Enhancing our platform for the future

ANNUAL REPORT 2013 Year ended March 31, 2013 Business Development Flowchart

Cellulosic Photographic Nonflammable Cellulose Acetate tow film applications acetate Derivatives

C1 Chemistry Petrochemical products such as Organic Acetic acid acetic acid produced products by the methanol Chemicals carbonylation process Celluloid Nitrocellulose Polyacetal Acetate resin Polyamide Plastics plastics SAN/ABS 12 resin and Films resin

Pyrotechnic Viscose Cellophane Plastic films applications Devices

Functional Propellant Propellants Products systems and Others

Profile Daicel Corporation was founded in 1919 as Dainippon Celluloid Company Limited, created through the merger of eight celluloid producers. Deploying its original celluloid-related technological expertise, the Company has expanded into the fields of cellulose chemistry, organic synthesis chemistry, polymer chemistry, and pyrotechnic chemistry.

Today, Daicel’s extensive business lineup expands beyond the chemical industry segment and includes cellulose acetates made from pulp and other natural fi bers, cigarette fi lter tow, water-soluble polymers and other cellulosic derivatives, organic chemical products (centering on acetic acid and acetic acid derivatives), organic fi ne chemical products, engineering plastics (such as polyacetal and polybutylene terephthalate resins), acrylonitrile styrene and acrylonitrile butadiene styrene resins, resin compounds derived from engineering plastic alloys, various plastic products, defense-related items (such as propellants and aircrew emergency escape systems), and automobile airbag infl ators.

Caution with Respect to Forward-Looking Statements This annual report contains forward-looking statements about the future plans, strategies, beliefs and performance of the Daicel Group as a whole and its individual consolidated companies. These forward-looking statements are not historical facts. They are expectations, estimates, forecasts and projections based on information currently available to the Daicel Group and are subject to a number of risks, uncertainties and assumptions, which, without limitation, include economic trends, fl uctuations in foreign currency exchange rates, fl uctuations in the price of raw materials, competition in markets where the Company is active, personal consumption, market demand, the tax system and other legislation. As such, actual results may differ materially from those projected and the Daicel Group cannot guarantee that these forward-looking statements are accurate or will be achieved.

1 • DAICEL CORPORATION Board of Directors Principal Group Symbol & Consolidated Message from Interview with Daicel Highlights Review of Research & Corporate Social Corporate Data & Profile Special Feature and Auditors/ Financial Section Subsidiaries & Basic Philosophy Financial Highlights the President the President of the Year Operations Development Responsibility Stock Information Executive Officers Affiliates 2 % % % % % • 1.8 39.1 18.4 20.8 19.9 2013 % 42.3 Annual Report ՘V̈œ˜>Ê*Àœ`ÕVÌÃÊ Overseas Sales Sales by Segment Sales UÊ*ÞÀœÌiV ˜ˆVÊ iۈViÃÊ UÊ Ê >˜`Ê"Ì iÀÃÊ UÊ"À}>˜ˆVÊ i“ˆV>ÃÊ UÊ*>Ã̈VÃÊ>˜`ʈ“ÃÊ UÊ iÕœÃˆVÊ iÀˆÛ>̈ÛiÃÊ Corporate Social Responsibility Financial Section liates and Affi Principal Subsidiaries Corporate Data Stock Information and Auditors/ of Directors Board No.1 26 78 80 36 80 35 cers Executive Offi World’s World’s Civil engineering Civil engineering / and oil drilling CMC ->iÃÊà >ÀiÊ­ >ˆViÊiÃ̈“>Ìi® Pharmaceutical development / Chiral columns Packaging and films for snacks and pocket warmers / Packaging films Main product application / Main product Product ” Medium-Term Plan ” Medium-Term I /

No.1 No.1 No.1 POM World’s POM World’s LCP World’s Japan’s Japan’s Cigarette filters / Cigarette ViÌ>ÌiÊ̜Ü] Cellulose acetate Production capacity share share capacity Production ­ >ˆViÊiÃ̈“>Ìi® Automotive paints / and Caprolactone special epoxy resins / components electronic *" ]Ê* /]Ê *Ê>˜`Ê**- *Àœ`ÕV̈œ˜ÊV>«>VˆÌÞÊà >ÀiÊ­ >ˆViÊiÃ̈“>Ìi® and equipment Office Eco-friendly System / E-Mizu system 17 At a Glance and Development Research of the Year Daicel Highlights Review of Operations le Profi Symbol Group Basic Philosophy Consolidated Financial Highlights the President Message from the President Interview with Special Feature: 25 15 17 1 3 4 5 6 7 11 19 Cellulosic Derivatives 20 Organic Chemicals 21 Plastics and Films 22 Devices Pyrotechnic 23 and Others Functional Products 24 Topics: The 2nd KAIZEN Case Study Meeting

of the “3D- Progress /

No.1 No.1 No.1 Contents No.1

ÉÊ/ and ABS

Japan’s Japan’s POM World’s POM World’s Japan’s Japan’s World’s World’s Major Applications of Daicel Group Products Group Daicel of Applications Major Airbag systems / ->iÃÊà >ÀiÊ­ >ˆViÊiÃ̈“>Ìi® Production capacity share capacity share Production ­ >ˆViÊiÃ̈“>Ìi® Auto parts / *" ]Ê* /]Ê**-]Ê SAN Polyester fibers / Acetic acid Production capacity share capacity share Production ­ >ˆViÊiÃ̈“>Ìi® Inflators wastewater treatment wastewater treatment ,iÛiÀÃiʜӜÈÃÊ membranes and ultrafiltration membranes Water filtration and Water ->iÃÊà >ÀiÊ­ >ˆViÊiÃ̈“>Ìi® LCDs Group Symbol

The new symbol, which uses Daicel blue, is given a sense of action and speed by the oblique character design used for the word “ .” The three red circles represent our unceasing passion for creation, our strong will to keep working on innovation, and our fi ghting spirit to continue taking on new fi elds outside our company’s current scope.

3 • DAICEL CORPORATION Board of Directors Principal Group Symbol & Consolidated Message from Interview with Daicel Highlights Review of Research & Corporate Social Corporate Data & Profile Special Feature and Auditors/ Financial Section Subsidiaries & Basic Philosophy Financial Highlights the President the President of the Year Operations Development Responsibility Stock Information Executive Officers Affiliates 4 • 2013 Annual Report .

. we believe in the unlimited potential of chemistry At the Daicel Group, manner, and expertise in the most effective By applying our unique technologies meeting the diverse needs of society. we are quality of life. contributes to a better society and an improved Our industrial group The Best Solution for You The Best an improved quality of life Contributing to by meeting the needs of society Basic Philosophy Basic Consolidated Financial Highlights Daicel Corporation (formerly, Daicel Chemical Industries, Ltd.) and Consolidated Subsidiaries Years ended March 31

Thousands of Millions of yen 2 U.S. dollars* 2009 2010 2011 2012 2013 2013 Results for the year Net sales ¥ 377,980 ¥ 320,243 ¥ 353,685 ¥ 341,943 ¥ 358,514 $ 3,813,979 Operating income 10,590 20,856 32,711 20,426 26,197 278,691 Income before income taxes and minority interests 6,272 16,911 29,713 19,962 25,283 268,968 Net income 1,297 11,070 16,803 11,827 15,373 163,543 Capital expenditures 25,666 18,424 11,753 17,394 26,067 277,309 Depreciation and amortization 39,674 37,782 33,529 28,849 24,605 261,755 Research and development expenses 12,046 11,317 11,971 12,731 12,876 136,979

At year-end Total assets ¥ 445,912 ¥ 428,377 ¥ 411,071 ¥ 398,197 ¥ 461,513 $ 4,909,713 Total equity 211,488 229,005 235,337 234,712 262,900 2,796,809

Yen U.S. dollars*2 Per share*1 Net income ¥ 3.62 ¥ 31.10 ¥ 47.22 ¥ 33.46 ¥ 43.71 $ 0.47 Cash dividends applicable to the year 8.00 10.00 10.00 10.00 12.00 0.13 *1: The computations of net income per common share are based on the weighted average number of shares outstanding. *2: The U.S. dollar amounts in this report are translated from Japanese yen, for convenience only, at the rate of ¥94 = $1, the approximate exchange rate at March 31, 2013.

Net Sales Operating Income Net Income/ (Billions of yen) (Billions of yen) Net Income Per Share (Billions of yen) (Yen) 400 40 20 60 378.0 353.7 358.5 341.9 16.8 320.2 32.7 300 30 15 15.4 45 26.2 47.22 11.8 43.71 11.1 200 20 20.9 20.4 10 30 33.46 31.10

100 10 10.6 5 15

1.3 0 0 0 3.62 0 09 10 131211 09 10 131211 09 10 131211 Net income (left) Net income per share (right)

5 • DAICEL CORPORATION Board of Directors Principal Group Symbol & Consolidated Message from Interview with Daicel Highlights Review of Research & Corporate Social Corporate Data & Profile Special Feature and Auditors/ Financial Section Subsidiaries & Basic Philosophy Financial Highlights the President the President of the Year Operations Development Responsibility Stock Information Executive Officers Affiliates 6 • 2013 Annual Report ” medium- I Misao Fudaba and CEO President ” medium-term plan. I

Our aim for the Daicel Group is to establish a steady is to establish a steady Our aim for the Daicel Group by expanding sales in trajectory of earnings growth to rising demand, particularly in Asia and North response our global business America, and by strengthening development, such as by enhancing local customer service, costs. to reduce while continuing our constant efforts Forecasts for the fi scal year ending March 2014 year ending March scal for the fi Forecasts scal in the fi economic recovery expect movement toward We anticipate lingering uncertainty 2014 but year ending March overseas due to in business conditions in Japan and such as rising downside risks to the economic outlook in the Chinese raw material and fuel prices, a slowdown and other factors. in Europe, nancial crisis the fi economy, Year in Review Year scal year fi t in the and profi in both sales growth achieved We sales volume, revising 2013 by expanding ended March fell short the results sales prices, and other factors, although the “3D- of the targets for the second year of a steady trajectory of earnings growth. and reducing costs to establish We are strengthening development business our global We Message from the President the from Message term plan (covering the fiscal years ending March 2012 to 2012 to March term plan (covering the fiscal years ending in also continued to make steady progress 2014). We March M&A, and other measures strategic new business creation, as basic strategies of the “3D- Interview with the President

We aim to realize stable profit growth by steadily implementing the basic strategies of our medium-term plan and continuing to reduce costs.

Q Please discuss earnings results for the fiscal year ended March 2013.

We achieved growth in sales and profits by expanding sales A in response to the recovery in automobile production, revising sales prices, and continuing efforts to reduce costs.

The movement toward economic recovery in Japan lacked substantial year-on-year increases in income as operating strength in the fiscal year ended March 2013 as it was income rose 28.2% to ¥26,197 million, ordinary income undermined by factors including deteriorating business rose 35.5% to ¥28,580 million, and net income rose 30.0% conditions in Europe and elsewhere overseas, persistent yen to ¥15,373 million. appreciation, and boycotts of Japanese products in China. Based on our improved performance, we raised the year- However, production activity and business conditions in Japan end ordinary dividend by ¥2 to ¥7 per share, for an annual began recovering at the start of 2013 as export conditions dividend distribution of ¥12 for the fi scal year. improved with the weakening yen and other factors.

In these conditions, the Daicel Group strove to improve Results for the Fiscal Years Ended March 2012 and 2013 its business performance by expanding sales in line with (Billions of yen) auto-industry-driven global production growth, revising 2012 2013 Change % Change sales prices attendant with higher raw material and fuel Net sales 341.9 358.5 +16.6 +4.8% costs, and continuing to cut costs. These efforts enabled Operating income 20.4 26.2 +5.8 +28.2% us to increase consolidated net sales by 4.8% year on Ordinary income 21.1 28.6 +7.5 +35.5% year to ¥358,514 million. The rise in sales combined with Net income 11.8 15.4 +3.5 +30.0% decrease in depreciation costs and other factors produced

7 • DAICEL CORPORATION Board of Directors Principal Group Symbol & Consolidated Message from Interview with Daicel Highlights Review of Research & Corporate Social Corporate Data & Profile Special Feature and Auditors/ Financial Section Subsidiaries & Basic Philosophy Financial Highlights the President the President of the Year Operations Development Responsibility Stock Information Executive Officers Affiliates 8 • 2013 Annual Report ” medium-term ” medium-term I Medium-Term Plan. Medium-Term I to further strengthen Other measures businesses included increasing our core filter tow, capacity for cigarette production production expanding polyacetal (POM) resin the production facilities in Malaysia, increasing ators outside Japan, and capacity of airbag infl establishing a new manufacturing site in South (For further details, see Special Feature Korea. on page 11–14) emissions. 2 (for FY 2011-2013) and marketing airbag initiators (inflator igniters) in the igniters) in the and marketing airbag initiators (inflator (LCP) materials in United States and liquid crystal polymer ed our business foundation In addition, we solidifi Germany. of a city gas co- in September 2012 with the installation generation system at the Aboshi Plant. The new facility expenses while electric power purchasing vastly reduces of our operations by burden the environmental reducing lowering CO Medium-Term Plan III (Fiscal 2017-2019) Deliver the Best Solution (The achievement phase) and delivery

3D- Growth Medium-Term Plan Medium-Term I a e We are performing steadily We 3D- for the basic strategy of for Development of new businesses • Enhancement of core businesses • a global perspective Development and enhancement of businesses from • Increased cost-competitiveness • Enhanced cooperation with business partners • Pursuit of M&A from a strategic perspective • Enhancement of business foundations • 3D- Medium-Term Plan ” medium-term plan, we made II (Fiscal 2014-2016) I Develop New Value (The growth and development phase) 3D- We made steady progress with our initiatives to create new businesses, new businesses, with our initiatives to create steady progress made We foundation. M&A, and further solidify our business utilize strategic A plan. What is the status of the measures being implemented under the plan? being implemented the status of the measures plan. What is The fi scal year ended March 2014 is the fi nal year of the “3D- nal the fi 2014 is March scal year ended The fi

esign the Future Medium-Term Plan I (Fiscal 2011-2013) Design the Future (The design phase) and initiative Q 3D- Becoming a companythat proudly delivers the best solutions to the global market The 3D Step-up Plan 3D Step-up The D Although we fell short of our earnings end of targets for the the second year of the “3D- steady progress advancing our basic strategies. In the area advancing our basic strategies. In the area steady progress we have been taking steps to new businesses, of creating energy elds of electronics, startups in the targeted fi create and healthcare. and environment, production Strategic M&A activities fortified the Group’s with the acquisitions of companies manufacturing structure Q What is your earnings outlook for the fi scal year ending March 2014? We forecast sales and profit growth for the year A as we continue to expand our sales volume and cut costs.

The Japanese economy is expected to begin moving solidly Our outlook also includes contributions from our joint toward recovery as the depreciation in the value of the yen venture company with MITSUBISHI RAYON CO., LTD., and rising stock prices support improving corporate and which started operations in May 2013, and increased household consumer sentiment. sales volume of cigarett