Basic Management Strategy

Mid-term Basic Management Strategy

The mission of Ishihara Chemical Co. Ltd. is to create material surfaces with new functionalities. This is based upon Ishihara Chemical's beginnings as an industrial chemical wholesaler, and has surface chemistry technologies as its core. Since our establishment, however, we have had a growing desire to become a manufacturer ourselves. Nowadays, we operate as a trading company, and also as a manufacturer, that has expanded into the following four business areas for chemical manufacturing in the electronics, automotive and industrial fields: plating chemicals and automatic control equipment for chemicals; electronics-related chemicals and materials; automotive chemicals for the aftermarket; and inorganic compounds and fine chemicals. To date, we have been committed to operating in our four long-standing flagship business areas. But in addition, we are also striving to move into new business areas that complement our existing pillars and to develop forward-looking new technologies and products. As a result, we have created businesses that have grown to the extent that they now help support our bottom line in the areas of plating solutions, automatic control devices for conversion treatment solutions, reagents, products subjected to functional material processing, and submicron nickel powder.

This business evolution has gone in tandem with the overseas expansion of the users of our electronics-related chemicals and materials. We have strengthened our support of these users by opening a representative office in Shanghai in April 2005. Furthermore, in June 2012, keeping pace with our expanding overseas business operations that is progressing in parallel with the advancement of globalization, we further bolstered our overseas operations by establishing another representative office in Bangkok. Meanwhile, we are rapidly laying the groundwork for metallic nanoparticles and new electric materials to become our fifth core business by pushing forward with the expansion of our R&D facility and by investing in new plants and machinery for mass production. At the same time, we are striving toward the enhancement and decentralization of our production capacity in order to maintain the reliability of our production system for our existing business areas.

Ishihara Chemical has adopted the following five mid-term basic management strategies, which incorporate the ongoing plans described above, in order to guide our mid-term activities as we strive to the utmost to secure our profitability, increase our return on equity, and improve our net profit per share, as well as enhancing corporate and shareholder value.

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.
5. Pursue the acquisition of plants and the expansion of production facilities with a view to enhancing production capacity and reducing risk for the production system by distributing production capacity among multiple sites.

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 six directors as well as a Board of Auditors that consists of three corporate auditors, two 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.