Consolidated Financial Statements for the Fiscal Year Ended March 31, 2010

April 28, 2010

These financial statements have been prepared for reference only in accordance with accounting principles and practices generally accepted in Japan.

Nagase & Co., Ltd.
Stock exchange listing: Tokyo, Osaka (First Sections)
Code number: 8012
(http://www.nagase.co.jp)
Representative:
Hiroshi Nagase, Representative Director and President
Contact:
Masanori Furukawa, Manager, Corporate Accounting Division
Annual General Meeting of Stockholders (scheduled):
June 25, 2010
Start of distribution of dividends (scheduled):
June 28, 2010
Filing of Securities Report (Yuka Shoken Hokokusho) (scheduled): June 28, 2010
(Note: Amounts have been rounded down to the nearest million yen.)

1． Consolidated Results for the Fiscal Year Ended March 31, 2010 (April 1, 2009 to March 31, 2010)(1) Consolidated Operating Results(Percentages represent changes compared with the previous fiscal year.)Net sales
Operating income
Ordinary income
Net income%

Millions of yen

Fiscal 2010
Fiscal 2009

603,949
715,238%

Millions of yen(15.6)(6.5)

13,12812,5224.8(45.7)%

Millions of yen

14,712
13,052

7,537
5,808

Ordinary
income/total
assetsYen
Yen%%
Fiscal 2010
58.64
—
4.0
4.1
Fiscal 2009
45.17
45.17
3.0
3.4
(Reference) Equity in earnings of affiliates: FY2010: ¥291 million (Fiscal 2009: ¥(520) million)
Earnings
per share

Earnings per
share (diluted)%

Millions of yen

12.7(47.4)

Return on
equity29.8(42.0)

Operatingincome/net sales
%
2.2
1.8

(2) Consolidated Financial Position
Total assets

Net assets

Net worth ratio%
March 31, 2010
368,088202,753
53.1
March 31, 2009
340,968
191,931
54.1(Reference) Equity capital: March 31, 2010: ¥195,344 (March 31, 2009: ¥184,599 million)
Millions of yen

Net assets per share
Yen

Millions of yen

1,519.61
1,435.88(3) Consolidated Cash Flows
Cash flows fromoperating activities

Millions of yen

Millions of yen

Millions of yen

27,87536,161(9,438)(11,062)(11,753)(5,549)42,80736,137

Dividends
Total
dividends
paid (fullfiscal year)

Dividends per share(Record date)Fiscal 2009
Fiscal 2010
Fiscal 2011
(est.)

3.

Cash and cash
equivalents at theend of the period

Cash flows fromfinancing activities

Millions of yen

Fiscal 2010
Fiscal 20092.

Cash flows frominvesting activities

1Q

InterimFiscalYear-End

3Q

Annual

Yen

Yen

Yen

Yen

Yen

Millions of yen

—
—

8.00
7.00

—
—

8.00
9.00

16.00
16.00

2,057
2,057

—

9.00

—

9.00

18.00

Payout ratio(consolidated)

Dividends/net
assets(consolidated)

%
35.4
27.3

%
1.1
1.1

24.4

Projected Consolidated Results for the fiscal year ending March 31, 2011
(April 1, 2010 to March 31, 2011)(Percentages represent changes compared with the corresponding periods of the previous fiscal year as applicable)

Net salesInterim period
Fiscal 2010
(Full fiscal year)

Operating income

Ordinary income

Earnings
pershare

Net income

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen%

Yen

323,000

14.8

7,500

42.5

8,000

38.0

4,600

48.6

35.78

647,000

7.1

15,00014.3

16,200

10.1

9,500

26.0

73.90

－1－

4. Other(1) Changes in major subsidiaries during the period (changes in specified subsidiaries due to changes in thescope of consolidated): None
New: — (Company name:)
Excluded: — (Company name:)(2) Changes in accounting principles, procedures and presentation methods in connection with the preparationof consolidated financial statements(Recorded under “Changes in important items considered fundamental to the preparation of consolidated
financial statements.”)i.
Changes in accordance with revisions to accounting and other standards: Yesii.
Changes in items other than (i) above: Yes(3) Number of shares issued and outstanding (common stock)i.
Number of shares issued and outstanding as of the fiscal year-end (including treasury stock)
March 31, 2010:
138,408,285 shares
March 31, 2009:
138,408,285 sharesii.
Number of treasury stock as of the fiscal year-end
March 31, 2010:
9,859,357 shares
March 31, 2009:
9,846,589 shares(Reference) Summary of non-consolidated results
1. Non-Consolidated Results for the Fiscal Year Ended March 31, 2010 (April 1, 2009 to March 31, 2010)(1) Net Sales and Income(Percentages represent changes compared with the previous fiscal year.)Net sales
Operating income
Ordinary income
Net income%

Millions of yen

Fiscal 2010
Fiscal 2009

414,657
457,632(9.4)(12.4)

Earnings
per share%

Millions of yen

2,913
2,573

7,203
7,711

(6.6)
(37.3)

Millions of yen

4,852
4,621

%

5.0
69.4

Earnings per share(diluted)
Yen

Fiscal 2010
Fiscal 2009%

Millions of yen

13.2(64.7)

Yen
—

37.74
35.93

35.93

(2) Non-Consolidated Financial Position
Total assets

Net assets

Net assets per share%
Yen
March 31, 2010
276,971
138,99950.1
1,079.46
March 31, 2009
239,088
129,22854.0
1,003.09(Reference) Equity capital: March 31, 2010: ¥138,763 million (March 31, 2009: ¥128,992 million)
Millions of yen

Net worth ratio

Millions of yen

2. Projected Non-Consolidated Results for the Fiscal Year Ending March 31, 2011
(April 1, 2010 to March 31, 2011)(Percentages represent changes compared with the corresponding periods of the previous fiscal year as applicable)

Net sales

Ordinary income

Earnings
pershare

Net income%

Millions of yen

2,400

70.4

5,400

%

Millions of yen

11.7

%

Millions of yen

222,000

24.2

3,800

26.6

29.56

445,000

7.3

4,800

64.8

9,000

24.9

5,900

21.6

45.90

Millions of yen

Interim period
Fiscal 2011
(Full fiscal year)

Operating income%

Yen

Notes: Cautionary Remark Regarding Forward-Looking Statements
Statements made in this document with respect to projected results and other statements that are not of historical fact are
forward-looking statements based on the assumptions, projections and plans of the Company as of the date of this report.
Readers are advised that actual results may differ materially from projections due to risks and uncertainties arising from avariety of factors including shifts in global economic and competitive conditions, foreign currency exchange rates andinterest rates. Please refer to 1. Business Performance on pages 3 to 8 of this document for additional information on
projected results.

－2－

1. Business Performance(1) Analysis of Business Performance(Performance for the Fiscal Year Ended March 31, 2010)
a. General Summary of Results
During the period under review, the Japanese economy recovered gradually due to such factors as progress made ininventory adjustments, the launch of a series of economic countermeasures, improved export conditions, amid a
recovery in overseas demand, as well as a rise in production. In addition, despite the emergence of the global
economy from the worst part of this recession with signs of a recovery taking place in Asia, beginning with China,
overall economic conditions remain severe.
Against this backdrop, total net sales contracted 15.6 percent compared with the previous fiscal year to ¥603.94
billion, as domestic sales decreased 8.7 percent to ¥360.38 billion and overseas sales declined 24.0 percent to ¥243.56
billion.
On the earnings front, gross profit fell 8.5 percent year on year to ¥65.41 billion due to a drop in net sales. Owing to
the effects of reductions in selling, general and administrative expenses, however, operating income increased 4.8
percent to ¥13.12 billion, and ordinary income rose 12.7 percent to ¥14.71 billion. Due to a year-on-year decline inextraordinary loss on valuation of investment securities, net income for the fiscal year under review jumped 29.8
percent to ¥7.53 billion.
b. Segment Summary[Chemicals]

Sales: ¥237.12 billion, a 9.9 percent decrease year on year

Overall sales in the Chemicals segment declined year on year. Despite a recovery trend in demand in the chemicalindustry overall and an increase in the sales of Nagase ChemteX Corp. products, sales for the full fiscal year did not
return to the level set during the previous fiscal year.
In the colors and imaging business, which handles pigments, dyestuffs and other products related to color, despitea drop in sales of dyestuffs for the fiber-processing industry, sales of ink materials for printers, functional color
pigments for plasma displays and conductive polymers rose. As a result, overall sales of the colors and imaging
business increased compared with the previous fiscal year.
In the performance chemicals business, which handles a wide array of products—from general-purpose
petrochemical products derived from naphtha to high-value-added products—overall sales have begun to recover.
However, sales to the coating material/ink, urethane foam, plastic and other industries all fell. Consequently,
overall sales in the performance chemicals business declined.
In the specialty chemicals business, sales to the semiconductor industry of raw materials used in sealants andother products for use overseas increased. However, sales of intermediates and raw materials for the surfactant
and organic synthesis industries fell, resulting in a decline in overall specialty chemicals business sales year on
year. Against this backdrop, products for LCD and other related applications manufactured by Nagase ChemteX
Corp. rose.
[Plastics]

Sales: ¥192.56 billion, a 24.7 percent decrease year on year

Although there were signs of a recovery in demand during the second half of the fiscal year under review, particularly
in China, sales in all regions did not reach the level of the previous fiscal year. Consequently, overall sales decreased
substantially.
Overall sales to office automation and consumer electronics businesses fell significantly during the second half ofthe fiscal year under review. This was attributable to continued weak sales of office automation equipment, bothoverseas—especially in China—and in Japan. This occurred despite signs of a recovery in demand taking place
for such products as consumer electronics in China.
Despite a year-on-year increase in sales in China, owing to higher automobile production and sales volume,
overall sales to the automotive industry decreased year on year due to the major impact of a drop in the number of
automobiles produced in North America and Japan.
In businesses focusing on functional films/sheets and plastic molding products, overall sales fell due to acontraction in construction-related businesses. This occurred despite a rise in sales of functional films andantireflective sheets for such electronic devices as mobile phones.
－3－

[Electronics]

Sales: ¥117.59 billion, a 13.4 percent decrease year on year

Sales in the Electronics segment declined overall. This is attributable to the significant impact of the economic
downturn that began during the latter half of the previous fiscal year, particularly overseas, despite an early recovery
in demand in one area of the LCD industry.
In the electronic chemicals business, sales recovered briskly during the second half of the fiscal year under review,primarily for products manufactured by Nagase ChemteX Corp. and other Group companies. Although sales offormulated epoxy resins used in light electronics and automobiles declined, sales of new products used in suchdevices as mobile phones were favorable, maintaining a level on par with the previous fiscal year. At the sametime, sales of chemicals used to manufacture LCDs jumped substantially due to the undertaking of a new project.
As a result, overall electronic chemicals business sales increased year on year.
In the electronic materials business, sales of precision abrasive materials used in silicon wafer processing used insemiconductors and hard disks remained nearly on par with the previous year’s level. In LCD displays, sales ofmaterials for touch panels and optical film were firm. Nagase also released new materials in response to theongoing slimming of LCD panels. Overall business sales, on the other hand, declined significantly due mainly toa decrease in sales of mobile phone modules as well as a decline in Nagase’s manufacturing and assemblybusiness in China.
[Life Sciences]

Sales: ¥55.54 billion, a 5.7 percent decrease year on year

In the Life Sciences segment, sales in the beauty care products business, which handles cosmetics and health foods,
decreased slightly. In addition, sales of such products as pharmaceutical raw materials and intermediates in the finechemicals business fell, while sales of raw materials used in agricultural chemicals and fermentation products
declined. As a result, overall sales fell.
In the fine chemicals business, sales of pharmaceutical raw materials and intermediates dipped slightly due tosuch factors as a delay in new chemical development plans for the pharmaceutical industry caused by delayed
economic recovery. In enzymes and fermentation products, although sales of new products developed by Nagase
ChemteX Corp. increased, these sales were unable to cover a drop in sales of existing products in this segment,
leading to a dip in sales. Coupled with the recording of lower overseas sales, overall sales in the fine chemicals
business declined.
In the beauty care products business, which handles cosmetics and health foods, despite favorable sales of new
beauty care products, health food sales were weak from the second half of the period under review. Consequently,
overall results in the beauty care products business saw a slight decline.
[Other]Sales: ¥1.12 billion, a 29.3 percent decrease year on year

No specific items to report in this segment during the year under review
Forecast for the Fiscal Year Ending March 31, 2011
Fiscal year ending March 31, 2011
Fiscal year ended March 31, 2010
Year-on-year comparison

Net Sales
Operating Income Ordinary Income
647,000
15,00016,200603,949
13,12814,712
7.1%
14.3%
10.1%

(Millions of yen)
Net Income
9,500
7,537
26.0%

a. Performance Forecast for the Fiscal Year Ending March 31, 2011 (Fiscal 2011)
Regarding the economic outlook for the fiscal year ending March 31, 2011, it is thought that a gradual recovery willcontinue, with China and the rest of Asia acting as growth drivers. By contrast, there is little room for optimism
regarding the domestic economy amid concerns about the slow pace of recovery. This is attributable to factors that
include the limited impact of economic stimulus measures that have sustained the economy to date, deflation andsluggish consumer spending.
Based on the aforementioned conditions, consolidated net sales for the fiscal year ending March 31, 2011 are
expected to rise 7.1 percent to ¥647.00 billion. From a profit perspective, operating income is projected to increase
14.3 percent to ¥15.00 billion, ordinary income to rise 10.1 percent to ¥16.20 billion and net income to jump 26.0
percent to ¥9.50 billion.
An exchange rate of ¥90 to US$1 is used as the basis of performance forecasts.
－4－

b. Forecast by Business Segment
In the Chemicals segment, although sales in the printing business in the China Caminami district are projected to drop,
sales in this segment are expected to increase 4.6 percent year on year to ¥248.00 billion owing to a rise in demand,
especially in China, and a gradual recovery of the Japanese economy. In the Plastics segment, amid a progressive shift
towards purchasing from overseas manufacturers, domestic sales fell. However, sales are forecasted to increase owing
to a recovery of demand in such areas as automobiles in Northeast Asia. Consequently, sales in this segment are
expected to rise 1.3 percent to ¥195.00 billion. In the Electronics segment, sales are expected to jump 24.3 percent to¥146.20 billion as a result of an augmentation of manufacturing capabilities and bases, both in Japan and overseas, tocontend with increasing demand in the LCD-related industry. Buoyed by redoubled efforts to develop and increase
sales of Group products, results in the Life Sciences segment are anticipated to climb 1.9 percent to ¥56.60 billion.
The forecast for the fiscal year ending March 31, 2011 is based on information available to the Company’s
management as of the date of this report. However, forecasts may differ from actual results due to a variety of factors
including unforeseen changes in economic conditions or the operating environment, including the effect of economic
trends in the United States and China and the effect of changes in the supply/demand balance in the electronicequipment, automotive and related markets.
(2) Analysis of Financial Positiona. Summary of Consolidated Balance Sheets
Total assets increased ¥27.12 billion compared with the end of the previous fiscal year, to ¥368.08 billion, despite adecrease in securities and inventories used as current assets. This is mainly attributable to an increase in cash and time
deposits—caused by a rise in notes and accounts receivable and an accumulation of cash and cash equivalents—aswell as to climbing current prices of investment account securities stemming from a rise in share prices.
Total liabilities increased ¥16.29 billion compared with the previous fiscal year-end to ¥165.33 billion due to suchfactors as rises in notes and accounts payable and deferred tax liability. This occurred despite a decrease in short-termloans.
Net assets stood at ¥202.75 billion as of March 31, 2010, up ¥10.82 billion compared with March 31, 2009 due
mainly to an increase in net unrealized holding gain on securities.
Accounting for the aforementioned factors, the net worth ratio fell 1.0 percentage point from 54.1 percent to 53.1
percent.
b. Summary of Consolidated Cash FlowsNet cash provided by operating activities was ¥27.87 billion, due to factors including decreases in working capital andincome before income taxes stemming from a contraction in inventory as well as income before income taxes andminority interests totaling ¥13.53 billion. This occurred despite rises in notes and accounts receivable and notes andaccounts payable.
Net cash used in investing activities amounted to ¥9.43 billion. This reflected such factors as purchases of property,
plant and equipment and investment securities.
Net cash used in financing activities totaled ¥11.75 billion due to such factors as a reduction in short-term loans andthe payment of dividends.
As a result, the balance of cash and cash equivalents as of March 31, 2010 stood at ¥42.80 billion, up ¥6.67 billion
compared with the end of the previous fiscal year.
c.

Trends in Cash Flow Indicators
Fiscal 2006

Fiscal 2007

Fiscal 2008

Fiscal 2009

Fiscal 2010

Net worth ratio

49.6%

48.5%

47.8%

54.1%

Net worth ratio based on market value

51.0%

45.1%

31.2%

28.7%

40.8%

Interest-bearing debt to cash flow ratio―

1.9 years―

0.9 years

0.8 years

Interest coverage ratio

―

12.6

―

36.0

44.7

－5－

53.1%

Notes:-

Net worth ratio = (Net assets – Stock acquisition rights – Minority interests) / Total assets
Net worth ratio based on market value = Market capitalization of shares / Total assets
Interest-bearing debt to cash flow ratio = Interest-bearing debt / Operating cash flow
Interest coverage ratio = Operating cash flow / Interest expense
All indicators are calculated on the basis of consolidated financial figures.
Total market value of shares is calculated by multiplying the closing price of shares at the end of the period by the
total number outstanding shares at the end of the period.
Operating cash flow refers to net cash provided by operating activities in the Consolidated Statements of Cash
Flows. Interest-bearing debt refers to all debt for which interest is payable as declared in the Consolidated
Balance Sheets. Interest expense refers to the amount of interest paid as shown in the Consolidated Statements ofCash Flows.

(3) Dividend Policy and Dividends for the Fiscal Years Ended March 31, 2010 and Ending March 31, 2011
The Nagase Group’s basic policy is the further enhancement of its corporate structure and earnings capabilities tocontinue generating steady dividends for shareholders, based on comprehensive consideration of medium- tolong-term demand for funds to meet future growth and consolidated business performance trends. The Nagase Groupintends to use internal funds effectively to enhance future business activities and its management base.
Based on this policy, Nagase plans to pay a fiscal year-end dividend of ¥9.00 per share for the fiscal year ended
March 31, 2010. Together with the interim dividend, the Company therefore intends to pay an annual dividend of ¥16
per share.
For the fiscal year ending March 31, 2011, Nagase plans to pay a total cash dividend of ¥18 per share, consisting of aninterim and fiscal year-end dividend of ¥9 per share each.
(4) Operating and Other Risks
The Nagase Group is engaged in trading, marketing, research and development, manufacturing and processing, and it
conducts global business activities in the five segments of Chemicals, Plastics, Electronics, Life Sciences and Others.
The following presents an overview of major operating and other risks to which the Nagase Group’s businesses are
subject by their nature and that exert or could exert a significant influence on investor decisions. Forward-looking
statements are Nagase Group estimates as of March 31, 2010.
a. Overall Operating Risk
The Nagase Group conducts a wide spectrum of operations across five fields comprising chemicals, plastics,
electronics, life sciences and others, all from its base in chemicals. The chemical industry both in Japan andinternationally is subject to significant volatility that could impact the Group’s performance and financial position.
b. Product Market Conditions
The Nagase Group is extensively involved in the chemicals, plastics and other businesses that deal in petrochemicals
manufactured from naphtha.
Raw material market conditions and the balance of supply and demand are key factors determining market
conditions for each product. Changes in these conditions could impact the Group’s performance and financial
position.
c. Impact of Fluctuations in Foreign Currency Exchange Rates
The Nagase Group undertakes import and export transactions and non-trade business transactions that involve
foreign currencies. Fluctuations in foreign currency exchange rates impact the value of transactions denominated inforeign currencies when translated into yen. The Nagase Group works to minimize the risks associated withfluctuations in foreign currency exchange rates by hedging these transactions using forward foreign exchange
contracts. However, fluctuations in foreign currency exchange rates could exert a material impact on the Group’s
performance and financial position. The Nagase Group also includes corporations domiciled in countries other thanJapan that maintain their financial statements in currencies other than Japanese yen. Fluctuations in foreign currency
exchange rates could therefore impact the consolidated financial statements upon translation of the accounts of these
corporations into Japanese yen.
d. Risks Involved in Interest Rate Fluctuations
The Nagase Group receives financing for its operating and investment activities through loans supplied by financial
institutions. Consequently, interest-bearing debt is subject to conditions that can cause interest rates to fluctuate. The
Group makes an effort to alleviate risk associated with interest rate fluctuations by utilizing interest swap contracts－6－and other measures. However, there exists the possibility that future interest rate fluctuations may impact the Group’s
operating results and financial position.
e. Risks Involved in Operating Overseas
A significant percentage of the Nagase Group’s activities involve selling and manufacturing overseas, principally in
China, Southeast Asia, Europe and North America. As a matter of policy, the Nagase Group makes every effort todetermine trends in markets overseas and respond appropriately to them. However, failure on the part of the Nagase
Group to make accurate projections due to unexpected events including factors related to the regulatory systems andcustoms of overseas countries could impact the Group’s performance and financial positions.
f. Impact of Changes in Stock Prices
The Nagase Group maintains a portfolio of marketable stock, primarily shares of companies with which the Grouptransacts business, and is subject to the risk of changes in the prices of these shares. As a matter of policy, the Nagase
Group seeks to reduce this risk by continuously reviewing and reorganizing its shareholdings. However, changes instock prices could impact the Group’s performance and financial position. Moreover, a drop in stock prices that
reduces return on pension plan assets could impact the Group’s profitability by increasing retirement benefit costs.
g. Counterparty Credit Risk
The Nagase Group is exposed to credit risk because it extends credit to buyers in a diverse array of transactions inJapan and overseas. As a matter of policy, the Nagase Group moves to reduce credit risk by taking measures such as
obtaining guarantees and collateral in correlation with the financial condition of buyers. In addition, although theNagase Group makes efforts to ensure stable, uninterrupted product procurement, the continuous supply of products
the Group handles could become difficult due to the deterioration of the financial condition or bankruptcy of
suppliers or other parties involved in transactions. Materialization of these risks could impact the Group’s
performance and financial position.
h. 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 a matter 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-leveltechnologies and information through measures 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 businesses. The increased latent risks involved could impact the Group’s
performance and financial position.
i. Product Quality Risk
The Nagase Group operates the Nagase R&D Center and manufacturing subsidiaries to provide high added value tocustomers, and devotes scrupulous attention to the quality of the technologies and products the Group thus provides.
In addition, the Nagase Group assumes liability for the products it handles as an importer, and devotes the sameattention to the quality of these products. However, issues such as defects in these products would terminate sales
and require the Nagase Group to reimburse customers or pay compensation for damages, which could impact theGroup’s performance and financial position.
j. Risks of Handling Various Chemicals
Chemicals are a core business of the Nagase Group, which imports and exports a diverse array of products for abroad range of applications. The Group’s exports are therefore subject to the application of regulations that aim inpart to maintain international peace and safety, including the Foreign Exchange and Foreign Trade Control Law andthe Export Trade Control Order, and imports are subject to the Chemical Substances Control Law and other laws andregulations. The Nagase Group has therefore established the Security Trade Control Committee and the Chemical
Management Committee, which work to assure compliance with the above regulatory systems and with laws related
to chemical product management in China, Europe, North America and elsewhere. Contravention of these regulatory
systems would result in restrictions on business activities, and therefore could impact the Group’s performance andfinancial position.

2.

Information on the Corporate Group

There are no material changes to the business activities of the Nagase Group or the status of affiliated companies
outlined in the Company’s Securities Report filed on June 26, 2009. Accordingly, this information has been omitted.

－7－3. Management Policies(1)

Basic Management Policy

Management Philosophy“The Nagase Group is a member of the world society. As such, it is our duty to maintain good and fair businesspractices and, through continued growth and development, provide society with the goods and services needed while
improving the welfare of our employees.”
Consistent with this management philosophy, the Company has positioned activities that contribute to society,including efforts to maintain good and fair business practices while ensuring continued growth and development, as
its most important goal.
Underpinned by the Group slogan “a technology and intelligence oriented company that turns wisdom into business,”
Nagase seeks to become a unique company that combines the functions of a trading company and a manufacturer by
exploiting technology, information and wisdom enhanced by experience. We will continue reinforcing these functions
and offering business solutions in order to be our customers’ partner of choice in their business operations.
(2)Management Objectives and Medium-Term Strategies

Guided by the aforementioned management philosophy, Nagase has formulated the following objectives andstrategies as it works toward realizing its vision for the future.
-

Allow stakeholders to realize their dreams and ideals through our businesses
Continue to grow and raise value with technology as the foundation in businesses in which we are strong
Anticipate changes in market structure and the environment, and make progress with customers by proposing
original solutions
Contribute to society and the global environment

Confronted by rapid structural and qualitative changes in its external environment, the Nagase Group recognizes theneed to secure sure-footed structural and operating business progress as it works toward realizing its vision for the
future. With this in mind, the Company formulated “CHANGE” 11, its new medium-term management plan, which
covers the three-year period commencing April 2009. By the final fiscal year of the plan, fiscal 2012, the fiscal year
ending March 31, 2012, Nagase has targeted consolidated net sales of ¥720.00 billion and consolidated operating
income of ¥15.00 billion. Recognizing the uncertainty that surrounds future economic conditions, however, theCompany is well aware of the need to adjust these numerical targets as changes in its operating environment dictate.
Looking ahead, the Nagase Group will continue to focus on consolidated operating income as its key numerical target,
representing the true nature and quality of its mainstay business activities. Positioning efforts to “enhance the qualityof its business and operations” as the cornerstone of “ CHANGE ” 11, the Company has also identified thefollowing core initiatives.
1.
2.
3.
4.
5.
6.

Select and concentrate businesses
Build businesses around environment- and energy-related technologies
Strengthen R&D and manufacturing functions
Promote globalization
Strengthen risk management
Promote employee diversity and work-life balance(3) Issues to be Addressed by the Company
Responding to Changes in the Business Environment
With the aim of achieving an ongoing increase in corporate value, Nagase will promote the “select and concentrate”
approach from the perspective of maintaining future growth in response to changes in the business environment inwhich the Company operates. With regard to the Company’s existing businesses, particularly those that exhibit a weak
operating foundation and are notably affected by shifts in the environment, Nagase is undertaking a stringent reviewof new investment activity encompassing investment details, timing and scale, and it is adopting wide-ranging
countermeasures that include business withdrawal. At the same time, the Company is evaluating the probability of
inventory sales and strengthening its business risk management capabilities focusing on asset management andmaintenance.

－8－Implementing Groupwide Strategies under the “CHANGE” 11 Medium-Term Management Plan
“ CHANGE ” 11, the Company’s three-year medium-term management plan was launched in April 2009.
Underpinned by the plan’s overarching basic strategy to “enhance the quality of its business and operations,” Nagase
will pursue the following core initiatives.
1. Select and concentrate businesses
Amid dramatic fluctuations in technological innovation and shifts in its operating environment, the Nagase Group isevaluating the quality and purport of its business strategies to ensure their continued relevance and value. For
businesses that exhibit a weak foundation and are easily affected by changes in business conditions, the Company isadopting wide-ranging countermeasures including business withdrawal. For businesses that exhibit growth potential,
Nagase is promoting Groupwide cooperation and is selectively channeling management resources to the priority
automotive, electronics and life science fields.
During the fiscal year under review, the Company made ongoing efforts to restructure its businesses, withdrew fromthe automobile components molding business—which is not expected to be profitable—and made a decision todiminish the scope of its construction materials-related business. Moreover, in the life sciences field, the Company
undertook active investment in the manufacturing industry. In the electronics field, Nagase promoted a companywide
project related to batteries as well as furthered internal company cooperation straddling divisions related to LEDs. In
the automotive field, Nagase initiated new businesses in India while acquiring lithium ion battery module
development firms.
2. Build businesses around environment- and energy-related technologies
As concerns surrounding the global environment and energy conservation gather momentum, society’s needs both inJapan and overseas focus increasingly on environmental protection and resource recycling. Against this backdrop, theNagase Group is pioneering global technology innovation and working diligently to cultivate new businesses.
During the fiscal year under review, Nagase established the Environment and Energy Office, bolstered efforts todevelop environment- and energy-related technologies and accelerate the promotion of these undertakings throughout
the Group. In addition, Nagase and Nagase ChemteX Corp. obtained approval from the Ministry of Economy, Tradeand Industry for their resource production innovation plan, covering chemical production and supply as well as thecollection and recycling of used chemicals at the LCD industrial complex located in Sakai.
3. Strengthen R&D and manufacturing functions
The Nagase Group is endeavoring to further strengthen and expand the scope of its research, development andmanufacturing capabilities in an effort to provide higher added value to its customers. At the same time, the Group is
striving to lift the overall share of its proprietary high-value-added businesses.
During the fiscal year under review, the Company undertook the acquisition of and investment in manufacturing
companies seen to have potential. Such efforts involved the creation of wholly owned subsidiaries, including alithium-ion battery module development firm and a company that produces and sells organic fertilizers. It also
invested in a pharmaceutical intermediate manufacturing company in India.
4. Promote globalization
Constituting an increasingly higher proportion of its total turnover, the Nagase Group is placing additional weight onoverseas sales and the promotion of its global activities. In this context, and in an effort to secure optimal operations,the Company is endeavoring to strike a balance between its business and regional strategies. In Asia, Nagase isworking to further reinforce its business platform, while in Europe and the United States, the Company is actively
rebuilding it existing business structure and systems. Looking ahead, the Group will focus on the chemical industry in
the Middle East, an area that is expected to experience solid growth.
During the fiscal year under review, the Company commenced sales of plastic additives for the Saudi Arabia-based
Rabigh Refining & Petrochemical Company, which boasts the world’s largest petroleum refining and petrochemicals
plant. Nagase also decided and is making preparations to establish an overseas company in Mexico in order to gain afoothold in markets in Central and South America, which are expected to grow in the future. In Southeast Asia, theCompany is expanding the scope of commercial licenses of an overseas company it established in Vietnam in 2008.
5. Strengthen risk management
To comprehensively identify, control and reduce the various types of risk that arise in conjunction with its operations,
it is imperative that the Nagase Group further enhance its risk management system. Given this situation, the Groupwill continue to bolster its compliance, production and quality control systems, while adhering strictly to its businessrisk management and internal control systems.
－9－During the fiscal year under review, Nagase continued to strengthen risk management systems with regards to theadministration of exported and imported products, including the establishment of internal rules to respond to revisions
in the Foreign Exchange and Foreign Trade Act. In addition, the Company took steps to formulate a business
continuity plan (BCP); as a part of this plan, the Company began transferring its server functions to an outside data
center.
6. Promote employee diversity and improve work-life balance
The Nagase Group is endeavoring to build a support structure that encompasses organizational reform. In promoting
an optimal workplace environment and corporate culture that takes into account the varied and diverse values andlifestyles of employees, Nagase is helping to maximize individual abilities and personalities.
During the fiscal year under review, Nagase continued to promote employee diversity and provide assistance towork-life balance efforts through such actions as encouraging male employees to take childcare leave and theintroduction of a “no overtime day” twice a month.

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