This document has been translated from the Japanese original for reference purposes only.
In the event of any discrepancy between this translated document and the Japanese original, the original
shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any otherforms of damages arising from the translation.

Disclosure on the Internet accompanying
the Notice of Convocation of the 161st Ordinary General Meeting of Shareholders

Company’s Systems and Policies
Consolidated Statement of Changes in Net Assets
Notes to Consolidated Financial Statements
Non-consolidated Statement of Changes in Net Assets
Notes to Non-consolidated Financial Statements(from April 1, 2019 to March 31, 2020)

Denka Co., Ltd.
(Securities Code: 4061)
The content of this document is posted on the website of Denka Co., Ltd. (“the Company”)(https://www.denka.co.jp/eng/), pursuant to laws and regulations and Article 16 of the Articles ofIncorporation of the Company.

1Company’s Systems and Policies(1) Systems to Ensure the Appropriateness of Operations
The Company is enacting the (Denka Mission) which represents our uppermost mission statement, andaction guidelines (Denka Principles) which make the corporate philosophy “The Denka Value.” Under thiscorporate philosophy, the Company has determined the following by the resolution of the Board of Directors
as a system to ensure the appropriate execution of duties.
1) Systems to ensure that Directors’ and employees’ execution of duties complies with laws andregulations and the Articles of Incorporation
The Board of Directors of the Company performs important decision-making concerning businessexecution in accordance with laws and regulations, the Articles of Incorporation, and the Board of
Directors Regulations and oversees Directors’ and Executive Officers’ execution of duties.
Executive Directors and Executive Officers execute their duties under supervision by the President
and oversee employees’ execution of duties at divisions for which they are responsible.
The Audit & Supervisory Committee performs investigations of matters including thedevelopment and implementation status of internal control systems by attending corporate andother important meetings, receiving briefings from Directors, reviewing important documents, andother means, and audits the execution of duties by Directors from an independent standpoint.
The Company establishes the Denka Group Ethics Policy as a set of action guidelines for all theofficers and employees of the Company and its subsidiaries concerning compliance, and corporate rules
and regulations are established to ensure compliance with specific laws and regulations and the Articles
of Incorporation.
In accordance with the provisions of the Denka Group Ethics Policy, the Company maintains a
resolute attitude against antisocial forces and does not provide any payoff. Based on this policy, theCompany establishes an internal system.
Regarding internal audits, the Company establishes the Internal Auditing Department as a dedicateddepartment that conducts comprehensive internal auditing. In addition, regarding specialized or specificfields, business units and various committees provide education on compliance with rules andregulations and audit compliance statuses according to functions and report to the responsible officers,
as necessary.
The Internal Auditing Department also performs assessment of statuses of design and operation ofinternal controls for the purpose of preparing a “report of internal control over financial reporting”
specified by the Financial Instruments and Exchange Act and reports the result to the responsible
officer.
The Company establishes the Compliance Hotline System to supplement internal audits by thedepartments described above to swiftly identify and address any violations.
2) Systems for storage and management of information related to Directors’ execution of duties
The Company records information related to Directors’ execution of duties in accordance with theBoard of Directors Regulations, job descriptions, and other internal rules and regulations, and stores andmanages such information based on the document retention regulations.
3) Rules and other systems for management of risk of loss
The Company formulates the Risk Management Guidelines to provide policies for responding toincidents that may greatly affect corporate activities.
Regarding such items as the environment, health and safety, and quality control,cross-organizational committees are established to comprehensively manage risks. Regarding items
unique to departments, the relevant departments are responsible for managing associated risks.
4) Systems to ensure that Directors’ execution of duties is efficient
The Company adopts the executive officer system to optimize the management decision-making
function of the Board of Directors and to strengthen each function of business execution and oversightby separating them.
Apart from the Board of Directors as the decision-making body, the Company establishes theManagement Committee consisting of Directors (including Directors who are Audit & Supervisory
Committee Members) and some Executive Officers. Depending on the agenda, relevant executive
officers also participate in the meeting of the Management Committee to streamline and acceleratedeliberation on important managerial matters.

2For such important matters as budget formulation and capital investment, the Company sets up
deliberative councils or special committees by function.
The job descriptions specify basic duties and decision-making authority of Directors, Executive
Officers, and employees to enhance efficiency of execution of duties.
5) Systems to ensure the appropriateness of operations of the GroupRegarding management of subsidiaries, the Company specifies organizations responsible for eachsubsidiary. These supervisory organizations take responsibility for supervising. In addition, they provide
guidance, administration, and oversight in accordance with the situation of each subsidiary.
Regarding ordinary operations of subsidiaries, the Company respects the autonomy andindependence of each affiliated company. Regarding compliance with laws and regulations and social
norms, the Company applies the Denka Group Ethics Policy and other relevant rules and regulations toaffiliated companies and provides education and oversight.
i) Systems for reporting of matters relating to execution of duties by subsidiaries’ directors etc. tothe parent company
The Company dispatches directors, etc. to subsidiaries from the organization that is responsible forthe subsidiaries and information about important matters for the subsidiaries is exchanged and discussed
at meetings of the Company’s Board of Directors, etc.
Regarding execution of duties, taking into account the degree of impact on the Group as a whole,subsidiaries report matters of greater importance to the parent company, that is the Company, via theirsupervisory organizations, in accordance with the Job Descriptions for Management of AffiliatedCompanies.
ii) Subsidiaries’ rules and other systems for management of risk of loss
The Company responds to incidents that may greatly affect subsidiaries’ corporate activities inaccordance with the Risk Management Guidelines.
Regarding such items as the environment, health and safety, and quality control at a subsidiary,
directors, etc. dispatched to the subsidiary from the supervisory organization responsible for thesubsidiary provide advice and guidance through discussion with specific organizations responsible foreach such item.
iii) Systems to ensure that execution of duties by subsidiaries’ directors, etc. is efficient
The Company dispatches directors, etc. to subsidiaries from the supervisory organizations
responsible for the subsidiaries to facilitate information sharing between the Company and subsidiaries
and to execute business systematically and efficiently by the Group as a whole.
Depending on the degree of importance of subsidiaries, the Company has subsidiaries introduce theshared accounting system and provides resources of administrative organizations to enhance efficiencyof execution of duties of subsidiaries.
iv) Systems to ensure that execution of duties by subsidiaries’ directors, etc. and employees
complies with laws and regulations and the Articles of Incorporation
The Company establishes the Denka Group Ethics Policy applicable to the Group, including to
subsidiaries, and encourages all the officers and employees of subsidiaries to ensure compliance withlaws and regulations. At the same time, the Company manages subsidiaries in accordance with the Job
Descriptions for Management of Affiliated Companies.
The Company’s Internal Auditing Department is principally responsible for internal audits ofsubsidiaries and conducts internal auditing, in a timely manner, receiving support of the Company’s
Legal Department, as necessary.
The Company establishes a whistleblower system for early detection and correction of
non-compliant conduct at subsidiaries.
6) Systems concerning employees who provide assistance to the Audit & Supervisory Committee,
matters concerning securing effectiveness of instructions to the employees and mattersconcerning independence of such staff from Directors (excluding Directors who are Audit &Supervisory Committee Members)
The Company sets up the Audit Committee Office as an organization that provides assistance to the
Audit & Supervisory Committee and assigns at least one exclusively assigned employee to the Audit
Committee Office based on consultation with the Audit & Supervisory Committee in advance. The
3

Audit Committee Office serves as the secretariat for the Audit & Supervisory Committee and is directly
commanded by the Audit & Supervisory Committee.
The Audit & Supervisory Committee are consulted in advance about performance evaluation of
employees who belong to the Audit Committee Office and determination of any other personnel
matters.
7) Systems concerning reporting to the Audit & Supervisory Committee by the Company’s
Directors (excluding Directors who are Audit & Supervisory Committee Members of theCompany) and employees and by those of subsidiaries, other systems concerning reporting to the
Audit & Supervisory Committee, and systems to ensure that they do not receive unfavorable
treatment because of their reporting to the Audit & Supervisory Committee
Directors (excluding Directors who are Audit & Supervisory Committee Members of the Company),
Executive Officers, and employees of the Company and those of subsidiaries report on their duties, byorganization or by subsidiary, periodically or as necessary, in accordance with the instructions and/or
requests of the Audit & Supervisory Committee. In addition, if they discover matters that will or may
cause significant harm to the Group, they will immediately report them to the Audit & Supervisory
Committee either directly or indirectly via the appropriate lines of command or Compliance Hotline
System.
The Internal Auditing Department reports the results of internal audits of the Company andsubsidiaries periodically to the Audit & Supervisory Committee.
The Company establishes a whistleblower system as a system available for all the officers andemployees of the Company and subsidiaries for reporting non-compliant conduct, designating the Audit
Committee Office as one of the contacts of the whistleblower system. If the Audit Committee Office,etc. receives a report, the content of the report is reported to the Audit & Supervisory Committee.
It is specified in the Denka Group Ethics Policy that no person who reports on non-compliant
conduct using the whistleblower system, etc. receives unfavorable treatment because of his/herreporting.
8) Policy for treatment of expenses, etc. incurred by Audit & Supervisory Committee Members’
execution of duties and other systems to ensure that the Audit & Supervisory Committee
effectively perform auditing
Directors secure the necessary budget in order not to impede execution of duties by Audit &Supervisory Committee Members. At the same time, when an Audit & Supervisory Committee Member
makes a claim in accordance with Article 399-2, Paragraph 4 of the Companies Act, the expenses andliabilities relevant to the claim will be paid without delay, unless it is deemed that they are unnecessaryfor execution of duties of the said Audit & Supervisory Committee Member.
The Internal Auditing Department and other internal auditing organizations collaborate with the
Audit & Supervisory Committee and coordinate with its auditing so that both internal auditingorganizations and the Audit & Supervisory Committee can perform their duties efficiently.
(2) Operational Status of Systems to Ensure the Appropriateness of Operations
1) Compliance structure
Based on the Denka Group Ethics Policy, which defines the fundamentals of compliance, and theWhistleblowing Policy, the Company continued to implement awareness activities, including training,
during the fiscal year under review.
2) Business execution of Directors
The Board of Directors of the Company is composed of twelve members, including fiveOutside Directors, and meetings of the Board of Directors were held 13 times during the fiscal
year under review. Based on laws and regulations, the Articles of Incorporation, and the Board of
Directors Regulations, decision-making was conducted regarding important business execution, reports
were received from Directors and Executive Officers regarding required business execution conditions,and appropriate supervision was provided.
Additionally, with the intent of deliberation and consideration for important management issues, theManagement Committee, composed of Directors (including Directors who are Audit & Supervisory
Committee Members), and a portion of Executive Officers, was held once a month, with the intent of
increasing efficiency of consideration of important management issues and accelerating
decision-making.
3) Business execution of the Audit & Supervisory Committee
4

The Audit & Supervisory Committee of the Company is composed of five members, including
three Outside Directors, and meetings of the Audit & Supervisory Committee were held 11 times
during the fiscal year under review. Additionally, the Audit & Supervisory Committee worked closelywith the Internal Auditing Department and other departments to perform efficient and effective audits of
the Company’s divisions and departments, business sites, and subsidiaries, in addition to receiving
briefings on the status of business execution, etc. at periodic divisional report meetings. They heldnecessary discussions concerning these and other activities at meetings of the Audit & Supervisory
Committee.
Furthermore, to assist the duties of the Audit & Supervisory Committee, the Audit Committee
Office was established and exclusive employees were assigned.
4) Risk management structure
To respond appropriately to events that may greatly affect the corporate activities of theCompany, the Risk Management Guidelines were defined, containing categories of specific types ofrisk that may occur, and a controlling division and emergency contact structure are maintained.
Meetings of the Risk Management Committee as defined by the above guidelines and various othermeetings related to risks are held periodically and as required, and report to the Board of Directors.
5) Implementation of internal audits
Based on the internal auditing plan, the Internal Auditing Department implements internal
audits of the Company and Group companies, and while reporting the results to the Board of
Directors and the Audit & Supervisory Committee, cooperates closely with the Audit &Supervisory Committee, working together to conduct operations that are mutually efficient.
(3) Basic Policies regarding the Control of the Company
The following matters were decided at a meeting of the Board of Directors of the Company
Under the Company’s corporate philosophy, the Denka Value, the Company strives to strengthen its
business foundation by improving its earning power and expanding the scope of operations, while
making every effort to continue being a company that can win the trust and sympathy of society, and in
so doing working to improve the Company’s corporate value and the common interests of theshareholders from a medium- to long-term perspective. Also, under this basic policy, the management
plan “Denka Value up” (five years from fiscal 2018), has been formulated, to strive for the realization ofcontinuous and sound growth.
The Company has not established so-called takeover defense countermeasures, but certain large
scale purchases that may damage corporate value and large scale purchases where sufficient
information or time may not be provided to shareholders in order to consider whether it should accept
or reject such a purchase attempt, within the scope permitted by laws and regulations, regulations offinancial instruments exchanges etc., appropriate interactions are taken in order to prevent damage to
the Company’s corporate value and the common interests of its shareholders.

5Consolidated Statement of Changes in Net Assets(From April 1, 2019 to March 31, 2020)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginning of the fiscal
year

Capital surplus

36,99849,353Retained earnings
144,638

Cumulative effects of changes inaccounting policies
Restated balance

Treasury stock

Total
shareholders’equity(5,492)

225,498(306)
36,99849,353

144,332(306)(5,492)

225,192

Changes of items during the fiscal
year
Dividends from surplus(10,396)(10,396)

Profit attributable to owners of parent

22,70322,703

Change of scope of consolidation
Change in ownership interest ofparent due to transactions with
non-controlling interests
Purchase of treasury stock

217

217

11

Disposal of treasury stockReversal of revaluation reserve forland
Net changes of items other thanshareholders’ equity

11(2,108)(2,108)

7

7

(0)
0

0
–

Total changes of items during the
fiscal year–11

12,525(2,101)

10,435

Balance at end of the fiscal year

36,99849,365

156,857(7,593)

235,628(Millions of yen)

Accumulated other comprehensive income
Valuation
Total
NonTotaldifference Deferred Revaluation Foreign Remeasurements valuation controllinggains
orcurrency
on availablenet
assetsofdefinedandreserveforlosses ontranslation
benefit plans translation interests
landfor-salehedgesadjustment
adjustments
securities

Balance at beginning of the fiscal
year
Cumulative effects of changes inaccounting policies

15,182

Restated balance

15,182(345)

10,260(120)(3,614)

21,362

3,620

–
(345)

10,260(120)(3,614)

21,362

250,481
(306)

3,620

250,175

Changes of items during the fiscal
year
Dividends from surplus–(10,396)

Profit attributable to owners of parent–

22,703

Change of scope of consolidation
Change in ownership interest ofparent due to transactions with
non-controlling interests
Purchase of treasury stock

–

217

–

11

–

(2,108)

–

7

–

0

Disposal of treasury stockReversal of revaluation reserve forland
Net changes of items other thanshareholders’ equity(4,491)

(206)

(0)

(755)

(815)

(6,270)(326)(6,596)

Total changes of items during the
fiscal year

(4,491)

(206)

(0)

(755)

(815)

(6,270)

(326)

3,839

Balance at end of the fiscal year

10,691(551)

10,259(876)(4,429)15,092

3,294

254,014(Note) Amounts are rounded down to the nearest million yen.

6

Notes to Consolidated Financial Statements(Significant Matters, etc. Providing the Basis for Preparation of Consolidated Financial Statements)
1. Scope of consolidation(1) Consolidated subsidiaries
Number of consolidated subsidiaries: 49
Names of principal consolidated subsidiaries:
Denka Singapore Pte., Ltd.
Denka Advantech Pte., Ltd.
Denka Performance Elastomer LLC
DENKA SEIKEN Co., Ltd.
DENKA Polymer Co., Ltd.
Hinode Kagaku Kogyo
Akros Trading Co., Ltd.
YK Inoas Co., Ltd.
Denka Chemicals Shanghai Co., Ltd. and Denka Chemicals Hong Kong Co., Ltd. which were a
non-consolidated subsidiary until the previous fiscal year, are included in the scope of consolidation
during the fiscal year under review as their significance has increased.
Omi Maintenance LLC. has been excluded from the scope of consolidation owing to thecompletion of liquidation.

(2) Principal non-consolidated subsidiaries
Names of principal non-consolidated subsidiaries:
KAMBARA NAMAKON K.K.
SANSHIN BUSSAN K.K.
DS POVAL K.K.
Reason for exclusion from the scope of consolidation:
The non-consolidated subsidiaries are excluded from the scope of consolidation because they are both
small in scale and the aggregate amounts of their total assets, net sales, net income or loss (amountprorated to the ownership), and retained earnings (amount prorated to the ownership), etc. have nomaterial impact on the consolidated financial statements.

7

2. Application of the equity method(1) Non-consolidated subsidiaries and affiliates to which the equity method is applied
Number of non-consolidated subsidiaries and affiliates to which the equity method is applied: 14
Names of principal non-consolidated subsidiaries to which the equity method is applied:
KAMBARA NAMAKON K.K.
SANSHIN BUSSAN K.K.
Names of principal affiliates to which the equity method is applied:
TOYO STYRENE Co., Ltd.
JUZEN Chemical Corporation
Denak Co., Ltd.,
Kurobegawa Electric Power Company(2) Non-consolidated subsidiaries and affiliates to which the equity method is not applied
Name of the principal non-consolidated subsidiary to which the equity method is not applied:
DS POVAL K.K.
Name of the principal affiliate to which the equity method is not applied:
Shogawa Nama Concrete Kogyo K.K.
Reason for not applying the equity method:
The non-consolidated subsidiary and affiliate not subject to the equity method are excluded fromapplication of the equity method because their individual impacts on consolidated net income or loss,
retained earnings, etc., are negligible, and their overall impact on the consolidated financial statements isimmaterial.

3. Accounting periods of consolidated subsidiaries
Among the consolidated subsidiaries, Denka Singapore Pte., Ltd. and 33 other subsidiaries have ayear-end balance sheet date of December 31.
Necessary adjustments are made in preparing the consolidated financial statements to reflect any
significant transactions that took place between that date and the consolidated balance sheet date.

84. Accounting policies(1) Standards and methods for valuation of principal assets
Securities
Available-for-sale securities
Securities with market value
Stated principally at market value based on the average quoted market price for a period of
one month before the balance sheet date(Valuation difference is reported as a separate component of net assets. The cost of sales iscalculated principally using the moving-average method.)
Securities without market value
Stated principally at cost using the moving-average method
Derivatives
Stated at market value
Inventories
Stated principally at cost using the weighted-average method(Balance sheet amounts are calculated by writing down their net realizable value when there isevidence of deterioration in value.)(2) Depreciation method for principal depreciable assets
Property, plant and equipment
Principally, the straight-line method is applied.
Intangible assets
Principally, the straight-line method is applied. (However, software for internal use is amortized by
the straight-line method over the estimated internal useful life (principally five years).)
Lease assets
For finance leases that do not transfer the ownership of the lease assets to the lessee, thestraight-line method with no residual value is applied, regarding the lease term as the useful life.
Furthermore, financial statements for consolidated subsidiaries overseas are prepared in accordancewith International Financial Reporting Standards, and as stated in (Changes in Accounting Policies),
International Financial Reporting Standard 16 Leases (“IFRS 16”) has been applied from the fiscal
year under review. Under IFRS 16, lessees record all leases as assets and liabilities on the balance
sheet, in principle, and the straight-line method is used as the depreciation method for right-of-use
assets recorded as assets.
(3) Standards of accounting for principal allowances and provisions• Allowance for doubtful accounts
Allowance for doubtful accounts is provided to cover possible losses on receivables. The
Company records an estimated irrecoverable amount based on the historical write-off rate forordinary receivables and based on assessment of recoverability of individual receivables for
specific doubtful accounts.
9• Provision for bonuses
The Company provides reserve for payment of bonuses to employees based on the amount of
estimated employees’ bonuses.
• Provision for stock benefits
In order to provide benefit from the Company’s shares, the amount of projected equity benefit at
the end of the consolidated fiscal year is recorded, based on officer stock benefits regulations for
Directors (excluding Directors who are Audit & Supervisory Committee Members and Outside
Directors).
(4) Other significant matters providing the basis for preparation of consolidated financial statements• Method of amortization of goodwill and amortization period
Goodwill is amortized within twenty years over a reasonable period, and amortized using thestraight-line method.
• Method of hedge accounting
The Company adopts the deferral method of hedge accounting. Interest rate swaps that satisfy thecriteria for application of the special method are accounted for by the special method provided by
the accounting standards. Forward exchange contracts that satisfy the criteria for application of theappropriation method are accounted for by the appropriation method.
• Method of accounting for retirement benefits
In order to prepare for payment of employees’ retirement benefits, based on the projected amounts
at the fiscal year-end, the amount of retirement benefit obligation from which the amount of plan
assets is deducted is recorded as net defined liability.
In calculating retirement benefit obligations, the benefit formula basis is adopted for attributing
expected benefits to periods.
Prior service cost is principally recorded by the straight-line method over certain periods(principally 10 years) within the average remaining service period of employees expected to receive
benefits.
Actuarial gains and losses are principally recorded by the straight-line method over certain periods(principally 10 years) within the average remaining service period of employees expected to receive
benefits, commencing with the following fiscal year.
Unrecognized actuarial gains and losses and unrecognized prior service cost are recorded, after
adjustment for tax effects, as remeasurements of defined benefit plans in accumulated othercomprehensive income in the net assets section.
• Consumption taxes
Consumption taxes are recorded using the tax-excluded method.

(Changes in Accounting Policies)
For subsidiaries applying International Financial Reporting Standards, International Financial ReportingStandard 16 Leases (“IFRS 16”) has been applied from the beginning of the fiscal year under review. As aresult, lessees record all leases as assets and liabilities on the balance sheet, in principle. As a transitional
10

measure for the application of IFRS 16, the Company has recorded the cumulative effects of changes inaccounting policies under retained earnings at the beginning of the fiscal year under review.
As a result, in the fiscal year under review, “lease assets” under property, plant and equipment increased
1,957 million yen, “other” under current liabilities increased 242 million yen, and “other” under noncurrent
liabilities increased 2,006 million yen. The impact on income/losses in the fiscal year under review isimmaterial. In addition, the balance of retained earnings at the beginning of the year decreased by 306 million
yen.

(Notes to the Consolidated Balance Sheet)
1. Assets pledged as collateral
Investment securities:

189 million yen

Liabilities corresponding to pledged assets
Notes and accounts payable-trade and other liabilities:
2. Accumulated depreciation of property, plant and equipment:

170 million yen
445,573 million yen

3. Guarantee obligations, etc.
Guarantee for loans from financial institutions:

2,855 million yen(Notes to the Consolidated Statement of Changes in Net Assets)
1. Type and total number of shares issued and type and number of shares of treasury stock
Number of shares at
Increase during the Decrease during the Number of shares atthe beginning of theyear
the end of the year
year
year
Shares issued
Common stock
88,555,840－－
88,555,840
Total
88,555,840－－
88,555,840
Treasury stock
Common stock
1,607,082
702,300
2,315
2,307,067(N
1Totald 2)
1,607,082
702,300
2,315
2,307,067
Notes: 1. The 702,300 increase in the number of shares of common stock of treasury stock was due to thepurchase of 699,400 shares of treasury stock and the increase by purchase of 2,900 sharesconstituting less than one unit in accordance with the provisions of Article 165, Paragraph 2 of
the Companies Act and of the Articles of Incorporation.
2. The 2,315 decrease in the number of shares of common stock of treasury stock was due to thesale of 115 shares constituting less than one unit and the granting of 2,200 shares of theCompany as benefits under the employee stock ownership plan.

11

2. Dividends(1) Payment of dividends• Dividends for common stock
Resolution
Ordinary General
Meeting of
Shareholders held on
June 20, 2019
Meeting of the Boardof Directors held on
November 8, 2019

Types ofsharesDividends paid Dividends(millions ofper share
yen)
(yen)

Record date

Effective date

March 31, 2019

June 21, 2019

Common
stock

5,219

60.00

Common
stock

5,177

60.00 September 30, 2019 December 2, 2019(2) Dividends whose record date falls during fiscal 2019 but whose effective date is in the next fiscal
year• Dividends for common stock
The following resolutions are expected to be made.
Dividends paid
Types of
Source of
Resolution(millions ofsharesdividends
yen)
Ordinary General
Meeting ofCommonRetained
5,608
Shareholders to bestock
earnings
held on June 19, 2020

Dividends per
Record dateshare (yen)Effective
date

March 31,2020

June 22,
2020

65.00

(Financial Instruments)
1. Financial instruments
The Group is not engaged in fund investment. The Group’s policy is to procure funds throughbank borrowings and issuance of bonds and/or commercial paper in combination, as necessary.
Notes and accounts receivable-trade are exposed to customer credit risk. For such risk,
management of due dates is implemented in accordance with the credit management rules. Investment
securities mainly consist of stocks, and the market values of listed stocks are determined on a quarterly
basis.
Loans payable, bonds payable, and commercial paper are used for working capital (mainly shortterm) and for capital investment. Certain long-term loans payable are exposed to the risk of interest
rate fluctuations. For such risk, interest rate swaps are employed to fix the amount of interest expenses.
Certain business transactions denominated in foreign currencies are exposed to the risk of foreignexchange fluctuations, and for such risk, forward exchange contracts are employed.
Derivative transactions are entered into only in the scope of practical purposes in accordance with theinternal control rules and not for speculative purposes.

122. Fair values of financial instruments
Carrying amounts and market values of the financial instruments and the differences between
carrying amounts and market values as of March 31, 2020 (consolidated balance sheet date of fiscal
2019) are as follows.
(Millions of yen)

(1) Cash and deposits(2) Notes and accounts receivable-trade(3) Investment securities
Available-for-sale securities
Total assets(4) Notes and accounts payable-trade(5) Short-term loans payable(6) Commercial paper(7) Long-term loans payable (*1)(8) Bonds payable
Total liabilities(9) Derivatives (*2)

Carrying amount(*)
29,172
85,637

Market value (*)

25,242140,052
43,00551,9299,000
36,41037,000177,346－

Difference

29,172
85,637－－25,242140,052
43,00551,9299,000
36,65036,867
177,452
－

－
－
－
－
－
239
(132)
106
－

(*1)

Long-term loans payable includes loans to be repaid within one year.

(*2)

The amount represents a net amount of credits and debts arising from derivative transactions and thefigures in parentheses are recorded as liabilities on the consolidated balance sheet.

Note 1: Method for calculating fair values of financial instruments and matters concerning investment
securities and derivatives(1) Cash and deposits and (2) Notes and accounts receivable-trade
Because of the short maturities of these instruments, their market values are approximately thesame as the book values, therefore, the book values are stated as the market value.
(3) Investment securities
The market value is estimated based on quoted market prices.
(4) Notes and accounts payable-trade, (5) Short-term loans payable and (6) Commercial paper
Because of the short maturities of these instruments, their market values are approximately thesame as the book values, therefore, the book values are stated as the market value.
(7) Long-term loans payable
The market value is the present value calculated by discounting the total amount of principal andinterest by the interest rate to be applied to new borrowings for the same amount of principal.
Long-term loans payable with variable interest rates are qualified for the special method applied
for interest rate swaps (Refer to “Derivatives” below.), and the market value of such long-termloans payable is calculated by discounting the total amount of principal and interest, which areaccounted for together with associated interest rate swaps, by the reasonably estimated rate to be
applied to similar borrowings.
(8) Bonds payable
The market value is estimated based on quoted market prices.
13

(9) Derivatives
The market value is calculated based on the prices provided by the financial institutions.
However, interest rate swaps that qualify for the special method are accounted for as part ofhedged long-term payables, and therefore, the market value of such interest rate swaps is includedin the market value of the corresponding long-term payables (Refer to (7) above.). Forward
exchange contracts that qualify for the appropriation method are accounted for as part of hedged
accounts receivable and accounts payable, excluding those associated with forecasted transactions,and therefore, the market value of such forward exchange contracts is included in the market valueof the corresponding accounts receivable and accounts payable (Refer to (2) and (4) above.)
Note 2: Unlisted stocks (amounting to 25,957 million yen on the consolidated balance sheet) are notincluded in “(3) Investment securities, Available-for-sale securities” because it is extremely
difficult to identify their market values as no quoted market price is available and it is impossible
to estimate their future cash flows.
(Real Estate for Rent)
Disclosure is omitted because the Group does not own real estate for the purpose of gaining rental
revenues or capital gains and the total amount of real estate for rent is immaterial.
(Notes to Per Share Information)
1. Net assets per share:

2,906.95 yen

2. Profit attributable to owners of parent per share:

262.62 yen

Note: In the calculation of consolidated net assets per share, shares of the Company owned by theemployee stock ownership plan is included in the deduction of treasury stock from the total
number of shares issued at the end of the fiscal year.
In addition, in the calculation of profit attributable to owners of parent per share, the amount of thecalculated average number of shares in the period is included in the deduction of treasury stock.
(Other Notes)
Figures shown in millions of yen have been rounded down to the nearest million.

14

Non-consolidated Statement of Changes in Net Assets(From April 1, 2019 to March 31, 2020)(Millions of yen)

Capitalstock

Balance at beginning of
the fiscal year
Changes of items during
the fiscal year
Reversal of reserve foradvanced depreciationof noncurrent assets
Dividends from surplus
Net income
Purchase of treasury stock
Disposal of treasury stockReversal of revaluation
reserve for land
Net changes of items
other than shareholders’equityTotal changes of items
during the fiscal year
Balance at end of the fiscal
year

36,998

Shareholders’ equity
Capital surplus
Retained earnings
Other retained
earnings
Reserve
for
Legal
Other
Total
Total
advanced Retained
capitalcapitalcapitalretaineddepreciaearnings
surplussurplussurplusearnings
tion ofbrought
noncurforward
rent
assets49,2840Treasury
stock

Total
shareholders’equity(5,492)

152,40249,284

3,804

67,806

71,610

–

(18)

18

–

–

(10,396)
15,821(10,396)
15,821(10,396)
15,821

–
–
–
(0)

–
–

(0)
–

0

–

(2,108)
7(2,108)
7

0

0

–

–

–

–

(0)

(0)

(18)

5,444

5,425

(2,101)

3,324

36,99849,284049,284

3,786

73,25077,036(7,593)

155,726(Millions of yen)
Valuation and translation adjustments
Valuation difference on
Revaluation reserve for
Total valuation andavailable-forlandtranslation adjustments
sale securities
Balance at beginning of the
fiscal year
Changes of items during
the fiscal year
Reversal of reserve foradvanced depreciationof noncurrent assets

Total net assets

23,895

176,297––

Dividends from surplus–(10,396)

Net income–

15,821

Purchase of treasury stock–(2,108)

Disposal of treasury stock

–

7

–

0

Reversal of revaluation
reserve for land
Net changes of items otherthan shareholders’equityTotal changes of items
during the fiscal year
Balance at end of the fiscal
year

13,635

10,260(4,245)(0)(4,246)(4,246)(4,245)(0)(4,246)

(921)

9,389

10,25919,649175,376(Note) Amounts are rounded down to the nearest million yen.

15

Notes to Non-consolidated Financial Statements(Matters Related to Significant Accounting Policies)
1. Standards and methods for valuation of assets(1) Securities
Stocks of subsidiaries and affiliates
Stated at cost using the moving-average method
Available-for-sale securities
Securities with market value
Stated at market value based on the average quoted market price for a period of one month
before the balance sheet date(Valuation difference is reported as a separate component of net assets. The cost of sales iscalculated using the moving-average method.)
Securities without market value
Stated at cost using the moving-average method(2) Inventories
Stated at cost using the weighted-average method(Balance sheet amounts are calculated by writing down their net realizable value when there isevidence of deterioration in value.)
2. Depreciation method for noncurrent assets
Property, plant and equipment
The straight-line method is applied.
Intangible assets
The straight-line method is applied. However, software for internal use is amortized by thestraight-line method over the estimated internal useful life (five years).
Lease assets
Finance leases that do not transfer the ownership of the lease assets to the lessee
The straight-line method with no residual value is applied, regarding the lease term as the usefullife.
3. Standards of accounting for allowances and provisions(1) Allowance for doubtful accounts
Allowance for doubtful accounts is provided to cover possible losses on notes and accounts
receivable. The Company records an estimated irrecoverable amount based on the historical
write-off rate for ordinary receivables and based on assessment of recoverability of individual
receivables for specific doubtful accounts.

16

(2) Provision for bonuses
The Company provides reserve for payment of bonuses to employees based on the amount of
estimated employees’ bonuses at the fiscal year-end.
(3) Provision for retirement benefits
The Company provides reserve for employees’ retirement benefits based on the projected benefit
obligation and plan assets at fair value at the fiscal year-end. Furthermore, if plan assets to berecognized at the end of the fiscal year under review exceed the amount of retirement benefit
obligations minus unrecognized actuarial gains and losses, etc., the excess is recorded as prepaid
pension cost under investments and other assets.
In calculating retirement benefit obligations, the benefit formula basis is adopted for attributing
expected benefits to periods.
Prior service cost is recorded by the straight-line method over certain periods (10 years) within the
average remaining service period of employees expected to receive benefits, commencing with thefollowing fiscal year.
Actuarial gains and losses are recorded by the straight-line method over certain periods (10 years)
within the average remaining service period of employees expected to receive benefits,commencing with the following fiscal year.
(4) Provision for stock benefits
In order to provide benefit from the Company’s shares, the amount of projected equity benefit at
the end of the consolidated fiscal year is recorded, based on officer stock benefits regulations for
Directors (excluding Directors who are Audit & Supervisory Committee Members and Outside
Directors).
4. Consumption taxes
Consumption taxes are recorded using the tax-excluded method.
(Notes to the Non-consolidated Balance Sheet)
1. Assets pledged as collateral:None

2. Accumulated depreciation of property, plant and equipment:

363,900 million yen

3. Guarantee obligations
Guarantee for loans from financial institutions:

5,966 million yen

4. Monetary receivables from and monetary obligations to subsidiaries and affiliates
Short-term monetary receivables:

29,595 million yen

Short-term monetary obligations:

34,536 million yen

Long-term monetary receivables:

4,652 million yen

17(Notes to the Non-consolidated Statement of Income)Amount of transactions with subsidiaries and affiliates
Sales to subsidiaries and affiliates:

77,747 million yen

Purchase from subsidiaries and affiliates:

32,042 million yen

Transactions with subsidiaries and affiliates other than business transactions
8,495 million yen(Notes to the Non-consolidated Statement of Changes in Net Assets)
Type and number of shares of treasury stock

Common stock

Number of shares at
Increase during the Decrease during the Number of shares atthe beginning of theyear
the end of the year
year
year
1,607,082
702,300
2,315
2,307,067

Notes: 1. The 702,300 increase in the number of shares of common stock of treasury stock was due to thepurchase of 699,400 shares of treasury stock and the increase by purchase of 2,900 sharesconstituting less than one unit in accordance with the provisions of Article 165, Paragraph 2 of
the Companies Act and of the Articles of Incorporation.
2. The 2,315 decrease in the number of shares of common stock of treasury stock was due to thesale of 115 shares constituting less than one unit and the granting of 2,200 shares of theCompany as benefits under the employee stock ownership plan.
(Notes to Deferred Tax Accounting)Breakdown of deferred tax assets and deferred tax liabilities by major cause(Millions of yen)
As of March 31, 2020
Deferred tax assets
Provision for bonuses
Loss on liquidation of business
Loss on valuation of investment securities
Loss on valuation of golf club membership
Impairment loss
Enterprise tax payable
Other
Subtotal of deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Prepaid pension cost
Valuation difference on available-for-sale securities
Reserve for advanced depreciation of non-current assets
Total deferred tax liabilities
Net deferred tax assets (liabilities)

18

553
552
522
369
849
187
920
3,952
(1,994)
1,958
188
4,001
1,658
5,847
(3,889)(Notes concerning Related Party Transactions)
Subsidiaries
Type

Company nameLocation

Capital or
equitySubsidiary

1,200
Akros Trading Co., Minato-ku,
million
Ltd.
Tokyo
yen

Subsidiary

Denka Chemicals
Holdings Asia
Singapore
Pacific Pte., Ltd.

Subsidiary YK Inoas Co., Ltd.

Subsidiary100
Bunkyo-ku,
millionTokyo
yen

DENKA SEIKEN Chuo-ku,
Co., Ltd.
Tokyo

1,000
millionyen

Delaware,
UnitedStates43.4
millionUS$

Subsidiary Denka USA LLC.

Affiliate68.70
millionUSdollars

5,000
TOYO STYRENE Minato-ku,
millionCo., LtdTokyo
yen

RelationshipTransaction
Balance at the
Ownership ofamountend of the year
Concurrent
Account
Transactions
Business(Millions of(Millions ofvoting rights positions, etc.
relationship
yen)
yen)
of directors
1 director
Sales of inorganic/
69.4% directlywith aThe Company sells Sales of theorganic industrial
Accounts
owned by the
concurrent
synthetic rubber
Company’s
27,244
9,079
products, industrial
receivable-trade
position at the products etc. to it.
products
Company
resins, etc.
Company
1 director
Regional
Holding of
100% directlywith aRegional
headquarters for
funds
9,283
Deposits
owned by the
concurrent headquarters of the
12,915Southeast and South
Payment of229
received
position at theCompany
Company
interest
Asia
Company
Sales of raw
The Company sells
materials forsynthetic resin
industrial
100% directly
Sales of theapplications, civil
products, civil
Accounts
owned by theCompany’s
13,807
4,726
engineering andengineering andreceivable-trade
Company
products
construction
construction
materials, andmaterials, etc. to it.
interior materials
2 directors
Manufacturing and
The Company
Holding of
100% directlywith asales of vaccines andconducts joint
funds
6,988
Deposits
owned by the
concurrent
9,800
clinical diagnostic
research andPayment of39
received
Company
position at thereagents
development
interest
Company
Lending ofInvestment and100% directlyLong-term
The Company
funds
3,325
lending to U.S.
owned by the
loans
4,494
Receiving oflends funds
102
subsidiaries
Company
receivableinterest
The Company
Sales of the
Accounts
1 director
supplies its
4,740
Company’s
12,098
receivable-trade
products as raw
Manufacturing,
50% directlywith aproducts andprocessing, and sales owned by the
concurrent
materials andpurchase of raw
of polystyrene resin
Company
position at the purchases certain
Accounts
materials from
5,569
2,113
Company
finished products
payablethe Company
from it.
Business

Notes: 1. Transaction amounts do not include consumption taxes, etc. Balance at the end of the year
includes consumption taxes, etc.
2. Sales of the Company’s products, etc. and purchase of raw materials, etc. are determined in thesame manner as for terms of transactions with unrelated parties.
3. Terms for the lending of funds to subsidiaries and the holding of funds from subsidiaries are
determined taking market interest rates into account.
4. The average balance during the period is shown for deposits received.

(Notes to Per Share Information)
1. Net assets per share:

2,033.37 yen

2. Net income per share:

183.01 yen

Note: 1. In the calculation of consolidated net assets per share, shares of the Company owned by theemployee stock ownership plan is included in the deduction of treasury stock from the total
number of shares issued at the end of the fiscal year.

19

(Notes to Significant Subsequent Events)
Absorption-type merger with consolidated subsidiaryPursuant to a resolution passed by the Board of Directors at a meeting held on October 15, 2019, theCompany conducted an absorption-type merger with DENKA SEIKEN Co., Ltd., a consolidated subsidiary,on April 1, 2020.
(1) Overview of the transaction
1) Name of company in combination and details of business
Name of company in combination:

DENKA SEIKEN Co., Ltd.

Details of business:

Manufacture and sale of various types of vaccine, diagnostic
reagents, etc.

2) Date of business combination
April 1, 2020
3) Legal format of business combination
Absorption-type merger with the Company as the surviving company and DENKA SEIKEN Co., Ltd.
as the dissolving company
4) Name of company after combination
Denka Co., Ltd.
5) Other matters related to the overview of the transaction
In the healthcare business, the Denka Group engages in the vaccine and diagnostic reagent business,
etc. through DENKA SEIKEN, while the Company develops norovirus vaccines using proprietaryplant-based gene modification technologies held by the macromolecular sodium hyaluronate
preparation business and IconGenetics GmbH, a Germany-based subsidiary, and operates otherdevelopment businesses including cancer gene alteration analysis and remedy information services.
In the “Denka Value-Up” plan, healthcare has been designated as a priority area. To further
strengthen and expand this business, we will integrate the healthcare operations of the two companies,
which are separate under our current organization, via merger.
(Objective of the merger)a. Accelerate the expansion of our specialty businesses, a “Denka Value-Up” growth strategy
By integrating the comprehensive strengths of the Denka Group, we will accelerate the expansion
and development of our specialty businesses.
b. Strengthen governance
We will further strengthen governance through integration of our healthcare businesses, to respond
appropriately to risks specific to this business.
c. Accelerate decision-making
Based on the Denka Group corporate philosophy and business strategy, we will speed up
decision-making for large-scale investments in the healthcare sector, which is expected to grow in
future.

20

d. Synergies in HR and organizational structures
Through the integration, we plan to further step up personnel exchanges and strengthen ourorganizational structure.
(2) Overview of accounting treatment
The Company intends to treat the transaction as a transaction between entities under common
control, pursuant to “Accounting Standard for Business Combinations” (ASBJ Statement No. 21,
January 16, 2019) and “Implementation Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10,
January 16, 2019).
(Other Notes)
1. Figures shown in millions of yen have been rounded down to the nearest million.

21