Integrated Report 2023

Delivering next.
Osaka Head Office:1-1-17, Shinmachi, Nishi-ku, Osaka City,
Osaka 550-8668, Japan
Tel: (81) 6-6535-2114
Tokyo Head Office:Tokiwabashi Tower, 2-6-4 Otemachi, Chiyoda-ku,
Tokyo 100-8142, Japan
Tel: (81) 3-3665-3021
Nagoya Branch Office:3-14-18, Marunouchi, Naka-ku, Nagoya City,
Aichi 460-8560, Japan
Tel: (81) 52-963-5615

https://www.nagase.com/

P-B10282

Printed in Japan

| Contents || Introduction |About NAGASE

Purpose and Values
The value of NAGASE’s
existence, and the value that we
provide to society

03 Purpose and Values
05 A History of Value Creation
07 The Business Environment
09 Strengths and Corporate Functions
NAGASE’s Ideal Future

Messages from the CEO
and the CFO

What We Envision for the Future, and How We Aim
to Achieve It

Competitive advantage,
long-term business prospects,
and financial strategy

13 Our Value Creation Story
15 CEO Message
19 CFO Message
Growth Strategy

Backcast from 2032 “Ideal NAGASE”
Progress on
Management Plan
Value generation in focus areas

25 Medium-Term Management Plan
27
Reform of Our Profit Structure
35

Reform of Our Corporate Culture

43

Functions Supporting Reforms

47 Social Contribution Activities
GovernanceInterview with
the Outside Directors
Strengthening our organization
to realize our visionof the future

We recognize our responsibility to society and offering
beneficial products and services while maintaining
the highest standards of integrity
51 Interview with the Outside Directors
53 Our Board
55 Corporate Governance
59 Risk Management and ComplianceBusiness Portfolio

Message from the Officer
in Charge of Sales
Business Portfolio Reform

Accelerate the shift of resources to focus anddevelopment area
63 Message from the Officer in Charge of Sales
65 List of Segments

Our Group slogan expresses
NAGASE’s value proposition,“Identify, Develop andExpand”. Step by step,by stacking “next”
on top of “next” together
with our partners,
we create a better future.

67 Strategy by Business and Region

NAGASE Report 2023

01

79 11-Year Financial Highlights
81 Financial Highlights

Financial and Non-financial
Management Performance

83 Non-Financial Highlights
85 Financial Statement
121 Investor Information and Corporate Information

About this Report

About the Front Cover

The NAGASE Group has created this integrated report to help
our diverse stakeholders better understand the Group’s
wide-ranging business fields and business activities, as wellas its unique value creation process. Going forward, we willcontinue to improve this report as a communication tool for
conveying the Group’s corporate value enhancement activities
in an easy-to-understand manner.

The color scheme used on the front cover has NAGASE Red
playing a central role. Nagase Red derives from a natural dye,safflower, which was one of NAGASE’s key products when
the Company was founded in 1832. This color thus represents
NAGASE’s roots. The pattern of diverse triangular shapes
represents NAGASE’s present as “Business Designer” which
combines diverse functions—including that of a trading
company, manufacturing, processing, and R&D—to deliver
added value to society. Finally, the children emphasize our
responsibility and commitment to the future, which wecannot afford to forget when developing our business.

Referenced Guidelines:• The International Integrated Reporting Framework developed by theInternational Integrated Reporting Council (IIRC)• Ministry of Economy, Trade and Industry’s Guidance for Collaborative
Value Creation
Period Covered: April 2022–March 2023 (FY2022). Some information
after March 2023 is also included.
Organizations Covered: Nagase & Co., Ltd. and the NAGASE GroupNAGASE Group Slogan

Delivering next.

02
NAGASE Report 2023

Data Section

Financial Highlights
Non-Financial Highlights

| About NAGASE | Purpose and Values |Over a period of more than 190 years,
NAGASE has constantly maintained thehighest standards of integrity, delivering the
products and services that are needed by ourcustomers, and by society as a whole.
What we have built up over that time is the trustthat our partners and society place in us.
Going forward, besides working to solve the problemsof today, the NAGASE Group will be delivering “next”
by addressing the new problems affecting society
and the whole of humanity through the provision of
new materials.

NAGASE’s
Management Philosophy

Maintaining the highest standards of integrity
We recognize our responsibility to society and offer beneficial products
and services while maintaining the highest standards of integrity. Throughour growth, we will contribute to society and enrich the lives of our employees.

“The Earth is borrowed from future generations.”04

To help realize a sustainable future society, NAGASE
will continue to steadily enhance the trust that people
place in us, working together with partners throughout
the world to build a future where people can live withpeace of mind.

NAGASE Report 2023

NAGASE Report 2023

03

| About NAGASE | A History of Value Creation |NAGASE’s History of Value Creation
International Expansion

1832–
Founding

The NAGASE Group traces its roots to1832 when founder Denbei Nagase
established Urokogataya, a dyestuffs
wholesale business that handled
safflower, funori seaweed and starches in
Nishijin, Kyoto. Later on, we establisheda foothold in the chemical industry by
starting to handle synthetic dyes in
addition to natural dyes.

Founder Denbei Nagase

NAGASE Report 2023

05

Strengthening of Manufacturing,
Processing and R&D Functions

Co-creation with Partners

1970–

2010–

Gearing Up the Food
Ingredients Business

Enhancing Functions as
a Manufacturer

General Electric Co. (GE)1901–

Forging Ties with Leading
Overseas Manufacturers
Entering the 1900s, the NAGASE Groupstarted doing business with overseas
manufacturers to pursue the possibilities
of chemicals. As it expanded its importbusiness, NAGASE established an officein Lyon, France in 1901. That spurred the
expansion of partnerships with overseas
manufacturers, including Basel Chemical
Co. of Switzerland, as well as Eastman
Kodak Co. (now Kodak) and DuPont of
the U.S. While importing state-of-the-art
products from overseas, including
technology not yet available in Japan,
and making great strides as a trading
company specializing in chemical
products, the NAGASE Group delivered
new value.

Since its founding, the NAGASE Grouphas engaged in diverse operations. In
1970, it established Nagase-CIBA Ltd.
(now Nagase ChemteX Corporation) as a
joint venture with Ciba for manufacturing
epoxy resins. The following year, itestablished Engineering Plastics, Ltd. ina 50-50 joint venture with GE. It also built
several new plants as part of steps tostrengthen and expand its manufacturing,processing, and other functions as amanufacturer.

Nagase Bio-Innovation Center

1990–

Demonstrating Superior
R&D Capabilities

From the 1990s, the NAGASE Groupbegan enhancing its R&D functions inearnest. In 1990, it established theNagase R&D Center (now the Nagase
Bio-Innovation Center) as a base for R&D
into bio-related materials. In the 2000s,
it established Nagase ChemteX (Wuxi)
Corporation in China as an epoxy resin
plant for Nagase ChemteX Corporation.
It also made Pac Tech-Packaging
Technologies GmbH of Germany a
subsidiary. In 2007, it opened theNagase Application Workshop, an open
innovation laboratory, in a push to also
secure an advantage in R&D functions.

In the 2010s, biotechnology also started
to gain more attention. In 2012, the
NAGASE Group made the biotechnology
specialist Hayashibara Co., Ltd. a
subsidiary to strengthen its foodingredients business. In 2019, it madePrinova Group LLC, a U.S.-based
company that sells and processes foodingredients and has a global sales
network, a subsidiary. By generatingsynergies among the new Group
companies, NAGASE brought its foodingredients business into full swing andglobal development.

Panoramic view of Ciba in 1893

2020–

Promoting Sustainability
Following on from the establishment of
the Sustainability Committee and theformulation of the Sustainability Basic
Policy in 2020, the Group set non-financial
targets in the Medium-term Management
Plan ACE 2.0. The Group aims to help
solve social and environmental issues torealize the sustainable growth of boththe Group itself and society as a whole.
In April 2023, Hayashibara Co., Ltd. wasmerged with the biochemical products
division of Nagase ChemteX Corporation,
thereby realizing a further strengtheningof the Group’s biotech business. The
NAGASE Group is building up theGroup’s foundations in order tocontribute toward the realization of asustainable society.

Prinova Group LLC

Fiscal year ended March 31, 1967
(non-consolidated)

Net sales:¥65.0 billion¥27.5 billion
Operating income: ¥1.8 billion
Total assets:

Fiscal year ended March 31, 1987
(non-consolidated)

Net sales:¥430.5 billion¥193.6 billion
Operating income: ¥6.4 billion
Total assets:

Fiscal year ended March 31, 2007
(consolidated)

Net sales:¥701.3 billion¥422.8 billion
Operating income: ¥21.6 billion
Total assets:

Fiscal year ended March 31, 2023
(consolidated)

Net sales:¥912.8 billion¥762.6 billion
Operating income: ¥33.3 billion
Total assets:

06
NAGASE Report 2023

Founding as a Dyestuff Wholesaler

| About NAGASE | The Business Environment |The External Business Environment Affecting NAGASE
When formulating the Medium-Term Management Plan ACE 2.0 which was announced in May 2021, the NAGASE Group
performed analysis of the external business environment. The most important issues affecting NAGASE and its stakeholders
were identified as: climate change and resource shortages, industrial reorganization, technological innovation, and demographic
changes. Viewing these changes in the external environment as new business opportunities, NAGASE will be working tocontribute toward the resolution of global environmental and social issues.

Climate change andresource shortages

Demographic
changesIndustrial reorganization

Technological innovation

Global net greenhouse gas (GHG) emissions

The industrial structure continues to be transformed, due tothe competitive environment, changing customer trends,
and deregulation. New trends are emerging as a result ofdevelopments such as increasingly vigorous open innovation,and the range of business partners available for NAGASE forcollaboration is expanding.
Changes in the supply chain
FY202207

Gigatons of CO2 equivalent emissions (GtCO2-eq)

80
Historic emissions(2000–2015)

Nationally determined
contributions (NDCs)
range in 2030

40

(US$ millions)

Implemented policies(Median, with percentiles
25–75% and 5–95%)

Lim
it W

20
Lim

0

Net Zero

it W
arm

a rmi
ng t o 2

ing to 1.5

Limit warming to 2°C(<67%)ºCºC

Limit warming to 1.5°C(<50%)

Assumes no overshooting, oronly limited overshooting–20

Shift of procurement sourcesfrom overseas to Japan

2020

2040

2060

2080

2100 (Year)

Source: Compiled by NAGASE & CO., LTD. based on Global Environment Bureau, Ministry of theEnvironment, “Summary of the Synthesis Report (SYR) of the Sixth Assessment Report(AR6) of the Intergovernmental Panel on Climate Change (IIRC)”AI

Electric vehicles

According to the United Nations’ State of World Population
2023 report, the world’s population reached 8 billion people
in 2022. Population structure is changing due to rising
lifespans, particularly in the developed nations, and due todeclining birthrates.

The Aging of the Population, and Forecasts for the Future (Japan)(Ten thousand persons)

Other

9,469

8,000

0–14 years

15–64 years

75 or older

Uncertain

65–74 years

15,00011,706

12,00012,361

12,69312,806

12,615

11,913
11,092

10,467
9,430

Dispersion and diversificationof R&D and marketing
functionsStandardization of products
and parts
Strengthening of systems
for mutual assistance withother companies
Ensuring maintenance ofstrategic inventory

IoT

10,000

Dispersion and diversificationof overseas production sites

Dispersion and diversificationof sourcing from overseas

2000

NAGASE Report 2023

The Value of new Technologies Expected to See Rapid
Growth in the 21st Century

FY2020

Relocating of production
sites from overseas to Japan

Implemented policies

60

FY2021

With the global competitive environment becoming increasingly
challenging, it is getting more difficult to sustain growth withexisting business models. In addition, the COVID-19 pandemic
accelerated the revolution in digital technology, and companies
have needed to explore new business opportunities.

6,000

9,000

4,000

6,000

2,000

0

10

20

30

40

50 (%)

Source: Compiled by NAGASE & CO., LTD. based on Development Bank of Japan (DBJ), “Survey
on Planned Capital Spending for Fiscal Year 2022”

0

1,526
2020

10,192

8,411

3,000

2030

Source: Compiled by NAGASE & CO., LTD. based on UNCTAD, Technology and Innovation
Report 2023

0

08
1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

Source: Compiled by NAGASE & CO., LTD. based on Cabinet Office, Annual Report on the Aging
Society (2022) (Japanese version) (Unabridged report)

Opportunities

Opportunities

Opportunities

Opportunities

NAGASE is working to create new markets that can help to solve
society’s problems, by making effective use of the technologicalknowhow that only the NAGASE Group possesses, including
industry-leading data, knowledge and biotechnology, anddecarbonization solutions.

At a time when customers are consolidating their purchasing withfewer suppliers and overhauling their transaction processes, the
NAGASE Group is winning high plaudits within the sector for its
technology, knowhow, and problem-solving capabilities. By adopting aproactive stance toward sustainability and investment in digitalization,
NAGASE is accelerating the process of providing new value.

NAGASE is proceeding with technology innovation that leverages
its strengths, including the integration of materials with digitaltransformation (DX), development of the semiconductor market, andthe development of cloud-based management for chemical productdocumentation, demand for which is high in the relevant industries.

NAGASE is leveraging its extensive networks and strong productdevelopment capabilities to secure new business opportunities
deriving from increased lifespans and rising health consciousness.

Examples• The NAGASE Group’s bio-related technologies> For more details, see P. 29-30• Plastic usage reduction through TiMELESS® gas control
technology > For more details, see P. 33• Carbon footprint (CFP) calculation consulting for the cosmetics
and pharmaceuticals industries > For more details, see P. 42• Forest credit and value creation for local communities and theforestry sector > For more details, see P. 42

Examples• AI-supported joint logistics matching services for chemical products> For more details, see P. 34• The NAGASE Group’s individual businesses by segments> For more details, see P. 61-67

ExamplesExamples• The NAGASE Group’s food materials business> For more details, see P. 31• The NAGASE Group’s semiconductor-related businesses• The NAGASE Group’s life and healthcare related businesses> For more details, see P. 32> For more details, see P. 75-76• The NAGASE Group’s DX initiatives> see P. 45-46

NAGASE Report 2023

With the trend toward decarbonization accelerating
throughout the world, business enterprises are expected toreduce emissions throughout the value chain. At the sametime, as the global population continues to increase and theconflict in Ukraine drags on, problems relating to energy
supply and food resources are becoming more serious.

| About NAGASE | Strengths and Corporate Functions |NAGASE’s Strengths

NAGASE’s unique functions

The key source of strength that the NAGASE Group has cultivated, and which has supported its sustained growth and been thefoundation for its value creation, is six types of capital: financial, human, intellectual, manufactured, social and relationship,and natural. By integrating these different forms of capital, Nagase the NAGASE Group is addressing various social problems
through its businesses.

By combining our capacities as a trading company with our unique capacities in manufacturing,processing, R&D, business investment, and DX, NAGASE functions as a “business designer,”delivering sustainable value to society while developing our unique businesses.

Management capital

Financial soundness
and strict financial
discipline

HumancapitalBusiness Designers
that integrate the
NAGASE Group’s
diverse functions tosolve problems

Intellectual
capitalLeveraging knowhow
across a wide rangeof fields to create
new business incollaboration withpartners

NAGASE Report 2023

09

Manufactured
capitalIncreasing
value-added throughenhanced
productivity,
technical innovation,and group synergy

Social andrelationshipcapitalPartnerships andsupply-chains built
on trust

Naturalcapital
Initiatives aimed atenhancing thesustainability of the
global environment• R&I: “A” rating• Issuance of Sustainability Linked Bonds:

10 billion yen (FY2022)• NAGASE’s Management Philosophy

We recognize our responsibility to society and offer beneficial products and services while
maintaining the highest standards of integrity. Through our growth, we will contribute to society
and enrich the lives of our employees.

• Consolidated Number of Employees

Global users

Manufacturing

Trading

Providing value through our own in-house materials
and proprietary processing knowhow, from functional
resins to food materials

Solving problems through customer-oriented sales activities
that are based on high levels of technological knowhow, andthrough NAGASE’s global logistics network

7,220• Creating innovation through biotechnological expertise (Nagase Bio-Innovation Center)• Evaluating and analyzing new technologies and material, and driving the development of new
applications, as a development partner for our customers (Nagase Application Workshop)• Promoting innovation within the Nagase Group, and building core businesses for the future (Future
Co-creation Office)• Submitting joint patent applications with over 200 partners from industry,
government and the university sector, including start-ups, over the past
20 years• Establishment of the Group Manufacturing Management Innovation Office (2022)• A total of 45 manufacturing sites in 15 countries and regions(as of March 31, 2023)• Approximately 18,000 partner companies• A global network of 108 business locations in 25 countries and regions(as of March 31, 2023)• Energy use 238,059MWh (Fiscal year ended March 31, 2023)• Total water intake 3,673ML (Fiscal year ended March 31, 2023)

Functional Materials
Nagase ChemteX Corporation

Prinova Group LLC

Advanced Materials& Processing

Mobility

Electronics & EnergyLife & Healthcare

Hayashibara Co., Ltd.

DX
Creating next-generation
businesses that make effective
use of AI and the IoT, andstrengthening digital marketing

R&D
Materials development
and process innovationthat take biotechnology as
their foundation

Offering solutions for resinand coating material
evaluation and analysis,
application development,
and formulation design

Nagase Bio-Innovation Center

Nagase Application Workshop(NAW)

Business partners
Domestic & overseas manufacturers

Business investment
Perceptive investment that
identifies advanced
technologies with strong
growth potential

10
NAGASE Report 2023

Financial
capitalCustomers• Shareholders’ equity: 309 billion yen (FYE March 31, 2023)• Growth investments: 150 billion yen (5-year target in the ACE 2.0 Medium-term Management Plan)

| NAGASE’s Ideal Future |Ideal Future
NAGASE’s Ideal Future—What We Envision for the Future, and How We Aim to Achieve It

CONTENTS
13

Our Value Creation Process

15

CEO Message

19

CFO Message

12
NAGASE Report 2023

NAGASE Report 202311

| NAGASE’s Ideal Future | Our Value Creation Process |Value Creation Process— Solving Manufacturing Challenges through Materials
By making effective use of our management resources (i.e., the strengths, functions and business areas that we havecultivated), and by addressing the issues affecting our customers, industry and society as a whole, the NAGASE Group solves
manufacturing challenges through materials. We aim to achieve our vision of “realizing a sustainable world where people livewith peace of mind” not only by generating ‘economic value’ but also fostering new ‘social value.’ By returning this value tothe society of the future, we are striving to achieve this vision.”

NAGASE’s management
resources

Identifying societal,
industrial, andcustomer challenges

Setting the axes for medium-term growth,challenges through materials

and solving manufacturing

Returning the Earth borrowed
from our future children ina clean state

Creation of economic andsocial value

VisionSocial issues

Trading functions

Trading,
Manufacturing,
R&D,
DX,
Business investment• Ability to extract perceptive
insights from information• Exploring issues and identifying
matching opportunities• A global network

Realizing a
Sustainable
World Where
People Livewith Peaceof MindSecuring customers
A wide range of solutions
Growing sales

Industrial issues

Economic
value

Bio-materials

Meetingsociety’s
needs

Our strengths

NAGASE Report 2023

13

Financial capital,
Human capital,
Intellectual capital,
Manufacturing capital,
Social capital,
Natural capital• Electrical equipment• Semiconductor

Customer issues

Chemicals

Materials

ResinsInorganic materials

SolutionsMarkets

Meeting
consumers’
needs

Business domains
Functional Materials,
Advanced Materials &Processing,Electronics & Energy,
Mobility,Life & Healthcare• FoodSolving problems throughNagase’s original materials

Manufacturing anddevelopment functions• Innovative materials andtechnologies• Manufacturing andquality management• Materials
customization

Enhancing profitability
Innovative solutions
Meeting customer needs

Value creation• Mobility

14• Chemical industry• Life sciences

Socialvalue

NAGASE Report 2023

Functions

Working with
our partners tosolve problems

| NAGASE’s Ideal Future | CEO Message |Accelerating our transformation
as a corporate group with exceptional uniqueness

It is a pleasure to introduce myself as the president of Nagase& Co., Ltd.., to which I was appointed on April 1, 2023. As arepresentative of the NAGASE Group, I would like to extend
our greetings and tell you about the business objectives andstrategies that we will be pursuing in the year ahead.
We are in a time of unprecedented change. In the past, a
company could remake itself once and expect to flourish for a
decade. Those days are gone, however. In today’s environment,
companies must be constantly evolving or they will not survive.
My appointment as president to lead our management in thisenvironment comes with one vital directive—to transform the
NAGASE Group. In my inaugural message to everyone in the
NAGASE Group, I emphasized the importance of achieving ourtransformation. I also said that there are two things that weabsolutely must not change: (1) our management philosophyof maintaining the highest standards of integrity and (2) our
relationship of trust with stakeholders.

NAGASE Report 2023

15

HiroyukiUeshima
Representative Director,
President and CEO
Nagase & Co., Ltd..

NAGASE is a company with a history of over 190 years.
I believe the reason we have survived for so long is that wehave maintained the highest standards of integrity as we havebuilt businesses that help our customers and society thrive. In
doing so, we have created a network connecting us to people
and companies around the world and gained the major assetof trust from our stakeholders. This proven integrity cannot bematched by new start-up companies and is the very source ofour value creation. When employees are unsure about adecision, I tell them to remember our management philosophy
and ask themselves: will this decision be following the highest
standard of integrity? This philosophy is also the reason forour existence—our purpose—and it will never change. Whilecontinuing the heritage of NAGASE’s outstanding corporate
culture, I will advance reforms that will enable the Group to remain
an essential part of society for another 100 years.

Solving manufacturing challenges with materials
We are entering the third year of the five-year medium-term
management plan ACE 2.0. In this plan, we reform our profit
structure and corporate culture in our “Pursuit of Quality.” Our
employees fully understand the plan’s objectives andstrategies, and the efforts they are putting in their work arestarting to produce results. At the same time, the environment
surrounding the NAGASE Group has changed substantiallysince the plan was formed, and this has caused several
challenges and discrepancies to emerge. We now see, forexample, that the current decision-making system needs tokeep up more with the speed of change in the external
environment; that although we have a culture of taking on new
challenges, we need to be more aware that management
resources for investment are finite; and that we need to further
eliminate inefficiency. We are therefore reexamining andrevising the strategic details of ACE 2.0 while maintaining its
fundamental objectives.
The new normal is rapidly redefining what we think of ascommon sense. As we scrutinize the strategies, we also havebeen asking ourselves—who is NAGASE? and why we exist?
My answer is that NAGASE is a company that solves
manufacturing challenges with materials. The fundamental
strength in our business is our ability to work closely with ourcustomers to accurately understand their issues and toharness our network of some 18,000 partners worldwide tooffer materials that provide solutions and that meet ourcustomers’ needs. If we need a material that no one else makes,
we also have the ability to use the Group’s manufacturing andprocessing functions to make the material ourselves. The
combination of our expertise in chemical, electronics, andbiotechnology, the network we have cultivated in our morethan 190-year history, and the Group’s manufacturing and R&D
functions give us unmatched capability to meet very specificcustomer needs. Under the ACE 2.0 plan, we will further refine
our superior business model to raise the quality of management.
As we transform the way we think and our businessstructure, we will maximize the use of our key resources ofpeople, money, and time as we restructure our business tomake it more rational and efficient. One of the changes wemade was realigning the Group businesses within the fourareas of Improvement, Foundation, Development, and Focus.
The new alignment allocates the businesses based on theirfunctions, which better represents the strengths of NAGASE
so we can enhance our profitability and generate further
growth in the future. In addition, each business project will becomprehensively managed using return on invested capital(ROIC), and unprofitable businesses, including those with
impairment risks, will be swiftly rebuilt and reorganized.

16
NAGASE Report 2023

Transformation while maintaining the NAGASE
highest standards of integrity

| NAGASE’s Ideal Future | CEO Message |Employee potential is what drives NAGASE’s growth
The NAGASE Group currently has 108 subsidiaries in 25
countries and regions with a workforce of diverse genders,
nationalities, ages, religions, and values. Nagase & Co., Ltd.
itself, however, still has some way to go with diversity andinclusion (D&I). Particularly in times when it is difficult topredict the future, D&I is vital for providing the different
perspectives, experiences, and values needed for innovationand is also indispensable for risk management. Therefore, we
are improving our work environments and enhancing our work
systems. One improvement we are making, while listening toopinions from employees, is expanding our educational
programs that support the active participation of female
employees and enhancing our systems accommodating
various life events, including childbirth.

Delegating authority and accelerating
decision-making

NAGASE Report 2023

17

We are taking steps to restructure our organization for greater
management efficiency. In October 2023, for example, we
consolidated our businesses from 11 to 7 divisions. We arealso establishing a new system for the delegation of authority
with the aim of speeding up decision-making. During my 35
years at the Company, I have worked in most of the businessdivisions, and that experience will be very useful in helping
determine to who, what, and how to delegate authority so it
can have the maximum effect at each worksite. We are also
reviewing the process the Board of Directors uses for making
decisions. The objective is to delegate authority to the executiveside so the Board can better focus on the longer-term view
when it discusses themes for maximizing NAGASE’s value inthe future.
Another change we will make is in our system for developing
and promoting the next generation of management personnel
who will lead NAGASE in the future. The first step will be madein April 2024, when we will introduce a personnel system created
to be “fair and impartial.” The system will be designed to actively
and dynamically promote employees without consideration ofage or gender. I believe that our employee evaluations andpromotions must be in line with public perceptions. Having asystem designed with that as its main objective should ensure

After spending time in various business divisions in mycareer, I know very well that there are many talented people
with huge latent potential working in NAGASE. It is not an
exaggeration to say that their potential is what drives thegrowth of the NAGASE Group. I ask the managers to do three
things to stimulate the potential of people working in NAGASE.
The first is to create opportunities for learning and taking onchallenges. The second is to actively engage in dialogue withsubordinates and set goals appropriate to each individual.
The third is, after delegating a task, do not micromanage it.
NAGASE has always had a culture that tolerates failure. Whena challenge to attain a rational goal ends in failure but thenleads to setting a better goal, that is valuable. Talking withsubordinates to thoroughly analyze the cause of the failureand sharing what you learn with others in the organization.
This turns that failure into an asset that will increase ourchance of success in the future.
A person can grow at any age. In the months since I
became president, I myself have grown by learning on my own
as well as by asking senior employees within the Company
and external managers to teach me. I want our employees totake on bigger challenges, and as I mentioned earlier, we wantto create a company that correctly recognizes people who takeon challenges and put in consistent effort. I also recognizethat my mission is also to foster a system and organizational
culture that encourages and supports people throughout theCompany to take on challenges.

“The Earth is borrowed from future generations”
Industry used to consider social value and economic value asa “trade-off” in which one came at the cost of the other. Thisview has changed in recent years and we are entering an ageof “trade-on” in which social value and environmental value are
prerequisites for economic value. We recognize that sustainability
is important, and that the NAGASE Group must contribute to
the development of society as we seek to generate sustaining
growth for our business. We established the Sustainability
Committee in fiscal 2020 to formulate our Sustainability Basic
Policy and strengthen our sustainability initiatives.
I believe that we need to instill our employees with adeeper understanding of issues related to sustainability. To
help raise awareness, I visited various departments in all
Group companies and talked with employees. When I talk to
people, the first thing I want to share is my own views on
sustainability. I tell them, “We borrow the Earth from future
generations, and it is important that we give back to them an
Earth so they can live better lives than we do. We must use ourcompany’s businesses so we can give them a more beautiful
Earth.” Then I say, “NAGASE can do that and, if we all work
together, we can make it happen.” Sustainability is fundamental
to corporate management, and I plan to continue talking about
it with employees.
We are placing particular emphasis on employee
engagement and becoming carbon neutral. Both are part of
the KPIs of the current medium-term management plan, andwe are monitoring our progress. The NAGASE Group defines
employee engagement as a relationship between organizationand employee built on mutual respect and mutual motivation.
The fiscal 2022 engagement survey of Nagase & Co., Ltd.
produced a score of 56.5, which was an improvement of 4.1
points from the previous year. During the year, we used thesurvey findings to hold dialogue meetings between
management and mid-level employees and created
opportunities for employees to interact.
We also made progress toward achieving carbon
neutrality. Increasing the use of renewable energy in businessactivities reduced the Group’s Scope 1 and 2 greenhouse gas
emissions (GHG) by 34% in fiscal 2022 compared to fiscal
2013. We are also using the NAGASE Group network to create
several businesses in the field of carbon neutrality. In
September 2021, we allied with Zeroboard, Inc. to launch a
GHG emissions calculation service to support corporate
decarbonization management. We are also participating in theJapan’s Ministry of Economy, Trade and Industry's GX League
to support the creation of forestry credits in cooperation withlocal governments. In additional, all of our Group companies
are engaging in ambitious projects that will address social
issues and grow their businesses. We look forward to sharing
their successes.

Using NAGASE’s unique strengths to solve social
issuesI joined Nagase & Co., Ltd. in 1988 and was first assigned tothe paint materials division of the chemicals business, where I
worked in sales. At my first job in Osaka, I learned the rigors
and the joys of the trading company business. I went on to
help launch new businesses and work in various departments,
and this experience gave me a deep understanding of the
NAGASE corporate culture and how each business works.
Since being appointed representative director and president, I
have been reminded of the unique strengths that NAGASE has
accumulated through our long history from the trust we haveearned with our customers and the strong network ofbusiness partners we have built in Japan and overseas. These
strengths are unmatched, and I believe we can use them andbuild on them to make significant contributions to solving not
only issues our customers face but also the complex
intertwining issues confronting society. I believe the markets
in our focus areas of food- semiconductor-, and life
science-related businesses as well as for our biotechnology
business, which is a development area that will extend acrossall of our businesses, each have substantial growth potential. I
also believe that bringing together the Group’s strengths will
give us the ability to provide a wider variety of value to society.
The NAGASE Group will remain true to its philosophy ofmaintaining the highest standards of integrity and solving
manufacturing challenges with materials. Our management
and employees are working together to use our exceptional
uniqueness to make us a leader in markets around the world
where customers will always know NAGASE has solutions. I
intend to lead the Group for an even faster transformation andbelieve that our employees have the power to make it a reality.
The transformation will undoubtedly enhance the Group’s
corporate value, and I look forward to the support of our
stakeholders as we “remain unchanged by continuing to change.”

18
NAGASE Report 2023

we hire outstanding human resources and have clearer evaluation
criteria. These changes will undoubtedly give us a more robust
succession plan as well. I intend to continue strengthening ourgovernance and making efficient use of our capital to raise the
NAGASE Group to a higher level.

December 2023

Hiroyuki Ueshima
Representative Director, President and CEO
Nagase & Co., Ltd..

| NAGASE’s Ideal Future | CFO Message |Masaya Ikemoto
Representative Director andSenior Managing Executive Officer

Responding to the tight supply chains andstrengthening group manufacturing

Strengthening corporate functions while
continuing the “Pursuit of Quality” in business,finance, and human capital

NAGASE Report 2023

19

Steady progress reforming the profit structure
The medium-term management plan ACE 2.0 outlines our
growth plan for the “Pursuit of Quality” as we seek to become
the “Ideal NAGASE” on the 200th anniversary of our foundingin 2032. By backcasting from this vision, we defined issues ofmateriality to address and set two core strategies of the“reform of our profit structure” and the “reform of our corporate
culture” for the five fiscal years of 2021-2025 as we seek tobecome a “Business Designer creating a sustainable future.”
In the second year of ACE 2.0, we recorded earnings
declines in both operating income and net income owing tofactors including the soaring raw material and logistics costs
worldwide and a growing interest burden as many countries
raised interest rate hikes. At the same time, we worked toreform the profit structure by advancing our main strategies
of reconstructing our business portfolio, strengthening theexisting businesses, creating sustainable businesses, andsteadily implementing measures in our focus areas.
The food-related business, which is a focus area of ACE 2.0,

expanded the market share of its trading operations, primarily
through the Prinova Group, commenced manufacturing
operations at the new plant in the U.S. state of Utah, andstepped up marketing campaigns for products including thewater soluble dietary fiber Fibryxa™ products manufactured by
Hayashibara Co., Ltd..
In the semiconductor-related business, we delivered
solutions to customers by highlighting the features of our
products, which cover all areas of the production process. In
addition to our business in the China and U.S. markets, we
anticipate Taiwanese and Japanese semiconductor
manufacturers to increase investment in Japan. The NAGASEGroup is accordingly advancing multiple strategies to expand
sales, including seeking to establish our products as built-in
components in the semiconductor industry.
The NAGASE Bio-Innovation Center and the NAGASE
Biotech Office are considering the best configuration for
applying biotechnologies for food, healthcare, and industrial
products. We integrated the Hayashibara Co., Ltd. and Nagase
ChemteX Corporation biochemicals businesses in April 2023

We also made progress with ACE 2.0 in the area ofstrengthening our existing businesses. Under the previous
ACE-2020 medium-term management plan, we started
working to broaden business opportunity for the NAGASEGroup by globalizing our business by building businessfoundations and acquiring local companies in key regions.
These efforts raised the percentage of our gross profit earned
overseas to above 50% in fiscal 2022 for the first time in our
history. The balance of our overseas gross profit has also
improved as the China region, which had previously accounted
for roughly half of overseas gross profit, is now better balancedwith earnings from the growing businesses in Europe and theUnited States.
Supply chains around the world were deeply disrupted
and very tight in both fiscal 2021 and 2022. Because the
NAGASE Group’s business content involves a high percentage
of chemicals and electronic materials, not fulfilling our supply
responsibilities would disrupt our customers’ businesses andinstantly compromise the trust our customers put in us. It
would also be very disadvantageous for our business partners.
We have therefore invested funds to reinforce the supply chain
with a main focus on securing inventory. This raised the valueof the Group’s fixed inventory assets above ¥170 billion, which
sharply increased the interest burden. Our inventories havebeen declining rapidly since the worldwide distribution
networks began gradually recovering in November 2022 and,even with the depreciation of the yen, our inventory value has
declined by tens of billions of yen from the peak. We have also
been globalizing our financing activities through worldwide
procurement management including foreign exchange risk
hedging and reducing interest and interest expenses.
Manufacturing operations account for approximately 30%of the NAGASE Group’s total operating income. The Group
Manufacturers’ Collaboration Committee was created in 2019
to bring together all of our manufacturing companies to help
strengthen our existing businesses by sharing primarily
non-financial information, such as on safety, quality, and theenvironment, and by working together to resolve issues. The
concerted effort of our companies to share their uniqueknowledge and know-how has exponentially improved theGroup’s overall productivity and technical capabilities.
In April 2022, we added the Group Manufacturing
Management Innovation Office as a corporate organization at
the head office to oversee the manufacturing companies’
overall business conditions. The office plays a vital role inenhancing the Group’s manufacturing operations by monitoring
the overall status of Group production technology, R&D, quality
control, and investment evaluations and by identifying andorganizing technologies for synergies as well as technologicalweaknesses.
Reforming the Group’s profit structure will require acomplete reconstruction of our portfolio of businesses. Overthe past decade, we have acquired Hayashibara Co., Ltd. and
the Prinova Group, while also selling businesses that were
struggling to remain profitable and competitive in the evolving
industrial structure. We base decisions to sell a business on
the best-owner principle and whether selling a business will
improve our future value and growth potential.

Achieving ROE targets and individual business ROIC
management
I would like go into a little more detail about our fiscal 2022
earnings performance from a financial perspective. After
achieving the ACE 2.0 quantitative target for ¥35 billion in
operating income in fiscal 2021, the plan’s first year, we fellback below target in the second year. As I mentioned at the
beginning, the main reasons for the decline in operating
income were soaring worldwide costs for raw material andlogistics and higher SG&A expenses. Return on equity (ROE)
also declined from 7.7% in fiscal 2021 to 6.6% in fiscal 2022.
The ACE 2.0 target is to raise ROE to 8% by fiscal 2025, theplan’s final year. However, considering that the average ROE oflisted companies in the United States is 18.4%, which is morethan double the average of companies in Japan, we
understand that investors want us to aim higher and areseeking ways to further strengthen our earning power. We willcontinue reforming our profit structure in the “Pursuit of
Quality” by strengthening our existing businesses, withdrawing
from unprofitable businesses, reorganizing our businessportfolio by selling subsidiaries, and investing in businesses
with strong competitive advantages.
Along with the need to raise our ROE, we are also awarethat the state of our investment returns being below ourcapital costs is a major issue that must be rectified. We aretaking steps to revise our weighted average cost of capital

20
NAGASE Report 2023

to bring together their biotechnologies and set a foundation
for activating synergies. In April 2024, Hayashibara will berenamed Nagase Viita Co., Ltd., and become a growth driver
for the Group’s biotechnology. In the second half of the ACE
2.0 plan, we will bring together the Group’s microbial research,
enzymatic reaction, and other technologies to refine ourdevelopment capabilities and take steps to strengthen thepresence of NAGASE as “the Biotechnology Company” in theindustrial world.
The NAGASE Group is currently creating “N-Sustainablebusinesses” that will enhance the social and environmental
value that our Group provides and bring us closer to realizing
our Group vision. The aim of these businesses is the earlyrecognition of issues that customers and society will face inthe future and to combine innovative Group services andtechnologies to offer solutions that generate profits. We haveset a quantitative target for the N-Sustainable businesses toaccount for 15% of operating income by fiscal 2025.

| NAGASE’s Ideal Future | CFO Message |Approach to investment in growth and human capital
Under ACE 2.0, we are ramping up our investments in the
food-related, semiconductor-related, and biotechnology
businesses along with other business domains with highgrowth potential and capital efficiency. During the plan’s five
years, we also created a framework for ¥150 billion in strategic
growth investment aimed at supporting the spirit of innovationand taking on challenges that are the DNA of the NAGASEGroup. In the past two years, we have allocated investment
funds for new businesses, digital transformation, and R&D. Our
strict financial discipline is behind every decision to invest, andReforming the corporate culture focused on using
diverse human resources
The second core strategy of ACE 2.0 to reform our corporate
culture places considerable emphasis on using diverse humanresources, which we have also defined as an importantsustainability issue (materiality). Our concept for using diverse
human resources refers to more than the ratio of male andfemale employees. At this stage, our goal is to fully incorporate
the abilities of employees with various backgrounds, beliefs,
and cultures into the Company’s growth strategy.
Key to this will be increasing employee engagement,
which refers to the level of trust and the strength of theconnections between management and employees. Employee
engagement scores increase when the management side
provides a comfortable working environment and a
consummately fair personnel system. High engagement
nurtures a positive attitude for contributing to the Company
and a corporate organization that can be expected to produce
results, such as by achieving departmental goals and training
lower-ranked employees. I believe that considering thisbalance and deepening understanding on both sides ofmanagement and employees will lead to improved engagement.
We will continue to draw wisdom from various perspectives as
we seek to establish a culture within the NAGASE Group inwhich a workforce of people from different backgrounds treat

each other with respect and work together to generate improving
business results.
We are also strengthening our corporate functions to
support the ACE 2.0 plan’s core strategies the “reform of our
profit structure” and the “reform of our corporate culture” Our
culture for the trading business has long been for eachbusiness unit to apply their own way of management. Thisapproach allows business division management to become very
specialized but at the same time compromised organizational
management efficiency, which makes it difficult to fully combine
and leverage the NAGASE Group’s various functions. In previous
medium-term management plan, we started taking steps tostrengthen our corporate functions so we could formulate themost effective management and organizational operating
structure. Over the past seven years, we have systematicallyconsolidated our back-office departments and createdvisualization and standardization for our operations. Whenthese were complete, in October 2023, we restructured theorganizations and business content of each of our businessdivisions. This restructuring is not only for NAGASE Corporation,
it is also for the dozens of NAGASE Group companies in Japanand around the world, where it will improve the profitability andefficiency and further advance us in our “Pursuit of Quality.”

also introduced a new president. When the new president’s
starts his tenure in April 2023, I believe it will be crucial tofurther accelerate the two reforms dictated by ACE 2.0. We
have also begun restructuring our business portfolio, which
had been organized and optimized during the five years of
ACE-2020, and partially revised our investment allocation.
Normally, upon the appointment of the new president, we
would announce revisions to the management plan andinvestment strategy, but we believe it was prudent to take thetime to ensure the revisions were sound and impactful before
announcing them. The revisions we are considering are aimed
at improving capital and investment efficiency and also at
making the strategies more powerful. (See page 23 for details.)
I believe that for a company to grow in the long term, it
must have a balance of obtaining economic benefits andproviding value to society. Since its founding nearly two
centuries ago, NAGASE has a proven history of expanding its
business domain amid dizzying changes in the businessenvironment and providing distinct value to society. We willcontinue applying the unique value that the NAGASE Group
offers to address social issues and extend our sustaining
growth into the future.

Consistent dividend growth and revising themanagement plan, including the investment strategy
As I mentioned earlier, we recognize that the top priority for
management is to establish the scenario for lifting ROE above
8% by fiscal 2025 by improving our management quality andimplementing all measures in accordance with the two main
ACE 2.0 strategies. Investors have a positive impression fromour shareholder return efforts to consistently increase thedividend per share payout, and this policy will continue during
ACE 2.0. However, we know that investor expectations will not
be met solely by increasing the dividend payment, which thatis why we added flexibly buying treasury stock to our capital
policy in fiscal 2021 as a second core form of providing
shareholder return. In May 2023, we resolved to repurchase¥8 billion in treasury stock and project a total shareholder
return of 71% in fiscal 2023.
In the spring of 2023, the Tokyo Stock Exchange requested
companies with a price-to-book ratio (PBR) of less than 1 toplace greater management focus on the cost of capital andstock price. As of end-September 2023, our PBR stood at 0.70.
We have no intention of conducting a shareholder return movesolely for the sake of lifting the share price or any extraordinary
measures to boost our PBR above 1. We intend to create
conditions for our stock price and PBR to rise by enhancing
our corporate value through investing in the NAGASE Group’s
core businesses and growth fields to strengthen our earning
power, lowering our weighted average cost of capital (WACC),
and raise our ROE. We will also increase dialogue with investors.
In fiscal 2023, the third and middle year of ACE 2.0, we

22
NAGASE Report 2023

NAGASE Report 2023

21

(WACC) by lowering the cost of capital while maintaining
adequate leverage to procure funds. Beginning in fiscal 2020,
we have been systematically repurchasing treasury stocks
and increasing shareholder return.
We are seeking efficient fund procurement, such as byclosely monitoring short- and long-term interest rate movements,
as we seek to maintain our leverage for procuring funds while
lowering WACC. In June 2022, we tried a new method of
procuring funds by issuing our first sustainability-linked bond.
While diversifying our financing methods, we also decided toissue corporate bonds to provide additional financing toensure we will achieve the quantitative targets of the NAGASEGroup Carbon Neutral Declaration. The declaration is also our
proclamation to the capital markets of the NAGASE Group’scommitment to addressing climate change.
Management is also placing additional emphasis on ROIC,
which is a key management indicator under ACE 2.0. We havein place a system for calculating ROIC not just for a business
unit or department, but for more than individual 100 projects.
The regular monitoring of ROIC will enable us to take action on
investment projects producing inadequate returns.

the expected ROIC is closely scrutinized for each investment.
A long-term perspective is essential when investing for
growth, but during the second half of ACE 2.0, we will beemphasizing investments that can start generating profits inthe shorter term while seeking to strike a balance of short andlong-term investments. Another criteria our investment
decisions will consider is sustainability. We are keenly awarethat investing in projects that ignore the SDGs or environmental
impact or that do not consider sustainability would invite
perilous risk for the NAGASE Group in the future. The objectiveof investing management resources in areas like the
N-Sustainable businesses that enhance the social andenvironmental value we provide is to support the sustainable
development of society and the growth of our Group.
The source of the NAGASE Group's sustainable growth isour human resources. That is why we consider investing inhuman capital as essential and linked directly to strengthening
our management foundation. We currently have programs for
dispatching personnel to overseas subsidiaries and businessschools, subsidizing participation in certifications courses, andmonetary rewards for earning qualifications. We plan toincrease these programs as a part of our investment in humancapital and to attract individuals that will bring new and uniquecapabilities to the NAGASE Group. We will also continue thereconstruction of the Tokyo Head Office Building and allocate
funds to create workplaces that are safe, comfortable andencourage creativity.

| Growth Strategy |Strategy
Growth Strategy—Backcast from 2032 “Ideal NAGASE”

CONTENTS
25

Medium-Term Management Plan

27

Reform of Our Profit Structure

29

Biotechnology

31

Food-Related and Semiconductor Businesses

33

Core Businesses

35

Reform of Our Corporate Culture

37

Employee Engagement Improvement

39

Carbon Neutrality

43

Functions Supporting Reforms

45

Further Acceleration of Digital
Transformation (DX)24

Medium-Term Management Plan

Reform of our profit structure

Reform of our corporate culture

Functions supporting reforms

1) Pursuing profitability andefficiency
2) Strengthening existing businesses
3) Creating sustainable businesses

1) Pursuing economic and social
value2) Pursuing efficiency
3) Strengthening human resources
to drive reform

1) Further Accelerating DX(Digital Transformation)2) Promoting sustainability3) Strengthening corporate functions

NAGASE Report 2023

NAGASE Report 2023

23

ACE 2.0| Growth Strategy | Medium-Term Management Plan |Profitstructure

Corporate
cultureFunctions supporting reforms

Medium-Term Management Plan:

5 Years in Pursuit of Quality as We Move toward “Ideal NAGASE”
Environmental adaptability

Medium-Term Management Plan ACE 2.0 is the second stageof our campaign toward achieving “Ideal NAGASE,” and wehave dedicated the five-year period it covers—from fiscal 2021
to fiscal 2025—to the pursuit of quality. To us, pursuit of quality
means giving concrete form (in our business, our systems, andour corporate culture) to the expectations of our shareholders.
We are aiming to achieve this, all while maintaining an ACE(Accountability, Commitment, and Efficiency) approach, inorder to facilitate the NAGASE Group’s sustainable growth.

Medium-Term Management Plan

Stage3

ACE 2.0

Review results and measures for Medium-Term Management Plan ACE 2.0

Stage2GrowthStage1

ACE 2.0 “Pursuit of Quality”

Reform
2016–2020

Pursuit of Quality
2021–2025

ACE-2020

ACE 2.0

Breakthrough2026–2032

Grow dramaticallyto achieve thetarget goals

Reform ofour profit structure
Reform ofour corporate cultureTime

ACE 2.0 Basic Policies(up toMarch
2023)

Become a true “Business Designer”
ACE 2.0“Pursuit of Quality”

Results todate

Reform of our profit structure

Capital investment and revenue growth in focus areas(food, semiconductors)
Developing new bio-related materials and launching
related marketing
Selling unprofitable businesses and consolidating ouroverseas bases

Work style innovation in connection with officerelocation
Promoting diversity through mid-career recruitment
Reducing cross-shareholdings

Functions supporting reforms(quality)>For more details, see P.27

Reform of our corporate culture

Create a profit base toward the “Ideal NAGASE”>For more details, see P.35

Mindset toward the “Ideal NAGASE”

Pursuing profitability and efficiency

Pursuing economic and social value• Company-wide businesses replacement and reallocation of resources• Cultivating sustainability-related mindsets and thoroughly monitoring
financial and non-financial data

Strengthening existing businesses• Expand our business opportunities through globalization• Increase value added through manufacturing productivity improvements
and technical innovation

Pursuing efficiency

Creating “N-Sustainable businesses”

Strengthening human resources to drive reform

Challenges
identified
in April
2023• The need for partial or full review of the Plan (theconditions on which it is based have changed inexcess of certain limits)• An ambitious growth strategy that will take theCompany to new heights• Decision-making processes and Company systems
able to respond to the speed of changes in ourbusiness environment• Deepen awareness of capital efficiency• Improve productivity of core operations

Functions supporting reforms
Accelerating digital transformation further

Reform of our corporate culture

Improving employee engagement through enhancing opportunities for dialogue
Promoting carbon neutrality in partnership with Zeroboard, Inc.
Improving our ESG scores from external assessment bodies

With an ACE (Accountability, Commitment, and Efficiency) mindset, and in order to facilitate the NAGASE Group’s sustainable growth,
we are giving concrete form (in our business, our systems, and our corporate culture) to the consideration that our stakeholders expect from us(pursuit)

Reform of our profit structure

Promoting sustainability• Not fully leveraging our resources to their limits(fostering readiness to take on challenges)• Eliminating waste• Increasing awareness of sustainability

Launch of
QUICK WINS

>For more details, see P.43

QUICK WINS: maximizing and optimizing use of resources (people, finances, and time)

Strengthening corporate functions

Developing our business and financial portfolio
Implemented policies

NAGASE Report 2023

25

The key goal indicators (KGIs) for “Pursuit of Quality” in regard toenhancing the rate of capital efficiency are ROE of 8.0% or more andoperating income of ¥35.0 billion for improvement of profitability.
Key performance indicators (KPIs) have also been set for profit
structure reform, corporate culture reform and corporate functions
supporting reforms and we rigorously manage these goals.

“Pursuit of Quality” KGIs (KGI: Key Goal Indicator)
Measures

Indicators

FY2020

FY2021

FY2022

FY2025*

Improvementin capitalefficiency

ROE

5.9%

7.7%

6.6%

8.0%
or moreIncreased
profitability

Operatingincome21.9
billion yen

35.2
billion yen

33.3
billion yen

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

Reform of our profit structure

Reform of our corporate culture
Functions supporting reforms

Measures

Indicators• Set WACC targets for each of our businesses in the aim ofincreasing ROIC
• Formulated an action plan and decision-making processes forexit planning• Shifted resources at our bases and in other areas from mature
markets to growth markets• Formulated a growth strategy for the future• Decided on a corporate venture capital (CVC) framework withthe aim of creating new businesses

Enhancing governance of management processes

Key Performance Indicators (KPIs) for Achieving the “Pursuit of Quality” (KPI: Key Performance Indicator)
Reform/ Function• Manage and implement our business portfolio based on ROIC
• Rebuild and reorganize unprofitable businesses (including
businesses at risk of impairment)• Execute a corporate-led growth strategy• Strengthen our search and development (S&D) capacities• Advance our digital marketing

FY2020

FY2025Growth investments*1—

150.0 billion yen*2

Company-wide businesses replacement
and reallocation of resources

Secure 10% of company-wide invested
capital and reinvest in focus anddevelopment 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 general administrative
expenses to gross profit*6

57.1%*7

52.1%

Deepen awareness of capital efficiency

Net DE ratio

0.23 times

0.5 times or lessAccelerate digital transformation further

Invested capital (including expenses)*8

2.4 billion yen

10.0 billion*2*1 N-Sustainable investment, new business investment, DX-related investment, R&D expenses, working capital *2 Five-year cumulative total *3 Figure based on internalmanagement *4 Simple sum calculation *5 Manufacturing classifications were reviewed, and Prinova Group was reclassified as a manufacturing business from fiscal 2021.
This new classification has been retroactively applied to performance figures for fiscal 2020. *6 Excludes R&D expenses, amortization of goodwill and other acquisition-related
intangible assets, and profit and loss due to amortization of actuarial differences *7 Average figure for the five-year period from fiscal 2016 to fiscal 2020 *8 Five-year
cumulative total of 10.0 billion yen in DX-related investments is included in growth investments of 150.0 billion yen

Implemented policies• Consolidate and manage our organization with rationality andefficiency as our goals• Review and effectively utilize decision-making structures• Delegate authority• Consolidated our 11 divisions into 7 and sped up ourdecision-making processes• Reviewed meeting structure and made our business operations
more efficient• Began delegation of authority

Rebuilding our human resources portfolio
Implemented policies• Train our next generation of human resources• Talent management (reallocation of human capital)• Develop infrastructure for implementation of D&I initiatives andreview systems and structures• Introduced an HRBP system (strengthening collaboration
between our corporate and other divisions)• Reallocated human capital through consolidation of our divisions• Encouraged dialogue between management and employees• Set fiscal 2025 targets for the proportion of women among
new career-track hires (30% or more) and for the percentage ofmanagement roles held by women (6% or more)

26
NAGASE Report 2023

Quantitative Goals (KGIs, KPIs)

ACE 2.0| Growth Strategy | Reform of Our Profit Structure |Profitstructure

Functions supporting reforms

Reform of Our Profit Structure
The key to profit structure reform is to secure and redeploy management resources to maximize efficiency. Specifically, from thestandpoint of efficiency and growth potential, we have classified businesses into four quadrants: Improvement, Foundation,
Development, and Focus, and are executing strategies according to each area.

A growth strategy for the future
Reorganizing each of our business domains along the lines of our trading, manufacturing, and R&D functions
NAGASE possesses manufacturing and R&D functions as well as its trading functions. While we had previously created fourorganizational quadrants divided along business lines, we have chosen to reorganize these quadrants to classify our businesses
according to their functions, in order to clearly identify each business’s functions and areas where we should invest our management
resources. We will utilize management resources and data generated by our trading functions (one of our core operations) in our
focus and development areas.
Potential investment for focus and development areas, from 2023 onward(approximately ¥80 billion)
Growth potential

Generate the cash flow and data that will allow us tostrengthen our manufacturing functions in focus anddevelopment areas

2. Focus

3. Development

2. Focus

Future revenue sources

Manufacturing functionsin specific areas

R&D (biotechnologies)

Food

New businesses(new products, etc.)
New regions(Global South)

Concentrate investment in our manufacturing functions infood, semiconductors, and the life sciences, domains inwhich we develop in-house products with high-growth andhigh-profit potential

2. Focus

Manufacturing functions in semiconductor fields

Increase our sales of high value-added products in the cutting-edge semiconductor market and develop ourmarket presenceSocial issues and needs

Market growth potential

NAGASE’s strengths and the solutions• Growing demand for cutting-edge
semiconductors• Decentralization of manufacturing facilities
driven by economic security concerns

Scope of the total semiconductor materials
market ($M)

NAGASE × Nagase ChemteX

Front-end process
50,000Back-end process

CAGR 5.9%

40,00030,00020,00010,0000

FY2023

FY2025

FY2027FY20XX

Source: Compiled by Nagase & Co., Ltd. based on FUJI KEIZAI GROUP
CO., LTD. data

2. Focus

3. Development

Provide NAGASE-made materials tailored to market trends and customer needs in the life sciences market,
where awareness of sustainability is rapidly increasing

Semiconductors
Life sciences

Social issues and needs

Market growth potential

NAGASE’s strengths and the solutions• Aging societies and increasing healthconsciousness• Increasing awareness of sustainability

Skin care market revenue ($M)
CAGR 3.3%
200,000

NAGASE × Hayashibara × Nagase ChemteX

1. Foundation

150,000

50,0000

Trading functions

Accelerate our R&D, enhance our in-house product range,and expand into the Global South

Unprofitable businesses
Businesses at riskof impairment

4. Improvement

Semiconductors

Electricalappliances

Food

Mobility

Chemicalindustry

Life sciences

Improve unprofitable businesses

3. Development
ROIC

NAGASE Report 2023

Manufacturing functions in food-related fields

Social issues and needs

Market growth potential

NAGASE’s strengths and the solutions• Increasing health consciousness globally• Awareness of food waste issues

Global sports nutrition market ($M)

NAGASE × Prinova × Hayashibara

30,00020,00010,0000

FY2023

FY2025

FY2027FY20XX

Source: Compiled by Nagase & Co., Ltd. based on Statista data for 2023

FY2027FY20XX

Strengthen our R&D and develop new biotechnological materials that will become industry mainstays

Expand our highly profitable manufacturing and processing businesses, and contribute to expanding
healthy-life expectancy and reducing food waste

CAGR 6.0%

FY2025• Point of contact with the sports nutrition
market, which offers high growth potential• Wide-ranging ingredients line-up, including
our own functional food ingredients(ingredients we manufacture ourselves
include TREHA®, Fibryxa™, HAYASHIBARAHESPERIDIN S)• Global sales network• M&A experience and knowhow• A business model offering one-stop solutions
from procurement to manufacturing• Sugar stabilization technology that will inturn support drug stability• Suggestions for drug formulation, as well as
analysis and evaluation functions• Ability to conform to different countries’
regulations• High-precision organic synthesis technologies• A global presence on sustainability issues

R&D (biotechnologies)

NAGASE’s strengths and the solutions• Climate change• Resource recycling• Healthy life expectancy (cognitive function,
sleep quality, etc.)

27

40,000

FY2023

Source: Compiled by Nagase & Co., Ltd. based on Statista Market
Insights data

Social issues and needs

2. Focus* Fan-out wafer level package

Manufacturing functions in life sciences fields

100,000

4. Improvement• Proven record of having our unique
technologies and products built into the
cutting-edge semiconductor market
Achieved top market share for liquidmolding compound for semiconductors foruse in devices integrating FOWLP*• Planning, design, and manufacturing functions
through our various key technologies

NAGASE (Nagase Bio-Innovation Center) × Hayashibara
Well-being: make progress on mass
production of ergothioneine (which is
expected to deliver the results below)
through fermentation• Benefits for cognitive function• Amelioration of wrinkles and age spots• Comfortable sleep

4. Improvement

Environmental: develop bio-based,biodegradable SAPs
• Reducing waste from disposable diapers• Regreening of drought-stricken areas

Initiatives in improvement areas

Move forward by reducing unprofitable businesses and impairment loss
Targets for improvement
1. Operating losses of our operating subsidiaries and equity losses of ouraffiliates:• Rapidly formulate and implement improvement plans. Consider
withdrawing from operations that seem unlikely to improve
2. Impairment loss:• Going forward, strengthen monitoring of assets at risk of impairment
and minimize that impairment
3. Unprofitable business arrangements:• Aim to improve unprofitable business arrangements by strengthening
monitoring and making exit plans

Financial scale of operating subsidiaries’ operating losses, equity losses,
impairment losses, and unprofitable business arrangements
0

FY2021

FY2022. . . . . . . . . . .

FY2025–20–40

Aiming forzero losses

–60
–80
–100

About
¥9.0 billion

About¥8.0 billion

28
NAGASE Report 2023

1. Foundation

Corporate
cultureACE 2.0| Growth Strategy | Reform of Our Profit Structure (Biotechnology) |Profitstructure

Corporate
cultureFunctions supporting reforms

Delivering value with biomaterials
by leveraging the group’s expertise

NAGASE Report 2023

29

The NAGASE Group has an in-depth
understanding of society’s needs, andis engaged in various businesses thatmake effective use of biotechnology tosolve societal issues.
In April 2023, to consolidate the
NAGASE Group’s biotechnology
operations and develop higher-growthbusinesses, Hayashibara Co., Ltd. (aNagase Group company) and Nagase
ChemteX Corporation’s bio-related
business (specifically, the Fukuchiyama

Plant), were merged.
Hayashibara Co., Ltd. has expertisein sugar production technology thatmakes effective use of microorganisms
and enzymes, while Nagase ChemteX
Corporation’s bio-related business isstrong in industrial enzyme production
technology. The use of biotechnologies
to develop sustainable materials is anarea that has been showing increasingpromise in recent years. By combining
these two companies’ respective

Nagase ChemteX Corporation’s bio-related business hosts
a company briefing about Hayashibara Co., Ltd.

technologies and expertise, the NAGASEGroup will strengthen our capacities inthis area, and enhance the value that our
products provide to customers and themarket as a whole.

Working to commercialize
ergothioneine, which cancontribute toward extending
healthy lifespanOne example of Nagase’s R&D activity
that makes effective use ofnext-generation bioproduction
technology is the commercialization ofergothioneine (EGT), which has been
touted as the “longevity vitamin.”
EGT, which is found in small
quantities in fungi, is a rare naturalamino acid which helps to improve brain
function, and which also has a strong
antioxidant effect. As a next-generation
functional material, it is expected tohave a wide range of applications,
including treating the symptoms ofneurodegenerative diseases (such as
Alzheimer’s disease and Parkinson’s
disease), depression, skin aging(wrinkles and spots) due to exposure to

Taking on the challenge ofdeveloping existing businessareas to create new,sustainability-focused markets
Besides developing new markets,
NAGASE is also proceeding with thedevelopment and provision of new
products in existing business areas thatcan contribute toward solving society’s
problems. As one example, in February
2023, we successfully completed thejoint development of superabsorbent
polymer (SAP) that is made using ahigher percentage of bio-derived raw
material, by combining Hayashibara Co.,

Ltd.’s enzyme utilization technology andNagase ChemteX Corporation’s resin
manufacturing technology. SAP is apolymer material with superior water
absorbency which has a wide range ofapplications, including sanitary products(such as paper diapers and sanitarynapkins), as well as agricultural products
and cosmetics. However, there havebeen issues with existing SAP products
as being environmentally unfriendly,
because of the petroleum-derived andnon-biodegradable materials used.
Although efforts have been made to
develop SAP made using natural raw
materials and with improved
biodegradability, the creation ofcommercially viable end products
proved difficult because of insufficientwater absorption. Despite being madefrom starch as the main raw material,
NAGASE’s newly developed SAP
material has absorption properties that
equal or surpass those of conventional
products, and is expected to have a wide
range of applications for products thatneed to be environmentally-compliant.
We are proceeding towards establishinga production system aimed at bringing
the new material to market from 2025
onwards, and NAGASE is committed tostrengthening our solution offering forthe sustainability market.

structure, including peptides, proteins
and antibodies. Especially in regard tocancer treatment, an area with anincreased need for new solutions, there
has been a global acceleration in thedevelopment of antibody-based
biopharmaceuticals (antibody drugs).
One major problem in this area ismaintaining stable quality during drug
storage. TREHALOSE SG is a highly
refined pharmaceutical excipient for
injectable solutions made from trehalose,
which Hayashibara Co., Ltd. became thefirst company in the world to successfully
industrialize the production of. It iseffective in enhancing quality stability,
regarded as a problem for antibody
drugs. With the advantage of handlingthe entire process domestically, fromprocurement of starch (the raw material
for trehalose) to purification, TREHALOSE
SG is now used as a stabilizing agent fora wide range of antibody drugs, including
bevacizumab, by pharmaceuticals
manufacturers throughout the world,
and it is expected to make a substantial
contribution toward enhancing quality oflife for many people.

Powdered trehalose

Contributing to thebiopharmaceutical field
Pharmaceutical excipient
TREHALOSE SG

30
NAGASE Report 2023

SPECIAL FEATURE 1

ultraviolet light, and cataracts, as well as
controlling glycative stress. However,the natural extraction of EGT involves
significant effort, while chemical synthesis
also poses the problem of creating aconsiderable environmental impact in
the production process.
In 2020, the Nagase Bio-Innovation
Center, an R&D facility which possesses
innovative fermentation technology,
succeeded in using smart cell technology(a biosynthesis technology that artificiallymaximizes the substance production
capability of cells) to increase EGT
production capability roughly 1,000-fold.
Going forward, the NAGASE Groupwe will be using the production strainsthat we have developed to realize
full-scale commercialization of EGT
through life science related applications
such as health foods, cosmetics, andpharmaceuticals. Through theachievement of environmentally friendly
manufacturing that effectively utilizes
bioproduction technology, we willcontribute toward extending healthy
lifespans throughout the world.

In recent years, pharmaceuticaldevelopment has shifted the focus of
new drug development from traditional
low-molecular-weight drugs towards
drugs with more complex molecular

NAGASE-developed SAP, which is made using a high percentage of bio-derived raw material,
before and after absorbing water (left and right, respectively)

Crystallized trehalose (micrograph)

ACE 2.0| Growth Strategy | Reform of Our Profit Structure (food-related and semiconductor businesses) |Profitstructure

Corporate
culture

De

nar

Pr
inspec obe
tion

ng
pi
Bu
m

iza

tion

The NAGASE Group’s business operations extend
throughout the complex supply chain. With anextensive network that gives it a comprehensive
view of the entire supply chain, NAGASE is able to
make a significant contribution to Japan’s
semiconductor industry.

dissolved in water, Fibryxa™ is transparent
with hardly any flavor or sweetness, so it
can be added to food and beverage
products without affecting the color or
taste. We are successfully increasing
sales of this new-generation dietary fiber,
which makes it possible for products tobe both healthy and tasty. In addition,
Fibryxa™ Granules, a consumer productproviding dietary fiber in granular form,
was relaunched in February 2022 as
Foods with Functional Claims (FFC),
with three individual claims related tomaintaining and increasing health, andhas proved very popular as a productthat meets diverse consumer needs.

Semiconductor businessIn the past, Japan’s semiconductor
industry held a global market share ofover 50%, but by 2019 this had fallen toaround 10%, and the industry was in thedoldrums. The NAGASE Group began
importing semiconductor materials into
Japan as general agent for Kodak in the

1960s, through a joint venture company,
and as a result developed a close
relationship with semiconductor-relatedcompanies in Japan. From 1974
onwards, NAGASE organized the NAGASE
Microelectronics Seminar, a study group
aimed at enhancing Japanese
semiconductor technology on across-enterprise basis, and was making
a positive contribution to the industry’s
development across the board.
Today, NAGASE has developed abusiness handling the semiconductor
chemicals required by semiconductor
manufacturing’s long and complex supply
chain, both in Japan and overseas,
including the manufacturing and sale ofliquid epoxy encapsulant material for
semiconductors (a sealing material that
protects semiconductors from lightand dust), which is manufactured by
Nagase ChemteX Corporation. While
working to leverage the most up-to-datetechnological information in this field,
we are strengthening our presence
within the semiconductor industry.
Various actors in Japan are currently
moving into production of most advanced
semiconductors and NAGASE is involvedin providing solutions that meet a range ofneeds in this arena. Our chemical-related

knowhow, supplier network, and expertisein transporting hazardous materials
have been recognized, and we havebeen selected as one of the operators
collaborating with Rapidus Corporation,
who is aiming to domestically mass
production of 2-nanometer semiconductors.
In this role, we will deliver and transport
a wide range of different materials forsemiconductor production usingtransportation methods optimized toeach material’s particular characteristics.
In addition, in order to contribute to thesustainability of the semiconductor
industry, Nagase & Co., Ltd., Nagase
ChemteX Corporation, and SN Tech
Corporation (our joint venture with
SACHEM, INC.) are working together on
a cutting-edge operation in Japan forthe collection and recycling of the highpurity developer (tetramethylammoniumhydroxide; TMAH) that is used insemiconductor manufacturing. Taking
pride in having supported thesemiconductor industry since its earlydays, and making effective use of the
network we have built up, NAGASE iscontributing toward a new stage in theevolution of Japan’s semiconductor
industry through the provision of thekind of value that only we can offer.

32
NAGASE Report 2023

NAGASE Report 2023

Element

Pla

ing

Dic

NAGASE’s chemical technology isleading the development of theJapanese semiconductor industry

Our water-soluble dietary fiber material, Fibryxa™

The NAGASE Group
connections in thesemiconductor
supply chainng

Dietary fiber is known to perform various
physiological functions, including
promoting the smooth functioning of
the digestive tract and regular bowel
movements, helping to slow theabsorption of nutrients, etc. However,Japanese people tend to lack dietaryfiber in their food, creating demand for
dietary fiber materials that can be
combined easily with food products.
Fibryxa™ (Isomaltodextrin), a
water-soluble dietary fiber material
developed by Hayashibara Co., Ltd. in2015, is widely used in products such as
beverage and food products intended tocompensate for dietary fiber deficiency,
a category of products that has been
attracting attention recently. When

ng

rni

tte

Pa

ing

Die bonding

This strategic move positions NAGASE toswiftly meet the surging demand for sports
nutrition products on the West Coast, while
concurrently solidifying Armada’s financial
standing. The powerful synergy created by
combining Prinova’s sales expertise and
NAGASE’s food materials and consumer
network fuels our accelerated global
business expansion.

Fulfilling consumer needs whileleveraging the intrinsic value of
our raw materials

ond

iri
W

Armada Nutrition’s Utah plant,
which commenced operations in 2022ebodeElectr31

In recent years, growing numbers of people
throughout the world have started exercising
regularly and have become more healthconscious. The sports nutrition market,
including protein and amino acidsupplements, is growing steadily, particularly
in Europe and North America. In response tothis trend and in order to benefit from thismarket opportunity, NAGASE strategicallyacquired the Prinova Group in 2019.
In 2019 NAGASE’s acquisition of the
Prinova Group, a global food ingredientssales and processing business, significantly
boosted market presence. Since its founding
in 1978, Prinova has grown into one of theworld’s largest distributors of nutrition
products, handling a wide variety ofmaterials including proteins, amino acids,
sweeteners, and caffeine, for use in foodproducts. Beyond simply selling materials,
Prinova has diversified into several
high-value businesses. One example is thegPrinova’s high-value-added
businesses are meeting the needs
emerging from the global trend
toward greater health consciousness

solutions (processing) business, which takes
the complexity out of food production byoffering premixes. These premixes expertly
combine multiple different ingredients,
saving manufacturers time and ensuringconsistent quality. Prinova also boasts a
dedicated flavors business, where expert
flavorists develop unique flavor profiles tocater to specific product needs. Finally,
Prinova's OEM production arm allows theirexpertise in materials and processing to
manufacture finished products for othercompanies, offering a comprehensive
solution from start to finish. Further, in 2021,
NAGASE acquired The Ingredient House,
which sells high-intensity sweeteners suchas sugar alcohols (including Xylitol) andsucralose. This acquisition has enabled
NAGASE to extend its product line-up andexpand into new business areas. Also in
2021, the NAGASE Group strengthened its
manufacturing and processing capabilities
by acquiring Lakeshore Technologies. This
strategic move brought in the specialties ofcontract milling and micronizing services,crucial for food processing. 2022 saw an
expansion for contract manufacturing
through NAGASE’s Armada Nutrition. A
massive new facility was opened in Utah.

in

Food-related business

Wir

po
sit
io
n

d
ol

Utilizing NAGASE’s competitive
advantage to tap into the foodand semiconductor markets

Final
ction
inspe

M

SPECIAL FEATURE 2

Wafer
s

Functions supporting reforms

ACE 2.0| Growth Strategy | Reform of Our Profit Structure (Core Businesses) |Profitstructure

Corporate
cultureFunctions supporting reforms

Facing up to logistics andenvironmental challenges in thechemicals industry with DX
With a domestic as well as global supply
chain network, the NAGASE Group will be
inevitably impacted by the “2024 logistics
problem.” From April 1, 2024, truck drivers’
overtime in Japan will be limited under the
Act on the Arrangement of Related Acts
to Promote Work Style Reform, which is
expected to lead to a shortage of drivers
and cost increases. In addition, logistics
companies are hesitant to deal withtransportation of chemical products due
to its difficulty from a safety perspective
and issues with odors and similar
challenges. Transit is therefore becoming
an urgent issue for the chemical industry.
Within this context, NAGASE has
acquired a license as part of Japan Pallet
Rental Corporation’s AI-powered joint
distribution matching service TranOpt, andhas been offering a version of the service
specializing in chemical products sinceNovember 2023, a first in the industry. This
service is aimed at companies that handlechemical products, and we hope that by

SPECIAL FEATURE 3

Making the most of our networkof connections to help solve
social issues close to homemanaging to achieve joint distributionof these items, which present various
challenges in terms of consolidation ofloads and other limiting factors, we willcontribute to lowering both our customers’
logistics costs and GHG emissions.
NAGASE does business with many
chemical companies, and we are working
to propose solutions to various social
issues like the logistics problem throughcommunication with our customers.
The establishment of this service is partof these efforts. In response to the
deep-seated concerns of our customers
who work with chemical products, we
utilized our knowledge in this area andour network of chemical manufacturers,
logistics companies, and other enterprises
to begin trialing this service in May 2022.
Together with customers at over 20
companies, we performed multiple roundsof testing and improvement before finallylaunching the service. Going forward, we
will build up transportation routes andcorroborative data to further develop theutility of the service, thereby contributing
to increasing the efficiency of logistics
throughout the chemicals industry.

TranOpt: a joint distribution matching service and transportation optimization solution

NAGASE Report 2023

33

The NAGASE Group acts as a Business
Designer, working in collaboration with
our partner companies to develop newservices by combining the various
technologies that each company brings
to the table. In this role, we are creating
solutions that will solve social issues.
One example of these is the global
challenge of moving away from plastics.
We have been developing solutions that
can tackle this issue in the arena of ourdaily lives. Bags for coffee beans feature
a plastic valve that allows gases to bereleased from the bag. It has been
calculated that, globally, we will be using
8.5 billion of these valves annually by 2028.
Interested in finding a solution, NAGASE
entered into a collaboration centeredaround MIB Co., Ltd.’s gas control
technology TiMELESS®, with Nakabayashi
Co., Ltd., Oji F-Tex Co., Ltd., and Mitsubishi
Chemical Corporation. By bringing
together areas each of us specializes

including the various packaging materials,
barrier and sealing technologies, wedeveloped asueco, a Nakabayashi Co.,
Ltd.-branded barrier packaging material
to be used for coffee beans. Asueco is
drawing attention as a solution that allows
coffee beans to maintain their freshness
without the use of a valve, reducing the
bag’s environment impact. TiMELESS®,a unique sealing technology for packaging
and other materials, is also starting tobe applied to efforts to reduce foodwaste following successful trials of its
use in keeping vegetables fresh.
TiMELESS®’s gas control technology

OxygenCarbon dioxide

Fukuoka

Osaka

Osaka

Fukuoka

Route information is entered by users

Tadatsugu Tazo
Digital Printing Supply Division,
Performance Chemicals Department

Our trading company network opened
up new possibilities for TiMELESS®
NAGASE saw the enormous potential of the
TiMELESS® technology created by MIB Co.,
Ltd. to contribute to a sustainable society if
paired with the right ideas. So, we suggested
working together on marketing and productplanning and development. The companies
that developed asueco are our establishedbusiness partners, and the connections that
we have cultivated over time as a trading
company appear to have been meaningful here.
We hope that those we collaborate with will see
NAGASE’s involvement in a project as meaning
access to the optimal partners for the job andthe expansion of its business possibilities.

Takamatsu

Fukuoka Osaka

AI

Osaka

Fukuoka

Joint
distribution
matching
systemTakamatsu

34

Osaka

Takamatsu

Fukuoka

Osaka

Yosuke Nakayoshi
Total Solutions Office,
Performance Chemicals Department

Creating new business
opportunities

Reducing costs,
maximizing efficiency

Decarbonization

Goals include: finding newtransportation routes and partners
for consolidated service

Goals include: improving
vehicle efficiency on
existing routes

Goals include: lowering
CO2 emissions andencouraging a modal shift

TranOpt is a service that uses AI to match companies who have goods to ship. By
creating opportunities for joint distribution, it contributes to improving the ratio of
actual driving distance (distance traveled while loaded relative to total distancetraveled) and loading efficiency (load carried relative to maximum possible load), bothof which are issues in the logistics industry, as well as reducing GHG emissions.
1. Numerous companies’ transportation routes are compiled as database, andoptimized matches are calculated by an AI. It can not only pair outward and return
journeys, but also create a route that combines three others and match companies
for load consolidation along a single route.
2. The service considers not only transportation route information but also various
other factors required for the job.
3. Fare estimates (bids) can be provided for each route and be able to choosetransportation at an optimized fare.

Aiming to utilize NAGASE’s network
to optimize AI-powered joint
distribution of chemical products
In order to build a joint distribution platformand enhance the accuracy of its matches, weneed a great deal of data. We have been able
to bring many other companies on board
and occasionally act as a bridge between
competing firms, from our neutral standpoint
as a trading company, to look for more
efficient ways of doing things. I think ourability to deliver value in this way is down to
NAGASE’s unique network of connections witha wide range of chemical companies. Throughthis initiative, we will be taking action on thelogistics issues facing society as a whole, andcontributing toward a carbon-free society.

NAGASE Report 2023

NAGASE’s network: solving global
issues in our everyday lives

ACE 2.0| Growth Strategy | Reform of Our Corporate Culture |Profitstructure

Functions supporting reforms

Reform of Our Corporate Culture

Pursuing economic and social value
Materiality (important issues)
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 have mutual respect and motivate each other.
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
the true causes of the increasingly complex problems ofbusiness 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.
Corporate governance• Establish a highly transparent corporate governance system.
• Make sustainable improvement of enterprise value bybalancing economic and social value

Pursuing efficiency
1. Deepening awareness of capitalefficiency and improving productivity ofcore operations
We will 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 lessthan 0.5 times

Continued dividend
increases, flexible
acquisition of treasury stock

We will basically use interest-bearing
debt to finance investments inexcess of operating cash flow, butwill continue to maintain a soundfinancial structure as a base forsustainable growth

We will build a financial structurethat effectively reflects the results ofbusiness strategies by transforming
the Company’s financial structure tooffer both soundness and efficiency

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

Cash flow from operating activities

NAGASE Report 2023

35

2. Shareholder returns and repurchase oftreasury stock
We will pursue a basic policy of continued
dividend increases, with consideration of ourconsolidated results and financial structure,taking into account our consolidated cash
flow and investment situation, and whileaiming to increase profitability and reinforce
our corporate structure.
We will take a flexible approach torepurchases of treasury stock, withefficiency in mind.

Operating CF

150.0 billion yen

Maintenanceinvestments–50.0 billion yen

Continuous
dividends–30.0 billion yen¥100.0–150.0 billion

N-Sustainable
investment

Growth investments

New business
investment

Total Case In

Up to¥180.0 billion

Cash flow fromfinancing activities

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

Up to 80.0
billion yen

Cash flow fromgovernance improvements
Reduction in strategic
cross-shareholdings

Repurchasetreasury stock

30.0
billion yen

DX-related investment
R&D investment

CultureCorporate culturethat embraces
challenge and diverse
personalities

Comfortable,
safe and inspiring
workplaces andworkstyles

Sustained growth and development for
employees and the Company[Use diverse human resources; offer a workplace environment and corporate culture]• Use advanced technologies to improve productivity and leverage diverse human resources• Provide a workplace environment and foster a corporate culture as a Group where employees withdiverse backgrounds have mutual respect and motivate each other

ACE 2.0 non-financial
targets (KPIs)

Group companies: Percentage of companies conducting regular engagement surveys: 100%NAGASE (Non-Consolidated): Total score on engagement survey: 60 or above

Policies behind our
initiatives

Talent management, health management, work style reform, diversity and inclusion, humanresources policies

Results of our initiatives

Engagement surveys conducted, work style reform (launched PROJECT BRIDGE [see p. 37], adopted a
flexible dress code)

Information disclosed[Employees (non-consolidated)]
Numbers of male and female employees (ratio), number of non-regular employees (ratio),
employment rate of people with disabilities, number of mid-career hires (sex disaggregated),
proportion of management positions held by women[Working styles (non-consolidated)]
Retention rate of new graduate hires three years after recruitment, voluntary severance rate, average
years of service, average annual salary, total annual working hours, proportion of available paid leave
taken, number of employees taking childbirth and childcare leave, number of employees taking
human resources development training[Health and safety (non-consolidated + domestic Group manufacturing companies)]
Number of work-related accidents, number of fatal accidents, frequency rate of work-related injuries,
number of employees taking health and safety training

Among our ACE 2.0 KPIs, we have also set reducing our consolidated Group Scope 1 and 2 emissions by 37% or more ascompared to fiscal 2013 and a reduction target that we aim to reach by purchasing and generating our own renewableenergies within the Group. We have also set a target of zero Scope 2 emissions for Nagase & Co., Ltd. (non-consolidated).
In addition to our trading functions, manufacturing and processing account for a significant portion of NAGASE Group
activity. We will work to implement carbon neutrality policies in the four quadrants and along the two axes of
trading/manufacturing and visualization/reduction.

PeopleTalent Management
Acquire and develop talents andplace them in the right roles

Health and Productivity Management
Ensure that employees are ingood physical and mental health• Visualize and strengthen analysis of
employees’ health condition and executenew measures

Our vision for
the “ideal
NAGASE”(medium-term)

Environment
Work Style Innovation
Offices where employees canWork styles independent
exercise their creativityof time or place• Establish a new workplace vision wherestrong individuals work together with asense of unity• Introduce effective and efficient work styles
such as working from home and staggered
shiftsCultureImprove engagement

Priority issues (materiality)

Non-Financial Target 2: Carbon neutrality

Building foundations that allow ourdiverse human resources to thrive• Visualize global personnel portfolio• Acquire and strengthen talents in conjunction
with business strategy

Principles
Vision Environment

Performance
this year(short-term)

Our vision foran “ideal
NAGASE”(long-term)

PeopleValuesOur vision for
the “ideal
NAGASE”(medium-term)[Employees]• Safe and comfortable work environments• Environments that allow our employees to enjoy their work and bring cheerful energy to their tasks• Being a corporate group that our employees and their families can speak of with pride

The value we hope to deliver
to our stakeholders[Society and Consumers]• Practicing legal compliance and ethical management, and contributing to the development of local
communities• Consideration for the rights, health, and comfort of those involved in our supply chains• Products and services aimed at creating a safe and caring world where everyone can live with peaceof mindPriority issues (materiality)• Solve problems that threaten safety and security, e.g., climate change and food and water shortage• Contribute to the acceleration of globalization and solve social issues in each region

ACE 2.0 non-financial
targets (KPIs)

Consolidated: Reduction rate for Scopes 1 and 2: 37% or more (compared to fiscal 2013)
Consolidated: Reduction due to generation/purchase of renewable energy: 35,000 tons or more(cumulative)
Nagase & Co., Ltd. (non-consolidated): Scope 2 zero emissions

Policies behind our
initiatives

Overall Measures: Participate in external initiatives, promote environmental investing, consider
internal carbon tax
Visualization: Visualize emissions in the supply chain, calculate life-cycle assessments forstrategic products
Reduction: Provide low carbon products and reduction solutions and introduce green facilities
Improve manufacturing processes and use renewable energy (Purchase/in-house generation)

Results of our initiatives

Our Carbon Neutral Declaration, announcement of endorsement of the TCFD recommendations,investment in Zeroboard, Inc., starting life-cycle assessments via our domestic manufacturingsubsidiaries

Information disclosed• Greenhouse gas emissions (Scopes 1, 2, and 3)• Scope 1 greenhouse gas emissions breakdown by emissions type
• Energy usage, electricity consumption, production emissions intensity (tons of CO2/tons of goods
produced)(Limited to the amount of strategic cross-shareholdings sold)

Aligning our business andhuman resource strategies
Innovative andglobal talents
leadinginnovation

Our vision for
the “ideal
NAGASE”(long-term)

The value we hope to deliver
to our stakeholders

Working capital

Human resource development to drive innovation
By creating a positive feedback
loop with our respective policies
in the areas of human resources,
the environment, and culture,
we will increase engagement
between employees and theCompany and achievesustainable growth anddevelopment for both.

The NAGASE Group defines employee engagement as a state in which companies (organizations) and employees
understand each other and improve each other. We have prioritized the promotion of vertical dialogue and horizontal
collaboration as a high-priority issue for NAGASE, starting with an Employee Engagement Improvement Project led bymanagement. We are steadily implementing policies Group-wide, with periodic surveys conducted by the whole Groupand a target of Nagase & Co., Ltd. (non-consolidated) employee total survey scores of 60 or more set as two of our ACE
2.0 KPIs.

Excluding changes in working capital

70.0 billion yen

Interest-bearing
debt procurement

Non-Financial Target 1: Employee engagement improvement

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

Human Resources Policy
Management decisions focused on
both improving capital efficiency andchallenging new businesses• Revision of the executive compensation
systemPerformance
this year(short-term)

36
NAGASE Report 2023

At the heart of our corporate culture reform is the improvement of both economic value and social value. We have therefore
set both financial and non-financial KPIs and are moving forward with initiatives in both areas.

Promoting the setting of bothfinancial and non-financial KPIs
We set improving employee
engagement and carbon
neutrality as two of our nonfinancial KPIs in May 2022 andare continuing to monitor these.

Corporate
cultureACE 2.0| Growth Strategy | Reform of Our Corporate Culture (Employee Engagement Improvement) |Profitstructure

Corporate
cultureFunctions supporting reforms

SPECIAL FEATURE 4

Proportion of women among
new career-track hires(Nagase & Co., Ltd.,
non-consolidated)

Improving employee
engagement through reforms toboth environment and culture
The NAGASE Group is working to create
comfortable, safe workplaces where
employees can bring a high degree ofcreativity to their work, to promote
development of a corporate culture thatembraces challenge and the individualityof our diverse personalities, and to develop
innovative global talent. Through thesecommitments, we aim to increase
employee engagement.
Promotion of diversity is indispensable
to enacting these strategies, and we are
implementing a variety of measures tosupport it at each career step, fromrecruitment to settling into the job topromotion.

Toward an efficient, creative andhealthy work environment
PROJECT BRIDGE is an initiative to update
our offices and working style. As part ofthis, we introduced Activity-Based
Workplace (ABW) in August 2022 at ourTokyo Head Office, enabling employees
to choose where to work depending onthat day’s duties and circumstances. We
have also adopted a flexible dress code,
where employees can choose their own

clothing, optimized to that day’s duties.
PROJECT BRIDGE promotes
discussions and initiatives to build acomfortable work environment for our
diverse employees that will allow themand their families—all of whom weconsider to be our assets—to enjoy both
physical and mental health.

Opportunities for dialogue
1. Group discussions withmanagement
In fiscal 2022, we ran N-Dialogue sessions,in which one of our directors and four tofive of our division supervisors met to

NAGASE Report 2023

37

Hitomi Kobana
Pharma-Medical Products Section,
Life & Healthcare Products Department

Discovering a mindset forembracing change

The Nagase Good Company Project, which encourages connection among younger employees
ABW at our Tokyo Head Office, allowing employees to choose where they work to suit their working style
N-Dialogue, where management and mid-level employees can engage in dialogue

I took part in PROJECT BRIDGE as anambassador of NAGASE’s ABW program andthe Company’s new working style. Issues thatcame up in our on-site, cross-departmental
discussions on operating rules for ABW and
our approach to internal communications are
now being incorporated into our workspaces
at NAGASE’s Tokyo Head Office. We all feel
uncertainty when faced with big changes, but
I learned that each of us can lean into andenjoy the changes to our working
environment by taking ownership of theCompany’s new working style.

30%
or more19%

16%

Holding group discussions at which our female
director meets with female mid-level employees
In order to create comfortable working environments
where our female employees can demonstrate theirabilities, we are holding group discussions at which our
female director meets with employees, which areleading to increased engagement among female
employees, proactive career planning, changes in
attitudes to working style, and more.
In fiscal 2022, all of our female career-track
employees held discussions with our female director insmall groups of four to five.
NAGASE has been striving to actively harness
women’s potential, including by hiring women as
career-track employees, promoting them tomanagement, and expanding their opportunities toadvance, among other efforts. However, the proportionof women among our career-track employees remains
relatively low. We have therefore added fiscal 2025
targets for the proportion of women among new
career-track hires and management positions held by
women to our quantitative goals.

discuss various specific themes.
NAGASE’s employee engagement
survey identified vertical dialogue andhorizontal collaboration as issues, andN-Dialogue was established as one
measure to improve these. Throughtheir discussions, both sides were able
to learn about the other’s accumulated
experience and values and discoverwhere these differed, with the aim of
fostering empathy and newunderstandings and inspiring people tobehave differently at work going forward.

2. Connection among younger
employees
In another measure to promote vertical
dialogue and horizontal collaboration,
we have established the Nagase Good
Company Project, which encourages
new employees and senior employees
to get together in groups of four formonthly hour-long meetings. Originallyproposed by employees as a way tosupport new employees during the
COVID-19 pandemic in 2021, we havecontinued the project as a way toprovide opportunities for younger
employees to connect with one another.

2022

2025 (FY)

Proportion of management
positions held by women(Nagase & Co., Ltd.,
non-consolidated)
Target6%
or more
4.6%

4.3%

2021

2022

2025 (FY)

Our childbirth and childcare support systems(Nagase & Co., Ltd., non-consolidated)
Childbirth leave

Childcare leave

Women

Women
Men

40
36

38

15

30

14

Kosuke Tsukahara
20

Functional Resin Division,
Advanced Functional Materials Department

20
13

Initiatives to support work-lifebalance
By enhancing our systems and measures
to support employees to balance childcare
and other caring responsibilities with
their work, we are focusing on developing
a corporate culture that facilitates staying
in work. The number of male employees
taking childcare leave has been increasing
in recent years.

2021

25

12

22

10
FY2020

FY2021

FY2022

Percentage of male employees
taking childcare leave(Nagase & Co., Ltd.,
non-consolidated)

59.5

%

Childcare leave contributing tofulfillment at home and at work
At the times when looking after our newborn
twins was a bit crazy, being able to devote
my time to looking after them together withmy wife was invaluable. I am so grateful forthe professional support I received from mymanagers and colleagues.
Even now that I am back at work, I have
options that allow me to efficiently fulfill mychildcare responsibilities and I have greater
peace of mind in both my private life and myprofessional life, which also means I am
better able to concentrate on my work. My
image of childcare leave has totally changed,
and I also feel more engaged at work.

NAGASE Report 2023

The ideal conditions for fostering
innovative human resources

TargetACE 2.0| Growth Strategy | Reform of Our Corporate Culture (Carbon Neutrality) |Profitstructure

Corporate
cultureFunctions supporting reforms”Visualizing and reducing“ ourGHG emissions in our ”trading
and manufacturing“ in the aim ofcarbon neutrality
The NAGASE Group possesses
manufacturing and processing
capabilities as well as its trading
capacities. As we work to achievecarbon neutrality, we have accordinglyclassified our strategies into four
quadrants along the two axes of “tradingbusiness/manufacturing business” and“visualization/reduction.”On the trading side, we are enhancing
our initiatives by combining visualization—in the form of developing “zeroboard,” aservice that visualizes GHG emissions
throughout supply chains—and reduction,in the form of offering low-carbon products
and solutions for GHG emissions reduction
tailored to the challenges our customers
are facing.
On the manufacturing side, in addition

SPECIAL FEATURE 5

Expanding connections alongsupply chains and supporting
society-wide decarbonization
The NAGASE Group recognizes climatechange as one of its importantmanagement issues. To facilitategroup-wide action on this issue, theGroup has established a Sustainability
Committee and a Risk Management &Compliance Committee—both overseenby the Board of Directors—which consider
and discuss policies, issues, and othermatters. Alongside analysis of themedium- to long-term risks and financial
impacts presented by climate change,
we also aim to seize the opportunities it

NAGASE Report 2023

39

offers and are implementing a businessstrategy designed to develop the new
products and services that will be
required in a carbon-neutral andrecycling society.
In the aim of achieving carbon
neutrality, we also formulated the NAGASEGroup Carbon Neutral Declaration in
January 2022, which sets out a targetof achieving net zero Scope 1 and 2
emissions by 2050. In addition, we haveset carbon neutrality-related KPIs as
part of the non-financial targets in our
Medium-Term Management Plan ACE
2.0, which is currently in operation.

Using renewable energies for in-house generation(Hayashibara Co., Ltd.)
Non-financial targets of
the Medium-Term Management Plan
ACE 2.0

NAGASE Group Greenhouse Gas Emissions: Results and Targets (Scopes 1 and 2)

FY2022 non-financial KPI outcomes

26%

86,197 t

2025
Target63,643 t

2013

2020

Results(Baseline)

Greenhouse gas emissions(Scopes 1 and 2)

37

46%

46,546 t

Net zero
Carbonneutrality

2030

2050

(FY)

TargetTargetNon-financial targets of the Medium-Term Management Plan ACE 2.0% reduction

We have set a target of reducing ourconsolidated Scope 1 and 2 emissions by
37% or more as compared to 2013 levels
by 2025, with a (cumulative) reduction of
35,000 tons or more through generation andpurchasing of renewable energies. We havealso set a target of zero Scope 2 emissions
for NAGASE & CO., LTD. (non-consolidated).

Initiatives to realize carbon neutrality by 2050 (over the two axes and four quadrants)
Overall Measures

Key Climate Change Risks and Opportunities
Category

Transition
Risks

Opportunities

Details

Participate in external initiatives
Degree of
ImpactPolicy and
Legal

Regulations for carbon pricing, emissions trading, etc. (materials manufacturers with large GHG emissions
may pass their costs onto prices, and this impact is being considered)

Large

Market andTechnology

Consumer preferences for petrochemical products decline, resulting in lower market demand and sales

Large

Products andServices

Provide alternative materials that help to improve energy efficiency (lighter weight, thermal insulation andheat dissipation, etc.)

Large

Markets

Provide emissions visualization and reduction solutions in the supply chain

Large

Promote environmental investing

Examine internal carbon tax

Trading

MeasureMeasure1
3

Manufacturing

Visualize emissions
in the supply chain

Visualization

MeasureProvide low-carbon products andreduction solutions, introduce green
facilities, etc.

Reduction

Measure2
4Life-cycle assessments forstrategic products
Improve manufacturing processes,
use renewable energy(purchase/in-house generation), etc.

40
NAGASE Report 2023

A framework taking climatechange risks and opportunities
into accountto installing solar power generation
facilities and purchasing renewableenergies, we are also sharing case studies
throughout the Group of production
process improvements aimed at
reducing greenhouse gas emissions in
our manufacturing and processing.
The NAGASE Group will continue tofollow the pathway toward decarbonizationand carbon neutrality in collaboration
with our customers, partner companies
and everyone along our supply chains.

ACE 2.0| Growth Strategy | Reform of Our Corporate Culture (Carbon Neutrality) |Profitstructure

Corporate
cultureFunctions supporting reforms

SPECIAL FEATURE 6

Contributions toward Decarbonization in the Supply Chain

1

Partner companies

All-inclusive support for calculating corporate GHG emissions andmanagement for decarbonization

Decarbonization initiatives require
collaboration between companies, but
we will be unable to devise concrete
reduction measures for GHG emissions
in the supply chain without the aid ofvisualization. As part of our efforts toincrease society-wide awareness ofdecarbonization and advance ourinitiatives in this area, NAGASE has
invested in Zeroboard Inc. and provides
GHG emissions calculation andvisualization services that cover theentire supply chain, in the form of“zeroboard.”“Zeroboard” allows users to calculate
and visualize GHG emissions generated
not only by their own company but
through their business activities andrelated supply chains. In addition toallowing companies using the service tolink and share GHG emissions data with
one another, “zeroboard” also helps withworkload and cost issues by providing
an easy-to-use interface and offering
low-cost plans that make it simple for
SMEs to adopt the service.
Using visualized GHG emissions
data, we provide help with all aspectsof corporate management for
decarbonization, with our all-inclusive
support even covering development andprovision of solutions.
In this way, we are leveraging the
NAGASE Group’s unique strengths,
including the expertise we havedeveloped in the chemical industry

Case
Study

NAGASE Report 2023

41

Hiromu Sugita
Corporate Sustainability Office,Corporate Planning Department

Taking supply chain visualization in
new directions
The Sustainability Linked Loan Frameworkthat we have put forward is a new approachallowing us to progress toward carbon
neutrality alongside our business partners.
Currently, it can be hard to see theimpacts of our work to visualize our GHG
emissions. In this context, we hope that thisframework will provide opportunities to makenew connections along supply chains forchemical products.

2

NAGASE

since our founding and the strong
relationships with each of our business
partners both upstream anddownstream in the supply chain.

Case
Study

Partner companies

Launching a product carbon footprint
calculation consulting service for thecosmetics and pharmaceuticals industries

Despite the high GHG emissions in thecosmetics and pharmaceutical industries
at all stages up to and including
distribution, cost barriers mean that we areseeing little action to remedy this issue.
In July 2023, NAGASE, in association
with Dai Nippon Printing Co., Ltd. (DNP),
launched a consulting service for productcarbon footprint (PCF) calculation, which
visualizes GHG emissions throughout
the product life cycle, from raw materials
to packaging.

DNP has been working for many
years to calculate GHG emissions forthe full life cycle of packaging, fromprocurement of raw materials to
manufacturing and disposal or recycling.
NAGASE, meanwhile, is furthering its work
to support visualization and reduction of
GHG emissions throughout supply chains.
We are bringing together the strengths ofboth companies to create an enhanced
support service for PCF calculation
throughout the product life cycle.

Contents (chemical substances
for use as raw materials)
Calculation, consulting

Packaging
Calculation, consulting

Medical, Cosmetics, and Other Industries

Partner companies

NAGASE is first trading company to havegroundbreaking Sustainability Linked Loan
Framework selected as model case

The NAGASE’s Sustainability Linked
Loan (SLL)*1 Framework, which wedeveloped together with MUFG Bank,
Ltd., was submitted in response to the
Ministry of the Environment’s Green
Finance Model Case Creation Projectand selected as a model case.
Within our framework, planning andprovision of SLLs are coordinated by
MUFG Bank, Ltd., who are high-level
experts in this field, with NAGASE
expertise in supporting management for
decarbonization utilized in developing
the framework. Our framework designates
as sustainability performance targets*2
not only GHG emissions themselves but
also the use of actual figures for supplier
GHG emissions, and it is designed tofacilitate NAGASE’s commitment to3

NAGASEvisualization and reduction of GHG
emissions throughout the entire supply
chain. These features were positively
received and contributed to theframework’s selection as a model case.
*1: Loans that encourage borrowers to achieve
ambitious sustainability performance targets(SPTs)*2: ESG targets based on the management
strategy of the issuing body that set the termsof issue for the Sustainability Linked Bond

Case
Study

4

NAGASE

Local government

Corporate Sustainability Office,Corporate Planning Department

Contributing to building a carbon
neutral society by supporting
PCF calculation
When we calculate PCFs, we not only
discover the levels of GHG emissions
throughout a product’s life cycle, we also use
the results to identify processes with highGHG emissions and aim to improve them.
We will continue to move forward withthese commitments, working to create anenhanced support service for PCF calculation
through our partnership with DNP and at thesame time—as a company that finds thesolutions to manufacturing problems in the
raw materials themselves—aiming to create
value for the customers who will purchaseour products after they have gone throughthe PCF calculation process.

Contributing to local communities and economies
through support for Forest Credit Creation

Collaboration with the state and local
governments is vital for the progress ofsociety-wide decarbonization. Nagase &Co., Ltd. is active under the Ministry of
Economy, Trade and Industry’s GX League
Basic Concept, which encourages industry,
government, and academia to work
together to discuss ways to achievetransformation throughout our social andeconomic systems and create new markets.
As one of our initiatives, in August
2022, Nagase & Co., Ltd. entered into anagreement with the town of Yusuhara in
Kochi Prefecture aimed at piloting a Forest
Credit Creation scheme. Under thisagreement, Nagase & Co., Ltd. supports

Yusuhara-cho,
Kochi

A seminar, organized by NAGASE, to discuss theutilization of SLL in the chemical sector

Yoshiyuki Shiobara

A thriving forest in Yusuhara
A snapshot from the signing ceremonyfor Yusuhara and NAGASE’s agreement
Left: Hisato Yoshida, Mayor of Yusuhara
Right: Ryuhei Tashima, then General
Manager, Corporate Strategy
Department, Nagase & Co., Ltd.

Yusuhara’s management of its forestry
resources and utilizes our technologicalknowhow, the latest ICT technologies, andother tools to contribute to stimulating
the town’s economy and creating a modelcase of sustainable project co-creation.
We launched a further three
initiatives in fiscal 2022. In collaboration
woodinfo (a provider of forest
management data systems), we piloted
forest surveys using drones andportable laser technologies and exploredpossibilities for credit creation andforestry optimization. We are also moving
ahead, together with BIOME Inc., withan initiative to turn the rich ecosystems
that are protected by the town ofYusuhara’s forest management into
tourist attractions. Finally, we are using
our expertise in materials R&D to develop
high-quality scent products. Throughthese initiatives, we aim to contributeto sustainability in society, including
sustainability in local communities.

42
NAGASE Report 2023

Case
Study

NAGASEACE 2.0| Growth Strategy | Functions Supporting Reforms |Profitstructure

Functions supporting reforms

Our Sustainability Policy and Framework
The NAGASE Group has identified priority issues (materiality)
for sustainability based on providing value to stakeholders.
Through the establishment of the Sustainability Basic
Policy as a way of thinking shared throughout our value
system along with the pursuit of activities to “Identify,

Develop, and Expand” espoused in the NAGASE Vision, we willaddress issues affecting our business partners and society as
a whole, thereby contributing toward the realization of asustainable society.

Sustainability Basic Policy

1. Integrity in business activities

2. Positive relations with society• We shall conduct our corporate activities incompliance with all applicable national andregional laws and regulations, and in keepingwith societal norms and ethical standards.
• We shall strive to prevent corruption of all
kinds and maintain healthy and proper
relations with our partners and government
entities.
• We shall strive to provide safe, high-quality
products and services, and seek tomaintain and improve the value to ourcustomers and partners.
• We shall safeguard the benefit to theconsumer through maintaining andpromoting fair and free competition.
• We shall strive toward rigorous
management and protection of information
about our customers and our company.

3. Consideration for the environment• We respect human rights and do not permit
any sort of discriminatory conduct. We
absolutely refuse to accept infringementsof human rights such as forced labor orchild labor.
• We respect the cultures and practices ofnational and regional societies, maintaining
positive relations with society.
• We shall strive to ensure health, safety, andappropriate communication with ourdiverse stakeholders.
• We shall constantly pay detailed attention
to sustainability among our suppliers, andshall work to make corrections should
there be any doubt to their sustainability.
• We shall proactively disclose corporate
information as appropriate.

• We shall comply with national and regional
environmental regulations.
• We shall contribute to the maintenance ofthe global environment, including limiting
climate change and preventing
contamination, promoting reduction in theenvironmental footprint of our businessactivities through suppression ofgreenhouse gas emissions and energy
consumption.
• We shall, throughenvironmentally-conscious products andservices, provide information to ourcustomers about appropriate productusage, recycling, and disposal methods.
• We shall contribute broadly to society
through environmental conservation
activities in various countries and regions.
• We recognize the importance of
biodiversity and shall strive to conserve
ecosystems.

Corporate
culture• Formulation and monitoring of KPIs
FY2020

FY2021

FY2022

Identification of materiality

Establishment of projects andformulation of KPIs

KPI management and materiality

Conducted discussion in the
NAGASE Group sustainability
promotion project, and identified
materiality to be addressed in themedium-term management plan
ACE 2.0

1) Employee Engagement Improvement
Project
2) Carbon-Neutral Project(monitoring)
Set KPIs for “Carbon neutrality” and “Employee
engagement improvement” as FY2025
medium-term management plan targets forcarbon neutrality.
Began managing progress on materiality,
mainly through KPIs.

FY2025
Achievetargets of
medium-term
management
plan

Materiality and KPIs
The NAGASE Group has identified materiality for each group of stakeholders. In May 2022, KPIs were set for materiality for employees
and society/consumers, and the Group will promote sustainability management while checking its progress on these.
Stakeholders

Employees

Materiality

Report on KPIs and initiatives

Use diverse human resources; offer aworkplace environment and corporate culture

KPIs• 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 have mutual respect and motivate each other.

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

Relevant SDGs

Group companies• Ratio periodically conducting engagement survey: 100%NAGASE & Co. (non-consolidated)• Total score on engagement survey: 60 or above

Report on initiatives
We have established the three N-Sustainable business fields:
Environment and Energy, Next-generation Communications,and Life sciences. By 2025, we aim to achieve operating
income of ¥5.0 billion or more in these businesses (based oninternal management).

Note: Information about the NAGASE Group’s sustainability is also available on our website. https://www.nagase.co.jp/english/sustainability/

Sustainability Committee

The NAGASE Group’s materiality (important issues)
The NAGASE Group conducted an external environmental
analysis during the formulation of its medium-term management
plan ACE 2.0 and identified the most important issues to bothNAGASE and its stakeholders. We also identified important
issues (materiality) in sustainability based on the value we
provide to our stakeholders. We use the process shown at
the top of the right page to formulate KPIs based on theidentification of materiality, and then manage them.

Sustainability Basic Policy

Business execution (practicalimplementation) based on
the Sustainability Basic Policy

Society andconsumers

Sustainability Committee
Chair

Representative Director
and President
Members Executive officers
Business manager

Secretariat of
the Sustainability Committee

Degree of importance to stakeholders*1

NAGASE Report 2023

43

We have established the Sustainability Committee, chaired by
the Representative Director and President with the aim ofcontinuously increasing the NAGASE Group’s corporate value
by contributing solutions to social and environmental issues
through our corporate activities. The committee is composedof a chair and at least two members, who are appointed by thepresident from the employees of the Company and its Group
companies. The Corporate Sustainability Office conducts
business execution (practical implementation) based on the
Sustainability Basic Policy.

Technological innovation
Increased demand for deciphering information
Expanded opportunities for new business,changes in industrial structures

Demographic changes
Population growth in emerging countries
Aging in advanced countries

Representative Director and President
Corporate Planning Department

Shareholders
Corporate Sustainability Office

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

Industrial reorganization
More active industry reorganization andreassessment of distribution channels
driven by intensifying competition and moresophisticated management 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.

• 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 in advanced countries.
• Contribute to the acceleration of globalization and solve
social issues in each region.

KPIs
Consolidated• Reduction rate for Scopes 1 and 2: 37% or more(compared to 2013)• Reduction amount due to generation/purchase ofrenewable energy: 35,000 tons or more (cumulative)
NAGASE & Co. (non-consolidated)• Scope 2 zero emissions›› For more details, see P.40

Corporate governance

Report on initiatives• Establish a highly transparent corporate governance system.
• Make sustainable improvement of enterprise value bybalancing economic and social value.

We have been presenting a directors’ skill matrix, and as acompany listed on the Tokyo Stock Exchange Prime Market,
we are also making progress on disclosing information inline with the TCFD recommendations.

Organizations responsible for implementing materiality initiatives
Besides our trading company function, the NAGASE Groupalso includes Group companies with manufacturing functions,and we have positioned the pursuit of carbon neutrality andenhancement of employee engagement as common issues
that all Group companies need to address. To this end, twoprojects have been established under the Sustainability
Committee, and the project leaders are working, with a strong
sense of responsibility, to promote materiality-related
initiatives. Regarding carbon neutrality, we are also proceedingwith related measures from a manufacturing perspective,

including the discussion of emissions reduction targets andreduction strategies by the Environmental Subcommittee of
the Group Manufacturing Industry Cooperation Committee.
The NAGASE Group Carbon Neutral Declaration specifies agoal of reducing Scope 3 emissions by at least 12.3%(compared to 2020). We are very much aware of the need forcollaboration and coordination in the supply chain, and we areundertaking supply chain initiatives that include collaboration
with business partners and participation in the GX League.

44
NAGASE Report 2023

Solving social and environmental issues,and globalization

ACE 2.0| Growth Strategy | Functions Supporting Reforms |Profitstructure

Functions supporting reforms

Further Acceleration of Digital Transformation (DX)The NAGASE Group is further enhancing the strengths
provided by a business network and industry knowledge built
up over a period of more than 190 years by integrating themwith digital technology, and is proceeding with system building
and human talent cultivation that will lead to an enhancementof corporate value.
We are also speeding up the building of the foundations
needed for digital marketing. In fiscal 2022 we launched our
new English-language global website, with the aim of
spreading awareness of the value that NAGASE provides
throughout the world, and increasing the range of digital
touch-points for communicating with our customers.
Going forward, we will be proceeding with the creation of
websites for each region that we operate in, and by addressing
customers’ needs in more detail, we will be supporting theoperating activities of the NAGASE Group as a whole.

Making marketing and operating activities more
systematic and more efficient
Expanding the customer base through digital marketing
The NAGASE Group has around 110 Group companies thatcarry out their business activities across a wide range of fields
and using different business models, but there has been an

issue with not effectively sharing knowledge and businessknowhow across organizations and companies. To address
this, we have been integrating the Group’s key systems, suchas its enterprise resource planning (ERP) and customer
relationship management (CRM*1) systems, and used thisintegration to start accumulating data from both physicaloperating activities and digital marketing. By utilizing dataaccording to clearly specified rules, not only are we able to
make the work of our sales personnel and sales organization
more efficient, we are also able to deliver solutions that
already have a track record of success to new customers, andto expand the range of industry usage fields and applications
for products that had previously only been sold to specificindustries, thereby helping to solve problems for new
customers, and aiming to expand our sales.
Increasing the number and quality of business consultations
through CRM and MA*2
By sharing information through CRM systems, the NAGASEGroup aims to strengthen the overall capabilities of the Group
as a whole. Currently, we are proceeding with the adoption of
a CRM system that will be shared by Group companies bothwithin and outside Japan.
In the future, we will be striving to realize centralized
management of usage methods and solutions on a group-widebasis, taking the system login rate and such as indicators.

Enhance existing strengths through the use of
DX as a function that supports innovation
Deepen/ExploreR&D and manufacturing with amore precise grasp ofsociety’s needs

Further enhance andexpand existing strengths

Cooperation

Broad
network

Uniquestate-of-the-art
digital solutions

Technical
knowledge

/
en
ep e
De plorEx

Solutions leveraging
digital and the Group’s
total capabilities*2: Marketing Automation

Cooperation

Problemsolving
capabilities
and human
resources
Strengthen data
analytics and nose forbusiness

Create Value

Further develop
NAGASE employees’
business acumen*1: Customer Relationship Management

Expand customer basethrough digitalmarketingCollect Needs

Identify Issues

Cooperation

Improve business opportunity
in quantity and quality throughCRM and MA

De
Ex epenplo /re

NAGASE Report 2023

45

Enhancedcommunications abilities
via Real × Digital

Build an analytic platform

Training and cultivation of DX talent
Human talent cultivation program
The NAGASE Group has adopted a two-stage human talentcultivation model, defining employees who have acquired a rangeof digital knowhow relating to the full sweep of the company’s
operations and who are capable of using this knowledge
effectively as “DX talent,” and defining employees who are able
to play a leading role in using digital knowhow to develop new
solutions and develop new markets as “marketers.”
We believe that it is vital for the NAGASE Group’s DX tohave DX talent account for over 50% of all employees. While
striving to strengthen employees’ digital capabilities throughe-learning, we are aiming to cultivate 100 marketers by fiscal
2025, and have DX talent employees make up more than 50%
of all employees by fiscal 2026.
Launching a marketer community
So that Marketers can learn from each other across theboundaries of individual businesses, in fiscal 2023, NAGASE
established a participant-centric learning community for all
NAGASE Group employees involved with digital marketing.
The learning community provides close support for

Providing the DocuValue chemical document
distribution management platform

marketing initiatives and activities, and provides a venue for the
sharing and co-creation of related knowledge, while also analyzing
how frequently the Group’s marketing websites are accessed, andaiming to enhance the digital skills of all employees participatingin the community by sharing, on a common portal, data obtainedby employees themselves, broken down by topic, such as searchengine optimization (SEO) strategies, MA usage, etc.
DX training framework

ital

Dig

Specialist
training

Community
participantsSpecialist DX knowhow (intermediate)
Specialist DX knowhow (basic)

Generaltraining

LegacyIT literacy

2021

2022

2023

2024

2025

2026

* DX talent: Employees who have acquired a range of digital knowhow relating to the fullsweep of the company’s operations and who are capable of using this knowledge
effectively

Next-generation Chemical Documentation Management

DocuValue ®

In February 2023, NAGASE began providing the DocuValuecloud-based service, which aims to realize centralized
management of the documents that are sent whentransferring or providing chemicals.
By avoiding the situation where the sending, receipt
and custody of documents become too dependent on
individual employees, and by facilitating the visualizationof inter-company communication, DocuValue supports
better organized document management, and reduces theburden on every company in the chemical supply chain.

Chemical documentation management platform

46

Selling Uncountable, a digital service tailored tomeet the needs of the materials development sector
Developed and supplied by Uncountable Inc., Uncountable isa data management platform that allows the digitalization of
every stage in the materials development process, fromexperimental data collection through to analysis andplan formulation. In May 2022, NAGASE entered into a
distribution agreement for Uncountable, and began selling
this platform in Japan from October 2022 onwards.
By making possible the centralized management ofvast amounts of research and performance data that in
the past would have been dispersed and managed byindividual employees, Uncountable promotes the sharingof data between researchers and provides powerfulsupport for customers’ materials development.

m
and

tiv

cul

m

gra

pro

etin

ark

DX talent*

t
len
g ta

n
atio

NAGASE Report 2023

Basic approach

Corporate
cultureData visualization• Flexible GUI makes visual
analysis possible• Instant visualizations of
the correlation between
ingredients and properties

Compoundoptimization using
machine learning• Using Bayesian
optimization to suggest
experiment points• Support from machinelearning engineers in thefield of MI is also possible

Communication• Promoting the sharing ofexperiment data
• Experiment instructions,
reports, and such can begenerated and shared

Experiment

Data collection andaccumulation• Structured data can becollected using an electronic
lab notebook (ELN)• Support for multiple data
formats• Data can be read directlyfrom devices

| Social Contribution Activities |Working Group-Wide to Contribute to Local Communities and Development of the Next Generation
Basic approach

Nurturing local culture

Supporting athletes

The NAGASE Management Philosophy reminds us that we aremembers of society and that, through our growth, we willcontribute to society and enrich the lives of our employees.
We engage in a variety of social contribution activities under
this banner.

Hayashibara Museum of Art
The Hayashibara Museum of Art is supported by one of the
NAGASE Group companies: Hayashibara Co., Ltd. The
museum houses a collection of Japanese and other East
Asian paintings, crafts, and other items. The museum also
exhibits furnishings inherited from the estate of the feudal
Ikeda clan of the Okayama Domain. The goal of the museum
is to contribute to research of cultural assets and improve theculture of the region and of Japan. It does this by preserving
works of art, conducting research on them, and allowing thegeneral public to enjoy them through unique exhibitions andother events.
In 2023, the museum’s main building (designed by renowned
architect Kunio Maekawa) and the nagaya gate and treasuries
that were relocated to the site at the end of the 19th century
were designated as national Registered Tangible Cultural
Properties (Structures). The museum will also mark the 60th
anniversary of its opening in 2024, and is planning an exhibition
and a variety of events to commemorate this milestone.

Supporting athletes
The NAGASE Group provides support for athletes. We areproud to count visually impaired runner Shinya Wada and his
escort runner Takumi Hasebe among our employees. The pairwon silver medals in the 1500 m (T11) and bronze in the 5000m (T11) at the Tokyo 2020 Paralympic Games. Following thiswith a new world record in the T11 marathon at the Osaka
Marathon in 2023 with a time of 2:24:29, they are continuing toachieve incredible successes in the international arena.

Hayashibara Life Seminars
Since fiscal 2017, Hayashibara Co., Ltd. has been holding the
Hayashibara Life Seminars, a lecture series aimed at thegeneral public.
Lectures are on themes closely related to people’s lives
and deliver useful information to consumers.
In 2023, Dr. Yuji Naito of the Kyoto Prefectural Universityof Medicine gave a talk on the relationships between aging
and digestive health and how these relate to extending
healthy-life expectancy, entitled “Gut Health for Mental andPhysical Health! Gut Microbiome Diversity Is the Secret to
Healthy Longevity.”

Promoting the employment of people withdisabilities
NAGASE MIRAI Corporation
In order to deepen connections with the local community and5th Hayashibara Life Seminar

NAGASE Report 2023

47

Chemistry experiment study for elementary school students
Since 2019, Nagase ChemteX Corporation has been holding
an event to invite the Tatsuno Kodomo Eco Club, anenvironmental learning group for elementary school students
run by the city of Tatsuno in Hyogo Prefecture, to thecompany’s Harima Plant.
Participants enjoy learning through simple experiments
using the Company’s environmentally friendly products andexplanations of how factory wastewater is purified, and theparticipants have received the program well.

Hayashibara Museum of Art(nagaya gate)

Supporting and training technologists
Nagase Science and Technology Foundation
To help advance science and technology in Japan, weestablished the Nagase Science and Technology Foundationin 1989 and made it a public interest foundation in 2011. The
Foundation strives to advance science and technology bysupporting research and development in the fields of organic
chemistry and biochemistry with the aim of contributing tosocioeconomic progress.
In 2023, a total of 25 research grant winners were selectedfrom 301 applicants in the fields of organic chemistry andbiochemistry, and each received a grant of ¥2.5 million and theNagase Foundation Award.

The award winners with membersof the Foundation

Presenting the results of an experiment at a hands-on event

The museum’s main building

The Foundation’s Chairperson gives
a speech at the award presentation
ceremonSpecial sponsors of the NAGASE Cup athletics
competition
Since 2022, as part of our commitment to social initiatives,
NAGASE has sponsored the WPA Approved NAGASE Cup Para
Athletics Competition (the NAGASE Cup), hosted by Japan
Para Athletics. In September 2023, the second NAGASE Cup
was held at the Japan National Stadium.
Based on a foundational concept of being an inclusive
tournament in which everyone can participate, the NAGASE
Cup is an athletics competition where athletes come together
to compete regardless of disability status, age, or nationality.
In 2023, the event was attended by a total of 1,424 athletes
from Japan and overseas, including approximately 450
para-athletes, and saw the setting of numerous records,
including a world record. A total of approximately 6,600
spectators attended over the two days of the event, and the
120 children running energetically around the stadium as they
took part in the newly established Elementary School Divisionwere met with enthusiastic cheers of support. During thetournament, we received comments from many athletes andspectators in agreement with the concept behind thecompetition and stating that they would like to take part nextyear, too. Approximately 50 NAGASE Group employees andother affiliates were involved in the tournament as volunteers,
providing operational support.
Since welcoming visually impaired runner Shinya Wada

Recognition as a special subsidiary

Local clean-up operation

onto our staff in 2018, the NAGASE Group has been supporting
sports in various ways and has held a range of related events.
This has given us all the opportunity to truly experience thefighting spirit of athletes, with and without disabilities, goingafter new records, and the social impact of their amazing
efforts, has inspired us to consider what we can give tosociety; this is the background to the launching of the NAGASE
Cup. Going forward, we will continue to work to develop thetournament as a space where all athletes, spectators, andvolunteers can encounter new experiences and values, as justone of our efforts toward creating a safe and caring world
where everyone can live with peace of mind.

48
NAGASE Report 2023

Contributing extensively to society

provide safe, stable working opportunities where people withdisabilities and older people who would like to remain in theworkforce can work with peace of mind, Nagase ChemteX
Corporation established NAGASE MIRAI Corporation (NAGASEMIRAI), a wholly owned subsidiary, on April 3, 2023. NAGASEMIRAI was recognized as the first special subsidiary (asubsidiary that gives special consideration to employees withdisabilities) in the city of Tatsuno, Hyogo Prefecture, in May ofthe same year.
With “bringing warmth to the different connections
between us” as its guiding purpose, NAGASE MIRAI has begun
providing general, janitorial, and other contract services at
Nagase ChemteX Corporation’s Harima Plant. We will aim toprovide further employment opportunities in the production,
processing, and sales of agricultural produce, as well as otherareas, in the future, while giving close attention to local issues.

| Governance |GovernanceWe recognize our responsibility to society and offer beneficial products andservices while maintaining the highest standards of integrity.
Governance Summary

CONTENTS
51

Interview with the Outside Directors

53

Our Board

55

Corporate Governance59

Risk Management and Compliance

Institutional Format

Company with Audit & Supervisory Board

Number of Directors

8Outside Directors

3Outside Audit & Supervisory Board Members

2

Chairperson of the Board

Chairman

Term of office stipulated in Articles ofIncorporation

1 year

Separation of Management andBusiness Execution

Executive officer system

Board Member Appointment

Nomination Committee

Director Compensation

Compensation Committee [1] Basic salary [2] Performance-linked compensation (in cash)[3] Performance-linked compensation (non-monetary)Compliance/Risk Management

Risk Management & Compliance Committee

Internal Control

Internal Control Committee

Sustainability

Sustainability Committee

Independent Auditor

Ernst & Young ShinNihon LLC

50
NAGASE Report 2023

NAGASE Report 2023

49

| Governance | Interview with the Outside Directors |Interview with the Outside Directors

Noriaki Horikiri

Toshiaki Mikoshiba

Hoping for concrete measures to realize diversity
In 2022, I was lucky enough to have the opportunity to take part ina town-hall meeting with some of NAGASE’s female employees,
which was a very meaningful experience in terms of being able tolearn about the NAGASE Group. I hope that the company willcontinue to hold this kind of event in the future, and I am looking
forward to meeting more NAGASE employees.
To be frank, my impression of NAGASE is that, viewed from adiversity perspective, to some extent it lags behind the averagelevel of diversity achieved by Japanese corporations. As many
employees have been with the company for a long time, everyone
tends to be “reading from the same hymn-sheet,” but on the other
hand, it may be more difficult for people to express dissenting
views. Going forward, I hope that the company will take concrete
steps to address this issue.

Balancing long-term development and short-term results
One thing that companies with a long history have in common isthat, while valuing their traditions, they are willing to take on thechallenge of innovating and transforming themselves to keep pacewith changing times. In the manufacturing sector, there is a needfor a seemingly contradictory corporate posture of “Move fast but
take it steady.” For example, the biotech business offers immense
potential, but the process of going from basic research to social
implementation takes a long time. As I see it, the need to strike theright balance between long-term development and short-term
results is a managerial issue that requires a greater degree ofresolution and flexibility than ever before.

A strong relationship of trust between outside directors andcompany executives, while maintaining an appropriate levelof tension
The NAGASE Group is seeking further growth opportunities in its
overseas operations and is strengthening its manufacturing function
on top of its trading company function. As a new member of theboard, I would like to contribute to these efforts by making effective
use of my own experience that I acquired through long-standing
involvement with overseas business operations and integrated
manufacturing-and-sales business at Honda. There are always risks
involved in business, therefore, in order to allow the executive side
to take on new challenges, it is important for the supervisory side todelegate the authority of decisions and keep monitoring business
operations with properly recognizing risks. I believe that one of themost important roles of Outside Directors is to help guide on
improving quality of the Board Meetings, while establishing a
relationship of solid trust, and keeping an appropriate level of tension.

Deciding whether to withdraw from certain businesses toachieve future growth is also important
I have come to feel that, while NAGASE has adopted a stance ofadapting flexibly to change, it will need to continue transforming
itself in order to realize further growth. The challenge will be torealize change from within as early as possible while maintaining
the essential features that make NAGASE what it is. In the past,
NAGASE has focused on launching new businesses; in the future,
I think it will also be important for the company to be resolute
about withdrawing from certain businesses.
To provide support for transformation and growth, both the
Executive and Outside Directors (myself included) will need tothink more deeply and develop an in-depth understanding of whatis needed. I believe that it would be good to have an atmospherein which directors feel comfortable about expressing contrary
opinions during Board meetings, and in which such opinions canbe discussed freely, including by non-executive employees. But
before building consensus and reaching a decision, it is important
to look at issues from different perspectives, to present opinions
based on differing viewpoints, and to engage in“three-dimensional” decision-making.

Discussing where the company should be in the coming century
While milestone of the company’s 200th anniversary in 2032
represents an important goal for NAGASE, it is important to think
50 years ahead, or even 100 years ahead, when considering
where the company should be in the future. It may be advisable
for NAGASE to undertake the building of a system where, rather
than each individual business focusing on its own area ofspecialization, the trading company part of NAGASE’s operations
and the manufacturing part are closely integrated, and canmutually make effective use of the information and technologythat each other possesses.
An organization is formed from people with different
personalities. As an organization gets larger, it becomes increasingly
difficult to listen to the views of each employee, and to be awareof their situation. This is why the cultivation of first-rate middle
managers is so important. Also, I believe that, by building anorganization capable of cross-functional approach, and the humantalent to support this, it should be possible to develop businesses
that make effective use of NAGASE’s comprehensive strength,
while still maintaining a level of expertise that general trading
companies lack.

Close communication based on the “Three Reality Principle.”
The NAGASE Group benefits from the high level of trustworthinessthat has been built up over 190 years since its foundation and iscapable of providing effective business solutions. Today, NAGASE
is boldly taking on the challenge of striving for an enhanced levelof profitability and the value of the company and solving social
issues at the same time. I am very happy and excited about
having opportunities to be involved in the process of corporatetransformation and leaving a footprint on a page of this richhistory of NAGASE.
I feel that the commitment to “maintain the highest standardsof integrity” which forms an important part of NAGASE’s management
philosophy has much in common with the philosophy of “helping
people and society” and “working for the benefit of people and theworld” at Honda, where I worked for many years. Since I am so
accustomed to the “Three Reality Principle” (San Gen Shugi), whichemphasizes “going to the actual place”, “knowing the actual situation”
and “being realistic” from my experience with Honda, as an Outside
Director, I hope to be able to engage in visiting actual worksites,
examining actual products, and observing actual situations at
NAGASE and keep close communications with employees.

52
NAGASE Report 2023

NAGASE Report 2023

51

Ritsuko Nonomiya

| Governance | Our Board |Our Board(as of November 1, 2023)

Directors

Note: Number of shares held based on available information as of May 31, 2023. Figures given for the number of shares held include those held in the name of Nagase & Co., Ltd.
Officers’ Shareholding Association.

Kenji Asakura

Note: Number of shares held based on available information as of May 31, 2023. Figures given for the number of shares held include those held in the name of Nagase & Co., Ltd.
Officers’ Shareholding Association and Own Share Investment Association.

Hiroyuki Ueshima

Representative Director
and Chairman
Number of shares held: 29 thousand

MasayaIkemoto

Audit & Supervisory Board Members

Representative Director,
President and CEO
Number of shares held: 22 thousand

Masanori
Furukawa

Nobuyuki
Shirafuji

Audit & Supervisory
Board Member
Number of shares held:
9 thousand

Outside Audit &Supervisory Board
MemberNumber of shares held:
2 thousand

Masatoshi
KamadaHiroshiNagaseAkira
TakamiGan
Matsui

Director andExecutive Officer
Number of shares held:
14 thousand

Director andSenior Adviser
Number of shares held:
1,360 thousand

Audit & Supervisory
Board Member
Number of shares held:
16 thousand

Outside Audit &Supervisory Board
MemberNumber of shares held:
2 thousand

RitsukoNonomiya

NoriakiHorikiri

Toshiaki
Mikoshiba

Outside Director
Number of shares held:
1 thousand

Outside Director
Number of shares held:
0 thousand

Outside Director
Number of shares held:
0

Representative
Director andSenior Managing
Executive Officer
Number of shares held:
11 thousand

1984
2003
2006
2013
2016

1980
1990
2005
2010
2012
2014
2015
2016
2018

Joined The Sumitomo Bank, Ltd. (currently Sumitomo Mitsui
Banking Corporation)
Deputy General Manager of Global Corporate Investment
Dept. (London), Sumitomo Mitsui Banking Corporation and
Sumitomo Mitsui Banking Corporation Europe Limited
General Manager of Credit Dept., Europe, Middle East andAfrica Division (London), Sumitomo Mitsui Banking Corporationand Sumitomo Mitsui Banking Corporation Europe Limited
General Manager of Credit Review Dept. of Sumitomo Mitsui
Banking Corporation
Retired from Sumitomo Mitsui Banking Corporation
Audit & Supervisory Board Member, Nagase & Co., Ltd. (current position)

Prosecutor, Tokyo District Public Prosecutors Office
Prosecutor, Tokyo District Public Prosecutors Office(Special Investigative Squad)
Director, Special Trial Department, Tokyo District Public Prosecutors Office
Assistant Public Prosecutor, Osaka High Public Prosecutors Office
Chief, Criminal Investigations, Supreme Public Prosecutors Office
Chief Prosecutor, Yokohama District Public Prosecutors Office
Superintending Prosecutor, Fukuoka High Public Prosecutors Office
Japan Federation of Bar Associations (Member, Tokyo Bar Association)
Yaesu Sogo Law Office (current position)
Audit & Supervisory Board Member, Nagase & Co., Ltd. (current position)

Executive Officers
Managing Executive Officer

1997
2000
2005
2008
2013

NAGASE Report 2023

53

2013
2017
2020
2022–

Joined Peat, Marwick, Mitchell & Company(currently KPMG LLP)
Partner of KPMG Corporate Finance K.K.
Joined UBS Warburg Japan (currently UBS
Securities Japan Co., Ltd.)
M&A Advisor and Managing Director, UBS
Warburg Japan
Senior Vice President and Business Development
Leader, GE Capital Asia Pacific Ltd.
Senior Executive Officer and Business Development
Leader, GE Capital Japan, GE Japan Inc.
Managing Director, GCA Savian Corporation(currently GCA Corporation)
Director, GCA Corporation (current position)
Director, Nagase & Co., Ltd. (current position)
Representative Director and CEO, Houlihan Lokey
Japan Co., Ltd. (current position)

1974
2003
2006
2008
2011
2013
2021
2022
2023

Joined Kikkoman Shoyu Co., Ltd. (currently
Kikkoman Corporation)
Corporate Officer, Kikkoman Corporation
Executive Corporate Officer, Kikkoman Corporation
Director and Executive Corporate Officer, Kikkoman
Corporation
Representative Director and Senior Executive
Corporate Officer, Kikkoman Corporation
Representative Director, President and CEO,Kikkoman Corporation
Representative Director, Chairman and CEO,Kikkoman Corporation
Director, Nagase & Co., Ltd. (current position)
Representative Director and Chairman, Kikkoman
Corporation (current position)

Board of Directors and Audit &Supervisory Board Skill Matrix
We have identified the skills that members of the Board of
Directors need to possess, and the roles that members of theBoard of Directors and of the Audit & Supervisory Board play,
and the specialist knowledge that they possess, as shown to
the right.

1980
2008
2011
2014
2015
2016
2017
2019
2023

Joined Honda Motor Co., Ltd.
Executive Officer, Honda Motor Co., Ltd., and Director andVice President, Honda Motor Europe Limited
President, Guangqi Honda Automobile Co., Ltd.
Managing Officer, Chief Officer for Regional Operations(Europe Region), Honda Motor Co., Ltd., and President andDirector, Honda Motor Europe Limited
Senior Managing Officer, Honda Motor Co., Ltd.
Chief Officer for Regional Operations (North America),
Honda Motor Co., Ltd., and President and CEO, Honda
North America, Inc.
Senior Managing Director, Honda Motor Co., Ltd.
Chairman, Honda Motor Co., Ltd.
Director, Nagase & Co., Ltd. (current position)

Takanori Yamauchi

Satoru Fujii

Donald K. Thorp

Kusuo OtaIn charge of Hayashibara
Co., Ltd.

In charge of Nagase Business
Expert Co., Ltd.

In charge of Nagase ChemteX
Corporation

In charge of Prinova Group LLC,
Food BusinessIn charge of Group Companies,
Greater China (CEO),and Europe (CEO)Koichi Sagawa

Ryuichi Uchida

Takeshi Takada

Noriaki Arashima

Noriyoshi Yamaoka

GM, Corporate Planning
Department

In charge of Marketing DX

Manager, Nagoya Branch Office

GM, Specialty Chemicals
Department

GM, Human Resources &General Affairs Department

Yoshihisa Shimizu

Xiaoli Liu

Eiroku Oki

Toru Araki

Tamotsu Isobe

GM, Corporate Management
Department

GM, Nagase Bio-Innovation
CenterASEAN and India CEO,Regional Operating
Centre Leader

GM, Risk Management
Department

GM, Performance Chemicals
Department

Executive Officer

Kentaro Nagase
GM, Global Communication
Department

Position in the Company

Name

Representative Director and Chairman

Kenji Asakura

Representative Director and President

Hiroyuki Ueshima

Represent Director

Masaya Ikemoto

Director

Masatoshi Kamada

Director and Senior Adviser

Hiroshi Nagase

Outside Director

Ritsuko Nonomiya

Outside Director

Noriaki Horikiri

Outside Director

Toshiaki Mikoshiba

Audit & Supervisory Board Member

Masanori Furukawa

Outside Audit & Supervisory Board Member

Nobuyuki Shirafuji

Audit & Supervisory Board Member

Akira Takami

Outside Audit & Supervisory Board Member

Gan Matsui

Corporate Management/
Management Strategy

Global Management

Sustainability

Marketing/SalesDX

Manufacturing/R&D

Finance andAccounting

Legal Affairs/
Risk Management

Human Resources/
Labor Affairs

54
NAGASE Report 2023

1987

Naoki Yasuba

| Governance | Corporate Governance |Corporate Governanceenhancing business execution. Our current management
system is based on 8 Directors (of which 3 are Outside
Directors), 19 executive officers (of which 3 are also Directors),
and 4 Audit & Supervisory Board Members (of which 2 are
Outside Audit & Supervisory Board Members). To strengthen
the corporate governance function, NAGASE has voluntarily
established a Compensation Committee, Nomination
Committee, and Conflict of Interest Management Committee.
Other voluntarily-established committees include the GroupManagement Committee, Sustainability Committee, Risk
Management & Compliance Committee, Internal Control
Committee, and Security Trade Control Committee.
Under the current corporate governance framework, thesuggestions and advice provided from an objective standpointby several independent Outside Directors, and the unbiased,
objective oversight provided by an Audit & Supervisory Board
whose members have a high level of specialist expertise andindependence, have proven to be functioning effectively. We
believe that, given the effective coordination between thevarious boards and committees that have been voluntarily
established by the Company, this corporate governanceframework is the most appropriate for our company.

The NAGASE Management Philosophy recognizes its
responsibility to society and offers beneficial products andservices while maintaining the highest standards of integrity.
Through our growth, we will contribute to society and enrich
the lives of our employees.
Based on this philosophy, NAGASE strives to increase
corporate value over the medium to long term in line with the
NAGASE Vision, its commitment to stakeholders: “To realize asustainable world where people live with peace of mind, eachof us embodies our value proposition, “Identify, Develop andExpand” through daily activities.” We are working to strengthen
our corporate governance, because we believe that rapid
decision-making and execution, and ensuring transparency are
essential for us to accomplish these objectives.

Overview of the corporate governance system
NAGASE has adopted the structure of a company with an
Audit & Supervisory Board. We have also adopted an executive
officer system that separates management and businessexecution, with the aim of accelerating decision-making andCorporate governance system

Election/Dismissal

Report/Suggestion

60%
Ratio ofoutside members

Independent
Auditor

Audit

Board of Directors (8)Composition

Board ofDirectors

The Board of Directors is clearly positioned as the body incharge of making decisions on management policies andstrategies, and supervises the execution of operations. It
holds a regular monthly meeting to make important decisions,
track business performance and formulate measures.

8, including
3 Outside
Directors

Audit &
Supervisory
Board / Audit &Supervisory
Board Members

In accordance with the audit policy and audit plans set at
Audit & Supervisory Board meetings, Audit & Supervisory
Board members conduct audits of the execution of duties bydirectors by attending important meetings such as Board of
Directors meetings and receiving reports solicited fromsubsidiaries on an as-needed basis.

Group
Management
Committee

Report/Suggestion

Outside (3)Inside (1)37.5%

4, including
2 Outside
Audit &
Supervisory
Board
Members

16• Issues identified by the Audit & Supervisory Board
Members in relation to the internal controls system, andcommunication regarding these issues• Content of important matters submitted to the Board of
Directors for deliberation, and the deliberation process• Business management status of individual Group
companies• Appropriateness and transparency of the process used to
select key audit matters (KAM) for auditing by the
Independent Auditor

The Group Management Committee comprises executive
officers appointed by the Board of Directors, and in principle,
meets regularly once a month to discuss management
strategies, investment projects, and other important matters
to support business decision-making. This committee
serves as an advisory body that discusses matters resolvedby the Board of Directors.

Executive
officers
appointed by
the Board of
Directors

23• Matters relating to management strategy, sustainability,and governance• Matters relating to risk management, internal controls, andcomplianceNomination
Committee

The Nomination Committee has five members, the majority
being outside directors. It deliberates on appointment
proposals for directors and executive officers andsuccession plans for the Chief Executive Officer. It thenprovides reports and recommendations to the Board of
Directors with the aim of ensuring objectivity andtransparency in nominations of NAGASE’s top management.

5, including
3 Outside
Officers

6• Matters relating to the selection of the President’s successor• Matters relating to the following year’s Directors andexecutive officers

Compensation
Committee

The Compensation Committee has four members, themajority being outside directors. It enhances the objectivity
and transparency of the decision-making process regarding
compensation of directors and executive officers by
screening the appropriateness of every compensation level
and the compensation system to report and makerecommendations to the Board of Directors.

4, including
3 Outside
Directors

5• Matters relating to the share compensation system• Matters relating to the compensation system for company
officers

Conflict ofInterest
Management
Committee

The Conflict of Interest Management Committee has threemembers, the majority being outside directors. It deliberates on
potential conflicts of interest in relation to the Group’s business
operations with objectivity and transparency, and reports toand makes recommendations to the Board of Directors.

3, including
2 Outside
Directors

Meetings
heldstartingfrom 2023—

Security Trade Control
Committee

Ratio ofoutside members

Ratio ofoutsidemembers

ReportBusiness
Execution

Audit

Supervision

Opinion/
ReportReportReport/Suggestion

Main initiatives to strengthen corporate governance
1990s

Outside (2)Inside (1)Group Management
Committee

Consideration/
Suggestion

President

Company officer
systemAudit Office

Executive officer
Audit

2010s

1994
Appointment of first Outside
Audit & Supervisory Board
Member

2005
Appointment ofmultiple Outside
Directors

2020s
2020
• Outside Directors account for atleast one-third of Board members• Appointment of first female
Director

1998
Appointment of multiple
Outside Audit & Supervisory
Board Members
2001
Adoption of executive
officer system
2018
Establishment of theNomination Committee

67%
2010
Establishment of theCompensation Committee

Ratio ofoutside members

2008
Restructuring of theCompliance Committee as
the Risk Management &Compliance Committee

2001
Establishment of
the Compliance
Committee

Sustainability Committee

2020
Establishment of
the Sustainability
Committee

Committees

Internal Control Committee

Consideration/Suggestion

2000s
2004
Appointment of
the first Outside
Director

Risk Management &Compliance Committee

LiaisonThe Risk Management & Compliance Committee establishes and strengthens risk management and compliance systems that cover not only legal
compliance but also corporate ethics.
The Sustainability Committee is chaired by the President with executive officers and Group company managers as members. This committee
formulates policies for promoting sustainability throughout the Group, establishes and maintains the promotion system, monitors measures, andconducts educational activities within the Group.
The Committee deliberates on basic policies for the internal control system, builds frameworks established by the internal control system, and monitors
the management of the frameworks to ensure the appropriateness of business operations.
The Security Trade Control Committee ensures compliance with export-related laws and regulations in relation to foreign currency exchange and foreign
trade for the Company’s trading of cargoes and technologies covered by such laws and regulations.

75%

Conflict of Interest
Management
Committee (3)Main Issues Addressed in FY2022• Matters relating to management strategy, sustainability,and governance• Matters relating to risk management, internal controls, andcompliance

Ratio ofoutside members

50%

No. ofMeetings
Held in
FY202216

Compensation
Committee (4)Outside (3)Inside (5)Outside (2)Inside (2)NAGASE Report 2023

55

Audit &
Supervisory Board (4)Summary

Internal Control Committee

Nomination
Committee (5)Outside (3)Inside (2)Election/Dismissal

LiaisonName

Risk Management &Compliance Committee
Sustainability Committee

Shareholders’ Meeting
Election/Dismissal

Overview of the main boards and committees

2007
Establishment of
the Internal Control
Promotion
Committee

Security Trade Control Committee
Other

2009
Restructuring of theInternal Control Promotion
Committee as the Internal
Control Committee

2007
Adoption ofanti-takeover measures

2019
Termination of anti-takeovermeasures56
NAGASE Report 2023

Basic approach

| Governance | Corporate Governance |Nomination policy and criteria

Status of audit by Audit & Supervisory Board Members

Company officer compensation policy

Strategic cross-shareholdings

Nomination policy and procedures for Directors and Audit &Supervisory Board Members Directors (Internal and Outside)
As a general rule, candidates for Internal Directorships arenominated from among persons who already have experience
as an executive officer.
Candidates for Outside Directorships are chosen frompersons of integrity who possess a high level of insight andcompetence, and who are able to raise issues from thestandpoint of what stakeholders and society as a whole require.
Candidates for Directorships are selected by the President
and Representative Director, and after review by a separate
Nomination Committee, the appointments are deliberated on
and decided upon by the Board of Directors, and then submitted
to the Shareholders’ Meeting for approval.
With regard to Audit & Supervisory Board Members,
candidates are selected by the President and Representative
Director from among persons who are deemed to meet thecriteria specified in the Audit Standards for Audit & Supervisory
Board Members, and after obtaining the agreement of the
Audit & Supervisory Board through preliminary discussion, theappointments are deliberated on and decided upon by the
Board of Directors, and then submitted to the Shareholders’Meeting for approval.
In addition, the reference materials appended to the noticeof the Shareholders Meeting disclose the reasons for appointing
each candidate for the positions of Director or Audit &Supervisory Board Member.
Regarding the removal of Directors, after the Nomination
Committee has deliberated on the appropriateness of removal,
the question of removal is then deliberated on and decided
upon by the Board of Directors, after which, where necessary,
the procedures for removal are followed. When a Director isremoved, the grounds for removal are disclosed.

The Audit & Supervisory Board comprises 3 full-time members(including 1 outside member) and 1 part-time member(including 1 outside member). The Audit & Supervisory Board
meets once a month in principle and as necessary to discussmatters. In fiscal 2022, it held 16 meetings.

Compensation standards are set so that compensation isappropriate for the role and scope of responsibilities for eachcompany officer and motivates them to sustainably enhance
corporate value in light of objective external data and thecurrent management situation, etc. The target ratios for eachcategory of compensation are as shown below.
Compensation for Outside Directors and Audit & Supervisory
Board Members is limited to basic compensation, a fixed salary,in view of the nature of their duties.
The indicators selected for performance-linked
compensation are net income attributable to shareholders of
the parent company, which is the final profit, as an incentive toimprove business performance, and ROE as an incentive toimprove capital efficiency. The method used to calculate
performance-linked compensation is as follows. The basic
amount of performance-linked compensation based on profit
attributable to owners of the parent is determined based on the
consolidated performance forecast at the beginning of the fiscal
year, and is multiplied by the ratio of net profit for the previous
fiscal year and the achievement ratio relative to the consolidated
performance forecast at the beginning of the fiscal year, andis adjusted based on individual assessment. With regard tocompensation based on ROE, to achieve the ultimate goals set
in the Medium-Term Management Plan, targets are set for eachfiscal year, and the amount of compensation is determinedbased on the extent to which the target for that year has beenreached. Starting from fiscal 2024, new ESG-related indicators
are being added as additional performance-linked indicators.

To realize the sustainable enhancement of corporate value,
the NAGASE Group holds strategic cross-shareholdings when
this is deemed necessary, taking into account a comprehensive
range of factors such as those relating to the maintenanceand strengthening of relationships with business partners,
business strategy, etc. Regarding the appropriateness of theseshareholdings, the relevant units scrutinize them to gauge
whether the earnings that can be achieved in terms of profits
from related transactions and dividends received meet theCompany’s internal hurdle rate based on capital cost, whether
the shareholdings can be expected to support businessexpansion or the creation of synergy, and whether they can be
expected to ensure the stable provision of services that arevital to the NAGASE Group’s corporate activities; the results ofthis scrutiny are then confirmed by the Board of Directors on
an annual basis. In cases where the holding of a particular
stock is deemed not to be appropriate, the Company will aim
to reduce its holdings of these shares by selling them off in a
step-by-step process, while taking various factors into account.
In addition, under the ACE 2.0 Medium-Term Management
Plan, implementation of which began in fiscal 2021, NAGASEplans to sell off strategic cross-shareholdings valued at acumulative total of 30 billion yen over a five-year period. As of
March 31, 2023, a total of 15.1 billion yen of shareholdings had
already been sold off.

Evaluation method
The Company analyzes and evaluates the effectiveness of theBoard of Directors every year, believing in the importance ofimproving board effectiveness. It conducts an anonymous
survey of all directors and Audit & Supervisory Board members
in order to generate more proactive and honest opinions. The
Company also eliminates bias by utilizing third-party
organizations to collect, tally and analyze the survey results,
thereby ensuring transparency in its evaluation methods.
Evaluation results
Based on the evaluation results, the Company confirmed thatits Board of Directors functions effectively, conducting
appropriate and timely deliberations and decision-making.
The status of the response to items recognized as issues
in fiscal 2021, and the issues recognized in fiscal 2022 basedon the evaluation results, and the response strategy for theseissues, are as follows.

NAGASE Report 2023

57

• Re-evaluation of document composition
We have made improvements in this regard, by adopting the inclusion of executive summaries in Board of Directors materials, and by clarifying
submission content and discussion points.
• Ensuring opportunities for discussion of overall strategy and management issues
We have canvassed the views of each Director regarding the raising of topics relating to concrete management issues.

Issues recognized in the FY 2022 evaluation results• The need for further discussion regarding how the Board of Directors operates• The need for continuous improvement to realize efficient operation
With regard to operational improvement, we are discussing the effective utilization of pre-meeting explanations and adjustment of the criteria
for submitting matters for discussion, so as to ensure that there is adequate time for discussion and deliberation on the day of Board meetings.
• The need to improve monitoring of management issues
We are proceeding with consideration of how to select discussion topics and ensure opportunities for discussion, of quantitative andqualitative reflection on the Medium-term Management Plan, and on the next action plan.

FY2019

Share held by each category of company officers’ compensation
Fixed
compensation
Performancelinked
compensation(monetary)

Issues identified in the evaluation of the effectiveness of the Board of Directors, and response measures
Status of the response to items recognized as issues in FY2021

Sale of strategic cross-shareholdings

Share of total: 50 – 70%

Annual compensation, paid in equal monthly payments
Share of total: 25 – 40%

Paid annually, in cash

ACE 2.0 Medium-Term
Management Plan
FY2021

FY2022

No. of stocks
sold off

7 stocks

5 stocks

49 stocks

13 stocks

Total sale price

10.4
billion yen

6.2
billion yen

7.8
billion yen

7.3
billion yen

Paid in lump sum at the end of June each year
Share of total: 5 – 10%

Performancelinked
compensation(non-monetary)

Paid monthly, in cash

FY2020On retirement, in the form ofsharesA performance-linked share compensation system has been
adopted whereby points are awarded based on position andachievement of performance targets, etc., and a number ofshares corresponding to the number of points awarded isheld in a trust set up by the Company to be paid on retirement.

Breakdown of company officers’ compensation and total amounts (FY2022)

Category of company officer

Internal

Directors

Audit &
Supervisory
Board Members

No. of eligible
company officers(persons)
6

58
NAGASE Report 2023

Board of Directors effectiveness evaluation

Amount of compensation by type (million yen)

Total amount ofcompensation(million yen)

Basic salary

Performance-linked
compensation(monetary)

Performance-linked
compensation(non-monetary)

502

200

270

31

Outside

4

34

34

—

—

Total

10

536

235

270

31

Internal

2

46

46

—

—

Outside

2

33

33

—

—

Total

4

80

80

—

—

| Governance | Risk Management and Compliance |Compliance

Basic approach
The NAGASE Group runs a global and diversified operation,
being exposed to various risks associated with the nature ofits businesses.
We therefore endeavor to gain an accurate assessmentof risks related to business activities within and outside thecompany, take appropriate action, and make improvements
so that we can achieve sustainable growth while minimizing
harm from emerging risks.

Strengthening of the risk management system
Responding to concerns about the possibility of failing to
identify risks that require monitoring, and to increasingawareness of the need to upgrade risk management systems
in response to changes in the external environment as well as
growing external demand for disclosure�related to these efforts,
NAGASE has sought to overhaul the risk management system
and rules. We have also implemented a large-scale adjustmentof corporate risk management items. The existing 17 risks havebeen broken down into 102 individual risks. Of these 102 risks,

Representative Director, President and CEO
Report and deliberation

Risk Management &Compliance Committee
Chair: Director in charge of Risk Compliance
Members: Executive officers
Administration Office

Support and instructions

Departmentsin charge of risk
management

NAGASE Report 2023

59

Report andconsultation

Head of
Risk Management

Business divisions
Support andinstructions

Report andconsultation

Promotion
Support

Audit Office

Risk Management
Department

Head of
Risk Management

Administrative units
Support andinstructions

Group companies

Report andconsultation

Group companies

FY2023 Group’s major risks – Candidate risks
Broadcategories

Risk item
Tensions between U.S. and China
Taiwan contingency
Failure to address diversity, equity, and inclusiveness of human capital

External
environment

New technology and service development and technology andservice innovation by competitors
Failure to cope with climate change risk
Depletion of natural resources
Growing social demands for human rights, environmental issues,
etc. in the supply chain
Failure of overseas strategy

Internal
environment

Losses incurred due to the withdrawal from business
Workplace harassment
Cyber-attacks
Utilization of personal data

Internal control
The NAGASE Group established an internal control system tobuild a stable and sustainable corporate foundation for theGroup with the aim of enhancing corporate value throughbusiness activities. The Internal Control Committee, the main
entity for advancing internal controls, discusses the basic
policy of the internal control system, monitors the construction
and operation of frameworks defined under the internal
control system, and ensures the propriety of operations.

Crisis prevention and business continuity planning(BCP)
Each NAGASE Group company has taken steps to mitigate suchrisks as those related to natural disasters that could have an
impact on the continuity of business activities as well as thesafety and lives of employees. We implement countermeasuresthrough the dual wheels of crisis prevention activities and BCP
activities. As for crisis prevention activities, we annually conduct
one drill that coordinates our major domestic bases of Tokyo,
Nagoya, and Osaka, checking the first responses during times ofcrisis. As for BCPs, each department has formulated a recovery
plan to assure delivery to major business partners.

Risk management system

Instructions

12 risks that have been assessed to be particularly high havebeen set as the Group’s major risks, based on assessment
criteria that utilize the three axes of impact, frequency/potentialof occurrence for occurrence and inadequate management.
The aim of these measures is to realize the wide-ranging
identification of risks and build a framework for sustainablerisk management.

Product safety and quality control
The NAGASE Group considers product safety and quality control
a major social responsibility to provide customers with safe
products and build a safe and secure society. According to the
NAGASE Group Product Safety Principles, we strive to ensure
the safety of products through Group-wide rules and education.
In addition, the Legal and Compliance Department provides
management of vendors and manufacturing contractors, and theGroup Manufacturers’ Collaboration Committee provides support
to Group manufacturing companies and internal education.

Occupational safety and health management byGroup Manufacturers’ Collaboration Committee
With regard to the occupational safety and health of Group
manufacturing companies, the Group supports improvements
to occupational safety and health activities undertaken byeach company at the Occupational Safety Subcommittee
within the Group Manufacturers’ Collaboration Committee. It
also supports solid implementation of activities and conducts
occupational safety evaluations and follow-ups on priority
target companies to achieve KPIs.

Basic approach

Fair business practice initiatives

The NAGASE Group values employee education and businessactivities that follow socially accepted norms and ethics as well as
observing laws and regulations, which are becoming more complex
and stringent in an increasingly borderless world. Thus, we arecommitted to compliance that keeps pace with the changing times.
To this end, we have established a Risk Management & Compliance
Committee to oversee risk management and compliance, anddefined its functions and authority. The Risk Management &Compliance Committee operates as a structure with clearly
defined roles and responsibilities.

In regard to the Antimonopoly Act, the NAGASE Group actively
runs education programs, mainly for our manufacturing
companies, to ensure that they are not involved in unfair trade.
We are also providing bribery education to Group companies
in Japan and overseas in the context of strengthening ourapproach to the prevention of bribery of foreign public officials
under Japan’s Unfair Competition Prevention Act andextraterrestrial application of the U.S. Foreign Corrupt Practices
Act and the U.K. Bribery Act. In fiscal 2022, as in past years, we
implemented related education that included topics of current
importance and developments within the NAGASE Group.

Components of the Basic Policy and Code of Conduct
Increasing the effectiveness of compliance requires clarification of
our compliance philosophy, a functional system to implement thatphilosophy, and the demonstration of concrete action guidelines. The
NAGASE Group has established a Basic Compliance Policy basedon its core Management
Compliance regulation system
Philosophy, and has
formulated and implemented
Management
the NAGASE Group Code ofPhilosophy
Conduct, which incorporates
the Management Philosophy
Basic Compliance Policy
into more concrete actions,as important rules that all
NAGASE Group Code of Conduct
Group executives andemployees must uphold.

Components of the Basic Compliance Policy and
Code of Conduct
Comply with applicable laws and regulations; conform tointernal rules
Eliminate anti-social elements
Provide useful products and service
Respect employee’s personality and individuality
Disclose information
Protect the global environment
Responsibilities of top management
Our Basic Policy and Code of Conduct is available on the Sustainability
section of our website.

Establishing a compliance system
The NAGASE Group has established consultation and reporting
hotlines as well as compliance rules for each Group company
and region, and established a system which makes it possible
to detect compliance issues that have occurred within theGroup in a timely manner and improve and resolve themquickly. It checks to make sure that the system for handlingconsultations and reports of harassment within the Group isproperly functioning, and continually promotes complianceactivities that involve taking proactive measures, such as
education focused on management and those in administrative
positions who lead organizations.

Response to security trade controls
To conduct trade appropriately in line with laws and regulations
as a member of the international community, the Security Trade
Control Committee works to understand the export control
situation, follows the latest revisions to the Foreign Exchange
and Foreign Trade Control Law, and ascertains a detailed
picture of export controls across the entire Group, while
formulating related Group policies. The Item ComplianceManagement Council is in charge of directing and educatingeach business division and Group company in matters andstatute updates determined by the Security Trade Control
Committee. It is the responsibility of the Item ComplianceManagement Council to protect the company and affiliates
against the risk of illegal acts. To be capable of responding
to the rapid change in the security trade control field, we
encourage our employees, particularly those involved with
export business, to take the security trade control certification
exam provided by the Center for Information on Security Trade
Control (CISTEC) (As of fiscal 2022, a cumulative total of 1,125
employees had obtained this certification).

Compliance with laws and regulations related
to products
We are strengthening our management of product-related
laws and regulations, including those relating to chemical
products. We are also promoting centralized information
management and have implemented a management system
to appropriately comply with related laws and regulations
across all products handled by the NAGASE Group.
• Specific compliance measures: We implement centralized
management of matters relating to relevant laws and regulations
using our comprehensive product management system, basedon the chemical composition and specifications of all the chemical
products that we handle.
• Compliance with global chemical substance regulations: We
are promoting the systemization of product management, andproviding education and guidance to our overseas subsidiaries sothat they can promptly provide their business partners with thelatest and most accurate information in response to regulatorychanges based on the Strategic Approach to International
Chemicals Management (SAICM).

60NAGASE Report 2023

Risk Management

| Business Portfolio |Business
Portfolio
Accelerate the shift of resources to focus and development areas

Reconstruction of our business portfolio

CONTENTS
63

Message from the Officer
in Charge of Sales

65

List of Segments

67

Functional Materials Segment

69

Advanced Materials & Processing
Segment

71

Electronics & Energy Segment

73

Mobility Segment

75

Life & Healthcare Segment

77

Regional Strategy

Until September 30, 2023

From October 1, 2023

Functional Materials Segment

Functional Materials Segment

Performance Chemicals Department
Speciality Chemicals Department
Advanced Materials & Processing Segment
Colors & Advanced Processing Department

Performance Chemicals Department
Speciality Chemicals Department
Advanced Materials & Processing Segment
Polymer Global Account Department

Polymer Global Account Department
Electronics & Energy Segment

Electronics & Energy Segment

Electronics Department

Electronics Department

Information & Communication and Energy Office
Functional Resin Department

Advanced Functional Materials Department

Precision Process Materials Department
Mobility Segment
Mobility Solutions Department
Life & Healthcare Segment
Food Ingredients Department
Life & Healthcare Products Department

Mobility Segment
Mobility Solutions Department
Life & Healthcare Segment
Life & Healthcare Products Department

62
NAGASE Report 2023

NAGASE Report 2023

61

| Business Portfolio | Message from the Director in Charge of Sales |Masatoshi
KamadaDirector and Executive Officer

Combining real-world and digital technologies toenhance our marketing quality and deliver unique
NAGASE solutions

NAGASE Report 2023

63

Shifting our mindset from a trading company
centered on sales and distribution to amarketing-oriented business
I consider the “Pursuit of Quality” at the heart of medium-term
management plan ACE 2.0 to mean using the value that only
NAGASE can provide to lead our customers to solutions. For
us to do this, we must once again strengthen the horizontal
integration of our marketing capabilities and business divisions.
The NAGASE Group is shifting its focus away from a single
standard trading company model of product sales anddistribution to a model that also has marketing-driven
business in which every employee is a “Business Designer”
creating new businesses and diverse value in our sales
activities. The reason we are making this transition is becauseof the increasing challenges our customers are facing aremanagement-level issues that are difficult to resolve with asingle product, service, or area of specialization. For us, this is
an opportunity to expand our business. That is because we are
more than a trading company specializing in chemicals, weoffer integrated high-level research, manufacturing,biotechnology, digital transformation, and other functions thatenable us to provide a wide range of solutions beyond thereach of other companies. As our projects grow in scale andprofits in turn grow with it, I believe we will be able to develop
our business in line with the ACE 2.0 basic policies.
To embody this scenario, however, we will need tostrengthen the marketing capabilities that I mentioned earlier.
More specifically, we will need to listen carefully to the concernsof our customers to draw out the issues, inspect and examine
them, and then have the ability to harness the whole NAGASEGroup to deliver value with our solutions. This mindset isspreading among our employees, and our marketing activities
that have started from “uncovering potential issues” thatNAGASE can address are becoming more noticeable. When I
visit the business divisions, each year I see more employees
who are eager to become Business Designers with the ability
to find seeds for new businesses when talking with customers
and to nurture the seeds and deliver multifaceted value.

The NAGASE Group is strengthening cooperation among ourinternal organizations so we can better address the
management-level issues our clients are facing. Ourorganizational structure was formed to leverage our high levelof expertise in each field. But while this independence was astrength in the past, it can become a weakness in the future.
The reason is that we cannot effectively address client
problems on the management level unless we have fullknowledge of all of our business’s products and services,
overseas networks, and examples of solutions. We therefore
need to use digital marketing to broaden our customer base.
One way we will do this is by planning an approach integrating
digital information into our operations in countries and regionswith potential for economic growth, such as Africa and SouthAmerica, where cost restraints or lack of real-world data
inhibited business development.
Digital technology will make this approach possible. Our
Group often has multiple divisions working for a single clientand even now several business negotiations are underway.
Still, our performance was hindered by insufficient
coordination among our organizations. We have now
introduced cloud-based marketing automation (MA)* andcustomer relationship management (CRM)* tools enabling
Group-wide access to centrally managed individual customer
information obtained during marketing activities and on thestatus of business negotiations. These tools give us acomprehensive understanding of issues being faced by eachcustomer’s divisions. The deeper analysis that these systems
have enabled has raised the quality of our businessnegotiations and increased the opportunities to propose
solutions to managers.
We are strengthening cooperation across businessdivisions to accelerate information sharing and businessexploration within the Group. We reformulated theorganizational structure and business divisions in October
2023 to increase our operating efficiency and productivity andlower barrier between our divisions with the aim of creating
new businesses. We have also started consciously creating
opportunities for general managers and middle managers tobring together NAGASE’s various functions and apply theGroup’s comprehensive strength to client account planning.*

Applying the management principles to businessactivities and to provide employees with growth
opportunities
The focus of ACE 2.0 is primarily focused on thesemiconductor-related and food-related businesses.
Semiconductor-related business sales have roughly doubled
since we instituted the integrated group structure in 2021. In
the food-related business, the Prinova Group is the main
growth driver and is highly competitive in the European andAmerican markets. We are planning to actively develop
business in the Asian market. We are positioning thebiotechnology business to be at the center of our Group
operations. We will continue investing management resourcesin our unique materials to establish us as NAGASE, “theBiotechnology Company.” We will continue consolidating ourearnings foundations to generate Group synergies as we apply
our business to address global environmental issues.
Human resources will be the key element to continuing
our growth as we approach the 200th anniversary of theCompany’s founding. Project leaders lead by example in thesales process and make a conscious effort to provide
employees with opportunities to think and act on their own. I
myself have worked in the synthetic resin and mobility
businesses and have had three assignments overseas. The
variety of experiences I have had is one of the reasons I am
where I am today. New businesses are more likely to arise outof a heterogenous culture than a homogeneous culture. We
would like to provide an environment of diversity to develop
our human resources.
Lastly, the NAGASE Group has a universal management
philosophy of “maintaining the highest standards of integrity.”
Integrity is consistency in words and actions. With this sharedprinciple throughout the Group, we are using our businessactivities to help build a better society.
* MA is a tool or platform for organizational marketing activities providing
visualization and streamlining of the process of acquiring information
about prospective customers, negotiating business, and tracking orders
and contracts.
* CRM is a system for implementing measures to build and maintain good
relationships with customers.
* Account planning is our basic concept for strategically deepening andexpanding our business by fully understanding each customer’s businessand external environment, and building long-term, continuing partnerships.

64
NAGASE Report 2023

Strengthening Group collaboration with horizontal
integration across business divisions

| Business Portfolio | List of Segments |Business segments

Department

Main products and services

Functional
Materials

Performance Chemicals Department

Performance Chemicals Department

Provides high-performance materials for a wide range of industries,
including paint, inks, urethane, printing and film, and LCD.
Also responding to customers’ needs by developing sustainableproducts, demand for which is rapidly increasing, based on the key
words “environment” and “bio,” and by effectively utilizing thefunctions of the Nagase Group as a whole, including manufacturing,
R&D, and processing.

Resin raw materials (various types of monomers), resins,
solvents, pigments, dyestuffs, coloring matter, dispersion
processing materials, paint and ink additives, urethanematerials, flame retardants, release agents, conductive
materials, functional sheets, films, adhesives, endotoxin
removal services, and sanitary materials

Speciality Chemicals Department

Petrochemical products, raw materials for industrial
metalworking oil solutions, surfactants and surfactant
raw materials, environmental equipment and chemicals(wastewater, exhaust gas, energy conservation), resin raw
materials and additives, electronics chemicals, UV curing
agent materials, chemical outsourcing coordination

For more details, see P.67

Advanced
Materials &Processing

Having established businesses over many years in a diversity ofindustries, now handles more than 10,000 products.
Is also expanding into new fields with a focus on business partners’
elemental technologies.

Gross Profit

0.4

29.8
(19.2%)

Speciality Chemicals Department

Polymer Global Account Department

Polymer Global Account Department

With a well-developed sales network and experienced local staff in
the Asia Pacific region, the department works with global companies
to sell synthetic resins for a wide range of industries, including officeequipment and the electrical and electronics industries. It is also
focusing on eco-friendly businesses, providing environmentally-friendly
materials and services such as recycled material and biomass plastics.

Engineering plastics, commodity plastics, packaging
materials and other plastics-related products, and service*1(0.3%)

55.9(36.0%)

155.4

24.2

(Billions of yen)

(15.6%)

14.4

30.7

(9.3%)(19.8%)For more details, see P.69
Operating Income

Electronics Department

Electronics Department

In addition to providing functional materials and their constituent
components to the silicon wafer, semiconductor, electronic
components and display industries, is working with partner companies
to develop products that align with market and customer needs.

Fine polishing abrasives, optical materials for displays,
touch panel components, functional paints, conductive
and insulating materials, adhesive and encapsulating
materials, high-heat-resistant films, optical lenses,
high-frequency devices, low dielectric materials, sensing
modules, optical materials for XR, semiconductor andelectronic device-related equipment

Advanced Functional Materials Department

For more details, see P.71

Mobility
NAGASE Report 2023

65

Nagase ChemteX Corporation’s modified epoxy resins, developing fluid,
stripping agent recovery solutions, high-performance materials for 3D
printing, etc., which are developed based on the company’s formulation,
compounding, precision cleaning, surface finishing and photosensitive
materials design technologies, are sold both in and outside Japan,
with key fields including the electrical/electronics industry, mobility,
the environment, energy, semiconductors (photolithography andencapsulant materials), 3D printing and displays.

-9.1

*1

10.4

(-27.3%)(31.2%)

Advanced Functional Materials Department
Formulated epoxy resins and related materials,
photolithography materials for flat panel displays andsemiconductors, 3D printing-related materials

33.3

10.5

Mobility Solutions Department

Mobility Solutions Department

We will contribute to the realization of a safe, secure and comfortablemobility society by grasping the needs of the mobility industry, including
automobiles, agricultural machinery, construction machinery andaircraft, and by offering diverse solutions through pursuing newtechnological innovations.

Automotive interior/exterior and functional components:
Various resins, functional paints, adhesives, lightweightcomponents, decorative components, HMI components
CASE-related:
xEV-related components, heat management components,
battery materials, sensors, LiDAR devices, autonomous
driving technologies

7.6(Billions of yen)

(22.8%)(31.5%)

66

4.7(14.1%)

9.2(27.6%)For more details, see P.73
*1

Life & Healthcare

For more details, see P.75

Life & Healthcare Products Department

Life & Healthcare Products Department

In the pharmaceutical, medical, cosmetics, household goods, and foodproducts (processed foods and nutrition) sectors, we provide a wide
range of solutions throughout the world through the Nagase Group’s
manufacturing, processing, procurement, logistics, research, application
development and regulatory-related functions. We are striving tocontribute toward the realization of healthy, enriched lifestyles.

Pharmaceuticals products (APIs, additives, intermediates,and other materials), materials for In Vitro diagnostics,
raw materials for cosmetics and household goods(active ingredients, additives, emulsifiers and fragrances),
food ingredients (nutrition materials, functional saccharides
such as TREHA™, glycosides, enzymes and otherprocessing aids), premix (OEM/ODM), and materials for
agriculture (including livestock raising) and fisheries

Other/Corporate: Includes businesses not included in reported
segments and eliminated inter-segment transactions, etc.

NAGASE Report 2023

Electronics &Energy| Business Portfolio | Strategy by Business and Region |Gross profit by region and field
Europe 2%

Operating income(billions of yen)

Other

1%

Americas 13%
ASEAN

11%

Functional Materials Segment

O

Opportunity• Launching services aimed at improving social value
and economic value throughout the entire industry• Submitting proposals to other firms in the upstream
and downstream segments• Expanded utilization of imported materials due tothe consolidation or closure of many chemicalbusinesses in Japan

Sales and services 90%

NAGASE Report 2023

ASEAN
PT. Toyo Quality One Indonesia(actual) (forecast)• The assumption that a stable supply can berealized for all products is being called into
question in a business environment with a strongemphasis on sustainability and carbon neutrality• Emergence of new competitors due to the widespread
implementation of DX (digital transformation)• Geopolitical risks (risk of conflict over Taiwan,
risk to stable supply of products from China, etc.)

W
T

ThreatExecutive Officer
GM, Performance Chemicals
Department

Sustainability Topic

Plastic reduction technology adopted by leading Japanese coffee manufacturers
NAGASE is the exclusive distributor for coffee-related applications for TiMELESS™, which has already been adopted byseveral leading Japanese coffee manufacturers.
TiMELESS™ contributes toward cost reduction and also helps to protect the environment by reducing plastic usage; it
is a “win-win” technology that creates both economic value and social value. Going forward, we will be aiming to roll out thistechnology more widely, with the aim of achieving full-scale dissemination and adoption both within and outside Japan.

• Portfolio optimization and acceleration of global
expansionO• Ability to contribute to carbon neutrality, within abusiness environment that requires sustainability• Further strengthening of human talent cultivation,and effective talent utilization• Environmental impact of businesses centered on
chemicalsStrength

Opportunity

Tamotsu Isobe*1 TiMELESS: A gas control technology that has applications in film and paper packaging materials, developed jointly by MIB Co.,
Ltd. and NAGASE.

S• Strong relationships with suppliers built on trust• In-depth knowledge of the industry andchemicals, and information capabilities thatleverage the Group’s capabilities

W

Weakness

Weakness

Enhancing social and environmental value through technological expertise and agility

67

2022 2023 (FY)

TQ-1 de MEXICO S.A. de C.V.
Cytech Products Inc.
Sofix LLC

Speciality Chemicals Department• Vulnerability to changes in the external environment,
including economic indicators (oil prices, exchange
rates, and automotive sector production volume)• Reduced need for the general-purpose chemical
trading company function, and lower profitability• Unsatisfactory ability to generate new businessmodels, due to operating in a mature market withrestricted talent flow
• Unpreparedness for developing e-commerce anddigital marketing

In the second year of the ACE 2.0 Plan, in numerical terms, results were favorable, partly due to theexternal environment.
We are proceeding with strategies to reduce the burden on the environment and enhance industry
value, and although more time will be needed to fully disseminate these measures from a quantitative
perspective, nevertheless, the past year has been one in which steady progress could be felt.
In fiscal 2022, we focused on safeguarding the environment and realizing carbon neutrality. This
year saw the development of biodegradable superabsorbent polymers (SAPs), the adoption of TiMELESS™*1
by major customers to drive the shift away from plastic, expanded adoption of greenhouse gas (GHG)
visualization solutions, and initiatives aimed at realizing joint distribution for chemicals. Going forward,
we will continue to take on the challenge of addressing environmental issues through a wide-ranging
network that extends beyond our own supply chain.
Business-wide issues that need to be addressed include the adjustment of our business portfolio,
allocation of resources to key business areas and related investment, and the need to spread awarenessof the importance of an emphasis on return on invested capital (ROIC) in management, all of whichshould help to achieve enhanced efficiency. Going forward, we will be striving to implement efficientbusiness development, including through business reorganization.

Americas

7%

TThreatMaking an in-depth contribution precisely because of being a business witha heavy environmental impact
The second year of implementation of the ACE 2.0 Plan saw a steady improvement in numerical terms,
partly because of a favorable external environment. However, with excessively high inventory ofintermediate goods leading to a slowdown in freight movement in the electronics market, and with
China’s recovery in the post-COVID period being slower than expected, there were still some causes forconcern going into fiscal 2023.
As regards the areas that we focused on in the past year, we began to implement surveys andanalysis of the semiconductor supply chain from a trading company perspective, to help maintain thecompetitive advantage of our business partners in Japan (from the point of view of economic security).
Having set our sights on realizing global expansion for the business, we are strengthening our partnerships
with suppliers. We have also been promoting digital marketing within our business division, and havebeen making smooth progress in securing leads and new projects.
However, there is room for further improvement in terms of optimizing our business portfolio, shifting
resources to areas that we want to focus on, and achieving a clear division between functions. To achieve
results at an early stage in key areas and R&D, we have established a planning and marketing office tofacilitate close collaboration with the sales team.
Building the foundations needed for a sustainable business is vital for realizing growth over the
medium and long term. This is a shared goal in this division, and we are employing diverse methods tomake forward progress, while not being influenced by short-term economic fluctuations.

Sustainability Topic

Wastewater consulting as an environmental solutions provider
supporting customers’ manufacturing operations
Responding to problems affecting our customers, including changes in wastewater treatment
requirements resulting from product diversification, and the resulting need to overhaul facilities, aswell as a shortage of operatives with related expertise at factory sites and difficulty in ensuring thetransfer of wastewater treatment knowhow to a new generation of employees, NAGASE is leveraging
its diverse product network, understanding of related issues and ability to offer solutions as a trading
company to provide wastewater consulting services. From the identification of problems to operational
improvements, we provide diverse solutions tailored to meet the needs and circumstances ofindividual customers.

68

Noriaki Arashima
Executive Officer
GM, Speciality Chemicals Department

NAGASE Report 2023

S

8.3

66%

Greater
China

Performance Chemicals Department

Strength

Japan
Nagase Filter Co., Ltd.
Nagase ChemteX Corporation
Aience Inc.
Fukui Yamada Chemical Co., Ltd.
Honshu Rheem Co., Ltd.

Japan

Manufacturing 10%• High market share in Japan• Strong relationships of trust with suppliers• A global network based on the high negotiating
ability, ability to respond effectively to new
developments in technology, and problem-solving
ability, of individual unit
• An extensive product line-up and cross-businesssolutions

10.4

Main manufacturing bases (Includes equity affiliates)

| Business Portfolio | Strategy by Business and by Region |Gross profit by region and field
Europe 0%
Americas 2%(billions of yen)

Other

0%

ASEAN

7.6

Main manufacturing bases (Includes equity affiliates)

6.9

Japan

24%

Advanced Materials & Processing Segment

Operating income

37%

Greater
China

36%

ASEAN
Manufacturing 16%

Sales and services 84%

2022 2023 (FY)

(actual) (forecast)

Nafuko Co., Ltd.
Dainichi Color Vietnam Co., Ltd.

Polymer Global Account Department

S

Strength• Sound supplier and customer base, technicalexpertise and information as well as know-how,
and a supply chain network in the Asia-Pacific area
• Effective global governance, and transparent
business operation• Relocation of invested capital in order to maximize
business profitability• Enhancement of systems in those business areas
not directly linked to Japanese companies

W

WeaknessO

Opportunity• Management efficiency support in relation to thebusiness restructuring being undertaken by our
global suppliers• Advantageous position as customers diversify
production bases and duties are increasingly
divided internationally• From a sustainability standpoint, ensuring
traceability in such ways as through a chemical
information networkT

ThreatSustainability TopicNAGASE Report 2023

69

Although not matching our highest-ever annual profits, we have achieved a level of profitability
that exceeds our target for the final year of implementation of the ACE 2.0 Medium-Term
Management Plan, and the restructuring of our business portfolio is proceeding smoothly. In
particular, in fiscal 2022, we almost completed our withdrawal from non-key, unprofitablebusiness areas, and as a result, we have been able to realize the reallocation of invested
resources from these businesses to new areas that we want to focus on.
We are also now operating the plaplat™ online platform, which represents the effective
utilization of digital tools to strengthen our contact points with customers. Through this platform,
we can help customers involved with the plastics and manufacturing sectors by proposing
solutions for issues such as those relating to sustainability, and by disseminating information to
support initiatives aimed at addressing these issues.
There is a need to build efficient operational systems in key areas, both within and outside
Japan. We are working on building up our sales and marketing systems and strengthening
relevant systems in relation to business activities undertaken for specific customers where
production has been relocated to China, the ASEAN region, India, or North America, starting withmaking our business operations in China more efficient.
In recent years, the restructuring of the global chemical industry has accelerated, and there
has been a diversification of our customers’ production sites. To respond to these changes, weare considering more M&A activity, strengthening risk management, and implementing
operations that are oriented toward greater efficiency through the integration of digitaltechnology, as we aim to realize truly global business operation.

Koji Yoshida
GM, Polymer Global Account Business
Department

plaplat™ – Integrating plastics and sustainability
On the plaplat™ platform, information collected through the NAGASE Group’s specialist
knowhow, superior sales capabilities, and global network is classified into six categories –materials, processing, facilities, logistics, regulatory, and industry trends – and used to offer
sustainability solutions that can help our customers to address their problems, with new
information being disseminated every working day.
This platform also provides the Plastics Pictorial Book, which is intended to let people
learn about plastics in detail in an enjoyable manner, and which has been widely used bothby industry insiders and people outside the plastics industry.

Proposals that integrate green materials with solutions
We have begun providing Ultibatch™, a high-concentration filler
masterbatch product that will help to drive the transition toenvironmentally friendly “green materials” while also enhancing
productivity and strengthening environment, health and safety(EHS) performance.
This new product will contribute toward the realization of areduction in the usage of petroleum-derived resin, and toward a
reduction in greenhouse gas emissions. An environmental solution
material that also improves the working environment, Ultibatch™
is supplied in pellet form in unprecedently high concentrations,providing a filler material that meets users’ needs. We are also
proceeding with related processing technology licensing.
At Nagase Plastics Corporation’s environmental solutions
development center, we are undertaking further technology
development with this material, and we are rolling out services
tailored to the Japanese market.

Sustainability Topic

Taking the next step forward together with society – Participating in the UMIGOMI Zero WEEK project
The Polymer Global Account Business department handles
around 500,000 tons of plastic per year. Plastic is a material thatenriches our lives, but it also has a serious impact on theenvironment, and we need to keep in mind that the plastic ourcompany sells is a contributing factor to the pollution of theoceans by plastic. We are constantly thinking about what form
the continued operation of our plastics business should take inthe future. With the aim of taking a first step forward bycontributing toward improving the environment in the vicinity of
our own business locations, and of realizing team-building, wehave organized marine waste clean-up activities undertaken by
employees and their family members. Aiming to be part of asustainable society, we will continue to think carefully about
what we can do in this area.

70
NAGASE Report 2023

Ensure a competitive position by leveraging the supply chain network capabilities

| Business Portfolio | Strategy by Business and Region |Gross profit by region and field
Europe 5%

Operating income(billions of yen)

Other

3%

Americas 8%

9.2

11.1

ASEAN

5%

Electronics & Energy Segment

55%

23%

Manufacturing 35%

Sales and services 65%

Electronics DepartmentO• Opportunities to expand into markets derivingfrom the development of the IoT-supported
society and the effective utilization of AI• Enhancement and diversification of devices,
accompanying the increase in data processing
volume• Increasing demand for renewable energy andenvironmental value• The growth of the 5G, 6G, EV, AI, semiconductorand AR markets• Impact of environmental regulations and the UN
SDGs on existing materials and technologies• Negative impact of intensified tension between
the US and China on business oriented toward
the Greater China region• Increase in the time needed to recoup investments,and sluggish market growth that can be difficult
to predict in advanceW

WeaknessT

ThreatBuilding a more robust team by strengthening networks and exercising perceptiveness

NAGASE Report 2023

71

The Electronics Department is working hard to develop new technologies and materials that meetcustomers’ needs. In the semiconductor business, we experienced growth (particularly in China, Taiwan, andSouth Korea), and in the last few years we have been adding new suppliers and strengthening our overseas
sales system. However, taking geopolitical considerations into account, we are now aiming to achieve further
growth by developing business oriented toward the US and Indian markets. In line with government policy,
the Japanese semiconductor industry is likely to bring production back to Japan, and so we will adjust our
regional strategy and systems to restructure our supply chain, both within and outside Japan.
In the display sector, while we are proceeding with the adoption of new materials and the forging
of partnerships with start-ups, the shift away from existing materials may require more time due to theweak demand for smartphones and intensified price competition. Having said that, with the growing
focus on sustainability in line with the UN SDGs when selecting materials, and with the outlook fordevelopment of new technologies and materials that contribute toward sustainability (by reducing
electric power consumption, for example) looking bright, we will continue to add new suppliers.
Despite the turbulent business environment, we will proceed with R&D activity that looks ahead tothe period after ACE 2.0, and we will develop a stronger organizational structure, so that a renewed
Electronics Department can contribute toward decarbonization.

Pac Tech-Packaging Technologies GmbH
Inkron Oy

2022 2023 (FY)

(actual) (forecast)

Nagase ChemteX Corporation
Nagase Techno-Engineering Co., Ltd.
CAPTEX Co., Ltd.
Americas
SN Tech Corporation
Nagase ChemteX America LLC
Pac Tech USA Packaging Technologies Inc. Nissei Technology Corporation
eX. Grade Co., Ltd.
Xenomax-Japan Co., Ltd

OthersASEAN

Nagase Engineering Service Korea Co., Ltd.

Pac Tech Asia Sdn. Bhd.

Kazuyuki Sato
GM, Electronics Department

S• Providing solutions based on technology and R&D
capabilities through an integration of NAGASE’s
trading and manufacturing functions.
• Processing technologies and specialist knowhow
in the field of electronic devices, among others• A strong track record in raw materials recycling
and reuse• A wealth of business experience, and thetechnologies needed to contribute to society• A revenue base that is too dependent on specificareas• Technologies that have been our strength in thepast becoming so widely adopted as to cease to
be a major source of competitive advantage for us• Collaborative co-creation initiatives with
manufacturers of process equipment and relatedmaterials

O• Expansion into new business areas througheffective use of technology• Strong demand for network infrastructure thatprovides safety, stability and peace of mind
• Growing demand for environmentally friendly productsthat support the response to climate change• The revival of the Japanese semiconductor industry• The growth of the compound semiconductor market• Geopolitical changes and the restructuring of thevalue chain• The shrinking of the domestic LCD industry, anddomestic production in China by Chinesecompanies.
• The negative impact on earnings of fluctuationsin oil prices and in exchange rates• Changes in consumer behavior during and after
the COVID-19 pandemic

Strength

Opportunity

W

WeaknessT

ThreatStrengthening human talent and technology capabilities is an urgent task torealize further business expansion
We are proceeding with many new initiatives aimed at transforming our business portfolio and developing
new markets. In addition to the adoption of materials used in front-end to back-end manufacturing
processes and encapsulating materials in advanced packaging for the major customers in thesemiconductor market, we have also newly entered the medical-related market and are making progressin the evaluation of developed products in the electronic components and metal processing industries.
While we are promoting these various initiatives, the current situation in regard to the recruitment
and cultivation of human talent possessing the necessary specialist skills is less than satisfactory, andwe intend to address this issue as speedily as possible. Other issues that we face are the need tocontinuously play catch-up in relation to constantly evolving and increasingly complex technologies, andthe need to strengthen technology alliances with other companies.
With the aim of becoming the core of the NAGASE Group's business, we will promote the penetrationof our activity policy and roles across all areas of the Group, with a view to establishing new de facto
standards, and will also focus on creating new businesses. In addition, we are accelerating our overseas
business expansion and contributing toward the realization of a decarbonized society.

Sustainability Topic

Sustainability Topic

Utilizing CMS in TFT and semiconductor photolithography processes

Expanding our circular economy businessPhotolithography processes, which need rigorous quality management, require large quantities ofchemical agents and generate large amounts of waste liquid. We provide a Chemical Management
System (CMS) for these processes which realizes effective chemical agent quality management,
efficient agent use, and reduced waste. Our CMS has a strong track record of successful performancedating back to the dawn of LCD panel mass production in the early 1990s. It also helps to reduce
manufacturing costs, and to reduce the burden on the environment.

In regard to circular economy demand, which is expected to increase in relation to various different
applications, we will leverage our extensive experience and strong track record that has beencultivated in our display business in the recycling and reuse business, which covers a range of items
from waste chemical agents to active ingredients, in order to expand the scope of the solutions that
we provide for the semiconductor industry. We will be promoting the development of the circular
economy across a wider range of areas.

72
NAGASE Report 2023

S

• Formulation and implementation of a future-oriented
regional strategy that takes into account our current
excessive focus on East Asia
• Development of technologies and materials thatcan be supplied to new markets• Timely investment in new markets and technologies,
and related judgements regarding manpower
allocation

Opportunity

EuropeNagase ChemteX (Wuxi) Corporation
Inkron Ltd.
Wuxi Chenghong Electronic Chemicals
Co., Ltd.

Advanced Functional Materials Department• Global network• A diverse range of partners focused on theelectronics sector• Being able to gather information through sales
activities throughout the supply chain, and to develop
products in collaboration with business partners• The knowhow, technology and strategies needed
to contribute toward the realization of the “smart
society”

Strength

Greater China

Japan

Japan

Greater
China

Main manufacturing bases (Includes equity affiliates)

Ryuhei Tashima
GM, Advanced Functional Materials
Department

| Business Portfolio | Strategy by Business and Region |Gross profit by region and field
Europe 2%(billions of yen)

Other

1%

Americas 12%

Main manufacturing bases (Includes equity affiliates)

4.7 4.8

Greater China
Tokai Spring Mfg. (Foshan) Co., Ltd.

ASEAN

Japan

20%

Mobility Segment

Operating income

43%

Greater
China

Americas23%

KN Platech America Corporation

ASEAN
Manufacturing 0%

Sales and services 100%

Automotive Mold Technology Co., Ltd.
UNO MINDA KYORAKU LIMITED2022 2023 (FY)

(actual) (forecast)

Mobility Solutions Department

S

Strength• A wide range of product lineups, and the ability todevelop new high-performance materials,
products, and technologies• A supply chain building capability that enables thestable supply of products across the globe• Strong relationships with suppliers built on trust• The need to expand business operations
targeting overseas automotive manufacturers• The need for business portfolio expansion tailoredto the innovation in materials, products andtechnologies in line with the acceleration of EVs

W

WeaknessO

Opportunity• The growth of EVs due to the global trend toward
carbon neutrality and the widespread adoption of
the Connected, Autonomous, Shared & Services,Electric (CASE)• The emergence of new mobility and Mobility as aService (MaaS)• The rise of emerging countries• Industry restructuring accompanying dramaticchanges in the business environmentT

ThreatSustainability TopicNAGASE Report 2023

73

Our core businesses, which include the sale of resins to Japanese automotive manufacturers,
have grown in accordance with our original plan, partly due to the market conditions. However, as
regards the expansion of our business dealings with overseas automotive manufacturers and the
expansion of our business portfolio in line with the acceleration of the trend towards EVs,
although we have made progress here, we are aware of the need to further accelerate this.
In 2022, with the adjustment of global supply chains against the background of a deteriorating
US-China relationship and the increasing importance of emerging countries, we focused on the
expansion of our business in India, which is one of the important strategies for us. India is a market
where we expect to see continued growth in the future. We have grown our business there byintroducing a variety of commercial materials, and we have also made a real effort to strengthen
our relationships with important local partner companies. In addition, we have begun working
with an Indian company that newly entered in market to jointly develop the global market forimportant materials used in EVs.
Daiji Matsuoka
As regards our strategy for the future, to accelerate the growth of our EV-related business, we
GM, Mobility Solutions Department
will be further increasing the number of partner companies we work with that possess technology
on a par with Japanese firms. To meet customer needs, we will also be proceeding with overseas
expansion together with Japanese partner firms, focusing on both the sales and overseas-based
production aspects. In addition, to expand the scale of our business with overseas automotive
manufacturers, we will be strengthening our marketing by making effective use of DX measures.
Working to develop our business in the midst of what has been described as a “once-in-a-century” transformation of the automotive
sector, going forward, we will continue to provide value in the way that only NAGASE can, while dealing, on a global basis, with dramaticallyfast change in terms of technology, market players, and the supply chain.

DX acceleration
We are speeding up the pace of DX to generate further business opportunities. We havebeen proceeding with the overhauling of the Mobility Solutions Business website, theutilization of effective digital marketing, the across-the-board implementation of customer
relationship management (CRM), and the expansion of operations using robotic process
automation (RPA), and these tasks are scheduled for completion during fiscal 2023. In
addition, we are spreading awareness of NAGASE’s initiatives in a timely manner bydisseminating the Mobility Solutions Business’s PLUS NAGASE e-mail newsletter, with theaim of familiarizing a wide range of stakeholders with our business’s ideas and activities.

Building the framework needed for effective utilization of environmentally friendly materials and technologies
While Europe has been at the forefront of the trend toward carbon
neutrality in the global mobility sector, there are also growing calls
within Japan to reduce the environment burden.
With Nagase & Co., Ltd., which has extensive recycling
technology knowhow thanks to its global supply chain andwide-ranging relationships with suppliers, taking a leading role,
we bring together suppliers who handle environmentally friendly
materials. We also hold technology exchange meetings withcustomers, where we exchange information on specific materials
and propose recycling technologies for intermediate products tocustomers.

74

Sustainability Topic

Using self-driving vehicles to help solve the problem of labor shortages
The logistics sector is facing many problems, including the “2024problem” (the imposition of stricter rules on drivers’ working hours,
due to come into effect in Japan in 2024). Driver shortages are aparticularly pressing problem for the industry. We are providing
labor-saving self-driving vehicles to help those industries where
delays in corporate activities caused by this issue are a concern.
A key tool for us here is our trading company business model,
which enables us to build a single, unified platform for integrating
different services. By providing self-driving vehicles of different
sizes for different purposes, along with mapping technology forin-house use of these vehicles, and remote operation technology
to facilitate self-driving, we can provide the support needed to not
only reduce the burden that driver shortages place on companies,
but also achieve smooth business operation.

NAGASE Report 2023

In an era of transformation, NAGASE is providing value throughout the world

| Business Portfolio | Strategy by Business and Region |Gross profit by region and field
Europe16%

Operating income(billions of yen)

Other

0%

Main manufacturing bases (Includes equity affiliates)

Europe10.5 10.8

Prinova Solutions Europe Ltd.

Japan
AmericasLife & Healthcare Segment

41%

38%
Greater
China

3%

ASEAN 2%

Manufacturing 78%

Japan
Nagase Beauty Care Co., Ltd.
Hayashibara Co., Ltd.

Sales and services 22%

2022 2023 (FY)

AmericasGreater China

Armada Nutrition LLC
Prinova Solutions LLC
Prinova Flavors LLC
Lakeshore Technologies, LLC

Prinova (Changzhou) Solutions
Co., Ltd.

(actual) (forecast)Life & Healthcare Products Department

S

Strength• Industry-leading customer base
• Group companies that have a competitive
advantage in their markets, including Hayashibara
Co., Ltd. and Prinova Group LLC• Improving efficiency and optimization of businessresources• Continuous training and securing of humanresources

W

WeaknessO

Opportunity• Expanding overseas businesses by using theknowledge and expertise acquired in domestic
businesses.
• Shoring up our bio-related business based on theGroup’s manufacturing and R&D functions• Developing new markets in the sustainability area

• Dealing with Pharmaceutical and Medical Device
Act, and the laws and other regulations of eachcountry involved in overseas business expansion• A high percentage of goods purchased from China

T

ThreatSustainability Topic (healthcare business)

Technology development for biopharmaceuticals that can lead to cost reduction

Further strengthening group-wide collaboration globally

The biopharmaceutical industry has to deal with materials thatare expensive and cannot be mass produced, sophisticated andcomplex manufacturing processes, the need for painstaking
quality management, and strict regulations. In order to support
the industry, the NAGASE Group provides its technology andservices, utilizing its supply chains network.
The NAGASE Group selects its partners on the basis of theirability to create synergy in the areas of current systems, services,and functions, based on the Group's client information andtechnological information. By providing key technologies andmanufacturing functions, it contributes to significant reduction in
manufacturing costs in the client company's value chain.

Kenji Okino
GM, Life & Healthcare Products
Department

Harnessing the power of the Group to
meet growing worldwide healthcare needs
With the graying of Japan and the experience of the COVID-19 pandemic, customers are
becoming more health conscious and aware of preventive self-care. In recent years,
healthcare-related services have been expanding, not only in the area of therapeutics but
also continuous management from preventions, diagnoses, therapies to prognoses. At thesame time, technological innovations, most notably computerization, have prompted new
players to take an active interest in these fields. The main business domain of this department
is pharmaceuticals, foods, and cosmetics that lead directly to improvements in the customer’squality of life. Taking advantage of the materials, sales networks, biotechnology, and otherassets that the Group possesses, we contribute to people enjoying better health andfulfillment in their everyday lives.

76

Sustainability Topic (food ingredients business)

Egg Reduction Solutions in Bakery and Confectionery
Egg reduction has been an unavoidable issue around the world,from the perspective of cost and sustainability. NAGASE Grouphas been presented DENABAKE™ RICH to Western-style bakery
and confectionery manufacturers to reduce amount of eggs used
for their products, without compromising texture and quality.
DENABAKE™ RICH is an enzyme that acts on lecithin to
increase emulsifying properties. It keeps volume, texture andappetizing appearance of bakery and confectionery products with
reduced-egg formulations.
NAGASE Group contributes to implementing sustainableproduct development with customers, by optimizing recipes andapplications along with their needs.

NAGASE Report 2023

NAGASE Report 2023

75

In the food business, one of the results achieved in the second year of ACE 2.0 is that the Prinova
business, which the NAGASE Group acquired in 2019, is expanding steadily and has become amajor pillar of the Group. In addition to growth in our core business of distribution, in order toexpand contract manufacturing of premixes and sports nutritions in the West Coast region of
the USA, we have established a new plant in Utah, which began operation in fiscal 2022.
Multiple factors, including yen depreciation, price corrections, robust demand for existingproducts and launch of new products, led to record-high level profits in the area ofpharmaceuticals and cosmetics in fiscal 2022. At the same time, ROIC was also improved
through the measures for rationalization of invested capital, such as reducing inventory andeliminating strategic-holding stocks. While firming up our operations base, we also took up thechallenge of entering new fields, such as health tech services related to sleep, and a website
creation platform for hair stylists.
One of our challenges is to strengthen alliances within the Group in our overseas businesses.
We are proceeding to optimize organizational design by revising our comprehensive businessstrategies, including Hayashibara, Prinova, and other overseas subsidiaries. Also we strengthen
our business infrastructure typified by regulatory functions to build an environment which enables
our group companies to perform their role even in the regulated markets without intervention of
the head office.

| Business Portfolio | Strategy by Business and Region |Regional Strategy
Note: Employees in the consolidated group (as of March 31, 2023)

Built on a foundation of chemistry, the NAGASE Group is engaged in global business across a wide spectrum of industries.
Utilizing the wide-ranging expertise accumulated through that network and experience, we provide a fine-tuned responseto the needs of each country and region.

Greater China

Base established: 1971/Number of employees: 846

Expanding locally-driven business with the “ONE China”
business strategy
We have transitioned away from a region-focused strategy emphasizing the individual businesslocations to a new business strategy that treats China as a single unit, and we have beenworking to strengthen our operations in each field. Going forward, we will realize even closer
coordination between our seven businesses (Semiconductor, Electronics, Functional Resin,
Mobility, Life & Healthcare, Chemicals, and Advanced Materials & Processing), ourmanufacturing locations – including Nagase ChemteX (Wuxi) Corporation and Prinova(Changzhou) – and our business locations in Taiwan, responding rapidly to changes in eachsector, and expanding the scope of locally-originated business within the Greater China region in
addition to NAGASE’s technology and product development in Japan, Europe and North America.
Main Businesses• Semiconductors• Mobility• Electronics

We are developing our semiconductor business across the whole supply chain, from front-end
processes to back-end processes, and we have built up a strong network in China and Taiwan.
Going forward, we will be working to expand our business while exploring the potential of a wide
range of materials.
China’s EV market is one of the world’s most highly developed, and we are utilizing a variety ofleading-edge technologies and products to explore high-quality concepts relating to safety and energy
saving. Besides China, we are also planning to expand sales in Europe and in other parts of Asia.
We are focusing on growing our business for both old and new applications, including those relating
to electronic devices such as PCs and smartphones, those relating to next-generation devices suchas OLED and Micro-LED displays, AR/VR and sensor applications utilizing 5G/6G infrastructure.

Kusuo OtaManaging Executive Officer
and Greater China CEO

Gross Profit/22.5 billion yen (FY2022)
BreakdownLife & Healthcare

Functional
Materials

6%

10%

Mobility

14%

Electronics& Energy

Advanced
Materials &Processing

31%

39%

AmericasBase established: 1971/Number of employees: 1,537

Strengthening our organizational capabilities to address awide range of business areas
The Americas region business is highly diverse and spans a wide range of industries. Our
focus continues to be led by the food and nutritional ingredient markets with other key
verticals such as mobility and chemicals playing a key role in future growth. To better
leverage resources, we are focusing on creating market vertical-based leadership in
combination with our regional affiliates in order to expedite growth.
Over the last several years, considerable investment has been made in the region todevelop expertise in the area of additive manufacturing*. In 2023, we introduced our additive
manufacturing education and showroom resource, Empowr3D. Through Empowr3D weprovide end-to-end solutions: from design, material selection, printer selection, validation, all
the way through to the production of printed parts. By walking side by side with ourcustomers we hope to expedite user adoption and, by extension, the growth of the additive
manufacturing industry.
* A manufacturing method that utilizes additive manufacturing technologies such as 3D printing

Bradley Hilborn
Americas CEO andNagase Holdings
America Corporation CEO

Gross Profit/33.1 billion yen (FY2022)
Breakdown

Functional Materials 12%

Advanced
Materials &Processing

2%

Electronics& EnergyLife &
Healthcare

8%

73%

Mobility

5%

Main Businesses• Food and Nutritional
Ingredients• Mobility

We will continue to focus on growth through the development and expansion of value added capabilities and services.
As the automotive landscape rapidly evolves, we are dedicated to providing innovative solutions that drive the transition to cleaner and more sustainabletransportation. Our mission is to accelerate the adoption of electrification, enabling manufacturers to realize a new era of eco-friendly and efficient transportation.

TopicsFor FY2023, we have implemented three key strategic initiatives across the region: optimizing operations for heightened efficiency, enhancing decision-making by clearly differentiatingrisk-taking from profitable ventures, and driving our organizational vision through internal alignment and external engagement. These initiatives collectively propel us towards streamlined
processes, focused growth, and amplified impact.

TopicsASEAN

NAGASE Report 2023

77

Base established: 1975/Number of employees: 800

Using successful models and strengthening the local
management system to develop new profitable areas
In the resin business, which is our main business area, we are aiming to expand our businessthroughout the region, across national boundaries, by establishing a trans-national, cross-regional
business promotion organization, assigning specialists for each industry category, andstrengthening ties with key suppliers. We have also forged a region-wide marketing organizationfor our Electronics and Life & Healthcare businesses, which had previously been relatively minor
business areas for us. By undertaking intra-regional market analysis that covers the strengths andweaknesses of each country, promoting effective utilization of human capital within the region,
and maintaining a close collaborative relationship with the relevant business divisions at NAGASE’shead office in Japan, we have put in place the optimal framework for business promotion.
Main Businesses• Electronics
Business• Life & Healthcare
Business

TopicsTaking as a foundation the business development model that has proved successful in Malaysia,
we are proceeding with analysis of the potential for business expansion in neighboring countries.
With support from the cross-regional team and from the relevant business divisions in NAGASE’shead office, we are proceeding with the building of the framework needed to implement regulatory
services in the future.

Eiroku Oki
Executive Officer and
ASEAN and India CEO
Regional Operating Centre
LeaderGross Profit/14.9 billion yen (FY2022)
BreakdownLife & Healthcare

9%Functional
Materials

22%

Mobility

19%

Electronics& Energy

11%

EuropeBase established: 1980/Number of employees: 284

Exploring new business and investment opportunities against
a background of rising environmental consciousness
The volatility in resource and energy procurement resulting from the conflict in Ukraine, and therelated price rises, have had a severe impact on the European business environment. At thesame time, Europe is leading the way in the global trend toward responding proactively to
climate change, and it is becoming necessary for chemical sector products, including cosmetics,
to secure certification under Ecovadis and other certification schemes. Changes such as theshift over to clean energy (including wind power) and to bio-derived materials, and particularly
the decision in Europe to ban sales of vehicles with internal combustion engines by 2035 so as
to boost the adoption of electric vehicles, represent major business opportunities. We offer avariety of solutions to meet the needs of electric vehicle manufacturers who are aiming to realize
high-performance batteries and enhanced safety. In regard to our food sector products, we areproceeding with the selection of key products to focus on, so as to enhance our competitivenessby optimizing the operations of the Group as a whole, for example by transferring Hayashibara
products to Prinova Europe Limited. Besides strengthening coordination with NAGASE Group
companies in Japan, Asia, and the Americas, we will also be actively taking on the challenge ofopportunities for investment, etc. in relation to locally originated businesses.

Kusuo OtaManaging Executive Officer
and Europe CEO

78
Gross Profit/11.2 billion yen (FY2022)
Breakdown

Functional Materials 4%

Advanced Materials& Processing

1%

Electronics& EnergyLife &
Healthcare

15%

78%

Mobility

2%

Main Businesses
Advanced
Materials &Processing

39%

In fiscal 2022, despite the rise in resource prices following the end of the COVID-19 pandemic, demand for office automation applications rose, and we met both our sales and operating
profit targets in this segment. Going forward, we anticipate that there will be a shift in business away from China due to heightened U.S.-China trade friction, and we will also consider
how to address the issue of how to approach trading in recycled plastic, demand for which is rising due to increased environmental awareness.
Due to factors such as semiconductor shortages, our performance in the automotive-related businesses did not meet the original targets. As the automotive market still accounts
for a high share of overall resin sales, we are expanding the scope of the materials that we handle, proceeding with a shift toward products relating to vehicle electrification andadvance mobility.

• Pharmaceuticals• Mobility• Chemicals

TopicsWe are proceeding with development of the biomedicine sector, focusing mainly on Hayashibara Co., Ltd. products.
Batteries represent the core technology for electric vehicles, and for battery applications we offer solutions tailored to customers’ needs, including chemical products
and additives to help realize high performance, and fire-resistant materials to enhance safety.
Making effective use of the Nagase Group network, we are offering Europe-based global corporations solutions for worldwide procurement functions. We are also
proceeding with the development of a variety of solutions for environmentally friendly food product packaging.

In fiscal 2022, we entered into a partnership with HALIX B.V., of the Netherlands, which is strong in biomedicines and pharmaceutical ingredients, such as viral vectors and recombinant
proteins, to begin providing contracted development and manufacturing services for the Japan market. As a result, we are now able to provide end-to-end services from processdevelopment to GMP manufacturing and final formulation. We have also been focusing on providing environmentally friendly production solutions for electric vehicle batteries,
chemical products, and the healthcare sector. In fiscal 2023, we will continue with sustainability-aware product development for the cosmetics sector.

NAGASE Report 2023

In fiscal 2022, despite the Shanghai lockdown and the rapid spread of infection in China following the easing of COVID-19 restrictions, overall, our business performed solidly. In
particular, the semiconductor business, which is a key business area for us, continued to post strong growth.
In fiscal 2023, the business environment has become increasingly challenging, with the slow economic recovery in the post-COVID era, and the impact of increased friction in the
U.S.-China relationship and uncertainty in the property market. Going forward, we will be aiming to realize steady, balanced, and sustainable growth by placing more emphasis on theLife & Healthcare business, which is less subject to shocks in the external environment, and on bio-derived “green” materials.
While continuing to focus on our existing seven business areas, we will also be striving to create new businesses and improve profitability.

| Data Section |11-Year Financial Highlights
FY2012FY2013

Investment Amount: ¥107.4 billion

Investment Amount: ¥41.1 billion

FY2018FY2019FY2020

FY2022

ACE 2.0

ACE-2020
Investment Amount: ¥13.7 billion

FY2021

Investment Amount: ¥129.1 billion¥ 723,212¥ 759,713¥ 742,194¥ 722,384¥ 783,933¥ 807,755¥ 799,559¥ 625,245¥ 780,557¥ 912,896

Functional Materials

167,017

169,973

168,238

157,149

153,546

174,922

179,627

169,318

75,294

99,874

156,161

Advanced Materials & Processing

214,214239,224

254,165

255,505

242,609262,831275,203

267,078

209,715

257,283

220,955

Electronics & Energy

125,014137,026

149,947

127,926

127,722

129,324

122,319

115,123

110,770

128,131

136,975

Mobility

83,06899,441

109,851

115,351

112,956

129,708

139,235

126,000

78,783103,389

125,560

Life & Healthcare

76,11676,81076,60985,571

84,90486,517

90,794

121,545

150,331

191,634

273,161

841

737

900

689

644

629

574

492

349

244

84

Domestic

361,971372,939374,208

363,038

369,365

395,428

412,617402,390

221,737

250,360

265,407

Overseas304,301

350,272

385,505

379,155

353,019

388,504

395,137

397,169

403,507530,196

647,489

Gross Profit

82,58388,93691,991

91,66391,503

102,675

105,441

104,901

114,600

139,494

155,410

Operating Income

15,57815,78918,15318,02415,03024,11825,226

19,167

21,91635,26333,371

Profit Attributable to Owners of the Parent

14,182

11,663

11,31812,316

10,331

17,175

20,13615,144

18,82925,93923,625

Total Assets¥ 486,747¥ 498,141¥ 546,525¥ 512,081¥ 530,775¥ 569,456¥ 567,346¥ 611,477¥ 640,587¥ 739,720¥ 762,688

Equity Capital

228,505

246,723

281,398

273,963

290,217

303,636

307,674

305,322329,687344,261

367,675

Interest-Bearing Debt

98,42592,82898,49387,56082,046

86,17385,620135,974

118,947

166,530

179,697

Net Income (Basic)¥ 111.31¥ 91.86¥ 89.10¥ 96.96¥ 81.65¥ 136.34¥ 161.30¥ 122.12¥ 151.91¥ 213.46¥ 199.54

Net Assets

1,803.31

1,942.20

2,215.18

2,156.67

2,301.10

2,424.97

2,481.01

2,462.04

2,670.09

2,868.22

3,139.26

Cash Dividends

26

28

30

32

33

40

42

44

46

54

70

Payout Ratio (%)

23.4

30.5

33.7

33.0

40.4

29.3

26.0

36.0

30.3

25.1

34.9

Overseas Sales to Net Sales

45.7

48.4

50.7

51.1

48.9

49.6

48.9

49.7

64.5

67.9

70.9

Manufacturing Ratio (Operating Income)

37.3

23.5

27.8

24.3

39.5

34.2

33.5

40.8

39.8

32.6

27.5

Operating Margin (Operating Income/Net Sales)

2.3

2.2

2.4

2.4

2.1

3.1

3.1

2.4

3.5

4.5

3.7

Return on Equity (ROE)

6.5

4.9

4.3

4.4

3.7

5.8

6.6

4.9

5.9

7.7

6.6

Shareholders’ Equity Ratio

46.9

49.5

51.5

53.5

54.7

53.3

54.2

49.9

51.5

46.5

48.2

Net DE Ratio (Times)

0.2

0.2

0.2

0.2

0.1

0.1

0.1

0.3

0.2

0.3

0.4

Total Return Ratio

34.9

30.5

33.7

33.0

51.0

39.5

35.6

36.0

35.2

48.3

58.9

Shareholders’ Equity Dividend Rate

1.5

1.5

1.4

1.5

1.5

1.7

1.7

1.8

1.8

1.9

2.3

Segments¥ 666,272

RegionOthersFinancial Condition:

Per Share Data:

NAGASE Report 2023

FY2017(Millions of yen)

Net Sales

79

FY2016

Ratios:(Millions of yen)

(Yen)

(%)

(Note 1) The Company has applied “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, issued on March 31, 2020) since the start of FY2021 (the fiscal year ended
March 31, 2022), and retroactively applied it figures from FY2020 (the fiscal year ended March 31, 2021).
(Note 2) Starting from the fiscal year ended March 31, 2021, overseas sales are calculated by compiling separate totals for each region where consolidated subsidiaries are located. Figures
for previous years were calculated by compiling separate totals for each region to which products are shipped.

80
NAGASE Report 2023

Performance (Accounting Fiscal Year):

FY2015

Change-S2014“CHANGE”11

Medium-Term Management Plan

FY2014

| Data Section |Financial Highlights(Millions of yen)

Net sales

Gross profit margin

Gross profit

1,000,000

18.3
800,000

799,559

600,000

13.1

912,89617.9
780,557

900,000
18.1

17.0

(%)

(Millions of yen)

20

70,00016

Trading and other business operating income
Manufacturing business operating income
Operating margin

60,00012

400,000

8

200,000

4

155,410

139,494

114,600

163,000

0
2019

2020

2021

2022

35,2632.4

30,00025,226
8,446

10,00016,780

0
2018

7,816

8,721

11,351

13,195

2019(%)(Times)

1.42

3.0

0
2022

2.5

1.22

1.13

0.80

1.0

0.40

0

0
2019

2020

2021

2022

2023
(Forecast)2018

5 Financial leverage and Net DE ratio
Financial leverage

2019

2020

2021

2022

6 Equity capital/ROE

Net DE ratio

ROE

Equity capital(Millions of yen)

2.50

400,000

1.9

2.1

2.0

1.9

2.1

307,674

300,000

344,261

329,687

305,322367,675

10.0

1.50

NAGASE Report 2023

81

200,000

0.3

0.2

0.1
2018

0.3

0.3

2020

2021

2022

521,6225.1
457,378

398,229

558,086(%)(Millions of yen)

6.0

40,000

5.0

5.3

4.4

4.2
3.6

300,000

4.0

2.0

100,000

1.0

0

0
2019

20,000

2019

2020

2021

2022

Operating CF

2020

Investing CF

2021

2022

(20,000)

Financing CF

33,074
17,37524,33427,282

20,391

9,414

2,643

0

3.0

200,000

2018

0
2018

ROIC

Invested capital

449,218
400,000

5.0

8 Cash flows from operating, investing and financing

600,000
500,000

4.9

0
2019

7 Invested capital/ROIC(Millions of yen)

6.6

100,000

0.50
0

7.7

5.9

6.6

1.00

(7,325) (8,909)(7,664)(17,776)(8,031)(17,247)(25,866)(40,000)(49,208)(60,000)
2018

2019

80

2020

(%)

(Millions of yen)80

25,000

2021

60

54
44

Cash dividends

Purchase of treasury stock

Total payout ratio

40

30.3

34.9

10,000

58.9
48.3

38.0
20

25.1

5,000

36.0

2022

0

0
2020

2021

2022

2023
(Forecast)

Overview of consolidated results
During the consolidated fiscal year under review, the global
economy saw both continued recovery, with the resumption of
economic activity post-COVID-19, and mounting fears of a global
economic slowdown as a result of heightened geopolitical risks
due to worsening of the protracted situation in Ukraine, soaring
raw materials prices and rising interest rates.
Each of the several regions in which the NAGASE Group
operates was affected in different ways. In Greater China,
manufacturing industry operations were among the principal areas
affected by the surge in COVID-19 infections immediately following
the reversal of the region’s zero-COVID policy, but the spread of thevirus was later curbed, allowing an upswing in both economic activity
and the economy as a whole. In the Americas, increases in businesscosts due to inflation and a decline in lending activity designed tocurb inflation reduced housing investment and capital expenditure,causing a moderate economic slowdown. The economies of theASEAN region saw various negative impacts, including rising importprices due to local currency depreciation in response to higher
interest rates in the U.S., yet remained steady, with increases inpersonal consumption. In Japan, despite a measure of inflation
caused by price rises to cover increases in raw materials and energy
costs, the economy is on course to recover thanks to increases indomestic demand and recovery in demand for inbound tourism due
to relaxation of COVID-19 restrictions and depreciation of the yen.
Against this backdrop, the NAGASE Group recorded revenue
increases in all segments, resulting in net sales of ¥912.89 billion(+17% year on year). In terms of profit, the yen saw progressive
depreciation, but a decrease in our gross profit margin, risinglogistics costs, increased selling costs associated with the Group’s
increased activity, and a rise in general administrative expenses
meant that our operating income was ¥33.37 billion (-5.4%). With
this decrease in operating income, as well as in ordinary income(primarily due to a rise in interest expenses), profit attributable toowners of the parent was ¥23.62 billion (-8.9%).
Financial condition
As of March 31, 2023, current assets amounted to ¥530.13 billion,
an increase of ¥15.84 billion compared to the end of the previous
consolidated fiscal year. This was mainly due to an increase ininventories and accounts receivable, partially offset by a decreasein cash and deposits. Non-current assets amounted to ¥232.55
billion, an increase of ¥7.12 billion over the same period, due toadditions to our tangible and intangible fixed assets, which were

12,520

35.2
6,643

2019

2020

60

17,148
8,000

40

5,662
20

952
8,246

6,514

5,691

0

80

13,908

6,006
5,456

(%)

76.2

20,00015,000

46

36.0
20

2019

1.36
1.00

1.9

Dividend payout ratio

24,192

23,776
2021

1.20

2.6

2.00

9,179

2.0

1.60

3.0

(Times)

40

1.0

2020

4 Total asset turnover

3.3

Dividends per share

60

3.0

33,371
11,487

21,916

19,167

3 Ratio of profit attributable to owners of parent

2.0

3.7

3.1

2023
(Forecast)

4.0

80

4.0

40,0000(Yen)

10 Cash dividends, purchase of treasury stock andtotal return ratio

70

3.5

20,000104,901

(%)

5.0

4.5

50,000625,245

9 Dividends per share and dividend payout ratio

2021

9,148
0

2022

2023
(Forecast)partially offset by sales of investments in securities. As a result,
total assets amounted to ¥762.68 billion, an increase of ¥22.96
billion compared to the end of the previous consolidated fiscal year.
Liabilities amounted to ¥384.3 billion, a decrease of ¥0.32 billion
compared to the end of the previous consolidated fiscal year, mainly
due to a decrease in accounts payable and short-term loans,partially offset by an increase in commercial papers and leaseobligations. Net assets amounted to ¥378.38 billion, an increase of¥23.29 billion over the same period, mainly due to recorded profit
attributable to owners of the parent and an increase in translation
adjustments, and despite a decrease in net unrealized holding gain
on securities. As a result, the Company recorded a shareholders’equity ratio of 48.2%, up 1.7 points as compared to 46.5% at theend of the previous consolidated fiscal year.
Summary of consolidated cash flows
As of March 31, 2023, cash and cash equivalents (hereinafter, cash),taking into account changes in exchange rates, decreased by ¥12.8
billion as compared to the end of the previous consolidated fiscal
year, amounting to ¥40.33 billion. Of this, cash provided by operating
activities was ¥9.41 billion, cash used in investing activities was¥8.03 billion and cash used in financing activities was ¥17.24 billion.
Cash flows from operating activities
Net cash provided by operating activities was ¥9.41 billion. Thiswas mainly due to our recording a net income before taxes andother adjustments of ¥33.1 billion and reducing cash outflow by¥12.3 billion because of depreciation, offset in part by an increase
in working capital leading to the use of ¥20.0 billion and paymentof ¥14.2 billion in corporate taxes.
Cash flows from investing activities
Net cash used in investing activities was ¥8.03 billion. This was
mainly due to the impact of purchases of property, plant andequipment amounting to ¥12.0 billion and of intangible fixed
assets amounting to ¥4.8 billion, offset in part by proceeds of ¥7.4
billion from sales of investments in securities and of ¥2.0 billion
from the sale of shares of subsidiaries resulting in changes in thescope of consolidation.
Cash flows from financing activities
Net cash used in financing activities was ¥17.24 billion. This was
mainly due to outgoings of ¥8.6 billion toward the repayment oflong-term loans, ¥7.1 billion in payment of dividends and ¥5.6
billion for the acquisition of treasury stock, offset in part by anincome of ¥5 billion from long-term loans.

82
NAGASE Report 2023

2 Operating income and profit margin by businesscategory (Company-wide)

1 Net sales, gross profit and gross profit margin

| Data Section |Non-Financial Highlights
Environment

Society

We share environmental data, including greenhouse gas (GHG) emissions as established in the NAGASE Group Carbon Neutral
Declaration from trading and manufacturing business, and promote business while giving consideration toward the environment.

The NAGASE Group sets “Improve Employee Engagement” as a main KPI, and discloses data related to labor practices, humanresource development, occupational health and safety, and health and productivity management, etc., and strives for thecontinual growth and development of employees and companies.

Group

Greenhouse gas emissions in our business activities
Direct greenhouse gas emissions (Scope 1) (left)
Indirect greenhouse gas emissions (Scope 2) market reference (left)

4,058,774

50,00040,00030,000(t-CO2)4,000,000

27,05731,09925,5552,000,000

Non-consolidated

100

(%)

(Employees)

100

60

251,653

250,000

81

80

50

80

40

240,000

238,059

235,382

60

56.5

52.4

230,000

60 or higher

60
40

40

1,000,000

220,000

20

20

0

0

0

0

Number of new graduates andmid-career recruits
Men

Women

54
42
29

30

26

20

41

10,00010

FY2020

FY2021

FY2020

FY2022

Use of water resources
Total water intake

Group

Total water discharge

(t)

4,000
3,635

3,488

3,616

3,488

3,673

12,000

FY2021

FY2022

Amount of waste

Group

9,000

2,000

(contracts)

9,064

8,561

8,446

11
4
7

25

4,597

3,000

3

0
FY2021

FY2022

FY2020

FY2021

1.14

FY2022

1

0

23

New Mid-career
graduates recruits

New Mid-career
graduates recruits

FY2021

FY2022

Number of employees who used thechildbirth and childcare support systems

0.62
0

0

1

1

20.8
40
30

20

0.5
0

0

60.0

59.5

58.1

40

1.0

0.96

(%)

60

1.5

1.35

0
0

1

0

21

(Employees)

(%)

5
3

14

Men (left)
Women (left)
Percentage of male employees taking childcare leave (right)

1.26

0 0.88

2

3,951
1,786

0

0

23

26
3

FY2020Non-consolidated

Serious accident frequency rate (right)
Accident frequency rate (right)

4

21

New Mid-career
graduates recruits

Target for 2025

Occupational health and safety

5

6,000

1,000

FY2022

Accidents causing absence from work
(excluding accidents while commuting) (left)
Accidents involving fatalities (left)

Amount of general industrial waste
Amount of special controlled industrial waste

3,522

3,000

FY2020

FY2021

29
6

12

0

0

(ML)

EES implementation status

Share of companies implementing
an engagement survey on a regular basis (right)

20,000

Group

Group

Engagement survey total score (left)

100

3,000,000

33,132

33,105

Non-consolidated

260,000

3,418,695
2,808,895
30,538Energy use(MWh)Greenhouse gas emissions in the supply chain (Scope 3) (right)(t-CO2)

Group

20

20

13

25

10

40.0

36

15

14
12

20.0

22

Regular Temporary
employees employees

Regular Temporary
employees employees

Regular Temporary
employees employeesChildbirth Childcare
leave
leave

Childbirth Childcare
leave
leave

Childbirth Childcare
leave
leave

FY2020

FY2021

FY2022

FY2020

FY2021

FY20220* Serious accident frequency rate: No. of deaths and injuries per million hours worked (accidents causing
absence from work)* Accident frequency rate: No. of occupational accidents (of all types) per hundred employees (accidents
causing absence from work + Accidents that do not require absence from work)

Endorsed initiatives

External evaluation (as of October 2023)
TCFD (Task Force on Climate-related
Financial Disclosures)

Expressing support for
the GX League Basic Concept

Zero-Emission Challenge

GPIF (Government Pension Investment Fund) ESG Index
Comprehensive

Other external evaluations

According to themeE
The NAGASE Group is a signatory to theUnited Nations Global Compact andpromotes sustainability activities based on
10 principles in the four areas of humanrights, labor, the environment, andanti-corruption.

RSPO (Roundtable on Sustainable
Palm Oil) Certification

The NAGASE Group has expressed its
support for TCFD (Task Force on
Climate-related Financial Disclosures).

Sedex

Nagase & Co., Ltd. has expressed its support
for the GX League Basic Concept, a framework
announced by the Ministry of Economy, Tradeand Industry for a group of companies thatare working actively to realize Green
Transformation (GX) to collaborate withgovernment and the university sector on
discussing the transformation of the economic
and social systems as a whole and on creating
new markets.

Nagase & Co., Ltd. is participating in a
project to develop production technology
for bio-based products that will accelerate
carbon recycling as part of the Zero-Emission
Challenge sponsored by the Ministry of
Economy, Trade and Industry to realize
carbon neutrality by 2050.

Initiatives for responsible care

Certified as a DX certified business
operator by the Ministry of Economy,
Trade and Industry

E

S

G

2-1079-20-100-00

Nagase & Co., Ltd. is a member of the RSPO
(Roundtable on Sustainable Palm Oil), andholds an RSPO Distributor License.

In 2019, Nagase & Co., Ltd. joined Sedex,
which promotes the creation of ethicalsupply chains.

Nagase & Co., Ltd. participates in the
Responsible Care (RC) Committee, anoperational committee of the Japan
Chemical Industry Association.

In January 2022, Nagase & Co., Ltd. wascertified as a DX certified business operator
under the Ministry of Economy, Trade andIndustry’s DX Certification System.

—

Climate change
Water security
Forests
Supplier
Engagement

AA
B
A (Leader)SG• Our Company’s disclosure casestudy was introduced in the Good
Practices for Disclosure of
Descriptive Information 2022

As a result of third-party evaluation, FTSE Russell (a registered trademark of FTSE International Limited and Frank Russell Company) hereby certifies that Nagase & Co., Ltd. has met thecriteria for incorporation in the FTSE Blossom Japan Sector Relative Index, making it a constituent stock of the index. The FTSE Blossom Japan Sector Relative Index is widely used tocreate and evaluate sustainable investment funds and other financial products.
The incorporation of Nagase & Co., Ltd. into the MSCI Index and the use of the MSCI logo, trademark, service mark or index name in this article do not constitute sponsorship, endorsement or
promotion of Nagase & Co., Ltd. by MSCI or its affiliates. The MSCI Index is the exclusive property of MSCI. MSCI Index names and logos are trademarks or service marks of MSCI or its affiliates.

NAGASE Report 2023

84
United Nations Global Compact

GeneralNAGASE Report 2023

83

| Data Section |Consolidated Balance SheetYear ended March 31, 2023

Thousands of
U.S. dollars (Note 1)

AssetsCurrent assets:
Cash and time deposits (Notes 19 and 25)
Notes and accounts receivable (Note 19)
Inventories (Notes 7 and 8)
Other current assets
Less allowance for doubtful accounts
Total current assets

Non-current assets
Property, plant and equipment, at cost (Notes 9 and 10):Land
Buildings and structures
Machinery, equipment and vehicles
Leased assets
Construction in progress
Less accumulated depreciation
Property, plant and equipment, net (Note 26)

NAGASE Report 2023

85

Investments and other assets:
Investments in securities (Notes 11 and 19):
Unconsolidated subsidiaries and affiliates
Other
Long-term loans receivable
Goodwill (Note 26)
Technology-based assets
Retirement benefit asset (Note 14)
Deferred tax assets (Note 15)
Other assets (Note 10)
Less allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets (Note 26)

2023

¥

40,897302,105
169,721
18,429(1,021)
530,132

18,83964,095
93,845
11,4392,135
190,355(108,290)
82,064

9,341
60,402
69,74317
29,004
4,337
2,645
3,857
41,063(176)
150,491
232,556¥ 762,688

2022¥

54,211
289,862
157,525
13,935(1,248)514,286

20,39861,43090,7482,337
2,027
176,942(104,387)
72,554

9,017
66,58375,60024
29,492
5,912
3,139
3,572
35,248(112)
152,879
225,434¥ 739,720

2023$

306,276
2,262,450
1,271,033
138,014(7,646)
3,970,134

141,084
480,004
702,801
85,666
15,9891,425,560(810,979)
614,574

69,954452,348
522,302127
217,210
32,48019,80828,885
307,519(1,318)
1,127,020
1,741,601$ 5,711,735

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liabilities and Net Assets
Current liabilities:
Notes and accounts payable (Note 19)
Short-term loans (Notes 12 and 19)
Current portion of long-term loans and lease obligations (Notes 12 and 19)
Commercial papers (Notes 12 and 19)
Current portion of bonds payable (Note 12)
Accrued income taxes (Note 15)
Accrued expenses
Accrued bonuses for employees
Accrued bonuses for directors and executive officers
Other current liabilities
Total current liabilities
Long-term liabilities:
Bonds (Notes 12 and 19)
Long-term loans and lease obligations (Notes 12 and 19)
Deferred tax liabilities (Note 15)
Retirement benefit liability (Note 14)
Provision for directors’ stock benefit
Other long-term liabilities
Total long-term liabilities

2023

2022

2023

¥ 140,438
66,1173,120
38,000
—
2,913
6,300
6,985
371
21,957286,203¥ 149,036
73,121
9,152
25,00010,000
7,100
6,479
7,648
497
19,799307,836$ 1,051,734
495,147
23,366
284,580—
21,81547,18052,3102,778
164,435
2,143,361

30,00042,46010,36013,19765
2,012
98,09720,00029,256
12,31013,238—
1,987
76,791

224,669
317,981
77,586
98,832487
15,068734,644

9,699
10,636290,279

9,699
10,639280,015

72,63579,653
2,173,886(1,550)309,064(1,534)
298,820(11,608)
2,314,566

28,928(7)30,414(726)
58,61031,732
178
13,690(161)
45,441

216,640(52)
227,769(5,437)438,928

10,713378,388¥ 762,688

10,830355,092¥ 739,720

80,2292,833,730$ 5,711,735

Contingent liabilities (Note 23)
Net assets:
Shareholders’ equity (Note 17):
Common stock:
Authorized — 346,980,000 shares
Issued —117,908,285 shares in 2023 and120,908,285 shares in 2022
Capital surplus
Retained earnings (Notes 24 and 28)
Treasury stock, at cost (Note 18) — 786,718 shares in 2023 and881,767 shares in 2022
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized holding gain on securities (Note 11)
Deferred (loss) gain on hedges (Note 20)
Translation adjustments
Retirement benefit liability adjustments (Note 14)
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets
See notes to consolidated financial statements.

86
NAGASE Report 2023

Millions of yen

| Data Section |Consolidated Statement of Income

Consolidated Statement of Comprehensive Income

Year ended March 31, 2023

Year ended March 31, 2023

Thousands of
U.S. dollars (Note 1)

Millions of yen

2023

2022

2023

¥ 912,896
757,486
155,410122,038
33,371¥ 780,557
641,062
139,494
104,231
35,263$ 6,836,636
5,672,778
1,163,858
913,937
249,914

Other income (expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Equity in losses of affiliates
Gain on sales of shares of subsidiaries and affiliates
Gain on sales of investments in securities (Note 11)
Loss on sales of shares of subsidiaries and affiliates
Gain on sales of investments in capital of subsidiaries and affiliates
Loss on sales of investment securities
Loss on devaluation of investments in securities (Note 11)
Gain on sales of property, plant and equipment
Gain on donation of property, plant and equipment
Loss on sales of property, plant and equipment
Loss on disposal of property, plant and equipment
Loss on impairment of fixed assets (Notes 10 and 26)
Gain on change in equity
Subsidy income
Other, net
Profit before income taxes

1,734(3,211)
318
—
52
6,587
(466)
147
(7)
(2,120)
144
—
(87)
(998)
(2,838)449
25
3733,137

1,551(1,176)—(1,031)
—
7,037
(59)
314
(6)
(1,436)
16
719
(177)
(453)
(2,974)—75
1,895
39,557

12,986(24,047)
2,381
—
389
49,330(3,490)1,101(52)(15,877)
1,078
—
(652)
(7,474)(21,254)
3,363
187
277
248,161

Income taxes (Note 15):
Current
DeferredProfit9,621(694)
24,21012,826(141)
26,872

72,051(5,197)
181,308

Profit attributable to:Non-controlling interests
Owners of parent(584)
23,625(932)
25,939(4,374)
176,927NAGASE Report 2023

87

See notes to consolidated financial statements.

2023

ProfitOther comprehensive income (Note 13):
Net unrealized holding loss on securities
Deferred (loss) gain on hedges
Translation adjustments
Retirement benefit liability adjustments
Share of other comprehensive income of affiliates accounted for by
the equity method¥

Comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests

24,2102022¥

26,872

2023$

181,308(2,794)(186)
16,852(564)(11,844)106
13,623(430)(20,924)(1,393)
126,204(4,224)¥477
13,78437,994

¥

282
1,736
28,608$3,572
103,228
284,535¥¥

36,8381,156¥¥

26,482
2,126$$

275,878
8,657

See notes to consolidated financial statements.

88

¥

¥

$

NAGASE Report 2023

Net sales (Note 26)
Cost of sales (Note 8)
Gross profit
Selling, general and administrative expenses (Notes 21 and 22)
Operating income (Note 26)

Thousands of
U.S. dollars (Note 1)

Millions of yen

| Data Section |Consolidated Statement of Changes in Net Assets
Year ended March 31, 2023

Millions of yen

NAGASE Report 2023

89

CapitalsurplusRetainedearnings

Total
shareholders’equityBalance at April 1, 2021
¥ 9,699 ¥ 10,646 ¥ 265,920 ¥ (1,503) ¥ 284,763 ¥ 43,576
Profit attributable to ownersof parent——
25,939—25,939—Cash dividends——(5,876)—(5,876)—
Purchases of treasury stock———(6,006)(6,006)—
Disposition of treasury stock
—
0
—
0
0
—
Retirement of treasury stock—(0)(5,975)5,975——
Changes in parent’s
ownership interest due totransactions with
non-controlling interests
—
(0)
—
—
(0)
—
Decrease in retained
earnings resulting fromchanges in scope of
consolidation
—
(6)
—
—
(6)
—
Increase in retained
earnings resulting fromchanges in scope of equity
method——7—
7—
Other changes————— (11,843)
Balance at April 1, 2022
9,699 10,639 280,015(1,534) 298,820 31,732
Profit attributable to ownersof parent——
23,625—23,625—
Cash dividends——(7,150)—(7,150)—Purchases of treasury stock———(5,662)(5,662)—Retirement of treasury stock——(5,645)
5,645——
Changes in parent’s
ownership interest due totransactions with
non-controlling interests
—
(0)
—
—
(0)
—
Decrease in retained
earnings resulting fromchanges in scope of—
consolidation
(3)
—
—
(3)
—
Decrease in retained
earnings resulting fromchanges in scope of equity—
method
—
(330)
—
(330)
—
Changes in accounting
period of consolidated
subsidiaries
(234)
(234)
—
—
Other changes————(2,804)
Balance at March 31, 2023 ¥ 9,699 ¥ 10,636 ¥ 290,279 ¥ (1,550) ¥ 309,064 ¥ 28,928
See notes to consolidated financial statements.

Thousands of U.S. dollars (Note 1)

Deferred
Retirement
Total
gain
benefitaccumulated(loss)
liability
other
Nonon
Translation adjustments comprehensive controlling
hedges adjustments (Note 13)
incomeinterests

Total
net assets¥ 72¥ 1,006¥ 268¥ 44,924¥ 8,743¥ 338,431

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

25,939(5,876)(6,006)
0
—

—

—

—

—

—

(0)

—

—

—

—

—

(6)

—
106
178

—
12,684
13,690

—
(430)
(161)

—
516
45,441—
2,086
10,83072,603
355,092

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

23,625(7,150)(5,662)
—

—

—

—

—

—

(0)

—

—

—

—

—

(3)

—

—

—

—

—

(330)

—
—
(186) 16,723¥ (7) ¥ 30,414

—
—
—
(234)
(564) 13,169(117) 13,051¥ (726) ¥ 58,610 ¥ 10,713 ¥ 378,388

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at costTotal
shareholders’equityNet
unrealized
holding
gain onsecurities

Deferred
Retirement
Total
gain
benefitaccumulated(loss)
liability
other
Nonon
Translation adjustments comprehensive controlling
hedges adjustments (Note 13)
incomeinterests

Balance at April 1, 2022
$72,635 $79,675 $2,097,019 $(11,488) $2,237,849 $237,639 $1,333 $102,524
Profit attributable to ownersof parent—— 176,927—
176,927———
Cash dividends—— (53,546)—(53,546)———
Purchases of treasury stock——— (42,402)(42,402)———
Retirement of treasury stock—— (42,275) 42,275————
Changes in parent’s
ownership interest due totransactions with
non-controlling interests
—
(0)
—
—
(0)
—
—
—
Decrease in retained
earnings resulting fromchanges in scope of
consolidation
—
(22)
—
—
(22)
—
—
—
Decrease in retained
earnings resulting fromchanges in scope of equity
method——(2,471)—(2,471)———
Changes in accounting
period of consolidated
subsidiaries——(1,752)—(1,752)———Other changes————— (20,999) (1,393) 125,238
Balance at March 31, 2023 $72,635 $79,653 $2,173,886 $(11,608) $2,314,566 $216,640 $(52) $227,769$(1,206) $340,306

Total
net assets$81,105 $2,659,268

—
—
—
—

—
—
—
—

—
—
—
—

176,927(53,546)(42,402)
—

—

—

—

(0)

—

—

—

(22)

—

—

—

(2,471)——(4,224) 98,622$(5,437) $438,928—(1,752)(876) 97,738$80,229 $2,833,730

See notes to consolidated financial statements.

90
NAGASE Report 2023

Commonstock

Treasurystock,
at costNet
unrealized
holding
gain onsecurities

| Data Section |Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

Year ended March 31, 2023

Year ended March 31, 2023

Thousands of
U.S. dollars (Note 1)

2023

Operating activities:
Profit before income taxes
Adjustments to reconcile profit before income taxes to net cash provided byoperating activities:
Depreciation and amortization other than amortization of goodwill
Loss on impairment of fixed assets
Amortization of goodwill
Subsidy income
Share of (gain) loss of entities accounted for using equity method
Gain on change in equity
Decrease in retirement benefit liability
Increase in retirement benefit asset
Interest and dividend income
Interest expense
Exchange gain, net
Gain on sales of investments in securities
Loss on valuation of investment securities
Changes in operating assets and liabilities:
Notes and accounts receivable
Inventories
Notes and accounts payable
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities

NAGASE Report 2023

91¥

Investing activities:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible fixed assets included in other assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Proceeds from sales of investments in capital
Purchase of shares of subsidiaries resulting in change in scope of consolidation
Proceeds from sales of shares of subsidiaries resulting in change in scope of
consolidation
Increase in short-term loans receivable included in other current assets, net
Decrease (increase) in time deposits, net
Subsidy income
Payments of leasehold and guarantee deposits
Other, net
Net cash used in investing activities
Financing activities:(Decrease) increase in short-term loans, net
Increase in commercial papers, net
Proceeds from long-term loans
Repayments of long-term loans
Proceeds from issuance of bonds
Redemption of bonds
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling interests
Other, net
Net cash (used in) provided by financing activities
Effects of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Decrease in cash and cash equivalents resulting from changes in fiscal
year-end of consolidated subsidiaries
Cash and cash equivalents at end of the year (Note 24)
See notes to consolidated financial statements.

¥

33,1372022¥

39,5572023$

248,161

12,377
2,838
2,545
(25)
(318)
(449)
(609)
(55)
(1,734)
3,211(891)(6,312)
2,120

11,216
2,974
2,478
(75)
1,031
—
(599)
(869)
(1,551)
1,176(778)(7,285)
1,436

92,691
21,254
19,059(187)(2,381)(3,363)(4,561)(412)(12,986)
24,047(6,673)(47,270)
15,877(5,171)(1,275)(13,584)(1,462)
24,341
2,418(3,058)(14,286)
9,414(34,234)(49,346)
20,465
4,859(9,544)
1,926(1,202)(8,956)(17,776)(38,725)(9,548)(101,730)(10,949)
182,289
18,108(22,901)(106,987)
70,501(12,029)
540(4,888)
(437)
7,474
178
—

(8,830)326(1,624)(1,317)
7,736
890(3,848)(90,085)
4,044(36,606)(3,273)55,972
1,333
—

2,040
(623)
337
25
—
(650)
(8,031)

587
(83)
(137)
75
(1,352)(86)(7,664)

15,277(4,666)
2,524
187—(4,868)(60,144)(11,961)
13,0005,000(8,623)
10,000(10,000)(5,662)(7,150)(1,133)(716)(17,247)

33,32517,0001,900(12,039)——(6,006)(5,876)(543)(477)
27,282(89,575)
97,35637,445(64,577)
74,890(74,890)(42,402)(53,546)(8,485)(5,362)(129,162)

3,064(12,800)
53,336

2,942
4,783
48,553

22,946(95,859)
399,431(204)
40,331¥—53,336$(1,528)302,037

1. BASIS OF PREPARATION
The accompanying consolidated financial statements of NAGASE& CO., LTD. (the “Company”) and consolidated subsidiaries
are prepared on the basis of accounting principles generally
accepted in Japan, which are different in certain respects as
to the application and disclosure requirements of International
Financial Reporting Standards, and have been compiled fromthe consolidated financial statements prepared by theCompany as required by the Financial Instruments andExchange Act of Japan.
In preparing the accompanying consolidated financial
statements, certain reclassifications and rearrangements
have been made to the consolidated financial statements
issued domestically in order to present them in a format
which is more familiar to readers outside Japan.
Certain amounts in the prior year’s consolidated financial
statements have been reclassified to conform to the current

year’s presentation. Such reclassifications had no effect on
consolidated profit or net assets.
The U.S. dollar amounts in the accompanying consolidated
financial statements have been translated from yen amounts
solely for the convenience of the reader, as a matter ofarithmetic computation only, at ¥133.53 = U.S.$1.00, the rateof exchange prevailing on March 31, 2023. This translation
should not be construed as a representation that the yenamounts have been, could have been, or could in the future
be, converted into U.S. dollars at the above or any other rate.
As permitted by the Financial Instruments and Exchange
Act of Japan, amounts of less than one million yen have been
omitted. Consequently, the totals shown in the accompanying
consolidated financial statements (both in yen and in U.S.
dollars) do not necessarily agree with the sum of theindividual amounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of the Company and companies that it controls
directly or indirectly. Affiliates over which the Company
exercises significant influence in terms of their operating andfinancial policies have been accounted for by the equity method.
All significant intercompany balances and transactions havebeen eliminated in consolidation.
Certain subsidiaries were excluded from the scope of
consolidation because the effect of their sales, net profit orloss, total assets and retained earnings on the accompanying
consolidated financial statements was immaterial. The
unconsolidated subsidiaries and affiliates not accounted forby the entity method were excluded from the scope of
application of the equity method, because their profit or loss
and retained earnings attributable to the Company’s interest
were not material to the consolidated financial statements.
Of the Company’s subsidiaries, 33 have a December 31
year end, which is different from that of the Company. The
financial statements of 11 subsidiaries have been included inconsolidation based on a provisional statement of accounts for a
full fiscal year ending March 31. As for the other 22 subsidiaries,
adjustments have been made for any significant intercompany
transactions that took place during the period between the year
end of these subsidiaries and the year end of the Company.
Interfacial Consultants LLC and Infinite Material Solutions,
LLC whose fiscal year-end date used to be December 31 hadbeen consolidated as of each of their year-end date andnecessary adjustments had been made for major transactions
that occurred between the companies’ fiscal year-end date
and the consolidated closing date. From the current fiscal

year, their fiscal-year end date was changed to March 31.
With this change in the accounting period, a 12-month period
from April 1, 2022 to March 31, 2023 was consolidated for thecurrent fiscal year. Income during the period from January 1,
2022 to March 31, 2022 of those consolidated subsidiaries has
been recognized as a change in retained earnings.
Unrealized intercompany gains among the Company andthe consolidated subsidiaries have been entirely eliminatedand the portion attributable to non-controlling interests has
been charged to non-controlling interests.
(b) Foreign Currency Translation
All monetary assets and liabilities denominated in foreign
currencies are translated into yen at the rates of exchange in
effect at the balance sheet date, except that receivables andpayables hedged by qualified foreign currency forward
exchange contracts are translated at the corresponding
contract rates. All other assets and liabilities denominated inforeign currencies are translated at their historical rates. Gainor loss on each translation is credited or charged to income.
Revenue and expense items arising from transactions
denominated in foreign currencies are generally translated
into yen at the rates in effect at the respective transaction
dates. Foreign exchange gain or loss is credited or charged toincome in the period in which such gain or loss is recognized
for financial reporting purposes.
The balance sheet accounts of the overseas consolidated
subsidiaries are translated into yen at the rates of exchange
in effect at the balance sheet date, except that the components
of net assets excluding non-controlling interests, net unrealized
holding gain on securities, and deferred gain or loss on hedges
are translated at their historical exchange rates. Revenue and92
NAGASE Report 2023

Millions of yen

| Data Section |transfer ownership to the lessee are depreciated to a residual
value of zero by the straight-line method over the respective
lease terms.
(j) Allowance for Doubtful Accounts
The Company and its consolidated subsidiaries provide
allowances for doubtful accounts based on their historicalexperience of bad debts on ordinary receivables plus anadditional estimate of probable specific doubtful accounts
from customers experiencing financial difficulties.
(k) Income Taxes
Income taxes are calculated based on taxable income andcharged to income on an accrual basis. Deferred tax assets
and liabilities are computed based on the temporary
differences between the financial reporting and the tax basesof the assets and liabilities that will result in taxable ordeductible amounts in the future. Computations of deferred
tax assets and liabilities are based on the tax rates whichhave been enacted as of the balance sheet date. The
Company and certain subsidiaries shifted to the stand-alone
taxation system in the current fiscal year in conjunction withthe abolishment of the consolidated taxation system.
(l) Accrued Bonuses for Employees
Accrued bonuses for employees are provided based on theestimated amount of bonuses to be paid to employees in thefollowing fiscal year which is attributable to the current
fiscal year.
(m) Accrued Bonuses for Directors and Executive Officers
Accrued bonuses for directors and executive officers areprovided based on the estimated amount of bonuses to be
paid to directors and executive officers in the following fiscal
year which is attributable to the current fiscal year.
(n) Provision for Directors’ Stock Benefit
In order to provide for the payment of shares, etc. of theCompany to Directors (excluding Outside Directors) and
executive officers, the estimated amount of stock-based
compensation payable in accordance with the Stock-Grant
Rules for Directors (internal rules) is recorded.
(o) Retirement Benefit Liability
Retirement benefit liability is provided based on the amountof the retirement benefit obligation less estimated pension plan
assets at the end of the fiscal year. The estimated benefit isattributed to each period based on the plan’s benefit formula.
Prior service cost is charged to income in the fiscal year
in which such cost is recognized for financial reporting
purposes. Actuarial differences are principally credited or
charged to income in the fiscal year following the fiscal year
in which such differences are recognized for financial
reporting purposes.
(p) Accounting for Significant Revenues and Expenses
The following is a description of the principal performanceobligations of the Company and its consolidated subsidiaries’
principal businesses relating to revenue from contracts withcustomers and the usual timing at which point such

performance obligations are satisfied (the usual time at whichrevenue is recognized).
Sales of merchandise and products are classified basedon the reportable segments and revenue is recognizedprimarily at the time the merchandise and products aredelivered to the customer, since the risks and economic valueof ownership of the products are transferred and the right toreceive payment is established at that time. In addition, theGroup may act as an agent in certain transactions. The
consideration from the customer is received primarily within
one year of satisfying the performance obligation and does
not include a significant financing component.
When the Group is acting as a principal in a transaction,
revenue is recognized at the gross amount of consideration
received from the customer, and when the Group is acting
as an agent for a third party, revenue is presented in a net
amount of fees received, which is the gross amount ofconsideration received from the customer less the amountcollected for the third party.
(q) Derivatives and Hedging Activities
Derivatives positions are carried at fair value with any changes
in unrealized gain or loss charged or credited to income, except
for those which meet the criteria for deferral hedge accounting
under which unrealized gain or loss is deferred as a componentof net assets. Foreign currency receivables and payables
hedged by qualified foreign currency forward exchange
contracts are translated at the corresponding foreign exchange
contract rates (“allocation method”). Interest-rate swaps
which meet certain conditions are accounted for as if theinterest rates applied to the swaps had originally applied tothe underlying loans.
Derivative financial instruments are utilized principallyin order to manage the risk arising from adverse fluctuation
in foreign currency exchange rates and interest-rate swaps

are also utilized to mitigate the risk of fluctuation in interest
rates on loans. Hedging instruments are foreign currency
forward exchange contracts, foreign currency deposits, foreign
currency loans and interest-rate swaps. Hedged items areforeign currency receivables and payables, forecast transactions
and interest rates on loans from financial institutions.
The Company and its consolidated subsidiaries (collectively,
the “Group”) manage derivative transactions in accordancewith internal management rules. Under these rules, the Group
conducts foreign currency forward exchange contracts withina range of actual demand of accounts receivable, accounts
payable and actual transactions in foreign currencies. Execution
and management of interest-rate swaps are based on internalmanagement rules and hedged items of interest-rate swaps
are identified by individual contracts.
The Company and certain consolidated subsidiaries
assess the effectiveness of the hedging activities based on acomparison of the accumulated fluctuations of the hedged
items and those of the hedging instruments in the period
from the start of the hedging activities to the assessment
date. However, with regard to interest-rate swaps which meetcertain conditions, the evaluation of effectiveness is omitted.
(r) Research and Development Costs
Research and development costs are charged to income
when incurred.
(s) Distributions of Retained Earnings
Dividends and other distributions of retained earnings areapproved by the shareholders at a meeting held subsequent
to the end of the fiscal year to which such distributions areapplicable. The accompanying consolidated financial
statements do not, however, reflect the applicable distributionsof retained earnings as approved by the shareholders
subsequent to the fiscal year end. (Refer to Note 28(a).)

3. ACCOUNTING CHANGES(a) Application of Accounting Standard for Fair Value
Measurement
As of the beginning of the current fiscal year, the Company
has adopted Implementation Guidance on AccountingStandard for Fair Value Measurement (Accounting Standards
Board of Japan (“ASBJ”) Guidance No. 31, June 17, 2021). In
accordance with the transitional treatment prescribed in
Paragraph 27-2 of ASBJ Guidance No.31, new accounting
policies prescribed by the guidance have been adopted
prospectively. This change in accounting treatment has noeffect on the consolidated financial statements.
(b) Application of FASB Accounting Standards Codification(“ASC”) 842, “Leases”
Certain foreign consolidated subsidiaries that adopted U.S.
GAAP apply ASC 842, Leases, beginning with the current

fiscal year. As a result, these subsidiaries, as lessees,
generally recognize all leases as assets and liabilities on
their balance sheets.
In applying this accounting standard, the subsidiaries
recognized the cumulative effect as of the date of adoption,
which is permitted under the transitional provisions.
As a result, Other assets under Non-current assets,
Current portion of long-term loans and lease obligations in
Current liabilities, and Long-term loans and lease obligations
under Long-term liabilities increased ¥8,206 million, ¥1,391
million and ¥7,875 million, respectively, as of the end of thecurrent fiscal year. The impact of this accounting treatment
on operating income, profit before income taxes, and profit forthe current fiscal year is immaterial.

94
NAGASE Report 2023

NAGASE Report 2023

93

expense accounts are translated at the average rates of
exchange in effect during the year. Adjustments resulting
from translating financial statements whose accounts aredenominated in foreign currencies are not included in thedetermination of profit but are reported as “Translation
adjustments” as a component of accumulated othercomprehensive income or loss in the accompanying
consolidated balance sheets.
(c) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand
deposits, and short-term investments which are readily
convertible to cash and subject to an insignificant risk of any
change in their value, which were purchased with an original
maturity of three months or less.
(d) Inventories
Inventories are stated at the lower of cost or the net selling value,
cost being determined primarily by the moving-average method.
(e) Investments in Securities
Securities are classified into three categories: trading securities,
held-to-maturity debt securities or other securities. Trading
securities, consisting of debt and marketable equity securities,
are stated at fair value. Gain and loss, both realized andunrealized, are credited or charged to income. Held-to-maturity
debt securities are stated at their amortized cost. Marketablesecurities classified as other securities are carried at fair value
with any changes in unrealized holding gain or loss, net ofthe applicable income taxes, reported as a separate componentof accumulated other comprehensive income or loss.
Non-marketable securities classified as other securities arecarried at cost determined by the moving-average method.
(f) Property, Plant and Equipment and Depreciation(except for leased assets)
Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment is calculatedby the straight-line method based on the estimated useful
lives of the respective assets.
The estimated useful lives of the principal assets are as
follows:
Buildings (other than structures attached to the buildings)
15 to 50 years
Machinery and equipment
2 to 20 years(g) Intangible Assets (except for leased assets)
Technology-based assets recognized upon acquisition areamortized on a straight-line basis over 13 to 17 years.
Costs incurred for computer software obtained forinternal use are capitalized and amortized on a straight-line
basis over an estimated useful life of 5 years.
(h) Goodwill
Goodwill is amortized over a period not exceeding 20 years
on a straight-line basis. When immaterial, goodwill is charged
to income as incurred.
(i) Leased Assets
Leased assets under finance lease contracts which do not

| Data Section |Assessment of impairment of property, plant and equipment and intangible fixed assets(a) Amounts recorded in the consolidated financial statements as of March 31, 2023 and 2022, and for the years then ended are
as follows.
Thousands of
U.S. dollars

Millions of yen

2023

Property, plant and equipment
Intangible fixed assets
Impairment losses(b) Information about significant accounting estimates
pertaining to identified items(i) Method of calculation
Non-current assets are grouped into the smallest
units that generate cash flows, and are measured for
impairment if any indication of impairment exists and,if so, whether an impairment loss should be recognized.
For the grouping of non-current assets, idle
assets are grouped individually, and business assets
are grouped mainly by company or plant. Goodwill isprincipally allocated to larger unit that includes related
business-use assets.
Undiscounted future cash flows used todetermine whether impairment losses need to berecognized are calculated in consideration of main
assets’ economic useful lives, etc., based on futurebusiness plans.
Impairment losses are measured by calculating
the recoverable amount of the relevant asset or asset

NAGASE Report 2023

95¥

82,06468,928
2,838

2022

¥

72,55465,070
2,974

2023

$

614,574
516,199
21,254group as the higher of net selling value or the value in
use, and the difference between the book value andthe recoverable amount is recorded as an impairment
loss for the current fiscal year. The discount rate used
for the calculation of the value in use is basicallydetermined using the time value of money taking into
account the risk related to the business.
(ii) Key assumptions used in the calculation
The key assumptions are the projected sales andcosts of sales included in future business plans, andthe discount rate used to calculate the value in use.
(iii) Effects on consolidated financial statements for the
next fiscal year
If the actual profit or loss of each asset or asset groupfalls below the business plan, or if there is a significant
change in the assumptions on which future businessplans are based, the recoverable amount may fall
below the book value and an impairment loss may berecognized in the next fiscal year.

(ii) Company shares remaining in the Trust
Company shares remaining in the Trust are recorded astreasury stock under net assets in the consolidatedbalance sheet based on the carrying value in the Trust(excluding-related expenses). The carrying value oftreasury stock as of the end of the current fiscal year was¥619 million and the corresponding number of shares oftreasury stock amounted to 292,200 shares.

7. INVENTORIESInventories at March 31, 2023 and 2022 are summarized as follows:

Merchandise and finished goods
Work in process
Raw materials and supplies
Total

2023

2022

2023

¥ 152,504
2,446
14,770¥ 169,721¥ 142,590
2,401
12,533¥ 157,525$ 1,142,095
18,318110,612$ 1,271,033

8. LOSS ON DEVALUATION OF INVENTORIES INCLUDED IN COST OF SALES
The balance of inventories at the end of the year is the amount after writing down book values due to decline in profitability andfollowing loss on devaluation of inventories is included in cost of sales for the year ended March 31, 2023 and 2022:
Thousands of
U.S. dollars

Millions of yen

2023

Loss on devaluation of inventories included in cost of sales

¥

2022

2,010

¥

622

2023

$

The amounts of subsidies received from the Japanese national government and deducted from the acquisition costs of property,
plant and equipment at March 31, 2023 and 2022 are as follows:
Thousands of
U.S. dollars

Millions of yen

2023

As a result of our adoption of ASC842, certain subsidiaries generally recognize all leases as assets and liabilities on their balance
sheets. Therefore, “Long-term loans and finance lease obligations” presented in the previous fiscal year has been changed to“Long-term loans and lease obligations” from the current fiscal year in line with the new accounting treatment.

6. ADDITIONAL INFORMATION
performance and increase in corporate value over the medium
to long term.
(i) Overview
The Plan is a stock-based compensation plan underwhich a trust (the “Trust”) established by monetarycontribution from the Company acquires Company
shares. The Company grants points to each Eligible
Individual, and the Trust delivers the number of Company
shares equivalent to the points earned by each Eligible
Individual. In principle, the delivery is made at the time of
the retirement of Eligible Individual.

15,053

9. REDUCTIONS IN ACQUISITION COSTS DUE TO SUBSIDIES

5. CHANGE IN PRESENTATION

Stock-Based Compensation Plan
Effective from the current fiscal year, the Company has adopted
a stock-based compensation plan (the “Plan”) for directors(excluding outside directors) and executive officers (collectively,“Eligible Individuals”). The purpose of the Plan is to establish
a clear link between compensation for the Eligible Individuals
and the Company’s performance and share value, as well as
for the Eligible Individuals to share the benefits and risks
associated with fluctuations in the share price with NAGASE
shareholders. In this way, the NAGASE Group intends to raiseawareness about contributing to improvement of businessThousands of
U.S. dollars

Millions of yen

Buildings and structures
Machinery, equipment and vehicles
Land
Total

¥

¥

403
730
190
1,324

2022

¥

¥

433
774
190
1,398

2023

$

$

3,018
5,467
1,423
9,915

96
NAGASE Report 2023

4. SIGNIFICANT ACCOUNTING ESTIMATES

| Data Section |10. LOSS ON IMPAIRMENT OF FIXED ASSETS

11. INVESTMENTS IN SECURITIESLoss on impairment of fixed assets for the years ended March 31, 2023 and 2022 was as follows:(a) Marketable securities classified as other securities at March 31, 2023 and 2022 are summarized as follows:

Major use

Classification

Millions of yen

Thousands of
U.S. dollars

2023

2023

Area

Machinery, equipment and vehicles,
Business-use assets for product andmanufacturing process development in Leased assets and other assets included
in Investments and other assets
the resin field
Machinery, equipment and vehicles andBusiness-use assets for development
other assets included in Investments andand manufacturing of water-soluble
other assets
support materials for 3D printing
Buildings and structures, and Land
Idle assets
Total

Carrying value

Wisconsin,
USA

¥

2,285

¥

539
12
2,838

Wisconsin,
USA
Kanto

$

17,112$

4,037
90
21,254

Millions of yen

Major use

NAGASE Report 2023

97

Classification

Area

Securities whose carrying
value exceeds theiracquisition costs:
Equity securities
Securities whose carrying
value does not exceed
their acquisition costs:
Equity securities
Total

Acquisition costs

2022
Unrealized gain (loss)

Carrying value

Acquisition costs

Unrealized gain (loss)¥

53,460¥12,004¥

41,456¥

57,951¥

13,108¥44,842¥

2,389
55,849¥3,056
15,061¥(667)
40,788¥2,560
60,511¥

2,810
15,918¥(249)
44,592

2022
Thousands of U.S. dollars

Goodwill, machinery, equipment andvehicles, and other

Goodwill

The Company and its consolidated subsidiaries group fixed
assets for business use principally based on business
management segments. Fixed assets to be disposed of andidle assets are grouped individually as the smallest
cash-generating units.
For the year ended March 31, 2022, the book value was
reduced to the recoverable amount because the Company nolonger expects to generate the initially anticipated earnings.
The recoverable amounts were measured at the net selling
value or the value in use. Net selling value is based on theassessed value for property tax purposes or the appraisedvalue of real estate. Goodwill related to the product andmanufacturing process development business in the resin

Wisconsin,
USA

2023

¥

Wisconsin,
USA
¥

2,911

63
2,974

segment was measured based in the value in use.
The future cash flows are discounted at a rate of 19.0%.
For the year ended March 31, 2023, the book values ofcertain fixed assets for business-use were reduced to theirrecoverable amounts, because the future cash flows fell below
the book value as a result of reviewing the future businessplans. As for idle assets, due to a declining fair value, thecarrying values were reduced to their recoverable amounts.
The recoverable amounts were measured at the net
selling value or the value in use. Net selling value is based on
the assessed value for property tax purposes or the appraisedvalue of real estate. The recoverable amounts for business-use
assets were measured at the net selling value.

Securities whose carrying
value exceeds theiracquisition costs:
Equity securities
Securities whose carrying
value does not exceed
their acquisition costs:
Equity securities
Total

Carrying value

Acquisition costs

Unrealized gain (loss)$

400,359$

89,897$

310,462$

17,891
418,251$

22,886
112,791$(4,995)
305,459“Acquisition costs” in the above table represent the carrying value after recognizing impairment losses.
(b) Securities classified as other securities whose market value is not available and not included in the table (a) at March 31,
2023 and 2022 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Market value not available:
Unlisted equity securities
Total

2023

2022

2023

Carrying value

Carrying value

Carrying value

¥
¥

¥
¥

$
$

4,552
4,552

6,071
6,071

34,09034,090(c) Proceeds from sales of, and gross realized gain and loss on, other securities for the years ended March 31, 2023 and 2022
are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2023

Proceeds from sales
Gain on sales
Loss on sales

¥

7,448
6,584
7

2022

¥

7,736
7,037
6

2023

$

55,77849,307
52

98
NAGASE Report 2023

Goodwill, business-use assets for
product and manufacturing processdevelopment in the resin field
Goodwill related to water soluble
support materials for 3D printing
production and development business
Total

Millions of yen

2023

| Data Section |(d) A breakdown of loss on devaluation of investments in securities for the years ended March 31, 2023 and 2022 issummarized as follows:
Thousands of
U.S. dollars

2023

¥

¥

2022

2,028
81
10
2,120

¥

¥

1,436
—
—
1,436

2023

2023

$

$

15,188607
75
15,877(*) Loss on devaluation of investments in securities is recorded on securities with market value whose market value at the end of the fiscal year has declined by 50%
or more from its acquisition cost, or whose market value has declined by 30% or more but less than 50% based on the amount deemed unrecoverable.

Lines of credit
Credit utilized¥

Short-term loans at March 31, 2023 and 2022 principally represented loans and commercial papers in the form of deeds at
weighted-average annual interest rates of 5.06% and 1.14% per annum, respectively.
Long-term loans, bonds and lease obligations at March 31, 2023 and 2022 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2023

NAGASE Report 2023

99

Unsecured loans from banks and insurance companies, payable in Yen,
U.S. dollars, and Euros due through 2032, at rates from 0.18% to 5.50%
Unsecured bonds in Yen, due 2022, at a rate of 0.539%
Unsecured bonds in Yen, due 2024, at a rate of 0.150%
Unsecured bonds in Yen, due 2029, at a rate of 0.290%
Unsecured bonds in Yen, due 2032, at a rate of 0.640%
Lease obligations
Less current portion
Total

¥

¥

33,754—10,00010,00010,00011,82675,580(3,120)72,4602022¥¥

36,997
10,00010,00010,000—1,411
68,408(19,152)
49,256

2023$$

252,782—
74,89074,89074,89088,564566,015(23,366)
542,650

The aggregate annual maturities of bonds, long-term loans and lease obligations subsequent to March 31, 2023 are summarized
as follows:
Years ending March 31,

Millions of yen

2024
2025
2026
2027
2028
2029 and thereafter
Total

¥

¥

3,120
19,053
6,982
16,307
6,185
23,93275,580Thousands of
U.S. dollars$$

23,366142,687
52,288122,122
46,319179,226
566,0152022

20,000—¥20,000—2023$

149,779—

13. OTHER COMPREHENSIVE INCOME
Reclassification adjustments and tax effects allocated to each component of other comprehensive income for the years ended
March 31, 2023 and 2022 were as follows:In addition, loss on devaluation of investments in securities is recorded on securities whose market value is not available bywriting down the carrying value to fair value when the decline in fair value is deemed to be unrecoverable considering thefinancial position of the issuers, etc., of the securities.

12. SHORT-TERM LOANS, BONDS, LONG-TERM LOANS, COMMERCIAL PAPERS AND
LEASE OBLIGATIONS

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Millions of yen

2023

Net unrealized holding loss on securities:
Amount arising during the year
Reclassification adjustments for gains and losses realized in the statementof incomeAmount before tax effectTax effectNet unrealized holding loss on securities
Deferred (loss) gain on hedges:
Amount arising during the year
Reclassification adjustments for gains and losses realized in the statementof incomeAmount before tax effectTax effect
Deferred (loss) gain on hedges
Translation adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses realized in the statementof incomeAmount before tax effectTax effectTranslation adjustments
Retirement benefit liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses realized in the statementof incomeAmount before tax effectTax effect
Retirement benefit liability adjustments
Share of other comprehensive income of affiliates accounted for by theequity method:Amount arising during the year
Total other comprehensive income

¥

¥

2,840

2022

¥

(10,058)2023$

21,269(6,671)(3,830)1,036(2,794)(6,800)(16,858)
5,013(11,844)(49,959)(28,683)
7,759(20,924)

(460)

125

(3,445)

192
(268)
82
(186)

27
152
(46)
106

1,438
(2,007)614(1,393)

16,852

13,623

126,204—
16,852—
16,852—
13,623—
13,623—
126,204—
126,204(1,042)(218)(7,803)

229
(813)
248
(564)

(396)
(614)
184
(430)

1,715
(6,089)1,857(4,224)477
13,784

¥

282
1,736

$

3,572
103,228100
NAGASE Report 2023

Millions of yen

Loss on devaluation of investments in securities (*)
Securities classified as other securities
Other investments in capital
Investments in capital of subsidiaries and affiliates
Total loss on devaluation of investments in securities

In order to achieve more efficient and flexible financing, the Company has concluded line-of-credit agreements with certain
financial institutions. The status of these lines of credit at March 31, 2023 and 2022 is as follows:

| Data Section |14. RETIREMENT BENEFIT PLANS

The components of retirement benefit expenses for the years ended March 31, 2023 and 2022 are as follows:

Thousands of
U.S. dollars

Millions of yen

2023

Balance at the beginning of the year
Service cost
Interest cost
Actuarial differences
Retirement benefits paid
Changes in scope of consolidation
Other
Balance at the end of the year

¥

¥

2022

34,2181,272
232
45(1,743)(262)
2333,786¥¥34,4571,299
257
20(1,750)(94)
28
34,2182023$$

256,257
9,526
1,737
337
(13,053)(1,962)
172
253,022

Thousands of
U.S. dollars

Millions of yen

2023

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial differences
Retirement benefit expense

¥

¥

2022

1,272
232
(502)
229
1,232

¥

¥

1,299
257
(484)
(396)
676

2023

$

$

Actuarial differences included in other comprehensive income (loss) (before tax effect) for the years ended March 31, 2023 and2022 are as follows:
Thousands of
U.S. dollars

Millions of yen

2023

Actuarial differences

¥

2022

(813)

¥

(614)

2023

$

The changes in plan assets for the years ended March 31, 2023 and 2022 are as follows:

2023
Thousands of
U.S. dollars

2023

Balance at the beginning of the year
Expected return on plan assets
Actuarial differences
Contributions by the Company and its consolidated subsidiaries
Retirement benefits paid
Other
Balance at the end of the year

NAGASE Report 2023

101

¥

¥

2022

24,119
502
(989)
595
(1,001)
8
23,234¥¥24,093
484
(198)
761
(1,043)21
24,1192023$$

180,626
3,759(7,407)
4,456(7,496)60
173,998(6,089)Unrecognized actuarial differences included in accumulated other comprehensive income (before tax effect) as of March 31, 2023
and 2022 are as follows:
Thousands of
U.S. dollars

Millions of yen

Millions of yen

9,526
1,737
(3,759)
1,715
9,226

Unrecognized actuarial differences

¥

2022

(1,032)

¥

(218)

2023

$

(7,729)The allocation of plan assets, by major category, as a percentage of total plan assets at fair value as of March 31, 2023 and 2022
is as follows:
Bonds
Equity securities
Alternative investments (*)
Other
Total

2023

2022

64%
18
17
1
100%

59%
23
16
2
100%

(*) “Alternative investments” consist of insurance-linked securities and private REITs.

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as ofMarch 31, 2023 and 2022 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

2023

Unfunded retirement benefit obligation
Net retirement benefit liability in the balance sheet

21,168(23,234)(2,065)
12,61810,552Retirement benefit liability
Retirement benefit asset
Net retirement benefit liability in the balance sheet

13,197(2,645)
10,552

Funded retirement benefit obligation
Plan assets at fair value

¥

¥

2022

¥

¥

21,481(24,119)(2,637)
12,736
10,09813,238(3,139)10,098102

The expected long-term rate of return on plan assets is determined as a result of consideration of both the portfolio allocation atpresent and in the future, and expected long-term rate of return from multiple plan assets at present and in the future.
The assumptions used in accounting for the above plans were as follows:

2023

$

$

158,526(173,998)(15,465)
94,49679,023
98,832(19,808)
79,023

Discount rate
Expected long-term rate of return on plan assets

2023

2022

0.7%
2.0%

0.8%
2.0%

(c) Defined contribution plans
Thousands of
U.S. dollars

Millions of yen

2023

Contributions to defined contribution plans by the Company and its
consolidated subsidiaries

¥

740

2022

¥

592

2023

$

5,549

NAGASE Report 2023

(a) Outline of retirement benefit plans for employees
The Company and its domestic consolidated subsidiaries have defined benefit plans, i.e., defined benefit pension plans andlump-sum payment plans. Certain overseas consolidated subsidiaries also have defined benefit plans. Also, the Company andcertain consolidated subsidiaries have defined contribution pension plans. In addition to the retirement benefit plans describedabove, the Company and its consolidated subsidiaries pay additional retirement benefits under certain conditions.
(b) Defined benefit plans
The changes in the retirement benefit obligation for the years ended March 31, 2023 and 2022 are as follows:

| Data Section |15. INCOME TAXES

16. REVENUE RECOGNITION

Income taxes applicable to the Company and its domestic consolidated subsidiaries consist of corporation, inhabitants’ andenterprise taxes, which, in the aggregate, resulted in statutory tax rates of approximately 30.6% for the years ended March 31,
2023 and 2022.
The effective tax rates reflected in the accompanying consolidated statements of income for the years ended March 31, 2023
and 2022 differ from the statutory tax rates for the following reasons:(a) Information on disaggregation of revenue from contracts with customers
Information on disaggregation of revenue from contracts with customers is presented in the Segment Information. (Refer to Note 26.)(b) Information that forms the basis for understanding revenues from contracts with customers
The information that forms the basis for understanding revenues is presented in the Summary of significant accounting policies.
(Refer to Note 2(p).)(c) Information about the relationship between the fulfillment of performance obligations based on the contract with thecustomer and the cash flow generated from the contract, and the amount and recognition timing of revenue from thecontract with the customer existing at the end of the current fiscal year expected to be recognized in the following fiscal year(i) Contract balances
The following is a breakdown of contract balances of the Company and its consolidated subsidiaries for the current fiscal
year. In the consolidated balance sheets, receivables from contracts with customers are included in “Notes and accounts
receivable” and contract liabilities are included in “Other current liabilities.” At the end of the previous fiscal year and theend of the current fiscal year, the beginning balance of contract liabilities were transferred to revenue by the end of the
fiscal year, and the amount carried forward from the next fiscal year onward is not significant.

2023

2022

30.6%

30.6%

2.0
(8.4)
9.6
(4.1)
(2.7)
2.4
—
0.5
(0.3)
(3.2)
0.6
26.9%

1.7
(5.5)
5.5
(3.8)
(1.1)
1.9
0.8
(0.1)
0.8
0.8
0.5
32.1%

The significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities at March 31,
2023 and 2022 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2023

NAGASE Report 2023

103

Deferred tax assets:
Accrued bonuses for employees
Allowance for doubtful accounts
Unrealized gain on inventories
Accrued enterprise taxes
Tax loss carryforwards
Retirement benefit liability
Investments in securities
Loss on impairment of fixed assets
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Technology-based assets
Deferred capital gain on property
Reserve for special depreciation
Undistributed earnings of subsidiaries and affiliates
Revaluation of land
Net unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities

¥

1,680
119
717
145
2,441
3,161
3,428
672
6,807
19,174(6,691)
12,482(1,321)
(936)
(49)
(373)
(292)
(12,214)(3,798)(18,985)¥ (6,503)

2022

¥

¥

2023

1,888
110
728
345
3,034
3,018
2,298
941
3,731
16,098(6,370)9,727$

12,581
891
5,370
1,086
18,281
23,67325,672
5,033
50,977
143,593(50,109)93,477(1,801)(1,055)
(99)
(406)
(291)
(13,276)(1,534)(18,464)(8,737)(9,893)(7,010)(367)(2,793)(2,187)(91,470)(28,443)(142,178)$ (48,701)

Thousands of
U.S. dollars

Millions of yen

Receivables from contracts with customers
Contract liabilities

2023

2022

2023

¥ 302,105
4,822¥ 289,862
3,789$ 2,262,450
36,112As of March 31, 2023, Accounts receivable and Notes receivable from contracts with customers included in the table aboveare ¥261,375 million ($1,957,425 thousand) and ¥40,730 million ($305,025 thousand), respectively.
(ii) Transaction price allocated to remaining performance obligations
Since there are no transactions with individual expected contract terms exceeding one year, the practical expedientmethod is applied and information on remaining performance obligations is omitted. There is no material consideration
with respect to contracts with customers that is not included in the transaction price.

17. SHAREHOLDERS’ EQUITYThe Corporation Law of Japan (the “Law”) provides that an
amount equal to 10% of the amount to be disbursed as
distributions of capital surplus (other than the capitalreserve) and retained earnings (other than the legal reserve)
be transferred to the capital reserve and the legal reserve,
respectively, until the sum of the capital reserve and the legal
reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolutionof the shareholders, or by the Board of Directors if certain
conditions are met.
The Company’s capital reserve included in capital surplus

at March 31, 2023 amounted to ¥9,634 million ($72,149
thousand). In addition, the Company’s legal reserve included
in retained earnings at March 31, 2023 amounted to ¥2,424
million ($18,153 thousand).
Under the Law, upon the issuance and sale of new sharesof common stock, the entire amount of the proceeds is required
to be accounted for as common stock, although a company
may, by resolution of the Board of Directors, account for an
amount not exceeding 50% of the proceeds of the sale of newshares as additional paid-in capital.

Movements in common stock during the years ended March 31, 2023 and 2022 are summarized as follows:
Number of shares

2023
April 1, 2022

Common stock

Increase

120,908,285—

Decrease

March 31, 2023

3,000,000

117,908,285

Decrease

March 31, 2022

3,500,000

120,908,285

2022
April 1, 2021

Common stock

124,408,285

Increase—

104
NAGASE Report 2023

Statutory tax rates
Adjustments for:Expenses not deductible for income tax purposes
Dividends and other income deductible for income tax purposes
Net adjustment resulting from elimination of dividend income upon consolidation
Different tax rates applied at overseas subsidiaries
Tax credit
Amortization of goodwill
Loss on impairment of goodwill
Adjustment of book value of shares of subsidiaries for consolidated taxation system
Equity in losses (gains) of affiliates
Valuation allowance
Other, net
Effective tax rates

| Data Section |18. TREASURY STOCK(c) Fair value of financial instruments
The carrying value of financial instruments on the consolidated balance sheets, fair value and the differences as of March 31,
2023 and 2022, are shown in the following table. Financial instruments for which fair value is deemed extremely difficult todetermine are not included.

Movements in treasury stock during the years ended March 31, 2023 and 2022 are summarized as follows:
Number of shares

2023
April 1, 2022

Treasury stock

881,767

Increase

Decrease

2,904,951

3,000,000

March 31, 2023

2022
April 1, 2021

Treasury stock

933,995

Increase

Decrease

3,447,833

3,500,061

March 31, 2022

881,767(*) Treasury stock at the end of the current fiscal year does include 292,200 shares of the Company’s shares held by the Stock-Granting Trust for Directors

The increase in treasury stock includes 2,612,300 shares
resulting from the purchases of treasury stock by resolutionof the Board of Directors, 292,200 shares resulting from thepurchases of treasury stock by the Stock-Granting Trust for
Directors and 451 shares resulting from the purchase ofshares less than one voting unit for the year ended March 31,
2023. The decrease in treasury stock includes 3,000,000 shares
resulting from the retirement of treasury stock by resolutionof the Board of Directors for the year ended March 31, 2023.

Millions of yen

786,718

The increase in treasury stock includes 3,447,500 shares
resulting from the purchases of treasury stock by resolutionof the Board of Directors and 333 shares resulting from thepurchase of shares less than one voting unit for the year
ended March 31, 2022. The decrease in treasury stockincludes 3,500,000 shares resulting from the retirement oftreasury stock by resolution of the Board of Directors and 61
shares resulting from the disposition of shares less than one
voting unit for the year ended March 31, 2022.

2023

Assets
Notes and accounts receivable
Investments in securities (*2)
Other securities
Total assets
Liabilities
Notes and accounts payable
Bonds
Long-term loans
Total liabilities
Derivatives (*3)
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

Carrying value

Fair value

Difference¥ 302,105¥ 302,105¥—

55,849¥ 357,955

55,849¥ 357,955¥——¥ 140,438
30,00032,697¥ 203,135¥ 140,438
29,58032,286¥ 202,304

¥

¥

¥

¥

¥

(405)
(11)
(416)

¥

(405)
(11)
(416)

¥

—
(420)
(410)
(830)
—
—
—

¥

Millions of yen

19. FINANCIAL INSTRUMENTS
foreign currency forward exchange contracts are used solely
for the netted position.
Investments in securities are subject to market pricefluctuation risk. However, these are mainly equity securitiesof other companies with which the Group has business
relationships. The Group regularly monitors both their fairvalue and the financial condition of the issuer. The Group also
reviews as needed the condition of its holdings with concern
to the status of business and financial transactions.
Short-term loans are raised primarily in connection withbusiness activities. Long-term loans and bonds are taken out
principally for the purpose of making capital spending,investments and financing. Loans with variable interest rates
are subject to the risk of fluctuating interest rates. However,to reduce such risk, the Group utilizes derivatives (interest-rate
swap transactions) as a hedging instrument.
Derivatives include foreign currency forward exchange
contracts to manage fluctuation risk in foreign currency
exchange rates and interest-rate swaps to manage fluctuation
risk of interest rates related to the interest payments forbank loans.
In addition, notes and accounts payable and bank loans
are exposed to liquidity risk. However, the Group manages
such risk by monitoring the balance of inflow and outflow ofcash and establishing liquidity on hand in excess of half of
the amount of monthly net sales.

Assets
Notes and accounts receivable
Investments in securities (*2)
Other securities
Total assets
Liabilities
Notes and accounts payable
Bonds
Long-term loans
Total liabilities
Derivatives (*3)
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

Fair value

Difference¥ 289,862¥ 289,862¥—

60,511¥ 350,374

60,511¥ 350,374¥——¥ 149,036
20,00028,244¥ 197,280¥ 149,036
19,82027,992¥ 196,849

¥

¥

¥

¥

¥

(133)
266
132

¥

(133)
266
132

¥

¥

—
(180)
(251)
(431)
—
—
—

106
NAGASE Report 2023

NAGASE Report 2023

105(a) Policy for financial instruments
With regard to the Group’s financing policy, short-termworking funds are raised by bank borrowings or issuance ofcommercial papers and long-term funds are raised by bankborrowings and the issuance of bonds. The policy forderivative transactions is that those are utilized to mitigate
the fluctuation risk related to foreign currency exchange
rates arising from the receivables and payables denominatedin foreign currencies, and fluctuation risk related to interest
rates with respect to loans payable, and derivative transactions
are not carried out for speculative purposes.
(b) Types of financial instruments, related risk and risk
management for financial instruments
Receivables such as trade notes and accounts receivable areexposed to customers’ credit risks. With regard to this risk,
the Group manages the settlement date by each customer,
and establishes credit limits by each customer based on theGroup’s internal credit rating policy and monitors outstandingbalances. The Group establishes system under which thecredit status by each customer is reviewed at least once a
year and the sales limit amount updated as necessary.
In the cases of notes and accounts receivable or payable
denominated in foreign currencies, foreign currency forward
exchange contracts are used to hedge the risk of fluctuation.
However, for foreign currency transactions denominated in
the same currency involving either payables or receivables,

2022
Carrying value

| Data Section |Level 3 fair value:
Fair value is calculated using inputs related to the calculation of unobservable fair value.

Thousands of U.S. dollars

2023

Assets
Notes and accounts receivable
Investments in securities (*2)
Other securities
Total assets
Liabilities
Notes and accounts payable
Bonds
Long-term loans
Total liabilities
Derivatives (*3)
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

Carrying value

Fair value

Difference$ 2,262,450$ 2,262,450$—

418,251$ 2,680,708

418,251$ 2,680,708$——$ 1,051,734
224,669
244,866$ 1,521,269$ 1,051,734
221,523
241,788$ 1,515,045

$

$

$

$

When multiple inputs that have a significant effect on fair value are used, fair value is classified into the level with the lowest
priority in the fair value calculation among the levels to which those inputs belong.
Financial instruments recorded on the consolidated balance sheet at fair value.
Millions of yen

2023

$

(3,033)(82)(3,115)(3,033)(82)(3,115)$—(3,145)(3,070)(6,216)

$

—
—
—

$

Investments in securities
Other securities
SharesDerivatives
Forward exchange contracts
Total assets

Thousands of
U.S. dollars

2023

Unlisted equity securities
Investments in unconsolidated subsidiaries and affiliates
Total

¥
¥

4,552
9,341
13,893

2022

¥

2023

6,071
9,017
15,089¥$34,09069,954
104,044$

Level 3

Total¥

55,849

¥

—

¥

—

¥

55,849¥—55,849

¥

(416)
(416)

¥

—
—

¥

(416)
55,432(*1) Cash is omitted from the notes. Time deposits, short-term loans, current portion of long-term loans, commercial papers, and current portion of bonds are omitted
from the notes because their fair values approximate their carrying amounts due to their short maturities.
(*2) Stocks and other securities without market quotations are not included in “Investment securities (*2)”. The carrying amount of such financial instruments on the
consolidated balance sheet is as follows.

Millions of yen

Level 2

Level 1Millions of yen

2022
Level 1

Investments in securities
Other securities
SharesDerivatives
Forward exchange contracts
Total assets

Level 2

Level 3

Total¥

60,511

¥

—

¥

—

¥

60,511¥—60,511

¥

132
132

¥

—
—

¥

132
60,644(*3) Receivables and payables arising from derivative transactions are presented as a net value with the amount in parentheses representing a net liability position.
Thousands of U.S. dollars

The redemption schedule for time deposits and notes and accounts receivable with maturity dates at March 31, 2023 issummarized as follows:

2023

Millions of yen
Within 1 year

NAGASE Report 2023

107

Over 1 year andless than 5 years¥

40,045
302,105¥ 342,151

Time deposits
Notes and accounts receivable
Total

¥
¥

—
—
—

Investments in securities
Other securities
SharesDerivatives
Forward exchange contracts
Total assets

Level 2$418,251$—
418,251

Level 3$—$

(3,115)(3,115)

Total

$

—

$

—
—

$

418,251$(3,115)415,128

Thousands of U.S. dollars
Within 1 year

Time deposits
Notes and accounts receivable
Total

$

299,895
2,262,450$ 2,562,353

Over 1 year andless than 5 years

$
$

—
—
—

With respect to the redemption schedule of bonds, long-term loans and finance lease obligations, please refer to Note 12.
The fair value of financial instruments is classified into the following three levels based on the observability and materiality of the
inputs used to determine fair value.
Level 1 fair value:
In the inputs related to the calculation of observable fair value, fair value is calculated based on quoted market prices for
assets or liabilities whose fair value are formed in an active market.
Level 2 fair value:
In the inputs related to the calculation of observable fair value, fair value is calculated by using inputs related to thecalculation of fair value other than Level 1 input.

Financial instruments other than those recorded on the consolidated balance sheets at fair value
Millions of yen

2023
Level 2

Level 1

Notes and accounts receivable
Total assets
Notes and accounts payable
Bonds
Long-term loans
Total liabilities

¥
¥

¥

—
—
—
—
—
—

¥ 302,105¥ 302,105
140,438
29,58032,286¥ 202,304

Level 3

¥
¥

¥

Total

—
—
—
—
—
—

¥ 302,105¥ 302,105
140,438
29,58032,286¥ 202,304

108
NAGASE Report 2023

Level 1

| Data Section |20. DERIVATIVES AND HEDGING ACTIVITIES

2022
Level 1

Notes and accounts receivable
Total assets
Notes and accounts payable
Bonds
Long-term loans
Total liabilities¥¥

Level 2

—
—
—
—
—
—

¥

Level 3¥¥¥ 289,862¥ 289,862
149,036
19,82027,992¥ 196,849

Total

—
—
—
—
—
—

¥

¥ 289,862¥ 289,862
149,036
19,82027,992¥ 196,849

Thousands of U.S. dollars

2023
Level 1

Notes and accounts receivable
Total assets
Notes and accounts payable
Bonds
Long-term loans
Total liabilities$$$

Level 2

—
—
—
—
—
—

$ 2,262,450$ 2,262,450
1,051,734
221,523
241,788$ 1,515,045

Level 3

$
$

$

Total

—
—
—
—
—
—

$ 2,262,450$ 2,262,450
1,051,734
221,523
241,788$ 1,515,045

Explanation of valuation techniques used, and inputs related to the calculation of fair value.

NAGASE Report 2023

109(i) Notes and accounts receivable
The fair value of notes and accounts receivable iscalculated based on the present values classified by
the certain period of times which are discounted
respectively by the interest rate determined taking
into account the remaining period to maturity and isclassified as Level 2.
(ii) Investment securities
Listed stocks are valued by using quoted market
prices. Since listed stocks are traded in active
markets, their fair value is classified as Level 1.
(iii) Derivative
Fair value is calculated based on prices, etc., provided
by counterparty financial institutions and is classified
as Level 2.
The fair value of foreign currency forward
exchange contracts and other derivatives that applied
the allocation method is included in the fair value ofthe underlying accounts receivable and payable.
The fair value of interest rate swaps that applied
the exceptional accounting treatment is included in
the long-term loans because it is accounted for as if
the interest rates applied to the swaps had originallyapplied to the underlying long-term loans.

(iv) Notes and accounts payable
The fair value of notes and accounts payable iscalculated based on the present values classified by
the certain period of times which are discounted
respectively by the interest rate determined taking
into account the remaining period to maturity and isclassified as Level 2.
(v) Bonds
The fair value of bonds issued by the Company iscalculated based on quoted market prices andclassified as Level 2.
(vi) Long-term loans
The fair value of long-term loans payable is calculated
based on the present value of the total of principal
and interest discounted by the incremental borrowing
rate and is classified as Level 2.

The currency-related derivatives positions outstanding for which hedge accounting has not been applied at March 31, 2023 and2022 are as follows:
Millions of yen

2023

Classification

Transaction

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
YenEuro
Over-theRMB
counter
IDR
transactions
Others
Buying:U.S. dollars
YenEuro
Others
Total

Contract value(notional principal
amount)

¥

¥

5,287
226
13,918
311
2,002
152
4,770
3,045
186
165
30,066

Contract value(notional principal
amount over
one year)

¥

¥

—
—
—
—
—
—
—
—
—
—
—

Fair value

Valuation
gain (loss)

¥

¥

¥

(61)
(2)
(283)
0
(37)
(2)
(20)
(2)
5
(0)
(405)

¥

(61)
(2)
(283)
0
(37)
(2)
(20)
(2)
5
(0)
(405)

Millions of yen

2022

Classification

Transaction

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
YenEuro
Over-theRMB
counter
IDR
transactions
Others
Buying:U.S. dollars
YenEuro
Others
Total

Contract value(notional principal
amount)¥¥11,953566
13,154
706
1,835
161
4,679
3,130
251
185
36,626

Contract value(notional principal
amount over
one year)

¥

¥

—
—
—
—
—
—
—
—
—
—
—

Fair value

¥

¥

(373)
24
298
(45)
(14)
(11)
98
(127)
10
7
(133)

Valuation
gain (loss)

¥

¥

(373)
24
298
(45)
(14)
(11)
98
(127)
10
7
(133)

110
NAGASE Report 2023

Millions of yen

| Data Section |Millions of yen

Thousands of U.S. dollars

2022

2023

Transaction

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
YenEuro
Over-theRMB
counter
IDR
transactions
Others
Buying:U.S. dollars
YenEuro
Others
Total

Contract value(notional principal
amount)$$39,594
1,693
104,2312,329
14,993
1,138
35,72222,804
1,393
1,236
225,163

$

—
—
—
—
—
—
—
—
—
—
—

$

Valuation
gain (loss)

Fair value

$

(457)
(15)
(2,119)
0
(277)
(15)
(150)
(15)
37
(1)
(3,033)$$

Method forhedge accounting

(457)
(15)
(2,119)
0
(277)
(15)
(150)
(15)
37
(1)
(3,033)$The currency-related derivatives positions outstanding for which hedge accounting has been applied at March 31, 2023 and 2022
are as follows:
Millions of yen

2023
Method forhedge accounting

NAGASE Report 2023

111

Deferralhedge
accounting

Allocation
method forforeigncurrency
forwardexchange
contracts(Note 2(p))
TotalTransaction

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Euro
RMB
Others
Buying:U.S. dollars
Euro
RMB
OthersForeign currency forward exchange contracts:
SellingEuro
Others
Buying:Euro
THB
OthersMajorhedged item

Contract value(notional principal
amount)Contract value(notional principal
amount over
one year)

Deferralhedge
accounting

Allocation
method forforeigncurrency
forwardexchange
contracts(Note 2(p))
TotalTransaction

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Euro
RMB
Others
Buying:U.S. dollars
Euro
RMB
OthersForeign currency forward exchange contracts:
SellingEuro
Others
Buying:Euro
THB
OthersMajorhedged item

Contract value(notional principal
amount)¥Contract value(notional principal
amount over
one year)¥

Fair value

¥

—
—
—
—

—
(16)
(6)
(0)

Accounts
receivable

—
342
99
10

Accounts
payable

4,879
352
7
36

—
—
—
—

274
14
0
1

Accounts
receivable

41
11

—
—

(*)
(*)

86
81
7
5,956

—
—
—
—

(*)
(*)
(*)
266

Accounts
payable¥Fair value¥¥

Thousands of U.S. dollars

2023¥
Accounts
receivable

—
335
72
17

¥

Accounts
receivable
Accounts
payable
¥

¥

—
(8)
0
(0)
(13)
11
0
0

—
—
—
—

5,480
359
57
67

Accounts
payable

—
—
—
—

110
12

—
—

(*)
(*)

202
122
12
6,850

—
—
—
—

(*)
(*)
(*)
(11)

¥

¥

Method forhedge accounting

Deferralhedge
accounting

Allocation
method forforeigncurrency
forwardexchange
contracts(Note 2(p))
TotalTransaction

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Euro
RMB
Others
Buying:U.S. dollars
Euro
RMB
OthersForeign currency forward exchange contracts:
SellingEuro
Others
Buying:Euro
THB
OthersMajorhedged item

Contract value(notional principal
amount)Contract value(notional principal
amount over
one year)

$

$

—
—
—
—

Fair value

$

—
(60)
0
(1)

Accounts
receivable

—
2,509
539
127

Accounts
payable41,039
2,689
427
502

—
—
—
—

(97)
82
0
0

Accounts
receivable

824
90

—
—

(*)
(*)

1,513
914
90
51,299

—
—
—
—

(*)
(*)
(*)
(82)

Accounts
payable$$$(*): The fair value of foreign currency forward exchange contracts that qualify for the allocation method is included in the fair value of the underlying accounts
receivable and payable.

112
NAGASE Report 2023

Classification

Contract value(notional principal
amount over
one year)| Data Section |The interest-related derivatives positions outstanding for which hedge accounting has been applied at March 31, 2022 are as follows.
Millions of yen

2022

Transaction

Hedged item

Interest-rate swap transactions(pay-fixed, receive-variable)

Long-termloans

Method for hedge accounting

Swap rates applied tounderlying long-term loans

Contract value(notional principal
amount)¥Contract value(notional principal
amount over
one year)

4,000

¥

Fair value—(*)(*): Since interest-rate swap agreements are accounted for as if the interest rates applied to the swaps had originally applied to the underlying long-term loans, theirfair values were included in the fair value of the long-term loans.

21. RESEARCH AND DEVELOPMENT COSTS

Net assets per share have been computed based on the number of shares of common stock outstanding at the year end.
Cash dividends per share represent the cash dividends proposed by the Board of Directors as applicable to the respective
years together with the interim cash dividends paid.
The Company’s shares held by the Stock-Granting Trust for Directors are included in treasury stock in shareholders’ equity.
These are excluded from the total number of issued shares at the end of the period when calculating net assets per share. Also,these are excluded from the calculation of average number of shares during the period when calculating profit attributable toowners of parent per share.
The number of such shares at the end of the period excluded from the calculation of net assets per share was 292,200 shares,
while the average number of shares during the period excluded from the calculation of profit attributable to owners of parent per
share was 22,477 shares.
The financial data used in the computation of basic profit attributable to owners of parent per share for the years ended
March 31, 2023 and 2022 are summarized as follows:

Research and development costs included in selling, general and administrative expenses for the years ended March 31, 2023
and 2022 totaled ¥5,755 million ($43,099 thousand) and ¥5,539 million, respectively.

2023

Profit attributable to owners of parent
Profit available for distribution to shareholders of common stock
Weighted-average number of shares

22. OPERATING LEASES

Thousands of
U.S. dollars

Millions of yen

2022

¥

23,62523,625
118,398,261¥

25,93925,939121,522,286

2023

$

176,927
176,927

Future minimum lease payments subsequent to March 31, 2023 under noncancelable operating leases are as follows:
Millions of yen

2024
2025 and thereafter
Total

¥
¥

269
177
447

Thousands of
U.S. dollars

$
$

2,015
1,326
3,348

25. CASH AND TIME DEPOSITS
A reconciliation of cash and time deposits in the accompanying consolidated balance sheets at March 31, 2023 and 2022 and cash
and cash equivalents in the accompanying consolidated statements of cash flows for the years then ended is as follows:(*): Since consolidated subsidiaries outside Japan that adopt U.S. accounting standards have applied ASC842, “Leases,” from the current fiscal year, future minimum
lease payments at the end of the current fiscal year under noncancelable operating leases have decreased.

NAGASE Report 2023

113

At March 31, 2023, the Company and its consolidated subsidiaries had contingent liabilities as guarantors of loans of customers
and other in the aggregate amount of ¥54 million ($404 thousand).
In addition, at March 31, 2023, the Company and its consolidated subsidiaries had contingent liabilities arising from notes
discounted with banks in the amount of ¥355 million ($2,659 thousand).

24. AMOUNTS PER SHARE
Amounts per share at March 31, 2023 and 2022 and for the years then ended are as follows:
Yen

U.S. dollars

2023

Profit attributable to owners of parent:
Basic
DilutedNet assets
Cash dividends applicable to the year

2023

Cash and time deposits
Time deposits with maturities of more than three months
Cash and cash equivalents

23. CONTINGENT LIABILITIES¥

199.54—
3,139.26
70.00

2022

¥

213.46—2,868.22
54.00

2023

$

1.49
—
23.51
0.52

Basic profit attributable to owners of parent per share has been computed based on the profit attributable to owners of parent
available for distribution to the shareholders of common stock and the weighted-average number of shares of common stock
outstanding during the year.
Diluted profit attributable to owners of parent per share for the years ended March 31, 2023 and 2022 has not been presented
because no potentially dilutive shares of common stock were outstanding.

Thousands of
U.S. dollars

Millions of yen¥¥

40,897(565)
40,331

2022¥¥

54,211(874)
53,3362023$$

306,276(4,231)
302,037

26. SEGMENT INFORMATION(a) Overview of reportable segments
The Company’s reportable segments are those units comprising
the NAGASE Group for which separate financial information isavailable and for which the board of directors makes regulardecisions regarding resource allocation and reviews
operating performance.
The Company classifies the reportable segments according
to the position of the business in the value chain and the target
market(s). Accordingly, the Company has defined five segmentcategories: Functional Materials (positioned in the upstream
value chain), Advanced Materials & Processing (positioned in
the next stage of the value chain), Electronics & Energy, Mobility,and Life & Healthcare (these last three segments functioning
across all industries).
The following describes the major products and services
handled by each reportable segment.
The Functional Materials segment is engaged in thesales of materials for paints/inks, and adhesives, urethanematerials and auxiliary materials, plastic materials, plastic

114

additives, industrial oil solutions, water processing raw
materials, surfactant raw materials, fluorochemicals,
encapsulant materials, 5G materials, silicone materials,
environmental solutions and environment-related commercial
products, sintered metal filters, and more for the paints/inks,
resins, urethane foam, organic synthesis, surfactants,
electronics chemicals, communications equipment, water
processing, metal processing, plastic and film processing,and other industries.
The Advanced Materials & Processing Segment isengaged in the sales of dyestuffs, pigments, additives,
processed pigments, dispersing elements, functional
pigments, thermal paper materials, toner and inkjetmaterials, thermoplastic resins, thermosetting resins,
automobile refinish paints, conductive coatings, synthetic
rubber, inorganic materials, plastics products, resin molding
tools/dies, and more for the dye/additive, coatings, ink,
plastic compounds, masterbatch, stationery, digital print
processing material, digital printing, fiber processing, raw

NAGASE Report 2023

Year ending March 31,

| Data Section |functional components, products for electrification, sensor
components, in-vehicle electronics products, in-vehicle
display-related components, self-driving-related products,
and other products for the overall mobility industry andrelated industries.
The Life & Healthcare segment is engaged in the sale ofpharmaceutical/agricultural chemicals and materials,
research products, in vitro diagnostics, enzymes, foodadditives, food ingredients, sports nutrition products, nutrient
premixes, additives for cosmetics, feeds, surfactants, andmedical appliances for the pharmaceutical, food andbeverage, cosmetics, agricultural, toiletries, and health careindustries. The segment offers radiation measurement andsleep measurement as one of its main services. In addition,
this segment sells cosmetics, health foods, and beauty foods
directly to consumers.
(b) Calculation methods of net sales, income or loss, assets,
and other items by reportable segments
The accounting policies of reportable segments are generally
identical to those described in Note 2. Reportable segment
income corresponds to operating income in the consolidated
statements of income. Intersegment internal income andtransfers are determined based on the values of transactionsat actual market prices.

Millions of yen

2022
Reportable Segments

Sales to customers
Intersegment sales andtransfers
Net sales
Segment income
Segment assets
Other items
Depreciation andamortization other thanamortization of goodwill
Amortization of goodwill
Unamortized balance of
goodwill
Investments in affiliates
accounted for by theequity method
Increase in property, plantand equipment, net andintangible assets

Functional
Materials

Advanced
Materials &Processing

Electronics&
EnergyMobilityLife &
Healthcare

Total

Others

Total

Corporate¥ 99,874¥257,283¥128,131¥103,389¥191,634¥780,313¥

244¥780,557¥

711
100,585
7,823
83,793

777
258,060
10,858164,249

2,319
130,450
10,27877,163

2,389
105,778
4,131
68,492452
192,087
9,429
218,060

6,649
786,962
42,521
611,759

4,649
4,893
100
2,838

11,298791,856
42,621
614,598

465
111

1,447
178

1,479
42

342
—

5,959
2,145

9,694
2,478

16
—

1,853

—

452

—

27,18629,492

1,300

1,828

2,761

1,403

3,139

562

1,742

1,610

558

2,435

(c) Information on net sales, income or loss, assets and other items for each reportable segment
Information by reportable segments for the year ended March 31, 2023 and 2022 are as follows:

NAGASE Report 2023

115

Sales to customers
Intersegment sales andtransfers
Net sales
Segment income
Segment assets
Other items
Depreciation andamortization other thanamortization of goodwill
Amortization of goodwill
Unamortized balance of
goodwill
Investments in affiliates
accounted for by theequity method
Increase in property, plantand equipment, net andintangible assets

Life &
Healthcare

Mobility

Total¥112,092 ¥265,024 ¥136,975 ¥125,560 ¥273,161 ¥912,815(11,298)(11,298)
331(64,926)—
780,557
35,263739,720

9,711
2,478

1,505
—

—
—

11,2162,478—

29,492——29,492

10,432

95

10,528—(0)

10,528

6,909

25

6,934

3,791

—

10,7252023

2023

Functional
Materials——(7,690)190,048

Reportable Segments
Functional
Materials

Reportable Segments
Electronics&
Energy¥780,557¥

Thousands of U.S. dollars

Millions of yen

Advanced
Materials &Processing

Adjustments Consolidated——

Others¥

Total

Corporate

81 ¥912,896 ¥Adjustments Consolidated— ¥— ¥912,896

2,257
127,817
4,794
74,739490
273,651
10,581
240,4426,936
919,751
42,802636,782

7,439
7,521
108
3,221

14,376927,273
42,910640,004——(9,932)
189,535(14,376)(14,376)394(66,850)—
912,896
33,371
762,688853
112,946
8,810
87,094755
265,779
9,342
156,840

2,580
139,555
9,273
77,666

477
134

1,440
—

1,608
51

468
—

6,536
2,359

10,5312,545

19—

10,551
2,545

1,826
—

—
—

12,377
2,545

1,890

—

442

—

26,671

29,004—29,004——29,004

1,334

1,920

2,562

1,259

3,268

10,344104

10,449—(0)

10,448

421

2,177

1,908

279

5,737

10,524

7

10,531

6,642—

17,174

Advanced
Materials &Processing

Electronics&
EnergyMobilityLife &
Healthcare

Total

Others

Total

Corporate

Adjustments Consolidated

Sales to customers— $6,836,636— $607 $6,836,636 $$ 839,452 $1,984,752 $1,025,799 $ 940,313 $2,045,690 $6,836,029 $Intersegment sales andtransfers—— (107,661)
55,710 107,661
51,943
3,670
16,903
19,322
5,654
6,388
Net sales— (107,661) 6,836,636
56,324 6,944,305
845,847 1,990,407 1,045,121 957,216 2,049,360 6,887,973
Segment income
2,951 249,914
809 321,351 (74,380)
79,241 320,542
35,902
69,44569,962
65,978Segment assets
24,122 4,792,960 1,419,419 (500,637) 5,711,735
652,243 1,174,568 581,637 559,717 1,800,659 4,768,831
Other items
Depreciation andamortization other thanamortization of goodwill
92,691—
13,67579,016
142
78,86648,9483,505
12,042
10,784
3,572
Amortization of goodwill
19,059——19,059—19,05917,666
—
382
—
1,004
Unamortized balance of
goodwill— 217,210—— 217,210— 199,738 217,210
3,310—
14,154
Investments in affiliates
accounted for by theequity method(0) 78,245—
78,252779
77,46624,474
9,429
19,187
14,379
9,990
Increase in property, plantand equipment, net andintangible assets— 128,615
49,742
78,86652
78,81442,9642,089
14,28916,303
3,153

116
NAGASE Report 2023

resin material, resin molding, functional film and sheet,appliance and office automation device, electronics, packaging
material, daily commodities, household goods, hygienematerials, construction material, and other industries.
The Electronics & Energy Segment is engaged in thesales of formulated epoxy resins, fluorine products, precisionabrasives, semiconductor assembly materials and devices,adhesives and encapsulant materials, display panel
components and devices, chemical management equipment
for display manufacturing processes, low-temperature/vacuum
equipment, liquid state analysis equipment, LEDs, 3D printing
products, design and manufacture of storage battery systems,
solar panels, optical wireless communication equipment, andother products for the semiconductor, electronic component,
AR/VR, environmental energy, 3D printing, heavy electricaland light electrical, HDD, automotive and aircraft, display,
touch panel, housing, lighting, storage battery, energy,
renewable energy, security device, large-scale commercial
facility, and other industries. Its main services include energy
management system proposals, battery assessments, andhealth care services.
The Mobility Segment is engaged in the sales of plastic
products in general, materials for secondary batteries,
interior and exterior materials and components, materials for

| Data Section |(d) Geographical information
Net sales by country or region for the years ended March 31, 2023 and 2022 are summarized as follows:

Thousands of U.S. dollars

2023
Reportable Segments

Millions of yen

2023

Functional
Materials

Reportable Segments

Japan
Greater China
ASEAN
Americas
EuropeOther
Revenues from contracts withcustomers
Net sales to customers

Advanced
Materials &Processing

Electronics&
EnergyLife &
Healthcare

Others(Note) 3

Total¥ 44,808 ¥ 61,641 ¥ 51,955 ¥ 39,817 ¥ 67,103
3,276
33,49956,943
13,288 115,304
5,507
36,541
7,540
73,801
29,35814,039 122,538
6,929
6,893
20,96974,386
1,321
4,712
5,606
2,660
349
342
8,893
1,775
1,007

¥ 81
—
—
—
—
—

¥265,407
222,312
152,750
171,370
88,686
12,368

29.1
24.4
16.7
18.8
9.7
1.3

273,161
273,161

81
81

912,896
912,896

100.0
100.0

Functional
Materials

112,092
112,092

265,024
265,024

136,975
136,975

Mobility

125,560
125,560

Composition(%)

1. Net sales are categorized by country or region, according to the location of the customer.
2. Major countries and regions in each category other than Japan(1) Greater China..... China, Hong Kong, Taiwan(2) ASEAN .................. Thailand, Vietnam, Indonesia(3) Americas.............. U.S., Mexico(4) Europe.................. U.K., Germany(5) Other..................... Korea
3. “Others” is a business segment consisting of businesses not included in Reportable Segments, and includes information processing services, and professional service.

Japan
Greater China
ASEAN
Americas
EuropeOther
Revenues from contracts withcustomers
Net sales to customers

Advanced
Materials &Processing

Electronics&
EnergyLife &
Healthcare

Mobility$ 335,565 $ 461,627 $ 389,089 $ 298,188 $ 502,531
24,534
99,513 863,506 426,443 250,872
41,242
56,467 273,654
219,861 552,692
51,891 105,137 917,681
51,621
157,036
9,893 557,073
35,28841,98319,921
2,614
2,561
66,59913,293
7,541
839,452 1,984,752 1,025,799
839,452 1,984,752 1,025,799

Others(Note) 3

Composition
(%)

Total

$ 607 $1,987,621— 1,664,884— 1,143,938— 1,283,382
664,165—
92,623
—

29.1
24.4
16.7
18.8
9.7
1.3

6,836,636
6,836,636

100.0
100.0

607
607

940,313 2,045,690
940,313 2,045,690

1. Net sales are categorized by country or region, according to the location of the customer.
2. Major countries and regions in each category other than Japan(1) Greater China..... China, Hong Kong, Taiwan(2) ASEAN .................. Thailand, Vietnam, Indonesia(3) Americas.............. U.S., Mexico(4) Europe.................. U.K., Germany(5) Other..................... Korea
3. “Others” is a business segment consisting of businesses not included in Reportable Segments, and includes information processing services, and professional service.

Information of major customers not presented here, since no single customer accounts for 10% or more of consolidated net sales.

Millions of yen

Property, plant and equipment by country or region as of March 31, 2023 and 2022 are summarized as follows:

Functional
Materials

NAGASE Report 2023

117

Japan
Greater China
ASEAN
Americas
EuropeOther
Revenues from contracts withcustomers
Net sales to customers

Advanced
Materials &Processing

Electronics&
EnergyMobilityLife &
Healthcare

Others(Note) 3

Total

Composition(%)¥ 40,971
11,987
26,58016,703
2,634
996¥ 69,123
117,092
58,949
6,172
4,598
1,347

¥ 50,640
54,354
7,267
5,221
4,071
6,575

¥ 31,555
30,534
29,416
10,2491,466
167¥ 57,825
3,594
3,493
79,24347,083
394

¥ 244
—
—
—
—
—

¥250,360
217,562
125,707
117,589
59,855
9,481

32.1
27.9
16.1
15.1
7.7
1.1

99,874
99,874257,283
257,283

128,131
128,131103,389
103,389

191,634
191,634244
244

780,557
780,557

100.0
100.0

Thousands of
U.S. dollars

Millions of yen

2023

¥

Japan
Other
Total

2022

59,80722,25782,064

¥

¥
¥

2023

62,185
10,36972,554$$

447,892
166,682
614,574(e) Information on loss on impairment of fixed assets per reportable segments
Loss on impairment of fixed assets for the years ended March 31, 2023 and 2022 is as follows:

118

Millions of yen

1. Net sales are categorized by country or region, according to the location of the customer.
2. Major countries and regions in each category other than Japan(1) Greater China..... China, Hong Kong, Taiwan(2) ASEAN .................. Thailand, Vietnam, Singapore(3) Americas.............. U.S., Mexico(4) Europe.................. U.K., Germany(5) Other..................... Korea
3. “Others” is a business segment consisting of businesses not included in Reportable Segments, and includes information processing services, and professional service.

2023
Reportable Segments

Loss on impairment of fixed assets

Functional
Materials

Advanced
Materials &Processing

Electronics&
Energy¥—¥ 2,825¥ 12

Mobility¥—Life &
Healthcare

¥—

Total

¥ 2,838

Others¥—Eliminations or
corporate

¥—

Total

¥ 2,838

The Company conducted a review of the future business plans for the business assets for the products and manufacturing
process development business related to resins and for the development and manufacturing business in connection withwater-soluble support materials for 3D printing, both in the Advanced Materials & Processing segment. As a result, the Company
determined that future cash flows fell below book value. Therefore, the Company wrote down the book value of these assets totheir recoverable amounts and recorded impairment losses of ¥2,285 million ($17,122 thousand) and ¥539 million ($4,037
thousand), respectively.

NAGASE Report 2023

2022
Reportable Segments

| Data Section |Millions of yen

2022
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics&
Energy¥—¥ 2,974¥—

Loss on impairment of fixed assets

Mobility¥—Life &
Healthcare

Total

¥—

Eliminations or
corporate

Others¥ 2,974

¥—

¥—

Total

¥ 2,974

The Company no longer expects the profitability originally anticipated for the product and manufacturing process development
business related to resins in the Advanced Materials & Processing segment. Therefore, the Company has written down the bookvalue of goodwill and other intangible fixed assets related to this business to their recoverable amounts, recording impairment
losses in the amount of ¥2,911 million.
Thousands of U.S. dollars

2023
Reportable Segments
Advanced
Materials &Processing

Electronics

Mobility &Energy$ — $ 21,156

$ 90

$—

Functional
Materials

Loss on impairment of fixed assets

Life &
Healthcare

Total

Eliminations or
corporate

Others$ — $ 21,254

$—

Total

$ — $ 21,254(b) Acquisition of treasury stock
The Company resolved matters relating to the acquisition of treasury stock at the meeting of its Board of Directors held on May 9,2023 as follows, pursuant to the provision of Article 156, as applied pursuant to Article 165, paragraph (3) of the Companies Act.
(1) Reason for the acquisition of treasury stock
The Company will acquire treasury stock with the aim of improving the corporate value through further improvement incapital efficiency as a result of taking into consideration comprehensively the current valuation of the Company’s shares in themarket, the status of financial soundness, surplus investment capacity for growth, and others, as part of efforts to improve
capital efficiency from both business and financial aspects under the Medium-term Management Plan ACE 2.0.
(2) Details of matters relating to the acquisition(i) Type of shares to be acquired
Common stock of the Company(ii) Total number of shares that can be acquired
Up to 6,000,000 (5.11% of total number of issued shares(excluding treasury stock))(iii) Total value of shares that can be acquired
Up to ¥8 billion(iv) Acquisition period
From May 10, 2023 to December 22, 2023(v) Acquisition method
To be purchased on the market* Reference: Treasury stock held as of April 30, 2023
Total number of issued shares (excluding treasury stock)
Number of shares of treasury stock

117,413,767 shares
494,518 shares(*) The number of treasury stock above does not include 292,200 shares of the Company’s stock held by the Stock-Granting Trust for Directors.

27. RELATED PARTY TRANSACTION
A consolidated subsidiary of the Company recorded the following related-party transactions for the years ended March 31, 2023
and 2022:

NAGASE Report 2023

119

Relationship with the related party

315 Fullerton A director of a consolidated
LLC (*1)
subsidiary of the Company
owns a majority of thevoting rights of thecompany.
LivPure LLC A close family member of adirector of a consolidated(*3)
subsidiary of the Company
owns a majority of thevoting rights of thecompany.
Total

Description of
the transaction

Thousands of
U.S. dollars

Millions of yen
Account

2023

2022

2023

Rental of real Rent payment
for real estate
estate (*2)

¥ 45

¥ 36

$ 337

Sale of sports
Sale ofproducts (*4) nutrition
products
Accounts
receivable

26

—

$ 195

21

—

$ 157

¥ 92

¥ 36

$ 689

(*1): Mr. Donald K. Thorp, a director of Prinova Group, LLC, which is a consolidated subsidiary of the Company, owns 77% of the voting rights.
(*2): Rent is determined taking the transactions in the neighboring area into consideration.
(*3): A close family member of Mr. Donald K. Thorp, a director of Prinova Group, LLC, which is a consolidated subsidiary of the Company, owns 67% of the voting rights.
(*4): Transaction terms relating to sale of products, and policies on determination of transaction terms are determined in the same manner as general transactions.

28. SUBSEQUENT EVENTS(a) Cash Dividends
The following distribution of retained earnings of the Company, which has not been reflected in the accompanying consolidated
financial statements for the year ended March 31, 2023, was approved at a meeting of the shareholders held on June 20, 2023:
Thousands of
U.S. dollars

Millions of yen

Cash dividends (¥40.0 = U.S.$ 0.3 per share)

¥

4,696

$

(*): Total amount of dividends for common stock of 4,696 million yen includes dividends of 11 million yen in relation to the Company’s shares held by the
Stock-Granting Trust for Directors.

35,168120
NAGASE Report 2023

Name ofrelated party

| Data Section |Investor Information

Corporate information(As of March 31, 2023)

Stock status

Principal shareholders

Number ofshares held
(thousands)% ofTotal Shares
Outstanding

15,078

12.84

NORTHERN TRUST CO. (AVFC) RE
SILCHESTER INTERNATIONALINVESTORS INTERNATIONALVALUE EQUITY TRUST

5,375

4.58

Custody Bank of Japan, Ltd. (Trust Account)

5,028

4.28

Sumitomo Mitsui Trust Bank, Limited

4,776

4.07

Sumitomo Mitsui Banking Corporation

4,377

3.73

Nippon Life Insurance Company

3,589

3.06

Reiko Nagase

3,503

2.98

Nagase & Co., Ltd. Own Share Investment
Association

3,492

2.97

Nagase Shunzo Co., Ltd.

2,688

2.29

NORTHERN TRUST CO. (AVFC) RE U.S.
TAX EXEMPTED PENSION FUNDS

2,302

1.96

Name

Stock exchange Tokyo (Prime Market)
Code
8012
Total number of shares issuable:
346,980,000 sharesStockstatusIssued number of shares:
117,908,285 shares
Number of
25,770shareholders
Composition of shareholders
FD

15.26%

A

By
shareholder
C 20.28%
type

Financial institutions (34)40,809,000 shares
B Foreign corporations, etc.
(265)
33,656,000 shares
C Individuals and others(25,178)
23,913,000 shares
D Domestic corporations(261)
17,995,000 shares
E Securities companies (31)1,039,000 shares
F Treasury stock (1)494,000 sharesA

0.88% 0.42%
E

The Master Trust Bank of Japan, Ltd.
(Trust Account)

34.61%

28.54%
B

Overview

Company name
FoundedEstablishment
Capital
Employees
Main business* The above figures do not include treasury stock (494,518 shares)
Note: Treasury stock was excluded when calculating the percentage of total shares outstanding held.

(As of March 31, 2023)

Main banks

Main offices

Number of bases
Number of
manufacturing
companies
Number ofsales andservice companies

Nagase & Co., Ltd.
June 18, 1832
December 9, 1917
¥9,699 million
Provided by
Osaka Head Office943 (consolidated: 7,220)
Mitsubishi
Estate Co., Ltd.
Tokyo Head Office
Import/export and domestic sales of chemicals, plastics,
electronics materials, cosmetics raw materials and food ingredients
Sumitomo Mitsui Banking Corporation, MUFG Bank, Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
1-1-17, Shinmachi, Nishi-ku, Osaka City, Osaka 550-8668 Tel: (81) 6-6535-2114
Osaka Head OfficeTokiwabashi Tower, 2-6-4, Otemachi, Chiyoda-ku, Tokyo 100-8142 Tel: (81) 3-3665-3021
Tokyo head office
3-14-18, Marunouchi, Naka-ku, Nagoya City, Aichi 460-8560 Tel: (81) 52-963-5615
Nagoya branch office
Nagase Bio-Innovation Center Kobe High Tech Park, 2-2-3, Murotani, Nishi-ku, Kobe City, Hyogo 651-2241 Tel: (81) 78-992-3162
Nagase Application Workshop 2-4-45, Higashi Tsukaguchicho, Amagasaki City, Hyogo 661-0011 Tel: (81) 6-4961-6730
108 companies in 25 countries
45 companies in 15 countries
63 companies in 24 countries

Organization (As of November 11, 2023)

Monthly share price range of NAGASE
TOPIX

Share price (left scale)
TOPIX (right scale)

2,000

4,000

Audit & Supervisory Board/
Audit & Supervisory
Board Members

3,200

Shareholders’ Meeting

Risk Management &Compliance Committee

Functional Materials Segment

Sustainability Committee

Speciality Chemicals Dept.

Performance Chemicals Dept.

Advanced Materials & Processing Segment

Internal Control Committee

1,500

2,400

1,000

1,600

500

800

0

0

Board of Directors

Polymer Global Account Dept.
Security Trade Control Committee

Electronics & Energy Segment

President

Electronics Dept.
Corporate Planning Dept.

NAGASE Report 2023

121
Apr. 2013

Apr. 2014

Apr. 2015

Apr. 2016

Apr. 2017

Apr. 2018

Apr. 2019

Apr. 2020

Apr. 2021

Apr. 2022

Apr. 2023

Monthly trading volume
12,000CEO Office

Advanced Functional Materials Dept.

Business Strategy Office

Mobility Segment

Corporate Sustainability Office

Mobility Solutions Dept.

Marketing Promotion Office
Corporate Management Dept.

Corporate Administration Div.
Corporate Finance Div.

(Thousands of shares)

Risk Management Dept.

Legal Affairs and Compliance Div.
IP & Security Trade Control Div.

9,000

Global Communication Dept.

Public Relations Office
Branding Office

6,000

Human Resources & General Affairs Dept.

Human Resources & General Affairs Div.

ICT Planning Dept.

ICT Planning Div.

Nagase Bio-Innovation Center
Future Co-creation Office
NAGASE Biotech Office
Nagase Application Workshop
Nagoya Branch Office
Nagase ChemteX Corporation
Hayashibara Co., Ltd.*
Prinova

3,000Group Manufacturing
Management Innovation Office0
Apr. 2013

Life & Healthcare Segment
Life & Healthcare Products Dept.

Apr. 2014

Apr. 2015

Apr. 2016

Apr. 2017

Apr. 2018

Apr. 2019

Apr. 2020

Apr. 2021

Apr. 2022

Apr. 2023

Nagase Business Expert Co., Ltd.

Audit Office* Hayashibara Co., Ltd. will begin trading under the new name of Nagase Viita Co., Ltd. on April 1, 2024.

122
NAGASE Report 2023

Share price (¥)

2,500