Medium-term Management Plan ACE 2.0“Pursuit of Quality” for becoming a “Business Designerthat Creates a Sustainable Future”

Contents▶ Review of Previous Medium-term Management Plan ACE-2020■ Conditions Surrounding the NAGASE Group and Ideal NAGASE■ New Medium-term Management Plan ACE 2.002

ACE-2020 Results and Issues

・Some improvements were seen, including progress with portfolio optimization, but efforts to reform a profit
structure dependent on external conditions are still underway.
・Execution of a highly feasible strategy for sustainable growth, including improving capital efficiency, is an issue

Basic Policy

Reform of Our Corporate
CultureReform of Our Profit
Structure

Portfolio Optimization
Categorize businesses and implement strategies
in each domain
Replace assets and redistribute resources
Accelerate Company-wide investment

Expand and Strengthen
the Revenue Base
Accelerate globalization “G6000”
Increase Manufacturing Profitability

MindsetFoster Accountability and Responsibility
Share Management’s Message
Thorough Monitoring and PDCA

Expand and Strengthen
Revenue Base
Pursue Efficiency
HR Development

Results and Issues
 Divided portfolio into four domains—Focus, Growth, Base and Improvement—andsteadily executed strategies
 Executed growth investments centered around Life & Healthcare and Electronics thatare in focus domains
 Withdrew from 14 unprofitable businesses and sold off 23.9 billion-yen-worth ofstrategic cross-shareholdings Portfolio optimization progressed as a result
 On the other hand, improving capital efficiency remains an issue
 Established regional management companies in the U.S. and China to build
a foundation for governance Efforts to advance development of new overseas markets and create new “out-out”
business did not progress The profit contribution from gap-filling-measures (inorganic growth) was delayed While profitability and efficiency improved in the manufacturing business, the amount of
profits failed to increase Company-wide permeation of the medium-term management plan, including the sharing
of top management messages, and the fostering of accountability and responsibility
have progressed, but issues remain in monitoring and PDCA.

 Improvement in efficiency is behind schedule although overall optimization of corporate
functions has been implemented, and infrastructure —including establishing a sharedservices company in pursuit of greater efficiencies—was established.
 Improvements were made in terms of corporate governance, including establishment ofa Nomination Committee and delegation of authority.

03

ACE-2020 Trajectory

・Solid execution toward strengthening focus areas and sowing seeds in develop areas
・Made progress in promoting efficiency, fostering accountability, promoting sustainability, and strengthening corporate governance

Focus andDevelop Areas

Red: Focus Areas
Black: Develop Areas

Growth investments: 122.6 billion yen
Invested in 3D Glass(85% allocated to focus areas)
Solutions in the U.S.
(now an affiliate)

Entered into the autonomous
driving technology field(LiDAR-related)
Inkron became a subsidiary

NVC Office creation

Invested in next-generation
displays and next-generation
pharmaceuticals.

FY2016FY2017FY2018Base and Improvement
Areas
Management base

Hayashibara
Increased production
capacity of TREHA®

Promoted delegation of authority
Launched project to enhance andstreamline back-office department
operations

Launched shared services company
Nagase Business Expert Co., Ltd.

Fitz Chem in the U.S. becamea subsidiary (now Nagase
Specialty Materials North
America)

Established branches in Lyon,
France and Izmir, Turkey

Yellow: Management base
White: Base and Improvement areas

Started joint development ofMaterials Informatics (MI) withIBM
Hayashibara signed Long-term
Partnership Agreement with
Lonza for Pullulan

FY2019Stipulated as the inaugural year
for ESG at NAGASE Group,
started full-scale efforts in ESG
and sustainability
Established Nomination
Committee
Established regional
management companies in the
U.S. and China (on 4/1/2019 in
the U.S.)Operating Income Composition
Hayashibara
FY2015
FY2020Established application lab
Life &
Life &
in China%% Healthcare
Healthcare
INTERFACIALCONSULTANTS in the U.S.
Launched MI
became a subsidiary“TABRASA” service
Launched NAGASE
Hayashibara
Technical Vitality Program
Established application lab
Prinova Group becamein Singapore
a subsidiary
Established DX promotion
Hayashibara
structure, started digital
New Pullulan and enzyme plant
marketing development
completed

22

19

FY2020Made Aience into anaffiliated company

EstablishedSustainability Committee

Abolished Takeover
defense measures

Ratio of outside directors
on Board of Directors
increased to more than
one-third

Established Group
Manufacturers’
Collaboration Committee

Sales Composition
FY2015
Americas4%

FY2020Americas11%-Withdrew from 14 businesses including unprofitable businesses from the perspective of efficiency and best owner principle,
and sold 23.9 billion yen in strategic cross-shareholdings-Increased dividends for the 11th consecutive year* and repurchased treasury stock to enhance corporate value* The year-end dividend for FY2020, the 11th year in a row the dividend has increased, is scheduled to be discussed at the Regular General Meeting of Shareholders scheduled for June 2021.

04

ACE-2020 Quantitative Goals KGI, KPI
KGI（Key Goal Indicator）: Goal and index
FY2015
ActualKGIConsolidated Sales
AmountConsolidated
Operating Income

742.1 billion yen
18.0 billion yen

FY2020Goal
1.0 trillion yen
or more30.0 billion yen
or more830.2 billion yen

83%

112%

21.9 billion yen

73%

122%

6.0% or more

5.9%(0.1)pt+1.5pt4.4％

ROE

FY2020
ActualDegree achieved

Versus FY2015

KPI （Key Performance Indicator）:Factor index to achieve KGIReform/Strategy

KPI

FY2015
ActualFY2020Goal

FY2020
ActualOperating Income in Focus Area ＊1

10.3 billion yen

16.9 billion yen

Growing Investment Distribution
Ratio in Focus Area

To be determined

35% ot more

424.7 billion yen

600.0 billion yen 482.0 billion yen

Measures
Increase Focused
Business(Portfolio Optimization)

Accelerate Globalization
Profit Structure (Expand and Strengthen
Reform Indicator Profit Structure)

Overseas Group Sales

Increase Manufacturing
Profitability

Operating Income from
Manufacturing(Expand and Strengthen
Profit Structure)＊1

Sales Growth Rate in the Americas To be determined

Break-Even Point Sales Ratio＊1＊1

Corporate Culture Pursue Efficiency(Strengthen Management
Reform Indicator Platform)

Consolidated Selling, General and
Administrative Ratio

Financial Strategy Investment
Indicator
Financial Structure

Growth Investment
Rating (R&I)

170％

18.2 billion yen

108%

177%

85%

+50pt

-

80%

113%

332%

+162pt

104%

77%

(4)pt

＋5pt

11.2%

(1.8)pt(1.3)pt

100 billion yen＊2 122.6 billion yen＊2

123%

-

「A」or more

100%

100%

14.4 billion yen

82%

73%

9.9%

9.4%

「A」

Versus
FY201560%

8.3 billion yen

To be determined

Degreeachieved

8.6 billion yen「A」*1 The figures in this chart are all simple management accounting data, which is different from the figures disclosed on the consolidated financial statements.
*2 Total over five years

05

Contents■ Review of Previous Medium-term Management Plan ACE-2020▶ Conditions Surrounding the NAGASE Group and Ideal NAGASE■ New Medium-term Management Plan ACE 2.006

Analysis of Internal Conditions: NAGASE’s Strengths
In addition to procuring and providing products, expanding provided value to research, development, processing and manufacturing toaddress customer issues and needs

Societal Issues and Needs
Customer Issues and Needs
Product R&D
based on customer
needs

Procurement andsupply of products
customers want

Processing andmanufacturing ofproducts based on
customer needs

Customer Value Chain

NAGASE’S
Strengths

R&D Planning

Procurement

Manufacturing and Processing

A broad network supporting customers’ global supply chains
Technical knowledge in chemicals, bio, etc.
Problem-solving capabilities and human resources that leverage the ability
to anticipate markets and technical knowledge

07

Our Recognition of External Environmental Changes＊1

Degree of importance to stakeholders ＊1

The most important matters for both NAGASE and its stakeholders are “technological innovation”, “climate change andresource shortages”, “demographic changes”, and “industrial reorganization”

Technological innovation

Climate change andresource shortages

Increased demand for deciphering information
Expanded opportunities for new business, changes inindustrial structures

Increased demand to develop materials andprocesses with lower environmental impact
Increased demand for supply chain-wide response

Demographic changes

Industrial reorganization

Population increase in emerging countries
Aging in advanced countries

More active industry reorganization andreassessment of distribution channels driven byintensifying competition and more sophisticatedmanagement methods

Degree of importance for NAGASE's business＊2*1 Assessed as important matters that produce great change to the respective needs of employees, business partners, local communities, consumers, and shareholders.
*2 Assessed as important matters that offer opportunities for new businesses, opportunities for existing businesses, threats to existing businesses, and threats to business continuation.

08

Dilution Risk of Our Provided Values /Future Opportunities and Threats
Dilution of Our Current Strengths

TechnologicalInnovation

Climate change
and resource
shortage

Demographic
Changes













Industrial
reorganization

Leveraging gaps in business information is decreasing
due to the increased availability of information in circulation.
The acceleration of information updates makes pastexperience and knowledge obsolete.

Business of selling high environmental impact
products is decreasing or disappearing.
Rising importance of the environment in capital markets,
including designated environmental stocks.

Future Opportunities and Threats
The evolution of digital marketing and emergence of digitalplatforms will close the information gap between
customers and suppliers.
 New competitors will emerge from unexpected areas.
The relative position of Japan is falling due to the rise of
emerging countries, etc.

Consumption and production areas are shifting fromadvanced countries to emerging countries.



Product differentiation made difficult by intensifying
competition through consolidation and increased
technical capabilities caused by the rise of emerging
nation companies, etc.

There will be heightened interest from business partners to
reduce environmental burden.
There will be a shift from existing products to sustainableproducts.

The volume of products will decrease in Japan due to adecrease in population and an aging society.
There will be changes to the supply chain in areas not yet fully
cultivated.

Customers will consolidate their business partners, andsuppliers will revisit/review existing distribution
channels/rights as industrial reorganization takes place.
 Distribution channels/rights will change due to theemergence of new competitors.
09Materiality (Key Issues)
Materiality

Delivered Values

Employees

•
•
•

•

Business
Partners••

Society andConsumers

•
•

•

Share
holders•

Provide a safe and friendly work environment.
Provide a cheerful, happy, and engaging
workplace.
Create a corporate Group that is a sense of pridefor employees and their families.
Establish a cooperative relationship by gaining
deep understanding of business partners, whichenables pursuit of a wide range of possibilities.
Provide solutions to issues that need to be tackled
throughout the value chain as well as social issues.

Contribute to the development of the local
community through legal compliance andethical management.
Consider the rights, health and comfort ofeveryone involved in the supply chain.
Provide products and services towards
realization of a sustainable world.
Foster trust and a sense of security through a highly
transparent management structure and timely andreasonable information disclosure.
Maximize enterprise value by increasing both
economic and social value and through continuous
business creation.

Related SDGs

【Use diverse human resources; offer a workplace environment andcorporate culture】••

Use advanced technologies to improve productivity and leverage
diverse human resources.
Provide a workplace environment and foster a corporate culture as aGroup where employees with diverse backgrounds have mutual respectand motivate each other.

【Use of state-of-the-art technology to create new value】••

Create new value leveraging advanced technologies and a network ofbusiness partners.
Provide a wide range of solutions based on understanding the truecauses of the increasingly complex problems of business partners.

【Solving Social and Environmental Issues, and Globalization】••••

Solve problems that threaten safety and security, e.g., climate change
and food and water shortage.
Contribute to securing and improving food safety by utilizing biotech, AI
and other advanced technologies.
Fulfill health maintenance demands due to increasingly aging societies inadvanced countries.
Contribute to the acceleration of globalization and solve social issues ineach region.

【Corporate Governance】••

Establish a highly transparent corporate governance system.
Make sustainable improvement of enterprise value by balancing
economic value and social value.

10

Ideal NAGASE
OurvisionA Business Designer that Creates a Sustainable Future“Identify, Develop and Expand” – We will contribute to the development of a sustainable world.
Enhancing Economic and Social Value
Meet the demandfor healthmaintenance

Build a sustainablesupply chain that

Value
Proposition

Solve climatechange andwater
shortages

respects the rights, healthand well-being of people

Ensure thesafety offood

Solve nutrition
and food
shortages

Be early to discover issues, understandtheir root causes, and solve themthrough a variety of methods

Digital Transformation (DX)New partnerships

×
A broad network

supporting customers’ global
supply chains

Technical knowledge
in chemicals, bio, etc.

Problem-solving capabilities
and human resourcesthat leverage the ability to anticipate
markets and technical knowledge

11

Contents■ Review of Previous Medium-term Management Plan ACE-2020■ Conditions Surrounding the NAGASE Group and Ideal NAGASE▶ New Medium-term Management Plan ACE 2.0

12

Corporate
Philosophy
We recognize our responsibility to society
and offer beneficial products and services
while maintaining the highest standards of

Sustainability Basic Policy"Continue to make efforts for solvingsocial and environmental issues
through our corporate activities forthe sustainable growth of the
NAGASE Group and society” ispositioned as a common idea
throughout the philosophy structure.

1.
2.
3.

Business operations
with integrity
Good relationship withsociety
Consideration for theenvironment

integrity.
Management
Philosophy

Throughour

growth,we

willcontribute to society and enrich the lives ofour employees.

To realize a sustainable world where people

Visionlive with peace of mind, each of us embodies
our value proposition, “Identify, Develop andExpand” through daily activities.

“Ideal NAGASE”
for 2032(200th anniversary)Business Designer that Createsa Sustainable Future :“Identify, Develop and Expand” – Contribute to
the development of sustainable society.

13Positioning of
the New ACE 2.0 Medium-term Management plan
Toward achieving the “Ideal NAGASE in 2032”, we changed the positioning of Stage 2 to “Pursuit of
Quality” from “Growth period” after we recognized dramatic changes of the external environmentMore diverse
workstyles

Advanced DX

Environmental
Adaptability

Stage3Re-examine mass production
and mass consumption society

Demand for safety andhealthDemand for engagement as
an ESG issue

Stage2
Stage1

GrowthReform2016～2020

Pursuit of
Quality2021～2025

ACE-2020

ACE 2.0｢ Profit structure reform ｣｢ Corporate culture reform ｣Concern for COIVD-19
becoming permanent

Breakthrough2026～2032
Grow dramatically toachieve the target goals

Re-examine of conventionalsales and marketing activities

Re-examine global supply chains
Time

Increased demand forcapital efficiency

Prolonged low crude oil andpetrochemical product prices
14

ACE 2.0 Basic Policies
Become a true “Business designer”
ACE 2.0 “Pursuit of Quality”
With a mindset focused on Accountability (A), Commitment (C) and Efficiency (E), and to enable its sustained growth,
NAGASE will work to give concrete shape (business, mechanisms, culture)(Pursuit)

to the aspirations expected by all of its stakeholders.
(Quality)

Reform of Profit Structure

Reform of Corporate Culture

Create a profit base toward the Ideal NAGASE(1) Pursuit of profitability and efficiency

Mindset toward the Ideal NAGASE

・Implement a company-wide asset replacement andreallocation of resources(2) Strengthen existing businesses

・Expand business opportunities through globalization
・Improve productivity of manufacturing businesses andexpand value-added through technical innovation(3) Create sustainable businesses (N-Sustainablebusiness)(1) Pursuit of economic and social value

・Fostering a sustainability mindset, and rigorous monitoring offinancial and non-financial indicators(2) Pursue efficiency

・Deepen awareness of capital efficiency
・Improve productivity of core operations(3) Strengthen human resources to drive reforms

Functions supporting reforms(1) Accelerate DX further(2) Promote sustainability(3) Strengthen corporate functions
15

Functions
supporting reforms

Accelerate DX Further

Enhance existing strengths throughthe use of DX as a function that
supports innovation

Deepen/ExploreEnhancedcommunications abilities
via Real x Digitai

R&D and manufacturing with a more
precise grasp of society’s needs• Access to customers, society andconsumers that cannot be captured
in the real world

Collect Needs• Advance product development to meet thepotential needs of customers and society ateach manufacturing company

Further enhance and expand
existing strengths

Cooperation

Unique state-of-the-art
digital solutions• Promote development of NAGASE Group’s
proprietary solutions within thedevelopment organization(ex. M1*3 (TABRASA))

Broad
network

Technical
knowledge

Solutions leveraging digitaland the Group’s total
capabilities

Further refine NAGASE employees’
nose for business• Employees who are capable of identify andsolve problems are the strength of NAGASE
Group＊2：Marketing Automation

Cooperation

Improve business opportunity inquantity and quality through CRM*1
and MA*2

Problemsolving
capabilities
and human
resources
Strengthen data analytics
and nose for business• Improve both the quantity and the qualityof business opportunities through strong
relationships with business partners built
over the years

Identify Issues

Create Value＊1：Customer Relationship Management

Expand customer basethrough digital marketing

Build an analytic platform
Cooperation• A mechanism that can tie together real world
and digital information to generate solutions
across the Group• Advanced analysis including unstructured data
• NAGASE Group’s solutions＊3： Materials Informatics

16

Reform of Profit
Structure

Pursuit of profitability and efficiency– Implement a company-wide asset replacement and reallocation of resources–
Key Policies

Approach to Business Portfolio

Develop
Partialwithdrawal

Foster and explore new business fields
Plant seeds for key fields in the future

Next-generation communications-related (5G, 6G, CASE)
Overseas-led business

Growthpotential

Businesses that have management
resources to maintain its competitive
advantages
Businesses where synergies are
expected to accelerate

Environment-related
Energy-related

Partialwithdrawal

Focus

Bio-related
Semiconductor-related
Food-related

Improve
Delivered values are diluted /Group synergies are small /NAGASE’s core competence is
not utilized / Difficult to establish
competitive advantages

Base

Business with organizational
capabilities (competitiveness inintangible assets) that are
generating stable cash flows

Brokerage of commodity materials and products

1. Secure management resources
 Ensure monitoring and securemanagement resources from businesses
with low capital efficiency

2. Reinvestment of management

resources Work to further improve profit structure by
reinvesting management resources thus
secured in energy-related and otherbusinesses with potential for revenue
growth, and business fields with highgrowth potential and capital efficiency,
including bio, semiconductors, and foodrelated businesses.
 KPI: Focus 10% of company-wide invested
capital/reinvest in focus/develop areas.

ROIC Company-wide capital costs
17

Reform of Profit
Structure

Breakdown of operating income goal
Operating income by segment(billion yen)

Change in Operating Income by Segment(billion yen)

35.0

21.9
6.5
1.8
8.4
7.3
4.7
(6.8)
2020

14.4

Life & Healthcare

4.1

Mobility

10.8

Electronics andenergy9.1

Advanced materials
and Processing

7.6

Functional
materials(11.0)

Others/Company-wide

(4.1)

35.0

7.8

21.9

2020

1.7

2.3

2.2

2.8

Electronics Mobility
Functional Advanced
materials materials and and energy
Processing

Life &
Healthcare

Others/Companywide

2025

2025

*In accordance with the reorganization of April 1, 2021, the method of classifying business segments has changed; results for FY2020 have been prepared under the classification method
following those changes.

18

Reform of Profit
Structure

Strengthen Existing Businesses– Expand business opportunities through globalization–
ACE-2020

ACE 2.0

Business・Steadily build business base in key areas
・Acquire overseas companies such as
Prinova

Create candidate businesses whose strategic
functions should be located overseas based onregional needs and industry trends

Structure/
Human
Resources

・Establish regional managing companies
in the Americas and China
・Promote appointment of local staff as
COOs of overseas entities

Promote delegation of authority and strengthen
development of local management personnel tocreate area-driven businesses

Focus segments by region
EuropeEnvironment,chemicals, mobility

Greater China
Americas

Semiconductors,
mobility, electronics,
food, plasticsｙFood, life & healthcare,chemicals, mobility,
electronics

Plastics, mobility,
life & healthcare,foodSoutheast Asia, SouthAsia, Middle and Near East

19

Reform of Profit
Structure

Strengthen Existing Businesses– Improve productivity of manufacturing and expand value-added through technical innovation
Group manufacturing companies: Operating income
Operating income*1

FY2015

FY2020

FY2025

8.3 billion yen

13.8 billion yen＊2

20.0 billion yen or more

＊1： Simple sum totals＊2： Manufacturing classifications were reviewed, and Prinova Group reclassified as a manufacturing business from FY2021; FY2020 results shown are also based on that reclassification.

Provide new values inbusinesses in Focus
and Development areas■Strengthen and expand elemental technologies andproduct development functions■Develop new materials utilizing MI (TABRASA)■Develop new markets through digital marketing

High-performance
optical materials
Semiconductorrelated materials

Functionalsaccharides

Eco-friendly
materials
Functional
healthcarematerials

Biomaterials

Sports nutrition

Flavors

3D printing-relatedmaterials

Strengthen thefoundation further■Reduce environmental burden■Promote production innovations utilizing DX

20

Reform of Profit
Structure

Create “Businesses that are Sustainable” (= N-Sustainable Business)
Create “businesses that are sustainable” to improve social and environmental values by identifying issues that
customers and society have not yet recognized and providing "solutions to generate profits" (= N-Sustainable)

Ideas of N-Sustainable Business1. Improve social and environmental values
Leave a sustainable future for our future generations byunraveling the 17 goals (169 targets) of the SDGs andcontributing to the resolution of these issues through ourbusiness activities.
and2. Provide new values that solve challenges
By foreseeing the challenges that customers and society will face inthe future, leverage the “network" of the Group to provide "solutions
that generate profits" through innovative services and technologies.

N-Sustainable Business Fields
Environment
and Energy
Contribute to solving
climate change andwater shortages

Next-generation
communications
Achieve a safe,
convenienttcommunications societyLife & Healthcare
Contribute to solving
food and nutrition
shortages, maintaining
good health

Environmental
solutions

CASE

Food

Energymanagement

Search engine
IP coreBio

Bioplastics

Fiber-optic
communications

HealthTechValue created by N-Sustainable businesses
Create innovation∞“Explore” new business models
TABRASA (Materials Informatics)“Deepen” existing business models

＊

XaaS

*X as a Service: Various service-related business models

21

Reform ofCorporate Culture

Pursuing Economic and Social Value- Fostering a sustainability mindset, andrigorous monitoring of financial and nonfinancial information

To succeed in the pursuit of quality, in addition to financial information, plans call for setting
and disclosing non-financial goals as KPIs in FY2021.
Materiality【Use diverse human resources; offer a workplace environmentand corporate culture】
・Use advanced technologies to improve productivity andleverage diverse human resources.
・Provide a workplace environment and foster a corporate culture
as a Group where employees with diverse backgrounds havemutual respect and motivate each other

Value Proposition Key Words【Employee engagement】【Work styles, diversity】

Envisioned KPIs
・Number of women in
management
・Number of specialist scientists
・Shift to local management ofoverseas entities, etc.

【Use of state-of-the-art technology to create new value】
・Create new value leveraging advanced technologies and a
network of business partners.
・Provide a wide range of solutions based on understanding thetrue causes of the increasingly complex problems of business
partners.

【Solving Social and Environmental Issues, and Globalization】
・Solve problems that threaten safety and security, e.g., climatechange and food and water shortage.
・Contribute to securing and improving food safety by utilizing
biotech, AI and other advanced technologies.
・Fulfill health maintenance demands due to increasingly aging
societies in advanced countries.
・Contribute to the acceleration of globalization and solve social
issues in each region.

【N-Sustainable business】【GHG emissions reductions】【Circular economy】【Food loss】【Corporate Governance】
・Establish a highly transparent corporate governance system.
・Make sustainable improvement of enterprise value by balancing
economic value and social value.

【Corporate Governance】

・Number of N-Sustainablebusiness deals
・GHG emissions
・Water usage and discharge
・Energy usage
・Waste generated, etc.

・Diversity in management
ranks, etc.

22

Reform of
Reformof Culture
Corporate
Corporate Culture

Non-Financial Target (1): Improve Employee Engagement

Single-year results(Short-Term)

Ideal NAGASE(Medium-Term)

Ideal NAGASE(Long-Term)

Announced May 10, 2022
Values we want toprovide to
stakeholders[Employees]•
Provide a safe and friendly work environment•
Provide a cheerful, happy, and engaging workplace•
Create a corporate group that is a sense of pride for employees and their families

Materialities(Key Issues)[Use diverse human resources; offer a workplace environment and corporate culture]•
Use advanced technologies to improve productivity and leverage diverse humanresources•
Provide a workplace environment and foster a corporate culture as a group where
employees with diverse backgrounds have mutual respect and motivate each other

ACE 2.0 Non-financial
targets (KPIs)*

Group companies
NAGASE(non-consolidated): Percentage of companies conducting regular
engagement surveys 100%
: Engagement survey score of 60 or more

Initiatives
and policies

Talent management, health management, work-style reform, Diversity &Inclusion, HR policy

Results

Implemented engagement survey; engaged in work-style reform (started Project
Bridge, eliminated dress code)

Disclosures[Number of employees (non-consolidated)]
Number (percentage) of male and female employees, number (percentage) of non-regular
employees, percentage of employees with disabilities, number of mid-career hires[Work-style (non-consolidated)]
Rate of new graduates retained after three years, turnover rate for personal reasons, average
years of service, average annual salary, total annual hours worked, rate of paid leave taken,
number of employees taking maternity and childcare leave, number of employees participating inhuman resource development training, total hours of training[Safety and health (non-consolidated + domestic manufacturing companies)]
Number of work-related accidents, number of fatalities, frequency rate, frequency of workrelated accidents, number of employees participating in training related to health and safety* Prinova Group calculated as a single company.
* FY2021: Implemented by 41% of group companies (including 24 companies with one-time implementation) NAGASE (non-consolidated)engagement survey score was 52.4.

23

Reform ofCorporate Culture

Non-Financial Target (2): Carbon Neutrality

Single-year results(Short-Term)

Ideal NAGASE(Medium-Term)

Ideal NAGASE(Long-term)

Announced May 10, 2022
Values we want toprovide to
stakeholders
Materialities(Key Issues)
ACE 2.0 Non-financial
targets (KPIs)[Society and Consumers]•
Contribute to the development of the local community through legal compliance andethical management•
Consider the rights, health and comfort of everyone involved in the supply chain•
Provide products and services towards realization of a sustainable world where
people live with peace of mind••

Solve problems that threaten safety and security, e.g., climate change and food andwater shortages
Contribute to the acceleration of globalization and solve social issues in each region

Consolidated
Consolidated
NAGASE(non-consolidated)
Overall Measures
Visualization

Initiatives
and policies

Reductions: Scope 1 and 2 reduction rate of 37% or more (compared to 2013): Reduce emissions through the generation or purchase ofrenewable energy of 35,000 tons or more (cumulative total): Scope 2 Zero emissions: Participation in external initiatives, promote environmental
investing, examine internal carbon tax: Visualize emissions in the supply chain, calculate the LCA ofstrategic products: Provide low-carbon products and reduction solutions; adopt
environmentally friendly facilities
Improve production process, utilize renewable energy(purchase, generate renewable energy in-house)

Results

Declaration of carbon neutrality, declaration of support for TCFD, businessalliance with ZeroBoard Inc. began calculating LCA for domestic manufacturingsubsidiaries

Disclosures(results only)[Consolidated]• Greenhouse gas emissions (Scope 1, 2, and 3)• Greenhouse gas Scope 1 emissions by type
• Energy consumption, electricity consumption, consumption rate during
production (t-CO2/ton of production)
24

Reform ofCorporate Culture

Pursue Efficiency - Deepen awareness of capital efficiency, improve productivity of core operations
Achieve ROE of 8% by FY2025, with ROIC > WACC while maintaining an aggressive investment policy aimed atsustained growthBusiness strategy

Financial strategy

ROE

ROIC＊1

WACC＊2

FY2020 results

FY2020 results

5.9%
FY2025 goal

8.0%

4.2%

FY2025 goal

5.0 - 5.5%×FY2020 results

5.7%

FY2025 goal

5.0% or less

Policy・Maintain aggressive investment policy
・Shift resources to Focus and Develop Areas
・Strongly promote Group-wide efficiencies, including productivity of core operations
・Reduce WACC through use of interest-bearing debt with a maximum Net DE ratio of 0.5 times
or less and through dividend increases, etc.
*1 Profit attributable to owners of the parent / average invested capital during the term * 100*2 Cost of shareholder capital comprising WACC is according to Company’s own method of calculation based on CAPM

25

Reform ofCorporate Culture

Pursue Efficiency - Deepen awareness of capital efficiency
Generate cash flow through sustained growth and portfolio improvements, ensure financial soundness, and efficiently allocate
funds to new business investments and R&D investments for new growth

Cash flow (cumulative)

Safety and Efficiency

Shareholder returns

Operating CF 150.0 billion yen

Net DE ratio of 0.5 times or lessContinued dividend increases, flexible
acquisition of treasury stock

We will basically use interest-bearing debt tofinance investments in excess of operating cash
flow, but we continue to maintain a sound financial
structure as a base for sustainable growth.

Build a financial structure that effectively reflects
the results of business strategies by transforming
the company's financial structure to offer bothsoundness and efficiency.

Dividends will be paid on the basis of continued
dividend increases during ACE 2.0 period.
In addition, we will consider flexible repurchases oftreasury stock with an awareness of the correlation
with our business strategies.

● Cash flow from operating activities

Operating CF

150 billion yen

Maintenanceinvestments(50 billion yen)

Continuous dividends

Excluding changes inworking capital(30 billion yen)
70 billion yen● Cash flow from financing
Interest-bearing
debt procurement~ 80 billion yen● Cash flow from governanceimprovements

Reduction in strategic
cross-shareholdings

30 billion yen

Total Cash Flow

~180 billion yen

100~150 billion yen

N-Sustainable Investment

Growthinvestments

New business investment＋

DX-related investment

Transfer to capital policy if there
are no investment opportunities
offeringhigh
investment
efficiency,

Repurchase oftreasury stock(Limited to the amount of strategic
cross-shareholding sold)R&D investment
Working capital26

Reform ofCorporate Culture

Pursue Efficiency —Deepen awareness of capital efficiency—
Shareholder
returns policy
during term of
ACE 2.0

Conventional

Dividend

Stabledividends

Acquisition oftreasury stock—

We will pay dividends based on consolidated cash flow and investment status, with a basic policy ofcontinuously increasing dividends in consideration of consolidated performance and financial structure,
while improving profitability and strengthening the corporate structure.
Further, we will consider repurchases of treasury stock in a flexible manner, while keeping efficiency inmind.

ACE 2.0• We will not be conscious of dividend
payout ratio or total return ratio, and inprinciple we will not reduce dividends
even if single-year performance declines
due to one-time factors.

Continued dividend
increase• Evaluation of Company’s stock in
capital markets• Status of financial soundness(Net DE ratio to be 0.5 times or less)• Investment capacity for growth
Overall consideration of
the above

Implement flexibly

Annual DPS (dividend per share) (Yen)
50

40

40

30

20

22

24

26

28

30

32

33

15

16

42

44

46

10

0

10

11

12

13

14

17

18

19

20

・・・ 2527

Reform ofCorporate Culture

Boost personnel to promote reforms
Improve engagement between employees and the company through a virtuous cycle of human resources, environment andcultural measures, and drive sustainable growth and development for employees and the company.
Alignment between

Create a foundation forbusiness strategy andhuman resource strategy① Human resources

1

Human
resources
Innovative and global
talents
leading innovation

3
CultureCorporate culture thatembrace challenges
and diverse
personalities

empowering diverse
personnel

ValuesPrinciples
VisionTalent management
Acquire and develop talented personnel
and placing them in the right roles

Health and Productivity Management
Physically and emotionallyhealthy employees• Make global personnel portfolio visible• Acquire and strengthen development of
personnel in conjunction with strategy• Strengthen efforts to visualize andanalyze employee health status andexecute new measures2
Environment

Comfortable, safe andinspiring workplaces andworkstyles② Environment
Offices where employees
can exercise their creativity

Work Style Reforms

Work styles independent oftime or place• Introduction of effective and efficientworking styles, such as telecommuting
and staggered working hours• Establish and achieve a new workplacevision where strong individuals work
together with a sense of unity③ Culture
Enhanced engagement

Sustained growth and development
for employees and the company

Diversity & Inclusion
Diversification of Personnel• Improve ratio of women, non-Japanese,and highly specialized personnel in Japan

Human Resource Policy
Management decisions focused on both
improving capital efficiency andchallenging new businesses• Revision of the executive compensation
system28

Quantitative Goals“Pursuit of Quality” Key Goal Indicators (KGIs)
Measures

Indicators

FY2020

FY2025*

Improvement in capital efficiency

ROE

5.9%

8.0% or greater

Increased profitability

Operating Income

21.9 billion yen

35.0 billion yen* FY2025 assumptions: 1 US$= 108.7 yen, 1 RMB = 15.6 yen

Key Performance Indicators (KPIs) for achieving the “Pursuit of Quality”
Measures

Measures

FY2020

FY2025Growth investments*1—

150.0 billion yen
or more*2

Secure 10% of company-wide
invested capital and reinvest in
focus and develop areas—

10% or more

Create “N-Sustainable businesses”

Operating Income—

5.0 billion yen
or more*3

Improve productivity of manufacturing
and expand value-added throughtechnical innovation

Manufacturing business operating
income*4

13.8 billion yen*5

20.0 billion yen
or moreImprove productivity of core
operations

Ratio of gross profit to generaladministrative expenses*6

57.1％*7

52.1％

Deepen awareness of capital efficiency

Net DE ratio

0.23 times

0.5 times or lessAccelerate DX further

Invested capital (including
expenses)*8

2.4 billion yen

10.0 billion yen*2

Company-wide asset replacement andreallocation of resources
Reform of Profit
Structure

Reform of Corporate
CultureFunctions supporting
reforms

Indicators*1 N-Sustainable investment, new business investment, DX-related investment, R&D expense,
working capital*2 5-year cumulative figure*3 Figure based on internal management*4 Simple sum calculation*5 Manufacturing classifications were reviewed, and Prinova Group reclassified as a manufacturingbusiness from FY2021; FY2020 results shown are also based on that reclassification.

*6 Excludes R&D expense, amortization of goodwill and other acquisition-related intangible assets,
and profit and loss due to amortization of actuarial differences*7 Average figure for past five years (FY2016-FY2020)*8 Five-year cumulative total of 10.0 billion yen in DX-related investments is included in growthinvestments of 150.0 billion yen

29Appendix

30

Segment Strategy
Functional Materials Segment
Market Opportunity• In the paint and ink industries, environmentally friendly
products such as low VOC (volatile organic
compounds) is increasing in response to tighter
environmental regulations worldwide.
• Increased demand for paints and inks in emerging
country markets• The plastic market has wide range of applications andwill continue to grow due to their use in metal
substitution and other applications.

Strengths
Broad
network

Extensive network of business partners based on
handling of diverse products, from commodity
chemicals to high-performance materials

In-depth knowledge of specialized fields such as
Technical energy- and cost-saving state-of-the-art organic
knowledge synthesis technologies, paints, and water
treatment
Problemsolving ability
and human
resources

The ability to quickly identify and respond tomarket issues by combining our technologicalexpertise and networks in the chemical field

Manufacturing Affiliates
Nagase ChemteX, Nagase Filter, Aience, etc.

Target Value Proposition

contribute to solving issues our business partners and customers
face as well as solving environmental problems, based on highly
specialized knowledge in the chemical field

Main Businesses• Sales of high-performance materials for electronics and otherapplications• Sales of ingredients to paint and ink manufacturers

Pursuit of profit and efficiency• Greater efficiency in sales activities through use of digitaltechnology• Drive high added value through use of development andassessment functions• Reassessment of policies for non-focus businesses

N-Sustainable Businesses• Develop eco-friendly products, including bio-derived materials, etc.
• Develop comprehensive eco-friendly consulting services in
exhaust gas, wastewater, energy savings, etc.
7.6

Operatingincome goal
(billion yen)

4.7

FY2020

FY202531

Segment Strategy
Advanced Materials & Processing Segment
Market Opportunity• Increased environmental awareness and tightened
environmental regulation have increased demand forchemicals, biodegradable plastics and recycling
technologies that have less impact on theenvironment and human health• Differentiation in engineering plastic and othernon-commodity plastics is advancing as functionality
increases

Strengths
Broad
networkGlobal network of business partners acrossa broad range of industries

Knowledge of plastics processing, development
Technical
and manufacturing of color materials, etc. accrued
knowledge in Group manufacturing and processing
companies
Problemsolving ability
and human
resources

Target Value Proposition

Quickly identify seeds and needs globally and across multiple
regions, providing eco-friendly products and services utilizing
business partner networks and Group manufacturing andprocessing capabilities

Main Businesses• Sales of high-performance, eco-friendly plastics• Sales of pigments and high-performance film, manufacturing
and sales of digital printing supplies

Pursuit of profit and efficiency• Greater efficiency in sales activities, advanced inventory
management by utilizing digital technology• Establish high value-added processing technology• Consider withdrawal from non-focus areas

N-Sustainable Businesses• Develop biomass and other eco-friendly materials• Work to build a plastics recycling supply chain

Problem-solving capabilities tied to the ability
to quickly identify and combine seeds andneeds globally and across multiple regions
7.3

Manufacturing Affiliates
Fukui Yamada Chemical, Nagase ChemteX,
Hayashibara, etc.

9.1

Operatingincome goal
(billion yen)
FY2020

FY202532

Segment Strategy
Electronics & Energy Segment
Market Opportunity• The next-generation telecommunications market (5G,
6G) is growing• With the rise of next-generation devices, thesemiconductor related materials market will continue
to grow.
• As demand for clean energy grows, new markets forhydrogen, power storage, etc. will expand

Strengths
Broad
network

Connections across a wide range ofindustries related to electronics, including
other segments

Deep insight into not only material properties but
Technical also processes in functional resins and precisionknowledge processing
Problemsolving ability
and human
resources

Ability to quickly identify and solve problems
by integrating development, manufacturing
and trading company functions

Target Value Proposition

Provide total solutions in the fields of electronics and energy
using advanced technologies with high performance and highfunctionality and contribute to the realization of a safe andconvenient communications society.

Main Businesses• Manufacturing and sales of liquid epoxy encapsulating materials
and other semiconductor-related materials• Sales of semiconductor precision processing-related materials

Pursuit of profit and efficiency• Promote greater efficiency in sales, lower logistics costs andother cost reductions• Develop new applications utilizing existing technology

N-Sustainable Businesses• Develop materials and processes for next generation
communications• Provide structural materials for 3D printers, materials, equipment
and services for XR and other next-generation devices• Manufacturing and sales of high heat-resistant polyimide film
• Expansion of energy management-related business
8.4

Manufacturing Affiliates
Nagase ChemteX, CAPTEX, INKRON, 3D Glass
Solutions, Xenomax-Japan, etc.

10.8

Operatingincome goal
(billion yen)
FY2020

FY202533

Segment Strategy
Mobility Segment
Market Opportunity• Electrification of mobility is accelerating from anenvironmental standpoint, generating new markets,
new customers and new technologies• As the trends of CASE and MaaS continue, mobility
will be equipped with new communication functions
and the use of IT technologies will be promoted.

Target Value Proposition

Provide solutions globally for achieving an eco-friendly, safe andcomfortable next-generation mobility life

Main Businesses

Strengths
Broad
network

Strong relationships of trust with business
partners, including not only procurement
but also technology development division

Deep knowledge encompassing everything
Technical from components to products, including
knowledge materials, processing technology andmanufacturing methods
Problemsolving ability
and human
resources• Sales of automotive interior and exterior materials, plastics,
materials and components for functional parts, battery materials,
and products for electrification, automated driving and interior
electronics

Pursuit of profit and efficiency• Enhance business portfolio• Create next-generation businesses

N-Sustainable Businesses• Expand sales of products related to electrification andautonomous driving• Consider MaaS business

The ability to offer proposals that flexibly
combine Group functions and partnerships,with a deep understanding of industry andcustomer needs

Manufacturing Affiliates
KN Platech America, Tokai Spring Mfg. (Foshan),Huizhou Sanli Three Synergy Precision, etc.

Operatingincome goal
(billion yen)

4.1
1.8
FY2020

FY202534

Segment Strategy
Life & Healthcare Segment
Market Opportunity• Expansion of functional food and preventive and predisease care markets due to the increase in the elderly
population and growing health consciousness• Food loss reduction, plant-based food, and clean labels are
expanding due to changes in consumer awareness• Transformation of the drug discovery process through thewidespread use of new modalities• Responding to new issues arising from increased
awareness of ethical awareness, and increasing use of
eco-friendly products, etc.

Strengths
Broad
network

A global network extending across Asia,
Europe and the Americas

Biotechnologies, new modality drug-related
Technical technologies, food processing/formulation
knowledge technologies, AI-based drug efficacy prediction
and novel marker discovery
Problemsolving ability
and human
resources

Ability to conceptualize new business andidentify technologies based on strong
technical literacy in the food and life
sciences fields

Manufacturing Affiliates
Hayashibara, Prinova Group, Nagase ChemteX, etc.

Target Value Proposition

Going beyond materials to contribute to future beauty andhealth, the joy of food, and a sustainable society andenvironment

Main Businesses• Manufacturing and sales of food additives and cosmetic
ingredients• Manufacturing and sales of pharmaceutical ingredients,
intermediates and additives• Sales of food materials, pre-mixes, sports nutrition-related
products

Pursuit of profit and efficiency• Reevaluate existing operations, including manufacturing,
distribution and inventory management, in addition to
improving and optimizing productivity using digital technology• Reevaluate policies for low-profit businesses

N-Sustainable Businesses• Development and sales of proprietary biomaterials• Expand Hayashibara products business that contributes tosolving food loss and other social issues• Develop health tech services in medical fields such as
prevention and pre-symptomatic care
14.4

Operatingincome goal
(billion yen)

6.5

FY2020

FY202535

https://www.nagase.co.jp/english/

These presentation materials contain forward-looking projections based on assumptions,forecasts, and plans as of May 11, 2021. Actual earnings may differ from projections due torisks and uncertainties in the future global economy, competitive landscape, currency
exchange rates, etc.