The Nippon Kayaku Group recognizes that disclosing information to its shareholders and investors in a timely and fair manner is an important issue, as is strengthening checks and balances to ensure management transparency. We believe that consensusbased decision-making by our Board of Directors, operating under the oversight of our auditors, is a corporate governance system that will allow our management to function more effectively.

Status of Programs

To remain nimble in this rapidly changing business environment, we use an Executive Directors System that separates the functions of business execution from oversight and decision making. This enables each function to be strengthened to ensure effective decision-making and agile operations.

Board of Directors Meeting (Held Monthly)

To ensure prompt decision-making, the Board is limited to 10 members. Decisions related to important business matters are made through the stipulations of the Board of Directors in conformity with relevant laws and our articles of incorporation. Operational oversight functions also are being strengthened.

Management Meeting (Held Weekly)

The Management Meeting deliberates important matters related to management and business affairs and receives reports from business divisions. The President, as the chairman, makes decisions after thorough deliberation among the Management Meeting members.

Executive Directors Meeting(Held Quarterly)

The Executive Directors Meeting is chaired by the President, and attended by all Executive Directors (up to 25) appointed by the Board of Directors. Executive Directors report on the status of the businesses they have been entrusted with from the Board of Directors and the President as well as other necessary matters.

Management Strategy Meeting(Held Semi-Annually)

Important management matters at the Board Meeting such as basic policy of our group and management strategy are distributed to management personnel through the Management Strategy Meeting to ensure thorough understanding and awareness.

Board of Auditors Meeting(Held Monthly)

The Board of Auditors consists of five auditors (three external). The members monitor and oversee the duties of Directors from an independent position based on the stipulations of the Board of Auditors..

In addition, the Company clarifies authority and responsibility by management position, segregation of duties and company organization structure, setting rules that stipulate duties and powers. This promotes organized and efficient operations and establishes a framework of accountability.

Internal Control System and Risk Management System

Since the establishment of the Risk Management Division, consisting of the Compliance Department and Risk Management Department on June 1, 2006, we have sought to maintain and improve our internal control system. Effective March 1, 2009, the division was renamed the Internal Control Management Division and added the J-SOX Department. The Division was also placed in charge of overseeing the internal controls of the entire Nippon Kayaku Group, including financial affairs.

The Compliance Department generates and executes a compliance action plan. The Department also conducts regular compliance training sessions to raise employee awareness on compliance matters. The Risk Management Department is tasked with holding regular risk management training sessions as well as assessing risks for the entire company and designating a depar tment responsible for developing a specific action plan for each risk factor. Whenever new risk factors are identified, a relevant department will be promptly assigned to address such factors. The J-SOX Department works to ensure that a structure is in place to facilitate reliable financial reporting and assesses the design and application of this structure, reporting findings to President.

Status of Internal Audits and Audits by the Auditors

An Audit Division has been established as an internal organization separate from the Board of Auditors. Its purpose is to conduct internal audits that will contribute to the prevention of improper behavior and errors in the performance of duties by management and employees. With work scheduled over a fiscal calendar, this division conducts audits of operations, including those of Group companies.

As for audits by the auditors, the auditors monitor and oversee the business conducts of the directors from an independent position through activities such as attendance at Board of Directors Meeting and audits of business affairs. Auditors activities are governed by audit policies, audit plans, and auditor role descriptions resolved by the Board of Auditors.

Establishment of Various Committees

CSR Management Committee

Decides CSR action policy and mid-term action plan as well as confirms the validity of the measures based on KAYAKU spirit and CSR philosophy to undertake corporate social responsibility sustainably.

Ethics Committee

Works to formulate policies and measures for compliance and implementation of the Charter of Business Conduct and Code of Business Conduct and to evaluate companywide compliance.

Risk Management Committee

Develops and maintains a risk management structure for risk preventive measure, damage control and damage remediation over the full range of management issues.

Disclosure Committee

Scrutinizing important managerial information of the company and maintains and improves the structure for timely and proper external disclosure.

Environment, Safety, and Quality Assurance Management Committee

Presents its fiscal year policies on environment, safety, and quality assurance matters. Assesses results, and devises plans for improvement.

Energy Conservation and Global Warming Prevention Committee

Makes mid- and long-term plans, confirms earch activity and discusses measures to problems based on the policy about energy conservation and global warming prevention.
These results are disclosed to inside and outside the company.

Research & Development Management Committee

Develops company-wide research and development policies and strategies. A forum to report, discuss and make decisions on important research and development matters.