The Technology and Intelligence Oriented Company
That Turns Wisdom into BusinessAnnual Report 2002

Profile
The Nagase Group Continues to Create New Businesses
Together with its Customers around the World
Today, the Nagase Group provides its customers with trading,
synthesis and biotechnology, while at the same time working on themarketing, R&D, manufacturing and processing functions in four key
development of pharmaceutical raw materials with fewer side effects
business areas: Chemicals, Plastics, Electronics and Health Care.
and natural extracts that will enhance the bioactivity of the human body.
Nagase & Co., Ltd., the nucleus of our group, was established as aNagase group manufacturing companies are involved in producing anddyestuffs wholesaler in Kyoto in 1832. In 1900, it started importing
processing pharmaceutical intermediates, functional polymers, raw
synthetic dyestuffs from Chemical Industry of Basel. In the ensuingmaterials for electronics applications and plastic products.
years, it has accumulated considerable know-how in its role as aCurrently, the Nagase Group comprises 102 member companies at“technology and intelligence oriented trading company.”home and overseas. One of the Group’s features is that it can call on
While developing new markets around the world together with its
these companies to combine their trading, marketing, R&D,
customers, Nagase has worked on acquiring processing andmanufacturing and processing functions as necessary to provide highmanufacturing functions, and R&D functions
levels of customer satisfaction.
The Nagase Group’s Four Businesses
for the development of new technologies
Looking ahead, the Nagase Group will,
and products.
along with its customers worldwide,
Plastics
Chemicals
At the Nagase Research andcontinue to seize business opportunities
Development Center, we conduct researchand provide business solutions.
Electronics
Health Careinto basic technologies such as organic

Management Philosophy

Management Vision

Based on our awareness of our role asmembers of society, we shall endeavor
to enhance the welfare of employees
and contribute to society by developing
the company through good and fairbusiness practices aimed at providing
the products and services societyseeks.

“The technology and intelligence oriented company that turns wisdom into business.”
In line with the management philosophy at left, Nagase has adopted “The technology andintelligence oriented company that turns wisdom into business” as its management vision for the
21st century.
Rooted in a thoroughgoing customer-oriented approach that insists “the market provides all theanswers,” this vision expresses our determination to exploit our “technology,” “information” and“wisdom,” enhanced by experience, to create businesses that go beyond the intermediary role ofthe trading company.
Customer demands are becoming more diverse, more complex and more sophisticated. The
straightforward intermediary business approach is no longer enough to satisfy these demands. At
the same time, we are aware that regardless of the industry, the era in which a single company canmeet all market needs alone is long gone. To help customers create new value, therefore, we willcontinue to propose and develop new businesses while strengthening our role as a reliablebusiness partner.

Contents
Financial Highlights

1

A Message from Management

2

Overview of Business Operations
Chemicals

Detailed Information by Topic
1 One Year since Integration of Manufacturing Subsidiaries

24

2 Integrated System for Contract Research and Development
6

Established with Nagase R&D Center at its Core

25

12

3 Nanotechnology-related Business

26

Electronics

16

4 Activities of Nagase Science and Technology Foundation

27

Health Care20

5 Tackling Environmental Issues

28

Plastics

Financial Section

29

Corporate Data

48

A Cautionary Note on Forward-Looking Statements:
This annual report contains statements regarding Nagase’s corporate views of future developments that are forward-looking in nature and are not simply reiterations of historical facts.
These statements are presented to inform shareholders of the views of Nagase’s management but should not be relied on solely in making investment and other decisions. You should be aware that a number of important risk
factors could lead to outcomes that differ materially from those presented in such forward-looking statements.
These include, but are not limited to, (i) change in economic conditions that may lead to unforeseen developments in markets for products handled by Nagase, (ii) fluctuations in currency exchange rates that may cause unexpected
deterioration in the value of transactions, (iii) adverse political developments that may create unavoidable delays or postponement of transactions and projects, (iv) changes in laws, regulations, or policies in any of the countries
where Nagase conducts its operations that may affect Nagase’s ability to fulfill its commitments, and (v) significant changes in the competitive environment.
In the course of its operations, Nagase adopts measures to control these and other types of risks, but this does not constitute a guarantee that such measures will be effective.

Financial Highlights
NAGASE & COMPANY, LTD. and Consolidated Subsidiaries
Years ended March 31

Thousands of U.S.
Dollars (Note)

Millions of Yen

2002

2001

2000

1999

1998

2002

¥ 490,583¥ 559,373¥ 568,294¥ 563,222¥ 596,128$ 3,681,673

Chemicals
Plastics
Electronics
Health Care

218,524
175,252
83,66013,146

237,872
205,460
103,383
12,658249,977
192,711
109,770
15,836

244,068
199,189
104,455
15,510258,294
204,718
115,556
17,5601,639,954
1,315,212
627,842
98,656

Operating Income
Net (Loss) Income

1,673(2,097)

7,752
4,946

8,147
6,371

7,791
3,561

8,208
4,905

12,555(15,737)¥ 300,073¥ 353,777¥ 316,657¥ 298,525¥ 300,781$ 2,251,954

144,176

153,499

134,838

125,930

122,531

1,081,996

For the Year:Net Sales

At the Year-End:Total Assets
Shareholders’ Equity

Yen

Per Share Data:¥¥(15.39)1,082.15

Net (Loss) Income
Shareholders’ Equity
Cash Dividends

35.28
1,104.80

8.00

¥

44.25
952.67

U.S. Dollars

¥

23.76
862.06

8.00

8.00

¥

8.00

$

32.39
809.17(0.11)
8.121
0.06

8.00

Note: Yen amounts have been translated for convenience only, at the rate of 133.25 yen to 1 U.S. dollar, the approximate exchange date on March 31, 2002.

Net Sales (¥ million)

Shareholders’ Equity (¥ million)

1998

596,128

1998

1999

563,222

1999

2000

568,294

2000

2001

559,3732001

490,5832002
0

100,000

200,000

300,000

400,000

500,000

40,00080,000120,000

1998

160,000

2000

23.76

2000

6,371

2001

32.39

1999

3,561

44.25
35.28

2001

4,946
-2,097
0

153,499
144,176

Net (Loss) Income per Share (¥)

1999-1,500134,8380

600,000

4,905-3,000125,930

2002

Net (Loss) Income (¥ million)
1998

2002

122,531-15.39

2002

1,500

3,000

4,500

6,000

7,500

-20.00

0

20.00

40.00

60.00

Composition of Net Sales
Health Care
2.3%

Health Care
2.7%

Electronics
18.5%

Electronics
17.1%

2002

Electronics
18.5%

Electronics
19.3%

Chemicals
44.5%
Plastics
35.7%

Chemicals
42.5%
Plastics
36.7%

2001

Health Care
2.8%

Health Care
2.8%

Chemicals
44.0%
Plastics
33.9%

2000

Health Care
3.0%

Electronics
19.4%
Chemicals
43.3%

Plastics
35.4%

1999

Chemicals
43.3%
Plastics
34.3%

1998

Annual Report 2002 1

A Message from Management

Nagase & Co., Ltd. develops businesses that are beneficial to customers, selecting optimal
locations worldwide for production and sales activities. We draw on the technology, intelligence
and wisdom of our 102 Group companies around the world to create new businesses, and thisis where our true value lies. In all of our activities we are committed to strengthening the overall
competitiveness of the Group.
The following sections review our performance during the year under review, which ended
March 2002. We hope they will enhance your understanding of the steps we are taking toachieve an earnings turnaround.

Results for the Fiscal Year Ended March 31, 2002

Affected by the slow domestic economy and the global IT recession, total consolidated,
sales amounted to ¥490.58 billion, a decline of ¥68.78 billion, or 12.3%, from last year s
total of ¥559.37 billion.
Despite reducing selling, general and administrative (SG&A) expenses ¥2.08 billion, or4.4%, to ¥45.3 billion, operating income fell by ¥6.07 billion, or 78.4%, to ¥1.67 billion
under the impact of stagnating sales. Additional extraordinary losses in the form of appraisal
losses on investment securities and special retirement benefits led to a net loss for the termof ¥2.09 billion. (See page 30 for details.)
Following our long-standing basic policyof maintaining stable dividends for ourshareholders, we decided to pay a dividendof ¥8 per share of common stock, the sameamount as last year.
Moreover, to enhance shareholder value,
we retired 529,000 shares of treasury stock
worth ¥266 million and, under changes in
the law, acquired 5,166,000 shares oftreasury stock for ¥2.67 billion. We intend to
employ these shares effectively in capital
policies such as stock retirement, stock
options and M&A.

Hideo Nagase, Chairman (Left)
Hiroshi Nagase, President (Right)

The WIT2000 Medium-term Management Plan
We are currently implementing the WIT2000 Medium-term Management Plan, which covers thethree years from April 2000 to March 2003. The plan seeks to achieve earnings in excess ofcapital costs and secure continued growth. It sets business strategies and results targets inpursuit of these goals and also establishes Nagase Return on Equity (N-ROE) as a management
performance indicator. Under this plan, we are working to boost earnings power and strengthen
management across the Group.

The WIT2000
1. Challenge Strategy
2. Dynamic Strategy
3. Group Strategy
4. Human Resources Strategy
5. Functional Development
Strategy

Promote business investment and develop new
businesses.
Adopt a selective, focused approach to business.
Reinforce manufacturing companies and boost
marketing strength of sales branches.
Train professionals.
Increase marketing strength by extracting anddeveloping business models.

N-ROE = Nagase profit ÷ Equity capital at the beginning of the term
Nagase profit = Net profit after tax + (Depreciation ± Appraisal profit or loss) x (1 - Effective tax rate)“Nagase profit” refers to the profit generated through operating activities, and is also referred to as “operating cash flow.”

2 Annual Report 2002

ICreatencrease Collaboration Within the Group and
Proposal-oriented Business Models
In accordance with WIT2000, we are pushing ahead with the creation of new, highly specializedbusinesses. The Nagase Group includes the Nagase R&D Center, which was established in1990 and conducts specialized research and development in the areas of organic synthesis andbiotechnology. It also includes a large number of subsidiaries that manufacture such products
as high value-added chemicals, pharmaceutical intermediates, and electronics materials. We arethus capable of partnering with our customers to develop new products and technologies on
top of fulfilling the more standard roles of developing new markets, procuring materials, andselling products. In developing new products and technologies, we make full use of ourbusiness groups, with their highly specialized knowledge and ability to gather information on thelatest developments in technology, and the R&D Center and our subsidiaries, with their researchand development and manufacturing capabilities. Since April 2000 we have promoted greatercollaboration within the Group in order to take advantage of these capabilities and to actively
create business models that provide valuable proposals to customers.
As a part of these efforts, we have formed projects teams that cut across group andsubsidiary to combine the knowledge and talents of authorities in differing specialized fields. The
teams are starting to generate results, as a number of proposal-oriented new businesses are
already in the works.
In April 2001, we established Nagase ChemteX Corporation by merging four major
manufacturing subsidiaries in order to strengthen our manufacturing capabilities. With themerger, which brought together the specialties of each of the four companies, we are able to
make the kind of large-scale investments that were not possible previously. We are currently
working on new developments in the fields of health care and electronics, areas in which theGroup is concentrating its energies. (See page 24 for details.)
Further, we are strengthening the relationships we share with our customers by reforming ourorganization based on ‘market in’ principles to respond better to their needs. With a Group
network numbering approximately 6,000 customers and suppliers, this will also enhance ourcapability to gather information on the latest technologies. As a part of these efforts, the Plastics
Group launched a system of strategic business units (SBU) in June 2001 and is currently
offering precision business solutions to its customers.

NAGASE & CO., LTD.
NAGASE R&D Center

Chemicals 21 Companies
Manufacturing

Processing

Sales

Business development
Research and development
Sales and service

Plastics 27 Companies
Manufacturing

Processing

Sales

Electronics 16 Companies
Manufacturing

Processing

Sales

Health Care and Others 22 Companies
Manufacturing

Processing

Sales

Overseas companies 16 Companies
Sales
There are a total of 102 related companies (67 subsidiaries, 35 affiliated companies).
Of the total, consolidated companies number 26 and those applying the equity method number eight.
Each of the above four business segments includes overseas companies that specialize in its respective area of business.
This information is current as of March 31, 2002.

Annual Report 2002 3

A Message from Management

Expanding “Top Share” Businesses

One of the main strategic goals of management is to increase the number of businesses with a
top share of domestic and overseas markets. Among businesses that have already secured a
top share of the market, those in which we have been engaged for a relatively long time, such as
dyestuffs and coatings materials, generate stable profits year in and year out. Looking ahead, we
intend also to commit to businesses that take advantage of our strengths in R&D andmanufacturing, and to those with a marketing
advantage based on our technological
Tensing Office
DairenTensingknowledge. Specifically, areas of focus include
Dairen Officeelectronics-related, environment-related andShanghai Nagase
health care businesses, as well as businesses that
Shanghai
Shanghai Hua Chang
fuse our biotechnology and organic synthesis
Ninphotechnology.
Nagase Hong Kong
Nagase Wahlee Plastics
Shinsen Office
In our overseas activities, we intend to maintainHong Kong Taiwan Nagase
TaiwanKuangohou Office
our focus on businesses in the Asian region.
Vietnam Hanoi OfficeBecause this is a market in which we have a
Nagase Thailand
Sales basestrong local sales presence and where business
Production basecan be readily conducted between foreign
Nagase Singapore
companies, it holds great potential for growth.
During the fiscal year under review, we increased
the number of sales centers we operate in China
from six to nine, and increased our staffing levels.
In this way, we anticipate new opportunities to
Aware of the remarkable growth potential of the Chinese market, we have divided our businesses in Asia into twoarise generated by the links between the three key
major spheres: an area centered on China and Taiwan (), and an area centered on Singapore (). We arecurrently developing business strategies tailored to the individual regional characteristics of these areas and arezones of Japan, Southeast Asia and China.
working to establish a global network to facilitate trade with Japan.

Outlook for the Coming Fiscal Year
Regarding the outlook for the coming fiscal year, concern over the prospects for the US
economy along with stagnating consumer spending and capital investment in Japan is causing
continued uncertainty. Against this background, we will continue to promote the three initiatives
we mentioned above: the creation of proposal-oriented business models, the strengthening ofcustomer relationships, and the expansion of “top share” businesses. We will also push ahead
with consolidating and discontinuing businesses as appropriate across the Group as a wholeand continue to cut costs through rationalization measures.
By implementing the above initiatives, we forecast net sales of ¥500 billion for the term ending
March 2003, operating income of ¥5.5 billion, and net income of ¥4.8 billion. We planned toraise N-ROE to 7% for the final year of the Medium-term Management Plan, but given theextremely severe business conditions we are revising the projection for N-ROE downwards to
5%. We intend to continue to pay a dividend of ¥8 per share of common stock, the same as in
the year under review.
We are committed to promoting the further development of the Nagase Group bystrengthening our business structure and corporate systems, and to making even greater
contributions to the community. We look forward to your continuing support in these endeavors.
July 1, 2002.

Hideo Nagase, Chairman

4 Annual Report 2002

Hiroshi Nagase, PresidentChemicals

6

Performance Chemicals Group
7
Coating and Imaging Materials Group 8
Fine Chemicals Group8
Speciality Chemicals Group9
Dyestuffs Division
10

Plastics

12

Plastics Group

13

Electronics

16

Electronics First GroupElectronics Second Group

17
18

Health Care

20

Health Care Group

21

Manufacturing and Processing

NAGASE & CO., LTD.
Research and Development

Nagase R&D Center

Nagase ChemteX Corporation
Sales and Service

Nagase GroupIn April 2001, four manufacturing subsidiaries were merged
to establish Nagase ChemteX Corporation. Working closelywith the business groups of Nagase and the Nagase R&D
Center, Nagase ChemteX develops and manufactures awide variety of chemical products including fermented
products, pharmaceutical intermediates, and formulated
epoxy resins. (See page 24 for detailed information.)

Overview of Business Operations
This section explains the current situation and future
prospects for each business group.

Company Profile 2002 5

Chemicals‘‘’’

Exploring the Limitless Potential of Chemistry
Close cooperation with the Nagase R&D Center is leading
to the creation of numerous new businesses

The Nagase R&D Center engages in joint research with pharmaceuticals manufacturers and university researchorganizations to generate the seeds that grow into new businesses. One example is our success in generating chiralcompounds (optically active substances) by means of the biocatalytic method.

6 Annual Report 2002

Performance Chemicals Group
The Performance Chemicals Group supplies the resin, paint, and ink industries with a wide rangeof products encompassing everything from petrochemical products to functional pigments anddies. For many years an import-driven business group, in recent years we have seen our export
ratio approach 25%, an upward trend that continues apace. We are hastening to transform ourbusiness structure, and have entered into alliances with other Chemicals, Plastics and Electronics
groups that have downstream business operations in an effort to develop new businesses.
Main Products Handled:
Petrochemical products, plastics raw materials and additives, pigments

Yoshizo Shibata
Executive Officer

Developing new domestic and overseas markets focused on color, films, and niche products
With the market for our products expanding beyond Japan to ASEAN countries, and from ASEAN
countries to China, the Performance Chemicals Group is focusing on developing new businesses, suchas support for customers as they transfer their production bases to China. For instance, we are providing
customers with useful functions such as smooth procurement of raw materials and risk hedging on thecollection of receivables. In cooperation with other business groups we intend to develop applications forthe products our customers make in China and sell those products, as we expand the scope of ourbusiness.
As is happening in the West, it is now commonplace in the Japanese chemicals industry for companies
to merge, transfer businesses, or withdraw from business sectors, and the old way of doing businessbased on the mere brokering of products is no longer of value. Acting as a purchasing agent for ourcustomers, we are carrying on with efforts to locate and procure products with new functions that
customers desire, not only in Europe and North America where the chemicals business is highly
developed, but also in Asia, an emerging source of supply.
In addition to these activities, we are also working to develop new markets from a fresh perspective.
Over the years the Performance Chemicals Group has adequately met the demands of our customers,
customers, but has had few opportunities to directly respond to the needs of manufacturers of finishedproducts. The Nagase Group as a whole, including other business groups, however, covers the market
from upstream to downstream, and can offer even manufacturers of finished products a broad selection of
products. We are therefore forming partnerships with other groups who develop downstream businesses
both domestically and abroad, aiming to develop new businesses that meet the needs of finished productmanufacturers in such areas as consumer electronics and housing. With color as our strength, we plan toput particular emphasis on highly functional films for plasma display applications and our original niche
products.
One example of this approach is the launch of Color Lab, a system for creating original color formulas
using functional colorants such as sparkling pigments. Through this project we have become involved in
the color selection process for home appliances, printed materials and other products made by ourcustomers, moving into the business of selling color expertise rather than just colorants.

Color LabThe Performance Chemicals Group newly launched Color
Lab, a system by which we go beyond the sales ofcolorants to offer color expertise.

Exhibiting the Color Lab system at the 2002 Paint Show

Annual Report 2002 7

Chemicals

Coating and Imaging Materials GroupThe Coating and Imaging Materials Group is engaged in two business sectors. The first is imaging
and recording materials, a field in which we have been involved for many years. It includes
pressure-sensitive and heat-sensitive paper, non-impact printing materials, and raw materials forpaper manufacturing. The second is coatings in the form of raw materials for inks and paints. We,
are currently utilizing other groups sales channels and customers, and making full use of our
network of leading chemical manufacturers, as we construct a new business model that adds
value to conventional raw materials supply.

Eiji Asami
Executive Officer

Main Products Handled:
Products and materials for imaging and recording, chemicals for paper manufacturing, raw materials for paints and inks

Taking full advantage of Nagase,s intellectual properties and internal and external networks
to construct a new business model that adds value to raw materials supply
The Coating and Imaging Materials Group is working to fully leverage the intellectual properties andinternal and external networks of Nagase to bring high added value to our business. An example of this is
the creation of new businesses by means of forging strategic partnerships. This involves cooperating withmaterials suppliers and users to move beyond the supply of raw materials to create businesses involving
issuing new product proposals, providing sales support, and supporting distribution activities. One aspectof this has been the development of N-SCM, a model for supply chain management developed by
Nagase. At present, N-SCM centers on proposals for streamlining physical distribution in the coatingsbusiness, but future plans call for extending it to include services that take advantage of our abundant
product knowledge: for instance, proposals for storage and transport methods tailored to our customers,
products. We also intend to extend N-SCM to the area of imaging materials.
We are also stepping up our engagement in the Chinese market. We offer distribution and sales
support for Japanese companies moving their operations overseas, targeting primarily customers who
would have difficultly undertaking the move on their own.
At the same time, we have begun considering partnerships with other groups and sales companies toraise the value-added of both partners, businesses. For example, we are considering the potential for
combining our information on inks and paints with the Plastics group,s plastic products for automobiles
and plastic materials for consumer appliances. Another opportunity could involve using some of our
products and materials for imaging and recording with the organic
Building Strategic Partnerships
LED materials handled by the Electronics groups. We intend to
The Coating and Imaging Materials
pursue the possibilities of developing new markets by exploring
Group is building strategic partnerships
with suppliers and users to create newpartnerships with outside groups such as these and by making fullbusinesses in the areas of productuse of the knowledge and expertise accumulated by the Group.
commercialization support, sales supportand distribution support.

Fine Chemicals GroupThe Fine Chemicals Group takes a global approach in providing functional products and services,
that are closely connected with people s lives and lifestyles, such as pharmaceuticals, agriculturalchemicals, and household insecticides. During fiscal 2003 we are working to establish a new
business to take its place alongside pharmaceuticals and agricultural chemicals. Promoting
businesses focused on the life sciences sector, we added enzymes, enzyme products, toiletry raw
materials, food additives, health food materials, and nutritional supplements to our existing line-upof products.
Takeo Kaneko
Executive Officer

Main Products Handled:
Pharmaceuticals (raw materials, intermediates, APIs, formulations, additives), agricultural chemicals (intermediates,bulks, formulations, submaterials), household insecticides (intermediates, bulks), diagnostic reagent materials,
enzymes, enzyme products, toiletry raw materials, food additives, health food materials, nutritional supplements, feed
and culturing products

Providing of an extensive line of functional products and services centered on the life sciences
Research and develop leadtimes for creating a new drug are said to average twelve years in Japan andeight years in the United States. For this reason, streamlining and speeding up the drug development
process is fast becoming an important management issue for the world,s pharmaceuticals
manufacturers.

8 Annual Report 2002

The Fine Chemicals Group contributes to streamlining our customers, drug development processes,
leveraging the technological capabilities of the Nagase R&D Center and of the manufacturing subsidiary
Nagase ChemteX. As a part of these activities, we capitalize on the strengths of a domestic and overseas
network that comprises more than 400 companies to outsource the production of intermediates, whichpharmaceuticals manufacturers use in the mass production of drugs as well as during research anddevelopment. A particular advantage is our front-line staff who consult with customers. These employees
possess knowledge of synthetic organic chemistry, biochemistry, and pharmacology. This enables us toprovide a rapid, high-level response to customer needs in any number of areas, from generating processsolutions to facilitating mass production to consulting on the development of environmentally friendly,
pollution-free processes.
We are focusing on developing new businesses in the area of the life sciences to establish a mainstay
business to complement our pharmaceuticals operation, putting special emphasis on new gene therapyrelated products and technologies, food additives, and raw materials for health foods. Specifically, we areworking to expand our business in household products, an area for which we are already the top supplierof bulk formulations. We also are developing a business in natural and fermented products that leverages
our knowledge of enzymes.
Investing in Overseas Venture Companies
Most industry observers believe that in twenty years gene therapy will
be squarely in the mainstream of health care. We are devoting ourefforts to establishing a new business in this field, aggressively
investing in overseas ventures and working to develop the newtechnologies and products needed in the field.

Speciality Chemicals GroupThe Specialty Chemicals Group handles a wide range of chemical products for industrial and,household applications. Our ultimate mission is to take full advantage of the Group s knowledge ofchemicals and abundant information and serve as a bridge linking the chemicals industry withoutside industries. During fiscal 2003 we are assumed responsibility for the high reactivity
chemicals, catalysts and other products previously handled by the Fine Chemicals Group, adevelopment that expanded our product range. We are focusing on the formation anddevelopment of small business units (SBU) that combine our wide-ranging products, technologies,
and information in exploring the potential of new businesses.

Shingo Bamba
Executive Officer

Main Products Handled:High reactivity chemicals, electronics chemicals, catalysts, raw materials for toiletries, surfactants, household raw
materials, fluorine, silicon

Focusing on the development of new businesses that leverage our wealth of products,
technologies, and information
The Specialty Chemicals Group handles chemical products for a broad spectrum of special applications
that range from household detergents and other consumer products to plating, water treatment agents,
detergents for precision parts processing, electronics chemicals, and environment-related materials.
To fully leverage the markets, technologies, and customer information accumulated over the years by
Nagase, we are currently engaged in developing a new business model that involves launching multiple
SBUs within the group. This involves selecting promising projects from among more than 200 project
themes put forth within the group and testing their potential for being developed as new businesses. We
are already actively engaged in business development activities based on developing energy-related
products, expanding resist products, and constructing sales networks with China as a supply base.
Although it will be some time before the fruits of these activities are reflected in actual business results,
we intend to continue to make use of Nagase,s knowledge of chemicals as well as its information
gathering and procurement capabilities to expand the scope of our business. To that end, we plan totake advantage of the sales channels and information networks of other divisions to explore the potential
for new businesses and to strengthen our alliance with subsidiary Nagase ChemteX. With Nagase
ChemteX we intend to develop new products based on its epoxy organic synthesis, compounding andfermentation technologies.

Annual Report 2002 9

Chemicals

Dyestuffs Division
The Dyestuffs Division sells dyestuffs, chemicals, and machinery for processing textiles. We enjoy
total coverage of the domestic market through Nagase Colors & Chemicals Co., Ltd., Delta Fine
Chemical Co., Ltd., Nishinihon Nagase Co., Ltd. and Kyushu Nagase Co., Ltd. We have launcheda functional dyestuffs business targeted at the entire Asian region, bringing to fruition previous
efforts to enter Asian markets.
Main Products Handled:

Yasuhiro Yamasaki
Manager, Dyestuffs Division
President, Nagase Colors & Chemicals Co., Ltd.

Dyestuffs, dyeing auxiliaries, industrial chemicals, finishing agents, textile processing resins, adhesives for textiles,
functionality-added finishing agents including anti-bacterial agents, deodorizing agents, and shape memory agentsBOAT21 Borderless Action in the Textile Field — A functional dyestuffs businesstargeting the entire Asian region is launched
Though the Japanese dyestuffs market has contracted in recent years, in the world,s textiles market
development of a global supply chain with Asia as the base of supply has progressed. In response tothese changes, the Dyestuffs Division has stepped up business development activities aimed at
Japanese companies entering Asian markets. In fiscal 2003, we launched a project named BOAT21.
This project brings together the collective capabilities of the Wise Men,s Group1 in Japan, the Shanghai
Office, the Shanghai Techno Center, and our subsidiaries in Thailand and Indonesia to powerfully
promote technological support and raw materials procurement for the dyeing and finishing industry as awhole. Furthermore, we intend to extend our business activities developed only in the midstream of textile
production to encompass upstream and downstream areas.
Scheduled to begin operations in September 2002, the Shanghai Techno Center plays the pivotal rolein this initiative. Initially this facility will perform on a contract basis staining (dip dyeing) tests, finishedprocess tests and various dye fastness tests in conformance with JIS. Beginning in fiscal 2004 we plan toinstall testing equipment necessary for performing continuous dyeing and printing tests and we intend toincrease the number of local staff. This facility will work closely with the existing Techno Center within the
Osaka headquarters, and in the future will provide the same technical services overseas that are provided
in Japan.
In Japan, the recognition capabilities of the computer telephony integration (CTI)2 system weintroduced in April 2001 have increased, and we will make use of customer relations management tostrengthen relations with key customers and expand our business in niche markets.
,

1 Wise Men s Group: This is an organization of specialists from within and outside Nagase who work to find more

concrete ways of taking advantage of our technology and information orientation. In conjunction with the Techno
Center, this organization has issued proposals related to the establishment of dyeing technologies for new materials, thedevelopment of dyestuffs, dyeing auxiliaries and finishing agents, and the production and formulation of blended
dyestuffs by means of original techniques.
2 CTI: Using this system Nagase manages more than 1,000 delivery destinations. Based on customer purchase orderdata a computer forecasts demand and issues instructions to the system operator. The system began operation in April
2001. In the future we plan to consolidate the order receipt function in a single location.

Development of the Digital Swatch Color Matching System
Selection of a dye color traditionally involved viewing color samples or other colored objects. Now, theinnovative Digital Swatch Color Matching System utilizes the Web to enable color confirmation, selection, andspecification on computer monitors. The system represents a cross-border supply chain management solution
for expediting processes from color specification to dyeing and for facilitating quality control.

Techno Center
The Techno Center is responsible for development of proprietary products and thedissemination of technical information. Currently, the center is developing metal-freedyestuffs and working to develop technologies to improve light-fastness, durability, andtexture for specialty apparel applications. Another Techno Center is scheduled to open
in China in September 2002.

10 Annual Report 2002

Contract manufacture ofpharmaceutical-related products
To satisfy the needs of pharmaceuticals
companies pursuing rationalization of the
drug-making process, we engage in thecontract manufacture of intermediates,
APIs, and formulations used in the
research and development of new drugs.
The lower photograph is of an injections
manufacturing line at the Itami Factory of
manufacturingsubsidiary
NagasePharmaceutical Co., Ltd.

Plastics‘‘’’

Solving the Issues Facing Industry is Our Core BusinessBroader Coverage and More Rapid Response in the Global Marketplace

In February 2002 Nagase established Design & Die Co., Ltd., a joint venture
engaged in the development and engineering of plastic components forautomobiles. The new company helps shorten development times, enhancequality, and reduce costs for automotive manufacturers by providing across-theboard subcontracting services for processes ranging from advanced threedimensional solid parts design to prototypes and mass production dies.

12 Annual Report 2002

Plastics Group
Adopt a thoroughly customer-oriented approach and actively invest when necessary — In line withthis management vision, in June 2001 we started a system of strategic business units (SBU) toserve as the interface with the market and our customers. We have devised a number of businessmodels — region-oriented, user-oriented, manufacturer-oriented, and product developmentoriented — in response to the increasingly diversified, complex, and sophisticated needs ofindividual customers, and have begun anticipatory investment to further develop and nurture them.
Main Products Handled:
Thermoplastic resins, thermosetting resins, synthetic rubbers, inorganics, auxiliaries, plastic products, plastic-related
equipment, devices and dies

Kazuaki Kobayashi
Director and Executive Officer

Establishing a flat organization for rapid decision-making in line with customer needs
We believe a “trading company of choice” is a company that can accurately and rapidly implement thesolutions required by customers and markets. The Plastics Group has restructured our operations andtransformed our business processes in accord with this belief and on the basis of the idea that “theanswer to everything lies in the market.”With markets changing at a bewildering pace, decision-making in the conventional pyramidorganization was not fast enough to keep up and led to lost business opportunities. For this reason, in
fiscal 2002 we abolished the traditional “department” and “section” structure and launched a system of
23 SBUs aligned with markets and customers, delegating authority while at the same time speeding-up
decision-making. The SBUs will explore various region-oriented, user-oriented, manufacturer-oriented,
and product development-oriented business themes.
At the same time, we put in place a separate support structure for the 23 SBUs. We formed a
specialist legal and taxation unit staffed by people with expert knowledge in investment and risk
assessment. We also created a specialist information technology unit to actively utilize IT and ecommerce. Through these organizational reforms, we are creating a “proposal-based business” that will
motivate customers to choose us as a business partner.

Twenty-three customer — and market-oriented SBUs create diverse
new markets and products
Currently, the Plastics Group,s 23 business units pursue their respective business themes, identifying
industry trends from a global perspective and engaging in aggressive overseas business development.
Some business units have set their sights on creating new businesses in various Asian markets. For
instance, currently many companies in the automotive, electric, and electronics industries are expanding
their production bases in China. In response to this situation, during the year under review Nagase
established Nagase Precision Plastics Shanghai Co., Ltd., a company that produces industrial plastic
packaging materials such as electronic component transport trays. The new company, KNCT Co., Ltd., acompany established in Thailand in fiscal 2001, and domestic manufacturing subsidiary Kotobuki
Industries Co., Ltd. comprise a network that links Japan and other Asian countries. Our aim in
constructing this supply structure for industrial plastic packaging materials is to expand our business inAsia.
We have established a regional sales base in the northeast of China, and plans call for enhancing oursales network in central, east, and south China. We are alsoestablishing a representative office in Hanoi, Vietnam in anticipation
Engineeringof a trend toward expansion of production bases beyond China
Styling
throughout all of Asia.
Module design
3D solid parts design
With regard to our automotive business units, in February
CAE
2002 we established the development and engineering
company Design & Die Co., Ltd. in Japan. Overseas, weSolutions for theestablished Nagase Plastics America Corp. in January
automotive industry
2002 in Detroit to meet customer needs in areas
Dies

Business Process Outsourcing for the Automotive Industry
With the establishment of Design & Die Co., Ltd. Nagase hasdeveloped 3D solid designs for automotive parts. This development
makes it possible to strengthen our comprehensive solutions
business, which involves raw materials supply, prototypes,
production dies, and development support.

Plastic dies
Press dies
(prototypes andmass production)

Raw materials
and parts
Affiliated manufacturers
Overseas joint ventures
OEM
Outsourcing

Annual Report 2002 13

Plastics

such as global procurement. In fiscal 2003 we will establish a representative office in Budapest, Hungary.
From these operating bases we will reinforce our solutions business by which we offer opportunities forthe world,s automotive manufacturers to streamline their development, planning, and production facilities.
Other business units focus on environment-related initiatives. One such SBU supplies air-cooled
refrigerating systems for use with machine tools and other such devices. Many manufacturers who havetransferred production to Asian countries are plagued by incessant machinery failure due to the poor
quality of local water used as cooling water. Our waterless air-cooled refrigerating systems are attracting
attention both for solving this problem and for not requiring wastewater processing.
The initiatives on which we are focusing the greatest effort are the development of new businesses
and new markets in Japan. The ongoing aging of society is certain to give rise to increasingly barrier-freeenvironments in urban spaces, public facilities, and the home. In addition, environmental concerns havegiven rise to demand for fully recyclable materials. The Plastics Group will link this latent demand with the
products we offer to open unexplored new markets for the company.
For instance, the Plastics Group has offered a recycling system for housing materials that uses
Pluswood, a product original to Nagase. Leveraging the knowledge and expertise gleaned through thisprogram, we are now working to develop new products and services targeted at market sectors whereenvironmental impact is a concern.
Nagase is already much more than a company that supplies materials to manufacturers. We willcontinue to create new businesses required by the market by taking advantage of our worldwide networkand making use of our wealth of internal and external technologies and information.

Air-cooled refrigeration systems
The Plastics Group is putting its efforts into an innovative, fully
electrical air-cooled refrigeration system. Because this systemdoes not require a tower or underground cistern for water cooling,or a large-scale water treatment system, it delivers a dramatic
reduction in mechanical trouble. Moreover, it is attracting
attention as an environmentally friendly product.

Plastics manufacturing subsidiary in Shanghai established
In January 2002 Nagase established Nagase Precision Plastics Shanghai Co., Ltd.
in Shanghai as a plastics manufacturing subsidiary. The new company began
production of plastic trays for electronics component carriers in March of the same
year. We intend to engage in sales initiatives directed at Japan-affiliatedmanufacturers of electronic equipment and parts active in China.

14 Annual Report 2002

Pluswood
Pluswood is a plastic compound building
material containing more than 51% byweight of wooden material. An
environmentally friendly construction
material, Pluswood contains no formalinsor dioxins and can be recycled for reuse.
Nagase has incorporated it into a housingmaterials recycling system.

Recycling System for Housing Materials

Wood powder
Form pellets

User

Process

Collect

Waste plastic

ReclaimElectronics‘‘’’

We Listen to the Voice of Customers in the Chinese Market
Contributing to developing infrastructure for the spread of PHS

In a joint project with Group company Gigatec Inc. we have developed PHS base station components such as power amplifiers.
These products are selling well in China, a market where demand for PHS communications is on the rise.

16 Annual Report 2002

Electronics First GroupIn close cooperation with production and sales companies within the Nagase Group, theElectronics First Group is engaged in providing the electronics component, semiconductor, andliquid crystal industries with materials and systems solutions. We are currently expanding ourbusiness in China, Korea, Taiwan, Singapore and other Asian markets, and aggressively investing
to build a foundation for future growth and business development.
Main Products Handled:
Semiconductor manufacturing equipment, chemicals management systems, semiconductor and photolithography
chemicals for liquid crystal manufacture, semiconductor packaging materials, semiconductor packaging systems,
insulating materials, fluoroplastic-related products, epoxy-resin related products

Kyoichi Zushi
Executive Officer

Expanding investment in the Asia region with a focus on China forthe construction of next-generation business infrastructure
Based on company-wide business policies, the Electronics First Group has established the following
policy initiatives:
1. Expand and enhance manufacturing capabilities, with a focus on Nagase ChemteX. 2. Expand
activities as a trading company with production capabilities in the Asia region. 3. Achieve early profitability
from businesses in which we have already invested. 4. Launch new functional materials. 5. Establish
next-generation businesses (two to three year timeframe) through organizational restructuring.
We intend to create profitable businesses by strategically linking and implementing these policies. In
particular, we are expanding our activities as a trading company with production capabilities by making
large-scale investments in Asia. With domestic markets for electronic components, semiconductors, andliquid crystal maturing and markets elsewhere in Asia growing rapidly, we intend these investments tostrengthen the foundation for our future growth and development.
In July 2001 Nagase established the joint venture company Nagase CMS Technology Co., Ltd., acompany whose mainstay product is the chemicals management systems (CMS) that Nagase is working
to expand. Aggressive capital expenditure in Japan, Korea, and Taiwan enabled this company to achieve
its first-year targets. In September, Nagase also established Nagase Fine Chemicals Singapore (Pte) Ltd.
and in the summer of 2002 we plan a full-fledged launch of a chemicals management business serving
liquid crystal panel and semiconductor factories in Singapore.
In fiscal 2003 we will actively develop business in the semiconductor and liquid crystal market sectors.
Primary areas of focus will be our core semiconductor manufacturing pre-processing and postprocessing materials, liquid crystal pre-processing materials, epoxy resins and other functional materials,
and systems solutions centered on the chemicals management system.
In the area of semiconductor pre-processing, we will launch a developer dilution system that uses
non-filtration membranes (reverse osmosis), and will expand local production in Korea and Taiwan. We
are continuing joint development of next-generation photoresists with Korea Kumho Petrochemical Co.,
Ltd. that began in fiscal 2002, and by strengthening our alliance with Ashland Chemical Company of the
U.S. we are working to expand our business in removers for semiconductors. We will also launch new
products into the liquid crystal market segment.
With regard to semiconductor post-processing, the wafer bumping processing business conducted
at Alpha Bumping Technology Co., Ltd., a domestic subsidiary established in fiscal 2001, is now in fullswing, and we expect to gradually see results from this undertaking going forward. The LSE (liquid epoxy
semiconductor encapsulation agent) business in fiscal 2002 was affected by the sluggish semiconductor
market, however, work continues on putting in place a global sales network that we expect to lead to a
20% share of the market within a few years.
As for functional materials, we are planning to produce formulated epoxy resins in China and intend tolaunch onto the market new value-added adhesives with induction heating, UV anaerobic, and Deep UVproperties.
What,s more, through the Strategic Development
Nagase & Co. and Nagase ChemteX sign acontract with the City of Wuxi, paving theDivision established in April 2002 we will bolster
way for construction of a joint plant in China
teamwork with Nagase groups involved in chemicals
Nagase & Co. and Nagase ChemteX have secured
and plastics to engage in new businesses thatfrom the City of Wuxi the land necessary to constructa plant to produce formulated epoxy resins forleverage Nagase,s proprietary knowledge in theelectrical, electronic, tooling, and adhesive
areas of liquid crystals, organic light emitting diodes
applications.
(LED), and nanotechnology.

Second from the left in the first row is Gong Pei Xing,
Vice Mayor of the Wuxi Municipal Government

Annual Report 2002 17

Electronics

Electronics Second GroupThe Electronics Second Group handles key devices and equipment for the IT sector, including
displays, communications components, network equipment and image processing devices. In
order to respond to the advance of Japanese and Taiwanese semiconductor and liquid crystal
device manufacturers into China, we are actively focusing on developing our business there.
Main Products Handled:

Kazuo Nagashima
Executive Officer

Display units, material for liquid crystal displays and organic light emitting diodes (LED), precision abrasive materials,
network equipment, wireless communication modules and systems, communications-related integrated circuit chips,
optical communications components and materials, surface defect inspection system

Creating original businesses in partnership with Group manufacturing andprocessing affiliates
The Electronics Second Group is currently focusing on creating original businesses that will contribute tosustained increases in corporate revenue. To this end, we will take advantage of the knowledge andexpertise accumulated over many years by the trading company Nagase in order to create original
businesses in the IT and electronics industries. Further, we will leverage the capabilities of the Group,smanufacturing and processing companies. Accordingly, we are in the process of dividing responsibility
with other parts of the Group and external business partners to build a cooperative framework forbusiness development.
In fiscal 2002 we targeted communications-related demand in Asian countries, a sector expected to
grow in the coming years, and developed our overseas operations in cooperation with other Group
companies. Sales of PHS base station components (such as power amplifiers), developed taking fulladvantage of the communications technologies of Group company Gigatec., have increased rapidly in
China, a market where wireless communication is demonstrating explosive growth in popularity.
In China, we are already involved in display unit production and polarizing film processing, and we plan
to expand local production operations by manufacturing light-emitting diodes. We have dispatchedadditional staff to China in anticipation of future growth from this market.
Some of the businesses we have focused on the past few years are beginning to bear fruit. Sales of
Scantec are growing satisfactorily. Scantec is a surface defect inspection system for steel plates ofautomobiles and optical films, and in the near future we will ramp up our sales activities in order toestablish it as the standard inspection system for optical films. In the area of precision abrasive materials
as well, sales of abrasive slurries used in leading-edge chemical mechanical polishing processes are
steadily increasing despite a slump in the semiconductor device industry. We are also hastening
development of related materials.
Our efforts in the communications sector during fiscal 2003 will continue to focus on reinforcing oursales of power amplifiers for PHS (Personal Handyphone System) base stations and other infrastructure
products for the mobile communications business. We have also concluded a sales agency agreementwith Memtek International Inc. to market Memorex brand products, the global market leader in CD-R and
DVD-R media. As we commence sales of these products, we plan to take advantage of this opportunity
to expand our IT business. In the area of network storage products, we are engaged in a cooperative
venture with Group subsidiary Hoei Sangyo Co., Ltd. and are approaching the stage where we canprogress from development to a major expansion in sales.
Although last year the semiconductor and communications industries were mired in a slump,
manufacturers are actively preparing for the next generation of markets. Nagase is a part of this trend, as
it incisively grasps market movements and creates original businesses.
Agency Agreement for Sales of Memorex
Products
As part of our efforts to expand our IT business, wehave signed a sales
agency agreement withMemtek International
Inc. to market CD-R
and DVD-R products.

Front row left, Eugene Kuo, Deputy Chairman ofMemtek International

18 Annual Report 2002

Scantec Sales Expand
Sales of the Scantec surface defect inspection system for
optical films are growing satisfactorily, as we arevigorously engaged in sales expansion activities aimed at
establishing Scantec as the standard inspection system for
optical films.

Nagase Finechem Singapore (Pte) Ltd.
Construction has begun on a new plant for Nagase
Finechem Singapore (Pte) Ltd., a company which
produces chemicals for use in the manufacture of liquid
crystal panels and semiconductors. In addition to
supplying chemicals to major electronics manufacturers,
the new plant will be equipped with systems forrecovering and recycling waste fluids generated during
manufacturing processes. It will provide liquid crystal
panel and semiconductor production plants withsuggestions for contributing to environmental preservationand lowering costs.

Company Profile 2002 19

Health Care‘‘’’

Our Mission is to Contribute to Beauty and HealthIn Closer Contact with Consumers

The discovery of carnosic acid, with its whitening and moisturizing action, represents the culmination ofyears of research into the properties of rosemary. In April 2002 we launched Sela White Essence V,
a new whitening essence that incorporates this ingredient.

20 Annual Report 2002

Health Care GroupAs society ages, awareness of health is increasing. Rooted in a “company-to-consumer”
orientation, we provide products and services that support a secure and comfortable life for our,customers, contributing to people s lifetime health plans and their quality of life.
Main Products Handled:
Cosmetics, health foods, beauty foods, bacteria test devices and reagents, diagnostic systems, infectious disease
control systems, reagents for research, x-ray-related equipment, automatic gene extraction devices, electronic medical
chart systems, healthcare accident prevention support systems, home nursing care products, home therapy devices

Makoto Ono
Executive Officer

Offering a comprehensive health care information system to help
advance community health care
The Health Care Group does business in the fields of medical and beauty care with a view to contributing
to secure and comfortable lifestyles.
The products we handle in the medical care sector include nursing care products and home therapy
devices for people whose health has declined, as well as medical care information systems that
contribute to improved health care services. We are especially focusing efforts on these systems. Taking
advantage of the knowledge and experience gained through our involvement with infectious disease
control systems, we began sales in fiscal 2002 of electronic medical charts for comprehensive medicalcare systems. This system for consolidating patient information is highly regarded not only as a means ofincreasing the efficiency of diagnosis and treatment, but also as a tool for increasing management
efficiency at medical institutions. It has been installed at medical institutions nationwide, including university
hospitals.
In recent years an increase in the number of medical-related accidents has become a serious
problem. In response to this we developed a support system to help prevent medical-related accidents ina joint effort with Tohoku University. By linking a LAN in the hospital with PDAs carried by hospital staff thissystem makes it possible to accurately distinguish patient type, medical treatment, and administered
medication. Operational testing at Tohoku University has already been completed and we have begun
selling the system nationwide.
Although we are still at the conceptual stage, we plan to create a new framework for regional medicalcare that will allow this medical information system to be used throughout the region. For example, linking
all the large hospitals, small and medium-sized hospitals, clinics and private practitioners in a specificregion via the Internet would allow each institution to shoulder its share of the burden while making themost of its individual specialties. This would ensure that they are all in the position to take appropriate
preventative measures and offer the most suitable medical treatments. As a first step, we are engaged in
activities to sell our electronic medical chart system to a wider market, including clinics and private
practitioners.
Support System to Prevent Medical-related Accidents
By linking PDAs the hospital LAN and barcodes, this system to prevent medical-related accidents makes nursing
care more efficient by matching patients and treatments. The medical care environment is made safer because thesystem integrates the management of information, actions, and objects.

Pharmaceutical
Department
・Prescription check・Contraindication check・Medicine for internal use
・Injection preparation

Medication order

Order and patient information

Order execution
information

Order execution
information

・Medication administration
information
Blood transfusion
order

Blood
Transfusion
Department
・Blood group check・Issuing of blood

Electronic
medical chart,ordering system

Server for the Accident
Prevention System

Order execution
information

Nursing care order
Order execution
information

Hospital Wireless LAN

Wireless LAN
PDA
access points (portableterminals)

Nursing Care
Support・Nursing Care SupportEachhospital room

Annual Report 2002 21

Health Care

Yet another initiative directly linked to increasing quality of life is home health care. In the years to comethe number of people who will require home medical care and nursing care is certain to increase. We
have already developed an oxygen concentrator jointly with Respironics Inc. of the United States and plana full-scale launch in October 2002. This represents the first step in a program to expand and enhance
our home medical care business.
We are also actively doing business in China, establishing a joint venture company in Shanghai to
produce clinical testing reagents and kits. We also opened sales routes into Singapore and Taiwan.

Opening salons and shops nationwide to provide more reassuring, reliable beauty care
In the beauty care market sector, we sell health foods for the maintenance of good health and high-grade
cosmetics that help to prevent aging through a nationwide network of 40,000 door-to-door sales people.
As in our medical care business, in our health foods and cosmetics business we have made “peace ofmind” and “trust” our watchwords in preparation for the day when products with no scientific basis or
products that don't offer clear-cut effectiveness won,t sell.
Based on this awareness, for years Nagase has researched the efficacy of natural extracts such as
herbal extracts in cooperation with university research institutes and the Nagase R&D Center. We have
paid particular attention to the aromatic plant rosemary, about which we have discovered various effects
and made presentations at academic conferences. Last year we discovered a new substance withwhitening and moisturizing action that represents the culmination of long years of research. In April 2002
we launched Sela White Essence V, a new whitening essence that incorporates this new ingredient.
The Health Care Group,s products are produced by an integrated system that begins with researchand development and continues through to manufacturing. For many years we have valued directcommunications with our customers, selling our products door-to-door. Beginning in fiscal 2002, we are
opening beauty salons in areas across the country to provide our customers with even greater peace ofmind as they use our products. Taking advantage of the characteristics of door-to-door selling, we areworking to enhance the salon,s counseling services, which make use of a range of high tech devices.
As a new experiment, in February 2002 the subsidiary Herbal Care Co., Ltd. began in-store sales. The
company opened four Pour Toi stores located in the Takashimaya Tamagawa Store, Odakyu Shinjuku
Store, Mitsukoshi Ebisu Store, and the Odakyu Machida Store. At these shops the company sells its
products, provides counseling, and enables customers to try aromatherapy and esthetic services.
Based on the theme “Turning wisdom into business,” Nagase is currently engaged in an effort tooriginate new businesses. The Health Care Group has long turned wisdom into safe products andservices and provided them to our customers, and we intend to continue to create high-quality healthcare that fosters “peace of mind” and “trust.” Our support system to prevent medical-related accidents
and our beauty salons represent the first step toward this end. In the coming years we will continue topursue the potential of medical care and beauty care and contribute to enhanced quality of life.
Newly Established Beauty Salons
We have established beauty salons in various locations toenable people to use the door-to-door sales services forcosmetics and health foods with greater peace of mind.
Featuring a full range of counseling services that make useof high tech devices, these offices deepen communications
with customers.

,
The Kobe Beauty Salon in Kobe s Central Ward.

22 Annual Report 2002

Pour Toi
Herbal Care Co., Ltd. launched in-store sales in February
2002. At four Pour Toi stores located in the Takashimaya
Tamagawa Store, Odakyu Shinjuku Store, Mitsukoshi
Ebisu Store, and the Odakyu Machida Store, thecompany sells its products and provides counseling,aromatherapy, and esthetic services.

Annual Report 2002 23

Detailed Information by Topic

1 One Year since Integration of

Manufacturing Subsidiaries— New Challenges for the New Nagase ChemteX (NCX)
Nagase ChemteX (NCX) was inaugurated in April 2001 by the merger of four manufacturing subsidiaries
belonging to the Nagase Group. During the current term, its 12 business segments were restructured
into five business groups to create an organization capable of offering proposals for new businesses fromas close as possible to the customer,s standpoint. NCX also started to develop new business potential
by fusing the technologies and expertise accumulated by the companies prior to the merger.

Focusing on the Field of Health Care

Reiji Nagase
President,
Nagase ChemteX Corporation (NCX)Managing Director and Executive Officer,
Nagase & Co., Ltd.

In the area of pharmaceuticals manufacture, the world,s pharmaceuticals companies are increasingly
concentrating resources on research and development. In Japan, progress in deregulating thepharmaceuticals sector has made it possible for us to form alliances of various kinds. For many years, wehave provided pharmaceuticals companies with pharmaceutical raw materials and fine chemicals. Now,
in addition to offering support for the mass production of pharmaceuticals, we are manufacturing oncontract such products as the intermediates used in drug development and are providing assistance forthe development of manufacturing processes. As part of these initiatives, we expect during the coming
term to complete a small-scale intermediates plant thatsatisfies the code of good manufacturing practice (GMP)
for pharmaceuticals. We are also considering further
investments in these areas in the future.
While working on expanding the health care business,a primary area of focus of the Nagase Group, we are alsoprioritizing research and development on fusing organic
synthesis technology and biotechnology, a field which
harnesses the power of enzymes and microorganisms.

New Developments in the Electronics Business

Conceptual drawing of the small-scale pilot plant forpharmaceutical intermediates in Fukuchiyama

Electronics is another area of focus of the Nagase
Group. As manufacturers of liquid crystal panels and semiconductors move production to locations
overseas, the Group is growing businesses at sites overseas to locally manufacture and recycle
chemicals. The summer of 2002 will mark the completion in Singapore of a chemicals manufacturing andrecycling plant for Nagase Finechem (Pte) Singapore. As a manufacturer, we will play a central role inensuring it goes into operation smoothly and work to expand its business in the future.
In the advanced semiconductors sector, we will increase our development, production and sales ofliquid and film packaging materials with a view to expanding our global market.
We will also promote the development of a number of new materials for the promising growth areas ofelectronics and optoelectronics. In the process, we intend to make the most not only of the organic
synthesis and formulation technologies that Group companies possessed before the merger, but also of
the applications development capabilities Nagase possesses in electronics and optoelectronics, and its
strong relationships with customers.

Largest Domestic Manufacturer of Formulated Epoxy Resins
We are Japan,s largest domestic manufacturer of formulated epoxy resins. In addition to the electricaland electronics sectors, we are expanding our operations into areas ranging from tooling to construction
and civil engineering. In particular, the new corrosion-resistant materials for concrete lining that we havedeveloped for use in construction and civil engineering has been very well-received. As orders forcorrosion-resistant covering work will be altered to performance-based orders in the future, we anticipate
substantial growth in demand for a new ultra-corrosion-resistant epoxy lining material (trade name
DENACOAT), which was recently launched on the market. In response, we acquired marketing rights inthe area of formulated epoxy resins from Nihon Polymer Co., Ltd., a subsidiary of Asahi Kasei
Corporation, in May 2002. Using the products and technologies accumulated by Nihon Polymer and its
network of agents and construction contractors, we intend to strengthen and expand our lining materials
business, including our own products.
Plans for the construction of a formulated epoxy resin production plant in China will also go ahead infiscal 2003, and we plan to start supplying Chinese electrical machinery manufacturers and others withproducts from early in fiscal 2005.

24 Annual Report 2002

When the four companies were merged, ourobjective was to fuse their technologies andexpertise, and to engage in selective, focusedinvestment for the future. We also aimed tostrengthen human networking with related
business groups at Nagase and the Nagase
R&D Center. As the above shows, we havegone a long way to achieving these goals andbelieve we have at last established a frameworkthat allows us to compete in the increasinglycompetitive global market. We are approaching
the stage when the fruits of our investments will
begin to emerge, and intend to fulfill yourexpectations by developing our businesses
hand in hand with the global expansion of theNagase Group.

Research & Development Division
Production Planning Division
Harima Factory 1
Harima Factory 2
Production Department
Fukuchiyama Factory
Process Engineering Division
Quality Control Division
President
Structural Materials DivisionCorporate Planning OfficeElectronics Materials Division
Electronics Chemicals Division
Functional Chemicals Division
Bio/Fine Chemicals Division
Regulatory Affairs Division
Administration Division,
Nagase ChemteX Corporation s Organization

2 Integrated System for Contract

Research and Development Establishedwith Nagase R&D Center at its Core
The Linchpin of R&D in the Nagase Group
Since its inauguration in 1990, the Nagase R&D Center,s policy has been to serve as the driving force
behind R&D in the Nagase Group through the 21st century. As such, it has been engaged in process
research and development, using microorganisms and enzymes for the manufacture of pharmaceuticalintermediaries and other fine chemical products. The R&D Center focuses in particular on developing
technologies for converting existing substances into high value-added products and, through the Nagase
Group,s network, has successfully met the needs of various customers
while acquiring many patents for processes used in manufacturing finechemicals.
The R&D Center plays an important role in strengthening the organic
synthesis and biotechnologies (production and application of various
enzymes) possessed by Nagase ChemteX. It has also established an
integrated system that allows it to both assess the market value ofNagase,s pharmaceutical intermediates and electronics materials and todevelop new products and manufacturing processes on a custom basis.
At the core of the R&D Center,s activities lie chiral technologies, which areused for producing optically active substances.

Leveraging Expertise in Chiral Technology
Chiral technologies encompass the fields of organic synthesis and biotechnology. They are currently
the focus of global attention as manufacturing technologies indispensable to the production ofpharmaceutical intermediates. Right from the start, the R&D Center has devoted itself to exploringchiral technologies, and has a successful track record in all three basic techniques — opticalresolution, asymmetric synthesis, and the biocatalytic method. In particular, the R&D Center hasreceived acclaim for being at the cutting edge of research in the enzyme method, which is very muchin the limelight as an effective means of addressing environmental issues. Based on the technologicalcapabilities of the R&D Center, (S) ibuprofen, an anti-inflammatory drug, is being produced throughoptical resolution in India and supplied to Europe and Asia. The R&D Center is also using its wide arrayof enzymes and other biocatalysts to offer formulations that meet the demands of the times from theperspective of green chemistry. In this way, the R&D Center,s technology base enables us to respondprecisely to various customer needs, ranging from procurement of the raw materials and intermediates
used in optically active substances to their process development and manufacture.

OH

CO2H
NH2
(1R,2S)-Norephedrine(S)-2-Phenylpropionic acid

NH2
OH
S-PBA

HO2C

N
CO2H

(S)-Benzylsuccinic acid(R)-3-Quinuclidinol

Development projects at the R&D Center

Annual Report 2002 25
23

Detailed Information by Topic

3 Nanotechnology-related BusinessWith an eye on the promising next-generation field of nanotechnology, we have started new businessmarketing activities in cooperation with one of our Group companies, Cluster Technology Co., Ltd. The
microfabrication technology of Cluster Technology is used in inkjet printers, but its elemental technology
for dispensing microscopic amounts of solution and ejecting droplets with great positional accuracy has
made a significant contribution to resolving a number of technological issues at the nano scale.
In December 2000 we started employing this inkjet ejection method in the development of “DNAmicroarray” manufacturing systems for use in the medical field. We also have high expectations that the
inkjet device technology we have accumulated in this field will find useful applications in the manufactureof organic LEDs in the Electronics business.

DNA Microarray Spotter (High Performance DNA Microarray Printing Technology)
By applying inkjet methods, we developed an inkjet DNA microarray spotter that dispenses minutespotting at one-tenth conventional levels with a liquid that contains DNA instead of ink. With thistechnology, the spotting amount has been improved along with the uniformity and reproducibility of theform. The technology has also made possible the mass production of high precision DNA microarrays. By
combining nano level hybrid compounds and microfabrication technology, we are also developing nanobiodevices, which are receiving considerable attention in the post-genome era.

Resolving Technical Issues Involved in Creating Full-color Organic LEDs
This elemental inkjet printer technology can also be applied to resolving patterning technology issues
arising in the manufacture of organic LEDs. Originally, one of the problems hindering the theircommercialization was that of enabling pico-level droplets to reach the target surface with sufficient
positional accuracy. Enabling the droplets to reach the desired target positions required the creation ofbanks (partitions), which also had to be made water-repellent. Although the resulting organic LEDs
emitted light, inconsistencies in the luminance of individual dots made the displays uneven.
We are developing key devices and systems for inkjet devices in an attempt to resolve thesetechnological problems.

Inking an agreement to enter a business alliancewith Cluster Technology(At right: Minoru Adachi, President of Cluster Technology)

Cluster Technology Co., Ltd.
1991: Company established (Nagase has a 20% equity interest)
2001: R&D approval under the Small and Medium Enterprise Creative Activity Promotion Law.
Selection for METI subsidies for the development of IT, and for the cost of developing
IT leading to the creation of new business.

26 Annual Report 2002

4 Activities of Nagase Science andTechnology Foundation
The Nagase Science and Technology Foundation was established in April 1989 to support scientific andtechnological development in fields such as biochemistry and organic chemistry. The mission of thefoundation is to contribute to socio-economic development by providing grants and other support for
research and development and international exchange activities. To date it has provided approximately¥610 million in aid in the form of 221 research grants and 175 international interchange projects.
The foundation is a specific juridical person for the promotion of the public interest and its chartering
agency is the Ministry of Education, Culture, Sports, Science and Technology.

Fiscal 2003 grant presentation ceremony

Reserach grants provided in fiscal 2003
Present office/Position

Subject matter

Yugo Iwasaki

Graduate School of Bioagricultural Sciences,
Nagoya University/Lecturer

Asymmetric synthesis of structured lipids by enzymes.

Yoshiyuki Kamio

Graduate School of Agricultural Science
Tohoku University/Professor

Role of the an iron-binding protein,
Dpr in oxdygen tolerance in the living cells

Akiko Kita

Graduate School of Science,
Kyoto University/Research Associate

Structural Biology of the Oxidative
Response Regulation Protein, SoxR.

Atsushi Shiraishi

Studies on the functional polymer composites comprised of the ordered-molecular
Faculty of Human, Environmental Science,
Fukuoka Women s University/Associate Professor and multi phase structures based on poly (γ-glutamic acid) and poly (ε-L-lysine)

Kenji Sugimoto

Graduate School of Agriculture and Biological Sciences
Osaka Prefecture University/Professor

Visualization of subcellular structures in living cells and its application to
re-evaluating bioactive substances

Masaya Nagao

Graduate School of Biostudies
Kyoto University/Professor

Protection of neuronal cell death by a technique for introducing
exogenous proteins into cells.

Kazunobu Matsushita

Yamaguchi University, Faculty of Agriculture/
Professor

A novel pellicle polysaccharide of Acetobacter aceti and its
biochemical and molecular biological study on the pellicle formation

Name
Biochemistry

Organic chemistry
Kazuo Akagi

Institute of Materials Science,
University of Tsukuba/Professor

Development of Chiral Luminescent Materials based on
Helical Liquid Crystalline Conjugated Polymers

Hiroshi Imahori

Graduate School of Engineering,
Kyoto University/Professor

Development of Gold Nanoclusters Modified
with Photofunctional Molecules

Junichi Uenishi

Kyoto Pharmaceutical University/
Professor

Stereocontrolled Synthesis of Carbon-conjugated
Alkenes and Stereoselective Preparation of Retinoids

Shigefumi Kuwahara

Graduate School of Agricultural Science,
Tohoku University/Professor

Synthetic studies on bioactive natural products
related to the control of agricultural ecosystem

Masaya Sawamura

Faculty of Science, Hokkaido University/
Professor

Synthesis and Applications of Trans-Chelating
Phosphine Ligands with Porphirin Scaffold

Kazuhiko Takai

Faculty of Engineering, Okayama University/
Professor

Development of Novel Synthetic Methods with Chromium(II)for Stereoselective Construction of Carbon Skeletons

Junzo Nokami

Okayama University of Science/
Professor

Development of a Convenient Asymmetric
Carbon-Carbon Bond Formation Reaction

Chisato Mukai

Faculty of Pharmaceutical Sciences,
Kanazawa University/Professor

Development of Highly Efficient Method for Constructionof Heterocycles Based on Endo Mode Cyclization of AllenesInternational interchange projects supported in fiscal 2003
Name

Present office/Position

Subject matter

Kenjiro Onimura

Faculty of Engineering, Yamaguchi University/
Research associate

14th International Symposium on Chirality

Kazuo Takimiya

Department of Applied Chemistry, Graduate
School of Engineering,Hiroshima University/
Research associateInternational Symposium on Functional π-Electron Systems

Etsuji Okada

Faculty of Engineering, Kobe University/
Associate Professor

Development of Highly Efficient Synthetic Methods for Novel
Biologically Active Heterocyclic Compounds Containing Fluorine Atoms

Atsuhiro Osuka

Department of Chemistry, Graduate Schoolof Science, Kyoto University/
Professor

Jeremy Keith Morris Sanders/Professor
Second International Conference on Porphyrins and Phthalocyanines

Tetsuya Kamataki

Naotaka Kuroda

Keisuke Suzuki

Graduate School of Pharmaceutical Sciences,
Hokkaido University/
Professor
School of Pharmaceutical Sciences,
Nagasaki University/
Professor

Susan M. Lunte/Associate Professor
123rd Annual Meeting of the Pharmaceutical Society of JapanTokyo Institute of Technology/
Professor

Stefan Matile/Associate Professor
The 2nd Tateshina Conference on Organic ChemistryFred F. Kadlubar/Director
14th International Symposium on Microsomes and Drug Oxidations

Annual Report 2002 27

Detailed Information by Topic

5 Tackling Environmental Issues
Environment Policies
Based on our management philosophy, we have formulated policies for preserving the global
environment and are working to put them into practice.
1. Comply with all environmental laws and regulations
2. Develop businesses that give full consideration to environmental issues
3. Fulfill our responsibilities as a good corporate citizen
4. Establish and continuously improve an environmental management system
5. Disclose and make all relevant parties fully aware of our Environmental Policy

Acquiring ISO14001 Certification
In May 1999, we established the Environment Protection Committee, formulating our environmental
policies following an inaugural announcement from our President in July 1999. Since then, the entire
company has been engaged in environmental preservation activities, including the creation of our own
environmental management system.
On April 28, 2000, we received ISO14001 certification, the international standard for environmental
management, from Lloyd,s Register Quality Assurance Limited. The certification applies to all the officesof our Tokyo and Osaka headquarters, the Nagoya branch, and the R&D Center. We are presently
continuing to work to protect and improve the environment and contribute to society as a whole.

Eco-business
Based on our corporate philosophy of adopting an “Environmentally-friendly Approach to Business,” weaim to contribute to environmental preservation through the expansion and creation of “eco-businesses.”
The direct impact of our business activities on the environment is limited compared with the
manufacturing industries. Nevertheless, we make a particular effort to utilize our strengths as a technology
and information company, actively offering information pertaining to the safety of chemical products (ASP
services conforming to the PRTR Law, sales of environment-related applications, etc.), information forachieving zero emissions (chemical recovery and regeneration systems, waste solvent recovery systems,etc.), and eco-materials, equipment and systems that will reduce the burden on the environment.

Key Projects● Development of New

Environmentally-friendly Wooden Materials● Support for Plastic Recycling● Proposals for Eco-materials● Proposals for Alternatives to

Toxic Substances● Support for Zero Emissions● Developing Business Models for

Recycling Resources● Providing Information on Chemical Safety● Chemical Research Concerning

Environmental Problems

Please visit our Web site for further information about our environmental preservation activities.

http://www.nagase.co.jp/iso/english/index.html

28 Annual Report 2002

Financial Section
Financial Review

30

Consolidated Balance Sheets

32

Consolidated Statements of Operations

34

Consolidated Statements of Shareholders’ Equity

35

Consolidated Statements of Cash Flows

36

Notes to Consolidated Financial Statements

37

Report of Independent Certified Public Accountants

47

Financial Review
Group Results
During the consolidated fiscal year under review, Japan’s economy
experienced a decline in private capital investment as corporate earnings
deteriorated, while consumer spending remained weak under the impact ofcontinuing high unemployment rates and stagnating personal income. As
was the case last year, deflation continued to affect the Japanese economy
and business conditions remained harsh.
Overseas, the US economy began to show signs of recovery in the second
half of the fiscal year, while expectations of a recovery in the Asian andEuropean economies have been rising. However, the impact of the IT
recession originating in the United States was severe and the global economy
overall remained weak throughout the year.
Under these conditions, total consolidated sales fell by ¥68.78 billion(12.3%) year-on-year to ¥490.58 billion owing to the slow domestic

economy and the consequences of the global IT recession. On a consolidated
basis, domestic sales fell by ¥51.45 billion (13.1%) year-on-year to ¥341.1
billion, while overseas sales declined by ¥17.33 billion (10.4%) to ¥149.48
billion.
Gross profit declined by ¥8.1 billion (14.8%) year-on-year to ¥46.97 billion.
Selling, general and administrative (SG&A) expenses fell by ¥2.08 billion to¥45.3 billion. Operating income decreased by ¥6.07billion to ¥1.67 billion,
including a non-consolidated operating loss of ¥0.9 billion for Nagase & Co., Ltd.
Nagase also reported an extraordinary loss for the term of ¥8.83 billion. Losson devaluation of investments in securities accounted for ¥6.72 billion of thisamount. Special retirement allowances of ¥1.7 billion were posted owing to
the introduction of a voluntary early retirement program. As a result, the net
loss for the term came to ¥2.09 billion.

Results by Business Segments
Chemicals:

In the Chemicals business, the pharmaceutical raw materials andpharmaceutical intermediates segments of reporting companies performed
strongly, but the economic slowdown at home and overseas affected sales ofpigments, paints, plastics raw materials and electronics-related chemicals,causing consolidated sales overall to fall below the levels recorded in thepreceding fiscal year.
Sales of the Chemicals business of Nagase ChemteX Corp. were lower than in
the preceding consolidated fiscal year because of stagnating sales of enzymes
and specialty chemicals. Nagase Colors & Chemicals Co., Ltd. also recorded
lower sales year-on-year because of the sluggish performance of the domestic
textiles industry. Nagase (Thailand) Co., Ltd. performed well thanks toexpanded sales of urethane plastics raw materials and other products. Nagase
America Corp. also put in a strong performance on the back of growth in salesof food additives.
As a result, sales fell by ¥19.34 billion (8.1%) to ¥218.52 billion comparedwith the preceding consolidated fiscal year. Consolidated operating income fellby ¥721 million (23.4%) year-on-year to ¥2.35 billion.
Plastics:

In the Plastics business, reporting companies revealed that the automobilerelated sectors and sales of Group company products were buoyant. Under the
impact of the IT recession, however, exports of plastics to manufacturers ofelectrical machinery and information-devices declined, while the transfer ofdomestic selling rights for General Electric products led to lower domestic
sales of plastics, resulting in a decline compared with the preceding
consolidated fiscal year.
Nagase Plastics Co., Ltd. also posted lower sales year-on-year as market
conditions remained weak due to competition from imports. Although
Kotobuki Industries Co., Ltd. performed well, the recession in the construction
and real estate industries and in office automation and consumer electronics
resulted in substantial year-on-year declines for Totaku Industries, Inc. and
Setsunan Kasei Co., Ltd. Nagase Singapore (Pte) Ltd. and Nagase Wahlee
Plastics Corp. both posted considerably lower sales than in the preceding
consolidated fiscal year owing to weak demand for plastics in the electricalmachinery and information devices sectors. Nagase (Hong Kong) Ltd. boosted
its sales as a result of shifting its production centers for electrical machineryand information devices to China. Canada Mold Technology Inc. improved its
sales of molds for automobiles in Canada.
As a result, sales fell by ¥30.2 billion (14.7%) to ¥175.25 billion comparedwith the preceding consolidated fiscal year. The operating loss totaled ¥1.15

30 Annual Report 2002

billion, an earnings decline of ¥4.14 billion compared with the preceding
consolidated fiscal year.
Electronics:

In the Electronics business, reporting companies disclosed sales growth incommunications component modules and image processing devices.
However, demand for PCs, mobile phones and information devices fell
sharply, causing a sharp decline in LCD unit sales prices. This, and slumping
sales of parts and materials for mobile phones, fluororesins andencapsulation materials resulted in lower sales compared with the preceding
consolidated fiscal year.
The Electronics business of Nagase ChemteX Corp. was buoyant thanks tosales of epoxy resins for the heavy electrical equipment sector and LCD
manufacturing chemicals. Despite this, epoxy resins for semiconductors andchemicals for use in semiconductor manufacturing declined sharply,
resulting in lower sales year-on-year. Hoei Sangyo Co., Ltd.’s video mediarelated business did well, but its results were flat year-on-year as a result of
stagnation in the equipment systems and software segments. Nagase
Electronic Equipment Service Co., Ltd. transferred a portion of its businessto Nagase CMS Technology Co., Ltd. a newly established subsidiary,causing sales to fall sharply compared with the preceding fiscal year.
As a result, sales fell by ¥19.72 billion (19.1%) year-on-year to ¥83.66
billion. Consolidated operating income fell by ¥1.23 billion (79.8%) yearon-year to ¥313 million.
Health Care & Others:

In the Health Care business, reporting companies declared a year-on-year
decline in sales of cosmetics through door-to-door sales, but sales of healthand beauty foods rose, as did sales of medical information equipment-related
products.
The door-to-door sales business felt the consequences of stagnant businessconditions in the form of lower market prices and deteriorating consumer
spending, which lead to weak sales of cosmetics. Nevertheless, health foods
grew as a result of growing health-consciousness and the launch of “New
Belmash.” In the medical information equipment-related segment, our focus
on expanding sales of infectious disease prevention systems and bacteria test
devices paid off in solid results.
As a result, sales rose by ¥488 million (3.9%) compared with the preceding
consolidated fiscal year to ¥13.14 billion. Consolidated operating income
increased by ¥26 million (20.4%) year-on-year to ¥157 million.

Results by Geographical Segments
Japan:

North America:

The return to General Electric of sales rights in the plastic business and theoverall weakness of the Japanese economy caused net sales to decline by¥66.81 billion (14.3%) compared with the preceding consolidated fiscal year to¥399.72 billion. As a result, the operating loss amounted to ¥785 million.

As a result of robust sales of pharmaceutical raw materials andpharmaceutical and agrochemical intermediates, net sales rose by ¥41
million (0.4%) compared with the preceding fiscal year to ¥10.67 billion.
Consolidated operating income increased by ¥61 million (83.5%) year-onyear to ¥136 million.

Asia:

Although some new products sold well in the China market, the sharp
downturn in demand for IT-related products led to a year-on-year decline in net
sales of ¥1.66 billion (2.2%) to ¥73.28 billion. Consolidated operating income
fell by ¥1.37 billion (39.6%) year-on-year to ¥2.09 billion.

Other Regions:

Although net sales fell by ¥352 million (4.9%) year-on-year to ¥6.9
billion, a review of the operating structure in Europe resulted in operating
income of ¥58 million, an increase of ¥149 million compared with thepreceding consolidated fiscal year.

Cash Flows
During the fiscal year under review, consolidated cash and cash equivalents
climbed by ¥3.49 billion (18.9%) year-on-year to ¥21.96 billion.
Cash Flow from Operating Activities:

During the fiscal year under review, consolidated cash and cash equivalentsfrom operating activities climbed by 51.3% year-on-year to ¥12.35 billion. Thiswas due to the fact that even though the Company posted a net loss of ¥2.94
billion and notes and accounts payable fell by ¥28.28 billion, trade receivables
declined by ¥33.11 billion and inventories by ¥5.97 billion. In addition,
adjustments were made to treat the ¥6.72 billion arising from loss ondevaluation of investments in securities as non-funding costs.
Cash Flow from Investing Activities:

from investing activities fell by 68.7% year-on-year to ¥1.3 billion. Outlays
on acquisitions of investments in securities amounted to ¥1.85 billion, and if
outlays on acquisitions of stocks in subsidiaries following changes in thescope of consolidation during the preceding consolidated fiscal year are
taken into consideration, the decline amounts to 77.0% year-on-year.
Collections of short-term loans receivable amounting to ¥1.12 billion also
played a role.
Cash Flow from Financing Activities:

During the fiscal year under review, consolidated cash and cash equivalentsfrom financing activities fell by 3.7% year-on-year to ¥8.61 billion. This wasdue to a net decline of ¥6.25 billion in short-term loans and outlays of ¥2.94
billion on purchases of treasury stock.

During the fiscal year under review, consolidated cash and cash equivalents

R&D Activities
The Nagase Group (Nagase and its consolidated subsidiaries) is focusing its allround group strengths into research and development activities aimed atdeveloping new products and distributing its technical information.
Currently, the Nagase R&D Center and the research and development
departments of its manufacturing subsidiaries are engaged in development
activities. Trading company activities such as the Chemicals and Health Carebusinesses are moving apace, as are R&D activities and technical information
evaluations related to new technologies and new products in the areas oforganic chemistry and biotechnology. These two areas are especially in linewith our future vision for our manufacturing subsidiaries. We have placed
particular emphasis on pharmaceutical synthesis technologies, especiallyapplications of chiral synthesis technology for provision to customers.
Already, we have commercialized some products that make use of thistechnology, and intend in the future to offer R&D functions that transcend
the framework of the trading company. During the consolidated fiscal year
under review, research and development expenditures totaled ¥2.05 billion.

AssetsAt the end of the consolidated fiscal year under review, total assets amounted
to ¥300.07 billion, a year-on-year decline of ¥53.7 billion, or 15.2%.
Current assets fell by ¥40.2 billion (16.3%) compared with the preceding
fiscal year-end to ¥206.06 billion as a result of a decline in notes andaccounts receivable.
Fixed assets declined by ¥13.49 billion (12.6%) year-on-year to ¥94.01
billion as the Company reduced its investments in securities due to theimpact of falling market values.

Liabilities
At the end of the consolidated fiscal year under review, total liabilities amounted
to ¥152.15 billion, a year-on-year decline of ¥44.23 billion, or 22.5%.
Current liabilities fell by ¥38.17 billion (22.7%) compared with the preceding
fiscal year-end to ¥129.96 billion as a result of a decline in notes andaccounts payable.
Fixed liabilities fell by ¥6.06 billion (21.5%) year-on-year to ¥22.18 billion
as a result of a decline in deferred income taxes.

Shareholders’ Equity
Shareholders’ equity at the end of the consolidated fiscal year under review
fell by ¥9.32 billion (6.1%) year-on-year to ¥144.17 billion as a result of the

net loss posted for the term, the purchase and retirement of treasury stocks,
and a decline in unrealized holding gains on securities.

Annual Report 2002 31

Consolidated Balance Sheets
Nagase & Co., Ltd. and Consolidated Subsidiaries
March 31, 2002 and 2001

AssetsThousands of
U.S. dollars (Note 1)

Millions of yen

2002

2001

2002

Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

¥

Short-term investments (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

21,960¥1,336

18,465$

2,939

164,803
10,026

Notes and accounts receivable:
Unconsolidated subsidiaries and affiliates . . . . . . . . . . . . . . . . . . ..............

6,592

8,288

49,470Trade ............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . ..............

144,730

176,330

1,086,153

Other ............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . ..............

988

1,473

7,414

Less allowance for doubtful receivables . . . . . . . . . . . . . . . . . . . . ..............

(1,579)(1,179)(11,849)

150,732

184,912

1,131,196

Inventories ......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .............

25,54534,180191,707

Deferred income taxes (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............

2,386

1,886

17,906

Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............

4,099

3,886

30,761

Total current assets .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............

206,062

246,268

1,546,431

Land (Note 5) ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

9,545

7,968

71,632

Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

25,70524,875

192,908

Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............

26,361

28,047

197,831

Property, plant and equipment:

Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............

5

211

37

61,618

61,101

462,424

Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............

(36,389)(36,370)(273,088)

Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

25,22824,731

189,328

Unconsolidated subsidiaries and affiliates . . . . . . . . . . . . . . . . . . ..............

12,159

11,172

91,249Other ............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . ..............

51,412

65,252385,831

63,572

76,424

477,088

424

315

3,181

Investments and other assets:
Investments in securities (Notes 3 and 5):Long-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Deferred income taxes (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

434

749

3,257

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

4,478

5,802

33,606

Less allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............

(126)

(512)

(945)

Total investments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............

68,78282,778516,187¥
See notes to consolidated financial statements.

32 Annual Report 2002

300,073¥353,777$

2,251,954

Liabilities and shareholders’ equity

Thousands of
U.S. dollars (Note 1)

Millions of yen

2002
Current liabilities:
Short-term loans (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Current portion of long-term debt (Note 4) . . . . . . . . . . . . . . . . . . ................

¥

Notes and accounts payable:
Unconsolidated subsidiaries and affiliates . . . . . . . . . . . . . . . . ................
Trade ............ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . ................

7,949
1,782

2001
¥

13,275727

2002$

59,654
13,373

Accrued income taxes (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Deferred income taxes (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............

3,554
102,045
105,599
563
12
5,261
8,797
129,966

2,192
132,146
134,338
4,615
—
6,062
9,125
168,142

26,671
765,816
792,487
4,225
90
39,48266,018975,354

Long-term liabilities:
Long-term debt (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Deferred income taxes (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Accrued retirement benefits for employees (Note 7) . . . . . . ...............
Accrued retirement benefits for officers . . . . . . . . . . . . . . . . . . . . . . . ...............
Other liabilities .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................

9,945
2,014
9,266
929
32
22,188

9,876
7,847
9,232
1,261
37
28,25374,634
15,11469,5386,971
240
166,514

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

3,741

3,883

28,075

9,699
—
9,634
114,870
11,690963(2,682)
144,176
300,073

—
9,700
9,635
118,337
16,211(383)(1)
153,499353,777

72,787—72,300862,063
87,7297,227(20,127)
1,081,996
2,251,954

Contingent liabilities (Note 11)
Shareholders’ equity:
Common stock:
Authorized:
346,980,000 shares and 347,509,000 shares at March 31,
2002 and 2001, respectively
Issued:2002 - 138,408,285 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
2001 - 138,937,285 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Additional paid-in capital (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Retained earnings (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Unrealized holding gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . ................
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Less treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................

¥

¥

$

Annual Report 2002 33

Consolidated Statements of Operations
Nagase & Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2002 and 2001

Thousands of
U.S. dollars (Note 1)

Millions of yen

2002
Net sales (Note 12) ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Cost of sales (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Gross profit ............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . ..............

¥

2001

490,583
443,60746,976¥559,373504,233
55,1402002$

3,681,673
3,329,133
352,540

Selling, general and administrative expenses (Note 9) . . . . . . . . . . ..............
Operating income (Note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............

45,302
1,673

47,388
7,752

339,977
12,555

Other income (expenses):
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Interest expense .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Gain on sales of investments in securities . . . . . . . . . . . . . . . . . . . . . . . . ..............

1,948
(623)
276
1,112

1,959
(815)
375
3,972

14,619(4,675)
2,071
8,345

Gain on marketable securities contributed to employees’
retirement benefit trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Loss on devaluation of investments in securities . . . . . . . . . . . . . . ..............
Gain on sales of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . ...............
Amortization of net retirement benefit obligation at transition ..........
Other, net ............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ...............
(Loss) income before income taxes and minority interests ...............

—(6,720)37—(654)(2,949)

1,870
(124)
1,519
(6,984)
(171)
9,353

—
(50,431)277—(4,908)(22,131)

Income taxes (Note 8):
Current ................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . ...............
Deferred .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . ...............
(Loss) income before minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............

1,758(2,807)(1,900)6,527(2,506)
5,332

13,193(21,065)(14,258)

Minority interests ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Net (loss) income ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............

¥

197(2,097)

¥

386
4,946

$

(U.S. dollars)(Note 1)

(Yen)
Amounts per share of common stock:
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Cash dividends ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
See notes to consolidated financial statements.

34 Annual Report 2002¥

(15.39)8.00

1,478(15,737)

¥

35.28
8.00

$

(0.11)
0.06

Consolidated Statements of Shareholders’ Equity
Nagase & Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2002 and 2001

Millions of yen
Number ofshares ofcommon stock

Common stock

Balance at March 31, 2000 . . . . . . 141,537,285—
Net income for the year . . . . . . . . . . .
Increase in retained earnings
resulting from merger of—
unconsolidated subsidiaries . . . .
—Cash dividends ......... . . . . . . . . . . . . .
—Bonuses to officers ..... . . . . . . . . . . . . .
Unrealized holding gain on—
securities .............. . . . . . . . . . . . . .
—Translation adjustments . . . . . . . . . . .
Retirement of treasury stock . . . . . . (2,600,000)¥

Balance at March 31, 2001 . . . . . . 138,937,285
Net loss for the year ... . . . . . . . . . . . . .
—Increase in retained earnings
resulting from merger ofconsolidated subsidiaries . . . . . . .
—Decrease in retained earnings
resulting from exclusion of
consolidated subsidiaries . . . . . . .
——Cash dividends ......... . . . . . . . . . . . . .
—Bonuses to officers ..... . . . . . . . . . . . . .
Unrealized holding gain on—
securities .............. . . . . . . . . . . . . .
—Translation adjustments . . . . . . . . . . .
—Increase in treasury stock . . . . . . . . . .
Retirement of treasury stock . . . . . .
(529,000)
Balance at March 31, 2002 . . . . . . 138,408,285¥¥

Additional
paid-in capital

Retainedearnings

Unrealized
holding gain on
securities

9,700 ¥
—

9,635
—

—
—
—

—
—
—

338
(1,132)
(62)

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
(1,257)

16,211
—
—

—
(383)
—

—
—
—

9,700 ¥—

9,635—

118,337 ¥(2,097)

16,211—(383) ¥
—

(1)
—

¥

¥

115,504
4,946

¥

—
—

Treasurystock

Translation
adjustments

¥

—
—

¥

¥

(1)
—

—

—

86

—

—

—

—
—
—

—
—
—

(23)
(1,111)
(54)

—
—
—

—
—
—

—
—
—

—
—
—
(266)
114,870 ¥(4,519)———
11,690 ¥

—
1,346
—
—
963

—
—
(2,681)—(2,682)————
9,699 ¥

—
—
—
—
9,634

¥

¥

Thousands of U.S. dollars (Note 1)

Common stock
Balance at March 31, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $Net loss for the year ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in retained earnings resulting frommerger of consolidated subsidiaries . . . . . . . . . . . . . . . . .
Decrease in retained earnings resulting fromexclusion of consolidated subsidiaries . . . . . . . . . . . . .
Cash dividends ......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonuses to officers .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized holding gain on securities . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at March 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . $Additional
paid-in capital

Retainedearnings

Unrealized
holding gain
on securities

Translation
adjustments

Treasurystock

72,795 $—72,307 $—888,082 $(15,737)

121,658 $—(2,874) $
—

(7)
—

—

—

645

—

—

—

—
—
—
—
—
—
—
72,787 $

—
—
—
—
—
—
—
72,300 $(172)(8,337)(405)———(1,996)
862,063 $———(33,913)———87,729 $————10,101
—
—
7,227

—
—
—
—
—
(20,120)—(20,127)$

See notes to consolidated financial statements.

Annual Report 2002 35

Consolidated Statement of Cash Flows
Nagase & Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2002 and 2001

Thousands of
U.S. dollars (Note 1)

Millions of yen

2002
Operating activities
Net (loss) income .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Provision for retirement benefits, net of payments . . . . . . . ..............
Loss (gain) on sales of property and equipment . . . . . . . . . . . . .............
Equity in earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Gain on sales of investments in securities . . . . . . . . . . . . . . . . . . . . .............

¥

2001

(2,097)

¥

2002

4,946

$

(15,737)

2,888
247
15
(276)
(1,075)

2,966
4,541
(1,478)(375)(3,802)

21,673
1,853
112(2,071)(8,067)

Gain on marketable securities contributed to employees’
retirement benefit trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Loss on devaluation of investments in securities . . . . . . . . . . . .............
Other, net .......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . ..............

—
6,720
(173)

(1,870)124874—
50,431(1,298)Changes in operating assets and liabilities:
Notes and accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Inventories ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Notes and accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

33,112
5,974
1,248(28,287)(5,174)(800)
31
12,351(2,342)(5,781)
401
7,118
2,894
(97)
46
8,165

248,495
44,8339,365(212,285)(38,829)(6,003)232
92,690Investing activities
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Proceeds from sales of property and equipment . . . . . . . . . . . . . . . . . . ..............
Purchases of investments in securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Proceeds from sales of investments in securities . . . . . . . . . . . . . . . . ..............
Purchases of shares of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Decrease (increase) in short-term loans receivable, net . . . . . . . . .............
Other, net ................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .............
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............

(3,993)156(1,858)
1,800
—
1,122
1,471
(1,300)(3,593)
2,046(5,185)
6,119(2,896)(270)(383)(4,162)(29,966)
1,170(13,943)
13,508—
8,420
11,039(9,756)

Financing activities
Decrease in short-term loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Other, net ................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . ..............
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............

(6,255)
3,054(1,101)(1,370)(2,948)5(8,615)(6,830)1,186(271)(1,883)(1,257)748(8,307)(46,941)
22,919(8,262)(10,281)(22,123)37(64,652)

1,318
3,753
18,465

1,073(3,231)21,016

9,891
28,165
138,574

—

680

—

(368)

—

(2,761)

Effect of exchange rate changes on cash and cash equivalents ...........
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . ..............
Cash and cash equivalents at beginning of the year . . . . . . . . . . . . ..............
Increase in cash and cash equivalents arising from merger of
unconsolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Decrease in cash and cash equivalents arising from exclusionof consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Increase in cash and cash equivalents arising from merger ofconsolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Cash and cash equivalents at end of the year . . . . . . . . . . . . . . . . . . . . . . .............

¥

110
21,960¥—18,465$825
164,803

Supplemental information on cash flows
Cash paid during the year for:
Interest ................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . ..............
Income taxes ........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............

¥

619
6,932

¥

822
3,634

$

4,645
52,022

See notes to consolidated financial statements.

36 Annual Report 2002

Notes to Consolidated Financial Statements
Nagase & Co., Ltd. and Consolidated Subsidiaries
March 31, 2002

1. Basis of Preparation
Nagase & Co., Ltd. (the “Company”) and its domestic consolidated
subsidiaries maintain their books of account and records in accordancewith the provisions set forth in the Commercial Code of Japan and in
conformity with accounting principles and practices generally accepted
and applied in Japan. Its foreign consolidated subsidiaries maintaintheir books in conformity with those of their countries of domicile.

The U.S. dollar amounts in the accompanying consolidated financial
statements have been translated from yen amounts solely for theconvenience of the reader and, as a matter of arithmetic computation
only, at the rate of ¥133.25 = U.S.$1.00, the rate of exchange prevailingon March 31, 2002. This translation should not be construed as arepresentation that 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.

The accompanying consolidated financial statements have been preparedfor domestic reporting purposes and have been compiled from theconsolidated financial statements prepared by the Company as required
under the Securities and Exchange Law of Japan, which may differ incertain material respects from accounting principles and practices
generally accepted in countries and jurisdictions other than Japan.

Certain reclassifications of previously reported amounts have been
made to conform the consolidated financial statements for the year
ended March 31, 2001 to the 2002 presentation. Such reclassifications
had no effect on consolidated net income or shareholders’ equity.

In preparing the accompanying consolidated financial statements,
certain reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order topresent them in a form which is more familiar to readers outside Japan.

As permitted by the Securities and Exchange Law of Japan, amounts ofless than one million yen for the year ended March 31, 2002 have been
omitted. Consequently, the totals shown in the accompanying
consolidated financial statements for the year ended March 31, 2002
(both in yen and in U.S. dollars) do not necessarily agree with the sumof the individual amounts.

2. Summary of Significant Accounting Policies(a) Principles of Consolidation
The accompanying consolidated financial statements include theaccounts of the Company and significant companies controlled
directly or indirectly by the Company. Companies over which theCompany exercises significant influence in terms of their operating
and financial policies have been included in the consolidated
financial statements on an equity basis. All significant intercompany
balances and transactions have been eliminated in consolidation.
The foreign consolidated subsidiaries have a December 31 year-end
date and one domestic consolidated subsidiary has its year end at theend of February, closing dates which differ from the balance-sheet
date of the Company. As a result, adjustments have been made forany significant intercompany transactions which took place during
the period between the year ends of these subsidiaries and the year
end of the Company.
Unrealized intercompany gains and losses among the Company and theconsolidated subsidiaries have been entirely eliminated and the portion
attributable to minority interests has been charged to minority interests.
The difference between the cost of an investment in a subsidiary andthe amount of the underlying equity in the net assets of the subsidiaryis treated as an asset or a liability as the case may be, and isamortized over a period of five years on a straight-line basis.
The difference between the cost of an investment in an affiliate and theamount of the Company’s underlying equity in the net assets of theaffiliate is amortized over a period of five years on a straight-line basis.
(b) Foreign Currency Translation
Revenue and expense items arising from transactions denominated inforeign currencies are generally translated into yen at the rates in
effect at the respective transaction dates. Foreign exchange gain orloss is credited or charged to income in the period in which such gain
and loss is recognized for financial reporting purposes.
The balance sheet accounts of the foreign consolidated subsidiaries
are translated into yen at the rates of exchange in effect at the balance
sheet date except that the components of shareholders’ equity aretranslated at their historical exchange rates. Revenue and expense
accounts are translated at the average rate of exchange in effectduring the year. Translation adjustments resulting from translating
foreign currency financial statements are not included in thedetermination of net income but are reported as “Translation
adjustments” in a component of shareholders’ equity and minority
interests in the consolidated financial statements.
Effective April 1, 2000, the Company and the consolidated
subsidiaries adopted a revised “Accounting Standard for Foreign
Currency Translation” issued by the Business Accounting
Deliberation Council of Japan. Under this standard, all monetary
assets and liabilities denominated in foreign currencies aretranslated into yen at the rate of exchange in effect at the balance
sheet date, except that receivables and payables hedged by qualified
forward foreign exchange contracts are translated at thecorresponding forward exchange contracts rates. All other assets
and liabilities denominated in foreign currencies are translated attheir historical rates. Gain or loss on each translation is credited or
charged to income. The effect of the adoption of the revised
standard on the consolidated financial statements for the year ended
March 31, 2001 was immaterial.
(c) Inventories
Inventories are stated at the lower of cost or market, cost being
determined by the weighted average method.
(d) Investments in Securities
Through March 31, 2000, marketable securities were statedprincipally at the lower of cost or market, cost being determined by
the moving average method, and investments in securities other thanmarketable securities were stated at cost determined by the moving
average method.
Effective April 1, 2000, the Company and the domestic
consolidated subsidiaries adopted “Accounting Standards for
Financial Instruments” issued by the Business Accounting
Deliberation Council of Japan. This standard requires that securities
be classified into three categories: trading securities, held-tomaturity debt securities or other securities.

Annual Report 2002 37

Notes to Consolidated Financial Statements
In accordance with the new standard, trading securities, consisting ofdebt and marketable equity securities, are stated at fair value. Gain
and loss, both realized and unrealized, are charged to income. Heldto-maturity debt securities are stated at their amortized cost.
Marketable securities classified as other securities are carried at fairvalue with any changes in unrealized holding gain or loss, net of theapplicable income taxes, reported as a separate component ofshareholders’ equity. Non-marketable securities classified as othersecurities are carried at cost determined by the moving averagemethod.
As of April 1, 2000, the Company and its consolidated subsidiaries
assessed their intent in holding their investments in securities,classified their investments at March 31, 2001 as “other securities,”and accounted for the securities in accordance with the standard
referred to above.
Golf club memberships
This new accounting standard for financial instruments also applies
to golf club memberships. A loss on the impairment of deposits forgolf club memberships is also required to be recognized.
The effect of the adoption of this standard on the consolidated
statement of income for the year ended March 31, 2001 was toincrease income before income taxes and minority interests by¥1,274 million.
(e) Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment is computed by the
declining-balance method over the estimated useful lives of therespective assets as prescribed by the Corporation Tax Law, exceptthat the straight-line method is applied to buildings (except forstructures attached to the buildings) acquired subsequent to April 1,
1998. Property, plant and equipment owned by certain consolidated
subsidiaries is depreciated by the straight-line method.
(f) Leases
The Company and its consolidated subsidiaries lease certain
equipment under noncancelable lease agreements referred to asfinance leases. Finance leases other than those which transfer theownership of the leased property to the lessees are accounted for as
operating leases.
(g) Income Taxes
Income taxes are calculated based on taxable income and charged toincome on an accrual basis. Deferred income tax assets andliabilities are computed for temporary differences between thefinancial reporting and tax bases of the assets and liabilities that will
result in taxable or deductible amounts in the future. Such deferredincome tax asset and liability computations are based on the enacted
tax laws.
(h) Retirement Benefits
The Company and the domestic consolidated subsidiaries havedefined benefit pension plans and retirement benefit plans. Certain
foreign consolidated subsidiaries also have defined benefit plans.
The employees’ retirement benefit plans provide for a lump-sum
payment determined by reference to the current rate of pay, length ofservice and conditions under which the termination occurs.

38 Annual Report 2002

For the year ended March 31, 2000, the liability for retirement
allowances was stated at the amount which would be required to be
paid if all employees covered by the plan involuntarily terminatedtheir employment at the Company’s request as of the balance sheet
date, less the amount covered by the pension plan.
Effective April 1, 2000, the Company and the domestic
consolidated subsidiaries adopted “Accounting Standard for
Retirement Benefits” issued by the Business Accounting
Deliberation Council of Japan. In accordance with this standard,
accrued retirement benefits were provided based on the amount of
the projected benefit obligation reduced by the pension plan assets
at fair value at the end of the year. The net retirement benefit
obligation at transition of ¥6,984 million was fully charged toincome for the year ended March 31, 2001.
In connection with the adoption of this standard, the Company
contributed its own securities to an employees’ retirement benefit
trust. In forming the trust and contributing its marketable securities,
the Company recognized gain of ¥1,870 million arising from thevaluation of the marketable securities contributed. This wasreported in the consolidated statement of operations for the year
ended March 31, 2001 as “Gain on marketable securities
contributed to employees’ retirement benefit trust.”
Actuarial gain or loss is amortized in the year following the year inwhich the gain or loss is recognized primarily by the straight-line
method over ten years, which is within the estimated averageremaining years of service of the eligible employees.
Prior service cost is being amortized as incurred by the straight-line
method over three years, which is within the estimated averageremaining years of service of the eligible employees. For the year
ended March 31, 2002, prior service cost incurred since the pension
plan of the Company was amended in accordance with anamendment to the Employee’s Pension Insurance Law.
The effect of the adoption of this standard for retirement benefits
was to decrease income before income taxes and minority interests
for the year ended March 31, 2001 by ¥5,186 million from theamount which would have been recorded under the method appliedin the previous year.
Directors and statutory auditors (“officers”) of the Company andcertain consolidated subsidiaries are customarily entitled to lumpsum payments under unfunded retirement benefit plans. Provision
for retirement benefits for these officers has been made at estimatedamounts based on the applicable internal rules.
(i) Derivatives and Hedging Activities
Derivative financial instruments are utilized by the Company andconsolidated subsidiaries principally in order to manage certain
risks arising from adverse fluctuations in foreign currency exchange
rates. The Company has established a control environment which
includes policies and procedures for risk assessment in accordancewith the Company’s rules for in-company foreign exchangetransactions. Under these rules, the Company conducts transactions
within a certain range and places limits on the applicable assets andliabilities based on the actual demand. In addition, the Company
also assesses the effectiveness of the hedging by verifying theapproval, reporting and monitoring of all transactions involving
derivatives. The Company and consolidated subsidiaries do nothold or issue derivative financial instruments for speculative trading
purposes.

The Company and consolidated subsidiaries are exposed to certain
market risks arising from their forward foreign exchange contracts.
The Company and consolidated subsidiaries are also exposed to therisk of credit loss in the event of non-performance by thecounterparties to the currency and interest-rate contracts; however,they do not anticipate nonperformance by any of these counterparties,
all of whom are financial institutions with high credit ratings.

unrealized gain or loss charged or credited to operations, except for
those which meet the criteria for deferral hedge accounting underwhich unrealized gain or loss is deferred as an asset or liability.
(j) Amounts Per Share
The computation of net (loss) income per share is based on theweighted average number of shares of common stock outstanding
during each year.

In accordance with a new accounting standard for financial
instruments which became effective April 1, 2000, derivative
financial instruments are carried at fair value with any changes in

Cash dividends per share represent the cash dividends declared as
applicable to the respective years.

3. Investments in Securities(a) Marketable securities classified as other securities at March 31, 2002 and 2001 are summarized as follows:
Millions of yen
2002
Other securities

Market value available:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

¥

Cost

Gross
unrealized
gain

Gross
unrealized
lossBook value(estimatedfair value)

25,720¥¥¥20,275(146 )

45,848Millions of yen
2001
Other securities

Market value available:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

¥

Cost

Gross
unrealized
gain

Gross
unrealized
lossBook value(estimatedfair value)

32,061¥¥¥

29,110(1,144 )60,027

Thousands of U.S. dollars
2002
Other securities

Market value available:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

Cost

Gross
unrealized
gain

Gross
unrealized
lossBook value(estimatedfair value)$ 193,020$ 152,157$$ 344,075(1,095 )(b) Securities whose market value was not available and were classified as other securities at March 31, 2002 and 2001 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

2002

2001

Carrying valueMarket value not available:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Bonds and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............

¥
¥

3,526
2,037
5,563

¥
¥

3,255
2,000
5,225

2002
Carrying value$$

26,461
15,287
41,748Annual Report 2002 39

Notes to Consolidated Financial Statements
4. Short-Term Loans and Long-Term Debt
Short-term loans at March 31, 2002 and 2001 principally represented
note, in the form of deeds, commercial paper and overdrafts due within

one year, at average annual interest rates of 1.72% and 3.76% perannum, respectively.

Long-term debt at March 31, 2002 and 2001 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2002
Secured loans from banks, payable in yen, due through 2003 at
rates from 1.84% to 1.94% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Unsecured loans from banks and insurance companies, payable inyen, due through 2011 at rates from 0.62% to 2.54% . . . . . . . . ..............
1.53% unsecured bond, payable in yen, due 2004 . . . . . . . . . . . . . . . . . .............

2001

¥

210

¥

4,518
7,000
11,728(1,782 )9,945

Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

¥

1,710

¥

1,893
7,000
10,603(727 )
9,876

The aggregate annual maturities of long-term debt subsequent to March 31, 2002 are summarized as follows:Year ending March 31,
2003 ................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . .............
2004 ................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ..............
2005 ................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ..............
2006 ................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ..............
2007 ................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ..............
2008 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

¥¥

Millions of yen

Thousands of
U.S. dollars

2002

2002

1,782
1,523
8,038
78
78
227
11,728$$13,373
11,42960,322
585
585
1,703
88,015

5. Pledged Assets
At March 31, 2002, assets pledged as collateral for short-term loans and long-term debt, including the current
portion of long-term debt were as follows:

Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Land ................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ..............
Investments in securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

¥¥

Millions of yen

Thousands of
U.S. dollars

2002

2002

700
7
224
931

$
$

5,253
52
1,681
6,986

At March 31, 2002, assets pledged as collateral to guarantee all transactions with certain customers were as follows:

Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Investments in securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............

¥¥

40 Annual Report 2002

Millions of yen

Thousands of
U.S. dollars

2002

2002

600
2,533
3,133

$
$

4,502
19,00923,512

2002
$

1,575

$

33,90652,53288,015(13,373 )
74,634

6. Additional Paid-in Capital and Retained Earnings
On October 1, 2001, an amendment (the “Amendment”) to theCommercial Code of Japan (the “Code”) became effective. The
Amendment eliminates the stated par value of the Company’s
outstanding shares, which resulted in all outstanding shares having nopar value as of October 1, 2001. The Amendment also provides that all
share issuances after September 30, 2001 will be of shares with no parvalue. Prior to the date on which the Amendment became effective, theCompany’s shares had a par value of ¥50 per share.

reserve until the legal reserve and additional paid-in capital equals 25%of the common stock account. The Code also stipulates that, to theextent that the sum of the additional paid-in capital account and thelegal reserve exceeds 25% of the common stock account, the amount of
any such excess is available for appropriation by resolution of theshareholders.
Retained earnings include the legal reserve provided in accordancewith the Commercial Code. The legal reserve of the Company
included in retained earnings at March 31, 2002 and 2001 amounted to¥2,424 million ($18,191 thousand).

The Code provides that an amount equal to at least 10% of the amounts
to be disbursed as distributions of earnings be appropriated to the legal

7. Retirement Benefits
The following table sets forth the funded and accrued status of the plans, and the amounts recognized in the consolidated balance sheets at
March 31, 2002 and 2001 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

2002
Retirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............
Unfunded retirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Unrecognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Accrued retirement benefits recognized in the consolidation
balance sheets .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............

2001

2002

¥

(33,256 )
20,248(13,008 )(421 )
4,162¥(33,619 )21,255(12,364 )
13
3,119

$

(249,575 )
151,954(97,621 )(3,159 )31,234¥(9,266 )¥(9,232 )$(69,538 )The components of retirement benefit expenses of the Company and the consolidated subsidiaries for the years ended March 31, 2002 and2001 are outlined as follows:
Thousands of
U.S. dollars

Millions of yen

2002
Service cost ........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Interest cost ........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Amortization of net retirement benefit obligation at transition .........
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Retirement benefit expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

¥

¥

1,532
852
—
(233 )
311
2,463

2001
¥

¥

1,617
803
(481 )
6,984
(45 )
8,878

2002
$

11,497
6,393—(1,748 )2,333
18,484$

The assumptions used in accounting for the defined benefit plans for the years ended March 31, 2002 and 2001 were as follows:
Discount rate ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................................................
Expected rate of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................................................

2002

2001

3.0%
0.0%

3.0%
2.61%

Annual Report 2002 41

Notes to Consolidated Financial Statements
8. Income Taxes
Income taxes applicable to the Company and its domestic consolidated
subsidiaries consist of corporation, inhabitants’ and enterprises taxes,
which, in the aggregate, resulted in a statutory tax rate of approximately
42.1% for the years ended March 31, 2002 and 2001.

taxes and minority interests has been omitted since the difference
between the statutory tax rate and the effective tax rate was minor. A
reconciliation of the statutory tax rate and the effective tax rate for theyear ended March 31, 2002 as a percentage of loss before income taxes
and minority interests has been omitted since the Company recorded aloss before income taxes and minority interests.

A reconciliation of the statutory tax rate and the effective tax rate for theyear ended March 31, 2001 as a percentage of income before income

Deferred income taxes reflect the net tax effect of the temporary differences between the carrying amounts of the assets and liabilities forfinancial reporting purposes and the corresponding amounts for income tax purposes. The significant components of the Companies’ deferred
tax assets and liabilities at March 31, 2002 and 2001 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2002
Deferred tax assets:
Unrealized gain on inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Investments in securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Long-term prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Accrued enterprise tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Accrued bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Retirement benefits for employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Retirement benefits for officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Other ................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . .............
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Deferred tax liabilities:
Revaluation of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Deferred capital gain on property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Special reserve for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Unrealized holding gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Other ................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . .............
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . .............

¥

¥

259
3,561
293
—
512
3,381
372
1,822
10,204(384 )(517 )(67 )(8,402 )(37 )(9,410 )
794

2001
¥

¥

333
1,450
277
384
501
3,054
516
1,010
7,525
(384 )(514 )(80 )(11,649 )(110 )(12,737 )(5,212 )

2002
$

$

1,943
26,724
2,198
—
3,842
25,373
2,791
13,67376,577(2,881 )(3,879 )(502 )(63,054 )(277 )(70,619 )5,958

9. Research and Development Expenses
Research and development expenses included in selling, general andadministrative expenses and manufacturing costs for the years ended

42 Annual Report 2002

March 31, 2002 and 2001 totaled ¥2,051 million ($15,392 thousand)and ¥2,845 million, respectively.

10. Leases
The following pro forma amounts represent the acquisition costs, accumulated depreciation and net book value of leased property as of March
31, 2002 and 2001, which would have been reflected in the balance sheets if finance leases other than those which transfer the ownership ofthe leased property of the Companies (which are currently accounted for as operating leases) were capitalized:
Millions of yen

Acquisition
costs
Buildings and structures . . . . . .
Machinery and equipment . . .
Furniture and fixtures . . . . . . . . .

¥

53
2,158
1,660
3,871

¥

2002
Accumulated
depreciation
¥
¥

7
1,165
913
2,086

Net bookvalue

Acquisition
costs

¥

¥

¥

45
992
747
1,785

¥

2001
Accumulated
depreciation

—
2,769
2,023
4,792

¥
¥

Net book
value

—
1,180
1,097
2,277

¥
¥

—
1,589
926
2,515

Thousands of U.S. dollars

Acquisition
costs
Buildings and structures . . . . . .
Machinery and equipment . . . .
Furniture and fixtures . . . . . . . . . .

$
$

397
16,195
12,457
29,0502002
Accumulated
depreciation
$
$

52
8,742
6,851
15,654

Net book
value
$
$

337
7,444
5,606
13,395

The related lease payments and depreciation for the years ended March 31, 2002 and 2001 were as follows:
Thousands of
U.S. dollars

Millions of yen

2002
Lease payments ...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Interest expense ...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

¥

1,006
878
97

2001
¥

1,317
1,002
133

2002
$

7,549
6,589
727

Depreciation is calculated by the straight-line method over the respective lease terms.
Future minimum lease payments (including the interest portion thereon) subsequent to March 31, 2002 under financeleases other than those which transfer the ownership of the leased property to the Companies are summarized as follows:Year ending March 31,
2003 .................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ..............
2004 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............

Millions of yen
¥
796
1,080
¥
1,877

Thousands of
U.S. dollars
$
5,973
8,105
$
14,086

11. Contingent Liabilities
At March 31, 2002, the Company and consolidated subsidiaries were
contingently liable as guarantors of loans of unconsolidated subsidiaries
and other in the aggregate amount of ¥2,232 million ($16,750 thousand)and as guarantors of housing loans of employees in the aggregate
amount of ¥311 million ($2,333 thousand).

In addition, at March 31, 2002, the Company and consolidated
subsidiaries had contingent liabilities arising from notes discounted bybanks and notes endorsed and delivered for payment to vendors in the
total amount of ¥655 million ($4,915 thousand).

Annual Report 2002 43

Notes to Consolidated Financial Statements
12. Segment Information
The Company and consolidated subsidiaries are primarily engaged in
the manufacture, purchase and sale of products in Japan and overseas infour major segments: chemicals which mainly include coating
materials, color materials, monomers, urethane raw materials, resin
additives, dyes, organic fine chemicals, specialty chemicals, andagricultural and ecological materials, plastics which include synthetic

resin, synthetic rubber and building materials, shaped processed goods,
electronics which include semiconductor water processing,semiconductor assembly processing, liquid crystal display components,
communications devices and other electronic devices, and health careproducts which include medical devices, cosmetics and health food, as
well as health care services.

The business and geographical segments of the Company and consolidated subsidiaries for the years ended March 31, 2002 and 2001 areoutlined as follows:Business Segments
Millions of yen

2002
Chemicals
Sales to customers .........................................
Intersegment sales .........................................
Total sales .............................................
Operating expenses .......................................
Operating income (loss) .................................

¥

Assets ..........................................................
Depreciation and amortization .......................
Capital expenditures .....................................

¥¥

Electronics

Health careand others

175,252
15
175,268
176,425(1,157 )¥83,660
3
83,663
83,349313¥

83,622
810
1,515

¥

46,442
826
1,251

¥

Plastics

218,524
12
218,537
216,178
2,358¥

117,716
1,067
1,453

¥

¥

¥

¥

Eliminations
or corporate

Consolidated
sales

490,583
1,695
492,279
490,606
1,673¥—(1,695 )(1,695 )(1,695 )0¥258,822
2,888
4,553

¥

41,250
—
—

¥

Total

13,146
1,663
14,81014,652
157¥

11,041
183
332

¥

¥

¥

¥

490,583—
490,583
488,9101,673
300,073
2,888
4,553

Millions of yen

2001
Chemicals
Sales to customers .........................................
Intersegment sales .........................................
Total sales .............................................
Operating expenses .......................................
Operating income ..........................................

¥

Assets ..........................................................
Depreciation and amortization .......................
Capital expenditures .....................................

¥¥

Plastics

237,8720237,872
234,792
3,080¥

130,489
1,362
1,557

¥

¥

Electronics

205,46064
205,524
202,535
2,989¥

103,605
732
1,380

¥

¥

Health careand others

103,3834
103,387
101,835
1,552¥

53,774
679
760

¥

¥

Eliminations
or corporate

Consolidated
sales

559,373
1,845
561,218
553,466
7,752¥—(1,845 )(1,845 )(1,845 )0¥297,096
2,966
3,769

¥

56,681
0
0

¥

Total

12,6581,777
14,435
14,304
131

¥

9,228
193
72

¥

¥

¥

¥

559,373—559,373551,6217,752
353,777
2,966
3,769

Thousands of U.S. dollars

2002
Chemicals

Plastics

Electronics

Health careand others

Sales to customers .........................................
Intersegment sales .........................................
Total sales .............................................
Operating expenses .......................................
Operating income (loss) ..................................

$ 1,639,954
90
1,640,052
1,622,348$
17,696$ 1,315,212
112
1,315,332
1,324,015(8,682 )$$627,84222
627,864
625,508
2,348$

Assets ..........................................................
Depreciation and amortization .......................
Capital expenditures .....................................

$

$

$

348,532
6,198
9,388

$

44 Annual Report 2002

883,442
8,007
10,904

627,557
6,078
11,369

$

$

Total

Eliminations
or corporate

Consolidated
sales—(12,720 )(12,720 )(12,720 )0$ 3,681,673—
3,681,673
3,669,118$
12,555309,568——$ 2,251,954
21,67334,16898,656
12,480111,144
109,958
1,178$ 3,681,673
12,7203,694,401
3,681,846$
12,555$82,8591,373
2,491$ 1,942,378
21,67334,168$$

Geographical Segments
Millions of yen

2002
Japan
Sales to customers .........................................
Intersegment sales .........................................
Total sales ..............................................
Operating expenses .......................................
Operating income (loss) .................................

¥

Assets ..........................................................

Asia

North America¥¥

73,283
2,730
76,01373,914
2,099¥

25,112¥¥399,725
48,320448,045448,831(785 )¥

237,886

Others¥¥

10,671
2,679
13,35013,214
136

¥

5,517

Total

Eliminations
or corporate

Consolidated
sales

¥

¥

¥

—
(55,379 )(55,379 )(55,543 )164¥

490,583—
490,583
488,910
1,673

29,221¥300,073

¥

¥

6,903
1,649
8,552
8,493
58

¥

490,583
55,379545,963544,454
1,509

¥

2,336

¥

270,852¥

Total

Eliminations
or corporate

Consolidated
sales

¥

¥

¥

—
(66,291 )(66,291 )(66,479 )188¥

559,373—559,373551,621
7,752¥

43,917¥353,777

Millions of yen

2001
Japan
Sales to customers .........................................
Intersegment sales .........................................
Total sales................................................
Operating expenses .......................................
Operating income (loss) .................................

¥

Assets ..........................................................

Asia

North America

¥

2,801

¥

309,860

5,358

28,923272,778

¥

¥

¥

¥

¥

559,373
66,291
625,664
618,100
7,564

¥

¥

¥

¥

¥

¥

¥

7,256
1,580
8,836
8,927
(91 )

10,6303,077
13,707
13,63374

74,948
4,142
79,09075,613
3,477

466,539
57,492524,031519,927
4,104

OthersThousands of U.S. dollars

2002
Japan

Asia

Sales to customers .........................................
Intersegment sales .........................................
Total sales ..............................................
Operating expenses .......................................
Operating income (loss) .................................

$ 2,999,812
362,626
3,362,439
3,368,337(5,891 )$$Assets ..........................................................

$ 1,785,260

North America

Others219,294$ 2,251,954$

17,530$ 2,032,660$

41,403

188,457$ 3,681,673—
3,681,673
3,669,118$
12,555$$$—(415,602 )(415,602 )(416,833 )
1,230
$

$

$

$

Consolidated
sales$ 3,681,673
415,602
4,097,283
4,085,958$
11,324$$

Eliminations
or corporate

51,804
12,37564,18063,737435

80,082
20,105100,187
99,166
1,020

549,966
20,487570,454554,701
15,752

Total

Annual Report 2002 45

Notes to Consolidated Financial Statements
Sales to Foreign Customers
Millions of yen

2002
Asia
Overseas sales ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Consolidated net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Overseas sales as a percentage of consolidated net sales ..............

¥ 128,657

North
America
¥

26.2%

Other

11,171

¥

9,652

2.3%

2.0%

Total
¥ 149,481¥ 490,583
30.5%

Millions of yen

2001
Asia
Overseas sales ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Consolidated net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............
Overseas sales as a percentage of consolidated net sales ..............

¥ 145,375

North
America
¥

26.0%

Other

12,305

¥

9,137

2.2%

1.6%

Total
¥ 166,817¥ 559,373
29.8%

Thousands of U.S. dollars

2002

Overseas sales ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............
Consolidated net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............

$

Asia

North
America

965,530$

83,834Other$

13. Subsequent Event
The following appropriations of retained earnings of the Company, which have not been reflected in the accompanying
consolidated financial statements for the year ended March 31, 2002, were approved at a shareholders’ meeting of theCompany held on June 27, 2002:

Cash dividends (¥8.00 = $0.06 per share) . . . . . . . . . . . . . . . . . . . . . . . . .............

46 Annual Report 2002

Millions of yen¥
1,065

Thousands of
U.S. dollars$
7,992

72,435

Total$ 1,121,808$ 3,681,673

Report of Independent Certified Public Accountants
The Board of Directors and the Shareholders
Nagase & Co., Ltd.

We have audited the consolidated balance sheets of Nagase & Co., Ltd. and consolidated subsidiaries as ofMarch 31, 2002 and 2001, and the related consolidated statements of operations, shareholders’ equity, and cash
flows for the years then ended, all expressed in yen. Our audits were made in accordance with auditing
standards, procedures and practices generally accepted and applied in Japan and, accordingly, included suchtests of the accounting records and such other auditing procedures as we considered necessary in thecircumstances.
In our opinion, the accompanying consolidated financial statements, expressed in yen, present fairly thefinancial position of Nagase & Co., Ltd. and consolidated subsidiaries at March 31, 2002 and 2001, and theconsolidated results of their operations and their cash flows for the years then ended in conformity withaccounting principles and practices generally accepted in Japan consistently applied during the period.
As described in Note 2, Nagase & Co., Ltd. and consolidated subsidiaries adopted new accounting standards forforeign currency translation, financial instruments and retirement benefits effective April 1, 2000 in the
preparation of their consolidated financial statements.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended
March 31, 2002 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 27, 2002

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

Annual Report 2002 47

Nagase in Japan
Our Major Consolidated Subsidiaries and Associated Companies

Manufacturing
Nagase ChemteX Corp. *Manufacture of epoxy resins, enzymes and industrial chemical products

Grelan Pharmaceutical Co., Ltd. **Manufacture and sales of pharmaceuticals

Nagase Pharmaceutical Co., Ltd. *Manufacture of pharmaceuticals

Totaku Industries, Inc. *Manufacture and sales of plastics products

Kyusyu Totaku Industries, Inc.

Manufacture and sales of plastics products

Thermo Co., Ltd. **Manufacture and sales of plastics products

Gigatec Inc.

Design, manufacture and sales of high frequency power amplifiers

Idea System Co., Ltd.

Design and manufacture of electronic parts and instruments

Nagase Alphametics Co., Ltd.

Manufacture of cosmetics and medical care products

Nagase Cosmetics Co., Ltd.

Manufacture of cosmetics and health foods

Processing
Kotobuki Industries Co., Ltd. *Molding, processing and sales of plastics products

Setsunan Kasei Co., Ltd. *Processing and sales of plastic coloring compounds

Kyoraku Co., Ltd. **Manufacture, processing and sales of plastics products

Cluster Technology Co., Ltd.

Manufacture, processing and sales of precision molded parts

Alpha Bumping Technology Co., Ltd.

Contract processing for wafer bumping using Ni/Au electroless plating

Servicing
Delta 21 Corp.

Marketing activities, management and consulting for plastics production

Design & Die Co., Ltd.

Design, manufacture and sales of parts of cars, plastics products

Nagase Electronic Equipment Service Co., Ltd. *Manufacture, sales and maintenance of low temperature vacuum
equipment, etc.

Nagase CMS Technology Co., Ltd.

Development, design, manufacture, sales and maintenance of
CMS devices

Nagase Landauer Ltd. **Radiation measuring services

NCC Engineering Co., Ltd.

Maintenance and manufacture of medical equipment

Nagase Storage & Distribution Co., Ltd. *Warehousing and distribution

Nagase General Service Co., Ltd. *Sales of sundry goods, lease and real estate management

Nagase Information Development, Ltd. *Software development and maintenanceNippon Vopak Co., Ltd. **Warehousing, automatic shipping of freight and freight handlingbusinesses

Nagase Business Support Corp.

Consulting

Nagase Trade Managment Co., Ltd.

Business agent for foreign trade documentation

Choko Co., Ltd.

Insurance agency* Consolidated subsidiary ** Company accounted for under the equity method

48 Annual Report 2002

(as of July 1, 2002)

Sales
Nagase Colors & Chemicals Co., Ltd. *Purchasing and sales of dyestuffs, industrial chemicals, etc. andrelated information provision

Delta Fine Chemical Co., Ltd. *Sales of dyestuffs, industrial chemicals, plastics and machinery

Kyushu Nagase Co., Ltd.

Sales of dyestuffs, auxiliaries industrial chemical and plastics

Nishinihon Nagase Co. Ltd.

Sales of dyestuffs, auxiliaries industrial chemical and plastics

Shizuoka Nagase Co., Ltd. *Sales of pigments and chemicals for paper manufacturing

Nagase Bio-chemical Sales Co., Ltd. *Sales of enzymes and additives for food and feed

Nagase Chemspec Co., Ltd.

Sales and technological servicing of chemicals, etc.

Nagase Agritech KK

Sales of agricultural products including chemicals and materials

Griffin Nagase KK

Sales of industrial chemicals and agricultural chemicals

Nagase Plastics Co., Ltd. *Sales of plastics raw materials and products

Nagase Elex Co., Ltd. *Sales of raw materials for plastics and plastics products

Hoei Sangyo Co., Ltd. *Sales of film materials, magnetic products, information imaging
materials, etc.

Nagase Barrel Finishing Systems Co., Ltd. *Sales of abrasives and grinding materials

Shinshu Nagase Co., Ltd.

Sales of electronics parts and plastics raw materials

Nagase Beauty Care Co., Ltd.

Sales promotion services for cosmetics and health foods

Herbal Care Co., Ltd.

Internet, mail-order and store sales of cosmetics and health foods

Nagase Medix Co., Ltd.

Manufacture and sales of pharmaceuticals and pharmaceuticals for animals

Annual Report 2002 49

Nagase Worldwide
Our Major Consolidated Subsidiaries and Associated Companies, Offices

EuropeGermany
Nagase (Europa) GmbH *Berliner Allee 59 40212 Dusseldorf, Germany
Tel: (211) 866200 Fax: (211) 3237068

UK
Nagase & Co., Ltd.,
London Representative Office
4F, Crown House, 143 Regent Street, London W1R 7LB, U.K.
Tel: (020) 72873368 Fax: (020) 72873588

Asia
Korea
Nagase Korea Corp.
The Daehan Maeil & Press Center Bldg.
10F 25, 1-Ga, Taepyung-ro, Chung-ku, Seoul, Korea
Tel: (02) 7348745 Fax: (02) 7348747

Nagase (Hong Kong) Ltd.,Guangzhou Representative OfficeRoom2615, Metro Plaza, 183 Tian
He Bei Road, Guangzhou, P.R. China
Tel: (20) 87550626 Fax: (20) 87550493

Nagase (Hong Kong) Ltd.,
Tianjin Representative Office
Room C02, 7/F, Hechuan Bldg,
Nanjing Road, Heping District, Tianjin, P.R. China
Tel: (22) 27217002 Fax: (22) 27213335

Nagase (Hong Kong) Ltd.,
Dalien Representative Office
Room 807-809, Furama Hotel,
60 Remin Road, Dalian, P.R. China
Tel: (411) 2593150 Fax: (411) 2808349

Shanghai Hua Chang Trading Co., Ltd.
Room 1505, Marine Tower, No.1,
Pudong Ave.Shanghai, P.R. China
Tel: (21) 68861177 Fax: (21) 68861435

Nagase Engineering Service Korea Co., Ltd.

Guangzhou Nagase Trading Ltd.

Seowon Bldg. 3F, Togok-Dong, 544-3,
Kangnam-ku, Seoul, Korea
Tel: (02) 5720881 Fax: (02) 5720884

Room 2317, CITIC Plaza Office Tower,
233 Tian He Bei Road, Guangzhou, China P.C. 510613
Tel: (020) 38911101 Fax: (020) 38911103

TaiwanNagase Precision Plastics Shanghai Co., Ltd.

Nagase (Taiwan) Co., Ltd. *B-Block, 1st Floor, 173 Meisheng Road,
Wai Gao Qiao Free Trade Zone, Pudong, Shanghai 200131, China
Tel: (021) 58681661 Fax: (021) 58681667

4F-1, 248, Sec.3, Nanking E. Road. Taipei,
Taiwan, R.O.C.
Tel: (02) 27733668 Fax: (02) 27737288

Nagase Wahlee Plastics Corp. *9F, Chuan Ta Bldg., No.37, Sec.3, Min Chuan
East Road, Taipei, Taiwan, R.O.C.
Tel: (02) 5062400 Fax: (02) 5062401

China
Shanghai Nagase Trading Co., Ltd.

ThailandNagase (Thailand) Co., Ltd. *25F, Thaniya Plaza Bldg., 52 Silom Road,
Bangkok 10500, Thailand
Tel: (02) 2312221 Fax: (02) 2312262

Katolec (Thailand) Co., Ltd.

16F, HSBC Tower, No.101 Yincheng Dong Lu,
Pudong new District, Shanghai,P.R. China
Tel: (21) 68413535 Fax: (21) 68411826

Saha Rattana Nakorn Industrial Estate, 115/5
Moo 4, Bangprakroo, Amphur Nakornluang,
Ayuthaya 13260, Thailand
Tel: (35) 360135 Fax: (35) 360134

Nagase & Co., Ltd., Shanghai Office

Sanko Gosei Technology (Thailand) Ltd.

16F, HSBC Tower, No.101 Yincheng Dong Lu,
Pudong new District, Shanghai, P.R. China
Tel: (21) 68413535 Fax: (21) 68411826

64/20 Moo 4 Eastem Seaboard Industrial
Estate T. Pluakdaeng. A.Pluakdaeng
Rayong 21140, Thailand
Tel: (38) 955234 Fax: (38) 955225

Nagase (Hong Kong) Ltd. *Suite 2001-6, Tower 1, China Hong Kong City,
33 Canton Road, Tsim Sha Tsui, Kowloon,
Hong Kong S.A.R., P.R. China
Tel: 23750000 Fax: 23772728

Advanced Mold Technology Co., Ltd.
22F, SSP Bldg., Tower 3, 88 Silom Road,
Suriyawongse, Bangrak, Bangkok
10500, Thailand
Tel: (02) 6366401 Fax: (02) 6366402

Nagase (Hong Kong) Ltd.,
Shenzhen Representative Office
Suite 1811, Kerry Centre, Reminnan Road,
Shenzhen, P.R. China 518001
Tel: (755) 25180683 Fax: (755) 82317089* Consolidated subsidiary ** Company accounted for under the equity method

50 Annual Report 2002

(as of July 1, 2002)

Malaysia

Philippines

Nagase (Malaysia) Sdn. Bhd. *Ｎａｇａｓｅ Philippines Ｃｏｒｐ．

Suite 16.01, Level 16, Menara IGB Mid Valley City
Lingkaran Syed Putra 59200 Kuala Lumpur, Malaysia
Tel: (03) 22832366 Fax: (03) 22822933

18-B Trafalgar Plaza H.V. Dela Costa Street,
Salcedo Village, 1227 Makati City, Philippines
Tel: (02) 7502935 Fax: (02) 8118296

Nagase (Malaysia) Sdn. Bhd.,
Penang Office

India

Suite13-2, 3F, Menara Penang Garden, 42A
Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia
Tel: (04) 2286951 Fax: (04) 2286841

Nagase & Co., Ltd.,
Bombay Liaison Office

Nagase (Malaysia) Sdn. Bhd.,
Johor Bahru Office
Suite 6.5A Level 6, Menara Pelangi, Taman Pelangi,
Jalan Kuning, 80400 Johor Bahru, Malaysia
Tel: (07) 3336088 Fax: (07) 3339088

Malaysian Fine Material Sdn. Bhd.
17, Lintan Beringin 6, Jalan Permatang
Damar Laut, Diamond Valley Industrial Park,
11960 Penang, West Malaysia
Tel: (04) 6262485 Fax: (04) 6262487

Singapore
Nagase Singapore (Pte) Ltd. *300 Beach Road, #39-00 The Concourse,
Singapore 199555.
Tel: 63980088 Fax: 63980227

Chang Fong Overseas Enterprises (Pte) Ltd.
31 Gul Circle, Jurong Industrial Estate,
Singapore 629569
Tel: 68623801 Fax: 68622655

Nagase Finechem Singapore (Pte) Ltd.
9 Tuas View Lane 637569 Singapore
Tel: 68989289 Fax: 68985313

VietnamNagase & Co., Ltd.,
Hanoi Representative Office
Unit 807 Hanoi Tung Shing Square 2
Ngo Quyen Hoan Kiem Dist., Hanoi, Vietnam
Tel: (04) 9350110 Fax: (04) 9350108

Nagase Singapore (Pte) Ltd.,
Vietnam Representative Office
Room1809, Sun Wah Tower, 115
Nguyen Hue Boulevard, Dist.1, HCMC, Vietnam
Tel: (08) 8219166 Fax: (08) 8219139

34, 3F, Maker Chamber III, Nariman Point,
Mumbai 400021, India
Tel: (22) 2844415 Fax: (22) 2045419

UAE
Nagase Singapore (Pte) Ltd.,
Dubai Office
LOB#15-320, Jebel Ali Free Zone,
P. O. Box 17865, Dubai-United Arab Emirates
Tel: (971）4-8871366 Fax: (971）4-8871377

North America
USA
Nagase America Corp. *546 Fifth Avenue 16F, New York, NY 10036 U.S.A.
Tel: (212) 7031340 Fax: (212) 3980687

Nagase Plastics America Corp. *34119 West Twelve Mile Road, Suite 205
Farmington Hills, MI 48331 U.S.A
Tel: (248) 3244467 Fax: (248) 3244471

Nagase California Corp. *710 Lakeway, Suite 135, Sunnyvale,
CA 94085, U.S.A.
Tel: (408) 3281520 Fax: (408) 7739567

Sofix Corp. **2800 Riverport Road, Chattanooga,
Tennessee 37406-1721, U.S.A.
Tel: (423) 6243500 Fax: (423) 6243587

CanadaCanada Mold Technology Inc. *1075 Ridgeway Road, Woodstock, Ontario,
Canada N4V 1E3
Tel: (519) 4210711 Fax: (519) 4210706

Indonesia
P.T. Nagase Impor-Ekspor Indonesia
14F, Lippo Plaza Jalan Jend, Sudirman
Kav. 25, Jakarta 12920, Indonesia
Tel: (21) 5203506 Fax: (21) 5203505

P.T. Daimei Santana Indonesia
Kawasan International Industrial City
Lot C4-b, JL. Toll. Jakarta Cikampek KM.
47 Karawang, Jawa Barat Indonesia
Tel: (21) 8904221 Fax: (21) 8904220

Annual Report 2002 51

Board of Directors and Auditors, Executive Officers(as of July 1, 2002)

BORD OF DIRECTORSREPRESENTATIVE DIRECTOR AND CHAIRMANHIDEO NAGASEREPRESENTATIVE DIRECTOR AND PRESIDENT(EXECUTIVE OFFICER)HIROSHI NAGASEREPRESENTATIVE DIRECTOR AND
EXECUTIVE MANAGING DIRECTORMICHIYUKI INUKAIBOARD SUPERVISOR, CHEMICALS BUSINESS GROUP;
BOARD SUPERVISOR, RESEARCH&DEVELOPMENT CENTER

REPRESENTATIVE DIRECTOR AND
EXECUTIVE MANAGING DIRECTOR (EXECUTIVE OFFICER)AKIRA NAITOHBOARD SUPERVISOR, ADMINISTRATIVE DIVISIONS;
COO, CORPORATE PLANNING OFFICE; COO, NEW BUSINESS DEVELOPMENT OFFICEMANAGING DIRECTORKAZUNORI ANDOBOARD SUPERVISOR, HEALTH CARE BUSINESS GROUPMANAGING DIRECTORAKIRA SAKAI

TAKESHI IWAIKAZUAKIKOBAYASHI

MASAHIROMURAYAMAREIJINAGASEKAZUNORI
ANDO

TAKESHIIWAI

BOARD SUPERVISOR, CHEMICALS BUSINESS GROUPMANAGING DIRECTOR (EXECUTIVE OFFICER)REIJI NAGASEMICHIYUKI
INUKAIHIDEO NAGASEHIROSHI NAGASEPRESIDENT OF NAGASE CHEMTEX CORPORATIONAKIRA NAITOHDIRECTOR (EXECUTIVE OFFICER)MASAHIRO MURAYAMABOARD SUPERVISOR, AUDIT OFFICE; BOARD SUPERVISOR,PERSONNEL DIVISION; BOARD SUPERVISOR,OSAKA ADMINISTRATIVE DIVISION; COO, GENERAL AFFAIRS DIVISIONDIRECTORAKIRA SAKAIPRESIDENT OF TOTAKU INDUSTRIES, INCORPORATEDEXECUTIVE OFFICERSDIRECTOR (EXECUTIVE OFFICER)KAZUAKI KOBAYASHIRYOICHI OKUNO

MAKOTO ONO

COO, PLASTICS BUSINESS GROUP

COO, NAGOYA BRANCH OFFICE

COO, HEALTH CARE BUSINESS GROUP

KANJI TAKAHASHISHINGO BAMBAMANAGING DIRECTOR OF
NAGASE CHEMTEX CORPORATION

COO, SPECIALITY CHEMICALS GROUPNORIO KURAKAKE

COO, COATING & IMAGING MATERIALS GROUP

COO, PERSONNEL DIVISION;
COO, LEGAL & CREDIT DIVISIONTAKEO KANEKOCORPORATE AUDITORS

COO, FINE CHEMICALS GROUP;
COO, CHEMICALS DEVELOPMENT OFFICE

TAKASHI MATSUYAMAYASUHIRO KASHIWADA

PLASTICS BUSINESS GROUPKEISUKE IAIYOSHIZO SHIBATA

SOUJI OKADA

COO, PERFORMANCE CHEMICALS GROUP;
COO, CHEMICALS PLANNING OFFICEEISAKU KIMURASHUNSUKE OKABE
PLASTICS BUSINESS GROUP

52 Annual Report 2002

EIJI ASAMI
KYOICHI ZUSHI
COO, ELECTRONICS 1ST GROUPKAZUO NAGASHIMA
COO, ELECTRONICS 2ND GROUP;
COO, ELECTRONICS PLANNING OFFICE

MAKOTO TSURUOKA
CHIEF FINANCIAL OFFICER

KOJI KURAMITSU
COO, BUSINESS PROCESS COORDINATE &MANAGEMENT DIVISION

Organizational Structure(as of July 1, 2002)

Dyestuffs Div.

Performance
Chemicals Group

Audit Office

Corporate Planning
OfficeFine Chemicals Group

Finance Div.

Board ofDirectors

Chemicals Business Group

Coating & Imaging
Materials Group

Shareholders’MeetingSpeciality Chemicals
Group

Legal and Credit Div.
ChairmanChemicals Development
OfficePresident
Business Process
Coordinate andManagement Div.

Auditors
andAuditor Meeting

Chemicals Planning
OfficePersonnel Div.
Plastics Group

General Affairs Div.

Osaka
Administrative Div.
Electronics Business
Planning Office

The NagaseResearch& Development
CenterElectronics Business GroupElectronics 1st GroupElectronics 2nd Group

Products Complianceand Security
Committee

Health CareGroup

Environment
Protection Committee
New Business
Development Office

NagoyaBranch Office

Annual Report 2002 53

Investor Information(as of March 31, 2002)
Head OfficeOsaka: 1-17, Shinmachi 1-chome
Nishi-ku, Osaka
Tokyo: 5-1, Kobunacho Nihonbashi
Chuo-ku, Tokyo

Stock Listed
First Section of the Tokyo Stock Exchange
and Osaka Securities Exchange(since August 1970)
Common Stock
Number of shares to be issued by the company: 346,980,000
Number of issued shares:
138,408,285

Branch Office
Nagoya: 14-18, Marunouchi 3-chomeNaka-ku, Nagoya

Number of Shareholders
8,738

Foundation
December 1917
For More Information Contact
General Affairs Division
Tel: (81) 3-3665-3021
Fax: (81) 3-3665-3030
Share Transfer Agent
Sumitomo Trust & Banking Co., Ltd.
5-33, Kitahama 4-Chome Chuo-ku, Osaka
Principal Shareholders (% of total shares held)

Investment in the Company

Investment by the Company

No. of shares held

Special rate

No. of shares held

Special rate

M shares%M shares%

1. Sumitomo Mitsui Bank

6,867

4.96

7,102

0.12

2. Sumitomo Trust Bank

5,841

4.22

4,060

0.28

3. Tokyo Mitsubishi Bank

5,402

3.90

----

----

4. UFJ Bank

4,603

3.33

----

----

5. Nippon Life Ins. Co.

4,228

3.05

----

----

6. Hiroshi Nagase

4,134

2.99

----

----

7. SNFE MAC Japan Active Shareholder Fund, L. P. 4,115

2.97

----

----

Share Distribution

Shares held % of total
Number (thousand stocks) shares held

Composition of Shareholders

54 Annual Report 2002

Securities Companies:

25

1,021

0.74

Non-Japanese Corporations, etc.:

55

13,378

9.66

Other Corporations:321

25,397

18.35

Private and Others:

8,252

43,293

31.28

Financial Institutions:85

55,31839.97

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