DKS REPORT2018

DKS Co. Ltd.

Chemistry provides
a solution.
DKS Credo

Contributing to the nation and society through industry

DKS Mottoes

Quality First, Cost Reduction, R&D Efforts

DKS Group Logo
The DKS Group logo symbolizes“Act for a Leap,”
our step for globalization.
It describes the bridge for growth toward“Challenge to 1000.”

CONTENTS
About the DKS Group
2 Message from the CEO
8 Advantages and Strengths of DKS Businesses
10 The History of Chemistry Provides a Solution
12 Value Creation Process of the DKS Group
14 Review of the Medium-Term Management Plans
15 Five-Year Management Plan“REACT1000”
16 Financial/Capital Strategies and Total Shareholder Return

DKS Report 2018 Editorial Policy

18 Financial and Nonfinancial 11-Year Summary

In 2016, the DKS Group began to publish its annual report (DKS
Report), which added information about the Company's finances andmanagement strategy to what had been in its Environmental andSocial Report. From 2017, we referred the International Integrated
Reporting Framework promoted by the International Integrated
Reporting Council (IIRC).
From the last fiscal year we are publishing an
English-language edition. As our business activities become
increasingly international in nature, we aim to communicate to all
our stakeholders including those outside Japan. Starting with thedisclosure of environmental, social and governance (ESG), andnonfinancial information associated with DKS’s sustainable growth,
we will also convey management’s vision, business results, growthstrategy, capital policy and other information.
In this Report, by visualizing those“invisible assets”that raise
corporate value, we attempt to describe the Company's current
conditions and its journey to the future, so as to be able to inform thereaders of the creation of value across the short, medium and longterms. Looking to the future, we will use the DKS Report as acommunication tool with all our stakeholders.
Please refer to our official website for detailed information
about the financial and nonfinancial information of the DKS Group.

20 Financial and Nonfinancial Highlights

Organizations Covered by this Report
DKS Co. Ltd.“( DKS”or“the Company”) and Group companies(collectively“the DKS Group”)

Period Covered by this Report

In principle, this Report contains our activities and data during
FY 2017 (from April 1, 2017, to March 31, 2018). The data on the
Industrial Accident Severity Rate (ASR) and the Industrial Accident
Frequency Rate (AFR) were obtained from January to December 2017.

Reference Guidelines

International Integrated Reporting Framework by the International
Integrated Reporting Council (IIRC),“Environmental Reporting
Guideline 2012”by the Ministry of the Environment,“Environmental
Accounting Guideline 2005”by the Ministry of the Environment,“Environmental Accounting Guideline for Chemical Industries(November 2003)”by the Japan Chemical Industry Association (JCIA)

Postedon theWebsiteThe Emission of Notification Substances
under the PRTR Law in FY 2017
Transition of the Environmental Impact at
Branches and Yokkaichi Chemical
Safety Securement and Disaster Prevention【Forward-Looking Statements】Statements contained in this report regarding

the plans, projections and strategies of DKS that are not historical fact constituteforward-looking statements about future financial results and are subject to risks
and uncertainties. As such, actual results might differ significantly from theseforward-looking statements due to changes in various external environmental factors.
Consequently, DKS hopes for your understanding as it does not guarantee thecertainty of such forward-looking statements.

Five Operating Segments
22 Five Core Business Segments
23 Surfactants
24 Amenity Materials
25 Polyurethane Materials
26 Functional Materials
27 Electronic Device Materials
28 Product Pickup
29 The Three Core Technologies of DKS

Business Foundations
30 Important CSR Issues
32 Important Issue 1: Quality and Safety Management
34 Important Issue 2: Research and Development
36 Important Issue 3: Human Resource Management
38 Important Issue 4: Consideration for the Environment
42 Important Issue 5: Responsibility as a Global Company
46 Management

Data
48 Fundamental Knowledge of Surfactants
50 Glossary
52 Consolidated Financial Statements
55 Dialogue with Shareholders and Investors
56 Domestic/Overseas Network
58 Corporate Data
59 On Publishing the DKS Report 2018

DKS REPORT 20181

About the DKS Group

Message from the CEO

We are on the path tobecoming a“Uni-Top”company,a top niche fine chemicals
manufacturer of the 21st century.
Chairman & CEO

Getting ready to aim at achieving the targets in thefive-year plan

Sharing kibi dango treats together
The third year of the current five-year management plan has
been completed. At the work commencement ceremony heldat the beginning of the year, I spoke in front of our employees
and cited the folk tale Momotaro, or Peach Boy, particularly
the part where Momotaro forges reliable friendships with awise monkey, a sharp-eyed pheasant and a loyal dog who
help him achieve his goal. (The order of these animals under
the Chinese astrological calendar is monkey, bird and dog
with 2018 the year of the dog.) This marked the beginning ofan adventure for Momotaro. In the context of this story, thesethree friends have their own respective roles in achieving thetargets in the two remaining years of the REACT1000 plan.
Under the plan, the administrative sector is identified as
Momotaro. I have instructed this sector to start considering
the next management plan while steering the Company
toward its targets in the final fiscal year of the current plan.
The production sector is the monkey, the most important partof a manufacturer. Here, I have ordered the sector to ensure
the quality of products. The R&D sector is the pheasant thatlooks on the earth from the skies. This sector will work fromeach of the medium- to long-term perspectives with anawareness of the 17 Sustainable Development Goals (SDGs)

2

DKS REPORT 2018

SAKAMOTO Takashi
promoted by the United Nations. Finally, sales are identified
as the dog. This sector aims to achieve net sales of ¥67.0
billion and operating income of ¥6.0 billion. I wrapped up my
speech to employees with a short statement: It is time tolisten to the signals from the market. I said I would explain
the meaning of these words in the next issue of the internal
newsletter.
In the previous fiscal year, DKS made three noteworthy
achievements. The first was posting record profits for the
fourth consecutive year, thanks to the efforts of all our
employees. Net sales also reached a record high. The
Company’s second achievement was being selected as a
Certified Health and Productivity Management Organization“( White 500”) by the Ministry of Economy, Trade and Industry
and the Ministry of Health, Labour and Welfare. The award
recognized our implementation of work-style reforms. The
third achievement was our share price rising to ¥1,058 on
February 2, which was one target called the Challenge to1000. This is why I told our employees to“listen to the signals
from the market.”The mission of management is to increase
corporate value, which can be defined in more than one way.
It is also expressed as enterprise value or shareholder value.
Shareholders measure corporate value through market
capitalization. I hear that having a market capitalization of atleast ¥30 billion is one of the requirements for a company tobe listed in the securities section of the Nikkei, the major
financial newspaper in Japan.

DKS REPORT 2018

3

Data

Business Foundations

Five Operating Segments

About the DKS GroupAbout the DKS Group

Message from the CEO

It was my longstanding dream that DKS’s marketcapitalization soar above ¥30 billion ever since it was at the
low level of around ¥20 billion. It is now around ¥40 billion.
This was the basis of my wrap-up statement at the workcommencement ceremony. Ten years ago, the daily trading
volume of DKS shares was around 20,000 to 30,000. The term
exposure refers to the market perception of how well acompany is known. DKS used to have little exposure and did
not attract much interest from the market. Back in 2009,
when our management plan focused on“change”for the
100th anniversary of the Company, we were aware that
capital investment was needed to change and renew thebusiness portfolio. One way of getting this capital is to
procure it from the stock market. We began promoting public
and investor relations activities, the results of which would
not be quickly recognizable. Meanwhile, daily trading volume
has increased from 300,000 to as high as 1,000,000 on
occasion. In the autumn of last year, our share price rose
above ¥600, nearly double what it was a year prior. This waswhen record high profits for a fourth consecutive year camewithin sight.
It was around this time that it occurred in my mind thatthe market was sending signals. I mentioned in the internal
newsletter:“the share price fluctuates up and down based on
evaluations of our performance and expectations for the
future. DKS has built a new plant and constantly explained its
business visions to the public. The efforts of all employees
were reflected in good figures, and as a result, the shareprice began to move in the second half of last year. However,I believe the expectations of the market slightly overstepped.
It is time to listen to market signals and increase earnings by
growing sales.”After crossing ¥1,000, President Trump
announced import restrictions on steel and aluminum andour share price declined alongside the Nikkei 225. Thissituation changed suddenly soon after the Company reported
results on April 26. As I was returning to my office after apress conference, I was informed that trading in the shares
was halted since it reached the maximum allowable
single-day loss. I replied:“I see. It is exactly what I said in my
new year’s speech. The drop in the share price should be due
to our forecast for higher sales but lower profits, contrary to
the market’s expectations for growth in both sales andprofits. Now that the market has settled down, conditions arein place for Momotaro to respond to the market.”

4

DKS REPORT 2018

Upgrade and augment the management infrastructure

Act in anticipation of change
Three years have passed since we declared our second
renaissance at the start of the current management plan. I
have stressed that our forecast for higher sales and lower
profits this fiscal year is the minimum target, which triggered
the fall in the share price. We are making steady progress on
our vision for creating the future, and we are building out ourmanagement infrastructure, including for new businesses.
DKS has started construction of its fifth line at the new plant in
Kasumi, Yokkaichi. Our subsidiary in Taiwan is constructing a
new plant with plans to complete the first phase in 2019. The
existing businesses or what we call“ACTUAL”businesses
have improved strongly. Unprofitable businesses have become
healthier. The“NEXT,”or peripheral businesses, which areproduct lines from the new plant in Kasumi, now generate
about one-fourth of operating income. When drawing up plans
to invest in new plants, we used ROIC (return on invested
capital) as a benchmark. Our target for ROIC was at least
double the weighted average cost of the amount of loans andcapital (WACC). ROIC has exceeded this target, allowing DKS
to post record-high profits in the fiscal year ended March 2018.
For stronger organization and higher efficiency, DKS
transitioned to a new structure in April. In business
management, there is some point where we make a decision
to turn R&D outcomes into commercial products to be sold in
the marketplace. In other words, this reflects the progress of amaterial from the research sector toward the sales sector.
Through commercialization and the creation of new
businesses, sales of these products are booked and we canincrease awareness in business divisions. However, there
were some cases where this progress was too early, which
resulted in the booking of impairment losses. The battery
materials business operated by Elexcel Corporation and the
RHEOCRYSTA cellulose nanofiber business are examples. In
fiscal 2018, we decided to move these two businesses back to
the R&D sector under head office expenses to focus on R&D
and accelerate the realization of outcomes without setting
sales budgets. As of April, the Quality Assurance Office was
moved under the direct control of the President to clarify ourstance on strengthening governance. The COO Office plants
the seeds of future businesses and 19 peripheral and new
businesses have begun to grow.
Regarding updates to the personnel system, we haveentered our third year under a new assessment system for
managers. While monitoring the uptake of the new system, weAbout the DKS GroupI finished both marathons
within my goal times, andI learned the importance ofbeing able to adapt to change.

Crossing the goal line at the Boston Marathon on April 16, 2018

Fine chemicals manufacturer of the 21st century
Five Operating Segments

Seed accelerator forsustainable growth

DKS REPORT 2018

Business Foundations

Next, I will talk about change and transformation. Every day,the term globalization appears in the news. Is this the best
expression? Globe means the earth. Where the meaning has
not changed over time, why is globalization used to express
movement around the world? Globalization originates back to
the Age of Exploration in the 15th century. I believe there are
no words to describe the phenomenon where space and time
are shrinking all over the globe which is happening today.
The economic fabric that was developed through the previous
century since the Industrial Revolution is changing in thecurrent century. If the 20th century was defined by electricity
and computers, the 21st century is being defined by thechanges brought about by IoT, Big Data and AI via theInternet. The Internet is making the world a smaller place intime and space. The consulting company I mentioned earlier
repeatedly said that digitization was disrupting the industry. I
believe the B to B and B to C trends have begun to be turned
around by the Internet to a C to B trend.
One disruption is the abnormal change in therelationship between things and money. The survival ofchemicals manufacturers is being tested by these changes
in the 21st century. I believe that chemicals will be around aslong as there are people. Machine-based memory andcomputing should not lead to the creation of new chemical
substances. It is in a similar sense that keys to discoveringdrugs are to be found in living organisms and biology rather
than machines. Established in 1909 and surviving throughthe 20th century, DKS found certain hints that enabled it tocontinue thriving in the 21st century. Big companies in
Europe and the United States have been pursuing scale andmarket share to survive. Then why does DKS still exist,
which has never exhibited a large scale? I believe a clue toour survival lies in our history and the fact that we were notDataannounced six factors to consider in succession plans forgrooming the next generation of leaders. These factors are 1)
work track record, 2) tenacity to achieve results, 3) fair insight,4) entrepreneurship, 5) leadership of organizations and 6)
ability to engage with shareholders. Our core management
training session last summer focused on these factors. We
asked an international consulting company to organize thissession, and they held a lecture regarding changes in thechemicals industry brought about by digitization. Examples
were also given where consortiums are working to solvecommon issues faced by the industry. I hope this increased
management’s awareness of innovation. For managementthat respects the interests of shareholders, the general
meeting of shareholders held last year passed a resolutionthat allows stock with restrictions on transfer to be allocatedas a portion of remuneration to our board members. We arealso hiring mid-career professionals with expertise while
launching businesses in the life sciences field.
Act for a leap is the subtitle of our current management
plan REACT1000. Although difficult, we need to stay ahead ofchange to take action. We also need to endure and progress
while facing changes that arise. The world’s oldest marathon
started in Boston 122 years ago. This year, Yuki Kawauchi won
the race, the first Japanese runner to do so in 31 years. On
April 16, I ran this race myself and experienced certain
feelings. Before this race, I finished the Tokyo Marathon on
February 25. The weather was clear with no winds, and thetemperature was between 3°and 9°Celsius. I was in great
condition. Yuta Shitara won the race while setting a record inJapan. In Boston, there was a headwind and heavy rain withtemperatures below freezing, between minus 1°and 3°
Celsius. In Tokyo, the conditions were favorable, while in
Boston, running conditions could not have been worse. Overthe same distance of 42.195 kilometers, the best and the worst
conditions tested the runners. Yuki Kawauchi turned the worst
conditions into an opportunity. I finished both marathons
within my goal times, and I learned the importance of being
able to adapt to change.

5About the DKS Group

Message from the CEO

eaten by larger players.“Uni-Top”expresses our ambition to
be a company that is well recognized for its originality. I
always appreciate the description of DKS written in Japan
Company Handbook published by Toyo Keizai Inc.:“Top inindustrial chemicals. Established reputation in technologicalcapabilities.”
Our role model as a new business accelerator forsustaining growth is 3M in the United States. From 3M, I
learned the concept of customer-inspired innovation. There,
a company can be a mutually-inspiring partner to its
customers and promote business hand-in-hand. Suchinspiring/inspired partners include business entities indifferent industrial sectors, for example, the machineryindustry. At our Kasumi Plant, we produce products tailoredto the needs of such inspiring/inspired partners. In the past,
we never built facilities dedicated to a single customer;
however, the Kasumi Plant did it for the first time. While
staying true to ACTUAL existing business fields, DKS iscommercializing NEXT businesses, which are improved on
and peripheral to ACTUAL businesses. Moreover, we havegiven the name DREAM to completely new businesses
including M&A that break from the past. One DREAMbusiness is the life sciences business, which is positioned asa seed to be accelerated at DKS.

As inspiring/inspired partners,
we work together withcustomers and create new
businesses to sustain growth.

6

DKS REPORT 2018

In December 2017, we held a Company briefing forindividual investors with 45 minutes of explanation and 15
minutes for Q&A. One question was on why neither“drugs”
nor“medicine”were mentioned in my presentation about
DKS while the Company name contains“seiyaku”“( making
pharmaceuticals”in Japanese).
In answering this question, I said that in compiling a
100-year anthology of the Company, I read the historical
record of DKS’s first 30 years from its foundation. While there
is no reference to where the word seiyaku became a part ofs name, the Company’s history is written fromthe Company’
the beginning of DKS (with the former name Dai-ichi Kogyo
Seiyaku). In the chemicals industry, materials are called
drugs (yaku in Japanese) or agents. I explained that this
could be why seiyaku became a part of our name.
The investor who asked the question did not seem
satisfied with my answer. I went on,“we can be a company
which newly focuses on supplements and functional foods sothat we are more suited to the name our predecessors gaveto the Company.”He then nodded his head. Last summer,
DKS acquired 100% of the shares in an academic-based
venture company researching substances for treating
dementia and a small company with technologies for
extracting target substances. DKS will further focus on thelife sciences field aiming to foster it into a core business.

DKS REPORT 2018

About the DKS Group
Five Operating Segments

The United Nations adopted the SDGs in September 2015. I
believe the essence of these SDGs is the basis of corporate
activity. Elements of the 17 SDGs can be found in the DKS
Credo of“contributing to the nation and society throughindustry”and the DKS Mottoes, as well as the Company
song’
s lyrics. Here, I introduce part of the Company song,which has four verses as a whole and is sung by all
employees three times a year, namely at commencement
ceremonies at the start of a new year, in April and in October.
It starts with“South of Shichijo-senbon, Kyoto”and ends with
“Promote industries of Japan, treasures of Japan and“Pursue highest quality forenhance brightness of culture.”
the world”and“Eliminate unnecessary costs.”Although theexpressions sound antique, the spirit behind these words isfresh and unchanging. This spirit is also relevant to theconcept of ESG, which is often mentioned in the market. The
169 targets of the SDGs are goals for 2030, and I have
instructed employees to integrate them in our nextmanagement plan that will begin in 2020, when our current
five-year plan will end. We are elaborately preparing for it.
We have chosen five of the 17 SDGs and will clarify theirrelevance to our business in terms of priorities based on
their importance to enhance corporate value and explain to
our stakeholders, such as employees, shareholders,customers, suppliers, partners and society. Social activist
Naomi Klein has said that the world will be crazy unlessenvironmental issues are addressed. Over the next two years,
we will outline the initiatives that we can take as a company.
In Japan, legislation for work-style reforms was passed. I
have been appointed the leader of a group in Kyoto that
promotes labor administration as a private entity. Whileaiming to increase productivity and efficiency, the Group is
focusing on health and safety promotion and disasterprevention with related organizations. In the autumn of 2019,
the 78th Japan Industrial Safety & Health Association
conference will be held in Kyoto for the first time. Internally,
we have stepped up efforts to promote women in theworkplace. Women now play key roles in their departments.
These efforts have been recognized externally; DKS was
selected as a White 500 company and awarded the WICIJapan Award for Excellence in Integrated Reporting and theIndustrial Technology Award.

Business Foundations

Initiatives in ESG and SDGs to raise
corporate value

It was also a female researcher of DKS who led thedevelopment in the life sciences field, which is our seed
accelerator for creating a better future. This life science
project focuses on a third bio-derived raw material after pulp
and sugar which go to make our products. The Empress
Shoken revived the ceremonial leaf feeding to silkworms
during the Meiji era to respect the raw material for silk
textiles, which was a national industry at the time. We are
eager to contribute to regional revitalization throughbusiness related to silkworm breeding as a part of the DKS
Credo.
Returning to the folk tale of Momotaro, the demons
Momotaro and his friends battle could be construed as
markets. There are three other characters who play essential
roles on this stage. The first one is the traveling merchant
who brings information about the demons. Inspiring/inspired
partners are important sources of information. The second is
the old man who understands Momotaro’s decision and gives
him encouragement. I believe this is our founders who left us
with the DKS Credo, the DKS Mottoes and the company song.
The third character is the old woman who makes kibi dango
treats, which give Momotaro and his friends their strength.
This kibi dango must be the technological capabilities passed
down by our senior colleagues.
Let me explain my understanding of the Company’stechnological capabilities. I believe DKS has two strengths.
One is our R&D capabilities as a chemicals manufacturer for
creating new applications. It is our ability to provide new ways
to use what we already have. The other strength is our
manufacturing capabilities that find functions by producing
adequate quantity. This is the production technology thatenables us to enhance added value in niches, and not to
reduce cost through mass production. The new Kasumi
Plant, which is pursuing smarter and modular solutions, is asymbol of such strengths. ACTUAL existing businesses,
NEXT peripheral businesses and DREAM new businesses.
We intend to grow NEXT businesses more, which alreadygenerate one-fourth of operating income. The two life
sciences businesses, which were DREAM businesses thatturned actual, are expected to contribute to operating incomein the fiscal year ending March 2020. ACTUAL, NEXT andDREAM businesses will beautifully blossom through the aidof kibi dango, or technological capabilities. Together with all
our employees, and with smiles on our faces, we are making
steady progress on the path to being a“Uni-Top”company asa fine chemicals manufacturer of the 21st century.

Data

A bright future comes from the smiles of Momotaro and his friends

7About the DKS Group

Advantages and Strengths of DKS Businesses
Chemistry provides a solution
Surfactants
We have provided highly functionalsurfactants since our foundation in 1909.

Customers’Industry/Sector

To preserve
the global
environment

Machines& metals

Functional
Chemicals
We provide solutions forthe individual needs ofvarious industries by
proposing and creating
additional value
based on our chemical
technology-derived
substances/material
technologies(detergents, emulsifiers,
dispersants, thickeners,
foaming agents).

Amenity Materials

We provide materials and application
technologies to add comfort in daily living
environments.

Customers’Industry/Sector
LivingFood

Polyurethane Materials

For safe
andsecure living

We provide industrial materials and polyurethanematerials (paints, adhesives, civil engineering andconstruction materials and electric insulation materials).

Customers’Industry/Sector
Civil engineering

Plastic
Materials

For happy
andconvenientsocieties

Chemicals

We provide plastic
additives and resinmaterials indispensable
for various plastics
that have remarkablecharacteristics
not found in natural
materials (radcure
monomers/oligomers,
flame retardants,
antistatic agents,
lubricants, anti-clouding
agents, antioxidants).

IT

Functional Materials

We provide flame retardants, radcure resins,
waterborne polyurethanes, etc., for applications
essential to home appliances and daily life.

Customers’Industry/Sector
Environment& recycling

Machines& metals

Electronic Device Materials

We provide ceramic materials, conductive
pastes, etc., for applications in home
appliances and electronic components.

Customers’Industry/Sector
Environment& recycling

8

DKS REPORT 2018

IT

DKS Group Products Around Us

About the DKS GroupDKS Group products support a variety of products usedin our daily life.

Rock hardening
agentsWaterproof
roofing materials

Feed binders

Five Operating Segments

Oil spill treatment
agentsConductive pastes
for solar batteries
Precision cleaning
agents

Optical fiber connectors

Business Foundations

Sealants forelectric insulation

Building reinforcing
agentsData

Silicon wafer detergents

Food additives
Coatings for building
material and furniture

ShampoosSurface modifiers
Flame retardants
IT & electronicmaterials

DKS REPORT 20189

About the DKS GroupThe History of Chemistry Provides
Industry Events

1900S

1930S-1950S

1960S-1970S

With the advent of World War I, thespinning industry undergoes dramatic
growth. Textile goods exceed 50% ofJapanese exports.

Following World War I, the industry
undergoes a period of modernization,
during which time the textile industry
sees an accelerating shift from natural
fibers to synthetic alternatives.

Upon entering Japan’s period of rapid
economic growth, the petrochemicalindustry begins to transition todomestic production and stronger
international competitiveness.

1937 MONOGEN higher alcohol-based detergent

1969 PYROGUARD flame retardant for plastics

1950 CELLOGEN synthetic thickener

1970 DK ESTER food emulsifier

Along with the development of the textile
industry, the Company developed many typesof soaps and textile oil agents, thereby
establishing its position as a textile oil agent
manufacturer.
During this period, the Company
developed the nonionic surfactant NOIGEN,
the cationic surfactant CATIOGEN and various
progenitors for other surfactants, setting thestage for its rise to the top of the industry.

Against the backdrop of intensifying price competition
in industrial fields, the Company expanded the scopeof and diversified its industrial products. In anticipationof the future potential of the polyurethanemarket―positioned as a downstream sector within the
petrochemical industry―the Company commenced its
polyether business. Moreover, the Company launched
one business after another that would serve as afoundation for the future, including flame retardants
and sucrose fatty acid esters.

Establishes Yokkaichi
Builds the Ohgata Plant, the first
Chemical to manufacture
facility in Japan to commence
and sell nonionic surfactants manufacturing of solvent-method
CMC (CELLOGEN)

1970 Constructs sucrose fatty
acid ester plant

DKS Product Development
1909 SILKREELER cocoon unwinding agent(chemical agent for spinning)

1915 Gembu Marseille Soap

(industrial soap for spinning)

Cocoon unwinding agents were developed at thestart of the 1900s to address the need for a methodto spin waste cocoons while leaving as much of
the sericin in place as possible, which had been achallenge for the spinning industry.
Following the start of World War I, theCompany introduced Gembu Marseille Soap, thefirst industrial soap for spinning made in Japan, andsupported the development of the textile industry.

View of the first shipment from the General
Partnership Company Ohno Kogyo Seiyakusho

DK ESTER

1978
Capital participation in Chin Yee Chemical Industries, Co., Ltd. in Taiwan,s shift to Southeast Asia
accompanying the textile industry’
1973
Gembu established1969
Dai-ichi Kagaku Kogyo Co., Ltd. established (absorbed in 2001, becomes the Shiga Plant)
Nippon Levulose Co., Ltd. established
1960
Ohgata Plant opened
1939
Yokkaichi Plant opened
1959
Yokkaichi Chemical Company
Limited established
1949
Listed as a public company

10

DKS REPORT 2018

3/1984

3/1983

3/1982

3/1981

3/19803/19793/1978

3/1977

3/1976

3/1975

3/1974

3/1973

3/1972

3/1971

3/19703/19693/1968

3/1967

3/1966

3/1965

3/1964

3/1963

3/1962

3/1961

3/19603/19593/1958

3/1957

3/1956

3/1955

3/1954

3/1953

3/1952

3/1951

3/19503/19491909 Founded
1915 Incorporated

1980S

1990S

2000S

In response to the two oil crises, the endof the fixed exchange rate system, therevaluation of the yen and other external
factors during the 1970s, the industry
transitions to high-value-added products.

Following the collapse of Japan’s bubble
economy, greater interest is placed on
rising energy costs and safety that takes
the environment into consideration,
which accelerates the greater functionalization of existing materials using
polymerization technologies.

Japan’s chemical industry begins to
see the development of high functional sectors that aggressively create anddeliver added value to society.

1981 NEW FRONTIER UV/EB-curable

1990 DK BE-CLEAR industrial washing agent

2005 ELEXCEL IL ionic liquid

1982 SUPERFLEX waterborne

1993 HITENOL polymerizable surfactant

In the transition to high-value-added products, theCompany enhanced its research and developmentin the priority areas of“Resources and Energy,”“Electronics and IT,”
“Food, Pharmaceuticals andCosmetics”and“new materials.”The Company
developed various highly functional surfactant andpolyurethane products.

In aiming to become a leader in highly functional
chemicals, the Company began collaborating withother industries as a way of addressing new needs.
Moreover, the Company developed a nonionicsurfactant with a low environmental impact incollaboration with an overseas manufacturer,
as well as promoted product development andmarketing that addressed the Japanese market.

EIMFLEX polyurethane

NEW FRONTIERSUPERFLEXDK BE-CLEAR

1986
Kyoto Elex Co., Ltd. established to
manufacture and sell electronicmaterials

In establishing electronic materials and IT as thenext generation of business pillars that will serveas the foundation for future growth, the Company
began to take steps to transition from a traditionalsurfactant company to a leading industrial
chemical supplier. In 2015, the Company completed
construction of the Kasumi Plant at its Yokkaichi
Branch, which is intended to serve as the core
location for corporate value creation.

Kasumi Plant (Yokkaichi City)HITENOL

2006
R&D labs relocated to
Kisshoin, Kyoto, to develop
new technologies

1996
P.T. Dai-ichi Kimia Rayaestablished in Indonesia

1988
Dai-ichi Ceramo Co., Ltd.
established to strengthen theelectronic materials sector

nanofibers

Five Operating Segments

polyurethanes

2015 RHEOCRYSTA cellulose

Business Foundations

monomers and oligomers

About the DKS Groupa Solution

2015 Construction of theKasumi Plant in(¥ billion)
Yokkaichi completed
602009 100th anniversaryof the founding

2002 Elexcel Corporation
established

50

30

Net Sales

40

Data

20

Product development and business deployment that address global events and expand net sales

3/20183/20173/20163/20153/20143/20133/20123/20113/20103/20093/20083/20073/20063/20053/20043/20033/20023/20013/20003/19993/1998

3/1997

3/1996

3/1995

3/1994

3/1993

3/1992

3/1991

3/19903/19893/1988

3/1987

3/1986

3/1985

10

0

DKS REPORT 201811

About the DKS Group

Value Creation Process of the DKS Group
Based on its technologies and trust accumulated over the past 100 years, the DKS Group applies
originality and imagination to limited resources to deliver materials that enrich our way of life.

Principal
Management
Resources

Business Model(Results for the fiscal year ended March 2018)

Research &Development

Manufacturing capital
Manufacturing bases: 11(includes four overseas)
Raw materials used:carbon, petroleum, coal,ore minerals, plants, wood

Intellectual capital
Patents held: 924(of which held overseas: 427)

Research & Design

Product
DesignB2B

B2B2C

Functional
Improvement

Develop products that
capture customer needs
through businesscollaboration with Inspiring/
Inspired Partners

Human capital
Employees: 976(of which global employees: 193)

Financial capital
Net assets: ￥31,960 million
Interest-bearing debt: ￥23,863 million

SampleMakingDevelop and market
commodity products
based on the needs ofbusiness customers

Production in dedicated plants(One variation of the Uni-Top Strategy)

Social capitalPrimary agencies(Zenkoku Ichi-Ko Kai): 34

Marketing

Mass
Production

Production
Management

Natural capital
Energy consumption: 26,100 kL
Water consumption: 4,460,000 m3

Sales & Marketing

Value
Drivers

12

DKS REPORT 2018

Manufacturing

Uni-Top Strategy
Aim for the top throughuniquenessStrengthen relationships with
Inspiring/Inspired Partners

R&D Foundation▶The Three Core Technologies

of DKS P.29

▶Research and Development P.34

Surfactants▶P.23

Amenity Materials▶P.24

Polyurethane
Materials▶P.25
Functional
Materials
▶P.26
Order
TakingElectronic Device
Materials▶P.27

Management

REACT1000,
AND100×6

5-year management planfor sustainable development▶P. 15

About the DKS Group

Skills acquisition
Work-life balance
Work motivation
Diversity

Shareholders
GrowthEfficient and transparent
management
Shareholder returns

Customers
Coexistence and mutual prosperity
through the joint development ofhigh-value-added productsSociety
Regional economic revitalization
driven by contributions to thedevelopment of local communities

Governance

Data

Procurement

Employees

Five Operating Segments(Five core business segments)

Prototype
Making

DKS Stakeholders
andValue Creation

Business Foundations

New ProductDevelopment/
Product
Improvement

Strong and transparent
business promotion structure▶Corporate Governance P.42

DKS REPORT 201813

About the DKS Group

Review of the Medium-Term Management Plans
ADD21(Ambitious Dynamics DKS
for the 21st Century)― Tolerance to Changes
April 2004–March 2009
net sales ￥50 billion
Targeted Figures Consolidated
Ratio of ordinary income to sales 7%

CHANGE100 Stage I

CHANGE100 Stage II

April 2009–March 2012

April 2012–March 2015

Consolidated net sales ￥55 billion or higher
Operating margin 4% or higher

Consolidated net sales ￥60 billion or higher
Operating margin 5% or higher“Each of Us Holds the Key to Success”“Each of Us Holds the Key to Success”―Changing the Corporate Culture ―Expansion along with Earnings

Slogan“With High Aspirations, We Will

VisionBusiness Expansion andSustainable Corporate Value Growth

Building a Business Structure Necessary
Staying Ahead of the Times as
as a Leading Industrial Chemical Company a Leading Industrial Chemical Company

Management
Policies

1. Putting the concept“R&D is the engineof the Company”into practice to realize
customer satisfaction
2. Continuously complementing andexpanding the values of the Company
3. Reinforcing the business byemphasizing the“three actuals”(actual
work site, actual goods and actual
situation)
4. Enhancing corporate governance
5. Promoting compliance management
6. Establishing an ideal company structureby the 100th anniversary (April 2009)

1. Securing a stable profit structure
2. Pursuing greater businessefficiency
3. Developing and strengthening our
foundation to realize the“technology makes the Company”
concept
4. Accelerating the creation of new
products
5. Enhancing compliancemanagement
6. Improving managerial skills andhuman resource development

Plan Outline

1. Increasing sales and building astable earnings-generating
business portfolio
2. Developing and expanding new
high-value-added businesses
3. Generating strong awareness ofand benefits from realizing targets
after establishing themanagement infrastructure

1. Enhancing the enterprise’s power (marketing clout, cost-saving ability, technicalstrength and organizational power) = Heightening our corporate value
2. Promoting selection and concentration = Determining the withdrawal fromunderperforming segments based on our exit rule
3. Optimizing the allocation of management resources = Funneling people, goods and capital
4. Seeking more productivity = Seeking more profitability through the integrated
business division approach
5. Creating new businesses and strengthening cooperation with the parties concerned =Developing inorganic materials, dispersion technology, electronics materials, etc.
6. Focusing on priority business segments = Promptly reaping the benefits of an existing,ongoing, highly profitable business

Review

In the final year of the plan (FY 2009),
business conditions became severe,characterized mainly by declining
demand and falling sales prices amid
surging raw material naphtha prices
caused by high crude oil prices and thesubsequent global recession triggeredby the financial crisis in the UnitedStates. Against this backdrop, DKS
undertook such initiatives as boostingsales of core products, developing newmarkets in growing fields that include
IT and the environment, focusing on
developing new materials, continuallyrevising prices, and cutting operating
expenses and other costs. Despite
these efforts, the Company’s earnings
fell below the plan’s targets.

The initial year saw the impact of thefinancial crisis triggered by the
Lehman Brothers bankruptcy. With
revenues growing over the next two
years, however, DKS successfully
achieved a target of the plan byrecording final fiscal year (fiscal year
ended March 2012) consolidated net
sales of ¥56.2 billion. In contrast, theCompany was unable to reach theplan’s operating income target due tooperating income decreasing in the
final fiscal year amid sharp demand
drops and ongoing high raw
resources prices.

Although DKS aimed to increase net
sales from ¥56.2 billion the previous
fiscal year to ¥60 billion, the fiscal
year ended March 2015, the final yearof the plan, ended with consolidated
net sales at ¥55.5 billion, below thetarget because of delays ininvestment to raise production in corebusinesses and stagnation in thesolar cell field. On the other hand,
DKS achieved its operating margin
target given record-high operating
income, ordinary income and net
income. While missing its quantitative
targets, DKS saw success inqualitative terms.

● Introduced an integrated business● Increased business divisions’● Upgraded the management infrastructure

Further instillation of a profitability
mind-set

Improve the corporate culture to bringa profitability mind-set to the forefront
Realize a balance in three areas:
1. Maintain a strong balance sheet:
Simultaneously increase assets andliabilities/capital
2. Revamp the business portfolio:
Select and concentrate on
future-oriented businesses
3. Optimize human resources:
Develop highly capable employeesthat cross generational lines

Maintain a robust and healthy balance
sheet to increase earnings

Shine Brightly in the 21st Century”

1. Expanding peripheral businessfields2. Enhancing and reinvigorating
domestic production facilities
3. Accelerating the creation of new
businesses
4. Pursuing cost reductions
5. Improving management
capabilities and developing humanresources
6. Enhancing overseas expansion andstrengthening administration

Basic Strategies

Successes

Issues14

DKS REPORT 2018division approach that verticallylinks the research, production andmarketing divisions, and promoteda change in consciousness toward
the concept of emphasizing
earnings based on strict budget
management and clarifying
responsibilities

profits by instilling a profitability
mind-set● Launched and promoted the
Human Resources Development
Project aimed at instilling anawareness of management in all
departments(e.g., commenced introducing a new ERP
system) for the future● Maintained a healthy balance sheet(increased the capital adequacy ratio)● Made new investments for growth (madeYokkaichi Chemical a wholly owned
subsidiary) to expand business fields,
purchased land, began preparation for a
new plantFive-Year Management Plan“REACT1000”April 2015 to March 2020

1 Create new corporate value

We will maximize our performance and market capitalization derived
from assets held.
We will increase awareness toward the Company's image and profile.
We will increase management efficiency by focusing on corporate governance.
We will pat careful attention to ROE from a medium- to long-term perspective.
We will promote the development of materials and technologies in collaboration
with business partners, academia, associations, and related parties.
We will improve Group-wide productivity based mainly on a Yokkaichicomposite base structure.

2 Create a clear corporate image

Management 3 Ensure more profound corporate governance
4 Maintain and increase optimal ROE levels
Policy5 Create advantages through collaboration

6 Accelerate and enhance mother plant functions

Scope of REACT1000 and AND100×6

Year to March 2020 Targets
Net Sales

Society

R (RETURN)

Give proper
credit for theircontributions

P/E andP/B for 1000

Positive
Active partner economic
cycle

E (EXPORT)

Increase theoverseas ratio

Annual reportMarketdevelopment

A (ADVANCE) ACTUAL100×6
C (CREATE)

NEXT100×6

T (TRAIN)

Training &education

Mother plant

Withdraw from
unprofitable DREAM100×6
businesses
Change from Diplomacy with
undervalued stock
specialto growth stock assignments
OutsideIncrease IT
executivesales
meetings

Operating Income¥67.0 billion ¥6.0 billion

BrandsOperating Margin

ROE

Public classes

Results(¥ billion)
70

40

39.0

41.9

46.0

48.9 46.550.0

44.4

3/07

3/08

3/10

60.0 or higher
56.2 55.0 or higher54.6 55.6
52.8 52.3
51.8
51.2

57.0

3/11

3/18

Target67.0

Business Foundations

50

Overseas Sales Ratio

9.0% 10% 20%

Regional
revitalization■ Net Sales

60

Five Operating Segments

Employees Shareholders Customers

About the DKS Group

Practicing the concept“chemistry provides a solution,”we will take up the challenge of carrying out ourmanagement plan REACT1000.

30
20
10
3/05

3/06

3/09

ADD21

3/12

CHANGE100 StageⅠ

3/13

3/14

3/15

3/16

3/17

CHANGE100 Stage Ⅱ

REACT1000

Results■ Operating Income/Operating Margin

Results

Target8.9(¥ billion)
765.0％ or higher

7

2
1
0

5.3

5.3

4
3

3.6

3.1
1.2

2.1

2.2

0.9

1.0
0.6

3/05

3/06

3/07
ADD21

3/08

2.7

1.6

1.3

7.5

5.1

6.5

5

3/20 (Target)

4.0％ or higher
3.4
3.6
2.0
1.8

4.5
2.5

2.9

3.4

Target
9.0

(％)
9

6.0

8
7
6

3.9

5
4
3
2

0.6

1

0.3

3/09

Data

0

3/10

3/11

3/12

CHANGE100 StageⅠ

3/13

3/14

3/15

CHANGE100 Stage Ⅱ

3/16

3/17

0
3/20 (Target)

3/18

REACT1000
DKS REPORT 201815

About the DKS Group

Financial/Capital Strategies and Total Shareholder Return

１Financial Position

As of the end of the fiscal year ended March 31,
2018, the Company had total assets of ¥73.9 billion,
net assets of ¥31.9 billion, an equity ratio of 40.8%,
cash and cash equivalents of ¥11.4 billion andinterest-bearing debt of ¥23.8 billion; the net D/E
ratio was 0.41.
Regarding cash flows for the period, cash flows
provided by operating activities achieved theirhighest levels in the Company’s history, reaching¥5.0 billion, significantly greater than the ¥3.7 billion
recorded during the previous fiscal year. As a result

2

of completing the first stage of investments in the
Kasumi Plant and implementing sales of real estateby the Company’s subsidiary in Taiwan, negative
cash flows from investment activities were kept
down to ¥1.1 billion, leading to positive free cash
flow of ¥3.8 billion.
Financial cash flows were negative at minus¥1.8 billion as a result of a dividend increase (of ¥2
per share) and loan repayments, whereas cash
deposits increased ¥2.1 billion, thereby indicating
continued stability of the financial base.

Financial Analysis of the Past 10 Years

The performance and financial results of the DKS Group for the period from April 2007 to March 2018 are
analyzed as follows. (Cumulative totals are the totals over the 10-year period from April 2008.)

Net Sales

April 2017–
March 2018¥48.8 billion¥56.9 billion

Increased 16.5%

Assessment/Comments

Operating Income¥623 million¥5.05 billion

Record-setting profit, resulting in four consecutive years
of profit growth

Operating Margin

1.3%

8.9%

Improved to a level near the 5-year target (9.0%)¥436 million¥3.35 billion

2.9%

11.8%

Total Assets¥46.1 billion¥73.9 billion

Increased 60.2%

Net Assets¥16.1 billion¥31.9 billion

Increased approximately two times because of retained
earnings and two capital increases

Interest-Bearing Debt

¥16.2 billion¥23.8 billion

Increased ¥7.6 billion mainly due to capital investment funds

0.9

0.4

Profit Attributable to Owners of Parent
ROE

Net D/E Ratio

16

April 2007–
March 2008

Increased approximately 7.7 times
Improved to a double-digit return on capital

Improved significantly due to increases in net assets andcash deposits

Total for 10 years from April 2008

Assessment/Comments

Profit Attributable to Ownersof Parent Cumulative Total¥13.4 billion

Weak in the past 10 years; there was an impact fromthe financial crisis of 2008

Capital Investment
Cumulative Total¥31.0 billion

Depreciation Cost Cumulative Total¥20.6 billion

Invested aggressively for growth since the fiscal year
from April 2014 onward investing more than the amountof depreciation by ¥10.4 billion

R&D Expenses Cumulative Total¥22.4 billion

Continued outlays for investment in technology

FCF Cumulative Total¥2.0 billion

FCF over the past 10 years increased slightly

Dividend Cumulative Total¥3.3 billion

Dividend per share increased for the fourth consecutive period

Capital Increase¥4.4 billion

Implemented public offerings on two occasions(March 2011, December 2014)

Share Buybacks¥1.0 billion

Determined as a shareholder return policy in January 2017

DKS REPORT 2018

Past Total Shareholder Return
About the DKS Group3

Total shareholder return (TSR) by dividend and stock price was as follows. The stock price rose more than 100%over the past year, resulting in an annual TSR over the past five years of 27.6% and an annual TSR over the past
10 years of 15.5%. Meanwhile, during the previous fiscal year volatility (standard deviation) in the annualized
weekly stock price was 46.8%, which was a greater degree of stock price variability than the 24.9% from the fiscal
year ended March 31, 2017, and the 32.4% from the fiscal year ended March 31, 2016. The fairly rapid pace atwhich the stock price rose during the second half of last year is assumed to have had an impact on the volatility.
500

DKS

TOPIX

TOPIX Chemicals Index

450
400
350
300
Five Operating Segments

250
200
150
100
50
0
3/20093/20103/2011

10 years

3/20123/20135 years

3/20143/2015

3 years

3/20163/2017

2 years

3/2018

1 yearCumulative
total

Annualrate

Cumulative
total

Annualrate

Cumulative
total

Annualrate

Cumulative
total

Annualrate

DKS

321.5%

15.5%

238.4%

27.6%

119.9%

30.0%

147.7%

57.4%

108.2%

TOPIX

73.9%

5.7%

83.6%

12.9%

18.5%

5.8%

32.9%

15.3%

15.9%

TOPIX Chemicals Index

157.7%

9.9%

145.1%

19.6%

43.0%

12.7%

58.9%

26.0%

23.8%

Future Financial Strategies/Shareholder Returns

Under REACT1000, our current five-year
management plan, we have set“maintaining andenhancing an appropriate ROE level”as amanagement policy. In addition, as an action point
we are promising all our shareholders a change
from comparative value stock to growth stock. For
our financial strategy going forward, while
supporting medium- to long-term growth, we would
like to implement measures to optimize the cost ofequity.
Because we are a chemical manufacturer,
continuous investments in plant and equipment, as
well as R&D expenditures, are indispensable forachieving medium- to long-term growth. Whilemaintaining continuing financial discipline, we are
therefore investing for growth, and the main sourceof that investment will be internal reserves andinterest-bearing debt. In addition, we believe an
important option will be to conduct policy flexibly,
such as making capital increases for growth or
financially strategic acquisitions of treasury stock,based on our financial situation and stock market
trends.
Specifically, we will steadily raise PBR to 1 orabove by improving and maintaining ROE to a level
above the cost of equity. Also, while maintaining
financial discipline, we will bring about a reductionin the cost of capital to an appropriate level by using
moderate leverage. While aiming for sustainabledividend growth, we will aim to optimize the cost ofcapital through flexible shareholder returnmeasures in conjunction with share buybacks.

DKS REPORT 2018

Data

4

Business Foundations

3/200817

About the DKS Group

Financial and Nonfinancial 11-Year Summary
Financial Data (Millions of yen)

3/20083/20093/20103/2011Net Sales

48,875
16,574
8,645
8,075
10,576
5,003
7,726
623
351
436
3,040
1,778
2,058
2,964
(2,743)221
195
16,172
46,166
16,25946,52815,880
8,316
7,504
9,406
5,420
7,572
298
(28)
(350)
2,929
1,700
1,936
1,383
(2,678)(1,295)
117
14,43841,74916,25944,352
14,373
7,397
7,161
9,467
5,950
6,692
1,575
1,239
503
873
1,733
1,863
3,061
(1,661)1,400
195
15,31644,291
14,49951,245
15,131
7,046
8,761
11,441
8,863
8,748
2,732
2,439
1,155
1,111
1,836
2,010
2,502
(616)
1,886
298
16,49847,741
14,09811.17
392.735.00(8.99)
350.233.00

12.89
367.845.00

29.38
367.85
7.00

15.8
4.2
1.3
2.9
1.0
33.2
0.9
228
20.4
0.6
2.2

16.3
4.2
0.6
(2.4)
(0.8)
32.7
1.0
195
0.6
1.5

15.1
4.2
3.6
3.6
1.2
32.4
0.8
266
20.6
0.7
1.9

17.1
3.9
5.3
7.7
2.5
32.9
0.5
261
8.9
0.7
2.7

934
647
125
14.2
5
8
66.3

894
609
131
14.3
6
6
72.3

910
582
129
14.6
8
4
71.4

861
554
131
14.8
6
6
69.0

Surfactants
Amenity Materials
Polyurethane Materials
Functional Materials
Electronic Device Materials
Overseas Sales
Operating Income
Ordinary Income
Profit Attributable to Owners of Parent
Capital Expenditures
Depreciation and Amortization
R&D Expenses
Net Cash Provided by (Used in) Operating Activities
Net Cash Provided by (Used in) Investing Activities
Free Cash Flows
Cash Dividends Paid
Net Assets
Total Assets
Interesting-Bearing Debt1
Per-Share Data (yen)Net Profit
Net Assets
Cash Dividend
Major IndicesOverseas Sales Ratio (％)
R&D Expenses to Sales Ratio (％)
Operating Margin (％)
Return on Equity (％)
Return on Assets (％)
Equity Ratio (％)
Net D/E Ratio (times)
Year-End Stock Price (yen)PER (times)
PBR (times)
Dividend Payout Ratio (％)－

Nonfinancial Data
No. of Employees (consolidated)
No. of Employees (non-consolidated)
No. of Employees Outside Japan
Ratio of Female Employees to Total Employees (non-consolidated)
No. of Employees Who Utilized the Child-Care Leave System (non-consolidated)
No. of Employees Who Utilized the Child-Care Part-Time Work System (non-consolidated)
Annual Paid Leave Rate (non-consolidated + assigned employees) (%)
No. of Patents Held (overseas) 2
Generated Waste Amount (tons) 3
CO2 Emissions (consolidated) (thousands of tons) 3－

12,800
46.6

－

8,579
43.1

－

9,912
37.4

1. Lease obligations not included in interest-bearing debt.
2. The collation method was amended to a legal effective date basis from FY 2016.
3. Data are presented on a non-consolidated basis up to FY 2009 and on a consolidated basis including Yokkaichi Chemical from FY 2010.

18

DKS REPORT 2018－

15,77457.5

3/2016

3/201756,24918,7797,220
8,634
10,228
11,386
8,296
2,033
1,742
165
2,312
2,252
2,273
2,309
(2,869)(560)
298
16,94951,357
15,70051,843
19,486
6,825
8,466
9,666
7,398
7,323
1,754
1,544
797
3,664
2,003
2,340
2,477
(3,548)(1,071)
298
18,20055,416
18,712

54,614
20,3597,141
9,564
10,680
6,868
8,103
2,477
2,374
1,336
1,512
2,104
2,506
3,553
(1,793)1,760
298
19,886
57,57020,67955,597
21,573
6,856
9,442
11,216
6,508
8,743
2,944
2,717
1,782
3,948
2,153
2,439
2,322
(3,229)(907)
474
26,15664,42021,32252,782
20,7797,208
8,934
11,259
4,600
9,131
3,439
3,200
2,198
8,485
2,087
2,380
4,197
(7,687)(3,490)528
26,74566,05723,22752,254
19,793
6,986
9,093
12,517
3,862
8,794
3,944
3,773
2,489
3,786
2,335
2,393
3,750
(3,336)414
608
28,044
69,046
24,59456,955
21,416
7,502
9,115
14,070
4,850
9,929
5,053
4,725
3,351
2,467
2,473
2,307
5,017
(1,130)3,886
710
31,96073,97623,8633.87
377.777.00

18.68
404.397.00

31.32
440.007.00

38.69
472.409.00

41.64
485.0510.00

47.40
529.9412.00

66.06
594.15
14.00

14.7
4.0
3.6
1.0
0.3
31.4
0.6
246
63.6
0.7
2.9

14.1
4.5
3.4
4.8
1.5
31.1
0.7
250
13.4
0.6
2.8

14.8
4.6
4.5
7.4
2.4
32.6
0.6
322
10.3
0.7
2.2

15.7
4.4
5.3
8.2
2.9
38.7
0.4
387
10.0
0.8
2.3

17.3
4.5
6.5
8.7
3.4
38.8
0.5
328
7.9
0.7
3.1

16.8
4.6
7.5
9.5
3.7
38.9
0.5
427
9.0
0.8
2.8

17.4
4.1
8.9
11.8
4.7
40.8
0.4
875
13.2
1.5
1.6

995
533
133
14.8
10
7
66.7

979
526
135
14.8
10
11
62.7
636 (237)
14,421
51.9

969
514
135
16.0
8
8
63.7
660 (245)
12,724
52.0

944
508
142
15.9
11
9
61.0
722 (299)
13,876
51.3

982
495
150
17.0
9
10
64.5
822 (344)
13,191
50.9

967
486
189
17.5
6
13
62.4
855 (378)
17,364
52.5

976
497
193
17.5
12
10
67.4
924 (427)
20,77053.9－

13,39549.8

3/2018

DKS REPORT 2018

About the DKS Group

3/2015

Five Operating Segments

3/2014

Business Foundations

3/2013Data

3/201219

About the DKS Group

Financial and Nonfinancial Highlights
Financial Highlights (Consolidated)■ Operating Income/Operating Margin■ Net Sales/Overseas Sales Ratio(¥ million)

54,614 55,597 52,782 52,254

60,00056,955(％)(¥ million)

30

5,000

25

4,000

20

3,000

15

2,000

50,00040,00030,000

15.7

14.8

17.3

16.8

17.4

20,00010,000

10

1,000

0

0

0

3/2014 3/2015 3/2016 3/2017 3/2018

5,053

2,477
4.5

2,944

3,439
6.5

5.3

(％)

(¥ million)

5.0

30,0004.0

25,000

12

10

10

9

8

7

6

1.7

2.0

2.4

2.1

2.5

2.0

4
2

0

3/20143/20153.0

3/20163/20173/20188.9

7.5

3/2014 3/2015 3/2016 3/2017 3/2018

(Yen)
12

10

20,00020,67921,322003/20143/20153/20163/20173/2018*Lease obligations not included in interest-bearing debt.

Nonfinancial Highlights (Group/Non-consolidated)■ Number of Patents Held* (Group)

Outside Japan

246

297

316

378

427

0

422

438

447

20

477

497

3/2014 3/2015 3/2016 3/2017 3/2018*Based on the effective date.

DKS REPORT 2018

15,00017,364
12,724

13,876 13,191

60
50

51.3

50.9

52.5 53.9

30
20

5,000
0

(1,000 t) 71.3
7040

10,000400
200

20,770(t)
20,000800■ CO2 Emissions (Group)Japan(Patents)
1,000

600

■ Generated Waste Amount10
3/2014 3/2015 3/2016 3/2017 3/2018

0024,594 23,863

10,0005,000

623,227

15,0001.0

8

2■ Interest-Bearing Debt*

14

3,944

12

4

■ Dividend per Share/Dividend on Equity (DOE)

14

(％)

3/2005 3/2015 3/2016 3/2017 3/2018

■ ROE■ Net Profit Margin

(％)

11.8

12.0
10.0

(％)

5.9

6.0

9.5

8.7

8.2

7.4

8.0

About the DKS GroupROE Analysis Based on the DuPont Model

4.2

4.0

2.4

6.0

4.8

3.2

2.0

4.0

0.0

3/20143/20153/20163/20173/20180.03/20143/20153/20173/2018

2.58

2.57

2.51

3/20163/20173/20183/2016■ Asset Turnover Ratio■ Financial Leverage(Times)(Times)

1.0

0.97

0.91

0.81

0.8

0.80

0.77

3/2016

the Child-Care Leave/Child-CarePart-Time Work Systems (Non-consolidated)
FemaleChild-Care Part-Time Work System

Male(People)
15

13

12
9

7

10

99

8

7
5

6

1

2

2

5

3/20183/201710
70.0

3/2014■ Ratio of Female Employees■ Annual Paid Leave Rate

(％)
20

(％)
80

(Non-consolidated)

15

17.5 17.5
16.0 15.9 17.0

(Non-consolidated + Assigned Employees)

7060

63.7 61.0 64.5 62.4

67.4

50
40

10

30
5

20

1

3/2014 3/2015 3/2016 3/2017 3/2018

3/2015Business Foundations

3/2015Data

3/2014■ Number of Employees to Utilize

0

2.79

1.0

0.2

3

3.13

2.0

0.4

0.0

4.0
3.0

0.6

Five Operating Segments

2.0

10
0

3/2014 3/2015 3/2016 3/2017 3/2018

0

3/2014 3/2015 3/2016 3/2017 3/2018

DKS REPORT 201821

Five Operating Segments

Five Core Business Segments
Surfactants
Share of Net Sales

37.6%
Amenity Materials

Providing highly functional surfactants since the Company’s founding in 1909■

Nonionic surfactants■

Cationic surfactants■Anionic surfactants■

Amphoteric surfactants

Major
products/
applications
IT & electronics

13.2%
Polyurethane Materials

■

16.0%
Functional Materials

24.7%
Electronic Device Materials

8.5%

22

DKS REPORT 2018■

Vinyl polymers
Acrylic polymers

Food

EnergyProviding industrial materials and urethane raw materials, for example, paints,
adhesives, civil engineering and construction materials, electric insulating materials■

Polyether polyols
Urethane prepolymers■

Urethane systems

Major
products/
applications
Civil engineering

Construction

Synthetic lubricants

Providing products that are essential to daily life and home electronics,
for example, flame retardants, radcure resins, waterborne polyurethanes■

Radiation-curable monomers/oligomers
Waterborne polyurethanes■■

Flame retardants
Amide-based lubricants

Major
products/
applications
Electronics

Flame retardants for plastics

Films

Providing ceramic materials and conductive pastes forhome electronics components■

Share of Net Sales■

Cosmetics & personal care■

Share of Net Sales

Sucrose fatty acid esters
Cellulose polymers

Major
products/
applications■

Share of Net Sales

MetalsProviding materials and peripheral application technologies necessary
for a comfortable living environment■

Share of Net Sales

Soap & detergents■Conductive pastes for electronics
Injection molding pellets■

Functional inorganic materials

Major
products/
applications
Ceramic materials

Solar cells

Net Sales (¥ million)＋8.2%

25,00020,00020,35921,573

20,77919,793

21,416

Operating Income (¥ million)
2,500

2,190

About the DKS Group

Surfactants
＋3.7%

2,094

2,171

3/20173/2018

2,000
1,607
1,500

10,000

1,000

5,000

500

3/20153/20163/20173/2018Segment outline
Since the Company’s founding in 1909, the surfactants
segment has been a core business for more than 100
years. DKS surfactants provide high added value to a wide
variety of B2B products in the energy, machinery, metal,
colorant, rubber, plastic, IT, electric and electronic sectors.
DKS is developing products in line with the recent
increase in environmental awareness around the world. In
particular, it is developing and manufacturing eco-friendly
products mainly at its Yokkaichi and Shiga branches using
natural oils and petrochemicals as raw materials.

A review of the fiscal year ended March 2018
and an outlook for the future
During the fiscal year ended March 2018, this segment saw
overall growth in net sales and overall strength in operating
income.
Although sales were fairly low for rubber and plastic
applications, sales for machinery and metal applications
were strong while sales for IT and electronics applications
saw growth. Sales for soap and detergent applications
grew noticeably.
The segment is working to accelerate the shift of theKasumi Plant to a mother plant. Production of nonionicsurfactants at this plant began in July 2017. The Company
is focusing on leveraging its core technologies to develop
highly functional products in line with the needs of its
customers in Japan and around the world.

03/20143/20153/2016The strengths of DKS andthe main functions of the business
The history of soap, which is representative of surfactant
products, traces back to the ancient Romans. After that
period, the focus moved from just the washing of dirt fromhands and feet to also include items offering the functionsof dispersion and emulsification, particularly thoseaffecting the surface of different substances, such as oil
and water.
The functions required of surfactants have become
more diversified and more sophisticated as the industries
in which the Company’s customers operate have evolved.
DKS has developed polymerizable surfactants thatfunction as surfactants and then enhance the properties oftarget materials such as water resistance and is working
on expansion of the market.
DKS’s five-year management plan REACT1000 aims to
expand sales as a“Uni-Top”market leader by leveraging
our fine-grinding technology to meet the performancerequests of our customers.

Business Foundations

3/2014

Strategies for future/risks and opportunities
The surfactants domain is where DKS can take advantage
of its technologies and experience accumulated over many
years. Growth in demand for polymerizable surfactants is
expected in the paint/coating and adhesive/binderindustries. Meanwhile, the Company faces many
competitors in this domain, including domestic chemical
manufacturers producing detergents and dispersants. To
maintain profitability in the segment, the Company isfocused on spurring growth by developing
high-value-added products that meet customers’needs
and/or are eco-friendly.

DKS REPORT 2018

Data

0

1,181
Five Operating Segments

15,00023

Five Operating Segments

Amenity Materials
Net Sales (¥ million)
10,000
8,000

7,141

6,856

7,208

6,986

＋7.4%

700

7,502

600

638

500

6,000

400

4,000

300

400

2,000

413

3/20163/2017100
3/20143/20153/20163/20173/201803/20143/20153/2018Segment outline

The strengths of DKS andthe main functions of the business

The Amenity Materials segment provides materials andperipheral application technologies necessary for a
comfortable living environment. The Company provides
materials suitable to the products of customers in a wide
range of industries including foods, pharmaceuticals,
cosmetics, toiletries, fisheries/livestock, textiles,
pulp/paper, civil engineering, agrochemicals andagro-materials.
In addition to core-technology surfactants, DKS
manufactures products made from natural raw materials,
including sugar and pulp, at the Shiga and Ohgata
branches in line with the Company’s commitment topreserving the environment.

With more than 65 years of experience in cellulose
polymers using pulp and more than 50 years of experiencein sucrose fatty acid esters using sugar, the Company has along history in product development and is developing
markets based on the basic and application technologies
accumulated to date.
In areas such as food and cosmetics, taste and texture
can be greatly affected by thickening, dispersing or
emulsifying. The effects of the products providing thesefunctions become clear when used in customer products.
The Company is focused on expanding sales by
providing its customers with highly functional products thatare both safe and reliable.

A review of the fiscal year ended March 2018
and an outlook for the future

Strategies for future/risks and opportunities

During the fiscal year ended March 2018, this segment saw
overall growth in net sales and saw significant growth inoperating income.
Although sales in Japan for cellulose polymer
materials for feed applications were fairly sluggish, sales
for energy and environmental applications saw growth.
Sucrose fatty acid esters in Japan saw strong sales for foodapplications, whereas overseas sales saw positive growthfor food and cosmetics applications.
The segment views the overseas markets as a growthfield and explores its customer base to improve the comfortof daily life by providing highly functional products.

24

409

180

200

0

＋54.5%

Operating Income (¥ million)

DKS REPORT 2018

While the Amenity Materials business targets companies
operating in a wide range of industries, the domestic
market for the segment appears unlikely to expand moving
forward given current demographic trends. The Company
nevertheless targets stable sales and profitability in Japan
in line with the customer base acquired to date. On theother hand, DKS targets an expansion in product sales
overseas, which the Company views as an area for growth,
especially for food and cosmetics-related applications.
The Company’s competitors in the field can be said toinclude food additive manufacturers.

9,564

9,442

8,934

9,093

Operating Income (¥ million)

9,115

350
300

8,000

306

293

250
6,000

200

4,000

150

230

－20.7%
127

100

3/20173/2018100
2,000

3/20143/20153/20163/20173/2018Segment outline
The segment provides polyurethane materials andindustrial materials, including paints, adhesives, civilengineering and construction materials, and electric
insulation materials. The main areas of development
include lower density soft urethane foams, polyether
polyols for rigid urethane foams with enhanced heatinsulation and flame retardancy, and rock hardening
agents primarily used for mountain tunnel projects andpolyether polyols to make flexible or rigid urethane foams.
Petrochemicals used as the mainstay raw materials inthe segment are mainly manufactured at the Yokkaichi
Branch.

A review of the fiscal year ended March 2018
and an outlook for the future
During the fiscal year ended March 2018, this segment saw
overall strength in net sales but saw a sharp drop in
operating income.
Although sales for construction and other functional
polyurethane applications were sluggish, an increase inpublic works projects contributed to positive sales for civilengineering–related chemicals. Sales of HFC regulation
compliant, eco-friendly synthetic lubricants were
somewhat sluggish.
Following the start of production at the Kasumi Plant in
2016, the Company has been aiming to expand sales ofrock hardening agents for tunnels, for which the Company
maintains both a high share and proven track record, for
the Linear Chuo Shinkansen.
Moreover, the Company commenced construction offunctional polyurethane products production facilities at theKasumi Plant. Completion is scheduled for June 2019.

0

3/20143/20153/2016The strengths of DKS andthe main functions of the business
The main functions of products in the segment are adhesion,
insulation and water stopping, which are all areas in which theCompany gains an advantage from its unique technologies andexperience. The Company has established a safety educationand training center at the Kasumi Plant, where production takes
place; aims to promote the training of human resources
throughout the group to generate synergies; and is working tobuild on its strengths to better meet the needs of its customers.

Business Foundations

050

Strategies for future/risks and opportunities
The Kasumi Plant, which was built at the Yokkaichi third
complex, began full-scale operations in December 2015.
Further expansions are progressing in line with the Company’splan to make the facility a mother factory. The Company aims todevelop and manufacture high-quality products through a
combination of applied technologies and the most cutting-edge
equipment.
Risks to the segment include competitors and the growthpotential of the market. While maintaining a focus on thepotential for growth in the target market, the Company also
aims to improve manufacturing capacity and its technologicalabilities to best its competitors.
The segment is developing water-reactive (foaming) polyols
and synthetic lubricants that are eco-friendly and in line with
HFC regulations, and in IT products is working to reduce volatileorganic compounds (VOCs) by developing a single-component
waterborne insulating coating. Although environment-related
measures can be considered risks, we remain committed tofinding opportunities to develop eco-friendly products.
Competitors in this business include civil engineering andbuilding construction firms, as well as electronic materials
manufacturers.
DKS REPORT 2018

Data

10,000＋0.2%

Five Operating Segments

Net Sales (¥ million)

About the DKS Group

Polyurethane Materials

25

Five Operating Segments

Functional Materials＋12.4%Net Sales (¥ million)

14,07015,000Operating Income (¥ million)
2,000＋47.5%

1,926

12,517
12,00010,68011,216

11,259

1,500

1,305

9,000
1,000
6,000

3/20143/20153/20163/20173/2018Segment outline
The Functional Materials segment supplies various plastic
additives indispensable to the highly functional plastics andrubber used in our living environment such as personal
computers, smartphones and home electronics, as well asradiation-curable monomers and oligomers, flame
retardants, antistatic agents, lubricants, anti-clouding
agents and antioxidants, among others.
Waterborne polyurethanes being developed since 1973
are used in coating wood and plastic, metal and paper
coating agents, film and wood adhesives, and paper/fiber
binding.
Although the Ohgata and Yokkaichi branches have been
the main manufacturing bases for these products, themanufacturing of new products now takes place at theKasumi Plant.

A review of the fiscal year ended March 2018
and an outlook for the future
During the fiscal year ended March 2018, this segment saw
significant overall growth in net sales and operating
income.
In Japan, sales of waterborne polyurethanes for textile
applications grew, as did sales of flame retardants forrubber and plastic applications. Sales of radiation-curable
resins for IT and electronics applications grew noticeably.
Thanks to recent years spent developing the market,
radiation-curable resins made a strong contribution to both
net sales and operating income as new highly functional
products.
Overseas, sales of radiation-curable resins for IT andelectronics applications saw growth, while sales of flame
retardants for rubber and plastic applications saw
noticeable growth.
26

673

500

3,000
0

767
578

DKS REPORT 20180

3/20143/20153/20163/20173/2018The strengths of DKS andthe main functions of the business
The technology used in radiation-curable monomers andoligomers is called radcure (UV or EB curing) in which a
resin composition such as paint is instantaneously driedand cured by irradiating it with ultraviolet light (UV) or anelectron beam (EB). Radcure technology is widely used in avariety of fields to conserve resources and energy and to
reduce the environmental impact. Its uses include clear
paint for building materials and furniture; anticorrosive
paint for metals; resist materials for semiconductors, dryfilms and LCDs; coating agents for mobile phones, opticalfibers, plastics and paper; printing inks and plate-making
materials; and adhesives.
Brominated flame retardant raw materials are sourced
from bromine production sites worldwide, with the market
for plastic applications mainly overseas. Brominated flame
retardants demonstrate higher flame retardancy thanconventional phosphorus and inorganic flame retardants.
Waterborne polyurethanes allow the polyurethanes, akind of plastics, to be dispersed in water and are therefore
increasingly essential as the world moves away fromorganic solvents.
DKS is developing a variety of products through the
combination of technologies that exhibit flame retardancy
and surface coating.

Strategies for future/risks and opportunities
Target markets for this business include those with strong
growth potential and areas both in Japan and overseas inwhich the Company believes it can demonstrate its
strengths. While competitors include electronic materials
manufacturers and overseas flame retardant
manufacturers, the Company is looking to secure growththrough its unique technologies and proposal capabilities.

Net Sales (¥ million)＋¥212 million

Operating Income (¥ million)

215

240

8,000

＋25.6%

6,508

6,000

4,850

4,600
3,862

4,000

200
160
120

94

80
40

2,000

0

10

Five Operating Segments

6,868

About the DKS GroupElectronic Device Materials

3(40)
3/20153/20163/20173/2018Segment outline
As evidenced by the spread of the Internet andsmartphones, as well as the increase in solar power
generation facilities, there has been a clear advancementin the information society and a concerted effort to create amore eco-friendly society. Since the 1980s, DKS has beendeveloping ion-conductive polymers and ionic liquids andcontinues to advance the supply of products in these areasof growth. We are also developing and supplying
lithium-ion battery materials, ceramic materials andconductive pastes.
Mainstay products in the electronic device materials
segment are produced at subsidiary companies Dai-ichi
Ceramo (Shiga) and Kyoto Elex (Kyoto).

A review of the fiscal year ended March 2018
and an outlook for the future
During the fiscal year ended March 2018, this segment saw
noticeable growth overall in net sales and operating
income.
Although sales of injection molding pellets dropped
sharply, a recovery in conductive pastes for solar cells
resulted in noticeable growth in this segment.

(80)

3/20143/2015(65)
3/20163/20173/2018The strengths of DKS andthe main functions of the business
DKS is focused on developing business activities at thesubsidiary companies that make use of the Company's
surfactant technologies. The Company's surface chemistry,
which is its core technology, is used in the mixing
techniques of resins and ceramic powders or organic
materials and metal powders. We can conduct mixing
operations under special conditions or with a high level ofviscosity thanks to our unique and extensive experienceand detailed know-how in the process.
The main features of our products are their highdegree of efficiency and precision. As an example, ionicliquids are compounds made of ion pairs, which generally
assume a liquid state at temperatures of 100°
C or less.
They have no vapor pressure and are nonflammable.
Because they are highly safe and efficient thanks to having
high ion conductivity, we are developing electrolyte
applications for lithium-ion batteries and capacitors. These
liquids are also attracting attention as next-generationmaterials in the energy device field and as green solventsfor reducing environmental impact.

Business Foundations

3/2014

Strategies for future/risks and opportunities
Data0

We expect a tough operating environment ahead for thesegment as there is some degree of uncertainty over the
potential growth for the industry and existing applications
for segment products. On the other hand, we aim toachieve growth and meet the quality demanded by ourcustomers by making full use of the group’s technologies
and promoting R&D efforts to advance the development of
next-generation products.

DKS REPORT 201827

Five Operating Segments

Product Pickup

CELLBINDER Dispersant for lithium-ion batteries
Lithium-ion battery (LiB) market
The rechargeable battery market is expected toincrease some 1.5 times over the five years starting in
2016. In particular, the market for automotive LiBs is
expected to reach ¥2 trillion, a size that is equivalent to
2.5 times the size of the market in 2016.1 This growthis due to the burgeoning“EV Shift,”whereby the worldis transitioning from gasoline and diesel vehicles toelectric vehicles (EVs). France and the United Kingdom
have even worked out policies to ban the sale ofgasoline and diesel vehicles by 2040, whereas China
has taken steps to support the greater use of EVs andplug-in hybrid electric vehicles (PHEVs) as part of its
national policy.
When LiBs are equipped on EVs, there is aparticular demand for a high level of safety, so sodium
carboxymethyl-cellulose (CMC), a type of cellulose
derivative, is used as the battery cell material
dispersant.

Role of CELLBINDER in LiB cell applications
In almost all cases today, the production of LiB anodes
utilizes a process in which the active material that stores theelectricity and the conductive additive that supports electron
conductivity are formulated into waterborne coatings. CMC
functions as a dispersant that blends both the active
material and the conductive additive with water, but alsofunctions as a thickener to provide these coatings with theappropriate degree of viscosity. These coatings must be
applied evenly and uniformly on the copper foil current
collector. With conventional general-purpose CMC, however,these coatings contain undissolved CMC components,
making it difficult to apply these coatings uniformly.
The Company discovered a way to fully minimize theamount of undissolved CMC by uniformly introducing
substituents, which it used to develop the CELLBINDER LiB

dispersant. In addition to enabling uniform coating,
CELLBINDER was found to decrease the resistance morethan general-purpose CMC. Improved discharge load
characteristic (Fig. 1) and low-temperature characteristic(Fig. 2) were also observed.2
Given that LiBs are an important factor that holds the
key to the success of EVs and PHEVs, in the future these
LiBs will demand greater performance in terms of higher
capacity and faster charging and discharging rates, as wellas in terms of a higher level of safety and reduced
environmental impact.
To achieve these performance demands, the Company
aims to expand the use of CELLBINDER as a battery
performance improving dispersant and thickener.

● Figure 1. Comparison of the discharge load characteristic● Figure 2. Comparison of the low-temperature characteristic

for CELLBINDER and general-purpose CMC

CELLBINDER ■General-purpose high-viscosity CMC added at 1% (viscosity of 1%
C is 6,500 mPa•s) ■aqueous solution at 25°
General-purpose low-viscosity CMC added at 2% (viscosity of 1%
C is 150 mPa•s) ■aqueous solution at 25°

100

100

100 91.996
100
89.248Capacity retention

（％）

70

90.3269060

70.19280
70

10,68011,21658.50262.58860

43.99350

34.45834.31940

19.04730

15.82113.675

20
10
0

1C

3C

5C

7C

10C

Conditions: Discharged at 3–10C under a constant temperature of 20°
C.
Compared using the capacity retention where the discharge capacity at
1C is 100%.
1C indicates the current value when the battery is fully discharged over
one hour from a fully charged state.

28

CELLBINDER ■General-purpose high-viscosity CMC added at 1% (viscosity of 1%
C is 6,500 mPa•s) ■aqueous solution at 25°
General-purpose low-viscosity CMC added at 2% (viscosity of 1%
C is 150 mPa•s) ■aqueous solution at 25°

DKS REPORT 2018

Capacity retention（％）

for CELLBINDER and general-purpose CMC

61.17555.52459.031

50
40
30
20
10
0

CELLBINDER

General-purpose General-purpose
high-viscosity CMC low-viscosity CMC
C.
Conditions: Discharged at 1C under a constant temperature of -20°
Compared using capacity retention where the discharge capacity at aC.
discharge rate of 1C is 100% under a constant temperature of 20°
References:
1. FUJI KEIZAI CO., LTD., Battery Market 2017: Comprehensive Survey for Current Aspects Vol. 1
2. DKS Co. Ltd., Takuto Newsletter, No. 574, pp. 11–14 (2015)

The Three Core Technologies of DKS

About the DKS Group

DKS was founded in 1909 for the development and sales of a cocoon unwinding agent for use in spinning. Since its
founding, the Company has cultivated three categories of technology: synthesis, blending and analysis. These havecreated the base for DKS, allowing it to create unique technologies to meet the requirements of many industries.

Emulsionpolymerization

Battery evaluation

Emulsion/
dispersion

Polymermodification

Precision cleaning
agent evaluation

Inorganic powder
mixingEthylene oxide
addition

Food application
evaluation

Functional
urethane design

Soap

Interface/surface
evaluation

Blending
technology

Synthesis
technology

Analysistechnology

Technology for realizing therequired function by combining
two or more different types ofsubstances

Technology for creating thetarget compound by utilizing achemical reaction

Technology for qualitatively andquantitatively identifying
substances using chemical
instruments

Business Foundations

Flame retardation

Data

Nano dispersion

Five Operating Segments

Urethanization

Cocoon unwinding agent
Production of a chemical agent in one corner of the Ohno Kungyokudo incense shop in 1909
DKS REPORT 201829

Business Foundations

Important CSR Issues
Basic Policies
We are confronted with a broad range of issues, from environmental problems such as global warming, resource
depletion and a crisis of biodiversity to an increasing population that causes food resource and energy problems
amid rapid globalization and an increasingly information-based society. We look to take on these challenges and toprotect our environment and way of life while improving safety and level of comfort. To do these things, we pursue“Chemistry provides a solution”and contribute to the establishment of a sustainable society.

Identifying Important CSR Issues (Materiality)
At DKS, we are formulating“materiality,”tackling issues from a long-term perspective. In the formulation of materiality,s Sustainable Development Goals (SDGs),* ISO 26000 and other global guidelines, given the
we have referenced the UN’important demands that international society places on DKS as we work to advance business globally.
*At the UN Sustainable Development Summit held in September 2015, there were 17 SDGs adopted to findsolutions to issues the world is facing.

Materiality Identification Process
Having mapped the aspects derived from Steps 1 and 2,
we identified five facets of materiality mainly in terms of priority.

STEP1
Identify theimportancefor the Company

STEP4

STEP3

STEP2
Identify theimportancefor stakeholders

Identify themateriality

Drawa materiality map

Importancefor stakeholders

Identify five critical issues of importance
Extremely
high

High

Importance for DKS

30

DKS REPORT 2018

Quality and
SafetyManagement
Consideration
for theEnvironment

ResearchandDevelopment

Human
Resource
Management

Responsibility
as a Global Company

Relationship between the Five Important DKS Issues and Global Guidelines（P.32）SDGs

ISO 26000

Providing highly safe products

Consumer issues

Ensuring quality assurance and securing product safety

Consumer issues

Promoting occupational safety and health

Labor practices

Responing to potential and apparent needs with

Research andDevelopment（P.34）

About the DKS Group

Quality and
Safety Management

Relation to global guidelines

Activity details“Uni-Top”strategy promotion

Consumer issues

Developing products that contribute to the environment

Environment

Promoting an intellectual property strategy

Fair operating
practices

Securing and nurturing outstanding human resources

Labor practices

Five Operating Segments

DKS’s important
CSR issues（P.36）

Consideration for
the Environment（P.38）

Responsibility asa Global Company（P.42）

Health management initiatives

Labor practices

Growing globally and contributing to regional economies

Community involvementand development

Responding to climate change (reducing GHGs)

Environment

Managing chemical substances

Environment

Reducing industrial waste

Environment

Preserving the air, environment & water resources

Environment

Raising management transparency with theappropriate disclosure of information

Organizational
governance

Strengthening risk management

Organizational
governanceRisk Management Manual (BCP)

Environment

Establishing a compliance structure

Fair operating
practices

Sustainable Development Goals (SDGs)
Stipulated by the United Nations

Seven Core Subjects of ISO 26000
Organizational
governanceCommunity
involvement
anddevelopment

ConsumerissuesFair operating
practices

Seven Core
Subjects

Environment

Data

Human Resource
Management

Business Foundations

Promoting diversity

HumanrightsLabor
practices

DKS REPORT 201831

Business Foundations
Important Issue

1 Quality and Safety Management

Basis of Quality Assurance
Our Company established its Quality Assurance Management Regulations and Quality Policy in 1995. Providing high-quality,
safe and reliable products based on quality assurance, we are working to realize improvements in customer satisfaction.
1．We establish quality-related management standards for each department that cover
the entire process, from product planning to customer service throughdesign/development, manufacturing and sales. Through the appropriate operation ofsuch standards, we strive to provide high-quality products that are safe and reliable,
maintain and improve product quality, and provide quality assurance for our customers.
2．To effectively bring about quality assurance functions throughout the entire Company,
we establish and maintain a quality management system.
3．All our employees must observe this basic concept of quality assurance and carry outtasks in accordance with the Quality Assurance Management Regulations.

Quality Policy

Quality Control System
We are committed to the maintenance and improvement of product quality using ISO 9001 as a basic tool in our quality
management system. We execute PDCA cycles to provide products and services that satisfy customer demands and comply
with laws and regulations, and we are continuously working to improve the level of satisfaction among our customers. In
addition to day-to-day activities (such as product quality review meetings, corrective measures and preventive actions relative
to complaints/nonconformity, audits, change control and training), we are implementing periodic reviews of the management
system in line with our goal of promoting the further integration of ISO and business activities.
● QC System Diagram

RC Promotion ConferenceManagement Committee

Business Headquarters

Procurement &Logistics Center

Sales
Department

R&D
Department

Production
Department

Quality Assurance (PL) Meeting

QMS Committee

Quality Assurance Department

Production Control Headquarters

Quality Control Section(General Manager of) Branch

Product quality review meetings at each production baseQuality Assurance (QA) System
We view quality assurance as fundamental to
our business, and as we keep our Quality Policyin mind, we continue to promote QA activities
from product design/development,
manufacturing and sales to customer service
through each relevant department. The QA
Department, which was established in April
2018, is charged with supervising quality
assurance and has strengthened the system forcoordination between our departments. In linewith the diversifying customer demands and theheightened requirements for product quality
from a social perspective, we remain committed
to working to ensure product safety and quality,
as well as trying to prevent quality-related
issues before they arise.

32

DKS REPORT 2018

● QA System Diagram

Chairman CEO
Management Committee

General Manager of
Quality Control Department

Director i/c Environment,
Safety & QA
Quality Assurance (PL) Meeting

Manager of Quality Control
Section at Yokkaichi,
Ohgata, Shiga
Executive General Manager i/c
Business Headquarters
General Managers/Business Divisions
General Managers/Sales Departments
General Managers/R&D Departments
General Managers/Production Departments

QMS Committee
Executive General Manager i/c
R&D Headquarters
General Manager/
Corporate R&D Department

Executive General Manager i/c
Production Control Headquarters

Product Safety (chemical substance management from design-development)
About the DKS GroupOur environmental and safety philosophy is centered on contributing to the sustainable development and realization of happysocieties by considering human health, safety and environmental preservation throughout the life cycle of each product fromdevelopment to scrapping. We put this philosophy into practice in the design and development of our products, and it is the driving
force behind measures such as the creation of chemical substance management regulations for the appropriate management ofchemical substances, the establishment of a system designed to ensure compliance with laws and regulations related to chemicals
in Japan and overseas, and the provision of information on product safety and applicable laws to our customers.
● Product Safety Mechanism

Customers & Local Communities
Search & Investigation

Design & Development

Commercial Production

Research & Preproduction

Securing of Product Safety
Process Safety andDisaster Prevention

Process Review
Planning

Investigation of technologicalinformation● Investigation of laws
and regulations●

Product Design

Realization of quality
Safety confirmation● Environmental impact
assessment● Investigation of conformity withapplicable laws and regulations● Investigation of raw materials

Commercial
Production Review
Occupational/Process
Safety & Disaster Prevention
Production technology review
Product evaluation (safety/packaging)● Compliance with applicable laws
and regulations● Environmental impact assessment● Securing of raw materials● Creation of SDS and technicaldocuments

Five Operating Segments

Required Quality(Product Sales)

Stable Supply
Technical Service
Quality control
Response to improvement requests● Provision of product information● Regulatory compliance● Environmental conservation● Securing of distribution safety

●

●

●

●

●

●

Compliance with Chemical Substance Laws and Regulations
Control Law but also the Export Trade Control Order in regard to
products for export, and overseas laws and regulations, including
those dealing with conflict minerals and rules regarding theregistration of chemical substances. We also focus on the sharing
of information by using groupware to post outlines of revisions tolaws and regulations.

Business Foundations

With the goal of obtaining the latest information and enacting
management measures to ensure compliance, we continue tomonitor trends in not only domestic laws such as the Act on the
Evaluation of Chemical Substances and Regulation of Their
Manufacture, etc., the Industrial Safety and Health Law, the Food
Hygiene Law, and the Poisonous and Deleterious Substances

Provision of Product and Technical Information
related to compliance with the Globally Harmonized System ofClassification and Labelling of Chemicals (GHS) and compliancewith local regulations for exports to the United States, Europe andAsia. We have continuously updated our SDS and labeling to remain
in compliance with the revised Act on the Evaluation of Chemical
Substances and Regulation of Their Manufacture, etc., and theIndustrial Safety and Health Law, as well as the Poisonous andDeleterious Substances Control Law. When introducing our
products, we not only focus on close communication with ourcustomers through daily business meetings but also disseminate
information through brochures and technical documents.

Data

Our products are utilized in a variety of industrial fields, and we
provide product and technical information tailored to thecharacteristics of each product and service. We always respond torequests and inquiries from our customers quickly, adequately andin good faith. We also provide information on hazardous materials toensure safe handling, including that relative to product properties,
applicable laws and regulations, transportation, handling methods
and emergency measures by means of safety data sheets (SDS). We
provide information using chemSHERPA, an information transfer
scheme for chemicals contained within products throughout the
supply chain. We also promote product labeling and issue SDS

Efforts to Reduce Complaints/Nonconformity Products
Because we position quality-related nonconformity(complaints/deviation) as an important issue for securing quality,
we check any appearance of nonconformity, determine the cause
and verify the corrective action and its effectiveness to prevent
reoccurrence. We also attempt to handle any product complaints
we have received quickly, adequately and in good faith. Informationon complaints and nonconformity is managed centrally via the
Company’s intranet, and we implement appropriate measures toprevent any similar recurrences. In addition to our efforts aimed atpreventing the reoccurrence of nonconformity, in the fiscal year
ended March 31, 2018, we conducted a review of our system andimplemented new measures in line with the priority to which we
give to responding to our customers with speed and theappropriate measures whenever such an event occurs. In the years
to come, we will continue to strive to improve customer satisfaction
by adopting innovative measures to further reduce nonconformity.
DKS REPORT 201833

Business Foundations
Important Issue

2 Research and Development

DKS’s Foundation That Underpins Strategies
As an industrial chemical manufacturer, it is our management philosophy to continue to be a prominent company that responds tothe expanding chemical requirements of industries. To realize that philosophy, we are focusing on the research and development ofhigh-value-added products, with a particular focus on products with IT and electronics-related applications, and the development of
new applications for battery materials and cellulose nanofibers. With innovative wisdom and technologies, we are pursuing“Chemistry provides a solution”in every industry and developing products that can contribute to a sustainable society.

R&D System
We established the Life Sciences R&D Department, which is
focused on the development of cellulose nanofibers, and theElexcel R&D Department, which develops applications forbattery materials, within the Research and Development
Headquarters as part of the reorganization to a systempromoting new development and collaboration with the
Corporate R&D Department in charge of new development, newbusinesses and companywide research themes. In addition topromoting in-group cooperation between the Functional
Chemicals R&D Department, which mainly conducts productdevelopment for the Surfactants and Amenity Materials
segments, and the Plastic Materials R&D Department, which is
responsible for the development of products for the
Polyurethane, Functional Materials and Electronic Materials
segments, we are working to accelerate research anddevelopment through cooperation with outside entities such as
public research institutes, universities and customers. The
Production Technology Department provides support for the
innovation and creation of new production technologies.

● R&D System Diagram

R&D Investments

Number of Patents Obtained

In FY 2017, the total expenses required for R&D amounted to¥2,307 million, which represented 4.1% of net sales. The total
number of R&D personnel of the Company and the domestic
subsidiary companies was 180, which was equivalent to around
18% of all employees (as of March 31, 2018).

Mindful of future business development, we actively promote
the filing and obtaining of intellectual property (IP) rights based
on R&D results. Recently, to provide our business operations
with stronger backup, we have been focusing on improving thequality of our patents through enhanced information retrieval
functions. We will continue to respond to the globalization of
our business and acquire rights securely for important
domestic and foreign markets.

● R&D Costs(¥ million)
3,000

2,439

2,380

2,393

2,307

2,000

Government
agencies

Joint research
Personnel exchanges

Customers

National projects

Closed/open
innovation

DKS Group R&D Departments
Functional
Chemicals
R&D Department

Plastic
Materials
R&D Department

Subsidiarycompanies'
R&D departments

Intragroup collaboration

R&D Headquarters(Corporate R&D Dept., Life Sciences R&D Dept., Elexcel R&D Dept.)

Production Technology Department● Number of Patents Held*

Outside Japan

In Japan

800
2014

2015

2016

2017
600

● Research Personnel(Persons)
200

Public research
institutions

1,000

1,000
0

Universities

172

169

174

180

344

378

478

477

427

299

400

150
100

423

200

497

50
0

34

0
2014

DKS REPORT 2018

2015

2016

2017

2014

2015

2016

2017

*Based on the effective date.

Our Products and Technology Development
About the DKS Group

Eco-Friendly Products and Technology Development
We supply products that meet environmental requirements, including global warming prevention, energy and resource saving,environmental protection and prevention of environmental pollution, and engage in the development of related technologies.

Environmental
requirement

Functions &featuresOur product lineup & technology/Application

Halogen-freeness
Energy efficiency

Energy & Resource
SavingEffective resource
utilization
Extension of life span

Binder for lithium-ion batteries

ELEXCEL ACG Series

Gel polymer for lithium-ion batteries

DD-1200C Series

Conductive paste for solar cells (lead-free)

DK BE-CLEAR Series

Waterborne detergents

DK POLYOL 3000 Series

HFC1 -free water-reactive polyols for urethane foams and insulating materials

COLOURSOL CT-171D

Dye accelerating/leveling agents for polyester

NEW FRONTIER Series

Solvent-free UV/EB-curable monomers/adhesives, coating agentsDK SYSTEM NF Series

HFC-free systems for rigid polyurethane foams and insulating materials

Slag anti-solidification agents
ELEXCEL IL Series

Ionic liquids/energy device materials

EIMFLEX Series

Polyurethanes for electric insulation/sealants

NOIGEN XL Series, NOIGEN TDS Series

Nonionic surfactants/emulsifiers, cleaning agents

RHEOCRYSTA Series

Cellulose nanofiber water dispersion

AH212

Organic alkaline agents

SUPERFLEX Series

Polyurethane water dispersions and paints, coating, binders

EIMFLEX WF Series

Waterborne polyurethanes for electric insulation/sealants

ELASTRON Series, ELASTRON BN Series

Thermoreactive polyurethane water dispersions, binders, adhesives

NEW FRONTIER Series

Solvent-free UV/EB-curable monomers/adhesives, coatings

Reduction ofenvironmental impact

HITENOL Series, NOIGEN Series

Polymerizable surfactants, emulsifiers for emulsion polymerization

TRIBIO Series

Polylactic acid modifier agent

Removal ofcontaminants

SEACLE N-800

Marine oil spill treatment agents

DEOPELLET Series

Foul odor gas absorbents for absorption towers

Eco-friendliness
Environmental
Protection,
Prevention ofEnvironmental
Pollution

CELLBINDER Series

VOC2 reduction

Products to Meet Environmental Requirements
Having developed RHEOCRYSTA, a cellulose nanofiber
product made from cellulose̶a recyclable, eco-friendly
material̶DKS is advancing the development ofapplications that make the best use of its uniqueproperties as a high-performance additive. We are also
developing hydrophobic cellulose nanofibers dispersed inorganic solvents to expand the scope of its applications.
DKS began to manufacture and sell HITENOL andBusiness Foundations

Clean energy

1. HFC: Hydrofluorocarbons
2. VOC: Volatile organic compounds

NOIGEN Series polymerizable surfactants in the 1980s.
Such eco-friendly products as water-based paints andadhesives, which have been popular in recent years, offer
excellent water resistance and adhesiveness. The new
HITENOL AR Series products offer excellent
copolymerization qualities with a wide range ofmonomers and improve the water resistance of andinhibit the formation of bubbles in paints and adhesives.

Data

Global Warming
Prevention

Five Operating Segments

Lithium-ion batteries

DKS REPORT 201835

Business Foundations
Important Issue

3 Human Resource Management

Securing Superior Human Resources, Ensuring Diversity
Human Resource Philosophy
Respect for Humanity
Our fundamental human resource philosophy isrooted in the idea that our people are our assets andmust be nurtured and treasured.
Our basic understanding is that the growth of ourpeople will support the growth of the Company. The
employees are supposed to actively play their roles ineach workplace; learn, grow and exhibit theircapabilities; and try to fulfill themselves. This way,
we believe that they become the power of prosperityof the Company and the source to make it eternal.

Human Resource Development Policies
1. Development of Professional Workers
We aim to train professional human resources who have highmarket value and can work on their own initiative.
(1) People possessing advanced, specialized skills(2) People who recognize and achieve their roles and goals(3) People who raise and solve issues themselves(4) People who demonstrate leadership in the workplace
2. Development of Autonomous Personnel
Switch to human resources able to work on theirown initiative through their own motivation

Respect for Human Rights and Diversity▶Efforts to Prevent Harassment

We are trying to prevent harassment through, for example,
educational programs in hierarchical training courses. Several
persons are selected as contacts, even from outside the
Personnel Department, so that anyone can easily findsomeone to talk to and get advice from, and in addition,
whistleblower portals in and out of the Company are in place.
▶Work-Style Reforms●

Work-Life Balance

We promote well-balanced work and home/family lifestyles,
and various benefit programs are in place. Every worker, as acorporate citizen, should be able to work all the time withenthusiasm and enjoyment, including our Chairman, Mr.
Sakamoto, who also chairs the Kyoto Labor Standards
Association. For FY 2017, the actual ratio of annual paid leave
taken was 67.4%. In the years to come, we will promote
initiatives toward achieving 70%, which is the target by the
Cabinet Office. There has been an increase in men taking
childcare leave in recent years. In the fiscal year ended March
31, 2018, 42% of those using childcare leave were men.
▶Promotion of Employee Participation and Advancement

Having set up an Employee Participation and Advancement
Promotion Committee chaired by the Company chairman, weare aiming for a human resource group capable of successfully
contributing to improvements in Company performance. We
aim to create an environment in which we can maximize theabilities of diverse employees, including women, seniors,
people with disabilities and LGBT, and enable them to take anactive part.
●

Promotion of Women’s Participation and Advancement

In addition to an environment that facilitates many andcontinuous working years for women, in the years to come wewill maintain a work environment that enables women todevelop their careers and implement measures aimed at having
7.0% or more of managerial positions occupied by women. As ofthe end of April 2018, the ratio had risen to 6.8% compared with
6.3% as of the end of April 2017.
●Retiree Reemployment System

In reemploying all applicants as“senior challenge staff,”weconduct monozukuri (manufacturing) by handing down thetechniques and skills that make the best use of the experience
they have accumulated over many years.
●

Employment of People with Disabilities

We are actively working to create opportunities for people withdisabilities to play active roles in the workplace according totheir individual abilities and aptitudes.

Human Resource Development/Education▶Global Human Resource Development

We are undertaking a variety of projects based on the DKS Group’s
globalization strategy.
In recent years, our efforts have focused on the active
recruitment of non-Japanese exchange students, conducting a
global mind-set and skill training sessions geared toward
employees ranging from the young to those in mid-level positions,the short-term acceptance at domestic departments in Japan of
local staff members from overseas bases, and visits to overseas
subsidiaries to exchange views on global issues with workers at
those companies and better understand different cultures.
We also are actively involved in other initiatives, such as
in-house language programs and select training sessions for
global executives. We will continue to accelerate the globalizationof the DKS Group.
36

DKS REPORT 2018

▶Education Courses

Education programs for our employees are supported by threepillars: in-house on-the-job training, external education to learn
skills and abilities, and assisting self-development. We havefocused in recent years on manners-related training for our
younger workers, as well as enhancing our brother/sister
program, which provides backup support for new employees bypairing them with more seasoned employees. The Company isfocusing its attention on human resource training in other areas
as well, including by bolstering its
support of employees aiming to
improve their own abilities, be it
through correspondence learning,
the acquisition of qualifications orother forms of self-development.

General view of a training session

Efforts in Healthy Company Management
About the DKS GroupWe aim to bolster the Company’s productivity, and thus its corporate value, by maintaining and improving the health of
our employees, which is a key RETURN component in the REACT matrix of action guidelines targeting Sustainable
Development Goal No. 3: Ensure healthy lives and promote well-being for all at all ages.

Healthy Company Declaration Regarding its employees as Company assets, DKS will strive to maintain and improve their health.

Concept of Healthy Company Management
Healthy Company Declaration
Prevent disease and mental health issues by health management

Regular health checkups, special health checkups,
specific health guidance● Mental care: internal and external EAP*, stress checks● In-house education: e-learning, group training, etc.
● Improve conditions of company premises and housing:amenity facilities, separation of smoking areas● Look into absenteeism and presenteeism

Plan

The management understands health checkup data andActionmental health survey results
In-house sharing of health checkup results data
● Internal and external release of an assessment by external institutions● Explore routes for improvement based on an assessment by external institutions● Explore next health management targets based on health checkup results andsecondary data●●

Efforts in Healthy Company Management
DKS was recognized for the first time in 2018 as a White 500
Organization, receiving certification from the Ministry of Economy, Tradeand Industry (METI) as an outstanding entity engaging in health andproductivity management. Five of our subsidiaries also have received
certification. The program is designed to honor large, as well as small to
medium-sized companies, showing excellence in health and productivity
management based on initiatives for the improvement of health being
advanced by the Nippon Kenko Kaigi and efforts to address
health-related challenges in regional locations.
We also acquired the highest health management rating from theDevelopment Bank of Japan Inc. (DBJ).
The purpose of acquiring therating is to assess Company
efforts through the eyes of externalorganizations, which could lead tofurther improvements in corporate
value in the years to come.

Do
Check

Five Operating Segments●●

Inspect workplaces, monitor working environments
Interview after health checkup and summarize results● Follow-up after stress checks● Third-party assessment by external institutions: DBJ
Health Management rating, White 500 (Certified Healthand Productivity Management Organizations)●●*EAP: Employee Assistance Program▶Health Management Initiatives

The Company’s health checkup participation rate, the re-checkup
participation rate, the health guidance implementation rate and thestress check rate all stand at 100%. We support daily exercise withmorning calisthenics and provide nutritious and well-balanced
meals at canteens. In addition to designating separate areas for
smoking, we educate all employees on how best to prevent
lifestyle-related diseases and fully subsidize influenza vaccinations.
The Company has established internal and external contact
centers for mental and physical issues, extending acceptance tofamily members such as parents. We provide mental healtheducation for all our employees and for employees who work longhours, and we have established interviews with occupational
physicians that exceed the statutory requirements. In addition tounderstanding the results of health checkups and stress checks at
the management level, we believe the enhanced health of ouremployees bolsters the overall strength of the Company.

Business Foundations

Formulate measures to prevent lifestyle-relateddiseases● Formulate health management targets● Develop internal company communication● Improve the workplace environment

Work and live in a safe and hygienic environment

Communication with Employees▶Information Transmission inside the Company

We hold Festa, which are festivals for each region, to promote
the good health of employees and their families and broad
exchanges. Elaborately planned events, such as an athletic
meet, bowling competition, tuna filleting show and cooking oftakoyaki, are useful in facilitating active inter-departmental
and intergenerational communications.

Publishing the in-housenewsletter“DKSCOM”every
other month, our Public &Investor Relations Department
works to instill the
management policies andvisions, as well as to foster
communications within the
Company. Feedback is also
taken into consideration inplanning the newsletters sothat information can bedisseminated and clearly
understood by all employees
in a timely fashion.

Data▶Holding of“Festa”

DKS REPORT 201837

Business Foundations
Important Issue

4 Consideration for the Environment

Basic Philosophy and Basic Policies for Environmental and Safety Practices
Basic Philosophy

Basic Policies

Our basic philosophy is to contribute to society bymaking a company that thrives together with local
communities and employees by supplying productsthat satisfy customers. Based on this, ourenvironmental and safety philosophy is to contributeto the sustainable development and realization of
happy societies by considering the human health,safety and environmental preservation throughout thelife cycle of each product from development to
scrapping.

(1) Throughout the life cycle of each product fromdevelopment to scrapping, we evaluate and minimize theimpact of business activities on the environment and makethe best efforts to preserve the environment.
(2) We aim at accident- and disaster-free operations to secure
the safety of both local communities and employees.
(3) We confirm the safety of raw materials, semi-finishedproducts and final products to prevent health-relateddisorders of all relevant people including, but not limited to,employees, logistic/transportation workers, customers andgeneral consumers.
(4) We strive to continuously improve the safety andenvironment not only by strictly complying with relevant
legislation and regulations but also by self-management.

Responsible Care (RC) Activity Promotion System
We set up the safety and environment philosophy, basic and action
policies, based on which we promote our corporate activities
related to quality, safety and the environment. Such issues are
discussed and decided by the RC Promotion Conference, which is
the top decision-making body and is chaired by the president.
Moreover, we regularly hold environmental preservation
meetings, safety and health meetings and quality

assurance/product liability meetings chaired by the quality, safety
and environment personnel and joined by the production branch
general managers and relevant department managers. In thesemeetings, corporate targets, action plans and results are
discussed to promote the RC activities. Under each of thesemeetings is a committee to make, implement and evaluate
specific action plans for continuous improvements.

● RC Promotion System Diagram

Management
Committee

Environment
Preservation Meeting

EMS1
Committee

RC(Environment, Safety andQuality Assurance)
Promotion Conference

Safety and
Health Meeting

SHMS2
Committee

Quality Assurance/
Product Liability Meeting

QMS3
Committee

Environment Preservation
Committee
Safety and Health Committee
Kyoto Central Branch
Production Branches● Tokyo Headquarters● Offices●●

Quality Assurance (PL)Committee●

Production Branches

1. EMS: Environmental Management System
2. SHMS: Safety and Health Management System
3. QMS: Quality Management System

Management Systems
The Company promotes the comprehensive safety
management of chemical substances based on the RC Code,which consists of the seven management systems stipulated
based on Japan Chemical Industry Association (JCIA) policies:
environmental conservation, safety and disaster prevention,

occupational safety and health, logistics safety, chemical
product/product safety, dialogue with society and management
system. In addition, the Company is working on improvements
in environmental conservation and quality, using
environmental ISO and quality ISO standards as tools.

Observation of Environmental Laws and Regulations
Environmental risk management is an important measure tominimize environmental risks and/or consequent damages
caused by risks. We comply with environmental-related
legislation and regulations and agreements with local
municipal governments, based on the Declaration of Action by
Board Members and Employees. All our production sites in38

DKS REPORT 2018

Japan are regularly checked for environmental compliance inaccordance with the ISO 14001–based environmental
management system. Up-to-date information on legislation ischecked and understood on a timely basis and disseminatedinternally to ensure compliance. Recently, education programs
using an e-learning system have started.

Environment-Related Complaints
About the DKS GroupThe Company received no complaints related to the environment in the fiscal year ended March 31, 2018. We will continue to strive toensure safety in our operations while working to earn the understanding of those living nearby our plants and other company locations.

Environment Accounting
In the fiscal year ended March 31, 2018, the DKS Group’s investment in environmental-related systems was spent mainly in the fieldof pollution prevention. Resource circulation costs accounted for a relatively strong ratio of costs tied to preservation of theenvironment. The economic benefits therein include profits on the actual sales of valuable resources and the amount of cost savings
and are not based on estimated economic benefits.
● Investments and Costs of Environmental Protection Activities

Main activities

Costs within
the plant premises
Upstream/downstream cost
Administrative cost
R&D cost
Social activity cost

Investment (Millions of yen) Costs (Millions of yen)

Air/water/other pollution prevention
Global environment preservation, energy saving
Resource recycling, resource saving, waste treatment/disposal
Lowering environmental impact in containers/packaging
ISO acquisition/completing surveillance audits, greening branch premises
Environmentally responsive R&D
Providing support grants for environmental protection toenvironmental preservation groups or local communities

Environmental damage cost
Total

34.2
4.6
0.4
0.0
7.1
0.0

145.6
71.5
454.5
0.1
36.1
452.5

0.3

1.6

0.0
46.6

0.0
1,161.9

Five Operating Segments

Category● Economic Effects Generated by Environmental Protection Measures

Category
Profit on sale of valuable resources
Amount of cost savings through energy saving
Amount of cost savings through resource saving
Total

Main activities

Cost (Millions of yen)

Profit on sale of metal scrap, waste oil and waste alkali, etc.
Amount of cost savings in electric power and fuels
Amount of cost savings through reduction of water use/waste

6.2
0.0
1.3
7.5

● FY 2017 Activity Targets and Results, FY 2018 Activity Targets

Business Foundations

Evaluation A: Significant result B: Result in line with the target C: Target remains unachieved

FY 2017 results
Evaluation Refer to page FY 2018 activity targets
1.4% improvement
1% improvement compared
P. 40
B
compared with FY 2016
with FY 201729.5% reduction compared24.6% reduction
with FY 2005 on average fromin FY 2017 compared
P. 40
C
FY 2016 to FY 2019with FY 2005
1% fiscal year rate
15.2% increaseC
improvement incompared with FY 2016
P. 41
non-consolidated DKSC
5.5％
3.5% or less in FY 201912.9% increase compared
SOx emissions
Cwith FY 2016
Reduced emissions of
Reduced emissions of
17.9%
increasecomparedC
NOx emissions
environmental pollutants with FY 2016environmental pollutants
Reduction ofin the air
in the air
environmental
4.1% increase comparedC
P. 41
impact substance Dust emissions
with FY 2016
emissions
13.2% increase comparedC
Water discharge Reduced emissions of
Reduced emissions ofwith FY 2016environmental pollutants
environmental pollutants
1.6%
increasecomparedin waterin waterC
COD emissions
with FY 2016
Proper management
PRTR Law–designated Reduced emissions of PRTR 0.5% increase compared
Reduced emissions of PRTRCP. 40
of chemical substances substances emissions Law–designated substances with FY 2016
Law–designated substances
Promoting the green
36.5%, decreased
Improvement of the green
Promotion of green procurement
procurement ratio of
8.7 percentage points
procurement ratio of officeーCoffice supplies
compared with FY 2016supplies
No occupational accidents
No occupational accidents
B
Zero cases occurred
Posted (days away from work)(days away from work)
Elimination of disasters/accidents
on ourEliminating severe accidents
website Elimination of severe accidents
Bassociated with production facilities No accidents occurred
involving production facilities
Promotion of an environmental
Promotion of an environmental
Environmental management system management system
MaintainedB
P. 38
management system

1. Derived from energy in the production and administrative sectors
2. The ratio of the final disposal amount to the generated waste amount
3. We have decided not to set numerical targets for the Group until the method of recycling sludge newly generated from the wastewater
treatment plant is established at a subsidiary company.
*GHG: Greenhouse gas
DKS REPORT 2018

Data

Target parameter Management items FY 2017 activity targets
Promotion of energy Energy consumption 1% improvementsavingper unit
compared with FY 2016
29.5% reduction compared
Reduction of GHG* CO 1
with FY 2005 on average from2emissions
FY 2016 to FY 2019
Waste generation 1% improvement in the
Reduction of
fiscal year rate of
per unit
industrial waste
nonconsolidated DKS3
Final disposal rate2 3.5% or less in FY 201939

Business Foundations
Important Issue

Consideration for the Environment

4

Global Warming Prevention (Energy Saving)
In the fiscal year ended March 31, 2018, energy consumption in the
DKS Group amounted to 26,100 kl, a 3.4% increase compared with theprevious fiscal year, however, the energy consumption per unit
improved 1.4%, which means that we were able to achieve our fiscal
year targets. While there was an increase in energy consumption due tothe operation of new facilities, production increased 4.7%. We recorded● Targets and Performance in FY 2017

Evaluation A: Significant result B: Result in line with the target C: Target remains unachieved

Target parameter Management items
Promotion of energy
saving53,900 tons of carbon dioxide emissions in the fiscal year ended March
31, 2018, a 2.7% increase compared with the previous fiscal year, but a
24.6% reduction compared with the fiscal year ended March 31, 2006,
meaning that the second year of the five-year target was not reached.
We will continue to work to improve the efficiency of our energy use
toward the achievement of our five-year targets.

Activity targets

Performance in FY 2017

Evaluation

Energy consumption
1% improvement compared with FY 2016 1.4% improvement compared with FY 2016
per unit

Reduction of GHG*
CO2emissions

29.5% reduction compared with FY 2005
24.6% reduction compared with FY 2005
on average from FY 2016 to FY 2019

B
C

*GHG: Greenhouse gas

Energy Consumption(1,000 kL)
30

30.4
24.2

25
20
10

200

26.1

132

122

117

15

25.2

24.2

Index of Energy Consumption per Unit

(Yokkaichi, Ohgata, Shiga, administrative sectors, domestic subsidiaries)
Index of energy consumption per unit

175

131

150
125
100

100

5

75

0

50
2005 20142015
2017 (FY)2016
Notes: 1. Index of energy consumption per unit [2005 = 100]
2. Domestic subsidiaries include Yokkaichi Chemical,
Kyoto Elex and Dai-ichi Ceramo, and in 2017. Elexcel as well.

● Changes in CO2 Emissions(Yokkaichi, Ohgata, Shiga, administrative sectors, domestic subsidiaries,
derived from non-energy)(1,000 t)
80
70
60
50
40
30
20
10
0

71.3
51.3

50.9

52.5

53.9

CO2

● Changes in Energy Consumption

2005
2014
2015
2016
2017 (FY)
Note: Carbon dioxide emissions in administrative sectors include fuels
for Company cars.

Proper Management of Chemical Substances
The DKS Group had a total of 65 notification substances under the PRTR
Law in FY 2017. The total amount of emissions was 48.4 tons, which
resulted in a 0.2-ton (0.5%) increase compared with the previous year. The
breakdown was 47.8 tons to air, 0.55 tons to water and none to land.
In FY 2017, the amount of waste transfer recorded was 269.0 tons, a

Evaluation A: Significant result B: Result in line with the target C: Target remains unachieved● Targets and Performance in FY 2017

Target parameter

Management items

Activity targets

Proper managementof chemical substances

PRTR Law–designatedsubstances

Emission reduction of PRTR
Law-designated substances● Changes in Emissions of PRTR Law-Designated Substances

(t)
80

76.4

60
40
20
0

63.9
47.6

35.8
0.41
2013

(t)
8

47.8

6
4

0.38
2014

0.49
2015

0.54
2016

0.55
2017 (FY)

20

Emissions to Water

Emissions to Air(DKS, Yokkaichi Chemical)
Emissions to air ■■ Emissions to water ■■Notes: 1. The numerical values show the total amount for DKS and Yokkaichi Chemical.
2. For the emission amount of notification substances under the PRTR Law in
FY 2017 (among all notification coverage substances, those of which theemission or transfer amount was 0.01 tons or more), please visit our website.
https://www.dks-web.co.jp/english/ir/report/index.html

40

15.7-ton (5.5%) reduction compared with the previous fiscal year due to theuse of recycled solvents and changes in the variety configuration. We will
advance improvements in production processes and the introduction ofrecovery equipment, while continuing to make efforts to reduce theemissions/discharge of PRTR substances into the environment.

DKS REPORT 2018

Performance in FY 20170.5% increase comparedwith FY 2016

Evaluation
CReducing Emissions of Environmental Impact Substances
Compared with the previous fiscal year, the DKS Group’s air-pollutant
emissions in FY 2017 showed a 12.9%, 17.9% and 4.1% increase in
SOx, NOx and dust emissions, respectively.
We will move ahead with facility improvements and studies ofoperational methods with the aim of making further energy-efficiency
enhancements.

Emission/discharge reduction ofenvironmental pollutants in the air
Emission/discharge reduction ofenvironmental pollutants in water(Yokkaichi, Ohgata, Shiga)
SOx emissions ■■ NOx emissions ■■ Dust emissions ■■

2.5

97.7
2.1

1.8

0.9
26.8

1.3
1.3
0.8
0.7
17.6
16.7

1.4

0.8
20.7

(t)
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0

SOx/Dust Emissions

NOx Emissions

(t)
140
120
100
80
60
40
20
0

Evaluation

12.9% increase compared with FY 2016
17.9% increase compared with FY 2016
4.1% increase compared with FY 2016
13.2% increase compared with FY 2016
1.6% increase compared with FY 2016

C
C
C
C
C

● Changes in Water Discharge and COD Emission Amounts(Yokkaichi, Ohgata, Shiga, Yokkaichi Chemical)
Water discharge ■■ COD emissions ■■(1,000 m3)
4,000
Water Discharge● Changes in SOx, NOx and Dust Emissions

Performance in FY 2017

Five Operating Segments

Activity targets

3,000

23.7
2,992

2,000

18.9

15.3

1,000
0

2013 2014 2015 20162017 (FY)
Note: Yokkaichi Chemical possesses no facilities that generate SOx,
NOx or dust.

4,424
3,877 3,908 25.9
26.3
3,541

2013

2014

2015

2016

2017

(FY)

(t)
35
30
25
20
15
10
5
0

COD Emissions

Target parameter Management items
SOx emissions
NOx emissions
Dust emissions
Water discharge
COD emissions

In FY 2017, the DKS Group recorded 4,424,000 cubic meters in the amount ofwater discharge, a 13.2% increase compared with the previous year, and 26.3
tons of COD emissions, a year-on-year increase of 1.6%. We will continue tomake efforts to reduce the water discharge and COD emission amounts by, forexample, conducting reviews of our production processes and optimizing theoperation methods at our effluent treatment facilities.

Evaluation A: Significant result B: Result in line with the target C: Target remains unachieved● Targets and Performance in FY 2017

Reduction ofenvironmental
impact substanceemissions

Water Pollution Prevention

About the DKS GroupAir Pollution Prevention

The amount of waste generated by the DKS Group in FY 2017 amounted to
20,770 tons, an increase of 3,406 tons compared with the previous fiscal
year. The waste generation per unit result was 15.2% worse (an increase)than the previous fiscal year, and thus we were unable to achieve ourtarget of a 1% improvement (decrease) in the annual rate. The recycling
rate was 91.8%, which marked a 0.2-percentage-point improvement(increase) compared with the previous fiscal year. The final disposal● Targets and Performance in FY 2017

Activity targets

Performance in FY 2017

Evaluation

Waste generation
per unit

1% improvement in the fiscal year rateof non-consolidated DKS

15.2% increase compared with FY 2016

C

Final disposal rate

3.5% or less in FY 2019

5.5%

C

● Changes in Final Disposal Amount and Final Disposal Rate

20,00015,00010,000

95.7

95.7

96.1

95.4

95.7

12,223 13,276 12,621

96.2
91.6

80
60
40

5,000

20

0

0

2013 2014 2015 20162017 (FY)
Note: Domestic subsidiaries include Yokkaichi Chemical andKyoto Elex.

(Yokkaichi, Ohgata, Shiga, Kyoto, Yokkaichi Chemical)

Final disposal amount ■■ Final disposal rate

(t)
1,200

5.9
1,145
5.5
1,023

1,000

(%)
6.0
5.0

800

4.0

600

3.0

400
200
0

1.5
193

1.2

1.4

171

180

2.0
1.0

Data

96.9
91.8
20,77017,36419,063
15,904
12,724 13,876 13,191
96.2

(%)
100

External Recycling Rate

Generated Waste Amount/
External Recycling Amount(Yokkaichi, Ohgata, Shiga, Kyoto, Yokkaichi Chemical)
Generated waste amount ■■ External recycling amount ■■External recycling rate(DKS
DKS Group)

Final Disposal Rate

Amount and External Recycling Rate

Final Disposal Amount● Changes in Generated Waste Amount, External Recycling(t)
25,000amount was 1,145 tons, representing 122 tons year-on-year increase. One
contributory factor was that the sludge generated at the new facility was
not recycled and that final disposal was fully carried out. For that reason,
the final disposal rate was 5.5%, a deterioration (increase) of 0.4
percentage point compared with the previous fiscal year. In the year
ahead, we will move ahead with a review of our sludge recycling and work
to reduce the final disposal amount.

Evaluation A: Significant result B: Result in line with the target C: Target remains unachieved

Target parameter Management items
Reduction of waste

Business Foundations

Waste Reduction02013 2014 2015 2016
2017
(FY)
Note: The ratio of the final disposal amount to the generated waste amount
DKS REPORT 201841

Business Foundations
Important Issue

5 Responsibility as a Global Company

Corporate Governance
Basic Concept

We are operating the business based on our Company
Credo“contributing to the nation and society throughindustry”along with our three Company Mottoes̶
“Cost Reduction”and“R&D Efforts,”“Quality First,”
which were the founders’spirit.
To aim for the establishment of a management basethat can gain and maintain the trust of society, as well as
to conduct transparent and fair corporate activities thatare rooted in corporate social responsibility (CSR), we
pursue higher governance as management policy andposition it as one of our most important tasks.
Specifically, we established a basic policy for the internal

control system in 2006 and keep revising it.
Through these practices, we will strengthen ourmanagement base so that we can earn high trust fromall stakeholders, including our customers and society.
We also believe it is important to conduct corporate
activities with transparency and fairness rooted in CSR.
To continuously enhance corporate value, we will
establish a management base that can earn the trust ofsociety. In addition, we have established and are working
to strengthen a corporate management system andother corporate governance systems that support our
corporate activities.

Constructive Dialogue with Shareholders and Investors
As a publicly traded company, DKS puts a priority on our
responsibility to our stakeholders, including our shareholders.
We are also focused on developing our business in a way that
contributes to the sustainable development of society, as
outlined in the SDGs. With this in mind, we have been actively
engaged in IR activities since 2015 and have pursued
constructive dialogue with shareholders and investors with thegoal of improving corporate value over the medium to long term.
We are committed to improving transparency, including
through direct discussions between management and analysts
and institutional investors, and we believe the assessments andviews of shareholders and market observers being reflected in
the Company’s management can contribute to enhanced

governance.
We also believe it is important to promote dialogue withstakeholders other than shareholders through the issuance ofintegrated reports.
● Dialogue-Based Activities in the Fiscal Year ended March 31, 2018

Results briefing

1

Small meetings for institutional investors and analysts

45

Of which, meetings with overseas investors

2

Briefings for individual investors

1

Status of Response to the CG CodeRegarding the status of our compliance with the Corporate
Governance Code, which covers the code of conduct to which
publicly listed companies should adhere, we are completely incompliance with the exception of the following four principles.
▶Each Corporate Code of Conduct Principle with which DKS

Is Not in Compliance and Reason for Non-Compliance【Supplementary Principle 1-2-4】

On the basis of our shareholder composition and theshareholding ratio of overseas investors, we have decided
that it is not necessary for us to use the electronic
exercise of voting rights or provide an English translationof the Notice of Convocation at this time.

【Principle 1-4 Cross Shareholdings】

We conduct the verification of cross-shareholdings from a mediumto long-term perspective, comprehensively consider the purpose ofownership, rationality, investment amount, etc., and decide whether
to make such investments. Regarding judgments on the exercise of
those voting rights, we make comprehensive judgments on
investment portfolio companies and, because we need to make42

DKS REPORT 2018

qualitative and comprehensive judgments in accordance withindividual shareholdings, we have not established unified criteria.
【Supplementary Principle 4-1-3】

The succession planning for the CEO and other top executives
remains a most important matter for company continuity, and it isimportant to carefully judge evident and potential management
ability. We therefore judge that it is appropriate for our Company
to make it a matter solely for the chief executive officer, who isfamiliar with the inner workings of the Company.

【Supplementary Principle 4-11-3】

As a result of our efforts to analyze and evaluate the effectiveness of
the Board of Directors as a whole, with regard to the effectiveness of
the Board of Directors, including the appropriateness of the numberof Board of Directors’meetings, the matters to be discussed,
content, etc., by the directors, including outside directors, and audit& supervisory board members, we have been credited for efforts
that are generally thought adequate and judge that the effectivenessof the entire board of directors is being maintained. As providing asummary of these analyses and evaluation results would concern
internal confidentiality, we will not disclose their current status.

▶Approach to Executive Remuneration

About the DKS Group

Executive Remunerationcompensation is set to a maximum of ¥100 million per annum(of which the portion for outside directors shall be ¥6 million orless per year, and which does not include the wage salaries ofindividuals serving concurrently as employees and executives).
In addition, the total number of shares of common stock that
the Company will thus issue or dispose of is to be up to a
maximum of 500,000 shares per annum. Having been drafted by
the representative directors, all the above is paid upon thepassing of a resolution by the Board of Directors.

Director remuneration consists of (1) basic remuneration, (2)performance-linked remuneration to provide incentives and (3)stock-linked compensation to accentuate the sharing of value
with shareholders. However, given their involvement indecisions with regard to business execution, remuneration foroutside directors consists of (1) basic remuneration and (3)stock-linked compensation.

(1) Basic Remuneration(2) Performance-Linked Remuneration

With regard to performance-linked remuneration, performance
evaluations of the Company as a whole in the previous fiscal
year are made once a year, and performance evaluations of thedivision of which each director is in charge are made twice ayear; amounts based on these results are added or deducted;
and the total amount is decided within a certain range.

(3) Stock-Linked Compensation

Having introduced restricted stock-linked compensation basedon the scope of operations for which each director is
responsible and his or her position, we set specific allocations
for the monetary compensation that provides a bonus for the
granting of shares with restriction on transfer.
Of the above, as determined by resolution of the 154th
Ordinary General Meeting of Shareholders held on June 26,
2018, (1) basic remuneration and (2) performance-linked
remuneration are set to a maximum amount of ¥30 million permonth (equating to ¥360 million per annum, of which theportion for outside directors shall be ¥3 million or less permonth, and which does not include the wage salaries ofindividuals serving concurrently as employees and executives).
As determined by resolution of the 153rd Ordinary General
Meeting of Shareholders held on June 27, 2017, (3) stock-linked●

By resolution of the 141st Ordinary General Meeting of
Shareholders held on June 29, 2005, we set the amount of thenormal monetary compensation to a prescribed maximum
monthly amount of ¥6 million (equating to ¥72 million per annum).

●

By resolution of the 153rd Ordinary General Meeting of
Shareholders held on June 27, 2017, we set specific allocations
for the monetary compensation that provides a bonus for the
granting of shares with restriction on transfer to a prescribedmaximum annual amount of ¥20 million. In addition, the total
number of shares of common stock to be thus issued or disposedof will be up to a maximum of 100,000 shares per annum.

Five Operating Segments

Audit & supervisory board member remuneration consistsof normal monetary remuneration and monetary compensationthat provides a bonus for the granting of shares with restriction
on transfer.

With regard to basic remuneration, we set the amount based on
the scope of operations for which each director is responsible
and his or her position and pay that amount as fixed monthly
remuneration.

Business Foundations

In addition, we introduced a stock-linked compensation planusing stock with restriction on transfer from FY 2017. Besides
executive directors, outside directors and audit & supervisoryboard members will also be eligible. Believing it important toattend to duties while remaining constantly aware of the interestsof all shareholders, even if the content of the duties of officers
responsible for the management of the Company differs
according to law, this plan was presented and, after paying
sufficient heed to the amount and allocation to be granted,
passed by resolution of the 153rd Ordinary General Meeting of
Shareholders.

● Executive Remuneration (Fiscal year ended March 2018)

Total by type of remuneration (Millions of yen)
Total remuneration(Millions of yen) Basic remuneration Stock options
BonusesNumber of
executives

Directors(excluding outside directors)

240

223

16

ー

11

Audit & supervisory board members(excluding outside audit &supervisory board members)

36

33

2

ー

2

Outside executives

23

21

1

ー

7

Data

Executive position● Significant Portion of Salary Paid to Executive Directors Who Concurrently Serve as Employees (Fiscal year ended March 2018)

Total (Millions of yen)

Number of executives

Details

56

7

Salary (including bonuses) as employees

DKS REPORT 201843

Business Foundations
Important Issue

5

Responsibility as a Global Company

Compliance
Basic Concept
Since the Compliance Control Committee was established in 2004, our Company has been continuously engaged in thebuilding and maintenance of our compliance system, as well as in activities to instill compliance practices in our
employees. Recognizing that compliance activities are indispensable for continuing as a sound company, we will further
strengthen our activities in the years to come.

Corporate Philosophy
The corporate philosophy around which the Company forms
the basis of its actions is indicated in our Company credo,
Company mottoes and Code of Corporate Ethics; these are
outlined in our Declaration of Action by Board Members andEmployees. For employees to always be able to confirm thecorporate philosophy, we have created and distributed to all
persons working in the Company a pocket-sized Corporate
Philosophy Handbook.
▶Code of Corporate Ethics

To establish corporate ethics that contribute to putting theCompany policies into practice, we established a six-item set ofprinciples as the Code of Corporate Ethics and adhere to theword and spirit of all laws and regulations, as well asinternational rules. We also respect the culture and customs ofeach country and region where we conduct our businessactivities and declare that we will act with social common sense.
▶Declaration of Action by Board Members

and Employees▶Activities to Implement and Instill Compliance Practices

We have set up internal and external whistleblower hotlinesthat enable employees to consult and report on violations oflaws and regulations. We also provide complianceassessments for each department, information such ascommentary on various laws through the Company intranet,e-learning programs in a quiz format for the promotion ofcompliance awareness and knowledge consolidation. Since
2010, we have declared October every year to be Corporate
Ethics Month, and we are carrying out activities to establish
and instill the theme. The theme for 2017 was information
management II, and we reviewed the information
management system and its operation at our Company andcarried out activities to improve its management.
To ascertain the achievement and the degree by whichthese compliance activities have been instilled, we conduct a
Compliance Awareness Survey once a year for all employees,
internally announce the results and try to extract the issues
from employees so that these are addressed in the following
fiscal year.

Regarding the six-item set of principles established as theCode of Corporate Ethics, we
broke down the content as towhat kind of behavior isactually required, clearlystate the guidelines for theactions of executives andemployees (including
seconded and contract
employees, as well as
temporary employees) anddeclare that these guidelines
will be implemented as acode of conduct.
Company Credo
Corporate philosophy handbook

Code of Corporate Ethics

44

DKS REPORT 2018

Company Mottoes"October is a Corporate
Ethics Month"Company Credo

Risk Management (Risks and Responses to Them)
About the DKS Group

Basic Concept
Diverse and becoming more complex, the corporate risks surrounding the Company could result in increased adverse
impacts on the Company itself, as well as on employees, shareholders, customers and local communities. We position
risk management as an important management issue and are taking steps to prevent potential risks and prevent the
spread of risks that have already manifested.

Risk Management
Major activities implemented in the fiscal year ended March
31, 2018, included measures aimed at the extraction of risks in eachdepartment and fostering continuous improvement, as well as
measures to prevent information leaks and alerts issued throughgroupware calling attention to such leaks. We also reviewed themanual on risk management responses for employees who are on
overseas business trips as well as the Business Continuity Plan
(BCP) covering earthquake countermeasures.
We have set new compliance standards, noting that events
such as“product quality non-conformity at the design or“product quality non-conformity in thedevelopment stage,”
manufacturing process”or“quality issues affecting compliance,
including in regard to laws and regulations”are“serious
non-conformity issues”that could affect either our customers’
business or our own.

Five Operating Segments

To address the risk surrounding the Company, we have establisheda Risk Management Control Committee that meets on a regularbasis and is composed of representatives of each department, withthe director in charge serving as the chairperson. The Committee ischarged with managing risk, establishing and managing a plan,
reviewing activity plans, assessing risk, formulating
countermeasures and responses, and confirming implementation.
In Japan and overseas, the Company and its subsidiaries areworking to operate and maintain crisis management systems on adaily basis so that we can obtain risk crisis information as soon as
possible, ascertain the situation and take appropriate measures. To
deal with potential and/or evident risks, we have taken several
steps, including establishing and maintaining Risk Management
Procedures, Product Liability (PL) Prevention and Management
Procedures and Information Security Rules.

Business Continuity Plan (BCP) and Earthquake Countermeasures▶Disaster Preparedness

In the event of a crisis, our Risk Management Manual establishes
management levels in line with the crisis, with the person in
charge in line with those risk management levels tasked with risk
management. Noting the increased occurrence of abnormal
Risk Management Level Ⅰ
Risk Management Level Ⅱ
Risk Management Level Ⅲ
Risk Management Level Ⅳ
Risk Management Level Ⅴ

Understanding risk possibilities under normal operation
Risks to be coped with within plants, branches, offices and subsidiaries
Risks to be coped with within divisions (including subsidiaries)
Risks to be coped with Companywide
Unexpected risks

Business Foundations

weather conditions, such as torrential rain, as well as
earthquakes, our annual preparation for natural disasters
includes training on understanding and reporting the safety
situations of employees and damage conditions, as well as ways
to improve crisis awareness. In the fiscal year ended March 31,
2018, too, we confirmed safety in each department using a safety
confirmation system and confirmed safety conditions using mobile
telephones and the Companywide computer system. We willcontinue training in the fiscal year ending March 31, 2019, to makesure all employees are registered in the safety confirmation
system and to reaffirm the reporting procedure through the
responsible parties.
To better respond to the diversification of risks in thebusiness environment in recent years, we will continue to promote
initiatives to improve business continuation and deploy them in
our Business Continuity Management (BCM)*.
* Business Continuity Management (BCM) refers to managements ability to continue
activities designed to enhance a company’business. These activities include the formulation, maintenance andupgrading of BCPs, as well as the implementation, testing andimprovement of education and training to entrench company
initiatives, the implementation of proactive measures and the
securing of the resources necessary to ensure business continuity.

Data

BCP is an abbreviation for Business Continuity Plan, which allows
a company to maintain critical operations when it is affected by an
unforeseen natural disaster such as an earthquake. Even if
business activities are unavoidably interrupted, the BCP focuses
on restarting important functions within the recovery time
objective and minimizing the risks involved in interrupted
operations. We have created a BCP for a large-scale earthquake
and the outbreak of a highly virulent H1N1-type influenza. We also
have created a BCP for logistics operations in the event of anearthquake or torrential rain. We are regularly reviewing andupdating our BCPs.

Information Security
Now forming an important foundation of the economy andin society, the role of IT controls is increasingly significant.
Having established an information security policy, measure
standards and implementation procedures, we are buildinga system to ensure information security against

information system risks, such as cyber terrorism andinformation leaks. Recognizing the importance of theinternal control system, we conduct internal audit by theInternal Audit Department as well as outside audit by the
independent auditor.

DKS REPORT 201845

Business Foundations

Management (as of June 26, 2018)
Board of Directors

SAKAMOTO Takashi
Chairman CEO■ Number of shares held: 131,000 shares■ Career summary

April 1970
February 1991
May 1994
December 1999
June 2001
June 2001
April 2004
June
June
June
June
June

2004
2007
2011
2013
2015

Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)Manager of Madrid Branch of Fuji BankManager of Nihonbashi Branch of Fuji BankManaging Director of Fuji Asset Management Co., Ltd.
Joined DKS Co. Ltd.
Director
Executive General Manager in charge of Corporate
Planning Headquarters
Managing Director
Senior Managing Director
Representative Vice President
Chairman and Executive Director (current)
Concurrently President (current)■ Number of shares held: 47,000 shares■ Career summary

April
April

1982 Joined DKS Co. Ltd.
2004 General Manager of Polyurethane & Construction Materials
East Sales Department, East Sales Headquarters
April 2008 General Manager of Plastic Materials Sales
Department, Plastic Materials Business Division
January 2009 General Manager of Procurement Department,
Procurement & Logistics Headquarters
April 2009 Executive General Manager in charge of Procurement& Logistics Headquarters
June 2011 Director and Executive General Manager in charge of
Personnel & General Affairs Headquarters
January 2012 Concurrently President of Osaka Branch
April 2013 Executive General Manager in charge of Corporate Planning
Headquarters and Personnel & General Affairs Headquarters
April 2014 Managing Director
April 2017 Representative Senior Managing Director (current)
Executive General Manager in charge of Business Headquarters (current)

ONISHI Hideaki■ Number of shares held: 58,000 shares■ Number of shares held: 44,000 shares■ Career summary

April 1975 Joined DKS Co. Ltd.
October 2007 General Manager of Financial Division andAssistant to Auditor
May 2008 General Manager of Accounting Department andAssistant to Auditor
June 2008 Executive General Manager in charge of Financial
Headquarters (current)
June 2009 Director
June 2016 Managing Director (current)

KITADA Akira

Director
Executive General Manager in charge of
Personnel & General Affairs Headquarters
President of Osaka Branch■ Number of shares held: 19,000 shares■ Career summary

April
April

1989 Joined DKS Co. Ltd.
2009 General Manager of Functional Chemicals R&D
Department, Functional Chemicals Business Division
October 2010 General Manager of Planning Office, Functional
Chemicals Business Division
April 2013 Executive General Manager of Functional Chemicals
Business Division, Business Headquarters
June 2015 Director (current)
April 2016 Executive General Manager in charge of Production
Control Headquarters and in charge of Environment,
Safety & Quality Assurance Department
April 2018 Executive General Manager in charge of Personnel & General Affairs
Headquarters (current) and President of Osaka Branch (current)Managing Director
Executive General Manager in charge of
R&D Headquarters■ Career summary

April
April

1982 Joined DKS Co. Ltd.
2001 General Manager of Plastic Materials R&D
Department, Plastic Materials Business Division
October 2005 General Manager of Synthesis R&D Supervision
Department, Technological Development Headquarters
March 2006 General Manager of Plastic Additive Materials R&D
Department, Technological Development Headquarters
April 2008 Deputy General Manager of Plastic Materials R&D
Department, Plastic Materials Business Division
April 2009 General Manager of Plastic Materials Laboratory,
Plastic Materials Business Division
June 2011 Executive General Manager in charge of R&D Headquarters (current)
June 2014 Director
April 2017 Managing Director (current)

OKAMOTO Osami

Director
Executive General Manager of Plastic Materials Business Division,
Business Headquarters and in charge of Tokyo Headquarters■ Number of shares held: 26,000 shares■ Career summary

April
April

1989 Joined DKS Co. Ltd.
2006 General Manager of Sales Department, Plastic Additive
Materials Business Division2007 General Manager of East Sales Department, Surfactants
Business Division
April 2008 General Manager of Planning Office, Functional Chemicals Business Division
October 2010 Director of Yokkaichi Chemical Co., Ltd.
April 2013 General Manager of Yokkaichi Reorganization
Department, Production Control Headquarters
April 2014 General Manager in charge of Management Planning
Office, Corporate Planning Headquarters
April 2016 Deputy Executive General Manager in charge of Corporate
Planning Headquarters
April 2017 Executive General Manager of Plastic Materials Business
Division, Business Headquarters (current)
Concurrently in charge of Tokyo Headquarters (current)
June 2017 Director (current)
May

YAMAJI Naoki

KAWAMURA Ichiji■ Number of shares held: 13,000 shares■ Number of shares held: 5,000 shares

Director
Executive General Manager in charge ofCorporate Planning Headquarters■ Career summary

April
April
April
April
April
April

June

1991 Joined DKS Co. Ltd.
2013 General Manager in charge of Planning Department,
Yokkaichi Reorganization Division, Production Control
Headquarters
2014 General Manager of COO Office2015 Executive General Manager of Plastic Materials
Business Division, Business Headquarters
2016 Concurrently in charge of Tokyo Headquarters
2017 Executive General Manager in charge of Corporate
Planning Headquarters (current) and COO Office2017 Director (current) and in charge of Personnel &General Affairs HeadquartersMISAWA Hideto

Director
Executive General Manager of Domestic
Subsidiaries Division (Business Headquarters)■ Number of shares held: 5,000 shares■ Career summary

April

1981 Joined Matsushita Electric Works, Ltd.
(current Panasonic Electric Works Co., Ltd.)
December 2001 General Manager of Product Development Department,
Electronic Device Materials Business Division
November 2002 General Manager of Market Development Department,
Electronic Device Materials Business Division
March 2004 General Manager of Circuit Materials Development Department,
Electronic R&D Center, Electronic Materials Headquarters
April 2007 General Manager of Functional Materials Business Division
April 2008 Director of Electronic R&D Center
October 2015 Director of New Business Development Center
October 2017 Joined DKS Co. Ltd. General Manager of COO Office
April 2018 Advisor and Executive General Manager in charge of Domestic
Subsidiaries Division, Business Headquarters (current)
June 2018 Director (current)

DKS REPORT 2018

Representative Senior Managing Director
Executive General Manager in charge ofBusiness Headquarters

URAYAMA Isaｍu

Managing Director
Executive General Manager in charge ofFinancial Headquarters

46

AKASE Yoshinobu

Director
Executive General Manager in charge of
Production Control Headquarters■ Career summary

April 1985
August 1995
November 2001
April 2002
May

2004

July
April
July

2008
2011
2013

April
April

2015
2016

April

2017

April

2018

June

2018

Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)
Senior Assistant to Director of London Branch
General Manager of Yokohama Branch
Assistant Branch Manager, Yokohama-chuo Branch ofMizuho Bank
Assistant Branch Manager, Seoul Branch of Mizuho
Corporate Bank, Ltd.
Deputy General Manager of Sales Department 6
General Manager, International Corporate Sales Department
General Manager, International Corporate Sales
Department of Mizuho Bank
Temporary transfer to DKS Co. Ltd.
Joined DKS Co. Ltd.
Deputy Executive General Manager in charge of
Personnel & General Affairs Headquarters
Executive General Manager in charge of Personnel &General Affairs Headquarters
Executive General Manager in charge of Production
Control Headquarters (current)
Director (current)

AOKI Sunao

TAKASHIMA Masahiro

Director (outside)

Director (outside)■ Number of shares held: 1,000 shares■ Number of shares held: ー■ Career summary

April 1972
June 2000
June 2003
January 2005
June 2005
December 2005
April 2006
April
June
April

2009
2011
2014

June

2014

Joined Mitsubishi Heavy Industries, Ltd.
Director of Takasago Laboratory, Technology Department
Director
General Manager, Technology Department
Representative Executive Officer
Visiting Professor of Tsinghua University in China (current)
Representative Managing Executive Officer of Mitsubishi
Heavy Industries, Ltd.
Executive Vice President and Executive Officer
Vice Chief Director of Mitsubishi Research Institute, Inc.
Special Advisor of Mitsubishi Heavy Industries, Ltd.
(current)
Director of DKS Co. Ltd. (current)■ Career summary

April
April
April
April
April
April
April
April

June

1985 Joined Daiichi Mutual Life Insurance Company
2005 President of Ueno General Branch2007 General Manager of Osaka Business Promotions
Department.
2010 General Manager of Osaka Business Promotions
Department, Daiichi Life Insurance Company, Limited
2011 General Manager of Metropolitan Area Business
Promotions Department
2013 Executive Officer and General Manager of Market
Supervision Department
2015 Managing Executive Officer and General Manager of
East Japan Sales Headquarters
Concurrently Chief of Hokkaido Sales Bureau
2017 Managing Executive Officer and Chief of Kansai
General Bureau (current)
2017 Director of DKS Co. Ltd.
Audit & Supervisory Board (current)

About the DKS Group

Board of Directors

TANIGUCHI Tsutomu
Director (outside)

Five Operating Segments■ Number of shares held: ー■ Career summary

October 1978 Labor Standard Inspector of Labor Ministry
April 2002 Chief of the Sonobe Labor Standards Inspection Office,Kyoto Labor Bureau, Ministry of Health, Labour andWelfare (former Labor Department)
April 2004 Senior Officer for Personnel Planning, General Affairs Division
April 2006 Chief of the Kyoto-minami Labor Standards Inspection Office
April 2008 Director of the General Affairs Division
April 2010 Chief of the Kyoto-shimo Labor Standards Inspection Office
April 2012 Chief of the Kyoto-kami Labor Standards Inspection Office
June 2014 Executive Director of Kyoto Labor Standards Association
June 2017 Registered as Labor and Social Security Attorney(Kyoto Labor and Social Security Attorney’s Association)
Chief of Tsutomu Taniguchi Labor and Social Securitys Office (current)
Attorney’Director of DKS Co. Ltd. (current)

NISHIZAKI Shinichi

FUJIOKA Toshinori■ Number of shares held: 24,000 shares■ Number of shares held: 52,000 shares■ Career summary

April
July

1982 Joined DKS Co. Ltd.
2004 General Manager of Financial Department,
General Affairs Financial Headquarters
October 2007 Executive General Manager of Secretary's
OfficeNovember 2008 Executive General Manager of Internal Audit
Office and Auditor
April 2010 General Manager of Financial Department,
Financial Headquarters and Auditor
April 2013 Assistant to President
June 2013 Audit & Supervisory Board Member (current)

Audit & Supervisory Board Member■ Career summary

April 1980 Joined DKS Co. Ltd.
October 2000 General Manager in charge of General Business
Promotion Office, Procurement & Logistics Headquarters
July 2001 General Manager in charge of Sales
Promotion Office, Sales Headquarters
October 2005 General Manager of East Supervision
Department, Sales Supervision Headquarters
June 2007 Executive General Manager in charge of
Personnel & General Affairs Headquarters
April 2010 President and Representative Director of Kyoto
Elex Co., Ltd.
June 2011 Executive General Manager in charge ofProcurement & Logistics Headquarters andPresident of Osaka Branch Office
June 2014 Director
April 2016 Executive General Manager of RHEOCRYSTA
Business Division (Business Headquarters)
April 2018 Assistant to President
June 2018 Audit & Supervisory Board Member (current)

IDE Hidehiko

TANAKA Haruo■ Number of shares held: 1,000 shares■ Number of shares held: ーAudit & Supervisory Board Member (outside)■ Career summary

April 1970
May 1995
May 1997
July 1999
September 1999

Joined The Fuji Bank, Limited
Manager of Chicago BranchManager of London Branch
Deputy Director General of Headquarters
Managing Director of Fuji AssetManagement Co., Ltd.
October 2005 Full-time Management Auditor of Mizuho
Private Wealth Management Co., Ltd.
June 2007 Auditor of Ulvac Materials, Co., Ltd.
June 2008 Audit & Supervisory Board Member of
DKS Co. Ltd. (current)

Audit & Supervisory Board Member (outside)■ Career summary

April 1978 Joined The Bank of Kyoto, Ltd.
February 2005 General Manager of Private Banking
Division
June 2006 General Manager of Public Affairs Division
June 2010 Executive Officer and General Manager of
Public Affairs Division
June 2011 Auditor
June 2013 Full-time Auditor
June 2015 President and Representative Director of
Kyogin Card Service Co., Ltd. (current)
June 2016 Audit & Supervisory Board Member(current)

DKS REPORT 2018

Data

Audit & Supervisory Board Member

Business Foundations

Audit & Supervisory Board

47

Data

Fundamental Knowledge of Surfactants
Generally, an“interface”refers to the border area between two materials of different states of solid, liquid or gas. A surface
active agent, or surfactant, is a term for a chemical that exhibits functions and improves the performance of these interfaces.

1 Basic Structure of Surfactants
Surfactants have a unique chemical structure that has
both hydrophilic and hydrophobic properties. Using thisstructure, surfactants can achieve a variety of effects suchas emulsification, dispersion, foaming and adsorption by
weakening surface tension or forming molecularaggregates or micelle (spheres).

Water

Oil / water
Fine powder

Surfactant molecular structure

Emulsifies

Add surfactants

Oil

Surface (interface) tension reduced

Functions of surfactants by reducing surface tension

Emulsion
Disperses

a Extremely thin solutionb Thin solutionc Critical micelled Extra critical micelle

Dispersion
Makes
foam

Air
Water

Foams

concentration

concentration

2 Surfactant Types
Surfactants have four main structural types based on thefunctions they are designed to achieve. Of these four types,
three are ionic surfactants that transform into electrolytic
dissociation ions (atoms or groups of atoms bearing anelectrical charge) when dissolved in water, and the remaining
Types of surfactantsAnionic surfactants

Cationic surfactants

Amphoteric surfactants

type is nonionic surfactants, which do not form ions. The threeionic surfactants are further subdivided based on the type ofion they form in water: anionic (or negative ion) surfactants,
cationic (or positive ion) surfactants and amphoteric(containing both positive and negative ions) surfactants.

Characteristics

Main applications

Superb emulsifying and dispersing● Good foaming● Not susceptible to temperature

Laundry detergent

Adsorbed by textiles, etc.
Antistatic effects● Sterilizing effectHair conditioner●●●

Non-irritative to the skin
Superb solubility in water● Synergetic effects with other surfactants●●

Balance of hydrophilic and hydrophobic
properties easily adjustable● Superb emulsifying andsolubilizing properties● Low foaming● Susceptible to temperature

ShampooShower gel
Fabric softener

Disinfectant
Shower gel

Dishwashing liquid

Shampoo●

Nonionic surfactants

48

DKS REPORT 2018

Laundry detergent

Emulsifier/solubilizer

Dispersant

Metal processing oil

Applications

Emulsifying,dispersing

Mixes water and oil and makes an
emulsion. Makes a uniform
dispersion with fine particles floatingon the water surface.

Ice cream, margarine,
paints, inks

Moistening,permeating

Makes wetting andpermeation easier

Spreads agrochemicals thin anduniform on the leaf surfaces. Evenly
disperses dyestuff and finishing
agents on textiles and leathers.

Pesticide spraying,permeation of dyestuff andfinishing agents on textiles
Foaming, defoaming

Making or
removing foamTakes in air bubbles in water andstabilizes. Prevents foaming.

Foam concrete,
light gypsum boards

Mixes incompatible
substances

Cleaning

Removes dirt

Softening,smoothing

Softens and smooths

Antistatic

Prevents static electricity

Rustproofing
Prevents rustLeveling, fixing

Prevents uneven dying,enhances dye fastness

Sterilizing

Five Operating Segments

Actions and effects

Removes dirt by moistening the surface
Household detergents,of textiles and dirt, taking the dirt off thebath soaps, machinery,textiles by penetrating in between them,
metalsand emulsifying/dispersing the dirt.
Improves the smoothness of yarns inthe spinning and/or knitting process
and makes soft and smooth-textured
textiles.

Textile finishing agents,
metal processing oils

Prevents static electricity generation bymaking the surfaces smooth. Makes static
electricity easier to escape by forming awater-absorptive coating on the surface.

Antistatic anddustproofing treatment
for synthetic fibers andplastic products

Adheres to the metal surface andforms a coat to prevent oxygen (air)and water from contacting the metal
and causing rust.

Metal surface
treatment

Makes the dyestuff gradually beabsorbed by the textiles and brings
about uniform dyeing.

Textile printing

A positively charged surfactant isabsorbed to negatively charged
bacteria, destroys the cells andsterilizes.

Hand sanitizer

Business Foundations

Function

About the DKS Group

3 Main Actions and Applications

Domestic wastewater contains surfactants. Most
such wastewater is collected and treated at publicsewage treatment plants and released to theenvironment although some could be released
directly to rivers/oceans or land.

Data

4 Environmental Impact of Surfactants
Because surfactants are biodegradable, even if
released into the environment they eventuallydegrade to carbon dioxide and water by bacteria. To
preserve the natural environment, products withhigh biodegradability are being developed andproactively used in Japan.
DKS REPORT 2018

49

Data

Glossary

50

Terminology

Description

Antioxidant

An additive used to prevent oxidation and deterioration caused by exposure to oxygen in the air.

Antistatic agent

A compound to prevent the electrification of synthetic fibers and plastics caused by static electricity, forwhich a surfactant is mainly used. It is applied to the surface of target materials by spraying and lets static
electricity escape.

BCP

An abbreviation for Business Continuity Plan through which, in the event of a disaster or other crisis,companies do not allow critical operations to go offline. Even if business activities are unavoidablyinterrupted, important functions will be restarted within the recovery time objective, and to minimize the risks
involved in interrupted operations strategic preparations for continuing business are carried out in advance.

CELLOGEN

DKS brand of Sodium Carboxymethyl Cellulose (CMC) products. They are a typical anionic water-soluble
polymer made from cellulose, widely used as a thickener, stabilizer, emulsion/dispersion stabilizer,
protective colloid and so on.

Cellulose
nanofibers

Very thin nano-sized fibers prepared by detangling cellulose, which makes up the cell walls of plants. The
width of the fibers is about 10 nm (nano = a billionth). They are made from wood-derived pulp, and whenused in plastics and rubbers, they enhance the strength of these materials while reducing thermal
expansion/contraction.

CMC

An abbreviation for Sodium Carboxymethyl Cellulose.

CNF

An abbreviation for Cellulose Nanofibers.

*See CELLOGEN.

*See cellulose nanofibers.

Cocoon unwindingagent

An agent to spin a silk yarn from cocoons.

COD emissions

COD is an abbreviation for Chemical Oxygen Demand, which refers to the chemical demand for oxygen.
The value indicates the oxygen volume needed for oxidizing underwater objects and is one of the major
indicators used for water quality.

Conductive paste

A paste used to fix a sample on a stage or be applied on a test piece to make it conductive. Some of theseproducts use silver particles or carbon black as a filler dispersed in resin, or others use colloidal graphite
dispersed in water.

Cost per unitof energy

An indicator used to express energy efficiency. It indicates the total energy consumption (in forms such as
electricity and heat) required to manufacture a certain volume or value of products. It is generally used toassess the progress of companies’energy conservation efforts. For example, if 1 billion kcal of energy isused to manufacture 100 million yen of value, the cost per unit of energy is 1 billion kcal / 100 million yen =10 kcal / 1 yen. Accordingly, smaller values indicate high manufacturing efficiency, energy conservation andcontributions to slowing global warming.

DuPont model

Also called the DuPont System; a method to analyze return on equity (ROE) by breaking it down to three
categories using the indices below. The name refers to its use by the chemical company DuPont for
financial analysis.
ROE (current net income / capital stock) = Financial leverage × Asset rotation ratio × Sales profit ratio

Feed binder

An additive to raise the viscosity of feed for domestic animals and fish.

Flame retardant

Depending on the usage environment, materials used in electric appliances, building materials and otherhousehold goods can cause a fire. To ensure our daily living stays safe, it is important to make thesematerials hardly flammable and minimize the release of smoke and other toxic substances. Flameretardant is a general term used to refer to the compounds used to achieve these goals.

Green solvents

Green solvents are solvents with low environmental impact. Ionic liquids, for example, are non-volatile andnon-flammable, which are different from the characteristics exhibited by general volatile organic solvents.

IoT logistics

IoT is an abbreviation for Internet of Things. IoT logistics involves attaching a sensor or other device toitems in storage or transit (packages) and enables acquisition of real-time location information over theInternet, with the goal of improving logistics efficiency.

LubricantWhen processing powder, solid or granulated materials, lubricants are additives used to reduce thefriction between both materials and processing machinery and the particles of the materials themselves.
These compounds improve fluidity, releasability and processing efficiency.

Materiality

A term that refers to how essential something is. Originally, it referred to the general rule of importance inthe accounting field for items that could have major effects on financial affairs. Recently, important issues
in CSR activities are also identified as“materiality,”and more and more companies are using thisapproach of conducting CSR activities and reporting the results.

DKS REPORT 2018

Description

Polymerizablesurfactant

A surfactant used for emulsion polymerization (monomers are emulsified/dispersed in water where theemulsifier is dispersed and lets polymerization occur by a water-soluble catalyst).

Polyurethane

A general term for polymer compounds with urethane bonding, having high abrasion resistance, chemical
resistance, solvent resistance and aging resistance. It can be used as a paint or an adhesive by dissolving
in a solvent, or as fibers. Urethane foams obtained by aerating polyurethane are used for furniture andconstruction materials, as well as packing material and mattresses.

Polyurethane
water dispersion

A liquid solution of polyurethane dispersed in water.

Precision
detergents

A surfactant blend formulation used for cleaning precision parts of electric/electronic/precision machinery.

Radiation-curable
monomers andoligomers

A general term for resins that harden in response to specific light wavelengths, such as ultraviolet light.
Low molecular weight compounds used when creating polymers are called monomers. Molecules with achemical structure not as large as polymers and created through the repetition of smaller numbers ofpolymerization are called oligomers.

Recycling ratio

The ratio of disused and waste materials that are recycled and reused to conserve resources and prevent
environmental pollution.

Responsible
Care (RC)
activities

Voluntary control activities by the companies in the chemical industry that promote the safe handling ofmaterials in every step of the process from manufacturing to distribution, consumption and disposal. First
proposed by the Chemistry Industry Association of Canada in 1985. The Japan Responsible Care Council
was founded in 1995.

SDGs

SDGs is an abbreviation for the Sustainable Development Goals, which are international targets adopted
by world leaders at a summit held at the United Nations in September 2015. The 17 SDGs contain 169
targets for achievement by 2030.

SDS

An abbreviation for Safety Data Sheets. The same materials previously were called Material Safety Data
Sheets (MSDS), however, since April 2012, all have been designated as SDS as used in the United Nations’Globally Harmonized System of Classification and Labelling of Chemicals (GHS).

Sealant forelectric insulation

A material to seal precision components without gaps to avoid exposure to the air.

Seedaccelerator

An organization that assists entrepreneurs and companies immediately after their establishment to help
assure their success. Support can come in the form of funds, personal connections, advice (mentoring) or
the provision of office space.

Sericin

Sericin is a so-called hard protein created by silkworms in the production of silk. The protein itself issynthesized in the central silk gland of the silkworm. Fibers in the cocoon are created by covering two
fibroins with three layers of sericin, with the protein component of the cocoon about 70% fibroin and about
30% sericin.

Sucrose fatty
acid esters

Approved food additive in Japan since 1959. The high safety of sucrose fatty acid esters is recognized byinternational organizations (FAO/WHO). They are a nonionic surfactant with sucrose as the hydroxyl groupand fatty acid from an edible oil as the lipophilic group, used in many food products as emulsifiers.

Unit emission ofindustrial waste

Unit consumption refers to the quantities of production factors (e.g., raw materials, power, labor force)necessary to produce a certain quantity of a product. In the same way, we measure the waste generated bys contribution to conservation
the production of a unit quantity of a product as an indicator of the Company’of the environment.

Urethane foam

A porous synthetic rubber material made from polyurethane. Used for applications such as thermal
insulating material, sound absorption material and bedding.

VOC

An abbreviation for Volatile Organic Compounds. VOC is a general term for organic compounds that arevolatile and exist in a gaseous form in the air, and the term encompasses a wide variety of compounds
such as toluene, xylene and ethyl acetate.

Water-reactive(foaming) polyols

Products in our polyurethane materials business segment. POLYGROUT, the water stopping material for
civil engineering, is a typical example.

About the DKS Group

Terminology

DKS REPORT 2018

Data

Business Foundations

Five Operating Segments*See polyurethane.

51

Data

Consolidated Financial Statements
Consolidated Balance Sheets
Assets

FY2016FY2017

Current assets
9,379 11,523
Cash and deposits
Notes and accounts receivable―trade 14,832 16,515
7,784
6,692
Merchandise and finished goods
31
35Work in process
2,134
1,683
Raw materials and supplies
270
245
Prepaid expenses
344
339
Deferred tax assets
2,342
2,750
Other current assets
(15)
(10)
Allowance for doubtful accounts
35,947 40,932
Total current assets
Non-current assets
Tangible fixed assets
24,525 24,905
Buildings and structures
Accumulated depreciation (13,170) (13,563)
11,355 11,341
Buildings and structures, net
32,313 33,625
Machinery, equipment and vehicles
Accumulated depreciation (26,667) (27,497)
6,128
5,646
Machinery, equipment and vehicles, net
3,659
3,573
Tools, furniture and fixtures(3,166) (3,170)
Accumulated depreciation
489
407
Tools, furniture and fixtures, net
8,933
9,358
Land
1,542
1,570
Leased assets
(946)
(870)
Accumulated depreciation
596
700
Leased assets, net
95922
Construction in progress
27,58428,390Total tangible fixed assets
378
387
Intangible assets
Investments and other assets
3,672
3,217
Investment securities
420
23
Long-term loans receivable208
324
Long-term prepaid expenses
57
51
Deferred tax assets
403
264
Net defined benefit assets
326
445
Other intangible fixed assets(6)(6)
Allowance for doubtful accounts
5,082
4,320
Total investments and other assets
33,098 33,044
Total non-current assets
69,046 73,976
Total assets(Millions of yen)

Liabilities

Notes and accounts payable―trade
Short-term loans payable
Lease obligations
Income taxes payable
Provision for bonuses
Accrued business office taxes
Accrued expenses
Deferred tax liabilities
Other current liabilities
Total current liabilities

10,464
6,001
299
532
603
35
386
2
2,222
20,547

12,222
6,197
313
893
649
37
220

18,593
819
426
262
72
279
20,45441,001

17,665
575
626
107
73
256
19,30342,015

8,895
7,218
11,300(1,120)26,2938,895
7,223
14,043(1,086)29,076

145

531

(2)
206

ー

271

212

279

561

1,082

3
1,186
28,044
69,046ーー

2,176
22,712

Non-current liabilities
Long-term loans payable
Lease obligations
Deferred tax liabilities
Net defined benefit liability
Asset retirement obligations
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Shareholders’equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’equity
Accumulated other comprehensive income
Valuation difference on availablefor-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined
benefit plans
Total accumulated othercomprehensive income
Subscription rights to shares
Non-controlling interests
Total liabilities and net assets

DKS REPORT 2018

FY2017

Current liabilities

Total net assets

52

FY2016

1,801
31,96073,976

Consolidated Statements of Income
FY2016FY2017

4,142
5,634
9,777
3,944

4,277
5,728
10,006
5,053

6
54
82
15
14
15
72
261

8
52
68
26
6
76
238

274
47
110
432
3,773

242
185
138
566
4,725

ー

1,098

55
55
187
93
ー

281
3,547
830
84
915
2,632
143
2,489

About the DKS Group

56,95541,896
15,059ーFive Operating Segments

52,25438,532
13,721

ー

1,098
171
113
29
314
5,509
1,434
61
1,496
4,012
660
3,351

Business Foundations

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Selling expenses
General and administrative expenses
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Share of profit of entities accounted for using equity method
Foreign exchange gains
Rent income
Insurance income
Other non-operating income
Total non-operating income
Non-operating expenses
Interest expenses
Compensation-related expenses
Other non-operating expenses
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of land
Gain on sales of investment securities
Total extraordinary income
Extraordinary losses
Impairment loss
Loss on disposal of non-current assets
Loss on sales of buildings
Total extraordinary losses
Profit before income taxes
Income taxes―current
Income taxes―deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent(Millions of yen)

Consolidated Statements of Comprehensive Income(Millions of yen)

FY2016FY2017

306
6
(69)
17
(36)
224
2,857
2,726
131

386
2
123
62
5
580
4,593
3,873
720

2,632

4,012

DKS REPORT 2018

Data

ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Share of other comprehensive income of entities accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

53

Data

Consolidated Financial Statements

Consolidated Statements of Cash Flows(Millions of yen)
FY2016

Cash flows from operating activities
Profit before income taxes
Depreciation
Increase (decrease) in allowance for doubtful accounts
Interest and dividend income
Interest expenses
Share of loss (profit) of entities accounted for using equity method
Impairment loss
Loss (gain) on disposal of tangible fixed assets
Loss (gain) on sales of tangible fixed assets
Loss (gain) on sales of investment securities
Decrease (increase) in notes and accounts receivable―trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable―trade
Increase (decrease) in net defined benefit liability
Other cash flows from operating activities
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchase of investment securities
Proceeds from sales of investment securities
Payments for loans receivableCollection of short-term loans receivable
Proceeds from subsidy income
Other cash flows from investing activities
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Repayments of lease obligations
Purchase of treasury shares
Proceeds from disposal of treasury shares
Cash dividends paid
Dividends paid to non-controlling interests
Payments from changes in ownership interests in subsidiaries that
do not result in change in scope of consolidation
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
54

DKS REPORT 2018

3,547
2,335
3
(61)
274
(82)
187
93
ー

(55)
(1,614)
409
227
(246)
(311)
4,708
121
(274)
(804)
3,750
(82)
ー

(3,900)27(2)441

FY2017

5,509
2,473
5
(61)
242
(68)
171
113
(1,068)ー(1,645)(1,466)
1,755
(188)
258
6,030
139
(241)
(911)
5,017
(116)
83
(2,505)
1,822
(2)
ー

ー

1
212
(33)
(3,336)

(400)
3
100
(114)
(1,130)(3,190)8,393(3,772)(346)(1,004)
21
(526)
(39)

(55)
4,000
(4,800)
(299)
(1)
7
(606)
(38)

(10)

(62)

(477)
(42)
(105)
9,401
9,296

(1,858)
78
2,106
9,296
11,402

Dialogue with Shareholders and Investors

About the DKS Group

Disclosing the necessary corporate information in a timely and appropriate manner, the Company attaches importance tothe occasions for communicating with the wide range of people concerned.
While actively conducting dialogues with its many investors, the Company has been able to seize opportunities for
dialogue involving stories about its creation of value.
Through the words of the Chairman himself, the Company arranges regular large and small meetings with investors.
In addition, with regard to explaining financial performance and business scope, the personnel in charge conduct interviews
and offer direct explanations as part of their everyday tasks. As this Report serves as a tool for sustainable and constructive
dialogue, we are working to improve corporate value, including mutual understanding through active communication.

Ordinary General Meeting of Shareholders
reflected in management.
As the general meetings are held at the Company’s
Headquarters, our employees there turn out in force towelcome the shareholders.
Five Operating Segments

On June 26, 2018, the Company held its 154th Ordinary
General Meeting of Shareholders at the hall at theCompany’s corporate Headquarters building. The
shareholders who attended that day numbered 107,
including some who had traveled long distances to be
there. After the conclusion of the general meeting, theCompany held a management briefing session given by
the Chairman and an informal gathering.
Using the valuable time to directly explain
management’s way of thinking and direction throughmutual dialogue, the Company regards the general
meeting as an important occasion not only as a venue atwhich to meet each other but also for the management
team to earnestly obtain feedback directly fromshareholders and for that feedback to be subsequently

154th Ordinary General Meeting of Shareholders(held on June 26, 2018)
Number of shareholders who attended

107shareholders

Percentage of those exercising voting rights

75.6％

Dialogue with Institutional Investors and Analysts

Dialogue with Individual Investors

We hold briefing sessions for investors covering thefirst-half and full-year periods.
In the fiscal year ended March 31, 2018, large
meetings were held at the Securities Analysts Associationof Japan and smaller meetings were at the Company’sTokyo Headquarters. There was a cumulative total of 52
attendees, and the Company hosted a relaxed dialogue via
a Q&A format.

Immediately after the General Meeting of Shareholders,
we held an informal gathering at our Headquarters andheard opinions from our shareholders firsthand. On July5, we held a management briefing session in Otemachi,
Tokyo, geared toward shareholders in the Kanto region.
Including the discussions afterward, the management
conveyed its thoughts to the shareholders. In the years tocome, the Company will continue to host occasions at
which to convey its direction in a more easily understoodmanner.

Business Foundations

Dialogue with Shareholders and Investors

Number of attendees at management briefings in 2018

Data

128 attendees

Number of dialogues in the fiscal year ended March 31, 2018

Cumulative total of

97 companies
DKS REPORT 2018

55

Data

Domestic/Overseas Network (As of March 31, 2018)
Domestic Network
Name

Ownership ofvoting rights (%)

Location

Connection toDKS’s business●Yokkaichi Chemical Company
Limited1

Yokkaichi, Mie100

Gembu Co., Ltd.

Chuo-ku, Osaka

100●

Dai-ichi Kenkou Co., Ltd.

Chuo-ku, Tokyo

100●

Dai-ichi Ceramo Co., Ltd.

Higashiomi, Shiga

100●

Elexcel Corporation

Yokkaichi, Mie80●

K&D Fine Chemical Corporation*

Chuo-ku, Chiba

50

●

●

●

Details of connection to
DKS's business

Surfactants
Polyurethanematerials●

Surfactants
Amenity materials
Polyurethanematerials
Electronic devicematerials
Electronic devicematerials
Surfactants

●

●

●
●

●

Manufacturing of surfactants
and polyurethane materials, etc.
Sales of surfactants andamenity materials, etc.
Sales of civil engineering andconstruction-use chemicals, etc.
Rental of land and buildings
Contracted research related todye-sensitized solar batteries andmedium-sized lithium batteries
Manufacturing of surfactants, etc.

Head Office/Laboratory

Nagoya Office

Tokyo Head Office
Dai-ichi Kenkou Co., Ltd.

Kyoto Elex Co., Ltd.

Kyushu Office
K&D Fine Chemical Corporation

Shiga Branch

Location: 427 Gokasho Hiyoshi-cho,Higashiomi, Shiga
Area: 106,813 m2
Main products: Sucrose fatty acid esters, foodadditives, metal surface treatment agents,
surfactants, solvent-alternative aqueous andnon-aqueous detergents

Osaka Office
Gembu Co., Ltd.

Dai-ichi Ceramo Co., Ltd.
Yokkaichi Chemical Company Limited

Chitose Plant, Yokkaichi Branch
Location: 7 Chitose-cho, Yokkaichi, Mie
Area: 17,355 m2
Main products: Polyether polyols, urethane prepolymers,
EV/EB-curable monomers/oligomers,
anionic surfactants, cationic surfactants

56

DKS REPORT 2018

Ohgata Branch
Location: 230 Saigata, Ohgata-ku, Joetsu, Niigata
Area: 87,732 m2
Main products: CMC, waterborne
polyurethanes, professional detergents,
polyvinylpyrrolidone

Kasumi Plant, Yokkaichi Branch
Location: 1-23-5 Kasumi, Yokkaichi, Mie
Area: 101,138 m2
Main products: Polyurethane materials,
functional materials

Ownership ofvoting rights (%)

Location

P.T. Dai-ichi Kimia Raya

Karawang, Indonesia

Chin Yee Chemical Industries,
Co., Ltd.

Taipei, Taiwan

51

DKS (Shanghai) International
Trading Co., Ltd.

Shanghai, China

100

Sisterna B.V.
Shuang Yi Li (Tianjin) New
Energy Co., Ltd.
Chin Yee Chemical Technologies(Wuxi) Co., Ltd.*
Dai-ichi Kogyo Seiyaku(Singapore) Pte. Ltd.***DDFR Corporation Ltd.**

Roosendaal,
the Netherlands
Tianjin EconomicTechnological Development
Area, China

91.53

94.9

Connection toDKS’s business
Surfactants
Amenity materials● Functional materials● Surfactants● Amenity materials● Functional materials● Surfactants● Amenity materials● Functional materials
●
●

●

100

●

57 (57)2●

Singapore0●

Hong Kong SAR, China

50

Wuxi, Jiangsu, China

Details of connection to
DKS's businessAmenity materials
Electronic devicematerials●●●

Amenity materials
Functional materials●

Functional materials

Manufacturing and salesof plastic lubricants, etc.

Importing and exporting
operations for the company’sproducts, etc.
● Sales of sucrose fatty
acid esters●●

Functional materials

Manufacturing and salesof surfactants, etc.

●●●

Manufacturing and sales oflithium-ion polymer batteries

Five Operating Segments

Name

About the DKS Group

Overseas Network

Manufacturing and salesof functional materials
Trading
Purchasing of flame
retardants

Business Foundations

1. The ratio of total sales of Yokkaichi Chemical Company Limited to consolidated sales (excluding internal sales between consolidated companies)
is more than 10%. Specified subsidiary.
2. Figure in ( ) in ownership ratio of voting rights indicates indirect ownership ratio included in the total.
3. * indicates equity-method non-consolidated subsidiaries; ** indicates an equity-method affiliate,*** indicates a non-consolidated subsidiary,

Shuang Yi Li (Tianjin) New Energy Co., Ltd.

Sisterna B.V.

Dai-ichi Kogyo Seiyaku(Singapore) Pte. Ltd.

Data

DKS (Shanghai) International Trading Co., Ltd.

Chin Yee Chemical Technologies(Wuxi) Co., Ltd.

DDFR Corporation Ltd.
Chin Yee Chemical Industries,
Co., Ltd.
P.T. Dai-ichi Kimia Raya
DKS REPORT 2018

57

Data

Corporate Data (As of March 31, 2018)
Corporate NameDKS Co. Ltd.

Foundation

April 1909

Incorporation

August 1918

Paid-in Capital

8,895 million yen

Headquarters / Laboratory
5 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391,
Japan
Phone: +81 75 323 5911 Fax: +81 75 326 7356

Number of Employees 497 (consolidated: 976)

Main Branch
55 Nishishichijo Higashikubo-cho, Shimogyo-ku, Kyoto
600-8873, JapanTokyo Headquarters
8th Floor, Yaesuguchi Daiei Building, 1-3-1 Kyobashi,
Chuo-ku, Tokyo 104-0031, Japan
Phone: +81 3 3275 0561 Fax: +81 3 3275 0593

Total Number of
53,421,609 shares
Shares Outstanding
Share Unit Number 1,000 shares
Number of
Shareholders

4,134

Stock Listing

Tokyo Stock Exchange

Securities Code

4461

Date of Record

Every year on March 31, and other dates
as necessary and publicly announced in advance

Annual Meetingof Shareholders

Every year in late June

Shareholder
Mizuho Trust & Banking Co., Ltd.
Registry Administrator 1-2, Yaesu 1-chome, Chuo-ku, Tokyo

Osaka Branch
2nd Floor, Osaka Asahi Seimei Building, 4-2-16 Koraibashi,
Chuo-ku, Osaka 541-0043, Japan
Phone: +81 6 6229 1717 Fax: +81 6 6229 1793
Nagoya Office
7th Floor, Nagoya International Center Building, 1-47-1
Nagono, Nakamura-ku, Nagoya 450-0001, Japan
Phone: +81 52 571 6331 Fax: +81 52 586 4539
Kyushu Office
4th Floor, Hakata Ekimae Daiichi Building, 1-2-3
Hakata-eki Minami, Hakata-ku, Fukuoka 812-0016, Japan
Phone: +81 92 472 6353 Fax: +81 92 472 4989

List of Major Shareholders (Top 10)
Shareholder Name

Number of Shares Ratio of Shareholding (%)

Japan Trustee Services Bank, Ltd. (Trust account)

5,891,000

11.61

The Dai-ichi Life Insurance Company, Limited

3,067,000

6.04

The Master Trust Bank of Japan, Ltd. (Trust account)

2,496,000

4.92

Mizuho Bank, Ltd.

2,135,000

4.21

The Bank of Kyoto, Ltd.

2,085,000

4.11

Asahi Mutual Life Insurance Company

1,697,000

3.34

Shareholding Association of DKS’s Business Partners

1,362,000

2.68

DKS Employee Shareholding Association

1,252,269

2.47

RE FUND 116-CLIENT AC

1,201,000

2.37

DFA International Small Cap Value Portfolio

1,062,536

2.09

Notes: 1. The Company has 2,661,260 of treasury shares that are excluded from the major shareholders above.
2. The ratio of shareholding is calculated after subtracting of treasury shares.

Shareholder Distribution
Composition by Shareholder
Securities companies

Financial institutions

Foreign corporations, etc.

Treasury stock

0.85%

0.77%

2.20%

Japanese
corporations

2.20%

58

Composition by Shareholdings Note: Figures as of March 31, 2017,

DKS REPORT 20180.02%
Individuals and others

93.95%

Treasury stock 4.98%（5.14％）
Japanese corporations
5.86%（6.28％）
Foreign corporations, etc.
15.77%（10.47％）

are indicated in ( ).

Securities companies
1.34%（1.75％）
Financial
institutions

46.08%

Individuals （39.87％）
and others

25.98%（36.49％）

On Publishing the DKS Report 2018

Five Operating Segments

About the DKS Group2017, we were awarded the best newcomer prize by
the Japanese organization of the World Intellectual
Capital/Assets Initiative (WICI Japan). Little by little,
we are receiving plaudits for our efforts from outside
the Company.
In DKS Report 2018, we maintained an awarenessof the SDGs toward which the Company’s management
is aiming, as well as the ESG aspects and CSR priority
issues. We are paying heed to the expressions used for
explaining the businesses in which we are engaging sothat they are made simple. We also worked to simplify
the descriptions of the complex operations
characteristic of chemical manufacturers in a form
called B to B. It is my intention to raise corporate value
and deepen the dialogue with all our stakeholders,
including shareholders and investors.
I would appreciate hearing your frank and candid
opinions and impressions with regard to this Report.

SAKAMOTO Takashi
Chairman CEO
September 2018

Business Foundations

The issue of the fiscal year ended March 31, 2018,
marks the third time the DKS Group has published
its integrated report. Since its initial publication in2016, the integrated report has been positioned as
an important means of communicating
management information to all stakeholders. Froma long-term perspective, the Company aims to lookat the current situation and explain the growthstrategy for the future in an easily understoodmanner. I consider this to be a source of dialogue on
the creation of value.
As a listed company, our aims are to meet the
expectations of our shareholders and to improve thecreation of value in cooperation with our customers,
business partners and employees. For the happinessof the people in the world and conservation of the
global environment, the realization of society’s
Sustainable Development Goals (SDGs) is being
demanded. While disclosing a wide range of
information, including nonfinancial content, theCompany has been focusing on gaining everyone’sunderstanding through IR activities and other means.
A bill relating to work-style reforms was enacted
on June 29 this year, and the Company has beencertified as an Excellent Health and Productivity
Management Organization (White 500) by the relevant
government agencies. For last year’s DKS Report

Editing Postscript
We would like to take this opportunity to express
our gratitude to all the parties concerned for theircooperation in the editing. We would also welcome
frank opinions from readers, with whom we intend tolink more directly with the fiscal year ending March 31,
2019, issue.

Data

Launched at the same time as our 5-Year Management
Plan, the Company’s integrated report now has reached
its third issuance. Receiving a prestigious prize fromWICI Japan last year served to focus our minds when
editing. Because this Report is not solely for investors,
information disclosure that includes nonfinancial
information is strongly desired. We would like this report
to be utilized as reference material to enable employees,
customers, suppliers and other stakeholders to gain adeeper understanding of DKS.
This year, the creating and editing of the Report was
carried out by three people over a period of about half ayear. We set out to show the Company’s value creation
capabilities by, for example, the enhancement of the ESG
information and combining financial and nonfinancial
information with reference to the IIRC integrated
reporting framework. We also cooperated with the
production company on the visual side and intend todevise ways to make the Report more reader friendly.

Tokyo Secretary & Investor Relations Group,
Public & Investor Relations Department

DKS REPORT 201859

DKS REPORT 2018

DKS Co. Ltd.
5 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391, Japan
TEL: +81 75 323 5911 FAX: +81 75 326 7356
https://www.dks-web.co.jp/english/index.html
Published: October 2018
Printed in Japan