Outline of Business Results (Consolidated)<Summary>
Management Policy
In this era of international megacompetition, we must steadily expand to
become an enterprise that boasts a strong business presence, and this forms
the basis for the management policy set out in our Fourth Five-Year
Medium-Term Business Plan, which began in fiscal 1996. The main pointsof this plan are: (1) expanding the scope of our business through aggressive
capital investment and the fostering of new businesses; (2) furthering ourglobal business development by adding Asian operations to those in Japan,
Europe, and North America; and (3) boosting overall Group capabilities
through initiatives such as strengthening production and sales tie-ups andintegrating administrative functions.

Business Environment and Results
Affected by factors such as continued depressed domestic economic
conditions and stagnation in Asian economies, the operating environment for
the Kuraray Group remained extremely harsh during the term under review,
with falls in demand making for sluggish business conditions.
In response to such conditions, focusing on its Fourth Medium-TermBusiness Plan, the Kuraray Group endeavored to (1) expand the scope of its
business; (2) rationalize cost and develop and market high-value-added
products; (3) strengthen the corporate structure by, for example, improving
the efficiency of management; and (4) pursue the Group synergistic effects
by developing joint businesses and production, processing, and sales tie-ups.
The first of these undertakings, with its basic target of 'expanding the scaleof the business while maintaining a sound corporate structure,' requires a
steady program of capital investment to provide the platform for the next
generation, and we have endeavored to ensure that newly-started capital
investment has translated quickly into improved business results.
Consequently, the Company posted net sales of ¥336,466 million (US$2,781
million), operating income of ¥ 27,148 million (US$224 million)and net
income of ¥13,171 million (US$109 million).

Dividend Policy
Kuraray's policy on profit distribution is to pay dividends that are in linewith business results, with ordinary dividends at a basic level of ¥8 pershare, while maintaining the dividend payout ratio at 30%. For the term
under review, we paid a mid-term dividend of ¥4.50 per share, made up of
an ordinary dividend of ¥4 and a special dividend of ¥0.50. Taking into
consideration the business results shown above, we intend to pay a term-end
dividend of ¥4.50 per share, comprised of an ordinary dividend of ¥4 and a
special dividend of ¥0.50, giving a total annual dividend of ¥9.00 per share.

Aggressive Capital Investment
In order to increase our business strength as outlined in the Fourth
Medium-Term Business Plan, during the term we actively pushed ahead
with capital investment, investing ¥33,497 million (US$277 million) during
the period. This was mainly accounted for by the construction of a new plant
for the production of "EVAL" ethylene-vinyl alcohol copolymer in Europe,
increasing production capacity for "Clarino" man-made leather, "SEPTON"

thermoplastic rubber, fine chemicals, and contact lenses, as well as new
equipment for the production by Kuraray Chemical Co., Ltd. of air purifying
filters for automobiles.

Future Issues
With a continued focus on the Fourth Medium-Term Business Plan, theKurarayGroup will work to fundamentally strengthen its core businesses anddevelopglobally, aiming to create 'a unique chemical enterprise that continuallydevelops worldwide.' Moreover, in order to maintain earnings in the current
deflationary environment, we will endeavor to improve the efficiency of ourmanagement, mainly by further cost reduction and rationalizing
administrative functions, while pushing ahead with various initiatives that
aim to produce a leaner, more powerful corporate structure.
In Japan, during the term under review we steadily added new facilities andboosted existing facilities for "Clarino" man-made leather and fine chemical
products. Overseas we are making progress with projects for poval
production in Singapore and the production of "EVAL" ethylene-vinyl
alcohol copolymer in Belgium. We will see to it that these new andexpanded facilities come on stream quickly and ensure that theseinvestments contribute to improved business results.
Furthermore, fully aware that treating local communities and theenvironment with respect is one of the fundamentals of business, we will
strive to reduce the environmental pollutants and to develop
environmentally-friendly products, while investing in new equipment topromote the recycling of plastic waste by the use of heat. We have been
actively involved in the 'Responsible Care' activities since its inception. As
part of the activities, in March 1999 our Kashima Plant received ISO 14001
certification, the international standard for environmental management
systems, and we intend to work steadily toward obtaining certification for all
our main plants.

Efforts to Tackle the Year 2000 Computer Problem
From the point of view of risk management, we have established atrans-organization committee and are working to deal with the Y2K
problem. Compliance measures for in-house systems to counter all possible
occurrences are scheduled to be completed by the end of October 1999. In
addition, we are taking possible measures to ascertain the Year 2000
compliance program of our raw materials suppliers and service providers.

Note : 1) The United States dollar amounts represent translation of Japanese
yen at the rate of ¥121=$1.
2) The financial information herein has not been audited.
3) In preparing these consolidated financial statements, certain
reclassifications have been made to the consolidated financial
statements issued domestically in order to present them in a form
which is more familiar to readers outside Japan.

CONSOLIDATED BALANCE SHEETS(unaudited)

Kuraray Co., Ltd. and Consolidated Subsidiaries

March 31, 1999 and 1998ASSETS
Current assets:
Cash and cash equivalents
Marketable securities
Notes and accounts receivable:
Trade
Unconsolidated subsidiaries and affiliates
Other
Loans receivable to unconsolidated subsidiaries and affiliates
Allowance for doubtful accounts

Inventories
Deferred income taxes
Other current assets
Total current assets

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

Investments and other assets:
Investment securities
Investments in unconsolidated subsidiaries and affiliates
Loans receivable to:Unconsolidated subsidiaries and affiliates
Other
Deferred income taxes
Other
Allowance for doubtful accounts

Millions of yen
1999
1998

Thousands of
U.S.dollars
1999¥28,902
10,252¥31,350
8,329$238,860
84,72789,466
1,316
3,493
509
(844)
93,94096,759
605
2,327
349
(1,097)
98,943739,388
10,87628,8684,207(6,974)776,365

70,624
3,604
791
208,11376,510353
931
216,416

583,669
29,785
6,536
1,719,942

25,397
79,535332,365
17,255454,552(325,526)
129,026

25,12578,001
320,5499,226
432,901(317,802)
115,099

209,893
657,3142,746,818
142,6033,756,628(2,690,297)
1,066,311

77,143
2,983

76,143
3,802

637,546
24,653

6,040
1,329
3,149
61,085(877)
150,852¥487,991

5,302
1,275
−
61,341(517)
147,346¥478,861

49,917
10,98326,025504,834(7,248)1,246,710$4,032,983

Millions of yen
1999
1998

Thousands of
U.S.dollars
1999

LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:
Short-term bank loans
Current portion of long-term debt
Notes and accounts payable:
Trade
Unconsolidated subsidiaries and affiliates
Other
Accrued income taxes
Accrued expenses and otherTotal current liabilities¥5,80920,382¥5,937
16,263$48,008
168,446

49,876
886
5,822
4,305
21,181
108,261

59,818
930
5,435
4,989
41,798135,170

412,198
7,322
48,11635,579175,050
894,719

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

93,923
2,866
12,684
9,978
119,451

83,292
2,325
11,596
12,613
109,826

776,223
23,686
104,826
82,463
987,198

370

371

3,058

Shareholders' equity:
Common stock with par value of ¥50 ($0.41) per share:
Authorized−700,000,000shares
Issued and outstanding−363,913,184 shares at March 31, 19 78,660
Issued and outstanding−354,327,992 shares at March 31, 1998
Additional paid-in capital
74,225Retained earnings
107,029
259,914
Treasury stock at cost(5)
Total shareholders' equity
259,909¥487,991

73,69467,932
91,877
233,503(9)
233,494¥478,861

Minority interests

Note : The United States dollar amounts represent translation of Japanese yen at the rate of ¥121=$1.
Certain reclassifications of previously reported amounts have been made to conform with current classifications.

‑1‑

650,083
613,430
884,537
2,148,050(42)
2,148,008$4,032,983

CONSOLIDATED STATEMENTS OF INCOME(unaudited)
Kuraray Co., Ltd. and Consolidated Subsidiaries

Thousands ofMillions of yen
U.S.dollars
1999
1998
1999

Years ended March 31, 1999 and 1998
Net sales¥336,466¥347,643$2,780,711

Cost of sales

250,195

259,788

2,067,728(Gross profit)

86,27187,855712,983

59,123

58,957

488,619

27,14828,898224,364

Other income (expenses):
Interest and dividend income
Equity in earnings of affiliates
Interest expenses
Other, net

4,464
6(3,269)(4,508)5,588
16(3,567)(4,762)36,89350(27,017)(37,257)(Income before income taxes)(3,307)
23,841(2,725)
26,173(27,331)
197,033

10,352309

11,296933

85,554
2,553

10,661

12,22988,107

(9)

18

(75)

¥13,171¥13,962$108,851

Selling, general and administrative expense(Operating income)

Income taxes:
Current
Deferred

Minority interests in net (income) loss of
consolidated subsidiaries
Net income

U.S.dollars

Yen
Net income per share:
Primary
Fully diluted¥36.83¥34.56¥40.46¥37.68

$0.30
$0.29

Note : The United States dollar amounts represent translation of Japanese yen at the rate of ¥121=$1.
Certain reclassifications of previously reported amounts have been made to conform with current classifications.

‑2‑

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(unaudited)
Kuraray Co., Ltd. and Consolidated Subsidiaries
Millions of yen
Additional
Commonpaid-in
Retained
Years ended March 31, 1999 and 1998
stock
capitalearnings
Balance at March 31, 1997
¥66,131¥60,369¥82,138
Net income
13,962
Conversion of convertible debentures
21
21
Stock issued on exercise of warrants
7,542
7,542
Cash dividends,¥9.00 per share(3,073)
Bonuses to directors and statutory auditors(79)
Effect of changes in reporting entity(1,071)
Balance at March 31, 1998
73,69467,932
91,877
Net income
13,171
Effect of change in accounting for income taxes
6,069
Conversion of convertible debentures
5
5
Stock issued on exercise of warrants
4,961
6,288
Cash dividends,¥9.00 per share(3,190)Bonuses to directors and statutory auditors(72)
Effect of changes in reporting entity(826)
Balance at March 31, 1999
¥78,660¥74,225¥107,029

Thousands of U.S.dollars
Balance at March 31, 1998
$609,041$561,421$759,314
Net income
108,851
Effect of change in accounting for income taxes
50,157
Conversion of convertible debentures
42
42
Stock issued on exercise of warrants
41,00051,967
Cash dividends,$0.07 per share(26,364)
Bonuses to directors and statutory auditors(595)
Effect of changes in reporting entity(6,826)
Balance at March 31, 1999
$650,083$613,430$884,537
Note : The United States dollar amounts represent translation of Japanese yen at the rate of ¥121=$1.
Certain reclassifications of previously reported amounts have been made to conform with current classifications.

‑3‑

･CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)

Kuraray Co., Ltd. and Consolidated Subsidiaries

Millions of yen
1999
1998

Years ended March 31,1999 and 1998
Cash flows from operating activities
Net income¥13,171
Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization
15,557
Provision for doubtful accounts, net(78)
Provision for loss in relation to guarantee, net
Write down of investment securities
130
Gain on sales of properties(1,512)Gain on sales of investment securities
Gain on sales of investments in affiliates
Loss on sales of investment securities
Increase (decrease) in accrued retirement benefits
1,097
Decrease in notes and accounts receivable
4,979
Decrease (increase) in inventories
5,119
Decrease in deferred income taxes
361(Decrease) increase in notes and accounts payable(9,591)(Decrease) increase in other current liabilities(12,841)
Decrease in accrued income taxes(312)
Other, net(2,799)Net cash provided by operating activities
13,281Thousands of
U.S.dollars
1999¥13,962

108,851

14,615
241
792
1,753
(587)
(590)
949
(245)
877
(15,245)
1,972
2,366
10,240(2,990)(4,540)23,570128,570
(645)

9,066
41,14942,306
2,983(79,264)(106,124)(2,579)(23,132)
109,759(33,148)
7,656
(953)

(20,599)
28,929(3,447)(273,950)
63,273(7,876)(25,000)
3,353
12,901(206,612)
27,711
106,620

1,960(33,231)(4,939)34,621599
1,707
36,871

198
31,779(16,113)
9,922(3,190)(6,275)
16,321(22,163)
6,008(56,073)
15,086(3,073)(79)(60,294)

1,636
262,636(133,165)
82,000(26,364)(51,858)
134,885

Effect of exchange rate changes on cash & cash equivalents

(182)

(2)

(1,504)

Effect of changes in reporting entities

1,363

1,620

11,265

Net (decreace) increase in cash and cash equivalents(2,448)

1,765(20,231)

Cash and cash equivalents, beginning of period

31,35029,585

259,091

Cash and cash equivalents, end of period¥28,902¥31,350$238,860

Cash flows from investing activities
Acquisitions of property, plant and equipment
Decrease in marketable securities
Increace in loans receivable
Increase in investments, mainly investment securities
and long-term fixed deposits
Proceeds from sales of properties
Proceeds from sales of investment securities
Proceeds from sales of investments in affiliates
Other, net
Net cash (used in) provided by investing activities
Cash flows from financing activities
Increase (decrease) in short-term bank loans
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from exercise of warrants
Dividends paid
Other, net
Net cash provided by (used in) financing activities

1,074(12,496)

16,198(274,636)

Note: The United States dollar amounts represent translation of Japanese yen at the rate of ¥121=$1.
Certain reclassifications of previously reported amounts have been made to conform with current classifications.

-4-

SEGMENT INFORMATION
Industrial segment information(unaudited)
Kuraray Co., Ltd. and Consolidated Subsidiaries

Net sales and Operating income
Net sales toYear ended March 31,1999
outside customers
Chemical and synthetic fibers¥103,120
Chemical products
142,071
Man-made leather, nonwoven
fabrics and fastening materials
35,557
Diversified businesses
55,718
Total
336,466
Elimination and Corporate−
Consolidated total¥336,466

Year ended March 31,1998
Chemical and synthetic fibers
Chemical products
Man-made leather, nonwoven
fabrics and fastening materials
Diversified businesses
Total
Elimination and Corporate
Consolidated total

Net sales tooutside customers¥111,041
150,319
38,80247,481
347,643−¥347,643

Millions of yen
Net sales tointersegment
Net sales¥1,591¥104,711
1,774
143,845421
16,874
20,660(20,660)¥−

Operatingincome¥2,686
16,50135,97872,592
357,126(20,660)¥336,466

4,650
3,512
27,349(201)¥27,148

Millions of yen
Net sales tointersegment
Net sales¥1,466¥112,507
2,443
152,762

Operatingincome¥3,76816,540524
18,56823,001(23,001)¥ −39,326
66,049370,644(23,001)¥347,643

Thousands of U.S.dollars
Net sales to
Net sales toYear ended March 31,1999
outside customers intersegment
Net sales
Chemical and synthetic fibe$852,231$13,149$865,380
Chemical products
1,174,141
14,661
1,188,802
Man‑made leather, nonwoven
fabrics and fastening ma
293,860
3,479
297,339
Diversified businesses
460,479
139,455
599,934
Total
2,780,711
170,744
2,951,455
Elimination and Corporate−(170,744)(170,744)
Consolidated total$2,780,711$−$2,780,711

5,454
3,482
29,244(346)¥28,898

Operatingincome$22,198
136,372
38,43029,025226,025(1,661)$224,364

Note: The United States dollar amounts represent translation of Japanese yen at the rate of ¥121=$1.
Certain reclassifications of previously reported amounts have been made to conform with curr−５−Industrial segment information(unaudited)
Kuraray Co., Ltd. and Consolidated Subsidiaries

Identifiable assets, Capital expenditure, Depreciation and amortization

Year ended March 31,1999
Chemical and synthetic fibers
Chemical products
Man-made leather, nonwoven
fabrics and fastening materials
Diversified businesses
Total
Elimination and Corporate
Consolidated total

Year ended March 31,1998
Chemical and synthetic fibers
Chemical products
Man-made leather, nonwoven
fabrics and fastening materials
Diversified businesses
Total
Elimination and Corporate
Consolidated total

Identifiable
assets¥80,160
151,143

Millions of yen
Capitalexpenditures¥3,91922,812

Depreciation andamortization¥3,8338,212

35,73951,665
318,707169,284¥487,991

Identifiable
assets¥86,177
131,814

Millions of yen
Capitalexpenditures¥7,263
9,497

Depreciation andamortization¥3,124
7,841

2,034
2,012
20,806

2,079
1,571
14,61531,752
71,139320,882
157,979¥478,861

4,525
2,241
33,497

2,178
1,334
15,557−−¥33,497¥15,557−−¥20,806¥14,615

Thousands of U.S.dollars
Identifiable
CapitalDepreciation andYear ended March 31,1999
assetsexpenditures
amortization
Chemical and synthetic fibers$662,479$32,388$31,677
Chemical products
1,249,116
188,529
67,868Man‑made leather, nonwoven
fabrics and fastening mater
295,364
37,39718,000
Diversified businesses
426,983
18,521
11,025
Total
2,633,942
276,835
128,570
Elimination and Corporate
1,399,041−−
Consolidated total$4,032,983$276,835$128,570
Note: The United States dollar amounts represent translation of Japanese yen at the rate of ¥121=$1.

−６−

Geographic Segment Information(unaudited)
Kuraray Co., Ltd. and Consolidated Subsidiaries

Year ended March 31,1999
Domestic (inside Japan)
Outside Japan
Total
Elimination and Corporate
Consolidated total

Millions of yen
Net sales to
Net sales to
Operating Identifiable
outside customers intersegment Net sales
incomeassets¥309,182¥17,920¥327,102¥22,467¥273,939
27,284
4,104
31,388
5,121
48,699336,466
22,024358,490
27,588322,638−(22,024)(22,024)(440)
165,353¥336,466¥−¥336,466¥27,148¥487,991

Thousands of U.S.dollars
Net sales to Net sales to
Operating Identifiable
Year ended March 31,1999outside customersintersegment Net sales
incomeassetsDomestic (inside Japan)$2,555,223$148,099 $2,703,322 $185,678 $2,263,959
Outside Japan
225,488
33,917259,405
42,322402,470
Total
2,780,711
182,016 2,962,727
228,000 2,666,429
Elimination and Corpora−(182,016) (182,016)(3,636) 1,366,554
Consolidated total$2,780,711$− 2,780,711$224,364 4,032,983
Note: The United States dollar amounts represent translation of Japanese yen at the rate of ¥121=$1.

−７−