Summary of Consolidated Financial Statements for
the Interim Period of the Fiscal Year Ending March 31, 2008
October 31, 2007
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 listings: Tokyo, Osaka (First Section)
Code number: 8012
http://www.nagase.co.jp
Representative: Hiroshi Nagase, Representative Director and President
Telephone: +86-3-3665-3103
Contact: Takahide Osada, Manager, Accounting Division
Filing of Securities Report (Hanki Hokokusho) (scheduled): December 21, 2007

1. Consolidated Results for the Interim Period Ended September 30, 2007
(April 1, 2007 - September 30, 2007)(Note: Amounts have been rounded down to the nearest million yen.)(1) Net Sales and Income

Interim period ended Sept. 30, 2007
Interim period ended Sept. 30, 2006
Fiscal year ended March 31, 2007

(Percentages represent change compared with the interim period of the previous fiscal year.)
Operating
Ordinary
Net sales(%)
income(%)
income(%)(¥ million)(¥ million)(¥ million)
369,256
7.6
10,6260.2
11,6571.9
343,074
11.4
10,60020.4
11,43514.9
701,321—
21,669—23,231—

Net
Year-on-year
Fully diluted
Earnings per shareincomechangeearnings per share(¥)(¥ million)(%)(¥)
Interim period ended Sept. 30, 2007
(642)—
(5.00)—
Interim period ended Sept. 30, 2006
6,489
(13.8)
50.68
50.49
Fiscal year ended March 31, 2007
13,567—105.85105.51(Reference) Equity in earnings of affiliates: Interim period ended Sept. 30, 2007: ¥203 million, Interim period ended Sept. 30, 2006:¥268 million, Fiscal year ended March 31, 2007: ¥519 million(2) Financial Position
Net assets
per share(¥)
Interim period ended Sept. 30, 2007
433,410
207,72746.2
1,559.03
Interim period ended Sept. 30, 2006
406,583
203,48748.5
1,538.82
Fiscal year ended March 31, 2007
422,859
211,67248.5
1,597.27(Reference) Equity capital: Interim period ended Sept. 30, 2007: ¥200,422 million, Interim period ended Sept. 30, 2006:¥197,346 million; Fiscal year ended March 31, 2007: ¥205,083 million
Total assets(¥ million)

Net assets(¥ million)

Net worth ratio(%)(3) Cash Flows

Interim period ended Sept. 30, 2007
Interim period ended Sept. 30, 2006
Fiscal year ended March 31, 2007

Net cash (used in)provided byoperating activities(¥ million)(5,133)6,470
10,855

Net cash used ininvesting activities(¥ million)(1,268)(2,667)(5,203)

Net cash providedby (used in)financing activities(¥ million)
7,643(6,271)(8,420)Cash and cash
equivalents at end of
period(¥ million)
25,19521,054
21,9192. Dividends
Interim
7.50

Dividends per share (¥)
Year-end
10.50

Full-year
Fiscal year ended March 31, 2007
18.00
Fiscal year ending March 31, 2008
—
—
17.00
(Actual)Fiscal year ending March 31, 2008 (Proj.)—
17.00
Note: The year-end dividend for the fiscal year ended March 31, 2007 included a special commemorative dividend of ¥2.00 per share.

3. Consolidated Forecast for the Fiscal Year Ending March 31, 2008 (April 1, 2007 - March 31, 2008)
Net sales

Fiscal year ending
March 31, 2008(¥ million)(%)

752,000

7.2(Percentages represent change compared with the previous fiscal year.)
Operating income
Ordinary income
Net income
Earnings
per share(¥ million)(%) (¥ million)(%) (¥ million) (%)(¥)
21,9001.1

123,6001.6

7,100(47.7)

55.23

1. Business Performance(1) Analysis of Business Performancea. General Summary of Results
During the interim period ended September 30, 2007, moderate economic expansion continued in Japan,
backed by an increase in exports and an increase in capital investment reflecting high levels of corporate
profits. Worldwide, although a subprime loan problem emerged in the United States, the global economy
remained steady, with no major decline.
As a result of Nagase’s efforts to maximize its business performance under such conditions, domestic sales
increased 2.6 percent compared with the same period of the previous year to ¥208.99 billion, and overseas sales
increased 15.0 percent to ¥160.25 billion, for total net sales of ¥369.25 billion, an increase of 7.6 percent.
Gross profit increased 7.2 percent to ¥38.70 billion due to the increase in net sales, but selling, general andadministrative expenses increased due to factors including amortization of actuarial gain in retirement benefit
accounting. Consequently, operating income increased 0.2 percent to ¥10.62 billion and ordinary income
increased 1.9 percent to ¥11.65 billion. However, Nagase decided to voluntarily recall portable DVD players
and other products sold by the Company. This recall resulted in an extraordinary loss of ¥14.30 billion, and a
net loss of ¥0.64 million for the interim period.
b. Summaries by Business Segment[Chemicals] Sales: ¥130.65 billion, 8.3 percent increase year-on-year
Overall sales were solid in the Chemicals segment. Domestic sales of Nagase Group products increased, andoverseas sales expanded, particularly in China and elsewhere in Asia.
•••

In the performance chemicals business, which covers relatively upstream areas, overall sales increased as aresult of strong sales of plastic raw materials and additives. Sales of urethane and coating materials mainly
to the automotive industry, on which this business is focusing, also increased.
In the colors and imaging business, which handles pigments, dyestuffs and other products related to color,sales of ink and toner materials for printers, copiers and other office equipment increased slightly, but salesof products such as functional color pigments for plasma displays and other applications decreased slightly.
Sales of dyestuffs were flat, including overseas sales. As a result, overall sales of the colors and imaging
business overall were also flat.
In the speciality chemicals business, which handles a wide range of surfactants and oil solutions used as
raw materials for detergents, cosmetics and other household toiletries, as well as materials for organic
synthesis such as silicones and fluorochemicals, sales were generally strong. Sales of products made by
Nagase ChemteX Corp., the Group’s core manufacturer, showed particular growth, centered on products
for LCD-related applications.

[Plastics] Sales: ¥126.52 billion, 5.3 percent increase year-on-year
Sales in the Plastics segment increased overall. Sales to the automotive industry expanded, as did overseas
sales of products for precision equipment and electronic equipment applications, mainly in the ASEAN region.
However, sales of engineering plastics and equipment-related products, primarily to customers in Taiwan, andsales of certain other domestic businesses, decreased.
••

Overall sales increased in businesses centered on precision equipment and electronic equipment
applications such as printers and copiers. While overseas sales increased in the ASEAN region and in the
Hong Kong and Shanghai regions, sales of engineering plastics for CDs, DVDs and other media
applications as well as sales of molding equipment for manufacturing LCD components decreased.
Sales to the automotive industry increased overall. Sales continued to expand in Asia, including China andThailand and other ASEAN countries. Sales in North America and Europe also increased, while sales inJapan were flat.

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•

•

In the housing equipment and building materials business, sales of original Nagase products using woodcomposite materials increased, but sales of building materials were down slightly due in part to a decreasein housing starts. Sales to the packaging materials industry and sales of the electronic component assemblybusiness, which is part of downstream operations in the plastics business, also decreased.
Among the Group’s domestic manufacturing companies, sales increased at Setsunan Kasei Co., Ltd.,
which handles plastic coloring and compounding. Sales increased marginally at Kotobuki Kasei Corp., amanufacturer of plastic trays used in food packaging, but decreased slightly at Totaku Industries, Inc., amanufacturer of various types of flexible hose and pipes for industrial applications and household
appliances.

[Electronics]
Sales: ¥84.17 billion, 14.0 percent increase year-on-year
Sales in the Electronics segment increased steadily overall. Sales of equipment decreased, but sales of LCD
components expanded. In addition, products including precision abrasive materials for semiconductors andother applications sold well.
•••In the electronic chemicals business, which is centered on original products manufactured by Nagase
ChemteX Corp. and other Group companies, sales of supply and control equipment for front-end-of-line
photolithography for LCDs and semiconductors decreased. However, sales of chemicals and formulated
epoxy resins were steady, resulting in a marginal increase in sales overall.
In the LCD-related business, including post-processing, sales of optical film and LCD modules decreased,
but sales of derivative businesses including LCD component processing and aluminum housing materials
for electronic equipment increased strongly, resulting in an overall increase in sales.
Sales of precision abrasive materials used in silicon wafer processing and encapsulants used in
post-processing of semiconductors increased steadily. However, sales of substrates for hard disks were flat,and sales of our surface inspection systems and other communications and imaging products manufacturedby the Nagase Group decreased.

[Life Sciences] Sales: ¥26.77 billion, 4.8 percent increase year-on-year
In the Life Sciences segment, sales in the beauty care products business, which handles cosmetics and healthfoods, decreased, but sales of pharmaceutical raw materials and intermediates in the fine chemicals businessexpanded, resulting in an overall increase in sales.
••

In the fine chemicals business, sales of fermentation products were flat, but strong domestic sales ofpharmaceutical raw materials and intermediates, in addition to growth in overseas sales centered on North
America and Europe, resulted in an overall increase in sales.
In the beauty care products business, despite the contribution of new cosmetic products, sluggish sales ofhealth foods resulted in an overall decrease in sales.

[Others] Sales: ¥1.12 billion, 61.4 percent decrease year-on-year
Sales of the Others segment decreased substantially because of the transfer of the business of direct sales of
DVD movie software and other products to consumers in the second half of the previous fiscal year, in addition
to a voluntary recall of portable DVD players and other products.
(3) Forecast for the Fiscal Year
(Million yen)

Net Sales

Operating Income Ordinary Income

Net Income

Year ending March 31, 2008

752,000

21,90023,6007,100Year ended March 31, 2007

701,321

21,66923,231

13,567

7.2%

1.1%

1.6%

(47.7)%

Year-on-year increase (decrease) (%)

The forecast for the fiscal year is calculated on the basis of information available to the Company at present.
However, the forecast may differ significantly from actual results due to unforeseen changes in economic
conditions or the operating environment, including economic trends in the United States and China, changes incrude oil prices that affect the materials industry, and changes in the supply/demand balance in the market for
LCDs and other electronic equipment- related products.

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(2) Analysis of Financial Positiona. Summary of Consolidated Balance Sheets
Total assets increased ¥10.55 billion compared with the end of the previous fiscal year to ¥433.41 billion
despite a decrease in investments in securities due to a decline in stock prices and the sale of stocks. Main
factors in the increase included an increase in notes and accounts receivable reflecting the increase in net sales,
and an increase in other current assets due to an increase in deferred tax assets associated with the provision ofa reserve for voluntary recall of products.
Liabilities increased ¥14.49 billion from the end of the previous fiscal year to ¥225.68 billion due to factors
including the provision of a reserve for voluntary recall of products and increases in short-term loans andlong-term debt.
Net assets decreased ¥3.94 billion compared with the end of the previous fiscal year to ¥207.72 billion, mainly
because net unrealized holding gain on securities included in net assets decreased and the Company recorded a
net loss for the interim period.
As a result, the net worth ratio declined 2.3 percentage points from 48.5 percent to 46.2 percent.
b. Summary of Consolidated Cash FlowsNet cash used in operating activities was ¥5.13 billion, due to factors including an increase in working capitaland income taxes paid.
Net cash used in investing activities was ¥1.26 billion, as a result of factors including purchases of property,
plant and equipment and intangible fixed assets that offset proceeds from sales of investments in securities.
Net cash provided by financing activities was ¥7.64 billion. Cash dividends paid were offset by factors
including proceeds from long-term debt and a net increase in short-term loans.
As a result, the balance of cash and cash equivalents at the end of the interim period was ¥25.19 billion, an
increase of ¥3.27 billion compared with the end of the previous fiscal year.

c. Trends in Cash Flow Indicators
Year ended
March 31, 2004

Year ended
March 31, 2005

Year ended
March 31, 2006

Year ended
March 31, 2007

Six months
ended Sept. 30,
2007
46.2%

50.3%
49.8%
49.6%
48.5%
Net worth ratio
Net worth ratio based on market
38.8%
40.8%
51.0%
45.1%
40.3%
value
Interest-bearing debt to cash
2.6 years
8.2 years–
1.9 years–
flow ratio
Interest coverage ratio
13.9
3.3
–
12.6
–
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 ofoutstanding 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 amountof interest paid as shown in the Consolidated Statements of Cash Flows.

4(3) Dividend Policy and Dividends for the Fiscal Years Ended March 31, 2007 and Ending March 31,
2008
The Nagase Group’s basic policy is to further enhance its corporate structure and earnings capabilities tocontinue generating steady dividends for shareholders, based on comprehensive consideration of
medium-to-long-term demand for funds to meet future growth and consolidated business performance trends.
The Nagase Group intends to use internal funds effectively to enhance future business activities and its
management base.
During the interim period ended September 30, 2007, Nagase posted a net loss on both a consolidated andnon-consolidated basis due to factors including an extraordinary loss of ¥14.3 billion in connection with avoluntary recall of portable DVD players and other products. Therefore, the Company has regrettably decided
not to pay an interim cash dividend. However, as the Nagase Group’s main businesses are performing well, theCompany intends to pay a year-end dividend of ¥17.00 per share, thus maintaining its initial dividend forecast
for the fiscal year.
(4) Operating and Other Risks
The Nagase Group is engaged in trading, marketing, research and development, manufacturing and processing,and 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 September 30, 2007.
a. Overall Operating Risk
The Nagase Group conducts a wide spectrum of operations in the fields of chemicals, plastics, electronics andlife sciences from its base in chemicals. The chemical industry both in Japan and internationally is subject tosignificant 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 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
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 than Japan that maintain their financial statements in currencies other thanJapanese 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 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 Groupmakes every effort to determine 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 and customs of overseas countries could impact the Group’s performance andfinancial position.
e. Impact of Changes in Stock Prices
The Nagase Group maintains a portfolio of marketable stock, primarily shares of companies with which theGroup transacts business, and is subject to the risk of changes in the prices of these shares. As a matter of policy,
5the Nagase Group seeks to reduce this risk by continuously reviewing and reorganizing its shareholdings.
However, changes in stock prices could impact the Group’s performance and financial position. Moreover, adrop in stock prices that reduces return on pension plan assets could impact the Group’s profitability byincreasing retirement benefit costs.
f. Counterparty Credit Risk
The Nagase Group is exposed to credit risk because it extends credit to counterparties in a diverse array oftransactions in Japan and overseas. As a matter of policy, the Nagase Group moves to preclude credit risk withrisk hedges 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 thefinancial condition or bankruptcy of counterparties could impact the Group’s performance and financial
position.
g. 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.
h. Product Quality Risk
The Nagase Group operates the Nagase R&D Center and manufacturing subsidiaries to provide high added
value to customers, and devotes scrupulous attention to the quality of the technologies and products the Groupthus provides. In addition, the Nagase Group assumes liability for the products it handles as an importer, anddevotes the same attention 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, which could impact the Group’s
performance and financial position.
i. Risks of Handling Various Chemicals
Chemicals are a core business of the Nagase Group, which imports and exports a diverse array of products fora broad range of applications. The Group’s exports are therefore subject to the application of regulations that
aim in part to maintain international peace and safety, including the Foreign Exchange and Foreign Trade
Control Law and the Export Trade Control Order, and imports are subject to the Chemical Substances Control
Law and other laws and regulations. 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 and financial position.

2. Overview of the Nagase Group
Disclosure is omitted, as there are no significant changes from the “Business Description” and “AffiliatedCompanies” in the most recent Securities Report (Yuka Shoken Hokokusho) issued on June 28, 2007.

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3. Management Policies(1) Basic Management Policy
The content has not changed significantly from that announced with the Summary of Consolidated Interim BusinessResults on October 30, 2006, and is summarized as follows:

Nagase seeks to become a unique company that combines the functions of a trading company and amanufacturer 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 intheir business operations.
The summary of consolidated interim business results in which the management policy is described in greater
detail is available at the following URL:
http://www.nagase.co.jp/english/investor/08-h19.html(2) Management Objectives and Medium-Term Strategies
The content has not changed significantly from that announced with the Summary of Consolidated Interim
Business Results on October 30, 2006, and is summarized as follows:
Medium-term Management Plan WIT2008
The Nagase Group has launched WIT2008 (W: Wisdom, I: Intelligence, T: Technology), a new
medium-term management plan for the three years from April 2006. We believe that now, when performanceis good, is the best time to reinforce our corporate structure in order for the Nagase Group to continue to growfor the long term. Therefore, we have designated WIT2008 as a period of reinforcing our corporate structure
for sustainable growth by balancing offensive and defensive strategies while strengthening both. Accordingly,
we have set numerical targets for fiscal 2008, the final year of WIT2008, of consolidated net sales of ¥770
billion and consolidated operating income of ¥24 billion. As a management indicator, we will place primary
importance on consolidated operating income, which clearly indicates the performance of main businesses inabsolute amounts as well as explicitly showing changes in performance.
The summary of consolidated interim business results in which the management objectives and medium-term
strategies are described in greater detail is available at the following URL:
http://www.nagase.co.jp/english/investor/08-h19.html(3) Issues to be Addressed by the Company

Implementation of the Company-wide Strategies of WIT2008
To reinforce the corporate structure for sustainable growth, we are conducting operations according to the following sevenstrategies.

a. Expand the Business Base
We are working to expand existing businesses, establish new ones and expand our production bases. Our aim is
to further solidify the industry position that we have established to date through a variety of business activities
that leverage the relationships with many excellent customers we have cultivated and our network of sales andproduction bases, primarily in Asia.
During the interim period ended September 30, 2007, Nagase decided to establish a joint venture company in Japan tooversee its textile-related business in China. In addition, we established a representative office of Nagase (Taiwan) Co.,
Ltd. in Xiamen, Fujian Province, China. At the plastics coloring joint venture in Vietnam, a masterbatch factory began
operations, and construction is under way on a compounding plant.

b. Invest Aggressively in Strategic Areas
Centered on electronics, life sciences, automotive and overseas operations, which are the strategic areas of
WIT2008, we will invest in carefully selected projects while ensuring they are compatible with our technology
7and market strategies. In total, we plan to make investments on the order of about ¥30 billion over three years
for projects such as new construction and renovation of production facilities at Group manufacturing
companies.
During the interim period ended September 30, 2007, in the area of electronics, Nagase International Electronics Ltd.
established a new base to expand its manufacturing and processing business in South China. In the area of life sciences,
Nagase ChemteX Corp. constructed a new facility for large-scale production of phospholipids, a functional foodingredient.

c. Restructure for High Profitability
To increase our proportion of higher-margin businesses, we are developing original Nagase Group businesses
centered on our manufacturing companies and the Nagase R&D Center. In this way, we are working to achieve
higher profitability for the entire Group by increasing the proportion of high value-added businesses.
During the interim period ended September 30, 2007, operations began at the Nagase Application Workshop, which wasestablished in Amagasaki, Hyogo Prefecture to centralize analysis and product development functions for plastics, coating
materials, and materials and additives related to textile processing. At Nagase ChemteX Corp., we introduced a recycling
plant and stripping agent facility as part of our efforts to build a recycling business for chemicals used in LCDs andsemiconductors. In addition, we constructed a manufacturing facility for nanoscale inorganic composites, which haveapplications in products such as optical film. Meanwhile, we continue to review unprofitable businesses, and based on our
strategy of specializing in electronic materials in our epoxy business, we withdrew from construction-related operations in
the formulated epoxy resin business, including sewage and water pipe corrosion inhibitors.

d. Maintain a Sound Financial Position
Nagase will continue to emphasize cash flow oriented management. While working to improve operating cash
flow, we will constantly review assets and focus on maintaining a sound financial position. In particular, tomanage the operating assets of our overseas bases, we are promoting the development of an inventory
management and operating structure that achieves a balance between meeting customer needs and minimizing
stock requirements.
e. Ensure Thorough Risk Management
To comprehensively identify, understand and control the various types of risk that arise in conjunction with
its operations, the Nagase Group must further enhance its risk management system. Given this situation, we
continue to review our organizational structure to implement and enhance thorough regulatory oversight inall our business activities. In addition, we established the Internal Control System Committee, which is
improving internal controls for financial reporting and working to create a business risk management
system.
f. Improve the Consolidated Management System
To strengthen Group management, the Nagase Group is stepping up the measures it has been taking to enhanceties with subsidiaries and affiliates in each business. These measures include promoting sharing of strategies
and information, and personnel exchange. In addition, we are working to enhance the Group operating
structure by reviewing the functions of domestic and overseas subsidiaries and affiliates and by promoting
more efficient use of management resources.
g. Enhance Personnel Quality and Quantity
Nagase’s most important asset is its people. We are currently hiring diverse personnel with a high level ofexpertise who are able to respond to the changes in our business structure and handle new businesses. In
addition, we have established a Human Resources Development Team and are conducting a training programthat will ensure employees of overseas subsidiaries and affiliates contribute strongly to the Nagase Group’s
future growth. In these and other ways, Nagase is promoting human resource development at all levels,
including at subsidiaries and affiliates.

8