2007
Annual Report

Originality
Drives Sustained
GrowthProfile
Based on its many years of experience in the chemicals and plastics businesses, the Nagase Group offers customers trading, market-

Contents
Financial Highlights

2

Message from the Management

4Interview with President Hiroshi Nagase

6ing, R&D and manufacturing functions in its four strategic areas of

Originality Drives Sustained Growthelectronics, life sciences, automotive and overseas operations.

Deeper: China Business

12

Broader: ASEAN Business

14

Faster:Improving Distribution

16

Stronger: Improved Risk Management andAdministrative Controls

17

Corporate Governance18

Nagase & Co., Ltd., the nucleus of our group, was established asa dyestuffs wholesaler in Kyoto in 1832. In 1900, it started importing
synthetic dyestuffs from Chemical Industry of Basel. Since then, it has
opened up new markets worldwide together with its customers andBoard of Directors,
Corporate Auditors and Executive Officers

21

Corporate Social Responsibility

22

Nagase at a Glance

24

enhanced its capabilities in new product R&D, manufacturing and pro-

Review of Operations

28

cessing.

Nagase ChemteX

40

Nagase R&D Center42

Six-year Summary

43Management’s Discussion andAnalysis of Operations and Finances44

accumulated considerable know-how in its role as “a technology andintelligence oriented trading company.” At the same time, it has

Today, the Nagase Group comprises more than 100 companies
and offices in Japan and overseas. The Group is building a new business model that organically combines the trading, marketing, R&D,

Consolidated Financial Statements

50

manufacturing and processing functions of these companies to pro-Company Information

67

vide a high-level response to customer needs. In doing so, we aim to

Organization

68

offer new proposals as “a technology and intelligence oriented com-

Major Consolidated Subsidiaries,
Affiliates and Offices

69

pany that turns wisdom into business.” Looking ahead, along with its

Investor Information73

customers worldwide, the Nagase Group will seize business opportunities to continue to develop and grow.
Notes on Financial Data and Graphs●

All yen amounts presented in this annual report have been truncated after thesecond decimal place in the case of billions of yen and yen amounts, and after thelowest whole number in the case of millions of yen amounts. Percentages arerounded to the nearest decimal place.
● U.S. dollar amounts have been translated from yen, for convenience only, at the rateof ¥118.05=U.S.$1.00, the approximate rate of exchange prevailing on March 31,
2007. In the case of thousand dollar amounts, portions less than one thousand
dollars have been truncated.
● Years in graphs represent fiscal years ended March 31.

A Cautionary Note on Forward-looking Statements
This annual report contains statements regarding Nagase’s corporate views offuture developments that are forward-looking in nature and are not simply reiterationsof 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.

Management Philosophy
The Nagase Group is a member of the world society. As such, it is our duty to maintain
good and fair business practices and, through continued growth and development,
provide society with the goods and services needed while improving the welfare of ouremployees.

“The Nagase Way” Action Principles
1 Always be customer-oriented.
2 Always be a creative challenger.
3 Always use the power of the Nagase Group.
4 Always think globally and act locally.
5 Always think systematically and act speedily.

Management Vision
A technology and intelligence oriented company that turns wisdom into businessTraditional Functions of a
Trading Company
Distribution
Risks (credit, finance)
Basket sales

Investment
Development

Nagase’s Strengths
Own products (manufacturing)Technologies, information
R&D Center
Strengthening
Flow from upstream
to downstream (value chain)
Asian network

Integration

Business
Creation

WisdomNAGASE & CO., LTD. ANNUAL REPORT 2007

1

Financial Highlights
Nagase & Co., Ltd. and Consolidated Subsidiaries(Years ended March 31)

For the Year:Net Sales (Note 2) ........................................
Chemicals ...........................................
Plastics................................................
Electronics...........................................
Life Sciences .......................................
Others .................................................
Gross Profit ..............................................
Operating Income.....................................
Net Income ..............................................
At the Year-End:Total Assets .............................................
Net Assets (Note 3) ......................................

Millions of Yen

ChangeThousands of
U.S. Dollars (Note 1)

2007

2006

2007/20062007¥ 701,321
247,094
244,681
150,796
53,556
5,191
73,63921,66913,567¥ 648,023
222,282229,278
132,086
56,404
7,972
67,64017,596
12,892

8.2%
11.2
6.7
14.2
(5.0)
(34.9)
8.9
23.1
5.2

$5,940,881
2,093,136
2,072,695
1,277,397
453,674
43,977
623,800
183,562
114,927¥ 422,859
211,672¥ 396,773
202,376

6.6%
7.7$3,582,038
1,793,071

Yen

Per Share Data:
Net Income (Basic) ...................................
Net Assets ...............................................
Cash Dividends ........................................

¥ 105.84
1,597.27
18.00

Change¥ 100.32
1,535.70
15.00

5.5%
4.0
20.0

%

Ratios:Net Worth Ratio .......................................
Operating Margin (Operating Income/Net Sales)......
Return on Equity (ROE) ..........................
Return on Assets (ROA).........................

48.5
3.1
6.8
3.3

U.S. Dollars

$

0.89
13.53
0.15

Change

49.6
2.7
7.1
3.5

(1.1) points
0.4
(0.3)
(0.2)

Notes 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥118.05=U.S.$1.00, the approximate rate of exchange prevailing on March 31, 2007.
2. As of the fiscal year ended March 31, 2007, the fine chemicals business, formerly included in Chemicals, and the health care business, formerly included in Health Care and Others, have been moved to the
newly created Life Sciences segment, and the business handling DVD players and other consumer products, formerly included in the Electronics segment, has been moved to the Others segment. Segment
information for the fiscal year ended March 31, 2006 has been restated to reflect the new segment classifications.
3. Effective from the year ended March 31, 2007, the Company has adopted a new accounting standard for presentation of net assets in the balance sheet. The amount for the previous fiscal year has been
restated to conform to the new standard.

Net Sales

Operating Income/Operating Margin

Gross Profit(¥ Billion)(¥ Billion)

73.6

701.3
648.0

61.9

575.6
503.6

Operating Income
Operating Margin(¥ Billion)

67.6

533.3

17.5

51.8 53.4
13.2
10.2
1.7

’04

’05

’06

’07

Years ended March 31

2

NAGASE & CO., LTD. ANNUAL REPORT 2007

’03

’04

’05

’06

Years ended March 31

’07

3.1

2.7
2.3

8.4

’03

21.6

’03

1.9

’04

’05

’06

Years ended March 31

’07

(%)

Segment Overview
Chemicals

Net Sales by Business Segment

Net Sales by Region(Year ended March 31, 2007)(Year ended March 31, 2007)

Net Sales
Operating Income(¥ Billion)

251.7

231.3

223.6

269.2

247.0
222.2

6.4

’03

5.3

4.2

3.1

Life Sciences
7.6%

Electronics
21.5%

7.0
5.6

North America
3.3%Southeast Asia
12.0%
Chemicals Northeast
Asia
35.2%
24.0%

Europe/Others
2.1%

Others0.8%¥701.3billion¥701.3billion

Japan
58.6%

Plastics
34.9%
’04

’05

’06

’07

Years ended March 31

Life Sciences

Plastics
Net Sales
Operating Income(¥ Billion)

229.2 229.2

OthersNet Sales
Operating Income(¥ Billion)

Net Sales
Operating Income(¥ Billion)

244.6

188.4
170.9

165.8

6.6

6.6

6.5

7.9

5.1

4.2
3.0

2.9

’03

’04

’05

’06

53.5
2.0

’06

’07

’07

Years ended March 31

Years ended March 31

Electronics

(0.7)

(0.3)

’06

’07

Years ended March 31

Health Care and Others(¥ Billion)

Net Sales
Operating Income(¥ Billion)

56.4
1.2

122.6

118.9

99.7

137.8 132.0

Net Sales
Operating Income

150.7
6.1

4.4
2.6

2.4

1.7

3.1
14.4 0.4

’03

’04

’05

’06

’07

’03

Years ended March 31

11.9

’04

0.3

12.8 0.6

0.9

11.6

’05

’06

Years ended March 31

Note: As of the fiscal year ended March 31, 2007, the fine chemicals business, formerly included in Chemicals, and the health care business, formerly included in Health Care and Others, have been moved
to the newly created Life Sciences segment, and the business handling DVD players and other consumer products, formerly included in the Electronics segment, has been moved to the Others segment.
Segment information for the fiscal year ended March 31, 2006 has been restated to reflect the new segment classifications.

Net Income

Net Income per ShareTotal Assets(¥)(¥ Billion)

12.8(¥ Billion)

13.5

100.3210.3

396.7
284.8 310.7

81.00

422.8

335.2

54.69

7.0
31.72

4.1

’03

105.84

’04

’05

’06

Years ended March 31

’07

’03

’04

’05

’06

Years ended March 31

’07

’03

’04

’05

’06

’07

As of March 31

NAGASE & CO., LTD. ANNUAL REPORT 20073

Message from the Management

In fiscal 2006, the first year of the new medium-term management plan WIT2008, Nagase & Co., Ltd. exceeded business performance targets, and achieved its fifth consecutive
year of record sales and profits. From its base in chemicals,
Nagase has become a technology and intelligence oriented
company that turns wisdom into business with a broad portfolio consisting of research and development and manufacturing. Under WIT2008, the Nagase Group will accelerate reinforcement of its corporate structure for sustainable growth
while continuing to focus on creating high-value-added businesses as it grows and develops with its stakeholders.
Hideo Nagase

Hiroshi Nagase

Results for the Year Ended March 31, 2007
During fiscal 2006, the year ended March 31, 2007, the Japanese economy was steady due to expansion ofcapital investment and an increase in exports aided by a weaker yen. The global economy was solid, with no significant slowdowns, despite factors including a growing sense of uncertainty regarding the outlook for the U.S.
economy.
The Nagase Group worked in unison to expand its business results under these conditions. As a result,domestic sales increased 5.7 percent compared with the previous fiscal year to ¥410.78 billion and overseas
sales increased 11.9 percent to ¥290.53 billion, for total consolidated net sales of ¥701.32 billion, an increase of
8.2 percent.
As for profits, due to the increase in net sales and other factors including amortization of actuarial gains on
pension fund investments that arose in the previous fiscal year, operating income increased 23.1 percent yearon-year to ¥21.66 billion. Net income increased only 5.2 percent to ¥13.56 billion due to factors including alarge year-on-year decrease in gains on sales of property and equipment and investments in securities. Net
income per share increased from ¥100.32 in the previous fiscal year to ¥105.84.

4

NAGASE & CO., LTD. ANNUAL REPORT 2007

Nagase’s basic policy is to generate steady dividends for shareholders. For the fiscal year ended March 31,
2007, Nagase decided to pay an ordinary year-end dividend of ¥8.50 per share and add a special dividend of¥2.00 per share to commemorate the Company’s 175th anniversary, for a total of ¥10.50 per share. Total dividends for the year, including the interim dividend, increased by ¥3.00 to ¥18.00 per share.

Increasing Shareholder Value
The Nagase Group has launched WIT2008 (W: Wisdom, I: Intelligence, T: Technology), a new medium-term
management plan for the three years from April 2006. Based on the belief that now, when performance is good,is the best time to reinforce our corporate structure for continued long-term growth, we have designated
WIT2008 as a period of reinforcing our corporate structure for sustainable growth by balancing offensive anddefensive strategies while strengthening both. We have set numerical targets for fiscal 2008, the final year of
WIT2008, of consolidated net sales of ¥770 billion and consolidated operating income of ¥24 billion. Businessperformance in the first year, however, has surpassed targets through steady deployment of offensive and defensive strategies. We will continue working with all speed to reinforce our corporate structure.
This year marks the 175th year since the foundation of the Nagase Group. Since its establishment, Nagase
has consistently followed a management philosophy based on maintaining good and fair business practices.
Looking forward, Nagase’s first priority is meeting its responsibilities to all its stakeholders, comprising shareholders, customers, business partners, employees and society, by expanding its profits and continuing to growthrough honest, transparent management.
By achieving the objectives of WIT2008, the Nagase Group will work to increase its corporate value and further raise shareholder value. We hope for your continued support and guidance.

July 2007

Hideo Nagase

Hiroshi Nagase

ChairmanPresident

NAGASE & CO., LTD. ANNUAL REPORT 2007

5

Interview with President Hiroshi Nagase

President Hiroshi Nagase discusses Nagase Group initiatives
during the year ended March 2007, which was the first year of
the WIT2008 medium-term management plan, and strategies
for future growth.

Nagase turned in another strong performance in the first year of WIT2008, generating
sales and profit growth for the fifth consecutive year. What factors contributed to this performance, and what is your assessment of the progress of WIT2008?
In the fiscal year ended March 31, 2007, our overall business environment was favorable, with higher product prices
accompanying the rise in crude oil prices, together with continued expansion of capital investment and an increase inexports due to the weakening yen. For several years, Nagase has been transforming from its role as a traditional,
straightforward intermediary into a business model involving manufacturing, research and development as “a technology
and intelligence oriented company that turns wisdom into business.” The increasing proportion of sales from original
Nagase products and processing mainly from Nagase ChemteX Corp., the Nagase Group’s core manufacturer, was a key
factor supporting our strong performance.
In my view, however, we have not reached the level I envisioned in terms of creating a more robust corporate
structure for sustainable growth, the objective of WIT2008. In particular, while we have made various strategic moves
for future growth by deepening our business portfolio strategy in the electronics and life sciences businesses and inoverseas business, the plastics and chemicals businesses seem to be lagging in the speed and depth of their efforts.
The rapid changes in the world are occurring faster than we are executing our measures, and this is an issue weneed to focus on starting this fiscal year.
One of the “offensive” strategies of WIT2008 is investing aggressively in key businessareas. Please discuss the Company’s progress and results in this endeavor.
Over the three years of WIT2008, we plan to make investments on the order of ¥30 billion, with a focus on our
key business areas of electronics, life sciences, automotive and overseas business. Selected projects will include newinvestments and renewals of manufacturing facilities of Nagase Group manufacturers, and we will make sure that

6

NAGASE & CO., LTD. ANNUAL REPORT 2007

these investments are consistent with our technology and market strategies. In the year ended March 2007, weinvested aggressively in electronics and life sciences.
In electronics, we aggressively expanded our LCD-related components business. Nagase Electronics Technology
Co., Ltd., a thin-glass processing joint venture for LCD glass panel units, which we established in Taiwan inNovember 2005, began full-scale operation during the past fiscal year, and we invested in additional facilities in
anticipation of further expansion of production.
We were also active in developing our semiconductor backend processing business. We opened the
Semiconductor Applications Development Center in the Kitakyushu Science and Research Park to promote development of elemental technologies. German subsidiary Pac Tech-Packaging Technologies GmbH, which we acquired in
January 2006, established a subsidiary in Malaysia in December 2006 to strengthen its production of semiconductor
manufacturing equipment and its wafer bumping services in Asia. Nagase’s wafer bumping business had been struggling, but making PacTech a subsidiary enabled it to turn a profit in the past fiscal year and contribute to the performance of the electronics business. We are very optimistic about its future prospects.
In addition, we launched a recycling business, centered at Nagase ChemteX Corp. and Nagase CMS Technology Co.,
Ltd., that provides a full range of services from supply to reclamation of chemicals to both outside customers and Nagase
Group companies. This business has received an excellent response from customers and other companies in the industry.
The life sciences business has been in a challenging phase during the last several years, but business improvement efforts, which included adjusting strategies and changing the product mix, are now yielding results. In the pastfiscal year, sales in the life sciences business declined due to our withdrawal from the medical care business in theprevious fiscal year. However, we have laid the foundation for future business expansion by promoting collaboration
between Nagase ChemteX Corp. and the Fine Chemicals Department and enhancing the sense of unity in this business. At Nagase ChemteX Corp., we also constructed new facilities for commercial production of phospholipids, afunctional ingredient in foods, and introduced a nanoparticle production facility. These additions will enable our life
sciences business to respond to a wide range of customer needs, and make it a business with good future prospects.
We also decided to further expand facilities for sterile preparations at Nagase Medicals Co., Ltd. The beauty carebusiness, which handles cosmetics and health foods, has been on a slow downward trend in the last several years,
with little prospect for significant growth in the door-to-door sales industry overall. However, in the past fiscal year,
a new line of high-end cosmetic products developed in cooperation with the Nagase R&D Center was a hit. A top
priority going forward will be increasing the number of sales representatives, the driving force of this business.
How is your progress in expanding the business base and restructuring for high profitability?
To expand our business base, we will leverage the relationships of trust the Nagase Group has cultivated with its
many excellent suppliers and the Group’s network of business sites, primarily in Asia. To further solidify our position,
we are working to expand existing businesses, develop new businesses and add to our business sites. Nagase
Philippines International Services Corp., which we established in December 2005 in the Philippines, began full-scale

NAGASE & CO., LTD. ANNUAL REPORT 20077

operation in the past fiscal year. In Vietnam, our plastics coloring joint venture also commenced production and is
expanding steadily. In addition, our sales companies in China obtained permission to conduct sales in renminbi underthat country’s new law. In India, we established a subsidiary in November 2006, and have set up operating bases in
Mumbai and New Delhi.
Looking at the performance of overseas business in the past fiscal year, business in the ASEAN countries in general, and the plastics business in Thailand and Vietnam in particular, expanded strongly. Sales growth in this region
outpaced that in Greater China. As a result, overseas sales accounted for 41 percent of total net sales.
In Japan, we are expanding into new businesses. We established the Nagase Application Workshop, which willoffers suggestions on colors and evaluate and research material functions and effects, while also serving as a librarywith a database of the samples created. Here we will concentrate testing laboratories for fiber processing, coating
materials and plastics in a single location, creating a structure that will help us offer ideas with greater added value.
To restructure for high profitability, we are developing original Nagase Group businesses led by our manufacturing
companies and the Nagase R&D Center. In this way, we are working to improve profitability for the Group as a whole
by increasing the proportion of high-value-added businesses. Earlier, I discussed the expansion of our electronicsrelated production, mainly at Nagase ChemteX Corp. In parallel with these activities, we are continuing to address
underperforming businesses through restructuring and other measures. In the previous fiscal year, we decisively
withdrew from the medical care business, and in the year ended March 31, 2007, we dissolved a Singapore-based
subsidiary that offered analysis and design of energy-efficient facilities, and sold our business of direct-to-consumer
sales of DVD movie software and other products.
What about Nagase’s defensive strategies?
WIT2008 includes four defensive strategies: maintain a sound financial position; ensure thorough risk management; improve our consolidated management system; and enhance personnel quality and quantity. We are proud that

Overview of WIT2008 (Fiscal 2006 to Fiscal 2008)■ Business Strategies■ Quantitative Targets

Become More Robust to Achieve Sustainable Growth
Invest Aggressively
in Key Areas

Restructure forHigh Profitability

Expand Business Base

Deepen Business Portfolio Strategy
Maintain Sound
Financial Position

Improve Consolidated
Management System

Ensure ThoroughRisk Management

Strengthen Administrative Operations
Front-line Focus

Enhance Personnel
Quality and Quantity

Strengthen Technology
and Intelligence

Maintain Nagase’s Unique Corporate Culture

8

NAGASE & CO., LTD. ANNUAL REPORT 2007

Fiscal 2005

Fiscal 2006

Fiscal 2008

(Actual)(Actual)(Target)Net Sales¥648.0 billion¥701.3 billion ¥770.0 billion

Domestic Sales¥388.4 billion¥410.7 billion ¥420.0 billion

Overseas Sales¥259.5 billion¥290.5 billion ¥350.0 billion

Operating Income¥17.5 billion¥21.6 billion¥24.0 billion

Interview with President Hiroshi Nagase

we have robust internal systems and structures that compare favorably with those of other companies. But more
important in my view is that each Nagase Group company and employee shares and follows the fundamental spirit ofmaintaining good and fair business practices, as stated in our management philosophy.
● Maintain a Sound Financial Position
Nagase will continue to emphasize cash flow-oriented management. While working to improve operating cash
flow, we will constantly review assets and focus on maintaining a sound financial position. To manage the operating assets of our overseas bases, we are promoting the development of an inventory management and operating
structure that achieves a balance between meeting customer needs and minimizing stock requirements.
● Ensure Thorough Risk Management
The Nagase Group must further enhance its risk management system to comprehensively identify, understand and control the various types of risk that arise in conjunction with its business operations. Accordingly, toimplement and enhance thorough legal management in all our business activities, we conducted reviews of ourorganizational structure, taking measures such as the establishment of the Compliance Division.
To improve our internal control system, we set up a dedicated office in January 2006 to prepare for theenactment of a new law requiring internal control systems for financial reporting. We also established the Internal
Control Promotion Committee in February 2007, and began a project to conduct concrete inspections and verifications and maintain records.
● Improve Our Consolidated Management System
The Nagase Group is upgrading its existing Group management by stepping up its efforts to promote ties
among subsidiaries, affiliates and departments in each business. These include promoting sharing of strategies
and information and personnel exchanges. In addition, we are working to enhance the Group operating structure
for sustainable growth by reviewing the functions of domestic and overseas Group companies and by promoting
more efficient use of our business resources.
● Enhance Personnel Quality and Quantity
Nagase’s most important asset is its people. We focus on hiring diverse personnel with a high level of professional expertise who are able to respond to the changes in our business structure and handle new businesses. In
addition, we have established a Human Resource Development Team, which conducts a training program toensure that employees of overseas subsidiaries and affiliates are able to contribute strongly to the Nagase
Group’s future growth. In these and other ways, Nagase is promoting human resource development at all levels,
including at subsidiaries and affiliates.
What are your policies for fiscal 2007, the second year of WIT2008?
As I said at the beginning, I would like to further deepen our businesses with a little more focus on speed. To
accomplish that, we need to restructure our organization to create a system for building new businesses and to promote greater inter-divisional cooperation and synergy between our manufacturing and trading company functions.
While doing so, we will first increase the variety of business that we can acquire or otherwise invest in.
NAGASE & CO., LTD. ANNUAL REPORT 20079

Interview with President Hiroshi Nagase

Overseas, we will expand our business further in the ASEAN region, with a focus on India and Vietnam. We arealso concentrating on business in North America and Europe. Although our business in North America and Europe
has a long history, it has not yet reached the point where the Nagase Group has a strong presence. Therefore, we
intend to build Nagase-led businesses by acquiring manufacturing functions through mergers and acquisitions andother means to increase the Nagase Group’s presence in those markets.
In Japan, we are now conducting full-fledged efforts with U.S. company NanoGram Corp., with which we formed
a business tie-up. In addition to creating a foundation for the nanotechnology business, we will build a functional film
business across the Company, centered on the newly established Sheet & Film Planning Office.
In closing, what is your message to shareholders and other investors?
This year is Nagase’s 175th anniversary. I strongly believe that the major success factors behind Nagase’s survival
and development over this long period are the excellent customer and supplier network built up by our predecessors,
our know-how as a “technology and intelligence oriented trading company,” and, as I’ve said previously, adherence toour enduring philosophy of following good and fair business practices. Of course, our business has also been supported
by advances in science. In commemoration of our 175th anniversary, the Nagase Science and Technology Foundation
will sponsor a symposium that pays tribute to past scientific advances and looks ahead to future developments.
Our goal is to fulfill Nagase’s unique business model of strategically deploying its accumulated technology to be “atechnology and intelligence oriented company that turns wisdom into business.” Above all, we will maintain good and fairbusiness practices, and continue as a business group that operates with a focus on corporate social responsibility (CSR).
Our fundamental policy for shareholder returns is to maintain steady dividend payouts while working to enable
returns linked to consolidated performance trends, taking into account the expected medium-to-long-term capitalrequirements to fund future growth. For the year ended March 31, 2007, we increased cash dividends by ¥3.00 per
share from the previous fiscal year to ¥18.00 per share, and have now increased dividends for four consecutive years.
By achieving the performance targets of WIT2008, we intend to continue to deliver a high level of shareholder returns.
The Nagase Group is committed to sustainable growth into the future as it raises its corporate value. We hopethat shareholders and investors will also look forward to our success with a medium-term perspective, and continue
to support our efforts.
Cash Dividends per Share
(¥)

20

18.0
15.0

15

10.5 (Year-end)
10

8.0

9.0

10.0

5

7.5 (Interim)

0
’03

’04

’05

’06

’07

Years ended March 31
Note: Nagase began paying an interim dividend in the fiscal year ended
March 31, 2007.

10

NAGASE & CO., LTD. ANNUAL REPORT 2007

Originality
Drives Sustained
Growthfor the Nagase Group.

Our originality helps us become

Deeper,Broader,
Fasterand Stronger.

DeeperBroader
Stronger
FasterNAGASE & CO., LTD. ANNUAL REPORT 200711

Originality Drives Sustained Growth

DeeperBroader

Deeper: China Business
The Nagase Group is expanding its business in the fast-growing Greater China region,
which includes Hong Kong, Shenzhen, Guangzhou, Wuhan, Shanghai, Suzhou, Tianjin, Dalian
and Taiwan. Our business in Greater China is primarily in chemicals, plastics and electronics.

Stronger

Sales in this region for fiscal 2006 increased 8.6 percent year-on-year to ¥168.2 billion. In

Faster

2001, we set a five-year sales target of ¥150 billion. This was a remarkably ambitious goal

given the scale of our business at the time, but the Nagase Group’s Greater China business hasgrown at an impressive rate, backed by rapid economic growth in China.

Timely Expansion of Operating Sites

Cultivating New Markets through Expansion in Strategic Areas

The Nagase Group’s operations in Greater China as of March 31,

With a clear area development strategy, Nagase is deepening its

2007 consist of 8 sales companies, 10 branches and offices, 13 manu-

presence in the Hong Kong, Taiwan and South China markets, the heart offacturing companies and 3 service companies, with a total of more thanthe Greater China region, and growing its business in East China, which

450 Group employees. Establishment and expansion of this network ofincludes Shanghai, into its next cornerstone. We are also promoting busi-

operating bases and business infrastructure to keep pace with market

ness development in North China.

expansion has supported our business growth.

Hong Kong and South China is a mature yet still-growing region, andAt sales bases in the past fiscal year, we increased staff at sales

investment there continues to expand. Sales in the past fiscal year rose 30

companies in Guangzhou and Tianjin, and our sales companies in Taiwan

percent due to growing business in the automotive and electronics sectors.

and Shanghai opened representative offices in Taizhong and Ningbo. The

Our chemical and plastic raw materials business for automobile manufac-

opening of the Ningbo Representative Office had an immediate effect, andturers and assembly and processing business for electronics and amuse-within a short period of time the office had to increase its staff. In

ment-related components showed particularly impressive growth.

Shenzhen, we reorganized our office and launched a new marketing com-

Taiwan is increasingly important as a source of business frompany. We plan to enhance our personnel and functions to provide a wide

Taiwanese companies operating in mainland China. Therefore, we haverange of customer-oriented services.

assigned a Taiwanese representative to our subsidiaries in Shanghai andIn manufacturing operations, a factory in Taipei that processes thinglass for LCDs came on line. This facility has prospered, gaining excellent
evaluations and a high share from major manufacturers in Taiwan, an electronics powerhouse, and operated at full capacity in its first year.

Guangzhou. In addition, our Taiwan subsidiary is considering establishinga new operating base in Fujian Province, where growth is expected.
East China is another region of expanding growth. In the past fiscal
year, paint materials and chemicals and plastics for office automationequipment and home appliances sold strongly. Sales of electronic materials manufactured by Nagase Group companies also rose dramatically. The

Tianjin

Daliansphere of activity of our East China subsidiaries is centered on Shanghai,
but has expanded to Suzhou, Wuxi, Hangzhou and Ningbo.

Wuhan

Our North China business, which is focused on Tianjin and Dalian, is

Wuxi
SuzhouShanghaiNingbostill small but growing steadily. We have started exploring the possibility ofa building materials business in Dalian. In addition, Nagase has begunsponsoring a student exchange program between Tsinghua University in

DongguanShenzhen
Guangzhou Hong Kong

TaiwanSales
Manufacturing
Branches, Representative
Offices and Others

The Nagase Group’s Network in Greater China

12

NAGASE & CO., LTD. ANNUAL REPORT 2007

Beijing and the Tokyo Institute of Technology. We intend to use thethemes and network of contacts gained from this program not only in our
China business but also in collecting information on politics, laws andmarketing in China.

Originality Drives Sustained Growth■ Net Sales in Greater China

Nagase’s Mission
in Greater China(¥ Billion)

200.0
154.9

1. Expand business originating in Greater
China
2. Develop the human resources able to
do so
3. Create a system to support this effort

168.2

122.0
89.5
72.3

’03

’04

’05

’06

’07

Years ended March 31’09(Target)Nagase ChemteX (Wuxi) Corp. manufactures epoxy
resins.

Promoting Collaboration among Regions, Businesses andFunctionsing functions by expanding assembly and processing of LCD components,

The Nagase Group is also promoting collaboration. We are aggres-

Nagase (Hong Kong) Ltd. provides solid support. Nagase Electronics

sively expanding collaboration among different regions, business areas

Technology Co., Ltd. processes thin glass for LCDs, which are marketed

and functions. In the past fiscal year, we clarified the roles of top execu-

and sold by the sales unit of Taiwan Nagase Co., Ltd. Nagase Precision

tives at each subsidiary for a higher level of collaboration among facilita-

Plastics Shanghai Co., Ltd. manufactures precision packaging compo-

tors of regional Group companies and business leaders in chemical, plas-

nents using vacuum forming machinery, and is strengthening collabora-

tic, electronics and other businesses in Greater China.

tion including information exchange with Shanghai Nagase Trading Co.,

Collaboration within the Region and with ASEAN

Ltd. and Shanghai Hua Chang Trading Co., Ltd. The effects of this collab-

We introduced promising products in each area and promoted inter-audio equipment and electronic components, while the sales unit oforation contributed to a 40 percent year-on-year increase in sales ofaction between subsidiaries in an effort to expand sales within and beyond

these three companies during the past fiscal year.

the region. Many new ideas were generated as a result. In the plastics

Strengthening Marketing of Group-Manufactured Products

business, we have made significant achievements conducting business in

Nagase also collaborates with other manufacturers in joint venture

mainland China through our Taiwan subsidiary, but we are now beginning

manufacturing businesses. Products from automotive spring manufactur-

to expand the chemical and electronics businesses using existing local

ers that have set up operations in an industrial site arranged by Nagase

subsidiaries. Moreover, our Shanghai subsidiary has accepted employees

are marketed mainly by Guangzhou Nagase Trading Co., Ltd.

from our subsidiary in Korea, and is now pursuing Korean business thathas shifted to mainland China.
Collaboration among the Chemicals, Plastics andElectronics Businesses
South China is a manufacturing mecca for amusement components
and game machines. Our electronics operations have grown in tandem with

Strategic Initiatives in Fiscal 2007
In fiscal 2007, the second year of WIT2008, we will step up our drive toachieve our sales target of ¥200 billion and work toward the mission we
have set. We have set “collaboration” as the primary keyword for our activities, and we intend to shift to the next level, “integration.”the LED fabrication business, while our plastics operations have acquired aSpecifically, we will create an organization to promote businesses thatmolded component business. Similarly, the business of resins used to makeare more integrated, businesses with functions that could not be realized

plastic products and the business of chemical raw materials and additives

without Nagase, and businesses in which Nagase plays a leading role. As afor resins are also achieving results from multiple points of collaboration.

result, we will develop businesses with high profit margins. We will increase

Collaboration between Sales and Manufacturing Companies

our participation in manufacturing, pursue development and expansion of

A full-time unit at Shanghai Nagase Trading sells epoxy resins pro-manufacturing themes with the cooperation of business divisions, and pro-

duced by Nagase ChemteX (Wuxi) Corp. This unit, as well as the sales

mote expansion of business with companies based in Hong Kong, Taiwan

teams of Nagase (Hong Kong) Ltd. and Tianjin Nagase Internationaland mainland China. Through these measures, we will further strengthen

Trading Co., Ltd., have begun conducting sales covering all of Greater

our operating infrastructure in China amid high economic growth leading up

China. Nagase International Electronics Ltd. is enhancing its manufactur-to the 2008 Beijing Olympics and the 2010 Shanghai World Expo.
NAGASE & CO., LTD. ANNUAL REPORT 200713

Faster

Broader

Broader: ASEAN BusinessSix subsidiaries in Singapore, Malaysia, Thailand, the Philippines, Indonesia and India,

Deeperwhich was added during the past fiscal year, and representative offices in Hanoi and Ho Chi
Minh City in Vietnam, conduct Nagase’s ASEAN business, which is working to expand the market with a focus on plastics. During fiscal 2006, sales increased 22.0 percent due to expansionof the plastics business in Thailand and Vietnam and the startup of a masterbatch blend factory
at a joint venture company. Nagase’s business in this region grew even faster than in Greater
China, with sales reaching ¥84.5 billion.

Stronger

Office in 1996 and the Hanoi Representative Office in 2002. In 2005, we

Expansion of ASEAN Business: Beyond China
The Nagase Group’s operations in the ASEAN region as of March 31,

established Dainichi Color (Vietnam) Co., Ltd., a plastic colorant manufac-

2007 consisted of 7 sales companies, 9 branches and offices, 9 manu-

turing joint venture with Dainichiseika Color & Chemicals Mfg. Co., Ltd.

facturing companies and 1 service companies. The strengths of ourThis company began production in the past fiscal year, and sales grew

ASEAN business operations include 1) the ability to conclude businesssteadily, centered on products for automobiles and hard disk drives.

locally, backed by the Group network; 2) the presence of subsidiaries in

In Singapore, after establishing a subsidiary in 1975, we establishedeach country, which allows them to determine needs directly from cus-

Nagase FineChem Singapore (Pte) Ltd., a subsidiary that manufactures,

tomers and link them to new businesses; and 3) deep ties with customers

recovers and recycles LCD chemicals, in 2001, and are expanding thebuilt up over many years.

electronics business.

One of the fundamental strategies of WIT2008 is to expand our net-

Malaysia’s abundant human resources and established infrastructure

work of sales bases in markets near China, such as India and Vietnam. Our

make it a suitable country for manufacturing. Nagase established a sub-business in these markets developed substantially in the past fiscal year.

sidiary in 1982 to conduct our business activities in Malaysia. In

In India, we opened our first ASEAN operating base, the Mumbai

December 2006, Nagase subsidiary Pac Tech-Packaging Technologies

Representative Office, in 1964. In November 2006, we established a sub-GmbH established Pac Tech Asia Sdn. Bhd., in Penang, Malaysia to rein-sidiary there with locations in Mumbai and New Delhi, and began opera-

force production of semiconductor manufacturing equipment and wafer

tions. The seeds of various new businesses are already starting to emerge

bumping services in Asia. The new company is expected to become ain the automobile and other industries in India, and our subsidiary iscentral base in Southeast Asia, where both Nagase and Pac Tech haveincreasing its staff.

many customers, and contribute to increasing production and strengthen-In Vietnam, we established the Ho Chi Minh City Representative

ing competitiveness.
In Thailand, subsidiary Nagase (Thailand) Co., Ltd. was establishedin 1989. In this country, which is steadily developing its economy, Nagase

New Delhi
Dubai

is expanding its plastics business with a focus on the automobile industry.

Hanoi
India

Philippines

during the past fiscal year. Automotive Mold Technology Co., Ltd., which

MumbaiVietnamBangkok
Si Racha

Sales
Manufacturing
Branches, Representative
Offices and Others

manufactures automotive molds and dies, is also growing smoothly.
In the Philippines, Nagase established a subsidiary in 1997. Nagase

PenangMalaysia
Kuala Lumpur
Johor Singapore

Philippines International Services Corp., which was established in 2005,
began full-scale operation during the past fiscal year.
SurabayaIndonesia

The Nagase Group’s Network in the ASEAN Region

14

Business in Thailand contributed substantially to overall results in ASEAN

NAGASE & CO., LTD. ANNUAL REPORT 2007

In Indonesia, Nagase established a subsidiary in 1998. Production
and sales of automobile parts for Honda (UK) are expanding steadily.

Originality Drives Sustained Growth■ Net Sales in the ASEAN Region■ Sales in the ASEAN Region
by Business Segment (Year ended March 31, 2007)(¥ Billion)

Life Sciences

Electronics

100.0

1%

13%

84.5
54.6

’04

59.0

’05

69.3

’06

Chemicals
25%’07

Years ended March 31¥84.5 Plastics
61%
billionNagase FineChem Singapore (Pte) Ltd. recycles chemicals.

’09(Target)Integrating ASEAN Operations and Sharing Resources
Nagase views its operations in the ASEAN region, which extends

take suitable personnel enhancement measures that include other operating bases.

across multiple countries, as a cohesive unit. Accordingly, we set up theWe will also deal with underperforming businesses, decisively makeRegional Business Center (RBC) to promote effective business develop-

concentrated investments in key businesses and regions, and map out ament by enhancing sharing and unification of IT strategy, human resource

medium-term strategy for the ASEAN business. Currently, plastics makedevelopment, risk management and other management functions. For

up over 60 percent of the sales of the ASEAN business, but we plan toexample, in the launch of Dainichi Color (Vietnam) Co., Ltd., RBC staff

increase the proportion of sales of chemicals and electronics while main-

were dispatched to assist in logistics-related matters, and in accounting

taining sales of plastics.

systems. RBC sent people from Nagase Singapore and Nagase (Thailand)
helping the company start up quickly. RBC also provided support for the
introduction in the Philippines of an IT system developed by Nagase
Singapore, and is performing follow-up functions such as updates, cus-

■ Plastics-Related Business
Flow ofcommerce

Nagasemanufacturing basetomization and report preparation.

generation of managerial candidates among national staff. The contents ofNagasemarketing base

Japanese plastics
manufacturers, etc.
Nagasemanufacturing base

Japanese, local and foreign manufacturers of automobiles and auto parts,
office automation equipment, home appliances, electronic components, etc.

In personnel development and enhancement, RBC cooperated with
Nagase (Hong Kong) to create and implement a program to cultivate the next

Local and foreign plastics
manufacturers, etc.

■ Chemicals-Related Business
Flow ofcommerce

Local and foreign
chemical manufacturers

Japanesechemical manufacturers

this program are different from ordinary management training because theyNagase marketing baseinclude programs unique to Nagase, such as understanding the Nagase

Local, Japanese & foreign manufacturers and regional dealers, etc., of resins,
paints & inks, dye processing, pharmaceuticals and precision instruments

Group philosophy and vision and imparting it to subordinates, and networkbuilding aimed at promoting collaboration within the Nagase Group.

Strategic Initiatives in Fiscal 2007

■ Electronics-Related Business
Flow ofcommerce

Local material manufacturers

Nagase manufacturing base

Japanese material manufacturers

Nagase marketing baseAiming for further growth in fiscal 2007, the second year of
Manufacturers of electronics, precision instruments, materials, etc.

WIT2008, Nagase will actively market new products and services to existing customers by uncovering business opportunities through closer customer contact and offering original Nagase products and technologies,
while strengthening local manufacturing. In Vietnam, Dainichi Color(Vietnam) will conduct more aggressive business development with afocus on automotive and hard disk drive related business, and prepare toestablish a subsidiary. In Singapore, we will set a clear direction for therecycling business of Nagase FineChem Singapore. In addition, we plan to

NAGASE & CO., LTD. ANNUAL REPORT 200715

Faster

Faster: Improving Distribution

Stronger

In overseas businesses, Nagase is focusing on development of distribution systems and services. Key objectives are cutting costs and raising efficiency in the Nagase Group’s business operations as well as improving distribution systems and services to reduce costs and increase efficiency for

Broadercustomers

DeeperCreating Distribution Systems that Help Customers
Lower Costs and Raise Productivity

Distribution-Related Customer Support Services
Weekly Full Container Service

Nagase is taking measures to create distribution systems thatIn 2003, the Nagase Group began offering a “weekly full container ser-respond to customer needs while supporting lower selling costs and effi-

vice,” a distribution support service for customers, as a proposal-based

cient sales activities in our own business. We are overhauling the invento-

business, and demand has increased each year. By consolidating cargo forry and transport methods and delivery systems of our subsidiaries to cre-multiple customers into a single container for overseas shipping, this ser-ate a more efficient distribution system and reduce selling expenses. The

vice lowers customers’ distribution costs and reduces their export opera-

Greater China Management Office provides support including guidance ontions. At the same time, it gives the Nagase Group’s overseas bases oppor-

improving distribution in China, and shares the optimal distribution models

tunities to discover and sell the products of these customers, thus con-used in other regions to apply them at subsidiaries in China.

tributing to expansion of sales and stronger relationships with customers.

For the paint materials and chemical materials Nagase supplies, key

Chemical Analysis Services at NCC Shanghai Techno Center

issues include safe storage of substances that require controlled tempera-

The services of NCC Shanghai Techno Center Co., Ltd. include con-tures or hazardous substances that require special handling, as well as

ducting tests of dye toning and properties and analysis of chemical mate-enhancement of the distribution system to provide warehouses capable ofrials for customers exporting chemical products from China. Demand forspeedy delivery to customers. Nagase has carefully conducted field sur-these services is expanding. The laboratory obtains samples from the pro-veys while building a logistics network that responds to requirements forduction site and analyzes them before they are shipped to Japan.

just-in-time production among customers operating in China. Nagase has

Compared to analysis after arrival in Japan, this service prevents prob-

already completed distribution networks in Tianjin, Qingdao, Shanghai andlems for customers in advance and enables them to respond in a timely

Guangzhou, and plans further enhancement and expansion.

manner to any issues that arise.

Nagase is licensed to handle hazardous substances in Shanghai and
Tianjin, and is working to obtain a license in Guangzhou. In addition, withthe acquisition of certification as a distributor by Nagase Marketing andService (Shenzhen) Ltd., we will consider operations for new businessdevelopment.
In the Philippines, we established logistics functions in the past fiscal
year that enable high-frequency, small-lot delivery and meet customer
requirements for just-in-time production control. In addition, we also provide bonded storage to support cost improvement.
NCC Shanghai Techno Center is expanding its chemical analysis functions.

16

NAGASE & CO., LTD. ANNUAL REPORT 2007

Originality Drives Sustained Growth

Stronger: Improved Risk Management andAdministrative Controls

Stronger

Nagase’s global business is expanding rapidly with the growth of business in the Greater China and ASEAN
regions, and overseas sales reached 41 percent of total net sales in fiscal 2006. This expansion is increasing theneed for stronger risk management and operational management, including human resource development. Nagase
is taking various measures in these areas to realize the defensive strategies in WIT2008.

Deeper

The expansion of Nagase’s global business has increased the issues

legal measures to recover nearly 100 percent of the bad debts that arosethat need to be addressed. In addition to risk management, including diligent

in East China. However, we also intend to study debt collection measurescollection of receivables and credit administration, stronger foreign exchange

unique to China.

Broadermanagement focusing on the movements of various currencies, and proper

With China’s entry into the World Trade Organization (WTO), a law for

response to evolving legal systems, we are also focusing on training the local

official approval of commercial activities in foreign currencies within China

employees and managers who support business operations.

was passed, and all of Nagase’s subsidiaries in Greater China hadreceived approval by March 2007.

Greater China■ Organization of the Greater China Management Office

On April 1, 2007, Nagase established the Greater China Management

FasterCEO

Office (GCMO) to oversee operations in the region. The purposes of thisoffice are to create a unified operating structure in the region, plan andArea Management

Business Planningpromote regional business strategies, and enhance the business support

Administrative
Planning

systems and develop the human resources that are essential for realizing
strategies. The GCMO is positioned at the center of our activities for all of

ASEAN Region

Greater China. In this region, where Nagase’s operations are becoming

In the ASEAN region, the Regional Business Center (RBC) oversees

more sophisticated, diverse and localized, the GCMO will create a system

operations in each country and region and fulfills support functions. The

for sharing and utilizing human resources, information and know-how on

RBC flexibly lays out the support and collaboration systems necessary fora regional scale, rather than for each operating base. It will provide cross-business development at each site, and promotes sharing and effective

divisional business support in areas including planning of business strate-use of specific functions and resources, including IT systems and person-

gies, legal and credit administration, distribution and compliance. In addi-

nel development, among all operating sites in the ASEAN region. In thistion, the GCMO will consider various systems such as personnel systems

way, the RBC supports smooth operations at each site. In fiscal 2007, thethat include personnel exchanges and reassignments, and plans to under-

RBC will formulate an ASEAN business strategy and promote further

take personnel development and other common issues and themes.

enhancement and unification of management functions. In risk manage-

In management guidance, we set numerical targets for management

ment, the RBC will instill thorough awareness of security trade control,indicators and formulate the “Greater China Management Indicator.” Weand will work in cooperation with the GCMO to improve the credit admin-view return on capital employed (ROCE) as the paramount indicator toistration system and make contract-related upgrades.

strengthen promotion of cash flow-oriented management. In the area of■ Organization of the Regional Business Center

administration, our efforts include strengthening our credit administrationCEOsystem, considering responses to new laws in China, providing guidance
Planning
Management

on distribution improvements, promoting a security trade control system

Sales
Development

and considering a core operational system (next-generation system).
WebsiteThese efforts are already producing results. In December 2006, we usedIT

Education

Risk
Management

NAGASE & CO., LTD. ANNUAL REPORT 200717

Corporate Governance
At Nagase, our management philosophy has always been to maintain good and fair business practices. To implement this philosophy and continue raising corporate value, quick decision-making and action, as well as active, transparent management, are vital.
Moreover, our operating environment is becoming increasingly global in scope. Nagase is therefore aggressively working to strengthen corporate governance as a key management issue.

by directors and executive officers through surveys of Company operations

Business Execution and Auditing Framework

and assets and management reports from subsidiaries, which theyNagase has established an executive officer system and adopted theBoard of Auditors system. The Company’s current management frame-

request on an as-needed basis. Monitoring and assignment of tasks are
based on policies set at Board of Auditors’ meetings.

work consists of ten directors, including two independent directors from

Executive officers attend General Managers’ Meetings, where theyoutside the Company; 21 executive officers, seven of whom serve concur-

discuss sales and marketing issues, and Managers’ Meetings, where they

rently as directors; and four corporate auditors, including two from outside

discuss administrative issues and establish concrete measures based on

the Company.

status reports received from each department. In addition, we have estab-

The Board of Directors, which holds a regular monthly meeting, islished an Advisory Board with an outside expert, based on our view thatclearly positioned as the body in charge of making decisions on manage-

objective checks and evaluation of the Company’s management practices

ment policies and strategies, and supervising the execution of operations.

are important.

It also reviews and formulates measures regarding important decisions

The Audit Office is in charge of internal audits, including audits toassess the appropriateness and efficiency of business activities. The Audit

and tracks business performance.
The Company’s two independent directors are Haruyuki Niimi,

Office and Board of Auditors regularly exchange information regarding

Chairman of Showa Shell Sekiyu K.K. and Takuya Goto, Chairman of theinternal audits and audits of domestic and overseas subsidiaries and hold

Board of Kao Corp. Neither they nor the two outside corporate auditors

meetings twice a year with auditors of affiliated companies. In addition,

have any personal, capital or business relationship with, or any otherthey perform liaison activities including receiving regular reports frominterest in, the Company. Kao and Nagase have a vendor-supplier rela-Nagase’s independent auditors Ernst & Young ShinNihon regarding

tionship with regard to chemicals, but all transaction terms are identical toaccounting matters and associated internal controls. Members of thethose between Nagase and other business partners.

Audit Office are also present at accounting audits conducted by the inde-

In addition to attending Board of Directors’ meetings and other impor-pendent auditors. As Nagase’s independent auditors, Ernst & Youngtant meetings, corporate auditors closely monitor the execution of duties

ShinNihon conducts fair and impartial audits of the Company’s accounts.

Corporate Governance System
General Meeting of Shareholders
Independent Auditors

LiaisonCorporate Auditors

Supervision(4 including 2 outside corporate auditors)

Board of Directors(10 including 2 independent
directors from outside the Company)

Board of Auditors
Supervision

Supervision
AdviceCompliance Committee
Advisory Board

Compliance Call Center(includes one person employedoutside the Company)

Supervision

Audit Office

Security Trade Control Committee
Chemical Management Committee

Supervision

General Managers’ Meeting (Sales)

18

NAGASE & CO., LTD. ANNUAL REPORT 2007

Environment Protection Committee

Managers’ Meeting (Administration)

Supervision

PresidentInternal
External

Compensation of Directors and Auditors

Enhancing Internal Controls

Total compensation paid to Company officers in fiscal 2006 was asfollows.

To strengthen management compliance, the Company has estab-

Title

NumberDirector

10

Corporate
AuditorTotal● Ensuring Thorough Compliancelished a Compliance Committee and a basic compliance policy, and uses

Compensation Officer Compensation Limits by Resolution of(¥ million)
Ordinary General Meeting of Shareholders
Up to ¥360 million annually¥289

regular workshops and other initiatives to ensure that corporate activities
are strictly in line with the Nagase Group Code of Conduct. Should(per resolution on June 29, 1988)

4

53

14

¥342

Up to ¥80 million annuallyemployees of Nagase or its Group companies become aware of legal or(per resolution on June 28, 2006)

other compliance issues, they report to the Compliance Committee, which

Notes: 1. The above compensation includes a total of ¥36 million paid to four outside directors
and corporate auditors.
2. The above total compensation does not include salary paid to directors holding concurrent positions as employees of the Company.
3. The above total compensation includes directors’ and corporate auditors’ bonuses of¥88 million expensed as accrued bonuses during fiscal 2006.
4. In addition to the above, bonuses to directors and corporate auditors totaling ¥70 million
were paid as appropriation from profit of the previous fiscal year.
5. In addition to the above, rights to purchase new shares in the form of stock options totaling¥11 million were issued as compensation to nine directors (including ¥1 million to
one independent director), per resolutions of the 91st Ordinary General Meeting of
Shareholders held on June 28, 2006 and the Board of Directors meeting held on July
31, 2006.

Compensation of Independent Auditors

immediately reports to the Board of Auditors. As part of our ongoing
efforts to develop a reporting system that is independent of the regularorganization hierarchy, in fiscal 2004 we set up a compliance call center
where employees can report or discuss issues directly with theCompliance Committee Office or outside lawyers.
The Company established the Internal Control Promotion Committee
in February 2007 in preparation for making a report on the internal control system for financial reporting, the submission of which will become(¥ million)

mandatory in fiscal 2008. The committee will work to achieve thoroughTotal compensation paid to independent auditors by the Company and its
consolidated subsidiaries in fiscal 2006.

¥74

internal controls through its executive bureau and four working groups.

Portion of the above paid by the Company and its consolidated subsidiaries for services
rendered pursuant to Article 2, Paragraph 1 of the Certified Public Accountants Law.

58

● Strengthening the Risk Management System

Portion of the above paid by the Company for such services.

49

The Corporate Management Office is responsible for providing comprehensive, cross-organizational risk management throughout theCompany. Under the Office’s leadership, department managers address
risk in their particular areas by setting rules and guidelines, holding workshops and preparing and distributing manuals.
To deal with additional risks that materialize, Nagase is also working

Comments from our Independent Directors

Haruyuki Niimi, Representative Director and Chairman,
Showa Shell Sekiyu K.K.
Utilizing my experience at corporations in various countries and in negotiating
corporate alliances, I provide counsel and advice, particularly regarding Nagase’s
overseas expansion. In the area of compliance, I intend to offer recommendations
from an objective, global perspective to ensure strict observance of laws and transparency in corporate management.

Takuya Goto, Chairman of the Board, Kao Corp.

Takuya Goto

Haruyuki Niimi

Based on my experience in the chemical products industry, I give counsel andadvice to Nagase’s management from a manufacturer’s point of view. I check operations from an independent standpoint outside the Company for a more effective
corporate governance structure. I hope that expressing my opinions will contributeto ensuring necessary risk management, particularly as the Company goes beyond
its commercial business and expands its production and processing functions.

NAGASE & CO., LTD. ANNUAL REPORT 200719

to develop a system that designates the departments responsible for

Measures to Achieve Our Basic Policies

rapid response, ensures speedy and appropriate communications should
an incident arise, and handles emergencies. Specifically, the Security
Trade Control Committee ensures that Nagase complies with all laws andregulations in connection with transactions involving goods and technologies falling under such laws as the Foreign Exchange and Foreign Trade
Control Law, which were established to maintain international peace andsafety. The Chemical Management Committee does the same with

1. We will implement the offensive strategy of deepening our businessportfolio strategy, in order to restructure for high profitability.
2. As our defensive strategy, we will strengthen our administrative operations by improving corporate governance including our consolidated
management system, maintaining a sound financial position andensuring thorough risk management.

respect to regulations pertaining to the Law Concerning the Evaluation of

3. Nagase’s basic policy regarding dividends is to further enhance its

Chemical Substances and Regulation of Their Manufacture, etc.

corporate structure and earnings capabilities to continue generating(Chemical Substances Control Law) and the Pharmaceutical Affairs Law.

steady dividends for shareholders, based on comprehensive consid-

The Environment Protection Committee has established an environ-eration of medium-to-long-term demand for funds to meet future

mental policy under which it works to 1) ensure thorough compliance withgrowth and consolidated business performance trends. Nagase

environmental laws and regulations; 2) promote environmental awarenessintends to use internal funds effectively to enhance future businessin business activities; 3) facilitate social harmony; 4) establish and contin-

activities and its management base.

ually improve environmental management systems; and 5) increase
employee awareness of and publicize the environmental policy. Measures
to protect personal information include issuing Regulations Regarding thePreventing Acquisition of Control by an Inappropriate Largescale Purchaser in Light of the Company’s Policies

Protection of Personal Information, based on our Personal Information

The decision to implement countermeasures to an attempted large-

Protection Policy, and holding briefing sessions to thoroughly familiarize

scale purchase of Company shares (Anti-takeover Defense Measures) inmanagement and staff.

order to prevent control of decision-making regarding the Company’s
financial and business policies was made at the Board of Directors meet-

Basic Stance on Control ofFinancial and Business Policies

ing held on May 28, 2007 and the Ordinary General Meeting of
Shareholders held on June 27, 2007.
In the event of a large-scale purchase, to ensure and improve corpo-

As Nagase is a listed company, we believe that, in principle, ourshareholders make decisions through freely trading the Company’s
shares, and that the decision to accept or refuse a large-scale corporate
acquisition, or large-scale purchase, should be left to the will of the individual shareholder. From this perspective, we also believe that theCompany’s duty is to increase corporate value, and that judging someone
attempting to control its financial and business policies should not be left
to the Company.
However, the value of the Company, which faithfully works toincrease corporate value, may in certain cases be inaccurately represented in the market. We are concerned that there may be those who would
take advantage of conditions resulting from a large-scale purchase of theCompany’s shares in pursuit of short-term profits, damaging corporate
value and the common interests of the shareholders.
We believe that a large-scale purchaser that would damage corporate value or the common interests of the shareholders is inappropriate
for determining the Company’s financial and business policies.

20

NAGASE & CO., LTD. ANNUAL REPORT 2007

rate value and the common interests of our shareholders, the Antitakeover Defense Measures require the large-scale purchaser to provide
advance information concerning the large-scale purchase. They also
ensure time for information gathering and deliberation and define procedures including those for negotiation with a large-scale purchaser and thepresentation of the Company management’s plan or an alternative plan.

Board of Directors, Corporate Auditors and Executive Officers(As of June 27, 2007)

From left: Takuya Goto, Yoshizo Shibata, Haruyuki Niimi, Hideo Nagase, Kyoichi Zushi, Hiroshi Nagase, Eiji Asami, Makoto Tsuruoka,
Kazuo Nagashima, Reiji Nagase

Board of Directors
Representative Director and Chairman

Hideo Nagase

Representative Director andPresident

Hiroshi Nagase

Representative Director andSenior Managing Executive Officer

Yoshizo Shibata

Representative Director andManaging Executive Officer

Makoto Tsuruoka

Director and Managing Executive Officer

Reiji Nagase

Overall Sales Group; Beauty Care Products Department;
Business Administrative Office; Corporate Marketing Office
Administrative Divisions; GM, Corporate Management
Office; GM, Finance Division; GM, Accounting Division
Plastics Businesses; Automotive Related Businesses;
Advanced Polymers Department; Automotive Solutions
Department; Eco-Materials & Products Department;
Nagoya Branch

Director and Managing Executive Officer

Director and Managing Executive Officer

Eiji Asami
Chemicals Businesses; Colors & Imaging Department;
Performance Chemicals Department; Speciality Chemicals
Department; Information & Functional Materials Department;
Nagase Application Workshop

Director and Executive Officer

Kazuo Nagashima
Electronics Businesses; Electronic Chemicals Department;
Display & Electronics Components Department;
New Business Development Office

Independent Director

Haruyuki Niimi(Representative Director and Chairman, Showa Shell Sekiyu K.K.)

Independent Director

Takuya Goto
(Chairman of the Board, Kao Corp.)

Kyoichi Zushi
Life Sciences Businesses; Fine Chemicals Department;
Nagase R&D Center; Nagase ChemteX Corp.;
IC Packaging Department

Corporate Auditors
Standing Corporate Auditor
Standing Corporate Auditor

Shunsuke Okabe
Hideo Yamashita

Standing Corporate Auditor
Corporate Auditor

Tetsuwa Konishi
Eisaku Kimura

Shingo Bamba

Executive Officer

Osamu Morikiyo

Executive Officers
Managing Executive Officer

GM, Information & Functional Materials Department;
Sheet & Film Planning Office

Managing Executive Officer

Koji Kuramitsu
Audit Office; GM, Legal & Credit Division;
GM, Compliance Division; GM, IT Planning Office

Executive Officer

Osamu Kitaguchi
CEO, China

Executive Officer

Masuhiro Nojiri
GM, Fine Chemicals Department

Executive Officer

Masao Hidaka
CEO, ASEAN Region/India

Executive Officer

Toshiro Yamaguchi

Shunichi Kawashiri
GM, Advanced Polymers Department

Executive Officer

Kenichi Matsuki
GM, Human Resources & General Affairs Division;
GM, Osaka Administrative Division

Masamichi Kan
GM, Nagoya Branch Office

Executive Officer

GM, Business Administrative Office

Executive Officer

Executive Officer

Hiroshi Hanamoto
GM, Colors & Imaging Department

Executive Officer

Tomitaka Ito
GM, Electronic Chemicals Department

Executive Officer

Kazuo Mitsuhashi
GM, Speciality Chemicals Department

Executive Officer

Ryuji Mise
GM, Beauty Care Products Department

GM, Performance Chemicals Department

NAGASE & CO., LTD. ANNUAL REPORT 200721

Corporate Social Responsibility
The Nagase Group is a member of society and, as such, it is our duty to behave in a manner in keeping with this role by maintaining good and fair business practices and providing society with the goods and services it needs. Through continued growth anddevelopment, Nagase can improve the welfare of its employees, while making a contribution to society. Nagase aggressively
promotes activities in line with this corporate philosophy.

Environmental Preservation Activities

new companies that benefit the country. The Nagase Group will continue efforts

Under an environmental policy of giving full consideration to environ-in Japan, South Korea, Taiwan, Singapore and throughout Asia to enhance themental issues in our business development, we aim to contribute to envi-

production, sale, recovery and recycling of chemicals used in LCD, semiconduc-ronmental preservation through expansion and creation of eco-businesses. Our various initiatives make the most of our strengths as a technology● ISO 14001 Nagase obtained ISO 14001 certification for its environmental
management system in April 2000, and advises and supports affiliated companies in obtaining certification. Currently, five sales companies – Nagase Colors &Chemicals Co., Ltd., Nagase Chemical Co., Ltd., Nagase Plastics Co., Ltd.,
Nagase Barrel Finishing Systems Co., Ltd. and Nishinihon Nagase Co., Ltd. –conduct activities together with Nagase at its certified business establishments.

oped Pluswood, a composite material made from environmentally friendly biomass materials such as mill ends and tree thinnings, and non-vinyl chloride
thermoplastic. Pluswood is the world’s first wood-plastic composite with over 51
percent of its weight consisting of powder made from chipped wood waste.
● Eco-Material Solutions The

design stages. To help reducetal activities include Nagase

environmental impact, Nagase

Nagaseoffers a lineup of eco-friendly

Medicals Co., Ltd., Setsunan

plastics, flame retardants, chemi-

Kasei Co., Ltd., Nagase
Chemical management system for recycling

cal substitutes, repairable adhe-

Pluswood, a new environmentally friendly
wood composite

sives and other materials designed

Co., Ltd., Hoei Sangyo Co., Ltd.,
Hoei Techno Service Co., Ltd., Totaku Industries, Inc. and Nagase CMS

with an emphasis on lightness, recyclability, safety and ease of decompositionand separation.

Technology Co., Ltd.
● Zero Emissions

society that makes effective use of limited resources. For example, we devel-its planning, development anddently and conduct environmen-

Electronic Equipment Service

Nagaseronment is largely determined in

obtained certification indepen-

Corp.,● New Environmentally Friendly Wood Composite Material

impact a product has on the envi-

Affiliated companies that

ChemteX

tor and electronic device manufacturing.

leverages new resources as part of its efforts to establish a recycling-oriented

and intelligence oriented company.

We have developed a chemical management system(CMS) and a waste solvent recovery system that contribute to realizing zero
emissions. The CMS controls the concentration of chemicals used in the manufacture of semiconductors and LCD panels in order to make the process morestable. It also reuses chemicals. Nagase is currently manufacturing and selling
its CMS in Japan and overseas as a low-cost, environmentally friendly solution

The waste solvent recovery system contributes to zero emissions by collecting and processing waste solvents that individual companies have difficulty
reducing, and reusing them as raw materials for different industries.
● Resource Recycling Business Model

Established in 2001, Nagase

FineChem Singapore (Pte) Ltd. contributes to minimizing environmental impact
by recycling the chemicals produced through the manufacture of LCDs, semiconductors and electronic devices in Southeast Asia. The company has been

NAGASE & CO., LTD. ANNUAL REPORT 2007

● Reducing Energy Used in Shipping Since 1996, the Nagase Group has
implemented joint distribution, in which we ship dyestuff-related products
together with other companies in the same business. Joint distribution facilitatedthe integration of formerly dispersed storage facilities, and has enabled us tooffer more efficient and finely tuned customer services, including vehicle dispatch. The Nagase Group operates a “weekly full container service,” which facilitates distribution by consolidating the cargo of multiple customers into a single

that meets customer needs.

22

granted “Pioneer Status” by the Singapore government, a distinction given tocontainer for overseas shipping. This service lessens the burden of distribution
for customers and contributes to preserving the environment by reducing theenergy used in shipping.
● Environmental Research Activities The Nagase Group actively promotes
joint environmental research, primarily through the Nagase R&D Center. One
example of our efforts to pursue green chemistry is in the area of organic synthesis, where research is currently underway to reduce the multi-step manufac-

turing process for the pharmaceutical intermediate (R)-3-Quinuclidinol to a sin-

Established in April 1989 and designated a public interest corporation by thegle step by using a biocatalyst to induce microbial reduction.

former Science and Technology Agency, the Nagase Science and Technology● Supporting and Cooperating with External Environmental

Foundation aims to contribute to socioeconomic development by advancing sci-

Organizations Coexisting with society is one of our environmental policies,

ence and technology by assisting research and development and supporting

and we support and cooperate with other organizations working to protect theinternational exchange in fields including biochemistry and organic chemistry.

environment. This includes participation in the Nippon Keidanren Committee on

Including research grants to researchers, financial support for attendance atNature Conservation, the Japan Foreign Trade Council Global Environment

overseas and domestic conferences and support for lectures, the Foundation

Committee, the Osaka Chamber of Commerce and Industry Environmental

has awarded a cumulative 296 research grants and 178 international exchange

Problem Research Council, and others. We also conduct activities to contribute

fellowships totaling approximately ¥780 million. (International exchange fellow-

to local communities.

ships have been suspended as of fiscal 2004.)

Further details regarding the Nagase Group’s environmental initiatives are

To commemorate Nagase’s 175th year of business, the Foundation will holdavailable on the Company’s website:a symposium on the theme of science and technology for creating a prosperous

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

society in September 2007. Through this symposium, it aims to contribute tosocial development by helping to build an information network between industry
and academia.

Contributing to Growth of Scientific Technology
Nagase has a long history of developing enzymes and technologies fororganic compounds for use not only in the chemical industry but for a wide
range of applications in various industries including pharmaceuticals. Throughthese activities we intend to promote awareness of the importance of basic
technology in biochemistry and organic chemistry, and aid in the broad advanceof scientific technology in Japan. To mark the 70th year since Nagase’s establishment, we established the Nagase Science and Technology Foundation.

Date: September 27-28, 2007
Speakers:
Keynote Lecturer: Ryoji Noyori, Nobel Laureate in Chemistry 2001
Keynote Lecturer: Masuo Aizawa, President, Tokyo Institute ofTechnology
Special Invited Speaker: Robert H. Grubbs, Nobel Laureate in Chemistry
2005
Special Invited Speaker: Shizuo Akira, Department of Host Defense,
Research Institute for Microbial Diseases, Osaka
And six others
University
Organizer: Nagase Science and Technology Foundation
Sponsors: Ministry of Education, Culture, Sports, Science andTechnology; Ministry of Economy, Trade and Industry;
Nagase & Co., Ltd.

Research Grants Provided in 2007
Name
Biochemistry

Position / Present Office

Assistant Professor / Graduate School of Agriculture,

Michiko Kato-Murai Kyoto University
Tetsuo Kobayashi
Shingo Saito
Hiroshi Takagi
Seiichi Taguchi
Masayuki Hara

Professor / Graduate School of Bioagricultural Sciences,
Nagoya University
Associate Professor / Graduate School of Science andEngineering, Saitama University
Professor / Graduate School of Biological Sciences,
Nara Institute of Science and Technology
Professor / Graduate School of Engineering, Hokkaido University
Professor / Graduate School of Science, Osaka Prefecture University

Subject Matter

Creation of functional enzymes based on catalytic antibodies produced in vitro andits application
Cellulolytic and xylanolytic systems governed by the transcriptional regulator AoXlnR
Development of a simplified metallome analysis method
Elucidation of anti-oxidant mechanism by the yeast novel acetyltransferase Mpr1 andconstruction of Mpr1 variants with improved function
Biopolyesters with Various Monomer Units Generated by Engineered Enzymes
Studies on the methods to promote the neurite-outgrowth using a sheet of cultured cells

Organic Chemistry

Development of Chiral Triaminoiminophosphorane with Hydrogen-bonding Capability and
Their Applications to Asymmetric Synthesis
Development of New Synthetic Protocols of π-Conjugated Aromatic Compounds via
Fumitoshi Kakiuchi Professor / Faculty of Science and Technology, Keio University Carbon-Hydrogen Bond Cleavage
Isao Kadota
Professor / Graduate School of Natural Science and Technology, Okayama University Total Synthesis and Biological Study of Marine Polycyclic Ethers
Development of New Methodologies for the Synthesis of Insulated Molecular Wires Using
Nobuaki Kambe
Professor / Graduate School of Engineering, Osaka University
Transition Metal Catalysts and for Build-upping Nanomolecular Devices
Associate Professor / Graduate School of Science andInvestigation of Interaction between Hole Injected Molecular Wires and Development of
Tohru Nishinaga
Engineering, Tokyo Metropolitan University
their Function
Takashi Ooi

Professor / Graduate School of Engineering, Nagoya University

Biochemistry/Organic Chemistry

Kazuya Kikuchi
Kaori Sakurai
Shiroh Futaki
Shigeki Matsunaga

Chemical Sensor Molecules Which Convert Biological Signal to Chemical Output
Professor / Graduate School of Engineering, Osaka University
Associate Professor / Institute of Symbiotic Science and Technology, Development of chemical probes that specifically recognize supramolecular glycolipids
Tokyo University of Agriculture and Technology
structures
Professor / Institute for Chemical Research, Kyoto University
Creation of artificial receptor channel systems as a novel sensor of external ligands
Professor / Graduate School of Agricultural and Life Sciences,
The University of Tokyo

Modes of action of cytotoxic activity for beta-helix-forming peptides from a marine sponge

NAGASE & CO., LTD. ANNUAL REPORT 200723

Nagase at a Glance

Based on its many years of experience in the chemicals and plastics businesses, the Nagase
Group offers customers trading, marketing, R&D and manufacturing functions in its four
strategic areas of electronics, life sciences, automotive and overseas operations.

Nagase’s Strengths■ Relationships developed over many years with more than 6,000 excellent companies■ Group manufacturing, research, development and marketing functions to provide superior products and services■ The ability to create and propose business models that go beyond being just an intermediary to maintain leadership■ Innovative technological and information-gathering capabilities based in the field of chemicals■ Solid finances

Departments

Chemicals
Colors & Imaging
Department

32.8%

35.2%

Customer Segments

Main Products and Services

Textile processing (clothing, other fabrics, carinteriors), plastic coloring, synthetic fiber, paintand ink, pigment dispersion, printing, inkjet
toner, thermal paper, photoactive chemicals,
flat panel displays, information recording
paper

Dyestuffs, dyeing auxiliaries, finishing agents, textile-processing
resins, adhesives for textiles, pigments, pigment dispersing agents,
plastic additives, UV cured resins, toner resins, silicones, dyes andrelated chemicals for imaging and recording, chemicals for paper
manufacturing, additives for paints and inks

Paint and ink, resins, synthetic fiber,urethane foam, flame retardants, FRP,
plasticizers, film

Plastic materials, plastics and pigments, solvents, additives for paints
and inks, urethane materials, flame retardants, plastic additives, plasticizers, polymer filters

Organic synthesis, surfactants

Petrochemical products, raw materials for household products, cosmetic ingredients, surfactants and surfactant raw materials, fluorochemicals, materials for silicones, electronics chemicals

Performance
Chemicals
Department
Net Sales
Operating Income
Note: Net sales do not include intersegment sales.
Operating income is prior to eliminations.

Speciality Chemicals
Department

24

NAGASE & CO., LTD. ANNUAL REPORT 2007

Comprehensive Strengths of
the Nagase Group

Overseas
Business

Sales & Serv
ices
Manufacturing & Processi
ng NagaseResearch &ChemteX
Development Nagase
R&D Center

Department Overview

Overview of Fiscal 2006 Results

The Colors & Imaging Department sells materials and systems under the theme of “color and light.”
Its products include cutting-edge color materials as well as light-related functional products and data
displays (imaging). The electronics and IT businesses comprise data processing technologies, but fordata to become usable information, it must first be expressed in the form of visible images or signals.
Many products handled by the department play a role in the relationship between electronics and thehuman eye.

Sales were solid in the pigments and textile processing industries. Due to inventory adjustments in the markets for display and digital print related products, however, overall departmental
performance did not meet targets. Our original transparent conductive materials and dyestuffs andchemicals for thermal paper grew steadily on a global scale.

The Performance Chemicals Department is responsible for Nagase’s core business as a chemicalbased company. Handling a broad range of petrochemical products, from commodities to high-valueadded products, the department enhances Nagase’s core function by further strengthening its business base. In addition, as its customers’ business activities become more global in nature, the department works to provide high-quality proposals and create new business models encompassing materials and products by elevating the importance of exports and overseas production and maximizing thecollective strength of the Nagase Group. The department’s five core businesses are coating materials,
urethane, plastic additives, filters and commodities.

Results were strong in the globally growing economy, represented by economic growth inChina and elsewhere in Asia. Activities focused on strengthening our business base expanded
domestic performance, and export business to China and Southeast Asia grew due to proposals
for supporting domestic customers’ overseas expansion. We also handled more downstream andhigh-value-added products that meet new needs required of materials, focusing on LCDs andother thin display devices in the digital household appliance industry and the automotive industry.
Profits were stable as improved market conditions due to price increases of raw materials such as
crude oil contributed to increased sales.

The Speciality Chemicals Department supplies a range of products, including raw materials for oil
solutions, plating chemicals, personal care, surfactants, fluorochemicals and silicones, to industries
involved in surfactants or organic synthesis products such as chemical intermediates. To add value tooperations, the department focuses on the specific needs of customers, improving sales organization
productivity and developing electronics chemicals.

Net sales surpassed targets by a wide margin as petrochemical feedstock prices increased inline with those for crude oil and naphtha. Operating income reached target due to strong sales ofplating chemicals, surfactant raw materials, and exports to Asia in the surfactant business, which
offset weak sales of certain high-value-added imported products in the organic synthesis business. For development projects in the cosmetics field, the delayed progress and interruption ofindividual themes caused weak sales. In the electronics field, however, progress was steady fordevelopment of Nagase ChemteX products, imports from China using Nagase’s original analysis
capabilities and process chemical exports to Asia.

NAGASE & CO., LTD. ANNUAL REPORT 200725

Departments

Plastics

30.6%

Advanced Polymers
Department

Customer Segments

Main Products and Services

Office automation equipment, electrical, electronics, consumer electronics

Functional resins, general-purpose resins, auxiliaries, plastic products, plastic-related equipment, devices and dies, software engineering

Automotive

General-purpose resins, functional resins, auxiliaries, plastic products, plastic-related equipment, devices and dies, software engineering, facility equipment

Construction, building materials, housing, film
sheet, electrical wire, amusement

Wood composite, resin materials, film sheet products, molded plastic
products

Semiconductors, liquid crystal, electronics
components, heavy electric machinery, automotive

Photoresist developer production equipment, chemical management
equipment for liquid crystal preprocessing, chemicals for the production of semiconductors and liquid crystals, formulated epoxy resins
and related products

Semiconductors, liquid crystal, communications, imaging, batteries

Semiconductor packaging materials, semiconductor packaging systems, insulating materials, fluoroplastic-related materials, precisionabrasive materials, wireless communication modules and systems,
communications-related integrated circuit chips, surface defectinspection systems

Displays, television and monitor assemblies,
amusement, touch panels

Liquid crystal displays (LCDs), materials, manufacturing devices andoptical films for LCDs and organic light-emitting diodes (LEDs),
processed aluminum products, processed glass products

Pharmaceuticals, food/feed chemicals, agricultural chemicals, household products

Pharmaceuticals (APIs, intermediates, raw materials, formulations,
excipients), in vitro diagnostics (bulks, instruments & kits), laboratory
and research products, medical equipment, agricultural chemicals(intermediates, bulks, formulations, submaterials), household insecticides (bulks, formulations), animal health products, enzymes, fermentation products, toiletries (raw materials, products), functional foodingredients, health food materials, food additives, nutritional supplements, feed, feed additives

General consumer market

Cosmetics, health foods, beauty foods

Automotive Solutions
Department

34.9%
Net Sales
Operating Income
Note: Net sales do not include intersegment sales.
Operating income is prior to eliminations.

Eco-Materials &Products Department

Electronics
Electronic Chemicals
Department

Information &Functional Materials
Department

21.5%

28.8%
Net Sales
Operating Income
Note: Net sales do not include intersegment sales.
Operating income is prior to eliminations.

Display & Electronics
Components
Department

Life Sciences
7.6%

Fine Chemicals
Department

9.4%
Net Sales
Operating Income
Note: Net sales do not include intersegment sales.
Operating income is prior to eliminations.

Beauty Care Products
Department

Note: Segment shares of net sales and operating income do not total 100 percent due to exclusion of the Others segment.

26

NAGASE & CO., LTD. ANNUAL REPORT 2007

Nagase at a Glance
Department Overview

Overview of Fiscal 2006 Results

The Advanced Polymers Department offers plastics and plastic processed goods, related auxiliaries,
equipment and facilities for industries such as the office automation, electric and electronics, andappliance industries. The department promotes strategic partnerships with other companies in the
Nagase Group in order to focus on the creation of new plastics-related businesses and businessexpansion that extends over both domestic and overseas markets.

Substantially higher fiscal 2005 prices for functional resins weakened, as some product prices
dropped in fiscal 2006 and competition further intensified. The decrease in market prices led to atemporary loss of overseas orders for functional resins, particularly for optical applications, causing net sales and operating income to fall short of targets.

The Automotive Solutions Department offers comprehensive business solutions in the automotive
area. In addition to handling everything from the sale of materials, products and equipment to component design, development of prototypes and production of dies, the department also acts as a purchasing agent for its customers’ overseas facilities. The department will continue to develop new businesswith companies in the increasingly global automotive industry while growing its operations in Japanand overseas.

Increased production, particularly in the U.S.A., China and Southeast Asia, greatly contributed
to results as overseas development of Japanese automakers accelerated. Domestically, performance in the Nagoya region grew significantly year-on-year due to continued strong conditions at
Toyota-related component manufacturers. Sales were nearly on target as a result of securing
orders in each region for automotive interior plastic molded products by expanding the department’s product lineup. Operating income was less than planned due to staff increases and a low
profit ratio in the die-related business.

From fiscal 2006, the Eco-Materials & Products Department began handling the film sheet, electrical wire and amusement industries, in addition to its existing composite wood, resins for housing
equipment and construction products. With sales activities based in Japan, the department is expanding business for products and components, in addition to its traditional policy of developing Nagasedriven business by providing environmentally friendly materials, products and systems. The department
is also independently developing business centered on Nagase’s own product, Pluswood, a new typeof eco-friendly composite material made from wood and non-vinyl chloride thermoplastic. Other activities include creating new business opportunities through cooperation with other Group companies, promoting recycling and making use of natural materials such as polylactic acid in expanding business.

The department solidified its position in the wood composite industry as sales of Pluswood
doubled compared with the previous fiscal year due to its use in a series of large, well-known
commercial projects. Escalating prices for imported wood and limited availability also boosted
business. In the plastic materials business, sales remained strong as product prices rose.
Successful new customer acquisition centered on general-purpose resins. In the products business, sales dropped from the previous fiscal year due to a strategic withdrawal from low-valueadded products. As a result, net sales did not meet targets, although they increased substantiallyfrom the previous fiscal year.

The Electronic Chemicals Department sells materials manufactured by the Nagase Group, as wellas the equipment and control systems used for their manufacturing processes, to the semiconductor,
liquid crystal, electronic component and automotive industries. With operations in China, Taiwan,
South Korea and Singapore, the department is aggressively expanding overseas business with the aimof creating highly profitable businesses that integrate trading company and manufacturing capabilities.

As the public and private sectors made aggressive capital investments, sales of equipment anddemand for epoxy grew. Steady growth of digital household appliance sales in the first half contributed to sales. As a result, overall net sales were basically on target and operating income
exceeded the plan by a wide margin.

The Information & Functional Materials Department meets market needs with original products suchas Scantec, an imaging inspection system, and communications-related products such as parts formobile phone base stations in the seven core businesses of imaging inspection, communications, polishing, chemical mechanical polishing (CMP), hard disk drives, encapsulants and fluorine. In addition, thedepartment provides various materials used in semiconductor pre-processing and backend processing,
and works to provide information and improve service based on thorough customer orientation and information collected on market needs. The department also responds to rapid technological advancement in
its targeted industries by assembling detailed business models and promoting business development.

Sales of components for precision abrasives and related products used in silicon wafer processing grew considerably, supported by capacity expansion in the semiconductor silicon wafer
industry and brisk demand. Computer hard disk sales also increased. Due to a strong market for
encapsulants and other products used in semiconductor backend processing and growth in eachof our seven core businesses, net sales and operating income surpassed targets by a wide margin.

The Display & Electronics Components Department uses its network in Japan and overseas to handle optical films and other materials used in LCDs and the equipment used in their manufacturing
process. In addition to its trading company capabilities, the department is aggressively developing anoverseas processing business for optical films and glass, as well as new businesses such as LEDs and
LED assemblies.

In tandem with expansion of the television market in fiscal 2006, the department was obliged
to lower prices more than 20 percent on an annual basis in order to keep pace with product pricerange penetration and due to share competition. The department reached its goals for small andmedium-sized televisions through Nagase’s business with customers of good standing that survived progressive mergers and acquisitions among LED manufacturers. Glass processing
remained strong amid a clearer trend toward lower-profile and lighter mobile phones and mobile
music players, and overseas business in this area started up without incident by taking advantage
of market conditions. Sales of amusement-oriented products focused on LED assemblies werestrong. Although sales of LCDs dropped due to a supply problem, derivative sales of processed
metal products for electronic device frames were strong. Overall, net sales and operating income
reached targets.

The Fine Chemicals Department provides a broad range of products and services related to healthcare, food and habitat, such as pharmaceuticals, biotechnology, agricultural chemicals and living environments, in the field of life sciences, which is a key strategic area of WIT2008. Particular efforts are
devoted to developing high-value-added products that apply comprehensive Group strengths in information, R&D and production.

Accelerated realignment and integration continued in the pharmaceutical, foods and agricultural chemical industries. Net sales and operating income reached targets through steady performance in the pharmaceutical and biotechnology products businesses despite the need to respondto revisions in the Pharmaceutical Affairs Law and Food Sanitation Law. Net sales for the entire
department increased over the previous fiscal year but did not reach their target due to lower
demand and inventory adjustments in the agricultural chemicals business. Performance in otherbusiness areas covered for this business, and operating income increased well past targets.

The Beauty Care Products Department manufactures and sells cosmetics, health foods and beauty
foods for the consumer market. Its philosophy is to contribute to the creation of a beautiful, healthy andprosperous society by providing safe, high-quality products and services that enhance beauty insideand out. A sales team of 40,000 sells products door-to-door throughout Japan. The department also
operates beauty salons across the country that offer enhanced counseling services and facial services
using state-of-the-art skin analyzers.

The domestic cosmetics market was essentially flat in fiscal 2006. Although the downward
trend in door-to-door sales continued, cosmetics sales increased slightly from the previous year,
centered on new products. The domestic market for functional health products targeted by theCompany has increased substantially over the last several years. A worsening image of theseproducts, however, due to the circulation of inferior goods and a tightening of the Pharmaceutical
Affairs Law caused sluggish sales, and overall sales decreased slightly. On the other hand, thedepartment achieved its operating income targets due to an improved profit margin.

NAGASE & CO., LTD. ANNUAL REPORT 200727

Review of Operations

Chemicals
Eiji Asami
Director and Managing Executive Officer
Chemicals Businesses; Colors & Imaging Department; Performance
Chemicals Department; Speciality Chemicals Department; Information& Functional Materials Department; Nagase Application Workshop

WIT2008 Basic Strategies➀ Expand core business➁ Expand export business➂ Expand business through cooperation within the Company➃ Expand new businesses that leverage Group functions

Achievements in Fiscal 2006

driving force behind Nagase’s independent business development.

In fiscal 2006, the first year of WIT2008, we achieved our net

In completing the fourth challenge, expanding new businesses thatsales and operating income targets by a wide margin backed byleverage Group functions, Nagase Chemical Co., Ltd. and Nagase

favorable economic conditions, particularly in automotive-related(Europa) GmbH cooperated to provide sales, procurement and otherapplications. Our business activities were guided by the four areas

services for Japanese companies expanding into Eastern Europe.

of expansion that make up our WIT2008 basic strategies. For the
first strategy, core business expanded steadily centered on mater-

28

Strategic Initiatives in Fiscal 2007

ials for the automotive and electronics industries under overall solid

We have set four policies for fiscal 2007. First, we will further

economic conditions. Particular causes of concern involve com-

promote cooperation within the Company and step up efforts tomodities, where consolidation among suppliers and loss of busi-

raise awareness and create new business. Second, Nagase will

ness due to discounting continue. We intend to revise functions andrespond decisively to the new Registration, Evaluation,

improve services to curb these trends while working toward a new

Authorization and Restriction of Chemicals (REACH) regulations

business model. For the second, export business increased approx-

enacted in the European Union in June 2007, while supplying

imately 10 percent year-on-year. Eighty percent of this increase

information and support for Japanese customers. We have already

was in China and elsewhere in Asia, however, and our next issue isbegun support activities for REACH including explanatory meet-

to expand operations in Europe and North America. Our third strate-

ings. Third, we will carry out investments including mergers andgy of expanding business through cooperation within the Company

acquisitions regardless of region that will allow Nagase to display

is taking hold in the workplace. Although tangible results are still

its full potential. Finally, we will prepare for the chemical industry’s

limited, we are strengthening a system linked to the results fromso-called 2008 problem caused by the simultaneous start of oper-

the Nagase Application Workshop (NAW) established in July 2007.

ation of large plants in the Middle East and China, which will have

The NAW functions as a testing laboratory for plastics, an experi-an enormous effect on Japanese chemical manufacturers. We will

mental laboratory for coatings and textile processing, and a library.

consider the potential changes in the Japanese petrochemical

Unlike the R&D Center, it has a close proximity to downstream busi-

industry and their impact on Nagase’s business, and place priority

ness as a technology evaluation center, which we intend to make a

on developing Nagase Group countermeasures.

NAGASE & CO., LTD. ANNUAL REPORT 2007

Colors & Imaging Department

Performance Chemicals Department
Toshiro Yamaguchi

Hiroshi Hanamoto

Executive Officer
GM, Performance Chemicals
Department; Marketing, Osaka
District

Executive Officer
GM, Colors & Imaging
Department

Achievements in Fiscal 2006
The Colors & Imaging Department, which handles color-related
products such as pigments and dyestuffs, began a contract businessfor copier toner in fiscal 2006. This is a good example of a businessmodel built to take advantage of the Nagase Group’s competitive
advantages, a basic strategy of WIT2008. The Group handles everything from raw material procurement to delivery management thattakes production planning into account. Functional color pigments forplasma displays and red pigment for use in color filters maintained
their leading shares in the global market. The department was deeply
involved in the development of raw material procurement methods
and new capital investment to upgrade its supply structure to
respond to sharp changes in rapidly growing demand for flat panel
materials.

Strategic Initiatives in Fiscal 2007
In fiscal 2007, we will continue to focus on three objectives:
building a business model that takes advantage of the Nagase
Group’s competitive advantages; promoting a business model inwhich additives determine the principal materials; and shifting to abusiness structure that allows us to respond to any change in theexternal business environment, such as anticipated risks in China,
environmental issues and customer mergers and acquisitions.
We will develop as a trusted business partner by further promoting activities of the Color Workshop at the Nagase Application
Workshop, which began operating in July 2007, and carrying out
joint development with customers.

Contracting business began for copier toner

Achievements in Fiscal 2006
Under our main WIT2008 theme of growth of overseas businessthrough consolidation, we enhanced awareness of overseas linkages,
realigned our domestic organization and reallocated humanresources in order to restructure our business around the five coreareas of coating materials, urethane, plastic additives, filters andcommodity products. Responding to the acceleration of Japanese
automakers’ overseas production, we increased expatriate personnel
in Guangzhou, China and Thailand to form the structure for providing
a level of service that equals or betters that in Japan. In cooperation
with other departments, Design & Die Co., Ltd., which designs car
parts for the Nagase Group, and Shanghai Hua Chang Trading Co.,
Ltd., which sells plastics, we promoted our value chain strategy forinterior and exterior car parts including plastic coatings as well asseat cushions. At the same time, we began initiatives in the North
American markets of the U.S., Canada and Mexico, and India andVietnam. Moreover, we established Nagase Filters Co., Ltd. as a new
manufacturing subsidiary for polymer filters, which are seeing
dynamic growth in demand due to the brisk market for LCD opticalfilms. Nagase Filters rapidly contributed to results, strengthening theCompany brand in manufacturing and sales.

Strategic Initiatives in Fiscal 2007
With “production” and “niche” as fiscal 2007 keywords, we will
strengthen the plastic raw materials business and expand handling ofdownstream products while offering original Nagase products in thefields of plastic additives and raw materials for coating that comefrom utilizing the Nagase Application Workshop. We will also promotea paradigm shift by building businesses
where Nagase is the leader throughaggressive overseas and other investment, license acquisition, and alliancesin order to respond to sudden changes inthe business environment. We also aim
to raise the quality of our organization by
improving operational efficiency everywhere from sales to administrative
Shifting to high-value-added
positions to meet the various needs of business by adding production
functionsour customers in a timely manner.

NAGASE & CO., LTD. ANNUAL REPORT 200729

Topics

Speciality Chemicals Department
Kazuo Mitsuhashi
Executive Officer
GM, Speciality Chemicals
Department

Established Nagase Filters Co., Ltd. to Strengthen Filter
Business
Nagase acquired the filter production business of Kimura Mfg. Co.,
Ltd. and established Nagase Filters Co., Ltd., as a fully owned
subsidiary to take over operations. Kimura Mfg., headquartered in
Higashi Osaka, was Nagase’s contractor for the OEM production of fineAchievements in Fiscal 2006

polymer filters (trademark: Dena Filter), indispensable in the production

The department’s basic strategies under WIT2008 are advancing

process for removing foreign matter during melt extrusion of resins.

our three core businesses of surfactants, organic synthesis andNagase handled sales of Dena Filter and outsourced production to

Nagase ChemteX Corp. (NCX), and promoting development of theKimura Mfg., which has advanced technology. To enhance thefour project areas of electronics, China, cosmetics and processbusiness, Nagase took over Kimura Mfg.’s facilities and staff, integrat-

chemicals. Our core businesses expanded steadily and secured

ing production and sales. Demand in the filter business is driven bystable profits in fiscal 2006, the first year of the plan. In particular,

rapidly growing optical film manufacturers in the information technology

our NCX business moved forward with electronics development andfield, and growth is projected to continue. Based on this new frame-

future-oriented development including for nano-materials. In our four

work, Nagase plans to develop the

project areas, where we expect future profits, we concentrated on tar

business, including filter cleaning, to achemicals and fluorochemicals in China, and established a foothold

scale of approximately ¥2 billion.

in the OEM cosmetics business. Cooperation within the Group
progressed both domestically and overseas, and we performed wellin the electronics and consumer goods areas and in utilizing ouranalysis capabilities in China.

Strategic Initiatives in Fiscal 2007
Environmental changes affecting business will continue in fiscal
2007, including unstable crude oil prices, economic development inOverview of Nagase Filters Co., Ltd.
Company Name: Nagase Filters Co., Ltd.
Established:
June 7, 2006
Paid-in Capital: ¥80 million
Main Business: Planning, production and quality
testing of metal filters
Representative: Kenichi Kurimoto,
Representative Director
Location:
4-9-6, Takaidanaka,
Higashiosaka, Osaka

Polymer filter

the BRICs countries of Brazil, Russia, India and China, and technological development in the electronics field. Under these conditions,

Established Nagase Application Workshop

we will continue to steadily expand our three core businesses andstrengthen development in the four project areas to reach our
WIT2008 goals.

The Nagase Application Workshop began full-scale operations inJuly 2007. The workshop concentrates technological services forplastics, coatings (paints and inks) and fabric processing, which Nagase
had previously offered separately by field, into a single location. It will
also help Nagase develop a more efficient sales style for raw materials
though joint materials development with end-users and pinpoint
technological support. The library room within the facility will handle
requests for new materials and processing methods from manufacturers’ design, engineering anddevelopment departments. In
addition to new materials, we

Liquid crystals handled by the Speciality Chemicals Department

plan to propose combinations ofexisting materials and processing methods.
Nagase Application Workshop

30

NAGASE & CO., LTD. ANNUAL REPORT 2007

Review of Operations

Plastics
Reiji Nagase
Director and Managing Executive Officer
Plastics Businesses; Automotive Related Businesses; Advanced
Polymers Department; Automotive Solutions Department;
Eco-Materials & Products Department; Nagoya Branch

WIT2008 Basic Strategy
Nagase will further expand the plastics businesses by promoting its
customer, supplier, regional and technology strategies and ensuring
thorough risk management.

Achievements in Fiscal 2006

Strategic Initiatives in Fiscal 2007

In fiscal 2006, the first year of WIT2008, we further expanded

The department aims to increase its added value to the Group in

our business in China, and worked to get our operations there on

fiscal 2007 by clarifying its structure in the upstream and down-

track. We also expanded into India, Vietnam and Eastern Europe.

stream plastics fields, strengthening cooperative development with

Overall performance was solid due to increased overseas sales

the Nagase Application Workshop (NAW), and expanding the auto-

centered on the Asian region and domestic growth in sales to auto-

motive business. In advanced polymers, we will work on new mate-motive-related industries.

rials and enhance OEM and other production functions through ourIn the eco-materials business, Pluswood, a core product devel-

Going Upstream Strategy by cooperating with NAW, Setsunan Kasei

oped by Nagase, was used as interior and exterior material in

Co., Ltd. and Dainichi Color (Vietnam) Co., Ltd. In eco-materials

large-scale commercial facilities, exceeding its sales target at more

and products, we will work toward the profitability and adoption ofthan double the previous fiscal year’s figures. Pluswood’s recogni-

Pluswood, which has expanded our operating base, under ourtion among design studios and developers increased significantly.

Going Downstream Strategy. To do so, we will consolidate businessWe launched a new functional film in fiscal 2006 from Sun Delta

into Nagase Eco Plus Co., Ltd. as a specialist group in the con-

Corporation, a joint-venture company established with Asahi Kasei

struction industry. Moreover, we will expand business for electron-

Corporation during the previous medium-term management plan

ics and electronic parts beyond resins alone and into the broader

WIT21. Overseas, operations began at Dainichi Color (Vietnam) Co.,region of chemicals, involving mold processing and parts assemblyLtd., a joint-venture resin manufacturer in Vietnam, and a sub-in the game console area.

sidiary established in India has created various business opportuni-

In addition, we will strengthen our overseas framework in theties in the automotive industry there. On the other hand, we experi-

automotive area, including Europe and North America, seeking out

enced delays in achieving greater concentration on product devel-business opportunities for more than just resins in the department’s

opment and production, and this will be a top priority for the future.

main areas of interior and exterior components, functional components and lamps.

NAGASE & CO., LTD. ANNUAL REPORT 200731

Advanced Polymers Department

Automotive Solutions Department

Shunichi Kawashiri

Kenji Asakura

Executive Officer
GM, Advanced Polymers
Department

Achievements in Fiscal 2006

Achievements in Fiscal 2006

In fiscal 2006 we strengthened the sales system for engineering
plastics at offices in Greater China and the ASEAN region to prepare
for expansion of our business base. Domestic and overseas sales
offices addressed the office automation industry, in which Japanesecompanies stand out, through close cooperation and by building a
structure for customer follow-up based on identical strategies.
Additionally, we reinforced our efforts to expand our range of
products such as materials for housings and internal components
and films for the growing field of displays. We launched a joint
venture for plastic colorants with Dainichiseika Color & Chemicals
Mfg. Co., Ltd. in Hanoi, as industries look to Vietnam to hedge risks
in China. By strengthening personnel in the Hanoi office and promoting market development, we formed the base of future businessexpansion.

Strategic Initiatives in Fiscal 2007
In fiscal 2007, Nagase will continue to promote consolidated
business expansion of overseas sales offices and the Group.
Particularly overseas, we will aim for increased expansion throughstrengthening of our sales structure for engineering plastics andstrategic cooperation in the office automation industry. Focusing on
Hanoi, we will launch an engineering plastics business through our
joint venture with Dainichiseika Color & Chemicals Mfg. and further
strengthen the Hanoi office while obtaining transfer business fromother countries in addition to Japan. This series of measures will
expand our range of products into plastics, processed goods andother areas by utilizing our engineering plastics sales base.

Strengthening the Hanoi office

32

GM, Automotive Solutions
Department

NAGASE & CO., LTD. ANNUAL REPORT 2007

Our basic strategies under WIT2008 are threefold: expand thebusiness by focusing on specific customers, products, collaborations
and alliances to reinforce bases in Japan, North America, Europe,Thailand and China; develop a global die design software engineeringbusiness; and take full advantage of Nagase’s capabilities as a
specialized trading company to develop more wide-ranging businesspackages including everything from raw materials to finishedproducts and equipment. Upgrading overseas bases led to significant
performance increases in China and Southeast Asia, and we createda new business model in Japan and China based on our die design
software engineering business which encompasses all processes
from die development to sales of plastic materials.

Strategic Initiatives in Fiscal 2007
In fiscal 2007 we will expand our scope of business in Japan andoverseas, pinpointing interior and exterior components, underhood orfunctional components and lighting components as three areas ofactivity. In interior and exterior components, the core of our department, we will continue to support our customers’ overseas development by drawing on information and knowledge of plastic raw
materials and products built up over many years, constructing asystem to offer a variety of lightweight, environmentally conscious
products. Forecasting increased use of engineering plastics in underhood applications, the department will collaborate with resin suppliers, increase its product lineup, and actively approach major
customers’ overseas bases in pursuing opportunities to utilize
functions that Nagase can provide. In lighting, we will coordinate withother departments in the chemical and electronics segments andaim for a new product lineup
to contribute to customer product development.
Moreover, we will promote
aggressive investment in
manufacturing and technology discovery to construct abase for future development. An automotive components manufacturer
involved with coatings

Review of Operations

TopicsEco-Materials & Products Department
Established a Subsidiary in the High-Potential Indian Market

Yuji Deguchi
GM, Eco-Materials & Products
Department

Nagase established a subsidiary in India in November 2006. One of
the BRICs countries, where growth is expected, India has recently
gained attention for its rapid increase in business projects. Nagase has
had a representative staff and office in Mumbai for over 40 years, andAchievements in Fiscal 2006
In fiscal 2006, the department promoted activities to build up
business for Pluswood, which is being used in a series of major
Japanese facilities and buildings as a result of finely tuned proposals
to major facility owners, design studios and construction companies.
Advertising that showed Pluswood’s actual applications was successful, and Internet-based inquiries about Pluswood increased ten times
over the previous fiscal year. We also succeeded in expanding sales

will prepare for high demand by making it a full-scale base. Moreover,
we have established a base in New Delhi and will strive to develop sales
activities in the brisk automotive-related market. As overseas operations
are a priority area under
WIT2008, we aim to further
expand sales in Asia with thisestablishment of a subsidiary
in India.

considerably for the range of associated products. In the resin
business, we made investments for future expansion of our interna-

New Delhi office of the Indian subsidiarytional procurement service (IPS), highly evaluated by customers, whichmakes use of Nagase’s network of overseas bases. In recycling, we
explored practical themes for plant-based plastics.

Strategic Initiatives in Fiscal 2007
As of fiscal 2007, we changed the department’s name from EcoMaterials to Eco-Materials & Products as we aim to expand the scale

Overview of Nagase India Private Limited
Company Name: Nagase India Private Ltd.
CEO:
Masao Hidaka
Paid-in Capital:Rs. 100 million
Established:
November 24, 2006
Start of Operations: February 1, 2007
Location:
404, Vaibhav Chambers, BKC, Bandra East, Mumbai
400 051, Indiaof business. We will do this by expanding the components andproducts business in addition to traditional sales of resin materials in
the film sheet, electrical wire, and amusement industries, responsibili-

Construction of New Dainichi Color (Vietnam) Plant

ties new to the department. In order to promote Pluswood in theDainichi Color (Vietnam) Co., Ltd., a joint venture with Dainichiseika

construction industry, we will transfer sales and marketing for thisColor & Chemicals Mfg. Co., Ltd., the largest manufacturer of pigments,

business to Nagase Eco Plus Co., Ltd., a wholly owned subsidiary thatbegan operating a resin compounding plant in July 2006, and has

will become a self-supporting company. We will concentrate
resources to rapidly build the business and sharpen our focus onsales of strategic customer products to expand transaction size inpromoting the functional film business, a major departmental theme.
In the amusement industry,
we

will

ventureJanuary 2008 with an annual production capacity of 600 tons of plastic
colorants and 10,800 tons of plastic compounds. The company predicts
over the next year from the current 30,000 tons per year as automotive

overseas procurement ofand information equipment manufacturers successively advance opera-

parts and assembled parts,

tions there and increase production. The new factory will make it possi-

and electronic components

ble to immediately meet

supply in addition to ourcustomer requests for special

traditional parts supply,
assembly businesses.

mately ¥800 million. The facility is scheduled to begin operations indemand for plastic compounds in Vietnam to expand rapidly, tripling

intosecondary processing andlaunched construction of a new plant with an investment of approxi-

Pluswood, a composite material made from wood
powder and non-vinyl chloride thermoplastic

compounds. Our policy will be
to increase production in lightof demand.
Joint venture for plastic colorants in Vietnam

NAGASE & CO., LTD. ANNUAL REPORT 200733

Electronics
Kazuo Nagashima
Director and Executive Officer
Electronics Businesses; Electronic Chemicals Department;
Display & Electronics Components Department;
New Business Development Office

WIT2008 Basic Strategies➀ Combine the Nagase Group’s information and wisdom and construct an
original business plan to provide services and customer satisfactionand expand business.
➁ Expand operations and actively focus management resources on
strengthening production in growing markets.
➂ Work on the chemical recycling business in consideration of environmental protection.

Achievements in Fiscal 2006

Europe and North America. Demand in chemicals-related businesses

In fiscal 2006, the first year of WIT2008, sales and income sur-is increasing from the semiconductor and LCD production fields.

passed targets by a large margin due to expansion in the semicon-

Investment in all these emerging markets during fiscal 2006, as out-

ductor and LCD-related businesses. Significant contributions tolined in our basic strategy, is beginning to bear fruit.

sales and income came from steady performance from Pac TechPackaging Technologies GmbH, a German semiconductor production equipment manufacturer acquired in 2006, and favorable sales

In fiscal 2007, we will concentrate on three measures. First, weof precision abrasive materials used in the semiconductor produc-

plan to strengthen expansion of semiconductor production equip-

tion process. To expand our semiconductor backend

ment and our wafer bumping service in Asia by building a Pac Techprocessing business, we opened the Semiconductor Applications

plant in Penang, Malaysia. During the fiscal year, we plan to launch

Development Center in the Kitakyushu Science and Research Parka plating line for wafer processing at this plant and begin manufac-

in November 2006 to develop elemental technology for next-

turing of semiconductor production equipment. The current foray

generation packaging. In display-related business we developed ainto Malaysia signifies the formation of a Japan-North America-

wide range of processing operations, particularly in East Asia, sub-Europe-Asia quadrilateral production network. Through this net-

stantially increasing business in the areas of processing for flat-

work, coupled with development support from the Semiconductor

panel glass, frames for electronic devices and optical films, andApplications Development Center in Japan, we will continue to

LED mounting for amusement electronic devices. Moreover, sales

make major gains in a rapidly changing semiconductor market.

of digital terrestrial repeater station amplifiers at consolidated sub-Second, we will focus on sales of developer and stripping agents

sidiary Gigatec Inc. are progressing steadily as infrastructureused in the semiconductor and LCD fields while actively proposing

upgrades move ahead in the communications field for the complete

chemical recycling systems for environmental preservation. Third,

shift to digital television broadcasting in 2011. In the epoxy busi-

we will directly address customer desires, cooperate more closely

ness, we are promoting an integrated production and sales strategy

with business partners and Group companies in Japan and over-with Nagase ChemteX Corp., expanding production in Japan, Northseas, and build a business model unique to Nagase.

America, Europe and Asia. We are working to put production in
China on a steady growth track and to reinforce sales manpower in

34

Strategic Initiatives in Fiscal 2007

NAGASE & CO., LTD. ANNUAL REPORT 2007

Note: Kyoichi Zushi replaced Kazuo Nagashima as General Manager of the IC Packaging
Department on June 1, 2007.

Review of Operations

Electronic Chemicals Department

Information & Functional Materials Department
Shingo Bamba

Tomitaka Ito

Managing Executive Officer
GM, Information & Functional
Materials Department; GM,
Sheet & Film Planning Office

Executive Officer
GM, Electronic Chemicals
Department

Achievements in Fiscal 2006

Achievements in Fiscal 2006

In fiscal 2006, Nagase ChemteX Corp. formed the core of

In the first year of WIT2008, we focused management resourcesbusiness expansion centered on developing original Nagase Groupon our seven core businesses. In promoting our keywords of “partner-

products. Nagase ChemteX increased production facilities for epoxy

ship” and “cooperation” inside and outside the department, wesheet, which sold well, and Nagase products became the de facto

displayed the comprehensive strengths of the Nagase Group as westandard for insulation and encapsulant material in cellular phone

worked to provide improved services and our proprietary information

parts. ChemteX (Wuxi) Corp., a manufacturer of formulated epoxy

to meet increasingly complex customer needs. For our Scantec

resins in China, expanded performance and cleared away theimaging inspection equipment, we introduced a new marking systemlosses accumulated since its establishment. Also in China, weand a high-speed model. Additionally, we succeeded in developing anestablished Nagase CMS Technology (Shanghai) Co., Ltd. as a baseinspection system for detecting thin streak imperfections during thefor maintenance of Nagase equipment used in front-end semi-

coating process of optical and other functional films. Moreover, we

conductor and liquid crystal production. In the area of photolitho-

started development of themes we can build into our next coregraphy chemicals, we accelerated new product development andbusinesses.

began recycling operations for stripping agent and developer aspart of efforts to strengthen the chemical recycling business.

Strategic Initiatives in Fiscal 2007

Strategic Initiatives in Fiscal 2007
In the second year of WIT2008, we will continue to further
promote our basic strategy and work for new growth. We will also

In fiscal 2007, as a world supplier of epoxy we will build a quadri-work to provide increasingly specialized services and continue

lateral framework encompassing Japan, the U.S., Europe and Asia.

thorough customer orientation in our seven core businesses. In

With Japan as a base for development and a market providing stable

addition, we will aggressively forge ahead to foster future coreearnings, we will enhance our production bases in China and build it

businesses based on differentiated business models focused on theinto a second source of revenue. “Environment” will be the keyword inareas of LEDs, batteries and semiconductor substrates. We will bringproviding customers with materials and facilities that enable energy

our independently developed streak inspection system to market andconservation, resource conservation and recycling. In July 2007, webuild up services that respond to market needs.

introduced a recycling plant and stripping agent facility at Nagase
ChemteX to respond to increasing demand, and we will continue towork to conserve resources.

The Scantec series of imaging
inspection equipment

Epoxy sheet

NAGASE & CO., LTD. ANNUAL REPORT 2007

35

Topics

Display & Electronics Components Department
Semiconductor-Related Company Established in Malaysia

Mitsuro Naba
GM, Display & Electronics
Components Department

Pac Tech Asia Sdn. Bhd. was established in December 2006 throughNagase’s subsidiary Pac Tech-Packaging Technologies GmbH. Based in
Penang, Malaysia, this facility will manufacture will manufacture
semiconductor backend processing equipment and offer wafer bumping

Achievements in Fiscal 2006
In fiscal 2006, we leveraged our network in Japan and overseas tostrengthen our assembly and processing functions in addition to our
traditional trading company capabilities of supplying optical films,
manufacturing devices and other related components. Nagase
Electronics Technology Co., Ltd., a thin glass processing company
established in Taiwan, began full-scale operations in August 2006,
and we made additional investments to strengthen processing capacity and respond to customer needs. We contributed to solving
customer problems by launching metal processing and productinspection businesses at Nagase International Electronics Ltd. in
China, adding to existing optical films processing and liquid crystal
backend processing business. Moreover, we pursued the development of components and products for displays other than LCDs, suchas organic electroluminescence (OEL), light-emitting diode (LED) andtouch panel displays. Toshiba Matsushita Display Technology Co.,
Ltd., which we supply with optical film, recognized our outstanding
abilities by presenting Nagase with its Best Supplier of the Year award
for the third consecutive year.

services. In its first stage, the company began sales and maintenance oflaser soldering equipment. Ultimately, equipment previously imported
from Germany for Asian customers will be able to be imported as parts,
assembled at the facility and supplied throughout Asia. From fiscal
2007, the company will install a plating line for wafer bumping andestablish facilities for an annual processing capacity of 600,000 eightinch wafers. This new base in Malaysia signifies the formation of a
Germany-Japan-North
America-Asia quadrilateralstructure, and we expect toexpand business with the 50
percent capacity increase in
our wafer bumping services.

Pac Tech Asia

Original Sheet Inspection Equipment for
Functional Film
In March 2007, Nagase launched the NRW Series automatic sheet
inspection equipment for functional film.
Demand is increasing significantly for quality stabilization and low

Strategic Initiatives in Fiscal 2007
In fiscal 2007, we will continue component sales centered on
optical films and manufacturing equipment and enhance production
and processing businesses. In particular, we will respond to customer
needs by strengthening processing capacity and improving technological capabilities at Nagase Electronics Technology Co., Ltd., which has
begun full-scale operations. Additionally, we will consider establishinga new base and respond to the rising need for ever thinner products.
Nagase International Electronics Ltd. in China will establish a newbase to expand the metal processing and product inspection
businesses launched there in 2006,
and press forward with plans for new
business. We will work to expand thedepartment’s business base beyond
liquid crystals by more actively pursuing component and product development for OEL, LED and touch panel
Example of a mounted LED productdisplays.

36

NAGASE & CO., LTD. ANNUAL REPORT 2007

cost in functional film for the rapidly expanding flat panel display, battery
and automotive markets. The NRW Series is the solution for minimizing
technological risk and labor and time costs that customers face, integrating the MRK50 multiple-head marking device, Scantec 7000 automatic
optical inspection equipment that boasts high-level defect detection
capability, and a film rolling machine into a single automatic sheet
inspection unit. Incorporating a high-speed, high-resolution CCD camera
makes it possible to detect lines, shade irregularities, minute foreignmaterials and numerous other defects that occur in functional film.
In addition, the NRW1650, with a roll width of
1,650mm, is on permanent
display in our showroom, andwe are enhancing our system
for responding to evaluation
requests by sheet width.
Nagase’s original NRW Series automatic sheet
inspection equipment

Review of Operations

Life Sciences
Kyoichi Zushi
Director and Managing Executive Officer
Life Sciences Businesses; Fine Chemicals Department;
Nagase R&D Center; Nagase ChemteX Corp.;
IC Packaging Department

WIT2008 Basic Strategy
Develop the life sciences businesses into a growth driver of the Nagase
Group beyond fiscal 2008 with organic management that unifies theinfrastructure of Nagase ChemteX Corp., the Nagase R&D Center,
Nagase Medicals Co., Ltd. and the Group’s overseas network.

Achievements in Fiscal 2006

Strategic Initiatives in Fiscal 2007

The Life Sciences segment, composed of the Fine Chemicals

In fiscal 2007, we will work to make our accumulated invest-

Department and the Beauty Care Products Department, continued

ments lead to results. The phospholipid production facility will grad-to press forward in fiscal 2006 with its basic strategy underually contribute to results in the second half after beginning opera-

WIT2008. The Fine Chemicals Department continues to develop

tions in September, and the Nagase Medicals plant will begin con-new business possibilities by generating synergy with the Nagase

tract production of pharmaceuticals upon its scheduled completion

Group network, including Nagase ChemteX Corp., the Nagase R&D

this year. In addition, we will continue to actively carry out invest-

Center and Nagase Medicals Co., Ltd. In the phospholipid business,ments such as restructuring Nagase ChemteX’s Fukuchiyama

for example, Nagase ChemteX is investing approximately ¥600 mil-Factory.

lion to build facilities for large-scale production of various phospho-

We will develop business with a global perspective and in thelipids, developed using Nagase’s original recombinant gene tech-most appropriate regions, based on the themes collected by the

nology. In switching from sales of only enzymes to a business

Nagase Fine Chemicals sales team, which is stronger than othermodel of enzyme modified products, we are excited about businesscompanies. For example, we will produce general-purpose prod-development and market potential that could increase several hun-ucts in China, India, Italy and Spain, and target global pharmaceuti-

dred-fold. Nagase Medicals, with an ¥800 million investment,

cal manufacturers using Nagase Group capabilities in Europe andbegan construction of facilities for sterile production of gel medi-

the Americas for direct sales of our original products, which we willcines.

produce in Asia to maximize Group synergy and develop business.

In the Beauty Care Products Department, we continued to focus
on training talented managers for sales staff and developing new
products. New premium cosmetics made with rosemary enjoyed afavorable reception and contributed to performance.

NAGASE & CO., LTD. ANNUAL REPORT 200737

Fine Chemicals Department

Beauty Care Products Department
Ryuji Mise

Masuhiro Nojiri

Executive Officer
GM, Beauty Care Products
Department

Executive Officer
GM, Fine Chemicals Department

Achievements in Fiscal 2006

Achievements in Fiscal 2006

WIT2008 got off to a good start in its first year. Operating income

Rosemarist N (suggested retail price ¥50,000), a premium skinsurpassed our target as we carried out a strategy of strengthening our

cream that represents the culmination of Nagase’s applications ofcore businesses centered on pharmaceuticals, foods and chemicals;rosemary, is enjoying a favorable reception since its launch in January

focusing on growing markets including functional food ingredients;

2006. Performance has surpassed expectations, contributing toand steadily growing the diagnostic agents business. We restructured

increased cosmetics sales. In addition, we have established a practi-

our department to accelerate the expansion of the contract synthesis

cal application for a new health food ingredient developed at thebusiness and the agricultural and living environment business, thus

Nagase R&D Center over the last several years, and plan to bring it tobuilding a foundation that will support the core of the Nagase Group’s

market following the next fiscal year.

life sciences business in the future.

Strategic Initiatives in Fiscal 2007

Strategic Initiatives in Fiscal 2007
In fiscal 2007, we will continue our basic strategy of building an

In fiscal 2007, we will expand our core businesses; create neworganization of 700 sales managers by fiscal 2008. The Beauty Carebusinesses with high-margin products; withdraw from underperform-

Products Department is structured so that sales managers foster sales

ing businesses and reallocate resources; and promote investment instaff into new managers. We cooperate with outside educational

personnel, research and development and infrastructure. For neworganizations in focusing on personnel training that involves managers

business, we will develop our pharmaceuticals business under theand employees working in unison.

themes of generics, biopharmaceuticals, new drug discovery andIn cosmetics, we are planning sales of a new skin whitening lineup

contract synthesis. We will narrow the focus of development inthat uses extracts from seaweed and other oceanic plants. We willbiotechnology-related business to enzymes, functional foods, agricul-

renew health foods by including a newly developed ingredient in ourtural materials and living environment materials. Additionally, we will

mainstay product BM ROYAL. Under the slogan of “vibrant, beautiful,commercialize original products by collaborating with the Nagase R&D

young and healthy,” we will develop this business, which turned 40 inCenter and Nagase ChemteX Corp. Through the consolidated opera-

fiscal 2006, into a 100-year endeavor.

tions of Group companies such as Nagase ChemteX Corp., Nagase
Medicals Co., Ltd, Nagase Bio-Chemical Sales Co., Ltd., Nagase
America Corp. and Nagase (Europa) GmbH, we will develop activities
as an integrated Group.

Use of fecal occult blood testing equipment isincreasing at medical institutions in the U.S.
and Southeast Asia.

38

NAGASE & CO., LTD. ANNUAL REPORT 2007

Rosemarist N, an anti-aging skincare series
made from rosemary

Review of Operations

Nagoya Branch Office
Overview of Business
Most Japanese domestic automakers andrelated component manufacturers areconcentrated in Japan’s Chubu district, whichcenters on Nagoya. As Nagase’s local base ofoperations in this district, the Nagoya Branch
Office plays an important role in Nagase’s
automotive businesses. We deal directly with
Masamichi Kan
major automakers as well as their group
Executive Officer
companies and affiliated component manufacGM, Nagoya Branch Officeturers. Consequently, over 60 percent of oursales are related to automobiles.
In the non-automotive area, we deal with major local companies inhandling pharmaceuticals, cosmetics ingredients, coating materials andplastics. Our overseas business, centered on automotive products andmaterials, is increasing.
Achievements in Fiscal 2006 and Strategic Initiatives in Fiscal 2007
Overall earnings of the Nagoya Branch Office in fiscal 2006 increased morethan 10 percent over the previous fiscal year, as strong automobile production
supported steady growth of the automotive-related business and new nonautomotive business development with major local companies progressed.
In the automotive field, as a result of expanding the use of plastics inelectronic and mechanical components and promoting development in theinterior parts and materials business, domestic sales grew considerably. In

overseas business, export sales increased as we focused on orders frombusinesses in this sector that have moved production facilities overseas.
Additionally, the Nagoya Branch Office began to take a central role inaddressing environment, safety and energy issues through the developmentof practical applications for new materials and battery technology. In nonautomotive fields, sales increased substantially to customers where we
made a concentrated investment of our strengths, although sales in someareas decreased year-on-year due to a drop in sales prices and stagnation
in some market sectors. We also steadily worked to create a contract
business for pharmaceutical formulations and functional health foods
through the cooperative efforts of all our departments.
In fiscal 2007, the second year of WIT2008, we will promote basic
strategies for reaching targets while carrying out activities to prepare forpost-WIT2008. In the automotive field, this will involve accelerating businessdevelopment activities in the fields of lightweight cars, environmental
responsiveness and car batteries. In the non-automotive field, we will
promote development of original Nagase
products in ways such as contract
manufacturing. To be more than asimple distribution channel of materials
acquisition and sales, we will promotechange to a high-value-added businessstructure.
Market development began for secondary batteries for vehicles.

IC Packaging Department
Overview of Business
Nagase inaugurated the current IC
Packaging Department as the Wafer Bumping
Department in April 2006 to expand semiconductor backend processing business. Utilizing
the technology of Pac Tech-Packaging
Technologies GmbH, a German semiconductor
production equipment manufacturer Nagase
Kazuhiro Osako
acquired in January 2006, our mission is toGM, IC Packaging
increase our competitive advantage in equipDepartment
ment and materials in the semiconductor
backend processing business, conduct trial mass production of flip chip
mounting and packaging, and strengthen sales of our product lineup by
proposing total solutions. We changed our name to the IC Packaging
Department to more strongly communicate this mission to customers.
Achievements in Fiscal 2006 and Strategic Initiatives in Fiscal 2007
At the Semiconductor Applications Development Center established infiscal 2006, we aim to provide optimum solutions by conducting structural
analysis and materials evaluation, and setting measures and processes toaddress various mounting and packaging issues of next-generation semicon-

ductors. We have already begun development of elemental technology for flip
chip micro bonding. In addition, a Pac Tech demonstration machine at theCenter capable of producing solder balls with diameters smaller than 100
micrometers has drawn many customer requests for test production.
The Nagase Group carries out wafer bumping in Japan, North America
and Europe, and plans to establish a Pac Tech subsidiary in Penang,
Malaysia in winter 2007 as a fourth center for processing. As semiconductor backend processing continues to move to Asia, the Group will provide
comprehensive support in fostering this center into a flagship plant throughPac Tech and other overseas Group subsidiaries. Domestically, based onprocess development activities at the
Semiconductor Applications Development Center, we will promote feasibility
studies regarding the launch of anassembly house for trial mass productionof flip chip mounting and packaging.
The Commercialization Support Center
within the Semiconductor Applications
Development Center

NAGASE & CO., LTD. ANNUAL REPORT 200739

Nagase ChemteX
Director and Managing Executive Officer;
President, Nagase ChemteX Corp.

Kyoichi Zushi
Nagase ChemteX occupies the central role in Group production. Our strengths lie in developing applications
that incorporate organic synthesis and formulation technologies and solid relationships with Nagase Groupcustomers. Based on these strengths, we develop technologies, as well as produce, supply and conduct
quality assurance, for chemicals including plastics, and pharmaceuticals.
Under WIT2008, we aim to further increase Nagase ChemteX’s presence and make even greater strides as
the largest manufacturer in the Nagase Group. To do this, we will concentrate on developing and producing
functional, high-value-added products in the three core business fields of electronics, life sciences and theenvironment while focusing management resources in three areas: strengthening research and development,
aggressive capital expenditures and investment in human resources.

Nagase ChemteX’s sales and income both remained strong in

R&D STRUCTURE

fiscal 2006 due to good performance in the electronics business

Nagase ChemteX’s research and development structure comprises aand the turn to profitability in our bio-chemicals business, which

staff of roughly 100 in departmental research divisions and teams work-

consists of pharmaceutical intermediates and enzymes. Operating

ing on company-wide R&D themes. In the life sciences field, we dispatch

income increased 50 percent from fiscal 2005 due to a decrease

research and development staff to the Nagase R&D Center to conduct

in depreciation and improved productivity at two domestic produc-

joint research in teams with researchers there. In the electronics field,tion bases.

the Harima Plant plays a central role in research and development.
Looking ahead, we will prepare for business expansion by accelerating

PRODUCTION STRUCTURE

research and development based on our original epoxy resin.

Productivity at Nagase ChemteX’s two domestic production bases is

We select our numerous development themes based on a keenincreasing as a result of concentrating operations in the previous fiscal

understanding of customer needs gained through the synergies createdyear that were formerly dispersed between them. The Harima Plant

between our R&D and trading company capabilities. Many of ourmanufactures electronics and performance chemicals. The

researchers have obtained doctorates, increasing the level of research

Fukuchiyama Factory uses biotechnology and organic synthesis tech-and technology in the Nagase Group.

nologies for life sciences-related manufacturing centered on pharmaceutical intermediates and enzymes.

● Strategic Initiatives in Fiscal 2007

In fiscal 2007, our basic

Nagase ChemteX has overseas production bases in Singapore,strategy of expanding business by specializing in functional, high-China and Taiwan. Earnings were supported by good performance atvalue-added products will remain unchanged. In addition, we will moveNagase FineChem Singapore (Pte) Ltd., which became profitable in fis-to build a long-term business structure for post-WIT2008.

cal 2005 and handles production and recycling of chemicals used in
the electronics field, Nagase ChemteX (Wuxi) Corp., establishedthrough a joint venture with Nagase & Co. Ltd. to produce formulated
epoxy resins, and the Nagase ChemteX Taiwan Branch.

ELECTRONICS
Our electronics business continues to grow steadily. This businessfocuses on the fields of microelectronics, organic devices, semiconductors and electronic components, and offers original functional, highvalue-added products such as liquid encapsulant for semiconductors,

40

NAGASE & CO., LTD. ANNUAL REPORT 2007

Some direct outside sales

Customization for niche areas, including
development of neew products andchanges in specs

Customers

Understanding ofcustomer needs andmarket trends

Global sourcing

Interactive support between
technology development andhuman resources

Manufacturing
partnerst
ChemicalsElectronics

Nagase & Co., Ltd.
Sales outside
the Group

Manufacturing contracts

Nagase ChemteX (NCX)

Plastics

NagaseR&D Center

Life
Sciences

film sealant (epoxy sheet), adhesives for organic devices for image sen-

The pharmaceuticals business, including the phospholipids busi-

sors and other applications, and materials for organic electrolumi-

ness, will be part of a long-term grand design for the Fukuchiyama

nescense. In fiscal 2006, joint global expansion of epoxy sheet with

Factory.

Nagase & Co., Ltd. contributed to business results. In addition, Nagase
ChemteX and Nagase CMS Technology Co., Ltd. were at the center of
initiating a total supply-to-recovery chemical recycling business initiatedwithin the Nagase Group.

PERFORMANCE CHEMICALSNagase ChemteX concentrates on high-value-added original products: liquid crystal intermediates, fluorene, polysilane and Denatron.
Highly transparent and possessing excellent electrical properties, these

LIFE SCIENCES

chemical substances are used in innovative applications. Sales of fluo-

In life sciences, Nagase ChemteX does business in two fields: phar-rene, which is mainly used as a material for LCDs, continued to increase

maceutical intermediates and enzymes. The pharmaceutical intermedi-

steadily in fiscal 2006 due to growth in the large-screen LCD television

ate business is primarily contract production and is concentrated inand other markets. Productivity is increasing as a result of concentratingareas that make use of our specialized technologies and those of the

production of performance chemicals at the Harima Plant.

Nagase R&D Center. At the Fukuchiyama Factory, we are increasing
utilization of cGMP-compliant production facilities for investigational

STRUCTURAL MATERIALS

new drugs (INDs), low-volume drugs, pharmaceutical intermediates andIn the structural materials business, Nagase ChemteX provides ure-other products. To strengthen our competitive edge, we are concentrat-

thane, UV cure acrylic and materials such as tooling resin for mastering on products with higher added value that combine our technologicalmolds and prototype production in the automotive industry. In addition,

strengths in the areas of organic synthesis and biology. In the industrial

we are working to achieve rapid commercialization of a specialty ther-

enzymes field, we went beyond merely selling enzymes to producing

moplastic resin.

and selling useful enzyme modified products that employ our fermentation technologies. In the phospholipid business, where we are currently
focused on bringing phospholipid-degrading enzymes to market, massproduction facilities are scheduled to begin operations in September
2007, contributing to performance in the second half of fiscal 2007.

NAGASE & CO., LTD. ANNUAL REPORT 2007

41

Nagase R&D Center
Under its policy of serving as the growth driver of Nagase’s life sciences businesses, theNagase R&D Center has three missions: to provide technological solutions to relevant businesses;
to make a strategic contribution to the Nagase Group’s consolidated businesses; and to strengthen the Group’s technology platform. The Center plays a pivotal role in the Nagase Group’s R&D
activities aimed at its life sciences businesses not only by creating original new products and production methods but also by expanding and strengthening Nagase ChemteX’s technology platform for pharmaceutical manufacturing, enzyme production, and fermentation.
Core Technologies and Main Research Themes at the Nagase R&D Center

allows selected proteins to be monitored for their movement and localization in

1. Process development
technologies

living cells under the fluorescence microscope for a prolonged period of time.

2. Enzyme development
technologies① Develop production methods for unnatural aminoacids using Maruoka Catalyst™ (asymmetric phasetransfer catalyst) and enzymes② Develop production methods for chiral compounds,
such as active pharmaceutical ingredients, intermediates
thereof and liquid crystal components, using resolution
and biotechnologies (microorganisms and enzymes) inelaborate multi-step processes.
① Identify new enzymes using a ready-to-use microorganism library; explore a ready-to-use microorganism
library expanding steadily in its genetic diversity for
new enzymes② Develop new enzymes using recombinant microorganisms③ Develop commercial-scale production methods for
enzymes using genetic engineering technologies

3. Natural materials① Identify and evaluate new ingredients for healthdevelopment technologies
foods and cosmetics② Develop formulation methods for health foods and cosmetics

4. Collaboration with Nagase ① Develop new production processes for pharmaceuticals
ChemteX② Strengthen and expand the technology platform
required to develop new enzymes

5. Analysis and evaluation
technologies

This observation technology helps pinpoint the mechanism of action of antitumor agents.

● Health and Cosmetics Materials
Investigation into rosemary was conducted further for the mechanism of its
biological defense and anti-aging to strengthen rosemary-associated Nagase’s
brand image in the industry. Such basic effort culminated in the fiscal 2006
launch of a rosemary-based line of new products including Rosemarist N, apremium anti-aging skin cream, which achieved record-high sales.

Policies for Fiscal 2007
To meet the targets of WIT2008 set for the life sciences businesses, theNagase R&D Center will involve itself in developing the Group’s new products
and manufacturing methods, thereby giving positive impact on the relevantbusinesses. As in fiscal 2006, major developmental effort will be made on four
the following themes: (1) process development for unnatural amino acids① Analyze imported active pharmaceutical ingredients
according to the Japanese Pharmacopeia in compliancewith good manufacturing practice (GMP) standards

using Maruoka CatalystTM; (2) process development for pharmaceutical active
ingredients and intermediates thereof; (3) development of new enzymes using
genetic engineering; and (4) development of functional foods and cosmetics

Achievements in Fiscal 2006
● Process Development

ingredients based on natural products. All these business-oriented developmental activities will be conducted in unison with related departments and in

In collaboration with Nagase ChemteX, the Nagase R&D Center has
achieved industrialization of the production methods for unnatural amino acids
that it developed using Maruoka Catalyst TM, a phase-transfer catalyst developedby Professor Keiji Maruoka of Kyoto University in fiscal 2005, thereby expanding
their potential as a resource for drug discovery. In fiscal 2006, success in collaborative development of scalable production methods for a new line of unnatural amino acids added to our achievements, particularly among multinational
pharmaceutical companies. Unnatural amino acids are those which do not exist

parallel, reformation of the existing technology platform will also be tackled tosupport the future of the Group’s consolidated life sciences businesses. To
complement development in house and increase its efficiency, the initiative
will be taken in pursuing collaboration with universities and other research
institutes outside the Nagase Group. The R&D achievements will be disclosed
actively through presentation and publication to enhance the interactive relationship with related academic organizations and industries and thereby toexpand business opportunities.

in proteins, such as α,α-disubstituted ones. In particular, α,α-disubstituted amino acids have remained less industrially available so far. Hence, their

Management and Use of Intellectual Property

production methods established at Nagase using Maruoka Catalyst should

The Nagase R&D Center cooperates closely with the Intellectual Property

open new avenues for their applications in the pharmaceutical industry, such as

Department of the Legal & Credit Division from the stage of theme selection tobuilding blocks for chiral drug substances and in peptide drugs.

filing for patent application to strategically establish Nagase’s competitive● Enzyme Development

edge by turning R&D results into intellectual property rights.

TM

New enzymes with unique properties were identified and developmental

Patent Applications Filed and Patents Acquired

work aimed at their industrialization commenced in collaboration with Nagase

During Fiscal 2006

ChemteX.

● Drug Discovery Support
New reagent kits to detect and quantify substances that interact withhuman hormonal receptors were developed using recombinant yeast cells andlaunched to the market. The live-cell-visualization system was developed that42

NAGASE & CO., LTD. ANNUAL REPORT 2007

Cumulative Total as ofMarch 31, 2007

In Japan

Overseas

In Japan

Overseas

Patent applications filed

11

10

217

109

Patent rights established

3

1

18

35

Note: The number of patent applications filed includes patent rights granted.

Six-year Summary
Nagase & Co., Ltd. and Consolidated Subsidiaries(Years ended March 31)
Thousands of
U.S. Dollars (Note 1)(Millions of Yen)

For the Year:Net Sales ............................
Gross Profit .........................
Operating Income................
Net Income (Loss) ...............
At the Year-End:Total Assets ........................
Net Assets* ........................
Interest-Bearing Debt ..........

2007

2006

2005

2004

2003

2002

2007

¥ 701,321¥ 648,023¥ 575,636¥ 533,301¥ 503,688¥ 490,583$5,940,881

73,63967,64061,96053,49451,89946,976

623,800

21,66917,596

13,256

10,244

8,433

1,673

183,562

13,567

12,892

10,384

7,010

4,186

(2,097)

114,927¥ 422,859¥ 396,773¥ 335,290¥ 310,793¥ 284,800¥ 300,073$3,582,038

211,672

202,376

171,937

160,407

145,017

147,918

1,793,071

20,491

24,83414,01916,417

16,578

16,677

173,584

31.72

(Yen)

Per Share Date:
Net Income (Loss) (Basic) ....
Net Assets ..........................
Cash Dividends ...................

¥ 105.84¥ 100.32¥

1,597.27

1,535.70

1,311.37

81.00

18.00

15.00

10.00

¥ (15.39) $0.89

1,227.82

1,107.54

1,082.15

13.53

9.00

8.00

8.00

0.15

9.6

¥

54.69

¥

(%)

Ratios:Ratio of Gross Profit to Sales ....
Total Asset Turnover (Times)...
Return on Assets (ROA).........
Return on Equity (ROE)......
Net Worth Ratio ................
Interest Coverage
Ratio (Times) ...................
Debt to Equity Ratio (Times)....
Number of Employees.........

10.5

10.4

10.8

10.0

10.3

1.7

1.8

1.8

1.8

1.7

1.5

3.3

3.5

3.2

2.4

1.4

(0.6)

6.8

7.1

6.4

4.7

2.9

(1.4)

48.5

49.6

49.8

50.3

49.5

48.0

26.9

30.5

31.0

25.7

22.9

5.8

0.10

0.13

0.08

0.11

0.12

0.14

3,865

3,504

3,203

2,884

2,790

2,718

* Effective from the year ended March 31, 2007, the Company has adopted a new accounting standard for presentation of net assets in the balance sheet. Amounts for previous fiscal years have been
restated to conform to the new standard.

NAGASE & CO., LTD. ANNUAL REPORT 200743

Management’s Discussion and Analysis of Operations and Finances
The Nagase Group and Its Businesses
The Nagase Group imports and exports a diverse array of products andGross Profit and Selling, General and Administrative
Expensesengages in domestic transactions, with Nagase & Co., Ltd. (the “Company” or

Cost of sales increased 8.1 percent, or ¥47.29 billion, year-on-year to“Nagase”) at its center. In addition, the Nagase Group manufactures and sells¥627.68 billion. Reflecting the increase in sales, gross profit increased 8.9

products and provides services. These businesses are conducted by 97 related

percent, or ¥5.99 billion, to ¥73.63 billion. As a result, the ratio of gross profit

companies, consisting of 69 subsidiaries and 28 affiliates. The scope of con-to net sales increased 0.1 percentage points to 10.5 percent.

solidation includes 47 subsidiaries and 10 affiliates accounted for by the equity

Selling, general and administrative (SG&A) expenses increased 3.9 percent, or ¥1.92 billion, year-on-year to ¥51.97 billion, even though the Nagase

method.
Seven companies were added to the scope of consolidation in the fiscal

Group credited an actuarial gain on pension plan assets that occurred in theyear ended March 31, 2007 because they had become increasingly material toprevious fiscal year to income. The ratio of SG&A expenses to net sales

consolidated results. The seven companies are Pac Tech-Packaging

decreased 0.3 percentage points to 7.4 percent.

Technologies GmbH, Pac Tech-Packaging Technologies USA Inc., Nagase
Philippines International Services Corp., Guangzhou Nagase Trading Ltd.,
Nagase Chemspec Co., Ltd., NCK Ltd. and Hoei Techno Service Co., Ltd.
The Nagase Group removed 22 companies including Nagase Eco Plus
Co., Ltd. from the scope of consolidation during the fiscal year ended March
31, 2007. Their total assets, net sales, net income and retained earnings had
no material effect on the consolidated financial statements.

Research and Development Expenses
The Nagase Group integrates its comprehensive strengths to engage in
research and development with the objective of developing new products anddisseminating technological information.

Research andDevelopment Expenses(¥ Billion)

Overview of Results
Net Sales

2.43

2.34

2.42

2.57

2004

2005

2006

2007

1.63

During the fiscal year ended March 31, 2007, the Japanese economy was
firm due to factors including growth in capital investment and increased
exports as a result of the depreciation of the yen. The global economy wasYears ended
March 312003

generally robust, as rising concern about the future health of the U.S. economy
did little to blunt growth.
In these conditions, the Nagase Group worked to expand sales and profits,

The Nagase R&D Center develops products that emphasize user needs andand sales increased both in Japan and overseas. Consolidated net sales

conducts applied research. Main research and development themes include

increased 8.2 percent, or ¥53.29 billion, year-on-year to ¥701.32 billion.

technologies related to biotechnology fields that make effective use of organic

Domestic sales increased 5.7 percent, or ¥22.31 billion, year-on-year tosynthesis, microorganisms and enzymes in development of pharmaceutical¥410.78 billion as a result of strong sales of LCD and semiconductor products

manufacturing techniques, and technologies for isolation and biological assay

in the Electronics business and solid sales in the Chemicals business.

of natural products. The Nagase R&D Center also collaborates with Nagase

Overseas sales increased 11.9 percent, or ¥30.97 billion, year-on-year to

ChemteX Corp., a major manufacturing subsidiary. The Nagase Group’s cus-¥290.53 billion. In ASEAN, sales in the Plastics business grew in Thailand andtomers hold in high regard the Nagase R&D Center’s ability to develop such

Vietnam, while in the Greater China region, sales in the Plastics andtechnologies as chiral synthesis technology to produce unnatural amino acids;

Electronics businesses remained solid.

the development of new enzymes ranging from isolation to production andapplication; and the development of cosmetics and health foods using natural

Net Sales

ingredients. In addition, the Nagase Group deploys a precise understanding of(¥ Billion)

648.02 701.32
503.68 533.30

575.63customer needs acquired from its marketing network and its extensive portfolioof organic synthesis and compounding technologies in developing and expanding sales of products such as plastic additives and coating materials. The
Nagase Group uses the many patents it has obtained from its research anddevelopment activities to increase earnings. For the fiscal year ended March

Years ended
March 3144

31, 2007, research and development expenses totaled ¥2.57 billion, com2003

NAGASE & CO., LTD. ANNUAL REPORT 2007

2004

2005

2006

2007

pared to ¥2.42 billion in the previous fiscal year.

Data from prior years has been restated to reflect the reclassification of

Operating Income
21.66(¥ Billion)

business segments.

17.59

Chemicals

13.25
8.43

(¥ Billion)

10.24

Net Sales
Years ended
March 31

2007

2006

Change (%)

247.09222.28

11.2

7.01

5.65

24.0
17.7

Operating Income
2003

2004

2005

2006

2007

Operating Income, Net Other Income and Net Income

Assets135.91115.46

Depreciation and Amortization

0.90

0.94

(4.0)

Capital Expenditures

1.55

1.23

25.9

Operating income increased 23.1 percent, or ¥4.07 billion, year-on-year to

Segment sales increased 11.2 percent, or ¥24.81 billion, year-on-year to¥21.66 billion as a result of the above. The operating margin increased 0.4¥247.09 billion. Segment operating income increased 24.0 percent, or ¥1.35

percentage points to 3.1 percent.

billion, year-on-year to ¥7.01 billion. Sales were strong overall, with increased

Net other income decreased 52.3 percent, or ¥1.56 billion, to ¥1.42 bil-sales of products for final applications in automobile-related fields and growthlion. The interest coverage ratio, defined as the sum of operating income andin sales of general-purpose chemical products due to factors such as improved

interest and dividend income divided by interest expense, decreased from 30.5

conditions in the markets for materials.

times to 26.9 times. Gain on sales of investments in securities decreased toOverall results were robust in the performance chemicals business, which¥0.27 billion from ¥1.19 billion in the previous fiscal year. Gain on sales ofcovers a relatively large portion of the upstream areas of the Chemicals seg-

property and equipment decreased to ¥0.07 billion from ¥1.09 billion in thement. Sales of urethane and paint materials and other products for the auto-

previous fiscal year.

motive industry increased as a result of Nagase’s emphasis on this business.

As a result, income before income taxes and minority interests increased
12.2 percent, or ¥2.51 billion, year-on-year to ¥23.09 billion. As a result, net

Sales of plastic additives increased in Japan and overseas, and sales of generalpurpose chemicals also increased.

income increased 5.2 percent, or ¥0.67 billion, from ¥12.89 billion for the pre-Overall sales increased slightly in the colors and imaging products busi-

vious fiscal year to ¥13.56 billion. Net income per share increased to ¥105.84

ness, which includes pigments, dyes and other businesses related to color.

from ¥100.32 in the previous fiscal year.

Sales of ink and toner materials for printers and copiers were flat. However,sales of products including performance additives for flat-panel displays andNet Income (¥ Billion) /Net Income per Share (¥)

conductive polymers increased. Sales of dyestuffs were flat in core overseas
12.89

13.56

10.38

The speciality chemicals business handles a wide range of organic prod100.32 105.84

7.01

81.00

54.69
Years ended
March 31ucts including surfactants used as raw materials for detergents, cosmetics andother household toiletries; industrial oil solutions; silicones; and fluorinated

4.18
Net Income
Net Income per Sharemarkets.

products. Overall sales were strong, centered on epoxy compounds and other31.72

products made by Nagase ChemteX Corp., the core of the Nagase Group’s
2003

2004

2005

2006

2007

manufacturing operations.

Plastics

Results by Business Segment
Reclassification of Business Segments
In the fiscal year ended March 31, 2007, the Nagase Group reclassified
the former four business segments of Chemicals, Plastics, Electronics, andHealth Care and Others into the five segments of Chemicals, Plastics,
Electronics, Life Sciences and Others. This reclassification took effect on April
1, 2006. The Fine Chemicals Department, formerly included in Chemicals, and(¥ Billion)

Net Sales
Operating Income

2007

2006

Change (%)

244.68229.27

6.7

6.53

6.67

(2.1)

118.80112.10

6.0

Depreciation and Amortization

0.96

0.96

0.6

Capital Expenditures

1.18

0.84

41.0

Assetsthe Beauty Care Products Department, formerly included in Health Care andSegment sales increased 6.7 percent, or ¥15.40 billion, year-on-year to

Others, have been grouped together in the Life Sciences segment to enhance¥244.68 billion, with increased overseas sales, primarily in Asia, and growth in

the linkage between them. Moreover, the business handling DVD players anddomestic sales, centered on the automotive industry. Operating income

other products, formerly included in Electronics, has been moved to the Others

decreased 2.1 percent, or ¥0.14 billion, year-on-year to ¥6.53 billion.

segment because unlike other businesses in the Electronics segment, it serves
general consumers.

Sales of plastics for precision equipment applications such as printers andcopiers were strong, centered on Southeast Asia. Sales of engineering plastics
NAGASE & CO., LTD. ANNUAL REPORT 200745

for CD, DVD and other media applications decreased in Greater China, includ-

Life Sciences(¥ Billion)

ing Hong Kong and Taiwan.
Sales to the automotive industry expanded in Asia, primarily in southern

2007

2006

Change (%)

China. Sales in North America were flat, but sales of plastics and components

Net Sales

53.55

56.40

(5.0)

were strong in Japan, which contributed to an overall increase in sales.

Operating Income

2.00

1.26

58.5

Assets

33.41

33.89

(1.4)

Sales of building materials and housing equipment expanded overall. Salesof original Nagase Group products using wood composite materials rose, while

Depreciation and Amortization

0.63

0.38

66.5

sales of other construction materials and plastics increased slightly.

Capital Expenditures

0.76

0.60

27.1

Sales to the domestic packaging materials industry increased for applica-

Segment sales decreased 5.0 percent, or ¥2.84 billion, year-on-year totions such as cosmetics containers, although sales of household-use packag-¥53.55 billion. Operating income increased 58.5 percent, or ¥0.73 billion, to

ing materials declined. Sales also decreased in the electronic component¥2.00 billion. The fine chemicals business was flat year-on-year, and sales inassembly business, which is part of the plastics-related products business.

the beauty care products business decreased slightly. Sales in the medical

Among Nagase Group manufacturing companies in Japan, sales were flatat Totaku Industries, Inc., which manufactures various types of flexible hoseand pipes for industrial applications and household appliances, and at Kotobuki
Kasei Corp., a manufacturer of plastic trays used in food packaging. Sales
decreased marginally at Setsunan Kasei Co., Ltd., which handles plastic color-care products business decreased in reflection of extensive restructuring,
including withdrawal from some businesses in the previous fiscal year.
Sales in the fine chemicals business were flat. Sales of pharmaceuticalintermediates decreased, while sales of enzymes and diagnostics increased.
Sales decreased slightly in the beauty care business, which includes cosmetics and health foods. Sales of new products related to cosmetics increased

ing and compounding.

slightly. Sales of health food-related products were flat.

Electronics(¥ Billion)

2007

2006

Change (%)

150.79132.0814.2

Segment sales decreased 34.9 percent, or ¥2.78 billion, year-on-year toOperating Income

6.16

4.46

38.1

¥5.19 billion. Operating loss totaled ¥0.35 billion. Direct sales of DVD movie

Assets

84.26

78.92

6.8

software and other products to consumers has been transferred to the Others

Depreciation and Amortization

1.46

1.10

31.7

segment.

Capital Expenditures

1.88

1.71

9.7

Net Sales

Segment sales increased 14.2 percent, or ¥18.71 billion, year-on-year to¥150.79 billion as a result of overall expansion in the LCD-related businessand growth in sales of precision abrasive materials for products including
semiconductors. Operating income increased 38.1 percent, or ¥1.70 billion, to¥6.16 billion.
Overall sales of original products manufactured by Nagase ChemteX Corp.
and other Nagase Group companies increased. Sales of formulated epoxy
resins were strong, and sales increased of supply and control equipment andchemicals for front-end-of-line photolithography for LCDs and semiconductors.
In the LCD-related business, including products for backend processing of
LCDs, sales of liquid crystal modules decreased substantially year-on-year,
and sales of optical films decreased slightly. However, overall sales were about
the same as in the previous fiscal year due to significant growth in offshootbusinesses such as LCD components and aluminum housing materials forelectronic equipment.

Results by Geographical Segment
Reclassification of Geographical Segments
In the fiscal year ended March 31, 2007, the Nagase Group reclassified
the former four geographic segments of Japan, Asia, North America andOthers into the five geographical segments of Japan, Northeast Asia,
Southeast Asia, North America and Europe to better reflect operational management and policies. Data from prior years has been restated to reflect thereclassification of geographical segments.
Intersegment sales are excluded from net sales. Results by geographicalsegment differ from the domestic and overseas net sales figures discussed
earlier because sales in Japan discussed below include domestic import andexport transactions and the overseas transactions of Nagase Group companies
domiciled in Japan. These latter transactions, however, are also included in theoverseas sales discussed above.

Japan

Sales of precision abrasives used in semiconductor-related silicon wafer

Sales in Japan increased 3.2 percent, or ¥14.75 billion, year-on-year toprocessing increased substantially, and sales of substrates for hard disk drives¥480.64 billion. In addition to growth in sales of the Chemicals and Plastics

also rose. Sales of encapsulants and other products used in semiconductorbusinesses due to improved conditions in the materials market and expandedbackend processing were also solid, which contributed to strong overall sales

sales for automotive applications, electronic component and material process-growth.

ing sales increased in the Electronics business. Operating income in Japan

Sales of surface inspection systems and other communications and imaging products manufactured by the Nagase Group were essentially unchanged.

46

OthersNAGASE & CO., LTD. ANNUAL REPORT 2007

increased 21.9 percent, or ¥2.59 billion, year-on-year to ¥14.44 billion.

Overview of Results

Northeast Asia

Company’s corporate value by aligning the interests of the Group with those ofSales in Northeast Asia increased 25.4 percent, or ¥23.31 billion, year-on-

shareholders. During the year ended March 31, 2007, the Nagase Group

year to ¥115.13 billion. Sales in the Chemicals and Electronics businesses

issued rights to purchase new shares in the form of stock options to directors,

expanded, particularly in southern China. Operating income in Northeast Asia

executive officers, technology officers and Company managers, as well as toincreased 10.6 percent, or ¥0.37 billion, year-on-year to ¥3.96 billion.

directors and individuals with equivalent titles at subsidiaries.

Southeast Asia
Sales in Southeast Asia increased 16.5 percent, or ¥10.11 billion, year-on-

Liquidity and Financial Position
Cash and cash equivalents as of March 31, 2007 decreased 4.4 percent,year to ¥71.51 billion. Sales of engineering plastics in Thailand increased.
Operating income in Southeast Asia increased 23.7 percent, or ¥0.49 billion,or ¥1.01 billion, from a year earlier to ¥21.91 billion.
Operating activities provided cash of ¥10.85 billion, reflecting net income

year-on-year to ¥2.56 billion.

North America

totaling ¥13.56 billion. Investing activities, including purchases of property andSales in North America increased 11.5 percent, or ¥2.23 billion, year-on-

equipment and purchases and sales of investments in securities, used cash ofyear to ¥21.72 billion. Sales in the Chemicals business were strong. Operating¥5.20 billion. Financing activities used cash of ¥8.42 billion for issues includ-

income in North America totaled ¥0.16 billion, compared to an operating loss

ing repayment of commercial paper and dividend payments.

of ¥0.02 billion for the previous fiscal year.

Europe & Others
Sales in Europe & Others increased 30.6 percent, or ¥2.87 billion, yearon-year to ¥12.29 billion, reflecting the addition of Pac Tech-Packaging
Technologies GmbH, a company involved in semiconductor backend processing in the Electronics business, to the scope of consolidation. Operating
income in Europe & Others increased 294.8 percent, or ¥0.33 billion, year-onyear to ¥0.45 billion.

Profit Sharing Policy
Dividend Policy
Nagase’s basic policy is to further enhance its corporate structure andearnings capabilities to continue generating steady dividends for shareholders.
The Company pays dividends after taking into overall consideration projected
capital requirements for future growth over the medium and long term andconsolidated performance. Nagase deploys internal capital resources effectively
to strengthen future business activities and the Nagase Group’s operating
foundation.
Based on this policy, Nagase increased cash dividends for the fiscal year
ended March 31, 2007 to ¥18.00 per share from ¥15.00 per share for theprevious fiscal year. The increase included a ¥2.00 dividend commemorating
the 175th anniversary of Nagase’s establishment. As a result, the dividend
payout ratio increased to 29.7 percent from 25.0 percent for the previous fis-

Net Cash Provided by Operating Activities
Net cash provided by operating activities was ¥10.85 billion; in the previous fiscal year, operating activities used net cash of ¥2.34 billion. An increasein net income to ¥13.56 billion contributed to the year-on-year change, as didchanges in working capital, principally an increase in notes and accounts
payable. These factors were offset by a decrease in accrued income taxes.

Net Cash Used in Investing Activities
Net cash used in investing activities increased ¥1.39 billion compared withthe previous fiscal year to ¥5.20 billion. Purchases of property and equipment
totaled ¥3.01 billion. Purchases of investments in securities totaled ¥1.37 billion.

Net Cash Used in Financing Activities
Financing activities used net cash of ¥8.42 billion. In the previous fiscal
year, financing activities provided net cash of ¥9.33 billion. Primary factors
were repayment of commercial paper totaling ¥5.00 billion and cash dividends
paid totaling ¥3.16 billion, reflecting the introduction of an interim dividend
system in the year ended March 2007, in addition to payment of dividends forthe previous fiscal year.

Cash Flow Summary(¥ Billion)

cal year. In addition, Nagase amended its Articles of Incorporation at theOrdinary General Meeting of Shareholders on June 28, 2006 to establish aninterim dividend system. This will enable Nagase to make flexible and appropriate distributions of profits to shareholders according to business conditions and

2007

2006

2005

Net Cash Provided by (Used in) Operating Activities

10.85(2.34)

1.71

Net Cash Used in Investing Activities(5.20)(3.80)(1.41)Net Cash (Used in) Provided by Financing Activities(8.42)

9.33(5.11)

other factors.

Stock Option System
In the fiscal year ended March 2003, the Nagase Group introduced a stock
option system aimed at boosting the motivation and morale of Group employees in order to improve their performance, and at further enhancing theAssetsTotal assets as of March 31, 2007 increased 6.6 percent, or ¥26.08 billion, from a year earlier to ¥422.85 billion.
Current assets increased 9.5 percent, or ¥25.32 billion, to ¥291.62 billion.
Primary factors included a ¥23.53 billion increase in notes and accounts

NAGASE & CO., LTD. ANNUAL REPORT 200747

receivable because net sales increased and the fiscal year ended on a bankholiday. Inventories also increased ¥3.10 billion.

Net Assets (¥ Billion) /Return on Equity (%)

Property, plant and equipment increased 3.3 percent, or ¥1.01 billion, to202.37 211.67¥31.83 billion as the Nagase Group invested in facilities at manufacturing sub-145.01 160.40

sidiaries.

4.7

Total Assets (¥ Billion) /Return on Assets (%)

396.77 422.85
284.80 310.79

3.2

6.8

2003

2004

2005

2006

2007

3.3

3.5

Investment in Plant and Equipment

1.4
As of /
Years ended
March 31

7.1

6.4

2.9

As of /
Years ended
March 31335.29

2.4
Total Assets
Return on Assets

Net Assets
Return on Equity

171.93

Investment in plant and equipment for the year ended March 31, 2007
centered on manufacturing facilities for chemicals and electronic components

2003

2004

2005

2006

2007

and totaled ¥4.25 billion.
In the Chemicals segment, investment in plant and equipment totaled¥1.01 billion and included production equipment at manufacturing subsidiaries

Liabilities
Total liabilities as of March 31, 2007 increased 8.6 percent, or ¥16.79

for industrial chemicals. In the Plastics segment, investment in plant andequipment totaled ¥0.90 billion and included plastic molding and production

billion, from a year earlier to ¥211.18 billion.
Current liabilities increased 10.5 percent, or ¥16.86 billion, to ¥177.11

equipment at Nagase and its manufacturing subsidiaries. In the Electronics

billion. Notes and accounts payable increased ¥22.65 billion from a year ear-segment, investment in plant and equipment totaled ¥1.46 billion and included

lier as a result of an increase in the amount of goods purchased.

production equipment for electronic components and related products at

Working capital increased to ¥114.51 billion from ¥106.05 billion a year

Nagase and its manufacturing subsidiaries. In the Life Sciences segment,

earlier. The current ratio was 1.65 times, compared to 1.66 times a year earlier.

investment in plant and equipment totaled ¥0.63 billion and included invest-

Long-term liabilities decreased 0.2 percent, or ¥0.07 billion, to ¥34.07 bil-ment in buildings and production equipment at manufacturing subsidiaries. Inlion, primarily because of a decrease of ¥1.70 billion in deferred income taxes

the Others segment, investment in plant and equipment totaled ¥0.23 billion.

as a result of a decrease in net unrealized holding gain on securities.

The Nagase Group used both internal and external capital resources to fundcapital expenditures.

Working Capital (¥ Billion) /Current Ratio (Times)

114.5193.41 106.05

Outlook for the Year Ending March 31, 2008

82.58 83.40
1.66
1.69

1.66

1.65

1.64

In the year ending March 31, 2008, the second year of the medium-term
management plan WIT2008, the Nagase Group will further accelerate reinforcement of its strategic areas of electronics, life sciences, automotive andWorking Capital
Current Ratio

overseas operations. Market demand is forecast to expand in each of these
As of March 31

2003

2004

2005

2006

2007

four areas, and Nagase believes it will have the opportunity to deploy its
strengths.
Based on the above, the outlook for the Nagase Group’s performance for

Net Assets

the year ending March 31, 2008 is as follows.
(¥ Million) (Announced on April 27, 2007)

Net assets including minority interests increased 4.6 percent, or ¥9.29
billion, from a year earlier to ¥211.67 billion. While net unrealized holding

Operating Income Ordinary Income Net Income

Year ending March 31,
2008 (Projected)

752,000

21,90023,60014,100ing higher net income for the year. As a result, the ratio of net assets to total

Year ended March 31,
2007 (Actual)

701,321

21,66923,231

13,567

assets decreased 0.9 percentage points to 50.1 percent from 51.0 percent a

Projected YOY increase

year earlier.

Note: On July 19, 2007, projected net income for the year ending March 31, 2008
was revised downward 47.7 percent to ¥7,100 million.

gain on securities decreased ¥4.15 billion from a year earlier, retained earnings increased ¥11.04 billion from a year earlier to ¥156.74 billion, reflect-

48

Net Sales

NAGASE & CO., LTD. ANNUAL REPORT 2007

7.2%

1.1%

1.6%

3.9%

Overview of Results

Operating and Other Risks

shares of companies with which the Group transacts business, and is subject

The Nagase Group is engaged in trading, marketing, research and devel-to the risk of changes in the prices of these shares. As a matter of policy, theopment, manufacturing and processing, and conducts global business activi-

Nagase Group seeks to reduce this risk by continuously reviewing and reorga-

ties in the five segments of Chemicals, Plastics, Electronics, Life Sciences andnizing its shareholdings. However, changes in stock prices could impact the

Others. The following presents an overview of major operating and other risksGroup’s performance and financial position. Moreover, a drop in stock prices

to which the Nagase Group’s businesses are subject by their nature and thatthat reduces return on pension plan assets could impact the Group’s profitabil-exert or could exert a significant influence on investor decisions.

ity by increasing retirement benefit costs.

Forward-looking statements are Nagase Group estimates as of March 31,
2007.

(1) Overall Operating Risk

(6) Counterparty Credit Risk
The Nagase Group is exposed to credit risk because it extends credit tocounterparties in a diverse array of transactions in Japan and overseas. As a

The Nagase Group conducts a wide spectrum of operations in the fields ofmatter of policy, the Nagase Group moves to preclude credit risk with risk

Chemicals, Plastics, Electronics and Life Sciences from its base in chemicals.

hedges such as guarantees and collateral in correlation with the financial con-

The chemical industry both in Japan and internationally is subject to significant

dition of counterparties. However, the Nagase Group cannot be absolutely cer-volatility that could impact the Group’s performance and financial position.

tain that it has avoided credit risk. Deterioration of the financial condition or(2) Product Market Conditions

bankruptcy of counterparties could impact the Group’s performance and financial position.

The Nagase Group is extensively involved in the chemicals, plastics andother businesses that deal in petrochemicals manufactured from naphtha.

(7) Risk of New Investments

Raw material market conditions and the balance of supply and demand are

The Nagase Group’s businesses are based on brokerage transactions, andkey factors determining market conditions for each product. Changes in these

the Group is working to develop high-value-added businesses. As a matter ofconditions could impact the Group’s performance and financial position.

policy, the Nagase Group is therefore supporting the ability of the Nagase R&D(3) Impact of Fluctuations in Foreign Currency
Exchange Rates
The Nagase Group undertakes import and export transactions and nontrade business transactions that involve foreign currencies. Fluctuations in foreign currency exchange rates impact the value of transactions denominated inCenter, Group manufacturing subsidiaries and other Group organizations toprovide high-level technologies and information through measures such as
aggressively investing in new businesses and strategic acquisitions. However,this policy entails operating risks that are different from those inherent in theGroup’s conventional low-risk brokerage businesses. The increased latent risks
involved could impact the Group’s performance and financial position.

foreign currencies when translated into yen. The Nagase Group works to minimize the risks associated with fluctuations in foreign currency exchange rates(8) Product Quality Risk

by hedging these transactions using forward foreign exchange contracts.

The Nagase Group operates the Nagase R&D Center and manufacturing

However, fluctuations in foreign currency exchange rates could exert a material

subsidiaries to provide high added value to customers, and devotes scrupulous

impact on the Nagase Group’s performance and financial position. The Nagase

attention to the quality of the technologies and products the Group thus pro-Group also includes corporations domiciled in countries other than Japan thatvides. However, issues such as defects in these products would terminate

maintain their financial statements in currencies other than Japanese yen.

sales and require the Nagase Group to reimburse customers, which could

Fluctuations in foreign currency exchange rates could therefore impact the

impact the Group’s performance and financial position.

consolidated financial statements upon translation of the accounts of these(9) Risks of Handling Various Chemicals

corporations into Japanese yen.

(4) Risks Involved in Operating Overseas

Chemicals are a core business of the Nagase Group, which imports andexports a diverse array of products for a broad range of applications. The

A significant percentage of the Nagase Group’s activities involve selling andGroup’s exports are therefore subject to the application of regulations that aim

manufacturing overseas, principally in China, Southeast Asia, Europe andin part to maintain international peace and safety, including the Foreign

North America. As a matter of policy, the Nagase Group makes every effort to

Exchange and Foreign Trade Control Law and the Export Trade Control Order,

determine trends in markets overseas and respond appropriately to them.

and imports are subject to the Chemical Substances Control Law and other

However, failure on the part of the Nagase Group to make accurate projections

laws and regulations. The Nagase Group has therefore established the Security

due to unexpected events including factors related to the regulatory systems

Trade Control Committee and the Chemical Management Committee, whichand customs of overseas countries could impact the Group’s performance andwork to assure compliance with the above regulatory systems and with laws

financial position.

related to chemical product management in China, Europe, North America and(5) Impact of Changes in Stock Prices
The Nagase Group maintains a portfolio of marketable stock, primarily

elsewhere. Contravention of these regulatory systems would result in restrictions on business activities, and therefore could impact the Group’s performance and financial position.

NAGASE & CO., LTD. ANNUAL REPORT 200749

Consolidated Balance Sheets
Nagase & Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2007 and 2006
Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS

2007

2006

2007

Cash and cash equivalents.....................................................................

¥ 21,919¥ 22,936$ 185,676

Time deposits.........................................................................................

3

603

32

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

1,696

2,558

14,367

Trade ..................................................................................................

216,368

192,150

1,832,852

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

1,557

1,273

13,195Less allowance for doubtful receivables ..............................................

(1,468)(1,365)(12,436)

218,153

194,617

1,847,978

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

43,37240,268367,407

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

3,055

3,529

25,883

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

5,121

4,344

43,382

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

291,626

266,2992,470,360

Land (Note 6) .........................................................................................

9,437

9,448

79,943

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

30,16330,026

255,516

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

37,26933,975

315,710

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

736

98

6,237

77,60773,548657,407

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

(45,772)(42,729)(387,738)

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

31,83430,819269,669

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

11,857

11,875

100,444

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

77,332

83,434655,083

89,19095,310755,528

Long-term loans receivable ....................................................................

118

42

1,000

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

757

712

6,414

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

9,671

4,101

81,930Less allowance for doubtful accounts.....................................................

(338)

(512)

(2,864)

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

99,39999,654

842,008

Total assets ...............................................................................................

¥422,859¥396,773$3,582,038

Current assets:

Notes and accounts receivable (Note 17):

Property, plant and equipment:

Investments and other assets:
Investments in securities (Notes 4 and 6):

See notes to consolidated financial statements.

50

NAGASE & CO., LTD. ANNUAL REPORT 2007

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND NET ASSETS

2007

2006

2007

¥ 13,948—
259¥ 13,650
5,000
660$ 118,156—
2,195

Accrued income taxes (Note 8) ..............................................................
Deferred income taxes (Note 8) ..............................................................
Accrued expenses .................................................................................
Accrued bonuses for employees ............................................................
Accrued bonuses for directors and corporate auditors ...........................
Other current liabilities ............................................................................
Total current liabilities .....................................................................

2,007
139,453
141,461
3,954
0
3,818
3,067
197
10,407
177,114

1,468
117,341
118,810
3,955
—
6,407
—
—
11,762160,247

17,0071,181,309
1,198,316
33,496032,34725,985
1,673
88,1591,500,331

Long-term liabilities:
Long-term debt (Note 5).........................................................................
Deferred income taxes (Note 8) ..............................................................
Accrued retirement benefits for employees (Note 7)................................
Accrued retirement benefits for officers ..................................................
Other liabilities ........................................................................................
Total long-term liabilities ..................................................................

6,284
19,790
6,851
263
883
34,073

5,523
21,497
5,902
933
291
34,14953,233
167,643
58,0372,233
7,487
288,635

Net Assets:
Shareholders’ equity (Note 9):
Common stock:
Authorized — 346,980,000 shares
Issued — 138,408,285 shares............................................................
Capital surplus .......................................................................................
Retained earnings ..................................................................................
Treasury stock .......................................................................................
Total shareholders’ equity ...................................................................

9,699
9,926
156,749(5,413)
170,961

9,699
9,725
145,709(5,604)
159,529

82,16684,083
1,327,820(45,854)
1,448,216

Valuation and translation adjustments:
Net unrealized holding gain on securities ................................................
Unrealized gain or loss on deferred hedge..............................................
Translation adjustments..........................................................................
Total valuation and translation adjustments.........................................

32,3480
1,772
34,12036,504—586
37,090274,023
1
15,018289,042

Stock acquisition rights ..........................................................................
Minority interests ....................................................................................
Total net assets .........................................................................................
Total liabilities and net assets.....................................................................

123
6,465
211,672¥422,859—
5,755
202,376¥396,773

1,045
54,767
1,793,071$3,582,038

Current liabilities:
Short-term loans (Note 5) .......................................................................
Commercial paper..................................................................................
Current portion of long-term debt (Note 5)..............................................
Notes and accounts payable (Note 17):
Unconsolidated subsidiaries and affiliates ...........................................
Trade ..................................................................................................

Contingent liabilities (Note 14)

NAGASE & CO., LTD. ANNUAL REPORT 200751

Consolidated Statements of Income
Nagase & Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2007 and 2006
Thousands of
U.S. dollars (Note 1)

Millions of yen

2007

2006

2007

Net sales (Note 16) ....................................................................................

¥701,321¥648,023$5,940,881

Cost of sales (Note 12) ..............................................................................

627,681580,383

5,317,080

Gross profit................................................................................................

73,63967,640623,800

Selling, general and administrative expenses (Note 12) ..............................

51,97050,043

440,238

Operating income (Note 16) ...................................................................

21,66917,596

183,562

Other income (expenses):
Interest and dividend income..................................................................

1,490

1,543

12,623

Interest expense.....................................................................................

(860)

(628)

(7,289)Equity in earnings of affiliates..................................................................

519

120

4,397

Gain on sales of investments in securities...............................................

275

1,190

2,330

Loss on devaluation of investments in securities.....................................

(48)

(92)

(406)

Gain on sales of property and equipment ...............................................

74

1,091

628

Loss on disposal of property and equipment ..........................................

(137)

(261)

(1,167)

Loss on impairment of fixed assets.........................................................

(80)

—

(684)

Other, net...............................................................................................

194

24

1,648

Income before income taxes and minority interests ................................

23,095

20,583

195,642

Current...................................................................................................

7,219

6,787

61,157

Deferred .................................................................................................

1,520

(58)

12,877

Income before minority interests .........................................................

14,355

13,854

121,607

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

788

962

6,679

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

¥ 13,567¥ 12,892$ 114,927

Income taxes (Note 8):

See notes to consolidated financial statements.

52

NAGASE & CO., LTD. ANNUAL REPORT 2007

Consolidated Statements of Changes in Net Assets
Nagase & Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2007 and 2006
Number of sharesof commonstock

Balance at March 31, 2005
138,408,285
Net income for the year ...........................
—
Gain on sales of treasury stock................
—
Increase in retained earnings resulting from—
inclusion of consolidated subsidiaries .......
Decrease in retained earnings resulting from—
inclusion of consolidated subsidiaries ........
Decrease in retained earnings resulting from
inclusion of companies accounted for by—
the equity method ..................................
Decrease in retained earnings resulting fromexclusion of companies accounted for by—
the equity method ..................................
Cash dividends........................................
—
Bonuses to officers..................................
—
Acquisition of treasury stock ....................
—
Disposition of treasury stock....................
—
Other .......................................................
—
Balance at March 31, 2006 ................... 138,408,285
Net income for the year ...........................
—
Gain on sales of treasury stock................
—
Increase in retained earnings resulting from—
inclusion of consolidated subsidiaries ........
Decrease in retained earnings resulting from—
inclusion of consolidated subsidiaries ........
Increase in retained earnings resulting from
inclusion of companies accounted for by—
the equity method ..................................
Cash dividends (Note)..............................
—Cash dividends........................................
—
Bonuses to officers (Note)........................
—
Acquisition of treasury stock ....................
—
Disposition of treasury stock....................
—
Other .......................................................
—
Balance at March 31, 2007 ................... 138,408,285

Commonstock

Capital surplus

Retainedearnings

TreasurystockMillions of yen
Total
Net unrealized Unrealized gain
shareholders’ holding gain on or loss on
Translation Stock acquisition
equitysecurities deferred hedge adjustments
rights¥9,699——¥9,648—76¥134,778
12,892—¥(5,908)——¥148,218
12,892
76¥20,431
—
—

¥—
—
—

¥(1,558)
—
—

¥ —
—
—

¥4,844——¥171,937
12,892
76

—

—

79

—

79

—

—

—

—

—

79

—

—

(393)

—

(393)

—

—

—

—

—

(393)

—

—

(6)

—

(6)

—

—

—

—

—

(6)

—
—
—
—
—
—
9,699
—
—

—
—
—
—
—
—
9,725
—
200

(287)
(1,274)(80)———
145,709
13,567
—

—
—
—
(48)
352
—
(5,604)——(287)(1,274)
(80)
(48)
352
0
159,529
13,567
200

—
—
—
—
—
16,07236,504
—
—

—
—
—
—
—
—
—
—
—

—
—
—
—
—
2,144
586
—
—

—
—
—
—
—
—
—
—
—

—
—
—
—
—
910
5,755
—
—

(287)
(1,274)
(80)
(48)
352
19,127202,376
13,567
200

—

—

374

—

374

—

—

—

—

—

374

—

—

(128)

—

(128)

—

—

—

—

—

(128)

—
—
—
—
—
—
—
¥9,699

—
—
—
—
—
—
—
¥9,926

189(1,920)
(962)
(80)
—
—
—
¥156,749

—
—
—
—
(51)
242
—
¥(5,413)189(1,920)
(962)
(80)
(51)
242
—
¥170,961

—
—
—
—
—
—
(4,156)¥32,348

—
—
—
—
—
—
0
¥0

—
—
—
—
—
—
1,186
¥ 1,772

—
—
—
—
—
—
123
¥123

—
—
—
—
—
—
709
¥6,465189(1,920)
(962)
(80)
(51)
242
(2,136)¥211,672

Treasurystock

Thousands of U.S. dollars (Note 1)
Total
Net unrealized Unrealized gain
shareholders’ holding gain on or loss on
Translation Stock acquisition
equitysecurities deferred hedge adjustments
rightsMinority
interests

Total net
assetsMinority
interests

Total net
assetsNote: Item for distribution of income at the General Meeting of Shareholders held on June 28, 2006.

Balance at March 31, 2006
Net income for the year.........................................
Gain on sales of treasury stock............................
Increase in retained earnings resulting from
inclusion of consolidated subsidiaries.............
Decrease in retained earnings resulting from
inclusion of consolidated subsidiaries.............
Increase in retained earnings resulting from
inclusion of companies accounted for by
the equity method .............................................
Cash dividends (Note) ...........................................
Cash dividends ......................................................
Bonuses to officers (Note)......................................
Acquisition of treasury stock ................................
Disposition of treasury stock ................................
Other .......................................................................
Balance at March 31, 2007.....................................

Commonstock

Capital surplus

Retainedearnings$82,166––$82,383 $1,234,299–
114,927
1,699–$(47,472) $1,351,376 $309,230–
114,927
–
–
1,699
–

$–
–
–

$4,965
–
–

$

–
–
–

$48,756 $1,714,328–
114,927
–
1,699

–

–

3,173

–

3,173

–

–

–

–

–

3,173

–

–

(1,087)–(1,087)

–

–

–

–

–

(1,087)

–
1,607
–
1,607
–
–
(16,266)–(16,266)––(8,150)–(8,150)
–
–
(683)
–
(683)
–
–
–
(437)
(437)
–
–
–
2,056
2,056
–
–
–
–
–
(35,206)$84,083 $1,327,820 $(45,854) $1,448,216 $274,023

–
–
–
–
–
–
1
$1

–
–
–
–
–
–
10,053$15,018

–
–
–
–
–
–
1,045
$1,045

–
–
–
–
–
–
–
$82,166–
1,607–(16,266)–(8,150)
–
(683)
–
(437)
–
2,056
6,010
18,096$54,767 $1,793,071

Note: Item for distribution of income at the General Meeting of Shareholders held on June 28, 2006.
See notes to consolidated financial statements.

NAGASE & CO., LTD. ANNUAL REPORT 200753

Consolidated Statements of Cash Flows
Nagase & Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2007 and 2006
Thousands of
U.S. dollars (Note 1)

Millions of yen

2007

2006

2007

¥ 23,095¥ 20,583$ 195,642

4,110
80
915
(1,490)
860
(27)
(20)
(275)
48

3,528
—
(1,534)(1,543)628(51)(1,056)(1,180)92

34,819684
7,752(12,623)
7,289
(233)
(170)
(2,330)406(21,618)(3,464)(2,322)
21,720(4,272)
17,3401,738(863)(7,359)10,855(21,991)—(4,300)
8,164
1,721
3,060
1,737
(615)
(6,524)(2,341)(183,130)(29,345)(19,673)
183,990(36,192)
146,887
14,730(7,314)(62,346)
91,956

Investing 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 .......................................
Increase in short-term loans receivable, net ...............................................
Other, net ..................................................................................................
Net cash used in investing activities........................................................

(3,016)180(1,373)399(100)(1,292)(5,203)(3,689)1,141(2,104)2,565(56)(1,666)(3,809)(25,553)
1,527(11,638)
3,386
(849)
(10,952)(44,080)

Financing activities:(Decrease) increase in short-term loans, net...............................................
(Decrease) increase in commercial paper ...................................................
Proceeds from long-term debt...................................................................
Cash dividends paid ..................................................................................
Other, net ..................................................................................................
Net cash (used in) provided by financing activities ..................................

(909)(5,000)258(3,161)391(8,420)

2,894
5,000
2,500
(1,443)378
9,330(7,700)(42,354)2,187(26,778)
3,318(71,326)962(1,806)22,936

1,989
5,168
17,215

8,149(15,302)194,291789¥ 21,919

551¥ 22,936

6,687$ 185,676

Operating activities:
Income before income taxes and minority interests....................................
Adjustments to reconcile income before income taxes and minority
interests to net cash provided by (used in) operating activities:
Depreciation and amortization ................................................................
Impairment loss on fixed assets..............................................................
Provision for (reversal of) retirement benefits, net of payments ...............
Interest and dividend income..................................................................
Interest expense.....................................................................................
Exchange gain, net.................................................................................
Gain on sales of property and equipment ...............................................
Gain on sales of investments in securities...............................................
Loss on devaluation of investments in securities.....................................
Changes in operating assets and liabilities:
Notes and accounts receivable ...........................................................
Prepaid pension expense....................................................................
Inventories ..........................................................................................
Notes and accounts payable ..............................................................
Other, net...............................................................................................
Subtotal ..............................................................................................
Interest and dividends received ..............................................................
Interest paid ...........................................................................................
Income taxes paid ..................................................................................
Net cash provided by (used in) operating activities..................................

Effect of exchange rate changes on cash and cash equivalents .................
Net (decrease) increase in cash and cash equivalents................................
Cash and cash equivalents at beginning of the year...................................
Increase in cash and cash equivalents arisingfrom inclusion of consolidated subsidiaries .............................................
Cash and cash equivalents at end of the year.........................................
See notes to consolidated financial statements.

54

NAGASE & CO., LTD. ANNUAL REPORT 2007

Notes to Consolidated Financial Statements
Nagase & Co., Ltd. and Consolidated Subsidiaries
March 31, 2007

1. BASIS OF PREPARATION
Nagase & Co., Ltd. (the “Company”) and its domestic consolidated subsidiaries maintain their books of account and their records in accordancewith accounting principles generally accepted in Japan. The overseas consolidated subsidiaries maintain their books of account in conformity withthose of their countries of domicile.
The accompanying consolidated financial statements have been prepared for 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 is different incertain respects as to the application and disclosure requirements of International Financial Reporting Standards.
In preparing the accompanying consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a format which is more familiar to readers outside Japan.
Effective the year ended March 31, 2007, the Company has adopted a new accounting standard for the presentation of net assets in the balance sheet and the related implementation guidance. In addition, effective the year ended March 31, 2007, the Company is required to prepare
consolidated statements of changes in net assets instead of consolidated statements of shareholders’ equity. In this connection, the previously
reported consolidated balance sheet as of March 31, 2006 and consolidated statement of shareholders’ equity for the year then ended have been
restated to conform to the presentation and disclosure of the consolidated financial statements for the year ended March 31, 2007.
The previously reported consolidated statement of cash flows for the year ended March 31, 2006 has been restated to conform to the presentation and disclosure of the consolidated statement of cash flows for the year ended March 31, 2007 and, in addition, certain reclassifications ofpreviously reported amounts have been made to conform the consolidated financial statements for the year ended March 31, 2006 to the 2007
presentation. Such reclassifications had no effect on consolidated net income or net assets.
The U.S. dollar amounts in the accompanying consolidated financial statements have been translated from yen amounts solely for the convenienceof the reader, as a matter of arithmetic computation only, at ¥118.05 = U.S.$1.00, the rate of exchange prevailing on March 31, 2007. Thistranslation should not be construed as a representation that the yen amounts have been, could have been, or could in the future be, converted
into U.S. dollars at the above or any other rate.
As permitted by the Securities and Exchange Law of Japan, amounts of less than one million yen for the years ended March 31, 2007 and2006 have been omitted. Consequently, the totals shown in the accompanying consolidated financial statements for the years ended March 31,
2007 and 2006 (both in yen and in U.S. dollars) do not necessarily agree with the sum of the individual amounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and significant companies that it controls directly or
indirectly. Significant companies over which the Company 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 inconsolidation.
The overseas consolidated subsidiaries have a December 31 year-end closing date and one domestic consolidated subsidiary’s year end is at
the end of February, which differs from the year-end date of the Company. As a result, adjustments have been made for any significant intercompany
transactions that took place during the periods between the year ends of these subsidiaries and the year end of the Company.
Unrealized intercompany gains and losses among the Company and the consolidated subsidiaries have been entirely eliminated and the portion
attributable to minority interests has been charged to minority interests.

(b) Foreign Currency Translation
All monetary assets and liabilities denominated in foreign currencies are translated into yen at the rates of exchange in effect at the balance
sheet date, except that receivables and payables hedged by qualified forward foreign exchange contracts are translated at the corresponding contract rates. All other assets and liabilities denominated in foreign currencies are translated at their historical rates. Gain or loss on each translationis credited or charged to income.
Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into yen at the rates in effectat the respective transaction dates. Foreign exchange gain or loss is credited or charged to income in the period in which such gain and loss isrecognized for financial reporting purposes.
The balance sheet accounts of the overseas consolidated subsidiaries are translated into yen at the rates of exchange in effect at the balance
sheet date, except that the components of net assets excluding minority interests are translated at their historical exchange rates. Revenue andexpense accounts are translated at the average rates of exchange in effect during the year. Adjustments resulting from translating financial statements whose accounts are denominated in foreign currencies are not included in the determination of net income but are reported as “Translation
adjustments” in a component of net assets in the accompanying consolidated financial statements.

(c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in banks and other highly liquid investments with maturities of three months or less whenpurchased.
NAGASE & CO., LTD. ANNUAL REPORT 200755

(d) Inventories
Inventories are stated at the lower of cost or market, cost being determined by the weighted-average method.

(e) Investments in Securities
Securities are classified into three categories: trading securities, held-to-maturity debt securities or other securities. Trading securities, consisting of debt and marketable equity securities, are stated at fair value. Gain and loss, both realized and unrealized, are charged to income. Heldto-maturity debt securities are stated at their amortized cost. Marketable securities classified as other securities are carried at fair value with any
changes in unrealized holding gain or loss, net of the applicable income taxes, and reported as a separate component of net assets. Non-marketable securities classified as other securities are carried at cost determined by the moving-average method.
All securities held by the Company and its consolidated subsidiaries are classified as “other securities” and have been accounted for as outlined above.

(f) Property, Plant and Equipment and Depreciation
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 the respective
assets as prescribed in the Corporation Tax Law, except that the straight-line method is applied to buildings (other than structures attached to thebuildings) acquired subsequent to April 1, 1998. Moreover, property, plant and equipment owned by certain consolidated subsidiaries is depreciated by the straight-line method.

(g) Computer Software
Costs incurred for computer software obtained for internal use are capitalized and amortized on a straight-line basis over an estimated usefullife of 5 years.

(h) Goodwill
Goodwill and negative goodwill are amortized over mainly five years on a straight-line basis. When immaterial, goodwill and negative goodwill
are charged to income as incurred.

(i) Leases
The Company and its consolidated subsidiaries lease certain property and equipment under noncancelable lease agreements referred to as financeleases. Finance leases other than those which transfer the ownership of the leased property to the lessees are accounted for as operating leases.

(j) Allowance for Doubtful Receivables
The Company and its subsidiaries provide allowances for doubtful receivables based on their historical experience of bad debts on ordinary
receivables plus an additional estimate of probable specific doubtful accounts from customers experiencing financial difficulties.

(k) Income Taxes
Income taxes are calculated based on taxable income and charged to income on an accrual basis. Deferred income tax assets and liabilities
are computed based on the temporary differences between the financial reporting and the tax bases of the assets and liabilities that will result intaxable or deductible amounts in the future. Computations of deferred tax assets and liabilities are based on the enacted tax laws.

(l) Accrued Bonuses for Employees
Accrued bonuses for employees are provided based on estimated bonuses to be paid to employees which are charged to income in the current year.
Previously, employee bonuses were treated as a fixed obligation. Effective the year ended March 31, 2007, they are recorded as accrued bonuses
for employees because they no longer meet the conditions of a fixed obligation with the introduction of performance-linked bonuses.

(m) Accrued Bonuses for Directors and Corporate Auditors
Accrued bonuses for directors and corporate auditors are provided at an estimate of the amount to be paid in the following year which has
been allocated to the current fiscal year.

(n) Retirement Benefits
The Company has defined benefit pension plans and retirement benefit plans. The Company also has defined contribution pension plans. The
domestic consolidated subsidiaries have defined benefit pension plans and retirement benefit plans. Certain overseas consolidated subsidiaries
also have defined benefit pension plans.
The Company has established an employees’ retirement benefit trust for the payment of retirement benefits.
Actuarial gain or loss is principally charged to income in the year following the year in which such gain or loss is recognized for financial reporting
purposes. Prior service cost is charged to income in the year in which such cost is recognized for financial reporting purposes.
Up to the date of the annual general meeting of the shareholders held in June 2006, the Company and one consolidated subsidiary had retirement benefit plans for payments to directors and corporate auditors (“officers”) which were stated at 100 percent of the estimated amount calculated in accordance with the internal rules. However, the Company and the consolidated subsidiary abolished the retirement plans for these officers at the annual general meeting referred to above. As a result, the outstanding balance of ¥690 million ($5,844 thousand) accrued in theretirement benefit plans for officers up to the date of the annual general meeting has been reclassified as “long-term liabilities – other liabilities”
in the consolidated balance sheet at March 31, 2007.

56

NAGASE & CO., LTD. ANNUAL REPORT 2007

Notes to Consolidated Financial Statements(o) Derivatives and Hedging Activities
The Company and its consolidated subsidiaries utilize derivative financial instruments principally in order to manage the risk arising fromadverse fluctuation in foreign currency exchange rates and to mitigate the risk of fluctuation in interest rates on borrowings. The Company has
established a control environment that includes policies and procedures for risk assessment in accordance with the Company’s rules for foreignexchange transactions and interest-rate swap transactions. Under these rules, the Company conducts transactions within a certain range andplaces limits on the applicable assets and liabilities based on the actual demand. In addition, the Company also assesses the effectiveness of thehedging and verifies the approval, reporting and monitoring of all transactions involving derivatives. The Company and its consolidated subsidiaries
do not hold or issue derivative financial instruments for speculative trading purposes.
If an interest-rate swap meets certain criteria, the net amount to be paid or received under the contract is added to or deducted from the interest on the underlying hedged item.
The Company and its consolidated subsidiaries are exposed to certain market risk arising from their forward foreign exchange contracts. They
are also exposed to the risk of credit loss in the event of non-performance by the counterparties 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.
Derivatives are carried at fair value with any changes in unrealized gain or loss being charged or credited to operations, except for those whichmeet the criteria for deferral hedge accounting under which unrealized gain or loss is deferred as an asset or a liability.

(p) Research and Development Expenses
Research and development expenses are charged to income when incurred.

(q) Appropriations of Retained Earnings
Dividends and other appropriations of retained earnings are approved by the shareholders at a meeting held subsequent to the end of the fiscal
year to which the appropriations are applicable. The accompanying consolidated financial statements do not, however, reflect the applicableappropriations of retained earnings as approved by the shareholders subsequent to the fiscal year end. (Refer to Note 15.)

3. CHANGES IN ACCOUNTING POLICY(a) Presentation of Net Assets in the Balance Sheet
Effective the year ended March 31, 2007, the Company adopted “Accounting Standard for Presentation of Net Assets in the Balance Sheet”(Accounting Standards Board of Japan (ASBJ) Statement No. 5 issued on December 9, 2005) and “Implementation Guidance on AccountingStandard for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8 issued on December 9, 2005). The amount corresponding toconventional shareholders’ equity is ¥205,083 million ($1,737,257 thousand).
(b) Share-Based Compensation
Effective the year ended March 31, 2007, the Company adopted “Accounting Standard for Share-Based Payment” (ASBJ Statement No. 8
issued on December 27, 2005) and “Implementation Guidance on Accounting Standard for Share-Based Payment” (ASBJ Guidance No. 11, final
revision on May 31, 2006). As a result of the adoption of this accounting standard, operating income and income before income taxes and minority interests decreased by ¥123 million ($1,045 thousand) for the year ended March 31, 2007 from the amounts which would have been recorded
under the method applied in the previous year. The effect on segment information is presented in Note 16 to the consolidated financial statements, Segment Information.
(c) Accrued Bonuses for Directors and Corporate Auditors
Effective the year ended March 31, 2007, the Company and consolidated subsidiaries have adopted “Accounting Standard for Directors’
Bonuses” (ASBJ Statement No. 4 issued on November 29, 2005). Under this standard, bonuses for directors and corporate auditors are expensed
as incurred and recorded in selling, general and administrative expenses, which would have been recorded as a deduction from retained earnings
in the previous year. As a result of the adoption of this accounting standard, operating income and income before income taxes and minority interests decreased by ¥197 million ($1,673 thousand) for the year ended March 31, 2007 from the amounts which would have been recorded underthe method applied in the previous year. The effect on segment information is presented in Note 16 to the consolidated financial statements,
Segment Information.

4. INVESTMENTS IN SECURITIES(a) Marketable securities classified as other securities at March 31, 2007 and 2006 are summarized as follows:
Millions of yen

2007

2006

Gross
unrealized
gain

Gross
unrealized
loss¥19,966 ¥54,728
14¥19,981 ¥54,728

¥(40)
(0)
¥(40)

Cost

Book value(estimatedfair value)Grossunrealized
gain

Gross
unrealized
lossBook value(estimatedfair value)¥74,654 ¥19,010 ¥61,728
14
14—¥74,669 ¥19,024 ¥61,728

¥(3)
(0)
¥(3)

¥80,735
14¥80,749

Cost

Market value determinable:

Stock...........................
Government bonds......
Total................................

NAGASE & CO., LTD. ANNUAL REPORT 200757

Thousands of U.S. dollars

2007

Market value determinable:
Stock.................................................................................
Government bonds............................................................
Total .....................................................................................
(b)

Cost

Gross
unrealized
gain

Gross
unrealized
lossBook value(estimatedfair value)$169,138
122$169,261$463,604—$463,304$(344)(1)$(346)$632,399
121$632,520

Securities whose market value was not determinable were classified as other securities at March 31, 2007 and 2006 are summarized
as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

Carrying value

Carrying value

Carrying value¥2,6630¥2,663¥2,65726¥2,684$22,5602$22,563

Market value not determinable:
Equity securities ............................................................................
Bonds and debentures ..................................................................
Total .................................................................................................

(c) Proceeds from sales of, and gross realized gain and loss on, other securities for the years ended March 31, 2007 and 2006 are summarized
as follows:
Thousands of
U.S. dollars

Millions of yen

Proceeds from sales .........................................................................
Gain on sales ....................................................................................
Loss on sales....................................................................................

2007

2006

2007

¥330
263
—

¥2,4961,190
6$2,8002,253—(d) The redemption schedule at March 31, 2007 and 2006 for securities which have maturity dates classified as other securities is as follows:
Millions of yen

2007

Other securities whichhave maturity dates

Within 1 year

Government bonds......
Bonds and debentures
Total................................

¥0
—
¥0

2006

Over 1 year
Over 5 years
within 5 years within 10 years Over 10 years

¥4
—
¥4

¥10
—
¥10

Over 1 year
Over 5 years
within 5 years within 10 years Over 10 years

Within 1 year

¥—
—
¥—

¥—
¥26
¥26

¥4
—
¥4

¥10
—
¥10

¥—
—
¥—

Thousands of U.S dollars

2007

Other securities which have maturity dates
Government bonds............................................................
Bonds and debentures ......................................................
Total .....................................................................................

Within 1 year

Over 1 year
within 5 years

Over 5 years
within 10 years

Over 10 years

$0
—
$0

$33
—
$33

$84
—
$84

$—
—
$—

5. SHORT-TERM LOANS AND LONG-TERM DEBT
Short-term loans at March 31, 2007 and 2006 principally represented notes and loans in the form of deeds at average annual interest rates
of 4.19% and 4.40% per annum, respectively.
Long-term debt at March 31, 2007 and 2006 consisted of the following:
Millions of yen

Unsecured loans from banks and insurance companies, payable in yen,
due through 2018, at rates from 0.62% to 7.50% .............................
Less current portion ......................................................................

58

NAGASE & CO., LTD. ANNUAL REPORT 2007

Thousands of
U.S. dollars

2007

2006

2007

¥6,543(259)¥6,284¥6,183(660)¥5,523$55,428(2,195)$53,233

Notes to Consolidated Financial Statements
The aggregate annual maturities of long-term debt subsequent to March 31, 2007 are summarized as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2008 ..........................................................................................................................

¥ 259
3,105
2,767
73
337
¥6,543$ 2,195
26,30823,444619
2,861$55,428

2009 ..........................................................................................................................
2010 ..........................................................................................................................
2011 ..........................................................................................................................
2012 and after............................................................................................................

6. PLEDGED ASSETSAt March 31, 2007, assets pledged as collateral to guarantee all transactions with certain customers were as follows:

Land ...................................................................................................................
Investments in securities .....................................................................................
Total ...................................................................................................................

Millions of yen

Thousands of
U.S. dollars

¥ 671
3,614
¥4,285$ 5,689
30,615$36,305

7. RETIREMENT BENEFITSThe Company and its domestic consolidated subsidiaries have defined benefit plans, i.e., defined benefit pension plans and lump-sum payment plans. The Company transferred certain defined benefit pension plans to a defined contribution pension plan. Certain overseas consolidated
subsidiaries also have defined benefit pension plans.
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, 2007 and 2006 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligation.............................................................
Plan assets at fair value ....................................................................
Unfunded retirement benefit obligation..............................................
Unrecognized actuarial loss (gain) .....................................................
Net retirement benefit obligation........................................................
Prepaid pension expense..................................................................
Accrued retirement benefits recognized in the consolidated balance sheets ...

2007

2006

2007

¥(21,990)
18,552(3,437)50(3,387)(3,464)¥ (6,851)¥(21,829)
17,907(3,921)(1,981)(5,902)—¥ (5,902)$(186,278)
157,157(29,121)429(28,692)(29,345)$ (58,037)

The components of retirement benefit expenses of the Company and the consolidated subsidiaries for the years ended March 31, 2007 and2006 are outlined as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost ......................................................................................
Interest cost .....................................................................................
Expected return on plan assets.........................................................
Amortization of actuarial gain ............................................................
Contributions to defined contribution pension plans ..........................
Retirement benefit expenses .............................................................

2007

2006

2007

929
473
(644)
(1,782)46¥ (977)

¥ 937
483
(349)
(468)
42
¥ 645

$ 7,876
4,007(5,455)(15,103)397$ (8,277)¥

The assumptions used in accounting for the defined benefit pension plans for the years ended March 31, 2007 and 2006 were as follows:
2007

Discount rate.............................................................................................................
2.5%
Expected rates of return on plan assets..................................................................... Mainly 4.0%

2006

2.5%
Mainly 2.5%

8. INCOME TAXES
Income taxes applicable to the Company and its domestic consolidated subsidiaries (companies) consist of corporation, inhabitants’ and enterprises taxes, which, in the aggregate, resulted in a statutory tax rate of approximately 40.7% for the years ended March 31, 2007 and 2006.

NAGASE & CO., LTD. ANNUAL REPORT 2007

59

The effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2007 and 2006 differ from the statutory tax rate for the following reasons:Statutory tax rate ..............................................................................................................
Effect of:
Expenses not deductible for income tax purposes ........................................................
Dividends and other income deductible for income tax purposes ..................................
Net adjustment resulting from elimination of dividend income upon consolidation..........
Different tax rates applied to income of overseas subsidiaries........................................
Tax credit ......................................................................................................................
Other, net......................................................................................................................
Effective tax rates .............................................................................................................

2007

2006

40.7%

40.7%

3.2
(3.0)
5.1
(5.0)
(2.6)
(0.6)
37.8%

2.0
(4.5)
4.5
(4.9)
(2.4)
(2.7)
32.7%

Deferred income taxes reflect the net tax effect of the temporary differences between the carrying amounts of the deferred assets and liabilities for financial reporting purposes and the corresponding amounts for income tax purposes. The significant components of the Companies’
deferred tax assets and liabilities at March 31, 2007 and 2006 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2007

Deferred tax assets:
Unrealized gain on inventories .......................................................
Allowance for doubtful receivables ................................................
Investments in securities ...............................................................
Accrued bonuses for employees ...................................................
Accrued retirement benefits for employees ....................................
Other ...........................................................................................
Gross deferred tax assets ..........................................................
Valuation allowance....................................................................
Total deferred tax assets ............................................................
Deferred tax liabilities:
Revaluation of land ........................................................................
Deferred capital gain on property ..................................................
Special reserve for depreciation .....................................................
Net unrealized holding gain on securities .......................................
Other ...........................................................................................
Total deferred tax liabilities .........................................................
Net deferred tax liabilities ...........................................................

¥

2006

413
482
2,575
1,252
1,595
2,418
8,737
(766)
7,971

¥

(371)
(1,296)(12)(22,247)(21)(23,949)¥(15,977)

400
536
2,443
—
2,660
4,091
10,132
(376)
9,756

(371)
(1,319)(27)(25,109)(183)(27,012)¥(17,256)

2007

$

3,502
4,083
21,81910,606
13,517
20,48974,019(6,489)67,529(3,149)(10,978)(103)(188,461)(183)(202,876)$(135,346)

9. SHAREHOLDERS’ EQUITY
The new Corporation Law of Japan (the “Law”), which superseded most of the provisions of the Commercial Code of Japan (the “Code”), went
into effect on May 1, 2006. The Law provides that an amount equal to 10% of the amount to be disbursed as distributions of capital surplus(other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve,
respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions can be made at
any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met.
The Company’s legal reserve included in retained earnings at March 31, 2007 amounted to ¥2,424 million ($20,533 thousand).
Under the Law, upon the issuance and sale of new shares of common stock, the entire amount of the proceeds is required to be accounted
for as common stock, although a company may, by resolution of the Board of Directors, account for an amount not exceeding 50% of the proceeds of the sale of new shares as additional paid-in capital.

10. TREASURY STOCK
Movements in treasury stock during the year ended March 31, 2007 are summarized as follows:
Number of shares

2007
Treasury stock .......................................................................

60

NAGASE & CO., LTD. ANNUAL REPORT 2007

March 31, 2006

Increase

Decrease

March 31, 2007

10,426,874

35,112449,555

10,012,431

Notes to Consolidated Financial Statements
11. SHARE-BASED COMPENSATIONAt March 31, 2007, the Company had five stock option plans: the 2002, 2003, 2004, 2005 and 2006 stock option plans.
The 2002 stock option plan (the 2002 plan) was approved by shareholders of the Company on June 27, 2002. The 2002 plan provided for
granting options to purchase 260,000 shares of common stock to directors, executive officers, certain key employees of the Company and directors of certain subsidiaries. The exercise price was ¥565 ($4.76) per share at March 31, 2007. This exercise price is subject to adjustment incertain cases which include stock splits. The options became exercisable on August 1, 2004 and are scheduled to expire on July 31, 2007.
The 2003 stock option plan (the 2003 plan) was approved by shareholders of the Company on June 27, 2003. The 2003 plan provided for
granting options to purchase 764,000 shares of common stock to directors, corporate auditors, executive officers, certain key employees of theCompany and directors of certain subsidiaries. The exercise price was ¥657 ($5.56) per share at March 31, 2007. This exercise price is subject
to adjustment in certain cases which include stock splits. The options became exercisable on August 1, 2005 and are scheduled to expire on July
31, 2008.
The 2004 stock option plan (the 2004 plan) was approved by shareholders of the Company on June 29, 2004. The 2004 plan provided for
granting options to purchase 759,000 shares of common stock to directors, corporate auditors, executive officers, certain key employees of theCompany and directors of certain subsidiaries. The exercise price was ¥1,023 ($8.66) per share at March 31, 2007. This exercise price is subject
to adjustment in certain cases which include stock splits. The options became exercisable on August 1, 2006 and are scheduled to expire on July
31, 2009.
The 2005 stock option plan (the 2005 plan) was approved by shareholders of the Company on June 28, 2005. The 2005 plan provided for
granting options to purchase 762,000 shares of common stock to directors, corporate auditors, executive officers, certain key employees of theCompany and directors of certain subsidiaries. The exercise price was ¥1,169 ($9.90) per share at March 31, 2007. This exercise price is subject
to adjustment in certain cases which include stock splits. The options become exercisable on August 1, 2007 and are scheduled to expire on July
31, 2010.
The 2006 stock option plan (the 2006 plan) was approved by shareholders of the Company on June 28, 2006. The 2006 plan provided for
granting options to purchase 781,000 shares of common stock to directors, executive officers, technology officers, certain key employees of theCompany and directors of certain subsidiaries. The exercise price was ¥1,510 ($12.79) per share at March 31, 2007. This exercise price is subject to adjustment in certain cases which include stock splits. The options become exercisable on August 1, 2008 and are scheduled to expire on
July 31, 2011.
Information regarding the Company’s stock option plans is as follows:
The 2002 plan

Number of shares:
Outstanding at April 1, 2006................
Granted......................................................
Cancelled ............................................
Expired................................................
Outstanding at March 31, 2007...........
Weighted average price when exercised ......

The 2003 plan

The 2004 plan

The 2005 plan

The 2006 plan

7,000
—
—
3,000
4,000

138,000—
2,000
43,00093,000759,000—
2,000
402,000
355,000

762,000———
762,000—
781,000——
781,000¥1,603¥1,526——(In yen)¥1,425

12. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses included in selling, general and administrative expenses and manufacturing costs for the years ended
March 31, 2007 and 2006 totaled ¥2,571 million ($21,785 thousand) and ¥2,428 million, respectively.

13. LEASESThe following pro forma amounts represent the acquisition costs, accumulated depreciation and net book value of the leased property at
March 31, 2007 and 2006, which would have been reflected in the balance sheets if the finance leases other than those that transfer the ownership of the leased property of the Company and the consolidated subsidiaries (which are currently accounted for as operating leases) were
capitalized:
Millions of yen

2007

Machinery, equipment
and vehicles .................
Furniture and fixtures .......
Total..........................

2006

Acquisition
costs

Accumulated
depreciation

Loss onimpairment of
fixed assets

Net bookvalue

Acquisition
costs

Accumulated
depreciation

Net book
value

¥216
300
¥517

¥114
200
¥314

¥51
—
¥51

¥ 51
99
¥150

¥259
393
¥652

¥181
256
¥437

¥ 77
137
¥215

NAGASE & CO., LTD. ANNUAL REPORT 2007

61

Thousands of U.S. dollars

2007

Machinery, equipment
and vehicles.................
Furniture and fixtures.......
Total................................

Acquisition
costs

Accumulated
depreciation

Loss onimpairment of
fixed assets

Net bookvalue$1,837
2,545$4,382$ 966
1,701$2,667

$437
—
$437

$ 432
844
$1,277

The related lease payments, depreciation and interest expenses related to finance leases accounted for as operating lease for the years ended
March 31, 2007 and 2006 were as follows:
Millions of yen

Lease payments ...............................................................................
Depreciation expense .......................................................................
Interest expense ..............................................................................
Loss on impairment of fixed assets ...................................................

Thousands of
U.S. dollars

2007

2006

2007

¥128
114
10
51

¥306
281
18
—

$1,087973
90
437

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, 2007 under finance leases other than thosewhich transfer the ownership of the leased property to the Company and the consolidated subsidiaries are summarized as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

¥ 81
154
¥235

$ 691
1,304
$1,9962008 ..................................................................................................................
2009 and after....................................................................................................
Total ...............................................................................................................
14. CONTINGENT LIABILITIESAt March 31, 2007, the Company and its consolidated subsidiaries were contingently liable as guarantors of loans of unconsolidated subsidiaries and other in the aggregate amount of ¥502 million ($4,257 thousand) and as guarantors of housing loans of employees in the aggregate
amount of ¥72 million ($615 thousand).
In addition, at March 31, 2007, the Company and its consolidated subsidiaries had contingent liabilities arising from notes discounted bybanks and notes endorsed for a total amount of ¥703 million ($5,962 thousand).

15. AMOUNTS PER SHAREYen

Net income:Basic ............................................................................................
Diluted..........................................................................................
Net assets .......................................................................................
Cash dividends applicable to the year .............................................

U.S. dollars

2007

2006

2007

¥ 105.84
105.51
1,597.27
18.00¥ 100.32
100.04
1,535.70
15.00$ 0.89
0.89
13.53
0.15

Basic net income per share has been computed based on the net income available to the shareholders of common stock and the weightedaverage number of shares of common stock outstanding during the year. Diluted net income per share has been computed based on the net
income available to the shareholders of common stock and the weighted-average number of shares of common stock outstanding during eachyear after giving effect to the dilutive potential of the shares of common stock to be issued upon the exercise of the stock options. The amounts
per share of net assets have been computed based on the net assets available for distribution to shareholders of common stock and the numberof shares of common stock outstanding at the year end.
Cash dividends per share represent the cash dividends proposed by the Board of Directors as applicable to the respective years together
with the interim cash dividends paid.

62

NAGASE & CO., LTD. ANNUAL REPORT 2007

Notes to Consolidated Financial Statements
The financial data for the computation of basic net income per share and diluted net income per share based on the above standard for theyears ended March 31, 2007 and 2006 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Net income .......................................................................................
Deductions from net income:
Bonuses to directors and corporate auditors .................................
Adjusted net income available to shareholders of common stock........
Weighted-average number of shares ................................................
Effect of dilutive securities .................................................................

2007

2006

¥13,567¥12,892$114,927

2007

—
79
¥13,567¥12,812
128,177,941 127,703,315
403,905
360,749—$114,927

16. SEGMENT INFORMATION
Effective the year ended March 31, 2007, the Company changed the presentation of segment information to reflect the change in segment ofinternal control. The Company now presents information for five segments: Chemicals, which includes coating materials, coloring materials,
monomers, urethane raw materials, resin additives, dyes, organic fine chemicals, speciality chemicals, agricultural and ecological materials;
Plastics, which includes synthetic resin, synthetic rubber and building materials, and shaped processed goods; Electronics, which includes semiconductor wafer processing, semiconductor assembly processing, and LCD components; Life Sciences, which includes fine chemicals, medical
devices, cosmetics, health food and health care services; and Others, which includes communications devices and other electronic devices for
consumer markets. The fine chemicals business within the Chemicals segment had become increasingly related to the former Healthcare andOthers segment. The Company therefore combined these businesses to create the Life Sciences segment. Moreover, DVD players and other businesses serving individual consumers differed from conventional operations within the Electronics segment, and have been combined within the
Others segment. Data for prior fiscal years have been restated to reflect the change in presentation.
The business and geographical segments of the Company and the consolidated subsidiaries for the years ended March 31, 2007 and 2006
are outlined as follows:
Millions of yen

Year ended March 31, 2007
Electronics

Life
Sciences

Others

Total

Sales to customers....... ¥247,094 ¥244,681 ¥150,796

Chemicals

Plastics

Eliminations
or corporate¥53,556¥ 5,191¥701,321

Intersegment sales .......

25

140

186

22

4,686

5,062

(5,062)—

Net sales ..................

247,120

244,822150,983

53,578

9,878

706,383(5,062)

701,321

Operating expenses .....

240,104

238,287

144,82151,575

10,237685,026(5,374)

679,651

Operating income (loss) ... ¥7,015 ¥

6,535 ¥

6,161

¥ 2,002¥(358) ¥ 21,356

Total assets.................. ¥135,919 ¥118,800 ¥ 84,262¥33,413¥ 7,448¥379,843¥

Consolidated
sales

¥

— ¥701,321

312 ¥ 21,669¥43,015 ¥422,859

Depreciation and amortization...

902

966

1,460

636

144

4,110

—

4,110

Capital expenditures.....

1,552

1,187

1,884

769

320

5,713

—

5,713

Eliminations
or corporate

Consolidated
sales

¥

¥648,023

Millions of yen

Year ended March 31, 2006
Chemicals

Plastics

Sales to customers....... ¥222,282 ¥229,278

Electronics

Life
Sciences

OthersTotal¥132,086¥56,404

Intersegment sales .......

9

134

177

20

5,324

5,666

(5,666)—

Net sales ..................

222,291

229,412132,264

56,424

13,296653,689(5,666)

648,023

Operating expenses .....

216,633

222,735

127,803

55,16014,059636,392(5,965)

630,427¥

Operating income (loss) ... ¥5,658 ¥

6,677

Total assets.................. ¥115,462 ¥112,106¥ 7,972 ¥648,023

4,460¥ 1,263¥¥ 78,920¥33,891¥ 6,688 ¥347,069(762) ¥ 17,297

¥

—

299

¥ 17,596¥49,704¥396,773

Depreciation and amortization...

940

960

1,109

382

135

3,528

—

3,528

Capital expenditures.....

1,233

842

1,717

605

379

4,777

(7)

4,769

NAGASE & CO., LTD. ANNUAL REPORT 2007

63

Thousands of U.S. dollars

Year ended March 31, 2007
Chemicals

Plastics

Electronics

Sales to customers........... $2,093,136 $2,072,695 $1,277,397

Life
Sciences

Others$453,674$43,977 $5,940,881

Eliminations
or corporate

Total

$

Consolidatedsales— $5,940,881

Intersegment sales ...........

217

1,193

1,582

188

39,70142,882(42,882)—

Net sales ......................

2,093,353

2,073,889

1,278,979

453,862

83,6785,983,764(42,882)

5,940,881

Operating expenses .........

2,033,922

2,018,527

1,226,783

436,896

86,7195,802,849(45,530)

5,757,319

52,195$ 16,966$ (3,040) $ 180,914$

Total assets...................... $1,151,369 $1,006,355 $ 713,782

Operating income (loss) ... $59,431 $55,361 $$283,047$63,096 $3,217,651$364,387 $3,582,038

2,648 $ 183,562

Depreciation and amortization ...

7,642

8,184

12,370

5,394

1,227

34,819—34,819

Capital expenditures.........

13,14810,055

15,962

6,518

2,711

48,397—

48,397

As discussed in Note 3(c), effective the year ended March 31, 2007, the Company adopted “Accounting Standard for Directors’ Bonuses” (ASBJ
Statement No. 4 issued on November 29, 2005). As a result of the adoption of this accounting standard, operating expenses for the year ended
March 31, 2007 increased by ¥44 million ($372 thousand) in the Chemicals segment, by ¥51 million ($437 thousand) in the Plastics segment, by¥57 million ($483 thousand) in the Electronics segment, by ¥26 million ($221 thousand) in the Life Sciences segment, and by ¥18 million ($156
thousand) in the Others segment as compared with the amounts which would have been recorded under the method applied in the previous year.
As discussed in Note 3(b), effective the year ended March 31, 2007, the Company adopted “Accounting Standard for Share-Based Payment”(ASBJ Statement No. 8 issued on December 27, 2005) and “Implementation Guidance on Accounting Standard for Share-Based Payment” (ASBJ
Guidance No. 11, final revision on May 31, 2006). As a result of the adoption of this accounting standard, operating expenses for the year ended
March 31, 2007 increased by ¥39 million ($336 thousand) in the Chemicals segment, by ¥34 million ($288 thousand) in the Plastics segment, by¥31 million ($266 thousand) in the Electronics segment, by ¥13 million ($118 thousand) in the Life Sciences segment, and by ¥4 million ($37 thousand) in the Others segment as compared with the amounts which would have been recorded under the method applied in the previous year.
Millions of yen

Year ended March 31, 2007
Northeast
Asia

Southeast
Asia

North
America

Europe &Others

Total

Sales to customers....... ¥480,645 ¥115,139¥71,515¥21,723¥12,298¥701,321

Japan

Eliminations
or corporate¥

Consolidatedsales— ¥701,321

Intersegment sales .......

70,524

10,818

3,578

1,846

2,039

88,807(88,807)—

Net sales ..................

551,169

125,957

75,09323,56914,337790,128(88,807)

701,321

Operating expenses .....

536,727

121,996(88,886)

679,651

72,52823,402

13,882

768,537

3,960¥ 2,564¥¥454¥ 21,590¥

Total assets.................. ¥316,934 ¥ 44,192¥27,643¥ 6,522¥ 5,936¥401,228¥ 21,630 ¥422,859

Operating income ..... ¥ 14,442 ¥167

79 ¥ 21,669

Millions of yen

Year ended March 31, 2006
Year ended March 31, 2006

Japan

Sales to customers....... ¥465,888
Intersegment sales .......

64

60,425

Northeast
Asia

Southeast
Asia

North
America

Europe &OthersTotal¥91,826¥61,403¥19,485¥ 9,419¥648,023

7,472

3,156

1,763

2,110

74,928Eliminations
or corporate

Consolidated
sales

¥

—

¥648,023(74,928)—

Net sales ..................

526,313

99,29964,55921,24911,530722,952(74,928)

648,023

Operating expenses .....

514,465

95,71762,486

21,271

11,414705,356(74,929)

630,427

Operating income (loss) ... ¥ 11,847¥ 3,581¥ 2,073¥¥115¥ 17,595¥

1¥ 17,596

Total assets.................. ¥293,599¥38,285¥24,749¥ 6,254¥ 2,909¥365,798¥ 30,974¥396,773

NAGASE & CO., LTD. ANNUAL REPORT 2007(22)

Notes to Consolidated Financial Statements
Thousands of U.S. dollars

Year ended March 31, 2007
Year ended March 31, 2007

Japan

Northeast
Asia

Sales to customers........... $4,071,537 $ 975,344

Southeast
Asia

North
America

Europe &OthersEliminations
or corporate

Total$605,804$184,015

91,64130,311

15,644

17,272752,283(752,283)—

Net sales ......................

4,668,950 1,066,985

636,116

199,660

121,451

6,693,164(752,283)

5,940,881

Operating expenses .........

4,546,609 1,033,433

614,389

198,238

117,600

6,510,271(752,952)

5,757,319

Intersegment sales ...........

597,41233,551$ 21,726$

Total assets...................... $2,684,747 $ 374,350

Operating income......... $ 122,341 $$234,168$ 55,253

1,422$104,178 $5,940,881$$

Consolidated
sales

3,850 $ 182,892— $5,940,881$$ 50,285 $3,398,804

669 $ 183,562$ 183,234 $3,582,038

As discussed in Note 3(c), effective the year ended March 31, 2007 the Company adopted “Accounting Standard for Directors’ Bonuses” (ASBJ
Statement No. 4 issued on November 29, 2005). As a result of the adoption this accounting standard, operating expenses for the year ended March
31, 2007 increased by ¥197 million ($1,673 thousand) in the Japan segment as compared with the amounts which would have been recorded
under the method applied in the previous year.
As discussed in Note 3(b), effective the year ended March 31, 2007, the Company adopted “Accounting Standard for Share-Based Payment”(ASBJ Statement No. 8 issued on December 27, 2005) and “Implementation Guidance on Accounting Standard for Share-Based Payment” (ASBJ
Guidance No. 11, final revision on May 31, 2006). As a result of the adoption this accounting standard, operating expenses for the year ended March
31, 2007 increased by ¥123 million ($1,045 thousand) in the Japan segment as compared with the amounts which would have been recorded
under the method applied in the previous year.
Millions of yen

Year ended March 31, 2007

Overseas sales ....................................................

Northeast Asia

Southeast Asia

North America

Europe & Others¥168,274¥84,594¥22,947¥14,715

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

Total¥290,532¥701,321

24.0%

12.0%

3.3%

2.1%

41.4%

Millions of yen

Year ended March 31, 2006
Year ended March 31, 2006

Northeast Asia

Southeast Asia

North America

Europe & Others

Overseas sales ....................................................

¥154,919¥69,353¥20,537¥14,742¥259,553¥648,023

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

Total

23.9%

10.7%

3.2%

2.3%

40.1%

Thousands of U.S. dollars

Year ended March 31, 2007
Northeast Asia

Southeast Asia

North America

Europe & Others

Total

Overseas sales .................................................... $1,425,452$716,602$194,392$124,651$2,461,098

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

$5,940,881

17. EFFECT OF BANK HOLIDAY ON MARCH 31, 2007
As the balance sheet date as of March 31, 2007 fell on a bank holiday, the following notes receivable, trade and notes payable, trade withdue dates of March 31, 2007 were included in the respective balances and were settled on the next business day.
Millions of yen

Thousands of
U.S. dollars

Notes receivable, trade ................................................................................................

¥3,073$26,037

Notes payable, trade ....................................................................................................

1,157

9,808

18. SUBSEQUENT EVENT
The following appropriation of retained earnings of the Company, which has not been reflected in the accompanying consolidated financial
statements for the year ended March 31, 2007, was approved at a meeting of the shareholders held on June 27, 2007:

Cash dividends (¥10.50=U.S. $0.09 per share) ............................................................

Millions of yen

Thousands of
U.S. dollars¥1,348$11,423NAGASE & CO., LTD. ANNUAL REPORT 2007

65

Report of Independent Auditors

The Board of Directors
NAGASE & CO., LTD.
We have audited the accompanying consolidated balance sheets of NAGASE & CO., LTD. and consolidated subsidiaries as ofMarch 31, 2007 and 2006, and the related consolidated statements of income, changes in net assets, and cash flows for theyears then ended, all expressed in yen. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial positionof NAGASE & CO., LTD. and consolidated subsidiaries at March 31, 2007 and 2006, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Japan.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2007
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, 2007

66

NAGASE & CO., LTD. ANNUAL REPORT 2007

Company Information(As of March 31, 2007)

About Nagase & Co., Ltd.
Company Name:

Nagase & Co., Ltd.

Founded:June 18, 1832

Established:

December 9, 1917

Paid-in Capital:¥9,699,714,135

Number of Employees: 907 (Consolidated: 3,865)
Main Business:

Import/export and domestic sales of dyestuffs, chemicals, plastics, machinery,electronics materials, cosmetics and health foods

Main Offices:

Osaka Head Office: 1-1-17, Shinmachi, Nishi-ku, Osaka City, Osaka, 550-8668 Tel: (81) 6-6535-2114
Tokyo Head Office: 5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo, 103-8355 Tel: (81) 3-3665-3021
Nagoya Branch Office: 3-14-18, Marunouchi, Naka-ku, Nagoya City, 460-8560 Tel: (81) 52-963-5615
Nagase R&D Center: Kobe High Tech Park, 2-2-3, Murotani, Nishi-ku, Kobe City, 651-2241 Tel: (81) 78-992-3162

History
1832
1893
1898
1900
1911
1917
1923
1930
1940
1943
1964
1968
1970

1971

1974
1975
1980
1982
1985

1988
Nagase founded in Kyoto as a dyestuffs trading concern
Sales of dyestuffs, starches and funori seaweed
1989■ Established Osaka branch office■ Head office switched to Osaka, branch office to Kyoto■ Established business ties with Basel Chemical Co. of
Switzerland (now Ciba Specialty Chemicals Ltd.)■ Established Tokyo branch office
1990■ Inaugurated as Nagase Shoten Company with capital of¥3 million■ Established business ties with Eastman Kodak Co. of
1992
the United States
1997■ Concluded exclusive distributorship agreements with
Union Carbide and Carbon Corp. of the United States■ Established Nagoya branch office
1998■ Company name changed to Nagase & Co., Ltd.
■ Listed Company shares on the Osaka Securities Exchange
2001■ Concluded an exclusive distributorship agreement with
General Electric Co. of the United States■ Established Nagase-CIBA Ltd. (now Nagase ChemteX Corp.)
jointly with Ciba-Geigy Ltd.
■ Listed Company shares on the Tokyo Stock Exchange
2002■ Established Nagase (Hong Kong) Ltd. and Nagase America Corp.
■ Established Engineering Plastics, Ltd.
(now GE Plastics Japan Ltd.) jointly with General Electric Co.
■ Established Nagase Landauer Ltd. jointly with Technical
2004
Operations, Inc. of the United States
2005■ Established Nagase Singapore (Pte) Ltd.
2006
■ Established Nagase (Europa) GmbH and Chang Fong
Overseas Enterprises (Pte) Ltd.
■ Established Nagase (Malaysia ) Sdn. Bhd.
■ Established Seoul branch office

Established Nagase California Corp. and Nagase (Taiwan) Co., Ltd.
Established Canada Mold Technology Inc.
■ Established Nagase (Thailand) Co., Ltd.
■ Established Nagase Science and Technology Foundation■ Tokyo branch office became head office; adoption of
Osaka/Tokyo two head office system■ Established Sofix Corp.
■ Set up the Nagase R&D Center in Kobe
■ Established joint venture Nagase Wahlee Plastics Corp. (Taiwan)■ Established London branch office■ Established Nagase Philippines Corp.
■ Established Shanghai Nagase Trading Co., Ltd. and Nagase
Engineering Service Korea Co., Ltd.
■ Established P.T. Nagase Impor-Ekspor Indonesia■ Established Shanghai Hua Chang Trading Co., Ltd.
■ Closed the Seoul branch office, and established Nagase Korea Corp.
■ Merged four production companies, and established
Nagase ChemteX Corp.
■ Established Nagase Finechem Singapore (Pte) Ltd.
■ Established Nagase Precision Plastics Shanghai Co., Ltd.
■ Established Nagase ChemteX (Wuxi) Corp.
■ Established a representative office in Hanoi, Vietnam■ Established Guangzhou Nagase Trading Ltd.
■ Established Nagase International Electronics Ltd.
■ Established Nagase Philippines International Services Corp.
■ Acquired stock of semiconductor manufacturing equipment maker
Pac Tech-Packaging Technologies GmbH■ Established Nagase India Private Ltd.

■

■

■

■

NAGASE & CO., LTD. ANNUAL REPORT 200767

Organization(As of April 1, 2007)

Research & Development Center
Nagase Application Workshop
Compliance Committee

Shareholders’Meeting

Internal Control Promotion
Committee
Security Trade Control
Committee

Board of Auditors
Auditors

Corporate Marketing Office
Sheet & Film Planning OfficeBusiness Administrative Office
Colors & Imaging Dept.

Board of Directors

ChairmanChemical Management
Committee
Environment Protection
Committee

Speciality Chemicals Dept.
Performance Chemicals Dept.
Fine Chemicals Dept.

President
Beauty Care Products Dept.
Corporate Strategy Office
Corporate
Management Office

New Business
Development Office
Advanced Polymers Dept.

IT Planning Office
Eco-Materials & Products Dept.
Compliance Div.
Automotive Solutions Dept.
Human Resources &General Affairs Div.
Finance Div.

Display & Electronics
Components Dept.

Accounting Div.

Information & Functional
Materials Dept.

Legal & Credit Div.

68

NAGASE & CO., LTD. ANNUAL REPORT 2007

Electronic Chemicals Dept.

IC Packaging Department

Osaka Administrative Div.

Nagoya Branch

Audit Office

Nagase ChemteX Corp. (NCX)Major Consolidated Subsidiaries, Affiliates and Offices
Company name
➀Description of business ➁Paid-in capital➂Date of establishment ➃Equity ownership (*indicates indirect investment)■ Consolidated subsidiary ■ Company accounted for under the equity method (Ownership status as of March 31, 2007)

JAPAN
Manufacturing

Processing■ Nagase ChemteX Corp.

■ Nagase Medicals Co., Ltd.

■ Kotobuki Kasei Corp.

■ Honshu Rheem Co., Ltd.

■ Totaku Industries, Inc.

■ Setsunan Kasei Co., Ltd.

➀Manufacture of epoxy resins, enzymes, industrial
chemicals ➁¥2,474 million ➂1970 ➃100%
1-17, Shinmachi 1-chome, Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6535-2582 Fax: (81) 6-6535-2174➀Manufacture and sale of fiber drums, import andsale of food processing machines and materials➁¥100 million ➂1968 ➃40.0%
8-11, Minami Hashimoto 4-chome, Sagamihara-City,
Kanagawa
Tel: (81) 42-773-3111 Fax: (81) 42-774-4369■ Gigatec Inc.

➀Design, manufacture and sale of high-frequency
power amplifiers ➁¥97 million ➂1989 ➃41.2%
625, Shimo Ooshimamachi, Takasaki-City, Gunma
Tel: (81) 27-343-1590 Fax: (81) 27-343-3365■ Toyo Beauty Supply Corp.

➀Contract manufacture of cosmetics➁¥40 million ➂1964 ➃40.0%
3-10, Nihonbashi-Hongokucho 3-chome, Chuo-ku, Tokyo
Tel: (81) 3-3241-1410 Fax: (81) 3-3270-6338➀Manufacture of pharmaceuticals ➁¥498 million➂1972 ➃100%
4-323, Senzo, Itami-City, Hyogo
Tel: (81) 72-778-7501 Fax: (81) 72-778-7506➀Manufacture and sale of plastic products➁¥270 million ➂1952 ➃77.1%
1-33, Mitsuya Minami 1-chome, Yodogawa-ku,
Osaka-City, Osaka
Tel: (81) 6-6308-8300 Fax: (81) 6-6308-7020

eX . Grade Co., Ltd.
➀Development, manufacture and sale ofcomponents for electronic equipment➁¥23 million ➂2003 ➃30.4%
5F, Daido-Showacho Dai 2 Bldg., 1-30, Showacho
5-chome, Abeno-ku, Osaka-City, Osaka
Tel: (81) 6-6623-7633 Fax: (81) 6-6623-7638

Nagase Filters Co., Ltd.
➀Planning, production, processing, quality testing andsale of metal filters ➁¥80 million ➂2006 ➃100%
4-9-6, Takaida Naka, Higashi Osaka-City, Osaka
Tel: (81) 6-6782-3324 Fax: (81) 6-6782-3304➀Molding, processing and sale of plastic products➁¥20 million ➂1972 ➃57.5%
7-9, Satsukicho, Kanuma-City, Tochigi
Tel: (81) 289-72-0112 Fax: (81) 289-72-0114➀Coloring and sale of plastics ➁¥125 million➂1966 ➃100%
2-22, Takaida Nishi 5-chome, Higashi Osaka-City, Osaka
Tel: (81) 6-6783-5231 Fax: (81) 6-6783-5228■ Kyoraku Co., Ltd.

➀Manufacture, processing and sale of plastic products➁¥200 million ➂1917 ➃29.3%
Kawaramachi Chuo Bldg., 3-10, Kawaramachi
2-chome, Chuo-ku, Osaka-City, Osaka
Tel: (81) 6-6203-1301 Fax: (81) 6-6203-1309■ Alpha Bumping Technology Co., Ltd.

➀Contract processing for wafer bumping using Ni/Au
electroless plating ➁¥300 million ➂2000 ➃100%
5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo
Tel: (81) 3-3665-3880 Fax: (81) 3-3665-3950

Servicing■ Nagase Electronic Equipment Service Co., Ltd.

■ Nagase CMS Technology Co., Ltd.

■ Nagase Landauer, Ltd.

■ Nagase Logistics Co., Ltd.

■ Nagase General Service Co., Ltd.

■ Nagase Information Development, Ltd.

■ Nippon Vopac Co., Ltd.

■ Nagase Trade Management Co., Ltd.

■ Sun Delta Corp.

■ Hoei Techno Service Co., Ltd.
➀Duplication and processing of computer software,

Design & Die Co., Ltd.
➀Design, manufacture and sale of automotive
components and plastic products➁¥50 million ➂2002 ➃51.0%
c/o Tatematsu Mold Industry, 27, Okuda Oosawacho,
Inazawa-City, Aichi
Tel: (81) 587-32-6281 Fax: (81) 587-32-5392➀Radiation measuring services ➁¥88 million➂1974 ➃50.0%
11-6, Nihonbashi-Hisamatsucho, Chuo-ku, Tokyo
Tel: (81) 3-3666-4300 Fax: (81) 3-3662-9518➀Software development and maintenance➁¥30 million ➂1987 ➃100%
Nagase Sangyo Honcho Bldg., 2-8,
Nihonbashi-Honcho 1-chome, Chuo-ku, Tokyo
Tel: (81) 3-3231-3581 Fax: (81) 3-3231-3584

Choko Co., Ltd.
➀Insurance agency ➁¥15 million ➂1971 ➃37.7%
11F, Toho Bldg., 1-13, Nishi Shinsaibashi 1-chome,
Chuo-ku, Osaka-City, Osaka
Tel: (81) 6-6244-0125 Fax: (81) 6-6258-3385➀Manufacture, sale and maintenance of lowtemperature vacuum equipment➁¥45 million ➂1989 ➃100%
5-10, Higashi Nakajima 3-chome, Higashi
Yodogawa-ku, Osaka-City, Osaka
Tel: (81) 6-6324-7626 Fax: (81) 6-6324-7680➀Warehousing and distribution ➁¥401 million➂1982 ➃100%
4-45, Higashi Tsukaguchicho 2-chome,
Amagasaki-City, Hyogo
Tel: (81) 6-6427-8651 Fax: (81) 6-6427-8772➀Warehousing, motor truck carrier business andfreight transportation services ➁¥404 million➂1966 ➃19.9%
5-7, Kajicho 1-chome, Chiyoda-ku, Tokyo
Tel: (81) 3-3254-9571 Fax: (81) 3-3254-9566➀Development of applications for plastic products andmanufacture and sale of processed products➁¥490 million ➂2005 ➃50.0%
9F, Hibiya-Mitsui Bldg., 1-2, Yurakucho 1-chome,
Chiyoda-ku, Tokyo
Tel: (81) 3-3507-2830 Fax: (81) 3-3507-2835➀Development, design, manufacture, sale andmaintenance of CMS devices➁¥150 million ➂2001 ➃65.0%
4-9, Chigasaki Minami 3-chome, Tsuzuki-ku,
Yokohama-City, Kanagawa
Tel: (81) 45-948-1072 Fax: (81) 45-948-1070➀Sale and lease of various goods, real estateadministration ➁¥20 million ➂1983 ➃100%
1-17, Shinmachi 1-chome, Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6535-2131 Fax: (81) 6-6535-2124➀Business agent for foreign trade documentation➁¥20 million ➂1996 ➃100%
5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo
Tel: (81) 3-3665-3125 Fax: (81) 3-3665-3286

warehousing and distribution ➁¥50 million ➂1991➃0.0%*
2-8, Nihonbashi-Honcho 1-chome, Chuo-ku, Tokyo
Tel: (81) 3-3274-7875 Fax: (81) 3-3274-7884■ NCK Ltd.

➀Small-lot repackaging of industrial-use resins andcuring agents, etc., filter cleaning, management of special containers ➁¥10 million ➂1985 ➃0.0%*236, Nakai, Tatsuno-cho, Tatsuno-City, Hyogo
Tel: (81) 791-63-4842 Fax: (81) 791-63-4913
NAGASE & CO., LTD. ANNUAL REPORT 2007

69

Sales■ Nagase Colors & Chemicals Co., Ltd.

■ Nagase Chemical Co., Ltd.

■ Nishinihon Nagase Co., Ltd.

■ Nagase Bio-Chemical Sales Co., Ltd.

■ Nagase Chemspec Co., Ltd.

■ Nagase Plastics Co., Ltd.

■ Nagase Elex Co., Ltd.

■ Hoei Sangyo Co., Ltd.

■ Nagase Barrel Finishing Systems Co., Ltd.

➀Purchasing and sale of dyestuffs, industrial
chemicals, etc. and related information provision➁¥100 million ➂1957 ➃100%
1-17, Shinmachi 1-chome, Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6535-2058 Fax: (81) 6-6535-2054➀Sale of enzymes and additives for food and feed➁¥30 million ➂1987 ➃87.0%
1-17, Shinmachi 1-chome, Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6535-2318 Fax: (81) 6-6535-2531➀Sale of raw materials for plastics andplastic products ➁¥20 million ➂1979 ➃100%
4F, Nihonbashi Tachibana Bldg., 6-11,
Higashi Nihonbashi 3-chome, Chuo-ku, Tokyo
Tel: (81) 3-3661-0821 Fax: (81) 3-3661-1560➀Sale of dyestuffs, industrial chemicals, chemicals for
manufacturing paper, plastics and machinery➁¥60 million ➂1995 ➃100%
Libra Bldg., 3-2, Nihonbashi-Kobunacho, Chuo-ku, Tokyo
Tel: (81) 3-5640-7431 Fax: (81) 3-5640-0791➀Sale and technological servicing of chemicals➁¥30 million ➂1976 ➃100%
5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo
Tel: (81) 3-3665-3726 Fax: (81) 3-3665-3746➀Sale of film materials, magnetic products,
information imaging materials, etc. ➁¥250 million➂1974 ➃80.5%
Nagase Sangyo Honcho Bldg., 2-8,
Nihonbashi-Honcho 1-chome, Chuo-ku, Tokyo
Tel: (81) 3-3274-7880 Fax: (81) 3-3274-7882

Shinshu Nagase Denzai Co., Ltd.

OnFine Co., Ltd.

➀Sale of electronics components, raw materials forplastics and plastic products ➁¥10 million➂1984 ➃100%
1-21, Shinmeicho 4-chome, Okaya-City, Nagano
Tel: (81) 266-24-2772 Fax: (81) 266-24-3311➀Manufacture and sale of electronics and fluorineand polysilane variants for use in materials➁¥10 million ➂2002 ➃25.0%
1-17, Shinmachi 1-chome, Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6535-2585 Fax: (81) 6-6535-2174➀Sale of dyestuffs, auxiliaries, industrial chemicals
and plastics ➁¥60 million ➂1969 ➃100%
7F, Nichido Fukuoka Dai-2 Bldg., 1-3,
Shimokawabatamachi, Hakata-ku, Fukuoka-City, Fukuoka
Tel: (81) 92-272-3661 Fax: (81) 92-272-3667➀Sale of raw materials for plastics and plastic
products ➁¥96 million ➂1975 ➃100%
1-17, Shinmachi 1-chome, Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6533-1181 Fax: (81) 6-6533-1189➀Sale of abrasives and grinding materials➁¥50 million ➂1955 ➃100%
3F, Osaka Anniks Bldg., 14-20, Itachibori 1-chome,
Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6543-7721 Fax: (81) 6-6543-7710■ Nagase Beauty Care Co., Ltd.

➀Sale of cosmetics and health foods➁¥100 million ➂1991 ➃100%
5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo
Tel: (81) 3-3665-3617 Fax: (81) 3-3665-3724

Nagase Eco Plus Co., Ltd.
➀Development and sale of Pluswood composite woodmaterial ➁¥310 million ➂1994 ➃100%
5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo
Tel: (81) 3-3665-3700 Fax: (81) 3-3665-3714

ASIA■ Shanghai Nagase Trading Co., Ltd.

➀International trade and trade consulting➁RMB8,120 thousand ➂1997 ➃100%
18F, Raffles City, No.268 Xizang Road Central,
Shanghai, P.R. China 200001
Tel: 86-(21) 63403300 Fax: 86-(21) 63403883

70■ Shanghai Hua Chang Trading Co., Ltd.

➀Sale of resins and related products➁RMB19,864 thousand ➂1998 ➃16.3%
Room 605, Aviation Center, 1600 Nanjing Road
West, Shanghai, P.R. China 200040
Tel: 86-(21) 62481133 Fax: 86-(21) 62486533

NCC Shanghai Techno Center Co., Ltd.

Nagase CMS Technology (Shanghai) Co., Ltd.

➀Testing operations for paints and finishing processes➁RMB2,445 thousand ➂2002 ➃0.0%*
6F, No.75 Bldg. No.1066 Qinzhou North
Road Caohejing Hi-Tech Park, Shanghai,
P.R. China 200233
Tel: 86-(21) 54261812 Fax: 86-(21) 54261811➀Construction and maintenance of chemical supply andmanagement equipment➁US$200 thousand ➂2006 ➃40.0%
Apollo Bldg 428 No.1440, Yan An Road Central,
Shanghai P.R. China 200040
Tel: 86-(21) 6103-1662 Fax: 86-(21) 6103-1663

Tianjin Nagase International Trading Co., Ltd.

Nagase Plastic Design and Die (Tianjin) Co., Ltd.

➀Import/export and marketing➁RMB2,482 thousand ➂2003 ➃0.0%*
Room 2008, 20/F., The Exchange Office Tower,
189 Nanjing Road, Heping District, Tianjin,
P.R. China 300051
Tel: 86-(22) 83191231 Fax: 86-(22) 83191122➀Design of automotive components and plastic products➁RMB2,483 thousand ➂2003 ➃41.7%
Rm G, 7/F, A1 Tianjin University’s Technology Zone,
No. 80, The 4th Avenue, TEDA District Tianjin,
P.R. China 300457
Tel: 86-(22) 83191234 Fax: 86-(22) 83191122

NAGASE & CO., LTD. ANNUAL REPORT 2007

■ Nagase Precision Plastics Shanghai Co., Ltd.

➀Plastic tray molding➁RMB16,512 thousand ➂2001 ➃94.0%
B-Block, 1F, 173 Meisheng Road, Wai Gao Qiao
Free Trade Zone, Pudong, Shanghai, P.R. China 200131
Tel: 86-(21) 58681661 Fax: 86-(21) 58681667■ Nagase ChemteX (Wuxi) Corp.

➀Plastic Manufacture and sale of adhesives and high-techchemical products for electronics, technology service➁RMB28,970 thousand ➂2002 ➃50.0%
B-B, Machinery & Electronics Industry Park,
Wuxi National Hi-tech Industrial Development Zone,
Jiangsu Province, P.R. China 21400
Tel: 86-(510) 5200052 Fax: 86-(510) 5200209

Company name
➀Description of business ➁Paid-in capital➂Date of establishment ➃Equity ownership (*indicates indirect investment)■ Consolidated subsidiary ■ Company accounted for under the equity method (Ownership status as of March 31, 2007)■ Guangzhou Nagase Trading Ltd.
➀Import/export and marketing➁RMB1,655 thousand ➂2002 ➃0.0%*
Rm 4201, CITIC Plaza Office Tower, 233 Tian He Bei
Road, Guangzhou, P.R. China 510613
Tel: 86-(20) 38911101 Fax: 86-(20) 38911103

Wuhan Branch Office
Room 1204, RuiTong Plaza B, No.847
Jianshe Avenue-Hankou, Wuhan 430015, P.R. China
Tel: 86-(27) 8548-7933 Fax: 86-(27) 8548-7953

Nagase Marketing and Service (Shenzhen) Ltd.
➀Contract customer services ➁HK$1,000 thousand➂2006 ➃0.0%*
Room 2501-02, China Resources Building, 5001
Shennan Dong Road, Shenzhen 518001, P.R. China
Tel: 86-(755) 3338-6603 Fax: 86-(755) 3338-6620■ Nagase (Hong Kong) Ltd.
➀Import/export, trade agency, market development,
information collection ➁HK$3,120 thousand➂1971 ➃100%
Suite 3901 & 3912-14, Tower 6, The Gateway
Harbour City, 9 Canton Road, Tsim Sha Tsui,
Kowloon, Hong Kong, S.A.R., P.R. China
Tel: 852-23750000 Fax: 852-23772728

Guangzhou Kurabo Chemicals Co., Ltd.

NWP International Trading (Shenzhen) Co., Ltd.

➀Manufacture of molded urethane products forautomobiles ➁US$7,000 thousand ➂2001➃20.0%
Jingquan 1st Rd., Yonghe Economic Zone,
Guangzhou Economic & Technological Development
Dist., Guangzhou City, Guangdong, P.R. China
Tel: 86-(20) 8297-0557 Fax: 86-(20) 8297-0551➀Sale of plastic products in South China➁US$1,200 thousand ➂2004 ➃0.0%*
No.201, Building 6C, International Commercial
Center, 1001 Hong Hua Road, Futian Free Trade
Zone, Shenzhen, Guangdong, P.R. China
Tel: 86-(755) 83599372 Fax: 86-(755) 83580547

Toyo Quality One Ningbo Co., Ltd.

Totaku Industries Suzhou Co., Ltd.

➀Manufacture and sale of polyurethane foam
➁US$3,770 thousand ➂1993 ➃24.2%
No.302 Chengnan East Rd., Cicheng Town,
Jiangbei Dist., Ningbo City, Zhejiang, P.R. China
Tel: 86-(574) 8757-0057 Fax: 86-(574) 8757-0885➀Manufacture and sale of plastic products➁US$1,700 thousand ➂2005 ➃0.0%*
9 Datong Road Export Processing Zone,
Suzhou New & Hi-tech District, Suzhou, P.R. China
Tel: 86-(512) 6269-6006 Fax: 86-(512) 6269-6008■ Nagase International Electronics Ltd.

➀Management of electronics-related manufacturingbusinesses in Japan and overseas➁HK$10,000 thousand ➂2004 ➃80.0%
Suite 3901 & 3912-14, Tower 6, The Gateway, Harbour
City, 9 Canton Road, Tsim Sha Tsui, Kowloon, Hong
Kong, S.A.R., P.R. China
Tel: 852-23762088 Fax: 852-23761666

Dalian Representative Office
21F, Senmao Bldg., No. 147 Zhongshan Road,
Xigang District, Dalian, P.R. China 116011
Tel: 86-(411) 83704270 Fax: 86-(411) 83704272

Tianjin Representative Office
Room 2008, 20/F., The Exchange Office Tower,
189 Nanjing Road, Heping District, Tianjin,
P.R. China 300050
Tel: 86-(22) 83191231 Fax: 86-(22) 83191122■ Nagase Wahlee Plastics Corp.

➀Sale of plastics and related products➁NT$100,000 thousand ➂1990 ➃55.0%
9F Chuan Ta Bldg., No. 37, Sec. 3, Min Chuan East
Road, Taipei, Taiwan, R.O.C.
Tel: 886-(2) 25062400 Fax: 886-(2) 25062401■ Nagase (Taiwan) Co., Ltd.

➀Import/export, trade agency, market development,
information collection ➁NT$45,000 thousand➂1988 ➃100%
16F-1, 248, Sec.3, Nanking E. Rd., Taipei, Taiwan, R.O.C.
Tel: 886-(2) 27733668 Fax: 886-(2) 27737288

Taichun Liaison Office
12F-7, No.530, Yingcai Rd., West District,Taichung City 403, Taiwan R.O.C
Tel: 886-(4) 2302-7200 Fax: 886-(4) 2302-7202

Nagase Electronics Technology Co., Ltd.
➀Chemical etching of liquid crystal glass panel units➁NT$178,000 thousand ➂2005 ➃60.0%
No.6 Yuanyuan St., Guanyin Township, Taoyuan
County 328, Taiwan, R.O.C.
Tel: 886-(3) 416-0498 Fax: 886-(3) 438-9956

Shenzhen Representative Office
Room 2501, China Resources Building, 5001
Shennan Dong Road, Shenzhen, 518001, P.R. China
Tel: 86-(755) 33380088 Fax: 86-(755) 33386999■ Nagase (Thailand) Co., Ltd.

➀Import/export, trade agency, market development,
information collection ➁BAHT87,000 thousand➂1989 ➃100%
14F, Ramaland Bldg., 952 Rama IV Road, Khwaeng
Suriyawongse, Khet Bangrak, Bangkok 10500, Thailand
Tel: 66-(2) 6327000 Fax: 66-(2) 6327111■ Nagase (Malaysia) Sdn. Bhd.

➀Import/export, trade agency, market development,
information collection ➁RM1,500 thousand➂1981 ➃51.0%
Suite 16.01, Level 16, Menara IGB Mid Valley City,
Lingkaran Syed Putra 59200 Kuala Lumpur, Malaysia
Tel: 60-(3) 22832366 Fax: 60-(3) 22822933■ Nagase Engineering Service Korea Co., Ltd.

➀Equipment maintenance service and engineering➁WON150,000 thousand ➂1997 ➃100%
Anyang Trade Center No.925 1107 Bisan-Dong,
Dongan-ku, Anyang City, Kyongki-do, Korea 431-050
Tel: 82-(31) 3890881 Fax: 82-(31) 3890884■ Sanko Gosei Technology (Thailand) Ltd.

➀Manufacture of automobile components➁BAHT370,000 thousand ➂1997 ➃40.0%
376 Moo 4 Suksawat Rd., Soi 36, Bangpakok,
Rasburana, Bangkok 10140, Thailand
Tel: 66-(2) 4277008 Fax: 66-(2) 4274923■ Nagase Korea Corp.
➀Wholesale sales ➁WON700,000 thousand➂2001 ➃100%
The Seoul Shinmun Daily & Press Center Bldg. 10F #25,
1-Ga, Taepyung-ro, Chung-ku, Seoul, Korea
Tel: 82-(2) 7348745 Fax: 82-(2) 7348747ATOK Direct■ Automotive Mold Technology, Co., Ltd.

➀Manufacture of automotive molds and dies
➁BAHT280,000 thousand ➂2000 ➃32.1%
Amata City Industrial Estate 7/117 Moo 4,
Mabyangporn Pluakdaeng, Rayong 21140, Thailand
Tel: 66-(038) 956151 Fax: 66-(038) 956155

Johor Bahru OfficePenang Office

Suite 6.5A Level 6, Menara Pelangi, Taman Pelangi,
Jalan Kuning, 80400, Johor Bahru, Malaysia
Tel: 60-(7) 3336088 Fax: 60-(7) 3339088

1-5-14&15, 5F, Krystal Point Corporate Park, Jalan Tun,
Dr. Awang, 11900 Sungai Nibong, Penang, Malaysia
Tel: 60-(4) 6430628 Fax: 60-(4) 6432490

NAGASE & CO., LTD. ANNUAL REPORT 200771

Company name
➀Description of business ➁Paid-in capital➂Date of establishment ➃Equity ownership (*indicates indirect investment)■ Consolidated subsidiary ■ Company accounted for under the equity method (Ownership status as of March 31, 2007)■ Nagase Singapore (Pte) Ltd.

➀Import/export, trade agency, market development,
information collection ➁US$1,738 thousand➂1975 ➃100%
300 Beach Road, #39-00 The Concourse,
Singapore 199555
Tel: 65-63980088 Fax: 65-63980227

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

Vietnam Representative Office■ Nagase FineChem Singapore (Pte) Ltd.

➀Manufacture and recycling of chemical agents forliquid crystals ➁S$14,000 thousand ➂2001➃60.0%
9 Tuas View Lane 637569, Singapore
Tel: 65-68989289 Fax: 65-68985313

Nagase & Co., Ltd.
Hanoi Representative Office
Unit 807, Hanoi Tung Shing Square 2 Ngo Quyen
Hoan Kiem Dist., Hanoi, Vietnam
Tel: 84-(4) 9350110 Fax: 84-(4) 9350108

Unit 1201, Sun Wah Tower, 115 Nguyen Hue
Boulevard, Dist. 1, HCMC, Vietnam
Tel: 84-(8) 8219166 Fax: 84-(8) 8219139■ Nagase Philippines Corp.

➀Import/export and retail ➁US$1,501 thousand➂1997 ➃100%
18-B Trafalgar Plaza H.V. Dela Costa Street,
Salcedo Village, 1227 Makati City, Philippines
Tel: 63-(2) 7502935 Fax: 63-(2) 8118296■ Nagase Philippines International
Services Corp.
➀Sale of raw materials ➁US$732 thousand➂2005 ➃100%
Building 3, 123-125 Technology Avenue Phase 4,
LTI Binan, Laguna, Philippines
Tel: 63-(4) 95440678 Fax: 63-(4) 95440679

Chang Fong Overseas Enterprises (Pte) Ltd.
➀Sale of chemical products ➁S$1,000 thousand➂1980 ➃100%
31 Gul Circle, Jurong Industrial Estate,
Singapore 629569
Tel: 65-68623801 Fax: 65-68622655■ P.T. Nagase Impor-Ekspor Indonesia➀Import/export sales and import/export consulting➁US$500 thousand ➂1998 ➃90.0%
Wisma Kyoei Prince, 21F JI. Jend.Sudirman Kav.3
Jakarta 10220, Indonesia
Tel: 62-(21) 57900391 Fax: 62-(21) 57900392

Nagase India Private Ltd.
➀Import/export, trade agency, market development,

information collection ➁IRS100,000 thousand➂2006 ➃99.0%
404, Vaibhav Chambers, Bandra-Kurla Complex(BKC), Bandra East, Mumbai 400 051, India
Tel: 91-(22) 26591337 Fax: 91-(22) 26591408

New Delhi Branch625-627, 6th Floor, West Block, Meridien Commercial
Tower, New Delhi-110 001, India
Tel: 91-(11) 23716931 Fax: 91-(11) 23320632

NORTH AMERICA■ Sofix Corp.

➀Manufacture and sale of color formers➁US$20,000 thousand ➂1990 ➃49.0%
2800 Riverport Road, Chattanooga,
TN 37406-1721, U.S.A.
Tel: 1-(423) 6243500 Fax: 1-(423) 6243587■ Canada Mold Technology Inc.

➀Manufacture, sale and maintenance of metal molds➁C$5,000 thousand ➂1989 ➃53.0%1075 Ridgeway Road, Woodstock, Ontario,
Canada N4V 1E3
Tel: 1-(519) 4210711 Fax: 1-(519) 4210706

Design and Die USA Inc.
➀Design of automotive components and plastic
products/die sales ➁US$200 thousand ➂2002➃25.0%
Crystal Glen Office Center, Suite 356, 39555
Orchard Hills Place, Novi, MI 48375, U.S.A.
Tel: 1-(248) 3740490 Fax: 1-(248) 3740497

72

NAGASE & CO., LTD. ANNUAL REPORT 2007

EUROPE■ Nagase America Corp.

➀Import/export, trade agency, market development,
information collection ➁US$3,500 thousand➂1971 ➃100%

New York Headquarters
546 5th Avenue 16F, New York, NY 10036-5000, U.S.A.
Tel: 1-(212) 7031340 Fax: 1-(212) 3980687

Michigan Branch
Crystal Glen Office Center, Suite 356, 39555 Orchard
Hills Place, Novi, MI 48375, U.S.A.
Tel: 1-(248) 3740490 Fax: 1-(248) 3740497

California Branch2880 Lakeside Drive, Suite 116, Santa Clara, CA
95054, U.S.A.
Tel: 1-(408) 5679728 Fax: 1-(408) 5679729■ Pac Tech USA-Packaging Technologies Inc.

➀Semiconductor wafer bumping, manufacture and saleof semiconductor manufacturing equipment➁US$3,772 thousand ➂2001 ➃0.0%*
328 Martin Avenue, Santa Clara, CA 95050, U.S.A.
Tel: 1-(408) 5881925 Fax: 1-(408) 5881927

Nagase & Co., Ltd.
London Branch
Room No. 402-403, Regent’s Place, 338 Euston Road,
London NW1 3BT, U.K.
Tel: 44-(870) 3517200 Fax: 44-(207) 5436926■ Nagase (Europa) GmbH

➀Import/export, trade agency, market development,
information collection ➁ 700 thousand ➂1980➃100%
Immermannstrasse 65c 40210 Dusseldorf, Germany
Tel: 49-(211) 866200 Fax: 49-(211) 3237068

Hungary Representative Office
MADACH TRADE CENTER BT, H-1075
Budapest, Madach I. ut 13-14. Hungary
Tel: 36-(1) 2681705 Fax: 36-(1) 2681706■ Pac Tech-Packaging Technologies GmbH

➀Semiconductor wafer bumping, manufacture and saleof semiconductor manufacturing equipment➁ 187.9 thousand ➂1995 ➃59.9%
Am Schlangenhorst 15-17 D-14641 Nauen, Germany
Tel: 49-(332) 1449513 Fax: 49-(332) 1449522

Investor Information(As of March 31, 2007)

Stock Listings: First Sections of the Tokyo Stock Exchange andthe Osaka Securities Exchange
Ticker Code: 8012
Authorized Number of Shares: 346,980,000
Issued Number of Shares:
138,408,285
Number of Shareholders:
6,653
Principal Shareholders
Name

Number of Shares Held(Thousands)

Percentage of Total
Shares Outstanding (%)

10,37910,250
6,150
4,377
4,178
3,984
3,522
2,951
2,825
2,699

7.50
7.41
4.44
3.16
3.02
2.88
2.54
2.13
2.04
1.95

The Master Trust Bank of Japan, Ltd.
Japan Trustee Services Bank, Ltd.
The Sumitomo Trust & Banking Co., Ltd.
Sumitomo Mitsui Banking Corporation
Hiroshi Nagase
Nippon Life Insurance Company
Reiko Nagase
Mitsui Sumitomo Insurance Co., Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Nagase Shunzo Co., Ltd.

Composition of Shareholders
Securities Companies (29)660 thousand shares (0.48%)

Financial Institutions (69)55,322 thousand shares

Treasury Stock (1)9,974 thousand shares

7.21%

Foreign Investors (147)
19,832 thousand shares

14.33%
39.97%
17.79%
Domestic Corporations (289)24,627 thousand shares

20.22%
Individuals and Others (6,118)
27,990 thousand shares

Note: In addition to the above, the Company holds 9,974 thousand shares (7.21%) of treasury stock without voting rights.

Monthly Share Price Range of Nagase
(¥)

TOPIX

1,800

3,000

1,500

2,500

1,200

2,000

900

1,500

600

1,000

300

500

Share Price (left scale)Tokyo Stock Exchange Stock Price Index (right scale)00April 2002

April 2003

April 2004

April 2005

April 2006

April 2007

April 2003

April 2004

April 2005

April 2006

April 2007

Monthly Trading Volume(Thousands of Shares)
8,000

6,000

4,000

2,000

0
April 2002

NAGASE & CO., LTD. ANNUAL REPORT 200773

http://www.nagase.co.jp/
Osaka Head Office:1-1-17, Shinmachi, Nishi-ku, Osaka City, Osaka 550-8668, Japan
Tel: (81) 6-6535-2114
Tokyo Head Office:5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo 103-8355, Japan
Tel: (81) 3-3665-3021
Nagoya Branch Office:3-14-18, Marunouchi, Naka-ku, Nagoya City 460-8560, Japan
Tel: (81) 52-963-5615

Printed in Japan on recycled paper with soy-based vegetable ink.