NAGASE & CO., LTD.

Consolidated Brief Financial Report (03/2000)(1) Management policy
1. Basic policy of management≪ Management Philosophy ≫Nagase Group as a member of society will do the best to contribute to the society andimprove the welfare of its employees through further development of the Group by providing
products and services demanded by the society through its good and fair business practices.
Keeping in mind of the above Management Philosophy, we make our new management vision
for 21st century clear as "The Technology and Intelligence Oriented Company that turns ourwisdom into business".
This vision is based on an idea "that every answer is in each market" and thorough customeroriented in developing business with our own "technology" and "information" furthermore
experience-added Wisdom not adhering to traditional concept of "a trading firm".
Although the beginning of economical recovery can be finally , a market is demanding us asteady continuos change making impossible to rest on stable commercial rights. Recognizing
we live in the time that simple intermediate function in business is no longer effective, wethink it is now the time that any kind of enterprise can not fulfill function by oneself independent
from others. It is imperative for us to hold every necessary functions that let our customer
select us as a reliable partner without hesitation when they are creating new value. It isnecessary to substantiate R&D and manufacturing function, reinforce a physical distribution
efficiency, and keep to expand a friendly relationship with people of many long-establisheddomestic and overseas business connections, and , above all, to build up our own humanresources. Selecting the business area based on the above line, we will steadily continue tooffer constant proposal for the market.
2. Basic policy about profit distribution.
While intensifying our corporate strength and securing retained earnings for future businessdevelopment, our basic policy is continue to carry on a stable dividend distribution.
We will make full use of our internal reserves for effective investment on a prospective
business as well as intensify our financial position under foreseeable more and more severe
future business conditions. And we think we would like to make a profit return to ourshareholders by time to time buybacks and scrapings of stock with the profit incurred.
3. Mid-to-long term management strategy

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NAGASE & CO., LTD.

Effective from this April, we introduced our mid-term management program "WIT 2000" (W:Wisdom, I: Intelligence and T: Technology)that is defined a focussing business strategy andobjectives to cover three years from 2000 to 2002.
Allocating Capitalstock to every operational division-headquarter, and setting Nagase style
ROE (NROE) (see the note) as a new management index, we will achieve 7% up of NROE
on a consolidated base by the end of 2002.A backbone of this program and a concrete action
to be taken are follows;① Intending to gain the profit more than capital cost and to continue profitable growth, wewill positively invest on the focused business area such as electronics, healthcare
principally within Nagase's profit. As the first step, we decided to make Nagase-Chiba
Ltd. our 100% subsidiary and try to strengthen liquid-encapsulation agent for next
generation semiconductor package. Also we have a plan to make a new investment on
the next-generation semiconductor related area.
② As a part of focussing policy on consolidated management, we are looking into
reinforcement of our manufacturing and sales group through integration and abolition ofthem. Concerning chemical manufacturing area, we enhanced fine-chemical manufacturing
through merging two companies of Nagase Chemicals Ltd. and Nagase Electronic
Chemicals Ltd. into one company in April, this year. Including our R&D Center, we are
now considering an integration of fusion technology of bio and organic synthesis.
Concerning our sales group, we integrated four dyestuff traders this April for sales
power up and improved competitiveness to develop more localized customer-orientedbusiness.
③ We divide our activity into four major segments of chemicals, plastics , electronics,
healthcare and clarified the core-business and the challenge-business for each segments tomake our resources put together for more effective use.
Our target is to achieve the sales of 640 billion yen with an operating income of 9.2billion yen,
and a net profit of the term of 8.3billion yen on a consolidated base by 2002.
(Note)
NROE = Nagase profit / equity capital at the beginning of term
Nagase profit =profit after tax+ (depreciation±appraisal profit/loss)×(1- effective tax rate)2

NAGASE & CO., LTD.

Nagase Profit means the profit incurred through business operation, namely, so-called cashflow.
4 . The matter to be dealt by the Company(1) Upbringing of a new business
Though there is still enough room for us to play our role in intermediary transaction of raw
materials, we will try to bring up a new business with view including M&A beyond a
traditional framework of trading firm . We will positively invest on such business area aselectronics and healthcare, particularly focussing on the semiconductor-related in electronics
area as well as a health food in the healthcare area.
(2) Intensification of overseas business development.
Our shares of overseas business is now 29 % mainly in Asia with plastics but we will put
more emphasis on the largest market of North American continent coping with the changes ofthe facts of life fixing our eyes on a move among big industries. To be more concrete, we will
try to develop more business involved in manufacturing such as Joint Venture business withproducers.
(3) Reinforcement of group manufacturing firms
By working of a divisionwise consolidated management, we will centralize our businessresources into the highest strategic business area including integration and abolition ofbusiness for strengthen manufacturing capability within our group. Not only depending thestrength within the group but we will consider an improved competitiveness of the groupthrough an alliance with other groups ,capital acquisition, and M&A.
(4) Buildup of IT
The up or down of an enterprise is depend on how to use IT. From now on we have to not
only depend on only in-house management resources but also to make use of external
resources through the outsourcing on order to improve our productivity; so we will build up
new sales route by making use of Internet. Along this line, we established "E-CommerceCommittee" in August, last year, and each web-site of "Web Diet" to sell diet food, "Nagase
Direct" to sell DVD decoder, movie and game software, and "PLUSWOOD" to sale ofbuilding new materials in January this year.
(5) Our move against environmental problems

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On April 28, 2000, we were awarded ISO 14001 certification, an international standard forenvironmental management, for a whole company including Tokyo & Osaka Head Office,Nagoya branch, R&D Center, and every sales offices.
We established "a terrestrial environmental Committee" in May, last year and exerted best
efforts as a whole company by setting up an environmental policy and building up an industrial
management system, particularly, setting a motto as policy " business promotion taking
environmental protection into account” and features our environmental protection activity incontribution to environmental safety through creation and expansion of ecobusiness.

(2) Business performance.
1 . Outlook of FY 1999
Business environment;
Japanese economy during the current term displayed mild improvement indicating increased
investment on IT related private sector thanks to effects of public investment; however,personal consumption was not so much improved as expected under severe unemployment
and reduced income which clearly shows that Japanese domestic economy is still in stagnant
and does not show any sign of true recovery.
On the other hand in overseas, the U.S.A. economy maintains firm while European and Asiannations show the conspicuous move towards recovery.
Consolidated sales
The turnover of the current term recorded 568.29 billion yen, up 0.9% of last year
Domestic sales was 404.15 billion yen, 0.4% down of last yet while overseas sales increased
to 164.13 billion yen, 4.1 % up of the last year.
The outlook by business【 Chemical business】 Sales: 249.97 billion yen (up 2.4% over last year)
In domestic sales, functional products for recording material shows a well-growth andthe product group including coating material, plastic additives, dyes and pigments were as
good as that of last year . In overseas sales, electronics-related chemicals particularly in
Thailand as well as colorformer, pharmaceutical raw and intermediate materials in
European and U.S. markets were fairly well .
【 Plastics business】 Sales: 192.71 billion yen (3.3% down over last year)
In spite of strong yen, overseas sales of engineering plastics for business machine and4

NAGASE & CO., LTD.

home electronics increased due to partially economic recovery in Asia and partially
production shift from Japan to overseas while sales of raw materials and die for
automobile and electronics parts in Europe and the U.S.A was also increased to exceed
last year level.
On the other hand, domestic sales of PET resin and the products made by the subsidiaries(food container, electronic parts, tray, information tube for optical cable ) was firm but
recorded less sales than last year due to reduction in production of automobiles,accelerated production shift of business machine and home electronics to overseas as well
as affects of business slump in cable industry.
【 Electronic business】 Sales: 109.77 billion yen (up 5.1% over last year)
Favorably influenced by worldwide demand recovery of personal computer-related
products, liquid crystal-related products marked 53.9 % up over last year while sales ofraw material and products for semiconductor showed 30.4% up over last year, too.
And liquid and equipment employed in the manufacturing process of liquid crystal, etc.
was recorded 36.2% up over last year due to production expansion and investment to
new equipment ,etc. in Taiwan. In the meantime, a recording media centering on aluminum
substrate for hard disc marked a significant drop-off due to shift to high density storage
and decline of the market price.
【 Health Care and other business】 Sales: 15.83 billion yen (up 2.1% over last year).
Medical Care-related products displayed a good sales supported by good demand frombacteria testing instrument and radioactive related products resulting in up 12.3% over lastyear. For beauty care-related area, summer use toilet water "new conditioning lotion", a
new skin-care "MIFORE" were put on the cosmetic market while a drink-type "Royal
Jelly BM700" and "Bellmush 100" were introduced into health food market but sales
decreased by 3.9% over last year due to stagnant personal consumption and change in
consumer needs from high quality to low price.

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NAGASE & CO., LTD.

Consolidated profit and loss
Profit was increased by 3.9% over last year recording 55.28 billion yen resulting in 4.6% up
over last year of 8.14 billion yen in operating income after deducted selling and general andadministrative expenses due to increase in number of consolidated subsidiaries. The ordinary
income recorded 9.88 billion yen, up 16.3% over last year due to increment of investment
profit on equity method and the net income of the term was 6.37 billion yen, up 78.9% overlast year thanks to reduction in domestic corporate income tax, etc.
The current term dividend and implementation of buyback of treasury stocks
eight (8) yen per share dividend as same as the preceding term is scheduled based on ourmanagement policy of a stable dividend.
As the result, 27.4% of dividend payoff ratio and 4.0% of net earnings on shareholders' equity
for the current term ,and 1.1% of dividend ratio of stockholders' equity were recorded.
And for the purpose of returning profit to shareholders, we have carried over theimplementation of buyback and scrapping of stock from the last year resulting in buyback andscrapping of 454.2 million stocks with value of 2.117 billion yen during the term.

2. Prospective for next term.
( million yen)
Sales

Operating

Ordinary income

Net income

income3/ 2001

580,000

8,300

11,3006,500

3/ 2000

568,293

8,147

9,885

6,371

Gr. ratio

2.1%

1.9%

14.3%

2.0%

Regarding economic prospects in future, capital investment (for plant and equipment) seems
continue to show expanding trend but no significant improvement in personal consumption canbe seen due to unfavorable employment and income expectation causing continuous feeling ofpoor economic recovery. Under these circumstances, our divisionwise future businessprospective are as follows;【 Chemicals business 】 Sales: 253.0 billion yen (1.2% up over last year)
Crude oil production increase by OPEC as a background, we expect reduction in naphtha
price from a latter half of next term, possibly resulting in a stop of increasing chemical priceand even demand for price reduction from the market may be seen. Domestic sales is6

NAGASE & CO., LTD.

estimated to show about the same level or slight increase over the preceding year, while
overseas sales may continue to be firm.
【 Plastics business 】 Sales: 200.0 billion yen (3.8% up over last year)
Substantial recovery of domestic sales cannot be expected but we estimate increased
profit by expanding sales of our handling line to our selected important customers andcommencing sales of profitable wood products based new material , etc. And though we
expect continuos increase in sales volume for overseas sales, overseas sales increase may
be small due to strong Japanese yen.
【 Electronics business 】 Sales: 113.5 billion yen (up 3.4% over last year)
Sales of semiconductor and crystal liquid related products are looking forward to be firm,and large increase in liquid and equipment employed in the manufacturing process of liquid
crystal, etc. can also be expected, On the other hand, we estimate declining in handlingof encapsulation products due to their production shift to Asia.
【 Healthcare and other business 】 Sales: 13.5 billion yen (down 14.7% over last year)
In beauty care-related area, we are going put such main products as new makeup series
and new health food on the market while sales in medical care related-area is estimatedto be declined due to transfer of sales rights of biochemical testing related products.
As a result, the next term sales will be 580.0 billion yen with ordinary income of 11.3 billion
yen and the current term net income of 6.5 billion yen. We schedule eight (8) yen per sharedividend distribution.
Further, the savings shorts of retirement payment debt (difference at the time of changing theaccounting standard) at the time of the end of March, 2000 is 6.9 billion yen for which wewill do lump sum wipe off as an extraordinary deductions at the end of March, 2001, and havea plan to make appropriation of an equivalent amount of an extraordinary income bycontribution gain of retirement payment trust and sold out gain of holding property, etc.
Accordingly the above profit estimation is not affected.

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