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

NOTICE OF CONVOCATION OF
THE 157TH ORDINARY GENERAL MEETING OF SHAREHOLDERS

Date and Time:

Wednesday, June 22, 2016 at 10:00 a.m.

Place:

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

Proposals to be resolved:
Proposal No. 1:

Appropriation of Surplus

Proposal No. 2:

Election of Eight (8) Directors

Proposal No. 3:

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

Please exercise your voting rights in writing or via the Internet by
5:00 p.m. on Tuesday, June 21, 2016.

1

Message from the Management
To Our Shareholders
By challenging the unknown possibilities of science, we will contribute to the development of society
through creating new value.
Enclosed please find the Notice of Convocation of the 157th Ordinary General Meeting of Shareholders.
I would like to take this opportunity to express my gratitude to you for your continued support of Denka
and make some observations concerning the Company’s results and current initiatives.
During the fiscal year ended March 31, 2016 (fiscal 2015), personal consumption and residential
investment waxed and waned. Conditions in exports and production also lacked strength, and the economy did
not fully recover. Although the global economy was on an overall recovery trend, the economy in China andemerging markets in Asia decelerated while declining oil and natural resource prices had an effect on resource
exporting countries, causing uncertainty to increase. In the chemical industry, corporate earnings were solid
overall due to weakening of the yen and lower prices of raw materials, such as naphtha.
In these economic circumstances, the Denka Group strove to expand its businesses and secure profitability
by working to increase sales in Japan and overseas and cutting costs. As a result, consolidated net sales forfiscal 2015 decreased year on year owing to a revision to sale prices for fossil-related products in response tolower prices of raw materials. However, with respect to profit, higher revenue from export products due to a
weaker yen, improvement in profitability for resins and processed products owing to lower prices of raw
materials, higher profits for influenza vaccines, and the effects of total cost inspections conducted across theGroup were all contributors to achieving historic records in operating income, ordinary income, and profit
attributable to owners of parent upon Denka’s centenary.
Upon Denka’s centenary last year, the Company’s name was changed to “Denka Co., Ltd.” and weembarked on our first step toward “creating new value” as a global company. This is thanks not only to ourshareholders, but to the support of various stakeholders, and we once again give our thanks. While responding
to many challenges along the way, Denka has continued its business for 100 years, but changes in the current
management environment are rapid, and the speed is accelerating. To continue growing under such anenvironment, we believe that the entire Denka Group must freely and openly exchange ideas without beingtied down by previous methods, and create an environment where employees can work with vigor. With abright and positive “Young Denka” as our motto, we will aim to achieve the Denka100 management plan.
This year will mark the 101st anniversary of Denka. Looking upon the first year of our second century, we
have decided to renew “The Denka Value” corporate philosophy that serves as the basis for our corporate
activities. For details, please see “Issues to be Addressed” on pages 23 to 25 of this Notice.
Under this new corporate philosophy, the Denka Group will continue to respond to the expectations andtrust of society, and in these endeavors, we request your understanding and look forward to your continued
support.
Shinsuke Yoshitaka
President2(Securities Code: 4061)
May 31, 2016
To Our Shareholders:
Shinsuke Yoshitaka
President
Denka Co., Ltd.
1-1, Nihonbashi-Muromachi 2-chome, Chuo-ku, TokyoNOTICE OF CONVOCATION OF
THE 157TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 157th Ordinary General Meeting of Shareholders of Denka Co., Ltd.
(the “Company”) to be held as described below.
If you are unable to attend the meeting in person, you may exercise your voting rights in writing bysubmitting the Voting Rights Exercise Form by mail or via the Internet etc. as described in the “Guide for
Exercise of Voting Rights” (Page 5). Please review the attached Reference Documents for the General
Meeting of Shareholders and exercise your voting rights by 5:00 p.m. on Tuesday, June 21, 2016.
1. Date and Time:

Wednesday, June 22, 2016 at 10:00 a.m.

2. Place:

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

3. Meeting Agenda:
Matters to be reported: 1. The Business Report, Consolidated Financial Statements for the Company’s
157th Term (from April 1, 2015 to March 31, 2016) and results of audits by
the Accounting Auditor and the Audit & Supervisory Board of theConsolidated Financial Statements
2. Non-consolidated Financial Statements for the Company’s 157th Term (from
April 1, 2015 to March 31, 2016)
Proposals to be resolved:
Proposal No. 1: Appropriation of Surplus
Proposal No. 2: Election of Eight (8) Directors
Proposal No. 3: Election of One (1) Substitute Audit & Supervisory Board Member3◎ The following are posted on the Company’s website at http://www.denka.co.jp/ in accordance with law
and Article 16 of the Company’s Articles of Incorporation and thus are not included in the documents
attached to this notice of convocation.
• Basic Policies regarding the Control of the Company (full text) in the Business Report• Notes to Consolidated Financial Statements• Notes to Non-consolidated Financial Statements
The Business Report, consolidated financial statements and the non-consolidated financial statements
audited by the Audit & Supervisory Board Members and the Accounting Auditor include the Notes toConsolidated Financial Statements and the Notes to Non-consolidated Financial Statements, which areposted on the Company’s website.
◎ If any revisions are made to the Business Report, Consolidated Financial Statements, Non-consolidated
Financial Statements, or Reference Documents for the General Meeting of Shareholders, they will be
posted on the Company’s website at http://www.denka.co.jp/.

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

(1) Exercise of Voting Rights by Attending the Meeting
Please bring the enclosed Voting Rights Exercise Form with you to the meeting and submit it to thereceptionist at the meeting venue.
* In the case of exercising voting rights by attending the meeting as a proxy, please submit a document
evidencing the authority of proxy to the receptionist at the meeting venue together with the Voting Rights
Exercise Form. Please note that such proxy must be one shareholder of the Company with voting rights
in accordance with Article 18 of the Company’s Articles of Incorporation.
(2) Exercise of Voting Rights in Writing by Mail (Voting Rights Exercise Form)
Please indicate your vote for or against the proposals on the enclosed Voting Rights Exercise Form and send
the completed form to us so that it is received by 5:00 p.m. on Tuesday, June 21, 2016.
(3) Exercise of Voting Rights via the Internet etc.
Please access the website for exercising voting rights designated by the Company (http://www.web54.net),
use the “Voting Rights Exercise Code” and the “Password” indicated on the enclosed Voting Rights Exercise
Form, and follow the on-screen guidance. Please vote for or against the proposals by 5:00 p.m. on Tuesday,June 21, 2016.
(Inquiry about Exercise of Voting Rights via the Internet etc.)
Sumitomo Mitsui Trust Bank Stock Transfer Web Support Dial
Tel: 0120-652-031(office hours: 9:00 a.m. - 9:00 p.m.)*Handling of duplicated exercise of voting rights
If you exercise your voting rights both by Method (2) Exercise of Voting Rights in Writing by Mail (Voting
Rights Exercise Form) and by Method (3) Exercise of Voting Rights via the Internet etc., the exercise of
voting rights by Method (3) Exercise of Voting Rights via the Internet etc. shall prevail regardless of the timeof arrival of the votes.
In addition, if you exercise your voting rights multiple times via the Internet, etc., the vote made last shallprevail.

5

Reference Documents for the General Meeting of Shareholders

Proposal No. 1: Appropriation of Surplus
It is proposed that the surplus be appropriated as follows:
Matters concerning year-end dividends
The Company is implementing many concrete measures for the future in accordance with the new growthstrategies of the Denka100 management plan and is resolved to achieve good results at an early stage.
Reflecting our determination to return the profits yielded by these initiatives to shareholders, weformulated the Policy on Shareholder Returns in November 2014. At the same time, with the aim ofachieving further growth, we set aside a budget for strategic investment, including M&A.
While maintaining a sound balance sheet, we intend to maximize shareholder returns and strategic
investment for the future, targeting an ROE of 10% as early as possible.
1. Policy on shareholder returns
Target total payout ratio*: 50%* Total payout ratio = (Dividends paid + treasury stock purchased) / consolidated net income
2. Methods for returning profits to shareholders(1) Dividends: Maintain steady payment of cash dividends, with minimum payout ratio set at 30%(2) Purchase of treasury stock: Flexibly purchase treasury stock in view of the stock price trend and themarket environment
3. Budget for forward-looking strategic investments
After returning profits to shareholders, the Company will appropriate funds from retained earnings aswell as cash inflows to finance such investments. The total amount budgeted for is approximately¥50.0 billion (for the four years from 2014 to 2017).
4. Term
Four years to the end of fiscal 2017, the target year of the Denka100 management plan
With respect to the year-end dividend for the 157th term, in accordance with the policy stated above, theCompany proposes the following, which is an increase from the most recently announced of ¥6.50.
(1) Type of dividend property
Cash(2) Allocation of dividend property and total amount thereof¥7 per share of common stock of the Company
Total amount of dividends: ¥3,131,367,631(3) Effective date of dividends from surplus
June 23, 2016
The amount of dividends for the full year will be ¥13 per share, including the interim dividend of ¥6 pershare paid in December 2015.

6

Proposal No. 2:

Election of Eight (8) Directors

The terms of office of all of the eight (8) Directors will expire at the conclusion of this Ordinary General
Meeting of Shareholders. Accordingly, the election of eight (8) Directors is proposed.
The Company’s views regarding Directors and the candidates for Directors are as follows.
[The Company’s views regarding Directors]
Toward achieving the current Denka100 management plan, the Company aims to strengthen the
management structure with Directors and Executive Officers, while enriching the governance structure andsupervisory functions. In electing Directors, internal Directors are chosen from persons who possess a wealthof experience and achievements in various divisions within the Company, while also possessing insights andadequate specialized knowledge as Director, and Outside Directors are chosen from persons who possess
specialization required for continuous growth and improvement in corporate value of the Company and wide
insights based on a wealth of business experience. The Company believes that a well-balanced election of
persons with various knowledge, experience, and abilities is important for the Board of Directors as a whole.
Additionally, the Company believes that Independent Directors should comprise at least one-third of
Directors, and implements this policy.

No.

Name

1

Reappointed Shinsuke Yoshitaka

2

3

4

5

6

7

Positions and responsibilities at the Company
Representative Director, President and Chief Executive
Officer

Attendance atBoard ofDirectors
meetings
13/13(100%)

Representative Director, Executive Vice President and Chief
Operating Officer
13/13
Reappointed
Mitsukuni Ayabe Assistant to CEO, Supervisor Corporate Planning,(100%)Development
DPE-Project, Purchasing Dept., Logistics Dept.
Director and Senior Managing Executive Officer
Investor Relations Dept., CSR & Corporate Communications
13/13
Dept.,
Reappointed Manabu Yamamoto(100%)
Internal Auditing Dept., Accounting & Finance Dept.,
Information System Dept.
General Manager, Corporate Planning Dept.;
Managing Executive Officer
Chief Compliance Officer / Representative in China
New candidate
Kenji Nakano—/—
Secretary Dept., Administrative Dept., Legal Dept.,
HR Dept., Denka100 Promoting Dept.
Director
13/13
Reappointed
Tetsuro Maeda President and Representative Director of DENKA SEIKEN(100%)
Co., Ltd.
10/10
Director(100%)
Reappointed
Yasuo Sato
(Outside Director)(After assuming(Independent Director)
office in June 2015)
10/10
Director(100%)
Reappointed
Akio Yamamoto (Outside Director)(After assuming(Independent Director)
office in June 2015)—
8 New candidate Tatsutsugu Fujihara (Outside Director)(Independent Director, scheduled)

7

—/—

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

Career summary, positions and responsibilities at the Company, andsignificant concurrent positions
April 1974
January 2001
June 2006

1

June 2007
June 2008
Shinsuke Yoshitaka April 2010
(February 1, 1951)[June 2008]
April 2011
[100% (13/13)](Reappointed)
June 2011

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

Number ofshares of theCompany held

119,000(Note 1)

Reasons for selection as the candidate for Director
Subsequent to responsibility for management strategy, medical business, accounting andfinance, and investor relations and corporate communication, Mr. Shinsuke Yoshitaka has
been promoting the “Denka100” management plan as Representative Director, President. In
addition to a wealth of experience and results as a manager, he serves as the Chairman of
the Board of Directors based on deep knowledge and understanding of the Group. The
Company has judged that he can appropriately fulfill the role of determining importantbusiness execution and supervising the business execution of Directors and Executive
Officers, and requests his election as Director.
April 1977
Joined the Company
June 2004
General Manager of Research and Development Dept. of
the Company
June 2007
Executive Officer of the Company, Managing Director of
Denka Singapore Pte., Ltd., Managing Director of
Denka Advantech Pte., Ltd.
April 2010
Senior Executive Officer of the Company, Director andChairman of Denka Chemicals Holdings Asia Pacific
44,000Pte., Ltd.
June 2011
Director and Managing Executive Officer of theCompany
Mitsukuni Ayabe
April 2013
Director and Senior Managing Executive Officer of the(September 23, 1952)
Company[June 2011]
April 2015
Representative Director and Senior Managing Executive[100% (13/13)]
2
Officer of the Company(Reappointed)
April 2016
Representative Director, Executive Vice President andChief Operating Officer of the Company (present)(Note 1)
Reasons for selection as the candidate for Director
Subsequent to management of research and development and overseas subsidiaries andresponsibility for medical business, accounting and finance, and investor relations andcorporate communication, Mr. Mitsukuni Ayabe has directed the overall technical divisions
as the general executive for planning and development, while also assisting the President as
Executive Vice President and Chief Operating Officer. In addition to a wealth of experienceand results as a manager, he excels at business promotion from a global viewpoint, and theCompany has judged that he can appropriately fulfill the role of determining importantbusiness execution and supervising the business execution of Directors and Executive
Officers, and requests his election as Director.

8

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

Career summary, positions and responsibilities at the Company, andsignificant concurrent positions
April 1981
June 2004
April 2009
April 2011
April 20133

June 2013
Manabu Yamamoto(March 31, 1956)
April 2015
[June 2013][100% (13/13)]
April 2016
(Reappointed)(Note 1)Joined the Company
General Manager of Functional Ceramics Div. ofElectronics Materials Business Group of the Company
Executive Officer of the Company, General Manager ofElectronics Materials Div. of Electronics Materials
Business Group of the Company
Senior Executive Officer of the Company
Managing Executive Officer of the Company, Head ofElectronics & Innovative Products
Director and Managing Executive Officer of theCompany
General Manager of Corporate Planning Dept. of theCompany (present)
Director and Senior Managing Executive Officer of theCompany (present)

Number ofshares of theCompany held

21,000Reasons for selection as the candidate for Director
Through work experience at overseas subsidiaries and many years of responsibility for theelectronics materials business division, Mr. Manabu Yamamoto possesses international
viewpoints and adequate operational experience. Currently, he integrates new businessstrategies and accounting and finance strategies across the entire Denka Group as theexecutive responsible for management strategy, accounting and finance, and investor
relations and corporate communication divisions, and the Company has judged that he canappropriately fulfill the role of determining important business execution and supervising
the business execution of Directors and Executive Officers, and requests his election as
Director.
April 1980
Joined the Company
June 2007
General Manager of Secretary Dept. of the Company
April 2011
Executive Officer of the Company, General Manager of
21,000HR Dept. of the Company
April 2013
Executive Officer of the Company, Representative in
China (present)
April 2014
Managing Executive Officer of the Company (present)

Kenji Nakano(November 17, 1955)(New candidate)4
Reasons for selection as the candidate for Director
Through work experience at plants and many years of responsibility for management(Note 1)
divisions such as general affairs, legal, and HR divisions, Mr. Kenji Nakano possesses
adequate operational experience, in addition to integrating business strategy in China as theRepresentative in China. Furthermore, as he is promoting the strengthening of risk
management and compliance systems as the executive responsible for compliance, theCompany has judged that he can appropriately fulfill the role of determining importantbusiness execution and supervising the business execution of Directors and Executive
Officers, and requests his election as Director.

9

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

Career summary, positions and responsibilities at the Company, andsignificant concurrent positions
April 1977
June 2000
June 2004
June 2006
April 2008
April 20105

Tetsuro Maeda(July 12, 1951)[June 2004][100% (13/13)](Reappointed)

April 2011
April 2013

Joined the Company
General Manager of Research and Development Dept. of
the Company
Director of the Company, General Manager of Planning &Promoting Dept. of Electronics Materials Business Group
Director of the Company, President of Electronics
Materials Business Group
Director and Managing Executive Officer of the Company
Representative Director and Senior Managing Executive
Officer of the Company
Representative Director, Executive Vice President andChief Operating Officer of the Company
Director of the Company (present)
President and Representative Director of DENKA
SEIKEN Co., Ltd. (present)

Number ofshares of theCompany held

76,000(Note 1)
Reasons for selection as the candidate for Director
Through many years of responsibility for research and development and electronics
materials business divisions, Mr. Kenji Nakano possesses adequate operational experience,and served as the Representative Director and Vice President of the Company. Currently, as
the President and Representative Director of DENKA SEIKAN Co., Ltd., he is tasked withstrategy for the “health” sector, which is one of the growth sectors at this major subsidiary,
and the Company has judged that he can appropriately fulfill the role of determining
important business execution and supervising the business execution of Directors andExecutive Officers, and requests his election as Director.

10Candidates for Outside Director
Name(Date of birth)
Number of
Career summary, positions and responsibilities at the Company, andNo. [Director since]
shares of thesignificant concurrent positions
Company held
[Attendance at Boardof Directors meetings]
April 1965
Joined TEIKOKU SANSO Co., Ltd. (present Air Liquide
Japan Ltd.)March 1987
Director and Vice President of Electronics Div. of Air
Liquide Japan Ltd.
April 1992
Vice President of Worldwide Electronics Div. of L’Air
Liquide S.A. (until March 1996)
March 1999
Representative Director and President of Air Liquide Japan
Ltd. (until January 2003)
January 2003 Director and Chairman of Japan Air Gases Co., Ltd. (until
March 2005)
March 2005
Director and Advisor (part-time) of Air Liquide Japan Ltd.
(until September 2007)
Yasuo Sato
Outside Director of Denal Silane Co., Ltd. (until February(September 30, 1942) June 20052008)
(Outside Director)
May 2006
President & CEO of I.B. Associates Co., Ltd. (present)(Reappointed)
June 2006
Outside Auditor of Santen Pharmaceutical Co., Ltd. (until(Independent
6
June 2014)
Director)[June 2015]
February 2008 Auditor of Denal Silane Co., Ltd. (until June 2014)[100% (10/10)]
June 2015
Outside Director of the Company (present)(Notes 1, 2, 4, 5)

Reasons for selection as the candidate for Outside Director
Mr. Yasuo Sato has gained rich experience and great insight as a manager through his
involvement in corporate management for many years. His career included serving as the
President of Air Liquide Japan Ltd. He also has rich international experience, including
serving as a vice president at global enterprises. The Company proposes that Mr. Sato beelected as an Outside Director in the expectation that he will utilize his knowledge inproviding suggestions about the Company’s overseas business expansion strategy andmanagement in general.
Message to shareholders
With rationality and fairness as principles, I will work to improve medium- to long-term
corporate value with decisions made from a global viewpoint.

11

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

Career summary, positions and responsibilities at the Company, andsignificant concurrent positions
April 1974
April 1999
April 2004
April 2007
April 2009
June 2014
June 20157

Akio Yamamoto(December 2, 1951)(Outside Director)(Reappointed)(Independent
Director)[June 2015][100% (10/10)](Notes 1, 3, 4, 5)

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

Number ofshares of theCompany held-

Reasons for selection as the candidate for Outside Director
Mr. Akio Yamamoto has rich experience and great insight as a manager in Japan andoverseas through his involvement in corporate management for many years. His career
included serving as an Executive Officer of Mitsui & Co., Ltd. and the Representative
Director and President of Mitsui & Co. Plastics Ltd. He also has rich international
experience, including serving as a vice president at global enterprises. The Company
proposes that Mr. Yamamoto be elected as an Outside Director in the expectation that hewill utilize his knowledge in providing suggestions about the Company’s overseas businessexpansion strategy and management in general. Although he used to work at a company
that has transactions with the Company, the Company considers that there is no risk thatconflict of interest with other general shareholders will arise because 1) he is not a current
or a recent operating officer of the said company; 2) although the Company’s sales to thesaid company account for 6.1% of the Company’s total sales, substantial transactions
between the Company and the said company are payments of commission by the Company
to the said company for services offered by its trading company function and the amount ofcommission paid is modest (under 2% of the said company’s sales); and 3) he satisfies theCompany’s “Standards of Independence for Outside Executives” and thus, the Company
considers that the said company has no special impact on the Company’s decision-making
by the Board of Directors etc.
Message to shareholders
While fulfilling the duties of Outside Director from a medium- to long-term perspective,
global viewpoint, and strong stance of fairness, I also wish to contribute to overseas
business expansion and personnel development.

12

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

Career summary, positions and responsibilities at the Company, andsignificant concurrent positions
April 1976
May 2000
April 2002
March 2003
June 2003
April 2005
June 2007
June 2013

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

Number ofshares of theCompany held-

Tatsutsugu Fujihara
June 2014(November 23, 1952)(Outside Director)
April 2016
(New candidate)(Independent
8
Reasons for selection as the candidate for Outside Director
Director
Mr. Tatsutsugu Fujihara has worked at financial institutions for many years and possesses[scheduled])
advanced insights regarding corporate finance, and to utilize these insights and receive
recommendations toward the Company’s overall management, his election as Outside(Notes 1, 5)
Director is requested. Additionally, although he used to work at a financial institution thathas transactions with the Company, the Company considers that there is no risk that conflictof interest with other general shareholders will arise because 1) he is not a current or a
recent operating officer of the said financial institution; 2) a significant number of years
have passed since he retired from the said financial institution (nine years have passed since
his retirement as of the day of this Ordinary General Meeting of Shareholders); 3) thecomposition of borrowings relative to net assets of the Company is low at approximately
30%, and the Company’s dependency on the said financial institution is low as it accounts
for less than 10% of overall borrowings; and 4) he satisfies the Company’s “Standards ofIndependence for Outside Executives” and thus, the Company considers that the said
financial institution has no special impact on the Company’s decision-making by the Boardof Directors, etc.

Notes: 1.
2.
3.
4.

5.

Message to shareholders
By contributing to strengthening governance, I wish to contribute to healthy development
and further improvement in corporate value of the Company.
No material conflict of interest exists between the Company and any of the above candidates.
Mr. Yasuo Sato was an Outside Director of a subsidiary of the Company and an Auditor of a
subsidiary of the Company until February 2008 and until June 2014, respectively.
Mr. Akio Yamamoto was the Representative Director and President of a special related enterpriseof the Company until June 2014.
Mr. Yasuo Sato and Mr. Akio Yamamoto are current Outside Directors of the Company. Both Mr.
Yasuo Sato and Mr. Akio Yamamoto will have served as Outside Director for one year at theconclusion of this Ordinary General Meeting of Shareholders.
Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes
liability limitation contracts with Mr. Yasuo Sato and Mr. Akio Yamamoto that limit their liability
for damages of Article 423, Paragraph 1 of said Act to a predefined amount of over ¥5 million or
the amount stipulated by laws and regulations, whichever is higher. If the election of both isapproved, the Company plans to continue the same contracts. Additionally, if the election of Mr.
Tatsutsugu Fujihara is approved, the Company plans to conclude an identical contract with him.

13

Proposal No. 3:

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

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

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

Gotaro Ichiki(December 4, 1949) January 2015
March 2015
Candidate forMarch 2016
Substitute Outside
Audit &
Supervisory Board
April 2016
MemberAdmitted to the bar in Japan (Yokohama Bar Association)
Joined Sagami Godo Law Office
Joined Hamada & Matsumoto Law Firm (transferred toDaini Tokyo Bar Association)
Partner in Hamada & Matsumoto Law Firm
Vice President of Daini Tokyo Bar Association (until
March 1997)
Deputy Secretary of Japan Federation of Bar Associations(until March 2002)
Partner in Mori Hamada & Matsumoto Law Firm formed
as a result of merger (until December 2014)
Joined Kowa Law Office

Number ofshares of theCompany held-

Outside Director of Nippon Denko Co., Ltd. (present)
Outside Director (Directors Serving on the Audit &Supervisory Committee) of COCA-COLA WEST
COMPANY, LIMITED (present)
Supervisory Officer of DBJ Private REIT Investment
Corporation (present) (to date)Reasons for selection as the candidate for substitute Outside Audit & Supervisory Board
MemberMr. Gotaro Ichiki has a long experience as a lawyer and abundant legal knowledge. The
Company proposes that Mr. Ichiki be elected as a substitute Outside Audit & Supervisory
Board Member in the expectation that he will utilize his knowledge for the benefit of theCompany’s auditing system. Although he has never been directly engaged in corporate
management, the Company deems that Mr. Ichiki will duly execute his duties as an Outside
Audit & Supervisory Board Member because he is well versed in corporate legal affairs and has
extensive insight into corporate governance.
Notes: 1. No material conflict of interest exists between the Company and the above candidate.
2. Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes
liability limitation contracts with Outside Audit & Supervisory Board Members that limit their
liability for damages of Article 423, Paragraph 1 of said Act to a predefined amount of over ¥5million or the amount stipulated by laws and regulations, whichever is higher. If Mr. Gotaro Ichikiassumes the position of Outside Audit & Supervisory Board Member, the Company plans toconclude an identical contract with him.

14

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

15

Denka’s Corporate Governance Initiatives
Basic Approach to Corporate Governance and Initiatives Thus Far
In order to fulfill the expectations and trust of its many stakeholders, including shareholders, customers,
local society, and employees, the Company strives to strengthen its business foundations by improving its
earnings power and expanding the scope of its operations, while also working to improve corporate value bymaking every effort to continue being a company that can win the trust and sympathy of society.
The Company considers corporate governance as the foundation for the above, and so we have striven tostrengthen governance as described below, in order to fulfill the responsibilities we owe to all our
stakeholders, and ensure the transparency and soundness of our management.

2007

2008

2015

2016

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

16

Board of Directors
The Board of Directors makes decisions relating to the execution of important business duties andmonitors and supervises the execution of business duties by corporate officers, in accordance with strategic
and management plans aimed at realizing the corporate philosophy of the Company.
First, in principle, the Company has discontinued the use of executive titles (such as Senior Managing
Director, Managing Director) for directors, such that all directors may focus on monitoring and supervising
the execution of business duties from an equal standpoint. In addition, the Company has set the length of
directors’ terms to one year, in order to facilitate flexible checks on directors at the General Meeting of
Shareholders.
In addition, the Board of Directors as a whole appoints candidates to be directors in line with thestandards for the appointment of both internal and outside directors, based on the belief that it is important toappoint a good balance of people with a variety of expertise, experiences, and skills. (Please see page 7 of
the reference documents for details of the Company’s approach to the appointment of directors.)
Audit & Supervisory Board
In accordance with their fiduciary responsibilities to shareholders, Corporate Auditors and the Audit &Supervisory Board work with the support of the full-time staff of the Auditor’s Office, whose independence
from management is ensured, to conduct audits of the execution of directors’ duties, internal governance,business duties, and accounting, by exercising statutory rights that include requesting reports on thebusinesses of the Company, investigations pertaining to business duties and accounting, and the appointment,
dismissal, and remuneration of an external auditing firm.
In addition, in view of the roles and responsibilities of the Audit & Supervisory Board, the Company
appoints candidates to be Audit & Supervisory Board Members based on the decision that there should be atleast one person with expertise in finance and accounting.
Outside Officers
Regarding Outside Directors and Outside Audit & Supervisory Board Members, the Company selects
candidates based mainly on practical considerations, such as whether we can expect the candidate tocontribute to an increase in the corporate value of the Company as an independent officer, and has also
defined its own standards of independence (see page 15 of the reference documents), in accordance with therequirements for independence stipulated in the Companies Act, in addition to the standards forindependence defined by the Tokyo Stock Exchange and other factors.
In addition, by enhancing their understanding of the Company, the Company strives to create anenvironment that allows those appointed as Outside Officers to perform their roles for the sake of thesustainable growth of the Company and the increase of its corporate value.
17

Specifically, the Company holds tours of offices, plants, and other facilities and briefings to facilitate anunderstanding of the Company’s businesses and research objectives, in addition to a “Directors andCorporate Auditors Round-Table Conference” once a month as a place for internal and outside directors andAudit & Supervisory Board Members to exchange opinions, thus deepening discussion of importantmanagement items.
In addition, the Company regularly holds an “Outside Officer Liaison Committee,” which comprises only
Outside Officers.
Message to Shareholders from Outside Audit & Supervisory Board Members“Having realized again the importance of the role of Outside Audit & Supervisory Board Member, I
conduct audits of whether the execution of business duties by directors complies with the law, and whether
they are conducted appropriately, in line with the Corporate Governance Code. In addition, I strive tomaintain an understanding of what shareholders and stakeholders expect from the executive bodies of theCompany and Outside Audit & Supervisory Board Members, and make every effort to meet those
expectations.” (Tsunehiro Sasanami, Outside Audit & Supervisory Board Member)“The mission of Audit & Supervisory Board Members is to contribute to the development of corporations
through their duties as a corporate auditor. We do not just identify problems, but also offer solutions. In
particular, I think independence and expertise are necessary for Outside Audit & Supervisory Board
Members.” (Toshio Kinoshita, Outside Audit & Supervisory Board Member)
Passing Experiences on to the Next Generation
Akio Yamamoto, who was newly appointed as an Outside Director last year, held a “Meeting to Talk
About Experiences Overseas” during the fiscal year ended March 31, 2016, in an effort to communicate theexperiences and ideas he gained from his own experiences overseas to a large number of the Company’s
employees.
At the “Meeting to Talk,” Outside Director Mr. Yamamoto talked about his experiences as a witness tothe actual scene of historical turning points such as the Iran-Iraq War and the German reunification, what hethought on those occasions, and his experiences in business. Including Group employees, a total of 360
people attended the meetings, which were held 16 times.
An understanding of the unique histories, religions, cultures, and other aspects of countries overseas areindispensable to Denka employees, which aim for global business development. Director Yamamoto’s talks
were of great interest, and will be very significant in future business initiatives.
Realizing The Denka Value
On the occasion of its centenary in 2015, the Company changed its name and logo, and also established a“Corporate Slogan” and the “Denka Principles,” in order to increase its corporate value. Then this year, the101st year since its founding, the Company has renewed its corporate philosophy, The Denka Value, which
will form the basis for the activities of the Denka Group as we look toward the next 100 years, as mentioned
in “Issues to be Addressed” in the Business Report (pages 23 to 25).
“The Denka Value” comprises the “Denka Mission,” which stands above all else, and the “Denka
Principles,” which form the standards for the actions of each and every Group employee.
The management plan, “Denka100,” is positioned beneath “The Denka Value.” The “New Growth
Strategy” and “Fulfillment of Social Responsibility” are positioned as the two wheels of the car that is the“Denka100” management plan, as the Denka Group continues to strive for the realization of The Denka
Value, based on the present corporate governance structure.

18

[Attached Documents]

Business Report(From April 1, 2015 to March 31, 2016)

1. Overview of the Group(1)

Business Progress and Results
During the fiscal year ended March 31, 2016 (fiscal 2015), personal consumption and residential
investment waxed and waned. Conditions in exports and production also lacked strength, and theeconomy did not fully recover. Although the global economy was on an overall recovery trend, theeconomy in China and emerging markets in Asia decelerated while declining oil and natural resource
prices had an effect on resource exporting countries, causing uncertainty to increase.
In the chemical industry, corporate earnings were solid overall due to weakening of the yen andlower prices of raw materials, such as naphtha.
In these economic circumstances, the Denka Group strove to expand its businesses and secure
profitability by working to increase sales in Japan and overseas and cutting costs. However,consolidated net sales for fiscal 2015 decreased ¥14,125 million or 3.7% year on year to ¥369,853
million owing to a revision to sale prices for fossil-related products in response to lower prices of raw
materials. With respect to profit, higher revenue from export products due to a weaker yen,
improvement in profitability for resins and processed products owing to lower prices of raw materials,
higher profits for influenza vaccines, and the effects of total cost inspections conducted across theGroup were all contributors, and operating income rose ¥6,587 million or 27.4% to ¥30,634 million, ahistoric record, and the ratio of operating income to net sales increased 2.0 percentage points to 8.3%.
Furthermore, ordinary income rose ¥2,735 million or 11.3% to ¥27,022 million, and profit attributableto owners of parent increased ¥451 million or 2.4% to ¥19,472 million, each recording historic highs.
Additionally, on May 11, 2016, the Company changed the name of the “Infrastructure & Inorganic
Materials Division” to the “Infrastructure & Social Solutions Division.” In line with this change, thename of the reporting segment was also changed on the same date, and the following results ofoperations by division are shown utilizing the changed segment name (old name in parentheses).
Results of operations by division are described below.
Elastomers & Performance Plastics Division (Sales: ¥155,601 million)
Principal products: Chloroprene rubber, acetylene black, styrene monomer, polystyrene resin, ABS
resin, CLEAREN, heat-resistant resin, transparent resin, acetic acid, POVAL,
etc.
Sales of chloroprene rubber increased thanks to higher sales volume, the result of the Omi plant andthe opening of a second production base on November 11 at US-based subsidiary Denka Performance
Elastomer. Sales of styrene polymers, ABS resin, and polystyrene resin by Denka Singapore Pte., Ltd., asubsidiary in Singapore, showed robust sales volume, but sales were down as a result of the revision ofsales prices corresponding to the decrease in raw material prices.
As a result, division sales decreased ¥10,710 million or 6.4% year on year to ¥155,601 million.

19

Infrastructure & Social Solutions Division (Sales: ¥49,098 million)(Previous name: Infrastructure & Inorganic Materials Division)
Principal products: Cement, special cement additives, fertilizers, calcium carbide, fire resistantmaterials, etc.
Whereas sales of special cement additives increased because of higher sales volume and sales ofagricultural products such as fertilizers increased as well, sales of cement, fire resistant materials, andferrous raw materials were lower than the previous year.
As a result, division sales increased ¥1,302 million or 2.7% year on year to ¥49,098 million.
Electronics & Innovative Products Division (Sales: ¥45,692 million)
Principal products: Fused silica, electronic circuit substrates, fine ceramics, electronic packaging
materials, etc.
Although sales of ALONBRIGHT SiAlON phosphors for LED increased because of higher sales
volumes, sales of functional films, such as THERMO FILM ALS for transportation and packing ofelectronic components and semiconductors, and sales volumes of electronic circuit substrates and
ALSINK highly reliable heat-dissipating plate declined. Sales of spherical fused silica fillers forsemiconductor sealing were also lower than the previous year.
As a result, division sales decreased ¥2,640 million or 5.5% year on year to ¥45,692 million.
Life Science & Environmental Products Division (Sales: ¥79,394 million)
Principal products: Food packaging materials, vaccines, joint function improvers, diagnostic
reagents, housing and environmental materials, industrial materials, etc.
Regarding pharmaceutical products, subsidiary DENKA SEIKEN Co., Ltd. recorded higher sales
because of increased sales of influenza vaccines.
In processed products, sales volume of TOYOKALON synthetic fiber for wigs and hairpieces and
DX Film anti-weather fluorine alloy film increased while sales of films for food packaging and sales of
products processed by subsidiary DENKA Polymer Co., Ltd. were robust. However, sales of plastic rain
gutters, corrugated drainpipes for agriculture and civil engineering, and vinyl tapes were down from theprevious year.
As a result, division sales decreased ¥788 million or 1.0% year on year to ¥79,394 million.
Others Division (Sales: ¥40,065 million)
Principal business: Plant engineering etc.
Transaction volumes of Akros Trading Co., Ltd. and other trading companies were down from theprevious year. The value of projects completed by Denka Consultant & Engineering Co., Ltd. increased
from the previous year.
As a result, division sales decreased ¥1,288 million or 3.1% year on year to ¥40,065 million.

20

(Reference)
TopicsIn the “Health and Life Sciences” industry, which the Denka Group has placed as a growing field, there arethree recent topics concerning DENKA SEIKEN Co., Ltd, which is a major group company that takes on acentral role in this field.
In the “Health and Life Sciences” industry, which is expected to grow quickly in the future, we will
aggressively undertake measures with the aim of solving various societal issues and precisely meeting themarket’s needs in the future.
Furthermore, Denka has entered the sales business for cultivation systems that use cutting-edge
agricultural technology as a method of further expanding and strengthening our agriculture related business,so we will introduce this along with the three topics about DENKA SEIKEN on page 22.
Completion of Construction on the New Kagamida Plant Manufacturing Building
At DENKA SEIKEN, the new manufacturing building at the Kagamida Plant, which was previously underconstruction, is finished, and a presentation ceremony for the completion was performed on March 15 of thisyear.
DENKA SEIKEN has two factories in Niigata Prefecture’s Gosen City, the Niigata Plant and theKagamida Plant. Completion on this construction of the Kagamida Plant’s new manufacturing building willallow part of the facilities related to test reagents, which were previously manufactured in the Niigata Plant, tobe relocated to the Kagamida Plant. This creates a consistent manufacturing system in which vaccines are
created in the Niigata Plant and test reagents are created in the Kagamida Plant.
At the presentation ceremony, people connected with the construction and the municipality, including
Hirohiko Izumida, the governor of Niigata Prefecture, and Katsumi Ito, mayor of Gosen City, were inattendance. At the ceremony, President & CEO Shinsuke Yoshitaka expressed his will to continue tocontribute to regional production and cultural promotion, without stopping at expanding the life sciencesbusiness. President Tetsuro Maeda of DENKA SEIKEN expressed his gratitude at the support for constructionof the new manufacturing building, and expressed his policy of putting further emphasis on research anddevelopment of test drugs for communicable diseases, which are becoming a threat on a global scale, anddiagnostic drugs to help prevent adult-onset diseases.
Beginning Development and Clinical Trials of Intracutaneous Administration Flu Vaccines
DENKA SEIKEN has determined to develop intracutaneous administration flu vaccines as a means ofstrengthening and expanding the vaccine business. Clinical trials (PI) have begun for obtaining permission to
manufacture and sale in Japan.
At present, flu vaccines on sale in Japan are injected with a method called “subcutaneous administration,”in which the medicine is administered to subcutaneous tissue via injection. However, by delivering the vaccine
antigens directly between the surface and subcutaneous tissue of the skin, where it is known that many
immune system cells exist, it becomes possible to induce a more efficient immunity with a needle that is shortand thin compared to needles used in subcutaneous administration, so we can anticipate that the pain from theneedle at the time of injection will be less for people being inoculated.
DENKA SEIKEN is progressing with research and development of a vaccine that matches the medical
needs of flu prevention, so while speeding up research and development with the aim of getting theintracutaneous administration flu vaccine to market as soon as possible, we will make efforts to maintain andimprove the health of people and improve Japan’s health and hygiene by making a safe, effective, andconvenient vaccine commercially available.
Obtaining Beijing City FDA (Food and Drug Administration) Approval for “sd LDL-C” Measurement
Reagent, a Risk Marker of Cardiac Disease
Beijing Strong Biotechnologies, Inc. (hereinafter referred to as Beijing Strong), a strategic partner with
DENKA SEIKEN in China, who is undertaking the manufacture and sales of clinical external diagnostic test
drugs and biochemical testing equipment, has received approval to manufacture and sell measurement
reagents for “small dense LCL cholesterol” (afterward, sd LDL-c) automated analyzers from the Beijing City
Food and Drug Administration for the first time.
sd LDL-C is a dense lipoprotein with particles that are smaller than normal LDL, and are widely
recognized as risk markers (factors that indicate the possibility of a disease development) for cardiac disease21

and coronary arteriopathy. DENKA SEIKEN was the first one in the world to develop this measurement
reagent for sd LDL-C automated analyzers, and we are continuing preparation to obtain approval by the FDA
in America. Furthermore, in China, with regard to sd LDL-C measurement reagents that are risk markers
which should be developed in national projects, DENKA SEIKEN is performing technical support for Beijing
Strong, which is an external diagnostic drug manufacturer that is participating in national projects, which led
up to recently obtaining approval from the Beijing FDA.
Thanks to this approval, we can expect to contribute to the health maintenance of the Chinese people, theprevention of diseases, and the control of bloated medical fees by spreading sd LDL-C tests widely throughout
health diagnoses in China.
DENKA SEIKEN’s supplying of major source reagents for sd LDL-C measurement reagents to Beijing
Strong will allow for not only the promotion of activities to spread it throughout China, but will also
contribute to the health maintenance and disease prevention of people all over the world through further
developments in various types of measurement reagents related to adult-onset diseases in the future.
Entering the Sales Business for Cultivation Systems that Use Cutting Edge Agricultural Technology
Denka has decided to enter the sales business for cultivation systems that use cutting edge agricultural
technology as a means of further strengthening and expanding the agriculture related business.
100 years have passed since the Company was founded in 1915, and we have continued to be involved with
agriculture through the production and sale of fertilizer. At present, we are taking measure to expand the fieldof agriculture related business while looking forward to the next 100 years. As one means of doing so, we will
use our experience built from our fertilizer business which continues to this day and our knowledge from longyears of product development to begin a new agricultural business that aims at the effective use of farmland
through cultivation systems that use cutting edge agricultural technology (Film Farming® (Imec®), afterward
referred to as Cultivation System).
This Cultivation System is a world-first technology that raises crops on top of a hydrogel membrane (ahydrophilic macromolecule film (Imec® (Film)) developed by Mebiol Inc. (See (1) and (2) below for details).
The Company has concluded a business collaboration agreement with Mebiol Inc., and will aim to raise theCultivation System’s value by using our unique technology for liquid fertilizer and plant activators, whileproviding the material necessary for the introduction and operation of the Cultivation System.
(1) What is Film Farming® (Imec®)?
Film Farming® (Imec®) is a first-world technology that uses a hydrogel membrane (a hydrophilicmacromolecule film (Imec® (Film)) developed in order to cope with the serious challenges of food safety,
water deficit, and land pollution. The thin film made from this hydrogel slowly brings up nutrient solutions(water containing nutrients) that have been provided beneath the film to the top of it. When this happens,
crops begin to produce large amounts of fine roots, looking for trace amounts of the nutrient solutions, andadhere to the film. As a result, the plants synthesize large amounts of sugars and amino acids, leading to highglucose and nutrition.
(2) The mechanism of Film Farming® (Imec®)
Film Farming® places a porous water tubes and bonded material on a waterproof sheet, overlays Imec®
film on top, and allows plants to grow, giving it a simple mechanism. It does not use land, so it can be
performed anywhere, and it does not allow the nutrient solution out, so the amounts of water and fertilizer
used are greatly reduced, making it an agricultural method that is kind to the environment.
* Film Farming® and Imec® are registered trademarks of Mebiol Inc.

22

(2)

Capital Investment
The Group is proactively implementing many concrete measures in accordance with the three new
growth strategies of the Denka100 management plan: “Create the most optimal production system,”“Scrutinize every cost element,” and “Focus management resources on new growth drivers and develop
next-generation products.” In the fiscal year ended March 31, 2016, the Group conducted capital
investment totaling ¥21,196 million.
Capital investment in the Elastomers & Performance Plastics Division amounted to ¥3,988 million.
Principal items were capital investment for the Company’s Omi Plant and Chiba Plant.
In the Infrastructure & Social Solutions Division, capital investment amounted to ¥6,244 million,
which mostly concerned the Company’s Omi Plant and Omuta Plant.
In the Electronics & Innovative Products Division, capital investment amounted to ¥3,687 million,
which mostly concerned the Company’s Omuta Plant and Isesaki Plant.
Capital investment in the Life Science & Environmental Products Division amounted to ¥7,229
million mainly for the Company and DENKA SEIKEN Co., Ltd.
Main capital investment projects completed during fiscal 2015 included construction of production
facilities for ultrahigh-purity acetylene black at the Company’s Chiba Plant and the New Kagamida
Plant Manufacturing Building of DENKA SEIKEN Co., Ltd., and those overseas included constructionof a manufacturing plant for ALSINK, a highly reliable heat-dissipating plate for power modules usedin high-speed rolling stock in Dalian, China, and construction of manufacturing plants in Vietnam for
VINI-TAPE, adhesive tape made of polyvinyl chloride and DENKA THERMOFILM, a material used
for transportation and packing of electronic components.
Projects underway included a new hydroelectric power plant at the Company’s Omi Plant.
In addition, the Company conducted several M&A transactions as strategic investments towardfurther growth. In the Elastomers & Performance Plastics Division, the business transfer of thechloroprene rubber business from E. I. du Pont de Nemours and Company in the US was completed on
October 31, 2015, and operations began on November 1, 2015. In the Infrastructure & Social Solutions
Division, the Company increased its capital stake in Malaysia-based construction materials
manufacturer POSCO Venture Sdn. Bhd. from 29% to 90% in April 2015, and made it a subsidiary (saidcompany changed its name to Denka Infrastructure Malaysia Sdn. Bhd. on June 9, 2015).
Furthermore, in the health and medical field of the Life Science & Environmental Products Division,
the Company acquired 51% of stock in Germany-based biomedical research and development company
Icon Genetics GmbH from Nomad Bioscience GmbH on August 20, 2015.

(3)

Financing
In line with the new growth strategy, the Company transferred a business of a chloroprene rubber
business in the US and acquired stock of a biomedical research and development company in Germany,and to respond to these activities, the Company utilized an overseas M&A financing support systemmanaged by the Japan Bank for International Cooperation and private banks to raise funds of ¥10.5
billion.

(4)

Issues to be Addressed
Last year, in line with the celebration of its centenary, the Company changed its name to “Denka Co.,
Ltd.,” and took the first step toward further growth as a global company and “Creating new value.”
Furthermore, in the previous fiscal year, the Company continued to steadily implement many
specific measures along the lines of the three new growth strategies of the Denka100 management plan.
In “Create the most optimal production system,” the Company established new plants in Vietnam
for plastic tape and cover tape and in China for ALSINK, and in the special cement additives business,with the intent of accelerating expansion in the Southeast Asia region, the Company made a
construction materials manufacturer in Malaysia a subsidiary. Additionally, in the chloroprene rubber
business, the Company received a business transfer from US-based DuPont, and created a production
structure with two bases in Japan and the US. Utilizing this as a stepping stone, the Company will aim
to increase its overall presence in the US.
In “Scrutinize every cost element,” through steady measures in each office, results are being steadily
realized. In particular, at the Chiba Plant, through working to optimize the procurement structure forsteam and power at the complex, the Company was able to significantly strengthen its competitiveness.
In “Focus management resources on new growth drivers and develop next-generation products,” theCompany acquired antibody manufacturing technologies utilized in new production technologies andmedicinal testing for vaccines by making Icon, a biomedical research and development company basedin Germany, a subsidiary. Furthermore, the Company began efforts to develop mass production methods
23towaard commerccialization off anti-cancer vvirus producttion, and is also
a proceedinng with surveys toward
estaablishing an anti-cancerainnformation pprovision business that maakes use of ggene mutatio
on analysis.
Addditionally, at major subsid
diary DENKA
A SEIKEN, clinicalctrials began towarrd commerciaalization of
an intradermal innfluenza vacccine with thee intent of strrengthening anda expandinng the vaccin
ne business,
nt in Gosen City of Niigata Prefectu
ure, a new m
manufacturin
ng building
whille at the Kaagamida Plancom
mpleted consttruction. As a result, a strructure was established inn which the Niigata Plan
nt produces
vacccines, and thee Kagamida Plant
P
producees prototype medicines.
mAs
A shown, thee Company will
w conduct
aggrressive measuures toward th
he “health” s ector, where significant fu
uture growth iis expected.
IIn light of thhe 101th anniv
versary of thee Company’ss founding an
nd in view off the next 100
0 years, theCommpany has decideddto reevise “The D
Denka Valuee,” its corporate philosopphy that serves as thefounndation for coorporate activ
vities of the D
Denka Group..
T
The Denka GroupG
will conntinue to resppond to the ex
xpectations annd trust of soociety.
ue (Corporatte Philosophyy)
Thee Denka ValuT
The Denka ValueV
consistss of the Denkaa Mission, which represen
nts our upperm
most missionn statement,
and the Denka Prrinciples, a seet of preceptss guiding actions taken by every Groupp employee.
Thee Denka Misssion
T
Taking on thhe challengee of expandiing the possiibilities of chemistryc
to create new value andconttribute to souund social dev
velopment.
N
Note: Based on the corporrate slogan “P
Possibility off Chemistry.”
nciples
Thee Denka PrinW
We:
hallenges withh determination and sincerrity.
 Boldlyy confront ch Thinkk and take action today witth the future in
i mind.
 Deliveer new valuess, and inspiree customers thhrough innovative monozuukuri.* Respeect the environment and crreate a cheerfful workplacee that prioritizzes safety.
 Contribute to a bettter society, w
whilst taking pridepin being
g a trusted corrporate citizeen.
*Japannese-style craaftsmanship24Outline of the Denka100 management plan
1. Create the most optimal production system
Three new growth 2. Scrutinize every cost element
strategies
3. Focus management resources on new growth drivers and develop
next-generation products
Consolidated operating income of ¥60 billion or more
Numerical targets
Fiscal 2017 Operating income ratio of 10% or more
Ratio of overseas sales to net sales of 50% or more

25

(5)

Financial Position and Results of Operations
154th term
Item

(Millions of yen, unless otherwise stated)
155th term
156th term
157th term(from April 1, 2012 to (from April 1, 2013 to (from April 1, 2014 to (from April 1, 2015 toMarch 31, 2013)
March 31, 2014)
March 31, 2015)
March 31, 2016)

Net sales
341,645376,809
383,978
369,853
Operating income
18,817
21,23024,04730,634
Ordinary income
17,82420,60424,28727,022
Profit attributable to11,255
13,57319,021
19,472owners of parent
Net income per share
23.63
29.03
41.48
42.94
(yen)
Total assets
415,356
431,347445,569
443,864
Total net assets
180,709
189,516
210,798
216,071
Net assets per share
376.99402.77455.94473.35(yen)
Total shareholders’
43.1
43.5
46.9
47.7
equity ratio (%)
Return on equity
6.4
7.4
9.6
9.3
(ROE) (%)
Total dividends paid
4,748
4,659
5,723
5,836
Dividends per share
10.00
10.00
12.50
13.00
Notes: 1. Net income per share is calculated using the average number of shares issued andoutstanding excluding treasury stock. Net assets per share are calculated using thenumber of shares issued and outstanding at the end of the fiscal year excluding
treasury stock.
2. For total dividends paid and dividends per share for the 157th term, the sum of theinterim dividend paid in December 2015 and the dividend proposed for resolution at
this Ordinary General Meeting of Shareholders is indicated.

26

(6) Significant Subsidiaries (as of March 31, 2016)
1) Significant subsidiaries
Company name

Denka Singapore Pte., Ltd.

The
Company’s
percentage ofequityparticipation

CapitalSGD 69,410 thousand

Denka Chemicals Holdings
USD 68,700 thousand
Asia Pacific Pte., Ltd.
Denka Performance Elastomer
USD 62,000 thousand
LLC
Hinode Kagaku Kogyo

JPY 300 million

Nishi-nihon Koatsu Gas Co.,Ltd.

JPY 80 million

DENKA RENOTEC Co., Ltd.

JPY 50 million

DENKA Azumin Co., Ltd.

JPY 300 million

Denka Infrastructure Malaysia
Sdn Bhd.

MYR 7,151 thousand

Estop Sdn. Bhd.

MYR 1,500 thousand

Denka Advantech Pte., Ltd.

SGD 17,000 thousand

Denal Silane Co., Ltd.

JPY 500 million

Denka Advanced Materials(Suzhou) Co., Ltd.

CNY 55,440 thousand

DENKA Polymer Co., Ltd.

JPY 2,080 million

Nakagawa Techno IndustrialCo., Ltd.

JPY 50 million

DENKA SEIKEN Co., Ltd.

JPY 1,000 million

Denka Advanced Materials
Vietnam Co., Ltd.

USD 12,000 thousand

YK Inoas Co., Ltd.

JPY 100 million

Denka Consultant &Engineering Co., Ltd.

JPY 50 million

Akros Trading Co., Ltd.

JPY 1,200 million

27

Principal business

Manufacturing and sales of
100.0
acetylene black and functional(100.0)polystyrene resin
Regional headquarters for
100.0
Southeast and South Asia
70.0 Manufacturing and sales of(70.0) synthetic rubbers
Manufacturing and sales of
100.0
chemical fertilizers
Manufacturing and sales of
93.2
high-pressure gas
Repair and reinforcement work
100.0 for concrete structures andbuildings and sales of materials
Manufacturing and sales of
100.0 fertilizers and agricultural
materials
90.0 Manufacturing and sales of(90.0) construction chemicals
100.0 Manufacturing and sales of(100.0) construction chemicals
Manufacturing and sales of
100.0
fused silica and synthetic fiber(100.0)for wigs and hairpieces
Manufacturing and sales of
51.0
monosilane gas, etc.
Manufacturing, processing, andsales of electronic packaging
100.0
materials and food packaging
materials, etc.
Manufacturing and sales of
100.0 various packaging materials
and plastic containers
Manufacturing, processing, and100.0
sales of metal rain gutters
Manufacturing and sales of
100.0 vaccines and clinical diagnostic
reagents
100.0 Manufacturing and sales of(100.0) plastic products
Sales of raw materials forindustrial applications, civil
100.0
engineering and construction
materials, and interior materials
Design and engineering of
100.0 various industrial facilities,
transportation facilities, etc.
Sales of inorganic industrial
68.5 products, organic industrial
products, industrial resins, etc.

100.0 Sales of electronic packaging(100.0) materials, etc.
Sales of resins andAkros Trading Taiwan Co.,
100.0
TWD 29,000 thousandsemiconductor-related
Ltd.
(100.0)materials, etc.
Note:
The Company’s percentage of equity participation is calculated by dividing thenumber of shares held by the Company by the number of shares issued and outstanding.
The figure within parentheses indicates the percentage of indirect ownership by
subsidiaries.
Akros Trading China Co., Ltd.

USD 300 thousand

2) Significant affiliates
Company name

The
Company’s
percentage ofequityparticipation

CapitalToyo Styrene Co., Ltd.

JPY 5,000 million

Denak Co., Ltd.

JPY 600 million(7)

Principal business

Manufacturing, processing, andsales of polystyrene resin
Manufacturing and sales of
50.0
monochloroacetic acid50.0

Principal Offices and Factories (as of March 31, 2016)
Company namePrincipal offices
Head Office:Denka Co., Ltd.

Denka Singapore Pte., Ltd.
Denka Chemical Holdings
Asia Pacific Pte., Ltd.
Denka Performance
Elastomer LLC
Hinode Kagaku Kogyo
Nishi-nihon Koatsu Gas
Co., Ltd.
DENKA RENOTEC Co.,Ltd.
DENKA Azumin Co., Ltd.
Denka Infrastructure
Malaysia Sdn Bhd.
Estop Sdn. Bhd.
Denka Advantech Pte., Ltd.
Denal Silane Co., Ltd.
Denka Advanced Materials(Suzhou) Co., Ltd.

1-1, Nihonbashi-Muromachi 2-chome, Chuo-ku,
TokyoBranches:
Osaka, Nagoya, Fukuoka, Niigata, Hokuriku(Toyama), Sapporo, Tohoku (Sendai)
Plants:Omi (Itoigawa, Niigata Prefecture), Omuta, Chiba(Ichihara, Chiba Prefecture), Shibukawa, Ofuna(Kamakura, Kanagawa Prefecture), Isesaki
Research Institutes: Denka Innovation Center (Advanced Technologies
Research Institute, Life Innovation ResearchInstitute, Infrastructure & Solutions Development
Research Institute) (Machida, Tokyo)
Polymer & Processing Technology Institute(Ichihara, Chiba Prefecture)
Head Office and Plants: Singapore
Head Office: Singapore
Head Office and Plant: Louisiana, United States
Head Office and Plant: Maizuru, Kyoto Prefecture
Head Office: Fukuoka, Fukuoka Prefecture
Head Office: Chuo-ku, Tokyo
Head Office and Plant: Hanamaki, Iwate Prefecture
Head Office and Plant: Selangor, Malaysia
Head Office and Plant: Selangor, Malaysia
Head Office and Plant: Singapore
Head Office: Chuo-ku, Tokyo
Head Office and Plant: Suzhou, Jiangsu, China

28

DENKA Polymer Co., Ltd.

Head Office: Koto-ku, Tokyo
Plants: Sakura, Katori (Tako-machi, Chiba Prefecture), Goi (Ichihara,
Chiba Prefecture)

Nakagawa Techno
Industrial Co., Ltd.

Head Office: Kasai, Hyogo Prefecture

DENKA SEIKEN Co., Ltd.

Head Office: Chuo-ku, Tokyo
Plant: Gosen, Niigata Prefecture

Denka Advanced Materials
Vietnam Co., Ltd.
YK Inoas Co., Ltd.
Denka Consultant &Engineering Co., Ltd.
Akros Trading Co., Ltd.
Akros Trading China Co.,Ltd.
Akros Trading Taiwan Co.,Ltd.

Head Office and Plant: Hung Yen, Vietnam
Head Office: Bunkyo-ku, Tokyo
Head Office: Chuo-ku, Tokyo
Head Office: Minato-ku, Tokyo
Head Office: Shanghai, China
Head Office: Hsin-Chu, Taiwan(8) Employees (as of March 31, 2016)
1) The Group
Business segment
Number of employees
Elastomers & Performance Plastics Division
1,091 [152]Infrastructure & Social Solutions Division
940
[203]
(previous name: Infrastructure & Inorganic
Materials Division)
Electronics & Innovative Products Division
923 [186]
Life Science & Environmental Products Division
1,747 [392]
Others Division
752 [201]
Corporate (common)
335 [ 68]
Total
5,788 [1,202]
Notes: 1. The number of employees indicated is the number of full-time employees and theannual average number of temporary employees is indicated in brackets.
2. The number of employees indicated for “Corporate (common)” is the number of
employees who belong to administrative divisions that cannot be classified into a
specific business.
2) The Company
Increase (Decrease)from the previous
Average age
Average service years
fiscal year-end
2,974 [657]+40 [-125]
39.9
18.0
Note:
The number of employees indicated is the number of full-time employees and theannual average number of temporary employees is indicated in the brackets.
Number of employees(9)Principal Lenders (as of March 31, 2016)
LenderOutstanding borrowings (Millions of yen)
Syndicated loan
32,000Mizuho Bank, Ltd.
13,478
Loan Facility Enhancing Global Business
10,466Development
Sumitomo Mitsui Banking Corporation
8,125
The Norinchukin Bank
6,871
Notes: 1. The syndicated loan is managed by Mizuho Bank, Ltd., Sumitomo Mitsui Banking
Corporation, and the Development Bank of Japan and is co-financed by The Daishi
Bank, Ltd. and other financial institutions.

29

2. The “Loan Facility Enhancing Global Business Development” is an overseas M&A
support loan system maintained by the Japan Bank for International Cooperation incooperation with private banks.
(10) Other Significant Matters concerning the Group’s Current Situation
Not applicable30

2. Status of Shares (as of March 31, 2016)(1) Total Number of Authorized Shares

1,584,070,000 shares(2) Shares of Common Stock Issued

465,954,121 shares(including 18,615,888 shares of treasury stock)(3) Number of Shareholders

32,554(4) Major Shareholders
Number of shares
held(thousand shares)
28,91828,792

Shareholder name

Percentage ofshares held
(%)
6.46
6.43

Japan Trustee Service Bank, Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
Trust & Custody Services Bank, Ltd.
(Mizuho Corporate Bank, Ltd. Retirement Benefit Trust
16,0793.59
Account re-entrusted by Mizuho Trust and Banking Co.,Ltd.)
National Mutual Insurance Federation of Agricultural
15,965
3.56
Cooperatives
MITSUI LIFE INSURANCE, CO., LIMITED
11,908
2.66
STATE STREET BANK AND TRUST COMPANY
10,9782.45505001
Mitsui Sumitomo Insurance Company, Limited
6,916
1.54
Trust & Custody Services Bank, Ltd. (Securities
6,914
1.54
Investment Trust Account)
MSCO CUSTOMER SECURITIES
6,798
1.51
CBNY – GOVERNMENT OF NORWAY
6,415
1.43
Notes: 1. The Company holds 18,615,888 shares of treasury stock but is excluded from theabove major shareholders.
2. Treasury stock is excluded for calculation of the percentage of shares held.
(5) Other Significant Matters concerning Shares
Not applicable

3. Matters concerning the Company’s Stock Acquisition Rights (as of March 31, 2016)
Not applicable314. Company Officers(1)

Directors and Audit & Supervisory Board Members (as of March 31, 2016)
Name

Position

Shinsuke Yoshitaka

President

Mitsukuni Ayabe

Representative
Director

Tetsuro Maeda

Director

Hideyuki Udagawa

Director

Manabu Yamamoto

Director

Tadashi Hashimoto
Yasuo Sato
Akio Yamamoto
Shohei Tamaki
Masanori
Sakamoto
Tsunehiro Sasanami

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

Responsibilities and significant concurrent positions
President and Chief Executive Officer
Outside Director of Koatsu Gas Kogyo Co., Ltd.
Senior Managing Executive Officer
Assistant to CEO, Supervisor Corporate Planning,
Development
DPE-Project, Purchasing Dept., Logistics Dept.
President and Representative Director of DENKA
SEIKEN Co., Ltd.
Managing Executive Officer
General Manager, Infrastructure & Inorganic Materials
Disaster Reconstruction Support Div.
Managing Executive Officer
Investor Relations Dept., CSR & Corporate
Communications Dept., Internal Auditing Dept.,
Accounting & Finance Dept., Information System Dept.
General Manager, Corporate Planning Dept.

President & CEO of I.B. Associates Co., Ltd.

Lawyer, Takushou Sogo Law Office

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

32

(Reference)
Executive Officers (as of April 1, 2016)
Name

Shinsuke Yoshitaka

Mitsukuni Ayabe

Toshiharu Kano

Position
President andChief Executive
Officer
Executive Vice
President andChief Operating
Officer
Senior Managing
Executive Officer

Hideyuki Udagawa

Senior Managing
Executive Officer

Manabu Yamamoto

Senior Managing
Executive Officer

Norihiro Shimizu

Managing
Executive Officer

Sanshiro Matsushita

Managing
Executive Officer

Kenji Nakano

Managing
Executive Officer

Ken Koizumi

Managing
Executive Officer
Executive Officer

Tetsuya Shinmura

Executive Officer

Junichi Kimura

Executive Officer

Toshio Imai
Hideki Hirano
Koichi Taguchi
Hideki Watanabe

Executive Officer
Executive Officer
Executive Officer
Executive Officer

Toyoki Yokoyama

Executive Officer

Koki Tabuchi

Executive Officer

Masaharu Suzuki

Responsibilities

Assistant to CEO, Supervisor Corporate Planning,
Development
DPE-Project, Purchasing Dept., Logistics Dept.
General Manager, Omi Plant
General Manager, Infrastructure & Social Solutions
Special Cement Additives Overseas Business
Promotion
General Manager, Disaster Reconstruction Support
Div.
Investor Relations Dept., CSR & Corporate
Communications Dept.,
Internal Auditing Dept., Accounting & Finance Dept.,
Information System Dept.
General Manager, Corporate Planning Dept.;
Research and Development, Innovation Center
New Business Development Dept., R&D Promoting
Dept., Intellectual Property Dept.
General Manager, Electronics & Innovative Products
Chief Compliance Officer
Representative in China
Secretary Dept., Administrative Dept., Legal Dept.,
HR Dept., Denka100 Promoting Dept.
Director Chairman, Denka Chemicals Holdings Asia
Pacific Pte., Ltd.
General Manager, Chiba Plant
General Manager, Technology Div.;
Project Manager, New Omigawa Power Plant
Construction Project
General Manager, Life Science & Environment
Products
Deputy General Manager, Disaster Reconstruction
Support Div.
General Manager, Elastomers & Performance Plastics
General Manager, Omuta Plant
General Manager, Isesaki Plant
Deputy General Manager, Omi Plant
Assistant to GM, Infrastructure & Social Solutions;
Deputy General Manager, Disaster Reconstruction
Support Div.
President of Denka Performance Elastomer LLC

33

(2) Directors and Audit & Supervisory Board Members that Retired During the Fiscal Year
Under Review

Name

Date of retirement

Reason for retirement

Hitoshi Watanabe

June 19, 2015

Term of office expired

Shinji Sugiyama

June 19, 2015

Term of office expired

Kozo Tanaka

June 19, 2015

Term of office expired

Hideo Oishi

June 19, 2015

Term of office expired

Jiro Hiroe

June 19, 2015

Term of office expired

Toshiaki Tada

June 19, 2015

Term of office expired

Positions, responsibilities,
and significant concurrent
positions at time ofretirement
Director
Technology Advisor
Director
Executive Vice Presidentof Akros Trading Co.,Ltd.
Director (Outside
Director)
Lawyer, Tanaka Law
OfficeAudit & Supervisory
Board Member
Audit & Supervisory
Board Member
Outside Audit &Supervisory Board
MemberLawyer, Hibiya Sogo Law
Offices
Outside Corporate Auditorof ITOCHU
Techno-Solutions
Corporation(3) Summary of Liability Limitation Agreements
Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes liability
limitation contracts with Directors Mr. Tadashi Hashimoto, Mr. Yasuo Sato, and Mr. Akio Yamamoto and
Audit & Supervisory Board Members Mr. Tsunehiro Sasanami and Mr. Toshio Kinoshita that limit their
liability for damages of Article 423, Paragraph 1 of said Act. The limit of liability under the contract is
set to a predefined amount of over ¥5 million or the amount stipulated by laws and regulations,whichever is higher.
(4) Remuneration for and Other Payments to Directors and Audit & Supervisory Board
Members
Category

Number of persons

Amount paid
(Millions of yen)

Directors
11296(of which Outside Directors)(4)(33)
Audit & Supervisory Board Members
7
80(of which Outside Audit & Supervisory(3)(24)
Board Members)
Total
18
376
(of which outside officers)(7)(57)
Notes: 1. The amount paid to Directors does not include portions of their salaries as employees.
2. The maximum amount of remuneration for Directors is ¥540 million per year (ofwhich the maximum amount of remuneration for Outside Directors is ¥50 million,
excluding the portions of their salaries as employees) as resolved at the 156th Ordinary
General Meeting of Shareholders held on June 19, 2015.

34

3. The maximum amount of remuneration for Audit & Supervisory Board Members is¥13 million per month as resolved at the 147th Ordinary General Meeting of
Shareholders held on June 29, 2006.
4. The number of Directors as of the end of the fiscal year under review was eight(including three Outside Directors), and the number of Audit & Supervisory Board
Members was four (including two Outside Audit & Supervisory Board Members). The
difference between these figures and the figures in (1) above are due to the retirementof three Directors (including one Outside Director) and three Audit & Supervisory
Board Members (including one Outside Audit & Supervisory Board Members) at the156th Ordinary General Meeting of Shareholders held on June 19, 2015 as in (2)above.
5. In addition, remuneration and other payments totaling ¥10 million were paid to an
Outside Officer by a subsidiary of the Company.
(5) Outside Officers
1) Significant concurrent positions as executive directors etc. at other companies, etc. and therelationship between the Company and such companies, etc.
Director Mr. Yasuo Sato is President & CEO of I.B. Associates Co., Ltd. There are no
significant transactions between the Company and I.B. Associates Co., Ltd.
Audit & Supervisory Board Member Mr. Tsunehiro Sasanami is a lawyer with Takushou Sogo
Law Office. There are no significant transactions between the Company and Takushou Sogo Law
Office.
Audit & Supervisory Board Member Toshio Kinoshita is Representative Director of Global
Professional Partners and Chief Executive of The Japanese Institute of Certified Public Accountants(JICPA). There are no significant transactions between the Company and Global Professional Partners
and The Japanese Institute of Certified Public Accountants (JICPA).
2) Significant concurrent positions as outside officers etc. at other companies, etc. and therelationship between the Company and such companies, etc.
Audit & Supervisory Board Member Mr. Toshio Kinoshita is Outside Audit & Supervisory
Board Member of Panasonic Corporation and Outside Corporate Auditor of Weathernews Inc. andOutside Director of Asatsu-DK Inc., Outside Director of Mizuho Bank, Ltd., and Outside Director of
TACHI-S CO., LTD.
There are no significant transactions between the Company and Weathernews Inc., Asatsu-DK Inc.,and TACHI-S CO., LTD.
The Company has transactions with Panasonic Corporation and Mizuho Bank, Ltd., but there areno special interest relationships.
3) Relationship with specified related parties such as major customers
Not applicable4) Principal activities in the fiscal year ended March 31, 2015
i. Outside Directors[Board of Directors meetings]
The Board of Directors met 13 times in the fiscal year ended March 31, 2016. Mr. Tadashi
Hashimoto attended all 13 meetings of the Board of Directors (attendance rate: 100%), and Mr. Yasuo
Sato and Mr. Akio Yamamoto attended all 10 meetings of the Board of Directors (attendance rate:100%) after assuming office as Directors on June 19, 2015. Mr. Hashimoto, based on his richexperience and insight as a specialist who worked at a financial institution, and Mr. Sato and Mr.
Yamamoto, based on their rich experience and wide views as managers and rich international
experience serving as persons responsible for business at global companies, actively made inquiries
and made recommendations regarding legal risks (risks associated with purchase agreements,
compliance, etc.) for overseas business expansion for the Group including overseas local companies,
as well as regarding business plans, management, and fund procurement. They also visited theCompany’s business sites and subsidiaries and received briefings on the business and asked questions
and stated opinions to Directors etc., as necessary, from external viewpoints.
ii. Outside Audit & Supervisory Board Members[Board of Directors meetings]
35

The Board of Directors met 13 times in the fiscal year ended March 31, 2016. Mr. Tsunehiro
Sasanami attended all the 13 meetings of the Board of Directors (attendance rate: 100%), and Mr.
Toshio Kinoshita attended 8 out of the 10 meetings of the Board of Directors (attendance rate: 80%)
after assuming office as Audit & Supervisory Board Member on June 19, 2015. Mr. Sasanami, basedon his rich experience and expert knowledge as a lawyer, and Mr. Kinoshita, based on his experienceand rich accounting knowledge as a certified public accountant in Japan and the US, actively madeinquiries and made recommendations regarding legal risks (risks associated with basic agreements,
intellectual property, etc.) for overseas business expansion of the Group in the US, Europe, and China,etc., funding plans for the overall Denka Group including subsidiaries, and corporate governance atGroup companies. They also visited the Company’s business sites and subsidiaries and received
briefings on the business and asked questions and stated opinions to Directors, etc., as necessary, fromexternal viewpoints.
[Audit & Supervisory Board meetings]
The Audit & Supervisory Board met 15 times in the fiscal year ended March 31, 2016. Mr.
Tsunehiro Sasanami attended all the 15 meetings of the Audit & Supervisory Board (attendance rate:100%), and Mr. Toshio Kinoshita attended 8 out of the 10 meetings of the Audit & Supervisory Board(attendance rate: 80%) after assuming office as Audit & Supervisory Board Member on June 19, 2015.
They also attended the Board of Directors meetings and other important meetings. In addition, they
reviewed important minutes, authorization documents, etc., investigated the Company’s divisions anddepartments, business sites and subsidiaries, and received briefings on the status of business execution
at periodic divisional report meetings. They reported the results of these activities to the Audit &Supervisory Board and had necessary discussions with other Audit & Supervisory Board Members.
Board of Directors meetings
Director
Tadashi Hashimoto
Director
Yasuo Sato
Director
Akio Yamamoto
Audit & Supervisory Board Member
Tsunehiro Sasanami
Audit & Supervisory Board Member
Toshio Kinoshita

Audit & Supervisory Board
meetings
Attendance Attendance rate

Attendance

Attendance rate

13/13

100%

-

-

10/10

100%

-

-

10/10

100%

13/13

100%

15/15

100%

8/10

80%

8/10

80%

36

5. Accounting Auditor(1)

Accounting Auditor’s Name
Ernst & Young ShinNihon LLC(2)Accounting Auditor’s Remuneration, etc. for the Fiscal Year Ended March 31, 2016
Amount paid (thousands of yen)
Remuneration, etc. for the Accounting Auditor for the fiscal
67,000year ended March 31, 2016
Monetary or property benefits to be paid by the Company
108,990
and its subsidiaries to the Accounting Auditor
Notes: 1. Under the audit agreement between the Company and its Accounting Auditor,
remuneration for audits based on the Companies Act and that for audits based on the
Financial Instruments and Exchange Act are not strictly distinguished and they cannot
be substantially distinguished. Consequently, the sum of the amounts of these
remunerations is stated as the amount of remuneration, etc. for the Accounting Auditor
for the fiscal year ended March 31, 2016.
2. The Audit and Supervisory Board of the Company, in observance of the “Practical
Guidelines for Cooperation with Accounting Auditors” published by the Japan Audit &Supervisory Board Members Association, has confirmed the time taken to audit each
audit item compared to audit plans for previous fiscal years and comparisons withamounts for other companies as disclosed for the fiscal year ended March 31, 2015,
and agrees to the fees, etc., of the Accounting Auditor under Article 399, Item 1 of theCompanies Act.

(3)

Non-audit Services
The Company pays fees to Ernst & Young ShinNihon LLC mainly for its review services related toadvice and direction operations regarding the implementation of International Financial ReportingStandards (IFRS).

(4)

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

(5)

Disposition of Suspension of Business of the Accounting Auditor during the Past Two Years
The Accounting Auditor of the Company received an order for the suspension of business from the
Financial Services Agency on December 22, 2015 regarding the conclusion of new contracts for threemonths (From January 1, 2016 to March 31, 2016).

(6)

Outline of the Limited Liability Contracts
Not applicable(7)

Status of Audits of Financial Statements of the Company’s Subsidiaries by Certified Public
Accountants or Audit Corporations Other Than the Company’s Accounting Auditor
Denka Chemicals Holdings Asia Pacific Pte., Ltd., Denka Singapore Pte., Ltd., Denka Advantech
Pte., Ltd., Denka Infrastructure Malaysia Sdn Bhd., and Denka Advanced Materials Vietnam Co., Ltd.
receive audits by an accounting corporation other than the Company’s Accounting Auditor.

37

6. Company’s Systems and Policies(1) Systems to Ensure the Appropriateness of Operations
The Company has determined the following by the resolution of the Board of Directors.
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.
Audit & Supervisory Board Members, in accordance with the audit policy determined by the
Audit & Supervisory Board, audit Directors’ execution of duties by attending the Board of
Directors meetings and other important meetings, receiving briefings from Directors, andreviewing important documents.
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. Depending on the agenda, relevant executive officers
also participate in the meeting of the Management Committee to streamline and accelerate deliberation
on important managerial matters.
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.

38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 Audit & Supervisory Board Members,
matters concerning securing effectiveness of instructions to the employees and mattersconcerning independence of such staff from Directors
The Company sets up the Audit & Supervisory Board Members Department as an organization thatprovides assistance to the Audit & Supervisory Board and to the Audit & Supervisory Board Members
and assigns at least one exclusively assigned employee to the Audit & Supervisory Board Members
Department based on consultation with the Audit & Supervisory Board Members in advance.
The Audit & Supervisory Board Members Department serves as the secretariat for the Audit &Supervisory Board and is directly commanded by the Audit & Supervisory Board Members.
The Audit & Supervisory Board Members are consulted in advance about performance evaluation of
employees who belong to the Audit & Supervisory Board Members Department and determination of
any other personnel matters.
397) Systems concerning reporting to Audit & Supervisory Board Members by the Company’s
Directors and employees and by those of subsidiaries, other systems concerning reporting to
Audit & Supervisory Board Members, and systems to ensure that they do not receive unfavorable
treatment because of their reporting to Audit & Supervisory Board Members
Directors, Executive Officers, and employees of the Company and those of subsidiaries report on
their duties, by organization or by subsidiary, periodically or as necessary, in accordance with the
instructions and/or requests of Audit & Supervisory Board Members.
The Internal Auditing Department reports the results of internal audits of the Company andsubsidiaries periodically to Audit & Supervisory Board Members.
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& Supervisory Board Members Department as one of the contacts of the whistleblower system. If the
Audit & Supervisory Board Members Department, etc. receives a report, the content of the report isreported to Audit & Supervisory Board Members.
It is specified in the Denka Group Ethics Policy that no person who reports on non-compliant
conduct using the whistleblower system receives unfavorable treatment because of his/her reporting.
8) Policy for treatment of expenses, etc. incurred by Audit & Supervisory Board Members’
execution of duties and other systems to ensure that Audit & Supervisory Board Members
effectively perform auditing
Directors secure the necessary budget in order not to impede execution of duties by the Audit &Supervisory Board and Audit & Supervisory Board Members. At the same time, when an Audit &Supervisory Board Member makes a claim in accordance with Article 388 of the Companies Act, theexpenses and liabilities relevant to the claim will be paid without delay, unless it is deemed that they are
unnecessary for execution of duties of the said Audit & Supervisory Board Member.
The Internal Auditing Department and other internal auditing organizations collaborate with Audit& Supervisory Board Members and coordinate with their auditing so that both internal auditingorganizations and Audit & Supervisory Board Members 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 that defines the fundamentals of compliance, theCompany continued to implement awareness activities, including training, during the fiscal year underreview.
Additionally, with the intent of further strengthening the risk management and compliance structure,a Chief Compliance Officer was selected from among Executive Officers.
Furthermore, the five-item Denka Principles were defined as the Company celebrated its centenary
to exemplify the basic stance of Denka Group employees, the foundations, and relationships withsociety, and it was distributed to each employee.
The Denka Principles
We:• Boldly confront challenges with determination and sincerity.
• Think and take action today with the future in mind.
• Deliver new values, and inspire customers through innovative monozukuri.*• Respect the environment and create a cheerful workplace that prioritizes safety.
• Contribute to a better society, whilst taking pride in being a trusted corporate citizen.
*Japanese-style craftsmanship2) Business execution of Directors
The Board of Directors of the Company is composed of eight members, including three
Outside 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, Audit & Supervisory Board Members, and a portion40

of Executive Officers, was held once a month in principle, with the intent of increasing efficiency of
consideration of important management issues and accelerating decision-making.
3) Business execution of Audit & Supervisory Board Members
The Audit & Supervisory Board is composed of four members, including two Outside Audit &Supervisory Board Members, and meetings of the Audit & Supervisory Board were held 15 times
during the fiscal year under review. Additionally, Audit & Supervisory Board Members attended
meetings of the Board of Directors and other important meetings, and while auditing the businessexecution of Directors, they also visited various business sites including those of Group companies, andreported to the Audit & Supervisory Board regarding the contents of audits.
Furthermore, to assist the duties of Audit & Supervisory Board Members, the Audit & Supervisory
Board Members Department 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 Board, cooperates as required with audits by the Audit &Supervisory Board Members, working together to conduct operations that are mutually efficient.
(3) Basic Policies regarding the Control of the Company
Since its establishment in 1915, the Company has grown to become a unique chemicals
manufacturer whose business lines include diverse chemical products ranging from inorganic andorganic materials to electronic materials, processed resin products and pharmaceutical products.
Reflecting this history, many of the Company’s products involve very lengthy processes from raw
materials to final products or utilize proprietary technologies in various fields in a complex manner.
These businesses are based on the accumulated efforts over the years, including capital investment and
R&D from a long-term perspective, and the cultivation of relationships of trust with business partners
and local communities.
As the onward march of globalization rapidly transforms the business environment and theinformation era gains traction, we recognize the effectiveness of M&A and business tie-ups as means of
pursuing growth strategies.
The Company’s Board of Directors considers that a “person that controls the Company’s financial
and business policies” should fully understand the source of the Company’s corporate value based on
the Company’s history and be capable of securing and enhancing the Company’s corporate value andthe common interests of its shareholders.
In order to realize the basic policies regarding the control of the Company outlined above, theCompany is promoting specific initiatives as described below.
1) Promotion of Denka100 management plan to achieve sustainable growth and enhancement ofcorporate value• Set numerical targets for the Company’s performance and promote “three new growthstrategies”—“Create the most optimal production system,” “Scrutinize every cost element,” and“Focus management resources on new growth drivers and develop next-generation products”• Formulate the Policy on Shareholder Returns. Concurrently, with the aim of achieving further
corporate growth, set aside a budget for strategic investment, such as M&A, for proactive
management.
2) Bolster our management structure for both defensive and offensive purposes• In order to build a more robust management structure for achieving the Denka100 management planand to strengthen corporate governance and enhance management transparency and soundness,41

establish a new structure, including an increase in the number of Outside Directors (from two to
three) and a decrease in the number of Directors on the Board (reduction by two) from June 2015.
Coinciding with the Company’s centenary in 2015, to express our determination to achieve theDenka100 management plan through a concerted effort of all employees, we renewed our corporate
logo and formulated a corporate slogan and action guidelines for employees. The Company will change
the Company’s trade name, provided that approval is secured at the 156th Ordinary General Meeting of
Shareholders.
Note:

The policy stated above is a summary of the policy resolved at the meeting of theCompany’s Board of Directors. The full text is posted on the Company’s website at
http://www.denka.co.jp/ in accordance with laws and regulations and Article 16 of theCompany’s Articles of Incorporation.

42

Consolidated Financial Statements
Consolidated Balance Sheet(As of March 31, 2016)

Account item
(Assets)
Current assets
Cash and deposits(Reference)
156th term
445,569
170,497

157th term

Account item

443,864
161,876(Liabilities)
Current liabilities
Notes and accounts
payable-trade

9,219

11,895

83,17276,00944,103(Millions of yen)
(Reference)
157th term
156th term
234,771
227,793
160,101
147,537
47,401

41,811

Short-term loans payable

47,45642,861

43,981

Commercial paper

9,000

5,000

2,725

3,279

Current portion of
long-term loans payable

12,57018,225

17,687

16,839Accounts payable-other

12,015

11,543

1,994

1,753

5,525

2,806

Other

11,851

8,336

Income taxes payable
Accrued consumption
taxes

1,799

1,433

Allowance for
doubtful accounts

(256)

(218)

Accrued expenses

8,095

8,972

275,071

281,988

Provision for bonuses
Other

2,544
13,692

2,741
12,142211,864

214,329

36,957
18,12540,70920,350Noncurrent liabilities
Bonds payable

74,66930,00080,25530,00074,19877,730Long-term loans payable

23,50928,510

438

647

6,114

3,984

2,481

3,046

8,879

8,407

63,30363,084

5,262

8,314

344

371

Deferred tax liabilities
Deferred tax liabilities forland revaluation
Net defined benefit
liability
Other

903

1,039

16,014

8,388

1,509
574
－
934

11,131
917
6,401
3,813

Net assets

210,798

216,071

Shareholders’ equity
Capital stock

182,722
36,998

190,647
36,99861,69856,527

Capital surplus

49,28449,28455,356

49,843Retained earnings

99,080112,335

1,430

1,293

Treasury stock(2,641)(7,971)

1,463

1,581

Notes and accounts
receivable-trade
Merchandise andfinished goods
Work in process
Raw materials andsupplies
Deferred tax assets

Noncurrent assets
Property, plant andequipment
Buildings
Structures
Machinery andequipment
VehiclesTools, furniture andfixturesLand
Lease assets
Construction inprogress
Intangible assets
Software
Goodwill
Right of using patent
Investments and otherassetsInvestment securities
Long-term loans
receivable
Long-term prepaid
expenses43

Deferred tax assets

915

1,210

Other

2,573

3,368

Allowance for
doubtful accounts

(42)

(770)

Total

445,569

443,864

Accumulated othercomprehensive income
Valuation difference on
available-for-salesecurities
Revaluation reserve forland
Foreign currencytranslation adjustment
Remeasurements ofdefined benefit plans
Non-controlling interests
Total(Note) Amounts are rounded down to the nearest million yen.

44

26,04321,087

13,231

10,775

9,795

10,267

3,174

2,739

(158)

(2,695)2,032
445,5694,336
443,864

Consolidated Statement of Income(From April 1, 2015 to March 31, 2016)(Millions of yen)
(Reference)
156th term
383,978

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

157th term
369,853

302,381

278,064

81,596

91,78857,54961,15424,04730,634Non-operating income
Interest and dividend income

1,254

1,210

Equity in earnings of affiliates

950

1,097

Other

2,169

4,374

850

3,158

Non-operating expenses
Interest expenses

962

Other

3,171

Ordinary income

860
4,133

5,909

24,2876,770
27,022Extraordinary income
Gain on sales of non-current assets

2,947

2,947

-

-

Extraordinary loss
Provision of allowance for doubtful accounts-

671

Acquisition-related expenses
Difference on change from simple method toprincipled method for retirement benefits
Income before income taxes

259

632

-

259

544

26,975

Income taxes-current

7,535

Income taxes-deferred

255

ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent(Note) Amounts are rounded down to the nearest million yen.

45

1,848
25,174

5,488
7,790

438

5,926

19,184

19,247162(225)

19,021

19,472

Consolidated Statement of Changes in Net Assets(From April 1, 2015 to March 31, 2016)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginning of the fiscal
year
Changes of items during the fiscal
year

Capital surplus

36,99849,284Retained earnings

Treasury stock

Total
shareholders’equity(2,641)

182,72299,080

Dividends from surplus(6,139)(6,139)Profit attributable to owners ofparent19,472

19,472(78)(78)

Change of scope of consolidation
Purchase of treasury stock
Disposal of treasury stock

0(5,330)(5,330)00

Net changes of items other thanshareholders’ equity-

Total changes of items during the
fiscal year-

0

13,255(5,330)

7,924

Balance at end of the fiscal year

36,99849,284112,335(7,971)

190,647(Millions of yen)

Accumulated other comprehensive income
Valuationdifference on Revaluation
availablereserve forland
for-salesecurities

Balance at beginning of the fiscal
year
Changes of items during the fiscal
year

13,231

Foreign
Total
Remeasurements
currency
valuation andof defined benefit
translationtranslationplans
adjustment
adjustments

9,795

3,174

(158)

26,043

Noncontrollinginterests

Total
net assets

2,032

210,798

Dividends from surplus–(6,139)Profit attributable to owners ofparent–19,472

Change of scope of consolidation

–

(78)

Purchase of treasury stock–(5,330)

Disposal of treasury stock–0

Net changes of items other thanshareholders’ equity(2,455)

472

(434)

(2,537)(4,955)2,304(2,651)

Total changes of items during the
fiscal year

(2,455)

472

(434)

(2,537)(4,955)

2,304

5,273

Balance at end of the fiscal year

10,775

10,267

2,739(2,695)21,087

4,336

216,071(Note) Amounts are rounded down to the nearest million yen.

46

Non-consolidated Financial Statements
Non-consolidated Balance Sheet(As of March 31, 2016)

Account item
(Assets)
Current assets(Reference)
156th term
353,026
110,729

157th term
345,893
103,015

Cash and deposits

2,280

4,476

Notes receivable-trade

2,364

3,157

Accounts
receivable-trade52,99946,310

Merchandise andfinished goods

32,20029,014

Raw materials andsupplies

11,333

9,686

Prepaid expenses

960

944

Deferred tax assets

893

699

Short-term loans
receivable

950

3,960

Other

6,783

4,772

Allowance for doubtful
accounts

(36)

(6)

Noncurrent assets
Property, plant andequipment
Buildings

242,296

242,878

175,078

168,557

28,35728,305Structures

15,06917,455

Machinery andequipment

55,68553,714363

464

Tools, furniture andfixtures

1,655

2,118

Land

60,15460,153

13,792

6,344

1,058

1,048

VehiclesConstruction inprogress
Intangible assets

47

Account item
(Liabilities)
Current liabilities
Accounts
payable-trade
Short-term loans
payableCommercial
paper
Current portionof long-termloans payable
Accounts
payable-other
Income taxes
payableAccruedconsumption
taxes
Accruedexpenses
Deposits
received
Provision forbonuses
Other
Noncurrent
liabilities
Bonds payable
Long-term loans
payableDeferred tax
liabilities
Deferred tax
liabilities forland
revaluation
Provision for
retirement
benefits
Long-term
accounts
payable-other
Asset retirement
obligations(Net assets)(Millions of yen)
(Reference)
157th term
156th term
194,928
190,142
123,217
116,531
30,28923,002

27,67527,675

9,000

5,000

12,05818,058

10,869

9,808

2,744

-

1,193

1,012

5,995

5,557

21,50024,389

1,414

1,488

477

537

71,71073,611

30,00030,00023,22927,637

5,845

4,906

8,879

8,407

3,619

2,522

13

13

124

125

158,098

155,750

Shareholders’equityCapital stock
Capital surplus
Legal capitalsurplus
Other capitalsurplusRetainedearnings
Other retained
earnings
Reserve foradvanceddepreciationof noncurrent
assetsRetainedearnings
brought
forwardSoftware423

481

Right of using patent

634

566

Investments and otherassets

66,15973,272

Investment securities

31,501

27,58030,29840,593

1,440

2,412

Long-term prepaid
expenses

1,201

950

Other investments

1,729

1,743

Allowance for doubtful
accounts

(12)

(7)

Treasury stock

345,893

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

Stocks of subsidiaries
and affiliates
Long-term loans
receivable

Total

353,026(Note) Amounts are rounded down to the nearest million yen.

48

136,543

135,840

36,99849,28436,99849,28449,28449,284－052,89257,51952,89257,519

3,781

3,854

49,11153,665(2,632)(7,962)

21,554

19,91011,758

9,643

9,795

10,267353,026

345,893Non-consolidated Statement of Income(From April 1, 2015 to March 31, 2016)(Millions of yen)
(Reference)
156th term
240,359

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

157th term
225,823

187,377

169,841

52,982

55,981

40,117

41,87912,864

14,101Non-operating income
Interest and dividend income

2,996

Other

2,437

4,562
5,434

964

5,527

Non-operating expenses
Interest expenses

779

Other

3,021

Ordinary income

702
3,801

4,786

14,4985,488
14,140Extraordinary income
Gain on sales of non-current assets

2,947

2,947

-

-

259

259

632

632

Extraordinary loss
Acquisition-related expenses
Income before income taxes

17,186

Income taxes-current

4,162

Income taxes-deferred

150

Net income

2,188
4,312
12,873(Note) Amounts are rounded down to the nearest million yen.

49

13,508554

2,742
10,766

Non-consolidated Statement of Changes in Net Assets(From April 1, 2015 to March 31, 2016)(Millions of yen)

Capitalstock

Balance at beginning of
the fiscal year
Changes of items during
the fiscal year
Provision of reserve foradvanced depreciationof noncurrent assets
Reversal of reserve foradvanced depreciationof noncurrent assets
Dividends from surplus
Net income
Purchase of treasury stock
Disposal of treasury stock
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
Retained earnings
Capital surplus
Other retained
earnings
Reserve
for
Total
Legal
Other
Total
advanced Retained
retained
capitalcapitalcapitaldepreciaearnings
earnings
surplussurplussurplustion ofbrought
noncurforward
rent
assets49,284–

Treasury
stock

Total
shareholders’equity(2,632)

136,543

49,284

3,781

49,111

52,892

-

99

(99)

-

-

-

(26)

26

-

-

(6,139)10,766(6,139)10,766-(6,139)10,766(5,330)000-(5,330)
0

-

-

-

-

0

0

72

4,554

4,626

(5,330)(703)

36,99849,284049,284

3,854

53,66557,519(7,962)

135,84050

(Millions of yen)
Valuation and translation adjustments
Valuation
Revaluation
Total valuationdifference on
reserve forand translation
available-forland
adjustments
sale securities
Balance at beginning of the
fiscal year
Changes of items during
the fiscal year
Provision of reserve foradvanced depreciationof noncurrent assets
Reversal of reserve foradvanced depreciationof noncurrent assets

Total net assets

21,554

158,098

–

–

–

–

Dividends from surplus–(6,139)Net income–

10,766

Purchase of treasury stock–(5,330)

Disposal of treasury stock–0

Net changes of items otherthan shareholders’equityTotal changes of items
during the fiscal year
Balance at end of the fiscal
year

11,758

9,795(2,115)472(1,643)(1,643)(2,115)472(1,643)(2,347)

9,643

10,267

19,910155,750(Note) Amounts are rounded down to the nearest million yen.

51

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

Independent Auditors’ Report(English Translation)
May 6, 2016
To the Board of Directors
Denka Co., Ltd.
Ernst & Young ShinNihon LLC
Shunji Momoi
Certified Public Accountant
Designated and Engagement Partner
Masahiko Minai
Certified Public Accountant
Designated and Engagement Partner
Shigeyuki Honda
Certified Public Accountant
Designated and Engagement Partner

Pursuant to Article 444, Section 4 of the Companies Act of Japan, we have audited the consolidated
financial statements, which consist of the consolidated balance sheet, the consolidated statement of income,the consolidated statement of changes in net assets, and the notes to consolidated financial statements of
Denka Co., Ltd. (hereinafter referred to as the “Company”) for the fiscal year from April 1, 2015 to March 31,
2016.
Management’s Responsibility for Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statementsin accordance with accounting principles generally accepted in Japan. This responsibility includes designingand operating internal control, which management considers necessary for the preparation and fairpresentation of the consolidated financial statements that are free from material misstatements, whether due tofraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audit as
independent auditors. We conducted our audit in accordance with auditing standards generally accepted inJapan. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected and applied depend on the auditors’ judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. The purpose of the audit is not to express an opinion on the effectiveness of theentity’s internal control. However, in making those risk assessments, we consider internal control relevant to
the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of52accounting policies used, the method of their application, and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position and the results of operations of the Denka Group consisting of Denka Co., Ltd. and its
consolidated subsidiaries, applicable to the fiscal year ended March 31, 2016 in conformity with accounting
principles generally accepted in Japan.
Conflicts of Interest
Our firm and engagement partners have no interest in the Company which should be disclosed incompliance with the Certified Public Accountants Act of Japan.

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

53

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

Independent Auditors’ Report(English Translation)
May 6, 2016
To the Board of Directors
Denka Co., Ltd.
Ernst & Young ShinNihon LLC
Shunji Momoi
Certified Public Accountant
Designated and Engagement Partner
Masahiko Minai
Certified Public Accountant
Designated and Engagement Partner
Shigeyuki Honda
Certified Public Accountant
Designated and Engagement Partner

Pursuant to Article 436, Section 2, Paragraph 1 of the Companies Act of Japan, we have audited thenon-consolidated financial statements, which consist of the balance sheet, the statement of income, thestatement of changes in net assets, the notes to financial statements, and the accompanying supplementaryschedules thereof of Denka Co., Ltd. (hereinafter referred to as the “Company”) for the 157th term from April
1, 2015 to March 31, 2016.
Management’s Responsibility for Non-consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the non-consolidated financial
statements and the accompanying supplementary schedules in accordance with accounting principles
generally accepted in Japan. This responsibility includes designing and operating internal control, which
management considers necessary for the preparation and fair presentation of the non-consolidated financial
statements and the accompanying supplementary schedules that are free from material misstatements, whether
due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the non-consolidated financial statements and theaccompanying supplementary schedules based on our audit as independent auditors. We conducted our audit
in accordance with auditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the non-consolidated financial statements andthe accompanying supplementary schedules are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
non-consolidated financial statements and the accompanying supplementary schedules. The procedures
selected and applied depend on the auditors’ judgment, including the assessment of the risks of material
misstatement of the non-consolidated financial statements and the accompanying supplementary schedules,
whether due to fraud or error. The purpose of the audit is not to express an opinion on the effectiveness of theentity’s internal control. However, in making those risk assessments, we consider internal control relevant to
the entity’s preparation and fair presentation of the non-consolidated financial statements and the54accompanying supplementary schedules in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of accounting policies used, the methodof their application, and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the non-consolidated financial statements and the accompanying
supplementary schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Audit Opinion
In our opinion, the financial statements and the accompanying supplementary schedules thereof referred toabove present fairly, in all material respects, the financial position and the results of operations of theCompany applicable to the fiscal year ended March 31, 2016 in conformity with accounting principles
generally accepted in Japan.
Conflicts of Interest
Our firm and engagement partners have no interest in the Company which should be disclosed incompliance with the Certified Public Accountant Act of Japan.

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

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Transcript of the Audit Report by the Audit & Supervisory Board

Audit Report(English Translation)
With respect to the Directors’ performance of their duties during the 157th term from April 1, 2015 toMarch 31, 2016, the Audit & Supervisory Board has prepared this audit report after deliberations based on theaudit reports prepared by each Audit & Supervisory Board Member, and hereby reports as follows:

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

May 10, 2016
Audit & Supervisory Board, Denka Co., Ltd.
Full-time Audit & Supervisory Board Member
Full-time Audit & Supervisory Board Member
Audit & Supervisory Board Member
Audit & Supervisory Board Member(Note)

Shohei Tamaki
Masanori Sakamoto
Tsunehiro Sasanami
Toshio Kinoshita

Audit & Supervisory Board Members Tsunehiro Sasanami and Toshio Kinoshita are outside
audit & supervisory board members as stipulated in Article 2, Item 16 and Article 335,
Paragraph 3 of the Companies Act.

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(Reference)
Notice of Decision to Purchase Treasury StockAt the meeting of the Company’s Board of Directors held on March 7, 2016, we resolved to purchase up to9,500,000 shares of the Company with an upper limit of ¥3.8 billion for the purpose of flexibly returning
profits to shareholders in accordance with the Policy on Shareholder Returns, and the acquisition of 8,331,000
shares was complete as of April 11, 2016.

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