Underpinned by the Company's overarching philosophy as well as the self-assurance and pride that comes from being the world's leading producer of molybdenum compound-based lubricant oil additives, the Souma Factory will continue to proactively engage in activities that maintain and enhance the environment, safety and quality while ensuring business continuity during periods of emergency and crisis.

Building on its existing Business Continuity Plan, which identifies the three core objectives of (1) ensuring uninterrupted production and shipment in the event of such emergencies as a major earthquake or outbreak of new influenza virus; (2) providing livelihood support to its network of employees; and (3) contributing to the prosperity and well-being of local communities, the Souma Factory is taking steps to acquire Business Continuity Management System (BCMS, BS25999-2) certification during fiscal 2009.

In March 2009, the Factory received an excellence award in a zero emission activity proposals contest sponsored by the Fukushima Prefectural Government in recognition of its waste reduction and recycling activities.

Since the commencement of operations in 1995, the Souma Factory has maintained an unblemished record with regard to accidents and disasters. Accordingly, there have been no facility accidents or disasters that have resulted in the suspension of activities or external impact.

Recognizing that in the normal course of Factory operations accidents and disasters can occur at any time, we make every effort to identify all sources of potential danger, examine the adequacy and efficacy of countermeasures and implement initiatives that move beyond mere accident and disaster reduction to their total elimination. In this manner, we are working to the ultimate goal of a "completely safe factory."

Boilers that had steadily deteriorated with age were upgraded in fiscal 2008. In reducing the capacity of each boiler to less than one-half and introducing a unit quantity control method aligned to the amount of stream used, we achieved both substantial energy savings and significant reductions in environmental load. Based on the replacement and upgrade of boilers, the Souma Factory is now fully compliant with the Air Pollution Control Law. Accordingly, relevant data has been omitted from this Report.

The Souma Factory undertakes to reuse, separate and sell off its industrial waste in an effort to substantially reduce the amount of waste treatment by commissioned subcontractors.

Turning to treatment measures by commissioned subcontractors, plastic and other wastes are crushed and compressed to be utilized as raw materials and fuels for paper and cement factories as well as recycled materials.

Sponsored by the Prefecture of Fukushima, the Souma Factory received the Governor's Excellence Award for its zero emissions activities in the "Mottainai / Zero Emissions Activity Contest" in March 2009.

The Souma Factory implemented a variety of measures during fiscal 2008 in its efforts to conserve energy. These included the upgrade of boilers to curtail the use of heavy fuel oils as well as cutbacks in power consumption attributable to the elimination and consolidation of air compressors and the introduction of inverter controls. At the same time, we placed considerable weight on the effective use of waste heat and oil while proactively taking steps to improve productivity output through enhanced processes as a part of our overall efforts to conserve energy.

Moreover, factory-wide energy consumption declined throughout the period under review due to the substantial impact of production adjustments brought about by the worldwide recession from the second half of fiscal 2008.