These documents have been translated from Japanese originals for reference purposes only.
In the event of any discrepancy between these translated documents and the Japanese originals, the originals
shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any otherforms of damages arising from the translations.
Denka Co., Ltd.
(Securities Code: 4061)

NOTICE OF CONVOCATION OF
THE 159TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
Date and Time:Thursday, June 21, 2018 at 10:00 a.m.

Place:

Nihonbashi Mitsui Hall, COREDO Muromachi 1 (reception desk on the 4th floor)
2-1, Nihonbashi-Muromachi 2-chome, Chuo-ku, Tokyo

Proposals to be resolved:
Proposal No. 1:

Appropriation of Surplus

Proposal No. 2:

Election of Eight (8) Directors

Proposal No. 3:

Election of One (1) Substitute Audit & Supervisory Board Member

Please exercise your voting rights in writing or via the Internet by
5:00 p.m. on Wednesday, June 20, 2018.

1

Message from the Management
To Our Shareholders
Promoting the new management plan “Denka Value-Up,” with the aim of Recreating Ourselves as a“Specialty-Fusion Company” as we move toward realization of “The Denka Value,” corporate
philosophy.
Enclosed please find the Notice of Convocation of the 159th Ordinary General Meeting of Shareholders.
We would like to take this opportunity to express our gratitude to you for your continued support of Denka
and make some observations concerning the Company’s results and current initiatives.
During the fiscal year ended March 31, 2018 (fiscal 2017), the Japanese economy showed moderate
recovery, with signs of a rebound in personal spending and exports as capital investment and production bothpicked up. Likewise, the global economy continued to show moderate recovery momentum overall, including
strong performance by the U.S. economy. In the chemical sector, corporate earnings generally held up, despite
the high yen and rising raw material prices in the second half.
In these economic circumstances, the Denka Group strove to expand its businesses and secure profitability
by working to increase sales in Japan and overseas and cutting costs. As a result, in terms of businessperformance for fiscal 2017, sales increased year on year to the Company’s highest ever sales, owing toincreased sales volume, mainly for chloroprene rubber and electronics and innovative products, and revisionsof selling prices in response to rising raw material prices. In terms of profits, expenses increased owing to
upfront investment for future growth in the healthcare field and other areas, but increased sales volume andbetter trade conditions contributed to earnings growth, and as a result the Company posted its highest-everoperating income, ordinary income and profit attributable to owners of parent, by a significant margin.
In the previous management plan Denka100, the Company established three growth strategies, “create themost optimal production system,” “scrutinize every cost element,” and “focus on growth drivers and develop
next-generation products,” in addition to implementing various policies, focusing on the three priority fieldsof health, environment and energy, and infrastructure. These initiatives have yielded steady and remarkable
operating results. We have also proactively engaged in forward-looking growth investment aimed at securing
more robust bases for each business segment.
Now, from fiscal 2017, we have launched the new management plan, “Denka Value-Up” under thefollowing three growth visions, based on our readiness to recreate ourselves with an advanced corporate
structure that anticipates the demands of the times, in order to survive in these tumultuous times.
First, we will aim to recreate ourselves as a “Specialty-Fusion Company” capable of promoting a constantrange of specialty products and businesses, in all aspects of our organization, from business structure totechnical development and talent pool.
In addition, we will aim to recreate ourselves as a company capable of overcoming changes in theenvironment amid increasingly uncertain global markets and achieving “Sustained Growth,” by significantly
improving productivity through innovating all processes, from manufacturing to research and operations.
At the same time, we will aim to secure “Sound Growth” as a company, by linking productivity
innovations to work style reforms and collaborating with employees to pursue stakeholder happiness.
In order to achieve these three growth visions, we will implement two growth strategies, a businessportfolio shift and the introduction of innovative processes, as we focus our management resources on threepriority fields, “Healthcare,” “Environment and energy,” and “High-value-added infrastructure,” and engage
in proactive strategic investment (e.g. execution of M&A and business alliances, reinforcement of our R&D
structure, and reallocation of human resources) to achieve numerical targets.
In addition to the above growth strategies, in order to realize “The Denka Value,” our corporate philosophy,
we have re-adjusted our focus to the following factors essential to sustainable corporate growth: “placing theutmost priority on safety”; “giving due consideration to environmental concerns”; “nurturing and better
utilizing human resources”; “making social contributions”; and “promoting compliance and establishing a
sense of ethics that goes beyond compliance”; and we are implementing “ESG” initiatives.
Moreover, in April 2017, we switched to a chairman and president-based business execution system, toenable us to appropriately and rapidly address the expansion and globalization of business domains, and in
October 2017, we established a “The Management Advisory Committee,” with Outside Officers comprising amajority of members, as an advisory body to the Board of Directors, in order to further enhance corporate
governance by using the diverse range of views and advice obtained from Outside Officers in regard to2

important management issues, such as nomination, remuneration, and other governance-related issues, toenable transparent, objective management decision-making.
Under the corporate philosophy “The Denka Value,” the Company aims to achieve sound growth throughthe measures of the new management plan, “Denka Value-Up,” thereby recreating ourselves as “Denka – aninspiration to the world.” In these endeavors, we request your understanding and look forward to yourcontinued support.
For details of the new management plan “Denka Value-Up” and the Company’s “ESG” initiatives, pleasesee pages 29 to 32 of the Notice of Convocation.
May 2018
Shinsuke Yoshitaka
Representative Director, Chairman, Board of Directors
Manabu Yamamoto
Representative Director, President3

(Securities Code: 4061)
May 30, 2018
To Our Shareholders:Manabu Yamamoto
President
Denka Co., Ltd.
1-1, Nihonbashi-Muromachi 2-chome, Chuo-ku, TokyoNOTICE OF CONVOCATION OF
THE 159TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 159th Ordinary General Meeting of Shareholders of Denka Co., Ltd.
(the “Company”) to be held as described below.
If you are unable to attend the meeting in person, you may exercise your voting rights in writing bysubmitting the Voting Rights Exercise Form by mail or via the Internet etc. as described in the “Guide for
Exercise of Voting Rights” (Page 6). Please review the attached Reference Documents for the General
Meeting of Shareholders and exercise your voting rights by 5:00 p.m. on Wednesday, June 20, 2018.
1. Date and Time:Thursday, June 21, 2018 at 10:00 a.m.

2. Place:

Nihonbashi Mitsui Hall, COREDO Muromachi 1(reception desk on the 4th floor)
2-1, Nihonbashi-Muromachi 2-chome, Chuo-ku, Tokyo

3. Meeting Agenda:
Matters to be reported: 1. The Business Report, Consolidated Financial Statements for the Company’s
159th Term (from April 1, 2017 to March 31, 2018) and results of audits by
the Accounting Auditor and the Audit & Supervisory Board of theConsolidated Financial Statements
2. Non-consolidated Financial Statements for the Company’s 159th Term (from
April 1, 2017 to March 31, 2018)
Proposals to be resolved:
Proposal No. 1: Appropriation of Surplus
Proposal No. 2: Election of Eight (8) Directors
Proposal No. 3: Election of One (1) Substitute Audit & Supervisory Board Member4◎ The following are posted on the Company’s website at http://www.denka.co.jp/ in accordance with law
and Article 16 of the Company’s Articles of Incorporation and thus are not included in the documents
attached to this notice of convocation.
•Company’s Systems and Policies (Systems to Ensure the Appropriateness of Operations, Operational
Status of Systems to Ensure the Appropriateness of Operations, and Basic Policies regarding theControl of the Company) in the Business Report•Consolidated Statement of Changes in Net Assets and Notes to Consolidated Financial Statements•Non-consolidated Statement of Changes in Net Assets and Notes to Non-consolidated Financial
Statements
The Business Report, consolidated financial statements and the non-consolidated financial statements
audited by the Audit & Supervisory Board Members and the Accounting Auditor include the above
documents posted on the Company’s website.
◎ If any revisions are made to the Business Report, Consolidated Financial Statements, Non-consolidated
Financial Statements, or Reference Documents for the General Meeting of Shareholders, they will be
posted on the Company’s website at http://www.denka.co.jp/.

5<Guide for Exercise of Voting Rights>
The following three methods are available for exercising voting rights pertaining to the Company’s General
Meeting of Shareholders.

(1) Exercise of Voting Rights by Attending the Meeting
Please bring the enclosed Voting Rights Exercise Form with you to the meeting and submit it to thereceptionist at the meeting venue.
* In the case of exercising voting rights by attending the meeting as a proxy, please submit a document
evidencing the authority of proxy to the receptionist at the meeting venue together with the Voting Rights
Exercise Form. Please note that such proxy must be one shareholder of the Company with voting rights
in accordance with Article 18 of the Company’s Articles of Incorporation.
(2) Exercise of Voting Rights in Writing by Mail (Voting Rights Exercise Form)
Please indicate your vote for or against the proposals on the enclosed Voting Rights Exercise Form and send
the completed form to us so that it is received by 5:00 p.m. on Wednesday, June 20, 2018.
(3) Exercise of Voting Rights via the Internet etc.
Please access the website for exercising voting rights designated by the Company (https://www.web54.net),
use the “Voting Rights Exercise Code” and the “Password” indicated on the enclosed Voting Rights Exercise
Form, and follow the on-screen guidance. Please vote for or against the proposals by 5:00 p.m. on Wednesday,June 20, 2018.
(Inquiry about Exercise of Voting Rights via the Internet etc.)
Sumitomo Mitsui Trust Bank Stock Transfer Web Support Dial
Tel: 0120-652-031(office hours: 9:00 a.m. - 9:00 p.m.)*Handling of duplicated exercise of voting rights
If you exercise your voting rights both by Method (2) Exercise of Voting Rights in Writing by Mail (Voting
Rights Exercise Form) and by Method (3) Exercise of Voting Rights via the Internet etc., the exercise of
voting rights by Method (3) Exercise of Voting Rights via the Internet etc. shall prevail regardless of the timeof arrival of the votes.
In addition, if you exercise your voting rights multiple times via the Internet, etc., the vote made last shallprevail.

6

Reference Documents for the General Meeting of Shareholders

Proposal No. 1: Appropriation of Surplus
It is proposed that the surplus be appropriated as follows:
Matters concerning year-end dividends
Reflecting our determination to return the profits yielded by the initiatives of the previous Denka100
management plan, we formulated the Policy on Shareholder Returns in November 2014. At the same time,with the aim of achieving further growth, we set aside a budget for strategic investment, including M&A.
1. Policy on shareholder returns
Target total payout ratio*: 50%* Total payout ratio = (Dividends paid + treasury stock purchased) / consolidated net income
2. Methods for returning profits to shareholders(1) Dividends: Maintain steady payment of cash dividends, with minimum payout ratio set at 30%(2) Purchase of treasury stock: Flexibly purchase treasury stock in view of the stock price trend and themarket environment
3. Budget for forward-looking strategic investments
After returning profits to shareholders, the Company will appropriate funds from retained earnings aswell as cash inflows to finance such investments. The total amount budgeted for is approximately¥50.0 billion (for the four years from 2014 to 2017).
4. Term
Four years to the end of fiscal 2017, the target year of the Denka100 management plan
During the five-year period starting from 2018 covered by the new management plan “Denka Value-Up,”
the Company will remain committed to a target total payout ratio of 50%, and we will focus on maintaining
the stable payment of cash dividends while flexibly carrying out share repurchases by giving due
consideration to such factors as a trend in stock prices.
With respect to the year-end dividend for the 159th term, in view of the above, the Company proposes thefollowing.
(1) Type of dividend property
Cash(2) Allocation of dividend property and total amount thereof¥55 per share of common stock of the Company
Total amount of dividends: ¥4,822,180,825(3) Effective date of dividends from surplus
June 22, 2018
Furthermore, the Company conducted a share consolidation of its common stock at a ratio of one sharefor five shares on October 1, 2017.
Calculated after adjustment for the consolidation, the interim dividend of ¥10 per share for the fiscal year
under review is equivalent to ¥50 per share, and therefore if this proposal is approved as originally proposed,
the amount of dividends per share for the full year will be ¥105 for the fiscal year under review.

7

Proposal No. 2:

Election of Eight (8) Directors

The terms of office of all of the eight (8) Directors will expire at the conclusion of this Ordinary General
Meeting of Shareholders. Accordingly, the election of eight (8) Directors is proposed.
The Company’s views regarding Directors and the candidates for Directors are as follows.
[The Company’s views regarding Directors]
In order to promote the new management plan, “Denka Value-Up” aimed at realizing “The Denka Value,”
the Company’s corporate philosophy, the Company aims to strengthen the management structure with
Directors and Executive Officers, while enriching the governance structure and supervisory functions.
In electing Directors, internal Directors are chosen from persons who possess a wealth of experience andachievements in various divisions within the Company, while also possessing insights and adequate
specialized knowledge as Director, and Outside Directors are chosen from persons who possess
specialization required for continuous growth and improvement in corporate value of the Company and wide
insights based on a wealth of business experience. The Company believes that a well-balanced election of
persons with various knowledge, experience, and abilities is important for the Board of Directors as a whole.
Additionally, the Company believes that Independent Directors should comprise at least one-third of
Directors, and implements this policy.

No.

Name

Positions and responsibilities at the Company

Attendance atBoard ofDirectors
meetings

1

Reappointed Shinsuke Yoshitaka Representative Director, Chairman, Board of Directors

13/13(100%)

2

Reappointed

Representative Director, President and Chief Executive
Officer

13/13(100%)

3

Reappointed

4

Reappointed

5

Reappointed

6

Reappointed

7

Reappointed

8

Reappointed

Manabu Yamamoto

Director and Executive Vice President
13/13
Supervisor of Life Innovation
Mitsukuni Ayabe(100%)
President and Representative Director of DENKA SEIKEN
Co., Ltd.
Director and Senior Managing Executive Officer
10/10
Chief Scientific Officer (CSO*)(100%)Norihiro Shimizu Chief R&D Officer(After assuming
New Business Development Dept., R&D Promoting Dept., officein June 2017)
Intellectual Property Dept.
Director and Managing Executive Officer
Supervisor of Infrastructure & Social Solutions
13/13
Kenji Nakano Chief Compliance Officer (CCO)(100%)
Secretary Dept., Internal Auditing Dept., Administrative
Dept., Legal Dept., HR Dept.
Director
13/13
Yasuo Sato
(Outside Director)(100%)(Independent Director)
Director
13/13
Akio Yamamoto (Outside Director)(100%)(Independent Director)
Director
13/13
Tatsutsugu Fujihara (Outside Director)(100%)(Independent Director)*CSO = Chief Scientific Officer

8

Name
(Date of birth)[Director since]
No. [Director’s term ofoffice][Attendance at Boardof Directors meetings]

Career summary and significant concurrent positions, etc.

April 1974
January 2001
June 2006
June 2007
June 2008
April 2010

Joined the Company
General Manager of Corporate Planning Dept. of theCompany
Director of the Company, General Manager of Corporate
Planning Dept. and Investor Relations & Corporate
Communications Dept.
Senior Executive Officer of the Company
Director and Senior Executive Officer of the Company
Representative Director and Managing Executive Officerof the Company
Representative Director, President and Chief Executive
Officer of the Company
Director of Koatsu Gas Kogyo Co., Ltd. (present)
Representative Director, Chairman, Board of Directors of
the Company (present)

Number ofshares of theCompany held

27,000Shinsuke Yoshitaka(February 1, 1951) April 2011
Age: 67
June 2011
April 2017
[June 2008][10 years
1 * at the conclusion ofthis Ordinary General Reasons for selection as the candidate for Director
Subsequent to responsibility for management strategy, medical business, accounting andMeeting offinance, and investor relations and corporate communication, Mr. Shinsuke Yoshitaka
Shareholders]promoted the “Denka100” management plan as Representative Director, President. In[100% (13/13)]
addition to a wealth of experience and results as a manager, he serves as the Chairman of(Reappointed)
the Board of Directors, as the Representative Director and Chairman based on his deep
knowledge and understanding of the Group. The Company has judged that he canappropriately fulfill the role of supervising the business execution of Directors andExecutive Officers, and requests his election as Director.
Message to shareholders
With good faith and determination, as laid out in the Company’s corporate philosophy (theDenka Principles), I will make every effort to boost corporate value. In addition, as
Chairman of the Board of Directors, I will endeavor to operate the Board of Directors in a
way that is sound and transparent, from the perspective of shareholders and investors.
Note: No material conflict of interest exists between the Company and the above candidate.

9

Name
(Date of birth)[Director since]
No. [Director’s term ofoffice][Attendance at Boardof Directors meetings]

Career summary and significant concurrent positions, etc.

April 1981
June 2004
April 2009
April 2011
April 2013
June 2013
April 2015
Manabu Yamamoto(March 31, 1956) April 2016
Age: 62
June 2016

Joined the Company
General Manager of Functional Ceramics Div. ofElectronics Materials Business Group of the Company
Executive Officer of the Company, General Manager ofElectronics Materials Div. of Electronics Materials
Business Group of the Company
Senior Executive Officer of the Company
Managing Executive Officer of the Company, Head ofElectronics & Innovative Products
Director and Managing Executive Officer of theCompany
General Manager of Corporate Planning Dept. of theCompany
Director and Senior Managing Executive Officer of theCompany
Outside Audit & Supervisory Board Member of Koatsu
Gas Kogyo Co., Ltd. (present)
Representative Director, President and Chief Executive
Officer of the Company (present)

Number ofshares of theCompany held

6,600

[June 2013]
April 2017
[5 years
2 * at the conclusion ofthis Ordinary General
Reasons for selection as the candidate for Director
Meeting ofThrough work experience at overseas subsidiaries and many years of responsibility for the
Shareholders]electronics materials business division, Mr. Manabu Yamamoto possesses international[100% (13/13)]
viewpoints and adequate operational experience. After he integrated new business strategies(Reappointed)
and accounting and finance strategies across the entire Denka Group as the executive
responsible for management strategy, accounting and finance, and investor relations andcorporate communication divisions, Mr. Yamamoto currently serves as President andRepresentative Director. Based on his rich experience and impressive track record inCompany administration, it is hence judged by the Company that he can appropriately fulfil
the role of determining important business execution and supervising the businessexecution of Directors and Executive Officers, and requests his election as Director.

Message to shareholders
Under the corporate philosophy, “The Denka Value,” in order to meet the expectations andtrust of all stakeholders, I aim for the Company to achieve sustainable growth throughfurther specialization of our business structure and productivity innovations, in addition to
being a sound company that fulfills our social responsibility.
Note: No material conflict of interest exists between the Company and the above candidate.

10

Name
(Date of birth)[Director since]
No. [Director’s term ofoffice][Attendance at Boardof Directors meetings]

Career summary and significant concurrent positions, etc.

April 1977
June 2004
June 2007
April 2010
June 2011
April 2013
Mitsukuni Ayabe(September 23, 1952) April 2015
Age: 65
April 2016

Joined the Company
General Manager of Research and Development Dept. of
the Company
Executive Officer of the Company, Managing Director of
Denka Singapore Pte., Ltd., Managing Director of
Denka Advantech Pte., Ltd.
Senior Executive Officer of the Company, Director andChairman of Denka Chemicals Holdings Asia PacificPte., Ltd.
Director and Managing Executive Officer of theCompany
Director and Senior Managing Executive Officer of theCompany
Representative Director and Senior Managing Executive
Officer of the Company
Representative Director, Executive Vice President andChief Operating Officer of the Company
Director, Executive Vice President of the Company(present)
President and Representative Director of DENKA
SEIKEN Co., Ltd. (present)

Number ofshares of theCompany held

11,800[June 2011]
April 2017
[7 years
3 * at the conclusion ofthis Ordinary General
Meeting of
Shareholders]
Reasons for selection as the candidate for Director[100% (13/13)]
Subsequent to management of research and development and overseas subsidiaries and(Reappointed)
responsibility for medical business, accounting and finance, and investor relations andcorporate communication, Mr. Mitsukuni Ayabe directed the overall technical divisions as
the general executive for planning and development, while also assisting the President as
Executive Vice President and Chief Operating Officer. Currently, Mr. Ayabe is in charge of
the Life Innovation Division and supports strategies in the growing healthcare field. The
Company has judged that he can appropriately fulfill the role of determining importantbusiness execution and supervising the business execution of Directors and Executive
Officers, and requests his election as Director.
Message to shareholders
I will “create a more trusted company” by ensuring thorough awareness of social
contribution and compliance, as well as working toward our targets by promoting the new
management plan, “Denka Value-Up” to all employees.

Note: No material conflict of interest exists between the Company and the above candidate.

11

Name
(Date of birth)[Director since]
No. [Director’s term ofoffice][Attendance at Boardof Directors meetings]

Career summary and significant concurrent positions, etc.

April 1980
October 2008
April 2009
April 2011
April 2013
Norihiro Shimizu(October 2, 1955)
Age: 62

April 2017
June 2017
April 2018

Joined the Company
General Manager of Electronic Materials ResearchInstitute of the Company
Executive Officer of the Company
Senior Executive Officer, General Manager of Central
Research Institute of the Company
Managing Executive Officer, General Manager ofResearch and Development Dept. of the Company
Managing Executive Officer of the Company
Director and Managing Executive Officer of theCompany
Director and Senior Managing Executive Officer of theCompany (present)

Number ofshares of theCompany held

5,000

[June 2017][1 year4 * at the conclusion of Reasons for selection as the candidate for Director
Mr. Norihiro Shimizu has ample practical experience, including oversight of research andthis Ordinary Generaldevelopment activities for many years in the fields of polymers and electronic materials.
Meeting ofCurrently, as Chief Scientific Officer and Chief R&D Officer, he is responsible for all
Shareholders]
research and development operations, and for business strategy including development of[100% (10/10)]
next-generation products and of new businesses. In light of his deep expertise and(Reappointed)
experience in research and development operations, we judge him to be well-suited for
decision-making regarding significant business matters, and for supervision of businessexecution by directors and executive officers, and so seek his election as a Director.

Message to shareholders
Through continuous innovation leveraging the comprehensive capabilities of the Group, I
am committed to ensuring sustainable growth and improving corporate value byimplementing business strategy at individual businesses in a way that strikes a balance
between profitability and sustainability.
Note: No material conflict of interest exists between the Company and the above candidate.

12

Name
(Date of birth)[Director since]
No. [Director’s term ofoffice][Attendance at Boardof Directors meetings]

Career summary and significant concurrent positions, etc.

April 1980
June 2007
April 2011
April 2013

Kenji Nakano(November 17, 1955)
Age: 62

April 2014
June 2016

Joined the Company
General Manager of Secretary Dept. of the Company
Executive Officer of the Company, General Manager of
HR Dept. of the Company
Executive Officer of the Company, Representative in
China
Managing Executive Officer of the Company
Director and Managing Executive Officer of theCompany (present)

Number ofshares of theCompany held

5,000

Reasons for selection as the candidate for Director
Through work experience at plants and subsidiaries, and many years of responsibility for[June 2016]
management divisions such as general affairs, legal, and HR divisions, and the[2 years
5* at the conclusion of Representative in China, Mr. Kenji Nakano possesses adequate operational experience.
Currently, Mr. Nakano is continuing to promote strengthening risk management andthis Ordinary Generalcompliance systems as the executive responsible for compliance, as well as overseeing
Meeting ofgeneral affairs, legal matters, personnel affairs, internal auditing and other areas, in addition
Shareholders]
to being in charge of the Infrastructure Social Solutions Division. The Company has judged[100% (13/13)]
that he can appropriately fulfill the role of determining important business execution and(Reappointed)
supervising the business execution of Directors and Executive Officers, and requests hiselection as Director.
Message to shareholders
I realize that achieving the three visions in “Denka Value-Up” will lead to corporate growthand development, and as I work toward this goal, I will divide our tasks into those we can
execute immediately, those that require time to implement, and those where we must lay thefoundations for future implementation.
Note: No material conflict of interest exists between the Company and the above candidate.

13

Candidates for Outside Director
Name(Date of birth)[Director since]
Number of
No. [Director’s term ofCareer summary and significant concurrent positions, etc.
shares of theCompany held
office][Attendance at Boardof Directors meetings]
April 1965
Joined TEIKOKU SANSO Co., Ltd. (present Air Liquide
Japan Ltd.)March 1987
Director and Vice President of Electronics Div. of Air
Liquide Japan Ltd.
April 1992
Vice President of Worldwide Electronics Div. of L’Air
Liquide S.A. (until March 1996)
March 1999
Representative Director and President of Air Liquide Japan
Ltd. (until January 2003)
January 2003 Director and Chairman of Japan Air Gases Co., Ltd. (until
March 2005)
Yasuo Sato
March 2005
Director and Advisor (part-time) of Air Liquide Japan Ltd.
(September 30, 1942)(until September 2007)
Age: 75
June 2005
Outside Director of Denal Silane Co., Ltd. (until February
2008)(Outside Director) May 2006
President & CEO of I.B. Associates Co., Ltd. (present(Reappointed)
Wisemech Corporation) (until June 2016)(Independent
June 2006
Outside Auditor of Santen Pharmaceutical Co., Ltd. (until
Director)
6
June 2014)[June 2015]
February 2008 Auditor of Denal Silane Co., Ltd. (until June 2014)[3 yearsJune 2015
Outside Director of the Company (present)* at the conclusion July 2016
Director Chairman of Wisemech Corporation (present)of this Ordinary
General Meeting of Reasons for selection as the candidate for Outside Director
Shareholders]Mr. Yasuo Sato has gained rich experience and great insight as a manager through his[100% (13/13)]
involvement in corporate management for many years. His career included serving as the
President of Air Liquide Japan Ltd. He also has rich international experience, including
serving as a vice president at global enterprises. The Company proposes that Mr. Sato beelected as an Outside Director in the expectation that he will utilize his knowledge inproviding suggestions about the Company’s overseas business expansion strategy andmanagement in general.
Message to shareholders
In a spirit of rationality and fairness, I am determined to contribute to the sustainable, soundgrowth of the Company and boost corporate value from a global, medium- to long-term
perspective.
Notes: 1. No material conflict of interest exists between the Company and the above candidate.
2. Up to February 2008, Mr. Sato was an Outside Director of a subsidiary of the Company. Up to June
2014, he worked as corporate auditor of a subsidiary of the Company.
3. Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes liability
limitation contracts with the candidate that limit his liability for damages of Article 423, Paragraph 1 ofsaid Act to a predefined amount of ¥5 million or more or the amount stipulated by laws and regulations,whichever is higher. If the election of Mr. Sato is approved, the Company plans to continue the same
contracts.

14

Name
(Date of birth)[Director since]
No. [Director’s term ofoffice][Attendance at Boardof Directors meetings]

Career summary and significant concurrent positions, etc.

April 1974
April 1999
April 2004
April 2007
April 2009
June 2014
June 2015

7

Joined Mitsui & Co., Ltd.
President of Mitsui & Co., Benelux S.A./N.V.
Vice President of Synthetic Resin & Inorganic Chemical
Products Business Unit of Mitsui & Co., Ltd.
Executive Officer of Mitsui & Co., Ltd. (until March
2010), President of Mitsui & Co. (Thailand) Ltd.
Representative Director and President of Mitsui Bussan
Plastic Trade Co., Ltd. (present Mitsui & Co. Plastics Ltd.)(until June 2014)
Counselor of Mitsui & Co. Plastics Ltd. (until June 2015)
Outside Director of the Company (present)

Number ofshares of theCompany held-

Akio Yamamoto(December 2, 1951)
Reasons for selection as the candidate for Outside Director
Age: 66
Mr. Akio Yamamoto has rich experience and great insight as a manager in Japan and(Outside Director) overseas through his involvement in corporate management for many years. His career
included serving as an Executive Officer of Mitsui & Co., Ltd. and the Representative(Reappointed)
Director and President of Mitsui & Co. Plastics Ltd. He also has rich international(Independent
experience, including serving as a vice president at global enterprises. The Company
Director)
proposes that Mr. Yamamoto be elected as an Outside Director in the expectation that he[June 2015]
will utilize his knowledge in providing suggestions about the Company’s overseas business[3 years* at the conclusion expansion strategy and management in general. Although he used to work at a company
that has transactions with the Company, the Company considers that there is no risk thatof this Ordinary
conflict of interest with other general shareholders will arise because 1) he is not a current
General Meeting ofor a recent operating officer of the said company; 2) although the Company’s sales to the
Shareholders]said company account for 6.6% of the Company’s total sales, substantial transactions[100% (13/13)]
between the Company and the said company are payments of commission by the Company
to the said company for services offered by its trading company function and the amount ofcommission paid is modest (under 2% of the said company’s sales); and 3) he satisfies theCompany’s “Standards of Independence for Outside Executives” and thus, the Company
considers that the said company has no special impact on the Company’s decision-making
by the Board of Directors etc.

Message to shareholders
Viewing the Company’s businesses from a historical perspective of our industry and a
global perspective, I am committed to maintaining a strong stance of fairness, andcontributing to corporate operations and increasing corporate value.
Notes: 1. No material conflict of interest exists between the Company and the above candidate.
2. Until June 2014, Mr. Yamamoto worked as president and representative director for a specified related
party of the Company.
3. Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes liability
limitation contracts with the candidate that limit his liability for damages of Article 423, Paragraph 1 ofsaid Act to a predefined amount of ¥5 million or more or the amount stipulated by laws and regulations,whichever is higher. If the election of Mr. Yamamoto is approved, the Company plans to continue thesame contracts.

15

Name
(Date of birth)[Director since]
No. [Director’s term ofoffice][Attendance at Boardof Directors meetings]

Career summary and significant concurrent positions, etc.

April 1976
May 2000
April 2002
March 2003
June 2003
April 2005
June 2007

Joined The Dai-Ichi Kangyo Bank, Ltd.
General Manager, Osaka Sales Department of The
Dai-Ichi Kangyo Bank, Ltd.
General Manager, Osaka Sales Department III of Mizuho
Corporate Bank, Limited
Executive Officer of Mizuho Corporate Bank, Limited(until April 2003), General Manager, Corporate
Department II (until April 2003)
Managing Executive Officer of Orient Corporation (until
March 2005)
Managing Executive Officer of Mizuho Corporate Bank,
Limited (until March 2007)
Director and President of Mizuho Marketing Experts Co.,
Ltd. (until March 2013)
Representative Director and President of KSO
Corporation
Representative Director and Chairman of KSO
Corporation
Director of KSO Corporation
Chairman and Executive Officer of KSO Corporation(present)
Outside Director of the Company (present)

Number ofshares of theCompany held-

June 2013
Tatsutsugu Fujihara(November 23, 1952) June 2014
Age: 65
April 2016
(Outside Director) June 2016
(Reappointed)(Independent
June 2016
Director)
8[June 2016])
Reasons for selection as the candidate for Outside Director[2 years
Having worked in corporate management at financial institutions for many years, Mr.
* at the conclusion Tatsutsugu Fujihara has rich experience and great insight as a manager and possessesof this Ordinary
advanced insights regarding corporate finance, and to utilize these insights and receive
General Meeting of recommendations toward the Company’s overall management, his election as Outside
Shareholders]
Director is requested. Additionally, although he used to work at a financial institution that
[100% (13/13)]
has transactions with the Company, the Company considers that there is no risk that conflictof interest with other general shareholders will arise because 1) he is not a current or a
recent operating officer of the said financial institution; 2) a significant number of years
have passed since he retired from the said financial institution (eleven years have passed
since his retirement as of the day of this Ordinary General Meeting of Shareholders); 3) thecomposition of borrowings relative to net assets of the Company is low at approximately
30%, and the Company’s dependency on the said financial institution is low as it accounts
for less than 10% of overall borrowings; and 4) he satisfies the Company’s “Standards ofIndependence for Denka Outside Officers” and thus, the Company considers that the said
financial institution has no special impact on the Company’s decision-making by the Boardof Directors, etc.
Message to shareholders
While aiming to “boost corporate value in the true sense,” I am determined to contribute to
the creation of an organizational culture that can properly demonstrate the “ability to keep
itself pure.”
Notes: 1. No material conflict of interest exists between the Company and the above candidate.
2. Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes
liability limitation contracts with the candidate that limit his liability for damages of Article 423,
Paragraph 1 of said Act to a predefined amount of ¥5 million or more or the amount stipulated bylaws and regulations, whichever is higher. If the election of Mr. Fujihara is approved, the Company
plans to continue the same contracts.

16

Proposal No. 3:

Election of One (1) Substitute Audit & Supervisory Board Member

In order to ensure that the number of incumbent Audit & Supervisory Board Members does not fall shortof that required by laws and regulations or the Articles of Incorporation of the Company, the election of one(1) substitute Audit & Supervisory Board Member is proposed.
The consent of the Audit & Supervisory Board has been obtained for the submission of this proposal.
The candidate for substitute Audit & Supervisory Board Member is as follows:
Name(Date of birth)

Career summary, positions and significant concurrent positions
April 1975
April 1983
April 1985
April 1996
April 2000
December 2002

January 2015
Gotaro Ichiki(December 4, 1949) March 2015
March 2016
Age: 68
Candidate for
Substitute Outside April 2016
Audit &
Supervisory Board April 2017
MemberJuly 2017

Admitted to the bar in Japan (Yokohama Bar Association)
Joined Sagami Godo Law Office
Joined Hamada & Matsumoto Law Firm (transferred toDaini Tokyo Bar Association)
Partner in Hamada & Matsumoto Law Firm
Vice President of Daini Tokyo Bar Association (until
March 1997)
Deputy Secretary of Japan Federation of Bar Associations(until March 2002)
Partner in Mori Hamada & Matsumoto Law Firm formed
as a result of merger (until December 2014)
Joined Kowa Law OfficeOutside Director of Nippon Denko Co., Ltd. (present)
Outside Director (Directors Serving on the Audit &Supervisory Committee) of COCA-COLA WEST
COMPANY, LIMITED (until March 2017)
Supervisory Officer of DBJ Private REIT Investment
Corporation (present)
Outside Auditor of COCA-COLA WEST COMPANY,
LIMITED (until December 2017)
Administrative Director of General Incorporated
Foundation Judiciary Association (present) (to date)

Number ofshares of theCompany held-

Reasons for selection as the candidate for substitute Outside Audit & Supervisory Board
MemberMr. Gotaro Ichiki has a long experience as a lawyer and abundant legal knowledge. The
Company proposes that Mr. Ichiki be elected as a substitute Outside Audit & Supervisory
Board Member in the expectation that he will utilize his knowledge for the benefit of theCompany’s auditing system. Although he has never been directly engaged in corporate
management, the Company deems that Mr. Ichiki will duly execute his duties as an Outside
Audit & Supervisory Board Member because he is well versed in corporate legal affairs and has
extensive insight into corporate governance.
Notes: 1. No material conflict of interest exists between the Company and the above candidate.
2. Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes
liability limitation contracts with Outside Audit & Supervisory Board Members that limit their
liability for damages of Article 423, Paragraph 1 of said Act to a predefined amount of ¥5 million
or more or the amount stipulated by laws and regulations, whichever is higher. If Mr. Ichikiassumes the position of Outside Audit & Supervisory Board Member, the Company plans toconclude an identical contract with him.
3. The candidate satisfies the conditions for independent officers as defined by Tokyo Stock
Exchange, Inc., and if he assumes the position of Outside Audit & Supervisory Board Member,the Company plans to designate him as an independent officer.

17

(Reference)
Standards of Independence for Denka Outside Officers
The Company selects candidates for Outside Directors and Outside Audit & Supervisory Board Members
based mainly on practical considerations, such as whether we can expect the candidate to contribute to anincrease in the corporate value of the Company as an independent officer. Specifically, the Company has
defined the following standards, in accordance with the requirements for independence stipulated in the
Companies Act, in addition to the standards for independence defined by the Tokyo Stock Exchange andother factors.
Standards of Independence for Outside Officers
The standard of independence for an Outside Director or Outside Audit & Supervisory Board Member of
the Company shall be persons that do not fall under any of the categories defined in items (1) through (5)below.
(1) An executor of business (*4) at a main customer (*1), main supplier (*2), or main lender (*3)
that is a main trading partner of the Company;(2) A consultant, accountant, lawyer, or other such person that has received money or other property
exceeding ¥10 million in value per year from the Company, excluding officer compensation, inthe most recent fiscal year;(3) A person belonging to a group for whom the amount paid by the Company makes up 2% or moreof the group’s revenues or total income in the most recent fiscal year, in cases where the entity
receiving property under item (2) above is a group;(4) A person that has fallen under any of the above categories (1) through (3) within the past year;(5) A spouse or relation within the second degree of a person falling under any of the categories
below (excluding an insignificant person):i.
A person that falls under any of the above categories (1) through (4);ii.
A person that is or was an executor of business at the Company or a subsidiary of theCompany now or within the past year;iii.
A person that is or was a non-executive director at the Company or a subsidiary of theCompany now or within the past year (for Outside Audit & Supervisory Board Membersonly).
(*1) Main customer: A customer from whom the amount paid has made up 2% or more of theCompany’s revenues in the most recent fiscal year(*2) Main supplier: A supplier to whom the amount paid from the Company has made up 2% ormore of the supplier’s revenues in the most recent fiscal year(*3) Main lender: A lender that was essential for the Company’s funding, and that the Company
relied on to the extent the lender was irreplaceable, as of the end of the most recent fiscal
year(*4) Executor of business: An executive director, executive, executive officer, or other
employee, etc.

18

(Reference)
Denka’s Corporate Governance Initiatives
Basic Approach to Corporate GovernanceIn order to fulfill the expectations and trust of its many stakeholders, including shareholders, customers,
local society, and employees, based on “The Denka Value” (corporate philosophy), which forms the basis forthe activities of the Denka Group, the Company strives to strengthen its business foundation by improving its
earnings power and expanding the scope of operations, while also working to improve corporate value bymaking every effort to continue being a company that can win the trust and sympathy of society.
The Company considers corporate governance as the foundation for the above, and so we have striven tostrengthen governance, in order to fulfill the responsibilities we owe to all our stakeholders, and ensure thetransparency and soundness of our management.
The Denka Value (Corporate Philosophy)“The Denka Value” (corporate philosophy) consists of the “Denka Mission,” which represents ouruppermost mission statement, and the “Denka Principles,” a set of precepts guiding actions taken by every
Group employee.
“The Denka Value” lies at the pinnacle of all corporate activities, including management plans, andthrough implementing “The Denka Value,” the Company will work to respond to the expectations and trustof society.
“The Denka Value” (Corporate Philosophy)
The Denka Mission
Taking on the challenge of expanding the possibilities of chemistry to create new value and contribute tosound social development.
Note: Based on the corporate slogan “Possibility of Chemistry.”
The Denka PrinciplesWe: Boldly confront challenges with determination and sincerity.
 Think and take action today with the future in mind.
 Deliver new values, and inspire customers through innovative monozukuri.* Respect the environment and create a cheerful workplace that prioritizes safety.
 Contribute to a better society, whilst taking pride in being a trusted corporate citizen.
*Japanese-style craftsmanship

19Board of Directors
To realize the Company’s corporate philosophy, “The Denka Value,” the Board of Directors monitors andsupervises major operational decision-making and execution of business duties by executive officers, basedon strategic and management planning. The Board of Directors as a whole appoints candidates to be
Directors in line with the standards for the appointment of both internal and Outside Directors, based on the
belief that it is important to appoint a good balance of people with a variety of expertise, experiences, andskills.
Additionally, the Management Advisory Committee has been established as an advisory organ of theBoard of Directors, to strengthen the roles of the Board of Directors and foster higher standards ofobjectivity and transparency. It also organizes the D&A Round Table, aimed at enriching deliberations on
major matters of particular management concern.
In addition, in principle, the Company has discontinued the use of executive titles, (such as Senior
Managing Director, Managing Director) for Directors, such that all Directors may focus on monitoring andsupervising the execution of business duties from an equal standpoint. Also, the Company has set the lengthof directors’ terms to one year, in order to facilitate flexible checks on directors at the General Meeting of
Shareholders.
■Management Advisory Committee
For major management matters such as nomination, remuneration and other elements of governance, theBoard of Directors has set up the Management Advisory Committee, comprising all Outside Directors, all
Outside Audit & Supervisory Board Members, the Chairman and the President, to foster transparency andobjectivity in management decision-making, informed by a wide range of opinion and advice from Outside
Directors.
In the previous fiscal year, this Committee received reports and advice from the Board of Directors
regarding remuneration and redeployments at the Director and Executive Officer level and regarding the new
management plan “Denka Value-Up.”■D&A Round Table
In order to facilitate in-depth discussions regarding management matters that are of particular importance,
the D&A Round Table is organized every month as a forum bringing together all Outside Directors andOutside Audit & Supervisory Board Members and all internal Directors and Audit & Supervisory Board
Members, for free, open-minded, constructive discussions, exchange of opinions and information, andstrengthening of cooperation.

20

■Dialogue with institutional investors
To foster understanding for management strategy and planning as well as corporate governance, a wide
range of measures are carried out including plant visits and dialogue with Outside Directors, in addition todialogue with the management team and specific departments.
■Evaluation of the Effectiveness of the Board of Directors
At Denka, the effectiveness of the Board of Directors is analyzed and evaluated annually by all Directors
and Audit & Supervisory Board Members, and the results disclosed in the Corporate Governance Report.
In the previous fiscal year, the Company analyzed and evaluated the effectiveness of the Board of
Directors by having all Directors and Audit & Supervisory Board Members complete a “Self-Evaluation
Questionnaire,” which covers over 20 items related to the effectiveness of the Board of Directors, such as its
scale, composition, operation, and other items, and discuss the questionnaire results at Board of Directors
meetings.
As a result of these measures, we reaffirmed that discussion was reinvigorated at the Board of Directors,
including deliberations on agenda items, by ensuring an appropriate Board size and composition (in terms ofgetting the right balance of expertise, experience, ability and diversity) and an appropriate meeting frequency
and duration, as well as through various initiatives to deepen the understanding of Outside Officers of theCompany, enabling them to make proactive contributions at the Board of Directors meetings.
At the same time, constructive opinions were submitted on the overall business strategy of the Group, tofurther improve the role of the Board of Directors by ensuring full and timely deliberations with briefingsand prior explanations, enabling appropriate management and supervision from a medium-to-long-term
perspective.
Looking ahead, the Board of Directors will work for sustainable growth and further improvement incorporate value, to ensure a still higher standard of discussion, and greater stability and soundness ofmanagement.

21

Audit & Supervisory Board
In accordance with their fiduciary responsibilities to shareholders, Corporate Auditors and the Audit &Supervisory Board work with the support of the full-time staff of the Auditor’s Office, whose independence
from management is ensured, to conduct audits of the execution of directors’ duties, internal governance,business duties, and accounting, by exercising statutory rights that include requesting reports on thebusinesses of the Company, investigations pertaining to business duties and accounting, and the appointment,
dismissal, and remuneration of an external auditing firm.
In addition, in view of the roles and responsibilities of the Audit & Supervisory Board, the Company
appoints candidates to be Audit & Supervisory Board Members based on the decision that there should be atleast one person with expertise in finance and accounting.
Message to Shareholders from Audit & Supervisory Board Members“In addition to the obligation of legality of execution of business duties by the Board of Directors under
the Companies Act, I aim to focus auditing activities on ensuring reasonable and effective (valid) ofexecution of business duties under the “Denka Value-Up” concept. (Shohei Tamaki, Audit & Supervisory
Board Member)“In order to gain the trust of all stakeholders, I aim to monitor the legality and validity of day-to-day
execution of business duties based on the Companies Act and the precepts of the corporate governance code.”(Masanori Sakamoto, Audit & Supervisory Board Member)“Drawing on my experience as a lawyer, I audit the execution of business duties operations of the Boardof Directors by asking whether the fullest compliance is achieved and whether the corporate governancesystem is working.” (Tsunehiro Sasanami, Outside Audit & Supervisory Board Member)“As one of the Outside Officers, with the perspective of a Certified Public Accountant specialized inaccounting, I help to ensure that standards of corporate governance at the Company are properly upheld, andcompliance.” (Toshio Kinoshita, Outside Audit & Supervisory Board Member)
Outside Officers
Regarding Outside Directors and Outside Audit & Supervisory Board Members, the Company selects
candidates based mainly on practical considerations, such as whether we can expect the candidate tocontribute to an increase in the corporate value of the Company as an independent officer, and has also
defined its own standards of independence (Please see page 18.), in accordance with the requirements forindependence stipulated in the Companies Act, in addition to the standards for independence defined by the
Tokyo Stock Exchange and other factors.
In addition, by enhancing their understanding of the Company, the Company strives to create anenvironment that allows those appointed as Outside Officers to perform their roles for the sake of thesustainable growth of the Company and the increase of its corporate value.
Specifically, in addition to tours of offices, plants, and other facilities, the Company has been
implementing the following initiatives:■Business and research policy briefings
Briefings are held twice a year in order to have Outside Officers understand the Company’s medium- tolong-term and short-term business and research policies.
■Outside Officer Liaison Committee
The Company holds “Outside Officer Liaison Committee” meetings four times a year to facilitate theexchange of information and mutual awareness among Outside Officers concerning matters related to
Denka’s corporate governance and business.

22

Initiatives to Corporate Governance Thus Far
2007

2008

2015

2016

2017

The Company cut the number of directors by half in order to speed up decision-making, andintroduced a corporate officer system.
The Company discontinued executive titles (such as Senior Managing Director, Managing
Director), such that directors would monitor and supervise the execution of business duties froman equal standing.
The Company transferred the authority of business execution and executive titles from directors tocorporate officers, in order to distinguish clearly between monitory and supervisory functions.
The Company shortened the length of directors’ appointments to one year, to facilitate flexible
checks on directors.
The Company appointed two Outside Directors, such that the total of four outside officers,
including two Outside Audit & Supervisory Board Members (per statutory requirements), could
carry out checks on management. The Company also created a framework for receiving
appropriate advice by facilitating adequate exchanges even outside of meetings of the Board of
Directors, such as conducting regular exchanges of opinions with top management.
The Company established a Management Committee comprising directors, Audit & Supervisory
Board Members (Outside), and some corporate officers, in order to deepen discussion of importantmanagement items, and speed up the decision-making process.
The Company increased the number of Outside Directors (from two to three) and decreased thenumber of members of the Board of Directors (decreased the number of directors by two), in orderto strengthen the governance framework, and increase the transparency and soundness ofmanagement.
The Company resolved to strengthen the round-table conferences between Outside Directors andCorporate Auditors, formerly held twice per year, by holding a “ A round table conference of
Directors and Audit & Supervisory Board Members ” once per month as a forum for free,vigorous and constructive deliberations, exchange of opinion and information andalliance-strengthening for Internal and Outside Directors and Audit & Supervisory Board
Members.
The Company established the Denka Corporate Governance Guidelines, aimed at creating the
optimum corporate governance for sustainable growth and improving medium- to long-term
corporate value.
The Company facilitated more advance explanations to Outside Officers regarding specificprojects that required adequate explanation, in order to deepen understanding of the Company’sbusiness, and stimulate debate at meetings of the Board of Directors.
The Company resolved to hold an “Outside Officer Liaison Committee” four times per year tofacilitate the exchange of information and a shared awareness between Outside Officers.
The Company resolved to conduct business and research objective briefings for Outside Officers
twice per year, for understanding the Company’s medium- to long-term and short-term businessand research objectives.
The Company clarified the contents of reporting documentation and documentation related to
discussions at meetings of the Board of Directors, in order to ensure that monitoring andsupervision of the execution of business duties by corporate officers would be adequately
conducted.
The effectiveness of the Board of Directors is analyzed and evaluated annually by all Directors
and all Audit & Supervisory Board Members, and the results disclosed in the Corporate
Governance Report.
With regard to governance and other major issues facing management, such as Director
nomination and remuneration, the Board of Directors has established the Management Advisory
Committee comprising all Outside Directors, all Outside Audit and Supervisory Board Members,
the Chairman and the President, to ensure transparency and objectivity in management
decision-making, based on a wide range of opinions and advice from outside officers.
It was decided to change the name of a round table conference of Directors and Audit &Supervisory Board Members to the D&A Round Table.

23[Attached Documents]

Business Report(From April 1, 2017 to March 31, 2018)

1. Overview of the Group(1)

Business Progress and Results
During the fiscal year ended March 31, 2018 (fiscal 2017), the Japanese economy was on a mild
recovery trend with signs of recovery in personal consumption and exports, and increase in capital
investment and production as well. Overall, the global economy continued moderate recovery, partly
buoyed a strong US economy.
In the chemical industry, corporate profits remained strong overall, despite yen appreciation andrising raw materials prices.
As a result, sales increased ¥32,982 million or 9.1% year on year to ¥395,629 million, reaching an
all-time high, driven by increased sales volumes mainly for chloroprene rubber and electronics andinnovative products, combined with market price revisions to absorb rising raw materials costs.
Earnings also reached record highs, by a significant margin. Operating income increased ¥7,807 million
or 30.2% to ¥33,652 million, ordinary income increased ¥8,340 million or 36.0% to ¥31,499 million,
and profit attributable to owners of parent increased ¥4,890 million or 26.9% to ¥23,035 million.
Contributory factors were increased volumes sold and improved terms of trade, which outweighed
increasing costs from upfront investments for the future, in the healthcare and other sectors.
On April 1, 2017, we established the Life Innovation Division to take overall control of all of theGroup’s healthcare-related businesses. The new division regroups the healthcare-related businesses
formerly under the Life Science & Environmental Products Division. The following overview of results
was prepared after related adjustments were made to previous-year figures.
Results of operations by division are described below.
Elastomers & Performance Plastics Division (Sales: ¥178,444 million)
Principal products: Chloroprene rubber, acetylene black, styrene monomer, polystyrene resin, ABS
resin, CLEAREN, heat-resistant resin, transparent resin, POVAL, etc.
Chloroprene rubber sales rose year on year, driven by increased volumes due partly to recovery indemand for resource-related applications, and revision of marketing prices to ensure profitability. Salesof acetylene black increased due to higher sales volumes of the lithium-ion battery and high-voltage
power cable sectors. Other strong sellers were styrene monomers, ABC resin and polystyrene resin
made by subsidiary Denka Singapore Pte. Ltd.
As a result, division sales increased ¥26,738 million or 17.6% year on year to ¥178,444 million.
Infrastructure & Social Solutions Division (Sales: ¥53,146 million)
Principal products: Cement, special cement additives, fertilizers, calcium carbide, fire resistantmaterials, environmental materials, etc.
Increased sales volumes resulted in higher sales of corrugated drainpipes for agriculture and civilengineering, and alumina fibers used in fire-resistant and thermal-insulation materials, etc. Althoughcement and fertilizers saw strong sales, special cement additives were down year on year.
As a result, division sales increased ¥1,329 million or 2.6% year on year to ¥53,146 million.

24Electronics & Innovative Products Division (Sales: ¥54,279 million)
Principal products: Fused silica, electronic circuit substrates, fine ceramics, electronic packaging
materials, etc.
Functional films such as THERMO FILM ALS for transportation and packing of electronic
components and semiconductors, spherical fused silica fillers for semiconductor sealing, and sphericalalumina saw shipments increase on buoyant demand. Likewise, sales volumes and sales rose forelectronic circuit substrates and ALSINK, highly reliable heat-dissipating plate, while strong shipments
also continued for ALONBRIGHT SiAlON phosphors for LED.
As a result, division sales increased ¥8,027 million or 17.4% year on year to ¥54,279 million.
Life Science & Environmental Products Division (Sales: ¥40,980 million)
Principal products: Food packaging materials, housing materials, life science and industrial
materials, etc.
Sales volumes and sales increased for plastic rain gutters and industrial tapes. Film for foodpackaging material and processed products from DENKA Polymer Co., Ltd. also turned in a strong
sales performance. Sales of “TOYOKALON” synthetic fiber for wigs were flat overall, while DX Film,
anti-weather fluorine alloy film were down year on year.
As a result, division sales decreased ¥207 million or 0.5% year on year to ¥40,980 million.
Life Innovation Division (Sales: ¥32,338 million)
Principal products: Vaccines, joint function improvers, and diagnostic reagents, etc.
Domestic and export sales volumes and sales increased for DENKA SEIKEN Co., Ltd.’s reagents,
but shipments of influenza vaccines were down year on year.
As a result, division sales decreased ¥1,682 million or 4.9% year on year to ¥32,338 million.
Others Division (Sales: ¥36,439 million)
Principal business: Plant engineering etc.
Transaction volumes of Akros Trading Co., Ltd. and other trading companies were down from theprevious year. The value of projects completed by Denka Consultant & Engineering Co., Ltd. was also
down.
As a result, division sales decreased ¥1,222 million or 3.2% year on year to ¥36,439 million.

25

(Reference)
TopicsDenka Gets “Leadership”-Level A- Rating in CDP Climate Change Report 2017
Denka was awarded a “Leadership”-level A-rating in a survey of over 6,200 companies around the worldorganized by the London-based international non-profit organization CDP, which was set up in 2000 by analliance of global institutional investors. The award came in recognition of Denka’s climate change initiatives
and disclosure record.
According to the Climate Change Report 2017 released by CDP Japan on October 24, 2017, of around 300
Japanese companies, 13 received an A rating and 59 an A- rating. Six companies in materials were awarded
the sector-highest A- rating, including Denka.
Denka has participated to the CDP survey since fiscal 2015. In fiscal 2017, the Company was evaluated bya third-party verification organization for greenhouse gas emission volumes. As part of measures to strengthen
disclosure and reliability of information, disclosure of global warming-related technologies includes
energy-saving measures, broadened use of renewable energy through in-house hydroelectric and photovoltaic
power facilities, and secondary battery materials and construction/civil engineering materials, all of which areimportant areas for materials companies.
The Group regards climate change, a globally shared challenge, as a management priority in the quest for asustainable global environment, and manages its operations with a focus on Environmental, Social andGovernance (ESG) criteria.
Measures to upgrade production processes
For achievement of sustainable growth, one of the pillars in the three growth visions of the management plan
“Denka Value-Up,” we are taking measures to dramatically improve productivity through innovative
processes using the latest IoT and AI-based technologies. Driven by the AI and IoT Promoting Dept. newly set
up in October 2017, we are re-engineering production and operational processes with the aim of doublinglabor productivity, through partnerships with plant and related facilities in Japan and overseas. In particular,
we plan the following initiatives for the five years from November 2017, through our major overseas unit inSingapore, where we have four manufacturing plants. Our smart-factory project is acknowledged as
dovetailing with the Singapore state growth strategy, and has won the support of the governmental Singapore
Economic Development Board.
(1) Strengthening of digital communications infrastructure(2) Abnormality forecasting and detection and operational stabilization, through online analysis ofmachinery vibration data, etc.
(3) Quality control and forecasting from process data
(4) Coordinated management and optimized production methods using supply chain data
At the same time, at our plants in Japan, we are aggressively taking steps to enable productivity improvements
and “smart factory” plant automation by applying the most advanced digital technologies, including
automated inspections using AI, automated conveyance and robotization using AGVs, etc., facility
abnormality detection and diagnosis using sensor technologies, and operational stabilization using big data
analysis.
AGV: Automated Guided Vehicle

26

(2)

Capital Investment
The Group has made aggressive investments in line with the “Denka100” management plan’s three
new growth strategies, of creating the most optimal production system, scrutinizing every cost element,
and focusing management resources on new growth drivers while developing next-generation products.
Likewise, in the new management plan “Denka Value-Up” beginning fiscal 2018, there are two growthstrategies: promoting a business portfolio shift and innovative processes. With particular regard to thefirst, we are rapidly accelerating the expansion of our specialty businesses, developing specializedbusiness platforms and redefining the positioning of the commodity businesses. Against thatbackground, in the fiscal year ended March 31, 2018, the Group carried out capital investments totaling¥22,694 million.
Capital investment in the Elastomers & Performance Plastics Division amounted to ¥6,684 million.
Principal items were capital investment for the Company’s Omi Plant and Chiba Plant.
In the Infrastructure & Social Solutions Division, capital investment amounted to ¥8,044 million,
which mostly concerned the Company’s Omi Plant and Omuta Plant.
In the Electronics & Innovative Products Division, capital investment amounted to ¥3,477 million,
which mostly concerned the Company’s Omuta Plant and Isesaki Plant.
Capital investment in the Life Science & Environmental Products Division amounted to ¥2,089
million mainly for the Company and DENKA Polymer Co., Ltd.
In the Life Innovation Division, capital investments of ¥2,122 million were made at DENKA
SEIKEN Co., Ltd. and other units.
Main capital investment projects completed during fiscal 2017 include an anti-cancer virus G47Δ
production facility at DENKA SEIKEN Co., Ltd. Furthermore, ongoing construction work at facilities
include construction of a new hydroelectric power plant at the Company’s Omi Plant.
Further measures came in the specialty businesses, in which we are making strategic investments forfurther growth. In healthcare, which we have designated a priority segment, we converted Icon Genetics
GmbH, a German biopharmaceutical R&D company that we took a stake in in August 2015, into awholly owned subsidiary with the purchase from Nomad Bioscience GmbH of all outstanding shares.
This took place on August 21, 2017, as initially planned.
In the commodity businesses, we also jointly established logistics rationalization company SOC &Denka Terminal Co., Ltd. in March 2018, after strengthening our operational alliance with Sumitomo
Osaka Cement Co., Ltd., to further strengthen our competitiveness in the cement sector and expand
business operations.

(3)

Financing
In fund procurement, the Company issued ¥7.0 billion in corporate bonds in September 2017, tomeet costs of redemption of previously issued corporate bonds.

(4)

Issues to be Addressed
Two years ago, the Company reaffirmed “The Denka Value,” the corporate philosophy that serves as
the basis for our corporate activities to lay the groundwork for the next 100 years. This coincided withthe first year of our second century, which marked the Denka’s 101st anniversary. For details, please see“Denka’s Corporate Governance Initiatives” on page 19 to 22 of this Notice.
In fiscal 2017, which was the final fiscal year of the management plan “Denka100” under the Denka
Value concept, we steadily put in place concrete growth strategy initiatives.
As a measure in the infrastructure segment, we decided to step up our business alliance with
Sumitomo Osaka Cement in the cement business, with consolidation and shared usage of cement
shipment terminals, to deploy management resources more efficiently and cut costs.
In the highly promising healthcare segment, major Group company DENKA SEIKEN Co., Ltd. won
approval from the U.S. Food and Drug Administration for its small, dense LDL cholesterol sd LDL-C, ameasuring reagent. It also expanded its QuickNavi™ series of test drugs and began marketing the
QuickNavi™-Mycoplasma antigen test kit and the influenza virus test kit QuickNavi™-Flu2. In a joint
venture with PlexBio Co., Ltd., our strategic partner headquartered in Taiwan, we signed a basic joint
agreement to develop systems (new equipment and reagents) to speed up identification of pathogenic
microorganisms and drug-resistant bacteria genes, helping alleviate one of the major roadblocks in thefield of infectious diseases.
Through such measures, we steadily carried out and garnered the benefits of growth strategies in theprevious “Denka100” management plan.

27

The current fiscal year is the initial year of the new “Denka Value-Up” management plan, which
carries on where “Denka100” left off. Looking ahead, we will implement our two-pronged growthstrategy, promoting a business portfolio shift and introducing innovative processes, to realize the three
growth visions under the “Denka Value-Up” plan. In particular, with regard to innovative processes, we
aim to revitalize the organization, breaking away from conventional thinking in production, R&D andindividual operational processes, by introducing the most advanced ICT, drilling down to the processessentials, further standardizing processes and innovating productivity, creating new businesses,changing work styles and promoting diversity.
At the same time as developing a wide range of policies under the “Denka Value-Up” concept, weshall respond to growing public pressure for deeper adoption of Environmental, Social and Governance(ESG) criteria, which have recently been a focus of global attention. For details of measures with regard
to “Denka Value-Up” and ESG at Denka, please refer to pages 29 to 32 of this Notice.
On March 3, 2018, at the Omuta Plant, an employee of the Company was killed in an accident whileworking inside a Company-owned warehouse when a flexible container of raw materials for our
products collapsed. In fulfilling its social responsibility as a player in the chemical sector, the Company
regards safety as the No. 1 priority. Speaking on behalf of the management team, the President
expressed his great sorrow at the accident, particularly in light of the timing, as it happened just when
the Company was finally seeing the benefits of many specific measures to ensure better safety in core
operations.
Looking ahead, Denka will carry out the radical measures needed to ensure that there is norepetition of this kind of incident. We also reaffirm our conviction as a group that safety is an absolute
precondition for the continued survival of the Company as a member of society. We shall further step up
activities to encourage all employees to get back to basics, question daily assumptions and, without fuss,
treat safety as the top priority.

28

(Reference)
Becoming a Specialty-Fusion Company under the “Denka Value-Up” Management Plan
In November 2017, Denka formulated the new“Denka Value-Up” management plan for the five
years from fiscal 2018 to fiscal 2022.
In the previous management plan, “Denka100,”
three priority growth strategies were laid down:
creating the most optimal production system,
scrutinizing every cost element and focusing
management resources on new growth drivers whiledeveloping next-generation products. With a focus on
the priority areas of health, environment/energy andinfrastructure, results consistently came out ahead of
pre-plan performance. We also made proactive
investments to seed future growth, and worked toconsolidate platforms for improved profitability at
individual businesses.
The new “Denka Value-Up” management plan isrooted in the basic concepts of safety as No. 1priority, environmental awareness, fostering andtapping human capital and contributing to thecommunity, all of which are indispensable forcontinued growth of the Company. We will aim torealize sustainable and sound growth as a“Specialty-Fusion Company,” through new strategies
toachieve
dramatic
growthglobally.
Overview of the “Denka Value-Up” Management Plan
1. Growth vision(1) Become a “Specialty-Fusion Company,” with a strong profile on global markets
We aim to become a company that boasts cutting-edge competitive capabilities in global markets, basedon a fusion of specialty businesses, products, technologies and human capital.
(2) Maintain sustained growth by significantly enhancing productivity through innovative processes
Through process innovation based on cutting-edge digital technologies such as IoT and AI and a focus onprocess essentials, we aim to dramatically improve productivity and position ourselves for sustained
growth regardless of external conditions.
(3) Secure sound growth through work-style reforms
By ensuring a workplace environment that is geared to diverse working and lifestyle needs, we aim, inpartnership with every individual employee, to satisfying stakeholders and secure sound corporate
growth.
2. Numerical targets
Operating income: ¥33.7 billion
Ratio of operating income: 8.5%

Operating income: ¥42.0 billion
Ratio of operating income: 10%
or moreOperating income : ¥50.0-60.0
billion(Figures will be officiallydecided in fiscal 2020)
Ratio of operating income: 15%
or moreRatio of specialty business*
50%
Fiscal 2017

Ratio of specialty business*
75%
Fiscal 2020

Ratio of specialty business*
90%
Fiscal 2022

29

*Definition“Specialty” refers to a business that combines a distinctive nature with high added value, is not easily
influenced by external conditions, and has a leading share of its market, as well as businesses with greatnear-term potential (businesses that have become specialized by fusing new specialty grades and solutions in
the healthcare, environment/energy, high value-added infrastructure and basic businesses).
3. Growth strategies(1) Business portfolio shift1) Accelerate the expansion of our specialty businesses
Concentrate management resources on three priority areas, and meet numerical targets through aggressive
strategic investment (including M&A and business alliances, stepped up R&D and focused human resource
policy).
Healthcare
Policy: Contribute to improved quality of life for people around the world through not only illness
prevention and early diagnosis, but development of the cancer remedy and gene alteration analysis
domains
Primary themes: Diagnostic reagents to measure lipoprotein subclasses, cancer treatment (particularly theselection of candidate drugs for molecular-targeted therapy), methods for mass-producing oncolytic viruses
and technologies to manufacture proteins using plants
The environment and energy
Policy: Employ such core technologies as cutting-edge inorganic materials to better satisfy the latest needs
for solutions that help achieve zero emissions, support autonomous driving systems and otherwise help
create a clean and safe future society
Primary themes: Lithium-ion battery materials, films as alternatives for coatings and materials for surface
decoration of interiors
High-value-added infrastructure
Policy: Meet high-profile global infrastructure development needs around the world through the provisionof cutting-edge materials and solutions
Primary themes: Promote global expansion via M&A, the marketing of products tailored to meetregion-specific needs and cutting-edge infrastructure diagnosis services employing ICT technologies2) Specialize our key businesses
Policy: To ensure resilience to changes in external conditions, we will work to increase the “specialty
grade” ratio in our product lineup, while shifting our focus to the solution business
3) Redefine the positioning of the commodity businesses
Policy: Redefine the positioning of the commodity businesses, which are intrinsically unsuitable for
specialization, through the Denka Value-Up Promoting Dept., an organization intended to drive the “Denka
Value-Up” management plan on a Groupwide basis, and take steps to overhaul strategy(2) Introduction of Innovative processes
Rather than adhering to precedent, proactively work to introduce cutting-edge ICT technologies, drill down
to truly essential processes and promote standardization of processes, to achieve dramatic improvements in
productivity, create new businesses, execute work-style reforms and promote diversity
1) Production process reforms
Restructure production facilities into ICT-based next-generation smart factories
Build a robust, overarching information platform capable of managing all data on a real-time basis
Enable manufacturing operations with greater productivity and superior stability2) R&D process reforms
Identify R&D themes oriented toward specialization
Develop R&D support systems employing ICT
Nurture diverse human resources by providing strategically designed career paths293) Operational process reforms
Revitalize in-house collaboration through the introduction of futuristic office functions
Improve operational productivity
Develop a working environment without fixed job stations○ Work-style reforms / Diversity promotion
Shift focus from working hours “quantity” to “quality”
Improve employee quality of life
Generate innovation through diversity of human capital
4. Investment Plan
Total for five years:
Of which strategic investment:
M&A, etc.:
Process reform:
Regular investment:¥200.0 billion¥75.0 billion (¥15.0 billion/year)¥60.0 billion¥15.0 billion¥125.0 billion (¥25.0 billion/year)

5. Shareholder returns
Continued commitment to 50% standard for total payout ratio
Regarding shareholder returns, the dividend is prioritized, with flexible purchase of treasury shares, depending
on stock price movements and other factors.
* Total payout ratio = (Dividends paid + treasury stock purchased) / consolidated net income
Diversity initiatives at Denka
The Company established a Diversity Promoting Dept. in October 2017 and is promoting diversity as oneof the growth strategies of “Denka Value-Up”.
“What makes you what you are is what makes Denka what it is”—this is the Denka diversity slogan.
Diversity promotion measures include seminars, workshops and lectures, and awareness-raising activities fora wide range of media including our intranet website, with the aim of transforming individual employee
awareness to create an environment where anybody can work enthusiastically regardless of gender, age,nationality, physical status, family structure or other matters of affiliation.
Looking ahead, we shall further accelerate promotion of diversity through measures such as a review of
personnel systems including appraisal systems, creation of new mechanisms for fostering talent tailored to theareas Denka specializes in, as well as improvements at the operational and work-style level, promotion ofstandardization and facilitation of work duties through introduction of IoT and AI technologies, in an overall
approach that combines both software and nuts-and-bolts measures.

30

(Reference)

Denka’s Initiatives in “ESG”
As globalization and the spread of information advances, the social need for “ESG (Environment, Society,
Governance” is progressing rapidly both in Japan and overseas, and to work toward resolving issues such as
shared international society targets as SDGs (sustainable developmental goals) set by a United Nations
Summit in 2015, the importance of evolution in current technologies, personnel, and trust relationships withstakeholders is gaining importance.
As a unique chemicals manufacturer with a very wide range of business activities, Denka has accumulated
expertise in areas including steady research and development activities and protection activities, capital
investment and personnel development from a long-term perspective, and relationships of trust withtransaction partners and regional societies.
In view of this accumulation, from April 2017, to respond to the expectations of society and as a company
group that can be trusted, we selected significant issues to work toward sound sustainable growth as CSR
issues (materiality), and set forth key policies for activities to be undertaken as we make progress in “ESG”
measures.
Denka will advance measures in materiality and fulfill its social responsibilities, working to realize thecorporate philosophy “The Denka Value.”
Denka’s significant CSR issues (materiality)
Category

Significant CSR issues (materiality)
Safety and disaster prevention

Top priority to safety

Products and technologies

Safe and clean labor and creating a positive, comfortable
work environment
Creating new products and technologies to contribute to thesustainable development of society
Product safety

Corporate governance:
Corporate activities that can betrustedSpreading corporate principles and reforming corporate
cultureStrengthening corporate governanceCompliance with laws and regulations and thoroughimplementation of corporate ethics
Personnel development and continuation of technologies

Employee happiness

Attention to respecting diversity and providing opportunity
equality
Improving work-life balance and employee healthPreventing environmental pollution of the air, water, andearth, etc.
Environmental protection
Promoting countermeasures against climate change(Preventing global warming, limiting release of greenhousegases, responding to change)
Appropriate disclosure of corporate information at the
Dialogue and partnership withappropriate time and establishment of bi-directionalsocietycommunication
Although corporate governance and trusted corporate activities (G), are provided in “Denka’s Corporate
Governance Initiatives” on pages 19 to 23 and employee happiness (S) are provided in “Denka’s Diversity
Initiatives” on page 30, we have provided additional information here that was not able to be included in theabove sections.
E: Environmental protection
Production of chemical products uses a vast amount of energy. Denka has been working actively to expand
the use of clean energy to conserve energy and reduce the emission of environmental pollutants.
Since its founding, Denka has utilized hydroelectric power, which is highly effective in reducing CO2
emissions. In line with the expansion of petrochemical products, we secured energy by installing thermal
31

power plants, but under the policy of “reducing environmental burden,” we transitioned from heavy oils atthermal power plants to natural gas, promoting initiatives such as the installation of high-efficiency gas
turbine generators for natural gas, strengthening power generation capacity through increasing efficiency inhydroelectric power generation, and power generation via waste heat produced by cement plants.
Currently, to increase the proportion of clean energy toward the future, we are advancing expansion in theuse of renewable energies through utilization of the fixed-price purchase system, and are actively advancing
the installation of solar power generation that utilizes plant land and roofing and the construction of newhydroelectric power plants, etc.
In particular, in hydroelectric power, 15 power generators are located around the Omi Plant in Itoigawa,Niigata Prefecture (including five locations held by the Kurobegawa Power Plant), which is one of the largest
such projects in Japan by a private chemical manufacturer. Furthermore, construction is underway at the New
Omigawa Power Plant (scheduled for completion in November 2019), and at the Kurobegawa Power Plant,
which is a joint venture with the Hokuriku Electric Power Company as well, construction will begin for the
New Himekawa Sixth Power Plant (scheduled to begin generating power in April 2022). Moving forward,
Denka will work toward the effective use of water resources and contribute to a low-carbon society throughcorporate activities that are considerate of the environment.
Power composition by power source (fiscal 2017) *Total amount used: 1.78 billion kWh
Self-generated power
Hydroelectric
36%

Thermal(Natural gas)
18%

Cement waste
heat
2%

Total
56%

Purchased
power
44%

E: Products and technologies“DENKA BLACK,” introduced by Denka, is a carbon black with a special construction produced throughthe thermal decomposition of acetylene gas, and is used as a conductor in lithium ion batteries (LiB).
DENKA BLACK’s most significant features are its chain structure and high purity. The chain structure(carbon atoms in a chain state) can create high conductivity even in small amounts. Additionally, impurities
have been reduced to an absolute minimum, creating a safe and highly functional conductive material.
Through Denka’s technologies, we are contributing to the proliferation of HEV (hybrid electric vehicles)
and EV (electric vehicles).
S: Dialogue and partnership with society
Toyokalon is a synthetic fiber for wigs created from PVC fibers pioneered by Denka in a world-firstcommercialization. For over 30 years since beginning exports, Denka has been working to provide products
matching the needs of the final consumers of females in Africa and African-American females in the UnitedStates.
On May 8, 2017, as a joint project with the Bennett Career Institute (BCI), a cosmetology school in the
United States, Denka held the 3W Project (Wigs for Wonderful Women) as a mother’s day event, inviting 50
cancer patients from the Washington Hospital Center. Under the “We care” slogan, we presented the patientswith wigs utilizing Luxeena, a product even closer to human hair than Toyokalon, while holding a hair showby students of the cosmetology school. These activities were also held in February 2018, and Denka plans tocontinue with them into the future.
Moving forward, Denka will actively participate in social contribution activities and work to create
relationships of trust with many stakeholders.

32

(5)

Financial Position and Results of Operations

Item

156th term(Millions of yen, unless otherwise stated)
157th term
158th term
159th term(from April 1, 2014 to (from April 1, 2015 to (from April 1, 2016 to (from April 1, 2017 toMarch 31, 2015)
March 31, 2016)
March 31, 2017)
March 31, 2018)

Net sales
383,978
369,853
362,647
395,629
Operating income
24,04730,63425,84433,652
Ordinary income
24,28727,022
23,15831,499Profit attributable to19,021
19,472
18,14523,035owners of parent
Net income per share
207.40214.71205.05261.80(yen)
Total assets
445,569
443,864
454,944475,086
Total net assets
210,798
216,071
227,487242,780
Net assets per share
2,279.70
2,366.74
2,526.42
2,727.94(yen)
Total shareholders’
46.9
47.7
49.1
50.3
equity ratio (%)
Return on equity
9.6
9.3
8.3
10.0
(ROE) (%)
Total dividends paid
5,723
5,836
6,194
9,206
Dividends per share
62.50
65.00
70.00
105.00(yen)
Notes: 1. The Company conducted a consolidation of shares at a ratio of five shares to one sharewith an effective date of October 1, 2017. As a result, net income per share, net assets
per share and dividends per share in the above chart are provided assuming that theshare consolidation had been conducted at the beginning of the 156th term.
2. Net income per share is calculated using the average number of shares issued andoutstanding excluding treasury stock. Net assets per share are calculated using thenumber of shares issued and outstanding at the end of the fiscal year excluding
treasury stock.
3. For total dividends paid and dividends per share for the 159th term, the sum of theinterim dividend paid in December 2017 and the dividend proposed for resolution at
this Ordinary General Meeting of Shareholders is indicated.

33

(6) Significant Subsidiaries (as of March 31, 2018)1) Significant subsidiaries
Company name

CapitalDenka Singapore Pte., Ltd.

SGD 69,410 thousand

Denka Chemicals Holdings
Asia Pacific Pte., Ltd.
Denka Performance
Elastomer LLC

USD 68,700 thousand
USD 62,000 thousand

Hinode Kagaku Kogyo

JPY 300 million

Nishi-nihon Koatsu Gas Co.,Ltd.

JPY 80 million

DENKA RENOTEC Co., Ltd.

JPY 50 million

DENKA Azumin Co., Ltd.

JPY 300 million

DENKA Inorganic Materials
Tianjin Co., Ltd.
DENKA Infrastructure
Technologies Shanghai Co.,Ltd.
Denka Infrastructure
Malaysia Sdn Bhd.

JPY 250 million
JPY 210 million
MYR 7,151 thousand

Estop Sdn. Bhd.

MYR 1,500 thousand

Denka Advantech Pte., Ltd.

SGD 17,000 thousand

Denal Silane Co., Ltd.

JPY 500 million

Denka Advanced Materials(Suzhou) Co., Ltd.

CNY 55,440 thousand

Denka Electronic Materials
Dalian Co., Ltd.

JPY 1,000 million

DENKA Polymer Co., Ltd.

JPY 2,080 million

Nakagawa Techno IndustrialCo., Ltd.

JPY 50 million

Denka Advanced Materials
Vietnam Co., Ltd.

USD 12,000 thousand

DENKA SEIKEN Co., Ltd.

JPY 1,000 million

34

The
Company’s
percentage ofequityparticipation

Principal business

Manufacturing and sales of
100.0
acetylene black and functional(100.0)polystyrene resin products
Regional headquarters for
100.0
Southeast and South Asia
70.0 Manufacturing and sales of(70.0) synthetic rubbers
Manufacturing and sales of
100.0
chemical fertilizers
Manufacturing and sales of
93.3
high-pressure gas
Repair, design, engineering
100.0 and management work forconcrete structures
Manufacturing and sales of
100.0 fertilizers and agricultural
materials
Manufacturing and sales of
100.0
special cement additives
Business headquarters for100.0 special cement additives in
China
90.0 Manufacturing and sales of(90.0) construction chemicals
100.0 Manufacturing and sales of(100.0) construction chemicals
Manufacturing and sales of
100.0
fused silica and synthetic fiber(100.0)for wigs and hairpieces
Manufacturing and sales of
51.0
monosilane gas, etc.
Manufacturing, processing,and sales of electronic
100.0
packaging materials and foodpackaging materials, etc.
Processing and sales of
100.0
electronic materials
Manufacturing and sales of
100.0 various packaging materials
and plastic containers
Manufacturing, processing,
100.0
and sales of metal rain gutters
Manufacturing and sales of
100.0
electronic packaging materials(100.0)and vinyl tapes
Manufacturing and sales of
100.0 vaccines and clinicaldiagnostic reagents

Sales of raw materials forindustrial applications, civil
YK Inoas Co., Ltd.
JPY 100 million
100.0 engineering and construction
materials, and interiormaterials
Design and engineering of
Denka Consultant &JPY 50 million
100.0 various industrial facilities,
Engineering Co., Ltd.
transportation facilities, etc.
Sales of inorganic industrial
Akros Trading Co., Ltd.
JPY 1,200 million
68.5 products, organic industrial
products, industrial resins, etc.
Akros Trading China Co.,
100.0 Sales of electronic packaging
USD 300 thousandLtd.
(100.0) materials, etc.
Sales of resins andAkros Trading Taiwan Co.,
100.0
TWD 29,000 thousandsemiconductor-related
Ltd.
(100.0)materials, etc.
Note:
The Company’s percentage of equity participation is calculated by dividing thenumber of shares held by the Company by the number of shares issued and outstanding.
The figure within parentheses indicates the percentage of indirect ownership by
subsidiaries.
2) Significant affiliates
Company nameToyo Styrene Co., Ltd.
Denak Co., Ltd.

The
Company’s
percentage ofequityparticipation

CapitalPrincipal business

Manufacturing, processing,and sales of polystyrene resin
Manufacturing and sales of
50.0
monochloroacetic acid

JPY 5,000 million

50.0

JPY 600 million(7) Principal Business Details (as of March 31, 2018)
The Company manufactures and sells the following products.
Business division
Elastomers & Performance
Plastics Division
Infrastructure & Social
Solutions Division
Electronics & Innovative
Products Division
Life Science &Environmental Products
DivisionLife Innovation Division
Others Division

Main products
Chloroprene rubber, acetylene black, styrene monomer, polystyrene
resin, ABS resin, CLEAREN, heat-resistant resin, transparent resin,
POVAL, etc.
Cement, special cement additives, fertilizers, calcium carbide, fire
resistant materials, environmental materials, etc.
Fused silica, electronic circuit substrates, fine ceramics, electronic
packaging materials, etc.
Food packaging materials, housing materials, life science and industrial
materials, etc.
Vaccines, joint function improvers, diagnostic reagents, etc.
Plant engineering etc.

35

(8)

Principal Offices and Factories (as of March 31, 2018)
Company namePrincipal offices
Head Office:1-1, Nihonbashi-Muromachi 2-chome, Chuo-ku,
TokyoBranches:
Osaka, Nagoya, Fukuoka, Niigata, Hokuriku(Toyama), Sapporo, Tohoku (Sendai)
Plants:Omi (Itoigawa, Niigata Prefecture), Omuta, Chiba(Ichihara, Chiba Prefecture), Shibukawa, Ofuna(Kamakura, Kanagawa Prefecture), Isesaki
Denka Co., Ltd.
Research Institutes: Denka Innovation Center (Advanced Technologies
Research Institute, Life Innovation ResearchInstitute, Infrastructure & Solutions Development
Research Institute) (Machida, Tokyo)
Polymer & Processing Technology Institute(Ichihara, Chiba Prefecture)
Denka Singapore Pte., Ltd. Head Office and Plants: Singapore
Denka Chemical Holdings
Head Office: Singapore
Asia Pacific Pte., Ltd.
Denka Performance
Head Office and Plant: Louisiana, United States
Elastomer LLC
Hinode Kagaku Kogyo
Head Office and Plant: Maizuru, Kyoto Prefecture
Nishi-nihon Koatsu Gas
Head Office: Fukuoka, Fukuoka PrefectureCo., Ltd.
DENKA RENOTEC Co.,
Head Office: Chuo-ku, TokyoLtd.
DENKA Azumin Co., Ltd. Head Office and Plant: Hanamaki, Iwate Prefecture
DENKA Inorganic
Head Office and Plant: Tianjin, China
Materials Tianjin Co., Ltd.
DENKA Infrastructure
Technologies Shanghai
Head Office: Shanghai, China
Co., Ltd.
Denka Infrastructure
Head Office and Plant: Selangor, Malaysia
Malaysia Sdn Bhd.
Estop Sdn. Bhd.
Head Office and Plant: Selangor, Malaysia
Denka Advantech Pte., Ltd. Head Office and Plant: Singapore
Denal Silane Co., Ltd.
Head Office: Chuo-ku, Tokyo
Denka Advanced Materials
Head Office and Plant: Suzhou, Jiangsu, China(Suzhou) Co., Ltd.
Denka Electronic Materials
Head Office and Plant: Dalian, Liaoning, China
Dalian Co., Ltd.
Head Office: Koto-ku, Tokyo
DENKA Polymer Co., Ltd. Plants: Sakura, Katori (Tako-machi, Chiba Prefecture), Goi (Ichihara,
Chiba Prefecture)
Nakagawa Techno
Head Office and Plant: Kasai, Hyogo Prefecture
Industrial Co., Ltd.
Denka Advanced Materials
Head Office and Plant: Hung Yen, Vietnam
Vietnam Co., Ltd.
Head Office: Chuo-ku, Tokyo
DENKA SEIKEN Co., Ltd.
Plant: Gosen, Niigata Prefecture
YK Inoas Co., Ltd.
Head Office: Bunkyo-ku, Tokyo
Denka Consultant &Head Office: Chuo-ku, Tokyo
Engineering Co., Ltd.
Akros Trading Co., Ltd.
Head Office: Minato-ku, Tokyo
Akros Trading China Co.,
Head Office: Shanghai, China
Ltd.
Akros Trading Taiwan Co.,
Head Office: Hsin-Chu, Taiwan
Ltd.

36

(9) Employees (as of March 31, 2018)
1) The Group
Business segment
Number of employees
1,072
[157]
Elastomers & Performance Plastics Division
Infrastructure & Social Solutions Division
964
[174]
Electronics & Innovative Products Division
954
[183]
Life Science & Environmental Products Division
1,018
[191]
Life Innovation Division
832
[211]
Others Division
752
[189]
Corporate (common)
352
[ 74]
Total
5,944 [1,179]
Notes: 1. The number of employees indicated is the number of full-time employees and theannual average number of temporary employees is indicated in brackets.
2. The number of employees indicated for “Corporate (common)” is the number of
employees who belong to administrative divisions that cannot be classified into a
specific business.
2) The Company
Increase (Decrease)from the previous
Average age
Average service years
fiscal year-end
3,011 [668]+51 [+23]
40.5
18.1
Note:
The number of employees indicated is the number of full-time employees and theannual average number of temporary employees is indicated in the brackets.
Number of employees(10) Principal Lenders (as of March 31, 2018)
LenderOutstanding borrowings (Millions of yen)
Syndicated loan
25,000Mizuho Bank, Ltd.
16,405
M&A loans
12,442The Norinchukin Bank
5,655
Sumitomo Mitsui Banking Corporation
5,176
Notes: 1. The syndicated loan is managed by Mizuho Bank, Ltd., Sumitomo Mitsui Banking
Corporation, and the Development Bank of Japan Inc. and is co-financed.
2. M&A loans refers to an overseas M&A support loan system maintained by the Japan
Bank for International Cooperation in cooperation with private banks.
(11) Other Significant Matters concerning the Group’s Current Situation
Not applicable37

2. Status of Shares (as of March 31, 2018)(1) Total Number of Authorized Shares

290,000,000 shares(2) Shares of Common Stock Issued

88,555,840 shares(including 879,825 shares of treasury stock)
26,546(3) Number of Shareholders(4) Major Shareholders

Number of shares
held(thousand shares)
8,518
6,344

Shareholder name

Percentage ofshares held
(%)
9.72
7.24

The Master Trust Bank of Japan, Ltd. (Trust Account)
Japan Trustee Service Bank, Ltd. (Trust Account)
Trust & Custody Services Bank, Ltd.
(Mizuho Corporate Bank, Ltd. Retirement Benefit Trust
3,215
Account re-entrusted by Mizuho Trust and Banking Co.,Ltd.)
National Mutual Insurance Federation of Agricultural
2,759
Cooperatives
MITSUI LIFE INSURANCE, CO., LIMITED
2,381
STATE STREET BANK AND TRUST COMPANY
2,043
505001
Japan Trustee Service Bank, Ltd. (Trust Account 5)
1,470
Mitsui Sumitomo Insurance Company, Limited
1,383
STATE STREET BANK AND TRUST COMPANY
1,290
505103
JP MORGAN CHASE BANK 385151
1,192
Note:
Treasury stock is excluded for calculation of the percentage of shares held.

3.67
3.15
2.72
2.33
1.68
1.58
1.47
1.36

(5) Other Significant Matters concerning Shares
On October 1, 2017, while changing the number of shares constituting one unit from 1,000 shares to
100 shares, the Company conducted a consolidation of shares at a ratio of five shares to one share. As aresult, the total number of authorized shares has changed from 1,584,070,000 shares to 290,000,000
shares, and the total number of shares issued has changed from 442,779,202 shares to 88,555,840
shares.

3. Matters concerning the Company’s Stock Acquisition Rights (as of March 31, 2018)
Not applicable38

4. Company Officers(1)

Directors and Audit & Supervisory Board Members (as of March 31, 2018)
Name

Position

Shinsuke Yoshitaka

Chairman, Boardof Directors

Manabu Yamamoto

President

Mitsukuni Ayabe

Director

Norihiro Shimizu

Director

Kenji Nakano

Director

Yasuo Sato
Akio Yamamoto
Tatsutsugu Fujihara
Shohei Tamaki
Masanori
Sakamoto
Tsunehiro Sasanami

Director(Outside Director)
Director(Outside Director)
Director(Outside Director)
Audit &
Supervisory
Board Member
Audit &
Supervisory
Board Member
Outside Audit &Supervisory
Board Member

Responsibilities and significant concurrent positions
Outside Director of Koatsu Gas Kogyo Co., Ltd.
President and Chief Executive Officer
Outside Audit & Supervisory Board Member of Koatsu
Gas Kogyo Co., Ltd.
Executive Vice President and Chief Operating Officer
Supervisor, Life Innovation
President and Representative Director of DENKA
SEIKEN Co., Ltd.
Managing Executive Officer
Chief R&D Officer, Innovation Center
New Business Development Dept., R&D Promoting
Dept., Intellectual Property Dept.
Managing Executive Officer
Chief Compliance Officer
Secretary Dept., Internal Auditing Dept., Administrative
Dept., Legal Dept., HR Dept.
Chairman and Director of Wisemech Corporation

Chairman and Executive Officer of KSO Corporation

Lawyer, Sasanami Law Office

Representative Director of Global Professional Partners
Outside Audit & Supervisory Board Member of
Outside Audit &Panasonic Corporation
Toshio Kinoshita
Supervisory
Outside Corporate Auditor of Weathernews Inc.
Board Member
Outside Director of ASATSU-DK Inc.
Outside Director of Mizuho Bank, Ltd.
Outside Director of TACHI-S CO., LTD.
Notes: 1. Directors Mr. Yasuo Sato, Mr. Akio Yamamoto, and Mr. Tatsutsugu Fujihara areoutside directors as stipulated in Article 2, Item 15 of the Companies Act.
2. Audit & Supervisory Board Members Mr. Tsunehiro Sasanami and Mr. Toshio
Kinoshita are outside auditors as stipulated in Article 2, Item 16 of the Companies Act.
3. Audit & Supervisory Board Member Mr. Toshio Kinoshita is a certified public
accountant, and has an adequate level of knowledge regarding finance and accounting.
4. The Company designated Directors Mr. Yasuo Sato, Mr. Akio Yamamoto, and Mr.
Tatsutsugu Fujihara and Audit & Supervisory Board Members Mr. Tsunehiro Sasanami
and Mr. Toshio Kinoshita as independent directors/auditors as defined by Tokyo Stock
Exchange, Inc. and notified it of the designation.

39

(Reference)
Executive Officers (as of April 1, 2018)
Position
President and Chief
Executive Officer
Executive Vice
President and Chief
Operating Officer
Senior Managing
Executive Officer
Managing Executive
Officer

Name
Manabu Yamamoto
Mitsukuni Ayabe

Norihiro Shimizu

Kenji Nakano

Masaharu Suzuki

Tetsuya Shinmura
Junichi Kimura
Toshio Imai
Executive Officer

Responsibilities

Hideki Hirano
Koichi Taguchi
Hideki Watanabe
Toyoki Yokoyama
Koki Tabuchi
Shojiro Watanabe
Nobuyuki Yoshino
Kazuya Tokumoto
Hideki Takahashi
Kazuo Takahashi
Rimiru Hayashida

Supervisor, Life Innovation
President and Representative Director of DENKA
SEIKEN Co., Ltd.
Chief Scientific Officer (CSO)
Chief R&D Officer
New Business Planning & Development Dept., R&D
Dept., Intellectual Property Dept.
Supervisor, Infrastructure & Social Solutions
Chief Compliance Officer(CCO)
Secretary Dept., Internal Auditing Dept.,
Administrative Dept., Legal Dept., HR Dept.
Investor Relations Dept., CSR & Corporate
Communications Dept., Automotive Materials &Solutions Dept.
General Manager, Corporate Planning Dept.
General Manager, Denka Value-Up Promotion Dept.
Chief Technical Officer (CTO)
Environment and Safety Dept., Purchasing Dept.,
Logistics Dept.
Representative, China
General Manager, Life Science & Environment
Products
Representative, USA
General Manager, Elastomers & Performance Plastics
General Manager, Omi Plant
General Manager, Isesaki Plant
General Manager, Chiba Plant
General Manager, Infrastructure & Social Solutions
President and Representative Director of DENKA
RENOTEC Co., Ltd.
President of Denka Performance Elastomer LLC
General Manager, Electronics & Innovative Products
Assistant to Chief R&D Officer
Innovation Center
General Manager, Advanced Technologies ResearchInstituteManaging Director, DCHA, DSPL, and DAPL
General Manager, Life Innovation
General Manager, Medical Science Dept.
General Manager, Omuta Plant
Information System Dept.
General Manager, Accounting & Finance Dept.

Notes: DCHA: Denka Chemicals Holdings Asia Pacific Pte., Ltd.
DSPL: Denka Singapore Pte., Ltd.
DAPL: Denka Advantech Pte., Ltd.

40

(2)

Directors that Retired During the Fiscal Year Under Review

Name

Tetsuro Maeda

Date of retirement

Reason for retirement

June 22, 2017

Term of office expired

Positions, responsibilities,
and significant concurrent
positions at time ofretirement
Chairman, Board of
Directors of DENKA
SEIKEN Co., Ltd.

(3) Summary of Liability Limitation Agreements
Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes liability
limitation contracts with Directors Mr. Yasuo Sato, and Mr. Akio Yamamoto, and Mr. Tatsutsugu Fujihara
and Audit & Supervisory Board Members Mr. Tsunehiro Sasanami and Mr. Toshio Kinoshita that limit
their liability for damages of Article 423, Paragraph 1 of said Act. The limit of liability under thecontract is set to a predefined amount of ¥5 million or more or the amount stipulated by laws andregulations, whichever is higher.
(4) Remuneration for and Other Payments to Directors and Audit & Supervisory Board Members

Category

Numberofpersons

Amount of
remuneration,
etc.
(Millions ofyen)

Breakdown
Cash remuneration
Performance-linked
Basic remuneration
remuneration
Number
Total
Number
Totalof(Millionsof(Millionspersonsof yen)personsof yen)Stockremuneration
Numberofpersons

Total(Millionsof yen)Directors(of which
9
335
9
279
5
37
5
18
Outside
(3)
(36)
(3)
(36)
(-)
(-)
(-)
(-)
Directors)
Audit &
Supervisory
Board
Members(of which
479
479
Outside
(2)
(24)
(2)
(24)
(-)
(-)
(-)
(-)
Audit &
Supervisory
Board
Members)
Total(of which
13
414
13
358
5
37
5
18
outside
(5)
(60)
(5)
(60)
(-)
(-)
(-)
(-)
officers)
Notes: 1. The maximum amount of cash compensation remuneration for Directors is ¥500
million per year (of which the maximum amount of remuneration for Outside Directors
is ¥50 million, excluding the portions of their salaries as employees) as resolved at the158th Ordinary General Meeting of Shareholders held on June 22, 2017.
2. The maximum amount of remuneration for Audit & Supervisory Board Members is¥13 million per month as resolved at the 147th Ordinary General Meeting of
Shareholders held on June 29, 2006.
3. The number of Directors as of the end of the fiscal year under review was eight(including three Outside Directors). The difference between these figures and thefigures in (1) above are due to the retirement of one Director at the 158th Ordinary
General Meeting of Shareholders held on June 22, 2017 as in (2) above.
4. The total amount of stock remuneration is the amount of expenses recorded for the
fiscal year under review for the stock remuneration plan that allots shares of the41Company (a stock remuneration plan wherein a trust established by the Company
makes acquisitions using funds contributed by the Company, and shares of theCompany and cash equivalent to the disposal conversion amount of the Company’s
shares are allotted to Directors (excluding Outside Directors) through said trust).

42

(5) Outside Officers
1) Significant concurrent positions as business executors at other companies, etc. and therelationship between the Company and such companies, etc.
Director Mr. Yasuo Sato is Chairman and Director of Wisemech Corporation. There are no
significant transactions between the Company and Wisemech Corporation.
Director Mr. Tatsutsugu Fujihara is the Chairman and Executive Officer of KSO Corporation.
There are no significant transactions between the Company and KSO Corporation.
Audit & Supervisory Board Member Mr. Tsunehiro Sasanami is a lawyer with Sasanami Law
Office. There are no significant transactions between the Company and Sasanami Law Office.
Audit & Supervisory Board Member Mr. Toshio Kinoshita is Representative Director of Global
Professional Partners. There are no significant transactions between the Company and Global
Professional Partners.
2) Significant concurrent positions as outside officers etc. at other companies, etc. and therelationship between the Company and such companies, etc.
Audit & Supervisory Board Member Mr. Toshio Kinoshita is Outside Audit & Supervisory
Board Member of Panasonic Corporation and Outside Corporate Auditor of Weathernews Inc. andOutside Director of ASATSU-DK Inc., Outside Director of Mizuho Bank, Ltd., and Outside
Director of TACHI-S CO., LTD.
There are no significant transactions between the Company and Weathernews Inc., Asatsu-DK
Inc., and TACHI-S CO., LTD.
The Company has transactions with Panasonic Corporation and Mizuho Bank, Ltd., but there
are no special interest relationships.
3) Relationship with specified related parties such as major customers
Not applicable4) Principal activities in the fiscal year ended March 31, 2018
i. Outside Directors[Board of Directors meetings]
The Board of Directors met 13 times in the fiscal year ended March 31, 2018. Mr. Yasuo Sato, Mr.
Akio Yamamoto and Mr. Tatsutsugu Fujihara attended all 13 meetings of the Board of Directors(attendance rate: 100%). Mr. Sato and Mr. Yamamoto, based on their rich experience and wide views
as managers and rich international experience serving as persons responsible for business at global
companies, and Mr. Fujihara, based on his rich experience and wide views as a manager, and expert
knowledge of corporate finance, actively made inquiries and recommendations on the Denka Group’s
corporate management, including business strategies and fund management systems, etc., at overseas
subsidiaries. Mr. Fujihara also visited the Company’s business sites and subsidiaries and received
briefings on the business, and asked questions and stated opinions to Directors etc., as necessary, fromexternal viewpoints.
ii. Outside Audit & Supervisory Board Members[Board of Directors meetings]
The Board of Directors met 13 times in the fiscal year ended March 31, 2018. Mr. Tsunehiro
Sasanami attended all 13 meetings of the Board of Directors (attendance rate: 100%), and Mr. Toshio
Kinoshita attended 11 out of the 13 meetings of the Board of Directors (attendance rate: 85%). Mr.
Sasanami, based on his rich experience and expert knowledge as a lawyer, and Mr. Kinoshita, based on
his experience and rich accounting knowledge as a certified public accountant in Japan and the US,
actively made inquiries and made recommendations regarding operation of the Company’s internal
control systems and business and funding plans at overseas subsidiaries. They also received briefings
on the business and asked questions and stated opinions to Directors, etc., as necessary, from external
viewpoints.
[Audit & Supervisory Board meetings]
The Audit & Supervisory Board met 15 times in the fiscal year ended March 31, 2018. Mr.
Tsunehiro Sasanami attended all 15 meetings of the Audit & Supervisory Board (attendance rate:100%), and Mr. Toshio Kinoshita attended 13 out of the 15 meetings of the Audit & Supervisory
Board (attendance rate: 87%). They also attended the Board of Directors meetings and other important
meetings. In addition, they reviewed important minutes, authorization documents, etc., investigatedthe Company’s divisions and departments, business sites and subsidiaries, and received briefings on43

the status of business execution at periodic divisional report meetings. They reported the results ofthese activities to the Audit & Supervisory Board and had necessary discussions with other Audit &Supervisory Board Members.
Board of Directors meetings
Director
Yasuo Sato
Director
Akio Yamamoto
Director
Tatsutsugu Fujihara
Audit & Supervisory Board Member
Tsunehiro Sasanami
Audit & Supervisory Board Member
Toshio Kinoshita

Audit & Supervisory Board
meetings
Attendance Attendance rate

Attendance

Attendance rate

13/13

100%

-

-

13/13

100%

-

-

13/13

100%

-

-

13/13

100%

15/15

100%

11/13

85%

13/15

87%

44

5. Accounting Auditor(1)

Accounting Auditor’s Name
Ernst & Young ShinNihon LLC(2)Accounting Auditor’s Remuneration, etc. for the Fiscal Year Ended March 31, 2018
Amount paid (thousands of yen)
Remuneration, etc. for the Accounting Auditor for the fiscal
72,000year ended March 31, 2018
Monetary or property benefits to be paid by the Company
112,870
and its subsidiaries to the Accounting Auditor
Notes: 1. Under the audit agreement between the Company and its Accounting Auditor,
remuneration for audits based on the Companies Act and that for audits based on the
Financial Instruments and Exchange Act are not strictly distinguished and they cannot
be substantially distinguished. Consequently, the sum of the amounts of these
remunerations is stated as the amount of remuneration, etc. for the Accounting Auditor
for the fiscal year ended March 31, 2018.
2. The Audit and Supervisory Board of the Company, in observance of the “Practical
Guidelines for Cooperation with Accounting Auditors” published by the Japan Audit &Supervisory Board Members Association, has confirmed the time taken to audit each
audit item compared to audit plans for previous fiscal years and comparisons withamounts for other companies as disclosed for the fiscal year ended March 31, 2017,and agrees to the fees, etc., of the Accounting Auditor under Article 399, Item 1 of theCompanies Act.
3. Financial statements (including corresponding statements) of some of the Company’s
significant subsidiaries are audited (subject to regulations of the Companies Act andthe Financial Instruments and Exchange Act; including corresponding laws andregulations overseas) by Certified Public Accountants or Audit Corporations(including persons with qualifications that correspond to these qualifications overseas)other than the Company’s Accounting Auditor.

(3)

Non-audit Services
The Company pays fees to Ernst & Young ShinNihon LLC mainly for work in the creation of
comfort letters associated with the issuance of corporate bonds.

(4)

Policy for Determination of Dismissal or Non-reappointment of the Accounting Auditor
If the Audit & Supervisory Board considers that it has become difficult for the Accounting Auditor
to perform its duties appropriately or otherwise considers it necessary, the Audit & Supervisory Board
will make a resolution for dismissal or non-reappointment of the Accounting Auditor, and the Board of
Directors will submit a proposal to the General Meeting of Shareholders based on this resolution.
If the Accounting Auditor is deemed to fall under any item of Article 340, Paragraph 1 of theCompanies Act, the Audit & Supervisory Board will dismiss the Accounting Auditor upon consent of all
the Audit & Supervisory Board Members.

(5)

Disposition of Suspension of Business of the Accounting Auditor during the Past Two Years
Not applicable(6)

Outline of the Limited Liability Contracts
Not applicable

45

Consolidated Financial Statements
Consolidated Balance Sheet(As of March 31, 2018)

Account item
(Assets)
Current assets
Cash and deposits
Notes and accounts
receivable-trade
Merchandise andfinished goods
Work in process
Raw materials andsupplies
Deferred tax assets(Reference)
158th term
454,944
168,902

159th term

Account item

475,086
186,467(Liabilities)
Current liabilities
Notes and accounts
payable-trade

10,258

14,11585,06995,58342,532

43,761

3,745

Short-term loans payable(Millions of yen)
(Reference)
159th term
158th term
227,456
232,305
144,190
158,044
46,811

53,62543,492

41,100

72

634

3,669

Current portion of
long-term loans payable
Current portion of bonds

10,00015,00016,907

18,870Accounts payable-other

14,22914,677

2,039

2,338

3,659

5,855

Other

8,809

8,595

Income taxes payable
Accrued consumption
taxes

814

1,081

Allowance for
doubtful accounts

(460)

(466)

Accrued expenses

9,690

10,7462,880
12,5393,002
12,322

83,26674,261

286,041

288,618

Provision for bonuses
Other

213,456

209,761

Noncurrent liabilities

39,84922,132

39,424
22,111

Bonds payable
Long-term loans payable

20,00040,18412,00039,53573,761

66,947

Deferred tax liabilities

5,895

6,604

577

488

8,405

8,403

Tools, furniture andfixtures

2,895

3,249

7,774

6,002

Land

63,24763,323

-

18

312

248

1,006

1,696

10,67913,968(Net assets)

227,487242,780

10,342
1,170
5,694
3,477

13,880
1,148
9,315
3,417

Shareholders’ equity
Capital stock
Capital surplus
Retained earnings

199,865
36,99849,284
123,752

212,479
36,99849,391
129,278

62,24264,975

Treasury stock(10,170)(3,189)54,604

58,17823,70026,584

Noncurrent assets
Property, plant andequipment
Buildings
Structures
Machinery andequipment
VehiclesLease assets
Construction inprogress
Intangible assets
Software
Goodwill
Right of using patent
Investments and otherassetsInvestment securities

Deferred tax liabilities forland revaluation
Net defined benefit
liability
Provision for stock
benefits
Other

Accumulated othercomprehensive income46Long-term loans
receivable

664

552

Long-term prepaid
expenses

2,789

2,122

Deferred tax assets

1,608

1,482

Other

3,399

2,779

Allowance for
doubtful accounts

(823)

(139)

Total

454,944

Valuation difference on
available-for-salesecurities
Deferred gains or losses
on hedges
Revaluation reserve forland
Foreign currencytranslation adjustment
Remeasurements ofdefined benefit plans
Non-controlling interests
Total

475,086

47

14,837

17,448-(195)

10,265

10,260

1,496

1,241

(2,898)(2,170)3,922
454,9443,717
475,086

Consolidated Statement of Income(From April 1, 2017 to March 31, 2018)(Millions of yen)
(Reference)
158th term
362,647

Account item
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Operating income

159th term
395,629

273,263295,583

89,383100,046

63,53966,39425,84433,652Non-operating income
Interest and dividend income

1,428

1,681

Equity in earnings of affiliates

568

1,105

Other

640

2,637

702

3,488

Non-operating expenses
Interest expenses

820

Other

4,502

Ordinary income

707
5,322

4,933

23,1585,641
31,499Extraordinary income
Loss on sales of investment securities

683

683

-

-

1,356

1,356

1,928

1,928

Extraordinary loss
Loss on liquidation of business
Income before income taxes

22,486

Income taxes-current

5,133

Income taxes-deferred(464)

29,571
7,280

4,669

(933)

6,347

Profit17,81623,224

Profit (loss) attributable to non-controlling interests

(329)

188

Profit attributable to owners of parent

18,14523,035(Note) Amounts are rounded down to the nearest million yen.

48

Non-consolidated Financial Statements
Non-consolidated Balance Sheet(As of March 31, 2018)

Account item
(Assets)
Current assets(Reference)
158th term
352,757
103,773

159th term
367,469
116,641

Cash and deposits

2,926

3,175

Notes receivable-trade

4,446

4,493

Accounts
receivable-trade52,30759,233

26,767

29,461

9,851

11,189Prepaid expenses

980

1,152

Deferred tax assets

807

1,005

Short-term loans
receivable

706

1,803

4,986

5,134

(6)

(7)

Merchandise andfinished goods
Raw materials andsupplies

Other
Allowance for doubtful
accounts
Noncurrent assets

248,984

250,827

Property, plant andequipment

167,764

163,111

Buildings

27,587

26,874Structures

19,46819,404

Machinery andequipment

50,18443,911

422

346

Tools, furniture andfixtures

1,967

2,203

Land

60,37360,451

Construction inprogress

7,760

9,919

Vehicles49

Account item
(Liabilities)
Current liabilities
Accounts
payable-trade
Short-term loans
payableCurrent portionof long-termloans payable
Current portionof bonds
Accounts
payable-other
Income taxes
payableAccruedconsumption
taxes
Accruedexpenses
Deposits
received
Provision forbonuses
Other
Noncurrent
liabilities
Bonds payable
Long-term loans
payableDeferred tax
liabilities
Deferred tax
liabilities forland
revaluation
Provision for
retirement
benefits
Provision forstock benefits
Long-term
accounts
payable-other
Asset retirement
obligations(Millions of yen)
(Reference)
159th term
158th term
189,854
195,866
113,660
127,358
26,76633,92527,67527,67558

58

10,00015,00012,454

13,054

1,169

3,940

335

883

6,021

6,581

27,08023,846

1,523

1,590

575

803

76,19468,50720,00012,00039,55439,495

6,456

6,681

8,405

8,403

1,639

972

-

18

13

-

126

127

Intangible assets

Other(Net assets)
Shareholders’equityCapital stock
Capital surplus
Legal capitalsurplus
Other capitalsurplusRetainedearnings
Other retained
earnings
Reserve foradvanceddepreciationof noncurrent
assetsRetainedearnings
brought
forward

1,246

1,001

Software776

610

Right of using patent

470

391

Investments and otherassets

79,972

86,714

Investment securities

33,25236,35140,78745,091

2,283

2,101

Long-term prepaid
expenses

1,908

1,413

Other investments

1,742

1,757

(1)

(1)

Treasury stock

367,469

Valuation andtranslation
adjustments
Valuationdifference on
available-forsale securities
Revaluation
reserve for
land
Total

Stocks of subsidiaries
and affiliates
Long-term loans
receivable

Allowance for doubtful
accounts

Total

352,757(Note) Amounts are rounded down to the nearest million yen.

50

162,903809
171,603

139,320

145,526

36,99849,28436,99849,28449,28449,2840

063,19962,424

63,19962,424

3,835

3,823

59,36358,600(10,161)(3,180)23,582

26,076

13,317

15,816

10,265

10,260352,757

367,469

Non-consolidated Statement of Income(From April 1, 2017 to March 31, 2018)(Millions of yen)
(Reference)
158th term
217,017

Account item
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Operating income

159th term
237,833

161,349

172,167

55,66765,66542,66944,661

12,99721,003Non-operating income
Interest and dividend income

5,177

Other

716

5,255
5,893

768

6,023

Non-operating expenses
Interest expenses

618

Other

3,524

Ordinary income

483
4,142

3,840

14,7484,323
22,703Extraordinary income
Gain on sales of investment securities

432

432

-

-

1,110

1,110

1,928

1,928

Extraordinary loss
Loss on liquidation of business
Income before income taxes

14,070

Income taxes-current

2,109

Income taxes-deferred

57

Profit5,061
2,166
11,904(Note) Amounts are rounded down to the nearest million yen.

51

20,775(1,018)

4,043
16,732

Transcript of Accounting Auditor’s Audit Report on Consolidated Financial Statements

Independent Auditors’ Report(English Translation)
May 8, 2018
To the Board of Directors
Denka Co., Ltd.
Ernst & Young ShinNihon LLC
Shunji Momoi
Certified Public Accountant
Designated and Engagement Partner
Mineo Kambayashi
Certified Public Accountant
Designated and Engagement Partner
Shigeyuki Honda
Certified Public Accountant
Designated and Engagement Partner

Pursuant to Article 444, Section 4 of the Companies Act of Japan, we have audited the consolidated
financial statements, which consist of the consolidated balance sheet, the consolidated statement of income,the consolidated statement of changes in net assets, and the notes to consolidated financial statements of
Denka Co., Ltd. (hereinafter referred to as the “Company”) for the fiscal year from April 1, 2017 to March 31,
2018.
Management’s Responsibility for Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statementsin accordance with accounting principles generally accepted in Japan. This responsibility includes designingand operating internal control, which management considers necessary for the preparation and fairpresentation of the consolidated financial statements that are free from material misstatements, whether due tofraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audit as
independent auditors. We conducted our audit in accordance with auditing standards generally accepted inJapan. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected and applied depend on the auditors’ judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. The purpose of the audit is not to express an opinion on the effectiveness of theentity’s internal control. However, in making those risk assessments, we consider internal control relevant to
the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of52accounting policies used, the method of their application, and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position and the results of operations of the Denka Group consisting of Denka Co., Ltd. and its
consolidated subsidiaries, applicable to the fiscal year ended March 31, 2018 in conformity with accounting
principles generally accepted in Japan.
Conflicts of Interest
Our firm and engagement partners have no interest in the Company which should be disclosed incompliance with the Certified Public Accountants Act of Japan.

The above represents a translation, for convenience only, of the original report issued in the Japanese language.

53

Transcript of Accounting Auditor’s Audit Report on Non-consolidated Financial Statements

Independent Auditors’ Report(English Translation)
May 8, 2018
To the Board of Directors
Denka Co., Ltd.
Ernst & Young ShinNihon LLC
Shunji Momoi
Certified Public Accountant
Designated and Engagement Partner
Mineo Kambayashi
Certified Public Accountant
Designated and Engagement Partner
Shigeyuki Honda
Certified Public Accountant
Designated and Engagement Partner

Pursuant to Article 436, Section 2, Paragraph 1 of the Companies Act of Japan, we have audited thenon-consolidated financial statements, which consist of the balance sheet, the statement of income, thestatement of changes in net assets, the notes to financial statements, and the accompanying supplementaryschedules thereof of Denka Co., Ltd. (hereinafter referred to as the “Company”) for the 159th term from April
1, 2017 to March 31, 2018.
Management’s Responsibility for Non-consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the non-consolidated financial
statements and the accompanying supplementary schedules in accordance with accounting principles
generally accepted in Japan. This responsibility includes designing and operating internal control, which
management considers necessary for the preparation and fair presentation of the non-consolidated financial
statements and the accompanying supplementary schedules that are free from material misstatements, whether
due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the non-consolidated financial statements and theaccompanying supplementary schedules based on our audit as independent auditors. We conducted our audit
in accordance with auditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the non-consolidated financial statements andthe accompanying supplementary schedules are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
non-consolidated financial statements and the accompanying supplementary schedules. The procedures
selected and applied depend on the auditors’ judgment, including the assessment of the risks of material
misstatement of the non-consolidated financial statements and the accompanying supplementary schedules,
whether due to fraud or error. The purpose of the audit is not to express an opinion on the effectiveness of theentity’s internal control. However, in making those risk assessments, we consider internal control relevant to
the entity’s preparation and fair presentation of the non-consolidated financial statements and the54accompanying supplementary schedules in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of accounting policies used, the methodof their application, and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the non-consolidated financial statements and the accompanying
supplementary schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Audit Opinion
In our opinion, the financial statements and the accompanying supplementary schedules thereof referred toabove present fairly, in all material respects, the financial position and the results of operations of theCompany applicable to the fiscal year ended March 31, 2018 in conformity with accounting principles
generally accepted in Japan.
Conflicts of Interest
Our firm and engagement partners have no interest in the Company which should be disclosed incompliance with the Certified Public Accountant Act of Japan.

The above represents a translation, for convenience only, of the original report issued in the Japanese language.

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Transcript of the Audit Report by the Audit & Supervisory Board

Audit Report(English Translation)
With respect to the Directors’ performance of their duties during the 159th term from April 1, 2017 toMarch 31, 2018, the Audit & Supervisory Board has prepared this audit report after deliberations based on theaudit reports prepared by each Audit & Supervisory Board Member, and hereby reports as follows:
1. Auditing Method Applied by the Audit & Supervisory Board Members and the Audit & Supervisory
Board and Details Thereof(1) The Audit & Supervisory Board established auditing policies, assignment of duties, and otherrelevant matters, and received a report from each Audit & Supervisory Board Member regarding thestatus of implementation of audits and results thereof. In addition, the Audit & Supervisory Board
received reports from the Directors, other relevant personnel and the Accounting Auditor regarding
the status of performance of their duties, and requested explanations as necessary.
(2) In conformity with the auditing standards for Audit & Supervisory Board Members established by
the Audit & Supervisory Board, and in accordance with the auditing policies, assignment of duties
and other relevant matters, each Audit & Supervisory Board Member communicated with Directors,
the Internal Auditing Department, other employees, and any other relevant personnel, andendeavored to collect information and maintain and improve the audit environment, conducting
audits as follows.
1) Each Audit & Supervisory Board Member also attended meetings of the Board of Directors
and other important meetings, received reports from the Directors, employees and otherrelevant personnel regarding the status of performance of their duties, requested explanations
as necessary, examined important documents related to important decisions and associatedinformation, and inspected the status of operations and assets at the head office and otherprincipal business offices. Concerning subsidiaries, communication was made with Directors
and Audit & Supervisory Board Members, etc., of subsidiaries, and information wascollected, and business reports were received from subsidiaries as necessary.
2) The Audit & Supervisory Board Members also expressed opinions on the resolutions of theBoard of Directors regarding the establishment of the system to ensure that the Directors’
performance of their duties as stated in the Business Report complies with laws andregulations and the Company’s Articles of Incorporation and other systems that are set forthin Article 100, Paragraphs 1 and 3 of the Ordinance for Enforcement of the Companies Act
of Japan as being necessary for ensuring the appropriateness of operations of a corporategroup comprised of a joint stock company (kabushiki kaisha) and its subsidiaries, and thesystems (internal control systems) established based on such resolutions. Audit &Supervisory Board Members periodically received reports from Directors, employees andother relevant personnel regarding the status of development and operation of such systems
and requested explanations as necessary.
3) With respect to the basic policy set forth in Article 118, Item 3 (i) of the Ordinance for
Enforcement of the Companies Act and the measures set forth in Item 3 (ii) of the said
article, which are described in the Business Report, the Audit & Supervisory Board
Members examined the content based on the status of deliberations at meetings of the Boardof Directors and other meetings.
4) Audit & Supervisory Board Members monitored and verified whether the Accounting
Auditor maintained its independence and implemented appropriate audits, received reports
from the Accounting Auditor regarding the status of the performance of its duties, andrequested explanations as necessary. In addition, the Audit & Supervisory Board Members
received notice from the Accounting Auditor that the “system for ensuring that duties are
performed properly” (matters set forth in each item of Article 131 of the Ordinance for
Corporate Accounting) had been prepared in accordance with the “Quality Control
Standards Relating to Auditing” (issued by the Business Accounting Council on October 28,2005) and other relevant standards, and requested explanations as necessary.
56Based on the above method, the Audit & Supervisory Board Members reviewed the non-consolidated
financial statements (non-consolidated balance sheet, non-consolidated statement of income,non-consolidated statement of changes in net assets, and notes to non-consolidated financial statements) andthe accompanying supplementary schedules, as well as the consolidated financial statements (consolidatedbalance sheet, consolidated statement of income, consolidated statement of changes in net assets, and notes
to consolidated financial statements), and the business report and its accompanying supplementary schedules
for the fiscal year in question.
2. Results of Audit(1) Results of Audit of Business Report, etc., and Other Relevant Documents
1) In our opinion, the Business Report and the accompanying supplementary schedules present fairly
the conditions of the Company in conformity with the applicable laws and regulations and the
Articles of Incorporation of the Company.
2) We have found no instances of misconduct or material violation of the applicable laws andregulations or the Articles of Incorporation with respect to performance of duties by the Directors.
3) In our opinion, the contents of the resolutions of the Board of Directors related to the internal
control systems are fair and reasonable. In addition, we have found no matters requiring special
mention regarding the description in the Business Report and the performance of duties by the
Directors related to such internal control systems.
4) We have found no matters requiring special mention with respect to the basic policies regarding thedetermination of policies on control of the finances and business of the Company described in theBusiness Report. In our opinion, the measures described in the Business Report, set forth in Article
118, Item 3 (ii) of the Ordinance for Enforcement of the Companies Act, are in line with the basic
policy, do not impair the common interests of the Company’s shareholders, and are not for the
purpose of maintaining the position of the Company’s officers.
(2) Results of Audit of Non-consolidated Financial Statements and the Accompanying Supplementary
Schedules
In our opinion, the method and the results of the audit performed by Ernst & Young ShinNihon
LLC are fair and reasonable.
(3) Results of Audit of Consolidated Financial Statements
In our opinion, the method and the results of the audit performed by Ernst & Young ShinNihon
LLC are fair and reasonable.
May 9, 2018
Audit & Supervisory Board, Denka Co., Ltd.
Full-time Audit & Supervisory Board Member
Full-time Audit & Supervisory Board Member
Audit & Supervisory Board Member
Audit & Supervisory Board Member(Note)

Shohei Tamaki
Masanori Sakamoto
Tsunehiro Sasanami
Toshio Kinoshita

Audit & Supervisory Board Members Tsunehiro Sasanami and Toshio Kinoshita are outside
audit & supervisory board members as stipulated in Article 2, Item 16 of the Companies Act.

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