2000

Annual ReportProfile
Since its foundation in 1941, Nippon Shokubai has been engaged in R&D
activities in search of original technical solutions in four major fields: catalyst
technology, polymer synthesis, environment preservation systems, and organic
synthesis. Our major products are basic chemicals, including acrylic acid,methacrylic acid and ethylene oxide; fine and specialty chemicals, including
superabsorbent polymers and higher alcohols; synthetic resin, including unsaturated polyester resins; and catalysts/environment preservation systems, including catalysts for cleaning automobile exhaust gases, process catalysts anddioxins decomposition/elimination equipment. Created through our proprietary technology and know-how, these products have made various contributions to our society and people’s daily lives.
In addition, our various chemical product manufacturing technologies havebeen highly appreciated overseas, as well as our diverse line of products.
A wide variety of chemicals manufacturing technologies, including thoserelated to acrylic acid/esters, methacrylic acid/esters and many other process
technologies, have been exported to Europe, Asia, the USA, and elsewhere.
In recent years, we have been making efforts to develop our business at
global basis by establishing production bases for acrylic acid and acrylic esters
in Southeast Asia and North America and for superabsorbent polymers inNorth America and Europe.
Under our corporate philosophy of “TechnoAmenity,” which seeks to harmonize “Technology” and “Natural Environment,” and focusing on our ultimate objective, “making human life richer and more comfortable throughtechnological innovations,” we are working to meet emerging global changes
and to enhance our potential for commercial competition.

Contents
Financial Highlights .................................................................................. 1
To Our Shareholders ................................................................................. 2
Review of Operations
Chemical Business ................................................................................. 4
Other Businesses .................................................................................... 6
Topics ........................................................................................................ 7
Management Indices ................................................................................. 8
Financial Section
Report of Independent Certified Public Accountants .......................... 11
Consolidated Balance Sheets ............................................................... 12
Consolidated Statements of Income..................................................... 14
Consolidated Statements of Shareholders’ Equity .............................. 15
Consolidated Statement of Cash Flows ............................................... 16
Notes to Consolidated Financial Statements ....................................... 18
Corporate Data ........................................................................................ 26

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

Millions of yen

Thousands of
U.S. dollars

2000

1999

1998

2000

For the YearNet Sales ........................................
Operating Income ..........................
Income before Income Taxes ........
Net Income ....................................

¥162,461
6,622
5,349
2,659

¥160,190
8,906
7,925
4,450

¥171,805
11,103
10,425
5,226$1,530,485
62,38350,39025,049At Year-End
Total Assets ...................................
Total Shareholders’ Equity ...........

¥216,896
118,820¥231,081
114,658¥218,953
111,673$2,043,297
1,119,359

Yen

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

¥13.547.00¥22.61
7.00

U.S. dollars¥26.54
7.00

$0.13
0.07

Foreign Exchange Rate: US$1.00 = ¥106.15

Net Sales (Billions of yen)

Net Income (Billions of yen)

Shareholders’ Equity(Billions of yen)

6

200

111.7

160 162114.7

106.9 107.6

5.2

172
158

118.8

120
5.5

5

100
4.5

150
4

80

3

100

2.7

2

56

60

40
1.5

50
1

20

0

0
’96 ’97* ’98

’99

’00

0
’96 ’97* ’98

’99

’00

’96 ’97* ’98

’99

’00

*The year 1997 covers only four months, from December 1, 1996, to March 31, 1997, since the company changed its fiscal year
and accounting period at the 84th annual general meeting of shareholders.

1

To Our Shareholders

2

Performance

Dividend Policy

In fiscal 1999, which ended on March 31,
2000, uncertainty about Japan’s economy
persisted throughout the year with the prevailing sentiment that production facilities andwork force were in excess, coupled with stillslow personal spending, although in the year’s
second half the economy appeared to havebottomed out and showed signs of mild recovery due to some growth in capital investment inindustries related to information technology
and in consumer demand.
Business conditions for the chemicalindustry were harsh as ever, as the yen’s steadyascent and the sharp rise in raw material prices,notably those of naphtha, had impact on
corporate earnings, although the recovering
Asian economy helped sustain demand.
In this business environment, our total net
sales increased by 2,271 million yen (1.4
percent), to 162,461 million yen, due to higher
sales volume and the addition of three consolidated subsidiaries, in spite of decrease inproceeds caused by lower price levels and the
yen’s advance against the dollar.
Operating profit declined by 2,283 million
yen (25.6 percent), to 6,622 million yen, as
decrease in proceeds due to lower selling
prices, rise in raw materials cost and theappreciation of the yen counteracted the effectsof sales volume increase and cost reduction.
Ordinary profits totaled 5,088 million yen,down 3,142 million yen (38.2 percent) from theprevious term. This decline was mainly due tolosses on investment by equity method of
accounting, caused by the addition as equitymethod affiliates of two new associated companies that had newly commenced commercial
operation.
Net profits for the term totaled 2,659
million yen, down 1,790 million yen (40.2
percent) from the previous fiscal year, in spiteof the reduction in effective corporate tax rate.
Net income per share was 13.54 yen,reducing ROE to 2.3 percent, down 1.6 points
from the previous term.

Nippon Shokubai considers shareholder
dividends as a top corporate priority, and ourpolicy is to ensure a pay-out of continuous,
stable dividends to our shareholders. At thesame time, the company must maintain its
competitive edge and follow practices that
promote sustainable growth, and this requires
judicious investment in facilities and researchand development. It is thus vital that we retainsome of the profits within the company.
Based on the current business environment
and the results in the fiscal year just ended, thecompany has decided to pay an annual dividend of ¥7.00 per share, including the ¥3.50
paid as an interim dividend, which is equivalent
to a pay-out ratio of 44.3 percent.
The company plans to use its retained
earnings for future projects to boost production
capacity, improve operating efficiency, andengage in new research and development
activities. In these efforts our aim will be topromote steady and continuous businessgrowth in the years ahead.

Our Business Program
In the new fiscal year, which will see thecompletion of our middle-range business plan,we will focus our efforts on the following threepoints, with the aim of solidifying our businessfoundation for great strides in the century
ahead.

(1) Reinforcement of our core businesses● Our acrylic acid and acrylic ester businesswill be boosted by P.T. Nisshoku Tripolyta
Acrylindo in Indonesia, which started
commercial operation in November 1998, as
well as by the project involving a new plantin the United States that is now underconstruction.
● In order to maintain our position as the top
leading firm in the superabsorbent polymer
business, we have expanded the production
capacity of Himeji Plant and developed thehighly advanced and most efficient manu-

facturing process that will respond tovarious customer needs. Construction of
the plant of our wholly owned subsidiary,
Nippon Shokubai Europe N.V. in Belgium
is progressing rapidly and will be completed by the year-end. Combined withthese developments, NA Industries, Inc.,
our wholly owned subsidiary in the UnitedStates, that also increased its production
capacity in 1998, will strengthen our tripolar (Japan-U.S.-Europe) superabsorbent
polymer business.

(2) Development of new products
In this fiercely contested market, thedevelopment of new products is essential forsurvival. In April of this year, we reformed
the R&D division and established the New
Products Promotion Committee, with the
President as Chairman, whose task is to
optimize the selection of R&D subjects andthe allocation of managerial resources.

Hiroshi Yanagida, President(3) Expansion of the environment
business
We are striving to spur innovation on
catalyst technologies, which are the mainstayof the company, and to promote their application to the environment business. In particular, our efforts are concentrated on the development and marketing of publicly concerned
dioxin decomposition catalysts and theirrelated systems, and exhaust gas and waste
water clean-up systems.
In addition, we will also focus on “Responsible Care” activities, obtaining ISO 9000
certificates for all products, and promoting theenvironmental management plan to obtain ISO
14000 certification.
As regards Y2K computer problems, wewere able to forestall any adverse effects by
taking various countermeasures on the initiative of our Computer System Year 2000
Readiness Committee.

Hiroshi Yanagida
President

3

REVIEW OF OPERATIONS

Chemical Business

Chemical Business(Change of net sales)(100 millions of yen)
2000

1,691
1,577 1,599

1,556
1500

1000

554
500

Basic Chemicals Grouphigher revenues.
Prices of ethylene glycols were boosted
by better demand and supply balance, but
reduced proceeds due to the appreciating
yen led to a decrease in revenues. Pricesof ethylene oxide and its derivatives did
not return to previous period levels, but
recovered demand for their use in surfaceactive agents brought about a gain inrevenues.
Domestic demand remained stagnant
for phthalic anhydride for use in plasticizers and paint, and revenues fell as a result.
Domestic demand formaleic anhydride for use
in synthetic resins and its
prices in overseas market
also failed to grow, which
resulted in reduced
revenues.
Consequently, sales of
the Basic Chemicals*Polyester fibers
Group totaled 53,584(Ethylene glycols)
million yen.

Demand for acrylic acid and acrylic
esters for use in superabsorbent polymers
remained strong, and this, together withrecovered demand for uses in paints andadhesives, contributed to an increase inrevenues in spite of reduced proceeds dueto the strong yen. Prices of methacrylicacid and methacrylate esters did not returnto previous period levels, but demand fortheir use in resins and paints started torecover, which, combined with the additionof Nippon Shokubai (Asia) Pte. Ltd. to theconsolidated subsidiaries, was conducive to

0
’96

’97

’98

’99

’00

Breakdown andcomponent ratio in
2000:(100 millions of yen)

Basic Chemicals
Group
536
33.5%

Chemicals Production Plant

Fine & Specialty Chemicals Group

Breakdown andcomponent ratio in
2000:(100 millions of yen)

Fine andSpecialty
Chemicals
Group

4

644
40.3%

Sales volumes of superabsorbent
Regarding other fine chemicals,
polymer products were about the same as
demand for raw materials for paints andthe previous year, in spite of the adverse
resins, resin adulterants and iodides
effects of the appreciating yen and theremained firm, but medical intermediates
demise of spot sales, which had been
showed a poor sales trend owing tocarried out in the previous term. This wasdecreased exports.
mainly due to the addition of Ultrasorb
As a result, overall sales of the Fine &Chemikalien GmbH in Germany to ourSpecialty Chemicals Group amounted toconsolidated subsidiaries.
64,414 million
End-user demand for higher-alcoholyen.
products (SOFTANOL) and other raw
materials for detergents recovered, and brought about increased revenues.
Thanks to their strong reputation in the market, products used
as concrete admixtures saw asteady upward trend in sales in*Polymers for concrete
spite of the prolonged slump in
admixture (AQUALOC)
construction investment, and* LCD displays (EPOSTAR)
yielded higher revenues.

Domestic

Breakdown andcomponent ratio in
2000:(100 millions of yen)

241
15.1%

Polymers
and Resins
Group

Polymers & Resins Group
Sales of unsaturated polyester resin(EPOLAC) for use in housing construction
and transport equipment continued to fall,leading to lower revenues.
Sales of FRP corrugated panels andcomponents were weak, but demand forpolycarbonate resin sheets remained firm.
Revenues from heat resisting paints andinsulating varnishes fell due to weak sales,
but sales of resins for use in ultra weatherresistant paints, adhesives and adherent
articles were generally strong.
Consequently, sales of the Polymers &Resins Group totaled 24,068 million yen.

*Bath Room(EPOLAC)*CRT deflection
yoke coil (ISOMID)

Breakdown andcomponent ratio in
2000:(100 millions of yen)

(178)
11.1%
Environment
Business andCatalysts Group

Environment Business & Catalysts Group
Sales of industrial catalysts throughtechnology licensing grew overall, owing
to firm replacement demand.
De-NOx catalysts enjoyed higher sales
and revenues due to higher demand fortheir use in power plants, and sales ofautomotive catalysts also grew.
Sales of wet-air oxidation catalysts andprocessing system (NSLC waste-water
treatment system) declined, but dioxins
decomposition catalysts and their related
systems enjoyed higher sales, mainly for
their use in municipal waste incineration
facilities.

As a result, sales of the Environment
Business & Catalysts Group totaled
17,838 million yen.
Consequently, overall sales for thechemicals business grew 2,200 million
yen (1.4 percent) from the previous term,
to 159,907 million yen.
Operating profits fell 2,243 million yen(28.3 percent) from the previous term, to
5,681 million yen, because of weak
product prices, rising raw materials prices
and the yen’s advance.

Environmental
monitoring vehicle

Exhaust gas treatment
catalysts*Examples of end uses for Nippon Shokubai products. The raw material in parentheses is the Nippon Shokubai products.

5

REVIEW OF OPERATIONSOther Businesses

Other Businesses(Change of net sales)(100 millions of yen)
30

28

27
25

25

26

Revenues from the transportation
business grew owing to increased haulage
volume, while service business suffereddeclining revenues due to the lingering
recession.

As a result, sales in other businesses
increased by 2.8 percent from the previous
term, to 2,554 million yen. Operating
profits fell 4.9 percent, to 808 million yen,in spite of our efforts in cost reduction.

20

15

9

10

5

0
’96

’97

’98

’99

’00

Geographic Information

6

Japan

Overseas

Chemicals business was slow
throughout the year, and sales totaled
143,363 million yen, while operating
profits were 5,399 million yen.

Ultrasorb Chemikalien GmbH inGermany and Nippon Shokubai (Asia)
Pte. Ltd. in Singapore were added to ourconsolidated subsidiaries. As a result,overall sales for overseas regions
amounted to 19,097 million yen, andoperating profits totaled 1,119 million
yen.

Topics

Cogeneration System in Himeji Plant toStart Operation

Cogeneration system in
Himeji Plant

A gas turbine cogeneration system wasinstalled in Himeji Plant, in order to copewith increasing demand for steam andelectricity while spurring energy conservation.
Cogeneration is a dualpurpose system that provides heat (steam) andelectricity. The new systemin our Himeji Plant uses
town gas as fuel, and its
three gas turbines and one
steam turbine are capable ofgenerating 26,000 kW ofpower. This system canprovide 70 to 80 percent of
the electricity used in the
Plant, while the steam from waste heatboilers with gas turbines is supplied to thesteam turbine and the production facilities
in the Plant.

New Production Facilities of Concrete
Admixture AQUALOC FC in the
United States
Domestic demand for thepolycarboxylic acid concrete admixture
AQUALOC FC is growing steadily;
Himeji and Kawasaki Plants’ annual
output of 20,000 tons in total will be
sufficient to cope with this.
In order to meet the growing demandin the larger North American market, NA
Industries, Inc., our wholly owned subsidiary in the United States, started theconstruction of a new plant with anannual output of 10,000 tons, which will
start commercial operation in the springof 2001.

Nippon Shokubai Europe N.V.’s
Superabsorbent Polymer Plant
Construction Underway
Nippon Shokubai Europe N.V., ourwholly owned subsidiary in Belgium, held
the groundbreaking ceremony for its new
superabsorbent polymer plant on September 2, 1999, in Antwerp, Flanders, with the
Flanders Minister of Economy, the Japanese Ambassador to Belgium, the Governorof Antwerp, the Mayor of Antwerp andmany other associated persons in attendance. The new plant, with an annual
output of 30,000 tons, will serve as production base in Europe after its completion at
the end of this year.

Groundbreaking ceremony on April 6, 2000

7

Management Indices(1) Consolidated Management Indices
PeriodFiscal Year End

83rd
November
1995

84th
November
1996

85th
March
1997

86th
March
1998

87th
March
1999

88th
March
2000

160,190
8,231
4,450
114,658
231,081

162,461
5,088
2,659
118,820
216,896(Millions of yen)

Net Sales
Ordinary Income
Net Income
Net Assets
Total Assets

152,658
10,604
5,601
102,676
200,196

158,460
10,0785,488
106,872
206,459

56,272
3,392
1,533
107,625
206,748

171,805
11,222
5,226
111,673
218,953(yen)

Net Assets per ShareNet Income per Share
Fully Diluted Net Income per Share

521.5228.45—

542.8327.88—

546.66
7.79—

567.21
26.54—

582.3922.61—

609.72
13.54—

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

51.3
5.6
33.5

51.8
5.2
31.2

52.1
4.3
31.6

51.0
4.8
28.0

49.6
3.9
29.7

54.8
2.3
33.2

(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

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
23,76718,285(5,709)(13,463)
22,827

Number of Employees

—

—

—

—

—

3,050

Note 1: Net Sales do not include consumption taxes.
Note 2: Fully Diluted Net Income per Share is not recorded because bonds with warrants attached and convertible bonds are not issued.
Note 3: The 85th period was 4 months, from December 1, 1996 through March 31, 1997, owing to the fact that the balance sheet date was changed toMarch 31. Return on Equity and Price Earning Ratio are on an annualized basis.

8(2) Non-consolidated Management Indices
PeriodFiscal Year End

83rd
November
1995

84th
November
1996

85th
March
1997

86th
March
1998

87th
March
1999

88th
March
2000

(Millions of yen)

Net Sales
Ordinary Income
Net Income
Capital128,162
9,007
4,807
16,529135,006
9,169
5,319
16,52946,782
2,954
1,394
16,529141,755
9,146
5,546
16,529128,998
6,870
4,115
16,529128,086
4,616
3,097
16,529Issued and Outstanding Shares(Thousands shares)

196,881

196,881

196,881

196,881

196,881

194,881109,533
203,537

113,470
189,999(Millions of yen)

Net Assets
Total Assets

97,251
180,245

101,115
184,303

101,743
183,600

106,113
193,178(yen)

Net Assets per ShareDividend per Share(Interim Dividend per Share)
Net Income per Share
Fully Diluted Net Income per Share
Capital Ratio (%)
Return on Equity (%)
Price Earning Ratio (times)
Dividend Payout Ratio (%)
Number of Employees

493.967.00(3.50)
24.42
—
54.0
5.0
39.0
28.7
2,275

513.597.00(3.50)
27.02
—
54.9
5.4
32.2
25.9
2,214

516.78
2.35
(—)
7.08
—
55.4
4.1
34.8
33.2
2,190

538.977.00(3.50)
28.17
—
54.9
5.3
26.4
24.8
2,217

556.347.00(3.50)
20.90
—
53.8
3.8
32.1
33.5
2,258

582.257.00(3.50)
15.77
—
59.7
2.8
28.5
44.3
2,217

Note 1: Net Sales do not include consumption taxes.
Note 2: Fully Diluted Net Income per Share is not recorded because bonds with warrants attached and convertible bonds are not issued.
Note 3: The 85th period was 4 months, from December 1, 1996 through March 31, 1997, owing to the fact that the balance sheet date was changed toMarch 31 at the shareholders’ meeting on February 27, 1997. Therefore, the Company waived an interim dividend for the period. Return on
Equity and Price Earning Ratio are on an annualized basis.
Note 4: Issued and Outstanding Shares are 2,000 thousands less than in the previous year, owing to the retirement of shares out of profit.
Note 5: Number of Employees will be the representation of the number of people actually engaged in work from this 88th period onward.

9

Financial Section

Report of Independent Certified Public Accountants ............. 11
Consolidated Balance Sheets .................................................. 12
Consolidated Statements of Income........................................ 14
Consolidated Statements of Shareholders’ Equity ................. 15
Consolidated Statement of Cash Flows .................................. 16
Notes to Consolidated Financial Statements .......................... 18

10

FINANCIAL SECTION

Report of Independent Certified Public Accountants

The Board of Directors and Shareholders
Nippon Shokubai Co., Ltd.

We have audited the consolidated balance sheets of Nippon Shokubai Co., Ltd. and consolidated
subsidiaries as of March 31, 2000 and 1999, and the related consolidated statements of income andshareholders’ equity for the years then ended, and the consolidated statement of cash flows for theyear ended March 31, 2000, all expressed in yen. Our audits were made in accordance with auditing standards, procedures and practices generally accepted and applied in Japan and, accordingly,
included such tests of the accounting records and such other auditing procedures as we considerednecessary in the circumstances.
In our opinion, the accompanying consolidated financial statements, expressed in yen, present
fairly the consolidated financial position of Nippon Shokubai Co., Ltd. and consolidated subsidiaries at March 31, 2000 and 1999, and the consolidated results of their operations for the years thenended and their cash flows for the year ended March 31, 2000 in conformity with accounting
principles and practices generally accepted in Japan applied on a consistent basis.
As described in Notes 1 to the consolidated financial statements, Nippon Shokubai Co., Ltd. andconsolidated subsidiaries have adopted new accounting standards for research and development
costs and tax-effect accounting in the preparation of their consolidated financial statements for theyear ended March 31, 2000.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2000 are presented solely for convenience. Our audit also included thetranslation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been
made on the basis described in Note 2 to the consolidated financial statements.

Osaka, Japan
June 27, 2000

See note 1(a) to the consolidated financial statements which explains the basis of preparation of the consolidated financial
statements of Nippon Shokubai Co., Ltd. under Japanese accounting principles and practices.

11

FINANCIAL SECTION

Consolidated Balance Sheets
Nippon Shokubai Co., Ltd. and Consolidated Subsidiaries

2000

March 31,
1999

(Millions of yen)

2000
(Thousands of
U.S. dollars)( Note 2)

AssetsCurrent assets:
Cash and cash equivalents .......................................................
Time deposits ...........................................................................
Marketable securities (Note 3) .................................................
Notes and accounts receivable:
Unconsolidated subsidiaries and affiliates ...........................
Trade .....................................................................................
Allowance for doubtful receivables ......................................
Inventories (Note 4) .................................................................
Deferred income taxes (Note 6) ...............................................
Other current assets ..................................................................
Total current assets .....................................................................
Property, plant and equipment:
Land ..........................................................................................
Buildings and structures ...........................................................
Machinery and equipment ........................................................
Construction in progress ..........................................................
Accumulated depreciation........................................................
Property, plant and equipment, net ............................................
Investments and other assets:
Investments in securities (Note 3) ...........................................
Investments in and advances to unconsolidated
subsidiaries and affiliates .........................................................
Deferred income taxes (Note 6) ...............................................
Other assets ..............................................................................
Total investments and other assets .............................................
Translation adjustments .............................................................
Total assets .................................................................................

12¥022,827362
22¥023,767
3,551
739$0,215,045
3,410
207

4,508
41,524(259)
24,408
1,713
2,528
97,633

7,175
36,370(334)
27,638—
4,712
103,618

42,468391,182(2,440)229,939
16,13823,815
919,764

26,991
57,937
194,006
109(195,602)
83,441

26,991
55,961
186,034
10,071(185,502)
93,555254,272
545,8031,827,659
1,027(1,842,694)
786,067

12,79916,608120,575

13,6003,096
4,640
34,135
1,687¥216,896

12,261—
4,704
33,573335¥231,081

128,121
29,16643,711
321,573
15,893$2,043,297

2000

March 31,
1999

2000
(Thousands of
U.S. dollars)( Note 2)(Millions of yen)

Liabilities and shareholders’ equity
Current liabilities:
Short-term bank loans (Note 5)................................................
Current Portion of long-term debt (Note 5) .............................
Notes and accounts payable:
Unconsolidated subsidiaries and affiliates ...........................
Trade .....................................................................................
Construction ..........................................................................
Accrued income taxes (Note 6) ................................................
Other current liabilities ............................................................
Total current liabilities ...............................................................

¥012,928
5,520¥14,409
12,987$0,121,790
52,002

4,763
22,261
1,184
1,514
7,808
55,978

1,979
25,558
8,473
1,314
6,788
71,50844,870209,713
11,154
14,26373,556527,348

29,741
10,3728
16440,28532,19010,877—
183
43,250280,179
97,71175
1,545
379,510

1,813

1,665

17,080Shareholders’ equity:
Common stock, ¥50 par value:
Authorized—426,000,000 shares:
Issued— 194,881,287 shares in 2000
196,881,287 shares in 1999 ...................................
Additional paid-in capital ...........................................................
Retained earnings (Note 7) ......................................................
Less treasury stock, at cost.......................................................
Total shareholders’ equity ..........................................................

16,52913,562
88,731(2)
118,820

16,52913,562
84,569(2)
114,658

155,713
127,763
835,902(19)
1,119,359

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

¥216,896¥231,081$2,043,297

Long-term liabilities:
Long-term debt (Note 5) ..........................................................
Retirement allowances .............................................................
Deferred income taxes (Note 6) ...............................................
Other .........................................................................................
Total long-term liabilities ...........................................................
Minority interests .......................................................................
Contingent Liabilities (Note 10)

See accompanying notes to consolidated financial statements.

13

FINANCIAL SECTION

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

Year ended March 31,
1999

2000

(Millions of yen)

2000
(Thousands of
U.S. dollars)( Note 2)

Net sales (Note 13) .....................................................................
Cost of sales (Note 8) .................................................................
Gross profit ...........................................................................

¥162,461
125,753
36,708¥160,190
120,613
39,577$1,530,485
1,184,673
345,812Selling, general and administrative expenses (Note 8) ..............
Operating income (Note 13) .................................................

30,086
6,622

30,671
8,906

283,429
62,383532(1,212)
886
673
(208)

767
(1,361)
(314)
955
—

5,012
(11,417)
8,347
6,340
(1,959)(1,372)
(572)
5,349

142
(1,170)
7,925(12,925)(5,390)50,391

2,858
(402)
2,456
2,893
(234)
¥002,659

3,156
—
3,156
4,769
(319)
¥4,45026,924(3,787)
23,13727,254(2,205)$0,025,049

Other income (expenses):
Interest and dividend income ...................................................
Interest expense ........................................................................
Gain (loss) on sales of investments in securities .....................
Royalty income ........................................................................
Loss on devaluation of investments in securities ....................
Equity in (losses) earnings of unconsolidated
subsidiaries and affiliates ..................................................
Other, net ..................................................................................
Income before income taxes and minority interests .............
Income taxes (Note 6):
Current ......................................................................................
Deferred ....................................................................................
Income before minority interests ..........................................
Minority interests in earnings of consolidated subsidiaries.......
Net income (Note 11) ...........................................................
See accompanying notes to consolidated financial statements.

14

FINANCIAL SECTION

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

2000

Year ended March 31,
1999

2000
(Thousands of
U.S. dollars)( Note 2)(Millions of yen)

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

¥16,529¥16,529$155,713

Additional paid-in capital:
Balance at beginning and end of the year ................................

¥13,562¥13,562$127,763¥84,5694,202
2,659(1,378)(88)¥81,582—
4,450(1,378)(85)$796,693
39,58525,049(12,981)
(829)

63

—

593

(225)

—

(2,120)(90)(981)¥88,731——¥84,569(847)(9,241)$835,902

Retained earnings:
Balance at beginning of the year..............................................
Prior year’s adjustment for deferred income taxes ..................
Net income ...............................................................................
Cash dividends .........................................................................
Bonuses to directors and corporate auditors ............................
Increase in retained earnings resulting from inclusion of
consolidated subsidiaries ....................................................
Decrease in retained earnings resulting from exclusion of
consolidated subsidiaries ....................................................
Decrease in retained earnings resulting from addition ofcompanies accounted from by the equity method ..............
Retirement of treasury stock ....................................................
Balance at end of year ................................................................

See accompanying notes to consolidated financial statements.

15

FINANCIAL SECTION

Consolidated Statement of Cash Flows
Nippon Shokubai Co., Ltd. and Consolidated Subsidiaries

Year ended March 31,
2000
2000

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 ............................................
Reversal of retirement allowances ......................................
Interest and dividend income ..............................................
Interest expense ...................................................................
Equity in losses of unconsolidated subsidiaries
and affiliates ..................................................................
Gain on sale of investments in securities ............................
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 .....................................................................
Other current assets .......................................................
Notes and accounts payable ..........................................
Other current liabilities .................................................
Subtotal ....................................................................
Interest and dividend income received .........................................
Interest paid ...................................................................................
Income taxes paid ..........................................................................
Net cash provided by operating activities ................
Investing activities:
Decrease in time deposits ..............................................................
Proceeds from sales of marketable securities andinvestments in securities ...........................................................
Purchases of marketable securities and investments in securities
Purchases of property, plant and equipment .................................
Increase in loans receivable ..........................................................
Collection of loans receivable .......................................................
Other, net .......................................................................................
Net cash used in investing activities ........................

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

¥ 5,349$ 50,391

12,475
(504)
(532)
1,212

117,522(4,748)(5,012)
11,417

1,372
(862)
208
236
454

12,925(8,121)
1,959
2,223
4,278

839
2,893
1,013
(3,210)702
21,645532(1,358)(2,534)
18,285

7,904
27,254
9,543(30,240)
6,614
203,909
5,012(12,793)(23,872)
172,256

3,199

30,137

6,774(4,665)(9,971)
(629)
206
(624)
(5,710)63,815(43,947)(93,933)(5,926)
1,941(5,879)(53,792)

Year ended March 31,
2000
2000
(Millions of yen)

Financing activities:
Decrease in short-term bank loans, net .........................................
Proceeds from long-term debt .......................................................
Repayment of long-term debt .......................................................
Purchases of treasury stock ...........................................................
Cash dividends paid ......................................................................
Other, net .......................................................................................
Net cash used in financing activities ............................
Effects of exchange rate changes on cash and cash equivalents ..
Decrease in cash and cash equivalents ..........................................
Cash and cash equivalents at beginning of year ...........................
Decrease in cash and cash equivalents resulting fromchange in number of consolidated subsidiaries ........................
Cash and cash equivalents at end of year ......................................

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

¥ (1,259)
6,070(15,901)(981)(1,378)(15)(13,464)$ (11,861)
57,183(149,797)(9,241)(12,981)(142)(126,839)

77(812)
23,767725(7,650)223,900(128)¥22,827(1,205)$215,045

See accompanying notes to consolidated financial statements.

17

FINANCIAL SECTION

Notes to Consolidated Financial Statements
Nippon Shokubai Co., Ltd. and Consolidated Subsidiaries
March 31, 2000

1. Summary of Significant Accounting Policies
(a)

(b)

18

Basis of Presentation of Consolidated Financial Statements
Nippon Shokubai Co., Ltd. (the “Company”) and
its domestic consolidated subsidiaries maintain theiraccounts and records in accordance with accounting
principles and practices generally accepted andapplied in Japan. Its foreign subsidiaries maintaintheir accounts in conformity with the requirementsof their countries of domicile. The accompanying
consolidated financial statements have been compiled from the consolidated financial statements
prepared by the Company as required by the Securities and Exchange Law of Japan, which may differ
in certain material respects from accounting principles and practices generally accepted in countries
and jurisdictions other than Japan.
Basis of Consolidation
The accompanying consolidated financial
statements include the accounts of the Company andits significant subsidiaries. All significant intercompany items have been eliminated in consolidation.
The foreign consolidated subsidiaries are consolidated 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.
Under a revised accounting standard for consolidated financial statement, which become effective
April 1, 1999, the Company is principally required
to consolidate all entities which are effectively
controlled by the Company unless such control isconsidered temporary. The effect of the applicationof this new accounting standard for consolidated
financial statements was immaterial.
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 thecurrent net income or losses of such companies,
after the elimination 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 atthe date of acquisition is amortized over a period offive years on a straight-line basis, except thatimmaterial amounts are charged to income as
incurred.
(c)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 exceptthat the components of shareholders’ equity aretranslated at their historical exchange rates. Translation differences resulting from translating thefinancial statements of the foreign consolidated
subsidiaries are not included in the determination of
net income but are presented as translation adjustments in the consolidated balance sheets.
Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into Japanese yen at the rates in
effective at the respective transaction dates.
Short-term receivables and payables denominated in foreign currencies are translated into yen at
the exchange rates prevailing at the balance sheet
date, or at the applicable exchange rates underforward foreign exchange contracts.
Long-term receivables and payables denominatedin foreign currencies, including investments insecurities, are translated at their historical rates.
Gains and losses on foreign exchange are credited or charged to income in the period in whichsuch gains and losses are recognized for financial
reporting purposes.

(d)Consolidated Statement of Cash Flows
The Company has initially adopted “AccountingStandards for Consolidated Statements of Cash
Flows” issued by the Business Accounting Deliberation Council of Japan which requires the preparationand disclosure of a consolidated statement of cash
flows as part of the basic consolidated financial
statements effective the year ended March 3l, 2000.
For the purposes of the consolidated statement ofcash flows for the year ended March 3l, 2000, cash
and cash equivalents include cash on hand and inbanks 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 ofcost or market, cost being determined by the last-in,
first-out method.

(f)Property, Plant and Equipment
Property, plant and equipment is stated on thebasis of cost. Depreciation is computed principallyby the declining-balance method over the estimateduseful lives of the respective assets, except for theforeign consolidated subsidiaries which computedepreciation by the straight-line method over theestimated 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 thatlease agreements which stipulate the transfer ofownership of the leased assets to the lessee areaccounted for as finance leases. However, leases ofthe foreign consolidated subsidiaries are generallyclassified and accounted for as either finance oroperating leases.

(h)Marketable Securities and Investments in
Securities
Marketable securities and investments in securities are stated principally at cost determined by theaverage method.

(i)

Research and Development Costs and Computer Software
Research and development costs are charged toincome when incurred. Expenditures relating tocomputer software developed 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 straightline method over their useful lives, generally aperiod of 5 years. “Accounting Standards for
Research and Development costs, etc.” which was
issued by the Business Accounting Deliberation
Council of Japan has been adopted effective April 1,
1999.

(j)

Income Taxes
Income taxes are calculated on taxable income
and charged to income on an accrual basis. Certain
temporary differences exist between taxable income
and income reported for financial statement purposes which enter into the determination of taxable
income in a different period. Effective April 1,
1999, the Company has initially adopted “Financial

Accounting Standards on Accounting for Effects on
Income Taxes” which was issued by BusinessAccounting Deliberation Council of Japan and has
recognized the tax effect of temporary differences in
its consolidated financial statements. The cumulative effect of this adoption of tax-effect accounting
through the beginning of the current year has beenreported as prior year’s adjustment for deferredincome taxes in the consolidated statements ofshareholders’ equity. As a result of this change inmethod of accounting, retained earnings at March
31, 2000 and net income for the year ended March
31, 2000 increased by ¥4,604 million ($43,372
thousand) and ¥402 million ($3,787 thousand),
respectively, from the amounts which would havebeen recorded if the method applied in the previous
year had been followed.
(k)

Retirement Allowances and Pension Plans
The Company’s employees are covered by an
employees’ retirement allowances plan and an
employees’ pension plan. The employees’ retirement allowances plan provides for a lump-sum
payment determined by reference to the rate of pay,
years of service and certain other factors. The
employees’ pension plan, which is contributory andfunded, was instituted to replace 60% of the benefits
under the retirement allowances plan for employees
who retire at the mandatory retirement age, and 10%of the benefits under the retirement allowances planfor employees who retire at age 50 or older and after
3 or more years of service. The assets of the pension plan at March 31, 2000 amounted to ¥11,066
million ($104,249 thousand).
The domestic consolidated subsidiaries have
either unfunded employees’ retirement allowances
plans and/or pension plans which are noncontributory and funded and which cover substantially all
their employees. These plans provide for lump-sum
payments and/or annuity payments payable upon
termination of employment.
The liability for retirement allowances is stated at
the amount which would be required to be paid if alleligible employees terminated their employment
involuntarily as of March 31, 2000 and 1999, lessthe balance of the funds in the pension plan.
In addition, directors and corporate auditors of
the Company and certain consolidated subsidiaries
are customarily entitled to lump-sum payments
under their respective unfunded retirement allowances plans. The provision for retirement allow-

19

FINANCIAL SECTION

ances 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
to the close of such financial period. The accounts
for that period do not, therefore, reflect such appropriations (See Note 14).

2. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollar
amounts is included solely for convenience, as amatter of arithmetic computation only, at the rate of¥106.15 = U.S.$1.00, the approximate rate ofexchange in effect on March 31, 2000. The translation should not be construed as a representation that
yen have been, could have been, or could in the
future be, converted into U.S. dollars at the above or
any other rate.

3. Marketable Securities and Investments in
Securities
Information with respect to the carrying amountand market value of the marketable equity securities
included in marketable securities and investments insecurities at March 31, 2000 is summarized asfollows:
2000

2000

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

Carrying Market
Amount Value

Carrying Market
Amount Value

Marketable securities
¥8
¥8
$75
$75
Investments insecurities ....... ¥11,962 ¥24,146 $112,689 $227,470

4. Inventories
Inventories at March 31, 2000 and 1999 were as
follows:
2000

1999

(Millions of yen)

Merchandise andfinished goods .....
Raw materials ...........
Work in process ........
Supplies ....................

¥10,735
5,982
6,367
1,324
¥24,408¥12,916
5,207
7,973
1,542
¥27,638$101,131
56,35459,981
12,473$229,939

5. Short-Term Bank Loans and Long-Term Debt
Short-term bank loans consisted mainly of
unsecured loans. The average interest rates of theshort-term bank loans outstanding at March 31,
2000 and 1999 were 0.81% and 1.49%, respectively.
Long-term debt at March 31, 2000 and 1999
consisted of the following:
2000

1999

2000

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

5.9% unsecured bonds
due July 1999 ............... ¥,000— ¥06,000 $ 0000—
5.7% unsecured bonds
due July 1999 ...............
—
4,000
—
1.425% unsecured bonds
due November 2002 .....
5,000
5,000
47,103
1.85% unsecured bonds
due November 2004 .....
5,000
5,000
47,103
Unsecured loans from banks
and insurance companies,
payable in yen, at rates from
0.97% to 4.00% due
through 2005 ................ 16,371
14,720154,226
Unsecured loans from banks
payable in U.S. dollars, atrates from 7.13% to 7.66%,
due through 2002..........
2,458
803
23,156
Secured loans from banks
and insurance companies,
payable in yen, at rates from
1.10% to 5.60% due
thorugh 2008 ................ 6,432
9,654
60,59335,26145,177332,181Less current portion ........... (5,520) (12,987) (52,002)¥29,741

20

2000(Thousands of
U.S.dollars)
dollars)
U.S.

¥32,190$280,179

FINANCIAL SECTION

The aggregate annual maturities of long-term
debt subsequent to March 31, 2000 are summarized
below:
Year ending March 31(Millions of yen) (Thousands of
U.S. dollars)

2001
2002
2003
2004
2005 and thereafter¥5,5206,536
12,2973,005
7,903¥35,261$52,00261,573
115,846
28,30974,451$332,181

Assets pledged as collateral for long-term debt,
including the current portions, and accounts andnotes payable at March 31, 2000 and 1999 were as
follows:
2000

1999

(Millions of yen)

Cash in banks ........
Buildings andstructures ..........
Machinery andequipment .........
Land.......................
Investments insecurities ..........

¥0,278¥00,218

2000(Thousands of
U.S. dollars)

2000
Statutory tax rates ...............................................
Effect of:
Equity in losses of an unconsolidated
subsidiary and affiliates..............................
Exclusion from equity method ........................
Permanently nondeductible expenses .............
Permanently nontaxable dividends received ...
Foreign tax credits ...........................................
Other, net .........................................................

42.0%

Effective tax rates ...............................................

45.9%

Deferred income taxes reflect the net tax effect of
the temporary differences between the carrying
amounts of the assets and liabilities for financial
reporting purposes and the corresponding tax bases
reported for income tax purposes. The significant
components of the deferred tax assets and liabilitiesof the Company and consolidated subsidiaries at
March 31, 2000 are summarized as follows:$02,619

1,003

1,085

9,449

1,191
1,145

1,527
1,647

11,22010,786

4,193¥7,8108,232¥12,70939,501$73,575

6. Income Taxes
Income taxes applicable to the Company and its
domestic consolidated subsidiaries consist of
corporation, inhabitants’ and enterprise taxes. The
statutory tax rates in Japan for the years ended
March 31, 2000 and 1999 were, in the aggregate,approximately 42% and 47%, respectively. The
effective tax rate reflected in the consolidated
statements of income for the year ended March 31,
2000 differs from the above statutory tax rate for thefollowing reasons:

10.4
(4.0)
2.3
(1.8)
(3.1)
0.1

2000

2000

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

Deferred tax assets:
Accrued severance benefits .......
Intercompany profit oninventories and property,
plant and equipment .............
Reserve for repairs .....................
Depreciation and amortization ..
Accrued employees’ bonuses ....
Accrued enterprise tax ...............
Other ..........................................
Total deferred tax assets ......

¥2,636$24,833

774
982
442
241
139
333

7,292
9,251
4,164
2,270
1,309
3,137

5,547

52,256

Deferred tax liabilities:
Deferred capital gains on property(463)
Reserve for depreciation for tax
deductible purposes ..............
(238)
Other ..........................................
(45)
Total deferred tax liabilities(746)
Net deferred tax assets.........
¥4,801(4,361)(2,242)(424)(7,027)$45,229

21

FINANCIAL SECTION

7. Retained Earnings
The Commercial Code of Japan provides that an
amount which is at least 10% of cash dividends andbonuses paid to directors and corporate auditors andexactly l0% of interim cash dividends paid be
appropriated to the legal reserve until such reserve
equals 25% of the stated capital. The Code also
provides that neither additional paid-in capital nor
the legal reserve is available for dividends but both
may be used to reduce or eliminate a deficit byresolution of the shareholders or may be transferred
to stated capital by resolution of the Board of Directors. Retained earnings include the legal reserve
provided in accordance with the provisions of theCommercial Code. The legal reserve of the Company included in retained earnings at March 31, 2000
and l999 amounted to ¥3,691 million ($34,772
thousand) and ¥3,542 million, respectively.

8. Research and Development Costs
Research and development costs included in costof sales and selling, general and administrative
expenses for the years ended March 31, 2000 and1999 totaled ¥9,546 million ($ 89,929 thousand) and¥10,287 million, respectively.

Years ending March 31,
2001 ..................................
2002 and thereafter ..........

(Millionsof yen)

¥201
273
¥474

(Thousands of
U.S. dollars)$1,893
2,572$4,465

10. Contingent Liabilities
At March 31, 2000, the Company and consolidated subsidiaries were contingently liable asguarantors of indebtedness of the Company’s
employees, affiliates and other in the aggregate
amount of ¥14,650 million ($ 138,012 thousand).
In addition, at March 31, 2000, the Company andconsolidated subsidiaries had contingent liabilities
arising from notes discounted by banks and notes
endorsed and delivered for payment to vendors in
the aggregate amount of ¥1,393 million ($13,123
thousand).

11. Amounts Per Share

9. 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, 2000 and 1999, which
would have been reflected in the balance sheets if
finance lease accounting had been applied to thefinance leases currently accounted for as operatingleases:2000

1999(Millions ofyen)

Machinery and equipment:
Acquisition costs ............ ¥1,008
Accumulated depreciation (534)Net book value ............... ¥474

2000
(Thousands(Thousands ofof
U.S.
U.S.dollars)
dollars)¥1,052(441)¥611$9,496(5,031)$4,465

Lease payments relating to finance leases accounted for as operating leases amounted to ¥232
million ($2,186 thousand) and ¥213 million for theyears ended March 31, 2000 and 1999, respectively.
Depreciation of the leased assets calculated by thestraight-line method over the respective lease terms
amounted to ¥232 million ($ 2,186 thousand) and¥213 million for the years ended March 31, 200022

and 1999, respectively.
Future minimum lease payments (including theinterest portion thereon) subsequent to March 31,
2000 for finance leases accounted for as operatingleases are summarized as follows:

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

2000

1999

2000

( yen)( yen)( U.S. dollars)¥13.547.00
609.72¥22.61
7.00
582.39

$0.13
0.07
5.74

The computation of net income per share isbased on the weighted average number of shares ofcommon stock outstanding during each year.
Cash dividends per share represent the cash
dividends declared as applicable to the respective
years together with the interim cash dividends paid.
Net assets per share are based on the number ofshares outstanding at the respective balance sheet
dates.

12. Derivatives
Derivative financial instruments are utilized by
the Company and consolidated subsidiaries principally to reduce the risk of fluctuation in interest rates
and foreign exchange rates. The Company has
established a control environment which includes
policies and procedures for risk assessment and forthe approval, reporting and monitoring of transac-

FINANCIAL SECTION

tions involving derivatives. The Company andconsolidated subsidiaries do not hold or issue derivative financial instruments for trading purposes.
The Company and consolidated subsidiaries are
exposed to certain market risks arising from forward
foreign exchange contracts and swap agreements.
The Company and consolidated subsidiaries are also
exposed to the risk of credit loss in the event of nonperformance by the counterparties to the currency
and interest rate contracts; however, the Company
and consolidated subsidiaries do not anticipate
nonperformance by any of these counterparties, all ofwhom are financial institutions with high credit
ratings.
At March 31, 2000, a consolidated subsidiary had

certain interest rate swap positions outstanding. The
total fair value of these positions was immaterial.

13. Segment Information
The Company and consolidated subsidiaries areprimarily engaged in the manufacture and sale ofproducts in Japan and overseas in the following
business segments : business in the chemicals
segments conducted principally by the Company.
Business Segments
The business segment information for the Company and consolidated subsidiaries for the years
ended March 31, 2000 and 1999 is outlined asfollows:

ChemicalsYear ended March 31, 2000
Other
Total
Eliminations/
Corporate

Consolidated(Millions of yen)

I. Sales and operating income
Sales to third parties ........................................................
Intergroup sales and transfers .........................................
Total sales ........................................................................
Operating expenses .........................................................
Operating income ............................................................

¥ 159,907
5
159,912
154,231¥ 005,681¥ 2,554
8,956
11,51010,702¥00808¥ 162,461
8,961
171,422
164,933¥006,489¥0000—(8,961)(8,961)(9,094)¥000133¥ 162,461—
162,461
155,839¥00,6,622

II. Assets, depreciation and capital expenditures
Total assets ......................................................................
Depreciation and amortization ........................................
Capital expenditures ........................................................

¥176,708
12,3294,126¥8,475340
83¥ 185,183
12,6694,209¥ 31,713
56—¥ 216,896
12,725
4,209

ChemicalsYear ended March 31, 1999
Other
Total
Eliminations/
Corporate

Consolidated(Millions of yen)

I. Sales and operating income
Sales to third parties ........................................................
Intergroup sales and transfers .........................................
Total sales ........................................................................
Operating expenses .........................................................
Operating income ............................................................

¥157,706—
157,706
149,781¥7,925¥2,484
9,555
12,03911,189¥850¥160,190
9,555
169,745
160,970¥8,775¥0,00—(9,555)(9,555)(9,686)¥131¥160,190—
160,190
151,284¥8,906

II. Assets, depreciation and capital expenditures
Total assets ......................................................................
Depreciation ....................................................................
Capital expenditures ........................................................

¥176,999
12,054
21,052¥8,506407
130¥185,505
12,461
21,182¥45,576176
0¥231,081
12,637
21,18223

FINANCIAL SECTION

ChemicalsYear ended March 31, 2000
Other
Total
Eliminations/
Corporate

Consolidated(Thousands of U.S. dollars)

I. Sales and operating income
Sales to third parties ........................................................ $1,506,425
Intergroup sales and transfers .........................................
47$24,060
84,371$1,530,485
84,418$0,000—(84,418)$1,530,485—

Total sales ........................................................................ 1,506,472
Operating expenses ......................................................... 1,452,954
Operating income ............................................................ $0,053,518

108,431100,819$07,6121,614,903
1,553,773$0,061,130(84,418)(85,671)$1,253

1,530,485
1,468,102$62,383

II. Assets, depreciation and capital expenditures
Total assets ...................................................................... $1,664,701
Depreciation ....................................................................
116,146
Capital expenditures ........................................................
38,869$79,840
3,203
782$1,744,541
119,349
39,651$298,756
528—$2,043,297
119,877
39,651

Geographical Areas
As more than 90% of the consolidated net sales for the year ended March 31, 1999 were made in Japan, thedisclosure of geographical segment information has been omitted.
The geographical segment information for the Company and consolidated subsidiaries for the year ended
March 31, 2000 is outlined as follows:Year ended March 31, 2000
Japan
Foreign
Total
ElimiConsolinations/
dated
corporate(Millions of yen)

I. Sales and operating income
Sales to third parties ........................................................
Intergroup sales and transfers .........................................
Total sales ...................................................................
Operating expenses .........................................................
Operating income ............................................................
II. Total assets ..............................................................

¥143,363
7,664
151,027
145,628¥5,399¥167,552¥19,098
29
19,12718,008¥1,119¥17,288¥162,461
7,693
170,154
163,636¥ 6,518¥184,840¥0000—(7,693)(7,693)(7,797)¥104¥ 32,056¥162,461—
162,461
155,839¥ 6,622¥216,896

Japan

Year ended March 31, 2000
Foreign
Total
Eliminations/
corporate

Consolidated(Thousands of U.S. dollars)

I. Sales and operating income
Sales to third parties ........................................................ $1,350,570
Intergroup sales and transfers .........................................
72,200Total sales ................................................................... 1,422,770
Operating expenses ......................................................... 1,371,908
Operating income ............................................................ $0,050,862
II. Total assets .............................................................. $1,578,445
24$179,915
273
180,188
169,647$010,541$162,864$1,530,485
72,473
1,602,958
1,541,555$0,061,403$1,741,309$0.000—(72,473)(72,473)(73,453)$ 000980$301,988$1,530,485—
1,530,485
1,468,102$ 62,383$2,043,297

FINANCIAL SECTION

Overseas Sales
Overseas sales, which include export sales of the Company and the domestic consolidated subsidiaries andsales (other than exports to Japan) of the foreign consolidated subsidiaries, for the years ended March 31, 2000
and 1999 are summarized as follows:

Asia

Year ended March 31, 2000
EuropeAmericaOther¥20,119¥15,405¥13,905¥5,191¥54,620

12.4%

9.5%

8.5%

3.2%

33.6%

Total

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

Asia

Year ended March 31, 1999
EuropeAmericaOther¥18,646¥14,551¥15,706¥4,285¥53,188

11.6%

9.1%

9.8%

2.7%

33.2%

Total

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

Asia

Year ended March 31, 2000
EuropeAmericaOther$189,534$145,125

Total(Thousands of U.S. dollars)

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

$130,994$48,902$514,555

14. Subsequent Events(1)

On June 19, 2000, the Company entered into anagreement to acquire 24,545 thousand shares of P.T.
Nisshoku Tripolyta Acrylindo, an affiliate of theCompany, from P.T. Tri Polyta Indonesia Tbk. As aresult of this acquisition, P.T. Nisshoku Tripolyta
Acrylindo will become a 90.9%-owned subsidiary.

(2)

The following appropriations of retained earnings of the Company, which have not been reflectedin the consolidated financial statements for the year
ended March 31, 2000, were approved at a shareholders’ meeting held on June 27, 2000:(Millions (Thousands ofof yen)U.S. dollars)

Cash dividends (¥3.50 = $ 0.03
per share) ...................................
Bonuses to directors and corporate
auditors ......................................

¥682$6,425

77
¥759

725
$7,15025

Corporate Data

NIPPON SHOKUBAI CO., LTD.

Board of Directors

Incorporated

Chairman:
Kenji Aida

August 21, 1941
Common Stock
Authorized: 424,000,000 shares
Issued:194,881,287 shares
Capital¥16,529,413,238
Number of Employees
2,279
Stock Listings
First Section, Tokyo Stock ExchangeFirst Section, Osaka Securities ExchangeFirst Section, Nagoya Stock Exchange
Transfer Agent
The Toyo Trust & Banking Co., Ltd.
1-4-3 Marunouchi, Chiyoda-ku
Tokyo 100-0005, Japan(as of March 31, 2000)

President:
Hiroshi Yanagida
Executive Managing Director:
Yasumasa Oba
Senior Managing Directors:
Yoshinori Sano
Kinya Hasegawa
Managing Directors:
Takeo Munehiro
Tatsuo Konishi
Hisayoshi Jono
Kazunosuke Nagai
Keizo Maruyama
Directors:
Takahiro Toyohama
Tsumoru Yamada
Yutaka Morimoto
Yuji Noma
Norimitsu Konno
Tsuneyuki Nakashima
Michio Ueshima
Corporate Auditors:
Masaru Abe
Tadashi Kimura
Haruki Yoshida
Kaneyoshi Nishiyama(As of June 27, 2000)

26

CORPORATE DATA

Consolidated Subsidiaries
Name

Principal Business
Paid-in
EquityCapital Ownership(millions)(%)

President

Nippoh Chemicals Co., Ltd.*

¥517

67.9

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

Tadao Kondo

Nippon Polyester Co., Ltd.*

¥400

96.9

Manufacture and sale of synthetic
resins and related additives

Yoshizumi Ozawa

Daiko Kaiun Co., Ltd.*

¥100

64.9

Transport

Katsunobu Kaneko

Tokyo Fine Chemical Co., Ltd.*

¥80

66.2

Manufacture and sale of stabilizerof vinyl chloride resin andanti-freeze

Masatoshi Tsuchino

Chugoku Kako Co., Ltd.*

¥75

74.3

Manufacture and sale of synthetic
resins and heat insulator

Seiji Yamaoka

Shinritsu Co., Ltd.*

¥40

73.1

Sale of chemical products

Toyohiko Kunihara

Nisshoku Kosan Co., Ltd.*

¥32

100.0

Management of golf driving range
and non-life insurance agent

Toshiyuki Sone

NA Industries, Inc.*

US$1.025** 100.0

Manufacture and sale of superabsorbent polymers
Technical liaison and businessdevelopment

Katsumi Uchida

Ultrasorb Chemikalien GmbH*

DM2.0

100.0

Sale of superabsorbent polymers

Norihito Hirose

Nippon Shokubai (Asia) Pte. Ltd.*

S$0.3

100.0

Sale of chemical products

Koichiro Yamada

Nihon Jyoryu Kogyo Co., Ltd.

¥90

46.6

Manufacture and sale ofanthraquinone, carbozole, andtheir derivatives

Kensuke Kumazawa

ICT Co., Ltd.

¥270

50.0

Sale of automobile exhaust catalyst

Kazuo Koshida

Nippon Polymer Ind. Co., Ltd.

¥100

50.0

Manufacture and sale of acrylic
emulsions

Yoshio Yasuda

Nisshoku Schenectady Kagaku, Inc.

¥40

45.0

Manufacture and sale of insulating
varnish and enamel

Kenji Aida

P.T. Nisshoku Tripolyta Acrylindo

US$60

50.0

Manufacture and sale of acrylicacid and acrylic esters

Takashi Onishi

S$58.940.0

Manufacture and sale of methacrylic acid and acrylic methacrylic
estersKazutoshi Matsukawa

International Catalyst Technology, Inc. US$7.4

50.0

Manufacture and sale of automobile exhaust catalyst

J. Plessow

Singapore MMA Monomer Pte. Ltd.

(as of June 30, 2000)
Included in consolidation
American Acryl NA LLC, and American Acryl LP., are consolidated into NA Industries, Inc. by the equity method.
Nishinippon FRP Shipbuilding Co., Ltd. was liquidated on March 15, 2000.
** This item only thousand dollars*

27

CORPORATE DATA

Directory

HEAD OFFICESLABORATORIESOsaka Office
Kogin Bldg.
4-1-1 Koraibashi, Chuo-ku
Osaka 541-0043, Japan
Telephone: 81-6-6223-9111
Facsimile: 81-6-6201-3716

Strategic Technology Research Center
5-8 Nishi Otabi-cho, Suita
Osaka 564-8512, JapanTokyo 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

SALES OFFICES
Nagoya Sales Office
Nagoya Mitsui Bldg., Annex
1-24-21 Meiekiminami, Nakamura-ku
Nagoya 450-0003, Japan
Fukuoka Sales Office
Hakata Bldg.
8-36 Hakataeki Chuogai, Hakata-ku
Fukuoka 812-0012, Japan
PLANTS
Kawasaki Chidori Plant
14-1 Chidori-cho, Kawasaki-ku
Kawasaki, Kanagawa 210-0865, Japan
Kawasaki Ukishima Plant
10-12 Ukishima-cho, Kawasaki-ku
Kawasaki, Kanagawa 210-0862, Japan
Himeji Plant
992-1 Aza Nishioki Okihama, Aboshi-ku
Himeji, Hyogo 671-1241, Japan
Suita Plant
5-8 Nishi Otabi-cho, Suita
Osaka 564-0034, Japan

28

Performance Chemicals & Materials ResearchCenter
5-8 Nishi Otabi-cho, Suita
Osaka 564-8512, Japan
Polymers Research Center
5-8 Nishi Otabi-cho, Suita
Osaka 564-8512, Japan
Catalysts Research Center
992-1 Aza Nishioki Okihama, Aboshi-ku
Himeji, Hyogo 671-1241, Japan
Resins Research Center
5-8 Nishi Otabi-cho, Suita
Osaka 564-0034, Japan
Process Technology Center
992-1 Aza Nishioki Okihama, Aboshi-ku
Himeji, Hyogo 671-1241, JapanOVERSEAS COMPANIESNA Industries, Inc.
P.O. Box 5407
2651 Riverport Road
Chattanooga, TN 37406, U.S.A.
NIPPON SHOKUBAI (ASIA) PTE. LTD.
138 Cecil Street, #05-04
Cecil Court, Singapore 069538
ULTRASORB Chemikalien GmbH
Niedenau 61-63
60325 Frankfurt am Main, Germany

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: +81-3-3506-7598’00 Aug., 2000
Printed in Japan