annual report 2008 - zeonoverview zeon corporation 2008 1 net sales （ millions of yen） 2004 2005...

Corporate Profile

101 ZEON CORPORATION 2008

Cautionary StatementStatements contained in this annual report with respect to ZEON Corporation's earnings plans, strategies, principles and earnings forecasts that are not historic facts are

forwardlooking statements about the future performance of the Company. They are based on ZEON's expectations, estimates, forecasts and plans that are currently available,

and on management's judgment. These expectations, estimates, forecasts and plans involve various potential risks, uncertainties and assumptions. Possible fluctuations in

these important factors could cause ZEON's actual performance to differ materially from any future results expressed or implied by the forward-looking statements. Therefore,

undue reliance should not be placed on these forward-looking statements. Also, please note that ZEON assumes no responsibility for updating its cautionary statement about

the forward-looking statements with respect to new information, future events or any other developments.

Risks, uncertainties and assumptions that may affect ZEON's actual performance include but are not limited to: commodity prices and currency exchange rates, the global

economic environment in which ZEON operates, the outcome of ongoing and future litigation, and ZEON's continued ability to procure funds and use financial products and

resources.

ZEON Corporation was established in 1950 as a producer of polyvinyl chloride resins. Its corporate philosophy is to

contribute to the preservation of the Earth and the prosperity of the human race. In 1959, ZEON became the first Japanese

company to produce synthetic rubbers, and in 1965 it developed an original process for extracting butadiene, a main raw

material for synthetic rubbers, from C4 fractions (the GPB process). With this technology applied to C5 fractions (the GPI

process), ZEON is now the world's top producer of products using C5 fractions, as well as specialty synthetic rubber

products.

In 2000, ZEON withdrew from polyvinyl chloride operations, the original field of the company. This withdrawal

reflects ZEON's commitment to focusing its resources on new ventures. At present, sales and operating income are steadily

growing in the company's new Specialty Materials Operations, which include specialty chemicals,

information materials, and specialty plastics. Thus, the ZEON Group, which includes 50 subsidiaries and 10

affiliated companies, continues to transform itself.

In 2008, ZEON announced a new medium-term management plan covering the period between 2008 and 2010,

Proud ZEON (IZ)-60, with the aim of making great advances and improving corporate value.

1

2-3

4-7

8-11

12-13

14

15

16-17

18-19

20

21

22

23-40

41

42-43

44

45

TABLE OF CONTENTS

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■ Financial Highlights

■ A Corporate Message to Our Shareholders

■ 3-year Mid-term Management Plan IZ-60

■ Review of Operations

■ Business-related Topics

■ Research and Development

■ Intellectual Property (IP)

■ Environment and Safety

■ Corporate Governance

■ CSR Promotion System

■ Financial Section

■ Five-year Summary

■ Consolidated Financial Statements

■ Report of Independent Auditors

■ International Operations and Overseas Network

■ Corporate History

■ Corporate Data

■ Overview …… 1-3 ■Mid-term Management Plan & Operation & Topics …… 4-13 ■ For The Future …… 14-15

■ CSR …… 16-20 ■ Data & Financial Statements …… 21-41 ■ Overseas & Corporate Data …… 42-45

■Overview

ZEON CORPORATION 2008 1

Net Sales（Millions of yen）

2004 2006 2007 200820050

50,000

100,000

150,000

200,000

250,000

300,000

Net Income（Millions of yen）

2004 2006 2007 200820050

5,000

10,000

150,000

Note: The U.S. dollar amounts above and elsewhere in this annual report are translated from yen, for convenience only, at the rate of ￥100.20=$1.00

(as of March 31, 2008).

Millions of yen (except number of employee) Thousands of U.S. dollars

2004

￥213,297

17,897

4,588

222,254

71,575

－

2,840

2005

￥231,364

19,303

7,773

236,861

76,357

－

2,784

2006

￥263,074

26,835

15,249

272,674

96,528

－

2,893

2007

￥281,613

30,175

17,077

315,448

－

115,180

2,972

2008

￥302,925

25,268

9,092

335,730

－

110,880

3,166

2008

$3,023,204

252,176

90,738

3,350,599

－

1,106,587

Net Sales

Operating Income

Net Income

Total Assets

Shareholder's equity

Net Assets

Number of Employees

Total Assets（Millions of yen）

2004 2006 2007 200820050

100,000

50,000

250,000

300,000

200,000

150,000

350,000

FINANCIAL HIGHLIGHTSZEON Corporation and Consolidated Subsidiaries

For the years ended March 31


I am very pleased to announce our business results for the fiscal year under review,

ended March 31, 2008. Before reporting on our activities during the year, I would

like to express my deep appreciation for the support and cooperation you have

extended to us. During the fiscal year under review, prices of crude oil soared, while

credit uncertainty triggered by the US subprime loan problem increased and currency

exchange rates fluctuated significantly, particularly at the beginning of 2008. As a

result, by the end of the fiscal year the Japanese economy, which had been gradually

recovering, faltered once again.

In the petrochemical industry, in which we operate, prices of raw materials such as

crude oil and naphtha remained at high levels. Despite a sudden shift in the supply

and demand balance in certain parts of the manufacturing sector, demand remained

firm owing to brisk exports to Asian markets.

In this business environment, the ZEON Group endeavored to reduce costs

thoroughly through ΖΣactivities. At the same time, in elastomer operations, product

prices were revised, profit-oriented sales strategies were pursued, and the specialty

materials sector strove to develop high-value-added products and to expand business

using its original technology.

As a result, net sales for the year under review reached ￥302,925 million, up 7.6%

on the previous year, while operating income fell 16.3%, to ￥25,268 million.

A Corporate Message to Our Shareholders


Naozumi FurukawaPresident & CEO

■Overview

Ordinary income was ￥20,638 million, down 30.7%, and net income declined to

￥9,092 million, a decrease of 46.8% on the previous year.

Regarding dividends, we declared a year-end dividend of ￥6 per share. On a full-

year basis, dividends came to ￥12 per share, making this the fifth consecutive year

of higher dividends.

In the period ahead, there are fears that the global economy will slow down as a

result of the downturn in the US economy. In addition, corporate earnings are

expected to slow due to the falling US dollar and appreciation of the yen and high

prices for crude oil and other raw materials, and there are concerns that personal

consumption will stagnate in view of uncertain economic prospects. Therefore, the

business environment surrounding ZEON will remain severe.

Under such circumstances, we will strive to make ZEON a highly profitable

company able to withstand change, by improving our ability to create stable and safe

production sites and further increasing our research and development capacities, as

set out in our new 3-year mid-term management plan “IZ-60”

for fiscal 2008 through 2010.

We sincerely request the continued support and

cooperation of our shareholders.

June 2008

Naozumi Furukawa

President & CEO

Elastomer BusinessWith global automobile production at over 70 million units a

year, mainly in Asia, the Elastomer Business is in a strong

position. ZEON intends to develop this business, which has

long been a stable source of revenue, into a growth business by

developing new products that help reduce environmental impact

and conserve energy. One example is the development of new

materials for automobiles in response to environmental

measures, such as 1) new tire materials for higher fuel

efficiency, 2) new biofuel compatible material compliant with

fuel emissions regulations, and 3) the New ZETPOL®

(hydrogenated acrylonitrile-butadiene rubber), a new material

compatible with the high temperatures produced by diesel

engines.

Performance targets for the Elastomer Business are increases in

both sales and profits, with consolidated net sales rising from

￥211,500 million in FY2008 to ￥230,000 million in FY2010

and consolidated operating income rising from ￥16,500

million in FY2008 to ￥20,000 million in FY2010. Although

we cannot be optimistic about the soaring price of naphtha, our

raw material, we intend to achieve our targets by developing

new products.


3-year Mid-term Management Plan IZ-60

To commemorate our 60th anniversary in 2010 as an innovatively transformed company, our three-year mid-term management plan

that began in FY2008 and will end in FY2010 is called “IZ-60”, short for Innovation ZEON. Based on our vision of the company in

2015, ZEON will focus on corporate social responsibility, strict compliance, and safety first as its management basis up to 2010, and

is striving to maximize its corporate value accordingly.

ZEON operates in two major segments. The first is the Elastomer Business, where we will seek solid growth by focusing on products

that have leading global shares, and the second is the Specialty Materials Business, where we will accelerate value creation by

developing new products. Together, these two areas will drive ZEON's expansion and dramatic progress.

Consolidated performance targets for 2010 under IZ-60 are as follows: net sales of ￥400,000 million, operating income of ￥35,000

million, operating margin of 8.8%, ordinary income of ￥35,000 million, ratio of ordinary income to net sales of 8.8%, and, most

importantly, nearly doubling our ROE from 8.3% in FY2007 to 15.3%.

Emphasis on Corporate Social Responsibility, Strict Compliance, Safety First

Maximize corporate value

Concept of IZ-60

Create valueDevelop eco-friendly

productsCustomer-oriented

Production innovationOperations innovation

Enhance quality

Establish a cultureof reform

and improvement

Establish businessmodel for the processing

business

Specialty Materials BusinessIn the Specialty Materials Business, ZEON intends to make

dramatic progress by continuously spawning lucrative new

businesses. We will develop highly profitable next-generation

businesses in the five target fields of semiconductors,

recording, displays, energy, and telecommunications, to help

create a ubiquitous networked society, by applying our original

innovative technologies, and we will maintain steady growth by

continuously introducing new products.

Regarding LCD materials of the future, the major issues will be

making displays thinner and more energy-efficient. ZEON's

patterned diffusion plates with ultra-thin backlights produce an

even lighting source across the screen. As the types of

televisions become more diverse, it is increasingly difficult to

develop new products that will be used in the strong-selling

products, but we are confident that ZEON is heading in the

right direction. Following a spate of accidents involving lithium

ion batteries, ZEON's water-based binders have been praised by

customers as being extremely safe, and business remains

healthy. If we can halve prices, the number of applications for

the batteries will increase, and so we are actively engaged in

development towards this goal. In the semiconductors materials

segment we are also developing new products in line with our

vision for the future, such as the New ZEORORA® etching gas

for fine processing.

Consolidated performance targets for the segment are to boost

consolidated net sales from ￥61,900 million in FY2008 to

￥100,000 million in FY2010 and to increase consolidated

operating income from ￥2,100 million to ￥13,500 million.


■Mid-term Management Plan & Operation & Topics

Actual Resultsfor FY2007

IZ-60 Planfor FY2008

IZ-60 Planfor FY2010

Net Sales

Operating Income

Operating Margin

Ordinary Income

Ordinary Income to Net Sales

ROE

￥302,900 million

￥25,300 million

8.3%

￥20,600 million

6.8%

8.3%

￥333,000 million

￥20,000 million

6.0%

￥20,000 million

6.0%

9.0%

￥400,000 million

￥35,000 million

8.8%

￥35,000 million

8.8%

15.3%

Consolidated Performance Targets for IZ-60(assumption of exchange rates:￥100/USD and ￥160/EUR;assumption of naphtha price:￥70,000/kl)

ZEON Directors

Cooperation among Industry, Government andAcademiaThrough cooperation among industry, government and

academia, ZEON has succeeded in increasing the contribution

of new businesses to sales and significantly reducing the time

taken for a new business to become profitable. Close

collaboration among the three players－industry (corporations),

government (public agencies and institutions) and academia

(universities and other educational institutions)－is a technology

management business model for creating highly competitive

products in cutting-edge fields of technology. Such

collaboration has significantly cut the time it takes ZEON to

make new businesses profitable, from an average of almost 12

years to just over 6 years. The duration from commercialization

to profitability is generally just over one year. In the area of

optical films, ZEON achieved a nearly 14-fold increase in sales

just four years after entering the market. This reflects the true

value of industry-government-academia cooperation, and is the

foundation of ZEON's success.

R&D on Next-Generation BusinessesZEON is continually accelerating the pace of development

through: 1) collaboration among industry, government and

academia, 2) careful selection of themes, 3) collaboration with

world-class engineers and recruiting engineers from outside of

the company, and 4) the use of production machinery to create

24-hour systems at new plants when developing materials. In

cutting-edge areas of technology, rapid development is the key

to higher profitability. Currently, ZEON's primary targets are:

1) computers, 2) energy, 3) displays, 4) telecommunications,

and 5) recording. Our IZ-60 mid-term management plan

promotes a wide range of next-generation businesses, including

a high-durability blu-ray pickup lens. In order to achieve

success in IZ-60, ZEON will make further use of industry-

government-academia cooperation to boost the speed of

development.

Aligning management and R&D strategies to acceleratenew product development in five target fields


3-year Mid-term Management Plan IZ-60

Low birefringencefθ lens for LBP

Blade serversubstrate

TFT protective film

TFT gateinsulation film

Color filter high-heatresistant sheet

Polymerizedtoner

Negative electrodebinder

Sealing compound

LCDresist

Optical filmrolls

PDP heatdissipation

Diffusion plate

Ener

gy

Tele

-C

omm

unic

atio

nsLCD display Electric binder



R&D on Next-Generation BusinessesFive Target Fields

45nm Low-k

Etching gas

Liner film Low-k

32nm Low-k

Low birefringenceLow birefringencefθ lens for LBP lens for LBP

Low birefringencefθ lens for LBP

Brightnessenhancing film

IPS retardationfilm

Capacitor electrode (UPS)

High-speed PKG circuitCOP insulator

EHF high-speedcircuit

RF module

HEV-binder

Antireflectionfilm

TFT protective filmTFT protective filmTFT protective film

Ultra-thindiffusion plate

TFT gateTFT gateinsulation filminsulation film

TFT gateinsulation film

Color filter high-heatColor filter high-heatresistant sheetresistant sheet

Color filter high-heatresistant sheet

High-durability blu-raypickup lens

Low birefringence lensfor mobile phone cameras

Next-generation etching gas

Thin stamper

High-potential positiveelectrode material

COP insulation material(high-speed, multipin)

Built-in antenna

Separator binder

High-rate negativeelectrode material

Positive electrodebinder

Patterned diffusionplate

VA-retardation film

TFT planarizationfilm

Blu-ray lens

DVD stamper

Color toner

PolymerizedPolymerizedtonertoner

Polymerizedtoner

Negative electrodeNegative electrodebinderbinder

Negative electrodebinder

Sealing compoundSealing compoundSealing compound

LCDLCDresistresistLCDresist

Optical filmOptical filmrollsrolls

Optical filmrolls

PDP heatPDP heatdissipationdissipationPDP heat

dissipation

Original(-2004)

PZ-3(2005-2007)

IZ-60(2008-2010)

Diffusion plateDiffusion plateDiffusion plate

Semiconductors

Recording

Display

s

y

Review of Operations


■ Elastomers

Automobile parts

Consolidated Net Sales (Elastomer Business)Net Sales (Millions of yen)

0

50,000

100,000

150,000

200,000

2008200720060

30,000

60,000

90,000

120,000

150,000

Non-consolidated Net Sales (Elastomer Business)Net Sales (Millions of yen)

200820072006

Business OutlineElastomers are ZEON's flagship business, accounting for over 60% of consolidated sales. The segment comprises three

categories: 1) synthetic rubbers used in automobile tires and conveyor belts, 2) synthetic latices used in tires and adhesives,

and 3) chemical products such as resins and inks. Despite the difficult environment caused by factors such as steep rises in

prices for naphtha, a raw material, the segment is steadily transforming from a stable revenue source to a growth business.

Major Products● Synthetic rubbers for automobile tires and

conveyor belts● Synthetic latices for tires and adhesives● Chemical products such as resins and inks

Elas

tom

ers



Gloves made of NBR latexSynchronous belt using hydrogenated

nitril rubber

Automobile tires using SBR, S-SBR,

BR, and IR

Overview by Business Segment

Elastomer OperationsSynthetic rubberBoth domestic and export sales of synthetic rubber exceeded

the previous year's volume, with demand from its major users,

the automobile and tire industries, remaining high, as in the

previous year. Net sales in the domestic market and exports

were both higher than the previous year, owing to a price

revision corresponding to the continuous hike in material prices

and a shift to a profit-oriented sales strategy. Prices were also

revised at overseas subsidiaries in response to the rising prices

of raw materials. Sales of U.S. subsidiaries in particular grew

steadily as a result of the depreciation of the dollar and

appreciation of the Euro. Profit performance of the U.K.

subsidiary improved significantly as a result of growth due to

introduction of new products and initiatives to stabilize

production processes. As a result, the overall synthetic rubber

figures surpassed the previous year's figures in net sales, but

operating income fell short of the previous year due to inability

to absorb the higher costs incurred by the steeply rising prices

of raw materials.

Synthetic laticesDomestic sales of synthetic latices were lower in volume than

the previous year due to the decreased demand for paper. In

contrast, export sales surpassed the previous year's level in both

volume and net sales with strong demand for gloves and other

materials. As a result, overall net sales of synthetic latices

increased year-on-year. Price revisions to adjust to exchange

rate fluctuations and the soaring raw materials prices, however,

came too late to offset a decline from the previous year in

operating income.

ChemicalsIn chemicals, shipments to existing markets remained firm, but

sales volume decreased slightly compared to the previous year

despite the impact of new markets and development of new

applications. Prices were revised to accommodate sharply rising

prices for raw materials, resulting in a year-on-year increase in

net sales. The Thai subsidiary for petrochemical resins

increased both its net sales and operating income.

Consequently, overall net sales of chemicals were higher than

the previous year, while overall operating income fell.

As a result of these factors, segmental net sales for the year

ended March 31, 2008 were ￥195,711 million (10.1% increase

on the previous year) and operating income was ￥16,570

million (15.1% decrease).



■ Specialty Materials

SpecialtyMaterials

Business OutlineSpecialty materials is a high-potential business consisting of three divisions: 1) synthetic aroma chemicals and other chemical

products, 2) information and imaging materials, such as materials for LC panels and semiconductor manufacturing, and

3) specialty plastics for optical lenses. The

research and development framework and

production structures are in place, and going

forward this business will grow to join elastomer

materials in propelling ZEON's business. The

new mid-term management plan “IZ-60” targets

sales of ￥100,000 million in fiscal 2010.

Consolidated Net Sales(Specialty Materials Business)

Net Sales (Millions of yen)

0

10,000

20,000

30,000

40,000

50,000

2006 2007 20080

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Non-consolidated Net Sales(Specialty Materials Business)


2006 2007 2008

■Others

Main Products & Applications● Synthetic aroma chemicals and other

chemical products● Information and imaging materials, such

as materials for LC panels and semiconductor manufacturing

● Specialty plastics for optical lenses

Business OutlineIn other business segments, sales of trading operations of subsidiaries grew, while a fall in cost prices in the health materials

segment resulted in increased revenue.

As a result, overall segmental net sales were

￥62,345 million (5.3% increase on the previous

year) and operating income was ￥1,216 million

(39.3% increase).

Consolidated Net Sales（Other Businesses）


0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2006 2007 20080

500

1,000

1,500

2,000

2,500

3,000

3,500

Non-consolidated Net Sales（Other Businesses）


2006 2007 2008

Other Segments / Products● Technology licensing● ECombined septic tanks● ERIM blending liquid / RIM molding

products● EMedical equipment

Others




■Specialty Materials OperationsSpecialty plasticsIn the specialty plastics (cyclo-olefin polymer) business, the

performance of ZEONEX® series plastics for optical lenses and

medical uses continued to perform strongly. Consequently, both

sales volume and net sales outperformed the previous year. In

ZEONOR® materials for LC panels, the sales volume and sales

for optical film and diffuser panels fell year on year due to

changes in the market environment. As a result, overall net

sales and operating income for specialty plastics declined from

the previous year.

Information materialsIn information materials, despite a decline in net sales of resist

and etching gas, net sales of battery materials and toner sales

grew steadily. As a result, overall net sales and operating

income for information materials recorded an increase over the

previous year.

ChemicalsIn chemicals, the sales volume for synthetic aroma chemicals

grew and net sales increased over the previous year. In specialty

chemicals, although the sales volume dipped below the

previous year, sales increased year on year as a result of sales

price revisions. Overall net sales and operating income for

chemicals therefore increased year on year.

As a result, overall segmental net sales were ￥47,153 million

(0.1% decrease on the previous year) and operating income was

￥7,609 million (21.9% decrease).

Printed-circuit boards ZEON Medical Inc. Combined septic tanks

ZEONORFILM®


contribution to the monodzukuri (manufacturing) culture that

supports Japanese industry.

ZEON embraced the challenge of developing a product that

had long been considered unachievable, succeeded in

developing an innovative production method, and in 2002

released “ZEONORFILM®.” Later, ZEON also succeeded in

developing the world's first wide biaxial stretched optical films,

and released these films under the brand “new ZEONORFILM®”

in 2004. These innovations not only improved the quality of

LCD televisions and reduced manufacturing costs, but also

significantly reduced the environmental impact.

In September 2007, ZEON's wholly owned subsidiary Optes

Co., Ltd. completed construction of the new Himi Plant at the

Toyama Plant. This addition strengthens ZEON's production

structure for responding to the rapidly growing demand for new

ZEONOR FILM® (stretched film) along with the growing size

of LCD TVs. ZEON decided to proceed with the second and

third investment phases to raise production capacity at the Himi

Plant, aiming to start in FY2008. At the existing Takaoka Plant,

capital investment to boost production capacity for optical film

rolls to 40 million m2 and capacity for the new ZEONORFILM®

to 30 million m2 is complete. With the addition of the Himi

Plant, ZEON plans to raise annual production capacity to 75

million m2. Going forward, ZEON will invest capital in stages,

with the aim of increasing the annual production of all types of

optical film for

large-size LCD

televisions to 100

million m2 in the

future.

Himi Plant

ZEON's activities in FY2007

In July 2007, ZEON installed an advanced industrial waste

treatment facility at its Kawasaki Plant. The plant, located in

the Keihin Industrial Complex close to Tokyo, has long been

involved in environmental safety measures to become an earth-

friendly urban plant. While providing the capacity for treating

nearly the same volume of industrial waste as conventional

facilities, the dry distillation type incinerator at the new

industrial waste treatment

facility, by gasifying and

burning waste industrial waste,

can reduce the concentration of

hazardous substances by 90%

and cut gas emission volumes

by 40% overall.

In August 2007, ZEON was awarded the Minister of Economy,

Trade and Industry's Prize in the Products and Technologies

Development Category at the 2nd Monodzukuri Nippon Grand

Award, established as part of the system of commendations

from the Prime Minister. ZEON's award-winning technology

was based on the development of optical films for LCDs

utilizing the sheet extrusion process. It won high acclaim for its

Kawasaki Plant

IEEE CPMT Young Award

Theme 1 Kawasaki Plant

Theme 2 Monodzukuri Nippon Grand Award

Theme 3 Himi Plant

Business-related Topics

ZEON has fully entered

the business of producing

color toner for high-

resolution photocopiers,

which has high growth

potential. Most toners are

produced by the

companies that

manufacture the copy

machines, so ZEON is

one of only a handful of

independent toner

manufacturers. In 2007,

ZEON began production

of its yellow polymerized toner at a pilot plant. In January

2008, ZEON invested approximately ¥3 billion to build a 500-

ton capacity plant at its Tokuyama Plant, and began full

production. With the production of blue and red toner

scheduled to commence in 2009, ZEON will begin construction

of new plants.

In January 2008, ZEON Corporation and its European

subsidiaries, ZEON Europe GmbH and ZEON Chemicals

Europe Ltd., received notification of a decision from the

European Commission regarding an allegation of infringement

of the competition law in the acrylonitrile butadiene rubber

(NBR) market in Europe. Reviewing the decision in light of

various factors, ZEON decided that it would not appeal, as the

company is committed to compliance with laws and regulations

as an important objective underpinning its management. Going

forward, ZEON will endeavor to strengthen its compliance

structures and to prevent such incidents from happening again.

In April 2008, construction of the Integrated Production Center

(IPC) at the Mizushima Plant was completed and the facility

began operations. In order to bolster on-site manufacturing,

ZEON has been introducing Daicel's innovative production

approach at the manufacturing worksite. The IPC serves as an

integrated manufacturing base, through which ZEON will

evolve its personnel and organization as well as production and

information systems, reform its corporate culture, and develop

human resources in a framework of continuous, self-directed

quality improvement at the workplace. Through the IPC, ZEON

hopes to achieve the following: 1) reformed corporate culture,

2) stable and safe production, 3) transformation of skills and

know-how into visible technologies and handing down of

expertise, 4) human resource development, 5) improved

productivity, and 6) reduced manufacturing costs. In order to

integrate the IPC with all our practical manufacturing functions,

the IPC building can withstand earthquakes of magnitude 7 and

above, and features countermeasures against tsunami and

ground liquefaction.


ZEON CORPORATION 2008 TOPICS

Laser printer using polymerized toner

Integrated Production Center

Theme 4 Color Toner Operations Theme 6 Integrated Production Center

Theme 5 NBR European Commission

Research and Development


customers on a daily basis, as well as the Incubation Center that

aims to deliver next-generation products quickly and reliably.

There is also a New Business Development Department

dedicated to seeking opportunities for next-generation products.

ZEON is pressing forward with R&D in collaboration with our customersand with external research institutions both in Japan and overseas.

Basic R&D PhilosophyBased on a corporate policy of focusing on technology, ZEON's

R&D philosophy is to contribute to society by creating world-

leading business through the development of unique,

innovative, and earth-friendly technologies in the specific fields

in which ZEON excels.

Special Features of ZEON R&DBased on our Technology Platform (TPF), the foundation of our

exclusive unparalleled technologies, we pursue innovative R&D

activities in order to contribute to 21st century society. A rich

variety of products have been created through our R&D

activities based on ZEON's own Technology Platform.

Research and Development Organization andActivitiesIn order to enable mutual collaboration between laboratories,

ZEON's R&D functions are consolidated at the R&D Center.

The Center contains the various laboratories that respond to

Business Domains for the Future

Technology Platform

Information / Telecommunications Materials Display Materials

Main Business Area

Energy-Related Materials

Bio-Technology

Recombinant DNA TechnologyTechnology Platform

Precision Molding Technology

Film Molding TechnologyUltra-fine Molding Technology

Polymer Technology

Elastomer TechnologyCyclo-olefin Polymer Technology

C5 Chemicals Technology

Organic Synthesis TechnologyMonomer Extraction Technology

Medical EquipmentBioscience

Optical FilmOptical Components

ChemicalsSpecialty ChemicalsRIMInformation Materials

Synthetic RubbersSynthetic LatexSpecialty PlasticsToner

The Center develops the basic technologyto rapidly realize next-generationproducts.

Each laboratory gains inspiration fornew products through daily contactwith customers and the issues they raise.

Incubation Center

Elastomer / C5 Laboratory

Specialty Materials Laboratory

Precision Molding Laboratory

Biological Laboratory

New Business DevelopmentDepartment

R&D Center

Intellectual Property ( IP) ■ For The Future


For The Future

IP Strategy and its Promotion SystemZEON Corporation's（ZEON）IP strategy is to ensure the

maintenance andexpansion of its IP rights, and thus to secure a

dominant position as ZEON competes with other companies by

offering products that meet customers' demands.

R&D activities in Japanese industry have changed from a

conventional catch-up approach to a front-runner approach. To

respond to this requirement, ZEON is aware of the importance

of proceeding with efficient R&D activities as parts of an

integrated strategy covering business, R&D and IP. ZEON has

set up an IP Strategy Board which includes top management as

a system for promoting IP activities throughout ZEON. In

addition, patent coordinators have been appointed at the

respective divisions and laboratories. Furthermore, the IP

Department plans and prepares ZEON's IP strategy from the

perspective of the entire company and implements the strategy

in cooperation with the relevant business and R&D segments.

Current Status of IP creation and protectionFor the creation of innovative technologies, ZEON believes that

it is important to foster innovation coupled with IP rights. With

respect to each important development theme, ZEON therefore

will focus activities on the establishment of a patent portfolio in

the early stage of development, and focus ZEON's efforts on

patent filing activities.

Patent applications (in Japan) by ZEON's three business

segments as published in CY2006 totaled 361 : 92 applications

from the elastomer materials business segment; 222 from the

specialty materials business segment; and 47 from the

miscellaneous business segment. As of March, 2007,ZEON

possesses about 640 Japanese patents and some 960 overseas

patents. The number of ZEON's published patent applications

(in Japan) over the last five years is summarized in the table

below:

Furthermore, ZEON is acquiring trademark rights to protect

confidence in ZEON's products. ZEON has established clear

rules for ZEON group companies in and outside Japan to ensure

the unified use of the brand “ZEON”.

For the avoidance of any potential hindrance to ZEON's global

business operations, the brand has been registered as a

trademark in 52 countries and ZEON is striving to protect

ZEON's trademark rights.

Measures against IP-related RisksZEON respects patent rights owned by other companies and, at

the same time, ZEON intends to avoid disputes concerning

patents. To this end, ZEON examines existing patents through

patent databases at every operational stage ranging from R&D

to the marketing of new products. In particular, prior to

introducing a new product on the market, ZEON's staff

members specialized in patent information research conduct

highly-accurate investigations through a plurality of Japanese

and foreign patent information databases to be confident in our

introducing products in the marketplace.

In the light of the recent revision of the provisions concerning

employees' inventions in Article 35 of the Japanese Patent Law,

ZEON reviewed it's internal rules in order to enhance

employees' motivation to create inventions and to avoid

litigation.

Meanwhile, to manage ZEON's technological know-how and

other corporate secrets and to prevent the leakage of

technology, ZEON is reviewing internal rules and striving to

implement the “blackboxing”of technological information to

ensure confidentiality.

Calendar year（CY）

Elastomer materials business segmentSpecialty materials business segment

Miscellaneous business segment

Total

’03

94

183

55

332

’04

95

197

61

353

’05

79

242

62

383

’06

92

222

47

361

’07

53

241

43

337

TOPICS

Acquisition of Patent for Cost-ReductionBusiness MethodsWith the aim of reducing costs, ZEON is deploying ZΣactivities in which employees set themes and manage

progress. The system and program for these activities

have been granted a patent as a business method.

Patents in this field are difficult to acquire, particularly

in the field of chemistry. Our ZΣ activities under the

former PZ-3 medium-term management plan reduced

costs by ¥20.9 billion, and under our current IZ-60

management plan we are anticipating a cost reduction

of ¥20.0 billion.

Responsible Care Action GuidelinesZEON has formulated the seven items of its Responsible Care

Action Guidelines based on the two major principles of

environmental conservation and safety. Environmental

protection is an obligation of a company as a public institution,

and we believe it can be achieved through our unique

technologies and the strong sense of responsibility and efforts

of all employees and officers. Safety is the very foundation of a

business and must be the top priority. One key to safety is the

belief that all accidents can be prevented. By implementing the

“5-S” activities of organization (Seiri), orderliness (Seiton),

standardized cleanup (Seiso), cleanliness (Seiketsu), and

discipline (Shitsuke), and fulfillment of individual

responsibility, we can achieve this goal. The seven guidelines

are: 1) placing top priority on the environment and safety; 2)

collecting and providing the latest information on chemical

products; 3) minimizing discharges of all toxic chemical

substances and waste; 4) promoting activities to conserve

resources and reduce energy consumption; 5) developing new

processes and products with special emphasis on the

environment and safety, and assuring the quality of these

products; 6) ensuring harmonious coexistence with society; and

7) pursuing continuous improvement.

Seven-Article Constitution of the ZEON GroupThe company name ZEON is a combination of the words “geo” meaning Earth and “eon” meaning eternity. As befits this name, we

are committed to contributing to the global environment and human prosperity through the development and application of original,

world-leading technologies. Based on this philosophy of “contributing to eternal Earth and human prosperity,” we have compiled a

seven-article constitution of the ZEON Group, which emphasizes three themes: 1) speed, 2) dialogue, and 3) social contribution.


Environment and Safety

Constitution of the ZEON Group

ZEON shall respect corporate ethics and serve society.

ZEON shall always emphasize environmental and safety issues.

ZEON shall continuously strive to meet market needs by employing its unique technologies.

ZEON shall provide products and services of excellent quality to assure customer satisfaction.

ZEON, as a vital organization, shall aid each employee in achieving self-fulfillment through his or her work.

Each ZEON employee shall be expected to meet challenges in his or her area of expertise in order to achievecorporate targets and the results shall be shared fairly.

ZEON shall highly regard “speed” in decision-making and response to daily requirements.

Article 1

Article 2

Article 3

Article 4

Article 5

Article 6

Article 7

Contributing to the Environment through OurProductsBased on the Responsible Care Action Guidelines, ZEON is

contributing to the environment through its products. Examples

include ZEORORA®H, which is related to the hot topic of

preventing global warming. This third-generation fluorocarbon

detergent has no harmful impact on the ozone layer. Our

ZEONEX® series cyclo-olefin polymer reduces environmental

risk in medical applications through its low-impurity

characteristics. Synthetic rubber for high fuel-efficiency tires

and ZEOGLOBULE® polymerized toner help to conserve

energy. QUINTAC® thermoplastic elastomer for non-solvent

adhesive tapes and Quintone® C5 petroleum resin for hot-melt

adhesives for road-marking paints contribute to the global

environment by being free of organic solvents.


■CSR

Contributing to the Environment through Our Products

Binder for BatteriesThermoplastic elastomer for

non-solvent adhesive tape

QUINTAC®

C5 petroleum resinfor road marking

Quintone®

New Zetpol®

Next-generation fluorocarbondetergent

ZEORORA®HEtching gas

ZEORORA® ZFL-58

Cyclo-olefin polymer

ZEONEX®

ZEONOR®

Global WarmingPrevention

Reduction ofEnvironmental

Risks

Reduction ofVoc Emissions

Energy-saving

Ultra-Thin DiffusionPlates for LCDs

Synthetic rubberfor fuel-efficient tires

Polymerized toner

ZEOGLOBULE®


Corporate Governance

(1) Basic Concepts of Corporate GovernanceZEON aims to continue generating profits and enhancing its

corporate value, while conscientiously attending to the interests

of shareholders and other stakeholders and securing

coordination among them. To this end, ZEON will continue to

build an effective corporate governance system for efficient and

sound corporate management. At the same time, ZEON will

improve its internal control system, in which the roles and

functions of each internal body and organization are clearly

stated. Thus, the Board of Directors can make a quick decision

Corporate Governance and Internal Control System

and instruct the internal organization proper executions for the

operation. The progress and results of these processes will be

monitored and disclosed in a proper manner, thereby increasing

management transparency. In order for these functions to work

effectively, ZEON intends to further improve its corporate

governance system.

(2) Internal organizations and control systemZEON has a corporate auditor system, under which five

statutory auditors, including three outside auditors, have been

appointed.

ZEON's corporate governance and internal control system and

its reporting lines are as follows.• Board of DirectorsThe Board of Directors ensures that operations are executed

conformance with relevant laws and the Company's articles of

association. The board meets on a monthly basis in principle,

with statutory auditors attending. The chairman presides over

the meeting. In addition to responsibilities stipulated by law, the

Board's primary roles are to decide on basic management

principles and strategies and to make important decisions on the

execution of business operations. ZEON currently has no

outside directors.

• Executive BoardThe Executive Board consists of full-time directors with the

title of managing director or above and any person the president

ReportReport(internal)(internal)Report

(internal)

General Meeting of Shareholders

Operating divisions, indirect divisions, laboratories and plants

Subsidiaries and affiliated companies

Execution of Operations and Internal Control System

Board of Directors

President and CEO

Executive Board

PL Council

Environmentaland SafetyProtectionCouncil

PublicRelations

Committee

AntitrustLaw Compliance

Committee

ComplianceCommittee

InternalAudit Dept

Outsidelawyers

Risk ManagementCommittee

Risk ManagementCouncil

Independent Auditors(Board of Corporate Auditors)Statutory Auditors

AuditorSupport Staff

Decision-making and supervisionDecision-making and supervisionassignment Decision-makingassignment Decision-making

and supervisionand supervision(assignment and dismissal)(assignment and dismissal)

Decision-making and supervisionassignment Decision-making

and supervision(assignment and dismissal)

Decision-makingDecision-makingand supervisionand supervision

(assignment and dismissal)(assignment and dismissal)

Decision-makingand supervision

(assignment and dismissal)Operational audit Accounting audit

(Assignment and dismissal)(Assignment and dismissal) (Assignment and dismissal)(Assignment and dismissal)(Assignment and dismissal)

Operationalaudit

(Dismissal)

Cooperation(support)

Cooperation

CooperationCooperationCooperation

ReportReportReport

Internalaudit

Report(outside)

Report(outside)

ReportReport(internal)(internal)Report

(internal)

PL basic policiesPL basic policiesPL basic policies

Managementand monitoring



EnvironmentEnvironmentand safetyand safety

basic policiesbasic policies

Environmentand safety

basic policies

AppropriateAppropriatedisclosuredisclosure

of informationof information

Appropriatedisclosure

of information

Compliance withCompliance withAntitrust LawAntitrust Law

Compliance withAntitrust Law

Export SecurityControl

Commitee

Lawful ExportLawful ExportLawful ExportEnsuring theEnsuring thereliability ofreliability of

financial reportsfinancial reports

Ensuring thereliability of

financial reports

CorporateGovernanceCommitee

Prevention,Prevention,education,education,

training andtraining andmonitoringmonitoring

Prevention,education,

training andmonitoring

(Assignment and dismissal)

Dealing with problemsDealing with problemsand prevention of and prevention of

recurrence Dealing recurrence Dealing with problemswith problems

and of recurrenceand of recurrence

Dealing with problemsand prevention of

recurrence Dealing with problems

and of recurrence


■CSR

delegates according to the Regulations of the Executive Board.

After having full discussions and hearing opinions from

standing statutory auditors present, the board makes decisions

on important management issues. Of proposals discussed and

resolved at the Executive Board, important matters specified in

the Regulations of the Board of Directors are submitted to the

Board of Directors for deliberations and decisions.

The Executive Board, over which the president presides, meets

twice a month in principle.

• Board of Corporate AuditorsThe Board of Corporate Auditors consists of five statutory

auditors, of which three are outside auditors. The roles of the

board, which meets once every four months in principle, are to

report, discuss and make necessary resolutions for audit-related

important matters. Based on auditing standards determined by

this board, each auditor monitors the execution of duties by

directors through such means as attendance at the Board of

Directors' meetings and holds an internal inquiry into business

operations,including subsidiaries' operations.

• PL CouncilThe PL (Product Liability) Council discusses and determines

basic guidelines and policies with regard to ZEON's product

liability. The council, over which the president presides, meets

twice a year in principle.

• Environmental and Safety Promotion CouncilThis council discusses and determines policies and actions

regarding environment-and safety-related matters. The council,

which the president chairs, meets twice a year in principle.

• Public Relations CommitteeTo ensure timely and appropriate disclosure of information, this

committee discusses and determines corporate information to

be disclosed and its details whenever necessary.

(3) Internal audits, statutoryauditors' audits and accounting auditsAs a company using a corporate auditing system, ZEON has

five statutory auditors, of which three are outside auditors.

Statutory auditors attend the Board of Directors' meetings and

other important internal meetings to provide any advice as

required. In addition, they join in the operational audits carried

out by the Internal Audit Department. In this way, statutory

auditors conduct efficient audits, maintaining close cooperation

with the department responsible for internal audits. If

necessary, statutory auditors request the department responsible

for internal audits or other relevant sections to conduct an

inquiry and submit reports to them.

The Internal Audit Department has been established as the

section responsible for internal audits. The department carries

out internal audits, which are necessary for ensuring appropriate

operations at each division and subsidiary. The department has

three staff members, who are also responsible for supporting

statutory auditors. Statutory auditors and the Internal Audit

Department regularly exchange views with the independent

auditors regarding the results of their accounting audits. If

necessary, they stand by during an accounting audit and discuss

matters with the certified public accountants who conduct the

audit, thereby enhancing mutual cooperation.

(4) Risk Management SystemZEON has the following three committees associated with risk

management under the Risk Management Council, over which

the president presides.

• Risk Management CommitteeThis committee is responsible for dealing with crises that have

occurred and preventing similar incidents from occurring in the

future.

Using ZEON's internal network, the committee quickly gathers

risk-related information. In addition, the Compliance Hotline, a

reporting system in which outside lawyers participate, has been

established.

• Compliance CommitteeThis committee's roles are to provide training and education

and to carry out inspections with the aim of preventing any

crisis from occurring. The committee draws up and implements

preventive measures regarding violations of laws and

regulations, and compliance-related training and education

programs and inspection plans.

• Antitrust Law Compliance Committee This committee was established to prevent any director or

employee from violating the Antitrust Law.

• Export Security Control CommiteeThe Security and Export Control Committee is an organization

that observes and appropriately implements export regulations.

During fiscal 2007 the committee responded to the partial

amendment of the Export Trade Control Order and revised the

company regulations.

• Corporate Governance CommiteeThe Internal Controls Committee promotes the creation and

evaluation of internal control systems governing financial

reports, and administers the internal control reporting system

based on the Financial Instruments and Exchange Law.


CSR Promotion System

President

Meetings

EnvironmentImprovement Projects

Audits

CSR

Risk Management Committee

Compliance Committee

Antitrust Law Regulatory Committee

CSR team

Internal Auditing

Corporate Communication & Public Affairs

Environmental & Safety Affairs

Quality Assurance

Legal Affairs

Export Security Control Committee

Corporate Governance Committee

Risk Management Committee (twice yearly)Discussions and decisions concerning progress reports from the three committees

(Risk Management, Compliance, and Anti-Monopoly) Chairman: President

PL Countermeasure Meeting (twice yearly)

Internal Plant Audits(1) Diagnosis by the plant manager(2) Environment ISO internal audit(3) Quality ISO internal audit

Environment and Safety Promotion Meeting (twice yearly)Discussions and decisions concerning company-wide polices for the

environment and safety and items for implementation Chairman: President

PL Meeting (twice yearly)Discussions and decisions concerning fundamental, company-wide

items related to chemical safety and product liability Chairman: PresidentPlanning, discussions and reports for specific policies

and countermeasures related to chemical safety and product liability

Company-wide Audits(1) Diagnosis by top management (yearly) Chairman: President(2) Responsible Care audit (yearly) Auditor: Employee in charge of environment and safety(3) Operation Department PL audit (yearly) Auditor: Head of the Quality Assurance Department(4) Voluntary Safety audit(5) Special audit by the head of the Safety Environmental Affairs Department(6) Plant technology audit

(1) Reducing the discharge of toxic chemicals (2) Reducing waste and reusing materials (3) Conserving resources and energy

Environment and Safety Meeting (four times yearly)Assessments of issues, planning, reports

and proposals related to the environment and safety

Plant Safety and Environment Meeting (monthly)Discussions and decisions for items related

to plant environment and safety

Risk Management Council

ZEON Corporation conducted a reorganization effective June 28, 2007, to more clearly define CSR, which is responsible for fulfilling

the social obligations of the company. CSR at ZEON comprises four departments: 1) the CSR Department, 2) the Audit Section,

3) the Safety Environmental Affairs Department, and 4) the Quality Assurance Department. A number of meetings chaired by the

president have been set up based on these organizations. These meetings implement the policies specified in Environment

Improvement Projects, and audit the entire Company, including plants. Through persistent Plan Do Check activities, these

organizations work to improve CSR.

TOPICS

ZEON wins City of Kawasaki Urban Planning Design AwardIn May 2006, ZEON completed a new laboratory building

with financial assistance from Kanagawa Prefecture to house

research for creating new, next-generation businesses. In

November 2006 the facility received the City of Kawasaki

Urban Planning Design Award in recognition of its success in

taking into account the environment, safety, and the city

landscape.

Hosting of Yamaguchi Higashi Regional DialogueIn September 2006, ZEON hosted the 5th Yamaguchi Higashi

Regional Dialogue on Responsible Care. The regional

dialogue is managed and run every two years by companies in

the Shunan industrial complex area. This year, ZEON's

Tokuyama Plant organized the event, which featured a

vigorous exchange of opinions with local autonomous bodies

and educational institutions.


Financial Section

FINANCIAL SECTION OF CONTENTS

22

23

25

26

27

28

41

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■ Five-year Summary

■ Consolidated Financial Statements

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Changes In Net Assets

Consolidated Statements of Cash Flows

Note to Consolidated Financial Statements

■ Report of Independent Auditors

■Data & Financial Statements


Five-year Summary

22

Note: The U.S. dollar amounts above and elsewhere in this annual report are translated from yen, for convenience only, at the rate of￥100.20=$1.00 (As of March 31, 2008)

Millions of yen (except per share amounts and number of employees)

Thousands of U.S. dollars(except per share amounts)

2004

￥213,297

17,897

6,165

4,588

18.74

－

222,254

71,575

－

32.2

295.47

6.7

2,840

2005

￥231,364

19,303

13,524

7,773

32.01

－

236,861

76,357

－

32.3

317.86

10.5

2,784

2006

￥263,074

26,835

24,101

15,249

63.23

－

272,674

96,528

－

35.4

405.10

17.6

2,893

2007

￥281,613

30,175

28,126

17,077

71.74

71.72

315,448

－

115,180

35.4

469.17

16.4

2,972

2008

￥302,925

25,268

18,173

9,092

38.24

38.22

335,730

－

110,880

31.9

453.54

8.3

3,166

2008

$3,023,204

252,176

181,367

90,738

0.38

0.38

3,350,599

－

1,106,587

4.53

Net Sales

Operating Income

Income before income taxes

Net Income

Net Income per share

Primary

Fully diluted

Total assets

Shareholder's equity

Net Assets

Equity ratio （%）

Shareholder's equity per share

ROE （%）

Number of employees

ZEON Corporation and Consolidated Subsidiaries For the years ended March 31


See accompanying notes to consolidated financial statements.



Millions of yen Thousands of U.S.dollars (Note 3)

￥6,126

383

72,115

4,701

56,021

3,101

30,815

（88）

173,174

13,970

59,498

215,639

15,557

304,664

（188,401）

116,263

5,898

34,576

2,227

469

3,583

（462）

40,393

2

￥335,730

2008

￥6,483

355

54,691

6,535

52,021

3,311

32,206

（113）

155,489

13,915

53,498

199,205

10,667

277,285

（175,637）

101,648

5,782

45,768

2,446

384

4,401

（473）

52,526

3

￥315,448

2007 2008

$64,701

3,543

545,818

65,220

519,172

33,044

321,416

（1,128）

1,551,786

138,872

533,912

1,988,074

106,457

2,767,315

（1,752,864）

1,014,451

57,705

456,766

24,411

3,832

43,924

（4,721）

524,212

30

$3,148,184

$61,138

3,822

719,711

46,916

559,092

30,948

307,534

（878）

1,728,283

139,421

593,792

2,152,086

155,260

3,040,559

（1,880,250）

1,160,309

58,863

345,070

22,226

4,681

35,758

（4,611）

403,124

20

$3,350,599

2007

Assets

Current assets:

Cash and cash equivalents

Short-term investments （Note 8）

Receivables, trade:

Notes and accounts

Unconsolidated subsidiaries and affiliates

Inventories （Note 5）

Deferred tax assets （Note 13）

Other current assets （Note 9）

Allowance for doubtful accounts

Total current assets

Property, plant and equipment, at cost（Notes 8 and 10）：

Land

Buildings and structures

Machinery and equipment

Construction in progress

Less accumulated depreciation

Property, plant and equipment, net

Intangible assets

Investments and other assets （Note 6）：

Investment securities （Notes 8 and 16）


Deferred tax assets （Note 13）

Other investments


Total investments and other assets

Deferred charges

Total assets

■Data & Financial StatementsAs of March 31, 2008 and 2007

24 ZEON CORPORATION 2008 24

Consolidated Balance SheetsAs of March 31, 2008 and 2007


Millions of yen Thousands of U.S.dollars (Note 3)

￥20,155

5,196

19,984

72,252

7,459

12,588

3,021

2,936

12,950

156,541

52,177

11,675

1,383

3,074

68,309

24,211

18,378

67,000

（5,433）－

104,156

5,056

2

（556）－

（1,595）2,907

151

3,666

110,880

￥335,730

2008

￥21,953

1,278

4,998

74,319

7,640

11,851

4,754

3,491

7,722

138,006

40,348

10,243

7,007

4,664

62,262

24,211

18,372

60,542

－

（4,444）98,681

13,872

12

（100）（789）

－

12,995

101

3,403

115,180

￥315,448

2007 2008

$219,092

12,754

49,880

741,707

76,248

118,273

47,445

34,840

77,067

1,377,306

402,675

102,226

69,930

46,546

621,377

241,627

183,353

604,212

－

（44,352）984,840

138,443

120

（998）（7,874）

－

129,691

1,008

33,962

1,149,501

$3,148,184

$201,148

51,856

199,441

721,078

74,441

125,629

30,150

29,301

129,241

1,562,285

520,729

116,517

13,802

30,679

681,727

241,627

183,413

668,663

（54,222）－

1,039,481

50,459

20

（5,549）－

（15,918）29,012

1,507

36,587

1,106,587$3,350,599

2007

Liabilities and shareholders' equity

Current liabilities:

Short-term loans payable （Note 7）Current portion of long-term debt （Note 7）Commercial paper

Payables, trade:

Notes and accounts


Payables, other （Note 9）Accrued income taxes

Accrued expenses （Note 9）Other current liabilities （Notes 9 and 13）

Total current liabilities

Long-term liabilities:

Long-term debt （Note 7）Allowance for employees' retirement benefits （Note 12）Deferred tax liabilities （Note 13）Other long-term liabilities

Total long-term liabilities

Contingent liabilities（Note 14）

Net assets:

Shareholders' equity

Common stock

Authorized － 800,000,000 shares

Issued － 242,075,556 shares

Capital surplus

Retained earnings （Note 4）Treasury stock, at cost

2008 － 6,014,022 shares

2007 － 4,048,429 shares

Total shareholders' equity

Valuation and translation adjustments

Net unrealized holding gain on available-for -sale securities

Deferred gain（losses） on hedges

Foreign currency translation adjustments

Minimum pension liabilities

Pension liabilities adjustments

Total valuation and translation adjustments

Stock acquisition rights

Minority interests

Total net assets

Total liabilities and net assets

Consolidated Statements of Income



Millions of yen Thousands of U.S. dollars (Note 3)

￥302,925

228,830

74,095

48,827

25,268

1,403

（1,468）

32

（7,062）

（7,095）

18,173

8,022

602

9,549

（457）

￥9,092

￥38.24

38.22

12.00

453.54

2008

￥281,613

203,164

78,449

48,274

30,175

1,187

（1,083）

27

（2,180）

（2,049）

28,126

9,723

780

17,623

（546）

￥17,077

￥71.74

71.72

10.00

469.17

2007 2008

$2,810,509

2,027,585

782,924

481,776

301,148

11,846

（10,808）

269

（21,756）

（20,449）

280,699

97,037

7,784

175,878

（5,449）

$170,429

$0.72

0.72

0.10

4.68

$3,023,204

2,283,733

739,471

487,295

252,176

14,002

（14,651）

319

（70,479）

（70,809）

181,367

80,060

6,008

95,299

（4,561）

$90,738

$0.38

0.38

0.12

4.53

2007

Net sales

Cost of sales（Notes 10 and 12）

Gross profit

Selling, general and administrative expenses

（Notes 10, 11 and 12）

Operating income

Other income（expenses）:

Interest and dividend income

Interest expenses

Equity in earnings of unconsolidated

subsidiaries and affiliates, net

Other, net（Notes 16 and 18）

Income before income taxes and minority interests

Income taxes:

Current

Deferred

Income before minority interests

Minority interests

Net income

Amounts per share:

Net income

Fully diluted net income

Cash dividends

Net Assets

Consolidated Statements of IncomeYears ended March 31 ■Data & Financial Statements

Consolidated Statements of Changes in Net Assets


Consolidated Statements of Changes in Net Assets

26


For the years ended March 31, 2008 and 2007

Millions of yenThousands

￥242,076

－

－

－

－

－

－

－

242,076

－

－

－

－

－

－

－

242,076

Number of shares of common

stock

￥24,211

－

－

－

－

－

－

－

24,211

－

－

－

－

－

－

－

￥24,211

common stock

￥18,372

－

0

－

－

－

－

－

18,372

－

－

－

6

－

－

－

￥18,378

Capitalsurplus

￥44,963

17,077

－

（2,380）

（101）

983

－

－

60,542

9,092

238

（15）

－

（2,857）

－

－

￥67,000

Retainedearnings

（￥4,435）

－

0

－

－

－

（9）

－

（4,444）

－

－

－

42

－

（1,031）

－

（￥5,433）

Treasurystock

￥14,497

－

－

－

－

－

－

（625）

13,872

－

－

－

－

－

－

（8,816）

￥5,056

Net unrealizedholding gain on

available-for-salesecurities

￥－

－

－

－

－

－

－

12

12

－

－

－

－

－

－

（10）

￥2

Deferredgain(losses)on hedges

（￥1,080）

－

－

－

－

－

－

980

（100）

－

－

－

－

－

－

（456）

（￥556）

Foreigncurrency

translationadjustments

￥－

－

－

－

－

－

－

（789）

（789）

－

－

－

－

－

－

789

￥－

Minimumpensionliabilities

￥－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

（1,595）

（￥1,595）

Pensionliabilities

adjustments

￥－

－

－

－

－

－

－

101

101

－

－

－

－

－

－

50

￥151

Stockacquisition

rights

￥3,162

－

－

－

－

－

－

241

3,403

－

－

－

－

－

－

263

￥3,666

Minorityinterests

Balance at March 31, 2006

Net income for the year

Disposition of treasury stock

Cash dividends paid

Bonuses to directors and statutory auditors

Adjustment in minimum pension liability of

consolidated subsidiaries in U.S.A.

Purchases of treasury stock

Net change during the year



Increase due to change in number of

consolidated subsidiaries

Decrease due to change in number of



Cash dividends paid




Thousands of U.S.dollars (Note3)

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

$241,627

－

－

－

－

－

－

－

241,627

－

－

－

－

－

－

－

$241,627

$183,353

－

0

－

－

－

－

－

183,353

－

－

－

60

－

－

－

$183,413

$448,733

170,429

－

（23,752）

（1,008）

9,810

－

－

604,212

90,738

2,376

（150）

－

（28,513）

－

－

$668,663

（$44,261）

－

0

－

－

－

（91）

－

（44,352）

－

－

－

419

－

（10,289）

－

（$54,222）

$144,681

－

－

－

－

－

－

（6,238）

138,443

－

－

－

－

－

－

（87,984）

$50,459

$-

－

－

－

－

－

－

120

120

－

－

－

－

－

－

（100）

$20

（$10,778）

－

－

－

－

－

－

9,780

（998）

－

－

－

－

－

－

（4,551）

（$5,549）

$－

－

－

－

－

－

－

（7,874）

（7,874）

－

－

－

－

－

－

7,874

$－

$－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

（15,918）

（$15,918）

$－

－

－

－

－

－

－

1,008

1,008

－

－

－

－

－

－

499

$1,507

$31,557

－

－

－

－

－

－

2,405

33,962

－

－

－

－

－

－

2,625

$36,587




Cash dividends paid

Bonuses to directors and statutory auditors

Adjustment in minimum pension liability of

consolidated subsidiaries in U.S.A.





Increase due to change in number of


Decrease due to change in number of



Cash dividends paid





Consolidated Statements Cash Flows


Millions of yen Thousands of U.S. dollars (Note 3)

￥18,173

19,497

（1,403）

1,468

（15,573）

（4,091）

（2,541）

2,361

17,891

1,607

（1,481）

（72）

（9,748）

8,197

（30,194）

（1,377）

（3,603）

707

452

（34,015）

（1,696）

14,987

17,178

（1,269）

（2,951）

（1,032）

3

25,220

（107）

（705）

6,483

348

￥6,126

2008

￥28,126

16,245

（1,187）

1,083

（12,103）

（6,861）

17,483

（8,116）

34,670

1,286

（916）

（490）

（10,917）

23,633

（26,394）

（1,054）

（3,082）

－

（1,155）

（31,685）

（1,376）

998

15,031

（5,166）

（2,449）

－

（10）

7,028

187

（837）

7,320

－

￥6,483

2007 2008

$280,699

162,126

（11,846）

10,808

（120,788）

（68,473）

174,481

（80,999）

346,008

12,834

（9,142）

（4,890）

（108,952）

235,858

（263,413）

（10,519）

（30,758）

－

（11,528）

（316,218）

（13,733）

9,960

150,010

（51,557）

（24,441）

－

（99）

70,140

1,867

（8,353）

73,054

－

$64,701

$181,367

194,581

（14,002）

14,651

（155,419）

（40,828）

（25,359）

23,562

178,553

16,038

（14,780）

（719）

（97,286）

81,806

（301,337）

（13,743）

（35,958）

7,056

4,511

（339,471）

（16,926）

149,571

171,437

（12,665）

（29,451）

（10,299）

30

251,697

（1,068）

（7,036）

64,701

3,473

$61,138

2007

Cash flows from operating activities:

Income before income taxes and minority interests

Adjustments to reconcile income before income taxes and minority

interests to net cash provided by operating activities:

Depreciation and amortization

Interest and dividend income

Interest expenses

（Increase）decrease in receivables, trade

（Increase）decrease in inventories

Increase（decrease）in payables, trade

Other, net

Cash generated from operations

Interest and dividends received

Interest paid

Payment of litigation costs

Income taxes paid

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property, plant and equipment

Purchases of intangible assets

Purchases of investment securities

Proceeds from sales of subsidiary stocks

associated with change in the scope of consolidation

Other, net

Net cash used in investing activities

Cash flows from financing activities:

Increase（decrease）in short-term borrowings

Increase（decrease）in commercial paper

Proceeds from long-term debt

Repayment of long-term debt

Dividends paid

Repurchase of treasury stock

Other, net

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase（decrease）in cash and cash equivalents

Cash and cash equivalents at beginning of year

Increase in cash due to increase in number of consolidated subsidiaries

Cash and cash equivalents at end of year

Consolidated Statements of Cash Flows

■Data & Financial StatementsYears ended March 31


Notes to Consolidated Financial Statements

28

ZEON Corporation and Consolidated Subsidiaries

1. Basis of PresentationZEON CORPORATION（the "Company"）and its domesticconsolidated subsidiaries maintain their accounting records andprepare their financial statements in accordance withaccounting principles generally accepted in Japan, and itsoverseas consolidated subsidiaries maintain their books ofaccount in conformity with those of their countries of domicile. The accompanying consolidated financial statements have beencompiled from the accounts prepared by the Company inaccordance with the provisions set forth in the FinancialInstruments and Exchange Law of Japan and in conformity withaccounting principles generally accepted in Japan, which aredifferent in certain respects as to the application and disclosurerequirements of International Financial Reporting Standards.

In addition, the notes to the consolidated financial statementsinclude information that is not required under accountingprinciples generally accepted in Japan but is presented herein asadditional information.

Certain amounts in the prior year's financial statements havebeen reclassified to conform to the current year's presentation.

2. Summary of Significant Accounting Policies（1）Principles of Consolidation

The accompanying consolidated financial statementsinclude the accounts of the Company and its significantsubsidiaries（23 subsidiaries as of March 31, 2008 and 21subsidiaries as of March 31, 2007）. All significantintercompany accounts and transactions have beeneliminated in consolidation. Investments in certainunconsolidated subsidiaries and significant affiliates areaccounted for by the equity method. All significantunrealized intercompany items have been eliminated inconsolidation.

Investments in other affiliates and unconsolidatedsubsidiaries, not significant in amounts, are carried at cost.

（2）Cash and Cash EquivalentsCash and cash equivalents include all highly liquid debtinstruments with a maturity of three months or less whenpurchased.

（3）SecuritiesSecurities other than investments in affiliates have beenclassified as "held-to-maturity securities" and "available-for-sale securities." Available-for-sale securities aresecurities other than trading securities and held-to-maturitysecurities. Held-to-maturity securities are carried at

amortized cost or accumulated cost calculated by thestraight-line method.Available-for-sale securities whose fair value is readilydeterminable are carried at fair value with thecorresponding unrealized gain/loss recorded directly as aseparate component of net assets, and those whose fairvalue is not readily determinable are carried at movingaverage cost.

（4）Allowance for Doubtful AccountsThe allowance for doubtful accounts is provided at anamount considered sufficient to cover estimated futurelosses.

（5）InventoriesInventories, in general, are stated at cost determinedprincipally by the average method.

（6）DepreciationDepreciation of property, plant and equipment is computedprimarily by the declining-balance method based on theestimated useful lives of the respective assets determinedaccording to their type of construction and use.Maintenance and repairs, including minor renewals andimprovements, are charged to income as incurred.

<Changes in accounting policy>Effective from the fiscal year ended March 31, 2008,pursuant to an amendment to the Corporate Tax Law, theCompany and its domestic consolidated subsidiaries havedepreciated Property, plant and equipment acquired on andafter April 1, 2007 in accordance with the methodstipulated in the amended Corporation Tax Low. As aresult of this change, compared with the previousaccounting method, operating income decreased by ¥795million（$7,934 thousand）, and ordinary income andincome before income taxes and minority interestsdecreased by ¥798 million（$7,964 thousand）.Effective from the fiscal year ended March 31, 2008, theproperty, plant and equipment acquired before April 1,2007 for which the allowable limit on the depreciableamount has been reached are to be depreciated evenly overfive years from the following fiscal year. As a result of thischange, compared with the previous accounting method,operating income decreased by ¥830 million（$8,283thousand）, and ordinary income and income before incometaxes and minority interests decreased by ¥856 million（$8,543 thousand）.

The effects of this change on the segment information areseparately stated in Note 19.



29

（7）LeasesFinance leases that are not deemed to transfer ownership ofleased property to lessee are accounted for in the samemanner as operating leases for the Company and domesticconsolidated subsidiaries, and principally as finance leasesfor foreign consolidated subsidiaries.

（8）Employees' Retirement BenefitsThe allowance for employees' retirement benefits isprovided at the amount incurred during the fiscal yearbased on the present value of the projected benefitobligation less the fair value of pension plan assets at theend of the fiscal year. The retirement benefit obligation for certain domesticconsolidated subsidiaries corresponds to the amount thatwould be required to be paid for retirement benefits if alleligible employees voluntarily quit their companies as ofthe balance-sheet dates or the amount of liability reserve inpension financing.Prior service cost for the Company and certain foreignconsolidated subsidiaries is amortized as incurred on astraight-line basis over a certain period（9-13 years）.Actuarial gain or loss is amortized by the straight-linemethod over a certain period（9-13 years mainly）, whichis not over than the average remaining service years foremployees when incurred, from the following fiscal year ofthe accrual.

（9）Income TaxesDeferred income taxes reflect the net tax effect of thetemporary differences between the carrying amounts of theassets and liabilities for financial reporting purposes andthe amounts reported for income tax purposes.

（10）Foreign Currency TranslationnBoth current and noncurrent receivables and payablesdenominated in foreign currencies have been translatedinto yen at the exchange rates in effect at the respectivebalance sheet dates.

The Company translates the asset and liability accounts,except for shareholders' equity, of its foreign consolidatedsubsidiaries at the exchange rates in effect at the respectivebalance sheet dates. The components of shareholders'equity are translated at their historical exchange rates.Revenue and expense accounts are translated at the averageexchange rate in effect during the year. The resultingtranslation differences have been recorded as "Foreigncurrency translation adjustments" except for thosecorresponding to minority interests.

（11）Net Income per ShareThe computation of basic net income per share is based onthe weighted average number of shares outstanding duringthe respective years. The computation of fully diluted netincome per share reflects the potential dilution that couldoccur if the stock acquisition rights were excercised.

3. U.S. Dollar AmountsThe Company maintains its accounting records in yen. TheU.S. dollar amounts included in the accompanying consolidatedfinancial statements and the notes thereto represent thearithmetic results of translating yen into U.S. dollars at¥100.20= US$1.00, the rate of exchange prevailing on March31, 2008. The inclusion of such U.S. dollar amounts is solelyfor the convenience of the reader and is not intended to implythat assets and liabilities which originated in yen have been orcould readily be converted, realized or settled in U.S. dollars atthe above or any other rate.

4. Shareholders' EquityThe Company Law in Japan（the "Law"）provides that anamount equal to at least 10% of the amounts to be disbursed asdistributions of earnings be appropriated to the legal reserveuntil the sum of the legal reserve and additional paid-in capital,which is included in Capital surplus, equals 25% of thecommon stock account. The Law provides that neitheradditional paid-in capital nor the legal reserve in available fordividends, but both may be used to reduce or eliminate a deficitby resolution of the shareholders or may be transferred tocommon stock upon approval by the Board of Directors.Accordingly, the Law provides that if the total amount ofadditional paid-in capital and the legal reserve exceeds 25% ofthe amount of common stock, the excess may be distributed tothe shareholders either as a return of capital or as dividendssubject to the approval of the shareholders. The Company'sshares of common stock had no par value in accordance withthe Law.

The retained earnings account in the accompanyingconsolidated financial statements at March 31, 2008 and 2007included the legal reserve of ¥3,359million（$33,519thousand ）and ¥3,287million（$32,802 thousand）.

5. InventoriesInventories at March 31, 2008 and 2007 consisted of the following:

6. Investments and Other AssetsInvestments in and long-term loans to unconsolidated subsidiaries and affiliates at March 31,2008 and 2007consisted of the following:

Other investments at March 31, 2008 and 2007 consisted of the following:

7. Short-Term Loans Payable and Long-Term DebtShort-term loans payable at March 31, 2008 and 2007 were unsecured.Long-term debt at March 31, 2008 and 2007 consisted of the following:


Millions of yen Thousands of U.S. dollars

￥42,711

4,558

8,752

￥56,021

2008

￥40,063

4,360

7,598

￥52,021

2007 2008

$399,830

43,513

75,829

$519,172

$426,257

45,489

87,346

$559,092

2007

Finished products

Work in process

Raw materials and supplies


￥1,530

697

￥2,227

2008

￥1,756

690

￥2,446

2007 2008

$17,525

6,886

$24,411

$15,269

6,957

$22,226

2007

Capital investments

Long-term loans


￥1,313

2,270

￥3,583

2008

￥1,972

2,429

￥4,401

2007 2008

$19,681

24,243

$43,924

$13,104

22,654

$35,758

2007

Long-term prepayments

Other


￥10,000

10,000

37,373

57,373

（5,196）

￥52,177

2008

￥10,000

10,000

21,626

41,626

（1,278）

￥40,348

2007 2008

$99,800

99,800

215,829

415,429

（12,754）

$402,675

$99,800

99,800

372,985

572,585

（51,856）

$520,729

2007

1.02% Japanese yen unsecured bonds due 2010

2.02% Japanese yen unsecured bonds due 2013

Loans（principally from banks and insurance companies）

Less current portion


The aggregate annual maturities of long-term debt subsequent to March 31,2008 are summarized as follows:

8. Assets pledged as collateralAssets pledged as collateral at March 31,2008 and 2007 consisted of the following:

9. Supplementary Information to the Consolidated Balance SheetsBalances with unconsolidated subsidiaries and affiliates at March 31,2008 and 2007 were principally as follows:

10. Depreciation and AmortizationDepreciation and amortization charges for the years ended March 31,2008 and 2007 were ¥19,497million ($194,581thousand) and ¥16,245million ($162,126thousand), respectively.

11. Research and Development ExpensesResearch and development expenses included in selling, general and administrative expenses for the years ended March 31,2008 and 2007 were ¥12,276million ($122,515thousand) and ¥11,745million ($117,216thousand), respectively.


Millions of yenYear ending March 31, Thousands of U.S. dollars

￥9,336

10,000

700

10,142

21,999

￥52,177

$93,174

99,800

6,986

101,218

219,551

$520,729

2010

2011

2012

2013

2014 and thereafter


￥－

25

3,632

2008

￥26

25

5,075

2007 2008

$259

250

50,649

$－

250

36,248

2007

Time deposits

Land

Investment securities


￥7,222

26

680

101

2008

￥7,295

13

1,112

126

2007 2008

$72,804

130

11,098

1,257

$72,076

259

6,786

1,008

2007

Other current assets

Payables, other

Accrued expenses

Other current liabilities


12. Retirement BenefitsThe Company and certain domestic consolidated subsidiaries have defined contribution pension plans, advanced retirement allowanceplans and lump-sum severance indemnity plans.Certain foreign consolidated subsidiaries have defined benefit pension plans covering substantially all their employees.

The table below sets forth funded status of the plans and the amounts recognized in the balance sheets at March 31,2008 and 2007 :

Retirement benefit expenses related to the plans, including amortization of the unfunded projected benefit obligation for the years ended March 31, 2008 and 2007 are summarized as follows:

The assumptions at March 31,2008 and 2007, which were used in determining retirement benefit expenses and the allowance foremployees' retirement benefits shown above were as follows:


（￥24,281）

10,621

（13,660）

￥－

2,774

（405）

（384）

（￥11,675）

2008

（￥24,758）

10,254

（14,504）

￥－

5,209

（317）

（631）

（￥10,243）

2007 2008

（$247,086）

102,335

（144,751）

$－

51,986

（3,164）

（6,297）

（$102,226）

（$242,325）

105,997

（136,328）

$－

27,685

（4,042）

（3,832）

（$116,517）

2007

Projected benefit obligation

Plan assets at fair value

Projected benefit obligation in excess of plan assets

Unrecognized net retirement benefit obligation at transition

Unrecognized net actuarial loss

Unrecognized prior service cost

Prepaid pension cost

Allowance for employees' retirement benefits


￥845

926

（728）

364

（23）

1,384

433

￥1,817

2008

￥766

892

（601）

177

（24）

1,210

432

￥1,642

2007 2008

$7,645

8,902

（5,998）

1,766

（240）

12,075

4,312

$16,387

$8,433

9,242

（7,265）

3,633

（230）

13,813

4,321

$18,134

2007

(a) Service cost

(b) Interest cost

(c) Expected return on plan assets

(d) Allocation of actuarial loss

(e) Amortization of prior service cost

(f) Net retirement benefit expenses [(a)+(b)+(c)+(d)+(e)]

(g) Employer match contribution

to defined contribution pension plans

(h) Total [(f)+(g)]

2008

Flat allocation

2.5%～6.0%

5.0%～8.3%

9～13 years

9～13 years mainly

2007

Flat allocation

2.5%～5.8%

4.7%～8.0%

9～13 years

9～13 years mainly

Allocation of retirement benefit expenses

Discount rates

Expected rates of return on plan assets

Period of amortization of past service cost

Period of allocation of actuarial loss



13. Income TaxesThe significant components of deferred tax assets and liabilities are summarized as follows:

A reconciliation of the differences between the statutory tax rate and the effective tax rates for the years ended March 31, 2008 and 2007 is as follows:

2008

40.0%

11.4

（5.8）

1.9

47.5

2007

40.0%

－

（4.4）

1.7

37.3

Statutory tax rate

Increase（reduction）in taxes resulting from:

Unrecognized tax effect of deficit subsidiaries

Tax credit

Other

Effective tax rates


￥1,342

539

1,121

－

－

365

686

4,830

－

617

2,050

－

－

1,618

13,168

（3,660）

9,508

（1,087）

（311）

（411）

（723）

（936）

－

（3,477）

（379）

（7,324）

￥2,184

2008

￥747

551

1,110

142

440

656

730

4,597

56

－

1,000

12

207

759

11,007

（1,480）

9,527

（1,258）

（311）

（411）

（798）

（612）

（36）

（9,069）

（347）

（12,842）

（￥3,315）

2007 2008

$7,455

5,499

11,078

1,417

4,391

6,547

7,285

45,878

559

－

9,980

120

2,066

7,575

109,850

（14,770）

95,080

（12,555）

（3,104）

（4,102）

（7,964）

（6,108）

（359）

（90,509）

（3,463）

（128,164）

（$33,084）

$13,393

5,379

11,187

－

－

3,643

6,846

48,204

－

6,158

20,459

－

－

16,148

131,417

（36,527）

94,890

（10,848）

（3,104）

（4,102）

（7,216）

（9,342）

－

（34,701）

（3,781）

（73,094）

$21,796

2007

Deferred tax assets:

Inventories


Net unrealized gain


Accrued enterprise tax

Payables, other

Accrued expenses

Allowance for employees' retirement benefits

Retirement allowances for directors and statutory auditors

Allowance for repairs

Operating losses carried forward

Foreign exchange loss

Allowance for environmental remediation

Other

Gross deferred tax assets

Valuation allowance

Total deferred tax assets

Deferred tax liabilities:

Depreciation and amortization

Land


Reserve for deferred gain on fixed assets for tax purposes

Retained earnings

Foreign exchange gain

Net unrealized holding gain on available-for -sale securities

Other

Total deferred tax liabilities

Net deferred tax assets


14. Contingent LiabilitiesContingent liabilities at March 31, 2008 and 2007 were as follows:

15. LeasesLease payments relating to finance lease transactions accounted for as operating leases amounted to ¥267million($2,665thousand) and ¥564million ($5,629thousand) for the years ended March 31, 2008 and 2007, respectively. Future minimum lease payments (including the interest portion thereon) subsequent to March 31,2008 and 2007 for finance leasesaccounted for as operating leases are summarized as follows:

Future minimum lease payments (including the interest portion thereon) subsequent to March 31, 2008 and 2007 for operating leasesare summarized as follows:


￥－

3,117

2008

￥5

4,377

2007 2008

$50

43,683

$－

31,108

2007

Notes discounted and endorsed

Guarantees


￥264

409

￥673

2008

￥400

588

￥988

2007 2008

$3,992

5,868

$9,860

$2,635

4,082

$6,717

2007

Due within one year

Due after one year

Total


￥165

524

￥689

2008

￥172

123

￥295

2007 2008

$1,717

1,228

$2,945

$1,647

5,230

$6,877

2007

Due within one year

Due after one year

Total

In May 2007, ZEON Corporation and its European subsidiaries,ZEON Europe GmbH and ZEON Chemicals Europe Ltd.(collectively "ZEON") received a Statement of Objections fromthe European Commission with respect to an investigation intothe NBR (acrylonitrile butadiene rubber) market in Europe.ZEON carefully reviewed the Statement of Objections and inJune 2007 filed its reply with the European Commission. InJanuary 2008, the European Commission rendered a decision to

impose a fine of 5.36 million Euro (approximately 840 millionYen) on ZEON for a certain period between 2000 and 2002. InMarch 2008, ZEON decided not to appeal to the court againstthe decision, taking into consideration all factors including thecost of long and burdensome litigation. The fine was paid inApril 2008 and reflected in the consolidated financialstatements for the fiscal year ended March 31, 2008.

16. SecuritiesThe fair value at March 31, 2008 and 2007 of available-for-sale securities is summarized as follows:

Total sales of available-for-sale securities and the related net realized gain for the years ended March 31, 2008 and 2007 were as follows:

Securities whose fair value was not known as of March 31, 2008 and 2007 principally consisted of the following:



35


￥100

4

2008

￥12

1

2007 2008

$120

10

$998

40

2007

Total sales

Net realized gain


￥－

－

3,397

－

－

2008

￥4

－

3,464

－

－

2007 2008

$40

－

34,571

－

－

$－

－

33,902

－

－

2007

Held-to-maturity securities:

Corporate bonds

Municipal bonds

Available-for-sale securities:

Unlisted equity securities

Unlisted foreign bond

Money management fund

Millions of yenCurrent fiscal year (As of March 31, 2008)

Thousands of U.S. dollars

￥19,360

－

￥19,360

￥3,140

－

￥3,140

￥22,500

Acquisition cost

￥28,731

－

￥28,731

￥2,448

－

￥2,448

￥31,179

Fair value

￥9,371

－

￥9,371

（￥692）

－

（￥692）

￥8,679

Unrealized gain (loss)

$193,214

－

$193,214

$31,337

－

$31,337

$224,551

Acquisition cost

$286,737

－

$286,737

$24,431

－

$24,431

$311,168

Fair value

$93,523

－

$93,523

（$6,906）

－

（$6,906）

$86,617


Securities whose fair value exceeds their acquisition cost:

Equity securities

Bonds and debentures

Subtotal

Securities whose acquisition cost exceeds their fair value:

Equity securities


Subtotal

Total

Millions of yenPrevious fiscal year (As of March 31, 2007)


￥18,916

－

￥18,916

￥106

2

￥108

￥19,024

Acquisition cost

￥42,198

－

￥42,198

￥100

2

￥102

￥42,300

Fair value

￥23,282

－

￥23,282

（￥6）

－

（￥6）

￥23,276


$188,782

－

$188,782

$1,057

20

$1,077

$189,859

Acquisition cost

$421,138

－

$421,138

$997

20

$1,017

$422,155

Fair value

$232,356

－

$232,356

（$60）

－

（$60）

$232,296


Securities whose fair value exceeds their acquisition cost:

Equity securities


Subtotal

Securities whose acquisition cost exceeds their fair value:

Equity securities


Subtotal

Total


The carrying amounts of held-to-maturity securities and available-for-sale securities which had maturities as of March 31, 2008 and 2007 were as follows:

17. Fair value of derivatives positionsThe fair value of derivatives positions at March 31, 2008 and 2007 is summarized as follows:

Current fiscal year (As of March 31, 2008)Millions of yen Thousands of U.S.dollars

￥－

￥－

5 to 10years

￥－

￥－

Over10years

$－

$－

Within1year

$－

$－

1 to 5years

$－

$－

5 to 10years

$－

$－

Over10years

￥－

￥－

1 to 5years

￥－

￥－

Within1year

Bonds

Total

Previous fiscal year (As of March 31, 2007)Millions of yen Thousands of U.S.dollars

￥－

￥－

5 to 10years

￥－

￥－

Over10years

$40

$40

Within1year

$20

$20

1 to 5years

$－

$－

5 to 10years

$－

$－

Over10years

￥2

￥2

1 to 5years

￥4

￥4

Within1year

Bonds

Total

Millions of yenCurrent fiscal year (As of March 31, 2008)


￥1,680

829

476

￥2,985

Contractamount

￥1,699

825

（24）

￥2,500

Fair value

（￥19）

（4）

（24）

（￥47）

Unrealizedgain(loss)

$16,766

8,273

4,750

$29,789

Contractamount

$16,956

8,234

（240）

$24,950

Fair value

（$190）

（39）

（240）

（$469）


Forward foreign exchange contracts:

To sell foreign currencies

To buy foreign currencies

Coupon swaps

Millions of yenPrevious fiscal year (As of March 31, 2007)


￥5,349

678

456

￥6,483

Contractamount

￥5,284

665

（17）

￥5,932

Fair value

￥65

（13）

（17）

￥35


$53,383

6,766

4,551

$64,700

Contractamount

$52,735

6,637

（170）

$59,202

Fair value

$648

（129）

（170）

$349


Forward foreign exchange contracts:

To sell foreign currencies

To buy foreign currencies

Coupon swaps



37

18. Other Income (Expenses) - Other, NetOther income (expenses) - other, net for the years ended March 31, 2008 and 2007 consisted of the following:

19. Segment InformationThe business and geographical segments of the Company and its consolidated subsidiaries for the years ended March 31,2008 and 2007 are outlined as follows:

Business Segments Current fiscal year (From April 1, 2007, to March 31, 2008)

Millions of yen

￥194,066

1,646

195,712

179,141

￥16,571

￥169,909

8,535

10,556

Elastomer

￥47,153

－

47,153

39,544

￥7,609

￥82,873

8,937

22,395

Specialtymaterials

￥61,706

639

62,345

61,129

￥1,216

￥36,103

718

590

Others

￥302,925

2,285

305,210

279,814

￥25,396

￥288,885

18,190

33,541

Total

￥－

（2,285）

（2,285）

（2,157）

（￥128）

￥46,845

1,307

1,959

Eliminations/Corporate

￥302,925

－

302,925

277,657

￥25,268

￥335,730

19,497

35,500

Consolidated

Ⅰ. Sales and operating income:

Sales to third parties

Inter-group sales and transfers

Total

Operating expenses

Operating income

Ⅱ. Assets, depreciation and capital expenditures:

Total assets

Depreciation

Capital expenditures


￥72

184

（1,849）

（3,797）

（1,160）

（1,123）

611

（￥7,062）

2008

￥102

1

125

（1,488）

（811）

（489）

380

（￥2,180）

2007 2008

$1,018

10

1,248

（14,850）

（8,094）

（4,880）

3,792

（$21,756）

$719

1,836

（18,453）

（37,894）

（11,577）

（11,208）

6,098

（$70,479）

2007

Rental income

Gain on sales of property, plant and equipment

Foreign exchange gain (loss), net

Loss on disposal of inventories

Loss on disposal of property, plant and equipment

Litigation costs

Other, net


Previous fiscal year (From April 1, 2006, to March 31, 2007)

Current fiscal year (From April 1, 2007, to March 31, 2008)


Millions of yen

￥176,222

1,481

177,703

158,176

￥19,527

￥156,601

6,829

9,284

Elastomer

￥47,197

－

47,197

37,451

￥9,746

￥68,209

7,377

16,307

Specialtymaterials

￥58,194

1,030

59,224

58,352

￥872

￥29,910

730

1,305

Others

￥281,613

2,511

284,124

253,979

￥30,145

￥254,720

14,936

26,896

Total

￥－

（2,511）

（2,511）

（2,541）

￥30

￥60,728

1,309

1,984


￥281,613

－

281,613

251,438

￥30,175

￥315,448

16,245

28,880

Consolidated




Total

Operating expenses

Operating income


Total assets

Depreciation


Thousands of U.S.dollars

$1,936,786

16,427

1,953,213

1,787,834

$165,379

$1,695,699

85,180

105,349

Elastomer

$470,589

－

470,589

394,651

$75,938

$827,076

89,192

223,503

Specialtymaterials

$615,829

6,377

622,206

610,070

$12,136

$360,309

7,165

5,888

Others

$3,023,204

22,804

3,046,008

2,792,555

$253,453

$2,883,084

181,537

334,740

Total

$－

（22,804）

（22,804）

（21,527）

（$1,277）

$467,515

13,044

19,551


$3,023,204

－

3,023,204

2,771,028

$252,176

$3,350,599

194,581

354,291

Consolidated




Total

Operating expenses

Operating income


Total assets

Depreciation



$1,758,703

14,780

1,773,483

1,578,603

$194,880

$1,562,884

68,154

92,655

Elastomer

$471,028

－

471,028

373,762

$97,266

$680,729

73,623

162,745

Specialtymaterials

$580,778

10,279

591,057

582,355

$8,702

$298,503

7,285

13,024

Others

$2,810,509

25,059

2,835,568

2,534,720

$300,848

－

$2,542,116

149,062

268,424

Total

$－

（25,059）

（25,059）

（25,359）

$300

$606,068

13,064

19,800


$2,810,509

－

2,810,509

2,509,361

$301,148

$3,148,184

162,126

288,224

Consolidated




Total

Operating expenses

Operating income


Total assets

Depreciation


Notes: 1. According to the ZEON Group's segmentation categories for business management purposes2. Major products by business segment are as follows:

3. Change in the depreciation method of property, plant and equipment

Geographical Segments Current fiscal year (From April 1, 2007, to March 31, 2008)




As described in the "2. Summary of Significant AccountingPolicies", effective from the fiscal year ended March 31,2008, pursuant to an amendment to the Corporate Tax Law,the Company and its domestic consolidated subsidiaries havedepreciated Property, plant and equipment acquired on andafter April 1, 2007 in accordance with the method stipulatedin the amended Corporation Tax Low.As a result of this change, compared with the previousaccounting method, operating expenses for the yearincreased ¥288 million ($2,874 thousand) for "Elastomer,"¥366 million ($3,653 thousand) for "Specialty materials" and¥141 million ($1,407 thousand) for "Others," whereasoperating income decreased by the same amount for the

respective segments.Also, effective from the fiscal year ended March 31, 2008,the property, plant and equipment acquired before April 1,2007 for which the allowable limit on the depreciableamount has been reached are to be depreciated evenly overfive years from the following fiscal year.As a result of this change, compared with the previousaccounting method, operating expenses for the yearincreased ¥647 million ($6,457 thousand) for "Elastomer,"¥126 million ($1,257 thousand) for "Specialty materials" and¥57 million ($569 thousand) for "Others," whereas operatingincome decreased by the same amount for the respectivesegments.

39

Millions of yen

￥24,675

8,763

33,438

29,958

￥3,480

￥27,712

NorthAmerica

￥239,372

29,585

268,957

248,173

￥20,784

￥262,278

Japan

￥20,854

662

21,516

20,958

￥558

￥10,623

Europe

￥18,024

1,832

19,856

19,240

￥616

￥8,925

Asia

￥302,925

40,842

343,767

318,329

￥25,438

￥309,538

Total

￥－

（40,842）（40,842）（40,672）（￥170）

￥26,192


￥302,925

－

302,925

277,657

￥25,268

￥335,730

Consolidated




Total

Operating expenses

Operating income

Ⅱ. Assets at end of year:

Total assets

Millions of yen

￥23,284

8,212

31,496

28,233

￥3,263

￥30,079

NorthAmerica

￥226,514

24,423

250,937

224,971

￥25,966

￥231,297

Japan

￥18,080

462

18,542

18,023

￥519

￥10,388

Europe

￥13,735

1,526

15,261

14,863

￥398

￥5,813

Asia

￥281,613

34,623

316,236

286,090

￥30,146

￥277,577

Total

￥－

（34,623）（34,623）（34,652）

￥29

￥37,871


￥281,613

－

281,613

251,438

￥30,175

￥315,448

Consolidated




Total

Operating expenses

Operating income


Total assets

Synthetic rubbers, Synthetic latices, Chemicals (e.g., C5 Petroleum resins, Thermoplastic elastomers)

Specialty Chemicals (e.g., Synthetic aroma, Synthetic organic pharmaceuticals), Information materials(e.g., Electronic materials, Polymerized toners), Specialty plastics (Cyclo-olefin polymer and fineprocessed products with Cyclo-olefin polymer)RIM blending liquid, RIM molding products, Medical equipment, Butadiene extraction technology,Outsourced production of vinyl chloride resins, Vinyl chloride compounds, Packaging and distributionmaterials, Housing materials, etc.

Elastomer

Major business line and productsBusiness segment

Specialty materials

Others


Current fiscal year (From April 1, 2007, to March 31, 2008)


Overseas Sales Sales are analyzed geographically as follows:

20. Subsequent EventsAppropriations of retained earnings The following appropriations of retained earnings of the Company were approved at a shareholders' meeting held on June 27, 2008:


$246,257

87,455

333,712

298,982

$34,730

$276,567

NorthAmerica

$2,388,943

295,259

2,684,202

2,476,776

$207,426

$2,617,545

Japan

$208,124

6,607

214,731

209,162

$5,569

$106,018

Europe

$179,880

18,283

198,163

192,016

$6,147

$89,072

Asia

$3,023,204

407,604

3,430,808

3,176,936

$253,872

$3,089,202

Total

$－

（407,604）（407,604）（405,908）（$1,696）

$261,397


$3,023,204

－

3,023,204

2,771,028

$252,176

$3,350,599

Consolidated




Total

Operating expenses

Operating income


Total assets


$232,375

81,956

314,331

281,766

$32,565

$300,190

NorthAmerica

$2,260,619

243,743

2,504,362

2,245,220

$259,142

$2,308,353

Japan

$180,439

4,611

185,050

179,870

$5,180

$103,673

Europe

$137,076

15,230

152,306

148,333

$3,973

$58,014

Asia

$2,810,509

345,540

3,156,049

2,855,189

$300,860

$2,770,230

Total

$－

（345,540）（345,540）（345,828）

$288

$377,954


$2,810,509

－

2,810,509

2,509,361

$301,148

$3,148,184

Consolidated




Total

Operating expenses

Operating income


Total assets


￥170,104

30,757

31,161

67,758

3,145

￥302,925

2008

￥157,267

29,647

29,285

62,064

3,350

￥281,613

2007 2008

$1,569,532

295,878

292,265

619,401

33,433

$2,810,509

$1,697,645

306,956

310,988

676,228

31,387

$3,023,204

2007

Sales designated for:

Japan

North America

Europe

Asia

Other

Total

￥1,416 $14,132Cash dividends (¥6.00 = $0.06 per share)



ZEON Chemicals Europe Ltd.Sully,Vale of Glamorgan, CF64 5YU, United KingdomTEL: +44-1446-725400 FAX: +44-1446-747988Business: Manufacture and sale of synthetic rubbers.Founded: February 6, 1989Capital: STG£28,300,000Percentage owned: ZEON Corporation 100%

ZEON Europe SpanishRepresentative OfficeC/Muntaner, 479-483 6

。6a, 08021 Barcelona, Spain

TEL: +34-93-417-6900 FAX: +34-93-254-0248Founded: December 11, 1996

ZEON Europe GmbHNiederkasseler Lohweg 177,40547 Dusseldorf, GermanyTEL: +49-211-52670 FAX: +49-211-5267160Business: Sale, export, and import of synthetic rubbersand resins.Founded: December 7, 1989Capital: EUR 2,659,000Percentage owned: ZEON Corporation 100%

ZEON France S.A.22, rue Guynemer 78600 MAISONS LAFFITTE,FranceTEL: +33-1-39-12-75-20 FAX: +33-1-39-12-75-26Business: Sale of synthetic rubbers and resins in France.Founded: February 15,1990Capital: EUR 480,000Percentage owned: ZEON Europe GmbH 100%

ZEON Italia S.r.l.Via G.B. Pirelli, 11, 20124 Milano, ItalyTEL: +39-2-671-417-03 FAX: +39-2-671-417-20Business: Sale of synthetic rubbers and resins in Italy.Founded: June 29, 1990Capital: EUR 26,000Percentage owned: ZEON Europe GmbH 100%

ZEON Asia Pte Ltd.331 North Bridge Road,#20-01/02,Odeon Towers,Singapore 188720TEL: +65-6332-2338 FAX: +65-6332-2339Business: Sale, export, and import of syntheticrubbers,synthetic latex and hydrocarbon resins.Founded: December 4, 1997 Capital: S$ 500,000Percentage owned: ZEON Corporation 100%

Malaysia BranchUnit 208, Block B, Phileo Damansara 2, No15,Jalan16/11, Off Jalan Damansara, 46350 PetalingJaya Selangor MalaysiaTEL: +603-7955-2032 FAX: +603-7955-2032

Shanghai ZEON Co., Ltd.No.380, Shennan Road, Zinzhuang IndustryDistrict,Minhang, Shanghai, 201108, ChinaTEL: +86-21-6489-6160 FAX: +86-21-6442-0569(Push "0" after announcements)Business: Manufacture and sale of rubber compounds.Founded: January 27, 2002 Capital: US$ 400,000Percentage owned: ZEON Corporation 100%

ZEON Trading (Shanghai) Co., Ltd.Room.319, No.500, Bingke Road, Wai Gao Qiao FreeTrade Zone, Shanghai, 200131, ChinaTEL: +86-21-6489-3343 FAX: +86-21-6442-0569(Push "0" after announcements)Business: Sale export and import of synthetic rubbersand chemicals and related products.Founded: March 19, 2002 Capital: US$ 200,000Percentage owned: ZEON Corporation 100%

ZEON Chemicals (Thailand) Co., Ltd.3 Soi G-14, Pakorn-Songkhrorad Road, TambolHuaypong, Amphur Muangrayong, Rayong 21150,ThailandTEL: +66-3-868-5973~5 FAX: +66-3-868-5972Business: Manufacture and sale of hydrocarbon resins.Founded: May 9, 1996 Capital: BHT 350,000,000Percentage owned: ZEON Corporation 73.9%

ZEON Advanced Polymix Co.,Ltd.591 UBCII BLDG, Office No.2206, 22thFL, Sukhumvit33rd,Klongton Nua, Wattana, Bangkok 10110 ThailandTEL: +66-2-261-0175 FAX: +66-2-261-0172Business: Manufacture and sale of rubber compounds.Founded: April 26, 1995 Capital: BHT 100,000,000Percentage owned: ZEON Corporation 40%

PlantInternational Polymer Park, No.112/2 Mu2 SoiNikom 13, Tmbol Makham Ging,Amphur Nikompattana,Rayong Province 21180, ThailandTEL: +66-38-893-565 FAX: +66-38-893-569

ZEON Shinhwa Inc.

ZEON Europe GmbH

Suzuhou Rui HongElectronic Chemicals Co., Ltd.

Shanghai ZEON Co.,Ltd.

ZEON Trading(Shanghai) Co.,Ltd.

International Operations andOverseas Network

ZEON Chemicals (Thailand) Co., Ltd.

ZEON Advanced Polymix Co., Ltd.

ZEON Chemicals Europe Ltd.

ZEON Italia S.r.l.

ZEON France S.A.

ZEON Europe GmbHSpain Office

ZEON Asia Pte LTD.


■Overseas & Corporate Data

ZEON Polymix (Guangzhou) Co., Ltd.Jing Quan 1st Road, Yong He Economic Zone,Guangzhou, 511356, ChinaTEL: +86-20-3222-1171 FAX: +86-20-3222-1820Business: Manufacture and sale of rubber compounds.Founded: July 16, 2003 Capital: US$ 3,000,000Percentage owned: ZEON Corporation 70%

Suzhou Rui Hong ElectronicChemicals Co., Ltd.81, Su Li Road, Wuzhong, Suzuhou, ChinaTEL: +86-512-5284759 FAX: +86-512-5279926Business: Manufacture and sale of photo resist.Founded: September 24, 1993Capital: RMB 15,340,000Percentage owned: ZEON Corporation 25.6%

ZEON Shinhwa Inc.16F Star Tower, 737, Yeoksam-Dong, Kangnam-Gu,Seoul,135-984, KoreaTEL: +82-2-761-7030 FAX: +82-2-786-7221Business: Sale of electronic materials.Founded: June 17, 1997 Capital: WON 100,000,000Percentage owned: ZEON Corporation 51%

ZEON CSC CORPORATION3rd Fl.266,Sec1,Wen Hwa 2 Road ,Linkou Hsiang,Taipei Hsien, Taiwan,R.O.CTEL: +886-2-2609-2156 FAX: +886-2-2600-6413Business:Sale of optical materials.Founded: March 26, 2001 Capital: NTD 20,000,000Percentage owned: ZEON Corporation 51%

R&D Center4111 Bells Lane, Louisville, Kentucky 40211, U.S.A.TEL: +1-502-775-7765 FAX: +1-502-775-7783

Kentucky Plant4100 Bells Lane, Louisville, Kentucky 40211, U.S.A.TEL: +1-502-775-7600 FAX: +1-502-775-7614

Mississippi Plant1301 West Seventh Street, Hattiesburg, Mississippi39401, U.S.A.TEL: +1-601-583-6020 FAX: +1-601-583-6032

Texas Plant11235 Choate Road, Pasadena, Texas 77507, U.S.A.TEL: +1-281-474-9693 FAX: +1-281-474-0966

ZEON Chemicals L.P.4100 Bells Lane, Louisville, Kentucky 40211, U.S.A.TEL: +1-502-775-7700 FAX: +1-502-775-7714Business: Manufacture and sale of synthetic rubbers.Founded: September 12, 1989Capital: US$ 36,000,000Percentage owned: ZEON Corporation 100%

Sales & Marketing Office4111 Bells Lane, Louisville, Kentucky 40211, U.S.A.TEL: +1-800-735-3388 FAX: +1-502-775-2055TEL: +1-502-775-2000

ZEON do Brasil LtdaRua Arandu, 1544, Sao Paulo SP, BrazilTEL:+55-11-5501-2120 FAX:+55-11-5501-2122Business: Sale of synthetic rubbers and resinsin South America.Founded: April 1, 2005Capital: R$ 1,000Percentage owned: ZEON Chemicals L.P. 99%

ZEON do Brasil Ltda

ZEON Chemicals L.P.Texas Plant

ZEON Chemicals L.P.Mississippi Plant

ZEON Chemicals L.P.

ZEON Chemicals L.P.Kentucky Plant

ZEON Chemicals L.P.R&D Center

ZEON CSC CORPORATION

ZEON CORPORATION

ZEON Polymix (Guangzhou) Co., Ltd.

Head Office


Corporate History

Apr. 1950 Nippon ZEON Co., Ltd. founded to manufacture and sellsynthetic resins with starting capital of 5 million yen.Head Office set up within Nippon Light Metal Co., Ltd.(7-3 Ginza Nishi, Chuo-ku, Tokyo).

Apr. 1952 Polyvinyl chloride resin (PVC) production begins atKanbara Plant (Shizuoka Prefecture).

Nov. 1956 PVC production begins at Takaoka Plant (ToyamaPrefecture).

Jul. 1959 Production of Japan’s first synthetic rubbers begins atKawasaki Plant (Kanagawa Prefecture).Central Research Laboratory opens.

Sep. 1961 Listed on the Tokyo Stock Exchange. Listed on the Osakaand Nagoya Stock Exchanges in October.

Jun. 1965 Head Office moves to Marunouchi, Chiyoda-ku, Tokyo.

Aug. 1965 Butadiene and SBR production using the GPB Process(Nippon ZEON's proprietary technology for extractingbutadiene) begins at Tokuyama Plant (YamaguchiPrefecture).

Mar. 1967 Kanbara Plant closed for rationalization.

Sep. 1969 PVC production begins at Mizushima Plant (OkayamaPrefecture).

Nov. 1971 GPI (ZEON’s proprietary technology for extractingisoprene) facility completed in Mizushima Plant andproduction of IR at the plant.

Oct. 1981 Spins off the Processed Products Division to establishZEON Kasei Co., Ltd. (now a consolidated subsidiary).

Jul. 1988 Establishes ZEON Chemicals, Inc. in the U.S. The company,now a consolidated subsidiary, is engaged in localproduction of hydrogenated acrylonitril butadiene rubber.

Mar. 1989 Establishes ZEON Chemicals Europe Limited in the U.K.The company, now a consolidated subsidiary, acquires thenitrile rubber division of BP Chemicals Ltd. and startsoperations on April 1.

Sep. 1989 Establishes ZEON Chemicals USA, Inc. in the U.S. Thefollowing month the company acquires the specialtyrubber division of BF Goodrich Chemical Co. of the U.S.

Oct. 1993 Moves into the electronic materials business in China andestablishes Suzuhou Rui Hong Electronic Chemicals Co.,Ltd., a joint venture with Suzuhou Electronic MaterialsCo., Ltd. and Marubeni Corporation.

Jul. 1995 Spins off vinyl chloride business, transferring it to ShinDai-Ichi Vinyl Corporation.

May. 1996 Establishes ZEON Chemicals (Thailand) Co., Ltd. toproduce C5 hydrocarbon resins. The company, now aconsolidated subsidiary, starts production in April 1998.

Apr. 1997 Completes Yonezawa Plant (Yamagata Prefecture), nowZEON Chemicals Yonezawa Co., Ltd., to manufacturefine chemicals.

Sep. 1997 ZEON Chemicals USA, Inc. (now a consolidatedsubsidiary) acquires the goodwill of acrylic rubberbusiness from EniChem Elastomerie,Inc. of Italy.

Mar. 1999 U.S.-based ZEON Chemicals L.P. (now a consolidatedsubsidiary) acquires DSM Copolymer's NBR business inNorth America.

Sep. 1999 ZEON Chemicals L.P. (now a consolidated subsidiary)

acquires a specialty rubber operation from Goodyear Tire& Rubber, of the U.S.

Mar. 2000 Discontinues production of PVC at Mizushima Plant andwithdraws from the PVC business.

Jun. 2000 Changes the English company name to ZEON Corporation.

Jul. 2000 Tokyo Zairyo Co., Ltd. (now a consolidated subsidiary)

and ZEON Trading Co., Ltd. merge.

Jun. 2001 ZEON Kasei Co., Ltd. (now a consolidated subsidiary) andAsahi Chemical Co., Ltd. merge.

Dec. 2001 Completes a factory for processing light-guide plates forhighly functional (thermoplastic transparent) resin COPliquid crystal displays, along with an optical film technicalcenter in Takaoka .

Mar. 2003 Applies for delisting of stock on the Nagoya StockExchange. (Delisted in April 2003.)

Aug. 2003 Transfers DCPD-RIM operations to RIMTEC Corporationby means of a company breakup.

Mar. 2005 Head office moves to present location.

May. 2006 Completes Next-Generation R&D Building No. 10.

Sep. 2007 Optes Co.,Ltd.(now a consolidated subsidiary) completesthe Himi Plant at the Toyama Plant.

Apr. 2008 Completes the Integrated Production Center (IPC) at theMizushima Plant.

1998Year Award issuing organization Award name and technology

Environmental Protection Agency (U.S.A) Stratospheric Ozone Protection Award (October 27)

Environment Technology Award“Development and manufacturing of environmentally friendlyfluorinated materials.” (May 25)

The 8th Award “Development and evaluation of cyclic fluorinatedcompounds as environmentally safe materials.” (May 29)

The Green Sustainable Chemistry (GSC),Minister of theEnvironmenta Award

Japan Chemical Industry Association

Tsukuba Foundation for Chemical andBio-Technology

The Green Sustainable ChemistryNetwork (GSCN)

2000

2000

2003

ZEORORA®-H received the Green & Sustainable Chemistry, Minister of the Environment AwardUnique fluorine cleaning solvent “ZEORORA®-H”, having no harmful effects on the ozone layer and less impact on global warming. We werehonored to receive the Green and Sustainable Chemistry (GSC), Minister of the Environment Award. In addition, ZEORORA®-H has receivedmany other commendations,including the U.S. Environmental Protection Agency's Stratospheric Ozone Protection Award, recognizing itsoutstanding features as an environment-friendlycleaning agent. It is widely used in products such as electronics components as a degreasingcleaner in place of CFC or chlorine solvents, and it is being extensively applied to many fields.


■Overseas & Corporate DataCorporate Data

ZEON Corporation

Shin Marunouchi Center Building, 1-6-2 Marunouchi,

Chiyoda-ku, Tokyo, 100-8246, Japan

Established April 12,1950

Capital ¥24,211 million

Number of Employees 3,166

(Consolidated: March 31, 2008)

Directors and Auditors (as of June 27,2008)

President & CEO Naozumi Furukawa

Representative Tadao Natsuume

Executive Managing

Director

Managing Director Masafumi Miyamoto

Seiichi Okada

Tadayuki Minami

Kohei Arakawa

Yoshimasa Fushimi

Director Minero Iwata

Hiroshi Takegami

Kimiaki Tanaka

Shuichi Kakinuma

Standing Auditors Teruaki Hiramatsu

Shuichi Mitsubori

Auditors Yasuo Tominaga

Yuzuru Fujita

Tamiki Ishihara

Public Relations Dept. Tel : +81-3-3216-2747

Fax: +81-3-3216-0501

Export Sales Tel : +81-3-3216-1807

Fax: +81-3-3216-0503

Home Page http://www.zeon.co.jp/index_e.html

Principal Domestic Subsidiaries and Affiliates

Consolidated or Accounted for by the Equity

Consolidation Percentage Owned

Optes Inc. 100.0

ZEON Kasei Co., Ltd. 100.0

ZEON Polymix Inc. 100.0

ZEON Medical Inc. 100.0

ZEON Yamaguchi Co., Ltd. 100.0

ZEON North Co., Ltd. 100.0

ZEON Environmental Material Co., Ltd. 100.0

Tokyo Zairyo Co., Ltd. 58.4

ZEON F&B Co., Ltd. 100.0

RIMTEC Corporation 60.0

ZEON Logistical Materials Co., Ltd. 100.0

Equity methodPercentage Owned

ZEON Analysis Center Co., Ltd 100.0

Number of Stocks Issued 242,075,556

Number of Shareholders 14,092 (as of March 31, 2008)

Major Shareholders Yokohama Rubber Co., Ltd.Japan Trustee Services Bank, Ltd.The Master Trust Bank of Japan, Ltd.Asahi Mutual Life Insurance CompanyMizuho Corporate Bank, Ltd.Furukawa Electric Co., Ltd. CompanyAsahi Kasei Chemicals Corp.Japan Trustee Services Bank, Ltd.Mizuho Bank, Ltd.Sompo Japan Insurance Inc.

Distribution of Stock Ownership

Closing Date March 31st of each year

Stock Exchange Tokyo (First Section) Osaka (First Section)

Transfer Agent The Chuo Mitsui Trust and BankingCompany, Limited

Other corporate bodies 21.8%Financial Institutions 43.4%

Securities Companies 1.2%Foreign corporate bodies 16.1%

Individuals & Others 17.5%

annual report 2008 - zeonoverview zeon corporation 2008 1 net sales （ millions of yen） 2004 2005...

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