WIN-WIN,WORLDWIDE2008
Annual ReportProfile
Based on its many years of experience in the chemicals and plastics businesses, the Nagase Group offers customers trading, marketing, R&D and manufacturing functions in its four strategic areas of electronics, life sciences, automotive andoverseas operations.
Nagase & Co., Ltd., the nucleus of our group, was established as a dyestuffs wholesaler in Kyoto in 1832. In 1900, it started importing synthetic dyestuffs from Chemical Industry of Basel. Since then, it has opened up new markets worldwide
together with its customers and accumulated considerable know-how in its role as “a technology and intelligence oriented
trading company.” At the same time, it has enhanced its capabilities for research and development of new products andtechnologies, as well as manufacturing and processing.
Today, the Nagase Group comprises more than 100 companies and offices in Japan and overseas. The Group is building
a new business model that organically combines the trading, marketing, R&D, manufacturing and processing functions ofthese companies to provide a high-level response to customer needs. In doing so, we aim to offer new proposals as “atechnology and intelligence oriented company that turns wisdom into business.” Looking ahead, along with its customers
worldwide, the Nagase Group will seize business opportunities to continue to develop and grow.

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

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

Notes on Financial Data and Graphs● All yen amounts presented in the text of this annual report have been truncated after the second● U.S. dollar amounts have been translated from yen, for convenience only, at the rate ofdecimal place in the case of billions of yen and yen amounts, and after the lowest whole numberin the case of millions of yen amounts. Percentages are rounded to the nearest decimal place.

¥100.19=U.S.$1.00, the approximate rate of exchange prevailing on March 31, 2008. In the caseof thousand dollar amounts, portions less than one thousand dollars have been truncated.
● Years in graphs represent fiscal years ended March 31.

CONTENTS
Financial Highlights

2

Message from the Management

4Interview with President Hiroshi Nagase

6

Feature:11

WIN-WIN, WORLDWIDE
Nagase Application Workshop
Development of the High-Value-Added
Phospholipids Business
Nagase and the Automotive Business in Guangzhou, China
Nagase at a Glance

18

Review of Operations

20

Nagase ChemteX

30

Nagase R&D Center

32

Corporate Governance

34

Board of Directors, Corporate Auditorsand Executive Officers

37

Corporate Social Responsibility

38

Six-year Summary

42Management’s Discussion and Analysis ofOperations and Finances
43
Consolidated Financial Statements

50

Company Information

67

Organization

68

Major Consolidated Subsidiaries,
Affiliates and Offices

69

Investor Information

73

A Cautionary Note on Forward-looking Statements
This annual report contains statements regarding Nagase’s corporate views of future developments that are forward-looking in nature and are not simply reiterations of historical facts.
These statements are presented to inform shareholders of the views of Nagase’s management

but should not be relied on solely in making investment and other decisions. You should be awarethat a number of important risk factors could lead to outcomes that differ materially from those presented in such forward-looking statements.

NAGASE & CO., LTD. ANNUAL REPORT 2008

1

FINANCIAL HIGHLIGHTS
Nagase & Co., Ltd. and Consolidated Subsidiaries(Years ended March 31)

Net sales ofOperating income of¥764.7 billion¥23.0 billion
Millions of Yen

ChangeThousands of
U.S. Dollars (Note 1)

2008

2007

2006

2008/20072008

For the Year:Net Sales (Note 2)
Chemicals
Plastics
Electronics
Life Sciences
OthersGross Profit
Operating Income
Net Income¥ 764,755
267,836
274,660
163,833
56,4891,934
80,50623,063
10,005¥ 701,321
247,094
244,681
150,796
53,556
5,191
73,63921,66913,567¥ 648,023
222,282229,278
132,086
56,404
7,972
67,64017,596
12,892

9.0%
8.4
12.3
8.6
5.5
(62.7)
9.3
6.4(26.3)$7,633,047
2,673,281
2,741,391
1,635,223
563,819
19,303
803,533
230,193
99,860At the Year-End:Total Assets
Net Assets (Note 3)
Interest-Bearing Debt

¥ 419,869
208,377
33,342¥ 422,859
211,672
20,491¥ 396,773
196,620
24,834(0.7)%(1.6)
62.7$4,190,728
2,079,818
332,777

Yen

Per Share Data:
Net Income (Basic)
Net Assets
Cash Dividends¥ 77.86
1,559.97
17.00

Change¥ 105.84
1,597.27
18.00¥ 100.32
1,535.70
15.00%

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

47.8
3.0
4.9
2.4
0.17

U.S. Dollars(26.4)%
(2.3)
(5.6)

$

0.78
15.57
0.17

Change

48.5
3.1
6.8
3.3
0.10

49.6
2.7
7.1
3.5
0.13

(0.7) points
(0.1)
(1.9)
(0.9)

Notes 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥100.19=U.S.$1.00, the approximate rate of exchange prevailing on March 31, 2008.
2. As of the fiscal year ended March 31, 2007, the fine chemicals business, formerly included in Chemicals, and the health care business, formerly included in Health Care and Others, have been moved to the
newly created Life Sciences segment, and the business handling DVD players and other consumer products, formerly included in the Electronics segment, has been moved to the Others segment. Segment
information for the fiscal year ended March 31, 2006 has been restated to reflect the new segment classifications.
3. Effective from the year ended March 31, 2007, the Company has adopted a new accounting standard for presentation of net assets in the balance sheet. The amount for the previous fiscal year has been
restated to conform to the new standard.

Net Sales

Gross Profit(¥ Billion)

Operating Income /Operating Margin(¥ Billion)

Operating Income (¥ Billion)
Operating Margin (%)

764.7
701.3
575.6

648.0

533.3

61.9

67.6

73.6

21.6

80.5

Net Income /Net Income per Share

23.0

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

12.8

17.5
3.1

53.4

13.2
10.2
1.9

10.3
3.0

2.7

7.0

2.3

13.5

100.32 105.8410.0

81.00

77.86

54.69

2004 2005 2006 2007 2008

2004 2005 2006 2007 2008

2004 2005 2006 2007 2008

2004 2005 2006 2007 2008

Years ended March 31

Years ended March 31

Years ended March 31

Years ended March 31

2 NAGASE & CO., LTD. ANNUAL REPORT 2008

Segment Overview

Net Sales by Business Segment

Net Sales by Region(Year ended March 31, 2008)(Year ended March 31, 2008)

21.4%
Electronics¥764.7billion

35.9%

Net Sales
Operating Income

231.3

Southeast Asia

12.9%

35.0%
Chemicals
Northeast
Asia

251.7

247.0

Japan

OthersNet Sales
Operating Income(¥ Billion)

Net Sales
Operating Income (Loss)

267.8

5.3

6.4

7.0

7.9

5.6

7.9
56.4

1.2

53.5
2.0

2006

2007

2008

56.4

2004

2005

2006

2007

2008

Years ended March 31

5.1

1.9

(0.7)

(0.3)

(0.0)

2006

2007

2008

1.6

Years ended March 31

Plastics

Years ended March 31

Health Care and Others

Net Sales
Operating Income(¥ Billion)

274.6
229.2 229.2
170.9

billionPlastics(¥ Billion)

269.2¥764.7 56.6%

222.2

4.2

(¥ Billion)

24.6%

Life Sciences

Chemicals(¥ Billion)

2.5%

3.4%

0.3%

7.4%

Europe/Others

North America

OthersLife Sciences

Net Sales
Operating Income

244.6

188.4
6.6

6.6

6.5

6.1

2007

2008

4.2
3.0
11.9 0.3 12.8 0.6 11.6 0.9
2004

2005

2006

2004

2005

2006

Years ended March 31

Years ended March 31

Electronics(¥ Billion)

Net Sales
Operating Income

118.9

122.6

2.4

2.6

2004

2005

137.8 132.0

3.1

4.4

2006

150.7

163.8

6.1

7.0

2007

2008

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

Years ended March 31

NAGASE & CO., LTD. ANNUAL REPORT 2008

3

MESSAGE FROM THE MANAGEMENT

In fiscal 2007, the halfway point of the mediumterm management plan WIT2008, Nagase & Co., Ltd.
achieved its sixth consecutive year of record sales andprofits. The Nagase Group is driven by wisdom that
adds experience to technology and intelligence for aunique presence that brings together trading company, R&D, manufacturing and processing functions.
Nagase will continue creating high-added-value businesses to attain its WIT2008 objective of becoming
more robust to achieve sustainable growth.

Hideo Nagase

Hiroshi Nagase

Results for the Year Ended March 31, 2008
The Japanese economy continued to expand gradually in fiscal 2007, the year ended March 31,
2008, supported by increased exports, but began slowing in the second half as a result of factors
including weakness in capital investment and consumer spending. In the global economy, theeffects of the subprime mortgage crisis in the United States and high crude oil prices are causing
growing concern about an economic slowdown.
Under such conditions, the Nagase Group worked to expand its business results to meet the targets of the medium-term management plan WIT2008 (W: Wisdom, I: Intelligence, T: Technology). As
a result, domestic sales increased 5.4 percent compared with the previous fiscal year to ¥432.81 billion, and overseas sales increased 14.3 percent to ¥331.94 billion, for total consolidated net sales of¥764.75 billion, an increase of 9.0 percent.
Gross profit increased 9.3 percent to ¥80.50 billion due to the increase in net sales, but selling,
general and administrative expenses increased, due primarily to amortization of actuarial loss inaccounting for retirement benefits. Consequently, operating income increased by 6.4 percent to¥23.06 billion, for the sixth consecutive year of growth. However, the voluntary recall of portable
DVD players and other products sold by the Company resulted in an extraordinary loss of ¥6.48 billion, which caused net income to decrease 26.3 percent to ¥10.00 billion. Net income per sharedecreased from ¥105.84 in the previous fiscal year to ¥77.86.

4 NAGASE & CO., LTD. ANNUAL REPORT 2008

Increasing Corporate Value
Nagase’s basic policy on returning profits to shareholders is to further enhance its corporate
structure and earnings capabilities to continue generating steady dividends for shareholders. The
Company pays dividends after taking into overall consideration projected capital requirements for
future growth over the medium and long term and trends in consolidated performance. Nagase
deploys internal capital resources effectively to strengthen future business activities and the Nagase
Group’s operating foundation.
Nagase elected to cancel the interim dividend in fiscal 2007, mainly due to the extraordinary loss
mentioned earlier, but decided to pay a year-end dividend of ¥17.00 per share. In the previous fiscal
year, Nagase paid a year-end dividend of ¥18.00 per share that included a ¥2.00 per share dividend
to commemorate the Company’s 175th anniversary.
The Nagase Group is vigorously moving forward with WIT2008 as a period for becoming morerobust to achieve sustainable growth over the medium to long term. The measures we have implemented are yielding steady results, based on a strategic core of creating high-value-added businesses.
Although we set numerical targets for fiscal 2008, the final year of WIT2008, of consolidated net salesof ¥770 billion and consolidated operating income of ¥24 billion, due to personnel expenses thatwill result from the amortization of actuarial loss in retirement benefit accounting, an increase indepreciation and amortization due to new capital investment, and the effect of a stronger yen, we
now forecast consolidated operating income of ¥21 billion. However, we plan to attain our WIT2008
objective of becoming more robust to achieve sustainable growth, and we will press forward in unison as a Group to formulate even higher targets for our next medium-term management plan.
The Nagase Group has consistently followed a management philosophy based on maintaining
good and fair business practices since its foundation 176 years ago. Looking forward, Nagase’s priority in raising corporate value and further increasing shareholder value is to meet its responsibilities
to all its stakeholders, comprising shareholders, customers, business partners, employees and society, by expanding its profits and continuing to grow through honest, transparent management.
We hope for your continued support and guidance.
July 2008

Chairman

Hideo Nagase

President Hiroshi Nagase

NAGASE & CO., LTD. ANNUAL REPORT 2008

5

INTERVIEW WITH PRESIDENT HIROSHI NAGASE

What is your assessment of Nagase’s performance infiscal 2007?
In the past year, demand was exceptionally strong, mainly
in China, and overseas revenues grew. I feel that the progress
we have made in promoting collaboration over the past several years is producing steady results, not only within the
Company but throughout the Group, together withstrengthening of manufacturing and processing functions. I
believe the Group’s strategies are being validated. In addition, although the yen is strong now, it was weak in the first
half, and we were able to transfer increases in raw material
prices to product prices. These external factors also contributed to an increase in sales. However, I was very disappointed by the problems that led to the voluntary recall of

President
Hiroshi Nagase

Nagase is transforming into a corporate groupthat proposes new businesses and develops
them together with customers, while generating

portable DVD players in July 2007 and the resulting decreasein net income.
Please review your progress and results in fiscal 2007, as
the halfway point of WIT2008. First, how have you progressed in expanding the business base?

synergy by adding manufacturing, processing

In July 2007, we established the Nagase Application

and R&D functions and skillfully combining themWorkshop (NAW), which evaluates and researches material

with its trading company functions. Our catch-functions and effectiveness, while creating a database ofphrase will be “preemptive direction change”insamples and functioning as a library. By concentrating test-

looking ahead to significant changes in ouroperating environment as we create an evenmore exciting presence.

ing laboratories for fiber processing, coating materials andplastics in a single location, we will offer ideas with greater
added value for customers and business partners. The workshop has received an excellent response in less than a year ofoperation, with demand for its functions and discovery ofdevelopment themes increasing. We will continue to focus
on generating steady results at NAW, as we expect it to be an
extremely effective forum for showcasing the unique qualities of the Nagase Group.
In addition, we established the Sheet and Film Planning
Office in April 2007 to effectively develop the film business

6 NAGASE & CO., LTD. ANNUAL REPORT 2008

by combining the film-related operations of several depart-tomer requests for special compounds. Our policy will be toments and consolidating information across the organiza-

increase production in light of demand trends. In the Middle

tion. The office utilizes the variety of knowledge within theEast, although our activities have so far been limited to ourGroup, and we expect to develop it into a very promising

office in Dubai, we will consider strategies to expand opera-

business.

tions based on Nagase’s unique style of business using aOverseas, we worked to increase our presence in thelarge order we secured in the region as a foothold.

ASEAN region with a variety of initiatives in fiscal 2007. First,

Development beyond our trading functions in Europe

we established ON Co-Labo Corporation in November 2007

and North America has not proceeded as we had hoped.

as a 50-50 joint venture with OG CORPORATION that will

However, we are closely examining various options including

handle our textile-related business in China. Our aim is tomergers and acquisitions, and remain committed to devel-

expand our presence in the rapidly growing textiles business

oping the Nagase Group’s original manufacturing and otherin China by sharing local functions to combine Nagase’sfunctions in Japan and Asia.

business, which is based on distribution for Japanese companies, with OG’s manufacturing business. In Vietnam, second

What is the status of your active investment in key

to China in rapid growth, we have obtained a license tobusiness areas?

establish a sales company and are preparing to set up a local
subsidiary. The second plant of Dainichi Color (Vietnam) Co.,Over the three years of WIT2008, we plan to make invest-

Ltd., a plastic colorant manufacturing joint venture, beganments on the order of ¥30 billion, with a focus on our key busi-

operations in April 2008. Demand for plastic compounds

ness areas of electronics, life sciences, automotive and over-increased three-fold over the previous year as automotive

seas business. Selected projects will include new investments

and information equipment manufacturers successively

and renewals of manufacturing facilities of Nagase Groupadvanced operations there and increased production, andmanufacturers, and we will make sure that these investments

the new factory makes it possible to immediately meet cus-

are consistent with our technology and market strategies.

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

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

Expand Business Base

Restructure forHigh Profitability

Deepen Business Portfolio Strategy
Maintain Sound
Financial Position

Improve Consolidated
Management System

Ensure thoroughRisk Management

Strengthen Administrative Operations
Front-line Focus

Enhance Personnel
Quality and Quantity

Strengthen Technology
and Intelligence

Maintain Nagase’s Unique Corporate Culture

NAGASE & CO., LTD. ANNUAL REPORT 20087

During fiscal 2007, in electronics, we decided to partici-

lipids at Nagase ChemteX’s Fukuchiyama Factory, whichpate together with Nagase ChemteX Corp. in thebegan operations in fall 2007. Business is growing steadily as“Manufacturing Complex for the 21st Century” of Sharp

we find more buyers. In the pharmaceutical business, weCorporation in Sakai City, Osaka. We will make a substantial

expanded facilities at Nagase Medicals Co., Ltd. for sterile

investment of approximately ¥9.0 billion to construct a plant

production of gel medicines at a cost of about ¥0.8 billion. In

for manufacturing and recycling chemicals such as developer

addition, we acquired iGENE Therapeutics, Inc., a ventureand stripping agents used in making large LCD panels.

company with RNA interference technology to suppress theCompletion is scheduled for fiscal 2009. We are very excitedlevel of expression of particular genes. We will build high-about this project, as Nagase will manage nearly all chemi-

value-added new drug discovery tools and services into acals for the facility, representing a new way for us to structure

new drug discovery support business.

business and significantly contribute to future growth. We
How is your progress in restructuring for high profitability?

see this as a sound business model that will generate synergy
between the Nagase Group’s strengths in chemical manufacturing and management functions and Nagase’s long-

We are working to increase the ratio of highly profitable

held trading company functions. This business will be able tobusinesses by building on Nagase’s originality, with its manu-

substantially reduce the use of chemicals, which makes it

facturing companies, the Nagase R&D Center and NAW at theextremely important from the standpoint of environmental

core. By increasing the ratio of high-value-added businesses,

protection.

we will raise profitability of the Group overall. During fiscal

In addition, we established SN Tech Corporation as a joint

2007, we strengthened and expanded our nanotechnology

venture with SACHEM Asia Co., Ltd. and Nagase ChemteX inbusiness. The scale of the nanotechnology market is expected

January 2008. SN Tech will carry out recycling in Asia of raw

to reach ¥27 trillion by 2010, and the Nagase Group producesmaterials for developer for semiconductors and LCD panels.

nanoparticles and develops and manufactures products with

In life sciences, we invested approximately ¥0.6 billion inhigh market share and high profitability for the display andnew facilities for the commercial production of phospho-

electronics fields such as masterbatch dispersion. In 2006 we

Overview of WIT2008 (Fiscal 2006 to Fiscal 2008)■ Quantitative Targets
Fiscal 2005

Fiscal 2006

Fiscal 2007

Fiscal 2008

(Actual)(Actual)(Actual)(Target)¥648.0 billion¥701.3 billion¥764.7 billion¥770.0 billion

Domestic Sales¥388.4 billion¥410.7 billion¥432.8 billion¥439.0 billion

Overseas Sales¥259.5 billion¥290.5 billion¥331.9 billion¥331.0 billion

Operating Income¥17.5 billion¥21.6 billion¥23.0 billion¥21.0 billion

Net Sales

8 NAGASE & CO., LTD. ANNUAL REPORT 2008

INTERVIEW WITH PRESIDENT HIROSHI NAGASE

concluded a distribution agreement with NanoGram

What progress have you made in efforts to maintain a

Corporation, a U.S. venture business with strong advantages

sound financial position, improve the consolidated man-in the nanotechnology field that develops and licenses core

agement system, ensure thorough risk management andprocess technology. Nagase carries out technology introduc-enhance personnel quality and quantity, which WIT2008

tion and product sales on behalf of NanoGram for customers

specifies as the four key areas in strengthening adminis-

in Japan. In fiscal 2007, we further strengthened our relation-

trative operations?

ship through capital investment, while installing production
equipment at Nagase ChemteX for nanoscale inorganic com-

We continue to address all four areas. In particular, newpounds with optical film and other applications, and acquir-risks that come with transforming business structure

ing nanoparticle production and application technology thatdemand better risk response. We faced the recall of DVD

we will combine with original Nagase products.

players in fiscal 2007 and recognize the need for further quality

On the other hand, we carry out ongoing restructuringcontrol in the import and sales business. We have estab-within the Group. We concentrated semiconductor backend

lished the Quality and Environmental Control Office to accel-

processing and wafer bumping services at Pac Tech-erate the strengthening of our quality control structure for

Packaging Technologies GmbH, a subsidiary in Germany thatimported and Group company products. In order to further

we acquired in January 2006. In March 2008, we liquidated

strengthen our internal control system, we reorganized theAlpha Bumping Technology Co., Ltd., which carried out con-Compliance Committee into the Risk Management &tract processing for wafer bumping.

Compliance Committee, and took steps to comprehensively
identify, understand and control various risks. Nagase will
establish and strengthen a risk management structure and acompliance structure that reflect not only legal compliancebut also corporate ethics while adhering to our philosophyof following good and fair business practices.

Operating Income from the Nagase Groupʼs
Manufacturing Businesses(¥ Billion)

6

Domestic
manufacturing
companies

Overseas
manufacturing
companies

What are your policies for fiscal 2008, the final year ofPercentage of operating
income from（%）
manufacturing30

5

WIT2008?
As you know, the economic situation is extremely uncertain, due in part to the subprime mortgage crisis, with fore-

20

4

casts growing that conditions will worsen. We expect a very
difficult environment with the price of crude oil, raw materials

3
10

2
1

and other resources likely to continue rising. Therefore, we willprioritize a more defensive stance and tighter management
over sales expansion. While remaining committed to achiev-

00

ing the goals of WIT2008, we will concentrate on control ofinventory and notes receivable and risk management. Over

-1
2005

2006

2007

2008

Years ended March 31

the long term, these measures will lead to sustainable growthNote: Financial figures for manufacturing subsidiaries are simplified totals.

NAGASE & CO., LTD. ANNUAL REPORT 2008

9

INTERVIEW WITH PRESIDENT HIROSHI NAGASEa promising post-WIT2008 project. I think that an awarenessof this key concept and way of thinking in all of Nagase’s
businesses will lead to new opportunities.
In addition, we have already begun training and securing
management personnel to promote diversity not only interms of nationality, race and gender, but also in backgrounds and values. An important issue for us is to create anenvironment where such a diverse group can work welltogether. We intend to turn this creation of diverse, highly
transparent workplaces, without the typical Japanese conformity, into a Nagase strength.
In closing, what is your message to shareholders andother investors?
for the Nagase Group and reassure our shareholders.
At the same time, we will continue capital investment
and structure building. We will restructure businesses andstrengthen profitability in order to quickly improve return on
equity (ROE), which remains below an acceptable level, while
carrying out active investment necessary to strengthen
our manufacturing and processing functions and build
partnerships.
What direction will you take following the completion of
the WIT2008 medium-term management plan?
We are considering post-WIT2008 and aim to complete
plans by fall 2008. Our key concept will be “Foresee major

So far, society has viewed Nagase as a unique trading
company. Over the past several years, Nagase has been creating synergy by adding manufacturing, processing and R&D
functions and skillfully combining them with its with trading
company functions, while aiming to suggest and create new
business with customers. Today, we are firmly facing in that
direction. The businesses that the Nagase Group created andnurtured are coming to fruition, one after another. The
Nagase Group will aim for a “preemptive direction change”
and create an even more exciting presence. We hope thatshareholders and investors will keep a medium-to-long-term
perspective and continue to support our activities. I am confident we will meet everyone’s expectations.

changes and alter direction preemptively.” A general atmosphere of increasing environmental awareness and greater

Cash Dividends per Shareattention to energy concerns on a global scale will defy conventional wisdom and bring rapid social changes. For example,

20.0

(¥)

20

18.0 17.0

one major task will be to restructure our businesses andgroup companies as required based on foresight regarding
the recent rise in crude oil prices. Accordingly, from WIT21

10

through the current WIT2008, we have established the four
key business areas of electronics, life sciences, automotive
and overseas, but even if we continue operating in thesefields, business expansion will require integration, realignment and development based on a completely different wayof thinking for business expansion. The recycling business at
the Sharp “Manufacturing Complex for the 21st Century” Imentioned earlier coincides with environmental changes as

10 NAGASE & CO., LTD. ANNUAL REPORT 2008

15.0

15

8.0

9.0

10.0

5
0
2003 2004 2005 2006 2007 2008 2009

Years ended March 31(Plan)
Note: Dividends for 2004 and 2007 include commemorative dividends of¥1 and ¥2, respectively.

Feature:

WIN-WIN,
WORLDWIDE

Nagase continues to expand value-added businesses and grow by changing toa business structure that adds R&D, manufacturing and processing to
its traditional trading company functions, and creating an innovative,
original business model and developing it globally. Nagase’s original business model
provides value simultaneously to customers and business partners,
and therefore to shareholders and society.
In this feature, we introduce Nagase’s business activities and various functions thatbuild win-win relationships with customers and business partners.

NAGASE & CO., LTD. ANNUAL REPORT 200811

FEATURE 1: Nagase Application Workshop

Functions of Nagase Application Workshop
The Nagase Application Workshop (NAW), established in July 2007,
provides a single location for us to work with business partners in evaluating and researching the functions and effects of materials and additives
related to plastics, coating materials and fiber processing, as well as analyzing data and conducting experiments for application development.
Nagase is developing an original business model by adding R&D, manufacturing and processing to its traditional trading company functions. NAW
was created as a direct result of this process, and is a function unique toNagase because it enables us to provide technical support as a trading
company.
Nagase has provided services to users in a broad array of fields on a
departmental and sector basis. With the establishment of NAW, we havecreated a system to fulfill customer requests by applying Nagase’s
resources across sectors.

The Benefits of NAW
We have incorporated NAW functions into
sales programs, which helps customers andmanufacturers to understand their benefits.
We have received over 150 inquiries, including
visits and consultations, since operation began
in August 2007. About 70 of these inquiries
resulted in transactions and business now inprogress.
Users wishing to make trial products cometo NAW when other manufacturers turn themaway due to the limited quantity required,when they have concerns about leakage
of information to other companies, or when
they want to do test production using theirproprietary technology. Many cases involve
cooperation with suppliers in the technicalevaluation of product applications or value for
manufacturers.
We expect NAW to be central to the creation of many win-win results in which Nagase
handles business derived from our contribution to customer solutions.

Masaya KimuraManager
Nagase Application Workshop
Nagase & Co., Ltd.

WIN-

NAW’s role is to respond in a straightforward manner to ourcustomers’ issues and to create the conditions in which they
can apply our valuable technical information.

We are committed to solving customer issues and adding value to proposals.
In addition, we involve other companies with the necessary capabilities to solve

problems when our labs require assistance. I believe in demonstrating conclusions on schedule and addressing every theme in a straightforward manner, evenwhen the results are not positive. NAW also gives Nagase sales representatives
ready access to valuable technical information to solve customer issues.

12 NAGASE & CO., LTD. ANNUAL REPORT 2008

WIN-WIN, WORLDWIDEMOLDING

PAINT/PRINTING

The plastics laboratory carries out
trial production of thermoplastics
to respond to requests for new colors, added functionality and exploration of new textures.

In testing dye dispersal, NAW carries out trial production of paints
and printing substances that meetcustomer specifications.

DYEING
We use a variety of methods inenhancing and matching colors
by utilizing knowledge accumulated from dyeing experiments.

We look forward to offering exact solutions forcustomer needs and discovering new product andmaterial development possibilities.

WIN

Masao Takase
Manager
AETS, P&PI Commercial Div.
Japan Specialty Chemicals Business
Dow Corning Toray Co., Ltd.

NAW covers a wide range of fields, from upstream to downstream, and hascollected a wealth of data. Its value to our company lies in its ability to gather information in areas close to downstream users that we find challenging to obtain.
Anticipating these superior information and analytic capabilities, we have asked
NAW for a variety of data analyses related to our plastics and coating products. This
project is helping us offer exact solutions for customer needs and, in the medium
and long term, we look forward to discovering new products, new material development possibilities and new business opportunities.

NAGASE & CO., LTD. ANNUAL REPORT 200813

FEATURE 2: Development of the High-Value-Added Phospholipid Business

Nagase's R&D Capabilities Create a High-Value-Added Phospholipid Business
Nagase has developed a unique phospholipid-converting enzyme that originated from actinomycetes. Among the many manufacturers of enzymes, Nagase is the leader in producing industrial
enzymes using actinomycetes.
This newly-developed enzyme has proven successful in efficiently synthesizing naturally existing phospholipids using Nagase's original technology. Moreover, Nagase is utilizing its customeroriented application development competence to create and launch a rich line-up of phospholipid
products in the market. The value of selling these products has the potential to become many tensof times greater than simply selling enzymes. This is an example of how Nagase is succeeding inbuilding the high-value-added business model it aims to achieve.

Operating Development and Production
Facilities in Cooperation with Nagase ChemteX
The phospholipid business allows the Nagase Group to makefull use of its strengths in R&D, manufacturing and marketing.
Initially, the Nagase R&D Center, the Nagase ChemteX ProductDevelopment Center, and the Nagase ChemteX Technical
Department collaborated in the development of the phospholipidconverting enzyme and the resulting phospholipid products. The
collaboration resulted in quick mass production of these products
and strengthened our technology capacities, thus building a powerful business foundation that other trading companies cannot
achieve.
Nagase ChemteX is handling production. In January 2008, it
began operating a newly constructed facility and orders haveincreased steadily. While supplying products according to customer orders, Nagase is also concentrating on sales of its own original products. These products will contribute to sales in the fiscal
year ending March 31, 2009, and Nagase aims to be number one in
the world in terms of price and quality.

Liu Xiaoli
Biochemical Product Division,
Enzyme Business Department
Product Development Section 1
Nagase ChemteX Corp.

W

In creating unique Nagase products by

The development of phospholipid products integrated enzyme andintegrating enzyme and fine chemicalfine chemical technologies, and the technological ability to handle thistechnologies, we made sure to reflect
customer requirements from the earlykind of integration is one of Nagase’s strengths. The Nagase R&D Centerand Nagase ChemteX cooperated efficiently to develop multiple new
products over a short span of seven years from initial theme setting. With

development stage. That's a major

manufacturing facilities now operating, the new business is up andreason why customers are so

running. In addition, Nagase used its competence in global information

excited about these products.

gathering to incorporate the needs of users from the early development
phase. These needs are reflected in original products that customers haveenthusiastically praised.

14 NAGASE & CO., LTD. ANNUAL REPORT 2008

WIN-WIN, WORLDWIDEPRODUCTION
EQUIPMENTPROCESSCONTROL

Nagase produces phospholipids with sophisticated,leading-edge production
equipment that began
operating in January 2008.

An HACCP regime based on
ISO9000 and ISO14000
standards governs processcontrol for phospholipids
used as food ingredients.

IN
WIN

Customers trust Nagase because we
provide high-quality, technologicallyadvanced products at competitive

Taku Fujimoto
NCX Enzyme TeamBio Products Division
Fine Chemicals Group
Nagase & Co., Ltd.

prices, worldwide and with integrity.
Customers in Japan and overseas have enthusiastically praised the phospholipid products that

Nagase has developed. From enzymes used in production to enzyme reaction technology andproducts, Nagase’s original products solve customer problems and respond in a timely manner tocurrent needs, and we are able to provide a large variety of phospholipids. Applications for ourphospholipids range widely from ingredients for functional foods to materials for cosmetics. Safe,
secure and in step with modern technological progress, our phospholipids are user-friendly and ecofriendly. The technology, quality and cost of our phospholipids, as well as Nagase’s sincere global

responsiveness, have earned the trust of customers. Nagase will continue to develop originaltechnologies and materials from an international perspective.
NAGASE & CO., LTD. ANNUAL REPORT 200815

FEATURE 3: Nagase and the Automotive Business in Guangzhou, China

Cooperating with Group Companies to Provide
a Wide Variety of Products and Services
Nagase’s involvement in the automotive business in Guangzhou, China centers on Guangzhou Nagase
Trading Ltd., which is a wholly owned subsidiary of Nagase (Hong Kong) Ltd. We also operate in four joint
ventures: two manufacturers of molded urethane products for automobiles, Guangzhou Kurabo Chemicals
Co., Ltd. and Toyo Quality One Ningbo Co., Ltd; automotive spring manufacturer Tokai Spring Mfg.
(Foshan) Co., Ltd.; and mold manufacturer Guangzhou GRG Lamko Mold Manufacturing Co., Ltd. In addition, Nagase cooperates with affiliate Dong Guan Kyoraku Plastics Co., Ltd., a molding company.
The automotive business accounts for 80 percent of Guangzhou Nagase’s net sales. Moreover, 80 percent of this automotive business is with Japanese-affiliated companies, and the remaining 20 percent iswith companies from China, Hong Kong and Taiwan. In addition to plastic raw materials, Guangzhou
Nagase Trading Ltd. sells urethane raw materials and the manufactured products of business partners
such as springs. The company also provides import substitution services for products and materials thatare difficult to import. At the same time, Guangzhou Nagase Trading Ltd. executes its crucial function as a
trading company by constantly managing the risks associated with inventory, repayment and otherissues to maintain a stable transaction stream.

Nagase’s Strengths in China’s Automotive Business
Nagase’s strengths in China are its expertise and ability torespond precisely to customer needs.
In recent years, as Japanese-affiliated car manufacturers have
expanded the number of new models, Guangzhou Nagase’s presence in products and materials requiring technological knowledge
and logistics has contributed to business expansion.
Moreover, the needs of Japanese-affiliated automobile manufacturers that have entered the Chinese market have become diverse.
Guangzhou Nagase’s expertise and ability to respond to customer
needs support its role in coordinating among directly and indirectly
related parties. For example, the company’s activities extend beyond
helping with the selection of materials to include studying the localization of production of imported materials.
With these unique capabilities, Nagase has much to look forward
to in working with customers to develop their businesses in the rapidly growing Chinese market. In the future, Nagase will use its
strength to make progress that continuously contributes to China’s
society and economy.

Daiji Matsuoka
General Manager
Guangzhou Nagase Trading Ltd.

Guangzhou Nagase’s urethane business is growing substantially. Moreover, sales ofplastic raw materials are growing because of the increasing array of automobile models,Expanding business is proof

while Guangzhou Nagase handles the largest volume of plastic pellets in South China.

that Nagase’s comprehensive

These successes have resulted because the Nagase Group includes manufacturing

capabilities and expertisecompanies in areas such as urethane and springs, and is therefore able to provide highvalue-added services to customers. Our comprehensive capabilities and expertise have

have earned the appreciation

earned the appreciation of our customers. Looking forward, we project that the market

of its customers.

will continue to expand. We will embrace a broad number of themes in responding
precisely to customer needs to contribute to the growth of customer businesses while
expanding our own sales.

16 NAGASE & CO., LTD. ANNUAL REPORT 2008

WIN-WIN, WORLDWIDE

Nagase takes the perspective of manufacturers
in providing helpful information and services.

Toshiaki Sakaue
General Manager
Guangzhou Kurabo Chemicals Co., Ltd.

Customers appreciate that.
We manufacture automotive interior materials using urethane forms, and sell primarilyWIN

to Japanese-affiliated automobile manufacturers in the Guangzhou area. Guangzhou
Nagase supports the smooth operation of our business in ways such as providing raw
materials and collecting local information. It is not simply a single company in the Nagase
Group. It integrates manufacturing and trading capabilities, and we appreciate its ability totake both the perspective of a manufacturer and provide useful information and services.
Moreover, Nagase has numerous bases in Asia, and we are confident that Nagase will be
an excellent partner that can supply its extensive knowledge of the region as we expand in

Asia. We look forward to expanding our business together with Nagase.

NAGASE & CO., LTD. ANNUAL REPORT 2008

17

NAGASE AT A GLANCE

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

Chemicals
35.0%
3(¥ Billion)

Net Sales

2008

2007

267.8

247.0

8.4

7.9

7.0

13.1

Operating Income

Net Sales
Operating Income

Change (%)

133.0

135.9

(2.1)

Depreciation andAmortization

1.2

0.9

40.6

CapitalExpenditures

2.2

1.5

48.0

Total Assets

34.9%
3

Departments

Years ended March 31

Plastics
35.9%(¥ Billion)

Net Sales

Net Sales
Operating Income

2007

Change (%)

244.6

12.3

6.1

6.5

(6.1)

126.0

118.8

6.1

Depreciation andAmortization

1.0

0.9

7.8

CapitalExpenditures

1.0

1.1

(12.7)

2008

2007

Change (%)

Operating Income
Total Assets

27.0%

2008

274.6

Years ended March 31

Electronics
21.4%

30.9%
Net Sales
Operating Income(¥ Billion)

163.8

150.7

8.6

Operating Income

7.0

6.1

14.1

Total Assets

88.2

84.2

4.7

Depreciation andAmortization

1.9

1.4

33.3

CapitalExpenditures

3.6

1.8

95.5

2008

2007

Change (%)

Net Sales

56.4

53.5

5.5

Operating Income

1.6

2.0

(16.6)

Total Assets

32.1

33.4

(3.7)

Depreciation andAmortization

0.6

0.6

4.5

CapitalExpenditures

1.6

Net Sales

Years ended March 31

7.3%
Net Sales
Operating Income

Performance
Chemicals
Department

0.7

117.1

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

Organic synthesis, surfactantsSpeciality Chemicals
Department

Advanced Polymers
Department

Office automation equipment, electrical, electronics,
consumer electronics

Automotive
Solutions
Department

Automotive

Eco-Materials &Products
Department

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

Semiconductors, liquid crystal, electronics components,

Electronic Chemicals heavy electric machinery, automotive
Department
Semiconductors, liquid crystal, communications, imaging,
Information &batteries
Functional Materials
Department

Display & Electronics Displays, television and monitor assemblies, amusement,
touch panels
Components
Department(¥ Billion)

Life Sciences
7.4%

Colors & Imaging
Department

Customer Segments
Textile processing (clothing, other fabrics, car interiors), plastic coloring, synthetic fiber, paint and ink, pigment dispersion, printing, inkjet toner, thermal paper, photoactive
chemicals, flat panel displays, information recording paper

Pharmaceuticals, food/feed chemicals, agriculturalchemicals, household products

Fine Chemicals
Department

Beauty Care
Products
Department

General consumer market

Years ended March 31

Notes: 1. Net sales do not include intersegment sales.
2. Operating income is prior to eliminations.
3. Segment shares of net sales and operating income do not total 100 percent due to the exclusion of the Others segment.

18 NAGASE & CO., LTD. ANNUAL REPORT 2008

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

Main Products and Services

Department Overview

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

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

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

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

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

The Speciality Chemicals Department supplies a range of products, including raw materials for oil solutions, plating chemicals, personal care, surfactants, fluorochemicals and silicones, to industries involved in surfactants or organic synthesis products
such as chemical intermediates. To add value to operations, the department focuses on improving sales organization productivity and promotes four projects: electronics, daily goods, China, and process chemicals.

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

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

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

The Automotive Solutions Department offers comprehensive business solutions in the automotive area. In addition to handling everything from the sale of materials, products and equipment to component design, development of prototypes andproduction of dies, the department also acts as a purchasing agent for its customers’ overseas facilities. The department will further develop globally and approach new technology related to electric vehicles and other next-generation vehicles.

Resin materials, film sheet products, molded plastic
products, construction products

The Eco-Materials & Products Department aims to expand business for products and parts, primarily engaged in resinmaterials and product sales in the functional film and sheet, electrical wire, amusement, packaging materials andother industries.

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

The Electronic Chemicals Department sells materials manufactured by the Nagase Group, as well as the equipment and control
systems used for their manufacturing processes, to the semiconductor, liquid crystal, electronic component and automotive
industries. The department actively conducts resource conservation and recycling proposals in focusing on environmental concerns. With operations in China, Taiwan, South Korea and Singapore, the department is aggressively expanding overseas business with the aim of creating highly profitable businesses that integrate trading company and manufacturing capabilities.

Semiconductor packaging materials, insulating materials,
fluoroplastic-related materials, precision abrasive materials,
diagnostic agents, wireless communication modules and systems, surface defect inspection systems

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

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

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

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

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

Cosmetics, health foods, beauty foods

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

NAGASE & CO., LTD. ANNUAL REPORT 2008

19

REVIEW OF OPERATIONS

Chemicals

WIT2008 Basic Strategies① Expand core business② Expand export business③ Expand business through cooperation within
the Company④ Expand new businesses that leverage GroupfunctionsFiscal 2007 Strategies and Performance

From left:

Hiroshi Hanamoto

Executive Officer; GM, Colors &Imaging Department

Toshiro Yamaguchi

Executive Officer; GM,
Performance Chemicals Department,
Osaka District

Mitsuro Naba

GM, Speciality Chemicals Department

In the second year of WIT2008, our activities were guided by four key
measures: 1) further promote cooperation within the Company and step up
efforts to raise awareness and create new business; 2) respond decisively tothe new Registration, Evaluation, Authorization and Restriction of Chemicals(REACH) regulations enacted in the European Union, while supplying information and support for Japanese customers; 3) carry out investments includ-Net Sales / Operating Income
Net Sales

Operating Income

ing mergers and acquisitions that will allow Nagase to display its full potential; and 4) prepare for the chemical industry’s so-called 2008 problem.

247.0

222.2

267.8
7.9

Sales in the Chemicals segment increased 8.4 percent year on year to¥267.83 billion. This was mainly the result of an increase in domestic sales of(¥ Billion)

7.0
5.6

Nagase Group products centered on LCD-related materials from Nagase
ChemteX Corp., as well as an increase in sales of urethane and coating materials for the automotive industry and solid sales of performance chemicals
including plastic materials and additives.

2006

2007

2008

Years ended March 31

TopicsGrowth of Denatron
Fiscal 2007, sales of Denatron, an organic conductive product from Nagase ChemteX, grew
1.3 times compared with the previous fiscal year. Produced through separation processing,
Denatron is highly evaluated for preventing static electricity in parts for LCD televisions. In
addition, we are working with Nagase ChemteX and customers to develop high conductivitygrade products for films. Our aim is to use these products in touch panels and other transparent electrode film applications as an alternative to indium tin oxide (ITO), a resource that is
becoming depleted.

Denatron

20 NAGASE & CO., LTD. ANNUAL REPORT 2008

Colors & Imaging Department

business, we began manufacturing-oriented development by

Fiscal 2007 Strategies and Results

merging the filter business, and carried out product development

In Japan, due to the effect of an adjustment period in the digitalfor downstream industries though collaboration with other depart-equipment market, sales of ink and toner materials for printers andments and within the Group. The filter business for optical film

copiers and functional color pigments for plasma displays and otherapplications and engineering plastics grew significantly as a result

applications remained at the previous fiscal year’s levels. However,of our active attention to proposals in progress. We strengthened

performance of the Nagase Group’s organic conductive dispersing

coverage of Japanese manufacturers operating in the brisk markets

agents grew steadily. Overseas, game console-related products andof China and the ASEAN region, resulting in increased exports tothermal paper materials performed well, and the department overall

Japanese plants overseas and expanded business including local

reached its consolidated operating income target.

support. Overseas, we established a manufacturing company in

In fiscal 2007, we focused on three objectives: building a busi-

Indonesia for urethane products used in automotive interiors, andness model that takes advantage of the Nagase Group’s competi-

deployed personnel to the ASEAN region to provide local service

tive advantages; promoting a business model in which additives

equal to or better than that in Japan.

determine the principal materials; and shifting to a business struc-

Strategic Initiatives for Fiscal 2008

ture that allows us to respond to any change in the external

We will continue to promote our four objectives. By effectively uti-

business environment. As a further evolution of the previous Colorlizing NAW, we will maintain and expand our presence in the coating

Workshop, the Nagase Application Workshop (NAW), which began

and ink, urethane, and plastics industries. We will further strengthen

operating in July 2007, carried out joint development with cus-

our structure as a manufacturer in the filter business to develop prod-

tomers. Response has been particularly good to Nagase’s uniqueucts and services that meet market needs.

services for the coating, plastic molding, printing, fiber processing
and other industries. In Saudi Arabia, we have begun preparation
for a joint venture after obtaining trading rights to sell plastic additives there. In addition, Nagase is recognized by the market for
its distributor functions following mergers and acquisitions by overseas manufacturers, and we increased the number of products that
consolidate this function at Nagase.

Strategic Initiatives in Fiscal 2008
In the final year of WIT2008, we will continue to promote the three
key objectives we set in the previous period, while aiming for business development closely tied with customers whose appreciation

Speciality Chemicals Department
Fiscal 2007 Strategies and Results
Sales and income increased significantly compared with the previous fiscal year, reaching over 110 percent of our original plan. Thiswas due to a price increase in petrochemical products following arise in crude oil and naphtha prices, and a substantial expansion ofsales of Nagase ChemteX’s performance products for electronics
materials. Trade with Europe and the U.S. as well as China expanded,with growing imports from China utilizing Nagase’s original analysis
capabilities.
We promoted the department’s basic strategies under WIT2008 of

we will earn as a trusted partner.

advancing our three core businesses of surfactants, organic synthesis

Performance Chemicals Department

and Nagase ChemteX, and promoting development of the four proj-

Fiscal 2007 Strategies and Results

ect areas of electronics, China, cosmetics and process chemicals. In

Sales increased due in part to the effect of a substantial priceour core businesses, we expanded sales of existing products andincrease that we carried out for petrochemical products following aenhanced results for new products by conducting a thorough follow-

rise in crude oil and naphtha prices. In addition, overall department

up of major customers. Project development progressed steadily, andsales and income rose with continued favorable economic condi-

imports of products from China increased as Nagase earned a hightions in China and the ASEAN region and brisk demand for urethane

evaluation from its customers for its original analysis capabilities.

materials and coating materials primarily for the automotive industry

Strategic Initiatives in Fiscal 2008

and electronic materials industry.

In fiscal 2008, the final year of WIT2008, we will continue steadyIn fiscal 2007, we focused on four objectives: strengthening the

expansion of our three core businesses to reach medium-term goals,

plastic raw materials business and expanding handling of down-

in a changing operating environment of high crude oil prices, astream products; offering original Nagase products in the fields ofstronger yen, and technological advances in electronics. Moreover,plastic additives and coating materials that use NAW; building busi-

we will promote greater cooperation within the Group to strengthen

nesses where Nagase is the leader; and raising the quality of ourdevelopment of our four project areas, and contribute to solve cus-organization by improving operational efficiency. In the materials

tomer problems by fully utilizing Nagase’s functions.
NAGASE & CO., LTD. ANNUAL REPORT 200821

Plastics

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

Fiscal 2007 Strategies and Performance
In the second year of WIT2008, we worked to increase our added value
to the Group by 1) clarifying our structure in the upstream and downstream plastics fields, 2) strengthening cooperative development with the

From left:

Kenji Asakura
Ichiro Wakabayashi
Yuji Deguchi
Kenji Nagafusa

GM, Automotive Solutions Department
GM, Advanced Polymers Department
GM, Pluswood Department
GM, Eco-Materials & Products
Department

Nagase Application Workshop (NAW), and 3) expanding the automotive

Net Sales / Operating Income

business.
Sales in the Plastics segment increased 12.3 percent year-on-year to¥274.66 billion, and operating income decreased 6.1 percent year-on-year

Net Sales

Operating Income(¥ Billion)

274.6

244.6

229.2

to ¥6.13 billion. Sales to the automotive industry grew sharply, and overseas sales of products for precision equipment and electronic equipment

6.6

6.5

6.1

2007

2008

applications also continued to expand, mainly in the ASEAN region.
Despite decreases in sales of engineering plastics and components for
optical applications, primarily to customers in Taiwan, and in sales of certain other domestic businesses, sales of the segment overall increased.

2006

Years ended March 31

Topics

Cultivating the Vietnam Market
Nagase obtained a subsidiary license in Vietnam in February 2008 for the sale ofbonded inventory, bringing the number of subsidiaries the Company has there to three.
In addition, Dainichi Color (Vietnam) Co., Ltd., a joint venture with Dainichiseika Color &Chemicals Mfg. Co., Ltd. for manufacturing plastic compounds, began operations in
April. By synergizing our local subsidiaries that take full advantage of Nagase’s competitive advantages with the plastic compounds factory, Nagase will expand business forJapanese companies advancing into Vietnam and Taiwanese companies accelerating

Dainichi Color (Vietnam) Co., Ltd.

22 NAGASE & CO., LTD. ANNUAL REPORT 2008

their shift from China.

REVIEW OF OPERATIONSAdvanced Polymers Department

nesses led by the Nagase Group. We plan to further strengthen our

Fiscal 2007 Strategies and Results

structure for providing information and services in Europe, theSales and profits increased in the ASEAN region centered on

ASEAN region and China for major customers expanding overseas. In

Vietnam, and in the Hong Kong and Shanghai regions due to an

addition, we will carry out full-scale handling of electric vehicle parts

increase in overseas production by Japanese manufacturers in theand other products that go beyond our traditional lineup.

office automation, home appliances and electronics fields, and the

Eco-Materials & Products Department

segment reached its targets.

Fiscal 2007 Strategies and Results

In fiscal 2007, we expanded business on a consolidated basis with

In fiscal 2007, implementation of the revised Building Standards

overseas bases and Group companies. In particular, we worked to

Law in the housing and construction materials industries and theincrease expansion by strengthening our sales structure for engineer-effect of stronger regulations in the amusement industry caused a

ing plastics and enhancing strategic cooperation in the officedecline in sales in these markets. However, we achieved sales in

automation industry. In Hanoi, a strategic region, we completed aexcess of targets due to the launch of environmentally friendly, non-plastics compound factory through a joint venture, upgraded thebromine insulating film and steady sales of Eastman Chemical

Hanoi office to a subsidiary and reinforced personnel. In addition toCompany’s PET resins. In the amusement industry, we successfullybusiness with Japanese companies, we obtained business from com-began overseas procurement of parts for game machines.

panies from Taiwan transferring to Vietnam in response to a sense of

In addition to focused investment of resources in development ofurgency about overdependence on China. Moreover, we expanded

Sun Delta Corporation’s functional films through a project manager

our range of products into plastics, processed goods and other areas

system, we cooperated with other departments, which led to earlyby utilizing our sales platform for engineering plastics.

product development and results.

Strategic Initiatives in Fiscal 2008

Strategic Initiatives in Fiscal 2008

We will continue to promote business expansion on a consolidat-

We will expand sales of flame retardant insulating film, continue

ed basis. We will maintain compliance and follow laws regarding

product development for electronics applications, and prepare forimports while raising operational efficiency. In Japan, we will focus on

overseas expansion. We will build the structure necessary to offer

development themes adapted to customer needs by further promot-

highly functional materials with insulation, breathability and othering collaboration with NAW, Setsunan Kasei Co., Ltd., and otherproperties to the housing and construction industries. In addition, we

departments including the Performance Chemicals Department andwill extend the business model we established in the amusement

the Colors & Imaging Department. Our sales activities will take advan-

field with plastic molded products, secondary processing, and assem-

tage of Nagase’s competitive advantage as we place priority on eco-

bly to other business areas, and focus on Eastman Chemical’s resin

plastics and eco-coatings and the plastics recycling business to meetmaterials and other eco-friendly materials.

demand for eco-friendly products.

Pluswood Department

Automotive Solutions Department

Sales of Pluswood, Nagase’s synthetic wood material, continued

Fiscal 2007 Strategies and Results

to increase in fiscal 2007 with its use in large-scale, well-known build-

In fiscal 2007, sales remained strong in Asia, including southern

ings. Advertising that showed Pluswood’s actual applications was

China and ASEAN countries such as Thailand. In addition, sales

successful, and internet-based inquiries about Pluswood increased 20

increased in the U.S. and Europe and recovered in Japan, leading totimes over the previous year, as it rapidly gained industry recognition.

significant growth in sales for the department overall.

In addition, repeat orders increased from major contractors.

As a result of focusing on new development themes throughout

The Pluswood Department, which has separated from the Eco-the year, we began handling promising materials including green

Materials & Products Department as of the fiscal year ending Marchmaterials and super-engineering plastics.

2009, handles OEM production of Pluswood, inventory control, andOur joint venture in China making precision springs performed

distribution functions. Through cooperation with Nagase Eco Pluswell due to market expansion. Although a feasibility study that weCo., Ltd., a Nagase subsidiary in charge of sales, marketing, quality

carried out for a plastic compounds and other production business inassurance and technical support, we will strengthen the foundation

the U.S. led to no definitive outcome, we conducted ongoing consid-of the Pluswood business and aim to establish an original high-value-eration of our options in this area.

added business model.

Strategic Initiatives in Fiscal 2008
We will concentrate on commercializing various new themes andformulate details for overseas production activities to expand busiNAGASE & CO., LTD. ANNUAL REPORT 200823

Electronics
WIT2008 Basic Strategies① Combine the Nagase Group’s information and wisdom and construct an original business plan toprovide services and customer satisfaction andexpand business.
② Expand operations and actively focus management
resources on strengthening production in growing
markets.
③ Work on the chemical recycling business in consideration of environmental protection.

Fiscal 2007 Strategies and Performance
In fiscal 2007, we focused on 1) strengthening expansion of semicon-

From left:

Kohei Sato
GM, Information & Functional Materials Department
Shingo Bamba Director and Managing Executive
Officer; GM, Display & Electronics Components
Department

ductor production equipment and our wafer bumping service in Asia, 2)
strengthening sales of developer and stripping agents used in the semiconductor and LCD fields while actively developing chemical recycling sys-

Kazuhiro Osako GM, IC Packaging Department
Tomitaka Ito
Executive Officer; GM, Electronic Chemicals
Department

tems for environmental preservation, and 3) cooperating more closely withbusiness partners and Group companies to build a business model uniqueto Nagase.

Net Sales / Operating Income
Net Sales(¥ Billion)

Operating Income

Sales increased 8.6 percent year on year to ¥163.83 billion, and operating
income increased 14.1 percent to ¥7.03 billion. This was the result of
expansion of the LCD-related parts business, and strong sales of chemicals

163.8

150.7

132.0

6.1

used in the production of LCDs and other products and precision abrasive

7.0

4.4

materials for semiconductors.

Note: Motonori Morizumi replaced Kazuhiro Osako as General Manager of the IC Packaging
Department on August 1, 2008.

2006

2007

2008

Years ended March 31

TopicsEstablishment of New Plant
Nagase decided to construct a plant for manufacturing, supplying and recycling chemicals within Sharp Corporation’s “Manufacturing Complex for the 21st Century” in Sakai
City, Osaka, scheduled for completion in fiscal 2009. In addition to supplying developer,
stripping agent and cleaning agents, the plant, which is currently under construction, will
introduce the recycling technology of Nagase ChemteX Corp. in serving an on-site fabrication function for the comprehensive control and recycling of all related chemicals. We thus
plan to contribute to a major reduction in chemical and raw material use as well as

Nagase Group Chemical Plant(Final completed conceptual image)environmental preservation at this environmentally oriented plant.
By completing this framework, we will contribute to the continued development of theliquid crystal industry as the only company in the global chemical industry that handles all
the functions of chemical manufacturing, recycling and process innovation.

24 NAGASE & CO., LTD. ANNUAL REPORT 2008

REVIEW OF OPERATIONSElectronic Chemicals Department

and worked to penetrate the market with existing inspection systems

Fiscal 2007 Strategies and Results

by utilizing sales routes within the Company.

In fiscal 2007, sales of chemical supply and control equipment for

Strategic Initiatives in Fiscal 2008

photolithography used in front-end processing of LCDs and semi-

In the last year of the medium-term management plan WIT2008,

conductors decreased. However, sales of chemicals and formulated

we will forcefully promote new business, while building the founda-

epoxy resins were strong, resulting in increased sales and profits.

tion for the next three-year plan by creating an original business

Sales increased for the department overall, especially due to the actu-

model to cultivate future core businesses. In peripheral areas of exist-

al contribution to performance of sheet and non-conductive paste

ing core businesses, we will carry out business discovery based on(NCP), a result of the chip bonding technology Nagase has devel-

the keywords of “environment” and “energy.” In our core business-

oped over many years.

es, we will establish a solid business foundation by continuing to pur-We are working to expand production of epoxy resins in Japanand China. In environmental initiatives, the stripping agent recycling
plant we built within Nagase ChemteX began operations. In addition,
we established SN Tech Corporation, a joint venture with SACHEM
Inc. of the U.S. and Nagase ChemteX for recycling developer used in
front-end liquid crystal processing, which we plan to expand in
Taiwan and South Korea as well as Japan. Moreover, we decided tobuild a plant within Sharp Corporation’s “Manufacturing Complex forthe 21st Century,” representing the culmination of the electronic
chemicals business we have promoted over many years.

Strategic Initiatives in Fiscal 2008
In fiscal 2008, we will continue active overseas development,
while focusing on sales expansion for heavy and light electrical applications and encapsulants in our core epoxy business. To enhance ourbusiness foundation, we will pursue development in the new fields ofcarbon fiber matrix for structural materials applications and windmill
materials for wind power generation. In the chemicals business, wewill utilize process know-how in materials and devices cultivated overmany years to propose onsite and offsite resource conservation andrecycling to customers in order to differentiate Nagase from its competitors and expand sales.

Information & Functional Materials Department
Fiscal 2007 Strategies and Results
In fiscal 2007, sales of precision abrasive materials used in siliconwafer processing and encapsulants used in post-processing of semiconductors were strong, and sales of substrates for hard disks also
increased, resulting in a rise in sales and profits. Overseas development progressed steadily, contributing to performance.
We worked to strengthen the foundation of our core businesses
by providing increasingly specialized technology and services andcontinuing thorough customer orientation. By concentrating on the
launch of new businesses that display Nagase’s comprehensive
strengths through partnership and cooperation within the Group, weclarified the direction of new themes including batteries and semi-sue products and services that customers want.

Display & Electronics Components Department
Fiscal 2007 Strategies and Results
In fiscal 2007, we worked to strengthen sales of components,
mainly optical films and manufacturing equipment, and to enhance
our production and processing businesses. In China, thin glass processing progressed steadily at Nagase Electronics Technology Co.,
Ltd., which began full-scale operations, contributing to performance.
In addition, Nagase International Electronics Ltd. expanded the metal
processing and product inspection businesses launched there in
2006, and pressed forward with plans for new business. Moreover,
new LED suppliers and LED assemblies as well as the touch panelrelated business grew.

Strategic Initiatives in Fiscal 2008
We will continue strengthening component sales centered on
optical films and manufacturing equipment, and expand production
and processing functions. In particular, we will strengthen our support structure to minimize risk associated with overseas production
and processing.

IC Packaging Department
The fourth base within the Pac-Tech Group for wafer bumping
began operations in Malaysia in June 2008. While deepening ourpartnership with this base and expanding our customer base inJapan for wafer bumping services, we will strengthen our sales structure for flaxless soldering ball machines from Pac Tech-Packaging
Technologies GmbH by strengthening our partnership with Nagase
CMS Technology Co., Ltd.
At the applications development center in Kitakyushu, we began
joint development of chip-on-chip (CoC) packaging that uses a 50
micrometer bump chip IC test element group (IC-TEG). During fiscal
2008, we plan to establish this elemental packaging technology andstart trial mass production while developing Nagase’s original 35
micrometer bump chip IC-TEG.

conductor substrates. We launched a simplified inspection system

NAGASE & CO., LTD. ANNUAL REPORT 200825

Life Sciences

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

Fiscal 2007 Strategies and Performance
During fiscal 2007, we focused on generating profit on our investments
to date in our phospholipid production facility that began operations in

From left:

Ryuji Mise

Executive Officer; GM, Beauty Care Products
Department

Masuhiro Nojiri

Executive Officer; GM, Fine Chemicals Department

September 2007, and facilities for investigational drugs at Nagase Medicals
that began operating in May 2007. Other ongoing active investments
included the restructuring of Nagase ChemteX’s Fukuchiyama Factory.
Development themes focused on activities to realize globalization andbusiness development in optimal regions.
Life Sciences sales in fiscal 2007 increased 5.5 percent year-on-year to

Net Sales / Operating Income
Net Sales(¥ Billion)

Operating Income

56.4

56.4

53.5

¥56.48 billion, and operating income decreased 16.6 percent to ¥1.66 bil-

2.0

lion. Sales in the beauty care products business, which handles cosmetics
and health foods, decreased slightly, but sales of pharmaceutical raw mate-

1.6

1.2

rials and intermediates in the fine chemicals business increased, resulting
in solid overall growth in sales.

2006

2007

2008

Years ended March 31

TopicsMedical Grade Silicone
The medical grade silicone of Dow Corning Corporation is the only silicone in the world to
be manufactured to meet critical Good Manufacturing Practices (cGMP) principles. Nagase’s
pharmaceutical regulatory affairs team collaborated in establishing a sales structure
conforming to the Japanese Pharmaceutical Affairs Law, giving it a major advantage inexpanding sales. Over 70 companies use this medical grade silicone, which has a wide
variety of applications including as a dimethicone formulation in an ethical drug for deforming stomach gas, an active pharmaceutical ingredient (API) for an over-the-counter (OTC)

Medical grade silicone

digestive drug, an expient for ointments and other external medicines, and silicone fluids
and elastomer parts for medical devices such as injection-related coatings and catheters. We
expect increased sales from this promising product.

26 NAGASE & CO., LTD. ANNUAL REPORT 2008

REVIEW OF OPERATIONSFine Chemicals Department

Beauty Care Products Department

Fiscal 2007 Strategies and Results

Fiscal 2007 Strategies and Results

Operating conditions were severe in fiscal 2007, as restructuring

In fiscal 2007, the environment was harsh with a flat domestic cos-

accelerated in the pharmaceutical, food and agricultural chemicals

metics market, a slight decrease in the health foods market and aindustries, our business domain, while revisions to thecontinuing downward trend in door-to-door sales. Although somePharmaceutical Affairs Law and Food Sanitation Law necessitated asales increased due to a renewal of main products, overall sales

response. However, sales increased overall. Sales of fermentation

decreased slightly due to sluggish sales of existing cosmetics andproducts were flat, but domestic sales of pharmaceutical raw materi-

health food products. However, operating income increased slightly

als and intermediates were strong, in addition to growth in overseas

due to cost reduction efforts.

sales, mainly in Europe.

In this ongoing uphill battle, through intensive efforts to promote

Within the department, we reorganized and reallocated

BM Royal M1, an original health food with fermented Asian ginseng,resources to strengthen the operating and management frame-

we tripled last year’s customer turnout at nationwide events towork in our core businesses of pharmaceuticals, foods and chemi-

20,000. In addition, sales of the product increased more than 30 per-cals. In addition, we invested aggressively in growth markets includ-cent compared with the previous fiscal year with significant response

ing functional food ingredients, and worked to steadily build theto our advertising slogan “M1 - Protecting heart and mind fromdiagnostic agents business.

stress,” contributing to performance.

Strategic Initiatives in Fiscal 2008

Strategic Initiatives in Fiscal 2008

In fiscal 2008, we will continue to expand our core businesses; cre-

We will continue to focus on our WIT2008 target of building an

ate profitable new products and businesses; withdraw from under-organization of 700 sales managers. New product launches will focus

performing businesses and reallocate resources; and promote invest-

on our original rosemary ingredient in renewing our large-scale

ment in personnel, R&D and infrastructure. We will collaborate withhealth food product Belmash. We will also consider overseas expan-

the Nagase R&D Center and Nagase ChemteX Corp. to further

sion in promoting new development for the department.

expand commercial supply of phospholipids, which began in fiscal
2007. Moreover, we will utilize the RNAi technology we obtainedwith Nagase’s fiscal 2007 acquisition of iGENE Therapeutics, Inc. tosteadily expand the new drug discovery support business and build
our business foundation.

BM Royal M1, the first health food product to include M1 fermented Asian ginseng, offers fundamental health support
for people with today’s stressful lifestyles.

Phospholipid manufacturing facilities(Nagase ChemteX Corp., Fukuchiyama Factory)

NAGASE & CO., LTD. ANNUAL REPORT 200827

Nagoya Branch Office
Most Japanese domestic automakers and automobile parts manufacturers are concentrated
in Japan’s Chubu district, which centers on Nagoya. As Nagase’s local base of operations inthis district, the Nagoya Branch Office plays an important role in Nagase’s automotive business. Almost 70 percent of our sales are related to automobiles. In non-automotive areas,
we deal with major local companies in handling pharmaceuticals, cosmetics ingredients,
coating materials and plastics.

Fiscal 2007 Strategies and Results

Executive Officer
GM, Nagoya Branch
OfficeMasamichi Kan

Strategies in Fiscal 2008

Overall earnings of the Nagoya Branch Office in fiscal 2007

We will raise the added value of the Nagoya Branch Office andincreased more than 10 percent compared with the previous fiscal

further expand business in Japan and overseas for major local com-

year. Steady sales in the automotive field continued, while sales inpanies through cooperation with

non-automotive fields increased by almost 20 percent, resulting

other departments and stronger uti-

from our concentrated efforts to increase business with major local

lization of our overseas network.

companies.

While continuing to promote devel-

In the automotive field, a departmental reorganization clarified

opment of original Nagase products

assignments in the areas of interior and exterior components andin ways such as contract manufactur-

electric and mechanical components. Moreover, we concentrated

ing, we will work to develop LED

on environmental impact, weight reduction, safety, energy andassemblies for new fields throughdecoration in each area. As a result, we created many promising

the Optical Device Unit, newly added

development themes to contribute to future business expansion.

to the Nagoya Branch Office, in con-Contract business focused on pharmaceutical formulations andfunctional health foods proceeded steadily through cooperative

tinuing our change to a high-valueadded business.

efforts inside and outside the Company.

Overseas Operations

China Business
Nagase’s operations in China consist of 8 sales companies, 9 branches and offices, 15 manufacturing companies and 4 service companies, with approximately 550 Group employees atsales and service companies and 2,400 at manufacturing companies. Business expansion iscentered on chemicals, plastics and electronics.

Executive Officer
CEO, China
Osamu Kitaguchi

Fiscal 2007 Strategies and Results
In fiscal 2007, sales increased 11.9 percent year-on-year to¥188.30 billion. In addition to significant growth in automotive-

Tianjin

Dalianrelated business throughout the region, the main reasons for thisadvance were expansion of the plastics and chemicals businesses inthe East China market and electronic device-related business in the
Hong Kong and South China markets, and strong performance of

Wuhan

LCD manufacturing-related business in Taiwan.
We strengthened customer service functions and built a distinc-

Xiamentive follow-up system for particular customers at subsidiaries in

DongguanChina in order to respond to just-in-time delivery for customers andShenzhen
Guangzhou Hong Kong

supplier needs for efficient shipping. The network of warehouses

28 NAGASE & CO., LTD. ANNUAL REPORT 2008

Wuxi
SuzhouShanghaiNingboTaiwanSales
Manufacturing
Branches, Representative
Offices and Others

REVIEW OF OPERATIONS

we established to handle cargo that requires strict temperature
control and hazardous materials made a major contribution to performance.

Strategies in Fiscal 2008
The China business is growing rapidly, and we plan to convert
from swift expansion of volume to qualitative growth in fiscal 2008.

In April 2007, Nagase established the Greater China

Our specific focuses will be to 1) respond to laws and regulations

Management Office (GMOC) to promote cooperation with Groupand implement internal controls, 2) enhance cooperation and thecompanies and unified operation. Combined with the Greater

support structure with Group companies, 3) clarify overall targets

China Management Meeting established in 2006, the GMOC plays

for Greater China, 4) further enhance and expand our distribution

an important role in area management, and made a significant con-network, 5) deepen the production business, 6) concentrate on thetribution to regional risk management in fiscal 2007 by building an

automotive and housing businesses, and 7) develop business relat-

internal control system and responding to new laws and regula-

ed to environmental protection and energy saving.

tions in China.

In base development, we will focus on the North China region

In addition, Nagase opened a representative office in Xiamen,

including Tianjin and Dailian, and consider making the representa-

Fujian in September 2007. We look forward to a central role for thetive office in Amoy a subsidiary. Moreover, we will promote person-

office together with the activities of Taiwan teams at subsidiaries innel development as a chief policy.

Shanghai and Guangzhou in developing Taiwan-related business.

ASEAN Business
The ASEAN business consists of seven sales companies, nine branches and offices, nine
manufacturing companies and one service company in seven countries. In addition to the
traditional plastics business, the strengths we utilize in promoting business development in
the chemicals, electronics and medical fields are 1) the ability to conclude business locally,backed by the broad Group network, 2) the presence of subsidiaries in each country, whichallows them to determine needs directly from customers and link them to new businesses,and 3) deep ties with customers built up over many years.

Fiscal 2007 Strategies and Results

Executive Officer
CEO, ASEAN
Region/India
Masao Hidaka

time, we will expand performance through 1) a switchover toSales in fiscal 2007 increased 17.1 percent year-on-year to ¥99.04

added-value business by establishing a joint venture with a manu-

billion. Performance was solid in plastics centered on automobiles,

facturer and other means, 2) development of team-driven promo-

chemicals used in the semiconductor and LCD fields, and electron-tion of business that integrates chemicals, plastics and electronics,

ics including hard disk parts due to customer-oriented business3) focus on the medical field with the potential for high-added-

development, leading to strong sales.
In fiscal 2007, we established footholds for new business invalue business, and 4) promotion of business unique to Nagase thatutilizes its manufacturing function.

Singapore for the pharmaceutical business and in the Middle Eastfor the chemical field. We increased capacity at the second plant ofplastics manufacturer Dainichi Color (Vietnam) Co., Ltd., with afocus on expanding the automotive and PC businesses. In addition,
special teams were launched to focus on development projects in
Thailand and Malaysia. We enhanced personnel in Thailand,
Vietnam and India, where expansion is forecast, and carried out

New Delhi
Dubai
Hanoi

active investment in key businesses and regions. We worked to fortify our business foundation with long-term inventory and debt
recovery control, and to bolster compliance by strengthening

India

Mumbai

Philippines

Bangkok
Si Racha

Vietnamexport controls and internal control.

Strategies in Fiscal 2008
In fiscal 2008, the final year of WIT2008, we will continue area
development in Vietnam, India and the Middle East. At the same

Sales
Manufacturing
Branches, Representative
Offices and Others

PenangMalaysia
Kuala Lumpur
Johor Singapore
JakartaSurabayaIndonesia

NAGASE & CO., LTD. ANNUAL REPORT 2008

29

NAGASE CHEMTEX

Nagase ChemteX Corp. occupies the central role inGroup manufacturing. Our development of a variety of
products is driven by organic synthesis, formulation andfermentation technologies. While improving production
technology and enhancing manufacturing, quality
assurance, technical services and other functions, wedevelop and provide functional, high-value-added
products in the electronics, life sciences and performance chemicals fields, based on solid relationships oftrust with Nagase Group Customers.
In addition, we carry out a commanding role in safety
and hygiene, environmental activities and quality control as the leading manufacturer and processor within

President, Nagase
ChemteX Corp.

the Group.

Mitsukuni Mori

synthesis technologies and fermentation technologies to produce life

Fiscal 2007 Performance
In fiscal 2007, sales increased 12 percent year on year to ¥27.52
billion, and operating income increased 8 percent to ¥3.02 billion.
Although sales of products for Life Sciences and Electronics
Chemicals were basically unchanged from the previous fiscal year,
Functional Chemicals and Electronics & Structural Materials sales

sciences-related products centered on pharmaceutical intermediatesand enzymes.
Overseas, Nagase ChemteX (Wuxi) Corp., a joint venture with Nagase& Co., Ltd. manufactures formulated epoxy resins. Nagase FineChem
Singapore (Pte) Ltd. and Nagase ChemteX Taiwan Branch manufacture
electronics chemicals.

increased significantly. Operating income met the fiscal 2007 tar-

In fiscal 2007, we built a distillation tower for recycling and rein-

get as a result of enhanced capacity utilization, and manufacturingforced microelectronics-related facilities at the Harima Plant, and com-and sales initiatives for functional, high-value-added materials forpleted a new plant at the Fukuchiyama Factory to manufacture phos-

the LCD and semiconductor industries, despite a worsening of thepholipids. At overseas production bases, sales grew steadily at Nagase
ChemteX (Wuxi), contributing to performance.

cost ratio due to a rise in raw material and fuel expenses.

R&D Structure

Net Sales / Operating Income(¥ Billion)

Net Sales

Operating Income

product development teams within divisions as well as an R&D Division

27.52
21.15

22.75

24.66

21.01

2.81

Nagase ChemteX’s research and development structure comprises
working company-wide. A staff of over 100 researchers, many of whom
hold doctorates, increase the level of research and technology in the

3.02

Nagase Group.
In the life sciences field, we dispatch research staff to the Nagase R&D
Center to promote joint development of pharmaceutical intermediates

1.88

and new enzymes with researchers there. The R&D Division within the
0.99

1.19

Harima Plant plays a central role in promoting development in the electronics field. In addition, we are looking to the future by developing opto-

2004

2005

2006

2007

2008

（Years ended March 31）

Production Structure
In Japan, the Harima Plant produces a variety of electronics-related
products and performance chemicals that incorporate accumulated

electronics materials, organic-inorganic hybrid materials and environmentally conscious plastics. Our strength in selecting development themescomes from a keen understanding of customer needs gained through oursales department and the synergy created between our R&D and trading
company functions.

organic and polymer synthesis technologies and resin formulation andIn fiscal 2007, we introduced nanoparticle production facilities andcompounding technologies. The Fukuchiyama Factory uses organic

began development in the nanotechnology field through our alliancewith NanoGram Corporation in the U.S.

30 NAGASE & CO., LTD. ANNUAL REPORT 2008

In particular, we steadily grew business for our unique, high-value-

Business Overview of Fiscal 2007

added products of fluorene derivatives, our electroconductive polymer

Electronics & Structural Materials
The Electronics & Structural Materials business carries out product

Denatron, and acrylic ester co-polymer as materials for LCDs and semi-

development based on high-level epoxy formulation technology andconductors. Offering superior transparency, conductivity, heat resistancehigh-mix low-volume production.

and adhesion, these products contribute to business expansion. Sales of

Our electronics business continues to grow steadily. This businessliquid crystal intermediates grew significantly as we reinforced our pro-focuses on the fields of microelectronics and other electronic parts, andduction structure in response to increased demand. In addition, weoffers original functional, high-value-added products such as liquid

focused on product development with epichlorohydrin derivatives tosemiconductor encapsulant (LSE), film sealant (epoxy sheet), and UVmeet needs in the conductive materials field.

curable adhesives for image sensors and organic electroluminescense.

Life Sciences

During fiscal 2007, successful global expansion of epoxy sheet sales andIn the Life Sciences business, Nagase ChemteX specializes in two

growth of the LSE product lineup contributed to results.

fields: pharmaceutical intermediates and enzymes.

In structural materials, based on previous results and experience

The pharmaceutical intermediate business is primarily contract pro-with epoxy formulation technology, we provide a variety of industrial

duction, and we have been gaining dramatically increasing recognition

adhesives, as well as materials for master models and prototype produc-from customers by concentrating in areas that make use of our special-tion and matrix resins used in fiber-reinforced plastics for the automo-

ized technologies and those of the Nagase R&D Center. As a result, wetive and wind power generation industries. In addition, sales for use inincreased the capacity utilization ratio of cGMP-compliant production

housing materials expanded and we are working to achieve rapid com-facilities at the Fukuchiyama Factory for investigational new drugs (INDs),

mercialization of a specialty thermoplastic resin.

low-volume drugs, pharmaceutical intermediates and other products. In

Electronics Chemicals

addition, we promoted development of unnatural amino acids for pharmaceutical ingredients.

The Electronics Chemicals Department handles a broad array of photolithography chemicals for the semiconductor and LCD industries. In fis-

We are concentrating on products with higher added value that com-cal 2007, domestic sales of LCD-related chemicals expanded. We rein-bine our technological strengths in the areas of organic synthesis andforced facilities in response to increased demand in Japan for our core

biology. In the industrial enzymes field, we went beyond merely selling

stripping agents, and began operations at a new recycling plant estab-

enzymes to producing and selling useful materials derived from enzyme

lished as an environmental and resource conservation initiative. The

reactions. Mass-production facilities using phospholipid-degradingindustry holds the Nagase Group in high regard for the Reuse-Reduce-

enzymes for phospholipid manufacturing, our current main area of focus,

Recycle (3R) business that we promote in providing chemicals from sup-began operations in September 2007.

ply and usage reduction to reuse. With recognition of these activities, theStrategic Initiatives in Fiscal 2008

Group began construction of an onsite plant as the sole chemicals manu-

In fiscal 2008, the final year of WIT2008, we will continue to strength-

facturer within Sharp Corporation’s “Manufacturing Complex for the 21sten research and development and carry out aggressive capital expendi-

Century” in Sakai City, Osaka.

tures and investment in human resources according to basic policies.

Functional Chemicals

While focusing on development and production of functional, high-We are steadily expanding sales of our core epichlorohydrin deriva-

value-added and differentiated products that target the electronics andtives and other performance chemicals and ecochemicals such as

life sciences fields, we will work to further strengthen our production

chelating agents based on joint domestic and overseas marketing activ-

foundation as a manufacturer and raise productivity.

ities with Nagase.

Some direct outside sales

Nagase ChemteX (NCX)

Customization for niche areas,
including global sourcing
development of new products
and changes in specs

ChemicalsInteractive support
between technology
development and humanresources

Electronics

Nagase & Co., Ltd.
Sales outside
the Group

Plastics

Life
Sciences

NagaseR&D Center

Manufacturing
partners

Customers

Understanding ofcustomer needs andmarket trends

Manufacturing contracts

NAGASE & CO., LTD. ANNUAL REPORT 2008

31

NAGASE R&D CENTER

The mission of the Nagase R&D Center is to develop a technology platform that backs up the Nagase
Group’s future businesses and to act as a driving force in businesses related to life sciences. The Center willcontinue to energetically offer and provide technological solutions with the aim of strategic involvementwith the Group and business expansion based on high-level research and development capabilities.

In the life sciences field, the Nagase R&D Center collaborates on

Achievements in Fiscal 2007

product commercialization with Nagase ChemteX, which has out-

Process Development / Production Method Development andstanding capabilities in process development and manufacturing

Commercialization of Unnatural Amino Acids

technology compliant with good manufacturing practice (GMP) stan-

The Nagase R&D Center continued to speedily develop production

dards for pharmaceuticals, and excellent development strengths andmethods for amino acids using Maruoka Catalyst™, a phase-transfer

production technologies for enzymes and fermentation related prod-

catalyst developed by Professor Keiji Maruoka of Kyoto University, anducts. In the health food and cosmetics field, the Center develops new

established numerous production methods for new amino acids. This

ingredients that match product concepts of the Beauty Care Products

raised Nagase’s presence among domestic and overseas pharmaceu-

Department and provides products on time.

tical companies as a supplier of unnatural amino acids.

Core Technologies and Main Research Themes at the Nagase R&D Center

Biotechnology

1. Process development
technologies① Develop production methods for unnaturalamino acids using Maruoka Catalyst™ (asymmetric phase-transfer catalyst) and enzymes② Develop production methods for chiralcompounds, such as active pharmaceuticalingredients, intermediates thereof and liquid crystal components, using chiral compounding technologies (hybrid of biotechnology and organic chemistry methods) inelaborate multi-step processes

2. Biotechnology(microorganisms,
enzymes)① Identify new enzymes using a ready-to-use
microorganism library; explore a ready-touse microorganism library expanding
steadily in its genetic diversity for new
enzymes② Achieve highly efficient protein production
using recombinant microorganisms③ Produce substances using enzymatic reaction technologies④ Develop various chemicals using geneticallymodified microbes

3. Natural materials
development andapplication
technologies① Identify and evaluate new ingredients forhealth foods and cosmetics

4. Drug discovery
support technologies① Develop multi-color live cell imaging for
drug and food evaluation② Develop formulation methods for healthfoods and cosmetics

mycete proteins (enzymes), steady development and application
research continued for new enzymes and products thereof. As aresult, the Center transferred several development themes to Nagase
ChemteX for manufacturing.

Health and Cosmetics Materials
The Center successfully developed M1 fermented Asian ginseng,an original functional health food ingredient. It contributed to sales
substantially beyond plans through its inclusion in BM Royal M1, acore health food product launched by the Beauty Care Products
Department.

Drug Discovery Support
The Center began deliberating commercialization opportunities
based on results from cultivating research related to live cell imaging,a technology garnering attention in the post-genome era.
Commercialization of reagent kit screening for receptors in humans
began following successful screening of non-hormonal nucleic receptors in humans.

Analysis and Evaluation Technologies(Analysis of Generic Pharmaceuticals)② Develop reagent kit screening for receptors
in humans③ Develop RNAi-related technologies (repression of I:sequence specific gene)

5. Analysis and evaluation
technologies

In addition to cultivation of overexpression technology for actino-① Analyze imported active pharmaceuticalingredients according to the JapanesePharmacopeia in compliance with GMP
standards and establish specifications

32 NAGASE & CO., LTD. ANNUAL REPORT 2008

By implementing drug analysis according to the Pharmaceutical
Affairs Law that went into effect in 2005, the Center responded to its
customers’ approval applications for new products and accumulated
results in GMP inspections.

Strategic Initiatives in Fiscal 2008
The Nagase R&D Center will focus on the following themes tosurpass the targets set in WIT2008.

1. Achieving Life Sciences Targets① Accelerate development of production methods forManagement and Use of Intellectual Property
The Nagase R&D Center cooperates closely with the Intellectual
Property Department of the Legal & Credit Division from the stage oftheme selection to filing for patent application to strategically establish Nagase’s competitive edge by turning R&D results into intellectual
property rights.

unnatural amino acids for the pharmaceutical industry② Transfer the manufacture of new actinomycete-derived

Patent Applications Filed and Patents Acquired
During Fiscal 2007

enzymes in the biotechnology-related field to Nagase

Cumulative Total asof March 31, 2008

In Japan

Overseas

In Japan③ Evaluate functions of new materials (provide evidence)

Patent applications filed

9

4

192

61

and propose product concepts in the cosmetics field

Patent rights established

1

0

29

11

ChemteX④ Develop and strengthen sales tools for drug discovery

Overseas

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

support⑤ Refine and exploit standardization technology for analysis ofgeneric pharmaceuticals in consideration of new products

2. Deepening the Technology Platform
Continue implementing technological development centered on biotechnology that will lead to the Nagase
Group’s future businesses

NAGASE & CO., LTD. ANNUAL REPORT 2008

33

CORPORATE GOVERNANCEAt Nagase, our management philosophy has always been to maintain good and fair business practices. To
implement this philosophy and continue raising corporate value, we believe that quick decision-making andaction, as well as active, transparent management, are vital. In addition, with the advance of globalization,
Nagase is aggressively working to strengthen corporate governance as a key management issue.

Business Execution and Auditing Framework

Meetings, where they discuss sales and marketing issues, andNagase has established an executive officer system and adopted

Managers’ Meetings, where they discuss administrative issues andthe Board of Auditors system. The Company’s current management

establish concrete measures based on status reports received fromframework consists of ten directors, including two independent direc-

each department.

tors from outside the Company; 21 executive officers, seven of whom

Moreover, Nagase has established an Advisory Board with an out-

serve concurrently as directors; and four corporate auditors, includingside expert, based on our view that objective checks and evaluation of

two from outside the Company.

the Company’s management practices are important.

The Board of Directors, at the foundation of a structure to ensure

In addition to attending Board of Directors’ meetings and otherefficiency in the execution of directors’ duties, is clearly positioned asimportant meetings, corporate auditors closely monitor the execution

the body in charge of making decisions on management policies andof duties by directors and executive officers, based on audit policy andstrategies, and supervising the execution of operations. It holds a reg-division of duties determined by the Board of Auditors, through sur-ular monthly meeting in addition to provisional meetings as neces-

veys of Company operations and assets and management reports

sary, reviews and formulates measures regarding important decisions

from subsidiaries, which they request on an as-needed basis.

and tracks business performance.

Monitoring and assignment of tasks are based on policies set at Board
of Auditors’ meetings.

Under an executive officer system, the roles of executive officers,
their responsibilities, and procedures within basic organizational regu-

The Audit Office is in charge of internal audits, including audits tolations for operation and division of duties are based on decisions ofassess the appropriateness and efficiency of business activities. The

the Board of Directors. Executive officers attend General Managers’

Audit Office and Board of Auditors regularly exchange information

Corporate Governance System
General Meeting of Shareholders
Independent Auditors

LiaisonSupervisionCorporate Auditors

Supervision

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

Board of Auditors(4 including 2 outside corporate auditors)

Supervision
Supervision

Compliance Call Center

Advisory Board(includes one person employedoutside the Company)

Risk Management &Compliance Committee

President
AdviceSupervision

Audit Oﬃce

Internal
External

Internal Control Promotion
Committee
Security Trade Control Committee
Chemical Management Committee

Supervision

Environment Protection Committee
General Managersʼ Meeting (Sales)

34 NAGASE & CO., LTD. ANNUAL REPORT 2008

Managersʼ Meeting (Administration)

regarding internal audits and audits of domestic and overseas subsidiaries and hold meetings twice a year with auditors of affiliatedInternal Control System and Risk Management System
The Company enhances the following systems to strengthen andcompanies. In addition, they perform liaison activities including

thoroughly implement internal control and risk management.

receiving regular reports from Nagase’s independent auditors Ernst &(Resolutions of the Board of Directors meeting held on March 25, 2008)

Young ShinNihon LLC regarding accounting matters and associated◆ System to Ensure Compliance with the Law andinternal controls. Members of the Audit Office are also present at

Nagase’s Articles of Incorporation in the Execution of

accounting audits conducted by the independent auditors.

Directors’ Duties

As Nagase’s independent auditors, Ernst & Young ShinNihon LLC
conducts fair and impartial audits of the Company’s accounts.

Based on the management philosophy, “maintain good andfair business practices as a member of society,” which Nagase has

Note: As of July 1, 2008, Ernst & Young ShinNihon changed its name to Ernst &Young ShinNihon LLC.

upheld for many years, the Company has established a basic policy
and code of conduct for legal compliance and employs the services of outside professionals as necessary to prevent violations of theCompensation of Directors and Auditors
Total compensation paid to Company officers in fiscal 2007 was as

the corporate governance system include a provision for a director

follows.
Title

law or Nagase’s Articles of Incorporation. Measures to strengthen

Compensation
Number(¥ million)

Director

10¥241

Corporate
Auditor

4

57

Total

14

¥298

Officer Compensation Limits by Resolution of
Ordinary General Meeting of Shareholders

who discovers a violation of the law or Nagase’s Articles of

Up to ¥360 million annually(per resolution on June 29, 1988)
Up to ¥80 million annually(per resolution on June 28, 2006)

Incorporation by another director to report immediately to theBoard of Directors or corporate auditors.

◆ Storage and Control of Information Related to the
Execution of Directors’ Duties

Notes: 1. The above compensation includes a total of ¥36 million paid to four
independent directors and outside corporate auditors.

Information related to the execution of directors’ duties is

2. The above total compensation includes directors’ and corporate
auditors’ bonuses of ¥59 million expensed as accrued bonuses during fiscal 2007.

recorded in documents or electronically, and stored according to

3. In addition to the above, ¥26 million was paid as salary to directors
holding concurrent positions as employees of the Company.

these materials at any time.

4. In addition to the above, rights to purchase new shares in the form ofstock options totaling ¥5 million were issued as compensation tonine directors (including ¥0 million to one independent director), perresolutions of the 92nd Ordinary General Meeting of Shareholders
held on June 27, 2007 and the Board of Directors meeting held on
August 1, 2007.
5. The amount scheduled to be paid to eight incumbent directors,
excluding independent directors, per resolution of the 91st Ordinary
General Meeting of Shareholders held on June 28, 2006 to abolishretirement benefits, is ¥648 million.
6. The total of the amount paid to corporate auditors who retired as of
the conclusion of the 92nd Ordinary General Meeting of
Shareholders held on June 27, 2007 and the amount scheduled to be
paid to three incumbent corporate auditors, per resolution of the
91st Ordinary General Meeting of Shareholders held on June 28, 2006
to abolish retirement benefits, is ¥24 million.

internal regulations. Directors and corporate auditors can view

◆ Risk Management System
The Company has established the Risk Management &Compliance Committee to integrate overall risk control, and put inplace a structure that sets its functions and authority and clarifies its
roles and responsibilities. Under the committee’s leadership, department managers address risks in their particular areas by setting rules
and guidelines, holding workshops and preparing and distributing
manuals. To deal with additional risks that materialize, Nagase is also
working to develop a system that designates the departments
responsible for rapid response, ensures speedy and appropriate
communications should an incident arise, and handles emergencies.

◆ Compliance System

Compensation of Independent Auditors(¥ Million)

Compensation paid to independent auditors by the Company infiscal 2007 for services rendered pursuant to Article 2, Paragraph 1of the Certified Public Accountants Law.

¥51

Compensation other than the above paid to independent auditors
by the Company for services rendered.

27

Total compensation paid to independent auditors by the Company
and its consolidated subsidiaries in fiscal 2007.

92

To upgrade and maintain its compliance structure, the Company
established the Risk Management & Compliance Committee and abasic compliance policy, and uses regular workshops and other initiatives to ensure that corporate activities are strictly in line with theNagase Group Code of Conduct. Should employees of Nagase or its
Group companies become aware of legal or other compliance

NAGASE & CO., LTD. ANNUAL REPORT 200835

CORPORATE GOVERNANCE

issues, they report to the Risk Management & Compliance

Policy Regarding a Large-scale Purchase ofCommittee, which immediately reports to the Board of Auditors. In

Company Shares

addition, the Company has introduced an internal reporting system
where employees and others can report or discuss issues directly.

◆ System to Ensure Fairness in
Business of the Nagase GroupThe Company ensures fairness in business with Group companies through specific articles of operational standards, requiring
Group companies to seek the approval of or notify the Company
before making decisions and providing in principle for the dispatch of Company executives.
In creating clear targets based on the medium-term management plan and annual budget system, Nagase implements budget
and performance control at the Company and Group companies.

Nagase has introduced countermeasures to an attempted largescale purchase of Company shares (Anti-takeover Defense Measures)in order to prevent control of decision-making regarding theCompany’s financial and business policies based on resolutions of theBoard of Directors meeting held on May 28, 2007 and the 92nd
Ordinary General Meeting of Shareholders held on June 27, 2007.
The decision to implement countermeasures to an attempted
large-scale purchase of Company shares (Anti-takeover Defense
Measures) in order to prevent control of decision-making regarding
the Company‘s financial and business policies was made at the Boardof Directors meeting held on May 28, 2007 and the Ordinary General
Meeting of Shareholders held on June 27, 2007.
In the event of a large-scale purchase, to ensure and improve cor-

In order to increase the reliability of financial reporting, theporate value and the common interests of our shareholders, the Anti-

Company documents, evaluates and improves its overall internal

takeover Defense Measures require the large-scale purchaser to pro-control system and the process for preparing financial statements,

vide advance information concerning the large-scale purchase. They

based on the Financial Instruments and Exchange Law.

also ensure time for information gathering and deliberation and◆ System to Ensure Effectiveness indefine procedures including those for negotiation with a large-scale

Reports to Directors and Audits

purchaser and the presentation of the Company management‘s plan

The Company has upgraded the system for corporate auditors
to understand the overall state of Company management on asteady basis by attending important meetings including Board of
Directors’ meetings and exchanging information, and viewing
approval-process documents and reports. Moreover, directors
report the following items to the corporate auditors or the Board
of Auditors either individually or through the Board of Directors.

or an alternative plan.
In the event these procedures are not followed, the Company may
implement countermeasures based on the judgment of the Board of
Directors including the allocation of share warrants without consideration. In principle, the Company will not implement countermeasuresin the event the procedures are followed. However, the Company may
implement countermeasures, including the allocation of share warrants without consideration, in the event that the large-scale purchaseof Company shares is confirmed to be detrimental to maintaining or・ Misconduct related to the execution of directors’ duties, violationsof the law or Nagase’s Articles of Incorporation, compliance-related
problems
・ Matters that have the potential to significantly damage the Company
・ Important items of disclosure
・ Reporting of matters based on the internal reporting system, etc.

improving Nagase’s corporate value or the common interests of theshareholders.
The Anti-takeover Defense Measures are effective until the conclusion of the Ordinary General Meeting of Shareholders in 2010.
However, because the term of office of directors is one year, the Boardof Directors will consider and discuss the continuance, discontinuation or modification of the Anti-takeover Defense Measures every year

The president and the corporate auditors hold regular conferences
to exchange opinions to recognize and understand the importanceand usefulness of audits. In addition, to enable corporate auditors tocarry out their duties efficiently and effectively, the Company has
upgraded its system for close coordination and reciprocity between
the corporate auditors and the independent auditors, the Audit Office
and auditors of affiliated companies.

36 NAGASE & CO., LTD. ANNUAL REPORT 2008

at the first Board of Directors meeting held following the conclusionof the Ordinary General Meeting of Shareholders.

BOARD OF DIRECTORS, CORPORATE AUDITORS AND EXECUTIVE OFFICERS(As of July 1, 2008)

Front row from left: Makoto Tsuruoka, Hideo Nagase, Hiroshi Nagase, Kyoichi Zushi
Back row from left: Shingo Bamba, Kazuo Nagashima, Reiji Nagase, Eiji Asami, Haruyuki Niimi, Takuya Goto

BOARD OF DIRECTORS
Representative Director
and Chairman

Hideo Nagase

Representative Director
and President

Hiroshi Nagase

Representative Director andManaging Executive Officer

Makoto Tsuruoka

Representative Director andManaging Executive Officer

Director and Managing
Executive Officer

Administrative Divisions; GM, Finance Division;
GM, Accounting Division

Director and Managing
Executive Officer

Director and Managing
Executive Officer

Shingo Bamba

Director andExecutive Officer

Kazuo Nagashima

Independent Director

Haruyuki Niimi

Kyoichi Zushi
Overall Sales Group; Business Administrative Office;Corporate Marketing Office;Nagase R&D Center

Reiji Nagase
Colors & Imaging Department;
Advanced Polymers Department;
Electronic Chemicals Department;
Pluswood Department

Eiji Asami
Performance Chemicals Department;
Automotive Solutions Department;
Information & Functional Materials Department;
Nagoya Branch; Nagase Application Workshop
Speciality Chemicals Department;
Eco-Materials & Products Department;
Sheet & Film Planning Office; GM, Display &Electronics Components Department
Fine Chemicals Department;
Beauty Care Products Department;
IC Packaging Department(Representative Director and Chairman,
Showa Shell Sekiyu K.K.)

Independent Director

Takuya Goto
(Adviser to Kao Corporation)

CORPORATE AUDITORSStanding Corporate Auditor

Shunsuke Okabe

Standing Corporate Auditor

Tetsuwa KonishiStanding Corporate Auditor

Hideo Yamashita

Corporate Auditor

Toshio Takano

Mitsukuni Mori

Executive Officer

Kenichi Matsuki

EXECUTIVE OFFICERSManaging Executive Officer

President, Nagase ChemteX Corp.

Executive Officer

GM, Human Resources & General Affairs Division;
GM, Legal & Credit Division;
GM, Osaka Administrative Division

Masamichi Kan
GM, Nagoya Branch Office

Executive Officer

Osamu Kitaguchi

Executive Officer

GM, Colors & Imaging Department

CEO, China

Executive Officer

Masuhiro Nojiri

Executive Officer

Masao Hidaka

Executive Officer

Toshiro Yamaguchi
GM, Performance Chemicals Department,
Osaka District

Executive Officer

Executive Officer

Ryuji Mise
GM, Beauty Care Products Department

Executive Officer

Masanori Shimizu
Corporate Marketing Office

Shunichi Kawashiri
Audit Office; Corporate Management Office;
GM, Compliance Division

Kazuo Mitsuhashi
Nagase ChemteX Corp.

CEO, ASEAN Region/India

Executive Officer

Tomitaka Ito
GM, Electronic Chemicals Department

GM, Fine Chemicals Department

Executive Officer

Hiroshi Hanamoto

Executive Officer

Mitsuaki ItoBusiness Administrative Office; GM, IT Planning Office

NAGASE & CO., LTD. ANNUAL REPORT 200837

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

Environmental
Protection
Measures

Under our environmental policy, we make the most of our strengths as a technology and intelligence oriented company in promoting environmentally conscious business development
and eco-businesses. We carry out initiatives to establish harmony with the environment.

◆ Environmental Management Structure
Nagase’s environmental activities have been enhanced every year
since the establishment of its Environmental Protection Committee in
1999. The committee conducts activities throughout the Group by
establishing environmental control officers and sub-committees, environmental preservation managers to consolidate activities at the
departmental level, and eco-leaders in promotional roles.
Since Nagase obtained ISO 14001 certification for its environmental management system in April 2000, the Environmental Protection
Committee has offered advice and support while expanding therange of certification. Currently, five sales companies - Nagase Colors& Chemicals Co., Ltd., Nagase Chemical Co., Ltd., Nagase Plastics Co.,
Ltd., Nagase Abrasive Materials Co., Ltd. and Nishinihon Nagase Co.,
Ltd. - conduct activities together with Nagase at its certified businessestablishments. Affiliated companies conducting environmental
activities that have obtained certification independently include
Nagase ChemteX Corp., Nagase Medicals Co., Ltd., Setsunan Kasei Co.,Ltd.,

NagaseElectronic

Environmental Policy① Comply with all environmental laws, regulations and other rules
We will observe all environmental laws, municipal bylaws, environmental
regulations and other rules as we conduct our business activities.

② Develop businesses that give full consideration
to environmental issues
We will conduct our business activities in full awareness of the need to preserve the ecosystem and protect the environment, and we will make every
possible effort to give full consideration to the environment within the limits of technological and economic feasibility.

③ Fulfill our responsibilities as a good corporate citizen
As a good corporate citizen we will work together with public institutions,industry, and local communities to promote environmental conservation
measures that are suitable for the Nagase Group.

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

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

Equipment Service Co., Ltd.,◆ Reducing Environmental Impact

Hoei Sangyo Co., Ltd., Hoei
Techno Service Co., Ltd.,

Nagase works to reduce environmental impact. In our central trad-

Totaku Industries, Inc., Nagase

ing company function, we work to reduce power and fossil fuel con-

CMS Technology Co., Ltd. andsumption, the use of copy paper and water resources and waste. We

Nagase Logistics Co., Ltd.

An internal audit in progress◆ Environmental Management Activities

reduced power consumption by 5.5 percent over the last three years
through efforts that include using high efficiency lighting and introducing energy-saving air conditioning systems, carefully controlling tem-

Each department carries out environmental management activities

perature settings and operation time, and having security personnel

based on the five targets of Nagase’s implementation plan: 1) thor-

check that lights are turned off during their rounds. We achieved a 12.8

oughly implement compliance with environmental laws and regula-percent reduction in general waste over the last three years’ throughtions; 2) expand and create eco-businesses; 3) respond to and prepare

separation of trash for collection and recycling activities.

for the prevention and occurrence of pollution from business activi-

In addition, efforts at Nagase ChemteX and Nagase Medicals, whichties, and critical situations; 4) enhance internal operation of environ-handle manufacturing and processing for the Nagase Group, tomental management activities; and 5) adapt risk reduction and opera-

reduce overall greenhouse gas emissions and industrial waste emis-tion improvements to the Company’s business.

sions include energy-saving activities and fuel switching.

38 NAGASE & CO., LTD. ANNUAL REPORT 2008

Power Consumption at
Nagase & Co., Ltd.1
9,000

8,559

8,500

(Thousand kWh)

130

8,309
8,086

8,000
7,500

Group. We will reaffirm the importance of global environmental pro-

120

110

6,500

105

2007

Fiscal 2008 is the beginning of the Kyoto Protocol commitment
period and the beginning of a new environmental era for the Nagase

125

7,000

2006

(Tons)

130

113

115

2005

◆ Initiatives to Strengthen Environmental Protection in
Fiscal 2008

General Waste Emissions at
Nagase & Co., Ltd.1

109

tection by promoting education within the Company based on ourparticipation in Team Minus 6% since April 2008.2
Notes: 1. At main offices in Japan (including spaces rented to Group companies)

2005

2006

2. Team Minus 6%, based on the Kyoto Protocol, is a national campaign
promoted by the Ministry of the Environment to reduce greenhousegas emissions in Japan by 6 percent compared with the benchmark
year. There were approximately 22,000 participating organizations as ofJune 30, 2008.

2007

Team Minus 6% Initiatives
Reduce CO2

Reduce Environmental Impact① Communicate energy-saving
activities within the Company① Waste① Prepare to formulate environmental
report for the Group・Separate waste for collection anddisposal・Raise recycling efficiency② Internal reduction initiatives

Company

Expand to Group Companies

・Update lighting fixtures
・Operate air conditioning efficiently
・Consider new energy facilities
・Streamline IT equipment such as servers② Maintain information exchange on
setting targets② Water conservation③ Strengthen environmental protection activities based on Team Minus
6% activities

・Install automatic faucets with sensors③ Green procurement (stationery,
office equipment, etc.)③ Create/analyze database・Consolidate purchasing routes

・Analyze efficiency improvement (ESCO,etc.)④ Paper conservation
・Systemize
・Continue measurement of usage④ Understand and analyze transportvolume by energy-saving methods
・Use new system to understand transportvolume・Implement thorough trash separation
・Promote use of non-disposable chopsticks and cups
・Green procurement
・Recycling
・Continue using both sides of office paper① Strengthen implementation ofenergy-saving activities
Employees

・Turn off lights during lunch hour・Adjust room temperature
・Promote turning off PCs

Team Minus 6% poster

Environmental Education① Education by level
・Environmental preservation managers /eco-leaders
・Internal auditors② General environmental educationfor employees
・Release monthly environmental educationmaterials (environmental topics)

・Implement e-learning for young employees(180 new employees between 2004 and2008)
・Recommend ecological certification◆ Environmentally Friendly Products, Services andBusiness Activities

2001, Nagase FineChem Singapore (Pte) Ltd. recycles the chemicals

Nagase’s Original Eco-Businessproduced through the manufacture of LCDs, semiconductors andElectronic Chemicals Businesselectronic devices in Southeast Asia. The company has been granted

Nagase currently manufactures and sells a chemical management
system (CMS) to control the concentration of chemicals used in the“Pioneer Status” by the Singapore government, a distinction given to
new companies that benefit the country.

manufacture of semiconductors and LCDs in order to make theThus recognized for its technology, know-how and performance,

process more stable. It also reuses chemicals. The waste solvent recov-

the Nagase Group has decided to build a plant within Sharp

ery system contributes to zero emissions by collecting and processing

Corporation’s “Manufacturing Complex for the 21st Century” to man-

waste solvents that individual companies have difficulty reducing, andufacture, supply and recycle chemicals. The new plant will recycle

reusing them as raw materials for different industries. Established indeveloper, stripping agents and other chemicals by introducing chemNAGASE & CO., LTD. ANNUAL REPORT 200839

ical management devices and the recycling technology of Nagase

tions, we established Sun Delta Corporation as a joint venture withChemteX. Concentrating the accumulated technology of the Nagase

ASAHI KASEI CHEMICALS CORPORATION to develop business utilizing

Group at this recycling-oriented plant will enable major reductions intheir research and development strengths and Nagase’s market search

the use of chemicals and raw materials and make a significant environ-

strengths and sales channels. Sun Delta has developed SunMorfee V,

mental contribution.

the world’s highest standard flame retardant polycarbonate insulating

In addition, Nagase has established SN Tech Corporation, a joint

sheet. SunMorfee V contains noventure between SACHEM Asia and Nagase ChemteX to recycle

brominated flame retardant

tetramethylammonium hydroxide (TMAH), a raw material for develop-

agents, which are an environmen-

er used in semiconductor and LCD manufacturing. We will jointly pro-tal concern. The sheet is being

mote the TMAH recycling business in Asia by combining the Mobius

used in LCDs by household elec-

System™ environmental protection technology of SACHEM Inc., par-tronics manufacturers and sales

ent company of SACHEM Asia, with the chemical control system tech-are expanding throughout Asia.
SunMorfee V

nology of the Nagase Group cultivated over many years as an LCD
panel manufacturer.

Pluswood, a New Environmentally Friendly Wood Composite
Material
Nagase leverages new resources as part of its efforts to establish a
recycling-oriented society that makes effective use of limited
resources. For example, we developed Pluswood, a composite material made from environmentally friendly biomass materials such as millends and tree thinnings, and non-vinyl chloride thermoplastic. We

Completed conceptual image of Sharp’s“Manufacturing Complex for the 21st Century”

Chemical management
system for recycling

Non-bromine Business
Environmental policies such as the Restriction of Hazardous
Substances Directive (RoHS) in Europe have promoted the development of environmentally friendly household electronics that arelighter and thinner, causing subsequent demand for parts with superior heat resistance and flame retardant properties. Under these condi-

Service to Reduce Energy Used in Shipping

steadily penetrated themarket since the launch of
Pluswood, which is theworld’s first wood-plastic
composite with over 51
percent of its weight consisting of powder madefrom chipped wood waste.

Pluswood, a new environmentally friendly
wood composite

Environmental Research Activities

Since 1996, the Nagase Group has implemented joint distribution,

The Nagase Group actively promotes joint environmental research,

in which we ship dyestuff-related products together with other com-primarily through the Nagase R&D Center. One example of our efforts

panies in the same business. Joint distribution facilitated the integra-

to pursue green chemistry is through research currently underway totion of formerly dispersed storage facilities, and has enabled us to offer

reduce a manufacturing process of multi-step chemical reactions formore efficient and finely tuned customer services, including vehicle

the pharmaceutical intermediate (R)-3-Quinuclidinol to a single step

dispatch. The Nagase Group operates a “weekly full container service,”by using a biocatalyst with the capacity for microbial reduction.

which facilitates distribution by consolidating the cargo of multiple

In addition, Nagase was contracted by the New Energy andcustomers into a single container for overseas shipping. This service

Industrial Technology Development Organization (NEDO) in 2007 tolessens the burden of distribution for customers and contributes tobegin research and development for the procurement and commer-

preserving the environment by reducing the energy used in shipping.

cialization of a new cellulose to improve the enzymic saccharification

In August 2008 we began operating the Nagase Energy Calculation

efficiency of cellulose biomass. Introducing enzymic saccharification

Online System (NECO System), which we developed in March 2008 to

into the production process for fuel grade ethanol from cellulose bio-

automatically calculate domestic cargo transport volume by using dis-mass requires a reduction in enzymatic volume. Hence, this researchtribution receipt data from our new sales control system. In addition to

involves selecting highly active cellulose and raising cellulose response

finding annual cargo transport volume, the system enables us to cal-efficiency. If successful, the results will contribute to fuel grade ethanol

culate and reduce CO2 emissions through analysis that optimizes

production and global resource conservation.

transport routes.

40 NAGASE & CO., LTD. ANNUAL REPORT 2008

CORPORATE SOCIAL RESPONSIBILITY

Supporting and Cooperating with External
Environmental Organizations
Coexisting with society is one of our environmental policies, andof Commerce and Industry Environmental Problem ResearchCouncil, and others. We also conduct activities to contribute to local
communities.
Further details regarding the Nagase Group’s environmental ini-

we support and cooperate with other organizations working to protect the environment. This includes participation in the Nippon

tiatives are available on the Company’s website:

Keidanren Committee on Nature Conservation, the Japan Foreign

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

Trade Council Global Environment Committee, the Osaka ChamberContributing
to Growth of
ScientificTechnology

Nagase has a long history of developing

exchange in fields including biochemistry and organic chemistry.

enzymes and technologies for organic

Contributions include research grants to researchers, financial

compounds for use not only in the chemical

support for attendance at overseas and domestic conferences andindustry but for a wide range of applications

support for lectures. To date, the Foundation has awarded a cumula-in various industries including pharmaceuti-tive 311 research grants and 178 international exchange fellowships

cals. Through these activities we intend tototaling approximately ¥820 million. (International exchange fellow-

promote awareness of the importance ofships were suspended in fiscal 2004.)

basic technology in biochemistry and organic chemistry, and aid in

To commemorate Nagase’s 175th year of business, thethe broad advance of scientific technology in Japan. To mark the 70th

Foundation held ayear since Nagase’s establishment, we established the Nagase

symposium on the

Science and Technology Foundation.

theme of science

Established in April 1989 and designated a public interest corpora-and technology fortion by the former Science and Technology Agency, the Nagase

creating a prosper-

Science and Technology Foundation aims to contribute to socioeco-

ous

nomic development through the advance of science and technology

September 2007.

societyinby assisting research and development and supporting international

Research Grants Provided in 2008
Name

Position/Present Office

Subject Matter

Biochemistry
Masayuki Azuma

Professor/Graduate School of Engineering, Osaka City University

Analysis of lipid modification of protein independent of energy compounds

Hidenori Ichijo

Professor/Graduate School of Pharmaceutical Sciences, The University of Tokyo

Mechanisms and physiological roles of osmosensing

Hiroshi Uyama

Professor/Graduate School of Engineering, Osaka University

Development of High-performance Immobilized Enzyme for Preparation of
Biodiesel

Michihiko Kataoka

Associate Professor/Graduate School of Agriculture, Kyoto University

Development of useful compound production processes using bioreduction
systemYoshiteru Hashimoto

Assistant Professor/Graduate School of Life and Environmental Sciences,
The University of Tsukuba

Biochemical analysis of the nitrile hydratase formation

Toshinobu Fujiwara

Associate Professor/Graduate School of Engineering, Kobe University

Utilization of mammalian selenocysteine insertion mechanism on productionof novel artificial proteins

Hirokazu Urabe

Professor/Graduate School of Bioscience and Biotechnology,
Tokyo Institute of Technology

Manipulation of Biomolecules Based on New Amino-derived Leaving Groups

Toshiyuki Kan

Professor/School of Pharmaceutical Sciences, University of Shizuoka

Synthesis of biologically active natural products toward analysis of its function

Hironao Sajiki

Professor/Faculty of Pharmaceutical Sciences, Gifu Pharmaceutical University

Development of the Hydrogenation of Aromatic Nuclei Using Heterogeneous
Catalyst Designed to Evolve a Synthetic Method of Functional Materials

Mamoru Tobisu

Designated Lecturer/Graduate School of Engineering, Osaka University

Development of New Catalytic Reactions Involving the Cleavage of Unreactive
Bonds

Shigeru Yamago

Professor/Institute for Chemical Research, Kyoto University

Development of metallations of heavier group 15 heteroatom compounds
and their applications

Organic Chemistry

Biochemistry/Organic Chemistry
Hirokazu Arimoto

Professor/Graduate School of Life Sciences, Tohoku University

Cytoprotective mechanism of endogenous nitronucleoside

Kazushi Kinbara

Associate Professor/School of Engineering, The University of Tokyo

Development of molecular tools for controlling assembly of biomolecules

Norio Shibata

Associate Professor/Department of Frontier Materials, Nagoya Institute of Technology

Design and Synthesis of Teflon-coated Phtalocyanines and Their Applications
in Photodynamic Therapy for Cancer

Noriaki Minakawa

Associate Professor/Graduate School of Pharmaceutical Sciences, Hokkaido University

Development of artificial DNA device possessing persistent RNAi activity

NAGASE & CO., LTD. ANNUAL REPORT 2008

41

SIX-YEAR SUMMARY
Nagase & Co., Ltd. and Consolidated Subsidiaries(Years ended March 31)

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

2008

For the Year:Net Sales .................................. ¥ 764,755
Gross Profit ...............................
80,506
Operating Income......................
23,063Net Income ...............................
10,005At the Year-End:Total Assets .............................. ¥ 419,869
Net Assets (Note 2) ................... 208,377
Interest-Bearing Debt ................
33,342

2007

2006

2005

2004

2003

2008

¥ 701,321
73,63921,66913,567¥ 648,023
67,64017,596
12,892¥ 575,636
61,96013,256
10,384¥ 533,301
53,494
10,2447,010¥ 503,688
51,8998,433
4,186$7,633,047
803,533
230,193
99,860¥ 422,859
211,672
20,491¥ 396,773
202,376
24,834¥ 335,290
171,937
14,019¥ 310,793
160,407
16,417¥ 284,800
145,017
16,578$4,190,728
2,079,818
332,777¥ 54.69
1,227.82
9.00¥ 31.72
1,107.54
8.00

$

(Yen)

Per Share Date:
Net Income (Basic) .................... ¥ 77.86
Net Assets ................................ 1,559.97
Cash Dividends .........................
17.00¥ 105.84
1,597.27
18.00¥ 100.32
1,535.70
15.00¥ 81.00
1,311.37
10.00

0.78
15.57
0.17

(%)

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

10.5
1.8
2.4
4.9
47.8

10.5
1.7
3.3
6.8
48.5

10.4
1.8
3.5
7.1
49.6

10.8
1.8
3.2
6.4
49.8

10.0
1.8
2.4
4.7
50.3

10.3
1.7
1.4
2.9
49.5

23.2
0.17

26.9
0.10

30.5
0.13

31.0
0.08

25.7
0.11

22.9
0.12

4,335

3,865

3,504

3,203

2,884

2,790

Notes 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥100.19=U.S.$1.00, the approximate rate of exchange prevailing on March 31, 2008.
2. Effective from the year ended March 31, 2007, the Company has adopted a new accounting standard for presentation of net assets in the balance sheet. Amounts for previous fiscal years have been
restated to conform to the new standard.

42 NAGASE & CO., LTD. ANNUAL REPORT 2008

MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCESThe Nagase Group and Its Businesses
The Nagase Group imports and exports a diverse array of products and

Net Sales(¥ Billion)

engages in domestic transactions, with Nagase & Co., Ltd. (the “Company”

533.30or “Nagase”) at its center. In addition, the Nagase Group manufactures and575.63648.02701.32764.75sells products and provides services. These businesses are conducted by 103
related companies, consisting of 70 subsidiaries and 33 affiliates. The scopeof consolidation includes 51 subsidiaries, and 11 affiliates are accounted forYears ended
March 31

2004

2005

2006

2007

2008

by the equity method.
Five companies were added to the scope of consolidation in the fiscal
year ended March 31, 2008 because they had become increasingly material
to consolidated results. The five companies are Tianjin Nagase International
Trading Co., Ltd., NWP International Trading (Shenzen) Co., Ltd., Totaku
Industries Suzhou Co., Ltd., Nagase Electronics Technology Co., Ltd. andNagase Eco Plus Co., Ltd.
During the fiscal year ended March 31, 2008, the Nagase Groupremoved Alpha Bumping Technology Co., Ltd. from the scope of consolidation due to its liquidation in February 2008. The Nagase Group also
removed 19 other companies, including Nagase Filter Co., Ltd., from thescope of consolidation during the fiscal year ended March 31, 2008. The
total assets, net sales, net income and retained earnings of these companies
had no material effect on the consolidated financial statements.

Overview of Results
Net Sales
During the fiscal year ended March 31, 2008, the Japanese economy
continued to expand moderately, supported by increased exports. However,
economic growth slowed because capital investment and personal consumption weakened. Concerns about the deceleration of the global economy increased due to the impact of the U.S. subprime mortgage crisis andthe high price of crude oil.
In these conditions, the Nagase Group worked to improve its performance, and sales increased both in Japan and overseas. Consolidated net sales
increased 9.0 percent, or ¥63.43 billion, year-on-year to ¥764.75 billion.
Domestic sales increased 5.4 percent, or ¥22.02 billion, year-on-year to¥432.81 billion, supported by strong sales of products, including those that
the Nagase Group manufactures, in the Chemicals business, and solid sales
in the Plastics business. Overseas sales increased 14.3 percent, or ¥41.40
billion, year-on-year to ¥331.94 billion. In the ASEAN region, sales in theplastics business increased in Thailand and Vietnam, while in the Greater
China region, sales in the Plastics and Electronics businesses were solid.

Gross Profit and Selling, General and
Administrative Expenses
Cost of sales increased 9.0 percent, or ¥56.56 billion, year-on-year to¥684.24 billion. Reflecting the increase in net sales, gross profit increased
9.3 percent, or ¥6.86 billion, year-on-year to ¥80.50 billion. The ratio ofgross profit to net sales was 10.5 percent, unchanged year-on-year.
Selling, general and administrative (SG&A) expenses increased 10.5 percent, or ¥5.47 billion, year-on-year to ¥57.44 billion, due to factors including amortization of actuarial loss in accounting for retirement benefits. The
ratio of SG&A expenses to net sales increased 0.1 percentage point to 7.5
percent.

Research and Development Expenses
The Nagase Group integrates its comprehensive strengths to engage in
research and development with the objective of developing new technologies and products and disseminating technological information, based on its
marketing activities, in order to create new businesses.
The Nagase R&D Center is currently conducting research with anemphasis on providing users with technological solutions. Main research
themes include process development for pharmaceuticals and pharmaceutical intermediates in the organic chemicals sector; the development of
enzyme and enzyme reaction products that make use of microorganisms inthe biotechnology sector; and the discovery and evaluation of the pharmacological activity of natural materials and ingredients in the cosmetics andhealth foods sector. The Nagase R&D Center also collaborates extensively
with Nagase ChemteX Corp., a major manufacturing subsidiary, in areas
ranging from the development to manufacturing of new products. The
Nagase Group’s intellectual property includes chiral synthesis technology to
produce unnatural amino acids; the development of new enzymes ranging
from isolation to production and application; and applications for cosmetics
and health foods using natural ingredients. In these and other sectors, theNagase Group has applied for numerous patents for its inventions, and customers hold the Nagase Group’s technological capabilities in high regard.

NAGASE & CO., LTD. ANNUAL REPORT 200843

Through these R&D activities, the Nagase R&D Center contributes to growthand increased earnings in the Life Sciences business.

Income before income taxes and minority interests decreased 12.3 percent, or ¥2.83 billion, year-on-year to ¥20.26 billion. As a result, net

Moreover, the Nagase Application Workshop (NAW) began full-scale

income decreased 26.3 percent, or ¥3.56 billion, to ¥10.00 billion fromoperations in July 2007. This organization consolidates in one place the for-¥13.56 billion for the previous fiscal year. Net income per share decreased

merly discrete technology services that the Nagase Group had been provid-

to ¥77.86 from ¥105.84 for the previous fiscal year.

ing to customers in plastics, coatings and textile processing. Looking forward, NAW will energetically provide even more precise services and con-

Net Income (¥ Billion) /Net Income per Share (¥)

12.89

duct joint development with customers that manufacture end-use products.

13.56

10.38

For the year ended March 31, 2008, research and development expens-

10.00
100.32

7.01

81.00

es increased to ¥2.92 billion from ¥2.57 billion for the previous fiscal year.

105.84

77.86

54.69
Net Income
Net Income per Share

Research andDevelopment Expenses

Years ended
March 31

2004

2005

2006

2007

2008

2.92

(¥ Billion)

2.43

2.34

2.42

2.57

Results by Business Segment
Chemicals

Years ended
March 31

2004

2005

2006

2007

2008

Net Sales
Operating Income

Operating Income, Net Other Expenses and Net Income
As a result of the above, operating income increased 6.4 percent, or¥1.39 billion, year-on-year to ¥23.06 billion. The operating income margindecreased 0.1 percentage point to 3.0 percent.

Total Assets(¥ Billion)
Change (%)

2008

2007

267.83247.09

8.4

7.93

7.01

13.1

133.05135.91(2.1)

Depreciation and Amortization

1.26

0.90

40.6

Capital Expenditures

2.29

1.55

48.0

Segment sales increased 8.4 percent, or ¥20.74 billion, year-on-year to

Net other expenses totaled ¥2.79 billion, compared to net other income¥267.83 billion. Segment operating income increased 13.1 percent, orOperating Income¥0.92 billion, year-on-year to ¥7.93 billion. Sales were strong overall, with(¥ Billion)

21.66

23.06

increased domestic sales of products manufactured by the Nagase Groupand higher overseas sales, primarily in the South China region.

17.59

Overall results were robust in the performance chemicals business,

13.25
10.24

which covers relatively upstream areas within the Chemicals segment. Salesof plastic raw materials and additives were strong, and sales of urethaneYears ended
March 31

2004

2005

2006

2007

2008

and coating materials and other products for the automotive industry
increased as a result of the Nagase Group’s emphasis on this business.

of ¥1.42 billion for the previous fiscal year. The primary factor in the year-

Overall sales were essentially unchanged year-on-year in the colors andon-year change was loss on voluntary recall of goods totaling ¥6.48 billion

imaging products business, which handles pigments, dyestuffs and otherin connection with a voluntary recall of portable DVD players the Company

products related to color. Sales of ink and toner materials for printers,

had been selling. Interest and dividend income increased because of factors

copiers and other office equipment increased slightly. However, sales ofincluding dividends on investments in affiliates. The interest coverage ratio,

products including functional color pigments for plasma displays and con-defined as the sum of operating income and interest and dividend income

ductive polymers were flat. Sales of dyestuffs, including overseas sales, weredivided by interest expense, decreased to 23.2 times from 26.9 times for thealso unchanged from the previous year.

previous fiscal year. Gain on sales of investments in securities increased to¥2.63 billion from ¥0.27 billion for the previous fiscal year.

The specialty chemicals business handles a wide range of organic products including surfactants used as raw materials for detergents, cosmetics
and other household toiletries; industrial oil solutions; silicones; and fluoro-

44 NAGASE & CO., LTD. ANNUAL REPORT 2008

MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCES

chemicals. Overall sales were robust, with particularly strong growth in sales

Electronics

at Nagase ChemteX Corp., the core of the Nagase Group’s manufacturing
operations, centered on products for LCD-related applications.

Net Sales

Plastics

Net Sales
Operating Income

2008

2007

(¥ Billion)
Change (%)

163.83150.79

8.6

Operating Income

7.03

6.16

14.1

Total Assets

88.26

84.26

4.7

Depreciation and Amortization

1.94

1.46

33.3

Capital Expenditures

3.68

1.88

95.5

2008

2007

(¥ Billion)
Change (%)

274.66244.68

12.3

6.13

6.53

(6.1)

Segment sales increased 8.6 percent, or ¥13.03 billion, year-on-year to

126.04118.806.1¥163.83 billion. Segment operating income increased 14.1 percent, or

Depreciation and Amortization

1.04

0.96

7.8

¥0.86 billion, year-on-year to ¥7.03 billion. Sales were strong overall.

Capital Expenditures

1.03

1.18

(12.7)

Equipment sales decreased, but sales expanded in the LCD components

Total Assets

Segment sales increased 12.3 percent, or ¥29.97 billion, year-on-year tobusiness. Moreover, sales of chemicals used in LCD production and preci-¥274.66 billion. Segment operating income decreased 6.1 percent, or ¥0.39

sion abrasive materials for semiconductors and other applications werebillion, year-on-year to ¥6.13 billion. Overall sales were strong despiterobust.

lower sales of engineering plastics and materials for optical applications,

In the electronic chemicals business, sales of original products manufac-

primarily to customers in Taiwan, and decreased sales in some businesses intured by Nagase ChemteX Corp. and other Nagase Group companies

Japan. Automotive application-related sales increased substantially, andincreased. Sales of supply and control equipment for front-end photolithog-

overseas sales related to applications such as precision equipment and elec-

raphy for LCDs and semiconductors decreased, but sales of chemicals andtronic equipment continued to expand, centered on the ASEAN region.

formulated epoxy resins were strong.

Sales of plastics for precision equipment and electronic equipment appli-

In the LCD business, including products for back-end processing of LCDs,

cations such as printers and copiers increased overall. Overseas, sales

sales of liquid crystal modules decreased, but overall sales were steadyincreased in the ASEAN region and the Hong Kong and Shanghai areas.

because of substantial growth in sales of offshoot businesses such as LCD

However, sales of engineering plastics for CDs, DVDs and other media

component processing and aluminum housing materials for electronic

applications and materials for LCD applications decreased, primarily inequipment. Sales of optical films also rose.

Taiwan.

Sales of precision abrasives used in semiconductor-related silicon wafer

Sales to the automotive industry increased strongly overall. In Asia, sales

processing and sales of encapsulants and other products used in semicon-

remained strong in the South China region as well as in Thailand and otherductor back-end processing were strong. Sales of substrates for hard disks

ASEAN countries. Sales increased in North America and Europe and recov-

also rose.

ered in Japan.
In the building materials and housing equipment business, although

Life Sciences
2008

2007

(¥ Billion)
Change (%)

56.48

53.55

5.5

sales of original Nagase Group products using wood composite materials
and related products increased, sales of general-use building materials
decreased due in part to the impact of the revised Building Standards Law.

Net Sales
Operating Income

1.66

2.00

(16.6)In addition, sales to the packaging materials industry were flat, and sales

Total Assets

32.17

33.41

(3.7)

decreased in the electronic component assembly business, which is one ofDepreciation and Amortization

0.66

0.63

4.5

the Nagase Group’s downstream plastics-related product businesses.

Capital Expenditures

1.67

0.76

117.1

Among Nagase Group manufacturing companies in Japan, sales
increased at Setsunan Kasei Co., Ltd., which handles plastic coloring andcompounding. Sales increased slightly at Kotobuki Kasei Corp., which manufactures plastic trays used in food packaging. Sales decreased slightly at
Totaku Industries, Inc. which manufactures various types of flexible hoseand pipes for industrial applications and household appliances.

Segment sales increased 5.5 percent, or ¥2.93 billion, year-on-year to¥56.48 billion. Segment operating income decreased 16.6 percent, or ¥0.33
billion, year-on-year to ¥1.66 billion. Overall sales were firm. While sales inthe beauty care products business, which handles sales of cosmetics andhealth foods, decreased slightly, sales of materials for pharmaceutical products and intermediates increased.

NAGASE & CO., LTD. ANNUAL REPORT 200845

Overall sales in the fine chemicals business increased. Sales of fermenta-

Europe & Others

tion products were flat, but domestic sales of pharmaceutical raw materials

Sales in Europe & Others increased 18.8 percent, or ¥2.30 billion, year-

and intermediates were strong. In addition, overseas sales increased, mainly

on-year to ¥14.60 billion. Sales increased in the Life Sciences business andin Europe.

in the Chemicals business. Operating income in Europe & Others increased

Sales decreased slightly in the beauty care business, which includes cos-

82.3 percent, or ¥0.37 billion, year-on-year to ¥0.82 billion.

metics and health foods. Sales of certain core products that were renewed
increased, but sales of existing cosmetics and health food products weak-Profit Sharing Policy

ened.

Dividend Policy
Nagase’s basic policy is to further enhance its corporate structure andOthersSegment sales decreased 62.7 percent, or ¥3.25 billion, year-on-year to¥1.93 billion. Segment operating loss totaled ¥0.04 billion. In the second
half of the previous fiscal year, the Nagase Group transferred its businessthat handles direct sales of DVD movie software and other consumer products. In addition, the voluntary recall of portable DVD players and otherproducts impacted results.

Results by Geographical Segment
Japan
Sales in Japan increased 3.4 percent, or ¥16.55 billion, year-on-year toearnings capabilities to continue generating steady dividends for shareholders. The Company pays dividends after taking into overall consideration projected capital requirements for future growth over the medium and longterm and consolidated performance. Nagase employs internal capital
resources effectively to strengthen future business activities and the Nagase
Group’s operating foundation.
Based on this policy, Nagase decreased cash dividends for the fiscal year
ended March 31, 2008 to ¥17.00 per share from ¥18.00 per share for theprevious fiscal year. Nagase omitted the interim dividend due to factors
including the non-recurring loss in connection with the voluntary recall of
portable DVD players and other products, and paid ¥17.00 per share as theyear-end dividend. The consolidated payout ratio increased to 21.8 percent¥497.19 billion. Factors included higher sales of Nagase ChemteX products

from 17.0 percent for the previous fiscal year.

in the Chemicals business, increased automotive-related sales in the Plastics

Stock Option Systembusiness and growth in LCD-related applications in the Electronics business.

In the fiscal year ended March 31, 2003, the Nagase Group introduced aOperating income in Japan decreased 6.4 percent, or ¥0.92 billion, year-on-

stock option system aimed at boosting the motivation and morale of Group

year to ¥13.51 billion due to the impact of amortization of actuarial loss in

employees in order to improve their performance, and at further enhancing

accounting for retirement benefits.

the Company’s corporate value by aligning the interests of the Group with

Northeast Asia

those of shareholders. During the year ended March 31, 2008, the Nagase

Sales in Northeast Asia increased 25.3 percent, or ¥29.14 billion, year-

Group issued rights to purchase new shares in the form of stock options toon-year to ¥144.28 billion. Sales of the component and material processing

directors, executive officers, technology officers and Company managers, asbusiness within the Electronics business increased, centered on the South

well as to directors and individuals with equivalent titles at subsidiaries.

China region. Operating income in Northeast Asia increased 35.5 percent,or ¥1.40 billion, year-on-year to ¥5.36 billion.

Southeast Asia
Sales in Southeast Asia increased 19.5 percent, or ¥13.94 billion, year-

Liquidity and Financial Position
Cash and cash equivalents as of March 31, 2008 increased 7.1 percent,or ¥1.56 billion, from a year earlier to ¥23.48 billion.

on-year to ¥85.46 billion. Factors included increased sales of engineering

Although income before income taxes and minority interests totaled

plastics in Thailand. Operating income in Southeast Asia increased 17.6 per-¥20.26 billion, operating activities used net cash of ¥2.58 billion because ofcent, or ¥0.45 billion, year-on-year to ¥3.01 billion.

factors including income tax payments and an increase in working capital.

North America

In addition, despite proceeds from sales of investments in securities, invest-

Sales in North America increased 6.8 percent, or ¥1.48 billion, year-on-

ing activities used net cash of ¥7.00 billion because of factors including pur-year to ¥23.20 billion. Sales were strong in the Chemicals business and inchases of property and equipment and purchases of intangible fixed assets.

the Plastics business. Operating income in North America increased 83.4

Financing activities provided net cash of ¥10.73 billion despite payment ofpercent, or ¥0.14 billion, year-on-year to ¥0.30 billion.

dividends because short- and long-term debt increased.

46 NAGASE & CO., LTD. ANNUAL REPORT 2008

MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCESNet Cash Used in Operating Activities
Net cash used in operating activities was ¥2.58 billion. In the previous

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

396.77 422.85 419.86

fiscal year, operating activities provided net cash of ¥10.85 billion.

310.79335.29Although income before income taxes and minority interests totaled ¥20.26¥7.67 billion.

Net Cash Used in Investing Activities
Net cash used in investing activities increased ¥1.80 billion comparedwith the previous fiscal year to ¥7.00 billion. While proceeds from sales ofinvestments in securities totaled ¥4.46 billion, purchases of property andequipment totaled ¥7.31 billion and purchases of intangible fixed assets

2.4

2.4

billion, notes and accounts receivable increased ¥13.10 billion, notes andaccounts payable decreased ¥5.87 billion and income taxes paid totaled

3.3

3.5

3.2

Total Assets
Return on Assets

As of /
Years ended
March 31

2004

2005

2006

2007

2008

Liabilities
Total liabilities as of March 31, 2008 increased 0.1 percent, or ¥0.30
billion, from a year earlier to ¥211.49 billion.
Current liabilities increased 3.9 percent, or ¥6.82 billion, from a year
earlier to ¥183.93 billion. While notes and accounts payable decreased

totaled ¥1.62 billion.

¥6.59 billion, factors in the overall increase included an increase in shortterm loans of ¥7.20 billion and an increase in the current portion of long-

Net Cash Provided by Financing Activities
Net cash provided by financing activities was ¥10.73 billion. In the previous fiscal year, financing activities used net cash of ¥8.42 billion. While
cash dividends paid totaled ¥1.55 billion, increase in short-term loans, net
was ¥6.26 billion and proceeds from long-term debt totaled ¥5.93 billion.

term debt of ¥2.93 billion.
Working capital increased to ¥125.67 billion from ¥114.51 billion ayear earlier. The current ratio increased to 1.68 times from 1.65 times ayear earlier.
Long-term liabilities decreased 19.1 percent, or ¥6.51 billion, from ayear earlier to ¥27.55 billion, primarily because of a ¥9.03 billion reduction

Cash Flow Summary
2008

2007

(¥ Billion)
2006

Net Cash (Used in) Provided by Operating Activities(2.58)

10.85(2.34)Net Cash Used in Investing Activities(7.00)(5.20)(3.80)Net Cash Provided by (Used in) Financing Activities

10.73(8.42)

9.33

in deferred income taxes due largely to the decrease in net unrealized
holding gain on securities resulting from a decline in share prices.
Working Capital (¥ Billion) /Current Ratio (Times)

114.51
93.41
83.40
1.64

Assets125.67106.05

1.66

1.66

1.65

1.68

Total assets as of March 31, 2008 decreased 0.7 percent, or ¥2.99 billion, from a year earlier to ¥419.86 billion.

Working Capital
Current Ratio

As of March 31

2004

Current assets increased 6.2 percent, or ¥17.98 billion, from a year ear-

2005

2006

2007

2008

lier to ¥309.61 billion. Primary factors included an increase of ¥13.78 billion
in trade notes and accounts receivable and notes and accounts receivable ofunconsolidated subsidiaries and affiliates due to the increase in net sales.

Net Assets
Net assets including minority interests decreased 1.6 percent, or ¥3.29

Property, plant and equipment increased 12.6 percent, or ¥4.00 billion,

billion, from a year earlier to ¥208.37 billion. Retained earnings increased

from a year earlier to ¥35.83 billion primarily because of an increase in¥8.91 billion from a year earlier due to net income for the fiscal year, butmachinery and equipment as the Nagase Group invested in facilities at

net unrealized holding gain on securities decreased ¥13.73 billion from amanufacturing subsidiaries.

year earlier to ¥18.61 billion. As a result of the above, the ratio of net

Investments and other assets decreased 25.1 percent, or ¥24.98 billion,
from a year earlier to ¥74.41 billion. This was primarily the result of aassets to total assets decreased 0.7 percentage points to 47.8 percent
from 48.5 percent a year earlier.

decrease in the carrying value of investments in securities due to lower
stock prices compared to a year earlier, as well as the sale of investments insecurities.

NAGASE & CO., LTD. ANNUAL REPORT 200847

Based on the above, the outlook for the Nagase Group’s performance

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

for the year ending March 31, 2009 is as follows. These performance pro202.37 211.67 208.37

jections are based on an exchange rate of ¥100 = US$1.00.

160.40 171.93
7.1

6.4

6.8

4.7
Net Assets
Return on Equity

As of /
Years ended
March 31

2004

2005

2006

2007

(¥ Million) (Announced on April 30, 2008)
Net Sales Operating Income Ordinary Income Net Income

4.9

2008

Year ending March 31,
2009 (Projected)

770,000

21,000Year ended March 31,
2008 (Actual)

764,755

Increase (decrease)

0.7%

22,00013,00023,06324,823

10,005(8.9)%(11.4)%

29.9%

Investment in Plant and Equipment
Investment in plant and equipment for the year ended March 31, 2008
centered on manufacturing facilities for manufacturing subsidiaries andtotaled ¥8.09 billion.

Operating and Other Risks
The Nagase Group is engaged in trading, marketing, research and development, manufacturing and processing, and conducts global business activi-

In the Chemicals segment, investment in plant and equipment totaled

ties in the five segments of Chemicals, Plastics, Electronics, Life Science and¥1.93 billion and included production facilities for industrial chemicals at

Others. The following presents an overview of major operating and othermanufacturing subsidiaries. In the Plastics segment, investment in plant andrisks to which the Nagase Group’s businesses are subject by their nature andequipment totaled ¥0.86 billion and included plastic molding and produc-that exert or could exert a significant influence on investor decisions.

tion facilities at Nagase and manufacturing subsidiaries. In the Electronics
segment, investment in plant and equipment totaled ¥3.25 billion andincluded buildings and manufacturing facilities at Nagase and manufacturing subsidiaries. In the Life Sciences segment, investment in plant andequipment totaled ¥1.58 billion and included manufacturing facilities atmanufacturing subsidiaries. In the Others segment, investment in plant andequipment totaled ¥0.45 billion. The Nagase Group used both internal andexternal capital resources to fund capital expenditures.

Outlook for the Year Ending March 31, 2009
The economic outlook for the year ending March 31, 2009 is for weak-

Forward-looking statements are Nagase Group estimates as of March
31, 2008.

(1) Overall Operating Risk
The Nagase Group conducts a wide spectrum of operations in the segments of Chemicals, Plastics, Electronics and Life Sciences from its base inchemicals. The chemical industry both in Japan and internationally is subject
to significant volatility that could impact the Group’s performance andfinancial position.

(2) Product Market Conditions
The Nagase Group is extensively involved in the chemicals, plastics andother businesses that deal in petrochemicals manufactured from naphtha.

er growth in the global economy, with the impact of rising raw material

Raw material market conditions and the balance of supply and demand

prices, the deceleration of the U.S. economy and exchange rate volatility.

are key factors determining market conditions for each product. Changes in

The Nagase Group will complete WIT2008, its three-year medium-term
management plan begun in April 2006, during the year ending March 31,
2009. Initial targets for the final year of the plan were consolidated net
sales of ¥770 billion and consolidated operating income of ¥24 billion. The
Nagase Group expects to surpass its net sales target through means such as
expanding sales of original Group products. However, the Nagase Group
does not expect to meet its target for operating income due to factors
including the increase in personnel expenses that will result from the amortization of actuarial loss in retirement benefit accounting, increased depreciation expenses due to new capital investments, and the impact of theappreciation of the yen.

48 NAGASE & CO., LTD. ANNUAL REPORT 2008

these conditions could impact the Group’s performance and financial position.

(3) Impact of Fluctuations in Foreign Currency
Exchange Rates
The Nagase Group undertakes import and export transactions and nontrade business transactions that involve foreign currencies. Fluctuations inforeign currency exchange rates impact the value of transactions denominated in foreign currencies when translated into yen. The Nagase Group
works to minimize the risks associated with fluctuations in foreign currency
exchange rates by hedging these transactions using forward foreignexchange contracts. However, fluctuations in foreign currency exchange
rates could exert a material impact on the Nagase Group’s performance andMANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCES

financial position. The Nagase Group also includes corporations domiciled

nesses. The increased latent risks involved could impact the Group’s per-in countries other than Japan that maintain their financial statements in cur-formance and financial position.

rencies other than Japanese yen. Fluctuations in foreign currency exchange(8) Product Quality Risk

rates could therefore impact the consolidated financial statements upon

The Nagase Group operates the Nagase R&D Center and manufacturingtranslation of the accounts of these corporations into Japanese yen.

subsidiaries to provide high added value to customers, and devotes scrupu-(4) Risks Involved in Operating Overseas

lous attention to the quality of the technologies and products the GroupA significant percentage of the Nagase Group’s activities involve selling

thus provides. However, issues such as defects in these products would ter-and manufacturing overseas, principally in China, Southeast Asia, Europe

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

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

could impact the Group’s performance and financial position.

effort to determine trends in markets overseas and respond appropriately to(9) Risks of Handling Various Chemicals

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

Chemicals are a core business of the Nagase Group, which imports andprojections due to unexpected events including factors related to the regula-exports a diverse array of products for a broad range of applications. The

tory systems and customs of overseas countries could impact the Group’sGroup’s exports are therefore subject to the application of regulations that

performance and financial position.

aim in part to maintain international peace and safety, including the Foreign(5) Impact of Changes in Stock Prices

Exchange and Foreign Trade Control Law and the Export Trade Control

The Nagase Group maintains a portfolio of marketable stock, primarily

Order, and imports are subject to the Chemical Substances Control Law andshares of companies with which the Group transacts business, and is sub-other laws and regulations. The Nagase Group has therefore established theject to the risk of changes in the prices of these shares. As a matter of poli-

Security Trade Control Committee and the Chemical Managementcy, the Nagase Group seeks to reduce this risk by continuously reviewing

Committee, which work to assure compliance with the above regulatory sys-and reorganizing its shareholdings. However, changes in stock prices could

tems and with laws related to chemical product management in China,

impact the Group’s performance and financial position. Moreover, a drop in

Europe, North America and elsewhere. Contravention of these regulatory

stock prices that reduces return on pension plan assets could impact thesystems would result in restrictions on business activities, and therefore

Group’s profitability by increasing retirement benefit costs.

could impact the Group’s performance and financial position.

(6) Counterparty Credit Risk
The Nagase Group is exposed to credit risk because it extends credit tocounterparties in a diverse array of transactions in Japan and overseas. As amatter of policy, the Nagase Group moves to preclude credit risk with riskhedges such as guarantees and collateral in correlation with the financial
condition of counterparties. However, the Nagase Group cannot be
absolutely certain that it has avoided credit risk. Deterioration of the financial condition or bankruptcy of counterparties could impact the Group’s performance and financial position.

(7) Risk of New Investments
The Nagase Group’s businesses are based on brokerage transactions,and the Group is working to develop high-value-added businesses. As amatter of policy, the Nagase Group is therefore supporting the ability of theNagase R&D Center, Group manufacturing subsidiaries and other Group
organizations to provide high-level technologies and information throughmeasures such as aggressively investing in new businesses and strategicacquisitions. However, this policy entails operating risks that are different
from those inherent in the Group’s conventional low-risk brokerage busi-

NAGASE & CO., LTD. ANNUAL REPORT 2008

49

CONSOLIDATED BALANCE SHEETS
Nagase & Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2008 and 2007

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS

2008

2007

2008

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

¥ 23,486¥ 21,919$ 234,415

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

3

3

30

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

1,847

1,696

18,435Trade........................................................................................................................

229,998

216,368

2,295,618

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

2,644

1,557

26,390Less allowance for doubtful receivables .....................................................................

(1,964)(1,468)(19,603)

232,526

218,153

2,320,850

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

42,94643,372428,646

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

4,620

3,055

46,112Other current assets .....................................................................................................

6,030

5,121

60,186

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

309,615

291,626

3,090,278

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

10,5179,437

104,971

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

31,90530,163

318,445

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

40,93837,269408,604

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

2,080

736

20,76185,44077,607852,780

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

(49,602)(45,772)(495,079)

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

35,837

31,834

357,690

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

12,638

11,857

126,140

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

51,081

77,401

509,831

63,71989,259635,982Long-term loans receivable ...........................................................................................

102

118

1,018

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

836

757

8,344

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

10,086

9,602

100,669

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

(329)

(338)

(3,284)

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

74,41699,399742,749

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

¥419,869¥422,859$4,190,728

Current assets:

Notes and accounts receivable:

Property, plant and equipment:

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

See notes to consolidated financial statements.

50 NAGASE & CO., LTD. ANNUAL REPORT 2008

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND NET ASSETS

2008

2007

2008

¥ 21,153
3,195¥ 13,948
259$ 211,129
31,889Accrued income taxes (Note 8) .....................................................................................
Deferred income taxes (Note 8).....................................................................................
Accrued expenses.........................................................................................................
Accrued bonuses for employees ....................................................................................
Accrued bonuses for directors .......................................................................................
Provision for voluntary recall of goods...........................................................................
Other current liabilities .................................................................................................
Total current liabilities ...........................................................................................

2,381
132,483
134,864
4,288
50
4,178
2,881
169
572
12,583
183,937

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

23,765
1,322,318
1,346,082
42,799499
41,701
28,755
1,687
5,709
125,591
1,835,882

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

8,993
10,7596,691
1,110
27,554

6,284
19,7906,851
1,147
34,07389,759107,386
66,783
11,079275,017

Net Assets
Shareholders’ equity (Note 9):
Common stock:
Authorized — 346,980,000 shares
Issued — 138,408,285 shares ..................................................................................
Capital surplus .............................................................................................................
Retained earnings (Note 17) .........................................................................................
Treasury stock (Note 10)...............................................................................................
Total shareholders’ equity.............................................................................................

9,699
10,017
165,664(5,342)
180,039

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

96,80699,9801,653,498(53,319)
1,796,976

Valuation, foreign currency and other adjustments ...................................................................
Net unrealized holding gain on securities.....................................................................................
Deferred hedge gain or loss ..........................................................................................
Translation adjustments................................................................................................
Total valuation and translation adjustments ..................................................................

18,613(20)
1,922
20,51532,3480
1,772
34,121

185,777(200)
19,184
204,761

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

183
7,639
208,377¥419,869

123
6,465
211,672¥422,859

1,827
76,2452,079,818$4,190,728

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

Contingent liabilities (Note 14)

NAGASE & CO., LTD. ANNUAL REPORT 2008

51

CONSOLIDATED STATEMENTS OF INCOME
Nagase & Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2008 and 2007

Thousands of
U.S. dollars (Note 1)

Millions of yen

2008

2007

2008

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

¥764,755¥701,321$7,633,047

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

684,248
80,506627,681
73,6396,829,504
803,533

Selling, general and administrative expenses (Note 12) .................................................
Operating income (Note 16)......................................................................................

57,44323,063

51,97021,669573,341
230,193

Other income (expenses):
Interest and dividend income.....................................................................................
Interest expense........................................................................................................
Equity in earnings of affiliates....................................................................................
Gain on sales of investments in securities ..................................................................
Loss on devaluation of investments in securities ........................................................
Gain on sales of property and equipment ..................................................................
Loss on disposal of property and equipment ..............................................................
Impairment loss on fixed assets .................................................................................
Loss on voluntary recall of goods...............................................................................
Other, net.................................................................................................................
Income before income taxes and minority interests ....................................................

1,538(1,060)
437
2,635
(61)
9
(111)
(229)
(6,480)523
20,264

1,490
(860)
519
275
(48)
74
(137)
(80)
—
194
23,095

15,351(10,580)
4,362
26,300(609)
90(1,108)(2,286)(64,677)5,220
202,256

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

7,987
1,111
11,165

7,219
1,520
14,35579,71911,089111,438

Minority interests..........................................................................................................
Net income ...........................................................................................................

1,159¥ 10,005

788¥ 13,567

11,56899,860See notes to consolidated financial statements.

52 NAGASE & CO., LTD. ANNUAL REPORT 2008$

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Nagase & Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2008 and 2007

Number of sharesof commonstock

Balance at March 31, 2006 ...................... 138,408,285
Net income for the year .............................
—
Gain on sales of treasury stock ..................
—
Increase in retained earnings resulting from
inclusion of consolidated subsidiaries ...........
—
Decrease in retained earnings resulting from
inclusion of consolidated subsidiaries ...........
—
Increase in retained earnings resulting from
inclusion of companies accounted for by
the equity method.....................................
—Cash dividends (Note) ...............................
—Cash dividends..........................................
—
Bonuses for officers (Note).........................
—
Acquisition of treasury stock ......................
—
Disposition of treasury stock ......................
—
Other ........................................................
—
Balance at March 31, 2007 ...................... 138,408,285
Net income for the year .............................
—
Gain on sales of treasury stock ..................
—
Increase in retained earnings resulting from
inclusion of consolidated subsidiaries ...........
—
Decrease in retained earnings resulting from
inclusion of consolidated subsidiaries ...........
—
Increase in retained earnings resulting from
inclusion of companies accounted for by
the equity method.....................................
—Cash dividends..........................................
—
Bonuses for officers ...................................
—
Acquisition of treasury stock ......................
—
Disposition of treasury stock ......................
—
Other ........................................................
—
Balance at March 31, 2008 ...................... 138,408,285

Millions of yen
Net unrealized Unrealized gain
holding gain on
or loss on
securities
deferred hedge

Capital surplus

Retainedearnings

Treasury
stock

Total
shareholders’equity¥9,699——¥ 9,725—200¥145,709
13,567—¥(5,604)——¥159,530
13,567200¥ 36,504
—
—

—

—

374

—

374

—

—

(128)

—

—
—
—
—
—
—
—
9,699
—
—

—
—
—
—
—
—
—
9,926
—
91

189
(1,920)
(962)
(80)
—
—
—
156,749
10,005
—

—

—

—

—
—
—
—
—
—
¥9,699Commonstock

Translation
adjustments

Stock acquisitionrightsMinority
interests

Total net
assets

¥ —
—
—

¥ 586
—
—

¥ —
—
—

¥5,755——¥202,376
13,567
200

—

—

—

—

—

374

(128)

—

—

—

—

—

(128)

—
—
—
—
(51)
242
—
(5,413)——

189(1,920)
(962)
(80)
(51)
242
—
170,961
10,005
91

—
—
—
—
—
—
(4,156)32,348
—
—

—
—
—
—
—
—
0
0
—
—

—
—
—
—
—
—
1,186
1,772
—
—

—
—
—
—
—
—
123
123
—
—

—
—
—
—
—
—
709
6,465
—
—

189
(1,920)
(962)
(80)
(51)
242
(2,136)211,672
10,005
91

219

—

219

—

—

—

—

—

219

—

(7)

—

(7)

—

—

—

—

—

(7)

—
—
—
—
—
—
¥10,01745(1,348)————¥165,664

—
—
—
(32)
103
—
¥(5,342)45(1,348)
—
(32)
103
—
¥180,039—————(13,735)¥ 18,613

—
—
—
—
—
(20)
¥(20)

—
—
—
—
—
149
¥ 1,922

—
—
—
—
—
59
¥183

—
—
—
—
—
1,174
¥7,63945(1,348)—(32)
103(12,371)¥208,377

Treasurystock

Thousands of U.S. dollars (Note 1)
Total
Net unrealized Unrealized gain
shareholders’ holding gain on
or loss onequitysecurities
deferred hedge

Translation
adjustments

Stock acquisitionrights0——$17,686——$1,228——

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

Commonstock

Balance at March 31, 2007 .........................................
Net income for the year ..................................................
Gain on sales of treasury stock........................................
Increase in retained earnings resulting from
inclusion of consolidated subsidiaries...........................
Decrease in retained earnings resulting from
inclusion of consolidated subsidiaries...........................
Increase in retained earnings resulting from inclusionof companies accounted for by the equity method........
Cash dividends ...............................................................
Bonuses for officers ........................................................
Acquisition of treasury stock ...........................................
Disposition of treasury stock ...........................................
Other .............................................................................
Balance at March 31, 2008 ...........................................

Capital surplus$96,806——

Retainedearnings$99,072 $1,564,517—
99,860908—$(54,027) $1,706,368—
99,860—908$ 322,867——$

Minority
interests

Total net
assets$64,527 $2,112,705—
99,860
—
908

—

—

2,186

—

2,186

—

—

—

—

—

2,185

—

—

(70)

—

(70)

—

—

—

—

—

(69)

—
449
—
(13,454)
—
—
(319)
(319)
1,028
1,028
—
—
$(53,319) $1,796,976

—
—
—
—
—
(137,090)$ 185,777

—
—
—
—
—
(200)
$(200)

—
—
—
—
—
1,487
$19,184

—
—
—
—
—
589
$1,827——————$96,806—449—(13,454)
—
—
—
—
—
—
—
—
$99,980 $1,653,498—
449—(13,454)
—
—
—
(319)
—
1,028
11,717(123,475)$76,245 $2,079,818

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

NAGASE & CO., LTD. ANNUAL REPORT 2008

53

CONSOLIDATED STATEMENTS OF CASH FLOWS
Nagase & Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2008 and 2007

Thousands of
U.S. dollars (Note 1)

Millions of yen

2008

2007

2008

¥ 20,264¥ 23,095$ 202,256

5,131
229
(168)
(1,538)1,060
344
1(2,324)
61

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

51,213
2,286(1,677)(15,351)
10,5803,433
10(23,196)609(13,106)(81)
259(5,871)
572
(572)
4,260
1,887
(1,058)(7,677)(2,586)(21,618)(3,464)(2,322)
21,720—(4,272)
17,3401,738(863)(7,359)10,855(130,811)
(808)
2,585
(58,599)
5,709(5,709)42,51918,834(10,560)(76,624)(25,811)

Investing activities:
Purchases of property and equipment ..................................................................................
Proceeds from sales of property and equipment ...................................................................
Purchases of investments in securities ..................................................................................
Proceeds from sales of investments in securities ...................................................................
Purchases of investments in capitals ....................................................................................
Increase in short-term loans receivable, net..........................................................................
Purchases of intangible fixed assets .....................................................................................
Other, net ...........................................................................................................................
Net cash used in investing activities .................................................................................

(7,311)44(2,150)
4,466
(401)
(15)
(1,622)(19)(7,009)(3,016)180(1,373)
399
(59)
(100)
(907)
(326)
(5,203)(72,971)439(21,459)
44,575(4,002)(150)(16,189)(190)(69,957)

Financing activities:
Increase (decrease) in short-term loans, net .........................................................................
Decrease in commercial paper .............................................................................................
Proceeds from long-term debt .............................................................................................
Cash dividends paid ............................................................................................................
Other, net ...........................................................................................................................
Net cash provided by (used in) financing activities ................................................................

6,260
—
5,933
(1,551)
96
10,738(909)(5,000)258(3,161)391(8,420)62,481—
59,217(15,481)958
107,176(28)
1,114
21,919962(1,806)22,936(279)
11,119218,774452¥ 23,486

789¥ 21,919

4,511$ 234,415

Operating activities:
Income before income taxes and minority interests ...........................................................
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization .........................................................................................
Impairment loss on fixed assets........................................................................................
(Reversal of) provision for retirement benefits, net of payments.........................................
Interest and dividend income ...........................................................................................
Interest expense ..............................................................................................................
Exchange gain, net ..........................................................................................................
Loss (gain) on sales of property and equipment ................................................................
Gain on sales of investments in securities.........................................................................
Loss on devaluation of investments in securities ...............................................................
Changes in operating assets and liabilities
Notes and accounts receivable .........................................................................................
Prepaid pension expense..............................................................................................
Inventories.......................................................................................................................
Notes and accounts payable ............................................................................................
Increase in provision for voluntary recall of goods.............................................................
Other, net ...........................................................................................................................
Subtotal ..........................................................................................................................
Interest and dividends received ........................................................................................
Interest paid ....................................................................................................................
Income taxes paid............................................................................................................
Net cash (used in) provided by operating activities ...............................................................

Effect of exchange rate changes on cash and cash equivalents .............................................
Net increase (decrease) in cash and cash equivalents ...........................................................
Cash and cash equivalents at beginning of the year .............................................................
Increase in cash and cash equivalents arising from
inclusion of consolidated subsidiaries ...............................................................................
Cash and cash equivalents at end of the year.......................................................................
See notes to consolidated financial statements.

54 NAGASE & CO., LTD. ANNUAL REPORT 2008

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nagase & Co., Ltd. and Consolidated Subsidiaries
March 31, 2008

1. BASIS OF PREPARATION
Nagase & Co., Ltd. (the “Company”) and its domestic consolidated subsidiaries maintain their books of account and their records in accordancewith accounting principles generally accepted in Japan. The overseas consolidated subsidiaries maintain their books of account in conformity with thoseof their countries of domicile.
The accompanying consolidated financial statements have been prepared for domestic reporting purposes and have been compiled from the consolidated financial statements prepared by the Company as required under the Financial Instruments and Exchange Law of Japan, which is different
in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.
In preparing the accompanying consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a format which is more familiar to readers outside Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements have been translated from yen amounts solely for the convenience ofthe reader, as a matter of arithmetic computation only, at ¥100.19 = U.S.$1.00, the rate of exchange prevailing on March 31, 2008. This translation should not be construed as a representation that the yen amounts have been, could have been, or could in the future be, converted into U.S.
dollars at the above or any other rate.
As permitted by the Financial Instruments and Exchange Law of Japan, amounts of less than one million yen for the years ended March 31, 2008
and 2007 have been omitted. Consequently, the totals shown in the accompanying consolidated financial statements for the years ended March 31,
2008 and 2007 (both in yen and in U.S. dollars) do not necessarily agree with the sum of the individual amounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and significant companies that it controls directly or indirectly. Significant companies over which the Company exercises significant influence in terms of their operating and financial policies have been includedin the consolidated financial statements on an equity basis. All significant intercompany balances and transactions have been eliminated in consolidation.
The overseas consolidated subsidiaries have a December 31 year-end closing date and one domestic consolidated subsidiary’s year end is at theend of February, which differs from the year-end date of the Company. As a result, adjustments have been made for any significant intercompany transactions that took place during the periods between the year ends of these subsidiaries and the year end of the Company.
Unrealized intercompany gains among the Company and the consolidated subsidiaries have been entirely eliminated and the portion attributable tominority interests has been charged to minority interests.

(b) Foreign Currency Translation
All monetary assets and liabilities denominated in foreign currencies are translated into yen at the rates of exchange in effect at the balance
sheet date, except that receivables and payables hedged by qualified forward foreign exchange contracts are translated at the corresponding contract rates. All other assets and liabilities denominated in foreign currencies are translated at their historical rates. Gain or loss on each translation iscredited or charged to income.
Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into yen at the rates in effect at
the respective transaction dates. Foreign exchange gain or loss is credited or charged to income in the period in which such gain or loss is recognized for financial reporting purposes.
The balance sheet accounts of the overseas consolidated subsidiaries are translated into yen at the rates of exchange in effect at the balance
sheet date, except that the components of net assets excluding minority interests are translated at their historical exchange rates. Revenue andexpense accounts are translated at the average rates of exchange in effect during the year. Adjustments resulting from translating financial statements whose accounts are denominated in foreign currencies are not included in the determination of net income but are reported as “Translation
adjustments” in a component of net assets in the accompanying consolidated financial statements.

(c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in banks and other highly liquid investments with maturities of three months or less whenpurchased.

(d) Inventories
Inventories are stated at the lower of cost or market, cost being determined by the weighted-average method.

(e) Investments in Securities
Securities are classified into three categories: trading securities, held-to-maturity debt securities or other securities. Trading securities, consistingof debt and marketable equity securities, are stated at fair value. Gain and loss, both realized and unrealized, are charged to income. Held-to-maturity debt securities are stated at their amortized cost. Marketable securities classified as other securities are carried at fair value with any changes in
unrealized holding gain or loss, net of the applicable income taxes, and reported as a separate component of net assets. Non-marketable securities
classified as other securities are carried at cost determined by the moving-average method.

NAGASE & CO., LTD. ANNUAL REPORT 200855

All securities held by the Company and its consolidated subsidiaries are classified as “other securities” and have been accounted for as outlined
above.

(f) Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment is computed by the declining-balance method over the estimated useful lives of the respective
assets as prescribed in the Corporation Tax Law, except that the straight-line method is applied to buildings (other than structures attached to thebuildings) acquired subsequent to April 1, 1998.
Moreover, property, plant and equipment owned by certain consolidated subsidiaries is depreciated by the straight-line method.
In accordance with an amendment to the Corporation Tax Law, property, plant and equipment acquired before April 1, 2007 that have reachedthe 5 percent residual value under the former method are depreciated on a straight-line basis over five years starting from when the former depreciable limit was reached. As a result, ordinary income and income before income taxes and minority interests both decreased by ¥176 million($1,757 thousand) from the amounts that would have been recorded using the previous method.
Note 16 provides additional information concerning the effect of this change on segment results.

(g) Computer Software
Costs incurred for computer software obtained for internal use are capitalized and amortized on a straight-line basis over an estimated useful lifeof 5 years.

(h) Goodwill
Goodwill and negative goodwill are amortized over mainly five years on a straight-line basis. When immaterial, goodwill and negative goodwill
are charged to income as incurred.

(i) Leases
The Company and its consolidated subsidiaries lease certain property and equipment under noncancelable lease agreements referred to as financeleases. Finance leases other than those which transfer the ownership of the leased property to the lessees are accounted for as operating leases.

(j) Allowance for Doubtful Receivables
The Company and its subsidiaries provide allowances for doubtful receivables based on their historical experience of bad debts on ordinary
receivables plus an additional estimate of probable specific doubtful accounts from customers experiencing financial difficulties.

(k) Income Taxes
Income taxes are calculated based on taxable income and charged to income on an accrual basis. Deferred income tax assets and liabilities 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. Computations of deferred tax assets and liabilities are based on the enacted tax laws.

(l) Accrued Bonuses for Employees
Accrued bonuses for employees are provided based on estimated bonuses to be paid to employees which are charged to income in the current year.
Previously, employee bonuses were treated as a fixed obligation. Effective the year ended March 31, 2007, they are recorded as accrued bonuses for
employees because they no longer meet the conditions of a fixed obligation with the introduction of performance-linked bonuses.

(m) Accrued Bonuses for Directors
Accrued bonuses for directors are provided based on estimated bonuses to be paid to directors and corporate auditors and are charged to incomein the current year.

(n) Retirement Benefits
The Company has defined benefit pension plans and retirement benefit plans. The Company also has defined contribution pension plans. The
domestic consolidated subsidiaries have defined benefit pension plans and retirement benefit plans. Certain overseas consolidated subsidiaries also
have defined benefit pension plans.
The Company has established an employees’ retirement benefit trust for the payment of retirement benefits.
Actuarial gain or loss is principally charged to income in the year following the year in which such gain or loss is recognized for financial reporting
purposes. Prior service cost is charged to income in the year in which such cost is recognized for financial reporting purposes.
Up to the date of the annual general meeting of the shareholders held in June 2006, the Company and one consolidated subsidiary had retirement
benefit plans for payments to directors and corporate auditors (”officers”) which were stated at 100 percent of the estimated amount calculated in accordance with the internal rules. However, the Company and the consolidated subsidiary abolished the retirement plans for these officers at the annual general meeting referred to above. As a result, the outstanding balance of ¥690 million accrued in the retirement benefit plans for officers up to the date of
the annual general meeting has been reclassified as “Long-term liabilities - other liabilities” in the consolidated balance sheet at March 31, 2007.

(o) Provision for Voluntary Recall of Goods
The Company has made provision for voluntary recall expenses for certain goods at an estimated amount based on the progress of the recall
and associated expenses including storage, shipping and communication cost incurred during the period from initial customer notification up to
March 31, 2008.

56 NAGASE & CO., LTD. ANNUAL REPORT 2008

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In July 2007, the Company began a voluntary recall of portable DVD players and other similar goods with LCD screens. The reason for the recall
was that, in rare cases, the frames of the LCDs of the portable DVD players became overheated, resulting in product deformation, emissions ofsmoke and an increase in the risk of fire.
As a result of a careful analysis of the status of the recall, actual expenses incurred during the period from initial customer notification up to
March 31, 2008, and projected costs in consideration of issues including the life cycle of the DVD players, “Loss on voluntary recall of goods”
included in “Other expenses” amounted to ¥6,480 million ($64,677 thousand) for the fiscal year ended March 31, 2008.
For the supplemental information, in preparing its semiannual consolidated financial statements for the six months ended September 30, 2007,
the Company conservatively charged the maximum estimated cost of the recall to income as a non-recurring item entitled “Voluntary recall expenseof goods” amounting to ¥14,305 million ($142,779 thousand) included in “Other expenses” in the semiannual consolidated financial statements
for the six months then ended.

(p) Derivatives and Hedging Activities
The Company and its consolidated subsidiaries utilize derivative financial instruments principally in order to manage the risk arising from adverse
fluctuation in foreign currency exchange rates and to mitigate the risk of fluctuation in interest rates on borrowings. The Company has established acontrol environment that includes policies and procedures for risk assessment in accordance with the Company’s rules for foreign exchange transactions and interest-rate swap transactions. Under these rules, the Company conducts transactions within a certain range and places limits on theapplicable assets and liabilities based on the actual demand. In addition, the Company also assesses the effectiveness of the hedging and verifies
the approval, reporting and monitoring of all transactions involving derivatives. The Company and its consolidated subsidiaries do not hold or issue
derivative financial instruments for speculative trading purposes.
If an interest-rate swap meets certain criteria, the net amount to be paid or received under the contract is added to or deducted from the intereston the underlying hedged item.
The Company and its consolidated subsidiaries are exposed to certain market risk arising from their forward foreign exchange contracts. They arealso exposed to the risk of credit loss in the event of non-performance by the counterparties to the currency and interest-rate contracts; however,they do not anticipate non-performance by any of these counterparties, all of whom are financial institutions with high credit ratings.
Derivatives are carried at fair value with any changes in unrealized gain or loss being charged or credited to operations, except for those whichmeet the criteria for deferral hedge accounting under which unrealized gain or loss is deferred as an asset or a liability.

(q) Research and Development Expenses
Research and development expenses are charged to income when incurred.

(r) Appropriations of Retained Earnings
Dividends and other appropriations of retained earnings are approved by the shareholders at a meeting held subsequent to the end of the fiscal
year to which the appropriations are applicable. The accompanying consolidated financial statements do not, however, reflect the applicable appropriations of retained earnings as approved by the shareholders subsequent to the fiscal year end. (Refer to Note 17.)

3. CHANGES IN ACCOUNTING POLICY(a) Depreciation
Effective the year ended March 31, 2008, pursuant to an amendment to the Corporation Tax Law, the Company and its consolidated domestic
subsidiaries have changed their method of depreciation for property, plant and equipment acquired after April 1, 2007. As a result of this change,
operating income, ordinary income, and income before income taxes decreased by ¥188 million ($1,876 thousand), respectively, from the amounts
that would have been recorded using the previous method.
Note 16 provides additional information concerning the effect of this change on segment results.
(b) Presentation of Net Assets in the Balance Sheet
Effective the year ended March 31, 2007, the Company adopted “Accounting Standard for Presentation of Net Assets in the Balance Sheet”(Accounting Standards Board of Japan (ASBJ) Statement No. 5 issued on December 9, 2005) and “Implementation Guidance on AccountingStandard for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8 issued on December 9, 2005). The amount corresponding toconventional shareholders’ equity is ¥205,083 million.
(c) Share-Based Compensation
Effective the year ended March 31, 2007, the Company adopted “Accounting Standard for Share-Based Payment” (ASBJ Statement No. 8 issued on
December 27, 2005) and “Implementation Guidance on Accounting Standard for Share-Based Payment” (ASBJ Guidance No. 11, final revision on May
31, 2006). As a result of the adoption of this accounting standard, operating income and income before income taxes and minority interests decreasedby ¥123 million for the year ended March 31, 2007 from the amounts which would have been recorded under the method applied in the previous year.
The effect on segment information is presented in Note 16 to the consolidated financial statements, Segment Information.
(d) Accrued Bonuses for Directors
Effective the year ended March 31, 2007, the Company and consolidated subsidiaries have adopted “Accounting Standard for Directors’
Bonuses” (ASBJ Statement No. 4 issued on November 29, 2005). Under this standard, bonuses for directors are expensed as incurred and recorded

NAGASE & CO., LTD. ANNUAL REPORT 200857

in selling, general and administrative expenses, which would have been recorded as a deduction from retained earnings in the previous year. As aresult of the adoption of this accounting standard, operating income and income before income taxes and minority interests decreased by ¥197
million for the year ended March 31, 2007 from the amounts which would have been recorded under the method applied in the previous year. The
effect on segment information is presented in Note 16 to the consolidated financial statements, Segment Information.

4. INVESTMENTS IN SECURITIES(a) Marketable securities classified as other securities at March 31, 2008 and 2007 are summarized as follows:
Millions of yen

2008
Cost

2007

Gross
unrealized
gain

Gross
unrealized
lossBook value(estimatedfair value)

Cost¥29,481¥(148)—¥(148)¥49,061
14¥49,076¥19,966
14¥19,981Grossunrealized
gain

Gross
unrealized
lossBook value(estimatedfair value)¥54,728

¥(40)
(0)
¥(40)

¥74,65414¥74,669

Market value determinable:

Stock ................................ ¥19,728
Government bonds...........
14
Total .................................... ¥19,743¥29,481¥54,728

Thousands of U.S. dollars

2008
Gross
unrealized
gain

Cost

Gross
unrealized
loss

Market value determinable:
Stock .................................................................................................... $196,906 $294,251
Government bonds...............................................................................
140
Total ........................................................................................................ $197,056 $294,251

Book value(estimatedfair value)$(1,477) $489,680—
140$(1,477) $489,830(b) Securities for which market value was not determinable were classified as other securities at March 31, 2008 and 2007 and are summarized
as follows:
Thousands of
U.S. dollars

Millions of yen

Market value not determinable:
Equity securities ....................................................................................
Bonds and debentures ..........................................................................
Total ........................................................................................................

2008

2007

2008

Carrying value

Carrying value

Carrying value¥2,0030¥2,003¥2,6630¥2,663$19,992
0$19,992(c) Proceeds from sales of, and gross realized gain and loss on, other securities for the years ended March 31, 2008 and 2007 are summarized
as follows:
Thousands of
U.S. dollars

Millions of yen

Proceeds from sales..................................................................................
Gain on sales ...........................................................................................
Loss on sales ............................................................................................

2008

2007

2008

¥4,472
2,635
310

¥330
263
—

$44,635
26,3003,094(d) The redemption schedule at March 31, 2008 and 2007 for securities which have maturity dates classified as other securities is as follows:
Millions of yen

2008

Other securities which
Over 1 year
Over 5 years
have maturity dates
Within 1 year within 5 years within 10 years Over 10 years
Government bonds ..............
¥0
¥4
¥10
¥—
Bonds and debentures .........
————
Total........................................
¥0
¥4
¥10
¥—

2007
Within 1 year

¥0
—
¥0

Over 1 year
Over 5 years
within 5 years within 10 years Over 10 years

¥4
—
¥4

¥10
—
¥10

¥—
—
¥—

Thousands of U.S dollars

2008

Other securities which have maturity dates
Within 1 year
Government bonds...............................................................................
$0
Bonds and debentures ..........................................................................
—
Total ........................................................................................................
$058 NAGASE & CO., LTD. ANNUAL REPORT 2008

Over 1 year
Over 5 years
within 5 years within 10 years Over 10 years

$40
—
$40

$100
—
$100

$—
—
$—

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. SHORT-TERM LOANS AND LONG-TERM DEBT
Short-term loans at March 31, 2008 and 2007 principally represented notes and loans in the form of deeds at weighted-average annual interest rates of 4.58% and 4.19% per annum, respectively.
Long-term debt at March 31, 2008 and 2007 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Unsecured loans from banks and insurance companies, payable in yen and euro,
due through 2018, at rates from 0.62% to 7.50%...................................
Less current portion ..............................................................................

2008

2007

2008

¥12,188(3,195)¥ 8,993¥6,543(259)¥6,284$121,649(31,889)$ 89,759

The aggregate annual maturities of long-term debt subsequent to March 31, 2008 are summarized as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2009..................................................................................................................................
2010..................................................................................................................................
2011..................................................................................................................................
2012..................................................................................................................................
2013 and after...................................................................................................................

¥ 3,195
2,783
194
87
5,928
¥12,188$ 31,889
27,777
1,936
868
59,168$121,649

6. PLEDGED ASSETSAt March 31, 2008, assets pledged as collateral to guarantee all transactions with certain customers were as follows:

Land ..........................................................................................................................
Investments in securities .............................................................................................
Total .......................................................................................................................

Millions of yen

Thousands of
U.S. dollars

¥ 671
2,554
¥3,226$ 6,697
25,492$32,199

7. RETIREMENT BENEFITSThe Company and its domestic consolidated subsidiaries have defined benefit plans, i.e., defined benefit pension plans and lump-sum payment
plans. Certain overseas consolidated subsidiaries also have defined benefit pension plans.
The following table sets forth the funded and accrued status of the plans and the amounts recognized in the consolidated balance sheets at
March 31, 2008 and 2007 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligation...................................................................
Plan assets at fair value ...........................................................................
Unfunded retirement benefit obligation ...................................................
Unrecognized actuarial loss ......................................................................
Net retirement benefit obligation .............................................................
Prepaid pension expense ..........................................................................
Accrued retirement benefits recognized in the consolidated balance sheets ...........

2008

2007

2008

¥(22,058)
16,741(5,317)
2,170(3,146)(3,545)¥ (6,691)¥(21,990)
18,552(3,437)50(3,387)(3,464)¥ (6,851)$(220,162)
167,093(53,069)
21,659(31,400)(35,383)$ (66,783)

The components of retirement benefit expenses of the Company and the consolidated subsidiaries for the years ended March 31, 2008 and2007 are outlined as follows:
Thousands of
U.S. dollars

Millions of yen

2008

Service cost ..............................................................................................
Interest cost ............................................................................................
Expected return on plan assets .................................................................
Amortization of actuarial gain ..................................................................
Contributions to defined contribution pension plans ................................
Retirement benefit expenses ....................................................................

¥1,069
475
(667)
105
46
¥1,030

2007

2008

929
473
(644)
(1,782)46¥ (977)$10,670
4,741(6,657)
1,048
459$10,280¥

NAGASE & CO., LTD. ANNUAL REPORT 2008

59

The assumptions used in accounting for the defined benefit pension plans for the years ended March 31, 2008 and 2007 were as follows:
2008

2007

Discount rate .................................................................................................................. Mainly 2.5%
Expected rates of return on plan assets ........................................................................... Mainly 4.0%

2.5%
Mainly 4.0%

8. INCOME TAXES
Income taxes applicable to the Company and its domestic consolidated subsidiaries (companies) consist of corporation, inhabitants’ and enterprises taxes, which, in the aggregate, resulted in a statutory tax rate of approximately 40.7% for the years ended March 31, 2008 and 2007.
The effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2008 and 2007 differ from the statutory tax rate for the following reasons:Statutory tax rate .....................................................................................................................
Effect of:
Expenses not deductible for income tax purposes .................................................................
Dividends and other income deductible for income tax purposes ..........................................
Net adjustment resulting from elimination of dividend income upon consolidation ...............
Different tax rates applied to income of overseas subsidiaries ...............................................
Tax credit .............................................................................................................................
Valuation allowance .............................................................................................................
Other, net ............................................................................................................................
Effective tax rates ....................................................................................................................

2008

2007

40.7%

40.7%

3.3
(4.0)
6.5
(6.9)
(3.5)
(6.6)
15.4
44.9%

3.2
(3.0)
5.1
(5.0)
(2.6)
(0.6)
—
37.8%

Deferred income taxes reflect the net tax effect of the temporary differences between the carrying amounts of the deferred assets and liabilities
for financial reporting purposes and the corresponding amounts for income tax purposes. The significant components of the Companies’ deferred
tax assets and liabilities at March 31, 2008 and 2007 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2008

Deferred tax assets:
Unrealized gain on inventories ..............................................................
Allowance for doubtful receivables ......................................................
Investments in securities ......................................................................
Accrued bonuses for employees............................................................
Accrued retirement benefits for employees ...........................................
Loss on voluntary recall of goods ..........................................................
Other ..................................................................................................
Gross deferred tax assets...................................................................
Valuation allowance ..........................................................................
Total deferred tax assets....................................................................
Deferred tax liabilities:
Revaluation of land...............................................................................
Deferred capital gain on property ........................................................
Special reserve for depreciation.............................................................
Net unrealized holding gain on securities ..............................................
Other ..................................................................................................
Total deferred tax liabilities................................................................
Net deferred tax liabilities ..................................................................

2007

2008

¥

427
687
3,233
1,159
1,529
1,801
2,218
11,057(3,878)¥ 7,178

¥

413
482
2,575
1,252
1,595
—
2,418
8,737
(766)
¥ 7,971

4,262
6,857
32,26911,56815,261
17,976
22,138110,360(38,706)$ 71,644

¥

¥

$

(384)
(1,255)—(10,529)(361)(12,531)¥ (5,352)(371)(1,296)(12)(22,247)(21)(23,949)¥(15,977)$(3,833)(12,526)—(105,090)(3,603)(125,072)$ (53,419)

9. SHAREHOLDERS’ EQUITY
The new Corporation Law of Japan (the “Law”) provides that an amount equal to 10% of the amount to be disbursed as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal
reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions can bemade at any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met.
The Company’s legal reserve included in retained earnings at March 31, 2008 amounted to ¥2,424 million ($24,194 thousand).
Under the Law, upon the issuance and sale of new shares of common stock, the entire amount of the proceeds is required to be accounted foras common stock, although a company may, by resolution of the Board of Directors, account for an amount not exceeding 50% of the proceeds ofthe sale of new shares as additional paid-in capital.

60 NAGASE & CO., LTD. ANNUAL REPORT 2008

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. TREASURY STOCK
Movements in treasury stock during the year ended March 31, 2008 are summarized as follows:
Number of shares

2008
March 31, 2007

Increase

Decrease

March 31, 2008

Treasury stock ............................................................................. 10,012,431

22,429189,926

9,844,934

2007
March 31, 2006

Increase

Decrease

March 31, 2008

Treasury stock ............................................................................. 10,426,874

35,112449,555

10,012,431

11. SHARE-BASED COMPENSATIONAt March 31, 2008, the Company had five stock option plans: the 2003, 2004, 2005, 2006 and 2007 stock option plans.
The 2003 stock option plan (the 2003 plan) was approved by shareholders of the Company on June 27, 2003. The 2003 plan provided for granting options to purchase 764,000 shares of common stock to directors, corporate auditors, executive officers, certain key employees of the Company
and directors of certain subsidiaries. The exercise price was ¥657 ($6.56) per share at March 31, 2008. This exercise price is subject to adjustment incertain cases which include stock splits. The options became exercisable on August 1, 2005 and are scheduled to expire on July 31, 2008.
The 2004 stock option plan (the 2004 plan) was approved by shareholders of the Company on June 29, 2004. The 2004 plan provided for granting options to purchase 759,000 shares of common stock to directors, corporate auditors, executive officers, certain key employees of the Company
and directors of certain subsidiaries. The exercise price was ¥1,023 ($10.21) per share at March 31, 2008. This exercise price is subject to adjustment
in certain cases which include stock splits. The options became exercisable on August 1, 2006 and are scheduled to expire on July 31, 2009.
The 2005 stock option plan (the 2005 plan) was approved by shareholders of the Company on June 28, 2005. The 2005 plan provided for granting options to purchase 762,000 shares of common stock to directors, corporate auditors, executive officers, certain key employees of the Company
and directors of certain subsidiaries. The exercise price was ¥1,169 ($11.67) per share at March 31, 2008. This exercise price is subject to adjustment
in certain cases which include stock splits. The options become exercisable on August 1, 2007 and are scheduled to expire on July 31, 2010.
The 2006 stock option plan (the 2006 plan) was approved by shareholders of the Company on June 28, 2006. The 2006 plan provided for granting options to purchase 781,000 shares of common stock to directors, executive officers, technology officers, certain key employees of the Company
and directors of certain subsidiaries. The exercise price was ¥1,510 ($15.07) per share at March 31, 2008. This exercise price is subject to adjustment
in certain cases which include stock splits. The options become exercisable on August 1, 2008 and are scheduled to expire on July 31, 2011.
The 2007 stock option plan (the 2007 plan) was approved by shareholders of the Company on June 27, 2007. The 2007 plan provided for granting options to purchase 419,000 shares of common stock to directors, executive officers, technology officers, certain key employees of the Company
and directors of certain subsidiaries. The exercise price was ¥1,647 ($16.44) per share at March 31, 2008. This exercise price is subject to adjustment
in certain cases which include stock splits. The options become exercisable on August 1, 2009 and are scheduled to expire on July 31, 2012.
Information regarding the Company’s stock option plans is as follows:
The 2003 plan

The 2004 plan

The 2005 plan

The 2006 plan

The 2007 plan

Number of shares:
Outstanding at April 1, 2006........................
Granted ...............................................................
Expired.........................................................
Exercised ......................................................
Outstanding at April 1, 2007........................
Granted ...............................................................
Expired.........................................................
Exercised ......................................................
Outstanding at March 31, 2008 ...................

138,000—
2,000
43,00093,000——21,00072,000759,000—
2,000
402,000
355,000——
117,000
238,000

762,000———
762,000—
3,000
46,000713,000—
781,000——
781,000———
781,000—————
419,000——
419,000

Weighted average stock price when exercised........
Fair value of options as of the grant date ..............

¥1,435—¥1,516
—

—
¥158

—
¥143

Weighted average stock price when exercised........
Fair value of options as of the grant date ..............

$14.32—$15.13
—

—
$1.58

—
¥1.43

(In yen)¥1,393—(In U.S. dollars)$13.90—12. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses included in selling, general and administrative expenses and manufacturing costs for the years ended
March 31, 2008 and 2007 totaled ¥2,927 million ($29,214 thousand) and ¥2,571 million, respectively.

NAGASE & CO., LTD. ANNUAL REPORT 200861

13. LEASESThe following pro forma amounts represent the acquisition costs, accumulated depreciation and net book value of the leased property at March
31, 2008 and 2007, which would have been reflected in the balance sheets if the finance leases other than those that transfer the ownership of theleased property of the Company and the consolidated subsidiaries (which are currently accounted for as operating leases) were capitalized:
Millions of yen

2008

Machinery, equipment
and vehicles.............
Furniture and fixtures ..
Software.....................
Total ...........................

2007

Acquisition
costs

Accumulated
depreciation

Accumulated
impairment loss on
fixed assets

Net bookvalue

Acquisition
costs

Accumulated
depreciation

Accumulated
impairment loss on
fixed assets

Net book
value

¥138
174
48
¥361

¥ 59
107
10
¥177

¥43
—
—
¥43

¥ 36
66
38
¥141

¥216
300
—
¥517

¥114
200
—
¥314

¥51
—
—
¥51

¥ 51
99
—
¥150

Thousands of U.S. dollars

2008
Acquisition
costs

Accumulated
depreciation

Accumulated
impairment loss on
fixed assets

Net book
value

Machinery, equipment
and vehicles............. $1,377
Furniture and fixtures.. 1,737
Software.....................
479
Total ........................... $3,603

$ 589
1,068
100
$1,767

$429
—
—
$429

$ 359
659
379
$1,407

The related lease payments, depreciation and interest expenses related to finance leases accounted for as operating lease for the years ended
March 31, 2008 and 2007 were as follows:
Thousands of
U.S. dollars

Millions of yen

Lease payments........................................................................................
Reversal of impairment loss ......................................................................
Depreciation expense ...............................................................................
Interest expense ......................................................................................
Loss on impairment of fixed assets ...........................................................

2008

2007

2008

¥94
8
80
9
—

¥128
—
114
10
51

$938
80
798
90
—

Depreciation is calculated by the straight-line method over the respective lease terms.
Future minimum lease payments (including the interest portion thereon) subsequent to March 31, 2008 under finance leases other than thosewhich transfer the ownership of the leased property to the Company and the consolidated subsidiaries are summarized as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

¥ 60
131
¥192

$ 599
1,308
$1,9162009 ..........................................................................................................................
2010 and after ...........................................................................................................
Total .......................................................................................................................

14. CONTINGENT LIABILITIESAt March 31, 2008, the Company and its consolidated subsidiaries were contingently liable as guarantors of loans of unconsolidated subsidiaries
and other in the aggregate amount of ¥130 million ($1,298 thousand) and as guarantors of housing loans of employees in the aggregate amount of¥126 million ($1,258 thousand).
In addition, at March 31, 2008, the Company and its consolidated subsidiaries had contingent liabilities arising from notes discounted bybanks and notes endorsed for a total amount of ¥473 million ($4,721 thousand).

15. AMOUNTS PER SHARE
Yen

2008

Net income:Basic..................................................................................................... ¥ 77.86
Diluted .................................................................................................
77.79
Net assets ................................................................................................ 1,559.97
Cash dividends applicable to the year ......................................................
17.00

62 NAGASE & CO., LTD. ANNUAL REPORT 2008

U.S. dollars

2007

2008

¥ 105.84
105.51
1,597.27
18.00$ 0.78
0.78
15.57
0.17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basic net income per share has been computed based on the net income available to the shareholders of common stock and the weightedaverage number of shares of common stock outstanding during the year. Diluted net income per share has been computed based on the net
income available to the shareholders of common stock and the weighted-average number of shares of common stock outstanding during eachyear after giving effect to the dilutive potential of the shares of common stock to be issued upon the exercise of the stock options. The amounts
per share of net assets have been computed based on the net assets available for distribution to shareholders of common stock and the numberof shares of common stock outstanding at the year end.
Cash dividends per share represent the cash dividends proposed by the Board of Directors as applicable to the respective years together with
the interim cash dividends paid.
The financial data for the computation of basic net income per share and diluted net income per share based on the above standard for theyears ended March 31, 2008 and 2007 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Net income ..............................................................................................
Adjusted net income available to shareholders of common stock ...............

2008

2007

2008

¥10,005¥10,005¥13,567¥13,567$99,860$99,860

Number of shares

Weighted-average number of shares........................................................ 128,515,225 128,177,941
Effect of dilutive securities........................................................................
107,611
403,905

16. SEGMENT INFORMATIONThe Company presents information for five segments: Chemicals, which includes coloring materials, information recording products, chemicals
for paper manufacturing, petrochemical products, compounding materials, pigments, coatings, additives for paints and inks, and materials for cosmetics and toiletries; Plastics, which includes thermoplastics, thermoset resins, synthetic rubber, inorganic materials, auxiliaries, plastic products, andplastic related equipment, devices and dies; Electronics, which includes liquid crystal display and semiconductor processing materials and equipment,
large-scale-integration assembly materials and equipment, precision cleaning agents for electronics, communications devices, low-temperature vacuum equipment, optical inspection equipment, and functional epoxy resins; Life Sciences, which includes materials for pharmaceuticals and agrichemicals, research products, diagnostic agents, fermentation products, biotechnology-related products, radiation-measuring services, cosmetics, healthfoods and beauty foods; and Others, which includes logistics services, information processing services and professional services.
The business and geographical segments of the Company and the consolidated subsidiaries for the years ended March 31, 2008 and 2007 areoutlined as follows:
Millions of yen

Year ended March 31, 2008
Chemicals

Plastics

Electronics

Sales to customers .............. ¥267,836 ¥274,660 ¥163,833
Intersegment sales ..............
45
195
159
Net sales.......................... 267,881 274,856 163,992
Operating expenses............. 259,943 268,718 156,960
Operating income (loss) ... ¥ 7,938 ¥ 6,138 ¥ 7,031
Total assets ......................... ¥133,053 ¥126,049 ¥ 88,262
Depreciation and amortization ...
1,268
1,041
1,946
Capital expenditures ...........
2,297
1,036
3,684

Life
Sciences

Others¥56,489
22
56,512
54,842¥ 1,669¥32,172665
1,670¥1,934 ¥764,755
4,957
5,380
6,892
770,135
6,934
747,398¥ (41) ¥ 22,736¥5,324 ¥384,862
209
5,131
1,196
9,885

Total

Eliminations
or corporate

Consolidated
sales

¥

— ¥764,755(5,380)—(5,380) 764,755(5,707) 741,691¥ 326 ¥ 23,063¥35,007 ¥419,869
—
5,131
—
9,885

Millions of yen

Year ended March 31, 2007
Chemicals

Plastics

Electronics

Sales to customers .............. ¥247,094 ¥244,681 ¥150,796
Intersegment sales ..............
25
140
186
Net sales.......................... 247,120 244,822 150,983
Operating expenses............. 240,104 238,287 144,821
Operating income (loss) ... ¥ 7,015 ¥ 6,535 ¥ 6,161
Total assets ......................... ¥135,919 ¥118,800 ¥ 84,262
Depreciation and amortization....
902
966
1,460
Capital expenditures ...........
1,552
1,187
1,884

Life
Sciences¥53,556
22
53,57851,575¥ 2,002¥33,413636
769

OthersTotal¥ 5,191 ¥701,321
4,686
5,062
9,878
706,383
10,237685,026¥ (358) ¥ 21,356¥ 7,448 ¥379,843
144
4,110
320
5,713

Eliminations
or corporate

Consolidated
sales

¥

— ¥701,321(5,062)—(5,062) 701,321(5,374) 679,651¥ 312 ¥ 21,669¥43,015 ¥422,859
—
4,110
—
5,713

NAGASE & CO., LTD. ANNUAL REPORT 200863

Thousands of U.S. dollars

Year ended March 31, 2008
Chemicals

Plastics

Electronics

Sales to customers ................... $2,673,281 $2,741,391 $1,635,223
Intersegment sales ...................
449
1,946
1,587
Net sales .............................. 2,673,730 2,743,348 1,636,810
Operating expenses ................. 2,594,500 2,682,084 1,566,623
Operating income (loss) .......... $ 79,229 $ 61,264 $ 70,177
Total assets .............................. $1,328,007 $1,258,100 $ 880,946
Depreciation and amortization....
12,656
10,39019,423
Capital expenditures ................
22,926
10,34036,770Life
Sciences

Others$563,819
220
564,048547,380$ 16,658$321,110
6,637
16,668$19,303 $7,633,047
49,476
53,69868,789 7,686,745
69,209 7,459,806$ (409) $ 226,929$53,139 $3,841,321
2,086
51,213
11,937
98,663

Total

Eliminations
or corporate

Consolidated
sales

$

— $7,633,047(53,698)—(53,698) 7,633,047(56,962) 7,402,845$ 3,254 $ 230,193$349,406 $4,190,728—
51,213—
98,663

As discussed in Note 3(a), effective the year ended March 31, 2008, pursuant to an amendment to the Corporation Tax Law, the Company and its
consolidated domestic subsidiaries have changed their method of depreciation for property, plant and equipment acquired after April 1, 2007. As aresult of the change, operating expenses for the year ended March 31, 2008 increased by ¥36 million ($359 thousand) in the Chemicals segment, by¥53 million ($529 thousand) in the Plastics segment, by ¥62 million ($619 thousand) in the Electronics segment, by ¥27 million ($269 thousand) in theLife Sciences segment, and by ¥8 million ($80 thousand) in the Others segment as compared with the amounts which would have been recorded underthe method applied in the previous year. Operating income or loss in each segment decreased or increased, respectively, by a corresponding amount.
In addition, as discussed in Note 2(f), pursuant to an amendment to the Corporation Tax Law, the Company and its consolidated domestic subsidiaries depreciate the difference between 5% of the acquisition cost of property, plant and equipment acquired on or before March 31, 2007 andthe carrying amount of the subject assets uniformly over a five-year period, starting the year following the fiscal year in which the depreciated value ofthe subject assets reaches 5% of the acquisition price using the pre-amendment depreciation method. As a result of the change, operating expenses
for the year ended March 31, 2008 increased by ¥50 million ($499 thousand) in the Chemicals segment, by ¥40 million ($399 thousand) in the
Plastics segment, by ¥57 million ($569 thousand) in the Electronics segment, by ¥23 million ($230 thousand) in the Life Sciences segment, and by ¥4
million ($40 thousand) in the Others segment as compared with the amounts which would have been recorded under the method applied in the previous year. Operating income or loss in each segment decreased or increased, respectively, by a corresponding amount.
As discussed in Note 3(d), effective the year ended March 31, 2007, the Company adopted “Accounting Standard for Directors’ Bonuses” (ASBJ
Statement No. 4 issued on November 29, 2005). As a result of the adoption of this accounting standard, operating expenses for the year ended
March 31, 2007 increased by ¥44 million in the Chemicals segment, by ¥51 million in the Plastics segment, by ¥57 million in the Electronics segment,by ¥26 million in the Life Sciences segment, and by ¥18 million in the Others segment as compared with the amounts which would have been recorded under the method applied in the previous year.
As discussed in Note 3(c), effective the year ended March 31, 2007, the Company adopted “Accounting Standard for Share-Based Payment”(ASBJ Statement No. 8 issued on December 27, 2005) and “Implementation Guidance on Accounting Standard for Share-Based Payment” (ASBJ
Guidance No. 11, final revision on May 31, 2006). As a result of the adoption of this accounting standard, operating expenses for the year ended
March 31, 2007 increased by ¥39 million in the Chemicals segment, by ¥34 million in the Plastics segment, by ¥31 million in the Electronics segment,by ¥13 million in the Life Sciences segment, and by ¥4 million in the Others segment as compared with the amounts which would have beenrecorded under the method applied in the previous year.
Millions of yen

Year ended March 31, 2008
Northeast
Asia

Southeast
Asia

North
America

Europe &OthersSales to customers .............. ¥497,196 ¥144,282
Intersegment sales ..............
80,51915,261
Net sales.......................... 577,715 159,543
Operating expenses............. 564,198 154,175
Operating income............ ¥ 13,517 ¥ 5,368
Total assets ......................... ¥306,308 ¥ 57,211¥85,464
3,165
88,62985,613¥ 3,016¥30,405¥23,205
1,836
25,042
24,734¥ 307¥ 6,151¥14,605
3,317
17,922
17,094¥ 828¥ 8,118

Japan

Total

Eliminations
or corporate

Consolidated
sales¥764,755 ¥— ¥764,755
104,099 (104,099)—
868,854 (104,099) 764,755
845,815 (104,123) 741,691¥ 23,039 ¥23 ¥ 23,063¥408,195 ¥ 11,674 ¥419,869

Millions of yen

Year ended March 31, 2007
Northeast
Asia

Southeast
Asia

North
America

Europe &Others

Total

Sales to customers .............. ¥480,645 ¥115,139
Intersegment sales ..............
70,524
10,818Net sales.......................... 551,169 125,957
Operating expenses............. 536,727 121,996
Operating income............ ¥ 14,442 ¥ 3,960
Total assets ......................... ¥316,934 ¥ 44,192¥71,515
3,578
75,09372,528¥ 2,564¥27,643¥21,723
1,846
23,56923,402¥ 167¥ 6,522¥12,298
2,039
14,337
13,882¥ 454¥ 5,936¥701,321
88,807790,128
768,537¥ 21,590¥401,228

Japan

64 NAGASE & CO., LTD. ANNUAL REPORT 2008

Eliminations
or corporate¥

Consolidatedsales— ¥701,321(88,807)—(88,807) 701,321(88,886) 679,651¥
79 ¥ 21,669¥ 21,630 ¥422,859

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Thousands of U.S. dollars

Year ended March 31, 2008
Northeast
Asia

Southeast
Asia

North
America

Sales to customers ................... $4,962,531 $1,440,084
Intersegment sales ...................
803,663
152,321Net sales .............................. 5,766,194 1,592,404
Operating expenses ................. 5,631,281 1,538,826
Operating income ................ $ 134,914 $ 53,578
Total assets .............................. $3,057,271 $ 571,025$853,019
31,590884,609854,506$ 30,103$303,473$231,610
18,325249,945
246,871$ 3,064$ 61,393

Japan

Europe &OthersEliminations
or corporate

Total

Consolidated
sales$145,773 $7,633,047 $— $7,633,047
33,107 1,039,016 (1,039,016)—
178,880 8,672,063 (1,039,016) 7,633,047
170,616 8,442,110 (1,039,255) 7,402,845$ 8,264 $ 229,953 $230 $ 230,193$ 81,026 $4,074,209 $ 116,519 $4,190,728

As discussed in Note 3(a), effective the year ended March 31, 2008, pursuant to an amendment to the Corporation Tax Law, the Company andits consolidated domestic subsidiaries have changed their method of depreciation for property, plant and equipment acquired after April 1, 2007. As
a result of the change, operating expenses for the year ended March 31, 2008 increased by ¥188 million ($1,876 thousand) in the Japan segment ascompared with the amount which would have been recorded under the method applied in the previous year. Operating income decreased by a corresponding amount.
In addition, as discussed in Note 2(f), pursuant to an amendment to the Corporation Tax Law, the Company and its consolidated domestic subsidiaries depreciate the difference between 5% of the acquisition cost of property, plant and equipment acquired on or before March 31, 2007 andthe carrying amount of the subject assets uniformly over a five-year period, starting the year following the fiscal year in which the depreciated value ofthe subject assets reaches 5% of the acquisition price using the pre-amendment depreciation method. As a result of the change, operating expenses
for the year ended March 31, 2008 increased by ¥176 million ($1,757 million) in the Japan segment as compared with the amounts which would
have been recorded under the method applied in the previous year. Operating income decreased by a corresponding amount.
As discussed in Note 3(d), effective the year ended March 31, 2007 the Company adopted “Accounting Standard for Directors' Bonuses” (ASBJ
Statement No. 4 issued on November 29, 2005). As a result of the adoption of this accounting standard, operating expenses for the year ended
March 31, 2007 increased by ¥197 million in the Japan segment as compared with the amounts which would have been recorded under the method
applied in the previous year.
As discussed in Note 3(b), effective the year ended March 31, 2007, the Company adopted “Accounting Standard for Share-Based Payment”(ASBJ Statement No. 8 issued on December 27, 2005) and “Implementation Guidance on Accounting Standard for Share-Based Payment” (ASBJ
Guidance No. 11, final revision on May 31, 2006). As a result of the adoption of this accounting standard, operating expenses for the year ended
March 31, 2007 increased by ¥123 million in the Japan segment as compared with the amounts which would have been recorded under the method
applied in the previous year.
Millions of yen

Year ended March 31, 2008

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

Northeast Asia

Southeast Asia

North America

Europe & Others

Total¥188,305¥99,041¥25,686¥18,908¥331,942¥764,755
43.4%

24.6%

12.9%

3.4%

2.5%

Millions of yen

Year ended March 31, 2007

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

Northeast Asia

Southeast Asia

North America

Europe & Others

Total¥168,274¥84,594¥22,947¥14,715¥290,532¥701,321
41.4%

24.0%

12.0%

3.3%

2.1%

Thousands of U.S. dollars

Year ended March 31, 2008
Northeast Asia

Southeast Asia

North America

Europe & Others

Total

Overseas sales............................................................ $1,879,479
Consolidated net sales ...............................................

$988,532$256,373$188,721$3,313,125$7,633,047

17. SUBSEQUENT EVENT
The following appropriation of retained earnings of the Company, which has not been reflected in the accompanying consolidated financial
statements for the year ended March 31, 2008, was approved at a meeting of the shareholders held on June 27, 2008:

Cash dividends (¥17.00=U.S. $0.17 per share)....................................................................

Millions of yen

Thousands of
U.S. dollars¥2,186$21,819

NAGASE & CO., LTD. ANNUAL REPORT 2008

65

REPORT OF INDEPENDENT AUDITORSThe Board of Directors
NAGASE & CO., LTD.
We have audited the accompanying consolidated balance sheets of NAGASE & CO., LTD. and consolidated subsidiaries as ofMarch 31, 2008 and 2007, and the related consolidated statements of income, changes in net assets, and cash flows for theyears then ended, all expressed in yen. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis forour opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NAGASE & CO., LTD. and consolidated subsidiaries at March 31, 2008 and 2007, and the consolidated results of theiroperations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Japan.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2008
are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in
our opinion, such translation has been made on the basis described in Note 1.

Osaka, Japan
June 13, 2008

66 NAGASE & CO., LTD. ANNUAL REPORT 2008

COMPANY INFORMATION(As of March 31, 2008)

About Nagase & Co., Ltd.
Company Name:

Nagase & Co., Ltd.

Founded:June 18, 1832

Established:

December 9, 1917

Paid-in Capital:¥9,699 million

Number of Employees:

920 (Consolidated: 4,335)

Main Business:

Import/export and domestic sales of dyestuffs, chemicals, plastics, machinery,electronics materials, cosmetics and health foods

Main Offices:

Osaka Head Office: 1-1-17, Shinmachi, Nishi-ku, Osaka City, Osaka, 550-8668 Tel: (81) 6-6535-2114
Tokyo Head Office: 5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo, 103-8355 Tel: (81) 3-3665-3021
Nagoya Branch Office: 3-14-18, Marunouchi, Naka-ku, Nagoya City, 460-8560 Tel: (81) 52-963-5615
Nagase R&D Center: Kobe High Tech Park, 2-2-3, Murotani, Nishi-ku, Kobe City, 651-2241 Tel: (81) 78-992-3162
Nagase Application Workshop: 2-4-45, Higashitsukaguchicho, Amagasaki City, 661-0011 Tel: (81) 6-4961-6730

History
1832

Nagase founded in Kyoto as a dyestuffs trading concern
Sales of dyestuffs, starches and funori seaweed■ Established Osaka branch office■ Head office switched to Osaka, branch office to Kyoto■ Established business ties with Basel Chemical Co. of
Switzerland (now Ciba Specialty Chemicals Ltd.)■ Established Tokyo branch office■ Inaugurated as Nagase Shoten Company with capital of¥3 million■ Established business ties with Eastman Kodak Co. of
the United States■ Concluded exclusive distributorship agreements with
Union Carbide and Carbon Corp. of the United States■ Established Nagoya branch office■ Company name changed to Nagase & Co., Ltd.
■ Listed Company shares on the Osaka Securities Exchange■ Concluded an exclusive distributorship agreement with
General Electric Co. of the United States■ Established Nagase-CIBA Ltd. (now Nagase ChemteX Corp.)
jointly with Ciba-Geigy Ltd.
■ Listed Company shares on the Tokyo Stock Exchange■ Established Nagase (Hong Kong) Ltd. and Nagase America Corp.
■ Established Engineering Plastics, Ltd.
(now GE Plastics Japan Ltd.) jointly with General Electric Co.
■ Established Nagase Landauer Ltd. jointly with Technical
Operations, Inc. of the United States■ Established Nagase Singapore (Pte) Ltd.
■ Established Nagase (Europa) GmbH and Chang Fong
Overseas Enterprises (Pte) Ltd.
■ Established Nagase (Malaysia ) Sdn. Bhd.
■ Established Seoul branch office
■
■

1893
1898
1900
1911
1917
1923
1930
1940
1943
1964
1968
1970

1971

1974
1975
1980
1982
1985

1988
1989

1990

1992
1997

1998
2001

2002

2004
2005
2006

2007

Established Nagase California Corp. and Nagase (Taiwan) Co., Ltd.
Established Canada Mold Technology Inc.
■ Established Nagase (Thailand) Co., Ltd.
■ Established Nagase Science and Technology Foundation■ Tokyo branch office became head office; adoption of
Osaka/Tokyo two head office system■ Established Sofix Corp.
■ Set up the Nagase R&D Center in Kobe
■ Established joint venture Nagase Wahlee Plastics Corp. (Taiwan)■ Established London branch office■ Established Nagase Philippines Corp.
■ Established Shanghai Nagase Trading Co., Ltd. and Nagase
Engineering Service Korea Co., Ltd.
■ Established P.T. Nagase Impor-Ekspor Indonesia■ Established Shanghai Hua Chang Trading Co., Ltd.
■ Closed the Seoul branch office, and established Nagase Korea Corp.
■ Merged four production companies, and established
Nagase ChemteX Corp.
■ Established Nagase Finechem Singapore (Pte) Ltd.
■ Established Nagase Precision Plastics Shanghai Co., Ltd.
■ Established Nagase ChemteX (Wuxi) Corp.
■ Established a representative office in Hanoi, Vietnam■ Established Guangzhou Nagase Trading Ltd.
■ Established Nagase International Electronics Ltd.
■ Established Nagase Philippines International Services Corp.
■ Acquired stock of semiconductor manufacturing equipment maker
Pac Tech-Packaging Technologies GmbH■ Established Nagase India Private Ltd.
■ Established Nagase Application Workshop■■

NAGASE & CO., LTD. ANNUAL REPORT 2008

67

ORGANIZATION(As of April 1, 2008)

Research &Development Center
Nagase Application Workshop
Risk Management &Compliance Committee

Shareholdersʼ
Meeting

Internal Control Promotion
Committee
Security Trade Control
Committee

Board of Auditors
Auditors

Board ofDirectors

Chairman

Corporate Marketing Oﬃce
Sheet & Film Planning Oﬃce
Business Administrative Oﬃce
Colors & Imaging Dept.

Chemical Management
Committee

Speciality Chemicals Dept.

Environment Protection
Committee

Performance Chemicals Dept.
Fine Chemicals Dept.

President

Beauty Care Products Dept.
Corporate Strategy Oﬃce

Advanced Polymers Dept.
Corporate
Management Oﬃce

Eco-Materials & Products Dept.
IT Planning Oﬃce

Automotive Solutions Dept.
Compliance Div.

Pluswood Dept.
Human Resources &General Aﬀairs Div.
Finance Div.
Accounting Div.
Legal & Credit Div.

68 NAGASE & CO., LTD. ANNUAL REPORT 2008

Electronic Chemicals Dept.
Display & Electronics Components Dept.
Information & Functional Materials Dept.
IC Packaging Department

Osaka Administrative Div.

Nagoya Branch

Audit Oﬃce

Nagase ChemteX Corp. (NCX)MAJOR CONSOLIDATED SUBSIDIARIES, AFFILIATES AND OFFICES
Company name
➀ Description of business ➁ Paid-in capital ➂ Date of establishment ➃ Equity ownership (*indicates indirect investment)■ Consolidated subsidiary ■ Company accounted for under the equity method (Ownership status as of March 31, 2008)

JAPAN
Manufacturing■ Nagase ChemteX Corp.

■ Nagase Medicals Co., Ltd.

➀Manufacture of epoxy resins, enzymes, industrial
chemicals ➁¥2,474 million ➂1970 ➃100%➀Manufacture of pharmaceuticals ➁¥498 million➂1972 ➃100%

1-17, Shinmachi 1-chome, Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6535-2582 Fax: (81) 6-6535-2174

4-323, Senzo, Itami-City, Hyogo
Tel: (81) 72-778-7501 Fax: (81) 72-778-7506■ Honshu Rheem Co., Ltd.

➀Manufacture and sale of fiber drums, import andsale of food processing machines and materials➁¥100 million ➂1968 ➃40.0%
8-11, Minami Hashimoto 4-chome, Sagamihara-City,
Kanagawa
Tel: (81) 42-773-3111 Fax: (81) 42-774-4369■ Gigatec Inc.

➀Design, manufacture and sale of high-frequency
power amplifiers ➁¥97 million ➂1989 ➃41.2%
625, Shimo Ooshimamachi, Takasaki-City, Gunma
Tel: (81) 27-343-1590 Fax: (81) 27-343-3365■ Toyo Beauty Supply Corp.

■ Totaku Industries, Inc.

➀Manufacture and sale of plastic products➁¥270 million ➂1952 ➃77.1%
1-33, Mitsuya Minami 1-chome, Yodogawa-ku,
Osaka-City, Osaka
Tel: (81) 6-6308-8300 Fax: (81) 6-6308-7020■ eX . Grade Co., Ltd.

■ Sun Delta Corporation➀Development of applications for plastic products andmanufacture and sale of processed products➁¥490 million ➂2005 ➃50.0%
5F, Jimbocho Mitsui Bldg., 1-105, Kanda-Jinbocho,
Chiyoda-ku, Tokyo
Tel: (81) 3-3296-3210 Fax: (81) 3-3296-3489

SN Tech Corporation➀Manufacture of developer, recycling business➁¥250 million ➂2008 ➃35.0%
6-27, Mizuhai 5-chome, Higashi Osaka-City, Osaka
Tel: (81) 6-6268-0145 Fax: (81) 6-6268-0181➀Development, manufacture and sale ofcomponents for electronic equipment➁¥23 million ➂2003 ➃30.4%
5F, Daido-Showacho Dai 2 Bldg., 1-30, Showacho
5-chome, Abeno-ku, Osaka-City, Osaka
Tel: (81) 6-6623-7633 Fax: (81) 6-6623-7638
Nagase Filters Co., Ltd.

➀Contract manufacture of cosmetics➁¥40 million ➂1964 ➃40.0%➀Planning, production, processing, quality testing andsale of metal filters ➁¥80 million ➂2006 ➃100%

3-10, Nihonbashi-Hongokucho 3-chome, Chuo-ku, Tokyo
Tel: (81) 3-3241-1410 Fax: (81) 3-3270-6338

4-9-6, Takaida Naka, Higashi Osaka-City, Osaka
Tel: (81) 6-6782-3324 Fax: (81) 6-6782-3304

Processing■ Kotobuki Kasei Corp.

■ Setsunan Kasei Co., Ltd.

■ Kyoraku Co., Ltd.

➀Molding, processing and sale of plastic products➁¥20 million ➂1972 ➃57.5%➀Coloring and sale of plastics ➁¥125 million➂1966 ➃100%➀Manufacture, processing and sale of plastic products➁¥200 million ➂1917 ➃29.3%

7-9, Satsukicho, Kanuma-City, Tochigi
Tel: (81) 289-72-0112 Fax: (81) 289-72-0114

2-22, Takaida Nishi 5-chome, Higashi Osaka-City, Osaka
Tel: (81) 6-6783-5231 Fax: (81) 6-6783-5228

Kawaramachi Chuo Bldg., 3-10, Kawaramachi
2-chome, Chuo-ku, Osaka-City, Osaka
Tel: (81) 6-6203-1301 Fax: (81) 6-6203-1309

Servicing
Design & Die Co., Ltd.

■ NCK Ltd.

➀Design, manufacture and sale of automotive➀Small-lot repackaging of industrial-use resins andcomponents and plastic products➁¥50 million ➂2002 ➃51.0%
c/o Tatematsu Mold Industry, 27, Okuda Oosawacho,
Inazawa-City, Aichi
Tel: (81) 587-32-6281 Fax: (81) 587-32-5392

curing agents, etc., filter cleaning, management of special containers ➁¥10 million ➂1985 ➃0.0%*236, Nakai, Tatsuno-cho, Tatsuno-City, Hyogo
Tel: (81) 791-63-4842 Fax: (81) 791-63-4913■ Nagase Landauer, Ltd.
➀Radiation measuring services ➁¥88 million➂1974 ➃50.0%
11-6, Nihonbashi-Hisamatsucho, Chuo-ku, Tokyo
Tel: (81) 3-3666-4300 Fax: (81) 3-3662-9518■ Nagase CMS Technology Co., Ltd.

➀Development, design, manufacture, sale andmaintenance of CMS devices➁¥150 million ➂2001 ➃65.0%
4-9, Chigasaki Minami 3-chome, Tsuzuki-ku,
Yokohama-City, Kanagawa
Tel: (81) 45-948-1072 Fax: (81) 45-948-1070■ Nagase Electronic Equipment Service Co., Ltd.

➀Manufacture, sale and maintenance of lowtemperature vacuum equipment➁¥45 million ➂1989 ➃100%
5-10, Higashi Nakajima 3-chome, Higashi
Yodogawa-ku, Osaka-City, Osaka
Tel: (81) 6-6324-7626 Fax: (81) 6-6324-7680■ Nagase General Service Co., Ltd.

➀Sale and lease of various goods, real estateadministration ➁¥20 million ➂1983 ➃100%
1-17, Shinmachi 1-chome, Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6535-2131 Fax: (81) 6-6535-2124■ Nagase Information Development, Ltd.

➀Software development and maintenance➁¥30 million ➂1987 ➃100%
5F, Nagase Sangyo Honcho Bldg., 2-8,
Nihonbashi-Honcho 1-chome, Chuo-ku, Tokyo
Tel: (81) 3-3231-3581 Fax: (81) 3-3231-3584

Choko Co., Ltd.

➀Insurance agency ➁¥15 million➂1971 ➃37.7%
11F, Toho Bldg., 1-13, Nishi Shinsaibashi 1-chome,
Chuo-ku, Osaka-City, Osaka
Tel: (81) 6-6244-0125 Fax: (81) 6-6258-3385■ Nagase Logistics Co., Ltd.

■ Nagase Trade Management Co., Ltd.

➀Warehousing and distribution ➁¥401 million➂1982 ➃100%➀Business agent for foreign trade documentation➁¥20 million ➂1996 ➃100%

4-45, Higashi Tsukaguchicho 2-chome,
Amagasaki-City, Hyogo
Tel: (81) 6-6427-8651 Fax: (81) 6-6427-8772

5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo
Tel: (81) 3-3665-3125 Fax: (81) 3-3665-3286■ Nippon Vopac Co., Ltd.

➀Warehousing, motor truck carrier business andfreight transportation services ➁¥404 million➂1966 ➃19.9%
5-7, Kajicho 1-chome, Chiyoda-ku, Tokyo
Tel: (81) 3-3254-9571 Fax: (81) 3-3254-9566■ Hoei Techno Service Co., Ltd.

➀Duplication and processing of computer software,
warehousing and distribution ➁¥50 million➂1991 ➃0.0%*
2-8, Nihonbashi-Honcho 1-chome, Chuo-ku, Tokyo
Tel: (81) 3-3274-7875 Fax: (81) 3-3274-7884
NAGASE & CO., LTD. ANNUAL REPORT 200869

Company name
➀ Description of business ➁ Paid-in capital (Foreign currency: Thousands) ➂ Date of establishment ➃ Equity ownership (*indicates indirect investment)■ Consolidated subsidiary ■ Company accounted for under the equity method (Ownership status as of March 31, 2008)

Servicing
ON Co-Labo Corporation

iGENE Therapeutics, Inc.

➀Promotion and handling of overseas textile related
business ➁¥70 million ➂2007 ➃50.0%➀Research and development of bioreagents based on
RNAi technology, contract development, manufacturing, importing and exporting, sales and technologicalguidance

1-43, Miyahara 4-chome, Yodogawa-ku, Osaka-City,
Osaka
Tel: (81) 6-6395-1918 Fax: (81) 6-6395-1555➁¥26 million ➂2003 ➃100.0%
5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo
Tel: (81) 3-3665-3143 Fax: (81) 3-3665-3324

Sales■ Nagase Colors & Chemicals Co., Ltd.

■ Nagase Chemical Co., Ltd.

➀Purchasing and sale of dyestuffs, industrial➀Sale of dyestuffs, industrial chemicals, chemicals forchemicals, etc. and related information provision➁¥100 million ➂1957 ➃100%
1-17, Shinmachi 1-chome, Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6535-2058 Fax: (81) 6-6535-2054

manufacturing paper, plastics and machinery➁¥60 million ➂1995 ➃100%
6F, Libra Bldg., 3-2, Nihonbashi-Kobunacho, Chuo-ku, Tokyo
Tel: (81) 3-5640-7431 Fax: (81) 3-5640-0791■ Nagase Bio-Chemical Sales Co., Ltd.

■ Nagase Chemspec Co., Ltd.

➀Sale of enzymes and additives for food and feed➁¥30 million ➂1987 ➃87.0%➀Sale and technological servicing of chemicals➁¥30 million ➂1976 ➃100%

1-17, Shinmachi 1-chome, Nishi-ku, Osaka-City, Osaka

5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo
Tel: (81) 3-3665-3726 Fax: (81) 3-3665-3746

Tel: (81) 6-6535-2318 Fax: (81) 6-6535-2531■ Nagase Elex Co., Ltd.

➀Sale of raw materials for plastics andplastic products ➁¥20 million ➂1979 ➃100%
4F, Nihonbashi Tachibana Bldg., 6-11,
Higashi Nihonbashi 3-chome, Chuo-ku, Tokyo
Tel: (81) 3-3661-0821 Fax: (81) 3-3661-1560■ Hoei Sangyo Co., Ltd.

➀Sale of film materials, magnetic products,
information imaging materials, etc. ➁¥250 million➂1974 ➃80.5%
Nagase Sangyo Honcho Bldg., 2-8,
Nihonbashi-Honcho 1-chome, Chuo-ku, Tokyo
Tel: (81) 3-3274-7880 Fax: (81) 3-3274-7882

Shinshu Nagase Denzai Co., Ltd.

OnFine Co., Ltd.

➀Sale of electronics components, raw materials forplastics and plastic products ➁¥10 million➂1984 ➃100%➀Manufacture and sale of electronics and fluorine

1-4-16, Akabane, Okaya-City, Nagano
Tel: (81) 266-24-2772 Fax: (81) 266-24-3311

and polysilane variants for use in materials➁¥10 million ➂2002 ➃25.0%
1-17, Shinmachi 1-chome, Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6535-2585 Fax: (81) 6-6535-2174■ Nishinihon Nagase Co., Ltd.

➀Sale of dyestuffs, auxiliaries, industrial chemicals
and plastics ➁¥60 million ➂1969 ➃100%
6F, Hakata Tokyo Kaijo Nichido Bldg., 1-3, Shimokawabata-machi, Hakata-ku, Fukuoka-City, Fukuoka
Tel: (81) 92-272-3661 Fax: (81) 92-272-3667■ Nagase Plastics Co., Ltd.

➀Sale of raw materials for plastics and plastic
products ➁¥96 million ➂1975 ➃100%
1-17, Shinmachi 1-chome, Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6533-1181 Fax: (81) 6-6533-1189■ Nagase Abrasive Materials Co., Ltd.

➀Sale of abrasives and grinding materials➁¥50 million ➂1955 ➃100%
3F, Osaka Anniks Bldg., 14-20, Itachibori 1-chome,
Nishi-ku, Osaka-City, Osaka
Tel: (81) 6-6543-7721 Fax: (81) 6-6543-7710■ Nagase Beauty Care Co., Ltd.

➀Sale of cosmetics and health foods➁¥100 million ➂1991 ➃100%
5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo
Tel: (81) 3-3665-3617 Fax: (81) 3-3665-3724

Nagase Eco Plus Co., Ltd.

➀Development and sale of Pluswood composite
wood material ➁¥310 million ➂1994 ➃100%
5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo
Tel: (81) 3-3665-3700 Fax: (81) 3-3665-3714

ASIA■ Shanghai Nagase Trading Co., Ltd.

■ Tianjin Nagase International Trading Co., Ltd.

➀International trade and trade consulting➁RMB8,120 ➂1997 ➃100%➀Import/export and marketing➁RMB2,482 ➂2003 ➃0.0%*

18F, Raffles City, No.268 Xizang Road Central,
Shanghai, P.R.China 200001

Rm 2008,20/F., The Exchange Office Tower,189
Nanjing Road, Heping District,Tianjin, P.R.China 300051

Tel: 86-(21)63403300 Fax: 86-(21)63403883

Tel: 86-(22)83191231 Fax: 86-(22)83191122

Nagase CMS Technology (Shanghai) Co., Ltd.

➀Construction and maintenance of chemical
supply and management equipment➁US$200 ➂2006 ➃40.0%
Apollo Bldg 428 No.1440, Yan An Road Central,
Shanghai P.R.China 200040
Tel: 86-(21)6103-1662 Fax: 86-(21)6103-1663

NCC Shanghai Techno Center Co., Ltd.

➀Testing operations for paints andfinishing processes ➁RMB2,445 ➂2002 ➃0.0%*
6F, No.75 Bldg. No.1066 Qinzhou North
Road Caohejing Hi-Tech Park, Shanghai,
P.R.China 200233
Tel: 86-(21)54261812 Fax: 86-(21)54261811

70 NAGASE & CO., LTD. ANNUAL REPORT 2008

■ Shanghai Hua Chang Trading Co., Ltd.

Nagase Plastic Design and Die (Tianjin) Co., Ltd.

➀Sale of resins and related products➁RMB19,864 ➂1998 ➃16.3%➀Design of automotive components and plastic
products ➁RMB2,483 ➂2003 ➃41.7%

Room 605, Aviation Center, 1600 Nanjing Road
West, Shanghai, P.R.China 200040
Tel: 86-(21)62481133 Fax: 86-(21)62486533

Rm 1005, 10/F., The Exchange OfficeTower,189 Nanjing Road, Heping District,Tianjin, P.R.China 300050
Tel: 86-(22)83191234 Fax: 86-(22)83191122

MAJOR CONSOLIDATED SUBSIDIARIES, AFFILIATES AND OFFICES■ Nagase Precision Plastics Shanghai Co., Ltd.

Nagase Marketing and Service (Shenzhen) Ltd.

■ Nagase Engineering Service Korea Co., Ltd.

➀Plastic tray molding➁RMB16,512 ➂2001 ➃94.0%➀Contract customer services ➁HK$1,000➂2006 ➃0.0%*➀Equipment maintenance service and engineering➁WON150,000 ➂1997 ➃100%

B-Block, 1F, 173 Meisheng Road, Wai Gao Qiao
Free Trade Zone, Pudong, Shanghai, P.R. China 200131
Tel: 86-(21)58681661 Fax: 86-(21)58681667

Room 2501-02, China Resources Building, 5001
Shennan Dong Road, Shenzhen 518001, P.R. CHINA
Tel: 86-(755)3338-6603 Fax: 86-(755)3338-6620

Anyang Trade Center No.925 1107,
Bisan-dong, Dongan-ku, Anyang City,
Kyongki-do, Korea 431-050
Tel: 82-(31)3890881 Fax: 82-(31)3890884■ Nagase ChemteX (Wuxi) Corp.

➀Plastic manufacture and sale of adhesives andhigh-tech chemical products for electronics, technology
service ➁RMB28,970 ➂2002 ➃50.0%
B-B, Machinery & Electronics Industry Park,
Wuxi National Hi-tech Industrial Development
Zone, Jiangsu Province, P.R. China 21400
Tel: 86-(510)5200052 Fax: 86-(510)5200209■ Guangzhou Nagase Trading Ltd.

➀Import/export and marketing➁RMB1,655 ➂2002 ➃0.0%*
Room5706, CITIC Plaza Office Tower, 233 Tian
He Bei Road, Guangzhou, P.R. China 510613
Tel: 86-(20)38911101 Fax: 86-(20)38911103

Wuhan Branch Office
Room 1204, RuiTong Plaza B, No.847
Jianshe Avenue-Hankou, Wuhan 430015, China
Tel: 86-(27)8548-7933 Fax: 86-(27)8548-7953

Guangzhou Kurabo Chemicals Co., Ltd.

➀Manufacture of molded urethane products forautomobiles ➁US$7,000 ➂2001➃20.0%
Jingquan 1st Rd., Yonghe Economic Zone,
Guangzhou Economic & Technological
Development Dist., Guangzhou City, Guangdong, China
Tel: 86-(20)8297-0557 Fax: 86-(20)8297-0551■ Nagase (Hong Kong) Ltd.

➀Import/export, trade agency, market development,
information collection ➁HK$3,120 ➂1971➃100%
Suite 3901 & 3912-14, Tower 6, The Gateway
Harbour City, 9 Canton Road, Tsim Sha Tsui,
Kowloon, Hong Kong, S.A.R., P.R. China
Tel: 852-23750000 Fax: 852-23772728

Dalian Representative Office
21F, Senmao Bldg., No. 147 Zhongshan Road,
Xigang District, Dalian, P.R. China 116011
Tel: 86-(411)83704270 Fax: 86-(411)83704272■ Totaku Industries Suzhou Co., Ltd.

➀Manufacture and sale of plastic products➁US$1,700 ➂2005 ➃0.0%*
9 Datong Road Export Processing Zone,
Suzhou New & Hi-tech District, Suzhou, China
Tel: 86-(512)6269-6006 Fax: 86-(512)6269-6008

Toyo Quality One Ningbo Co., Ltd.

➀Manufacture and sale of polyurethane foam
➁US$3,770 ➂1993 ➃24.2%
No.302 Chengnan East Rd., Cicheng Town,
Jiangbei Dist., Ningbo City, Zhejiang, China
Tel: 86-(574)8757-0057 Fax: 86-(574)8757-0885■ Nagase (Taiwan) Co., Ltd.

➀Import/export, trade agency, market development,
information collection ➁NT$45,000 ➂1988➃100%
16F-1, 248, Sec.3, Nanking E. Rd., Taipei, Taiwan, R.O.C.
Tel: 886-(2)27733668 Fax: 886-(2)27737288

Taichung Liaison Office
12F-7, No.530, Yingcai Rd., West District,Taichung City 403, Taiwan R.O.C
Tel: 886-(4)2302-7200 Fax: 886-(4)2302-7202

Xiamen Office
Room 1811,The Bank Center, No.189 Xiahe Road
Xiamen, Fujian, 361000 China
Tel: 86-592-2200-213 Fax: 86-592-2203-662■ Nagase Electronics Technology Co., Ltd.

➀Chemical etching of liquid crystal glass panel units➁NT$178,000 ➂2005 ➃60.0%
No.6 Yuanyuan St., Guanyin Township, Taoyuan
County328, Taiwan, R.O.C.
Tel: 886-(3)416-0498 Fax: 886-(3)438-9956■ Nagase Wahlee Plastics Corp.

➀Sale of plastics and related products➁NT$100,000 ➂1990 ➃55.0%
9F Chuan Ta Bldg., No. 37, Sec. 3, Min
Chuan East Road, Taipei, Taiwan, R.O.C
Tel: 886-(2)25062400 Fax: 886-(2)25062401■ Nagase International Electronics Ltd.

➀Management of electronics-related manufacturingbusinesses in Japan and overseas ➁HK$10,000➂2004 ➃80.0%
Suite 3901 & 3912-14, Tower 6, The Gateway
Harbour City, 9 Canton Road, Tsim Sha Tsui,
Kowloon, Hong Kong, S.A.R., P.R. China
Tel: 852-23762088 Fax: 852-23761666■ Nagase Korea Corp.

■ Nagase Singapore (Pte) Ltd.

➀Import/export, trade agency, market development,
information collection ➁US$1,738 ➂1975➃100%
300 Beach Road, #39-00 The Concourse,
Singapore 199555
Tel: 65-63980088 Fax: 65-63980227
Dubai Office
Lob#15-406, Jebel Ali Free Zone, P.O.Box 17865
Dubai-United Arab Emirates
Tel: 971-(4)8871366 Fax: 971-(4)8871377

Vietnam Representative Office
Unit 1201, Sun Wah Tower, 115 Nguyen Hue
Boulevard, Dist. 1, HCMC, Vietnam
Tel: 84-(8)8219166 Fax: 84-(8)8219139■ Nagase FineChem Singapore (Pte) Ltd.

➀Manufacture and recycling of chemical agents forliquid crystals ➁S$14,000 ➂2001 ➃60.0%
9 Tuas View Lane 637569, Singapore
Tel: 65-68989289 Fax: 65-68985313■ Nagase (Thailand) Co., Ltd.

➀Import/export, trade agency, market development,
information collection ➁BAHT87,000 ➂1989➃100%
14F, Ramaland Bldg., 952 Rama IV Road, Khwaeng
Suriyawongse, Khet Bangrak, Bangkok 10500, Thailand
Tel: 66-(2)6327000 Fax: 66-(2)6327111■ Sanko Gosei Technology (Thailand) Ltd.

➀Manufacture of automobile components➁BAHT370,000 ➂1997 ➃40.0%
376 Moo 4 Suksawat Rd., Soi 36, Bangpakok,
Rasburana, Bangkok 10140, Thailand
Tel: 66-(2)4277008 Fax: 66-(2)4274923■ Automotive Mold Technology Co., Ltd.

➀Manufacture of automotive molds and dies
➁BAHT280,000 ➂2000 ➃32.1%
Amata City Industrial Estate 7/117 Moo 4, Mabyangporn
Pluakdaeng, Rayong 21140, Thailand
Tel: 66-(38)956151 Fax: 66-(38)956155➀Wholesale sales ➁WON700,000 ➂2001➃100%
18F, Daewoo Center, 5-541, Namdaemun-Ro,
Jung-Gu, Seoul, Korea
Tel: 82-(2)7348745 Fax: 82-(2)7348747■ NWP International Trading (Shenzhen) Co., Ltd.

➀Sale of plastic products in South China➁US$1,200 ➂2004 ➃0.0%*
No.201, Building 6C, International Commercial
Center, 1001 Hong Hua Road, Futian Free Trade
Zone, Shenzhen, Guangdong, China
Tel: 86-769-5416501 Fax: 86-769-5416503

NAGASE & CO., LTD. ANNUAL REPORT 2008

71

MAJOR CONSOLIDATED SUBSIDIARIES, AFFILIATES AND OFFICES
Company name
➀ Description of business ➁ Paid-in capital (Thousands) ➂ Date of establishment ➃ Equity ownership (*indicates indirect investment)■ Consolidated subsidiary ■ Company accounted for under the equity method (Ownership status as of March 31, 2008)■ Nagase (Malaysia) Sdn. Bhd.

➀Import/export, trade agency, market development,
information collection ➁RM1,500 ➂1981➃51.0%
Suite 16.01, Level 16, Menara IGB Mid Valley City,
Lingkaran Syed Putra 59200 Kuala Lumpur, Malaysia
Tel: 60-(3)22832366 Fax: 60-(3)22822933

Nagase & Co., Ltd.
Hanoi Representative Office
Unit 1202, Hanoi Tung Shing Square 2 Ngo Quyen
Hoan Kiem Dist., Hanoi, Vietnam
Tel: 84-(4)9350110 Fax: 84-(4)9350108■ Nagase Philippines International

Nagase India Private Ltd.

➀Import/export, trade agency, market development,
information collection ➁IRS100,000 ➂2006➃99.0%
404, Vaibhav Chambers, Bandra-Kurla Complex(BKC), Bandra East, Mumbai 400 051, INDIA
Tel: 91-(22)26591337 Fax: 91-(22)26591408

Johor Bahru OfficeServices Corp.

New Delhi Branch

Suite 6.5A Level 6, Menara Pelangi, Taman Pelangi,
Jalan Kuning, 80400, Johor Bahru, Malaysia
Tel: 60-(7)3336088 Fax: 60-(7)3339088➀Sale of raw materials ➁US$732➂2005 ➃100%625-627, 6th Floor, West Block, Meridien Commercial
Tower, New Delhi-110 001, INDIA
Tel: 91-(11)23716931 Fax: 91-(11)23320632

Penang Office
1-5-14&15, 5F, Krystal Point Corporate Park, Jalan Tun,
Dr. Awang, 11900 Sungai Nibong, Penang, Malaysia
Tel: 60-(4)6430628 Fax: 60-(4)6432490■ Nagase Philippines Corp.

➀Import/export and retail➁US$1,501 ➂1997 ➃100%
18-B Trafalgar Plaza H.V. Dela Costa Street,
Salcedo Village, 1227 Makati City, Philippines
Tel: 63-(2)7502935 Fax: 63-(2)8118296

Building 3, 123-125 Technology Avenue Phase 4,
LTI Binan, Laguna, Philippines
Tel: 63-(4)95440678 Fax: 63-(4)95440679■ P.T.Nagase Impor-Ekspor Indonesia➀Import/export sales and import/export consulting➁US$500 ➂1998 ➃90.0%
Wisma Kyoei Prince, 21F JI. Jend.Sudirman
Kav.3 Jakarta 10220, Indonesia
Tel: 62-(21) 57900391 Fax: 62-(21)57900392

NORTH AMERICA■ Sofix Corp.

➀Manufacture and sale of color formers➁US$20,000 ➂1990 ➃49.0%
2800 Riverport Road, Chattanooga,
TN 37406-1721, U.S.A.
Tel: 1-(423)6243500 Fax: 1-(423)6243587■ Nagase America Corp.

➀Import/export, trade agency, market development,
information collection ➁US$3,500 ➂1971➃100%
New York Headquarters
546 5th Avenue 16F, New York, NY 10036-5000, U.S.A.
Tel: 1-(212)7031340 Fax: 1-(212)3980687➀Manufacture, sale and maintenance of metal molds➁C$5,000 ➂1989 ➃53.0%39555 Orchard Hills Place, Crystal Glen Office Center,
Suite 356, Novi, MI 48375, U.S.A.
Tel: 1-(248)3740490 Fax: 1-(248)3740497

1075 Ridgeway Road, Woodstock, Ontario,

California Branch

Canada N4V 1E3

2880 Lakeside Drive, Suite 116 Santa Clara, CA
95054, U.S.A.
Tel: 1-(408)5679728 Fax: 1-(408)5679729

Tel: 1-(519)4210711 Fax: 1-(519)4210706

Design and Die USA Inc.

➀Design of automotive components and plastic
products/die sales ➁US$200 ➂2002 ➃25.0%
Crystal Glen Office Center, Suite 356, 39555
Orchard Hills Place, Novi, MI 48375, U.S.A.
Tel: 1-(248)3740490 Fax: 1-(248)3740497

72 NAGASE & CO., LTD. ANNUAL REPORT 2008

➀Manufacture and sales of semiconductor manufacturing equipment, contract processing for wafer
bumping ➁RM10,000 ➂2006 ➃0.0%*
Plot14, Medan Bayan Lepas Technoplex, Phase 4 Bayan
Lepas Indutrial Zone 11900 Bayan Lepas, Penang, Malaysia
Tel: 60-(4)6430-628 Fax: 60-(4)6432-490

EUROPE

Michigan Branch■ Canada Mold Technology Inc.

Pac Tech Asia Sdn.Bhd.

■ Nagase (Europa) GmbH

➀Import/export, trade agency, market development,
information collection ➁€700 ➂1980 ➃100%
Immermannstrasse 65c 40210 Dusseldorf,
Germany
Tel: 49-(211)866200 Fax: 49-(211)3237068
Hungary Representative Office
MADACH TRADE CENTER BT, H-1075
Budapest, Madach I. ut 13-14. Hungary
Tel: 36-(1)2681705 Fax: 36-(1)2681706

London Branch
Room No. 402-403, Regent’s Place, 338 Euston
Road, London NW1 3BT, U.K
Tel: 44-(870)3517200 Fax: 44-(207)5436926■ Pac Tech-Packaging Technologies GmbH■ Pac Tech USA-Packaging Technologies Inc.

➀Semiconductor wafer bumping, manufacture andsale of semiconductor manufacturing equipment➁US$3,772 ➂2001 ➃0.0%*
328 Martin Avenue, Santa Clara, CA 95050, U.S.A.
Tel: 1-(408)5881925 Fax: 1-(408)5881927➀Semiconductor wafer bumping, manufacture andsale of semiconductor manufacturing equipment➁€187 ➂1995 ➃59.9%
Am Schlangenhorst 15-17 D-14641 Nauen, Germany
Tel: 49-(332)1449513 Fax: 49-(332)1449522

INVESTOR INFORMATION(As of March 31, 2008)

Stock Listings: First Sections of the Tokyo Stock Exchange and the Osaka Securities Exchange
Ticker Code:8012

Authorized Number of Shares: 346,980,000
Issued Number of Shares:

138,408,285

Number of Shareholders:

6,324
Composition of Shareholders

Principal Shareholders
Name

The Master Trust Bank of Japan, Ltd.
Japan Trustee Services Bank, Ltd.
The Sumitomo Trust & Banking Co., Ltd.
Northean Trust Company (ABFC)
Sub-Client American AccountNippon Life Insurance Company
Sumitomo Mitsui Banking Corporation
Hiroshi Nagase
Reiko Nagase
Mitsui Sumitomo Insurance Co., Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Number of
Shares Held (Thousands)

Percentage of Total
Shares Outstanding (%)

10,793
6,719
5,776

7.80
4.85
4.17

5,024

3.63

4,610
4,377
4,192
3,522
2,951
2,825

3.33
3.16
3.03
2.54
2.13
2.04

Note: In addition to the above, the Company holds 9,807 thousand shares (7.09%) oftreasury stock without voting rights.

Financial
Institutions (50)
52,102 thousand shares

Securities
Companies (27)542 thousand shares (0.39%)
Treasury Stock (1)9,807 thousand shares
Domestic
Corporations (261)
24,009 thousand
sharesForeignInvestors (146)24,932 thousand shares

7.09%
17.35%

37.64%

18.01%
19.52%

Individuals andOthers (5,839)
27,014 thousand shares

Monthly Share Price Range of Nagase
(¥)
1,800

TOPIX

3,000

1,500

2,500

1,200

2,000

900

1,500

600

1,000

300

500
Share Price (left scale)Tokyo Stock Exchange Stock Price Index (right scale)0

April 2003

April 2004

April 2005

April 2006

Monthly Trading Volume

April 2007

April 2008

0

13,282
12,559(Thousands of Shares)
10,000

8,000

6,000

4,000

2,000

0
April 2003

April 2004

April 2005

April 2006

April 2007

April 2008

NAGASE & CO., LTD. ANNUAL REPORT 200873

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

Osaka Head Office:1-1-17, Shinmachi, Nishi-ku, Osaka City, Osaka 550-8668, Japan
Tel: (81) 6-6535-2114
Tokyo Head Office:5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo 103-8355, Japan
Tel: (81) 3-3665-3021
Nagoya Branch Office:3-14-18, Marunouchi, Naka-ku, Nagoya City 460-8560, Japan
Tel: (81) 52-963-5615
Printed in Japan on recycled paper with soy-based vegetable ink.