Management Policy
Basic Policy
Fiscal 2000 saw the start of the Kuraray Group's new 5-year medium-term businessplan — dubbed ‘G-21.’ The plan was inspired by the belief that a company thatwishes to develop in the face of global competition must: (1) maintain international
competitive power, (2) give consideration to the natural environment, (3) utilize
electronic information technology and carve out and develop markets in that field,(4) maximize synergy among group companies, and (5) give balanced consideration
to every stakeholder.
Guided by the plan, we are aiming to build ‘an eco-friendly enterprise withunique technology.’ To attain this goal, we must expand in three crucial areas —businesses with international competitive strength, those that contribute to thepreservation and improvement of the global environment, and those that serve toestablish our unique identity throughout the world.

Medium-Term Strategy
Under the plan, we will seek to achieve efficient management of our business
operations by (1) attaining an ROA (target: 7.0%) that exceeds capital cost, (2)emphasizing the importance of ROA and cash flow as management indices, (3)utilizing M&A, and (4) making decisions based on ‘Business Reevaluation Criteria’
concerning businesses with worsening achievements.
To create a corporate culture able to respond swiftly to changes in the market
environment, we will implement the following improvements to our organizationand management:(1)Creating a flat management structure and devolving authorization(2)

Making businesses and group companies self-supporting(3)

Maximizing synergy among group businesses by ensuring shared values andbusiness strategies

1

(4)

Creating an employee evaluation system that better reflects the achievementsof each individual, and(5)

Promoting BPR and utilizing information technology

The Company's business strategy combines due concern for both product-specificstrategy and market-specific strategy. Among our operating fields, our corebusinesses — which we intend to strengthen further — are vinyl-acetate related
fields (poval, "EVAL", “Kuralon” and "Kuralon K-II"), isoprene chemical fields(thermoplastic elastomers, fine chemicals), and man-made leather fields ("Clarino").

In addition to this product-specific strategy, we have also established a marketspecific strategy focused on four areas: electronic information technologies (e.g.
poval film for LCDs, the highly heat-resistant resin PA9T); eco-friendly areas(asbestos substitutes, gas barrier materials, substitutes for polychlorinated vinyl
and vulcanized rubber); environment business areas (activated carbon, PVA gels,
industrial membranes); and the medical areas (artificial organs, dental materials).
We are seeking to expand these business areas by utilizing the market-in approach.

Basic Dividend Policy
We are keenly aware that the distribution of profit to shareholders is our highest
priority, and we regard our mission as being to attain a steady advance in businessperformance so as to ensure that profit is distributed appropriately. Amid a businessenvironment in which competition is expected to become increasingly fierce, retained
earnings will be used for strategic investment aimed at the expansion of operations,
including M&A transactions both in Japan and overseas whenever necessary.

Future Issues
In order to survive amid the abrupt changes taking place in the business operating2

environment, it is essential for companies to increase profitability still further. For thispurpose, Kuraray is placing emphasis on the following measures.
(1) We will boost performance by ensuring rapid realization of the effects of capital
investment already implemented.
(2) In businesses with strong worldwide growth potential, we will step up production
and sales activities in locations close to areas of demand, thereby enhancing
competitiveness. As part of this strategy, in the field of the thermoplastic elastomer"Septon", a core businesses, we established the U.S. subsidiary Septon Company ofAmerica during the term under review, and started the construction of a new plant.
(3) On April 1, 2001 we carried out a reorganization by which we created a structure
characterized by greater emphasis on the market-in business approach. Under this, theCompany will devote its full energy to responding quickly to market trends, developing
new products and carving out new markets.
(4) We will enhance business efficiency by pushing ahead with BPR. To this end, weestablished an administration center on April 1, 2001, and will be amalgamating andslimming down support divisions of group companies.
(5) We regard contributing to environmental conservation and to the local community
as important issues for corporate management, and will therefore continue to reduce
the use of substances that adversely affect the environment, and to develop and supply
products that are environmentally beneficial. As part of our Responsible Care activities,
we have acquired ISO 14001 certification – the international standard forenvironmental management systems – at all our domestic plants, and are making
progress with preparations to obtain the same certification for our research facilities.

3

Business Performance
Performance Review
The Group's operating environment remained very difficult during the term underreview, owing to factors such as sharp increases in raw material prices and lackluster
product prices amid the prevailing deflationary trend in Japan.
To minimize the deterioration in earnings, the Group placed emphasis on suchmeasures as increasing sales in areas where it boasts particular strengths, passing onhigh materials prices, cutting both selling and manufacturing costs, and cultivating
new markets.
In spite of our best efforts, however, consolidated net sales slipped by ¥2,793 million, or
0.9%, from the previous year, to ¥313,651 million, and operating income fell ¥390
million, or 1.9%, to ¥19,931 million. After posting items such as ¥7,596 million of
special provision for retirement benefits and ¥8,871 million for restructuring charges,
net income for the period totaled ¥4,045 million, representing a decline of ¥3,407
million, or 45.7%, from the previous year.
On a segment-specific basis, performance was as follows.

1. Segment Performancea. Fibers and Textiles
Sales in the Fibers and Textiles segment fell ¥7,266 million, or 7.4 from the preceding
year, to ¥90,822 million, accompanied by a decline of ¥1,049 million, or 37.9%, in
operating income, to ¥1,720 million.
(1) Polyester suffered declines in both sales and earnings, owing to the sluggishness ofdemand for apparel in the domestic market, and to increased sales of end-user products
overseas.
(2) In the field of polyvinyl alcohol fiber “Kuralon”, however, sales and profits both4

remained relatively steady. This was because, in spite of declines in sales in fields suchas fisheries materials, the Company achieved steady sales growth in areas where it wasable to take advantage of its distinctive capabilities, for example, paper, nonwoven
fabrics, and rubber materials.
(3) We decided to withdraw from the business of rayon production, and ceased
operations during the term under review.
b. Chemical Products
Sales of Chemical Products increased ¥6,572 million, or 4.5%, to ¥151,007 million, andoperating income rose ¥555 million, or 4.6%, to ¥12,715 million.
(1) Poval sales and earnings both rose, buoyed by robust sales of automobile safety glass
inter-layers, and of poval film for use in LCD devices.
(2) With regard to the EVOH resin "EVAL," in Europe the performance of the newly
operational Belgian subsidiary EVAL Europe N.V. achieved a favorable improvement on
the previous term, but operations were hit hard by sharp increases in raw material
prices in the United States and elsewhere. As a result, earnings slipped in spite of sales
growth.
(3) Methacrylic resins and related products generated increases in both sales andearnings. The principal factors behind this were a tight supply-demand balance, andcontinued strong demand for optical screens for projection TVs in the United States.
(4) In the isoprene products, thermoplastic elastomers continued to perform well,particularly in Europe and the United States, but raw materials for vitamin,
agrochemical intermediates, and other fine chemicals slumped. In consequence, sales
and income declined.
(5) Among other principal products, growth in both sales and earnings was recorded by
activated carbon products, which were buoyed by increased demand for environmental
uses.
c. Man-Made Leather, Nonwoven Fabrics, and Fastening Materials
Sales of Man-Made Leather, Nonwoven Fabrics and Fastening Materials fell ¥1,649
million, or 5.0%, year-on-year, to ¥31,641 million, and operating income declined by¥374 million, or 15.6%, to ¥2,028 million.
(1) The man-made leather "Clarino" was dealt severe blows by depressed demand forapparel-related use in Europe, and by the weakness of the euro. Both sales andearnings declined from the previous year.

5(2) Nonwoven fabrics operations were boosted by the contribution of sales growthposted by wiping cloth, as a result of which both sales and earnings rose. In thefastening business, brisk sales of "Freemagic" functional hook and loop fasteners
enabled sales and earnings to maintain their year-earlier levels.
d. Diversified Businesses
Diversified businesses recorded a year-on-year decline in sales of ¥450 million, or 1.1%,
to reach ¥40,181 million, while operating income fell ¥270 million, or 7.4%, to ¥3,359
million.
(1) In the medical products business, sales of dental materials increased as a result of
the favorable development of this field overseas, but contact lenses saw increasingly
intense competition. The net result of this was that both sales and earnings remained
unchanged from the previous year.
(2) During the year under review, the Company ceased production of its 30 cm laser
discs.

2. Segmentation by Geographical Region
a. Japan
The Company suffered a very difficult operating environment in Japan, under the
impact of the deflationary conditions in the economy. In consequence, we posted net
sales of ¥276,113 million, and operating income of ¥17,674 million.
b. Other Regions
Aggregate net sales in other regions totaled ¥37,538 million, and operating income
came to ¥2,108 million.
(1) In North America, we achieved strong sales of thermoplastic elastomers and opticalscreens for projection TVs, but sales of "EVAL" were affected by soaring raw materials
prices, leading to an increase in sales but a decrease in income.
(2) In Europe, demand for man-made leather was sluggish, but a full contribution wasmade by EVAL Europe N.V., which started operations during the previous term. The
net result of this was that sales remained flat, but profitability improved.
(3) In Asia, an increase in poval sales pushed sales revenues upward but sharp

6

increases in prices of raw materials caused profits to fall.

3. Cash Flow
Cash and cash equivalents (hereinafter ‘cash’) increased by ¥26,280 million during theterm under review. Principal contributing factors in cash flow were ¥15,887 million in
cash provided by operating activities, ¥20,323 million in cash provided by investment
activities, and ¥10,448 million in cash used in financing activities. As a result, the cash
balance at the end of the term stood at ¥40,170 million.
The principal components of operating, investing, and financing cash flows were as
follows.
(1) Operating activities
In the term under review, net cash provided by operating activities declined by ¥9,179
million from the previous term, to ¥15,887 million. This was attributable to factors
such as a fall in net income.
(2) Investing activities
Net cash generated by investing activities showed an improvement of ¥63,075 million
from the previous term, to ¥20,323 million. Major factors were a decline in paymentsfor purchases of investment securities, and an increase in proceeds from sales andredemptions of investment securities.
(3) Financing activities
Net cash used in financing activities amounted to ¥10,448 million, a ¥13,488 million
decline from the previous term. This was principally due to a fall in proceeds fromlong-term debt, and the redemptions of bonds.

7

4. Dividends
It is proposed to pay a dividend of ¥9 per share of common stock, comprising an
ordinary dividend of ¥8 and a special dividend of ¥1. The Company has already paid aninterim dividend of ¥4.5 per share, comprising an ordinary dividend of ¥4 per shareand a special dividend of ¥0.50 per share.

Outlook for Fiscal 2001
The Japanese economy is expected to remain in a very difficult state in fiscal 2001, andthe impact of deflation on the chemical and fiber industries, to which the Kuraray
Group belongs, continues to be a cause for concern. Meanwhile, despite expectations ofa recovery in the U.S. economy by some observers, the uncertainty of prospects overseas
has not yet been dispelled, owing to such factors as the economic situations in Europe
and Asia, and trends in crude oil prices.
On the assumption that business conditions remain in their current state, we aretargeting net sales in fiscal 2001 of ¥325 billion, operating income of ¥23 billion,
ordinary income of ¥24 billion, and net income of ¥12 billion on a consolidated basis.
In fiber operations, we will accelerate the shift of polyester operations toward specialfunction products in order to enhance profitability, while in the field of polyvinyl alcohol
fiber we will sustain our efforts to increase sales in areas where we can take advantageof special features such as high strength and alkali resistance.
In chemical operations, we will be seeking to augment sales in business areas where
demand is continuing to expand, including poval, "EVAL," thermoplastic elastomers,
and optical screens. We will also be aggressively developing our activities in the areas ofelectronic information technology, eco-friendly, environment business, and medical
products, and will put operations in the fields of man-made leather and fine chemicals
back on the growth track. In these ways, we are committed to the achievement ofgrowth in both sales and profits.

8

The projections for fiscal 2001 results are premised on an average yen exchange rate of¥115 against the U.S. dollar and ¥110 against the euro, and on an average price ofDubai crude oil of $23 per barrel.
The dividend for the fiscal year is projected at ¥9 per share of common stock,
comprising an ordinary dividend of ¥8 and a special dividend of ¥1.

9

CONSOLIDATED BALANCE SHEETS
Kuraray Co., Ltd. and Consolidated Subsidiaries(unaudited)

March 31, 2001 and 2000
ASSETS
Current assets:
Cash and cash equivalents
Marketable securities (Note 2)
Notes and accounts receivable:
Trade
Unconsolidated subsidiaries and affiliates
Other
Loans receivable from 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 (Note 2)
Investments in unconsolidated subsidiaries and affiliates
Loans receivable from:
Unconsolidated subsidiaries and affiliates
Other
Deferred income taxes
Other
Allowance for doubtful accounts

See Notes to consolidated financial report.

Millions of yen
2000
2001

Thousands of
U.S.dollars(Note 1)
2001

\40,171
14,687\13,869
26,033$323,960
118,444

96,025
918
4,396
640
(689)
101,290

89,102
789
3,634
541
(696)
93,370774,395
7,403
35,452
5,161(5,556)
816,855

75,5455,355
2,606
239,654

75,1203,761
1,140
213,293609,234
43,18521,016
1,932,694

24,34986,635359,462
7,897
478,343(350,875)
127,468

25,176
86,213351,695
4,356
467,440(339,097)
128,343

196,363698,669
2,898,887
63,686
3,857,605(2,829,637)
1,027,968

71,397
2,755

80,9102,687

575,782
22,218

5,616
1,326
6,323
59,244(1,304)145,357\512,479

5,345
1,293
7,196
65,988(1,289)162,130\503,766

45,29010,69450,992477,773(10,516)
1,172,233$4,132,895

Thousands of
U.S.dollars(Note 1)
2001

Millions of yen
2000
2001
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
Deferred income taxes
Accrued expenses and otherTotal current liabilities\8,807
20,228\3,805
3,467$71,024
163,129

54,147
1,277
6,160
2,196
2
17,417110,234

51,257
1,149
6,945
4,312
21
16,63687,592436,669
10,29849,677
17,71016
140,461
888,984

Long-term liabilities:
Long-term debt
Deferred income taxes
Accrued retirement benefits (Note 2)
Other
Total long-term liabilities

67,527
3,859
25,336
16,001
112,723

94,225
3,164
22,164
13,494133,047

544,573
31,121
204,323
129,040
909,057

53

372

427

88,95587,147
111,622
3,355(1,609)289,470(1)
289,469\512,479

88,95587,147111,151(4,496)
282,757(2)
282,755\503,766

717,379
702,798
900,177
27,057(12,976)
2,334,435(8)
2,334,427$4,132,895

Minority interests

Shareholders' equity:
Common stock with par value of \50 ($0.40) per share:
Authorized－700,000,000 shares
Issued and outstanding－382,863,603 shares
Additional paid-in capital
Retained earnings
Unrealized gain on revaluation of securities (Note 2)
Cumulative translation adjustments
Treasury stock at cost
Total shareholders' equity

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

Thousands of
U.S.dollars(Note 1)
2001

Years ended March 31, 2001 and 2000

Millions of yen
2000
2001

Net sales\313,651\316,444$2,529,444

Cost of sales

234,946

235,603

1,894,726

78,70580,841

634,718

58,77460,520473,984

19,931

20,321

160,734

3,659
127(2,377)(8,872)(7,596)
3,014
(86)

3,774
83
(2,659)(335)(9,492)
1,192
493

29,5081,024(19,169)(71,548)(61,258)
24,306(694)(12,131)
7,800(6,944)
13,377(97,831)62,903

6,633(2,879)9,461(3,560)53,492(23,218)

3,754

5,901

30,274

(1)

(24)

(8)

\4,045\7,452$32,621(Gross profit)
Selling, general and administrative expenses(Operating income)
Other income (expenses):
Interest and dividend income
Equity in earnings of affiliates
Interest expenses
Restructuring charges
Special provision for retirement benefits (Note 2)
Gain on sales and appreciation of marketable securities (Note 2)
Other, net(Income before income taxes)
Income taxes:
Current
Deferred

Minority interests in net income of
consolidated subsidiaries
Net income

U.S.dollars

Yen
Net income per share:
Primary
Fully diluted
See Notes to consolidated financial report.

\10.56\10.46\20.00\19.42

$0.09
$0.08

CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)

Kuraray Co., Ltd. and Consolidated Subsidiaries

Years ended March 31, 2001 and 2000

Thousands of
U.S.dollars(Note 1)
2001

Millions of yen
2001
2000

Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities Depreciation and amortization
Provision for accrued retirement benefits, net of payments
Gain on sales of investment securities
Gain on sales and appreciation of marketable securities (Note 2)
Exchange loss on loans receivable from subsidiaries
Increase in notes and accounts receivable
Decrease (increase) in inventories
Increase in notes and accounts payable
Other, net
Net cash provided by operating activities\4,045\7,452$32,621

16,593
3,280(3,014)(5,799)1,213
2,122(2,553)
15,887

16,7699,488(2,191)(1,192)
2,559(143)(6,203)
2,686(4,159)25,066

133,815
26,452(24,306)(46,766)
9,782
17,113(20,590)
128,121

Cash flows from investing activities
Decrease (increase) in marketable securities
Acquisitions of property, plant and equipment
Payments for purchases of investment securities
Proceeds from sales of investment securities
Other, net
Net cash provided by (used in) investing activities

2,667(17,583)(3,116)30,891
7,464
20,323(2,498)(19,980)(29,327)
13,474(4,421)(42,752)

21,508(141,798)(25,129)
249,121
60,193
163,895

Cash flows from financing activities
Increase in short-term bank loans
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from exercise of warrants
Dividends paid
Net cash (used in) provided by financing activities

(948)
1,550
(7,604)(3,446)(10,448)

(594)
7,028
(20,457)
20,364(3,301)
3,040(7,645)
12,500(61,323)(27,790)(84,258)

Effect of exchange rate changes on cash and cash equivalents

518

(553)

4,178

Effect of changes in reporting entities

22

151

177

Net increase (decreace) in cash and cash equivalents

26,302(15,048)

212,113

Cash and cash equivalents, beginning of period

13,86928,917

111,847

Cash and cash equivalents, end of period\40,171\13,869$323,960

See Notes to consolidated financial report.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(unaudited)
Kuraray Co., Ltd. and Consolidated Subsidiaries
Millions of yen

Years ended March 31, 2001 and 2000
Balance at March 31, 1999
Net income
Conversion of convertible debentures
Stock issued on exercise of warrants
Cash dividends, \9.00 per share
Bonuses to directors and statutory auditors
Effect of changes in reporting entity
Translation adjustments
Balance at March 31, 2000
Net income
Cash dividends, \9.00 per share
Bonuses to directors and statutory auditors
Effect of changes in reporting entity
Change in unrealized gain on revaluation of securities (Note 2)
Translation adjustments
Balance at March 31, 2001

Commonstock\78,660

Additional
paid-in
capital\74,225

114
10,181

114
12,808Cumulativetranslation
adjustments-(3,301)(62)
33
88,95587,147111,151
4,045(3,446)(60)(68)(4,496)(\4,496)-

3,355\88,955

Balance at March 31, 2000
$717,379
Net income
Cash dividends, $0.07 per share
Bonuses to directors and statutory auditors
Effect of changes in reporting entity
Change in unrealized gain on revaluation of securities (Note 2)
Translation adjustments
Balance at March 31, 2001
$717,379
See Notes to consolidated financial report.

Retainedearnings\107,029
7,452

Unrealized
gain onrevaluation of
securities(Note 2)-

\87,147\111,622\3,355

Thousands of U.S.dollars (Note 1)$702,798$896,379$32,621($27,790)($485)($548)$27,057$702,798$900,177$27,057

2,887(\1,609)($36,258)$23,282($12,976)

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

Net sales and Operating income

Year ended March 31, 2001
Fibers and textiles
Chemical products
Man-made leather, nonwoven
fabrics and fastening materials
Diversified businesses
Total
Elimination
Consolidated total

Net sales tooutside customers\90,822
151,00731,64140,181
313,651－\313,651

Millions of yen
Net sales tointersegment
Net sales\858\91,680
2,091
153,098239
15,85819,046(19,046)\ －31,88056,039332,697(19,046)\313,651

Operatingincome\1,72012,7152,028
3,359
19,822
109\19,931

Millions of yen
Year ended March 31, 2000

Net sales to

Net sales tooutside customers

intersegment

Operating
Net sales

incomeFibers and textiles\98,088\1,817\99,905\2,769Chemical products

144,435

2,592

147,027

12,16033,290338

33,6282,402

40,631

18,63659,267

3,629

316,444

23,383339,827

20,960－\316,444(23,383)\ －(23,383)\316,444(639)\20,321

Thousands of U.S.dollars (Note 1)
Net sales tointersegment
Net sales$6,919$739,355
16,863
1,234,661

Operatingincome$13,871
102,540

Man-made leather, nonwoven
fabrics and fastening materials
Diversified businesses
Total
Elimination
Consolidated total

Year ended March 31, 2001
Fibers and textiles
Chemical products
Man-made leather, nonwoven
fabrics and fastening materials
Diversified businesses
Total
Elimination
Consolidated total
See Notes to consolidated financial report.

Net sales tooutside customers$732,436
1,217,798
255,170
324,040
2,529,444－$2,529,444

1,928
127,887
153,597(153,597)$ －257,098
451,927
2,683,041(153,597)$2,529,444

16,35527,089159,855879$160,734

Industrial segment information(unaudited)
Kuraray Co., Ltd. and Consolidated Subsidiaries
Identifiable assets, Capital expenditures and Depreciation and amortization

Year ended March 31, 2001
Fibers and textiles
Chemical products
Man-made leather, nonwoven
fabrics and fastening materials
Diversified businesses
Total
Elimination and Corporate
Consolidated total

Identifiable
assets\73,841
162,677

Millions of yen
Capitalexpenditures\2,722
9,439

Depreciation andamortization\3,246
9,576

35,23158,304330,053
182,426\512,479

1,556
2,097
15,814－\15,814

2,241
1,530
16,593－\16,593

Millions of yen
Year ended March 31, 2000

Identifiable

CapitalDepreciation andassetsexpenditures

amortization

Fibers and textiles\78,511\2,965\3,406

Chemical products

147,081

9,529

9,327

36,830

1,524

2,503

58,278

5,746

1,533

320,700

19,764

16,769183,066\503,766－\19,764－\16,769

Man-made leather, nonwoven
fabrics and fastening materials
Diversified businesses
Total
Elimination and Corporate
Consolidated total

Year ended March 31, 2001
Fibers and textiles
Chemical products
Man-made leather, nonwoven
fabrics and fastening materials
Diversified businesses
Total
Elimination and Corporate
Consolidated total
See Notes to consolidated financial report.

Thousands of U.S.dollars (Note 1)
Identifiable
CapitalDepreciation andassetsexpenditures
amortization$595,492$21,952$26,177
1,311,911
76,121
77,226284,121470,194
2,661,718
1,471,177$4,132,895

12,54816,911
127,532－$127,532

18,073
12,339133,815－$133,815

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

Millions of yen
Year ended March 31, 2001
Domestic (inside Japan)
Outside Japan
Total
Elimination and Corporate
Consolidated total

Net sales tooutside customers\276,113
37,538313,651－\313,651

Net sales tointersegment\20,231
3,831
24,062(24,062)\ －Net sales to

Net sales tooutside customers

intersegment

Net sales\296,344
41,369337,713(24,062)\313,651

Operatingincome\17,674
2,108
19,782
149\19,931

Identifiable
assets\278,770
55,300334,070
178,409\512,479

OperatingIdentifiable

incomeassetsMillions of yen
Year ended March 31, 2000
Domestic (inside Japan)

Net sales\283,491\20,436\303,927\17,862

Outside Japan

32,953

3,818

36,771

2,580

47,462

Total

316,444

24,254

340,698

20,442

324,004－\316,444(24,254)\ －(24,254)\316,444(121)\20,321

179,762\503,766

Thousands of U.S.dollars (Note 1)
Net sales to
Operatingintersegment
Net sales
income$163,153$2,389,871$142,532
30,895
333,62117,000
194,048
2,723,492
159,532(194,048)(194,048)
1,202$ －$2,529,444$160,734

Identifiable
assets$2,248,145
445,968
2,694,113
1,438,782$4,132,895

Elimination and Corporate
Consolidated total

Year ended March 31, 2001
Domestic (inside Japan)
Outside Japan
Total
Elimination and Corporate
Consolidated total
See Notes to consolidated financial report.

Net sales tooutside customers$2,226,718
302,726
2,529,444－$2,529,444\276,542

Notes to consolidated financial report(unaudited)
Kuraray Co., Ltd. and Consolidated Subsidiaries
1. Basis of presenting consolidated financial report
In preparing the consolidated financial report, certain reclassifications have been
made to the Consolidated Financial Statements issued domestically in order topresent it in a form which is more familiar to readers outside Japan. In addition,certain reclassifications of previously reported amounts have been made to conformwith current classifications.
The United States dollar amounts included herein are given solely forconvenience and are stated, as a matter of arithmetical computation only, at the rateof ¥124=$1, the approximate exchange rate prevailing on March 31, 2001. The
translations should not be construed as representations that the Japanese yenamounts have been or could have been or could in the future be, converted into
United States dollars at that or any other rate.
2. Accounting procedures employed for the consolidated financial report which are
different from those used in financial statements for a previous fiscal year:
・ In accordance with the new accounting standard in Japan "Accounting Standard of
Financial Instruments", which is effective on and after April 1, 2000, marketablesecurities and investment securities are classified in the three categories, i.e. heldto-maturity, trading or available-for-sale securities. Trading securities are carriedat fair values with unrealized gains or loss to be included in income, and held-tomaturity securities are carried at amortized cost. Available-for-sale securities arecarried at fair value with unrealized gains or losses to be recorded as a componentof shareholders' equity, net of applicable taxes. Moreover, available-for-salesecurities with maturity of one year or less and trading securities are classified incurrent assets, and other securities are classified in Investments and other assets.
At beginning of the year ended March 31, 2001, adoption of the Standard caused
reclassifications of securities between current assets and non-current assets, andnet effect of the reclassifications was to increase securities in current assets by¥368 million ($2,968 thousand), and decrease securities included in Investments
and other assets by the same amount as of April 1, 2000. Classification of
securities in the balance sheet as of March 31, 2000 was remained unchanged.
・ In accordance with the new accounting standard in Japan "Accounting Standard of
Employees' Retirement Benefit", which is effective on and after April 1, 2000, a
company is required to recognize a pension liability to cover the amount ofprojected benefit obligation in excess of plan assets at fair value, considering
unrecognized items, plus previously recognized unfunded accrued retirement
benefit. The effect of adoption of the Standard was to decrease income before
income taxes for the year ended March 31, 2001 by ¥8,181 million ($65,976
thousand).
・ Effective April 1, 2000, the Company adopted the amended "AccountingStandards for Foreign Currency Transactions, etc". The effect of adoption of theStandard was to increase income before income taxes for the year ended March 31,
2001 by ¥1,109 million ($8,944 thousand).