Basic Management Policy

In Japan where the resources are scarce, development of natural gas which is a valuable domestic resource and the supply of the gas to the customers are the main businesses of the KNG Group. Additionally, the Group manufactures and sells iodine which is a valuable resource worldwide.

As a corporation group involved in the basic businesses which support industries and life in the region, the Group places importance on the stable supply of gas. At the same time, by reinforcing the price competitiveness with cost reduction or by developing new businesses, the Group is trying to deal appropriately with the changes in the situation such as the intensification of the competition between energy types, etc. due to more and more deregulation. Moreover, the Group is responding to the social credibility by achieving a balance between the business activities and the natural environment by promoting the development of environment-friendly natural gases.

As a leading producer of iodine in the world, we are striving for a stable supply of iodine along with promotion of streamlining and improvement in the efficiency of the production system to further improve our ability to compete in overseas markets. Also, We are continuously engaged in the development of high-value-added products since iodine is an essential element to the human body, and is widely used as a raw material for pharmaceutical producta and industrial products.

While the core of our business development is gas and iodine, the Group is also putting efforts into the peripheral businesses aiming at growth and development of the entire group.

Issues to be Addressed

Under the mid-term management plan formulated to cover the five years from fiscal year 2011, the KNG Group will work to implement the strategies outlined below.

In connection with the gas-related operations which are the core business of the Group, as concerns focus on the issue of global warming, interest in natural gas, which produces lower carbon dioxide emissions than other fossil fuels, is reflected in the important position it occupies in the Basic Energy Plan formulated by the Japanese government in 2010.

Against a background of continuing instability in the international energy situation, the Group, as a supplier of natural gas and a producer of the domestic natural gas which offers a stable long-term supply source, is committed to harmonizing its production activities with the environment and carrying out active capital investment so as to establish a stable supply system and maintain and enhance the volume of production.

Meanwhile, given the need to respond to competition from other forms of energy by promoting the environmental advantages of natural gas, which contributes to the goal of a low-carbon society, the Group will work to expand sales, making active use of a number of gas sources.

In the iodine and brine business, we will work to streamline our production system and enhance our supply capacity so as to meet the globally expanding demand for iodine. In parallel, we will adopt a proactive approach to research and development activity that exploits the special features of iodine and brine resources, continuing in this way to pioneer new fields of use and create high added value.

In the construction business and our other businesses, to contend with the fierce competition for contracts and intense price competition, we will sustain all-out efforts to attract orders by enhancing technological abilities and reducing costs.

Finally, to maintain and build on relationships of mutual understanding and trust with local communities and other stakeholders, we will perform appropriate information disclosure and maintain adequate levels of communication. Equally, we will promote efficiency across our operations, demonstrate awareness of our public duty to ensure a stable supply of valuable domestic resources, and work to implement compliance-based management, ensure reliable safety systems, and make our business operations environment-conscious. Through these efforts, we are committed to responding in good faith to the public confidence placed in the KNG Group.

Basic Policy Concerning Profit Distribution

To produce and to steadily supply valuable domestic resources for a long term, We have set the enhancement of internal reserves that form the foundation of the management base and continuous stable dividends as our basic policy.

As for the internal reserve fund we will allot it for investment in production and transportation equipment of natural gas and research and development of the extraction technology, etc. and use it effectively to improve our business performance in the future.

Based on this policy, dividends are basically paid twice a year during each fiscal year, i.e. the interim dividends and year-end dividends. As for the decision-making bodies concerning dividends, the year-end dividend is decided in the shareholders' meeting and the interim dividend is decided in the board meeting according to the articles of incorporation.