A n nu a l R e p or t 2 0 11
Year ended March 31, 2011

A technology- and intelligence-oriented Company
that turns wisdom into business.

h t t p : / / w w w. n a g a s e . c o . j p /Osaka Head Office:1-1-17, Shinmachi, Nishi-ku, Osaka City, Osaka 550-8668, Japan
Tel: (81) 6-6535-2114

Tokyo Head Office:5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo 103-8355, Japan
Tel: (81) 3-3665-3021

Nagoya Branch Office: 3-14-18, Marunouchi, Naka-ku, Nagoya City 460-8560, Japan
Tel: (81) 52-963-5615

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Corporate Profile

Trad
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Distribution
Risks (Credit, Finance)
Basket sales

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The Nagase Group comprises more than 100 companies
and offices in Japan and overseas. In positioning

Naaga
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’s Uniniqu
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chemicals and plastics as its core segments, together

Technology/information-related capabilities

with the three strategic fields of electronics, life sciences
and automotive-related materials, Nagase offers trading,marketing, research and development as well as(A strong customer base of approximately 6,000 outstanding
companies; in the context of technology, highly talented
employees capable of building close relationships with customers)

Deve
De
velo
lopm
pmen
entt

Crea
atiing New
w Valueue

Business Creation

Integration

Inve
In
vest
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ment
nt

Nagase Group products(Nagase ChemteX and other manufacturers with unique technologies)

manufacturing and processing functions that make it

Nagase R&D Center, Nagase Application Workshop“a technology- and intelligence-oriented company that

Flow from upstream to downstream (Value chain)
Global network

turns wisdom into business.”(Centered on a network of sales bases in Northeast Asia,
Southeast Asia, North America and Europe)

A technology-

and intelligence-oriented company
that turns wisdom into business.

Nagase & Co., Ltd., the principal company of theNagase Group, was founded in 1832 as a dyestuff
wholesaler in Kyoto. Ever since 1900, when Nagase

Chemicals

Plastics

Electronics

Life Sciences

first commenced the import of synthetic dyestuffs from
Switzerland-based Chemical Industry of Basel(Ciba, today part of the BASF Group), Nagase has
worked with customers to develop new markets.

Contents

By accumulating expertise as a technology andinformation company, the Nagase Group has cultivatedstrengths that include: a customer base of approximately
6,000 outstanding companies; a number of employees
possessing advanced technical information; advanced
manufacturing and research and development functions;and a sound financial structure.
Working in partnership with its customers worldwide,
the Nagase Group will continue to create new business
opportunities and redouble its efforts toward further
development and growth.

A Cautionary Note on Forward-Looking Statements
This annual report contains statements and information regarding the plans,
prospects, strategies and beliefs of Nagase and the Nagase Group that are
forward-looking in nature and are not simply reiterations of historical fact.
Such forward-looking statements and information involve known
and unknown risks, uncertainties and other factors that could lead tooutcomes that differ materially from those presented in this report. Readers
are therefore cautioned not to overly rely on this information. Furthermore,factors that have the potential to impact performance are not limited tothose contained in this report.

2
4
6
12
14
16
18
19
20
21
22
25
26
27
28
29
31

Corporate Profile
11-Year Financial Highlights
To Our Stakeholders
An Interview with the President
Nagase Group at a Glance
Chemicals
Plastics
Electronics
Life Sciences
Greater China Business
ASEAN & the Middle East Business
Nagase ChemteX
Nagase R&D Center
Nagase Application Workshop
CSR Management
Directors, Corporate Auditors and Executive Officers
Corporate Governance/Business Continuity Plan (BCP)
Risk Management and Compliance

33
34
38
41
42
43
50
52
53
54
55
71
72
76
77

Environmental and Social Contribution Activities
Environmental Burden Reduction Activities/Businesses
Involving Environment- and Energy-Related Technologies
Together with Our Employees (Diversity and Work-Life Balance)
Social Contribution Activities
Six-Year Summary
Management’s Discussion and Analysis of Operations
and Finances
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors
Consolidated Subsidiaries, Affiliates and Offices
Corporate Information
Investor Information

NAGASE & CO.,LTD. Annual Report 2011

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11-Year Financial Highlights
Nagase & Co., Ltd. and Consolidated Subsidiaries (Years Ended March 31)

Millions of Yen

2001/3

2002/3Thousands of
U.S. Dollars

Millions of Yen

2003/3

2004/3

2005/3

2006/3

1 WIT2000 (Reform)

2 WIT21 (Promotion)

Investment Amount: ¥20.2 billion

Investment Amount: ¥23.7 billion

2007/3

2008/3

2009/3

2010/3

2011/3

From WIT Medium-Term Management Plans
to2011/34 4 “CHANGE” 11

3 WIT 2008 (Reinforcement)

Investment Amount: ¥27.7 billion

Investment Amount: ¥10.7 billion

W: Wisdom I: Intelligence T: Technology

Performance (Accounting Fiscal Year):¥ 559,372

Regions

Segments

Net Sales¥ 490,583¥ 503,688¥ 533,301¥ 575,636¥ 648,023¥ 701,321¥ 764,755¥ 715,238¥ 603,949¥ 660,213

WIT2000 (Reform)$ 7,940,024

Chemicals

237,871

218,524

223,656

231,360

251,725

222,282

247,094

267,836

263,114

237,124

253,2903,046,182

N-ROE (Nagase ROE) numerical target 7%

Plastics

205,460

175,252

165,810

170,996

188,456

229,278

244,681274,660

255,859

192,569

222,100

2,671,076

N-ROE = Sales cash flow/Net assets at the start of
the fiscal year

Electronics

103,382

83,66099,759118,978

122,632

132,086

150,796

163,833

135,773

117,591

133,640

1,607,216

Life Sciences

—

—

—

—

—

56,40453,55656,48958,90555,54250,247604,293

Other

—

—

—

—

—

7,972

5,191

1,934

1,585

1,121

934

11,233

Healthcare/Other

12,65813,146

14,461

11,966

12,821

—

—

—

—

—

—

—

Domestic

392,555

341,102337,531349,557

363,708

388,470

410,789432,813394,874

360,382

389,379

4,682,850

Overseas

166,817

149,481

166,157

183,744

211,928

259,553

290,532

331,942

320,364

243,567

270,833

3,257,162

Gross Profit

55,14046,97651,89953,494

61,96067,64073,63980,506

71,52765,41573,008878,028

Operating Income

7,752

1,673

8,433

10,244

13,256

17,596

21,66923,063

12,522

13,12818,732

225,280

Net Income (Loss)

4,945(2,097)

4,186

7,010

10,384

12,892

13,567

10,005

5,808

7,537

12,823

154,215

Total Assets¥ 353,776¥ 300,073¥ 284,800¥ 310,793¥ 335,290¥ 396,773¥ 422,859¥ 419,869¥ 340,968¥ 368,088¥ 375,336$ 4,513,963

Equity Capital

153,498

144,176

140,944

156,210167,092

196,620

205,083

200,554

184,599

195,344

201,516

2,423,524

Interest-Bearing Debt

23,87819,677

16,57816,417

14,01924,834

20,49133,342

31,34021,88627,125326,218

WIT21 (Promotion)
Numerical targets¥550.0 billion¥11.0 billion

Consolidated net sales
Consolidated operating income

WIT2008 (Reinforcement)
Numerical targets¥770.0 billion¥24.0 billion

Consolidated net sales
Consolidated operating income

Financial Condition:

Numerical targets
Yen

Yen

¥720.0 billion¥15.0 billion

Consolidated net sales
Consolidated operating income

U.S. Dollars

Per Share Data:¥

Net Income (Basic)
Net Assets

35.28

¥

(15.39)

¥

31.72

¥

54.69

¥

81.00

¥

100.32¥105.84

¥

77.86

¥

45.17

¥

58.64

¥

99.76

$

1.20

1,104.81

1,082.16

1,107.55

1,227.82

1,311.37

1,535.70

1,597.27

1,559.97

1,435.88

1,519.61

1,568.04

18.86

8.0

8.0

8.0

9.0

10.0

15.0

18.0

17.0

16.0

16.0

22.0

0.26

Cash Dividends%%

Ratios:Overseas Sales to Net Sales

29.8

30.5

33.0

34.5

36.8

40.1

41.4

43.4

44.8

40.3

41.0

Manufacturing Ratio(Operating Income)

11.3

(9.6)

21.4

19.2

16.4

20.5

22.3

24.4

15.5

35.4

29.0

Operating Margin(Operating Income/Net Sales)

1.4

0.3

1.7

1.9

2.3

2.7

3.1

3.0

1.8

2.2

2.8

Return on Equity (ROE)

3.4

(1.4)

2.9

4.7

6.4

7.1

6.8

4.9

3.0

4.0

6.5

Net Worth Ratio

43.4

48.0

49.5

50.3

49.8

49.6

48.5

47.8

54.1

53.1

53.7

Debt to Equity Ratio (Times)

0.16

0.14

0.12

0.11

0.08

0.13

0.10

0.17

0.17

0.11

0.13

Net Salesby Business Segment

Composition Ratioof Net Sales by Region¥660.2
Billion¥660.2
BillionChemicals
Plastics
Electronics
Life Sciences
Other

38.4%
33.6%
20.2%
7.6%
0.1%

Japan
Northeast Asia
Southeast Asia
North America
Europe/Others

59.0%
24.1%
11.7%
2.9%
2.3%

Note: Segment shares do not total
100% because calculations wererounded off to the second decimal place.

Note: U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥83.15=U.S.$1.00, the approximate rate of exchange prevailing on March 31, 2011

Net Sales

Trading Business

Operating Income/Operating Margin

Manufacturing Business(Millions of Yen)
800,000

Total Assets/Net Worth Ratio

Trading Business (left)
Manufacturing Business (left)
Operating Margin (right)

Net Assets/ROE

Total Assets (left)
Net Worth Ratio (right)

Net Assets (left)

ROE (right)(Millions of Yen)
25,000(%)
5.0(Millions of Yen)
450,000(%)
60.0(Millions of Yen)
250,000(%)
10.0

20,0004.0

375,000

50.0

200,000

8.0

15,0003.0

300,000

40.0

150,000

6.0

10,0002.0

225,000

30.0

100,000

4.0

5,000

1.0

150,000

20.0

50,0002.0

0075,000

10.0

0

0.0

600,000

400,000

200,000-5,000

0
01/3

2

02/3

03/3

04/3

05/3

NAGASE & CO.,LTD. Annual Report 2011

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06/3

07/3

08/3

09/3

10/3

11/3

-2.0

0.0

0
01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3

01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3

01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3

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To Our Stakeholders
1. Hiroshi Nagase, Representative Director, President and CEO

8

Aiming to be a unique “technology- and intelligence-oriented
company that turns wisdom into business,”

76

2. Makoto Tsuruoka, Representative Director and Senior Managing Executive Officer

5

9

10

3. Kyoichi Zushi, Representative Director and Senior Managing Executive Officer
4. Reiji Nagase, Representative Director and Senior Managing Executive Officer

3

1

2

4

5. Shingo Bamba, Director and Managing Executive Officer
6. Kazuo Nagashima, Director and Managing Executive Officer
7. Kenichi Matsuki, Director and Executive Officer
8. Toshiro Yamaguchi, Director and Executive Officer
9. Haruyuki Niimi, Outside Director
10. Iwao Nakamura , Outside Director

the Nagase Group will

make concerted efforts

to provide relief assistancebased on its management philosophy of “good and fair business practices.”

The entire Nagase Group would like to express its deepest condolences to the victims of
the Great East Japan Earthquake and extend its sincerest wishes for the speedy recovery of the stricken areas.
We at the Nagase Group have donated ¥50 million, and employees are conducting
donation drives to be of some small assistance to those affected by the recent disasterand to aid in the recovery of stricken areas. In addition, Nagase is continuing to saveelectricity companywide in response to the likelihood of ongoing power shortages.
In the chemical industry, our core business, manufacturing in general has been seriously impacted as a result of supply chain-related disruption caused by the damage
sustained by plants during and the power shortages after the recent disaster. Under
these circumstances, drawing on our accumulated knowledge and experience, we will
work to supply the raw materials demanded by customers through such initiatives as
contacting our worldwide network of suppliers. Through these ongoing efforts, westrongly believe that we can be of genuine assistance in disaster recovery efforts andplay an instrumental role in the domestic and global economies.
Based on our management philosophy of “good and fair business practices,” we at
the Nagase Group will contribute to society by meeting customer needs in a precise andrapid manner.

July 2011
The Directors of Nagase & Co., Ltd.

4NAGASE & CO.,LTD. Annual Report 2011

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An Interview with the President
which were able to make quick decisions about
pressing issues. For example, some decided on
the immediate transfer of headquarter functions tolocations outside of Tokyo.
Improvement is certainly needed in the areasof initial response and coordination, underscoring
the need to redouble the Nagase Group’s crisis
management capabilities. Moreover, although we
distributed complete disaster kits that include
emergency provisions and protective gear, we plan
to improve our preparation for emergencies thatexceed current contingencies.

Q_ What types of actions were taken toaddress customer needs in relation to
Nagase’s main businesses?

President

Hiroshi Nagase“

Apart from functional business
continuity plans (BCPs), we
strongly recognize the importance of reinforcing our crisis
management from the standpoint of making rapid decisions during an emergency.

”

6

NAGASE & CO.,LTD. Annual Report 2011

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Crisis Management

Q_ What was Nagase’s response to theGreat East Japan Earthquake on March 11,
2011?
Firstly, I would like to take this opportunity toextend our deepest sympathies for all thoseaffected by the Great East Japan Earthquake andsincere wish that those who are suffering will soon
be able to regain their normal lifestyles.
On the day of the disaster, I was attending ameeting in Tokyo. I had never experienced anearthquake of that magnitude, and the sheer
length of the shaking is impossible to forget. The
shelves in my office toppled over and broken glass
was strewn everywhere. Immediately following theearthquake, our safety confirmation system andemergency communications network were activated to confirm the status of Group employees.
At the same time, an emergency responsecommand center was set up, led by a director toconsolidate disaster-related information. Lateron, this center played a useful role in assessing
the necessity of employees reporting for work,
adjusting work hours and other matters.
With the earthquake occurring on a Friday, confirming the safety of employees and their families was not completed until three days lateron Monday morning. However, I am very relieved
to report that none of our employees were
harmed.
In terms of our business operations, we wereable to confirm that during the earthquake coresystems remained intact companywide, which isan important measure of the BCP we establishedin anticipation of an earthquake directly underTokyo. By maintaining these critical functions, wehave established a platform that enables us tocompletely fulfill our responsibilities to business
partners.
On the other hand, we could benefit from emulating some foreign and domestic companies,

Immediately following the earthquake, we madeongoing efforts to determine the status of customers in each department and engaged in information exchanges that went beyond departments andsegments to analyze the impact of and problems
caused by the disaster on all of our petrochemical
supply chains.
Investigations have revealed that the chemicalindustry will be negatively impacted over the next
six months by damage sustained at four facilities
that produce approximately 36% of Japan’s
ethylene. The loss of this ethylene production
capacity is having a major effect on the production
and supply of raw materials for such items as
paper, daily commodities, semiconductors,
synthetic rubber and ink. Although efforts toresume operations at these damaged facilities are
steadily progressing, it is still not clear when thisprocess will be fully completed. In light of thissituation, the Nagase Group has received
numerous requests from customers to supply
them not only with the products it regularly sells
them, but also chemical derivatives and otheritems. In response, concerted efforts are being
made as Group employees work together tomaximize Nagase’s global supply network. Despite
our best efforts, I would like all customers tounderstand that given the severity of this situation,
it may not be possible to supply these products.
Despite these circumstances the Nagase
Group will do its utmost to meet customer needs
by focusing its efforts to secure currently available

chemical derivatives as well as proposing
substitutes.

Fiscal 2010
Business Performance in Review

Q_In the fiscal year ended March 31, 2011,
Nagase reported noticeable improvements insales and income. Net sales increased 9.3%
year on year to ¥660.2 billion, while operating income rose 42.7% to ¥18.7 billion, andnet income jumped 70.1% to ¥12.8 billion.
Please characterize business performance
during the year under review.

“Except for Life Sciences, performance in all segments
exceeded initial forecasts.
Nagase recorded significant
gains in domestic and overseas earnings driven by strong
performance in the liquid
crystal, semiconductor andautomotive industries.

”

To summarize Nagase’s overall performance, withthe exception of Life Sciences, performance for all
segments exceeded initial forecasts to a noticeable degree. Nagase recorded significant gains inearnings in Japan and overseas.
In the Chemicals segment, sales in Japan
increased owning to steady demand throughout
the chemicals industry, while overseas revenuerose because of strong sales in Southeast Asia
and Europe that offset declines in Northeast Asia.
Such increases in domestic and overseas revenue
led to a 6.8% year-on-year improvement in net
sales to ¥253.2 billion, with an overseas sales
ratio of approximately 30%. Operating income
rose 12.1% to ¥8.7 billion. These results were
specifically attributable to strong sales of liquid
crystal-related components of the Group’s manufacturing companies.
In the Plastics segment, net sales rose 15.3%
year on year to ¥222.1 billion, with an overseas
sales ratio of approximately 60%. Operating
income jumped 54.2% to ¥4.7 billion. These
increases were thanks to robust sales, including
exports from Japan, in response to active overseas
demand, mainly for products related to officeautomation, consumer electronics and automotives in Northeast and Southeast Asia. Since thePlastics segment has a higher ratio of overseas
sales compared with other segments, it is impacted to a greater extent by overseas manufacturingconditions than by those in Japan.
Net sales in the Electronics segment increased
13.6% year on year to ¥133.6 billion, with an

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“The quality of Nagase’s business and opera tions canessentially be determined on
our own by the kind of value
we deliver to customers. As
one solution in this area, wewill promote Nagase-led businesses.

”

overseas sales ratio of approximately 45%.
Operating income surged 76.0% to ¥6.1 billion.
The significant rise in both revenue and earnings
resulted from favorable sales of components for
producing smartphones as well as each type ofcomponents used in the liquid crystal and semiconductor industries. In particular, the Group’s
formulated epoxy resin and processed glass
product manufacturing businesses recorded
strong sales.
By contrast, the Life Sciences segment was
the notable exception, with decreases in revenue
and earnings. Specifically, net sales fell 9.5% year
on year to ¥50.2 billion, with an overseas sales
ratio of approximately 20%. Operating income
dropped 38.7% to ¥0.9 billion. These declines
were caused by decreased sales in the pharmaceutical business, which handles pharmaceuticalintermediates, and those for such daily commodities as food additives in the Fine Chemicals
Department. Moreover, in the Beauty Care
Products Department, brisk sales of health foodproducts failed to make up for stagnant sales ofcosmetics.

Q_ Although performance was driven
mainly by the liquid crystal, semiconductor
and automotive industries, what was thestate of the market during the fiscal year
under review?
The liquid crystal and semiconductor industries
were relatively strong throughout fiscal 2010,
despite inventory adjustments in certain areas
during the first half and sluggishness in the second half. As you know, the market for smartphonerelated products in particular continued toincrease dramatically and is becoming an industry
for which much is expected.
At the same time, the automotive industry was
forecasted to sustain a major drop in sales inJapan following the cessation of beneficial sales
promotion systems in the first half of fiscal 2010.
However, such forecasts did not materialize andmarket conditions were favorable throughout the
fiscal year under review thanks to only minor
decreases in production and robust overseas sales
primarily in China, Thailand and Indonesia.

Looking Back on the Second Year of“CHANGE” 11

Q_ There are six core initiatives thatcomprise “CHANGE” 11 : 1) Select andconcentrate businesses; 2) Build businesses around environment- and energyrelated technologies; 3) Strengthen R&D
and manufacturing functions; 4) Promote
globalization; 5) Strengthen risk management; and 6) Promote employee
diversity and work-life balance. Could
you provide a progress report on these
initiatives?
As the next medium-term management plan after
the nine-year “WIT (Wisdom Intelligence
Technology)-21” plan, “CHANGE” 11 has
as its basic strategy “improve the quality of business and operations.” Against this backdrop, weare comprehensively and accurately addressingchanges in the Group brought about by the success of “WIT-21” (Sales growth at manufacturing

companies, Rising overseas sales ratio, Increasing
overseas headcount) and shifts in the external environment (the operation of new petrochemical plants
mainly in the Middle East ).
Although the table below outlines the progress we have made for each initiative, I willreport on what we have accomplished to
improve the quality of business and operations.
The quality of Nagase’s business and operations can essentially be determined on our own
by the kind of value we deliver to customers. As
one solution in this area, we will promote
Nagase-led businesses.
Listed here are examples of some of themeasures we undertook during fiscal 2010.
•The development of lithium ion battery modules
promoted by the Automotive Solutions
Department and the Energy Device Office in partnership with CAPTEX Co., Ltd. (please refer toBusinesses Involving Environment- and EnergyRelated Technologies on p. 35).
•The development of photovoltaic generation systems for apartment buildings promoted by theEnvironment & Energy Office in concert with

Note:The ratio of overseas sales is the ratio to net sales before consolidation and eliminations.

Basic Strategy of “CHANGE” 11

Major externalchangesCore initiatives for “CHANGE” 11

Basic Strategy

Improve quality of businessand operations

Corporate ethics
Environmental
and resource
issuesAwareness of the needto change

Change within
the Group
Sales growthat manufacturing
companies
Rising overseas
sales ratio
Increasing overseas
headcount

Basic Principle

1.

Select and concentratebusinesses

2.

Build businesses aroundenvironment- and energyrelated technologies

3.

Strengthen R&D andmanufacturing functions

4.

Promote globalization

5.

Strengthen risk
management

6.

Promote employee diversity
and work-life balance

Maintain good and fair business practices

Movement away from the single-minded pursuitof profit to a greater emphasis on social contributions, CSR and corporate ethics

Growing concern for the global environment
along with stricter regulations

8

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Shifts in the market structure due to higher prices ofcrude oil and other natural resources
Greater emphasis on energy saving, weight reduction,
recycling, and the development of alternative energy

Establishment of new petrochemical plants in the
Middle East and China• Established a joint venture in Indiana, USA to manufacture and sell blow-formed components and products for automobile interiors inorder to deepen Nagase’s presence in U.S. automotive markets (mass production commenced)• Decided in 2009 to build a new factory in Okazaki City, Aichi Prefecture to mass produce lithium ion battery modules developed by thesubsidiary CAPTEX Co., Ltd.
• Established the Energy Device Office to build systems capable of ensuring uniform operations, from materials to application, byconsolidating lithium ion battery-related businesses. This action is intended to expand businesses related to energy.
• Nagase ChemteX decided to construct new production facilities at the Harima Plant to respond to growing demand in Japan andoverseas for mobile device components, liquid molding materials for semiconductors, and solar cell-related materials. All of these are
handed by the epoxy resin business.
• Nagase ChemteX decided to build a new plant at the Fukuchiyama Plant to expand production of enzymes, phospholipid and otheroriginal products that use actinomycete properties, which are handled by the enzyme business• Established a subsidiary in Mexico and a joint venture to manufacture and sell frame laminated materials for automobiles and urethane

Changes in the Operating Environment
Values expected of businesses• Upgraded U.S. and Japan-based affiliated manufacturing companies to subsidiaries following the transfer of the color-former business(specialty dye used for thermal paper) in order to build a comprehensive thermal business• Set up a joint venture to engage in consigned production of high-performance plastics and intermediates in Changzhou City, Jiangsu
Province, China to address increasing demand in China for plastic products manufactured on consignment• Promoted compliance with overseas chemical-related laws and upgraded systems related to security trade control for overseas
subsidiaries• Implemented ongoing awareness-raising initiatives including the implementation of security trade control training at Nagase andaffiliated companies• Achieved accreditation as a general business owner compliant with the Next Generation Nurturing Support Measures Promotion Law
issued by the Osaka Labor Bureau and acquired the next generation accreditation mark “KURUMINN”• Implemented “No Overtime Days” and internal training lectures

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GRID, Inc. (please refer to Businesses Involving
Environment- and Energy-Related Technologies
on p. 35).

“

Global petrochemical market
trends indicate these items
are being absorbed by active
demand in China. Although theimpact on Japan remains
minimal, there is no doubt that
we are being swept by thecurrent of this major change.

”•The recent construction of a plant by Setsunan
Kasei Co., Ltd. that adds new development functions for original plastic compound promoted by
the Polymer Products Department.
•The building of new production facilities toexpand unique product lineups for enzymes andphospholipids and other items promoted by theFine Chemicals Department and Nagase
ChemteX Corp..
•The construction of a new plant to increase
production of formulated epoxy resins for
products related to mobile devices, semiconductors and solar cells promoted by Nagase
ChemteX.
Through these and other measures, we are aiming
to implement price revisions and marketing conducted by Nagase-led businesses.
The Nagase R&D Center is a source of theGroup’s competitive advantage. The general manager heading the Center also concurrently serves
as the general manager of Nagase ChemteX. This
move toward unified management has accelerated
the speed of our R&D.
Note: Growth strategies for the following key measures: shifting froman intermediary-led business structure targeting import
distributors to a technology/information business with added
R&D and manufacturing functions; expanding the scope andcapacity of the Greater China and ASEAN & the Middle Eastbusinesses; and increase Asian businesses by upgrading ourbusiness bases (please refer to 11-Year Financial Highlights on
p. 2-3).

Q_Amid major changes taking place in theexternal environment, please tell us about
trends in petrochemical markets* following
the commencement of operations at new petrochemical plants primarily in the Middle East.
— Petrochemical Market Trends in the Middle
East
Ethylene production capacity in the Middle East
reached an annual level of 25 million tons at theend of 2010, while petrochemical derivates
manufactured in the region can now be supplied
to Europe and China. Although we are not yet able
to provide a significant supply of petrochemical
derivates, our capabilities are steadily increasing.
Accordingly, we believe that our supply capabilities
will account for a major percentage of total
supplies in the near future. In addition, since our10

NAGASE & CO.,LTD. Annual Report 2011

nag̲2011本文(e)̲PDF.indd 10-11

ability to increase output of ethane (a byproduct of
crude oil production) is limited, we intend to move
forward with production plans related to petrochemical derivatives, using raw materials that areheavier than naphtha.

materials of naphtha and natural gas. This fosters a relationshipwhere fluctuations in the supply and demand of basic products canexert an impact on petrochemical derivatives.

Looking Toward the Final Year of“CHANGE” 11— Petrochemical Market Trends in China
Ethylene production capacity in China exceeds 15
million tons per year, while the amount actually
produced surpassed 14 million tons, twice that ofJapan. Amid ongoing efforts to increase ethylene
production capacity, we expect to exceed 20
million tons in 2014. Nevertheless, with ethylene
demand expected to increase to above 30 million
tons annually, at least 10 million tons must
continually be imported. In light of such active
demand, our new China-based plant is anticipatedto operate at full capacity.
— Petrochemical Market Trends in JapanThe capacity utilization ratio of our Japan-based
ethylene cracker remained at 90% throughout theyear under review, which reflected relatively
favorable conditions in 2010. This ratio indicatesthat the impact on Japan from the operations of
new petrochemical plants in the Middle East andChina remains minimal due to the greater-thanexpected surges in demand in China that I
mentioned previously. In light of this, conditions
related to petrochemicals in across Asia arepositive.
Against this backdrop, specific movements toeliminate and consolidate crackers have alreadybegun to taper off. Nevertheless, there is anapparent trend towards consolidating generalpurpose chemical and plastic operations as well
as strengthening highly functional products thathighlight the competitive advantages of individualcompanies.
Consequently, although energetic demand in
China has fostered relatively favorable conditions,the impact of this major change persists. Coupledwith the effect of the recent disaster, Nagase is
striving to establish close ties with petrochemical
manufacturers as it accelerates initiatives to secure
petrochemical derivatives for its customers.
Note: Nagase’s business domains include electronic materials, pharmaceutical intermediates, biotechnology solutions and other fine chemicals
as well as plastics and raw materials for paints and cleaning agentsused in intermediate products referred to as petrochemical derivatives. Petrochemical derivatives are produced from ethylene, propylene and other basic products that are, in turn, made from the raw

Q_In fiscal 2011, Nagase anticipates net
sales of ¥660 billion, operating income of¥18 billion and net income of ¥12 billion.
Please share with us the basis of thesenumerical projections as well as the statusof your efforts to realize the basic strategy
to improve the quality of business andoperations.
The numerical targets for “CHANGE” 11
were formulated amid extremely uncertain
economic conditions following the onset of the
global recession, which was triggered by afinancial crisis in the United States. Despite these
difficulties, we achieved our operating incometarget of ¥15 billion a year ahead of schedule.
However, I acknowledge that efforts taken toachieve “CHANGE” 11 ’s basic strategy
remain insufficient despite the steady efforts
made by all the directors. For example, I believethat there is still room for improvement regarding
the speed of business execution compared with
our international competitors. Accordingly, we willtake steps to accelerate these functions in final
year of “CHANGE” 11.
For its part, the Polymer Global AccountDepartment (formerly the Advanced Polymers
Department), which handles plastics, will increasebusiness execution speed based on its high ratioof transactions with overseas manufacturers anddue to the transfer of its core functions to
Singapore.
Despite steady progress made to encourageinternal cooperation, there is still room for
improvement in essential areas. As a result, we
will hold discussions to formulate post“CHANGE” 11 initiatives that include developing organizational structures that promote agreater degree of dynamic collaboration.
Examining current economic conditions, therecent disaster has affected supplies of important
raw materials and core components, while
production lines for finished products will likely

take time to return to normal levels. Stagnation in
the Japanese economy has further exacerbatedthis severe operating environment. In spite ofthese difficulties, we expect to maintain an
operating income of ¥18 billion, which is nearly on
par with the previous fiscal year. To this end, we“

will maximize the Nagase Group’s competitive
advantages in areas that will significantly increasein demand once post-disaster recovery operations
gain momentum, including LED lighting, eco-cars,
next-generation energy systems and devices, andpharmaceuticals.

We aim to achieve ¥12 billion
in net income in fiscal 2011
by further accelerating theexecution of our businesses
and taking full advantageof the Nagase Group’s competitive edge.

”

Shareholder Returns

Q_Nagase has determined that the yearend cash dividend per share will increase ¥6
to ¥22. What were the reasons for thisimprovement?
Following a change in its income distribution policy, Nagase adheres to a basic policy of making
stable dividend payouts to shareholders by further
enhancing its earnings power and corporate structure. With due consideration given to the payout
ratio and the ratio of dividends to net assets on aconsolidated basis, we aim to keep raising our
per-share dividend levels. Based on this, the fiscal
year-end cash dividend stood at ¥13 per share,exceeding earlier forecasts by ¥4 (in combination
with interim cash dividends, annual cash dividends
per share totaled ¥22). For the fiscal year ending
March 31, 2012, Nagase plans to pay an annual
cash dividend of ¥24 per share, an increase of ¥2.
We hope that shareholders will view Nagase’s
efforts to be a “technology- and intelligenceoriented company that turns wisdom into business” from a medium- to long-term perspective
and continue to give us their understanding
and support.

Dividends
Dividends per share (left axis)
Dividend payout ratio (left axis)

DOE (right axis)(%)
2(%, ¥)
40

30

20

1

10

0

0
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

July 2011(estimated)

Hiroshi Nagase
President

Note: FY03 included a commemorative dividend of ¥1
FY06 included a commemorative dividend of ¥2

NAGASE & CO.,LTD. Annual Report 201111

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Nagase Group at a Glance* By business scale
which encompasses the semiconductor and visual display fields.

department is aggressively developing new businesses overseas, such as optical film

Polymer Products Department

and glass processing and the manufacture of LEDs and their associated assemblies.

Main Products and Services*

38.4%

Chemicals

42.5%
Net sales

Petrochemical products, raw materials for industrial oil solutions, surfactants and

The Polymer Products Department has been transforming its

Main Products and Services*surfactant raw materials, personal care products, plating chemicals, electronics

business into the development and marketing of unique

Materials for liquid crystal displays (LCDs) and organic light-emitting diodes

chemicals, fluorochemicals, raw materials for silicone and encapsulants, precision

products, anchored mainly by functional films and sheets and(OLEDs), electronic paper-related materials, optical film, processed glass products,

abrasive materials, hard disk-related materials and Nagase ChemteX Corp. products

plastic molding products. With the aim of integrating its

back lights, LED chip-related materials and products and their assembling andCustomer Segments*

trading and manufacturing activities, the department has established a process

mounting businesses

Organic synthesis, surfactant, semiconductor, solar cell industries andR&D base in the Shanghai region of China. At the same time the department is

Customer Segments*

HDD-related industries

supporting a structure that, in its own right, functionalizes film sheet, for example

Display, information and communication device, television, touch panel and LED industries

ome
Operating income

Colors & Imaging Department

sheet forming, surface treatment and secondary processing.
Main Products and Services*

Whether analog or digital, data that exists anywhere in the

23.1%

world functions as information only when it is made available topeople. Mainly involved in the handling of essential chemicals

and plastic molding productsthat are the functional materials that connect information andCustomer Segments*

people, the Colors & Imaging Department contributes to society

Plastics

7.6%

Functional films and sheet, copolyester plastics, surface defect detection machines

4.6%

Life Sciences

Electronics, toiletries, and functional films and sheet industries

in a wide range of fields. This department is working to move away from simply
Net sales

selling products and, in each of its business areas, toward building a network

Net sales

33.6%

backed by proprietary proposals that leverage the capabilities of the Nagase

Operating income

20.2%

Operating income

Application Workshop (NAW).
Main Products and Services*

Polymer Global Account Department

Dyes/additives, functional color pigments, functional dyes, digital print processing

29.7%

Electronics

materials, organic transparent conductive materials, dyestuffs, fiber processing

The Polymer Global Account Department offers plastics andNet sales

agentsplastic processed goods, related auxiliaries, equipment andOperating income

Customer Segments*

facilities mainly to the office automation (OA), electric andDye/pigment, functional film, thermal toner, printing and printing materials,

electronics and consumer electronics industries not only infiber processing industries

Japan, but also in China and ASEAN countries. The department promotes strategic
partnerships with other companies in the Nagase Group in order to focus on the

Performance Chemicals Department

creation of new, plastics-related businesses and business expansion that extends
over both domestic and overseas markets.

Fine Chemicals Department
The Fine Chemicals Department provides a broad range of
products and services related to healthcare, food and habitat,such as pharmaceuticals, biotechnology solutions, agriculturalchemicals and living environments, in the field of life sciences,

Electronic Chemicals Department

which forms one of the key strategic areas throughout the Company. Particularefforts are devoted to developing high-value-added products that leverage the

The Electronic Chemicals Department, which comprises sevenGroup’s comprehensive strengths in trading, R&D and manufacturing.

manufacturing companies in Japan and overseas, manufac-

Main Products and Services*tures and sells modified epoxy resins and high-grade chemi-

Pharmaceuticals (active pharmaceutical ingredients [APIs]), intermediates, raw

cals along with related supply equipment and manufacturing

materials, formulations, excipients), in vitro diagnostics (bulks, instruments & kits),

control systems to the semiconductor, liquid crystal, electronic component,

research products, medical equipment, agricultural chemicals (intermediates,

automotive and solar cell industries. With overseas operations in China, Taiwan,bulks, formulations, submaterials), household insecticides (bulks, formulations),

A parent department positioned in up-stream petrochemical

Main Products and Services*

products, core Nagase materials, the Performance Chemicals

Functional resins, general-purpose resins, auxiliaries, plastic products,

Department provides a broad range of goods and services toplastic-related equipment, devices and moldings

the global market, from general-purpose petrochemical

Customer Segments*

South Korea, Singapore, Malaysia, Germany and the United States, the department

animal health products, enzymes, fermentation products, household goods

products to high-value-added products. The department’s four mainstay business-

Office automation (OA) equipment, electronics and consumer electronics industries

is aggressively expanding with the aim of creating highly profitable businesses that(raw materials, products), functional food ingredients, health food materials,

integrate trading company and manufacturing capabilities. Also quick to tackle

food additives, nutritional supplements, feed, and feed additives

es are coating materials, urethane, plastic materials and filters, with each businessrecognized by the market as a leader in its field.

Automotive Solutions Department

Main Products and Services*

environmental issues, the department proactively works on solutions that conserve
resources and involve recycling.

Plastic materials, plastics and pigments, solvents, additives for paints and inks,

The Automotive Solutions Department is constructing a

Main Products and Services*urethane materials, plastic additives, flame retardants, polymer filters

uniform service structure in Japan and overseas capable of

Formulated epoxy resins and related products, chemicals for production ofCustomer Segments*

handling everything from sales of automotive materials,

semiconductors and liquid crystals, chemical management equipment for liquid

Paint/ink, resin, synthetic fiber, urethane foam and film industries

products and equipment to component design, the develop-

crystal preprocessing and bump molding services through nonelectrolytic plating

ment of prototypes and the production of moldings. The department also acts as

Customer Segments*a purchasing agent for its customers’ domestic and overseas facilities. In addition

Liquid crystal, semiconductor, electronic component, heavy electric, automotive,

to further global development focusing on emerging countries, the department

solar battery and other industries

Speciality Chemicals Department
Building total solutions businesses based on a broad range ofdownstream and upstream information, the Speciality

will concentrate on expanding new businesses related to eco-friendly vehicles,
including electric automobiles.

Customer Segments*

Pharmaceutical, in vitro diagnostic, household product, food/feed chemical andagricultural chemical industries

Beauty Care Products Department
In keeping with its business philosophy to provide safe,
high-quality products and services that enhance beauty insideand out, the Beauty Care Products Department manufacturesand sells cosmetics and health foods led by its rosemary

Electronic Materials Department

Chemicals Department supplies intermediates and materials

Main Products and Services*with applications in a range of areas—including industrial oil

Functional resins, general-purpose resins, lightweight components, battery cellsolutions, plating chemicals, personal care and consumer goods (cosmetics andmodules, rechargers, electronics components, auxiliaries, plastic-related equip-

other household toiletries), water processing agents, photoresist developer,

ment, devices and moldings

fluorochemicals and silicones. In addition, the department is engaged in a wide

Customer Segments*

paper and touch panels, as well as materials for LEDs and solar cells, both of whicharray of areas, supplying raw and processed materials for the electronics industry,

Automotive industry

are expected to be growth areas. In addition to a traditional trading function, theingredient, which is the result of state-of-the-art research conducted in Japan andoverseas. In addition, the department’s sales network is comprised of 40,000

The Electronic Materials Department leverages its domestic andpersonnel who offer advanced counseling and facial care services.

overseas network to handle sales of optical films and other

Main Products and Services*materials used in liquid crystal displays, materials for electronic

Cosmetics (including skin care counseling and facial care services) and health foods
Customer Segments*

General consumers

Note: On April 1, 2011, the Advanced Polymers Department was abolished and its business operations were merged into the Polymer Products Department and the newly established Polymer Global
Account Department. Because the “Others” segment is omitted, figures showing the composition of net sales in each business do not add up to 100%.

12NAGASE & CO.,LTD. Annual Report 2011

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Review of Operations

Performance Chemicals Department

Chemicals

Net sales

263.1
237.1
7.8

253.2
8.7

5.3

approaches, including investing in the strengthen-in South Korea and Taiwan.

ing of overseas businesses and upgrading of
infrastructure; the reinforcement of manufacturing

Kohei Satofocusing on developing bio raw materials for use infunctions; and the bolstering of development

Executive Officer;
GM, Performance Chemicals
Department

urethane and coating materials as we investigate

functions. In addition, we will further increase ourthe production of bio-based chemicals using theindustry presence with the aim of building uniform

Group’s unique technologies.

value chains—from raw material procurement to

Fiscal 2010 Strategies and Results

Operating income

in Fiscal 2011, we will promote dynamic businessforward with the establishment of cleaning facilities
Turning to environmental technologies, we are

Net sales / Operating income(¥ Billion)

and Indonesia. In the filter business, we are moving

As a result, the Performance Chemicals
Department recorded an increase in revenue andfollowing underlying strategies: the strengthening

earnings in fiscal 2010 owing to the gradual eco-

Finally, we will concentrate our efforts on build-of overseas businesses and upgrading of infra-

nomic recovery in Japan and an ongoing robust

ing businesses that contribute to society by fully

structure; the reinforcement of manufacturing

expansion of exports being led by Asia.

ascertaining the needs of and acting in concert

functions; and the bolstering of development
functions. In the coating material business, we areworking to expand overseas businesses centered
09/3

10/3

product manufacturing—by fostering ongoing

In fiscal 2010, we continued to promote thecooperation within the Group.

with our business partners.

Strategic Initiatives in Fiscal 2011
With “CHANGE” 11 coming to a conclusion

on global coating teams. Through such actions,

11/3

Nagase established contract production bases in
China for resins used in paint and moved forward
Note: The Company has applied “Accounting Standard for Disclosures about the Segments of an Enterprise and Related Information” from fiscal 2010.
Operating income numerical values for fiscal 2009 have been modified accordingly.

with plans to set up a coating laboratory in India.
In the Middle East, we are promoting the plastics

United States and Japan.

Colors & Imaging Department

alliances with strategic partners, and flexible

As a result, domestic performance increased

responses to environmental changes. In particular,slightly compared with the previous fiscal year due

through Nagase’s unique proposals to brandto favorable sales in the digital display industry.

owners, we will further strengthen our close

Overseas performance remained on track despite

relationships with current partners by promoting

Hiroshi Hanamoto

the impact of exchange rate fluctuations andmarket expansion and creation.

Executive Officer;
GM, Colors & Imaging Department

severe competition caused by stagnation in the

In overseas markets that are expected to grow,thermal toner and digital print processing

Nagase will focus on overseas procurement by

Fiscal 2010 Strategies and Results
Implementing “CHANGE” 11 involved thematerials industries.

setting the following objectives: establishing

following three objectives: creating a business

Strategic Initiatives in Fiscal 2011

initiatives; providing added value to the globally

additives business by upgrading infrastructure insuch areas as local logistics functions following the

We anticipate a major increase inlaunch of large-scale petrochemicals plants.

sales owing to a strong overseas

Closely monitoring emerging markets in the ure-

willingness to engage in capitalthane industry, we established a production base ininvestment.

Mexico, an addition to those already built in China

production bases with a focus on M&A and otherSpeciality Chemicals Department

production with leading companies, establishingincrease the synergistic effects of the Electronicmodel that builds on the Nagase Group’s competi-

In consideration of this department’s main businessexpanding thermal toner industry; and by further

joint ventures and developing value chains on aMedia Department acquired in fiscal 2010, whichtive advantages; promoting a business model inof handling functional materials for mature indus-

improving quality control functions that maintainglobal scale. In other businesses, we received highfocuses on the handling of inorganic materials;

which additives determine the principal materials;

tries in Japan, we will place a greater focus on

the trust of its partners.

acclaim for successfully augmenting the analysis

facilitate cooperation with other departments;and shifting to businesses Nagase can operate bydeveloping the following business models:functions of the Shanghai Techno Center.

integrate Nagase ChemteX’s manufacturing

increasing added value in the areas of manufactur-

expansion of business fields, the reinforcement of

Mitsuro Naba
Executive Officer;
GM, Speciality Chemicals Department

ing management and quality control. In fiscal 2010,
we made proposals to brand owners in the display,

As a result, the Speciality Chemicals Department

functions and technologies; and utilize the Group’s

experienced a rise in revenue and earnings in fiscal

diverse array of upstream through downstream

2010. This result was spurred on by robust

information. Furthermore, we will focus our energy

business equipment, and game console industries

Fiscal 2010 Strategies and Results

demand mainly in the LCD television, personal

on developing new products that combine inorganicthat have led directly to the creation of new busi-

Speciality Chemicals Department is successfully

computer and mobile phone markets in Japanand organic compounds; promote themes related

nesses; these are making steady progress. Having

acquiring new businesses and undertaking new

and abroad as well as the development of new

to the environment and energy under the keywords

development rooted in customer needs and based

themes for battery-related, environmental and“environment-friendly chemicals, petroleum-freeon market information. In particular, we areother businesses.

and natural products;” and engage in the creation

advanced the development of overseas products
aimed primarily at China, Nagase has received

Functional Masterbatch Achieves a
90% Share of the World Market

favorable evaluations from overseas users thanks
to the Company’s quality control program.

14

Rapid Recovery in the
Denafilter Businessexpanding development activities under theof unique technologies and products particularly for

Functional Masterbatch for polyester

keywords “electronics chemicals” and “theStrategic Initiatives in Fiscal 2011

Divesting itself from business operations related

films handled by the Chemicals

environment and energy.” Keeping pace with

Maintaining both marketing and production

to “Color Former”—a specialized dye for thermal

Department is used in LCD televisions,changes in the domestic petrochemical industry,functions, the Speciality Chemicals Department set

toner—the Nagase Group achieved a one third

solar batteries and reflective film.

we will build new business models by, for example,

a goal of continuous growth through the provision

share of the world chemicals market by acquiring

securing procurement agreements primarily withof high-value added chemicals. To promote

full ownership of its manufacturing affiliates in the

Chinese manufacturers, engaging in consignment

businesses that add ever greater value we will:

NAGASE & CO.,LTD. Annual Report 2011

nag̲2011本文(e)̲PDF.indd 14-15

the U.S. and European markets.

NAGASE & CO.,LTD. Annual Report 201115

11/09/02 16:51

fiscal year under review. In addition, we established

Automotive Solutions Department

Plastics

ture for our North American automotive business.

Net sales

Operating income

255.8
192.5

222.1
4.7

3.0

Strategic Initiatives in Fiscal 2011

In the electronics business, we focused on the

Amid the significant business opportunities

Kenji Asakura

development of new products by aggressively financ-expected in such areas as components for storage

Executive Officer;
GM, Automotive Solutions Department
and Nagoya Branch Officeing business ventures related to components. Having

batteries, rechargers and power modules, we will

first entered the battery module business in fiscal

concentrate on steadily implementing related

2009, we made steady progress in development andinvestment plans and building businesses respon-

Fiscal 2010 Strategies and Results

prototype testing while moving forward with oursive to new market needs. In our plastics-related

In the Automotive Solutions Department, thedecision to build a new plant to expand production.

business, we will focus our efforts on developing

Net sales / Operating income(¥ Billion)

manufacturers during the second half of fiscal 2010.

a subsidiary in Mexico to bolster the support struc-development of materials for eco-friendly vehicles

As a result, the Automotive Solutions Department

highly functional plastics as we provide customers

and the early launch of components businesses areexperienced a rise in revenues and earnings due tonot only with raw materials, but also high-value-

goals outlined in “CHANGE” 11 that must bea significant increase in sales to major components

added films and other products.

achieved. In fiscal 2010, the automotive industry

2.4

underwent a dramatic recovery spurred on byincreases in production in emerging countries, led
09/3

10/3

by China and India. In Japan, component sales

11/3

Electric Vehicles and Hybrid Electric Vehicles(HEV) Driving Change in the Automobile Society

were strong owing to increased shipments ofNote: The Company has applied “Accounting Standard for Disclosures about the Segments of an Enterprise and Related Information” from fiscal 2010.
Operating income numerical values for fiscal 2009 have been modified accordingly.

Polymer Global Account Department

our representative office in Hanoi, Vietnam to local

the volume of plastic sold overseas is now greater

subsidiary status from the beginning of 2010 tothan that in Japan. Against this backdrop, we are

improve our sales structure in this growth market.

actively taking steps to optimally integrate sales,

In terms of the department’s development anddevelopment and manufacturing functions on a

Setsunan Kasei Co., Ltd. and other affiliated plas-

raft of capabilities—related to the environment,

strengthening the sales structure of our bases in

new functional films and sheets as well as plastic

tics manufacturers.

Functional Masterbatch, super-engineering plastics

Japan, China and the ASEAN region. This initiative

During the fiscal year under review, we actively

and recycling—to Setsunan Kasei’s current

will be undertaken with a view to developing

promoted measures to facilitate the optimal inte-consignment compounding operations for plastic

decision-making functions that closely reflectgration of sales, development and manufacturing

manufacturers, allowing us to maximize themarket conditions. As a first step, the department’s

functions, as outlined in “CHANGE” 11.

technological support functions of the Company’s

core functions will be transferred to Singapore

In Japan, we revamped the department’s sales

networks and the Nagase Application Workshop

in order to manage its businesses in Japan,

structure, including the augmentation of manage-(NAW). This initiative will greatly assist us in

China and the ASEAN region from an overseas

ment resources in the areas of sales and adminis-

providing materials that meet customer needs.

tration. To this end, we transferred department

In the ASEAN region, the stable performance of

perspective.
We will work to maximize consolidated earnings

sales functions to Nagase Plastics Co., Ltd. By

Dainichiseika Color & Chemicals Mfg., Co., Ltd.

through the following measures: continuing tostrengthening the links between the department

and its joint venture company, Dainichi Color

direct sales functions in Japan toward domestic

and the Company’s overseas subsidiaries, weVietnam Co., Ltd., are contributing to Nagase’s

sales to global companies; expanding operating

consolidated results.

bases in China’s interior to tap into demand in that

services primarily in the office automation andAs a result of the above, the Polymer Global

country; and introducing management resources

electronics industries. At the same time, we added

Account Department recorded increases in revenue

rooted in our operations in the ASEAN region andand earnings in fiscal 2010.

Strategic Initiatives in Fiscal 2011
Japanese companies began venturing into thea joint venture composed of Taiwanese andoverseas market in earnest between 1990 andChinese businesses, in order to tap into demand in

2000. This trend was spurred on by greaternag̲2011本文(e)̲PDF.indd 16-17

India to the growth areas of India, Indonesia andVietnam.

branch of Shanghai Hua Chang Trading Co., Ltd.,NAGASE & CO.,LTD. Annual Report 2011

personnel in China and Southeast Asia during thethe ongoing design, development and release ofplastic sales strategies in Japan and Asia.

16

thanks to the on-schedule installation of equipment and facilities.

of the department’s business management by

October 2010. This relocation enabled us to add a

China’s interior. In the ASEAN region, we upgraded

Solutions Department took steps to increaseby promoting technological exchanges with

In fiscal 2011, we will continue the globalization

In China, we decided to establish the Chengdu

formed component plant operated by KN Platech America Corporation

ings and composite processing within the Group

Kasei Co., Ltd. to Izumi City, Osaka Prefecture inimportant new functions to assist in formulating

business conducted overseas, the Automotive

In fiscal 2011, we will keep our sights set firmly on

Executive Officer;
GM, Polymer Global Account Department,
CEO, ASEAN Region/India

broadened to our global customer base andWe have begun commercial production at our U.S.-based blow-

Strategic Initiatives in Fiscal 2011global scale.

Ichiro Wakabayashi

manufacturing functions, we relocated Setsunan

Fiscal 2010 Strategies and Results

hybrid vehicles. Accompanying a rise in the ratio of

infrastructure development in China. Consequently,

Polymer Products Department

molding products. We will also cooperate with

As focus markets, we will develop potential

Nagase ChemteX Corp. and other departments togrowth areas related to the environment andcontinue developing our global marketing capabili-energy (peripheral materials for LED lighting andties. By focusing on our technological development

battery chargers) and Life Sciences (materials for

Fiscal 2010 Strategies and Resultsbase in Shanghai, we will promote the accumula-

medical applications and cosmetics). Such initia-

In fiscal 2010, although worldwide standards weretion of technologies and technical information

tives will be undertaken in concert with our efforts

successfully established for applications of Sun

within the Group. At the same time, we will con-

to expand conventional electronics, toiletries andDelta Corporation’s SunMorfee V insulating sheet instruct a framework that will enable us to finalizefunctional films and sheets.

televisions and power supply devices, competition

the development of compounds, moldings, coat-

Kenji Nagafusa
Executive Officer;
GM, Polymer Products Department

increased in severity following the release of similar
products. Thanks to the introduction of new functions the market share of Nagase’s Scantec® filmsheet surface-defect inspection system increased

SunMorfeeTM T is applied between the base plate and aluminum plate

Expanding Applications for
SunMorfee T Primarily in LED Lighting

in spite of somewhat subdued market conditions.

SunMorfeeTM T

Aluminum base plate

Cooling fan
ChassisLens, cap, seal

Specializing in development and sales throughFollowing SunMorfee V—the eco-friendly flame

the selection and concentration of functional film

retardant polycarbonate insulating sheet (film) thatsheets, we are close to completing original

boasts the world’s highest flame retardant properties

products that use Eastman Chemical Company

while containing no brominated or phosphorus flame

copolyester as a raw material.

retardant a gents—a pplica tions of silicon-free,

As a result, Polymer Products Department
performance in fiscal 2010 did not meet projec-

PCB(circuit board)

Punch out

LED package

Light
distribution lensRoll sheet

heat-conducting SunMorfee T sheets are expanding
mainly in the field of LED lighting.

Slittions due to fiercer competition.

NAGASE & CO.,LTD. Annual Report 201117

11/09/02 16:51

Electronics

Life Sciences

Net sales / Operating income(¥ Billion)

Net sales

Net sales / Operating income

Operating income(¥ Billion)

Net sales

58.9
135.7
117.5

133.6
6.1

Operating income

55.5
1.5

50.2

1.1
3.0

09/3

0.9

3.4

10/3

11/3

Note: The Company has applied “Accounting Standard for Disclosures about the Segments of an Enterprise and Related Information” from fiscal 2010.
Operating income numerical values for fiscal 2009 have been modified accordingly.

Electronic Chemicals Department

Tomitaka Ito
Executive Officer;
GM, Electronic Chemicals Department

sheet and liquid encap-

Moreover, our chemicals business has steadily

sulation materials overincreased output at its production plant located inmany years, applying

Sharp Corporation’s “Green Front Sakai” complex.

10/3

11/3

Note: The Company has applied “Accounting Standard for Disclosures about the Segments of an Enterprise and Related Information” from fiscal 2010.
Operating income numerical values for fiscal 2009 have been modified accordingly.

commercialization-related themes through theFine Chemicals Department

establishment of a Bio Solution Team (BST) to

Launching Next-Generation
Nucleic Acid Drugs

develop businesses using biotechnologies.

We began developing joint busi-

them to a wide array of

As a result, the Electronic Chemicals Department

Despite a lack of major changes in core productness operations with TAGCYX Biotechnologies,

components for HEVs

recorded improvements in both revenue andsales, the Fine Chemicals Department recorded aa biotechnology venture company that possesses

Mitsuru Kanno

decline in revenue and earnings caused primarily

unique nucleic acid stabilization and artificial base

GM,
Fine Chemicals Department

by delayed sales of developed items, the withdraw-

and electric vehicles as

Liquid resin materials forsemiconductor encapsulation

earnings during fiscal 2010.

well as smartphones

pair technologies. By linking our technologies andcommercializing our manufacturing operations, weand other mobile devices. In the environmental

Strategic Initiatives in Fiscal 2011

Fiscal 2010 Strategies and Results

business, we are using formulated epoxy resins in

In fiscal 2011, we will restructure our organization

Fiscal 2010 Strategies and Results

The Electronic Chemicals Department set the goal

fields related to wind and solar cell power generation.

from one currently categorized by products to one

In fiscal 2010, we established a pharmaceuticalof establishing a new business model as a trading

In particular, in response to rising sales of liquidorganized along industry lines; focus closely on

administration office to further reinforce our prod-

Strategic Initiatives in Fiscal 2011

bolstering overseas production bases and engaging

company that has maker’s capabilities, as outlined

resin materials for semiconductor encapsulation tosemiconductor post-processing operations; anduct testing and pharmaceutical quality evaluation

In the pharmaceutical business, we will establish

in capital investment. In the biotechnology busi-

in the medium-term management plan,

Europe and the ASEAN region as well as Taiwan andconsolidate Nagase’s key elemental epoxy,structure; this move has achieved tangible results.

strategy teams to promote cooperation between

ness, we will refine commercialization themes“CHANGE” 11. The Nagase Group manufac-

other countries, we will further promote the global-

Photosensitive material and junction technologies

In addition, we invested in TAGCYX Biotechnologies,

Group companies with the aim of developing areas

centered on the BST (which was established inturing company Nagase ChemteX Corp. and theization of the epoxy business, thus cultivating a

in three-dimensional mounting, for which further

which boasts unique technologies related to nucleic

that place Nagase apart from its competitors. The

2010), monitor operations at Nagase ChemteX

modified epoxy resin business have developed

major pillar of the Electronic Chemicals Department.

innovations are expected.

acid drugs used in place of low-molecular medi-

department will take the initiative within the Group

Corp.’s new enzyme production plant and focus oncine. In the biotechnology business, we selectedin such actions as introducing new technology,

the marketing of new products.

sales of recently released products; conducting test

expected to remain sluggish, we will implement

marketing using mail order sales channels; andmeasures focusing on expanding the door-to-doorcommencing retail sales in Dalian, China.

sales business in Japan that include: releasing new

In the area of “the environment and energy” weElectronic Materials Department

Masatoshi Kamada
GM,Electronic Materials Department

al from unprofitable businesses and the impact ofare supporting the creation of new, groundbreak-exchange rate fluctuations.

ing medicines by pharmaceutical manufacturers.

semiconductor industries.

promoted the expansion of LED-related material

Beauty Care Products Department

sales and the mounting/assembly businesses.

Strategic Initiatives in Fiscal 2011

At the same time, we focused on the sale of crystal-In fiscal 2011, we will make every effort to prompt-

type solar battery materials and the establishment

ly anticipate changes in the market structure andAs a result, the Beauty Care Products Department

products; continuing efforts to expand advertisingof the processing business.

environment in our core displays and touch panel

experienced a rise in revenue thanks to the impact

and improve brand image; accelerating distributor

Takaaki Hiraiof new product releases. In contrast, earnings fell

cultivation; and tapping into key regions using

Executive Officer;
GM, Beauty Care Products Department

following an increase in business investment.

headquarters-led development teams. Moreover,As a result of the aforementioned initiatives, thebusinesses. Based on this, we will strengthen ourElectronic Materials Department experienced

unique solution services, including LED backlight

we will promote ongoing market development in

Fiscal 2010 Strategies and Results

decreases in revenue and earnings due to changes

production and glass processing capabilities.

In fiscal 2010, the Electronic Materials Department

in materials that took place in the HDD-related

Furthermore, we will promote the strengthening of

Fiscal 2010 Strategies and Results

Strategic Initiatives in Fiscal 2011

redoubled its domestic and overseas sales activi-

business. This result occurred despite a recovery

LED-related businesses to contribute to the global

In fiscal 2010, the cosmetics and health food mar-

In fiscal 2011, although consumer spending isties in the display industry for optical films, touchin its main business areas, the display andenvironment and society.

ket conditions remained severe with no improve-

panel and LCD backlight modules while enhancing

ment seen in sluggish consumer spending.

the production and processing business.

Consequently, the Beauty Care Products Department

In the semiconductor wafer and HDD-related
fields, we focused on providing products andMajor Growth of LED Backlights for Big Screen TVs
Touch panel markets along with processes for producing slim-

services demanded by customers while working tomer panels are continuing to expand in response to increasing

develop new businesses amid market expansion in

global demand for smartphones, touch panel terminals andthe highly functional mobile device market. We also

other related devices.

promoted the development of new businesses.

18

09/3

NAGASE & CO.,LTD. Annual Report 2011

nag̲2011本文(e)̲PDF.indd 18-19

devised business strategies to counter these
difficult circumstances. These strategies included:
accelerating the cultivation of distributors throughsales system improvements, which were begun in
April 2011; developing new advertising and increasing awareness of its updated brand image; boosting

markets showing noticeable growth in China.

Nagase Releases Inner Act, a New Health Food Productthat Supports Modern People’s Health and Beauty
Inner Act is blended with seaweed polyphenols, including
Ecklonia kurome, and the notable soybean-based ingredient, phospholipid (PIPS), which is produced utilizing
Nagase’s proprietary enzyme technologies.

왎 Self Medics Inner Act
15.6g (30 packets, each containing two 260mg pills): ¥8,000
Main ingredients include seaweed polyphenols, PIPS,
rosemary extract and rosehip extract

NAGASE & CO.,LTD. Annual Report 201119

11/09/02 16:51

Major Strategies by Region

One area, one g
goal
oa and original businesscreated byy kn
knowledge
nowle
o
ow
and enthusiasm

Greater China Business

Osamu Morishita
Executive Officer;
CEO, China

Nagase’s Greater China Business consists of 9 sales companies, 11 branches and offices, 11 manufacturing companies and 4 service/management companies located in China, Taiwan and Hong Kong. With
approximately 2,100 Group employees forming the foundation of these operations, business expansion
is centered on chemicals, life sciences, plastics, automobiles and electronics. Under the theme ofmaking deeper inroads into the growing Chinese market, we are undertaking market development that
extends the provision of quality information, service and distribution networks from coastal China to
the country’s midwestern and northeastern regions.

ASEAN & the Middle East Business

Ichiro Wakabayashi
Executive Officer;
CEO, ASEAN Region/India;
GM, Polymer Global
Account Department

ChangeChannge individualindivn
du mind, change business quality

Building upon the ASEAN business’ existing framework, we are carrying out regional business strategies
through eight sales companies, seven branches and offices, and seven manufacturing companies,
which encompass the Middle East, India and the nine countries that comprise Oceania. In particular,
we have established key bases in Indonesia, Vietnam and India, where ongoing development is expected.
Against the backdrop of this broad Group network platform and the rapidly expanding ASEAN Free
Trade Agreement, we will develop locally directed businesses in concert with upgrades to ouroverall operations.

Fiscal 2010 Strategies and Results

Strategies in Fiscal 2011

Fiscal 2010 Strategies and Results

solar battery-related businesses. We will also focus on bringing to fruition

In fiscal 2010, we experienced business growth in internal Chinese markets

Under the slogan of “One area, one goal and original business created by

In fiscal 2010, we strengthened our manufacturing functions and risk man-businesses related to wind power generation, recycling and palm oil.

as well as breakthroughs in our local manufacturing facilities and each service

knowledge and enthusiasm,” we are aiming to expand the dimensions of ouragement while promoting globalization and the development of businesses

business. Such positive results were spurred on by a recovery from theoriginal business we introduced into China by collaborating with contacts inrelated to the environment and energy.

Lehman Shock and by China having displaced Japan as the world’s second

China, Hong Kong, Taiwan, Japan and other areas. Focusing on the ChineseWith regard to the strengthening of our manufacturing functions, welargest economy. As a result, net sales rose 10.1%* year on year to ¥159.48

market, with its high growth potential, we will concentrate on the coreapplied the expertise of Nagase FineChem Singapore (Pte) Ltd. (NFCS), whichbillion. Moreover, we focused on expanding the area covered by our businesssegments—automotive components, electronics and fine chemicals—as wellis unrivaled in the ASEAN region owing to its combined general electronic

operations by establishing new bases in Nanjing, Tsingtao and Chongqing.

as such environment-related fields as solar power and LED lighting.

chemicals manufacturing and recycling facilities. Consequently, we are

Strategies in Fiscal 2011

In fiscal 2010, the ASEAN & the Middle East Business recorded a 13.9%
year-on-year rise in net sales to ¥77.14 billion. Although they remained below
pre-recession levels, consistently high economic growth rates in Asia were amajor factor in this result.

Consequently, our share of domestic sales in China, Taiwan and Hong Kong

To further accelerate the expansion of our business structure from that ofbranching out from the electronic chemicals industry and entering the phar-

In fiscal 2011, we will focus on realizing businesses derived from themes

exceeded 40% in fiscal 2010. Turning to core business development, we built

an agency to one providing multiple services with manufacturing capabilities,

maceutical and semiconductor industries. At the same time, we will expand

we developed in fiscal 2009 and fiscal 2010, the first two years ofa sales structure for solar cell-related components, focused on life sciences

we will proactively seek possibilities for new investments in promising areas,business themes focused on the environment- and energy-related businesses.

“CHANGE” 11. Specifically, we will move ahead with high-value-added

businesses, invested in facilities to produce synthetic chemicals on consign-

while leveraging the capabilities of Group manufacturing companies. In addi-

In Malaysia, we commenced and expect to ramp up operations at our dry film

businesses related to solar batteries and wind power generation in the “envi-

ment and drew on our analytical capabilities to develop new suppliers.

tion, we will promote the chemicals, electronics/automotive materials and life

processing plant. We expanded the facilities at Dainichi Color Vietnam Co.,ronment and energy” area, concentrating primarily on NFCS’s recycling opera-

sciences businesses to make significant progress in developing ties with theLtd. our Vietnam-based joint venture that manufactures plastic compounds,

tions and Nagase ChemteX products.

Japanese market and deepening our presence in local Chinese markets.

where performance is steadily increasing. In India, we invested in a local man-

As part of our regional strategies, we will examine the possibility of

One of the key roles of Nagase’s overseas subsidiaries is to follow up on
business transfers as Japanese companies relocate their production activities
overseas. We also focused on the expansion of the so-called “local specs inWith a view to augmenting standardized operations and administration

ufacturing intermediary, ZCL Chemicals Ltd., with the aim of expanding phar-establishing businesses in such emerging markets as Myanmar and Cambodia

business,” the carrying out of local business operations at local subsidiaries.

between Nagase’s headquarters and local subsidiaries, we have newly

maceutical- and agricultural chemical-related businesses. With the goal ofas well as in Africa to complement our efforts undertaken as a matter ofAt the same time, we prioritized direct sales of products to businesses based

established Nagase Business Management and Planning (Shanghai) Co., Ltd.,

expanding high-value-added businesses that highlight Nagase’s strengths,

course to foster business opportunities in Australia and New Zealand.

in China, Taiwan and Hong Kong through our own local businesses. As thethe lynchpin of our efforts to cultivate executive officer candidates among

we established a paint and coating laboratory while providing comprehensive

Moreover, executive officers will be transferred from Tokyo to Singapore in

driving force behind these activities, we are deepening our relationship withlocal staff, to strengthen integrated risk management and IT infrastructure

support in the areas of paint compound testing, analysis and evaluation.

order to implement global business strategies involving Nagase’s new plastics

leading companies in this market (including makers of electronics, chemicals

functions, and to support the expansion of our businesses in China.

In our efforts to strengthen risk management, we investigated and upgrad-and plastic-related products. Through these initiatives, we will accelerate theand EMS) owing primarily to the efforts of our local staff, under a policy ofed each region’s business continuity plan (BCP) following political unrest intransformation of the ASEAN & the Middle East Business into a global

promoting diversity. Consequently, we have made noticeable progress in ourThailand. Taking advantage of experience gained during the worldwide

account- and global market-oriented business.

efforts to build connections with businesses engaged in high-performancerecession, we worked to reduce long-term inventories and holding claims.

materials and fine chemicals as well as those related to energy (power

In anticipation of further business globalization, we began developing a core

generation, power saving, transmission and storage sectors).

unified, Asia-wide management system that includes Greater China Business.

*Net sales in the Greater China Business include a portion of those for South Korea.

Greater China Operational Management System

With the system scheduled to be introduced in 2013, we are taking steps tostandardize management operations and, in turn, augment compliance.

Headquarters
Planned Operation of a New Value-Added Synthetic
Chemical Trustee Company
Greater China
In addition to providing high-value services that include assisting in the

before shipping, we plan to commence operations of a new, value-added
synthetic chemical trustee company. Through this new company, we aretaking steps to upgrade a structure that supplies, to Japanese standards,
small lots of high-quality, highly functional chemical raw materials andintermediates that are difficult to procure locally.

20

NAGASE & CO.,LTD. Annual Report 2011

nag̲2011本文(e)̲PDF.indd 20-21(center of photograph)
We are taking on new chal-

expanding into new markets. Accordingly, we are strengthening our ability tolenges by creating business-

2. Reinforce corporate governancemeet customer needs and expand our business operations in this market,

es in developed markets

3. Promote regional business strategies

drawing on the new branch’s capabilities that will enable us to undertake

rather than following the overseas market penetration model

inventory sales in Australia.

traditionally favored by Japanese companies. By maximizing Nagase’s

1. Build an operation/administration system

Nagase Business
Management and Planning

Local
subsidiary

redoubling our credit and recall management in light of the recent politicalbranch office of Nagase Singapore (Pte) Ltd. in Australia with a view to

CEO

Local
subsidiary

Sales Base Establishedin Melbourne, Australia

instability that has gripped this region. In addition, we have established a

supply of raw materials to Japanese manufacturers, engaging in chemical
raw material import and export, evaluation and analysis, and property testing

Turning to our efforts to promote globalization, our businesses in the
Middle East are growing, especially for chemicals. However, we are

Local
subsidiary

Designed to maximize the potential of our involvement in the environment
and energy field, we are steadily refining themes particularly for developing

strengths and bolstering life sciences businesses, we are developing
the Oceania market for chemicals, plastics and electronics.

NAGASE & CO.,LTD. Annual Report 201121

11/09/02 16:52

Major Production/R&D Functions

Nagase ChemteX Corp. occupies the central role in Group manu-

Nagase ChemteX

facturing. Leveraging our long-accumulated, proprietary technologies of synthesis, compounding, biotechnology and evaluation,
we have developed a variety of products and have become aunique chemical maker with a high market share of a number ofIn fiscal 2010, net sales rose 18% year on year to ¥30.86 billion, while operating income increased 19% to ¥3.82 billion. Sales in the life sciences busi-

In the electronics field, we proactively engaged in such areas as opto-

ness remained on par with the previous fiscal year, but growth in sales ofelectronics materials, organic/inorganic hybrid materials, nanotechnology

products for the electronics industry, such as those for flat-panel displays

materials, conductive materials and environmentally conscious plastics.

(FPDs) as well as smartphones and other mobile devices, resulted in substan-Particularly in terms of nanotechnology materials, we created technology thattially increased revenue. Significant gains on the earnings front were due tomaintains nano particles at a high level before dispersal. Nano particle disper-

on a relationship of trust with customers. In the environmental

particularly favorable sales of high-value-added products, chiefly for electronic

sal elements made with this technology have a wide array of applications andfield in particular, we are expanding the commercialization of, formaterials.

garner high ratings. When selecting development themes, we utilize Nagase’s

have achieved new product development capabilities that correspond with user needs and high technological strength to meetdemand for the small-quantity production of diversified products.
By enhancing our manufacturing capabilities, we develop andoffer high-performance, high-value-added products to the elec-

Mitsukuni Mori

In the life sciences field, we promoted the development of pharmaceuticalintermediates and new enzymes in collaboration with the Nagase R&D Center.

items. Deepening and integrating these core technologies, weNagase ChemteX
President

within divisions as well as an R&D Division working companywide.

Fiscal 2010 Performancetronics, life sciences, environment and automotive fields based

sales departments to assess market needs, taking advantage of synergies by

example, chemical recycling and formulated epoxy resins. In

coordinating R&D with trading company functions.

addition, we are playing a leading role as a Group manufacturer

Net Sales/ Operating Income

in terms of safety and hygiene, environment-oriented responses

Net Sales
Operating Income(¥ Billions )30.8

and legal administration.

Globally Expanding
Nagase Group

27.3
25.0
2.8

26.1
23.4

3.0

3.8

3.2

Business Overview of Fiscal 2010
 Electronics & Structural Materials
The Electronics & Structural Materials business carries out product develop-

0.9

ment to manufacture a wide variety of products based on its advanced epoxy
formulation technology. In the electronics business, demand for epoxy sheet

07/3

Nagase & Co., Ltd.

R&D

Design Testing

09/3

10/3

11/3

Quality Control
AnalysisElectronics
Formulated Epoxy Resins & Photolithography

for mobile phones is growing, and we are making progress on commercializing new packages for our liquid semiconductor encapsulant. In the environ-

NagaseR&D
Centermental energy field, we have acquired new business by promoting theNagase ChemteX
Production
Equipment
Manufacturing

08/3

Japan
Proactive Allianceswith Industry,
Academia
and Government Production Structure

reduced weight, durability and recyclability of our products for all applica-

We bolstered the production structure of the Harima Plant, which produces

tions—such as solar batteries, wind power generators, smart grid heavy elec-

electronics-related materials, thanks to extremely favorable sales for materials

tric machinery, automobile fiber reinforced plastic (FRP) parts, hybrid cars andused in LCDs and smartphones. In addition, we expanded production facilities

electronic paper. Our adhesive for solar batteries has entered full-scale pro-for organic conductive materials, revamped epichlorohydrin derivative produc-

duction and we have begun deliveries of resins for use in the rotors of windtion equipment and upgraded manufacturing operations of formulated epoxy

power generators. Furthermore, having received recognition from a major

resins. At the Fukuchiyama Plant, which produces items related to life scienc-

European customer in the heavy electric field, we have commenced the global

es, we worked to maintain stable production levels and completed an overhaul

deployment of our heavy electric machinery materials.

of our existing product lines. Moreover, activities designed to encourage energy reduction, safety and hygiene at all our offices produced results. Finally, we
commenced a five-year plan that establishes a grand design for rebuilding

Performance
Chemicals

Bio/Fine Chemicals

and expanding facilities and structures atthe Harima and Fukuchiyama plants.

Environmental Energy Field in Formulated Epoxy Resins

Overseas, we augmented our formulated epoxy resin manufacturing facilities at
Solar
Batteries

Nagase ChemteX (Wuxi) Corp. in China

Formulated Epoxy Resins

and began producing chemicals used in

High Adhesion, Insulationand Heat ResistanceWind Power
Generationelectronics.
HybridAutomobiles
Electric
Automobiles

 R&D Structure
Nagase ChemteX’s R&D structure, which
employs a total of 140 staff members,
comprises product development teams

22

NAGASE & CO.,LTD. Annual Report 2011

nag̲2011本文(e)̲PDF.indd 22-23

Image of the new formulated epoxy
resin production plant

Newly Developed
Products
Smart Grid
Automobile
Weight Reduction
Thermoplastic
Epoxy Resin

NAGASE & CO.,LTD. Annual Report 201123

11/09/02 16:52

Nagase R&D Center

The mission of the Nagase R&D Center is to develop a technology
platform that backs up the Nagase Group’s future business andto act as a driving force in maximizing business performance Electronics Chemicals

efforts to generate new applications for active pharmaceutical ingredients andrelated to the life sciences. The Center will continue to energeti-

The Electronics Chemicals business develops a broad array of photolithogra-intermediates enabled us to increase the number of contract production items

cally offer and provide the market with technological solutions.

phy chemicals for the semiconductor and liquid crystal industries. Specifically,and promote the development of unnatural amino acids. In addition, we

we are working to acquire a significant share of the stripping agent and devel-obtained FDA certification at the Fukuchiyama Plant.

oper markets. In fiscal 2010, we recorded robust sales for products used in
LCD televisions and smartphones. Our chemicals plant located in Sharp’s“Green Front Sakai,” acquired ISO14000 and OHSAS certification. At the sametime, we established people- and environment-friendly systems at this facility

Strategic Initiatives in Fiscal 2011

and increased production under a structure that maintains safe, stable opera-

Under “CHANGE” 11, the medium-term management plan that started

tions. In the field of photosensitive agents, we achieved global expansion within fiscal 2009, we will further reinforce our management platforms in keeping

businesses related to photoresist developers used in laser direct patterningwith each group’s basic policies.

masks. In terms of our development activities, we constructed a new evalua-

We are aggressively undertaking measures with the aim of maintaining

tion laboratory in partnershipsustainable growth. Regarding our R&D activities, we are striving to build awith the French company

new management structure by strengthening links with other companies andAlchimer, which possesses rev-

universities. We are also promoting global business expansion by effectively

olutionary TSV three-dimension-utilizing the Nagase Group’s overseas network and wealth of information.

Technological ResultsCore Technologies and Main Research Themesat the Nagase R&D Center
1. Process development technologies
1 Develop production methods for unnatural amino acids by utilizing
Maruoka Catalyst™ (asymmetric phase-transfer catalyst)
2 Develop functional peptides utilizing chiral compounding technologies

2. Biotechnology (microorganisms, enzymes)
1 Identify new enzymes through a ready-to-use microorganism andgenome libraryal mounting technology. ThroughBy employing capital investment in an enterprising way both in Japan andthis initiative, we completed ouroverseas, we will make every effort to consolidate our production foundation

3 Produce substances by utilizing enzymatic reaction technologies

development structure.

as a company that focuses on safe business operations, production technolo-

4 Develop various chemicals by utilizing genetically modified microbes

gy and quality assurance. We will fulfill our central role in the Nagase Group’s
Electronics evaluation facilities

 Functional Chemicals

1 Establishment of functional amino acid production method
2 Cultivation of actinomycete high-expression technology using a newly
discovered strength promoter
3 Acquisition of bioinformatics technology
4 Development of dermal melatonin receptor manifestation accelerators

2 Achieve highly efficient protein production by utilizing genetic engineeringIntellectual Property Administration and Usage
To administer and use intellectual property from R&D through activities, theNagase R&D Center strategically engages in the acquisition of intellectual
property rights for research results jointly with the Intellectual Property Office
as well as the establishment of new companies based on projects undertaken
by business departments and affiliated companies.

3. Natural materials development and application technologies

R&D and manufacturing functions.
In other R&D activities, we are meeting a wide array of needs by leveraging

We aggressively developed and increased sales for products in the electronics

numerous elemental technologies that form the basis of our core technolo-

field while developing new applications for special acrylic ester copolymer,

gies, strengthening our ability to develop unique technologies and creating

high-functional fluorene derivatives, denatron electroconductive polymer andnew businesses and products. To achieve this aim, we have integrated theliquid crystal raw materials, all of which sold steadily. We also released low-

Harima Plant’s development capabilities within the Functional Material

chlorinated, high-purity epoxy products and undertook the global expansion of

Development Department. Finally, we will engage in flexible and rapid devel-

the epichlorohydrin derivatives business in the tire cord market. Owing to theopment activities by reinforcing our partnerships with other companies andsuccess of our marketing activities in Europe and Asia, we have expanded ouruniversities.

1 Identify and evaluate new ingredients for health foods and cosmetics

During Fiscal 2010

Cumulative Total (as of March 31, 2011)

In Japan Overseas (2)In Japan Overseas

2 Develop formulation methods for cosmetics and health foods

Patent rights established (1)

16

0

802

391

4. Drug discovery support technologies

Patent rights established (1)

10

9

172

183

1 Develop nucleic acid-related technology in cooperation with TagCyx
Biotechnologies(1) The number of patents is in the name of the Nagase R&D Center. Licenses and otherintellectual property rights are not included.
(2) The above patents include applications for international patents.

2 Develop applications for adhesamine derivatives in the field of
regenerative medicine
3 Develop reagent for receptors in humans in the diagnostic andevaluation fields

Strategic Initiatives in Fiscal 2011
On the product development front, the Nagase R&D Center is making abusiness operations.

5. Analysis and evaluation technologies

significant contribution to related departments as well as to related maker Bio/Fine Chemicals

1 Analyze imported active pharmaceutical ingredients according to theJapanese Pharmacopeia in compliance with GMP standards andestablish specifications

medium-term management plan.

In the enzyme business, we commenced sales and expanded business in new

Nagase ChemteX, helping to realize the goals of the “CHANGE” 11
In fiscal 2011, we will place the top priority on the launch of several new
enzyme products and build connections for the natural amino acid contract

enzymes to meet customer needs, thanks to our actinomycete high-expres-production business. In technological development, we will leverage microor-sion technology. We also expanded our lineup of phospholipid products, which
utilize our proprietary phospholipid converting enzyme, and made progress inAchievements in Fiscal 2010

ganism and biotechnology-related technologies, which have been cultivated forthe market development of applications for health foods and cosmetics. Our

Product Development

70 years, to further explore their diverse use in the life sciences, environment

1 Expansion of the pharmaceutical intermediate contract production businessbased on unnatural amino acid technology
2 Launch of a new, actinomycete-derived enzyme (glucanase)
3 Launch of a health food Inner Act and the cosmetic Repair Rhythm Mask

and energy fields. Simultaneously, we will take the initiative in creating new
businesses with our proprietary actinomycete technology. Furthermore, withthe aim of accelerating R&D activities, we are creating a strong tie-up with
Kobe University and other outside institutions to bring about open innovation.

Actinomycete

24

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NAGASE & CO.,LTD. Annual Report 201125

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Nagase Application Workshop

The Nagase Application Workshop (NAW) facility is where, jointly

CSR Managementwith customers, we engage in activities that range from function
and application development of raw materials related to plastics,

Management Philosophy

coating materials and fiber processing to the formulation development of finished products that use such raw materials. NAW wasborn of necessity in the course of adding R&D, manufacturing andprocessing functions to our conventional base as a trading compa-“Maintain Good and Fair Business Practices”

ny. Accordingly, NAW is an important tool for advancing a switchfrom our previous sales model that focused on materials exploration to one that is driven by application proposals and joint development. In offering such technological support, NAW is providing

The Nagase Group is a member of world society. As such, it is our duty to maintain good and fairbusiness practices and, through continued growth and development, provide society with thegoods and services it needs while improving the welfare of our employees.

unparalleled functions that only Nagase is capable of providing.

“The Nagase Way” Action Principles
Materials
manufacturers

1. Always be customer-oriented.

Customers

Process companies

NAW

Evaluate the functions of raw materials
and processing technology
Marketing that includes application development

1. Plastics
2. Coating materials
3. Fiber processing

Support for local
production overseas
Product development
for unique brands

2. Always be a creative challenger.

4. Always think globally and act locally.

Automobiles
Appliances, officeequipment, mobile phones
Amusement
Housing
Apparel, sporting goods
Cosmetics, food products,
beverages

3. Always use the power of the Nagase Group.

5. Always think systematically and act speedily.

Organization (as of April 1, 2011)

Board of Auditors/Auditors

Shareholders’ Meeting

This mechanism is made uniquely possible by Nagase

Risk Management &Compliance Committee

Nagase R&D Center

Internal Control Committee

Nagase Application Workshop

Security Trade Control Committee

Business Administrative Office

Item Compliance Committee

Colors & Imaging Dept.

Board of Directors
Principal Functions

Results from Solutions Proposed

1. Plastics

Speciality Chemicals Dept.
Fiscal 2010
Sales Results

1. Plastics
Formula design function carried out by expert
technicians, test production of compounds
centered on a twin-screw extruder, properties
assessed using all types of assessment equipment(Equipment)

President• Development of electrically conductive plastics,
primarily carbon nanotube• Development of PC plastic formulas for LED lighting• Development of automotive polypropylene materials, etc• Developed green plastic, increased recycled plastic
capabilities¥150
Million

Performance Chemicals Dept.
Corporate Strategy Office

Fine Chemicals Dept.

Corporate Planning OfficeBeauty Care Products Dept.

Intellectual Property Office

Polymer Global Account Dept.

• Twin-screw extruders (15mm long/D=45 and 26mm/D=64)• Single-screw extruder (20mm) / Injection molding machines(80t and 110t)

2. Coating Materials

Compliance Div.

Polymer Products Dept.

• Henschel mixers (small, medium), etc.

• Development of coating materials for thermal paper

Human Resources &General Affairs Div.

Automotive Solutions Dept.

• Acquisition of new export trade rights for coating
raw materials• Began newly importing coatings, etc.

¥100
Million

2. Coating Materials
3. Fiber Processing
Coating and ink composition design function
carried out by expert technicians, test productionof coatings and inks using all types of assessment
equipment, properties assessed using all types ofassessment equipment• Technology development for the digital printing sector• Development of own products for new synthetic fibers• Development of automotive interior dyes
• Supported overseas production by apparel makers¥80
MillionFinance Div.

Electronic Chemicals Dept.

Accounting Div.

Electronic Materials Dept.

Legal & Credit Div.

Environment & Energy OfficeOsaka Administrative Div.

Energy Device Office

Audit Office(Equipment)

Nagoya Branch Office• Two painting booths

Nagase ChemteX Corp.

• Disperser (paint conditioner, bead mill)• UV curing system

3. Fiber Processing
Dye composition design suited to various fiber
materials carried out by expert technicians,
dyeing testing carried out by machine, properties
assessed using all types of assessment equipment(Equipment)• Minicolor dyeing machine, shaking-type dyeing machine,
printing screens

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Future Priority Areas and Project Themes

Priority Areas

Project Theme Examples• Development of eco-friendly
materials (plastics sector)

Recycling, biomaterials• Development of eco-friendly
materials (coatings sector)

Reduced use of oil• Development of a next-generation
dyeing system

Digital printing• Development of high-performanceplastics in niche sectors

High thermal conductivity, heatrelease, electrical conductivity• Color design marketing

New decoration technologies

Basic Concept of CSR
The Nagase Group is a member of society. As such, it is our duty to maintain good and fair business practices and,through continued growth and development, provide society with the goods and services needed while improving
the welfare of our employees. Nagase concentrates not only on business growth but also on CSR-oriented operations with active contributions to society in the areas of environmental preservation, responsibilities as a good
corporate citizen and development of scientific technology.
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Directors, Corporate Auditors and Executive Officers

Corporate Governance(As of July 1, 2011)

Director
Hiroshi Nagase

Makoto Tsuruoka

Kyoichi Zushi

Reiji Nagase

Representative Director,
President and CEO

Representative Director andSenior Managing Executive
Officer

Representative Director and Senior
Managing Executive Officer

Representative Director andSenior Managing Executive
Officer

GM, Fine Chemicals Department,
Beauty Care Products Department,
Research & Development Center

GM, Finance Division,
Accounting Division,
Corporate Planning Office

Shingo Bamba

Kazuo Nagashima

Director and Managing Executive
Officer

Director and Managing Executive
Officer

GM, Colors & Imaging
Department, Polymer Global
Account Department,
Polymer Products Department

GM, Electronic Chemicals
Department, Electronic Materials
Department,
CEO, America, Europe

GM, Automotive Solutions
Department, Environment &Energy Office, Energy Device
Office, Nagoya Branch Office

Kenichi Matsuki

Under a corporate system that adopts a Board of Auditors, Nagase introduced

In light of the importance of securing objective supervision of and guidanceDirector and Executive Officer

Director and Executive Officer

the executive officer system in June 2001. The Company’s current managementon its management, Nagase set up an Advisory Board to secure advisors from

GM, Audit Office, Human
Resources & General Affairs
Division, Legal & Credit Division,
Compliance Division, Osaka
Administrative Division,
Intellectual Property Office

GM, Speciality Chemicals
Department, Performance
Chemicals Department, Business
Administrative Office, Nagase
Application Workshop, CEO,
Osaka Region

framework consists of ten directors (including two outside directors), 21 execu-

outside the Company. Furthermore, Nagase established the following commit-

tive officers (eight of whom concurrently serve a directors), and four corporate

tees to reinforce its corporate governance function.

auditors (including two outside corporate auditors). The Board of Directors isWith the majority of its members made up of outside directors, theclearly positioned as the body in charge of making decisions on management

Compensation Committee was established on May 1, 2010. This body ensurespolicies and strategies, and it supervises the execution of operations. Holding a

the objectivity and transparency of the Company’s directors and executive

regular monthly meeting, the Board of Directors reviews and formulates

officers in the decision-making process regarding compensation by screening

measures regarding important decisions and tracks business performance.

the appropriateness of every compensation level and the compensation

Haruyuki Niimi

Iwao Nakamura

Outside Director

Outside Director

Board of Auditors’ meetings, corporate auditors attend important meetings,

As a consultative body for the Board of Directors, the Risk Management &1960

Joined Showa Shell Sekiyu K.K.

1966

Joined Nissan Motor Co., Ltd.

such as Board of Directors’ meetings, and conduct audits of the execution ofCompliance Committee establishes and strengthens risk management and1985

Managing Director, Showa Shell Sekiyu K.K.

1995

Director, Nissan Motor Co., Ltd.

1993

Senior Managing Director, Representative Director and Vice President,
Showa Shell Sekiyu K.K.

2000

Managing Director, Nissan Motor Co., Ltd.

duties of directors and executive officers based on reports solicited fromcompliance systems that cover not only legal compliance but also corporate

2002

Representative Director and President, Nissan Diesel Motor Co., Ltd.
(currently UD Trucks Corporation)

subsidiaries on an as-needed basis.

ethics. The Committee also maintains ISO environmental management

Chairman, Showa Shell Sekiyu K.K.

1998

Chairman and President, Showa Shell Sekiyu K.K.

2004

Current position

Executive officers determine specific measures for sales-related adminis-

2009 Current position

system to report and make recommendations to the Board of Directors.

standards and promotes energy conservation initiatives.

trative matters by attending divisional general managers’ meetings andsupervisors’ meetings and discussing each division’s status report.

Takahide Osada

Toshio Takano

Corporate Auditor(Outside Corporate Auditor)

Corporate Auditor

Corporate Auditor

Corporate Auditor(Outside Corporate Auditor)

1972

Joined The Sumitomo Bank, Limited

1973

Joined Nagase & Co., Ltd.

1974

Joined Nagase & Co., Ltd.

2000

Head Office Senior Management Staff and,
General Manager, Kanda Corporate Banking
Dept at The Sumitomo Bank Limited

2011

Current position

2009

Current position

Senior Head Office Staff in Osaka at the
Sumitomo Mitsui Banking Corporation

1987

Deputy General Manager of the Special
Investigation Department of the Tokyo District
Public Prosecutors Office

2001

Superintendent Public Prosecutor of the Sendai
High Public Prosecutors Office

2004

Superintendent Public Prosecutor of the
Nagoya High Public Prosecutors Office

Current position

Takano Law Firm

2008

Current position

Shareholders’ Meeting

Independent
Auditors

LiaisonExecutive Officers

Audit

Corporate Auditors(4 including 2 outside corporate auditors)

Kazuo Mitsuhashi

Kenji Asakura

Takaaki Hirai

Managing Executive Officer
President, Nagase ChemteX Corp.

Executive Officer
Nagase ChemteX Corp.

Executive Officer
GM, Automotive Solutions Department,
Energy Device Office, Nagoya Branch Office

Executive Officer
GM, Beauty Care Products Department

Hiroshi Hanamoto

Mitsuaki Ito

Executive Officer
GM, Colors & Imaging Department

Executive Officer
GM, Business Administrative Office

Tomitaka Ito

Mitsuro Naba

Executive Officer
GM, Electronic Chemicals Department

Executive Officer
GM, Speciality Chemicals Department

Executive Officer
CEO, China

Ichiro Wakabayashi
Executive Officer
CEO, ASEAN Region/India
GM, Polymer Global Account Department

Kohei Sato

Risk Management & Compliance
Committee
Compliance Call Center

Advisory Board

President(includes one outside advisor)

Executive Officer
GM, Polymer Products Department

Katsuhisa Yamaguchis )NTERNAL
s %XTERNALInternal Control Committee
Security Trade Control Committee

Audit Office

Executive Officer
GM, Performance Chemicals Department

Kenji Nagafusa(outside directors + directors)

Item Compliance Committee
Audit

Osamu Morishita(10 including 2 outside directors)

Supervision

Guidance, Advice

Mitsukuni Mori

Compensation Committee

Board of Directors

Board of Corporate Auditors

Support2006

Nagase’s Corporate Governance System

Audit

Masao Hidaka

control conditions and financial statement preparation process to further

Supervision

Hideo Yamashita

The Internal Control Committee documents the companywide internalSupervision

1995

In accordance with audit policy and standards for responsible work set at

Corporate Auditors

2004

Business Execution Framework

Toshiro Yamaguchi

Outside Directors

2002

The Nagase Group is a member of society. As such, it is our duty to maintain good and fair business practices and, through continued growth and development, provide society with the goods and services it needs while improving the welfare of our employees.
To implement this philosophy and continue raising corporate value, we believe that quick decision-making and action, as well asactive, transparent management, are vital. In addition, with the advance of globalization, Nagase is aggressively working tostrengthen corporate governance as a key management issue.

General Managers’ Meeting (Sales)

Supervisors’ Meeting (Administration)

Executive Officer
GM, Corporate Strategy Office28

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Risk Management and Complianceenhance its financial reporting credibility, while maintaining and strengthening

manner by a staff of 30, which includes the following specified limited-liability

a structure to carry out evaluation and improvements.

partners and accountant trainees.

The Security Trade Control Committee thoroughly complies with exportrelated laws and regulations in relation to foreign currency exchange andforeign trade for its trading of cargos and technologies covered by such laws
and regulations. The Item Compliance Committee ensures strict compliance

Certified Public Accountants

Auditing Firm

Specified limited-liability partners• Managing partner: Kenichiro Arai
• Managing partner: Yuka Hayashi

Ernst & Young ShinNihon LLC

with laws and regulations related to those of the Company’s products thatcome under the purview of the Act on the Evaluation of Chemical Substances
and Regulation of Their Manufacture, etc., and the Pharmaceutical Affairs Act.

Independent Directors andIndependent Corporate Auditors

The Nagase Group, being aware that risk management and compliance are bound together within one system, establishes, maintains, improves and promotes across the entire Group structures for compliance and risk management that reflect not only legal
compliance but also corporate ethics. This Risk Management and Compliance section aims to introduce specific measures being
taken with regard to Product Quality Risk and Risks of Handling Various Chemicals, against the backdrop of known risks as the
Nagase Group conducts global business development.

Comprehensive Identification, Understanding and Control of Risks
In April 2008, the Company reorganized the Compliance Committee into the Risk Management & Compliance Committee to put in place a comprehensive structure for

Under the executive officer system, Nagase’s corporate governance system

Pursuant to the Securities Listing Regulations of Japanese securities exchang-risk management as well as to monitor risk management and compliance as an advisory body to the Board of Directors. The Company maintains a structure that setscollaborates with the abovementioned committees to appoint outside directors

es, companies are required to appoint at least one “independent director or

the committee’s functions and authority and clarifies its roles and responsibilities. Under the committee’s leadership, department managers address risks in their par-and members to the Board of Auditors as well as to reinforce its corporate

independent corporate auditor” each from their outside directors and outside

ticular areas by formulating rules and implementing training. The Company also works through the Risk Management & Compliance Committee to develop systems andgovernance system. Having secured supervision and auditing functions that

corporate auditors, who will not cause conflict of interest with general share-

departments responsible for additional risks that materialize and strives to lower the risks that could impact the Company’s business.

operate from diversified perspectives, including from outside the Company,

holders. To that end, Nagase appointed all of its outside officers, namely,

In addition, the Management & Compliance Committee formulates the basic compliance policy to develop and maintain the Company’s compliance system and uses

Nagase believes the current corporate governance system is more rational

the two outside directors, Messrs. Haruyuki Niimi and Iwao Nakamura, andregular workshops and other initiatives to ensure that corporate activities are strictly in line with the Nagase Group Code of Conduct. Should employees of Nagase or its

than ever. We will increase our efforts to further reinforce our corporate

two outside corporate auditors, Messrs. Hideo Yamashita and Toshio Takano,Group companies become aware of legal or other compliance issues, they report to the Risk Management & Compliance Committee, which immediately reports to thegovernance system to secure stakeholders’ trust.

and registered them as Nagase’s independent directors and independent

Board of Auditors. In addition, the Company has introduced an internal reporting system wherein employees and others can report or discuss issues directly.

corporate auditors with the Tokyo Stock Exchange.

Auditing Framework
The Audit Office is in charge of internal audits, including audits to assess theappropriateness and efficiency of the Company’s business activities. The Audit
Office is staffed by eight employees, including certified internal auditors andother individuals who possess specialized knowledge in internal audits. The
Board of Auditors consists of four corporate auditors (including two outside
corporate auditors) who have a considerable amount of knowledge about
finance, accounting, general corporate management, compliance (including
those who are board-certified compliance officers) and governance.
The Company established the Audit Office to also ensure corporate auditors’auditing effectiveness, supplying staff upon request to support the corporate
auditors’ work. The Audit Office and the Board of Auditors regularly exchange

Basic Compliance Policy
Major Actions in Fiscal 2010
Haruyuki Niimi• Haruyuki Niimi attended 13 of 14 Board of Directors’ meetings (93% attendance ratio) andprovided appropriate opinions and advice from a wide range of viewpoints gained from his
extensive international experience.

Iwao Nakamura• Iwao Nakamura attended all 14 Board of Directors’ meetings (100% attendance ratio) andprovided appropriate opinions and advice attained from his experience in industry.

Hideo Yamashita• Hideo Yamashita attended all 14 Board of Directors’ and Board of Auditors’ meetings (100%attendance ratio) and provided appropriate opinions based on his wide-ranging experience
gained from many years of working overseas in financial institutions.

Toshio Takano• Toshio Takano attended 13 of 14 Board of Directors’ meetings (93% attendance ratio) andall 14 Board of Auditors’ meetings (100% attendance ratio) and provided appropriate opinionsfrom his specialized perspective as a lawyer.

information regarding internal audits and audits of domestic and overseas sub-1 Compliance with laws, regulations and internal rules and regulations• Corporate activities will be conducted fairly and in good faith, in accordance with laws
and rules, and without any deviation from social standards.
• Business activities will be conducted in accordance with the rules of the international
community to ensure the continuing growth and development of Nagase as a global
enterprise.

2 Elimination of anti-social elements
Anti-social elements that threaten public order and safety will be met with firmness andresolutely eliminated.

3 Provision of goods and services that are useful to society
Nagase will contribute to society by supplying goods and services that are useful
to society.

sidiaries, while holding meetings twice a year with affiliate companies’ auditors.
In addition, they perform wide-ranging liaison activities, including receiving

As a member of world society, the Nagase Group must maintain good and fair business practices and, through continued growth and development, provide society with the goods
and services needed while improving the welfare of its employees. Nagase has developed and carries out the following basic compliance policy. Based on this corporate philosophy,
Nagase has adopted and will implement the following Basic Compliance Policy.
This policy defines the behavior standards that Nagase and its officers and employees will observe as it carries out its various business activities. Officers and employees ofNagase must behave in accordance with these behavior standards and endeavor to disseminate them to those within the corporate organization, especially those with whom theywork. If circumstances arise in which there is a risk that these behavior standards may be compromised, officers and employees must work to resolve problems without delay andimprove operations by identifying the causes of problems and taking steps to prevent recurrences.

4 Respect for the qualities and individuality of employees• Nagase will respect the autonomy and creativity of every employee and foster a
corporate culture in which those qualities can be applied to corporate activities.
• Nagase will protect its employees’ health, respect their human rights, treat themfairly and without discrimination, and secure and provide safe and enriching work
environments.

5 Disclosure of information to stakeholders
Nagase will strive to ensure transparency by fairly and actively disclosing corporate
information to stakeholders, including customers, suppliers, employees and shareholders.

6 Preserving the global environment
Nagase recognizes its responsibility to maintain the global environment in a better
condition and will act in accordance with that responsibility.

Business Continuity Plans (BCPs)

regular reports from Ernst & Young ShinNihon LLC, Nagase’s independent
auditors, regarding accounting matters and associated internal controls; maintaining a presence during accounting audits; and cooperating as needed withaudits conducted at affiliated companies, including those located overseas.
In addition to discussing individual matters with corporate auditors on adaily basis, independent auditors also hold meetings twice a year with theBoard of Auditors.
Nagase established the Internal Control Committee and the Committee
Affairs Bureau in its internal control section, and the Audit Office serves as theCompany’s independent internal auditor. Evaluation results of internal control
operations are reported appropriately to the Internal Control Committee by the
Audit Office, and the Internal Control Committee reports on the internal control
status to the Board of Auditors and independent auditors on a regular basis.
Audits by certified public accounts are performed in a fair and unbiased

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Fiscal 2010 Results
In order to confirm effectiveness of the BCPs created for Company departments, Nagase
implemented a mock disaster drill in November 2010. Based on assumptions maderegarding the probable situation immediately following an earthquake and a few hours later,
the Company conducts ongoing trainings based on established manuals to secure importantbusiness activities. In addition, we began formulating BCPs for three additional departments.
In anticipation of a major earthquake, Nagase conducted initial drills as well as safety
registration drills for all employees using the Company’s safety registration system.
Nagase also focused on the issue of dealing with an outbreak of a new strain of influenza
by demonstrating at the model department the viability of continually carrying out duties
through telecommuting based on upgraded IT infrastructure.

Fiscal 2011 Initiatives
In fiscal 2011, Nagase will continue to conduct mock disaster drills to confirm theeffectiveness of its BCPs. Simultaneously, the Company plans to introduce the BCPs at fourother departments in order to spread this initiative.
Through these efforts, Nagase will formulate BCPs for all of its departments. In addition,
the model department plans put into practice the concept of carrying out important businessactivities through telecommuting should a highly virulent new-type influenza begin to spread.

1. Specific Measures Taken for Individual Risks: Product Safety and Quality Control
As the Nagase Group accelerates business globalization, the volume of off-shoreenhance the capabilities of Group manufacturing companies, including joint ven-transactions it engages in as well as exports to and imports from China and othertures, and continuously improve quality management at these companies.

rapidly growing countries is increasing. The Company’s principal suppliers to date

Accordingly, pursuant to the Nagase Group Product Safety Principles, formulated

have been major chemical manufacturers in Europe and the United States, whichin October 2008, the Company is promoting the formulation of Groupwide rules

differ from new suppliers in emerging countries in that transactions with the latter

regarding quality management and product quality assurance while providing its

require that initiatives be put in place to prevent the occurrence of quality man-

employees with educational programs. Through these activities, we are working toagement and other issues due to legal and regulatory differences between Japan

ensure the safety of the products handled throughout the Group.

and the countries in question. Therefore, Nagase recognizes the increasing

In tandem with its growth as a business engaged in manufacturing, Nagase will

importance of encouraging overseas suppliers to conduct sound quality manage-

increasingly be called upon to assume responsibility for quality assurance. To

ment. At the same time, one of the goals of Nagase’s “CHANGE” 11 medium-assist in this area, the Company established the Quality Assurance Support Teamterm management plan involves the further reinforcement and expansion ofwithin the Intellectual Property Office in December 2010.

Groupwide R&D and production functions. To achieve this goal, Nagase must

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Environmental and Social Contribution Activities

2. Specific Measures Taken for Individual Risks: Security Trade Controls

Nagase Group Environmental Management Structure

Environmental Management Activities

As a trading company specializing in chemicals and which also carries out export

Trade Control Committee works to understand the export control situation,

Nagase began building an environmental management structure in May 1999

Nagase bases its environmental management activities on daily operations.

business activities, mainly of chemical products and plastics, Nagase has set up

the latest revisions to the Foreign Exchange and Foreign Trade Control Law andby establishing an Environmental Protection Committee, a role currently

Specific activities include the creation and expansion of eco-businesses andits own Security Trade Control Regulations and established the Security Tradeto ascertain a detailed picture of export controls across the entire Group while

Control Committee to appropriately implement security trade control. Furthermore,formulating related Group policies. The Trade Control Commission disseminates

the Company has established a department-level Security Trade Control Officematters determined at Security Trade Control Committee meetings to all businesswithin the Compliance Division to specialize in export controls and act as the
Security Trade Control Committee’s secretariat.
In addition, meetings of the Security Trade Control Committee and the Tradeassumed by the Risk Management & Compliance Committee. Relatively earlier

the enhancement of operational efficiency. Under “CHANGE” 11 —thethan other trading companies in Japan, Nagase obtained ISO 14001 certifica-

Nagase Group’s medium-term management plan that was launched in April

units and Group companies while providing instruction based on decisions madetion for its environmental management system in April 2000 in response to

2009—the Company is strengthening its existing eco-businesses with newby the Security Trade Control Committee. Through these efforts, the risk ofsocietal demands. Since then, the Environmental Protection Committee hasbusinesses in the energy field, placing extra focus on photovoltaic generation

violating the laws associated with export controls is prevented.

offered affiliated companies advice and support for obtaining ISO certifications

and energy-storage devices. At the same time, by promoting information shar-and thereby expanded the scope of certification. Currently, six sales compa-

ing and complementing functions among its departments and business

nies—Nagase Colors & Chemicals Co., Ltd., Nagase Chemical Co., Ltd.,

groups, the Company will further reinforce the business structure required forNagase Plastics Co., Ltd., Nagase Abrasive Materials Co., Ltd., Nishinihon

the efficient and flexible provision of products and services that contribute to
the realization of a sustainable, recycling-oriented and low-carbon society.

Control Commission are convened once a month. At these meetings, the Security

Specific Management Framework

Efforts to Promote Personnel Development

At Nagase, with regard to all products for export, the Compliance Program Procedural

Every year, the practical business of security trade controls becomes ever more

Administration System (CP-PAS) for goods and technology is employed to record data

complex. To keep pace with developments, the Nagase Group encourages its

Nagase Co., Ltd. and Nagase General Service Co., Ltd. (certified in November

on export products and overseas customers. Furthermore, these activities are regulated

employees—primarily those involved in export operations—to become STC Associates

by the Foreign Exchange and Foreign Trade Control Law and the United States’ Exportby taking the exam offered by the Center for Information on Security Trade Controls2010)—conduct activities under the ISO management structure together with

Administration Regulations (EAR), while the Sales Division and export control officers(CISTEC). As of March 31, 2011, 337 employees from a total of 16 companies,

confirm whether or not permission to export is required. This system is designed toincluding Nagase and affiliates, had taken the exam. We continue to strive to foster

ensure that only those products approved by the Security Trade Control Office are

personnel with a high level of knowledge and expertise.

available for export.
Moreover, going one step beyond mere adherence to the law, we define policies ofthe entire Nagase Group associated with security export controls that prohibit trade

Aiming to Raise Awareness of Security Trade Controls

in products that are military-related items or that have military applications. We also
make the Nagase Group fully aware of Group policies to prevent any exposure tosecurity export control risks.

At Nagase, internal security trade control training is provided to all employees, and the
Human Resources & General Affairs Division offers various training opportunities such

In addition, Nagase is promoting activities aimed at reducing the environmental impact of its business operations. We are a trading company and, thus,

Nagase at its certified business establishments.
In addition, many Nagase Group companies, having acquired certification
independently, are conducting their own environmental activities.

do not operate such energy-intensive facilities as plants. Still, we believe that
we can reduce the environmental impact of our business activities by, for

Certified Nagase Group companies will always have clear environmental

example, improving the efficiency of our logistics operations. Acting on thisgoals and action plans. To achieve these goals and plans, Nagase and its

belief, we developed the Nagase Energy Calculation Online (NECO) System,

Group companies appoint environmental protection officers, who coordinate

which enables the automatic calculation of domestic cargo transport volume

department-specific environmental activities, and eco-leaders, who promoteusing distribution receipt data managed by our sales control system, bringing

implementation of other activities that educate and instill knowledge. In addition,

the implementation of these activities. With these officers and leaders in

it on line in August 2008. This system makes it possible not only to calculate

we hold lectures for domestic subsidiaries and affiliates as well as overseas-based

place, the Nagase Group is proactively advancing initiatives aimed at continu-

our annual cargo transport volume and CO2 emissions but to analyze transport

ously improving various environmental activities.

routes for optimization, which also helps reduce our CO2 emissions. In suchas orientation for new employees, personnel training according to level, and thesubsidiaries, with the entire Group participating. In fiscal 2010, a total of 99 training
lectures were provided to 1,980 people.

ways, the Nagase Group is striving to reduce energy consumption in its logistics operations, thereby contributing to the prevention of global warming.

Environmental Management Structure

3. Specific Measures Taken for Individual Risks: Regulatory Compliance in Products

Risk Management &Compliance Committee

Because of a rising awareness of safety and security in the international community, and against the backdrop of increasing concern with regard to chemical substances,including those that are used in finished products, Nagase established the Item Compliance Committee. Focusing on chemical management, this committee is underpinning aEnvironmental Policy

structure that appropriately responds to laws and regulations with regard to the entire Group’s handling of chemical products.

32

Framework for Compliance with
Chemical Laws and Regulations

Strategic Approach to International
Chemicals Management (SAICM)

Every time Nagase begins handling a new chemical, it conducts stringent
investigations into the materials involved in the chemical’s manufacture
and related laws and regulations, while efficiently managing data compiled
through such investigations. In this way, we are able to swiftly confirm
which products contain regulated materials and ingredients and provide
our customers with the information they require to confirm compliancewith revised laws in Japan and abroad. As for parts and products that theCompany procures or provides, it is difficult to manage information
regarding the materials and ingredients involved in their manufacture.
Nevertheless, to meet our own and customers’ green procurement
requirements, we confirm that these parts and products and their
manufacture are free of regulated materials and ingredients before
purchasing or shipping out.
In addition, because we distribute information on the chemical
substances contained in products along the supply chain, we endeavor topass on accurate information by participating in the Joint Article
Management Promotion-consortium (JAMP) and by using specialized tools
for products containing chemical substances, such as MSDS Plus and AIS.

The action plan adopted at the 2002 World Summit on Sustainable Development—also known
as the Johannesburg Summit—is aimed at ensuring that, by the year 2020, chemicals are produced and used in ways that minimize significant adverse impacts on the environment andhuman health. In accordance with this policy, the entire world is accelerating the tightening andstandardization of regulations concerning chemical management. Consequently, each nation iswitnessing dynamic changes in applicable laws and regulations.
Also, the Registration, Evaluation, Assessment of Chemicals (REACH) regulations took effectin Europe in 2007. Following this, in 2009, China, South Korea, Taiwan and other countries
bolstered their respective regulatory systems relating to chemical management. In such an environment, as a company promoting business worldwide, Nagase is providing support to its overseas subsidiaries in responding to these legal and regulatory developments.
These legal and regulatory developments naturally affect the finished products in which
Nagase products are used. Therefore, it is important for the Nagase Group to offer its
customers relevant information, and the Company works to ensure an accurate understandingof worldwide legal and regulatory trends with regard to chemical management. At the sametime, with the aim of establishing a system to facilitate the global management of information
related to the chemical products and chemical substances used in our products, we areproviding product management education and guidance to our overseas counterparts.

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Environmental ISO
Management Organization
Environmental ISO
Management Representative

1. Comply with all environmental laws, regulations and other rules
Affiliates

Nagase & Co., Ltd.

• We will observe all environmental laws, municipal bylaws, environmental regulations and otherrules as we conduct our business activities.

2. Develop businesses that give full consideration to environmental issues

Management• We will conduct our business activities in full awareness of the need to preserve the ecosystemand protect the environment, and we will make every possible effort to give full consideration to
the environment within the limits of technological and economic feasibility.

Environmental ISO Management
General Secretariat
Chief Environmental
Management Representative

3. Fulfill our responsibilities as a good corporate citizen
Environmental Management
Representative
Internal Environmental
Audit Team

Environmental Management
Representative
Internal Environmental
Audit Team

Secretariat

Secretariat

Environmental
Protection Officers

Environmental
Protection Officers

Eco-Leaders

Eco-Leaders* Nagase disbanded the Environmental Protection Committee and transferred the activities formerly
under its auspices to the Risk Management & Compliance Committee on April 1, 2011.

• As a good corporate citizen we will work together with public institutions, industry, and local
communities to promote environmental conservation measures that are suitable for the Nagase Group.

4. Establish and continually improve an environmental management system• We will work to construct an environmental management system in order to fully achieve theobjectives set out in this Policy. We will continuously make improvements to this system by setting
concrete goals and working to fulfill them.

5. Disclose and make the relevant parties fully aware of
our Environmental Policy• We will disclose the Policy to the public and make all who work for the Nagase Group fully awareof its contents.

NAGASE & CO.,LTD. Annual Report 201133

11/09/02 16:52

Environmental Burden Reduction Activities
Together with efforts to reduce its environmental impact, NAGASE & CO.,LTD., the core company of the Nagase Group, intends to “develop businesses that give full consideration to environmental issues” as one
important element of its environmental policy. Nagase contributes toreducing environmental burden through the discovery and development
at Group manufacturing companies of environment-oriented products
and materials that are vital to society.

Businesses Involving Environment- andEnvironment & Energy Office

Energy-Related Technologies
Strategic Initiatives in Fiscal 2011

tery modules; the creation of energy systems equipped with battery modules;

In fiscal 2011, the Environment & Energy Office will move forward with efforts

and participation in energy-related verification testing.

Aiming to develop new and unique businesses in the field of the environment

to develop photovoltaic generation systems particularly for industrial applica-

With battery supply chains extending over a wide area, the Energy Device

and energy, the Environment & Energy Office facilitates information sharing

tions as it expands this business overseas. The Office will bolster its proposal

Office has combined its capabilities with the commercial and manufacturing

Groupwide and promotes cross-organizational cooperation.

capabilities for total power systems in the areas of generation, storage andcompany CAPTEX Co., Ltd. (see p. 36) to organically connect upstream andCurrently, the Environment & Energy Office is focusing on procurement andconservation. In addition, the Office intends to promote projects to create sys-

downstream information to create business proposals that only Nagase issales of photovoltaic generation systems, all-electric homes, energy-savingtems that address disaster prevention awareness—the importance of which

capable of.

In line with revisions made to the Act on the Rational Use of Energy in fiscal

products as well as the sale of solar panels, power conditioners and otherwas heightened dramatically in the aftermath of the recent calamity—while

2009, Nagase has been designated as a “specified corporation” by the Bureau

photovoltaic generation system equipment, EcoCute water heating systems,

examining business models to accelerate the recovery of stricken regions.

of Economy, Trade and Industry since its energy usage exceeds fixed levels.

LED lighting, energy storage devices, IH heaters and energy-saving support

Consequently, we compile data on the amount of energy consumed at every

systems. Through these and other products, the Office is offering proposals

facility, formulate medium- and long-term energy reduction plans, prepare

for energy generation, storage and conservation that reduce environmental

management standards for repair and maintenance of facilities andburden. In the area of photovoltaic generation systems, the Office is particu-

The Energy Device Office specializes in energy device-related businesses,

facturing customers, the Energy Device Office will focus on the development

equipment, and sub-larly adept at developing electric power sales systems for individual units infocusing on lithium ion batteries, for which applications are expected to rapid-of battery materials in new areas in conjunction with Nagase ChemteX (see p.

mit reports to theapartment buildings.

ly expand. The Office expands businesses oriented towards manufacturers

22).

Concentrating on factory farm systems, the Environment & Energy Office is

Bureau of Economy,

also engaged in new business development.

Trade and Industry.
In fiscal 2011, weStrategic Initiatives in Fiscal 2011
During fiscal 2011, in addition to assisting and promoting sales strategies forEnergy Device Office

CAPTEX Co., Ltd. (which has made the decision to establish a new plant) as
well as engaging in the sale of battery materials for Nagase’s current manu-(including battery materials, batteries, battery modules and energy systems)

In addition, the Office will expand its operations through business tie-ups

and government agencies. These business endeavors include the handling ofand M&A to meet the demand for energy storage batteries, which has dramat-

battery manufacturing materials; the development, production and sale of bat-

ically risen in the aftermath of the Great East Japan Earthquake.

will upgrade energysaving facilities andequipment with the
purpose of undertaking systematicenergy conservation
activities.

LED lighting has been adopted on a trial basis
at a portion of Tokyo headquarters. Data is being collected
in order to expand the use of LED lighting.

1. Electronic Chemicals Business
Developer Dilution Supply
Equipment

Activities Undertaken by Nagase ChemteX
Nagase currently manufactures and sells a chemical management

manufacturing processes,

Nagase ChemteX Corp., a core manufacturing subsidiary of the Nagase Group,

system (CMS) to control the concentration of chemicals used in thew i t h i n S h a r p ’s “ G r e e npromoted energy conservation activities by developing an energy-saving

manufacture of semiconductors and liquid crystal displays (LCDs) in

F r o n t S a k a i ,” a n d t h i sframework at all its facilities in accordance with the revised Act on the Rational

order to make the process more stable. Moreover, the Company

facility commenced oper-

Use of Energy. Nagase ChemteX is also working to reduce greenhouse gases.

reuses chemicals. The waste solvent

ations in October 2009.

To this end, Nagase ChemteX has undertaken the following key energy-

recover y system contributes to zero

Utilizing the CMS andconservation measures: formulated and monitored energy conservation

emissions by collecting and processing

Nagase ChemteX Corp.’swaste solvents that individual companies

chemical recycling tech-

have difficulty reducing, and reusing

nologies, this on-sitethem as raw materials for different

plant recycles developer,

industries.

stripping agents and othertargets at each department based on the efforts of all employees; establisheda system to improve energy conservation-related proposals; and improved
capital investment activities undertaken by Energy Conservation Committee
staff members.
In addition, Nagase ChemteX
decreased greenhouse gas emis-

Applying the entire range of its tech-chemicals. Concentrating

sions by upgrading to high-efficiency

nologies, expertise and experience

the Nagase Group’s long-

boilers and switching from heavy oilin the electronic chemicals business, theaccumulated technologies

to liquid natural gas in January 2009.

Nagase Group also completed a plant,

at this recycling-oriented plant will enable major reductions in the use

Through these actions, Nagase

which manufactures, supplies andof chemicals and raw materials as well as significant environmental

ChemteX was designated as arecycles chemicals used in LCD panel

contributions.

Precision Filtration Equipment

Chemical recycling plant within Sharp’s “Green Front Sakai”

greenhouse gas emission-reducing
business under the Japanese government’s Domestic Carbon Credit

Developer Control Equipment

System in March 2011.

34

NAGASE & CO.,LTD. Annual Report 2011

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NAGASE & CO.,LTD. Annual Report 201135

11/09/02 16:52

2. Nagase Enters Organic Fertilizer Business3.

Commencing Development of Lithium Ion Battery Control

Modules Indispensable for Electric Vehicles and Smart Grids

the New Domain of Photovoltaic
4. Penetrating
Generation Systems for Housing Complexes

The Nagase Group launched its medium-term management plan,

The Nagase Group is

Amid demand for high-efficiency, long-lasting and safe batteries,“CHANGE” 11, in April 2009, setting six core initiatives. In line

expanding its businesses

control modules are a necessary component of technology to regu-

Nagase has provided capital and participates in a business partner-with two of these initiatives—namely, strengthening R&D and manu-in the area of supply

late battery-related data. Leveraging CAPTEX’s highly effective con-ship with the photovoltaic generation system integration business,facturing functions and building businesses around environment-

chains for lithium ion bat-trol technology and expertise in the area of remote battery data

GRID, Inc., to develop value chains in the solar cell market. Thisand energy-related technologies—the Group is advancing a projectteries, notable for their use

management, we are designing and developing control circuitry as

partnership facilitates innovative solutions combining the upstream

aimed at realizing the “Nagase Eco Farm Concept” for a recycling-

as storage devices primar-

well as promoting secondary battery packs.

area of conventional solar cell materials and component sales withoriented agricultural, livestock and fishery business that uses bio-

ily in automobiles, laptop computers and mobile phones. Against thisWe are gaining the support of numerous customers owing to themass and untapped natural resources. As the first step in thisbackdrop, CAPTEX Co., Ltd., a wholly owned Nagase subsidiary, isprovision of one-stop services in the following areas: 1. Battery sys-

In the downstream area, Nagase supplies environment-related

endeavor, Nagase has acquired all shares in Kawai Hir yo

concentrating on the manufacture and development of lithium ion

tem overview (dimensions and voltage); 2. Project proposals (con-products including solar cell modules and power conditioners as it

Corporation.

battery control modules.

cept, structural and controller design); 3. Specification reviews

procures solar cell panels from Taiwan-based original equipment

Kawai Hiryo manufactures organic fertilizers, including Bokashi(sample creation: design, casing, battery power source, electricalmanufacturers (products made under the GRID brand). In addition,

fertilizers, and agricultural chemicals and materials, and supplies

discharge control, transmission; evaluation: electrical discharge,

GRID is responsible for designing photovoltaic generation systems

heat, vibration testing); 4. Verification (Benchmarks and monitor

that are sold under the Nagase brand name.

these products to professional and amateur agricultural producers

Raw materials

nationwide. Based on waste foodstuffs and other materials, Bokashi

Sales of these products target condominiums, apartments andevaluation).
s 2ARE METALS s ,ITHIUM

fertilizers are manufactured through fermentation using certains #OBALT s.ICKEL s -ANGANESE s /THERS

microorganisms. This type of fertilizer is highly soluble and easily
absorbed into the soil and contains nutrients that are efficiently
absorbed by plants. Looking ahead, Nagase aims to develop new

Cell Materials

fertilizers and livestock feed through the integration of Kawai Hiryo’s

s 0OSITIVE ELECTRODE MATERIALS

technologies with its biotechnologies.

With the construction of a high-volume production plant* inother housing complexes. Until now, photovoltaic generation systems

Okazaki City, Aichi Prefecture, which commenced in June 2011, we

installed in such buildings were limited to common areas due to thewill expand applications of lithium ion battery control modules

difficulty posed by individual power distribution. As a result, this was

beyond automotives to smart grids oriented to residential, office,an undeveloped business field. We are now able to enter this newcommercial facility, factory and other uses.

field owing to photovoltaic generation systems developed by GRID
that are compatible with individual power distribution—from roofs .EGATIVE ELECTRODE MATERIALS s %LECTROLYTES
s 3EPARATORS s 3PACERS s "INDERS s #ASING

the new downstream area of photovoltaic generation system sales.

*Land area: approx. 23,000m2, floor area: approx. 5,000m2 (2 stories), scheduled
completion: March 2012

panels to each apartment unit—and capable of electric sales toeach unit.

The Nagase
Group’sbusinessdomains

Nagase Eco Farm Concept

After establishing a proven track record in the area of housing

Cells

complexes, we will expand applications of this new photovoltaic gen-s #ELL   LAMINATES

eration system to encompass residential housing and such industrial

s /THERS

applications as factories and warehouses.

Production of
biomass-based resources(livestock feed and fertilizers)

Agricultural, livestock andfishery producers

Pack Controllers
Livestock feed/fertilizers
s 0ACKS MODULES BANKS
s #ONTROLLERS PROTECTION ELECTRICAL DISCHARGECONTROL ADJUSTMENT CONTROL

Nursery plants,
enzyme preparation, etc.

Apartment unit
Power utility

Kawai Hiryo
Corporation

New Technology

Super-delicious
vegetable farms

CAPTEX’s
businessdomains

EV/PHV(electric vehicles)

Factory/Office

Systemss ,OAD s 5PPER %#5
s 3TRUCTURE FOR COMMERCIAL USE

Buyelectricity
Sellelectricity

Parking lot
Supermarket/
Large-sized stores

Convenience storesIndustrial biomass(Including bean curd
refuse, egg shells,
poultry manure, sludge)

Super-delicious
vegetables
Grape tomatoes,
cabbages
Processed food manufacturers,
foodstuff sales companies

36

NAGASE & CO.,LTD. Annual Report 2011

nag̲2011本文(e)下版後.indd 36-37

Super-sweet pumpkins
Cold-resistant
Ashitaba plant

Products
s 6EHICLES %6 0(%6 )33
s 3TATIONARY "%-3 (%-3 DISCHARGERSImage of a housing complex equipped with GRID’s
new photovoltaic generation system(1) Solar cell module (generates electricity), (2) Connection box (collects electricity),(3) Power conditioner (converts electricity into power), (4) Display equipment(enables power monitoring), (5) Interior switchboard (distributes power)

NAGASE & CO.,LTD. Annual Report 201137

11/09/07 16:48

Together with Our Employees (Diversity and Work-Life Balance)
As part of its promotion of global business operations, the Group considers it important to create new value for its companies byutilizing diverse human resources and providing comfortable work environments where each Group employee can demonstrate hisor her abilities to the fullest. To this end, the Group included the promotion of employee diversity and work-life balance as one of
the six key initiatives in its “CHANGE” 11 medium-term management plan.

1. Basic Stance on Work-Life Balance
Themes for Diversity Promotion

Striking a balance between work and life is indispensable to thepromotion of employee diversity. Therefore, the Group maintains a

1. Basic Stance on Diversity

2. Diversity Initiatives

The Nagase Group currently employs a diverse range of workers who

Nagase commenced the promotion of employee diversity in fiscal 2008

differ in terms of gender, nationality, age, values and lifestyles. The Group

with the establishment of the Diversity Promotion Committee. Based on

considers that the development of corporate culture will lead to thethe belief that the promotion of diversity should be addressed by all

creation of new businesses as well as the improvement of businessemployees over the medium to long term, the Group first conducted an

performance throughout the Group. These objectives involve the develop-

employees’ awareness survey and hearings on their ideas about diversi-

ment of a corporate culture in which a diverse range of workers canty. Based on the survey and hearing results, the Group held a number ofshare ideas, build shared acceptance through mutual understanding anddiscussions to define diversity, devise themes for diversity promotion andhelp each other perform tasks while working vigorously and generating

lay out specific measures for the next three years. After these processes,

new synergies by exchanging values. Accordingly, the Nagase Groupthe Group announced details of a promotional campaign in May 2009

positions diversity as one of its important corporate strategies.

and began to educate employees. In addition, Nagase held diversity

1. Sharing corporate philosophy and vision
2. Enhancement of transparency
3. Reinforcing relationships of friendly competition
4. Encouraging a breakthrough to the current situation
5. Eliminating a mindset that leads to gender bias
6. Creating a work environment in which employees

A wide variety of human resources
with different nationalities, genders,business specializations and values

1

Specific
MeasureIn-house
education2.
Constructionof a base fordiversity:
Corporatephilosophy,
shared vision,mutualunderstanding,respect,
acceptance,
promotion ofrelationships of
mutual support

Themes for
Diversity
Promotion

Specific
Measuremanagement plan and to carry out such a plan at each site. In addition tothese efforts, the Company engaged in the following four activities during

Enhanced performancethroughout the Group38

NAGASE & CO.,LTD. Annual Report 2011

nag̲2011本文(e)̲PDF.indd 38-39

Diversity inorganizationand individuals

During January and February 2009, Nagase invited Tsuneo Sasaki and
Yoshie Komuro to give work-life balance lectures, promoting this concept
throughout the Company. At the same time, we introduced the “armo”
program to assist employees taking child care leave and to help themeventually return to work. In October 2009, Nagase made the second andthird Wednesdays of each month “No Overtime Days” and encouraged

3

Developmentof comfortableworkplace

their personal life needs through self education. Moreover, the Company
widened the scope of persons eligible for child care leave, while holdinga briefing session for its in-house welfare program staff to facilitate
five male employees applied for and were granted child care leave.

1 Diversity briefing lectures given by Kiichiro Nakamura
for all employees and a DVD featuring a panel discussion
Director Kenichi Matsuki and Executive Officer Hiroshi

3PECIFIC -EASURE

2 Training programs for overseas national staff
3 Diversity promotion site was established on the Company
intranet to showcase the president’s messages anddepartmental initiatives related to diversity

1

Receiving recognition for such efforts, Nagase has been accredited
In-house educations 0ERIODIC MESSAGES FROM TOP MANAGEMENT
s &ACILITATION OF UNDERSTANDING ABOUT DEPARTMENT’S BUSINESSDIRECTION THROUGHOUT THE ORGANIZATION
s 0ROMOTION OF DIVERSITY RELATED INFORMATION PROVISION AND EXCHANGE
s 0LANNING AND IMPLEMENTATION OF DIVERSITY RELATEDTRAINING AND SEMINARS

3PECIFIC -EASURE

Creating synergies and increasing thevalue of knowledge by exchanging
opinions

work-life balance-related systems.

understanding of rules related to child care and nursing care. As a result,(36 employees participated in 2010)
5. Synergy of knowledge as
an organization or group2

fiscal 2010.

Hanamoto was made.
Each individual confidently expresses
their opinions

employees, and thus strives to raise awareness in house and develop

employees to achieve more rewarding working conditions by fulfillinga diversity action plan as part of the “CHANGE” 11 medium-termon diversity with Representative Director Kyoichi Zushi,
4. Diversity in opinions

Specific
MeasureFurthermore, the Company is requiring each department to establish

3. Diversity in thinking—individualism
Each individual freely brings ideas
and exercises their capability andoriginality

between work and life will bring benefits to both the Company and2. Work-Life Balance Initiatives

concept within the Group.

1. Diversity in attributes

realize a good work-life balance. Nagase believes a good balancefeel free to utilize the in-house benefit system

briefing sessions for managers in February 2010 to further spread thisObjectives to Achieve throughthe Promotion of Employee Diversity

comfortable workplaces for employees with diverse characteristics to2

as a general business owner compliant with the Next Generation
Nurturing Support Measures Promotion Law issued by the Osaka Labor
Bureau in Chuo-ku, Osaka, as of May 21, 2010, and acquired the“KURUMINN” next-generation accreditation mark. Nagase will makecontinuing efforts to enhance work-life balance to achieve even more
comfortable work environments.

Diversity in organization and individuals

s 0ROMOTION OF GLOBAL PERSONNEL SYSTEM
s 0ROMOTION OF INTER 'ROUP PERSONNEL EXCHANGESBOTH IN *APAN AND OVERSEAS
s #ONTINUING TO EMPLOY FEMALE CAREER TRACK EMPLOYEES
s 3UPPORT FOR EMPLOYEES CAREER DEVELOPMENT

4 Employment of female career-track employees

3

Development of comfortable workplace(4 out of 16 new employees in fiscal 2010 and 4 out of

3PECIFIC -EASURE

28 employees in fiscal 2011)s 3TANDARDIZATION AND STREAMLINING OF WORK PROCESSES
s 0LANNING AND PROMOTION OF WORK LIFE BALANCE RELATED SYSTEMSNAGASE & CO.,LTD. Annual Report 201139

11/09/02 16:52

Social Contribution Activities

1. Policy Regarding Developing Human Resources

Department

1. Contributing to Growth of Scientific Technology

Senior Manager

Manager

LeaderMultifaceted Management Development Program
Rank-specific training(required)

In step with the increasing globalization of its businesses, the Nagase
Group develops training programs responsive to the rank and position ofeach employee as a systematic addition to its traditional approach ofproviding employees with on-the-job training.

Manager Training
ManagementLeadershiporiented
training
businesscourses

Core/skill training
Follow-up programs for
new employees
Core businesses courses
On-the-job training
Introductory training for
new employees

Nagase is encouraging a training-oriented corporate culture throughon-the-job training, including instruction programs for new employees,
and overseas training as well as basic and management-oriented business courses. Moreover, we are offering support to motivated employees
by providing a selection of training programs for those individuals who
have a personal interest in increasing their knowledge.

Position- /themespecific training

Newly appointed manager training (Evaluation/mental health management)
Newly appointed senior manager training (personnel management)

Name

Ryuichiro Sato

NMP

Tohru Dairi
Domestic/Asianbusiness schools

Business English
Short-term overseas
study courses

nurture the next generation of employees who will lead the Nagase
Group in the years ahead.

The Next-Generation Leadership Program for Overseas National Staff

Other

Theme-specific training (including goal setting courses)

Managerial
positions
For managerial
positionslocated abroad. Through these efforts, we are taking systematic steps toElective training (17 courses including management strategy, English,
Chinese, and computer skills)

Specific
activity
training
Supervisor
training

For overseas
companies

theme-specific, elective, overseas training and programs for local staff

Mitsuaki Tabuchi

Chinese language overseas study courses
Business management courses
Business school overseas study courses

Focusing on required rank-specific training, the Nagase Group provides
a wide range of training programs that include position-specific,

Atsushi Kuhara

Executive Management Programs in Japan

Overseas
training

3.

Akira Kikuchi

Japanese business schools
Cross-industrial
associations
Middle management seminars in Japan

Management strategy
courses in Japan

NMP

GMP

Brush-up training
Business courses
New employee follow up
Introductory training for
new employees

Seiji Masuda
Tatsuo Maruyama

Subject matter

Professor
Graduate School of Medicine, Osaka University
Junior Associate Professor
Faculty of Science and Engineering, Konan University
Professor
Graduate School of Agricultural and Life Sciences, University of Tokyo
Professor
Graduate School of Engineering, Hokkaido University
Associate Professor
Faculty of Agriculture, Kagawa University
Associate Professor
Graduate School of Biostudies, Kyoto University
Associate Professor
Graduate School of Engineering, Kobe University

Development of methods for epithelial tubule formation using three
dimensional cultures

Professor
Graduate School of Engineering, Gunma University
Professor
Faculty of Science, Tokyo University of Science
Professor
Graduate School of Pharmaceutical Sciences, Tohoku University
Professor
Graduate School of Pharmaceutical Sciences Nagoya City University
Associate Professor
Graduate School of Science, Osaka University

Development of Enantioselective Transformation using Chiral Trifluoromethylated
Metal Complexes
Development of an efficient methodology for the synthesis of medium-sized cyclic
amines by the ring expansion reactions
Development of Useful Synthesis of Biologically Active and Structurally
Complex Alkaloids using Highly Efficient One-pot Sequential Reactions

Molecular mechanism on diacylglycerol signaling involved in neural plasticity
Study on the function of glutamine in cultured cells
Biosynthetic studies of isoprenoids produced by fungi and its application.
Analysis of the molecular mechanism for heat tolerance through the regulationof sphingolipid metabolism in yeast
Molecular construction of mRNA export receptor specific to the target mRNAfor the improvement of recombinant protein production.
Enzyme-mediated refolding of denatured protein<Organic chemistry>
Hideki Amii
Shinichi Saito
Hidetoshi Tokuyama
Seiichi Nakamura
Yasushi Morita

BMP BMP-A

Studies toward the total synthesis of marine toxins having an azaspiro ring system
Development of organic neutral radical discotic liquid crystal withelectronic-spin delocalizing nature<Biochemistry /Organic chemistry>
Akio Ojida
Hiroshi Sugiyama

As an elective program within its overall training system that the Group is making
the utmost effort in developing, the Next-Generation Leadership Program for

Position / Present office<Biochemistry>

Japanese business administration courses

Middle Management Programs in Japan

Establish a Training Program that Emphasizes“Systematic Training”

Research Grants Provided in Fiscal 2011

Supervisor
training

Overseas
HarvardBusiness
School AMP
Elective training

2. Cultivate a Corporate Culture of “On-the-Job Training”

Career/Specialized/Research Positions

Executive training

Nagase has a long history of developing enzymes and technologies for organic compounds for use not only in the chemical industry but for awide range of applications in various industries, including pharmaceuticals. Through its business operations, the Company has come to understand the importance of basic research in biochemistry and organic chemistry. In line with this realization, we established the Nagase Scienceand Technology Foundation in 1989 with the aim of supporting research and development, as well as international exchange, in fields including
biochemistry and organic chemistry, promoting advances in scientific technology and ultimately promoting socioeconomic development.
Contributions include research grants to researchers, financial support for attendance at overseas and domestic conferences and support for
lectures. To date, the foundation has awarded a cumulative 356 research grants and 178 international exchange fellowships, the sum of which
totals approximately ¥930 million.
Beginning anew as a charitable organization on April 1, 2011, Nagase Science and Technology Foundation began providing research grants
accompanying the bestowing of the Nagase Research Promotion Award.

Sachiko Tsukamoto

Number of Employees by Gender

Professor
Graduate School of Pharmaceutical Sciences, Kyushu University
Professor
Graduate School of Science, Kyoto University
Professor
Graduate School of Pharmaceutical Sciences, Kumamoto University

Development of new fluorescent probes for In Cell functional analysis
Induction of useful iPS cells using functional small molecules
Study on the Diels-Alderase producing the antipodes

Overseas National Staff is being systemized based on the Basic Management
Program (BMP) for managerial candidates, the General Management Program

994

944

920

907

2. Active Contributions to Society

963(GMP) for general managerial candidates and the Nagase Management Program(NMP) for potential executives. In the latter, for example, four overseas local staff

335

303

294

283

330

members were among the approximately 20 participants who were divided into
teams in order to make proposals to management completely in English intended(Persons)

to help solve Group management issues. Such initiatives are significantly

FemaleMalecontributing to the development of the next-generation of leaders.

624

626

641

659

March 2007

March 2008

March 2009

March 2010

633
March 2011

Number of Career-track Employees Hired among New Graduates
Fiscal 2010 Results

Rank-specificElective
Overseas
The Next-Generation Leadership
Program for Overseas National Staff

398 persons
18 persons
12 persons(%)

NAGASE & CO.,LTD. Annual Report 2011

nag̲2011本文(e)̲PDF.indd 40-41

14%

17%

4%

32
3

28

26
1

37 persons

24

4
4

16
(Persons)
Female
Male

40

25%

9%
Ratio offemaleemployees

TABLE FOR TWO Initiative
In October 2008, Nagase Tokyo Head Office participated in the TABLE FOR TWO (TFT)
program operated by the NPO organization TABLE FOR TWO International as part of its
employee-participatory social contribution activities. The Osaka Head Office also took
part in the TFT program in January 2009. TFT was launched to reduce the incidenceof lifestyle-related diseases caused by overeating and obesity in advanced countries
including Japan, while extending food assistance to developing countries where

Number of Participants at Main Training Programs
Training Program

At the Nagase Group, one element of our environmental policy is to fulfill our responsibilities as a good corporate citizen. This is demonstrated
by collaboration, sponsorship and other support, as well as participation in external organizations that implement environmental preservation
activities. In addition to taking part in the Nippon Keidanren Committee on Nature Conservation, the Japan Foreign Trade Council’s Global
Environment Committee and other organizations, Nagase proactively takes action that contributes to local communities.

4
29

25

20

12

24

April 2007

April 2008

April 2009

April 2010

April 2011

Fostering Communication with the Local Community
The Kobunacho district of Nihonbashi, where the Company’s Tokyo headquarters is
located, has been alive with fish markets, bonito flake wholesalers and other traditional businesses since the Edo Period. As a part of this community, Nagase Group
employees actively participate in the “Tennosai” festival at the Yakumo Shinto Shrine(a traditional aspect of this historical area) by carrying large mikoshi (portable shrines).

people suffer from the shortage of food.
Every time a TFT healthy meal—a meal that includes an ample portion ofvegetables—or other TFT licensed food is bought, the employee who makes thepurchase and the Company each donate 10 yen to the
TFT office. This buys one highly nutritious school meal
for a child in the developing world. The total numberof meals donated was 20,500 as of March 31, 2010.

This festival has been held in Kobunacho once every four years for around 340 years.
Group employees working in the Kobunacho
district value the relationships they have forgedwith members of the local community and willcontinue to do their utmost to preserve theunique history and traditions of the area.

NAGASE & CO.,LTD. Annual Report 201141

11/09/02 16:52

Six-Year Summary

Management’s Discussion and Analysis of Operations and Finances

Nagase & Co., Ltd. and Consolidated Subsidiaries (Fiscal years ended March 31)

Thousands of
U.S. Dollars (Note)(Millions of yen)

2006

2007

2008

2009

2010

2011

Net Sales

2011

The Nagase Group imports and exports a diverse array of products and engages

For the Fiscal Year:Net Sales

The Nagase Group and Its Businesses

in domestic transactions, with Nagase & Co., Ltd. (the “Company” or “Nagase”) at¥ 648,023¥ 701,321¥ 764,755¥ 715,238¥ 603,949¥ 660,213$ 7,940,024

Domestic

388,470

410,789432,813394,874

360,382

389,379

4,682,850

Overseas259,553

290,532

331,942

320,364

243,567

270,833

3,257,162

Gross Profit

67,64073,63980,506

71,52765,41573,008878,028

includes 51 subsidiaries as well as 9 affiliates, which are accounted for by the

Operating Income

17,596

21,66923,063

12,522

13,12818,732

225,280

equity method.

Income before Income Taxes
and Minority Interests

20,58323,095

20,264

11,183

13,534

20,918

251,569

Co., Ltd. into a consolidated subsidiary due to the increased significance of the

Net Income

12,892

13,567

10,005

5,808

7,537

12,823

154,215

business. Sofix Corp. (which had been an affiliate accounted for by the equity

9,885¥ 10,040

Capital Investment

its center. In addition, the Nagase Group manufactures and sells products and

4,769

¥

5,713

¥

¥

7,266

¥

7,212

$

86,735600

provides services. These businesses are conducted by 95 related companies,
consisting of 71 subsidiaries and 24 affiliates. The scope of consolidation

During fiscal 2010, ended March 31, 2011, Nagase turned Nagase Vietnam¥(¥ Billion)
800

400
200
0
Fiscal years
ended March 31

2007

2008

2009

2010

2011

method in fiscal 2009) also became a consolidated subsidiary following Nagase’s Gross Profit and Selling, General and Administrative Expenses

purchase of additional shares.

Cost of sales rose ¥48.67 billion, or 9.0 percent, year on year to ¥587.20 billion.

Depreciation and Amortization

3,528

4,110

5,131

5,425

5,976

6,387

76,813

During fiscal 2010, the Nagase Group removed 20 companies, including

In line with the increase in revenue, gross profit grew ¥7.59 billion, or 11.6

Research and Development Expenses

2,428

2,571

2,927

2,985

3,241

3,512

42,237

Nagase Filters Co., Ltd., from its scope of consolidation. The total assets, net

percent, to ¥73.00 billion. On this basis, the ratio of gross profit to net sales

sales, net income and retained earnings of these companies had no material

improved 0.3 of a percentage point to 11.1 percent.

As of the Fiscal Year-End:

effect on the consolidated financial statements.

Total Assets¥ 396,773¥ 422,859¥ 419,869¥ 340,968¥ 368,088¥ 375,336$ 4,513,963

Net Assets

196,620

211,672

208,377

191,931202,753

209,316

2,517,330

Interest-Bearing Debt

24,834

20,49133,342

31,34021,88627,125326,218

Share Price (Yen)

1,582

1,485

1,018

761

1,169

990

11.91

Market Value
Number of Shares Issued and Outstanding(Thousands of Shares)
Number of Shareholders
Number of Employees

218,961
138,408
6,904
3,504

205,536

140,899

138,408

105,328

138,408

6,653

138,408

6,324

3,865

161,799
138,408

5,801

4,335

137,024
138,408

5,446

4,506

1,647,913
—

5,136

4,469

—

4,693

(Yen)

—
U.S. Dollars (Note)

Per Share Data:
Net Income
Net Assets
Cash Dividends¥ 100.32¥ 105.84

¥

77.86

¥

45.17

¥

58.64

¥

99.76

$

1.20

1,535.70

1,597.27

1,559.97

1,435.88

1,519.61

1,568.04

18.86

15.00

18.00

17.00

16.00

16.00

22.00

0.26

Ratios:Operating Margin(Operating Income / Net Sales) (%)

2.7

3.1

3.0

1.8

2.2

2.8

—

Selling, general and administrative expenses increased ¥1.99 billion, or 3.8
percent, year on year to ¥54.27 billion. The ratio of SG&A expenses to net sales

Overview of Results

declined 0.5 of a percentage point year on year to 8.2 percent.

 Net Sales

 Research and Development Expenses

During the period under review, despite the sharp appreciation of the yen, the

The Nagase Group integrates its comprehensive strengths to engage in research

Japanese economy remained robust, supported by economic-stimulus measuresand development with the objectives of developing new technologies andimplemented by the government and recovery in overseas economies. However,products and disseminating technological information, based on its marketing

the Great East Japan Earthquake in March 2011 has not only caused direct

activities, in order to create new businesses.

damage to the disaster areas, but also had significant, negative impact on
manufacturers in Japan and overseas due to disruptions in supply chains.

The Nagase R&D Center continues to conduct research with an emphasis on
providing users with technological solutions. Main research themes include

Reflecting these conditions, Nagase’s consolidated net sales increased

process development for pharmaceuticals and pharmaceutical intermediates¥56.26 billion, or 9.3 percent, year on year to ¥660.21 billion due to improved

through the application of organic synthesis technologies and biotechnologies;

revenue in Japan and overseas.

the development of drug discovery support technologies; the development of

On the domestic front, favorable performance in the Electronics segment andenzyme and enzyme-based products through the application of microorganism

steady sales in the Plastics segment led to net sales of ¥389.37 billion, a ¥28.99

utilization technologies; and the development of cosmetic and health-foodbillion, or 8.0 percent, rise compared with the previous fiscal year. Outside of

products through the discovery of natural materials and ingredients and theJapan, sales increases were recorded in the greater China and the ASEAN region

application of pharmacological evaluation technologies. Furthermore, theas well as in the Plastics and Electronics segments in North America.

Company commenced the application of biotechnological research focusing on

Consequently, overseas sales stood at ¥270.83 billion, a ¥27.26 billion, or 11.2

the environment and energy fields from fiscal 2008. The Nagase R&D Center also

percent, improvement in year-on-year.

collaborates extensively with Nagase ChemteX, a major manufacturing subsidiary,

Ratio of Income before Income Taxes andMinority Interests to Net Sales (%)

3.2

3.3

2.6

1.6

2.2

3.2

—

in areas ranging from the development to the manufacture of products. The

Return on Sales (ROS) (%)

2.0

1.9

1.3

0.8

1.2

1.9

—

Nagase Group’s intellectual property includes chiral synthesis technology to

Total Assets Turnover (Times)

1.8

1.7

1.8

1.9

1.7

1.8

—

Return on Assets (ROA) (%)

3.5

3.3

2.4

1.5

2.1

3.4

—

Return on Equity (ROE) (%)

7.1

6.8

4.9

3.0

4.0

6.5

—

Shareholders’ Equity Ratio (%)

49.6

48.5

47.8

54.1

53.1

53.7

—

the Nagase Group’s technological capabilities in high regard. Through these R&D

Debt to Equity Ratio (Times)

0.13

0.10

0.17

0.17

0.11

0.13

—

activities, the Nagase R&D Center also contributes to growth and increased earn-Interest Coverage Ratio (Times)

30.5

26.9

23.2

13.5

23.2

35.4

—

ings in the Life Sciences segment.

produce unnatural amino acids; the development of new enzymes ranging fromdiscovery to production and application; and applications for cosmetics andhealth foods using natural ingredients. In these and other sectors, the Nagase
Group has applied for numerous patents for its inventions, and customers holdNote: U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥83.15=U.S.$1.00, the approximate rate of exchange prevailing on March 31, 2011.

42

NAGASE & CO.,LTD. Annual Report 2011ngs̲2011̲財務̲e̲PDF2.indd 42-43

NAGASE & CO.,LTD. Annual Report 201143

11/09/02 17:15

Located in Amagasaki City, Hyogo Prefecture, the Nagase Application
Workshop (NAW) has now been in full-scale operation for approximately four
years. NAW responds with great care to each of the various developmental andtechnical support issues introduced from customers and suppliers through sales,

sales in Europe, the United States and Japan expanded. As a result, sales
Chemicals(¥ Billion)
24

processing. As such, Nagase is contributing to the solution of customer issues
through technological development at NAW.
At Nagase ChemteX, with particular focus on the electronics, life sciences,automotive and environmental fields, researchers who belong to product development
divisions of individual business departments and to the cross-divisional Nagase

18

237.12

253.29Despite inventory adjustments conducted by certain industry players during

7.83

8.78

the period under review, domestic sales to office automation and consumer

103.01

107.29electronics businesses showed steady growth. Supported also by increased

Depreciation and Amortization

0.42

0.46

exports of resins and molding-related products to China, overall sales in thisAmount invested in equity method affiliates

0.95

0.09

category expanded from the previous fiscal year.

Amount of increase in tangible and intangible
fixed assets

0.29

0.39

on the back of increased automobile production as a result of various government

Total Assets

0
2007

2008

2009

2010

2011

R&D Center are advancing the development of new products through the applicationof wide-ranging technologies. Long-nurtured through the Company’s business to Extraordinary Income and Loss, Net Income

or 54.1 percent, to ¥4.76 billion.

Domestic sales of automotive materials and products showed robust growthpolicies. The termination of these government policies, including the provision ofdate, these proprietary technologies include synthetic, compounding, culturing

Extraordinary net income was ¥0.29 billion, a positive turnaround from a loss ofIn the Chemicals segment, overall demand in the chemicals industry was strong,and evaluation technologies. More recently, Nagase ChemteX has been accelerating¥1.17 billion in the previous fiscal year. Extraordinary income increased to ¥2.02

and Nagase’s domestic sales expanded. Overseas, decreased sales in Northeast

these materials and products. Overseas, Northeast and Southeast Asia saw aenvironmental R&D projects in such areas as solar cells, hybrid cars, wind powerbillion, from ¥0.18 billion in the previous fiscal year. This rise was mainly

Asia were offset by increased sales in Southeast Asia and Europe, resulting in acontinuing boom in the production of automobiles, and North America started togeneration, recycling and product weight reduction. Through such projects,

attributable to gain on sales of noncurrent assets totaling ¥0.52 billion andrise in segment sales. Accordingly, net sales in the Chemicals segment improved

see signs of recovery in automobile production. Accordingly, sales of automotive

Nagase ChemteX is developing advanced, high-value-added products that areincome from sales of investments in securities amounting to ¥1.19 billion.

¥16.16 billion, or 6.8 percent, year on year, to ¥253.29 billion. Segment operat-materials and products expanded, increasing overall sales in this business.

lightweight, durable and easy to recycle. For the fiscal year under review,

Extraordinary loss rose to ¥1.72 billion, from ¥1.36 billion in the previous fiscal

ing income increased ¥0.94 billion, or 12.1 percent, to ¥8.78 billion.

research and development expenses totaled ¥3.51 billion.

year, primarily due to a provision of allowance for doubtful accounts for subsidiar-In the colors and imaging business, which handles pigments, dyestuffs,

products, sales of functional films (insulating sheets) for LCD TVs and power

ies and affiliates of ¥0.69 billion and to the loss on step acquisitions totaling

digital print processing materials, functional dyes and other products related toconnectors and anti-reflective sheets for such electronic devices as mobile¥0.34 billion.

color, the business performance of dyestuffs and fiber-processing agents for thephones declined. Despite an increase in sales of precision inspection systems for

Income before income taxes and minority interests climbed ¥7.38 billion, or

fiber-processing industry and thermal toner materials remained flat year on year.

liquid crystal polarizer films, overall sales in these businesses dropped slightly

54.6 percent, year on year to ¥20.91 billion. On this basis, the ratio of income

However, an increase in sales of printer ink materials, functional color pigments

year on year.

before income taxes and minority interests to net sales rose 1.0 percentage point

for display-related applications and electro conductive polymer pushed up overall

to 3.2 percent.

sales in this business.

Research and Development Expenses(¥ Billion)
4
3
2
1
0
Fiscal years
ended March 31

2007

2008

2009

2010

As a result of the above, operating income jumped ¥5.60 billion, or 42.7 percent,In businesses focusing on functional films and sheets and plastic molding

Electronics

As a result, net income soared ¥5.28 billion, or 70.1 percent, year on year to¥12.82 billion. This translated to a net income to net sales ratio of 1.9 percent,products ranging from naphtha-derived general-purpose petrochemical products

up 0.7 of a percentage point. Net income per share increased from ¥58.64 in

to high-value-added products, overseas sales of plastic raw materials and

Net Salesfiscal 2009 to ¥99.76.

additives were brisk. Also, sales of urethane and paint materials to the automobile
industry grew, raising overall sales in this business.

2011

 Operating Income, Net Other Income

In the speciality chemicals business, which boasts an extensive product

Net Income (Left)

Net Income per Share (Right)

portfolio that includes surfactants, industrial oil solutions and organic synthesis(¥ Billion)
15

(¥)
150

materials as well as sealant materials for fluorochemical and semiconductor

year on year to ¥18.73 billion, for an operating margin of 2.8 percent, anapplications, overall performance was robust. Nagase ChemteX, which functions

improvement of 0.6 of a percentage point.

as the core manufacturing company within the Nagase Group, saw higher sales,

10

100

5

50

year. This improvement was mainly attributable to a rise in dividend income and adecrease in interest expense. The interest coverage ratio, defined as the sum ofoperating income and interest and dividend income divided by interest expense,
rose from 23.2 times in fiscal 2009 to 35.4 times.
Accounting for these factors, ordinary income surged ¥5.91 billion, or 40.2
percent, year on year to ¥20.62 billion. The ratio of ordinary income to net sales
increased 0.7 of a percentage point to 3.1 percent.

NAGASE & CO.,LTD. Annual Report 2011ngs̲2011̲財務̲e̲PDF2.indd 44-45

0
Fiscal years
ended March 31

0
2007

2008

2009

2010

Fiscal years ended March 31(¥ Billion)
2010

2011

117.59133.64

Operating Income

3.48

6.13

Total Assets

60.86

60.12

Depreciation and Amortization

2.17

2.70

Amount invested in equity method affiliates

0.11

0.07

Amount of increase in tangible and intangible
fixed assets

3.73

2.16

In Electronics, increased demand for liquid crystals, semiconductors, touchparticularly of products for LCD-related applications.

Nagase posted net other income totaling ¥1.89 billion, for the fiscal year
under review, a rise of ¥0.30 billion, or 19.5 percent, from the previous fiscal

subsidies to buyers of eco cars, during the period had little effect on sales ofIn the performance chemicals business, which handles a wide array of

Net Income / Net Income per Share44

percent, to ¥222.10 billion. Segment operating income jumped ¥1.67 billion,

2011

Operating Income

6(¥ Billion)
2010

Net Sales

12

Fiscal years
ended March 31

in the Plastics segment increased year on year, rising ¥29.53 billion, or 15.3

Fiscal years ended March 31

and it uses processing equipment and evaluation devices operated by technicalstaff specializing in the three areas of plastics, coating materials and fiber

In the Plastics segment, sales in Northeast and Southeast Asia were strong, while

Results by Business Segment
Operating Income

panels, smartphones and other electronic products resulted in steady growth of
Plastics

segment sales. By region, sales in Southeast Asia declined, while those in Japan,

Fiscal years ended March 31

2011

Net Sales(¥ Billion)

Northeast Asia, Europe and the United States increased. Consequently, net sales

2010

2011

in the Electronics segment improved ¥16.04 billion, or 13.6 percent, year on

192.56222.10year, to ¥133.64 billion. Segment operating income surged ¥2.64 billion, or 76.0
percent, to ¥6.13 billion.

Operating Income

3.09

4.76

Total Assets

91.97

100.26In the electronic chemicals business, particularly the products of Nagase

Depreciation and Amortization

0.74

0.58

Group companies, such as Nagase ChemteX, performed robustly. Sales ofAmount invested in equity method affiliates

0.70

0.78

formulated epoxy resins expanded significantly, supported by a recovery inAmount of increase in tangible and intangible
fixed assets

0.79

1.01

demand for these resins for heavy electric machinery applications and by strong
demand for applications in mobile phones, particularly smartphones. Sales of

NAGASE & CO.,LTD. Annual Report 201145

11/09/02 17:15

chemicals used to manufacture LCDs also expanded substantially, reflecting

Results by Geographical Segment

the positive impact of a new business launch. As a result, overall sales in thisYear ended March 31, 2011

business grew year on year.
In the electronic materials business, sales of precision abrasive materials(¥ Billion)
Japan

China

OthersTotalused in silicon wafer processing for semiconductors and hard disks remained flat

Net Sales

389.37112.63158.20660.21compared with the previous fiscal year. In LCDs, sales of materials for optical film

Fixed Assets

36.62

—

3.28

39.91

were firm, while sales of materials for touch panels increased significantly.

Note: Net sales are classified by country and region based on customer location.

Overseas, the performance of businesses focusing on the ongoing slimming of
LCD panels showed significant growth. Consequently, overall sales in this Cash Flows from Operating Activities

 Liabilities

Net cash provided by operating activities totaled ¥10.99 billion. This reflected

As of March 31, 2011, total liabilities stood at ¥166.02 billion, an increase ofsuch factors as income before income taxes and minority interests totaling¥0.68 billion from March 31, 2010.

¥20.91 billion, which offset an increase in working capital following an upswing

Current liabilities rose ¥1.40 billion to ¥138.51 billion. In spite of a fall inin notes and accounts receivable due to sales expansion and a rise in inventories.

notes and accounts payable, this result was due to an increase in short-termloans following an upswing in working capital and other factors.

 Cash Flows from Investing Activities

Working capital increased year on year, from ¥130.66 billion to ¥138.78

Net cash used in investing activities amounted to ¥9.14 billion. Major components

Profit Sharing Policy

business expanded substantially.

were acquisitions of property and equipment totaling ¥5.70 billion and purchases

 Dividend Policy
Fiscal years ended March 31

Net Sales(¥ Billion)a fall in net unrealized holding gain on securities in line with lower share prices.

Through the enhancement of its earnings power and corporate structure, Nagase

 Cash Flows from Financing Activities

adheres to an ongoing basic policy of making continuous and secured dividend

Net cash provided by financing activities was ¥3.56 billion. This was primarily

payouts linked to its consolidated performance, and thus it aims to keep

attributable to an increase in short-term loans of ¥6.11 billion that offset the

2010

2011

55.54

50.24

increasing the per-share dividend with due consideration given to the payout ratio

payment of cash dividends amounting to ¥2.31 billion.

Operating Income

1.55

0.95

and the ratio of dividends to net assets on a consolidated basis. Nagase intends

Total Assets

31.88

30.13

to use the retained funds effectively to support future business activities and to

Cash Flow Summary

Depreciation and Amortization

0.80

0.65

strengthen its management foundation.

Fiscal years ended March 31

Amount invested in equity method affiliates

1.42

1.53

Amount of increase in tangible and intangible
fixed assets

0.18

0.26

In the Life Sciences segment, the fine chemicals business experienced a decline
in sales of pharmaceutical raw materials and intermediates and raw materials

2009

2010

2011

36.16

27.87

10.99

interim dividend, the Company will pay an annual dividend of ¥22.00 per share.

Net Cash Provided by Operating
Activities

The consolidated payout ratio decreased to 22.1 percent from 27.3 percent for

Net Cash Used in Investing Activities(11.06)(9.43)(9.14)

the previous fiscal year.

Net Cash Provided by (Used in)
Financing Activities(5.54)(11.75)

3.56

used in agricultural chemicals, as well as a slight dip in sales of materials of
living commodities. Sales in the beauty care products business, which handles
cosmetics and health foods, also dipped slightly. As a result, segment sales
decreased year on year. Accordingly, net sales in the Life Sciences segment
decreased ¥5.29 billion, or 9.5 percent, year on year, to ¥50.24 billion. Segment
operating income dropped ¥0.60 billion, or 38.7 percent, to ¥0.95 billion.
In the fine chemicals business, sales of pharmaceutical products
manufactured by Nagase Medicals Co., Ltd. remained almost on par with theprevious fiscal year. Meanwhile, demand for existing pharmaceutical raw materials
and intermediates stalled, and there was a delay in the development of new
products. Accordingly, sales of these products declined year on year. In enzymes
and fermentation products, sales of products developed by Nagase ChemteX
Corp. showed a slight increase. However, overall sales in this business decreased
year on year.
In the beauty care products business, sales of new health food products werebrisk. On the other hand, sales of cosmetics were stagnant, reflecting a general
hesitance among consumers to buy when anticipating new releases. As a result,overall sales in this business slipped slightly year on year.

OthersSegment net sales decreased ¥0.18 billion, or 16.7 percent, to ¥0.93 billion,
while segment operating income amounted to ¥10 million.

For the fiscal year ending March 31, 2012, Nagase plans to pay an annual

 Stock Option Systemngs̲2011̲財務̲e̲PDF2.indd 46-47(Times)
3

100

2

50

1

As of / Year
ended March 31

0
2007

2008

2009

2010

2011

 Net Assets
Net assets as of March 31, 2011 stood at ¥209.31 billion, up ¥6.56 billion

Total assets as of March 31, 2011 stood at ¥375.33 billion, an increase of ¥7.24

from March 31, 2010. This increase was primarily attributable to a rise inbillion from March 31, 2010.

retained earnings, which resulted from the posting of net income in the fiscal

In the fiscal year ended March 31, 2003, the Nagase Group introduced a stock

Current assets increased ¥9.52 billion to ¥277.30 billion. Despite a decrease

year under review. This result occurred despite a drop in net unrealized holding

option system aimed at boosting the motivation and morale of Group employees

in notes and accounts receivable of overseas subsidiaries caused by foreign

gain on securities and a worsening of translation adjustments. Accounting forin order to improve their performance and at further enhancing the Company’s

exchange fluctuations, this rise was mainly the result of an increase in inventories

these factors, the shareholders’ equity ratio grew 0.6 of a percentage point tocorporate value by aligning the interests of the Group with those of shareholders.

and higher cash and time deposits aimed at enhancing liquidity.

53.7 percent.

The sum of property, plant and equipment and investments and other assets

 Liquidity and Financial Condition

fell ¥2.28 billion to ¥98.03 billion. This contraction was largely due to a decline in

Cash and cash equivalents as of March 31, 2011 increased ¥4.39 billion, or 10.3

investments in securities, reflecting a decrease in their market value and the salepercent, from March 31, 2010 to ¥47.20 billion.

of shares.

For the fiscal year under review, net cash provided by operating activities
totaled ¥10.99 billion, mainly due to the posting of income before income taxes

Total Assets / Return on Assets

and minority interests amounting to ¥20.91 billion. This result occurred despite a

Total Assets (Left)rise in working capital on the back of increases in notes and accounts receivable(¥ Billion)
500

Return on Assets (Right)
(%)
5

400

4

investments in securities. Net cash provided by financing activities was ¥3.56

300

3

billion owing to an increase in short-term loans that offset such factors as the200

2

payment of cash dividends.

100

1

and inventories. Meanwhile, net cash used in investing activities totaled ¥9.14
billion, primarily attributable to purchases of property and equipment as well as

0

NAGASE & CO.,LTD. Annual Report 2011

Current Ratio (Right)

 Assets

As of / Year
ended March 31

46

Working Capital (Left)(¥ Billion)
150

0per-share dividend of ¥24.00, consisting of an interim and year-end dividend of¥12.00 each.

Working Capital / Current Ratio(¥ Billion)

Based on this policy, Nagase plans to pay a year-end dividend of ¥13.00 per
share for the fiscal year ended March 31, 2011. Therefore, together with theLong-term liabilities decreased ¥0.71 billion from March 31, 2010 to ¥27.50
billion. This rise was mainly due to a decline in deferred income taxes caused byof investments in securities of ¥1.58 billion.

Life Sciencesbillion. The current ratio improved 4.9 points to 200.2 times from a year earlier.

0
2007

2008

2009

2010

2011

NAGASE & CO.,LTD. Annual Report 201147

11/09/02 17:15

Net Assets / Return on Equity
Net Assets (Left)

Return on Equity (Right)(¥ Billion)
240

(%)
8

180

6

120

Statements made in this document with respect to the Nagase Group’s(5) Risks Involved in Operating Overseas(10) Risks of Handling Various Chemicals

performance outlook contain forward-looking statements based on assumptions,

A significant percentage of the Nagase Group’s activities involve selling and man-Chemicals are a core business of the Nagase Group, which imports and exports a

projections and plans of the Company as of April 28, 2011. Forecasts inufacturing overseas, principally in China, Southeast Asia, Europe and North

diverse array of products for a broad range of applications. The Group’s exports

connection with the Group’s future performance are subject to a variety of risks

America. As a matter of policy, the Nagase Group makes every effort to determine

are therefore subject to the application of regulations that aim in part to maintainand uncertainties including those outlined as follows. As a result, readers aretrends in markets overseas and respond appropriately to them. However, failure

international peace and safety, including the Foreign Exchange and Foreign Tradeadvised that actual results may differ materially from projections.

on the part of the Nagase Group to make accurate projections due to unexpected

Control Law and the Export Trade Control Order, and imports are subject to theevents including factors related to the regulatory systems and customs of over-Chemical Substances Control Law and other laws and regulations. The Nagase

Operating and Other Risks

seas countries could impact the Group’s performance and financial position.

Group has therefore established the Security Trade Control Committee and the

The Nagase Group is engaged in trading, marketing, research and development,(6) Impact of Changes in Stock Prices

regulatory systems and with laws related to chemical product management in

manufacturing and processing, and conducts global business activities in the five

The Nagase Group maintains a portfolio of marketable stock, primarily shares ofChina, Southeast Asia, Europe, North America and elsewhere. Contravention ofsegments of Chemicals, Plastics, Electronics, Life Sciences and Others. The fol-companies with which the Group transacts business, and is subject to the risk ofthese regulatory systems would result in restrictions on business activities, andlowing presents an overview of major operating and other risks to which thechanges in the prices of these shares. As a matter of policy, the Nagase Group

therefore could impact the Group’s performance and financial position.

Nagase Group’s businesses are subject by their nature and that exert or could

seeks to reduce this risk by continuously reviewing and reorganizing its share-exert a significant influence on investor decisions.

holdings. However, changes in stock prices could impact the Group’s perfor-

4

60

2

0

0

Item Compliance Committee, which work to assure compliance with the above
As of / Year
ended March 31

2007

2008

2009

2010

2011

Investment in Plant and Equipment
Investment in plant and equipment for the fiscal year ended March 31, 2011
centered on manufacturing facilities for manufacturing subsidiaries and totaled

mance and financial position. Moreover, a drop in stock prices that reduces return(1) Overall Operating Riskon pension plan assets could impact the Group’s profitability by increasing retire-

By segment, in the Chemicals segment, investment in plant and equipment

The Nagase Group conducts a wide spectrum of operations in the segments ofment benefit costs.

totaled ¥0.39 billion and included manufacturing and other facilities ofChemicals, Plastics, Electronics, Life Sciences and Others from its base in chemi-

manufacturing subsidiaries. In the Plastics segment, investment in plant andcals. The chemical industry both in Japan and internationally is subject to signifi-(7) Counterparty Credit Risk

equipment totaled ¥1.00 billion and included manufacturing and other facilities ofcant volatility that could impact the Group’s performance and financial position.

The Nagase Group is exposed to credit risk because it extends credit to counter-¥5.05 billion.

manufacturing subsidiaries. In the Electronics segment, investment in plant andparties in a diverse array of transactions in Japan and overseas. As a matter of

equipment totaled ¥2.13 billion and included manufacturing and other facilities(2) Product Market Conditions

policy, the Nagase Group moves to preclude credit risk with risk hedges such asof Nagase and manufacturing subsidiaries. In the Life Sciences segment,

The Nagase Group is extensively involved in the chemicals, plastics and otherguarantees and collateral in correlation with the financial condition of counterpar-

investment in plant and equipment totaled ¥0.25 billion and included

businesses that deal in petrochemicals manufactured from naphtha.

ties. However, the Nagase Group cannot be absolutely certain that it has avoided

manufacturing facilities of manufacturing subsidiaries. Nagase’s investment in

Raw material market conditions and the balance of supply and demand areplant and equipment totaled ¥1.26 billion companywide. The Nagase Group used

key factors determining market conditions for each product. Changes in theseboth internal and external capital resources to fund these activities.

conditions could impact the Group’s revenue and earnings.

Outlook for the Year Ending March 31, 2012(3) Impact of Fluctuations in Foreign Currency Exchange Rates

The Nagase Group’s businesses are based on brokerage transactions, and the

The Nagase Group undertakes import and export transactions and nontrade busi-

Group is working to develop high-value-added businesses. As a matter of policy,

Regarding the economic outlook for the fiscal year ending March 31, 2012,ness transactions that involve foreign currencies. Fluctuations in foreign currency

the Nagase Group is therefore supporting the ability of the Nagase R&D Center,

China and emerging nations in Asia, Europe and the United States are all

exchange rates impact the value of transactions denominated in foreign curren-

Group manufacturing subsidiaries and other Group organizations to provide high-expected to continue to expand. In Japan, however, it may be some time before

cies when translated into yen. The Nagase Group works to minimize the risks

level technologies and information through measures such as aggressively

manufacturers of end products are able to return to normal operations, due to theassociated with fluctuations in foreign currency exchange rates by hedging theseinvesting in new businesses and strategic acquisitions. However, this policy

adverse impact of the Great East Japan Earthquake on the supply of principal raw

transactions using forward foreign exchange contracts. However, fluctuations inentails operating risks that are different from those inherent in the Group’s con-materials, core parts and components.

foreign currency exchange rates could exert a material impact on the Nagase

ventional low-risk brokerage businesses. The increased latent risks involved

Based on the above, the outlook for the Nagase Group’s fiscal 2011

Group’s performance and financial position. The Nagase Group also includes cor-

could impact the Group’s performance and financial position.

performance is shown in the table below. These performance projections are

porations domiciled in countries other than Japan that maintain their financial

based on an exchange rate of ¥83=U.S.$1.00.

statements in currencies other than Japanese yen. Fluctuations in foreign curren-(9) Product Quality Riskcy exchange rates could therefore impact the consolidated financial statements

The Nagase Group operates the Nagase R&D Center and manufacturing subsid-

upon translation of the accounts of these corporations into Japanese yen.

iaries to provide high added value to customers, and devotes scrupulous attention

credit risk. Deterioration of the financial condition or bankruptcy of counterparties
could impact the Group’s performance and financial position.

(8) Risk of New Investments(Announced on April 28, 2011)

Year ending March 31, 2012
(Projected)
Year ended March 31, 2011
(Actual)Increase (Decrease) (%)(¥ Billion)
Net Sales

Operating
IncomeOrdinary
IncomeNet Income

660.0

18.0

19.0

12.0

660.2
(0.0)

18.7
(3.9)

20.6
(7.9)

12.8
(6.4)

to the quality of the technologies and products the Group thus provides. Also, the(4) Impact of Fluctuations in Interest Rates

Group handles products for which it assumes liability as their importer. As such,

The Nagase Group procures the funds required for its operating and investingGroup devotes significant attention to the quality of these products. However,activities through debt financing with financial institutions. The Group has a cer-issues such as defects in these products would terminate sales and require thetain amount of interest-bearing debt with variable interest rates. When undertak-Nagase Group to reimburse customers, which could impact the Group’s perfor-

ing variable-rate debt financing, the Group ensures that the risk associated withmance and financial position.

fluctuations in interest rates is minimized by using interest rate swap contracts
and other available means. However, future fluctuations in interest rates could
impact the Nagase Group’s performance and financial position.

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Consolidated Balance Sheets

Nagase & Co., Ltd. and Consolidated Subsidiaries (March 31, 2011 and 2010)ASSETS

Thousands of
U.S. dollars (Note 1)

Millions of yen

2011

2010

LIABILITIES AND NET ASSETS

2011

Current assets:

Thousands of
U.S. dollars (Note 1)

Millions of yen

2011

2010

2011

¥ 15,525¥ 10,274$ 186,711

746

183

8,972

101,679

108,643

1,222,838

Current liabilities:

Cash and time deposits (Notes 15 and 21)¥ 47,202¥ 42,807$ 567,673

Short-term loans (Notes 6 and 15)

Notes and accounts receivable (Note 15)

186,113

186,985

2,238,280

Current portion of long-term debt and finance lease obligations (Notes 6 and 15)

Inventories (Note 4)

36,71531,052441,551

Notes and accounts payable (Note 15)

Deferred income taxes (Note 10)

2,582

2,825

31,052

Accrued income taxes (Note 10)

3,947

1,992

47,468Other current assets

5,881

6,055

70,728Deferred income taxes (Note 10)

38

21

457

Less allowance for doubtful accounts
Total current assets(1,191)(1,951)(14,324)

277,304

267,775

3,334,985

Accrued expenses

3,339

3,120

40,156

Accrued bonuses for employees

3,342

2,814

40,192

Accrued bonuses for directors

212

160

2,550

9,685

9,903

116,476

138,517

137,114

1,665,869

Long-term debt and finance lease obligations (Notes 6 and 15)

10,854

11,428130,535

Other current liabilities
Total current liabilities
Long-term liabilities:
Property, plant and equipment, at cost:

Deferred income taxes (Note 10)

8,810

9,498

105,953

Land (Note 7)

11,747

11,692

141,275

Accrued retirement benefits for employees (Note 9)

7,295

6,815

87,733

Buildings and structures

40,25838,427484,161

Other liabilities

Machinery and equipment

45,762

43,152

550,355

Leased assets

507

319

6,097

Construction in progress

535

640

6,434

98,811

94,231

1,188,346(58,894)(53,909)(708,286)

39,91640,322

480,048

Less accumulated depreciation
Property, plant and equipment, net

Total long-term liabilities

542

477

6,518

27,502

28,221

330,752

Contingent liabilities (Note 19)
Net assets:
Shareholders’ equity (Note 11):
Common stock:
Authorized — 346,980,000 shares
9,699

9,699

116,645

Capital surplus

Issued— 138,408,285 shares in 2011 and 2010

10,041

10,040120,758

Retained earnings (Note 23)

181,665

171,286

2,184,787(5,460)(5,427)(65,664)

195,946

185,5992,356,536

13,188

14,961

158,605

Less treasury stock, at cost (Note 12)
Total shareholders’ equity

Investments and other assets:
Investments in securities (Notes 5, 7 and 15):

Accumulated other comprehensive income (loss):

Unconsolidated subsidiaries and affiliates

7,403

7,420

89,032

Other

43,322

46,268521,01050,726

53,688610,054

599

51

7,204

Deferred income taxes (Note 10)

1,046

968

12,580

Other assets

6,335

5,666

76,188Stock acquisition rights
Minority interests

Long-term loans receivable

Less allowance for doubtful accounts
Total investments and other assets
Total assets (Note 22)

Net unrealized holding gain on securities
Deferred (loss) gain on hedges

(8)

8

(96)

Translation adjustments(7,610)(5,225)(91,521)

Total accumulated other comprehensive income

5,570

9,744

66,987

235

235

2,826

(592)

(384)

(7,120)

7,564

7,173

90,968

58,11559,991

698,918

Total net assets

209,316

202,753

2,517,330¥375,336¥368,088$ 4,513,963

Total liabilities and net assets¥375,336¥368,088$ 4,513,963

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Nagase & Co., Ltd. and Consolidated Subsidiaries (Years ended March 31, 2011 and 2010)2011

Net sales (Note 22)
Cost of sales (Note 17)
Gross profit
Selling, general and administrative expenses (Note 17)
Operating income (Note 22)
Other income (expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Gain on sales of investments in securities
Reversal of allowance for doubtful accounts
Loss on devaluation of investments in securities
Gain on sales of property and equipment
Loss on disposal of property and equipment
Provision of allowance for doubtful accounts for subsidiaries and an affiliate
Gain on recognition of negative goodwill (Note 13)
Loss on step acquisitions (Note 13)
Loss on impairment of fixed assets
Special retirement expenses
Other, net
Income before income taxes and minority interests
Income taxes (Note 10):
Current
DeferredIncome before minority interests

2010¥603,949
538,534
65,415$ 7,940,024
7,061,984
878,028

54,276
18,73252,286
13,128652,748
225,280

997
(608)
291
165
—
(706)
20
(167)
—
—
—
(102)
(174)
690
13,534

16,609(6,831)
3,608
14,311
3,391(3,127)
6,326(2,610)(8,406)241(4,101)
(601)
—
7,456
251,569

7,005
280
13,632

4,103
1,505
7,925

84,245
3,367
163,945809¥ 12,823

387¥ 7,537

9,729$ 154,215

Balance at March 31, 2009
Net income for the year

Total
shareholders’equityNet
unrealized
holding gain
on securities

Stock
Deferred(loss) gain Translation acquisitionrightson hedges adjustments

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at cost¥ 9,699¥ 10,040¥ 168,257¥ (5,385)¥ 182,611¥ 7,939¥ 64¥ (6,016)

—

—

7,537

—

7,537

—

—

—

2011

¥660,213
587,204
73,008

1,381
(568)
300
1,190
282
(260)
526
(217)
(699)
20
(341)
(50)
—
620
20,918Millions of yen

Thousands of
U.S. dollars (Note 1)

Millions of yen

Nagase & Co., Ltd. and Consolidated Subsidiaries (Years ended March 31, 2011 and 2010)

Minority
interests

Total
net assets¥ 235¥ 7,096¥ 191,931

—

—

7,537

Gain on sales of treasury stock

—

0

—

0

1

—

—

—

—

—

1

Cash dividends——(1,928)—(1,928)

—

—

—

—

—

(1,928)Purchases of treasury stock

—

—

—

(50)

(50)

—

—

—

—

—

(50)

Disposition of treasury stock

—

—

—

0

0

—

—

—

—

—

0

Decrease in retained earnings resulting fromchanges in scope of consolidation

—

—

(6)

—

(6)

—

—

—

—

—

(6)

Adjustments due to change in scope of applicationof equity method——(2,572)8(2,564)

—

—

—

—

—

(2,564)

Other

—

—

—

—

—

7,021

(56)

790

—

77

7,833

Balance at March 31, 2010

9,699

10,040171,286(5,427)

185,599

14,961

8(5,225)

235

7,173

202,753

Net income for the year——

12,823—

12,823

—

—

—

—

—

12,823Gain on sales of treasury stock

—

0

—

—

0

—

—

—

—

—

0

Cash dividends——(2,313)—(2,313)

—

—

—

—

—

(2,313)Purchases of treasury stock

—

—

—

(33)

(33)

—

—

—

—

—

(33)

Disposition of treasury stock

—

—

—

0

0

—

—

—

—

—

0

Decrease in retained earnings resulting fromchanges in scope of consolidation

—

—

(51)

—

(51)

—

—

—

—

—

(51)

Adjustments due to change in scope of
application of equity method

—

—

(137)

—

(137)

—

—

—

—

—

(137)

Increase in retained earnings resulting frommerger

—

—

58

—

58

—

—

—

—

—

58

Other
Balance at March 31, 2011

—

—

—

—

—

(1,773)(16)(2,384)—390(3,783)¥ 9,699¥ 10,041¥ 181,665¥ (5,460)¥ 195,946¥ 13,188¥ (8)¥ (7,610)¥ 235¥ 7,564¥ 209,316

Stock
Deferred(loss) gain Translation acquisitionrightson hedges adjustments

Minority
interests

Total
net assets

Thousands of U.S. dollars (Note 1)

Minority interests
Net income

Commonstock

See accompanying notes to consolidated financial statements.

Balance at March 31, 2010

Consolidated Statement of Comprehensive Income

Income before minority interests
Other comprehensive loss:
Net unrealized holding loss on securities
Deferred loss on hedges
Translation adjustments
Share of other comprehensive loss of affiliates accounted for by the equity method
Comprehensive income
Comprehensive income attributable to:Shareholders of the Company
Minority interests

Nagase & Co., Ltd. and Consolidated Subsidiaries (Year ended March 31, 2011)

CapitalsurplusRetainedearnings

Treasurystock,
at costTotal
shareholders’equityNet
unrealized
holding gain
on securities$ 116,645 $ 120,746 $ 2,059,964 $ (65,268) $ 2,232,099 $ 179,928$ 96$ (62,838) $2,826 $ 86,266 $ 2,438,400

Net income for the year——

154,215—

154,215

—

—

—

—

—

154,215

Gain on sales of treasury stock

—

0

—

—

0

—

—

—

—

—

0

Cash dividends——(27,817)—(27,817)

—

—

—

—

—

(27,817)

Millions of yen

Thousands of
U.S. dollars (Note 1)

Purchases of treasury stock

—

—

—

(397)

(397)

—

—

—

—

—

(397)

2011

2011

Disposition of treasury stock

—

—

—

0

0

—

—

—

—

—

0

¥ 13,632$163,945

Decrease in retained earnings resulting fromchanges in scope of consolidation

—

—

(613)

—

(613)

—

—

—

—

—

(613)

(1,780)(18)(2,531)(110)(4,441)¥ 9,191(21,407)(216)(30,439)(1,323)(53,410)$110,535

Adjustments due to change in scope of applicationof equity method——(1,648)—(1,648)

—

—

—

—

—

(1,648)

Increase in retained earnings resulting frommerger

—

—

698

—

698

—

—

—

—

—

698

Other

—

—

—

—

—

(21,323)(192)(28,671)—4,690(45,496)$ 116,645 $ 120,758 $ 2,184,787 $ (65,664) $ 2,356,536 $ 158,605$ (96)$ (91,521) $2,826 $ 90,968 $ 2,517,330

Balance at March 31, 2011
See accompanying notes to consolidated financial statements.

¥ 8,648542$104,005
6,518

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Cash Flows

Nagase & Co., Ltd. and Consolidated Subsidiaries (Years ended March 31, 2011 and 2010)

Thousands of
U.S. dollars (Note 1)

Millions of yen

2011

2010

2011

¥ 20,918¥ 13,534$ 251,569

6,387
50
483
(1,381)
568
(298)
(504)
(1,115)
260

5,976
102
(78)
(997)
608
14
(11)
(82)
706

76,813601
5,809(16,609)
6,831(3,584)(6,061)(13,410)
3,127(2,272)—(6,472)(4,273)—
2,643
14,994
1,596(563)(5,029)10,997(19,733)
1,388
9,400
18,129(136)
1,807
30,6281,196(623)(3,326)27,875(27,324)—(77,835)(51,389)—
31,786
180,325
19,194(6,771)(60,481)132,255

Investing activities
Purchases of short-term investments in securities
Proceeds from sales of short-term investments in securities
Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of investments in securities
Proceeds from sales of investments in securities
Payments for sales of investments in subsidiaries resulting in change in scope of consolidation
Purchase of investments in subsidiaries resulting in change in scope of consolidation
Purchases of investments in capital
Increase in short-term loans receivable, net
Purchases of intangible fixed assets
Other, net
Net cash used in investing activities——(5,708)574(1,588)
2,082
—
(460)
(168)
(1,225)(1,825)(827)(9,147)(10,000)
10,000(6,537)29(3,333)
1,059
(187)
—
(177)
(229)
(672)
610
(9,438)——(68,647)
6,903(19,098)
25,039—(5,532)(2,020)(14,732)(21,948)(9,946)(110,006)

Financing activities
Increase (decrease) in short-term loans, net
Proceeds from long-term debt
Cash dividends paid
Cash dividends paid to minority shareholders
Other, net
Net cash provided by (used in) financing activities

6,114
138
(2,313)
(152)
(222)
3,564

(9,657)200(1,928)(182)(184)(11,753)

73,5301,660(27,817)(1,828)(2,670)42,862(1,253)4,161
42,807204
29¥ 47,202

(18)
6,664
36,137
6—¥ 42,807(15,069)
50,042514,8172,453
349$ 567,673

Operating activities
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization
Loss on impairment of fixed assets
Provision for (reversal of) accrued retirement benefits for employees, net of payments
Interest and dividend income
Interest expense
Exchange (gain) loss, net
Gain on sales of property and equipment, net
Gain on sales of investments in securities, net
Loss on devaluation of investments in securities
Changes in operating assets and liabilities:
Notes and accounts receivable
Prepaid pension expense
Inventories
Notes and accounts payable
Allowance for voluntary recall expenses
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents resulting from inclusion of subsidiaries in consolidation
Increase in cash and cash equivalents resulting from merger with an unconsolidated subsidiary
Cash and cash equivalents at end of the year (Note 21)

Notes to Consolidated Financial Statements

Nagase & Co., Ltd. and Consolidated Subsidiaries (March 31, 2011)

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 theapplication and disclosure requirements of International Financial Reporting Standards,
and have been compiled from the consolidated financial statements prepared by theCompany as required by the Financial Instruments and Exchange Act of Japan.
Effective the year ended March 31, 2011, the Company has adopted the“Accounting Standard for Presentation of Comprehensive Income” (AccountingStandards Board of Japan (ASBJ) Statement No. 25 issued on June 30, 2010). In connection with the adoption of this standard, “Accumulated other comprehensive income(loss)” and “Total accumulated other comprehensive income” shown in the accompanying consolidated balance sheet as of March 31, 2010 had previously been stated as“Valuation and translation adjustments” and “Total valuation and translation adjustments,” respectively, in the prior year’s consolidated balance sheet.
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.

In addition, a certain reclassification of previously stated amounts has been madeto conform the consolidated financial statements for the year ended March 31, 2010 to
the 2011 presentation. Such reclassification had no effect on consolidated net income
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 amatter of arithmetic computation only, at ¥83.15 = U.S.$1.00, the rate of exchange
prevailing on March 31, 2011. This translation should not be construed as a representation that the yen amounts 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 ofless than one million yen for the years ended March 31, 2011 and 2010 have been
omitted. Consequently, the totals shown in the accompanying consolidated financial
statements for the years ended March 31, 2011 and 2010 (both in yen and in U.S. dollars) do not necessarily agree with the sum of the individual amounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of theCompany and significant companies that it controls directly or indirectly. Significant
affiliates over which the Company exercises significant influence in terms of their operating and financial policies have been accounted for by the equity method. All significant intercompany balances and transactions have been eliminated in consolidation.
The overseas consolidated subsidiaries have a December 31 year-end closing dateand one domestic consolidated subsidiary’s year end is at the end of February, both ofwhich differ from the year-end date of the Company. As a result, adjustments havebeen made for any significant intercompany transactions that took place during theperiods between the year ends of these subsidiaries and the year end of the Company.
Unrealized intercompany gains among the Company and the consolidated subsidiaries have been entirely eliminated and the portion attributable to minority interests has
been charged to minority 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
and payables hedged by qualified forward foreign exchange contracts are translated at
the corresponding contract rates. All other assets and liabilities denominated in foreign
currencies are translated at their historical rates. Gain or loss on each translation iscredited 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 to income 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 thecomponents of net assets excluding minority interests, net unrealized holding gain on
securities, and deferred (loss) gain on hedges are translated at their historical exchange
rates. Revenue and expense accounts are translated at the average rates of exchange
in effect during the year. Adjustments resulting from translating financial statements
whose accounts are denominated in foreign currencies are not included in the determination of net income but are reported as “Translation adjustments” as a component ofaccumulated other comprehensive income (loss) in the accompanying consolidated balance sheets.
(c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in banks and other highly liquid
investments with maturities of three months or less when purchased.
(d) Inventories
Inventories are stated at lower of cost or net selling value, cost being determined primarily by the weighted-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 and unrealized,
are credited or charged to income. Held-to-maturity debt securities are stated at theiramortized cost. Marketable securities classified as other securities are carried at fairvalue with any changes in unrealized holding gain or loss, net of the applicable income
taxes, reported as a separate component of accumulated other comprehensive income(loss). Non-marketable securities classified as other securities are carried at cost determined by the moving-average method.
All securities held by the Company and its consolidated subsidiaries are classified
as “other securities” and have been accounted for as outlined above.
(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 computed by the declining-balance method over the useful lives of the respective assets as prescribed in the
Corporation Tax Law of Japan, except that the straight-line method is applied to buildings (other than structures attached to the buildings) acquired on or subsequent to April
1, 1998.
Property, plant and equipment owned by certain consolidated subsidiaries are
depreciated by the straight-line method.
(g) Computer Software (except for leased assets)
Costs incurred for computer software obtained for internal use are capitalized andamortized on a straight-line basis over an estimated useful life of 5 years.
(h) Goodwill
Goodwill is amortized primarily over a period of five years on a straight-line basis. When
immaterial, goodwill is charged to income as incurred.
(i) Leased Assets
Leased assets under finance lease contracts that do not transfer ownership to the lessee are depreciated to a residual value of zero by the straight-line method using theterm of the contract as the useful life.
Finance lease transactions commencing on or before March 31, 2008 other thanthose in which the ownership of the leased assets is transferred to the lessee areaccounted for in the same manner as operating leases.
(j) Allowance for Doubtful Receivables
The Company and its consolidated subsidiaries provide allowances for doubtful receivables based on their historical experience 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 and charged to income on an

See accompanying notes to consolidated financial statements.

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accrual basis. Deferred income tax assets and liabilities are computed based on thetemporary differences between the financial reporting and the tax bases of the assets
and liabilities that will result in taxable or deductible amounts in the future.
Computations of deferred tax assets and liabilities are based on the enacted tax laws.
(l) Accrued Bonuses for Employees
Accrued bonuses for employees are provided based on the estimated amount ofbonuses to be paid to employees and are charged to income in the current year.
(m) Accrued Bonuses for Directors
Accrued bonuses for directors are provided based on the estimated amount of bonuses
to be paid to directors and are charged to income in the current year.
(n) Retirement Benefits
The Company has defined benefit pension plans, defined contribution pension plans
and retirement benefit plans. The consolidated subsidiaries have defined benefit pension plans, defined contribution plans and retirement benefit plans.
The Company has established an employees’ retirement benefit trust for the payment of retirement benefits.
Actuarial gain or loss is principally credited or charged to income in the year following the year in which such gain or loss is recognized for financial reporting purposes.
Prior service cost is charged to income in the year in which such cost is recognized forfinancial reporting purposes.
(Supplementary information)
One domestic consolidated subsidiary transferred its tax-qualified pension plan to adefined contribution pension plan on November 1, 2009, and in connection with thistransfer, the Company recognized the terminal loss of ¥91 million as other expenses,
which was included in other, net in the consolidated statement of income for the year
ended March 31, 2010 in accordance with “Accounting for Transfers between
Retirement Benefit Plans” (ASBJ Guidance No. 1).
(o) Derivatives and Hedging Activities
The Company and its consolidated subsidiaries utilize derivative financial instruments
principally in order to manage the risk arising from adverse fluctuation in foreign currency exchange rates and to mitigate the risk of fluctuation in interest rates on borrowings. The Company has established a control environment that includes policies andprocedures for risk assessment in accordance with the Company’s rules for foreignexchange transactions and interest-rate swap transactions.
Under these rules, the Company conducts transactions within a certain range andplaces limits on the applicable assets and liabilities based on the actual demand. In
addition, the Company assesses the effectiveness of the hedging activities and verifies
the approval, reporting and monitoring of all transactions involving derivatives. The
Company and its consolidated subsidiaries do not hold or issue derivative financial
instruments for speculative trading purposes.
If an interest-rate swap contract meets certain criteria, the net amount to be paid or
received under the contract is added to or deducted from the interest on the underlying
hedged item.
Receivables and payables hedged by forward foreign exchange contracts are translated at the corresponding foreign exchange contract rates (“Allocation method”).
The Company and its consolidated subsidiaries are exposed to certain market risk
arising from their forward foreign exchange contracts. They are also exposed to the riskof credit loss in the event of non-performance by the counterparties to the currency andinterest-rate contracts; however, they do not anticipate non-performance by any ofthese counterparties, all of whom are financial institutions with high credit ratings.
Derivatives are carried at fair value with any changes in unrealized gain or loss
credited or charged to income except for those which meet the criteria for deferral
hedge accounting under which unrealized gain or loss, net of the applicable income
taxes, is reported as a separate component of accumulated other comprehensive
income (loss).
(p) Research and Development Expenses
Research and development expenses are charged to income when incurred.
(q) Distributions of Retained Earnings
Dividends and other distributions of retained earnings are approved by the shareholders
at a meeting held subsequent to the end of the fiscal year to which such distributions
are applicable. The accompanying consolidated financial statements do not, however,reflect the applicable distributions of retained earnings as approved by the shareholders
subsequent to the fiscal year end. (Refer to Note 23)(a) Marketable securities classified as other securities at March 31, 2011 and 2010 are summarized as follows:
Millions of yen

2011Statement No. 21 issued on December 26, 2008), the “Accounting Standard forConsolidated Financial Statements” (ASBJ Statement No. 22 issued on December 26,2008), the “Partial Amendments to Accounting Standard for Research and Development
Costs” (ASBJ Statement No. 23 issued on December 26, 2008), the “Revised
Accounting Standard for Business Divestitures” (ASBJ Statement No. 7 issued on
December 26, 2008), the “Revised Accounting Standard for Equity Method of
Accounting for Investments” (ASBJ Statement No. 16 issued on December 26, 2008)
and the “Revised Guidance on Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures” (ASBJ Guidance No. 10 issued on
December 26, 2008).
(d) Partial Amendments to Accounting Standard for Retirement Benefits
Effective the year ended March 31, 2010, the Company and its domestic consolidated
subsidiaries have adopted the “Partial Amendments to Accounting Standard for
Retirement Benefits (Part 3)” (ASBJ Statement No. 19 issued on July 31, 2008). The
adoption of this standard had no impact on operating results for the year ended March
31, 2010.

Thousands of
U.S. dollars

Millions of yen

56

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14¥19,015

0¥24,576¥ (301)—¥ (301)¥43,277—¥40,243

Cost

Equity securities¥18,413¥22,478¥ (648)Government bonds
Total—¥18,413—¥22,478—¥ (648)Market value determinable:
14¥43,291

Thousands of U.S. dollars

2011

Cost

Gross
unrealized
gain

Gross
unrealized
lossBook value(estimatedfair value)

Equity securities$ 221,443$ 270,331$ (7,793)$ 483,981

Government bonds
Total—$ 221,443—$ 270,331—$ (7,793)—$ 483,981

Market value determinable:(b) Securities classified as other securities for which market value was not determinable at March 31, 2011 and 2010 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2011

2010

2011

Carrying value

Carrying value

Carrying value¥ 3,079¥ 3,079¥ 2,977¥ 2,977$37,029$37,029

Market value not determinable:
Equity securities
Total(c) Proceeds from sales of, and gross realized gain and loss on, other securities for the years ended March 31, 2011 and 2010 are summarized as follows:

Inventories at March 31, 2011 and 2010 are summarized as follows.

Raw materials and supplies
Total

Book value(estimatedfair value)Book value(estimatedfair value)

2011

2010

2011

¥34,033¥28,456$ 409,296

531

566

6,386

2,150
¥36,7152,029¥31,052

25,857$ 441,551

Thousands of
U.S. dollars

Millions of yen

2011

2010

2011

Proceeds from sales¥ 2,070¥ 179$24,895

Gain on sales

1,190

140

14,311

Loss on sales

18

—

216

6. SHORT-TERM LOANS, LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS
Short-term loans at March 31, 2011 and 2010 principally represented notes and loans in the form of deeds at weighted-average annual interest rates of 1.87% and 2.12% perannum, respectively.
Long-term debt and finance lease obligations at March 31, 2011 and 2010 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Unsecured loans from banks and insurance companies, payable in yen, euro and RMB, due through 2018,
at rates from 1.37% to 5.35%

4. INVENTORIESWork in process

Cost

Gross
unrealized
loss

Gross
unrealized
loss

Lease obligations

Merchandise and finished goods

2010
Gross
unrealized
gain

Gross
unrealized
gain

Please refer to Note 15.

3. CHANGES IN ACCOUNTING POLICIES(a) Accounting Standard for Equity Method of Accounting for Investments
Effective the year ended March 31, 2011, the Company has adopted the “AccountingStandard for Equity Method of Accounting for Investments” (ASBJ Statement No. 16
issued on March 10, 2008) and the “Practical Solution on Unification of Accounting
Policies Applied to Associates Accounted for Using the Equity Method” (ASBJ Practical
Issues Task Force (PITF) No. 24 issued on March 10, 2008). The adoption of this standard had no impact on operating results for the year ended March 31, 2011.
(b) Accounting Standard for Asset Retirement Obligations
Effective the year ended March 31, 2011, the Company and its domestic consolidated
subsidiaries have adopted the “Accounting Standard for Asset Retirement Obligations”(ASBJ Statement No. 18 issued on March 31, 2008) and the “Implementation Guidanceon Accounting Standard for Asset Retirement Obligations” (ASBJ Guidance No. 21
issued on March 31, 2008). The adoption of this standard had no impact on operating
results for the year ended March 31, 2011.
(c) Accounting Standard for Business Combinations and Others
Effective the year ended March 31, 2011, the Company and its domestic consolidated
subsidiaries have adopted the “Accounting Standard for Business Combinations” (ASBJ

5. INVESTMENTS IN SECURITIESLess current portion
Total

2011

2010

2011

¥11,168¥11,242$ 134,311

430

369

5,171

11,60011,611

139,507(746)¥10,854(183)¥11,428(8,972)$ 130,535

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The aggregate annual maturities of long-term debt and finance lease obligations subsequent to March 31, 2011 are summarized as follows:Year ending March 31,

The components of retirement benefit expenses of the Company and the consolidated subsidiaries for the years ended March 31, 2011 and 2010 are outlined as follows:

Millions of yen

2012

¥

746

Thousands of
U.S. dollars$

Thousands of
U.S. dollars

Millions of yen

2011

2010

2011

¥ 940

¥ 961

$11,305

8,972

2013

5,856

70,427

Service cost

2014

4,555

54,781

Interest cost

435

453

5,232

2015

223

2,682

Expected return on plan assets

(291)

(270)

(3,500)218¥11,600

2,622$ 139,507

(79)

1,046

(950)

136
¥ 1,14294¥ 2,284

1,636$13,734

2016 and thereafterTotal

7. PLEDGED ASSETS

Amortization of actuarial (gain) loss
Contributions to defined contribution pension plans
Retirement benefit expenses

The assumptions used in accounting for the defined benefit pension plans for the years ended March 31, 2011 and 2010 were as follows:

At March 31, 2011, assets pledged as collateral to guarantee all transactions with certain customers were as follows:
Millions of yen

Thousands of
U.S. dollars

Land

¥ 560

$ 6,735

Investments in securities
Total

1,609
¥ 2,169

19,351$26,085

2011

2010

Discount rate

Mainly 2.5%

Mainly 2.5%

Expected rate of return on plan assets

Mainly 2.5%

Mainly 2.5%

10. INCOME TAXES
Income taxes applicable to the Company and its domestic consolidated subsidiaries consist of corporation, inhabitants’ and enterprise taxes, which, in the aggregate, resulted in astatutory tax rate of approximately 40.7% for the years ended March 31, 2011 and 2010.
The effective tax rate reflected in the accompanying consolidated statement of income for the year ended March 31, 2011 differ from the statutory tax rate for the following reasons:

8. COMPREHENSIVE INCOME
Comprehensive income attributable to shareholders of the Company and minority interests and other comprehensive income for the year ended March 31, 2010 were as follows:

2011
Millions of yen

2010

Comprehensive income attributable to:Shareholders of the Company
Minority interests
Total

40.7 %

Effect of:
Expenses not deductible for income tax purposes

2.4¥15,294

Dividends and other income deductible for income tax purposes

(4.5)

460
¥15,755

Net adjustment resulting from elimination of dividend income upon consolidation

5.3

Different tax rates applied at overseas subsidiaries(6.1)

Millions of yen

2010

Other comprehensive income:Net unrealized holding gain on securities

Statutory tax rate

Tax credit(1.4)

Valuation allowance(5.5)

Other, net
Effective tax rate

3.9
34.8 %¥ 6,956

Deferred loss on hedges(54)

Translation adjustments

810

Share of other comprehensive income of affiliates accounted for by the equity method
Total

117
¥ 7,829

A reconciliation of the statutory and effective tax rate for the year ended March 31, 2010 was omitted because the difference between the statutory tax rate and the Company’s
effective tax rate for financial statement purposes was less than 5% of the statutory tax rate.
Deferred income taxes reflect the net tax effect of the temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and thecorresponding amounts for income purposes.
The significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities at March 31, 2011 and 2010 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

9. RETIREMENT BENEFITS2011

The Company and its domestic consolidated subsidiaries have defined benefit plans, i.e., defined benefit pension plans and lump-sum payment plans. Certain overseas consolidated
subsidiaries also have defined benefit pension plans. Also, the Company and certain domestic consolidated subsidiaries have a defined contribution pension plan.
The following table sets forth the funded and accrued status of the plans and the amounts recognized in the accompanying consolidated balance sheets at March 31, 2011 and2010 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

2011

2010

2011

¥(20,577)¥ (20,443)$ (247,468)

Plan assets at fair value

12,59813,719151,509

Unfunded retirement benefit obligation(7,979)(6,724)(95,959)

683

(91)

8,214

(7,295)¥ (7,295)(6,815)¥ (6,815)(87,733)$ (87,733)

Retirement benefit obligation

Unrecognized actuarial loss (gain)
Net retirement benefit obligation
Accrued retirement benefits recognized in the consolidated balance sheets58

NAGASE & CO.,LTD. Annual Report 2011ngs̲2011̲財務̲e̲PDF2.indd 58-59

Deferred tax assets:
Unrealized gain on inventories
Allowance for doubtful receivables
Investments in securities
Accrued bonuses for employees
Accrued retirement benefits for employees
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Revaluation of landDeferred capital gain on property
Net unrealized holding gain on securities
Reserve for special depreciation
Other
Total deferred tax liabilities
Net deferred tax liabilities

2010

2011

¥

403
646
2,232
1,289
3,119
3,041
10,733(3,777)¥ 6,955

¥

362
775
3,651
1,087
3,313
2,791
11,982(4,936)¥ 7,045

$

4,847
7,769
26,843
15,50237,511
36,572129,080(45,424)$ 83,644¥ (382)(1,297)(8,555)(1,460)(478)(12,175)¥ (5,220)¥ (371)(1,180)(9,225)(1,744)(249)(12,771)¥ (5,725)$ (4,594)(15,598)(102,886)(17,559)(5,749)(146,422)$ (62,778)

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11. SHAREHOLDERS’ EQUITYThe Corporation Law of Japan (the “Law”) provides that an amount equal to 10% of theamount 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 andthe legal reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolution of the shareholders, or by
the Board of Directors if certain conditions are met.

14. SHARE-BASED COMPENSATIONThe Company’s legal reserve included in retained earnings at March 31, 2011 and2010 amounted to ¥2,424 million ($29,152 thousand).
Under the Law, upon the issuance and sale of new shares of common stock, theentire 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 new shares as additional
paid-in capital.

Movements in common stock during the years ended March 31, 2011 and 2010 are summarized as follows:
Number of shares

2011

Common stock

March 31, 2010

Increase

Decrease

March 31, 2011

138,408,285——

138,408,285

2010

Common stock

March 31, 2009

Increase

Decrease

March 31, 2010

138,408,285——

138,408,285

The 2006 plan

The 2007 plan

The 2008 plan

421,000

713,000

781,000

419,000

—

—

—

—

Expired(3,000)(3,000)(2,000)(2,000)

—

—

—

—

710,000

778,000

417,000

419,000

Number of shares

Granted

—

—

—

—

2011

Expired

—

—

—

—

Exercised

—

—

—

—

Outstanding at March 31, 2011—

778,000

417,000

419,000

Fair value of options as of the grant date

—

¥158

¥143

¥124

$1.72

$1.49

March 31, 2010

Increase

Decrease

March 31, 2011

9,859,357

35,033582

9,893,808

(Yen)

2010

9,846,589

The 2005 plan

GrantedOutstanding at March 31, 2010

Movements in treasury stock during the years ended March 31, 2011 and 2010 are summarized as follows:

Treasury stock

Outstanding at March 31, 2009

Exercised

March 31, 2009

and certain key employees of the Company and directors of certain subsidiaries. The
exercise price was ¥1,647 ($19.81) per share at March 31, 2011. This exercise priceis subject to adjustment in certain cases which include stock splits. The options
became exercisable on August 1, 2009 and are scheduled to expire on July 31, 2012.
The 2008 stock option plan (the 2008 plan) was approved by shareholders of theCompany on June 26, 2008. The 2008 plan provided for granting options to purchase421,000 shares of common stock to directors, executive officers, technology officers
and certain key employees of the Company and directors of certain subsidiaries. The
exercise price was ¥1,114 ($13.40) per share at March 31, 2011. This exercise priceis subject to adjustment in certain cases which include stock splits. The options
became exercisable on August 1, 2010 and are scheduled to expire on July 31, 2013.
Information regarding the Company’s stock option plans is summarized as follows:

Number of shares:

12. TREASURY STOCK

Treasury stock

At March 31, 2011, the Company had three stock option plans: the 2006, 2007 and2008 stock option plans.
The 2006 stock option plan (the 2006 plan) was approved by shareholders of theCompany on June 28, 2006. The 2006 plan provided for granting options to purchase781,000 shares of common stock to directors, executive officers, technology officers
and certain key employees of the Company and directors of certain subsidiaries. The
exercise price was ¥1,510 ($18.16) per share at March 31, 2011. This exercise priceis subject to adjustment in certain cases which include stock splits. The options
became exercisable on August 1, 2008 and are scheduled to expire on July 31, 2011.
The 2007 stock option plan (the 2007 plan) was approved by shareholders of theCompany on June 27, 2007. The 2007 plan provided for granting options to purchase419,000 shares of common stock to directors, executive officers, technology officers

Increase

Decrease

47,67934,911March 31, 2010

(U.S. dollars)

9,859,357
Fair value of options as of the grant date

—

$1.90

13. BUSINESS COMBINATIONSOn March 31, 2011, the Company additionally acquired 51% of shares of Sofix
Corporation, which was an affiliate accounted for by the equity method, for ¥744 million ($8,948 thousand) in cash and made it a wholly-owned subsidiary. Sofix
Corporation is engaged in the manufacture and sales of products relating to color formers. The Company determined to undertake this acquisition to promote the business ofcolor formers based on the management policy of the Company. The Company did notinclude operating results of Sofix Corporation in the accompanying consolidated state-ment of income for the year ended March 31, 2011 because this business combination
was completed on March 31, 2011. The Company recorded loss on step acquisitions of¥341 million ($4,101 thousand) relating to this business combination in the accompanying consolidated statement of income for the year ended March 31, 2011.
The fair value of assets acquired and liabilities assumed of Sofix Corporation, theacquisition cost and negative goodwill were as follows:

Millions of yen

Thousands of
U.S. dollars

2011

2011

Current assets¥ 933$11,221

Fixed assets

682

8,202

Total assets¥ 1,616$19,435

Current liabilities¥ 124$ 1,491

Fair value of assets acquired and liabilities assumed:

Long-term liabilities
Total liabilities
Fair value of net assets at acquisition

10

120

¥ 135

$ 1,624¥ 1,481$17,811¥ 715$ 8,599

Acquisition cost:
Fair value of shares of Sofix Corporation which the Company owned at acquisition date
Additional acquisition cost of shares of Sofix Corporation
Total acquisition cost
Difference: negative goodwill

744

8,948

¥ 1,459¥ 20$17,547$ 241

15. FINANCIAL INSTRUMENTS(a) Policy for Financial Instruments
The Company and its consolidated subsidiaries (the “Group”) invest excess funds inhighly secure, short-term financial assets (principal protection). With regard to financing, short-term working funds are raised by bank borrowings or issuance of commercial
paper and Group policy is to procure long-term funds with bank borrowings andthrough the issuance of bonds. The purpose of entering into derivative transactions is to
mitigate the foreign currency exchange risk arising from the receivables and payables
denominated in foreign currencies, and fluctuation risk related to interest rates withrespect 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 and accounts receivable are exposed 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 the Group’s internal credit
rating policy and monitors outstanding balances in conjunction with an established system under which the credit status by each customer is reviewed at least once a year
and the credit limit amount updated as necessary.
In the cases of those receivables and liabilities denominated in foreign currencies,
foreign currency forward contracts are used to hedge the risk of fluctuation. However,for foreign currency transactions denominated in the same currency involving either
payables or receivables, foreign currency forward contracts are used solely for the netted position.

Investments in securities are subject to market price fluctuation risk. However,these are mainly shares of common stock of other companies with which the Grouphas business relationships. The Group regularly monitors both their fair value and thefinancial condition of the issuer. The Group also reviews as needed the condition of its
holdings with concern to the status of sales and financial transactions.
Short-term loans are raised primarily in connection with business activities, andlong-term debt is taken out principally for the purpose of making capital investments.
Debt with variable interest rates is 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 mainly include foreign currencies forward contracts to manage the market risk of fluctuation in foreign currencies and interest-rate swaps to manage the market risk of fluctuating interest rates related to the interest payments for bank loans.
In addition, liabilities and bank loans are exposed to liquidity risk. However, theGroup works to build up a clear picture of the balance of inflow and outflow of cash,
managing such risk by establishing liquidity on hand in excess of half of the amount ofmonthly net sales.
(c) Market Value of Financial Instruments
Carrying amount, estimated fair value and unrecognized gain (loss) as of March 31,
2011 and 2010 are as follows. Financial instruments for which fair value is deemed
extremely difficult to determine are not included.

The effect on the consolidated statement of income for the year ended March 31, 2011, assuming that this acquisition had been completed at April 1, 2010, was immaterial.

60

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Millions of yen

2011
Carrying amount

Estimated fair value

Unrecognized gain (loss)¥ 47,202¥ 47,202¥ —186,113

186,113(0)

Other securities
Total assets

40,243¥273,558

40,243¥273,558—¥ (0)Liabilities
Notes and accounts payable¥101,679¥101,679¥ —16,138

16,138—Long-term debt
Total liabilities

10,555¥128,372

10,699¥128,516

144
¥ 144

Derivatives(*)
Not subject to hedge accounting

¥

(47)

¥

(47)

¥ —

¥

(13)
(60)

¥

(13)
(60)

—
¥ —

AssetsCash and time deposits
Notes and accounts receivable
Investments in securities

Short-term loans, including current portion of long-term debt

Subject to hedge accounting
Total derivative transactions

Millions of yen

The calculation methods of fair values of financial instruments and securities andderivative transactions are as follows:
Cash and time deposits
Since these items are settled in a short period of time, their carrying values approximate the fair value.
Notes and accounts receivable
The fair value of trade notes and accounts receivable is estimated as the present valueof future cash flow of each receivable classified by settlement date and discounted at
the market rate of interest at the reporting date.
Investments in securities
The fair value of investment in securities is based on quoted market prices. Please refer
to Note 5 regarding respective objectives for holding securities.
Notes and accounts payable, and short-term loans
Since these items are settled in a short period of time, their carrying values approxi-

mate the fair value.
Long-term debt
The fair value of long-term debt with fixed interest rates is based on the present valueof the total of principal and interest discounted by the interest rate to be applied
assuming new loans under similar conditions to existing loans are made. Floating interest rates for long-term loans are hedged by interest-rate swap agreements andaccounted for as loans with fixed interest rates. The fair value of those long-term loans
is reasonably based on the present value of the total of principals, interests and net
cash flows of swap agreements discounted by the interest rates, estimated reasonably,
applicable to loans made under similar circumstances.
Derivative transactions
Please refer to Note 16.

The carrying value of financial instruments without determinable market value at March 31, 2011 and 2010 is presented as follows:
Thousands of
U.S. dollars

Millions of yen

Unlisted equity securities
Investments in unconsolidated subsidiaries and affiliates
Total

2011

2010

2011

¥ 3,079
7,403¥10,482¥ 2,977
7,420¥10,397$ 37,029
89,032$ 126,061

2010

AssetsCash and time deposits

Carrying amount

Estimated fair value

Unrecognized gain (loss)¥ 42,807¥ 42,807¥ —186,985

186,985(0)Notes and accounts receivable

For the above securities, there is no market price and it is difficult to determine the fair value. Therefore, the fair value of the securities is not included in investments in securities in the summary table of financial instruments.
The redemption schedule for time deposits and notes and accounts receivable with maturity dates at March 31, 2011 is summarized as follows:
Millions of yen

Investments in securities
Other securities
Total assets

43,291¥273,084

43,291¥273,084—¥ (0)Liabilities
Notes and accounts payable¥108,643¥108,643¥ —10,412

10,412—Long-term debt
Total liabilities

11,104¥130,161

11,324¥130,380

219
¥ 219

Derivatives(*)
Not subject to hedge accounting

¥

(128)

¥

(128)

¥ —

¥

18
(110)

¥

18
(110)

—
¥ —

Short-term loans, including current portion of long-term debt

Subject to hedge accounting
Total derivative transactions

Thousands of U.S. dollars

2011

AssetsCash and time deposits

Carrying amount

Estimated fair value$ 567,673$ 567,673

2,238,280

2,238,280

Unrecognized gain (loss)

Time deposits
Notes and accounts receivable
Total

Within 1 year

Over 1 year andless than 5 years¥ 47,164
186,091¥233,255

¥—
22
¥ 22

Thousands of U.S. dollars

Time deposits
Notes and accounts receivable
Total

Within 1 year

Over 1 year andless than 5 years$ 567,216
2,238,016$ 2,805,232

$ —
265
$ 265

With respect to the redemption schedule of short-term loans, long-term debt and finance lease obligations, please refer to Note 6.
Effective the year ended March 31, 2010, the Company and its consolidated subsidiaries have adopted “Accounting Standard for Financial Instruments” (ASBJ Statement No.
10 issued on March 10, 2008) and “Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19 issued on March 10, 2008).

16. DERIVATIVES AND HEDGING ACTIVITIESThe open currency-related derivatives positions not designated as hedging instruments at March 31, 2011 and 2010 are as follows:

Notes and accounts receivable$

Millions of yen

—

2011

(0)
Type

Investments in securities

Contract value

Estimated fair value

Unrecognized gain (loss)¥ (26)

Forward foreign exchange contracts:

Other securities
Total assets

483,981$ 3,289,934

483,981$ 3,289,934

$

—
(0)

Liabilities
Notes and accounts payable¥ 2,997¥ (26)$ 1,222,838$ 1,222,838

$

—

Yen

190

(4)

(4)

194,083

194,083

—

Euro

612

(33)

(33)

Long-term debt
Total liabilities

126,939$ 1,543,860

128,671$ 1,545,592

1,732$1,732Others

7

(0)

(0)

Derivatives(*)
Not subject to hedge accounting

U.S. dollars

1,128

(5)

(5)

$

(565)

$

(565)

$

—

Yen

1,311

21

21

Subject to hedge accounting
Total derivative transactions

(156)
(722)

1

1

$

—
—

45

$

(156)
(722)

Euro

$

3
¥ 6,295(0)¥ (47)(0)¥ (47)

Selling:
U.S. dollars

Short-term loans, including current portion of long-term debt

Over-the-counter transactions

Buying:Others
Total*Receivables and payables arising from derivative transactions are presented as a net amount. Net payables are presented in parentheses.

62

NAGASE & CO.,LTD. Annual Report 2011ngs̲2011̲財務̲e̲PDF2.indd 62-63

NAGASE & CO.,LTD. Annual Report 201163

11/09/02 17:15

Millions of yen

Millions of yen

2010
Type

Contract value

Estimated fair value

2010
Unrecognized gain (loss)

Forward foreign exchange contracts:

Method for hedge accounting

Selling:Over-the-counter transactions

Major hedged item

Contract value(notional principal
amount over one year)

Estimated fair value¥ 1,664¥ —¥ (48)

123

3

2

2

—

(0)

1,991

—

64

83

—

(0)

6

—

(0)

2,013

—

(*)

346

—

(*)

173

—

(*)

513

—

(*)

69

—

(*)

14
¥ 7,003

—
¥ 3

(*)
¥ 18

Forward foreign exchange contracts:

U.S. dollars¥ 4,538¥ (109)¥ (109)

Yen

1,324

(21)

(21)

U.S. dollars

Euro

485

19

19

Euro

Others

2

(0)

(0)

1,143

7

7

Yen

994

(25)

(25)

Euro

Euro

37

(0)

(0)

Others3¥ 8,5300¥ (128)0¥ (128)Selling:

Deferral hedge accounting

Buying:Accounts receivable

Others
Buying:U.S. dollars

OthersTotal

U.S. dollars

Selling:
U.S. dollars

2011
Type

Contract value

Estimated fair value

Accounts payable

Forward foreign exchange contracts:

Thousands of U.S. dollars

Unrecognized gain (loss)

Allocation method for forward foreignexchange contracts (Note 2(o))

Forward foreign exchange contracts:

Euro

Accounts receivable

Others
Buying:U.S. dollars

Selling:
U.S. dollars$ 36,043

Yen
Over-the-counter transactions

Type of derivative transaction

Contract value(notional principal
amount)$ (313)

2,285

(48)

$ (313)

Euro

(48)

Others

Euro

7,360

(397)

(397)

Others

84

(0)

(0)

U.S. dollars

13,566

(60)

(60)

Yen

15,767

253

253

Euro

541

12

12

36
$ 75,707(0)$ (565)(0)$ (565)

Accounts payable

Total

Thousands of U.S. dollars

Buying:2011

Others
Total

Method for hedge accounting

U.S. dollars
Deferral hedge accounting

Major hedged itemEuro
Estimated fair value

Accounts receivable

OthersU.S. dollars
Accounts payable

Others¥ —¥ (24)

149

1

(5)

1

—

(0)

Accounts receivable

OthersU.S. dollars
Othersngs̲2011̲財務̲e̲PDF2.indd 64-65

(60)

12

—

(0)

13,337

—

132

1,696

—

48

120

—

0

40,661

—

(*)

3,428

—

(*)

1,864

—

(*)

11

U.S. dollars

4

Euro

10

—

0

Others

—

(*)

285

—

(*)

155

—

(*)

804

—

(*)

134

—

(*)

11
¥ 8,108—¥ 1(*)¥ (13)

Accounts payable

9,669

—

(*)

1,612

—

(*)

132
$ 97,511

—
$ 12

(*)
$ (156)

Fair value is based on the prices obtained from financial institutions.
(*): The fair value of forward foreign exchange contracts that qualify for deferral hedge accounting is included in accounts receivables and accounts payables.

Buying:Euro

NAGASE & CO.,LTD. Annual Report 2011

$ (289)12

Buying:—3,381

Accounts receivable

Others—Total

U.S. dollars

64

Allocation method for forward foreignexchange contracts (Note 2(o))

Euro

141

Selling:

Total

U.S. dollars

1,109

Forward foreign exchange contracts:

Euro

$—

1,792

Selling:¥ 1,921

Buying:

Allocation method for forward foreignexchange contracts (Note 2(o))$ 23,103

Forward foreign exchange contracts:

U.S. dollars

Euro

Accounts payable

OthersSelling:

Deferral hedge accounting

OthersU.S. dollars

Contract value(notional principal
amount over one year)

Forward foreign exchange contracts:

Euro

Accounts receivable

Buying:2011

Type of derivative transaction

Estimated fair value

Selling:

Millions of yen

Method for hedge accounting

Major hedged item

Contract value(notional principal
amount over one year)

Forward foreign exchange contracts:

Euro

Fair value is based on the prices obtained from financial institutions.
The open currency-related derivatives positions designated as hedging instruments at March 31, 2011 and 2010 are as follows:

Contract value(notional principal
amount)Type of derivative transaction

Contract value(notional principal
amount)Accounts payable

NAGASE & CO.,LTD. Annual Report 201165

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The open interest-related derivatives positions designated as hedging instruments at March 31, 2011 and 2010 are as follows.

The related lease payments, reversal of impairment loss, depreciation/amortization expense and interest expenses related to finance leases accounted for as operating leases
for the years ended March 31, 2011 and 2010 were as follows:

Millions of yen

Thousands of
U.S. dollars

2011

Method for hedge accounting

Swap rate applied to underlying debt
(Note 2(o))

Type of derivative transaction

Interest-rate swap transaction (pay-fixed,
receive-floating)Millions of yen

Hedged item

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

Estimated fair value

Long-term debt

¥8,000¥8,000(**)

Millions of yen

2010

Method for hedge accounting

Swap rate applied to underlying debt
(Note 2(o))

Type of derivative transaction

Interest-rate swap transaction (pay-fixed,
receive-floating)Hedged item

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

Estimated fair value

Long-term debt

¥8,000¥8,000(**)

Thousands of U.S. dollars

2011

2010

2011

Lease payments

¥ 37

¥ 57

$ 445

Reversal of impairment loss

25

9

301

Depreciation/amortization expense

33

49

397

Interest expense

2

5

24

Depreciation/amortization is calculated by the straight-line method over the respective lease terms.
Future minimum lease payments subsequent to March 31, 2011 under finance leases other than those which transfer the ownership of the leased assets to the Company andits consolidated subsidiaries are summarized as follows:
Millions of yen

Thousands of
U.S. dollars

2012

¥ 21

$ 253

2013 and thereafter
Total

7
¥ 28

84
$ 337

Millions of yen

Thousands of
U.S. dollars

2012

¥232

$2,7902013 and thereafter
Total

542
¥775

6,518
$9,321

Year ending March 31,

2011

Method for hedge accounting

Swap rate applied to underlying debt
(Note 2(o))

Type of derivative transaction

Interest-rate swap transaction (pay-fixed,
receive-floating)Hedged item

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

Estimated fair value

Long-term debt

$96,212$96,212(**)(**): 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 debt, their fair values were
included in long-term debt.

(b) Operating leases
Future minimum lease payments subsequent to March 31, 2011 under operating leases are as follows:Year ending March 31,

17. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses included in selling, general and administrative expenses and manufacturing costs for the years ended March 31, 2011 and 2010 totaled¥3,512 million ($42,237 thousand) and ¥3,241 million, respectively.

18. LEASES(a) Finance leases
The following pro forma amounts represent the acquisition costs, accumulated depreciation/amortization and net book value of the leased assets under finance lease contracts,
commencing on or before March 31, 2008 that do not transfer ownership to the lessee at March 31, 2011 and 2010, which would have been reflected in the accompanying consolidated balance sheets if finance lease accounting had been applied to the finance leases currently accounted for as operating leases:

19. CONTINGENT LIABILITIESAt March 31, 2011, the Company and its consolidated subsidiaries were contingently
liable as guarantors of loans of customers and other in the aggregate amount of¥1,562 million ($18,785 thousand) and as guarantors of housing loans of employees in
the aggregate amount of ¥16 million ($192 thousand).

20. AMOUNTS PER SHARE
Yen

Millions of yen

Machinery, equipment and vehicles
Furniture and fixtures
Software included in other assets
Total

2010

Furniture and fixtures
Software included in other assets
Total

Net book
value

¥ 54

¥ 25

¥ 7

116

89

—

26

44
¥248

24
¥168

—
¥ 25

20
¥ 54

Net book
value

¥ 21

¥ 18

¥—

¥ 3

¥ 87

60

46

—

14

44
¥127

33
¥ 98

—
¥—

11
¥ 28

2011

Machinery, equipment and vehicles

Accumulated
impairment loss
on fixed assets

Accumulated
impairment loss
on fixed assets

Acquisition
costs

Accumulated
depreciation/amortization

Accumulated
impairment loss
on fixed assets

Net book
value

$ 253

$ 216

$ —

$ 36

722

553

—

168

529
$ 1,527397$ 1,179

—
$ —

132
$337

Acquisition
costs

Basic

ngs̲2011̲財務̲e̲PDF2.indd 66-67

¥

99.76

¥

58.64

$ 1.20———Net assets

1,568.04

1,519.61

18.86

22.00

16.00

0.26

Cash dividends applicable to the year
Basic net income per share has been computed based on the net income available for
distribution to the shareholders of common stock and the weighted-average number ofshares of common stock outstanding during the year.
Diluted net income per share for the years ended March 31, 2011 and 2010 havenot been presented because no potentially dilutive shares of common stock were outstanding.
The amounts per share of net assets have been computed based on the number ofshares 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 financial data used in the computation of basic net income per share and diluted
net income per share for the years ended March 31, 2011 and 2010 are summarized asfollows:
Thousands of
U.S. dollars

Millions of yen

2011

Net income
Adjusted net income available for distribution to shareholders of common stock

NAGASE & CO.,LTD. Annual Report 20112011

DilutedWeighted-average number of shares

66

2010

Net income:Accumulated
depreciation/amortization

Accumulated
depreciation/amortization

Thousands of U.S. dollars

U.S. dollars

2011

2011
Acquisitioncosts

In addition, at March 31, 2011, the Company and its consolidated subsidiaries had
contingent liabilities arising from notes discounted by banks and notes endorsed for a
total amount of ¥366 million ($4,402 thousand).

¥12,823

2010

2011

¥7,537$154,215¥12,823¥7,537$154,215

128,535,317

128,553,733

NAGASE & CO.,LTD. Annual Report 201167

11/09/02 17:16

Under the new segmentation policy adopted by the Company, information by reportable segment for the year ended March 31, 2010 would have been as follows:

21. CASH AND TIME DEPOSITS

Millions of yen

A reconciliation of cash and time deposits in the accompanying consolidated balance
sheets at March 31, 2011 and 2010 and cash and cash equivalents in the accompanying

consolidated statements of cash flows for the years then ended is omitted since there
were no reconciliation items.

2010
OthersTotal¥ 237,124
1
237,126¥ 7,838¥ 103,017¥ 192,569
219
192,788¥ 3,093¥ 91,972¥ 117,591
159
117,751¥ 3,488¥ 60,866¥55,542
17
55,559¥ 1,559¥31,889¥ 602,828
397
603,225¥ 15,978¥ 287,746¥1,121
4,193
5,314
¥ 10
¥7,815¥ 603,949
4,590
608,540¥ 15,989¥ 295,561

425
7
8

745
—
—

2,178
123
103

805
—
—

4,153
130
112

331
—
—

4,485
130
112

1,490
—
—

—
—
(3)

5,976
130
109

959

705

114

1,428

3,208

1,613

4,821

—

—

4,821

299

796

3,738

185

5,020

1,387

6,407

859

—

7,266

Chemicals

22. SEGMENT INFORMATION(a) Overview of reportable segments
The reportable segments of the Company comprise those entities for which obtaining
separate financial reports is possible and that are subject to regular review by the
Board of Directors, which decides upon the distribution of management resources tosaid segments.
The Company classifies its business segments based on products and services
under the headquarters. Each business segment identifies comprehensive domestic
and overseas strategies in addition to pursuing business expansion in its respective
product and service area.
The reportable segments (by products and target industry) that comprise theCompany’s operations are: Chemicals, Plastics, Electronics and Life Sciences.
The Chemicals business segment engages in sales of chemicals to a wide array of
industries. Main products include dyestuffs, pigments, information recording products,
functional dyes, materials for paints and inks, urethane materials, plastic raw materials
and additives, raw materials for industrial oil solutions, surfactants, fluoro-chemicals,
raw materials for encapsulants and silicon.
The Plastics business segment engages in sales to the automotive, automotive
parts, consumer electronics, office automation, residential construction and other related industries. Main products include thermoplastics, thermoset resins, synthetic rubber,
inorganic materials, plastic products, plastic-related equipment, devices and molding,and optional inspection equipment.
The Electronics business segment engages in sales to the display, touch panel, liquid crystal, semiconductor, electronic component and heavy electric and other industries. Main products include materials and equipment for liquid crystal display panels,
semiconductor assembly-related materials and equipment, precision cleaning agentsfor electronics, low-temperature vacuum equipment and functional epoxy resins.
The Life Sciences business segment engages in sales of materials used in pharmaceuticals and agrichemicals, research products, diagnostic agents, fermentation products, biotechnology-related products, radiation measuring services, cosmetics andhealth foods and beauty foods.
(b) Calculation methods of net sales, income or loss, assets, and other items byreportable segment
Accounting methods for reportable segments are generally the same as those listed in
Note 2. Reportable segment income is correspondence with operating income for the
consolidated statements of Income. Intersegment internal income and transfers are
determined based on the values of transactions at actual market prices.
(c) Information on net sales, income or loss, assets and other items for eachreportable segment
Information by reportable segment for the year ended March 31, 2011 is as follows:

Millions of yen

Sales to customers
Intersegments sales and transfers
Net sales
Segment income
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Unamortized balance of goodwill
Investments in affiliates accounted
for by the equity method
Increase in tangible and intangible
fixed assets

Others

Total

Total

Total

Corporate

Adjustments¥ 603,949—
603,949¥ 13,128¥ 368,088

Thousands of
U.S. dollars

Japan¥389,379$ 4,682,850

China

112,6311,354,552

Other
Total

158,202¥660,213

1,902,610$ 7,940,024

Millions of yen

Thousands of
U.S. dollars

Japan¥36,627$ 440,493

Other
Total

3,289
¥39,916

39,555$ 480,048

Consolidated

Chemicals

Plastics¥253,290
2,315
255,605¥ 8,783¥107,296¥222,100
2,676
224,777¥ 4,767¥100,265¥133,640
544
134,185¥ 6,137¥ 60,127¥ 50,247
514
50,762¥ 956¥ 30,136¥659,279
6,050
665,330¥ 20,645¥297,826

¥ 934
5,461
6,395
¥ 13
¥ 7,371¥660,213
11,512
671,725¥ 20,659¥305,198———¥ (2,685)¥101,437—(11,512)(11,512)¥ 758¥(31,299)¥660,213—
660,213¥ 18,732¥375,336

467
7
1

586
—
—

2,703
103
—

650
—
—

4,409
110
1

398
—
—

4,807
110
1

1,579
0
—

—
—
—

6,387
110
1

¥

¥

(e) Information on loss on impairment of fixed assets per reportable segments

99

786

74

1,534

398

1,014

2,167

262

Chemicals

2,495

1,669

4,164

—

—

4,164

3,843

47

3,891

3,321

—

7,212

Reportable Segments
Plastics
Electronics
Life Sciences

Total$3,046,182 $2,671,076 $1,607,216 $ 604,293 $7,928,791
27,84132,1836,542
6,182
72,7603,074,023 2,703,271 1,613,770 610,487 8,001,563$ 105,628 $ 57,330 $ 73,806 $ 11,497 $ 248,286$1,290,391 $1,205,833 $ 723,115 $ 362,429 $3,581,792

NAGASE & CO.,LTD. Annual Report 2011ngs̲2011̲財務̲e̲PDF2.indd 68-69

Consolidated

Millions of yen

Millions of yen

2011

Loss on impairment of fixed assets

Chemicals

Plastics——

Reportable Segment
Electronics
Life Sciences——

Others$11,233
65,67676,909$ 156$88,647

Total—

OthersEliminations or
corporate

Total

—

¥50

¥50

OthersEliminations or
corporate

Total

—

$601

$601

Thousands of U.S. dollars

2011

2011

68

Adjustments— ¥——(4,590)—(4,590)¥ (3,198) ¥ 336¥ 100,131 ¥(27,604)(d) Geographical information
Net sales for the year ended March 31, 2011 are summarized as follows:

Thousands of U.S. dollars

Sales to customers
Intersegments sales and transfers
Net sales
Segment income
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Unamortized balance of goodwill
Investments in affiliates accounted
for by the equity method
Increase in tangible and intangible
fixed assets

Corporate¥

Net sales are classified by countries or region based on locations of customers.
Property, plant and equipment as of March 31, 2011 is summarized as follows:

2011
Reportable Segments
Electronics
Life Sciences

Sales to customers
Intersegments sales and transfers
Net sales
Segment income
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Unamortized balance of goodwill
Investments in affiliates accounted
for by the equity method
Increase in tangible and intangible
fixed assets

Reportable Segments
Plastics
Electronics
Life Sciences

Total

Corporate

Adjustments

Consolidated$7,940,024 $— $— $7,940,024
138,449— (138,449)—
8,078,473— (138,449) 7,940,024$ 248,455 $ (32,291) $ 9,116 $ 225,280$3,670,451 $1,219,928 $ (376,416) $4,513,963

5,616
84
12

7,048
—
—

32,508
1,239
—

7,817
—
—

53,025
1,323
12

4,787
—
—

57,811
1,323
12

18,9900————76,813
1,323
12

1,191

9,453

890

18,44930,006

20,07250,078——50,078

4,787

12,195

26,061

3,151

46,218565

46,79539,940—86,735

Loss on impairment of fixed assets

Chemicals

Plastics——

Reportable Segment
Electronics
Life Sciences

—

—

Total

—

(f) Information on gain on recognition of negative goodwill per reportable segments
The Company additionally acquired shares of Sofix Corporation, which was an affiliate accounted for by the equity method. As a result of the acquisition, the Company recorded gain
on recognition of negative goodwill of ¥20 million ($241 thousand) in the Chemicals segment for the year ended March 31, 2011. (Refer to Note 13.)
Effective the year ended March 31, 2011, the Company has adopted the “Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” (ASBJ
Statement No. 17 issued on March 27, 2009) and the “Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” (ASBJ Guidance
No. 20 issued on March 21, 2008).
Segment information for the year ended March 31, 2010 under the previous accounting standard was as follows:

NAGASE & CO.,LTD. Annual Report 201169

11/09/02 17:16

Report of Independent Auditors(a) Business Segment Information

Millions of yen

Year ended March 31, 2010
Chemicals

Sales to customers
Intersegment sales
Net sales
Operating expenses
Operating income
Total assets
Depreciation and amortization
Capital expenditures¥ 237,124
		 1
		237,126
		230,338¥ 6,787¥ 132,059
		1,636
		1,135

Plastics¥ 192,569
		219
		192,788
		190,511¥ 2,277¥ 98,615
		940
		999

Electronics

Life Sciences

Others¥ 117,591
		159
		117,751
		114,973¥ 2,778¥ 72,492
		2,131
		3,291¥55,542
		17
		55,559
		54,616¥ 942¥34,780
		938
		452

¥ 1,121
		4,193
		5,314
		5,309¥5¥ 6,215
		328
		1,387(b) Geographical Segment Information

Eliminations
or corporate

Total¥ 603,949
		4,590		608,540		595,748¥ 12,791¥ 344,163
		5,976
		7,266

Consolidated¥—¥ 603,949
		(4,590) 		—		(4,590) 		603,949
		(4,927) 		590,821¥ 336¥ 13,128¥23,925¥ 368,088
		— 		5,976
		— 		7,266

Millions of yen

Year ended March 31, 2010
Japan

Sales to customers
Intersegment sales
Net sales
Operating expenses
Operating income
Total assets

Northeast
Asia

Southeast
Asia

North
America

Europe &OthersEliminations
or corporate

Total

Consolidated¥ 406,568¥ 118,337¥53,074¥13,502¥12,467¥ 603,949¥—¥ 603,949
		55,798 		4,642 		1,613 		1,148 		2,559 		65,763 		(65,763) 		—		462,367 		122,980 		54,687 		14,650 		15,027 		669,713 		(65,763) 		603,949
		454,294 		119,762 		53,247 		14,582 		14,799 		656,686 		(65,865) 		590,821¥ 8,072¥ 3,218¥ 1,440¥
67¥ 227¥ 13,026¥ 102¥ 13,128¥ 286,210¥ 42,832¥22,082¥ 3,959¥ 7,313¥ 362,398¥ 5,690¥ 368,088(c) Overseas Sales
Millions of yen

Year ended March 31, 2010

Overseas sales

Northeast Asia

Southeast Asia

North America

Europe & Others

Total¥ 144,860¥67,715¥16,018¥14,973¥ 243,567

		24.0%		11.2%

		2.6%

		2.5%

		40.3%

Consolidated net sales
Overseas sales as a percentage of consolidated net sales¥ 603,949

23. SUBSEQUENT EVENT
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,
2011, was approved at a meeting of the shareholders held on June 28, 2011:

Cash dividends (¥13.0 = U.S.$0.16 per share)

The Board of Directors
NAGASE & CO., LTD.

Millions of yen

Thousands of
U.S. dollars¥1,670$20,084

We have audited the accompanying consolidated balance sheets of NAGASE &CO., LTD. and consolidated subsidiaries as of March 31, 2011 and 2010, and therelated consolidated statements of income, changes in net assets and cash flows forthe years then ended, and consolidated statement of comprehensive income for theyear ended March 31, 2011, all expressed in yen. These financial statements are
the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally acceptedin Japan. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of NAGASE & CO., LTD.
and consolidated subsidiaries at March 31, 2011 and 2010, and the consolidated
results of their operations and their cash flows for the years then ended inconformity with accounting principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements withrespect to the year ended March 31, 2011 are presented solely for convenience. Our
audit also included the translation of yen amounts into U.S. dollar amounts and, in
our opinion, such translation has been made on the basis described in Note 1.

Osaka, Japan
June 28, 201170

NAGASE & CO.,LTD. Annual Report 2011

NAGASE & CO.,LTD. Annual Report 201171

Consolidated Subsidiaries, Affiliates and Offices
쎲 Consolidated subsidiary쎲 Company accounted for under the equity method

Company name

Description of business

Equity ownership (%)
Paid-in capitalYear of(indicates indirect(Millions of Yen) (Foreign
establishment
investment)
currency: Thousands)

JAPAN

Company name

Equity ownership (%)
Paid-in capitalYear of(indicates indirect(Millions of Yen) (Foreign
establishment
investment)
currency: Thousands)

Sales

Manufacturing and Processing

쎲Nagase ChemteX Corp.

Manufacture of epoxy resins, enzymes, industrial chemicals

쎲Nagase Medicals Co., Ltd.

쎲쎲Nagase Chemical Co., Ltd.

Sale of dyestuffs, industrial chemicals, chemicals for manufacturing paper,
plastics and machinery

60

1995

100.0

쎲

Nagase Plastics Co., Ltd.

Sale of raw materials for plastics and plastic products

96

1975

100.0

2,474

1970

100.0

Manufacture of pharmaceuticals

498

1972

100.0

Setsunan Kasei Co., Ltd.

Coloring and sale of plastics

300

1966

100.0

쎲

Nagase Colors & Chemicals Co., Ltd.

Purchasing and sale of dyestuffs, industrial chemicals, etc.
and related information provision

100

1957

100.0

쎲

Totaku Industries, Inc.

Manufacture and sale of plastic products

270

1952

77.1

쎲

Hoei Sangyo Co., Ltd.

Sale of film materials, magnetic products, information imaging materials, etc.

250

1974

80.5

쎲

Kotobuki Kasei Corp.

Molding, processing and sale of plastic products

20

1972

57.5

쎲

Nagase Beauty Care Co., Ltd.

Sale of cosmetics and health foods

100

1991

100.0

쎲

Sale of dyestuffs, auxiliaries, industrial chemicals and plastics

60

1969

100.0

Nagase Techno-Engineering Co., Ltd.

Manufacture, sale and maintenance of low-temperature vacuum equipment,
systems for chemical supply management and recycling processes,
inspection systems, and the peripheral equipment for each of these.

Nishinihon Nagase Co., Ltd.

쎲

45

1989

100.0

쎲

Nagase Elex Co., Ltd.

Sale of raw materials for plastics and plastic products

20

1979

100.0

쎲

Nagase Abrasive Materials Co., Ltd.

Sale of abrasives, inorganic materials and related equipment

50

1955

100.0

쎲

Nagase Sanbio Co., Ltd.

Sale of enzymes and additives for food and feed

30

1987

100.0 (13.0)

쎲Nagase Chemspec Co., Ltd.

Sale and technological servicing of chemicals

30

1976

100.0

Nihon UNF Co., Ltd.

Manufacture, sale, and import/export of pharmaceuticals and quasi drugs,
management consulting, and investing business

26

2001

20.0

OnFine Co., Ltd.

Manufacture and sale of electronics and fluorine and polysilane variants foruse in materials

10

2002

25.0

Aikawa Kogyo Co., Ltd.

Sale of resin for automobile models, prototype materials and carbon-fiber
composite materials

10

1965

100.0

쎲

NCK Ltd.

Small-lot repackaging of industrial-use resins and curing agents, etc.,
filter cleaning, management of special containers

10

1985

100.0 (100.0)

쎲Sun Delta Corporation

Development of applications for synthetic plastic products and manufactureand sale of processed products

490

2005

50.0

쎲

Honshu Rheem Co., Ltd.

Manufacture and sale of fiber drums, import and sale of food processing
machines and materials

100

1968

40.0

쎲

Toyo Beauty Supply Corp.

Contract manufacture of cosmetics

40

1964

40.0

쎲

eX . Grade Co., Ltd.

Development, manufacture and sale of components for electronic equipment

23

2003

30.4

쎲

SN Tech Corporation

Manufacture of developer, recycling business

400

2008

40.0 (5.0)

Nagase Filters Co., Ltd.

Planning, production, processing, quality testing and sale of metal filters

80

2006

100.0

Kawai Hiryo Corporation

Manufacture and sale of organic fertilizers and agricultural chemicals and materials

13

1981

100.0 (33.3)

Nihon Bio Fertilizer Co., Ltd.

Manufacture and sale of organic fertilizer

11

1986

100.0 (100.0)

쎲Nagase ChemteX (Wuxi) Corp.

Plastic manufacture and sale of adhesives and high-tech chemical products forelectronics, technology services

US$3,5002002

100.0 (50.0)

Yuki Saisei co., ltd.

Development, design and maintenance of fertilizer manufacturing equipment
and provision of related consulting services

10

2000

100.0 (100.0)

쎲Nagase International Electronics Ltd.

Process and assembly of films in South China

HK$10,000

2004

100.0 (20.0)

Manufacture and sale of plastic products

US$1,7002005

100.0 (100.0)

Manufacture of color former

250

1985

90.0

쎲

Totaku Industries Suzhou Co., Ltd.

Fukui Yamada Chemical Co., Ltd.

Nagase Precision Plastics Shanghai Co., Ltd.

Plastic tray molding

550

2001

99.0 (5.0)

Manufacture and development of battery power source controllers,
battery power sources and power source peripheral equipment

쎲

CAPTEX Co., Ltd.

496

2004

100.0

쎲

Nagase Electronics Technology Co., Ltd.

Chemical etching of liquid crystal glass panel units

NT$178,000

2005

71.0 (11.0)

Nagase Electronics Technology (Xiamen) Co., Ltd.

Chemical etching of liquid crystal glass panel units

US$6,0002010

100.0 (100.0)

Guangzhou Kurabo Chemicals Co., Ltd.

Manufacture of molded urethane products for automobiles

US$7,000

2001

20.0

Toyo Quality One (Guangzhou) Co., Ltd.

Research and development, manufacturing, processing, sale,technology consulting, and after-sale service for major automotive parts

US$5,000

2004

20.0

Toyo Quality One Ningbo Co., Ltd.

Manufacture and sale of polyurethane foam

US$3,770

1993

24.2

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

Development, manufacture, and sale of precision press products, spring,and standard molds

US$3,300

2005

30.0

WON150,000

1997

100.0

HK$1,0002006

100.0 (100.0)

GREATER CHINA AND KOREA
Manufacturing and Processing

Servicing72

Description of business쎲Nagase Logistics Co., Ltd.

Warehousing and distribution

401

1982

100.0

쎲

Hoei Techno Service Co., Ltd.

Duplication and processing of computer software, warehousing and distribution

50

1991

100.0 (100.0)

쎲Nagase General Service Co., Ltd.

Sale and lease of various goods, real estate administration

20

1983

100.0

쎲

Nagase Information Development, Ltd.

Software development and maintenance

30

1987

100.0

쎲

Nagase Trade Management Co., Ltd.

Business agent for foreign trade documentation

20

1996

100.0

쎲

Nippon Vopac Co., Ltd.

Warehousing, motor truck carrier business and freight transportation services

404

1966

20.0

Servicing쎲Nagase Landauer, Ltd.

Radiation measuring services

88

1974

50.0

쎲

iGENE Therapeutics, Inc.

Research and development of bioreagents based on RNAi technology, contract development, manufacturing, importing and exporting, sales and technological guidance

26

2003

100.0

Green Park Company, Ltd.

Contract operation and management of monthly/coin parking and planning, research,
design, consulting, and information services for effective use of car parking

10

2002

100.0 (100.0)

Umemoto Sagyo & Co., Ltd.

An exclusive stevedore for Nagase Logistics Co., Ltd.

10

1954

100.0 (100.0)

ON Co-Labo Corporation

Promotion and handling of overseas textile related business

70

2007

50.0 (25.0)

Choko Co., Ltd.

Insurance agency

15

1971

37.7

NAGASE & CO.,LTD. Annual Report 2011ngs̲2011̲財務̲e̲PDF2.indd 72-73

Nagase Engineering Service Korea Co.,Ltd.

Equipment maintenance service and engineering

Nagase Marketing and Service (Shenzhen) Ltd.

Contract customer services

Nagase CMS Technology (Shanghai) Co., Ltd.

Construction and maintenance of chemical supply and management equipment

US$2002006

100.0 (60.0)

NW Consultant Service (Shenzhen) Ltd.

Print quality management consultant

HK$7002008

60.0 (30.0)

NAGASE & CO.,LTD. Annual Report 201173

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Company name

Description of business

Equity ownership (%)
Paid-in capitalYear of(indicates indirect(Millions of Yen) (Foreign
establishment
investment)
currency: Thousands)

Company name

Description of business

Equity ownership (%)
Paid-in capitalYear of(indicates indirect(Millions of Yen) (Foreign
establishment
investment)
currency: Thousands)

Sales

Sales

쎲

Nagase (Hong Kong) Ltd.

Import/export, domestic sales, marketing

HK$3,120

1971

100.0

쎲

Nagase (Thailand) Co.,Ltd.

Import/export, domestic sales, marketing

BAHT87,000

1989

100.0

쎲

Shanghai Hua Chang Trading Co., Ltd.

Sale of resins and related products

US$2,400

1998

70.0 (53.8)

쎲Nagase Singapore (Pte) Ltd.

Import/export, domestic sales, marketing

S$2,700

1975

100.0

Import/export, domestic sales, marketing

RM1,500

1981

100.0

Suzhou Branch

Australia Branch

Ningbo Branch

Vietnam Representative Office쎲Chengdu Branch쎲Shanghai Nagase Trading Co., Ltd.

Import/export, domestic sales, marketing

US$1,000

1997

100.0

Johor Bahru OfficeNanjing Branch쎲

Nagase Wahlee Plastics Corp.

Nagase (Malaysia) Sdn. Bhd.

Penang Office
Sale of plastics and related products

NT$100,000

1990

60.0 (5.0)

쎲

P.T. Nagase Impor-Ekspor Indonesia

Import/export, domestic sales, marketing

US$5001998

100.0 (10.0)

Taichung Office쎲Nagase Philippines Corp.

Import/export, domestic sales, marketing

PHP45,893

1997

100.0

Gangshan Offince쎲Nagase Philippines International Services Corp.

Domestic sales, import/export

PHP40,000

2005

100.0

쎲

Nagase Vietnam Co., Ltd.

Import/export, domestic sales, marketing

US$3,000

2008

100.0

Nagase & Co., Ltd. Hanoi Representative Office

Representative Office

Nagase India Private Ltd.

Import/export, domestic sales, marketing

INR200,000

2006

100.0 (0.1)

Nagase (Siam) Co., Ltd.

Provision of commissioned services for Group companies

BAHT4,000

2000

49.0 (49.0)

Nagase & Co., Ltd. Dubai Branch

Branch쎲

NWP (B.V.I.) Corporation

Investment business쎲

Guangzhou Nagase Trading Ltd.

Import/export, domestic sales, marketing

US$2,4202007

100.0 (100.0)

US$5002002

100.0 (100.0)

Wuhan Branch
Chongqing BranchNorth India Branch쎲

Nagase (Taiwan) Co., Ltd.

Import/export, domestic sales, marketing

NT$45,000

1988

100.0

쎲

Tianjin Nagase International Trading Co., Ltd.

Import/export, domestic sales, marketing

US$300

2003

100.0

Dalian Branch

NORTH AND CENTRAL AMERICA
Qingdao Branch쎲

NWP International Trading (Shenzhen) Co., Ltd.

Manufacturing and Sales
Sale of plastic products in South China

US$1,2002004

100.0 (100.0)

WON700,000

2001

100.0

Guangzhou Branch쎲

Nagase Korea Corp.

General import/export trading, retailing/wholeselling, import/export trade agency

Nagase Business Management and Planning(Shanghai) Co., Ltd.

Management of Nagase Group operations and promotion of businessstrategies related to Greater China

Xiamen Nagase International Trading Co., Ltd.

Import/export, domestic sales, marketing

US$2,000
US$500

2011
2011

쎲

Pac Tech USA-Packaging Technologies Inc.

Semiconductor wafer bumping, manufacture and sale ofsemiconductor manufacturing equipment

US$3,773

2001

100.0 (100.0)

쎲Sofix Corp.

Manufacture and sale of color formers

US$20,000

1990

100.0

KN Platech America Corporation

Manufacture and sale of blow-formed plastic components and products

US$7,500

2010

50.0

TIMLE S.A. DE C.V.

Manufacture and sale of automotive laminated frames Sale of automotive
urethane foam

US$3,000

2010

15.0

Nagase America Corp.

Import/export, domestic sales, marketing

US$3,500

1971

100.0

Import/export sales, intermediate trade, market development, information collection

Peso6,500

2010

100.0 (100.0)

EUR188

1995

59.9

EUR1,200

1980

100.0

100.0
100.0 (100.0)

ASEAN AND THE MIDDLE EAST

Sales

쎲

Manufacturing and Processing
Michigan Branch쎲

Nagase Finechem Singapore (Pte) Ltd.

Manufacture and recycling of chemical agents for liquid crystals쎲

Sanko Gosei Technology (Thailand) Ltd.

쎲

S$14,0002001

100.0 (40.0)

Manufacture of automobile components

BAHT370,000

1997

40.0

Automotive Mold Technology Co.,Ltd.

Manufacture of automotive molds and dies

BAHT280,000

2000

32.1

Nafuko Co.,Ltd.

Manufacture, import/export and sale of packaging materials and related equipment

BAHT10,000

1996

28.0 (28.0)

Dainichi Color Vietnam Co.,Ltd.

Manufacture and sale of color masterbatch blend for plastic

US$8,700

2005

40.0

Pac Tech Asia Sdn. Bhd.

Manufacture and sales of semiconductor manufacturing equipment,
contract processing for wafer bumping

RM10,0002006

100.0 (100.0)

P.T. Toyo Quality One Indonesia

Manufacture of flame lamination products

US$1,500

2008

25.0

ZCL Chemicals Ltd.

Contract synthesis and process development

INR100,000

1991

25.0

California Branch
Nagase Enterprise Mexico S.A.de C.V.

EUROPE
Manufacturing and Processing쎲

Pac Tech-Packaging Technologies GmbH

Semiconductor wafer bumping, manufacture and sale ofsemiconductor manufacturing equipment

Nagase (Europa) GmbH

Import/export, domestic sales, marketing

Sales

쎲

Hungary Representative OfficeLondon Branch
Poland Representative Office74

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Corporate Information

Investor Information(As of March 31, 2011)

쏋 Stock Listings

About Nagase & Co., Ltd.

(As of March 31, 2011)쏋 Composition of Shareholders| First Sections of the Tokyo Stock Exchange andthe Osaka Securities Exchange

Company Name|쏋 CodeNAGASE & CO., LTD.

쏋 Authorized Number of Shares

Founded|June 18, 1832

Established|

December 9, 1917

Paid-in Capital|¥9,699 million

Number of Employees|

963 (Consolidated: 4,693)

Main Business|

Import/export and domestic sales of dyestuffs, chemicals, plastics, machinery, electronics materials, cosmetics and health foods

쏋 Issued Number of Shares쏋 Number of Shareholders| 8012| 346,980,000| 138,408,285| 5,136

Main Banks|

Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Corporate Bank, Ltd.,The Sumitomo Trust & Banking Co., Ltd., The Norinchukin Bank

Main Offices|

Osaka Head Office

Number of Shares Held
Percentage of Total(Thousands)
Shares Outstanding (%)

18.72%
22.10%NORTHERN TRUST CO.
(AVFC) SUB A/C AMERICAN CLIENTS

8,634

6.24

7,088

5.12

The Sumitomo Trust & Banking Co., Ltd.

5,776

4.17

Financial Institutions (48)47,836 thousand shares: 5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo, 103-8355 Tel: (81) 3-3665-3021

Japan Trustee Services Bank, Ltd. (Trust Account)

5,476

3.96

Foreign Investors (183)30,581 thousand shares

Nippon Life Insurance Company

4,984

3.60

Individuals and Others (4,670) 25,911 thousand shares

Sumitomo Mitsui Banking Corporation

4,377

3.16

Domestic Corporations (208)23,576 thousand shares

Hiroshi Nagase

4,223

3.05

Treasury Stock (1)9,893 thousand shares

Reiko Nagase

3,522

2.54

NORTHERN TRUST CO. AVFC RE U.S. TAXEXEMPTED PENTION FUNDS

3,391

2.45

Mitsui Sumitomo Insurance Co., Ltd.

2,951

2.13

: 3-14-18, Marunouchi, Naka-ku, Nagoya City, 460-8560 Tel: (81) 52-963-5615

Nagase R&D Center: Kobe High Tech Park, 2-2-3, Murotani, Nishi-ku, Kobe City, 651-2241 Tel: (81) 78-992-3162

History1832• Nagase founded in Kyoto as a dyestuffs trading concern• Sales of dyestuffs, starches and funori seaweed1893• Established Osaka branch office

1898• Head office moved to Osaka, branch office to Kyoto

1900• Established business ties with Basel Chemical Co. of Switzerland(now Ciba Specialty Chemicals Ltd.)1911• Established Tokyo branch office

1917• Inaugurated as Nagase Shoten Company with capital of ¥3 million

1923• Established business ties with Eastman Kodak Co. of the United States

1930• Concluded exclusive distributorship agreements with Union Carbide andCarbon Corp. of the United States

1940• Established Nagoya branch office

1943• Company name changed to Nagase & Co., Ltd.

1964

• Listed Company shares on the Osaka Securities Exchange

1968• Concluded an exclusive distributorship agreement with General Electric Co.
of the United States

1970• Established Nagase-CIBA Ltd. (now Nagase ChemteX Corp.) jointly with
Ciba-Geigy Ltd.
• Listed Company shares on the Tokyo Stock Exchange

1971• Established Nagase (Hong Kong) Ltd. and Nagase America Corp.
• Established Engineering Plastics, Ltd. jointly with General Electric Co.

1974• Established Nagase Landauer Ltd. jointly with Technical Operations, Inc.
of the United States

1975• Established Nagase Singapore (Pte) Ltd.

1980

• Established Nagase (Europa) GmbH1982

• Established Nagase (Malaysia ) Sdn. Bhd.

1985

• Established Seoul branch office1988• Established Nagase (Taiwan) Co., Ltd.

Securities Companies (25)
Other (1)605 thousand shares
3 thousand shares

Note: In addition to the above, the Company holds 9,893 thousand shares of treasury stock without voting rights.

1989

1990

1997

• Established Nagase (Thailand) Co., Ltd.
• Established Nagase Science and Technology Foundation• Tokyo branch office became head office; adoption of Osaka/Tokyo
two head office system• Established Sofix Corp.
• Set up the Nagase R&D Center in Kobe
• Established joint venture Nagase Wahlee Plastics Corp. (Taiwan)• Established Nagase Philippines Corp.
• Established Shanghai Nagase Trading Co., Ltd.
• Established Nagase Engineering Service Korea Co., Ltd.

1998

• Established P.T. Nagase Impor-Ekspor Indonesia• Established Shanghai Hua Chang Trading Co., Ltd.

2001

• Closed the Seoul branch office and established Nagase Korea Corp.
• Established Nagase Finechem Singapore (Pte) Ltd.
• Established Nagase Precision Plastics Shanghai Co., Ltd.

2002

• Established Guangzhou Nagase Trading Ltd.
• Established a representative office in Hanoi, Vietnam• Established Nagase ChemteX (Wuxi) Corp.

2004• Established Nagase International Electronics Ltd.
• Established NWP International Trading (Shenzhen) Co., Ltd.

2005

• Established Totaku Industries Suzhou Co., Ltd.
• Established Nagase Electronics Technology Co., Ltd.
• Established Nagase Philippines International Services Corp.

2006• Acquired stock of semiconductor manufacturing equipment maker
Pac Tech-Packaging Technologies GmbH• Established Nagase India Private Ltd.

쏋 Monthly Share Price Range of Nagase
(¥)

TOPIX

1,800
1,500

3,000

Share Price
TOPIX

2,500

1,200

2,000

900

1,500

600

1,000
500

300
0

April 2001

April 2002

April 2003

April 2004

April 2005

April 2006

April 2007

April 2008

April 2009

April 2010

April 2011

April 2003

April 2004

April 2005

April 2006

April 2007

April 2008

April 2009

April 2010

April 2011

쏋 Monthly Trading Volume(Thousands of Shares)
15,00012,000

9,000

2007

• Established Nagase Application Workshop

2008• Established Sakai Sales Office• Established Nagase Vietnam Co., Ltd.

6,000

2009

• Opened a branch office in Dubai

3,000

0

ngs̲2011̲財務̲e̲PDF2.indd 76-77

34.56%The Master Trust Bank of Japan, Ltd.(Trust Account)Nagoya Branch Office

NAGASE & CO.,LTD. Annual Report 2011

0.00 %: 1-1-17, Shinmachi, Nishi-ku, Osaka City, Osaka, 550-8668 Tel: (81) 6-6535-2114

Nagase Application Workshop : 2-4-45, Higashitsukaguchicho, Amagasaki City, 661-0011 Tel: (81) 6-4961-6730

76

0.44%

17.03%

쏋 Principal Shareholders
NameTokyo Head Office

7.15%

April 2001

April 2002

NAGASE & CO.,LTD. Annual Report 201177

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