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Guiding Principles

We believe the future of good business is deeply rooted in the past. By following our guiding principles designed to enhance customer focus, productivity, innovation and profitability, we are able to make continual process and product improvements for customers, while producing solid results for our shareholders. Our ability to produce commercial innovations on a continual basis for our customers is the foundation of our success.

Our main guiding principles include the following:

• Decentralisation
• 80/20 Process
• Innovation

Decentralisation

We operate a collection of business units and brands across diverse worldwide end markets. Our decentralised operating strategy and focus place our businesses close to the people who buy our products. This familiarity results in entrepreneurial sales and support activities, where we can quickly identify and respond to customer needs at the business unit level by providing original, customized products and service.

Another advantage of diversification is that it allows us to overcome market uncertainties. Strength in one market helps offset fluctuations in another. When assets are used efficiently (thanks to our 80/20 process) across a broad mix of markets, risk is reduced and we optimize our ability to produce improved financial results and shareholder returns.

80/20

A driving force behind much of our success at Performance Polymers Europe is our 80/20 business process, a practice that keeps us focused on our most profitable products and customers. The concept underlying 80/20 is simple: 80 percent of a company’s sales are derived from the 20 percent of its product offering being sold to key customers.

Put simply, too often companies do not spend enough time on the critical 20 percent of their key customers and products and spend too much time on the less important 80 percent. Our view is that once you know who your high volume customers are, you can begin to understand what drives your growth and what your true costs are in the business. At the same time, we don’t typically walk away from low volume customers; we just treat them differently, via outsourcing and specialty pricing programs.

Known internally as the ITW Toolbox, this repository of proven strategies and techniques guides our business process and helps us find new ways to enhance customer satisfaction as well as drive margin growth and profitability. Specific strategies that help us reach our goals include: product line simplification, segmentation, in-lining, cellular manufacturing and outsourcing, as well as manufacturing to the market rate of demand.

Innovation

ITW’s culture is rooted in developing commercial innovations. Many of our product success stories begin on-site, where our customers’ needs are most apparent. Thanks to the expertise of ITW’s management and sales force (many of whom are trained engineers), we are well equipped to provide practical and time-sensitive solutions to the most complex situations. Our seasoned workforce intimately understands the manufacturing challenges facing customers and can develop original solutions from the ground up.

We also have the ability to support our businesses through our ITW Technology Center. Working on a request-only basis from our business units, the technology center provides advanced consulting on issues such as cutting-edge materials, mechanical designs and manufacturing processes.

ITW’s passion for creating commercial innovations is no secret, considering we typically rank in the top 100 of patent recipients in the United States. In 2007, we had nearly 20,000 unexpired patents and pending applications worldwide and ranked 79 of top issuers of U.S. patents in 2006.

In addition, each year we recognize the worldwide patent contributions of our people through the ITW Patent Society. Founded in 1969, the society has 800 members, including hundreds of engineers, technicians and other innovative thinkers employed by ITW (including hundreds of our talented salespeople). Nearly 185 of the members are considered Distinguished Fellows, recognized for having patents on inventions for products with noteworthy commercial success, and 21 individuals are Hall of Fame members, distinguished for their lifetime achievement.