Annual

Report2000
Year ended 2000

1

Corporate Profile
Chemicals

Plastics

Nagase & Co., Ltd. was established as a wholesalerof dyestuffs in Kyoto in 1832, when Japan was still
under the control of the Shogunate. Since then, from
the Meiji Restoration up to today, Nagase has
contributed to the growth of the Japanese economy
by providing chemical products for industries such as:
textiles, housing, automotive, and electronics.
Throughout this period, in addition to handling the
products of domestic makers as a trading company,
Nagase has also served as an exclusive trading
agent for leading overseas companies. It hascontinued to develop a business structure that offers
customers not only the functions of a trading
company but manufacturing, parts assembly,
research and development functions as well.
At present, the company is researching organic
synthetic technology, biotechnology, cosmetic
science, polymer science and developing
manufacturing methods to produce optically active
compounds, cosmetics and functional coating
materials at the Nagase Research and Development
Center. Nagase group manufacturing companies
produce and process goods such as: pharmaceuticalintermediates, functional polymers, and raw materials
for electronics applications.
Nagase sells these products directly to its customers,

without the use of middlemen.
Building a system that integrates development,
production, and sales efforts enables Nagase torespond at a high level to its customers' needs.
Playing an active role in research and development
activities as well as in production and processing
allows the company to offer its customers technology
and information and work together with them todevelop their markets. Staying close to its customers
and their markets also enables Nagase to expand its
own knowledge and business opportunities.
In the March 2000 period, the company converted
its ten business divisions into four business groups:
Chemicals, Plastics, Electronics, and Health Care.
Nagase launched a new management vision,changing its former slogan, "a technology oriented
marketing company" to "the technology andintelligence oriented company that turns wisdom intobusiness." In addition, the new Mid-term Management
Program, "WIT 2000," was created during this period.
Beginning with the next fiscal year, Nagase will also
initiate this program, which focuses on expanding into
new business areas.
The Nagase group will continue to deliver highquality service to customers and will push beyond theframework of an ordinary "trading company."

NAGASE & CO.,LTD.
Trading

Domestic

Electronics

Manufacturing

Processing

Overseas

Servicing

Selling

Manufacturing

Subsidiaries

Subsidiaries

Contents

Health Care

SellingSpecial Edition

Financial Highlights

2

I. Strengthening the group's research and development,
production and processing functions

19

To Our Shareholders

3

II. Strengthening of business expansion overseas

23

Review of Operations

7

III. Strengthening IT

24

Chemicals Business Group9

IV. Our approach to environmental protection

25

Plastics Business Group

11

Contribution to Society

26Electronics Business Group13

Financial Section

27

Health Care Business Group

15

Board of Directors and Auditors

45

Geographic Area Segment Information

17

Investors Information45

2

Consolidated Financial Highlights
Nagase & Co.,Ltd. and Consolidated Subsidiaries
Years ended 31st March,2000,1999,1998,1997
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2000

1999

1998

1997

2000

¥568,294¥563,222¥596,128¥571,948$5,353,686¥249,977
192,711
109,770
15,836¥244,068
199,189
104,455
15,510258,294
204,718
115,556
17,560¥264,206
197,401
92,464
17,877$2,354,942
1,815,458
1,034,106
149,180

6,371

3,561

4,905

5,689

60,021¥316,657
134,8382,500¥298,525
125,9302,252¥300,781
122,5312,601¥330,686
118,915
1,782$2,983,113
1,270,262
23,555For the year:
Net Sales
Chemicals
Plastics
Electronics
Health CareNet Income

For years ended:
Total Assets
Shareholders' Equity
Long-Term Debt

Yen

Per Share Data:
44.25
8.00
952.67

Eanings Per share
Cash Dividends
Book Value Per share

23.76
8.00
862.06

U.S. Dollars

32.39
8.00
809.1737.57
8.00
785.29

0.42
0.075
8.97

Note 1 : The conversion rate used was 106.15 yen to the dollar at 31st March, 2000.

Composition of Net Sales (2000)

Net Sales

Shareholders' Equity

Net Income(¥million)(¥million)(¥million)

600,000

596,128
571,9487,000

150,000

563,222 568,294
6,371

134,838

Health Care
2.8%

125,930
122,531
118,915
120,000

500,000

Electronics
19.3%

6,000
5,689

258,294
264,206

Chemicals
44.0%

249,977
244,068

5,000

4,905

400,000
90,000

Plastics
33.9%

4,000
3,561
300,000
3,000
204,718
192,711
197,401
199,189

60,000200,000
2,000

30,000100,000
1,000
115,556
109,770
92,464
104,455

0

17,87717,560 15,510 15,836
1997 1998

1999

2000

0

0
1997 1998

1999 2000

1997 1998

1999 2000

3

To Our Shareholders

Hideo Nagase, Chairman

Hiroshi Nagase, President

The past fiscal year saw Japan's economy edge slightly forwards, motivated by stepped up public works
spending and brisk capital investment in the IT sector. However, the employment picture remained bleak andthere were no appreciable gains in personal income resulting in repressed consumer spending. As a result, theeconomy remained stagnant and few signs of a recovery could be seen.
Overseas, the U.S. economy continued its respectable performance and economic recovery accelerated inEurope and Asia. Although Nagase closed the fiscal year under review with growth in sales and profits, ourbusiness performance was colored by the domestic and overseas economic climate.
We would like to briefly review our business performance in the past fiscal year and discuss the outlook forthe next fiscal year. We would also like to explain the objectives that we have set for ourselves in WIT 2000 thatwill see us through fiscal 2003.

The Year in Review
Consolidated sales increased 0.9%, or 5,072 million

increased 3.9% or 2,072 million yen, to 55,287

yen, from the previous year to 568,294 million yen,million yen.

mainly due to an expanded scope of consolidation.*1

Operating income, after allowing for selling,

Domestic sales declined 0.4%, or 1,423 million yen,general and administrative expenses, rose 4.6%, orto 404,156 million yen, but overseas sales were up

356 million yen, to 8,147 million yen. Benefiting from

4.1%, or 6,495 million yen, to 164,138 million yen.

the reduction in corporate tax rates in Japan, andWeak domestic sales reflected the sluggish state ofdue to increases in investment profits on equity

the Japanese economy. Gross profit on sales

method, net income increased 78.9%, or 2,810

4favoring aggressive expansion. WIT 2000 will

million yen, to 6,371 million yen.

achieve this key goal by focusing on creating new

Teikoku Chemical Industries Co., Ltd.,*1: Includes
Nagase (Taiwan) Co., Ltd., Nagase (Europa) GmbHbusiness opportunities. We converted our ten
business divisions into four independent business

WIT 2000groups — a move that will support better allocation of

We named our Mid-term Management Program "WIT

our investment resources. The new plan also defines

2000" in consideration of its focus on three elements:

investment standards, limiting investments to"Wisdom, Intelligence, Technology." As its nameprojects that are not only expected to produce

implies, the primary objective of the plan is toreturns exceeding the cost of capital but that will alsotransform Nagase into "the technology andcontribute to enhancing the functions of the Nagase

intelligence oriented company that turns wisdom into

Group as a whole. Finally, investment will be limited

business." The three-year program will guide us

to operating cash flow. The two strategic areas thatthrough to the end of fiscal 2003 and defines

will receive priority in the allocation of investmentsare "electronics" and "health care." These will not be

strategic business areas and goals. We will augment
the plan with the unique Nagase ROE model (NROE*

2)

distinct segments. All business groups will invest in

we have developed. This model allocates capital tothese areas. Finally we feel that it is important toeach business group, and is then used to measureform alliances, enter into capital partnerships andbusiness performance against standard financial

seek new opportunities through M&A, instead ofindicators. We expect consolidated NROE to rise torelying solely on in-house resources.

7% in fiscal 2003, the final year of the plan.

Creating New Businesses——
Channeling Investment into Strategic Areas

profit/equity capital at the beginning of*2 NROE: Nagase
the term
Nagase profit: Net profit after tax +(depreciation --+ appraisal profit/loss) x (1 - effective tax rate)"Nagase profit" refers to the profit generated throughbusiness operations, which is also referred to as "operating
cash flow."

Although we reported higher sales and profit for theterm under review, our overall business performancehas been less than stellar when examined over the

Focusing on Consolidated Management ——the integration of chemical production subsidiaries

medium term. The primary reason behind thisHaving product development and manufacturing

lackluster performance is that the organization on thecapabilities within the Group is Nagase's corewhole seems to have taken a defensive stance.

strength. Our chemical production subsidiaries in

Our Mid-term Management Program addresses thisparticular have unique technologies that are related

problem and is designed to cultivate a new attitude

to organic syntheses, biotechnology, and next-

5

generation semiconductors that will play an importantfine chemicals, in April 2000. We also integrated fourrole in increasing our group's developmental andof our dye marketing subsidiaries. The resultant

manufacturing capabilities in the future. In order to meld

dyestuffs marketing company will make us costthese technologies to create the optimal strategiccompetitive and strengthen our organization to ensure

enterprise, we are concentrating our resources andthat we will emerge as a winner in the shrinking

personnel through the integration of our chemical

domestic market for dyestuffs.

subsidiaries (details on page 19).
We are establishing a committee to work on a planto achieve this.

Massive investments are required to launch new
businesses. In order to support this, core businesses
are equally important to maintain a solid businessfoundation. To assure this, all four business groups

Outlook

will focus on building closer relations with customers.

To further strengthen our electronics business, weThis should in turn increase cash flow. We will also be

converted Nagase-CIBA Ltd., a joint venture with Ciba

focusing on improving financial indicators such as

Specialty Chemicals (Switzerland) into a wholly-owned

working capital, inventories and credit management.

subsidiary*

3 in June 2000. We will be increasing theWe will conduct a group-wide campaign to improve

production of liquid sealing materials for next generation

cash flow. Our management function must be

semiconductor packages, and making investments instrengthened if we are to strengthen core businesses

other next generation semiconductor-related products.

and create new business lines. We are conducting a

We are also taking a series of initiatives tothorough review of our administrative divisions in orderconsolidate our subsidiaries in order to reinforce ourto eliminate redundancy and reinforce capabilities andmanufacturing and marketing networks. As the first step,

will reorganize these divisions in the next period.

we integrated two of our chemicals manufacturing

Along with reorganization, we will move from a

subsidiaries, while increasing our production capacity forseniority-based wage structure to one based on merit6

that rewards achievement.
As these initiatives begin to yield results, we expect
net income in the next term to reach 6.5 billion yen * 4,
respectively, on sales of 580 billion yen. The
management plans to propose an 8 yen dividend percommon share.
We have completed the planning phase of WIT
2000 as well as the restructuring of our businessgroups. The primary objective in the next fiscal year will
be to make sure that the goals of these changes arecompletely understood by all of our employees. To

Chairman Hideo Nagase

achieve this important objective, we will implement
several initiatives to enhance in-house communication
among employees. "Let Each of Us Create a Business"is the core program in this initiative. A stable balance
sheet alone is not enough. We must also encourage our
employees to channel our assets into promising areas.
President Hiroshi Nagase

Ltd. renamed*3: Nagase-CIBA
Nagase ChemteX Co., Ltd. in June 2000
liabilities (after revision of the*4: Unreserved
accounting standards) of the employees' retirement
benefit fund totaled 6.9 billion yen as of the end of
March 2000. We will be charging appropriations tofund these liabilities as an extraordinary loss in the
March 2001 term. Simultaneously, we will bereporting an equivalent amount of extraordinary
profit on sales of assets and contributions to theretirement benefit trust. Thus, the extraordinary loss
will not affect earnings in the next term.

(June 29, 2000)

7

Review of Operations
The Review of Operations has been edited into a Q&A style with respect toGeneral Manager of each business group.
( June 29, 2000 )Composition of Net Sales

Electronics
19.3%

Health Care
2.8%
Chemicals
44.0%

Plastics
33.9%

Chemicals Business Group

9This business group was established in April 1999 with the reorganizationof our chemical sales divisions. We consolidated some of the functions
within the chemical product business to eliminate redundancy and increase
efficiency, while trying to seamlessly integrate both people and technology.
This business group is divided into two groups.
★The core businesses of the Chemicals 1st Business Group are coating materials, color
materials, monomers, urethane raw materials, resin additives, and dyestuffs.
The Chemicals 1st Business Group will also be focusing on the imaging and recording
materials business.

★The core businesses of Chemicals 2nd Business Group are organic fine chemicals, specialty
chemicals, agricultural and ecological materials with chemicals for use in the electronics
industry being brought in as a new business area.

Plastics Business Group
The Plastics Business Group is totally committed to meeting thedemands of both domestic and overseas customers.
At present, the main business activities of the Plastics Business Groupare the sales of engineering plastics, machinery, equipment and relatedmaterials to customers in the automotive, office automation equipment,
home electronics, construction and packaging markets.
We are focusing on areas related to the environment (Pluswood, abuilding material we developed that is composed of wood powder andplastics resin), software development and automotive engineering (in allareas ranging from initial design to final product), and the assembly ofelectronic parts (supply of OEM and ODM parts).

11

8Michiyuki Inukai

Takeshi Iwai

Executive Managing Director
General Manager
Chemicals 1st. Business GroupManaging Director
Vice President
General Manager
General Manager
Chemicals 2nd. Business Group Plastics Business Group

Shinichi Kokame

Reiji Nagase

Kazunori AndoManaging Director
General Manager
Electronics Business GroupManaging Director
General Manager
Health Care Business GroupElectronics Business Group

13

This group was previously called the Electronic Systems and Materials
Division and was reorganized to the Electronics Business Group in
September 1999. With "beyond trading" as its slogan, we are presently
implementing a change in business values. This group will pursue todevelop both a Coordination function to supply of materials, parts andsystems, to support for customers seeking partners for collaboration and a
Creation function to add, create, and offer valuable new services and goods
throughout the group.
★The business areas of this group are: semiconductor wafer processing, semiconductor
assembly processing, display components, communications devices and other electronic
devices. This group is also involved in developing high speed communication devices andhigh density storage devices, future generation micro-assembly techniques, test
equipment for industrial use, LSI package design and CAD software.

Health Care Business Group
The Beauty Care Products Division, which sells cosmetics and health foods to individuals
door to door and the Medical Care Products Division, which sells medical devices andmedical information systems to medical institutions were integrated in April 1999. The
Health Care Business Group primarily sells unique items as well as providing health careservices and systems. This group's objective is to provide total healthcare systems.
★Beauty Care Products Division : it has a sales force of 40,000 people and sells cosmetics
and health foods to individuals.

★Medical Care Products Division : it sells infectious disease related devices and medical
information systems to medical institutions, such as hospitals and commercial
laboratories. It also sells reagents for research to universities and laboratories, antigens
for diagnostics reagents, antibodies, enzymes, etc. to diagnostic reagent manufacturers
and various monitoring devices and systems to nuclear energy research institutions.

15

9

Net sales (￥million)

Chemicals Business Group

250,000

244,068

249,977

200,000

In the domestic market, sales of functional products for recording materials grewsteadily, and sales for the product group that includes coating materials, plastic

150,000

additives, and dyes and pigments kept pace with last year.
Overseas sales of chemicals for electronics applications were quite strong,particularly in Thailand, as were color formers and pharmaceutical raw materials and100,000

intermediates in the European and U.S. markets.
This resulted in a 5,909 million yen increase (2.4%) in sales which were at 249,977

50,000

million yen, as compared to last year. Operating profits were 4,137 million yen.
0
1999

2000

Q.What were the trends in terms ofbusiness areas?

A.In dyes and pigments, sales decreased compared toMichiyuki Inukai
Executive Managing Director
General Manager
Chemicals 1st. Business Group

Q.What was the reason for the good results
achieved in fiscal 2000?

A.We were able to realize solid sales by focusing on
our housing and environmental businesses in thedomestic market, where sales had been sluggish.
Overall sales for chemical products increased
overseas, with the American market prospering and
the Asian markets beginning to recover for products
like plastic additives.

'Colorformers' are used as
printing materials

last year due to the continued shrinking of domestic
market. As the top dealer in the field, we plan to takea stance that will ensure large profits by streamlining
logistics, strengthening our service system* 1 andincreasing our position in the industry.
In the field of imaging and recording materials,
we maintained the world's top share for our feature
product, color formers, and recognizing the need tofocus on the ever-expanding electronics market, we
also entered the recording media material field. We
have begun offering such products as IC cards andoptical media, and plan on developing these into abusiness division.
In the coating materials field, we are utilizing our
experience and technological strength to boost ourshare as a materials supplier in the coating materials
and ink industries by working to further deepen ourmarket presence.
In the performance chemicals field, we will
expand sales of materials like monomers, plastic
additives and urethane raw materials in Japan andAsia while working to increase our business with
important trading partners.
In the field of organic fine chemicals, we put
several new pharmaceutical intermediates on themarket during this fiscal year, which contributed toincreased sales. We have established a system
within this division that allows us to offer a full rangeof pharmaceutical products — from raw materials,
intermediates, bulk and pharmaceutical formulations— all the way up to the final products.
In the specialty chemicals field, with fermentation
and biotech-related products, natural products, andsurfactants as a base, we plan to pioneer the
opening of a wide range of markets, beginning withfoodstuffs and bio-related products. In the future, weshould be able to cultivate new fields like oil
additives, cosmetics, and chemicals for use in the

10Review of Operations

market from the standpoint of equipment anddevices.

electronics industry.
In the agricultural and ecological fields, weclarified functions through structural reorganization.
Sales for all agricultural chemicals and ecologicalmaterials were placed under the control of Nagase
Agritech K.K. in mid-March 2000. We will continue
the sales of intermediate for agricultural chemicals
and active ingredients. We also plan to transfer our
farm equipment business to our affiliated sales
companies as part of our streamlining operation for
the entire group.

Q.What kind of prospects do you foresee forthe fiscal period beginning in April 2000
and what kind of policies are you planningto implement?

A. Our sales goal is 253 billion yen (a 1.2% increase

Q.What are the objectives of the planned
Electronics Chemicals Division?

A. We integrated all of our businesses that have been
separately focused on the electronics market with theestablishment of a new division on April 1, 2000. This
new division will allow us to stay close to the market
and to gather, dispatch, and coordinate information
about the latest trends in the industry. The main
products include cleaning solvents for metal surface
processing, polishing materials, photo-resist
intermediates, and semiconductor chemicals. We will
also develop an upstream strategy for raw materials
aimed at the electronics market. We also plan toprovide total customer support in cooperation with
our Electronics Business Group and to approach theover last year). Price decreases in naphtha are
expected from the middle of the next period as aresult of increased oil production by OPEC. This willbring a halt to the rising prices of chemical products.
In addition, it has been forecast that the market willcall for a price reduction. We expect domestic sales
to be even or slightly greater than last year, andoverseas sales to remain solid.
In the next period, while pursuing results fromorganizational restructuring, we will make efforts tofurther strengthen our core businesses and take on
new business challenges. We will also strengthen
consolidated management and development ofoverseas business, and increase their portions of
total sales. In keeping with our company's overall
strategy, growth in the electronics and health carerelated fields is projected.
a concrete action, we integrated four affiliate dyestuff*1: Assales companies on April 1, 2000 and set up Nagase
Colors & Chemicals Co., Ltd. In order to establish a firm,
trusting relationship with our customers and suppliers,
it is necessary that we take the lead in reforming theindustry's structure so as to maintain the market's current
scale.

Takeshi Iwai
Managing Director
General Manager
Chemicals 2nd. Business Group11

Net sales (￥million)

Plastics Business Group

200,000

199,189

192,711150,000

Overseas sales of engineering plastics for office automation equipment andhome electronics increased despite the strong yen thanks to the partial
economic recovery in Asia and the shift of production from Japan to Asia. Sales

100,000

of raw materials and molds for automobiles and electronics parts in Europe andthe U.S. also increased and exceeded last year's levels.
Domestic sales were generally down as compared to last year due to a

50,000decrease in the number of automobiles produced, the accelerated shift inproduction to other Asian countries and a slump in the cable industry, althoughsales of PET resin and our subsidiaries' products (food containers, trays forelectronics parts and conduits for optical cable installations) held firm.

0
1999

2000

Sales were 192,711 million yen, a decrease of 6,478 million yen, down 3.3%
from last year. Operating profits were 1,800 million yen.

Q.What do you see for fiscal 2000?
A. Although sales failed to increase in the Japanesemarket, those of our overseas subsidiaries showedstrong increases and contributed significantly to our
results. In Asia, Taiwan was the biggest contributor,
followed by the Southern China region andSingapore with favorable conditions predicted tocontinue in Taiwan and Singapore. Thailand is
rapidly recovering from its economic slump. We
expect to see more growth in the Southern China
region and Thailand and plan to concentrate ourresources in these areas.

Q.What kind of development are you
planning outside of Asia?

A. In North America and Europe, we are developing ourbusiness by primarily focusing on customers in theautomotive market. In Canada, we have a subsidiarythat manufactures molds for automotive components.

We also have another subsidiary in Mexico that
assembles electronics parts targeted at the North
American market that had remarkable sales growthlast year.

Q.Didn't Nagase's original "Pluswood" draw
quite a bit of attention?

A. In the past we had focused on housing materials,
however we switched our marketing efforts to"Pluswood," a new material we developed in-house.
It has the potential for rapid sales growth because it
does not contain vinyl chloride, and thus will notaffect the environment. It is made from recycledmaterials. This product has been written about
several times in newspapers and is attracting a lot of
attention in the marketplace.

Products made from molds made at our company.

Canada Mold Technology Inc.
Location: Ontario, Canada
Capital: C＄ 5,000,000(Nagase Group's ratio of shares: 53%)
Design and manufacture of molds for the automobile industry.

12

Review of Operations
Review of Operations

Q.What is your strategy for maintaining
top market position?

A. We believe the most important point is to meet thecustomer's diversified and complex requirements
through total commitment to the customer. In order tobetter serve our customers, we have strengthened
partnerships with leading manufacturers in the fields
of home electronics, office automation equipment
and automobiles that make up our primary clientbase. We also are working to strengthen andmaintain our position through the use of our "fabless"(without fab) manufacturing worldwide and by using
methods of production and supply that are tailored toour customers.
Our software and auto engineering businesses,
which were established two-and-a-half years ago,
have grown remarkably and we have high hopes forthem as new business models. Our auto engineeringbusiness pays strict attention to the customer's
requirements and offers everything from design andmold production to the supply of auto components. In
the auto industry, we are able to offer designs tomeet the exact requirements of each individual
customer. Our subsidiary company in Canada
provides molds that match special designs. In view of
the advantages of shorter lead times, cost andquality, we are planning to use our overseas
production network to search out an additional
production site.

Shinichi KokameVice President
General Manager
Plastics Business Group

Q.What is the outlook for fiscal 2001?
A. Our sales goal is 200 billion yen, (a 3.8% increaseover last year). While we cannot expect a complete
recovery for domestic sales, we plan to increase
sales by concentrating on our program of "totalcommitment" to our priority customers. We also
expect an increase in revenue with the start of salesof "Pluswood" which is a profit-generating product.
In addition to an increase in the volume ofoverseas sales we foresee a slight increase inreturns due to the strengthening of the yen.

PLUSWOOD
Timber from trimming operations and mills ends is put to effective
use by making it into a powder and mixing it with halogen-freeresins to get plastic compounds. This has resulted in a new
construction material that is environmentally friendly and that canbe recycled so that formalins or dioxins are not emitted.

13

Net sales (￥million)

Electronics Business Group

120,000
109,770
104,455
100,000

Boosted by a worldwide recovery in the demand for personal computers and related

80,000products, sales of materials and devices related to LCDs increased by 53.9% over lastyear, as did sales of raw materials and products for semiconductors, which increased by

60,00030.4%. Chemicals and equipment used in the production processes of semiconductors
and LCDs also grew by 36.2% as compared to the prior year due to the expansion of

40,000production and investment in new equipment in Taiwan. Sales of recording media,
especially aluminum substrate for hard disks, dropped off significantly due to a shift to

20,000high-density storage and a decline in market price.
As a result, sales were 109,770 million yen, an increase of 5,315 million yen (5.1%)

01999

over last year. Operating profits were 1,783 million yen.

2000

Q.What was the reason for the good results? Q.What is the strategy of the business group?
A. In accordance with our theme "beyond trading," we will
A. Of course, the worldwide increase in IT relatedindustries with corresponding recovery in the demandfor PCs and brisk increase in portable phones helped
form the background for the favorable results this fiscal
period. Although we reorganized from September ofthis fiscal year, we have a long history of participation in
the electronics industry, and the strength of our position
has begun to show.
Our group supplies materials, parts, partiallyfinished goods, devices, and equipment to supply
materials and provides maintenance and service as
well. We believe we are in a superior position to assist
customers in that we have the ability to understandthe technical requirements of our customers due toour strong technological background. We also have awell-trained sales force with a wealth of experience thatis capable of providing the optimal model, as well as
experience with several investments related to
production that have paid off.

Q.What are the geographical areas andfields in which you can expect large sales
increases in the coming middle term?

A. As the shift in production of basic parts for large-sized
LCDs from Japan and the U.S. to Asia continues due toa drop in the cost of PCs, growth in exports to Asia will
also continue.
Among various electronics products, materials anddevices related to LCDs, assembly processing materials
for semiconductors, precision abrasives for electronics
parts, etc. are areas in which growth is expected.
Our company has a base for processing the materials
and production of LCDs in Shenzhen China, and thisfield is one in which we will not only be handling exports,
but plan on increasing both production and supply as
well.

generate a profit by pursuing both coordination(supply of materials, parts and systems, support forcustomers seeking partners for collaboration) andcreation (add, create, and offer valuable new services
and goods throughout the group). The creation aspect
will be enhanced through the use of our global businessnetworks. In the electronics industry, because of theextremely broad range of product development and shortlife cycle of products, it is difficult to supply materials
and parts within the group alone. Therefore, our groupplans to aggressively promote outside tie-ups in orderto provide enhanced services.

Q.In what areas do you plan to proceed withbusiness tie-ups?

A. We have accumulated a fair amount of experience inthe areas of sales and marketing and have areasonable amount of knowledge in these areas so
we will probably seek out resources in newtechnologies and production fields. We will have toaggressively approach companies that possess
these resources, be they venture companies or giant
corporations in Japan or abroad.
Examples:• Media Devices Design Center
Business areas include design and sales support for CAD
software used in U.S., and domestic and overseas designbusiness networks (E-commerce).
• Idea Systems Co., Ltd.
Manufacturing of semiconductor packages and IC cards.
• Gigatec, Inc.
Manufacturing of high-frequency parts for wirelesscommunications.
• α Bumping Technology Co., Ltd.
Semiconductor wafer plating based on the introduction oftechnology from Germany.

14

Review of Operations

Q.Can you tell us about your plans to aggressively
enter the environmental conservation field?

A. In manufacturing, the electronics industry is the mostsensitive about this subject. We want to do morethan just respond to demands for non-halogen andlead-free products, we want to turn these intobusinesses. We are currently looking for businesses
in relation to securing ISO14001 certification and in
the implementation of recycling laws. In conjunction
with this, our company already has a unique
Chemical Management System (patented), that has
performed well.
This system serves to help protect theenvironment by reducing the amount of chemicals
used in the production processes for LCDs andsemiconductors. It keeps chemical concentrations
and performance constant through the use of avariety of sensors, allowing chemicals to be added
only in the amounts required, as opposed to thecomplete refilling which had been done in the past.
These features make it the perfect system for
maintaining the supply of chemicals during all
production processes. As a result, the amount ofchemicals used can be reduced dramatically. Thissystem is being used by most TFT-LCD makers inJapan and Asia, and our group has maintenancesystems for the equipment in Japan, Korea andTaiwan. We have great expectations for this productin the future. We are also aggressively working on
the development of energy reduction and clean
purification systems.

Reiji Nagase
Managing Director
General Manager
Electronics Business GroupWe are planning to expand in the area of
production both within and outside our group, as well as
in the supply of materials used in the production of
LCDs. We are also looking at expanding in thetelecommunications field. Expansion is also being
planned to meet the rapid increase in portablephones that are coming out with higher transmission
speeds, larger memories, etc.

Q.What is the policy for the March 2001 period?
A. The electronics industry is growing rapidly and we

Q.What are some other business targets?
A. We are considering a variety of target areas in theelectronics field, of which semiconductor assembly
processing is just an example. Semiconductors havecome to be used in a wide variety of applications besides
PCs and their technology is being advanced at a fast
pace to keep up with the diverse demands from
customers. We plan to increase our shares in the supplyof various materials, components, and devices aimed at
the next generation of semiconductors.

DDS-32S

DDS-21S

want to make sure we avail ourselves of all possible
business opportunities.
Our sales goal is 113.5 billion yen (a 3.4%
increase over last year). Strong activity has been
predicted for the semiconductor and LCDs
industries' markets. What with the increase in LCDs
manufacturers, particularly in Asia, it is safe to saythat there will be a correspondingly large increase in
the chemicals and equipment used to manufacture
and process their LCDs.
We plan to accurately grasp the requirements of
the users and suppliers that make up the core of theelectronics business market and to move quickly tofill them. Once we have done that, the focus will turnto how much we can expand on the possibilities ofthis business opportunity. With this in mind, we are
directing our efforts into establishing solid humanresources, streamlining our organization, andstrengthening business alliances.

CMS (chemical management system forsemiconductos and LCDs production)
Large volumes of etching and remover liquids
are necessary in the production processes ofsemiconductors and LCDs, however, throughthe use of the CMS system (device forrecovering developer liquids) we developed,
about 85% of the liquid reagents can be reused.

15

Net sales (￥million)

Health Care Business Group

15,51015,83615,000

Sales of the Medical Care Products Division increased by 12.3% over last year,
thanks to the strong performance of instruments related to infectious

10,000diseases, reagents, and products related to radiation. In the Beauty Care
Products Division, "Conditioning Lotion," a toiletry water for use in summer,and "Mifore," a new skin-care series, were put on the market, along with
"Royal Jelly BM700" and "Bellmash 100," two new health drinks. However,

5,000

sales ended up down 3.9% from the previous period due to a drop in personal
consumption and a shift in consumer needs from premium to low-cost goods.
Total sales were 15,836 million yen, a 326 million yen increase (2.1%) over

Q.The Beauty Care Products Division had

established in April 1999, has just completed its firstyear. Due to the merging of two divisions withdifferent markets and sales routes, the beneficial
effects of integration have not yet surfaced.
In the Beauty Care Products Division, we havethe power to develop preventive-medicine products
for the health-food field. Our theme is to boost thepower of our distribution channels. We plan on
utilizing a multi-faceted approach, taking advantageof the power of our 40,000-person sales network as
a base to develop business with salons.
We especially believe that the health-food field willgrow as a result of the aging of society and theincrease of life-style related diseases.

2000

Q.Can you tell us about your measuresin response to termination of the contract
with Ortho Clinical Diagnostics K.K. for salesof automated biochemistry analyzers?

a slow year. What measures will you be
implementing to rectify this?

A. The Health Care Business Group, which was01999

last year. Operating profits were 428 million yen.

A.Trade rights from Ortho Clinical Diagnostics K.K.
expired at the end of March. Though this will mean adecrease in sales of 2 billion yen from the 7 billion
yen Medical Care Products Division, we are
optimistic. We have been preparing for four years inanticipation of this development, and have a lot ofbusiness seeds planted in the medical field.

Q. What is the division doing to bring about
beneficial effects from integration?

A. This fiscal year, we set up a Business Planning
Office. Its purpose is to figure out how we should
approach the health-care market. At the same time,
it is undertaking projects centered around several
specific themes, and is also enlisting participationfrom throughout the group to take on some newchallenges. We are also planning a new Internet
business. This is still in the test stage, but it willconnect both product divisions as part of ourapproach to "preventive medicine."

Q. You have started selling over the Internet.
How do you plan to proceed in this area?

A. This fiscal period was the trial stage. As soon as our

Kazunori AndoManaging Director
General Manager
Health Care Business Group"diet foods for those who enjoy alcohol" went on themarket in January 2000 and were reported on in
popular magazines, we received a rush of orders
through our Web site. We consider advertising inother media as well as the Internet to be important.
In our Beauty Care Products Division,
we originally sold health foods targeted at women. In
the future, using the Internet and other sales routes,
we also plan to sell health foods for men. In order to16

Review of Operations

facilitate development of new products for multiple
sales routes, we gathered a number of talented
individuals and set up a Product ResearchLaboratory in our business group in April of this fiscal
year.

Q.Do you have any concrete themes forresearch and development?

A. Our research theme is anti-aging for the body andskin. For instance, we are focusing on the plantessence of rosemary, an herb that plays a crucialrole in removing active oxygen that occurs in the
aging process. We have already verified that it has apositive effect on preventing the aging of the skin,and are working on turning it into a marketableproduct. With research like this, we will be able toachieve effects similar to those achieved in the
medical field. For instance, we are researchingmaterials that can partially control the progress ofcertain types of cancers, and have applied forpatents for many of these.

Q. What is the outlook for the
March 2001 period?

A. Our sales goal is 13.5 billion yen (a 14.7% decrease
from last year). We are planning to increase sales

through the introduction of a new makeup series, "Orneige" from our Beauty
Care Products Division and our "BM
Royal" health food product, which has
positive effects on the autonomic
nervous and immune systems.
We expect a sales decrease in the
Medical Care Products Division,
however, as a result of the transfer of
trade rights of the biochemistry analyzers.
New products from the Medical Care Products
Division will include our company's own patientreporting system; our infectious disease control
system, designed to prevent the spread of infections
in hospitals and suitable for use with antibiotics; animage entry system, developed jointly with Toyo Ink
Mfg. Co., Ltd. which streamlines commercial
laboratories' work; and the UV-C Monitor, anenvironmental product that uses UV diamond
sensors. We will also continue to concentrate on test
reagents for research and raw materials fordiagnostic reagents and plan to release a reagent
and system related to genes for the research market.

17

Geographic Area Segment InformationJAPAN

NORTH AMERICA

Japan's economy had yet to recover, however, the influence of
the increase in the number of consolidated subsidiaries
coupled with the growth of exports to Asian countries resulted
in an increase in sales of 8,850 million yen (+1.9%) over theprior fiscal year with sales at 480,248 million yen.
The unification of accounting procedures between theparent and subsidiary companies and the changes in the listingof the reserve for employees' retirement for our domestic
consolidated subsidiaries that were undertaken in order tostrengthen the financial health of the company resulted in adecrease in income of 227 million yen (-4.2%) as compared tothe prior fiscal year on operating income of 5,220 million yen.

Delays in the development of new businesses caused a4,539 million yen reduction in sales (-20.1%) ascompared to the prior consolidated fiscal accounting
period on sales of 18,087 million yen and operating
income was also down 220 million yen (-67.1%) ascompared to the prior consolidated fiscal accounting
period with operating income at 108 million yen.

Sales to Customers (￥million)

Sales to Customers (￥million)

2000

480,248

2000

1999

471,398

1999

0

100,000

200,000

300,000

400,000

500,000

18,087
22,6260

5,000

10,00015,00020,00025,000ASIAOTHERS

The Asian currency crises were resolved and recovery could beseen throughout the Asian countries with sales in eachcountry's currency showing steady increases overall; however,the strong yen resulted in a reduction in sales of 893 million
yen (-1.4%) as compared to the prior consolidated fiscal
accounting period on sales of 61,298 million yen when the
results were converted into yen. Operating income showed an
829 million yen (+45.2%) increase over the prior consolidated
fiscal accounting period with the effects of reductions in sales
and general administrative expenses resulting in operating
income of 2,663 million yen.

Sales reached 8,661 million yen for a 1,654 million yen(23.6%) increase over the prior consolidated fiscal
accounting period, and although operating income was
12 million yen in the red, the amount of red ink had been
reduced by 184 million yen as compared to the priorconsolidated fiscal accounting period.

Sales to Customers (￥million)

Sales to Customers (￥million)

2000

61,298

2000

1999

62,191

1999

0

10,00020,00030,00040,00050,00060,00070,000

8,661
7,007
0

2,000

4,000

6,000

8,000

10,000Consolidated Subsidiaries (Overseas)

Nagase (Europe) Ltd.
Nagase (Europa) GmbH

Canada Mold Technology Inc.
Nagase America Corp.

Nagase (Hong Kong) Ltd.
Nagase (Thailand) Co.,Ltd.
Nagase (Malaysia) Sdn Bhd.

Nagase California Corp.
Nagase (Taiwan) Co.,Ltd.
Nagase Wahlee Plastics Corp.

Nagase Singapore (Pte) Ltd.

Sofix Corp.

18［Performance of subsidiaries］
Hoei Sangyo Co., Ltd.

Nagase Storage & Distribution Co., Ltd.

Nagase Wahlee Plastics Corp.

Location: Chuou-ku, Tokyo, Japan
Capital: ¥ 250,000,000
Business lines: Sale of various recording
media for information and image, and device
and system for recording, compression andprocessing of information & image

Location: Amagasaki city, Hyogo, Japan
Capital: ¥401,000,000
Business lines: Warehousing anddistribution

Location: Taipei, Taiwan
Capital: NT$ 52,000,000
Business lines: Trading

Totaku Industries., Inc.

Nagase America Corp.

Location: Takatsuki city, Osaka, Japan
Capital: ¥270,000,000
Business lines: Manufacturing and selling ofplastic-based products

Location: New York, U.S.A.
Capital: US$ 1,000,000
Business lines: Import & export andintermediary trade and marketingdevelopment and data gathering

Setsunan Kasei Co., Ltd.

Nagase (Hong Kong) Ltd.

Location: Higashiosaka city, Osaka, Japan
Capital: ¥105,000,000
Business lines: Coloration and improvementof plastic

Location: Hong Kong, China.
Capital: HK$ 3,120,000
Business lines: Import & export andintermediary trade and marketingdevelopment and data gathering

Nagase (Thailand) Co., Ltd.
Location: Bangkok, Thailand
Capital: BAHT 12,000,000
Business lines: Import & export andintermediary trade and marketingdevelopment and data gathering

Kotobuki industries Co., Ltd.

Nagase Plastics Co., Ltd.

Nagase (Europe) Ltd.

Location: Nishi-ku, Osaka city, Japan
Capital: ¥ 96,600,000
Business lines: Sales of plastic based
products

Location: London, U.K.
Capital: ￡ 300,000
Business lines: Import & export andintermediary trade and marketingdevelopment and data gathering

Location: Kanuma city, Tochigi, Japan
Capital: ￥ 20,000,000
Business lines: Molding and Improvementof plastic-based products

Nagase Barrel Finishing Systems Co., Ltd.
Location: Nishi-ku, Osaka city, Japan
Capital: ¥ 50,000,000
Business lines: Sales of abrasive and it's
relating machines

Delta Fine Chemical Co., Ltd.
Location: Chiyoda-ku, Tokyo, Japan
Capital: ¥ 30,000,000
Business lines: Sales of coating material,
dyestuff and chemicals

Nagase Singapore (Pte) Ltd.

Nagase (Malaysia) Sdn. Bhd.

Location: Singapore
Capital: S$ 2,700,000
Business lines: Import & export andintermediary trade and marketingdevelopment and data gathering

Location: Kuala Lumpur, Malaysia
Capital: M$ 1,500,000
Business lines: Import & export andintermediary trade and marketingdevelopment and data gathering

Nagase Tokai Co., Ltd.

Nagase Biochemicals Sales Co., Ltd.

Location: Hamamatsu city, Shizuoka, Japan
Capital: ￥ 30,000,000
Business lines: Sales of dyestuff andindustrial chemicals

Location: Nishi-ku, Osaka city, Japan
Capital: ￥ 30,000,000
Business lines: Sales of enzyme preparation

Nagase Elex Co., Ltd.

Nagase Machinery Sales Co., Ltd.

Location: Chuou-ku, Tokyo, Japan
Capital: ￥ 20,000,000
Business lines: Sales of plastic-based
products and plastic raw material

Location: Minami-ku, Kyoto city, Japan
Capital: ￥ 48,000,000
Business lines: Sales of devices and repair
for dairy industrial machines

Nagase Biochemicals Ltd.

Nagase California Corp.

Location: Nishi-ku, Osaka city, Japan
Capital: ￥ 490,000,000
Business lines: Manufacturing of enzyme
preparation, food additives and feed
additives.

Location: California, U.S.A.
Capital: US$ 300,000
Business lines: Import & export andintermediary trade and marketingdevelopment and data gathering

Teikoku Chemical Industries Co., Ltd.

Nagase Chemicals Ltd.

Canada Mold Technology Inc.

Location: Nishi-ku, Osaka city, Japan
Capital: ￥ 266,000,000
Business lines: Manufacturing of generalindustrial chemicals

Location: Ontario, Canada
Capital: C$ 5,000,000
Business lines: Design and manufacture ofmolds for the automobile industry

Nagase (Taiwan) Co., Ltd.

Nagase Electronic Equipment Service Co., Ltd.
Location: Chuou-ku, Tokyo, Japan
Capital: ¥ 45,000,000
Business lines: Sales and maintenance ofmachines for manufacturing
semiconductor, etc

Shizuoka Nagase Co., Ltd.
Location: Fuji city, Shizuoka, Japan
Capital: ¥ 30,000,000
Business lines: Sales of dyestuff andindustrial chemicals

Nagase (Europa)
GmbH..

Location: Dusseldorf, Germany
Capital: DM 1,200,000
Business lines: Import & export andintermediary trade and marketingdevelopment and data gathering
Location: Nishi-ku, Osaka city, Japan
Capital: ¥ 200,000,000
Business lines: Manufacturing and selling ofpharmaceuticals, cosmetics and industrial
chemicals

Location: Taipei, Taiwan
Capital: NT$ 31,000,000
Business lines: Import & export andintermediary trade and marketingdevelopment and data gathering［Performance of affiliates］
Nagase-CIBA Ltd.

Honshu Rheem Co., Ltd.

Nippon GATX Co., Ltd.

Location: Nishi-ku, Osaka city, Japan
Capital: ¥ 730,000,000
Business lines: Sales and manufacturing ofthermosetting or alteration resin andhardening agent

Location: Chuou-ku, Tokyo, Japan
Capital: ¥ 100,000,000
Business lines: Sales and manufacturing offiber drum

Location: Chiyoda-ku, Tokyo, Japan
Capital: ¥ 404,000,000
Business lines: Warehousing, cargotransportation

Kyoraku Co., Ltd.

Nagase Landauer Ltd.

Thermo Co., Ltd.

Location: Chuou-ku, Osaka city, Japan
Capital: ¥ 200,000,000
Business lines: Sales and manufacturing ofplastic-based products

Location: Chuou-ku, Tokyo, Japan
Capital: ¥ 88,000,000
Business lines: Radiation measurement
service

Location: Ota-ku, Tokyo, Japan
Capital: ¥ 200,000,000
Business lines: Sales and manufacturing ofplastic-based products

Sofix Corp.

Nisshin Automobile Co., Ltd.

Location: Tennessee, U.S.A.
Capital: US$ 20,000,000
Business lines: Manufacturing of pressuresensitive and thermo-sensitive dyestuff

Location: Nishi-ku, Osaka city, Japan
Capital: ¥ 100,000,000
Business lines: Sales of devices forautomobile, lease of fixed property

19Special Edition:

The Technology and Intelligence Oriented Company. Strengthening the group's research and development, production
Integration of Our Chemical Manufacturing Subsidiaries

Outline of production subsidiary integration

D
⑪

⑤

B

⑫
①

A

④＋⑥＋⑨

C

⑦

⑩
④＋⑧

②
③

⑬

E
⑭

A) Teikoku Chemical Industries Co., Ltd.
Pharmaceuticals① Pharmaceutical intermediates, active bulk ingredients② Medical drugs, pharmaceutical formulations③ Health foods, cosmetics
Chemicals④ Functional polymers⑤ Chelating agents⑥ Liquid crystal, near infrared absorption agents, etc.

C) Nagase Electronic Chemicals, Ltd⑩ Electronic materials (remover, photoresists, etc.)
D) Nagase Biochemicals, Ltd.
⑪ Enzymes⑫ Fermentation products
E) Nagase ChemteX, Ltd. (formerly Nagase-CIBA, Ltd.)B) Nagase Chemicals, Ltd.
⑦ Epichlorhydrin derivatives⑧ Biocides―active ingredients, mixtures and formulations⑨ Basic and intermediate materials for electronic materials(developing agents)⑬ Epoxy resin compounds (for electronics/heavy electricalequipment industries), liquid sealing materials forsemiconductors.
⑭ Epoxy resin compounds (for construction / industrial
painting applications), adhesives, production tools

The former joint venture Nagase-CIBA, Ltd. (Nagase investment share-ratio of 50%) became 100% Nagase-owned inJune 2000 and was renamed Nagase ChemteX, Ltd.

Aiming to achieve selection andconcentration within the enterprise
The major chemical manufacturing subsidiaries in the
Nagase Group as of March 2000 were: (A) Teikoku
Chemical Industries Co., Ltd. (TKS); (B) Nagase
Chemicals, Ltd. (NKK); (C) Nagase Electronic
Chemicals, Ltd. (NDK); (D)Nagase Biochemicals, Ltd.
(NBL); and (E) Nagase ChemteX, Ltd. (NCX).
Each of these companies has had a major role inthe manufacturing functions of the Nagase Group andeach has its own separate history and business field.
Although each company's business activities areimportant, from the standpoint of the group as a whole,these activities are spread over too wide a range.
Thus, in order to use our limited personnel andresources effectively, selection and concentration of our
subsidiaries' activities must be implemented.
This is because our company's policies are: toconcentrate resources in the most important strategic
business activities to meet the production functions of
the entire group; to avoid redundancy and streamline
operations; to increase the power of the enterprisethrough integration; to aggressively promote
investment in production facilities, research anddevelopment and technology in order to achieve
production and sales of products that will allow us tocompete in markets around the world as a manufacturer.
In order to achieve the above, NKK and NDK weremerged on April 1, 2000, under the name of NKK. In
addition, preparations to integrate TKS, NBL NCX andthe new NKK in fiscal 2002 are underway.
In conjunction with the integration of these companies,
cooperation with our company's R&D Center will bestrengthened.

20

that Turns Wisdom into Businessand processing functions

Advantages of Integrationa. Strengthening of the health care andelectronics areas
Integrating the manufacturing subsidiaries will allow
the group's resources to be focused on the healthcare and electronics areas, which are considered tobe the most important strategically.
In the health care area, a new enterprise will be
developed through the merging of the enzyme
production business (at present, a business activityof NBL) and organic synthesis (currently a businessactivity of TKS). The core of this business will be
pharmaceutical intermediates production, which isindispensable in the launching and supply of new
drugs. The technology that will make this businessarea come to life is chirotechnology, which the R&D
Center has developed to selectively produce opticalcompounds. In addition, there are great expectations
for this in the electronics field.
Following integration, it will be possible for asingle company to offer all of the products used in
production of semiconductors, from wafer processing
to assembly processing. This change should allow for
faster support in electronics industry where rapidchange is the norm.
The integrated company will develop newtechnologies and supply products to thepharmaceuticals and electronics markets.

Fukuchiyama Factories(NBL,TKS)

Laboratory(NBL)

b. Increasing reinvestment in effective enterprises
Advantages from integration will arise with regard toinvestment for an effective enterprise. This isbecause the ordinary profits of the five companies
listed in the table above amounted to several
hundred million yen each, but the high cost required
to put competitive chemicals on the market limited
the amount of profit that could be reinvested.
However, after integration, since operations will be
combined resulting in greater profits, reinvestment
capability will increase.

Harima Factories(NKK,TKS,NCX)

Clean Room (NKK)21

Chirotechnology: the technology to produce optically active compounds
Serving customers in the electronics and pharmaceuticalindustries using technologies developed at the R&D Center

Nagase R&D Center

The place of the R&D Center in the group
Ten years have passed since the establishment of the
R&D Center in 1990. During this period, thedevelopment of pharmaceutical intermediate processes
using microorganisms and enzymes and thedevelopment of production processes for fine chemicals
have taken place in keeping with Nagase's policy thatstates " the Center will become Nagase's weapon for the
21st century by providing the research and development
needed by Nagase." In particular, the emphasis of R&D
into "technologies that will transform existing materials
into products with large amounts of added value" hasgotten numerous patents in the field of various kinds ofprocesses for fine chemicals through the trading
company, Nagase, and has earned the esteem ofcustomers for these products in various industries
As mentioned earlier, the integration of production
subsidiaries will strengthen our organic synthesis
technology and biotechnology (enzymes), and with thecooperation of the R&D Center, production will be
unified, not only in the development and evaluation ofpharmaceutical intermediates and fine chemicals forelectronics industries, but all the way to production, in
keeping with customers requests. The chirotechnology
developed at the R&D Center provides the essential
technology needed to accomplish this.

The possibilities of "chirotechnology"
Chirotechnology is a technology to produce optically
active compounds that overlaps the fields of bothorganic synthesis and biotechnology (see column for
details). At present it is drawing attention around theworld as being indispensable for the production ofpharmaceutical intermediates and is being looked at asa technology with potential in the development ofelectronic materials. For example, products preparedfrom optically active compounds are beginning toappear as dopants for liquid crystals.
As a company that specializes in chemicals trading,Nagase has a wealth of experience in the productionof enzymes and their applications. This led to researchin "chirotechnology" in the 1980s when the R&D
Center was still in its planning stages and thepharmaceutical department had begun cooperative
development regarding the pharmaceutical andpharmaceutical intermediates business with overseas
venture companies. At the time, the technology related
to the cooperative development still in its infancy;
however, since then it has grown and the level ofresearch is now quite advanced, having contributed tothe creation of various products on the way.
The R&D Center has been researching optically
active compounds since its inception and has
achievements in all three basic areas (opticalresolution, asymmetric synthesis, and thechemoenzymatic method). Nagase is a trading
company which has research and development
capabilities that allow it to understand the customer's
requirements in both the pharmaceutical andelectronics industries, and which allow it to meet the
production processing requirements using any one of
the three methods mentioned earlier that best suits thesituation. Environmental problems are an example ofthis in particular (even in the case of the threemethods), and research in the area of thechemoenzymatic method, which has attracted a lot of
attention and is expected to become the core methodin the future, is one of the leading topics within theacademic community. Hereafter, we will increase theuse of our wealth of knowledge (which is our strength)
regarding chemoenzymatic method to propose
processes that will provide the greatest advantages toour customers. The applied usage field for our
optically active compounds is attracting interest
worldwide and is one of the major fields for the
Nagase Group.

Example) Chemoenzymatic production of
optically active 3-quinuclidinol
Announced at the 3rd Japanese Symposium on theChemistry of Biocatalysis in January 2000(R)-3-Quinuclidinol is a versatile optically active
compound that is being as a pharmaceutical intermediate,
for example, for a drug used for the treatment of urinary
incontinence. At present, industrial production on a 100-kg
scale is being carried out using the chemoenzymatic
production method developed at Nagase's R&D Center and
it is being supplied to a pharmaceutical company which isusing it for clinical trials. When this new drug is marketed in
the near future, production of (R)-3-Quinuclidinol in ton
quantities is expected. The results of this researchappeared as the top article in the 43rd issue of the"Enzyme Engineering News" published by the JapaneseSociety of Enzyme Engineering (one of the organizations
that is promoting the development of Japan's bioindustries).

22

Special Edition:
The Technology and Intelligence Oriented Company that Turns Wisdom into Business

I. Strengthening the group's research and development, production and processing functions

Nagase&Co.,Ltd
Chemicals
Business Group

Plastics
Business Group

Customers

NAGASE
R&D CENTER

Manufacturing Partners

Electronics
Business Group

Health Care
Business Group

Manufactures ofNagase GroupR&D Center ---- Major Themes
Research Team

Main Technology

Theme Outline

1st Research Team

Organic synthesis

2nd Research Team

Biotechnology(microorganisms, enzymology)

R&D directed towards the manufacturing of chiral compounds(optically active compounds) including API's, pharmaceuticalintermediates, dopants for liquid crystals etc.

3rd Research Team
4th Research Team

Cell Biology, Cosmetic Biology,
Free Radical Biology
Instrumental analysis, Formulation
Polymer science
Analysis

Development of active ingredients for health foods,
functional foods cosmetics, etc.
Development of functional coating materials
Development of plastics additives
Analysis of imported API's in accordance with GMPI standards

Under a broad interpretation, optically active materials may
be referred to as enantiomers or as chiral compounds.
When an organic molecule cannot be superimposed on its
mirror image, it is said to be chiral and in this case, eachmolecule is called an enantiomer. Enantiomers have thecapability to rotate the plane of polarized light. For thisreason, such molecules are known as optically active
compounds. A pair of enantiomers is called a racematecollectively.
Proteins, nucleic acids, and sugars, and other common
biomacromolecules that make up life on earth, from viruses
to human beings, are built from optically active
components; l-amino acids for proteins, d-nucleotides fornucleic acids, and d-saccharide for sugars (l- and d- areprefixes to discriminate enantiomers).
With the exception of a few rare occurrences,
the amino acids found in nature are all made up of l-forms,
as are those in humans. The natural amino acids thatmake up proteins are all l-forms, which means that humans
can discriminate one enantiomer (a real image) fromanother (a mirror image).

Prior to the 1970s when this information was not known,
the tragic problem with the thalidomide sleeping pills
occurred. At that time, thalidomide was prescribed as aracemate, a 1:1 mixture of l- and d- forms, and it is now
believed that the strong teratogenic side effect is present in
only in the l- form of thalidomide while the desired
pharmacological activity is found in both the l- and dforms. After this tragedy, detailed investigation into opticalactivity was promoted and the FDA charged the
responsibility for evaluating the side effects andpharmacological activity of optical enantiomers andracemates. Recently, racemic drugs including antiinflammatory and psychotropic drugs were resolved into
their constituent enantiomers (optically active
components), and the single enantiomers with improved
pharamacological efficacy were submitted to the FDA as
new drugs. 70 % of the drugs approved in the past ten
years have been single enantiomers, or optically active
pharmaceuticals.

23

II. Strengthening of business expansion overseas

Yoshizo Shibata
Director
Corporate Planning Office

Promoting the creation of new markets
As a longtime exclusive distributor for major
overseas manufacturers, Nagase has a solid historyof opening new markets.
Particularly in the field of chemicals, which makeup the foundation of all industries, we have beenquick to put staff members with technical expertise in
the front lines of marketing to beat out othercompanies. We have also produced new
applications in cooperation with manufacturers andcustomers. In this manner, we managed to build up ahuman network in customer research anddevelopment and on their production sites.
This network goes beyond Japan. We had alreadyestablished our own overseas network by the timeother Japanese companies were starting overseas
expansion activities. Although we have gradually
been losing our edge in the handling of imports, weare not worried. Full utilization of our subsidiary
manufacturing companies and the capabilities of our
R&D Center, the formation of alliances with various
other companies, and our continuing efforts toprovide new products and services to meet theneeds of our customers will ensure that we maintainour leading position.

Overseas expansion strategy
The Japanese home appliance, electronics andautomotive industries have been active inestablishing overseas production bases, and ourcompany has contributed to these overseas facilities
in the areas of processing and assembly. We havealso established a supply-chain management system
and increased the cost-effectiveness of distribution.
Since most of these activities were carried out in

Asia, our company established a network ofcompanies incorporated under the laws of eachcountry in the region.
Until recently, there was a tendency for
production to be undertaken in single regions(especially in Asia); however, the trend is presently
moving toward bringing production closer to thelocation where the items will be used. In addition,
there is a demand for the capability of providing only
the required number of items, when and where they
are needed.
For example, sales by Nagase Kisho Electronics
Inc.*1, our joint-venture company in Mexico that
produces parts for TVs and PC monitors, have grownconsiderably. This was due to the fact that Nagase
Kisho was able to meet the demand for shorter
delivery times brought on by the growth of
E-commerce in the U.S. and the use of the "just-intime" system.
Companies are moving toward the use ofalliances to handle everything from the developmentof new products to their marketing, as opposed todoing everything in-house. As this trend continues toexpand around the world, we have an advantageous
position in that the global network we have built up
over the years allows us to advise our customers on
which corporate alliances would produce optimal
results. As such, we plan to propose "production
and supply solutions" that incorporate our company's
manufacturing and processing capabilities.
Kisho Electronics Inc. was a non-consolidated*1: Nagase
subsidiary in fiscal 2000.

24

Special Edition:
The Technology and Intelligence Oriented Company that Turns Wisdom into BusinessIII. Strengthening IT
The strengthening of IT is a must
At present, we are according IT and related
expenditures 1.6 billion yen per year in investment
and costs, an amount which is the equivalent of 0.3%
of our sales; however, we will be increasing this in
the future. In a trading company where people areassets, the productivity of each employee is vital. In
order to get the greatest amount of work done in alimited time, and to be able to confer with others, aswell as communicate throughout the various
departments and with other companies, it ismandatory that we strengthen our IT. We must also
surmount the many obstacles surrounding thevarious management topics regarding the use andstrengthening of IT, and we have to increase ourcompany's capabilities to expand to the point where
it exceeds that of other companies. In particular,
E-commerce will definitely have a great influence on
our company in the future, and although we still do
not have a clear idea of the concrete influence it will
exert, we are in the process of linking our companies
in order to obtain positive effects.

Present progress in E-Commerce
Last fall saw the beginning of internet sales of DVD
decoding software. While this software has alreadybeen sold to more than 30,000 members, we would
like to increase sales to 200,000 by the end of 2000.
We have also begun the trial marketing of
nutritional supplements. We have managed toestablish the minimum infrastructure needed toparticipate in E-Commerce as a result of these twotrials. In the future, we will have to set up a payment
collection system, and incorporate a reliable, lowcost distribution system in Japan using the Nagase
Group's technology.

Other concrete themes that are now
under consideration are:
1. a marketing system for home building supplies for building
contractors
2. a health management system to prevent diseases related
to lifestyles
3. marketing of plastics and chemicals in Southeast Asia
4. marketing of functional coloring materials in America
5. a supply-chain management system for dyes and pigments
6. design of molds for plastics, and the building of a production
system for thempropose that our main overseas suppliers use SCM
in every stage from production design to themarketing of imports. We are also building acommon domestic distribution and area delivery
system that can be used within our group. With
regard to overseas distribution, we established acustomer service organization in each of our
subsidiaries in ASEAN countries while filling out our
distribution capabilities and reducing costs.
Nagase Logistics Service Co., Ltd., which is
being used by the entire group for outsourcing importand export operations, has a strong, new, clientserver database system for import and export tradeand has boosted productivity through theconcentrated operation of this system. In otherareas, the EDI extranet between overseas
subsidiaries and the building of an ordering andorder reception/shipping information system,
together with the sharing of distribution information
between Japan and overseas group companies
through communications technology, has definitively
increased operations efficiency.

ｅコマースへの取り組み：決算説明の図

http://direct.nagase.co.jp/dvdirect/

Reinforcing domestic and overseas distribution
We are aiming to increase our group's
competitiveness by strengthening our distribution
capabilities and emphasizing optimization of
distribution throughout our group. As the first step,
we are setting up our database for optimal inventory
management so that it can be used within ourgroup's production companies for supply-chain
management (SCM). In addition, we are planning to

http://direct.nagase.co.jp/

http://www.nutrimedics.com/

25

Special Edition:
The Technology and Intelligence Oriented Company that Turns Wisdom into Business. Our approach to environmental protection
In May 1999, our company established an
Environmental Protection Committee, and after the"kick-off declaration" by our President in July,environmental policies were decided, anenvironmental management system configured andactivities directed toward preserving the environment
incorporated throughout our company.
Using ISO14001 as a springboard, we plan toincrease our contribution to society throughpreservation and improvement of the environment.

Research and development regarding
the environment
Masahiro Murayama
Director, and Chairman ofNagase s Environmental Protection Comittee

Policies on environmental protection
Nagase, "the technology and intelligence oriented
company," turns wisdom into business while helping
the environment. New products we develop areenvironmentally friendly and contribute to theconservation of the world's resources. Throughcreation and expansion of our "eco-business"
activities, we are working to protect the environment.
At present, we are using our strength as a
specialized chemicals trading company to provide
information on the safety of chemicals-informationthat will help lead to the achievement of zero
emissions. We also market eco-materials, equipment
and systems that will reduce the burden on theenvironment, as well as provide us withapproximately 30 billion yen in sales. Among our
specific areas of involvement are: halogen-freeresins, biodegradable plastics, fluoro-hydrocarbon
alternatives, recycling of waste materials, heavymetal-free materials, solvent collection, and energysaving equipment, support for low resourceconsumption equipment, development of newmaterials and technology to lessen the strain on theenvironment.

As a trading company we are unique in that we havean R&D Center that develops and evaluates newtechnologies and serves as the nexus for joint
research and development in cooperation with
universities.
Our cooperative research and development withregard to the environment includes an enzyme
method that uses "intelligent" yeast to produce"biofuel" from waste cooking oil; a "solation andgelation" method, which is a new technology forcoloring coatings that allows for the recycling ofcolored glass; and "bio-scouring" method using
enzymes for a cotton scouring.
Our company is approaching environmental
problems with new concepts in chemistry in ways
such as these.

Acquisition of ISO14001 certification(Certificate No. 772685)
On April 28, 2000, we received ISO14001
certification from Lloyd's Register Quality Assurance
Limited, which is authorized by the Japan
Accreditation Board for Conformity Assessment(JAB) and the United Kingdom Accreditation Service(UKAS). The certification applies to our Tokyo andOsaka headquarters, Nagoya branch, R & D Center,and Sendai, Hiroshima, Takamatsu and Fukuoka
offices.

All employees havethis card written
environmental policy.

26

Contribution to Society
Nagase Science and Technology Foundation
The Nagase Science and Technology Foundation was establishedin April 1989 in order to promote the development of scientifictechnology in the fields of biochemistry and organic chemistry.
It aims to contribute to development of the social economy throughthe support of international exchange and research anddevelopment. It has supported 191 research projects and 156
international exchange projects to date, providing funding for themin the amount of 520 million yen.
The Science and Technology Agency, which is the agency incharge, has recognized it as a special legal entity that promotes the
public interest.
2000

The support of research and development
Occupation

Name

Theme

〈Biochemistry〉
Makoto Ashiuchi

Associate Professor, Faculty of Agriculture, Kochi University

Construction of mass-production system of poly-γ-glutamate by using a novel bacterium isolated
from SENGOKUSYO, a traditional Korean fermented soybean-paste similar to Japanese MISO

Kimiyasu Isobe

Associate professor, Faculty of Agriculture, Iwate University

Studies on extracellular enzymes produced by acid- and thermotolerant fungiMichihiko Kobayashi

Professor, Institute of Applied Biochemistry,The University of Tsukuba

Analysis of nitrilase reaction mechanism

Masataka Tsuda

Professor, Institute of Genetic Ecology, Tohoku University

Mobility of microbial xenobiotic-degrading genes and its use for isolation andcharacterization of new xenobiotic-degrading genes

Hideyoshi Harashima

Professor, Department of Pharmaceuticals Graduate School, Hokkaido University

Molecular design of biofunctional molecules to control intracellular trafficking of genes
for their optimum delivery system

Tadao Fukushima

Associate professor, Department of Dental Materials, Fukuoka Dental College

Antibacterial activity of DNA/n-alkyl-L-alanine complexes

Kousaku Murata

Professor, Research Institute for Food Science, Kyoto University

Three-dimensional structure of pit-dependent macromolecule transport system in bacteria

Masaaki Morikawa

Associate Professor, Graduate School of Engineering, Osaka University

A study on the adaptation mechanisms of extremophiles to high temperature,high pressure, and hydrophobic condition〈Organic chemistry〉
Nobuharu Iwasawa

Professor, Department of Chemistry, Tokyo Institute of Technology

Efficient Method for the Construction of Carbon Frameworks Utilizing the Change ofStructure on Complex Formation

Bunsho Ohtani

Professor, Catalysis Research Center, Hokkaido University

Design of Two-dimensionally Chiral Surface and Application to Chiral Discrimination and Synthesis

Mitsuhiko Shionoya

Professor, Graduate School of Science，
The University of Tokyo

Synthesis of Metal-Assisted Artificial DNAs and Their Applications to Control of Metal Ion
Arrangement

Toshikazu Takata

Professror, Department of Applied Chemistry, Graduate School ofEngineering, Osaka Prefecture University

Studies on the Development of Novel Functionalized Materials Endowed with Helical Chiral Field

Takashi Hayashi

Associate Professor,Department of Chemistry and Biochemistry
Graduate School of Engineering, Kyushu University

Functionalization of Myoglobin by Synthetic Chemical Process

Masahiko Hayashi

Associate Professor, Department of Chemistry, Faculty of Science,
Yamaguchi University

Development of Stereoselective Synthesis of Carbohydrates Using Transition Metal Catalysts

Norihiro Yamada

Associate Professor, Faculty of Education, Chiba University

Reseach on Termination of β-Sheet Structure with a view to Developing Therapy for Alzheimer's
Disease2000

The support of international exchange and research and development
Name

Occupation

Theme

Bunji Uno

Associate Professor, Gifu Pharmaceutical University

The 197th Meeting of The Electrochemical Society (Toronto, Canada)

Tetsuo Otsubo

Professor, Faculty of Engineering, Hiroshima University

The 8th International Conference on the Chemistry of Selenium and Tellurium (San Paulo, Brazil)

Seiji Kurihara

Associate Professor, Faculty of Engineering, Kumamoto University

SPIE's 45th Annual Meeting (San Diego, USA)

Mitsuru Haruki

Assistant, Graduate School of Engineering, Osaka University

YEAR 2000 RNASE H MEETING（Seattle, USA）

Yoshihiro Matsumura

Professor, Department of Pharmaceutical Science, Nagasaki University

The 197th Meeting of The Electrochemical Society（Tronto, Canada）

Yoichi Sakakibara

Assistant, Faculty of Agriculture, Miyazaki University"Molecular clonimg and biochemical characterization of brain specific sulfotransferase"（Tyler,Texas, USA）

Katsuhiko Kitamoto

Professor, Graduate School of Agricultural and Life Sciences, The University of Tokyo

International symposium Molecular biology of filamentous fungi, Aspergilli

Mitsuo Komatsu

Professor, Graduate School of Engineering, Osaka University

The 8th International Kyoto Conference on New Aspects of Organic Chemistry

Takayuki Shioiri

Professor, Faculty of Pharmaceutical Sciences，Nagoya City University

The 8th Akabori Conference:Japanese German Symposium on Peptide Science（To support Prof.Horst Kunz）

Kazuhiko Takai

Professor, Faculty of Engineering, Okayama University

Okayama International Conference on Organic Synthesis（To support Prof.Craig J.Forsyth）

Shinji Murai

Professor, Graduate School of Engineering, Osaka University

400 Years Japan-Netherlands / Garatama Workshop（To support Prof. Gerard van Koten）

27

Financial Section
Greetings from the Director of the Finance
Department
This page and the pages following it are the report of
the Financial Section. The contents contained herein
follow the basic rules of Japanese accounting.
The contents of this report have been shortened forthe sake of brevity and we ask for your kindunderstanding on this point.
This fiscal period marks the first time that Nagase& Co., Ltd. and its group companies have produced
an annual report. Japanese accounting is in the
midst of shifting towards consolidated accounting,and our company will strive to increase the level of

Akira Naito

disclosure offered by consolidated accounting.

Managing Director
Finance Dept.

In addition to the contents of this annual report, weplan to make corporate information available to the
public as far as possible in real time via our website.
http:// www.nagase.co.jp/
We hope that you will continue to honor ourcompany and group with your kind support.

Financial Review................... 28
Consolidated Balance Sheets.................... 29
Consolidated Statements of Income.................... 31
Consolidated Statements of Shareholders' Equity.................... 32
Consolidated Statements of Cash Flows.................... 33
Notes to Consolidated Financial Statements.................... 34
Independent Auditors' Report.................... 44

28

Financial Review
Operating Results
Total sales for this fiscal period were 568,294 million yen - anincrease of 0.9% over the prior year.
Domestic sales were 404,156 million yen, a reduction of 0.4% ascompared to the prior year, and overseas sales were 164,138
million yen which represented 4.1% increase over the prior year.
Viewed by business areas, the chemicals business increased
2.4% with sales of 249,977 million yen while plastics businesssales decreased 3.3% to 192,711 million yen. The electronics
business increased 5.1% with sales of 109,770 million yen, and thehealth care & other business was up by 2.1% with sales of 15,836

million yen.
With regard to profits, gross profits increased 3.9% over theprior year to 55,287 million yen due to increases of ourconsolidated subsidiaries, with an increase of 4.6% over the prioryear in operating income which was 8,147 million yen after the
deduction of selling, general and administrative expenses. Net
income increased 78.9% over the prior year to 6,371 million yen
due to increases in investment profits on equity method, decrease indomestic income tax rates, etc.

Financial Position
AssetsShareholders' Equity

Total assets at the end of the fiscal period had increased by 6.1%
over the prior fiscal period and were at 316,657 million yen.
Current assets increased by 5.8% to 236,393 million yen, tradereceivables increased to 6,685 million yen, inventories increased
to 2,293 million yen, and deferred tax assets increased to 1,407
million yen with the introduction of tax-effect accounting.
Tangible fixed assets were up 13.9% at 22,110 million yen due
to increases in our consolidated subsidiaries. Investments andadvances increased by 4.4% to 57,997 million yen. The main
reason for this was the increase in deferred tax assets to 2,890
million yen and the reduction of investments in securities to 877
million yen.

Shareholders’ equity at the end of the fiscal period had increasedby 7.1% as compared to the end of the prior fiscal period andwas at 134,838 million yen. With the objective of returning
profits to shareholders, the buying back and retirement oftreasury stock was carried out, with 4,542,000 shares amounting
to 2,118 million yen bought back.

Liabilities
Total liabilities at the end of the fiscal period had increased by
4.6% as compared to the end of the prior fiscal period and were
175,425 million yen. With regard to current liabilities, a
reduction of 3,225 million yen in accrued income taxes,
reduction in short-term loans payable of 1,245 million yen, withthe subtraction of an increase of 5,307 million yen in tradeliabilities, etc. resulted in a 0.1% reduction of 159,816 million
yen. Fixed liabilities increased 15,609 million yen, or 100.1%,
due to the issuance of company bond amounting to 7,000 million
yen, etc.

Cash Flows
In our current consolidated fiscal year cash flows, we saw thecontribution of increases in operating income from ourconsolidated subsidiaries, with capital from operating activities
increasing to 3,613 million yen, however, due to an increase ininvestments in facilities there was a reduction in capital to 2,607
million yen in investing activities. With regard to financing
activities, the Company increased capital by issuing bond and as
a result of efforts in earnings gained by canceling common stockand the reduction of interest liabilities designed to strengthen
subsidiary companies financial status, a reduction in capital of 28
million yen was achieved. The result of the above was 559
million yen increase in cash and cash equivalents as compared tothe closing balance of the prior fiscal period to 21,016 million
yen.

Research and Development Activities
Our group (our company and its consolidated subsidiaries) is
engaged in research and development aimed at concentrating thegroup’s total power and at creating new products and technologies.
At present research activities are being carried out in research anddevelopment sections in our production companies as well as at our
Research and Development Center in trading activities regarding
chemical products, plastics, etc. and in the fields of organic

chemistry and biotechnology which are related to the future of our
production companies, as well as in the creation of new products
and technologies together with the evaluation of information
concerning their technologies. Research and development expenses
totaled 2,063 million yen in the current consolidated fiscal
accounting period.

29

Consolidated Balance Sheets
Nagase & Co.,Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2000 and 1999ASSETS
2000
Current assets:
Cash and time deposits (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Short-term Investments (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............

¥

Trade receivables:
Unconsolidated subsidiaries and affiliates . . . . . . . . . . . . . . . . ................
Others .......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . ...............
Less allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . ...............
Trade receivables−net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Inventories ......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................
Deferred tax assets (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ...
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................

18,452
4,998(

Property and equipment:
Land ................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . ................
Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Vehicles ............ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ...............
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Other property ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... ...........
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Property and equipment−net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............

(

Investments and advances:
Investments in securities: (Note 3)
Unconsolidated subsidiaries and affiliates . . . . . . . . . . . . . . . . ...............
Others ........... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . ................
Total Investments in securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Long-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... ........
Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........... .....
Deferred tax assets (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Less allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . ...............
Total investments and advances . . . . . . . . . . . . . . . . . . . . . . . . . ................

(

Other assets ......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . ...............

¥
The accompanying notes are an integral part of these statements.

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

1999¥

10,022
169,154
1,163 )
178,01327,824
1,407
5,699
236,393(

7,075
22,527
15,442
402
476
8,239
54,161
32,051 )22,110(10,43439,07049,504
331
5,435
2,890
163 )
57,997
157
316,657

18,303
4,156

(

¥

2000
$

9,564
162,927
1,307 )
171,184
25,531—
4,219
223,393(

6,317
20,583
10,0337,475
104
50
44,56225,149 )19,413(

10,951
39,43050,381
457
4,966
—
225 )
55,579140
298,525

173,82847,087($

94,417
1,593,534
10,959 )1,676,992
262,123
13,252
53,6902,226,972

66,650212,218
145,4783,786
4,486
77,617510,235
301,941 )
208,294

98,292368,069
466,361
3,121
51,18927,227
1,533 )
546,365
1,482
2,983,113

30

LIABILITIES AND SHAREHOLDERS' EQUITY
2000
Current liabilities:
Accounts payable:
Unconsolidated subsidiaries and affiliates . . . . . . . . . . . . . . . . ...............
Others ............ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . ................

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

¥

1999

3,730
114,493
118,223
4,744
5,523
31,450159,940¥

2000

26,694
1,137,037
1,163,731
14,31058,020269,5031,505,564

Accrued income taxes (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........... .....
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................

2,834
120,696
123,530
1,519
6,159
28,608
159,816$Long-term liabilities:
Long-term debt (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Bond (Note 4) .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... ...........
Accrued severance indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................

2,500
7,000
5,590
519
15,609

2,252
—
5,525
25
7,802

23,55565,944
52,664
4,885
147,048

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......... .......

6,394

4,853

60,239

9,700
—
9,635
115,503 )0
134,838
316,657

—
9,700
9,635
106,595
0)125,930
298,525

91,377—90,767
1,088,121
3)
1,270,262
2,983,113

Contingent liabilities (Note 5)

Shareholders’ equity: (Note 8)
Common stock:
Authorized− 350,109,000 shares
Issued (¥50 par value):
March 31, 2000 — 141,537,285 shares . . . . . . . . . . . . . . . . . . ................
March 31, 1999 — 146,079,285 shares . . . . . . . . . . . . . . . . . . ................
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Consolidated surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............... .
Treasury common stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................

(
¥

(
¥

(
$

31

Consolidated Statements of Income
Nagase & Co.,Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2000 and 1999

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2000
Net sales (Note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ ........
Cost of sales (Note 9, 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... .........

¥

1999

568,294
513,00755,287¥

47,1408,147

Selling, general and administrative expenses (Note 9)
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Other income (expenses):
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... ......
Gain on sales of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Others — net ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Income before income taxes and minority interests ...............

(

2000

563,222510,00753,215$5,353,686
4,832,846
520,840

45,424
7,791

2,091
758 )
334
524
10,338((444,086
76,754

1,947
1,093 )
439
193 )
8,891

(

19,695
7,142 )
3,146
4,936
97,389

Income taxes:(Note 10)
Current ........... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . ................
Deferred .......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . ...............
Income before minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................

3,486
144
6,708

5,197
—
3,694

32,842
1,354
63,193

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ ........

337

133

3,172

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......... ......

¥

6,371

¥

3，
561

$

U.S. Dollars(Note 1)

Yen

2000
Amounts per share of common stock:
Net income :Basic ...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Diluted ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... ...........
Cash dividends applicable to the period . . . . . . . . . . . . . . ...............
The accompanying notes are an integral part of these statements.

¥

44.25
44.25
8.00

60,021

1999

¥

23.76
23.76
8.00

2000

$

0.42
0.42
0.08

32

Consolidated Statements of Shareholders' Equity
Nagase & Co.,Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2000 and 1999

Millions of Yen
Shares ofcommon stock
Balance at March 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
151,428,285
Transfer according to revision of "Regulations
Concerning the Terminology,Forms andPreparation Method of Consolidated Financial
Statements" (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—Net income ............ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—Increase in retained earnings accompanying theincrease in number of consolidated subsidiaries . . . .
—Increase in retained earnings accompanying theincrease in number of companies accounted forby the equity method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—Cash dividends ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—Bonuses to directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—Retirement of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 5,349,000 )Balance at March 31, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income ........... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in retained earnings
accompanying the increase in number ofconsolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in retained earnings
accompanying the increase in number ofcompanies accounted for by the equity method . . . . .
Cash dividents ........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonuses to directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in unapporopriated retained earnings bymerger .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior-year adjustment of deferred taxes . . . . . . . . . . . . . . . .
Balance at March 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

146,079,285—(

Common stock¥
9,700

Additional
paid-in capital
¥
9,635

—
—

—
—

—

—

—
—
—
—

—
—
—
—

¥

9,700
—

¥

9,635
—

Legal reserve¥
2,425

Retainedearnings¥
100,771((¥

2,425 )—

Consolidated
surplus¥—100,771 )—103,196
3,561

—

—

1,141

—
—
—
—

—
—
—
—

—
—

¥

—
—

(
(
(
¥

2,332
1,211 )
68 )2,356 )
106,595
6,371

—

—

—

—

—

—
—
—
4,542,000 )

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
141,537,285

—
—
9,700

—
—
9,635

—
—
—

—
—
—

¥

—
—

Consolidated
surplus$1,004,190
60,021

2,454

¥

¥

¥

¥

260

(
(
(

885
1,169 )
60 )
2,118 )
272
4,467
115,503

Thousands of U.S.Dollars (Note 1)
Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... $Balance at March 31, 1999
91,377
Net income ........... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ......
—
Increase in retained earnings
accompanying the increase in number ofconsolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......
—
Increase in retained earnings
accompanying the increase in number ofcompanies accounted for by the equity method . . . . . . . . . . . . . . . . . . . . . .......
—Cash dividents ........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........
—
Bonuses to directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......
—
Retirement of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......
—
Increase in unapporopriated retained earnings bymerger .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . .......
—
Prior-year adjustment of deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......
—
Balance at March 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... $91,377
The accompanying notes are an integral part of these statements.

Additional
paid-in capital$
90,767—

Legal reserve
$
—
—

—

—

—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
90,767

—
—
—

—
—
—

$

$

Retainedearnings
$

$

(
(
(

$

8,337
11,009 )564 )19,951 )
2,565
42,0781,088,121

33

Consolidated Statements of Cash Flows
Nagase & Co.,Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2000 and 1999

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2000
Operating activities:
Net income ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Provision for retirement benefits-net . . . . . . . . . . . . . . . . . . . . . ...............
Gain on disposal of property and equipment-net . . . . ................
Equity in earnings of unconsolidated subsidiaries andaffiliates-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............. ...
Gain on sales of investment securities . . . . . . . . . . . . . . . . . . . . . . . . ...............
Loss on devaluation of investment securities . . . . . . . . . . . . . . ...............
Others — net ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... ..........

(
(
(
(

Decrease (increase) in operating assets:
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........... .....
Inventories ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Other operating assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............

(((

Increase (decrease) in operating liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........... ....
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............. ...
Other operating liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Net cash provided by operating activities . . . . . . . . . . . . . . . . ...............

((

Investing activities:
Increase in marketable securities-net . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Proceeds from sales of property and equipment . . . . . . . . . . . . ...............
Purchases of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Proceeds from sales of investment securities . . . . . . . . . . . . . . . . ...............
Additions of long-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Collections of long-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Others — net ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... ............
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . ................

(
(
(
(

Financing activities:
Decrease in short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Issuance of commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Cash dividends and bonuses to directors . . . . . . . . . . . . . . . . . . . . . . . ...............
Proceeds from issuance of bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Expenditures for treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Others — 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 the beginning of the year . . ...............
Increase in cash accompanying consolidation . . . . . . . . . . . . . . ...............
Cash and cash equivalents at the end of the year (Note 13) ............
The accompanying notes are an integral part of these statements.

6,371

¥

(

¥

1999
3,561

¥

2,144
874 )
13 )

(
(

770 )
305 )
1,449
79

20,196
8,236 )
123 )

(

(
(

15,926
1,298 )
59 )

(
(
(

25,032 )5,978 )
8,454 )—
2,929 )
1,273
3,168 )
1,602
212 )
75
752
2,607 )((

2,298 )
1,000 )—
878 )
1,229 )
7,000
2,118 )
495
28 )

(

(

(
(
(

(
(
(
(
(
(

¥

(
(

7,259 )
2,876 )
13,649762(

21,016

2,311
297 )
6)

(
(

2,929
3,282 )
636
562 )
3,613

419 )
559
19,735722

60,021

$

261 )
281 )
1,806
307 )

(
(

2,657 )
635 )
897 )

2000

12,296 )
2,361
658
41 )
11,777((2,949 )
2,426 )
214
4,353 )
1,516
338 )
159
210
7,967 )

(
(
(
(

633 )
—
250
891 )
1,280 )—
2,356 )
3)
4,913 )((—
1,103 )
17,593
1,813(

18,303(((($

27,59630,919 )5,991
5,298 )
34,040—27,595 )11,991
29,849 )15,092
1,996 )
705
7,088
24,564 )21,652 )9,421 )—
8,279 )
11,574 )65,944
19,951 )
4,666
267 )
3,941 )
5,268
185,912
6,803
197,983

34

Notes to Consolidated Financial Statements
Nagase & Co.,Ltd. and Consolidated Subsidiaries

1.BASIS OF PREPARING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared from the accounts maintained by Nagase & Co., Ltd.
(the “Company”) in accordance with the provisions set forth in
the Japanese Commercial Code and in conformity withaccounting principles and practices generally accepted in Japan,
which may differ in some material respects from accounting
principles and practices generally accepted in countries andjurisdictions other than Japan.
In addition, the notes to the consolidated financial statements
include information which is not required under accounting
principles generally accepted in Japan but is presented herein as
additional information.

The “Legal reserve” and “Retained earnings” that appeared in
the consolidated financial statements in the fiscal period prior tothat preceding this one appear as “Consolidated surplus” due to arevision of the rules concerning the consolidated financial
statement.
The U.S. dollar figures are presented merely for the sake of
convenience and are simple conversions of yen to dollars. The
conversion rate used was 106.15 yen to the dollar, which was theexchange rate current on March 31, 2000. This translation should
not be construed as a representation that Japanese yen have beenor could be converted into U.S. dollars at that rate.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES（1）Principles of consolidation
The major Japanese subsidiaries and overseas subsidiaries overwhich the Company has management authority are included in thisconsolidated financial statement. With regard to investments inunconsolidated subsidiaries and affiliates (possession of 15-50%
shares), the equity method has been applied for those which havean influence to the consolidated financial statements. All
significant inter-company transactions and accounts are eliminated.
Consolidated account adjustments are uniformly depreciated over a
5-year period.
（2）Foreign currency translation
With regard to short term foreign currency receivables andpayables, the yen conversion rate at the time of the transaction orthat of the currency market at the time had been employed in thepast, however, from this consolidated fiscal year, the currency
market rate at the time of balancing the accounts will be utilized. In
conjunction with this change, an excess amounting to 15 million
yen ($144 thousand) in the income before income taxes andminority interests for the prior period and this period has been
listed using a similar fiscal period in the prior consolidated
accounting period as a comparison standard. With regard tooverseas consolidated subsidiaries, the foreign exchange rate on thedate of the balance sheet was used in all parts of the balance sheet
except for the shareholders' equity section; and with regard toincome and expenses, the currency market yen average for the year
was used.
（3）Short-term investments and investments in securities
For securities for which a securities market exists, the lower of costor market value method using the moving average method wasused. For all other securities, the cost method using the moving
average method was used.
（4）Inventories
The evaluation standard and method for inventories was the lowerof cost or market value method using the weighted average method.
（5）Depreciation
With regard to tangible fixed assets, the declining-balance method
specified under the Corporation Tax Law has been used. For five of
the consolidated subsidiaries the straight-line method has beenused. However, in accordance with the 1998 revision of the Tax
Code, the life of buildings has been reduced and the straight-line
method has been used on buildings acquired after April 1, 1998.
（6）Employee's retirement benefits plans

In the prior fiscal period, in order to meet employee's retirement
payments - for those who retired at the request of the company,
100% for the Company; and for consolidated domestic
subsidiaries’ employees, those who voluntarily retired, 100% were used as the basis for the reserve, and the qualified pension
plan (used at the Company and at 8 subsidiaries) were deducted as
the retirement fund balance and placed in the reserve for
employees' retirement, however, in this fiscal period employees
who retired at the request of the company in both the Company
and the subsidiaries required payment reserves that were based on
100% and the qualified pension plan (used at the Company and 8
subsidiaries) with the amount deducted as the retirement asset
balance and used as the amount for the reserve for employee’s
retirement. This change was enacted to unify the accounting
processing standards used between the Company and subsidiaries
and to better ensure the financial health of the company. In
conjunction with this change, 364 million yen ($3,431 thousand)less of operating income and income before income taxes andminority interests have been listed using a similar fiscal period in
the prior consolidated accounting period as a comparison standard.
With regard to the Company, an adjusted pension plan is also
being used in addition to the qualified pension plan.
（7）Income taxes
Under the Japanese income tax system there are corporate taxes,
enterprise taxes, and inhabitants’ taxes. The amount that is paid
for these taxes each year has been listed. In accordance with therevision of the rules for consolidated financial statements, taxeffect accounting has been implemented beginning with thiscurrent consolidated accounting financial period. In accordancewith this change, deferred tax assets of 4,297 million yen ($40,479
thousand) (1,407 million yen ($13,252 thousand) in current assets
and 2,890 million yen ($27,227 thousand) in investments andadvances) have been newly listed with net income listed at 144
million yen ($1,354 thousand) less with the consolidated surplus at
the end of the year being listed at 4,323 million yen ($40,724
thousand) in excess.
（8）Research and development cost
Research and development costs are included in income andexpenditures.
（9）Allowance for doubtful receivables
In order to prepare for losses from uncollectible accounts
receivables, in addition to the limit specified under Corporation
Tax Law, this has been listed after taking into consideration thecollectibility of receivables.

35

Notes to Consolidated Financial Statements（10）Accounting for lease transaction
Finance leases other than those where the rights of possession forthe leased article are transferred to the leasee have been processedin accordance with the accounting procedures for normal rental
transactions.

（12）Cash and cash equivalents
For purposes of the consolidated statement of cash flows cash andcash equivalents, consist of cash on hand, demand deposits andshort-term investments, which are readily convertible to cash
subject to an insignificant risk of changes in value and which werepurchased with an original maturity of three months or less.

（11）Net income per share
Net income per share has been calculated based on the average ofthe number of stock issued for the period.

3.SHORT-TERM INVESTMENTS AND INVESTMENTS IN SECURITIESSHORT-TERM INVESTMENTS

2000

Millions of Yen

Book valueMarket value available
Equities ............ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ................
Bonds .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ................
Others .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ................
Sub-Total ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Market value not available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Total .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . ...............

¥

¥

—
—
—
—
4,998
4,998

Market value
¥
¥

—
—
—
—

Unrealized gain (loss)
¥
¥

—
—
—
—

* These are shown for only the present consolidated fiscal period.

2000

Thousands of U.S. Dollars (Note 1)

Book valueMarket value available
Equities ............ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ................
Bonds .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ................
Others .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ................
Sub-Total ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Market value not available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Total .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . ...............

$

$

—
—
—
—
47,08747,087

Market value
$
$

—
—
—
—

Unrealized gain (loss)
$
$

—
—
—
—

INVESTMENTS IN SECURITIES

2000

Millions of Yen

Book valueMarket value available
Equities ............ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ................
Bonds .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ................
Others .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ................
Sub-Total ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Market value not available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Total .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . ...............

¥¥

33,31718—
33,335
16,16949,504Market value¥¥

74,616
127—
74,743

Unrealized gain (loss)¥¥

41,299109—
41,408* These are shown for only the present consolidated fiscal period.

2000

Thousands of U.S. Dollars (Note 1)

Book valueMarket value available
Equities ............ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ................
Bonds .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ................
Others .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ................
Sub-Total ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Market value not available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Total .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . ...............

$$

313,869
166—
314,035
152,326
466,361

Market value$$

702,933
1,197—
704,130

Unrealized gain (loss)$$

389,064
1,031—
390,095

36

4.LONG-TERM DEBT AND BOND
Long-term debt at March 31, 2000 and 1999 consisted of the following:Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2000
Loans from banks and insurance companies,
maturing serially through 2007 1.7%-2.8% . . . . . . . . . . . . . . . . . . . . . . ................

¥

1999

2,500

¥

2000

2,252

$

23,555The amount expected to be paid for long-term loans payable (loans with repayment schedules of less than a year are not included)with consolidated maturity dates of 5 years or less are as listed below.

2000
Over 1 year to 2 year
Over 2 year to 3 year
Over 3 year to 4 year
Over 4 year to 5 year

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............. .

Millions of Yen
¥
621
757
50
25

Thousands of
U.S. Dollars (Note 1)
$
5,850
7,128
471
235

* These are shown for only the present consolidated fiscal period.

Bond at March 31, 2000 and 1999 consisted of the following:Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2000
Unsecured corporate bondTo be maturing on November 30, 2004
with a coupon rate of 1.53%. . . . . . . . . . . . . . . . . . . . . . ................

¥

1999

7,000

¥

2000
—

$

65,944

5.CONTINGENT LIABILITIESThousands of
U.S. Dollars (Note 1)

Millions of Yen

2000
Notes discounted or endorsed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Guarantees of bank loans:
Unconsolidated subsidiaries and affiliates . . . . . . . . . . . . . . . . . . . . . ...............
Others ................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . ...............

¥

1,118
1,225
485

1999
¥

1,084
1,003
1,014

2000
$

10,533
11,5364,570

37

Notes to Consolidated Financial Statements
6.LEASES
Our group (the Company and its consolidated subsidiaries) leases
certain buildings and structures, equipment and vehicles,
furniture and fixtures. Total lease payments under these were¥1,315 million ($12,392 thousand) and ¥1,155 million for theyears ended March 31, 2000 and 1999, respectively.
Pro forma information on finance leases other than those where
the rights of possession for the leased article are transferred to theleasee is as given below.

2000

Millions of Yen

Acquisition cost or
its equivalent value
Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Equipment and vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............. .
Total ............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . ................

¥

Accumulated depreciation
or its equivalent value

—
3,167
1,924
5,091

¥

¥

—
1,292
937
2,229

¥

1999

Balance at year-end
or its equivalent value
¥

—
1,875
987
2,862

¥

Millions of Yen

Acquisition cost or
its equivalent value
Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Equipment and vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............. .
Total ............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . ................

¥¥

Accumulated depreciation
or its equivalent value

54
2,072
2,431
4,557

2000

¥
¥

Balance at year-end
or its equivalent value

28
826
1,313
2,167

¥

26
1,246
1,118
2,390

¥

Thousands of U.S. Dollars (Note 1)

Acquisition cost or
its equivalent value
Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Equipment and vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............. .
Total ............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . ................

$$

Accumulated depreciation
or its equivalent value—
29,837
18,121
47,958$$

Balance at year-end
or its equivalent value—
12,173
8,827
21,000$—17,664
9,294
26,958$Future minimum lease payments to be made under finance leases subsequent to March 31, 2000 and 1999 were as follows:
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2000
Within 1 year ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Over 1 year .......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . ................
Total ............... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . ................

¥
¥

1,021
2,107
3,128

1999
¥
¥

919
1,686
2,605

2000
$
$

9,624
19,84829,472

38

7.DERIVATIVES AND HEDGING ACTIVITIESIn order to prepare for risks associated with fluctuations in
exchange rates incurred in import-export transactions, ourcorporate group utilizes exchange futures transactions mainly for
our foreign currencies accounts payables and accounts receivables.
In addition, interest options transactions are also utilized toprepare for risks associated with interest fluctuations. Thesetransactions are conducted within the range of contracted amounts
and applicable asset/liability constraints based on actual need.
With regard to this consolidated financial period, derivativetransactions used to achieve these objectives that bear the risk ofmarket fluctuations are listed under “Items related to market pricetransactions.” The parties with whom derivative transactions arecontracted are all reliable major financial institutions; and as noneof the transactions are long-term, the risk of trustworthiness withregard to breach of contract has been judged to be slight.
In addition, we are carrying out risk management inaccordance with our “Rules for in-company foreign exchangetransactions” with regard to foreign exchange futures transactionsin the Company and consolidated companies.

Items related to market price transactions
I. Exchange related

2000
Type of transaction
Forward exchange
Contracts to sell
US $ .................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ...............................
Others ................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . ...............................
Contracts to buy
US $ ................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . ...............................
JP ¥ ................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . ...............................
Others ................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . ................................
Total .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ................................

Millions of Yen
Contract value,etc.

Over 1year

¥

¥

¥

5,414
69
911
203
127
—

¥

—
—
—
—
—
—

¥

¥

MarketValue

Unrealized
gain (loss)

5,319
66

¥

920
202
128
—

95
3

(
¥

9
1)
1
107

* Assessment method for market value.
The foreign exchange futures market has been used.
* Futures exchange contracts have foreign currency receivables and payables, etc. and the established exchange values offoreign currency receivables and payables, etc. in yen value at the time of cashing listed on the consolidated balance
sheets with their corresponding values are excluded from the table.
* These are shown for only the present consolidated fiscal period.

2000
Type of transaction
Forward exchange
Contracts to sell
US $ .................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ...............................
Others ............... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . ................................
Contracts to buy
US $ .................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . ................................
JP ¥ ................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ................................
Others ................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . ...............................
Total .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . ...............................

Thousands of U.S. Dollars(Note 1)
Contract value,etc.

$ 51,005
650

$

8,581
1,914
1,199
—

MarketValue

Over 1year

$

$

—
—

$ 50,106
622

—
—
—
—

8,661
1,909
1,205
—

$

Unrealized
gain (loss)

$

899
28

(
$

80
5)
6
1,008

39

Notes to Consolidated Financial Statements
II. Interest related

2000

Millions of Yen

Type of transaction
Interest rate cap
Contracts to buy ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............................
[Book value] ......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ................................
Total .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ................................

Contract value,etc.

Over 1year

¥

¥

¥

120
[ 2]
—

¥

Market
Value

—
[—]
—

¥
¥

0
—

Unrealized
gain (loss)

¥(
¥(

2)
2)

* Assessment method for market value.
Values are those that has been submitted by the corresponding financial institutions.
* These are shown for only the present consolidated fiscal period.

2000

Thousands of U.S. Dollars(Note 1)

Type of transaction
Interest rate cap
Contracts to buy ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............................
[Book value] ......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ................................
Total .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ................................

Contract value,etc.

Over 1year

$

$

$

1,130
[ 18]
—

$

Market
Value

—
[—]
—

$
$

0
—

Unrealized
gain (loss)

$(
$(

18 )
18 )

8.SHAREHOLDERS’ EQUITY
Under the Japanese Commercial Code, in resolving profits at theend of each fiscal period 10% or more of the cash dividends anddirector’s bonuses paid up to the amount of 25% of the company’s
capital must be saved as a "Legal Reserve.” Amounts from this“Legal Reserve” cannot be given out as dividends, however, they

can be used to reduce losses in capital. They can also be moved
back into capital. Amounts not exceeding 50% of the stock issued
may not be put into capital. However, even in the case when it isacceptable for them not to be put into capital, this is limited toamounts that exceed the face value of face value shares.

9.RESEARCH AND DEVELOPMENT
Our research and development expenses for the year ended March
31, 2000 totaled ¥2,063 million ($19,440 thousand) and areincluded in cost of sales and selling, general and administrative
expenses.

10.INCOME TAXESThe Company and its consolidated subsidiaries are subject to anumber of taxes based on income. Total statutory tax rates wereapproximately 42% for the March 2000 period and 48% for the

March 1999 period. As the tax rates of consolidated financial
statements have expenses that are not recognized as perpetual
losses under the tax statutes, they differ from legal tax rates.

Reasons for the differences in terms of major items between the statutory tax rate and the effective tax rate.
Statutory tax rate ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... ................................................
（Adjustment）
Items which will not be absorbed into loss on a permanent basis .............................................
Items which will not be absorbed into profit on a permanent basis ...........................................
Net adjustment from intercompany elimination of dividend revenue ........................................
Par capita portion of inhabitants' taxes and, etc. . . . . . . . . . . . . . . ................................................. ....
Tax rate differentials with consolidated overseas subsidiaries .................................................
Others .................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ....................................................
Effective tax rate .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....................................................

42.1
(
(

4.2
8.7 )
1.8
0.3
5.4 )
0.8
35.1

%

40

Breakdown according to causes for deferred tax assets and deferred tax liabilities

2000(Assets subject to deferred tax)
Unrealized inventory profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Long-term prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Unpaid corporate tax, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Bonus reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... .........
Provision for retirement allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Allowance for directors’ bonus at retirement . . . . . . . . . . . . . . . . ...............
Others ............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ...............
Total of assets subject to deferred tax . . . . . . . . . . . . . . . . . . ...............
(Liabilities subject to deferred tax)
Reserve for compressed booking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Special reserve for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Others ............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . ................
Total of liabilities subject to deferred tax . . . . . . . . . . . . ................
Net assets subject to deferred tax . . . . . . . . . . . . . . . . . . . . . . . . ................

Millions of Yen
¥

241
1,273
272
136
386
780
478
801
4,367
(
(
(
(

¥

11 )
51 )
8)
70 )
4,297

Thousands of
U.S. Dollars (Note 1)$

2,271
11,996
2,559
1,285
3,634
7,350
4,504
7,543
41,142
(
(
(
(

$

106 )
480 )
77 )
663 )
40,479

41

Notes to Consolidated Financial Statements
11.SEGMENT INFORMATIONBusiness information
2000

Millions of Yen
Chemicals

Sales to customers ......................................... ¥Intersegment sales .........................................
Total sales ............................................. ¥Cost of sales and selling, generaland administrative expenses .................
Operating income ....................................... ¥Total assets ........................................... ¥249,97710
249,987
245,850
4,137
130,186

Plastics¥¥

192,71143
192,754¥¥

190,954
1,800
97,272

Health Care
& Others

Electronics¥¥

109,7703
109,773¥¥

107,990
1,783
47,352¥¥

15,836
1,693
17,529¥¥17,101
428
11,662

Total

Intercompany
elimination

Consolidated
Sales

¥

¥

568,294
1,749
570,043(¥(— ¥1,749 )
1,749 ) ¥568,294—568,294¥¥

561,895
8,148
286,472(¥(¥

1,748 )
1) ¥30,185 ¥560,147
8,147
316,657¥* The business classifications used for in-house management have been used with regard to classifications of business categories.

1999

Millions of Yen
Chemicals

Sales to customers ........................................ ¥244,068

Plastics¥

199,189

Health Care
& Others

Electronics¥

104,455¥

15,510

Total¥

563,222* With regard to the business classifications for the prior fiscal period, only sales for customers have been listed.

2000

Thousands of U.S. Dollars (Note 1)
Chemicals

Sales to customers ......................................... $Intersegment sales .........................................
Total sales ............................................. $Cost of sales and selling, generaland administrative expenses .................
Operating income ....................................... $Total assets ........................................... $2,354,942
92
2,355,034
2,316,057
38,9771,226,436

Plastics$$

1,815,458
401
1,815,859$$

1,798,904
16,955916,365

Health Care
& Others

Electronics$$

1,034,10629
1,034,135$$

1,017,341
16,794
446,092$$

149,180
15,955
165,135$$

161,102
4,033
109,862

Total

Intercompany
elimination

Consolidated
Sales

$

$

5,353,686
16,4775,370,163

(
$(

— $
16,477 )
16,477 ) $5,353,686—
5,353,686$$

5,293,404
76,7592,698,755($($

16,472 )5) $284,358 $5,276,932
76,754
2,983,113$

42

Geographic information
2000

Millions of Yen
Japan

Sales to customers ......................................... ¥Intersegment sales .........................................
Total sales ............................................. ¥Cost of sales and selling , generaland administrative expenses .................
Operating income (loss) .............................. ¥Total assets ........................................... ¥480,248
53,340533,588528,368
5,220
295,661Asia¥¥

61,2983,858
65,156¥¥62,493
2,663
23,896

North America¥¥

18,087
4,370
22,457¥¥22,349108
5,810

Others

Total

¥

¥

8,661
3,297
11,958¥568,294
64,865633,159¥(¥

11,97012 ) ¥
2,483 ¥

625,180
7,979
327,850¥

Intercompany
elimination

Consolidated
Sales

¥
(
¥(

— ¥
64,865 )64,865 ) ¥568,294—568,294(¥¥(

65,033 )168 ¥11,193 ) ¥560,147
8,147
316,657* In conjunction with the change of Note 2(6), 364 million yen ($3,431 thousand) less of operating income of Japan has been listed using
a similar fiscal period in the prior consolidated accounting period as a comparison standard.

1999

Millions of Yen
Japan

Sales to customers ......................................... ¥Intersegment sales .........................................
Total sales ............................................. ¥Cost of sales and selling, generaland administrative expenses .................
Operating income (loss) .............................. ¥Total assets ........................................... ¥471,398
60,481
531,879
526,432
5,447
279,705

Asia¥¥

62,191
3,336
65,527¥¥

63,693
1,834
20,456

North America¥¥

22,626
5,259
27,885¥¥27,557
328
4,729

2000

Total

¥

¥

7,007
3,051
10,058¥563,22272,127635,349¥(¥

10,254196 ) ¥
3,344 ¥

627,936
7,413
308,234¥

Intercompany
elimination

Consolidated
Sales

¥
(
¥(

— ¥
72,127 )72,127 ) ¥563,222—563,222(¥¥(72,505 )378 ¥9,709 ) ¥555,4317,791
298,525

Thousands of U.S. Dollars (Note 1)
Japan

Sales to customers ......................................... $Intersegment sales .........................................
Total sales ............................................. $Cost of sales and selling, generaland administrative expenses .................
Operating income (loss) .............................. $Total assets ........................................... $Others4,524,243
502,498
5,026,741
4,977,569
49,172
2,785,315

Asia

North America$$

577,464
36,346
613,810$$588,723
25,087225,117$$170,390
41,166
211,556$$

210,529
1,027
54,738Others

Total

$

$

81,58931,063112,652$

5,353,686
611,073
5,964,759$($

112,767
115 ) $
23,388 $5,889,588
75,171
3,088,558$

Intercompany
elimination

Consolidated
Sales

$
(
$(

— $
611,073 )
611,073 ) $5,353,686—
5,353,686($$(

612,656 )
1,583 $
105,445 ) $5,276,932
76,754
2,983,113

Overseas trading transactions
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2000
Overseas trading transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Shares of consolidated net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............

¥

164,138
28.9%

1999
¥

157,643
28.0%

2000
$

1,546,283
28.9%

43

Notes to Consolidated Financial Statements
12.SALES TO AND PURCHASES FROM UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2000
Sales .................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ...............
Purchases ........... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . ...............

¥

1999

24,67911,935¥25,24017,391

2000$

232,494
112,433

13.SUPPLEMENTAL INFORMATION ON STATEMENTS OF CASH FLOWS
Adjustment between the balance of “Cash and time deposits” on the consolidated balance sheets and “Cash and cash equivalents
at the end of the year” on the consolidated statements of cash flows are summarized as follows:
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2000
Cash and time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............. .
Repo in securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... .........
Time deposits (maturity date falls over 3 months) . . . . . . . . . . ...............
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................

¥¥

18,452
4,998(2,434)21,016

1999¥¥

18,303——18,303

2000$$

173,82847,087(22,932)
197,983* “Cash and cash equivalents at the end of the year” shown on the consolidated statement ofcash flows for the year ended March 31, 1999 did not include cash equivalents.

14.SUBSEQUENT EVENTSOn June 29, 2000, the shareholders of the Company approved the payment of a cash dividend of ¥8.00 ($0.08) per share toshareholders of record at March 31, 2000 for a total of ¥1,132 mil1ion ($10,667 thousand) and bonuses of ¥50 million($471 thousand) to directors.

44

Independent Auditors' Report

The Board of Directors and shareholders
Nagase & Co., Ltd.

We have examined the consolidated balance sheets of Nagase & Co., Ltd. and its consolidated subsidiaries
as of March 31, 2000 and 1999, and the related consolidated statements of income, shareholders’ equity andcash flows for the years then ended, expressed in yen. Our audits were made in accordance with auditing
standards, procedures and practices generally accepted and applied in Japan and, accordingly, included suchtests of the accounting records and such other auditing procedures as we considered necessary in thecircumstances.
In our opinion, the accompanying consolidated financial statements, expressed in yen, present fairly the
consolidated financial position of Nagase & Co., Ltd. and consolidated subsidiaries at March 31, 2000 and 1999,
and the consolidated results of their operations and their cash flows for the years then ended in conformity withaccounting principles and practices generally accepted in Japan consistently applied during the period except forthe changes, with which we concur, in the methods of accounting for foreign currency translation andemployee’s retirement benefits plans as described in Notes 2 (2) and 2 (6) to the consolidated financial
statements.
As described in Note 2 (7) to the consolidated financial statements, Nagase & Co., Ltd. and consolidated
domestic subsidiaries have adopted a new accounting standard for tax-effect accounting in the preparation of
their consolidated financial statements for the year ended March 31, 2000.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2000 are presented solely for convenience. Our audit also included the translation of yen
amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in
Note 1 to the consolidated financial statements.
Osaka, Japan
June 29, 2000

Century Ota Showa & Co.

See Note 1 to the consolidated financial statements which explains the basis of preparing the consolidated
financial statements of Nagase & Co., Ltd. under Japanese accounting principles and practices.

45

BOARD OF DIRECTORS AND AUDITORS
Representative Director and Chairman
Hideo Nagase
Representative Director and President
Hiroshi Nagase
Representative Director and Vice President
Shinichi Kokame
Representative Directorand Executive Managing Director
Michiyuki Inukai
Managing Directors
Kazunori Andoh
Takeshi Iwai
Akira Naitoh
Reiji Nagase

Directors
Yasuhiro Kashiwada
Masahiro Murayama
Hirozo Bessho
Akira Sakai
Kazuaki Kobayashi
Ryoichi Okuno
Kanji Takahashi
Masami Takatori
Norio Kurakake
Takeo Kaneko
Takashi Matsuyama
Yoshizo Shibata

Statutory Auditors
Koji Sawada
Keisuke Iai
Souji Okada
Eisaku Kimura

INVESTORS INFORMATION(as of March 31, 2000)

HEAD OFFICE
1-17, Shinmachi 1-Chome Nishi-ku, Osaka
5-1, Kobunacho Nihonbashi Chuo-ku, Tokyo

STOCK STATUS
Number of shares to be issued by the company: 350,109,000
Number of issued shares:
141,537,285

FOUNDATION
December,1917

NUMBER OF SAHREHOLDERS
10,742

CONTACT TO
General Affairs Department
Phone 81-3-3665-3028
Fax. 81-3-3665-3030

STATUS OF PROPRIETARY STOCK DISTRIBUTIONSHARE TRANSFER AGENT
Sumitomo Trust & Banking Co.,Ltd.
5-33, Kitahama 4-Chome Chuo-ku, Osaka
STOCK LISTED
Listed at the first section of Tokyo andOsaka Stock Exchange (since August, 1970)

Number
Securities Companies;

33

Number of shares holdspecial rate

808 thousand stocks ( 0.57%)
11,391 thousand stocks ( 8.05%)
25,667 thousand stocks ( 18.14%)

Foreign Corporation, etc.;

81

Other Corporation;

365

Private and Others;

10,17844,986 thousand stocks ( 31.78%)

85

58,683 thousand stocks ( 41.46%)

Financial Institutions;46

Osaka Head Office

Tokyo Head Office

Nagoya Branch OfficeOsaka Head Office
1-17, Shinmachi 1-Chome, Nishi-ku, Osaka
550-8668, JapanTokyo Head Office
5-1, Nihonbashi Kobunacho,
Chuo-ku, Tokyo 103-8355, Japan

http://www.nagase.co.jp/(BC0008315000)