An epoxy resin having hydroxyl groups is modified with .epsilon.-caprolactone by effecting the ring opening polymerization of .epsilon.-caprolactone onto the hydroxyl groups contained in the epoxy resin. The modified epoxy resin is further combined with a polycarboxylic anhydride and a promotor for curing, or polyamine to give a curable composition. The modified epoxy resin is further modified by reacting the epoxy groups therein with a primary or secondary amine. Both the modified resin and the compositions are useful as coating.