Integrated Report 2 0 1 7Year ended March 31, 2017

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, Aichi 460-8560, Japan
Tel: (81) 52-963-5615

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

Printed in Japan

Contents
About theNAGASE Group

Integrated Report 2017

2 NAGASE by the Numbers
4 Management Philosophy and
the NAGASE Vision

6 NAGASE Group Businesses
8 The NAGASE Group:

Blending Tradition and Innovation

10 How We Create Corporate Value
12 Valuable Products and Services
14 13-Year Financial Highlights
16 Annual Topics
Leading Us
to the Future

t
i
g
n
i
g
Brin
r
e
h
t
e
g
all toPerformanceby Segment

Unique Products

The NAGASE Group Slogan is “Bringing it all together.” This slogan
inspires us to realize a sustainable world where people live withpeace of mind, each of us embodies our value proposition, Identify,
Develop and Expand through daily activities.
This integrated report is our opportunity to communicate to ourstakeholders, providing financial and non-financial information
related to the NAGASE Group as a business organization, our issues,and our mid- and long-term strategies in a single, integrated
publication.
We intend to continue to evolve this annual report as an effective
tool to communicate our activities for improving the NAGASE Group
corporate value over the medium and long term.
In creating this report, we referred to version 1.0 of the International Integrated Reporting Framework issued in December 2013 by
the International Integrated Reporting Council.

32 At a Glance
34 Functional Materials
36 Advanced Materials & Processing
38 Electronics
40 Automotive & Energy
42 Life & Healthcare
44 Global Network
46 Regional Overview
50 Main Manufacturing and Processing
Functions

54 Major R&D Functions
Critical Initiatives
for Sustainable
GrowthFinancial andCorporate
Information

About this Report

18 Message from the President
24 Our Board
26 Corporate Governance

56 Human Rights, Employment Practices
59 Environment
61 Fair Business Practices
64 For Consumer Safety and Security
65 Community Involvement and Development
66 Financial Foundation Supporting
Business Growth

69 Management’s Discussion andAnalysis of Operations and Finances

76 Consolidated Financial Statements
102 Consolidated Subsidiaries, Affiliates and

y
f
i
nt p
e
d elo
oi
t
v nd
d
e
ee
d
p
o
a
S
p
dt
x
e
e
e
Sp
to
d
ee
p
S

Offices

106 Corporate Information
107 Investor Information

Forward-Looking Statements
Non-historic information contained in this integrated report related to NAGASE & CO., LTD. and
NAGASE Group revenue and profit plans, strategies, presumptions, etc., includes forward-looking
statements that entail elements of risk and uncertainty. Actual earnings may differ significantly fromforecasts due to changes in these elements. 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.

NAGASE & CO., LTD.

Integrated Report 2017

1

NAGASE by the Numbers
About the NAGASE Group

Manufacturing Companies(as of March 31, 2017)

other useful information.

2032
See here for more.

Employees

We launched our ACE-2020 mid-term
management plan in 2016.
By the fiscal year ending March 2021,
we will normalize ¥30 billion
or more in consolidated
operating income.

Consolidated net sales of ¥722.3 billion
for the fiscal year ending March 2017.
Strong financial underpinning;issuer rating of A.
Investors

11 Countries
45 Companies
Practical answers
to customer needs
through research
and manufacturingfunctions.
P.50–55
Business Partners

Performance by Segment

Establishing the NAGASE
brand heading toward 200 years
in business.

or more¥722.3 billion

Leading Us to the Future¥30 billion

NAGASE trends and

P.4–5
Management

48.9%(as of March 31, 2017)

6,241

A diverse employee base engaged
in NAGASE business worldwide.

Unique Products

Network spanning
22 countries and 99 companies;
overseas sales account for 48.9%
of consolidated net sales.

Consolidated Employees(FYE March 2017)

P.44–49

Employees
Critical Initiatives for Sustainable Growth

CHECK !
Overseas Employees

Financial and Corporate Information

2

NAGASE & CO., LTD.

Integrated Report 2017

NAGASE & CO., LTD.

Integrated Report 20173

Management Philosophy and the NAGASE Vision
About the NAGASE Group
Performance by Segment

A sense of values shared
NAGASEグループの理念体系
within the NAGASE Group

■

■

■

■

NAGASENAGASEManagement
経営理念
Philosophy

常に独創的な挑戦者であれ
Always be a creative challenger.

常にグループ力の活用を考えよ
Always use the power of the NAGASE Group.

Alwaysthink globally andルに行動せよ
act locally.
常にグ
ローバルに考えローカ

Always thinksystematicallyact speedily.
常にシステマティッ
クに考えスピーデandィーに行動せよ■ 半歩先を見て能動的に提案する力（半歩先見）

Value
提供価値
Proposition

NAGASEビジョ
Visionン
NAGASE

常に顧客指向であれ
Always be customer-oriented.

“­The NAGASE Way”ウェイ
NAGASE
Action Principles Maintaining the highest standards of integrity for almost 200 years■
誠実に正道を歩んできた（誠実正道）
200 年近くの歴史
Workingwith partners to enable
new businesses ‌■
Driving
new technologies
with knowledge
and experience
パートナーとともにビジネスを創造する力（協働基盤） ‌■
Stayinga step ahead of the技術の目利き力
market to actively
off­er solutions
技術に対する深い理解、（技術発想）

Vision
実現したい
for社the会 Future ■
Wビジネスの種を
e “Identify,
Develop andExpand”
new businesses
「見つけ、
育み、
拡げる」

1.1.
IdentifyWe
discover untapped business opportunities
見つけ:：
誰も気づいていない機会を発見する
2.2.
Develop:We
convert opportunities into customer value
育み ：新たな価値を生み出すビジネスへと成長させる
3.3.
Expand:‌We
deliver solutions to multiple fields and regions
拡げる：様々な分野・地域へビジネスを展開する ■
W人々が快適に暮らせるe will contribute to a sustainable
world where people live with peace of mind
安心・安全で温もりある社会

Spe Speededtt
Spe Speo ide o ide
eded nt nt
to d to d ify ify
Spe Spe eede vel evel
to e d to e
op op

Financial and Corporate Information■

Strengths/
Characteristics
強み／ 特 長Critical Initiatives for Sustainable Growth

社員の一人ひとりが 、日々の活動で
「見つけ、
育み、
To
realize a sustainable
world where
people live
with
peace
of
mind,
each
of
us
embodies
ourvalue
拡げる」を体現することにより、「人々が快適に暮らせる
proposition, Identify, Develop and Expand through
安心・安全で温もdaily
activities. りある社会」の実現に貢献する。

The
NAGASE
ビジョンVision
NAGASE
Unique Products

社会の構成員たることを自覚し、り、We
recognize our responsibility誠実に正道を歩む活動によto society and offer beneficial
products
andserviceswhilemaintaining
thehigheststandards
社会が求める製品とサービスを提供し、会社の発展を通じて、 of
integrity. Through our growth, we will contribute to society and
社員の福祉の向上と社会への貢献に努める。
enrichthe lives of our employees.

Leading Us to the Future

The NAGASE Group works toward sustainable growth and improving corporate value.
We have defined the NAGASE Management Philosophy, NAGASE Vision,and The NAGASE Way (employee behavioral guidelines) as a set of common values
for the Group in our project of developing a global brand.
Our slogan of “Bringing it all together” represents our commitment
to encompassing all aspects of our business as one,
including our business domains, operating regions
and countries, people, products, technologies, and services.
This slogan inspires us to realize a sustainable world
where people live with peace of mind, each of us embodies our value proposition,
Identify, Develop and Expand, through our daily activities.

xpa xpand nd

4

NAGASE & CO., LTD.

Integrated Report 2017

NAGASE & CO., LTD.

Integrated Report 2017

5

NAGASE Group Businesses

Advanced
Materials & Processing

Electronics

Automotive& Energy Colors & Advanced Processing
Department Electronic Chemicals Department Automotive Solutions Department

About the NAGASE Group

Functional
Materials

Consolidated
Net Sales

Life& Healthcare

Leading Us to the Future¥ 722.3
billionLife &
Healthcare

11.8%

Automotive& Energy Performance Chemicals
Department
Functional
Materials

21.3%

Fiscal 2016 Results

Electronics

Advanced
Materials &Processing

17.7%

33.6%

<Department Overview><Department Overview><Department Overview><Department Overview><Department Overview>

The Performance Chemicals Department
leverages Group manufacturing and R&D
functions to provide a broad range of goods andservices to the global market, from generalpurpose petrochemical products to high-valueadded products. The department consists of a
raw materials business for the paints and inks
industry and a raw materials business for theurethane industry, each of which is recognized
as an established leader in its respective market.

This department traces its roots back to thedyeing business at the very founding of ourcompany. The department consists of four main
product groups: digital printing supply, colors &additives, functional film materials, and polymer
products. We established a new Group
Development Team to work with otherdepartments and affiliated companies in order
to cover a wider range of industries. This teampromotes cross-organizational development
activities, working to uncover new businesses
opportunities, mainly in the trading sphere, inJapan and overseas.

The Electronic Chemicals Department provides
unique products and services for the electronics
industry, including formulated epoxy resins,
photolithography materials, chemical management equipment, semiconductor equipment,
and other proprietary products and services. The
department answers the needs of the Japaneseand overseas markets, focusing on high-valueadded products produced by Group manufacturing companies. The department strives forhigh profitability, integrating trading and Group
manufacturing functions.

The Automotive Solutions Department operates
in the global automotive industry, which isexperiencing increasingly rapid growth. Here, we
make the most of our superior global network to
expand sales of raw materials and products inglobal markets, particularly China, ASEAN, andNorth America. At the same time, we are working
to improve Group manufacturing functions tooffer greater levels of safety, security, comfort,
and environmental friendliness demanded bysociety now and in the future. In doing so, weplan to contribute to the new automobile
society and grow our business at the same time.

The Life & Healthcare Products Department sets
its sights on contributing to food, beauty, andhealth as a member of the Life & Healthcare
segment. This department is developing
high-value-added products that help people
live better and healthier lives, leveraging theGroup’s comprehensive strengths in trading,
R&D, and manufacturing and processing in the
global food materials, pharmaceutical/medical
materials, fragrances and cosmetics materials,
household products materials, and agriculture,
fisheries, and livestock fields.

<Main Products and Services>

Formulated epoxy resins and related products,
photolithography materials for the productionof semiconductors and liquid crystal displays,siloxane materials, chemical management
equipment for liquid crystal display production
processes, semiconductor manufacturing
equipment and wafer bumping services<Main Products and Services><Customer Industries><Customer Industries>

Electronic components, semiconductors, heavy
electric machinery, displays, automotive, aircraft,environment and energy

Automotive and automotive parts industries

Functional food ingredients (functionalsaccharides, enzymes, health food materials,
and food additives), fragrances/cosmetics andhousehold product materials (whitening
agents, moisturizing agents, UV absorbers,
activators, antibacterial agents, and chelates),
pharmaceuticals (active pharmaceuticalingredients [APIs], clinical trial APIs, intermediates, raw materials, formulations, additives),
in-vitro diagnostics, medical materials andequipment, materials for agriculture, fisheries,
and livestock (agricultural chemicals andmaterials, fertilizers, feed and feed additives)<Main Products and Services>

Resins, raw materials for resins, pigments,
solvents, and additives for paints and inks,
urethane materials, flame retardants, releaseagents<Customer Industries>

Paints and inks, urethane

billionLife &
Healthcare

16.2%

Automotive& Energy

7.5%

Functional
Materials

20.3%

Operating
IncomeComposition

Electronics

24.7%

30.7%

<Main Products and Services>

Petrochemical products, plastic materials andadditives, chemicals for paper manufacturing,raw materials for industrial oil solutions,surfactants and surfactant raw materials,
fluorochemicals, silicone materials, platingchemicals, electronics chemicals and polymer
filters<Customer Industries>

Petrochemicals, plastics, electronic materials,
semiconductors, industrial oil, surfactants,
organic synthetics, etc.

Paper manufacturing/thermal paper, cosmetics
and toiletries, electronic equipment, sheets andfilms, printing and print materials, fiber
processing, auto body paint Polymer Global AccountDepartment Electronic Materials Department<Department Overview><Department Overview>

The Polymer Global Account Department
provides plastics, packaging materials, equipment and facilities to the domestic andinternational office automation (OA), electricand electronics, and consumer electronics
industries. The greatest strength of thisdepartment is the sheer number of local staff
who maintain networks in Asia, as well as theirwealth of experience and knowledge. The
department continues to create new plastics
businesses through cooperative efforts,
reflecting NAGASE Group growth strategies.

The Electronic Materials Department sells
materials and components to smartphone,tablet, and wearables brand owners. The
department also sells materials and components to display device, smartphone chassis,
electronic substrate, and other suppliers. Overthe past few years, we have been developing
new businesses for the coming era of theInternet of Things. As a manufacturer, thedepartment conducts businesses in glassprocessing, flame-resistant insulation/thermal
conductive sheets.

<Main Products and Services><Main Products and Services>

Functional resins, general-purpose resins,
auxiliaries, packaging materials, plastic-related
equipment, devices and moldings

Flexible display materials, organic EL materials,
touch panel components, optical film for LCDs,
electronic paper materials, materials for smartphone and tablet cases, silicon/semiconductor
processing materials, flame-resistant insulation/
thermal conductive sheets, sensor and lensmodules, LED chips, abrasives, glass processing<Customer Industries>

Office automation, electronics and consumer
electronics, home appliances, housing andconstruction materials, packaging materials<Customer Industries>

Smartphones, displays, touch panels, semiconductors, infotainment, lighting

6

NAGASE & CO., LTD.

Integrated Report 2017

 Energy Business Office<Department Overview>

The Energy Business Office deals in energy
management systems (EMS) combining andnetworking lithium ion battery (LiB) systems andphotovoltaic (PV) modules. In combination withrelated component materials, NAGASE devises
marketing strategies that anticipate futureneeds, dealing in and sharing information
covering all aspects of the business fromupstream to downstream. Beginning fiscal 2016,
the department will begin dealing in LED opticalcommunications equipment for the safe, stable
control of infrastructure related to the businesses referenced above.

<Customer Industries>

Foods, pharmaceuticals and medical, diagnostic
drugs, fragrances and cosmetics, householdproducts, agricultural, fisheries and livestock Beauty Care Products
Department
On April 1, 2017, the Beauty Care Products
Department transferred to Nagase Beauty Care
Co., Ltd. to generate greater efficiency.
 For more, see the Nagase Beauty Carewebsite.

http://nbc.jp/<Main Products and Services>Raw materials for lithium ion battery (LiB),
photovoltaic (PV) modules, LiB systems, PV
materials, applied products in energy management systems, independently poweredsystems, LED optical communications
equipment, wireless communications modules

Financial and Corporate Information

Fiscal 2016 Results

Advanced
Materials &Processing

The Speciality Chemicals Department has a longand successful history, serving more than 2,000
customers in the plastic materials and additives,
industrial oil materials, plating chemicals, water
processing agents, photoresist materials,
fluorochemicals, silicone, 3D, and otherindustries. Today, the department handles morethan 10,000 different products. We are working
to expand into new fields as we keep our eyeson the underlying technologies of our business
partners.

<Customer Industries>

Critical Initiatives for Sustainable Growth¥ 15.0<Department Overview>

Commodity plastics and engineering plastics forautomotive interior/exterior components,
automotive interior/exterior and functional
components, lightweight materials andcomponents, electronics components, auxiliaries,
plastic-related equipment, devices and tools<Main Products and Services>

Unique Products Speciality Chemicals Department

Consolidated
Operating Income

Pigments/additives, digital print processing
materials, copolyester resins, functional sheets
and films, organic transparent conductive
materials, dyestuffs, fiber processing agents,
auto body repair paint<Main Products and Services>

Performance by Segment

Net Sales
Composition

15.6% Life & Healthcare Products
Department<Customer Industries>

Batteries, photovoltaics, automotive andautomotive parts, construction, logistics, lighting,commercial facilities, public facilities, etc.

NAGASE & CO., LTD.

Integrated Report 2017

7

The NAGASE Group: Blending Tradition and Innovation
About the NAGASE Group

Right: Nagase-CIBA Ltd. in 1971
Bottom: Newly completed Tokyo branch
office building (October 1969)

Top: Hayashibara Co., Ltd (functionalsaccharides manufacturing plant)
Top Right: Nagase R&D Center

Accelerating
growth in Asiaand othermarkets
overseas

Foundation for Cooperative Growth
Creating new businesses in cooperation
with our customers and business partners
around the world

A chemicals trading company building a strong
reputation in manufacturing, processing,and research and development
Manufacturing
andProcessing

TradingCompany

R&D

Performance by Segment

NAGASE & CO., LTD. is a chemicals trading firm, founded in Kyoto, Japan in 1832.
The NAGASE Group began as a specialized sales agent securing exclusive contracts
to sell industry-leading products from around the world in Japan.
Over the years, we have leveraged our technology and information gathering expertise—as well as our global network—to transform our business into a hybrid model offering superior
manufacturing, processing, and R&D functions as well as trading company services.
Looking forward to our 200th anniversary in the year 2032,
we are creating a platform for sustainable growth.

Unique Functions

Leading Us to the Future

Tradition and Innovation

Expandingmanufacturingbases, R&D
centers

Overseas Network

Supporting Japanese Industry

Our

185th year in business

Overseas
Sales to Net Sales
As of fiscal 2016

48.9%

1900s

Sales of dyestuffs, starches and funori seaweed
1898 Head office moved to Osaka

1901 Opened office in Lyon
1911 Established Tokyo branch office1913 Opened offices in London and New York
1917	Established Nagase Shoten Company (fromOne of theearliest
companies toexpandoverseassole proprietor to corporation)

1923	
Established business ties with Eastman
Kodak Co. of the United States

1930	
Concluded an exclusive distributorshipFounding

agreement with Union Carbide andCarbon Corp. of the United States
1938	Established Teikoku Chemical
Industries Co., Ltd.

Top: NAGASE partner Eastman Kodakin the early 20th century
Left: Osaka head office at incorporation in December 1917

8

NAGASE & CO., LTD.

Integrated Report 2017

Industries, and Nagase Biochemicals merged to Nagase
ChemteX Corporation
	Closed the Seoul branch office and established Nagase Korea
Corporation
2002 Established Guangzhou Nagase Trading Ltd.
Established Nagase ChemteX (Wuxi) Corporation
2004 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
Corporation
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.
2009 Established Dubai branch office2012	Acquired stock of Engineered Materials Systems, Inc., U.S.-based
maker of formulated epoxy resins
Acquired stock of Hayashibara Co., Ltd. (Okayama, Japan)
Established local entity in Brazil
2014 Completion of NAGASE Global HR Development Center2015	Created NAGASE Long-Term Management Policy andupdated Management Philosophy Structure

Financial and Corporate Information

Founder: Denbei Nagase(now Nagase ChemteX Corporation) jointly with Ciba-Geigy Ltd.
Listed Company shares on the Tokyo Stock Exchange
1971	Established Nagase (Hong Kong) Ltd. and Nagase America
Corporation
	Established Engineering Plastics, Ltd. jointlywith General Electric Co.
1972 Established Nagase Medicals Co., Ltd.
1975 Established Nagase Singapore (Pte) Ltd.
1977 Established Nagase Biochemicals, Ltd.
1980 Established Nagase Chemicals, Ltd.
Established Nagase (Europa) GmbH
1981 Established Nagase (Malaysia) Sdn. Bhd.
1985 Established Seoul branch office
1988 Established Nagase (Taiwan) Co., Ltd.
1989 Established Nagase (Thailand) Co., Ltd.
Established Nagase Science and Technology Foundation
	Tokyo branch office became a head office;adoption of Osaka/Tokyo two head office system
1990	Established Sofix Corporation, a U.S.-based color former
production joint venture
Set up the Nagase R&D Center in Kobe	Established joint venture Nagase Wahlee Plastics Corporation(Taiwan)1997 Established Nagase Philippines Corporation
Established Shanghai Nagase Trading Co., Ltd.
Established Nagase Engineering Service Korea Co., Ltd.
1998 Established PT. Nagase Impor-Ekspor Indonesia
Established Shanghai Hua Chang Trading Co., Ltd.

to Nagase ChemteX Corporation

2001	Nagase ChemteX, Nagase Chemicals, Teikoku Chemical

Critical Initiatives for Sustainable Growth1832	Nagase founded in Kyoto as a dyestuffs trading concern

1964 Listed Company shares on the Osaka Securities Exchange
1968	Concluded an exclusive distributorship agreementwith General Electric Co. of the United Statesof Switzerland (now Ciba Specialty Chemicals Ltd.)

1832

1950s

1970	Established Nagase-CIBA Ltd.

1900	
Established business ties with Basel Chemical Co.

Established in2000	Changed the name of Nagase-CIBA, Ltd.

Unique Products

Founded as a dyestuffs wholesaler,
we became an industrial raw
materials supplier during Japan’s
high-growth period

2000s

In the 1900s, we signed sales representative agreements with Eastman Kodak and General Electric,building a foundationof trust lasting nearly two centuries

2016 Launched new mid-term management plan

2032 O ur 200th anniversary
NAGASE & CO., LTD.

Integrated Report 20179How We Create Corporate Value
About the NAGASE GroupA Unique Business Model that Extends
Beyond the Traditional Trading Firm Framework

Share of NAGASE Consolidated Operating Income
Represented by Manufacturing Businesses

The NAGASE Group has created a truly unique, highly valuable business modelby integrating traditional trading firm functions with manufacturing, processing, and research and development functions.

39.5%

（%）
40
30

Leading Us to the Future20

Maintain high profit ratios
by offering high-value-added materials

1002012/3

Find needs
and seedsIntellectual capital
Human capitalSocial/relationship capital
Natural capital

20

Business
Investment

Trade

Purchasing

Sales

Research/
Application
Development

Manufacturing
and Processing

NAGASE Group(Sales)Co

UniqueNAGASE
Functions
Manufacturing
and Processinga t e Go ver nan

2012/3

B to B&
B to C

2013/3

2015/3

2016/32017/3

We improve corporate value through our businessand return profits to shareholders.

Users
User
Consumers

We contribute to creating a sustainable world
where people live with peace of mind.

ce

NAGASEGroup

2014/3

Supporting industry
through materials andfinished products

Financial and Corporate Information

TradingCompany
Functions
Functionr por

0

Critical Initiatives for Sustainable Growth

Unique NAGASE Functions

Dividends paid
from business profits

10

Ongoingbusiness growth33

Unique Products

Manufactured capital

Opportunities and Risks

Financial capital

Information/
Research, Market
Development

2017/3¥30

Trading
Trading Company
Company Functions
Function

Strategy and Capital Allocation

Main
Management
Resources

2016/3(¥)
40

ExpandGrow seeds
into businesses

2015/3

Performance by Segment

Develop2014/3

Per Share Dividends

NAGASE

Identify

2013/3

Supporting
beauty and health• Nagase ChemteX (p.50)
Corporation (p.46)• Hayashibara (p.52),(p.48), 43
47 Other Companies(p.50)
Research/Application • Nagase R&D Center (p.54)
Development• Nagase Application Workshop (p.55)(p.51)

10

NAGASE & CO., LTD.

Integrated Report 2017

NAGASE & CO., LTD.

Integrated Report 201711

Valuable Products and Services

NAGASE delivers value that contributes to creating a sustainable world where people live with peace of mind.
This value is represented in everything from raw materials for plastic materials and additives, functional polymers,
and plastic products to functional food ingredients and pharmaceutical raw materials and intermediates.
We will continue to grow as we work together closely with our customers in producing products and services of value.

Advanced Materials& Processing

Electronics

A Sustainable World Where
People Live with Peace of Mind

Automotive & Energy

Leading Us to the Future

Functional Materials

About the NAGASE Group

Delivering Valuable Products and Services on the Global Stage

Life & Healthcare

Performance by Segment

Color Formers

Semiconductor-Related Products

Car Electronics

Pharmaceutical and Medical Fields

Coating raw materials sold by NAGASE are used in
automobile bodies and other applications.

Manufacture and sale of color formers used inthermal paper applications, including cash
register receipts and tickets.

Sales of encapsulants for semiconductors,
photolithography materials, manufacturing
equipment, wafer bumping services.

Solutions for new materials, components, andtechnologies for next-generation environmental
applications.

Manufacture and sale of pharmaceutical raw
materials and anti-cancer drugs.

Urethane Materials

Copolyester Resin (Tritan™)

Epoxy Resins

Next-Generation Products and Services

Fragrances/Cosmetics

High-density, flexible urethane materials sold by
NAGASE are used in car seat cushions.

A copolyester resin resistant to temperatures
greater than 100°C. This material is widely used asa substitute to compensate for defects intableware and other glass products.

Manufacture and sale of high-performance resins
for use in electronic components, wind power
generation, solar cells, aircraft, optical components, etc.

Technological support and sales of components
and new materials required by car multimedia,
sensors, and self-driving systems.

Manufacture and sale of fragrances and cosmetics
materials, products, and health foods.

Denafilter™

Engineering Plastics

Liquid Crystal, Flexible Display, Organic EL Materials

Home Energy Management System

Foods

Manufacture and sale of Denafilter™, a filtration
system used in the manufacturing process ofhigh-​quality films for packaging and opticalapplications.

Sales of plastics for use in office automationequipment and other applications.

Sale of display device peripheral components,
touch panel materials, chemicals, and equipment
to the smartphone and tablet PC industry.

The affordable home energy management
system (HEMS) is under development to realize
easy access to zero energy houses (ZEH).

Manufacture and sale of functional saccharides,
enzymes, and other food and health foodmaterials.

Unique Products

Coating Raw Materials

Integrated Report 2017

Financial and Corporate Information

NAGASE & CO., LTD.

Critical Initiatives for Sustainable Growth

12

NAGASE & CO., LTD.

Integrated Report 201713

13-Year Financial Highlights

NAGASE & CO., LTD. and Consolidated Subsidiaries (Years Ended March 31)

2006/3

2007/3

2008/3

2009/3(Millions of yen)

2010/3

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3“CHANGE”11

WIT21

WIT2008

Investment Amount: ¥23.7 billion

Investment Amount: ¥27.7 billion

About the NAGASE Group(Millions of yen)

2005/3

ACE-2020

Investment Amount: ¥107.4 billion

Investment Amount:¥13.7 billion

Investment Amount: ¥41.1 billion

Investment Amount:¥14.0 billion

Performance (Accounting Fiscal Year)Net Sales
Functional Materials (formerly Chemicals)Electronics
Automotive & EnergyLife & Healthcare (formerly Healthcare/Other)
Other
RegionDomestic
Overseas

Gross Profit
Operating Income
Profit Attributable to Owners of the Parent¥ 648,023
222,282229,278
132,086—
56,404
7,972
388,470259,553
67,64017,596
12,892¥ 701,321
247,094
244,681
150,796—
53,556
5,191
410,789
290,532
73,63921,66913,567¥ 764,755
267,836
274,660
163,833—
56,4891,934
432,813331,942
80,50623,063
10,005¥ 715,238
248,461
253,029
153,255—
58,905
1,585
394,874
320,364
71,527
12,522
5,808¥ 603,949
237,124
192,569
117,591—
55,542
1,121
360,382
243,567
65,415
13,1287,537¥ 660,213
253,290
222,100
133,640—
50,247934
389,379
270,833
73,00818,732
12,823¥ 631,854
177,126
217,929
110,495
76,11349,1701,018
366,369
265,484
71,62813,4278,570¥ 666,272
167,017214,214125,01483,06876,116841
361,971304,301
82,583
15,57814,182¥ 723,212
169,973
239,224
137,026
99,441
76,810737
372,939
350,272
88,936
15,78911,663¥ 759,713
168,238
254,165
149,947
109,851
76,609900
374,208
385,505
91,991
18,153
11,318¥ 742,194
157,149
255,505
127,926
115,351
85,571
689
363,038
379,155
91,66318,024
12,316¥ 722,384
153,546
242,609
127,722112,956
84,904644
369,365
353,019
91,503
15,03010,331¥ 335,290
167,092
14,019¥ 396,773
196,620
24,834¥ 422,859
205,083
20,491¥ 419,869
200,554
33,342¥ 340,968
184,599
31,340¥ 368,088
195,344
21,886¥ 375,336
201,516
27,125¥ 450,842
204,706
88,710¥ 486,747
228,505
98,425¥ 498,141
246,723
92,828¥ 546,525
281,398
98,493¥ 512,081
273,963
87,560¥ 530,775
290,21782,046

Leading Us to the Future

Segments

Advanced Materials & Processing (formerly Plastics)¥ 575,636
251,725
188,456
122,632—
12,821—
363,708
211,928
61,96013,256
10,384

Total Assets
Equity CapitalInterest-Bearing Debt

(Yen)

Performance by Segment

Financial Condition:(Yen)

Per Share Data:
Net Income (Basic)
Net Assets
Cash Dividends
Payout Ratio (%)
Shareholders’ Equity Dividend Rate (%)¥   81.00
1,311.37
10
12.3
0.79

¥  100.32
1,535.70
15
14.9
1.06

¥  105.84
1,597.27
18
17.0
1.15

¥   77.86
1,559.97
17
21.8
1.08

¥   45.17
1,435.88
16
35.4
1.07

¥   58.64
1,519.61
16
27.3
1.08

¥   99.76
1,568.04
22
22.1
1.42

¥   66.69
1,592.87
24
36.0
1.52

¥  111.31
1,803.31
26
23.4
1.52

¥   91.86
1,942.20
28
30.5
1.50

¥   89.10
2,215.18
30
33.7
1.44

¥   96.96
2,156.67
32
33.0
1.46

¥   81.65
2,301.10
33
40.4
1.48
Unique Products

(%)

(%)

Ratios:Overseas Sales to Net Sales
Manufacturing Ratio (Operating Income)Operating Margin (Operating Income/Net Sales)
Return on Equity (ROE)Net Worth Ratio

40.1
20.5
2.7
7.1
49.6
0.13

41.4
22.3
3.1
6.8
48.5
0.10

43.4
24.4
3.0
4.9
47.8
0.17

44.8
15.5
1.8
3.0
54.1
0.17

40.3
35.4
2.2
4.0
53.1
0.11

(Note 1) A t the beginning of fiscal 2005, 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)	At the beginning of fiscal 2009, the Company moved its information and functional materials businesses handling materials related to insulating materials and fluoroplastic-related materials from theElectronics segment to the Chemicals segment. Businesses handling surface detection machines for functional films and sheets have been moved under the Plastics segment.

41.0
29.0
2.8
6.5
53.7
0.13

42.0
31.3
2.1
4.2
45.4
0.43

45.7
37.3
2.3
6.5
46.9
0.43

48.4
23.5
2.2
4.9
49.5
0.38

50.7
27.8
2.4
4.3
51.5
0.35

51.1
24.3
2.4
4.4
53.5
0.32

48.9
39.5
2.1
3.7
54.7
0.28

Critical Initiatives for Sustainable Growth

Debt Equity Ratio (Times)

36.8
16.4
2.3
6.4
49.8
0.08

(Note 3) At the beginning of fiscal 2012, 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 Plastics segment) and the Energy Business Office, which was launched as an integrated entity from theEnvironment & Energy Office (under Other) and the Energy Device Office.
(Note 4) At the beginning of fiscal 2013, the Automotive & Energy segment was organized by combining the former Automotive Solutions Department (under the Plastics segment) and the former Energy
Business Office, which was an integrated entity combining the Environment & Energy Office (under the Other segment) and the Energy Device Office.

Net sales
Trading Business

Operating Income
Manufacturing Business（百万円）(Millions of Yen)

Trading Business

Manufacturing Business（百万円）(Millions of Yen)

800,000

25,00020,000600,000

Total Assets/ROA
Total Assets (left axis)

Net Assets/ROE
ROA (right axis)（百万円）(Millions of Yen)

600,000

Net Assets (left axis)
（%）

6.0

ROE (right axis)（百万円）(Millions of Yen)（%）

300,000

12.0

5.0

250,000

10.0

400,000

4.0

200,000

8.0

300,000

3.0

150,000

6.0

200,000

2.0

100,000

4.0

100,000

1.0

50,0002.0

00

Financial and Corporate Information

500,000

15,000400,000
10,000200,000

5,000

0

0
05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3

14

NAGASE & CO., LTD.

Integrated Report 2017005/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3

05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3

0
05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3

NAGASE & CO., LTD.

Integrated Report 201715

Annual Topics

Sale of Nagase FineChem Singapore stock:
Withdrawal from the electronics chemicals
business in Singapore

April

Increased number of products manufactured,
expanded number of products in development

Strategic advancements in bio businesses

Okayama Functional Saccharide Plant,
T Building Expansion

Greater bread volume withretained softness

Founding member

NAGASE & CO., LTD.

NAGASE & CO., LTD.

Hayashibara Co., Ltd.

NAGASE & CO., LTD.

NAGASE & CO., LTD.

Nagase Medicals Co., Ltd.

Nagase R&D Center

Stronger manufacturing functions
for high-potency injection drugs
at Nagase Medicals Co., Ltd.
Construction of new building andlaunch of freeze drying line
June

Obtained patent:
Method for Manufacturing Ferritin
Developed technology to control
the volume of metal ions stored
within proteins
AugustCompleted constructionof the Okayama Functional
Saccharide Plant, T Building

September

Hayashibara Co., Ltd.
Nagase ChemteX Corporation

Started sales of DENABAKE™ EXTRA,
bread-making enzyme developed jointly
between Nagase ChemteX and Hayashibara
October

Performance by Segment

NAGASE & CO., LTD.

2016

Major NAGASE Group highlights during fiscal 2016.
Leading Us to the Future

in FY

About the NAGASE Group

Highlights

Participated as a founding memberin the IBM Research Frontiers Institute,aiming for the development of chemicalmaterials supporting the future IT society

February
Unique Products

April 2016

March 2017
May

Obtained patent jointlywith the Kitasato Institute:
Method for Manufacturing MycosporineLike Amino Acids Using Microorganisms

Hayashibara Co., Ltd.

Received GRAS Certification
for isomaltodextrin (soluble dietary fiber)from the U.S. Food and Drug Administration

NAGASE & CO., LTD.

NAGASE & CO., LTD.
Nagase ChemteX Corporation

Developed world’s thinnest bloodflow authentication technology
jointly with Bionics Co., Ltd. andentered the security-related business

Stronger partnership with Inkron:Greater presence in the display, touch sensor, and wearables markets

World’s First!
Developed high-efficiency
production technology

NAGASE & CO., LTD.
Nagase America Corporation
Building even stronger alliances

NAGASE & CO., LTD.

Integrated Report 2017

7mm thin
Demo unit for ultra-thin blood flow
authentication system

Stronger urethane businessin North America:
Start of product developmentwith Cytech in response
to North American needs

Financial and Corporate Information

Isomaltodextrin
Product Name: Fibryxa™

16

Critical Initiatives for Sustainable Growth

NAGASE & CO., LTD.

Cytech Products Inc.

NAGASE & CO., LTD.

Integrated Report 201717

Message from the President
About the NAGASE GroupNAGASE has pushed for corporate value growthunder the key concepts of full participation and front-line focus.

our profit structure andLooking Back on Fiscal 2016

for sustainable growth.

Representative Director and President

Kenji Asakura

NAGASE Vision

NAGASE Group Slogan

Summary of the Long-Term Management Policy

Stage 1(Business Scale)

NAGASE & CO., LTD.

Integrated Report 2017

• Restructure global governance• Increase flexibility in HR management• Enhance safety and assurance• Consolidate communications
infrastructure

Stage 2

ACE-2020

Stage 3

Image of Growth Path

Establish multinational
management system
Enhance overseas
operating structure

Expand overseas
operations

Financial and Corporate Information

Reinforcethe Management
Platformfor Growth• Increase growth investment• Accelerate organic growth• Expand overseas operations

Bringing it all together
Critical Initiatives for Sustainable Growth

To realize a sustainable world where people livewith peace of mind, each of us embodies our value­proposition, Identify, Develop and Expand
through daily activities.

Challenges
for Growth

Unique Products

July 2017

Performance by Segment

Global financial markets experienced turmoil during the first half of 2016 in response to the lack ofclear direction in the Chinese economy and the British exit from the EU. While the first half of the
fiscal year was one of decelerating momentum in the global economy, the second half brought with it a
gradual recovery. This unstable environment during the first half of the year had a negative impact on
NAGASE Group performance. However, general growth in Asia during the second half helped us
achieve profits for the year (see P.69 for more about financial results).
During 2015, the NAGASE Group created medium-term policies and updated the structure of ourcorporate principles as we look forward to the year 2032 and our 200th anniversary. In 2016, we began
operating under our new ACE-2020 mid-term management plan, which covers fiscal years 2016
through 2020. The ACE in this plan is an acronym for Accountability, Commitment, and Efficiency.
We are engaged in two major reforms under this plan: Reform Profit Structure and Reform Corporate
Culture. We took our first steps toward these goals in the initial year of the plan.
To become a company known for sustainable growth in our 200th year, it is important that we not
only grow our existing businesses, but also create new businesses. Conditions have changed significantly both geopolitically and in business since we adopted our new policies in 2015. However, we aremaking progress in creating new businesses through the policies that we have already implemented.
At the beginning of this year, I proclaimed the phrase Speed Up. It should go without saying that wemust increase the speed of our engagement.

corporate culture

18

Leading Us to the Future

We are reforming

Goal to 2032

Normalization of the profit
more than tripled.

2015

2032

NAGASE & CO., LTD.

(Year)

Integrated Report 201719

Message from the President
About the NAGASE Group

Four Key Policies Under ACE-2020

Reform Corporate Culture2) Expand and strengthen revenue base: To accelerate our global expansion, we acquired 35% of Cytech
Products Inc. to bolster our urethane business in North America. We are making progress toward
strengthening our management base, including investing in new businesses. We also introduced a numberof policies to improve profitability at our manufacturing companies, demonstrating significant improvement over the course of fiscal 2016. We will continue to focus on raising profitability to new levels.

Investment

NAGASE Transforms from
“Shosha/Trading” to “Business Designer.”

Logistics

KGI (Key Goal Indicator)
KGI

FY2016FY2017 (planned)

FY2020Consolidated Sales

722.3 Billion Yen

732.0 Billion Yen

1.0 Trillion Yen or more

Consolidated
Operating Income

15 Billion Yen

19.1 Billion Yen

30 Billion Yen or more

3.7%

4.2%

6% or more

ROE

KPI (Key Performance Indicator) Factor index to achieve KGI[6 Functions]

FY2017(planned)

FY2020Operating Income in Focus Area*

11.9 B Yen

11.5 B Yen

16.9 B Yen

GlobalNetworkGrowing Investment Distribution
Ratio in Focus Area

46%

40%

35% <

350.2 B Yen

350.2 B Yen

600 B Yen

Sales Growth Rate in theAmericas

90%

92%

170%

Operating Income from
Manufacturing*

9.0 B Yen

10.1 B Yen

14.4 B Yen

Break-Even Point Sales Ratio*

76%

78%

73%

Pursue Efficiency(Strengthen Management Platform)

Consolidated Selling, Generaland Administrative Ratio

10.6%

10.4%

9.4%

Investment

Growth Investment

8.2 B Yen** 25.4 B Yen** 100 B Yen

Financial Structure

Rating (R&I)

[A]

[A]

[A] or more

Increase Focused Business(Portfolio Optimization)
Trading

Manufacturing

Profit Structure
Reform Indicator

Accelerate Globalization(Expand and Strengthen Profit
Structure)

Leverage Group functions to achieve the quantitative and qualitative targets.

Reform Profit Structure
Portfolio Optimization

Expand and Strengthen
Revenue Base• Categorization of business• Accelerate globalizationand execution of strategy that
“G6000”matches with the area• Improve manufacturing• Replacement of asset andprofitability
reallocation of resources• Acceleration in investment thatcreates core business of group

20

NAGASE & CO., LTD.

Integrated Report 2017

Increase Manufacturing Profitability(Expand and Strengthen Profit
Structure)

Reform Corporate Culture
Mindset• Breed independence andresponsibility• Share the management’s
message• Thorough monitoring and
PDCA

Strengthen
Management Platform

Corporate Culture
Reform Indicator• Pursue efficiency• HR development
Financial Strategy
Indicator

Overseas Group Sales*

Financial and Corporate Information

FY2016

Measures

Critical Initiatives for Sustainable Growth

KPI (Index)

Reform/Strategy
R&D

Business
Designer

NAGASE strings all the groups together
to create and provide new value to the world through 6 key functions.

Unique Products

ACE-2020 Basic Policy4) Strengthen management platform: To create greater management efficiencies, we inventoried our
processes and performed a review of our functions, consolidating some of our back office organizations.
We will conduct more reviews of our back office systems in the future.

Performance by Segment

1) Portfolio optimization: We will categorize businesses into Growth/Emerging, Focus, Base, andImprovement; and execute strategies under each. At present, we have not altered our policy of allocating resources to Focus sectors such as Life & Healthcare and Electronics. In our Life & Healthcare
segment, we expanded the Hayashibara production facilities manufacturing TREHA™. We also madethe decision to build an additional manufacturing building for high-potency injection drugs at Nagase
Medicals Co., Ltd. In October 2016, we began sales of DENABAKE™ EXTRA, a bread-making
enzyme developed jointly between Nagase ChemteX and Hayashibara. At present, we conduct
research and development at three different locations. These types of successful joint projects will besomething we point to as part of our proven track record in the future. In our Electronics segment, we
strengthened our relationship with Inkron Oy of Finland, making the company a subsidiary during
fiscal 2017 and bolstering our presence in the display, touch panel, and wearables businesses. In thesecond year of ACE-2020, we hope to focus more deeply in the liquid crystal and semiconductor
markets in China in addition to growing sales of our own products. As measures to replace assets andreallocate resources, we sold stock in certain affiliated companies and consolidated others.

Leading Us to the Future3) Mindset: With accountability, which is the A in ACE, we must Identify, Develop, and Expand theseeds of businesses that represent the NAGASE Vision. To foster greater accountability, we are delegating authority to the heads of our various organizations. Those employees who resonate with ourprinciples and have the capacity to develop new businesses at the front lines of our company will be theones who lead us forward.

Reform Profit Structure* The figures in this document are all management accounting data (simple sums). It is different from the figures disclosed on the consolidated financial statement.
** Total numbers in 5 years

NAGASE & CO., LTD.

Integrated Report 201721

Message from the President

22

NAGASE & CO., LTD.

Integrated Report 2017

100
90

99.53

97.45

89.15

89.19
79.98

80

65.28

70
60
50
40

Project
Recognition

Understanding ofProject Goals

Leadership
through brand building
activities contributes
to higher awarenessamong Group employees

Understanding ofProject Activity Details

To Our Shareholders and Investors
Since being named president of NAGASE & CO., LTD., I have had the opportunity to meet with anumber of stakeholders in Japan and across the world. I believe in the importance of open communication, disclosing our progress and circumstances through such meetings and in the media. Our positive
attitude and active investor relations campaigns have resulted in quite an increase in the number ofshareholders owning NAGASE stock. I hope to take even more opportunities to interact with you in
the future, hearing your feedback about our company. We hope to take your feedback and incorporate
it into future discussions, building stronger relationships with our stakeholders via this type of two-way
communication. I ask for your continued support as we pursue our vision for NAGASE.

We will continue to reinvent ourselves
as a Business Designer,
creating new societal value
through means beyond the frameworkof our traditional trading company roots.

Financial and Corporate Information

Having achieved compliance with the Corporate Governance Code to the letter, now it is time for us
to comply by the spirit of the code. To instill branding internally and reform our corporate culture asstated in ACE-2020, we must communicate messages from top management to all employees.
We are hiring more mid-career employees than ever before. Now, more than 6,000 people from adiverse range of backgrounds work at NAGASE companies in Japan and throughout the world. To
create a sense of shared Group values among all employees, we began Top Management Tours by ourchairman, president, and vice president in January 2016. To date, more than 127 Top Management
Tours have taken place, with approximately 26% of employees participating. These meetings, consistingof 10 or so participants, have been well received as a means to raise understanding and help employees
resonate with our principles and the NAGASE Vision. We plan to continue this practice to help create（%）* Group survey conducted at the end of fiscal 2016

Top Management Tour Participants

Critical Initiatives for Sustainable Growth

ESG and Branding Initiatives

Overall

Unique Products

Under ACE-2020, we have set aside ¥100 billion for growth investment. During fiscal 2016, weinvestigated an unprecedented number of potential investments, leading to a deeper pool of expertise inbusiness investment. While I cannot say for sure what will happen in fiscal 2017, we have a number ofpotential investments in the pipeline and we are highly interested in making investments.
Risk management becomes even more important as we hasten our global expansion and increase
the number of businesses with manufacturing functions. In addition to hiring experts and taking othersteps to strengthen our risk management at the front lines, we are also delegating more authority.
We are also upgrading our Group enterprise systems to facilitate rapid decision-making and better
monitoring through more advanced internal controls.

Survey Results: Branding Project Recognition

Performance by Segment

Toward Greater Growthsustainable growth and improved corporate value. Personally, I plan to maintain a close relationshipwith the front lines of our businesses. I will strive to continue to create video messages, write blog posts,
and interact directly with our younger employees.

Leading Us to the Future

The NAGASE Group conducts research and development through the Nagase R&D Center, Nagase
Application Workshop, and our manufacturing subsidiaries.
As one part of our research and development activities, in 2016 we joined the IBM Research Frontiers Institute, founded by IBM. We started a chemical materials development project, which uses
cognitive systems and advanced data analytics. Working mainly with Japanese chemical manufacturers
and NAGASE Group companies, we are developing materials and applications. Inputting chemicaldevelopment data and thesis papers should lead to new insights based on the automatic generation ofchemical formulas. This method of development should also reduce time and costs compared to traditional trial-and-error experimentation.
We have also established the New Value Creation Office as an internal organization. It is clear thatthe evolution of technologies such as the Internet of Things, Big Data, and Artificial Intelligence willchange by order of magnitude. We believe the needs for new materials will be a major business opportunity. In the course of major trends in technology innovation, the NAGASE Group will identify areasof focus where we can provide value to the world.

About the NAGASE GroupUse of AI Technology in Research and Development

NAGASE & CO., LTD.

Integrated Report 201723

Our Board
100%

Sustainable corporate value
through management and disclosure accountabilityLess than
five
years
5年未満

Five years
orgreater
5年以上

20%Ratio of Outside
社外役員のDirectors’
取締役会
Attendance
at FYE
March 2017
出席率
Board Meetings

30%

Ratio of社外取締役のOutside割合
Directors

About the NAGASE Group(as of June 29, 2017)

70%

取締役
Length of Director
経験年数別Service by Years
構成

Leading Us to the Future

Directors

Performance by Segment

Director andExecutive Officer

Director andExecutive Officer

Representative Director andSenior Managing Executive Officer

Representative Director
and Chairman

Representative Director,
President and CEO

Director andVice Chairman

Director andManaging Executive Officer

Director andExecutive Officer

Outside Director

Nobumasa Kemori

Takanori Yamauchi

Kohei Sato

Mitsuro Naba

Hiroshi Nagase

Kenji Asakura

Reiji Nagase

Osamu Morishita

Ichiro Wakabayashi

Hidenori Nishi

1980 Joined Sumitomo Metal Mining Co., Ltd.
GM, Human Resources& General Affairs Division
2006 Managing Executive Officer and Director,
Sumitomo Metal Mining Co., Ltd.
GM, BPR & Administration
Division
2007 Representative Director and President,
Sumitomo Metal Mining Co.., Ltd.
Administration2013 Representative Director and Chairman,
Sumitomo Metal Mining Co., Ltd.
2016 Director and Chairman, Sumitomo Metal
Mining Co., Ltd.
Director, NAGASE & CO., LTD.
2017 Executive Adviser, Sumitomo Metal Mining Co., Ltd.

Overseas Operations

Corporate Administration
and Osaka Region

Akihiko Isono

Katsuhisa Yamaguchi

Mitsuru Kanno

Masatoshi Kamada

Satoru Morita

External Audit &Supervisory Board Member

Audit & Supervisory Board Member

External Audit &Supervisory Board Member (part-time)

Naoki Yasuba

Masaya Ikemoto

Yasuhiro Mihara

Takahiro Okumura

Kusuo Ota

Kenichi Matsuki

Nobuyuki Shirafuji

Masanori Furukawa

Toshio Takano

1984	Joined the Sumitomo Bank, Ltd. (currently
Sumitomo Mitsui Banking Corporation)
2003	
General Manager of the London Group of Global
Corporate Investment Dept. of Sumitomo Mitsui
Banking Corporation and Sumitomo Mitsui
Banking Corporation Europe Limited
2006	
General Manager of Credit Dept., Europe, Middle
East and Africa Division (London) of Sumitomo
Mitsui Banking Corporation and Sumitomo
Mitsui Banking Corporation Europe Limited
2013	General Manager of Credit Review Dept. of
Sumitomo Mitsui Banking Corporation
2016	Retired from the Sumitomo Mitsui Banking Corporation
Corporate Auditor, NAGASE & CO., LTD.

Integrated Report 20171987	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	Corporate Auditor, NAGASE & CO., LTD.

Hiroyuki Ueshima

Koichi Sagawa

Executive Officer
Hayashibara Co., Ltd.
General Executive, Life &Healthcare Segment
GM, Life & Healthcare Products
Department

Executive Officer
GM, Corporate Planning Division

Executive Officer
Greater China CEO
Nagase Business Management &Planning (Shanghai) Co., Ltd. COO

Executive Officer
General Executive, Automotive &Energy Segment
GM, Automotive Solutions Department
Nagoya Branch

Executive Officer
Nagase (Europa) GmbH CEO

Executive Officer
General Executive, Functional
Materials Segment
GM, Speciality Chemicals
Department

Executive Officer
GM, Electronic Materials
Department

Executive Officer
General Executive, Electronics
Segment
GM, Electronic Chemicals
Department

Executive Officer
GM, Legal Division
The Operational Support ofManufacturing Subsidiaries

Executive Officer
General Executive, Advanced
Materials & Processing Segment
GM, Colors & Advanced
Processing Department
Nagase Application Workshop

Financial and Corporate Information

Audit & Supervisory Board Member

NAGASE & CO., LTD.

1975 Joined KAGOME CO., LTD.
2000 Director, KAGOME CO., LTD.
2003 Director and Executive Officer, KAGOME CO., LTD.
2005 Director and Managing Executive Officer, KAGOME CO., LTD.
2008 Director and Senior Managing Executive
Officer, KAGOME CO., LTD.
2009 Representative Director and President, KAGOME CO., LTD.
2014 Representative Director and Chairman, KAGOME CO., LTD.
2014 Director, NAGASE & CO., LTD.
2016	Chairman of the Board, KAGOME CO., LTD.

Executive Officers
Managing Executive Officer
Nagase ChemteX Corporation

24

Sales & Marketing

Critical Initiatives for Sustainable Growth

Corporate Auditors

Hayashibara Co., Ltd.
Nagase R&D Center
Manufacturing

Executive Officer
GM, Polymer Global AccountDepartment

NAGASE & CO., LTD.

Integrated Report 2017

Unique Products

Outside Director

25Corporate Governance
About the NAGASE Group

Basic Approach
Institutional Format

Total Number
of Directors
取締役の人数One Year(same for outside directors)（社外役員全員）(all outside directors)

44名

Corporation with Boardof Directors and Audit &Supervisory Board
Members(Audit & Supervisory
Board)

名910

Number of Outside Directors

Executive Officer System Adopted

Total Number of Audit &Supervisory Board Members

Number of Outside Auditor

2

Yes

4

2

The NAGASE Group is a member of the world society. As such, it
is our duty to maintain good and fair business practices and, throughcontinued growth and development, provide society with the goods
and services needed while improving the welfare of our employees.
Under our management philosophy, we have established the
NAGASE Vision as our promise to our stakeholders: To realize asustainable world where people live with peace of mind, each of us
embodies our value proposition, Identify, Develop and Expand
through daily activities.

Initiatives to Strengthen Corporate Governance(Year)~2000

Number of Board of Directors
Meetings

16

Number of Audit & Supervisory
Board Meetings

Yes

16

Independent Auditor

Ernst & Young
ShinNihon LLC* Mr. Kemori was appointed an outside director in June 2016 and activities refer to Board of Directors meetings
subsequent to the date of appointment.
** Mr. Shirafuji was appointed an outside corporate auditor in June 2016 and activities refer to Board of Directors
meetings subsequent to the date of appointment.

NAGASE & CO., LTD.

Integrated Report 2017

2004

2005

2007

2008

Separation ofManagement
and Business
Execution

2009

2010

2012

Hiroshi Nagase

2015

2016

2017

Kenji Asakura

Chairman of the
Chairman
Board of Directors

President

Reduced board
20
10
directors to 11 directors

8

10

9

Chairman

10

9

10

Adopted executive officer system (for faster decisions and stronger business execution)

Advisory Board

2
1 Individual
Individuals

OutsideDirectors

1
Individual

2 Individuals

Outside Corporate
1994~ 1 Individual, 1998~ 2 Individuals
Auditors
Compliance Committee[Principle 4-11(3)]Risk Management & Compliance Committee

Evaluation of the Effectiveness of the Board of Directors
During fiscal 2016, we conducted a survey to evaluate the effectiveness of our Board of Directors. This survey asked all directors andcorporate auditors to respond to questions about board structure,operations, deliberations, and more. The results of this survey werecompiled and analyzed by the Office of Evaluations. Based on theseresults, the board conducted an evaluation of board effectiveness.
As a result, the NAGASE Board of Directors confirmed that it operates under a proper composition of personnel, and that deliberations and decision-making are conducted in a timely and proper
manner. At the same time, the board confirmed the need to further
look into meeting preparation and the discussion process to engender deeper deliberations. The Board of Directors will continue toseek ways to improve board effectiveness.
Please refer to our corporate governance report for more information.

26

2003

Established Basic Compliance Policy

Compliance

Established NAGASE Group Compliance Behavior Standards

RevisedEstablished Compliance Call Center Rules
Internal Controls
Promotion
Committee
Director
Compensation

Financial and Corporate Information

As of June 2016, there was one item of explanation. However, having
conducted an effectiveness evaluation of the Board of Directors in
March 2017, we determined that we were in compliance with all
aspects of the Corporate Governance Code.
To improve corporate value over the medium and long term, we
believe that it is important to continuously assess and verify our
status, beyond simply creating the systems and structures. We arecommitted to continuing the improvement of our corporate
governance.

2002

Critical Initiatives for Sustainable GrowthCompliance with the Corporate Governance Code (as of July 1, 2017)

President

2001

Unique Products(Attendance by Outside Directors)
Mr. Hidenori Nishi, 100%
Mr. Nobumasa Kemori, 100%*(Attendance by Outside Corporate Auditors)
Mr. Nobuyuki Shirafuji, 100%**
Mr. Toshio Takano, 100%Compensation Committee

To put these principles and vision into practice, we established aframework for sustainable growth in any business climate. This
framework of our long-term management policy includes Challenges
for Growth and Reinforce the Management Platform for Growth.
We are improving our corporate value over the medium and longterm guided by this framework.
We believe that rapid decision-making, execution, and transparency are essential for us to accomplish these initiatives as we engage
in strengthening our corporate governance.

Performance by Segment

Number of Independent
独立役員の人数
Directors

Leading Us to the Future

Director Term of Service

Internal Control Committee

Compensation Committee

Management
Philosophy

NAGASE & CO., LTD.

Integrated Report 201727

Corporate Governance4
Shareholders’ Meeting

Liaison

Audit

Corporate Auditors

Board of Directors
10Compliance Committee

Supervision

Risk Management &Compliance Committee

NAGASE & CO., LTD.

Integrated Report 2017

6

Internal Control
Committee

Supervision

7

Security Trade Control
Committee

Audit Office
Audit

3

General Managers’
Meeting (Sales)

General Managers’
Meeting(Administration)

3

Supervision

6 Internal Control Committee
The Internal Control Committee
documents the Company-wide internal
control conditions and financial statement preparation process to further
enhance its financial reporting credibility, while maintaining and strengthening a structure to carry out evaluationand improvements.

7 Security Trade Control
Committee

Financial and Corporate Information28

Support• Internal• External

Critical Initiatives for Sustainable Growth

Executive officers attend the General
Managers’ Meeting (Sales) and
General Managers’ Meeting(Administration) related to theirsales and managerial responsibilities.
Each department provides a status
report, which is discussed by meeting
attendees before an action plan isformulated.

President

As a consultative body for the Board of
Directors, the Risk Management &Compliance Committee establishes andstrengthens risk management andcompliance systems that cover not only
legal compliance but also corporate
ethics. The committee also maintains
ISO environmental management
standards and promotes energy conservation initiatives.

Unique Products

3 Executive Officers

5Compliance Call Center
LiaisonWith the majority of its members madeup of outside directors, the Compensation Committee ensures the objectivity
and transparency of the Company’s
directors and executive officers in thedecision-making process regarding
compensation by screening the appropriateness of every compensation level
and the compensation system to reportand make recommendations to theBoard of Directors.

5 Risk Management &(including 2 outside corporate auditors)

2 Corporate Auditors/

In accordance with audit policy andstandards for responsible work set at
Audit & Supervisory Board meetings,
corporate auditors attend important
meetings, such as Board of Directors
meetings, and conduct audits of theexecution of duties of directors andexecutive officers based on reports
solicited from subsidiaries on an
as-needed basis.

(outside directors + directors)(including 2 outside directors)

Audit & Supervisory Board
連携
4

Audit

Audit & Supervisory Board
Members

Compensation Committee

Compensation Committee

Performance by Segment

The Board of Directors is clearly
positioned as the body in charge ofmaking decisions on management
policies and strategies, and it
supervises the execution of operations. Holding a regular monthly
meeting, the Board of Directors
reviews and formulates measures
regarding important decisions andtracks business performance.

Independent
Auditor4

1

2

Leading Us to the Future

Under the executive officer system, the NAGASE corporate governance system collaborates various internal committees to appoint outside directors and members to the
Audit & Supervisory Board as well as to reinforce its corporate governance system. Having
secured supervision and auditing functions that operate from diversified perspectives,
including from outside the Company, NAGASE believes the current corporate governancesystem is more rational than ever. We will increase our efforts to further reinforce ourcorporate governance system to secure the trust of our stakeholders.

NAGASE’s Corporate
Governance System

1 Board of Directors

About the NAGASE Group

Executive Structure

Under a corporate system that adopts an Audit & Supervisory Board, NAGASE
introduced the executive officer system in June 2001. The Company’s current management framework consists of 10 directors (including 2 outside directors), 18 executive
officers (6 of whom concurrently serve as directors), and 4 corporate auditors­(including 2 outside corporate auditors). NAGASE has also established the following
committees to reinforce its corporate governance function.

The Security Trade Control Committee
thoroughly complies with export related
laws and regulations in relation toforeign currency exchange and foreign
trade for its trading of cargos andtechnologies covered by such laws andregulations.

NAGASE & CO., LTD.

Integrated Report 201729

Corporate Governance(Millions of yen)

Total
Compensation

Title

Total Compensation
by Type
Basic
Compensation

Bonus

Number of
Eligible
Directors

334

222

112

8

Corporate Auditors(excluding Outside
Corporate Auditors)

44

44

—

2

Outside Officers

48

Certified Public Accountants

Auditing Firm

Mikio Konishi

48

—

6

Important Matters regarding Employee Bonuses for Employees
Also Serving as Directors

Specified limited
liability partners

Hideo Yamamoto

Managing partners

Ernst & Young ShinNihon
LLC

Yasuhiro Takada(Millions of yen)

Number of Eligible Directors

Comments

31

3

Paid in an amount equivalent
to employee bonus.

Internal Audit System

30

NAGASE & CO., LTD.

Integrated Report 2017

NAGASE & CO., LTD. selects candidates for outside directors inaccordance with the standards of independence stipulated by the
Financial Instruments Exchange, and who have the ability to identify issues from a perspective representing the interests of stakeholders and society at large. The Company selects candidates for outside
corporate auditor who have a wealth of knowledge and experience ina variety of fields, and who have the ability to conduct audits from astandpoint of neutrality and objectivity.
The Company has designated a total of four outside directors andcorporate auditors as independent: Mr. Hidenori Nishi and Mr.
Nobumasa Kemori as outside directors, and Mr. Nobuyuki Shirafuji
and Mr. Toshio Takano as outside corporate auditors.

Concurrent Titles/Responsibilities

Hidenori
Nishi

Hidenori Nishi has been involved in the management of KAGOME CO., LTD.
for many years and possesses advanced knowledge and extensive
experience regarding corporate management. He will use this knowledge
and experience to make proposals concerning the Company’s overallmanagement from a perspective of familiarity with industry and is
expected to enhance the Company’s corporate governance.

16/16

Chairman of the Board, KAGOME CO., LTD.
Outside Director, Dynapac Co., Ltd.
Chairman, Japan Canners Association

Nobumasa
Kemori

Nobumasa Kemori has been involved in the management of Sumitomo
Metal Mining Co., Ltd. for many years and possesses advanced knowledge
and extensive experience regarding corporate management. He will use
this knowledge and experience to make proposals concerning theCompany’s overall management from a perspective of familiarity withindustry and is expected to enhance the Company’s corporate governance.

12/12
Named outside
director in June
2016

Executive Adviser, Sumitomo Metal Mining
Co., Ltd.

Nobuyuki
Shirafuji

Nobuyuki Shirafuji does not have direct managerial experience, but hepossesses wide-ranging knowledge based on his many years of overseas
experience in financial institutions. He also has many years of experience
concerning audits and audit divisions and possesses considerable
knowledge regarding finance and accounting, and consequently, we
determined that he will properly perform his duties as an External Audit &Supervisory Board Member.

12/12
Named outside
corporate auditor
in June 2016

N/A

ToshioTakanoToshio Takano does not have direct managerial experience, but he has
many years of experience in legal circles and possesses considerable
knowledge regarding compliance and corporate governance. Consequently, we determined that he will properly perform his duties as anExternal Audit & Supervisory Board Member.

OutsideDirectors

OutsideCorporate
Auditors

Outside Corporate Auditor, Kakaku.com, Inc.
Outside Corporate Auditor, Daicel
Corporation
Outside Corporate Auditor, FANCLCORPORATION

16/16(Note) The number of Board of Directors meetings noted above does not include resolutions made in writing.

Policies Related to Company Information
Disclosure
Pursuant to the NAGASE Group Compliance Behavior Standards,
we engage in ongoing communications with society and our stake­holders through timely disclosure of truly important information
over appropriate channels. We are mindful that all corporate activities remain within the bounds of socially accepted norms.
This basic philosophy guides us as we conduct timely, appropriate, and fair disclosure of information through investor relations
activities, public relations programs, and websites for our shareholders and investors to improve management transparency andaccountability.
See “Timely Disclosure System” on our corporate website for
more.
Major Investor Relations Activities during Fiscal 2016
Activity

No. of
EventsConferences/briefings
for institutional
investors and analysts

2

Financial results disclosure,forecasts, special topics(year-end, interim)

10

Conducted at branches of
securities companies(Osaka 3 times; Kanagawa 2 times;
and Aichi, Iwate, Hiroshima,
Miyagi and Yamaguchi 1 time)Overseas roadshows

1

President and CFO traveled
overseas to meet directly, havediscussions with institutional
investors

Overseas conferences

Varioustimes

Participation in conferences
sponsored by securities
companies

Individual investor
conferences/meetings

Comments

Business Continuity Planning
Fiscal 2016 Results
During 2016, the Group conducted initial response
training at the Tokyo head office (October) and the
Osaka Headquarters and Nagoya branch office(November). The training tested the response of theFire Prevention head office, Self-Defense Squad,
Facilities Confirmation Team, Information Systems
Team, and Logistics Confirmation Team during asimulated emergency. Further, in March, based on thebusiness continuity plan created by the division, we helda training in the Model Division to determine whether
ordering operations could be taken over by the Nagoya
branch office in the event of a disaster in Tokyo.
In the event of a large-scale disaster making thecontinued use of our Tokyo Head Office unfeasible, wehave the option of using the NAGASE Global HR
Development Center (opened May 2014 in Sendagaya,
Tokyo) as a backup office. During December 2016, we
implemented disaster prevention BCP response
training.

Fiscal 2017 Initiatives

Financial and Corporate Information

The Audit Office is in charge of internal audits, including audits toassess the appropriateness and efficiency of the Company’s businessactivities including affiliated companies. The Audit Office is staffedby 13 employees, including certified internal auditors (CIA), qualified internal auditors (QIA), and other individuals who possess
specialized knowledge in internal audits. The Audit & Supervisory
Board consists of four corporate auditors (including two outside
corporate auditors) who have a considerable amount of knowledge
about finance and accounting.
The Company established the Audit Office to also ensure corporate auditors’ auditing effectiveness, supplying staff upon request to

Independence Standards and Policies for
Outside Directors and Corporate Auditors

Attendance at FYE March2017 Board Meetings

Critical Initiatives for Sustainable Growth

Total
Compensation

Reason for Appointment

Unique Products

Directors(excluding Outside Directors)

Name

Performance by Segment

Total Director Compensation by Title/Total Compensation
by Type/Number of Eligible Directors

Category

Leading Us to the Future

Director compensation (excluding outside directors and corporate
auditors) consists of basic salary and performance incentives(bonuses). The Company calculates compensation based on director
compensation rules, contingent on approval by the Board of Directors. Performance incentive (bonus) amounts are determined according to a basic payment amount based on Company earnings for theperiod in question. The Company considers individual performancebased on the Goal Management System when determining basic
salary and director bonuses.
The Compensation Committee, with the majority of its members
outside directors, assesses the validity of compensation standards andsystems, reporting to and advising the Board of Directors. This
ensures improved objectivity and transparency in the director compensation decision-making process.

support the corporate auditors’ work. The Audit Office and the
Audit & Supervisory Board exchange information regarding internal
audits and audits of domestic and overseas subsidiaries as necessary,
while holding meetings twice a year with affiliate companies’ auditors. In addition, they perform wide-ranging liaison activities,
including receiving regular reports from Ernst & Young ShinNihon
LLC, NAGASE’s independent auditor, regarding accounting matters and associated internal controls; maintaining a presence duringaccounting audits; and cooperating as needed with audits conducted
at affiliated companies, including those located overseas. In addition
to discussing individual matters with corporate auditors on a routine
basis, the independent auditor also holds meetings quarterly with the
Audit & Supervisory Board.
Further, the Audit Office, as an independent internal auditor,
compiles evaluations of internal controls in response to our internal
controls reporting system as it relates to our financial reporting,reporting to the Internal Control Committee as appropriate. The
Internal Control Committee reports regularly to the Audit & Supervisory Board and independent auditor regarding the implementation
status of the internal controls system.
Audits by certified public accountants are performed in a fair andunbiased manner by a staff of 36, which includes the following
specified limited-liability partners and accountant trainees.

About the NAGASE Group

Director Compensation

As in fiscal 2016, we will continue to conduct emergency
response training to improve initial response quality andspeed. We will conduct disaster prevention BCP training
for the NAGASE Global HR Development Center(backup office location) to improve our disaster preparedness and response.

NAGASE & CO., LTD.

Integrated Report 201731

At a Glance

Advanced
Materials & Processing Performance Chemicals
Department Colors & Advanced Processing
Department

売上高の推移
Net
Sales

1,500

 Electronic Chemicals Department Automotive Solutions Department Electronic Materials Department

売上高の推移
Net
Sales

（億円）
(¥ hundred million)
2,000

1,682

 Polymer Global AccountDepartment

Automotive& Energy

売上高の推移
Net
Sales

（億円）
(¥ hundred million)
3,000

1,571

2,541

1,535

2,426

1,500

1,499

2,000
1,000

（億円）
(¥ hundred million)
1,200

1,098

 Life & Healthcare Products
Department Beauty Care Products Department

1,153

1,129

（億円）
(¥ hundred million)
1,000

800

1,279

1,277

800

766

0

0

15/3

16/3

17/3

営業利益の推移
Operating
Income

15/3

16/3

17/3

15/3

営業利益の推移
Operating
Income（億円）(¥ hundred million)
50

36

41

48

17/3

49

50
60

55

15/3

17/3

Automotive & Energy
その他

62

63
20

15

0

15/3

16/3

17/3

Executive Officer
General Executive,
Functional Materials
Segment

16/3

17/3

15/3

Kusuo Ota

Executive Officer
General Executive,
Advanced Materials &Processing Segment

16/3

17/3

Takahiro Okumura
Executive Officer
General Executive,
Electronics Segment

16/3

17/3

180

15/3

16/3

150

70

31

33

0

–70

Functional Materials
機能素材
加工材料

17/3
電子

Advanced Materials & Processing
Electronics
自動車・エネルギー
生活関連

0

15/3

181

15/3

16/3

Masaya Ikemoto

Executive Officer
General Executive,
Automotive & Energy Segment

17/3

Automotive & Energy

その他・全社共通

Life & Healthcare

Others/Corporate

Critical Initiatives for Sustainable Growth

Yasuhiro Mihara

15/3

0

(¥ hundred million)
（億円）
210

140

10

0

Life & Healthcare

Unique Products

20

0

17/3

20

10

10

16/3

38

40

13

20

15/3

30

電子

Operating Income by Segment
セグメント別営業利益（億円）(¥ hundred million)
50

22

17/3

Others

営業利益の推移
Operating
Income（億円）(¥ hundred million)
30

40
20

16/3

16/3

Advanced Materials & Processing 生活関連
Electronics
自動車・エネルギー0

営業利益の推移
Operating
Income（億円）(¥ hundred million)
80

40

30

16/3

営業利益の推移
Operating
Income（億円）(¥ hundred million)
60

43

0

15/3

Functional Materials
機能素材
加工材料

200

0

7,597 7,421 7,223

5,000

849

400

400

7,500

0

855

600

500

(¥ hundred million)（億円）
10,000

Performance by Segment

1,000

Net Sales by Segment
セグメント別売上高

2,500

売上高の推移
Net
Sales

1,000

500

40

 Energy Business Office

売上高の推移
Net
Sales

（億円）
(¥ hundred million)
2,000

2,555

Life
& Healthcare

Leading Us to the Future

Speciality Chemicals Department

Electronics

About the NAGASE Group

Functional
Materials

Naoki Yasuba

Executive Officer
General Executive,
Life & Healthcare Segment

Financial and Corporate Information

32

NAGASE & CO., LTD.

Integrated Report 2017

NAGASE & CO., LTD.

Integrated Report 201733

Performance by Segment
About the NAGASE Group

Functional Materials
Major Manufacturers• PT. Toyo Quality One Indonesia• TQ-1 de MEXICO S.A. de C.V.
• Toyo Quality One Ningbo Co., Ltd.
• Guangzhou Kurabo Chemicals Co., Ltd. • Light Chemical (Changzhou) Co., Ltd.
• Toyo Quality One (Guangzhou) Co., Ltd. • Cytech Products Inc.

Performance Chemicals Department

NAGASE Market Strengths and the Business Environment
Strengths

Paints and Inks
Industry

specializing in the domestic
and overseas paints and inks
industry Domestic and overseas sales
channels Unique solutions as a trading
company with R&D, manufacturing, and processing
functions Strong customer pipeline

GM, Performance Chemicals Department

Tamotsu Isobe

Integrated Report 2017 Business growth with local

 Manufacturing companies within the Restructuring in the petrochemical

 Uniquely creative solutions utilizing

 Increasing need for high-function, high Experience in a variety of diverse

 Increasing awareness of environmental

and inks in overseas markets

customers(non-Japanese) customers
overseasGroup

information from the value chain

chemical products, from general
purpose to specialty
 Expert, experienced personnel

industryindustry (including biochemicals)
value-added products
issues Growing demand for urethane

in emerging countries

 Accelerating customer (Japa-

nese companies) entry inoverseas markets
 Higher awareness of energy
conservation, the environment,
and bio-based chemistry

Executive Officer
General Executive, Functional Materials Segment
GM, Speciality Chemicals Department

To build a stronger domestic business foundation, we will
focus on sourcing from both China and India. We will strive toimprove sales of customer products, aiming for notable resultsin sales to overseas customers.
We intend to make more effective use of the NAGASEGroup network to strengthen our overseas business. We will
expand our business selling to multinational paints and inks
customers, while seeking more joint business and investment
opportunities with local partners. One such example is Cytechof the U.S., a company in which we made an equity investment
during 2016. Here, we plan to focus on environmental compatibility in the development and expanded sales of release agentsfor urethane.
One way in which we will reform our profit structure is bycultivating new businesses. Our plans include conducting
research for market penetration and overseas expansion of our
new Pat!naLock™ reactive paint, establishing our carbon
hybrid™ coating system, and developing applications for new
urethane materials.

Fiscal 2016 Strategies and Results

Fiscal 2017 Strategies

Fiscal 2016 was the first year of our new mid-term
management plan ACE-2020. During the year, we worked to
add high-value features to our traditional functions, emphasizing value to our business partners. As a result, we achieved
targets and delivered higher profits in our core businesses,
including compounding technologies, organic synthesis
technologies, and polymer technologies.
To reform our profit structure, we recommitted to working
with our business partners, holding a biweekly reform council
meeting to uncover and create new business. We also brought
in lecturers and conducted other training, which led to achange in value perception and attitude among our employees.
These efforts have helped us ingrain a culture of volunteering
ideas for new business models.

We will build our existing businesses to new levels, continuing
to execute new strategies which include working with partners
in business alliances and investments. As we develop new
collaborations with customers based on their elemental technologies, we will strive to bring these new businesses to themarket as quickly as possible. Our participation in the IBM
consortium will be a step forward in using cognitive systems
for building a platform strategy.
We will also set up a new Nagase ChemteX product market
development team in our department, leading to deeper
collaborative efforts between our organizations.

TOPICS New Pat!naLock™ Reactive Paint

TOPICS New Denafilter™ Plant Contributes to High-Quality Film Manufacturing and Business Growth

Using rust prevention by rust is a new concept not found in current
anti-rust paint. Based on this concept, we developed a reactive paintthat brings a new dimension in maintenance management. We havediscovered that we can inhibit the progression of common rust by
creating a dense protective rust
BeforeAfter
BeforeAfterlayer Patina with anticorrosion
properties on a surface to becoated.

Nagase Filter Co., Ltd. manufactures Denafilter™, a stainless steel
polymer filter that removes foreign particles during the manufacture of film for LCD panels and other products. Looking
toward the company’s 10th anniversary—and representing asignificant step forward for growth—construction was completed for a new plant in Japan’s Fukui Prefecture in 2016.
Nagase Filter will expand its service offerings to answer therising demands for quality as it aims to expand its polymer filter
business.

* In 2015, this technology was awarded theSpecial Prize in the 6th Annual Monozukuri
Grand Award, sponsored by the Ministry of
Economy, Trade and Industry.

Financial and Corporate Information

NAGASE & CO., LTD.

Business Environment
 AI technology research in the chemical

Critical Initiatives for Sustainable Growth* VOC: Volatile Organic Compounds

During the second year of our ACE-2020 mid-term management plan, we plan to continue to accelerate toward ourthree key goals, leveraging the value chain and network within
the NAGASE Group.

34

Strengths
 Strong relationships of trust with

Unique Products

During fiscal 2016, the Performance Chemicals Department
engaged in measures to achieve goals in three main areas: (1)
Build a stronger domestic business foundation; (2) Strengthen
overseas business; and (3) Cultivate new businesses.
A continued decline in oil and naphtha prices contributed
to a challenging environment for building a stronger domestic
business foundation. However, we focused our efforts onoverseas product sourcing and selling customer products,
making significant strides in sourcing products from China andother regions.
Overseas, our coating business contract manufacturingsubsidiary in China recorded solid results. In India, we used
our coatings laboratory to expand our lineup of high-valueadded products. These factors helped strengthen our overseas
business. While our urethane business struggled against local
competitors in the Chinese market, we saw growth forautomobile-related applications in Indonesia.
Toward cultivating new businesses, we focused on projects
to commercialize products and services for VOC* reduction,energy efficiency, and other aspects of corporate social value.
In terms of financial results, we recorded lower revenues
and profits for the year, mainly due to declining naphtha prices,
the negative impact of the strong yen on our export businessthrough November 2016, and the hiring of additional staff in
preparation for launching new businesses.

Fiscal 2017 Strategies

Business Environment Growing demand for paints

Yasuhiro Mihara

Fiscal 2016 Strategies and Results



NAGASE Market Strengths and the Business Environment

Performance by Segment

UrethaneIndustry

supported by consultativesales
 Packaged sales of various
urethane materials
 Overseas sales network• Nagase ChemteX Corporation• Nagase Filter Co., Ltd.

Leading Us to the Future Organization and personnel

Major Manufacturers

Speciality Chemicals Department

Leaf Disk Filter (Denafilter™)
New Nagase Filter Co., Ltd. Fukui Plant

NAGASE & CO., LTD.

Integrated Report 201735

Performance by Segment
About the NAGASE Group

Advanced Materials & Processing
Major Manufacturers

Colors & Advanced Processing Department• Fukui Yamada Chemical Co., Ltd.
• Sofix Corporation• Nagase ChemteX Corporation• Hayashibara Co., Ltd.
• Totaku Industries, Inc.
• Kotobuki Kasei Corporation• ON Textile Chemicals (Shanghai) Co., LTD.

NAGASE Market Strengths and the Business Environment
Strengths
Digital Printing
Supply Industry

 Highly specialized global

network Relationships with top manufac-

Colors &Additives
Industryturers, customers

 Expertise in colors and disper-sion processing Ability to distribute a wide variety

of products, small-batch sales

 Personnel with international

 Relationships with suppliers thathave strong product lineups

 Information resources at numer-

ous top-class business partners

Business Environment
ment in response to overseas
expansion and new round ofindustry digitalization

 Growing demand for dispersion

processing and decoration
overseas Accelerating customer (Japanesecompanies) entry in overseas
markets

 Diversification and polarizationof needs

 Increasing awareness of safety

and environmentally conscious
products

 Growth of medical, diagnostics,

and nursing care markets

36

NAGASE & CO., LTD.

Integrated Report 2017

TOPICS Copolyester Resin Tritan™
We expect to grow sales of copolyester resins as these products areembraced throughout the world as part of a trend to avoid environmental issues. We will engage in a number of measures to raise theprofile of our copolyester resins among our customers and end users
in the Japanese market.

ties in inland China and newly
emerging countries in Southeast Asia
 Increasing local spec business Business reorganization
among suppliers

Executive Officer
GM, Polymer Global Account Department

Koichi Sagawa

Fiscal 2016 Strategies and Results
Despite the negative impact of foreign exchange on earnings,
fiscal 2016 operating income rose compared to the prior fiscal
year.
Sales of plastics within Japan for the office equipment,
appliance, and video game device markets were higher, whilesales of high-performance films for use in tablets also grew.
These factors and profit improvements at manufacturingsubsidiaries contributed to earnings in a major way.
In China, Shanghai Hua Chang Trading Co., Ltd. contributed significantly to higher sales of high-performance resins inEast China and continued business growth in our inlandbusiness.
In Southeast Asia, our local entities reported strong sales to
non-Japanese customers, outperforming targets.
As a whole, our department saw solid results in dealings
with major suppliers, and we expect even further sales growthfor fiscal 2017. As the first year of our new mid-term management plan, fiscal 2016 was a year of building a foundation toreach our goals in the next five years.

Our approach to our packaging materials business in Asia
is to grow by working much more closely with new customers
and processing partners.
As a department, we plan to look outside Asia for new
business, seeking new investment opportunities and reforming
our profit structure.

TOPICS Proprietary Denapolymer™ Compound
Wholly owned subsidiary Setsunan Kasei Co., Ltd. launched its own
Denapolymer™ brand of products. Denapolymer™ is a result of thecompany’s strengths in resin processing technologies. This new product line features recycled resins that offer unique features in an environmentally friendly format. Currently, we are looking more closely athigh sliding polyethylene. We expect that we will be able to differentiate our high sliding polyethylene products from those of ourcompetitors.

Fiscal 2017 Strategies

Copolyester
Resin Tritan™

Fiscal 2017 marks the second year of our ACE-2020 midterm management plan. We see this year as a year of execution.
We intend to continue establishing market superiority forour core resin sales business by leveraging the NAGASEGroup network.
In our compound business, we plan to deliver even greaterlevels of profits for existing businesses, while growing sales ofour own high-value-added Denapolymer™ product.

Profile extrusion molded product fromhigh sliding polyethylene HS80

Financial and Corporate Information

The Colors & Advanced Processing Department exists midstream in the value chain as a part of the Advanced Materials& Processing segment. From our position, we are able to match
upstream seeds and downstream needs for markets, industries,
and our clients.
During fiscal 2017, we plan to execute on the Identify andDevelop concepts of the NAGASE Vision, focusing on
business matching activities to find new business opportunities.
We intend to conduct fundamental trading company
activities to delve deeper into the core businesses within thedigital printing supply, colors & additives, functional film
materials, and resin processing businesses in our department.
We will also seek potential opportunities to expand market
supremacy for strategic products (pigments, additives, andresins) outside the borders of Japan.

At the same time, we will strive to improve our abilities as avendor to provide trading + α (basic and added value) functions
that offer solutions to a variety of issues with which ourcustomers struggle.
Further, we intend to strengthen cooperative businessactivities for cross-organization projects involving our department and NAGASE affiliates across a wide range of industries.
We believe that personal, cross-department networks promote
communication and perspectives based on different businessexperiences. We will leverage these networks to bring the powerof our integrated business to bear and to strengthen our capacity
to design businesses. These advancements will be an important
link in training future business leaders in our department.

Asia and other regions (personnel, offices, logistics bases) Wealth of experienced, knowledgeable national staff
 Direct approach to the end
user (spec business functions) Size and number of transactions with Japanese andnon-Japanese affiliatedcustomers
 Strong partnerships withleading manufacturers inJapan and around the world

Critical Initiatives for Sustainable GrowthFiscal 2017 Strategies

Resin Sales
Business

Business Environment Growing business opportuni-

Unique Products

Our functional film materials, dyes, and copolyester resins
businesses recorded solid results for fiscal 2016. However,intensified competition in the thermal paper market had anegative impact on profitability among our manufacturingsubsidiaries, while sales of functional dyes struggled. As a result,
our consolidated earnings failed to achieve our targets.
Our inspection equipment business, which contributed tosales during fiscal 2015, was transferred to a different segment
to optimize the structure of our total portfolio. We bolstered
the PDCA cycle for a number of development projects that
had fallen behind schedule, clearly defining the path towardcommercialization.

Strengths
 Expanding sales network in Materials and systems develop-

Kusuo Ota

Fiscal 2016 Strategies and Results

NAGASE Market Strengths and the Business Environment

Performance by Segment

Executive Officer
General Executive, Advanced Materials & Processing Segment
GM, Colors & Advanced Processing Department
Nagase Application Workshop

Polymer
Products
Industry

experience and expertise infilms, resins, molding, andmasterbatches industries• Setsunan Kasei Co., Ltd.
• Dainichi Color Vietnam Co., Ltd.

Leading Us to the Future Manufacturing bases

Major Manufacturers

Polymer Global Account Department

Sheet/film product from high sliding
polyethylene HS80

NAGASE & CO., LTD.

Integrated Report 201737

Performance by Segment
About the NAGASE GroupElectronics• Nagase Techno-Engineering Co., Ltd.
• Pac Tech-Packaging Technologies GmbH
• Nagase ChemteX Corporation• Nagase Engineering Service Korea Co., Ltd.
• Nagase ChemteX (Wuxi) Corporation• Inkron Oy*• Engineered Materials Systems, Inc.
• Wuxi Chenghong Electronic Chemicals Co., LTD. * Group member as of April 2017

Major Manufacturers

Electronic Chemicals Department

Major Manufacturers

Electronic Materials Department

NAGASE Market Strengths and the Business Environment
Strengths

Semiconductor
Industry

Display Industry

Executive Officer
General Executive, Electronics Segment
GM, Electronic Chemicals Department

Takahiro Okumura

Energy &Environment
Industry

Business Environment Epoxy sheet encapsulant materials

maintain a large market share amongcommunication device applications;these materials are based on uniqueNagase ChemteX advanced formulation technologies

 Growth in the communication device

markets of China and emerging economies
 Expanding next-generation high-speed
communications networks

 Total solutions provided through Nagase

 Rising demand related to Internet of Things,

 Advanced technological capabilities and Growing market for liquid crystal displays/

ChemteX high-value-added materials and
Pac Tech Group subcontracting services
and equipment
leading position in high-grade chemicals
and supply and management equipment

OLEDs* in China

 Rising global demand for infrastructure, Group network capable of building Growing demand for lightweight composite

upon a history of successes in automobiles, aircraft, rail cars, and wind power
generation to overseas markets

materials

market for displays and the market for semiconductors, whichis expected to grow over the long term.
We will strengthen the research and development functionsin the United States for our Pac Tech business to create newtechnologies for semiconductor packaging, focusing on wafer
bumping. As well, we intend to begin new development forelectronic device packaging applications in connection withsemiconductor manufacturing equipment.
The Electronic Chemicals Department will engage in aworldwide rollout of total solutions based on proprietary
NAGASE Group technologies, stepping up the creation ofbusinesses that provide special value to our customers.

Integrated Report 2017

TOPICS Equity Investment in INKRON LIMITED
Leads to Strengthen Materials Development
for Next-Generation Applications
With development and manufacturing bases in Finland, Inkron Oy is atechnology leader in next-generation siloxane materials for displays,
semiconductors, and printed electronics. Inkron is set for global
expansion with the help of high-value-added products integrating
Nagase ChemteX synthesis, compounding, and mass-production
technologies.

Clean Room Facilities

Display Industry

Inkron Products

tal technologies, including products for flexible
displays, pressure sensors, and haptics

barriers to entry
 Professionals with highly specialized skills



Fiscal 2016 Strategies and Results
Sales of silicon wafer production-related materials were strong
throughout fiscal 2016. However, demand for materials used indisplays and smartphones did not grow as we would have liked.
At the same time, the strong yen had a significant negative
impact on performance, which also contributed to lower
revenues and profits for the department.
As competition intensifies in existing LCD markets, wehave changed our department structure to accelerate development of products for new displays and nurture new businesses.
Our glass processing business has nearly completed the shift inproduction from Taiwan to China.
We also launched a processing business for flexible display
products in Taiwan. In Japan, we made advances in development for modules combining lenses and sensors incorporated
into the Internet of Things.

Fiscal 2017 Strategies

We have three defined goals under the ACE-2020 mid-term
management plan: shift to growth businesses, create businessthrough investment, and exercise true global management.
To shift to growth businesses, we bolstered our marketingof organic EL and flexible display materials. We also madegains in growing sales of silicon wafer production-relatedmaterials to the Chinese semiconductor market. During 2016,
we developed a sensor module for lens-related applications. In
fiscal 2017, we plan to make strides in adding value throughthis product and our distinctive super wide-angle lens, among
other products.
We plan to create business through investments by looking

developing new fields

 Advancements in the development of elemen- China, Korea and Taiwan have become theglobal center for LCD panels

 Full engagement in organic EL, particularly

development and investment related toflexible displays*1 Virtual Reality *2 Internet of Things *3 Artificial Intelligence

into funding flexible display-related products and new
businesses. We have also started to participate in professional
staff exchanges with other companies that possess elemental
technologies in glass processing. This interchange is one way inwhich we hope to expand our presence in the glass processing
field.
To exercise true global management, we plan to appoint
leaders by project regardless of region, operating from a global
perspective and training a new generation of leaders.
TOPICS Anti-Reflective/Anti-Glare Covers for
Infotainment Displays
We have introduced a new anti-reflective product for the infotainment display market. Based on anti-reflective plastic sheets, thisproduct can be used on flat surfaces or wrapped around curved
surfaces to cover the display entirely. We market this product mainly
for use in automobile displays. This business was moved to theElectronic Materials Department from another NAGASE department
beginning fiscal 2015. Together with the anti-reflective glass developed by our department, we can now take orders for both plastic andglass versions.

TOPICS Polyimide Film Glass Lamination Processing

Financial and Corporate Information

NAGASE & CO., LTD.

 Intensified competition, expectations foron East Asia
 General handling of main materials

growth has shifted away from the advanced
nations toward the developing nations
 As VR*1 becomes more popular, augmented
reality is also expected to be embraced as astandard technology in the future. Smartphones
to become more specialized for particular uses
 IoT*2 is becoming more entrenched in industry;smartphones to become more important asboth control devices and sensors (with added
information processing/AI*3)

Critical Initiatives for Sustainable Growth38

 NAGASE network capabilities focused Ability to handle many products; highExecutive Officer
GM, Electronic Materials Department* OLEDs: Organic Light-Emitting Diodes

Force Sensors Incorporating
Inkron Materials

 While the market is growing, the focus ofbilities through global bases Brand owner ~EMS~ Components~
Business relationships with material
manufacturers
 Professionals with highly specialized skills

Masatoshi Kamada

Fiscal 2017 Strategies
The goal of the Electronic Chemicals Department for the final
year of the NAGASE Group mid-term management plan is tointegrate and optimally allocate technologies among our
locations to supply high-value-added products through proprietary NAGASE technologies, contributing to the success of
our local communities and customers.
We have determined five target markets to pursue as
defined under ACE-2020 for Nagase ChemteX and our core
epoxy business: heavy electrical, light electrical, car electronics,
microelectronics, and environment and energy. At present, weare generating concrete results in each of these areas. Towards
further global expansion, we intend to construct new manufacturing bases in Europe, following our projects in China andNorth America.
In our photolithography business, we intend to expand
Nagase ChemteX production bases for high-valued-added
products in the Chinese market, expanding our presence in the Core customer communication capa-

Unique Products

In our epoxy business, we recorded sales growth for smartphone communication device sheet materials, liquid resins thathave become the de facto standard in semiconductor packaging, and heavy electrical materials for use in Japanese infrastructure. Our photolithography business experienced thesmooth launch of a chemical manufacturing company inChina, while our chemical management equipment businessrecorded strong results in the Japanese, Chinese, Taiwanese,and Korean markets. Our Pac Tech business contributed toearnings through its wafer bumping services in Europe.

Touch Panel
Industry

particularly among the emerging
economiesFiscal 2016 Strategies and Results

Smartphone andTablet Businesses

Business Environment

Artificial Intelligence, automotive, andmedical devices markets

 Fifty years of strong market share inhigh-performance, highly reliablematerials markets in Japan

Strengths

Performance by Segment

Heavy Electric
Machinery Industry(Electricity/Railways)

NAGASE Market Strengths and the Business Environment

Leading Us to the FutureElectronic
Components(Communication
Devices)• Nagase Electronics Technology Co., Ltd.
• Nagase Electronics Technology (Xiamen) Co., Ltd.
• Sun Delta Corporation

Our industry has high expectations for the use of polyimide in organic
EL and flexible displays. While polyimide is a challenging material towork with, we can make the job easier in each current stage of processing by bonding film temporarily to a glass substrate. We havestarted an alliance with several companies in Taiwan for this temporary bonding process. We plan to look into this field further with aneye toward future expansion.

NAGASE & CO., LTD.

Integrated Report 201739

Performance by Segment
About the NAGASE Group

Automotive & Energy
Major Manufacturers

Automotive Solutions Department• Sanko Gosei Technology (Thailand) Ltd. • KN Platech America Corporation• Automotive Mold Technology Co., Ltd. • Tokai Spring Mfg. (Foshan) Co., Ltd.

Business Environment

Strengths

 Growing business opportuni-

 Ability to handle both batter-based on global partnerships
with leading manufacturers

ships with customers

Components
Industry New initiatives for bringing

ing expatriate assignees andlocal staff. Long-standing
relationships with Japaneseand non-Japanese suppliers;
strong customer base40

NAGASE & CO., LTD.

Integrated Report 2017

 CO2 reduction regulations; Historically strong connections

 Adoption of the My Number

ZEV (zero emissions vehicle)
regulations in the U.S.

 Growing opportunities inemerging economies (Mexico,inland China, India), global
expansion, growing Out-Out
business

GM, Energy Business Office

Kiyoshi Sato

Commercial
Facilities
Logistics Industry

Fiscal 2016 Strategies and Results

TOPICS New Car Multimedia Businesswith Major Tier 1 Firms in Europe
The European automobile market is expected to see greater adoptionof heads-up display technologies in response to regulations andfavorable insurance treatment designed to promote safe driving
systems. Here, we are working to answer needs related to polarizationand heat management, starting business with major Tier 1 companies
in Europe. We will continue developing car multimedia components
for the European market.

Our battery materials business includes the sales of electrolytic
solutions/additives and the newly launched cathode and anodeactive material/current collector foil business. We successfully
expanded the range of products we offer, achieving plan targets
for sales. Several projects we conceived during fiscal 2016
should translate into specific profit contribution for fiscal 2017.
The storage battery business reported strong sales of
NAGASE Group company CAPTEX industrial-size storage
battery systems and other products. In fact, fiscal 2016 sales
outperformed the prior year by a significant margin. We plan
to integrate our storage battery system business and Green
Energy business, introducing new products to the growing
home energy management system device market in Japan.
The Green Energy business experienced weak performancein sales of PV modules made by overseas manufacturers, mainly
due to the contraction in the industrial solar power market. We
expect that our activities focused on development of home-use
devices in response to changes in the market environment willcontribute to sales in fiscal 2017.

with the logistics industry fromour background in lighting
equipment sales(social security number)system Personal Information Protection Act

the eneEase™ home energy management device with a major
device manufacturer. We began selling this product in April
2017.
We plan to build up our own sales and after-sales network,
creating and proposing new energy businesses.

TOPICS Introducing the eneEase™ Home Energy
Management Device
In April 2017, the Energy Business Office began selling the eneEase™
home energy management device. This product incorporates a lithium ion battery system developed by CAPTEX Co., Ltd.

Fiscal 2017 Strategies

Helping to Build a Smart Society Infrastructure

Financial and Corporate Information

Fiscal 2017 represents the second year of our ACE-2020
business plan. In Japan, we intend to move forward with newdevelopment of high-function materials for car electronics in
our core resins business. At the same time, we will focus on
securing new major contracts for interior components,
strengthening our relationships with car electronics component
manufacturing partners, and searching for new avenues ofdevelopment for car multimedia products.
Overseas, we intend to do more to develop a non-Japanesecustomer base in Europe, the U.S. and China. We look forward
to expanding sales of interior components, car multimedia
components, and high-function materials, while advancing joint
ventures with component manufacturing partners overseas.

 NAGASE Group sales channels

renewable energy; electric
power deregulation; newemerging markets overseas

Critical Initiatives for Sustainable GrowthFiscal 2017 Strategies

 Promotional policies for

Unique Products* Engineering plastics: Thermoplastic resinsrenewable energy; electric
power deregulation; newemerging markets overseas;
future government subsidies

 Ability to handle both batter-

ies/PV and systems/materials
 Fabless

PV Industry

safety, security, comfort, andeco-friendliness to the nextgeneration car society

Fiscal 2016 Strategies and Results

Fiscal 2016 was the first year of our ACE-2020 mid-term
management plan. The year began with numerous challenges,
including the Kumamoto earthquakes, fuel consumption
manipulations, naphtha price decreases, the strong yen, andmore. We also saw escalating costs in our interior components
business. However, new initiatives in other components businesses and engineering plastic* products for car electronics led
to growing sales and a stronger business infrastructure.
At the same time, we recorded continuing strong sales in
China and North America. While sales were steady in Southeast Asia, we moved forward in closing unprofitable businesses
in Indonesia. As a result of these factors, the department
recorded lower revenues and higher profits.

 The NAGASE network

Performance by Segment

Masaya Ikemoto

ies/PV and systems/materials

Battery Industry

Automotive/
Components
Materials Industry
 Strong global network, includ-

Executive Officer
General Executive, Automotive & Energy Segment
GM, Automotive Solutions Department, Nagoya Branchties in North America and
Mexico Introduction of newtechnologies

Business Environment Promotional policies for

Leading Us to the Future

Strengths
 Understanding design needs

 Close, long-standing relation-

Global Resin
Industry• CAPTEX Co., Ltd.

NAGASE Market Strengths and the Business Environment

NAGASE Market Strengths and the Business Environment

Automotive
Interior Industry

Major Manufacturers

Energy Business Office

Bringing Innovation to Housing, Industry, Traffic, IT,
and Communications Infrastructure

One of our main focuses for fiscal 2017 will be to produce
innovations in home infrastructure. The Japanese government
has called for 50 percent of new residential construction to be
zero-energy houses in 2020. By 2030, that number will rise to
80 percent. Last year, the Energy Business Office codeveloped
NAGASE & CO., LTD.

Integrated Report 201741

Performance by Segment
About the NAGASE Group

Life & Healthcare
Major Manufacturers• Nagase Medicals Co., Ltd.
• Hayashibara Co., Ltd.
• Kawai Hiryo Corporation• Nagase ChemteX Corporation • Uma Yasai Farm Corporation

Life & Healthcare Products Department

Major Manufacturers

Beauty Care Products Department• Nagase Medicals Co., Ltd.
• Toyo Beauty Supply Corporation

NAGASE Market Strengths and the Business Environment
Strengths
Fragrances/
Cosmetics

Pharmaceuticals/
MedicalFoods

fragrances and cosmetics tohousehold items)News Policies encouraging use of Global network of NAGASE Trust in the “Made in Japan”

injections of formulation
developments function

Group

global & domestic regulations

label

Japanese food ingredients andindustry of medical materials

Masahiro Yoshino

42

NAGASE & CO., LTD.

Integrated Report 2017

Fiscal 2016 Strategies and Results
Observing the 50th anniversary of our direct sales business, we
introduced a number of special promotions and added training
for sales agents. During the first half of the year, we introduced
the White Program Bright Lotion whitening cosmetics (quasi
drug), which contain Hayashibara’s AA2G™. We also reformulated the Viomate health food product. During the second
half of the year, we unveiled a 50th Anniversary Facial Coffret
and the reformulated Belmash, a core health food product, to awide and popular reception. Unfortunately, sales for the
department fell compared to the prior fiscal year, owing in partto a decline in sales of our high-end Rosemarist cream, reformulated during the prior fiscal year.

We will continue to set our sights on enhancing beauty
inside and out, offering safe, quality products and services that
help build a society of abundant beauty and health.
Nagase Beauty Care offers Activity, Beauty, Youth, andHealth to those who have dreams of staying active, enjoying
life, living young, and being healthy.

Fiscal 2017 Strategies
TOPICS NAGASE Personal Care Website
This website introduces Hayashibara raw materials and other products
from a global perspective. E-mail news letters and digital marketing
tools are coming soon.

Despite reaching our 50th anniversary in fiscal 2016, we are
dealing with a number of business issues, including slowing
sales due to the advancing average age of our sales agents.
We must find ways to hand leadership over to the next generation of sales agents while also improving our approach andability to create businesses in wider markets. In the past,
NAGASE & CO., LTD. had performed product manufacturing while Nagase Beauty Care handled product sales. Beginning fiscal 2017, all business functions, from manufacturing tosales, will be handled under Nagase Beauty Care. This organizational change should allow for stronger branding, marketing,and planning. We plan to introduce two new products toappeal to general consumers. The first, QACT, is a perspirationskin care product for younger consumers. The second, WIZ D,
is a new makeup line.

50th Anniversary Facial CoffretFinancial and Corporate Information

Our commitment is to establish a reputation for NAGASE asa bio leading company following 3 core strategies: 1) global
shift, 2) innovation, and 3) sustainability to achieve the target
set under the mid-term management plan. We will takeeffective & specific actions for global growth.
In our food materials business, to differentiate ourselvesfrom competitors, we will develop more local friendly applications while introducing new materials and products to market.
In fragrances and cosmetics, we are making greater progress
as a “global distributor” to meet our customers’ needs by

supporting them in the global market using IT promotion
tools.
In pharmaceuticals, we will focus on growing domestic
market for generics, while opening the door to the Europeanand American markets for anti-cancer drugs. Further, we areinvesting in nucleic acids and antibody drugs, aiming to create
a long-term business model.

Critical Initiatives for Sustainable GrowthFiscal 2017 Strategies

Representative Director and President
Nagase Beauty Care Co., Ltd.

Unique Products

The Life & Healthcare Products Department successfully
achieved the fiscal 2016 target set under the ACE-2020
mid-term management plan by continuously focusing on foods
and beverages, fragrances, cosmetics and toiletries, and pharmaceuticals and medical materials.
In the food materials area, competitors gaining in power inNortheast Asia negatively impacted on our sales, and as a result,the division was unable to achieve its target. For fragrances andcosmetics, even though the number of inbound tourists inJapan decreased, our ingenious strategy and global big sales ofHayashibara’s AA2G™ (Stable version of Vitamin C) contributed to this achievement. The pharmaceuticals division also
surpassed our sales target by promoting our business in thegeneric drug market which has been growing year after year.
Additionally, in order for us to comply with global and domestic regulations in our business area, our regulatory organization
became bigger by placing experts inside and outside of Japan.

 See the Nagase Beauty Care website for more information:
http://nbc.jp/

 Policies promoting

Naoki Yasuba

Fiscal 2016 Strategies and Results

On April 1, 2017, the Beauty Care Products Department transferred to Nagase Beauty Care Co., Ltd. to generate greater
efficiency.

generic drugs

Performance by Segment

Regulation

firms expanding overseas

 Manufacture of highly active

 Organization to comply with

Executive Officer
Hayashibara Co., Ltd.
General Executive, Life & Healthcare Segment
GM, Life & Healthcare Products Department

Business Environment Major Japanese cosmetics

Leading Us to the Future Wide range of activities (fromhttp://nbc.jp

NAGASE & CO., LTD.

Integrated Report 201743

Global Network
About the NAGASE GroupNet Sales by Region (Japan/Overseas)
and Overseas Sales to Net Sales■Japan ■Overseas (left axis)
Overseas Sales to Net Sales (right axis)■Greater China ■ASEAN ■Americas ■Europe ■Other(¥ hundred million)
10,000

(%)
60

51.1

48.9

1,019

5,000

3,791

EuropeNet sales: ¥11.9 billion
Number of employees: 195

Net sales: ¥193.7 billion
Group companies: 27

Net sales: ¥369.3 billion

15

3,630

0

16/3

3,693
17/3

Group companies: 39

2 	Improve Manufacturing

Profitability

1

Net sales: ¥29.5 billion
Group companies: 9

ASEAN

Number of employees: 185

Net sales: ¥101.9 billion
Group companies: 19

Improve Manufacturing Profitability

Creating a scenario and human resources
development which focuses on overseas
market expansion (overseas marketing andproduction).

Financial and Corporate Information

Integrated Report 20172

Number of employees: 690

Drive Global Business
NAGASE & CO., LTD.

* Figures represent total sales (simple sum) for overseas local entities
rather than sales by region.

Critical Initiatives for Sustainable Growth

Number of employees: 30

Americas

Unique Products

Net sales: ¥15.6 billion
Group companies: 2

Accelerate Globalization

Aim for ¥600 billion* in total overseas Groupsales through 2020. Search and execute growthinvestment (M&A) that matches with themarket strategy of the designated area andaccelerate the business development to expand
business (especially focused in North America).

Other

44

0

Launched in 2016, our ACE-2020
mid-term management plan defines
two pillars for growing and expanding revenues:

1 Accelerate Globalization

Number of employees: 3,678

Greater China

Sales and servicing companies
Manufacturing and processing companies

30

1,937

Number of employees: 1,463

ASEAN andthe Middle East

45

Performance by Segment

Group companies: 3

3,530

2,500

Japan
Greater China

156
119
295

7,500

Overseas Strategy
Under Our Mid-Term
Management Plan

Leading Us to the Future

Built on a foundation of chemistry, the NAGASE Group is engaged in activities around the worldthat 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, home electronics, automobiles, LCDs, semiconductors,
pharmaceutical/medical applications, cosmetics and functional food ingredients.
We have grown to become a global technology and information network with 99 companies
in 22 countries and 6,241 employees worldwide as of the fiscal year ended March 2017.
Today, overseas revenues represent 48.9% of our total business.

ForwardNAGASE & CO., LTD.

Integrated Report 201745

Regional Overview

ASEAN and the Middle East
While the death of the king of Thailand was a major event during the year, economic
confusion was not as great as some had feared, and economic activity in the country
remained relatively calm in fiscal 2016. The region also experienced other significant politicaldevelopments during the year, including the inauguration of a democratic government in
Myanmar and the administration of the new president of the Philippines. Even in the face of
these and other events, ASEAN held to its cooperative structure and the economy of theregion grew. At the same time, the new U.S. administration has created dark clouds over the
TPP and its anticipated effect on economic expansion. Meanwhile, greater direct investment
into the region by China, steady growth in the Indian economy, and other locally-originatedbusinesses contributed to make 2016 a year of major business opportunities.

Major Market Trends

The automobile industry is experiencing stable growth, owing in part to government tax incentives.
The electronics industry is undergoing a rapid change in technology trends, while the office equipment and home appliance industries are undergoing a dramatic evolution in manufacturing. Theenergy, environment, food, medical, and other lifestyle-related industries should see strong growth indomestic demand in China, while the Chinese markets for semiconductors and displays are also
growing.

Major Market Trends

Katsuhisa Yamaguchi

Net
sales
売上高
(¥ hundred million)（億円）

While business grew for plastics and other products for automobiles, semiconductor-related
products, and display-related products in fiscal 2016, sales of smartphone and tablet components were affected by downturns in certain markets.
Our business dealing with Nagase ChemteX products included strong sales of formulated
epoxy resins. In 2015, NAGASE invested in Wuxi Chenghong Electronic Chemicals Co.,
LTD. As a factory for this company came online, first-year sales of chemicals for liquid
crystals progressed in line with our expectations.
In addition to sales of Hayashibara products (TREHA™, etc.), our food business saw
progress in the development of functional materials made by other companies. At the sametime, our new business dealing in environment and infrastructure products (including volatileorganic compounds/soil contamination) began making specific inroads with Japanesecompanies.

2,500

ASEAN and India CEO

Takayuki Masuda

Fiscal 2016 Results
Both sales and profits outperformed the prior year on a local currency basis, making for aquick start out of the box in the first year of the ACE-2020 plan. Our businesses are on
growth paths in nearly every area of this region, and we are moving to a new stage in growth
as we proceed to expand both our customer base and our sourcing infrastructure. The launchof business in Myanmar and restructuring in the UAE and Australia have set the stage forfurther regional expansion.

Net
sales
売上高
(¥ hundred million)
（億円）
1,500

1,937

1,500

1,000

500

16/3

17/3

We plan to bolster initiatives with our main suppliers in our resin sales business, continuing
to expand sales in the Chinese inland market. We are also developing decorative/functional
materials to sell to non-Japanese customers in the automobile industry.
In electronics, we intend to use our local manufacturing functions to develop new
applications and expand sales. At the same time, we will concentrate on developing products
for OLEDs*, LCDs, and car electronics. In semiconductors, we plan to speed up marketingof functional materials, mainly focusing on NAGASE Group products and materials
developed by our partners.
In our food business, we will work to grow sales of TREHA™, using this sales network
to grow the market for functional foods in our region. Our environment and infrastructurebusiness is defined as a Growth business. Here, we intend to continue pushing Japanesetechnologies and functional materials for their security and safety.

1,200

1,098

1,019

900

600

300

Fiscal 2017 Strategies
We expect continued significant growth in this region as we bolster our traditional tradingbusiness, while engaging with more speed to uncover and execute investment projects. We
intend to invest in business infrastructure and train our employees to provide perfectly
consistent, high-quality service to our existing business partners. Moving forward in cooperative business with prominent local companies and investing in businesses will be another key
to our success during the year.

Critical Initiatives for Sustainable Growth0

Fiscal 2017 Strategies

Unique Products

2,071

Performance by Segment

Manufacturing and sales in India, the center of the regional automobile industry, have grown.
However, the economies of Thailand and Indonesia have not quite recovered. Even so, we haveboosted our functions as a hub, anticipating even higher levels of automobile production in theregion in the future. Other market trends in the region include the growth in domestic production in
Malaysia, the start of automobile manufacturing in the Philippines, and an increase in the sales of cars
in Vietnam, Myanmar, and other emerging economies. At the same time, these regions are building
stronger domestic production infrastructures. Meanwhile, the large population of this region is
becoming wealthier. Interest is rising in luxury goods, including lifestyle-related products and foodmaterials. Local prominent corporations are also becoming much more active. In other trends, active
investment in this region by Korean and Chinese companies has helped expand our business with
non-Japanese customers in the area.

Fiscal 2016 Results
Executive Officer
Greater China CEO
Nagase Business Management &Planning (Shanghai) Co., Ltd. COO

Leading Us to the Future

Including sales companies, manufacturing companies, and services companies, the
NAGASE Group has more than 40 locations throughout Greater China (Mainland
China, Hong Kong, and Taiwan). Our basic approach to business is to contribute toGroup profit growth by delving deeper for domestic demand and creating locally originated businesses. At the same time, we work with prominent companies and leverage thecomprehensive power of the NAGASE Group to create global business between andamong our worldwide locations.

2,000

About the NAGASE Group

Greater China

0

16/3

17/3

* OLEDs: Organic Light-Emitting Diodes

TOPICS Fostering Human Resources
TOPICS Products for Displays and Semiconductors

46

NAGASE & CO., LTD.

Integrated Report 2017

Financial and Corporate Information

During 2015, NAGASE & CO., LTD. and Nagase ChemteX invested in Wuxi Chenghong
Electronic Chemicals Co., LTD. to boost research and development, manufacturing, and sales ofelectronic chemicals for the semiconductor, flat panel display, and other electronics fields. The
Wuxi Chenghong Electronic Chemicals plant began operations, producing favorable results inthe first year in dealing with chemicals for liquid crystals. We intend to make further inroads
and expand across the Chinese continent in the future.

In fiscal 2016, we began a human resource
development program for mid-level staff at our local
entities. As part of fostering human resources, thoseteaching in this program, those being taught, andour management will continue discussions
throughout the year, considering the future of ourbusinesses in the region. In promoting a companywide branding project, we have started to create anorganic network of ONE NAGASE relationships thatspans international borders.

PT. Nagase Impor-Ekspor Indonesia Branding Roadshow

NAGASE & CO., LTD.

Integrated Report 201747

Regional Overview

Americas

Korea
The NAGASE Group has three local entities (sixlocations) and six Group manufacturing companies
operating in the Americas. We expect stable growth
to continue in the United States, with Mexico garnering more attention as a manufacturing center, andSouth America holding potential for future business.
During 2016, we made new investments in manufacturing companies, expanding our manufacturingfunctions within the regional group.

Major Market Trends

Mitsuru Kanno

Fiscal 2016 Results
Sales of our mainstay electronics and cosmetics
products achieved targets for fiscal 2016 performance.
We recorded growth for existing products, while also
benefiting from the contribution of new businesses.
Our core chemical products business continues tostruggle in the face of competing Chinese products.
Shifting to growth businesses is an urgent need forour business.

Net
sales
売上高
(¥ hundred million)（億円）

Fiscal 2017 Strategies

160

119

80

40

16/3

17/3

Ryuichi Uchida

Net
sales
売上高
(¥ hundred million)
（億円）

300

320

Our business portfolio strategy will consist of
replacing assets, while concentrating resources on
businesses deemed to be Focus businesses. In Central
and South America, our plans call for expanding
business in emerging markets and handling a wider
range of NAGASE Group products. We willtransition some products to local production andotherwise find ways to work more closely with ourcustomers. Effective use of investments will help us
not only uncover new technologies, but also acquire astrong customer base and sales network, accelerating
our expansion in the region. One focus of our efforts
will be to strengthen our management infrastructure
to support these activities.

295

200

100

0

16/3

17/3

TOPICS Application Development

TOPICS Establishment of a Managementin the Electronics Field

Organization in the Americas

North
America

CentralAmerica

Nagase Americas
Management Office(NAMO)Car Multimedia

NAGASE & CO., LTD.

Integrated Report 2017

©Continental Automotive

Shared Service Center
Business Solution Center

South
AmericaWith our growing businesses in the Americas, ourregion is now home to more than 600 employees of
the NAGASE Group and affiliated companies. As wegrow and deepen our local roots, we must look to ourmanagement structure and ability to sustain growth.
In April 2016, we established the Nagase Americas
Management Office, a step toward building a stronger foundation for our business management.

Takeshi Takada* OLEDs: Organic Light-Emitting Diodes

Fiscal 2016 Results
Net
Sales
売上高
(¥ hundred million)
（億円）
200

150

161

156

The automobile industry of North America
demonstrated strength during the period, andsales of Korean-made automobile decorative
components and plastic materials continued
to grow. Furthermore, sales of NAGASEGroup products related to semiconductors,
electronic components, displays, and foodcontributed to profits in a major way.
Fiscal 2017 Strategies

100

50

0

16/3

17/3

Our goal is to contribute to the profits of
the NAGASE Group by creating andgrowing Korean-led businesses. In addition
to our businesses in automobiles andelectronics, sales of Life & Healthcare
segment products (particularly Hayashibara products) are expanding. At the sametime, we are building a foundation fromwhich to sell our Korean-made resins.
Focusing on these products, we plan tostrengthen ties with NAGASE local
entities in every region, seeing a future
where we introduce Korean-led businesses
to worldwide markets. In particular, wehave focused on North America and theemerging market of Vietnam for greater
development. We will be moving forwardwith promising projects in these regions.

Financial and Corporate Information

Based on good collaboration and codevelopment on particular cases, Nagase(Europa) GmbH and European leading
Automotive Industries provide outstanding
solutions for new challenges in our future
automobile mobility.

48

Our mainstay automotive solutions business continued to perform well. Our newly established 3D
printing business expanded throughout the year,
while we sought out new applications for our
products in coordination with local Group manufacturing subsidiaries. Looking toward the core businesses of our future, we invested in a capital venture
fund and also made equity investments in companies
that own unique manufacturing functions.
Fiscal 2017 Strategies

400

With the conclusion of the first year of the ACE2020 mid-term management plan, we see that our
profit structure has changed in a significant way.
Looking forward to the second year of this plan, we
intend to review our mid-term strategy in Europe,
reallocating resources as appropriate. We will makemore efficient use of resources in fields where
growing product sales may be difficult. In fields likely
to provide growth, we will strengthen our infrastructure to support the creation of a model for businesses
developed originally within Europe. Further, we will
engage with more speed in the automobile-related
products that have been in development for the past
several years. We will also work to rapidly market
new applications for these products.

Fiscal 2016 Results

Nagase Korea Corporation CEO and COO

Critical Initiatives for Sustainable Growth0

Nagase America Corporation CEO and COO
Nagase do Brasil Comercio de Produtos
Quimicos Ltda. CEO
Nagase Enterprise Mexico S.A. de C.V. CEO

Major Market Trends

Mass production of ultra-high speed
memory has begun in the semiconductor
industry. 3D memory technology has led to
the foundation of a new stage for growth,
while the expanding adoption of OLEDs* in
smartphones has grown the market for
displays. Korea holds a near-monopolistic
share of the global market for small- andmedium-format OLEDs, and the country ismaking strides in the development offlexible screens. The automobile industry is
globalizing further, extending out from the
U.S. and Chinese markets.

Unique Products

139
120

Major Market Trends

While the U.S. automotive industry continued on a path ofsteady growth, we must keep an eye on any changes inregulatory trends introduced by the new administration.
At the same time, we will continue to focus on eco-friendly
products. We have also turned our attention toward foodmaterials in response to ever-increasing trends in healthy
lifestyle changes. In this area, we are strengthening ourmarketing activities in both North and South America.

Performance by Segment

Executive Officer
Nagase (Europa) GmbH CEO

Korea represents an important market
internationally. An export-based economy,
the country’s top corporations are achieving remarkable growth through investment and globally oriented, speed-based
management. Korea is positioned withsuperior access to the EU, the U.S., China,
and ASEAN through free trade agreements, and the country has had a history of
success in entering emerging markets.

Leading Us to the Future

Global corporations in Europe are dealing with anumber of issues, including Brexit, immigration, andmore. Despite these issues, business growth inEurope is strong. Universities and research institutes
here are ambitiously developing new technologies
and products in electronics, energy, the environment,
and other fields. These entities represent potentially
important partners for Japanese companies.
The automobile industry drives activity in the European
economy. As energy conservation and electrification inthis industry accelerates, there is an impetus to shift
production to the former eastern European region. We
must act with haste in response to these developments,
while minimizing risk to the greatest extent possible. In
the life and healthcare field, we see an ongoing parade ofmergers, acquisitions, and business tie-ups. We mustleverage the NAGASE network to provide a global
response to these developments.

About the NAGASE Group

EuropeTOPICS Growing Korean-Led Businesses
In Korea, our aim is to transition from spec-in activities to global expansion,
handling more NAGASE Group products and other products related tobusinesses in which Korean companies have a special affinity (OLED-relatedmaterials, semiconductor processing materials, cosmetics raw materials, etc.).

NAGASE & CO., LTD.

Integrated Report 201749

Main Manufacturing and Processing Functions
About the NAGASE Group

Nagase ChemteX Corporation
Research and Development Organization

Nagase ChemteX Corporation
Representative Director and President

Net sales/Operating income■ Net sales (Left Axis) ■ Operating income (Right Axis)(¥ hundred million)(¥ hundred million)

300

60

263

237

256

200

40

Nagase ChemteX
Corporation

29
100

20

Functional
ResinsBusiness

20

0

0

15/3

16/3

17/3

The NAGASE Group
Continues to Expand
Across the World
Nagase R&D
CenterNAGASE &CO., LTD.

R&D

DesignTesting

Production
Equipment
Manufacturing

Quality
Control
Analysis

Functional Resins
Business
Performance Chemicals
Business

Photolithography
Materials BusinessPhoto­
lithography
Materials
Business

Japan/Overseas
Proactive Allianceswith Industry,
Academia andGovernment

Bio Chemicals Business

Performance
Chemicals
Business

Net sales for fiscal 2016 amounted to ¥25.61 billion (8% year-on-yearincrease), while operating income came in at ¥2.96 billion (62%increase). In electronics, we recorded strong sales of epoxy resins,
including liquid sealants for semiconductors and sheet encapsulation

for hollow packages for high-frequency devices. Profits were higher,
mainly due to higher net sales, production rationalization, andoperating efficiencies designed to improve and strengthen our
fundamentals.

Production Systems
Nagase ChemteX is striving to strengthen our production system, improving production planning
accuracy and production efficiencies. With the goal of improving the safety awareness of all
employees, we began an official safety awareness training program during fiscal 2015. This program
offers practical training for all employees at our Harima facility, as well as for employees of neighboring companies. During fiscal 2016, we installed new sludge reduction equipment to lower
disposal costs related to factory waste water.

Integrated Report 2017

The Photolithography Materials Business is engaged in product development and manufacturing
activities based on the technology and know-how developed in the chemical business for liquid
crystals and front-end processing for semiconductors. Sales of stripping agents for displays werestrong during fiscal 2016, coupled with growth in photoresist sales. During the year, we beganSingle-Layer Ultra-Anti Tapered
development of new resists in cooperation with universities. The project has been moving forward Resist
at a satisfactory pace. We have completed the work for our manufacturing bases in Taiwan and
China, which are now engaged in stable operations. We will improve the speed of evaluations by
establishing a laboratory in Taiwan, and we are also looking into locating a new manufacturing
Double-Layer T-Shaped Resist
base capable of handling new flat panel factory construction plans in China.
Our Performance Chemicals Business is engaged in development and manufacturing activities
for functional materials based on unique organic synthesis technologies, polymerization technologies, and compounding technologies. In our epichlorohydrin derivatives business, we used
proprietary synthesis technology to successfully develop new polyfunctional/fully water-soluble
epoxy and low-chlorine epoxy. We have also made strides in developing new products using thecharacteristics of these materials, including film coatings, fiber processing, and other applications. Touch Panel
We are moving forward in product development for a multi-function Denatron, a product thatwill add secondary characteristics of stretchiness, slipperiness, and water repellency, among others,
to the anti-static version of our transparent conductive coating Denatron product for display
applications. We are also developing touch panel and bio sensor features for our highly conductive
version of the product, delivering on concepts of simplicity and flexibility.
The Bio Chemicals Business manufactures and sells our proprietary enzyme products, mainly tocustomers in the food industry. During fiscal 2016, we developed food enzymes for use in breadmaking, confectionery, and meat tenderizing. These were just some of our activities in proposing
value-added products and applications to our customers. In particular, we began sales of
DENABAKE ™ EXTRA in October 2016. This product was the result of joint development
between Nagase ChemteX and NAGASE Group company Hayashibara. Ongoing productivity
improvements allowed us to achieve higher levels of profitability for our main products.

Wearable Electrocardiogram

DENABAKE ™
EXTRAFiscal 2017 is the second year of our ACE-2020 plan. We willcontinue to strive to improve under the four key policies of this plan:(1) Portfolio Optimization; (2) Expand and Strengthen revenue base;(3) Mindset; and (4) Strengthen Management platform. We plan to
use the business unit structure to streamline our businesses by clearly
defining our profit structure, reducing costs, and consolidating products. At the same time, we will aim to create new businesses throughactive investment and accelerated development activities.

Financial and Corporate Information

NAGASE & CO., LTD.

Poster(semiconductors)

Fiscal 2017 Strategies

Sludge Reduction Equipment

50

BioChemicals
Business

Internepcon Japan

Critical Initiatives for Sustainable GrowthFiscal 2016 Results

The Functional Resins Business is engaged in product development and production basedon advanced formulated epoxy technologies. We recorded higher sales of resins for use inhydrogen fuel cell tanks in fuel cell vehicles, sealants for car electronics (used in ecofriendly cars), and coating materials for low-power chip components. This growth ismainly in response to rising needs for environmentally friendly, energy-saving materials.
We recorded significant growth in molding compound for semiconductors, where we
introduced new applications in all types of fan-out wafer level-packaging uses. Sales werealso strong for sheet encapsulation for hollow packages for high-frequency devices, as well
as sealants for displays. We have also conducted our own new materials development andpioneered new applications, expanding our business through exhibitions and othermarketing channels.

Unique Products

18

Endotoxin Removal
Agent and Prototype
Minicolumn

Fiscal 2016 Operations

Major Market Trends

Despite slowing growth in the smartphone market, our businesses in the electronics field forsmall- and medium-sized high-definition displays and electronic components recorded stable sales.
However, our large-format TV business continued to fight headwinds in the Japanese domestic
market due to the emergence of Chinese, Korean, and Taiwanese manufacturers. For automobiles
and other transport-related equipment, our response to demands for weight-savings and environmental considerations will likely lead to an increase in plastic materials usage, for which we can
expect future growth. We expect to see greater demand for enzyme production in our food businessin response to the rapid growth of the functional foods labeling market.

Silver Nanowire Ink for IJ

Performance by Segment

Akihiko Isono

UV-Cured Resin(Rubber-Type) for 3D
Modeling

Leading Us to the Future

Nagase ChemteX Corporation plays the central role in NAGASE Group manufacturing, leveraging our long-accumulated proprietary technologies in synthesis,
compounding, biotechnology and evaluation. Our company is a chemicals manufacturer offering a unique line of products and posting a high share of the market
in niche categories. By creating deeper expertise and integrating core technologies, we are able to develop products that meet the needs of our customers. As webuild on our foundational technologies, we continue to add high functionality anddifferentiation to our products in niche markets, building stronger relationships oftrust with our customers. This trust drives us to continue to create much more
highly-function, highly-value-added products and services for our customers in
the electronics, environment, energy, and biotechnology fields. In addition,
Nagase ChemteX plays a lead role in production technologies, safety, environmental compliance, quality assurance, and regulatory compliance for the
NAGASE Group.

One of the key policies of mid-term management plan ACE-2020 is Portfolio Optimization. One
means to accomplish this objective is to create new businesses, and we are currently engaged in building
businesses in promising new markets. Specific examples of next-generation manufacturing out of our
Research and Development Head Office in fiscal 2016 included resin ink (stable performance in the
additive manufacturing process) and ink for wiring. We are currently building up our supply structure forthese products. We have started sample work for products under development in our life sciences business.
These include biomaterials using precision organic synthesis technology and removal agents related tomaterials refining. We are working together with Hayashibara and other Group companies to leverage thewide NAGASE Group information network. At the same time, we are looking outside our own company,
actively pursuing joint research and development with universities, research institutes, and othercompanies.

The NAGASE equity investment in Finnish development andmanufacturing company Inkron (next-generation products for displays,
semiconductors, and printed electronics) will allow for more access tothat company’s technologies, as well as more opportunities for joint
development. We intend to leverage this partnership to strengthen ourbusinesses in the display, touch sensor, and wearables markets. We also
intend to strengthen our manufacturing infrastructure in terms ofoperating safety, manufacturing technology, and quality assurance.

NAGASE & CO., LTD.

Integrated Report 201751

Main Manufacturing and Processing Functions
About the NAGASE Group

Hayashibara Co., Ltd.
Research and Development Organization

Research andDevelopment Center

Leading Us to the Future

Our business is divided mainly into two categories. Our Saccharides Businessleverages biotechnology to manufacture and sell food materials (TREHA™,
Hayashibara Hesperidin S, and Fibryxa™ (isomaltodextrin)), cosmetics materials(AA2G™ (stabilized vitamin C)), and pharmaceutical materials (maltose). Our
Fine & Wellness Business utilizes organic synthesis technologies to offer products
in commercial photography and display, as well as pharmaceuticals(LUMIN™-A), in-vitro diagnostics, and other products in the life sciences field.
To be more global, we intend to strengthen new materials development and application development in parallel. At the same time, we will establish a reliable global
supply system for high-quality products, promoting food safety and quality assurance in line with global standards.

Microorganism screening derived from years of expertise andnew research efforts has put us on the course to developing
purpose-driven research into new enzymes and the development of new saccharides using enzymes. We collect evidence
about market needs through our own survey system, working
closely with our customers to bring new products and applications to the market quickly. Meanwhile, we are active inregistering our intellectual assets, building a structure thatallows our customers to use our products with confidence. At
the same time, we are conducting research and development incooperation with Nagase ChemteX and the Nagase R&D
Center, leveraging the strengths of these entities. In October
2016, we developed a new enzyme for bread making with
Nagase ChemteX. Called DENABAKE™ EXTRA, this new
product is sold by NAGASE & CO., LTD.

Press Conference Launching
DENABAKE™ EXTRA

Major Market Trends
Hayashibara Co., Ltd.
Representative Director and President

Net sales/Operating income■ Net sales (Left Axis) ■ Operating income (Right Axis)(¥ hundred million)(¥ hundred million)

300

90

237

241

Fiscal 2016 Operations
Saccharides
Business

238

200

60

47

45

46

100

30

0

15/3

16/3

17/3
Line of Functional Saccharide Products

The Japanese food industry is our core market in our Saccharides Business. Here, demandhas been very strong for our mainstay TREHA™, SUNMALT™, and HALLODEX™
products. Meanwhile, the market has recognized the antioxidant effects of high-​
performance Ascofresh™, as well as the neutral lipid reduction and improved blood
circulation effects of Hayashibara Hesperidin S. We are gratified to see more cases ofadoption of these products in their respective markets. We are seeing a steady increase in
the number of customers using the new soluble dietary fiber Fibryxa™ (isomaltodextrin).
Fibryxa™ was first introduced to the market last year by Hayashibara, their first new
product since reorganizing the company.
The market for overseas food businesses is expanding, attracting the entry of several
Chinese manufacturers.
In the perfume and cosmetics field, the decline in inbound tourist demand led tosomewhat lower domestic results. However, our efforts in intellectual asset and pricing
strategies have worked synergistically to increase business overseas.
In the medical and pharmaceutical field, we are in the process of acquiring certifications and registrations to respond to highly pure trehalose development projects overseas.

Hayashibara Hesperidin S

Unique Products

0

Performance by Segment

Osamu Morishita

Our B to B customers give our products high marks not only for their physical properties, but also for
their functionality. Our product line extends widely from the food and cosmetics markets to the
medical and industrial fields. In our food business, we have been proactive in creating a systematic
review process necessary for compliance with the rules for Food for Specified Uses and the rules for
Food with Function Claims. This is just one of the ways in which we are building a support structure
for customer product development. Japanese products have a reputation for reliable quality inoverseas markets. In addition to this reputation, we offer added value to our customers throughstable supply, protected intellectual property, and expertise in our products. We will continue to work
together with academia and our clients to conduct advanced research and development in applications for our saccharide products in the pharmaceutical and medical fields.

Soluble Dietary Fiber Fibryxa™
Food Product Development Exhibition

Net sales for fiscal 2016 amounted to ¥23.85 billion, which was a 1%
decrease compared to the prior year. This decrease was mainly due tothe impact of intensified competition overseas. On the other hand,operating income rose 3% to ¥4.63 billion, mainly due to controlled
manufacturing costs arising from lower main raw materials and energy
costs.

Production Systems
We began operations of two new plants to replace the former
Okayama Plant I, establishing systems to supply products reliably andsafely through state-of-the-art manufacturing facilities. We added toour capacity to manufacture TREHA™ at our Okayama Functional
Saccharide Plant, T Building. This new addition began operations in
September 2016.
In addition to making advances in manufacturing process improvements and energy efficiencies through our own engineering methods,
we have also adopted quality control systems based on FSSC 22000,
ISO 9001, and GMP. To answer customer requests from overseas, weare making progress toward Kosher and Halal certification.

Integrated Report 2017

LUMIN™-A Website

Under the ACE-2020 mid-term management plan, we are executing
a basic strategy of pursuing clear growth markets and regions globally.
More specifically, we are moving forward with new application
development worldwide for TREHA™ in response to increased
production capacity for this product. In addition, we are expanding our
product lineup overseas, where the markets are growing. We are also
making advancements in developing applications and validating
functions for our core functional products, including Fibryxa™,
Hayashibara Hesperidin S, and Ascofresh™, preparing to introduce

Financial and Corporate Information

ISO 9001 Certificate

NAGASE & CO., LTD.

LUMIN™-A Promotion (Interior Bus Ad)

Fiscal 2017 Strategies

Okayama Functional Saccharide Plant, T Building

52

While sales of photography and printing plates and other dyesfor commercial use decreased for the year in the Fine &Wellness Business, sales of in-vitro diagnostics and other life
science products were strong. We expect future growth in salesof dyes for use in polarizers and displays. Here, we are increasing production in good order, even though we have yet tocomplete the mass production development stage. Meanwhile,
sales of Class III pharmaceutical LUMIN™-A recovered,outperforming the prior year. This was the result of creating astronger working relationship with our sales agents.

Critical Initiatives for Sustainable GrowthFiscal 2016 Results

Fine &
Wellness
Businessthem to appropriate markets.
On the production front, we are shoring up our technology
development and production centers in Okayama, while researching
the potential for overseas production from the standpoint of consistent
raw materials procurement and competitiveness.
Our highly original materials research is the DNA of our company. Based on our capabilities here, we plan to further deliver added
value combining our own materials, utilizing government-academicindustry projects, and contributing to a healthier and happier society.
NAGASE & CO., LTD.

Integrated Report 201753

Major R&D Functions
Nagase Application Workshop
The Nagase Application Workshop (NAW) is home to specialized equipment
and expert staff capable of conducting raw materials analysis, application development, and final product formulation for plastics and coating materials. This
organization is responsible for technological development, incubation, and technological training. The NAW continues to pursue surface decoration and functional
properties in the fields of plastics and coatings.
Main Functions
1. Plastics

Main Functions
 Proprietary biotechnology development functions integrating advanced technologies andGM, Nagase Application Workshop

Xiaoli Liu

academic knowledge across a wide range of fields (N-STePP™: Nagase Streptomyces Technology
for Precious Products) Planning and development functions leading to new businesses that make possible the use of
biotechnologies for efficient production of valuable materials with low environmental impact (Field:
Biochemicals, functional materials)
 External Biotechnology assessment and adoption functions

Tetsuya Asakawa

Technologies Fundamental Technologies: Genetic engineering, metabolic engineering, fermentation engineer-ing, bioprocess engineering, bioinformatics
 Core Technologies: Materials production technologies using actinomycetes, strain improvement
technologies utilizing metabolic engineering

Achievements in Fiscal 2016
 Discovery of a method to improve substance productivity by new microorganisms (patented)
 Development of a manufacturing method for functional material ferritin (patented)
 Academic presentation about the efficient production of UV-absorbing substance Shinorine via

actinomycete streptomyces lividans Academic presentation about a method to improve substance productivity focusing on tRNA
activity rates (Winner of the Hot Topic Award at the 2017 Annual Meeting of the Japan Society for
Bioscience, Biotechnology and Agrochemistry)

Fiscal 2017 Strategies
The Nagase R&D Center is dedicated to creating a sustainable world
where people live with peace of mind. To this end, we develop valueadded materials utilizing proprietary microorganisms, based on
multidisciplinary fields in synthetic biology. At the same time, we
continue to propose new ideas to commercialize these technologies,
planting seeds that we hope will one day become new businesses. In
fiscal 2017, we plan to strengthen ties with universities and outside
research institutes in order to be able to take the lead in discovering
seeds of new business, quickly conducting validation and feasibility
studies of new concepts guided by surveys of customer needs. This willlead to the creation of even more new development concepts for our
department to pursue. Further, we are aiming for the early achievement of technological milestones in functional material and components under development, working with development partners both inJapan and overseas.

Integrated Report 2017

NAW
1. Plastics
2. Coating materials
Multipurpose
laboratory

3. Multipurpose
laboratory● Support for local

production overseas

The NAW serves as an incubator for new business development within the NAGASE Group,
receiving expert staff from divisions and affiliated companies on a temporary basis. This
increases the speed of business development through the effective use of technical support
available through NAW facilities and staff.

● Develop unique

NAGASE brandproducts

Development History
Throughout fiscal 2016, we received inquiries and requests from
customers, materials manufacturers, and processing companies basedon our reputation for conducting applied technology development thatmeets true market needs. We received representatives from more than
200 companies, in addition to more than 300 requests for testing anddevelopment. Intellectual property activities included five patentapplications* and four acquisitions of rights. In addition, we actively
pursued collaboration with companies inside and outside the
NAGASE Group, universities, and other external research institutes.

Plastics

Coatings• Develop plastic materials for molding with
automotive industry parts makers (Tier 1, Tier 2).
Weight savings, high-grade treatment,
improvement in scratch resistance, etc.

Development of Pat!naLock™
(new-concept antirust paint using “rustprevention by rust”) and a carbon
hybrid™ coating system that significantly reduces solvent-based coating
VOC• Development of high sliding polyethylene
featuring superior processing characteristics• Development of transparent, highly rigid
plastics for use in cosmetics, medical products,
and food applications

Technologicalcapabilities

Expertjudgment• Discover seeds of newtechnologies/businesses• Technology assessment

Survey andanalysis
capabilities• Needs assessment• Value analysis

Cumulative(through fiscal 2016)

Fiscal 2016
In Japan

Overseas*2

In Japan

Overseas*2

Patentapplications*1

10

7

885

440

Patents*

6

0

206

208

1

*1 The number of patents under the name of the Nagase R&D Center.
Licenses and other intellectual property rights are not included.
*2 Figures include applications for international patents.

Fiscal 2017 Policies
The NAW works with customers and suppliers as development
partners in the plastics and coatings fields. Through these activities, we
add new levels of support for technical sales, contributing to the realand perceived value of the NAGASE name.
During fiscal 2017, we plan to speed up our cooperative businessdevelopment with other divisions and affiliated companies in Japanand overseas. In particular, we are targeting the commercialization of a
TOPICS Development of a Carbon Hybrid™ Coating Systemcarbon hybrid™ coating system and a high sliding polyethylene,
among other projects.
Our goal is to uncover new elemental technologies and functional
materials earlier than any other company in the world, contributing to
growth in our markets. We will develop useful formulations and create
proprietary NAGASE technologies that we can suggest as effective
solutions to our customers.
Coating

VOC

Coating

Carbondioxide

VOC
CarbonAs the world moves to limit emissions of VOCs, pollutants and threats to human health, thedioxideNAW is developing a carbon hybrid™ coating system that will reduce paint and paint thinner
Diluting solvent
Liquefied carbon
VOCs by 50 percent. This coating system replaces paint thinner with liquid carbon dioxide as adioxidesolvent-based coating (Fig. 1, 2) to reduce VOCs by a significant amount. In contrast to waterFigure 1 Solvent Coating
Figure 2 Carbon Hybrid™ Coating
and powder-based coatings, this method is expected to reduce VOCs while also increasing(Traditional)
Systemcoating efficiency. The use of liquid carbon dioxide offers a number of advantages to paintthinner: (1) Not harmful to human health; (2) Low environmental footprint; (3) High solubility, viscosity reduction, and volatility; and (4) Cost savings. As such,
this method does not contribute to the production of new carbon dioxide, which is known to be a greenhouse gas.
The carbon hybrid™ coating system can be installed in existing solvent-based coating booths, serving as a promising, environmentally friendly coating
system that can be adopted at lower costs than water- or powder-based systems. The NAW is applying for a number of patents as part of an intellectual
property strategy to commercialize this carbon hybrid™ coating system.

NAGASE & CO., LTD.

Integrated Report 2017

Financial and Corporate Information

NAGASE & CO., LTD.

materials andprocessing technology● Marketing, including
application
development

Customers
Automobiles/
Appliances, Office
Equipment, Mobile
Phones/Amusement/
Housing/Apparel,
Sporting Goods/
Cosmetics, Food Products,
Beverages

Critical Initiatives for Sustainable Growth54● Evaluation of raw

various processing equipment, physical property assessment using various evaluationequipment(Equipment) Dry type paint booths, disperser (paint conditioner, horizontal/vertical bead mill),
UV curing system drying oven, environment testing equipment (xenon WOM, SUV weathering test equipment, salt spray test equipment, constant temperature/humidity oven, etc.)* Number of projects during fiscal 2016. Projects listed under the Nagase Application Workshop name do not include licenses or other intellectual properties.

• Fundamental actinomycete
technologies• Multidisciplinary expertiseIntellectual Property Administration and Usage
The intellectual property team within the Nagase R&D Centersecures the outcomes of research and technological development
activities in the center as intellectual property. At the same time, theteam proposes patent strategies for use in future businesses, conducting
research and development as business strategy. The team will workwith the Intellectual Property Office (currently Legal Division) to
manage and utilize NAGASE Group property, securing patent rights
and coordinating strategically with departments at our affiliates.

Processing
companies

This mechanism is madeuniquely possible
by NAGASE

2. Coating materials Coating and ink formulation by expert technicians, test production of coatings and inks using

Unique Products

Hot Topics Award at the 2017
Annual Meeting of the Japan
Society for Bioscience, Biotechnology and Agrochemistry Production method for new cosmetic material using actinomycetes

Materials
manufacturers

NAGASE

Formula design by expert technicians, test production of compounds (mainly via twin-screw
extruder), test production of molded plastic products (via injection molding), physicalproperty assessment using various evaluation equipment(Equipment) Twin-screw extruders (15mm/18mm/26mm), Henschel mixers, injection
molding machines (80t and 110t), T die extruder, press molder, analytical equipment (thermal
analysis, FT-IR, etc.), physical property measurement equipment (tensile strength, bending,shock testing equipment, HDT testers, etc.), computer color matching system (CCM)

Performance by Segment

GM, Nagase R&D Center

Leading Us to the Future

The Nagase R&D Center serves to provide biotechnology research and development functions for the NAGASE Group as a whole, bridging the NAGASEGroup trading company and manufacturing hybrid business model. Our mission isto develop proprietary actinomycetes technologies to bring safe, secure, eco-friendly
chemicals and materials to fruition through biotechnology process innovation. In
doing so, the center will continue to create the seeds of new businesses not yet conceived of in our current operations. The watchwords of the Nagase R&D Centerare “unique, independent, and innovative.” Guided by this motto, we pursue
research and development activities that provide value to both NAGASE Groupaffiliated companies and our customers. This type of value is distinctive of theresearch and development function within the traditional trading company model.

Nagase R&D Center

About the NAGASE Group

Nagase R&D Center55

Critical Initiatives for Sustainable Growth

The NAGASE Group has a Code of Conduct which defines
our respect for human rights and our refusal to discriminate
against individuals or groups in any manner. As a corporategroup doing business around the globe, the NAGASE Group
respects the history, culture, and customs of every region, andwe do not engage in harassment or discrimination based on
race, creed, gender, religion, nationality, language, physicalcharacteristics, wealth, or place of birth. This Code of Conduct

is available in Japanese, English, Chinese, and German,
distributed as a booklet and available through our corporate
intranet for the reference of all Group employees. We require
every NAGASE Group employee to comply with this Code of
Conduct. In the event of an incident of discrimination, theGroup will take immediate steps to investigate the situation,acting to help the affected individual(s) and to prevent any
recurrence.

Work-Life Balance
Basic Stance on Work-Life Balance

Work-Life Balance Initiatives

We believe that work-life balance is a critical part of respecting diversity. Establishing a workplace environment in which
it is easy for employees from a wide variety of backgrounds towork enables achieving a working style that has a balance
between professional and private lives, connects to fulfilled
work and living, and we take this to be beneficial for both thecompany and employees. Thus, we are reforming mindsets
and establishing systems to accomplish this.

The monthly meeting of the Health Committee includes
discussions related to flexible work schedules, encouraging paid
time off, and reducing overtime. The committee uses results ofworkplace surveys as a basis for labor-management talks
regarding creating a workplace environment that is moreamenable to work-life balance.
We expect to see more women excelling in the workplace,as well as increasing employees who also provide in-home carefor family members. Accordingly, our aim is to develop apractical system allowing employees more choices about work
arrangements as they go through different stages in their lives.

TOPICS Flex-Time for Parents of Young Children
and Caregivers

Diversity Initiatives

The NAGASE Group believes that diversity is an importantpart of its overall corporate strategy.
The NAGASE Group currently employs a diverse range of
personnel who differ in terms of gender, nationality, age, values
and lifestyles. Respect for the ideas and views of a diverse rangeof employees encourages more dynamic internal discussions
and leads to new ideas that become the source of competitive
advantage in the market. This in turn leads to the growth ofboth the NAGASE Group and each individual employee.

Our diversity initiatives began in earnest in fiscal 2008 with thelaunch of the Diversity Promotion Committee. We conducteda second survey during fiscal 2011, and will continue to monitor our progress over a three-year span as we introduced newactivities in fiscal 2012.
During fiscal 2016, we formed a subcommittee consistingof members from a variety of backgrounds to discuss “Diversity
Management.” More specifically, members discussed theinfluence of diversity in the future of the NAGASE Groupand how we can be more receptive to diversity (Diversity andInclusion). Based on these discussions, the subcommittee
proposed goals and the direction of future policies for embracing diversity within the NAGASE Group.

Themes for Diversity Promotion

2.	Diversity in organizations andindividuals

3. Develop good places to work➀	Periodic messages from top management andbroadcasts of related information➁ Instill the NAGASE Management Philosophy,
NAGASE Vision, and The NAGASE Way deeply
into NAGASE Group employees➂ Improve global communications➃ Support employees’ career development➄	Continue employing non-Japanese people
and women as main career track staff andimprove our corporate culture➅	Instill awareness and activate initiatives forcontinuity and productivity improvements➆	Support employees who are dealing withhome care or other challenges

The NAGASE Group HR Development Policy■ Male ■ Female

The NAGASE Group Approachto HR Development

NAGASE Group HR development programs consist of anorganized combination of on-the-job and off-the-job training.
On-the-job training lets employees experience real-world workin a variety of roles to gain new knowledge and skills. Off-thejob training also involves training and gaining skills throughboth formal lectures and self-directed learning.
The NAGASE Group promotes on-the-job training, whileat the same time ensuring employees are able to learn knowledge and skills for their continued growth. These programs
include rank-specific training for young staff, training for
managers, and position-specific training to ensure staff havethe necessary knowledge and skills to perform their work.

Organization-Wide HR Development
to Promote Group Function

Frank Exchanges ofOpinions

Sharing New, ValueAdded Ideas

New Proposals to
Customers

Company Growthand Contribution toSociety

We offer Group-wide HR development programs based onrank, as well as improved head office-based training for overseas national staff designed to more fully deliver the NAGASEGroup functions.
TOPICS The President’s Award
In fiscal 2016, we introduced the President’s Award as another means
to foster job satisfaction and motivation among our employees. We
believe this program will help us build a better company, encouraging

NAGASE & CO., LTD.

Integrated Report 2017

(Persons)
1,000

972

978

973

971

944

800

346

600

346

350

349

332

400
200

626

0

13/3

632
14/3

623
15/3

622
16/3

612
17/3

Number of Main Career Track Employees Hiredamong New Graduates■ Male ■ Female (Left Axis)(Persons)
40

36

Ratio of Female Employees (Right Axis)
(%)
40

2

30

30

27 0

23

20

3

13%
10

34
13/4

0%

27

14/4

20
15/4

16

3

15%

6%

0

20

20

2

13%
17

16/4

10

14

Financial and Corporate Information

Discussions among
Employees who Have
Various Backgrounds

Number of Employees by Gender

Critical Initiatives for Sustainable Growth

1. Internal education

Human Resource Development

Unique Products

Basic Stance on Diversity

Performance by Segment

As one measure encouraging flexible work arrangements for
employees, beginning April 2017 NAGASE & CO., LTD. has expanded
eligibility for the flex-time system to parents of young children andcaregivers in addition to those employees who have been engaged
in research at the Nagase R&D Center.

Diversity

56

Leading Us to the Future

Respect for Human Rights

About the NAGASE Group

Human Rights, Employment Practices

See P.22 for more
about NAGASE Groupbranding activities.

0

17/4

employees and management to come together in finding satisfaction in
their work and committing to full participation. We have rolled out thisprogram to the entire Group to motivate and create greater solidarity
among our employees.

NAGASE & CO., LTD.

Integrated Report 201757

Critical Initiatives for Sustainable Growth

Training Program

Strengthening Management Capabilities and Operating
Skills and Fostering Globally Proficient Personnel➊ Promote globalization• Assign employees to overseas entities• Send employees to business school• Provide cultural training• Offer English language training support➋ Train managers

Programs to sharpen our competitive ability(send employees to business school or MBA
basic training, etc.)

Fiscal 2016

Rank-Specific Training

873

796

699

Overseas Training

17

19

11

Selective Training

21

8

20

Business Leadership
Program for Overseas
National Staff

39

37

36

Using the NAGASE Global HR Development Center
In May 2014, we opened the NAGASE
Global HR Development Center in
Sendagaya, Tokyo. The center serves as
our base for developing humanresources that will lead us towardsustained growth. During fiscal 2016, weused the facility for a number of different purposes. We held major
meetings (joint division council meetings, global meetings, mid-termplan council meetings), training (HR training, Group company
training, intern training, etc.), and more. A total of 4,261 people used
the facility during fiscal 2016, including 1,286 room nights and 142
training meetings.

• Provide shared value workshops in rankspecific training• Offer shared value workshops for managers• Conduct surveys
As the external business environmentchanges, we will continue to revise andimprove our training programs.

Staff Development Program
For National Staff
SkillsGeneral Manager

MindsetFor Clerical Position Staff

Practical

Overseas Business School Enrollment

Division Manager

NAGASE Group
Environmental ­Management Structure
NAGASE began building an environmental management
structure in May 1999 by establishing an Environmental
Protection Committee, a role currently assumed by the Risk
Management & Compliance Committee. Earlier than othertrading companies in Japan, NAGASE & CO., LTD. obtained
ISO 14001 certification for its environmental management
system in April 2000 in response to societal demands. Since
then, the Environmental Protection Committee has offeredaffiliated companies advice and support for obtaining ISO
certifications and thereby expanded the scope of certification.
We conduct activities together with six sales companies, Nagase
Chemical, Nagase Plastics, Nagase Abrasive Materials,­Nishinihon Nagase, Nagase Elex and Nagase-OG Colors &Chemicals under the Environmental ISO Management
Organization.
Many of our domestic manufacturing, processing, services,
sales, and other Group companies are working independently toacquire certifications and are engaged in environmental activities.
These firms include Nagase ChemteX Corporation, Nagase
Medicals Co., Ltd., Totaku Industries, Inc., Nagase Techno-­
Engineering Co., Ltd., Nagase Techno Service Co., Ltd. andFukui Yamada Chemical Co., Ltd.
We will continue with activities to improve the environmental management systems among certified Group companies.

Environmental Management Structure
Risk Management & Compliance Committee

Environmental ISO
Management Organization
Environmental ISO
Management Representative

NAGASE & CO., LTD.

Affiliates
Management

Environmental ISO
Management General Secretariat
Chief Environmental
Management Representative
Environmental Management
Representative

Environmental Management
Representative
Internal Environmental
Audit TeamInternal Environmental
Audit Team
Secretariat

Secretariat

Environmental Protection
Officers

Environmental Protection
Officers

Eco-Leaders

Eco-Leaders

NMP (NAGASE Management Program)

Section Manager
Manager Training

Appraiser Training
GMP(General Management Program)Manager Candidate Training
Management Skills
Seminar

SA Training(Promotion)
昇格SA研修Overseas Business On-the-Job Training

Section Staff
Leadership Training

NAGASE & CO., LTD.

Practical Skills Seminar

BMP（Basic Management Program）

Business Skills Training

Core/Skill Training

Office Systems Training

Office Systems Training

Introductory Training

Basic Practical Skills
SeminarIntroductory Training

Integrated Report 2017

logistics. Reflecting our beliefs, in August 2008, we developedand implemented the Nagase Energy Calculation Online
System. This system uses logistics voucher data from our sales
management system to calculate domestic cargo transportvolumes.
This system makes it possible not only to calculate ourannual cargo transport volume and CO2 emissions but toanalyze transport routes for optimization, which also helps
reduce our CO2 emissions. In such ways, the NAGASE Group
is striving to reduce energy consumption in its logistics operations, thereby contributing to the prevention of global
warming.
Beginning in fiscal 2012, we have held regular Safety
Patrols and Energy Conservation and Recycling Patrols inbuildings owned by the Company. These patrols ensure safety
in the workplace and promote energy-saving awareness within
the Company.

NAGASE & CO., LTD.

Integrated Report 2017

Financial and Corporate Information

MBA Basic Education
Program

BIP（Business Improvement Program）

NAGASE & CO., LTD. bases its environmental management
activities on daily operations. Specific activities include thepromotion of environmental businesses and energy conservation activities, as well as the enhancement of operational
efficiency. Our environmental businesses encompass renewableenergy, energy storage, energy/resource conservation, regulatedmaterials replacements, recycling/reuse, and measures tocombat global warming. One Company-wide initiative is tocreate and expand businesses utilizing environmental andenergy technologies. We will continue to share informationand functions among and between Group companies tobecome an organization that rapidly develops and deploys
products and services that lead to a more sustainable andlow-carbon society.
Another way we believe we can shrink our environmental
footprint through our business is to be more efficient in our

Critical Initiatives for Sustainable Growth

Environmental Management Activities

Domestic Business School Enrollment

58

Environmental Management

Unique Products

For Main Career Track Staff, Specialized Position Staff, R&D Position Staff

Environment

Performance by Segment➌ Instill shared values

Fiscal 2015

Leading Us to the Future

We have emphasized the following three points among ourvarious development policies. We will continue to revise Group
education and training programs according to changes in theexternal business environment and NAGASE Group strategy.

Fiscal 2014

About the NAGASE Group

Number of Participants in Main Training Programs

Major Policies

59

Critical Initiatives for Sustainable Growth➌ Fulfill our responsibilities as agood corporate citizen

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

We will conduct our business activities in full awareness of the need to preserve the ecosystem andprotect the environment, and we will make every
possible effort to give full consideration to theenvironment within the limits of technological andeconomic feasibility.

As a good corporate citizen, we will work
together with public institutions, industries, and local communities to promote
environmental conservation measuresthat are suitable for the NAGASE Group.

➍ Environmental management systems
and continuous improvement➎ Disclose and make the relevant parties
fully aware of our Environmental Policy

The NAGASE Group has set environmental targets
to achieve our environmental policies. Further, wehave established and operate an environmental
management system, striving for continuous
improvement.

We will disclose our Environmental Policy to the
public and make all who work for the NAGASEGroup fully aware of its contents.

Activities Undertaken by Nagase ChemteX

6,110,367

6,131,628

Fiscal 2016

Waste (t)

188

217

189

Recycling (t)

149

183

148

79.5%

84.1%

78.6%

Recycling (Ratio)
Participating Companies: NAGASE & CO., LTD.
Period: April 2014 to March 2017

Integrated Report 2017

2,826

2,494

3,197

Paper Usage
Fiscal 2014

Fiscal 2015

Fiscal 2016

Paper Usage (1,000 sheets)

7,264

6,007

5,431

Paper Usage (t)

31.0

25.8

23.4

Fiscal 2014

Fiscal 2015

Fiscal 2016

1,727

1,787

1,840

The NAGASE Group is a member of society and, as such, it is ourduty to behave in a manner in keeping with this role by maintaining
good and fair business practices and providing society with the goods
and services it needs. Through continued growth and development,
NAGASE can improve the welfare of its employees, while making acontribution to society.
Based on this corporate philosophy, NAGASE has adopted andwill implement the following Basic Compliance Policy.
This policy defines the behavior standards that NAGASE and its

officers and employees will observe as it carries out its various businessactivities.
Officers and employees of NAGASE must behave in accordance withthese behavior standards and endeavor to disseminate them to thosewithin the corporate organization, especially those with whom theywork. If circumstances arise in which there is a risk that these behavior
standards may be compromised, officers and employees must work to
resolve problems without delay, and to improve operations by identifying the causes of problems and taking steps to prevent recurrences.

➊ Compliance with laws, regulations and internal rules andregulations➍ Respect for the qualities and individuality of employees• Corporate activities will be conducted fairly and in good faith, in accordance with laws and rules, and without any deviation from social
standards.
• Business activities will be conducted in accordance with the rules of theinternational community to ensure the continuing growth and development of NAGASE as a global enterprise.

➋ Elimination of anti-social elements• NAGASE will respect the autonomy and creativity of every employee andfoster a corporate culture in which those qualities can be applied tocorporate activities.
• NAGASE will protect its employees’ health, respect their human rights,
treat them fairly and without discrimination, and secure and provide safeand enriching work environments.

➎ Disclosure of information to stakeholders• Anti-social elements that threaten public order and safety will be met
with firmness and resolutely eliminated.

• NAGASE will strive to ensure transparency by fairly and actively disclosing corporate information to stakeholders, including customers, suppliers, employees and shareholders.

➌ Provision of goods and services that are useful to society➏ Preserving the global environment• NAGASE will contribute to society by supplying goods and services thatare useful to society.

• NAGASE recognizes its responsibility to maintain the global environment
in a better condition and will act in accordance with that responsibility.

Financial and Corporate Information

Fiscal 2015

Fiscal 2016

Fiscal 2016

Waste and Recycling
Fiscal 2014

Fiscal 2015

Basic Compliance Policy

Critical Initiatives for Sustainable Growth5,861,177

Fiscal 2015

Fiscal 2014

The Company established the Risk Management &­Compliance Committee to put into place a structure for risk
management as well as to monitor risk management andcompliance as an advisory body to the Board of Directors. This
committee determines committee member functions andauthority, operating a structure of clearly defined roles andresponsibilities. Under the committee’s leadership, department
managers address risks in their particular areas by formulating
rules and implementing training. The Company also works
through the Risk Management & Compliance Committee todevelop systems and departments responsible for additionalrisks that materialize and strives to lower the risks that could
impact the Company’s business.
In addition, the Risk Management & Compliance­Committee formulates the basic compliance policy to maintainthe Company’s compliance system and uses regular workshops

and other initiatives to ensure that corporate activities arestrictly in line with the NAGASE Group Code of Conduct.
Should employees of NAGASE or its Group companies
become aware of legal or other compliance issues, they immediately report to the Risk Management & Compliance Committee, which promptly reports to the Audit & Supervisory
Board. In addition, the Company has introduced an internalreporting system wherein employees and others can report or
discuss issues directly. The Company revised the NAGASEGroup Code of Conduct in November 2012, distributing the
document to all employees throughout the entire domestic andinternational NAGASE organization.
In January 2015, we established the Crisis Management
Guidelines. These rules are part of a structural and communications system that allows us to quickly and properly respondas a cohesive organization, gathering information, providing
reports, and issuing instructions in the event of a crisis that
affects business continuity.

Unique Products

The slogan of the core NAGASE Group manufacturing subsidiary
Nagase ChemteX is, “We are a green company and want to help makethe world greener.” Nagase ChemteX is actively engaged in environmental activities, one of which is the creation of a company-wide
energy conservation organization that drives energy-saving activities.
During fiscal 2016, a working group at each business unit level was
responsible for reducing energy output by at least 1%, setting conditions for energy reduction according to equipment, manufacturing
processes, and operating rules.
Once again in fiscal 2016, Kansai Electric Power Co. Inc. asked
Nagase ChemteX to cooperate with energy-saving measures during
the hot summer months. We signed a special peak-time adjustment
contract to cut 10% of used electricity during July, August, andSeptember. We achieved that goal for all three months of the contract, earning a discount on electricity fees.

CO2 Output (t-CO2)

Electricity Usage (kWh)NAGASE & CO., LTD.

peak usage times to keep environmental settings within target
levels. The building energy management system gives us more
visibility in building operations, allowing us to publish electricity
usage to Company personnel in real time, helping employees
understand the need for and status of our energy conservation.

CO2 Output

Electricity Usage
Fiscal 2014

Identify, Understand, and Control Risk

Performance by Segment

Environmental Performance Data

Risk Management and Compliance

Leading Us to the Future➋ Develop businesses that give full­consideration to environmental issues

As the core company of the NAGASE Group, NAGASE &CO., LTD. sets an example through activities to reduce its
ecological footprint. In addition, the Company views developing eco-conscious businesses as a major component of its
environmental policies. NAGASE & CO., LTD. contributes tosociety by reducing its own footprint, while discovering anddeveloping the types of eco-friendly products that society
demands.
In line with revisions made to the Act on the Rational Useof Energy, NAGASE & CO., LTD. has been designated as a
specified corporation by the Bureau of Economy, Trade andIndustry since its energy usage exceeds fixed levels. Consequently, since fiscal 2011, we have compiled data on theamount of energy consumed at every facility, formulated
medium- and long-term energy reduction plans, and submitted
regular reports to the Bureau of Economy, Trade and Industry.
We adopted and operate a building energy management
system (BEMS) at our Tokyo head office building and Nagoya
branch office. We use automated environmental impact reduction controls and energy conversation operations during summer

60

Fair Business Practices➊ Comply with all environmental laws,
regulations and other rules

Reducing Our Ecological Footprint

About the NAGASE Group

Environmental Policy

CO2 Output from Logistics Activities

CO2 Output (t-CO2)

NAGASE & CO., LTD.

Integrated Report 201761

Critical Initiatives for Sustainable Growth• Basic Approach

Implementation

April 2014–

Targets

Training for new hires related to important points of the Subcontract Act
Held once each in Okayama and TokyoNAGASE & CO., LTD.,
certain affiliatedcompanies

Global trends in bribery prevention
regulations focusing on the U.S. Foreign
Corrupt Practices Act, UK Bribery Act, andUnfair Competition Prevention Act ofJapan, given by an outside expert
attorney
Held nine times in total(Tokyo, Osaka, Nagoya)

March
2016

August–October
2016

62

NAGASE & CO., LTD.,
certain affiliatedcompanies

Additional seminars conducted by anoutside expert attorney related to global
trends in anti-bribery regulations,particularly related to the U.S. Foreign
Corrupt Practices Act, the UK Bribery Act,and the Unfair Competition Prevention
Act of Japan.
Held once in TokyoNAGASE & CO., LTD.,
certain affiliatedcompanies

E-Learning training related to global
trends in anti-bribery regulations,particularly related to the U.S. Foreign
Corrupt Practices Act, the UK Bribery Act,and the Unfair Competition Prevention
Act of Japan.
331 attendees

Hayashibara Co., Ltd.

Seminar on business-related risks inconnection with the Antimonopoly Act
Held once each in Okayama and Tokyo

February
2017

NAGASE & CO., LTD.,
certain business units

Seminar on business-related risks inconnection with the Subcontract Act
Held once each in Tokyo and Nagoya

February–
March
2017

NAGASE & CO., LTD.,
certain affiliatedcompanies
Section managers

Compliance seminars conducted by rank
Held once each in Tokyo and Osaka

NAGASE & CO., LTD.

Integrated Report 2017

• Security Trade Controls

As a trading company specializing in technology and information and which also carries out export business activities, mainlyof chemical products and precision equipment components,
NAGASE has set up its own Security Trade Control Regulations and established the Security Trade Control Committee toappropriately implement security trade control. The Item
Compliance Management Section of the Logistics Management Division serves as the office of the Security Trade Control
Committee. Furthermore, the Item Compliance Management
Section is responsible for security trade control of the Company
and acts as the Security Trade Control Committee’s secretariat.
Meetings of the Security Trade Control Committee andthe Item Compliance Management Council are held as
deemed appropriate. At these meetings, the Security Trade
Control Committee works to understand the export control
situation, follow the latest revisions to the Foreign Exchange
and Foreign Trade Control Law and ascertain a detailed

Efforts to Promote Personnel Development

Every year, the practical business of security trade controls
becomes ever more complex. To keep pace with developments,
the NAGASE Group encourages its employees—primarily
those involved in export operations—to become Security Trade
Control Associates by taking the exam offered by the Center for
Information on Security Trade Controls (CISTEC). As of
March 2017, NAGASE had 856 qualified STC Associates in 21
Group companies. We continue to strive to foster personnel witha high level of knowledge and expertise.

Aiming to Raise Awareness of Security Trade Controls

At NAGASE, internal security trade control training is provided
to all employees, and the Human Resources & General Affairs
Division offers various training opportunities such as orientation
for new employees, rank-specific personnel training, and theimplementation of other activities that educate and instillknowledge. In addition, we hold lectures for domestic subsidiaries and affiliates as well as overseas-based subsidiaries, with theentire Group participating.

• Regulatory Compliance in ProductsInternational society is becoming more concerned about
environment- and safety-related issues. At NAGASE, we
continue to improve product-related compliance and centralized information management, including management ofchemical products. All products we deal in are subject to the
management system administered by the Item ComplianceManagement Section within the Logistics Management
Division. This allows us to comply properly with any laws or
regulations that affect our products.

Strategic Approach to International Chemical­Management (SAICM)

The action plan adopted at the 2002 World Summit on Sustainable Development—also known as the Johannesburg Summit—
is aimed at ensuring that, by the year 2020, chemicals areproduced and used in ways that minimize significant adverse
impacts on the environment and human health. In accordancewith this policy, the entire world is adopting more strict andstandardized regulations concerning chemical management.
Consequently, each nation is witnessing dynamic changes inapplicable laws and regulations.
Also, the Registration, Evaluation, Assessment of Chemicals(REACH) regulations took effect in Europe in 2007. Following
this, from 2009, China, South Korea, Taiwan, Malaysia andother countries bolstered their respective regulatory systems
relating to chemical management. In such an environment, as anentity engaged in business worldwide, the NAGASE Group
provides support to its overseas subsidiaries for responding tothese legal and regulatory developments via the abovementioned Product Management System.
These legal and regulatory developments naturally affect thefinished products in which NAGASE products are used.
Therefore, it is important for the NAGASE Group to offer its
customers relevant information. We work to ensure an accurate
understanding of worldwide legal and regulatory trends withregard to chemical management. At the same time, with the aimof establishing a system to facilitate the global management of
information related to the chemical products and chemical
substances used in our products, we are providing productmanagement education and guidance to our overseas
counterparts.

NAGASE & CO., LTD.

Integrated Report 2017

Financial and Corporate Information

November
2016–
January
2017

Compliance seminars conducted by rank
Held once each in Tokyo and Osaka

All information about our export products, technologies, andoverseas customers is stored in our proprietary Product Management System. Our Sales Division and Item Compliance Management staff confirm whether certain products or technologies
are subject to restriction under the rules of the Foreign Exchange
and Foreign Trade Control Law and the U.S. Export Administration Regulations. Only those products approved by the Item
Compliance Management Section are put into the system asproducts allowed for export.
Moreover, going one step beyond mere adherence to the law,
we define policies of the entire NAGASE Group associated withsecurity export controls that, as a rule, prohibit trade of productsthat are military-related items or that have military applications.
We also make the NAGASE Group fully aware of Group
policies to prevent any exposure to security export control risks.

Critical Initiatives for Sustainable Growth

NAGASE & CO., LTD.,
certain affiliatedcompanies
Section managers

Specific Management Framework

The NAGASE Group checks related laws for the chemicalcomponents and regulated effects of new products that we plan
to introduce to the market. Information related to these products
is managed within the aforementioned Product Management
System database and shared Group-wide. Using this system, weare able to swiftly confirm which products contain regulatedmaterials and ingredients, complying as appropriate with related
regulations and providing our customers with the information
they require to confirm compliance with revised laws in Japanand abroad. Furthermore, to respond to the demands for more
green procurement from our customers, we have establishedGreen Procurement Requirements, procuring and delivering
products after confirming they have been procured in compliance with these guidelines.
We are members of the Japan Chemical Industry Association, the Japan Chemical Exporters and Importers Association,and several other industry organizations. In addition, because we
distribute information on the chemical substances contained in
products along the supply chain, we endeavor to pass on accurate
information by participating in the Joint Article Management
Promotion-consortium ( JAMP) and by using specialized tools
for products containing chemical substances, such as MSDSplus
and AIS.

Unique Products

NAGASE & CO., LTD.
New employees

June–July
2015

February
2016

Content/Attendance

As the NAGASE Group accelerates business globalization, thevolume of off-shore transactions it engages in, as well as
exports to and imports from China, Asia, and other rapidly
growing regions, is increasing. Transactions with suppliers inemerging countries require measures be put in place to prevent
quality management and other issues that may arise due tolegal and regulatory differences between Japan and the countries in question. Therefore, NAGASE & CO., LTD. recognizes the increasing importance of encouraging overseas
suppliers to conduct sound quality management.
We have also worked on test programs to strengthen andexpand Group-wide research, development, and manufacturingfunctions, recognizing the importance of continuing quality
improvement for the Group as a whole.
Accordingly, pursuant to the NAGASE Group Product
Safety Principles formulated in October 2008, the Company ispromoting the establishment of Group-wide rules regarding
quality management and product quality assurance whileproviding its employees with educational programs. Throughthese activities, we are working to ensure the safety of the
products handled throughout the Group.
As NAGASE changes business models from sales agents to
manufacturing/processing and manufacturer investment, we
will increasingly be called upon to assume responsibility for
quality assurance. To assist in this area, the Company established the Quality Assurance Support Team within the Intellectual Property Office (currently the Legal Division) in
December 2010. The Quality Assurance Support Teammanages vendors and contracted manufacturers, supporting
Group manufacturing companies and conducting internal
training.

Framework for Compliance with Product Laws
and Regulations

Performance by Segment• Education Activities (2014–)• Product Safety and Quality Control

picture of export controls across the entire Group while
formulating related Group policies. The Item ComplianceManagement Council is in charge of directing and educatingeach business division and Group company in matters andstatute updates determined by the Security Trade Control
Committee. It is the responsibility of the Item ComplianceManagement to protect the Company and affiliates against therisk of illegal acts with respect to export controls.

Leading Us to the Future

The risk of cartel enforcement, particularly surcharges, underthe Antimonopoly Act can have a major impact on a business.
Since cartel regulations can be an issue, particularly for manufacturing firms, the NAGASE Group actively conducts
education activities, mainly for our manufacturing companies.
Our sales companies (including NAGASE & CO., LTD.),
must be continually aware of the risks associated with violating
sales agent regulations and subcontractor risks under the
Antimonopoly Act. As such, we hold regular education activities through a variety of means to keep this risk in the forefrontof the minds of our employees.
Moving forward, we will continue to educate our employees
about laws related to fair business practices, particularly those
directly affecting our business. The NAGASE Group intends
to strengthen its approach to the prevention of bribery of
foreign public officials with respect to Japan’s Unfair Competition Prevention Act. The Group also plans to continue educating employees worldwide regarding bribery prevention
regulations throughout fiscal 2017. This education also reflectsconsiderations of extraterritorial application of the U.S. Foreign
Corrupt Practices Act and the UK Bribery Act.

Specific Measures Taken for
Individual Risks

About the NAGASE Group

Fair Business Practice Initiatives

63

Critical Initiatives for Sustainable Growth

Community Involvement and Development
Guided by the NAGASE Management Philosophy, we recognize that our Group is a member of the world society. As such, it is ourduty to maintain good and fair business practices and, through continued growth and development, provide society with the goods andservices needed while improving the welfare of our employees.

Nagase Science and Technology Foundation

Nagase ChemteX is engaged in two pillars of environmental
management based on ISO 14001: Green Company (aiming
to be a company that does not negatively impact the environment) and Green Technologies and Products (reducing theoverall impact of society on the environment by developing
and manufacturing environment-friendly products). Nagase
ChemteX pays particular focus to not using (or reducing theusage of ) hazardous chemical substances subject to intensified
regulations worldwide (substances restricted under the RoHS
Directive, substances of very high concern regulated under
REACH, etc.). The company strives to provide products that
customers can use with safety and confidence throughout the
product life cycle.

• Basic Approach

64

NAGASE & CO., LTD.

Integrated Report 2017

Our research and development pursues herb sciences andtechnology, selecting materials from a variety of plants, seeking
out those that combine safety and functionality. The plantmaterials coming out of our research are used as the raw
materials of end products, which are in turn subject to strict
quality management systems in connection with the production process.
At the same time, our designs incorporate considerations
for ease of use, ease of reading, and ease of understanding to
respond to the shift in age demographics of our customers.
Nagase Beauty Care has established an after-sales support
office, which answers customer questions about their purchases.
This support office is staffed with experienced beauty instructors and professionals who work directly with customers. We
have received support from this office in raising the quality ofour products and services in response to customer feedback.
Careful selection of useful herbs fromaround the world. The manufacturing of products that are sensitive
to changes in temperature andhumidity requires efficient extraction
technologies and strict quality
management to ensure that quality
standards remain high.

©Save the Children Japan

Hayashibara Museum of Art

URL:http://www.nagase-f.or.jp/

TABLE FOR TWO Initiative
Under our TABLE FOR TWO (TFT) program, when an employee purchases ameal at our corporate cafeteria, a school meal is donated to children in
Africa. When an eligible menu item is selected, a ¥20 donation is given to
the TFT office, which represents a school lunch for one student. NAGASE isproud to be an active participant in thisprogram since 2008. Through matching
gifts, NAGASE donates an equivalentamount to the program. As of April 2017,
NAGASE and its employees have donateda combined total of ¥2,578,040.

URL: http://jp.tablefor2.org/

URL: http://www.savechildren.or.jp/

Source: TABLE FOR TWOSCRUM JAPAN PROGRAMNAGASE & CO., LTD. supports the SCRUM JAPAN PROGRAM, a program
operated by the Japan Rugby Football Union to foster human resources
through the sport of rugby. This program promotes rugby to elementary,junior high, and high school students, who represent Japan’s future leaders. Through rugby, these children learn
the spirit of the sport: Courage, trust,
responsibility, determination, cooperation, and loyalty.

URL: https://www.rugby-japan.jp/scrum_japan_program/

NAGASE Group company Hayashibara Co., Ltd. provides operational
support for the Hayashibara Museum of Art. The museum houses a collection of Japanese and other East Asian paintings, crafts, and other items
collected by the late Ichiro Hayashibara.
The museum also exhibits furnishings
inherited from the estate of the feudal
Ikeda clan of the Okayama Domain. The
goal of the museum is to contribute toresearch of cultural assets and improvethe culture of the region and of Japan.

URL: http://www.hayashibara-museumofart.jp/

Participation in the Living Architecture Museum Festival
The NAGASE & CO.,LTD. Osaka head office
is a registered cityscape resource of Osaka
City. Every year, NAGASE participates inthe Living Architecture Museum Festival
in Osaka, helping promote the city as an
attraction.

URL: http://ikenchiku.jp/

Community Contribution
Financial and Corporate Information

To contribute to building a welcoming society in which people
can live in peace and safety, Nagase ChemteX believes foodsafety and security is a quality assurance concept for which
there can be no compromise. To ensure food safety andsecurity, our Fukuchiyama Plant, which manufactures foodadditives and health food materials, is subject to strict management as a member of the food chain, from the acceptanceof raw materials and manufacturing to quality assurance andproduct delivery. These practices incorporate Food Additive
Good Manufacturing Practices and FSSC 22000 (voluntary
adoption), based mainly on ISO 9001 standards. Throughthese measures and more, we earn the trust of our customers
by delivering safe, high-quality products.
The company is also expanding its lineup of Kosher andHalal certified products to answer the needs and concerns ofeven more customers across the world.

• Specific Initiatives

NAGASE supports Save the Children Japan. With the aim of realizing every
child's right to survival, development, protection and participation, Save
the Children Japan is part of a coalition
operating in nearly 120 countries aroundthe world, engaged in activities focusing
on child protection, disaster risk reduction,
humanitarian aid, health, nutrition, andeducation.

Critical Initiatives for Sustainable Growth

Food Safety and Security

Nagase Beauty Care sells direct to the consumer through anorganization of independent sales agents. Because theseproducts are cosmetics and health foods that come in directcontact with the human body, the product manufacturing
process must adhere to the strictest quality control standards.
Our highest priority is offering safe, secure products andservices to our customers, both old and new.

We believe in the importance of fundamental research in the organic
chemistry and biochemistry fields, and that offering subsidies throughresearch and development and international exchange leads to theadvancement of science and technology. As part of our contribution tosocioeconomic progress, we established the Nagase Science and Technology Foundation in 1989. Current programs include research grants toresearchers and other subsidies. To date, NAGASE has helped finance 472
research projects, provided support for
178 international exchange programs(program terminated during fiscal 2004),
and contributed a total of ¥1.22 billion tofurther science.

Unique Products

Cosmetics Safety and Security

Save the Children Japan

Performance by Segment

Green Company Initiatives

Leading Us to the Future

The NAGASE Group deals in more than just chemical products.
We also manufacture and sell enzymes and other food products and cosmetics under strict quality management and effective sales systems.
On this page, you will find examples of Group companies that focus on the security, safety, and trust of our customers.
Read more about Nagase ChemteX and how the company reduces its environmental impact and ensures food security and safety,
while dealing in electronics-related materials and food materials.
We also highlight Nagase Beauty Care, a NAGASE Group company that deals mainly in cosmetics and health food.

http://www.nagasechemtex.co.jp/en/environment/index.html

About the NAGASE GroupFor Consumer Safety and Security

NAGASE employees volunteer their time (cleaning, removing protective straw
mats from trees, etc., at Hamarikyu Gardens, etc.) participating in the activities
of Chuo Planet (Chuo-ku/Tokyo Social Contribution Committee).

Blood Donation Activities
Employees participate in blood drives in Tokyo and Osaka twice yearly. In
fiscal 2016, nearly 170 NAGASE employees donated blood.

NAGASE & CO., LTD.

Integrated Report 201765

Financial Foundation Supporting Business Growth

Cash flows

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities(millions of yen)
30,00016,776

15,474

12,721

14,527

Leading Us to the Future

9,047

10,000Free cash flow

29,376
18,57620,000

About the NAGASE GroupIn the first year of our ACE-2020 mid-term management plan,
we engaged in Reform of Corporate Culture andReform of Profit Structure, taking a first, solid step
toward becoming the company we envision for ourselves.

8,009

7,742
0

Representative Director andSenior Managing Executive Officer

Mitsuro Naba

(14,171)–20,000
13/3

Equity capital/Interest-bearing debt/Net worth ratio

66

NAGASE & CO., LTD.

Integrated Report 2017

16/3

Equity capital (left)

17/3

Interest-bearing debt (left)

46.9

300,000

228,505

51.5

53.5

281,398

273,96349.5
246,723

Net worth ratio (right)
(%)
60.0

54.7

45.0

290,217200,000

30.0

98,425100,000

98,49392,82887,56015.0

82,046

0

0
13/3

14/3

15/3

16/3

17/3

ROE = Post-tax Profit ÷ Equity

ROE
Normalize over 6%

Pre-tax ROIC = Pre-tax Profit ÷ (Equity + Interest-bearing debt)

ROIC =

Pre-tax Profit
Sales AmountPre-tax Profit Ratio

8.0%

Sales Amount
Equity + Interest-bearing debt

6.5%

6.5%
6.0%

Invested Capital
Turn Over Ratio
4.9%
4.3% 4.4%

All measures that efficiently
increase profit by reduced cost

All measures that efficiently
increases sales with limited asset

Sales of new andadded-value productIncrease growth investment

Logistics efficiency

M&A

Utilize shared service

Reduce slow-moving,long-term inventory

Withdraw
from unprofitable business

Utilizegroup cash management system

Rationalization

Idle assets liquidation

4.2%

4.0%

4.0% 4.2%
3.7%
3.0%

0.0%

09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3 18/3
(Plan)NAGASE & CO., LTD.

Financial and Corporate Information

Our basic policy is to continue paying a stable dividend to ourshareholders in line with our consolidated results as we
improve our earnings power and management structure. We
look to improve per-share dividends based on considerations of
the consolidated payout ratio and consolidated dividend toequity ratio.
Our initial forecast for fiscal 2016 dividends was ¥32 pershare. However, we raised that figure to ¥33 per share, based on
our most recent earnings and financial condition. For fiscal 2017,
we forecast a ¥35 per share dividend.

15/3

Critical Initiatives for Sustainable Growth

Return of Profits to Shareholders

14/3(millions of yen)
400,000

Capital Procurement

Under ACE-2020, we expect to invest ¥100 billion over five
years to grow our businesses. For fiscal 2016, our investments
amounted to ¥14 billion. We will source our investment capitaland working capital mainly from operating cash flows andinterest-bearing debt. At the same time, efficient use of working
capital and asset replacement will serve to preserve our strong
financial foundation, a particular strength of NAGASE & CO.,LTD. We have established an R&I (Rating and Investment
Information, Inc.) rank of A or higher as an indicator of our
financial strength.

(12,600)

Unique Products

Our ACE-2020 mid-term management plan guides us
through the five years to the fiscal year ending March 2021. Our
goals under this plan are to reach at least ¥1 trillion in consolidated net sales, at least ¥30 billion in consolidated operating
income, and an ROE of at least 6%. We use improved return on
invested capital (ROIC) as a benchmark, focusing on measuresthat contribute to an improved net income ratio (before taxes)
and ROIC.
By investing in and financing our manufacturing functions,research and development, technology and information, andglobal network, we aim to create uniqueness and competitive
advantage, improving the core of our businesses and building
corporate value.

(6,518)(7,732)(9,529)Performance by Segment

Basic Policy(1,450)–10,000

21/3

Integrated Report 201767

Management’s Discussion and Analysis of Operations and Finances

Six-Year Summary

2012

2013

2017

¥631,854
366,369
265,484
71,62813,427¥666,272
361,971304,301
82,583
15,578¥723,212
372,939
350,272
88,936
15,789¥759,713
374,208
385,505
91,991
18,153¥742,194
363,038
379,155
91,66318,024¥722,384
369,365
353,019
91,503
15,030$6,438,934
3,292,317
3,146,617
815,607
133,969

16,536
8,570

19,45814,182

18,353
11,663

18,98911,31815,23912,316

16,10010,331

143,507
92,085¥450,842
212,744
88,7101,024
141,730¥486,747
237,806
98,425
1,147
158,754¥498,141
251,892
92,8281,275
176,470¥546,525
287,500
98,493
1,573
200,413¥512,081
279,149
87,5601,237
157,604¥530,775
295,198
82,046
1,551
197,610$4,731,037
2,631,233
731,313
13,825
1,761,387

138,408
6,124
5,545

138,408
6,921
5,897

138,408
6,984
5,960

127,408
6,781
6,259

127,408
7,338
6,267

127,408
10,394
6,241———
U.S. Dollars(Note 1)(Yen)

The Company recorded gross profit of ¥91.50 billion (0.2% decrease) in
conjunction with lower revenues. Operating income amounted to¥15.03 billion, a decrease of 16.6%. This decrease was mainly due to anincrease in retirement benefit expense in connection with the amortization of actuarial losses. As a result, the gross profit ratio rose 0.3
points compared to the prior fiscal year, up to 12.7%, while the operating margin amounted to 2.1%.
Ordinary income amounted to ¥16.36 billion (11.0% decrease). The
ratio of ordinary income to net sales fell 0.2 points to 2.3%.

¥   91.86
1,942.20
28.00¥   89.10
2,215.18
30.00¥   96.96
2,156.67
32.00¥  81.65
2,301.10
33.00$     0.73
20.51
0.29

2.1

2.3

2.2

2.4

2.4

2.1

—

2.6
1.4
1.5
2.1
4.2
45.4
0.43
155.4
21.26

2.9
2.1
1.4
3.0
6.5
46.9
0.43
184.4
15.46

2.5
1.6
1.5
2.4
4.9
49.5
0.38
187.2
15.8

2.5
1.5
1.5
2.2
4.3
51.5
0.35
187.0
17.86

2.1
1.7
1.4
2.3
4.4
53.5
0.32
200.1
18.69

2.2
1.4
1.4
2.0
3.7
54.7
0.28
192.9
16.31

—
—
—
—
—
—
—
—
—

Despite weakness in personal spending, improved corporate earnings,
employment, and payrolls led to a gradual recovery in the economy
of Japan during the current consolidated fiscal year. The global economy continued to grow at a moderate pace, despite slowing growthin China and other emerging economies. Other worrisome factors
include uncertainty surrounding the economic and trade policies of
the new U.S. administration and the impact of the British exit fromthe EU.
In this environment, the Company recorded domestic sales of¥369.36 billion for the consolidated fiscal year, which represented a
1.7% increase year on year. Overseas sales, impacted by the comparatively strong yen, fell to ¥353.01 billion (6.9% decrease). In total, theCompany recorded ¥722.38 billion in net sales, a decrease of 2.7%.

Net Sales

Note: 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥112.19=U.S. $1.00, the approximate rate of exchange prevailing on March 31, 2017.
Note: 2. Interest coverage ratio is calculated as (operating income + interest income + dividend income) / interest expense.

(Billions of yen)
800

666.27723.21759.71

742.19722.38(Billions of yen)100

■ Gross Profit■ Operating Income

91.6

91.9

88.9

82.5

91.5

75

50

25

15.7

15.5

18.1

18.0

15.0

0
Fiscal years ended 2013
March 31

2014

2015

2016

2017

The Company recorded profit before income taxes of ¥16.10 billion(5.6% increase) with a ratio of profit before income taxes to net sales of
2.2%, which was a 0.2-point increase compared to the prior fiscal year.
Profit attributable to owners of the parent amounted to ¥10.33 billion(16.1% decrease). Return on sales decreased 0.2 points to 1.4%, while
earnings per share was ¥81.65, compared to ¥96.96 in the prior year.

600

Profit attributable to owners of the parent/
Earnings per share

400(Billions of yen)15

■ Profit attributable to owners of the parent (Left scale)Earnings per share (Right scale)

200

11.66

10

0
Fiscal years ended 2013
March 31

(Yen)
150

14.18

2014

2015

2016

11.31

111.31

2017

91.86

Critical Initiatives for Sustainable Growth¥  111.31
1,803.31
26.00

Gross Profit and Operating Income■ Net Sales

Unique Products¥   66.69
1,592.87
24.00

Ratio

Operating Margin(Operating Income/Net Sales) (%)
Ratio of Income before Income Taxes andNon-controlling Interests to Net Sales (%)
Return on Sales (ROS) (%)
Total Assets Turnover (Times)
Return on Assets (ROA) (%)
Return on Equity (ROE) (%)
Shareholders’ Equity Ratio (%)
Debt to Equity Ratio (Times)
Current Ratio (%)
Interest Coverage Ratio (Times) (Note: 2)

The NAGASE Group imports and exports a diverse array of products
and engages in domestic transactions, with NAGASE & CO., LTD. (the“Company” or “NAGASE”) at its center. In addition, the NAGASE Group
manufactures and sells products and provides services. These businesses are conducted by 99 related companies, consisting of 68­subsidiaries and 31 affiliates. The scope of consolidation includes 59
subsidiaries as well as 21 affiliates, which are accounted for by theequity method.

■ Gross Profit and Profit Attributable to
Owners of the Parent

Overview of Results

Per Share Data

Profit attributable to owners of the parent
Net Assets
Cash Dividends

Business Lines and Scope of Consolidation

Performance by Segment

As of the Fiscal Year-End:Total Assets
Net Assets
Interest-Bearing Debt
Share Price (Yen)Market Value
Number of Shares Issued and Outstanding(Thousands of Shares)
Number of Shareholders
Number of Employees

2016(Millions of yen)
2014
2015

Leading Us to the Future

For the Fiscal Year:Net Sales
Domestic
Overseas
Gross Profit
Operating Income
Income before income taxes andnon-controlling interests
Profit attributable to owners of the parent

Thousands of
U.S. Dollars(Note 1)2017

About the NAGASE GroupNAGASE & CO., LTD. and Consolidated Subsidiaries (Fiscal years ended March 31, 2012–2017)

12.31
96.96

89.10

10.33

100

81.65
50

5

0

0
Fiscal years ended 2013
March 31

2014

2015

2016

2017

Financial and Corporate Information

68

NAGASE & CO., LTD.

Integrated Report 2017

NAGASE & CO., LTD.

Integrated Report 201769

Management’s Discussion and Analysis of Operations and Finances

Functional Materials
Fiscal years ended March 31

2016

2017

¥157,149
3,679
71,042
509
—
—
1,752

¥153,546
4,185
72,576
476
—
—
1,716

1,690

297

Fiscal years ended March 31

2016

2017

¥255,505
4,979
122,802
859
—
—
2,389

¥242,609
5,093
121,346
809
—
—
1,394

1,466

3,561

70

NAGASE & CO., LTD.

Integrated Report 2017

Sales to customers
Segment Income
Segment Assets
Depreciation and Amortization
Amortization of Goodwill
Goodwill
Investments in Equity Affiliates
Increase in Property, Plant, and Equipment
and Intangible Fixed Assets(Millions of yen)

2016

2017

■ Cash Flows from Operating Activities¥127,926
6,255
62,912
2,672
132
672
1,968

¥127,722
6,333
65,610
2,524
41
627
2,318

2,855

1,825

The Electronics segment recorded segment sales level with the prioryear. Despite higher sales in Japan, driven by the performance ofdomestic manufacturing subsidiaries, overseas sales were lower.
The Electronic Chemicals business recorded increased sales for theperiod, driven by higher sales of formulated epoxy resin to the electronic components and semiconductor industries.
The Electronic Materials business recorded lower net sales,
mainly due to lower sales of materials for touch panels and thinglass processing.
As a result, the segment recorded sales of ¥127.72 billion for theyear, representing a ¥200 million (0.2%) decrease compared to theprior consolidated fiscal year. Operating income for the segment was¥6.33 billion, representing a ¥70 million (1.2%) increase. This increase
was mainly due to the contribution of higher revenues raising profits
at domestic manufacturing subsidiaries.
Automotive & Energy
Fiscal years ended March 31

Sales to customers
Segment Income
Segment Assets
Depreciation and Amortization
Amortization of Goodwill
Goodwill
Investments in Equity Affiliates
Increase in Property, Plant, and Equipment
and Intangible Fixed Assets(Millions of yen)

2016

2017

¥115,351
1,300
42,136
157
—
—
1,355

¥112,956
1,539
46,258
219
—
—
1,235

244

284

The Automotive Solutions business recorded slightly lower sales forthe year. While sales increased thanks to growth in the resins­business in Japan, the impact of lower naphtha prices drove sales
down overseas.

Fiscal years ended March 31

Sales to customers
Segment Income
Segment Assets
Depreciation and Amortization
Amortization of Goodwill
Goodwill
Investments in Equity Affiliates
Increase in Property, Plant, and Equipment
and Intangible Fixed Assets(Millions of yen)

2016

2017

¥85,571
3,864
99,6203,258
1,502
23,9092,385¥84,904
3,332
98,2213,412
1,502
22,407
2,476

2,341

4,906

The Life & Healthcare segment recorded net sales slightly lower
compared to the same period in the prior fiscal year. While sales werelevel domestically, sales from Greater China and other overseas
regions were lower.
The Life & Healthcare Products business recorded slightly lower
sales of TREHA™ and other products to food ingredient makers inJapan, while sales were also lower in overseas markets. Although thebusiness recorded lower sales of AA2G™ to major Japanese customers
in the skin care and toiletries field, sales of raw materials to the same
field in Japan and overseas grew year on year. In the pharmaceuticals
and medical fields, sales of raw pharmaceuticals and intermediates
grew, significantly, while sales of medical materials were lower. As aresult, the business recorded slightly lower sales compared to the prioryear.
The Beauty Care Products business, which includes sales of cosmetics and health foods, recorded lower sales, mainly due to weakness in the performance of existing products, despite growth in new
product sales.
As a result, the segment recorded sales of ¥84.90 billion for theyear, representing a ¥660 million (0.8%) decrease compared to theprior consolidated fiscal year. Operating income for the segment was¥3.33 billion, which was ¥530 million (13.8%) lower. This decrease
was mainly due to lower profits in connection with lower sales ofcosmetics and health foods.

Cash flows from operating activities for the consolidated fiscal year
amounted to ¥14.52 billion. While the Company paid ¥7.73 billion inincome taxes, it also recorded profit before income taxes of ¥16.1
billion and depreciation and amortization in the amount of ¥9.38
billion.

■ Cash Flows from Investing Activities
Cash used in investing activities during the consolidated fiscal year
amounted to ¥6.51 billion. This result was mainly due to cash outlaysof ¥11.53 billion for purchases of property, plant and equipment andintangible fixed assets, as well as ¥1.82 billion used for purchases ofinvestments in securities. These factors offset cash proceeds of ¥4.65
billion in proceeds from sales of investments in securities.

■ Cash Flows from Financing Activities
Cash used in financing activities for the consolidated fiscal year
amounted to ¥10.59 billion. This result was mainly due to ¥9.18 billion in
repayments of long-term loans and ¥4.05 billion in dividend payments.
Cash Flow Summary
Fiscal years ended March 31(Millions of yen)

2013

2014

2015

2016

2017

Cash Flows fromOperating
Activities¥18,576 ¥ 12,721 ¥15,474 ¥ 29,376 ¥  14,527
Cash Flows from
Investing Activities (9,529) (14,171) (7,732) (12,600) (6,518)
Cash Flows from
Financing
Activities
1,164 (11,833) (3,205) (12,822) (10,592)

OthersOur Other segment recorded sales of ¥644 million, representing a ¥40
million (6.5%) decrease compared to the prior fiscal year. Segment
profit amounted to ¥140 million, down ¥60 million (31.2%) versus theprior year.

Financial and Corporate Information

The Advanced Materials & Processing segment recorded lower sales inboth domestic and overseas markets.
The Colors & Advanced Processing business recorded lower sales.
Despite higher sales of conductive materials from domestic manufacturing subsidiaries, sales of plastic resins for packaging applications and digital print processing materials were lower both in Japanand overseas.
The Polymer Global Account business mainly sells plastics to officeequipment, appliance, and video game device markets. Here, sales
were lower as a whole, as performance declines in sales of thermoplastic resins were lower in Greater China and other overseas markets,
despite gains from domestic manufacturing subsidiaries.

Fiscal years ended March 31

Cash and cash equivalents (Cash) decreased by ¥3.17 billion (7.4%)
compared to the end of the prior consolidated fiscal year, amounting
to ¥39.73 billion.

Critical Initiatives for Sustainable Growth

Sales to customers
Segment Income
Segment Assets
Depreciation and Amortization
Amortization of Goodwill
Goodwill
Investments in Equity Affiliates
Increase in Property, Plant, and Equipment
and Intangible Fixed Assets(Millions of yen)Life & Healthcare

Electronics(Summary of Consolidated Cash Flows)

Unique Products

Advanced Materials & Processing

Financial Condition

Performance by Segment

The Functional Materials segment recorded slightly lower sales in both
domestic and overseas markets.
The Performance Chemicals business recorded slightly lower sales
as a whole, mainly due to lower naphtha prices driving sales of coating
raw materials and urethane materials down in Japan and Greater China.
The Speciality Chemicals business recorded slightly lower sales forthe year. While sales of plastic additives and silicone materials werestrong in the Americas, sales fell in other regions.
As a result, the segment recorded sales of ¥153.54 billion for theyear, representing a ¥3.6 billion (2.3%) decrease compared to the priorconsolidated fiscal year. Operating income for the segment was ¥4.18
billion, representing a ¥500 million (13.7%) increase. This increase wasmainly due to lower raw materials procurement costs at domestic
manufacturing subsidiaries.

As a result, the Automotive & Energy segment recorded sales of¥112.95 billion for the year, representing a ¥2.39 billion (2.1%)
decrease compared to the prior consolidated fiscal year. Operating
income for the segment was ¥1.53 billion, representing a ¥230 million(18.4%) increase. This increase was mainly due to the profit improvements at domestic manufacturing subsidiaries.

Leading Us to the Future

Sales to customers
Segment Income
Segment Assets
Depreciation and Amortization
Amortization of Goodwill
Goodwill
Investments in Equity Affiliates
Increase in Property, Plant, and Equipment
and Intangible Fixed Assets(Millions of yen)

As a result, the segment recorded sales of ¥242.6 billion for the year,
representing a ¥12.89 billion (5.0%) decrease compared to the priorconsolidated fiscal year. Meanwhile, operating income increased ¥110
million (2.3%) to ¥5.09 billion, mainly due to improved product mix andcost reduction measures at domestic manufacturing subsidiaries.

About the NAGASE Group

Results by Business Segment

NAGASE & CO., LTD.

Integrated Report 201771

Management’s Discussion and Analysis of Operations and Finances■ Assets

Total Assets / ROA
546.52(%)
6512.08530.77
4

400

3.0

2.4

200

2.2

2.3
2.0

2014

2015

2016

2017

3

2.70
2.53

2

1

0

0

Fiscal years ended 2013
March 31

2014

2015

2016

2017

Net assets amounted to ¥295.19 billion, up ¥16.04 billion. This increase
was mainly due to ¥10.33 billion in profit attributable to owners of theparent and an increase in net unrealized holding gain in securities.
As a result, the Company recorded a shareholders’ equity ratio of
54.7%, up 1.2 points compared to the end of the prior consolidated
fiscal year.

Shareholders’ Equity Ratio / ROE
(%)
60

45

■ Liabilities

Shareholders’ Equity Ratio (Left scale)ROE (Right scale)

49.5

54.7

6

46.9
4.9

30

4.3

4

4.4
3.7

15

2

0
Fiscal years ended 2013
March 31

0

2014

2015

2016

2017

The NAGASE Group recorded ¥12.17 billion in capital investment(including intangible fixed assets), including ¥2.93 billion in capital
investment for Hayashibara Co., Ltd., to stabilize supplies of functionalsugar products and enhance competitiveness (in the Life & Healthcare
segment).
A breakdown of capital investment amounts by segment is set
forth below.
(Millions of yen)¥   297
3,561
1,825
284
4,906
1,297
12,173(Billions of yen)
6

4.61

5.17

4.90

5.06

5.16

2015

2016

2017

4

2

0
Fiscal years ended 2013
March 312014

Outlook for the Year Ending March 31, 2018
Personal spending is expected to remain strong throughout the next
fiscal year, buoyed by an improving picture in domestic employment
and payrolls. Overseas, corporate earnings and strong personal spending in the United States is expected to continue. However, the impact
of policies introduced by the new U.S. administration on China andother emerging economies is unclear, leading to continued instability
in the overall business environment.
For the year ending March 31, 2018, we forecast consolidated net
sales of ¥732 billion (1.3% year-on-year increase), operating income of¥19.1 billion (27.1% increase), ordinary income of ¥20.9 billion (27.7%
increase), and profit attributable to owners of the parent in theamount of ¥12.5 billion (21.0% increase).
These forecasts have been developed based on a currency conversion rate of ¥108 to the US dollar.

NAGASE & CO., LTD.

Integrated Report 2017

Financial and Corporate Information

Functional Materials
Advanced Materials & Processing
Electronics
Automotive & EnergyLife & Healthcare
OthersTotal

Research and Development Expenses

Critical Initiatives for Sustainable Growth

Capital Investment

Reportable Segments

Integrated Report 2017

51.5

53.5

(%)
8

Unique Products

Liabilities amounted to ¥235.57 billion, a ¥2.64 billion increase compared to the end of the prior consolidated fiscal year. This increase wasmainly due to increases in notes and accounts payable and long-termdeferred tax liabilities.
Current liabilities increased ¥10.37 billion compared to the end of theprior fiscal year, amounting to ¥166.49 billion. This increase was mainly
due to increases in short-term loans and current portion of bonds.
Long-term liabilities decreased ¥7.73 billion to ¥69.08 billion. Thisdecrease was mainly due to a decrease in bonds.
As a result, working capital increased from ¥161.45 billion at theend of the prior fiscal year to ¥167.89 billion. Prepaid cost recoveryrose 0.17 months to 2.70 months. The current ratio was 192.9%, compared to 200.1% at the end of the prior year.

NAGASE & CO., LTD.

167.89

50

6.5

72

161.45

2.63

2.47

2.38

100

171.482

0

0
Fiscal years ended 2013
March 31139.92

155.44To leverage the total capacity of the Group and create new business
opportunities, the NAGASE Group engages in research activities
designed for marketing-driven development of new technologies andproducts, as well as to gather and share technological information.
The Nagase R&D Center works to advance foundational technology development and propose new avenues of research in NAGASEGroup bio-related technologies. In addition to core substance production technology utilizing actinomycetes, the center has expertisein a wide variety of foundational technologies, including genetic
engineering, metabolic engineering, fermentation engineering,
bioprocess engineering, and bioinformatics. With these technologies,
the center references the latest technologies developed at universities and other outside research institutes, coordinating with Nagase
ChemteX, Hayashibara, NAGASE Group companies, and other external partners to develop eco-friendly chemicals utilizing bioprocesses.
In so doing, the center plays an important role in helping create awelcoming society in which people can live in peace and safety. At
present, the center is pursuing research across a wide range of disciplines, including the development of new enzymes, non-naturalamino acids, and antiaging substances, as well as research applications for use in cosmetics and health foods incorporating natural
extracts. The center has applied for numerous patents in these andperipheral fields. In this way, the Nagase R&D Center accomplishes
its mission to develop foundational biotechnologies that usher in the
future of the NAGASE Group, while developing products through theutilization of biotechnology.
The Nagase Application Workshop (NAW) is home to specialized
equipment and expert staff capable of conducting raw materials
analysis, application development, and final product formulation forplastics and coating materials. This organization is responsible fortechnological development, incubation, and research. The NAW combines the materials and processing technologies from Group manufacturing companies and other business partners to propose innovative
solutions that meet the needs of customers and the market, after
these needs have been identified by the NAGASE Group marketing
function. This strategy is one way in which the Company proves itself
to be a unique evolution of the traditional trading company businessmodel. The NAW works to accurately formulate new elemental technologies and functional materials, as well as develop proprietary
technologies we can suggest as effective solutions to our customers,
developing new business ideas in cooperation with NAGASE & CO.
divisions and Group companies.
Nagase ChemteX Corporation focuses on electronics, life science,
automotive, and environment/energy fields. Nagase ChemteX staff, in across-organizational research and development division, and productdevelopment departments in each Group business work together todevelop new products, leveraging our long-accumulated proprietary
technologies in synthesis, compounding, biotechnology and evaluation—all developed over many years of technological experience. In
particular, Nagase ChemteX works to develop high-function, highvalue-added products (automobiles, aircraft, and other transportrelated equipment, biomaterials, etc.) that are lightweight, durable, andrecyclable.

Performance by Segment

498.14150(Months)
4■ Net Assets■ Total Assets (Left scale)
ROA (Right scale)486.74■ Working Capital (Left scale)
Prepaid Cost Recovery (Right scale)(Billions of yen)
200

Hayashibara Co., Ltd. conducts research and development intofunctional saccharides and functional dyes. The functional saccharides business consists of screening for microbes leading to thediscovery and analysis of new enzyme-producing bacteria andresearch and development into unique functional saccharides produced from these enzyme-producing bacteria. The NAGASE Group’sfunctional saccharides have applications and usages in a wide variety
of fields, from foods to ­cosmetics and perfumes, pharmaceuticals,
health care, agriculture, and industry. On top of our long history oftechnological development, we continue to explore and adopt new
methods. This work has resulted in products such as TREHA™, AA2G™,
and a new generation of powerful, functional saccharide products.
We continue to pursue research and development programs thatcreate new products and applications, from basic research to appliedresearch and from application development to patents, all linked in acohesive intellectual property strategy. In the functional dyes business, we are making use of the extensive H­ ayashibara functional dyes
library, pursuing development to offer products and new applications in the photo and printing plate and other commercial fields, aswell as in life sciences fields such as pharmaceuticals. The Group
incurred a total of ¥5.16 billion in consolidated research and development expenses for the fiscal year under review.

Leading Us to the Future

Total assets increased by ¥18.69 billion, up to ¥530.77 billion as of theend of the consolidated fiscal year. Current assets amounted to¥321.21 billion. This represented an increase of ¥8.88 billion comparedto the end of the prior consolidated fiscal year, mainly due to increases
in notes and accounts receivable in excess of decreases in cash andtime deposits. Non-current assets amounted to ¥209.55 billion, up¥9.81 billion. Although the Company sold shares of affiliates during theperiod, higher fair values for shares retained resulted in an increase ininvestments in securities. As a result of these various factors.

(Billions of yen)
600

Research Costs

Working Capital / Prepaid Cost Recovery

About the NAGASE Group

Summary of the Consolidated Balance Sheet73

Management’s Discussion and Analysis of Operations and Finances

Net sales¥732,000¥19,100¥20,900¥12,500

722,384+1.3%

15,030+27.1%

16,361+27.7%

10,331+21.0%

Profit Sharing Policy■ Dividend Policy

Consolidated Payout Ratio (Left scale)
Consolidated Dividend to Equity Ratio (Right scale)

30.5

30

1.52
20

1.50

33.7

40.4

33.0
1.5

1.44

1.46

1.0

10

0.5

0

NAGASE & CO., LTD.

2015

Integrated Report 2017

2016

2017

(3) Impact of Fluctuations in Foreign Currency Exchange Rates
The NAGASE Group conducts import/export as well as non-tradebusiness transactions denominated in foreign currencies. Fluctuations
in currency markets have a significant impact when prices are converted to yen. While the Group executes exchange contract hedges forthese transactions to minimize exchange rate risk to the greatest
extent possible, currency exchange rate fluctuations could have asignificant impact on Group earnings and financial conditions. The
NAGASE Group owns foreign-domiciled corporations whose financial
statements are prepared using local currencies. The conversion ofthese currencies to Japanese yen for consolidated reporting purposes
entails currency conversion risk due to fluctuating exchange rates.

(6) Impact of Changes in Stock Prices
The NAGASE Group maintains a portfolio of marketable securities,
primarily equity shares of companies doing business with the Group.
These equity investments are subject to share price fluctuation risks. Asa matter of policy, the NAGASE Group reduces risk by continuously
reviewing and reorganizing its shareholdings. However, changes inshare prices could impact Group earnings and financial condition. A
decline in share prices could damage the value of pension plan assets
managed by the Group, increasing retirement benefit costs andthereby reducing Group profits.
(7) Counterparty Credit Risk
The NAGASE Group extends credit to domestic and overseas purchasers in connection with various transactions. As a matter of policy, the
NAGASE Group reduces credit risk by obtaining guarantees, collateral,and insurance, etc. according to the financial condition of the purchaser. Although the NAGASE Group strives to ensure stable, uninterrupted product procurement, financial weakness or bankruptcies
among suppliers or others could damage the Group’s ability to procure
goods. Such circumstances could have an impact on the Group’s
earnings and financial condition.
(8) Risk of Investments
The NAGASE Group engages in investment activities to establish newcompanies, to invest in equipment at manufacturing subsidiaries, andto acquire other business entities. These types of investment activities
involve certain risks, including the risk of failing to recover investments in cases where the Company is not able to record profits at
initially planned levels, the risk that additional funding may berequired, and the risk that the Group will not be able to withdraw
from investments according to the desired timing and method. The
NAGASE Group strives to reduce risk in this area. Decisions to invest in
new businesses are made after a careful study of the viability ofbusiness plans and profitability. At the same time, the Group regularly
monitors the performance of existing investments. However, even(10) Product Quality Risk
The NAGASE Group operates the Nagase R&D Center and manufacturing subsidiaries to offer high-value-added products to our customers.
We pay detailed attention to the quality of the technologies andproducts that bear the name of NAGASE and our affiliates. We also
bear manufacturers’ liability for imported products, products manufactured on a contract basis, etc. Accordingly, the Group treats theseproducts with the same attention to detail and quality as if they weremade in our own facilities. However, product defects could result incessation of sales and/or product recalls, exposing the NAGASE Groupto liability for damages, which could have an impact on Group earnings and financial conditions.
(11) Risks related to Product Laws
The NAGASE Group imports, exports, and sells domestically a wide
variety of chemicals and other products for a broad range of uses. To
maintain international peace and safety, the chemicals and other items
we export are subject to different laws, including the Foreign
Exchange and Foreign Trade Control Law and the Export Trade Control
Order. Imports and domestic sales are subject to the Chemical Substances Control Law and other related statutes, as well as similar regulations in foreign jurisdictions. To ensure compliance, the Group has
established internal Security Trade Control Regulations and Chemical/
Product Control Regulations. However, a violation of such laws andstatutes could result in restrictions on Group business activities, having
an impact on Group earnings and financial condition.
(12) Risks of Natural Disasters
The NAGASE Group has put emergency response systems in place,including the creation of a business contingency plan, the adoption ofsafety confirmation systems, the creation of a disaster-responsemanual, earthquake-response measures, disaster-response training,and other measures to deal with natural disasters. However, as we
conduct business across a great number of countries and regions, weare exposed to the risk of major natural disasters, H1N1 influenza andother communicable diseases, and other emergencies that could
disrupt our supply chain. Such disruptions could prevent us fromselling our products or damage the manufacturing capabilities ofimportant Group facilities. Such interruptions would result in opportunity loss, and could have a significant impact on Group earnings andfinancial condition.

NAGASE & CO., LTD.

Integrated Report 2017

Financial and Corporate Information

74

0

2014

(2) Product Market Conditions
The NAGASE Group handles extensive petrochemicals manufactured
from naphtha in our Functional Materials, Advanced Materials &­Processing, and Automotive & Energy segments. Raw materials­markets and demand-supply balance are two factors that result in
unique market circumstances for each of our products. Fluctuations inthese factors could affect our revenues and profits in related productlines. Also, some products manufactured by the Group use raw materials derived from grains. Raw materials costs fluctuate widely due tochanges in grain market prices; we may not be able to pass on
increased raw materials costs through higher sales prices, which could
affect our profits in related product lines.

1.48

23.4

Fiscal years ended 2013
March 31(%)2.0

(1) Overall Operating Risk
The NAGASE Group is engaged in activities that rely on the use ofchemicals across a wide spectrum of products and services throughour Functional Materials, Advanced Materials & Processing, Electronics,
Automotive & Energy and Life & Healthcare business. These products
and services include dyes/pigments, coating materials/inks, surfactants, OA, electrical equipment, home electronics, automobiles, LCDs,
semiconductors, and pharmaceutical/medical applications. Accordingly, significant changes in domestic and international commercial
chemicals industry could affect the NAGASE Group’s earnings andfinancial condition.

(5) Risks Involved in Operating Overseas
A significant and increasing percentage of NAGASE Group sales andmanufacturing are conducted overseas in locations such as China,
Southeast Asia, Europe, and the United States. While Group management keeps a close eye on local trends and conditions in order to
respond appropriately, unforeseen events stemming from local government regulations, business customs, or other influences could have an
impact on Group business performance and financial conditions.

(9) Risk of Asset Impairment
The NAGASE Group owns non-current assets such as business assets in
manufacturing subsidiaries and goodwill. These assets entail the risk of
impairment loss if asset value declines. The NAGASE Group records
impairment losses when deemed necessary. However, even greater
impairment losses may be incurred as a result of deteriorating businessprofits or other factors in the future, which may have an impact onGroup business performance and financial condition.

Critical Initiatives for Sustainable Growth(%)
40

The NAGASE Group is engaged in trading, marketing, research anddevelopment, manufacturing and processing in six business segments
across the world: Functional Materials, Advanced Materials & Processing, Electronics, Automotive & Energy, Life & Healthcare, and Other.
The nature of these businesses entails various risks that may have amaterial effect on investment decisions. We provide a discussion of the
major risks below.
Any forward-looking statements are based on management decisions as of the end of fiscal year under review.

these management initiatives cannot completely negate potential
investment risk, and such risk may have an impact on Group earnings
and financial condition.

Unique Products

Consolidated Payout Ratio /Consolidated Dividend to Equity Ratio

Operating and Other Risks(4) Impact of Fluctuations in Interest Rates
The NAGASE Group obtains funds for operating and investing activities
through loans from financial institutions; some of these loans areinterest-bearing debt including variable interest terms. The Group
reduces interest rate fluctuation risk related to variable interest loans
by utilizing interest-rate swap contracts. Group earnings and financial
conditions may be affected by future interest rate trends. Interest rate
fluctuations cause variations in discount rates used for retirement
benefit obligations and plan asset investment income, impacting
NAGASE Group business performance and financial position.

Performance by Segment

Our basic policy is to continue paying a stable dividend to our shareholders in line with our consolidated results as we improve our earnings power and management structure. We look to improve per-share
dividends based on considerations of the consolidated payout ratio
and consolidated dividend to equity ratio. We also plan to use funds
from internal reserves effectively in our business activities and to build
a stronger management function.
In addition, the Company has determined in its articles of incorporation, allowances or interim dividend payments according to the provisions of article 454 Paragraph 5 of the Companies Act. Accordingly, theCompany’s Board of Directors has resolved to adopt a dividend policy
calling for two dividend payments every year, one interim subject toboard of director resolution and one at the end of the fiscal year, subject to approval by the general meeting of shareholders.
The NAGASE Group declared a year-end dividend of ¥17 per sharebased on this policy, a ¥1 increase compared to the prior fiscal year. As aresult, the scheduled full-year cash dividend will amount to ¥33 per share.
We forecast a full-year dividend of ¥35 per share for the next fiscal
year, ¥2 higher than the prior year. This dividend will consist of a ¥17
per-share interim dividend and a ¥18 per share year-end dividend.

May 2, 2017. Forecasts in connection with the Group’s future performance are subject to a variety of risks and uncertainties including
those outlined as follows. As a result, readers are advised that actual
results may differ from projections.

Leading Us to the Future

Year ending
March 31, 2018
(Projected)
Year ended March
31, 2017 (Actual)
ChangeOperating
Income(Millions of yen)
Profit­attributable toowners of
Ordinary Income the parent

About the NAGASE Group(Announced on May 2, 2017)75

Consolidated Balance Sheet2017¥ 39,830
206,846
63,120
2,375
9,681
(638)
321,2152016¥ 43,283
196,335
62,920
2,842
7,843
(890)
312,334

Thousands of
U.S. dollars (Note 1)2017$  355,023
1,843,712
562,617
21,16986,291(5,687)2,863,134

LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable (Note 14)
Short-term loans (Notes 8 and 14)
Current portion of long-term loans and finance lease obligations (Notes 8 and 14)
Current portion of bonds (Notes 8 and 14)
Accrued income taxes (Note 11)
Deferred tax liabilities (Note 11)
Accrued expenses
Accrued bonuses for employees
Accrued bonuses for directors and executive officers
Other current liabilities
Total current liabilities

Less accumulated depreciation
Property, plant and equipment, net (Note 21)

9,498
71,847
81,345
1,023
24,582
15,366
—
1,544
9,584
(174)
133,272¥512,081

195,552
489,446
743,132
4,742
16,704
1,449,594(846,876)
602,719

69,418773,322842,749
4,296
205,312122,925
9
13,58478,848(2,576)1,265,175$4,731,037

Total long-term liabilities¥102,076
28,162
3,582
10,000
1,849
37
3,095
4,512
171
13,006
166,494¥ 97,800
25,294
8,895
—
4,305
13
3,551
4,224
194
11,838156,118$  909,849
251,02131,92889,135
16,481
330
27,587
40,217
1,524
115,928
1,484,036

20,00020,335
13,503
14,625617
69,08230,00023,3708,433
14,060949
76,813

178,269
181,255
120,358
130,3595,500
615,759

Contingent liabilities (Note 18)
Net assets:
Shareholders’ equity (Note 12):
Common stock:
Authorized— 346,980,000 shares
Issued—127,408,285 shares in 2017 and 2016
Capital surplus
Retained earnings (Note 22)
Treasury stock, at cost (Note 13)—1,287,366 shares in 2017 and
377,300 shares in 2016
Total shareholders’ equity

9,699
11,590219,721

9,699
11,615
213,572

86,452
103,307
1,958,472(1,337)
239,674(230)
234,657(11,917)
2,136,322

Accumulated other comprehensive income (loss):
Net unrealized holding gain on securities (Note 7)
Deferred gain (loss) on hedges (Note 14)
Translation adjustments
Retirement benefit liability adjustments (Note 10)
Total accumulated other comprehensive income

47,683
4
3,129
(274)
50,542

37,074(9)
4,411(2,169)39,305425,02036
27,890(2,442)450,504

4,981
295,198¥530,775

5,185
279,149¥512,081

44,3982,631,233$4,731,037

NAGASE & CO., LTD.

Integrated Report 2017

Non-controlling interests
Total net assets
Total liabilities and net assets

Critical Initiatives for Sustainable GrowthLong-term loans receivable
Goodwill (Note 21)
Technology-based assets
Asset for retirement benefits (Note 10)
Deferred tax assets (Note 11)
Other assets (Note 6)
Less allowance for doubtful accounts
Total investments and other assets
Total assets (Note 21)

7,788
86,75994,548482
23,034
13,791
1
1,524
8,846
(289)
141,940¥530,775

18,91055,731
83,243503
1,876
160,265(93,790)
66,4742016

Unique Products

Investments and other assets:
Investments in securities (Notes 7 and 14):
Unconsolidated subsidiaries and affiliates
Other

21,93954,911
83,372532
1,874
162,630(95,011)67,6192017

Thousands of
U.S. dollars (Note 1)
2017

Performance by Segment

Property, plant and equipment, at cost (Notes 5 and 6):
Land
Buildings and structures
Machinery, equipment and vehicles
Leased assets
Construction in progress

Long-term liabilities:
Bonds (Notes 8 and 14)
Long-term loans and finance lease obligations (Notes 8 and 14)
Deferred tax liabilities (Note 11)
Liability for retirement benefits (Note 10)
Other long-term liabilities

Millions of yen

Leading Us to the Future

ASSETS
Current assets:
Cash and time deposits (Notes 14 and 20)
Notes and accounts receivable (Note 14)
Inventories (Note 4)
Deferred tax assets (Note 11)
Other current assets
Less allowance for doubtful accounts
Total current assets

Millions of yen

About the NAGASE GroupNAGASE & CO., LTD. and Consolidated Subsidiaries (March 31, 2017 and 2016)

See notes to consolidated financial statements.

Financial and Corporate Information

76

NAGASE & CO., LTD.

Integrated Report 201777

Consolidated Statement of Income

Consolidated Statement of Changes in Net Assets
NAGASE & CO., LTD. and Consolidated Subsidiaries (Years ended March 31, 2017 and 2016)

Millions of yen
2017

2016

Thousands of
U.S. dollars (Note 1)
2017$6,438,934
5,623,326
815,607

Selling, general and administrative expenses (Note 16)
Operating income (Note 21)

76,472
15,03073,63918,024

681,629
133,969

Other income (expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Equity in losses of affiliates
Gain on sales of investments in securities (Note 7)
Gain on sales of shares of an affiliate
Loss on sales of shares of a subsidiary and affiliates
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 21)
Loss on reduction of property, plant and equipment
Subsidy income
Other, net
Profit before income taxes

1,812(1,032)
217
—
2,006
—
(290)
(106)
239
(60)
(227)
(1,398)
(290)
314
(112)
16,1001,562(1,048)
—
(48)
70
33
—
(70)
57
(47)
(251)
(2,756)——(287)
15,23916,151(9,199)1,934—
17,880—(2,585)
(945)
2,130
(535)
(2,023)(12,461)(2,585)
2,799(998)
143,507

Profit attributable to:Non-controlling interests
Owners of parent

5,020
417
10,662

6,536(3,763)
12,46644,746
3,717
95,035(330)¥ 10,331(150)¥ 12,316(2,941)$   92,085

See notes to consolidated financial statements.

Millions of yen

Total net assets

¥   3
—
—
—

¥   9,478———¥   666———¥  55,069———¥   6,102———¥  287,500
12,316(3,937)
(1)

—

(38)

—

—

(38)

—

—

—

—

—

—

(38)

—
—
9,699
—
—
—
—

—
—
11,615
—
—
—
0

(9)
—
213,572
10,331(4,050)
—
—

—
—
(230)
—
—
(1,107)0(9)—234,657
10,331(4,050)(1,107)0—(7,845)37,074
—
—
—
—

—
(13)
(9)
—
—
—
—

—
(5,067)
4,411
—
—
—
—

—
(2,835)(2,169)—————(15,763)
39,305
—
—
—
—

—
(916)
5,185
—
—
—
—

(9)
(16,679)
279,149
10,331(4,050)(1,107)
0

—

(25)

—

—

(25)

—

—

—

—

—

—

(25)

—

—

0

—

0

—

—

—

—

—

—

0

(132)
—
(132)
—
—
—
—
10,609¥219,721 ¥(1,337) ¥239,674 ¥47,683

—
14
¥  4

—
(1,281)¥  3,129——
1,895
11,236¥  (274) ¥50,542

Total
Net unrealized Deferred gain
Treasuryshareholders’ holding gain
(loss) on
Translation
stock, at costequityon securities
hedgesadjustments

Retirement
Total
benefitaccumulated
liabilityotheradjustments comprehensive income(Note 10)————
¥9,699 ¥11,590

—
(132)
(204)
11,032¥4,981 ¥295,198

Thousands of U.S. dollars (Note 1)

Commonstock

CapitalsurplusRetainedearnings

Balance at April 1, 2016
$86,452 $103,530 $1,903,663 $ (2,050) $2,091,604 $330,457
Profit attributable to owners of parent——
92,085—92,085—
Cash dividends—(36,099)—(36,099)—
Purchases of treasury stock——— (9,867)(9,867)—
Disposition of treasury stock
—
0
—
0
0
—
Changes in parent’s ownership interest due totransactions with non-controlling interests
—
(223)
—
—
(223)
—
Changes resulting from merger with an
unconsolidated subsidiary
—
—
0
—
0
—
Decrease in retained earnings resulting fromchanges in scope of equity method——(1,177)—(1,177)—
Other changes
—
—
—
—
—
94,563
Balance at March 31, 2017
$86,452 $103,307 $1,958,472 $(11,917) $2,136,322 $425,020$  (80) $  39,317 $(19,333) $350,343
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

Noncontrollinginterests

Total net assets$46,216 $2,488,181—
92,085—(36,099)—(9,867)
—
0

—

—

—

—

—

(223)

—

—

—

—

—

0

—
—
—
—
125 (11,418) 16,891 100,152$ 36 $  27,890 $ (2,442) $450,504—(1,177)(1,818)98,333$44,398 $2,631,233

Thousands of
U.S. dollars (Note 1)
2017

2017

2016

¥10,662¥ 12,466$ 95,035

10,60214(1,223)
1,895(152)
11,135¥21,798(7,844)(13)(5,065)(2,835)(553)(16,312)¥ (3,845)

94,500125(10,901)
16,891(1,355)99,251$194,295¥21,622¥   175¥ (3,446)¥   (399)$192,727$  1,560

Financial and Corporate Information

Comprehensive income (loss)
Total comprehensive income (loss) attributable to:
Owners of parent
Non-controlling interests¥  205,203 ¥     (228) ¥  226,328 ¥  44,920
12,316—
12,316—(3,937)—(3,937)
—
—
(1)
(1)
—

Noncontrollinginterests

See notes to consolidated financial statements.

NAGASE & CO., LTD. and Consolidated Subsidiaries (Years ended March 31, 2017 and 2016)

ProfitOther comprehensive income (loss) (Note 9):
Net unrealized holding gain (loss) on securities
Deferred gain (loss) on hedges
Translation adjustments
Retirement benefit liability adjustments
Share of other comprehensive loss of affiliates accounted for by the equity method¥ 9,699 ¥  11,654
—
—
—
—
—
—

Retainedearnings

Critical Initiatives for Sustainable Growth

Consolidated Statement of Comprehensive Income

Balance at April 1, 2015
Profit attributable to owners of parent
Cash dividends
Purchases of treasury stock
Changes in parent’s ownership interest due totransactions with non-controlling interests
Decrease in retained earnings resulting fromchanges in scope of consolidation
Other changes
Balance at April 1, 2016
Profit attributable to owners of parent
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Changes in parent’s ownership interest due totransactions with non-controlling interests
Changes resulting from merger with an
unconsolidated subsidiary
Decrease in retained earnings resulting fromchanges in scope of equity method
Other changes
Balance at March 31, 2017

CapitalsurplusRetirement
Total
benefitaccumulated
liabilityotheradjustments comprehensive income(Note 10)Unique Products

Income taxes (Note 11):
Current
DeferredProfitCommonstock

Total
Net unrealized Deferred gain
Treasuryshareholders’ holding gain
(loss) on
Translation
stock, at costequityon securities
hedgesadjustments

Performance by Segment¥742,194
650,530
91,663

Millions of yen

Leading Us to the Future¥722,384
630,881
91,503

Net sales (Note 21)
Cost of sales (Note 16)
Gross profit

About the NAGASE GroupNAGASE & CO., LTD. and Consolidated Subsidiaries (Years ended March 31, 2017 and 2016)

See notes to consolidated financial statements.

78

NAGASE & CO., LTD.

Integrated Report 2017

NAGASE & CO., LTD.

Integrated Report 201779

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

NAGASE & CO., LTD. and Consolidated Subsidiaries (Years ended March 31, 2017 and 2016)

Thousands of
U.S. dollars (Note 1)
2017

Millions of yen

9,381
1,543
1,398
(314)
290
3,297
(1,812)
1,032
345
(178)

9,493
1,634
2,756
—
—
(848)
(1,562)
1,048
(640)
(10)

83,617
13,753
12,461(2,799)2,585
29,388(16,151)
9,199
3,075
(1,587)(1,690)(94)(15,064)(11,885)(1,017)
5,198(614)
21,0752,235(1,045)(7,737)  14,527

6,784
3,162
(3,829)(168)
32,964
1,965(1,013)(4,540)  29,376(105,936)(9,065)46,332(5,473)
187,851
19,922(9,315)(68,963)  129,486

Investing activities:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible fixed assets included in other assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Purchases of investments in capital
Proceeds from sales of shares of a subsidiary resulting in change in scope of consolidation
Decrease (increase) in short-term loans receivable included in other current assets, net
Decrease (increase) in time deposits, net
Proceeds from subsidy income
Other, net
Net cash used in investing activities(10,667)976(867)(1,825)
4,658
(53)
293
434
274
314
(54)
(6,518)(8,937)414(1,898)(2,129)
213
(358)
—
(177)
(351)
—
623
(12,600)(95,080)
8,700(7,728)(16,267)
41,519
(472)
2,612
3,868
2,442
2,799
(481)
(58,098)

Financing activities:
Increase (decrease) in short-term loans, net
Proceeds from long-term loans
Repayments of long-term loans
Proceeds from issuance of bonds
Redemption of bonds
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling interests
Other, net
Net cash used in financing activities

3,232
950
(9,182)——(1,107)(4,050)(254)(181)(10,592)(3,764)
1,976(6,440)
9,949(10,000)(1)(3,937)(421)(182)(12,822)28,8088,468(81,843)——(9,867)(36,099)(2,264)(1,613)(94,411)(596)(3,180)42,900(1,575)2,377
40,522(5,312)(28,345)
382,38710¥  39,730—¥  42,90089$  354,131

Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents resulting from merger withan unconsolidated subsidiary
Cash and cash equivalents at end of the year (Note 20)
See notes to consolidated financial statements.

80

NAGASE & CO., LTD.

Integrated Report 2017

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of Consolidation
The accompanying consolidated financial statements include theaccounts of the Company and companies that it controls directly or
indirectly. Affiliates over which the Company exercises significant
influence in terms of their operating and financial policies have beenaccounted for by the equity method. All significant intercompany
balances and transactions have been eliminated in consolidation.
Certain subsidiaries were excluded from the scope of consolidation because the effect of their sales, net profit or loss, total assets
and retained earnings on the accompanying consolidated financial
statements was immaterial. The unconsolidated subsidiaries andaffiliates not accounted for by the entity method were excluded fromthe scope of application of the equity method, because their profit ofloss and retained earnings attributable to the Company’s interest
were not material to the consolidated financial statements.
For consolidation purposes, the financial statements of the consolidated subsidiaries whose fiscal year end date differs from that of
the Company have been included in consolidation based on a provisional statement of accounts for a full fiscal year ending March 31.
Unrealized intercompany gains among the Company and theconsolidated subsidiaries have been entirely eliminated and the
portion attributable to non-controlling interests has been charged to
non-controlling interests.
(b) Foreign currency translation
All monetary assets and liabilities denominated in foreign currencies
are translated into yen at the rates of exchange in effect at the balance
sheet date, except that receivables and payables hedged by qualified
foreign currency forward exchange contracts are translated at thecorresponding contract rates. All other assets and liabilities denominated in foreign currencies are translated at their historical rates. Gainor loss on each translation is credited or charged to income.
Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into yen at therates in effect at the respective transaction dates. Foreign exchange
gain or loss is credited or charged to income in the period in whichsuch 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 thebalance sheet date, except that the components of net assets excluding non-controlling interests, net unrealized holding gain on securities,
and deferred gain or loss on hedges are translated at their historicalexchange 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 aredenominated in foreign currencies are not included in the determination of net income but are reported as “Translation adjustments” as acomponent of accumulated other comprehensive income or loss inthe accompanying consolidated balance sheets.
(c) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, demand deposits,
and short-term investments which are readily convertible to cash andsubject to an insignificant risk of any change in their value, whichwere purchased with an original maturity of three months or less.
(d) Inventories
Inventories are stated at the lower of cost or net selling value, cost
being determined primarily by the moving-average method.
(e) Investments in securities
Securities are classified into three categories: trading securities, heldto-maturity debt securities or other securities. Trading securities, consisting of debt and marketable equity securities, are stated at fairvalue. 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 arecarried at fair value 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 or loss. Nonmarketable securities classified as other securities are carried at cost
determined by the moving-average method.
(f) Property, plant and equipment and depreciation(except for leased assets)
Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment is calculated by
the straight-line method based on the estimated useful lives of therespective assets.

NAGASE & CO., LTD.

Integrated Report 2017

Financial and Corporate Information$  143,507

Critical Initiatives for Sustainable Growth¥  15,239

The U.S. dollar amounts in the accompanying consolidated
financial statements have been translated from yen amounts solely
for the convenience of the reader, as a matter of arithmetic computation only, at ¥112.19 = U.S.$1.00, the rate of exchange prevailingon March 31, 2017. This translation should not be construed as arepresentation 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 ofJapan, amounts of less than one million yen for the years ended
March 31, 2017 and 2016 have been omitted. Consequently, thetotals shown in the accompanying consolidated financial statements for the years ended March 31, 2017 and 2016 (both in yen
and in U.S. dollars) do not necessarily agree with the sum of theindividual amounts.

Unique Products¥  16,100

Operating activities:
Profit before income taxes
Adjustments to reconcile profit before income taxes to net cash provided
by operating activities:
Depreciation and amortization other than amortization of goodwill
Amortization of goodwill
Loss on impairment of fixed assets
Subsidy income
Loss on reduction of property, plant and equipment
Increase (decrease) in liability for retirement benefits
Interest and dividend income
Interest expense
Exchange loss (gain), net
Gain on sales of property, plant and equipment, net
Gain on sales of investments in securities, investments in capital, shares of subsidiaries
and affiliates, and investments in capital of subsidiaries and affiliates, net
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

The accompanying consolidated financial statements of NAGASE &CO., LTD. (the “Company”) and consolidated subsidiaries are preparedon the basis of accounting principles generally accepted in Japan,
which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting­Standards, and have been compiled from the consolidated financial
statements prepared by the Company 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 domesticallyin order to present them in a format which is more familiar toreaders outside Japan.
Certain amounts in the prior year’s consolidated financial statements
have been reclassified to conform to the current year’s presentation.
Such reclassifications had no effect on consolidated profit or net assets.

Performance by Segment

2016

1. BASIS OF PREPARATION

Leading Us to the Future

2017

About the NAGASE GroupNAGASE & CO., LTD. and Consolidated Subsidiaries (March 31, 2017)81

Notes to Consolidated Financial Statements(b) Implementation guidance on recoverability of deferred
tax assets
Effective April 1, 2016, the Company and its domestic consolidated
subsidiaries adopted “Revised Implementation Guidance on

Recoverability of Deferred Tax Assets” (Accounting Standards Board ofJapan (“ASBJ”) Guidance No. 26, March 28, 2016).

4. INVENTORIESInventories at March 31, 2017 and 2016 are summarized as follows:
2017

2016

Thousands of
U.S. dollars
2017¥58,162
1,309
3,648¥63,120¥57,404
1,726
3,789¥62,920$518,424
11,66832,516$562,617

Millions of yen

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

Leading Us to the Future

5. REDUCTIONS IN ACQUISITION COST DUE TO SUBSIDIESThe amounts of subsidies received from the national government and deducted from the acquisition cost of property, plant and equipment at
March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars
2017

Millions of yen
2017

2016

¥359
575
¥935

¥140
511
¥652

$3,2005,125$8,334

Millions of yen
2017

Thousands of
U.S. dollars
2017¥1,233$10,990

15

134

Kinki

85

758

Tokai

38

339

Tokai

17

152

Kanto
Kinki

1
6
¥1,3989
53$12,461

Buildings and structures
Machinery, equipment and vehicles
Total

Performance by Segment

6. LOSS ON IMPAIRMENT OF FIXED ASSETS
Loss on impairment of fixed assets for the years ended March 31, 2017 and 2016 was as follows:
Major use

Business-use assets for manufacturing andselling of color formers

Classification

Buildings and structures, machinery,equipment and vehicles, construction inprogress, intangible assets included inother assets
Machinery, equipment and vehicles

Hokuriku
Tennessee,
U.S.A

Critical Initiatives for Sustainable GrowthBusiness-use assets for manufacturing andselling of color formers
Business-use assets for processing and selling of Buildings and structures, machinery,plastic materials
equipment and vehicles, intangible assets
included in other assets
Business-use assets for manufacturing andMachinery, equipment and vehicles,
selling of rechargeable battery systems
intangible assets included in other assets
Business-use assets for manufacturing andBuildings and structures
selling of polymer products
Business-use assets for semiconductors andBuildings and structures, machinery,display devices
equipment and vehicles
Idle assets
Land
Total

Area

Unique Products

Prior service cost is charged to income in the fiscal year in whichsuch cost is recognized for financial reporting purposes. Actuarial
differences are principally credited or charged to income in the fiscal
year following the fiscal year in which such differences are recognized
for financial reporting purposes.
(p) Derivatives and hedging activities
Derivative positions are carried at fair value with any changes in­unrealized gain or loss charged or credited to income, except for
those which meet the criteria for deferral hedge accounting underwhich unrealized gain or loss is deferred as a component of net
assets. ­Foreign currency receivables and payables hedged by qualified
foreign currency forward exchange contracts are translated at thecorresponding foreign exchange contract rates (“allocation method”).
Interest-rate swaps which meet certain conditions are accounted for
as if the interest rates applied to the swaps had originally applied tothe underlying loans.
Derivative financial instruments are utilized principally in order tomanage the risk arising from adverse fluctuation in foreign currency
exchange rates and interest-rate swaps are also utilized to mitigate therisk of fluctuation in interest rates on loans. Hedging instruments areforeign currency forward exchange contracts, foreign currency deposits, foreign currency loans and interest-rate swaps. Hedged items areforeign currency receivables and payables, forecast transactions andinterest rates on loans from financial institutions.
The Company and its consolidated subsidiaries (collectively, the“Group”) manage derivative transactions in accordance with internalmanagement rules. Under these rules, the Group conducts foreign
currency forward exchange contracts within a range of actual demandof accounts receivable, accounts payable and actual transactions inforeign currencies. Execution and management of interest-rate swaps
are based on internal management rules and hedged items of­interest-rate swaps are identified by individual contracts.
The Company and certain consolidated subsidiaries assess theeffectiveness of the hedging activities based on a comparison of theaccumulated fluctuations of the hedged items and those of the hedging instruments in the period from the start of the hedging activities tothe assessment date. However, with regard to interest-rate swaps whichmeet certain conditions, the evaluation of effectiveness is omitted.
(q) Research and development costs
Research and development costs are charged to income when incurred.
(r) Distributions of retained earnings
Dividends and other distributions of retained earnings are approvedby 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 theapplicable distributions of retained earnings as approved by the shareholders subsequent to the fiscal year end. (Refer to Note 22.)

About the NAGASE GroupThe 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)
Technology-based assets recognized upon acquisition are amortizedon a straight-line basis over 13 to 17 years.
Costs incurred for computer software obtained for internal use arecapitalized and amortized on a straight-line basis over an estimateduseful life of 5 years.
(h) Goodwill
Goodwill is amortized over a period not exceeding 20 years on astraight-line basis. When immaterial, goodwill is charged to income
as incurred.
(i) Leased assets
Leased assets under finance lease contracts which do not transfer
ownership to the lessee are depreciated to a residual value of zero by
the straight-line method over the respective lease terms.
(j) Allowance for doubtful accounts
The Company and its consolidated subsidiaries provide allowances for
doubtful accounts based on their historical experience of bad debts on
ordinary receivables plus an additional estimate of probable specificdoubtful accounts from customers experiencing financial difficulties.
(k) Income taxes
Income taxes are calculated based on taxable income and charged
to income on an accrual basis. Deferred tax assets and liabilities arecomputed 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. Computationsof deferred tax assets and liabilities are based on the tax rates
which have been enacted as of the balance sheet date or are subsequently enacted.
(l) Application of consolidated taxation system
The Company and certain domestic consolidated subsidiaries adopted
the consolidated taxation system from the year ended March 31, 2017.
(m) Accrued bonuses for employees
Accrued bonuses for employees are provided based on the estimatedamount of bonuses to be paid to employees in the following fiscal
year which is attributable to the current fiscal year.
(n) Accrued Bonuses for Directors and Executive Officers
Accrued bonuses for directors and executive officers are provided
based on the estimated amount of bonuses to be paid to directors
and executive officers in the following fiscal year which is attributable
to the current fiscal year.
(o) Liability for retirement benefits
Liability for retirement benefits is provided based on the amount of
the retirement benefit obligation less estimated pension plan assets at
the end of the fiscal year. The estimated benefit is attributed to eachperiod based on the plan’s benefit formula.

Financial and Corporate Information

3. ACCOUNTING CHANGES(a) Change in Method of Inventory Valuation
Inventories of the Company and certain domestic consolidated subsidiaries, which were previously determined by the weighted-averagemethod, are now determined by the moving-average method, effective from the year ended March 31, 2017. As a result of the adoptionof new core systems in August 2016, this change was implemented

82

NAGASE & CO., LTD.

Integrated Report 2017

for the purpose of conducting periodic profit and loss accounting
more promptly and accurately, by calculating costs of inventories on amore timely basis.
As the effect of this change on the consolidated financial statements as of March 31, 2017 and for the year then ended was immaterial, the moving-average method was not applied retrospectively.

NAGASE & CO., LTD.

Integrated Report 201783

Notes to Consolidated Financial Statements

Business-use assets for manufacturing andselling of rechargeable battery systems
Business-use assets for semiconductors anddisplay devices
Idle assets

Area

Goodwill
Buildings and structures, machinery,equipment and vehicles
Buildings and structures, machinery,equipment and vehicles
Buildings and structures, machinery,equipment and vehicles, intangible assets
included in other assets
Buildings and structures, construction inprogress, intangible assets included inother assets
Machinery, equipment and vehicles,
intangible assets included in other assets
Land, buildings and structures, machinery,equipment and vehicles

Ohio, U.S.A
Tennessee,
U.S.A¥1,364
500

Kinki

304

Market value not determinable:
Unlisted equity securities
Total

Tokai

36

(c) Proceeds from sales of, and gross realized gain and loss on, other securities for the years ended March 31, 2017 and 2016 are summarized
as follows:

Kanto

19

Kinki and other2017
Carrying value

91¥2,756¥69,183¥16,378¥52,805

269¥84,090344¥16,643(74)¥67,446518¥69,702678¥17,056(159)¥52,645

Integrated Report 2017

$21,401
17,880223

8. SHORT-TERM LOANS, BONDS, LONG-TERM LOANS AND FINANCE LEASE OBLIGATIONS
Short-term loans at March 31, 2017 and 2016, principally represented notes and loans in the form of deeds at weighted-average annual interest
rates of 1.47% and 1.31% per annum, respectively.
Long-term loans, bonds and finance lease obligations at March 31, 2017 and 2016 consisted of the following:
2016

Thousands of
U.S. dollars
2017¥31,932
10,00010,00010,000333
62,265(8,895)¥53,370$  210,366
89,135
89,135
89,135
2,817
480,595(121,062)$  359,524

Millions of yen
2017

Unsecured loans from banks and insurance companies, payable in Yen, U.S. dollars and
RMB, due through 2023, at rates from 0.13% to 2.60%
Unsecured bonds in Yen, due 2017, at a rate of 0.442%
Unsecured bonds in Yen, due 2019, at a rate of 0.753%
Unsecured bonds in Yen, due 2022, at a rate of 0.539%
Lease obligations¥  23,601
10,00010,00010,000316
53,918(13,582)¥  40,335

The aggregate annual maturities of bonds, long-term loans and finance lease obligations subsequent to March 31, 2017 are summarized as follows:
Years ending March 31,

Millions of yen

Thousands of
U.S. dollars

2018
2019
2020
2021
2022
2023 and thereafter
Total¥13,582
10,711
10,281
501
4,735
14,104¥53,918$121,062
95,472
91,6394,466
42,205
125,715$480,595

In order to achieve more efficient and flexible financing, the Company has concluded line-of-credit agreements with certain financial institutions.
The status of these lines of credit at March 31, 2017 and 2016 is as follows:
Thousands of
U.S. dollars
2017

Millions of yen$747,125$145,280$601,836

2,398$749,532

3,066$148,347(660)$601,177

Lines of credit
Credit utilized

2017

2016

¥10,000—¥10,000—

NAGASE & CO., LTD.

Financial and Corporate Information

NAGASE & CO., LTD.

Acquisition costs

¥163
70
9

Critical Initiatives for Sustainable Growth¥67,520

Unrealized
gain (loss)

2016¥2,4012,006
25Unique Products¥16,299

Carrying value

84

Unrealized
gain (loss)¥83,820

Thousands of U.S. dollars
2017

Securities whose carrying value exceeds theiracquisition costs:
Equity securities
Securities whose carrying value does notexceed their acquisition costs:
Equity securities
Total

Acquisition costs

2017

Thousands of
U.S. dollars
2017

Performance by Segment

Securities whose carrying value exceeds theiracquisition costs:
Equity securities
Securities whose carrying value does notexceed their acquisition costs:
Equity securities
Total

2016
Carrying value

Proceeds from sales
Gain on sales
Loss on sales

Less current portion
Total

Millions of yen
2017¥2,669¥2,669Millions of yen(a) Marketable securities classified as other securities at March 31, 2017 and 2016 are summarized as follows:

Acquisition costs$23,790$23,790440

7. INVESTMENTS IN SECURITIES

Carrying value¥2,144¥2,144

Fujian, China

value of goodwill mainly for developing, manufacturing and sellingindustrial adhesives was reduced to the recoverable amount. In addition, due to decreasing profitability on business-use assets, their carrying values were reduced to their recoverable amounts. As to idle
assets, due to a declining fair value, their carrying values were reduced
to their recoverable amounts.
The recoverable amounts were measured at net selling value orvalue in use. The value in use of goodwill is measured based on future
cash-flows using a discount rate of 9.1%. In addition, the value in useof processing facilities for thin glass panels is measured based on
future cash-flows using a discount rate of 10.1%. Net selling value wascalculated based on the appraisal value published by the tax authorities or the real estate appraisers.

Unrealized
gain (loss)

2016
Carrying value

Thousands of
U.S. dollars
2017
Carrying value

Millions of yen

Total
The Company and its consolidated subsidiaries group fixed assets forbusiness use principally based on its business management segment.
They also group fixed assets to be disposed of and idle assets at each
asset individually as smallest cash-generating units.
For the year ended March 31, 2017, due to decreasing profitability
on business-use assets, the carrying values were reduced to theirrecoverable amounts. As to idle assets, due to a declining fair value,
the carrying values were reduced to their recoverable amounts.
The recoverable amounts were measured at net selling value orvalue in use. Net selling value was calculated based on the appraisal
value published by the tax authorities or the real estate appraisers.
For the year ended March 31, 2016, as achieving the initially projected level of income could no longer be expected, the carrying“Acquisition costs” in the above table represent the carrying value after recognizing impairment losses. The Company and its consolidated subsidiaries recognized impairment losses on valuation of marketable securities of ¥98 million ($874 thousand) for the year ended March 31, 2017. For theyear ended March 31, 2016, the Company and its consolidated subsidiaries did not recognize any such impairment losses.
(b) Securities classified as other securities for which market value was not determinable and not included in the table at March 31, 2017 and 2016
are summarized as follows:

Millions of yen
2016

Leading Us to the Future

Goodwill for developing, manufacturing andselling of industrial adhesives and other
Business-use assets for manufacturing andselling of color formers
Business-use assets for processing of thin glass
panelsBusiness-use assets for processing and selling ofplastic materials

Classification

About the NAGASE Group

Major use

$89,135—

Integrated Report 201785

Notes to Consolidated Financial Statements

The changes in plan assets for the years ended March 31, 2017 and 2016 are as follows:

Reclassification adjustments and tax effects allocated to each component of other comprehensive income (loss) for the years ended March 31,2017 and 2016 were as follows:¥16,799(1,884)
14,915(4,313)
10,602¥(12,628)(49)(12,678)
4,834(7,844)$149,737(16,793)
132,944(38,444)
94,500

121
(100)
20
(6)
14

(50)
30
(19)
6
(13)

1,079
(891)
178
(53)
125

(1,108)(159)(1,267)44(1,223)(5,021)—(5,021)(44)(5,065)(9,876)(1,417)(11,293)392(10,901)

(369)
3,111
2,742
(847)
1,895

(3,173)(957)(4,130)1,294(2,835)(3,289)27,73024,441(7,550)16,891(152)¥11,135(553)¥(16,312)(1,355)$ 99,251¥18,810
400
(331)
697
(632)
(12)
¥18,932$168,749
3,521(2,219)5,205(6,970)62$168,357

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as of March 31, 2017and 2016 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
2016

Thousands of
U.S. dollars
2017

Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheet¥  22,273(18,888)
3,384
11,23914,624¥  22,047(18,932)
3,115
10,945
14,060$  198,529(168,357)
30,163
100,178
130,350

Liability for retirement benefits
Asset for the retirement benefits
Net liability for retirement benefits in the balance sheet

14,625(1)¥  14,624

14,060—¥  14,060

130,359(9)$  130,350

Millions of yen
2017

Funded retirement benefit obligation
Plan assets at fair value

The components of retirement benefit expenses for the years ended March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars
2017

Millions of yen

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

2017

2016

¥1,445
253
(395)
3,111
¥4,414¥1,312
382
(400)
(957)
¥  337

Thousands of
U.S. dollars
2017

Millions of yen

Actuarial differences

2017

2016

¥2,742¥(4,130)

Unrecognized actuarial differences included in accumulated other comprehensive income (before tax effect) as of March 31, 2017 and 2016 are
as follows:
Thousands of
U.S. dollars
2017

Millions of yen
2017

2016

¥32,993
1,445
253
120
(1,316)
16¥33,512¥29,613
1,312
382
2,847
(1,126)(36)¥32,993$294,081
12,8802,255
1,070(11,730)143$298,708

Unrecognized actuarial differences

2016¥(388)¥(3,131)

The allocation of plan assets, by major category, as a percentage of total plan assets at fair value as of March 31, 2017 and 2016 is as follows:
2017

Bonds
Equity securities
Other
Total

2016

73%
17
10
100%

2017

Integrated Report 2017

74%
15
11
100%

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

NAGASE & CO., LTD.

$(3,458)

Financial and Corporate Information

2017

Thousands of
U.S. dollars
2017

Millions of yen$24,441
Critical Initiatives for Sustainable Growthconsolidated subsidiaries have defined contribution pension plans.
In addition to the retirement benefit plans described above, theCompany and its consolidated subsidiaries pay additional retirement
benefits under certain conditions.

(b) Defined benefit pension plans
The changes in the retirement benefit obligation for the years ended March 31, 2017 and 2016 are as follows:86$12,880
2,255(3,521)
27,730$39,344

Actuarial differences included in other comprehensive income (loss) (before tax effect) for the years ended March 31, 2017 and 2016 are as follows:

10. RETIREMENT BENEFIT PLANS

Balance at the beginning of the year
Service cost
Interest cost
Actuarial differences
Retirement benefits paid
Other
Balance at the end of the year2016

¥18,932
395
(249)
584
(782)
7
¥18,888

Unique Products

2016

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

Performance by Segment

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

2017

Thousands of
U.S. dollars
2017

Millions of yen

Leading Us to the Future

2017

Thousands of
U.S. dollars
2017

Millions of yen(a) Outline of retirement benefit plans for employees
The Company and its domestic consolidated subsidiaries havedefined benefit plans, i.e., defined benefit pension plans and lumpsum payment plans. Certain overseas consolidated subsidiaries also
have defined benefit pension plans. Also, the Company and certain

About the NAGASE Group

9. OTHER COMPREHENSIVE INCOME (LOSS)

2016

0.8%
2.1%

NAGASE & CO., LTD.

0.8%
2.1%

Integrated Report 201787

Notes to Consolidated Financial Statements

Millions of yen
2017

Contributions to defined contribution pension plans by the Company andits consolidated subsidiaries

2016

¥287

¥279

Thousands of
U.S. dollars
2017$2,558

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 30.9% and 33.1% for the years ended March 31, 2017 and 2016, respectively.
The effective tax rates reflected in the accompanying consolidated statements of income for the years ended March 31, 2017 and 2016 differ
from the statutory tax rates for the following reasons:
2017

2016

30.9%

33.1%

3.0
(6.9)
8.8
(3.1)
(2.1)
3.0
—
1.4
0.1
—
(1.3)
33.8%

2.4
(12.3)
12.4
(5.9)
(2.5)
3.5
3.0
(1.3)
2.9
(18.3)
1.2
18.2%

The significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities at March 31, 2017 and 2016 aresummarized as follows:
2017

88

NAGASE & CO., LTD.

Integrated Report 2017¥    1,141
290
561
379
3,044
4,343
1,040
1,038
10,567
2,585
24,992(5,522)¥  19,469

Movements in common stock during the years ended March 31, 2017 and 2016 are summarized as follows:
Number of shares
2017

Thousands of
U.S. dollars
2017$    10,714
2,112
4,528
2,202
31,68740,075
9,930
11,92675,265
24,690213,174(53,766)$  159,408

April 1, 2016

Common stock

Increase

127,408,285

Decrease——

March 31, 2017

127,408,285

2016
April 1, 2015

Common stock

Increase

127,408,285

Decrease——

March 31, 2016

127,408,285

13. TREASURY STOCK
Movements in treasury stock during the years ended March 31, 2017 and 2016 are summarized as follows:
Number of shares
2017
Increase
Decrease

March 31, 2017377,300

910,147

1,287,366

April 1, 2015

Increase

April 1, 2016

Treasury stock

81
2016

¥ (4,204)(1,425)
(354)
(553)
(311)
(20,186)(490)(27,526)¥ (9,641)¥ (4,687)(1,410)
(103)
(255)
(312)
(15,757)(1,002)(23,529)¥ (4,059)$ (37,472)(12,702)(3,155)(4,929)(2,772)(179,927)(4,368)(245,352)$ (85,935)

Treasury stock
The increase in treasury stock consists of 908,000 shares resulting fromthe purchase of treasury stock by resolution of the Board of Directors
and 2,147 shares resulting from the purchase of shares of less than
one voting unit for the year ended March 31, 2017. The decrease intreasury stock consists of 81 shares resulting from the disposition of376,363

Decrease

937—

March 31, 2016

377,300
Financial and Corporate Information

Deferred tax liabilities:
Technology-based assets
Deferred capital gain on property
Reserve for special depreciation
Undistributed earnings of subsidiaries and affiliates
Revaluation of land
Net unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities¥    1,202
237
508
247
3,555
4,496
1,114
1,338
8,444
2,770
23,916(6,032)¥  17,884

2016

March 31, 2017 amounted to ¥9,634 million ($85,872 thousand). In
addition, the Company’s legal reserve included in retained earnings
at March 31, 2017 amounted to ¥2,424 million ($21,606 thousand).
Under the Law, upon the issuance and sale of new shares ofcommon stock, the entire amount of the proceeds is required to beaccounted 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.

Critical Initiatives for Sustainable GrowthDeferred tax assets:
Accrued bonuses for employees
Allowance for doubtful accounts
Unrealized gain on inventories
Accrued enterprise taxes
Tax loss carryforwards
Liability for retirement benefits
Investments in securities
Loss on impairment of fixed assets
Tax goodwill
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets

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

Unique Products

Millions of yen

12. SHAREHOLDERS’ EQUITY

Performance by Segment

Statutory tax rates
Adjustments for:Expenses not deductible for income tax purposes
Dividends and other income deductible for income tax purposes
Net adjustment resulting from elimination of dividend income upon consolidation
Different tax rates applied at overseas subsidiaries
Tax credit
Amortization of goodwill
Loss on impairment of goodwill
Valuation allowance
Decrease in deferred tax assets resulting from change in statutory tax rates
Decrease in tax expenses resulting from application of consolidated taxation system
Other, net
Effective tax rates

rate of the corporation levy that comprises a part of the corporate
residential tax, which had been scheduled from fiscal years beginningon or after April 1, 2017, was postponed to fiscal years beginning on
or after October 1, 2019.
Though the domestic statutory tax rates to calculate deferred tax
assets and liabilities will not change, the tax rates are reclassified
between national tax and local tax. Since the Company and certain
domestic consolidated subsidiaries have been using the consolidated
taxation system, deferred tax assets decreased and deferred income
taxes-deferred increased for the consolidated subsidiaries whose
judgments regarding the recoverability of deferred tax assets differ
between national taxes based on the consolidated taxation system
and local taxes based on non-consolidated local tax payments.
The effect of the change on the consolidated financial statements
was immaterial.

Leading Us to the Future

11. INCOME TAXESThe “Act for Partial Revision of Regulations Including the Act for,among Other Purposes, Partial Revision of the Consumption Tax Act to
Implement a Drastic Reform of the Taxation System for Purposes Suchas Securing Stable Financial Resources for Social Security” (Act No. 85,
2016) and the “Act for Partial Revision of Regulations Including the Act
for, among Other Purposes, Partial Revision of the Local Tax Act andthe Local Allocation Tax Act to Implement a Drastic Reform of theTaxation System for Purposes Such as Securing Stable Financial
Resources for Social Security” (Act No. 86, 2016) were enacted in theJapanese Diet session on November 18, 2016 and the timing of implementation of the consumption tax rate increase to 10% was postponed from April 1, 2017 to October 1, 2019.
In line with these revisions, the timing of implementation of theabolishment of the special local corporation tax, the restoration of theenterprise tax on corporations as a result of said abolishment, therevision of the local corporate income tax rate, and the revision of the

About the NAGASE Group(c) Defined contribution pension plans

shares less than one voting unit for the year ended March 31, 2017.
The increase in treasury stock consists of 937 shares resulting fromthe purchase of shares of less than one voting unit for the year ended
March 31, 2016.

NAGASE & CO., LTD.

Integrated Report 201789

Notes to Consolidated Financial Statements(c) Fair value of financial instruments
The carrying value of financial instruments on the consolidated balance sheets, fair value and the differences as of March 31, 2017 and 2016, areshown in the following table. Financial instruments for which fair value is deemed extremely difficult to determine are not included.

Integrated Report 2017

¥ 39,830
206,846¥ 39,830
206,846¥ ——84,090¥330,767

84,090¥330,767—¥ —¥102,076
28,162
3,522
10,00020,00020,078¥183,840¥102,076
28,162
3,522
10,007
20,256
20,329¥184,354

¥ —
—
—
7
256
250
¥513

¥     211¥     22¥     211¥     22

¥ —
—
¥ —

¥ 43,283
196,335¥ 43,283
196,335¥  ——

69,702¥309,320

69,702¥309,320—¥  —¥ 97,800
25,294
8,823
30,00023,108¥185,027¥ 97,800
25,294
8,823
30,43023,375¥185,723

¥  —
—
—
430
266
¥696

¥    1083¥    111¥    1083¥    111

¥  —
—
¥  —

Thousands of U.S. dollars
2017

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
Current portion of bonds
Bonds
Long-term loans
Total liabilities
Derivatives*
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

Carrying value

Fair value

Difference$  355,023
1,843,712$  355,023
1,843,712$   ——

749,532$2,948,275

749,532$2,948,275

—
$   —

$  909,849
251,021
31,393
89,135
178,269
178,964$1,638,649$  909,849
251,021
31,39389,197
180,551
181,202$1,643,230

$   —
—
—
62
2,282
2,228
$4,573$      1879$      196$      1879$      196

$   —
—
$   —

* Receivables and payables arising from derivative transactions are presented as a net value with the amount in parentheses representing a net liability position.

The calculation methods of fair values of financial instruments andsecurities and derivative transactions are as follows:
Cash and time deposits
Their carrying value approximates the fair value.
Notes and accounts receivable
The fair value of notes and accounts receivable is based on theirpresent values discounted by the interest rate determined taking into
account the remaining period to maturity for each receivable classified
by settlement 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 byholding purpose.

Notes and accounts payable
The fair value of notes and accounts payable is based on their present
values discounted by the interest rate determined taking into accountthe remaining period to maturity for each payable classified by settlement date.
Short-term loans and current portion of long-term loans
Since these items are settled in a short period of time, their carrying
value approximates the fair value.
Current portion of bonds and bonds
The fair value of bonds is based on the market price.

NAGASE & CO., LTD.

Integrated Report 2017

Financial and Corporate Information

NAGASE & CO., LTD.

Difference

Difference

Critical Initiatives for Sustainable Growth90

Carrying value

Carrying value

Unique Products

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
Current portion of bonds
Bonds
Long-term loans
Total liabilities
Derivatives*
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

Millions of yen
2017
Fair value

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
Bonds
Long-term loans
Total liabilities
Derivatives*
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

Performance by Segment

currency transactions denominated in the same currency involving
either payables or receivables, foreign currency forward exchange
contracts are used solely for the netted position.
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 withconcern to the status of business and financial transactions.
Short-term loans are raised primarily in connection with businessactivities. Long-term loans and bonds are taken out principally for the
purpose of making capital spending, investments and financing. Loans
with variable interest rates are subject to the risk of fluctuating interest
rates. However, to reduce such risk, the Group utilizes derivatives(interest-rate swap transactions) as a hedging instrument.
Derivatives include foreign currency forward exchange contracts
to manage fluctuation risk in foreign currency exchange rates andinterest-rate swaps to manage fluctuation risk of interest rates related
to the interest payments for bank loans.
In addition, notes and accounts payable and bank loans are
exposed to liquidity risk. However, the Group manages such risk bymonitoring the balance of inflow and outflow of cash and establishingliquidity on hand in excess of half of the amount of monthly net sales.

Millions of yen
2016
Fair value

Leading Us to the Future(a) Policy for financial instruments
The Group invests excess funds in highly secure and short-term financial assets, whose principal is guaranteed to be recoverable. With regard
to financing policy, short-term working funds are raised by bank borrowings or issuance of commercial paper and long-term funds areraised by bank borrowings and the issuance of bonds. The policy forderivative transactions is that those are utilized to mitigate the foreign
currency exchange rate fluctuation risk arising from the receivables andpayables 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 each customer, and establishes credit limits byeach customer based on the Group’s internal credit rating policy andmonitors outstanding balances. The Group establishes system underwhich the credit status by each customer is reviewed at least once a
year and the sales limit amount updated as necessary.
In the cases of notes and accounts receivable or payable denominated in foreign currencies, foreign currency forward exchange contracts are used to hedge the risk of fluctuation. However, for foreign

About the NAGASE Group14. FINANCIAL INSTRUMENTS

91

Notes to Consolidated Financial Statements

long-term loans is 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 new loans undersimilar conditions.
Derivative transactions
Please refer to Note 15.

2017

2016

Thousands of
U.S. dollars
2017¥ 2,669
7,788¥10,458¥ 2,1449,498¥11,642$23,790
69,418$93,217

Millions of yen

Unlisted equity securities
Investments in unconsolidated subsidiaries and affiliates
Total

The redemption schedule for time deposits and notes and accounts receivable with maturity dates at March 31, 2017 is summarized as follows:¥ 39,637
206,846¥246,483

Time deposits
Notes and accounts receivable
Total

¥—
—
¥—

Thousands of U.S. dollars
Over 1 year andWithin 1 year
less than 5 years$  353,302
1,843,712$2,197,014

Time deposits
Notes and accounts receivable
Total

$—
—
$—

With respect to the redemption schedule of bonds, long-term loans and finance lease obligations, please refer to Note 8.

The currency-related derivatives positions outstanding for which hedge accounting has not been applied at March 31, 2017 and 2016 are
as follows:

Transaction

92

NAGASE & CO., LTD.

Integrated Report 2017

¥ 7,475
1,772
763
440
88

¥—
—
—
—
—

¥  24
(10)
3
1
(1)

¥  24
(10)
3
1
(1)

750
379
33
3
¥11,706

—
—
—
—
¥—

2
2
(0)
0
¥  21

2
2
(0)
0
¥  21

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Yen
Euro
RMB
Over-the-counter transactions
Others
Buying:U.S. dollars
YenEuro
Others
Total

¥ 51
(10)
9
2
0
(0)

¥ 51
(10)
9
2
0
(0)

1,423
563
43
2
¥10,497

—
—
—
—
¥—

54
0
(0)
(0)
¥108

54
0
(0)
(0)
¥108

Thousands of U.S. dollars
2017
Contract value(notional principal
Contract value
amount over(notional principal
one year)
Fair value
amount)Valuation
gain (loss)$ 66,628
15,795
6,801
3,922
784

$—
—
—
—
—

$214
(89)
27
9
(9)

$214
(89)
27
9
(9)

6,685
3,378
294
27
$104,341

—
—
—
—
$—

18
18
(0)
0
$187

18
18
(0)
0
$187

The fair value of foreign currency forward exchange contracts is mainly computed using the prices provided by counterparty financial institutions.

Financial and Corporate Information

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Yen
Euro
RMB
Over-the-counter transactions
Others
Buying:U.S. dollars
YenEuro
OthersTotal

Transaction

¥—
—
—
—
—
—

Critical Initiatives for Sustainable Growth

Classification

Valuation
gain (loss)

Classification¥ 5,629
1,520
656
516
67
74

Unique Products

15. DERIVATIVES AND HEDGING ACTIVITIESMillions of yen
2017
Contract value(notional principal
Contract value
amount over(notional principal
one year)
Fair value
amount)Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Yen
Euro
RMB
Over-the-counter transactions
SGD
Others
Buying:U.S. dollars
YenEuro
Others
Total

Valuation
gain (loss)

Performance by Segment

Millions of yen
Over 1 year andWithin 1 year
less than 5 years

Transaction

Leading Us to the Future

The carrying value of financial instruments without determinable market value at March 31, 2017 and 2016 is presented as follows:

Classification

Millions of yen
2016
Contract value(notional principal
Contract value
amount over(notional principal
one year)
Fair value
amount)About the NAGASE Group

Long-term loans
The fair value of long-term loans with fixed interest rates is based on
the present value of 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 longterm loans are hedged by interest-rate swap agreements andaccounted for as loans with fixed interest rates. The fair value of those

NAGASE & CO., LTD.

Integrated Report 201793

Notes to Consolidated Financial Statements

Method for hedge accounting

Accounts
receivable

¥  4
434
76
23

¥—
—
—
—

¥  0
1
0
(0)

Accounts payable

45
178
29
24
18

—
—
—
—
—

0
(1)
(0)
0
0

Accounts
receivableEuro
Buying:Euro
Others

Accounts payable

Total

Deferral hedge accounting

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

Total

94

NAGASE & CO., LTD.

Integrated Report 2017

Accounts
receivable

Accounts payable

Accounts
receivable
Accounts payable

(*)

86
23
¥956

—
—
¥—

(*)
(*)
¥  1

Millions of yen
2016
Contract value
Contract value(notional principal(notional principal
amount over one year)
amount)Accounts
receivable$   36
3,868
677
205

$—
—
—
—

$  0
9
0
(0)

Accounts payable

401
1,587
258
214
160

—
—
—
—
—

0
(9)
(0)
0
0

107

—

(*)

767
205
$8,521

—
—
$—

(*)
(*)
$  9

Accounts
receivableEuro
Buying:Euro
OthersFair value

Accounts payable

Total

The fair value of foreign currency forward exchange contracts is mainly computed using the prices provided by counterparty financial institutions.
(*): The fair value of foreign currency forward exchange contracts that qualify for the allocation method is included in the fair value of the underlying accounts receivable andpayable.

Fair value

¥ 44
204
58
8

¥—
—
—
—

¥  1
3
0
(0)

13
25
20
36

—
—
—
—

(0)
(0)
(0)
(0)

0

—

(*)

49
7
¥469

—
—
¥—

(*)
(*)
¥  3

The interest-related derivatives positions outstanding for which hedge accounting has been applied at March 31, 2017 and 2016 are as follows.

Method for hedge accounting

Transaction

Swap rates applied toInterest-rate swap transactions
underlying long-term loans (pay—fixed, receive—variable)

Method for hedge accounting

Transaction

Swap rates applied toInterest-rate swap transactions
underlying long-term loans (pay—fixed, receive—variable)

Method for hedge accounting

Transaction

Swap rates applied toInterest-rate swap transactions
underlying long-term loans (pay—fixed, receive—variable)

Hedged item

Long-term loans

Hedged item

Long-term loans

Hedged item

Long-term loans

Millions of yen
2017
Contract value
Contract value(notional principal(notional principal
amount over one year)
amount)¥20,465¥18,000(**)

Millions of yen
2016
Contract value
Contract value(notional principal(notional principal
amount over one year)
amount)¥25,626¥20,439$160,442

Fair value(**)

Thousands of U.S. dollars
2017
Contract value
Contract value(notional principal(notional principal
amount over one year)
amount)$182,414

Fair value

Fair value(**)

Financial and Corporate Information

Buying:Euro
OthersMajor hedged item—

Allocation method forforeign currency forward
exchange contracts(Note 2(p))

Major hedged item

Critical Initiatives for Sustainable Growth

Allocation method forforeign currency forward
exchange contracts(Note 2(p))

Transaction

12

Deferral hedge accounting

Transaction

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

Unique Products

Method for hedge accounting

Method for hedge accounting
Fair value

Performance by Segment

Allocation method forforeign currency forward
exchange contracts(Note 2(p))

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

Major hedged item

Thousands of U.S. dollars
2017
Contract value
Contract value(notional principal(notional principal
amount over one year)
amount)Leading Us to the Future

Deferral hedge accounting

Transaction

Millions of yen
2017
Contract value
Contract value(notional principal(notional principal
amount over one year)
amount)About the NAGASE GroupThe currency-related derivatives positions outstanding for which hedge accounting has been applied at March 31, 2017 and 2016 are as follows:(**): 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 the fair value of the long-term loans.

NAGASE & CO., LTD.

Integrated Report 201795

Notes to Consolidated Financial Statements

20. CASH AND TIME DEPOSITS

Research and development costs included in cost of sales and selling, general and administrative expenses for the years ended March 31, 2017 and2016 totaled ¥5,167 million ($46,056 thousand) and ¥5,063 million, respectively.

A reconciliation of cash and time deposits in the accompanying consolidated balance sheets at March 31, 2017 and 2016 and cash and cash equivalents in the accompanying consolidated statements of cash flows for the years then ended is as follows:
Thousands of U.S.
dollars
2017

Millions of yen

17. OPERATING LEASES
Future minimum lease payments subsequent to March 31, 2017 under noncancelable operating leases are as follows:
Millions of yen

Thousands of
U.S. dollars

20182019 and thereafter
Total

¥437
391
¥829

$3,895
3,485$7,38918. CONTINGENT LIABILITIESIn addition, at March 31, 2017, the Company and its consolidated
subsidiaries had contingent liabilities arising from notes discountedwith banks in the amount of ¥245 million ($2,184 thousand).

19. AMOUNTS PER SHARE
Amounts per share at March 31, 2017 and 2016 and for the years then ended are as follows:
Yen

Basic profit attributable to owners of parent per share has been computed based on the profit attributable to owners of parent available
for distribution to the shareholders of common stock and theweighted-average number of shares of common stock outstanding
during the year.
Diluted profit attributable to owners of parent per share for theyears ended March 31, 2017 and 2016 has not been presented2016¥   81.65—
2,301.10
33.00¥   96.96—
2,156.67
32.00

U.S. dollars
2017$ 0.73
—
20.51
0.29

because no potentially dilutive shares of common stock were
outstanding.
Net assets per share have been computed based on the numberof shares of common stock outstanding at the year end.
Cash dividends per share represent the cash dividends proposedby the Board of Directors as applicable to the respective years
together with the interim cash dividends paid.

Millions of yen

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

2017

2016

¥10,331¥10,331
126,541,671¥12,316¥12,316
127,031,413

21. SEGMENT INFORMATION(a) Overview of reportable segments
The reportable segments of the Company comprise those entities
for which obtaining separate financial reports is possible and thatare subject to regular review by the Board of Directors, which
decides upon the distribution of management resources andassesses their performance.
Reflecting the respective positions of each business in the value
chain, as well as identifying the most closely aligned industries, theCompany defined five segment categories: Functional Materials (locatedat the top of the value chain), Advanced Materials & ­Processing (locatedin the next stage of the value chain), Electronics, Automotive & Energy,
and Life & Healthcare (functioning within the corresponding industries).
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, auxiliaries, plastic materials,
plastic additives, industrial oil solutions, surfactants materials, fluorochemicals, encapsulant materials, silicone materials, and more for thepaints/inks, resins, urethane foams, organic synthesis, surfactants, andsemiconductors industries.
The Advanced Materials & Processing segment is engaged in thesales of dyestuffs, dyes, functional dyes, digital print processing products, thermoplastic resins, thermosetting resins, conductive coatings,
synthetic rubber, inorganic materials, plastics products, resins­molding tools/dies, and external inspection equipment for the dye/­
additive, digital print processing materials, fiber processing, raw resinmaterials, resins molding, functional films and sheets, constructions,and other industries.
The Electronics segment is engaged in the sales of pre-processing
materials and devices for LCD/semiconductors, materials for display
panels, materials and devices for semiconductor assembly, low-­temperature/vacuum equipment, high-function epoxy resins, precisionelectronics abrasives, and more for the displays, touch panels, semiconductors, hard disk drives, electronic components, and heavy electrical industries.
The Automotive & Energy segment is engaged in the sales ofplastic products, thermoplastic resins, thermosetting resins, silicone
products, resins molding tools/dies, battery materials, solar cell/­secondary battery materials and more for the automotives, automotive
components, and energy industries.
The Life & Healthcare segment is engaged in the sales of­pharmaceutical/agricultural chemicals and materials, research products, in vitro diagnostics, enzymes, food additives, additives for cosmetics, feeds/fertilizers, and surfactants for the pharmaceutical, food,and cosmetics industries. Furthermore, the segment offers radiation
measurement as one of its main services. In addition, this segment
sells cosmetics, health foods, and beauty foods directly to consumers.
(b) Calculation methods of net sales, income or loss, assets, andother items by reportable segments
The accounting policies of reportable segments are generally identicalto those described in Note 2. Reportable segment income corresponds to operating income in the consolidated statements ofincome. Intersegment internal income and transfers are determinedbased on the values of transactions at actual market prices.

Critical Initiatives for Sustainable Growth

The financial data used in the computation of basic profit attributable to owners of parent per share for the years ended March 31, 2017 and2016 are summarized as follows:$355,02318(909)$354,131

Unique Products

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

2017

2016

¥43,2831(384)¥42,900

Performance by Segment

At March 31, 2017, the Company and its consolidated subsidiaries were
contingently liable as guarantors of loans of customers and other in theaggregate amount of ¥316 million ($2,817 thousand), and as guarantors of loans of employees in the amount of ¥1 million ($9 thousand).

2017¥39,8302(102)¥39,730

Leading Us to the Future

Years ending March 31,

Cash and time deposits
Long-term deposit included in other assets of investments and other assets
Time deposits with maturities of more than three months
Cash and cash equivalents

About the NAGASE Group

16. RESEARCH AND DEVELOPMENT COSTS

Thousands of
U.S. dollars
2017$92,085$92,085

Financial and Corporate Information

96

NAGASE & CO., LTD.

Integrated Report 2017

NAGASE & CO., LTD.

Integrated Report 201797

Notes to Consolidated Financial Statements

Thousands of U.S. dollars
2017
Reportable Segments

Millions of yen
2017

Functional
Materials

Reportable Segments
Electronics

Automotive& EnergyLife &
Healthcare

Total¥153,546
2,000
155,546¥  4,185¥ 72,576¥242,609
2,414
245,024¥  5,093¥121,346¥127,722
1,977
129,699¥  6,333¥ 65,610¥112,956
2,619
115,576¥  1,539¥ 46,258¥84,904472
85,376¥ 3,332¥98,221¥721,739
9,483
731,223¥ 20,484¥404,013

OthersTotal¥  6445,432
6,077¥  148¥5,089¥722,384
14,916
737,300¥ 20,633¥409,102

Corporate

Adjustments Consolidated¥      — ¥     — ¥722,384—(14,916)——(14,916) 722,384¥   (6,153) ¥     550 ¥ 15,030¥149,020 ¥(27,347) ¥530,775¥    809——¥  2,52441627¥    219——¥ 3,412
1,502
22,407¥  7,442
1,543
23,034¥  216——¥  7,658
1,543
23,034¥  1,722——¥     ———¥  9,381
1,543
23,034

1,716

1,394

2,318

1,235

2,476

9,140

—

9,140

—

(1)

9,139

297

3,561

1,825

284

4,906

10,875190

11,066

1,107—

12,173

Electronics

Automotive &Life &
EnergyHealthcare

Total

Others

Total

Corporate

Adjustments Consolidated$1,368,625 $2,162,483 $1,138,444 $1,006,828
17,82721,517
17,622
23,344
1,386,452 2,184,009 1,156,066 1,030,181$   37,303 $   45,396 $   56,449 $   13,718$  646,903 $1,081,612 $  584,811 $  412,318$756,788 $6,433,185
4,207
84,526760,995 6,517,720$ 29,700 $  182,583$875,488 $3,601,150$ 5,740 $6,438,934 $         — $     — $6,438,934
48,418132,953— (132,953)—
54,167 6,571,887— (132,953) 6,438,934$ 1,319 $  183,911 $      (54,844) $    4,902 $  133,969$45,361 $3,646,510 $1,328,282 $(243,756) $4,731,037$    4,243 $    7,211 $   22,498 $    1,952
—
—
365
—
—
—
5,589
—

$ 30,413 $   66,334
13,38813,753
199,724
205,312$ 1,925 $   68,259 $   15,349 $     — $   83,617—
13,753——
13,753—205,312——205,312

15,295

12,425

20,661

11,00822,07081,469—81,469—(9)81,4602,647

31,741

16,2672,531

43,72996,934

1,694

98,636

9,867—

108,503(d) Geographical information
Net sales by country or region for the years ended March 31, 2017 and 2016 are summarized as follows:

Reportable Segments

2016¥369,365
193,784
101,998
29,573
11,975
15,687¥722,384¥363,038
207,191
109,837
32,01613,992
16,117¥742,194$3,292,317
1,727,284
909,154
263,597
106,739
139,825$6,438,934

Advanced
Materials &Processing

Electronics

Automotive& EnergyLife &
Healthcare

Total

Corporate¥157,149
1,955
159,105¥  3,679¥ 71,042¥255,505
2,241
257,747¥  4,979¥122,802¥127,926
1,211
129,138¥  6,255¥ 62,912¥115,351
2,626
117,978¥  1,300¥ 42,136¥85,571514
86,086¥ 3,864¥99,620¥741,505
8,549
750,055¥ 20,079¥398,514¥  6895,851
6,540¥  215¥7,213¥742,194
14,401
756,595¥ 20,295¥405,728¥      ———¥   (2,725)¥145,038¥    —(14,401)(14,401)¥    455¥(38,685)¥742,194—
742,194¥ 18,024¥512,081¥    509——¥    859——¥  2,672132
672¥    157——¥ 3,258
1,502
23,909¥  7,458
1,634
24,582¥  208——¥  7,667
1,634
24,582¥  1,826——¥    ———¥  9,493
1,634
24,582

1,752

2,389

1,968

1,355

2,385

9,852

1,944

11,797—(53)

11,743

1,690

1,466

2,855

244

2,341

8,598

158

8,757

2,368

—

11,125

Total

OthersAdjustments Consolidated

Notes: 1. Net sales are categorized by country or region based on the locations of customers.
2. Country or region is determined by geographical proximity.
3. Major countries in each region:		 (1) Greater China
China, Hong Kong, and Taiwan
		 (2) ASEAN
Thailand, and Singapore
		 (3) Americas U.S.A, and Mexico
		 (4) Europe
Germany		 (5) Other
Korea
4. Change in regional classifications
		The Company had classified its regions as Northeast Asia, Southeast Asia, North America, and Europe & Others in the previous years. During the year ended March 31,
2017, the Company renamed and reclassified its regions for coordination with Company’s mid-term management plan “ACE-2020.” Geographical information for the year
ended March 31, 2016 was reclassified to conform to this change in the regional classifications in the current fiscal year.
		 (1) Northeast Asia was renamed Greater China; Southeast Asia was renamed ASEAN; and North America was renamed Americas. Europe & Others was categorized separately into Europe and Other.
		 (2) Brazil, which was previously classified under Europe & Others, was included in Americas.
		 (3) Korea, which was previously classified under Northeast Asia, was included in Other.

Critical Initiatives for Sustainable Growth

Sales to customers
Intersegment sales and transfers
Net sales
Segment income
Segment assets
Other items
Depreciation and amortization
other than amortization of
goodwill
Amortization of goodwill
Unamortized balance of goodwill
Investments in affiliates accounted
for by the equity method
Increase in property, plant andequipment, net and intangible
assetsFunctional
Materials

Japan
Greater China
ASEAN
Americas
EuropeOther
Total

Unique Products

2017

Thousands of
U.S. dollars
2017

Millions of yen
Millions of yen
2016

Performance by Segment¥    476——

Sales to customers
Intersegment sales and transfers
Net sales
Segment income
Segment assets
Other items
Depreciation and amortization
other than amortization of
goodwill
Amortization of goodwill
Unamortized balance of goodwill
Investments in affiliates accounted
for by the equity method
Increase in property, plant andequipment, net and intangible
assetsAdvanced
Materials &Processing

Leading Us to the Future

Sales to customers
Intersegment sales and transfers
Net sales
Segment income
Segment assets
Other items
Depreciation and amortization
other than amortization of
goodwill
Amortization of goodwill
Unamortized balance of goodwill
Investments in affiliates accounted
for by the equity method
Increase in property, plant andequipment, net and intangible
assetsFunctional
Materials

Advanced
Materials &Processing

About the NAGASE Group(c) Information on net sales, income or loss, assets and other items for each reportable segment
Information by reportable segments for the year ended March 31, 2017 is as follows:

Property, plant and equipment by country or region as of March 31, 2017 and 2016 are summarized as follows:

Japan
Other
Total

2016

¥61,666
5,952¥67,619¥59,646
6,828¥66,474$549,657
53,053$602,719

98

NAGASE & CO., LTD.

Integrated Report 2017

NAGASE & CO., LTD.

Integrated Report 2017

Financial and Corporate Information

2017

Thousands of
U.S. dollars
2017

Millions of yen

99Independent Auditor’s Report

Notes to Consolidated Financial Statements

About the NAGASE Group(e) Information on loss on impairment of fixed assets per reportable segments
Loss on impairment of fixed assets for the years ended March 31, 2017 and 2016 is as follows:
Millions of yen
2017
Reportable Segments
Electronics

Automotive& EnergyLife &
Healthcare¥—¥1,352

¥1

¥38

¥—

Loss on impairment of fixed assets

Total¥1,392OthersEliminations
or corporate

¥—

¥6

Total

¥1,398

Leading Us to the Future

Functional
Materials

Advanced­Materials &Processing

Millions of yen
2016
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics

Automotive& EnergyLife &
Healthcare

¥—

¥818

¥1,862¥36¥—

Loss on impairment of fixed assets

Total¥2,717

OthersEliminations
or corporate

¥—

¥39

Total

¥2,756

Thousands of U.S. dollars
2017
Reportable Segments
Advanced­Materials &Processing

Electronics$—$12,051$9

Loss on impairment of fixed assets

$339

$—

Total

$12,408

OthersEliminations
or corporate

$—

$53

Total

$12,461of ¥500 million and ¥304 million, respectively.
As to goodwill for developing and manufacturing of industrial
adhesives and other in Electronics segment, as achieving the initiallyprojected level of income could no longer be expected, the carrying
value of goodwill was reduced to the recoverable amount andrecorded loss on impairment loss of fixed assets of ¥1,364 million. And
as to business-use assets for processing of thin glass panels in thesame segment, due to decreasing profitability, the carrying values
were reduced to their recoverable amounts and recorded loss on
impairment of fixed assets of ¥440 million.

Unique Products

For the year ended March 31, 2017, as to business-use assets for
manufacturing of color formers in Advanced Materials & Processing
segment, due to a decreasing profitability, the carrying values werereduced to their recoverable amounts and recorded loss on impairment of fixed assets of ¥1,249 million ($11,133 thousand).
For the year ended March 31, 2016, as to business-use assets for
manufacturing of color formers and business-use assets for processingof plastic materials in Advanced Materials& Processing segment, due
to a decreasing profitability, the carrying values were reduced to theirrecoverable amounts and recorded loss on impairment of fixed assets

Automotive &Life &
EnergyHealthcare

Performance by Segment

Functional
Materials

22. SUBSEQUENT EVENTSThe 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, 2017, was approved at a meeting of the shareholders held on June 28, 2017:
Thousands of
U.S. dollars¥2,144$19,110

Critical Initiatives for Sustainable Growth

Cash dividends (¥17.0 = U.S.$0.15 per share)

Millions of yen

Financial and Corporate Information

100

NAGASE & CO., LTD.

Integrated Report 2017

NAGASE & CO., LTD.

Integrated Report 2017101

Consolidated Subsidiaries, Affiliates and Offices

Category○ Company accounted for under the equity method
Company name

As of April 1, 2017
Description of business

Location

Year ofestablishment●

Nagase ChemteX Corporation

Company name

Sales

Japan

Manufacturing and Processing

Category

Research, manufacture, and sale of enzymes, fermented products, pharmaceuticalintermediates, disinfecting agents, functional polymers, epichlorohydrine derivatives,electronics materials, etc.

Osaka Pref.

1970

Description of business

Location

Year ofestablishment

1995

Nagase Chemical Co., Ltd.

Sale of dyestuffs, industrial chemicals, chemicals for manufacturing paper, plastics andmachineryTokyo Pref.

●

Nagase Plastics Co., Ltd.

Sale of raw materials for plastics and plastic products

Osaka Pref.

1975

●

Nagase Beauty Care Co., Ltd.

Sale of cosmetics and health foods

Tokyo Pref.

1991

●

Nishinihon Nagase Co., Ltd.

Sale of dyestuffs, auxiliaries, industrial chemicals and plastics

Fukuoka Pref.

1969
1979

●

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

●

Nagase Medicals Co., Ltd.

Manufacture and sale of pharmaceuticals, animal drugs, health foods, and cosmetics

Hyogo Pref.

1972

●

Nagase Elex Co., Ltd.

Sale of raw materials for plastics and plastic productsTokyo Pref.

●

Setsunan Kasei Co., Ltd.

Coloring and sale of plastics

Osaka Pref.

1966

●

Nagase Abrasive Materials Co., Ltd.

Sale of abrasives, inorganic materials and related equipment

Osaka Pref.

1955

Nagase Sanbio Co., Ltd.

Sales of medicine for agriculture and additives for fertilizers, feed and foodTokyo Pref.

1987

Sale of auto models, test production materials, and carbon fiber composites

Tokyo Pref.

1965

●

Totaku Industries, Inc.

Manufacture and sale of plastic products

Osaka Pref.

1952

●

●

Kotobuki Kasei Corporation

Molding, processing and sale of plastic products

Tochigi Pref.

1972

●

Nagase Tool Matex Co., Ltd.
Nagase-OG Colors & Chemicals Co., Ltd.

Purchasing and information services related to dyes, industrial chemicals, etc.

Osaka Pref.

1957

Nagase Techno-Engineering Co., Ltd.

Manufacture, sale and maintenance of low-temperature vacuum equipment, systems
for chemical supply management and recycling processes, inspection systems, andthe peripheral equipment for each of these○●Tokyo Pref.

1989

Nihon UNF Co., Ltd.

Manufacture, sale, import/export, management consulting, and investment inpharmaceuticals and non-pharmaceuticals

Shizuoka Pref.

2001

●

Fukui Yamada Chemical Co., Ltd.

Manufacture of color former

Fukui Pref.

1985

●

Nagase Filter Co., Ltd.

Planning, production, processing, quality testing and sale of metal filters

Osaka Pref.

2006

●

CAPTEX Co., Ltd.

Manufacture and development of battery power source controllers, battery powersources and power source peripheral equipment

Aichi Pref.

2004

●

Nagase ChemteX (Wuxi) Corporation

Plastic manufacture and sale of adhesives and high-tech chemical products forelectronics, technology services

China

2002

●

Kawai Hiryo Corporation

Manufacture and sale of organic fertilizers and agricultural chemicals and materials

Shizuoka Pref.

1981

●

Totaku Industries Suzhou Co., Ltd.

Manufacture and sale of plastic products

China

2005

○

Sun Delta Corporation

Development of applications for synthetic plastic products and manufacture and saleof processed productsTokyo Pref.

2005

●

Nagase Electronics Technology Co., Ltd.

Chemical etching of liquid crystal glass panel units

Taiwan2005○

Honshu Rheem Co., Ltd.

Manufacture and sale of fiber drums, import and sale of food processing machines
and materials

Kanagawa Pref.

1968

●

Nagase Engineering Service Korea
Co., Ltd.

Equipment maintenance service and engineering

Korea

1997

○

Toyo Beauty Supply Corporation

Contract manufacture of cosmetics and health foods

Tokyo Pref.

1964

●

Nagase Electronics Technology(Xiamen) Co., Ltd.

Chemical etching of liquid crystal glass panel units

China

2010

○

eX. Grade Co., Ltd.

Development, manufacture and sale of components for electronic equipment

Osaka Pref.

2003

○

Guangzhou Kurabo Chemicals Co., Ltd.

Manufacture of molded urethane products for automobiles

China

2001

○

SN Tech Corporation

Manufacture of developer, recycling businessOsaka Pref.

2008

○

Toyo Quality One (Guangzhou) Co., Ltd.

China

2004

Nissei Technology Corporation

Design, development, and manufacture of ultra-precision plastic lenses and opticalunits; manufacture of precision mechanical components and units

Research and development, manufacturing, processing, sale, technology consulting,and after-sale service for major automotive parts

Hyogo Pref.

1953

○

Toyo Quality One Ningbo Co., Ltd.

Manufacture and sale of polyurethane foam

China

1993

Uma Yasai Farm Corporation

Processing and sale of agricultural and livestock goods

Shizuoka Pref.

2008

○

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

Development, manufacture, and sale of precision press products, spring, and standard
molds

China

2005

Nagase Logistics Co., Ltd.

Warehousing and distribution

Hyogo Pref.

1982

○

Light Chemical (Changzhou) Co., Ltd.

China

2011

●

Nagase Techno Service Co., Ltd.

Sales of BPO services, catalog & online commerce, recordable media, RFID; logistics
services

Research, development, and after-sale service for high-function composites andintermediates; sales of internally developed products

Chiba Pref.

1991

○

Wuxi Chenghong Electronic Chemicals Research, development, manufacture, and sales of electronics chemicals includingCo., LTD.
semiconductors and flat panel displays (FPDs)

China

2013

●

Nagase General Service Co., Ltd.

Sale and lease of various goods, real estate administration

Tokyo Pref.

1983

●

Nagase Information Development, Ltd.

Software development and maintenanceTokyo Pref.

1987

ON Textile Chemicals (Shanghai)Co., LTD.

Manufacture, sales, and export/import of textile-related products,
dyeing processing agents

China

2003

●

Nagase Trade Management Co., Ltd.

Import/export and receivables/payables administration; shared services for receipts/
disbursements

Tokyo Pref.

1996

●

Nagase Chemspec Co., Ltd.

Sale and technical servicing of chemicals

Tokyo Pref.

1976

Construction and maintenance of chemical supply and management equipment

China

2006

○

Nagase Landauer, Ltd.

Radiation measuring services

Ibaraki Pref.

1974

NW Consultant Service (Shenzhen) Ltd.

Print quality management consultant

China

2008

Nagase Logistics Support Co., Ltd.

An exclusive stevedore for Nagase Logistics Co., Ltd.

Hyogo Pref.

1954

2011

Insurance agency

Osaka Pref.

1971

Management of NAGASE Group operations and promotion of business strategies
related to Greater China

China

Choko Co., Ltd.

Nagase Business Management andPlanning (Shanghai) Co., Ltd.

●

Manufacturing and Processing

Unique Products

ServicingGreater China and Korea

Performance by Segment○

Leading Us to the Future●

About the NAGASE Group● Consolidated subsidiary

Servicing

Critical Initiatives for Sustainable Growth

Nagase CMS Technology (Shanghai)Co., Ltd.

Financial and Corporate Information

102

NAGASE & CO., LTD.

Integrated Report 2017

NAGASE & CO., LTD.

Integrated Report 2017103

Consolidated Subsidiaries, Affiliates and Offices

Category○ Company accounted for under the equity method
Company name

Description of business

Location

Year ofestablishment

Sales
Nagase (Hong Kong) Ltd.

Import/export, domestic sales, marketing

China

1971

●

Shanghai Hua Chang Trading Co., Ltd.

Sale of resins and related products

China

1998

Location

Year ofestablishment●

Nagase (Thailand) Co., Ltd.

Import/export, domestic sales, marketing

Eastern Office

Thailand

1989

ThailandSuzhou Branch Office/Ningbo Branch Office

China

Chengdu Branch Office/Chongqing Branch Office

China

Australia Branch

Australia

Nanjing Branch

China

Bangladesh Liaison Office

Bangladesh

Shanghai Nagase Trading Co., Ltd.
Nagase Wahlee Plastics Corporation

Yangon Branch●

Import/export, domestic sales, marketing
Sale of resins and related products

China
TaiwanNagase Singapore (Pte) Ltd.

1990

●

Nagase (Malaysia) Sdn. Bhd.

TaiwanJohor Bahru OfficeGangshan OfficeTaiwanPenang Office

NWP (B.V.I.) Corporation

Vehicle for investments into China from Taiwan●

Guangzhou Nagase Trading Co., Ltd.

Import/export, domestic sales, marketing

British Virgin Islands

2007

China

2002

China

Zhengzhou Branch Office

China

●

Nagase (Taiwan) Co., Ltd.

Import/export, domestic sales, marketing

Taiwan1988●

Tianjin Nagase International Trading
Co., Ltd.

Import/export, domestic sales, marketing

China

2003

Dalian Branch Office/
Qingdao Branch Office

China

Changchun Branch OfficeChina

NWP International Trading(Shenzhen) Co., Ltd.

Sale of plastic products in South China

China

Dongguan Branch Office

China

Guangzhou Branch Office

China

Xiamen Branch Office

China

Singapore●

PT. Nagase Impor-Ekspor Indonesia

●

1975

United Arab Emirates
Import/export, domestic sales, marketing

Malaysia

1981

Malaysia
Malaysia
Import/export, domestic sales, marketingIndonesia

Nagase Philippines Corporation

Import/export, domestic sales, marketing

Philippines

1997

●

Nagase Philippines International
Services Corporation

Domestic sales, import/export

Philippines

2005

●

Nagase Vietnam Co., Ltd.

Import/export, domestic sales, marketing

Vietnam

2008●

Nagase India Private Ltd.

Surabaya BranchIndonesia

Ho Chi Minh City Branch

Vietnam
Import/export, domestic sales, marketing

India

North India Branch (Gurgaon)

2006

India

South India Branch (Chennai)
2004

1998

India

PT. Indonesia Mold Technology

Design changes and maintenance for large-scale plastic automobile component molds

Indonesia

2015

Nagase (Siam) Co., Ltd

Contract services for Group companies

Thailand2000

Landauer Australasia Pty Ltd

Radiation measuring services

Australia

2006

Americas

Manufacturing and Processing

Nagase Korea Corporation

General import/export trading, retailing/wholesaling, import/export trade agency

Korea

2001

●

Engineered Materials Systems, Inc.

Research and development, manufacture, and sales of materials for commercial
adhesives, conductive adhesives

America

1993●

Xiamen Nagase International Trading
Co., Ltd.

Import/export, domestic sales, marketing

China

2011

●

Pac Tech USA Packaging Technologies
Inc.

Semiconductor wafer bumping, manufacture and sale of semiconductor
manufacturing equipment

America

2001●

Nagase Marketing and Service(Shenzhen) Ltd.

Import/export, domestic sales, marketing

China

2006

China
China

QINGDAO REPLUS CO., LTD.

Planning and development, manufacturing control, quality control and sales of foodpackaging

China

Manufacture and sale of color formers

America

1990

Manufacture and sale of blow-formed plastic molding components and products

America2010○

TQ-1 de MEXICO S.A. de C.V.

Manufacture and sale of urethane for automotive seat pads and automotive
laminated frames and sale of automotive urethane foam

Mexico2012○

Cytech Products Inc.

Manufacture and sales of mold release agents for polyurethane resins, thermal paper
additives and emulsion dispersing element

America

1988

Nagase America Corporation

Import/export, domestic sales, marketing

America

1971

2002
2015

Sales
●

Asean and The Middle East

Manufacturing and Processing

Sofix Corporation
KN Platech America Corporation

Michigan Branch●

Pac Tech Asia Sdn. Bhd.

Manufacture and sale of semiconductor manufacturing equipment, semiconductor
wafer bumping contract manufacturing

Malaysia

2006○

Sanko Gosei Technology (Thailand) Ltd.

Manufacture of automobile components

Thailand

1994

Bangkok Design Office

California Branch●

Manufacture of automotive molds and dies

Thailand

2000○

Nafuko Co., Ltd.

Manufacture, import/export and sale of packaging materials and related equipment

Thailand

1996○

Dainichi Color Vietnam Co., Ltd.

Manufacture and sale of color masterbatch blend for plastic

Vietnam

2006○

PT. Toyo Quality One Indonesia

Manufacture of flame lamination products

Indonesia

2008

America
Import/export sales, intermediate trade, market development, information collection

Nagase do Brasil Comércio deProdutos Químicos Ltda.

Mexico2010

MexicoImport/export sales, intermediate trade, market development, information collection

Brazil2012

EuropeManufacturing and Processing●

Pac Tech-Packaging Technologies
GmbH

Semiconductor wafer bumping, manufacture and sale of semiconductor
manufacturing equipment

Germany

1995

Nagase (Europa) GmbH

Import/export, domestic sales, marketing

Germany

1980

Sales
●

104

NAGASE & CO., LTD.

Integrated Report 2017

Hungary Representative Office

Hungary

London Branch

England

NAGASE & CO., LTD.

Integrated Report 2017

Financial and Corporate Information

Automotive Mold Technology Co., Ltd.

Nagase Enterprise Mexico S.A. de C.V.
Leon Branch Office

Thailand○America

Critical Initiatives for Sustainable Growth

ON Colors & Chemicals (Shanghai)Co., Ltd.

Sales of textile-related products, dyeing processing agents, related equipment;
export/import and technology consulting, technological development of dyeing
processing●○

Unique Products●

Guanlan Branch Co.

Performance by Segment

Wuhan Branch Office/Chongqing Branch Office

MyanmarImport/export, domestic sales, marketing

Middle East Representative Office

1997

Taichung Office●●

Description of businessLeading Us to the Future●

Company nameSales and Servicing●●

Category

About the NAGASE Group● Consolidated subsidiary105

Investor Information (As of March 31, 2017)

Overview

Stock Exchange Tokyo (First Section)

Company Name NAGASE & CO., LTD.

Establishment

December 9, 1917

Capital¥9,699 million

Employees

944 (Consolidated: 6,241)

Main Business

Import/export and domestic sales of dyestuffs, chemicals, plastics, machinery, electronics materials, cosmetics andhealth foods

Main Banks

Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Bank, Ltd.,
Sumitomo Mitsui Trust Bank, Limited

Main Offices

Osaka Head Office
Tokyo Head Office
Nagoya Branch Office
Nagase R&D Center
Nagase Application Workshop

Shareholders’ Meeting

Stock Status

Authorized Number of Shares 346,980,000 shares
Issued Number of Shares
127,408,285 shares

Number of
Shareholders

10,394Composition of Shareholders

1-1-17, Shinmachi, Nishi-ku, Osaka City, Osaka 550-8668, Tel: (81) 6-6535-2114
5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo 103-8355, Tel: (81) 3-3665-3021
3-14-18, Marunouchi, Naka-ku, Nagoya City, Aichi 460-8560, Tel: (81) 52-963-5615
Kobe High Tech Park, 2-2-3, Murotani, Nishi-ku, Kobe City, Hyogo 651-2241, Tel: (81) 78-992-3162
2-4-45, Higashitsukaguchicho, Amagasaki City, Hyogo 661-0011, Tel: (81) 6-4961-6730

Treasury Stock (1)1,287 thousand shares (1.01%)
Other Investors (225)
18,386thousand shares

Securities
Companies (24)1,314 thousand
shares (1.03%)

14.43%

Financial Institutions (51)42,899 thousand shares

33.67%
17.86%

Individuals and Others(9,847)22,757 thousand shares

31.99%

Foreign Investors (246)
40,763 thousand shares

Number of
Shares Held Percentage of Total(Thousands) Shares Outstanding (%)

Name

NORTHERN TRUST CO. (AVFC) RE
SILCHESTER INTERNATIONAL INVESTORSINTERNATIONAL VALUE EQUITY TRUST

6,836

5.37

The Master Trust Bank of Japan, Ltd.
(Trust Account)

6,161

4.84

Sumitomo Mitsui Trust Bank, Limited

5,776

4.53

Japan Trustee Services Bank, Ltd.
(Trust Account)

4,539

3.56

Sumitomo Mitsui Banking Corporation

4,377

3.44

NORTHERN TRUST CO. (AVFC)
RE U.S. TAX EXEMPTED PENSION FUNDS

4,193

3.29

Nippon Life Insurance Company

3,589

2.82

Reiko Nagase

3,555

2.79

Hiroshi Nagase

2,948

2.31

NORTHERN TRUST CO. (AVFC)
SUB A/C NON TREATY

2,797

2.20

* Shares owned by Hiroshi Nagase include shares nominally owned by
the NAGASE & CO., LTD. Officers’ Shareholding Association

Monthly Share Price Range of NAGASE

Organization (as of April 1, 2017)
Audit & Supervisory Board/
Audit & Supervisory Board Members

8012

(¥)

1,800

Risk Management & Compliance Committee

Nagase R&D Center

Internal Control Committee

Nagase Application Workshop

Performance by Segment

June 18, 1832

Code

Leading Us to the Future

FoundedPrincipal Shareholders

Share Price

TOPIX

TOPIX

3,000
2,500

1,200

2,000

900

1,500

600

1,000

Advanced Materials & Processing Segment

300

500

Corporate Planning Div.

Colors & Advanced Processing Dept.

0

New Value Creation Office

Polymer Global Account Dept.

Functional Materials Segment
Performance Chemicals Dept.

Board of Directors

Speciality Chemicals Dept.

President

Electronics Segment

Logistics Management Div.

Electronic Chemicals Dept.

Human Resources & General Affairs Div.

Electronic Materials Dept.

Finance Div.

Automotive & Energy Segment

Accounting Div.

Automotive Solutions Dept.

Legal & Credit Div.

Energy Business OfficeInformation Technology Div.

Life & Healthcare Products Dept.

2009/4

2010/4

2011/4

2012/42013/4

2014/4

2015/4

2016/42017/4

2009/4

2010/4

2011/4

2012/42013/4

2014/4

2015/4

2016/42017/4Monthly Trading Volume(Thousands of shares)

15,00012,000

9,000

6,000

3,000

Nagoya Branch0

Nagase ChemteX Corporation

2007/4

2008/4

Hayashibara Co., Ltd.

106

NAGASE & CO., LTD.

Integrated Report 2017

NAGASE & CO., LTD.

Integrated Report 2017

Financial and Corporate Information

Audit OfficeLife & Healthcare Segment

2008/4

Critical Initiatives for Sustainable Growth

BPR & Administration Div.

2007/4

Unique Products

1,500

Security Trade Control Committee

About the NAGASE Group

Corporate Information (As of March 31, 2017)107