Basic Chemicals,in spite of the sales decrease of Functional Chemicals
caused by the transfer of the unsaturated polyester
resin operations to a joint venture and the intensifying
competition in the concrete admixtures market.
In spite of increasing raw material cost, mainly due
to the steep rise in naphtha price, the consolidated
operating income increased by ¥2,693 million, orHiroshi Yanagida, President(Unit: millions of yen)

Performance
Highlights
Net sales
Operating income
Ordinary income
Net income
Net income per share
ROA
ROE
Exchange rate

Performance by BusinessGroup and Region

Naphtha priceFiscal Year
2003
2002
169,733
163,514
15,45012,757
17,212
10,971
8,822
5,516¥45.37¥27.97
7.9%
4.9%
7.0%
4.6%
$=¥113.11$=¥121.96
EUR=¥132.64 EUR=¥120.98¥25,700/kl¥24,000/kl

ChangeAmount
6,219
2,693
6,241
3,306
¥17.40
—
—

%
3.8%
21.1%
56.9%
59.9%
62.2%
3.0 points
2.4 points(¥8.85)¥11.66¥1,700/kl(Unit: millions of yen)

Fiscal Year 2003

Fiscal Year 2002

ChangeProduct GroupBasic
Chemicals

Functional
Chemicals

Environment& Catalysts

Basic
Chemicals

Functional
Chemicals

Environment& Catalysts

Basic
Chemicals

Functional
Chemicals

Environment& Catalysts

Sales
Operating income
Regional
Sales
Operating income

63,3204,261
Japan
135,575
12,85890,646
10,411
Europe18,817957

15,766829
Other Regions
15,339986

54,650(1,059)Japan
134,113
11,43591,657
11,869Europe16,002
1,038

17,206
1,906
Other Regions
13,398
(74)

8,669
5,320
Japan
1,462
1,423

(1,010)(1,457)
Europe2,815(80)(1,439)(1,077)
Other Regions
1,940
1,060

| 2 | Nippon Shokubai Co., Ltd. |21.1%, to ¥15,450 million, as the result of risingmarket prices of basic chemicals, increase of sales
volumes and our continuous efforts to reduce the costof production and sales as well as the general cost.
Consolidated ordinary income increased by ¥6,241
million, or 1.6 times, to ¥17,212 million, owing to theincrease of technical license revenues and the recovery
from loss to income in equity in unconsolidated
subsidiaries and affiliates.
The Company booked an extraordinary loss during
the fiscal year due to an early adoption of a new
accounting standard for impairment accounting for
fixed assets. Despite this, consolidated net income
increased by ¥3,306 million, or 1.6 times, to ¥8,822
million.
Consolidated net income per share amounted to¥45.37. Return on consolidated assets (ROA) was
7.9%, up 3.0 points from the previous fiscal year while
return on consolidated equity (ROE) increased by 2.4
points, to 7.0%.
On a non-consolidated basis, net sales increased by¥6,009 million, or 4.7%, to ¥132,622 million.
Operating income increased by ¥1,367 million, or
13.4%, to ¥11,579 million, while ordinary income
increased by ¥3,348 million, or 1.3 times, to ¥14,228
million. Net income increased to ¥5,966 million,¥2,872 million more, or 1.9 times of the previous fiscal
year.
Our company announced a year-end cash dividendof ¥5.00 per share for fiscal 2003, considering thebusiness circumstances and our achievements.
Including the interim cash dividend, total cash
dividends for the fiscal year amounted to ¥9.00 per
share, up ¥2.00 per share, more than the previous fiscal
year.

Medium- and Long-term Business Plans
Today’s chemical industry faces an extremely
difficult situation. As international markets has
become more unified and borderless, and competition
for survival has intensified. Under such the lasting
severe conditions, companies without any strong point
have been weeded out.
Under such circumstances, we have given toppriority to the pursuit of quality growth based onrecognizing our strengths and weaknesses and on
sifting and concentrating our business resources.
Based on this prioriy, we prepared the Long-term
Business Plan and the Medium-term Business Plan—apractical scheme for every three years—that was
implemented in April 2001. During fiscal 2003, we
initiated the New Medium-term Business Plan basedon the result of the previous Medium-term Business
Plan, aiming for further growth.
Summary of the Long-term Business Plan,“TechnoAmenity NV”
1. Our future vision of the company is “a global
company creating new values through unique
technologies.”
2. With a slogan, “A Shift from Quantitative Growth
to Qualitative Growth for Our Development in the
21st Century,” we are aiming to convert ourselves
into a more powerful enterprise, by sifting andconcentrating our business resources in newly
developed product fields, establishing a businessportfolio in our existing fields, clarifying profit
responsibilities, and to activating the staffs andorganization.
3. For increasing efficiency of assets and profitability,
we have presented “return on assets (ROA) on aconsolidated basis” as a target for overall corporate
performance, and “operation cash flow and sales
profit” as a target for our business operations,which are our original indexes.
Results of the Previous Medium-term Business Plan
During the period of the previous Medium-term
Business Plan, we implemented a diversification of
measures. Among existing product groups, we took
steps to develop overseas markets for super absorbent
polymers and acrylic acid. We also agreed with
Sumitomo Chemical Co., Ltd. to exchange acrylic acidand methyl methacryllate (MMA) monomer
businesses. In our resin operations, we establishedJapan Composite Co., Ltd., jointly with Mitsui Takeda
Chemicals, Inc.
In new product fields, we focused our effort on
major development themes. As part of this effort, weestablished the New Business Planning Division andplaced Company directors in charge of eachdevelopment theme.

| Nippon Shokubai Co., Ltd. | 3 |Among other activities, we introduced a virtual
business division system and a new personnel system,
through which we established integrated information
system for the entire Company, covering our core
information system, and we aimed to vitalize our staff
and our organizations.
Summary of the New Medium-term Business Plan

development and research work for marketing of new
products.
In the field of Environment and Catalysts Group,
we are specializing in catalysts technology, which is
our core technology. We have established a New
Energy Business Unit to concentrate on new energyrelated businesses.

Under the New Medium-term Business Plan,following the direction of our Long-term Business Plan,
we are focusing on creating and developing new
product businesses, as well as increasing the proportionof overseas sales to the whole sales.

For overseas business, utilizing our group bases inNorth America, Europe, and Asia, we will develop
worldwide operations to increase the proportion ofoverseas sales to the whole sales.

As concrete steps for the existing businesses, we
agreed with Sumitomo Chemicals Co., Ltd. to take over
the acrylic acid operation in Singapore, that will
increase our group’s annual production capacity foracrylic acid by 30 thousand tons, to 450 thousand tons.

Through such strategies as above, we aim toachieve the goal of our new Medium-term Business
Plan—consolidated “ROA of 7% or more”—, increase
the efficiency of assets, and, finally, to establish ourgroup with stable profitability that may not be
influenced by market conditions.

For producing super absorbent polymers in China,
we have established a company, Nisshoku Chemical
Industry (Zhangjiagang), Jiangsu, China, and we expect
to complete the plant with annual capacity of 30
thousand tons within this year. In addition, Nippon
Shokubai Europe N.V. in Belgium is planning toincrease its annual capacity by 30 thousand tons in2005. When these expansions have been completed, theannual capacity of super absorbent polymers of ourgroup will be 320 thousand tons, which will keep
Nippon Shokubai Group at the top position of superabsorbent polymer business in the world.
To develop new businesses, we are giving toppriority to the business strategy based on our clear longterm vision. As a part of that strategy, we havereorganized the existing organization, setting up theFine and Specialty Chemicals Business Division and
the Performance Chemicals Business Division.
The Fine and Specialty Chemicals Business
Division handles such product groups as to be soldunder the strategy supported by research anddevelopment. It also works for reinforcing the overseas
business, and actively seeks business alliances.
The Performance Chemicals Business Division’s
work is to create and grow new products. The division
adopts a business unit system to unify sales operation,| 4 | Nippon Shokubai Co., Ltd. |We hope all shareholders around the world would
extend kind cooperation and support to us as ever.

June 2004

Hiroshi Yanagida
PresidentBasic Stance on Corporate Governance and Measures
We are reinforcing the structureof our company so that we might
be competitive enough keep up
with the worldwide changes aroundus. We deem corporate governancea key for reaching the goal. We
will aim to have a more active
board of directors, a firmer
auditing system, a more efficientbusiness operations, and a more
steady and reliable compliancesystem.

board of directors for decisionmaking. The corporate management committee consists of thepresident, vice president, senior
managing directors, managing
directors, and other directors
appointed by the president. Aiming
to speed up the decision-making
process and to improve operating
efficiency, the committee covers
on major operating issues.
● The Board of Corporate

Corporate Governance
Measures and Status
Our corporate governancesystem is comprised of thefollowing management bodies
aiming at speeding up decision,
execution, and monitoring performance of management. We have
corporate auditor system as anorganization for corporate compliance. Out of the Company’s four
auditors, two are outside ones.
● Board of Directors

At the end of March, 2004, theboard of directors consisted of 15
members. Their role is to consider
and make decisions on business
operations and to monitor the
performance of directors who arecorporate officers. In principle, wehave the board once a month overwhich the president presides. The
Company’s four corporate auditors,
including two outside ones, also
attend board meetings and give
their opinions when required.
● Corporate Management

Committee
The corporate management
committee is an advisory body forthe president. It considers issues
related to fundamental business
policies and strategies, and related
to business execution issues ofdivisions. After screening,
important issues are passed to the

Auditors
The board of corporate auditors
consists of four auditors consists offour auditors, two of which areoutside auditors. In principle, theboard meets once a month toreport, discuss, and to makedecisions on important issues. As
well as the board of directors’
meetings, corporate auditors attend
the meetings of the corporate
management committee and otherimportant meetings forunderstanding the Company’s
performance and for making
significant decision and businessexecution. In addition, thecorporate auditors receive reports
from the independent auditors,
directors and other employees of
the Company on which, after
deliberation, they issue audit
report.

Possible Conflicts ofInterest Among Outside
Directors and Auditors
The current two outside auditors
have no personal or any otherrelationships through investmentsthat could create a conflict ofinterest in the performance of theirduties.

Measures Introduced
Over the Past Year toStrengthen Corporate
GovernanceDuring the fiscal year, thesections in charge gave complianceexplanation seminars and otherwise
took measures to ensure thoroughcompliance based on the
Company’s Basic Policy on
Compliance, which was issued in
March 2003. In addition, to earn thetrust of customers and society, theCompany carried out environmental
protection, chemical safety, andprocess safety and disasterprevention, and other Responsible
Care (RC) activities based on its
basic RC promotion plan.

● Third-Party Involvement byLegal Advisor andIndependent Auditor
The Company has a legal
advisor to consult with on mattersthat require a legal opinion. The
independent auditor, in addition tocarrying out audits in accordancewith the Commercial Code ofJapan and the Securities andExchange Law, also provides
opinions on accounting matterswhen required. Neither the legal
advisor nor the independent auditor
has any involvement in actual
business decisions.

| Nippon Shokubai Co., Ltd. | 5 |Review of Operations

Basic Chemicals FunctionalGroup
Chemicals Group

Breakdown andComponent Ratio by EachBusiness Group(100 millions of yen)
Environment &Catalysts Group158 9.3%
Basic
Chemicals
Group
633
37.3%

Several factors contributed to
growth in sales of acrylic acid andacrylic esters during the fiscal year.
Global market prices rose for bothproducts, and demand was firm foracrylic esters.
Sales of ethylene glycols
increased owing to improved prices
on international markets, andexpanded sales volumes both inJapan and abroad.
Sales of ethylene oxide werealso firm, rising somewhat.
Sales of ethanolamine increased
since we could keep up with thefirm demand from overseas markets

Functional
Chemicals Group
906 53.4%

with the newly developed
production method.
We made up for the decline indemand for higher-alcohol
surfactants (SOFTANOL) in Japan
with expanded exports during the
fiscal year. However, on a net basis,
sales decreased.
Overall, sales of the Basic
Chemicals Group increased by
15.9% from the previous fiscal year,to ¥63,320 million.
Operating income of the group
amounted to ¥4,261 million, moving
back into the black from a loss inthe previous fiscal year. Although
the sharp hike in naphtha prices
drove up raw material costs, pricesrose for ethylene glycols and acrylic
esters during the fiscal year andincreased sales volumes provided
cost benefits, supported the growth
in profitability.
| 6 | Nippon Shokubai Co., Ltd. |Expanding world demand forsuper absorbent polymers pushed up
sales volume in fiscal 2003, andresulted in sales growth.
Sales of resin modifiers andIntermediates for agriculturalchemicals and pharmaceuticals fellduring the fiscal year due to thedeclining demand.
Demand was strong for maleic
anhydride in Japan and overseas,
resulting in sales growth in fiscal
2003.
Sales volumes of concrete
admixtures increased due to theintroduction of a new type ofadmixture and to rising exports.
However, the lowered price due tothe intensified competition resulted
in decrease in profit.
Sales of raw materials for paints,
resins and detergents increased,
supported by the firm overseas
demand.
Sales of iodine compounds
increased due to the favorable
demands.
The firm domestic and overseas
demands for organic and inorganic
fine sphere particles resulted inoverall sales growth.
Sales of the adhesives andtackifiers and paint resins of acrylic
family increased owing to strong
domestic demand. Sales of adhesive
processed product also increased.
Because of the transfer of theunsaturated polyesters resin
operations to Japan Composite Co.,

Ltd., our joint venture with Mitsui
Takeda Chemicals, Inc., theCompany only ran commissioned
production, which resulted in lower
sales of unsaturated polyesters
resin.
Sales of heat-resistant andelectrical insulating paints declined
due to weak demand in Japan.
Sales of plastic molded products
also remained weak, reflecting
stagnant demand.
Sales of other fine chemicals
rose because of strong demands forsuch new products as
Vinylpyrrolidone, and polymers forlithium metal batteries.
Overall, Sales of the Functional
Chemicals Group decreased by
1.1%, to ¥90,646 million comparedwith the previous fiscal year.
Operating income decreased by
12.3%, to ¥10,411 million. Despite
the increase in sales volume, rising
prices of some raw materials andweak product prices resulted inoverall decline in profitability.

Environment & Catalysts Group
Sales of industrial catalysts
through technology licensing
decreased because of fewer
replacement.
Due to the inactive demands
from electric power plants, sales of
De-NOx catalysts decreased.
Sales of automotive catalysts
rose because of strong demands inexport markets.
Sales of Catalytic Dioxins
Decomposition and Removal
System and Catalytic Oxidation
System for Waste Gas sunk due toinactive domestic demand.
Overall, sales of theEnvironment & Catalysts Group
totaled ¥15,766 million, 8.4% lessthan the previous fiscal year.
Operating income fell 56.5%, to¥829 million.

Regional Information
Japan
Although the sales of someproducts of Functional Chemicals
and of Environment & Catalysts
declined, the big sales growth of
Basic Chemicals supported overall
domestic sales growth. As a result,sales in Japan increased by 1.1%, to¥135,575 million.
Regional operating income
increased by 12.4%, to ¥12,858
million, to which recovered market
prices and increased sales volumesof some Basic Chemicals’ products
contributed.

EuropeSupported by the stable sales ofsuper absorbent polymers, net salesin Europe increased by 17.6% morethan previous fiscal year, to¥18,817 million, to which theincreased sales volumes
contributed. However, operating
income decreased by 7.8% to ¥957
million due to the increase of raw
material cost, etc..

Breakdown and Component
Ratio by Region(100 millions of yen)

Other Regions
153 9.0%
Europe188 11.1%

Other Regions
Sales in other regions increasedby 14.5% to ¥15.339 million,
principally due to strong Basic
Chemicals sales in Asian markets.
Regional operating income ismoving back into the black as ¥986
million, to which recovered market
prices and increased sales volumesof some Basic Chemicals’ products
contributed.

Japan
1,356
79.9%

| Nippon Shokubai Co., Ltd. | 7 |Responsible Care
1. Nippon Shokubai’s Fundamental Policy Regarding Environmental
Preservation, Safety and Quality
We believe that we have to be a good corporate
citizen of this world, and place a special emphasis onenvironmental preservation, safety and quality
throughout the entire life cycle of our products from thedevelopment to disposal. Under the key concept“Sustainable Development,” which is the fundamental
policy of our corporate activities, and which serves toharmonize our activity with environmental preservation
on global basis.

2. RC Promotion Organization(1) RC Promotion System(2) RC Management System

Note:“FY” Stands for fiscal year.

th

3. 4 Medium-Term RC Promotion
Basic Plan (FY2004 — FY2006)

ISO Certification
ISO 14001:
Certification of all operations completed in July 2001.
ISO 9001:
Certification of all operations complete. Upgrading to improved 2000
standards completed in 2003.

4th Basic Plan Implementation Items

Goals(1) Voluntarily pursuing goals in each of the related areas within
the company
Environmental preservation● 50% reduction of emissions based on PRTR chemical substances.

(vrs. FY2000)● Reduction of amount of externally commissioned waste● 40% reduction of total externally commissioned waste disposal

Chemical substance safety● Zero chemical substance problems (legal or social).
Communications with society● Communicate with regional communities regarding RC and hold
events.
Quality● Zero major claims(vrs. FY2002)● Reduction of waste for external landfill disposal.
● Energy saving activities: maintain basic energy unit at FY1997

levels (112.6 L/t)
Process, Safety and Disaster Prevention● Zero disaster, 50% reduction of accidents. (vrs. FY2001 – FY2003)
Occupational safety and health● Zero industrial injuries with lost workdays.
● 50% reduction of industrial injuries without lost workdays.
(vrs. FY2001 – FY2003)| 8 | Nippon Shokubai Co., Ltd. |(2) Development of RC activities by the Group
Construct systems and promote activities of RC by the Group including
domestic and overseas affiliated companies.
● Management of the above RC goals occurs at the same level as in the

Company. Group companies seek to attain the same performance as theCompany.

4. RC Performance in FY2003(1) Environmental Preservation
1 Energy Saving
2 Reduction of emissions based on PRTR
chemical substances
3 Reduction of industrial waste(5) Communications with regional communities
Regional activities (potato digging,conservation of local chrysanthemums“Noji-Giku”), regional community dialogue
with JRCC, international contributions.

5000

0.005

4000

0.004

3000

0.003

2000

0.002

1000

0.001

0

90

91 92

93

94 95

96 97

98 99

00

01

02

03

Basic Unit (tons/ tons production amount)

Disposal Amount (tons)

Final Amount of External Landfill Disposal

Conservation of local
chrysanthemums “Noji-Giku”

Potato digging

Regional Community
Dialogue with JRCC

Acceptance of ASEAN
RC related people

0.000

Final Amount of External Landfill Disposal
Basic Unit

(2) Process Safety and Disaster Prevention
1 Prior facilities assessment and safety
reassessment by HAZOP method.
2 Disaster prevention organization and training.
3 There have been no disasters in 7 years since
FY1997.
4 Logistics safety: Yellow Card system used,training for transport emergencies.
(3) Occupational Safety and Health
OSHMS (Occupational Safety and HealthManagement System) introduced since FY2001,
self-verification.
(4) Chemical Substance Safety
Safety assessment of new products, useof MSDS, LRI, HPV, container Yellow Card.

PRTR: Pollutant Release and Transfer Register
A regulatory system which requires reporting of emission volumes ofchemical substances into the air, water and soil and transferred volumesof wastes. Data compiled to the government bodies are disclosed to the
public.
HAZOP: Hazard and Operability Studies
An execution to estimate the safety of plants.
Yellow Card:
A card stating the procedures to be taken and contact information fortransporters, fire squads, and police in the event of an accident during
the road transport of chemical substances.

(6) Group RC Activities in Japan and Abroad
The Nippon Shokubai Group mutual cooperates
and supports the activities of the Group companies
in order to raise the level of RC activities.
1 Domestic-affiliated companies:
RC information exchange and mutual site
inspections carried out twice annually.
2 Overseas-affiliated companies:
Have started exchanging RC information.
Information exchange content:• Sharing of information on labor accidents
and equipment troubles• Reports on environmental emissions• Disclosure of RC activities plans

MSDS : Material Safety Data Sheet
A document that describes the health, safety and environmental hazardsof a material and provides information on how the material can be safely
handled, used and disposed.
LRI: Long-range Research Initiative
A voluntary long-term plan to study the effects of chemical substanceson health, safety, and the environment, one of ICCA’s most crucial
agendas.
HPV: (High Production Volume) Preexisting Chemical Substances
An OECD program for collecting and evaluating safety data on chemical
substances with production volumes exceeding 1,000 tons per country.
JRCC: Japan Responsible Care Council
An organization established within JCIA in 1995 for the promotion of
RC in Japan.

| Nippon Shokubai Co., Ltd. | 9 |Management Indices(1) Consolidated Management Indices
PeriodFiscal Year End

88th
March
2000

89th
March
2001

90th
March
2002

91st
March
2003

92nd
March
2004
(Millions of yen)

Net Sales
Ordinary Income
Net Income
Total Shareholders’ Equity
Total Assets

162,461
5,088
2,659
118,820
216,896

160,585
4,303
1,242
117,340
230,468

159,7225,558
1,590
120,238
230,253

163,514
10,971
5,516
121,297
216,756

169,733
17,212
8,822
131,685
220,185(yen)

Net Assets per ShareNet Income per Share
Fully Diluted Net Income per Share
Capital Ratio (%)
Return on Equity (%)
Price Earning Ratio (times)

609.72
13.54—

602.116.37—

617.058.16—

631.1227.97—

685.20
45.37
—

54.8
2.3
33.2

50.9
1.1
70.6

52.2
1.3
62.0

56.0
4.6
20.4

59.8
7.0
18.0
(Millions of yen)

Cash Flow from Operating Activities
Cash Flow from Investing Activities
Cash Flow from Financing Activities
Cash and Cash Equivalents at Year-end
Number of Employees

18,285(5,709)(13,463)
22,827

9,757(12,961)(6,584)
14,806

17,268(8,178)(1,579)23,151

23,117(8,751)(15,956)
21,217

16,399(9,161)(9,506)
18,654

3,050

3,189

3,077

2,967

2,658

Note 1: Net Sales do not include consumption taxes.
Note 2: Starting with the fiscal year ended March 2003, net assets and net income per share have been prepared in accordance with Financial
Accounting Standard No.2, “Accounting Standards for Earnings per Share,” and Financial Accounting Standard Implementation Guidance
No.4, “Implementation Guidance for Accounting Standard for Earnings per Share.”Note 3: Fully diluted Net Income per Share is not recorded because no dilutive shares exist.

| 10 | Nippon Shokubai Co., Ltd. |(2) Non-consolidated Management Indices
PeriodFiscal Year End

88th
March
2000

89th
March
2001

90th
March
2002

91st
March
2003

92nd
March
2004
(Millions of yen)

Net Sales
Ordinary Income
Net Income
Capital128,086
4,616
3,097
16,529129,712
5,205
2,539
16,529123,706
8,054
1,744
16,529126,612
10,8793,094
16,529132,622
14,228
5,966
16,529Issued and Outstanding Shares(Thousands shares)

194,881

194,881

194,881

194,881

194,881(Millions of yen)

Total Shareholders’ Equity
Total Assets

113,470
189,999

114,568
189,236

115,578
188,821

115,593
176,155

124,417
182,806(yen)

Net Assets per ShareDividend per Share(Interim Dividend per Share)
Net Income per Share
Fully Diluted Net Income per Share582.257.00(3.50)
15.77—

587.897.00(3.50)
13.03—

593.147.00(3.50)
8.95—

601.487.00(3.50)
15.55—

647.41
9.00(4.00)
30.56—

Capital Ratio (%)
Return on Equity (%)
Price Earning Ratio (times)
Dividend Payout Ratio (%)

59.7
2.8
28.5
44.3

60.5
2.2
34.5
53.7

61.2
1.5
56.5
78.2

65.6
2.7
36.7
45.0

68.1
5.0
26.7
29.5

Number of Employees

2,127

2,004

1,937

1,881

1,774

Note 1: Net Sales do not include consumption taxes.
Note 2: Starting with the fiscal year ended March 2002, treasury stock has been eliminated from capital and also eliminated from issued and outstanding shares in the calculation of net assets and net income per share.
Note 3: Starting with the fiscal year ended March 2003, net assets and net income per share have been prepared in accordance with Financial
Accounting Standard No.2, “Accounting Standards for Earnings per Share,” and Financial Accounting Standard Implementation Guidance
No.4, “Implementation Guidance for Accounting Standard for Earnings per Share.”Note 4: Fully diluted Net Income per Share is not recorded because no dilutive shares exist.

| Nippon Shokubai Co., Ltd. | 11 |Consolidated Financial Statements
Years ended March 31, 2004 and 2003

Report of Independent Auditors .............................................. 13
Consolidated Balance Sheets .................................................. 14
Consolidated Statements of Income ........................................ 16
Consolidated Statements of Shareholders’ Equity ................. 17
Consolidated Statements of Cash Flows ................................. 18
Notes to Consolidated Financial Statements .......................... 20| 12 | Nippon Shokubai Co., Ltd. |Report of Independent Auditors| Nippon Shokubai Co., Ltd. | 13 |Consolidated Balance Sheets
Nippon Shokubai Co., Ltd. and Consolidated Subsidiaries

March 31,
2003

2004

2004
(Thousands of
U.S. dollars)( Note 2)(Millions of yen)

AssetsCurrent assets:
Cash and cash equivalents .......................................................
Time deposits (Note 7) .............................................................
Notes and accounts receivable:
Unconsolidated subsidiaries and affiliates ...........................
Trade .....................................................................................
Allowance for doubtful receivables ......................................
Inventories (Note 5) .................................................................
Deferred income taxes (Note 9) ...............................................
Other current assets ..................................................................

¥

18,65418¥

21,217
38$

176,481
170

5,505
39,042(112)
23,918
2,666
5,771

4,055
37,805(103)
23,7682,461
4,620

52,082
369,366(1,060)226,281
25,22354,598

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

95,462

93,861

903,141

Property, plant and equipment (Notes 6 and 7):
Land ..........................................................................................
Buildings and structures ...........................................................
Machinery and equipment ........................................................
Construction in progress ..........................................................
Accumulated depreciation........................................................

25,08658,268203,991
639(210,826)

28,24258,417211,153824(214,705)

237,332
551,258
1,929,906
6,045(1,994,569)

Property, plant and equipment, net ............................................

77,15883,931

729,972

Investments and other assets:
Investments in securities (Notes 4 and 7) ................................
Investments in and advances to unconsolidated
subsidiaries and affiliates ......................................................
Deferred income taxes (Note 9) ...............................................
Prepaid pension cost .................................................................
Other assets ..............................................................................

21,83910,896206,613

11,456
1,669
1,972
10,62910,9483,800
2,073
11,247

108,382
15,79018,657
100,558

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

47,56538,964450,000

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

¥ 220,185¥ 216,756$ 2,083,113| 14 | Nippon Shokubai Co., Ltd. |March 31,
2003

2004

2004
(Thousands of
U.S. dollars)( Note 2)(Millions of yen)

Liabilities and shareholders’ equity
Current liabilities:
Short-term bank loans (Note 7) ................................................
Current portion of long-term debt (Note 7) .............................
Notes and accounts payable:
Unconsolidated subsidiaries and affiliates ...........................
Trade .....................................................................................
Construction ..........................................................................
Accrued income taxes (Note 9) ................................................
Other current liabilities ............................................................

¥

7,188
11,825¥

11,786
8,493$

68,004
111,873

3,856
25,270
685
3,206
8,911

2,745
25,651
299
2,871
7,920

36,481
239,072
6,481
30,33184,30560,941

59,765576,547

16,0706,609

24,3777,111

152,034
62,526

292
1,077
1,741

427
466
1,485

2,763
10,18916,471

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

25,78933,866

243,983

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

1,770

1,828

16,746

Shareholders’ equity (Note 10):
Common stock:
Authorized – 424,000,000 shares
Issued – 194,881,287 shares in 2004 and 2003 ....................
Additional paid-in capital ........................................................
Retained earnings .....................................................................
Net unrealized holding gain on securities ................................
Translation adjustments ...........................................................
Less treasury stock, at cost .......................................................

16,52913,563
98,947
4,961(839)(1,476)

16,52913,56291,652539
468(1,453)

156,377
128,316
936,11246,935(7,938)(13,965)

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

131,685

121,297

1,245,837

Total liabilities and shareholders’ equity ...................................

¥ 220,185¥ 216,756$ 2,083,113

Total current liabilities ...............................................................
Long-term liabilities:
Long-term debt (Note 7) ..........................................................
Accrued retirement benefits for employees (Note 8) ...............
Accrued retirement benefits for directors andcorporate auditors .................................................................
Deferred income taxes (Note 9) ...............................................
Other .....................................................................................

Contingent liabilities (Note 13)

See accompanying notes to consolidated financial statements.

| Nippon Shokubai Co., Ltd. | 15 |Consolidated Statements of Income
Nippon Shokubai Co., Ltd. and Consolidated Subsidiaries

Year ended March 31,
2003

2004

(Millions of yen)

2004
(Thousands of
U.S. dollars)( Note 2)

Net sales (Note 16) .....................................................................
Cost of sales (Note 11) ...............................................................
Gross profit ...........................................................................

¥ 169,733
125,699
44,034¥ 163,514
121,666
41,848$ 1,605,799
1,189,205
416,594

Selling, general and administrative expenses (Note 11) ............
Operating income (Note 16) .................................................

28,584
15,45029,091
12,757

270,426
146,168

596
(602)
1,929
–

590
(1,020)622(2,496)

5,639(5,696)
18,250–

Other income (expenses):
Interest and dividend income ...................................................
Interest expense ........................................................................
Royalty income ........................................................................
Loss on devaluation of investments in securities ....................
Equity in earnings (losses) of unconsolidated
subsidiaries and affiliates ......................................................
Gain on sales of property, plant and equipment ......................
Gain on return of substitutional portion of
Welfare Pension Fund Plan (Note 8) ....................................
Amortization of excess of cost over net assets acquired .........
Impairment loss on fixed assets (Note 6) .................................
Other, net ..................................................................................

596
167

(828)
241

5,639
1,580

–
–
(3,709)
(686)

2,834
(930)
–
(1,613)––(35,090)(6,490)

Income before income taxes and minority interests .............

13,741

10,157130,000

Income taxes (Note 9):
Current ......................................................................................
Deferred ....................................................................................

5,397
(480)

5,365
(726)

51,059(4,541)

4,917

4,639

46,518

8,824
(2)

5,518
(2)

83,482(19)

Income before minority interests ..........................................
Minority interests in earnings of consolidated subsidiaries .......
Net income (Note 14) ............................................................
See accompanying notes to consolidated financial statements.

| 16 | Nippon Shokubai Co., Ltd. |

¥

8,822

¥

5,516

$

83,463

Consolidated Statements of Shareholders’ Equity
Nippon Shokubai Co., Ltd. and Consolidated Subsidiaries

Year ended March 31,
2003

2004

(Millions of yen)

Common stock:
Balance at beginning and end of year ......................................

2004(Thousands of
U.S. dollars)( Note 2)¥

16,529¥16,529$156,377

Additional paid-in capital:
Balance at beginning of year ....................................................
Gain on sale of treasury stock ..................................................

¥

13,562
1¥

13,562–$

128,307
9

Balance at end of year ..............................................................

¥

13,563¥

13,562$

128,316¥

91,652
8,822(1,440)(87)¥

87,686
5,516(1,364)(87)$

867,095
83,463(13,623)(823)

Retained earnings:
Balance at beginning of year ....................................................
Net income ...............................................................................
Cash dividends .........................................................................
Bonuses to directors and corporate auditors ............................
Decrease in retained earnings resulting from exclusion ofa consolidated subsidiary ......................................................

–

(99)

–

Balance at end of year ................................................................

¥

98,947¥91,652$

936,112

Net unrealized holding gain on securities:
Balance at beginning of year ....................................................
Net change during the year ......................................................

¥

539
4,422

¥

744
(205)

$

5,099
41,836

Balance at end of year ................................................................

¥

4,961

¥

539

$

46,935

Translation adjustments:
Balance at beginning of year ....................................................
Net change during the year ......................................................

¥

468(1,307)¥

1,727(1,259)$4,427(12,365)

Balance at end of year ................................................................

¥

(839)

¥

468

$

(7,938)Less treasury stock, at cost:
Balance at beginning of year ....................................................
Net change during the year ......................................................

¥(1,453)
(23)

¥

(10)
(1,443)$(13,746)(219)

Balance at end of year ................................................................

¥(1,476)¥(1,453)$(13,965)

See accompanying notes to consolidated financial statements.

| Nippon Shokubai Co., Ltd. | 17 |Consolidated Statements of Cash Flows
Nippon Shokubai Co., Ltd. and Consolidated Subsidiaries

Year ended March 31,
2004
2003
(Millions of yen)

Operating activities:
Income before income taxes and minority interests ..................
Adjustments to reconcile income before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization ..............................................
Impairment loss on fixed assets ............................................
(Decrease) increase in accrued retirement benefits ..............
Interest and dividend income ................................................
Interest expense .....................................................................
Equity in (earnings) losses of unconsolidated subsidiaries
and affiliates .....................................................................
Gain on return of substitutional portion of
Welfare Pension Fund Plan .............................................
Loss on devaluation of investments in securities .................
Loss on disposal of property, plant and equipment ..............
Other, net ...............................................................................
Changes in operating assets and liabilities:
Notes and accounts receivable ..........................................
Inventories .........................................................................
Notes and accounts payable ..............................................
Other current liabilities .....................................................

¥

13,741¥

10,157

2004(Thousands of
U.S. dollars)(Note 2)$130,000

7,998
3,709
(466)
(596)
602

9,310
–
1,795
(590)
1,020

75,66735,090(4,408)(5,639)
5,696

(596)

828

(5,639)––477(1,110)(2,834)
2,496
317
(155)

–
–
4,512
(10,502)(2,743)
(194)
672
0

2,620
605
3,729
(159)

(25,951)(1,835)
6,357
0Subtotal ......................................................................
Interest and dividends received ..................................................
Interest paid ................................................................................
Other, net ....................................................................................
Income taxes paid .......................................................................

21,494675(710)–(5,060)29,139617(1,129)(297)(5,213)203,348
6,386(6,717)–(47,871)

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

16,39923,117

155,146

Investing activities:
Proceeds from sales of short-term investments and investments
in securities ...............................................................................
Purchases of marketable securities and investments in securities ...
Purchases of property, plant and equipment ..............................
Proceeds from sales of property, plant and equipment ..............
Increase in loans receivable .......................................................
Collection of loans receivable ....................................................
Other, net ....................................................................................

2,004(5,671)(5,356)
624
(683)
1,085
(1,164)

191(3,814)(2,858)375(2,361)
544(828)

18,959(53,652)(50,672)
5,904(6,462)
10,265(11,012)Net cash used in investing activities ..........................................

(9,161)(8,751)(86,670)| 18 | Nippon Shokubai Co., Ltd. |Year ended March 31,
2004
2003
(Millions of yen)

2004
(Thousands of
U.S. dollars)(Note 2)Financing activities:
Decrease in short-term bank loans, net ......................................
Proceeds from long-term debt ....................................................
Repayment of long-term debt ....................................................
Redemption of bonds .................................................................
Cash dividends paid ...................................................................
Purchases of treasury stock ........................................................
Other, net ....................................................................................

(4,636)
6,350(9,742)–(1,440)
(26)
(12)

(568)
2,050
(9,620)(5,000)(1,363)(1,442)(13)(43,860)
60,076(92,167)–(13,623)
(246)
(113)

Net cash used in financing activities ..........................................

(9,506)(15,956)(89,933)

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

(295)

(274)

(2,790)Decrease in cash and cash equivalents .......................................
Cash and cash equivalents at beginning of year ........................
Decrease in cash and cash equivalents resulting
from changes in number of consolidated subsidiaries .............

(2,563)
21,217(1,864)
23,151(24,247)
200,728

–

(70)

–

Cash and cash equivalents at end of year ...................................

¥

18,654¥

21,217$

176,481See accompanying notes to consolidated financial statements.

| Nippon Shokubai Co., Ltd. | 19 |Notes to Consolodated Financial Statements
Nippon Shokubai Co., Ltd. and Consolidated Subsidiaries
March 31, 2004

1. Summary of Significant Accounting Policies
(a)

(b)

(c)

Basis of Presentation
Nippon Shokubai Co., Ltd. (the “Company”) and
its domestic consolidated subsidiaries maintain theiraccounts and records in accordance with accounting
principles generally accepted in Japan. Its foreignsubsidiaries maintain their accounts in conformity withthe requirements of their countries of domicile. The
accompanying consolidated financial statements havebeen compiled from the consolidated financial
statements prepared by the Company as required by the
Securities and Exchange Law of Japan, which are
different in certain respects as to the application anddisclosure requirements of International Financial
Reporting Standards.
Basis of Consolidation
The accompanying consolidated financial
statements include the accounts of the Company and its
significant subsidiaries. All significant intercompany
items have been eliminated in consolidation.
The foreign consolidated subsidiaries areconsolidated on the basis of fiscal periods ending
December 31, which differs from the balance sheet
date of the Company. As a result, adjustments havebeen made for any significant intercompany
transactions which took place during the period
between the year ends of these foreign consolidated
subsidiaries and the year end of the Company.
Investments in an unconsolidated subsidiary andsignificant affiliates are stated at cost plus equity intheir undistributed earnings or losses. Consolidated net
income includes the Company’s equity in the current
net income or loss of such companies after theelimination of unrealized intercompany profits.
Investments in unconsolidated subsidiaries andaffiliates not accounted for by the equity method are
carried at cost.
The excess of cost over underlying net assets at thedate of acquisition is amortized over a period of five
years on a straight-line basis, except that immaterial
amounts are charged to income as incurred.
Foreign Currency Translation
The financial statements of the foreign consolidated
subsidiaries are translated into yen at the rates of
exchange in effect at the balance sheet date except thatthe components of shareholders’ equity are translated| 20 | Nippon Shokubai Co., Ltd. |at their historical exchange rates. Differences resulting
from translating the financial statements of the foreign
consolidated subsidiaries are not included in thedetermination of net income but are reported astranslation adjustments in a separate component ofshareholders’ equity and minority interests in the
consolidated balance sheets at March 31, 2004 and2003.
Revenue and expense items arising fromtransactions denominated in foreign currencies are
generally translated into yen at the rates in effect at therespective transaction dates.
(d)Cash and Cash Equivalents
Cash and cash equivalents include cash on handand in banks and other highly liquid investments withmaturities of three months or less when purchased.

(e)Inventories
Inventories of the Company and its consolidated
subsidiaries are stated principally at the lower of costor market, cost being determined by the moving
average method.

(f)

Property, Plant and Equipment
Property, plant and equipment is stated on the basisof cost. Depreciation is computed principally by the
declining-balance method over the estimated useful
lives of the respective assets, except that the foreign
consolidated subsidiaries compute depreciation by thestraight-line method over the estimated useful lives of
the respective assets.

(g)

LeasesNon-cancelable leases of the Company and its
domestic consolidated subsidiaries are accounted for as
operating leases (whether such leases are classified as
operating or finance leases), except that leases which
stipulate the transfer of ownership of the leased assets
to the lessee are accounted for as finance leases.
However, leases of the foreign consolidated
subsidiaries are generally classified and accounted foras either finance or operating leases.

(h)

Investments in Securities
Securities are classified into three categories:
trading securities, held-to-maturity debt securities andother securities.

Trading securities, consisting of debt andmarketable equity securities, are carried at fair value.
Gain and loss, both realized and unrealized, arecharged to income. Held-to-maturity debt securities
are carried at amortized cost. Marketable securities
classified as other securities are carried at fair value,with any changes in unrealized holding gain or loss,
net of the applicable income taxes, reported as aseparate component of shareholders’ equity. Nonmarketable securities classified as other securities arecarried at cost. Cost of securities sold is determined by
the moving average method.
(i)

(j)

(k)

Research and Development Costs and Computer
SoftwareResearch and development costs are charged toincome when incurred.
Expenditures relating to the development ofcomputer software intended for internal use arecharged to income as incurred, except if these are
deemed to contribute to the generation of future
income or cost savings. Such expenditures arecapitalized as assets and amortized by the straight-line
method over their useful lives, generally a period of 5
years.
Income Taxes
Income taxes are calculated based on taxable
income and charged to income on an accrual basis.
Deferred income tax assets and liabilities are computed
based on the temporary differences between thefinancial reporting and tax bases of the assets andliabilities which will result in taxable or deductible
amounts in the future. The calculation of deferredincome tax assets and liabilities is based on the enacted
tax laws.
Retirement Benefits
The Company’s employees are covered by an
employees’ retirement benefit plan and an employees’
pension plan. The employees’ retirement benefit plan
provides for lump-sum payments determined byreference to their basic salary, years of service andcertain other factors. The domestic consolidated
subsidiaries have either unfunded employees’
retirement benefit plans and/or pension plans which arenoncontributory and funded and which coversubstantially all their employees. These plans provide
for lump-sum payments and/or annuity payments
payable upon termination of employment.
Accrued retirement benefits for employees havebeen provided, in general, based on the retirement
benefit obligation and the fair value of the pension plan
assets as adjusted for unrecognized actuarial gain orloss and unrecognized prior service cost.
Prior service cost is amortized principally by thestraight-line method over 5 years, which falls within
the estimated average remaining years of service of theeligible employees.
Actuarial gain or loss is amortized in the year
following the year in which the gain or loss isrecognized principally by the straight-line method over
10 years, which falls within the estimated averageremaining years of service of the eligible employees.
In addition, directors and corporate auditors of theCompany and certain consolidated subsidiaries arecustomarily entitled to lump-sum payments under theirrespective unfunded retirement benefit plans. The
provision for retirement benefits for these officers has
been made at an estimated amount.
(l)Appropriation of Retained Earnings
Under the Commercial Code of Japan, theappropriation of retained earnings with respect to agiven financial period is made by resolution of theshareholders at a general meeting held subsequent tothe close of the financial period. The accounts for that
period do not, therefore, reflect such appropriations(see Note 17).

2. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollar
amounts is included solely for convenience, as a matterof arithmetic computation only, at ¥105.7 = U.S.$1.00,
the approximate rate of exchange in effect on March
31, 2004. This translation should not be construed as arepresentation that yen have been, could have been, or
could in the future be, converted into U.S. dollars at theabove or any other rate.

| Nippon Shokubai Co., Ltd. | 21 |

3. Change in Method of Accounting
2004. The effect of the adoption of this standard was
to decrease income before income taxes and minority
interests by ¥3,709 million ($35,090 thousand) for theyear ended March 31, 2004.

Effective April 1, 2003, the Company and its
domestic consolidated subsidiaries adopted a new
accounting standard for impairment accounting for
fixed assets as early adoption of the standard was
permitted commencing the fiscal year ended March 31,

4. Investments in Securities
Marketable securities classified as other securities at March 31, 2004 and 2003 are summarized as follows:

2004(Millions of yen)

...
...
...
Securities whose fairmarket value exceeds their cost:
Equity securities .............. ¥Subtotal ...................................
Securities whose costexceeds their fair market value:
Equity securities ...................
Subtotal ...................................
Total ............................................ ¥(Thousands of U.S. dollars)

CostBook value(Fair market Unrealized
value)
gain (loss)

Book value(Fair market Unrealized
value)
gain (loss)

10,893
10,893¥ 19,410
19,410¥ 8,5178,517$ 103,056
103,056$ 183,633
183,633$ 80,577
80,577931
931
11,824800
800¥ 20,210

(131)
(131)
¥ 8,386

8,808
8,808
$ 111,864

7,569
7,569
$ 191,202(1,239)(1,239)$ 79,338

Cost

2003
(Millions of yen)

...
...
...
Securities whose fairCostmarket value exceeds their cost:
Equity securities ............. ¥Subtotal ...................................
Securities whose costexceeds their fair market value:
Equity securities .............
Subtotal ...................................
Total ............................................ ¥(Thousands of U.S. dollars)Book value(Fair market Unrealized
value)
gain (loss)

4,280
4,280
4,082
4,082
8,362

¥

¥

6,308
6,308

¥ 2,028
2,028

2,992
2,992
9,300

(1,090)(1,090)
¥
938

Cost
$

$

40,49240,492
38,61938,61979,111

Book value(Fair market Unrealized
value)
gain (loss)$$

59,67859,678$19,18619,18628,30728,307
87,985(10,312)(10,312)$8,874

The proceeds and gross realized gains and losses on sales of securities classified as other securities at March 31,
2004 and 2003 were as follows:

2004

2003

2004

(Millions of yen)

Proceeds
¥ 702

Gross
realized
gains
¥ 71

| 22 | Nippon Shokubai Co., Ltd. |Grossrealized
losses¥ 0

Grossrealized
Proceeds gains
¥ 209
¥ 3

(Thousands of U.S. dollars)Grossrealized
losses¥ 88

Proceeds$ 6,641Grossrealized
gains
$ 672

Gross
realized
losses$ 0

A breakdown of other securities whose market
value was not determinable at March 31, 2004 and2003 is as follows:
2004

2003

(Millions of yen)Preferred subscription
certificates ...............
Other securities ..........

2004(Thousands of
U.S. dollars)

¥ 500

¥ 500

$ 4,730

1,128

1,094

10,672

5. Inventories
Inventories at March 31, 2004 and 2003 were as
follows:
2004

2003

(Millions of yen)

Merchandise andfinished goods ..... ¥ 10,134
Raw materials ...........
7,159
Work in process ........
4,872
Supplies ....................
1,753¥ 23,918¥ 10,525
6,801
4,795
1,647
¥ 23,768

2004(Thousands of
U.S. dollars)$ 95,874
67,72946,093
16,585$ 226,281

6. Impairment Loss on Fixed Assets
The impairment loss on fixed assets for the year
ended March 31, 2004 related primarily to thesignificant decrease in the market value of theCompany’s land as well as to an overall deteriorationin its business environment.
Impairment loss on fixed assets for the year ended
March 31, 2004 consisted of the following:

Plant site
(nonperforming assets):
Land .......................
Structures ...............
Other .......................
Production facilities
for fluorine compounds:
Machinery ..............
Building ..................
Structure .................
Nonperforming assets:
Land .......................
Total ................................

(Millions of yen)(Thousands of
U.S. dollars)¥ 2,564
455
115
3,134

$ 24,257
4,305
1,088
29,650

221
123
17
361

2,091
1,164
161
3,416

214
¥ 3,7092,024$ 35,090

An impairment loss on production facilities forfluorine compounds was recorded at the amount at
which the acquisition cost of each asset exceeded an
estimate of its future cash flows, discounted at 1.2%.
An impairment loss on plant site andnonperforming assets was recorded at the amount at
which the acquisition cost of each asset exceeded its
estimated fair value. The estimated fair value of theseassets, if material, was determined using real estateappraisal standards.

7. Short-Term Bank Loans and Long-Term
Debt
Short-term bank loans consisted mainly of
unsecured loans. The average interest rates on the
short-term bank loans outstanding at March 31, 2004
and 2003 were 0.96% and 0.72%, respectively.
Long-term debt at March 31, 2004 and 2003
consisted of the following:
2004

2003

2004

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

1.85% unsecured bonds
due November 2004 ................ ¥5,000 ¥5,000 $47,304
Unsecured loans from banks
and insurance companies,
payable in yen, at rates
from 0.49% to 4.82%,
due through 2009 ..................... 7,847
6,423
74,238
Unsecured loans from banks,
payable in U.S. dollars,
at rates from 1.42% to2.58%, due through 2009 ........ 12,078 16,957 114,267
Unsecured loans from banks,
payable in Euro, at rates
from 2.49% to 4.83%,
due through 2005 .....................
999
1,653
9,451
Secured loans from banks
and insurance companies,
payable in yen, at rates
from 1.10% to 5.60%,
due through 2008 ..................... 1,971
2,837
18,647
Subtotal ........................... 27,895 32,870 263,907
Less current portion .................... (11,825) (8,493) (111,873)
Total ................................ ¥16,070 ¥24,377 $152,034| Nippon Shokubai Co., Ltd. | 23 |The aggregate annual maturities of long-term debt
subsequent to March 31, 2004 are summarized below:
Year ending March 31,(Millions of yen)(Thousands of
U.S. dollars)

2005 ..........................
2006 ..........................
2007 ..........................
2008 ..........................
2009 and thereafter ...

¥ 11,825
5,118
3,789
3,338
3,825
¥ 27,895$ 111,873
48,42035,84731,58036,187$ 263,907

Assets pledged as collateral for long-term debt,
including the current portion thereof, and accounts andnotes payable at March 31, 2004 and 2003 were as
follows:
2004

2003

(Millions of yen)Time deposits ................... ¥8Land ..................................
55
Buildings and structures ...
32
Investments in securities ..
2,463¥ 2,558

2004(Thousands of
U.S. dollars)

¥

38 $
76
745
520
714
303
2,357
23,302¥ 3,854 $ 24,201

8. Retirement Benefits
The following table sets forth the funded andaccrued status of the plans and the amounts recognizedin the consolidated balance sheets at March 31, 2004
and 2003 for the Company’s and the consolidated
subsidiaries’ defined benefit plans:
2004

2003

2004

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

Retirement benefit
obligation at end of year .......... ¥ (27,512) ¥ (29,827) $ (260,284)
Fair value of plan assets
at end of year ............................
19,15015,590181,173
Unfunded retirement
benefit obligation .....................
(8,362) (14,237)(79,111)
Unrecognized actuarial loss ........
4,165
9,925
39,404
Unrecognized past service cost ..
(440)
(726)
(4,163)
Net retirement benefit obligation(4,637)(5,038)(43,870)
Prepaid pension cost ...................
1,972
2,073
18,657
Accrued retirement benefits ....... ¥ (6,609) ¥ (7,111) $ (62,527)| 24 | Nippon Shokubai Co., Ltd. |The components of retirement benefit expenses forthe years ended March 31, 2004 and 2003 are outlined
as follows:
2004

2003

2004

(Millions of yen)(Thousands of
U.S. dollars)Service cost ...................... ¥ 995 ¥ 1,947 $ 9,413
Interest cost ......................
725
994
6,859
Expected return on plan assets ...
(363)
(912)
(3,434)
Amortization:
Past service cost .............
(285)
(500)
(2,696)
Actuarial loss .................
1,090
997
10,312Retirement benefit expenses .... ¥ 2,162 ¥ 2,526 $ 20,454
The assumptions used in accounting for the defined
benefit plans for the years ended March 31, 2004 and2003 were as follows:
2004

2003

Discount rate .................... Principally 2.6% Principally 2.6%
Expected rate of returnon plan assets ................ Principally 3.0% Principally 4.5%
On February 17, 2003, the Company received
approval from the Minister of Health, Labor andWelfare with respect to its application for exemption
from the obligation for benefits related to future
employee services under the substitutional portion of
the Welfare Pension Fund Plan (WPFP). In accordance with the transitional provision stipulated in“Practical Guidelines for Accounting for Retirement
Benefits,” the Company accounted for the separation of
the substitutional portion from the corporate portion of
the benefit obligation under its WPFP as of the date of
approval of its exemption, assuming that the transfer to
the Japanese government of the substitutional portionof the benefit obligation and the related pension plan
assets had been completed as of that date. As a result,a gain of ¥2,834 million was recognized for the year
ended March 31, 2003. The portion of the pension
assets to be transferred was calculated at ¥6,418
million ($60,719 thousand) at March 31, 2004.

9. Income Taxes

2004

Income taxes applicable to the Company and its
domestic consolidated subsidiaries consist of
corporation, inhabitants’ and enterprise taxes. The
statutory tax rate in Japan for the years ended March
31, 2004 and 2003 was, in the aggregate,approximately 42.0%. The effective tax rates reflectedin the consolidated statements of income for the years
ended March 31, 2004 and 2003 differed from theabove statutory tax rate for the following reasons:Statutory tax rate ...........................
Effect of:Tax credit for research anddevelopment costs ...................
Loss on amortization of excess of
cost over net assets acquired ...
Permanently nondeductible expenses
Permanently nontaxable
dividends received ...................
Equity in earnings of an
unconsolidated subsidiary
and affiliates ..........................
Valuation allowance ...................
Tax loss carryforward .................
Effect of change in statutory tax rate
Other, net .....................................
Effective tax rates ..........................

2004

2003

42.0%

42.0%

(5.8)

–

–
0.8

4.5
1.2

(0.9)

(1.7)

(1.8)
2.4
(1.7)
–
0.8
35.8%

–
(3.3)
–
0.7
2.3
45.7%

Deferred income taxes reflect the net tax effect of
the temporary differences between the carrying
amounts of the assets and liabilities calculated forfinancial reporting purposes and the corresponding tax
bases reported for income tax purposes. The significant components of the deferred tax assets and liabilities of the Company and its consolidated subsidiaries
at March 31, 2004 and 2003 are summarized asfollows:

2003(Millions of yen)

Deferred tax assets:
Accrued retirement benefits .... ¥ 1,367
Intercompany profit oninventories and property,
plant and equipment .............
987
Tax loss carryforwards ............
359
Reserve for repairs ...................
856
Depreciation
and amortization ..................
479
Impairment loss on fixed
assets .................................... 1,507
Accrued employees’ bonuses ..
709
Impairment of investments
in securities and other .......... 1,896
Accrued enterprise tax .............
385
Other ........................................ 1,031
Gross deferred tax assets ........... 9,576
Less: Valuation allowance ...... (1,016)
Total deferred tax assets ............ 8,560
Deferred tax liabilities:
Equity in earnings of
a foreign affiliate ................. (535)Net unrealized holding
gain on securities ................. (3,404)
Depreciation and amortization ... (807)Deferred capital gain on
property ................................ (342)Reserve for depreciation
for tax purposes .................... (143)
Other ........................................
(71)
Total deferred tax liabilities ....... (5,302)
Net deferred tax assets ............... ¥ 3,258

2004(Thousands of
U.S. dollars))¥ 1,098$ 12,933

1,018
894
804

9,338
3,396
8,098

495

4,532

–
658

14,257
6,708

2,449
302
1,084
8,802
(710)
8,092

17,9383,642
9,754
90,596(9,612)80,984(729)(5,061)

(390)
(569)

(32,204)(7,635)(355)(3,236)(182)(1,353)(75)(671)(2,300) (50,160)¥ 5,792 $ 30,824

10. Shareholders’ Equity
The Commercial Code of Japan (the “Code”)
provides that an amount equal to at least 10% of theamounts to be disbursed as distributions of earnings be
appropriated to the legal reserve until the sum of thelegal reserve and additional paid-in capital equals 25%of the common stock account. The Code also
stipulates that, to the extent that the sum of theadditional paid-in capital account and the legal reserve
exceeds 25% of the common stock account, the amountof any such excess is available for appropriation by
resolution of the shareholders.
Retained earnings include the legal reserve
provided in accordance with the Code. The legal
reserve of the Company included in retained earnings
amounted to ¥3,919 million ($37,077 thousand) at
March 31, 2004 and 2003.
| Nippon Shokubai Co., Ltd. | 25 |

13. Contingent Liabilities

11. Research and Development Costs
Research and development costs included in cost of
sales and selling, general and administrative expenses
for the years ended March 31, 2004 and 2003 totaled¥9,424 million ($89,158 thousand) and ¥9,233 million,
respectively.

12. Leases
The following pro forma amounts represent theacquisition costs (including the interest portion),
accumulated depreciation and net book value of theleased assets as of March 31, 2004 and 2003, which
would have been reflected in the balance sheets if
finance lease accounting had been applied to thefinance leases currently accounted for as operatingleases:2004

2003(Millions of yen)

Machinery, equipment and software:
Acquisition costs .............. ¥ 525
Accumulated depreciation ... (253)
Net book value ................. ¥ 272

¥ 607
(312)
¥ 295

2004
(Thousands of
U.S. dollars)$ 4,967(2,394)$ 2,573

Lease payments relating to finance leases accounted for as operating leases amounted to ¥126
million ($1,192 thousand) and ¥179 million for theyears ended March 31, 2004 and 2003, respectively.
Depreciation of the leased assets calculated by thestraight-line method over the respective lease terms
amounted to ¥126 million ($1,192 thousand) and ¥179
million for the years ended March 31, 2004 and 2003,
respectively.
Future minimum lease payments (including theinterest portion thereon) subsequent to March 31, 2004
for finance leases accounted for as operating leases are
summarized as follows:
Years ending March 31,
2005 ............................................
2006 and thereafter ....................

| 26 | Nippon Shokubai Co., Ltd. |of(Millions of yen) (Thousands
U.S. dollars)

¥ 113
159
¥ 272

$ 1,069
1,504$ 2,573

At March 31, 2004, the Company and one consolidated subsidiary were contingently liable as guarantors
of indebtedness of affiliates, the Company’s employees
and others in the aggregate amount of ¥3,266 million($30,899 thousand).
In addition, at March 31, 2004, two consolidated
subsidiaries had contingent liabilities arising fromnotes discounted by banks and notes endorsed in theaggregate amount of ¥807 million ($7,635 thousand).

14. Amounts Per Share
2004

2003
(yen)

Net income ..................
Cash dividends ............
Net assets .....................

¥ 45.379.00
685.202004(U.S. dollars)¥ 27.977.00
631.12$ 0.430.09
6.48

Net income per share has been computed basedon the net income attributable to shareholders ofcommon stock and the weighted-average number ofshares of common stock outstanding during the year.
The amount per share of net assets has been computed based on the net assets available for distribution to shareholders of common stock and thenumber of shares of common stock outstanding at
the year end.
Cash dividends per share represent the cash
dividends declared as applicable to the respective years
together with the interim cash dividends paid.
The financial data used in the computation of net
income per share for the years ended March 31, 2004
and 2003 is summarized as follows:
2004

2003

(Millions of yen)

2004
(Thousands of
U.S. dollars)

Net income ............................... ¥ 8,822¥ 5,516 $ 83,463
Deduction from net income:
Bonuses to directors
and corporate auditors ..........
(109)
(87)
(1,031)
Adjusted net income
attributable to shareholdersof common stock .................. ¥ 8,713¥ 5,428 $ 82,432
Weighted-average numberof shares of common
stock outstanding forthe current year
(thousands of shares) ............ 192,036 194,091 192,036

15. Derivatives

16. Segment Information

Derivative financial instruments are utilized by theCompany and its consolidated subsidiaries principally
to reduce the risk of fluctuation in interest rates andforeign exchange rates. The Company has establisheda control environment which includes policies andprocedures for risk assessment and for the approval,reporting and monitoring of transactions involving
derivatives. The Company and its consolidated
subsidiaries do not hold or issue derivatives for
speculative trading purposes.
The Company and its consolidated subsidiaries are
exposed to certain market risks arising from forward
foreign exchange contracts and interest-rate swaps.
The Company and its consolidated subsidiaries are also
exposed to the risk of credit loss in the event of
nonperformance by the counterparties to these forward
foreign exchange contracts and interest-rate swap
contracts; however, the Company and its consolidated
subsidiaries do not anticipate nonperformance by anyof the counterparties, all of whom are financial
institutions with high credit ratings.
At March 31, 2004, two consolidated subsidiaries
had open interest-rate swap positions. The total valueof these positions, however, was immaterial.

Basicchemicals

The Company and its consolidated subsidiaries areprimarily engaged in the manufacture and sales of
products in Japan and overseas.

Change in presentation of segment information
Through March 31, 2003, the Company disclosed
business segment information on Chemicals and Other.
Effective April 1, 2003, the Company changed its
method of classifying its basic chemical, functional
chemicals, and environment & catalysts businesses.
Since the Company has introduced, a virtual businessdivision system, management believes that this change
reflects a more accurate presentation of the various
business segments involved in the Company’s and its
consolidated subsidiaries’ operations.
The Company has also reclassified the previously
reported business segment information for the year
ended March 31, 2003 to conform to this revised
segmentation.
Business Segments
The business segment information of the Company
and its consolidated subsidiaries for the years ended
March 31, 2004 and 2003 is outlined as follows:Year ended March 31, 2004
Functional Environment
Total
Eliminachemicals & catalysts
tions or
corporate

Consolidated(Millions of yen)

I. Sales and operating income
Sales to third parties ........................... ¥ 63,320
Intergroup sales and transfers .............
8,766
Total sales ...........................................
72,086
Operating expenses .............................
67,825
Operating income ............................... ¥ 4,261¥ 90,647 ¥ 15,766
269
829
90,916
16,59580,504
15,766¥ 10,412 ¥829¥ 169,733
9,864
179,597
164,095¥ 15,502¥–(9,864)(9,864)(9,812)¥(52)¥ 169,733–
169,733
154,283¥ 15,450

II. Assets, depreciation, impairment loss
and capital expenditures
Total assets ......................................... ¥ 65,103
Depreciation and amortization ...........
2,950
Impairment loss ..................................
–
Capital expenditures ...........................
1,987¥ 106,092 ¥ 19,189
5,111
471
575
–
5,874
551

¥ 190,384
8,532
575
8,412

¥ 29,801
43
3,134
–

¥ 220,185
8,575
3,709
8,412

| Nippon Shokubai Co., Ltd. | 27 |BasicchemicalsYear ended March 31, 2003
Functional Environment
Total
Eliminachemicals & catalysts
tions or
corporate

Consolidated(Millions of yen)

I. Sales and operating income
Sales to third parties ........................... ¥ 54,650
Intergroup sales and transfers .............
6,601
Total sales ...........................................
61,251
Operating expenses .............................
62,310Operating (loss) income ..................... ¥ (1,059)¥ 163,514
7,905
171,419
158,702¥ 12,717¥¥

91,658 ¥ 17,206
624
680
92,282
17,88680,413
15,97911,869 ¥ 1,907–(7,905)(7,905)(7,945)¥40¥ 163,514–
163,514150,757¥ 12,757

II. Assets, depreciation andcapital expenditures
Total assets ......................................... ¥ 65,760
Depreciation and amortization ...........
3,703
Capital expenditures ...........................
2,079¥ 112,168 ¥ 18,286
5,755
391
2,279
290

¥ 196,214
9,849
4,648

¥ 20,54247–¥ 216,756
9,896
4,648

Year ended March 31, 2004
Functional Environment
Total
Eliminachemicals & catalysts
tions or
corporate

Consolidated

Basicchemicals¥(Thousands of U.S. dollars)

I. Sales and operating income
Sales to third parties ........................... $ 599,054
Intergroup sales and transfers .............
82,933
Total sales ...........................................
681,987
Operating expenses .............................
641,675
Operating income ............................... $ 40,312$ 857,587 $ 149,158 $1,605,799
2,545
7,843
93,321
860,132
157,001
1,699,120
761,627
149,158
1,552,460$ 98,505 $ 7,843 $ 146,660$–(93,321)(93,321)(92,829)$ (492)$1,605,799–
1,605,799
1,459,631$ 146,168

II. Assets, depreciation, impairment loss
and capital expenditures
Total assets ......................................... $ 615,922
Depreciation and amortization ...........
27,909Impairment loss ..................................
–
Capital expenditures ...........................
18,798$1,003,710 $ 181,542 $ 1,801,174
48,354
4,456
80,719
5,440
–
5,440
55,572
5,213
79,583$281,939
407
29,650–$2,083,113
81,12635,09079,583| 28 | Nippon Shokubai Co., Ltd. |Geographical Areas
The geographical segment information of the Company and its consolidated subsidiaries for the years ended March
31, 2004 and 2003 is outlined as follows:
A new geographic segment, “Europe,” which had previously been part of the “Other” segment has been disclosed
separately in the geographical segment information for the year ended March 31, 2004 reflecting its increasingmateriality.

Japan

EuropeYear ended March 31, 2004
Other
Total
Eliminations or
corporate

Consolidated(Millions of yen)

I. Sales and operating income
Sales to third parties ........................... ¥ 135,576Intergroup sales and transfers .............
12,426
Total sales ...........................................
148,002
Operating expenses .............................
135,143
Operating income ............................... ¥ 12,859¥ 18,818
46
18,864
17,907¥957¥ 15,339
2,942
18,281
17,295¥986¥ 169,733
15,414
185,147
170,345¥ 14,802¥–(15,414)(15,414)(16,062)¥648¥ 169,733–
169,733
154,283¥ 15,450

II. Total assets ........................................ ¥ 153,434¥ 11,634¥ 29,705¥ 194,773¥ 25,412¥ 220,185

EuropeYear ended March 31, 2003
Other
Total
Eliminations or
corporate

Consolidated

Japan(Millions of yen)

I. Sales and operating income
Sales to third parties ........................... ¥ 134,113
Intergroup sales and transfers .............
11,198
Total sales ...........................................
145,311
Operating expenses .............................
133,876
Operating income (loss) ..................... ¥ 11,435¥ 16,002
79
16,081
15,043¥ 1,038¥ 13,399
3,729
17,12817,203¥(75)¥ 163,514
15,006
178,520
166,122¥ 12,398¥–(15,006)(15,006)(15,365)¥359¥ 163,514–
163,514150,757¥ 12,757

II. Total assets ........................................ ¥ 155,157¥ 11,203¥ 34,519¥ 200,879¥ 15,877¥ 216,756

Year ended March 31, 2004
Other
Total
Eliminations or
corporate

Consolidated

Japan

Europe(Thousands of U.S. dollars)

I. Sales and operating income
Sales to third parties ........................... $ 1,282,649
Intergroup sales and transfers .............
117,559
Total sales ........................................... 1,400,208
Operating expenses ............................. 1,278,553
Operating income ............................... $ 121,655$ 178,032
435
178,467
169,413$ 9,054$ 145,118
27,833
172,951
163,623$ 9,328$ 1,605,799
145,827
1,751,626
1,611,589$ 140,037$–(145,827)(145,827)(151,958)$ 6,131$ 1,605,799–
1,605,799
1,459,631$ 146,168

II. Total assets ........................................ $ 1,451,599$ 110,066$ 281,031$ 1,842,696$ 240,417$ 2,083,113| Nippon Shokubai Co., Ltd. | 29 |Overseas Sales
Overseas sales, which include export sales of the Company and the domestic consolidated subsidiaries and sales(other than exports to Japan) of the foreign consolidated subsidiaries, for the years ended March 31, 2004 and 2003
are summarized as follows:

Asia

Year ended March 31, 2004
EuropeNorth
Other
America¥ 29,952¥ 24,712¥ 12,593¥ 4,387¥ 71,644

17.6%

14.6%

7.4%

2.6%

42.2%

Total

(Millions of yen)Overseas sales .................................................................
Overseas sales as a percentage of consolidated
net sales ................................................................

Asia

Year ended March 31, 2003
EuropeNorth
Other
America¥ 25,212¥ 23,567¥ 15,053¥ 3,374¥ 67,206

15.4%

14.4%

9.2%

2.1%

41.1%

Total

(Millions of yen)Overseas sales .................................................................
Overseas sales as a percentage of consolidated
net sales ................................................................

Asia

Year ended March 31, 2004
EuropeNorth
Other
America

Total(Thousands of U.S. dollars)

Overseas sales .................................................................

17. Subsequent Event
The following appropriations of retained earningsof the Company, which have not been reflected in theaccompanying consolidated financial statements forthe year ended March 31, 2004, were approved at ashareholders’ meeting held on June 24, 2004:| 30 | Nippon Shokubai Co., Ltd. |$ 283,368 $ 233,794$ 119,139$ 41,504(Millionsof yen)Cash dividends(¥5.00 = $0.05 per share) .......... ¥ 960
Bonuses to directors andcorporate auditors ......................
99¥ 1,059$ 677,805(Thousands of
U.S. dollars)$ 9,082937$ 10,019

Corporate Data
NIPPON SHOKUBAI CO., LTD.
Incorporated
August 21, 1941

Stock Listings
First Section, Tokyo Stock ExchangeFirst Section, Osaka Securities Exchange
Transfer Agent
UFJ Trust Bank Limited
1-4-3 Marunouchi, Chiyoda-ku
Tokyo 100-0005, Japan

Common Stock
Authorized:
424,000,000 shares
Issued:194,881,287 shares
Capital¥16,529,413,238(as of March 31, 2004)

Number of Employees
1,774

Organization
Division and Department
Internal Audit Office
Corporate Planning
Information Technology Management Office
Administration
Finance & Accounting
Board of Directors

President

Responsible Care
Production

Corporate
Management Committee

Business PlanningResearch & Development
Ethylene Oxide BusinessAcrylic Business
Fine & Specialty Chemicals Business
Performance Chemicals Business
Environment & Catalysts BusinessResins Business Office
Logistics Center
Kawasaki Plant
Himeji Plant
Suita Plant

Board of Corporate Auditors
Corporate Auditors

Auditor’s Office| Nippon Shokubai Co., Ltd. | 31 |

Consolidated Subsidiaries and Affiliates
Name

Paid-in
Capital(millions)

EquityOwnership Principal Business(%)

President

Nippoh Chemicals Co., Ltd.*

¥517

67.9

Manufacture and sale of iodine,
iodic compounds, and natural gas

Tatsuhito Matsuda

Nippon Polyester Co., Ltd.*

¥400

97.7

Manufacture and sale of synthetic
resins and related additives

Yoshizumi Ozawa

Nisshoku Butsuryu Co., Ltd.*

¥100

100.0

Transport

Wataru Makii

Tokyo Fine Chemical Co., Ltd.*

¥80

71.9

Manufacture and sale of stabilizerof vinyl chloride resin andanti-freeze

Kazumi Fukuyasu

Chugoku Kako Co., Ltd.*

¥75

89.4

Manufacture and sale of adhesive tape
Fukio Ogawa
and heat insulator

Shinritsu Co., Ltd.*

¥40

73.1

Sale of chemical products

Masayoshi Sugimoto

US$1,525***

100.0

Manufacture and sale of superabsorbent polymers
Technical liaison and businessdevelopment

Yuji Noma

Nippon Shokubai (Asia) Pte. Ltd.*

S$0.3

100.0

Sale of chemical products

Takeshi Sano

Nippon Shokubai Europe N.V.*

EUR27

100.0

Manufacture and sale ofsuperabsorbent polymers

Keishi Tsuboi

PT. Nippon Shokubai Indonesia*

US$12093.7

Manufacture and sale of acrylicacid and acrylic esters

Takashi Onishi

Nihon Jyoryu Kogyo Co., Ltd.

¥90

53.2

Manufacture and sale ofanthraquinone, carbozole, andtheir derivatives

Takakiyo Goto

ICT Co., Ltd.

¥320

50.0

Sale of automobile exhaust catalyst

Yojiro Takahashi

Nihon Polymer Ind. Co., Ltd.

¥100

50.0

Manufacture and sale of acrylic
emulsionsTadahiro Yoneda

Nisshoku Schenectady Kagaku, Inc.

¥40

45.0

Manufacture and sale of insulating
varnish and enamel

Norio Matsui

International Catalyst Technology, Inc.

US$7.450.0

Manufacture and sale of automobile exhaust catalyst

W. Staron

Japan Composite Co., Ltd.

¥1,00535.0

Manufacture and sale of unsaturated
polyesters resin and plastic moldedmaterials

Sanpei Okuda

NA Industries, Inc.**(as of June 30, 2004)* Included in consolidation** American Acryl NA LLC, and American Acryl L.P., are consolidated into NA Industries, Inc. by the equity method.
*** The unit of this item only is dollars not millions.

| 32 | Nippon Shokubai Co., Ltd. |Directory
HEAD OFFICES

Osaka Office
Kogin Bldg.
4-1-1 Koraibashi, Chuo-ku
Osaka 541-0043, Japan
Telephone: 81-6-6223-9111
Facsimile: 81-6-6201-3716
Tokyo Office
Hibiya Dai Bldg.
1-2-2 Uchisaiwai-cho, Chiyoda-ku
Tokyo 100-0011, Japan
Telephone: 81-3-3506-7475
Facsimile: 81-3-3506-7598
PLANTS
Kawasaki Chidori Plant
14-1 Chidori-cho, Kawasaki-ku
Kawasaki, Kanagawa 210-0865,
Japan

LABORATORIESAdvanced Technology ResearchCenter
5-8 Nishi Otabi-cho, Suita
Osaka 564-8512, Japan
Advanced Materials ResearchLaboratory
5-8 Nishi Otabi-cho, Suita
Osaka 564-8512, Japan
E&I Materials Research Laboratory
5-8 Nishi Otabi-cho, Suita
Osaka 564-8512, Japan
Strategic Technology ResearchLaboratory
5-8 Nishi Otabi-cho, Suita
Osaka 564-8512, Japan

Kawasaki Ukishima Plant
10-12 Ukishima-cho, Kawasaki-ku
Kawasaki, Kanagawa 210-0862,
Japan

Fine & Specialty Chemicals
Research Center
5-8 Nishi Otabi-cho, Suita
Osaka 564-8512, Japan

Himeji Plant
992-1 Aza Nishioki Okihama,
Aboshi-ku
Himeji, Hyogo 671-1282, Japan

Catalysts Research Center
992-1 Aza Nishioki Okihama,
Aboshi-ku, Himeji
Hyogo 671-1292, Japan

Ehime Plant
5-1 Soubiraki-cho, Niihama, Ehime
792-8521, Japan

Superabsorbent Polymers ResearchCenter992-1 Aza Nishioki Okihama,
Aboshi-ku, Himeji
Hyogo 671-1292, Japan

Suita Plant
5-8 Nishi Otabi-cho, Suita
Osaka 564-0034, JapanOVERSEAS COMPANIESNA Industries, Inc.
2651 Riverport Road
Chattanooga, TN 37406, U.S.A.
(P.O. Box 5407)
Telephone: 1-423-624-6496
Facsimile: 1-423-629-0531

NIPPON SHOKUBAI (ASIA) PTE
LTD
1 Raffles Place OUS Centre #31-01
Singapore 048616
Telephone: 65-6532-0078
Facsimile: 65-6532-0079
NIPPON SHOKUBAI EUROPE N.V.
Haven 1053, Nieuwe Weg 1, B-2070
Zwijndrecht, Belgium
Telephone: 32-3-250-3705
Facsimile: 32-3-250-3712
PT. NIPPON SHOKUBAIINDONESIA
Kawasan Industri Panca Pun
Jl.Raya Anyer Km.122
Ciwandan Cilegon 42447 Bantan,
Indonesia
Telephone: 62-254-600660
Facsimile: 62-254-600657
NISSHOKU CHEMICAL INDUSTRY(ZHANGJIAGANG) CO., LTD.
No.19 Changjiang Road (E),
Yangtze River International
Chemical Industrial Park, Zhangjiagang,
Jiangsu, China, 215635
Telephone: 86-512-5893-7910
Facsimile: 86-512-5893-7912

Osaka Office
Kogin Bldg.
4-1-1 Koraibashi, Chuo-ku
Osaka 541-0043, Japan
Telephone: +81-6-6223-9111
Facsimile: +81-6-6201-3716
Tokyo Office
Hibiya Dai Bldg.
1-2-2 Uchisaiwai-cho, Chiyoda-ku
Tokyo 100-0011, Japan
Telephone: +81-3-3506-7475
Facsimile: +81-3-3506-7598
URL: http://www.shokubai.co.jp’04 Aug., 1500
Printed in Japan