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Mid-term Basic Management Strategy

Ishihara Chemical got its start as a wholesaler of industrial chemicals in keeping with the basic concept of “Creating the functions of material surface.” through core surface chemistry technologies. Over time, we transitioned to manufacturing and became a trading company, developing the four businesses of plating chemicals and automatic control equipment for chemicals, electronic materials, automotive chemicals for aftermarket, and inorganic compounds and fine chemicals in the three fields of electronics-related chemicals and materials, automotive chemicals, and industrial chemicals. In addition to nurturing our flagship businesses, we have consistently sought to develop complementary businesses as well as new technologies and products with future potential. As a result, we have gained mature businesses in plating solutions, automatic control devices for conversion treatment solutions as well as reagents, processed functional materials, and submicron nickel powder, all of which help support our business base. To accommodate efforts by users of our electronics-related chemicals and materials products to enter overseas markets, we established a representative office in Shanghai, China, in April 2005 and bolstered our R&D organization by completing a new R&D wing at our Head Office site in July 2006 as part of an effort to expand R&D work in that product segment. At the same time, we’re working to hire and develop a workforce with a high level of technical skill.

Ishihara Chemical has embraced the four-part basic management strategy described below. Going forward, we are committed to making use of our full resources to improve corporate value and increase profits shared with shareholders, for example by ensuring ordinary profit, increasing return on equity, and improving net profit per share.

1. Actively allocate R&D funds for the development of new products and technologies.
2. Develop the three fields and four businesses that anchor our operations in a well-balanced manner while working to increase the profitability of all businesses and improve the company’s overall performance.
3. Become a highly profitable company by working to increase the percentage of in-house products used as well as gross operating profit.
4. Prioritize development of the electronic materials field to make it Ishihara Chemical’s fifth business.

CSR Activities

In addition to developing and bringing to market environmentally friendly products, Ishihara Chemical is working to enhance the environmental protection measures in place at its Head office Tokyo Branch, and Shiga Plant on the shores of Lake Biwa. Our facilities have been certified under the ISO 9001 international quality management system standard as well as the ISO 14001 international environmental management system standard, both of which we use as tools to implement robust maintenance and management of quality and environmental issues. We also seek to contribute to the local communities in which our facilities are located.

Corporate Governance

Ishihara Chemical considers the development and ongoing enhancement of management structures that facilitate efficient and sound management and speedy decision-making as well as management checks and balances implemented from the standpoint of transparency to be essential to its operation.

1. Companywide institutions
   Ishihara Chemical has adopted a Board of Directors that consists of seven directors as well as a Board of Auditors that consists of four corporate auditors, three of whom are outside auditors.
   Board of Directors: Meets regularly once a month and as needed.
   Board of Auditors: Meets regularly once a month.

   To streamline management and further strengthen the functions of the Board of Directors, a Management Council consisting of directors and other members as nominated by the president meets as frequently as every two months to consider important business relating to the general management of the company as well as more narrowly defined issues in an expert and multifaceted manner. The Council reports to the Board of Directors.

2. Internal control system and compliance and risk management structures
   Ishihara Chemical is working to put in place and strengthen a robust system of internal controls. The basic outlines of the system have been decided by the Board of Directors from the standpoint of ensuring management effectiveness and efficiency, the reliability of business and financial reporting, legal compliance, and adequate risk management.

   In terms of compliance, we have put in place a framework by which individual departments report on compliance to a Managers’ Conference and other groups to ensure a broad understanding of the issues involved, allowing each department to share relevant information, apply it to its operations, and verify that those operations conform to legal requirements as well as the rules laid out in the company’s articles of incorporation. In risk management, we have put in place a framework that allows departments to assess their operations for risks that might result in losses, thereby identifying and addressing potential issues and preventing risks from manifesting themselves. In addition to having directors monitor one another’s execution of responsibilities, auditors monitor directors’ execution of responsibilities, and the Internal Control Office verify compliance with legal requirements as well as the rules laid out in the company’s articles of incorporation, we’re working to develop structures to ensure sufficient risk management.