NAGASE & CO., LTD.
ANNUAL REPORT 2013

Annual Report 2013
Year ended March 31, 2013

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

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

Osaka Head Office:1-1-17, Shinmachi, Nishi-ku, Osaka City, Osaka 550-8668, Japan
Tel: (81) 6-6535-2114

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

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

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To Our Stakeholders

Outside Director

Director and Executive Officer

Director and Executive Officer

Representative Director and Managing Executive Officer

Representative Director, President and CEO

Iwao Nakamura

Mitsuro Naba

Hiroshi Hanamoto

Kenichi Matsuki

Hiroshi Nagase

Our management philosophy is to maintain good and fair business practices,
accelerating global ‘“CHANGE” as
we practice the Nagase Way.

Representative Director and Senior Managing

Representative Director and Managing

Executive Officer

Executive Officer

Reiji Nagase

Toshiro Yamaguchi

Director and Executive Officer

Director and Executive Officer

Outside Director

Osamu Morishita

Kenji Asakura

Yasuo Nishiguchi

a specialized sales agent company representing the gold standard in the chemicals business, securing exclusive contracts to sell industry-leading products from America’s Union
Carbide (Dow Chemical), GE Plastics (SABIC), and others.
Today, our business model is undergoing a major change. In 2000, we began to build
out our manufacturing infrastructure to make fundamental structure changes. As a result,
we were able to create a new Nagase—a technology- and intelligence-oriented company
that turns wisdom into business. Our next task is to accelerate the pace of this change.
That is the role played by Change-S2014.

The Nagase Group has come together as one 5,897-employee entity, working under theguidance of our Change-S2014 medium-term management plan to focus our expertise to
create value in the most important components of our chemical value chain: Bio, Energy& Environment, and Electronics.
We started as a paint wholesaler in Kyoto back in 1832. As we began to import syn-At the Nagase Group, our management philosophy is to maintain good and fair business practices, accelerating global ‘“CHANGE” ’ as we practice the Nagase Way.

July 2013
The Directors of NAGASE & CO., LTD.

thetic dyes from Basel Chemical Co, of Switzerland (modern-day BASF), we morphed into

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Corporate Profile
Contents

The Nagase Group: A technology- and intelligenceoriented company that turns wisdom into businessLife & Healthcare
In 1832, Nagase & Co., the central company of what would become the Nagase Group, was founded as a dyestuffs wholesaler in Kyoto,
Japan. In 1900, the company started importing synthetic dyes from Basel Chemical Co, of Switzerland, pioneering new markets throughout the world in cooperation with its customers. Since that time, the Company has created a strong and growing foundation of technology,
information, and expertise. Today, the Nagase Group boasts more than 6,000 leading corporate customers, numerous employees withadvanced technical skills, a global network expanding throughout the world, strong manufacturing, research, and development functions,and a solid financial foundation.
Today, the Nagase Group combines trading company functions (in chemicals and a wide variety of fields), research and development
functions, and manufacturing and processing functions organically. We are much more than a trading firm, having grown into a Group thatcan contribute to the growth of Japan’s chemical and other industries at the highest levels, meeting the varied needs of our customers.
We have secured our position as a technology- and intelligence-oriented company (trading company) leading industry into the future.
Moving forward, the Nagase Group intends to exercise all efforts to generate more opportunities for growth, creating business with ourcustomers around the world.
0.1%

10.8%

27.0%

26
Financial Foundation
Supporting Business
Growth7
34.8%
Consolidated
Operating Profit

4.9%¥666.2 billion

15.3%

20

40.4%

Functional Materials
Advanced Materials& Processing

Automotive & Energy

Electronics

Advanced Materials& Processingng(Fiscal 2012)
32.2%

17.4%

Functional Materials¥15.5 billion(Fiscal 2012)

Automotive & EnergyLife & Healthcare

Functional Materials
Advanced Materials& Processing

Other

Electronics

Other

Nagase Group
Businesses

Message fromthe President

12
NAGASE & CO., LTD. Annual Report 2013

Corporate Profile

4

Our Strengths

8Medium-Term Management Plan Change-S2014

10

13-Year Financial Highlights

12

Message from the President

18

Nagase Group Businesses

20

Functional Materials

22

Advanced Materials & Processing

24

Electronics

26

Automotive & Energy

28Life & Healthcare

30

Greater China

31

ASEAN and the Middle East

32

Nagase ChemteX Corporation

34

Hayashibara Co., Ltd.

36

Nagase R&D Center

37

Nagase Application Workshop

38

22

Global Network

CSR Management
Directors, Audit & Supervisory Board Members andExecutive Officers

40

Corporate Governance

44

Risk Management and Compliance

47

Environmental Management

48

Nagase’s Environmental Business50

Social Contribution Activities

51

Together with Our Employees (Diversity , Work-Life
Balance, and Professional Development)

54

Six-Year Summary

55

Management’s Discussion and Analysis ofLife & Healthcare*Operating profi t composition ratio above does notreflect corporate eliminations.

18

To Our Stakeholders

2

39

25.6%

Consolidated Net Sales

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Automotive & Energy

1.7%

12.5 %

2

28

1

Operations and Finances

5
Manufacturing andProcessing Functions/
Research andDevelopment Functions

6

Electronics

24

62

Consolidated Balance Sheets

64

Consolidated Statements of Income

64

Consolidated Statements of Comprehensive Income

65

Consolidated Statements of Changes in Net Assets

66

Consolidated Statements of Cash Flows67

Notes to Consolidated Financial Statements

85

Independent Auditor’s Report

86

Consolidated Subsidiaries, Affiliates and Offices

90

Corporate Information

91

Investor Information

Forward-Looking Statements
Non-historic information contained in this annual report related to NAGASE &CO. and Nagase Group revenue and profit plans, strategies, presumptions, etc.
are forward-looking statements that include elements of risk and uncertainty.
Actual earnings may differ significantly from forecasts due to changes in theseelements. Accordingly, the reader is cautioned to refrain from placing undue
reliance on such future forecasts contained in this document. Elements that
could impact earnings results are not necessarily limited to those explicitly
noted in this document.

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Our Strengths

Global Network

In the more than 180 years since our founding, NAGASE & CO. has built a wealth of proprietary technologies
and database of information. Today, our strengths lie in our Group-wide manufacturing and research anddevelopment functions, as well as in our unsurpassed global network. These strengths have helped us createa business that adds consistent value at every stage in the value chain—from research and development tomanufacturing and processing to sales. We are creating integrated businesses that combine these strengths
with our long-standing trading company functions (logistics, risk assumption (credit risk), cross-selling).
EuropeNortheast Asia

Net sales ¥17.0 billion
Operating bases: 2 companies
Number of Employees: 166(•: 132, •: 34)

Net sales: ¥175.9 billion
Operating bases: 29 companies
Number of Employees: 1,464(•: 731, •: 733)

Japan
Net sales: ¥361.9 billion
Operating bases: 44 companies
Number of Employees: 3,526(•: 1,809, •: 1,717)

Global Network

The Value Chain

Technology andInformation

Manufacturing andProcessing Functions/
Research andDevelopment Functions

Solid Financial
Foundation

4

The Nagase Group has created a truly global network,
expanding from Northeast and Southeast Asia to
Europe and throughout the Americas, all the time adding to our worldwide presence in sales, manufacturing,and processing services.

Each business in the Nagase Group focuses on creating greater value in every point along the value chain,from upstream to downstream.

Nearly 60% of all Nagase Group employees hail from atechnical background. This gives us an incredible
advantage in developing profitable relationships withour customers based on high-level technical information. Our 6,000 customers are leaders in their fields.
We work closely with our customers in research anddevelopment across a wide range of cutting-edge
fields, creating new technologies, new products, andnew markets.

In addition to core manufacturing technologies inorganic synthesis, enzymatic reaction, and blend, weare also very skilled in glass processing and other
niche technologies, genetic screening, mass production and other advance technologies, using this combination of skills to engage in manufacturing anddevelopment activities that lead to high-value-added
products.

As of the last day of the fiscal year ended March 2013,
our shareholders’ equity ratio sat at 46.9%, reflecting
the strong financial foundation of the Nagase Group.
The Rating and Investment Information Inc. has given
the Nagase Group an A issuer credit rating.

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The Nagase Group Business Model.AGASES
5NIQUE 3TRENGTHS

4RADITIONAL 4RADING#OMPANY &UNCTIONS

s-ANUFACTURING AND
0ROCESSING &UNCTIONSINTERNAL 'ROUP PRODUCTS
s4ECHNOLOGICAL #APACITY AND)NFORMATION 'ATHERING &UNCTIONS
s2ESEARCH AND $EVELOPMENT&UNCTIONS 2$ #ENTER
s'LOBAL .ETWORKs6ALUE #HAIN COMPLETE
UPSTREAM TO DOWNSTREAM)MPROVE)NVEST

North, Central andSouth America

Southeast Asia
Net sales: ¥85.8 billion
Operating bases: 19 companies
Number of Employees: 578(•: 85, •: 493)

Net sales: ¥25.4 billion
Operating bases: 9 companies
Number of Employees: 163(•: 102, •: 61)s,OGISTICS
s2ISK !SSUMPTION•Manufacturing and processing companies•Sales and servicing companies

#REDIT 2ISKs#ROSS SELLING

Stronger/
DeeperIntegration

Consulting/Proposal

WisdomThe Globally Expanding Nagase Network

Training Global Business Leaders

The Nagase Group is engaged in activities around the world that rely on
the use of chemicals across a wide spectrum of products and services
through our Functional Materials, Advanced Materials & Processing,Electronics, Automotive & Energy, and Life & Healthcare segments.
These products and services include dyes/pigments, coating materials/
inks, surfactants, office automation (OA), electrical equipment, homeelectronics, automobiles, LCDs, semiconductors, pharmaceutical/medical applications, cosmetics and functional food ingredients.
We have grown to become a global technology and information
network with 103 companies in 20 overseas countries and 5,897
employees (consolidated) worldwide.
As a result, overseas sales accounted for 45.7% of consolidated
net sales. We will continue to pursue a course of stronger marketing in
all regions, leveraging investment in growth markets and interregional
projects to create new overseas businesses.
During Fiscal 2012, the Nagase Group established its first businessin Brazil for the purpose of monitoring the bio business and otherdeveloping businesses in South America.

We count our employees and their understanding of advanced technical information as one of our strengths. By fostering a culture of training and through a mentoring system, we are creating the next
generation of global business leaders.

See page 52

Human Resources Development

Comparison of Net Sales by Region
Japan

Asia

America and Europe

Northeast Asia

Southeast Asia

(％)

100

2

6

27

26
39

13

50

71

54

0
01/3

Business Creation

13/3

Net sales

Net sales¥550.2 billion¥666.2 billion

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Manufacturing and Processing Functions/Research and Development Functions

During fiscal 2012, Hayashibara Co., Ltd. decided to move the
Okayama No. 1 Plant (responsible for manufacturing functional saccharides) and improve its manufacturing capabilities. The goals of this initiative were to improve manufacturing efficiencies, to ensure the stablesupply of existing products, to add production capacity, and to deal withthe production of new products. The Group has likewise made the decision to establish a new Nagase ChemteX (Wuxi) Corp. research anddevelopment facility to enhance the company's ability to develop customized products that meet the needs of the local customers in theelectronics industry.

While the Nagase Group has worked from day one to expand our business as an almost exclusive importer and agent for foreign companies,changes in the market structure of Japan have meant that our competitive advantage in this country has declined gradually. In response tothis trend, we defined a new business model for the Nagase Group in
the year 2000, strengthening our manufacturing functions to add greater value and improve our business offerings as a technology- and intelligence-oriented company that turns wisdom into business. Today, theNagase Group counts 50 manufacturing and processing companies in
our family. As a Group, we deal in pharmaceutical, functional polymers,
electronics materials, plastics, cosmetics, and functional food ingredients production and processing, creating our own value-added products in addition to intermediary business. In addition, the Nagase
Group's R&D Center works closely with Group manufacturing companies in all fields, engaging in research and development activities. As aresult, our manufacturing businesses account for more than 37% of
operating profit, and have led to a notable improvement in our grossprofit ratio as well.

Manufacturing/
Processing
Bases

50

Manufacturing Ratio(Net Sales and Operating Profit)
Operating profit

Nagase ChemteX Corporation

See page 34

Hayashibara Co., Ltd.

See page 36

Nagase R&D Center

See page 37

Nagase Application Workshop

29.0

12

10.8

11.1

11.3

10.0

31.3

Cash Flows
Cash flows from operating activities
Free cash flows

Cash flows from investing activities(Millions of Yen)

40,00036,161

30,00027,87525,09918,43720,00018,576
10,997

10,000
1,850

5,690

9,047

0
-10,000(11,062)(9,438)(9,147)

09/3

10/3

11/3

(9,529)(81,066)-80,000(75,376)

12/3

13/3

Shareholders’ Equity / Interest-bearing Debt /D/(D+E) Ratio* / Net Worth Ratio
Shareholders’ equity

Interest-bearing debt

D/(D+E) ratio

Net worth ratio(Millions of Yen)

12.4

(%)

35.4

The Nagase Group does not engage in investment or financing for purposes of speculative income generation. Through manufacturing, R&D,
technology, business intelligence, and a global network—what we perceive as our competitive strengths along our Group value chain( See page 4 the Nagase Group Business Model)—we create uniqueand highly competitive businesses. These businesses allow us to
improve our service quality and value as a corporation. Our
Change-S2104 medium-term management plan (fiscal 2012 throughfiscal 2014) calls for ¥40.0 billion in investments and financing. We
intend to follow these policies to continue to grow as a business.
When investing, we will always improve cash flows of the businesses, enhancing systems in order to understand efficiency and effectiveness of investment, and raising corporate value. In order tomaintain stable financial strength, we have determined D/(D+E) = 33%(D:E = 1:2) as the maximum limit of debt to equity and will try to raise
corporate value by maintaining or even improving our rating.
Liabilities and interest-bearing debt grew significantly during fiscal
2011. These funds were raised from financial institutions or throughthe issuance of unsecured bonds for the purpose of acquiring ofHayashibara Co., Ltd. and the conversion of that company to a Groupsubsidiary. Despite the increase in liabilities, the Group maintained afinancially sound shareholders' equity ratio of 46.9% (as of March 31,2013).
* D/(D+E) Ratio: Interest-bearing debt (D)/(Interest-bearing debt
(D)+Owned capital (E))

Net sales

37.3

Investing for Greater Corporate Valuecompanies in 13 countries

Gross Profit Ratio

(%)

40

See page 32

Financial Foundation Supporting Business Growth

The Nagase group uses the D/(D+E) ratio as an indicator for understanding the balance of financial resources. Utilization of interest-bearing debt is necessary for effective investment, but maintaining a sound financial basis is indispensable forcontinuous development of our business. We therefore have determined D/(D+E)
ratio = 33% (Interest-bearing debt: Owned capital = 1:2) as the maximum limit ofdebt to equity.

(%)

250,000
200,000

54.1
184,599

53.7

53.1

201,516

195,344

204,706
45.4

46.9

30.2

30.1

150,000
100,000
10.1
31,34048.0
36.0

98,42588,71014.5
50,00060.0

228,505

12.0

11.9
27,12521,886

0

0

09/3
20

24.0

10/3

11/3

12/3

13/3

6

15.5

Rating
9.9

10.0

10.4

12.1

13.4

0

0
09/3

6

10/3

11/3

12/3

NAGASE & CO., LTD. Annual Report 2013長瀬13̲E̲本文̲PDF用.indd 6-7

13/3

09/3

10/3

11/3

12/3

13/3

AgencyType

RatingRating and Investment
Information, Inc.

Issuer credit ratingA

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Change-S2014 Medium-Term Management Plan (Fiscal 2012 through Fiscal 2014)
Basic Strategies

Environment/Energy Initiatives

Speed Up

Accelerate the improving quality of our business and operations

Step upBring the total strength of the Nagase Group to bear throughout the value chain in
our strategic markets

Sustainable growth

Expand our unique solutions globally, creating sustained growth

The Nagase Group is creating a new business model anticipating global
technological innovations in green energy, bringing our entire force tobear in businesses focused on friendly manufacturing (using electricity
generated from solar power, wind power, and other renewable sources),
Area of functional materials
Special organic chemicals
Resin/Coating raw materials

smart grids, and energy conservation systems, as well as next-generation
automobiles that make smart use of resources. We are also advancing
research into reducing the environmental burden of business, such as
chemical recycling and creating lighter components for automobiles.

Area of processed materials
Engineering

Area of final application
Renewable energy generation

Smart grid

Environmentally-friendly vehicle

Solar power, wind power, biomass

HEMS/BEMS
High capacity storage batteries

Car electronics devices
Power modules
Light weight units

Plastics
Films sheet
Surface treating agent

The theme of Change-S2014 is to ACCELERATE ‘“CHANGE” ’, pursu-

Change-S2014 Numerical Targets
Consolidated Net Sales¥800.0 billion

ing a basic strategy as outlined above to achieve growth based on a val-

Consolidated Operating Profit¥30.0 billion

ue-chain strategy, focused on markets using technologies from bio,

ROE

8.0%

Three-Year Investment¥40.0 billion

environment and energy, and electronics.
Of the five Nagase business segments, Functional Materials is
located at the top of the value chain. The Advanced Materials &Processing segment is located in the next stage of the value chain,followed by the Electronics, the Automotive & Energy, and the Life
& Healthcare segments functioning across all industries. These
five segments are tasked with ACCELERATING ‘“CHANGE” ’,following two key strategies: Globalization and the creating of
high-added-value businesses and create new opportunities bytaking advantage of the Group’s strengths in core fields related tobioscience, environment and energy, and electronics. This will beaccomplished by combining the Group’s foundational technologies
with the functions of each business segment.

Value Chain Strategies

Electronics Initiatives

Core markets (bio, environment and energy, electronics)
Value chain
SupplySupplyCollaboration

Electronics

Materials

Collaboration

Materials

Collaboration

Automotive & Energy& Processing

SupplyCollaboration
Collaboration

Life & Healthcare

SupplyBio Initiatives
Working from the Hayashibara business, we will create aquicker feedback loop from the market through the integrationof the Nagase Group research and development and sales
functions. Our goal is to create highly original bio-related
products, expanding sales of the same throughout the world,which will lead to a stronger competitive position and higher
growth in the medical, food, health and beauty markets within
our Life & Healthcare segment. We are also moving forwardwith initiatives to expand bio-related technologies into generalcommercial applications, as well as looking into the use ofrenewable resources over the long term.

8

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our customers. At the same time, we are moving forward in strengthening
our overseas manufacturing and development functions to accelerate ourgrowth in the global market.

Collaboration

Advanced
Functional

SupplyThe electronics field is one of rapid technological innovation and structural change. Here, our goal is to expand our business by offering highly
innovative technologies, products, and services that meet the needs ofStronger Management Foundation
Where the Japanese market has slowed compared to the growing markets in emerging countries, the Nagase Group has chosen to focus on
expanding business in emerging and other international markets, establishing high-value-added businesses using our manufacturing andprocessing functions.
Through investments in manufacturing, we have increased Group-wide manufacturing and processing bases in Japan and around theworld, changing the fundamental shape of internal risk in the Group’s manufacturing businesses. To respond to these internal and externalchanges, we are engaged in creating a stronger consolidated management structure, building more mature risk management policies, anddeveloping higher-caliber human resources.

Scale

Bio-derived chemicals
・Speciality chemicals
・Functional chemicals

Life and healthcare(medical, food, health, beauty)

General industry
・Freshness-preserving film
・Improvement of water-based paint・Ink additives

Application development+
Global network

Total power

Functionalsaccharides

Future• Improved Consolidated Management Structure• Stronger Risk Management

With respect to strengthening the consolidated management structure,
we continue to build a more efficient Group management structure,encourage personnel interchange within the Group, and improve our IT
infrastructure. To ensure a sound financial foundation, we are working tobalance liabilities and equity at prudent levels, while keeping an eye open
for any changes in our credit rating. At the same time, we are improving
our ability to forecast present and future operating cash flows to balance
investment (risk assets) and operating cash flows properly. From a perspective of efficient asset utilization, we are replacing older assets withnewer, more profitable assets.

See page 44
Risk Management and Compliance
We are in the process of putting stronger systems into place for internal
controls, risk management, and transaction risk control across the Group’s
companies.

• Human Resources Staff Training
Professional Development
We are also in the process of establishing a stronger Group managementfoundation through hiring, training, and utilizing a talented workforce thatcan respond to the diverse demands of our businesses.
See page 52

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13-Year Financial Highlights
NAGASE & CO., Ltd. and Consolidated Subsidiaries (Years Ended March 31)(Millions of Yen)

2001/3

2002/3

2003/3

2004/3(Millions of Yen)

2005/3

WIT2000 (Reform)

2006/3

2007/3

2008/3

WIT21 (Promotion)

Investment Amount: ¥20.2 billion

2009/3

2010/3

WIT2008 (Reinforcement)

Investment Amount: ¥23.7 billion

2011/3

2012/3

2013/3‘“CHANGE”11’ (Improving quality of our business and operations)

Investment Amount: ¥27.7 billion

Change-S2014
Investment Amount:¥12.0 billion

Investment Amount: ¥107.4 billion

Performance (Accounting Fiscal Year)

Segments

Net Sales
Functional Materials (formerly Chemicals)
Advanced Materials & Processing (formerly
Plastics)
Electronics¥ 559,372
237,871¥ 490,583
218,524¥ 503,688
223,656

205,460

175,252

103,382

83,660Automotive & Energy¥ 533,301
231,360¥ 575,636
251,725¥ 648,023
222,282¥ 701,321
247,094¥ 764,755
267,836¥ 715,238
248,461

165,810

170,996

188,456

229,278

244,681274,660

253,02999,759118,978

122,632

132,086

150,796

163,833

153,255¥ 603,949
237,124¥ 660,213
253,290¥ 631,854
177,126¥ 666,272
180,025

192,569

222,100

217,929

214,546

117,591

133,640

110,495

116,105

—

—

—

—

—

—

—

—

—

—

—

76,11383,06812,65813,146

14,461

11,966

12,821

56,40453,55656,48958,90555,54250,24749,17071,685

—

—

—

—

—

7,972

5,191

1,934

1,585

1,121

934

1,018

841

Domestic
Overseas392,555
166,817

341,102
149,481

337,531
166,157

349,557
183,744363,708
211,928

388,470259,553

410,789
290,532

432,813331,942394,874
320,364

360,382
243,567

389,379
270,833

366,369
265,484

361,971304,301

Gross Profit

55,14046,97651,89953,494

61,96067,64073,63980,506

71,52765,41573,00871,62882,583Operating Income

7,752

1,673

8,433

10,244

13,256

17,596

21,66923,063

12,522

13,12818,732

13,427

15,578Net Income (Loss)

4,945( 2,097)

4,186

7,010

10,384

12,892

13,567

10,005

5,808

7,537

12,8238,570

14,182

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

Equity Capital

153,498

144,176

140,944

156,210167,092

196,620

205,083

200,554

184,599

195,344

201,516

204,706

228,505

Interest-Bearing Debt

23,87819,677

16,57816,417

14,01924,834

20,49133,342

31,34021,88627,12588,71098,425

Life & Healthcare (former Healthcare/Other)
Regions

Other

Financial Condition:

(Yen)

¥

450,842¥486,747(Yen)

Per Share Data:
Net Income (Basic)¥

Net Assets

1,104.81

35.28¥

1,082.16

Cash Dividends

8.0

8.0

Payout Ratio (%)

22.5

—

Shareholders’ Equity Dividend Rate (%)

0.77

0.72

0.71

(15.39)

¥

31.72

81.00

¥ 100.32¥ 105.84

1,227.82

1,311.37

1,535.70

1,597.27

1,559.97

1,435.88

1,519.61

1,568.04

1,592.87

1,803.31

8.0

9.0

10.0

15.0

18.0

17.0

16.0

16.0

22.0

24.0

26.0

24.3

16.3

12.3

14.9

17.0

21.8

35.4

27.3

22.1

36.0

23.4

0.77

0.79

1.06

1.15

1.08

1.07

1.08

1.42

1.52

1.53

1,107.55

¥

54.69

¥

¥

77.86

(%)

¥

45.17

¥

58.64

¥

99.76

¥

66.69

¥

111.31(%)

Ratios:Overseas Sales to Net Sales

29.8

30.5

33.0

34.5

36.8

40.1

41.4

43.4

44.8

40.3

41.0

42.0

45.7

Manufacturing Ratio (Operating Income)11.3( 9.6)

21.4

19.2

16.4

20.5

22.3

24.4

15.5

35.4

29.0

31.3

37.3

Operating Margin (Operating Income/Net Sales)

1.4

0.3

1.7

1.9

2.3

2.7

3.1

3.0

1.8

2.2

2.8

2.1

2.3

Return on Equity (ROE)

3.4( 1.4)

2.9

4.7

6.4

7.1

6.8

4.9

3.0

4.0

6.5

4.2

6.5

Net Worth Ratio

43.4

48.0

49.5

50.3

49.8

49.6

48.5

47.8

54.1

53.1

53.7

45.4

46.9

Debt Equity Ratio (Times)

0.16

0.14

0.12

0.11

0.08

0.13

0.10

0.17

0.17

0.11

0.13

0.43

0.43

(Note 1) In the fiscal year ended March 2006, the Fine Chemicals Department (part of the Chemicals segment) was integrated with the Healthcare segment. The combined organization is now known as the Life Sciences segment.
(Note 2) Beginning with the fiscal year ended March 2010, the Company has moved its information and functional materials businesses handling materials related to insulating materials and fluoroplastic-related materials from the Electronics segment to the Chemicals segment. Businesses handling surface detection machines for functional films and sheets have been moved under the Plastics segment.

Composition Ratio of Net Sales by Region

Net Sales

Operating Profit

Trading BusinessNorth America

Europe3.8%

2.6%

Southeast Asia

Manufacturing Business¥666.2
Northeast Asia

billion26.4%

長瀬13̲E̲本文̲PDF用.indd 10-11

Net Assets (left)

ROE (right)(Millions of Yen)

(Millions of Yen)(%)

25,000250,000

10.0

20,000200,000

8.0

15,000150,000

6.0

10,000100,000

4.0

5,000

50,000

2.0

0

0

0.0

600,000

54.3%
400,000

200,000-2.0-5,00001/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3

NAGASE & CO., LTD. Annual Report 2013

Net Assets/ROE
Manufacturing Business(Millions of Yen)

0

10

Trading Business

800,000

12.9%
Japan

(Note 3) During the fiscal year ended March 2013, the Nagase Group reorganized its four business segments into five business segments (Functional Materials, Advanced Materials & Processing, Electronics, Automotive & Energy, and Life &Healthcare) to more fully reflect the respective positions of each business in the value chain. For comparative purposes, fiscal 2011 figures have been calculated using the new business segments. The Colors & Imaging Department formerly under the Chemicals segment has been moved under the Advanced Materials & Processing segment. The Automotive & Energy segment was organized out of the Automotive Solutions Department (belonging to the Plastic segment) and the Energy Business Office, which was launched as an integrated entity from the Environment & Energy Office (under Other) and the Energy Device Office.

01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3

01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3

NAGASE & CO., LTD. Annual Report 201311

13/08/12 17:15

Message from the President
Operating Profit by Segment
12/03

13/03

(¥ hundred million)

The Nagase Group is growing ourpresence in the bio, environment/
energy, and electronics fields
through intersegment cooperating
and investment, driving strategic
growth.

100
80
60 62

62
54

60

39

40

29

23

20

9 7

7

0
-20
(36) (34)-40-60Functional Advanced Electronics Automotive
Life &
Other,
Materials Materials& Energy Healthcare Corporate,& Processing
Eliminations

Operating Profit Change Factors (PY Actual vs. CY Actual)
Plus Factors

Minus Factors

tablet markets. However, economic stagnation in Europe and the anti-Japanese sentiment in China due tothe Senkaku Islands issue were two factors that placed downward pressure on growth. As a result, theNagase Group saw slowness throughout the year in our trading business (particularly Functional Materials
and Advanced Materials & Processing) and domestic manufacturing services. The main factors that worked
to combat this slow activity were the consolidation of Hayashibara Co., Ltd. and an accounting change inmoving from the declining balance method to the straight-line method of depreciation.
Looking at performance by region, the Group recorded net sales in overseas markets of ¥304.301 billion(14.6% year-on-year growth) representing a strong 45.7% of consolidated sales (3.7 point year-on-yearincrease). We saw particular growth in Northeast Asia ( See page 30 Greater China ), with net sales of ¥175.965
billion (13.0% year-on-year growth), and Southeast Asia ( See page 31 ASEAN and the Middle East ), with net sales
growth of 17.8% to ¥85.881 billion.
The Group recorded ordinary income of ¥17.92 billion (14.3% year-on-year increase). While the Group
recorded higher interest expense for long-term funds raised for purchasing Hayashibara Co., Ltd., we also
saw higher equity method income. The Group recorded net income of ¥14.18 billion (65.5% increase). An
impairment loss of ¥1.89 billion for less-profitable manufacturing facilities was offset by a gain on sale ofnon-current assets (replacement of business-use land) in the amount of ¥3.35 billion. We also recorded
deferred tax assets of ¥1.42 billion, considering a possible recovery of deferred tax assets related to
Hayashibara’s loss carryforwards based on the business plan.

(¥ hundred million)+18 (1) (17)

180

2,000

1,771 1,800

1,500
1,104 1,161
1,000
761

830
716
491

500

10 8

0
Functional Advanced Electronics Automotive
Life &
Materials Materials& Energy Healthcare& Processing

12

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Other

Eliminations

2,179 2,145

Europe, America

2,500

GC

(¥ hundred million)

For the fiscal year ended March 2013, the Nagase Group recorded higher year-on-year revenues and profits, with consolidated net sales of ¥666.272 billion (5.4% year-on-year increase), consolidated operating
profit of ¥15.578 billion (16.0% increase), and net income of ¥14.182 billion (65.5% increase). Given thatthe final-year targets for our Change-S2014 medium-term management plan (fiscal 2012 through fiscal
2014) are consolidated net sales of ¥800 billion and operating profit of ¥30 billion, we must admit that weare lagging behind in achieving our goals.
Earnings by segment are as follows: Year on year, the Functional Materials segment recorded higher
revenues and lower profits, with net sales of ¥180.025 billion (1.6% year-on-year increase) and operating
profit of ¥5.428 billion (13.6% year-on-year decrease) See page 20 Functional Materials . The Advanced
Materials & Processing segment recorded lower revenues and profits, with net sales of ¥214.546 billion(1.6% year-on-year decrease) and operating profit of ¥2.386 billion (19.9% year-on-year decrease)
See page 22 Advanced Materials & Processing . The Electronics segment experienced higher revenues and profits,with net sales of ¥116.105 billion (5.1% year-on-year increase) and operating profit of ¥6.297 billion (4.6%
year-on-year increase) See page 24 Electronics . The Automotive & Energy segment recorded higher revenues
and lower profits, with segment net sales of ¥83.068 billion (9.1% year-on-year increase) and operating
profit of ¥763 million (18.5% year-on-year decrease) See page 26 Automotive & Energy . The Life &Healthcare segment recorded higher revenues and profits, with net sales of ¥71.685 billion (45.8% yearon-year increase) and operating profit of ¥3.986 billion (464.6% year-on-year increase)
See page 28 Life & Healthcare .
Conventional wisdom called for a gradual economic recovery for fiscal 2012, with higher demand forpost-disaster services in the wake of the March 11 earthquake and growth driven by the smartphone and

ASEAN

Reflection on Fiscal 2012 Earnings

13/03(3) +3 (0.1) (0.2) (2)155
Domestic sales

Includes Hayashibara
goodwill intangible
asset amortization

12/03

Domestic manufacturing

134

120

Net Sales by Segment

New consolidation

140

Impact of change in depreciation method

Hiroshi Nagase+26 +1160

NAGASE & CO.

President

Change-S2014 Medium-Term Management Plan: First-Year Initiatives

100
Fiscal2011
Year-End

Fiscal2012
Year-End* GC: Greater China

Overseas Sales by Region (vs. PY)
Northeast Asia

Southeast Asia

North America

Europe & Other(¥ hundred million)

3,500
3,043
3,000

2,654
156
212

2,500
2,000

170
254

109%
120%

858

118%

728
1,500
1,000
500
1,759 113%

1,556
0
12/3

13/3

Our Change-S2014 medium-term management plan is a plan that builds upon the five goals of the‘“CHANGE”11 ’ plan: (1) Speed up the pace of reform; (2) Pursue growth in Life Sciences andEnvironment/Energy businesses; (3) Facilitate greater intersegment cooperation; (4) Create a stronger management matrix at the intersection of business and geographical location; and, (5) Pursue higher-addedvalue in our businesses. The overall theme of Change-S2014 is ACCELERATE “CHANGE” , adopting
value-chain strategies in our target fields; namely, bio, environment/energy, and electronics. See page 8Intersegment cooperation lies at the core of our value-chain strategy. The Functional Materials segment
is positioned to provide upstream information, while the Advanced Materials & Processing segment is positioned to function mid-way between upstream and down, and is responsible for sharing function-related
information in both directions. The Electronics segment puts out information regarding electronics market
needs and seeds. The Automotive & Energy segment issues information about trends in smart cities, automobiles (EV, HV), and renewable energy. Lastly, the Life & Healthcare segment generates and issues information regarding the expansion of Hayashibara products in the market. The Group has been very focused
and active in information generation and sharing, as well as staffing exchange programs, the results ofwhich have showed good progress in the first year of our new management plan.
One example of this type of cooperation is how we have vastly improved our staffing programs andlogistics functions through intersegment cooperation with respect to our work with major U.S. smartphone
and tablet device makers. As a result of this work, we have expanded the types of products in which we
deal. We have also established more timely communications among our locations and segments withrespect to U.S. Engineered Materials Systems Inc. (converted to a Group subsidiary as of fiscal 2011) formulated epoxy business. At the same time, we established a Regional Operating Centre (virtual organization
with functions to integrate businesses) in Singapore. These measures have helped us quickly ramp up our
strategic projects in ASEAN (e.g. automotive field, OA field, Hayashibara and other business food products,
cosmetics and perfumes, etc.). We are seeing moves to this type of cooperation in all aspects of our business, which I believe has greatly expanded our view of the long-term future.
I believe that the change in mind-set among local overseas staff and the increase in the volume of
information shared locally has played a role in building the foundation of these cooperative activities. These
are the results of one of our focus initiatives from ‘“CHANGE”11 ’, our prior management plan.
Having promoted more local management and staff training, we have come a long way in realizing a future
where local staff, rather than Japanese assignees, run local entities. See page 53 At the same time, we have

NAGASE & CO., LTD. Annual Report 201313

13/08/13 10:48

been able to improve our IT infrastructure (core systems) to the point where we have eliminated information
gaps among our widespread locations, allowing each employee to contribute to the entire breadth of thevalue chain. The result is an increase in joint projects through local channels and an acceleration in ourhuman and information network, which is quickly turning into a mesh-shaped structure spanning all of ouroperations.
At the same time, creating new businesses through cooperation also brings with it a new type of latentrisk. Take, for example, a case in which NAGASE & CO., a materials company and a processing company
come together on development and sales of a new product. The ultimate liability for the product lies withNAGASE & CO. as the product manufacturer. Accordingly, Nagase may need to direct other entities in compliance with respect to product safety, quality, hygiene management, and perhaps even in regulatory compliance. We are working to shore up our systems to strengthen these types of functions at the segment andcorporate (management center) levels. See page 44

Life & Healthcare’s Business Domains

Our major initiatives for the first year of our Change-S2014 management plan are as show in the chart
below.

Life & Healthcare Products Market(1)

The mainstay Hayashibara products in the food industry reported strong sales, as well as the development and launch of new products. We are building a stronger foundation from which to expand Hayashibara product sales overseas, and we have also revised our policies for sales agents. Group management made the decision to move andimprove the functional saccharide manufacturing functions currently performed by the Okayama No. 1 Plant. These measures are designed to improve manufacturing efficiencies, ensure the stable supply of existing products, and give us flexibility to expand our manufacturing capacity. See page 34(2)

The next-generation agri-industrial bio production project we are currently running in cooperation with Kobe University and other labs was adopted by the Ministry of
Education, Culture, Sports, Science and Technology as a continuing program to run through fiscal 2018. The Nagase R&D Center leads this program in promoting biotechnology research and development.

(3)

Brazil and South America as a whole are very active in the food and agriculture industries. Here, we established our first Brazilian entity (July 2012) to monitor the bio-business and other development business markets in the region.

Fields using environment- and energy-related technologies(1)

Sales of photovoltaic power generation systems for industrial use have performed well due to the launch of a feed-in tariff scheme for renewable energy.

(2)

CAPTEX Co., Ltd. manufactures and sells storage battery systems designed with lithium ion rechargeable batteries. The company began mass production of these systems
at its Okazaki City, Aichi Prefecture plant in April 2012. In fiscal 2013, the company plans to begin sales of compact power generation systems, and has been accelerating
development for applications using their own proprietary technologies. See page 27

Fields using electronics-related technologies(1)

U.S. Engineered Materials Systems Inc. (acquired in January 2012) has reported strong sales of conducting materials for electronics components used in tablets and otherproducts.

(2)

Nagase ChemteX (Wuxi) Corp. will open a new research and development facility to expand R&D functions for products tailored to the local markets. This facility is scheduled to open during fiscal 2013. See page 32

Stronger Operating Foundation(1)

The Group created Investment Guidelines to clarify investment standards and speed up the decision-making process. These Guidelines will also help management monitor
investment performance.

(2)

To strengthen our transaction risk management as a manufacturer, we have started to implement ways to visualize and reduce risk.

(3)

The Group established a Regional Operating Centre in Singapore. This Center is one way in which the Group is moving to expand our business and strengthen our management inside and outside ASEAN. See page 31(4)

We have increased the level of human resources exchange among our related companies, affiliates, and overseas entities, while moving forward with evolved Group-wide
human resources systems. One example of this is the start of an integrated human resources system for local Greater China entities through the offices of NMC(Shanghai). See page 30

New Growth Strategies: Bio Vision (Hayashibara and Others)
To date, the Nagase Group business portfolio has been heavily weighted toward the economy-sensitiveelectronics and automobile sectors. This has meant that our business has been affected to a larger degreeby the ups-and-downs of the economy. It goes without saying that we have made great strides in improving

14

NAGASE & CO., LTD. Annual Report 2013長瀬13̲E̲本文̲PDF用.indd 14-15

Pharmaceutical/
Medical Materials

FOOD
Food
Beverages

EnzymeMarkets for
Animals/Plants

Agriculture

Cosmetics
Toiletries

MedicalMaterials

Formulation

Functionalsaccharides

Feed, Fertilizer, Cultivation

FEED

People/Animals/Plants

Fields using bio-related technologies

Marketsfor People

our portfolio by adding Hayashibara and building a stronger bio business. We have re-examined our business structure for the future of our Life & Healthcare segment, repositioning this segment to contribute tohealthier, happier lifestyle in our target, food/beverages, cosmetics/toiletries, and pharmaceutical/medical
materials businesses.
First in our specific growth strategies is to focus on marketing for Hayashibara functional saccharide
materials and Nagase ChemteX Corp. enzymes/phospholipid materials, cultivating products in the food andcosmetics/toiletries fields. We are focusing particularly on overseas business development for Hayashibara’s
trehalose (TREHATM) functional saccharide materials*1 and stabilized vitamin C (AA2GTM)*2 products. At thesame time, we are beginning to look at possibilities for general commercial uses of these products.
Meanwhile, we are developing and launching new products, including monoglucosyl hesperidin (Glucosyl
Hesperidin), used in food for specified health use.
A second strategy is in the Nagase Group's pursuit of development in bio-derived chemicals. As fossil
resources are depleting, the advent of shale gas has been prominent in the energy sector; however, the biorelated technologies in this field are also gaining traction around the world. There are mainly three factors
within this point: (1) Development of functional products through the hybridization of organic biochemicals;(2) Existing chemical alternatives in bio-technologies; and, (3) Development of basic technologies for specialty chemicals. We are approaching these business opportunities from a manufacturer's perspective, rather than as traditional buy-sell businesses.
To accomplish these growth strategies, we are re-examining our Group R&D functions, clarifying theroles between corporate R&D and manufacturing company R&D, delving deeper into our proprietary fields.
At the same time, we are working to beef up Group-wide R&D functions in coordination with all Group companies. We are reconsidering the operating structure for our corporate R&D (Nagase R&D Center) to clearly
define Group-wide functions and technological areas as we build our bio-related business. In April 2013,
the Nagase Group established the R&D Center Management Group. The purpose of this organization is tobroadcast and share information about the Nagase R&D Center research and development operations witheach division and manufacturing company in the Group.
We encourage our readers to reference the Group's Change-S2014 medium-term management plan
to understand our strategies for growth in environment and energy, electronics, and other segments.
See pages 8

See pages 20-29*1 TREHATM is the result of the successful mass-production of historically expensive-to-produce trehalose, reducing manufacturing costs to 1/100th of the former
cost. While trehalose had only been used in pharmaceuticals in the past, it has now found applications in the food industry, driving growth at Hayashibara.
*2 AA2GTM is a product that combines glucose with vitamin C (normally sensitive to heat and shock) to improve the effects of vitamin C in the body. It is also used
in whitening cosmetics.

Toward Better Investment Quality and Results
Under our Change-S2014 medium-term management plan, we intend to invest a total of ¥40.0 billion
over the course of three years. More specifically, we will dedicate ¥30.0 billion in new investments in core
fields, with another ¥10.0 billion scheduled for investing in existing facility upgrades. For fiscal 2012, weinvested ¥12.05 billion, allocated as shown in the following table.
Major Investments■ Established NAGASE DO BRASIL REPRESENTAÇÃO COMERCIA LTDA. (Brazilian entity)■ Acquired building next to Tokyo headquarters building■ Established a joint-venture company in Mexico to manufacture urethane seat pads for automobiles■ Added to Nagase Medicals Co., Ltd. Production Center No. 2 (anti-cancer vial drug manufacturing
facility)■ Constructed Okinawa Plant for Totaku Industries, Inc. (answering demand for bridge-related materials in Okinawa)
Major Investments Scheduled for Fiscal 2013

■ Move and function expansion for Hayashibara Plant No. 1

NAGASE & CO., LTD. Annual Report 201315

13/08/13 10:48

The Group purchased the building next to the present Tokyo headquarters building for the purpose ofgaining operating efficiencies by consolidating widespread Group company locations. The Group is also
constructing a research facility in Sendagaya (Tokyo). This facility will offer employee training and cooperative project conferences, as well as complement the Tokyo headquarters business continuity planning functions during times of disaster or other crisis. With respect to joint project conferences, in particular, theGroup had difficulties in securing meeting space near Narita Airport, which is a convenient location for visitors from different countries. The Group expects to see even more in the way of emerging businesses andtalented employees.

The Nagase Group Investment Guidelines
To extricate ourselves from a business model relying on master distributor licenses, the Nagase Group committed in the year 2000 to strengthening our own manufacturing functions, investing over a 12-year periodin our manufacturing capacity, beginning with our WIT management plan (fiscal 2000 through fiscal 2008)
and extending through our ‘“CHANGE”11 ’ plan (fiscal 2009 through fiscal 2011). One of the mainconcepts in our current Change-S2014 medium-term management plan is the creation of high-addedvalue businesses, under which we plan to invest in improving Group functions. Looking back over the past
12 years, we noted several unprofitable investments and investments in which we did not gain the intended
synergies, calling for the need to establish clearer investment standards. Our Investment Guidelines andInvestment Checklist are two tools designed to improve the quality of Nagase Group investments.
Specifically, the Group is considering qualitative information regarding market trends, competitive
advantage, Group synergies, operating systems, and likely risks. Investments will be quantitatively measured for profitability using the discounted cash flow method, and only those proposed investments meetinga certain return will be executed. Once made, investments will be periodically reviewed according to internal
review/abandonment standards. The Group will take necessary measures as a result of deliberations to prevent the expansion of any losses.
While the Group had established standards for investments, the newly revised guidelines will ensure ashared understanding of an investment Group-wide, as well as a clear checklist of requirements prior to the
execution of an investment (improved investment due diligence). As a result, we believe these measures willlead to greater investment precision and more rapid decision-making.
Last year, the Group decided to withdraw from our plastic shipping tray product manufacturing business in China, our LCD optical film processing business, and our domestic semiconductor wafer plating
business run under Nagase ChemteX Corp.

FYE March 2014 Earnings Outlook
The Nagase Group expects an improvement in the near-term export environment due to the lower valuationof the yen, as well as a recovery in consumer sentiment based on general market recoveries. At the sametime, North America and ASEAN are projected to continue a strong recovery. Despite these positive factors,
the long-standing financial struggles in Europe mean that the future direction of the global economy is far
from clear. In this environment, the Group forecasts higher revenue, spurred by growth in the smartphone
and tablet markets overseas—particularly in Greater China and ASEAN—as well as a recovery in manufactured units of office equipment, appliances, and automobiles. Meanwhile, the Group sees domestic growthin smartphones and tablets similar to foreign markets. However, lump-sum amortization of actuarial differences in the NAGASE & CO. retirement benefit obligations and the associated increase in retirement benefit
expenses, combined with increased development investment costs in the Life & Healthcare business, will

16

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result in slightly narrower earnings growth. As a result, the Nagase Group forecasts consolidated net salesof ¥764.0 billion (14.7% year-on-year increase), with gross profit of ¥93.4 billion (13.1% increase), operating profit of ¥19.2 billion (23.2% increase), ordinary income of ¥21.0 billion (17.1% increase), and net
income of ¥14.5 billion (2.2% increase). The Group has assumed a currency exchange rate of ¥95 to one
U.S. dollar for these calculations.

Earnings Forecast
13/03

14/03 (Plan)(¥ hundred million)

7,640
6,662
1,500

Corporate Governance, Dividends, Shareholders' Equity Policies
934

1,000

The Nagase Group believes that a strong corporate governance function is an important management issue.
As such, the Group actively works to bring in outside directors who have an extensive knowledge of the petrochemical and manufacturing industries, as well as a wealth of management experience in business.

825

500

See pages 40-42

155 192

179 210 141 145

In fiscal 2012, in addition to Iwao Nakamura (from Nissan Diesel Motor Co., Ltd. [currently UD Trucks
Corporation]), the Nagase Group welcomed Yasuo Nishiguchi (from KYOCERA Corporation) as a new outside
director to strengthen our Board. The Board of Directors has held active discussions regarding productquality, profitability, and investment quality, stemming from differences in the traditional NAGASE & CO.
trading company business and the Group's manufacturing businesses.

0
Net salesGrossprofitOperating Ordinary Net income
profitincomeDividends, Shareholders' Equity Policies
Dividends
Cash dividends per share

Payout ratio (left axis)

DOE (right axis)

(%,¥)

(%)

40

2

30

20

1

10

0

0
05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3
(Plan)

Our basic policy concerning dividends is to continue to make stable payments to our shareholders based on
consolidated achievements, reflecting improving earnings capacity and corporate infrastructural integrity.
Given this policy, we have committed to an end-of-year per-share dividend of ¥13 (full-year dividend of ¥26
per share, including a ¥13 per share interim dividend). This decision was based on considerations of consolidated payout ratio, consolidated debt-to-equity ratio, and a corporate goal to pay increasing dividends.
With higher profits from the addition of Hayashibara as a Group subsidiary, the Group has implemented a
dividend increase according to the policies noted above.
Based on the preceding policies, the Group has set a goal to improve the dividend on equity ratio(DOE) over the medium term, working to improve Group-wide business and operations quality under theguidance of our Change-S2014 medium-term management plan, increasing dividends per share throughstronger earnings.
The Group is focused on increasing profits as the basic path toward the target ROE of 8% defined in
our Change-S2014 management plan. Our emphasis on investment to create high-value-added businesses is exactly for this purpose.
The Nagase Group strives to improve overall returns to our shareholder, balancing investment for continued business growth with direct shareholder returns such as dividends and stock sales or buybacks.
July 2013
Hiroshi Nagase
President

NAGASE & CO., LTD. Annual Report 201317

13/08/13 10:48

Nagase Group Businesses
Advanced Materials &Processing Segment

Net sales
OperatingprofitPerformance Chemicals Department

15.3%
32.2%
Net sales
OperatingprofitColors & Imaging Department

Main Products and Services

Main Products and Services

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

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

urethane materials, plastic additives, flame retardants, polymer filtersmaterials, organic transparent conductive materials, dyestuffs, fiber processing agentss

Customer Industry

Customer Industry

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

Dye/pigment, manufacturing/thermal papers, printing and printing materials, and fiber pro-Electronics Segment

Functional Materials
Segment

27.0%
34.8%

Collaboration
17.4%
40.4%

cessing industries
Description of Businesses and Departments

Description of Businesses and Departments

A parent department positioned in up-stream petrochemical products, core

Whether analog or digital, data that exists anywhere in the world functions as information only

Nagase materials, the Performance Chemicals Department provides a broadwhen it is made available to people. Mainly involved in the handling of essential chemicals

range of goods and services to the global market, from general-purpose petro-that are the functional materials that connect information and people, the Colors & Imaging
Department contributes to society in a wide range of fields, This department is working to

The department’s four mainstay businesses are coating materials, urethane,

Application Workshop (NAW).

SupplyMajor Manufacturers• Fukui Yamada Chemical Co., Ltd. • Sofix Corp. • Nagase ChemteX Corp.

Kurabo Chemicals Co., Ltd. • Toyo Quality One (Guangzhou) Co., Ltd. • P.T.

• Hayashibara Co., Ltd.

Toyo Quality One Indonesia • TIMLE S.A. DE C.V. • TQ-1 de MEXICO S.A DE
C.V • Light Chemical (Changzhou) Co., Ltd.

Polymer Global Account Department
Main Products and Services

Collaboration

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

Collaboration

pplastic-related equipment, devices and moldings

12.5%
12.

Customer Industry
C

Petrochemical products, raw materials for industrial oil solutions, surfactants

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

and surfactant raw materials, fluorochemicals, raw materials for silicone and

Description of Businesses and Departments

encapsulants, plating chemicals, electronics chemicals, microorganism phar-

The Polymer Global Account Department provides plastics, related auxiliaries, equipment andmaceuticals, nanomaterials, inorganic materials

facilities to the domestic and international office automation (OA), electric and electronics, andconsumer electronics industries. The greatest strength of this department is the sheer number of local staff who maintain networks in Asia, as well as their wealth of experience andknowledge. The department is putting focus and energy into expanding and creating new

Net sales
Operatingprofit• Setsunan Kasei Co., Ltd. • Dainichi Color Vietnam Co.,Ltd. • Majend Makcs Co., Ltd.

upstream information, the Speciality Chemicals Department supplies intermediates and materials with applications in a range of areas—including industrial

Polymer Products Department

oil solutions plating chemicals, water processing agents, photoresist developer,
fluorochemicals and silicones. The range of activities crosses a wide field, from

Main Products and Services

semiconductor and visual display in the electronics industry to environmental-

Copolyester resins, functional dyes, organic transparent conductive materials, functionally-friendly business utilizing microorganisms and more. Further, we are focus-

sheets and films, sheet and film surface detection machines, plastic molding products

ing energy on new business products that make the most of the unique
technological strengths of our customers and our value chain.
Major Manufacturers• Nagase ChemteX Corp.

Customer Industry
Cosmetics and toiletries, electric and electronics, and sheets and films industries

Life & Healthcare
Segment

Major Manufacturers

Building total solutions businesses based on a broad range of downstream andCollaboration

Description of Businesses and Departments
The Polymer Products Department mainly sells copolyester resins, functional sheets and

10.8%
25.6%

films, and plastic molding products made by Eastman Chemical. The department works withGroup companies to create a structure for developing new applications as well as original
products. In particular, this department is concentrating on developing sheets that use
Eastman Chemical resins.
Major Manufacturers• Totaku Industries, Inc. • Kotobuki Kasei Corp. • Sun Delta Corporation • Nagase Precision
Plastics Shanghai Co., Ltd. • Nagase ChemteX Corp.

18

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Net sales
OperatingprofitSupplyMajor Manufacturers• Nagase International Electronics Ltd. • Nagase Electronics Technology Co.,
Ltd. • Nagase Electronics Technology (Xiamen) Co., Ltd. • Nagase International
Electronics (Shenzhen) Ltd.

Ma Manufacturers
Major• Nagase ChemteX Corp. • Nagase ChemteX (Wuxi) Corp. • Engineered
Ma
Materials Systems Inc. • Nagase Techno-Engineering Co., Ltd. • Pac TechPa
Packaging Technologies GmbH • Nagase Finechem Singapore (Pte) Ltd.

Automotive Solutions Department

Energy Business Office
EneMain Products and Services
Functional resins, general-purpose resins, automotive interior and exterior components and functional components, lightweight materials and components, electronics components, auxiliaries, plastic-related equipment, devices and moldings

Main Products and Services
Raw materials for lithium ion battery (LIB), photovoltaic (PV) modules, LIB systems, PV materials, power line communication (PLC) systems
Customer Industry
Battery, photovoltaic, electric equipment, and automotive industries

Customer Industry
Automotive and automotive parts industries

Description of Businesses and Departments
This year marks the second of the Energy Business Office, which brought theEnvironment & Energy Office and the Energy Device Office under one roof. The
Energy Business Office deals mainly with LIB systems, PV modules, and thecomponent materials used in their manufacture. This office devises marketingstrategies that anticipate future needs, dealing in and sharing information covering all aspects of the business from downstream to upstream. The office hasdeveloped an energy management system (EMS) combining LIB and PV technologies, which the office intends to launch in the near future.

Description of Businesses and Departments
In order to meet customer needs, the Automotive Solutions Department hascoconstructed a uniform service structure in Japan and overseas capable of handlidling everything from sales of automotive-related raw materials, products andeqequipment to component production at Nagase’s affiliates and joint venturecocompanies. In addition to further global development focusing on emerging
cocountries, which have rapidly expanded recently, the department will concentra
trate on expanding new businesses related to eco-friendly vehicles throughdedevelopment of new materials, components and technologies needed for ane
new automobile society with eco-friendly vehicles, such as hybrid, electric, andfue
fuel-cell-powered automobiles.
Major Manufacturers
Ma• Sanko Gosei Technology (Thailand) Ltd. • Automotive Mold Technology
ogy
Co
ng
Co.,Ltd. • KN Platech America Corporation • PT. TUNE Manufacturing
Ind
Indonesia • Digital Wire Technology Co., Ltd.

plastics businesses on the back of Group strategies and cooperative efforts.
Description of Businesses and Departments

Description of Businesses and Departments
The Electronic Materials Department leverages its domestic and overseas network to handle sales of display device peripheral components as well as LED
related materials, which are expected to see significant growth, for PC manufacturers and suppliers both of which are planning to expand smartphone andtablet business globally. The department proactively conducts trading as wellas the manufacture and processing of glass and LED assembly.

SupplyMajor Manufacturers• CAPTEX Co., Ltd.

Collaboration

ductor industries

4.9%

Customer Industry
Smartphone and tablet PC, display, touch panel, and LED industries

Description of Businesses and Departments
The Electronic Chemicals Department, which comprises eight manufacturing
companies in Japan and overseas, manufactures and sells formulated epoxy
resins and high-grade chemicals along with related supply equipment andmamanufacturing control systems to the semiconductor, liquid crystal, electroniccocomponent, automotive and solar battery industries. With overseas production
sit
sites in China, Taiwan, South Korea, Singapore, Malaysia, Germany and theUn
United States, the department is aggressively expanding with the aim of creating highly profitable businesses that integrate trading company and manufactur
turing capabilities. Also quick to tackle environmental issues, the department
proproactively works on solutions that conserve resources and involve recycling.

((Downstream)

Main Products and Services

Oil solution, surfactant, organic synthesis, electronics materials, and semicon-

Customer Industry
Liquid crystal, semiconductor, electronic components, heavy electric machinery, automotive, and solar battery industries

Value chain

Value Chain (Upstream)• Nagase Filters Co., Ltd. • Toyo Quality One Ningbo Co., Ltd. • GuangzhououAutomotive &EnergySegment

SupplyCustomer Industry

Main Products and Services
Surface treatment materials for smartphones and tablet PC cases, optical films
for liquid crystal displays (LCDs), materials for touch panels, glass processing,
optical adhesive agents, optical sheets for backlights, electronic paper-relatedmaterials, materials for flexible displays, organic light-emitting materials, LED
chip-related materials and their assembly and mounting

ness area backed by proprietary proposals that leverage the capabilities of the Nagase
gleader in their various markets.

Speciality Chemicals Department

Main Products and Services
Formulated epoxy resins and related products, chemicals for production of semiconductors and liquid crystals, chemical management equipment for liquid crystal preprocessing and bump molding services through nonelectrolytic plating

move away from simply selling products and, toward building a network in each of its busi-

plastic materials and filters. Each business has established a reputation as a

Major Manufacturers

Net sales
OperatingprofitElectronic Materials Department

Collaboration

chemical products to high-value-added products.

Electronic Chemicals Department

Life & Healthcare Products Department

Beauty Care Products Department
Be

Main Products and Services
Functional food ingredients (functional saccharides, enzymes, health foodmaterials, and food additives), cosmetic materials (whitening agents, moisturizing agents, activators, antibacterial agents, and nutritional supplements), pharmaceutical (active pharmaceutical ingredients [APIs], clinical trial APIs,
intermediates, raw materials, formulations, additives), in vitro diagnostics,
medical materials, related materials for agriculture, fisheries, and livestock(agricultural chemicals and materials, fertilizers, feed and feed additives)
Customer Industry
Food, pharmaceutical and medical, diagnostic drug, cosmetics, household,agricultural, fisheries and livestock industries
ag
Description of Businesses and Departments
De
The Life & Healthcare Products Department sets its eyes on contributing toThfood, beauty, and health as a member of the Life & Healthcare segment. Thisfoo
department is developing high-value-added products that help people live betde
ter and healthier lives, leveraging the Group’s comprehensive strengths in trading, R&D and manufacturing. These products span the food materials,
ing
pharmaceuticals, medical materials, cosmetic materials, household materials,
phagricultural, fishery and livestock fields.
ag
Major Manufacturers
Ma•H
Hayashibara Co., Ltd. • Nagase ChemteX Corp. • Nagase Medicals Co., Ltd.
• Kawai Hiryo Corporation • Nihon Bio Fertilizer Co., Ltd. • Uma Yasai Farm
Corporation • ZCL Chemicals Ltd.
Co

Main Products and Services
Cosmetics (including skin care counselling and facial care services), health
foods
Customer Industry
General consumers
Description of Businesses and Departments
In keeping with its business philosophy to provide safe, high-quality products
and services that enhance beauty inside and out, the Beauty Care Products
Department manufactures and sells cosmetics and health foods led by its
rosemary ingredient, which is the result of state-of-the-art research conductedin Japan and overseas. In addition, the department’s sales network is comprised of 50,000 personnel who offer advanced counseling and facial careservices.

SupplyMajor Manufacturers• Nagase Medicals Co., Ltd. • Toyo Beauty Supply Corp.

NAGASE & CO., LTD. Annual Report 201319

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Performance by Segment
Functional Materials Segment

Functional Materials
As Nagase’s parent division, we have accepted the challenge of creating new value
to respond to the needs of the times, contributing to the value chain in order to offer
complete peace of mind to all our customers.

Net sales/Operating profit
Net sales (left)

Operating profit (right)(¥ hundred million)
2,000
1,500

Re
Representative
Director and Managing
Ex
Executive Officer

Executive Officer;
GM, Performance Chemicals Department

Kohei Sato

80

1,810

1,800
62

54

52

60

1,000

40

500

20

Segment Strengths (Businesses)

Our operating words in the Functional Materials
Segment are safe, stable, and unique.
Developing materials and applications in thisbusiness meeting these standards is ourprimary focus. We offer high-function materials
based on fossil business to industries and Groupsegments across the bio, environment/energy,
and electronics fields.

• A business model working closely with customers, offeringhigh levels of satisfaction, tremendous sales capabilities, andthe ability to collect and share technological information
globally among customers and manufacturers• Nagase ChemteX Corp., a Nagase manufacturingsubsidiary• Global procurement capacity• A foundation and strong presence in the chemicals
industry• Enhanced management systems for chemicals-related
regulations and security trade

0

0

12/3

TToshiro Yamaguchi

Performance Chemicals Department

1,771(¥ hundred million)

Segment Overview (Functions)

13/3

Primary Businesses

1Strategic customer business

2

Overseas business3

Nagase ChemteX business4

Filter business

5

Environmentally-friendly business

6

Inorganic materials business

14/3(Forecast)

Major Market Trends

Speciality Chemicals Department

The difficult business environment continued throughout the fiscal year ended March 2013. Exports struggled dueto the high yen valuation, the Japanese government ended its eco-car subsidy program, and Japan-China political
friction resulted in pressure on Japanese corporate production and sales volumes in China. We expect the economy
to reach a bottom during the first part of fiscal 2013, with recovery in exports, expansion of reconstruction demand,and proposed increase in consumption tax leading to a flurry of pre-enforcement demand. We believe these factors
should combine to shift the economy toward a gradual recovery.

GM, Speciality Chemicals Department

Gen Hirao

Major Market Trends
The Nagase Group is involved in a wide array of businesses. One of our priorities is the electronics
industry, where we see a growing demand in the smartphone and tablet markets for everything fromnew product development and functional materials. In the automobile industry, we expect the cheaper
yen to increase the market share enjoyed by Japan's auto manufacturers. This will likely lead to higher demand for raw materials for industrial oil solutions and plating chemicals, as well as opportunities
to introduce new materials.

Fiscal 2012 Strategies and Results

Change-S2014 and Fiscal 2013 Strategies

Fiscal 2012 Strategies and Results

Change-S2014 and Fiscal 2013 Strategies

During fiscal 2012, the Company focused on (1) building strength in our customer
base, (2) expanding our overseas business, (3) developing our bio-related business, and (4) improving our filters business. We are expanding customer service
activities to improve customer satisfaction throughout the Group. Our focus here isto respond accurately to customer needs and offer better service as an integrated
entity. Overseas, we launched a new company to manufacture resins for coating
materials in China where we have started contract manufacturing services. In oururethane business, we set up and started production at a second company in
Mexico to make molded urethane pads for car seats. In our filter business, we built
a cleansing base and began local cleansing services in Taiwan, following ourefforts in this field in Korea. In the meantime, we have seen the structural changes
occurring in the petrochemical industry. In response, we have integrated the existing technological functions inside the Group (both domestic and international) in
pursuit of bio-based chemicals development as our answer to the environmental
technology issues of the future.
As a result, profits for fiscal 2012 underperformed the prior year. Despite revenue growth for basic chemicals in Southeast Asia and additives for Middle East,
increased anti-Japanese sentiment in China and financial stagnation in the EU
combined to drive performance lower for the year.

Fiscal 2013 represents the second year of our Change-S2014 business plan. This
plan also calls for us to strengthen our customer base to improve levels of customer satisfaction. We are making a vigorous push to take advantage of our Groupvalue chain to allow us to anticipate future customer needs. We also continue totake measures to strengthen our overseas, bio-related, and filter businesses.
Meanwhile, we are looking to uncover new medium- and long-term business
opportunities as we identify macro-environmental changes due to the shale gas
revolution and changes in the fossil industry. Executing on these initiatives, we
believe we can further strengthen the Nagase brand in the chemical industry, as
well create new value globally.

The Speciality Chemicals Department focuses on developing high-function raw
materials in demand by the electronics, automobile, consumer goods, industrial oil
solutions, water processing agents, and other industries. The business is also creating a global-scale value chain in the rapidly changing fossil industry, sourcing
production with leading domestic and international manufacturers and establishingjoint ventures. During fiscal 2012 (first year of Change-S2014), the businessbegan new development in the fields of inorganic materials and contributions toenvironmental protection. In addition to setting goals for practical development inhigh-function nanomaterials so necessary in the electronics industry, the businessbegan work on research involving microorganism as a measure to gain further
inroads as an environmentally-friendly business.
However, earnings for fiscal 2012 reflected lower year-on-year revenues andprofits. This result was mainly due to the impact of weak performance in electronics materials for the LCD and semiconductor markets, stagnation in precisionabrasive materials for the hard disk and electronics components sectors, the highyen valuation, and political friction with China and Korea.

Our guiding vision in this business under the Change-S2014 plan is to build aneven stronger transaction foundation, creating new value to respond to the needsof the times, and contributing to the Group value chain. Of the five Nagase business segments, Functional Materials occupies the most upstream position in thevalue chain. We will create an even more valuable business by collecting andassimilating information related to organic/inorganic technologies and materials—
particularly new and functional materials—from a wide range of sources. By sharing this information throughout the Nagase Group, we will contribute to creating
new business opportunities that meet technological needs downstream.
Beginning with fiscal 2013, the Company will move the precision abrasive
materials business under the Electronics segment, and the consumer goods materials business under the Life & Healthcare segment. The company intends to makemaximum use of the deep relationships of trust developed over time with leadingbusiness partners and research institutions, constructing environmentally-friendly
business and inorganic materials business that includes nanoparticles.

TOPICS
The new energy fields are gaining more attention witheach passing day. Here, the Company plans to expand
our microorganism pharmaceuticals business in the
biogas field, which we expect to fully commercialize
during the fiscal year ending March 2014. In addition,
sales of NOx gas removal device in the environmental
field have also made a contribution to Group earnings.

20

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Advanced Materials & Processing
Segment

Advanced Materials & Processing

Polymer Global Account Department

Major Market Trends
More than 60% of the consolidated net sales generated by the Polymer Products AccountDepartment are in overseas markets. In China and the inland regions, we have noted growth in thenumber of production centers operated by our clients. In ASEAN, new investment from Japan and theshift of production centers from China have been particularly notable. We believe that both of thesefactors will lead to growth markets and new business opportunities in emerging countries.

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

Ichiro Wakabayashi

This business segment contributes to society through the growth of the Nagase Group, as
we pursue a global business model that links
materials with application development, expanding
our expertise and experience in plastics, dyes, andFiscal 2012 Strategies and Results
Net sales/Operating profit
Net sales (left)

Operating profit (right)(¥ hundred million)(¥ hundred million)

3,000

processing technologies.

2,550 50

2,179
2,000

60

2,145
40

29

23

1,000

20

0

0

Director and Executive Officer

Hiroshi Hanamoto
Segment Overview (Functions)

12/3• Offer the strength of the Nagase Group,
coordinating with customers on everythingfrom raw materials insights to application
development• Major overseas business partners: SABIC IP,
BASF, Eastman Chemical• Application development functions: NAW(Nagase Application Workshop), Shanghai
Techno Center, Color Lab

Colors & Imaging Department
Executive Officer;
GM, Colors & Imaging Department

14/3(Forecast)

Segment Strengths (Businesses)

The Advanced Materials & Processing Segment is
positioned along the next step in the value chain of addedvalue creation. The goal of this segment is to propose
added function, design, and functionality solutions to the
Nagase Group as a whole through dispersion, filmification,
molding, and other processing technologies.

13/3

Primary Businesses

1

Propose materials and application solutions to the businessequipment industry

2
3
4
5

Expand business via strategy coordination with core suppliers

During fiscal 2012 our major management policies called for cultivating more nonJapanese clients in terms of customer strategy. In terms of regional strategy, we
focused on strengthening our Chinese inland operating bases, committing moremanagement resources to emerging countries in ASEAN, and developing more
applications and elemental technologies in growth sectors.
As a means to cultivating more non-Japanese clients, we set up an organization
within our Asia network to deal with major EMS companies, while also investing timeand energy into presenting our unique functional products. With respect to China’s
inland regions, we are currently researching the potential for establishing new basesof operations following the launch of the Shanghai Hua Chang Trading Co., Ltd.
inland entity/Chengdu Branch Office. And, as part of our investment of management
resources in the ASEAN emerging countries, we have increased the number of local
staff (including expatriates) in all locations related to this business. In pursuit of

TOPICS

Expand overseas business

Global Conference

Strengthen integrated management activities with affiliates

This is a large business unit consisting of over 700 employees in domestic and international
locations. Periodically, we hold a global conference to help ensure good communications across
our wide-ranging operations. The fiscal 2012 conference was held in Japan, attended by 60
employees from Japan and around the world. The conference featured healthy debate, discussion, and information sharing.

Functional films and sheets business

Major Market Trends

Polymer Products Department

We believe that the fields in which this segment works, namely, coating, ink, plastic coloring, andchemical toners for use in thermal paper, will provide very stable earnings. Accordingly, we believeearnings in the segment will outperform the prior fiscal year. We are planning the launch of new business in the Colors & Imaging Department for the fiscal year ending March 2014. We expect that the
new business will be the engine of growth for the fiscal year.

Executive Officer;
GM, Polymer Products Department

Mitsuru Kanno

Fiscal 2012 Strategies and Results
Despite weak performance in digital equipment and the Senkaku Islands disputes during fiscal 2012, the Company was still able to outperform prior-year earnings, owing tosupport from smartphone applications, and contributions from higher added value inquality management, as well as cost improvements related to color former for specialty
dyes for use in thermal paper. In addition, we launched the environmentally-friendly digital printing system for textiles (based on proprietary technologies), and repositioned the
IM-Mold transfer printing film business (via technology transfer). As such, we expect
these new businesses to contribute to Group earnings for fiscal 2013.

TOPICS
Zero-Emission Digital Printing System
A proprietaryaqueous ink thatprints beautifully on
paper of any
texture(*1)

A texture and lookthat is every bit as
good as dye printing

At DENATEX, zero emissions
mean more than justconservation and environmental
consciousness. We stand at theforefront of a vital social eco
movement, believing that saving
the environment is an integral
part of our corporate mission.

Print in large lots or
small—only what
you need(*3)

22With this print
system, there's noneed for paper
pre-processing

Color reproduction
via our proprietarycolor management
system(*2)

Heat treatment(*4) for
print finishingmeans this systemis eco-friendly, too!

NAGASE & CO., LTD. Annual Report 2013長瀬13̲E̲本文̲PDF用.indd 22-23

Kenji Nagafusa

As a result of the preceding, earnings for fiscal 2012 reflected lower revenues
and higher profits. This result was mainly due to our execution of strategic initiatives
and reorganization of operations of dyestuffs and fiber processing agents for fiber
processing industry into equity method affiliates.

Change-S2014 and Fiscal 2013 Strategies
This department deals mainly in functional raw materials for the maturing Japanesemarket and the growing overseas markets. As such, we plan to create new business
and work more closely with our existing customer base in Japan, leading to stronger
technical sales capabilities. To create new business we intend to expand our productrange, as well as conceive products that are recognized by global markets as new
and innovative—product that could result in new companies. To strengthen our technical sales capabilities, we will make even better use of Nagase Application
Workshop, establishing stronger technical product capacity, information collection
capabilities, and customer relationships to create deeper relationships of trust withour business partners.
Meanwhile, we expect to see growth in overseas markets. Here, we have identified two major priorities, namely, the Chinese market, which we expect to continue togrow significantly, and the Asian, North American, and European markets, which aretied together by Japan. The Company intends to engage in mergers and acquisitions
and joint ventures, as well as improving our quality management functions and production capacity, with the goal of being recognized as a main player in the global
chemical industry.

developing applications and elemental technologies in growth fields, we committed
resources to creating more business in non-plastics in the OA sector. In the LED
sector, we focused on proposing areas of development reflecting market trends.
As a result, earnings for fiscal 2012 reflected higher revenues and lower profits.
While the Group experienced favorable performance overseas (particularly Asia),
weak domestic manufacturing pushed revenues and profits lower.

Change-S2014 and Fiscal 2013 Strategies
Our primary focus for fiscal 2013 will be on expanding existing businesses and driving results in new businesses. In terms of expanding existing businesses, we intend
to (1) capture new demand in emerging regions and countries, (2) establish newbases of operations in inland China, and (3) capitalize on and invest more management resources in our Dainichi Color Vietnam Co., Ltd. joint venture with Dainichiseika
Color & Chemicals Mfg. Co., Ltd. in ASEAN.
To drive results in new businesses, we intend to leverage new application and elemental technology development activities into specific products in the office automation, LED, optical, and environmental fields. Further, we will be active in creating new
business opportunities by developing unique technologies and proprietary products
made possible through the best use of the Nagase Group management resources.
We also plan on expanding our business operations by further improving communications among our companies and affiliates in Japan, greater China, and ASEAN.

Major Market Trends
The electronics industry is one significant focus of this department. Here, the strong yen, intensified competition, and theshift of manufacturing overseas have made for a continued challenging environment. As a result, sales for surface detection
machines and flame retardant insulation sheets for TV have been subject to a particularly negative impact. For fiscal 2013,
our goal is to strengthen our core businesses in the cosmetics, toiletries, food, and medical industries where we can expect
stable demand in Japan. At the same time, we will actively search for new business opportunities in functional sheets andother processed products, hoping this also will contribute to stable growth.

Fiscal 2012 Strategies and Results

Change-S2014 and Fiscal 2013 Strategies

Although sales of Eastman Chemical’s plastics in the high-priority cosmetics and toiletries fields grew by a wide margin during fiscal 2012, the Eastman Chemical’s plastic business on the whole experienced a slight year-on-year decrease due to theemergence of competitors in general-purpose products. We were, however, able todeliver solid results in the development of Denaito AceTM sheets and films based on
the Eastman Chemical copolyester. We will focus more energy resources in this area
during fiscal 2013, as we have discovered new needs in the market.
Intense competition in the TV market led to weak performance of the mainstay
SunMorfeeTM V product, driving down year-on-year sales for the Sun Delta Corporation
business. Similarly, sales of the SCANTECTM, our own surface detection system, for theelectronics industry closed out the year on a low note.
As a result of the preceding, we experienced lower revenues and profits in thisdepartment.
Investors and stakeholders should note that overseas business should benefit
from the new joint venture between Fukuvi Chemical Industry Co., Ltd. and Dong Nai
Province of Vietnam, scheduled to come online during fiscal 2013.

Under Change-S2014, the strategies in this department call for developing original
products, strengthening our core businesses, and creating synergies with other groupcompanies.
One initiative in original product creation is developing added functionality for
Denaito AceTM and derivatives. Denaito AceTM films and sheets are based on the
Eastman Chemical copolyester. We are executing on policies from Eastman Chemical
to expand sales in the cosmetics and toiletries markets for products that represent ourcore business. Eastman Chemical has also identified the medical industry as a primarymarket. Here also, we will focus our energies to expand sales. Our plan with respect to
Sun Delta Corporation is to market and sell new product lines in close coordination
with other business divisions, while the same time growing sales of our core products.
To improve the profitability of our SCANTECTM business, we intend to create an organization that more rationally aligns with the market and market conditions.
To create more synergies among Group companies, we are actively pursuing
greater cooperation in terms of manufacturing, processing, and sales together with
Totaku Industries, Inc., Kotobuki Kasei Corp., Setsunan Kasei Co., Ltd., and Nagase
Plastics Co., Ltd.
Starting fiscal 2013, the Functional Film Division, which deals in functional additives forthe functional sheets and films industry, will join this department from the Colors & Imaging
Department, leading to more opportunities to pitch new businesses to our customers.

TOPICS
Eastman Chemical Copolyester CN-015
CN-015 is a PCTA resin, and the clearest polymer ever produced by
Eastman Chemical. The product is gaining traction in the market under
the catch phrase, “looks like glass, feels like glass.” We are marketing
this product particularly to customers in the cosmetics industry.

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Electronics Segment

Electronics
We offer electronics industry worldwide solutions through a leading businessmodel that predicts and understands technological and service needs in themarket, utilizing the Nagase Group and partner resources. We believe thisbusiness model will lead to sustained
growth in our segment.

Net sales/Operating profit
Net sales (left)

Operating profit (right)(¥ hundred million)

Segment Strengths (Businesses)

The Electronics Segment offers original products
and services, anticipating big demand in theelectronics, while at the same time offering
information from downstream sources to otherGroup segments.

• Domestic and international manufacturing/processing
functions in the electronics industry• Greater product and development capacity, concentratingon Nagase ChemteX Corp. products• In-channel information collection, marketing functions• Solutions proposal (business planning, creation) function(¥ hundred million)

1,490

1,500

90

Primary Businesses

60

1Smartphone and tablet businesses

2

Next-generation display business3

Epoxy business4

Semiconductor postprocessing

5

Environment and energy business

100

1,161

1,104
1,000

Segment Overview (Functions)

62
50

500

Director and Executive Officer
Di0Electronic Chemicals Department
Executive Officer;
GM, Electronic Chemicals Department

Kenichi Horie

Electronic Materials Department

Revenues further declined as the domestic semiconductor and LCD markets suffered from a reduced capacity to compete
on cost due to the strong yen and stagnant demand for consumer products in the United States, Europe, and China. As aresult the Company engaged in a program of consolidating or abandoning business units. Meanwhile, the scope of mass
production in Korea, Taiwan, and China grew, leading the Company to expand our local production and supply structures.
Similarly, we noted growth in local production of electronics components and automobiles in the Chinese and Southeast
Asian regions. This trend demands that the Company respond with stronger local support.

TOPICSNew Development in Epoxy Resin containing Magnetic Powder
Epoxy resin containing magnetic powder is a type of plastic
developed through dense-pack filler technologies that exhibit
high dispersibility and printability, based on years of cumulative epoxy resin modification technology. Closely packing ferrite and metallic magnetic filler resulted in producing a highmagnetic permeability in the epoxy resin itself. This technology
has made a significant contribution in the miniaturization andspecialization of components, particularly for inductors and other coil electronic components.

長瀬13̲E̲本文̲PDF用.indd 24-25

14/3

Major Market Trends

During fiscal 2012, we saw an increase in orders for the Company’s newly developed magnetic powder resins in our formulated epoxy business. However, orders
fell for thermal conductive sheets for power devices and sheets for surface acoustic wave (SAW) devices.
In contrast, the Company saw wide gains in sales of formulated epoxy resin
manufactured by Company subsidiary Engineered Materials Systems Inc. (U.S.) for
use in the tablet PC market. Increased production of tablet PCs and recovering
demand for large-format TV panels led to significant growth in the Company’s
chemicals business under the LCD business.
Meanwhile, sales continue to be slow in Japan for bump molding services
through nonelectrolytic metal plating. However, orders increased for both laser soldering equipment for hard disk drives (Subsidiary Pac Tech-Packaging
Technologies GmbH, Germany) and bumping services in the United States.

NAGASE & CO., LTD. Annual Report 2013

13/3

(Forecast)Fiscal 2012 Strategies and Results

24

0

12/3

Kenji Asakura
K

As a result of the circumstances, we experienced lower revenues and higher
profits for fiscal 2012.

Change-S2014 and Fiscal 2013 Strategies
The major goals for this department under Change-S2014 to approve the development and manufacturing systems at our bases of operations in Japan, theUnited States, Europe and Asia, utilizing Nagase ChemteX elemental technologies(epoxy, photosensitive materials and related solutions, specialty coatings) to operate a locally autonomous business model, establishing a robust foundation for our
display, electronic devices, semiconductor manufacturing processes and environmental businesses.
During fiscal 2013, we will send staff on long-term assignments to Korea,
China, and Taiwan, where mass production of semiconductors, large-format LCD
panels, and organic EL are most concentrated. This policy will bolster our epoxy
resin products mass production and sales structure, taking advantage of development and production bases in Japan, America, and Asia.
We have plans to grow sales of our Total Chemical Management (TCM) business in Korea, China, and Taiwan. At the same time, we intend to produce solid
results in sales of our electronics solvent recycling system, a new product in thissegment. We are also revising our product development roadmap for 3D semiconductor mountings, consolidating our current technologies of Nagase ChemteX, Pac
Tech-Packaging Technologies GmbH (Germany), and Alchimer S.A. (France) in
response to the realistic demands of our target customers.

Executive Officer;
GM, Electronic Materials Department

Major Market Trends
We expect the smartphone and tablet PC markets to continue to grow, as the introduction of
Windows 8 helps to drive growth in Ultrabook sales as well. As it seems market growth in this
sector tends to result in lower prices, we foresee much greater cost competition in the future.
And, while we see continued growth in the LED lighting market, we also predict a similarly challenging cost-based competition.

Masatoshi Kamada

Fiscal 2012 Strategies and Results
Fiscal 2012 saw a major shift in the smartphone and tablet PC markets. Where
Apple Inc. and Samsung Electronics Co., Ltd. have enjoyed an overwhelming
market share, a large number of new players have emerged out of the UnitedStates, Europe, and Asia, all carving out a growing market share in the industry.
Also, driven by growth in the industry as a whole, demand for touch panels grew
dramatically.
In response to these changes in the environment, this department set threestrategic policies to execute: (1) Launch an end-user-focused program to further
strengthen marketing and sales to the world’s smartphone and tablet PC manufacturers; train and improve sales staff skills both in Japan and at overseas entities;(2) dedicate more staff to uncovering new products based on market needs andfuture products seeds; and (3) expand our sales and processing capacity for thechallenging panel industry.
As a result, we successfully grew our existing end-user business, while capturing new end-users at the same time, leading to significant growth in revenues

TOPICS

among local entities overseas. Accordingly, we experienced higher revenues for the
fiscal year ended March 2013, with an approximate 20% growth in profits.

Change-S2014 and Fiscal 2013 Strategies
Under Change-S2014, the goal of this department is to learn directly from smartphone and tablet brand owners their true needs, putting ourselves in a position to
pursue joint development projects. We believe this will lead to the continued creation of high-value-added business.
Guided by this goal, we will build on prior-year efforts to improve our global
cooperative business structure and human resources training at local sales andmanufacturing entities in Japan, Europe, the United States, China and other Asian
regions, South Korea, and ASEAN regions. In addition, as a business located neardownstream products, we believe that one of the most important things we can dois to promote cooperative business ventures with other Group segments.
We continue to develop new clients in our LED lighting business as we
shape our domestic sales organization to respond to market growth. This market
has seen gains in the wake of the March 11 earthquake as consumers havebecome much more highly aware of the need for energy conservation and ecoconsciousness.

Significant Growth in Surface Treatment Materials for Smartphone andTablet PC Cases
As a result of making significant improvements to our employee
structure and logistics functions, we experienced an increase ininquiries and product transactions, which contributed to higher
profits in our business targeting major U.S. smartphone and tablet
PC manufacturers.

NAGASE & CO., LTD. Annual Report 201325

13/08/12 17:15

Automotive & Energy Segment

Automotive & Energy
Our goal is to capture growing demand in emerging countries, as we contributeto the advancement of new car societies through the expansion of our plastics
and other foundation businesses. We are also looking to grow in energy
management-related businesses, focusing on
the application of our proprietary technologies
in the rechargeable battery business.

Net sales/Operating profit
Operating profit (right)

Net sales (left)(¥ hundred million)(¥ hundred million)

1,000
750

940

830

761

13

9

15

Automotive Solutions Department
GM, Automotive Solutions
Department

Masaya Ikemoto

Global Growth in Interior Decorations

26

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1

Resins related business2

Car electronics business

3

Energy storage business

4

Energy creation/energy
conservation business

0

0

12/3

13/3

14/3
(Forecast)

Energy Business OfficeDuring the first half of fiscal 2012, the Japanese domestic automotive industry benefited from the disaster recovery andgovernment eco-car subsidies. However, the second half of the year saw stagnation in the Chinese market and the end ofJapanese government subsidies, resulting in weaker sales and only slight gains in the domestic market. Meanwhile, themarket in ASEAN and North America grew, in contrast to weaker performance in China due to worsening anti-Japanesesentiment. We forecast higher revenues and profits for fiscal 2013, driven by recovery in China, strength in the North
American market, and continued growth in ASEAN.

Fiscal 2012 marked the first year of Change-S2014. During this time, we engaged
in initiatives guided by the concept of results and consistency to improve profitability and make greater inroads in our resins related and car electronics businesses. We also established a new plastic components painting joint venture inIndonesia during the year. In India, we saw our joint blow-formed component
manufacturing company begin full operations. Our global initiatives gained
momentum, and we improved the coordination among our overseas branches,international joint ventures, related companies, and affiliates. We also made progress in developing new technologies, new manufacturing methods, and new
products in our businesses related to eco-friendly vehicles, working closely withrelated companies, affiliates, and joint ventures.
Despite negative factors during the second half of fiscal 2012, including
challenges in the Chinese market due to anti-Japanese sentiment and lower
manufacturing numbers in response to the end of the Japanese government ecocar subsidies, new business in Vietnam and Korea, together with a rapid recovery
from the flooding in the Thailand market and strong performance in the North

The Company launched the business working withJapanese auto manufacturers in North America, thanks tocloser coordination with overseas automobile interior andexterior component manufacturers. Not only has theCompany enjoyed greater activity with local overseas entities, but we also expect higher levels of engagement withJapanese auto manufacturers in North America.

• Marketing capabilities that uncover the needs andprovide new products to the automobile industry• Close coordination between overseas networks andGroup departments• Relationships of trust with customers build on our
understanding industry and expert knowledge• CAPTEX Co., Ltd. (batteries), other partner company
expertise and manufacturing development functions

5

Major Market Trends

Fiscal 2012 Strategies and Results

TOPICSIn our Automotive & Energy Segment, we are
pursuing original technological innovation inplastic components and storage battery systems
in the automobile and other environmentallyfriendly energy business sectors. In doing so, we
believe we will be up to create new businessmodels.

Primary Businesses

10

250

Kenji Asakura

Segment Strengths (Businesses)

7500

Director and Executive Officer

Segment Overview (Functions)

American market led to higher revenues and higher profits.

Change-S2014 and Fiscal 2013 Strategies
In this department, our task under Change-S2014 is to provide technologies andproducts necessary for the new environmentally-friendly car society, contributing
to global society while the same time creating a business model supporting thenext-generation of products and services in the auto industry through ourAutomotive & Energy Segment. We plan to integrate our automobile business andenvironment/energy business. At the same time, the resins business in which weestablished our reputation in the market has shifted towards using fewer raw
materials. Here, we will offer even higher value by transitioning metal components
to resins, and developing our own light-weight materials and technologies.
In the car electronics field, we are working towards creating a global procurement and supply for battery motor power module components and materials—products in which Japan has particular strengths. In pursuit of this goal, we
will be working even more closely with Group operating bases around the world.
We also intend to develop functional products that match the needs of the market
by creating stronger cooperative ventures inside our own Group and with joint
development partners, as well as equity investments and manufacturing joint ventures.
In addition to engaging more actively in China where future growth is anticipated, we will also be more active in Indonesia, India, Mexico, Turkey and otheremerging countries.

GM, Energy Business Office

Kiyoshi Sato

Major Market Trends
In the two years that have passed since the March 11 earthquake, the restart of certain nuclear power facilities and other factors have reduced concerns about energy supplies and rolling blackouts. However, an
increase in the number of public works projects and the start of the full purchase system for industrial photovoltaic power means that demand for lithium ion battery systems and photovoltaic systems will remainhigh. While we project price declines in lithium-ion battery and photovoltaic systems, we also expect that themarket will expand as a whole.

Fiscal 2012 Strategies and Results
During fiscal 2012, the nation of Japan gradually began to emerge from theeffects of the March 11 earthquake. The introduction of the whole purchase system for industrial photovoltaic power led to the Company’s sales of photovoltaic
systems outperforming the prior period by a wide margin. However, sales of battery materials for electric vehicles did not perform as we had expected, owing to asignificant decline in year-on-year performance among auto manufacturers. As
such the Company underperformed the fiscal 2012 plan in this area. The Natural
Eco 371 is a greenhouse heater that the Company developed for the purpose of
reducing fuel oil usage in horticulture facility and other greenhouse heating applications. Since this product successfully results in a 30% reduction in fuel oil
usage, with expected significant sales gains for the period. However, the lack ofrelated government subsidies resulted in our performance significantly underperforming plan. Accordingly, the Company has reconsidered its participation inbusinesses such as this that are affected by government subsidies. As of the endof fiscal 2012, the Company decided to withdraw from this business.
During the March 11 earthquake, power outages and resulting system crashes meant that cars parked in coin-operated parking lots could not be removed bytheir owners. In response to customers in this field and similarly affected fields,

TOPICS
Completion of the CAPTEX Okazaki Plant

we began development of compact power systems for emergency use and independent power generation systems incorporating photovoltaics. We began production of compact power generation systems at our subsidiary, CAPTEX Co.,
Ltd. and the systems are slated to launch in fiscal 2013.

Change-S2014 and Fiscal 2013 Strategies
Under Change-S2014, the goal of this office is to build an integrated foundationfor our businesses and to create synergistic business opportunities working incooperation with other Group organizations. In the past, our business domains
were organized under headings such as Battery Materials, Battery Systems, andGreen Energy. Beginning fiscal 2013, we have reorganized these domains underregional headings, such as Tokyo, Nagoya, and Osaka. By placing these businessdomains under project managers, we are able to operate more effectively acrossregions. This represents a step forward from the business unit teambuilding wehave engaged in since the start of this office. The objective of this new system is
to allow us to work more closely with our customers, as well as to create andoffer total business solutions that combine our core lithium-ion battery and photovoltaic systems in one.
Under the umbrella of lithium-ion battery and photovoltaic component sales,
we plan to adopt a consultative sales model which will allow us to take the initiative in total energy management and business continuity planning markets, focusing on lithium-ion battery systems and photovoltaic systems as our main
business, while establishing a stable foundation for business going forward.

On April 11, 2012 we held a ceremony to celebrate the completionof the new CAPTEX plant at the Tobu Industrial Park in Okazaki City,
Aichi Prefecture. With the completion of this plant, CAPTEX is now
able to offer one-stop services for mass-produced storage battery
systems.

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Life & Healthcare Segment

Life & Healthcare
Our philosophy is to contribute to a healthier and richer lifestyle. We have identified
Ou
ou
our primary markets as the food products/beverages, cosmetics/toiletries, andphpharmaceuticals/medical materials fields, with the goal of maximizing businessvavalue by effectively utilizing group resources andtetechnologies (saccharide, enzyme, formulation,

Net sales/Operating profit

anand compound) in the global market.

Net sales (left)(¥ hundred million)

Operating profit (right)(¥ hundred million)

1,000

716 39

750
500
250

Director and Executive Officer
Dire

Director and Executive Officer;
GM, Life & Healthcare Products Department

27

491

25

7
0

0

12/3

Osamu Morishita
OsLife & Healthcare Products Department

50

840

13/3

Segment Overview (Functions)

Segment Strengths (Businesses)

In the Life & Healthcare Segment, we arecommitted to information collection, technologicaladvancement, and manufacturing activities that
contribute to a richer and healthier lifestyle for ourcustomers. By creating new value in this area, wework together with our customers and otherGroup companies to contribute to a better society,becoming a corporate group with a more visible
and respected presence. In addition, we areadvancing in developing new functional materials,
cultivating the progress in the biotechnology area
in anticipation of future society needs.

• Group’s unique R&D and manufacturing functions
related to saccharides, enzymes, formulations,and compounds• Global network extending from Asia to Europe
and North America• A successful history in business related topharmaceutical administration system, serving
as a business foundation• A domestic door-to-door sales network serving
as the foundation of our beauty care products
business

Bringing Hayashibara into the Group during fiscal 2012, we made the decision tosignificantly change our target business fields. In the past, our focus has been on
growing our business mainly in pharmaceuticals/medical materials and enzyme
business. However, we have pivoted to focus on functional saccharides, to which
we will add food materials and cosmetics raw materials as our growth businesslines of choice. In addition, we have completed the construction of a new manufacturing building for Nagase Medicals. Here, the Group will dedicate resources tomanufacturing generic anticancer drugs. Furthermore, we have completed theconstruction of a new production facility in Kyoto (Fukuchiyama) for Nagase
ChemteX to more thoroughly research and produce an enzyme derived from actinomycetes. We have also decided to create a cooperative sales organization
between Hayashibara and Nagase. We will construct a new manufacturing facility
in Okayama, which will enhance our functional saccharides production capabilities.
While the global economy continues to struggle, we have welcomed
Hayashibara to the Group and executed a plan of aggressive advance investment

TOPICS
The following discusses our progress in major development initiatives.
(1) Decision to construct a new manufacturing facility
to bolster Hayashibara technology and manufacturing of functional saccharides(2) Extension of global applications for an enzyme
derived from actinomycetes developed by Nagase
ChemteX(3) Completion of new facilities utilizing the pharmaceutical manufacturing expertise of Nagase
Chemicals.

28

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1

Deploy saccharide and enzyme businesses
to food products and beverages

2

Grow the cosmetics and toiletries business3

Expand the pharmaceuticals and medical
materials business globally

4Grow the agricultural, fisheries and livestockbusiness

5

Door-to-door sales of beauty care products

14/3(Forecast)

Major Market Trends

Beauty Care Products Department

In the current business environment, we see increased needs for safe and reliable food materials, as well as cheap, high functioning cosmetics, pharmaceuticals, and pharmaceutical raw
materials. This reflects our understanding of the global increase in the world’s population.
Through our global marketing activities, we are able to understand worldwide market trends,
allowing us to foster businesses that meet these rising needs.

Major Market Trends
While the cosmetics market remains flat, we see greater demand for drinks in the health foods
market, driving slight growth overall.
In the door-to-door cosmetics sales market, we see growth in the small local salon business, which is finding new ways to interact with customers. Meanwhile, traditional door-to-door
type businesses are struggling.

Executive Officer;
GM, Beauty Care Products Department

Osamu Morishita

Fiscal 2012 Strategies and Results

Primary Businesses

Takaaki Hirai

and business development for the future of the Group. As a result, net sales andoperating profit have both enjoyed significant improvements.

Change-S2014 and Fiscal 2013 Strategies
Fiscal 2013 represents the second year of our Change-S2014 business plan.
Here in this department, we plan to advance and expand business through integration of trading company and manufacturing functions targeting food products,
beverages, cosmetics, toiletries, and pharmaceuticals/medical materials markets.
We believe these plans will result in an organization capable of creating morehigh-value-added businesses.
We intend to establish a new organization for the agricultural, fisheries, andlivestock fields, as we engage more actively in targeted programs. We intend to
make effective use of the Group’s technological, intellectual, human, and organizational assets, engaging in activities that range far beyond those of a trading
company. We will execute marketing activities reflecting the new global nature ofmarkets, and build our capacity to plan and develop for success over the medium- and long-term. While the world has become more globalized, the population
has become much older, with fewer children born, and skyrocketing medical
costs. In response to these trends, we will focus on activities that allow us to contribute to a richer and healthier lifestyle. We will pursue business developmentthat contributes to our manufacturing base for food materials, cosmetics, pharmaceuticals, and medical materials – growth markets that call for safe and reliable practices.

Fiscal 2012 Strategies and Results
Under Change-S2014, one of our major initiatives is to continue the growth ofour door-to-door sales business. To accomplish this, we will increase Nagase
brand recognition in the market with advertising and promotional videos, speed
up the pace of sales agent training through a revised sales system, extend theeffectiveness of our human resources through the adoption of the Nagase BrushUp System training and human resources development program, engage in
research based on the theory of herb sciences and technology, clarify the direction of our product research, and work to extend our reach into new regions
through development teams directed from our headquarters.
This department is working towards sustained growth in the door-to-doorsales business under the guidance of Change-S2014. To accomplish this, wehave adopted five strategies: (1) Improving Nagase brand recognition in the market with advertising and promotional videos; (2) speeding up the pace of sales

TOPICS

Change-S2014 and Fiscal 2013 Strategies

Introducing Nagase Trianne, a beauty routine
food that creates true beauty from the insideout using the power of flowers-in purity, luster
and brightness.
Nagase Trianne is a beauty food focused on generating inner
beauty for those who aspire to a more beautiful life from theinside out. This product features three different floral extracts.
The gardenia extract offers a wonderful translucence, thecherry blossom extract targets saccharization, and the safflower extract supports a smooth flow in day-to-day life. It is this
triple approach that gives women a healthy inner beauty, supporting a full and healthful glow.

agent training through a revised sales system; (3) extending the effectiveness of
our human resources through the adoption of the Nagase Brush-Up System training and human resources development program; (4) engaging in research basedon the theory of herb sciences and technology and clarifying the direction of our
product research; and, (5) working to extend our reach into new regions throughdevelopment teams directed from our headquarters. In addition, we have opened
NALPHAS Okayama, the third outlet directly managed by our headquarters, following Nihonbashi and Kobe outlets.
Meanwhile, we conducted new product test marketing in the rapidly growing
Chinese market; however, we have been winding down business development in
China after the decision was made to focus on domestic businesses.
Despite the positive impact of new products, we encountered difficulties
extending the sales of existing products, leading to lower revenues and lower
profits in the segment for fiscal 2012.

■ Nagase Trianne
27g (900mg x 30 sachets)¥7,700 (including tax)

To establish sustainable growth in the door-to-door sales market for fiscal 2013,
the department will pursue a six-point plan. (1) Improving Nagase brand recognition in the markets through advertising and public relations activities; (2) generating more activities and new sales in existing regions, including a review of offices
nationwide; (3) speeding up the pace of sales agent training through a revised
sales system; (4) expanding the number of Nagase partners by actively teaching
and using the new Nagase Brush-Up System (new technique training, staff education program); (5) promoting research and product development according to
the theory of herb sciences and technology; and (6) moving into new areas via
business development teams under new headquarters projects.

NAGASE & CO., LTD. Annual Report 201329

13/08/12 17:15

Regional Overview

Greater China

ASEAN and the Middle East

Executive Officer
CEO, Greater China

Katsuhisa Yamaguchi

The Nagase Group has more than 40 locations throughout Greater China(Mainland China, Hong Kong, Taiwan), including sales companies, manufacturing companies, branches, and offices. We forecast fiscal 2013 net sales for theregion at approximately ¥190 billion (108% vs. prior year). Here, we areengaged in business activities tied closely with customers and markets, while
the same time creating a business model that maximizes the comprehensive
power of the Nagase Group.

Major Market Trends
GDP growth in China for fiscal 2012 was a strong 7.8%, but marked the first time that theeconomy fell below 8% in 13 years. Factors impacting the Chinese economy included lower
exports due to the global economic slowdown stemming from credit concerns in Europe, as well
as related inventory adjustments among domestic manufacturers.
In September, Japan-China relations reached a low point, with declining sales of Japanesebrand automobiles, home appliances, and other goods. Fiscal 2012 was certainly a year of challenges for Nagase and other Japanese companies.
The Chinese government had set a GDP growth target of 7.5% for 2013, maintaining
aggressive financial and healthy banking policies, looking to keep the economy on a steadycourse of growth. While government infrastructure-related investment comprised a large part ofeconomic growth, the country has struggled with a number of problems, including smog andother environmental issues, income disparity, national territory issues, and a real estate bubble.
However, the country does boast a strong and sustainable growth engine backed by an enormous consumer market. As the United States and other economies recover, China will enjoy
greater external demand, as it remains a region of outstanding growth among other regions
around the globe.

TOPICSA New Thin Glass for Displays Processing Facility in Xiamen
In July 2012 the Group completed construction of aplant for Nagase Electronics Technology (Xiamen) Co.,
Ltd. in Xiamen, Fujian Province, China. Nagase
Electronics Technology (Xiamen) Co., Ltd. is a wholly
owned entity of Nagase Electronics Technology Co.,
Ltd. (Taiwan). The plant is in the final stages of preparation towards full operations beginning fiscal 2013.

Fiscal 2012 Strategies and Results
Delays in inventory adjustments among domestic industries and a deceleration in
the overall Chinese economy due to lower exports led to a temporary yet significant decline in sales of products for the automotive industry located in Guangzhou
and Tianjin Districts during the second half of fiscal 2012. However, the Groupexperienced growing sales of new products for smartphones and tablets in theelectronics market, resulting in overall net sales of ¥175.96 billion, representing a
13.0% year-on-year increase.
The Group worked to expand sales of Hayashibara products for the food, cosmetics, and other life & healthcare businesses. We selected employees from ourlocal staff to create a special cross-regional Hayashibara Team sales group, collecting information on market needs and sources of demand, expanding sales
throughout the China, and developing new applications for our products.

30

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Change-S2014 and Fiscal 2013 Strategies
Under the guidance of Change-S2014, we will promote our Greater China (including mainland China, Hong Kong, Taiwan) business by raising the level of the business as a whole and taking steps for transformation. Our mission is to create ourown value and expand through regionally focused business. Our goal is to create
conditions fostering intercompany and interregional synergies for the increasingly
active southern, midwestern, eastern, northern regions, Taiwan and for Greater
China as a whole. With an eye toward continued high growth rates in the Chinese
market, we have identified the environment/energy, electronics, automobiles, andlife & healthcare businesses as top priorities. We will invest management resources in these promising areas, while at the same time optimizing balance across our
five business segments: functional materials, advanced materials & processing,automotive & energy, electronics, and life & healthcare segments.
Our fundamental businesses are electronics, processing materials, and automobile businesses. In these fields, we intend to build out our product offerings
through global-scale coordination, targeting Japanese companies, local Chinesecompanies, and other foreign companies invested in China to drive sales. In ourfunctional materials business, we will continue to open new markets for Chinese
raw materials where we enjoy high cost competitiveness, making use of our Groupsales network to extend our presence throughout Southeast Asia.
Our Hayashibara Team, launched in 2012, will take the lead in strengthening
our specialization, working closely with the Hayas hibara home office to build ourlife & healthcare business. At the same time, we will expand our marketing efforts,
extend our sales network, and further cultivate new application development. In
addition, we plan to grow our business targeting the LIB, PV, and LED markets inthe environment/energy fields.
While we extend our marketing and sales functions, we will also strengthen
our manufacturing and development functions in China, advancing our abilities tosupport product expansion and sources of demand that match the Chinese market
needs. This spring, our joint venture in Changzhou with Light Chemical Co., Ltd.
will begin contract manufacturing operations for resin/fine chemicals related products, while the Nagase Electronics Technology Xiamen plant will enter full operations during the year. The Wuxi R&D Center (mainly epoxy resins) is scheduled to
begin work this fall.
Nagase Business Management and Planning (Shanghai) Co., Ltd. will be thecentral player in advancing our operations and management in terms of employee
strategy, stronger governance, and IT infrastructure adoption, maintenance, andoperations, leading to stronger regional management and support functions, which
will support our growing business in China.

Executive Officer;
CEO, ASEAN/India;
GM, Polymer Global AccountDepartment

Ichiro Wakabayashi

Traditionally, the ASEAN region has been known for cheap labor and manufacturing, but with the growth of economies and per-capita GDP, these regions are gaining more attention as a consumer market and for China Plus One strategy. Our
ASEAN businesses now encompass India, the Middle East and Oceania (eightsales companies, eight branch offices and nine manufacturing companies). We
will focus on establishing a locally directed business model built on our wideranging Group network.

Change-S2014 and Fiscal 2013 Strategies

Major Market Trends

The goal for the remaining two years under Change-S2014 for this segment is to
grow our resin-related business, while at the same time accelerating the pace ofgrowth in other fields (electronics, chemicals, life sciences) as we balance ourbusinesses and the geographical regions in which we operate.
During fiscal 2013, we intend to increase coordination between Japan and
China in our core functional and processing materials businesses, continuing to
add suppliers and strengthen our engagement with OA manufacturers to drive
growth in the region. Meanwhile, we will be working on new development to (1)grow our packaging materials business; (2) extend our automotive/energy business in Thailand and outlying areas; (3) continue with important development projects in our electronics business in Malaysia and Singapore; and, (4) improve thesales process at Hayashibara. At the same time, we intend to strengthen our presence in the growing VIP countries (Vietnam, Indonesia, Philippines), and accelerate
our regional expansion in Bangladesh and the three countries along the Mekong
Delta (Myanmar, Cambodia, Laos), aiming for sustainable growth in these areas. In
terms of management issues, we intend to continue our programs to strengthen
regional management functions for rapid business growth and more mature risk
management.

While the economic future of Japan and other advanced nations remains cloudy, we project that
active investment by foreign companies and an expanding middle class will drive strong economic growth in ASEAN.

Fiscal 2012 Strategies and Results
During fiscal 2012, growth in the Thailand automobile business, progress in the
packaging materials business, growth in the chemicals business in the Middle
East, and more transactions in the office automation market resulted in net salesof ¥85.88 billion, which was a 17.8% year-on-year gain.
Operationally, we added personnel and opened new offices in a number of different regions, making advance investment toward sustainable growth. We also
took other steps toward more stable corporate operations by adopting a sharedcore IT system and improving our regional management functions.

TOPICS
Establishment of a Regional Operating CenterWe established a Regional Operating Center for improved regional management functions. The goal of this new Center is to improve both sales (coordinating information sharing between Japan and China regionally, as anintegrated cross-border business, and locally) and management (improving
risk management associated with entering new regions and businessdomains) in the region.

10

9

5

Operating Strategies(1) Hayashibara Business Project
Objective: Stable rollout of Hayashibara businesses and creation of a wellmanaged sales structure(2) Packaging Business Project
Objective: Grow packaging business(3) Resin Purchasing Business Project
Objective: Strengthen buying capacity; improve intra-regional coordination(4) Chemical Business Project
Objective: Lateral business model extension; propose new investments(5) Automobile Business Project
Objective: Improve intra-regional coordination related to the automobile industry(6) Electronics Business Project
Objective: Expand electronics business, mainly driven by Nagase FineChem
Singapore (Pte) Ltd.
(7) New Business Project
Objective: Promote business investment regionally, generate new intra-regional
business

7
8

4

1 Nagase Singapore (Pte) Ltd.
2 Nagase FineChem Singapore (Pte) Ltd.
3 Nagase (Malaysia) Sdn. Bhd.
4 Nagase (Thailand) Co., Ltd.

3
1 2
6

5 Nagase Vietnam Co., Ltd.
6 P.T.Nagase Impor-Ekspor Indonesia
7 Nagase Philippines Corp.
8 Nagase Philippines International Services Corp.
9 Nagase India Private Ltd.
10 Nagase & Co., Ltd. Dubai Branch,ten other subsidiaries, offices
Subsidiary Branches, Offices

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Major Production/R&D Functions• Epoxy chemical compounddesign• Acrylic polymer design• Conductive materials
design•Precision organic synthesis

Nagase ChemteX Corporation
Research and Development System
Nagase ChemteX Corp. occupies the central role in Group manufacturing.
Leveraging our long-accumulated, proprietary technologies of synthesis,
compounding, biotechnology and evaluation—this company is a chemicals
manufacturer offering a unique line of products posting high market share inniche categories. By creating deeper expertise and integrating these coretechnologies, we are able to offer highly technical services supporting new
development and small-run production capabilities to meet the needs of ourusers. As we improve our various foundational technologies, adding highfunctionality and differentiation in various niche markets, we will build on thefoundation of trust with Nagase Group customers, developing high-function,
high-value-added products and services for our end users and biotechnology,
environment, energy, and electronics applications. In addition, this company
plays a lead role in safety, environmental compliance, quality assurance, andregulatory compliance for Group manufacturing and processing.

Nagase ChemteX Corporation
Representative Director, President

Kazuo Mitsuhashi

Globally Expanding
Nagase Group

NagaseNagase & Co., Ltd. R&D Center

Nagase ChemteX
R&D

Production
Equipment
Manufacturing

DesignTesting

Quality
Control
AnalysisElectronics
Formulated Epoxy Resins & Photolithography
Performance Chemicals Business

Production System

Japan/Overseas
Proactive Allianceswith Industry,
Academia
and Government

Bio/Fine Chemicals

Major Market Trends
Despite higher demand in the smartphone and tablet growth markets, the slowdown in theworld economy and negative consumer sentiment in Japan have combined to cloud the future
direction of the markets.

Fiscal 2012 Results
Net sales for the fiscal year ended March 2013 amounted to ¥26.23 billion (2.7%
year-on-year decrease), while operating profit was level with the prior year at¥2.74 billion (0.3% year-on-year decrease). While sales of our formulated epoxy
resin products were strong in the heavy electrical, light electrical, and mobile
phone sectors, declining sales for semiconductors and LCD panel materials drove
performance down overall. In terms of profits, declining sales prices and sluggish
sales of high-value-added electronic materials products pushed earning lower.

Net sales/Operating profit
Net sales (left)

Operating profit (right)(¥ hundred million)(¥ hundred million)
50

350

308
300
250

38

261
234

269

262

40

32
27

200

27

150
100

20

9

0

Fukuchiyama Plant: New Enzyme Production
Building

China: Nagase ChemteX (Wuxi) Corp.
R&D Center (artist’s rendering)

In this business, we perform a product development and production based on advanced
formulated epoxy technologies. In the electronics business, we saw growth in organic
EL adhesives, as well as new adoptions ofhigh-function epoxy resins for smartphones.
However, sales of liquid sealants for semiconductors and power IC applications underperformed prior-year levels. With the second-halfrecovery in large-format panels in the liquid
crystal-related business, we were able todeliver results in line with plan. In our environment and energy business, we began mass
production of adhesives for (H)EV vehicles;
however, the market for solar cell and wind power generation applications remains
weak. Sales of coating materials at Engineered Materials Systems Inc. (added to
the Group last fiscal year) enjoyed significant gains in coating materials, and webegan producing products for the U.S. markets locally.

Performance Chemicals BusinessIn our Performance Chemicals Business, we were able to expand our offerings offunctional materials based on unique organic synthesis and polymer synthesis
technologies. With respect to epichlorohydrin conductors, we were able toimprove our inspection technologies for the purpose of expanding our alreadysuccessful tire cord business. We introduced this technology in the Chinese andIndian markets, where we expect to see significant growth, finding gains in
adoption. We have also made progress in developing new epoxy materials thatmeet needs for transparency, light resistance, and heat resistance. In our special
acrylic rubber business, we made progress in pioneering new applications fortarget markets in Korea, Taiwan, and China, as well as Japan, beginning sales
during the period. We actively pursued developing in highly conductive type oftransparent conductive polymer Denatron, working new and well-received applications for electronics materials in uses other than our current mainstay antistatic display-related products.

• Process development,
synthesis• Materials analysis, impurity
analysis• High-efficiency productionof actinomycete enzymes• Microbe fermentation,
breeding• Microbe exchange,
enzymatic reactions• Photolithography materials
design• Electrochemical function
control• Thin film solution control• Electrochemical thin film
control• Epoxy resin/synthesis
design• High-density filler,
compound design• Compounding• Stress-reduction agent
compounds• Rheology characteristics,
compound design• Processing technologies

Nagase ChemteX Corp. Component technologies

Bio/Fine Chemicals BusinessIn our enzymes business, we have focused on developing applications of our own
products. We have been proactive in proposing solutions to our clients, which has
led to steady increase in sales. With respect to phospholipid products, which use
our own phospholipid converting enzymes, we have produced a more complete
application data set, engaging in sales building activities both in Japan and overseas, successfully growing our sales results. With respect to our pharmaceuticalraw materials and intermediates
business, we have made progressin the further evolution of ourunnatural amino acid-based technologies in pursuit of new biocompatible materials in order to expand
into the medical materials field.

Change-S2014 and Fiscal 2013 Strategies
Following the basic policies outlined in the Change-S2014 plan, we will make further improvements in our foundational management practices.
In research and development projects, we intend to create new businessand new products based on our unique development capabilities built on numerous elemental technologies in order to meet the diverse range of needs in the markets. At the same time, we will focus on research and future growth areas,leveraging domestic and international network of the Nagase Group and the wealthof information available, aiming to solidify our core businesses, elemental technologies, and core materials over the medium and long term. Further, we intend to
improve productivity and strengthening our production foundation as a manufacturer, exemplifying operational safety, production technologies, and quality assurance, and playing a central role in the R&D and manufacturing functions of theNagase Group, looking to improve the quality of our technology management.

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Harima Plant: Microelectronics
New Production Line and Equipment

Fiscal 2012 Operations
Electronics Business• Composite materials design• Organic/inorganic hybridmaterials design• Nano materials design

10

50

32

30

The Harima Plant manufactures a wide variety of electronics and functional chemicals
products. Here, we completed a new production line for microelectronics-related products, beginning full production. The
Fukuchiyama Plant, which produces
enzymes, fermentation products, and otherlife sciences-related products, completed
construction for a new enzyme production
plant, starting manufacturing work on
enzymes for export overseas. In addition,
every plant has engaged in energy conservation activities. Both the Harima and
Fukuchiyama Plants have made progress inelectrical power usage reductions in
response to summer power shortages. The
Harima Plant received OHSAS18001 certification, reflecting its commitment to creatinga safe and secure work environment.
Overseas, at Nagase ChemteX (Wuxi)
Corp., in addition to our manufacturing facility for formulated epoxy resin products, wehave started preparation to open an R&D
center to expand research and development
functions.

Nagase ChemteX’s R&D structure, which employs a total of 140 staff members,
comprises product development teams within divisions as well as an R&D Division
working companywide. In the electronics field, we were active in developing conductive, transparent, nano-sized, battery and environmentally-friendly materials.
With respect to development of organic and inorganic hybrid polymers (a type ofclear material) in particular, we have made progress in developing high-function
coating and lens applications, successfully expanding the scope of uses in thisproduct line. In the life sciences field, we promoted the development of pharmaceutical intermediates and new enzymes in collaboration with the Nagase R&D
Center. One of our strengths is our ability to select periods for development basedon our understanding of Group-wide needs, creating synergies between R&D andtrading company functions.

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Hayashibara Co., Ltd.
Research and Development Structure
We can largely categorize our business into functional saccharides and functional dyes. We manufacture and sell functional saccharides, including TREHATM and Glucosyl Hesperidin (used as foodmaterials), AA2GTM (stabilized vitamin C used in cosmetics materials), and Maltose for infusion(used in pharmaceuticals). Our functional dyes business consists of a large dye library based onorganic synthetic technologies. We rely on this library of dyes to provide products to the industrial
fields (photography, printing plate sensitizer, etc.) and the life sciences field (the drug LUMINTMA
and in vitro diagnostics).
Moving forward, we will shift a part of our sales functions to NAGASE & CO. to allow theNagase Group to leverage Group-wide resources on promoting global expansion. At the same time,
we will focus more management resources on our own research and development to speed development of new products, while promoting global standards in food safety and quality management through greater improvements in our production functions, showing that our commitment
extends beyond just ensuring a stable supply of product. During fiscal 2012, we became certified
under the FSSC22000 global food safety standards at the plant manufacturing our TREHATM functional saccharide.

Hayashibara Co., Ltd.
Representative Director, President

Reiji Nagase

Production System

Major Market Trends
Our products receive high marks not only for their physical properties, but also for their functionality. We have extended our product line from the food and cosmetics markets to the medical and industrial fields. In particular, recent consumer interest in health and the demographic
shift toward an aging population lead us to project much higher demand in functional raw materials for the health, nutrition, and beauty sectors. Here, we believe our superior products willmeet the needs of these markets.

Fiscal 2012 Results
Net sales for fiscal 2012 amounted to ¥25.22 billion, representing a slight 1.2%
year-on-year decrease. The major factor behind this result was our re-examinationof unprofitable products. Our domestic food business accounts for 60% of net
sales. Here, our mainstay TREHATM and Glucosyl Hesperidin, and other products alloutperformed prior-year results. Meanwhile, the ongoing shift to digital photography among consumers led to weak performance in our functional dyes business.

The functional saccharide factory that produces TREHATM received FSSC22000
certification (food safety) during fiscal 2012. In addition, we are working towards
kosher and halal certification overseas to increase opportunities for sales. Looking
to even higher levels of quality, we plan to acquire ISO9001 certification during fiscal 2013, and we are presently engaged in corporate wide initiatives, including
programs related to the functional dyes business.
While we are updating equipment according to schedule in all of our manufacturing plants, equipment in the Okayama Plant 1 has particularly aged.
Accordingly, we are planning to complete construction on a new plant to take over
the old plant’s operations in March 2015. This new plant will not only ensure thestable supply of existing products, but it will also function as a pilot plant for new
product development. The plant features an efficient and energy-saving design thatoffers flexibility in manufacturing a number of different types of products.

Microorganism screening and other new technologies derived from years ofexpertise have put us on the course to developing new saccharides that utilize
new enzymes that we have researched. Our goal is to use these saccharides infood, cosmetics, medical, and industrial applications as a result of our pursuit ofunique technologies and materials, as well as the Nagase Group marketing capabilities in response to market needs. Our efforts focus on research and development that we can quickly and efficiently leverage to launch new products in themarket. We continue to make strategic use of these intellectual assets that result

Change-S2014 and Fiscal 2013 Strategies

Fiscal 2012 Operations
Functional Saccharides Business
Our functional saccharides business makes use of
the functions at the Tokyo Laboratory, L'Plaza where
we develop recipes that maximize the functionality of
our saccharide products. Our goal is to expand theapplications of the saccharides beyond confectionary
to cooked rice, bread, noodles and other staple foods,
as well as prepared foods, beverages, and processed
foods. We remodeled and reopened the Tokyo
Laboratory, L’Plaza in the Nagase Sangyo Tokyo
Honsha East Building for the purpose of incorporating
greater functions into these products. Thanks in partto the launch of new foods for specialized health uses
utilizing the blood lipid neutralizing effects of our
Glucosyl Hesperidin product, we saw significant yearon-year growth in sales.

from our research.
Our latest research has resulted in Highly
Branched Glucan, which can be expected to alleviate
the effects of metabolic syndrome, a disease resulting from the modern lifestyle. Glucosyl Adenosine isanother discovery that we believe will have anti- Highly Branched Glucan
aging effects. We announced both of these breakthroughs at the Japan Society for Bioscience, Biotechnology, and Agrochemistryin March 2013.

Presentation room, Tokyo Laboratory,
L'Plaza

Application development room,
Tokyo Laboratory, L'Plaza

Glucosyl Hesperidin

Functional Dyes BusinessIn our functional dyes business, we have successfully
extended applications of the dyes we manufacture
beyond photography and printing plate commercial
sectors into test agents and other life science fields.
As we work on dyes business projects in cooperation
with other Nagase Group affiliates, we also find ways LUMIN A
to meet client needs through the development of newmaterials and potential applications. We continue to see a steady increase in customers of our LUMIN TMA dyes formulation who faithfully use the product as adrug.

We have started operations of several new systems related to company management (management planning, management accounting, information systems,
human resources, etc.). These systems will form management foundation supporting future growth for the Company. In addition, with respect to our manufacturing systems, we are conducting reviews of our production facilities to ensure astable system of supply, as well as improvements in safety, quality, and technology. For this purpose we are engaging in proactive capital investment, including
construction of a new plant called for in our current plans. Furthermore, we intend
to make the investments necessary to adopt new technologies that support forward-looking research and development activities.
To bring the entire Nagase Group resources to bear on sales functions, wewill move overseas sales functions for the food sector and both overseas anddomestic management functions for the cosmetics/medical sector of the saccharides business to NAGASE & CO. during fiscal 2013. After the move, we will be
responsible for domestic food sector sales functions, quality assurance and othermanufacturing functions, and research and development functions. Sales functions for the functional dyes business have also been transferred under NAGASE& CO.
We believe that strengthening our business overseas, where we believe themarkets will grow, is a particularly important link in improving our earnings. As
such, we will be taking advantage of the Nagase Group overseas network to pushoverseas sales to 30% of our total business over the medium term.

TM

Net sales/Operating profit
Net sales (left)

Operating profit (right)(¥ hundred million)(¥ hundred million)

300

80

255

252
56

200

42
40

Functional saccharide plantResearch laboratories

100

0

Sales of saccharides that meet market needs
Proposing recipes (formulas) optimized for users

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Trehalose (powder): Nagase Group locations

34

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Major Markets

Foods

Target Regions

Americas

Perfumes andCosmetics

PharmaTrehalose (crystal)
EuropeGreater China

ASEAN

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Nagase R&D Center

Nagase Application Workshop

The mission of the Nagase R&D Center is to develop a biotechnology platform that backs up theNagase Group’s future business and to utilize biotechnology for product and service development,
guided by concepts of uniqueness, self-direction, and invention. We consider the R&D Center to be
the main group responsible for driving the creation of high-value-added businesses leading to further
growth and originality in combining manufacturing, processing, research and development functions,marketing, and trading functions under the umbrella of Nagase, a technical information company.
Through close coordination with business divisions and front-line sales, the R&D Center will continue
to provide customer and market solutions from a technological perspective.
The R&D Center will push on with research and development to advance our Life & Healthcare segment, introducing new cosmetics, health foods, and medical diagnostic drug products.

The Nagase Application Workshop (NAW) facility is where, jointly with customers, we engage in activities
that range from function and application development of raw materials related to plastics and coating
materials to the formulation development of finished products that use such raw materials. NAW wasborn of necessity in the course of adding R&D, manufacturing and processing functions to our conventional base as a trading company. Accordingly, NAW is an important tool for advancing a switch from ourprevious sales model that focused on materials exploration to one that is driven by application proposals
and joint development. In offering such technological support, NAW is providing unparalleled functions
that only Nagase is capable of providing.
Further, to accelerate development among departments, related companies, and affiliates along unique and independent topics, we opened
the multipurpose laboratory in fiscal 2012. Departments, related companies, and affiliates can bring their own ideas compatible with NAW facilities,
technological staff knowledge, and expertise, using the NAW as a space for development activities using the support of the NAW staff.

Biotechnology (microorganisms) and Topics(1) Physical production technologies using original actinomycete microorganisms(2) Research in new genetic material synthesis utilizing bioinformatics(3) Development of recombined microorganisms to improve chemical and protein
production capacity(4) Practical production technology research in non-petroleum dependent andbiochemicals(5) Bio-themed research related to ecological and resource conservation

Beginning with fiscal 2013, we will narrow the focus of the R&D Center to bio-related
technologies, delving into original featured technologies and developing technologicalapplications. Specifically, the R&D Center will further expand its strengths in genetic
engineering and bioinformatics technologies for the purpose of rapid commercialization of effective non-petroleum-dependent chemical compound production related tounique actinomycete technologies researched to date. In particular, the R&D Center
will work closely with university and other external research institutions related tometabolic engineering, making the most of the research resources owned by suchinstitutions. At the same time, we will strengthen our adoption of leading-edge technologies. Meanwhile, the R&D Center will also actively share information with Groupsales divisions, working with them to create more new business opportunities in environmental detoxification and other projects where we can highlight our expertise withrespect to biotechnologies to an extent even greater than before.

Intellectual Property Administration and Usage
To administer and use intellectual property from R&D through activities, the Nagase
R&D Center strategically engages in the acquisition of intellectual property rights forresearch results jointly with the Intellectual Property Office as well as the establishment of new companies based on projects undertaken by business departments andaffiliated companies.
Fiscal 2012

In Japan

Overseas

In Japan

Overseas

Patent applications*1

28

7

849

406

Patents

9

12

190

204

*1

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

Throughout fiscal 2012, we worked closely with our customers, materials makers andprocessors on a number of different solutions and requests. We received visitors fromalmost 100 different firms, and turned a total of more than 50 new solutions into
practical operations.
Plastics•Development of plastic materials for molding with automotive industry parts makers (Tier 1,
Tier 2); Weight savings, high-grade treatment (under discussion), improvement in scratch
resistance, etc.
•Development of additive masterbatches that expand degrees of freedom for plastic materials
procurement by parts makers overseas•Development of the original plastic grades that make use of recycled materials from OA
manufacturers•Development of artificial marble coloring technologies allowing the use of styrene resins

Coatings•Sales of coating raw materials in overseas markets, particularly effective technicalsupport of proposals for functional materials contributed quicker development andgreater sales; Coordination with the coating lab established in India (Mumbai), providing technological support for pioneering raw materials locally.
•Continue to develop functional coating materials with external partners; Anti-fog coatings (patent pending), special coatings using silver nanoparticles, etc.
•Begin new-product development in cooperation with raw materials manufacturers;
Radiant materials, pigment dispersant, etc.

High-value-added products, services*1 The number of patent in the name of the Nagase R&D Center. Licenses and other intellectual property rights are notincluded.
*2 Figures include applications for international patents.

Technological Results

1. Plastics
2. Coating materials

Support for local
production overseas
Product development
for unique brands

Multipurpose laboratory*2

Achievements in Fiscal 2012

NAW

Process companies

R&D (unique technologies)

Cumulative Total (to Fiscal 2012)*2

This mechanism is made uniquely
possible by Nagase

Departments (customers, markets)

R&D (technological expertise)

Customers

Materials manufacturers

Strategies for Fiscal 2013

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

Fiscal 2013 Policies
The NAW is solidifying its reputation as an outlet for unique, original Nagase functions, fully providing continuing development functions and technical customer/user
support befitting a development partner of choice as a plastic and coating applied
technology development center. Having identified industries and technologies on
which to focus, Nagase will take the lead in implementing activities that create seedsof new high-value-added businesses. We have set our sights on the automotive andOA fields as target industries, working in coordination with other departments to create new business approaches that only a firm like Nagase could produce. During fiscal 2013, we will concentrate on surface treatment technologies, working mainly tocommercialize composite technologies such as plastics, coatings, and printing.
Our goal is to uncover new elemental technologies more quickly than any othercompany in the world, working every day to offer the right decisions and NAW that wecan propose to customers.

Principal Functions
1. Plastics

2. Coating Materials

3. Multipurpose Laboratory(1) Genetic tools to increase microorganism’s physical production capabilities(patent pending)Formula design function car-Coating and ink composition

By assigning technical staff from departments, related companies, and affili-

ried out by expert techni-

design function carried out by

ates to the NAW multipurpose laboratory to work with respect to themes relat-(2) Create microorganisms optimized for target physical production(genome modification)

cians, test production ofexpert technicians, test pro-ed to plastic, coating, ink, and other compounding technologies, dyes/

compounds centered on aduction of coatings and inks

additives, filler, and other materials technologies; color, surface treatment, andtwin-screw extruder, properties assessed using allusing all types of assessment equipment, properties

printing technologies within various themes developed within the Nagase Group, NAW facilities and NAW

types of assessment equipment

assessed using all types of assessment equipment

staff-provided technical support are effectively used, leading to faster development speed.

Equipment• Twin-screw extruders (15mm L/D=45 and 26mm L/
D=64) • Henschel mixers • Injection molding
machines (80t and 110t) • Analytical equipment (thermal analysis equipment, FT-IR, etc.) • Physical property
measurement equipment (tensile strength, bending,shock testing equipment, HDT testers, etc.) • CCM(computer color matching system)

Equipment• Painting booths • Disperser (paint conditioner, horizontal, vertical bead mill) • UV curing system Drying
oven • Age testing equipment (xenon WOM, SUV
weathering test equipment, constant temperature/humidity oven, etc.)

Current Major Themes• Development of digital printing technologies • Development of coating agent formulation for thermal
paper • Development of in-mold transfer foils manufacturing technologies • Development of LED UV
lamp-compatible UV-cured ink/paint materials • Applied development of silicon materials in medical
uses • Development of LED lighting module components(3) Conclusive proof of special biochemical production concepts via recombined microorganisms(4) Discovery of new biochemicals and related synthesized genes(preparing patent application)(5) Compounds protecting biopolymers from denaturalization due to freezing and thawing (patent pending)36

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CSR Management

Directors, Audit & Supervisory Board Members and Executive Officers(As of July 1, 2013)

Directors
Management Philosophy“Maintain Good and Fair Business Practices”
The Nagase Group is a member of world society. As such, it is our duty to maintain good and fair business

Hiroshi Nagase

Reiji Nagase

Representative Director, President and CEO

practices and, through continued growth and development, provide society with the goods and services it

Kenichi Matsuki

Representative Director and Senior Managing
Executive Officer
Hayashibara Co., Ltd.

needs while improving the welfare of our employees.

Representative Director and Managing Executive Officer
Human Resources & General Affairs Div., Legal &Credit Div., Logistics Management Div., GM
Intellectual Property Office, Audit Office

Toshiro Yamaguchi
Representative Director and Managing Executive Officer
Functional Materials Segment, Greater China/ASEAN/
India“The Nagase Way” Action Principles
1 Always be customer-oriented.

2 Always be a creative challenger.

4 Always think globally and act locally.

3 Always use the power of the Nagase Group.

5 Always think systematically and act speedily.

Hiroshi Hanamoto

Osamu Morishita

Mitsuro Naba

Director and Executive Officer

Director and Executive Officer

Director and Executive Officer

Director and Executive Officer

Advanced Materials & Processing Segment, Nagase
Application Workshop

Life & Healthcare Segment, R&D Center, Osaka
Region, GM, Life & Healthcare Products Dept.

Business Administrative Div., Finance Div.,
Accounting Div., Corporate Planning Office,Information Technology Div.

Electronics Segment, Automotive & Energy Segment,
America, Europe, South Korea
Nagoya Branch

Organization (as of April 1, 2013)
Audit & Supervisory Board /Audit& Supervisory Board Members
Shareholders’ Meeting

Risk Management & Compliance Committee

Nagase R&D Center

Internal Control Committee

Nagase Application Workshop

Security Trade Control Committee

Business Administrative Div.

Outside Directors

Kenji Asakura

Audit & Supervisory Board Members

Performance Chemicals Dept.
Board of Directors
Speciality Chemicals Dept.
Colors & Imaging Dept.

President
Corporate Strategy Office

Polymer Global Account Dept.

Corporate Planning Office

Polymer Products Dept.

Intellectual Property OfficeElectronic Chemicals Dept.

Logistics Management Div.

Electronic Materials Dept.

Human Resources & General Affairs Div.

Automotive Solutions Dept.

Finance Div.

Life & Healthcare Products Dept.

Legal & Credit Div.

Beauty Care Products Dept.

Audit Office

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

長瀬13̲E̲本文̲PDF用.indd 38-39

Masao Hidaka

Outside Director

Outside Director

External Audit & Supervisory Board Member

Audit & Supervisory Board Member

1966 Joined Nissan Motor Co., Ltd.
1995 Director, Nissan Motor Co., Ltd.
2000 Managing Director, Nissan Motor Co., Ltd.
2002 Representative Director and President, Nissan
Diesel Motor Co., Ltd. (currently UD Trucks
Corporation)2007 Consultant, Nissan Diesel Motor Co., Ltd.
2009 Retired from Nissan Diesel Motor Co., Ltd.
2009 Current position

1975 Joined Kyoto Ceramic Co., Ltd. (currently
KYOCERA Corporation)
1987 Director, KYOCERA Corporation
1992 Representative Director, Managing Director,
KYOCERA Corporation
1997 Representative Director, Vice President,
KYOCERA Corporation
1999 Representative Director, President, KYOCERA
Corporation
2003 Representative Director, President andExecutive Officer, KYOCERA Corporation2005 Representative Director, Chairman and CEO,KYOCERA Corporation
2006 Director, Consultant, KYOCERA Corporation2007 Consultant, KYOCERA Corporation2009 Retired from KYOCERA Corporation2012 Current position

1972 Joined The Sumitomo Bank, Limited (currently
Sumitomo Mitsui Banking Corporation)2000 Head Office Senior Management Staff and,
General Manager, Kanda Corporate Banking
Dept at The Sumitomo Bank Limited
2004 Retired from the Sumitomo Mitsui Banking
Corporation
2004 Current position

1973 Joined NAGASE & CO., LTD.
2011 Current position

Toshio Takano
External Audit & Supervisory Board Member (part-time)Masahiko Hamaguchi
Audit & Supervisory Board Member
1982 Joined NAGASE & CO., LTD.
2013 Current position

1987 Deputy General Manager of the Special
Investigation Department of the Tokyo District
Public Prosecutors Office
2001 Superintendent Public Prosecutor of the Sendai
High Public Prosecutors Office
2004 Superintendent Public Prosecutor of the
Nagoya High Public Prosecutors Office2006 Takano Law Firm2008 Current position

Nagase ChemteX Corp.

Basic Concept of CSR

NAGASE & CO., LTD. Annual Report 2013

Hideo Yamashita

Nagoya Branch

Hayashibara Co., Ltd.

38

Yasuo Nishiguchi

Energy Business Office

Accounting Div.

Information Technology Div.

Iwao Nakamura

Executive Officers
Mitsukuni Mori

Ichiro Wakabayashi

Kohei Sato

Mitsuru Kanno

Masatoshi Kamada

Managing Executive Officer
Hayashibara Co., Ltd.

Executive Officer
GM, Polymer Global Account Dept.
CEO, ASEAN/India

Executive Officer
GM, Performance Chemicals Dept.

Executive Officer
GM, Colors and Imaging Dept.

Executive Officer
GM, Electronic Materials Dept.

Kenji Nagafusa

Kenichi Horie

Masanori Furukawa

Executive Officer
GM, Polymer Products Dept.

Executive Officer
GM, Electronic Chemicals Dept.

Executive Officer
Finance Div. GM, Accounting Div.

Katsuhisa Yamaguchi

Shinji Nakamura

Takanori Yamauchi

Executive Officer
CEO, Greater China

Executive Officer
GM , Business Administrative Div.

Executive Officer
Corporate Planning Office GM, Information
Technology Div.

Kazuo Mitsuhashi
Managing Executive Officer
Nagase ChemteX Corp.

Takaaki Hirai
Executive Officer
GM, Beauty Care Products Dept.

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

Advisory Board to secure advisors from outside the Company.

Executive Officers
Under a corporate system that adopts an Audit & Supervisory Board, Nagase
introduced the executive officer system in June 2001. The Company’s current

Furthermore, Nagase established the following committees to reinforce its
corporate governance function.

management framework consists of ten directors (including two outside direc-

With the majority of its members made up of outside directors, thetors), 21 executive officers (eight of whom concurrently serve as directors), andCompensation Committee ensures the objectivity and transparency of thefour audit & supervisory board members (including two external audit & super-

Company’s directors and executive officers in the decision-making process

visory board members). The Board of Directors is clearly positioned as the body

regarding compensation by screening the appropriateness of every compensa-

in charge of making decisions on management policies and strategies, and ittion level and the compensation system to report and make recommendations

supervises the execution of operations. Holding a regular monthly meeting, theto the Board of Directors. As a consultative body for the Board of Directors, theBoard of Directors reviews and formulates measures regarding important deci-

Risk Management & Compliance Committee establishes and strengthens risk

sions and tracks business performance.

management and compliance systems that cover not only legal compliance but

In accordance with audit policy and standards for responsible work set atthe Audit & Supervisory Board’s meetings, corporate auditors attend importantalso corporate ethics. The Committee also maintains ISO environmental management standards and promotes energy conservation initiatives.

meetings, such as Board of Directors’ meetings, and conduct audits of the exe-

The Internal Control Committee documents the companywide internal con-cution of duties of directors and executive officers based on reports solicitedtrol conditions and financial statement preparation process to further enhancefrom subsidiaries on an as-needed basis.

its financial reporting credibility, while maintaining and strengthening a struc-Executive officers determine specific measures for sales-related administrative
matters by attending divisional general managers’ meetings and supervisors’ meet-

Under the executive officer system, Nagase’s corporate governance system
collaborates with the abovementioned committees to appoint outside directors

ings and discussing each division’s status report. In light of the importance of secur-

relation to foreign currency exchange and foreign trade for its trading of cargos

ing objective supervision of and guidance on its management, Nagase set up an

and technologies covered by such laws and regulations.

Nagase’s Corporate Governance System

The Company established the Audit Office to also ensure audit & supervisory

rate governance system. Having secured supervision and auditing functions thatboard members’ auditing effectiveness, supplying staff upon request to support theoperate from diversified perspectives, including from outside the Company,

audit & supervisory board members’ work. The Audit Office and the Audit &Nagase believes the current corporate governance system is more rational thanSupervisory Board regularly exchange information regarding internal audits andever. We will increase our efforts to further reinforce our corporate governanceaudits of domestic and overseas subsidiaries, while holding meetings twice a year

system to secure stakeholders’ trust.

with affiliate companies’ auditors. In addition, they perform wide-ranging liaison
activities, including receiving regular reports from Ernst & Young ShinNihon LLC,

Director Compensation

Nagase’s independent auditors, regarding accounting matters and associated inter-

Director compensation (excluding outside directors and audit & supervisory board

nal controls; maintaining a presence during accounting audits; and cooperating as

members) consists of basic salary and performance incentives (bonuses). The

needed with audits conducted at affiliated companies, including those located over-Company calculates compensation based on director compensation rules, contin-

seas. In addition to discussing individual matters with audit & supervisory board

gent on approval by the Board of Directors. Performance incentive (bonus) amounts

members on a daily basis, independent auditors also hold meetings twice a year

are determined according to a basic payment amount based on Company earnings

with the Audit & Supervisory Board.

for the period in question. The Company considers individual performance based on

Nagase established the Internal Control Committee and the Committee

the Goal Management System when determining basic salary and director bonuses.

Affairs Bureau in its internal control section, and the Audit Office serves as the

The Compensation Committee assesses the validity of compensation stan-

LiaisonAudit

Audit & Supervisory Board Members

The Audit Office reports results of its internal operational audits to theimproved objectivity and transparency in the director compensation decision-mak-Internal Controls Committee. The Internal Controls Committee regularly reports on

ing process.

the status of internal controls to the Audit & Supervisory Board and the

Total Director Compensation by Title, Total Compensation by Type, Number of Eligible Directors(Millions of Yen)

Compensation

Basic
Compensation

Basic
Compensation

Number of
Eligible
Directors

Directors (excluding Outside
Directors)

265

173

91

10

Audit & Supervisory Board
Members(excluding External Audit &Supervisory Board Members)

44

Outside Officers

42

Total Compensation by Type

Total

Title

 INCLUDING  EXTERNAL AUDIT 
supervisory board members)(10 including 2 outside directors)—

2Compliance Cell Center

Internal Control Committee
Security Trade Control Committee

Audit Office

Supervision

Supervision

SupportLiaison

Guidance, Advice50s)NTERNAL
s%XTERNAL

President(includes one outside advisor)—

4(Millions of Yen)

Risk Management & Compliance Committee
Advisory Board

42(outside directors + directors)

Total

Audits by certified public accounts are performed in a fair and unbiased
manner by a staff of 30, which includes the following specified limited-liability
partners and accountant trainees.

Auditing Firm
Kenichiro Arai

44

Important Matters regarding Employee Bonuses for Employees Also Serving as Directors

Supervision

Company's external auditor.

Certified Public AccountantsCompensation Committee

Audit

Audit & Supervisory Board

Board of Directors

Company’s independent internal auditor.

dards and systems, reporting to and advising the Board of Directors. This ensures

Shareholders’ Meeting

Independent Auditors

governance.

and members to the Audit & Supervisory Board as well as to reinforce its corpo-

ture to carry out evaluation and improvements. The Security Trade Control
Committee thoroughly complies with export related laws and regulations inedge about finance, accounting, general corporate management, compliance andSpecified limited-liability
partners
Managing partners

Ernst & Young ShinNihon LLC

Yuka Hayashi
Hideo Yamamoto

Independent Directors and Independent Audit & Supervisory Board Members
Nagase appointed all of its outside officers, namely, the two outside directors,
Messrs. Iwao Nakamura and Yasuo Nishiguchi, and two external audit & supervi-

Number of Eligible
Directors

Comments

5

Paid in an amount equivalent
to employee bonus

sory board members, Messrs. Hideo Yamashita and Toshio Takano, and registeredthem as Nagase’s independent directors and independent audit & supervisoryboard members with the Tokyo Stock Exchange.

Internal Audit System
The Audit Office is in charge of internal audits, including audits to assess theappropriateness and efficiency of the Company’s business activities. The Audit

Audit

Office is staffed by twelve employees, including certified public accountants, certified internal auditors (CIA), qualified internal auditors (QIA) and other individuals
who possess specialized knowledge in internal audits. The Audit & Supervisory

General Managers’ Meeting (Sales)

Supervisors’ Meeting (Administration)

Board consists of four audit & supervisory board members (including two external
audit & supervisory board members) who have a considerable amount of knowl-

40

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Category

Name

Reason for Appointment

Major Actions in Fiscal 2012

IR Publications

IR Activities

Twice annually, the Company publishes a shareholder newsletter. The Company
OutsideIwao

Directors

Nakamura

Yasuo
Nishiguchi

Mr. Nakamura has served in management positions at Nissan Diesel Co., Ltd. (presently UD Trucks Corporation) and Nissan Motor Co., Ltd. He has a wealth of knowledge
and experience to call on in offering expert industry management advice to theCompany, which we expect will lead to stronger corporate governance.

Mr. Nakamura attended all 14 board of Directors meetings (100% attendance), offering appropriate opinions and advice.

Mr. Nishiguchi has served in management positions at KYOCERA Corporation. He has awealth of knowledge and experience to call on in offering expert industry management
advice to the Company, which we expect will lead to stronger corporate governance.

Mr. Nishiguchi attended all 10 Board of Directors meetings (100% attendance), offering appropriate opinions and advice. (Mr. Nishiguchi wasnamed a Company outside director in June 2012.)

Mr. Yamashita has a wealth of knowledge and experience in the workings of financial
institutions, serving many years in various positions in Japan and overseas. We believe
he will be able to call on this wisdom and experience to properly conduct his duties as
an external audit & supervisory board members.

Mr. Yamashita attended all 14 Board of Directors meetings (100% attendance), as well as all 14 Audit & Supervisory Board meetings. Mr.
Yamashita offered appropriate opinions based on his breadth of knowledge from serving in financial institutions overseas.

Mr. Takano served many years in the Lawyers Association gaining experience andknowledge. We believe he will be able to call on his expertise to properly conduct his
duties as an external audit & supervisory board members.

Mr. Takano attended all 14 Board of Directors meetings (100% attendance), as well as all 14 Audit & Supervisory Board meetings. Mr. Takano
offered appropriate opinions based on his expertise as an attorney.

also publishes an annual report, available to all stakeholders.

The Company’s representative directors, officers, and investor relations staff
actively engage in investor relations activities for our shareholders and for institu-

IR Website
The Company publishes financial information, stock data, briefing materials, andassociated media (videos, etc.) through the Company’s IR website: http://www.
nagase.co.jp/english/ir/

tional investors in Japan and around the world.
Please contact the Company’s Public & Investor Relations Section of the Finance
Division with any investor relations inquiries:
Telephone: 81-3-3665-3028
IR Website: http://www.nagase.co.jp/english/ir/

External Audit

Hideo& Supervisory

Yamashita

Board
Members
ToshioTakano(Note) The number of Board of Directors meetings noted above does not include resolutions made in writing.

Timely Disclosure
The Company has established Basic Compliance Policies that require compli-This system allows the Company to identify and manage information for time-ance with laws, regulations and Company rules, as well as disclosing infor-

ly disclosure. The Company works to consistently manage important internalmation to stakeholders. We proactively disclose corporate information in a fair

information and prevent insider trading, as guided by Company rules in thismanner, striving to maintain management transparency.

area. The Company held a total of nine insider trading prevention seminars

The Company has set into place the following internal systems to support
the timely and appropriate disclosure of Company information to investors.

during fiscal 2012 as one way of offering regular internal education regarding
insider trading prevention.

Information Disclosure
Company's corporate website. The Company also provides video of the brief-Group Compliance Behavior Standards and timely disclosure of important

ing meeting proceedings.

information through proper channels. Through the establishment of theBriefing Meetings for Individual Investors

Nagase Group Code of Conduct and the timely disclosure via proper channels

The Company offers briefing meeting for individual investors on an ongoingof information needed by society, we engage in continuing communicationbasis. Business, results of operations, and dividends are addressed by thewith society. In this way, we maintain a fair, transparent dialogue, never allow-

responsible director. Last year, the Company offered a total of three briefing

ing corporate activities to deviate from socially accepted norms.

meetings. Briefing meeting materials can be found at the Company's corporate website.

fair disclosure of information through IR activities, public relations programs,

Facility Tours

and websites for our shareholders and investors to improve management

The Company holds facility tours for institutional investors and analysts.

transparency and accountability.

During fiscal 2012, the Company offered a plant tour at subsidiary42

Individual Meetings

1. Initiatives for More Active General Shareholders’ Meeting; Facilitating

The Company engages in individual meetings with institutional investors andthe Exercise of Voting Rights

analysts as appropriate. During fiscal 2012, the Company met 79 times with

Early Delivery of General Shareholders’ Meeting Convocation Notices

representatives from 41 different companies.

•We sent convocation notices on June 6 announcing our June 28, 2012 97th

Shareholder Surveys

General Shareholders’ Meeting. We sent this notice earlier than the deadline

During fiscal 2012, the Company conducted a survey regarding the future

required by law.

direction of management and investor relations as one activity to establish

Electronic Exercise of Voting Rights

better communications with our shareholders.

•The Company has adopted the exercise of voting rights via Internet and an

Corporate Introduction Videos

electronic voting platform.

The Company creates corporate introductory videos for stakeholders to view

Tallying Votes on the Day of Meeting of Shareholders

on the Company’s website.

Decision

Financial Data

Department/Subsidiary

Department/Subsidiary
Related Companies

Department/Subsidiary
Corporate
Planning Office
Related Departments

Communication/
Coordination

Communication/
Coordination

Accounting Div.

Responsible Party (Finance Div.)

Representative Director, President

Board of Directors

Audit & Supervisory
Board

Outside Experts

Hayashibara Co., Ltd.
IR Activities

Fact/Information

Related Departments

This basic philosophy guides us as we conduct timely, appropriate, andTimely Disclosure System
Corporate Planning Office, Finance Div.

We engage in continuing communications with society through the Nagase

Finance Div.

Timely Disclosure

Facts or information subject to disclosure are reported to the responsible

tive director/president, and then on to the Board of Directors for a final reso-•The Company tallies the number of attendee votes on the day of theparty through the related general manager/department GM, according tolution before the timely disclosure of said information by the Finance Division.

Meeting of Shareholders, publishing voting results on the same day as theinformation provided from a department or subsidiary. The responsible party

To ensure reliability, information related to financial results (including

Meeting.

coordinates with internal departments and reports to the representative direc-

information from consolidated affiliates) is submitted for review by the

2. Initiatives for Improving Contact with Investors

tor/president of the Company. As necessary, a report is made to the Board of

Accounting Division, Finance Division, and Corporate Planning Office to cor-

Regular Briefings with Institutional Investors and Analysts

Directors, after which the Finance Division promptly makes a public disclo-porate auditors and outside experts for advice and guidance. Subsequently,

The Company holds financial briefing meetings with institutional investors andsure of said facts or information.

financial data and publication drafts are prepared and submitted for approval

analysts once every half year. The Company’s president and officers provide

Information related to decisions is forwarded via department/subsidiarydetails of performance, earnings forecasts, and other management issues.

internal memo to the Corporate Planning Office or related department for

Briefing meeting materials are available in Japanese and English at theapproval. From there, the information is reported to the Company representa-

NAGASE & CO., LTD. Annual Report 2013長瀬13̲E̲本文̲PDF用.indd 42-43

to the Board of Directors, after which the information is promptly disclosed tothe public by the Finance Division.

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

Comprehensive Identification, Understanding and Control of Risks

1

Specific Measures Taken for Individual Risks:
Product Safety and Quality Control

tance of continuing quality improvement for the Group as a whole.
Accordingly, pursuant to the Nagase Group Product Safety Principles, for-As the Nagase Group accelerates business globalization, the volume of off-

mulated in October 2008, the Company is promoting the formulation ofshore transactions it engages in as well as exports to and imports from China

Group-wide rules regarding quality management and product quality assur-and other rapidly growing countries is increasing. The Company’s principal

ance while providing its employees with educational programs. Through these

suppliers to date have been major chemical manufacturers in Europe and theactivities, we are working to ensure the safety of the products handled

United States, which differ from new suppliers in emerging countries in thatthroughout the Group.

In addition, the Risk Management & Compliance Committee formulates

transactions with the latter require that initiatives be put in place to prevent

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

The Company established the Risk Management & Compliance Committee tothe basic compliance policy to develop and maintain the Company’s compli-

the occurrence of quality management and other issues due to legal and reg-Nagase will increasingly be called upon to assume responsibility for quality

put in place a comprehensive structure for risk management as well as toance system and uses regular workshops and other initiatives to ensure thatulatory differences between Japan and the countries in question. Therefore,

assurance. To assist in this area, the Company established the Quality

monitor risk management and compliance as an advisory body to the Board

corporate activities are strictly in line with the Nagase Group Code ofNagase recognizes the increasing importance of encouraging overseas sup-Assurance Support Team within the Intellectual Property Office in Decemberof Directors. This Committee determines committee member functions andConduct. Should employees of Nagase or its Group companies become aware

2010. Quality Assurance Support manages vendors and contract manufactur-

authority, creating a structure of clearly defined roles and responsibilities.

of legal or other compliance issues, they report to the Risk Management &Under the committee’s leadership, department managers address risks in

Compliance Committee, which immediately reports to the Audit & Supervisory

pliers to conduct sound quality management.
We have also worked on test programs to strengthen and expand Groupwide research, development, and manufacturing functions, recognizing the impor-their particular areas by formulating rules and implementing training. The

Board. In addition, the Company has introduced an internal reporting system

Company also works through the Risk Management & Compliance Committee

wherein employees and others can report or discuss issues directly. The

to develop systems and departments responsible for additional risks that

Company revised the Nagase Group Code of Conduct in November 2012, dis-materialize and strives to lower the risks that could impact the Company’s

tributing the document to all employees throughout the entire domestic andinternational Nagase organization.

business.

Basic Compliance Policy

2

Specific Measures Taken for Individual Risks:
Security Trade Controls

ers, supporting Group manufacturing companies, as well as providing internal
education and other services for sales divisions.

Export Management Council meets on a monthly basis. At these meetings,
the Security Trade Control Committee works to understand the export con-

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

trol situation, the latest revisions to the Foreign Exchange and Foreign Trade

export business activities, mainly of chemical products and plastics, Nagase

Control Law and to ascertain a detailed picture of export controls across thehas set up its own Security Trade Control Regulations and established theentire Group while formulating related Group policies. The E xpor t

Security Trade Control Committee to appropriately implement security trade

Management Council is in charge of directing and educating each business

control. Furthermore, the Company has established a department-level

division and Group company in the matters and statute updates determined

Security Trade Control Office within the Logistics Management Division toby the Security Trade Control Committee. It is the responsibility of the Export
Management Council to protect the Company and affiliates against the riskof illegal acts with respect to export controls.

As a member of world society, the Nagase Group must maintain good andOfficers and employees of Nagase must behave in accordance with these

specialize in export controls and act as the Security Trade Control

fair business practices and, through continued growth and development,

behavior standards and endeavor to disseminate them to those within theCommittee’s secretariat.
The Security Trade Control Committee meets once quarterly, while theprovide society with the goods and services needed while improving thecorporate organization, especially those with whom they work. If circum-

welfare of its employees. Nagase has developed and carries out the follow-

stances arise in which there is a risk that these behavior standards may be

ing basic compliance policy. Based on this corporate philosophy, Nagase

compromised, officers and employees must work to resolve problems with-has adopted and will implement the following Basic Compliance Policy.

out delay and improve operations by identifying the causes of problems andSpecific Management Framework

Efforts to Promote Personnel Development

taking steps to prevent recurrences.

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

Every year, the practical business of security trade controls becomes

Program Procedural Administration System (CP-PAS) for goods andever more complex. To keep pace with developments, the Nagase Grouptechnology is employed to record data on export products and overseas

encourages its employees—primarily those involved in export opera-

customers. Furthermore, these activities are regulated by the Foreign

tions—to become Security Trade Control (STC) Associates by taking• Nagase will respect the autonomy and creativity of every employee and foster a

Exchange and Foreign Trade Control Law and the United States’ Export

the exam offered by the Center for Information on Security Trade

corporate culture in which those qualities can be applied to corporate activities.

Administration Regulations (EAR), while the Sales Division and export

Controls (CISTEC). As of March 2013, the Company had 530 qualified• Business activities will be conducted in accordance with the rules of the inter-• Nagase will protect its employees’ health, respect their human rights, treat

control officers confirm whether or not permission to export is required.

STC Associates in 21 companies, with several STC Experts at Company

national community to ensure the continuing growth and development ofthem fairly and without discrimination, and secure and provide safe andThis system is designed to ensure that only those products approved byheadquarters. We continue to strive to foster personnel with a high level

Nagase as a global enterprise.

enriching work environments.

the Security Trade Control Office are available for export.

of knowledge and expertise.

This policy defines the behavior standards that Nagase and its officers
and employees will observe as it carries out its various business activities.
1 Compliance with laws, regulations and internal rules and regulations• Corporate activities will be conducted fairly and in good faith, in accordancewith laws and rules, and without any deviation from social standards.

2 Elimination of anti-social elements

4 Respect for the qualities and individuality of employees

5 Disclosure of information to stakeholders

Moreover, going one step beyond mere adherence to the law, we

Anti-social elements that threaten public order and safety will be met with firm-

Nagase will strive to ensure transparency by fairly and actively disclosing corpo-

define policies of the entire Nagase Group associated with security

Aiming to Raise Awareness of Security Trade Controls

ness and resolutely eliminated.

rate information to stakeholders, including customers, suppliers, employees andexport controls that prohibit trade in products that are military-related

At Nagase, internal security trade control training is provided to all employ-shareholders.

items or that have military applications. We also make the Nagase

ees, and the Human Resources & General Affairs Division offers various

Group fully aware of Group policies to prevent any exposure to security

training opportunities such as orientation for new employees, personnel

export control risks.

training according to level, and the implementation of other activities that

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

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

educate and instill knowledge. In addition, we hold lectures for domestic subsidiaries and affiliates as well as overseas-based subsidiaries, with the entire
Group participating. During fiscal 2012, a total of 969 individuals participated in training lectures through e-learning courses.

44

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Environmental Management
3

Specific Measures Taken for Individual Risks:
Regulatory Compliance in Products

continues in efforts to improve chemicals and product management, as wellas to centralize information management. This strengthens the Company’s

Because of a rising awareness of safety and security in the international com-

internal logistics management systems for handling chemicals and managing

Nagase Group Environmental Management Structure

Environmental Management Activities

munity, and against the backdrop of increasing concern with regard to chemi-

products in compliance with relevant laws and regulations.

Nagase began building an environmental management structure in May 1999

Nagase bases its environmental management activities on daily operations.

by establishing an Environmental Protection Committee, a role currently

Specific activities include the creation and expansion of eco-businesses andassumed by the Risk Management & Compliance Committee. Relatively earli-

the enhancement of operational efficiency. The Company is strengthening its

er than other trading companies in Japan, Nagase obtained ISO 14001 certi-

existing eco-businesses with new businesses in the energy field, placing

cal substances, including those that are used in finished products, Nagase

Framework for Compliance with Chemical Laws and Regulations

that minimize significant adverse impacts on the environment and humanfication for its environmental management system in April 2000 in response

extra focus on photovoltaic (PV) generation and energy-storage devices.

Every time Nagase begins handling a new chemical, it conducts stringent

health. In accordance with this policy, the entire world is accelerating theto societal demands. Since then, the Environmental Protection Committee has

Under our new three-year plan Change-S2014, Nagase will emphasize cre-investigations into the materials involved in the chemical’s manufacture andtightening and standardization of regulations concerning chemical manage-

offered affiliated companies advice and support for obtaining ISO certifica-

ating and expanding environmental and energy technology. By promoting

related laws and regulations, while efficiently managing data compiled

ment. Consequently, each nation is witnessing dynamic changes in applica-

tions and thereby expanded the scope of certification. During December

information sharing and complementing functions among its departments andthrough such investigations using the above mentioned CP-PAS system. In

ble laws and regulations.

2012, Nagase Elex Co., Ltd. joined Nagase as a certified business establish-

business groups, the Company will further reinforce the business structure

this way, we are able to swiftly confirm which products contain regulatedAlso, the Registration, Evaluation, Assessment of Chemicals (REACH)

ment. In total, six sales companies (including NAGASE-OG COLORS &required for the efficient and flexible provision of products and services thatmaterials and ingredients and provide our customers with the information

regulations took effect in Europe in 2007. Following this, in 2009, China,

CHEMICALS CO., LTD., Nagase Chemical Co., Ltd., Nagase Plastics Co., Ltd.,

contribute to the realization of a sustainable, recycling-oriented and low-car-they require to confirm compliance with revised laws in Japan and abroad. To

South Korea, Taiwan and other countries bolstered their respective regulatory

Nagase Abrasive Materials Co., Ltd., Nishinihon Nagase Co., Ltd.) conduct

bon society.

meet our own and customers’ green procurement requirements, we rebrand-

systems relating to chemical management. In such an environment, as a

activities under the Environmental ISO Management Organization.

ed our Green Procurement Guidelines (established in February 2007) ascompany promoting business worldwide, Nagase is providing support to its

In addition, many Nagase Group manufacturing, processing, services,mental impact of its business operations. Still, we believe that we can reduce

Green Procurement Management Regulations in November 2011, providing

overseas subsidiaries in responding to these legal and regulatory develop-

sales and other Group companies, having acquired certification independent-

the environmental impact of our business activities by, for example, improving

for the procurement/supply of appropriate goods after verification.

ments.

ly, are conducting their own environmental activities.

the efficiency of our logistics operations. Acting on this belief, we developed

In addition, because we distribute information on the chemical sub-

These legal and regulatory developments naturally affect the finishedstances contained in products along the supply chain, we endeavor to passproducts in which Nagase products are used. Therefore, it is important foron accurate information by participating in the Joint Article Management

the Nagase Group to offer its customers relevant information, and thePromotion-consortium (JAMP) and by using specialized tools for productsCompany works to ensure an accurate understanding of worldwide legal andcontaining chemical substances, such as MSDS Plus and AIS.

regulatory trends with regard to chemical management. At the same time,

We will continue with activities to improve the environmental management systems among certified Group companies.

the Nagase Energy Calculation Online (NECO) System, which enables theautomatic calculation of domestic cargo transport volume using distribution
receipt data managed by our sales control system, bringing it on line inAugust 2008.

Environmental Management StructureThis system makes it possible not only to calculate our annual cargowith the aim of establishing a system to facilitate the global management oftransport volume and CO2 emissions but to analyze transport routes for opti-

Strategic Approach to International Chemical Management (SAICM)

information related to the chemical products and chemical substances usedmization, which also helps reduce our CO 2 emissions. In such ways, theThe action plan adopted at the 2002 World Summit on Sustainablein our products, we are providing product management education and guid-

Development—also known as the Johannesburg Summit—is aimed atance to our overseas counterparts.

Risk Management and Compliance Committee

Nagase Group is striving to reduce energy consumption in its logistics operations, thereby contributing to the prevention of global warming.
Environmental ISO
Management Organization
Environmental ISO
Management Representative

ensuring that, by the year 2020, chemicals are produced and used in ways

Business Continuity Plan (BCP)46

In addition, Nagase is promoting activities aimed at reducing the environ-

Affiliates

During fiscal 2008, the Company created a business continuity plan for a

the Company’s divisions starting in fiscal 2009. By the end of fiscal 2011, allmodel department assuming a major-scale earthquake and its effects on adivisions were working to adopt the plan, which is now in a continuous

typical business division. The plan was approved by the Risk Management &review and improvement stage.

Compliance Committee, as based on government guidelines requiring conti-

In August 2009, the Company presented the outlines of the business con-nuity planning (all major corporations and at least 50% of mid-sized firms

tinuity plan to all domestic Nagase Group companies. We hold regular discus-

required to have plans in place by 2016 as recommended by the Cabinet

sions with central Group manufacturing firm Nagase ChemteX Corp., and we

Office’s Central Disaster Prevention Council). This plan was rolled out throughare working together with that firm to develop specific stand-alone plans.

Fiscal 2012 Results
During the fiscal year ended March 2013, the Group conducted a disaster recovery drill simulating an earthquake
occuring in the Nankai Trough. Our scenario had the Osaka
headquarters and Nagoya Branch Office experiencing
damage, and the Group used the Tokyo headquarters as analternate to provide backup, with each location taking partand responding appropriately in the drill. The locations directly affected by the disaster confirmed the safety of local employees, while the alternate location collected data regarding
the safety of all locations, gathered information, and confirmed the operation of our BCP
measures, and both extracted other issues according to business function. We will continue
to improve the quality of our drills in the future.

Fiscal 2013 Initiatives
At present, all divisions within the Group are adopting business continuity plans. During fiscal 2013 we
intend to have relevant departments and individuals
read and verify plans, while we create different scenarios with each related Group company to protect
value chain integrity, continuing to train in uninterrupted service delivery.

NAGASE & CO., LTD. Annual Report 2013長瀬13̲E̲本文̲PDF用.indd 46-47

Beginning fiscal 2012, we have held regular Safety Patrols and Energy
and Resource Conservation Patrols in buildings owned by the Company.
These patrols ensure safety in the workplace and promote energy savings

NAGASE & CO., LTD.

awareness within the Company.

Management

Environmental Policy
Environmental ISO Management
General Secretariat
Chief Environmental
Management Representative

Environmental Management
Representative
Internal Environmental
Audit Team

1. Comply with all environmental laws, regulations and other rules• We will observe all environmental laws, municipal bylaws, environmental regulations
and other rules as we conduct our business activities.

Environmental Management
Representative
Internal Environmental
Audit Team

Secretariat

Secretariat

Environmental
Protection Officers

Environmental
Protection Officers

Eco-Leaders

Eco-Leaders

2. Develop businesses that give full consideration to environmental issues• We will conduct our business activities in full awareness of the need to preserve theecosystem and protect the environment, and we will make every possible effort togive full consideration to the environment within the limits of technological and economic feasibility.
3. Fulfill our responsibilities as a good corporate citizen• As a good corporate citizen we will work together with public institutions, industry,and local communities to promote environmental conservation measures that aresuitable for the Nagase Group.
4. Establish and continually improve an environmental management system• We will work to construct an environmental management system in order to fully
achieve the objectives set out in this Policy. We will continuously make improvements
to this system by setting concrete goals and working to fulfill them.
5. Disclose and make the relevant parties fully aware of our Environmental Policy• We will disclose the Policy to the public and make all who work for the Nagase Groupfully aware of its contents.

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Environmental Burden Reduction Activities
Together with efforts to reduce its environmental impact, NAGASE & CO., LTD.,the core company of the Nagase Group, intends to “develop businesses that

Nagase’s Environmental Businessgive full consideration to environmental issues” as one important element of its
environmental policy. Nagase contributes to reducing environmental burden

The Nagase Group takes advantage of its trading company functions to uncover environmentally friendly
products, offer feedback on market trends to suppliers, and propose new or alternative uses. The Company
supports the environment and energy business through products, services, technology, and information.

through the discovery and development at Group manufacturing companies ofenvironment-oriented products and materials that are vital to society.
In line with revisions made to the Act on the Rational Use of Energy,
Nagase has been designated as a “specified corporation” by the Bureau of
Economy, Trade and Industry since its energy usage exceeds fixed levels.
Consequently, since fiscal 2011, we have compiled data on the amount ofenergy consumed at every facility, formulated medium- and long-term energy

Nagase Enters Organic

Electronic Chemicals

1 Business

2 Fertilizer and Agribusiness3 Smart Grid Business

reduction plans, and submitted regular reports to the Bureau of Economy,
Trade and Industry.
We built a roof-top greening system on the

Nagase currently manufactures and sells a chemical man-

Kawai Hiryo manufactures organic

The Nagase Group has started a business based on a system that combines pho-west terrace of our headquarters building inagement system (CMS) to control the concentration offertilizers, including Bokashi fertiliz-

tovoltaic electricity and rechargeable lithium ion batteries. Wholly owned subsid-

Tokyo. This system uses a non-irrigation veg-

chemicals used in the manufacture of semiconductors anders, and agricultural chemicals andiary Captex Co., Ltd. is taking the main role in development and manufacturing,

etation base to effectively catch moisture,liquid crystal displays (LCDs) in order to make the processmaterials, and supplies these prod-

focusing on rechargeable lithium ion battery control modules.

evenly distribute water, insulate, and provide

more stable. Moreover, the Company reuses chemicals. The

ucts to professional agricultural

These control modules require rechargeable batteries to be highly efficient,evapotranspiration, eliminating the need for

waste solvent recovery system contributes to zero emis-

producers nationwide. Bokashi fer-long-lived, and safe, which demands control technologies that can manage battery

regular watering. During summer months,

sions by collecting and processing waste solvents that indi-

tilizers feature (1) easier break-information. Captex are experts in advanced control technologies for the remote

offices directly below the space enjoy a prov-

vidual companies have difficulty reducing, and reusing them as raw materials

down in soil and (2) easier plant

management of rechargeable battery information, and the company is using theseen average two-degree cooling effect (mea-for different industries.

absorption of components in theassets to design and develop control circuits and packaging for the batteries.

sured above the ceiling) compared to

In addition, we relied on Group

fertilizer. This is accomplished by

We are gaining the support of numerous customers owing to the provision oflocations not under the greening system. A

technologies, our expertise, and suc-obtaining limited food residues andone-stop services in the following areas: (1) Rechargeable battery system over-similar system is being built at the Company’s

cessful track record to build an on-other organic raw materials, turningview (dimensions and voltage); (2) Project proposals (concept, structural, control-

Osaka headquarters building.

site plant within Green Front Sakaithem into high-value-added fertilizer through fermentation and aging.

ler design, etc.); (3) Specification reviews (sample creation: design, casing, battery(Sakai Display Products Corporation,

During fiscal 2012, Kawai Hiryo worked to expand sales of Akitsushima, a

power source, electrical discharge control, transmission; evaluation: electrical dis-formerly Sharp Sakai Plant) to manu-

high-activity Bokashi fertilizer sold through our fertilizer business that is usedcharge, heat, vibration testing); (4) Verification (Benchmarks and monitor evalua-facture, supply, and recycle chemi-

as raw materials for local chicken production in Tokushima Prefecture. Thetion); (5) Mass production (battery packaging, compact power source, rechargecals used in the manufacture of LCD

company was certified as a major sales agent of Ajinomoto Healthy Supply,

system).

panels. The plant came online inInc., promoting and selling high-function liquid fertilizers, including AMIHEART

With the completion of a high-volume production plant* in Okazaki City, Aichi

October 2009. Utilizing the CMS andand AJIFOL. The company is helping generate higher-quality agricultural pro-Prefecture, in April 2012, we are expanding applications of lithium ion battery

Nagase ChemteX Corp.’s chemical

duction throughout Japan, from Hokkaido in the north to Kyushu in the south.

control modules beyond automotives to smart grids oriented to residential, office,recycling technologies, this on-site

Another major Kawai business is in the growing/sales of tomatoes andplant recycles developer, stripping

other premium agricultural goods.

agents and other chemicals.

Here, the company works in coop-

Concentrating the Nagase Group’s

eration with affiliate Uma Yasai

long-accumulated technologies at this recycling-oriented plant will enable

Farm to expand the Uma Yasai

Developer Dilution Supply Equipment

Activities Undertaken by Nagase ChemteX

長瀬13̲E̲本文̲PDF用.indd 48-49*Land area: approx. 23,000m2, floor area: approx. 5,000 m2 (2 stories, completed: April 11, 2012)

Raw Materials
Rare Metals, Lithium, Cobalt, Nickel, Manganese, Other

major reductions in the use of chemicals and raw materials as well as signifi-

brand products based on proprie-cant environmental contributions.

tary cultivation technologies. This

Cell Materials

venture is designed to expand pro-

Positive Electrode Materials, Negative Electrode Materials, Electrolytes, Separators,
Spacers, Binders, Casings

duction of agricultural goods using
the Kawai fertilizers.
Going forward, Kawai will integrate with the Nagase Group bio
technologies, actively developing
fertilizers and agricultural materials, engaging in agricultural pursuits through proprietary means, and establishing a new generation of high-value-added businesses.

Cell
Cell (18650, 26650, laminates)

CAPTEX’s business domains

NAGASE & CO., LTD. Annual Report 2013

Precision Filtration Equipment

commercial facility, factory and other uses.

Nagase Group’s business domains

Nagase ChemteX Corp., a core manufacturing subsidiary of the Nagase Group, promoted energy conservation activities bydeveloping an energy-saving framework at
all its facilities in accordance with therevised Act on the Rational Use of Energy.
Nagase ChemteX is also working to reducegreenhouse gases. To this end, Nagase
ChemteX has undertaken the following key
energy-conservation measures: formulated
and monitored energy conservation targets
at each department based on the efforts ofall employees; established a system toimprove energy conservation-related proposals; and improved capital investment activities undertaken by Energy
Conservation Committee staff members.
In addition, Nagase ChemteX decreased greenhouse gas emissions by
upgrading to high-efficiency boilers and switching from heavy oil to liquid natural
gas in January 2009. Through these actions, Nagase ChemteX was designated asa greenhouse gas emission-reducing business under the Japanese government’s
Domestic Carbon Credit System in March 2011.
During fiscal 2012, the Kansai Electric Power Co. Inc. asked Nagase to cooperate with energy-saving measures during the hot summer months. In September,we signed a special peak-time adjustment contract to cut 15% of used electricity.
We achieved that goal for all three months of the contract, earning a discount onelectricity fees.

48

Developer Control Equipment

Pack Controllers
Packaging (modules, banks), Controllers (protection, recharge/discharge control,
adjustment control)

Systems
Load, Upper ECU, Structure (for commercial use)

Products
Vehicles (EV, PHEV, ISS), Fixed Installations (BEMS, HEMS, rechargers)

Chemical Recycling Plant within “Green Front Sakai”

NAGASE & CO., LTD. Annual Report 201349

13/08/12 17:15

Social Contribution Activities
1

Together with Our Employees (Diversity, Work-Life Balance, Professional Development)

Contributing to Growth of Scientific Technology

Nagase has a long history of developing enzymes and technologies for organic
compounds for use not only in the chemical industry but for a wide range ofapplications in various industries, including pharmaceuticals. Through its business
operations, the Company has come to understand the importance of basic
research in biochemistry and organic chemistry. In line with this realization, weestablished the Nagase Science and Technology Foundation in 1989 with the aimof supporting research and development, as well as international exchange, infields including biochemistry and organic chemistry, promoting advances in scien-tific technology and ultimately promoting socioeconomic development.
Current contributions include research grants to researchers, etc. To date, thefoundation has awarded a cumulative 392 research grants and 178 international
exchange fellowships (discontinued in fiscal 2004), the sum of which totals
approximately ¥1.02 billion.
Beginning anew as a charitable organization on April 1, 2011, Nagase
Science and Technology Foundation began providing research grants accompanying the bestowing of the Nagase Research Promotion Award.

Organization

Title

Subject matter

Biochemistry
Hiroyasu Ogino
Shigenobu Kishino
Shinji Sugiura
Naoki Sugimoto
Takashi Sera
Motohiro Tani
Ken-ichi Nishiyama
Kohsuke Honda
Kenji Matsuno
Toshiyuki Wakimoto
Kenji Watanabe

Department of Chemical Engineering,Osaka Prefecture University
Graduate School of Agriculture,
Kyoto University
Research Center for Stem Cell Engineering, National Institute of Advanced
Industrial Science and Technology (AIST)
Frontier Institute for Biomolecular Engineering Research (FIBER), Konan
University
Graduate School of Natural Science and Technology,
Okayama University
Department of Chemistry, Faculty of Sciences,
Kyushu University
Cryobiofrontier Research Center, Faculty of Agriculture,
Iwate University
Graduate School of Engineering,Osaka University
Graduate School of Science, Department of Biological Sciences,
Osaka University
Graduate School of Pharmaceutical Sciences,
The University of Tokyo
Department of Pharmaceutical Sciences,
University of Shizuoka

Diversity
1

Research Grants Provided in Fiscal 2013
Name

As part of its promotion of global business operations, the Group considers it important to create new value for its companies by utilizing
diverse human resources and providing comfortable work environments where each Group employee can demonstrate his or her abilities
to the fullest.
Recognizing the need for a long-term plan to achieve this goal, we launched the diversity committee in 2008, continuing to roll out initiatives since that time.

Professor
Assistant
Professor
SeniorScientist

Development of organic solvent-tolerant enzymes
Construction of the rare fatty acid library by specific fatty acid metabolism in anaerobic bacteria

The Nagase Group currently employs a diverse range of workers who differ inthrough mutual understanding and help each other perform tasks while work-terms of gender, nationality, age, values and lifestyles. The Group considers

ing vigorously and generating new synergies by exchanging values.

that the development of corporate culture will lead to the creation of new

Accordingly, the Nagase Group positions diversity as one of its important cor-businesses as well as the improvement of business performance throughout

porate strategies.

the Group. These objectives involve the development of a corporate culture in
Development of microenvironment array chip for screening of stem cell differentiation condition

Professor

Regulation of translational frameshift of RNA and function of produced protein mediated by non-canonicalstructures of mRNA

Professor

Editing of bacterial genomes using novel artificial restriction enzymes

Associate
Professor

Study on regulation of metabolism and signaling of biomembrane phospholipids

Professor

Elucidation and application of molecular mechanisms underlying the function of MPIase, a glycolipozyme essential
for membrane protein integration

Associate
Professor

Synthetic metabolic engineering -toward the on-demand bioproduction

Professor

Mechanisms of planar cell chirality formation trough Myosin I.

Associate
Professor
Associate
Professor

which a diverse range of workers can share ideas, build shared acceptance

Basic Stance on Diversity

Objectives to Achieve through the Promotion of Employee Diversity
1

Diversity in attributes

A wide variety of humanresources with different
nationalities, genders, businessspecializations and values

Search for bacterial symbionts producing sponge metabolites

3

Diversity in thinking-Individuals

Each individual freely brings
ideas and exercises theircapability and originality

4

Diversity in opinions

Each individual confidently
expresses their opinions

5

Synergy of knowledge
as an organization
or group

Creating synergies andincreasing the value ofknowledge by exchanging
opinions

Enhanced performancethroughout the Group

Targeted disruption of transcriptional regulators in fungi activates biosynthetic pathways

Organic Chemistry
Masanobu Uchiyama
Tsuneomi Kawasaki
Takeo Kawabata
Wataru Setaka
Takashi Nakanishi
Shuichi Nakamura
Satoshi Minakata

Graduate School of Pharmaceutical Sciences,
University of Tokyo
Department of Materials Science and Engineering,
University of Fukui
Institute for Chemical Research,
Kyoto University
Faculty of Urban Environmental Sciences,
Tokyo Metropolitan University
Polymer Materials Unit,
National Institute for Materials Science
Graduate School of Engineering,
Nagoya Institute of Technology
Graduate School of Engineering,Osaka University

Professor

Development near-IR molecules opening a new field of material and life sciences

Associate
Professor

Development of the enantioselective synthesis of amino acids using oriented prochirality of achiral imine at thesingle crystal surface

Professor

Regioselective total syntheses of natural glycosides

Associate
Synthesis and properties of crystalline molecular gyrotop having a thiophene rotor
Professor
Principal
Room temperature liquids of metal complexes: Electro-chromic and -magnetic liquid materials
Researcher
Associate
Development of highly functional chiral catalysts and reagents having coordination group
Professor
Professor

Development of organic reactions using mono- and trivalent iodine reagents2
Construction of a base for diversity: Corporate philosophy, shared vision, mutual understanding, respect, acceptance, promotion of relationships of mutual support

2

Diversity Initiatives

Our diversity initiatives began in earnest in fiscal 2008 with the launch of theDiversity Promotion Committee. We conducted a second annual survey during

2

Active Contributions to Societythat implement environmental preservation activities. In addition to taking part in

fiscal 2011, and will continue to monitor our progress over a three-year span

At the Nagase Group, one element of our environmental policy is to fulfill our

the Nippon Keidanren Committee on Nature Conservation, the Japan Foreign

as we introduced new activities in fiscal 2012.

responsibilities as a good corporate citizen. This is demonstrated by collaboration,

Trade Council’s Global Environment Committee and other organizations, Nagase

sponsorship and other support, as well as participation in external organizations

proactively takes action that contributes to local communities.

We believe that diversity is an issue that our employees need to learn
more about over time. To this end, the first three years of this program mainly
called for education-based activities. Based on our surveys, however, we have

TABLE FOR TWO Initiative
In October 2008, Nagase Tokyo Head Office participated in the TABLE FOR TWO (TFT) program operatedb y t h e N P O o r g a n i z a t i o n TA B L E F O R T W O
International as part of its employee-participatorysocial contribution activities. The Osaka Head Officealso took part in the TFT program in January 2009.
TFT was launched to reduce the incidence of lifestyle-related diseases caused by overeating and obesity in advanced countries
including Japan, while extending food assistance to developing countries where
people suffer from the shortage of food.
Every time a TFT healthy meal—a meal that includes an ample portion of vegetables—is bought at our employee dining halls, the employee who makes the purchase and the Company each donate 10 yen to the TFT office. This buys one highly

50

NAGASE & CO., LTD. Annual Report 2013長瀬13̲E̲本文̲PDF用.indd 50-51

nutritious school meal for a child in the developing world. The total number of meals
donated was 64,941 as of March 2013.
As there is no employee dining hall in the Nagoya Branch, the facility participates in TFT activities via vending machines. Purchasing beverages at special vending machines results in a contribution of a percentage of the sale. The Osakabranch has also installed TFT vending machines, making more opportunities available for social contributions outside the employee dining hall.

started looking at more specific measures, including the fiscal 2012 initia-

1 Continued messages via internal corporate communications(in-house education)
2 Career support program trial(Diversity in organization and individuals—career planningsupport)3 Participation in inter-industry interchange meetings forfemale employees (same as above)
4 Home care seminars (Development of comfortable workplace)tives listed on the right.

Collecting Used Stamps and Prepaid Cards
All Nagase locations have a place for collecting usedstamps and prepaid cards. These items are regularly
donated to the Japan Overseas Christian Medical
Cooperative Service, which uses them to support overseas medical activities.

NAGASE & CO., LTD. Annual Report 201351

13/08/12 17:15

1

Themes for Diversity Promotion

2
3

Sharing corporate philosophy and vision

4

Enhancement of transparency

5

Reinforcing relationships
of friendly competition

6

Encouraging a breakthrough tothe current situation
Eliminating a mindset that leads
to gender bias
Creating a work environment in which
employees feel free to utilize thein-house benefit system

Promoting Group Functions through Organization-Wide Human
Resources Development

Number of Participants at Main Training Programs
Training Program

Under our Change-S2014 medium-term business plan, our basic strategy is to

Rank-specificbring to bear the total strength of the Nagase Group into the important fields

Electivealong our value chain. The plan also defines Group-wide education programs
based on rank, as well as improved headquarters-based training for overseas
national staff.

employees in our management philosophy, vision, and strategy. Rank-specificq Periodic messages from top management, Broadcasts of related information

Specific
Measurew Instill deeply into Management Philosophy, Nagase Way, Direction, Current Conditions

Specific Measure

527
14
14

37

29

46

Number of Employees by Gender
Male

Female994

944(Persons)

963

972

961

Nagase Way training and on-site Nagase Way workshops are two ways that we
continue to instill a better understanding of the Nagase Way among employees.

In-house
education

Diversity in organization and individuals
e Improve global communications

2

303

335

330

335

346

641

659

633

626

626

Major Topics under Change-S2014 for Nagase & Co.

Promoting globalization in our employees and sponsoring managementr Support for employees’ career developmenttraining to create leaders with business skills

t Continue employing non-Japanese, women for managerial positions;improve culture
Specific Measure

Fiscal 2012

486
15
5

The Business Leadership
Program for Overseas National
Staff

The Nagase Way is a common code of conduct that guides Nagase Group

In-house education

Fiscal 2011

398
18
12

Overseas

Instilling Our Management Philosophy and the Nagase Way
Specific Measure

Fiscal 2010

Specific
MeasureDevelopment of comfortable workplacey Instill awareness and activate initiatives for continuity
and productivity improvements
u Support employees who are dealing with home careor other challenges

Themesfor Diversity
Promotion

Diversityin organizationand individuals

We have identified two major topics under Change-S2014 for professional develSpecificMeasureDevelopmentof comfortableworkplace

opment.
Overseas business school and practical training
required for senior career-track employees(Assistant Manager); intercultural education
programs (by title, responsibility) Promote globalization

Introduce a coaching program for division
managers; add section manager training courses
Basic MBA Skills (Globis)

 Train managers

09/3

10/3

11/3

12/3

13/3

Number of Career-track Employees Hired among New Graduates
Male

Ratio of female employees

Female

25%

( %)

17%

14%

13%
6%

We will continue to revise Group eduction and training programs according toWork-Life Balance

36changes in the external business environment and Nagase Group strategy.
28(Persons)

1

Basic Stance on Work-Life Balance2

employee diversity. Therefore, the Group maintains a comfortable workplace

employees to split home-care time off (up to two segments for each incident

for employees with diverse characteristics to realize a good work-life balance.

requiring home care). In addition, employees now can use up to five days per year

Nagase believes a good balance between work and life will bring benefits tofor long-term sick leave (accumulated paid time off) when they need time off toboth the Company and employees, and thus strives to raise awareness incare for a parent after using all regular eligible paid time off. The Company offers

house and develop work-life balance-related systems.

home care seminars (in conjunction with a not-forlabor program to educate employees on corporate

4

20
09/4

enhance work-life balance to achieve even more

Rank-specific, Position-specific, Elective
General Manager

part of professional growth. However, we believe that on-the-job training can’t beSection Staff

Core/Skill Training (Second Year)them. The Nagase Group promotes on-the-job training, while at the same time
growth. These programs include rank-specific, position-specific, and elective
training, and other education opportunities.

Elective training

長瀬13̲E̲本文̲PDF用.indd 52-53

Overseas Business On-the-Job Training

Strategic Planning Basics (Sixth Year)

Supervisor training

NAGASE & CO., LTD. Annual Report 2013

MBA Basics Education Program

New employees

52

The general consensus is that on-the-job training is an extremely important

SA Training (Promotion)

Pre-assignment training

Manager Training

MBA Basics Education Program

ensuring employees are able to learn knowledge and skills for their continued

13/4

For National Staff

NMP(Nagase Management Program)

NMP (Nagase Management Program)

Strategic Planning Trainingclasses and self-directed learning.

Other

Division Manager Training Program (Coaching)

Professional Development

Off-the-job training also involves training and gaining skills through both formal

For Clerical Position Staff

Management Skills Seminareffective without adding new knowledge, skills, and systems for understanding

34

27
12/4

Division Manager Education Program (Domestic/International Business School Enrollment)

Division Manager

Section Manager

experience real-world work in a variety of roles to gain new knowledge and skills.

24
11/4

Overseas Business School Enrollment

comfortable work environments.

bination of on-the-job and off-the-job training. On-the-job training lets employees

12
10/4

Staff Development Program

benefits. Nagase will make continuing efforts to

The Nagase Group professional development program consists of a natural com-

4
4

profit organization) as another joint management-

The Nagase Group Approach to Professional Development

4

16

During fiscal 2012 we partially revised the current internal system, allowing

The Nagase Group Professional Development Policy

24Work-Life Balance Initiatives

Striking a balance between work and life is indispensable to the promotion of

1

2

31

GMP
(General Management Program)
BMP(Basic Management Program)

Clerical Position Business Skills Training(Second Year)

Follow-Up Training

Follow-Up Training

Core Businesses Training

Office Systems Training

On-the-job Training

Introductory Training

Introductory Training

NAGASE & CO., LTD. Annual Report 201353

13/08/12 17:15

Six-Year Summary

Management’s Discussion and Analysis of Operations and Finances

NAGASE & CO., LTD. and Consolidated Subsidiaries (Fiscal years ended March 31, 2008–2013)

Thousands of
U.S. Dollars (Note 1)(Millions of yen)

2008

2009

2010

2011

2012

2013

By adding Hayashibara Co., Ltd. to our consolidation, and with strong sales of2013

For the Fiscal Year:Net Sales Gross Profit and Net Income

Business Lines and Scope of Consolidation¥ 764,755¥ 715,238¥ 603,949¥ 660,213¥ 631,854¥ 666,272$ 7,084,232

Domestic

432,813394,874

360,382

389,379

366,369

361,971

3,848,708

Overseas

331,942

320,364

243,567

270,833

265,485

304,3013,235,524

Gross Profit

80,506

71,52765,41573,00871,62882,583Operating Income

23,063

12,522

13,12818,732

13,427

Income before Income Taxes
and Minority Interest

20,264

11,183

13,534

20,918Net Income

10,005

5,808

7,537

12,823

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

components for smart phones and tablets, the Group recorded year-on-year

in domestic transactions, with NAGASE & CO., LTD. (the “Company” orgross profit increase of 15.3%, reaching ¥82.58 billion. As a result, our gross“NAGASE”) at its center. In addition, the Nagase Group manufactures and sells

profit ratio rose 1.1 points to 12.4%.

products and provides services. These businesses are conducted by 104 related

Operating profit climbed 16% compared to the prior fiscal year, to ¥15.57 bil-companies, consisting of 76 subsidiaries and 28 affiliates. The scope of consoli-lion. The Group felt the negative impact of higher selling, general and administra-

878,075

dation includes 61 subsidiaries as well as 21 affiliates, which are accounted fortive expenses with the addition of new consolidated subsidiaries as well as higher

15,578

165,635by the equity method.

operating losses among several subsidiaries. However, a change in depreciation

16,536

19,458206,890

Overview of Results

8,570

14,182

150,792

method for property, plant and equipment led to lower depreciation and amortization expense, offsetting the downward pressure on results. The Group’s operating
margin improved 0.2 points compared to the prior fiscal year, rising to 2.3%.

 Net Sales
As of the Fiscal Year-End:During the period under review, Japan’s economy was a mix of good and bad

Gross Profit and Operating Profit

Total Assets¥ 419,869¥ 340,968¥ 368,088¥ 375,336¥ 450,842¥ 486,747$ 5,175,407

news, depending on the region and industry. Consumer sentiment was weak,

Gross Profit

Net Assets

208,377

191,931202,753

209,316

212,744

237,806

2,528,506

while the economic stagnation in Europe, slowing growth in China, and anti-Jap-

Interest-Bearing Debt

33,342

31,34021,88627,12588,71098,425

1,046,518

anese demonstrations there, were all factors dragging on the economy. The(¥ Billion)
100

Share Price (Yen)

1,018

761

1,169

990

1,024

1,147

12.20

recent weakness in the yen has led to an improved export environment and rising

1,687,974

share prices in the stock market—both promising signs of recovery. However, theMarket Value

140,899

105,328

161,799

137,024

141,730

158,754

impact of these positive factors was limited, making for an overall challenging

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

business environment.

138,408

138,408

138,408

138,408

138,408

—

6,324

5,801

5,446

5,136

6,124

6,921

—

In response to this environment, the Nagase Group recorded domestic sales—of ¥361.97 billion (1.2% year-on-year decrease) and overseas sales of ¥304.3

4,506

4,469

4,693

5,545

5,897

billion (14.6% increase). Consolidated net sales amounted to ¥666.27 billion,(Yen)

U.S. Dollars (Note 1)

75
50
25

138,408
4,335

Operating Profit

0
Fiscal years
ended March 31

2009

2010

2011

2012

2013

representing a 5.4% year-on-year increase.

Per Share Data:

The Nagase Group recorded ordinary income of ¥17.92 billion, which was a

Net Income

14.3% year-on-year increase. While the Group enjoyed an increase in equity in

Net Assets
Cash Dividends

¥

66.69

¥ 111.31

1,559.97

77.86¥

1,435.88

45.17¥

1,519.61

58.64¥

1,568.04

99.76¥

1,592.87

1,803.31

$

19.17

1.18

17.00

16.00

16.00

22.00

24.00

26.00

0.28

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

Net Salesearnings of affiliates, interest expense associated with securing long-term loans
to acquire Hayashibara Co., Ltd. also rose significantly. The ordinary income ratio(¥ Billion)
800

improved 0.2% compared to the prior fiscal year, amounting to 2.7%.
Net income before income taxes and minority interest amounted to ¥19.45

600

billion, which was a 17.7% year-on-year increase. The ratio of income before

3.0

1.8

2.2

2.8

2.1

2.3

—

400

income taxes and minority interests to net sales improved 0.3 points to 2.9%
As a result, the Group recorded net income of ¥14.18 billion, a 65.5% year-

200

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

2.6

1.6

2.2

3.2

2.6

2.9

—

Return on Sales (ROS) (%)

1.3

0.8

1.2

1.9

1.4

2.1

—

Total Assets Turnover (Times)

1.8

1.9

1.7

1.8

1.5

1.4

—

Return on Assets (ROA) (%)

2.4

1.5

2.1

3.4

2.1

3.0

—

Return on Equity (ROE) (%)

4.9

3.0

4.0

6.5

4.2

6.5

—

Shareholders’ Equity Ratio (%)

47.8

54.1

53.1

53.7

45.4

46.9

—

Debt to Equity Ratio (Times)

0.17

0.17

0.11

0.13

0.43

0.43

—

Current Ratio (%)

168.3

197.3

195.3

200.2

155.4

184.4

—

Interest Coverage Ratio (Times) (Note 2)

23.2

13.5

23.2

35.4

21.26

15.46

—

Note: 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥94.05=U.S. $1.00, the approximate rate of exchange prevailing on March 31, 2013.
Note: 2. Interest coverage ratio is calculated as (operating profit + interest income + dividend income)/interest expense.

on-year increase. Return on sales (ROS) improved 0.7 points, up to 2.1%. Net
0
Fiscal years
ended March 31

2009

2010

2011

2012

2013

income per share improved from ¥66.69 in the prior fiscal year to ¥111.31 forthe year under review.

Net Income / Net Income per ShareNet Income (Left)

Net Income per Share (Right)(¥ Billion)
15

(¥)
150

10

100

5

50

0
Fiscal years
ended March 31

54

NAGASE & CO., LTD. Annual Report 2013

H̲nag2013E̲054-085.indd 54-55

0
2009

2010

2011

2012

2013

NAGASE & CO., LTD. Annual Report 201355

13/08/19 13:24

manufacturing facilities related to office equipment and appliances.

Results by Business Segment
Functional Materials
Fiscal years ended March 31(¥ Million)

The Automotive & Energy segment enjoyed revenue growth compared to the prior

Other

The Group’s colors and imaging business recorded lower overall sales com-

fiscal period. During the first half of the year, demand for reconstruction in the

The Other business segment saw lower revenues and higher profits for the fiscal

pared to the prior fiscal year. Sales underperformed prior-year levels in dyes/

wake of the March 11 disaster and government eco-car subsidies domesticallyperiod under review. Net sales amounted to ¥0.84 billion, a ¥0.17 billion

additives and information printing materials. At the same consolidation and reor-

led to major growth in auto production. Overseas, Japanese car makers again

decrease (-17.4%), while operating profit showed a ¥0.12 billion year-on-year

ganization among dyestuffs and textile processing agents for the textile process-saw production gains. These factors combined to push Group revenues for raw

increase (+87.9%), up to ¥0.26 billion.

ing industry also placed downward pressure on sales for the year.

materials and parts to the Japanese and international auto markets higher.

2012

2013

177,126

180,025

Segment Income

6,285

5,428

Office Equipment and Appliances saw an overall increase in sales compared

Meanwhile, the second half of the fiscal year saw the end of eco-car subsi-

Segment Assets

81,267

81,384to the prior fiscal year. Despite lower sales domestically and decreased exports ofdies, leading to lower domestic sales. Anti-Japanese sentiment in China pushed

599

434

raw materials to major users, sales of plastics grew in Asia, while exports ofauto manufacturing by Japanese companies lower, meaning weaker sales perfor-

Consolidated Statement of Cash Flows—

molding tools also outperformed prior-year levels.

mance by the Group in the related Japanese and Chinese markets. However,Cash and cash equivalents at the end of the year amounted to ¥45.81 billion,

favorable sales trends in North America and ASEAN worked to drive sales for the

representing a ¥17.29 billion (+60.7%) increase compared to the end of thesegment higher overall year on year.

prior fiscal year.

Net Sales

Depreciation and Amortization
Amortization of Goodwill

1

Goodwill——

Amount Invested in Equity Method Affiliates

367

1,781

Amount of Increase in Tangible and Intangible
Fixed Assets

1,107

626

As a whole, business in functional films and sheets and plastic molding products fell year on year. Despite sales gains in anti-reflective sheets for gamemachines, these gains were more than offset by declines in sales of liquid crystal
polarizer film precision inspection systems.

Net sales of Functional Materials rose ¥2.89 billion (+1.6%) year on year, up to

Electronics¥180.02 billion. Despite significant growth in Southeast Asia, sales in Japan and

Fiscal years ended March 31

Northeast Asia fell, resulting in a slight gain overall. In contrast, operating profit(¥ Million)
2012

2013

110,495

116,105

As a result, net sales for the Automotive & Energy segment amounted to¥83.06 billion, representing a ¥6.95 billion (+9.1%) increase compared to the Cash Flows from Operating Activities

prior fiscal year. Operating profit came in at ¥0.76 billion, or a ¥0.17 billion

Cash flows from operating activities amounted to ¥18.57 billion for the fiscal year

decrease (-18.4%). This was mainly the result of operating losses in our energy

under review. Cash outlays for income tax payments amounted to ¥6.38 billion,

business, for which improved profitability in export transactions stemming from awhich was more than offset by net income before income taxes and minority

weakened yen during the fourth quarter could not compensate.

interests of ¥19.45 billion and non-cash depreciation and amortization of ¥7.44

fell ¥850 million (-13.6%) to ¥5.42 billion for the period. Increased earnings in

Net Sales

Southeast Asia only had a minor impact on profits, while lower revenues in Japan

Segment Income

6,019

6,297

Life & Healthcare

and Northeast Asia led to gross profit declines as well.

Segment Assets

52,834

61,760Fiscal years ended March 31

As a whole, the performance chemical business experienced slightly lower
year-on-year sales. Sales of plastic materials and additives to the Asian markets
fell, while anti-Japanese sentiment in China led to decreased sales of urethanematerials to the automotive industry. Despite this weakness, the Group recorded
solid sales of coating raw materials for domestic construction, and increased
year-on-year sales of basic chemicals in Southeast Asia and additives for the

Depreciation and Amortization
Amortization of Goodwill
Goodwill

1,927

1,508

23

96

1,884

2,046

Amount Invested in Equity Method Affiliates

103

56

Amount of Increase in Tangible and Intangible
Fixed Assets

4,079

2,784

Middle East.
The specialty chemicals business recorded lower year-on-year sales as a

The Electronics business recorded significant revenue growth in Northeast Asia, as

whole. While sales of surfactants performed well, sales of raw materials forwell as gains in Japan, Southeast Asia, Europe, and the United States. As a result,industrial oil solutions and fluorochemicals for the automotive and fiber industries

net sales amounted to ¥116.1 billion, representing a ¥5.6 billion (+5.1%) year-on-

were weak. Sales of precision abrasive materials for the hard disk drive industry

year increase. Operating profit came in at ¥6.29 billion, or a ¥0.27 billion (+4.6%

also came in at levels lower than the prior fiscal year.

increase), mainly due to gross profit linked sales increases in touch-panel materials.

Advanced Materials & Processing
Fiscal years ended March 31(¥ Million)

billion.
(¥ Million)
2013

Cash flows used in investing activities amounted to ¥9.52 billion. While the Group49,17071,685recorded cash inflows from the sales of property, plant and equipment in the

Segment Income

706

3,986

amount of ¥3.23 billion, cash used in the acquisition of non-current tangible andSegment Assets

102,317

95,735intangible fixed assets amounted to ¥12.26 billion.

Depreciation and Amortization

813

2,025

Amortization of Goodwill

126

1,516

 Cash Flows from Financing Activities

Goodwill

30,19528,679Cash flows from financing activities amounted to ¥1.16 billion for the fiscal year

Amount Invested in Equity Method Affiliates

1,598

1,856

under review. The Group paid ¥27.83 billion in repayments of loans, which was

Amount of Increase in Tangible and Intangible
Fixed Assets

1,438

3,028

Net Sales

offset by ¥29.85 billion in proceeds from the issuance of corporate bonds.
Cash Flow Summary
Fiscal years ended March 31

The Group’s Electronic chemicals business experienced lower year-on-year

In Life & Healthcare, sales improved significantly as a whole compared to therevenues as a whole. Solid performance in formulated epoxy resin sales forprior fiscal year. This result was mainly due to the consolidation of functional sac-mobile phones was more than offset by lower comparable sales of chemicals

charides business sales from Hayashibara Co., Ltd. (net sales of ¥24.41 billion),used in the manufacture of semiconductors and LCD panels.

acquired by the Group during the prior fiscal year. As a result, net sales amounted

2012

2013

214,546

Meanwhile, the Electronic materials business saw significant gains in touch-to ¥71.68 billion yen, representing a year-on-year increase of ¥22.51 billion

Segment Income

2,979

2,386

panel materials revenues, outpacing weaker performance in liquid crystal film(+45.8%). Operating profit amounted to ¥3.98 billion, a ¥3.27 billion (464.1%)

Segment Assets

105,771

108,696and LED-related components.

increase, again, mainly due to the addition of Hayashibara functional saccharides.

Depreciation and Amortization

693

537

Amortization of Goodwill——

Goodwill——

Amount Invested in Equity Method Affiliates

233

1,545

Amount of Increase in Tangible and Intangible
Fixed Assets

225

853

Advanced Materials & Processing recorded net sales of ¥214.54 billion, which
was a ¥3.38 billion (-1.6%) year-on-year decrease. This result was mainly due tolower domestic sales, despite gains in Northeast Asia and Southeast Asia.
Operating profit came in at ¥2.38 billion, or a ¥0.59 billion (-19.9%) year-on-year
decrease. Factors contributing to this decline included lower gross profit levels,
stemming from lower revenues, and wider operating losses among the Group’s

56

NAGASE & CO., LTD. Annual Report 2013

H̲nag2013E̲054-085.indd 56-57

As a whole, the Group’s fine chemicals business experienced revenue growth
Automotive & Energy(¥ Million)
2009

2010

2011

2012

2013

Net Cash Provided by(Used in) Operating
Activities

36,161

27,875

10,997

5,690

18,576Net Cash Provided by(Used in) Investing
Activities(11,062)(9,438)(9,147) (81,066)(9,529)Net Cash Provided by(Used in) Financing
Activities(5,549) (11,753)

3,564

1,164

56,961for the period under review. Sales of pharmaceutical raw materials and interme-

Fiscal years ended March 31(¥ Million)

diates were level with the prior fiscal year, while in vitro diagnostics and medical

2012

2013

materials performed relatively well. At the same time, the Group saw strong sales

76,11383,068gains in trehalose and other functional saccharides. Enzyme and fermentation

Segment Income

936

763

Segment Assets

Net Sales Cash Flows from Investing Activities

2012

217,929

Net Sales

Financial Condition

products also reported steady revenue trends in the food and starch sectors.

34,79537,387The beauty care products business (cosmetics and health foods sales)

Depreciation and Amortization

530

250

recorded higher sales of newly introduced health foods and whitening cosmetics;

Amortization of Goodwill——

however, overall revenues were down due to decreased sales in major cosmetics

Goodwill——

products launched during the prior fiscal year.

Amount Invested in Equity Method Affiliates

726

1,613

Amount of Increase in Tangible and Intangible
Fixed Assets

1,515

92
NAGASE & CO., LTD. Annual Report 201357

13/08/19 13:24

 Net Assets

ucts using microorganism technologies, and the development of cosmetics andNet assets improved ¥25.06 billion compared to the end of the prior fiscal year,

health foods utilizing natural material exploration and pharmacological assess- Assets

reaching ¥237.8 billion. This increase was mainly due to ¥14.18 billion in net

ment technologies. Since fiscal 2008, we have worked in cooperation with Kobe

Total assets as of the end of the fiscal year under review amounted to ¥486.74

income and improved translation adjustments stemming from a weakened yen.

University in a next-generation agri-industrial bio production project, moving clos-

Consolidated Balance Sheets

billion, a ¥35.9 billion increase compared to the end of the prior fiscal year.
Current assets increased by ¥23.47 billion to ¥305.75 billion, mainly due toAs a result, the Group saw a 1.5-point increase in shareholders’ equity ratio,

increases in cash and time deposits and inventories. Non-current assets

ChemteX Corp. across a wide range of projects to develop and manufacture newincreased by ¥12.43 billion, reaching ¥180.99 billion at the end of the fiscal year.

products. We will forge deeper ties with the Hayashibara R&D Center to drivesynergies in our business. Our intellectual property includes chiral synthesis tech-This increase was mainly due to acquisitions of property, plant and equipment in

Shareholders’ Equity Ratio / ROE

the form of land and buildings, as well as valuation gains in investments in secu-

Shareholders’Equity Ratio (Left)

rities.

(%)
60

(%)
8

enzymes (exploration, manufacturing, application). As well, we have applied for

45

6health foods fields, and we enjoy a highly positive reputation among our custom-

30

4

15

2

0

0

Total Assets / ROA
Total Assets (Left)

nologies for the production of non-natural amino acids, and development of new

ROE (Right)

ROA (Right)(¥ Billion)
500

(%)
5

400

4

300

(¥ Billion)4

er to producing specific, practical results.
In addition, we continue to work closely with our major subsidiary Nagase

up to 46.9% as of the end of the fiscal year under review.

Research and Development Expenses

32
10
Fiscal years
ended March 31

2009

2010

2011

2012

2013

numerous patents related to the invention of applications in the cosmetics anders, who cite our technological development capacities. In this manner, theOutlook for the Year Ending March 31, 2014

Nagase R&D Center contributes to development and revenue growth of theNagase Life Sciences segment.

The business environment for the fiscal year ending March 2014 is likely to see

The Nagase Application Workshop (NAW) is home to expert technical staff,

improvements in Japanese exports due to the weakened yen, as well as higher

processing facilities, and assessment equipment related to plastics and coating

utilization rates among Japanese manufacturers. This should contribute to3materials. The Nagase Group sales network brings in many different suggestions

improved consumer confidence, driven by better business conditions and rising200

2

for development and technical support services from their interaction with cus-prices in the stock market. Meanwhile, conventional wisdom has North America

1

tomers and vendors. The NAW looks closely at each idea, working to solve cus-

and ASEAN countries continuing to recover economically, in contrast to the EU,

100

0

tomer needs through technical development.

which will continue to suffer the effects of long-term financial issues. As such0
As of / Years
ended March 31

2009

2010

2011

2012

2013

 Liabilities
Total liabilities as of the end of the fiscal year under review amounted to ¥248.94

As of / Years
ended March 31

2009

2010

2011

2012

2013

Capital Investment

exports levels to the EU are a source of concern for businesses world-wide.

Capital investment during the fiscal period under review amounted to ¥11.69 bil-Nagase ChemteX Corp. focuses on electronics, life science, automotive, andlion, mainly stemming from investments in domestic manufacturing subsidiaries.

environment/energy fields. ChemteX staff, in a cross-organization research andGiven this outlook, the Group forecasts consolidated net sales of ¥764.0 bil-

By segment, the Company made capital investments as described below:

development division, and product development departments in each Group busi-

lion (14.7% year-on-year increase) for the next fiscal year. The Group also fore-

Functional materials-related capital investment amounted to ¥0.62 billion,

ness work together to develop new products, leveraging proprietary Nagase syn-casts a 13.1% increase in gross profit, to ¥93.4 billion. With respect to operating

thesis, compounding, and bio-technologies, as well as assessment technologies—all

profit, we expect an increase in retirement benefit costs related to the amortiza-

used for improvements at Group manufacturing subsidiaries.

billion, an increase of ¥10.84 billion compared to the end of the prior fiscal year.

The Group added another ¥0.85 billion in capital investment for new manu-

developed over many years of technological experience. In particular, Nagase

tion of actuarial differences in retirement benefit obligations. However, we still

This increase was mainly due to the issuance of unsecured bonds, offset in partfacturing automation equipment related to advanced materials and processing at

ChemteX is actively engaged in development for solar cells, hybrid vehicles, windforecast operating profit of ¥19.2 billion (23.2% increase), based on the afore-

by a decrease in loans.

manufacturing subsidiaries.

power, bio-materials, and other environment/energy-related fields, producing

mentioned increase in net sales. As a result, the Group forecasts ordinary income

high-function, high-value-added products and solutions designed to meet market

in the amount of ¥21.0 billion (17.1% year-on-year increase), with a smaller

demands for lighter weight, enhanced durability, and recyclability. Hayashibara

2.2% growth in net income of ¥14.5 billion, mainly due to the absence of special

conducts research and development into functional saccharides and functional

prior-year factors such as additional deferred tax assets.

Current liabilities decreased by ¥15.87 billion, amounting to ¥165.81 billion
at the end of the year. This decrease was mainly due to decreases in trade payables, short-term loans, and current portion of long-term debt.

Electronics and Automotive & Energy-related capital investment amounted to¥2.78 billion (LCD panel processing equipment) and ¥90 million respectively.
In the Life & Healthcare business, the Group committed ¥3.02 billion in capi-Long-term liabilities increased by ¥26.72 billion, rising to ¥83.12 billion as oftal funds to build new formulation and enzyme product manufacturing lines. The

the end of the year. A decrease in long-term debt was outpaced by increases inGroup also invested ¥3.87 billion to acquire land to expand office space leased

bonds and deferred tax liabilities.

from another party.

dyes.
The functional saccharides business consists of screening for microbes lead-In the Other segment, the Group invested ¥0.43 billion to acquire software.

and development into unique functional saccharides produces from theseyear to ¥139.92 billion at the end of the year. Prepaid cost recovery improved by

Cash on hand and capital acquired from outside sources were used as fund-enzyme-producing bacteria. The Nagase Group functional saccharides have

Net Sales

764,000

19,20021,00014,500methods. This work has resulted in products such as TREHATM, AA2GTM, and a newYear ended March 31, 2013
(Actual)666,272

15,57817,927

14,182To leverage the total capacity of the Group and create new business opportuni-

generation of powerful functional saccharide products. We continue to pursue

Increase (Decrease)+14.7%+23.2%+17.1%+2.2%

ties, the Nagase Group engages in research activities designed for marketing

research and development programs that create new products and applications,driven development of new technologies and products, as well as to gather andfrom basic research to applied research, from application development to pat-share technological information.

ents, all linked in a cohesive intellectual property strategy. In functional dyes busi-

Working Capital / Prepaid Cost Recovery(Months)
3

100

2

50

1

0
As of / Years
ended March 31

0
2009

applications and usages in a wide variety of fields, from foods to cosmetics andperfumes, pharmaceuticals, health, agriculture, and industry. On top of our longPrepaid Cost Recovery (Right)

2010

2011

2012

2013

(¥ Million)

Year ending March 31, 2014
(Projected)

ing for these capital investments.

Research Costs
Working Capital (Left)(Announced on May 8, 2013)
Operating
Profit155.4%, rising to 184.4%.

(¥ Billion)
150

above earnings forecasts.

ing to the discovery and analysis of new enzyme-producing bacteria and research

As a result, working capital rose from ¥133.79 billion at the beginning of the0.01 months. Current ratio improved 29.0 points, compared to last year’s

The Group has assumed an exchange rate of 95 yen to one U.S. dollar in thehistory of technological development, we continue to explore and adopt new

At present, the Nagase R&D Center pursues research focusing on technologi-

ness, we are making use of the extensive Hayashibara functional dyes library,cal solutions that we can bring to our customers. Major areas of research at the

pursuing development to offer products and new applications in photo and print-

R&D Center include process development for pharmaceuticals and intermediates

ing plate and other commercial fields, as well as in Life Sciences fields such asutilizing organic synthesis and biotech, development of medical equipment mate-pharmaceuticals.

rials/nucleic acid-related technology, development of enzymes and enzyme prod-

Ordinary
IncomeNet Income

The Group incurred a total of ¥4.61 billion in consolidated research costs forthe fiscal year under review.

58

NAGASE & CO., LTD. Annual Report 2013

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Profit Sharing Policy

 Operating and Other Risks(4) Impact of Fluctuations in Interest Rates(9) Product Quality Risk

The Nagase Group is engaged in trading, marketing, research and development,

The Nagase Group procures the funds required for its operating and investing

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

 Dividend Policy

manufacturing and processing, and conducts global business activities in the fiveactivities through debt financing with financial institutions. The Group has a cer-

iaries to provide high added value to customers, and devotes scrupulous attention

Through the enhancement of its earnings power and corporate structure,

segments of Functional Materials, Advanced Materials & Processing, Electronics,

tain amount of interest-bearing debt with variable interest rates. When undertak-to the quality of the technologies and products the Group thus provides. Also, the

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

Automotive & Energy, Life & Healthcare, and Other. The following presents an

ing variable-rate debt financing, the Group ensures that the risk associated withGroup handles products for which it assumes liability as their importer. As such,

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

overview of major operating and other risks to which the Nagase Group’s busi-

fluctuations in interest rates is minimized by using interest rate swap contracts

the Group devotes significant attention to the quality of these products. However,increasing the per-share dividend with due consideration given to the payout ratio

nesses are subject by their nature and that exert or could exert a significant influ-

and other available means. However, future fluctuations in interest rates could

issues such as defects in these products would terminate sales and require theand the ratio of dividends to net assets on a consolidated basis. NAGASE intends

ence on investor decisions.

impact the Nagase Group’s performance and financial position.

Nagase Group to reimburse customers, which could impact the Group’s perfor-

to use the retained funds effectively to support future business activities and tostrengthen its management foundation.

mance and financial position.

This section includes forward-looking statements. Such statements havebeen based on conditions as of the end of the fiscal year under review.

(5) Risks Involved in Operating Overseas
A significant percentage of the Nagase Group’s activities involve selling and man-(10) Risks of Handling Various Chemicals(1) Overall Operating Risk

ufacturing overseas, principally in China, Southeast Asia, Europe and North

Chemicals are a core business of the Nagase Group, which imports and exports aparagraph 5 of the Companies Act. Accordingly, the Company’s board of directors

The Nagase Group conducts a wide spectrum of operations in the segments ofAmerica. As a matter of policy, the Nagase Group makes every effort to determine

diverse array of products for a broad range of applications. The Group’s exports

has resolved to adopt a dividend policy calling for two dividend payments every

Functional Materials, Advanced Materials & Processing, Electronics, Automotive &trends in markets overseas and respond appropriately to them. However, failure

are therefore subject to the application of regulations that aim in part to maintainyear, one at interim and one at the end of the fiscal year, subject to approval by

Energy, and Life & Healthcare, conducting business in the dyes/pigments, coatingon the part of the Nagase Group to make accurate projections due to unexpectedinternational peace and safety, including the Foreign Exchange and Foreign Tradethe general meeting of shareholders.

raw material/ink, surfactants, OA, electrical equipment, home electronics, auto-

events including factors related to the regulatory systems and customs of over-Control Law and the Export Trade Control Order, and imports are subject to theBased on this policy, NAGASE plans to pay a year-end dividend of ¥13.00 per

mobiles, LCDs, semiconductors, and pharmaceutical/medical industries from aseas countries could impact the Group’s performance and financial position.

Chemical Substances Control Law and other laws and regulations. The Nagase

share for the fiscal year ended March 31, 2013. Therefore, together with thebase in. The chemical industry both in Japan and internationally is subject to sig-

interim dividend, the Company will pay an annual dividend of ¥26.00 per share.

nificant volatility that could impact the Group’s performance and financial posi-(6) Impact of Changes in Stock Prices

Item Compliance Committee, which work to assure compliance with the above

The consolidated payout ratio decreased to 23.4% from 36.0% for the previoustion.

The Nagase Group maintains a portfolio of marketable stock, primarily shares ofregulatory systems and with laws related to chemical product management incompanies with which the Group transacts business, and is subject to the risk of

China, Southeast Asia, Europe, North America and elsewhere. Contravention of

In addition, the Company has determined in its articles of incorporation allowances or interim dividend payments according to the provisions of article 454

fiscal year.
For the fiscal year ending March 31, 2014, NAGASE plans to pay an annual

Group has therefore established the Security Trade Control Committee and the(2) Product Market Conditions

changes in the prices of these shares. As a matter of policy, the Nagase Groupthese regulatory systems would result in restrictions on business activities, andper-share dividend of ¥28.00, consisting of an interim and year-end dividend of

The Nagase Group relies heavily on petrochemicals manufactured from naphthaseeks to reduce this risk by continuously reviewing and reorganizing its share-

therefore could impact the Group’s performance and financial position.

¥14.00 each.

in our Functional Materials, Advanced Materials & Processing, and Automotive &holdings.

Consolidated Payout Ratio/
Ratio of Dividends to Net Assets on a Consolidated Basis
Consolidated Payout Ratio (Left)
Ratio of Dividends to Net Assets on a Consolidated Basis (Right)
(%)
40

(%)
2.0

30

1.5

20

1.0

10

0.5
0

0
As of / Years
ended March 31

2009

2010

2011

2012

2013

(11) Risk of Natural Disasters

Energy segments. Petrochemical product raw material market conditions and the

However, changes in stock prices could impact the Group’s performance andbalance of supply and demand are key factors determining market conditions forfinancial position. Moreover, a drop in stock prices that reduces return on pension

The Nagase Group companies have each created a business continuity plan ineach product. Changes in these conditions could impact Company revenues andplan assets could impact the Group’s profitability by increasing retirement benefit

the event of a natural disaster, adopting a presence verification system, drafting a

profits. In addition, the Nagase Group uses raw materials derived from grains incosts.

disaster-response manual, and implementing measures to respond to earthquakes, disaster prevention training, and other preparations in the event of a nat-

the production of certain products. Market prices for grains are subject to wide
volatility To the extent that cost increases cannot be passed on to the consumer(7) Counterparty Credit Risk

ural disaster. However as the Nagase Group conducts business across a widein prices adjustments, the Company may experience significant impact on profits.

The Nagase Group is exposed to credit risk because it extends credit to counter-

range of nations and regions, large-scale disasters, H1N1 flu and other infectious

parties in a diverse array of transactions in Japan and overseas. As a matter of

diseases, or other events could potentially disrupt the Company’s supply chain,(3) Impact of Fluctuations in Foreign Currency Exchange Rates

policy, the Nagase Group moves to preclude credit risk with risk hedges such as

slowing Company sales activities or interrupting production due to damage to

The Nagase Group undertakes import and export transactions and nontrade busi-

guarantees and collateral in correlation with the financial condition of counterpar-

plant facilities. Such events could result in significant opportunity loss, or haveness transactions that involve foreign currencies. Fluctuations in foreign currency

ties.

other adverse effects on Group management performance and/or financial condi-

exchange rates impact the value of transactions denominated in foreign curren-

However, the Nagase Group cannot be absolutely certain that it has avoided

cies when translated into yen. The Nagase Group works to minimize the risks

credit risk. Deterioration of the financial condition or bankruptcy of counterparties

associated with fluctuations in foreign currency exchange rates by hedging these

could impact the Group’s performance and financial position.

tions.

transactions using forward foreign exchange contracts. However, fluctuations inStatements made in this document with respect to the Nagase Group’s per-foreign currency exchange rates could exert a material impact on the Nagase(8) Risk of Investments

formance outlook contain forward-looking statements based on assumptions,Group’s performance and financial position. The Nagase Group also includes cor-

The Nagase Group’s businesses are based on brokerage transactions, and the

projections and plans of the Company as of May 10, 2013. Forecasts in connec-

porations domiciled in countries other than Japan that maintain their financial

Group is working to develop high-value-added businesses. As a matter of policy,

tion with the Group’s future performance are subject to a variety of risks andstatements in currencies other than Japanese yen. Fluctuations in foreign curren-

the Nagase Group is therefore supporting the ability of the Nagase R&D Center,

uncertainties including those outlined as follows. As a result, readers are advised

cy exchange rates could therefore impact the consolidated financial statements

Group manufacturing subsidiaries and other Group organizations to provide highthat actual results may differ materially from projections.

upon translation of the accounts of these corporations into Japanese yen.

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 the Group’s conventional low-risk brokerage businesses. The increased latent risks involved
could impact the Group’s performance and financial position.

60

NAGASE & CO., LTD. Annual Report 2013

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Consolidated Balance Sheets

Nagase & Co., Ltd. and Consolidated Subsidiaries (March 31, 2013 and 2012)ASSETS

Thousands of
U.S. dollars (Note 1)

Millions of yen

2013

2012

LIABILITIES AND NET ASSETS

2013

Current assets:

Thousands of
U.S. dollars (Note 1)

Millions of yen

2013

2012

2013

¥107,941¥109,163$1,147,698

Current liabilities:

Cash and time deposits (Notes 16 and 22)¥ 46,693¥ 29,184$ 496,470

Notes and accounts payable (Notes 9, 16 and 25)

Notes and accounts receivable (Notes 16 and 25)

196,001

197,7022,084,009

Short-term loans (Notes 8 and 16)

25,061

38,633

266,465

Inventories (Note 5)

51,86345,260551,441

Current portion of long-term loans and finance lease obligations (Notes 8 and 16)

10,473

11,613111,356

Deferred tax assets (Note 12)

4,282

4,067

45,529Accrued income taxes (Note 12)

2,947

3,170

31,334

Other current assets

7,967

7,299

84,710

Deferred tax liabilities (Note 12)

21

50

223

Less allowance for doubtful accounts(1,057)(1,235)(11,239)

Accrued expenses

3,538

3,605

37,618305,751

282,280

3,250,941

Accrued bonuses for employees

3,968

3,632

42,190Accrued bonuses for directors

219

198

2,329

Total current assets

Other current liabilities
Total current liabilities

11,641

11,622

123,775

165,812

181,689

1,763,020

Long-term liabilities:
Property, plant and equipment, at cost (Note 6):

Bonds (Notes 8 and 16)

30,000—318,979

Long-term loans and finance lease obligations (Notes 8 and 16)

32,89038,463349,708

Land (Note 9)

19,441

18,523

206,709

Deferred tax liabilities (Note 12)

9,251

7,251

98,363

Buildings and structures

50,05745,398532,238

Accrued retirement benefits for employees (Note 11)

10,283

10,032

109,335

Machinery, equipment and vehicles

77,351

71,588822,446

Other long-term liabilities

537

566

5,710

Leased assets
Construction in progress
Less accumulated depreciation
Property, plant and equipment, net (Note 23)

Total long-term liabilities

1,833

4,120

19,490149,221140,198

1,586,614

Contingent liabilities (Note 20)(88,254)(83,470)(938,373)

Net assets:

60,96756,727648,240

703

660

7,475

83,12956,407883,881

Shareholders’ equity (Note 13):
Common stock:
Authorized—346,980,000 shares
Issued—138,408,285 shares in 2013 and 2012

Investments in securities (Notes 7 and 16):
Unconsolidated subsidiaries and affiliates (Note 23)

7,770

7,307

82,616

Other

49,09941,707522,052

56,87049,014

604,678

837

1,122

8,900

Goodwill (Notes 23)

30,72632,079326,699

Technology-based assets

20,093

21,669213,642

Deferred tax assets (Note 12)

2,249

896

23,913

Other assets (Note 6)

9,542

7,317

101,457

Less allowance for doubtful accounts
Total investments and other assets
Total assets (Note 23)

9,699

103,126

10,041

10,041

106,762

Retained earnings (Note 26)

199,160

186,907

2,117,597(7,109)(5,460)(75,587)

211,792

201,188

2,251,909

17,943

12,731

190,781

(6)

(21)

(64)

Less treasury stock, at cost (Note 14)–11,693,809 shares in 2013 and 9,893,787 shares in 2012

Investments and other assets:Long-term loans receivable

9,699

Capital surplus

Total shareholders’ equity
Accumulated other comprehensive income (loss):
Net unrealized holding gain on securities (Note 7)
Deferred loss on hedges (Note 16(c))
Translation adjustments
Total accumulated other comprehensive income
Stock acquisition rights
Minority interests(1,223)(9,191)(13,004)

16,712

3,518

177,693

50

110

532

(289)

(266)

(3,073)

9,250

7,927

98,352120,029

111,833

1,276,225

Total net assets

237,806

212,7442,528,506¥486,747¥450,842$5,175,407

Total liabilities and net assets¥486,747¥450,842$5,175,407

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Nagase & Co., Ltd. and Consolidated Subsidiaries (Years ended March 31, 2013 and 2012)

Net sales (Note 23)
Cost of sales (Note 18)
Gross profit

Millions of yen

Thousands of
U.S. dollars (Note 1)

Millions of yen

2013

2012

2013

¥666,272
583,689
82,583¥631,854
560,226
71,628$7,084,232
6,206,156
878,075

Balance at April 1, 2011

67,004
15,578Other income (expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Gain on sales of investments in securities
Loss on devaluation of investments in securities
Gain on sales of property, plant and equipment
Loss on sales of property, plant and equipment
Loss on disposal of property, plant and equipment
Loss on impairment of fixed assets (Notes 6 and 23)
Other, net
Income before income taxes and minority interests

1,416(1,099)
933
801
(45)
3,358
(98)
(196)
(1,896)707
19,458

Income taxes (Note 12):Current
DeferredIncome before minority interests
Minority interests
Net income

58,20013,427

1,286
(692)
368
1,759
(383)
16
(5)
(172)
(455)
1,388
16,536

6,417(2,004)
15,044862¥ 14,182

6,980
118
9,438
867
¥ 8,570

712,430
165,635

15,056(11,685)
9,920
8,517
(478)
35,704(1,042)(2,084)(20,159)
7,517
206,890

68,230(21,308)
159,957
9,165$ 150,792

Total
accumulated
Stock
other
Net unrealized Deferred
Totalshareholders’ holding gain loss on Translation comprehensive acquisition Minority
Treasuryrightsinterests
incomeon securities hedges adjustments
equitystock, at cost

Commonstock

CapitalsurplusRetainedearnings¥ 9,699¥ 10,041¥ 181,665¥ (5,460)

—

—

8,570

—

Net income for the year

Selling, general and administrative expenses (Note 18)
Operating income (Note 23)

Nagase & Co., Ltd. and Consolidated Subsidiaries (Years ended March 31, 2013 and 2012)¥ 195,946 ¥ 13,188
8,570

—

¥ (8) ¥ (7,610)——¥ 5,570

¥ 235

—

—

Total
net assets¥ 7,564 ¥ 209,316
—

8,570

Gain on sales of treasury stock

—

0

—

—

0

—

—

—

—

—

—

0

Cash dividends——(3,212)—(3,212)

—

—

—

—

—

—

(3,212)

Purchases of treasury stock

—

—

—

(0)

(0)

—

—

—

—

—

—

(0)

Disposition of treasury stock

—

—

—

0

0

—

—

—

—

—

—

0

Decrease in retained earnings resulting fromchanges in scope of consolidation

(118)

—

(118)

—

—

—

—

—

—

(118)

—

—

Adjustments due to change in scope of
application of equity method

—

—

3

—

3

—

—

—

—

—

—

3

Other

—

—

—

—

—

(457)

(13)

(1,580)(2,051)

(124)

363

(1,813)

Balance at April 1, 2012

9,699

10,041

186,907(5,460)201,188

12,731(21)(9,191)

3,518

110

7,927

212,744

Net income for the year——

14,182—

14,182

—

—

—

—

—

—

14,182Gain on sales of treasury stock

—

0

—

—

0

—

—

—

—

—

—

0

Cash dividends——(3,189)—(3,189)

—

—

—

—

—

—

(3,189)Purchases of treasury stock

—

—

—

(1,649)(1,649)

—

—

—

—

—

—

(1,649)

Disposition of treasury stock

—

—

—

0

0

—

—

—

—

—

—

0

Decrease in retained earnings resulting fromchanges in scope of consolidation

—

—

(66)

—

(66)

—

—

—

—

—

—

(66)

Adjustments due to change in scope of
application of equity method

—

—

717

—

717

—

—

—

—

—

—

717

Changes in fiscal year-end of consolidated
subsidiaries

—

—

609

—

609

—

—

—

—

—

—

609

Other

—

—

—

—

—

5,211

15

7,967

13,194

(60)

1,322

14,457¥ 9,699¥ 10,041¥ 199,160¥ (7,109)¥ (6) ¥ (1,223)¥16,712¥ 50

Balance at March 31, 2013¥ 211,792 ¥ 17,943¥ 9,250 ¥ 237,806

See accompanying notes to consolidated financial statements.

Thousands of U.S. dollars (Note 1)

Commonstock

Balance at April 1, 2012

Consolidated Statements of Comprehensive Income
Nagase & Co., Ltd. and Consolidated Subsidiaries (Years ended March 31, 2013 and 2012)
Thousands of
U.S. dollars (Note 1)

Millions of yen

Income before minority interests
Other comprehensive income (loss) (Note 10):
Net unrealized holding gain (loss) on securities
Deferred gain (loss) on hedges
Translation adjustments
Share of other comprehensive income (loss) of affiliates accounted for by the equity method
Comprehensive income
Comprehensive income attributable to:Shareholders of the Company
Minority interests

CapitalsurplusRetainedearnings

Total
accumulated
Stock
other
Net unrealized Deferred
Totalshareholders’ holding gain loss on Translation comprehensive acquisition Minority
Treasuryrightsinterests
incomeon securities hedges adjustments
equitystock, at cost

$ 103,126 $ 106,762 $ 1,987,315 $ (58,054) $ 2,139,160 $ 135,364 $ (223) $ (97,725) $ 37,406

Net income for the year—

Gain on sales of treasury stock—

Cash dividends——

150,792

—

—

—

—

Total
net assets$1,170 $84,285 $2,262,031

150,792———

150,792

0

—

—

0

—

—

—

—

—

—

0

—

(33,907)—(33,907)

—

—

—

—

—

—

(33,907)

2013

2012

2013

Purchases of treasury stock

—

—

—

(17,533)(17,533)

—

—

—

—

—

—

(17,533)¥15,044¥ 9,438$159,957

Disposition of treasury stock

—

—

—

0

0

—

—

—

—

—

—

0

5,212
15
6,181
768
12,178¥27,222(456)(13)(1,626)(58)(2,155)¥ 7,282

55,417
159
65,7208,166
129,484$289,442

Decrease in retained earnings resulting fromchanges in scope of consolidation

—

—

(702)

—

(702)

—

—

—

—

—

—

(702)

Adjustments due to change in scope of
application of equity method

—

—

7,624

—

7,624

—

—

—

—

—

—

7,624

6,475

—

—

—

—

—

—

6,475

—

55,407

159

84,710140,287(638) 14,056(153,716)

Changes in fiscal year-end of consolidated
subsidiaries
Other
Balance at March 31, 2013¥25,674
1,548¥ 6,518764$272,982
16,459

6,475
—

—

—

—

$ 103,126 $ 106,762 $ 2,117,597 $ (75,587) $ 2,251,909 $ 190,781 $ (64) $ (13,004) $177,693 $ 532 $98,352 $2,528,506

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Cash Flows

Nagase & Co., Ltd. and Consolidated Subsidiaries (Years ended March 31, 2013 and 2012)

Thousands of
U.S. dollars (Note 1)

Millions of yen

2013

2012

2013

¥19,458¥16,536$206,890

7,445
1,612
1,896
205
(1,416)
1,099(1,032)(3,259)
(800)
45

7,272
151
455
974
(1,286)
692
(9)
(11)
(1,753)383

79,16017,14020,1592,180(15,056)
11,685(10,973)(34,652)(8,506)478

10,357(1,490)(8,771)(1,061)
24,2891,724(1,050)(6,387)
18,576(10,120)(7,417)
6,712
111
12,6891,467(637)(7,829)5,690

110,122(15,843)(93,259)(11,281)258,256
18,331(11,164)(67,911)
197,512Investing activities
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investments in securities
Proceeds from sales of investments in securities
Proceeds from sales of investments in subsidiaries resulting in change in scope of consolidation
Net disbursement due to the acquisition of subsidiaries
Purchases of investments in capital included in Other assets
Increase in short-term loans receivable included in Other current assets, net
Purchases of intangible fixed assets included in Other assets
Other, net
Net cash used in investing activities(10,551)
3,235
(214)
1,200
—
—
(646)
(380)
(1,709)(464)(9,529)(11,215)
46
(914)
2,151
537
(67,774)
(686)
(175)
(1,420)(1,615)(81,066)(112,185)
34,397(2,275)12,759——(6,869)(4,040)(18,171)(4,934)(101,318)

Financing activities(Decrease) increase in short-term loans payable, net
Proceeds from long-term loans
Repayments of long-term loans
Proceeds from issuance of bonds
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to minority shareholders
Other, net
Net cash provided by financing activities(16,273)
4,665(11,564)
29,855(1,649)(3,189)
(540)
(139)
1,164

22,97639,257(1,527)—(0)(3,212)(401)(130)
56,961(173,025)
49,601(122,956)
317,438(17,533)(33,907)(5,742)(1,478)12,376

2,451
12,66228,517915(434)(18,849)
47,202
165

26,061
134,631303,211
9,729

3,721
¥45,816—¥28,517

39,564$487,145

Operating activities
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes and minority interests to net cash provided
by operating activities:
Depreciation and amortization other than amortization of goodwill
Amortization of goodwill
Loss on impairment of fixed assets
Provision for accrued retirement benefits for employees, net of payments
Interest and dividend income
Interest expense
Exchange gain, net
Gain on sales of property, plant and equipment, net
Gain on sales of investments in securities, net
Loss on devaluation of investments in securities
Changes in operating assets and liabilities:
Notes and accounts receivable
Inventories
Notes and accounts payable
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents resulting from inclusion of subsidiaries in consolidation
Increase in cash and cash equivalents resulting from changes in fiscal year-end of consolidated
subsidiaries
Cash and cash equivalents at end of the year (Note 22)

Notes to Consolidated Financial Statements

Nagase & Co., Ltd. and Consolidated Subsidiaries (March 31, 2013)

1. BASIS OF PREPARATION
The accompanying consolidated financial statements of NAGASE & CO., LTD. (the“Company”) and consolidated subsidiaries are prepared on the basis of accounting
principles generally accepted in Japan, which are different in certain respects as to theapplication and disclosure requirements of International Financial Reporting Standards,
and have been compiled from the consolidated financial statements prepared by theCompany as required by the Financial Instruments and Exchange Act of Japan.
In preparing the accompanying consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements
issued domestically in order to present them in a format which is more familiar to readers outside Japan.
In addition, certain reclassifications of previously stated amounts have been madeto conform the consolidated financial statements for the year ended March 31, 2012 to
the 2013 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 convenience of the reader, as amatter of arithmetic computation only, at ¥94.05 = U.S.$1.00, the rate of exchange
prevailing on March 31, 2013. This translation should not be construed as a representation that the yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.
As permitted by the Financial Instruments and Exchange Act of Japan, amounts ofless than one million yen for the years ended March 31, 2013 and 2012 have been
omitted. Consequently, the totals shown in the accompanying consolidated financial
statements for the years ended March 31, 2013 and 2012 (both in yen and in U.S. dollars) do not necessarily agree with the sum of the individual amounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of theCompany and significant companies that it controls directly or indirectly. Significant
affiliates over which the Company exercises significant influence in terms of their operating and financial policies have been accounted for by the equity method. All significant intercompany balances and transactions have been eliminated in consolidation.
Unrealized intercompany gains among the Company and the consolidated subsidiaries have been entirely eliminated and the portion attributable to minority interests has
been charged to minority interests.
From the fiscal year ended March 31, 2013, the reporting dates of 21 consolidated
subsidiaries and TOTAKU INDUSTRIES, INC., of which the fiscal year ends had been thelast day of December and February, respectively, were conformed to that of theCompany for the sake of timely performance management, prompt implementation ofmanagement policies and adequate disclosure.
In addition, 10 consolidated subsidiaries and 3 affiliates, which are required to havea December 31 year-end closing date in accordance with regulations of their countriesof domicile, are consolidated by using their financial statements as of the parent fiscal
year end prepared solely for consolidation purposes. Until the fiscal year ended March
31, 2012, necessary adjustments had been made for any significant intercompany
transactions that had been incurred during the periods between the year ends of thesecompanies and the year end of the Company.
In accordance with these changes, operating results from March 1, 2012 to March
31, 2012 for TOTAKU INDUSTRIES, INC. and from January 1, 2012 to March 31, 2012
for the other consolidated subsidiaries and affiliates have been credited to retained
earnings and the changes in cash and cash equivalents are presented as “Increase in
cash and cash equivalents resulting from changes in fiscal year-end of consolidated
subsidiaries” in the accompanying consolidated statement of cash flow for the year
ended March 31, 2013.
(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 foreign currency forward exchange contracts aretranslated at the corresponding contract rates. All other assets and liabilities denominated in foreign currencies are translated at their historical rates. Gain or loss on eachtranslation is credited or charged to income.
Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into yen at the rates in effect at the respective transaction dates. Foreign exchange gain or loss is credited or charged to income in the period
in which such gain or loss is recognized for financial reporting purposes.
The balance sheet accounts of the overseas consolidated subsidiaries are translated into yen at the rates of exchange in effect at the balance sheet date, except that thecomponents of net assets excluding minority interests, net unrealized holding gain on
securities, and deferred loss on hedges are translated at their historical exchange rates.
Revenue and expense accounts are translated at the average rates of exchange in
effect during the year. Adjustments resulting from translating financial statements

whose accounts are denominated in foreign currencies are not included in the determination of net income but are reported as “Translation adjustments” as a component ofaccumulated other comprehensive income (loss) in the accompanying consolidated balance sheets.
(c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in banks and other highly liquid
investments with maturities of three months or less when purchased.
(d) Inventories
Inventories are stated at the lower of cost or net selling value, cost being determinedprimarily by the weighted-average method.
(e) Investments in Securities
Securities are classified into three categories: trading securities, held-to-maturity debt
securities or other securities. Trading securities, consisting of debt and marketable
equity securities, are stated at fair value. Gain and loss, both realized and unrealized,
are credited or charged to income. Held-to-maturity debt securities are stated at theiramortized cost. Marketable securities classified as other securities are carried at fairvalue with any changes in unrealized holding gain or loss, net of the applicable income
taxes, reported as a separate component of accumulated other comprehensive income(loss). Non-marketable securities classified as other securities are carried at cost determined by the moving-average method.
All securities held by the Company and its consolidated subsidiaries are classified
as “other securities” and have been accounted for as outlined above.
(f) Property, Plant and Equipment and Depreciation (except for leased assets)
Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment is calculated by the straight-line
method based on the estimated useful lives of the respective assets.
The estimated useful lives of the principal assets are as follows:
Buildings (other than structures attached to the buildings)
15 to 50 years
Machinery and equipment
2 to 17 years(g) Intangible Assets (except for leased assets)
Costs incurred for computer software obtained for internal use are capitalized andamortized on a straight-line basis over an estimated useful life of 5 years.
Technology-based assets recognized upon acquisition are amortized on a straightline basis over 13 to 17 years.
(h) Goodwill
Goodwill is amortized over a period not exceeding 20 years on a straight-line basis.
When immaterial, goodwill is charged to income as incurred.
(i) Leased Assets
Leased assets under finance lease contracts that do not transfer ownership to the lessee are depreciated to a residual value of zero by the straight-line method using theterm of the contract as the useful life.
(j) Allowance for Doubtful Accounts
The Company and its consolidated subsidiaries provide allowances for doubtful
accounts based on their historical experience of bad debts on ordinary receivables plus
an additional estimate of probable specific doubtful accounts from customers experi-

See accompanying notes to consolidated financial statements.

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encing financial difficulties.
(k) Income Taxes
Income taxes are calculated based on taxable income and charged to income on an
accrual basis. Deferred tax assets and liabilities are computed based on the temporary
differences between the financial reporting and the tax bases of the assets and liabilities that will result in taxable or deductible amounts in the future. Computations ofdeferred tax assets and liabilities are based on the enacted tax laws.
(l) Accrued Bonuses for Employees
Accrued bonuses for employees are provided based on the estimated amount ofbonuses to be paid to employees in the following fiscal year which has been earned in
the current fiscal year.
(m) Accrued Bonuses for Directors
Accrued bonuses for directors are provided based on the estimated amount of bonuses
to be paid to directors in the following fiscal year which has been earned in the current
fiscal year.
(n) Retirement Benefits
Accrued retirement benefits for employees are provided based on the amount of the
projected benefit obligation reduced by the pension plan assets at fair value at the endof the year.
Actuarial gain or loss is principally credited or charged to income in the year following the year in which such gain or loss is recognized for financial reporting purposes.
Prior service cost is charged to income in the year in which such cost is recognized forfinancial reporting purposes.
(o) Derivatives and Hedging Activities
The Company and its consolidated subsidiaries utilize derivative financial instruments
principally in order to manage the risk arising from adverse fluctuation in foreign currency exchange rates and to mitigate the risk of fluctuation in interest rates on borrowings. The Company has established a control environment that includes policies andprocedures for risk assessment in accordance with the Company’s rules for foreignexchange transactions and interest-rate swap transactions.

Under these rules, the Company conducts transactions within a certain range andplaces limits on the applicable assets and liabilities based on the actual demand. In
addition, the Company assesses the effectiveness of the hedging activities and verifies
the approval, reporting and monitoring of all transactions involving derivatives. The
Company and its consolidated subsidiaries do not hold or issue derivative financial
instruments for speculative trading purposes.
If an interest-rate swap contract meets certain criteria, the net amount to be paid or
received under the contract is added to or deducted from the interest on the underlying
hedged item.
Receivables and payables hedged by foreign currency forward exchange contracts
are translated at the corresponding foreign exchange contract rates (“Allocation method”).
The Company and its consolidated subsidiaries are exposed to certain market risk
arising from their foreign currency forward exchange contracts. They are also exposedto the risk of credit loss in the event of non-performance by the counterparties to thecurrency and interest-rate contracts; however, they do not anticipate non-performanceby 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
credited or charged to income except for those which meet the criteria for deferral
hedge accounting under which unrealized gain or loss, net of the applicable income
taxes, is reported as a separate component of accumulated other comprehensive
income (loss).
(p) Research and Development Costs
Research and development costs are charged to income when incurred.
(q) Distributions of Retained Earnings
Dividends and other distributions of retained earnings are approved by the shareholders
at a meeting held subsequent to the end of the fiscal year to which such distributions
are applicable. The accompanying consolidated financial statements do not, however,reflect the applicable distributions of retained earnings as approved by the shareholders
subsequent to the fiscal year end. (Refer to Note 26.)

3. ACCOUNTING CHANGES(a) Change in Accounting Principles that are Difficult to Distinguish from
Changes in Accounting Estimates
Effective April 1, 2012, the Company and its domestic consolidated subsidiaries havechanged their depreciation method for property, plant and equipment, except for buildings acquired on or subsequent to April 1, 1998, to the straight-line method. Previously,
the declining-balance method had been principally applied by the Company and its
domestic consolidated subsidiaries, and the straight-line method had been applied
principally by the Company’s overseas subsidiaries.
Under the “CHANGE” 11 medium-term business plan (from the year ended March
31, 2010 to the year ended March 31, 2012), the Company and its consolidated subsidiaries (collectively, the “Group”) had been engaged in building stronger research,development, and manufacturing functions. In addition, the current “Change-S2014”
medium-term business plan (from the year ended March 31, 2013 to the year ending
March 31, 2015), keeps the Group’s attention focused on these same areas, while calling for significant increase in capital investment.
With increased capital investment, greater investment in group manufacturing companies, and full-scale operations of manufacturing facilities from the year ended March
31, 2013, the Company has reexamined its depreciation policies for property, plant andequipment. As a result, the Company concluded that adopting the straight-line method
to allocate depreciation expense evenly over the estimated useful lives of property, plantand equipment would more appropriately reflect the actual characteristics of theGroup’s business considering that manufacturing facilities and equipment will likely be
used consistently and reliably over the estimated useful lives.
As a result of this change, depreciation expense decreased by ¥2,138 million($22,733 thousand), operating income increased by ¥1,896 million ($20,159 thousand) and income before income taxes and minority interests increased by ¥1,918 million ($20,393 thousand) for the year ended March 31, 2013, from the corresponding
amounts which would have been recorded under the previous depreciation method.
(b) Change in Accounting Estimates
Effective April 1, 2012, the Company and certain consolidated subsidiaries havechanged the estimated useful lives of certain items of property, plant and equipment.
As a result of this change, depreciation expense increased by ¥90 million ($957
thousand), and operating income and income before income taxes and minority interests decreased by ¥88 million ($936 thousand) for the year ended March 31, 2013,
from the corresponding amounts which would have been recorded under the previous
estimated useful lives.

5. INVENTORIESInventories at March 31, 2013 and 2012 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Merchandise and finished goods

2013

2012

2013

¥47,104¥41,087$ 500,840

1,554

1,292

16,523

3,204¥51,8632,879¥45,260

34,067$ 551,441

Millions of yen

Thousands of
U.S. dollars

Work in process
Raw materials and supplies
Total

6. LOSS ON IMPAIRMENT OF FIXED ASSETS
Loss on impairment of fixed assets for the years ended March 31, 2013 and 2012 was as follows:

Major use

Classification

Location

2013

2013

Processing equipment for plastic materials

Building, machinery and land

Kinki area

¥ 1,252$13,312

Coating equipment for semiconductor wafer

Machinery

Kinki area

269

2,860

Manufacturing facility for pharmaceutical intermediates
Manufacturing equipment for resin plastic tray products fortransport use

Building and machinery

Kinki area

196

2,084

Machinery and structure

Shanghai

94

999

Processing facility for optical films for liquid crystal displays (LCDs)

Building and machineryLand and intangible assets
included in Other assets

Guangdong

56

595

Idle assets

Kinki area

Total

27

287

¥ 1,896$20,159

Millions of yen

Major use

Classification

Location

2012

Processing equipment for liquid crystal panel materials

Machinery and equipment

Kanto area, Shanghai¥ 319

Parking facilities

Buildings and structures

Kinki area

82

Idle assets
Total

Land

Kinki area

54
¥ 455

The Company and its consolidated subsidiaries group fixed assets for business use
principally based on its business management segment. They also group fixed assets tobe disposed of and idle assets at each asset individually as smallest cash-generating
units.
For the year ended March 31, 2013, accompanied with the withdrawal from thecorresponding businesses, the carrying values of manufacturing equipment for resin
plastic tray products for transport use, coating equipment for semiconductor wafer, anda processing facility for optical films for LCDs were reduced to their recoverable
amounts and a loss on impairment was recognized.
Due to decreasing profitability in response to the drastic change in the businessenvironment, the carrying values of processing equipment for plastic materials, and amanufacturing facility for pharmaceutical intermediates were reduced to their recoverable amounts and a loss on impairment was recognized.
The recoverable amounts were measured at the higher of net selling value andvalue in use. Net selling value for assets to be disposed of was set at zero since it isdifficult to sell them or use them for any purpose other than their original purpose.
Value in use for the measurement of recoverable amounts is based on the present

value of the future cash flow with the discount rate of 1.239%.
Due to decreasing land prices, the carrying values of idle assets were reduced totheir recoverable amounts and a loss on impairment was recognized. The recoverable
amounts were calculated based on the appraisal value published by the tax authorities.
For the year ended March 31, 2012, accompanied with the withdrawal from thecorresponding business, the carrying values of processing equipment for liquid crystal
panel materials were reduced to their recoverable amounts and a loss on impairment
was recognized.
Accompanied with the closure of a part of parking facilities operated by theCompany’s consolidated subsidiary, the carrying values of parking facilities werereduced to their recoverable amounts and a loss on impairment was recognized.
The recoverable amounts were measured at net selling value. Net selling value forassets to be disposed of was set at zero since it is difficult to sell them or use them forany purpose other than their original purpose.
Due to decreasing land prices, the carrying values of idle assets were reduced totheir recoverable amounts and a loss on impairment was recognized. The recoverable
amounts were calculated based on the appraisal value published by the tax authorities.

4. ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
Accounting Standards for Retirement Benefits“Accounting Standard for Retirement Benefits” (Accounting Standards Board of Japan(“ASBJ”) Statement No.26 revised on May 17, 2012) and “Guidance on AccountingStandard for Retirement Benefits” (ASBJ Guidance No.25 revised on May 17, 2012.)
Under the revised accounting standards, actuarial gains and losses and prior service costs that have yet to be recognized in profit or loss shall be recognized within net
assets (accumulated other comprehensive income (loss)), after adjusting for tax effects,
and the deficit or surplus shall be recognized as a liability or asset. In addition, the68

NAGASE & CO., LTD. Annual Report 2013

H̲nag2013E̲054-085.indd 68-69

retirement benefit obligation can be attributed to each period based on the plan’s benefit formula or the straight-line method, and the calculation method for the discount rate
has been revised.
The Company and certain consolidated subsidiaries expect to apply the revised
accounting standard and related guidance from the beginning of the year ending March
31, 2014. The Company is in the process of evaluating the effect of applying therevised accounting standard on its consolidated financial statements.

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7. INVESTMENTS IN SECURITIES

8. SHORT-TERM LOANS, BONDS, LONG-TERM LOANS AND FINANCE LEASE OBLIGATIONS(a) Marketable securities classified as other securities at March 31, 2013 and 2012 are summarized as follows:

Short-term loans at March 31, 2013 and 2012, principally represented notes and loans in the form of deeds at weighted-average annual interest rates of 1.97% and 1.33% perannum, respectively.
Long-term loans, bonds and finance lease obligations at March 31, 2013 and 2012 consisted of the following:

Millions of yen

2013

2012

Carrying value

Acquisition cost

Unrealized gain
(loss)¥43,727¥16,433¥27,293

Carrying value

Acquisition cost

Unrealized gain
(loss)¥33,237¥13,043¥20,194

Unsecured loans from banks and insurance companies, payable in Yen, U.S. dollar, Euro, Malaysian ringgit
and RMB, due through 2019, at rates from 0.44% to 6.75%(705)¥19,489

Unsecured bonds in Yen, due 2015, at a rate of 0.306%

2013

2012

¥ 43,022¥ 49,751$ 457,438

10,000–106,326

Unsecured bonds in Yen, due 2017, at a rate of 0.442%

10,000–106,326

Unsecured bonds in Yen, due 2019, at a rate of 0.753%

10,000–106,326

341

325

3,626

73,36450,077780,053(10,473)¥ 62,890(11,613)¥ 38,463(111,356)$ 668,687

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

1,196
¥44,923

1,369¥17,802(172)¥27,1214,356¥37,594

5,061¥18,105

Thousands of U.S. dollars

Lease obligations

2013
Carrying value

Acquisition cost

Unrealized gain
(loss)$464,934$174,726$290,197

Less current portion
Total

Securities whose carrying value exceeds their acquisition cost:
Equity securities

12,717$477,650

14,556$189,282(1,829)$288,368

Year ending March 31,

2014

The Company and its consolidated subsidiaries recognized impairment losses on valuation of marketable securities of ¥38 million ($404 thousand) and ¥251 million for the years
ended March 31, 2013 and 2012, respectively.
(b) Securities classified as other securities for which market value was not determinable at March 31, 2013 and 2012 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

Carrying value

Carrying value

Carrying value¥4,176¥4,176¥4,112¥4,112$44,402$44,402

Market value not determinable:
Equity securities
Total

2013

2012

2013

Proceeds from sales¥ 1,199¥ 2,127$12,749

Gain on sales

801

1,594

8,517

Loss on sales

0

5

0

H̲nag2013E̲054-085.indd 70-71¥10,473$ 111,356

6,335

67,35815,777

167,751

2017

8,378

89,0802018

12,256130,3142019 and thereafter
Total

20,142¥73,364

214,163$ 780,053

Millions of yen

Thousands of
U.S. dollars

¥560
¥560

$5,954$5,954

9. PLEDGED ASSETSAt March 31, 2013, a consolidated subsidiary’s assets pledged as collateral for its accounts payable were as follows:

Thousands of
U.S. dollars

Millions of yen

NAGASE & CO., LTD. Annual Report 2013

Thousands of
U.S. dollars

2016

Land
Total

(c) Proceeds from sales of, and gross realized gain and loss on, other securities for the years ended March 31, 2013 and 2012 are summarized as follows:

Millions of yen

2015

Please refer to Note 16 (c).

70

2013

The aggregate annual maturities of bonds, long-term loans and finance lease obligations subsequent to March 31, 2013 are summarized as follows:

Securities whose carrying value does not exceed their acquisition cost:
Equity securities
Total

Thousands of
U.S. dollars

Millions of yen

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10. OTHER COMPREHENSIVE INCOME (LOSS)

12. INCOME TAXES

Reclassification adjustments and tax effects allocated to each component of other comprehensive income (loss) for the years ended March 31, 2013 and 2012 were as follows:
Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

¥ 8,420¥(1,399)$ 89,527

Income taxes applicable to the Company and its domestic consolidated subsidiaries
consist of corporation, inhabitants’ and enterprise taxes, which, in the aggregate,
resulted in statutory tax rates of approximately 38.0% and 40.7% for the years ended
March 31, 2013 and 2012, respectively.

The effective tax rates reflected in the accompanying consolidated statements ofincome for the years ended March 31, 2013 and 2012 differ from the statutory tax
rates for the following reasons:

Net unrealized holding gain (loss) on investments in securities:
Amount arising during the year

Statutory tax rates

2013

2012

38.0%

40.7%

Reclassification adjustments for gains and losses realized in the statement of income

(747)

(910)

(7,943)

Amount before tax effect

7,672(2,309)81,574

Expenses not deductible for income tax purposes

2.4

3.0

Tax effect(2,459)1,852(26,146)

Dividends and other income deductible for income tax purposes(11.0)(13.5)Net unrealized holding gain (loss) on investments in securities

5,212

(456)

55,417

Net adjustment resulting from elimination of dividend income upon consolidation

10.0

13.9

Different tax rates applied at overseas subsidiaries

(5.7)

(7.5)

Deferred gain (loss) on hedges:

Effect of:Amount arising during the year

(202)

(21)

(2,148)

Tax credit

(0.6)

(0.6)

Reclassification adjustments for gains and losses realized in the statement of income

226

—

2,403

Amortization of goodwill

3.2

0.4

Amount before tax effect

24

(21)

255

(11.7)

4.4

Tax effect

(9)

7

(96)

Deferred gain (loss) on hedges

15

(13)

159

(1.9)
22.7%

2.1
42.9%

6,181

(1,626)65,720768¥12,178(58)¥(2,155)

8,166$129,484

Valuation allowance
Other, net
Effective tax rates

Translation adjustments:
Amount arising during the year

The significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities at March 31, 2013 and 2012 are summarized as follows:

Share of other comprehensive income (loss) of affiliates accounted for by the equity method:Amount arising during the year
Other comprehensive income (loss), net

11. 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 has
established an employees’ retirement benefit trust for the payment of retirement benefits. Certain overseas consolidated subsidiaries also have defined benefit pension plans.
Also, the Company and certain domestic consolidated subsidiaries have defined contribution pension plans. In addition to the retirement benefit plans described above, theCompany and its consolidated subsidiaries pay additional retirement benefits undercertain conditions.
The following table sets forth the funded and accrued status of the plans and theamounts recognized in the accompanying consolidated balance sheets at March 31,
2013 and 2012 for the Company’s and the consolidated subsidiaries’ defined benefit
plans:
Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligation

2013

2012

2013

¥(28,103)¥ (25,049)$ (298,809)

Plan assets at fair value

16,392

14,294

174,290

Unfunded retirement benefit obligation(11,710)(10,755)(124,508)

1,516

722

16,119(89)¥(10,283)—¥ (10,032)(946)$ (109,335)

Unrecognized actuarial loss
Prepaid pension costAccrued retirement benefits recognized in the consolidated balance sheets

The components of retirement benefit expenses of the Company and the consolidated subsidiaries for the years ended March 31, 2013 and 2012 are outlined as follows:
Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

Service cost

¥ 1,226¥ 1,047$13,036

Interest cost

513

444

5,455
(3,424)

Expected return on plan assets

(322)

(292)

Amortization of actuarial loss

694

674

7,379

Contributions to defined contribution pension plans

237

156

2,520

92
¥ 2,442—¥ 2,030

978$25,965

Amortization of prior service cost
Retirement benefit expenses

Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

Deferred tax assets:
Accrued bonuses for employees
Allowance for doubtful accounts
Unrealized gain on inventories
Accrued enterprise taxes
Tax loss carryforwards
Accrued retirement benefits for employees
Investments in securities
Loss on impairment of fixed assets
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets¥ 1,363598
522
221
18,192
3,639
1,818
601
2,064
29,022(11,779)¥17,243¥ 1,314590
447
256
19,674
3,648
1,963
160
1,807
29,864(14,512)¥15,352$ 14,492
6,358
5,550
2,350
193,429
38,692
19,3306,390
21,946
308,581(125,242)$ 183,339

Deferred tax liabilities:
Technology-based assets
Deferred capital gain on property
Reserve for special depreciation
Undistributed earnings of overseas subsidiaries
Revaluation of land
Net unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities¥ (7,183)(1,974)
(728)
(442)
(359)
(9,168)(127)(19,985)¥ (2,741)¥ (7,778)(1,113)(1,086)(531)(357)(6,697)(124)(17,689)¥ (2,337)$ (76,374)(20,989)(7,741)(4,700)(3,817)(97,480)(1,350)(212,493)$ (29,144)

The assumptions used in accounting for the defined benefit pension plans for the years ended March 31, 2013 and 2012 were as follows:
2013

2012

Discount rate

Mainly 1.7%

Mainly 2.5%

Expected rate of return on plan assets

Mainly 2.1%

Mainly 2.5%

72

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13. SHAREHOLDERS’ EQUITYThe Corporation Law of Japan (the “Law”) provides that an amount equal to 10% of theamount to be disbursed as distributions of capital surplus (other than the capitalreserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve andthe legal reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolution of the shareholders, or by
the Board of Directors if certain conditions are met.
The Company’s legal reserve included in retained earnings at March 31, 2013 and16. FINANCIAL INSTRUMENTS
2012 amounted to ¥2,424 million ($25,774 thousand).
Under the Law, upon the issuance and sale of new shares of common stock, theentire amount of the proceeds is required to be accounted for as common stock,
although a company may, by resolution of the Board of Directors, account for an
amount not exceeding 50% of the proceeds of the sale of new shares as additional
paid-in capital.
Movements in common stock during the years ended March 31, 2013 and 2012
are summarized as follows:
Number of shares

2013

Common stock

April 1, 2012

Increase

Decrease

March 31, 2013

138,408,285——

138,408,285

April 1, 2011

Increase

Decrease

March 31, 2012

138,408,285——

138,408,285

2012

Common stock

14. TREASURY STOCK
Movements in treasury stock during the years ended March 31, 2013 and 2012 are summarized as follows:
Number of shares

2013

Treasury stock

April 1, 2012

Increase

Decrease

March 31, 2013

9,893,787

1,800,372

350

11,693,809

2012

Treasury stock

April 1, 2011

Increase

Decrease

March 31, 2012

9,893,808

210

231

9,893,787

15. SHARE-BASED COMPENSATIONAt March 31, 2013, the Company had one stock option plan: the 2008 stock option
plan.
The 2008 stock option plan (the 2008 plan) was approved by shareholders of theCompany on June 26, 2008. The 2008 plan provided for granting options to purchase421,000 shares of common stock to directors, executive officers, technology officers

and certain key employees of the Company and directors of certain subsidiaries. The
exercise price was ¥1,114 ($11.84) per share at March 31, 2013. This exercise priceis subject to adjustment in certain cases which include stock splits. The options
became exercisable on August 1, 2010 and are scheduled to expire on July 31, 2013.
Information regarding the Company’s stock option plans is summarized as follows:
The 2008 plan

Number of shares:
Outstanding at March 31, 2011

419,000

Granted—Expired(5,000)Exercised
Outstanding at March 31, 2012——

Expired(5,000)

Outstanding at March 31, 2013

Investments in securities are subject to market price fluctuation risk. However,these are mainly equity securities of other companies with which the Group has business relationships. The Group regularly monitors both their fair value and the financial
condition of the issuer. The Group also reviews as needed the condition of its holdings
with concern to the status of sales and financial transactions.
Short-term loans are raised primarily in connection with business activities andbridge loans relating to investments and financing. Long-term loans and bonds aretaken out principally for the purpose of making capital spending, investments andfinancing. Loans with variable interest rates are subject to the risk of fluctuating interest
rates. However, to reduce such risk, the Group utilizes derivatives (interest-rate swap
transactions) as a hedging instrument.
Derivatives mainly include foreign currencies forward exchange contracts to manage the market risk of fluctuation in foreign currency exchange rates and interest-rate
swaps to manage the market risk of fluctuating interest rates related to the interest
payments for bank loans.
In addition, operating liabilities and bank loans are exposed to liquidity risk.
However, the Group works to build up a clear picture of the balance of inflow and outflow of cash, managing such risk by establishing liquidity on hand in excess of half of
the amount of monthly net sales.
(c) Market Value of Financial Instruments
Carrying amount, estimated fair value and difference as of March 31, 2013 and 2012
are as follows. Financial instruments for which fair value is deemed extremely difficult
to determine are not included.
Millions of yen

2013

AssetsCash and time deposits
Notes and accounts receivable
Investments in securities
Other securities
Total assets
Liabilities
Notes and accounts payable
Short-term loans
Current portion of long-term loans
Long-term loans
Bonds
Total liabilities
Derivatives(*)
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

Carrying amount

Estimated fair value

Difference¥ 46,693
196,001¥ 46,693
196,001¥ —(0)44,923¥287,618

44,923¥287,618—¥ (0)¥107,941
25,061
10,40832,61430,000¥206,024¥107,941
25,061
10,40832,99430,266¥206,671

¥ (0)
—
—
380
266
¥ 646

¥

¥

¥ —
—
¥ —

¥

(385)
(9)
(395)

¥

(385)
(9)
(395)

414,000

GrantedExercised(a) Policy for Financial Instruments
The Company and its consolidated subsidiaries invest excess funds in highly secureand short-term financial assets, whose principal is guaranteed to be recoverable. With
regard to financing, short-term working funds are raised by bank borrowings or issuance of commercial paper and the Group policy is to procure long-term funds with bankborrowings and through the issuance of bonds. The purpose of entering into derivativetransactions is to mitigate the foreign currency exchange rate fluctuation risk arisingfrom the receivables and payables denominated in foreign currencies, and fluctuation
risk related to interest rates with respect to loans payable, and derivative transactions
are not carried out for speculative purposes.
(b) Types of Financial Instruments, Related Risk and Risk Management for
Financial Instruments
Receivables such as trade notes and accounts receivable are exposed to customers’
credit risks. With regard to this risk, the Group manages the settlement date by eachcustomer, and establishes credit limits by each customer based on the Group’s internal
credit rating policy and monitors outstanding balances in conjunction with an established system under which the credit status by each customer is reviewed at least oncea year and the credit limit amount updated as necessary.
In the cases of those receivables and liabilities denominated in foreign currencies,
foreign currency forward exchange contracts are used to hedge the risk of fluctuation.
However, for foreign currency transactions denominated in the same currency involving
either payables or receivables, foreign currency forward exchange contracts are usedsolely for the netted position.

—
409,000(Yen)

Fair value of options as of the grant date

¥124
(U.S. dollars)

Fair value of options as of the grant date

74

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Millions of yen

The carrying value of financial instruments without determinable market value at March 31, 2013 and 2012 is presented as follows:

2012
Carrying amount

AssetsCash and time deposits
Notes and accounts receivable
Investments in securities
Other securities
Total assets
Liabilities
Notes and accounts payable
Short-term loans
Current portion of long-term loans
Long-term loans
Total liabilities
Derivatives(*)
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

Estimated fair value

The calculation methods of fair values of financial instruments and securities andderivative transactions are as follows:
Cash and time deposits
Since these items are settled in a short period of time, their carrying amount approximates the fair value.
Notes and accounts receivable
The fair value of trade notes and accounts receivable is estimated as the present valueof future cash flow of each receivable classified by settlement date and discounted at
the market rate of interest at the reporting date.
Investments in securities
The fair value of investment in securities is based on quoted market prices. Please refer
to Note 7 regarding information on securities by holding objective.
Notes and accounts payable
The fair value of trade notes and accounts payable is estimated as the present value of
future cash flow of each payable classified by settlement date and discounted at themarket rate of interest at the reporting date.
Short-term loans and current portion of long-term loans
Since these items are settled in a short period of time, their carrying amount approxi-

76

NAGASE & CO., LTD. Annual Report 2013

H̲nag2013E̲054-085.indd 76-77

2012

2013

¥ 4,112
7,307¥11,419$ 44,402
82,616$ 127,028¥ 29,184
197,702¥ 29,184
197,702¥ —(0)

37,594¥264,480

37,594¥264,480—¥ (0)For the above securities, there is no market price and it is difficult to determine the fair value. Therefore, the fair value of the securities is not included in investments in securities in the summary table of financial instruments.
The redemption schedule for time deposits and notes and accounts receivable with maturity dates at March 31, 2013 is summarized as follows:¥109,163
38,633
11,551
38,200¥197,548¥109,163
38,633
11,551
38,335¥197,683

¥ (0)
—
—
135
¥ 135

¥

¥

¥ —
—
¥ —

¥

(126)
(34)
(161)

¥

(126)
(34)
(161)
2013

* Receivables and payables arising from derivative transactions are presented as a net amount.
Net payables are presented in parentheses.

2013¥ 4,176
7,770¥11,947

Unlisted equity securities
Investments in unconsolidated subsidiaries and affiliates
Total

Thousands of U.S. dollars

AssetsCash and time deposits
Notes and accounts receivable
Investments in securities
Other securities
Total assets
Liabilities
Notes and accounts payable
Short-term loans
Current portion of long-term loans
Long-term loans
Bonds
Total liabilities
Derivatives(*)
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

Thousands of
U.S. dollars

Millions of yen

Difference

Carrying amount

Estimated fair value$ 496,470
2,084,009$ 496,470
2,084,009

477,650$3,058,139

477,650$3,058,139$1,147,698
266,465
110,665
346,773
318,979$2,190,579$1,147,698
266,465
110,665
350,813
321,808$2,197,459

Difference

Millions of yen

Time deposits
Notes and accounts receivable
Total

Within 1 year

Over 1 year andless than 5 years¥ 46,257
195,993¥242,251¥—7¥ 7

Thousands of U.S. dollars

Time deposits
Notes and accounts receivable
Total

Within 1 year

Over 1 year andless than 5 years$ 491,834
2,083,923$ 2,575,768

$ —
74
$ 74

With respect to the redemption schedule of short-term loans, bonds, long-term loans and finance lease obligations, please refer to Note 8.
$

$

—
(0)
—
(0)

17. DERIVATIVES AND HEDGING ACTIVITIESThe open currency-related derivatives positions not designated as hedging instruments at March 31, 2013 and 2012 are as follows:
Millions of yen

2013

$
$

(4,094)(96)(4,200)$$(4,094)(96)(4,200)

$

(0)
—
—
4,040
2,828
$6,869$$———mates the fair value.
Long-term loans
The fair value of long-term loans with fixed interest rates is based on the present valueof the total of principal and interest discounted by the interest rate to be applied
assuming new loans under similar conditions to existing loans are made. Floating interest rates for long-term loans are hedged by interest-rate swap agreements andaccounted for as loans with fixed interest rates. The fair value of those long-term loans
is reasonably based on the present value of the total of principals, interests and net
cash flows of swap agreements discounted by the interest rates, estimated reasonably,
applicable to loans made under similar circumstances.
Bonds
The fair value of bonds is based on the market price.
Derivative transactions
Please refer to Note 17.

Type

Contract value

Estimated fair value

Unrecognized gain (loss)¥ (303)Foreign currency forward exchange contracts:
Selling:
U.S. dollars

Over-the-counter transactions¥ 6,392¥ (303)

Yen

48

(0)

(0)

Euro

832

(7)

(7)

RMB

174

1

1

Others83

6

6

U.S. dollars

2,067

(23)

(23)

Yen

1,651

(58)

(58)

Euro

42

(0)

(0)

1
¥11,2920¥ (385)0¥ (385)

Buying:OthersTotal

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13/08/19 13:24

Millions of yen

Millions of yen

2012
Type

Contract value

Estimated fair value

2012
Unrecognized gain (loss)

Foreign currency forward exchange contracts:

Method for hedge accounting

Selling:¥ 2,652¥ (86)¥ (86)

Yen

351

(2)

(2)

Estimated fair value

U.S. dollars

Euro

628

(34)

(34)

Euro

¥ 1,878¥ —¥ (68)

95

—

RMB

358

(30)

(30)

RMB

(5)

84

—

Others

0

(0)

(0)

(7)

7

—

(0)

1,085

—

40

146

—

6

8

—

0

4,000

—

(*)

10

—

(*)

162

—

(*)

721

—

(*)

108

—

(*)

(0)
¥ 8,310—¥ —(*)¥ (34)

Selling:

Deferral hedge accounting

Buying:Accounts receivable

Others
Buying:U.S. dollars

966

11

11

U.S. dollars

Yen

1,150

14

14

Euro

Euro

38

1

1

Others2¥ 6,1500¥ (126)0¥ (126)

Others
Total

Selling:
U.S. dollars

2013
Type

Contract value

Estimated fair value

Accounts payable

Foreign currency forward exchange contracts:

Thousands of U.S. dollars

Unrecognized gain (loss)

Allocation method for foreign currency
forward exchange contracts (Note 2(o))

Foreign currency forward exchange contracts:

Euro

Accounts receivable

Others
Buying:U.S. dollars

Selling:
U.S. dollars

Over-the-counter transactions

Major hedged item

Contract value(notional principal
amount over one year)

Foreign currency forward exchange contracts:

U.S. dollars

Over-the-counter transactions

Type of derivative transaction

Contract value(notional principal
amount)$ 67,964$(3,222)$(3,222)

Yen

510

(0)

(0)

Euro

8,846

(74)

(74)

RMB

1,850

11

11

Others

883

64

64

Euro

Accounts payable

Others
Total

Thousands of U.S. dollars

2013

Buying:U.S. dollars

21,978

(245)

(245)

Yen

17,554

(617)

(617)

Euro

447

(0)

(0)

Selling:11$120,0640$(4,094)0$(4,094)

Euro

Others
Total

Method for hedge accounting

Major hedged item

Contract value(notional principal
amount over one year)

Estimated fair value$ 2,350

$106

$(85)

3,530

—

(32)

32

—

0

255

—

21

468

—

0

128

—

0

138

—

(*)

11

—

(*)

510

—

(*)

0
$ 7,475

—
$106

(*)
$(96)

Foreign currency forward exchange contracts:
U.S. dollars
Deferral hedge accounting

Fair value is based on the prices obtained from financial institutions.

Type of derivative transaction

Contract value(notional principal
amount)Accounts receivable

Others
Buying:The open currency-related derivatives positions designated as hedging instruments at March 31, 2013 and 2012 are as follows:

U.S. dollars

Millions of yen

Euro

2013

Method for hedge accounting

Type of derivative transaction

Major hedged item

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

Foreign currency forward exchange contracts:
Estimated fair value

Selling:

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Euro
Deferral hedge accounting

Accounts receivable

Others

Allocation method for foreign currency
forward exchange contracts (Note 2(o))

Accounts payable

OthersOthers

¥ 10

¥ (8)

332

—

(3)

Euro

3

—

(0)

OthersTotal

U.S. dollars

Euro

¥ 221

Buying:Euro

Accounts payable

24

—

2

44

—

(0)

12

—

0

13

—

(*)

1

—

(*)

48

—

(*)

0
¥ 703

—
¥ 10

(*)
¥ (9)

Accounts receivable

Buying:Accounts payable

Fair value is based on the prices obtained from financial institutions.
(*): The fair value of foreign currency forward exchange contracts that qualify for the Allocation method is included in estimated fair value of accounts receivables and accounts
payables.

Foreign currency forward exchange contracts:
Selling:
Allocation method for foreign currency
forward exchange contracts (Note 2(o))

EuroOthers
Buying:Euro
OthersTotal

78

NAGASE & CO., LTD. Annual Report 2013

H̲nag2013E̲054-085.indd 78-79

Accounts receivable

Accounts payable

NAGASE & CO., LTD. Annual Report 201379

13/08/19 13:24

The open interest-related derivatives positions designated as hedging instruments at March 31, 2013 and 2012 are as follows.

21. AMOUNTS PER SHARE

Millions of yen

Amounts per share at March 31, 2013 and 2012 and for the years then ended are as follows:

2013

Method for hedge accounting

Swap rates applied to underlying debt

Type of derivative transaction

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

Hedged item

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

Long-term loans¥35,840¥26,580

(**)

2012

Swap rates applied to underlying debt

Type of derivative transaction

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

Hedged item

Contract value(notional principal
amount over one year)

Estimated fair value

Long-term loans¥42,300¥33,840

(**)

2013

Swap rates applied to underlying debt

Type of derivative transaction

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

Hedged item

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

2012

2013

Net income:Basic¥ 111.31

Diluted———Net assets

1,803.31

1,592.87

19.17

26.00

24.00

0.28

Cash dividends applicable to the year

Contract value(notional principal
amount)Thousands of U.S. dollars

Method for hedge accounting

U.S. dollars

2013

Millions of yen

Method for hedge accounting

Yen

Estimated fair value

Basic net income per share has been computed based on the net income available
for distribution to the shareholders of common stock and the weighted-average numberof shares of common stock outstanding during the year.
Diluted net income per share for the years ended March 31, 2013 and 2012 havenot been presented because no potentially dilutive shares of common stock were outstanding.
The amounts per share of net assets have been computed based on the number of

¥

66.69

shares of common stock outstanding at the year end.
Cash dividends per share represent the cash dividends proposed by the Board of
Directors as applicable to the respective years together with the interim cash dividends
paid.
The financial data used in the computation of basic net income per share for theyears ended March 31, 2013 and 2012 are summarized as follows:
Thousands of
U.S. dollars

Estimated fair value
Millions of yen

Long-term loans$381,074$282,616(**)(**): Since interest-rate swap agreements are accounted for as if the interest rates applied to the swaps had originally applied to the underlying long-term loans, their fair values
were included in estimated fair value of long-term loans.

2013

Net income
Adjusted net income available for distribution to shareholders of common stock
Weighted-average number of shares$ 1.182012¥14,182

2013¥8,570$150,792¥14,182¥8,570$150,792

127,406,786

128,514,527

18. RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in selling, general and administrative expenses and manufacturing costs for the years ended March 31, 2013 and 2012 totaled ¥4,610
million ($49,016 thousand) and ¥3,372 million, respectively.

22. CASH AND TIME DEPOSITS
A reconciliation of cash and time deposits in the accompanying consolidated balance sheets at March 31, 2013 and 2012 and cash and cash equivalents in the accompanying consolidated statements of cash flows for the years then ended is as follows:

19. LEASES(a) Finance leases
Finance lease transactions commencing on or before March 31, 2008 that do nottransfer ownership to the lessee are accounted for in the same manner as operatingleases. However, the related disclosures as of and for the years ended March 31, 2013

and 2012 were omitted because these amounts were immaterial.
(b) Operating leases
Future minimum lease payments subsequent to March 31, 2013 under operating leases are as follows:
Millions of yen

Thousands of
U.S. dollars

2014

¥288

$ 3,0622015 and thereafter
Total

655
¥943

6,964
$10,027

Year ending March 31,

Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

Cash and time deposits¥46,693¥29,184$ 496,470

Time deposits with maturities of more than three months
Cash and cash equivalents(876)¥45,816(667)¥28,517(9,314)$ 487,145

20. CONTINGENT LIABILITIESAt March 31, 2013, the Company and its consolidated subsidiaries were contingently
liable as guarantors of loans of customers and other in the aggregate amount of ¥809
million ($8,602 thousand) and as guarantors of housing loans of employees in theaggregate amount of ¥9 million ($96 thousand).

80

NAGASE & CO., LTD. Annual Report 2013

H̲nag2013E̲054-085.indd 80-81

In addition, at March 31, 2013, the Company and its consolidated subsidiaries had
contingent liabilities arising from notes discounted with banks and notes endorsed for a
total amount of ¥304 million ($3,232 thousand).

NAGASE & CO., LTD. Annual Report 201381

13/08/19 13:24

Under the new segmentation policy adopted by the Company, information by reportable segments for the year ended March 31, 2012 would have been as follows:

23. SEGMENT INFORMATION

Millions of yen(a) Overview of reportable segments
The reportable segments of the Company comprise those entities for which obtaining
separate financial reports is possible and that are subject to regular review by the
Board of Directors, which decides upon the distribution of management resources tosaid segments.
From April 2012, the Company has been executing on the “Change-S2014” threeyear business plan. To accomplish the goals set out in this plan, effective April 1, 2012,
the Company reorganized four business segments (Chemicals, Plastics, Electronics, andLife Sciences) away from product categories into segments to more fully concentrate thestrengths of the entire group, reflecting the respective positions of each business in thevalue chain, as well as with the most closely aligned industries. This realignment has
resulted in five segment categories: Functional Materials (located at the top of the value
chain), Advanced Materials & Processing (located in the next stage of the value chain),Electronics, Automotive & Energy, and Life & Healthcare (functioning over the relatedindustries). Reportable segments have also been reclassified to reflect this change.
The following describes the major products and services handled by each reportable segment.
The Functional Materials segment is engaged in the sales of materials for paints/
inks, urethane materials, plastic materials, plastic adhesives, industrial oil solutions,surfactants, fluorochemicals, encapsulant materials, silicone materials, precision electronics abrasives, and more for the paints/inks, resins, urethane foam, organic synthesis, surfactants, semiconductor, and HDD-related industries.
The Advanced Materials & Processing segment is engaged in the sales of dyestuffs,
dyes, functional dyes, information printing products, thermoplastic resins, thermosetting
resins, synthetic rubber, inorganic materials, plastics products, resins molding tools/
dies, and external inspection equipment, and more for the dye/additive, information

printing, textile processing, raw resin material, resin molding, and functional film andsheet industries.
The Electronics segment is engaged in the sales of pre-processing materials anddevices for LCD/semiconductors, materials for LCD panels, materials and devices forsemiconductor assembly, low-temperatures/vacuum equipment, high-function epoxy
resins, and more for the display, touch panel, LCD, semiconductor, electronic components, heavy electrical, and other industries.
The Automotive & Energy segment is engaged in sales of plastic products, thermoplastic resins, thermosetting resins, resins molding tools/dies, battery materials, solar
cell/secondary battery-related materials, and more for the automotive, automotive component, and energy industries.
The Life & Healthcare segment is engaged in the sales of pharmaceutical/agricultural chemicals and materials, research products, in vitro diagnostics, enzymes, foodadditives, additives for cosmetics, and feeds/fertilizers and radiation measurement services for the pharmaceutical, food, cosmetics, and other industries. In addition, thissegment sells cosmetics, health foods, and beauty foods directly to consumers.
(b) Calculation methods of net sales, income or loss, assets, and other items byreportable segments
Accounting methods for reportable segments are generally the same as those listed in
Note 2. Reportable segment income corresponds to operating income in the consolidated statements of income. Intersegment internal income and transfers are determinedbased on the values of transactions at actual market prices.
(c) Information on net sales, income or loss, assets and other items for eachreportable segment
Information by reportable segments for the year ended March 31, 2013 is as follows:
Millions of yen

2013
Reportable Segments
Functional
Materials

Sales to customers¥180,025
Intersegment sales and transfers
4,904
Net sales
184,929
Segment income¥ 5,428
Segment assets¥ 81,384
Other items
Depreciation and amortization otherthan amortization of goodwill
434
Amortization of goodwill—
Unamortized balance of goodwill—
Investments in affiliates accounted for by the equity method
1,781
Increase in tangible and intangible fixed assets
626

Advanced
Materials &Processing

Electronics

Automotive &EnergyLife &
Healthcare

Total¥214,546
2,182
216,728¥ 2,386¥108,696¥116,105733
116,838¥ 6,297¥ 61,760¥83,068
1,384
84,453¥ 763¥37,387¥71,685452
72,138¥ 3,986¥95,735¥665,431
9,657
675,088¥ 18,862¥384,964

NAGASE & CO., LTD. Annual Report 2013

H̲nag2013E̲054-085.indd 82-83

¥ 841
5,523
6,364
¥ 265
¥6,489

Total¥666,272
15,180681,453¥ 19,127¥391,453

Corporate

Adjustments Consolidated¥— ¥— ¥666,272— (15,180)—— (15,180) 666,272¥ (3,672) ¥ 123 ¥ 15,578¥127,891 ¥(32,597) ¥486,747

537
—
—

1,508
96
2,046

250
—
—

2,025
1,516
28,6794,756
1,612
30,726

202
—
—

4,959
1,612
30,726

2,486
—
—

—
—
—

7,445
1,612
30,726

1,545

56

1,613

1,856

6,854

1,793

8,648

—

—

8,648

853

2,784

92

As described in Note 3(a), effective April 1, 2012, the Company and its domestic
consolidated subsidiaries have changed its depreciation method from principally the
declining-balance method to the straight-line method. As a result of this change, segment income increased in the “Functional Materials” segment, the “Advanced Materials& Processing” segment, the “Electronics” segment, the “Automotive & Energy” segment, the “Life & Healthcare” segment, and the “corporate” segment by ¥218 million($2,318 thousand), ¥215 million ($2,286 thousand), ¥778 million ($8,272 thousand),¥170 million ($1,808 thousand), ¥168 million ($1,786 thousand), and ¥344 million($3,658 thousand), respectively, from the corresponding amounts which would havebeen recorded under the previous depreciation method.

82

Others2012
Reportable Segments
Functional
Materials

Sales to customers¥177,126
Intersegment sales and transfers
5,449
Net sales
182,576
Segment income¥ 6,285
Segment assets¥ 81,267
Other items
Depreciation and amortization otherthan amortization of goodwill
599
Amortization of goodwill
1
Unamortized balance of goodwill—
Investments in affiliates accounted for by the equity method
367
Increase in tangible and intangible fixed assets
1,107

Advanced
Materials &Processing

Electronics

Automotive &EnergyLife &
Healthcare

Total¥217,929
2,224
220,154¥ 2,979¥105,771¥110,495
710
111,206¥ 6,019¥ 52,834¥76,113
1,967
78,080¥ 936¥34,795¥ 49,170
629
49,800¥706¥102,317¥630,835
10,982641,818¥ 16,927¥376,985¥1,018
5,369
6,388
¥ 141
¥6,702¥631,854
16,352648,207¥ 17,068¥383,688

693
—
—

1,927
23
1,884

530
—
—

813
126
30,195

4,564
151
32,079

343
—
—

4,908
151
32,079

2,363
—
—

—
—
—

7,272
151
32,079

233

103

726

1,598

3,028

1,725

4,753

—

—

4,753

225

4,079

1,515

1,438

8,366

78

8,445

4,736

—

13,182Adjustments

Consolidated

Others

Total

Corporate

Adjustments Consolidated

¥

— ¥
—
— (16,352)— (16,352)¥ (4,477) ¥ 835¥ 95,917 ¥(28,763)¥631,854—
631,854¥ 13,427¥450,842

Thousands of U.S. dollars

2013
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics

Automotive &EnergyLife &
Healthcare

Others

Total

Sales to customers$1,914,141 $2,281,191 $1,234,503 $883,232 $ 762,201 $7,075,290
Intersegment sales and transfers
52,142
23,2007,794
14,716
4,806
102,679
Net sales
1,966,284 2,304,391 1,242,297 897,959
767,018 7,177,969
Segment income$ 57,714 $ 25,369 $ 66,954 $ 8,113 $ 42,382 $ 200,553
Segment assets$ 865,327 $1,155,726 $ 656,672 $397,523 $1,017,916 $4,093,184
Other items
Depreciation and amortization otherthan amortization of goodwill
4,615
5,710
16,034
2,658
21,531
50,569Amortization of goodwill
—
—
1,021
—
16,11917,140
Unamortized balance of goodwill——
21,754—
304,934
326,699
Investments in affiliates accounted for by the equity method
18,937
16,427595
17,15019,73472,876
Increase in tangible and intangible fixed assets
6,656
9,070
29,601
97832,19678,522

Total

Corporate$ 8,942 $7,084,232 $— $— $7,084,232
58,724
161,404— (161,404)—
67,666 7,245,646— (161,404) 7,084,232$ 2,818 $ 203,371 $ (39,043) $ 1,308 $ 165,635$68,995 $4,162,180 $1,359,819 $(346,592) $5,175,407

2,148
—
—

52,727
17,140326,699

26,433—————

79,16017,140326,699

19,064

91,951——

91,951

4,636

83,15841,148—124,306(d) Geographical information
Net sales for the years ended March 31, 2013 and 2012 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

Japan

¥361,971¥366,369$ 3,848,708

11,691

China

133,076

122,501

1,414,949

As described in Note 3(b), effective April 1, 2012, the Company and certain consolidated subsidiaries have changed the useful lives of certain items of property, plant andequipment. As a result of this change, segment income decreased in the “Electronics”
segment and the “Automotive & Energy” segment by ¥86 million ($914 thousand) and¥2 million ($21 thousand), respectively, from the corresponding amounts which would
have been recorded under the previous estimated useful lives.

Other
Total

171,224¥666,272

142,983¥631,854

1,820,564$ 7,084,232

3,028

7,385

436

7,821

3,870

—

Net sales are classified by country or region based on locations of customers.
Property, plant and equipment as of March 31, 2013 and 2012 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

Japan

¥54,619¥53,569$ 580,744

Other
Total

6,347
¥60,967

3,158¥56,727

67,485$ 648,240

NAGASE & CO., LTD. Annual Report 201383

13/08/19 13:24

Independent Auditor’s Report(e) Information on loss on impairment of fixed assets per reportable segments
Loss on impairment of fixed assets for the years ended March 31, 2013 and 2012 is as follows:
Millions of yen

2013
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics—¥1,359¥326

Loss on impairment of fixed assets

Automotive &Life & Healthcare
Energy

—

Total

¥211

¥1,896

OthersEliminations or
corporate

Total

—

—

¥1,896

OthersEliminations or
corporate

Total

¥82

—

¥455

OthersEliminations or
corporate

Total

—

—

$20,159

Millions of yen

2012
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics

—

—

¥319

Loss on impairment of fixed assets

Automotive &Life & Healthcare
Energy

—

Total

¥54

¥373

Thousands of U.S. dollars

2013
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics—$14,450$3,466

Loss on impairment of fixed assets

Automotive &Life & Healthcare
Energy—$2,243

Total$20,159

24. RELATED PARTY TRANSACTION
On August 10, 2012, the Company acquired treasury stock from Mr. Reiji Nagase, a representative director of the Company, and his relatives Ms. Reiko Nagase and Ms. Yoshiko
Umezono as determined by a resolution at the Board of Directors’ meeting held on August 9, 2012 through the off-auction own share repurchase trading system (ToSTNeT-3) on theTokyo Stock Exchange at ¥913 ($9.71) per share, the closing price on August 9, 2012.
The Company and its subsidiary’s transactions with these related parties for the year ended March 31, 2013 were as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2013

With Mr. Reiji Nagase -Acquisition of treasury stock¥ 584$ 6,209

With Ms. Reiko Nagase - Acquisition of treasury stock

442

4,700

With Ms. Yoshiko Umezono -Acquisition of treasury stock

456

4,848

Transactions:25. EFFECT OF BANK HOLIDAYAs the balance sheet date fell on a bank holiday, the following notes receivable and notes payable with due dates of March 31, 2013 and 2012 were included in the respective balances and were settled on the next business day.
Thousands of
U.S. dollars

Millions of yen

Notes receivable
Notes payable

2013

2012

2013

¥ 2,146579¥ 2,158579$ 22,818
6,156

26. SUBSEQUENT EVENT
The following distribution of retained earnings of the Company, which has not been reflected in the accompanying consolidated financial statements for the year ended March 31,
2013, was approved at a meeting of the shareholders held on June 26, 2013:

Cash dividends (¥13.0 = U.S.$0.14 per share)

84

NAGASE & CO., LTD. Annual Report 2013

H̲nag2013E̲054-085.indd 84-85

Millions of yen

Thousands of
U.S. dollars¥1,647$17,512NAGASE & CO., LTD. Annual Report 201385

13/08/19 13:24

Consolidated Subsidiaries, Affiliates and Offices● Consolidated subsidiary ● Company accounted for under the equity method
Category

Company name

Description of business

Location

Year of establishment

Equity ownership (%)(* indicates indirect
investment)Japan

Category

Company name

Description of business

Location

Year of establishment

Equity ownership (%)(* indicates indirect
investment)

Sales

Manufacturing and Processing●

Nagase Chemical Co., Ltd.

Sale of dyestuffs, industrial chemicals, chemicals for manufacturing paper, plastics andmachineryTokyo Pref.

1995

100.0

●

Nagase Plastics Co., Ltd.

Sale of raw materials for plastics and plastic products

Osaka Pref.

1975

100.0

●

Hoei Sangyo Co., Ltd.

Sale of film materials, magnetic products, information imaging materials, etc.

Tokyo Pref.

1974

80.5

●

Nagase Beauty Care Co., Ltd.

Sale of cosmetics and health foods

Tokyo Pref.

1991

100.0

●

Nagase ChemteX Corporation

Research, manufacture, and sale of enzymes, fermented products, pharmaceutical intermediates, disinfecting agents, functional polymers, epichlorohydrin derivatives, electronics
materials, etc.

●

Hayashibara Co., Ltd.

Development, manufacture, and sale of food raw materials, pharmaceutical raw materials,
cosmetics raw materials, health foods raw materials, functional dyes, etc.

Okayama Pref.

1932

100.0

●

Nagase Medicals Co., Ltd.

Manufacture and sale of pharmaceuticals, animal drugs, health foods, and cosmetics

Hyogo Pref.

1972

100.0

●

Setsunan Kasei Co., Ltd.

Coloring and sale of plastics

Osaka Pref.

1966

100.0

●

Nishinihon Nagase Co., Ltd.

Sale of dyestuffs, auxiliaries, industrial chemicals and plastics

Fukuoka Pref.

1969

100.0

●

Totaku Industries, Inc.

Manufacture and sale of plastic products

Osaka Pref.

1952

77.1

●

Nagase Elex Co., Ltd.

Sale of raw materials for plastics and plastic productsTokyo Pref.

1979

100.0

●

Kotobuki Kasei Corp.

Molding, processing and sale of plastic products

Tochigi Pref.

1972

100.0 (42.5)●

Nagase Abrasive Materials Co., Ltd.

Sale of abrasives, inorganic materials and related equipment

Osaka Pref.

1955

100.0

●

Nagase Techno-Engineering Co., Ltd.

Manufacture, sale and maintenance of low-temperature vacuum equipment, systems forchemical supply management and recycling processes, inspection systems, and the
peripheral equipment for each of these.

Tokyo Pref.

1989

100.0

●

Nagase Sanbio Co., Ltd.

Sale of enzymes and additives for food and feed

Tokyo Pref.

1987

100.0 (13.0)

Nagase Chemspec Co., Ltd.

Sale and technological servicing of chemicals

Tokyo Pref.

1976

100.0

NCK Ltd.

Small-lot repackaging of industrial-use resins and curing agents, etc., filter cleaning, management of special containers●●

Hyogo Pref.

1985

100.0 (100.0)●

Nagase Tool Matex Co., Ltd.

Sale of auto models, test production materials, and carbon fiber composites

Tokyo Pref.

1965

100.0

●

Fukui Yamada Chemical Co., Ltd.

Manufacture of color former

Fukui Pref.

1985

90.0
●

NAGASE-OG COLORS & CHEMICALS CO., LTD.

Purchasing and information services related to dyes, industrial chemicals, etc.

Osaka Pref.

1957

50.0

●

Nagase Filters Co., Ltd.

Planning, production, processing, quality testing and sale of metal filters

Osaka Pref.

2006

100.0
●

OnFine Co., Ltd.

Manufacture and sale of electronics and fluorine and polysilane variants for use in materials

Osaka Pref.

2002

50.0 (25.0)

Manufacture, sale, import/export, management consulting, and investment in pharmaceuticals and non-pharmaceuticals

Shizuoka Pref.

2001

20.0

Osaka Pref.

1970

100.0

●

CAPTEX Co., Ltd.

Manufacture and development of battery power source controllers, battery power sources
and power source peripheral equipment

Aichi Pref.

2004

100.0

Nihon UNF Co., Ltd.

●Sun Delta Corporation

Development of applications for synthetic plastic products and manufacture and sale ofprocessed productsTokyo Pref.

2005

50.0

GREATER CHINA AND KOREA●

Honshu Rheem Co., Ltd.

Manufacture and sale of fiber drums, import and sale of food processing machines andmaterials

Kanagawa Pref.

1968

40.0

Manufacturing and Processing●

Toyo Beauty Supply Corp.

Contract manufacture of cosmetics and health foods

Tokyo Pref.

1964

40.0

●

eX. Grade Co., Ltd.

Development, manufacture and sale of components for electronic equipment

Osaka Pref.

2003

30.4

●

SN Tech Corporation

Manufacture of developer, recycling businessOsaka Pref.

2008

40.0 (5.0)

Kawai Hiryo Corporation

Manufacture and sale of organic fertilizers and agricultural chemicals and materials

Shizuoka Pref.

1981

100.0 (33.3)

Nihon Bio Fertilizer Co., Ltd.

Manufacture and sale of organic fertilizer

Shizuoka Pref.

1986

100.0 (100.0)

Uma Yasai Farm Corporation

Processing and sale of agricultural and livestock goods

Shizuoka Pref.

2008

90.0 (90.0)

Digital Wire Technology Co., Ltd.

Design, manufacture, and quality management of fabless semiconductors

Tokyo Pref.

2012

66.0

Servicing●

Nagase Logistics Co., Ltd.

Warehousing and distribution

Hyogo Pref.

1982

100.0

●

Hoei Techno Service Co., Ltd.

Duplication and processing of computer software, warehousing and distribution

Tokyo Pref.

1991

100.0 (100.0)●

Nagase General Service Co., Ltd.

Sale and lease of various goods, real estate administration

Tokyo Pref.

1983

100.0

●

Nagase Information Development, Ltd.

Software development and maintenanceTokyo Pref.

1987

100.0

●

Nagase Trade Management Co., Ltd.

Business agent for foreign trade documentation

Tokyo Pref.

1996

100.0

●

Nippon Vopac Co., Ltd.

Warehousing, motor truck carrier business and freight transportation services

Tokyo Pref.

1966

20.0

●

Nagase Landauer, Ltd.

Radiation measuring services

Ibaraki Pref.

1974

50.0

Nagase Logistics Support Co., Ltd.

An exclusive stevedore for Nagase Logistics Co., Ltd.

Hyogo Pref.

1954

100.0 (100.0)

Choko Co., Ltd.

Insurance agency

Osaka Pref.

1971

44.6

TAGCyx Biotechnologies

High-function materials using artificial bases, reagent kits, diagnostic products, pharmaceuticals

Kanagawa Pref.

2007

36.5

●

Nagase ChemteX (Wuxi) Corp.

Plastic manufacture and sale of adhesives and high-tech chemical products for electronics, technology services

China

2002

100.0 (50.0)●

Nagase International Electronics Ltd.

Process and assembly of films in South China

China

2004

100.0 (20.0)●

Totaku Industries Suzhou Co., Ltd.

Manufacture and sale of plastic products

China

2005

100.0 (100.0)●

Nagase Precision Plastics Shanghai Co., Ltd.

Plastic tray molding

China

2001

99.4 (3.2)●

Nagase Electronics Technology Co., Ltd.

Chemical etching of liquid crystal glass panel units

Taiwan2005

71.0 (11.0)●

Nagase Engineering Service Korea Co., Ltd.

Equipment maintenance service and engineering

Korea

1997

100.0 (100.0)●

Nagase Electronics Technology (Xiamen) Co., Ltd. Chemical etching of liquid crystal glass panel units

China

2010

100.0 (100.0)●

Guangzhou Kurabo Chemicals Co., Ltd.

Manufacture of molded urethane products for automobiles

China

2001

20.0

●

Toyo Quality One (Guangzhou) Co., Ltd.

Research and development, manufacturing, processing, sale, technology consulting, andafter-sale service for major automotive parts

China

2004

20.0

●

Toyo Quality One Ningbo Co., Ltd.

Manufacture and sale of polyurethane foam

China

1993

24.2

●

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

Development, manufacture, and sale of precision press products, spring, and standard
molds

China

2005

30.0

Light Chemical (Changzhou) Co., Ltd.

Research, development, and afterservice for high-function composites and intermediates;
sales of internally developed products

China

2011

33.4

China

2012

100.0 (100.0)

Nagase International Electronics (Shenzhen) Ltd. Film processing and assemblyServicing86

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Nagase Marketing and Service (Shenzhen) Ltd.

Contract customer services

China

2006

100.0 (100.0)

Nagase CMS Technology (Shanghai) Co., Ltd.

Construction and maintenance of chemical supply and management equipment

China

2006

100.0 (60.0)

NW Consultant Service (Shenzhen) Ltd.

Print quality management consultant

China

2008

60.0 (30.0)

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

Management of Nagase Group operations and promotion of business strategies related toGreater China

China

2011

100.0

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Category

Company name

Description of business

Location

Year of establishment

Equity ownership (%)(* indicates indirect
investment)●

Nagase (Hong Kong) Ltd.

Import/export, domestic sales, marketing

China

1971

100.0

●

Shanghai Hua Chang Trading Co., Ltd.

Sale of resins and related products

China

1998

70.0 (53.8)

Suzhou Branch Office / Ningbo Branch Office

China

Chengdu Branch Office / Chongqing Branch Office

China

Shanghai Nagase Trading Co., Ltd.

Import/export, domestic sales, marketing

China

1997

100.0

●

Nagase Wahlee Plastics Corp.

Sale of plastics and related products

Taiwan1990

60.0 (5.0)

Taichung Office / Taipei OfficeTaiwanGangshan OfficeTaiwan●NWP (B.V.I.) Corporation

Vehicle for investments into China from Taiwan●

Guangzhou Nagase Trading Ltd.

Import/export, domestic sales, marketing2007

100.0 (100.0)

China

2002

100.0 (100.0)

China

Chengdu Branch Office /Changsha Branch Office

China

Zhengzhou Branch Office

China

Nagase (Taiwan) Co., Ltd.

Import/export, domestic sales, marketing

Xiamen Representative Office●

British Virgin Islands

Wuhan Branch Office / Chongqing Branch Office

Tianjin Nagase International Trading Co., Ltd.

TaiwanChina

Dalian Branch Office/ Qingdao Branch Office

China

Changchun Branch OfficeChina

NWP International Trading (Shenzhen) Co., Ltd.

1988

Description of business

Sale of plastic products in South China

China

●

Equity ownership (%)(* indicates indirect
investment)

Location

Year of establishment

Thailand

1989

100.0

Import/export, domestic sales, marketing

1975

100.0

1981

100.0

Singapore

Australia Branch

Australia

Bangladesh Liaison Office

Bangladesh

Nagase (Malaysia) Sdn. Bhd.

Import/export, domestic sales, marketing

Malaysia

Johor Bahru Office

Malaysia

Penang Office

Malaysia
Import/export, domestic sales, marketingIndonesia

1998

100.0 (10.0)●

Nagase Philippines Corp.

Import/export, domestic sales, marketing

Philippines

1997

100.0

●

Nagase Philippines International Services Corp.

Domestic sales, import/export

Philippines

2005

100.0

●

Nagase Vietnam Co., Ltd.

Import/export, domestic sales, marketing

Vietnam

2008

100.0

2006

100.0 (0.1)

2000

49.0 (49.0)

Ho Chi Minh City Branch
Nagase India Private Ltd.

Vietnam
Import/export, domestic sales, marketing

North India Branch (Gurgaon)

100.0

100.0 (100.0)

Nagase Singapore (Pte) Ltd.

Thailand

P.T. Nagase Impor-Ekspor Indonesia

-

2004

Import/export, domestic sales, marketing

●

●

2003

Nagase (Thailand) Co., Ltd.
Eastern Office

100.0

China
Import/export, domestic sales, marketing

●

●

●

●

Company name

Sales

Sales

●

Category

India
India

Nagase (Siam) Co., Ltd.

Contract services for Group companies

Nagase & Co., Ltd. Dubai Branch

BranchThailand
United Arab Emirates

AMERICAS

Dongguan Branch Office

China

Manufacturing and Processing

Guangzhou Branch Office

China

●

Engineered Materials Systems Inc.

Research and development, manufacture, and sale of materials for commercial adhesives, conductive adhesives

America

1993

100.0 (50.0)●

Nagase Korea Corp.

General import/export trading, retailing/wholeselling, import/export trade agency

Korea

2001

100.0

●

Pac Tech USA-Packaging Technologies Inc.

Semiconductor wafer bumping, manufacture and sale of semiconductor manufacturing
equipment

America

2001

100.0 (100.0)●

Xiamen Nagase International Trading Co., Ltd.

Import/export, domestic sales, marketing

China

2011

100.0 (100.0)●

Sofix Corp.

Manufacture and sale of color formers

America

1990

100.0

Sekisui Plastics (Hong Kong) Trading Co., Ltd.

Sale of import components, sale of molded products

China

2011

26.0

●

KN Platech America Corporation

Manufacture and sale of blow-formed plastic components and products

America

2010

50.0

●

TIMLE S.A. DE C.V.

Manufacture and sale of automotive laminated frames sale of automotive urethane
foam

Mexico2010

15.0

TQ-1 de MEXICO S.A. DE C.V.

Manufacture and sale of urethane for automotive seat pads

Mexico2012

25.0

Import/export, domestic sales, marketing

America

1971

100.0

ASEAN AND THE MIDDLE EAST
Manufacturing and Processing●

Nagase Finechem Singapore (Pte) Ltd.

Manufacture and recycling of chemical agents for liquid crystals

Singapore2001

100.0 (40.0)●

Pac Tech Asia Sdn. Bhd.

Manufacture and sale of semiconductor manufacturing equipment, semiconductor wafer
bumping contract manufacturing

Malaysia

2006

100.0 (100.0)●

Sanko Gosei Technology (Thailand) Ltd.

Manufacture of automobile components

Thailand

1994

40.0

●

Automotive Mold Technology Co., Ltd.

Manufacture of automotive molds and dies

Thailand

2000

32.1

●

Nafuko Co., Ltd.

Manufacture, import/export and sale of packaging materials and related equipment

Thailand1996

28.0 (28.0)●

Dainichi Color Vietnam Co., Ltd.

Manufacture and sale of color masterbatch blend for plastic

Vietnam

2005

40.0

●

P.T. Toyo Quality One Indonesia

Manufacture of flame lamination products

Indonesia

2008

25.0

●

Majend Makcs Co., Ltd.

Plastic film processing

Thailand2002

30.0 (30.0)

ZCL Chemicals Ltd.

Contract synthesis and process development

India

1991

25.0

PT. TUNE Manufacturing Indonesia

Painting and sale of exterior auto parts

Indonesia

2013

35.0 (25.0)

Sales
●

●

Nagase America Corp.
Michigan Branch

America

California Branch

America

Nagase Enterprise Mexico S.A. de C.V.

Import/export sales, intermediate trade, market development, information collection

Mexico2010

100.0 (100.0)

NAGASE DO BRASIL REPRESENTAÇÃO
COMERCIAL LTDA.

Survey biomedical businesses in Brazil and South America; review other development
businesses in the region

Brazil2012

100.0 (0.1)

Semiconductor wafer bumping, manufacture and sale of semiconductor manufacturing
equipment

Germany

1995

73.5

Import/export, domestic sales, marketing

Germany

1980

100.0

Europe88

Manufacturing and Processing

NAGASE & CO., LTD. Annual Report 2013長瀬13̲E̲本文̲PDF用.indd 88-89●

Pac Tech-Packaging Technologies GmbH

Sales
●

Nagase (Europa) GmbH
Hungary Representative Office

Hungary

London Branch

England

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Corporate Information

Investor Information(As of March 31, 2013)

About NAGASE & CO., LTD.
Company NameNAGASE & CO., LTD.

FoundedJune 18, 1832

Establishment

December 9, 1917

Capital(As of March 31, 2013)■ Stock Exchange Listings|

Tokyo, Osaka (First Sections)■ Code|8012■ Authorized Number of Shares|

346,980,000
138,408,285

Issued Number of Shares■ Number of Shareholders|■ Composition of Shareholders

0.64 %

8.45 %

6,921■ Principal Shareholders¥9,699 million

14.35 %
Number ofof Total Shares
Shares Held Percentage
Outstanding (%)(thousands)

Name

Employees

972 (Consolidated: 5,897)

Main Business

Import/export and domestic sales of dyestuffs, chemicals, plastics, machinery, electronics materials, cosmetics and health foods

Main Banks

Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Corporate Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited

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

Nagase Application Workshop : 2-4-45, Higashitsukaguchicho, Amagasaki City, 661-0011 Tel: (81) 6-4961-6730• Nagase founded in Kyoto as a dyestuffs trading concern• Sales of dyestuffs, starches and funori seaweed1893• Established Osaka branch office

1898• Head office moved to Osaka

1900• Established business ties with Basel Chemical Co. of Switzerland (now BASF)

1911• Established Tokyo branch office

1917• Inaugurated as Nagase Shoten Company with capital of ¥3 million

1923• Established business ties with Eastman Kodak Co. of the United States

1930• Concluded exclusive distributorship agreements with Union Carbide and Carbon Corp. of
the United States

10,005

7.23

6,574
5,776
4,891
4,486
4,377
4,139
3,593

4.75
4.17
3.53
3.24
3.16
2.99
2.60

3,582

2.59

2,951

2.13

19.21%
23.52 %

Financial Institutions (49) ........... 46,827,964 shares
Foreign Investors (182) .............. 32,548,632 shares
Individuals and Others (6,444) ... 26,594,457 shares
Other Investors (212) ................. 19,862,340 shares
Treasury Stock (1)...................... 11,693,809 shares
Securities
Companies (33) ........
................................................
881,083 shares

Notes: 1. In addition to the above, the Company holds 11,693 thousand shares of treasury stock (8.45%) without voting rights.
2. Shares owned by Hiroshi Nagase include shares nominally owned by NAGASE & CO., LTD.

History
1832

NORTHERN TRUST CO. (AVFC) SUB A/C AMERICAN
CLIENTS
The Master Trust Bank of Japan, Ltd. (Trust Account)
Sumitomo Mitsui Trust Bank, Limited
Japan Trustee Services Bank, Ltd. (Trust Account)
Nippon Life Insurance Company
Sumitomo Mitsui Banking Corporation
Hiroshi Nagase
Reiko Nagase
NORTHERN TRUST CO. AVFC RE U.S. TAX EXEMPTEDPENSION FUNDS
Mitsui Sumitomo Insurance Co., Ltd.

33.83 %

1990

• Established Sofix Corp.
• Set up the Nagase R&D Center in Kobe
• Established joint venture Nagase Wahlee Plastics Corp. (Taiwan)■ Monthly Share Price Range of Nagase• Established Nagase Philippines Corp.
• Established Shanghai Nagase Trading Co., Ltd.
• Established Nagase Engineering Service Korea Co., Ltd.

(¥)

TOPIX

1,800

3,000

1998

• Established P.T. Nagase Impor-Ekspor Indonesia• Established Shanghai Hua Chang Trading Co., Ltd.

1,500

2,500

2001

• Closed the Seoul branch office and established Nagase Korea Corp.
• Established Nagase FineChem Singapore (Pte) Ltd.
• Established Nagase Precision Plastics Shanghai Co., Ltd.

1,200

2,000

2002

• Established Guangzhou Nagase Trading Ltd.
• Established a representative office in Hanoi, Vietnam• Established Nagase ChemteX (Wuxi) Corp.

900

1,500

600

1,000

2004

• Established Nagase International Electronics Ltd.
• Established NWP International Trading (Shenzhen) Co., Ltd.

2005

• Established Totaku Industries Suzhou Co., Ltd.
• Established Nagase Electronics Technology Co., Ltd.
• Established Nagase Philippines International Services Corp.

1997

Share Price
TOPIX

1940

• Established Nagoya branch office

1943• Company name changed to NAGASE & CO., LTD.

1964

• Listed Company shares on the Osaka Securities Exchange

1968• Concluded an exclusive distributorship agreement with General Electric Co. of theUnited States

1970• Established Nagase-CIBA Ltd. (now Nagase ChemteX Corp.) jointly with Ciba-Geigy Ltd.
• Listed Company shares on the Tokyo Stock Exchange

1971• Established Nagase (Hong Kong) Ltd. and Nagase America Corp.
• Established Engineering Plastics, Ltd. jointly with General Electric Co.

1974• Established Nagase Landauer Ltd. jointly with Technical Operations, Inc. of the United States

1975• Established Nagase Singapore (Pte) Ltd.

1980

• Established Nagase (Europa) GmbH2009

• Opened a branch office in Dubai

1982• Established Nagase (Malaysia ) Sdn. Bhd.

2012

1985

• Established Seoul branch office• Acquisition of Engineered Materials Systems Inc. stock (consolidated subsidiary),
U.S.-based maker of formulated epoxy resins• Acquisition of Hayashibara Co., Ltd. stock (Okayama, Japan; consolidated subsidiary)

1988• Established Nagase (Taiwan) Co., Ltd.

9,000

1989

• 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

6,000

2006

• Acquired stock of semiconductor manufacturing equipment maker Pac Tech- Packaging
Technologies GmbH• Established Nagase India Private Ltd.

2007

• Established Nagase Application Workshop

2008• Established Sakai Sales Office• Established Nagase Vietnam Co., Ltd.

500

300
0
April 2003

April 2004

April 2005

April 2006

April 2007

April 2008

April 2009

April 2010

April 2011

April 2012

April 2013

April 2005

April 2006

April 2007

April 2008

April 2009

April 2010

April 2011

April 2012

April 2013

■ Monthly Trading Volume(Thousands of Shares)

15,00012,0003,000

0April 2003

90

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April 2004

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